Good morning. And welcome to the Ryder Systems, Inc. Third Quarter 2014 Earnings Release Conference Call. All lines are in a listen-only mode until after the presentation. (Operator Instructions). Today’s call is being recorded. 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 third quarter 2014 earnings conference call. I’d like to remind you that during this presentation you will 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. 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 third quarter 2014 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 third quarter results. Comparable earnings per share from continuing operations were a record $1.63 for the third quarter of 2014, up from $1.46 in the prior year. This is an improvement of $0.17 or 12%. Third quarter comparable results exclude non-operating and other pension-related costs. We came in at the top-end of our third quarter forecast range of $1.58 to $1.63. Our performance was driven by Fleet Management where we realized strong used vehicle sales and commercial rental results, as well as higher full service lease results. Strength in FMS was partially offset by Supply Chain which was expected to be down this quarter. Operating revenue, which excludes FMS fuel and all subcontracted transportation revenue was up by 5% to a record $1.42 billion in the third quarter. Revenue growth was driven by Fleet Management, which accelerated to 7% growth. Page 5 includes some additional financial information for the third quarter. The average number of diluted shares outstanding for the quarter increased by 800,000 shares to $53 million, this reflects the pause in our anti-dilutive share repurchase program last year. In December 2013, we announced a new 2 million share anti-dilutive repurchase program and started buying under the program in early February. During the third quarter, we bought 143,000 shares at an average price of $89.85. To-date we’ve purchased 1.2 million shares at an average price of $78.90 under this program. Excluding non-operating pension cost, the comparable tax rate was 35.4%, above the prior year of 34.1%. The increased rate reflects the lower non-deductible…

Thanks, Robert. Turning to page 11; year-to-date gross capital expenditures were $1.74 billion, up nearly $240 million from the prior year. This increase reflects planned investments in our rental fleet in light of strong demand. We realized proceeds primarily from sales of revenue earning equipment of around $400 million, up by $60 million from the prior year. The increase reflects higher sales prices per vehicle. During the third quarter we also realized proceeds of $126 million from a planned sale leaseback of revenue earning equipment purchased earlier this year. We executed a larger than planned transaction this quarter due to attractive lease financing rates. Year-to-date, net capital expenditures increased by $55 million to $1.2 billion. Turning to the next page, we generated cash from operating activities of $975 million year-to-date, up $85 million or 10% from the prior year. This increase was driven primarily by higher cash-based earnings and lower working capital needs, partially offset by the timing of annual pension contributions. We generated $1.54 billion of total cash year-to-date, up about $250 million from the prior year, primarily due to the sale-leaseback, higher operating cash flow and higher sales proceeds. Cash payments for capital expenditures increased by almost $250 million to $1.74 billion year-to-date. Company had negative free cash flow of $197 million year-to-date compared to negative $206 million the prior year. Higher planned spending on rental vehicles compared to the prior year was offset by the sale-leaseback transaction, stronger used vehicle proceeds and higher cash from operations. Our full year outlook for free cash flow was unchanged at negative $300 million. Page 13 addresses our debt-to-equity position. Total obligations of $4.7 billion increased by almost $420 million from year-end 2013, total obligations as a percent to equity at the end of quarter were 237%, up from 226% at…

Thanks, Art. Page 15 summarizes key results from our asset management area. Used vehicle inventory held for sale was 5,800 vehicles, significantly down from 8,200 units in the prior year and 500 units below the second quarter. Used vehicle inventory is at the low-end of our target range of 6,000 to 8,000 vehicles. Pricing for used vehicles was strong for both tractors and trucks. Compared with the third quarter of 2013, proceeds from vehicles sold were up 16% for tractors and up 14% for trucks. From a sequential standpoint, tractor pricing was up 1% and truck pricing was down 2%. We saw improved pricing in all used vehicle sales channels. We’ve also shifted more of our sales to retail instead of wholesale now that inventories are at normalized levels following elevated inventories in the prior years. The number of leased vehicles that were extended beyond their original lease terms decreased versus last year by around 360 units or 7% and remains below recessionary levels. Early terminations of leased vehicles increased slightly by about 100 units and also remained well below recessionary levels. I will turn now to page 17 and cover our outlook and forecast. Our full year earnings outlook remains on track due to a strong performance from Fleet Management Solutions partially offset by lower supply chain results. We are seeing strong performance in both used vehicle sales and rental in October and we expect these trends to continue. As previously announced, we increased rental capacity in vehicle classes with high demand by purchasing a modest number of new units. We expect our full year average rental fleet to grow by 6%, up from our previously forecast 5%. Our year end fleet should grow by 5%, up from our prior forecast of 4%. In terms of pricing, we now…

Thank you. (Operator Instructions). And the first question comes from Todd Fowler with KeyBanc Capital Markets. Your line is open.

Great, thanks. Good morning. And thank you for taking my questions. Robert, I just wanted to make sure I understand the comments on the lease fleet expectations; the guidance is still for 2,500 units organically excluding the UK trailers. Our math is that you got about 1,000 on the books through the third quarter so that implies 1,500 into the fourth quarter. Can you talk about the timing of that and why it’s kind of a little bit more fourth quarter weighted than maybe what we were expecting in the middle part of the year?

Yes. Good morning, Todd. Your math is right. We’re 1,000 into the 2,500. We’re expecting 1,500 in the fourth quarter. It really has to do with the timing of new business signed and when the lost business comes in. If you recall, last year fourth quarter we also had a pretty big uplift at the end of the year. So I can’t say that happens every year, but it just have to do with the timing of when customer sign the new business.

So nothing unusual or no kind of change in what you’re seeing it’s just it’s the timing of kind of when it actually gets into the fleet?

Yes. We saw -- I mean if you recall throughout the year we talked about the second quarter was a very strong sales year. I mean sales quarter. We talked about that last quarter and remember we said that June was the record -- was a record sales quarter. So, you do have some of that that kind of usually takes 90 days to kick in and that will -- we’ll see that kicking in the fourth quarter. So, that would be probably the only data point that you can look at. Other than that we still saw very healthy sales in the third quarter and we’re expecting also continued healthy sales in the fourth.

Okay. And then my second question on the rental pricing commentary. It sounds like from the prepared remarks that there were some mix issues during the quarter and I know that you’ve increased the rental fleet with the vehicle types where there is the most demand, it feels like that the rental pricing expectations for the year are a little bit lower than where they were previously. Is that mostly mix or can you talk about what’s happening with the rental pricing environment? Thank you.

Yes, it’s really all mix. As we mentioned, we are renting more to national customers, which -- with those customers you’re going to have a slightly lower rate, but you’re going to have better utilizations, they’re going to take the units for a longer period of time. So that’s really the primary. Dennis [is there] any color on what we’re seeing in rental today and how that’s shaping up?

No, just the national customers, Todd, we’re seeing strong demand from them. And you’ll tend to have higher utilization, but a lower rate with them. Also the lease support activity is strong. We have customers who are waiting their lease product to come in and then we’ve got rental units with them and they will be renting at lower rates also. So, it’s an excess driving.

And Dennis is there any color as to why the national customers have been so strong recently?

It’s seasonal. And we were seeing a lot of the major national customers who are taking units sooner as we prepare for the holiday season. So that’s really what we’re seeing. It’s just an uptick in national in general.

Okay. That makes sense. Thanks a lot for the time this morning.

Thanks Todd.

Thank you. And our next question comes from Ben Hartford with Robert W. Baird. Your line is open.

Hey, good morning guys. I guess if we could just think about 2015 for the moment and I’m just interested in terms of learning how you’re going to balance the dynamics between rental and lease into ‘15; it sounds pretty clear that you have momentum on the full-service lease fleet side. But what is an early approach or just kind of a summary of how you think about the business, Robert thinking about this cycle balancing rental demand which remains healthy, but certainly there is probably a bias toward converting rental customers to longer-term leases plus you have marketing campaigns and several initiatives to help grow that lease fleet in ‘15 and beyond. So, maybe just talk about how you think about those two products comingled as we head into ‘15 and kind of look through the balance of how long this maybe?

Yes. I’d say, Ben without getting too deep into 2015, I think it’s clear that we’re going to really be looking for growth in both. We’re going to be looking for as the economy continues to move at least in the right direction rentals should continue to be pretty healthy going into 2015. We still haven’t made our pick yet of exactly what we’re going to do in terms of growth, but if things continue the way they are, I would expect continued growth in rental and in full service lease, it’s what we’ve seen the last now year and a quarter at least where lease sales have really strengthened. Customers are feeling more confident about being able to sign up to longer-term leases because there is a little more confident in the economy and also the fuel efficiency benefits that they’re getting from the vehicles is helping us. Marry that with the efforts we have around converting ownership accounts and non-outsourced accounts into full service leasing, those things are just in the early stages still. So I would expect us to really continue to see increased growth in full service lease and in our other product lines. So, I guess the simple answer is we’re going to be looking for growth in both.

Okay. That’s helpful. And then I guess John, congratulations on the announced retirement. Robert, can you give us an update in terms of what you’re thinking about the leadership transition within SCS maybe just an update on from the announcement a couple of months ago?

Sure. We’re fortunate that John has given us an extended time to be able to make sure that we make the right decisions around that. We are interviewing external candidates and also internal candidates and we feel confident that we’ll have a person in place certainly well before John’s retirement date of end of March, but we’re still trying to find a clone for John, but haven’t found that technology yet.

Well done. Thanks for the time.

Thanks.

Next is Art Hatfield with Raymond James. Your line is open.

Thank you. Hey, morning everyone.

Good morning.

Hey Robert, looking at FMS, the NBT margins at 13% in the quarter, very strong, but you’re kind of in the last couple of quarters back to those pre-recession levels. How do we think about FMS going forward? Are we kind of at a peak margin level and we’re going to be relied on top-line growth or is portions of that business still underperforming and can raise that level of performance?

Yes. No, I think growth is certainly going to be a factor going forward on earnings expansion. As we look to the fourth quarter and certainly to 2015, we expect less of the benefit to come from gains and more of it to come from the core business, the core product lines if you will. But you also have to keep in mind that is as used vehicle sales has continued to strengthen, that is going to translate into more depreciation benefit as we raise residuals into 2015 because we’re going to not clearly be adding a very strong used vehicle sales here to our five year look back, while we’re going to be dropping off a pretty weak year. So, you’re going certainly get some earnings impact from that. As we continue to refine our maintenance expertise around the new technology, we expect to continue to see benefit each year from that. And then the new products, as Dennis and his team really finalize the changes that we’re making for on-demand and we start to see that product really get launched next year and customers start signing up for that, we’re really encouraged. We think that certainly the testing we’ve done with customers in the marketplace for acceptance for this product is very high. And we would expect to see benefits that are going to help the margin on the FMS side there. So, we expect that we will over this next several years be able to get beyond our current levels.

Okay. And my second question, I want to go to the pension thing, a couple of things about that if I can understand. The number Art that you gave out the $300 million plus, is that the vested portion or is that the accumulated or projected liability portion for those employees? And then secondly is that, can you address why you’re only offering us to 20% of the pension fund participants as opposed to a higher number or even conversely I guess the lower number?

Right. So the 370, Art, represents the pension benefit obligation for those employees, which are the terminated vested employees. So that we’re really offering effectively to all of our term vested employees and that represents just about 20% of our obligation; the rest is associated with current retirees and then also active employees.

Okay. Very good. That helps me a lot. Thank you.

Okay. You got it.

Next is from Scott Group with Wolfe Research. Your line is open.

Hi, thanks. Good morning, guys.

Hey. Good morning, Scott.

So, you mentioned a couple of times less benefit from gains. Just want to make sure I understand, are you saying less of an increasing in gains or you think gains turn negative year-over-year, I’m thinking more about 15?

No, no, less of an increase. Because if you think about last year, we started to see gains kick in last year and then the year-over-year comps now are going to get tougher in the fourth quarter. As we get into next year, it could come down, but that will be -- that should be offset by benefit we’re going to get in depreciation expense. So, I would see those two as maybe being a slight net positive next year.

So the increase in depreciation, sorry, the reduction in depreciation or gains on sales maybe come down is the net positive?

We should be a net positive.

Okay.

Yes. We expect the benefit around residual value changes to exceed any impact from reduced gains on a year-over-year basis.

Okay. That makes sense. On the fleet growth -- so I think there is a lot of hope that it’s going to show up, but what’s the realistic piece of growth to expect. I think the fleet is up by 2% year-over-year. If this works -- your strategy of getting more growth, should we be thinking 2% kind of fleet growth or couldn’t this get to a 4% 5% fleet growth in the year?

Yes. I think longer term, I don’t know if it’s next year or the following year, but certainly our goal here is to get the fleet growth up certainly beyond the 2% whether it’s 3%, 4% or 5%, but we want to see. You’ve got a huge segment of the market, that’s 90% that is out there. If we can start shipping away that, it’s certainly realistic to expect that the numbers would look more like a 3% or 4% maybe even 5% overtime.

And when do you think that happens or can happen?

I think continued progress. Look last year we grew -- if you exclude UK trailers, last year Dennis and his team grew the lease fleet 1,700 units. This year we’re targeting 25. So, I would expect that 25 next year to be great. And I don’t -- not into yet exactly what that number is going to be, but continued progress. Dennis and his team have done a great job of beginning to focus the sales force in this area. We’re still selling about a third of what our growth is from private fleet conversions. But we expect that overtime to continue to be greater. And Dennis has a total cost of ownership tool that he has rolled out to his sales force. More recently, we’ve made some adjustments to the commission plan to encourage more of the conversion. So, I think all of these things overtime are going to lead to more focus and more growth in that side of the business.

Okay. Thank you, guys.

Thank you, Scott.

Next question comes from Jeff Kauffman with Buckingham Research. Your line is open.

Thank you very much. Hi everyone.

Hey Jeff. Good morning.

Good morning. Can I focus a little bit on CSS because between the allocated [$11.5] million and it looks like there was a big jump in the unallocated. Could you talk a little bit more -- I know you said technology investments and some other things. But talk a little bit more about what driving those numbers up and kind of where we should be thinking in, in terms of where they level out?

Yes Jeff, the price that we talked about in the release it’s a combination of higher sales and marketing costs as we’ve started the initiatives really that we announced over the last few months, as well as the investments in technology that is really key to our business going forward. So, it was maybe a little more pronounced this quarter since some of the marketing was maybe more centralized in the third quarter. As we look out, I mean over the near-term, we would not expect those kinds of year-over-year comps to play out in the fourth quarter. We expect it to be more much more in line with the prior year from an unallocated spending perspective.

Okay. So, I guess you’re saying I should probably see 60 to fall back a little bit as the unallocated normalizes?

Yes.

Okay. And on the dedicated side, you gave us a little glimpse into what was going on Supply Chain, but it looks like though the revenue per vehicle on the dedicated side was down about 2%, is that fuel related, is that mix related. What would be causing that type of change because that number has been a positive number?

Yes. Fuel represents about two percentage points of growth. So, the fuel price being down would represent 2% of that.

Jeff, I think if you back that out, it’s flat. And the rest of it’s mix, because we have different revenue per vehicles at different types of accounts. So, the rest of the variation is going to be mix and then of course, if the loss business is a slightly different type of project which it was, then that will also affect the total.

Okay.

We are -- cost increases that we see, what you’re getting at, are we passing on cost increases, we are. And when we, to the extent that we’re experiencing wage rate increases, we are able to pass on to our customers by and large.

I’m seeing the margin better, but this -- the dedicated growth rate is a little bit slower than the rest of the industry, historically little stronger than this. So, is this a function of, we’re slowing our growth because the drivers are tough to get, so we’re our slowing down sidings or is it just more kind of seasonal mix customer related?

Well, we definitely don’t see ourselves as growing slower than the market or growing slower in dedicated in general. You are seeing lost business and we’re quoting to dedicated here, which really automotive trucking.

Okay.

And that’s definitely putting a dent in the dedicated, what we’re reporting as the dedicated growth rate. If you look at our new sales in dedicated, they are more than double what they were a few years ago. So, and that’s the market that you’re seeing with other companies as well. And it’s also from the efforts of working with FMS on converting private fleets to dedicated. And I think we will continue to see that going forward.

Okay. Thanks John. So, what you’re saying is mostly optics is what I’m saying.

You’re seeing a lot of; the auto is kind of messing with the optics a little bit, yes.

Yes, and I think just to add to what John said, Jeff. There is strong sales activity in dedicated, I think it’s also a matter of timing of when the new business ramps up versus the loss business that we saw in auto. And once those -- once we start to get some of these new accounts ramped up and implemented, you’ll start to see that growth start to pick up again in 2015.

Okay, guys. Thanks.

Thanks Jeff.

Next question is David Ross with Stifel. Your line is open.

Yes, thanks. Good morning, gentlemen.

Good morning.

Good morning, David.

Robert, with the strong used vehicle sales and good pricing right now, could you remind us how you’re estimating residual value and new contracts that are signed, is it assumed that current used price or rolling average?

No, it’s the same thing we talked about for depreciation part; it’s a five year rolling average. So we don’t -- we certainly aren’t putting the current pricing in there, we’re using a five year -- although, it has been coming up as you might imagine, which is helping us get more competitive on the leases. But it’s the same methodology we’ve used for a long time which is a five year rolling average.

Okay. And then as far as the new contracts that are being signed for full service lease, is the average contract in terms of number of trucks moving significantly one way or the other? Put another way, are you attracting more smaller customers or more bigger customers?

Yes. I don’t think there has been a big movement. I think the one thing we are seeing and we talked a little bit about it in the second quarter call was we had a big account that we signed contract maintenance. So, we are seeing both large and small customers; some may go to full service lease, some may go to contract maintenance, and some may go to on-demand. So I think the one thing we’re just getting our arms around here and I think as over the next few years it will play out is what products customers decide to go to. And I think the important thing is that we’re expanding the number of offerings. So, we have a broader selection and we can attract more customers and each of those products will be profitable. But no, we’re really -- we’re trying to be broad about who we go after and some of these new products that we’re coming out with are really to target some of the larger fleets.

Excellent thanks.

Thank you.

Thank you, David.

Next is Thomas Kim with Goldman Sachs. Your line is open.

Thank you. Can I ask on your thoughts on rising interest rates and your ability to pass along the higher cost of borrower to customers? How sort of dynamic is your pricing when you sign new contracts in an environment where over the next five years the probability rate is going up -- would seem will be high? Thanks.

We really update -- we update our interest rate and pricing, we can update it on a real time basis almost. So as interest rates change, we make updates to our cost of capital that gets priced into the next lease. And we don’t buy a truck until we have a signed lease. So we really do match the interest rate that we’re charging the customer with the interest rate that we’re getting in our empty end. So, it’s really pretty tightly match funded.

What percentage of your debt is on variable?

25% Tom.

25. Okay, all right. Great. That’s very helpful. And then, can I just touch on some of the questions with regard to driver shortages? Obviously this isn’t necessarily a huge problem or challenge for you per se but kind of going back one of the earlier questions I was kind of alluding to possibly seeing maybe a bit of damp in growth maybe your customers are facing driver shortages. To what extent can you comment on that being a potential to the headwind for either obviously specifically related to FSL or even on the rental side?

I’ll let John elaborate on this in a second, but I do want to reiterate the fact that in a lot of ways this driver shortage is actually a good thing for us. The harder it gets to hire drivers for private fleet, more likely they are to look at outsourcing. So, some of the things that we’re seeing in dedicated sales even with customers that are leasing and decide to also going to dedicated is because they’re having some of these challenges and we have a very extensive driver recruiting network and it’s an area that we’re really can excel at. Even though it is tougher for us, we have 6,000 commercial drivers that work for Ryder. And we are very good at recruiting and retaining drivers. So, I’ll let John to talk about some of the challenges that we are seeing in the market.

That’s the main factor, it drives more outsourcing because some private fleets are having more trouble hiring drivers and they look to us for that. Smaller factor I guess kind of a secondary impact is, couple of carriers. Most private fleet have to decide or most private shippers have to decide which shipments go on for hire and which shipments go on their private fleets and there is kind of a breakpoint often times it’s like a mileage breakpoint if it’s more than 200 miles it goes for hire et cetera. And then as the private, as for-hire trucking capacity has gotten really tight, some of these big fleets are looking at expanding the scope of their private fleet or of their dedicated fleet versus the for-hire. And so that we’re seeing that lead to customers take a higher percentage of their transportation and move it either on a dedicated fleet or a private fleet versus for-hire, that’s also helping growth.

So, just given that, should we expect the dedicated side to really ramp up and accelerate just given the dynamics we have seen and are likely to persist?

Yes. Like I said, we’ve seen Ryder dedicated new sales more than double. It’s on track this year to be more than double what it was a couple of years ago. And so, when we look out in our strategic planning over the next three years, we’re expecting to see pretty good growth in Ryder dedicating certainly at least a point or two higher than say SCS in total.

Okay. That’s helpful. Thanks a lot.

Great. Thank you, Tom.

Next is Kevin Sterling with BB&T Capital Markets. Your line is open. Kevin Sterling - BB&T Capital Markets: Thank you. Good morning gentlemen.

Good morning Kevin. Kevin Sterling - BB&T Capital Markets: Robert, it might be early, but given your strong lease pipeline, can you maybe tell us directionally how we should think about your CapEx spending for 2015, is that possible?

Well, CapEx there will be less replacement, CapEx next year slightly less. Kevin Sterling - BB&T Capital Markets: Okay.

And really the unknown is still how much growth. And as I just mentioned earlier, I would expect us without knowing yet what the number is, we want to build on what we did this year. So, we’d like it to be more than the 2,500. But we’ll be providing more information on that in February. Kevin Sterling - BB&T Capital Markets: Okay. And then kind of switching gears here, your maintenance-only product seems to have some pretty good success growing that. Have you had some success converting those maintenance-only customers to full lease customers?

Yes. I think it’s still early. We’re -- as I mentioned, we haven’t really fully rolled it out, we’ve got now 30 customers and we’re beginning to get some business from them. But I’ll let Dennis give you some more color on what we’ve seen with those customers.

Yes. What I would add to that, Kevin is that, what we’re seeing initially is when these customers are coming in; they are renting from us and buying things like fuel. So, we haven’t necessarily seen any of these customers expressing interest in leasing, but they’re getting more comfortable where they’re buying ancillary services from us. And we expect over time for there to be leasing opportunities with those customers. Kevin Sterling - BB&T Capital Markets: Okay. I guess the goal there is to kind of get your teeth more to those customers, eventually convert them to full leasing, is that correct?

Yes. Really it gets down to -- it’s them getting comfortable to us, getting exposure to us and that that relationship building. We’re addressing the major pinpoint that people are seeing out there, which is with the new technology, both primarily the maintenance cost is increasing. Now the acquisition cost, they’re seen, but with the maintenance cost, they’re seen the training challenges, the tooling challenges and they can come to Ryder for a one-stop solution, one-stop shop if you will, it’s very helpful. So, once we get in the door with them, there is a lot of comfort that’s built a lot of trust and then we’re able to sell additional products to them. Kevin Sterling - BB&T Capital Markets: Got you, okay. Great and thanks so much for your time this morning.

Thank you.

Thanks Kevin.

Justin Long with Stephens. Your line is open.

Thanks. And first question I just wanted to ask, if you could help put some more color on the backlog or the pipeline in both the leasing business and SCS. Have you seen things improve on a sequential basis and thus far in the fourth quarter and is there any way to quantify the visibility you have on growth, potentially accelerating going forward?

Yes. I would say in leasing the pipeline has continued to be strong. The sales in the third quarter were strong; we’re expecting fourth quarter to also end strong and a lot of interest. And as the economy continues to hill and as we get more fuel efficient vehicles and as we’re doing a better job of converting some ownership accounts that that pipeline continues to be at a strong level. In terms of supply chain, same thing; there is still lot of -- John mentioned, the amount of sales that we’ve had in supply chain over the last year and last two years, we’ve had some lost business that has kind of hurt us a little bit here in the last few quarters. But as we implement that new business that will really start to show up in 2015. So we’re encouraged by that. I do want to be clear that certainly we have seen no slowdown in our end markets whether it’s rental, lease, supply chain, dedicated even through this month in October, I’d tell you it continues to be a relatively strong market. And as you know, we’re primarily North American; over 90% of our revenues are North America. So we’re very tied into the North American economy and we’re seeing continued strength in our end markets.

Great, that’s good to hear. And as my second question, I wanted to ask about margins in the FMS segment. Going forward, how should we generally think about the incremental margin profile of that business as you return to prerecession margin levels and start trying to improve beyond that 12%?

Yes I think this year; we’ve had a bit of boost for used vehicle sales. I would tell you about a percentage point of what we’re seeing is going to be from the gains that we experienced this year. They’re really very, very strong used vehicle market. As we get into next year, we’re still expecting used vehicle market to be relatively strong because there is still going to be tight supply. We’re selling out vehicles that were manufactured in ‘08 and ‘09 which were really relatively soft OEM production years. So, as we look into next year, I’d expect that tight supply to continue to help solidify pricing. But definitely we’re going to see some headwind in terms of margin percent from that into next year. However the offset is we’re going to see depreciation expense benefit. So we’re up a 190 basis points I think in FMS. I wouldn’t expect 190 basis points improvement next year but I would expect us to go back to probably that 70 to 80…

Right, we’re 90 basis points up excluding the UVS gains. So next year as you kind of look out, you may have some headwind because of gains do decline, you may see some decrement but you’re in that range in that so 60 to 90% type of range.

And then you’re getting the earnings improvement through growth, through growth in each of the product lines.

Great, that’s really helpful color. I appreciate the time.

Thank you, Justin.

Thank you. Next is Matt Brooklier with Longbow Research. Your line is open.

Hey, thanks. Good morning.

Good morning Matt.

So just a question, I know it typically doesn’t, but did the swing in fuel prices; did that have any impact on the quarter?

I think the only places in the total revenue line; I mean there was some write-ups this morning about us missing the consensus total revenue that would have impacted total revenue because fuel prices are down. But other than, if you look at the operating revenue line, there really isn’t one and on the bottom-line, there isn’t either.

Okay. So, no impact on the bottom-line. And then Art, could you maybe talk to what’s baked into gains on vehicle sales for fourth quarter? It sounds like it maybe down sequentially but ahead of last year’s fourth quarter, maybe just add a little bit of color there.

Yes, it should be down, we’re expecting, Matt obviously we had very strong third quarter, still will be up year-over-year. So, I mean directionally maybe say 10% down sequentially, that’s being in that target range. The other thing to keep in mind is this where we’ll start to see less year-over-year benefit that we expect from used vehicle gains. We’re starting to see the ramp up like Robert said earlier in the fourth quarter of last year. So, gains will be up, but it’s not going to be to the extent we’ve seen in the first three quarters.

Okay, helpful. I appreciate the time.

Thank you.

Thank you. Casey Deak with Wells Fargo. Your line is open.

Thanks. Hey guys.

Hello.

So, if I look at the spread to the cost of capital, 100 to 110, you’ve talked about getting to 150 basis points in the past. Is that still the goal? And then what gets you there? Is it going to be the pricing on the new leases, is it growth in dedicated offerings, is it going to be more on the on demand maintenance, if you could delineate that a little bit? And would that ultimately get you above 150 down the road?

I guess it’s yes to all of those. But what is going to get us there is growth in FSL because as we grow, we’ll be able to leverage the overheads. Certainly these new services of on demand maintenance and some of the things that Dennis and his team is bringing on is going to help expand that ROC spread. Growth in dedicated and growth in Supply Chain, those are high ROC product lines with limited capital required. So, margin improvement and margin recovery there is going to help get us there. And it’s just really -- beyond that, it’s just that continued growth story. As we look to bring more of the non-outsourced market in and we start to grow the top-line, we start to leverage the overhead, leverage the infrastructure that we have and drive that spread. And 150 is our target. Obviously, once we get there, we’ll raise the target. But right now that’s our target.

And also maintaining within our target leverage range.

All right, that’s great. And then second question on on-demand maintenance. Are you guys able to quantify kind of repeat visits you’re seeing? I know that 6,200 is going to be unique visits in the quarter. But trying to get a sense of how sticky is the business, are customers coming in when there is only a problem with the truck or are they coming in for preventative, are they coming back in, are you seeing them multiple times in a quarter, if you could talk a little bit about that?

I’ll let Dennis give you color on that.

Yes. What I would say Casey is we’re seeing for unique vehicle two to three visits. Well, for the vehicles we’re seeing, we’re seeing them two to three times over the period since we have launched on-demand.

Okay.

So that kind of gives you a rough ballpark for what we’re seeing right now.

Okay. And you’ve seen, so the guys that have signed on and that are coming in, you haven’t seen where somebody is coming in and then they’re dropping off and you don’t see them again on that?

You’ll see that some, but once a customer gets comfortable, we’re seeing repeat business from them.

Okay, great. Thanks guys.

Thank you.

Thank you.

Thank you. And our last question comes from David Campbell of Thompson Davis. Your line is open.

Hi, good morning everybody, just still morning. I just wanted to -- most of my questions have been answered but I’m just curious about the supply chain business, I’ve seen revenue increases for that business around the world and domestically. And I’m just a little surprised that you’re not seeing it either or at least not much and considering the fact that you’re also trying to convert as I understand it, some full service leases into dedicated business. It sounds as the macro environment not as strong as it looks or what’s going on?

Yes David. I certainly understand the question and I would tell you that we are seeing a healthy external environment. What the reason that our growth rate has come down in the quarter in this quarter and into next quarter is primarily some lost business pretty significant in terms of revenue that hit us in the second quarter really. And we expect that we’ve got new business coming on that over the next several quarters will begin to offset that. But we’re in a little bit of a soft patch here. It really has to do with the timing of when we lost the business and the timing of the new business coming back on. But overall, I agree with your statement. The market is good and growing. We have seen supply chain growth nicely over the last several years, their earnings between ‘09 and 2013 grew at a CAGR of 14%. So, we’re in a little bit of a soft patch this year with SCS but we expect to get back on track in 2015.

Okay, thank you very much.

All right, David. Thank you.

Thank you. I’ll now turn the call back over to Robert Sanchez for closing comments.

Okay, well thank you everyone. Thanks for being on the call. Great questions and we certainly look forward to seeing you out on the road shows and conferences as we get out during the quarter. So everyone, have a good day.

Thank you. This does conclude the conference. You may disconnect at this time.