Greetings, and welcome to the Schneider National 2018 First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Pat Costello, Senior Vice President of Investor Relations for Schneider National. Thank you, Mr. Costello, you may begin.

Thank you, operator. Good morning, everyone, and thank you for joining our call. By now, you should have received a copy of the earnings release for the Company's first quarter 2018 results. If you do not have a copy, one is available on our website. Joining me on the call today are Chris Lofgren, our Chief Executive Officer; Mark Rourke, our Chief Operating Officer; and Lori Lutey, our Chief Financial Officer. Before we begin, I would like to remind you that some of the comments made on today's call, including our financial guidance are forward-looking statements. These statements are subject to risks and uncertainties, including those described in the company's filings with the SEC. Our actual results may differ materially from those described during the call. In addition, any and all forward-looking statements are made as of today, and the company does not undertake to update any forward-looking statements based upon new circumstances or revised expectations. Also, non-GAAP financial measures discussed during this call are reconciled to the most directly comparable GAAP measures in the tables attached to our press release. I would now like to turn the call over to our CEO, Chris Lofgren. Chris?

Thank you, Pat. Good morning and thank you all for joining us. As mentioned in our earnings release, the first quarter played out much like we had expected. Demand continue to increase bringing with it pricing opportunities and the driver capacity challenge continue to become more prominent. This created an environment we have not experienced in well over a decade. All segments of our business performed well in this environment with the network service offerings that execute using the full extent of our Quest platform. We're able to balance customer needs on maximizing operating contribution per load and for tractor in this highly constrained capacity market. For those of you who may have has doubts as to the importance of this platform to the execution of all of our network businesses, I believe 2018 will demonstrate its same level of effectiveness in the up part of the cycle that was demonstrated in the down cycle of 2016 and the first half of 2017. Mark will detail on price both from contracted basis and from exercising choice based on dynamic operating contribution all played out through the quarter. We continue to invest in our First to Final Mile service offering, positioning to be the channel choice for retailers to deliver their goods ordered on their websites into the homes of their customers. We're making good progress open terms of the service levels we can offer and growth in order volumes to ultimately leverage this fixed infrastructure business. Mark will provide more color to this in his remarks. The tightness of the driver capacity has caused us to make a moderate adjustment to our capital expenditure plan for 2018, given the lower driver the revenue nature of our intermodal business combined with the tightness we are witnessing in the industry's intermodal continuously, we are well positioned this business to grow incrementally above our plan. Lori will highlight our capital expenditure guidance in her section. While there are certain numerous factors that could disrupt the growing North American economy, we remained bullish on the prospects as our customers continue grow their businesses, but in a premium on our broad portfolio services to help meet their transportation needs in this marketplace. We have a good start to the year. We've into foundation set in the first quarter will carry us into a good second quarter, but the more significant upside will occur in the second half of the year. As such, we will raise guidance. Lori will continue to highlight this in her comments. With that I will turn it over to Mark for his comments on the operations.

Thank you, Chris, and good morning to everyone. First, a big thank you to our professional driver fleet and maintenance team for persisting through a series of especially difficult weather events in the quarter and perhaps now with the recent mid-April storm in the upper Midwest behind us, we can finally turn our attention to the spring. As Chris indicated, each of our segments of truckload intermodal logistics operated in an environment where demand outstrips supply consistently throughout the quarter. It was a successful quarter and working closely with our customers to address the inflationary cost environment through contractual rate increase updates and renewables. And I'll provide some additional color on that as we get within the segments. And in addition, our broad portfolio services offered leverage to serve the customers free coverage needs as the over the road conversion to intermodal and truckload assets to third party brokerage continue to gain increasing prominence in our transportation solutions. In our truckload segment, our overall tractor count which is a combination of company and owner operator units was relatively flat year-over-year and down sequentially 250 units from Q4 2017 as driver growth has proved to be very challenging. Revenue per truck per week in Q1 of 2018 increase 6% excluding fuel surcharge revenues compared to Q1 of 2017. Impact from price improvement was 7% offset by a 1% erosion in productivity. Our largest quadrant in truckload are for-hire standard quadrant increased revenue per truck per week 9% excluding fuel surcharge year-over-year as compared to Q1 of 2017 and nearly all of that increase was attributed price gain. Customer contract renewals closed in Q1 averaged price gains in the low double digits. Our for-hire specialty quadrant experienced a greatest improvement in price at 10.5% year-over-year offset also by a largest negative productivity…

Thank you, Mark. Now on to the results for the first quarter of 2018. Enterprise operating revenue in the first quarter increased 13% year-over-year to $1.1 billion, while revenue excluding fuel surcharge increased 11% to $1 billion. The revenue growth was primarily due to the strong price and demand environment. The company's broad portfolio of complementary services enabled it to offer and deliver alternative capacity solutions in this tight supply market. In addition increased revenue was generated by continued growth in the company's leasing operations. Enterprise income from operations in the first quarter of 2018 were $67.6 million, an increase at 55% compared to first quarter of 2017. This is primarily driven by improved price. This is a record level of operating earnings for the first quarter. Net income in the first quarter were $47.6 million or $0.27 per diluted share as compared to $22.6 million and $0.14 per diluted share of a year ago. On an adjusted basis, EPS in the first quarter of 2018 was unchanged at $0.27 compared to and adjusted EPS of $0.15 a year ago. The impact of the reduction in the tax rate estimated at $0.05 per share is offset by the impact as increased share count from the IPO estimated at $0.03 per share. The effective tax rate of 26.2% was slightly higher than we had anticipated. Discrete tax items have and will continue to affect our effective tax rate in both positive and negative manners. We anticipate the 2018 effective tax rate to be between 25.5% and 26.5%. This is slightly more than our previous estimate which is a result of some increases in state tax rates. Operating ratio in the first quarter improved 160 basis points year-over-year to 94.1% and improved 170 basis point on an adjusted basis to 93.4%. Now…

Thank you. We will now being our question-and-answer session. [Operator Instructions] Our first question comes from the line of Tom Wadewitz with UBS. If you could also please limit yourself to one question and if you have follow-up questions please re-queue. Thank you

Good morning. Let's see, there are I guess a lot of questions, you know I try to think intermodal strength and kind of sustainability of that is you know it looks like one of the highlights for the quarter, I know you had good intermodal results, very good in fourth quarter as well. How would you think about the key drivers of that strength and margin performance and kind of you know conviction that you sustain that trend? I guess also maybe how the new containers that you're adding, the new capacity might affect that very favorable trend in our performance in intermodal?

Good morning, Tom, this is Chris. Let me just give you a bit of an overview. I think that a lot of what has happened with that business and the improvements that we've seen are driven by clearly we talked about being in the sixth inning with our Quest platform when we were on the road show. And this was one of the businesses that was just starting to use the decision science that we were putting in on the revenue management side. And so I think clearly that is helping the business perform. And without doubt the investment that we made in our owned chassis has certainly had the impact that we talked about and adjusted for last year. But the improvement that is made in terms of the productivity has played a key part in that. And then I think we just can't overestimate the fact that capacity is tight across North America on all surface transportation and that's rolling into it. But in terms of execution and how we're thinking about the extra containers, let me just have Mark provide a little more color to that.

Yeah. Thank you. And then certainly our dray performance being able to increase our coverage on our Orange assets both from a productivity and a service standpoint, I think continue to offer differentiation in the marketplace at least from a customer experience and cost to serve time. In addition, we would estimate just based upon missed opportunities in the market has additional boxes have been consumed on the train just based upon overall rail fluidity that we could have easily based upon quality demand another 6,000 orders within the quarter. And so the additional boxes that will start to see, a more prominent basis coming in here middle of second quarter will give us an opportunity to capture the quality demand that our customers are asking us to cover. And right now we are almost as constrained and we are as constrained on the box front as we are on the truck front. And so that's why we believe this is sustainable, our execution platform is operating very well and both from a revenue management, network management, dray and now putting some additional resource boxes against the effort, we think we'll have a really good position in the market for the remainder of the year.

So I mean it sounds like you have conviction at this, performance is sustainable and good visibility to using the boxes, selling the boxes, is that a fair way to summarize that?

Yes it is, yeah.

Okay. Great. Thank you and congratulations on the strong results.

Thank you, Tom.

Thank you.

Our next question comes from the line of Ben Hartford with Robert W. Baird. Please proceed with your question.

Thank you. And then Lori, congrats and best of luck in retirement. Mark, maybe just, you touched on it there at the end but what is the approach that shippers are taking to this year's bid, you're putting a very strong performance in intermodal, you talked about constraints in the box side, but their service show big numbers and growth and brokerage, but I know what these big shippers have been spending a disproportionate amount in the spot market and they're looking to work their back. So your portfolio is well situated into that. What are you seeing during this year's bid and then any peak in the 2019 as well to assess the durability of it? Are you seeing a migration toward committed truckload capacity and away from spot and perhaps avoiding intermodal because of the service issues or is there increased appetite to use intermodal over the next few years because of the visibility to rising freight rates or you just from a high level perspective, how were some of the large retail customers managing this year and thinking about supply chains over the next couple years?

Great. Thank you, Ben. Certainly I think customer desire and commentary with us is very much on the load acceptance vein of what can be done contractually even it's perhaps higher price points or at as you mentioned the service challenges a bit in intermodal but they're not so much that it's driving any real volume away from the train. And because if you do those well then there's - they believe there's less going to be into the spot market which has been more problematic. So we have had and continue to see just a real strong appetite for over the road to intermodal conversion, really and all geographies and virtually all segments of the customer vertical space. So - and again another reason, we're bullish on adding some of containers to that. We haven't added a great deal of containers over the last several years and based upon our ability to perform at where we are, we think it's absolutely the right time to do that. And so overall it's been obviously a difficult discussion at times of customers just because of the desire that have us take more fright than we're capable of based upon the demand on our assets and services and so. As you mentioned, our portfolio allows us to bring into the brokerage arena and so we really are trying to be very collaborative in that regard and know that we are more of a contract customer play than simply throwing everything that we do out into the spot market and we think that's the best long term of play.

And could you give a follow-up on the point of the brokerage side, obviously you are going to have more difficult comparisons visible to the year but we've seen enough to suggest that mid to upper single-digit perhaps low double-digit type volume growth is sustainable in the brokerage side as a result of all of that?

Yeah, I believe so. And again multi-modal, we play and all forms of LTL, intermodal and obviously truckload being the largest of that. But yeah, we feel we're positioned well and would stay on trend.

Thank you.

Our next question comes from the line of Ken Hoexter with Merrill Lynch. Please proceed with your question.

Great. Good morning and congrats Lori, and obviously the best to you as you go on to your next phase. Can you I guess maybe talk - Chris or Mark, talk a little bit about the last mile rollout, the impact on margins, you talked about the scale of the ramp up and are you going into the home now or are you getting new trucks for that last mile or is this still on you know standard on tractors. Can maybe just talk a little bit about given that the 250 basis point drag that walk us through the business a little bit more in what you're expanding?

Good morning, Ken. Sure, I'd be happy to do that. What - we have multiple segments of the Final Mile market that we serve both in the B2B space and that's going to continue to be important in serving the over dimensional product categories and replenishing store fronts. But increasingly, where we see the growth in the market and where the biggest opportunity to have the best mousetrap ultimately be addressing the e-commerce into the home segment of the market. And what we use from a capital standpoint for that is not the Class A tractors on the Final Mile, amount of investment throughout the network to field those units for that e-commerce consumer base. And so we're really in a phase of transitioning the importance of the e-commerce trend into both our geographic coverage, our execution systems and also from a transit standpoint that we can have a very competitive e-commerce transit throughout the network that really necessary to serve that market well and present volumes, because it's a much more of a fixed cost infrastructure than is typical in a full load network that we're not at optimal fill rates and all portions of the network and so now that we have the transits and we have - that we feel is very, very competitive, it's about the volume to leverage across that need much more accretive [Technical Difficulty] With that tightening of capacity back in that timeframe, the industry made a lot of progress on fuel surcharge and on accessorial billing. And what really needs to happen it's clearly our rate per mile or however the driver page structure I mean that will need to move overtime, as we have this full employment economy and that kind of thing. But the other thing that has to happen…

Thanks Chris. Just a couple other comments. And you know we certainly have been adjusting pay really since 2017 and we will believe continue to do that. We want to pay our drivers more, we need to pay our drivers more and that's part of alternately match your point part of the equation. But the other part of the equation to deliver every other strength that we have, certainly the cultures of the company, the safety stance, people want to be around folks who are committed to their safety and then ultimately leverage our portfolio really have to have choice and options based upon lifestyle and income, desires and so. One of the attractions of that to bring back up the first final mile but is you know we have the ability to have very stable local in the market jobs ones that don't require a CDO and grow our business in a way that's different than we've traditionally grown it. Has mention, our intermodal business highly productive and a great value proposition for those drivers from a time at home basis and you know on and on. And so we have to have this on multiple fronts and we are really as an organization mobilized to be thinking about the driver experience. And to make sure that everything that we're doing in our process, everything we're doing in our technology and personal interfaces, respect and understand the lens from the driver into our business. And we do those things well and we're committed to doing those things well. We think ultimately, we'll be successful with the driver thing. But it takes a full effort across comp, how you think about freight selection that you're putting the driver in the best possible condition as Chris mentioned and then certainly your commitment to their experience.

I appreciate the thoughtful answer and Lori, congratulations kind of a walk off home run to be able to handle an IPO is as so smoothly, you know we missed. Thank you.

Thank you very much

Our next question comes from the line of Chris Wetherbee from Citi. Please proceed with your question.

Hey, thanks, good morning, everybody. And again congrats to Lori. I want to ask about the fleet trajectory, you got a question about it before, but I guess I just wanted to come back and make sure I understood if there, reassure what the underlying assumption on the truckload fleet is you know underpinning the guidance. If you could just give us a sense, do you think you can kind of move that number back into the 12s or is there another way to sort of think about it?

On the truckload segment side on the truck front, you know we typically have our peak production relative to trucks on the road, it is late third into the fourth quarter then typically we because of a holiday condition and some of the other elements have a seasonal downturn relative the total units in the fleet, which is exactly what we experienced here. You know I do believe we're still looking a way to upgrade the portfolio relative to customer mix and freight mix. And so we'll have some good deal of business growth that doesn't necessarily always translate into additional tractor units, because we are continually looking at how to improve the mix of the business. But as we look out for the full year, specifically to your question, we do not have a great deal, we're at this juncture putting more of our growth capital, our growth capital planned into our intermodal offering both tractor, container and chassis and we would look to be a fairly flat relative to the truck side of the business. But as Chris said that could change and we could find opportunities that intrigue us to do so and we will absolutely you know obviously have with all our CapEx guidance in the middle of that range. And so we still have you know plenty of powder to make some adjustments there and we're excited to do so.

Okay, that's helpful. And just to clarify flat you're sort of topping off of that one first quarter level?

I am.

Okay, that's really helpful. And then just coming back to the intermodal point, you know I think what you just said was helpful as well, but when you think about profile into the cost there in particular sort of you know rail cost and frankly rail service, is there any, you know how do we think about that as the year progresses, is it sort of regular step ups, is it sort of a reasonable matching between real cost increases and the prices or the ability to go back into the market and get prices? Just want to get a sense if there's any timing differentials between sort of when you have to pay that relative to how you're repricing your contract book?

Hey, Chris. I would encourage you maybe in the follow-up calls. We have another couple calls and probably won't get to all of them and I want to make sure that we have the opportunity to do that. So if I could just ask that you would kind of come back around and check on that when you talk on a follow-up call later today.

Sure, thank you.

I would appreciate that. Thank you.

Our next question comes from the line of Brian Ossenbeck with JPMorgan. Please proceed with your question.

Hey, good morning, thanks for getting me on the call here. Just one additional, Christopher you mentioned just briefly in a commentary about the whole reversed logistic returns process. So I wonder if just you could give more commentary on that if that's part of the build out, if you are expecting that the factor into some of the demands on the equipment and how you purchase that, that sort of business, because you could have fleet coming back, which might be damaged, so wonder if you have that it into your strategy and how far away you are from implementing that as well? Thank you.

Thank you, Brian. Certainly our reversal logistics is an important part of the whole e-commerce world, very liberal return policies, really make it necessary to be a value added partner there that you have to have a mechanism to capture, connect and lend resolve with actually the retailer really making the call whether that's a return all the way back to the vendor or whether that's a disposal or charity, donation, et cetera, et cetera, that's all based upon various rules by the consumer - excuse me, by the retailer. But certainly having the ability to satisfy that portion of the service equation is incredibly important and we have really been on that journey and extending some of the platform that we had acquired from the technology standpoint from the acquisitions to accommodate the increasingly important element of that to the service equation. So we see that as an additional revenue stream and additional earnings stream that comes with providing that service.

Okay, thanks for additional color. I appreciate it.

There are no further questions in queue. I'd like to hand the call back over to Chris Lofgren for closing comments.

Well, thank you again everybody. We are kind of pushing this right up here to the limit, but I would not want to exit the call without thanking Lori one more time for the contributions. And frankly, she just never missed a beat while she was here helping us make this transition. She looks out to the next phase of her life and I appreciate everything that she has done for the company, her commitment is have been unbelievable and everything she's done for me. So I'm grateful and I'm standing on the sidelines as you move into the next phase. As you all know Steve will be starting next week following the Lori's role and I know he is looking forward rekindling past relationships that many of you have on the call here with him. And with that let me thank you for your time and wish you a great day.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.