state of the ltl freight industry

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State of the LTL IndustryState of the LTL IndustryState of the LTL Industry

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State of the LTL IndustryState of the LTL Industry

• Industry Overview and Outlook

Market Share: Past, Present & Future

Shipper Trends in the LTL Sector

Tonnage & Pricing Trends

Key Competitors Market Position: Who's Left Standing?

Future LTL Trends

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$26.5 Billion LTL Market in North America in 2009

Defined in terms of service:Defined in terms of service:

Next Day(0 - 500 miles)

$12.1 billion

2 - 5 Day

$14.5 billion

2 Day 3 –5 Day (500 - 1000 miles) (over 1000)

$6.4 billion $8.1 billion

Source: Tom Jackson Estimates

Down -26% from LTL revenue peak of 2006

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• Key Competitors YRC National Transportation ABF Freight Systems FedEx National LTL Con-way Freight FedEx Freight Estes Express Lines UPS Freight Old Dominion Freight Line YRC Regional Transportation AAA Cooper Transportation Southeastern Freight Lines Saia Motor Freight Averitt Express R+L Carriers Vitran Express

Long Haul Carriers

Super Regional Carriers

Next Day Carriers

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• Carrier ConsolidationsRANK COMPANY

1979 Revenue

$MM

2009 Revenue

$MMNOTES

1 Roadway Express $1,098 $1,674 Acquired by Yellow Corp., 12/2003

2 Consolidated Freightways $849 Closed 09/02

3 Yellow Freight Systems $805 $1,814

4 PIE Nationwide $561 Closed

5 McLean Trucking $540 Closed

6 Pacific Intermountain Express $403 Merged with Ryder

7 Spector Industries $316 Closed

8 Smith's Transfer $253 Closed

9 Transcon Lines $238 Closed

10 East Texas Motor Freight Lines $235 Merged with ABF Freight

11 Interstate System $233 Closed

12 Overnite $229 $1,807 Acquired by UPS, Inc. 5/2005

13 ABF Freight Systems $229 $1,384

14 American Freight System $223 Closed

15 Carolina Freight System $216 Merged with ABF Freight Systems

16 Hall's Motor Transit $199 Closed

17 Mason & Dixon Lines $184 LTL business merged with Central Transport

18 Lee Way Motor Freight $172 Closed

19 T-I-M-E DC $170 Closed

20 Wilson Freight $165 Closed

21 Preston Trucking $160 Closed

22 IML Freight $159 Closed

23 Associated Truck Lines $156 Combines with Garrett and Grave to form ANR

24 Central Freight Lines $154 $224 Went private ownership status in 2006

25 Jones Motor $148 LTL business closed. Now TL carrier

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• Decline in Unionized Trucking - Past The decline of the unionized carrier has occurred due in part to

the recent number of bankruptcies of these carriers whose workers belonged to IBT. The primary reason for the bankruptcies of these carriers is the higher union wages, benefits and lack of work rules flexibility.

At the time of deregulation, 55 out of the top 60 carriers in the LTL industry were unionized. Now only two are left.

Non Union – 49%

Union – 27%

Non Union – 73%

Union – 51%

1990 2009

Tonnage Market Share of Unionized LTL Carriers has Declined


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• Market Share – Present & Future

LTL Carriers

ABF Freight Systems 3.82% 3.78%

Con-way Freight 12.43% 12.08%

FedEx Freight 14.98% 12.67%

Old Dominion Freight Line 6.28% 6.17%

UPS Freight 6.20% 6.52%

Saia Motor Freight 5.07% 5.29%

Vitran Express 3.64% 3.52%

YRC National Transportation 8.96% 9.88%

YRC Regional Transportation 7.33% 7.96%

All Other Carriers 31.29% 32.13%

Q4 2009 Market Share



CNW was 9.2%, FDX was 12.5%, YRC was 22.2% in Q4 2008

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• Market Share – Present & Future

LTL Carriers

ABF Freight Systems 3.82% 4.3%

Con-way Freight 12.43% 13.5%

FedEx Freight 14.98% 16.3%

Old Dominion Freight Line 6.28% 7.2%

UPS Freight 6.20% 7.1%

Saia Motor Freight 5.07% 5.8%

Vitran Express 3.64% 4.2%

YRC National Transportation 8.96% 6.1%

YRC Regional Transportation 7.33% 5.4%

All Other Carriers 31.29% 30.3%




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• Shipper Trends in the LTL Sector

• DC Bypass

• Pool Distribution

• Growth in Outsourcing

• One-Stop Shopping

• Blurring the Lines of Freight Transportation

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Asia

1. Before the container doors are closed

2. After the container doors are opened

• Shipping Patterns – DC Bypass Two of the best places to affect the efficiency of the Asia to US

supply chain for DC Bypass:

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Truckload

Regional LTL Network

Target Regional DC

Target Stores

Target Regional DC Consolidation

Center

1. Manufacturer's Freight

2. Target's Freight

Truckload

• Shipping Patterns – Pool Distribution Shipper's have changed their distribution patterns to have added

more regional DCs vs. one national DC. This results from the need to be closer to their customers and have shorter lead times (product needs to be there tomorrow, not in three days).

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• Growth in Outsourcing – 3PLs Many shippers realize that transportation is outside their core

competency. The shift to outsourcing will benefit the LTL industry at the expense of the private fleet sector. Shippers see the value of leveraging the expertise of a LTL firm as a way to lower costs and compress the logistics cycle time.

3PLs grow much faster than asset truckersOutsourcing: Percent of Fortune

500 Companies Outsourcing Freight Shipping


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• Service/Price Bundling - “One-Stop Shopping” Large integrated package carriers such as UPS, FedEx, and DHL

will continue to offer shippers a “One-Stop Shopping” solution. These integrators bundle services and price to customers, as they via for the entire transportation share of wallet of a customer.

UPS and FedEx’s sales and marketing power to bundling its LTL service with its small package offerings should enable them to exceed market growth. DHL will eventually enter the LTL space.

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• Blurring the Lines of Freight Transportation

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• LTL Demand Trends

Monthly volumes likely bottomed in Q3 2009. Signs of sequential and y/y improvement last 16 weeks, but still below historical norms.

Inventory restocking - home improvement retailers indicate better trends

Federal stimulus programs pulled weak demand forward

Freight diversion from struggling carrier

TL volumes stronger, TL capacity tighter, LTL wgt/shp growing

Industry capacity should continue to exit in 2010. However, trying to predict capacity reduction, like with YRC, has proven difficult with banks and debt holders willing to restructure deals rather than force closure and sell off assets in a weak environment. Shippers are NOT going back to YRC

Is this another Q2 2008? (demand can’t get materially worse)

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• LTL Pricing Pressure

Rates growth typically follows volume growth by a few quarters. Rates should be better 2H, while rate in 1H will have a modest uptick y/y. (f/surcharge, culling non contributors, capacity better, TL volumes/stop-offs, wgt/shp trending better)

Rates will not get significantly better until meaningful capacity exits or an economic tailwind takes hold.

Regional pricing much more aggressive than longer haul rates. LTL bid activity was at all time high levels in 2009. GP/3PL programs will continue to becoming popular in 2010.

Fuel surcharge rates were less of an issue in 2009 versus 2008. But 2010 is beginning to see fuel expense rise.

The longer the freight recession lasts, the better the rebound. Rate recovery from the economy or a major trucking closure will push pricing power back to the carriers. (greater than ’06 and’99 levels).

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• Who's Left Standing…Long-term? Integrated package carriers with LTL offerings (UPS, FDX)

will continue to grow.

Large super regional LTLs with a diversified freight mix and partnerships with other modes will prosper (Estes, CNW, ODFL) and take share.

Regional LTL carriers that serve niche markets (SAIA, VTNC) will gain national footprints as weaker marginal players sell or exit a geography.

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• YRC will continue to shed market share in 2010?

140,953 shipments a day in Q2 2008







~75,250 shipments a day in Q1 2010 (estimate)


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• Freight Overflow To Other Modes

In the near term, the LTL industry would have trouble absorbing an abrupt closure of YRC, as labor capacity would be the bottle neck. Initially, overflow of YRC freight would also benefit other modes such as (purchased transportation) TL, Intermodal, Forwarders and Small Pack carriers.

LTL industry terminal (dock doors) capacity = 25 to 30%

LTL industry equipment (truck/trailer) capacity = 20 to 25%

LTL industry labor (driver/dockworker) capacity = <5%

Note: Up to 26% of Yellow/Roadway freight moves on the rails for linehaul


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• Future LTL Trends

YRC market share erosion continues (41.4% 1990 to 11.5% Q1 2011)

Modal indifference: ”Blurring the lines of freight transportation”

Pricing bundling: "One Stop Shipping" for freight transportation

Pricing pressure will continue until meaningful capacity is removed or an economic tailwind takes hold.

Further industry consolidation: another LTL acquisition by large integrator and super regionals get national footprint (after 2011).

Growth of 3PLs will continue (“Echo” types are big customers)

Used class 8 demand growing with better freight levels, EGR-SCR, pushed out PMs,

Driver shortage problem will reappear (CSA, HOS, driver health) 2011

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• Future LTL Trends

Profitable Growth Segments of LTL Trucking

• Regional Deliveries (JIT inventory)

• Expedited (air, ground hot shot)

• International (Canada, Mexico, Puerto Rico, HI, AK)

• Specialized Shipments (Government, Tradeshow, White Glove)

Long term, shippers are redesigning supply chain to remove more costs (costly modes, packaging/weight, fuel)

Long slow road to recovery—The “new normal” in LTL demand (3%+ GDP)

The longer the freight recession lasts, the better the rebound will be, as someone has to physically haul the freight. The future will be bright for those that survive, “Darwinism at its best”.

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state of the ltl freight industry

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