L.A. Transportation Club Marine Intermodal – The Evolving Chassis Model Keith E. Lovetro Chief Executive Officer TRAC Intermodal Oct 11, 2016 1
Discussion Agenda • An Introduction – Who Is TRAC Intermodal • The Evolving State of Marine Intermodal • Different Marine Chassis Pool Structures • Our View – What Needs to Change • Open Discussion – Q&A 2
Who is TRAC Intermodal TRAC is the nation’s leading Intermodal chassis pool manager and equipment provider for domestic and international Transportation Companies 3
TRAC Intermodal - Company Overview • Largest provider of chassis in North America with over 310,000 units under management - 195,000 in the Marine Segment - 81,000 in the Domestic Segment - 34,000 units in storage • Broad distribution network which includes 630 Marine, 160 Domestic and 60 Depot locations • Largest pool operator - 11 Neutral Marine Pools and only National Domestic Pool operator • Investing in “Refurbs”, New Pools, Facilities and Infrastructure TRAC Fleet Size Geographic Footprint Seattle Spokane Tacoma Montreal Storage Portland Springfield Chippewa Falls Worcester 12% Toronto Syracuse Grand Rapids Boston St. Paul Detroit S. Kearny Buffalo Little Ferry Chicago ChambersburgN. Bergen Cleveland Stockton Salt Lake City Omaha Philadelphia Indianapolis Marysville Columbus Baltimore Oakland Kansan City St. Louis Denver Domestic Cincinnati Portsmouth Marine Los Angeles Evansville 24% Huntsville 64% San Bernardino Memphis Long Beach Nashville Charlotte Atlanta Phoenix Birmingham Charleston Jackson Dallas Savannah El Paso Jacksonville Mobile Houston Orlando San Antonio New Orleans Ft. Pierce Tampa Ft. Lauderdale Laredo Miami Monterrey 4
TRAC Intermodal - Company Overview • LA Service Center 5
TRAC Intermodal - Company Overview • TRAC Mobile Service Units 6
TRAC Intermodal - Company Overview 7
North America Chassis Market • Total Estimated Market Size = 759,000 Active Chassis - Marine - 578,000 (76%) - Domestic - 181,000 (24%) • TRAC has an estimated 37% of the total active chassis market share in North America - 34% in the Marine market - 44% in the Domestic market Total Chassis Market: 759,000 (1) Domestic Market: 181,000 (2) Marine Market: 578,000 Other Lessors / Terminals Truckers Shipping 7% 4% Lines Truckers Other Lessors / Terminals Others Railroads 7% Shipping 6%4% 20% Lines 37% 10% 8% 34% 44% 22% 17% DCLI Railroad / 36% DCLI Logistic 24% Companies 20% Flexi-Van Flexi-Van (1) Based on reported chassis fleets and TRAC estimates as of June 30, 2016 (2) Domestic excludes JB Hunt ‘s 68k proprietary nonstandard chassis 8
North America Chassis Market • 15 primary Steamship Lines have sold approximately 80% of their owned chassis since 2012 • 2 of these lines still own significantly large fleets (10,000+ each) • The Steamship Line divestiture trend is expected to continue beyond 2016 • TRAC has acquired approximately 50% of the chassis that have traded Steamship Line Divesture of Chassis 2012-2016 Top 15 SSLs 180,000 158,165 160,000 140,000 120,000 100,000 80,000 60,000 31,234 40,000 20,000 - Beginning of 2012 Q3 2016 9
Evolving State of Marine Intermodal • Excess capacity is undermining the economic viability of the Marine segment • Steamship lines are posting significant financial losses - WSJ estimated losses are $8-10 billion this year • The Marine industry is prime for consolidation - Bankruptcies - Mergers / Acquisitions • Steamship lines struggle to exit chassis provisioning – half-in / half-out • Steamship line alliances continue to shift - creating additional complexity 10
Evolving State of Marine Intermodal • Marine Intermodal operations are not well integrated - MTO operating practices and schedules are different - Information is fragmented with limited availability • The independent chassis business model is not fully recognized - PMA / ILWU negotiations included chassis - Many Marine Terminal Operators don’t pay for their on-terminal use • Chassis pool models are inconsistent and in certain markets, not interoperable • The Pool of Pools created interoperability but there are still many challenges 11
Marine Chassis Pool Structures • Neutral Pools (Private Pool) - “Neutral” due to it not being associated with any specific steamship line - The company setting up the pool is the pool manager and IEP for their respective customers in a geographic area. - The pool manager establishes the hosting agreements, M&R agreements and operating practices for the pool. • Co-Op Pool – (Market Pool) - Operates with one pool manager and one set of operating rules. - Multiple IEPs may contribute to the fleet, and chassis Independent are “gray” across all locations in the pool. or IEP as Mgr - The pool manager establishes the hosting agreements, M&R agreements and operating practices according the Operating Pool guidelines 12
Marine Chassis Pool Structures Pool of Pools - Allows multiple neutral pools operating in the same geographic area to use each-others fleets. This creates an “interoperable fleet” in multiple locations in a market - Each contributing pool is responsible for and continues to manage their own pool, their own M&R, their own fleeting and their respective pool operating rules - Cross usage volumes are reconciled at the end of each month - The Pool of Pool structure is only used in the Ports of Los Angeles & Long Beach 13
Our View – What Needs To Change • Steamship lines need to exit chassis provisioning – as they aspire to do – Today over 60% of the Marine pool transactions are still steamship line controlled (CH) • Create a consistent information source across the Port complex – Vessel landing location and schedule – Size / quantity of boxes being imported • Harmonize and Integrate Port Terminal Operations – Align gate hours and days of operation – Facilitate live lift capabilities 14
Our View – What Needs To Change • Chassis must be recognized as an independent part of the intermodal supply chain – Data tracked at the chassis level – A service that is purchased – on-terminal or on-ramp use • Chassis depots need to move off dock – but be in very close proximity (near dock) – Allows better management of the chassis and the service quality – Frees up valuable working water front • Pool of Pools model needs to evolve to a “Co-Op” pool structure – One pool manager / one set of Operating rules – Consistent set of hosting and M&R agreements across the MTO’s – Evolve to “near-doc” chassis depots 15
Open Discussion – Q&A 16
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