![](media/image1.png){width="2.5in"
height="1.2354166666666666in"}FMCSA-RI-06-042

Motor Carrier Industry Profile:

An Update

**2004-2005**

Prepared by:

Thomas M. Corsi

Michelle Smith Professor of Logistics

Co-Director, Supply Chain Management Center

Robert H. Smith School of Business

University of Maryland

College Park, MD 20742

Prepared for:

Analysis Division

Office of Research and Analysis

Federal Motor Carrier Safety Administration

August 2005

#  Introduction

This report updates the **Motor Carrier Industry Profile:
2001-2003**[^1] and **Stock Market Performance of Publicly Traded
Trucking Sector Stocks by Industry Segment, 2000-2004**[^2] to reflect
more recent developments of particular significance to the industry and
its various segments. The **Motor Carrier Industry Profile: 2001-2003**
relied heavily on Motor Carrier Annual Reports from over two thousand of
the largest for-hire motor carriers for calendar years 2001, 2002, and
2003. However, there is a significant lag in the publication of annual
report data. In fact, the 2004 calendar year data will not be available
until late in 2005 or early in 2006. As a result, this report will fill
in the gaps as best is possible without the benefit of the detailed
annual report data. This report's objective will be to identify trends
and major events that have impacted the trucking industry during 2004
and 2005. It is based on available reports, trade journal articles,
roundtable discussions, etc. The report will also update the stock
market information included in **Stock Market Performance of Publicly
Traded Trucking Sector Stocks by Industry Segment, 2000-2004** to
reflect stock market performance in the second half of 2004 and first
half of 2005.

This new report, entitled **Motor Carrier Industry Profile: An Update,
2004-2005** is one of a series of reports analyzing various aspects of
the motor carrier industry. Other reports in the series focus on the
safety performance of the industry and its major segments[^3] and on the
linkage between safety performance and operating performance overall and
in each of the major segments[^4].

The year 2003 constituted a transition year for the motor carrier
industry. After a rather sustained period of post-deregulation operating
challenges and weak financial results, beginning in 2003 the profit
environment started to become more favorable overall for the industry
and for many of its individual segments. There were four principal
factors contributing to this shift: continued bankruptcies and the
removal of capacity, especially among less-than-truckload carriers,
mergers and acquisitions and the resultant further rationalization of
capacity, driver shortages, and improvements in the national economic
picture. The combination of these factors reduced industry capacity and
created an environment in which modest rate increases were sustained,
since shippers had fewer service options and were trying to meet an
increased demand level. Clearly, sustained modest rate increases had a
positive impact on industry profitability.

This report will examine continuing developments during 2004 and 2005 in
the principal factors contributing to the shift in profitability for the
industry and the resultant impact on industry profitability overall and
in the various industry segments. The report will also examine an array
of other events and factors with direct and indirect impact on the motor
carrier industry and its segments. The discussion will also reflect an
updated industry perspective by financial analysts and investors based
on the market performance of industry stocks in the second half of 2004
and the first half of 2005.

The report is divided into the following major sections: LTL and Mega
Package/Small Parcel Carriers, Truckload Carriers, and Future
Issues---2006 and Beyond.

**LTL and Mega Package/Small Parcel Carriers**

In the past, the discussion of the motor carrier industry and its
segments would involve the identification of a separate
less-than-truckload carrier segment and a package/small parcel segment.
Recognized industry leaders in the LTL segment traditionally have been:
Yellow Freight, Roadway Express, and Consolidated Freightways---the Big
Three. Recognized leaders in the parcel/small package segment
traditionally have been: United Parcel Service and Federal Express.

However, a series of recent developments have brought about a fusion of
these segments into a single large and very powerful industry segment.
This section of the report will discuss the following topics:
rationalization of capacity in the LTL segment through bankruptcies and
mergers and acquisitions; decline of Teamster carriers; fusion of
package/small parcel segment into LTL segment through acquisitions by
package/small parcel carriers; improved LTL carrier commitment to
service as part of integrated supply chain solutions; improved traffic
growth among LTL carriers, especially among regional LTL carriers;
sustained rate increases and better operating margins; and mixed stock
market performance in 2005, after excellent growth in 2000-2004 time
period.

***Capacity Rationalization through Bankruptcies and Mergers and
Acquisitions***

The less-than-truckload carrier segment experienced a series of
bankruptcies and business failures in the late 1990s that have continued
up to the present time. Table 1 lists these failures and their dates.

Table 1: Recent LTL Bankruptcies/Business Failures

  ----------------------------------- -----------------------------------
  *Bankrupt/Failed Company*           *Date of Bankruptcy/Failure*

  USF Dugan                           July, 2005

  Guaranteed Overnight Delivery       November, 2004

  USF Red Star                        May, 2004

  Consolidated Freightways            September, 2002

  APA Transport                       February, 2002

  Preston Trucking                    July, 1999

  Nation's Way                        May, 1999

  **ANR Advance**                     December, 1998
  ----------------------------------- -----------------------------------

Source: William Fisher and Buck Horne, Raymond James & Associates, Inc.,
**LTL: Key Secular Trends Driving Regional Carriers**, October 13, 2004,
p. 9 with update to reflect 2005 LTL bankruptcy of USF Dugan and 2004
bankruptcy of Guaranteed Overnight Delivery.

The largest bankruptcy on this list involved that of Consolidated
Freightways, one of the three largest less-than-truckload carriers in
2002. It is quite significant to note that all of the carriers included
in Table 1 were Teamster-organized carriers. In fact, in the middle of
2005, the unionized portion of the LTL package/small parcel segment
consisted of jut the following set of carriers; Yellow-Roadway[^5],
Arkansas Best Freightways, and United Parcel System. The next
sub-section will discuss the rationale for the demise of the Teamster
carriers.

In addition to the significant bankruptcies of less-than-truckload
carriers listed in Table 1, the LTL segment has experienced a series of
mergers and acquisitions as well. These mergers and acquisitions have
brought about a further rationalization of the segment's capacity. The
largest merger, of course, involved Yellow Freight and Roadway Express
in December of 2003. Their merger resulted in the creation of the
largest LTL carrier in the nation. The newly-merged carrier, Yellow
Roadway, itself, launched a major purchase in May of 2005 by acquiring
the consolidated group of regional LTL carriers known as USF Corp. USF
Corp. consisted of the following set of regional LTL carriers, which
USF, itself, had fashioned together as a set of independent operating
units within its overall corporate structure: USF Holland, USF Bestway,
USF Reddaway, and USF Dugan. Yellow Roadway subsequently shut down
operations at USF Dugan in July of 2005. Yellow Roadway's acquisition of
USF Corp. represented its effort to expand into regional LTL services as
a supplement to the national and, increasingly, international focus of
its operations.

Through these bankruptcies and mergers and acquisitions, there has been
a definite reduction in the capacity of this industry segment.
Operations have been rationalized and duplicate services removed. Fisher
and Horne, Raymond James & Associates, estimate that the combination of
bankruptcies and mergers and acquisitions has reduced industry capacity
by 15 percent.[^6]

***Decline of Teamster LTL Carriers***

As noted, the recent bankruptcies in the LTL segment have all involved
unionized carriers whose workers belonged to the International
Brotherhood of Teamsters. The primary reason for the bankruptcies of
these carriers involved the higher union wages and benefits and lack of
union work rules flexibility, according to analysts Fisher and
Horne.[^7]

Indeed, the Teamster employees average "\$73,800 per year compared to
\$55,700 per year for non-union counterparts" in the LTL segment in
wages and benefits per employee on an annual basis.[^8] According to
Fisher and Horne, the additional wages for the unionized LTL carriers in
comparison to the non-unionized carriers averages 15% per employee on an
annual basis, while the benefit differences are 45% greater per employee
on an annual basis among the unionized LTL carriers versus the
non-unionized carriers.[^9]

These differences are quite significant and have placed the unionized
carriers at a significant disadvantage. Indeed, many unionized LTL
carriers have not been able to overcome this disparity as evidenced by
the string of unionized LTL carrier bankruptcies.

In addition to the significant wage disadvantage, the unionized LTL
carriers have inflexible work rules that limit their productivity and
create significant competitive disadvantages for them. According to
Fisher and Horne, "importantly, workers for unionized LTLs are given
designated job titles and responsibilities, and there is very little
deviation from those specific tasks. Meaning, a driver for a union LTL
usually only drives and a dockworker will often only load/unload
freight, even if there is an obvious lack of one or the other at a given
time and help is needed to move freight. With non-union LTLs, drivers
will often get out of their trucks at the end of a run and start helping
on the dock to load/unload freight."[^10]

Furthermore, the non-union carriers have greater flexibility in
assigning shifts to their workers in comparison with the rigidity of the
union carriers. Fisher and Horne state that "another aspect of the
union/non-union flexibility issue is the ability to change worker shifts
and hours to meet demand. Unionized workers are often guaranteed a
minimum number of hours per week...and are not easily moved from shift
to shift. Non-union LTLs, on the other hand, often employ a number of
part-time workers who can be called in on an as needed basis to
supplement various shifts."[^11]

Clearly, the combination of higher wages and fringe benefits coupled
with the work rules inflexibility are major factors in the decline of
the union LTL carriers. The non-union carriers, especially the regional
non-union LTL carriers, have made substantial inroads into a market,
once dominated by national LTL unionized carriers.

***Fusion of Package/Small Parcel Segment into LTL Segment***

Another significant development with an important impact on the LTL
segment involves the expansion of the package/small parcel carriers into
the traditional LTL carrier segment. Indeed, for many years the
package/small parcel carriers focused on shipments under 100 lbs., while
the LTL carriers handled shipments from 100 lbs. all the way to under
10,000 lbs. The two segments were quite distinct with minimal overlaps.
The LTL carriers focused on company to company deliveries. The
package/small parcel carriers directed primary emphasis on business to
consumer deliveries.

However, Federal Express initiated a significant break in this pattern
by purchasing several regional, traditional LTL carriers. In 1998, they
purchased Viking Freight and in 2001 they purchased American
Freightways, both of which were regional LTL carriers. In May 2005, UPS
offered to buy Overnite Corp, a major regional LTL carrier, in part as a
competitive response to the establishment of Fed Ex Freight (the name
given by Federal Express to its merged operation of Viking Express and
American Freightways). Thus, the two major package/small parcel giants
will have major traditional LTL operations sometime in 2005 if the UPS
acquisition of Overnite takes effect.

The result, of course, is a very strong and powerful industry segment
consisting of several very large carriers, including: Yellow Roadway,
UPS, and Federal Express. This powerful and rationalized industry
segment has experienced some significant gains in the 04/05 time period.

***Improved LTL Service as part of Integrated Supply Chain Solutions***

Increasingly, major corporations in the United States and throughout the
world are moving their supply chains into a real-time environment. This
type of transformational paradigm involves a major commitment of time
and resources, but offers the firms the prospect of significant savings
in time and substantial improvements in business efficiency. In fact,
there is a strong argument that companies failing to shift to the new
real-time environment will not survive in the intensely competitive
global economy.[^12]

Shifting supply chains to a real-time environment requires the corporate
entity to adopt a single enterprise-wide data base for transactions,
i.e. an enterprise resource planning system. With this foundation in
place, application layers can be added to accomplish supply chain
planning, procurement management/supplier relationship management
systems, demand planning systems, inventory optimization systems, and
customer relationship management systems. Many companies rely on secured
Internet portals to move data across applications and to share it with
extended enterprise partners, i.e. suppliers, wholesalers, and
retailers.

These types of real-time supply chain environments rely on data
exchanges to track all transactions and physical flows of components and
finished goods in either real-time or near real time. Long gone are the
days when shippers hand over the freight to carriers with the promise
that it will be delivered in from five to seven days from New York to
Los Angeles. This type of imprecision is no longer acceptable. The
globally-competitive firm needs real time knowledge of its assets and
movements in order to facilitate planning and financial management.
Firms without such information are doomed to failure in our high-tech
world.

The traditional LTL carriers, however, set up their hub-and-spoke
terminal structure to maximize efficient operations and with only a
secondary focus on service. Thus, trucks would not be dispatched between
terminals until trailers were full, even if there were delays in
dispatching and, ultimately, in delivery of freight. Thus, shippers were
often quoted time windows of several days for freight deliveries.
However, in the real-time supply chain world, this type of imprecision
is no longer the norm. Instead, the emphasis is on complete tracking of
shipments, knowledge of how the freight moves through the carrier's
system, and precise service commitments.

The package/small parcel carriers took the lead in adopting new
technologies to provide very accurate tracking and tracing of shipments.
According to Mark Davis, a senior analyst with FTN Midwest Research
Securities Corp, "UPS is currently in the lead when it comes to the race
for supply chain management supremacy as they leverage their small
package experiences in order to create visibility for their customers
across the entire global supply chain."[^13]

Following this lead, the traditional LTL firms, in particular the
regional LTL carriers have been rushing to provide service commitments
to their customers as part of an overall effort to improve service. As
noted by Fisher and Horne: "...improving transit times has been a major
focus of some regionals over the past two years as a means of taking
market share from union carriers without sacrificing any pricing. Five
day service was often cut to three, and three-day service was knocked
down to two, all while next-day service was expanded to reach the
500-600 mile length of bandwidth. Regionals, to their credit, have
fine-tuned their networks such that certain carriers now offer
money-back guarantees, which would have been unheard of just a few years
ago."[^14]

Further improvements in service by the LTL carriers, regionals as well
as remaining nationals, will require substantial investments in
technologies, which are now available and offer significant
opportunities for the carriers. According to Fisher and Horne, "By most
accounts, there are a number of new technologies available that can
meaningfully improve LTL operations---systems such as Dock Yard
Management (DYM), wireless handheld data units, sophisticated software
packages (for routing, e-billing, Web-tracking, etc), and Radio
Frequency I.D. tags (RFID)."[^15]

LTL carriers are increasingly recognizing that the global economy has
forced shippers to improve supply chain efficiency. There is a direct
link between supply chain efficiency and real-time data and the tracking
and tracing of shipments flowing through a carrier's system. LTL
carriers have made some significant improvements in their level of
service in response to these changes. Although still behind the mega
parcel/small package giants, i.e. UPS and Fed Ex, the regional LTL
carriers, and the national carriers as well, recognize the need to
continue improving their service commitments and recognize the role of
technology in achieving improved service and efficiency.

***Improved Traffic Growth***

The LTL carriers, in particular, the regional LTL carriers, have
experienced significant growth in traffic volumes as a result of
improved service levels (as discussed above), a generally improving
national economic picture, and changes in the hours-of-service
regulations.

Table 2 provides information on the traffic growth volumes experienced
by both the national and regional LTL carriers during the first half of
2004 in comparison to the first half of 2003.

Table 2: Growth in Tonnage Volume: LTL National and Regional Carriers

+-----------------------------------+-----------------------------------+
| Company                           | 1^st^ Half 2004                   |
|                                   |                                   |
|                                   | Tonnage Growth from 1^st^ Half    |
|                                   | 2003                              |
+-----------------------------------+-----------------------------------+
| **National LTL**                  |                                   |
+-----------------------------------+-----------------------------------+
| *Yellow Roadway*                  | 4.8%                              |
+-----------------------------------+-----------------------------------+
| *ABF Freight System*              | 6.1%                              |
+-----------------------------------+-----------------------------------+
| *Weighted Average*                | 5.9%                              |
+-----------------------------------+-----------------------------------+
| **Regional LTL**                  |                                   |
+-----------------------------------+-----------------------------------+
| *Fed Ex Freight*                  | 15.2%                             |
+-----------------------------------+-----------------------------------+
| *Con-Way Group*                   | 13.8%                             |
+-----------------------------------+-----------------------------------+
| *USF Corp. Group*                 | 9.1%                              |
+-----------------------------------+-----------------------------------+
| *Overnite Transportation*         | 13.2%                             |
+-----------------------------------+-----------------------------------+
| *Old Dominion Freight Lines*      | 19.3%                             |
+-----------------------------------+-----------------------------------+
| *Saia Motor*                      | 18.6%                             |
+-----------------------------------+-----------------------------------+
| *New Penn*                        | 13.4%                             |
+-----------------------------------+-----------------------------------+
| *Weighted Average*                | 13.7%                             |
+-----------------------------------+-----------------------------------+

William H. Fisher and Buck Horne, **Less than Truckload: Key Secular
Trends Driving Regional Carriers,** Raymond James & Associates, Inc.,
October 13, 2004, p. 8.

As shown, the weighted average tonnage growth during the first half of
2004 in comparison to the first half of 2003 for the national LTL
carriers was 5.9%. However, the comparable weighted average growth for
the regional LTL carriers was more than double the growth rate for the
national LTL carriers. Several regional LTL carriers (Old Dominion
Freight Lines and Saia Motor) had growth rates that tripled the average
rates achieved by the national LTL carriers.

The LTL carriers also benefited from the changes in the hours-of-service
laws that took effect in January 2004. Although these new laws are still
subject to review and re-examination by the Federal Motor Carrier Safety
Administration, they have remained in effect until that review is
completed. The new hours-of-service laws extend from ten to eleven the
consecutive driving hours allowed, but do not allow drivers to "stop"
their clocks during their work shift (maximum of fourteen hours). This
prohibition against stopping the clock during a work shift is quite
significant. Truckload carriers, in particular, had used this ability to
allow drivers to "stop" their clocks when they reached a shipper's dock
and were waiting to unload their trailer. With no penalty associated
with these delays, the truckload carriers could seek multiple-stop loads
involving shipments that combined would constitute a full truckload, but
separately would involve three large LTL shipments.[^16] However, since
the truckload carriers can no longer "stop" the clock of their drivers
while waiting at shipper terminals, the multiple-stop trips are far less
desirable.

Table 3 from Fisher and Horne demonstrates the growth during the second
quarter of 2004 from the second quarter of 2003 in shipments handled by
LTL carriers in excess of 10,000 lbs.

**\
**Table 3: Growth in Truckload Tonnage Volume: LTL National and Regional
Carriers

+-----------------------------------+-----------------------------------+
| Company                           | 2^nd^ Quarter 2004                |
|                                   |                                   |
|                                   | Tonnage Growth from 2^nd^ Quarter |
|                                   | 2003                              |
+-----------------------------------+-----------------------------------+
| **National LTL**                  |                                   |
+-----------------------------------+-----------------------------------+
| *Yellow*                          | 29.2%                             |
+-----------------------------------+-----------------------------------+
| *Roadway*                         | 8.7%                              |
+-----------------------------------+-----------------------------------+
| *ABF Freight System*              | 10.9%                             |
+-----------------------------------+-----------------------------------+
| *Weighted Average*                | 17.6%                             |
+-----------------------------------+-----------------------------------+
| **Regional LTL**                  |                                   |
+-----------------------------------+-----------------------------------+
| *Fed Ex Freight*                  | 13.9%                             |
+-----------------------------------+-----------------------------------+
| *Con-Way Group*                   | 28.6%                             |
+-----------------------------------+-----------------------------------+
| *USF Corp. Group*                 | 21.7%                             |
+-----------------------------------+-----------------------------------+
| *Overnite Transportation*         | 27.2%                             |
+-----------------------------------+-----------------------------------+
| *Old Dominion Freight Lines*      | 26.7%                             |
+-----------------------------------+-----------------------------------+
| *Saia Motor*                      | 15.8%                             |
+-----------------------------------+-----------------------------------+
| *New Penn*                        | 29.0%                             |
+-----------------------------------+-----------------------------------+
| *Weighted Average*                | 24.0%                             |
+-----------------------------------+-----------------------------------+

Truckload tonnage only (shipments more than 10,000). William H. Fisher
and Buck Horne, **Less than Truckload: Key Secular Trends Driving
Regional Carriers,** Raymond James & Associates, Inc., October 13, 2004,
p. 12.

As shown in Table 3, both the national LTL and the regional LTL carriers
have had significant increases in their large LTL shipments since the
introduction of the new hours-of-service regulations at the beginning of
2004. The ability to sustain this pattern will be determined in large
part by the final outcome of the hours-of-service review by the Federal
Motor Carrier Safety Administration.

***Sustained Rate Increases and Improved Operating Margins***

As a consequence of the factors discussed in the previous sections, the
LTL carriers have been successful in the 2004-2005 period of sustaining
announced rate increases. Specifically, the capacity rationalization in
the LTL sector due to bankruptcies and mergers and acquisition in
combination with the growth in the economy has served to create a very
favorable demand-supply situation for the LTL carriers. Added to this
favorable situation, the driver shortage problems have a particularly
strong negative impact on the availability of truckload capacity (to be
discussed in detailed in a subsequent part of this report). In light of
these factors, shippers have examined the capabilities of LTL carriers
to handle large less-than-truckload shipments, which they might have
switched to truckload carriers offering multiple stop services.

On May 10, 2005, the investment firm of Morgan Stanley called "2004 LTL
rate increases 'stellar.'"[^17] Although rate increases have slowed
during the first half of 2005, the overall situation of sustained rate
increases has had favorable impacts on the operating performance of the
LTL carriers, both national and regional. Table 4 provides the specific
operating ratios of both national and regional LTL carriers for the
2^nd^ quarter of 2004. As shown, the weighted average operating ratio
for the LTL carriers during the 2^nd^ quarter of 2004 stood at 94.7%,
while the weighted average ratio for the regional carriers was only
90.2%. These quarterly operating ratios represent substantial
improvements over the annual operating ratios reported by the LTL
national and regional carriers for the entire calendar year 2003.

In this environment of high fuel prices, it is important to note that
the LTL carriers have in place fuel surcharge agreements that protect
them in most cases from the impacts of fuel price volatility. It should
also be emphasized that for the large LTL carriers, in particular, fuel
costs represent a very small portion of total operating revenues.
According to Fisher and Horne, "using Overnite and Old Dominion as
examples, those companies' net fuel expense as a percentage of operating
revenues typically runs between 1.0% and 1.5%."[^18]

Table 4: Operating Ratios: LTL National and Regional Carriers

+-----------------------------------+-----------------------------------+
| Company                           | 2^nd^ Quarter 2004                |
|                                   |                                   |
|                                   | Operating Ratio                   |
+-----------------------------------+-----------------------------------+
| **National LTL**                  |                                   |
+-----------------------------------+-----------------------------------+
| *Yellow Roadway*                  | 94.7%                             |
+-----------------------------------+-----------------------------------+
| *ABF Freight System*              | 91.6%                             |
+-----------------------------------+-----------------------------------+
| *Weighted Average*                | 94.1%                             |
+-----------------------------------+-----------------------------------+
| **Regional LTL**                  |                                   |
+-----------------------------------+-----------------------------------+
| *Fed Ex Freight*                  | 87.2%                             |
+-----------------------------------+-----------------------------------+
| *Con-Way Group*                   | 89.8%                             |
+-----------------------------------+-----------------------------------+
| *USF Corp. Group*                 | 92.4%                             |
+-----------------------------------+-----------------------------------+
| *Overnite Transportation*         | 93.0%                             |
+-----------------------------------+-----------------------------------+
| *Old Dominion Freight Lines*      | 90.6%                             |
+-----------------------------------+-----------------------------------+
| *Saia Motor*                      | 93.8%                             |
+-----------------------------------+-----------------------------------+
| *New Penn*                        | 85.8%                             |
+-----------------------------------+-----------------------------------+
| *Weighted Average*                | 90.2%                             |
+-----------------------------------+-----------------------------------+

William H. Fisher and Buck Horne, **Less than Truckload: Key Secular
Trends Driving Regional Carriers,** Raymond James & Associates, Inc.,
October 13, 2004, p. 8.

***Stock Market Performance 2004-2005***

As shown in Table 5, the LTL stocks have performed quite well during the
2000-2005 time-period. Between the end of the first quarter in 2000 and
the end of the year in 2004, the seven companies represented in Table 5
had an average increase in stock price of 210%. It should be noted that
for SCS Transport, the analysis time-period covered from the end of the
first quarter in 2003 to the end of the year in 2004. For Overnite, the
analysis time period covered from the end of the first quarter in 2004
to the end of the year in 2004. The average increase in stock price from
the end of the first quarter in 2000 to the close of the market on
August 3 fell to 176%. Again, there is a difference in time period
coverage for SCS Transport and Overnite. Five of the seven companies
(Arkansas Best, Forward Air Corp., Old Dominion Freight Line, SCS
Transport, and Yellow Roadway) had a decline in stock price from the end
of the year in 2004 to the close of the stock markets on August 3, 2005.
In contrast, two LTL companies (Overnite and CNF, Inc.) experienced an
increase in stock price during this time-period.

Clearly, the results in Table 5 suggest that the LTL stocks have fared
quite well in the 2000-2005 time-period, although 2005, thus far, has
not been as strong a year for LTL stocks as was 2004. This most likely
reflects investor concerns that some of the driver shortage problems
faced by truckload carriers may filter their way into the LTL sector as
the shortages deepen.

##  Table 5: Stock Market Performance: LTL National and Regional Carriers, 2000-2005, Closing Stock Price in Dollars

## ![](media/image2.wmf)

Sourced: Author's Calculations

**Truckload Carriers**

Parallel to the situation of the LTL carriers, the TL carriers have
faced many challenges during the 2004-2005-time period. Like the LTL
carriers, the TL carriers have, on the whole, benefited from the
improvements in the economy in the 2004-2005-time period. They have
translated capacity shortages into sustained rate increases and improved
profitability. This section focuses on the following major themes for
the TL industry sector: driver shortages and the responses by TL
carriers; intermodalism and potential for rail-truck coordination;
mega-TL carriers: expanded services and new technologies; TL rate
increases and overall profitability; and investment perceptions of the
TL carriers, 2004-2005.

### Driver Shortages and Responses by TL Carriers

As the general economy improved during 2004, the motor carrier industry
and, in particular, the TL carrier segment faced an intensifying driver
shortage problem. This shortage most clearly manifested itself in
overbooking situations among the

TL carriers. In fact, Michael LaTronica, Managing Director of the
Excalibur Group, estimated that on any given day in 2004, TL carriers
were overbooked 10 to 15%. In fact, during the peak-shipping season in
2004, this overbooking figure rose to 25%, according to LaTronica.[^19]

The causes of the driver shortage problem are complex and
multi-dimensional. Clearly, there has been a significant effort to
monitor the driving performance record of truck drivers as part of an
overall campaign to improve truck safety. The commercial driving license
program and the efforts to have states share driver performance records
and to eliminate the problem of drivers' having licenses in multiple
states has resulted in the elimination of some drivers with unsafe
records from the pool of eligible drivers. Furthermore, required drug
testing of drivers by carriers has further pruned the pool of eligible
drivers. There is also the post 9-11 security environment that has
intensified the level of background checks needed to qualify individual
drivers prior to employment. Clearly, the combination of the commercial
drivers license program, drug testing, and the intensified post 9-11
security environment have negative (although, it could be argued,
desirable) consequences for the pool of available drivers.

In May of 2005, the American Trucking Associations released a report by
Global Insight, Inc. on the severity and long-term implications of the
truck driver shortage problem.[^20] Global Insight estimated that at the
present time, there is a shortage of 20,000 over-the-road truck drivers,
or a 1.5% shortage. They projected that "in the absence of substantial
market adjustments, this driver shortfall---projected demand less
projected supply---would rise to 110,000 in 2014."[^21]

Global Insight's estimated shortfall is based on a combination of
factors. First, economic growth will give rise "to a need for a 2.2%
average annual increase in the number of long-haul heavy-duty truck
drivers, or an additional 320,000 jobs overall" over the next 10
years.[^22] In addition, over the same time period, Global Insight
estimated that "another 219,000 new truck drivers must be found to
replace drivers currently of ages 55 and older who will retire over the
next 10 years and to replace those in younger groups who will leave the
occupation."[^23] Hiring as consequence of these two factors alone
represents an average of 54,000 annually over the next ten years.
However, according to Global Insight, actual hiring needs will be
substantially greater. Global Insight's notes: "The 54,000 per year
total is a net figure. It reflects the hiring of new truck drivers to
offset drivers exiting the occupation only on a net basis, and it does
not include the substantial amount of hiring that trucking companies
must do each year as a result of job switching (churning) within the
industry."[^24] The combination of these factors leads to the projected
shortfall noted above of 110,000 drivers in 2014, an increase from the
current shortfall of 20,000 drivers.

The driver shortage problem has significant implications for the motor
carrier industry, in particular, for TL carriers. First, the inability
to employ a sufficient number of drivers represents lost revenue
opportunities for carriers, in many instances. If shipments, rather than
being lost, are delayed, customer satisfaction with a carrier's
performance, at the very least, is compromised. Second, driver shortages
lead to higher driver turnover rates as the existing pool of qualified
drivers takes advantage of the supply shortages by shifting carriers. It
is estimated that driver re-training costs run from \$4,000-\$7,000 per
driver.[^25] Indeed, driver turnover rates have jumped significantly in
the 2004-2005 time-period as a reflection of the significant driver
shortages documented above. As noted in a recent **Transport Topics**
article, "Driver turnover rates for large and small truckload companies
hit record highs in the fourth quarter of 2004, with the rate for large
carriers---those with more than \$30 million annual revenue---jumping to
136% from 121% in the third quarter, American Trucking Associations
said. The rate for small carriers...increased even more dramatically to
102% from 79% in the third quarter."[^26]

The industry recognized the problem and is addressing it on multiple
fronts. First, carriers have increased driver pay and compensation
packages, particularly for TL drivers. Indeed, **Transport Topics**
reported that TL carriers increased driver pay 5 to 7% in the spring of
2004 in an attempt to address this problem.[^27] Second, many carriers
have examined their operating strategies and dispatching policies in
order to increase the number of times drivers return to home base and
the amount of time they spend at home.

While important, significant improvements in TL driver pay and working
conditions are intended to change long-term perceptions about the
occupation of a truck driver. While these aggressive actions are likely
to continue, they will not in the short-term overcome the documented
driver shortage problem.

In short, the driver shortage problem in the TL industry segment has an
impact similar to the impact of bankruptcies and mergers and
acquisitions in the LTL segment. In both industry segments, the
2004-2005 time-period represented a tightening of capacity at the very
time that demand was growing with an improved economy. In both
instances, this capacity mismatch with demand has created an environment
that allowed the carriers to sustain modest rate increases in a way that
has been uncharacteristic of the post deregulation period.

### Intermodalism: Potential for Rail-Truck Coordination

Transport economists have long been intrigued with the economic benefits
and potential advantages of rail-truck intermodal movements for
long-haul shipments. Rail has the appeal of great economies of density
and the ability to move hundreds of containers/trailers with a minimum
labor commitment. Motor carriers have the inherent flexibility and
ubiquity to provide efficient short-haul distribution requirements. In
the transport economist's mind, there is a perfect match between
railroads and motor carriers for these long-haul shipments.

Indeed, there has been significant growth in intermodal traffic as a
reflection of its economic advantage. According to Transport Topics: "In
2004, railroads moved 10.2 million containers and 2.6 million trailers
for a total rail intermodal volume of almost 12.9 million units, up
substantially from the 10.3 million moved in 2000, according to the
Intermodal Association of North America. Last year alone, intermodal
traffic was up 8.6%."[^28] Much of this growth has resulted from the
increasing reliance by US companies on components and finished goods
being manufactured in China and Asia, shipped to West Coast ports, and
transported in intermodal containers from the West Coast to the Midwest,
with final distribution via TL carriers.

With the significant driver shortage problem, cooperation between
railroad and TL carriers on intermodal movements is increasingly more
frequent. J.B. Hunt's landmark agreement with the Sante Fe Railroad (now
the BNSF Railroad) in 1989 led the way for intermodal cooperation
between the modes. According to Bill Matheson, general manager of
intermodal services at Schneider National, "nearly all of the long-term
trends favor intermodal vs. pure over-the-road trucking service.
Compared to a while ago, the main thing is our intermodal product is
becoming a surrogate for the over-the-road service product. Thirty
years, or even ten years ago, that would have never been the case."[^29]

The major current impediment to additional expansion of this intermodal
service, however, is a railroad service problem. It is clear that the
growth in intermodal traffic has challenged the railroads from a service
perspective. In a presentation by Ron Widdows, Chief Executive Officer,
American President Lines, to the U.S. Department of Transportation on
February 25, 2005, he noted that there is now a 2-3 day delay in rail
transit times from the West Coast on average, with a 4-6 day delay now a
common occurrence.[^30] These types of service delays present huge
problems in an environment of real-time supply chain management placing
a great emphasis on timely delivery and real-time visibility of
shipments.

Thus, while intermodal shipments have gained prominence in an
environment of truck driver shortages and major traffic flows from
factories, particularly in China, they are not a panacea for the
capacity issues in the TL sector. There is no question that intermodal
traffic will grow and its growth will depend, in large part, on the
ability of the railroads to improve service. There is no question that
the TL carriers stand able and willing to move the long-distance
shipments to intermodal and achieve synergies, long ago only
contemplated by transport economists. Yet, in the short term,
intermodalism does not remove the tremendous capacity issues facing the
TL carriers.

### Mega-TL Carriers: Expanded Services and New Technologies

In the LTL section of this report, there was a discussion of the
fundamental shift to a shipping environment in which companies rely on a
secured Internet portal to share applications and data across their own
enterprise and with their extended enterprise partners in real time.
This shift has been driven by the requirements of globalization with an
increasing amount of production occurring in Asia and the increasing
need to ship internationally in a very security sensitive world. Along
with globalization and international production and distribution is the
requirement to exchange information about production and shipping
schedules in real time. Manufacturers, distributors, transportation
providers, wholesalers, retailers, and customers want 24/7 information
on the location of their shipments.

This type of very sophisticated, real-time environment puts a premium on
large carriers with information technology resources to support the new
business model. These large carriers must integrate seamlessly with the
supply chain systems of both shippers and receivers. Small and
medium-sized TL carriers will have difficulties transitioning to this
new model. The new environment clearly favors the large integrated TL
carriers---both asset-based and non-asset-based or third-party logistics
providers or third-party brokers.

According to Jon Langenfeld, Senior Vice-President and Equity Research
Analyst with Robert W. Baird & Company, at a recent roundtable forum:
"Looking at the regulatory and security issues from a slightly different
perspective, these requirements should provide yet another catalyst for
further industry consolidation among transportation and logistics
providers in favor of the larger, more sophisticated companies.
Security, for any shipper comes down to the credibility of your
suppliers and credibility of your supply chain. The need for credibility
clearly favors the more sophisticated global transport providers with
competent IT systems and diversified global offerings to service global
customers."[^31] At the same roundtable discussion, Mr. David Campbell,
a security analyst with Thompson, Davis & Company, made a similar
observation regarding the advantage of the large, sophisticated TL
carrier: "There is a need for shippers to have substantial information
technology and infrastructure to support their shipments and identify
and do customs work on those shipments prior to or at the time of
embarkation from foreign ports. That type of information is available
from sophisticated and large logistics providers. It just drives more
business to them and away from smaller providers or away from some of
the asset-based companies that may not have all that infrastructure and
connections."[^32]

One very excellent example of the TL carrier making significant shifts
to adapt to this new environment is Schneider National. Schneider has
expanded its technology investment and its scope of operation to provide
a variety of capabilities and services to match the needs of shippers in
a real-time supply chain environment. A recent review of their
operations concludes: "Schneider National, the largest truckload carrier
in North America with annual revenues in excess of \$1.2 billion has the
following set of trademarked services: One-way Van Truckload, Dedicated,
TruckRail/InterModal, Brokerage, and Expedited. While some these
services are self-explanatory, it should be noted that Dedicated
Services assign equipment and drivers exclusively to specific customers
as a supplement to or replacement for private carriers. The InterModal
services are integrated with rail operations to facilitate intermodal
shipments. The Expedited Services division of Schneider National
provides time definite deliveries by team or solo drivers, depending
upon the distances involved."[^33] Clearly, the resource and technology
demands of the real-time supply chain environment dictate a growing
importance for the larger TL carriers.

There should also be recognition that the new environment has spurred
the growth of third party logistics providers or transport
brokers/intermediaries. These providers make substantial technology, IT
investments to link to manufacturers and shippers as part of the
real-time supply chains. However, many are non-asset based and rely on
smaller independent TL carriers and/or owner-operators to provide the
transport assets. This model has seemed to work well. According to Mark
Davis, Senior Analyst with FTN Midwest Research Securities Corp., "we
continue to like C.H. Robinson due to the company's position as the
largest player in the U.S. domestic truck brokerage market and its
best-in-class IT system. We believe C.H. Robinson continue to perform
extremely well as trucking rates remain high, capacity continues to
enter the market in the form of owner operators, and truckers
increasingly rely on brokers to find loads, cut deadhead miles, and more
effectively manage their cash flows."[^34] There is one note of caution
in the non-asset based model. While the logistics/broker has
sophisticated IT technology to link with real-time supply chains, there
is some question about the IT sophistication of the asset based small
TL/owner-operator providing the physical transportation. Often times,
there is a mismatch that has the potential for breaking the
communication/real-time links that are vital to the success of the
overall supply chain system.

***TL Rate Increases and Overall Profitability***

Give n the combination of capacity constraints (due primarily to driver
shortages) and enhanced demand as a result of national economic growth,
TL carriers, like their LTL counterparts, have been able to introduce
and sustain modest rate increases in the 2004-2005 time-period. These
rate increases are in addition to the fuel surcharges due to rapidly
increasing oil prices.

Indeed, the rate increases put in place by the TL sector during the
first quarter of 2005 (exclusive of fuel surcharges) have been
significant. According to a recent **Transport Topics** article: "A
**Transport Topics** survey of 13 leading truckload companies showed
revenue per loaded mile before fuel surcharges---the industry standard
for measuring pricing---increased by 7.9% from the first quarter of 2004
through the January to March period of this year... 'These are the
strongest results on exhibit in, say, two decades---and it's going on
throughout the industry, with smaller carriers too. There's a sever
capacity imbalance for this level of demand,' said stock analyst Donald
Broughton, who follows transportation companies for A.G. Edwards & Sons
in St. Louis."[^35]

**Table 6: Major TL Carriers: Change in Revenues and Net-Incomes-2003 to
2004**

+-----------------------+----------+---------+-------------+----------+
| **Carrier Name**      | Revenue  | \%      | Net Income  | \%       |
|                       | (\$)     | Change  | (\$)        | Change   |
|                       |          |         |             |          |
|                       | \(000\)  |         | \(000\)     |          |
+-----------------------+----------+---------+-------------+----------+
| Swift Transportation  | 2        | 17.9    | 103,482     | 30.4     |
|                       | ,826,201 |         |             |          |
+-----------------------+----------+---------+-------------+----------+
| J.B. Hunt             | 2        | 14.5    | 146,300     | 53.2     |
|                       | ,786,200 |         |             |          |
+-----------------------+----------+---------+-------------+----------+
| Landstar              | 2        | 26.5    | 71,872      | 41.8     |
|                       | ,019,936 |         |             |          |
+-----------------------+----------+---------+-------------+----------+
| Uni Group (United Van | 1        | 10.3    | 20,507      | 22.9     |
| Lines, Mayflower      | ,994,783 |         |             |          |
| Transit)              |          |         |             |          |
+-----------------------+----------+---------+-------------+----------+
| Werner Enterprises    | 1        | 15.1    | 87,310      | 18.4     |
|                       | ,678,043 |         |             |          |
+-----------------------+----------+---------+-------------+----------+
| US Xpress Enterprise  | 1        | 18.8    | 16,426      | 114.9    |
|                       | ,105,656 |         |             |          |
+-----------------------+----------+---------+-------------+----------+
| Covenant Transport    | 603,622  | 3.6     | 3,376       | \- 72.2  |
+-----------------------+----------+---------+-------------+----------+
| Prime, Inc.           | 587,208  | 5.0     | 62,076      | 25.0     |
+-----------------------+----------+---------+-------------+----------+
| C.R. England, Inc.    | 508,659  | 1.8     | 29,065      | 36.5     |
+-----------------------+----------+---------+-------------+----------+
| Heartland Express     | 457,086  | 12.8    | 62,447      | 9.1      |
+-----------------------+----------+---------+-------------+----------+
| Knight Transport      | 442,288  | 30.1    | 47,860      | 35.0     |
+-----------------------+----------+---------+-------------+----------+

Source: Daniel Bearth, "TT 100 For-Hire Carriers Changed, Grew in 2004,"
**Transport Topics**, July 25, 2005, pp. 8-16. This list includes the TL
carriers among the top 50 carriers with reported revenue and net income
change between 2003 and 2004. It excludes all the LTL carriers among the
top 50 as well as any TL carriers with no reports of revenue and income
change between 2003 and 2004.

Table 6 reports on the changing revenue and net income picture for major
TL carriers between 2003 (annual) and 2004 (annual). It demonstrates
that the major TL carriers have been successful in translating their
sustained rate increases into growth in both annual revenues as well as
net income. Among the twelve TL carriers listed in Table 6, only one,
Covenant Transport, reported a decline in net income between 2003 and
2004. The remaining carriers all had increases in net income between the
two years. The percentage growth in net income for the eleven carriers
ranged from a low value of 9.1% for Heartland Express to a high value of
114.9% for US Xpress Enterprise. Based on Table 6, the largest TL
carriers, i.e., Swift Transport and J.B. Hunt, reported gains in net
income of 30.4% and 53.2%, respectively. It should be emphasized that
some of the largest TL carriers, e.g. Schneider National had not stated
net incomes at the time of publication of the **Transport Topics**
article.

The conclusion of Table 6 is that the largest TL carriers have been
successful in translating their sustained rate increases into improved
profitability. This is not to minimize the increased costs associated
with the very concerted effort by carriers to raise driver pay and
improve driver working conditions in order to reduce driver turnover.
Clearly, these initiatives have increased carrier costs. Furthermore,
the sharp increases in fuel prices, while often passed through to the
shipper with surcharges, are a growing concern for all motor carriers.

***Stock Market Performance 2004-2005***

As shown in Table 7, the TL stocks have performed well during the
2000-2005 time-period. Between the end of the first quarter in 2000 and
the end of the year in 2004, the fifteen companies listed in Table 7 had
an average increase in stock price of 199%.---just slightly below the
210% increase in stock price achieved on average by the LTL carriers
during the same time period. However, in a fashion similar to the
experience of the LTL carriers, the average increase in stock price for
the TL carriers from the end of the first quarter in 2000 to the close
of the market on August 3, 2005 fell to 149%. There were four TL
carriers who experienced an increase in stock price between the end of
2004 and the close of the market on August 3, 2005. While Marten
Transport experienced a 257.4% increase in stock price from the end of
the first quarter in 2000 until the end of the year in 2004, their stock
price went up 300.8% from the end of the first quarter of 2000 until the
close of the stock market on August 3, 2005. In a similar fashion,
Patriot Transport Holdings had increase in stock price from 111.7% to
184.2 % during the comparable time periods. Swift Transport had an
increase of 4.8% in stock price during the first period and an increase
of 7.0 percent during the second period, while USA Truck had an increase
of 134.5% in the first period, but 303.9 percent in the second period at
the close of the stock market on August 3, 2005.

Results in Table 7 suggest that the TL stocks, like the LTL stocks, have
fared quite well in the 2000-2005 time-period, although 2005, thus far,
has not been as strong a year for TL or LTL stocks as was 2004. This
most likely reflects investor concerns about the driver shortage
problems faced by truckload carriers. However, the pessimism expressed
by the market to date does not seem entirely warranted in view of the
rate increase and profitability trends discussed earliers.

## Table 7: Stock Market Performance: TL Carriers, 2000-2005, Closing Stock Price in Dollars

![](media/image3.wmf)Source: Author's Calculations

**Future Issues---2006 and Beyond**

This report has demonstrated that during the 2004-2005 time-period, the
motor carrier industry, in both the LTL and the TL segments, sustained
the turnaround begun in 2003. Both the LTL and the TL segments
transformed a tight supply market into an opportunity to initiate and
sustain freight rate increases. In the LTL segment, capacity issues
emerged as a result of a series of bankruptcies, coupled with
significant merger and acquisition activity. In the TL segment, capacity
constraints stemmed from the rapidly intensifying driver shortage
problem. Although TL carriers, in particular, faced significant cost
challenges as they ramped up their driver compensation in response to
shortages, the rate increases provided for most TL and LTL carriers to
improve operating margins and net incomes in 2004 and into 2005.

Yet, there are no shortage of continuing challenges that TL and LTL
carriers will face in the last quarter of 2005 and into 2006 and beyond.
First, there will be some final resolution of the hours-of-service
regulations with the new set of regulations determined at last. Whether
the new regulations will continue to assist the LTL carriers in winning
back some large-sized LTL shipments from TL Carriers, who had tried to
combine the large LTL shipments into multiple-stop truckloads, is an
open question. Clearly, there will be some restrictions on driver hours
and there will be some counting of loading/unloading and wait time as
work time. These restrictions will definitely have a greater operating
impact/cost impact on TL carriers than they will on LTL carriers.

Combining the hours-of-service regulations with basic demographics
suggests a continuing and significantly worsening driver shortage
crisis. TL carriers, in particular, will need to continue efforts to
improve the working conditions and pay for truck drivers in order to
make the occupation more attractive to targeted age groups. The recently
finished American Trucking Associations report provides an excellent
framework for understanding the driver shortage issue and for estimating
the magnitude of its impact.

The trend toward the adoption of real-time supply chain management by
major manufacturing and distribution companies will favor larger-sized
LTL and TL companies. The new environment is technology-intensive. The
technology requirements for TL and LTL carriers will continue to grow as
the transportation providers must integrate their services with the
technology infrastructure of their customers who manage their supply
chains in real-time.

In addition to favoring larger-sized carriers, the new environment puts
a premium on the services of third party logistics providers/brokers.
Increasingly, these non-asset providers link transportation carriers to
available loads/supply chain networks in a way that minimizes empty dead
heads and maximizes equipment and driver utilization. In fact, if
small-sized TL companies, in particular, have any hope to survive into
the next decade they might have to link their services to these third
party logistics providers/brokers. The Hub Group and C.H. Robinson are
two representative large-scale third party, non asset based brokers.

There must also be a clear recognition that increasing reliance by US
manufacturers on Asia and China, in particular, as a source of
production will change the basic freight flows in the United States. The
growth in container traffic from West Coast ports to the mid-section of
the United States was documented in an earlier section of this report.
Increasing reliance on Asian production will intensify these movements
and further alter freight flows in the United States. The impact of this
fundamental shift on the U.S. transportation industries has not been
fully investigated. Clearly, movement patterns and customer-bases will
be disrupted and new ones will emerge. There will be winners and losers
in this process. Yet, there are many questions to be resolved especially
in view of the inability of the railroads to demonstrate a capacity to
handle additional container movements and still meet precise schedules,
required by the new supply chain environment.

A discussion of events in 2006 and beyond would be remiss if security
and safety issues were neglected. The post 9/11 environment is
security-dominated. Growing intermodal shipments from Asian production
locations will intensify requirements on carriers to adopt new
security-conscious technologies and approaches. Coupled with increasing
security requirements will be increasing demands for motor carriers to
guarantee safer operations. The trucking industry seems to be on the
verge of a whole range of technologies to monitor driver and vehicle
performance in ways that will provide alerts and interventions to avoid
truck crashes. There is no question that security and safety issues will
require carriers to make significant cash investments. Clearly, the
advantage will be with carriers who have the financial resources to make
these investments.

Thus, while the post-MCA environment broke down many entry barriers, the
realities of the post 9/11 environment and the real-time supply chain
movement are that larger carriers with significant technology investment
capabilities will increasingly dominate the motor carrier industry
market with increasing disadvantage to the smaller-sized carriers.

The year 2005 is coming to a close with unprecedented fuel price
increases and significant driver shortages. While carriers have been
doing better, in general, in terms of operating margins and net incomes,
there are many uncertainties clouding the future and peaking the
attention of motor carrier executives. There will be no let-up in the
need for motor carrier executives to respond to driver shortages and to
security issues into the future. Successful motor carriers will be the
ones with the vision to adapt new technologies and to integrate with
their customers in a real-time supply chain environment. Successful
carriers will also be the ones with innovative driver compensation and
working condition packages that will lower their overall driver turnover
rates.

[^1]: Thomas M. Corsi, Garrick Infanger, and John Jansen, **Motor
    Carrier Industry Profile: 2001-2003,** Supply Chain Management
    Center, Robert H. Smith School of Business, University of Maryland,
    July 2005, Prepared for the Federal Motor Carrier Safety
    Administration, Washington, D.C.

[^2]: Thomas M. Corsi and John Jansen, **Motor Carrier Industry Profile
    Study: Stock Market Performance of Publicly Traded Trucking Sector
    Stocks by Industry Segment, 2000-2004**, Supply Chain Management
    Center, Robert H. Smith School of Business, University of Maryland,
    July 2005, Prepared for the Federal Motor Carrier Safety
    Administration, Washington, D.C.

[^3]: Thomas M. Corsi and Marius Stefan, **Motor Carrier Industry Safety
    Performance Profile: 2000-2003,** Supply Chain Management Center,
    Robert H. Smith School of Business, University of Maryland, February
    2004, prepared for the Federal Motor Carrier Safety Administration,
    Washington, D.C.

[^4]: Thomas M. Corsi, **Linkages Between Financial and Safety
    Performance Among Carriers in Major Industry Segments-2003,** Supply
    Chain Management Center, Robert H. Smith School of Business,
    University of Maryland, November 2004, prepared for the Federal
    Motor Carrier Safety Administration, Washington, D.C.

[^5]: Note that the unionized USF carriers are included in the
    Yellow-Roadway designation to reflect the acquisition of USF by
    Yellow-Roadway in May of 2005.

[^6]: William H. Fisher and Buck Horne, **Less than Truckload: Key
    Secular Trends Driving Regional Carriers,** Raymond James &
    Associates, Inc., October 13, 2004, p. 9

[^7]: William H. Fisher and Buck Horne, **Less than Truckload: Key
    Secular Trends Driving Regional Carriers,** Raymond James &
    Associates, Inc., October 13, 2004, p. 17

[^8]: William H. Fisher and Buck Horne, **Less than Truckload: Key
    Secular Trends Driving Regional Carriers,** Raymond James &
    Associates, Inc., October 13, 2004, p. 18

[^9]: William H. Fisher and Buck Horne, **Less than Truckload: Key
    Secular Trends Driving Regional Carriers,** Raymond James &
    Associates, Inc., October 13, 2004, p. 19

[^10]: William H. Fisher and Buck Horne, **Less than Truckload: Key
    Secular Trends Driving Regional Carriers,** Raymond James &
    Associates, Inc., October 13, 2004, p. 20

[^11]: William H. Fisher and Buck Horne, **Less than Truckload: Key
    Secular Trends Driving Regional Carriers,** Raymond James &
    Associates, Inc., October 13, 2004, p. 21

[^12]: Sandor Boyson, Lisa Harrington, and Thomas Corsi, **In Real Time:
    Managing the New Supply Chain**, Praeger Press, 2004, p. 25.

[^13]: Mark Davis, FTN Midwest Research Securities Corp.,
    **Transportation and Logistics: Roundtable Forum**, Wall Street
    Transcript, 67 Wall Street, NY, NY, June 13, 2005, p. 17.

[^14]: William H. Fisher and Buck Horne, **Less than Truckload: Key
    Secular Trends Driving Regional Carriers,** Raymond James &
    Associates, Inc., October 13, 2004, p. 23.

[^15]: William H. Fisher and Buck Horne, **Less than Truckload: Key
    Secular Trends Driving Regional Carriers,** Raymond James &
    Associates, Inc., October 13, 2004, p. 27

[^16]: The notion that the hours of service change had a positive impact
    on the tonnage of LTL carriers is discussed by William H. Fisher and
    Buck Horne, **Less than Truckload: Key Secular Trends Driving
    Regional Carriers,** Raymond James & Associates, Inc., October 13,
    2004, p. 11. They note that under the new regulations, multiple-stop
    trips by truckload carriers are negatively impacted.

[^17]: Jonathan S. Reiskin, "LTL Rate Hikes Average 3% as Longhaul
    Fleets Improve," **Transport Topics**, May 16, 2005, p. 1.

[^18]: William H. Fisher and Buck Horne, **Less than Truckload: Key
    Secular Trends Driving Regional Carriers,** Raymond James &
    Associates, Inc., October 13, 2004, p. 41

[^19]: La Tronica is quoted by Tiffany Wlazlowski, "Surging Volume,
    Tight Capacity Pushed Carrier Profits," **Transport Topics**,
    January 3, 2005, p. 1.

[^20]: Global Insight, Inc., **The U.S. Truck Driver Shortage: Analysis
    and Forecasts**, Prepared for the American Trucking Associations,
    Alexandria, VA, May 2005.

[^21]: Global Insight, Inc., **The U.S. Truck Driver Shortage: Analysis
    and Forecasts**, Prepared for the American Trucking Associations,
    Alexandria, VA, May 2005, p. 2.

[^22]: Global Insight, Inc., **The U.S. Truck Driver Shortage: Analysis
    and Forecasts**, Prepared for the American Trucking Associations,
    Alexandria, VA, May 2005, p. 1.

[^23]: Global Insight, Inc., **The U.S. Truck Driver Shortage: Analysis
    and Forecasts**, Prepared for the American Trucking Associations,
    Alexandria, VA, May 2005, p. 1

[^24]: Global Insight, Inc., **The U.S. Truck Driver Shortage: Analysis
    and Forecasts**, Prepared for the American Trucking Associations,
    Alexandria, VA, May 2005, p. 1.

[^25]: Bob Costello quoted in Daniel W. Guido, "Driver Churn Sets
    Record," **Transport Topics**, April 4, 2005, p. 26.

[^26]: Daniel W. Guido, "Driver Churn Sets Record," **Transport
    Topics**, April 4, 2005, p.1.

[^27]: Tiffany Wlazlowski, "Surviving Volume, Tight Capacity Pushed
    Carrier Profits," **Transport Topics**, January 3, 2005, p. 1.

[^28]: John D. Schulz, "Intermodal Freight Surges from Humble
    Beginnings," **Transport Topics**, May 30, 2005, p. 1.

[^29]: Bill Matheson quoted by John D. Schulz, "Intermodal Freight
    Surges from Humble Beginnings," **Transport Topics**, May 30, 2005,
    p. 12.

[^30]: Power Point presentation of Ron Widdows, American President
    Lines, to the U.S. Department of Transportation, Washington, D.C.,
    February 25, 2005.

[^31]: Jon Langenfeld, Robert W. Baird & Company, **Transportation and
    Logistics: Roundtable Forum**, Wall Street Transcript, 67 Wall
    Street, NY, NY, June 13, 2005, p. 11.

[^32]: David Campbell, Thompson, Davis & Company., **Transportation and
    Logistics: Roundtable Forum**, Wall Street Transcript, 67 Wall
    Street, NY, NY, June 13, 2005, p. 11.

[^33]: Thomas M. Corsi, "The Truckload Carrier Industry Segment,"
    **Trucking in the Age of Information**, Dale Belman, editor, Ashgate
    Publishing, forthcoming, 2005.

[^34]: Mark Davis, FTN Midwest Research Securities Corp.,
    **Transportation and Logistics: Roundtable Forum**, Wall Street
    Transcript, 67 Wall Street, NY, NY, June 13, 2005, p. 16.

[^35]: Jonathan S. Reiskin, "Truckload Rates Soared in 1Q, but Higher
    Expenses Hit Profits," **Transport Topics**, May 9, 2005, p. 1.