Less than truckload ltl market report

Less-than-Truckload Market Report
Less-than-Truckload
Market Report

Executive Summary .......................................................................................................... 4
A. Overview of Domestic Trucking .............................................................................. 6
B. Market Size and Growth.......................................................................................... 6
C. Trucking Deregulation of 1980 ................................................................................ 7
D. Key Competitors (Appendix A provides details on LTL carriers) .......................... 8
E. Role of Parcel Integrators in LTL Competitive Dynamics ................................... 9
F. Industry Pricing ...................................................................................................... 12
1. Rate Bureaus and the NMFC................................................................................ 12
2. Deficit Weight Rating and Alternate Pricing Systems .......................................... 13
3. Fuel Surcharge and Other Accessorial Charges .................................................. 14
4. Shipment Characteristics...................................................................................... 15
5. Yield Trends .......................................................................................................... 17
G. Operations................................................................................................................ 18
1. Network................................................................................................................. 18
2. Terminal Operations............................................................................................. 22
3. Supply & Demand................................................................................................. 23
4. Terminal Capacity................................................................................................. 25
5. Revenue Equipment – LTL Carrier Fleet.............................................................. 26
6. Union/Non-Union Labor....................................................................................... 27
7. Cost Breakdown and Operating Ratio .................................................................. 28
8. Sales and Marketing.............................................................................................. 31
9. Technology............................................................................................................ 32
H. Industry Growth and Entry/Exit of Players......................................................... 34
1. Major Mergers and Acquisitions .......................................................................... 34
2. Major Bankruptcies and Closures ........................................................................ 35
3. Cyclicality ............................................................................................................. 36
4. Expansion into North America and Other International Markets ........................ 37
I. Current Scenario..................................................................................................... 38
1. By the Numbers – Second Quarter, 2013.............................................................. 38
2. Current Trends...................................................................................................... 41
3. Key Issues and Developments at Major LTL Carriers ......................................... 43
J. Future Projections for Market Size, Tonnage, Yield........................................... 50
K. Future of the LTL Industry ................................................................................... 52
Appendix A – 2012 Top 50 US and Canadian LTL Carriers ........................................I
Additional Data Available..............................................................................................IV

Table of Figures
Figure 1: Growth in Volumes of World Merchandise Trade and GDP: 2000 - 2011................................................. 5
Figure 2: Domestic Transportation Market Share by Mode (in Revenues)................................................................ 5
Figure 3: LTL Terminal Setup........................................................................................................................................ 6
Figure 4: LTL Market Size and Growth: 2003 – 2013 .................................................................................................. 7
Figure 5: LTL Regional Market Share: 2013 and 2016e (in Revenues)...................................................................... 7
Figure 6: Top 10 LTL Carriers in 1979 and Their Current Situation........................................................................ 8
Figure 7: Top LTL Carriers and LTL Market Share: 1993, 2000, 2005, 2013 (in Revenues).................................. 9
Figure 8: FedEx Revenues by Segment:1997, 2003, 2013........................................................................................... 10
Figure 9: UPS Revenues by Segment: 1993, 2003, 2013.............................................................................................. 11
Figure 10: CCSB Density and Value Guidelines.......................................................................................................... 12
Figure 11: Annual General Rate Increases: 2008 – 2013............................................................................................ 13
Figure 12: Example of Deficit Weight Rating.............................................................................................................. 13
Figure 13: Con-way Freight Fuel Expense vs. Fuel Surcharge Revenues: 2008 - 2013........................................... 15
Figure 14: Various Accessorial Charges (not a comprehensive list) ........................................................................... 15
Figure 15: Distribution of Regional LTL Shipments by Weight Range.................................................................... 16
Figure 16: Distribution of Regional LTL Shipments by Freight Class...................................................................... 16
Figure 17: LTL Pricing Index (incl. FSC): 2001 – 2013.............................................................................................. 17
Figure 18: LTL Yield Index vs. Parcel and Truckload (excl. FSC): 2008 - 2013...................................................... 18
Figure 19: Regional LTL Terminal Network............................................................................................................... 19
Figure 20: Regional LTL Players by Geography......................................................................................................... 19
Figure 21: Long Haul LTL Terminal Network – Usage of Breakbulks.................................................................... 20
Figure 22: Roadrunner Transportation Systems Terminal and Delivery Agent Map............................................. 20
Figure 23: ABF Tonnage by Transit Days: 2005 and 2011......................................................................................... 21
Figure 24: Average Length of Haul Trend for Multi-Regional LTL Carriers: 1990 - 2013.................................... 22
Figure 25: Bird’s Eye View of LTL Terminal.............................................................................................................. 22
Figure 26: Terminal and Terminal Door Efficiency: 2013 ......................................................................................... 23
Figure 27: Con-way Freight Purchased Transportation + Rail Utilization: 2006 - 2013......................................... 24
Figure 28: LTL Tonnage Trend vs. Tractors and Trailers: 2006 - 2013.................................................................. 25
Figure 29: Number of Terminals – Top LTL Carriers: 2008 to 2013........................................................................ 25
Figure 30: LTL Carrier Fleet Vehicles......................................................................................................................... 27
Figure 31: Non-Union Revenues % of Total Top-10 Carrier Revenues: 2003 – 2013 ............................................. 28
Figure 32: LTL Cost Breakdown (% of Revenues) by Short Haul and Long Haul Shipments.............................. 29
Figure 33: LTL Operating Ratio Trend vs. Other Transportation Segments: 2005 - 2013.................................... 29
Figure 34: LTL Operating Ratios by Carrier vs. Historical Peak: 2013................................................................... 30
Figure 35: Advertising Expenses Comparison – LTL Carriers vs. Integrators: 2007 – 2013 ................................. 31
Figure 36: LTL Network Speed Comparison: % of Lanes with Fastest Transit Time............................................ 32
Figure 37: ODFL Technology Capital Expenditures: 2003 - 2013............................................................................. 33
Figure 38: Major Mergers and Acquisitions within the LTL Segment..................................................................... 34
Figure 39: Major Bankruptcies and Closures within the LTL Segment................................................................... 35
Figure 40: Distribution of LTL Tonnage by Industry Vertical: 2010........................................................................ 36
Figure 41: LTL Volume Trends vs. Retail Sales and ISM PMI Index: 2004 – Current.......................................... 37
Figure 42: Change in Revenue and Operating Margins: 2Q’13................................................................................. 38
Figure 43: Change in Daily Shipments and Tonnage: 2Q’13..................................................................................... 40
Figure 44: Change in Avg. Revenue perShpt., Yield, Weight perShpt.: 2Q’13...................................................... 40
Figure 45: The Effect of Fuel Surcharge Revenues on Large LTL Carriers: 2010- 2013 ....................................... 42
Figure 46: Top 10 LTL Carrier Market Share: 2012 – 2013...................................................................................... 43
Figure 47: Historical and Projected LTL Tonnage and Yield Trend: 2008 – 2018e................................................ 50
Figure 48: LTL Market Size Growth Projection: 2013 – 2018e................................................................................. 51

Executive Summary
 The Less-than-Truckload (LTL) market is estimated at $33.0 billion in 2013 and it
contributes to about four percent of the total domestic transportation market.
 The rate of growth of the LTL market has been slowing over the last few years as
market revenues increased 11.6 percent in 2011, 4.3 percent in 2012 and 3.1 percent
in 2013. The market is projected to grow around five percent CAGR to an estimated
$41.9 billion in 2018.
 The major carriers in the LTL market are YRC Freight (formerly Yellow and
Roadway / YRC National), YRC Regional (Holland, Reddaway, New Penn), FedEx
Freight, Con-way Freight, UPS Freight, Old Dominion Freight Line, ABF Freight and
Estes Express. These eight carriers account for nearly two-thirds of industry revenues.
 Since deregulation, the LTL industry has undergone rapid consolidation as union
carriers have shut-down and non-union carriers have expanded by way of
acquisitions. Of the top 10 LTL carriers operating in 1979, only three still remain in
the market, although all are currently operating as different conglomerates.
 Lines have blurred between traditional long haul and regional carriers. Long haul
carriers have been expanding into regional markets through acquisitions and service
enhancements, while regional carriers have become multi-regional carriers by
nationally expanding their coverage. Long haul shipments, defined as shipments with
a transit time of three or more days, account for one-third of public LTL carriers’
freight and $11 billion of the LTL market.
 Parcel integrators have been gaining LTL market share since their entry into the LTL
market by way of hundredweight service. These integrators have positively
influenced the service and pricing methods of the LTL industry.
 The LTL industry is getting squeezed by parcel integrators and truckload carriers,
which are targeting the lower and higher-end LTL shipment. The LTL industry is
also losing tonnage through shipper initiatives such as product design and packaging
changes.
 After experiencing several years of negative operating income, most LTL carriers are
now generating operating profits although profit margins are still well below the
historical bests obtained in the mid-2000s.

Increased worldwide adoption of trade liberalization strategies over the past ten years has
powered a record growth in international trade. Growing regional partnerships through
trade agreements like NAFTA are creating new avenues that promote trade between
nations. In particular merchandise exports are growing faster than aggregate global GDP,
which implies a rising share of world production is crossing domestic borders (Figure 1).
Figure 1: Growth in Volumes of World Merchandise Trade and GDP: 2000 - 2012
-15
-12
-9
-6
-3
0
3
6
9
12
15
2000-06 2007 2008 2009 2010 2011 2012
AnnualPercentageChange
GDP Volume of Total Exports
Source: World Trade Organization
The freight transportation systems that provide mobilization of goods through the global
supply chain encompass a range of transportation modes – air, land and sea. Coupled
with rapid development in telecommunications, the increasing flow of freight has been a
basic component of change in economic systems at the global, regional and local scales.
As the transportation industry evolves, traditional boundaries among modes and logistics
functions are eroding. Transportation companies are increasingly blending information
technology with their established strengths to provide a broad range of shipping services.
As the most commonly used mode for the domestic movement of goods, trucking serves
as the key link between the domestic freight dynamics (Figure 2).
Figure 2: Domestic Transportation Market Share by Mode (in Revenues)
Truckload
35.4%
Private Truck
35.1%
LTL
3.9%
Parcel
7.8%
Air
3.1%
Rail (Rail +
Intermodal)
8.8%
Others
5.9%
2012 Domestic Transportation Market:
Approximately $820 billion
Source: American Trucking Associations (ATA), LTL and Ground Parcel markets are SJC estimates

A. Overview of Domestic Trucking
At a broader level, the trucking business can be broken into “private” carriers (carrier
also owns the freight) and “for-hire” carriers (carrier hauls freight for another party). The
for-hire trucking industry is further split into Truckload (TL) and Less-than-Truckload
(LTL) carriers.
By definition, truckload carriers dedicate an entire trailer to one customer from origin to
destination. Truckload carriers generally pick-up a load at the shipper's dock and
transport it directly to the consignee in the same truck. The truckload market is highly
fragmented and includes few large carriers and thousands of very small carriers. Some of
the major truckload players include Swift Transportation, Schneider National, Werner
Enterprises and U.S. Xpress. Other than dry-van truckload, this market also includes
specialized service offerings like refrigerated and flatbed.
Because the utilization of truckload shipments is linked to trailer capacity, its efficiency
starts to decline as the load becomes a smaller fraction of the trailer. LTL carriers
alleviate this inefficiency by consolidating shipments. LTL carriers handle multiple
shipments from several shippers and route them through terminals, where freight is
moved onto other trucks with similar destinations (Figure 3). For this purpose, LTL
carriers require networks of local pick-up and delivery terminals, coupled with a few
large consolidation, or breakbulk facilities.
Figure 3: LTL Terminal Setup
The major LTL carriers are YRC Freight (formerly Yellow and Roadway / YRC
National), YRC Regional (Holland, Reddaway, New Penn), FedEx Freight, Con-way
Freight, UPS Freight, Old Dominion Freight Line, ABF Freight and Estes Express.
B. Market Size and Growth
The historical growth of the LTL segment is illustrated in Figure 4. The LTL market has
grown from $27.4 billion in 2003 to $33.0 billion in 2013, increasing at a compounded
annual growth rate of 1.9 percent (Real GDP CAGR for 2003 – 2013 = 1.7 percent).
During this time, the LTL segment as a whole has lost inter-city freight to other
transportation segments, primarily truckload (2.3 percent CAGR) and parcel (3.0 percent
CAGR).
To/ From Other Terminals

Figure 4: LTL Market Size and Growth: 2003 – 2013
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
$15
$17
$19
$21
$23
$25
$27
$29
$31
$33
$35
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
YOY%Change
LTLMarketSize($billoin)
LTL Market Size ($ billion) YOY % Change
Source: Company reports, SJC estimates
The distribution of LTL revenues by region for 2013 is shown in Figure 5 (regions are
defined as shown in Figure 21). The South comprises the largest portion of market share,
followed closely by the Midwest. While the Northeast accounts for the smallest amount
of LTL revenues, the area has the greatest density and the largest revenue per square
mile. Figure 5 also shows the projected market share distribution for 2016. It is estimated
that all regions will have positive revenue growth during the period while the Northeast
will drop slightly in market share and the West and Midwest will have marginal gains.
Figure 5: LTL Regional Market Share: 2013 and 2016e (in Revenues)
Source: ATA, Bureau of Transportation Statistics, US Census Bureau, BLS, State governments,
SJC estimates
C. Trucking Deregulation of 1980
Under the Motor Carrier Act of 1935, the Interstate Commerce Commission (ICC)
controlled charged rates, entry and exit of carriers and routes of trucking service. The
regulatory regime placed a number of constraints restricting how for-hire carriers could
serve shippers. Before 1980, truckers were required to charge specified rates for
transporting goods over particular routes, regardless of the quality of service provided.
Midwest
29.2%
Northeast
18.7%
South
32.0%
West
20.0%
2013 LTL Market Share by Region
Midwest
29.3%
Northeast
18.5%
South
32.0%
West
20.2%
2016 LTL Market Share by Region
Significant
Events:
HOS Rules
Changes
Hurricane Katrina
Effect
Global
Recession

The key transformation for the trucking industry came with the Motor Carrier Act of
1980, which eased the entry of new carriers and initiated greater competition within the
industry. However, this deregulation was only “partial”, as it did not eliminate the
antitrust immunity for ratemaking and allowed the existence of rate bureaus (albeit with
limited activities).
Following deregulation, the number of carriers (both truckload and LTL) has increased
from 18,045 general freight carriers in 1980 to more than 400,000 for-hire trucking
companies operating in 2011, according to the American Trucking Associations;
however, the majority of new entrants have been in the truckload segment. The
fundamental reason for the relatively stable number of LTL carriers has been the high
capital expenditure requirement to establish an LTL network. In addition to deregulation,
the LTL segment has been further affected by the increased ability of carriers to take
“independent rate action” rather than adhering to the rates set by rate bureaus.
D. Key Competitors (Appendix A provides details on LTL carriers)
Since deregulation, industry consolidation has been a key trend resulting in change within
the LTL segment. With few new entries into the LTL market, the widespread merger and
acquisition (M&A) activity coupled with carrier bankruptcies and closures has resulted in
fewer carriers. The top 10 LTL carriers in 1979 (Figure 6) were all unionized and lost
their rank to non-union carriers, who began taking advantage of their lower labor costs.
Of the top 10 carriers in 1979, only three are still currently in operation, although all have
been merged into other conglomerates.
Figure 6: Top 10 LTL Carriers in 1979 and Their Current Situation
1979
Rank
Carrier
1979
Revenue
($million)
Union/
Nonunion
Current Status
1 Roadway Express 1,098$ Union
Merged with Yellow to form YRC, Inc. in 2009 (renamed YRC
Freight in Feb.'12). $3,127M in 2013
2 Consolidated Freightways 849$ Union Filed for bankruptcy in 2002
3 Yellow Freight System 805$ Union
Merged with Roadway to form YRC, Inc. in 2009 (renamed YRC
Freight in Feb.'12). $3,127M in 2013
4 P-I-E Nationwide 561$ Union
Purchased by the International Utilities conglomerate. Was
spun off as PIE Nationwide but filed for bankruptcy in 1991
5 McLean Trucking Co. 540$ Union Filed for bankruptcy in 1987
6 Spector Industries 316$ Union
Telecom Corporation's Red Ball Motor Freight merged with
Spector Industries in 1980. Filed for Bankruptcy in 1983
7 Smith's Transfer Corp. 253$ Union Purchased by American Freight System which closed in 1989
8 Transcon Lines 238$ Union Shut down in April 1991
9 East Texas Motor Freight 235$ Union Merged into Arkansas Best in 1982. $1,762M in 2013
10 Interstate System 233$ Union Ceased operations in 1985
Source: Company reports, Press releases, SJC estimates
Figure 7 illustrates the change in market share of top LTL carriers from 1993 to 2013.
The top three LTL carriers from 1979 to 2000 were Yellow, Roadway and Consolidated
Freightways (CF), although their rankings shifted during the period. The change in the
top three competitors for the subsequent period (2000 to present) highlights the
consolidation and entry of integrators within the segment. Yellow acquired Roadway in

2003 and added US Freightways in 2005 under the YRC Worldwide (YRCW) umbrella.
CF ceased operations and filed for liquidation bankruptcy in 2002. In 2001, FedEx
Freight was created by the combination of Viking Freight (part of the Caliber System
acquisition in 1998) and American Freightways (AFWY) (acquired February 2001).
FedEx Freight and YRC Worldwide were the largest LTL carriers in terms of revenue
during 2013 each with 15 percent market share (See Appendix A for details on the Top 50
LTL carriers).
Figure 7: Top LTL Carriers and LTL Market Share: 1993, 2000, 2005, 2013 (in Revenues)
Yellow
14%
Roadway
13%
Consolidated
Freightways
12%
Overnite
6%ABF
5%
TNT
4%
Con-way
4%
AFWY
2%
Viking
2%
Other
38%
Roadway
10%
Yellow
9%
Consolidated
Freightways
7%
Con-way
7%
US Freightways
7%
AFWY
5%ABF
5%
Overnite
4%
Viking
1%
Other
45%
Yellow
10%
Roadway
10%
Regional
7%
FedEx Freight
9%
Con-way
9%
UPS Freight
6%
ABF
5%
Estes
4%
ODFL
3%
Other
36%
Yellow Roadway
27%
FedEx Freight
15%
YRC Freight
9%
Con-way
11%
UPS Freight
8%ODFL
6%
Estes
6%
ABF
5%
Other
34%
YRC Worldwide
15%
Regional 5%
E. Role of Parcel Integrators in LTL Competitive Dynamics
The LTL segment has experienced an increased threat of substitution from the parcel
integrators since the introduction of the multi-weight shipment program. The LTL
industry’s minimum charge pricing approach opened the door for parcel carriers to
capture the low-end LTL market with attractive pricing, improved delivery options and
better information systems. The tactical increase in the weight and size limitations of the
packages handled by the parcel carriers has been impinging the LTL market. In the early
1980s, UPS’ limits were 70 pounds and 108 inches in combined length and girth.
Roadway Package System (RPS), the ground parcel division of Roadway Express,
entered the ground parcel market with limits of 100 pounds and 130 inches. In
recognition of the fact that it could handle heavier parcels more efficiently than its sister
1993 LTL
Market Size:
$17.0 Billion
2005 LTL
Market Size:
$32.4 Billion
2000 LTL
Market Size:
$27.6 Billion
2012 LTL
Market Size:
$32.0 Billion

LTL companies, RPS increased the weight limit to 150 pounds. Following the success of
the RPS product, UPS began the hundredweight service, which created competition
between integrators and LTL carriers. The hundredweight program was intended for
shipments up to 1,000 pounds and transit times ranged from express to ground for all
carriers. In addition, hundredweight shipments were not palletized, unlike traditional LTL
shipments. Each package was treated individually, receiving its own bar code. SJC
estimates that in 2003, UPS Hundredweight and FedEx Multiweight combined for
approximately $3.5 billion, or roughly nine percent of their total combined $39 billion
domestic express and ground revenues. By 2008, these services declined to an estimated
$2.6 billion, or roughly five percent of the $50 billion domestic express and ground
revenues for both companies.
By acquiring the successful RPS and the rest of the Caliber System companies, FedEx
strengthened its LTL presence with the combination of American Freightways and
Viking Freight as FedEx Freight in 2001. In spite of its large market share, the FedEx
Freight unit increased faster than the total LTL market. The growth was attributed to
consistent service, technology and the shift in domestic distribution patterns that aided
regional LTL carriers. In combination with other strategic acquisitions in key segments
(Figure 8), FedEx Freight provided FedEx new opportunities to bundle its portfolio of
global transportation services.
Figure 8: FedEx Revenues by Segment:1997, 2003, 2013
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
FY 1997 FY 2003 FY 2013
Revenue($bil.)
Services
Freight
Ground
International
Express Domestic
Source: Company reports
FedEx expanded its LTL service portfolio in 2006 when it acquired long haul provider
Watkins Motor Lines (rebranded FedEx National LTL). After several consecutive
quarters of operating losses during the economic recession, FedEx decided to merge the
two networks to in order to increase pick-up and delivery density and reduce costs. With
the merger of FedEx Freight and National LTL, the company launched Priority and
Economy services, which allowed shippers to select slower and cheaper (Economy) or
faster and more expensive (Priority) LTL transportation. The two services are offered on
all lanes and the Economy product utilizes intermodal transportation for long-haul moves.
UPS responded to FedEx’s LTL acquisitions with the acquisition of Overnite
Transportation in 2005. Before the acquisition, UPS offered LTL service through UPS

Supply Chain Solutions (SCS) on a non-asset basis, but it was unable to penetrate the
LTL market due to the reduction of available carriers, the inability to fit LTL offerings
into its service portfolio and the inability to shift express freight to a ground freight
network. The Overnite acquisition added the LTL component in its offering of a full suite
of heavy freight services. Figure 9 shows the change in the service portfolio of UPS.
Figure 9: UPS Revenues by Segment: 1993, 2003, 2013
$0
$10
$20
$30
$40
$50
$60
1993 2003 2013
Revenue($bil.)
Non-Package
International
Next Day Air
Deferred
Ground
The acquisitions of LTL carriers have given the parcel integrators new opportunities
through the bundling of their services. The advantage is two-fold as the integrators can
increase LTL business by offering lower parcel pricing to its multiple mode shippers.
Integrators can also win parcel volumes by discounting their LTL services. Adding
truckload services gives integrators the ability to transport a customer’s domestic
shipment, regardless of its size or destination.
The entry of integrators has changed the competitive landscape of the LTL industry and
increased competition for LTL freight. The parcel market has grown at 4.9 percent
CAGR from $22 billion in 1990 to $67 billion in 2013 while the LTL market grew at a
slower rate during the same period. In order to compete with integrators, LTL carriers
have tried to expand outside the traditional LTL offering. For example, Con-way
acquired Contract Freighters Inc., a truckload carrier in July 2007, adding full truckload
and intermodal freight transportation to its services portfolio of day-definite LTL. Averitt
Express, a regional LTL carrier, offers import/export capabilities, consolidation/
deconsolidation and supply chain management solutions. Roadrunner, a light-asset LTL
carrier, has made nearly 20 acquisitions of non-LTL related transportation providers since
2011. However, some carriers, including YRCW and Vitran, have been unable to gain
synergies between core LTL services and new business segments and have recently sold-
off truckload and logistics businesses during periods of financial difficulties.

F. Industry Pricing
1. Rate Bureaus and the NMFC
Historically in the regulation era, motor carrier rate bureaus had authority to enter into
agreements with member carriers to collectively establish rates, rules, classifications,
mileage guides and rate adjustments for general application based on industry average
carrier costs. Rate bureaus developed collective rates (referred to as class rates) based on
the classification ratings developed by the National Classification Committee (NCC), an
independent standing committee of National Motor Freight Traffic Association
(NMFTA) consisting of 100 motor carrier members elected or appointed from North
America. In addition, class rates were also based on other movement characteristics, such
as distance, shipment weight and truckload or LTL service. Supplementary services
provided by rate bureaus included carrier cost analysis and mileage guides.
Under the National Motor Freight Classification (NMFC), commodities are grouped into
one of 18 classes—from a low of class 50 to a high of class 500—based on an evaluation
of four transportation characteristics. The following four characteristics determine a
commodity’s transportability: density, stowability, handling and liability. The density and
value guidelines set forth by the NMFTA Commodity Classification Standards Board
(CCSB) are shown in Figure 10. While higher classes are associated with higher value
per pound (and hence higher revenue per hundredweight), they are less dense
commodities. For instance, building bricks are class 50, while ping-pong balls are class
500.
Figure 10: CCSB Density and Value Guidelines
Class
Max Avg
Value per
lbs
Min Avg
Density
(lbs/ft3
)
Class
Max Avg
Value per
lbs
Min Avg
Density
(lbs/ft3
)
Class
Max Avg
Value per
lbs
Min Avg
Density
(lbs/ft3
)
50 1.20$ 50 85 17.76$ 12 175 51.79$ 5
55 2.35$ 35 92.5 23.64$ 10.5 200 59.19$ 4
60 3.55$ 30 100 29.57$ 9 250 73.97$ 3
65 5.88$ 22.5 110 32.54$ 8 300 88.75$ 2
70 8.87$ 15 125 36.97$ 7 400 118.35$ 1
77.5 11.82$ 13.5 150 44.40$ 6 500 147.95$ < 1
Source: NMFTA
Prior to the reforms of the Motor Carrier Act of 1980, shippers were more likely to be
charged the class rates set by rate bureaus. Rate bureaus were permitted to operate until
May 2007, when the Surface Transportation Board (STB) terminated its approval of the
agreements of motor carrier bureaus to engage in rate-related collective activities. After
deregulation, many larger carriers began to set and publish their own rates based on their
costs and market conditions. However, as of May 2007 there were still 11 motor carrier
bureaus with STB-approved agreements conducting various activities.
Rate bureaus also computed the annual general rate increase (GRI) for their members.
These GRIs were instigated to enhance operating ratios by taking into account carriers’
annual cost increases. Historical GRIs for several LTL carriers are shown in Figure 11.

Figure 11: Annual General Rate Increases: 2008 – 2013
Carrier 2008 2009 2010-1Q 2010-4Q 2011 2012 2013
YRC / Yellow 3.90% 5.90% 5.90% 5.90% 6.90% 6.90% 5.90%
FedEx Freight 5.48% 5.70% 5.90% 6.90% 6.75% 6.90% 4.50%
Con-way Freight 5.50% None 5.90% 6.50% 6.90% 6.90% 5.90%
UPS Freight 5.40% 5.90% 5.70% 5.90% 6.90% 5.90% 5.90%
ODFL 5.40% 5.60% 4.40% 4.90% 4.90% 4.90% 4.90%
ABF Freight 5.45% 5.79% 5.70% 5.90% 6.90% 6.90% 5.90%
Estes Express 5.50% 5.70% 5.50% 5.90% 6.90% 6.90% 3.70%
Saia 5.40% 4.90% 4.80% 5.90% 6.90% 6.90% 5.90%
The announced GRIs have lost their significance due to the large discounts on base
pricing that carriers offer their customers. Additionally, the majority of a carrier’s
revenue comes from individual shipper contracts that are negotiated on a contract-by-
contract basis for rate increases and are not subject to the GRI. For example, only 25
percent of Con-way’s revenue base is subjected to its GRI. Additionally, carriers offer
shippers the ability to negotiate a discount to the announced rate increase, further
reducing the impact of a GRI. For example, Roadrunner realized 60 percent of the
company’s announced GRI of 6.9 percent in August 2011.
2. Deficit Weight Rating and Alternate Pricing Systems
LTL pricing is based on a step function that results in deficit weight rating, which is a
pricing method whereby shipments of varying weights receive the same charge. Figure
12 shows an example of deficit weight rating (comparing total charge with shipment
weight) where the portions of the chart circled in red represent shipments rated at deficit
weights.
Figure 12: Example of Deficit Weight Rating
$40
$60
$80
$100
$120
$140
$160
$180
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
UndiscountedRateperCwt.
TotalCharge
Shipment Weight
Total Charge Rate per Cwt.
Note: Charges and rates exclude discounts and fuel surcharges; Source: Company reports

As an example of how deficit weight rating works, suppose that a shipment weighing
between 500 and 999 pounds is priced at $18 per hundredweight (cwt.) and a shipment
weighing 1,000 to 1,999 pounds is priced at $15 per cwt. Using deficit weight rating, a
shipment weighing 900 pounds will be rated as a 1,000 pound shipment and will incur a
charge of $150 instead of the $162 that the shipment would warrant if it were rated at the
given cwt. price. Deficit weight rating results in some shippers subsidizing other
shippers’ freight. A 900 pound shipment can be priced the same as a 1,000 pound
shipment, suggesting that the pricing on the 1,000 shipment is too low or the 900 pound
shipment’s rate is too high.
Some carriers use alternative, less complex rating systems in their pricing contracts. One
method that is prevalent within the LTL segment is Freight-All-Kinds (FAK) rating
which eliminates the need to compute rates for each freight class. Under this system,
depending on the shipper’s assortment of different items with different class ratings, the
carrier develops a single class rate for the shipper to move all his products. This pricing
system has become widespread in the industry and often impacts more than one-third of a
carrier’s shipments, in spite of the fact that many carriers have realized that the system is
only beneficial to shippers. Another simplified rating system utilized by some LTL
carriers, including Central Transport, is known as pallet pricing, whereby a carrier
develops a flat rate per pallet, regardless of shipment class and weight. FedEx Freight
tested a simplified pricing option for some shippers that is based on zones (rather than zip
code pairings), similar to what the company uses for its ground parcels, but this method
has not yet received widespread usage.
3. Fuel Surcharge and Other Accessorial Charges
Since September 1996, when Roadway became the first carrier to implement a fuel
surcharge, the fuel surcharge program (as a separate expense component) has been well
established by all major LTL carriers, with significant customer acceptance. The fuel
surcharge system used by most LTL carriers is based on the National U.S. Average On-
Highway Diesel Fuel Prices reported by the US Department of Energy, which is
correlated with major fuel price indices nationwide. The surcharge percentage is adjusted
weekly based on National U.S. Average On-Highway Diesel Fuel Prices and in most
cases, the national average diesel fuel price each Monday is used to determine the fuel
surcharge in effect beginning the following Wednesday through Tuesday. The method
narrowly associates the fuel surcharges to prevailing market prices for diesel and
facilitates quicker responses to fuel price variations by carriers and their customers.
With volatile fuel prices, LTL carriers are able to recover costs using the above method.
At the current industry average of approximately twenty percent of freight rates, the fuel
surcharge has in some respects become a profit center for LTL carriers. Publicly traded
LTL carriers have claimed that high fuel prices in the recent past were offset by fuel
surcharge revenues. As seen in Figure 13, fuel surcharge revenues were greater than fuel
expenses for Con-way Freight during recent periods of high diesel costs.

Figure 13: Con-way Freight Fuel Expense vs. Fuel Surcharge Revenues: 2008 - 2013
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
$-
$100
$200
$300
$400
$500
$600
$700
2008 2009 2010 2011 2012 2013
DieselPrice($/Gallon)
FuelExpense,FSCRevenue($mil)
Total Fuel Expense Fuel Surcharge Revenues Diesel Price
Source: Company Reports, US Dept. of Energy, SJC Estimates
Besides the fuel surcharge, there are other added charges called accessorial charges,
which are levied for services offered in addition to the transportation of goods. These
charges vary depending on the carrier and include hazardous material surcharge, inside
delivery charges, lift-gate charge, re-consignment fee, storage charges, repackaging fee
and import handling fee among others. LTL carriers have increased some accessorial
charges over 100 percent in only a few years, such as ABF’s hazardous material charge,
which has increased 193 percent since 2002. Figure 14 compares a few common LTL
accessorial charges for ABF and ODFL. While some charges have more than doubled
over a short time, LTL carriers’ practice of reducing fees for some shippers and waiving
them entirely for others has made the accessorial charge increases, like GRIs, less
meaningful.
Figure 14: Various Accessorial Charges (not a comprehensive list)
Accessorial Charges
ABF
2013
ODFL
2013
Advancing Ch. (% of Amount) 6% 5%
Notification Prior to Delivery (per Notification) 47.25$ 11.00$
Corrected BOL Ch. (per Change) 25.00$ 15.00$
Haz. Mat. Ch. (per Shpt) 31.45$ 11.00$
Lift Gate Service (per CWT) 6.45$ 3.00$
Inside Delivery (per CWT) 9.45$ 6.00$
Residential Delivery (Min) 102.65$ 60.00$
Redelivery (per CWT) 8.90$ 5.25$
Storage (per CWT) 3.05$ 1.75$
Source: Company Tariffs (effective as of February 2013)
4. Shipment Characteristics
The average weight of an LTL shipment is roughly 1,300 pounds, although the majority
of freight handled weighs considerably less, and a result, the median LTL shipment

weight is around 600 pounds (Figure 15). Recently, LTL carriers have noted the
percentage of shipments handled that weigh less than 500 pounds has been increasing.
This is a result of several factors including a reduction in packaging, smaller product
sizes and changes in supply chains whereby shippers are maintaining smaller inventories.
These lighter-weight shipments result in higher yields, but due to the fixed costs
associated with pick-up and delivery operations, lighter-weight shipments are generally
less profitable than heavier ones.
Figure 15: Distribution of Regional LTL Shipments by Weight Range
0 - 500
53%
501 - 1,000
19%
1,001 - 5,000
24%
5,001 - 10,000
3%
10,000 +
1%
Source: Company reports, SJC Estimates
LTL shipments are generally defined as weighing between 150 and 10,000 lbs., but not
all shipments that fall within this weight range are handled by LTL carriers. Parcel
carriers have taken market share of the low weight shipments while truckload carriers
have captured heavier LTL shipments. Consider that the revenue of the LTL shipments
moved by parcel and truckload carriers was more than $12 billion in 2011, or forty
percent of the $30.6 billion in revenue generated by LTL carriers.
The average freight class of an LTL shipment is around 70 and nearly 50 percent of
shipments rated at class 65 or below (Figure 16). This suggests that a large portion of
LTL shipments are dense, or low value products. As previously mentioned, the NMFC
maintains 18 different freight classes, but 93 percent of LTL shipments are rated at one of
the nine classes between 50 and 100 and classes from 110 to 500 are seldom used.
Figure 16: Distribution of Regional LTL Shipments by Freight Class
50 - 65
48%
70 - 77.5
25%
85 - 100
20%
110 - 500
7%
Source: Company reports, SJC Estimates

5. Yield Trends
LTL yield is described in terms of revenue per hundredweight (cwt.). LTL carriers track
revenue per cwt. as a measure of pricing, commodity mix and rate trends. As seen in
Figure 17, the combined LTL yield index (including fuel surcharge) showed an upward
trend (about 4.7 percent CAGR) for the seven-year period between from 2001 to 2008.
Yields dropped sharply in 2009 as carriers cut rates, and sinking diesel prices reduced the
fuel surcharge component. Profitability fell as rates declined, but in mid-2010 yields
started to rebound as demand improved and carriers began to seek margin improvements
instead of market share gains. In 2011 and into early 2012, yields were up significantly
from the previous year as carriers continued to seek sizeable rate increases and rising
diesel costs inflated fuel surcharge revenues. Yield growth is decelerating as evidenced
by the index which grew 9.1 percent in 2011, 3.9 percent in 2012, and only 1.1 percent in
2013.
Figure 17: LTL Pricing Index (incl. FSC): 2001 – 2013
95
105
115
125
135
145
LTLRev/Cwt.Index
Source: Company Reports, SJC Estimates
In Figure 18, the historical change in LTL yields (revenue per cwt.) to corresponding
changes in ground parcel yields (revenue per package) and truckload yields (revenue per
loaded mile) are compared. As observed, LTL yields have had the slowest rate of growth
over the four-year period. The slow growth of LTL yields can be attributed to several
factors, one of which was the rate cuts offered by carriers in 2009. Slow growth can also
be attributed to the manner in which LTL carriers negotiate rate increases. First, consider
that from 2000 to 2011, announced rate increases for ground parcel carriers amounted to
56 percent. During this same period, LTL rate increases totaled around 90 percent. GRIs
would suggest that LTL yields should have grown faster than parcel yields during the 10-
year period, which was not the case. GRIs for LTL carriers apply to a minority of their
revenue base whereas parcel rate increases apply to most shippers. There is also a
reversal of negotiating power as shippers go to parcel carriers for rate discounts while
LTL carriers have to go to their customers for rate increases. The practice of discounting
rate increases has also resulted in lower LTL yields. Additionally, LTL brokers have also
emerged during the last decade and have shifted small shippers from LTL carriers’ base
rates onto separate negotiated contract rates which are lower than a small shipper would
otherwise be able to obtain directly from a carrier.

Figure 18: LTL Yield Index vs. Parcel and Truckload (excl. FSC): 2008 - 2013
96
98
100
102
104
106
108
110
112
114
2008 2009 2010 2011 2012 2013
YieldIndex(2008=100)
Truckload LTL Parcel
LTL CAGR: 0.8%
TL CAGR: 1.3%
Parcel CAGR: 2.1%
Note: Based on reported information of public carriers within each segment
G. Operations
1. Network
Depending on the transit days, the LTL segment was historically classified into three
subgroups: long haul/national, regional and multi-regional carriers. However, these lines
have blurred as traditional long-haul carriers transitioned into regional lanes and regional
carriers expanded to offer national coverage. Today, the market is a mix of (long haul /
multi-regional) national carriers and regional carriers. The vast majority of carriers
operate an asset-based model consisting of a network of owned or leased terminals. There
are a few players operating a hybrid or light-asset model that offer regional and long haul
coverage through a relatively small number of service centers.
 Regional Carriers focus on one- and two-day markets. As Figure 19 illustrates,
regional LTL companies concentrate on providing LTL service to a limited
geographic region by emphasizing direct loading of freight between service
centers without intermediate handling, in order to avoid the associated costs.
Figure 20 lists some of the regional LTL carriers by their respective region. E.g.:
Oak Harbor Freight Lines, Dayton Freight Lines, New England Motor Freight,
AAA Cooper. Regional carriers can serve the three-plus day market by partnering
with other regional carriers that operate in different parts of the country. The
Reliance Network is an example of one of these partnerships and offers
nationwide coverage through the networks of eight regional carriers.

Figure 19: Regional LTL Terminal Network
Figure 20: Regional LTL Players by Geography
Source: Company websites
 National Carriers focus on anywhere from one- to six-day markets. National
carriers move freight directly between terminals for shorter-haul moves, like the
regional carriers, and utilize a network of breakbulk and satellite terminals for
shipments moving longer distances. In a typical terminal-breakbulk set-up, an
LTL shipment is picked up from a shipper location and dropped off at the local
terminal where it is consolidated with other shipments and then trucked to a
breakbulk facility. At the breakulk, the shipment is reconsolidated with other
shipments that have a nearby final destination and is then trucked to the breakbulk
Note: Carriers shown are examples
operatingin the specified region and
are not tobe referredtoas a complete
list of regional LTL players.
West
Dependable Highway Express
Mountain Valley Express
Oak Harbor Freight Lines
Peninsula Truck Lines
Midwest
Dayton Freight Lines
Dohrn Transfer
Lakeville Motor Express
Midwest Motor Express
Standard Forwarding
South
AAA Cooper
Averitt Express
Southeastern Freight Lines
Southwestern Motor Transport
Wilson Trucking
Northeast
A. Duie Pyle
Land Air Express of NE
New England Motor Freight
New Penn Motor Express

associated with the destination terminal of the consignee. From the second
breakbulk, the shipment is reconsolidated then moved with shipments that are
traveling to the local terminal, from which point it is delivered to the consignee.
By using breakbulk terminals, long haul LTL carriers can achieve similar
economies of scale as the truckload carriers (Figure 21). Some national players
use rail intermodal transportation for breakbulk-to-breakbulk moves. E.g.: FedEx
Freight, YRC Freight, Con-way, UPS Freight, ODFL, ABF Freight, Estes
Express, YRC Regional, R+L Carriers, Saia.
Figure 21: Long Haul LTL Terminal Network – Usage of Breakbulks
 Light-Asset Carriers are different from traditional LTL carriers in that they do
not operate through an extensive brick and mortar system of terminals. Rather,
light-asset carriers use only a few consolidation centers, primarily located in
major cities, and rely on third parties, owner-operators and delivery agents to
transport freight. These carriers primarily compete in the long haul segment as
evidenced by Roadrunner’s average length of haul of 1,600 miles. E.g.: Daylight
Transport, Roadrunner Transportation (Figure 22).
Figure 22: Roadrunner Transportation Systems Terminal and Delivery Agent Map

 Hybrid LTL carriers also do not operate extensive networks of terminals
and utilize a load-to-ride system whereby shipments from multiple shippers
are loaded directly for multiple destinations, avoiding intermediate sorting and
consolidating. These carriers typically handle heavier-weight LTL shipments
and compete in both regional and long haul lanes. E.g.: New Century
Transportation, Cheeseman.
As the value of products has increased, manufacturers have adopted techniques that
permit adjustments to be made based on demand. Over the past few decades, a growing
emphasis on just-in-time (JIT), quick response inventory and distribution management
systems have resulted in smaller, more frequent shipments. In designing a transportation
infrastructure that responds to JIT, LTL carriers have made modifications to their
networks by individually increasing their efforts to serve multiple sub-segments. While
single-regional carriers expanded their boundaries and became multi-regional companies,
national carriers expanded into the next-day LTL markets, thus blurring the haul-based
subgroups and making segmentation by length of haul irrelevant in current LTL
dynamics. In particular, traditional long haul carriers entered into short haul markets.
YRCW expanded into the regional market through its acquisition of US Freightways in
2005 and ABF began offering short-haul service with its Regional Performance Model
(RPM), which focuses on one- and two-day lanes. RPM enabled ABF to provide next and
second-day service through its existing network of terminals. Figure 23 shows the change
in ABF’s tonnage by transit days as a result.
Figure 23: ABF Tonnage by Transit Days: 2005 and 2011
1 Day
3%
2 Days
28%
3+ Days
69%
2005
1 Day
20%
2 Days
41%
3+ Days
39%
2011
Conversely, Con-way and ODFL, historically known as regional carriers, have increased
their long haul business, implied by the overall increase in average length of haul (Figure
24). In 2013, 13 percent of ODFL’s shipments moved in four days or more. For Saia,
another formerly regional carrier that has expanded by way of acquisitions, shipments
with transit times of three or more days have grown from 12 percent of total in 2004 to 22
percent in 2013.

Figure 24: Average Length of Haul Trend for Multi-Regional LTL Carriers: 1990 - 2013
200
300
400
500
600
700
800
900
1,000
AverageLengthofHaul(Miles)
ODFL Con-Way
2. Terminal Operations
Significant capital expenditure is essential for carriers to establish a network of LTL
service centers. In addition to a terminal building, a lot for trailer maneuvering and
storage and a maintenance shop are necessities of large service centers. The sizeable
infrastructure spending needed for LTL operations presents a high barrier of entry for
smaller carriers hoping to effectively compete with established players.
In a typical LTL network, terminals serve three basic functions: the outbound, inbound
and breakbulk operations. These functions usually consist of unloading, sorting,
consolidating and loading operations. In conjunction with the operations, cross-docking is
the core technique used by LTL carriers. Cross-docking is a logistics concept that
eliminates the storage and order picking functions of a warehousing operation while
allowing it to serve the receiving and shipping functions. Most cross-docks are long,
narrow rectangles with low ceilings and a high number of dock doors around the
perimeter (Figure 25). The idea is to transfer shipments directly from incoming to
outgoing trailers without in between storage. Shipments typically spend less than 24
hours in a cross dock, sometimes less than an hour.
Figure 25: Bird’s Eye View of LTL Terminal
Source: Bing Maps

In terms of terminal efficiency, measured in revenue per terminal, the regional carriers
based in the densely populated Mid-Atlantic and Northeast region have the highest
efficiency among the largest LTL carriers. As seen in Figure 26, A Duie Pyle, Pitt Ohio
and New Penn ranked amongst the highest carriers in revenue per terminal in 2013 and
each cover the Mid-Atlantic and Northeast. In terms of revenue per door, these three
companies also rank at the top of the list in addition to Holland, FedEx Freight and Con-
way Freight who operate within several regions.
Figure 26: Terminal and Terminal Door Efficiency: 2013
Rank Carrier
Rev. / Term.
($ mil.)
Rank Carrier
Rev. / Door
($ 000s)
1 A Duie Pyle 19.5$ 1 Pitt Ohio 330.6$
2 Holland 17.7$ 2 A Duie Pyle 314.7$
3 Pitt Ohio 17.2$ 3 New Penn 284.5$
4 New Penn 15.3$ 4 FedEx Freight 247.2$
5 FedEx Freight 14.0$ 5 Holland 242.6$
6 R+L Carriers 12.0$ 6 Con-way Freight 224.9$
19 ABF Freight 6.4$ 19 AAA Cooper 150.3$
20 Ward Trucking 6.4$ 20 Ward Trucking 143.0$
21 Oak Harbor 5.1$ 21 R+L Carriers 140.8$
22 Central Freight 4.2$ 22 Wilson Trucking 103.7$
23 Wilson Trucking 4.1$ 23 Central Transport 70.4$
24 Central Transport 3.1$ 24 Central Freight 64.8$
Source: Company Reports, SJC estimates(includes 24 largest asset-based LTL carriers only)
3. Supply & Demand
LTL carriers control capacity in the marketplace through three primary components: real
estate, equipment and labor. Labor and equipment are predominantly variable
contributors with real estate being fixed. A carrier can mitigate some of the negative
effects of a downturn in freight by laying-off drivers and dockworkers and disposing of
excess equipment. Conversely, a carrier can hire additional labor and purchase or lease
equipment to handle an upswing in volume. However, these two aspects are not always
variable as an oversaturated used tractor market may constrain a carrier’s ability to sell-
off equipment and tight driver supply may make hiring qualified drivers difficult.
Real estate is fixed as it cannot be quickly disposed of and maintaining a network of
terminals is a key to providing service in a particular geographical area. Likewise,
reducing terminal door capacity on a large scale requires detailed planning and execution.
However, as excess capacity soared during the economic downturn, several carriers
including YRCW and FedEx Freight trimmed their terminal networks and capacity
balanced out once freight rebounded.
Just as cutting terminal capacity can be difficult, adding doors can also be a challenge.
Carriers often add doors onto existing terminals, but for buildings that are on lots with
already limited space for trailer maneuvering and parking, this may not be possible.
Additionally, building a new terminal or relocating to an existing facility is a costly
investment in expensive real estate markets. Carriers can offset tight capacity by hiring
additional labor to process more freight per door and effectively increase door utilization.

This practice is most common in areas with dense populations and expensive real estate.
For example, terminals in the densely populated metro-areas of the Northeast process
more tons per door than service centers in the more sparsely populated Western states.
Supply and demand in the truckload sector typically is a leading indicator for change in
LTL shipment weights. Falling truckload demand usually results in increasing excess
capacity in the segment and precedes a decline in LTL weight per shipment and
conversely, as truckload volumes increase, LTL weight per shipment typically also rise.
This occurs, because as truckload demand falls in the absence a decline in truck capacity,
rates fall and make truckload carriers more likely to target heavy LTL shipments to fill
empty equipment. Likewise, when truckload demand is increasing and rates are rising,
these carriers are less likely to look at lower priced LTL freight.
Tight truckload capacity aids LTL carriers by shifting heavyweight LTL freight from
truckload fleets into LTL networks and also gives LTL carrier the opportunity to increase
their own rates. However, the higher rates charged by truckload carriers can negatively
impact some LTL carriers that rely heavily on purchased truckload capacity for linehaul
moves. Con-way Freight spends 17.1 percent of its revenue on purchased transportation
and is one of the carriers to see a negative impact from tight truckload capacity (Figure
27). LTL carriers that rely less on outside truckload companies to supply trucks and
trailers for line-haul moves are better positioned to benefit from the segment’s tight
capacity. They include ODFL and Saia, which spend 4.5 and 6.4 percent of revenue on
purchased transportation, respectively, as well as some profitable regional carriers such
as Pitt Ohio and Dayton Freight Lines. Likewise, companies that rely on rail for long-
haul moves, like YRC Freight and ABF, are better hedged against an increase in
truckload rates.
Figure 27: Con-way Freight Purchased Transportation + Rail Utilization: 2006 - 2013
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
2006 2007 2008 2009 2010 2011 2012 2013
Purchased Trans. % Total Exp. Rail % Linehaul Miles
Source: Company Reports, SJC Estimates
Figure 28 displays the change in LTL tonnage compared with increases and decreases in
revenue equipment (tractors and trailers) for the public LTL carriers. The number of

tractors has been on a steady decline since 2006, while tonnage dropped temporarily in
2009 and then partially rebounded. The slow decline in the number of tractors resulted in
excess capacity for several years and some LTL players reduced pricing in order to
minimize empty equipment. Tractors numbers have also declined as carriers have
increased their use of rail and truckload capacity for linehaul moves. The excess capacity
gap has since shrunk and the market has been near equilibrium for the last few years.
Figure 28: LTL Tonnage Trend vs. Tractors and Trailers: 2006 - 2013
100,000
120,000
140,000
160,000
180,000
200,000
220,000
240,000
45,000
50,000
55,000
60,000
65,000
70,000
75,000
2006 2007 2008 2009 2010 2011 2012
Trailers
LTLTonnage(000s),Tractors
LTL Tonnage Tractors Trailers
Source: BTS, Company reports, FMCSA, SJC estimates
4. Terminal Capacity
Overall, the number of terminals for the top LTL players has declined 15 percent in the
five-year period from 2008 to 2013 (Figure 29). As traditional national LTL players
(YRC, ABF, FedEx National) as a whole have greatly reduced their network of service
centers, multi-regional / regional players have expanded their networks through the
addition of facilities (mostly by way of acquisitions). The number of terminals declined
in 2013 due primarily to Central Transport’s acquisition of Vitran as Central merged the
two LTL networks after the purchase. Based on extensive research on terminal locations
of LTL players, SJC has estimated the average number of doors per terminal is 47
(Please refer to the Appendix D for additional information on obtaining the LTL terminal
data research).
Figure 29: Number of Terminals – Top LTL Carriers: 2008 to 2013

2008 2009 2010 2011 2012 2013
Number of Terminals: Top 25 LTL Carriers
-15%
Discussions with ODFL executives indicate that they have experienced an eight percent
annual increase in replacement value of their terminal properties through property
insurance firms. As per Saia executives, the value of the terminals acquired through the
Clark Brothers and Connection acquisitions (2004 and 2006) influenced the valuation on
the companies acquired. In addition, Saia sought options to purchase additional terminals
from both companies to ensure availability in the tight real estate market.
During the economic downturn, some carriers consolidated networks to meet the
reduction in freight volumes. YRCW was the single largest consolidator and closed
hundreds of facilities when it combined the operations of its Yellow and Roadway
subsidiaries. Yellow and Roadway operated a combined 586 terminals at the end of 2007
and this number was reduced to 267 facilities as of year-end 2013. In addition to closing
terminals in its national network, YRCW also reduced the footprint of its regional
subsidiaries by eliminating overlapping coverage between the company’s Holland and
New Penn subsidiaries. Other large players that reduced their terminal networks include
Con-way, which removed 30 facilities from its network in late 2008 and FedEx Freight,
which closed 100 service centers when it consolidated the networks of its short-haul
(FedEx Freight) and long-haul (FedEx National LTL) operations into a single entity.
On the contrary, ODFL has steadily increased its terminal capacity, including in 2008 and
2009 when most other carriers were reducing theirs. Since 2009, ODFL has opened 23
terminals in new markets and has added door capacity to another 62 facilities. In 2013
alone, the company added or expanded 23 facilities.
5. Revenue Equipment – LTL Carrier Fleet
Having the right mix of power and trailers at a particular terminal location determines an
LTL carrier’s ability to efficiently serve its customers. Straight trucks and truck tractors
are the primary types of freight vehicles in use within the LTL industry. The method in
which these vehicle types are deployed is related to the differences in geographic range of
operation. Carriers use a mix of single body straight trucks and tractors with 28-foot to
53-foot trailers for pick-up and delivery operations (Figure 30). The distribution of

straight trucks to tractor-trailers varies by carrier. ODFL, for example, employs about
6,000 power units, only 2 percent of which are straight trucks, while 35 percent of the
power equipment in Pitt Ohio’s fleet is straight trucks. Some carriers also utilize sprinter
vans (more commonly used by parcel carriers), which are smaller than straight trucks and
are generally used for pick-up and delivery of shipments that can be moved by hand.
Figure 30: LTL Carrier Fleet Vehicles
Straight
Truck –
Pick-up &
Delivery
Operations
Twin 28-
foot
Trailers
Linehaul
Operations
Rocky
Mountain
Double
Linehaul
Operations
Standard linehaul equipment for LTL carriers is a Class-8 tractor with a 48- or 53-foot
trailer or twin 28-foot trailers (Figure 30). Usage of 28-foot trailers improves the load
factors of LTL carriers as twin trailers and longer-combination vehicles enable more
freight to be hauled behind a single tractor than can be hauled by one larger trailer.
Moreover, the use of 28-foot trailers can permit carriers to transport freight efficiently
from its point of origin to destination with minimal unloading and reloading, which can
also reduce cargo claims expenses. Longer-combined vehicles, such as double 48-foot
trailers and triple 28-foot trailers, further improve linehaul efficiency but are legal only in
some states.
6. Union/Non-Union Labor
Before deregulation in 1980, the International Brotherhood of Teamsters (IBT) gained
power attributing union drivers as a substantial share of LTL industry costs. While
unionized LTL carriers have lower turnover rates and higher labor efficiency rates, non-
union competitors have a lower fringe benefit cost structure for their freight handling and
driving personnel. As expected, deregulation facilitated the entry and expansion of non-
union trucking operations and produced a high rate of business failure among high cost
union LTL companies such as PIE (closed 1990), Branch Motor Express (closed 1984)
and McLean (closed 1986). Based on the Current Population Surveys (CPS) for 1983-90,
union density (defined as the percentage of drivers that are part of a union) in the
previously regulated for-hire sector of the trucking industry fell from about 60 percent in
the 1970s to about 25 percent by 1990. Figure 31 illustrates the composition change of

revenues associated with union and non-union workforces for the ten largest carriers. As
seen in the figure, union carriers have consistently been losing market share, implied by
the 2.1 percent average increase in market share for non-union carriers during the 10-year
period.
Figure 31: Non-Union Revenues % of Total Top-10 Carrier Revenues: 2003 – 2013
30%
35%
40%
45%
50%
55%
60%
65%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Non-unionRev.%Total
+2.1%
Avg.
The National Master Freight Agreement (NMFA) was introduced to the LTL industry by
the Teamsters Union in 1964 and covered some 400,000 workers. The term “Master
Agreement” refers to its use as the primary contract in the domestic trucking industry
(local, over-the-road and long haul) for member carriers operating throughout the U.S.
Four carriers (ABF, Holland, New Penn and YRC Freight) ratified the five-year NMFA
in February 2008. Since then, YRCW has made several modifications to the agreement
including cutting wages, reducing pension contributions and extended the lift of the
contract, among other items. Likewise, ABF was awarded its own labor contract in 2013
after the March 31, 2013 expiration of the prior NMFA. ABF’s newest contract is still
modeled after the previous NMFA, but since there is no longer a “master” contract
covering multiple companies within the LTL industry, the NFMA is effectively deceased.
Other LTL carriers with unionized workforces that operate under company-exclusive
agreements with the IBT include UPS Freight, Oak Harbor, Standard Forwarding and
Peninsula Truck Lines. The IBT began organizing UPS Freight in 2008 and in January
2014, UPS Freight’s Teamster employees ratified their second contract which gave UPS
Freight drivers the highest wages in the industry (although total compensation cost may
still be lower than ABF when factoring in pension, healthcare benefits and work rules).
New England Motor Freight (NEMF) was party to the NMFA until 1977 after which it
deviated into a separate collective bargaining agreement but more recently lost all
Teamster affiliations as workers re-organized with the International Association of
Machinists.
7. Cost Breakdown and Operating Ratio
The cost structure of traditional asset-based LTL carriers consists of high levels of fixed
costs and relatively low variable costs. Based on the LTL activities, costs can be divided
into four categories: linehaul, pick-up and delivery (PUD), dock costs and administrative

overheads (other). Figure 33 provides the percentage breakdown of the above cost
categories for short haul and long haul shipments.
Figure 32: LTL Cost Breakdown (% of Revenues) by Short Haul and Long Haul Shipments
Short Haul Long Haul
Linehaul 30.4% 40.0%
PUD 23.4% 17.5%
Dock 10.8% 10.0%
Other 24.7% 29.7%
Avg. $/Shpt 115$ 225$
Fuel, labor, insurance and maintenance are the main cost drivers within the LTL segment
and are distributed between the above categories. The service elements determining the
route costs of a linehaul move are time and distance. The service elements of a PUD
operation are time, distance, customer dock time, number of stops per pick-up/delivery
and number of shipments per stop.
One metric used to gauge a company’s financial health is its operating ratio. The
operating ratio (OR) is computed by dividing total expenses by total revenues. An
operating ratio greater than 100 percent illustrates an operating loss and an OR below 100
percent shows a profit. In 2013 the weighted average OR for the public LTL carriers was
95.8 percent and ranged from 101.0 percent for YRC Freight to 85.5 percent for ODFL.
The 2013 mark was an improvement from the operating losses between sustained
between 2008 and 2010, although the OR is still worse than carriers in the ground parcel
and truckload segments (Figure 34).
Figure 33: LTL Operating Ratio Trend vs. Other Transportation Segments: 2005 - 2013
80%
85%
90%
95%
100%
105%
110%
2005 2006 2007 2008 2009 2010 2011 2012 2013
OperatingRatio
LTL Truckload Parcel
Source: Company reports, SJC estimates (weighted avg. for public carriers in each segment)
The average OR for domestic ground parcel carriers has consistently been better than
LTL, which is due to the high efficiency, cost control measures and focus on profitable
pricing of parcel operators. When compared to truckload, the average OR for LTL was

near that of truckload from 2004 to 2007, but the LTL segment saw its operating ratio
deteriorate in 2008 to 2010 while truckload carriers were able to mitigate some of the
pressures of the economic recession and maintain profits. Predatory pricing and freight
diversion to competing modes resulted in the operating losses by LTLs and although the
difference in LTL and truckload ORs has shrunk from its peak of 10.9 percent in 2009,
average LTL ORs were still 4.1 percent worse than truckload in 2013.
Figure 34: LTL Operating Ratios by Carrier vs. Historical Peak: 2013
-12%
-9%
-6%
-3%
0%
3%
6%
9%
12%
15%
ABF YRC
Freight
FedEx
Freight
Con-way Saia YRC
Regional
RRTS ODFL
2013 Op. Margin Deviation from 10-Yr. Peak
Source: Company Reports
Some LTL carriers have had success in returning their margins to peak, or near peak,
levels and mitigating the negative impacts of the economic recession. Figure 35 displays
2013 operating margins of the public LTL carriers and their relation to each company’s
best annual result since 2004. ODFL reported their best annual margin in history in 2013
and Roadrunner and Saia were less than one percent worse than their best mark. The
other five LTL carriers seen in the figure fell short of their historical high by an average
of 6.7 percent, led by FedEx Freight and ABF at 8.5%.
Another contributing factor to the higher operating ratios for LTL carriers is their poor
pricing functions. The pricing mechanisms currently being utilized by LTL carriers have
remained largely unchanged in the three decades following regulation, while at the same
time, new technologies like scaled forklifts have emerged that allow carriers to quickly
and accurately capture a shipment’s true weight. In spite of the advances, carriers do not
weigh all shipments that move across their docks and some that do maintain weight
thresholds that will exempt a shipment from receiving a rate adjustment if the actual
weight is off by more than 50 pounds. Furthermore, some carriers exempt some of their
large shippers from rate corrections for shipments that are off by as many as 100 pounds.
As a result, the weight billed by LTL carriers is less than the weight actually being
handled. Additionally, other aspects of the operations such the use of oversize equipment
for pick-up and delivery operations and fuel surcharge caps are contributing to lower
margins.
In 2009, operating ratios rose as demand plummeted and pricing competition increased.
Traditionally profitable carriers (e.g. FedEx Freight and Con-way Freight) lowered
pricing in an effort to boost their volumes and force YRCW out of the market. The

attempt failed and margins for the many of the public carriers remained negative through
2010. Private carriers on the other hand, were more conservative in lowering prices and
were collectively profitable in 2009 and 2010. Of the 25 largest LTL carriers in 2011
(representing about 90 percent of industry revenues), private companies controlled about
25 percent of revenues, but accounted for nearly half of operating income.
8. Sales and Marketing
Since parcel integrators entered the industry via hundredweight service, traditional LTL
carriers began actively investing in their sales and marketing functions. Brand value plays
a vital part in competitive dynamics within the LTL segment and the entry of integrators
has upped the ante of having a strong brand. FedEx branded its regional LTL carriers
“FedEx Freight” and renamed Watkins Motor Lines “FedEx National LTL” after it was
acquired in 2006. Similarly, UPS re-dubbed Overnite Transportation as “UPS Freight”.
Some other LTL carriers have followed suit by bringing all companies under a single
operating name. For example, in February 2006, Con-way announced a corporate name
change from CNF to Con-way Inc. to bring the company’s operations under a single
master brand and value identity, an initiative that incurred costs of $21 million. Likewise,
YRCW changed the name of its national unit to YRC Freight to emphasize the
company’s focus on the LTL market and bring about a single company identity.
As observed in Figure 36, spend by LTL carriers on advertising ranges widely by
company. ODFL and Saia formerly accounted a similar percentage of operating expenses
to advertisements, but ODFL has since increased this spend over the last few years,
including a more than 50 percent jump in 2013, and the company’s annual expenditure is
now 10-times higher (as a percentage of operating expenses) than Saia and nears that of
global integrators like FedEx. ODFL advertising campaign includes television spots on
national cable networks, including CNN and Fox News. Senior management at FedEx
Freight believes that the powerful FedEx brand, along with the strategy of cross-selling
the full portfolio of services, has led to strong market acceptance and customer gains at
the company. Private carriers have also leveraged their advertising spend. R+L Carriers is
a title sponsor to a college bowl game each year and some smaller players with revenue
under $400 million, such as Pitt Ohio, also spend marginally on advertising.
Figure 35: Advertising Expenses Comparison – LTL Carriers vs. Integrators: 2007 – 2013
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
2007 2008 2009 2010 2011 2012 2013
Advertising%Op.Expenses
ODFL Saia FedEx
$424M
$17M
$0.7M

FedEx Freight touts itself as having the fastest published transit times of any LTL carrier
and independent research done by SJC validates this claim. SJC analyzed the published
transit times on more than 300,00 lanes for the large, nationwide LTL carriers and found
that FedEx Freight’s Priority service has the fastest transit time on 93 percent of the lanes
that it serves, the highest percentage of any carrier. Other companies with speedier
networks include Con-way and UPS Freight. While a faster network may help a carrier
with marketing, it also increases operating costs as companies must employ additional
equipment and drivers in order to meet service requirements. As such, the companies
with the quickest transit times (FedEx Freight, Con-way, UPS Freight) are not always
those that have the highest margins (ODFL, Saia) (Figure 36).
Figure 36: LTL Network Speed Comparison: % of Lanes with Fastest Transit Time
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
FDXF - Priority Con-way UPS Freight Saia ODFL
LTL Network Speed Comparison:
% of Lanes with the Fastest Transit Time
Source: SJ Consulting Group, Inc.Source: SJ Consulting Group, Inc.
9. Technology
Since the early 1990’s, proliferation of technology has methodically altered business
practices within the trucking industry. Based on the University of Michigan survey on
technological innovation in the trucking industry, an average LTL carrier sends out fewer
than 18 percent of invoices via electronic data interchange (EDI), and fewer than five
percent of the bills of lading are received via EDI. The comparable number within the
parcel industry is more than 95 percent. With committed use of information technology
being the major element of success, integrators’ entry into the LTL arena has amplified
the need for technology within the segment. In order for LTL carriers to maintain the title
of competitor in respect to the integrators, technology utilized to record and make use of
information such as manifesting, weight capture and other shipment attributes needs to be
implemented for load planning and route optimization.
With processes that permit transactions to take place online, LTL firms are exploiting
capabilities to explore new IT-enabled business opportunities like global connectivity,
quick communication and access to valuable information. This fact is evidenced by the
following LTL carrier data related to technology spending:

 ABF invested $14.2 million in its sales force, customer service and
information technology during 2012. Part of the IT investment included
deploying wireless handheld devices to its drivers and dock workers.
 Technology-related expenditure totaled $15 million for ODFL in 2013 and
accounted for 5.2 percent of total expenditures (Figure 37). In 2010, the
company implemented onboard recorders in its tractors and handheld scanners
for use across its LTL system.
Figure 37: ODFL Technology Capital Expenditures: 2003 - 2013
0%
2%
4%
6%
8%
10%
12%
14%
16%
$-
$5
$10
$15
$20
$25
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
%TotalCapEx
TechnologyCapEx($mil.)
Technology CapEx % Total CapEx
 Saia’s expenditure for technology-related items was $7.1 million in 2013 and
represented 5.8 percent of total net capital expenditures. Recent technology
related capital expenditures include dimensional scanners and tractor on-board
technologies aimed in increasing efficiency.
Influx of technology has enabled carriers to provide service elements such as money-back
guaranteed delivery commitment and exception notifications. Additional technologies
that have experience growth are the use of on-board tracking and communication
equipment for contact with drivers and use of Global Positioning System (GPS) or in-
vehicle navigation devices for routing efficiencies.
Senior management at FedEx Freight anticipates increased capital spending, largely on
new and expanded facilities and information technology investments. FedEx developed
an “electronic onboard recorder” (EOBR) to enable tracking of driver Hours-of-Service
(HOS) and payroll, to increase shipment data accessibility and to aid in geo-fencing
among other things. Similarly, UPS Freight, ODFL and Con-way, amongst others, are
using handheld computers to track freight shipments. Smaller, regional carriers have also
made significant information technology investments and many are utilizing in-cab
devices to provide real-time shipment tracking and load planning.

Dimensional scanners are gaining popularity among LTL carriers as these tools enable
companies to accurately measure the true dimensions of shipments and thus allow
companies to improve pricing and billing. Saia is currently using more than 20
dimensioners at largefacilities and ODFL is another major user of this technology. The
price of a dimensior unit is about $60,000 to $75,000 and other LTL carriers, including
YRC Freight, are considering implementing the technology once it reaches a lower cost.
H. Industry Growth and Entry/Exit of Players
1. Major Mergers and Acquisitions
Some of the major acquisitions within the LTL segment are shown in Figure 38. The
2000s were filled with several major acquisitions as global integrators entered the LTL
space and Yellow grew into what is now YRCW. Formerly regional players, including
ODFL, Estes, Saia and Vitran, also expanded their geography by acquiring multiple,
smaller carriers. M&A activity has slowed since the end of the economic recession and
the most recent deal involved the split-up of Vitran via separate purchases by Central
Transport and the major Canadian player, Transforce. There is a potential for M&A
activity as Saia is still without service in the Northeast and strong regional players,
including Southeastern, Averitt, Dayton and Pitt Ohio, could make deals to expand their
service area.
Figure 38: Major Mergers and Acquisitions within the LTL Segment

2013 Acquirer
LTL Rev.*
Target Rev. at
Time of Acq.
Acquisition
Price
FedEx Viking Freight (div. of Caliber) 1998 5,095$ 382$ NM
FedEx American Freightways 2001 5,095$ 1,167$ 1,200$
FedEx Watkins 2006 5,095$ 1,006$ 780$
Roadway Arnold Industries, New Penn 2001 4,865$ 415$ 491$
Yellow Roadway Express 2003 4,865$ 3,321$ 966$
Yellow Roadway USF Corporation 2005 4,865$ 2,005$ 1,304$
Overnite Motor Cargo Industries 2001 2,502$ 140$ 76$
UPS Overnite 2005 2,502$ 1,739$ 1,250$
ODFL Carter & Sons Freightways 2001 2,126$ 38$ 10$
ODFL Wichita SE Kansas Transit 2004 2,126$ 68$ 25$
ODFL UW Freight Lines 2006 2,126$ 23$ 19$
ODFL Priority Freight Lines 2007 2,126$ 17$
ODFL Bullocks Express 2007 2,126$ 17$
ODFL Bob's Pickup & Delivery 2008 2,126$ 10$
Estes G.I. Trucking (from ABF) 2005 1,835$ 162$ 40$
Saia WestEx and Action Express 2001 1,139$ 117$ Merger
Saia Clark Bros. 2004 1,139$ 66$ 31$
Saia Connection Company 2006 1,139$ 70$ 18$
Saia Madison Freight Systems 2007 1,139$ 15$ 3$
Vitran Chris Truck Line 2005 NM 29$ 29$
Vitran Sierra West 2005 NM 16$ 3$
Vitran PJAX 2006 NM 175$ 132$
Vitran Milan Express 2011 NM 80$ 8$
Central Transport Vitran (U.S. business) 2013 488$ 509$ 2$
TransForce Vitran (Canada business) 2014 619$ 194$ 136$
Roadrunner Bullet Freight 2009 559$ 48$ 27$
Roadrunner Expedited Freight Systems 2012 559$ 19$ 10$
DP - DHL Standard Forwarding 2011 97$ 70$ NA
DHE Matheson Fast Freight 2010 65$ 34$ NA
Acquirer Target
Year of
Deal
($ in millions)
28$
Source: Company reports, Industry publications, SJC estimates
2. Major Bankruptcies and Closures
The LTL segment has experienced continued removal of capacity through bankruptcies
and business failures since the end of deregulation (Figure 39). Most of the bankruptcies
involved unionized carriers with the leading reasons for the union LTL failures being
higher salaries and benefits and the lack of flexibility due to work rules that restricted
productivity and created competitive weakness. The most significant bankruptcy in the
LTL industry is that of Consolidated Freightways in September 2002. The liquidation
represented the largest single capacity exit in LTL history. Other significant failures of
sizable players include Preston and NationsWay in the late 1990s and Jevic
Transportation, a hybrid-LTL company in May 2008. The more recent closures were of
smaller, regional players.
Figure 39: Major Bankruptcies and Closures within the LTL Segment

Company
Month of
Closure
Year of
Closure
Rev. at
Closure
($ mil.)
Coverage Area
Express Transport December 2012 20$ West
New York Carolina Express November 2012 19$ East Coast
Terminal Trucking Company December 2011 17$ Southeast
Furniture Transport Group September 2011 85$ Nationwide
Brandt Truck Line March 2011 16$ Midwest
Mid-States Express March 2009 55$ Midwest
Alvan Motor Freight June 2008 77$ Midwest
Jevic Transportation May 2008 $ 345 Nationwide
Billings Group June 2006 49$ Southeast
USF Dugan July 2005 229$ South + Midwest
Service Transport April 2005 101$ Southeast + Midwest
Guaranteed Overnight Delivery (G.O.D.) November 2004 50$ Northeast
USF Red Star May 2004 229$ East Coast
K&R Express Systems March 2004 65$ Midwest
Alterman Transportation (Refrigerated) February 2003 75$ Nationwide
Consolidated Freightways September 2002 2,052$ Nationwide
APA Transport February 2002 153$ Northeast
Preston Trucking Inc. July 1999 436$ Northeast
ANR Advance February 1999 196$ Midwest
NationsWay May 1999 400$ Nationwide
Source: Company reports, Press releases, Company estimates
3. Cyclicality
By and large, LTL providers derive their revenues from the manufacturing, wholesale
and retail segments (Figure 40). The three segments account for more than 90 percent of
total LTL tonnage and most carriers report a heavy focus in these industries. Currently,
Saia reports that 18 percent of its revenues come from general merchandise retailers,
while Con-way reports that around 60 percent of its revenue is derived from
manufacturing and 40 percent from wholesale / retail.
Figure 40: Distribution of LTL Tonnage by Industry Vertical: 2010
Manufacturing
44%
Wholesale
35%
Retail
12%
All Others
9%

Source: U.S. Census Commodity Flow Survey, Carrier Reports, Company Estimates
In understanding the cyclicality of the LTL segment, we benchmark the fundamental
indicators of these customer verticals to the changes in the American Trucking
Associations’ Seasonally Adjusted (SA) LTL Tonnage Index. The correlation between
the changes in LTL tonnage index to the Institute of Supply Management’s Purchasing
Managers Index (PMI) (a national manufacturing index based on a survey of purchasing
executives at roughly 300 industrial companies) is illustrated in Figure 41. The PMI
signals expansion in manufacturing when it is above 50 and contraction when it is below
50. As can be observed, strong manufacturing activity during 2004 – 2005 resulted in
year-over-year tonnage gains for LTL carriers, while the slowing ISM from 2006 – 2009
resulted in declining LTL tonnage. Similarly, Figure 41 also correlates the changes in
LTL tonnage to retail sales. Crests and troughs in retail sales correspond to the highs and
lows year-over-year that are observed for LTL tonnage growth.
Figure 41: LTL Volume Trends vs. Retail Sales and ISM PMI Index: 2004 – Current
30
35
40
45
50
55
60
65
70
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
LTLTonnage&RetailSalesYOY%Change
ATA LTL SA Tonnage Index
Retail Sales (excl. Food)
ISM PMI Index
ISMPMIIndex
Source: ATA, US Census Bureau, University of Michigan
4. Expansion into North America and Other International Markets
Canada and Mexico are two of the three largest international trade markets for the United
States. In 1994, the United States, Canada and Mexico signed the North American Free
Trade Agreement (NAFTA) to encourage the free flow of trade within North America,
and as a result, the movement of goods between the countries has been consistently
increasing. Imports and exports between Canada and the US have grown around four
percent annually from 2004 to 2013, with surface transportation accounting for about 83
percent of the values. Mexico, on the other hand, has seen a seven percent annual growth
over the same period with surface transportation accounting for 80 percent. These cargo
movements provide a lucrative opportunity for LTL carriers to expand their North
American footprint. Roadway formed a subsidiary to offer service to and from Mexico,
while Con-way uses the services of its sister company, CFI Logistica for intra-Mexico
shipments. ABF, Southeastern Freight Lines and other carriers manage shipping to and

from Mexico through alliances. FedEx Freight advertises its Mexican operations with the
tag line “Your North American Carrier”.
Beyond North American borders, LTL carriers have looked globally for alliances in
response to new LTL competition from integrators with global networks. In August 2006,
Con-way partnered with APL Logistics to launch the OceanGuaranteed Service, a
guaranteed port-to-door delivery from China to the US. The partnership was in response
to an opportunity in the market to improve less-than container load (LCL) service and
reduce global supply chain variability. Other LTL carriers, including ODFL, ABF and
Averitt Express, have launched similar LTL-LCL services for shipments originating in
Asia Pacific. By providing high-service LCL and value-added handling at ports, LTL
carriers are able to compete with the global capabilities of integrators like UPS and
FedEx.
I. Current Scenario
1. By the Numbers – Second Quarter, 2013
The second quarter of 2013 reflected the sluggish economic environment as LTL tonnage
and revenues were largely unchanged from the previous year. Revenues increased 1.8
percent including fuel surcharges and daily tonnage crawled up by a meager 0.2 percent
during the quarter. Margins improved sequentially, as is typical in the second quarter, but
were down by 0.8 percent from 5.3 percent in 2Q’12 to 4.5 percent in 2Q’13
The sequential and year-over-year changes in operating revenues and reported operating
margins are shown in Figure 42 (all FedEx Freight results are adjusted to closer resemble
calendar quarters). Combined quarterly revenues for the public LTL carriers increased
1.8 percent year-over-year and grew 8.7 percent from 1Q’13. Revenue declines from
FedEx Freight Priority, YRC Freight and Vitran nearly offset revenue increases by all
other carriers. Roadrunner showed the largest year-over-year increase at 12.9 percent,
partially due to an August 2012 acquisition. FedEx Freight Economy revenues grew 3.1
percent during the quarter, but this was at the expense of Priority revenues, which
dropped 1.8 percent, as shippers continue to switch to the lower priced service. UPS
Freight and ODFL both increased market share during the quarter as the two companies’
saw revenues increase by 6.3 percent and 8.0 percent, respectively. Vitran’s revenue
decline of 10 percent reflects the company’s ongoing operating troubles as well as the
impact from the company’s decision to end service to the Western US.
Figure 42: Change in Revenue and Operating Margins: 2Q’13

Source: Company reports, estimates
Figure 42 shows the change in operating margins for the carriers (UPS Freight is
estimated). YRC Freight’s operating improvement took a step in the wrong direction in
2Q’13 after the company reported a 0.5 percent year-over-year decline in its margin and a
1.4 percent decline from the first quarter. Saia continued its improving margin trend, and
the company’s 2Q’13 mark of 8.0 percent was only slightly lower than the company’s
record second quarter margin of 8.5 percent set in 2Q’06. Vitran’s margin dropped to -9.4
percent, a slight fall from the company’s -9.0 margin in 1Q’13 but a steep decline from
the -2.7 percent margin a year ago making it the ninth straight quarter that the company
has reported a negative margin. FedEx Freight’s margin decline was almost exclusively
due to voluntary buy-out payments that are part of FedEx Corp.’s realignment program.
As seen in Figure 43, tonnage and shipments showed their normal seasonal increase
between the first and second quarters but growth was basically flat from the prior year.
The companies in 2Q’13 showed 6.0 percent more shipments than in 1Q’13, mainly
credited to the seasonal changes, as the year-over-year shipment growth during the same
period decreased by 0.2 percent. This slow volume increase is also being experienced by
other transportation segments, including truckload as evidenced in the 0.5 percent year-
over-year decline in total loaded miles for the reporting public truckload carriers.
Roadrunner had the largest volume increase in the quarter, due to the aforementioned
acquisition as well as organic growth from terminal openings in new origin market.

Vitran’s decline was due to the previously noted operating challenges. FedEx Freight
Economy volume growth outpaced the Priority segment and UPS Freight and ODFL
were the other companies to grow market share.
Figure 43: Change in Daily Shipments and Tonnage: 2Q’13
Source: Company reports, estimates
Figure 44 displays the change in revenue per cwt. (yield), revenue per shipment and
average weight per shipment for the reporting carriers. The weighted average yield
increased 1.4 percent from 2Q’12 and most carriers reported an increase in pricing. The
average yield including fuel surcharge grew marginally at 0.7 percent, as fuel surcharge
revenues were higher in 2Q’13 than in the previous year. FedEx Freight Economy again
had the highest yield growth at 4.9 percent, aided largely by a decline in weight per
shipment. Saia’s increase of 3.3 percent was the largest absolute increase in price
(adjusting for the impact of changes in shipment weight). Roadrunner’s drop in revenue
per cwt. was 5.4 percent in the quarter, due to its acquisition of EFS, which had an
average yield around $11 compared to the $15 average yields for Roadrunner’s prior
business. ABF’s yield declined due to mix changes as a lower freight class and decline in
average length of haul had a negative impact on pricing. Overall average shipment
weights shrank 0.2 percent during the quarter.
Figure 44: Change in Avg. Revenue per Shpt., Yield, Weight per Shpt.: 2Q’13

-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
FDXF-P FDXF-E YRC
Freight
YRC
Reg.
Con-
way
UPS
Freight
ODFL ABF Saia Vitran RRTS Avg.
2Q'13 - Percent Change in Weight per Shipment
Seq. YOY
2. Current Trends
 The LTL industry is seeing only modest growth as the pace of economic
expansion is slow. Total market revenue growth has decelerated over the past
few years from 11.6 percent in 2011 to 3.1 percent in 2013. Modest yield and

tonnage growth during 2013 contributed to the higher industry revenues as
fuel surcharges had a negative impact on total market growth.
Fuel surcharge revenues are a sizeable percentage of total revenues, but to
understand the ongoing trends affecting the LTL market, revenues excluding
fuel surcharges should be considered (Figure 45). In 2011 and 2012, revenues
excluding fuel surcharges increased at a slower rate than total revenues and
are more reflective of the modest increases in both tonnage and pricing.
Figure 45: The Effect of Fuel Surcharge Revenues on Large LTL Carriers: 2010- 2013
$10,000
$12,000
$14,000
$16,000
$18,000
$20,000
$22,000
$24,000
2010 2011 2012 2013
LTLRevenue($millioin)
LTL Revenues excl. FSC FSC Revenues
Source: Company reports,
 The LTL market is consolidating via acquisitions and carrier failures. Most
recent acquisitions have been of small companies with less than $100 million
in revenue, but Central Transport’s acquisition of Vitran in 2013 was the
largest M&A deal (in terms of revenue) since FedEx acquired Watkins in
2006. Most recent carrier failures have been of small, regional players with
revenues less than $50 million and include companies that are closing due to a
major customer loss or unable to finance necessary equipment upgrades.
 Freight brokers and third party logistics companies are becoming an
increasing source of revenue for LTL carriers. While too much reliance on
brokers and 3PLs for freight will impact a carrier’s margin, some carriers have
been able to maintain profitable relationships with non-asset providers.
ODFL, for example, generates about one-third of its revenue from such
sources, and an 85.5 percent OR. The manner in which a carrier manages its
3PL and broker customer base is crucial to profitability. Likewise, 3PL
customers that manage a shipper’s transportation spend, compared with pure
brokers that simply shop for the lowest LTL rate, are typically a more
profitable customer for carriers.
 LTL tonnage growth has been marginal as the U.S. and world economics are
treading water. LTL tonnage grew 1.6 percent in 2011, 1.4 percent in 2012

and 2.2 percent in 2013. As a result of the slow volume growth, yield
increases have declined from 5.0 percent in 2011 down to 1.3 percent in 2013.
 Some LTL carriers are venturing into other transportation segments to grow
revenues and expand their service offering. Arkansas Best Corp. acquired
Panther Expedited in June 2012. Similarly, Saia acquired a small truckload
and brokerage services provider in July 2012. Roadrunner has successfully
diversified its portfolio by acquiring several companies in the truckload,
drayage and logistics sectors. Conversely, other LTL carriers that experienced
financial difficulties, notably YRC Worldwide and Vitran, have divested non-
core segments in order to refocus and improve LTL operations.
 Market share shifted in 2013 as the three largest carriers, FedEx Freight, YRC
Freight and Con-way, lost business to smaller competitors (Figure 46). The
top three companies saw their combined market share decline from 36.3
percent in 2012 to 35.5 percent in 2013. Conversely, ODFL saw the largest
market share gain during the year, growing from 6.1 percent of total market
revenue in 2012 to 6.4 percent in 2013.
Figure 46: Top 10 LTL Carrier Market Share: 2012 – 2013
FedEx Freight
15.5%
YRC Freight
9.5%
YRC Regional
5.2%
Con-way
10.5%
UPS Freight
7.6%
ODFL
6.4%
Estes
5.6%
ABF
5.2%
R+L
3.9%
Saia
3.5%
Others
27.1%
FedEx Freight
15.7%
YRC Freight
10.0%
YRC Regional
5.1%
Con-way
10.6%
UPS Freight
7.4%
ODFL
6.1%
Estes
5.5%
ABF
5.2%
R+L
3.9%
Saia
3.4%
Others
27.1%
Source: Company reports,
3. Key Issues and Developments at Major LTL Carriers
 FedEx Freight:
- After making progress on improving its operating ratio in 2011 and 2012, the
company reversed its direction in 2013 as its operating ratio worsened by 0.7
percent during the year. The company made solid progress during FY 3Q’14
as it reported an operating margin of 2.2 percent, which was better than near
breakeven margins in FY 3Q’12 and FY 3Q’13 despite worse than normal
winter weather.
- FedEx Freight has the fastest nationwide LTL network through its Priority
service offering. Our research shows that FedEx Freight Priority is faster than
all other carriers in 37,000 or 11.3 percent of the 327,184 major lanes
analyzed and is one of the fastest carriers in 92.7 percent of lanes. The second
2012 2013

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