John Engquist:We will not be de-fleeting in cranes. If anything subject to availability, we will grow our crane fleet somewhat, but we will be significantly reducing our capital spending on our aerial fleet and our earthmoving fleets.
Our original plan called for some modest fleet growth to the $10 million to $25 million or $30 million this year, and now we are looking at maybe bringing our fleet down $25 million or $30 million. And that’s primarily in the area of aerials and earthmoving equipment.
Seth Weber (Banc of America Securities): On the rental fleet, how much of the crane fleet is actually boom trucks versus rough terrains or crawlers?
John Engquist: The total rental fleet is something north of 60% aerials.
Seth Weber (Banc of America Securities): Are you trying to lock in equipment at lower rates?
John Engquist: Typically when you go on a big project that’s going to last a long time and you lock equipment up, you can afford to take a lower rental rate. You end up for a given period of time with a 100% time utilization.
You handle the equipment a lot less, so your maintenance cost goes down. So you can afford to take a lesser rate on a long-term project. Our position has always been that we like long-term projects.
Typically today the average length of a rental contract for us is about 45 days. So our business is weighted to longer-term contracts. That also varies a lot by product type. Cranes typically stay out longer duration than some of our other products.
Seth Weber (Banc of America Securities): Are you planning to close any stores as part of this kind of strategic review of your business at this point?
John Engquist: We are not looking at store closure. We might be looking at some store consolidations down the line. We have got some markets where we have stores in close proximity so there may be some consolidation.
Seth Weber (Banc of America Securities): Can you try and strip out for us how much of your business is actually industrial?
John Engquist: The industrial sector drives at least half of our revenue, and industrial being petrochemical, oil patch, mining and energy sectors.
Jason Molick (Goldman Sachs): Any areas that are still showing strength versus weakness?
John Engquist: We are pretty much seeing strength across all of our used equipment product lines. We are very pleased with residual value and the way pricing holding up.
Jason Molick (Goldman Sachs): Should we expect a good portion of the CapEx to go to the crane segment?
John Engquist: Yes. Any growth CapEx that you see from us will be on the crane side. Again, looking at aerials and looking at earthmoving equipment, we intend to reduce our capital spending there significantly.
Jason Molick (Goldman Sachs): Comment on free cashflow usage?
John Engquist: At this point we would be paying down our revolver and/or repurchasing shares.
Chris Daugherty (Oppenheimer & Company): Is there any big discrepancy with the dollar utilization between pieces of equipment?
John Engquist: Absolutely. Our lowest dollar returns or dollar utilization is in our crane business. On a lifecycle basis, it’s a very profitable asset for us, but the dollar returns are lower.
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