Good morning and welcome to Ryder System Second Quarter 2017 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 now like to introduce Mr. Bob Brunn, Vice President, Corporate Strategy & Investor Relations for Ryder. Mr. Brunn, you may begin.

Thanks very much. Good morning and welcome to Ryder's second quarter 2017 earnings conference call. I'd like to remind you that, during this presentation, you'll hear some 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 earnings release and in Ryder's filings with the Securities and Exchange Commission. This conference call also includes certain non-GAAP financial measures. You'll find reconciliations of each non-GAAP measure to the nearest GAAP measure in the written presentation accompanying this call, which is available on our website at investors.ryder.com. 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 and available for questions following the presentation. With that, let me turn it over to Robert.

Good morning, everyone, and thanks for joining us. This morning, we'll recap our second quarter 2017 results, review the asset management area, and discuss the current outlook for our business, then we'll open the call for questions. With that, let's turn to an overview of our second quarter results. Comparable earnings per share from continuing operations were $1.00 for the second quarter 2017, down 36% from the prior year. Second quarter 2017 comparable results exclude $0.07 of non-operating pension cost and a $0.04 gain on sale of properties disposed as part of last year's restructuring plan. Last year's comparable earnings exclude $0.09 of non-operating pension cost and $0.09 in pension-related adjustments. Our second quarter results were above the high-end of our forecast range of $0.87 to $0.97, due to better than expected performance in our contractual lease and maintenance product lines as well as in commercial rental. Outperformance in these areas was partially offset by lower than expected results in used vehicle sales due to valuation adjustments taken to better position the fleet for future sale, and in Supply Chain due to lower than planned automotive volumes. Dedicated performance was in line with our expectations. Operating revenue, which excludes fuel and subcontracted transportation, increased by 2% to a record $1.5 billion for the second quarter and was higher in all business segments, despite rental revenue being down by 7%. Excluding the impact of foreign exchange, operating revenue increased by 3%. Total revenue increased by 5%, reflecting higher subcontracted transportation, driven by new business and increased operating revenue. Page 5 includes some additional financial information for the second quarter. The average number of diluted shares outstanding for the quarter declined by 500,000 shares from the prior year of 52.9 million shares. We began repurchasing shares under the current 2 million share…

Thanks, Robert. Turning to page 10, year-to-date gross capital expenditures totaled over $900 million, down around $80 million from the prior year. This decrease primarily reflects lower planned investments in the lease fleet, partially offset by higher planned investments to refresh the rental fleet. We realized proceeds primarily from the sale of revenue earning equipment of $206 million, down $46 million from the prior year. The decrease reflects lower sales pricing and volumes. Net capital expenditures decreased by $36 million to $727 million. Full-year 2017 gross capital expenditures are now expected to be down by $100 million from our initial forecast. This primarily reflects a greater use of used equipment to fulfill new lease contracts. Turning to the next page, we generated cash from operating activities of $732 million year-to-date, down 4%. The decrease was driven primarily by increased working capital requirements, partially offset by lower pension contributions. We generated $971 million of total cash year-to-date, down $88 million from the prior year. Cash payments for capital expenditures decreased by around $270 million to $855 million year-to-date. The company's free cash flow was positive $115 million year-to-date versus the prior year of negative $61 million, reflecting lower capital expenditures. We are maintaining our full-year 2017 forecast for free cash flow of positive $250 million, as lower operating cash flow is offset by lower capital expenditures. Page 12 addresses our debt-to-equity position. Total debt of $5.4 billion is basically flat with year-end 2016. Debt-to-equity at the end of the second quarter decreased to 256% from 263% at the end of 2016. The company has a long-term debt-to-equity target which is focused on achieving a competitive cost of capital, while maintaining a solid investment-grade credit rating. The target range is periodically reviewed, based on a combination of factors. Based on our most recent review, we've revised the target range from 225% to 275% to a range of 250% to 300%. This revised range is consistent with the longstanding historical target range that was in place prior to mid-2013. Our forecast for balance sheet leverage at year-end remains unchanged at 240%, which would place us somewhat below the revised target range. Equity at the end of the quarter was just over $2.1 billion, up $54 million from year-end 2016, primarily due to earnings and foreign exchange, partially offset by share repurchase and dividends. At this point, I'll hand the call back over to Robert to provide an asset management update.

Thanks, Art. Page 14 summarizes key results in our asset management area. Used vehicle inventory held for sale was 7,500 vehicles at quarter-end. This excludes the elevated number of vehicles being prepared for sale that I mentioned earlier. A more relevant comparison, which includes these vehicles, would result in used vehicle inventory of approximately 8,400 units, down 700 vehicles year over year and unchanged sequentially. We sold 4,300 used vehicles during the quarter, down 16% from the prior year and down 4% sequentially. Proceeds per vehicles sold were down 16% for tractors and down 14% for trucks compared to a year ago. From a sequential standpoint, tractor pricing was down 5% and truck pricing was down 1%. As I mentioned earlier, pricing was better than expected, especially for trucks. As compared to peak prices realized in the second quarter of 2015, overall used prices were down 25%. We continue to sell a higher than normal number of vehicles through our wholesale channel, although the retail mix improved to 64% in the second quarter versus 57% in the first quarter. The higher than normal use of wholesaling this year is part of our plan to move inventory levels to the midpoint of our target range of 6,000 to 8,000 vehicles by year-end, which will better position the used fleet as we go into 2018. I'll turn now to page 16 to cover our outlook. During the second quarter, we continue to focus on mitigating the impact of a challenging environment in used vehicle sales and rental, while growing our contractual businesses. Our contractual products, ChoiceLease, Dedicated, and Supply Chain, all generated revenue growth during the quarter and will provide the majority of the company's earnings during 2017. As these products generally represent 3 to 7-year contractual revenue streams, growing this portfolio…

We'll pause for just a moment to allow everyone an opportunity to signal for questions. And we'll take our first question from Ben Hartford with Baird. Ben J. Hartford - Robert W. Baird & Co., Inc.: Hey, good morning, everybody. I guess, Robert, let's start on the Supply Chain side in the auto exposure and some of the headwinds here, 40% of that business is tied to auto. Is it – could you talk a little bit about the sources of the weakness there? Is it from any particular OEM with which you do business, or is it just broader pressure to USR (23:16), in particular? That's one. And then two, within that segment, you're somewhat under-represented in healthcare and perhaps retail. You talk about new business wins, but what is the opportunity to be able to offset some of the headwinds in auto cyclically through sales efforts on – within these other verticals going forward to kind of drive to that mid-single-digit type operating revenue target that you've talked about historically in that segment?

Yeah, I – Ben, I'll tell you that we can't comment on specific accounts, but I think if you listen to what's going on in the auto industry where you're having some slowdown, certainly in certain models across a lot of the different OEMs, I think it's just consistent with that. But the offset to that is the sales that we're seeing really in Supply Chain across all verticals, I would say even including in auto with some new businesses we're picking up. So, that's why we're talking about the fourth quarter really earnings coming back stronger versus the third quarter. And also, revenue, and that's really from (24:25) some of the new growth. So, Steve, if you want to add some additional color.

Yeah, Ben, I would say that if you think about the diversity, we deal with a number of OEMs and across those plants you've got a good diverse model portfolio as well. So, really, it's around a ramp-up of new volume associated in the quarter. And as you think about Q3, you've got some model year changeover, so there's a little softness there as well. So – but I think, as Robert commented, on the portfolio we're seeing good healthy pipeline across all verticals, good strong growth. So, we expect that to be pretty even across the verticals as we go into the back half. Ben J. Hartford - Robert W. Baird & Co., Inc.: Okay, good. And then switching gears on the commercial rental side, Robert, could you talk about the trends through the quarter kind of uniformly on the broader truckload side? Spot activity did firm up in June, slightly above seasonal. Want to see if that was your experience as well. What are you experiencing in July and what is the outlook in terms of rental utilization relative to expectations in the back half of the year from a demand point of view? How much of the improvement in utilization is the supply reductions that you've talked about versus perhaps some recent improvement in underlying demand. Thanks.

Yeah, I think, Ben, we did see almost, I would say, consistent with what you heard from the truckload guys, we did see improvement in the second quarter, better than what we had expected, I'd say slightly better than seasonal. So, we have some of that built into the balance of the year and we're expecting to get, as you can see, some improvement in utilization as a result of that. So we didn't quite bring the fleet down as much as we had originally expected, I think, because of we saw better than expected utilization. So, now we're looking to really see that continue through the balance of the year. So, Dennis, I don't know if you want to give more detail.

I would say that February and March were tough, as we shared before, from a demand point of view and we expected it to perform seasonally after that. And, as Robert said, it performed slightly better and, as a result, we didn't de-fleet as much as we had originally planned and so we did see some strengthening in demand.

In July, we're seeing really consistent with (26:43) Q2.

Consistent. Yeah. Ben J. Hartford - Robert W. Baird & Co., Inc.: Consistent with 2Q? So, above seasonal in July and then it sounded like you're expecting slightly above seasonal trends here to finish out the year, is that right?

Slightly above. Slightly. Ben J. Hartford - Robert W. Baird & Co., Inc.: Okay. Okay, thank you.

And we'll take our next question from Justin Long with Stephens.

Thanks, and good morning.

Good morning.

Good morning, Justin.

So, Robert, I think you mentioned in your comments that used truck sales were about 64% retail in the quarter, and I'm curious, was that number a little bit higher than what you were expecting? And as we look at the guidance going forward, what are you baking in in terms of that split between retail and wholesale in the back half of the year?

I'll let Dennis...

Yeah, Justin, it was basically in line with what we had forecast and, going forward, we're projecting it to be slightly below as we continue to get the amount of units in the UTC down, so, but basically in line as we were forecasting previously.

Okay. And slightly below, I'm guessing, like maybe 60% retail, 40% wholesale, something in that ballpark?

Yeah, I think it was a little higher than that. I think we're expecting the full-year to end right around 65%, right? About 65% for the full-year.

Okay, that's helpful. And then secondly, I wanted to ask about -

I'm sorry, Justin, let me just mention one thing.

Sure.

I think on the call I mentioned that truck pricing sequentially was down 1%. Truck pricing was actually up 1% sequentially, so I wanted to make that correction.

Okay, that's helpful to clarify. And secondly, I wanted to ask about FSL. I think you've talked historically about targeting a return of 80 to 120 basis points above your cost of capital. Just curious where that spread stands today and, going forward, do you think that target of 80 to 120 basis points is still achievable if the used truck market doesn't recover?

Yeah, I think we're in that range. We're not going to get – I won't get into a lot of detail, but if you look at return on capital spreads across our business, I mean, leases continue to be strong. Obviously, the challenge has been that we went from used vehicle gains of $100 million now to slightly down, so, but we really priced this business with breakeven at the end on the gain side. So, I would say that the lease pricing should still remain very competitive, even given what we've seen so far on the used truck side.

Okay, that's helpful. I'll leave it at that. Appreciate the time.

Thank you, Justin.

We'll take our next question from Todd Fowler with KeyBanc Capital Markets.

Great, thanks. Good morning. I was hoping you could help us understand just the expectations for used vehicle gains or losses in the back half of the year. Are you expecting to continue to have losses on used vehicle sales? It looks like year-to-date, the line is about a $0.50 loss, and I think the original guidance was around $0.30. So what's the expectation for gains or losses on used vehicle sales into the back half? And if you can also help us understand maybe what's in the third quarter guidance, that could be helpful.

Yeah, we're expecting a break-even, so I'd say flat for the balance of the year. Obviously, we had, I think it was $0.15 loss in Q2 and that was primarily driven by the valuation adjustments that we took in the second quarter. We're not forecasting to need to take those in Q3 and Q4, so that's why you're seeing that change. So I would say it's the pricing environment, similar to what we had said prior, maybe a little bit better, just because we didn't see it – we saw it firming up a little bit. But still obviously challenge is going into the second half.

Okay, that helps. And then we'll probably see this in the 10-Q, but what was the exact dollar amount of the valuation allowances this quarter?

For the quarter, it was $25 million, Todd. Gains of $10 million, valuation of $25 million gets you to the negative $15 million.

Perfect. That helps, Art. Okay, and then just for my follow-up, what is the age of the lease fleet currently? And what was it in the first quarter and what was it in the year ago, if you have that?

Yeah, I think Dennis has that.

Yeah. Todd, it's 39 months and it was 39 months in the first quarter. In the second quarter of 2016, it was 38 months, so it's one month older.

Great, okay. Thanks for the help this morning and good job turning things around from 1Q.

Thank you, Todd.

Thanks, Todd.

We'll take our next question from Scott Group with Wolfe Research.

Hey, thanks, morning, guys. So want to stick on the used vehicle side. So since you accelerated some depreciation in the second quarter, are you raising your expectations for third and fourth quarter gains on sales? I know you just said you think they're kind of break-even. I don't know if that's a change that's better than what you were previously expecting.

Yeah. The net is probably up a little bit because, obviously, we did a good job in the second quarter of bringing in more units than we had anticipated. So some of those units there was a P&L impact that was in our prior guidance. So the UVS results are a little bit better than what they were before.

So I guess if we have better used vehicle and better rental, I'm not sure why you're not – I understand Supply Chain is a little weaker, but that's a much smaller part of the business. I guess I'm not entirely sure why you're not raising the outlook for the second half of the year.

Yeah, I think, Scott, it was – it's really – Supply Chain is obviously being impacted by the lower auto volumes and investments we're making in technology. So those are the – that's really the biggest driver of the offset. And then we've also got some additional investments we're making in other areas of the business that are helping to offset it. But, yeah, that's how the numbers are falling out.

Okay. And then if I can just ask just on – staying on used vehicles, so like, if the pricing was a little bit better than you thought in the second quarter, why are you doing the accelerated depreciation? And is that something that you're going to – you plan to do more of going forward? And then how does that impact residual value for 2018? Do you think that's a positive or negative kind of earnings in 2018 residual value?

Yeah, I mean, pricing was modestly above where we thought. I don't want you to think it was significantly above to begin with, so we'll have to just look at it. Obviously, increasing price is always going to help us from an accelerated depreciation, but, I mean, for the quarter it wasn't a big impact to the process of what we're trying to get done with that. So I think from that sense, I don't think it's going to have a big impact. We'll have to wait and see as we get further down to the year to decide around accelerated depreciation.

And then just thoughts on residual value for next year.

Yeah, the residual values, I mean, remember, it was only up modestly, so I don't think it has a big effect on where we are. So our views about the residual impact is still there, it's what we think. We're going to have some additional headwind next year around some residual value changes. So that really hasn't changed.

Okay. All right, thank you, guys.

Okay.

And we'll take our next question from David Ross with Stifel. David Ross - Stifel, Nicolaus & Co., Inc.: Yes, good morning, gentlemen. Just continuing on the ChoiceLease side, the higher maintenance costs that were talked about in the quarter on older vehicles, you talked about it on the last call as well. Were they, I guess, as expected, higher? Or were they higher than you had expected them to be? And what does the tail look like on these older vehicles?

Yeah, these are – they were in-line with what we had expected. I would argue, maybe slightly – actually, maintenance costs were little bit better than what we had expected, but these are units that are going to be really exiting the fleet within the next, I'd call it, 18 months. So you're really talking about through 2018. So these are the more challenging units. We're going to be replacing those during that period of time, so that's – those are the vehicles – that's the item that we're mentioning. David Ross - Stifel, Nicolaus & Co., Inc.: Okay. So this is still the 2012 problem child. Had there been any other issues that have popped up since kind of the 2012-2013 model years where maintenance costs have been higher than you expected when you wrote the contracts?

No, no, we're seeing relatively good performance really on all the vehicles after those. David Ross - Stifel, Nicolaus & Co., Inc.: And then last question on the lease side relates actually more to the maintenance under FMS. The vehicles that are under On-Demand Maintenance still seeing good growth there, but is the profitability tracking as expected?

Yeah, it is. It is. As we've mentioned before, obviously the growth – it hasn't grown to the level that we want it to grow yet. It's growing slower. But certainly, it gives us an opportunity to tap into a different market than we have historically and also give us more flexibility around some of the SelectCare and ChoiceLease offerings.

David, it's Dennis. I would just add to that, as Robert was saying, that we thought this would be a door-opener to, as an entrée for a lot of customers, an on-ramp, if you will, where once they've come in and experienced our maintenance, we're able to sell them up to other SelectCare and even ChoiceLease products. David Ross - Stifel, Nicolaus & Co., Inc.: A door opener but not loss leader.

Correct. No, no.

No, no. Absolutely not. Profitability is in line.

Profitability is in line with our earlier expectation. David Ross - Stifel, Nicolaus & Co., Inc.: Excellent. Thank you.

We'll take our next question from Jeff Kauffman with Aegis Capital.

Thank you very much. Hi, everyone.

Morning.

A couple questions here. One having to do with fleet size. So, if I'm thinking about what you're saying correctly, we're going to add about 2,000, I guess 2,600 vehicles, to Full Service lease before the end of the year, and then I think we were originally thinking the rental fleet may be sized down, but it sounds like you're saying we're going to be around that 37,000 vehicle-count in rental. Can you kind of tell me whether I'm barking up the right tree or heading in the wrong direction?

We're going to be – I know you're – on the ChoiceLease side, you're exactly right. We're on our original plan. On the rental, Dennis, you've got -

Rental will take it down slightly, but that's just what we do seasonally. But as we said, the demand is slightly stronger than what we had originally projected, so we won't be taking the fleet down as much as we originally planned.

And that's based on the 75.6% utilization rate, that's just saying we shouldn't reduce it by that much. Okay. And then a follow-up question, you've raised your targeted leverage range, and I know historically we've said when we get below the range we start to consider things like share buyback in excess of anti-dilutive. So, does that logic still hold as you plan to be below the range toward the end of year?

Yeah. No, our position hasn't changed. We're committed to staying within our target leverage range, but as we talked about before, it's always predicated on the views of what our organic growth opportunities are, what M&A is out there, things like that as a way to first – be the first call on capital, if you will. So, our view hasn't changed and we'll continue to look at it as we go forward. We're only slightly below by the end of the year as it is.

Okay, fair point. And then finally, you had talked about how the realization on some of the vehicle sales has been a little bit better than what you anticipated. Can you give us a little more context as to whether or not it's a particular kind of geography, a particular kind of vehicle type? And kind of how have you been surprised and how is this changing your view on where we go with used vehicle sales?

Yeah, I'd say it's modestly better and it's really – it's been trucks. If I had to say one of them, trucks have come in a little better – came in a little better in the second quarter than we expected. Tractors, it's hard to tell if they're better. The decline certainly year-over-year has subsided some. So, there's some talk out there that maybe the prices are bottoming out right now. There's still a lot if inventory in the market, so we're still focused on moving those units out. I wouldn't say it's really changed our outlook much yet. Obviously, we'd have to see several quarters of stabilization of pricing and then continued volumes moving out so our inventories come down before we change our view.

Okay. Well, congratulations and thank you.

Thank you, Jeff.

Thanks, Jeff.

And we'll take our next question from Brian Ossenbeck with JPMorgan.

Hey, good morning. Thanks for taking my question. So, you talked about the SCS already in auto. I wanted to ask what you're seeing on the retail side. Obviously, there is – they argue (41:20) there's more disruption than just some retooling and production that you're seeing in auto. You do see a broader push into omni-channel and final-mile, broadly speaking, so, just wondering if you could give us some thoughts on that vertical and if you're seeing any trouble finding the right sort of staffing levels, operating locations, as more and more focus tends to be on getting the warehouse, the fulfillment centers, in general, closer to the end consumer.

No, Brian, I think that as you look at the quarter, we had nice growth in retail CPG at 14%, so we're seeing again a consistent healthy pipeline in that book of business. The team's focused on several initiatives, which is just as you described to get product closer to our customers and to continue to build-out our final-mile solutions. So, very focused in that area. And I think the omni-channel e-commerce is going to really impact positively all verticals as we look out in the far term. So, we're excited about that and I think positioned well.

Okay. And any trouble finding labor force in an area that you're expanding in or just flat-out finding the space? I know oftentimes you get a lease with a contract, so just some thoughts on how that's progressing in the last quarter and how you think that's going to pan out for rest of the year?

Yeah, our head count is up year-over-year about 12%. I would say that our time to fill is pretty consistent over last year, so not really seeing any negative impact to that. Space remains available. In key markets, certainly you're going to go into some ZIP codes and have pressure there, but there is a lot of new construction in these key areas, as well. We just recently opened up a brand new 1 million square foot for a customer up in the Northeast. So you may see some compression, but, right now, we haven't seen anything to speak of.

Okay, great. Thanks. And on the used vehicle side, obviously a lot has been talked about already. I was just wondering if you've done any work and have some historical context just about shadow inventory, if we do get stabilization to actually improvement in pricing in the markets. Do you have a sense of just how much additional supply could come to the market if we get a sort of stable to increasing path here? I don't know if you could size it relative to what you have currently, or just maybe some broader comments would be helpful.

Yeah, look, when we kind of determined our view of this, we build that into our view, right? So, as we look at what we think, we assume used vehicle pricing is going to remain soft at least through middle of next year. That is assuming that there is clearly – there's always been a shadow inventory out there that's kind of waiting for pricing to come up so it could come to market, so, we're expecting that's out there and that's going to – that would continue to kind of create some pressure. So, I would argue – I would tell you that's kind of – that's already built into our view.

Okay. And just a quick follow-up on that, do you have just a rough sense of how big, how wide the shadow has cast? If it's – like you say, there's always something there, but just some way to think about it relative to, I don't know, this time last year or at the trough of the last cycle would be helpful.

Yeah, I think – look, I think you've seen some of the stuff we had last year come to market already as vehicles continue to depreciate with carriers and with shippers that are out – I mean, with fleets that are out there. So, you've seen some of that already coming to market and I think as pricing comes back up and vehicles continue to appreciate, there's still more to be at, because there was a lot of vehicles built in 2012 and 2013 and into 2014, so, those vehicles will cycle through as pricing comes up.

Okay, thanks for your time.

All right. Thanks, Brian.

We'll take our next question from Casey Deak with Wells Fargo.

Thank you. Just wanted to touch a little bit on the asset management, and specifically with things getting a little better here in the rental and some of the pricing on used vehicle sales, does your strategy change at all or when you're looking at shifting assets around? Or would your ability to do that shift at all going into the back half of the year? Do you still have runway to move rental – or to move older lease vehicles into rental if you must and if that's going to help the overall operation?

Yeah, Casey, this is Dennis. We're always looking at vehicles that come off lease and still have more mileage left, and we'll look at bringing them into rental if it makes sense. So, we're constantly looking at that from an asset management point of view. And on the other hand, we're always looking at opportunities to take rental vehicles and move them into longer term lease commitments, and so we continue to do that. Nothing has changed there.

So, there is still some opportunity. I'd say, to the back end of your question is that we have opportunity for the balance of the year. There is some. I mean, obviously it's not an infinite number, but there's opportunity if demand comes a little higher to bring some additional vehicles into the rental fleet.

Okay. And kind of on top of that, the CapEx comments around rental being a little higher proportion of what you're doing there in the CapEx, is that generally going to be just replenishment? You're not looking, because you are taking, you said, a little bit down on the overall fleet number, so, what's like the percentage of the fleet there that you think you have to turn over on an annual basis or this year?

Yeah, it's all replacement really. We're going to spend $250 million this year, $250 million to $300 million we're going to spend in rental, and that's really all replacement. Replacement spend for us is probably around $400 million, so we're even sub our normal replacement where last year we only spent $90 million. So, we've really had two years of sub-replacement level, which, as we move into the next few years, you'll probably see some of that come up.

Okay, understood. Thank you.

Thank you.

We'll take our next question from Kevin Sterling with Seaport Global Securities.

Thank you, good morning, gentlemen.

Good morning, Kevin.

So, Robert, you talked about the greater use of used equipment to fulfill lease contracts. Maybe you can give us some perspective, is this higher than historical norms? And maybe what is the average age of used equipment you're putting on a lease now? So, maybe just, you could put in some historical context for us, like I said, is this typical, is this higher than typically you've seen in the past? And then lastly, how much of a discount does a customer get on a lease price by taking a piece of used equipment, if any?

Yeah, it is higher than historical norms. There is some discount we don't really get into that, but it's just, in some cases, a slight discount to take a somewhat older vehicle, in terms of the age of what we're redeploying.

Yeah, I would say, Kevin, it would be in the range of two years to three years in that range and customers who are looking for used equipment, it's a nice option. And then if we see strong rental demand, we'll backfill it with a new unit, so this is one of the ways to keep the rental fleet refreshed or to downsize the rental fleet when you're seeing soft demand. So we're open for business when it comes to, as we call it, rental to lease options.

Yeah, and I imagine, and correct me if I'm wrong, you guys have probably gotten good traction with this because of your superior maintenance program, and customers understand that. Is that a fair statement?

Yeah, I think customers look at the uptime that we provide with our maintenance and it's viewed favorably and the equipments that they're buying, the used equipments, they know it's taken care of very well.

And so last along those lines, you guys had mentioned – Robert, you talked about getting vehicles ready for sale. That seems to be little bit higher than I think historical norms from what I can remember. And with some of the engine complexities and everything, does it cost more to get these vehicles ready for sale than historically maybe a couple years ago?

That's a good question. Just to give you the background, we had plenty of vehicles to sell several quarters ago. We started slowing down a little bit, the process of getting them out-serviced and, at the end of the first quarter, we had I think 1,700 vehicles above normal, if you will, in that process of getting ready for sale. So we really bit into that pretty well this year. We took a nice chunk out of it. We are down to 900 vehicles now over the normal, and plan to be at normal levels by the end of the year. So yes, there is some cost to doing that. I would tell you because of the technology that cost would naturally go up; however, we're very pleased that Dennis and his team have done a great job of focusing on streamlining some of that work and actually bringing those costs down over the last year to two years. So yes, it naturally would go up, but I'd say the initiatives that we've put in place and Dennis's team have put in place and executed have really helped to bring those costs down.

Well, great. Thanks for your time today. I really appreciate it. Take care.

Thank you.

Thanks, Kevin.

We'll take our next question from John Cummings with Copeland Capital.

Hi, good morning. I just wanted to ask about the deceleration you've seen in the ChoiceLease business over the past few quarters in terms of revenue going from sort of the mid-single digit range to now 2%, and it sounds like that's consistent with your expectations, but can you just talk about what's driving that maybe in terms of market share or competition or just general trends towards outsourcing?

Yeah, I would tell you that the 2% was in line with our expectation. It just has to do with the timing of when sales happen, when customers want vehicles. We're really on track for our 4% number for the full year. And in terms of the slowdown, you would argue from 4% versus the 6%, 7% that we saw last year, it's really been a result of just the lower OEM production. You've got fewer opportunities to go after as fewer trucks are being built, so even though we're still getting more than our fair share of it with the trends towards outsourcing, you're just not seeing as many opportunities as we did just a couple of years ago with OEM production being down. So Dennis, you want to add a little color?

Yeah, Robert, what I'd add to it is when you look at the mix of new versus used, as we've been redeploying more units, you've got used equipment that doesn't get as high a price, but more revenue – less revenue than we would see with new equipment. So another piece, Robert.

That's a good point, yeah. The elevated levels of redeployment we have do impact that revenue growth some too. So those are probably the two biggest factors.

Okay, thanks. And then just a follow-up in terms of pricing of leasing contracts. How does a potential increase in interest rates affect the pricing? And then maybe what interest rates are the most important, the short-term or long-term?

Well, we price our vehicles really based on our medium-term notes, which is really how we fund, how we fund the five-year notes, so that's how we fund the assets. So the way that our pricing works is as interest rates change, we immediately make the change in our pricing model, and the next vehicle that we buy is going to be bought with the – and we price is going to be priced with the higher interest rate.

Okay, thanks. That's helpful.

Thank you.

Thank you.

And we'll take a follow-up question from Ben Hartford with Baird. Ben J. Hartford - Robert W. Baird & Co., Inc.: Hi, thanks. Since we haven't exhausted the used equipment pricing discussion enough yet, the U.S. dollar is weakened by almost 10% year-to-date, and globally it seems like end-markets are generally improving. Are we near enough, given the combination of both, particularly that dollar weakness year-to-date where some of the offshoring opportunities with regard to these tractors is beginning to open up? And if we're not close yet, is there a sense as to how much further depreciation of a dollar we need before those export opportunities, that window may open back up?

Yeah, I think it's still hard to tell. There was reports of some additional exports to Vietnam. I'd say it was pretty concentrated with one OEM. But beyond that, I think, obviously dollar going down is good for exports, but we haven't – and I'll let Dennis comment if we've seen anything recently in terms of improvement in that export market.

Yeah, not really. We keep looking at it and, as we've written assets down, we look at whether or not a market like Vietnam starts to make sense. So the answer, Ben, is we're constantly evaluating it, but there is no real change at this point in time. Ben J. Hartford - Robert W. Baird & Co., Inc.: Okay. And then a follow-up for Art on the long-term – the raising of the long-term debt-to-equity target. You obviously kept the year-end target the same. Any reason why not to raise the year-end target in conjunction with the raising of the long-term target? And I guess that's one question. And then in a related vein, when do you expect any decisions to be made as to how quickly you do deploy capital to push you into that longer-term range? Do you expect that decision during the back half of this year? Or is that something that as you get through the budgeting process for 2018 and you make a decision toward 2018, or more liquidity or something at that point in time?

Yeah, that's it, Ben. So, I think our view is the year-end number at 240% was unchanged is based on the business outlook, what's happening. We're going to, as we complete our business plan, look out for the next year, that's probably when we'll make some decision as to what do we think leverage is going to do and how we react to that. So, it's more probably a year-end kind of decision. Ben J. Hartford - Robert W. Baird & Co., Inc.: And what changed during this quarter to give you confidence to re-engage that prior 2013 longer-term target again?

Yeah, it's a combination of factors. As we look at our business metrics, how we're reviewed by the agencies and the like, all that factors into our view as to completing our outlook for a few years as to what we think the metrics are going to do and if we were comfortable raising it back to that target. Ben J. Hartford - Robert W. Baird & Co., Inc.: Okay, that's great. Thanks for the time, guys.

And we'll take our last question from Scott Group with Wolfe Research.

Hey, guys thanks, appreciate it. So, just a last couple things. The increase in extensions, what's driving that and what does that tell you about the leasing market?

Yeah, that – the increase in extensions that you see is a pretty big spike up. It's primarily one customer that had a significant number of trailers that we extended on that lease. So I wouldn't read a lot into that big increase.

Okay, good. Do you, by any chance, have utilization for rental or demand for rental on a monthly basis including July?

We've got – I know we've got through June. We got to – digging it up here.

And maybe, while – go ahead.

Scott, it's – we're seeing in July for Power is in the 77% range. I'm sorry.

April, May, June.

April, May, June. So it was, again for Power, utilization was, call it, 72% in April; May, 76%; and June, 78% and in the 77% range right now.

And would you say that's – I'm guessing it typically falls from June to July.

Yeah.

Seasonally, yes.

Okay. And then just last thing – and, sorry, one more on the gains on sales line. Can you just help frame how we should think about 2018? So, you've done some accelerated depreciation, hopefully some more retail versus wholesale next year. Prices may be stabilizing. Should we – any kind of initial thoughts on directionally gains on sales, losses on sales, magnitude of gains on sales for next year? Any color you have or thoughts.

Scott, there's still a lot to play out this year, but I would, if you just think about what we see right now, assuming UVS doesn't take another big step down or do anything different, I would say you probably want to plan for kind of a neutral UVS year-over-year. We're going to have some additional headwinds in depreciation. We talked about insurance premiums, also, being a headwind next year. But then the offsets are really the growth in the contractual businesses, the rental. We expect rental – while there's not a big drop-off in demand again, rental should be a positive year-over-year. And then, obviously, cost takeouts as we do every year. I think that's going to be – those are going to be generally the positives in the puts and takes, and again, UVS is still a lot to play out, so it's early to really start to put a stake in the ground, but we'll see that play out over the balance of the year. We've got a lot of work to do over the balance of the year, too.

That's all very helpful. And just so I'm clear, you're saying neutral year-over-year including this year's accelerated depreciation or are you excluding that?

No, we were talking just UVS.

No, we're talking about just UVS gains.

Okay.

UVS net impact. What I would tell you, the accelerated depreciation, we mentioned it on the last call, I think, we're saying that that could be $0.10 or $10 million additional when you look at -

For next year.

For next year. Yeah.

Okay. All right, thank you, guys. Appreciate it.

At this time, there are no additional questions. I'd like to turn the call back over to Mr. Robert Sanchez for closing remarks.

All right, well, we're just past the top of the hour. I think, hopefully, we've got everybody's questions answered and we'll be out and meeting with several of you, I'm sure, over the next few weeks. So, look forward to seeing you then and stay safe. Thank you.

This concludes today's call. Thank you for your participation. You may now disconnect.