J.B. Hunt Transport Services, Inc. (JBHT) Earnings Call Transcript & Summary

Okay. Thanks, everyone. Sorry, we're a couple of minutes behind. We've got our intermodal panel now. We've got from Hub Group, Phil Yeager, President and COO; from J.B. Hunt, we've got Darren Field, President of Intermodal; and from Schneider National, we've got Jim Filter, Senior VP and General Manager of Intermodal. Thanks, guys, for being here. I appreciate everyone doing the panel together. This should be a good one. We're going to start with Phil from Hub. He's got just a couple of quick slides, and then we'll get into questions.

Great. Yes. If you could just look to the third slide, I just wanted to give a brief overview of Hub. Perfect. Yes. So as you're probably aware, we're an integrated supply chain solutions provider really focusing on great people, great customers. And as you can see, it's been recognized for that. Because of that, we were able to generate $3.7 billion in revenue last year, $160 million in adjusted operating income. If you look at our customer breakdown, we're 44% retail; 30%, consumer products; and 11%, durable goods. And we think that diversification is obviously going to help us longer term. We break ourselves down into 4 key segments from a business line perspective, Intermodal being the largest at 59%. We have 38,000 containers, 2,600 drivers and move our business on the Union Pacific and Norfolk Southern. We have a logistics business, which is 21% of revenue, mostly outsourced transportation management for our customers. But we completed an acquisition in December of 2018 of a company called CaseStack that does consumer product consolidation going inbound to retail that has been doing very well as of late. We also have our truck brokerage, which is mostly contractual freight in the full truckload space, and we've been expanding margins there. And lastly is our dedicated business, where we mostly do distribution center to store deliveries for our retail and consumer products line. So just wanted to give a brief overview and really appreciate, Scott, you having us on. Thank you.

We're missing you, Scott. Scott, we can't hear you.

Sorry about that. I was on mute for a second. Thank you, Phil. Grace, I think you could take Phil's slides down. Darren or Jim, any opening comments you guys wanted to make? Or do you want to go right into questions?

I've got a couple. I've just got an opening comment that I'd like to share.

Yes, that's great.

I think that before we get started, we had multiple meetings this morning, and I just wanted to highlight some themes from this morning that I think all of the audience would like to hear. I'm assuming that the other 2 members of our panel here today are going to agree with me when I come right out front and say, look, Intermodal is still a growth story. There is still ample runway for Intermodal to grow over the years. And I just want to get that out in front immediately. We spend a lot of time in these one-on-ones talking about what is the ability to grow Intermodal? And hey, there's 3 kind of key elements to growing Intermodal. What's the truckload capacity and pricing component, what's the role of fuel and what's the role of rail service? Well, right at the moment, 2 of those areas, truckload capacity and fuel, are not necessarily a catalyst for growing Intermodal. But I just want to remind everybody, that's a cycle. That will change. We will get through COVID-19, and capacity in the truckload market is going to tighten again. Fuel prices will climb, and rail service is actually contributing really nicely right now. I think across the board, the industry has experienced really, really significant improvements in service. And hopefully, our rail providers throughout North America are all listening. And I think the 3 of us would all agree that we want the rail providers to work alongside us to sustain that improved service as the economy returns, and we're looking forward to that opportunity to prove that Intermodal can grow. And then maybe a new fourth kind of catalyst is just the role that the carbon footprint plays in our supply chains for our shippers. I think today, more than ever, customers are beginning to care more about that, and Intermodal continues to be the most environmentally friendly method of shipping. And Intermodal is here to stay, and we'll continue to grow. It's all I've got, Scott.

I appreciate that, Darren. Jim, anything you wanted to just open with?

Yes. Well, first of all, thanks for having me here, really appreciate it. And the Schneider's Intermodal segment is our asset-based Intermodal service, which means that we own our own containers on our chassis, and nearly all of our shipments are done with company drivers. We use very, very few owner operators in our business and partners in the East. CSX is our partner in the East. BNSF is our partner in the West. And I think we're going to talk about this quite a bit. Certainly, the environment right now is not what we anticipated when we were coming into 2020, but the volumes that we're seeing today are certainly better than what was in our COVID-19 plan just a couple of months ago. Thank you.

That's great. And by the way, anyone, we've got a lot of people dialed in here. So anyone that has questions, feel free to submit them and I'll make sure we get to them. So Jim, I want to start with you, following up on that comment about maybe volumes being better than you feared heading into the situation. Can you give us an update on the volume trends that you're seeing? If I am remembering correctly, you talked about down in the -- maybe in the high teens in April. I think you said last week, down in the mid-teens, but maybe if I'm getting that wrong, correct me, but any update you can give there?

Yes. Yes. That's correct. In our earnings call at the end of April, we shared that volume was down in the high teens. But we were starting to see what we believe was merchants have a little bit of accrual. When that accrual was continued, we would call it sort of mid-teens at this point in terms of kind of hitting that trough, and we had a significant number of shippers that were completely churned off. So I can't get too much below not shipping at all, and that's kind of where we've improved from.

Now I'm going to get to everybody with the same question, but is there -- one of the things that we've been concerned about in the near term is that you actually had pretty decent imports in April expectations or that May and June are going to see a drop-off again in the imports. Do you view that as a meaningful risk that maybe we haven't yet seen the bottom in Intermodal? Or is there enough that's -- as other customers that were closed are reopening, there's enough there that gives you the comfort to say that we've probably bottomed here?

Yes. Well, the metrics that I'm really paying attention to, are retailers open? Are manufacturers open? And trying to get a gauge for what is sustainable demand. And I just think port volumes are things that can kind of rise up and down, and we're not necessarily going to change our business or making long-term plans because of a week here or there. Right now, there's a lot of variables out there, very fluid situation, but I'm paying more attention to the retail demands, the consumer, that's what we're really watching.

Okay. Darren, I want to ask you this question. I think on the call, you guys said April was down mid- to high single digits. You said that for the quarter, expect something in double digits, which is -- obviously could be a big range. But any update that you can tell us? Have you seen directionally something similar to what Jim is talking about of May being a little bit better than April?

Well, I don't know that I can comment specifically on May. I think that what I would say is from the time we made that statement on our Q2 -- Q1 earnings call in mid-April, I think we went first before the other 2. We highlighted at that time, it was probably a little -- it was a difficult time to try to be making assumptions on what exactly was going to happen. Since then, we're not ready to adjust any of those statements that we made. I think that clearly, there have been surprises, meaning we have some customers that are performing better than what we would have expected and segments that are performing better than what we would have expected at that time. But we probably have segments and customers that are actually performing worse than what we said there and maybe more so than just what's happened until now, May 15, or May 18 or 19 is we've got a lot of time left in the quarter, so I'm going to have a hard time making an update to that statement about volume. I do think that we're positioned well to outgrow the industry and feel confident that we will grow faster than really the whole intermodal industry collectively, and we're in a good spot to do that.

And how about the question I asked Jim about imports, if they take another step down, which I think is expected in May and June. I think 40% of your Intermodal is maybe tied to port activity. Do you -- does that tell you that maybe we haven't yet hit the bottom in Intermodal?

Yes, I think our experience at the end of March and April was that imports really, really fell down significantly, and that probably impacted our volume a fair amount. I think as it's one of the reasons I'm concerned about delivering any kind of attention to volume improvement from what we said is as we go into June, I expect to experience another decline. I'm not ready to say that I think we -- I guess, I don't anticipate it becoming any worse than kind of the weakest volume week we've experienced so far. But I'm still also kind of moving on assumptions and what kind of forecast we're getting from our customers, I feel for them. I don't think that they have a lot of great visibility themselves into what to expect with Intermodal volumes in the back half of June in particular. So we certainly stand to have some challenges with weaker imports. But I don't think -- I guess I would say I think we've hit the bottom, but I guess we might bump up against the same bottom again.

Okay. And then, Phil, sort of same question for you. I think April was down about 16% on volume. Any update you can give us on quarter-to-date or May? Do you think we've hit the bottom for you guys yet?

Yes. Just to give you a little bit of higher level context. When we made that statement, about 20% of our customers were actually closed for their operations. 5% had a significant impact to their business, meaning close to 50% impact on volumes. And the remaining 75% were actually performing relatively well. Probably not a full tilt, but close to it, and some were seeing surges in demand. We certainly saw some improvement in import volume. I agree with you that I don't think that, that is going to be sustained. But our anticipation is that we're going to see the Intermodal volumes kind of move with those factors of truckload capacity being readily available, import volumes and a continuing environment that has lose capacity. So we're set up for that. We're seeing our other business units perform well. I would tell you, our logistics segment is bringing on new customers. CaseStack is surging, and we're holding up well in our dedicated business as well.

Okay. And then now let's talk about Intermodal pricing trends. I'll start with you, Phil. I think you talked about expectations for low single-digit reductions in Intermodal pricing. Anything changing in terms of that expectation? How would you characterize the competitive environment right now?

Yes. No, I don't see that changing. I would tell you, it is a competitive environment. It really -- varying by length of haul. The longer haul lanes, obviously, is going to be more intra-Intermodal competition, given the discount that Intermodal still has to spot truckload, and the shorter length of -- lengths of haul is very competitive with the truckload sector as well. And as Darren highlighted, I think lower fuel prices is not going to help us in the short term there as well. But I would just highlight, it is competitive, but we're continuing to see volumes and awards that indicate strength when the economy returns.

Darren, what's your perspective on Intermodal pricing, maybe given any kind of update on bid season? Does down low single digits sound about right? Your views of the competitive dynamic right now. Let's start with the Intermodal competitive dynamic. We'll get to the Intermodal versus trucking there.

Well, I think that Phil probably highlighted it pretty well. I think as we came into the year, we knew that truckload pricing would apply some pressure in markets. And hey, fuel was falling before the pandemics. So certainly, we had -- we probably all felt some pressure from that early on. I think bid season was going about like we would have expected it to. The truckload market, I think, has more negative pressure on it than even the Intermodal market. So we're hanging in there, but at the same time, there is fierce competition, and that is along the lines of both truckload and other Intermodal competition. So that's real. And -- but at the same time, I don't think to the bids that have completed, I would say anything has been surprising. I think the bids that are yet to finish could be challenging for everybody, just given the timing and some of the uncertainty today around demand and challenges in the future on rail networks and creating balance for our various networks, All 3 of us on this panel run a network business, so we all have elements of our business that complements another portion. And so everybody is aware of that, and we're all -- I think, we're all very good at what we do and compete fiercely in a lot of ways.

Right. So Darren, you said earlier that you're confident that whatever the Intermodal market does, you'll outperform that in second quarter, which I think is really a function of the some of the share gains that you guys had really starting in the back half last year that you just haven't lapped yet. Are you approaching the market right now trying to take additional market share? Or is your comment more a function of what you already took seemingly a year ago?

I think it probably has more to do with the lapping from the back half of last year. I mean bid season this year has been unusual. There's been a lot of opportunities to just negotiate and maintain what is your own share, and there's a smaller ability to go in and look at new opportunities or maybe compete for somebody else's share. We're always going to be focused on looking for truckload highway conversion to Intermodal first. And that's probably slower this year than it's been in the past. I mean truckload rates are down. And customers that have historically used highway services first are a little less likely to go through the process of learning what Intermodal can do right now. They're far more tactical in their approach and trying to just make sure that we're providing supply chain to and sourcing the orders for their company. As the year goes on, those same entities may look for opportunities in reducing costs. And the question will be, can Intermodal provide a cost benefit versus truckload at some point in the future, and we'll have to wait and see and look at those, one opportunity at a time.

Okay. Jim at Schneider, what can you add to the Intermodal pricing discussion, anything different?

Yes. Well, I agree with what the other gentleman shared here. One additional point here, I'd say there's about 1/3 of the bids that are already complete. They're implemented. Of 15% that are complete, just not implemented yet. And then you have about 1/3 that are very close to completion here. And I know you wanted to kind of focus just on Intermodal, but Darren was going there, it's very difficult this year to split it out, not talk about truck because that -- there is some competition there. But what we really focus on is are we competing against long-term truck rates? Are we competing against a broker and some spot rates? And the strategic shippers are really spending time thinking about, is this rate sustainable? And I think Intermodal still completes -- competes very favorable to those long-term truck rates. And we have access to what the long-term truck rates are. And we feel really good about how we're positioned there. But certainly, someone can go up in the spot rate today and find some lower rates. The question for those types of shippers that are thinking very tactical, is how long is that going to last? And frankly, the more shippers that go down that path, it just creates an opportunity for us later and potentially the pricing market changes. Obviously, we prefer to have a more disciplined market that shippers are thinking long term, they're buying with capacity in mind.

That makes sense. And so last year, Intermodal pricing clearly held up, better outperform truckload pricing. Is this a similar -- from the bids that you've seen so far, Jim, because you guys have Intermodal and truckload, obviously, is that -- is the same thing playing out again this year?

Yes. I'd say we're seeing very similar changes between truckload and Intermodal on a contract basis.

A contract. Okay. And where would you -- how would you characterize the difference in rate on a comparable lane, we're on the same lane, where they compete? How much -- what is that pricing discount now Intermodal versus truckload?

Yes. And it depends on the lane. And I've seen a number of metrics out there that I think it's a little difficult because sometimes they're comparing spot to a contract rate. But in most lines, you're still seeing at least a 15% discount. And there's other lanes longer distance that the discount is longer or greater than that.

Okay. So your point, and I think Darren's point earlier, is that, hey, the spot market is under cyclical pressure right now but -- like night is day, right? The spot market is going to get stronger again, right? And at that point, you say that the discount of Intermodal versus truck that you still see on a contract basis will become even more apparent, and that's when you think Intermodal starts to grow again?

Yes.

Right. Is that sort of everyone's view here?

Yes.

Yes.

The question is, do the rails need to do something to help here? And are they willing to do something to help here to give you any relief in this market? In either relief that you keep from a margin perspective that needs to get passed on to the customer? But do the rails feel like they need to do something here to help Intermodal grow again? Or is the rail's view, maybe your view, hey, it's just cyclical, it's going to grow again. We don't need to do anything, and we're certainly not willing to lower our rates. I don't know -- anyone have a view, maybe, Phil, if you want to start? And let's see if anyone...

Sure. I'd say, yes, this is cyclically driven. I think you're going to see capacity exit the market. CapEx is being cut. And so I do think there is a bottleneck that is coming. And when that happens, is really what the debate is. We keep a really open dialogue with our rail partners. I think that's extremely important. They need to know what's going on in the market, what we're seeing in bids, the feedback that we're getting. And so we keep that dialogue very open, and we'll continue to do so.

Jim or Darren, anything different that you want to add on the -- or maybe before we get to Jim or Darren, Phil, just to maybe follow-up, like, do you -- more directly, like are you seeing the rails in any way willing -- any willingness to give up some of their rate that you pay them to help this Intermodal dynamic?

We have long-term agreements in place with our rail partners, and we're going to keep an open dialogue with them.

Jim, Darren, anything different to add there?

Go ahead, Jim.

Okay. Thanks. Yes. So I'd agree with that point that very similar long-term deals in place. But certainly, the railroads don't want to give up a bunch of business to go over the road. And so generally speaking, they do understand the competitive dynamic and don't want to lose share and are going to work with us to make sure that we maintain that share.

Does that mean that you actually can see rail costs go down this year? Or is it that they're just not going to go up as much as maybe they went up last year? How do I interpret what you're saying?

Yes. So we've shared this that our deals are market based, so they go both directions. And with rates going down, we would expect to see costs go down as well.

Darren, your thoughts here?

So I think everybody is accurate, and that the railroads care a lot about volume right now. They're concerned. At the same time, they feel like they've accomplished a lot of hard work in order to generate maybe a return improvement and are focused on that. But they've -- all of the comments around focus on yield and that sort of thing. At the end of the day, we are in a competitive business. And even if contract truckload pricing were to only be down in the 2% to 3% range, Intermodal competition can't necessarily continue to face a decline of truckload pricing in this 2% to 3% range if Intermodal prices aren't also trying to compete against that. So the reality is in order to retain -- in order to grow new opportunities and bring highway conversion to the rail, I think the railroad has to participate somehow. If it's just a matter of let's defend and retain what we already have, that might be a little bit different. It may not be necessary for the railroad to really participate in a big way there. But certainly, when we're talking about better ways to grow Intermodal market off of the highway and not just be one Eastern railroad versus another Eastern railroad for share, we really all want to grow the Intermodal business off the highway. And I do think the Intermodal -- the railroads have to participate somehow. And ultimately, whatever amount they're willing to participate, finds its way to the customer. And then we, as marketing channels, look for better ways to drive efficiency onto that rail system and see if we can't help that railroad drive cost reduction to offset any kind of change in price. So that's going to be our focus is how can we, together with the railroad, drive some efficiency that can be used to pass along to the customer?

Okay. So I want to then -- Darren, I want to follow-up with you -- there's a background noise. Hopefully, not bothering anyone else. We're good. Okay. So your -- I want to ask a follow-up on that with respect to sort of your margin -- long-term margin targets. You've been consistently talking about 11% to 13%. We've been below 11%, I think, if we adjust for all the arbitration costs for the last 4 years. Do you still feel comfortable with 11% to 13% as the right long-term range? And if so, why? And then maybe alternatively, are you willing to sacrifice that margin expectation a little bit in order to get some better Intermodal growth? And I'm not just talking about this year, I'm talking about longer term.

Sure. Okay. I understand the question. So we have not changed our long-term margin guidance. We will always have 11% to 13% as our goal. It's been that way for many years now. You're exactly right. It's in -- the last the 4 years have been a challenge in that area. During that same 4-year window, we have increased rail costs associated with an arbitration that you talked about. We have kind of a capacity crunch window in '17 and '18 when driver wage increases were growing faster than anything we've ever seen. We've gone through PSR implementation at -- really at both the Eastern railroads so that we've seen and experienced some lane closures or just general network disruption. And now here we are in a global pandemic. So I think that while we still believe that, that is the correct long-term margin expectation, we think that in the first quarter, we saw some opportunities that we were on a quality trajectory, albeit pretty short, given what's happened with COVID-19. But we still stand behind 11% to 13% and believe that as we grow our network and we do so with balance in mind, and we do so understanding that we have to be competitive with truckload pricing, but we also have to be more aware of just our return profile, what kind of return on our investment capital are we able to produce -- and we do care more about that than we do hitting in 11% to 13%. Most of the time, the 11% to 13% should be sufficient. But if you find the right kind of business to grow in a margin target that might be below that 11% to 13% but it satisfies our return thresholds or expectations, then, yes, we're willing to -- I guess, I'm not sure sacrifice is the right word. I think we're targeting a return profile and the margin that comes with that return profile is simply an outcome. And so that's our focus.

Two, hopefully, just very quick follow-up for you, Darren, because then I want to get Jim and Phil involved in this discussion, too. Can you say is the arbitration definitively behind us? And then how many pricing cycles do you think we need? It's not this year, but '21, '22? How many pricing years do we need to get back to 11% to 13%?

Okay. What I can tell you...

Hopefully quick.

We don't talk a lot about arbitration. We've shared that we have a final award. We did share that we had to make an adjustment in the first quarter. To the best of our knowledge, we're done making accruals. And so I really don't have any further update as it relates to arbitration. In terms of pricing cycles for us to achieve our margin target, I think that it depends on what's a normal pricing cycle. When can we get back to -- we're just executing a bid. We're looking to fill empty segments, and we're trying to drive efficiency that way. But certainly going in through the rest of 2020, not knowing what to expect next year, I'm not going to tell you that I think that's on the next 1 year. I would probably say it should be at least probably 2. But we will certainly have that as our goal to accomplish an even 1 cycle.

Okay. So let's get -- maybe bring Jim from Schneider into the margin discussion. I think your longer-term guidance on Intermodal margins, I think, is 10% to 12%. You were there last year, right in the middle at 11%. Do you think you can stay in that 10% to 12% margin range this year? Does that feel like that's still the right margin range? Do you -- Darren didn't like the word sacrifice, but I don't have a better word off the top of my head. Maybe are we willing to sacrifice that 10% to 12% range to get to more Intermodal growth?

Yes. So 10% to 12% is our kind of our long-term objective. And so you're right, we're right in the middle of last year, the year before 2018. We were -- we are closer to 14% margin. So what we're saying is normally, we're going to be in that 10% to 12%. Last year also wasn't a perfect year. There were some challenges. The tariffs had some impact to our business. It was -- there were plenty of other challenges. But we believe, normally, we're going to be 10% to 12%. I think this year might be a little bit challenging, but we're not going to go out there and take business that's not in alignment with the long-term strategy here of maintaining that 10% to 12% margin.

And do you still have a view or a goal to increase Intermodal at the -- as a percentage of the mix of the overall business of Schneider, do you think that grows faster than your overall trucking business over the medium term?

We don't compete against our other business segments. So it's not a race against Intermodal versus truckload or logistics. We want to grow all of them. So if we were to grow our logistics or our truckload business, I'd be the first one to pat them on the back. We want to grow all of them as quickly as we can and with profitable business.

Okay. And then, Phil, for you on the margin discussion, I guess we don't get Intermodal margins. We get corporate margins. The goal has been to get to 5%. We were making some nice progress last year. It feels like we're going to take a step back this year. Do you still feel like you can get to 5%? How many, I guess, pricing cycles do you think we're going to need to get there?

Yes, sure. So obviously, with the 5% goal, we feel as though we did achieve that in the third quarter of last year. But obviously, we want to do that on a full year basis going forward. Certainly, pricing is a key component of our ability to continue to expand margins. But as we've highlighted on our most recent calls, we put into place $60 million in profit improvement initiatives last year, another $40 million this year that we're ahead of schedule on. And so really focusing on improving our drayage network, taking more in-house, investing in more of a company truck model. And we're seeing some success with that and continuing to utilize our drivers more. So the other piece of that, and I think Darren highlighted it, is the fluidity and growth of the network in a more balanced fashion, really getting rid of repositioning costs and ensuring that we're winning business that fits into the network that really helps us hit those targets. So long term, yes, we still feel confident in that, and that's the goal that we're setting. And I would just tell you in our other service lines, we are continuing to see really good margin improvement, in particular, in logistics and brokerage.

But in the near term, Phil, if -- we've got good cost performance, but if pricing and Intermodal is down, volumes are down, I'm guessing the market dynamics more than overwhelm the cost performance. Is that the right -- I mean, that's what we saw in first quarter. Is that the right way to think about that?

Yes. As you saw on the slide, I mean, 59% of our revenue is Intermodal, right? So yes, that is going to have a significant impact. However, we do think that when there is a rebound, when we see more market cooperation, that we're going to be growing off of a much stronger baseline that will allow us to achieve that.

Okay. This is going to be one for everybody. I'll start with Darren just because he's the one that mentioned it. You mentioned carbon footprint is sort of the fourth driver for Intermodal, and a bunch of people have asked if you can follow up. Which types of customers' cargo are most interested in carbon benefits? Do you think it's realistic, someone else, will a shipper pick carbon over cost? So -- but just -- that will be a question for everybody to the extent, are you actually hearing this from customers as it relates to carbon footprint as a reason for Intermodal?

Well, I'm not going to mention customers by name, but certainly, we have customers that have highlighted, do you have the opportunity to secure electric vehicle capacity to utilize on my business, for example, in order to provide the drayage? Because I want to be carbon -- I want to show an improvement in my carbon footprint throughout my organization, and I have a goal to accomplish this in X number of years, as an example. And so that conversation is beginning to play out more and more often. And so I just think it's a more common discussion today than it has been for the last 4 or 5 years. There's clearly some pressure on some of our shipper organizations around what are you doing to eliminate carbon footprint, and we just want to highlight that Intermodal is one of the very best ways, if not the best way, to do that inside of transportation. So I want to be cautious here. Look, we don't have -- it's not like 80% of our business that customers are coming in saying, "Show me how you're going to reduce carbon and I'll give you more business." It's not yet that level of amplification. But I think that over the next 4 or 5 years, I'm expecting it to be a meaningful topic and something that will drive growth in Intermodal.

Jim or Phil, anything you want to add on this carbon discussion?

Yes. So 5 years ago, we were talking to customers about carbon footprint. And now at least customers are talking to us about it and our customers that are using it in their decision-making. So I'd agree with Darren's points.

I'd just say it's a factor, right? It's not a decision maker. We have customers that we have scorecards that we review at our QBRs with them on carbon footprint. And so we are seeing it as a more prevalent discussion. But certainly, at this point, at least not a trade-off that people are willing to make when there's a cost decision, but becoming more and more important.

Someone asked me to ask a question about onshoring and reshoring. So I'm going to ask sort of 2 parts to it. The type of things that move in Intermodal, do they naturally, you think, lend themselves to the extent -- and I guess I'm talking about your -- the imported freight that you move in Intermodal, those types of goods, do they lend themselves to being made in the U.S. or Mexico? And then do you think in aggregate, is Schneider, is J.B. Hunt, is Hub, will they benefit or get hurt if we see an accelerating trend of onshoring or reshoring? Maybe we'll start with you, Jim.

Yes. So I think you hit the right point. The types of products that we're bringing in, most of them don't lend themselves necessarily being made everywhere in the U.S. But certainly, Mexico is a place that we could see some growth there, some changes. But these things take place over a very long period of time. So here in North -- in Wisconsin, we're still waiting for our new big plants -- actually between where Phil and I live, there's supposed to be a really large plant growing up there. And that's -- that was announced. And here we are several years later, and there still isn't a plant there, and there was a lot of work done there. So I -- while things will change over time. Generally, we have not seen them change quickly over time, but we believe that Mexico could absolutely be one of those places that we see more growth, and we feel really good about our capabilities there.

Is your point, hey, it's one thing if we start making masks in the U.S. instead of China, which maybe that makes a lot of sense, but like some of the general merchandise that shows up in Intermodal, that's where it's tougher. Is that your point?

Yes. So your playground sets and those really big, bulky things, items are probably still difficult to make those in -- throughout the U.S.

Phil or Darren, anything to add on the onshoring question?

Yes. I just think a lot of companies are thinking about longer-term supply chain risk right now and looking at all of their options. Clearly, cost is going to be a play here. And manufacturing in the U.S. is -- while it would be great to see that, from a cost perspective, it's going to need to change quite a bit to be able to get folks to make that sort of investment or business decision. I think what you could see is maybe the port activity or the port locations that actually are growing may shift as a result of this as things may be moved to be developed out of China to perhaps Southeast Asia just from a sourcing perspective. But if there is near shoring to Mexico, that would obviously benefit Intermodals, and I would agree with Jim.

Darren, maybe just ask you one different -- because we're getting close on -- we're almost basically out of time. Is e-commerce, in your opinion, a good or a bad thing for Intermodal in aggregate?

I think e-commerce is a significant growth opportunity for Intermodal. Inventories have to be close to the population centers. And whether an item is imported or it's manufactured, it still has to get distributed into locations close by to population centers. Certainly feel like e-commerce retailers all have Intermodal as a key component of their supply chain thoughts and are continue to work with all the Intermodal channels to improve on supply chain awareness that they can use inside their programs for planning purposes for e-commerce.

So your point is, we take it into that distribution center or fulfillment center. So the move inbound to that DC or fulfillment center is not a short-haul move that we lose out on.

That's right.

We're not going to take it out of the fulfillment center, but we'll still take it in.

That's right. Absolutely.

Okay. And then just last one. If anyone is willing to venture a guess -- and it's not guidance, it's just a guess. When do you think Intermodal volumes turn positive again? Darren, you made that bold prediction middle of last year about it getting there, so maybe I'll start with you. When do you think we get there?

I think at this point, given the uncertainty of what's going on in the world, I'm afraid for the industry, that could be -- best case would be fourth quarter, most likely first quarter of next year.

Phil, Jim, anything different?

Yes. This is so complex because we're not just talking about an economic issue. We're talking about a biological issue going on here as well. So I'm not even willing to venture a guess here because you have some really big factors that aren't normal items that the 3 of us would be participating.

I generally agree with the sentiment. I do think there's a lot of unknowns. And while I'm hopeful to see a return to significant growth, I think we're talking about fourth quarter or next year.

Okay. All right. We're going to wrap it there. I want to thank you guys a lot for being willing to do it, this forum, the 3 of you together. I think it makes for a really interesting conversation, and I really enjoyed it. So thank you guys. Glad to see you guys are doing well.

Thank you. Stay safe.

Speak soon. All right. We've got our next panel that's going to get going in 1 minute. It's our final panel of the day. It's a truck, regulatory and capacity panel.

Thank you.

Thanks, guys.

Thanks.