Good morning and welcome to Ryder Systems, Incorporated Fourth Quarter 2014 Earnings and 2015 Forecast 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 fourth quarter 2014 earnings and 2015 forecast 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 fourth quarter 2014 results, review the asset management area and discuss the current outlook and forecast for 2015. Then we’ll open up the call for questions. With that let’s turn to an overview of our fourth quarter results. Comparable earnings per share from continuing operations were a record $1.60 in the fourth quarter of 2014, up from $1.35 in the prior year. This is an improvement of $0.25 or 19%. We came in towards the top-end of our fourth quarter forecast range of $1.56 to $1.61. Fourth quarter comparable results exclude charges of $1.38 primarily for pension buyout cost as well as restructuring and other charges. The pension settlement cost totaled $1.29 and relate to our previously announced lump-sum pension distribution made to approximately 6000 former employees during the quarter and to a lesser extent the buyout of certain multi-employer pension obligations. We'll discuss these pension related items in more detail later. Fourth quarter comparable results also exclude $0.06 of restructuring and other costs primarily for severance. Operating revenue which excludes FMS fuel and all subcontracted transportation revenue was up 5% to a record $1.42 billion for the fourth quarter. Revenue grew in both business segments. Growth in FMS was driven by full service lease and commercial rental, while SCS benefited from new business and higher volumes. Page 5, includes some additional financial information for the fourth quarter. The average number of diluted shares outstanding for the quarter increased by 300,000 shares to $53 million, this reflects the pause of our anti-dilutive share repurchase program during 2013. In December 2013, we announced a $2 million share anti-dilutive repurchase program and began buying under the program in February 2014. During the fourth quarter, we bought 153,000 shares at…

Thanks, Robert. Turning to page 11; full year gross capital expenditures were $2.3 billion, up $114 million from the prior year. This increase reflects planned investments in our rental fleet in light of strong demand partially offset by lower lease replacement activity. We realized proceeds primarily from sales of revenue earning equipment of nearly $500 million, up 10% 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 in the year. Full year net capital expenditures decreased 3% to $1.68 billion. Turning to the next page, we generated cash from operating activities of $1.37 billion for 2014. That's up $147 million or 12% from the prior year. This increase was driven primarily by higher cash-based earnings and the timing of cash payments. We generated over $2 billion of total cash during the year, up $300 million from the prior year, primarily due to higher operating cash flow, the sale leaseback and higher sales proceeds. Cash payments for capital expenditures increased by 6% to $2.3 billion for the year. 2014 free cash flow of negative $202 million improved from negative $386 million in the prior year. Higher cash from operations, the sale leaseback transaction, and stronger used vehicle proceeds more than offset higher growth capital spending. Page 13 addresses our debt-to-equity position. Total obligations of $4.7 billion increased by $419 million from year-end 2013. Total obligations as a percent to equity at the end of the year were 258%, up from 226% at the end of 2013. Leverage at year end is within our target range of 225% to 275%. Year-end leverage was above our earlier expectations due to a year end pension equity adjustment. This adjustment…

Thanks Art. Page 15 summarizes key results for our asset management area. Used vehicle inventory held-for-sale was 5,500 vehicles, significantly down from 7,900 units in the prior year and 300 units below the third quarter. Used vehicle inventory is just below our target range of 6000 to 8000 vehicles. Pricing for used vehicles was strong for both tractors and trucks. Compared with fourth quarter 2013 proceeds from vehicles sold were up 17% for tractors and up 19% for trucks. From a sequential standpoint, tractor pricing was up 2% and truck pricing was up 1% versus the third quarter of 2014. 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 year. The number of leased vehicles that were extended beyond their original lease term decreased versus last year by around 480 units or 7% and remain below recessionary levels. Early termination of leased vehicles increased slightly by about 280 units and remain well below recessionary levels. I’ll turn now to page 17 and cover our outlook for 2015. Pages 17 and 18 highlight some of the key assumptions in the development of our 2015 earnings forecast. Our 2015 plan anticipates moderate growth in the overall economy. We’re assuming foreign exchange rates remain stable at their current levels, which will result in a negative year-over-year impact to both revenue and earnings. In Fleet Management Solutions we’re expecting growth in all product lines. In lease strong sales should drive an acceleration in fleet growth. For 2015 we're forecasting to grow our lease fleet by over 4000 vehicles excluding UK trailers as market demand improves and we make meaningful progress on our initiatives to penetrate the non-outsourced market.…

Thanks Robert. Turning to page 22, we’re forecasting total gross capital spending of $2.5 billion for the year and $250 million over last year with higher spending in both lease and rental. Lease capital is forecast to grow by over $200 million to support increased fleet growth on stronger sales as well as higher purchase costs for vehicle due to inflation and EPA mandated emission standard requirements. We plan to spend $450 million on rental vehicles primarily to refresh the fleet as well as for 5% growth in the average fleet size. Our outlook for improved rental demand and pricing remains favorable through January. Proceeds from sales of primarily revenue earning equipment are forecast to decline by about 10% to $450 million. This mainly reflects a change in mix of units sold with relatively more trailers versus power vehicles as compared to the prior year. We’re planning a $250 million sale-leaseback transaction this year. As a result, net capital expenditures are forecast at $1.85 billion, this represents a 10% increase from 2014. Free cash flow is forecast at negative $300 million this year. Please note that free cash flow would be strongly positive excluding growth capital spending and lease. We expect total obligation to equity to remain flat at 260% at year-end and within our target range of 225% to 275%. We’ve talked in recent years about the impact that higher growth capital spending has on the business. Page 23 highlights the amount of growth capital spending we’ve had by year, driven from both fleet growth and higher vehicle investment cost per unit and its impact on cash flow. For 2015 we expect to spend just over $1 billion on growth capital, $850 million in lease and $180 million in rental. In 2010 and 2011 growth capital spending was focused primarily on the rental fleet as we started to move past the recession and experienced very strong rental demand. Starting in 2012 the largest part of our growth capital spend is for contracted lease units. This amount has been steadily increasing as we execute on our strategy to penetrate the historically non-outsourced market. The box on the right-hand side of the page highlights 2015 gross spending and lease. A greater number of leased vehicles will require $450 million capital while higher per unit cost will require an additional $400 million. Both our earnings and cash flow will benefit from this contracted growth over the typical five to seven-year life of these vehicles. In the near-term free cash flow is negatively impacted since we're spending an increasing amount upfront to purchase vehicles. As you can see in the bottom line of the page however, this growth capital spending is significantly benefiting operating cash. Operating cash flow is projected to be close to $1.5 billion this year up 50% from 2009. At this point, let me turn the call back over to Robert to recap our EPS forecast.

Thanks Art. Turning to page 24, we're expecting EPS to grow 12% to 15% to a range of $6.25 to $6.40 versus a comparable $5.58 last year. This improvement is despite $0.10 negative impact from a higher tax rate and foreign exchange. We're also providing first-quarter EPS forecast of $0.95 to $1 versus comparable prior year EPS of $0.92. The growth rate of earnings in the first quarter is somewhat below full year due to challenging first quarter rental comparisons and a lesser benefit coming from supply chain early in the year. That concludes our prepared remarks this morning. Before we move to Q&A I'd like to take a minute to thank John Williford for his many contributions to Ryder. As you know from our prior announcement, John will be retiring from the company in March and so this will be his last earnings call here. John has provided tremendous leadership to the overall company and significantly shaped the vision of Ryder supply chain business. I greatly appreciate the depth of logistics expertise John brought to the company and the work he has done to develop our team here. Given John's work on development and succession planning, as we previously announced, I'm pleased that we've got two long-term Ryder employees stepping up to take over the leadership roles in this area. Steve Sensing will be running our supply chain business and John Diez will be running our dedicated business after John's retirement. I want to personally thank John again for his support and leadership and wish him all the best in his future endeavors. We had a lot of material to cover today with both our fourth quarter results and 2015 outlook. As a result, I'd like to ask that you limit yourself to one question and one related follow up if clarification is needed. If you have additional questions you are welcome to get back in the queue and we'll take as many calls as we can. At this time, I'll turn the call over to the operator to open up the line for questions.

Thank you. [Operator Instructions] The first question today is from John Barnes with RBC Capital Markets.

Hey, good morning, guys, nice quarter. Could you talk a little bit about, you know, if I look at 1Q guidance versus the full year, the 1Q guidance is selling out kind of mid-single-digit earnings growth in your upper range versus the 12% to 15% you've talked about and I recognize the couple limitations you're talking about. But t just seems like 1Q is a lot more conservative than what you're laying out for the full year. Can you talk about, is there anything else besides those couple of things you've thrown out that as you are concerned about 1Q and then kind of more importantly given that 1Q is the slower of the growth quarters it looks like, can you talk a little bit about how you think the progression through the year plays out?

Yeah, I think the two items that we mentioned John, is so to layout was some of the headwind in the first quarter is, it relates to this growth. First is, remember last year during the polar vortex we had a lot of rental activity that really has created some more difficult comps in rental. And then more importantly I think in supply chain, you remember a lot of the challenges we had especially around the startup were, a lot of that came in the second quarter. So the comparables really started to improve supply chain in the second quarter and then you see that through the balance of the year. So I think those are the two big ones that you pull those two out and you start to get closer to our full year growth rate.

And then, what about the progression through the year?

It's John, this is Art it's going to improve much more in line obviously with the full year as this becomes the magic of numbers to a certain extent. So we're expecting to what Robert said, especially on the supply chain side we're going to get much better results starting in the second quarter with, you know because the comps are a little bit easier with the headwinds we had in 2014.

Okay, all right. And then other question, given your comments around, outside of the growth capital, you're talking about being free cash flow positive and if I look at the balance sheet you're still low within kind of the parameters you've laid out for yourself in terms of your debt-to-capital or debt-to-equity, can you just talk a little bit about the decision on the sale-leaseback and why what is there something in the market that makes that attractive at this point? Is here some other demand for capital that you see or can you just elaborate a little bit on the need for that?

Well obviously we're spending a lot, we're planning to spend a lot in 2015 and from a tax perspective we are and are well positioned right now with bonus depreciation that was enacted for 2014. So, really there's other providers that can more efficiently use the tax benefits right now and so that we're going to avail ourselves of that and that's really one of the benefits of this transaction as we can get more cost effective funding than otherwise.

Okay does the sale leaseback then have some implications for the margin, maybe, do you sacrifice anything on the EBIT margin and gain it back on lower, again I guess lower debt cost?

No, not really. Now this is done after the fact. So we're going to lease to our customers under the same terms that we always would. This is just a little more cost-effective financing for us.

All right, very good. Thanks for all the color today, I appreciate it.

Okay.

Thank you. The next question is from John Mims with FBR Capital Markets.

Hey, good morning guys. Wish you all the best moving forward. So Robert, let me ask you on the lease fleet guidance, last year you had guided to about 2000 trucks in growth and ended up being 3,200. You know the guidance this year is obviously much stronger than that, but based on that 4000-truck number, what do you know right now, like how sticky is that number now as far as what's committed? What kind of sensitivity there may be to the upside or also to the downside of that 4000-truck growth?

Yeah, we feel really good about the 4000, a lot of that is driven by what we saw in the fourth quarter. We had a record sales quarter in the fourth quarter. So that's going to give us a nice boost going into 2015. As you saw we ended the year strong too with the 3,200 coming in. So, if you think back, we've been talking about this for several years, right? That we believe that Ryder can become a growth company and a growth story primarily because, there are two reasons. One is the economy improves and the second thing is that there are trends that really favor outsourcing and the things that we do continue to get tougher because of regulation, because of more complexities around technology. I think what we're beginning to see here is that start to come to fruition and we had not had organic lease fleet growth for a long time. We started to see it a few years ago and now we're seeing it accelerate. So, I feel great about the progress we're making. I feel really good about the prospects for continued growth rate, rates in FSL and this 4000 I think is a nice milestone to hit. Is there upside? Obviously, you know the whole year has it's, we don’t know what the sales are for the full year. We certainly know what we did in the fourth quarter. We know it was great, but have some estimates of what we think we're going to do in the year, but we could always do better.

All right, I guess, is visibility any different at this point this year than it was at this point last year? And the reason I asked is I'm just trying to see if there was some anomaly in 2014 and it’s a great problem to have right, when you beat your guidance by 60%. But, is there something in particular about 2014 that allowed that to happen or is it theoretically possible for that to happen again this year?

No, it's theoretically possible if that happens again this year. I mean, we have about the same visibility. If you look at lead times it is not much different than what it was last year. It stretched out a little bit, but there's a lot of things going on. You've got, you know what's going on with the economy as freight demand begins to improve, all the initiatives that Dennis and his team have around converting the private, the ownership accounts and do-it-yourselfers and the good progress they are making there. So we take an estimate of what we think the pace of that is going to be. If it comes in better, then you're going to see that number improve, which is really what happened in 2014 right? We had given an estimate of 2,500 and ended up at 3,200. So right now we think it is going to be north of 4000 vehicles and we'll see how that evolves as sales continue to come in over the next few quarters.

Perfect, and if I could add just one follow up for John and Robert, you had mentioned it before the 2% SCS growth and I know that's excluding fuel, but what's kind of the driver of why is that low, is that inclusive of companies, customer specific, volume throughput or is that just like a new business type of number?

It's a little lower than our long-term kind of we've been saying for the business 7 to 10, we still believe that for the combined, that's the right target and we've been saying our Ryder Dedicated expectation is a little higher than the non-Dedicated piece. So, and you can see from our guidance of Ryder Dedicated expectation is still very strong. So, well, a couple of points below for the non-Ryder Dedicated from our target and that's what we described, it's a couple of things. It's the lost automotive business that was lost in midyear, that's kind of, that effect is going to persist for the first half of the year. And then as we pointed out in the information is that there's a couple of, actually about two or three accounts that are largish accounts we're doing network redesigns for that's going to lower our revenue a little bit, a couple of points below our target in the second half.

All right, well fair enough. Thank you so much.

Thank you, John.

Thank you. The next question is from Ben Hartford with Robert W. Baird.

Hey, good morning guys. Could you provide some perspective on the full service lease fleet growth in 2015 and then some of the components where you're seeing demand either from a vertical standpoint, from a customer standpoint or class types? Is there anything of note as it relates to the trends as you look at adding 4000 vehicles in 2015? And then could you, stuff what you talked about Robert I think in the prepared remarks you talked about long-term growth within FMS trending toward high single-digits as opposed to mid-single-digit revenue growth, I'm assuming that comes on the back of fleet growth as opposed to pricing. Can you talk about how you see the cadence of fleet growth this cycle are we still in a situation where you can see momentum build in 2015 and potentially accelerate in 2016 from 2015 levels? I know a lot in there, but I'll let you tackle it.

All right, let me address first the sector growth, I think it's a broad growth that we're seeing across all industry sectors. You know clearly it is what you would expect. As we've always said, we touch a lot of different industry sectors in the economy. So as you might imagine we are probably seeing a little bit of pressure on some of the oil and gas stuff, but overall where it comes to things related to consumer and end market spending, we're seeing growth there. I think as fuel prices have come down, that puts more money in our customer's pockets and allows them to maybe do some things that they otherwise wouldn't be able to do. So that's translating also into a positive. And I think we're also beginning to see continued improvement in our efforts to convert the ownership accounts. You know, as I mentioned, we've been doing about 30% of our growth has come from first-time customers to full service lease. We saw that pick up a little bit in the fourth quarter, so we're encouraged by that. We made some adjustments to our own internal compensation plan for our sales folks to further encourage going after some of these ownership accounts. So we think all of those things are really helping to drive this really shift or change in the growth trajectory of the business. So, I think, to your second question about, is there an opportunity for accelerated growth beyond that, yes that's the plan right, is that we are still in the early innings of making these conversions. Remember, it is 90% of the overall market that is still not outsourced. So to the extent we continue to move and make progress on those conversion efforts, which I feel really good about, we’re going to see that growth continue to accelerate for years to come.

Okay, that’s good, helpful. Thank you.

Thank you. The next question is from David Ross with Stifel.

Yes, good morning gentlemen.

Good morning, David.

Dedicated is showing some nice growth and I wanted to talk a little bit about, yeah the pricing of Dedicated contracts, you know for a while one, you could say they were underpriced in terms of earning inadequate return over the life of the contract, where do you see pricing in the Dedicated segment right now? Is it where you wanted and then how long are the average deals that you are signing today?

Yeah, we’re, the average deal is typically three to five years with Domingo Evergreen after that we tend to be able to hang on to customers as we do a good job for them. I would say the pricing is always competitive in dedicated, but I wouldn't say it’s anymore than what we’ve seen historically. Remember, we try to compete in the areas where we can really bring more value if not just doctored or doctored [ph] type Dedicated and we continue to see a lot of opportunity. Remember, as we, as driver recruiting has gotten tougher, as all the regulations around private fleets continue to increase, we are seeing more companies that have been doing it themselves looking to outsource the dedicated solution. And in our unique position of having over 13,000 customers that we do business with on the fleet side and being able to convert those customers to Dedicated, I think gives us a real advantage and a leg up in that effort.

And have you seen driver pay pressure from your own recruitment to satisfy your Dedicated fleets and if so have you been able to pass that along to the customer pretty easily?

There is a little bit of pressure, but we have been able to pass along the increase, we’ve been able to put through increases that we need to get the drivers we need and by the way our openings is down quite a bit from a year ago and we’ve been able for the most part to pass through the wage increases in CPI or rather price increases.

Thanks.

Okay.

Thank you. The next question is from Scott Group with Wolfe Research.

Hey thanks, good morning guys.

Good morning Scott.

I wanted to ask about FMS margins. So with this acceleration in fleet growth, how are you thinking about margins in FMS this year? And Robert, if you're right that there's a few years of kind of this accelerated leasing growth, where would you think FMS margins could peak at this cycle relative to last cycle?

Yeah, Scott, I think it’s hard to tell where they are going to peak. You know, we set our goal here for the last several years had been to get back to that 12% to 13%. We hit 12% this year, probably a little earlier than we expected primarily due to the used vehicle sales benefit in the gain side. We won’t have that going into next year, so you are not going to have anywhere near that type of an improvement, you know, was a 200 basis points I think is what we saw in the year. So you’re going to be way short of that, but again continued improvement though in FMS earnings percentage and driven now more by fleet growth and improvements in the in the core product lines of best to sell in rental as opposed to more of the used vehicle gain side. So I think that's probably the change. You’re not going to see a big jump up of 200 basis points anymore, but you are going to see continued progress and continued upward movement in margins.

Yeah, maybe a better way of asking that would have been, what do you think are the incremental margins on that fleet growth?

You’re talking about incremental margins percent?

Yeah.

Yeah, I think you know, we’ve talked about in the past is that if you take out gains from the equation and the impact of that, you're looking at 60 to 80 basis points improvement year-over-year. In this year we’re going to get some headwinds from gains, so it will bring that number down some, but I think as you get into more of a steady-state that's what I would be looking for.

Okay. And then just the other question I had was, you know, there's been some of the, the kind of the spot data that we can see in the first quarter, January wasn't particularly strong and I know you guys have a good feel on near-term changes in the rental business. Are you seeing any changes, slowdown, acceleration, are you seeing anything out there?

Scott, this is Dennis. The answer to your question is no. You know, as we look forward, demand is remaining strong, utilization is strong, so we feel good about the way the year is starting.

Okay, thank you guys.

Thank you. The next question is from Art Hatfield with Raymond James.

Hey good morning. Most of my questions have been answered. Now my other ones were actually on pension related stuff and I figured out just wait until the K comes out, but one question. Given the success of the buyout that you had this year, is that something that you guys would consider going forward to kind of continue to reduce that ongoing long-term pension exposure?

Yeah, absolutely Art, I mean it’s going to depend on the funded status of the plan at the time as well as what are the discount rates you have to use in the buyout offers. Here there was an opportunity. You’ve seen a lot in the marketplace now because the discount rates that you could make in the offer were advantageous versus the current rate environment. So right now that's probably not there as we sit here today in 2015, but who knows down the road and obviously the pension plan has been impacted by the mortality and discount rate changes I talked about earlier. So funded status has dropped somewhat, so we need to see that come up a little bit before we look forward to doing more of these, but I think on an ongoing basis as part of our strategy as we’re putting more money into the pension plan we want to be in a good spot three to five years down the road.

Sure. Can you explain real quick what you mean by the differential in the discount rate that is currently out there and the discount rate you use to do a buyout?

Right. Well, the current environment was about let’s say low 4% discount rate environment for the liability, but in 2014 you were allowed to offer a settlement using say a 5% discount rate.

Okay, that’s helpful.

Right.

Okay, thank you.

Thank you, Art.

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

Great, thanks. Good morning everyone. I wanted to make sure I understand what’s going on with maintenance costs. I mean that's been a tailwind as the fleet ages come down for the past several years, but in some of the commentary around the assumptions it kind of implies that the maintenance of the new technology might be shifting towards more of a headwind. Is maintenance now a year-over-year headwind or it is just that the maintenance is going to step up, are you still getting a benefit from the lower fleet age?

Yeah, I think we’ve been talking the last several quarters, really the most of 2014 that we feel we’ve gotten to the end of the benefit if you will as the fleet got younger. And I would say certainly in the second half of the year if not for a good portion of 2014, maintenance costs are really, have been more of a headwind on margins, offset generally by maintenance initiatives that we have to get more efficient. You know, this all is all kind of tied together right? Customers are coming to Ryder because this maintenance is getting more complex, it’s getting more difficult. That’s a great thing for our growth prospects. On the flipside it’s making our life harder, but Dennis and his team I think are doing a great job of dealing with it and managing it and we’ve got plans to continue to do that here next year and into the future. We work very closely with the OEMs on this and we think we are in the best position to deal with this added complexity, but yeah you've got it right. I mean as we move forward maintenance will be more of a headwind as it's been in 2014 and we’ll continue to work on initiatives to make sure that we keep it under control.

And then Robert, you have the ability to adjust some of the lease pricing as you get more information about you know, your own internal cost to maintain the fleet and then can you go back and try as new leases are coming on, you'll price the leases accordingly?

Yeah, we do that prospectively on an ongoing basis right? So as we learn more about maintenance we adjust the pricing and the model. You know, clearly you have the deal that you’ve signed, but I can tell you over the last several years, each year and in some cases even more than once a year we’ve made adjustments to the pricing to account for some of the maintenance cost for some of the maintenance cost increases that we’ve seen.

Okay. And then just my follow up is, what should we expect from the cadence of the lease fleet additions and in 2015? 2014 was obviously very backend weighted. It sounds like you have good momentum based on what you saw in the fourth quarter. Is 2015 more consistent throughout the quarters or should we expect kind of the same sort of hockey stick on the lease fleet growth? Thanks.

Yeah, I think if you look at the last couple of years, we've seen the lease fleet really grow heavily in the last quarter and really grow the least in the second quarter. As we look at 2015 we’re viewing it more flat. Probably second quarter is still less than the other three quarters, but more level across first, third and fourth quarter. And again, we’ll see how the second half evolves as sales come in, in FMS.

Sure, okay, that’s all helpful. Thanks for the time.

All right. Thank you.

Thank you. The next question is from Jeff Kauffman with Buckingham Research.

Hi, it’s actually Ryan Mueller on for Jeff Kauffman. How is it going?

Good.

I want to ask you about the high utilization rate with rental and how much of that high rate is lease customers waiting for their vehicles become available?

With the new, with the growth that we've had recently obviously the await new lease as we call it has been strong, but we’re also seeing as we call it pure rental that is strong. So if the economy has picked up then as Robert said earlier, you know, across all segments you’re getting both frankly, you're getting increased demand. It's coming from our leased fleet as it’s growing and sales are strong, but you're also seeing as we call it pure rental that’s increasing. So it’s really both that is growing.

Okay. With the strong industry orders that we’ve seen over the past year, how do you kind of view that in light of strong demand you are seeing for lease growth and do you think these strong orders are driving more capacity into the market, I mean I know it’s driver constrained, but when see these large order numbers coming in, what do you think about it?

Yeah, I think and I’ll hand it over to Dennis. I think there’s really strong correlation historically between the two right? As more trucks are built we’re getting our fair share of those. So people are either buying trucks or they are leasing them, but as demand picks up, it picks up for everybody and certainly a good portion of what you see from the OEMs we are the largest purchaser, so we are certainly coming place in our results, but…

I’ll just add to that, that if you look at our new orders, about a third of them are coming from the private fleet conversions. So it’s not really capacity that’s being added, it’s a shift o leasing from the ownership market that's really driving a portion of our sales and we expect to see that continued increase.

Great. Thank you.

Okay, thanks Ryan.

Thank you. The next question is from Thomas Kim with Goldman Sachs.

Hi, in the back of the deck you provided some good analysis on extensions and early terminations within the asset management side and I am wondering can talk a bit about the decrease in extensions and increase in the early terminations?

Yeah, well the decrease in extensions I think is as some of these vehicles have aged out and also as the new more fuel-efficient technology that the OEMs are bringing out I think are making it more attractive for customers to get into new equipment, so that may be a little bit of that and on the early terminations I would say it’s not a meaningful increase, I think that’s kind of noise in the machine, because we have not seen anything that would alarm us on the early termination side.

Okay. Thank you.

Thank you. The next question is from Kevin Sterling with BB&T Capital Markets.

Thank you, John congratulations on your pending retirement.

Thank you.

Robert, the growth e-commerce we’ve seen in the past couple years, is this possibly making your fourth quarter maybe a little bit stronger than years past, how are you guys thinking about that impact on your business?

Yeah, I think clearly, when you look at our rental performance in the fourth quarters, you know, certainly a portion of that was these parcel companies that we really had a push for rental equipment in the fourth quarter. So I would say yes, in the fourth quarter we benefited from that, but if you look at the whole year, you know rental was strong through the entire year and different sectors really driving different quarters. So I would say yes it has contributed to the fourth quarter, but I think the overall story is that we are seeing strength in the rental market really across most all sectors. You know, it may be a recently a slowdown a little bit in the oil and gas area.

Okay, thank you. How much exposure do you have to oil and gas industry?

2%, I think 2% of our business is oil and gas and not a big exposure.

Not big, okay. And last question here. Are you seeing any impact in maybe your SCS or any other of your business lines from West Coast port disruptions?

The port disruptions John?

Yeah, now we see some customers have routed around the West Coast, either you know, the Prince Rupert, the Pacific Northwest or to Mexico and we help some of our customers do that. We arrange transportation and help provide a solution to get their inventory to where it needs to be, but it is not a big driver in our financial results one way or the other.

Okay, thank you for your time today.

Thank you.

Thank you. The next question is from Justin Long with Stephens.

Thanks and good morning. I’ll just ask a quick one because I know we’re about out of time, but I was curious on the SCS segment. Could you speak to the margin expansion that you’re assuming in the 2015 guidance and you know, looking ahead, do you have a longer-term margin target for this business?

Well, the margin expansion is driven by two things. Primarily recovery in the supply chain sector from some of the challenges we had in 2014 and then the growth in dedicated, on the dedicated side and better productivity. So you are going to see improvements there. You know, we have historically said that our goal for margins as the way we are measuring for supply chain was 6.5 to 7 and that was using our own definition for operating revenue, which included fuel. If you back out fuel you probably have to add 100 basis points to that. So we’re probably more like 7% to 8% under the new measure and I think that’s going to be our target really across both. You’ll see dedicated and supply chain, not huge differences is the profitability percentage of those two. You’ll be getting that area in the next month or so. So yeah, our targets really remain the same just adjusted for eliminating fuel from the top line.

Okay, great. That’s helpful color. Thanks Robert, I appreciate the time.

Thank you.

Thank you. The next question is from Matt Brooklier with Longbow Research.

Hey, thanks. Good morning, I’ll squeeze in a quick one here. I think John may have alluded to it earlier in the call, but trying to get a sense for if the overall driver market has improved and is that part of, if it has improved part of the more I guess optimistic outlook in terms of your growth at dedicated this year?

I would say it’s kind of settled down over the last few months. You know the driver shortage we've seen is a long-term thing and it’s been more or less severe, almost over 20 years in different periods of time. Right now it’s not so bad like I mentioned earlier, our openings is down, a number of openings is down and our time to fill jobs is improved as well. We don't really expect any major change though. I would expect in the summer as if the economy stays strong, we’re going to see the driver shortage heat up again. We've done a lot so that we can improve our recruiting and make that a competitive advantage. We think a tough driver market is volatile, a little bit of a cost pressure. It’s a good reason to outsource and so I think the driver market for a long time will drive, will be an incentive to outsource and drive growth.

Okay and then I guess just kind of dig in a little bit, the improvement that we’re seeing right now, do you think that is more a seasonal factor and then things are going to get tight again as we move through this year or do you think part of it is structural and maybe part of it is, you know, the wage increases that we've seen throughout ‘14 that’s kind of I guess helping the driver market settle a little bit and maybe you’re tracking incremental employees?

I can just give you my sense because I can’t really prove any of it, but my sense is the wage increase is pushed through by truckload carriers led to some movement earlier in the year and that’s kind of settled down and then there is always a seasonal impact, you know, this time a year with construction being down, that removed some of the pressure from driver hiring and driver turnover and it could be with, maybe there's some oil and gas impact this time of the year with construction being down that removed some of the pressure from driver hiring and driver turnover. And it could be maybe there is some oil and gas impact it is not clear. And then you know, we also saw earlier in the year we saw rail shortages spill over into truckload and that kind of also creates tension in the driver market. So all that is kind of settled down, but like I said before, I think that’s temporarily and I do think we’re going to see driver shortages for some time and it will flare up and get much worse when the economy is stronger.

Appreciate the color. Thanks.

Yep.

Thank you. The next question is from Casey Deak with Wells Fargo.

Hey, thanks for getting me in. The $0.23 headwind you guys are seeing in strategic investments and other for 2015. How much of that can you relate to the rollout of on-demand maintenance, any systems integration that you’re doing there, kind of a getting the billing practice straightened out?

Yeah, I think a small part of it I would say on the IT side that we’ve spent some money this year and have a little bit of continued spending in 2015, but now I think a lot of it is if you really break it down there are some additional IT work we’re doing primarily in FMS around our maintenance system to make us more efficient and make it more seamless for our customer. There's a lot of – there’s more money that we’re spending on salespeople, adding folks to our sales force to help drive some of the growth and then also some of the marketing spend as you know, we've ramped up our marketing efforts here over the last year and a half and we’re beginning to see some nice benefits from that. So we expect to continue to make some investments there. So it’s really investments and things that are going to help drive growth.

Okay, it seems that still remains pretty much incremental on top of your network. So with the on-demand maintenance, I mean the contract related maintenance growth of 4% this quarter, I was expecting a little better from there. You can give kind of an update on the customer count that you’re seeing in on-demand maintenance and what you’d expect kind of in ’15 and if you’re ahead of schedule or not?

Yeah, Casey, this is Dennis and the answer is we’re ahead of what we expected for this year. I think we told you around 20 and we’re north of 30 in terms of customers. We haven’t been driving it real aggressively because we wanted to make sure that the billing process was in order and we expect you know, mid-year this year to really put a push on and the interest especially from larger fleets out there who are running units across the country and looking for somebody that can go to giving consistent quality, consistent pricing for outsourced maintenance you know, we are real attractive to those customers. So we’re seeing a lot of demand and you are going to see us really push aggressively in the middle of the year. So we see as being a favorable environment for on-demand growth.

Thanks guys.

Thank you.

The next question is from John Mims with FBR Capital Markets. Q – John Mims: Thanks. I had a follow-up, but I am good. I’ll let you go. Thank you guys.

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

Thanks for taking the follow-up. The question is on the cash flow guidance and really kind of the CapEx. In 2015 are you getting towards the end of lapping the two emissions standards for upgrading the fleets or do you have more of that to go into 2016 and going forward?

Yeah, there’s a little bit more to go I guess, we’re obviously we’re going to start replacing more ‘07s and ‘08s as we go forward, but I would tell you that there has been decency OEM inflation on the cost even outside of those, you know, the big changes in ‘07 intensive. So there's still a decent amount of inflation we’re going to be seeing on vehicles, obviously will be less than what we have now if we’re replacing an ’06, but there's still going to be some decent inflation there.

Is there a way to think about the 400 million of higher per unit investment, how much of that is related to omissions versus cost inflation?

It’s probably two-thirds is emissions I’d say. We may see it come down by about a third.

Okay, good. That’s what I was looking for. Thanks for your additional time.

Thank you. Our final question today is from Thomas Kim with Goldman Sachs.

Hi, thanks for your letting me having another one here. Robert, I think the last time we talked about how national accounts were reducing your commercial run rates during the course of the year and you're spot on the overall run rate came in at about 4% for the year and then I guess specifically looking at the fourth quarter it was up 3% and so as we think about your rental pricing momentum should we sort of assume that the rental rates will continue to hover around this 2%, 3% range and then see an acceleration after some of these national accounts lap in the fourth quarter?

Yeah, remember we’ve talked about in the fourth quarter we talked about kind of something unusual was happening and that we had extraordinary demand from some of our large national customers, you know, a lot of these parcel companies and we said that we were going to be muting a bit of the pricing growth rate because of that, but we were going to have high utilization because the vehicles, the customers took the vehicles early. That is exactly what happened if you look at our utilization was north of 80%. So I would say that's a bit of one quarter issue. For the balance of the year though I expect to see continued pricing increases into 2015, probably more like the 4% rate I think for the year is what we're looking for 2015. So again, continue to clip if you will that we saw in full-year 2014.

Great, thanks for that additional color.

All right, thanks Tom.

Thank you. I would now like to turn the call over to Mr. Robert Sanchez for closing comments.

Okay, well. We’re 10 minutes past the hour. I think we were able to get everybody that was in the queue and along with the follow-up questions. So hopefully, we’ve got all the answers questioned and got clarity around the results. So I appreciate everyone on the call and look forward to seeing you here in the next several weeks as we get up to conferences. Bye, bye.

Thank you. This concludes today's conference. Thank you for your participation. You may disconnect at this time.