Good afternoon. My name is Jennifer, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Knight Transportation Third Quarter 2016 Earnings Call. All lines have been placed on mute to lessen the background noise. After the speaker's remarks, there will be a question-and-answer session. Speakers for today's call will be Dave Jackson, President and CEO; and Adam Miller, CFO. Mr. Miller, the meeting is now yours.

Well, thank you, Jennifer, and good afternoon, everyone. Thank you for joining our call. We have slides to accompany this call posted on our website at investor.knighttrans.com/events. Our call is scheduled to go until 5:30 PM Eastern Time. And following our commentary, we'll hope to answer as many questions as time will allow. If we're not able to get to your call or – sorry, if we're not able to get to your question due to time restrictions, you may call 602-606-6315 following the call, and we'll return your call. Again, that number's 602-606-6315. And the rules for questions remain the same as in the past, one question per participant. If we don't clearly answer the question, a follow-up may be asked. Again, more often than not, we end up with people in the queue that are not able to answer- to ask a question. So, we ask again that you keep it to one question per participant. To begin, I'll first refer you to the disclosure on page two of the presentation. And I'll also read the following: This conference call and presentation may contain forward-looking statements made by the company that involve risks, assumptions, and uncertainties that are difficult to predict. Investors are directed to the information contained in item 1A Risk Factors or Part I of the company's annual report on Form 10-K filed with the United States SEC for a discussion of the risks that may affect the company's future operating results. Actual results may differ. And now, I'll begin by covering some of the numbers in detail, including a brief recap of the third quarter results, starting with the next slide, slide three. For the third quarter 2016, total revenue decreased 6.5% year-over-year to $281 million; while revenue, excluding trucking fuel surcharge decreased 5.1% to…

Okay. Thank you, Adam, and good afternoon, everybody. We appreciate you joining the call today. We will now move to slide seven. In the third quarter, our asset-based trucking businesses operated at an 83.1% operating ratio, which includes our drive-in businesses, refrigerated businesses, drayage business and dedicated business. Most of the 330 basis point OR increase year-over-year was a result of lower rate per mile, increased net fuel expense, higher claims costs, and lower gain on sale of equipment. Our asset-based businesses remain focused on developing the type of freight in the specific lanes we desire at appropriate prices. We've done much in prior quarters to prepare our costs for this environment, including decreasing the fleet late last year and reducing non-driver head count. We continue to manage costs aggressively. Operations and maintenance would be another example of that this quarter. Miles per truck again saw meaningful improvement in the third quarter, being up 1.6% year-over-year. Our non-asset-based logistics segment produced an OR of 95.2%. As Adam mentioned earlier, our brokerage business, which is the largest component of our logistics segment, grew volume 7%, while gross margins contracted 140 basis points. Lower fuel surcharge, a shorter average length of haul and lower non-contract pricing led to a 4.5% decline in brokerage revenue despite the year-over-year increase in load volumes. Our logistics performance continues to confirm the opportunities for growth as well as the value provided to our customers through our offering of transportation, management, brokerage, and intermodal services. Now on to slide 8. This graph provides insight into each of our third quarters since 2012 for our trucking segment. Each of these third quarters have faced unique market dynamics. Some, like last year, benefited from a favorable bid season; 2014 saw meaningful non-contract premiums in the third quarter; 2013 was…

All right. Thank you, Dave. Slide 14 is our final slide, where we'll discuss guidance. Based on the current truckload market and recent trends, we are re-affirming our previously announced fourth quarter guidance of $0.30 to $0.33 per diluted share. And we're establishing our expected range for the first quarter of 2017, which is $0.26 to $0.29 per diluted share. I'm going to go over some of the assumptions made by management to arrive at this guidance range. So, first, no organic growth from our current tractor count. We expect our total rate per mile to continue to improve sequentially into the fourth quarter. However, it still – it will still trend down on a year-over-year basis, but not to the same degree as a second quarter or third quarter. We expect rates in the first quarter to be slightly negative as we work through the upcoming bid season and begin to renew much of our business, which in many cases, goes into effect in the second quarter. We also expect miles per tractor to continue to trend positively, similar to what we have experienced in the first three quarters of the year. Our assumption is that net fuel expense will continue to be a cost headwind in the next two quarters, however, as we all know, that can be very difficult to predict. Long term, we expect to continue to grow our logistics segment in that 25% plus range, while operating in a low-90% to mid-90%s operating ratio; and our brokerage business, which is the largest component of our logistics segment. We expect continued revenue per load headwinds that include lower fuel surcharge, shorter length of haul, and less non-contract opportunities. These headwinds will likely impact the revenue growth year-over-year and will result in revenue growth below that 25%…

Our first question comes from the line of Kelly Dougherty with Macquarie.

Hi, Kelly. Kelly Dougherty - Macquarie Capital (USA), Inc. Hey, thanks for taking the question. You talked about not growing the fleet until you see significant strength in demand and higher rates. I guess this is kind of like the meaning of life question, but when do you think we really start to see that happen? I'm just trying to get a sense of the outlook for demand and pricing. But then also how you think about how much free cash flow you guys think you can generate next year.

Maybe Kelly, I'll take the first part of that question and let free cash flow go to Adam. When we talk about organic growth, there's a few things that are interconnected. So when we see an environment where we can get the kind of pricing that we think we need to have in order to justify the capital investment, then we do it. Well, about that time, we are going to have to also raise driver pay, because that's historically how that works. Those two go in tandem. And so you raise driver pay, which gives you a little bit more of a chance of adding drivers to the fleet, not just maintaining the number of drivers that you need at any given moment. And so by the time you get rates up enough to raise driver pay, have the impact to bring on drivers, then you usually see the trucks roll in and the fleet growth happen. So if we had to look at this right now, if we see the kind of non-contract pricing environment that we're anticipating in November and December then that perhaps positions us for an increase that's meaningful enough in the bid season so that we can immediately begin to pay more to our drivers. And as we do that, then we're probably looking into the second quarter that we've been able to work through increases, raise driver pay, be in a spot to add capacity for it to work out. So if those events happen that way, that's how I would probably see the soonest organic growth happen. So we don't have to order those trucks just yet. And it's amazing how fast they can build a truck these days with anemic orders. Kelly Dougherty - Macquarie Capital (USA), Inc. I imagine them probably too being pretty aggressive in offering pricing tier to incentivize you guys to do that. How does that factor into things?

Yeah, we would welcome them to be more aggressive. So if they're listening, we would love to see it become even a little more aggressive. So maybe I'll let Adam talk about cash flow. Kelly Dougherty - Macquarie Capital (USA), Inc. Thanks.

So Kelly, we touched on the presentation, we've already generated about $113 million of free cash flow through the first three quarters. So we're probably on pace to be in that $140 million, $150 million dollar range. I think looking at next year, we're still kind of working through what that CapEx is going to look like with us extending our trade cycle. But we probably see a little bit of a step-up in our CapEx but nothing meaningful. So I think we're still in that $100 million-plus range in free cash flow as we look at it right now projecting out 2017.

Our next question comes from the line of Tom Wadewitz with UBS.

Hi, Tom.

Hey, Dave. Hey, Adam. I hope you guys doing well. It looks like good cost management, good results in a tough market. Wanted to see if you could give a little more perspective on the kind of trend in freight however you want to characterize that by month in the quarter. And then you sound like you're optimistic on seeing some improvement in October. I guess just get a sense of what that looks like and how optimistic you are. And I don't know if you can tie that to a guess on 2017 pricing bid season or not. But that's just kind of that line of thinking, that flavor. Thank you.

We'll try to answer all three of those questions, Tom.

You can pick one if you want or answer them all, your choice.

Well, Tom, I'll walk through how the quarter progressed and then I'll turn it over to Dave to talk about maybe the fourth quarter and then future outlook. Really looking at the third quarter, excluding the fact that the Labor Day fell on a different week, when you're comparing just the number of weeks, we improved on our utilization on a year-over-year basis every single week during the quarter. It was stronger coming out of the Independence Day holiday which isn't atypical, as you usually see a little bit of an afterburn there. But that strength continued into the back half of July. August would be the weaker of the three months which isn't atypical. There's not as many catalysts for freight in August but we did see some meaningful strength in September and finished the quarter really strong. And that strength really continued into the first few weeks of October. So it played out not dissimilar than what we expected but the strength was encouraging from our perspective. Dave, I'll turn it over to you.

Yes, so what we've seen so far in October has been positive. Volumes and productivity month-to-date in October has been encouraging. The trend has continued from the third quarter. You had a little disruption there with the hurricane but things have been trending better than a year ago October. And most recently, it feels as if we've seen the volume that last year we saw in early November. We've seen that so far here in late October. So that's very encouraging to us. And for some of the reasons we mentioned earlier when we were walking through the slides, it feels like we've hit that bottom in the second quarter. More specifically, I think it was in May. April and May continued to be down. And then by June, we saw gross margins begin to compress. I wouldn't be surprised if that was also the case for a lot of the larger non asset-based brokers. They really saw it change in June. So second quarter looked a little bit better gross margin than maybe what it was really already feeling like by the time we got to July to report those. And so we saw in June, July, all the way through now, where there's been pressure on that gross margin. And so typically what happens is we hit that bottom, kind of bounce off of that. And brokers, even carriers, are maybe a little less likely to make commitments, certainly at discounted rates. And it's hard to find carriers to haul loads. And so pretty quickly, things start to turn and rates typically lag not much but they don't bounce back at the same trajectory as purchase transportation costs. But it doesn't take them long to get there. And so I think we're starting to see that in October. For example, we've seen premiums paid for non-contract pricing. That was virtually nonexistent last year in October. So that's a positive sign. It's not to the level that we would hope or expect it to be as we get a little deeper into the holiday season but nonetheless it's a very positive sign. The other thing I would say is we're finding ourselves now where we're unable to make commitments for mid to late November and into December with some of our customers who are looking to secure capacity. We're not in a position to be able to commit that. And that's typically freight that's paying at a premium. So, those are kind of what we're seeing. I hope that helps answer your question.

Do you have a guess on pricing next year, kind of 2017 bid season up like one or two, or do you think it's better than that?

I think that low single digits is probably where we would view it right now. But that we'll be watching that closely. And we reserve the right to adjust that next time we talk in three months.

Of course. Of course. Thank you for the time.

Thanks, Tom.

Your next question is from the line of Brad Delco with Stephens, Incorporated.

Good afternoon, David.

Hi, Brad.

Good afternoon, Adam. How's it going? Dave, really appreciate you walking us through all that detail. The question I had for you, based on your comments and what it sounds like, call it, the inflection with non-contract rates, last time we were here back in late 2013 we did see more consolidation events in the industry. I guess what I wanted to ask you is, in sort of this backdrop where used equipment values are challenged and people have made the case that used equipment values could be, let's say, lower for longer because of what segment of the market could be impacted by the electronic log mandate. Would this prevent you from acting on any M&A opportunities in the near term, or what can you comment on what the market is like today?

Well, appreciate the question, Brad. I think we are always looking at opportunities in the acquisition world. And we don't only look at asset-based companies. We look at a variety of businesses that might have niches or strategic advantages in an area that maybe we don't. It's a key focus for us. There's a considerable amount of time that gets spent in looking and evaluating these businesses. As you know, Kevin Knight still works full time in the business. And he spends a lot of time looking and thinking and evaluating in this kind of vein. So, times like this do create opportunities. So there's always risk in acquiring businesses in our space. Just given how immature, if I could use that word, the industry is and we have such volatility, so I don't know that there is such a thing as a perfect time to acquire a company or a risk-free time to acquire a company. But there are several things that I think work to maybe encourage us to make acquisitions. And as you pointed out, in certain circumstances there might be additional risks. But I don't mean to try and talk out of both sides of my mouth but there's always going to be risks, but we're always looking. So, it's been a while since we last did our acquisition and we're very happy with how that has turned out and how well that group has performed. And so we're very much open and optimistic about our opportunities to continue to find companies over time. And as I alluded to those comments earlier, as the industry matures a bit, as we get a little bit better in how we seek returns for capital and become maybe a little less cavalier or a little less tolerant with lower returns, we think that sets this industry up long term to be one where there can be meaningful consolidation and make it a healthier industry over time, so.

If I could just ask a short follow-up. So we've heard this a lot, I just want to see – get your thought on it. We would have seen more M&A activity in the market today if book value of assets were closer to the market value of the assets. Do you agree with that, yes or no?

Yes, I agree with that.

Okay. All right. Thanks, Dave, and thanks, Adam.

Your next question comes from the line of Scott Group with Wolfe Research.

Hi, Scott.

Hey, thanks. Good afternoon, guys. One quick thing I wanted to clarify first. Dave, I think you said a couple of times you've seen a pick-up in the non-contract business. I think, Adam, in your kind of framework on guidance you said you were expecting less non-contract business on the brokerage side. I just want to make sure I heard that right and is there – yes, if you can clarify that.

Yeah, I think we have seen a pick-up. I do think that the guidance for the brokers. We may see a little bit more on the non-contract side. So I would probably clarify that, yes, I think that business does see a little bit more. But I do feel like it's still at this point a – when you're all-in on the non-contract and the contract rates that you still have the revenue per load headwind there. So I should clarify that, Scott.

And that applies to the truckload and the brokerage business?

Correct, correct.

Okay, great. Okay. So bigger picture...

Scott, sorry to interrupt you there. So from a guidance perspective, we expect in the fourth quarter to see more non-contract pricing improvement than what we saw last year. It was very muted last year. And so we're taking into our estimates that he talks about for fourth quarter, we're assuming that we see sequential improvement in rates, which is going to come from the non-contract opportunities because there just aren't going to be contractual rates taking effect during this time of the year. So I hope that clarified that.

Okay. It does. That's helpful. Thank you. And then so bigger picture, so I know you gave us a look at first quarter 2017. Is there any way you can help maybe try and frame like full year 2017? I think you said pricing low single digits but maybe utilization, kind of overall fleet? And maybe if you roll it all up, what's your confidence in the ability to see kind of full year earnings growth next year?

Well, we're fresh off the bottom here, Scott. So we're watching this closely. We internally think we have a feel for the trajectory of the recovery, if you will. But as these things go, this is close to the bottom. We're not in a position yet where we're ready to declare full year 2017 earnings growth or with even more specificity what we see in the rate world. Once we get through November and December, we'll probably have a better feel on what to expect through the bid season. And so once we get through that bid season, we'll have a better feel for what that mid-May through July time period will look like from a non-contract perspective because most likely, that in a positive rate environment, that will contribute to earnings, and of course, rate improvement. And so we're going to kind of need to watch this a couple of steps at a time at least before I feel comfortable making such a public statement.

Okay. That seems fair. Thank you, guys.

Thanks, Scott.

Your next question comes from the line of Ken Hoexter with Merrill Lynch.

Hey, Dave, Adam. How are you doing? Good afternoon. Just to clarify that last answer. I guess are you already seeing level of inventories dropping and bankruptcies scaling? Is that what's giving the confidence, or you just feel like a bottom is here? I just want to clarify what you were just saying there.

Yes, I think that maybe the most compelling evidence is what's going on with supply, with the lack of new orders and the limited number of used sales of equipment. And then on top of that is this phenomenon or trend that we've seen of brokerage margin compression that we think really started in the month of June. And that was made more manifest in the third quarter when you had three more consecutive months. So we're, call it, four – with October, we're five months into margin compression. And typically when those purchase trans costs finally hit the bottom and start to go the other way, rates follow. And they follow in part because, the non-asset based brokers are probably not going to be willing to go make the kind of bets that they made last year. They're not going to maybe drop rates like they did and make big commitments. They might decide to be a little more transactional and in the market, so less committed and which then begets the shipping community, who's in pursuit of more and more commitments. As they pursue more commitments in a tight market, the price goes up in order for that to happen. So all of these events begin to snowball. So we really weren't talking about inventories, and Adam made a mention about how we continue to see bankruptcies increase. Those numbers haven't been massive but 4,000 trucks in a quarter is a lot of trucks to come out of the space. And so at least we think that's a lot of trucks because we run just a little more than that. So those weren't maybe the two strongest data points, but of course those data points are pointing in a direction that's consistent with the others we've talked about. Does that help answer your question?

It does. But I guess just to clarify on the – I guess what I'm concerned in that question is you mentioned limited use sales of equipment. Does that mean your costs go up as your maintenance and others? Is that something that could be at risk before you get the bounce in the freight?

Well, you've seen most trucking companies take hits on their gain on sale. We still had a gain on sale, and we hadn't modified our depreciation along the way. And so some have some catch-up depreciation in addition to not experiencing the kind of gain on sales that we have been accustomed to over the last few years. So, yeah, there's a short-term impact there. If you looked at the average age of our fleet, third quarter of last year, we were 1.8 years old, third quarter this year, we're two years old but our maintenance cost was down, if you look at our operations and maintenance line item. And so our group is working very hard, working to be very proactive in maintaining a slightly older fleet. We're not sure how old that will get in the end, but I think, if you look at a used truck, it sells for about the price of a retirement condo in Florida. So just like real estate when the market bottoms, if you can wait to sell, you should, and your patience is usually rewarded. I don't think it's much different with trucks. And so you see some of that going on. My comments before were that for fleets out there that are not able to earn a double-digit return on invested capital or upper single digits that might match their weighted average cost of capital, then one of the solutions might be to run their trucks a little bit longer because in that ROIC calculation, you create a smaller denominator. And so fleets might choose to do that. And so that might have a small impact perhaps on their cost, but Ken, we're moving into an environment where there will be increases in rate per mile. And that will more than offset, I believe, any kind of equipment increases. You don't have to look too far in transportation. You might have to look at the locomotives, for example, where we see an industry that where you have a large player that has 20% of their locomotives parked but it results in nearly a 2% increase in pricing. That in their world, more than offsets the depreciation. Now, trucking is much more fragmented, obviously. It's much more of a free market. But at least that principle of maybe slightly older equipment but higher prices is going to lead to a better return. So Ken, did I get close to answering your question?

No, that's great. Yeah, you definitely did. Thanks for the time.

Ken, maybe to add on your question about the costs. When you're looking at just our cost per mile, when you run a truck that's four years old for another year instead of replacing it with a more expensive truck, your depreciation per truck, you do get an offset of cost there, and your risk is your maintenance costs start to increase. And so one would offset the other hopefully, and hopefully there's a gain there if we can manage our preventive maintenance more effectively.

Appreciate the time, Dave and Adam. Thank you.

Thanks, Ken.

The next question is from the line of Matt Brooklier with Longbow Research.

Hi, Matt.

Hey. Thanks, Dave and Adam. Good afternoon. So I had another question on pricing here. I kind of understood that we're seeing sequential improvement in the spot market, which is great. But I wanted to get a feel for if that lift in the spot market is starting to help negotiations on the contract side of things. Maybe if you could comment where contract pricing is trending currently and understood you don't have a ton of business that comes up at this time of year but maybe where contract pricing is trending and maybe compare that to where it was trending in 2Q.

Well, it's very early on. And this is kind of the quiet season for bids. So it's too early to really have a good answer for your question, I think. What will have a bigger impact on the discussions through bids will be how difficult it becomes to find trucks in November and December. And so between now and then, the inability for carriers to increase driver pay continues to play a factor that we haven't talked about that one yet. You have, according to one study I saw, less than 1% of carriers have increased driver pay in 2016. And given that we're now just about to November, my guess is that's not going to change between now and the end of the year. So who knows how many drivers we've lost to other industries that are maybe more mature and that least keep pace with inflation. So as we continue to see capacity leak out one way or another, that will largely determine how tight it is and how tight it feels. And then that will influence the bid season that really gets going as we get closer to the end of the year. And so there are some bids that begin here in the fall. But for the most part, those are activities that are really reserved to the first quarter.

Okay. So I guess a little too early to tell at this point but we're hopeful, we're seeing signs that we could be in for a better bid season next year?

Yeah, I think that's why you see – at least for us, we just look back at history to try and have a guide and try and help us to understand how this is probably going to work and play out. So that's why we reference 2013 going into 2014, because that was the last time we saw activities that seemed somewhat similar to what we're experiencing now. And back in those days – I mean that wasn't that long ago, I can still remember that. So, we went into that as late as February and March. We were reading articles written about the expectation that bid rates would be down 2%. And that, of course, proved not to be the case in the 2014 bid season. And then, of course, things changed in 2015 and there weren't those comments anymore. And so I wouldn't be surprised if we don't see a whole lot of mixed messages between now and into the second quarter of next year. And the truth of the matter is this is a B2B world. And so you have two businesses that are both trying to figure out how to work together and make it a win-win from a return perspective for both businesses. So you're going to get mixed messages and different points of view, and I imagine this will be no different than what that type of messaging looked like in previous cycles.

Okay. Appreciate the color.

Thanks.

Your next question comes from the line of Chris Wetherbee with Citi.

Hey, thanks. Good afternoon, guys.

Hi, Chris.

Want to touch a little bit on utilization and sort of the outlook on a revenue per tractor basis. When you look into the fourth quarter as you highlighted, I think, some improving sequential trends and when I look back to last year from a miles per tractor standpoint, it looks like comps get a little bit easier 4Q versus 3Q. And tying back to some of the comments you've made around sort of the end of 2013 and some similarities there, when you think about this progression to 4Q, do you think you can see sort of similar magnitudes and revenue per tractor, miles per tractor, those kinds of things? Just want to get a kind of sense of maybe what the trends that you're seeing ultimately might translate into results in the fleet.

Yeah. Appreciate the question. So, if you look at utilization this year so far, we improved at 1.8% in the first quarter then 1.7% and now 1.6%. And so fourth quarter we think that we can still be in that range, call it, up a percent and a half or so, we think is reasonable and I think we're on track for that. Then the comps obviously begin to become a little more difficult. I think last year we were about flat on our utilization in the fourth quarter of 2015 versus 2014. So this coming fourth quarter will be one of the more challenging comps that we've had. Now, we've made this improvement in so far what has been not the most robust freight market. And so we like our chances of making progress, if there's a little more tightness, a little more demand for our trucks going into 2017. So, hopefully that will help us in addition to the organizational shifts and some of the changes that we've made to try and improve on a miles per truck basis. As you know, it's been a major focus for us. It's frankly been long overdue for us to make progress in that area. And so we feel good about continuing the pace in fourth quarter and then next year we'll probably need a little help from the market to keep it – to try and make meaningful improvement on a year-over-year basis. But I don't think getting close to a 0.5% to 1% year-over-year improvement throughout 2017. I don't think that's unrealistic and I hope that proves to be a very conservative outlook.

And just to clarify, when you think about that for next year, that's basically on the assumption of a flat fleet, give or take?

Well, not necessarily. If we add trucks, we're going to add trucks when we feel like we're not going to negatively impact our miles. So, we try – I don't know if we ever have. I hope not. We try not to ever use an excuse that our miles weren't as good because we just added a whole bunch of trucks. So, as you know, the way we measure the utilization or miles per truck is based on our entire fleet. Every truck we're depreciating, whether it has a driver seated in that truck or not. So that is not just seated trucks. That's total trucks. And so we're very sensitive to when we add additional trucks because we know it puts pressure on that miles per truck which ultimately affects your revenue per truck. So I would say that I'm comfortable sharing that number even with some organic fleet growth, if we chose to do so in the second half of 2017.

Okay. That's very helpful. Appreciate the time, guys. Thank you.

Thank you.

And your next question comes from the line of Ravi Shanker with Morgan Stanley.

Hi, Ravi.

Thanks, good evening, guys. Hi. Thanks for all the detail on the anatomy of a truck cycle here. Really helpful in getting a sense of what you guys seeing out there. I guess the million or billion dollar question is, what's the catalyst that sets off that quick increase in the rates, as you said, and what's that been historically? Has it been predominantly supply driven or demand driven? Or do you need to see some kind of force majeure event like weather or something to set it off? Or is it just going to be a slow progression of those different things that you said you're kind of looking for and already seeing in your slides?

Well, I think that in the 36 years that the industry has been deregulated, it's come from both ways. It sometimes has come from the demand side, it sometimes has come from the supply side. For example, you could go back to a year like 1994, which probably had both going for it. You could go back to 2004, which probably had maybe more to do with the economy taking off, in that 2004 to 2006 period. And then if we then fast forward here to the time period of what we saw happen at the fourth quarter of 2013 and endured through the first quarter of 2015, that seemed to be almost exclusively supply-driven. And then, of course, we added a whole lot of trucks. So fourth quarter, for example, October of 2014, two years ago, as an industry we ordered 45,000 trucks, which was more than twice what the average would be and more than twice what we needed just to kind of maintain the average age. And so we did, as an industry, we flooded the market with trucks and found enough drivers to fit in. And so I think that number has been rationalizing since probably the midpoint of 2015. So we're now call it 15 months in a tough environment. And so I don't, so it can be, from my perspective, it can be demand or it can be supply or it can be a little bit of both. This go around, and the most recent cycle seems to be almost exclusively supply-driven. If GDP, which I've read some are expecting 2.25%, some are more optimistic and think it'll be more like 3% for the third quarter but even at a 2% GDP environment, that is stable enough given what's going on with supply, that…

It was. And fingers crossed that, that plays out. Just a couple of follow-ups on your truck fleet here. What's the max that you're comfortable pushing already a truck age to? And also, not to second-guess your truck fleet strategy here, because I don't think there's an easy answer to the used truck situation. But is there a case that if this yearly situation does play out like you just outlined, that the used truck market could be even worse next year?

Well, Brad Delco's question, I think, alluded to the fact that the small carrier might find themselves next year in a very difficult spot. And that might be a group that relies heavily on the used equipment world. So yeah, I think it's possible that used equipment or depressed used equipment prices could be here to stay for a while. So and that leads into the first question that you asked on how late or how long would you push out a trade cycle. Well, we're going to constantly evaluate the economics, and the economics of what maintenance costs are doing, the economics of what we could sell that equipment for. So we have not yet come to some hard, fast rule on how long we're going to do that. And it may vary based on the make and model of a truck, but one thing you can be sure is that we will watch it and evaluate the economics all along the way. And the way we buy equipment, we typically give ourselves some flexibility in that arena. So we might have a little more flexibility than most to be able to do that.

And we've flexed on our trade cycle in the past. We've been at five years before and we've brought it down even earlier than four years and have gone back up to four years. So we have experience in being able to be flexible when we trade our equipment and we know how to work through that.

And we have reached our allotted time for questions. And now I'd like to turn the conference back over to our presenters.

Okay, thank you, everybody, for joining us today. We appreciate the interest and support. We hope you have a great evening.

Thank you for your participation. This does conclude today's conference call, and you may now disconnect.