1. RAY KUNTZ CEO & PRESIDENT OF WATKINS SHEPARD TRUCKING, INC.

2. GENERAL ECONOMIC THEMES & TRUCK FREIGHT The Bad 1. Factory output is quite soft, which impacts LTL fleets and many TL sectors (dry van, tank truck, flatbed). 2. Energy production (frack well drilling) has hurt many tank truck and flatbed carriers. 3. Current inventory cycle is a big drag on freight volumes. The Good/OK 1. Consumer spending drives a significant amount of dry van, dedicated, and temperature controlled truckload freight. 2. Housing starts are important for some flatbed fleets and dry van.

3. JOB GROWTH IS SOLID Sources: BLA & ATA

4. TOTAL BUSINESS INVENTORY-TO-SALES RATIO (DATA ADJUSTED FOR SEASONAL, HOLIDAY, AND TRADING-DAY DIFFERENCES, BUT NOT PRICE CHANGES.) Sources: Census Bureau

5. HOUSEHOLD FORMATION WILL SUPPORT FURTHER GAINS IN HOUSING STARTS Sources: Census, HIS & ATA 201420152016 H.S.1 Mil1.11 M1.23 M

6. QUARTERLY REAL GDP & FORECASTS 2014201520162017 2.4% 2.1%2.8% Sources: BEA & ATA

7. REAL PERSONAL DISPOSABLE INCOME GROWTH Sources: BEA & ATA

8. US CRUDE OIL DATA

9. GENERAL TRUCKING THEMES 1.Truck freight volumes weakened considerably through 2015. Growth this year will remain uneven by sector and weak during first half of the year. 2.Capacity loosened due to slower demand and more capacity. The industry added a little OTR capacity (mainly small TLs and LTLs) in 2015, but tractor counts remain well below all-time highs. Some sectors are adding trailers to boost trailer-to-tractor ratios. Expect capacity to tighten going into 2017 as volumes improve and the ELD mandate gets closer. 3.Revenue per mile grew in 2015 for contract freight, but weakened throughout the year. Spot market is very soft. 4.Driver shortage is remains tough, but combination of pay hikes and oil field weakness helped in the short-term. 5.Fleets continue to see rising costs x fuel. Fleets using fuel savings to pay drivers more, replace trucks and add trailers.

10. TRUCK CAPACITY TRENDS

11. TRACTOR COUNT CHANGES Sources: ATA’s Trucking activity report Includes company tractors and independent contractors.

12. TRAILER COUNT CHANGES Sources: ATA’s Trucking activity report Includes company tractors and independent contractors.

13. ANNUALIZED LINE-HAUL DRIVER TURNOVER RATES 2015 is for the first three quarters of the year. Sources: ATA’s Trucking activity report

14. DRIVER SHORTAGE Sources: ATA’s Truck Driver Shortage Analysis 2015 Shortage was 48,000 in 2015. At current trends, it would balloon to 175,000 in 2024.

15. DRIVER SHORTAGES: ELDS Rough estimate: only 20% of tractors are equipped with ELDs today. TL fleets that have already adopted are generally larger and more sophisticated than most of those that haven’t. So, productivity impact could be larger than fleets have seen so far. What if just 1% to 3% of drivers leave the market for a host of reasons, including cheaters, anti-technology, anti-big government, or just don’t want to change? Some carriers are likely to exit the industry.

16. RETAIL SALES (Q1 2000= 100) Sources: Census Bureau +1433% +49%

17. RETAIL SALES 20002015 When excluding autos, gasoline, and food and beverage, on-line sales are 15% of total sales. Sources: Census Bureau

18. ABANDONING SHOPPING CART REASONS Approximately $4 trillion worth of merchandise will be abandoned in online shopping carts this year, according to Business Insider Intelligence estimates.

19. FURNITURE SHIPPING DEMANDS: OF BOX STORES 1. Price 2. Damage free 3. Service time

20. FURNITURE SHIPPING DEMANDS: OF E-COMMERCE 1. Service time 2. Damage free 3. Price

21. WATKINS SHEPARD STRATEGY Nation wide manufacturing to customer’s door service and one bill rate.

23. Team 1 Way Route Team 2 Way Route Furniture – Team Map

24. HOURS OF SERVICE SUBCOMMITTEE Restart Issue Sec. 133 of 2015 Appropriations Act (Cromnibus) Suspended the restart provision until FMCSA completed a second study on the impacts of the restart provision Also: “The restart provisions in effect on June 30, 2013, shall be in effect during this period.” Sec. 133 of 2016 Appropriations Act Stipulated that FMCSA cannot reinstate the restart provision unless the study “demonstrates statistically significant improvement in all outcomes related to safety, operator fatigue, driver health and longevity, and work schedules.” The Glitch: Did not include sentence in Red.

25. HOURS OF SERVICE SUBCOMMITTEE Restart Issue Possible Impact: DOT issues study that does not show safety improvements. DOT suspends entire restart provision, industry reverts to rolling recap State of Play: Restart Study still in Secretary’s office (must be approved by Secretary and Inspector General before its sent to Congress). Legislative Strategy Clarify Congressional intent, preserve simple 34 hour restart Language included in Senate appropriations base bill Also Caps weekly hours at 73 Similar language expected in House (without 73 hour cap)

26. SAFETY FITNESS DETERMINATION RULEMAKING

27. Like Safety Ratings (Unsatisfactory, Conditional, Satisfactory) Both Roadside Inspection and Compliance Review Results Only Preventable Crashes Considered Failure in Two BASICS - Against "Failure Standard" 15-Day Appeal Process Based on "Measures," Not Scores, Alerts, or Percentile Ranks

30. USDOL’S PROPOSED CHANGES TO OVERTIME EXEMPTIONS Timeline : On March 13, 2014, President Obama signs Presidential Memorandum directing USDOL to update tests for determining white collar workers who are protected by FLSA’s overtime requirement On July 6, 2015, USDOL publishes proposed rule; comment period closes on September 4, 2015 Fall regulatory agenda lists July 2016 as expected final rule date USDOL Solicitor General Patricia Smith suggests that rule will not be finalized until late 2016

31. STATUTORY EXEMPTION TODAY Generally, an employee in a bona fide executive, administrative, or professional capacity is exempt from FLSA’s minimum wage and overtime requirements if: paid a predetermined and fixed salary not subject to reduction (“salary basis”); the amount of salary paid meets or exceeds a specified amount (“salary level test”); and the employee’s job duties primarily consist of executive, administrative, or professional duties (“duties test”).

32. FOCUS ON THE SALARY TEST The salary threshold was last set in 2004 at $455/week or $23,660/year Proposal was to increase to $921/week or $47,892 per year for a full-year worker in 2013 and adjust for inflation; $122,148/yr for highly compensated employees Assuming USDOL stays the course, the numbers effective as of 2016 would likely be $970/week or $50,440/year

33. CALCULATING COMPENSATION What cannot be included in salary calculation for purposes of meeting the test? Discretionary bonuses Board, lodging, or other facilities expenses Fringe benefits, such as payment for medical, disability or life insurance, or contributions to retirement plans USDOL is considering including, in some limited manner, payment of nondiscretionary bonuses as part of salary calculation Considering limiting the amount that can be attributed to salary calculation to 10% Considering requiring that nondiscretionary bonus payments be made monthly or even more frequently to count toward

34. DUTIES TEST CONSIDERATION Without proposing anything, USDOL asked for comments on whether there should be changes to the duties tests? Looking at whether there should some minimum amount of time spent on work that is their primary duty to qualify for the exemption (mentioned California, which requires 50% of time be spent exclusively on work to be considered primary duty) Resurrect the long/short duties tests?

35. CURRENT EXEMPTIONS - EXECUTIVE Compensated on a salary basis at rate not less than salary test; Primary duty is management of the enterprise in which the employee is employed or of a customarily recognized department or subdivision thereof; Customarily and regularly directs the work of two or more other employees; and Has the authority to hire or fire other employees or whose suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees are given particular weight

36. CURRENT EXEMPTIONS - ADMINISTRATIVE Compensated on a salary basis at rate not less than salary test; Primary duty is the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer's customers; and Primary duty includes the exercise of discretion and independent judgment with respect to matters of significance

37. DILEMMA WITH DISPATCHERS The increased salary level will be a challenge Courts split currently on administrative exemption based on dispatcher’s job duties (requires more than mere communication and tracking of vehicles) Primary duty is thing employee spends more than half his time doing – 29 C.F.R. 541.700(b) However, primary duty can also be a duty that is most important or the principal, main, or major duty and thus qualify as primary duty even if less than half employee’s time is spent on it – 29 C.F.R. 541.700

38. QUESTIONS? CONTACT: RAYK@WKSH.COM

39. THANK YOU!!