Good morning and welcome to Landstar System, Incorporated Second Quarter 2016 Earnings Release Conference Call. All lines will be in listen-only mode until the formal question-and answer-session. Today's call is being recorded. If you have any objections, you may disconnect at this time. Joining us today from Landstar are Mr. Jim Gattoni, President and CEO; Mr. Kevin Stout, Vice President and CFO; Mr. Pat O'Malley, Vice President and Chief Commercial and Marketing Officer; Mr. Joe Beacom, Vice President and Chief Safety and Operations Officer. Now I would like to turn the call over to Mr. Jim Gattoni. Sir, you may begin.

Thank you, Olive. Good morning and welcome to Landstar's 2016 second quarter earnings conference call. This conference call will be limited to one hour. Due to a high level of participation on these calls, I am requesting that each participant have a two-question limit. Time permitting, we can circle back for additional questions. But before we begin, let me read the following statement. The following is a Safe Harbor statement under the Private Securities Litigation Reform Act of 1995. Statements made during this conference call that are not based on historical facts are forward-looking statements. During this conference call, we may make statements that contain forward-looking information that relates to Landstar's business objectives, plans, strategies and expectations. Such information is, by nature, subject to uncertainties and risks, including but not limited to the operational, financial and legal risks detailed in Landstar's Form 10-K for the 2015 fiscal year described in the section risk factors and other SEC filings from time to time. These risks and uncertainties could cause results or events to differ materially from historical results or those anticipated. Investors should not place undue reliance on such forward-looking information, and Landstar undertakes no obligation to publicly update or revise any forward-looking information. Industry fundamentals during the 2016 second quarter remain similar to those experienced in the 2016 first quarter with soft demand and more readily available truck capacity. Those freight conditions, along with the lower diesel fuel prices, continued to put downward pressure on revenue per load on loads hauled via truck. Considering the softness in demand, we executed relatively well during the quarter. In this low-growth environment, we increased a number of loads hauled via truck during the 2016 second quarter over the prior year when excluding loads related to a now completed special project for an automotive…

Thanks, Jim. Jim has covered certain information on our 2016 second quarter, so I will cover various other financial information included in the press release. Gross profit, defined as revenue less the cost of purchase transportation and commissions to agents, decreased 7% to $121 million and represented 15.6% of revenue in the 2016 second quarter compared to $131 million or 15.1% of revenue in 2015. The cost of purchase transportation was 76% of revenue in the 2016 quarter versus 76.9% in 2015. The rate paid to truck brokerage carriers in the 2016 second quarter was 100 basis points lower than the rate paid in the 2015 second quarter. The decrease in the cost of purchase transportation was mostly due to the effect lower diesel fuel costs have on revenue and the cost of purchase transportation on freight hauled via truck brokerage carriers and more readily available capacity. Commissions to agents as a percentage of revenue were 30 basis points higher in the 2016 quarter as compared to 2015 due to an increased net revenue margin, revenue less the cost of purchase transportation on loads hauled by truck brokerage carriers. Other operating costs were $6.6 million in the 2016 second quarter compared to $8 million in 2015. This decrease was primarily due to increased gains on the sale of used trailing equipment and decreased trailer rental costs. The company has increased its company-controlled trailer fleet to 10,985 trailers, an 11% increase over prior year, as the number of BCOs hauling Landstar trailing equipment has increased with the increased demand for drop-and-hook services. Insurance and claims costs were $16.1 million in the 2016 second quarter compared to $12.3 million in 2015. Total insurance and claims costs for the 2016 quarter were 4.3% of BCO revenue compared to 3.1% in 2015. The increase…

Thanks, Kevin. I expect the current freight environment to continue throughout the third quarter. Although we have experienced a normal seasonal uptick in pricing into the first few weeks of July, I expect revenue per load on loads hauled via truck in the 2016 third quarter to be lower than the 2015 third quarter in a mid single-digit percentage range. Excluding the 20,000 loads related to the completed automotive project from the 2015 third quarter, I expect the number of loads hauled via truck in the 2016 third quarter to increase over the prior-year third quarter in a low single-digit percentage range. Based on the continuation of recent revenue trends, I currently anticipate 2016 third quarter revenue to be similar to the revenue in the 2016 second quarter. In comparing the 2016 third quarter diluted earnings per share guidance with the third quarter of 2015, the 2015 third quarter included approximately $0.07 in diluted earnings per share attributable to the projects for the automotive customer. Based on the range of revenue estimate and assuming insurance and claim costs are approximately 3.2% of BCO revenue, we anticipate 2016 third quarter diluted earnings per share to be in a range of $0.79 to $0.84. The first half of 2016 experienced a soft operating environment. With that said, however, the model performed well in the current low-growth environment. We continue to add agents and capacity to the network and are well-positioned when the market improves. With that, Olive, we will open to questions.

Thank you very much, sir. At this time, we will begin the question-and-answer session. Our first question comes from Rob Salmon of Deutsche Bank. Your line is open.

Hey, good morning and thanks for taking the question. Jim, in your prepared remarks, you had mentioned – could you just repeat what the new agent revenue contribution was in the second quarter and what does the pipeline look like and what are you guys contemplating as we look out to the third quarter with regards to new agent revenue?

Rob, this is Pat. The new agent revenue in the quarter was $31 million. And as we've stated in previous conference calls, we feel very good about the current pipeline of agent prospects. And I can't give you an estimate on what the revenue will be in the quarter, but to answer your question, we feel very comfortable about where we're at on the new agent revenue.

Got it. And then with regard to the capacity side of the equation, could you talk a little bit more about what you're seeing? It sounds like the sequential decline in independent contractors, your BCOs, that was entirely related to just people basically kind of moving to the sidelines in the weaker revenue per load environment, but we're also seeing kind of an uptick in terms of broker carriers. What do those new broker carriers look like who are coming on at Landstar platform as well?

Yeah, Rob, Joe Beacom here. The decline in the BCO count is kind of, as we've stated, mostly attributable to just the loading environment. We're seeing an increased number of adds but also an increased number of terminations, and so you saw the slight decline in the quarter. And the carrier count growth, as you would think about it, more carriers looking for better loading opportunities coming to Landstar. So, that's where you see the carrier count growing and the active carrier count growing and then the BCO count just slid just slightly in the quarter.

Got it. Appreciate the color.

Yes.

Thank you. Our next question comes from Alex Vecchio of Morgan Stanley. Your line is open.

Good morning. Alexander Vecchio - Morgan Stanley & Co. LLC: Hey, there. Hey, Jim. Good morning. Thanks for taking the questions. I just wanted to follow up again on the BCO count. Jim, I think on the last quarter call, you mentioned you had expected that to grow your BCOs for the full year in 2016, albeit to a lesser extent relative to 2015. Just considering how the market backdrop is still remaining relatively soft, is that still the right way to think about it, or maybe at this point, it's fair to think about that BCO count maybe even decline in the next few quarters as well? How should we sort of think about that?

Hey, Alex, this is Joe. I think kind of what we said on the environment, it's going to be kind of more of the same. I think you're going to see kind of a flattish look to our BCO count as far out as we can see into the third quarter. There's really nothing that I can point to that would significantly change that at this point. Alexander Vecchio - Morgan Stanley & Co. LLC: Okay. And then just as a follow-up on the insurance side, the last two quarters, insurance has been a bit higher than the historical trend. I think it's been roughly call it 4% and change of BCO revenues. Is there any – I realize you're guiding to 3 points going back to long-term averaging 3.2, but is there sort of risk to that number? And how should we sort of think about that longer term, just considering kind of some of the trends we've seen the last two quarters?

There's always risk to that 3.2%. And the reason we use the 3.2% is because – and over a longer term, because we do believe that over the longer term, we'll hold it at 3.2%. As you know, we're self-insured up to $5 million per occurrence. And unfortunately, this year, we've had two events that we would think that kind of blew up each quarter. So I would say that the 3.2% holds, and we'll continue to use that. I wouldn't say this is an unusual. It's just very – it's unpredictable of when you're going to have a severe accident and the cause of that accident. And as you know what we do is when we have an accident, we are quick to put up a provision if we find that there's one necessary. So that's really how the two quarters have worked out. When you're self-insured up to $5 million per occurrence, you have this volatility in that line item, but I don't think the fundamentals of that insurance and claims line has changed much about the accidents and how we handle them. What I will say, though, is we did just renew what we refer to as our policy over our $5 million. And that environment, that market is getting very tight and very – I won't say very costly, but the increase in the premiums that we're paying there are probably up 15%, 20% over prior year. That will drive that line up a little bit I'm talking maybe $1 million over the – year over year starting May 1. But from an accident standpoint, as I said, it's highly unpredictable, but I don't think the conditions have changed. I think it's just the fact that we are subject to $5 million per loss and we just had two that the fact patterns aren't favorable. Alexander Vecchio - Morgan Stanley & Co. LLC: Yeah. No, I realized – is there anything you can do from your end to kind of reduce the risk of that? I've realized it is unpredictable and accidents happen. But is there any sort of company-specific initiative that you can take to kind of reduce that risk of the accidents over the next few quarters or is it kind of just at the whim (21:52) of the market?

I think we have some of the strongest safety programs in the industry. I mean, we've been running safety Thursday calls to remind everybody about safety, and we actually have one today, since 1993, right? Ad we do all sorts of programs. I don't know how many Landstar safety officer meetings we have every year, but it seems like they're almost every week, where BCOs participate and we're constantly pushing that safety message. But as you said, accidents are accidents. Sometimes, they're unavoidable and even those can kind of flip on us. But we do everything we can to be safe. We pride ourselves on being a safety-first company, and we do have a rather large safety department to make sure that we are safe. So we are constantly working on programs to avoid the situations that we get into but, again, like they're unpredictable. Alexander Vecchio - Morgan Stanley & Co. LLC: Got it. Makes sense. Okay. Thanks very much for the time.

Yes.

Thank you. Our next question comes from Jack Atkins of Stephens. Your line is open.

Hey, guys, good morning. Thank you for the time.

Hey.

So, Jim, I guess, first off, when you think about – and I guess, Kevin, maybe this is a question for you as well, but the decreased comp, incentive comp accruals in the second quarter, can you maybe walk us through what those would have looked like on a more normalized basis as we kind of think about how the comps go into next year, I guess? I'm just trying to normalize that out as we look forward for the insurance issues.

Hey, Jack, this is Kevin. If you're modeling the incentive comp, the best way to look at is about $2 million per quarter. If we hit right on our targets, it's going to be about $8 million for the full year. So that's how I would model that.

Okay, got you. So it's $8 million a year, $2 million a quarter roughly, and so for the last two quarters, you've accrued essentially zero. Is that the right way to think about it?

Close to that, right. We have some programs that pay out that aren't based on the EPS and the operating income but, yeah, basically, it's close to zero.

Okay. Okay, great. And then...

We are not expecting anything in the third quarter, either...

Okay, okay. That's helpful. And then just as a follow-up. When we think about demand for wind power products, I know that in the past, that's been a decent source of incremental business for you guys at times. I think we're seeing some orders being placed here and there for some larger wind power projects. Could you maybe give us an outlook for how you see that portion of the business trending over the course of the next several quarters? Do you see some opportunities there that could provide a little – a boost on that piece of the business?

Jack, this is Pat. And given the site preparation and the complexity of these moves, we generally have a fairly good line of sight into the traffic opportunities in that segment, and we don't see any really big modifications to what we've experienced so far this year.

Okay. Okay, Pat. Thanks very much for the time.

You're welcome.

Thank you. Our next question comes from Jason Seidl of Cowen. Your line is open. Matthew Frankel - Cowen & Co. LLC: Hey, good morning, guys. It's actually Matt Frankel on for Jason.

Hey, Matt. Matthew Frankel - Cowen & Co. LLC: Hey, a couple of questions for you. One, just bigger picture, if I'm not mistaken, I believe the IT project is well underway at this point in terms of – or just the beginning of the rollout should have started or is about to start. I was wondering if you can just give an update on that project. I know it's going to be a big part of recruiting and hopefully will be operational and will help you guys improve over the long term. But if you could comment on that, I would appreciate it.

Yeah, we're kind of moving along on it. We have one agent on it right now, and we are still working on integrations between the new system and our core systems. We're hoping we complete all those integrations by the end of the year and start launch next year. We are probably a couple of months behind schedule, but it is moving along nicely, as a matter of fact, and I think we're getting a lot of favorable inputs from some of our focus group agents. So we're still looking forward to a launch. It's looking now probably beginning of the year. One of the things we do is we generally don't launch new technologies in the fourth quarter from an internal control perspective. So if we don't launch it prior to the end of September, and we don't think we're going to hit that, we're going to have to launch it sometime January. Matthew Frankel - Cowen & Co. LLC: Okay. And what's your expectation on the pace of that rollout?

It will be rather slow because, as you know, we're very decentralized, and every independent agent we have out there kind of does their own – they work and use their own methods to dispatch, take orders and then dispatch trucks. So, at the beginning, it's going to be pretty slow as we roll out two or three agents at a time. And as we build momentum, then we can take more on. But it's going to be a slow, progressive – a slow process. And rollout, I would guess, is going to take two years to three years to hit every agent. Matthew Frankel - Cowen & Co. LLC: Understood. Thanks, guys. And one last thing here. Just trying to get a better understanding of the capacity in the marketplace. You guys have been talking about a bit of oversupply in the flatbed market for some time now. Some of that may be due to some guys coming from the energy – the oilfields into driving now. I'm curious with fuel prices picking up, we've heard of some oil projects or nat gas specifically projects having picked up recently with what pricing has done in that market. Can you talk about your expectation for capacity over the next, call it, six months or so?

Matt, this is Joe. I'm not aware of any natural gas related projects that we're aware of that are out on the horizon for us that are going to move the needle in the platform capacity area. Matthew Frankel - Cowen & Co. LLC: I didn't mean you specifically. I just mean broader in the marketplace in terms of drivers potentially going back into the oilfields, going back into that work, potentially having capacity squeezed a little bit from where it is today?

If it's happening, we haven't been able to detect it. I hope you're right, but at this point, the softness there continues. Matthew Frankel - Cowen & Co. LLC: Okay. Thanks, Joe.

Thank you. Our next question comes from Scott Neuberger of Oppenheimer. Your line is open. Daniel Hultberg - Oppenheimer & Co., Inc. (Broker): Hi, guys. It's Daniel in for Scott. Can you just discuss how flatbed trended month by month, excluding the auto contract year-over-year in the quarter? What your expectations are for the back half, as well as if you can discuss how your conversations are going with your industrial customers and can you get us a feel for the outlook as we look out a couple of quarters?

This is Kevin. I can give you the month-to-month changes without the automotive contract from last year. The volumes were positive 2%, flat in May and then positive 3% in June.

Daniel, this is Pat. We really haven't had much change from the industrial base in terms of their expectations for the third quarter. As Jim said, we think it's going to be kind of like seasonally consistent and, to quote Joe, more of the same. Daniel Hultberg - Oppenheimer & Co., Inc. (Broker): Thanks, guys.

Thank you. Our next question comes from Matt Brooklier of Longbow Research. Your line is open.

Hey, thanks. Good morning. First question, the decline in truck brokerage volume during second quarter, can you provide a little bit more color in terms of what drove that? Was it just a function of a weaker market? Was there potentially any customer losses, sales agents' losses? Just trying to get a sense for the step down.

Well, overall, probably about 50% of that automotive project was on brokers. So you're talking 6,000 or 7,000 loads there. And it's really just the environment. I mean, what tends to happen is you see more stability in the BCO loadings as we have 9,500 BCOs. They're generally going to haul 1.8 loads per week regardless of the environment. And then if it's soft, what you see is you see a little softness on the broker truck side.

Okay. So outside of a softer environment and just the comp from a year ago...

The only specific that I know of is that automotive project. Other than that, it's no specific industry, no specific customer. It's just a general softness and just the little bit of demand that's out there.

And it's a similar breakout in terms of the percentage of auto volume in the upcoming quarter, i.e., like 50% of that with truck brokers and 50% of it was with your BCOs, roughly.

Brokers actually slowed down a little bit as a percent, but it might have dropped to 40% to 45% in the back half, but it's still...

Close to half.

It's close to half.

Well, I guess, my question – I was trying to clarify the amount of loads that you hauled for auto, that auto contract last year, how much of that was with BCOs and how much of that was with truck brokers?

Yeah, it was about 45%. It was still close to about half.

Okay. And then can you talk to – you mentioned that your truck brokerage net revenue margin expanded by 60 basis points during 2Q. Do you have the month-by-month breakout on that?

I do not.

Yeah, we don't.

If you call me, I can get that. I just don't have them right at my fingertip.

Okay, I can follow up. Thank you.

Yeah.

Thank you. Our next question comes from Todd Fowler of KeyBanc Capital Markets. Your line is open.

Great. Thanks. Good morning.

Hey.

Jim, with the third quarter guidance expecting revenue to be somewhat similar, when I try and normalize for the insurance but also thinking about the Agent Convention cost in the second quarter not reoccurring in the third quarter, it feels like maybe that there's something else on the cost side or something sequentially into the third quarter that the guidance should be a little bit higher. Is it something with equipment gains or is there something else in the third quarter from the cost side that's coming in as to why the EPS guidance wouldn't be a little bit higher, given the insurance and the agent costs in the second quarter?

Well, we have the Agent Convention in the second quarter, but we do a BCO All-Star event in the third quarter. So, from an SG&A standpoint, the – look, the agent's a little more money than the BCO event because there's more people there but it's – those kind awash so that – on an SG&A standpoint, you're looking at similar.

Okay. That helps. And then on the brokerage gross margins, your comments about expecting brokerage gross margins in the third quarter to show a similar sort of year-over-year increase that's 60 basis points as what you saw in the second quarter, help me think about if the spot market is a little bit more seasonal than what we saw in the second quarter, at least that's your expectation for the third quarter, how do you maintain those gross margins, you had gross margin expansion with what you saw in the second quarter? Just how does that kind of work with a more seasonal spot market into the third quarter?

Well, I think you just look at the comps, right? I think what we're saying is, seasonally, the gross profit expansion we expect the third quarter to look like the second quarter. So it's really, if there's a seasonal – I don't think we saw anything unusual seasonally in last year's third quarter when it comes to the PT rates, and I think we're just going to be consistent with that as we flow into this third quarter. So, seasonally, I thought the PT rates looked consistent with where we were last year in the second quarter. Third quarter I expect to be similar to this year. What really drove it last year was your revenue per load is really where the seasonal unusual stuff was from last year, not necessarily in what the rates were paying the capacity.

Got it. Okay. That helps. And so that just kind of fits into your view that the second half looks a little bit like the first half, no big change in kind of the capacity environment and getting back to kind of more of a normal environment just from the trend standpoint month-over-month or sequentially into the third quarter.

Yes, that would be true.

Okay. Thanks a lot for the time this morning.

Yeah.

Thank you. Our next question comes from Kelly Dougherty of Macquarie. Your line is open. Kelly Dougherty - Macquarie Capital (USA), Inc.: Good morning, guys. I've got a bit of a strategic question for you. I'm just wondering if there's any way or any plans to maybe pivot the business more towards e-commerce, which is obviously a brighter spot in the economy and it just reduced the outright industrial exposure a bit. I don't know if growing the drop-and-hook business helped you do that or if there's some reason that's just not a focus for Landstar, I don't know maybe from a length of haul perspective or something like that?

Well, we don't – e-commerce, in my brain, is a lot of small package0type stuff, business to consumer, maybe some business to business. But where we play in that market is as open – as people open more and more warehousing and distribution centers, we refer to it as substitute line haul, right? So, as they're pulling truckloads of this B2C or this B2B in the small package, we do a lot of that for some of the large carriers, some of the large LTL carriers or some of those. So we play in that relatively well where we refer to the substitute line haul, we haul the truckload and we step in, especially during peak is where we jump in. But we also provide some of that services throughout the year with some of those e-commerce-type customers, whether it be – well, you know who they are. But it is a pretty good niche for us, actually. Kelly Dougherty - Macquarie Capital (USA), Inc.: Okay. But maybe not e-commerce specifically, but just any plans to kind of try to shift – I don't know if you can do it through hiring different agents or kind of in sending them a different way or pushing them to kind of shift away from the industrial exposure a bit or, I guess, do you feel that, hey, look, we've been through a pretty rough patch from an industrial perspective and, hopefully, it should get better soon so we're in a spot for when the economy starts to improve?

We're constantly looking for opportunities, whether it be the last mile or e-commerce or stuff like that. But at this point, as we're looking, we don't see opportunities for us to jump in at this point. We do a little bit of all of it, right? But most of it – we are moving us off of that 80% to 90% reliance on industrial base – that through the agent model, we haven't had an opportunity to jump in there, but we're constantly keeping an eye on it. But am I looking at something that relates specifically to e-commerce at this point? No. Kelly Dougherty - Macquarie Capital (USA), Inc.: Okay, great. Fair enough. And then just a quick one on CapEx. So it looks like it was up pretty meaningfully from the first quarter to the second quarter and also versus the first half last year. I assume that's the trailer investment and maybe you could help us just think about what your CapEx plans are for the year, how that rolls into depreciation, and then how you can decide between cash CapEx and then what you do through the leases.

Yeah. We basically finance all of our trailer purchases through capital leases, and that actually doesn't show up in your cash CapEx from an accounting standpoint. So when you look at our cash flow, that $18 million Kevin referred to in trailer acquisitions this year actually won't show up in the cash flow. What's in the cash flow this year is we are building a facility in Laredo, Texas, to improve our cross-border Mexican business and business operations where for the first time in – we have a little cross-dock operation down there now, but it can handle about one truck at a time. We're building a Laredo facility that's got 30 doors, and that should be ready by the end of December. That's what's in the cash CapEx, the land purchase and the beginning of that project. We're expecting $20 million, $25 million for that project this year to hit our cash flow. But going forward, that's our significant cash outflow, that and IT equipment. And other than that, we finance our trailers through capital leases. And, Kevin, do you know how many more capital leases we're going to add this year? $30 million?

$30 million.

Yeah, I would guess that we're trying to add about another $30 million of capital leases this year in addition to the $18 million for trailering equipment. And there's a little bit of back order and waiting on trailers to come in, so I'm not sure we're going to hit that. Kelly Dougherty - Macquarie Capital (USA), Inc.: Okay, great. So then the CapEx would kind of go back to a more normal level – the cash CapEx, more normal level next year?

Next year. Kelly Dougherty - Macquarie Capital (USA), Inc.: Okay, great. Thanks very much.

Kelly, that's about $5 million to $6 million, $7 million annually. Kelly Dougherty - Macquarie Capital (USA), Inc.: Yeah, that's kind of what I was thinking. And then all of a sudden, it was $9 million. I just wanted to make sure we were thinking about it correctly.

Yes. Kelly Dougherty - Macquarie Capital (USA), Inc.: Thanks, guys.

Thank you. Our next question comes from Scott Group of Wolfe Research. Your line is open.

Hey, thanks. Morning, guys. So, I think I heard the monthly flatbed volumes, I don't think I heard dry van. Can you give those? And just while we're just talking about volume, Jim, you seem to be saying that a lot of this is just normal kind of seasonality pick-up in June. Why do you think this is just seasonality and not more of a true inflection?

Because I don't want to commit to saying it's more than that in the short period of time we're dealing with, honestly. I mean, that's the fact of it. And what we're seeing, when I say it's normal seasonality, because I have about 10 years of data that I look at based on our trends, and the growth rate from May to June and June to July is, excluding last year which was an anomaly, is consistent with what I've seen, right? So, for example, if revenue per load from June to July historically went up 2% and I'm looking at 4%, I would say, hey, there's some industry stuff in there, the fundamentals are getting better, but that's not what I'm seeing. I'm seeing the normal seasonality.

Okay. And then do you have the monthly dry van volumes?

Yes. Those were, from April to June, positive 1%, negative 1%, positive 1%.

And July is?

It's running in the low single digits.

Up or down?

Up.

Okay. The IT rollout, what's the – I think you had been saying $0.05 to $0.10. What's the number now that you're seeing for this year and do you have a view on next year?

I'm expecting it to be more of the $0.10. And at this point, although we haven't prepared our 2017 plan yet, I would expect at this point that it's going to be similar to that higher end of the $0.10.

Okay. And then just last quick question. Are you hearing anything from the agents where they're telling you, customer want more truckers – want more of the trucks to have ELDs now or anything from the customer that says they care about ELDs yet?

Scott, this is Joe. No to that question. We really haven't heard much from our customer base that they're that interested or requiring it or mandating it or anything like that. To this point, I think – we try to get ahead of it and tell them about the rule and when it's effective and how we'll get there within the BCO fleet. But to this point, there's really been no pressure from customers to meet any artificial deadline in advance of December of next year.

Okay. All right. Thank you, guys.

Yes.

Thank you. Our next question comes from John Larkin of Stifel. Your line is open. John Larkin - Stifel, Nicolaus & Co., Inc.: Yes, good morning, gentlemen. Thanks for taking the question.

Hey, John. John Larkin - Stifel, Nicolaus & Co., Inc.: I had a question on the $18 million of leases, I think, that you entered into which, I guess, presumably is for incremental dry van equipment. Is that correct?

It's mostly replacement as opposed to incremental. We're getting rid of some 2007s and...

2008s.

...2008 trailers. But there is some additional – we might be adding about 300 to 500 this year, but it's mostly just replacing the old – swapping out the old fleet. And actually, what we're doing, some of those old trailers are heading down to Laredo for some cross-border work. John Larkin - Stifel, Nicolaus & Co., Inc.: So the $30 million or so of incremental capital leases will mostly be replacement, maybe 300 to 500 incremental. Is that the way to think about it?

The other thing I didn't say, which is what we're also doing, if you look at last year's other operating cost included a bunch of short-term rentals as we reacted to market conditions and we didn't have the assets. So there's a little bit of short-term rental costs coming down. So we are adding some trailers to replace those short-term rentals. And to tell you the truth, John, I don't have the number, so maybe we are down a little bit but more than 500 to replace some of the rentals that we had in the system. But it's not us growing the fleet, it's shifting it from short-term rentals to owned. John Larkin - Stifel, Nicolaus & Co., Inc.: During the Analyst Day, you talked a lot about how the demand for drop-and-hook style dry van business was really a growth driver, and I guess I was surprised to see that that only grew, if I read the press release correctly, at about 1% in the second quarter...

I think I commented that it was – yeah, I think I commented that the demand for our trailers, the revenue there grew 6%. John Larkin - Stifel, Nicolaus & Co., Inc.: Oh, okay. So that's growing nicely and you expect that to continue even though the overall market is soft?

Yes. John Larkin - Stifel, Nicolaus & Co., Inc.: Okay. And then just on the insurance side, and I know this is kind of a perennial question and really probably one for actuaries more so than we normal humans. But in a world where the cost of insurance is rising, where settlements and severe accidents seem to be rising at a pretty astronomical clip, there seems to be no talk of tort reform or anything like that in the presidential campaign. At what point does it make sense to maybe reconsider the $5 million self-insured retention to maybe bring that down to create a little less volatility in the earnings stream as a result of severe accidents?

To be honest with you, John, that – below the $5 million is getting so expensive, the cost benefit isn't there. We have this – it creates so much volatility in our line. I'm sure the uncertainty in our insurance line, I'm sure it creates a little concern for some of the analysts and investors. But from a financial standpoint over a period of time – we look at it over a period of time. And when we look at it now, to insure – to drop our insurance coverage, so we're only $1 million exposed, the cost there wouldn't be worth the benefit we'd get from occasionally having an accident, but over time, you can see that we're better off self-insuring to $5 million strictly from a financial perspective. From a volatility perspective, clearly, we'd be better off insuring up to the – over the first $1 million, but I think economically and financially, that doesn't make sense. And if we hold to this 3.2% and we kind of get back to a normalized percentage of BCO revenue, then that's where we want to be. We've been self-insured to $5 million since maybe 2001 or 2004, I forget where we did that. John Larkin - Stifel, Nicolaus & Co., Inc.: It's down from $10 million (44:27).

It's built in – that volatility has been built in over the years. John Larkin - Stifel, Nicolaus & Co., Inc.: Got it. And then just maybe just a real quick one on the share repurchase activity. It looked like in the first quarter that the pace was pretty high early in the quarter then it slowed. But then, overall, the pace of share repurchase in the second quarter looked faster than the overall pace in the first quarter, even though the share price was, call it, order of magnitude $10 higher on average. Normally, you would expect an opportunistic share repurchaser to maybe slow things down as the price recovered. Was there something in there that I was not seeing in the press release that caused you to behave a little differently than we normally might expect you to?

I think the variance between the first quarter and second quarter is only 70,000 shares. So you could see that we're clearly behind last year's pace, right? So if you compare to last year, we were a little bit more aggressive last year. And toward the end of the quarter, we did slow it down because, as you could see, the stock price climbed and, generally, we wait for it to settle into a range and we were comfortable with where it settled during the first half of the second quarter. And then it kept climbing, so we pulled back. But that's kind of how the quarter rolled out. And the price in the second quarter was a little higher than the price in the first quarter. But again, like I said, we wait for it to settle into a range. We were comfortable with the range and that's where we were. John Larkin - Stifel, Nicolaus & Co., Inc.: Got it. Thanks very much for answering the questions.

All right, John.

Thank you. Our next question comes from Thom Albrecht of BB&T. Your line is open.

Hey, Thom. Thomas Stephen Albrecht - BB&T Capital Markets: Hey, guys. I think one of the things that is intriguing to me is the growth in the refrigerated fleet. Could you run through those numbers again, the size of the trailer fleet there and what kind of growth you had?

Anything we do on the refrigerated is mostly brokerage. I don't think we talked about refrigerated, did we? Thomas Stephen Albrecht - BB&T Capital Markets: I thought Kevin gave a refrigerated trailer number?

No, no, I don't think so. Thomas Stephen Albrecht - BB&T Capital Markets: Okay.

That's the total trailers, the 11,000, that's our total trailers. Thomas Stephen Albrecht - BB&T Capital Markets: Right, right. Okay. I thought you had mentioned within that a growth component of reefer trailers but I might have misunderstood you...

We talked about the drop-and-hook growth, the 6%, which is just – those are just normal van trailers. Thomas Stephen Albrecht - BB&T Capital Markets: Right.

Mostly. Thomas Stephen Albrecht - BB&T Capital Markets: And my second question also relates to – I just want to clarify something I heard. I think, Jim, you were talking about the revenue per load changed from June to July. Initially, I thought I heard that it was down versus the prior eight years, but then you ended up giving some numbers that the range has been plus 1.1% to 4.3%, and you're right in the middle of that. So you're saying that the revenue per load in July has increased from June. Is that correct?

Yeah, Thom, the down was last year. I think my comment was that the – for the first time and I go back to probably 2007, we hadn't had a decrease in revenue per load from June to July, and the only time it happened was last year in 2015. This year we're seeing that normal seasonal uptick within that 1.1% to 4.3% range from June to July. That's what it was. So there was a down but it was last year. It wasn't this year. Thomas Stephen Albrecht - BB&T Capital Markets: Okay, I appreciate that. And then even though the sequential drop in BCO trucks was modest, I think it was about 35 units, I mean, do you get a sense at the corporate headquarters, what happens to those individuals? Do they just park trucks? Are you aware of personal bankruptcy filings? I mean, just any color that you might have because we're all trying to figure out what's temporarily going to the sidelines versus what might be more of a permanent impact to capacity, not just at your organization, but across the industry.

Yeah, Thom, this is Joe. I think it's truly – to the extent that we have visibility into it, it's a mixed bag. I mean, you have some BCOs that will retire. You have some that choose to go and lease to their truck to somebody to stay closer to home and get something a little bit more predictable. You have others that they've paid off their truck. They don't have a truck payment. They don't really like the environment right now, so they'll park it for some period of time until, in their view, things improve and then they'll come back. I mean, it's really a pretty good mix of all of the above. There is no one or two things. It's really a mixed bag and it depends on the individual. Thomas Stephen Albrecht - BB&T Capital Markets: Okay. Great. That's all I had. Thank you.

Thank you. Our next question comes from Ben Hartford of Robert Baird. Your line is open. Ben J. Hartford - Robert W. Baird & Co., Inc. (Broker): Hey, good morning, guys. Jim, the margins, as we look into 2017, are you still targeting 50% margins as a percent of net revenue ex-the workflow project?

I'm targeting it. Is it getting a little more difficult to hit? Absolutely. And that was – and again, we put out that 50% target four years ago or three years ago and it was before we got into this agent workflow project. So that 50% was before that, but I think with the gross profit being downward this year and that wasn't anticipated, it is clearly getting difficult. We haven't prepared our 2017 plan yet, but sitting here today, it's going to be difficult to hit that. Ben J. Hartford - Robert W. Baird & Co., Inc. (Broker): Right, understood. And then another question just about the current environment. I mean, if you guys – your truck data tends to correlate very closely with some of the PMI metrics, specifically the Chicago PMI. And I think what stands out here, what we've seen year-to-date is that sequential improvement of the PMI well above seasonal, but your description of normal seasonal trends through the quarter, which I think is consistent with what we've been hearing across the industry. Any reason why the data now seems not to hold, whereas in the past, it might have? In other words, that sequential improvement in some of these PMI readings above seasonal doesn't appear to be occurring from an underlying demand perspective. I'm just wondering if you have any perspective as to why that may be the case.

I don't have any perspective on relating that back to that PMI. Again, I think like what I said, it's been such a – I'm dealing with a 3- to 6-week period where we're seeing that seasonal uptick. And could there be some industry fundamentals in there, improvement in PMI? Yeah, but I think right now, I'm sticking with the normal seasonal patterns. Ben J. Hartford - Robert W. Baird & Co., Inc. (Broker): Sure. Okay. Thanks.

Thank you. Our next question comes from Matt Young of Morningstar. Your line is open.

Good morning, guys.

Good morning.

Quick question on the ELD front. I think last quarter you actually mentioned that you haven't seen much of a difference in the productivity when BCOs add ELDs. Just wondering you why think that might be. Would it be because your BCOs are choosing freight that doesn't run up against the hours of service rules?

Yeah, Matt, this is Joe. I think, yeah, that we had done a pretty good job, I believe, in monitoring hours of service even when it was on paper. So going to the ELDs really didn't change the game for them all that much. And they're typically not pushing up against their hourly limits as a rule. So that's the large – that's the predominant way I would look at it.

Okay. So overall, you still don't expect any impact in the year ahead when the other BCOs add ELDs?

I wouldn't think so, no. I would not think so.

Okay. And I think you talked about it but just wanted to clarify, if you think that the increased gross profit margin on broker carrier business thus far in the third quarter is more from the lower fuel dynamic or more the benefit of the lower PT rates.

We believe it's PT.

Okay. Just fuel at this point is probably abating the benefit?

Yeah, it just creates a lower denominator, right?

Yeah. You get the mathematical increase.

Yeah, Matt, the price of diesel was down about 30% in the first quarter and 20% in the second quarter. We're modeling about 6% in the third quarter.

Okay. Great. All right. Hey, thanks.

Thank you. Our next question comes from Alex Vecchio of Morgan Stanley. Your line is open. Alexander Vecchio - Morgan Stanley & Co. LLC: Hey there. Thanks for taking the follow-up. Sorry if I missed it earlier, Jim, did you mention how much you expect the IT cost expense to be in the third and fourth quarters of this year?

I did not. Alexander Vecchio - Morgan Stanley & Co. LLC: Do you mind providing us with that?

We're running about – what is it, Kevin, it's about $1 million?

$1.5 million.

It's about $1.5 million per quarter and I would think that that's kind of going to continue. Alexander Vecchio - Morgan Stanley & Co. LLC: Okay. And then how about in 2017?

Like I said, we haven't prepared our plan yet, but I would kind of stick with that $1.5 million per quarter and we'll update you later. I'm thinking it's still going to be about $0.10 next year, but we still have a lot of work to do to figure out whether that holds. So we'll update you. I'll probably have a better idea of that when I get in toward the end of the third quarter. Alexander Vecchio - Morgan Stanley & Co. LLC: Okay, but $0.10 is what we should think about for 2017 as a whole as the impact?

At this point, yes, specifically. Alexander Vecchio - Morgan Stanley & Co. LLC: Okay. And then just one more clarification. I thought I heard you guys note that July volumes were running up low single digits. A, did I hear that right? And then, B, presumably, that's excluding the impact of the auto contract?

Yes, that's excluding the impact of the auto. And we guided to – Jim's comments said that we're going to be low single digits. Alexander Vecchio - Morgan Stanley & Co. LLC: Right, for the full quarter. Right. Okay. That's all I had. Thanks very much.

Thank you. Our last question comes from Todd Fowler of KeyBanc Capital Markets. Your line is open.

Hey, Todd, you there?

Please check your mute button. Your line is open.

Jim, can you hear me?

Yes.

Okay. Sorry about that. Hey, thanks for taking the follow-up. Did you provide, and if you did not provide, could you provide what the amount of equipment gains were here in the second quarter and what you think that they'll be for the second half of the year?

They were about $1 million in the second quarter and that's what we've modeled for the third quarter. I haven't done anything on the fourth quarter yet, but it's probably less than $1 million.

We're feeling a little softness in selling into the market right now. I think the trailer market is softening up a little bit there. So that's why the fourth quarter is a little unpredictable at this point.

But your volume is going to be pretty consistent. And then this is the big trailer replacement year, so you wouldn't expect to be selling as much trailering equipment next year. Is that the right way to think about it as well?

Yes, that's true.

That's correct.

Okay, good. Thanks a lot for the follow-up, guys, and have a good day.

Yes.

Thank you. At this time, I show no further questions. I would like to turn the call back over to you, sir, for closing remarks

Thank you, Olive. Thank you and I look forward to speaking with you again on our 2016 third quarter earnings conference call currently scheduled for October 20. Have a good day.

Thank you for joining the conference call today. Have a good morning. Please disconnect your lines at this time.