Robert S. Brunn - Vice President of Corporate Strategy & Investor Relations Robert E. Sanchez - Chairman, Chief Executive Officer and President Art A. Garcia - Chief Financial Officer and Executive Vice President John H. Williford - President of Global Supply Chain Solutions Dennis C. Cooke - President of Global Fleet Management Solutions

David G. Ross - Stifel, Nicolaus & Co., Inc., Research Division Todd C. Fowler - KeyBanc Capital Markets Inc., Research Division Anthony P. Gallo - Wells Fargo Securities, LLC, Research Division Benjamin J. Hartford - Robert W. Baird & Co. Incorporated, Research Division Arthur W. Hatfield - Raymond James & Associates, Inc., Research Division John R. Mims - FBR Capital Markets & Co., Research Division Scott H. Group - Wolfe Research, LLC Kevin W. Sterling - BB&T Capital Markets, Research Division Matthew S. Brooklier - Longbow Research LLC Justin Long - Stephens Inc., Research Division Nicholas J. Bender - Wunderlich Securities Inc., Research Division Ryan Mueller - The Buckingham Research Group Incorporated David P. Campbell - Thompson, Davis & Company

Good morning, and welcome to the Ryder System, Inc. Second Quarter 2013 Earnings Release Conference Call. [Operator Instructions] Today's call is being recorded. And if you have any objections, please disconnect at this time. I would like to introduce Mr. Bob Brunn, Vice President, Corporate Strategy and Investor Relations for Ryder. Mr. Brunn, you may begin.

Thanks very much. Good morning, and welcome to Ryder's second quarter 2013 earnings conference call. I'd like to remind you that during this presentation, you'll see here 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. 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; and John Williford, 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 2013 results, review the asset management area and discuss the current outlook for our business. We'll then open up the call for questions. With that, let's turn to an overview of our second quarter results. Net earnings per diluted share from continuing operations were $1.19 for the second quarter 2013, up from $0.91 in the prior-year period. Second quarter results included $0.06 of non-operating pension cost. The year-ago period included $0.18 of net expense related to non-operating pension cost and restructuring charges. Excluding these items in both periods, comparable earnings per share were $1.25 in the second quarter, up from $1.09 in the prior year, an improvement of $0.16 or 15%. Total revenue grew 3%. Operating revenue, which excludes FMS fuel and all subcontracted transportation revenue, was up by 4%. These revenue increases reflect new business and supply chain, as well as lease revenue growth. Page 5 includes some additional financials for the second quarter. The average number of diluted shares outstanding for the quarter increased by 1.2 million shares to 51.9 million. This reflects the temporary pause of our anti-dilutive share repurchase program that we discussed previously and is higher than planned due to increased employee stock activity. As of June 30, there were 52.3 million shares outstanding, of which 51.9 million are included in the diluted share calculation. Our second quarter 2013 tax rate was 35.7% and includes the impact of non-operating pension cost. Excluding this item, the comparable tax rate would be 36%. This rate is below the prior year comparable tax rate of 36.8%, reflecting a higher proportion of earnings in lower tax jurisdictions this year, as well as the impact of a prior year tax law change. Page 6 highlights…

Thanks, Robert. Turning to Page 11, year-to-date gross capital expenditures were just under $1 billion, that's down $328 million from the prior year. This decrease primarily reflects lower planned investments in our Commercial Rental fleet. Around lease capital, we're seeing a higher-than-planned percentage of sales being filled with new equipment versus used equipment. This is obviously a positive story, as we're contracting for longer terms. However, capital spend will be up. This additional spend offsets the impact of less-than-planned fleet growth. Around rental capital, given improved demand versus our initial expectations, we're going to spend a modest additional amount on U.S. rental purchases, partially offset by lower purchases in the U.K. As a result of these factors, we expect full year capital expenditures to be at the high end of our forecast range. We realized proceeds primarily from sales of revenue-earning equipment of $229 million, up by $30 million from the prior year. The increase reflects more units sold versus last year. Net capital expenditures decreased by $228 million to $760 million. Turning to the next page. We generated cash from operating activities of $564 million year-to-date. It was up by $92 million from the prior year. The improvement reflects lower working capital needs, higher earnings and lower pension contributions. We generated $841 million of total cash year-to-date, up by $7 million, reflecting higher operating cash flow in the current period, offset by a sale leaseback in the prior year. Cash payments for capital expenditures decreased by $256 million to $948 million year-to-date. The company had negative free cash flow of $107 million year-to-date. Free cash flow did improve by $263 million from the prior year due to higher cash from operations and lower rental capital spending. As a reminder, our original full year free cash flow forecast was for…

Thanks, Art. Page 15 summarizes key results for our asset management area. At quarter end, our used vehicle inventory for sale was 9,600 vehicles, up from 9,200 units in the same period last year. This is in line with the expected range that we previously communicated of 9,000 to 10,000 vehicles for 2013, reflecting the elevated lease vehicle replacement cycle. On a sequential basis, from the first quarter of 2013, ending inventories decreased by 400 units and are expected to be lower by year end. Pricing for used vehicles remained generally stable. Comparable -- compared with the second quarter of 2012, proceeds from vehicles sold were down 1% for tractors and up 2% for trucks, including heavier-than-normal wholesale volumes due to the replacement cycle. From a sequential standpoint, tractor pricing was down 3%, and truck pricing was up 1%. Excluding wholesaling, retail pricing was down 7% for tractors, primarily due to selling older units, and up 4% for trucks on a year-to-date basis. We plan to continue higher use of wholesale channels this year given our elevated inventory levels and our expectations for continued lease replacement activity. The number of leased vehicles that were extended beyond their original lease term decreased versus last year by almost 784 units or 20%. Early terminations of leased vehicles increased by 365 units, but remained well below pre-recessionary levels. Our average Commercial Rental fleet was down by 10% versus prior year and was unchanged from the first quarter. I'll turn now to Page 17 and cover our outlook and forecast. In fleet management, we saw nice improvement in full service lease revenue, driven by higher rates on new vehicle technology and better residual values. The lease fleet is somewhat below our expectations, reflecting nonrenewal of some low-margin trailers in the U.K., the impact of…

[Operator Instructions] The first question today is from David Ross with Stifel. David G. Ross - Stifel, Nicolaus & Co., Inc., Research Division: You talked about, in your lease comments, more efficient redeployment of off-lease vehicles. Can you just add a little more color on what that means?

Sure. If you remember, on the last call, we talked about -- as rental was coming in stronger than expected in the U.S., we would look to sell fewer units out of rental, so hold onto them a little longer, and we would also redeploy units coming off-lease into the rental product line. So over the last quarter, really through the year, we have done quite a bit more of that than we normally do. So that's accounted for about 800 additional units that otherwise would be in an off-lease status. So they'd be in the lease fleet count, but would not be earning revenue -- or, actually, earning revenue in rental now. David G. Ross - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And then, you talked about the on-demand maintenance product that I think you're testing with some larger customers. What exactly is the on-demand maintenance product, and how's that expected to get you more business or more profitability?

Sure. Well, as you know, we've been working on various new initiatives and new products to help us really solve customer problems and penetrate more of the non-outsourced market. One of those products that we've been piloting is really doing maintenance primarily targeted at the for-hire carrier market and just doing maintenance on those fleets. That is a very large market segment. We have found that many of those customers, although they have their own maintenance facilities, there's a lot of maintenance that they do with third parties, and we are looking to work with them to help them in that area. So far, we have a couple customers that we've been piloting, and the results are coming out pretty promising. So we expect that to grow. As I said, it's still a very small part of the total business, but I would expect in the coming years it to become a bigger part of the growth story. David G. Ross - Stifel, Nicolaus & Co., Inc., Research Division: Yes, I think there would be a lot of opportunity there. And then, just quickly on the supply-chain side of things. You mentioned dedicated being very strong. But on the more transportation management, supply chain logistics piece, what industry segments were strong? What regions, trade lanes might have been considered strong in the quarter and which might have underperformed?

John?

Yes. Well, we've had good growth in our CPG business segment and good growth in Mexico, have been the 2 highest growing areas. And then, we've -- our growth has been a little constrained by existing volumes in automotive. David G. Ross - Stifel, Nicolaus & Co., Inc., Research Division: So auto did very well the last couple of years, but it kind of isn't getting much better? Is that what you're seeing?

Yes. And the thing in automotive for us is we have -- while we have general exposure to almost all the car companies and all the Tier 1s, we have a little more exposure on certain projects that are aimed at certain plants, especially when we do all the trucking to supply a given plant. And we've had a couple of car companies with specific models and plants where the volumes are down, and that -- as you can see from our results, auto was only up 2% in the quarter, and that's what's holding us back a little bit there.

The next question is from Todd Fowler with KeyBanc Capital Markets.

I just wanted to come back to the discussion on the long-term leverage targets. And I guess, I was just curious, it obviously sounds like the pension impact is going to be favorable for the balance sheet at the end of the year, but -- so the decision to reduce the leverage targets, is that driven by the credit agencies, or is that a function of what's happening with interest rates? I'm just curious as to what the thinking behind that is right now.

Yes, Todd. This is Art. Yes, it's a combination of a lot of factors. Obviously, we had a long-standing target of 250% to 300% that was set many years ago before we actually were in that range. As we've been in the range over the last few years, we've obviously doubled our efforts to make sure we understand our standing within that. It is impacted to a certain extent by where pension is and where we expect it to be over a period of time. So in light of that, we took all those factors into account to determine what was the best range for us to maintain a solid investment-grade rating, as well as keeping the right access to the capital markets.

And then, does that push out the timing of when we could potentially see you come back into, at least, buying stock on the anti-dilutive side?

That is going to be an item -- as we've talked about, we paused it for this year. The plan would be to take a look at it again next year, and it's a combination of -- one of the reasons why we paused it was we wanted to reduce leverage a little bit to provide flexibility for acquisitions and the like. We haven't done any deals yet. But you're right, we're going to see benefits from pension. So we'll have to look at it as we move forward into next year.

Okay. And then, on the lease fleet, can you put a number around the number of trailers that came out from the U.K. during the quarter? I'm just kind of trying to get an idea of maybe what an implied organic growth rate would be if you excluded the mix impact.

Sure. If you look at -- we're down year-to-date, Todd, about 2,100 units and U.K. trailers is about 800 of those units. That's the ones that we had planned to take out. In addition to that, this redeployment of vehicles from lease into rental makes up another 800 units, as I mentioned earlier. So you got 1,600 of those units that are really these 2 activities. The balance of it is softer-than-expected results in terms of sales, and that's primarily in the U.K. As you know, the U.K. economy is extremely soft, and we're seeing the impact of some of that not only in rental but also in lease.

Okay. And then, Robert, so the comments about the lease fleet being consistent going forward, are there more trailers that are going to come out? Or what's kind of the mix impact, I guess, for the rest of the year as well?

Yes. For the balance of the year, we expect some more trailers to come out. There's going to be an additional 500 trailers between now and the end of the year in the U.K. And then, we expect again some additional softness in the U.K. really offsetting some fleet growth that we expect in the U.S. So the U.S., we expect fleet growth from this point in terms of lease, and it's going to be offset by some softness in the U.K.

And so, the mix of all that though should be favorable from a margin standpoint because you're trading out low-margin units on the trailer side with probably more normal margins -- or maybe even higher margin business in the U.S. because it's new equipment?

That's correct. The power is significantly more margin dollars, if you will, than the trailers. And these trailers are really related to the acquisition we did a few years ago. When we did the acquisition, we did it primarily for the power fleet that we could use to leverage our infrastructure. There was a trailer fleet that came along with it that we had originally planned we would certainly partially de-fleet over time.

Right, I remember that. Okay. And then, the last one I had and I'll turn it over, on the maintenance initiatives this year, I think, in your original guidance, when you had a range of $0.38 to $0.41 and part of that was on the fleet age coming down and then some internal initiatives on the maintenance side. I guess, I'm curious -- the comments in the release stated it sounded like that there's still some more benefit to recognize. Is the lease fleet age on track with your expectations and then you're still expecting something on the internal maintenance initiatives? And how does that impact margins for the rest of the year then?

Yes. Both of those have been built into the range that we gave. But, yes, we are seeing the benefit of the fleet getting younger. We are a little bit behind on the initiatives that we had laid out. If you remember, there was a couple of things driving that. One is that we had more units to outsource -- to out-service and sent to the used truck centers [ph], primarily in the first quarter. And then, there were some initiatives. The example I gave was really around we hired some additional technicians in order to do more work in-house versus sending it out to third parties. We still think that's the right thing to do. We're seeing benefits at least from an uptime standpoint with our units. But the cost benefit that we were expecting, we haven't gotten all of that yet. So that's an example of some of that.

Do you still expect to get the full amount, though, of the guidance this year? Or does some of that get pushed out?

We expect, by the end of the year, to start getting most of it. But, yes, the full dollar amount for the year we're going to be short.

Our next question is from Anthony Gallo with Wells Fargo.

Just on -- I guess, when a customer -- my first question is, when a customer moves from lease to dedicated, what does the internal accounting of that look like? I assume it moves -- revenue recognition you said [ph] moves from one division to the other. Is that correct?

Yes, you're going to see-- what happens there is the customer will then become a dedicated customer, will -- with the third-party revenue obviously being recognized there. But like with all the equipment in dedicated, it's leased from our FMS division. So you'll see FMS still have the truck on its books and then we have that line, equipment contribution, where we eliminate the inter-company profits, if you will.

Okay. So that's not going to have much of an influence, if we're trying to look at the size of the lease fleet. Correct?

Right. That shouldn't affect the lease fleet because it stays within the lease fleet.

Okay. And then, a question for John. You mentioned Mexico. Could you tell us what you're doing there right now? How much of the supply chain is Mexico? And are you involved with some of the auto business down there?

Yes. All our verticals have businesses in Mexico. We have a really -- I think we have a very strong competitive position in Mexico. We have a really nice setup. We have a multi-client warehousing in all the main cities in Mexico and also at all the border crossings in Mexico. We have a multi-client transportation network that connects all those cities and also runs cross-border to and from the U.S. We have a focus on the same type of customers we have in the U.S., so primarily auto, high-tech, CPG and retail. If you're looking for numbers, we did -- I think we did about $30 million of operating revenue in the second quarter and about $3 million of NBT in the second quarter...

What do you think those...

In Mexico.

What do you think those numbers were last year?

Excuse me? I missed that question.

The revenue in NBT, Q2 of '12 from Mexico?

Q2 of '12?

Yes, I'm just curious...

Q2 of '12 -- give me a second. Well, we grew about 9% in operating revenue, and we had very significant growth in profit, which is a number so high I'm not going to read.

The next question is from Ben Hartford with Baird. Benjamin J. Hartford - Robert W. Baird & Co. Incorporated, Research Division: Could I -- just looking at rental utilization and it being above 80%, the highest that we have on record. Why not better pricing on the rental product this quarter on a year-over-year basis? Maybe -- there is no accusation there. I'm just trying to get an understanding of how you guys are looking at utilization here above 80% relative to price and also wanting to maintain some of those engagements and hope to transition those over to lease. Can you talk a little bit about the logic there?

Right. I think you got the gist of it. It -- obviously, we'd like to run out and just raise rental rates tomorrow much higher. The issue is we're coming off -- remember, we were coming off of a year -- last year, we had -- we were in the opposite situation. We had too many vehicles. So it's a way of really doing it in a way that's digestible for the customer base. A portion of our rental business is with lease customers, where their rates are more contracted, if you will. So those take a little longer to move up. And on the spot market, we are moving them up. As a matter of fact, we had a rate increase that we rolled out towards the tail end of the second quarter that we'll start to see some more of that kick in, in the third and fourth quarter. Benjamin J. Hartford - Robert W. Baird & Co. Incorporated, Research Division: Okay. That's good. On these maintenance initiatives, some of the benefit being deferred into 2014, Robert, when do you think the full effect will be absorbed within the segment for the various initiatives, both the reduction in the fleet age -- or the normalization of the fleet age, I should say, plus the realization of these other initiatives? Is it mid-2014? Is it late 2014? Is it into 2015?

Yes, I think it's into early -- at least early 2015 for the replacement cycle. However, maintenance initiatives are an annual event. I mean, we do this every year. We identify things that we can do better and that we want to focus on in order to improve the operation to be more efficient, and you're going to see -- we've done it every year. You're going to see us continue to do that, so that's an ongoing just continuous improvement process. Benjamin J. Hartford - Robert W. Baird & Co. Incorporated, Research Division: Okay. And then, John, just a follow-up on the comment that you had made within auto. With respect to some of the challenges that you guys had model-specific or product-specific, is that just -- is that a function of the given OEMs' model, and it's something that when we get the change-over and we go toward the fall, those product-specific issues should normalize? Is it just something that is a function of the given product here in 2013, and it won't persist into 2014? How should we think about that?

Yes. I mean, like I said, we have such broad exposure to automotive. In the long term, it'll -- it has to normalize. I feel like we got some bad luck with a couple of plants, but it's not going to normalize in the second half. It should get -- actually, those couple situations should get a little bit worse in the second half of this year and maybe be a 1-point drag, 1 point in growth drag on us in the second half. Benjamin J. Hartford - Robert W. Baird & Co. Incorporated, Research Division: Okay. And then, if I could sneak 1 more question in. Robert, your perspective on the U.K. economy, we know it's soft, there's some leasing headwinds that you're experiencing there with some anecdotes generally about signs of bottoming in Europe. What is your sense about the U.K. economy and kind of where we are as it relates to the economic cycle?

Yes. I think if you look at it, GDP is still sub-1% they're expecting for this year. It does appear to be hitting the transportation sector more heavily because there -- the OEM production there of commercial equipment is down about 20%, 25% from their forecast at the beginning of the year. So we're seeing the impact of that not only on the rental side, but also on new lease sales. So I think it's moving sideways for now, and we'll see if things begin to improve here over the next -- over the balance of the year or certainly getting into 2014.

The next question is from Art Hatfield with Raymond James. Arthur W. Hatfield - Raymond James & Associates, Inc., Research Division: I apologize if I'm regurgitating anything, and I unfortunately got on the call late, but I kind of just want to go back to your decision to lower the targeted leverage range that you have. And could you comment on how maybe you think that may impact your position competitively? Or should we really be thinking about this going forward that if we get higher interest rates that really lower pension obligations is going to really wash out your -- going to still be able to grow the business?

Yes. Let me take a shot at that, Art. The decision to lower the range, as Art said, was really driven by our focus around maintaining a solid investment-grade rating, and that's something that, in order to be competitive in the marketplace, we believe we need to do. In terms of the impact on our lease pricing, it is very small. So I don't see that being a significant driver on lease. I think interest rates going up though are important because as interest rates rise, our pension liability will come down, and you will see a positive impact on our leverage. It will bring our leverage down quicker. So as that happens obviously, we get -- we start to get closer to a position where we could start to turn back on our anti-dilutive share repurchase program. So I think net-net, interest rates going up is more of a positive story for Ryder because of the impact that it's going to -- positive impact it will have on our pension. And as you know... Arthur W. Hatfield - Raymond James & Associates, Inc., Research Division: And that I think -- will that make you more competitive vis-à-vis some of the regional and kind of local competitors that you face in the marketplace?

It's hard to tell. I think our competitive advantage versus the local guys is much broader than just the interest rate side. It's purchasing leverage. It's leverage across all our facilities and our residual values as we sell vehicles through our used truck network. So those are probably bigger drivers in terms of the competitive advantage than just the interest rates.

Right. I think when you think about interest rates, for us, from a corporate view, pension has accounted for about 76 percentage points of our leverage right now. So as that -- that will come down as interest rates rise and it normalizes, it will just provide us with a lot more balance sheet flexibility and capacity to handle acquisition, growth and things like that.

The next question is from John Mims with FBR Capital Markets. John R. Mims - FBR Capital Markets & Co., Research Division: Robert, let me first follow up on the question Ben asked on utilization in the rental fleet. The timing, as far as modeling going forward with utilization versus price, how long does it take for that to roll over? I mean, could we see utilization stay at or near 80% over the next couple of quarters? Or do you see that switch into more rate and less utilization for the back half of the year?

Well, it's just, seasonally, you would expect utilization to remain strong in the third and the fourth quarter. We are at, historically, very high levels right now at 80%, so 80-plus-percent. So I would say barring any significant change in the economy or in activity, utilization levels should remain strong, certainly into the third quarter and most of the fourth quarter, really just dropping off post holiday in the fourth quarter. So I think that, that would be a reasonable assumption for the balance of the year. John R. Mims - FBR Capital Markets & Co., Research Division: But since we're, kind of, in uncharted territory here at 80%, how high is -- if you see that seasonal swing up, I mean, could you get a couple of hundred more basis points? Or is 85% out of the realm of possibility? Or...

No -- yes, we're probably at the peak levels here. If you can -- you may be able to swing up maybe another percentage point or so, but we are really in uncharted territory. I think most of the benefit will come from price uplift in the next couple of quarters, primarily around some of our more transactional-type customers. John R. Mims - FBR Capital Markets & Co., Research Division: Sure. Okay. That's fair. On the maintenance side, new contract maintenance versus contract-related maintenance, so your contract maintenance truck count, kind of, slid throughout the quarter, contract-related maintenance is growing. Are those tied together at all? I mean, is one pulling from the other? Or they're completely different products? That the growth in contract-related doesn't...

Yes. I don't think it's as simple as one's pulling from the other. I think there are just different products that we're beginning to offer now. In contract-related, as I mentioned earlier, we're beginning to offer and piloting this on-demand maintenance that maybe historically -- actually, historically, we probably wouldn't have been dealing with those customers. But you might have had more growth on the contract maintenance side. So I think they complement each other, and there different product offerings that we can offer different market segments. John R. Mims - FBR Capital Markets & Co., Research Division: Okay. With your contract-related still in line for double-digit-ish type of growth, but with the fleet count within the contract maintenance division, should that, kind of, reverse the trend that you saw in second quarter going forward? Or is there any kind of drivers there that we should be modeling or thinking about?

Yes, I think we're looking for -- I'll let Dennis elaborate or something else. But I think we're looking for generally flat-ish on the contract maintenance side for the balance of the year. Contract-related, I think, over time, certainly, I don't know the -- precisely what could happen in the third and fourth quarter. But over time, I think you should look for that to start to really increase as we are able to, over time, sell more of these new products and services.

Yes, I agree with that, Robert, which is that -- the contract maintenance, I'd say flat here as we're look into the second half. Contract-related maintenance, the pipelines are rich. I mean, there's a lot of people looking for somebody who has the ability to provide coverage throughout the country and can provide the same level of quality on an on-demand basis. So I think you're going to see the contract-related maintenance continue to increase over time.

Our next question is from Scott Group with Wolfe Research.

So when I think about the earnings waterfall chart you gave us in the beginning of the year. So it sounds like the taxes and share count are a $0.06, $0.07 headwind relative to that and you're taking up guidance a couple of pennies despite that, so underlying results a little bit better. Is that underlying better -- is that just on the rental side? I guess, my question is -- I'm not clear if FMS is -- on the contractual side is better or worse than you thought. I get that the fleet is lower than you thought. But is the pricing and margin better than you thought, and is that offsetting the lower fleet size?

Yes -- no, the margin is not better than we thought on the contractual side. I think the benefit is primarily coming from rental, and it's also coming from better results on the used vehicle side.

Okay. Got you. Fuel was down year-over-year and sequentially. What kind of impact do you think that had? I think, typically, you guys benefit a little bit when fuel is going up. Was that a few cents in the quarter?

No. I think fuel was primarily in line.

Yes, yes.

Okay, okay. And then, last couple of things. The -- when you talk about trailers being lower margin than power units, is this -- are we talking about like 100 basis points, or is it something more material directionally?

No, I think if you look at it in terms of margin dollars, so what they can contribute to the company, you're looking at -- in the case of these particular units in the U.K., you're looking at 20% to 30% of the contribution you would expect to get from a power unit.

Okay. That's really helpful. And just last thing, the -- so the last time we saw the rental utilization start to get towards peak-ish levels, we got excited that, well, eventually, that's going to spill over into the leasing side, and it never happened. Is there any reason to think it's going to happen this time? Or is this just more of the same -- we just don't really get why, and there's not more leasing even though rental is so strong?

Yes. Scott, that's a good question. This all gets back to the same theme we've had for the last several years. It's the uncertain economic environment that kind of seems to have fits and starts, right, and we're in an environment now -- last year, we're in an environment where rental really softened on us unexpectedly. Now we're seeing it, sort of, beginning to solidify some, which usually is an indication that there's some activity out there. But until there's more certainty, you don't start to see more of that conversion to lease, and that's really what, I think, is holding us back a bit. We're making good progress on a lot of our sales and marketing initiatives, especially here in the U.S., and we are seeing strong activity. Like I said, U.S. lease fleet, we expect to be up from where we are today by year end, and we're seeing good revenue and earnings growth in that product line. But really, the overall water table rising is probably more tied to economic certainty and really trying to get some more of that in the environment.

The next question is from Kevin Sterling with BB&T Capital Markets. Kevin W. Sterling - BB&T Capital Markets, Research Division: Robert, let me take that question a little bit further, of Scott's. As you talk to customers, given the uncertain macro, are they asking for shorter-term leases, or they just -- it seems like they're mainly sticking with Commercial Rental for the time being?

Yes. I'll pass that to Dennis in a minute. I think you're -- they are asking for shorter-term leases, which we provide. We have several products that we offer, either taking a mid-life equipment from the rental fleet and leasing that or providing them some shorter-term products. However, we are seeing certainly a percentage of the customers that are just saying, "You know what? For the short term, I'm just going to go ahead and rent and wait it out a bit more." Now as we get the benefits of some of the more -- the new fuel efficiency on the newer units, I think that's helping us. But you're in a position right now where it really hasn't tipped the scales completely to help us with the growth that we're looking for. And, Dennis, do you want to elaborate on that?

I think that's right. I think the fuel-efficient spec is helping with the interest. But again, it comes back to economic uncertainty with the willingness to commit longer term. So we're focused on providing the flexibility that's needed, not only in terms of shorter-term lease, but even -- and I'll go back to the on-demand product. If somebody wants to hold onto a vehicle, but they're struggling with getting the maintenance quality that they need, we offer that product to them. And oftentimes, that's leading to an opportunity then to move into lease. So again, I think if you get a little more economic certainty, I think you start to see people look more at the lease product. Kevin W. Sterling - BB&T Capital Markets, Research Division: Right. Okay. And so, it sounds like your Commercial Rental duration is longer too. Is that right? Customers renting for a longer period of time, whether over weekends or even a couple of weeks at a time. Is that the right way to think about it?

Well, usually, Kevin, when you get into an environment like this, they do because they don't want to lose the vehicle. When you get into this kind of an environment, they know that if they return it, it may get rented to somebody else. So if for no other reason, you're seeing that. But you're right, I think, intuitively, you would expect that in an environment like this, where they're substituting it for a vehicle they would otherwise own or lease, they'd be renting it for longer. Kevin W. Sterling - BB&T Capital Markets, Research Division: Okay. And, Robert, let me kind of follow up there. Commercial Rental obviously was doing well. You talked about the high utilization. Do you worry about building the rental fleet too much, and we get into a situation like we saw a year ago where you grew your rental fleet and then all of a sudden, the rental demand just hit a cliff and dropped off? Or maybe this year, it's a little bit different. You're just not growing your fleet that fast and just keeping utilization above that 80% level?

Yes. Let me -- I'll hand it over to Dennis. I'll just tell you that, just as a data point, we are not looking to grow the fleet from where it is today, where otherwise we might have had some movement down. So what we're doing is we're keeping it steady. So we're not having a big growth. And then, more importantly, where the vehicles are coming from is we're not running out and buying a whole lot of new vehicles. We're buying some, but a lot of it are redeployed.

Yes. Kevin, I would just add that we have been really focused on our asset management because of the concerns to not get into the position that we were in last year. So as Robert mentioned earlier, we've been focused on moving units from the surplus category or lease surplus over into rental, and we've been driving that very aggressively. And the reason for doing that is better asset utilization. In fact, we don't want to be in a position that we're in last year. So as we mentioned in Robert's opening comments, we've grown the rental fleet some from new vehicles, but a very small amount. It's been a lot of movement from the non-revenue generating lease category over into rental for the very reason, the very concern that you described. Kevin W. Sterling - BB&T Capital Markets, Research Division: Okay. Great. And then, 1 last question, just going down a different path here. Do you guys see -- what's the opportunity for you in the energy space with the growth in frac-ing and the oil plays coming from the shales? Could you just maybe talk a little bit about if there is an opportunity for you in energy?

Sure. I'll -- let me hand it over to John because John has one of the initiatives that he has. We're talking about new initiatives and new products that we're working on. One of his initiatives has been around really penetrating that oil and gas sector with some of our dedicated offerings. So I'll let John expand on it.

Yes. And we've had a pretty successful oil and gas initiative, mostly in our Ryder dedicated business, where we -- at a high level, we kind of combined 3 different things. We have a management -- we call it LLP, Lead Logistics Provider service, where we help oil and gas companies manage the flow of materials and products in and out of a field and within a field, including repair, parts and other products, except not bulk oil. And then, we combine that with offering Ryder dedicated services, and we've gotten a lot of new sales in this area in our dedicated business for those kinds of customers in those fields. And then, we have a very small, transactional trucking business that does flatbed trucking in one of the fields, and that's kind of an experiment to see if we can combine some transactional business -- very specialized, small transactional business in areas we're very strong in to, kind of, leverage our strength. And so, those 3 products are really successful right now and driving a little bit of growth for us in Ryder dedicated.

Our next question is from Matt Brooklier with Longbow Research.

I just wanted to quickly clarify something, I think, Robert said earlier on the Commercial Rental fleet. We're at roughly, I think, 38,000 units at the end of the quarter. The expectations are that we don't grow any further from here, or we're just not adding, I guess, new equipment to that -- to the Commercial Rental fleet?

Yes, we're at 38,000. We're going to be right about that at the end of the year. So we're not going to add a whole lot to the Commercial Rental fleet between now and then.

All right. That's helpful. And then, aside from maybe a little bit of uncertainty driving customers to use rental a little bit more than the lease product, could you also talk to what verticals within rental are feeling stronger or doing a little bit better, where you're actually seeing some, I guess, net positive activity?

No, I think -- it's interesting. It's been -- it's really across the board. We're seeing rental really pick up. Obviously, Superstorm Sandy helped some of that in the last several quarters, but it's really been strong utilization across sectors and really across regions in the country, and I think that's just generally the combination of some economic activity with a lot of uncertainty. And it's really driving some of what we're seeing.

Okay. And then, it may potentially be a little bit too early, but hours of service, the change there, is that a potential opportunity for Ryder on the rental or lease side? How are you thinking about that? And have you seen, I guess, a change in the marketplace since that rule went into effect beginning of July?

Yes. We haven't seen a big impact from that yet. Certainly, in our own dedicated business, we didn't see a big impact. As you know, most of our dedicated business is closed-loop, and drivers are usually back home each night, so not a big impact from those changes. But, no, I couldn't say that, in our rental fleet, we have seen any significant change from that.

Our next question is from Justin Long with Stephens.

You touched on the balance sheet earlier. But based on where it stands today, I was wondering if you could talk about the possibility of an acquisition in the near term. Are you still looking at opportunities today? And also, could you just talk about the level of activity, in general, that you're seeing out there in the M&A market?

Yes. First of all, to your first question, the level of interest we always -- we're always interested in acquisitions both in the FMS side, tuck-in type acquisitions, and then on the supply-chain side to really expand our service offerings. And I would tell you, there's still activity. But as you know, historically, these things, it depends on when an owner is ready to do something. Usually, it gets to transition periods and times when a seller is ready to sell. So it's hard to predict exactly when those are going to happen. And I think the important thing to know is that we're out there in the market and we continue to be, and we continue to be actively looking for opportunities.

Okay. Great. And one on D&A [ph]. I know you're benefiting this year from the increase to residual values. But could you remind us of the expected year-over-year benefit in 2013? And now that we're a couple of quarters into the year, has there been any change to that?

Yes, year-to-date it's probably about $15 million, I want to say, something like that. So you could just double that for the full year, and so it's $28 million, $30 million type of benefit year-over-year. That will be an item that we'll look to each year. We adjust our residuals, factoring in what current pricing is doing. So as we've talked about, pricing continues to be stable and at historically high levels. So everything else being equal, you'd expect me to have some upside as we go into next year around that item.

Our next question is from Nicholas Bender with Wunderlich Securities.

You mentioned a step-down in used vehicle inventory by the end of the year. Is that sort of a linear progression we're going to see in the third and fourth quarter? Or do you just expect to be down to a more typical, sort of, range on the used vehicle side at the end of the year?

Yes -- no, I -- it's hard to tell if it was going to be linear or maybe a little in more one quarter or the other. But I think, generally, what we're -- the message there is that we are seeing that improve, right? We were at levels that were certainly higher than what we'd like to be. Last quarter, we were at 10,000. Our range is 6,000 to 8,000. So we've been wholesaling more than we would like to as a result of those elevated levels. So the good news is as we continue to come down, you should see a -- there'll be -- there should be less wholesale activity happening, especially as we get into next year. So I think that's generally a positive trend.

Yes, understood. Definitely. It's certainly the on-demand maintenance offering is an exciting opportunity for you guys. Is there much capital investment there over the next couple of quarters as you, sort of, are ramping that in the pilot stage?

No. One of the beauties of this -- of that product is there's really -- the capital investment is very little because you don't -- you're not buying the trucks. In that type of a situation what we're doing is we are maintaining the vehicles for a customer based on pre-negotiated rates. But there -- but the work is done and paid by the job. So a customer comes in, we give them an estimate of what it's going to take. They agree to do the work. We do the work, and then we bill them. So there is no -- we don't own the vehicle. We don't lease it to them. The revenue and dollars per vehicle are much less than a Full Service Lease as you might imagine because there's not the reinvestment in the -- there's not the investment in the vehicle, but the return on capital is dramatically higher and it allows us to leverage our network infrastructure and really bring incremental revenue and earnings for the company. So I want to make sure I'm clear. We're still in the early stages of this. But the reason we've mentioned it is because we are getting positive results from it, and we're -- we really believe that, over the next several years, that could begin to drive more -- some of the growth story in -- on the FMS side.

Right. And that definitely seems to make sense longer term as you just sort of layer it on the current network. Just a quick follow-up for John, real quick on the SCS side. I know we talked a lot about auto on the call today. Can you talk a little bit about trends you're seeing in tech, which directionally seems to be a little bit encouraging this quarter, and also in industrial that saw the nice jump year-over-year, if there's anything specific there, if you're having a particular success in [indiscernible].

Yes, I'm glad you asked that question because, earlier, I was asked which segments were we getting the strongest growth in, and I neglected to mention industrial. We have landed a fair number of new projects in industrial. Some of that -- that's related to oil and gas. Some of it is related to taking our skills and -- largely from automotive and applying them to large industrial companies who have big plants in the U.S. and doing those same kind of logistics projects for those customers. That's helped us a lot this year as well. So that -- all of that has helped our new sales to grow dramatically. I mean, our new sales have been up almost 40%. Basically, since the last -- since the middle of last year, new sales growth has been stronger than it had been historically. So that's the industrial answer. And then, what was the first part of your question again?

Just directionally with the revenue in the tech segment?

Oh, tech. Yes. So tech had been down -- I mean, the thing holding back tech is if you're not making tablets or you're -- or cell phones, you're not doing -- and you're a manufacturer then your growth has been down. And if you're doing logistics for those companies, your growth had been down as well, and that's been -- that had been holding us back. I think we've kind of bottomed out on that. You can see that in our results, and we are landing new customers. And I think our traditional tech companies, their volumes seemed -- hopefully, have bottomed out as well. So we should see little better results in tech going forward.

Our next question is from Jeff Kauffman with Buckingham Research.

This is Ryan Mueller on for Jeff Kauffman. Just quickly, with the guidance of negative $190 million of free cash flow this year, when do you expect free cash flow to turn positive? I wanted to know just kind of how much free cash flow you see generating over the next decade compared to the last decade and where you think the level of free cash flow can get to?

Yes. Jeff (sic) [Ryan], you were kind of breaking up a little bit, but I think your question is about free cash flow and we're guiding towards a negative $190 million. And I think your question is, when do we expect to be cash flow positive? Without really doing the full plans for the next couple of years, I think just intuitively, next year -- this was a heavy replacement cycle this year. We expect some of that to roll into 2014, which as you start having this heavier replacement, that negatively impacts free cash flow. So we would expect improvement next year. And then, I can't tell you whether it'd be positive or not yet. But certainly, as we get into 2015, you would expect to see some positive free cash flow.

Right. Ryan, I think one thing you want to factor in is that there is a big premium on replacement activity. Trucks cost 40% to 50% more than what the -- the ones we're replacing. So even though next year may be a lower replacement process, we're still going to have a decent amount of growth spend within there because the premium is large. So that's going to play out here over the next couple of years, and that then will impact what our free cash flow really looks like. But Robert is right, we should see less lease replacement next year. This year, the rental spend is fairly low. It's below maintenance levels. So we'd expect, everything else being equal, that, that would probably rise over time.

Our next question is from David Campbell with Thompson, Davis & Company. David P. Campbell - Thompson, Davis & Company: I just wanted to check on your statement about lease vehicle sales in the last 6 months. I think I heard that you said it would be down. But I can't remember, down from the first 6 months or down from a year ago?

No, the -- you're talking about the lease fleet? David P. Campbell - Thompson, Davis & Company: Yes -- so the vehicle sales. The vehicle sales.

Oh, used vehicle sales? David P. Campbell - Thompson, Davis & Company: Yes.

Used vehicle sales are -- on a net-net, are actually slightly positive year-over-year. David P. Campbell - Thompson, Davis & Company: In the last 6 months?

Yes. Oh, you might be thinking about inventory. Our inventory will be down. That's what we said. The inventory of used vehicles will be down from where we are today. So we're at -- today, we're at 9,600 units. We expect that, by end of the year, to be lower, which is a good thing because we're currently above our target range of 6,000 to 8,000. David P. Campbell - Thompson, Davis & Company: Right. And that means that your vehicle sales will be down in the last 6 months?

No, vehicle sales results won't be down because we're still selling -- we've got plenty to sell. So we're selling the inventory that we have, and we're -- as that inventory gets closer to our target levels, you'll see us do more retail and less wholesale, which should be a positive.

And that concludes the question-and-answer session. I would like to turn the call over to Mr. Robert Sanchez.

Great. Thank you, all. I appreciate everybody getting on the call. I think we're a little bit beyond the top of the hour, but I wanted to make sure that we answered every call that was out there and -- every question that was out there, I'm sorry. And I wish everybody a great day and look forward to seeing you as we get on the road.

Thank you. This does conclude today's conference. Thank you very much for joining. You may disconnect at this time.