Serving North America

1
gt gt gt
Serving North America
Dedicated
Expedited-Teams
Intermodal
One-Way Van
Brokerage
Bulk
Specialized
2
The View from 30,000 feet

• Impact on overall capacity, safety and pricing

3
Hours of Service implications will have a far
reaching impact on the supply chain

• Service
• Capacity
• Stop off Loads
• Inbound Run Materials Loads
• Border Crossing
• Order Cycle Time
• Yard Management

These impacts must be considered in the context
of the current state of the industry.

• High level of bankruptcies Industry
  Consolidation
• Escalating equipment costs
• Skyrocketing insurance
• Increasing rates
• Slower growth
• New cost pressures
• Driver wages

4
If the supply chain becomes no more efficient,
the Hours of Service regulations are estimated to
reduce productivity by 4.5.

• Impact could vary from 0 20
• 90,000 additional units of capacity would be
  necessary to offset the loss in productivity.
• The largest industry expansion was in 1993 where
  100,000 units were added.
• 2004 industry expansion is expected to require an
  additional 60,000 units to meet shippers needs.

5
2002 Bankruptcies More Carriers Failed

• Bankruptcies at record highs

Source A.G. Edwards estimates and Dun
Bradstreet May. 03
6
Owner Operator Population
7
Industry ConsolidationThe Big Get Bigger The
Smaller Leave
8
Near Term Forecast Demand Outstrips Capacity

• Morgan Stanley Freight Index shows 2003 trend of
  demand vs. capacity increasing
• 2002 summer peak due to port strike threat
• 2003 likely to exceed previous six years

Paul Schneider / Woody Richardson monthly
Source Morgan Stanley, Updated November 18, 2003
9
Slowed Growth

• Top 16 public companies
• 3.6 growth for 2003
• 11.9 growth for 96-97
• similar economic climate

Tractor Growth 16 Largest Public TL Companies
3.6 YOY Increase
11.9 YOY Increase
Source BBT Capital Markets
10
Capacity Landscape

• Will be tight as a result of industry
  contraction.
• HOS rules changes will amplify the impact.
• Shippers, consignees and carriers will need to
  collaborate to mitigate lost productivity.

11
The HOS rules change are intended to increase
road safety and provide CMV drivers more
opportunity for restorative sleep.

• Drivers have traditionally been the buffer for
  inefficiencies in the supply chain.
• DOT has targeted a reduction of 75 fatigue
  related fatalities per year.

12
Risk and insurance cost pressures will drive the
next set of carrier failures
The industry has become more safety conscious,
but awards have continued to rise

• 130 increase in wrongful death verdicts
  (1994-2000)
• In 2001, 200 juries awarded more than 10m per
  case
• Vehicular accidents account for 35 of all
  wrongful death suits

Accidents with Fatalities/m miles
Average Award USm
Source Marsh and Schneider National Inc.
¹ Based on Employment Policy Foundation lifetime
projected earnings
13
Insurance - Truckload
Carrier Current Deductible Change in
Deductible Example 1 2 million on primary
coverage 2 million (3/03-3/04) 2 million
excess 1 million (11/02-3/03) 500K CO2
(Mar-Nov) 250K CO1-CO2 12,500 in
2000 Example 2 2 million 2 million (starting
4/04) 500K prior Example 3 1.5 million 1.5
million current 100K over past 5 years Example
4 2 million 2 million CO3 1.75 million
CO2 500K CO1 100K in late 90s Example 5 1
million Raised to 1 million in CO3 CO2
250K Example 6 500K Unchanged in past 5
years Self insured a portion of the first few
claims between 500K-3M Example 7 500K 500K
currently 1 million to 3 million 250K prior
to 9/02 3,000 prior to 9/01
14
Logistics as a Percent of GDP...
Source U.S. Department of Commerce
15
Schneider Average Truckload Price vs. Consumer
Price Index
16
Driver Wages will Come Under Pressure to Increase

• Announced increase in driver wages
• Morgan Stanley predicts tightening driver
  recruitment market . . . 2004

Source Morgan Stanley, Air Freight and Surface
Transportation February 21, 2003
17
Driver Market Analyst Reports Indicate Truckload
Carriers Will Experience Cost Pressure in Driver
Pay During 2004
Trucking Fundamentals Improving Except Driver Pay
If a carriers model reveals significant driver
recruiting requirements, we believe that they
should take action now to position their
companies to retain current drivers and
compete for new drivers in (a) new environment.
A new environment that is likely to look much
more like the driver shortage period of 1995-1999
than the last three years. Carriers who wait
run the risk of failing to meet their new driver
quotas and losing significant numbers of
existing drivers to more aggressive
competitors before they can react. Gordon
Klemp National Survey of Driver Wages
Source Morgan Stanley
18
Government Regulations Increasing Engine Costs
Total Cost of 02 and 07 Engines
84
0.7
(NOx Only)
0.6
1990
1988
hr
0.5
g/hp
0.4
0.3
1991
Particulate
0.2
0.1
1998
1994
2004
2007
0.01
2002/04
0.0
0.20
1.2
10.7
0.0
2.0
4.0
6.0
8.0
10.0
2010
19
Fuel Volatility 2nd Largest Cost Tough to
Predict

• Fuel still hard to predict
• Lower prices a temporary relief
• Rising price pressures
• OPEC controls
• Stronger economy
• Middle East unrest

Trucking Failures vs. Average National Diesel
Fuel Prices (/gal)
Note Only includes fleets with five trucks or
more. Source A.G. Edwards, US Department of
Energy, and American Trucking Associates, Inc.
20
Industry Analysts Are Suggesting Rates Could
Rise Like Never Before
Rates are poised to rise 3-4 annually in
2003-2004 after rising about 1.2 in 2002.
BBT Loaded Rate/Mile Index
Source Company reports and BBT Capital Markets
estimates. Data excludes fuel surcharges.
BBT Capital Markets
Source Ed Wolfe, Bears Stearns 04-29-03
21
Hours of Service Cost Impact SummaryCost
Minimization Solutions

• Schneider National actions
• Re-engineered dispatching process to eliminate
  delays between loads
• Streamlined maintenance procedures to minimize
  downtime
• Updating customer profiles to include open hours,
  directions and facilities
• Investment in trailer tracking to minimize delays
  in finding empty trailers
• Customer actions
• Reduce driver/tractor detention at loading and
  unloading
• Reduce multiple stop pickups and/or deliveries
• Reduced number or time of driver loading and
  unloading
• More efficient delivery appointments or trailer
  drops