Good morning and welcome to Ryder System Incorporated Fourth Quarter 2015 Earnings Release Conference Call. All lines are in a listen-only mode until after the presentation. Today's call is being recorded. If you have any objections, please disconnect at this time. I would like to introduce Bob Braun, Vice President, Corporate Strategy and Investor Relations for Ryder. Robert S. Brunn - Vice President, Corporate Strategy & Investor Relations: Good morning, and welcome to Ryder's Fourth Quarter 2015 Earnings Conference and 2016 Forecast Conference Call. I'd like to remind you that during this presentation you will hear forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to changes in economic, business, competitive, market, political and regulatory factors. More detailed information about these factors is contained in this morning's press release and in Ryder's filings with the Securities and Exchange Commission. Presenting on today's call are Robert Sanchez, Chairman and Chief Executive Officer; and Art Garcia, Executive Vice President and Chief Financial Officer. Additionally, Dennis Cooke, President of Global Fleet Management Solutions; John Diez, President of Dedicated Transportation Solutions; and Steve Sensing, President of Global Supply Chain Solutions are on the call today available for questions following the presentation. With that, let me turn it over to Robert. Robert E. Sanchez - Chairman & Chief Executive Officer: Good morning, everyone and thanks for joining us. This morning, we'll recap our fourth quarter 2015 results, review the asset management area and discuss forecast for 2016. Then, we will open up the call for questions. With that, let's turn to an overview of our fourth quarter results. Comparable earnings per share from continuing…

Thank you. The first question today is from Ben Hartford with Baird. Your line is now open. Ben J. Hartford - Robert W. Baird & Co., Inc. (Broker): Hey. Good morning, guys. Good summary. Maybe, Robert, if we could just talk about long term how you're looking at the FMS business. What is the confidence today after some of the challenges in the back half of 2015, the outlook that you provided here in 2016 with regard to softening used truck pricing and weaker rental utilization? What is the confidence that the growth that you've seen in the contractual business, specifically full service lease, is leverageable, is producing the operating leverage that you had expected such that as you continue to grow that book of business and we get through some of these cyclical headwinds in 2016, that we will start to see operating leverage in FMS with line of sight to exceeding prior peak margins? Robert E. Sanchez - Chairman & Chief Executive Officer: Yeah, I think, Ben, the confidence level is very high around the contractual business. If you look at the growth that we had in 2015, the lease fleet growth of 6,800 vehicles, we're looking at next year even in a softer environment of starting out with a forecast of 3,500 vehicles. The secular trends that are driving this outsourcing continue to be very strong. We had a very strong fourth quarter sales in FMS. I've not seen really a slowdown there at all, and we feel really good about our ability to do that. I think clearly with – if you look at just the overall, your question about earnings leverage, the headwind from UVS is meaningful. Certainly what we have forecasted in 2016 is a meaningful headwind with a pretty significant decline in pricing.…

Our next question is from David Ross with Stifel, Nicolaus. Your line is now open. David G. Ross - Stifel, Nicolaus & Co., Inc.: Yes, good morning, gentlemen. Robert E. Sanchez - Chairman & Chief Executive Officer: Hi, David. David G. Ross - Stifel, Nicolaus & Co., Inc.: So could we talk a little bit more about the deceleration in the fleet gross in the leasing in 2016? You're looking – going back down to 3,500 vehicles and that's with some strong fourth quarter sales at FMS. So are those fourth quarter sales already baked into that implying, I guess, more deceleration through the year? And if you talk a little bit about why this environment matters for lease growth if a lot of these leases are long-term contractual in nature. They are trucks that people need and it's not as cyclical as the rental division? Robert E. Sanchez - Chairman & Chief Executive Officer: Right. Well, let me point out. We're still forecasting growth. This would be the second largest growth rate we've had in the company. So we're not really backing off growth. What we're looking at and saying if you look at the overall freight environment, if freight environment slows down, it all trickles down and at some point you have less of a need for trucks. You're right. We are kind of assuming that's going to happen later in the year because what we're seeing right now is a relatively strong environment in terms of truck leasing. So we put that forecast out there based on, again, a very soft freight environment in 2016. But as the year goes on, we'll adjust based on what we're seeing and I feel really good about the work that Dennis is doing with his team on converting more people to leasing. This will be the first time that we have five-straight years of lease fleet growth and we feel good. The other thing is I'd tell you is as we cut back in some areas we did not cut back in the number of front-line salespeople that we have, knocking on doors and finding new customers. So I'd say that's just to give you a little better color as to where, how we came up with the 3,500 vehicles but clearly we'll see how the year progresses and if the freight environment comes in better then you'll see us do better than that. I don't know Art, Dennis, if you want add anything to that?

Yeah. David, I would just add as we look at Class 8 production for the year, we're looking at a number that's similar to what it was in 2014, and in 2014 we had 3,200 units of fleet growth, so we think the 3,500 number is a prudent number to start the year with. David G. Ross - Stifel, Nicolaus & Co., Inc.: And then what is the average lease fleet age currently? Do you think given the growth prospects that it should still lower again in 2016, or should it flatten out this year?

Yeah, David, it's Dennis again. So the fleet age right now for Power is at 37 months and as we look into next year, we do see that declining slightly, not much but slightly. So that's what we see right now. Robert E. Sanchez - Chairman & Chief Executive Officer: I think, David, remember the benefit of the declining fleet age was sort of behind us or even with the new technology and all, it doesn't really play as big a factor anymore. David G. Ross - Stifel, Nicolaus & Co., Inc.: Excellent. Thank you very much. Robert E. Sanchez - Chairman & Chief Executive Officer: All right. Thanks, David.

Our next question is from Scott Group with Wolfe Research. Your line is now open.

Hey. Thanks. Good morning, guys. Robert E. Sanchez - Chairman & Chief Executive Officer: Good morning, Scott.

Just on the used truck pricing, I think you said down 20%. What have you seen to date relative to that peak? How much incremental downside on used truck pricing are you assuming in the guidance? Is there maybe... Robert E. Sanchez - Chairman & Chief Executive Officer: Well, we'll...

Any color you can give us on January so far? And then is there any good sensitivity to use if we want to assume a 30% drop or something, what that means? Robert E. Sanchez - Chairman & Chief Executive Officer: Well, I would – here's the way I would frame it up. We've seen -we're talking about is tractor prices and primarily Class 8 is where the bigger issue is. So what we saw in the fourth quarter was 11%, so we're assuming another 9 percentage points beyond that which is consistent with what we've seen in other – in prior-used vehicle sales downturns. The most – several of the most recent ones, including the one during the last freight recession, so that's sort of how we've teed that up. We have not seen 20%, but we're assuming there's going to be some further deterioration as there continues to be – appear to be an oversupply of Class 8 tractors in the marketplace.

Okay. And just given that oversupply, what are you assuming for OEM pricing that you're paying? Are you starting to see that come down yet or is that more stable? Robert E. Sanchez - Chairman & Chief Executive Officer: No. Remember we're buying directly from the OEM, so we don't – we're typically getting some pretty competitive pricing regardless of the environment. So, I don't see that as a big change.

And you're not seeing that come down with the OEMs? It's kind of just flattish? Robert E. Sanchez - Chairman & Chief Executive Officer: No, it's relatively stable. Yeah.

Okay. All right. Thank you. Robert E. Sanchez - Chairman & Chief Executive Officer: Thank you, Scott.

Our next question is coming from Brooklier of Longbow Research. Your line is now open.

Hey. Thanks. Good morning. Robert E. Sanchez - Chairman & Chief Executive Officer: Good morning, Matt.

So I wanted to go back to the expectations for lease fleet growth, The 3,500 unit addition number. Can you talk to roughly how much of that you've already won? How much of that is already contract signed at this point in time?

Now remember it's a long – it's 12 months, so it's really hard to kind of break that out. I think you're going to see us continue to have probably higher than that growth in the first half of the year, and then maybe slowdown in the second half. Again, more based on what we predict or our assumptions, not we predict, our assumptions around a weaker freight environment. So that's kind of the way it lays out. But I would tell you fourth quarter was a strong sales quarter for full-service lease and we've got a healthy pipeline going into the first quarter and our sales guys are busy. So, as of right now, we haven't seen that materialize. I guess, what I'd want to probably point out is unlike other years where I think we've had better visibility to the year, I think this year really it is a little murkier. There's a lot more uncertainty. You've heard a lot of talk about the industrial recession and a softer freight environment from some of the truckers. We've seen it manifest itself right now in our used truck pricing a bit, and clearly a little bit more in rental. But that's why we felt it was prudent to really build this plan around that type of an environment. The truth is it could turn out to be better and if it does, I think we're well positioned to capitalize on that, certainly our lease sales will do better. It could help our used truck pricing, and rental, especially in the first half of the year, could benefit from a better environment. So, I just want to make sure everybody is clear on that.

Okay. And then just a kind of a segue into a rental question. Your guidance talks to the fleet being down 4%, but I guess your pricing mix being pretty much flat. So I'm trying to get a sense for what's kind of your confidence level that you're able to, I guess, maintain pricing on a year-over-year basis at rental? And, I guess, is there any potential offset in the fact that if maybe if the market is a little bit weaker than we anticipate from here that there could be increased demand on the rental side and you could actually see, I guess, better pricing? Robert E. Sanchez - Chairman & Chief Executive Officer: Well, there's a lot of questions in there. First of all, the price increase is something we're implementing early in the year and we do feel in this environment we have an opportunity to get it. The vehicles cost more and the overall market I think is moving in that direction. Clearly, if things – we think that will continue. We believe that in the environment we've painted here with softer freight environment, we can still achieve that pricing increase.

Thank you. Robert E. Sanchez - Chairman & Chief Executive Officer: Go ahead, Dennis.

Yeah. I would just add to that, Matt. If we do see a stronger rental environment, we'll utilize our centralized asset management capability to move units that are coming off of lease that still have life with them. We'll move those into the rental product line. If we do see upside, we would do that before we would spend CapEx on vehicles. So, again, we'll leverage our central asset management capability. Robert E. Sanchez - Chairman & Chief Executive Officer: Yeah. It's our ability to flex up if things are better. I'm sorry, Art, did you want to mention something? Art A. Garcia - Chief Financial Officer & Executive Vice President: Yeah. I wanted to follow back up on Matt's comment, given we did have a good sales quarter, Q4, and we do see a softer environment as we go into 2016, you're going to see our fleet growth probably be a little more front-end loaded this year than it was last year given that. Robert E. Sanchez - Chairman & Chief Executive Officer: Good.

Okay. I appreciate the time. Robert E. Sanchez - Chairman & Chief Executive Officer: Thank you, Matt.

Our next question is coming from Justin Long with Stephens. Your line is now open.

Thanks, and good morning. Robert E. Sanchez - Chairman & Chief Executive Officer: Good morning, Justin.

There's a lot more talk today about the possibility of a recession on the horizon and with that in mind, I was wondering if you could just talk about how outsourcing trended during the past recession? Did you see a trend towards more outsourcing as your customers looked to cut costs, or did you see more hesitancy from customers to make structural changes to their network in a weak economic environment? Robert E. Sanchez - Chairman & Chief Executive Officer: Well, when you say the last recession, if you look at 2008/2009 that's probably a tough comp because everything was down during that time. But certainly, in prior recessions to that, I would say there is some headwind clearly on existing customers not needing to grow. But our opportunity and I think with our improved sales and marketing efforts, the additional sales people we have on the street, the overall secular trends that favor outsourcing I see it as an opportunity because I think as customers are looking or prospects are looking for ways to cut costs, and we've got products that typically can get you 10% to 15% savings, I think it's a nice opportunity for us to be able to grow. I think this is a little different environment than – certainly different environment that the pre 2008, 2009 recessions and I think it – I guess, to your point, I think it could create an opportunity for us.

Okay. Great. And just given the uncertainty could you talk about the month-to-month trends that you saw in rental? I'm just curious if things got incrementally weaker over the course of the quarter and also if you could share what you're seeing so far or what you saw in January?

Yeah, Justin. This is Dennis, I'll start with Q4. As Robert said in his opening remarks, we looked at the parcel companies. They were picking up units a little later than we expected, than what we had forecasted. So October and early November, a little weaker than we expected and then I got significantly stronger as we headed into the back half of November and December. And in January, the markets looked decent as we look at the demand here in the U.S. in particular.

Okay. That's really helpful. Thanks for your time.

Thank you.

Our next question is from Kristine Kubacki of Avondale Partners. Your line is now open.

Good morning, guys. Just a quick question. Robert E. Sanchez - Chairman & Chief Executive Officer: Good morning, Kristine.

Wondering if you could talk more about the maintenance trends both in contract and contract related. You keep talking about a softer freight environment and presumably less utilization across the whole truck fleet. Are you able to continue to add more trucks to that and offset less maintenance, as I would assume, per truck. And, I guess, to add on to the question that was a little bit earlier, is this an area where fleets will continue to outsource during a soft freight environment or will they ever think about bringing that back in house? Robert E. Sanchez - Chairman & Chief Executive Officer: Well, let me just split out contract maintenance versus contract related. Contract maintenance is under a contract where a customer is paying typically a flat rate for maintenance and then we handle all the maintenance associated with that. So it isn't a tool that a customer will pull back on maintenance. We maintain those vehicles to our standards. Contract-related and within that, on-demand maintenance, you're right. When things slow down they may pull back on some of the maintenance; may run a fewer miles. But I think in this environment, given our opportunity to save customers money, we could offset that with growth of new customers. So I think that's the two sides of the coin, if you will, as it relates to growth in those items.

Okay. Very good. Thank you very much. Robert E. Sanchez - Chairman & Chief Executive Officer: Thank you. Art A. Garcia - Chief Financial Officer & Executive Vice President: Thank you.

Our next question is from Art Hatfield of Raymond James. Your line is now open. Art W. Hatfield - Raymond James & Associates, Inc.: Hey. Good morning. Hey, Robert. Robert E. Sanchez - Chairman & Chief Executive Officer: Hey, Art. Art W. Hatfield - Raymond James & Associates, Inc.: Morning, everybody. I've kind of been in and out. Listening to some your commentary, just a couple quick ones if I could. You talking about a softer freight environment in 2016, and the last three months of 2015 you did see miles per unit per day increase 1.3%. Robert E. Sanchez - Chairman & Chief Executive Officer: Right. Art W. Hatfield - Raymond James & Associates, Inc.: Do you expect that to go negative in Q1, or is that something that you may be up a little bit but worsens as we move through the year? Robert E. Sanchez - Chairman & Chief Executive Officer: No. We're still assuming that to be flattish, I would say. Art W. Hatfield - Raymond James & Associates, Inc.: Okay. and then on the used vehicle sales, just a two-part question on that. One, I didn't hear you comment on this, but the 8,000 units held for sale at the end of the quarter, kind of what's your thought on where that goes to over the next quarter or two? And then, secondly, you commented on how you are looking at this relative to prior downturns in the used vehicle market. Is there any reason to believe because of model year changes over the last several years that we should think about that it could be different than we've seen in last cycles? Robert E. Sanchez - Chairman & Chief Executive Officer: Well, first, Art, let me – on the 8,000 units. that came up…

Our next question is coming from Jeff Kauffman of Buckingham Research. Your line is now open.

Thank you very much. I wanted to focus a little bit on DCS (sic) [DTS] (52:30). You talked about the big revenue increase there and then I'm looking at the guidance you've given on gain on sale and kind of bridging the gap on 140 basis point to 110 basis point spread. What kind of new business are you bringing on there and what type of – sorry: blanking on this. What type of fleet growth are you looking for there? Robert E. Sanchez - Chairman & Chief Executive Officer: You talking about on the DTS side?

DTS side, yeah. Robert E. Sanchez - Chairman & Chief Executive Officer: We're...

Because it looks like revenue per unit on DTS is down on a year-to-year basis, almost 7%. Maybe I'm calculating that wrong. So I'm just wondering what kind of new business is coming on there.

Well, Jeff, this is John. Let me try to address a few things. First on the growth side, I think you had it right. We had 11% growth on dry revenue. So first up, make sure that you're working off the dry revenue number because the total revenue number is impacted by fuel changes, and in price the fuel is down 30%.

Fuel, okay.

But if you look at our base measure of operating revenue, we're up 11% and that's been growing in the second half. We've had some pretty good traction with prior fleet conversions and some of that has taken place in the second half of the year. So that's what impacted fourth quarter, if you look at the sales and the prior-fleet conversions we saw during the quarter. And then, that momentum we expect to carry over for the first half of 2016 and then it will temper in the second half of 2016.

Okay. Robert E. Sanchez - Chairman & Chief Executive Officer: Yeah. I think the fleet count as it relates to DTS, the revenue per unit could vary based on the type of accounting. They have more trailers than tractors. So I think you focus on the revenue growth. We're looking at 9% revenue growth in 2016. So we're really expecting that continued strong sales and strong growth there as we convert customers that lease into Dedicated.

All right. And just one detail follow-up. You gave a great break out on vehicles by lease versus rental versus DTS, and you spoke about the differences you were seeing on truck pricing versus tractor pricing. Can you give us a rough idea how the fleet breaks out right now, trucks versus tractors versus trailers?

Held for sale fleet. Robert E. Sanchez - Chairman & Chief Executive Officer: You're talking about the fleet that's at the used truck centers or are you talking about the overall fleet?

Used truck centers. Thank you. Robert E. Sanchez - Chairman & Chief Executive Officer: Used trucks, hang on. Let me – the team is looking that up.

Yeah, that's fine. Robert E. Sanchez - Chairman & Chief Executive Officer: We can go to the next caller and then we'll come back.

Thank you.

All right, Jeff.

Our next question is from John Barnes with RBC Capital Markets. Your line is now open.

Hey. A couple of things. First, you mentioned that normally used truck cycles last kind of four to six quarters. You obviously went through a period where you enjoyed like that three-year reprieve where there were not a lot of Class 8 truck deliveries during that kind of 2009, 2010, 2011 timeframe. Now, we've gotten into several-year period where we're kind of well above replacement levels of deliveries. Does that suggest that four to six quarters becomes something different and you get into – maybe this is a more pronounced downturn or – you see what I'm saying? It's a much different environment than what we are kind of used to. Robert E. Sanchez - Chairman & Chief Executive Officer: Obviously, nobody has a crystal ball here, but I think if you look at even the rates that Class 8 production, the rates we saw in 2011, 2012 and 2013, they're still relatively stable and if you compare them to what we had historically done in the early 2000s, it is not at those – the peak levels that caused the chaos which were sales that we had in 1995 and in 1999 and in 2006, those levels have not been achieved in this cycle. So I don't see that as being dramatically different than what we've seen in the past. I would tell you also remember, we hold vehicles seven years. So, we're still selling vehicles from 2009 in this year and we're still at a point where there's not a lot of big production years coming into our used truck environment. So, I think that will bode well through this downturn, and as we get out of it then we will probably have some additional units coming in and we'll be in a good position to sell them.

Okay. And then, secondly, I just want to back follow up on the 3,500 units of lease growth that you're forecasting. I recognize it's a long sales process. You say fourth quarter was a good quarter from a sales perspective. As we think about trying to model this in, are we talking two thirds of these units should be layered in into the first half and then begin to lighten it up in the back half or should it be more ratable per quarter than that? I heard you say that probably a little lighter in the second half but just maybe magnitude, can you give us a little color on that? Robert E. Sanchez - Chairman & Chief Executive Officer: Yeah, I would say the first half of the year, you just did year-over-year comps. The first half of the year you should continue to see in that 5,000 units to 6,000 units range as you do in first quarter to first quarter, second quarter to second quarter. And then, it really dropped. It really slows down in the second half more to the what we're talking about ending right around that 3,000 units to 4,000 units range.

Okay. All right. That makes sense. All right. Thanks for your time today. I appreciate it. Robert E. Sanchez - Chairman & Chief Executive Officer: Okay.

Our next question is from Todd Fowler with KeyBanc Capital Markets. Your line is now open.

Great. Thanks. Good morning and thanks for all the detail. Robert, just on the expected decline in the used truck pricing. I mean, if you did see that 20% drop from peak to trough as you have in your guidance, where would that put the residuals for 2016? Would those still be favorable relative to the residuals you'd be rolling off and really what I'm trying to get at as I think about that depreciation benefit that you've got penciled in for this year, how does that look going forward if we see the softness in the used truck market play out the way you're expecting it to? Robert E. Sanchez - Chairman & Chief Executive Officer: Yeah. I think we have to say, as we considered the depreciation policy, we did look at that also. And if we had a type of kind of bleak environment as we've painted here, you would be in a situation in probably 2017 where things would be flat, right? Art A. Garcia - Chief Financial Officer & Executive Vice President: Right. Robert E. Sanchez - Chairman & Chief Executive Officer: In terms of depreciation. So there wouldn't be a depreciation policy movement one way or the other. Art A. Garcia - Chief Financial Officer & Executive Vice President: Right.

Okay. That helps. And this is maybe a little bit along the lines of what John was just asking, but do you have a sense of what the increase in used truck pricing was this cycle maybe relative to last cycle? And when we look at equipment gains as a percent of your overall earnings, it does feel like it's been elevated maybe to where it's been in the past, and it feels like there has been a bit of a bubble on the used truck side. So was the increase in used truck pricing this go around consistent with where it was the last cycle so that the fall would be consistent? Or is it kind of difficult to maybe look at it on an apples-to-apples basis? Robert E. Sanchez - Chairman & Chief Executive Officer: Well, remember, look, the price of used trucks has gone up quite a bit because of the new technology and all those things. Remember, what we're baking in here is a percentage drop. So it's a percent. It's 20% on a bigger number versus the drops that we saw in prior periods. So, I guess, the answer to your question is yes, used truck pricing has gone up materially over the last cycle, generally because of new technology. And we are assuming in our forecast a 20% drop off of that higher number.

Okay. But I guess, asking it the same way, I mean, was the percent increase, was that similar or it means that you're trying to adjust for the absolute price of the vehicle? Art A. Garcia - Chief Financial Officer & Executive Vice President: Right. Robert E. Sanchez - Chairman & Chief Executive Officer: No. The percentage increase would have been higher from over the last several years.

Okay. Okay. Robert E. Sanchez - Chairman & Chief Executive Officer: I think it basically boils down to – in today's environment, whether you're going to buy a new truck or a used truck, it costs a lot more than it did 10 years ago. New trucks just cost meaningfully more because of all the EPA mandated changes. So, I think, yes, we've adjusted to a higher cost environment in both the new and used truck sales.

Yeah, no. We understand. I mean there's a lot of moving parts and it seems that the guidance is trying to take into consideration the best factors. Just trying to get some sensitivity around if things play out better or worse, kind of what that could mean. So, I appreciate the time this morning. Robert E. Sanchez - Chairman & Chief Executive Officer: Okay.

Thank you.

Our next question... Robert E. Sanchez - Chairman & Chief Executive Officer: Hang on one second. Before we get the next caller, I think Art's got the answer to the previous question. Art A. Garcia - Chief Financial Officer & Executive Vice President: Yeah. Let me follow up on Jeff's question from earlier relative to our inventory held for sale, about 40% are trucks, 50% are tractors, and 10% are trailers.

Our next question is from Casey Deak with Wells Fargo. Your line is now open.

Okay. Thank you. I just had a question if we could go back to the 3,500 lease fleet growth. What are you guys forecasting as far as early termination as we go through the year? Do you anticipate that that is going to ramp up as you've seen some rental weakness here maybe foreshadowing that as we go through the year? Robert E. Sanchez - Chairman & Chief Executive Officer: No. We have not forecast a meaningful increase in early terminations. Again, we're trying to paint as realistic a picture as we can and at the same time also erring on the side of caution. But as it relates to early terminations, no, we have not built in any meaningful increase there.

Okay. So you just assume that it kind of stays around the levels where we've been trending the past year? Robert E. Sanchez - Chairman & Chief Executive Officer: Right.

Okay. All right. I'll leave it at that. Thanks guys. Art A. Garcia - Chief Financial Officer & Executive Vice President: Thank you.

Due to time constraints, we'd like to turn the call over back to Mr. Robert Sanchez. Mr. Sanchez, you may proceed. Robert E. Sanchez - Chairman & Chief Executive Officer: Great. Thank you. Well, we're just past the top of the hour, so I appreciate you all being on the call. Good questions. I look forward to seeing you as we get out and visit at some of the conferences and get out to some road shows. Take care.

And that ends today's conference. Thank you all for your participation. You may disconnect at this time.