Robert Brunn - Vice President-Corporate Strategy and Investor Relations Robert Sanchez - Chairman and Chief Executive Officer Art Garcia - Executive Vice President and Chief Financial Officer Dennis Cooke - President of Global Fleet Management Solutions John Diez - President of Dedicated Transportation Solutions Steve Sensing - President of Global Supply Chain Solutions.

David Ross - Stifel Jeff Kauffman - Buckingham research Benjamin Hartford - Baird Scott Group - Wolfe Research John Barnes - RBC Capital Markets Justin Long - Stephens Arthur Hatfield - Raymond James Matthew Brooklier - Longbow Research Todd Fowler - KeyBanc Capital Markets Casey Deak - Wells Fargo Brian Colley - JPMorgan.

Good morning, and welcome to Ryder System, Inc. First Quarter 2016 Earnings Release Conference Call. All lines are in a listen-only mode for the presentation. Today's call is being recorded. If you have any objection, please disconnect at this time. I would like to introduce Mr.

Bob Brunn, Vice President-Corporate Strategy and Investor Relations for Ryder. You may begin..

Good morning, and welcome to Ryder's 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 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 revelatory factors. Detailed info about these factors contained in this morning's earnings release and 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 and available for questions following the presentation.

Before we get into our call, I'd like to remind everyone that Ryder will be holding our first investor day on Thursday, May 19, in New York from 8:30 a.m. to 1:30 p.m. The day will consist of presentations and Q&A with our CEO, CFO, division presidents and chief marketing officer.

We're also hosting the solutions showcase that will provide a more in-depth look at some of the products and services driving our long-term profitable growth strategy and a chance to interact with a broad group of Ryder officers and product leaders. Please note that advanced registration is required to attend and space is limited.

If you're not already registered and are interested in attending in person, please send an email to me or to Ryder for investors@ryder.com. The event will also be webcast live and available for replay if you're unable to make it that day. Additional details about the day can be found in our IR website, investors.ryder.com.

With that, let me turn it over to Robert..

Good morning, everyone, and thanks for joining us. This morning we'll recap our first quarter 2016 results, review the asset management asset area and discuss the current outlook for our business. Then we'll open the call for questions. Let's turn to an overview of our first quarter results.

Comparable earnings per share from continuing operations were $1.12 for the first quarter of 2016, up 4% from the prior year. Comparable results were above our forecast range of $1.03 to $1.08 due to better than planned rental demand and used vehicle prices.

Fourth quarter comparable results exclude $0.07 of non-operating pension costs in 2016 and $0.06 in the prior year. 2015 comparable earnings also exclude $0.02 in professional fees.

Operating revenue, which excludes fuel and subcontracted transportation revenue, grew by 8% to a record $1.4 billion for the first quarter and was higher in all business segments. Excluding the impact of foreign exchange, operating revenue grew by 9%. Total revenue increased by 4% and was impacted by lower fuel costs passed through to customers.

Page five includes some additional financial info for the first quarter. The average number of diluted shares outstanding for the quarter increased to 53.4 million shares, up from 53.1 million shares last year.

We expect to begin repurchases shares under our previously announced 2 million share antidilutive share repurchase program in the second quarter earlier than previously anticipated.

The plan allows management to purchase up to 1.5 million shares issued to employees after December 1, 2015, and another 500,000 shares from the former plan that were not repurchased prior to expiration. Excluding pension costs and other items, the comparable tax rate was 37.1, consistent with the prior year.

I'll turn now to page six and discuss key trends we saw in the business segments during the quarter. Ryder solutions often revenue, which excludes fuel, grew 7%, driven mainly by growth in full-service lease. Excluding the impact of foreign exchange, FMS operating revenue was up 8%.

Full-service lease revenue decreased 8% due to fleet growth and higher rate on replacement vehicles, reflecting the higher cost of new engine technology. The lease we grew organically by 6,500 vehicles year over year, excluding the impact from the planned reduction of U.K. trailers.

Sequentially, the lease fleet increased by 1,700 vehicles, excluding U.K. trailers. We continue to benefit from favorable outsourcing trends and our sales and marketing initiatives. During the quarter we were pleased to see that over 40% of our new lease sales came from customers new to outsourcing, up from about a third last year.

Miles driven per vehicle per day on U.S. lease power units were consistent with the prior year and continued to run at normal historical levels. Contract maintenance revenue increased by 9%. The average contract maintenance fleet grew by 5,400 vehicles from the prior year and 2,700 units sequentially, reflecting a significant new customer win.

Contract related maintenance revenue was up 21% from the prior year. Included in contract related maintenance are 7,100 vehicles serviced under the quarter under on-demand maintenance agreements, an increase of 9% from the prior year. Commercial rental revenue was flat for the quarter.

Global rental demand was up by nearly 2%, driven by higher truck demand, partially offset by lower demand for tractors. Although higher than planned, rental demand was the driver of the product lines better-than-expected results. Demand trends worsened through the quarter and April demand to date is lower-than-expected.

Global pricing was flat for the quarter due to higher per rental rates offset by lower lease support rates. The average rental fleet grew by 2% from the prior year.

The ending rental fleet was down by 5% or 2,000 vehicles sequentially from the fourth quarter, consistent with our plan to position the rental fleet more conservatively for 2016 in light of softer expected demand conditions.

Rental utilization on power units was 70.4%, down 300 basis points year over year and still at a solid level for the seasonally low first quarter.

Rental utilization was adversely impacted as we carried a higher fleet level than normal during the first quarter in order to maintain sufficient capacity for the peak rental season, given significantly lower rental capital spending for new vehicles this year.

Although better than forecast, used vehicle results were down year over year due to lower pricing on tractors. I'll discuss those results separately in a few minutes.

Overall, FMS earnings decreased due to lower used vehicle results, higher insurance costs and the lack of unusual fuel benefit realized in the prior year, partially offset by higher full-service lease results. Earnings before tax in FMS decreased 8%. FMS earnings as a percent of operating revenue were 8.6%, down 140 basis points from the prior year.

Of this 140 basis points decline, 130 basis points was due to used vehicle sales. I'll turn now to dedicated transportation solutions on page seven. Operating total revenue growth were strong at 15% due to new business, higher volumes and increased pricing. DTS earnings increased 59% due to higher operating revenue and lower insurance costs.

Segment earnings before taxes as a percent of operating revenue were 7.5%, up 210 basis points from the prior year. I'll turn now to Supply Chain Solutions on page eight. Operating revenue grew 9% or 11%, excluding foreign exchange, due to new business, increased volumes and higher pricing.

Total revenue was up 5% as higher opportunity revenue was partially offset by lower third-party purchase transportation costs and lower fuel costs passed through to customers. SCS earnings before tax were up 26% due to operating revenue growth.

Segment earnings before tax as a percent of operating revenue were 6.1% for the quarter, up 80 basis points from the prior year. Page nine shows the business segment view of the income statement I just discussed and is included here for your reference.

At this point I'll turn the call over to our CFO, Art Garcia, to cover several items, including capital spending..

Thanks, Robert. Turning to page 10, gross capital expenditures for the quarter were around $500 million, down $155 million from the prior year. This decrease reflects lower planned rental capital spending. We realized proceeds primarily from the sale of revenue earning equipment of $121 million. That's up $24 million from the prior year.

The increase primarily reflects higher plan sales volumes and increased truck pricing, partially offset by lower tractor pricing. Overall, used vehicle pricing exceeded our expectations. Robert will cover that area in more detail next. First quarter net capital expenditures decreased by $179 million to $377 million.

Turning to the next page, we generated cash from operating activities of $365 million for the quarter, up $81 million. The increase was driven primarily by higher cash-based earnings and lower working capital needs.

We generated $511 million of total cash during the year, up $114 million from the prior year, reflecting higher operating cash and sales proceeds. Cash payments for capital expenditures increased by $22 million to $575 million. Free cash flow for the quarter was $164 million, that's $92 million better than the prior year.

Our full-year free cash flow forecast remains at a positive $100 million. Page 12 addresses our debt-to-equity position. Total debt of $5.6 billion increased by $97 million from the prior year. Debt-to-equity at the end of the first quarter decreased to 274% from 277% at the end of 2015, and is within our target range of 225% to 275%.

We expect our balance sheet leverage to come down a bit more quickly than planned, and as a result, expect to resume antidilutive share repurchases in the second quarter. Equity end of the quarter was just over $2 billion. That's up around $60 million from year-end 2015, primarily due to earnings partially offset by dividends.

Before I hand it back to Robert, I want to highlight one reporting change we've made starting this quarter. Gains on vehicle sales on the P&L are now being shown net of valuation adjustments that previously had been in included in depreciation and reported in other operating expenses.

Valuation adjustments are made when a vehicle is moved to the used truck center if its book value is above recent sales prices and therefore a loss is expected at the time of sale. Including this adjustment in the reported gains line, provides a better picture of gains net of losses on vehicles yet to be sold.

A table with quarterly history for the past five years under this approach is included on page 19 in the appendix. 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 from our asset management area. Used vehicle inventory held for sale was 8,600 vehicles, up from 5,800 vehicles in the prior year and up sequentially by 600 vehicles. This is above the high end of our target range of 6,000 to 8,000, but consistent with our forecast.

Higher used vehicle inventory levels reflect our decision to downsize the rental fleet in order to position it more conservatively for 2016. We expect inventory levels to decline over the next few quarters and we should end 2016 closer to the bottom end of our target range.

We sold 4,700 used vehicles during the quarter, up 9% from the prior year and up 4% sequentially. Used vehicle pricing declined by somewhat less than we had initially forecast for the quarter. Although pricing conditions are still relatively weak, the rate of price declines slowed as the quarter progressed.

Proceeds from vehicles sold were down 8% for tractors and up 6% for trucks compared to the prior year. From a sequential standpoint, tractor pricing was unchanged and truck pricing was up 8% versus the fourth quarter of 2015.

As compared to peak prices realized in the second quarter of 2015, overall used vehicle prices for power units were down 5% as compared to our expectation of down 9%. This is driven primarily by used tractor pricing which was down 12% from the second quarter peak, partially offset by truck pricing which was up 2%.

The number of leased vehicles that were extended beyond their original lease term increased versus last year by around 400 units or 30% during the quarter, although still below recessionary levels. The increase was driven by activity with two specific customers. Vehicles redeployed into other applications increased by almost 500 units or 76%.

This reflects our actions to put excess rental vehicles into leased contracts as we downsize the rental fleet. Early termination of leased vehicles decreased by 450 units this year and we're below levels seen over the last 60 years. I'll turn now to page 16 and cover our outlook for 2016.

During the first quarter we delivered profitable growth as strong performance in our contractual businesses and cost actions taken early in the year helped us offset a challenging environment in used vehicle sales and rental. We generated strong revenue growth in all business segments driven by growth in our contractual product lines.

We're particularly encouraged by continued momentum in new sales contracts signed across all business segments. In full-service lease we grew the fleet by 1,700 vehicles sequentially and our full-year plan remains at 3500 vehicles.

Our outlook anticipates slower fleet growth in the second half of the year due to new vehicle production declines at OEMs and generally soft freight conditions. However, this trend has not materialized yet as we continue to see strong lease sales and strong new business pipeline during the quarter.

We're also pleased that over 40% of our new lease trucks added during the quarter came from customers outsourcing for the first time. In rental, we reached our plan go to downsize the fleet by 5% or 2,000 units by the end of the quarter.

Although we saw better-than-expected rental demand during the first quarter, April today demand was lower-than-expected, particularly with tractors. As a result, we expect second quarter rental results to be below our initial forecast and are further reducing the fleet size.

We now expect our full-year average rental fleet to decline by 7% versus our prior forecast of 4%. This also – we also expect rental pricing to be flat. We continue to focus on vehicle redeployment, especially into lease and dedicated as a strategy to D fleet rental without needing to sell as many units.

In our asset light maintenance products, we're pleased at the strong growth in contract maintenance and continued market interest in our on-demand maintenance service. We're emphasizing growth in these products as a way to drive revenue and earnings with no capital investment required.

In used vehicles, sales pricing was stronger than anticipated during the quarter market conditions remain soft.

Based on recent activity including strong sales volumes in March and into April, we now expect used vehicle sales results to be slightly better than our original forecast for the balance of the year, but we expect inventory levels to decline going forward, and in the year at the lower end of our target range at around 6,500 vehicles.

In supply chain we continue to expect mid-single digits operating revenue growth based on strong sales activity. Dedicated we expect high-single-digit revenue growth for the year, with the successful upselling of full-service lease customers to dedicated continuing to be a key growth driver.

Earnings comparisons and dedicated are expected to benefit from new sales and lower self-insurance expense. Our second quarter comparable EPS forecast is $1.50 to $1.55 versus our prior year of $1.65. This reflects weaker year-over-year performance in rental and used vehicle sales.

Used vehicle sales comparisons will be the most unfavorable in the second quarter, as used vehicle pricing peaked in the second quarter last year.

Due to ongoing uncertainty and rental in used vehicle sales, we're maintaining our full-year EPS forecast range of $6.10 to $6.30, a flat to modest increase from the prior year as a strength in our contractual businesses mitigates weakness with transactional products.

We also plan to begin antidilutive share repurchase activity in the second quarter, earlier than previously expected. That concludes our prepared remarks for this morning. At this time I'll turn it over to the operator to open up the line for questions.

In order to give everyone an opportunity, please limit yourself to one question and one related follow up if clarification is needed. If you have additional questions, you're welcome to get back in the queue and we'll take as many calls as we can..

Thank you. [Operator Instructions] The first question today is from David Ross was Stifel. Your line is now open..

Hello, David?.

Hello..

Yes, we hear you, David..

Sorry. Used trucks, it seems like the trucks are outperforming the tractors in the used market.

Is there a reason for why this is happening?.

Dave, I think you've got to think back to some of the dynamics that we feel is driving the tractor pricing down. First and foremost, there is some softness in general around tractors you see it even in our rental fleet. There's also the strong dollar really impacting some of the offshore sales that were happening in the industry.

The dollar's coming down little bit so that might turnaround. But that impacts tractors; more tractors being assured then we had the issue around the 11-O and 12-O Navistar that came into the market. Those are primarily tractors also which really created some pricing pressure. I think its combination of those things.

This probably more heavily waiting the tractor issue than the street truck issue..

And of the new contracts that you're signing up for leasing Morford trucks are more for tractors?.

I don't know, David. I think it's consistently with what we've done historically. There's no real trend with one more than the other..

Follow up there, are there better returns on tractor contract on average versus a truck contract?.

We really target a similar return in terms of return on capital over our cost of capital really on both of them..

Excellent. Thanks..

Thank you. The next question is from Jeff Kauffman Buckingham research. Your line is now open..

Thank you. Good morning. I just wanted to focus a little bit more in the supply chain and dedicated divisions. That was really nice surprise on the margins. You noted improved customer wins and lower insurance costs.

I guess are you saying we're at a sustained level of profitability? And if I look at the jump in the improvement in earnings, how much of this is more topline and operating-driven versus lower insurance cost-driven?.

I think if you look at DTS the year over year improbable half-and-half right about half of that came from insurance and the other half I would say is operational.

So if you look at, 60% year over year earnings growth is not what you'd expect for the full year, but we are expecting a pretty meaningful increase year over year in earnings overall, and topline growth of high single digits, again with the margins really expanding from last year pretty meaningfully..

Okay.

And with respect to supply chain?.

Supply chain I think with what we said there is what is getting a benefit from his volume and higher pricing in some of the new business. The pricing will catch its tail here in the next quarter, and that's why we're going to see growth instead of at that 9%.

We're probably looking at mythical digits, but again still earnings expansion year over year is what we're expecting also.

Again, remember if you just at back, as the contractual business not just full-service lease but dedicated in supply chain that we're really looking at helping us offset the weakness and transactional, and that's what we saw some of that materializing here in the first quarter..

Okay, guys. Congratulations, and thank you..

Thanks, Jeff..

Thank you. The next question is from line of Ben Hartford of Baird. Your line is now open..

Hey, Robert.

Hey, been touching on FMS margins got deeper do this year trends a pillow bit more challenging the outlook pressured, how do you feel about FMS margins and the ability to drive leverage and know we've talked about in the past but given some of the puts and takes that we've seen here year to date still continued growth in some of these contractual product, how confident are you that we will see better peak margins in FMS going forward?.

I'm still confident that we're going to get back to that 12% to 13% range. Obviously the header that we have particularly on the used truck side right because gains really put a lot of pressure on that metric.

But as we get past this year and we start looking out into the next year or so, I would expect us to start really moving back into that range of the 12% to 13%, and longer-term as we can really pick up some additional growth in the contractual businesses in the asset light business even opportunity to get above that.

Can your mind is in terms of the 2016 outlook what it assumed terms of used truck pricing declined from the peak maybe at the midpoint I would expecting now?.

The most important metric is tractors. We were assuming tractors would be down 20% from the peak.

We're probably looking at a number now more like 60%, 70% down from the peak so that's really the benefit that we're kind of baking into the balance of the year again being offset by some of the headwinds in rental and trucks are going to be doing a little bit better to. That's true..

Thank you. Next question is from the line of Scott Group with Wolfe Research. Your line is now open..

Hey, guys. Good morning. Just to clarify that last point assuming another 4% drop in used truck pricing in the guidance from current levels..

Correct. About 4%. I wanted to just focus on rental.

Can you just talk maybe about how much demand in your mind was up were down in the first quarter and then how much what you're seeing now in April? And can you just is there any color you can give us on end markets that you're seeing?.

I'll just give you a brief summary. First quarter, demand was actually up slightly, up 2%, as primarily trucks being up tractors being down and it plans to 2% up. It did deteriorate throughout the quarter ending April we've seen it now down certainly below what we originally estimated and below that.

So we are we're trying to forecast with that's going to be for the balance of the year, but we're looking at that right now and we built in some additional decline, I think we're looking at a percent how much are we looking at down about a percent..

Yes..

We're looking about 8% down and demand year over year that's we've got built-in..

Sorry.

Just to be clear, 8% down in April or 8% down for the full year?.

7% down for the full year for the full year..

Okay.

And can you say what you're seeing for April?.

About 8% down..

Okay. Perfect. Thank you, guys..

Thank you..

Thank you. Next question is from John Barnes with RBC Capital Markets..

Hey.

Being on the used trucks, can you talk a little bit about your forecast in terms of unit sales just given the environment right now on the new equipment side using any slowdown in used equipment demand as well? Is that part of the forecast as well?.

I'm sorry. I missed the first part of the question.

Are you referring to used vehicle sales?.

You're forecasting down proceeds.

Can you talk a little bit about the unit sales the forecast on the unit side? Or using any weakness on the unit side?.

No. No, our forecast is actually the be down year-over-year but they're going to be better than our previous forecast and we are seeing we saw unit volumes really pick up throughout the first quarter so March pretty good voice. You can see our volume – year-over-year volumes were up a total of 9%..

You would expect that to continue? I guess that's what I'm asking. You anticipate....

Yes, we do. We do expect that to continue. We're seeing it continue in April, I can tell you that..

Can you just talk a little bit about right now in this kind of environment maybe it's a little bit more sluggish, what you're seeing from a sales channel perspective? Are you seeing the sales pipeline as robust as it was in 3Q and 4Q and you've seen it moderate little bit and have you seen it any other factors that might a change there or size of the lease deals being looked at in terms of units or units taking longer to close a transaction? Is it been any change there is reflective of the challenging environment?.

Spritzing a very strong pipeline across all three segments. In terms of the final of activity, I'd say it hasn't really slowed down. I think there's probably been a little bit of a shift if I think about and smaller deals are taking longer larger deals new to outsourcing type customers, so all in all, activity strongly across the three segments..

Nice quarter, guys. Thank you.

Thank you..

Next question, Justin Long with Stephens. Your line is now open..

Thanks, and good morning. Bill, I wanted to ask what you would view as a worst-case scenario for rental demands and maybe one way to think about it would be if you assuming rental demand is down 7% this year.

What type of incremental decline in demand would get you to a recession scenario for that business?.

That's the crystal ball question. It's tough to answer. If you look back at what happened it 2009, 2009 was down 14%. If you had a recurrence of 2009 type scenario, we'd be down double what we're forecasting.

Right now based on what we're seeing and where we think things are coming in, we're forecasting the seven, but that gives you an idea of what it could be. I think the important thing for us is to be quickly rightsizing the fleet.

If you think about we're down 2,000 units in the first quarter, we're down 3,700 units already from the peak of the third quarter so we're going to continue to bring that fleet down by the end of the year.

It would be down another 1,500 units and we should be at our target rate though in terms of the number of units in rental by the end of the second quarter beginning of third quarter so we're really trying to track demand as steady as we can with the vehicles that we have in the fleet..

That's really helpful. Maybe to follow up on that last point, you said you're going to take the average rental fleet down. I don't want to be pessimistic, but let's just say rental demand forecast flexibility to quickly react and maybe just down even more than that....

Are going to continue to really rely on redeployment into lease. We're up to 300 to 400 a month tractors I want to step back this is primarily a tractors right now really stay focused on redeploying into lease is helping our lease sales and we think that can continue but hundred to 400 a month assuming capacity to keep bringing it down.

Let me headed over to Dennis to give you little more color. For 2009 was down 14%, 2012 demand was down 1%.

So we're somewhere in the middle we're positioned to handle either scenario and that's why we want to make sure that we're prepared for and if not, then we'll adjust and handle the demand coming off of lease also some life in them, we'll move that into the rental fleet..

Next we'll go to Arthur Hatfield of Raymond James..

Good morning, and thanks for taking my question this morning. You mentioned units held for sale will pursue market.

That group of assets towards tractors at the moment?.

Let me answer a few questions in there. Once you get over 8,600 right little more wholesale we did doing the quarter global etiquette was 65% retail and in the U.S. word about 72%, 73%.

The reason we haven't ratcheted that up more is that we know what fleet is coming in for the balance of the year and we believe we can handle that through enough retail and still get the fleet down to the low end of the target range by the end of the year.

If we don't see that materializing we will obviously do more wholesaling, but we're trying to get as much money as we can for those vehicles. In terms of the mix of tractors to straight trucks, I believe there's probably more tractors than there is a straight trucks but I don't know the exact percentages.

You have it, Dennis?.

I will get the percentage right now..

If I could ask a follow up, Robert, you said and I can't recall you mentioning it today but in the past you've talked about historically these used truck cycles these down cycles lasting anywhere from 4% to 8%. 4% I think if I recall correctly.

Anything that you're seeing now that would indicate a kind of different scenario, the more likely type of down cycle than we've seen in the past?.

It’s typically been 4% to 6% and considering we saw a bit of a leveling off here in the first quarter, I would say probably not.

It's probably looking more like a 4% to 6/4 event because who knows it could happen next quarter, but we're now we're into our third quarter of a slowing, used truck market and if it starts to level off a little bit we could be out of this in the 40 6/4 that you normally see..

Following up for the quarter, 30% of the unit sold for tractors, 50% were trucks and 40% trailers. And historically, actually tractors were slightly higher percent on a volume basis, they're pretty much even year over year. That's a big help..

That's a big help. Thank you..

Thank you. Your next question is coming from Matt Brooklier of Longbow Research. Your line is now open..

Thanks. Good morning.

Did you guys provide the number in terms of how many vehicles were serviced at on-demand maintenance and if you didn't, could you?.

We did. I'll get you the number there. 7,100.

7,100 vehicles and that was up at that 9% of last year..

9%.

Have your thoughts changed all I guess where did that come in relative to your expectations? And then have your thoughts changed it all in terms of on-demand contribution? To 2016 earnings?.

No, it's in line with our expectations, I think. As we mentioned in the fourth quarter, what we did learn I think in the third and fourth quarter take a little bit longer to get the vehicles into the shop it's really in line with what we've..

The sales volume were talking more customers in line with contract maintenance products and we found that be very helpful..

Okay. And then just my second question central support services the overhead there that was I think down on a year-over-year basis.

I'm just curious to hear what drove that and if that's sustainable for the rest of the year?.

Yeah, I think, overall we're expecting that number to kind of trend up a little bit maybe from where we were in Q1, but generally reflecting so the cost actions we've taken over the past few months..

Okay. Great. Thank you..

Thank you. Next question is from Todd of KeyBanc Capital Markets. Your line is open..

Great. Thanks. Good morning. Robert, just want to make sure he understood some of the comments on the dedicated performance here in the quarter it was obviously a good margin for the first quarter improvement year over year and I think there were some comments about some of that was from insurance.

Is it really two that was something unusual on insurance that I guess I'm trying to just get a sense of the sustainability of the dedicated margins as per 2016?.

That was a result of self-insurance activity. Some of that coming from prior-year development..

To comparison..

We didn't really see those headwinds this year..

Okay.

So I think but dedicated margins, moving off of the first quarter today continue to improve from these levels was from seasonality or was just a run rate they should be for the full year?.

Yes, it's John here. Typically we do expect some uplift when you move from Q1 into Q2 and Q3 which are typically our stronger quarters. So we do expect that to continue in 2016 as we look forward..

Okay.

And then just for a follow up I might have missed this but did you give a number for gross CapEx and net CapEx for 2016? Did that change from the initial guidance?.

No, we didn't change. We're sticking with the original forecast..

Okay. Thank you very much..

Thank you. Next question is from Casey Deak Wells Fargo. Your line is open..

Thank you, and good morning, guys..

Morning..

I wanted to ask, sought good results early termination remain pretty low relative to history.

How is the customer base performing on the rental side, those lease customers? How much of the week year over year is the product of these customers not observing that capacity?.

Some of the missing, especially around tractors, is coming from lease customers who have treated up and are not needing as much additional capacity as well as did a year ago.

So we're releasing it across lease customers and also rental customers, may be more like customers that are in the carrier business where we're seeing them have less demand for rental vehicles..

How does that probably interisland what you expect for the rest of the year from your leased customers as far as renting an extra truck, does that deteriorate or would you expect it to be more good at redeployment and the lease vehicles versus trying to get that capacity?.

That's all built into our 7% down that we've got in the fourth quarter so not coming to rental customers coming from these customers were renting less now. That could change. As you know the dynamics between freight volumes and capacity can change pretty quickly but right now it's definitely soft..

Okay. I appreciate the time. Thanks, Robert..

Thank you. Next question is from Brian Colley with JPMorgan. Your line is now open..

Hey. Good morning..

Morning, Brian..

I just had a question about the new customer percentages with up a fair amount in full-service lease.

So want to get your thoughts on that, what drove it, and if that something you would expect to continue in the future and these customers community more amenable to using some of the other services quicker? 40 think that this has a slower higher number but maybe a little bit slower conversion when it comes to upselling a new cross-selling..

I'm sorry. I missed your question..

Just wondering how quickly you can cross sell or upsell the customer mix which is a bigger percentage of your full-service lease this quarter?.

No, that's been our focus the last several years is really how do we get that large market segment that hasn't outsourced yet to outsource. So for us it's been very encouraging that the numbers moved from 30% to 40%.

We related – one quarter doesn't make a trend that we would really like to see that number sustain and continue to move up from that level.

We've got a lot of focus around it Dennis and his team around getting after the large market that still is buying their own trucks and doing their own maintenance so 40% of the growth 40+ percent is a new milestone for us, so we're happy for that.

We also as you know Dennis and the team really rolled out two-and-a-half years ago this total cost of ownership tool the sales force is been using, and I think that's had a lot to do with some of the success that spurred along with the secular trends that are out there that are making it more difficult for them to do their own maintenance and by their own trucks.

But as an example, over the last two years the team has done over 10,000 TCO analyses with prospects. So that starts to chip away over time as customers really begin to see how much they can save by outsourcing versus doing things on their own. So I think we're beginning to see some of the benefit to that in some of the fruits of that labor..

Okay. Just as a follow up on that, do you think the 40% would be sustainable then if the fleet market were to remain softer and pricing wasn't as tight? Because if pricing wasn't as high or do you think that will just basically extend what you see is a longer secular trend? Thanks..

I don't have a crystal ball that but I will expected to be sustainable because the market is so large, and even in a down market summaries buying a truck and if we can save them money, that should be attractive for them.

So it's really is knocking on enough doors getting in front of enough people on enough fleets to be able to keep that number moving in the right direction..

Okay. Thanks for taking my questions..

Okay. Thank you, Brian..

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

Okay. Well, thank you, everyone. Great questions, and looking forward to seeing all of you over the next several weeks and certainly at our investor day. Thank you..

Thank you. That concludes today's conference call. Thank you for participating. You may now disconnect..