freight transportation: freight pulse 40 shipper survey...

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January 11, 2016

Freight Pulse 40 Shipper Survey: Shippers' Macro Outlook Remains Relatively Unchanged

M O R G A N S T A N L E Y R E S E A R C H Morgan Stanley & Co. LLC

N O R T H A M E R I C A

Alexander Vecchio, CFA [email protected] (212) 761-6233 Ravi Shanker [email protected] (212) 761-6350 Tracy Huang [email protected] (212) 761-3373 Diane Huang [email protected] (212) 761-8290

North America Freight Transportation

In our latest shipper surveys, respondents' economic outlook remained relatively unchanged from our previous survey with sentiment continuing to trend similar to 2013 levels. Shippers continue to report high inventory levels and the % of shippers expecting to reduce inventories remains high relative to history. Volume growth expectations remain flattish for Rail and +1-2% for TL/LTL while rate growth expectations continued to decelerate across all modes. Despite ongoing improvement in Rail service reliability, shippers expect Intermodal volume growth to decelerate over the next 6 months as falling fuel prices and looser TL capacity make TL more competitive.

Freight/Macro Highlights: (1) Shippers’ Economic Outlook Remains Relatively Unchanged; (2) Automotive Shippers Most Constructive on Macro; Chemical Shippers Least Constructive; (3) Inventories Still Elevated, with % of Shippers Expecting to Reduce Inventories Still Relatively High; (4) Expectations for Capacity Tightness Continue to Decline Across All Modes ex. Barge; (5) Barge and Rail Service Levels Show the Most Sequential Improvement.

Rail Highlights: (1) Rail Volume Growth Expectations Remain at 0.5%; (2) Shippers Expect Rail Rate Growth to Decelerate in Next 6 Months; (3) More Shippers Expect Rail Spend to Remain Unchanged Though Rate Negotiations Have Become More Difficult; (4) Avg. Intermodal Discount to Truckload (Ex. Fuel) Returns to Historical Average of ~15%; (5) Rail Service Reliability Continued to Improve Sequentially in 4Q15.

Truck Highlights: (1) Intermodal Volume Growth Expectations Decelerate to the Lowest Level Since Sept 2009; (2) Rate Growth Expectations Decelerate to ~1% across All Truck Modes; (3) Shippers Expect Capacity to Loosen Across All Truck Modes; (4) Improving Rail Service a Larger Factor Driving Intermodal Growth, but Fuel Efficiency Remains Most Important; (5) More Shippers Reporting that TL Price Discounts Have Offset Some of the Rail Cost Differential.

Parcel Highlights: (1) Air, International, and Ground Parcel Volume Growth Expectations Edge Lower; (2) Parcel Pricing Growth Expectations Remain in the 1-2% Range over the Next 6 Months; (3) Shippers Expect B2C as % of Total Parcel Shipment Stay Roughly Unchanged from Prior Survey Results; (4) Shippers See Parcel Carriers Becoming More Aggressive in Trying to Win Business; (5) According to Shippers, Discounts Off List Rates Increased Seq. for FDX Air & Ground.

mailto:[email protected]




M O R G A N S T A N L E Y R E S E A R C H

January 11, 2016 Freight Transportation

Alexander Vecchio, CFA, (212) 761-6233, [email protected]

2

Freight Pulse: General Freight and Macro Highlights

General Freight and Macro Highlights





3

Freight Pulse: General Freight and Macro Key Takeaways

1. Economic Outlook

2. Economic Outlook by Industry

Automotive Shippers Most Constructive on Macro; Chemical Shippers Least Constructive

3. Inventory & Restocking

Inventories Still Elevated, with % of Shippers Expecting to Reduce Inventories Still Relatively High

4. Capacity Expectations

Expectations for Capacity Tightness Continue to Decline Across All Modes ex. Barge

5. Service Trends Barge and Rail Service Levels Show the Most Sequential Improvement

Shippers’ Economic Outlook Remains Relatively Unchanged





4

5.6

7.1

4.2

5.6

4.4

5.4

6.25.9

5.2 5.1

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0StrongEconomy

No Change

Recession

1. Shippers’ Economic Outlook Remains Relatively Unchanged

Source: Morgan Stanley Freight Pulse Surveys

State of the Economy from Shippers’ Perspective





5

1

2

3

4

5

6

7

8

9

10 Food and Beverage Retailing Chemical

Manufacturing Metals and Mining Automotive

StrongEconomy

No Change

Recession


Shippers’ View of the Economy by Industry

2. Automotive Shippers Most Constructive on Macro; Chemical Shippers Least Constructive





6


-70%

-50%

-30%

-10%

10%

30%

50%

70%

-50%-40%-30%-20%-10%

0%10%20%30%40%50%

Apr 0

9

Apr 1

0

Jan

11

Jun

11

Dec

11

Jun

12

Dec

12

Jun

13

Dec

13

Jun

14

Dec

14

Jun

15

Dec

15

Net O

rder

ing

/ Inv

ento

ry(%

Hig

her Y

/Y -

% L

ower

)

Net C

hg in

Ord

erin

g Le

ss N

et C

hg

in In

vent

ory

(Ordering - Inventory) (LHS)

Net Ordering (RHS)

Net Inventory (RHS)

45%44%43%43%46%43%41%41%46%46%45%36%40%41%45%49%

42%42%51%

37%35%

35%33%44%39%37%

34%45%44%37%34%39%

45%37%32%33%30%

31%39%

38%

45%43%

20%23%

13%17%17%23%

14%15%17%20%17%19%23%26%

23%21%26%

20%11%

18%22%

0%10%20%30%40%50%60%70%80%90%

100%

Jan

11A

pr 1

1Ju

n 11

Sep

11D

ec 1

1M

ar 1

2Ju

n 12

Sep

12D

ec 1

2M

ar 1

3Ju

n 13

Sep

13D

ec 1

3M

ar 1

4Ju

n 14

Sep

14D

ec 1

4M

ar 1

5Ju

n 15

Sep

15D

ec 1

5

% o

f Res

pond

ents

Increaseinventory levels

Reduce inventorylevels

Maintain currentinventory levels

Shippers' Net Y/Y Orders vs. Net Y/Y Inventory Shippers' Inventory Plans

3. Inventories Still Elevated, with % of Shippers Expecting to Reduce Inventories Still Relatively High





7

4. Expectations for Capacity Tightness Continue to Decline Across All Modes ex. Barge


5.1 5.1 5.0 4.9 4.8 4.84.4

4.1

3.03.54.04.55.05.56.06.57.07.58.0

Barg

e TL

Rail

(car

load

)

Inte

rmod

al

Regi

onal

LTL

Nat

iona

lLT

L

Airf

reig

ht

Oce

an

Jun 15 Sep 15 Dec 15

Abundant

Very Tight

Projected Capacity in 6 Months





8

5. Barge and Rail Service Levels Show the Most Sequential Improvement

How would you rate service levels among different modes of transportation for the past 6 months?


-0.1

0.3

0.20.0

0.4

-0.1

0.30.2

0.6

0.40.3 0.3

0.30.2

0.0 0.0

-0.2

-0.1

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

Barge Rail(carload)

Truckload Intermodal Ocean Airfreight NationalLTL

RegionalLTL

Sequ

entia

l Poi

nt C

hang

e

Sep 15 Dec 15

Poor

Excellent





9

Freight Pulse: Railroad Highlights

Railroad Highlights





10

Freight Pulse: Rail Key Takeaways

1. Rail Volume Rail Volume Growth Expectations Remain at 0.5%

2. Pricing Shippers Expect Rail Rate Growth to Decelerate in Next 6 Months

3. Spending More Shippers Expect Rail Spend to Remain Unchanged Though Rate Negotiations Have Become More Difficult

4. Intermodal Avg. Intermodal Discount to Truckload (Ex. Fuel) Returns to Historical Average of ~15%

5. Service Trends Rail Service Reliability Continued to Improve Sequentially in 4Q15





11

1% 1% 1% 3%

16%

26%

32%

15%

3%0% 0%

0%

5%

10%

15%

20%

25%

30%

35%

-25%+ -25% to -16%

-15% to -9%

-8% to -4%

-3% to -1%

NoChange

+1% to+3%

+4% to+8%

+9% to+15%

+16% to+25%

25%+

% o

f Res

pond

ents

1. Rail Volume Growth Expectations Remain at 0.5%

Source: Morgan Stanley Freight Pulse Surveys; Note: Mix of rail respondents is skewed toward manufacturing & intermodal and not coal, despite the fact that coal is key to overall rail industry trends

0.2

1.8 1.6 1.82.6

3.32.6

1.50.9 0.9

1.3

0.5 0.7 0.8 -0.1

-2.0-1.5

2.62.0

2.4

4.03.3 3.2

2.2 2.53.1 3.1 3.2

2.4

3.4

2.4 2.43.1 2.9 2.9

1.92.6

1.7

0.5 0.5

-3-2-1012345

Nor

mal

ized

Exp

ecte

d Vo

l. Tr

endYoY Volume Growth Expectations for Next 6 Mo. by Range

MS Expected Rail Volume Change Index





12

2.9%0.0% 1.5% 0.0%

4.4%

29.4%26.5%

32.4%

1.5% 1.5% 0.0%0%

5%

10%

15%

20%

25%

30%

35%

-15%+ -15% to -11%

-10% to -6%

-5% to -3%

-2% to -1%

NoChange

+1% to+2%

+3% to+5%

+6% to+10%

+11% to+15%

15%+

% o

f Res

pond

ents

2. Shippers Expect Rail Rate Growth to Decelerate in Next 6 Months

2.7

1.9

1.0

2.21.92.6

4.4 4.4

5.6 5.9

3.53.33.5

2.72.72.6

1.2

2.53.13.1

4.33.6

3.73.5 3.6

2.52.82.62.62.42.62.42.9

2.72.73.2 3.33.4

1.71.4

01234567

Nor

mal

ized

Exp

ecte

d R

ate

Tren

dYoY Rate Growth Expectations for Next 6 Mo. by Range

MS Expected Rail Rate Change Index






13

Rail Spend Forward 6 Month YoY Growth Expectations


3. More Shippers Expect Rail Spend to Remain Unchanged Though Rate Negotiations Have Become More Difficult

58% 60% 66% 64%50% 50%

25% 28% 18% 22%

30%40%

12% 16% 14% 20%10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

3Q15 4Q15 3Q15 4Q15 3Q15 4Q15

% o

f Res

pond

ents

Decrease

No Change

Increase

All Shippers Large Shippers Small ShippersAll Shippers Large Shippers Small ShippersAll Shippers Large Shippers Small ShippersAll Shippers Large Shippers Small Shippers

Rail Rate Negotiations: Rate the Difficulty of Recent Rate Negotiations

5.6

6.1

6.7

6.9 7.0 6.8

7.0 7.0

6.9

6.3

6.8

6.4 6.6

6.5 6.4 6.4

6.8

6.3

6.9 7.0

6.9 6.7

6.2

6.7

5.0

5.5

6.0

6.5

7.0

7.5

Sep-09

Apr-10

Sep-10

Jan-11

Apr-11

Jun-11

Sep-11

Dec-11

Mar-12

Jun-12

Sep-12

Dec-12

Mar-13

Jun-13

Sep-13

Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

Mar-15

Jun-15

Sep-15

Dec-15





14


12%

13%

14%

15%

16%

17%

18%

19%

20%S

ep 0

6

Sep

07

Oct

08

Sep

09

Sep

10

Ap

r 11

Sep

11

Mar

12

Sep

12

Mar

13

Sep

13

Mar

14

Sep

14

Mar

15

Sep

15

Ave

rag

e In

term

od

al %

Dis

cou

nt

vs. T

L

Discount Excluding Fuel Historical Average (ex. Fuel)

What discount is being offered in the marketplace for intermodal services when compared to TL services in a similar lane?

4. Avg. Intermodal Discount to Truckload (Ex. Fuel) Returns to Historical Average of ~15%





15

5. Rail Service Reliability Continued to Improve Sequentially in 4Q15

5.76.25.96.05.75.45.45.25.15.55.35.65.56.16.16.16.25.96.06.06.26.26.26.16.36.26.76.66.56.56.15.76.05.85.95.85.76.16.2

02468

10Value for Dollar (Scale 1 = Worst to 10 = Best)

6.16.16.56.46.15.95.45.65.85.96.15.76.36.26.66.96.36.15.85.55.65.85.65.86.05.95.96.26.66.06.35.75.05.25.35.24.95.55.76.1

02468

10Service Reliability (Scale 1 = Worst to 10 = Best)






16

Freight Pulse: Trucking Highlights

Trucking Highlights





17

Freight Pulse: Trucking Key Takeaways

1. Truck Volume

2. Pricing Rate Growth Expectations Decelerate to ~1% across All Truck Modes

3. Capacity Shippers Expect Capacity to Loosen Across All Truck Modes

4. Intermodal Use Improving Rail Service a Larger Factor Driving Intermodal Growth, but Fuel Efficiency Remains Most Important

5. Intermodal Cost More Shippers Reporting that TL Price Discounts Have Offset Some of the Rail Cost Differential

Intermodal Volume Growth Expectations Decelerate to the Lowest Level Since Sept 2009





18

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

Jan 02 Jun 03 Mar 05 Sep 06 Mar 08 Sep 09 Jan 11 Sep 11 Jun 12 Mar 13 Dec 13 Sep 14 Jun 15

Year

-ove

r-Yea

r % C

hang

e

Truckload Intermodal Regional LTL National LTL

1. Intermodal Volume Growth Expectations Decelerate to the Lowest Level Since Sept 2009


Indicate the YoY % Change You Expect in Your Organization’s Volume





19

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

Jan 02 Jun 03 Mar 05 Sep 06 Mar 08 Sep 09 Jan 11 Sep 11 Jun 12 Mar 13 Dec 13 Sep 14 Jun 15

Year

-ove

r-Yea

r % C

hang

e



2. Rate Growth Expectations Decelerate to ~1% across All Truck Modes

Indicate the YoY % Change You Expect in Your Organization’s Base Rates





20

7.5

6.6

5.6 5.6

7.2

6.25.6 5.6

6.6

5.95.5 5.4

5.85.4 5.2 5.15.1

4.9 4.8 4.8

1

2

3

4

5

6

7

8

9

10

Truckload Intermodal National LTL Regional LTL

Dec 14 Mar 15 Jun 15 Sep 15 Dec 15

Abundant

Balanced

Very Tight

Project Capacity to be:

3. Shippers Expect Capacity to Loosen Across All Truck Modes


What are your Expectations for Capacity in 6 Months?





21

6.9 6.77.1

6.76.3 6.3

5.7 5.96.6 6.9 7.0 6.7 6.6

6.3 6.1 6.1

7.4 7.3 7.2 7.0 6.96.4 6.2

5.8

1

2

3

4

5

6

7

8

9

10

Barge Truckload RegionalLTL

Intermodal Ocean National LTL Rail(carload)

Airfreight


Poor

Excellent

4. Improving Rail Service a Larger Factor Driving Intermodal Growth, but Fuel Efficiency Remains Most Important

Source: Morgan Stanley Freight Pulse Survey

6.3 6.85.6

5.0 4.6 4.5

6.1 6.6

5.3 5.24.4 4.1

5.56.3

5.4 5.24.4 4.2

5.56.4

5.05.7

4.5 4.1

123456789

10

TL Rates HaveRisen to Point

Where IntermodalIs Competitive

Intermodal is morefuel efficient

Turning to theIntermodal

Alternative MoreOften During

Periods of TightCapacity

RailroadIntermodal Service

Has Improved

Strong ImportGrowth

Strong ExportGrowth

FP 37 (Mar15) FP 38 (Jun15) FP 39 (Sep15) FP 40 (Dec15)

What Factors are Impacting Your Use of Intermodal Most?

“Value for the Dollar” for Each Mode





22

5. More Shippers Reporting that TL Price Discounts Have Offset Some of the Rail Cost Differential


1 2 3 4 5 6 7 8 9

10

Oct

08

Apr 0

9Se

p 09

Apr 1

0Se

p 10

Jan

11Ap

r 11

Jun

11Se

p 11

Dec

11

Mar

12

Jun

12Se

p 12

Dec

12

Mar

13

Jun

13Se

p 13

Dec

13

Mar

14

Jun

14Se

p 14

Dec

14

Mar

15

Jun

15Se

p 15

Dec

15

Rail doesn't support faster inventory turnoverTL price discounts have offset some of the rail cost differentialOther Factors

StronglyAgree

StronglyDisagree

What Factors are Limiting your Organization from Shipping More Volume on the Railroads?





23

Freight Pulse: Parcel Highlights

Parcel Highlights





24

Freight Pulse: Parcel Key Takeaways

1. Parcel Volumes Air, International, and Ground Parcel Volume Growth Expectations Edge Lower

2. Pricing Parcel Pricing Growth Expectations Remain in the 1-2% Range over the Next 6 Months

3. B2C Shippers Expect B2C as % of Total Parcel Shipment Stay Roughly Unchanged from Prior Survey Results

4. Aggressiveness Shippers See Parcel Carriers Becoming More Aggressive in Trying to Win Business

5. Rate Discounts According to Shippers, Discounts Off List Rates Increased Seq. for FDX Air & Ground





25

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

Jan-

02M

ay-0

2Ja

n-03

Jun-

03M

ar-0

4S

ep-0

4A

pr-0

5S

ep-0

5M

ar-0

6S

ep-0

6M

ar-0

7S

ep-0

7A

pr-0

8O

ct-0

8A

pr-0

9S

ep-0

9A

pr-1

0S

ep-1

0Ja

n-11

Apr

-11

Jun-

11S

ep-1

1D

ec-1

1M

ar-1

2Ju

n-12

Sep

-12

Dec

-12

Mar

-13

Jun-

13S

ep-1

3D

ec-1

3M

ar-1

4Ju

n-14

Sep

-14

Dec

-14

Mar

-15

Jun-

15S

ep-1

5D

ec-1

5

Air Ground Int'l

1. Air, International, and Ground Parcel Volume Growth Expectations Edge Lower

Source: Morgan Stanley Parcel Survey

Volume Growth Expectations “Over the Next 6 Months” vs. Last Year





26

2. Parcel Pricing Growth Expectations Remain in the 1-2% Range over the Next 6 Months

-0.5%0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%4.0%4.5%

Jan-

02M

ay-0

2Ja

n-03

Jun-

03M

ar-0

4S

ep-0

4A

pr-0

5S

ep-0

5M

ar-0

6S

ep-0

6M

ar-0

7S

ep-0

7A

pr-0

8O

ct-0

8A

pr-0

9S

ep-0

9A

pr-1

0S

ep-1

0Ja

n-11

Apr

-11

Jun-

11S

ep-1

1D

ec-1

1M

ar-1

2Ju

n-12

Sep

-12

Dec

-12

Mar

-13

Jun-

13S

ep-1

3D

ec-1

3M

ar-1

4Ju

n-14

Sep

-14

Dec

-14

Mar

-15

Jun-

15S

ep-1

5D

ec-1

5

Air Ground Int'l

Includes All responses, equally-weighted. Source: Morgan Stanley Parcel Survey

Average Base Rate Expectations “Over the Next 6 Months” vs. Last Year





27 Source: Morgan Stanley Parcel Survey

3. Shippers Expect B2C as % of Total Parcel Shipment Stay Roughly Unchanged from Prior Survey Results

YoY Change in B2C as % of Total

52%45% 46%

55% 58%

45%37%

53%49% 48% 45% 46% 49% 49% 45%

41%

51% 48%52% 51% 51%

42% 45% 48%

1%1%

1%

2%

1%

1%1% 1%

1% 1%0%

1%

1%2%

2% 2% 2%

1%2%

1%

10%

8%11%

8% 5%

6%11%

8%6% 9%

5% 6%5% 5%

4%3%

5% 5%4% 3% 4%

7%5%

4%

29%

37%36% 28% 29%

38%44%

32%36% 30%

34%35%

36% 37%40%

41%

27% 32%35% 34% 34%

34% 34%37%

9% 10% 6% 9% 8% 10%6% 7% 8%

12%15% 12%

9% 9% 10%14% 16%

12%7% 9% 9%

16% 15%10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%Se

p-09

Apr-1

0Se

p-10

Jan-

11Ap

r-11

Jun-

11Se

p-11

Dec

-11

Mar

-12

Jun-

12Se

p-12

Dec

-12

Mar

-13

Jun-

13Se

p-13

Dec

-13

Mar

-14

Jun-

14Se

p-14

Dec

-14

Mar

-15

Jun-

15Se

p-15

Dec

-15

% o

f Res

pond

ents

Significantly largerportion

Slightly larger portion

Slightly smaller portion

Significantly smallerportion

No change





28

5.0

5.5

6.0

6.5

7.0

7.5M

ar-0

6Se

p-06

Mar

-07

Sep-

07Ap

r-08

Oct

-08

Apr-0

9Se

p-09

Apr-1

0Se

p-10

Jan-

11Ap

r-11

Jun-

11Se

p-11

Dec

-11

Mar

-12

Jun-

12Se

p-12

Dec

-12

Mar

-13

Jun-

13Se

p-13

Dec

-13

Mar

-14

Jun-

14Se

p-14

Dec

-14

Mar

-15

Jun-

15Se

p-15

Dec

-15

FDX

UPS

More Aggressive

LessAggressive

Rat

ing

Scal

e (1

-10)

4. Shippers See Parcel Carriers Becoming More Aggressive in Trying to Win Business


Parcel Shippers’ Rankings of Carriers’ “Aggressiveness” in Trying to Win Business Over Past Six Months






5. According to Shippers, Discounts Off List Rates Increased Seq. for FDX Air & Ground

Average List Rate Discount

15%

20%

25%

30%

35%

40%

45%

50%

55%

Apr

-05

Mar

-06

Mar

-07

Apr

-08

Apr

-09

Apr

-10

Jan-

11

Jun-

11

Dec

-11

Jun-

12

Dec

-12

Jun-

13

Dec

-13

Jun-

14

Dec

-14

Jun-

15

Dec

-15

Dis

coun

t Off

List

Rat

esFDX Ground UPS Ground FDX Air UPS Air





30

Appendix

Appendix





31

About the Surveys Part 1: About the Surveys

1. General Freight 2. Rail Industry 3. Truck Industry 4. Parcel Industry

Summary of Contents

General Freight Trends

Rail Trends

Truck Trends

Parcel Trends





32

General Freight: About the Freight Pulse Survey

Note: just those shippers providing an industry classification and spend. Source: MS Freight Pulse Surveys

20% 19%18%

15%

7%5%

3% 2% 2% 2% 2% 2% 2% 1% 1% 0%0%

10%

20%

30%3P

L

Oth

er In

dust

ry

Man

ufac

turin

g

Food

and

Bev

erag

e

Ret

ailin

g

Che

mic

al

Pape

r & P

acka

ging

Com

pute

r / T

ech

Auto

mot

ive

Fore

st /

Build

ing

Prod

ucts Min

ing

Fina

ncia

l / L

egal

Serv

ices

Phar

mac

eutic

al

Indu

s Eq

uip

/ Cap

Goo

ds

Agric

ultu

re

Elec

trica

l Gen

erat

ion

Respondents by Industry





33

General Freight: Segmented by Shipper Profile

Note: just those shippers providing an industry classification and spend. Source: MS Freight Pulse Surveys

Trucking, 63%

Railroads (including

Intermodal), 3%

Both Trucking

and Railroads (including

Intermodal), 34%

< $100k, 14.8%

$100k to $500k, 4.6%

$500k to $1MM, 1.5% $1MM to

$5MM, 12.8%

$5 MM to $40 MM, 56.6%

$40MM+, 9.7%

Modes Used Respondents’ Total Spend





34

Rails: Segmented by Industry and Shipper Profile

$0 -$100k, 7%

$100 -$500k, 3%

$500k -$1mm, 8%

$1 -$5mm, 13%

$5 -$20mm,

30%

Over $20mm,

39%


Rail Respondents by Industry Respondents’ Rail Spend

20% 19%

14%13%

6% 6%4% 3% 3% 3%

2% 2% 2% 1% 1% 1%0%

5%

10%

15%

20%

25%

Oth

er In

dust

ry

3PL

Man

ufac

turin

g

Food

and

Bev

erag

e

Che

mic

al

Ret

ailin

g

Pap

er &

Pac

kagi

ng

Min

ing

Aut

omot

ive

Com

pute

r/Tec

hnol

ogy

Indu

stria

lE

quip

men

t/Cap

ital…

Fina

ncia

l/Leg

alS

ervi

ces

Fore

st/B

uild

ing

Pro

duct

s

Agr

icul

ture

Pha

rmac

eutic

al

Ele

ctric

al G

ener

atio

n





35

Trucks: Segmented by Industry and Shipper Profile


21%19%19%

15%

7%4% 3% 2% 2% 2% 2% 1% 1% 1% 1% 0%

0%

10%

20%

30%

3PL

Oth

er In

dust

ry

Man

ufac

turin

g

Food

and

Bev

erag

e

Ret

ailin

g

Che

mic

al

Pap

er &

Pac

kagi

ng

Com

pute

r / T

ech

Aut

omot

ive

Fore

st /

Build

ing…

Pha

rmac

eutic

al

Min

ing

Indu

s E

quip

/ C

ap…

Fina

ncia

l / L

egal

…

Agr

icul

ture

Ele

ctric

al G

ener

atio

n

< $100k, 11%

$100k to $500k, 5%

$500k to $1MM, 3%

$1MM to $5MM, 14%

$5 MM to $20 MM,

18%

$20MM+, 50%

Truck Respondents by Industry Respondents’ Truck Spend





36

Parcel: About Our Parcel Survey

$0 to $100k, 23%

$100k to $500k, 11%

$500k to $1MM, 8%$1MM to

$5MM, 21%

$5 MM to $20 MM,

17%

$20MM+, 19%

31%

20%

13% 13% 12% 12%

0%

10%

20%

30%

40%

Man

ufac

turin

g

Who

lesa

le /

Dis

tribu

tion

Oth

er

Ret

ail

3PL

Prov

ider

Con

sulta

nt


Respondents' Parcel Spend Respondents' Primary Business





37

Parcel: Respondent Profile

$0 to $10, 19%

$11 - $25, 10%

$26 -$50, 5%

$51 -$100, 16%

$100 -$1,000,

14%

$1,000+, 35%

0 - 100k, 43%

100k -500k, 23%

500k -1MM, 7%

1MM -5MM, 13% 5MM+,

15%


Company Sales ($MM) Parcels Shipped





38

UPS, 49%UPS, 58%

UPS, 33%

FDX, 47% FDX, 33%

FDX, 32%

USPS, 5%

USPS, 1%

DHL, 0%

DHL, 31%

Other, 1% Other, 3% Other, 4%

0%

20%

40%

60%

80%

100%

Air Ground Int'l

Dol

lar-

wei

ghte

d %

of r

espo

nden

ts

Parcel: Market Share of Respondents Roughly Consistent with Market


UPS, 41% UPS, 48%

UPS, 29%

50% 40%

36%

USPS, 4% USPS, 9%

USPS, 8%

DHL, 1%

DHL, 15%

Other, 3% Other, 3%

Other, 8%

0%

20%

40%

60%

80%

100%

Air Ground Int'l

% o

f res

pond

ents

Primary Parcel Carrier – Weighted by Spend Parcel Carrier – Average of All Responses





39

Summary of Contents

Part 1: General Freight Industry Trends 1. Service Trends 2. Capacity Trends 3. Modal Shift 4. Intermodal vs. Truck

Part 2: Macro Trends 1. Inventories and Orders 2. Economic Outlook

About the Surveys


Rail Trends

Truck Trends

Parcel Trends





40

7.6 7.4 7.06.6

6.3 6.3 5.9 5.5

7.5 7.67.2 6.9

6.3 6.3 6.3 5.7

7.8 7.6 7.56.9 6.9 6.7 6.5

6.1

0

1

2

3

4

5

6

7

8

9

10

Airfreight Regional LTL Truckload National LTL Barge Intermodal Ocean Rail (carload)


Poor

Excellent

Service Reliability & Value by Mode: Average Across All Shippers


“Service Reliability” for Each Mode

6.9 6.77.1

6.76.3 6.3

5.7 5.96.6 6.9 7.0 6.7 6.6

6.3 6.1 6.1

7.4 7.3 7.2 7.0 6.96.4 6.2

5.8

1

2

3

4

5

6

7

8

9

10

Barge Truckload RegionalLTL

Intermodal Ocean NationalLTL

Rail(carload)

Airfreight


Poor

Excellent “Value for the Dollar” for Each Mode





41

Capacity by Mode


Current Capacity Projected Capacity in 6 Months

5.1 5.1 5.0 4.9 4.8 4.8 4.4 4.1

123456789

10

Barg

e TL

Rail

(car

load

)

Inte

rmod

al

Regi

onal

LTL

Nat

iona

lLT

L

Airf

reig

ht

Oce

an

Abundant

Very Tight

4.9 4.8 4.7 4.6 4.5 4.5 4.3 3.9

123456789

10

Barg

e

Rail

(car

load

)

Inte

rmod

al

Regi

onal

LTL

Nat

iona

lLT

L TL

Airf

reig

ht

Oce

an

Abundant

Very Tight





42

12%

5%

15%13%

41%

4%6%

2% 2% 1%0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

1 2 3 4 5 6 7 8 9 10

Airfreight - % of Shippers Providing Rankings

Abundant Very Tight

Capacity Ranking Skew: Airfreight


11%

4%

13% 11%

46%

4% 4% 2% 1% 2%0%

10%

20%

30%

40%

50%

60%

1 2 3 4 5 6 7 8 9 10

Airfreight - % of Shippers Providing Rankings

Abundant Very Tight






43

Capacity Ranking Skew: Ocean

15%

9%

20%

16%

25%

6%

2%

6%

1% 0%0%

5%

10%

15%

20%

25%

30%

1 2 3 4 5 6 7 8 9 10

Ocean - % of Shippers Providing Rankings

Abundant Very Tight


10% 10%

22%

14%

28%

2%6% 7%

0% 1%0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

1 2 3 4 5 6 7 8 9 10

Ocean - % of Shippers Providing Rankings

Abundant Very Tight






44

2%5%

15% 15%

43%

6% 5%7%

1% 1%0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

1 2 3 4 5 6 7 8 9 10

Rail (carload) - % of Shippers Providing Rankings

Abundant Very Tight

Capacity Ranking Skew: Rail (Carload)


1%4%

13%15%

41%

10%8%

4% 3% 1%0%

10%

20%

30%

40%

50%

60%

1 2 3 4 5 6 7 8 9 10

Rail (carload) - % of Shippers Providing Rankings

Abundant Very Tight






45

Capacity Ranking Skew: Barge

7%3%

10%7%

55%

3% 3% 3% 3% 3%

0%

10%

20%

30%

40%

50%

60%

70%

1 2 3 4 5 6 7 8 9 10

Barge - % of Shippers Providing Rankings

Abundant Very Tight


0%3%

14%10%

48%

3%

14%

3%0%

3%

0%

10%

20%

30%

40%

50%

60%

70%

1 2 3 4 5 6 7 8 9 10

Barge - % of Shippers Providing Rankings

Abundant Very Tight






46

Shipper Modal Shift Statistics – Truckload to Rail

54%

42%

4%

58%

39%

3%

61%

36%

3%

61%

37%

3%

69%

30%

1%0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

No Yes, shifting some volume Yes, shifting a significant amount ofvolume



Truckload to Rail

92% 89%100%

75%66%

44%60%

8% 11%0%

25%33%

56%39%

1% 1%

0%10%20%30%40%50%60%70%80%90%

100%

< $

100k

$10

0k to

$500

k

$50

0k to

$1M

M

$1M

M to

$5M

M

$5

MM

to$4

0 M

M

$40

MM

+

Wei

ghte

dAv

gR

espo

nse

% o

f Res

pond

ents

Yes, shiftinga significantamount ofvolume

Yes, shiftingsome volume

No

Truckload to Rail - Modal Shift by Spend





47

Shipper Modal Shift Statistics – Rail to Truckload

82%

15%

2%

83%

16%

1%

77%

22%

1%

78%

21%

1%

80%

18%

2%0%

10%

20%

30%

40%

50%

60%

70%

80%

90%




Rail to Truckload

96% 89%100%

83% 80%

44%

71%

4% 0%19%

50%

26%

0%10%20%30%40%50%60%70%80%90%

100%

< $

100k

$10

0k to

$500

k

$50

0k to

$1M

M

$1M

M to

$5M

M

$5

MM

to$4

0 M

M

$40

MM

+

Wei

ghte

dAv

gR

espo

nse

% o

f Res

pond

ents

Yes, shiftinga significantamount ofvolume


No

Rail to Truckload - Modal Shift by Spend





48

Shipper Modal Shift Statistics – Airfreight to LTL

85%

13%

1%

90%

9%1%

86%

13%

1%

86%

13%

1%

84%

14%

1%0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%




Airfreight to LTL

88%

56%67%

92% 86% 88% 87%

44%

8% 12% 13% 12%

0% 2% 1%

0%10%20%30%40%50%60%70%80%90%

100%

< $

100k

$10

0k to

$500

k

$50

0k to

$1M

M

$1M

M to

$5M

M

$5

MM

to$4

0 M

M

$40

MM

+

Wei

ghte

dAv

gR

espo

nse

% o

f Res

pond

ents

Yes, shifting asignificantamount ofvolume


No

Airfreight to LTL - Modal Shift by Spend





49

Shipper Modal Shift Statistics – LTL to Airfreight

97%

3% 0%

96%

3% 1%

97%

3% 0%

97%

3% 0%

96%

4%0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%




LTL to Airfreight

92%78%

100% 96% 99% 94% 98%

22%

1% 2%

0%10%20%30%40%50%60%70%80%90%

100%

< $

100k

$10

0k to

$500

k

$50

0k to

$1M

M

$1M

M to

$5M

M

$5

MM

to$4

0 M

M

$40

MM

+

Wei

ghte

dAv

gR

espo

nse

% o

f Res

pond

ents



No

LTL to Airfreight - Modal Shift by Spend





50

Shipper Modal Shift Statistics – Truckload to LTL

80%

20%

0%

78%

20%

1%

83%

17%

0%

84%

15%

0%

85%

14%

2%0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%




Truckload to LTL

96%75% 67%

92% 86%75% 83%

4%25%

33%0% 13%

25% 16%

0%10%20%30%40%50%60%70%80%90%

100%

< $

100k

$10

0k to

$500

k

$50

0k to

$1M

M

$1M

M to

$5M

M

$5

MM

to $

40M

M

$40

MM

+

Wei

ghte

d Av

gR

espo

nse

% o

f Res

pond

ents



No

Truckload to LTL - Modal Shift by Spend





51

Shipper Modal Shift Statistics – LTL to Truckload

61%

35%

4%

65%

33%

2%

63%

35%

2%

63%

34%

2%

64%

33%

4%0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%




LTL to Truckload

88%75%

67% 71%61%

44%58%

12%25% 29%

36%

44%37%

0%10%20%30%40%50%60%70%80%90%

100%

< $

100k

$10

0k to

$500

k

$50

0k to

$1M

M

$1M

M to

$5M

M

$5

MM

to$4

0 M

M

$40

MM

+

Wei

ghte

dAv

gR

espo

nse

% o

f Res

pond

ents



No

LTL to Truckload - Modal Shift by Spend





52

Shipper Modal Shift Statistics – Ocean to Rail

99%

1% 0%

98%

1% 0%

96%

4% 0%

97%

3% 0%

96%

4%0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%




Ocean to Rail

96% 100% 100%88%

99%88%

96%

0%10%20%30%40%50%60%70%80%90%

100%

< $

100k

$10

0k to

$500

k

$50

0k to

$1M

M

$1M

M to

$5M

M

$5

MM

to$4

0 M

M

$40

MM

+

Wei

ghte

dAv

gR

espo

nse

% o

f Res

pond

ents



No

Ocean to Rail - Modal Shift by Spend





53

Shipper Modal Shift Statistics – Rail to Ocean

97%

2% 1%

97%

3% 0%

97%

3% 0%

97%

3% 0%

97%

3% 0%0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%




Rail to Ocean

96% 100% 100%91%

100%88%

97%

0%10%20%30%40%50%60%70%80%90%

100%

< $

100k

$10

0k to

$500

k

$50

0k to

$1M

M

$1M

M to

$5M

M

$5

MM

to$4

0 M

M

$40

MM

+

Wei

ghte

dAv

gR

espo

nse

% o

f Res

pond

ents



No

Rail to Ocean - Modal Shift by Spend





54

Shipper Modal Shift Statistics – Airfreight to Ocean

88%

11%

1%

91%

8%1%

86%

13%

1%

90%

9%1%

86%

11%3%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%




Airfreight to Ocean

88%

63% 67%88% 87% 94% 88%

8% 11% 10%

0%10%20%30%40%50%60%70%80%90%

100%

< $

100k

$10

0k to

$500

k

$50

0k to

$1M

M

$1M

M to

$5M

M

$5

MM

to$4

0 M

M

$40

MM

+

Wei

ghte

dAv

gR

espo

nse

% o

f Res

pond

ents



No

Airfreight to Ocean - Modal Shift by Spend





55

Shipper Modal Shift Statistics – Ocean to Airfreight

92%

7%1%

90%

9%2%

94%

5%1%

94%

6%0%

94%

6%0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%




Ocean to Airfreight

96% 100%

33%

88%97% 94% 96%

0% 3% 4%

0%10%20%30%40%50%60%70%80%90%

100%

< $

100k

$10

0k to

$500

k

$50

0k to

$1M

M

$1M

M to

$5M

M

$5

MM

to$4

0 M

M

$40

MM

+

Wei

ghte

dAv

gR

espo

nse

% o

f Res

pond

ents



No

Ocean to Airfreight - Modal Shift by Spend





56

Shipper Modal Shift Statistics – Barge to Rail

99%

1% 0%

98%

2% 0%

97%

3% 0%

98%

2% 0%

98%

2% 0%0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%




Barge to Rail

100%89%

100% 100% 97% 100% 98%

0%10%20%30%40%50%60%70%80%90%

100%

< $

100k

$10

0k to

$500

k

$50

0k to

$1M

M

$1M

M to

$5M

M

$5

MM

to$4

0 M

M

$40

MM

+

Wei

ghte

dAv

gR

espo

nse

% o

f Res

pond

ents



No

Barge to Rail - Modal Shift by Spend





57

Shipper Modal Shift Statistics – Rail to Barge

93%

7%0%

95%

5%0%

94%

6%0%

98%

2% 0%

96%

3% 1%0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%




Rail to Barge

96% 100% 100% 96% 98% 94% 97%

6% 3%

0%10%20%30%40%50%60%70%80%90%

100%

< $

100k

$10

0k to

$500

k

$50

0k to

$1M

M

$1M

M to

$5M

M

$5

MM

to $

40M

M

$40

MM

+

Wei

ghte

d Av

gR

espo

nse

% o

f Res

pond

ents



No

Rail to Barge - Modal Shift by Spend





58

Intermodal vs. Truck: Intermodal Discount Over Time


12%

13%

14%

15%

16%

17%

18%

19%

20%S

ep 0

6

Sep

07

Oct

08

Sep

09

Sep

10

Ap

r 11

Sep

11

Mar

12

Sep

12

Mar

13

Sep

13

Mar

14

Sep

14

Mar

15

Sep

15

Ave

rag

e In

term

od

al %

Dis

cou

nt

vs. T

L

Discount Excluding Fuel Historical Average (ex. Fuel)

What discount is being offered in the marketplace for intermodal services when compared to TL services in a similar lane?





59

Summary of Contents

Part 1: General Freight Industry Trends 1. Service Trends 2. Capacity Trends 3. Modal Shift 4. Intermodal vs. Truck

Part 2: Macro Trends 1. Inventories and Orders 2. Economic Outlook

About the Surveys


Rail Trends

Truck Trends

Parcel Trends





60

Shipper Inventory and Stocking Trends


38%33%

30%28%

44%

28%

0%5%

10%15%20%25%30%35%40%45%50%

Higher Same Lower

% o

f Res

pond

ents

Inventory Ordering

Shipper Inventories and Orders Relative to Last Year





61

17%10%

41%46%42%47%36%

22%31%

45%

28%33%28%31%34%36%33%39%42%45%40%36%28%25%28%

36%

22%

31%34%43%37%

39%

43%

45%

39%

43%36%47%45%44%38%51%43%41%39%46%

45%48%

47%44%

47%

68%

28%20%15%16%

25%35%

24%16%

29%31%25%24%22%26%

16%18%17%16%15%19%25%28%28%

0%10%20%30%40%50%60%70%80%90%

100%

% o

f Res

pond

ents

Higher Same Lower

43% 41% 41% 46% 46% 45%36% 40% 41% 45% 49% 42% 42%

51%37% 35%

34%45% 44% 37% 34% 39%

45% 37% 32% 33% 30%31% 39%

38%

45% 43%

23%14% 15% 17% 20% 17% 19% 23% 26% 23% 21% 26% 20%

11% 18% 22%

0%10%20%30%40%50%60%70%80%90%

100%

% o

f Res

pond

ents

Maintain current inventory levels Reduce inventory levels Increase inventory levels

Shipper Inventory and Stocking Trends


Y/Y Change in Shippers' Inventory Y/Y Change in Shippers' Orders





62

Assessing Restocking Potential: Net Inventory Trends and Inventory Plans


-70%

-50%

-30%

-10%

10%

30%

50%

70%

-50%-40%-30%-20%-10%

0%10%20%30%40%50%

Apr 0

9

Apr 1

0

Jan

11

Jun

11

Dec

11

Jun

12

Dec

12

Jun

13

Dec

13

Jun

14

Dec

14

Jun

15

Dec

15

Net O

rder

ing

/ Inv

ento

ry(%

Hig

her Y

/Y -

% L

ower

)

Net C

hg in

Ord

erin

g Le

ss N

et C

hg

in In

vent

ory

(Ordering - Inventory) (LHS)

Net Ordering (RHS)

Net Inventory (RHS)

45%44%43%43%46%43%41%41%46%46%45%36%40%41%45%49%

42%42%51%

37%35%

35%33%44%39%37%

34%45%44%37%34%39%

45%37%32%33%30%

31%39%

38%

45%43%

20%23%

13%17%17%23%

14%15%17%20%17%19%23%26%

23%21%26%

20%11%

18%22%

0%10%20%30%40%50%60%70%80%90%

100%

Jan

11A

pr 1

1Ju

n 11

Sep

11D

ec 1

1M

ar 1

2Ju

n 12

Sep

12D

ec 1

2M

ar 1

3Ju

n 13

Sep

13D

ec 1

3M

ar 1

4Ju

n 14

Sep

14D

ec 1

4M

ar 1

5Ju

n 15

Sep

15D

ec 1

5

% o

f Res

pond

ents

Increaseinventory levels

Reduce inventorylevels

Maintain currentinventory levels

Shippers' Net Y/Y Orders vs. Net Y/Y Inventory Shippers' Inventory Plans





63

5.6

7.1

4.2

5.6

4.4

5.4

6.25.9

5.2 5.1

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0StrongEconomy

No Change

Recession

Economic Outlook: Average Across All Shippers

State of the Economy from Shippers’ Perspective






64

10.0

7.7

6.0 5.7 5.7 5.4 5.3 5.2 5.1 5.0 4.7 4.5 4.5 4.3

123456789

1011

Agric

ultu

re

Fina

ncia

l / L

egal

Serv

ices

Fore

st /

Build

ing…

Auto

mot

ive

Phar

mac

eutic

al

Reta

iling 3P

L

Oth

er In

dust

ry

Man

ufac

turin

g

Food

and

Beve

rage

Min

ing

Indu

s Eq

uip

/Ca

p G

oods

Pape

r &Pa

ckag

ing

Com

pute

r /Te

ch

Strong Economy

No Change

Recession

Economic Outlook: Granular View by Spend and Shipper Industry


State of Economy - All Shippers





65

1

2

3

4

5

6

7

8

9

10 Food and Beverage Retailing Chemical

Manufacturing Metals and Mining Automotive

StrongEconomy

No Change

Recession

Economic Outlook: View by Industry Over Time

Shippers’ Historical View of the Economy by Industry Segment






66

Summary of Contents

Part 1: Key Rail Trends 1. Volume Trends 2. Rate Trends 3. Spend Trends 4. Pricing Trends 5. Service Trends

Part 2: Special Topics 1. Intermodal 2. Rate Mitigation Efforts 3. Rail Competition 4. Rate Negotiations 5. Rate Cases 6. Support for Legislation

About the Surveys


Rail Trends

Truck Trends

Parcel Trends





67

Rail Volume Trends: Forward 6 Month YoY Volume Expectations

1% 1% 1% 3%

16%

26%

32%

15%

3%0% 0%

0%

5%

10%

15%

20%

25%

30%

35%

-25%+ -25% to -16%

-15% to -9%

-8% to -4%

-3% to -1%

NoChange

+1% to+3%

+4% to+8%

+9% to+15%

+16% to+25%

25%+

% o

f Res

pond

ents

0.2

1.8 1.6 1.82.6

3.32.6

1.50.9 0.9

1.3

0.5 0.7 0.8 -0.1

-2.0-1.5

2.62.0

2.4

4.03.3 3.2

2.2 2.53.1 3.1 3.2

2.4

3.4

2.4 2.43.1 2.9 2.9

1.92.6

1.7

0.5 0.5

-3-2-1012345

Nor

mal

ized

Exp

ecte

d Vo

l. Tr

end


YoY Volume Growth Expectations for Next 6 Mo. by Range

MS Expected Rail Volume Change Index





68

YoY Volume Growth Expectations

Rail Volume Trends: Forward 6 Month YoY Volume Expectations by Segment

26% 22% 30%

24% 26%30%

50% 52%40%

0%10%20%30%40%50%60%70%80%90%

100%

All Shippers LargeShippers

SmallShippers

% o

f Res

pond

ents

Increase

Decrease

No Change

0.8%

-2.8%-3.5%-3.0%-2.5%-2.0%-1.5%-1.0%-0.5%0.0%0.5%1.0%1.5%

Large Shippers Small Shippers

Expe

ctat

ions

for N

ext 6

Mo.

-6.3%

1.0%

-1.6%

2.0%

0.8% 0.5% 0.6%

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

$0 -$100k

$100 -$500k

$500k -$1mm

$1 -$5mm

$5 -$20mm

Over$20mm

WeightedAvg

Response


YoY Volume Growth Expectations 6 Mo. YoY Volume Growth Expectation by

Spend





69

Rail Rate Trends: Forward 6 Month YoY Rate Expectations

2.9%0.0% 1.5% 0.0%

4.4%

29.4%26.5%

32.4%

1.5% 1.5% 0.0%0%

5%

10%

15%

20%

25%

30%

35%

-15%+ -15% to -11%

-10% to -6%

-5% to -3%

-2% to -1%

NoChange

+1% to+2%

+3% to+5%

+6% to+10%

+11% to+15%

15%+

% o

f Res

pond

ents

2.7

1.9

1.0

2.21.92.6

4.4 4.4

5.6 5.9

3.53.33.5

2.72.72.6

1.2

2.53.13.1

4.33.6

3.73.5 3.6

2.52.82.62.62.42.62.42.9

2.72.73.2 3.33.4

1.71.4

01234567

Nor

mal

ized

Exp

ecte

d R

ate

Tren

d


YoY Rate Growth Expectations for Next 6 Mo. by Range

MS Expected Rate Change Index





70

Rail Rate Trends: Forward 6 Month YoY Rate Expectations by Segment

29% 22%40%

9%8%

10%

62% 70%50%

0%10%20%30%40%50%60%70%80%90%

100%


SmallShippers

% o

f Res

pond

ents

Increase

Decrease

No Change

2.0%

-0.5%-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%


Expe

ctat

ions

for N

ext 6

Mo.

-4.5%

0.0%

1.7%2.4%

2.0% 1.8% 1.9%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

$0 -$100k

$100 -$500k

$500k -$1mm

$1 -$5mm

$5 -$20mm

Over$20mm

WeightedAvg

Response


6 Mo. YoY Rate Growth Expectation by Spend

YoY Rate Growth Expectations

YoY Rate Growth Expectations





71

Rail Spend Trends: Forward 6 Month YoY Spend Expectations

3%0% 0% 1%

7%

28%

40%

18%

1% 0% 0%

-5%

5%

15%

25%

35%

45%

55%

(30%)+ (30) to(21%)

(20) to(11%)

(10) to(6%)

(5) to(1%)

NoChange

1 to 5% 6 to 10% 11 to 20% 21 to 30% 30%+

% o

f Res

pond

ents


YoY Rail Spend Growth Expectations for Next 6 Mo. by Range





72

Rail Spend Trends: Forward 6 Month YoY Spend Expectations by Segment

28% 22%40%

12%14%

60% 64%50%

0%10%20%30%40%50%60%70%80%90%

100%


SmallShippers

% o

f Res

pond

ents

Increase

Decrease

No Change

2.0%

-1.5%-2%-2%-1%-1%0%1%1%2%2%3%


Expe

ctat

ion

for N

ext 6

Mo.

-10.0%

1.5%2.4% 2.5% 2.0% 1.8% 1.9%

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

$0 -$100k

$100 -$500k

$500k -$1mm

$1 -$5mm

$5 -$20mm

Over$20mm

WeightedAvg

Response


6 Mo. YoY Spend Growth Expectation by Spend

Spend Expectations by Size

YoY Spend Growth Expectations





73

Rail Pricing Trends: Renewal Rates

0%

10%

5% 4% 4%

6%6%

15%

7%

4%

12%

3% 3% 3%

1%

0%

3%

8%

3% 3% 3%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

$0 - $100k $100 -$500k

$500k -$1mm

$1 - $5mm $5 -$20mm

Over$20mm

WeightedAvg

Response

YoY

Incr

ease

in R

ates

Ex-

Fuel

FP 38 (Jun15) FP 39 (Sep15) FP 40 (Dec15)


Expectations for Current Year YoY Pricing Ex-Fuel by Spend





74

Rail Service Trends: Average Service Levels

5.96.4 6.2 6.1 5.8

5.4 5.5 5.5 5.55.8 5.5

5.9 5.86.3 6.5 6.2 6.2

5.8 5.8 5.8 6.0 5.9 6.0 6.0 6.1 6.06.5 6.6

6.2 6.45.9

5.3 5.6 5.5 5.5 5.3 5.6 5.9 6.2

123456789

10


Average Service Levels (Scale 1 = Worst to 10 = Best)





75

Rail Service Trends: Detail

6.16.16.56.46.15.95.45.65.85.96.15.76.36.26.66.96.36.15.85.55.65.85.65.86.05.95.96.26.66.06.35.75.05.25.35.24.95.55.76.1

02468

10

5.76.25.96.05.75.45.45.25.15.55.35.65.56.16.16.16.25.96.06.06.26.26.26.16.36.26.76.66.56.56.15.76.05.85.95.85.76.16.2

02468

10


Service Reliability (Scale 1 = Worst to 10 = Best)

Value for Dollar (Scale 1 = Worst to 10 = Best)





76

Summary of Contents

Part 1: Key Rail Trends 1. Volume Trends 2. Rate Trends 3. Spend Trends 4. Pricing Trends 5. Service Trends

Part 2: Special Topics 1. Intermodal 2. Rate Mitigation Efforts 3. Rail Competition 4. Rate Negotiations 5. Rate Cases 6. Support for Legislation

About the Surveys


Rail Trends

Truck Trends

Parcel Trends





77

Intermodal: What Factors Are Impacting Your Use of Intermodal Most?


Avg. Response on Scale of 1 (Least Impact) to 10 (Most Impact)

6.3 6.85.6

5.0 4.6 4.5

6.1 6.6

5.3 5.24.4 4.1

5.56.3

5.4 5.24.4 4.2

5.56.4

5.05.7

4.5 4.1

123456789

10

TL Rates HaveRisen to Point

Where IntermodalIs Competitive

Intermodal is morefuel efficient

Turning to theIntermodal

Alternative MoreOften During

Periods of TightCapacity

RailroadIntermodal Service

Has Improved

Strong ImportGrowth

Strong ExportGrowth






78

Intermodal: Average % Discount to Truckload Carriers?

11121314151617181920

Avg.

Rai

l % D

isco

unt t

o Tr

uckl

oad

Avg. Excl. Fuel = 15.5%


Avg. Discount Excl. Fuel





79

Rate Mitigation: What Have You Done in an Effort to Reduce Railroad Spend ?

5.9 5.65.1

4.65.4 5.5

5.9

4.55.4

5.95.5

4.65.0

5.75.1

4.4

1

2

3

4

5

6

7

8

9

10

Have Not Made AnyChanges; are Paying Higher

Rail Rates

Moved Freight to AnotherMode (i.e. Truck or Barge)

Moved Freight to AnotherRailroad

Changed Sourcing Facility toIncrease Competitive Options

FP 37 (Mar15) FP 38 (Jun15) FP 39 (Sep15) FP 40 (Dec15)StronglyAgree

StronglyDisagree


All Shippers





80

Competition: Have You Been Solicited With Competing Bids Offering Lower Rates?

47% 45%

9%

60%

40%

0%0%

10%20%30%40%50%60%70%80%90%

100%

No Yes, but competition hasnot been aggressive

Yes, railroads appear to becompeting aggressively on

price

% o

f Res

pond

ents

Large Shippers

Small Shippers


Price Competition from Railroads

All Shippers

40%

49%

10%

38%44%

19%

45% 44%

11%

49%

43%

8%

0%

10%

20%

30%

40%

50%

60%

No Yes, but competition has not beenaggressive

Yes, railroads appear to be competingaggressively on price


StronglyAgree

StronglyDisagree





81

Rail Rate Negotiations: Rate the Difficulty of Recent Rate Negotiations

5.6

6.1

6.7

6.9 7.0 6.8

7.0 7.0

6.9

6.3

6.8

6.4 6.6

6.5 6.4 6.4

6.8

6.3

6.9 7.0

6.9 6.7

6.2

6.7

5.0

5.5

6.0

6.5

7.0

7.5

Sep-09

Apr-10

Sep-10

Jan-11

Apr-11

Jun-11

Sep-11

Dec-11

Mar-12

Jun-12

Sep-12

Dec-12

Mar-13

Jun-13

Sep-13

Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

Mar-15

Jun-15

Sep-15

Dec-15


Scale of 1 (Least Difficult) to 10 (Most Difficult)





82

Legislation: Do You Expect to Take a More Active Role in Legislative Rail Reform?

19% 26%

50%50%

60%

31% 24%40%

0%10%20%30%40%50%60%70%80%90%

100%

All Shippers Large Shippers Small Shippers

% o

f Res

pond

ents

Don'tKnow

No

Yes

0%10%20%30%40%50%60%


Action on Legislative Rail Reform

% Respondents Saying "Yes"





83

Summary of Contents

Part 1: Key Truck Trends 1. Capacity Trends 2. Volume Trends 3. Rate Trends 4. Overall Spend Trends

Part 2: Special Topics 1. Truckload Freight Index 2. Fuel Surcharge Concessions 3. Limitations on Truck to Rail Conversion

About the Surveys


Rail Trends

Truck Trends

Parcel Trends





84

1

2

3

4

5

6

7

8

9

10M

ay

02

Jan

03

Ju

n 0

3M

ar

04

Se

p 0

4M

ar

05

Se

p 0

5M

ar

06

Se

p 0

6A

pr

07

Se

p 0

7M

ar

08

Oc

t 0

8A

pr

09

Se

p 0

9A

pr

10

Se

p 1

0J

an 1

1A

pr

11

Ju

n 1

1S

ep

11

De

c 1

1M

ar

12

Ju

n 1

2S

ep

12

De

c 1

2M

ar

13

Ju

n 1

3S

ep

13

De

c 1

3M

ar

14

Ju

n 1

4S

ep

14

De

c 1

4M

ar

15

Ju

n 1

5S

ep

15

De

c 1

5

Truckload Intermodal National LTL Regional LTL

Abundant

Balanced

Very Tight

Capacity is:

Shipper Measures for Availability of Truck Capacity


Trucking Shipper Responses to “How Would You Currently Characterize the Availability of Equipment?”





85

20% 25% 21% 20%

56%58% 61% 65%

24% 17% 18% 14%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Truckload Intermodal National LTL Regional LTLPe

rcen

t of R

espo

nden

ts

Tight

Balanced

Abundant

Shipper Expectations for Availability of Truck Capacity

34% 26% 26% 29%

49% 58% 59% 60%

17% 16% 14% 12%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


Perc

ent o

f Res

pond

ents

Tight

Balanced

Abundant






86

3%5%

12%

18%

28%

10%12%

7%

2% 3%

0%

5%

10%

15%

20%

25%

30%

1 2 3 4 5 6 7 8 9 10

TL - % of Respondents

Very TightAbundant

Capacity: Distribution of Truckload Capacity Rankings

7% 8%

19% 20%

23%

6%8%

5%

2% 3%

0%

5%

10%

15%

20%

25%

30%

1 2 3 4 5 6 7 8 9 10

TL - % of Respondents

Very TightAbundant

* Shipper rankings of available capacity where 1= Abundant and 10 = Very Tight Source: Morgan Stanley Freight Pulse Surveys






87

9% 7% 6%

13%

42%

6% 6% 6%4% 2%

-5%

5%

15%

25%

35%

45%

55%

1 2 3 4 5 6 7 8 9 10

Regional LTL - % of Respondents

Very TightAbundant

Capacity: Distribution of Regional Less-Than-Truckload Capacity Rankings

10%5%

11% 11%

40%

8% 7%4%

2% 1%0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

1 2 3 4 5 6 7 8 9 10

Regional LTL - % of Respondents

Very TightAbundant







88

9%4%

8%

14%

45%

6% 4% 4% 2% 3%

0%

10%

20%

30%

40%

50%

60%

1 2 3 4 5 6 7 8 9 10

National LTL - % of Respondents

Very TightAbundant

Capacity: Distribution of National Less-Than-Truckload Capacity Rankings

9%6%

13% 12%

40%

8%4% 5%

1% 1%0%

10%

20%

30%

40%

50%

60%

1 2 3 4 5 6 7 8 9 10

National LTL - % of Respondents

Very TightAbundant







89

2%5%

17%15%

33%

9%6% 5% 4%

2%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

1 2 3 4 5 6 7 8 9 10

Intermodal - % of Respondents

Very TightAbundant

Capacity: Distribution of Intermodal Capacity Rankings

6%

1%

19%15%

34%

8%6% 6%

3% 1%0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

1 2 3 4 5 6 7 8 9 10

Intermodal - % of Respondents

Very TightAbundant







90

Truck Volume Outlook Over The Next 6 Months


29%39% 39% 42%

14%12% 14%

10%

58%49% 47% 48%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

TL RegionalLTL

NationalLTL

Intermodal

% o

f Res

pond

ents Increase

Decrease

No Change

Shipper Growth Expectations by Mode





91

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

Year

-ove

r-Ye

ar %

LTL

Vol

ume

Cha

nge

Regional LTL National LTL Truckload Intermodal

Volume Response History


Trends in Trucking Shippers’ Expectations Over the Next 6 Months vs. the Same Period in the Prior Year”





92

Truckload Volume Detail by Spend, Industry, and Response Skew

1.0% 1.1%

2.8%

1.4%

1.8%

2.5%2.4%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

< $

100k

$10

0k to

$500

k

$50

0k to

$1M

M

$1M

M to

$5M

M

$5

MM

to $

20M

M

$20

MM

+

Wei

ghte

d A

vgR

espo

nse


0% 0% 1% 2%

11%

29%

38%

13%

3% 3%1%

0%

5%

10%

15%

20%

25%

30%

35%

40%

-25%+ -25% to

-16%

-15% to

-9%

-8% to

-4%

-3% to

-1%

No Change

+1% to

+3%

+4% to

+8%

+9% to

+15%

+16% to

+25%

25%+

Avg.

Truckload - Y/Y Volume Expectation by Range Truckload - Avg Volume Change by Spend





93

National LTL - Y/Y Volume Expectation by Range

National LTL Volume Detail by Spend, Industry, and Response Skew


1.3%

2.2%

5.8%

1.9%

0.3%

1.9% 1.6%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

< $

100k

$10

0k to

$500

k

$50

0k to

$1M

M

$1M

M to

$5M

M

$5

MM

to $

20M

M

$20

MM

+

Wei

ghte

d A

vgR

espo

nse

0% 0% 1% 2%

11%

39%

26%

15%

2% 3%1%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

-25%+-25% to

-16%

-15% to

-9%

-8% to

-4%

-3% to

-1%

No Change

+1% to

+3%

+4% to

+8%

+9% to

+15%

+16% to

+25%

25%+

Avg.

National LTL - Avg Volume Change by Spend





94

Regional LTL - Y/Y Volume Expectation by Range

Regional LTL Volume Detail by Spend, Industry, and Response Skew

1.2%

4.1%

5.4%

2.0%

0.3%

1.8%1.5%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

< $

100k

$10

0k to

$500

k

$50

0k to

$1M

M

$1M

M to

$5M

M

$5

MM

to $

20M

M

$20

MM

+

Wei

ghte

d A

vgR

espo

nse


0% 0% 1% 1%

10%

39%

30%

14%

1%3%

1%0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

-25%+-25% to

-16%

-15% to

-9%

-8% to

-4%

-3% to

-1%

No Change

+1% to

+3%

+4% to

+8%

+9% to

+15%

+16% to

+25%

25%+

Avg.

Regional LTL - Avg Volume Change by Spend





95

Intermodal Volume Detail by Spend, Industry, and Response Skew

0.4% 0.4%

0.8%0.7%

0.0%

1.6%

1.3%

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

1.8%

< $

100k

$10

0k to

$500

k

$50

0k to

$1M

M

$1M

M to

$5M

M

$5

MM

to $

20M

M

$20

MM

+

Wei

ghte

d A

vgR

espo

nse


1% 0% 0%2%

7%

42%

33%

11%

3%1% 0%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

-25%+-25% to

-16%

-15% to

-9%

-8% to

-4%

-3% to

-1%

No Change

+1% to

+3%

+4% to

+8%

+9% to

+15%

+16% to

+25%

25%+

Avg.

Intermodal - Y/Y Volume Expectation by Range Intermodal - Avg Volume Change by Spend





96

Truck Base Rates Outlook Over The Next 6 Months


26%37% 36% 43%

24%14% 13%

15%

50% 49% 51% 43%

0%10%20%30%40%50%60%70%80%90%

100%

TL RegionalLTL

NationalLTL

Intermodal

% o

f Res

pond

ents

Increase

Decrease

No Change

0.8%

1.1%1.2%

0.7%

0.3%

0.7%0.8%

0.6%

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

TL Regional LTL National LTL Intermodal

Average Change Weighted Average

Base Rates: Average vs. Weighted Average Shipper Rate Expectations by Mode





97

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

Jan

02

Jan

03

Mar

04

Mar

05

Mar

06

Apr

07

Mar

08

Apr

09

Apr

10

Jan

11

Jun

11

Dec

11

Jun

12

Dec

12

Jun

13

Dec

13

Jun

14

Dec

14

Jun

15

Dec

15

Year

-ove

r-Ye

ar %

Bas

e R

ate

Cha

nge

Regional LTL

National LTL

Intermodal

Truckload

Base Rate Response History


Trends in Trucking Shippers’ Expectations Over the Next 6 Months vs. the Same Period in the Prior Year”





98

TL Base Rate Detail by Spend, Industry, and Response Skew

1.4%1.2%

4.2%

2.6%

0.6%0.1% 0.3%

0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%4.0%4.5%

< $

100k

$10

0k to

$500

k

$50

0k to

$1M

M

$1M

M to

$5M

M

$5

MM

to $

20M

M

$20

MM

+

Wei

ghte

d A

vgR

espo

nse


0% 1% 0%

8%

16%

26%

30%

18%

1% 1% 0%0%

5%

10%

15%

20%

25%

30%

35%

-15%+ -15% to

-11%

-10% to

-6%

-5% to

-3%

-2% to

-1%

No Change

+1% to

+2%

+3% to

+5%

+6% to

+10%

+11% to

+15%

15%+

Truckload - Y/Y Base Rate Expectation by Range TL - Avg Change by Spend





99

National LTL Base Rate Detail by Spend, Industry, and Response Skew

0.9%

2.0%

4.5%

2.5%

1.1%0.7% 0.8%

0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%4.0%4.5%5.0%

< $

100k

$10

0k to

$500

k

$50

0k to

$1M

M

$1M

M to

$5M

M

$5

MM

to$2

0 M

M

$20

MM

+

Wei

ghte

dA

vgR

espo

nse


0% 0%2% 2%

9%

36%

26%23%

2% 1% 0%0%

5%

10%

15%

20%

25%

30%

35%

40%

-15%+-15% to

-11%

-10% to

-6%

-5% to

-3%

-2% to

-1%

No Change

+1% to

+2%

+3% to

+5%

+6% to

+10%

+11% to

+15%

15%+

Avg.

National LTL - Y/Y Base Rate Expectation by Range National LTL - Avg Change by Spend





100

Regional LTL Base Rate Detail by Spend, Industry, and Response Skew

1.0%

1.7%

3.7%

2.5%

0.9%0.6% 0.7%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

< $

100k

$10

0k to

$500

k

$50

0k to

$1M

M

$1M

M to

$5M

M

$5

MM

to$2

0 M

M

$20

MM

+

Wei

ghte

dA

vgR

espo

nse


0% 1% 1%2%

10%

37%

26%

20%

2% 1% 0%0%

5%

10%

15%

20%

25%

30%

35%

40%

-15%+-15% to

-11%

-10% to

-6%

-5% to

-3%

-2% to

-1%

No Change

+1% to

+2%

+3% to

+5%

+6% to

+10%

+11% to

+15%

15%+

Avg.

Regional LTL - Y/Y Base Rate Expectation by Range Regional LTL - Avg Change by Spend





101

Intermodal Base Rate Detail by Spend, Industry, and Response Skew

0.6%

1.2%

2.7%

1.6%

0.3%

0.6% 0.6%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

< $

100k

$10

0k to

$500

k

$50

0k to

$1M

M

$1M

M to

$5M

M

$5

MM

to $

20M

M

$20

MM

+

Wei

ghte

d A

vgR

espo

nse


0% 0% 1%4%

11%

43%

30%

11%

1% 1% 0%0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

-15%+-15% to

-11%

-10% to

-6%

-5% to

-3%

-2% to

-1%

No Change

+1% to

+2%

+3% to

+5%

+6% to

+10%

+11% to

+15%

15%+

Avg.

Intermodal - Y/Y Base Rate Expectation by Range Intermodal - Avg Change by Spend





102

Truck Spend Outlook Over The Next 6 Months


17%33% 30% 37%

22%

16%19%

18%

61%51% 52% 45%

0%10%20%30%40%50%60%70%80%90%

100%

TL RegionalLTL

NationalLTL

Intermodal

% o

f Res

pond

ents Increase

Decrease

No Change

Shipper Spend Expectations by Mode





103

Truck Spend: Change vs. Prior Survey


4%4%

3%3%3% 3%

3% 3%2%2%

2%2%2%

1%2% 2%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%


Year

-ove

r-ye

ar C

hang

e %

Mar 15 Jun 15 Sep 15 Dec 15

YoY % Change in You Organization’s Spend Over the Next 6 Months





104

Summary of Contents

Part 1: Key Truck Trends 1. Capacity Trends 2. Volume Trends 3. Rate Trends 4. Overall Spend Trends

Part 2: Special Topics 1. Truckload Freight Index 2. Fuel Surcharge Concessions 3. Limitations on Truck to Rail Conversion

About the Surveys


Rail Trends

Truck Trends

Parcel Trends





105

0

1

2

3

4

5

6

7

8

9

103-

Jan

24-J

an

14-F

eb

7-M

ar

28-M

ar

18-A

pr

9-M

ay

30-M

ay

20-J

un

11-J

ul

1-A

ug

22-A

ug

12-S

ep

3-O

ct

24-O

ct

14-N

ov

5-D

ec

26-D

ec

2009 2010

2011 2012

2006-2014 Average* 2013

2014 2015

2016 Straight line Analysis

Through December 29

Morgan Stanley Truckload Freight Index With Straight-Line Forecast

The index measures the demand for Dry-Van Truckload services compared to the number of Dry-Van trucks on the road. The index begins in April 1994. When a given reading is above prior years’ level, it means there is more freight demand relative to available capacity. When a given reading is below prior years’ level, it means there is less freight demand relative to capacity Source: Morgan Stanley Research





106

Truckload Fuel Surcharge Concession History


1 2 3 4 5 6 7 8 9

10O

ct 0

8Ap

r 09

Sep

09Ap

r 10

Sep

10Ja

n 11

Apr 1

1Ju

n 11

Sep

11D

ec 1

1M

ar 1

2Ju

n 12

Sep

12D

ec 1

2M

ar 1

3Ju

n 13

Sep

13D

ec 1

3M

ar 1

4Ju

n 14

Sep

14D

ec 1

4M

ar 1

5Ju

n 15

Sep

15D

ec 1

5

Rail doesn't support faster inventory turnoverTL price discounts have offset some of the rail cost differentialOther Factors

StronglyAgree

StronglyDisagree

What Factors are Limiting your Organization from Shipping More Volume on the Railroads?





107

6.6 6.4

5.2 5.4 4.9

6.1

4.4

1

2

3

4

5

6

7

8

9

10

Rail doesn'tsupportfaster

inventoryturnover

OtherFactors

Willing topay more forTL service

Rail notcompetitiveon price and

service

Changes insourcingreducedtransport

costs

TL pricediscountshave offsetsome of the

rail costdifferential

Rail not anoption

Dec 14 Mar 15 Jun 15 Sep 15 Dec 15StronglyAgree

StronglyDisagree

Truck to Rail Conversion: Key Obstacles to Overcome

Source: Morgan Stanley Freight Pulse Survey

What Factors are Impacting Your Decision to Keep More Volume with Truckload Carriers?





108

Summary of Contents

About the Surveys


Rail Trends

Truck Trends

Parcel Trends

Part 1: Volume Trends & Share Shift 1. Volume Outlook 2. Expectations for Total Parcel Spend 3. Product Usage (e.g. Air vs. Ground) 4. B2B vs. B2C 5. Changes in Primary Carrier

Part 2: Pricing Trends 1. Outlook for Parcel Base Rates 2. Measures of Aggressiveness 3. Trends in List Rate Discounts 4. Accessorial Charges

Part 3: Service & Value Trends 1. Service Reliability Rankings 2. Value of Service Rankings





109

28%32% 34% 34% 35%

30% 35% 39% 39% 36% 37% 40%35%

43% 38% 36% 39% 43% 39% 37%43% 38% 38% 37%

44%23% 18%

12% 11%14%

16%18% 15%

17%19% 17%

19%

18%18%

8%12%

13% 16%14%

12% 21%12% 13%

29%

45% 47%54% 54% 56%

49%43% 46% 48% 44% 43% 46%

40% 44%

56%48% 44% 45% 49% 46%

41%50% 50%

0%10%20%30%40%50%60%70%80%90%

100%

Sep

-09

Apr

-10

Sep

-10

Jan-

11A

pr-1

1Ju

n-11

Sep

-11

Dec

-11

Mar

-12

Jun-

12S

ep-1

2D

ec-1

2M

ar-1

3Ju

n-13

Sep

-13

Dec

-13

Mar

-14

Jun-

14S

ep-1

4D

ec-1

4M

ar-1

5Ju

n-15

Sep

-15

Dec

-15

No Change Decrease Increase

Parcel Volume Outlook Over the Next 6 Months


25% 25% 23% 22% 23% 26% 23% 24% 27% 23% 24%29%

23% 23% 25%20% 22%

28% 31%23%

28%22% 23% 22%

30%

15%12% 8% 8%

11% 14% 11% 7% 11% 11%8%

8% 9%10%

6%10%

5%10%

10%8%

10% 10% 7%

45%

60%65%

70% 70%63%

63%65%

66%67% 65% 63% 68% 67%

64%

74%

68%67%

59%67% 64% 67% 67% 70%

0%10%20%30%40%50%60%70%80%90%

100%

Sep

-09

Apr

-10

Sep

-10

Jan-

11A

pr-1

1Ju

n-11

Sep

-11

Dec

-11

Mar

-12

Jun-

12S

ep-1

2D

ec-1

2M

ar-1

3Ju

n-13

Sep

-13

Dec

-13

Mar

-14

Jun-

14S

ep-1

4D

ec-1

4M

ar-1

5Ju

n-15

Sep

-15

Dec

-15


42% 42% 41% 41%35%

40%33% 36%

43% 39% 41% 40% 38% 39% 36%31% 33%

44% 45%39% 41%

35%40% 38%

24%

11%5% 4%

4%5%

11% 7%5%

8% 7% 9%6%

11%11%

5%10%

6% 8%

9%9%

12%9%

8%

34%

47%54% 55%

61%55% 56% 57% 52% 53% 51% 51%

55%51% 53%

64%57%

49% 47%53% 50% 53% 51% 55%

0%10%20%30%40%50%60%70%80%90%

100%

Sep

-09

Apr

-10

Sep

-10

Jan-

11A

pr-1

1Ju

n-11

Sep

-11

Dec

-11

Mar

-12

Jun-

12S

ep-1

2D

ec-1

2M

ar-1

3Ju

n-13

Sep

-13

Dec

-13

Mar

-14

Jun-

14S

ep-1

4D

ec-1

4M

ar-1

5Ju

n-15

Sep

-15

Dec

-15


% of Shippers Expecting Air to: % of Shippers Expecting Ground to:

% of Shippers Expecting International to:





110

Volume Trends by Product

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

Jan-

02M

ay-0

2Ja

n-03

Jun-

03M

ar-0

4S

ep-0

4A

pr-0

5S

ep-0

5M

ar-0

6S

ep-0

6M

ar-0

7S

ep-0

7A

pr-0

8O

ct-0

8A

pr-0

9S

ep-0

9A

pr-1

0S

ep-1

0Ja

n-11

Apr

-11

Jun-

11S

ep-1

1D

ec-1

1M

ar-1

2Ju

n-12

Sep

-12

Dec

-12

Mar

-13

Jun-

13S

ep-1

3D

ec-1

3M

ar-1

4Ju

n-14

Sep

-14

Dec

-14

Mar

-15

Jun-

15S

ep-1

5D

ec-1

5

Air Ground Int'l


Volume Growth Expectations “Over the Next 6 Months” vs. Last Year





111

Volume Response Skew – All Shippers


0%

5%

10%

15%

20%

25%

30%

35%

40%

-25%+ -25%to -15%

-15%to -10%

-10%to -5%

-5% to0%

NoChange

+0% to+5%

+5% to+10%

+10%to

+15%

+15%to

+25%

25%+

% o

f Res

pond

ents

Exp

ectin

g

Air

Ground

Int'l

Volume Growth Expectations “Over the Next 6 Months” vs. Same Period Last Year





112

Volume Growth Outlook by Industry


1.7% 1.9%

3.1%

6.2%

1.4%2.2%

0%

1%

2%

3%

4%

5%

6%

7%

8%

Man

ufac

turin

g

Who

lesa

le /

Dis

tribu

tion

Ret

ail

3PL

Pro

vide

r

Con

sulta

nt

Oth

er

2.1%

6.3%7.3%

8.8%

1.8%2.5%

0%1%2%3%4%5%6%7%8%9%

10%

Man

ufac

turin

g

Who

lesa

le /

Dis

tribu

tion

Ret

ail

3PL

Pro

vide

r

Con

sulta

nt

Oth

er

1.0%

3.0%

5.9%

7.0%

3.8%

0.0%0%

1%

2%

3%

4%

5%

6%

7%

8%

Man

ufac

turin

g

Who

lesa

le /

Dis

tribu

tion

Ret

ail

3PL

Pro

vide

r

Con

sulta

nt

Oth

er

Air - Avg Change by Industry Ground - Avg Change by Industry

International - Avg Change by Industry





113

Volume Growth Outlook by Listed Primary Carrier


1.1%

3.1%3.3%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

UPS FDX USPSPrimary Carrier

5.5%

3.2%3.8%

0%

1%

2%

3%

4%

5%

6%

UPS FDX USPSPrimary Carrier

2.3%

3.1%

1.8%

2.1%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

UPS FDX USPS DHLPrimary Carrier

Air - Avg Volume Change by Primary Carrier Ground - Avg Volume Change by Primary Carrier

International - Avg Volume Chg by Primary Carrier





114

18%20%25%19%16%

21%22%22%20%18%22%25%24%29%30%27%25%22%24%23%21%23%28%23%

44%

23%17%

7% 9%10%11%10% 8% 10%

10%12%16%

14%11%4% 12%

7%12%11%

8%15% 8%

6%

39%

57%58%

75%75%69%67%68%71%72%67%63%60%57%59%

69%63%

70%64%66%71%

62%64%71%

0%10%20%30%40%50%60%70%80%90%

100%

Sep-

09Ap

r-10

Sep-

10Ja

n-11

Apr-1

1Ju

n-11

Sep-

11D

ec-1

1M

ar-1

2Ju

n-12

Sep-

12D

ec-1

2M

ar-1

3Ju

n-13

Sep-

13D

ec-1

3M

ar-1

4Ju

n-14

Sep-

14D

ec-1

4M

ar-1

5Ju

n-15

Sep-

15D

ec-1

5


Parcel Spend Outlook Over the Next 6 Months


18%18%18%15%11%16%20%17%17%12%18%21%17%22%23%20%17%17%23%

15%17%16%20%15%

32%

18%13%

6%7%

7%9%

6% 6%7%

7%9%

6%10% 9% 1%

9% 7%7%

8% 4% 11% 7%4%

49%

65%70%79%83%78%

71%76%77%81%75%70%

77%69%68%

78%75%76%70%77%78%73%73%

80%

0%10%20%30%40%50%60%70%80%90%

100%

Sep-

09Ap

r-10

Sep-

10Ja

n-11

Apr-1

1Ju

n-11

Sep-

11D

ec-1

1M

ar-1

2Ju

n-12

Sep-

12D

ec-1

2M

ar-1

3Ju

n-13

Sep-

13D

ec-1

3M

ar-1

4Ju

n-14

Sep-

14D

ec-1

4M

ar-1

5Ju

n-15

Sep-

15D

ec-1

5


32%29%28%27%22%

28%27%24%28%21%26%25%28%28%28%26%24%28%29%26%23%23%

31%26%

28%

14%10%3%

5%

5% 10%5%

5%

5%5% 8% 5% 8% 8% 2%

11% 6% 7%6% 8% 12%

7%8%

40%

57%62%69%74%

67%64%71%67%

73%68%68%66%63%64%

72%65%66%63%68%70%65%62%66%

0%10%20%30%40%50%60%70%80%90%

100%

Sep-

09Ap

r-10

Sep-

10Ja

n-11

Apr-1

1Ju

n-11

Sep-

11D

ec-1

1M

ar-1

2Ju

n-12

Sep-

12D

ec-1

2M

ar-1

3Ju

n-13

Sep-

13D

ec-1

3M

ar-1

4Ju

n-14

Sep-

14D

ec-1

4M

ar-1

5Ju

n-15

Sep-

15D

ec-1

5








115

Expected Shift in Product Usage: All Shippers

61% 63%55%

71%

3% 3%6%

2%16%22% 31%

20%17%

10% 6% 5%3% 2% 2% 2%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Overnight /Next Day

Deferred / 2-Day

Ground /Priority Mail

Consolidators

% o

f Res

pond

ents

Significantlysmaller portion

Slightly smallerportion

Slightly largerportion

Significantlylarger portion

No change


How Will Your Usage of the Following Products Change as a Proportion of your Total Parcel Shipment Budget (on a Year-over-Year Basis) Over the Next 6 Months?





116

Historical Expected Change in Use of Air Products

67%55%59%

67%63%59%60%

46%50%61%66%66%62%

68%61%60%62%59%57%

68%62%61%

70%68%66%67%70%65%65%61%69%

63%

20%

27%25%

20%23%19%21%

27%28%

24%23%21%25%

22%

22%21%20%25%24%

20%21%26%

20%21%21%20%17%24%20%24%

21%25%

13%18%16%13%13%22%20%

27%22%15%11%13%13% 9%

17%18%18%16%19%12%17%14%11%11%13%13%13%11%15%15%

9% 12%

0%10%20%30%40%50%60%70%80%90%

100%

Sep

-05

Mar

-06

Sep

-06

Mar

-07

Sep

-07

Apr

-08

Oct

-08

Apr

-09

Sep

-09

Apr

-10

Sep

-10

Jan-

11A

pr-1

1Ju

n-11

Sep

-11

Dec

-11

Mar

-12

Jun-

12S

ep-1

2D

ec-1

2M

ar-1

3Ju

n-13

Sep

-13

Dec

-13

Mar

-14

Jun-

14S

ep-1

4D

ec-1

4M

ar-1

5Ju

n-15

Sep

-15

Dec

-15

No Change Larger Smaller


61%54%

61%59%65%

59%52%

40%45%53%

63%64%62%61%56%64%

58%60%57%63%60%64%69%69%

62%62%72%

65%60%57%

75%

61%

5% 21%16%18%

11%10%

7%

7%

15%

14%

14%14%14%15%13%

10%11%10%17%

12%12%

11%10% 9%

13%11%

6%12%

11%18%

9%

19%

34%26%23%23%23%

30%41%

53%40%

33%23%22%24%24%

31%26%30%30%26%25%28%25%21%22%25%27%

22%23%28%25%

16%20%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Sep-

05

Sep-

06

Sep-

07

Oct

-08

Sep-

09

Sep-

10

Apr-1

1

Sep-

11

Mar

-12

Sep-

12

Mar

-13

Sep-

13

Mar

-14

Sep-

14

Mar

-15

Sep-

15


Overnight / Next Day

Deferred / 2-Day






117

Historical Expected Change in Use of Ground and Consolidators

67%74%72%

82%70%73%71%72%

78%74%74%75%77%70%73%73%70%

76%84%

76%74%65%66%

78%71%

28%24%24%

16%

24%19%24%24%20%

23%21%20%19%25%19%20%25%19%

13%19%19%

28%26%14%

22%

5% 2% 4% 2% 6% 8% 5% 5% 1% 3% 5% 5% 3% 5% 8% 7% 5% 5% 2% 5% 6% 7% 8% 8% 7%

0%10%20%30%40%50%60%70%80%90%

100%

Sep

-05

Mar

-06

Sep

-06

Mar

-07

Sep

-07

Apr

-08

Oct

-08

Apr

-09

Sep

-09

Apr

-10

Sep

-10

Jan-

11A

pr-1

1Ju

n-11

Sep

-11

Dec

-11

Mar

-12

Jun-

12S

ep-1

2D

ec-1

2M

ar-1

3Ju

n-13

Sep

-13

Dec

-13

Mar

-14

Jun-

14S

ep-1

4D

ec-1

4M

ar-1

5Ju

n-15

Sep

-15

Dec

-15



65%55%

60%59%59%53%53%48%47%52%

64%54%58%61%

52%59%56%51%51%

58%54%55%58%57%56%54%60%

53%53%51%58%55%

32%41%

36%33%34%42%43%

46%45%43%

32%

38%34%35%

38%31%37%

39%43%38%

42%37%37%40%37%39%32%

37%41%41%34%37%

4% 5% 3%9% 7% 5% 5% 7% 8% 5% 4% 8% 7% 4%

9% 10% 8% 10% 7% 4% 4% 7% 6% 3% 7% 7% 8% 10% 6% 8% 8% 8%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Sep-

05M

ar-0

6Se

p-06

Mar

-07

Sep-

07Ap

r-08

Oct

-08

Apr-0

9Se

p-09

Apr-1

0Se

p-10

Jan-

11Ap

r-11

Jun-

11Se

p-11

Dec

-11

Mar

-12

Jun-

12Se

p-12

Dec

-12

Mar

-13

Jun-

13Se

p-13

Dec

-13

Mar

-14

Jun-

14Se

p-14

Dec

-14

Mar

-15

Jun-

15Se

p-15

Dec

-15


Ground

Consolidators






52%45% 46%

55% 58%

45%37%

53%49% 48% 45% 46% 49% 49% 45%

41%

51% 48%52% 51% 51%

42% 45% 48%

1%1%

1%

2%

1%

1%1% 1%

1% 1%0%

1%

1%2%

2% 2% 2%

1%2%

1%

10%

8%11%

8% 5%

6%11%

8%6% 9%

5% 6%5% 5%

4%3%

5% 5%4% 3% 4%

7%5%

4%

29%

37%36% 28% 29%

38%44%

32%36% 30%

34%35%

36% 37%40%

41%

27% 32%35% 34% 34%

34% 34%37%

9% 10% 6% 9% 8% 10%6% 7% 8%

12%15% 12%

9% 9% 10%14% 16%

12%7% 9% 9%

16% 15%10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%S

ep-0

9A

pr-1

0S

ep-1

0Ja

n-11

Apr

-11

Jun-

11S

ep-1

1D

ec-1

1M

ar-1

2Ju

n-12

Sep

-12

Dec

-12

Mar

-13

Jun-

13S

ep-1

3D

ec-1

3M

ar-1

4Ju

n-14

Sep

-14

Dec

-14

Mar

-15

Jun-

15S

ep-1

5D

ec-1

5

% o

f Res

pond

ents

Significantly largerportion

Slightly larger portion

Slightly smaller portion

Significantly smallerportion

No change

118

Expected Trends in B2C


YoY Change in B2C as % of Total





119

Expected Trends in B2C


38%

46%

42%36% 37%

49% 50%

39%44%

42%

49%47%45%

46%50%

55%

43%45%

42%43%43%

50%

49%47%

0%

10%

20%

30%

40%

50%

60%

70%Se

p-09

Apr-1

0Se

p-10

Jan-

11Ap

r-11

Jun-

11Se

p-11

Dec

-11

Mar

-12

Jun-

12Se

p-12

Dec

-12

Mar

-13

Jun-

13Se

p-13

Dec

-13

Mar

-14

Jun-

14Se

p-14

Dec

-14

Mar

-15

Jun-

15Se

p-15

Dec

-15

UPS FDX Total

% of Respondents Indicating Increase in B2C Shipping as % of Total





120

% of Respondents Switching Primary Carriers Over Time

0%

5%

10%

15%

20%

25%

30%

35%

40%

Apr-0

5Se

p-05

Mar

-06

Sep-

06M

ar-0

7Se

p-07

Apr-0

8O

ct-0

8Ap

r-09

Sep-

09Ap

r-10

Sep-

10Ja

n-11

Apr-1

1Ju

n-11

Sep-

11D

ec-1

1M

ar-1

2Ju

n-12

Sep-

12D

ec-1

2M

ar-1

3Ju

n-13

Sep-

13D

ec-1

3M

ar-1

4Ju

n-14

Sep-

14D

ec-1

4M

ar-1

5Ju

n-15

Sep-

15D

ec-1

5

Air Ground Int'l


% of Shippers Switching Primary Carriers Over the Past 6 Months





121

Air Switching: Reasons for Switch and Primary Carrier


20%

30%

40%

50%

60%

70%

80%

90%

100%Price Related Service Related

50%

47%

44%

44%

48%

53%

47%

45%

56%47%48%48%49%49%54%

67%

46%41%

49%49%53%49%45%47%49%

46%

46%

50%

49%

46%

40%

48%

48%

35%46%45%40%38%42%37%

28%

47%49%

44%42%43%

43%46%44%

47%

0%

20%

40%

60%

80%

100%

Apr

-09

Apr

-10

Jan-

11

Jun-

11

Dec

-11

Jun-

12

Dec

-12

Jun-

13

Dec

-13

Jun-

14

Dec

-14

Jun-

15

Dec

-15

Cum

ulat

ive

Mar

ket S

hare

(%)

Other

USPS

DHL

FDX

UPS

Air: Reason for Switching Primary Carriers Air: Dollar-weighted Market Share






Ground Switching: Reasons for Switch and Primary Carrier

20%

30%

40%

50%

60%

70%

80%

90%

100% Price Related Service Related

59%

54%

51%

59%

54%

59%

61%

57%

73%

53%56%52%58%56%60%

66%

49%50%52%55%60%54%

49%50%58%

36%35%

37%

34%41%

33%

27%35%

21%

38%35%38%

32%34%29%20%

38%37%36%29%

32%33%

36%35%

33%

0%

20%

40%

60%

80%

100%

Apr

-09

Apr

-10

Jan-

11

Jun-

11

Dec

-11

Jun-

12

Dec

-12

Jun-

13

Dec

-13

Jun-

14

Dec

-14

Jun-

15

Dec

-15

Cum

ulat

ive

Mar

ket S

hare

(%)

Other

USPS

DHL

FDX

UPS

Ground: Reason for Switching Primary Carriers Ground: Dollar-weighted Market Share






International Switching: Reasons for Switch and Primary Carrier

10%20%30%40%50%60%70%80%90%

100% Price Related Service Related

35%38%34%31%34%34%35%34%35%28%

39%34%38%33%40%

49%

34%31%40%

30%34%34%28%

40%33%

34%42%45%

39%36%41%39%43%34%46%28%42%32%

31%

36%20%38%

37%33%

36%40%

30%32%

35%

32%

0%

20%

40%

60%

80%

100%

Apr

-09

Apr

-10

Jan-

11

Jun-

11

Dec

-11

Jun-

12

Dec

-12

Jun-

13

Dec

-13

Jun-

14

Dec

-14

Jun-

15

Dec

-15

Cum

ulat

ive

Mar

ket S

hare

(%)

Other

USPS

DHL

FDX

UPS

International: Reason for Switching Primary Carriers

International: Dollar-weighted Market Share





124

Summary of Contents

About the Surveys


Rail Trends

Truck Trends

Parcel Trends








125

Parcel Pricing Outlook Over the Next 6 Months


35% 38%31%

25% 21%27% 23% 20%

31%23%

29% 24% 28% 29% 30% 26% 26% 26% 28%21% 22%

30% 34%

22%

21%8%

7%

4% 8%6% 11%

7%

5%

6%3%

7%8% 8% 9%

4% 9% 5% 5%8% 7%

8%6%

7%

44%53%

62%72% 71% 67% 66%

73%64%

71% 68% 69%64% 63% 61%

69% 65% 68% 67% 71% 71%62% 61%

71%

0%10%20%30%40%50%60%70%80%90%

100%

Sep-

09Ap

r-10

Sep-

10Ja

n-11

Apr-1

1Ju

n-11

Sep-

11D

ec-1

1M

ar-1

2Ju

n-12

Sep-

12D

ec-1

2M

ar-1

3Ju

n-13

Sep-

13D

ec-1

3M

ar-1

4Ju

n-14

Sep-

14D

ec-1

4M

ar-1

5Ju

n-15

Sep-

15D

ec-1

5


29% 33%28%

20% 17% 21% 22% 20%25% 21% 21% 22% 25% 28% 25% 28% 26% 23% 24% 22% 19%

28% 32%

20%

26%11%

10%

5%7%

9% 11%9%

7%9% 7% 9%

10%11% 13% 6% 8%

6% 8% 8%9%

9%8%

9%

45%56%

63%

75% 77%70% 67% 71% 68% 69% 72% 69% 65% 61% 62% 66% 65%

72% 69% 69% 72%62% 60%

72%

0%10%20%30%40%50%60%70%80%90%

100%

Sep-

09Ap

r-10

Sep-

10Ja

n-11

Apr-1

1Ju

n-11

Sep-

11D

ec-1

1M

ar-1

2Ju

n-12

Sep-

12D

ec-1

2M

ar-1

3Ju

n-13

Sep-

13D

ec-1

3M

ar-1

4Ju

n-14

Sep-

14D

ec-1

4M

ar-1

5Ju

n-15

Sep-

15D

ec-1

5


28% 32%23% 20% 16% 20% 18% 17%

22% 19% 19% 18%24% 23% 25% 21% 21% 19% 22%

17% 19%24% 24%

17%

25%12%

10%

5%6%

7% 12%6%

7%6% 6% 8%

8% 11% 10%6% 8%

5% 4%9% 8%

8% 6%

7%

48%57%

67%75% 78%

73% 70%77%

71% 75% 75% 74%68% 66% 66%

73% 71% 76% 74% 74% 73%68% 70%

77%

0%10%20%30%40%50%60%70%80%90%

100%

Sep-

09Ap

r-10

Sep-

10Ja

n-11

Apr-1

1Ju

n-11

Sep-

11D

ec-1

1M

ar-1

2Ju

n-12

Sep-

12D

ec-1

2M

ar-1

3Ju

n-13

Sep-

13D

ec-1

3M

ar-1

4Ju

n-14

Sep-

14D

ec-1

4M

ar-1

5Ju

n-15

Sep-

15D

ec-1

5








126

Pricing Trends by Product: Large vs. Small Shipper

-0.5%0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%4.0%4.5%

Jan-

02M

ay-0

2Ja

n-03

Jun-

03M

ar-0

4S

ep-0

4A

pr-0

5S

ep-0

5M

ar-0

6S

ep-0

6M

ar-0

7S

ep-0

7A

pr-0

8O

ct-0

8A

pr-0

9S

ep-0

9A

pr-1

0S

ep-1

0Ja

n-11

Apr

-11

Jun-

11S

ep-1

1D

ec-1

1M

ar-1

2Ju

n-12

Sep

-12

Dec

-12

Mar

-13

Jun-

13S

ep-1

3D

ec-1

3M

ar-1

4Ju

n-14

Sep

-14

Dec

-14

Mar

-15

Jun-

15S

ep-1

5D

ec-1

5

Air Ground Int'l


Average Base Rate Expectations "Over the Next 6 Months" vs. Last Year





127

Base Rate Response Skew – All Shippers


0%

5%

10%

15%

20%

25%

30%

35%

40%

45%Air

Ground

Int'l

Base Rate Growth Expectations “Over the Next 6 Months” vs. Same Period Last Year





128

Pricing Outlook by Industry


2.1%

1.4%

2.5%2.9% 3.1%

-0.3%-1.0%-0.5%0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%

Man

ufac

turin

g

Who

lesa

le /

Dis

tribu

tion

Ret

ail

3PL

Prov

ider

Con

sulta

nt

Oth

er

2.3%2.1%

2.3%

3.5%

2.7%

-0.2%-0.5%0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%4.0%

Man

ufac

turin

g

Who

lesa

le /

Dis

tribu

tion

Ret

ail

3PL

Prov

ider

Con

sulta

nt

Oth

er

2.3%

1.9%

2.3%

3.0% 3.1%

0.8%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

Man

ufac

turin

g

Who

lesa

le /

Dis

tribu

tion

Ret

ail

3PL

Prov

ider

Con

sulta

nt

Oth

er

Air - Avg Change by Industry Ground - Avg Change by Industry

International - Avg Change by Industry





129

Pricing Outlook by Listed Primary Carrier


1.4%

1.9%

3.9%

0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%4.0%4.5%

UPS FDX USPS

Primary Carrier

1.9% 1.9%

2.6%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

UPS FDX USPS

Primary Carrier

1.5%

2.8%

1.2%

2.8%

1.1%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

UPS FDX USPS DHL OtherPrimary Carrier

Air - Avg Change by Carrier Ground - Avg Change by Carrier

International - Avg Change by Carrier





130

5.0

5.5

6.0

6.5

7.0

7.5M

ar-0

6Se

p-06

Mar

-07

Sep-

07Ap

r-08

Oct

-08

Apr-0

9Se

p-09

Apr-1

0Se

p-10

Jan-

11Ap

r-11

Jun-

11Se

p-11

Dec

-11

Mar

-12

Jun-

12Se

p-12

Dec

-12

Mar

-13

Jun-

13Se

p-13

Dec

-13

Mar

-14

Jun-

14Se

p-14

Dec

-14

Mar

-15

Jun-

15Se

p-15

Dec

-15

FDX

UPS

More Aggressive

LessAggressive

Rat

ing

Scal

e (1

-10)

Level of Aggressiveness in Trying to Win New Business


Parcel Shippers’ Rankings of Carriers’ “Aggressiveness” in Trying to Win Business Over Past Six Months





131

List Rate Increases

Source: Company data, Morgan Stanley Research

0%

1%

2%

3%

4%

5%

6%

7%

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

List

Rat

e In

crea

se

UPS

FDX

0%

1%

2%

3%

4%

5%

6%

7%

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

List

Rat

e In

crea

se

UPS

FDX

Ground List Rate Increase Air List Rate Increase





132

15%

20%

25%

30%

35%

40%

45%

50%Ju

n-03

Mar

-04

Sep

-04

Apr

-05

Sep

-05

Mar

-06

Sep

-06

Mar

-07

Sep

-07

Apr

-08

Oct

-08

Apr

-09

Sep

-09

Apr

-10

Sep

-10

Jan-

11A

pr-1

1Ju

n-11

Sep

-11

Dec

-11

Mar

-12

Jun-

12S

ep-1

2D

ec-1

2M

ar-1

3Ju

n-13

Sep

-13

Dec

-13

Mar

-14

Jun-

14S

ep-1

4D

ec-1

4M

ar-1

5Ju

n-15

Sep

-15

Dec

-15

Dis

coun

t Off

List

Rat

es

Ground Air

Percentage Discount Off of List Rates


Average List Rate Discount





133

Percentage Discount Off of List Rates


15%

20%

25%

30%

35%

40%

45%

50%

55%

Apr

-05

Mar

-06

Mar

-07

Apr

-08

Apr

-09

Apr

-10

Jan-

11

Jun-

11

Dec

-11

Jun-

12

Dec

-12

Jun-

13

Dec

-13

Jun-

14

Dec

-14

Jun-

15

Dec

-15

Dis

coun

t Off

List

Rat

esFDX Ground UPS Ground FDX Air UPS Air

Average Discount by Carrier and Product





134

29%

46%

32%

56%61% 61% 60%

32% 35%38%

34%

45%

59%

53%

0%

10%

20%

30%

40%

50%

60%

70%

$0

to $

100k

$10

0k to

$500

k

$50

0k to

$1M

M

$1M

M to

$5M

M

$5

MM

to$2

0 M

M

$20

MM

+

Wtd

Avg

Res

pons

e

FedEx UPS

Air List Rate Discount by Spend


What is Your % Discount Off of Listed Parcel Rates for Air Express?





135

19%

38%

18%

43%37%

49%43%

15%

33%

42%

33% 35%

46%41%

0%

10%

20%

30%

40%

50%

60%

$0

to $

100k

$10

0k to

$500

k

$50

0k to

$1M

M

$1M

M to

$5M

M

$5

MM

to$2

0 M

M

$20

MM

+

Wtd

Avg

Res

pons

e

FedEx UPS

Ground List Rate Discount by Spend


What is Your % Discount Off of Listed Parcel Rates for Ground?





136

Summary of Contents

About the Surveys


Rail Trends

Truck Trends

Parcel Trends








137

7.8

8.0

8.2

8.4

8.6

8.8

9.0

Jan-

02M

ay-0

2Ja

n-03

Jun-

03M

ar-0

4Se

p-04

Apr

-05

Sep-

05M

ar-0

6Se

p-06

Mar

-07

Sep-

07A

pr-0

8O

ct-0

8A

pr-0

9Se

p-09

Apr

-10

Sep-

10Ja

n-11

Apr

-11

Jun-

11Se

p-11

Dec

-11

Mar

-12

Jun-

12Se

p-12

Dec

-12

Mar

-13

Jun-

13Se

p-13

Dec

-13

Mar

-14

Jun-

14Se

p-14

Dec

-14

Mar

-15

Jun-

15Se

p-15

Dec

-15

FDX Air UPS AirBetter

Worse

Service Reliability Rankings: Historical Trends


Poor

Excellent Air Express: Service Reliability





138

Service Reliability Rankings: Historical Trends


5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

9.5

Jan-

02M

ay-0

2Ja

n-03

Jun-

03M

ar-0

4Se

p-04

Apr

-05

Sep-

05M

ar-0

6Se

p-06

Mar

-07

Sep-

07A

pr-0

8O

ct-0

8A

pr-0

9Se

p-09

Apr

-10

Sep-

10Ja

n-11

Apr

-11

Jun-

11Se

p-11

Dec

-11

Mar

-12

Jun-

12Se

p-12

Dec

-12

Mar

-13

Jun-

13Se

p-13

Dec

-13

Mar

-14

Jun-

14Se

p-14

Dec

-14

Mar

-15

Jun-

15Se

p-15

Dec

-15

FDX Ground UPS Ground US Postal Consolidators

Poor

Excellent Ground: Service Reliability





139

6.2

6.4

6.6

6.8

7.0

7.2

7.4

7.6

May

-01

Jan-

02M

ay-0

2Ja

n-03

Jun-

03M

ar-0

4Se

p-04

Apr

-05

Sep-

05M

ar-0

6Se

p-06

Mar

-07

Sep-

07A

pr-0

8O

ct-0

8A

pr-0

9Se

p-09

Apr

-10

Sep-

10Ja

n-11

Apr

-11

Jun-

11Se

p-11

Dec

-11

Mar

-12

Jun-

12Se

p-12

Dec

-12

Mar

-13

Jun-

13Se

p-13

Dec

-13

Mar

-14

Jun-

14Se

p-14

Dec

-14

Mar

-15

Jun-

15Se

p-15

Dec

-15

FDX Air UPS Air

Value for Dollar Rankings: Historical Trends


Poor

Excellent Air Express: Value for Dollar





140

Value for Dollar Rankings: Historical Trends


6.0

6.5

7.0

7.5

8.0

8.5

9.0

Jan-

02M

ay-0

2Ja

n-03

Jun-

03M

ar-0

4Se

p-04

Apr

-05

Sep-

05M

ar-0

6Se

p-06

Mar

-07

Sep-

07A

pr-0

8O

ct-0

8A

pr-0

9Se

p-09

Apr

-10

Sep-

10Ja

n-11

Apr

-11

Jun-

11Se

p-11

Dec

-11

Mar

-12

Jun-

12Se

p-12

Dec

-12

Mar

-13

Jun-

13Se

p-13

Dec

-13

Mar

-14

Jun-

14Se

p-14

Dec

-14

Mar

-15

Jun-

15Se

p-15

Dec

-15

FDX Ground UPS Ground US Postal Consolidators

Poor

Excellent Ground: Value for Dollar



January 11, 2016

Disclosure Section Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan Stanley Research. Investors should consider Morgan Stanley Research as only a single factor in making their investment decision. The information and opinions in Morgan Stanley Research were prepared or are disseminated by Morgan Stanley & Co. LLC and/or Morgan Stanley C.T.V.M. S.A. and/or Morgan Stanley México, Casa de Bolsa, S.A. de C.V. and/or Morgan Stanley Canada Limited and/or Morgan Stanley & Co. International plc and/or RMB Morgan Stanley (Proprietary) Limited and/or Morgan Stanley MUFG Securities Co., Ltd. and/or Morgan Stanley Capital Group Japan Co., Ltd. and/or Morgan Stanley Asia Limited and/or Morgan Stanley Asia (Singapore) Pte. (Registration number 199206298Z) and/or Morgan Stanley Asia (Singapore) Securities Pte Ltd (Registration number 200008434H), regulated by the Monetary Authority of Singapore (which accepts legal responsibility for its contents and should be contacted with respect to any matters arising from, or in connection with, Morgan Stanley Research) and/or Morgan Stanley Taiwan Limited and/or Morgan Stanley & Co International plc, Seoul Branch, and/or Morgan Stanley Australia Limited (A.B.N. 67 003 734 576, holder of Australian financial services license No. 233742, which accepts responsibility for its contents), and/or Morgan Stanley Wealth Management Australia Pty Ltd (A.B.N. 19 009 145 555, holder of Australian financial services license No. 240813, which accepts responsibility for its contents), and/or Morgan Stanley India Company Private Limited, regulated by the Securities and Exchange Board of India (“SEBI”) and holder of licenses as a Research Analyst (SEBI Registration No. INH000001105), Stock Broker (BSE Registration No. INB011054237 and NSE Registration No. INB/INF231054231), Merchant Banker (SEBI Registration No. INM000011203), and depository participant with National Securities Depository Limited (SEBI Registration No. IN-DP-NSDL-372-2014) which accepts the responsibility for its contents and should be contacted with respect to any matters arising from, or in connection with, Morgan Stanley Research, and/or PT Morgan Stanley Asia Indonesia and their affiliates (collectively, "Morgan Stanley"). For important disclosures, stock price charts and equity rating histories regarding companies that are the subject of this report, please see the Morgan Stanley Research Disclosure Website at www.morganstanley.com/researchdisclosures, or contact your investment representative or Morgan Stanley Research at 1585 Broadway, (Attention: Research Management), New York, NY, 10036 USA. For valuation methodology and risks associated with any price targets referenced in this research report, please contact the Client Support Team as follows: US/Canada +1 800 303-2495; Hong Kong +852 2848-5999; Latin America +1 718 754-5444 (U.S.); London +44 (0)20-7425-8169; Singapore +65 6834-6860; Sydney +61 (0)2-9770-1505; Tokyo +81 (0)3-6836-9000. Alternatively you may contact your investment representative or Morgan Stanley Research at 1585 Broadway, (Attention: Research Management), New York, NY 10036 USA. Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report: Alexander Vecchio. Unless otherwise stated, the individuals listed on the cover page of this report are research analysts. Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy, which is available at www.morganstanley.com/institutional/research/conflictpolicies. Important US Regulatory Disclosures on Subject Companies As of December 31, 2015, Morgan Stanley beneficially owned 1% or more of a class of common equity securities of the following companies covered in Morgan Stanley Research: Canadian Pacific Railway Ltd., Kansas City Southern, United Parcel Service, UTi Worldwide, XPO Logistics, Inc.. Within the last 12 months, Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of Canadian Pacific Railway Ltd., CSX Corporation, Echo Global Logistics Inc, FedEx Corporation, J.B. Hunt Transport Services Inc., Kansas City Southern, Norfolk Southern Corp., Union Pacific Corp., United Parcel Service, XPO Logistics, Inc.. Within the last 12 months, Morgan Stanley has received compensation for investment banking services from Canadian Pacific Railway Ltd., CSX Corporation, Echo Global Logistics Inc, FedEx Corporation, Genesee & Wyoming Inc., J.B. Hunt Transport Services Inc., Kansas City Southern, Norfolk Southern Corp., Union Pacific Corp., United Parcel Service, XPO Logistics, Inc.. In the next 3 months, Morgan Stanley expects to receive or intends to seek compensation for investment banking services from ArcBest Corp, C.H. Robinson Worldwide Inc., Canadian National Railway Co., Canadian Pacific Railway Ltd., CSX Corporation, Echo Global Logistics Inc, FedEx Corporation, Forward Air Corp, Genesee & Wyoming Inc., Heartland Express Inc., J.B. Hunt Transport Services Inc., Kansas City Southern, Knight Transportation Inc., Landstar System Inc, Norfolk Southern Corp., Old Dominion Freight Line Inc, Roadrunner Transportation Systems Inc, Saia, Inc., Union Pacific Corp., United Parcel Service, UTi Worldwide, Werner Enterprises, XPO Logistics, Inc.. Within the last 12 months, Morgan Stanley has received compensation for products and services other than investment banking services from Canadian Pacific Railway Ltd., CSX Corporation, Genesee & Wyoming Inc., J.B. Hunt Transport Services Inc., Kansas City Southern, Old Dominion Freight Line Inc, Union Pacific Corp., United Parcel Service, XPO Logistics, Inc.. Within the last 12 months, Morgan Stanley has provided or is providing investment banking services to, or has an investment banking client relationship with, the following company: ArcBest Corp, C.H. Robinson Worldwide Inc., Canadian National Railway Co., Canadian Pacific Railway Ltd., CSX Corporation, Echo Global Logistics Inc, FedEx Corporation, Forward Air Corp, Genesee & Wyoming Inc., Heartland Express Inc., J.B. Hunt Transport Services Inc., Kansas City Southern, Knight Transportation Inc., Landstar System Inc, Norfolk Southern Corp., Old Dominion Freight Line Inc, Roadrunner Transportation Systems Inc, Saia, Inc., Union Pacific Corp., United Parcel Service, UTi Worldwide, Werner Enterprises, XPO Logistics, Inc.. 141


January 11, 2016

Within the last 12 months, Morgan Stanley has either provided or is providing non-investment banking, securities-related services to and/or in the past has entered into an agreement to provide services or has a client relationship with the following company: C.H. Robinson Worldwide Inc., Canadian National Railway Co., Canadian Pacific Railway Ltd., CSX Corporation, FedEx Corporation, Genesee & Wyoming Inc., J.B. Hunt Transport Services Inc., Kansas City Southern, Norfolk Southern Corp., Old Dominion Freight Line Inc, Union Pacific Corp., United Parcel Service, XPO Logistics, Inc.. An employee, director or consultant of Morgan Stanley is a director of Norfolk Southern Corp.. This person is not a research analyst or a member of a research analyst's household. Morgan Stanley & Co. LLC makes a market in the securities of ArcBest Corp, C.H. Robinson Worldwide Inc., Canadian National Railway Co., Canadian Pacific Railway Ltd., CSX Corporation, Echo Global Logistics Inc, Expeditors International of Washington I, FedEx Corporation, Forward Air Corp, Genesee & Wyoming Inc., Heartland Express Inc., Hub Group Inc, J.B. Hunt Transport Services Inc., Kansas City Southern, Knight Transportation Inc., Landstar System Inc, Norfolk Southern Corp., Old Dominion Freight Line Inc, Roadrunner Transportation Systems Inc, Saia, Inc., Swift Transportation, Union Pacific Corp., United Parcel Service, UTi Worldwide, Werner Enterprises, XPO Logistics, Inc.. The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors, firm revenues and overall investment banking revenues. Morgan Stanley and its affiliates do business that relates to companies/instruments covered in Morgan Stanley Research, including market making, providing liquidity, fund management, commercial banking, extension of credit, investment services and investment banking. Morgan Stanley sells to and buys from customers the securities/instruments of companies covered in Morgan Stanley Research on a principal basis. Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report. Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions. STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight, Equal-weight, Not-Rated or Underweight (see definitions below). Morgan Stanley does not assign ratings of Buy, Hold or Sell to the stocks we cover. Overweight, Equal-weight, Not-Rated and Underweight are not the equivalent of buy, hold and sell. Investors should carefully read the definitions of all ratings used in Morgan Stanley Research. In addition, since Morgan Stanley Research contains more complete information concerning the analyst's views, investors should carefully read Morgan Stanley Research, in its entirety, and not infer the contents from the rating alone. In any case, ratings (or research) should not be used or relied upon as investment advice. An investor's decision to buy or sell a stock should depend on individual circumstances (such as the investor's existing holdings) and other considerations. Global Stock Ratings Distribution (as of December 31, 2015) For disclosure purposes only (in accordance with NASD and NYSE requirements), we include the category headings of Buy, Hold, and Sell alongside our ratings of Overweight, Equal-weight, Not-Rated and Underweight. Morgan Stanley does not assign ratings of Buy, Hold or Sell to the stocks we cover. Overweight, Equal-weight, Not-Rated and Underweight are not the equivalent of buy, hold, and sell but represent recommended relative weightings (see definitions below). To satisfy regulatory requirements, we correspond Overweight, our most positive stock rating, with a buy recommendation; we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations, respectively. Stock Rating Category Count

% ofTotal Count

% ofTotal IBC

% of RatingCategory

Overweight/Buy 1193 35% 324 43% 27%Equal-weight/Hold 1449 43% 330 44% 23%Not-Rated/Hold 89 3% 12 2% 13%Underweight/Sell 660 19% 88 12% 13%Total 3,391 754

Investment Banking Clients (IBC)Coverage Universe

Disclosure Section (cont’d)

142


January 11, 2016

Disclosure Section (cont’d) Data include common stock and ADRs currently assigned ratings. Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months. Analyst Stock Ratings Overweight (O or Over) - The stock's total return is expected to exceed the total return of the relevant country MSCI Index or the average total return of the analyst's industry (or industry team's) coverage universe, on a risk-adjusted basis over the next 12-18 months. Equal-weight (E or Equal) - The stock's total return is expected to be in line with the total return of the relevant country MSCI Index or the average total return of the analyst's industry (or industry team's) coverage universe, on a risk-adjusted basis over the next 12-18 months. Not-Rated (NR) - Currently the analyst does not have adequate conviction about the stock's total return relative to the relevant country MSCI Index or the average total return of the analyst's industry (or industry team's) coverage universe, on a risk-adjusted basis, over the next 12-18 months. Underweight (U or Under) - The stock's total return is expected to be below the total return of the relevant country MSCI Index or the average total return of the analyst's industry (or industry team's) coverage universe, on a risk-adjusted basis, over the next 12-18 months. Unless otherwise specified, the time frame for price targets included in Morgan Stanley Research is 12 to 18 months. Analyst Industry Views Attractive (A): The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs. the relevant broad market benchmark, as indicated below. In-Line (I): The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark, as indicated below. Cautious (C): The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs. the relevant broad market benchmark, as indicated below. Benchmarks for each region are as follows: North America - S&P 500; Latin America - relevant MSCI country index or MSCI Latin America Index; Europe - MSCI Europe; Japan - TOPIX; Asia - relevant MSCI country index or MSCI sub-regional index or MSCI AC Asia Pacific ex Japan Index. Stock Price, Price Target and Rating History (See Rating Definitions) Important Disclosures for Morgan Stanley Smith Barney LLC Customers Important disclosures regarding the relationship between the companies that are the subject of Morgan Stanley Research and Morgan Stanley Smith Barney LLC or Morgan Stanley or any of their affiliates, are available on the Morgan Stanley Wealth Management disclosure website at www.morganstanley.com/online/researchdisclosures. For Morgan Stanley specific disclosures, you may refer to www.morganstanley.com/researchdisclosures. Each Morgan Stanley Equity Research report is reviewed and approved on behalf of Morgan Stanley Smith Barney LLC. This review and approval is conducted by the same person who reviews the Equity Research report on behalf of Morgan Stanley. This could create a conflict of interest. Other Important Disclosures Morgan Stanley & Co. International PLC and its affiliates have a significant financial interest in the debt securities of C.H. Robinson Worldwide Inc., Canadian National Railway Co., Canadian Pacific Railway Ltd., CSX Corporation, FedEx Corporation, Genesee & Wyoming Inc., Kansas City Southern, Norfolk Southern Corp., Union Pacific Corp., United Parcel Service, XPO Logistics, Inc.. Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be, and do not constitute, advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Morgan Stanley produces an equity research product called a "Tactical Idea." Views contained in a "Tactical Idea" on a particular stock may be contrary to the recommendations or views expressed in research on the same stock. This may be the result of differing time horizons, methodologies, market events, or other factors. For all research available on a particular stock, please contact your sales representative or go to Matrix at http://www.morganstanley.com/matrix. Morgan Stanley Research is provided to our clients through our proprietary research portal on Matrix and also distributed electronically by Morgan Stanley to clients. Certain, but not all, Morgan Stanley Research products are also made available to clients through third-party vendors or redistributed to clients through alternate electronic means as a convenience. For access to all available Morgan Stanley Research, please contact your sales representative or go to Matrix at http://www.morganstanley.com/matrix. Any access and/or use of Morgan Stanley Research is subject to Morgan Stanley's Terms of Use (http://www.morganstanley.com/terms.html). By accessing and/or using Morgan Stanley Research, you are indicating that you have read and agree to be bound by our Terms of Use (http://www.morganstanley.com/terms.html). 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January 11, 2016

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Disclosure Section (cont’d) Morgan Stanley Research does not provide individually tailored investment advice. Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it. Morgan Stanley recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of an investment or strategy will depend on an investor's circumstances and objectives. The securities, instruments, or strategies discussed in Morgan Stanley Research may not be suitable for all investors, and certain investors may not be eligible to purchase or participate in some or all of them. Morgan Stanley Research is not an offer to buy or sell or the solicitation of an offer to buy or sell any security/instrument or to participate in any particular trading strategy. The value of and income from your investments may vary because of changes in interest rates, foreign exchange rates, default rates, prepayment rates, securities/instruments prices, market indexes, operational or financial conditions of companies or other factors. There may be time limitations on the exercise of options or other rights in securities/instruments transactions. Past performance is not necessarily a guide to future performance. Estimates of future performance are based on assumptions that may not be realized. If provided, and unless otherwise stated, the closing price on the cover page is that of the primary exchange for the subject company's securities/instruments. The fixed income research analysts, strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors, including quality, accuracy and value of research, firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues), client feedback and competitive factors. Fixed Income Research analysts', strategists' or economists' compensation is not linked to investment banking or capital markets transactions performed by Morgan Stanley or the profitability or revenues of particular trading desks. The "Important US Regulatory Disclosures on Subject Companies" section in Morgan Stanley Research lists all companies mentioned where Morgan Stanley owns 1% or more of a class of common equity securities of the companies. For all other companies mentioned in Morgan Stanley Research, Morgan Stanley may have an investment of less than 1% in securities/instruments or derivatives of securities/instruments of companies and may trade them in ways different from those discussed in Morgan Stanley Research. Employees of Morgan Stanley not involved in the preparation of Morgan Stanley Research may have investments in securities/instruments or derivatives of securities/instruments of companies mentioned and may trade them in ways different from those discussed in Morgan Stanley Research. Derivatives may be issued by Morgan Stanley or associated persons. With the exception of information regarding Morgan Stanley, Morgan Stanley Research is based on public information. Morgan Stanley makes every effort to use reliable, comprehensive information, but we make no representation that it is accurate or complete. We have no obligation to tell you when opinions or information in Morgan Stanley Research change apart from when we intend to discontinue equity research coverage of a subject company. Facts and views presented in Morgan Stanley Research have not been reviewed by, and may not reflect information known to, professionals in other Morgan Stanley business areas, including investment banking personnel. Morgan Stanley Research personnel may participate in company events such as site visits and are generally prohibited from accepting payment by the company of associated expenses unless pre-approved by authorized members of Research management. Morgan Stanley may make investment decisions that are inconsistent with the recommendations or views in this report. To our readers in Taiwan: Information on securities/instruments that trade in Taiwan is distributed by Morgan Stanley Taiwan Limited ("MSTL"). Such information is for your reference only. 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Certain information in Morgan Stanley Research was sourced by employees of the Shanghai Representative Office of Morgan Stanley Asia Limited for the use of Morgan Stanley Asia Limited.


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Morgan Stanley is not incorporated under PRC law and the research in relation to this report is conducted outside the PRC. Morgan Stanley Research does not constitute an offer to sell or the solicitation of an offer to buy any securities in the PRC. PRC investors shall have the relevant qualifications to invest in such securities and shall be responsible for obtaining all relevant approvals, licenses, verifications and/or registrations from the relevant governmental authorities themselves. Morgan Stanley Research is disseminated in Brazil by Morgan Stanley C.T.V.M. S.A.; in Mexico by Morgan Stanley México, Casa de Bolsa, S.A. de C.V which is regulated by Comision Nacional Bancaria y de Valores. Paseo de los Tamarindos 90, Torre 1, Col. 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The information in Morgan Stanley Research is being disseminated by Morgan Stanley Saudi Arabia, regulated by the Capital Market Authority in the Kingdom of Saudi Arabia , and is directed at Sophisticated investors only. The information in Morgan Stanley Research is being communicated by Morgan Stanley & Co. International plc (DIFC Branch), regulated by the Dubai Financial Services Authority (the DFSA), and is directed at Professional Clients only, as defined by the DFSA. The financial products or financial services to which this research relates will only be made available to a customer who we are satisfied meets the regulatory criteria to be a Professional Client. The information in Morgan Stanley Research is being communicated by Morgan Stanley & Co. 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