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Stifel Nicolaus Conference Call: Intermodal Growth Peaking -- For Now

November 3, 2008

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The conversion of domestic freight traffic from on-highway to domestic intermodal may have already peaked, but intermodal may begin to experience its full potential after the economy recovers.
That's the conclusion of a conference call hosted last week by Stifel Nicolaus with Larry Gross, a well-known analyst of intermodal data.

Gross reported that intermodal market share seems to have settled in at 12 percent to 13 percent of the overall long-haul dry van freight market. Intermodal volumes began a precipitous decline in the third quarter of 2006, and year-over-year volume comparisons have been consistently negative since the second quarter of 2007. Intermodal traffic is down 1.6 percent year-to-date through September; a 4.7 percent growth in domestic volume has not been able to offset a 5.5 percent volume decline in international traffic.

"It is our belief that intermodal may begin to experience its full potential sometime over the next nine to 18 months," wrote Stifel Nicolaus' transportation analysts in a follow-up analysis of the conference call. "Given the substantial amount of trucking capacity exiting the industry (reducing supply), the fiscal and monetary policy stimuli at work within the economy (could ultimately improve freight volumes), and many corporations' implementation of long-term sustainability plans, we are expecting intermodal growth to resume sometime in late 2009 or in 2010."

In the near future, however, international intermodal movements related to imports are expected to remain weak, containerized exports are expected to lose momentum, and truck-to rail conversion is expected to slow.

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