H&E Equipment Services Inc (HEES) 2009 Q4 法說會逐字稿

Good day and welcome to today's H&E Equipment Services fourth-quarter 2009 conference call. Today's call is being recorded.

At this time I would like to turn the call over to Mr. Kevin Inda. Please go ahead, sir.

Thank you, Lisa, and welcome to H&E Equipment Services conference call to review the Company's results for the fourth quarter and year ended December 31, 2009, which were released earlier this morning.

The format for today's call includes a PowerPoint presentation which is posted on our website at www.HE-equipment.com. Please proceed to slide one.

Conducting the call today will be John Engquist, President and Chief Executive Officer, and Leslie Magee, Chief Financial Officer and Secretary.

Please proceed to slide two. During today's call we will refer to certain non-GAAP financial measures and we have reconciled these measures to GAAP figures in our earnings release which is available on our website.

Before we start let me offer the cautionary note that this call contains forward-looking statements within the meaning of the federal securities laws. Statements about our beliefs and expectations and statements containing words such as may, could, believe, expect, anticipate, and similar expressions constitute forward-looking statements.

Forward-looking statements involve known and unknown risks and uncertainties which could cause actual results to differ materially from those contained in these forward-looking statements. These risk factors are included in the Company's most recent annual report on Form 10-K.

Investors, potential investors, and other listeners are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The Company does not undertake to publicly update or revise any forward-looking statements after the date of this conference call.

With that stated I will turn the call over to John Engquist.

Thank you, Kevin, and good morning, everyone. Welcome to H&E Equipment Services fourth-quarter 2009 earnings call. On the call with me today is Leslie Magee, our Chief Financial Officer.

Please move to slide three. This morning I will give an overview of the fourth quarter and also discuss continued efforts to manage our business. I believe we are managing through historically low levels of demand for our products and services in the midst of the most difficult and uncertain operating environment our company has faced.

Leslie will summarize the quarter and full-year financials. When Leslie concludes we will then take questions.

Please move to slide five. Our business continued to face unprecedented challenges during the fourth quarter as demand remained low and pricing remained weak. In our non-residential construction and industrial markets results continued to decline as the segments of the economy that drive demand for our products and services remained depressed. On the positive side we continued to make excellent progress on initiatives that are more within our control, which included cost control, debt reduction, and cash generation.

We continue to control our costs with SG&A expenses down 20.5% versus the year-ago quarter. The fourth-quarter results included reduced inventories and we had further negative net CapEx spending resulting in a lower fleet size. We fully repaid our revolver early in the quarter and began building cash.

I am extremely pleased with these accomplishments given the challenging operating environment we faced during 2009.

As a result of the ongoing challenges in our markets, our revenue, EBITDA, and net income were down year-over-year and the fourth quarter resulted in the weakest quarter of the year. Revenue declined 47.4% to $137.7 million from $261.9 million a year ago. Adjusted EBITDA decreased $40.2 million to $19.6 million on a margin of 14.2%.

We posted a net loss for the fourth quarter of $12.1 million compared to a net loss of $600,000 a year ago. Net loss per share was $0.35 versus a loss of $0.02 in the fourth quarter a year ago. Keep in mind included in our fourth quarter 2009 and 2008 net losses were pretax, non-cash impairment charges of $9 million and $22.7 million, respectively. These non-cash impairment charges reduced fourth-quarter 2009 and 2008 net income by $0.16 and $0.42, respectively.

Our strategy during 2009 remains in tact. Until we see signs of recovery in our end-user markets we will continue to tightly control our costs and our capital spending. We intend to continue to generate cash, strengthen our balance sheet, and position our company to take advantage of future opportunities when the recovery begins. Should end-user demand pick up faster than our current expectations, we expect to be able to quickly and effectively adjust our spending levels to meet demand.

Please move to slide six. Our Gulf Coast region still accounts for the majority of our revenue and gross profit at 55% and 60%, respectively. Louisiana and Texas continue to generate solid results for our company given our involvement in the oil and gas and petrochemical industries. Our Intermountain region is our second most productive region generating 21% of revenues and 22% of gross profit. Historically this region has provided us with significant exposure to the mining sector and with current commodity prices we hope to see some increased demand in our Intermountain region.

Our remaining regions, Mid-Atlantic, Southwest, Southeast, and West Coast, account for 24% of our revenue and 18% of our gross profit. Our customers in these markets are less industrial and more non-residential construction focused. Activities in these markets has been very slow as funding remains difficult and construction activity is at a virtual standstill.

During our last update call we talked about two new [aerial] store openings in Baltimore and Nashville. We plan to continue our new branch strategy in order to redeploy fleet from some of our weaker markets. Currently we are opening three additional stores -- namely Pasco, Washington; Indianapolis, Indiana; and Louisville, Kentucky.

If you would proceed to slide seven, please. There continues to be negatives and some positives in the market. On the negative side, the economy has not shown major signs of improvement. Demand and pricing remain at historically low levels with excess capacity in the market.

The non-residential sector typically lags the recovery of the general economy. Lending is still very tight for non-residential projects and commercial real estate remains problematic for the economy. Lastly, we continue to have very limited visibility into 2010.

On the positive side, forecasts call for accelerated stimulus spending and some of the major equipment manufacturers are forecasting improving business conditions during 2010. We also believe that with current commodity prices the industrial sector will recover ahead of non-residential construction. Our strong presence in the Gulf Coast and Intermountain regions gives us significant exposure to the industrial markets and we expect to benefit as these end markets improve.

Please move to slide eight. Let me conclude with the following, we made significant steps to strengthen our balance sheet during a very difficult 2009. We remain very focused on maintaining a strong balance sheet and cash generation in light of our expectations of continued weak demand well into 2010. At year end our leverage, net of cash, was only 1.7 times. Currently we are well capitalized with our debt carrying a low interest rate and no near-term maturity dates. Our focus on cost control remains very much intact.

As far as 2010, we expect the challenging conditions to continue near term. The first quarter is historically a soft quarter combined with the current ongoing weak economic conditions and unusually adverse weather conditions so far this year. Due to the continued lack of visibility in our and markets, we are not providing guidance on specific metrics. However, we expect 2010 to be the bottom of the cycle for our sector.

We are continuing to take proactive steps to protect our performance under the current market conditions. We will continue to shrink our fleet to adapt to current conditions and focus on cost. Our strong ties to the industrial sector may help offset the impact of weaker end markets, but the weakness in the overall economy is affecting all of our customers regardless of their industry.

We remain confident that our integrated business model and exposure to historically stable industries has and will continue to offset the impacts of the recession. Lastly, our strong balance sheet provides us with complete flexibility to take advantage of future improvement in our end markets.

At this time I am going to turn the call over to Leslie for her financial review.

Thank you, John. Good morning. I will continue today's call with a more detailed review of our fourth quarter and then I will close by summarizing our 2009 full-year results.

The fourth quarter was affected by very low demand for our products and services and resulted in the weakest quarter of the year. As demand was severely depressed, revenues, margins, and profitability were all impacted significantly. In general, we are discussing the same trends from previous updates as little has changed in our sector. The impact of these trends touches nearly every slide that I am addressing today.

On slide 10 I will begin with a discussion of our fourth-quarter year-over-year performance for total revenues and gross profit as reflected in the charts. On a year-over-year basis total revenues decreased 47.4% to $137.7 million. Revenues declined across all business segments.

First, I will address our rental segment in more detail. Rental revenues decreased $30 million or 42.3% compared to last year. Rentals declined in all four product lines and aerials, earthmoving, and cranes were all down in the 40% range.

Dollar returns were 23.9% for the fourth quarter of 2009 as compared to 35.6% for the same period in 2008. Our dollar returns were negatively impacted by lower time utilization at 53.3% versus 63.8% in the fourth quarter of 2008.

On a product line basis lower demand for aerials and cranes continued to drive the declines in year-over-year time utilization. Sequentially time utilization declined 100 basis points from the third quarter. Physical demand for our fleet remained stable until the last month of the quarter when we experienced sequential declines in all product lines.

Dollar returns were also affected by lower rental rates. For the quarter rates were down 18.5% on new contracts compared to a year ago. Sequentially rates declined 2.3% largely driven by rate in the one month of October. Rates reflected some improvement during the month of December versus November. However, rate pressures in our sector continue to be a daily challenge.

New equipment sales declined $63 million or 63.1% over the prior-year period. The declines continue to be largely due to lower new crane and earthmoving sales. Used equipment sales were down $14.6 million or 45.1% over the fourth quarter of 2008. In dollars the declines were fairly evenly spread across cranes, aerials, and earthmoving unit sales.

Lower demand was also reflected in our product support businesses. On a combined basis revenues declined $11.8 million or 25.2%.

Now moving on to gross profit in each segment. Gross profit for the quarter was $30.7 million compared to $74.3 million a year ago. From a gross margin perspective, margins decreased to 22.3% as compared to 28.4% primarily driven by lower gross margins on rentals. However, all segments reflected lower gross margins.

For a sequential comparison, our gross margins were 22.8% in the third quarter.

In our rental segment margins declined to 27.1% from 45.6% in the prior year. The declines in average rental rates and time utilization previously mentioned have affected our rental gross margins. Partially offsetting the impact of rates and utilization were lower rental cost of sales. Rental fleet depreciation expense decreased 21% and maintenance and repair expenses decreased nearly 30%.

Margins on new equipment sales were 9.6% this quarter compared to 12.9% in the prior year. The decline in new margins is due to lower margins on cranes. In the fourth quarter of 2009 new earthmoving margins improved and aerial margins were consistent with the prior year's quarter.

Our gross margins on used equipment sales declined to 22% from 25.8% in the prior year. We combined the sale of used inventory and the sales from our rental fleet in this P&L line item. Margins were lower in both components of used equipment sales. However, sales from our rental fleet are still performing well with margins at 27% this quarter.

Margins in our parts and service business declined to 39.3% from 42.1% in the prior year. Parts gross margins decreased to 26.4% from 29% due primarily to the mix of parts sold. Also, service gross margins were 62.1% versus 63.9% a year ago, negatively impacted mostly by service revenue mix.

Slide 11, please. As we mentioned in this morning's release our fourth-quarter results reflect a non-cash goodwill impairment charge of $9 million. This impairment charge will be excluded from the EBITDA calculation for purposes of our covenant test under our senior secured credit facility and will not affect availability under the facility.

I will discuss most of the remaining financial results on an as-adjusted basis or excluding the charges from both periods as we believe the comparisons on this basis are a more meaningful presentation of our financial performance.

We incurred charges of a similar nature in the fourth quarter of 2008 totaling $22.7 million. Our presentation includes reconciliations of these non-GAAP measures in the appendix.

Income from operations as adjusted decreased $34.5 million to a loss of $3.3 million. Margins were a negative 2.4% compared to 11.9% a year ago. While we have made significant progress in controlling both cost of sales and SG&A costs, our profitability has been impacted by sharp declines in top-line revenues and rental pricing as I discussed in detail on the previous slide. Revenues declined 47.4% and gross profit declined 58.6%, but these declines were partially offset by a 20.5% reduction in SG&A costs.

Proceed to slide 12. For the quarter net loss including the charge was $12.1 million or a loss of $0.35 per share compared to a net loss of $600,000 or $0.02 per share. On an adjusted basis net loss was $6.6 million or a loss of $0.19 per share in the current quarter compared to net income of $13.8 million or earnings of $0.40 per share in the fourth quarter of last year.

For the quarter interest expense decreased $1.8 million or 19.4% to $7.3 million, primarily as a result of the payoff of the outstanding balance under the senior credit facility early in the fourth quarter and lower floor plan balances.

Please flip to slide 11 -- I am sorry, slide 14. Adjusted EBITDA decreased $40.2 million or 67.2% to $19.6 million with margins decreasing to 14.2% from 22.8% compared to a year ago on lower revenues and gross margins also due to the factors previously discussed.

Next, slide 15. Our SG&A costs decreased $8.8 million or 20.5% to $34.1 million for the quarter. Lower SG&A costs continued to occur in many categories such as salaries, wages, incentives, fuels, utilities, and promotional expenses.

Our workforce is down 15.7% or nearly 300 employees since the beginning of 2009. Since the onset of 2008 we have reduced our workforce by nearly 25% or a total of more than 500 employees. Given the contraction in our top line, SG&A costs were 24.8% as a percentage of revenue versus 16.4% a year ago.

Slide 16. Let me now briefly review our full-year 2009 results. Deep recession resulted in significant revenue declines across all of our business segments, which presented considerable obstacles in maintaining margins and profitability. Regardless of the economic challenges we faced, we were very successful in scaling our business to the current environment focusing on asset management, balance sheet protection, and cash generation.

We eliminated $76.3 million of debt under our revolving credit facility, significantly increased our cash position during the fourth quarter, and maintained low levels of leverage in spite of sharp declines in EBITDA. We also reduced inventories by 26.5% or $34 million and fleet by 14% or $111 million during 2009.

As a result of our focus on cost control, we reduced SG&A by $36.5 million or 20.2% to $144.5 million in 2009. As a percentage of total revenues SG&A was 21.3% versus 16.9% in 2008.

We were also pleased to have completed the development and testing of our new ERP system which was initiated in early 2008. We implemented the first phase of our company-wide rollout about 30 days ago. This marks a significant accomplishment for our organization and we are very proud of the dedication and tremendous efforts of the project team, which consists of many people throughout the Company.

We will continue along the path of deploying the new system to the remainder of the Company in two additional phases over a relatively short period of time.

For the year revenues decreased $389.2 million or 36.4% to $679.7 million. Gross profit decreased $144.5 million or 46.6% to $165.5 million and our gross margins were 24.3% compared to 29% in 2008. These results reflect the sharp decline in demand.

Furthermore, income from operations as adjusted was $21.6 million or 3.2% operating margin. Our bottom-line results were a net loss as adjusted of $6.5 million. On an as adjusted EPS level we reported a loss of $0.19 per share compared to earnings of $1.62 per share.

The effective tax rate adjusted for the impairment charges was 29.3% as compared to 37.2% in 2008. Adjusted EBITDA decreased $126.6 million to $121.5 million and resulted in margins of 17.9% compared to 23.2% in 2008.

Slide 17, please. Our gross fleet capital expenditures for the quarter were $6.9 million including non-cash transfers from inventory and net fleet capital expenditures were a negative $6.7 million or cash inflows of $6.7 million. Our fleet at the end of the quarter was $675.1 million based on our original equipment costs which has decreased $110.5 million since the beginning of the year or a decrease of $19 million since the end of the third quarter.

Gross PP&E CapEx was $4 million and net PP&E CapEx for the quarter was $3.9 million. Our fleet age at the end of December was 40 months as compared to 33.3 months at the beginning of this year.

And the last slide, page 18, please. We continue to operate with a very strong liquidity position. We are pleased to have repaid our revolver and we currently have our full facility net of outstanding letters of credit of $8 million resulting in a net $312 million available under this line. Furthermore, our access to the $320 million facility is dependent on the availability of eligible assets as collateral. As of December 31, our eligible assets were approximately $430 million providing $110 million of suppressed availability.

As a reminder, our financial covenant applies only as availability is less than $25 million and with $320 million of availability we obviously do not have covenant concerns. We are also pleased that in times of significant declines in earnings our leverage remains low at 1.7 times on net debt or total debt less cash on hand through an adjusted EBITDA basis.

In closing, we will continue our current focus of asset management and cash generation until an improved environment provides other opportunities.

We will now take your questions. Operator, [if you will] please provide instructions for the Q&A session.

(Operator Instructions) Henry Kirn, UBS.

Good morning. It's actually Eric Crawford on for Henry; he is in Europe. Was wondering if you could talk a bit about rental rates as they trended through the fourth quarter. Did you see the decline moderate at all or were they accelerating?

No, we have seen the decline moderate and we expect that to continue. Again, when you start comparing rental rate performance I think it's difficult due to the fact that there is no common platform for measuring rates. But, yes, we did see the rate of decline moderate.

Okay, that is helpful. You mentioned forecasts for accelerated stimulus spending. Have you begun to see any benefits there? Or short of that, are your branch managers hearing of projects soon to come online?

To date we have had very minimal impact from stimulus spending. What we are seeing right now is some fairly substantial work being let in New Orleans that relates to storm protection. It's levy work; it's flood control structures. There has been well in excess of $1 billion worth of work let there and there is more coming so we feel pretty good about that.

We have had some local contractors that we have close ties to get some of that work, so that is going to benefit us in the near term.

Great. And one more if I could, please. Are there any categories where you are seeing improvement in your parts and services business that might be a leading indicator today?

That absolutely will be a leading indicator for us. We are not seeing anything we can really get our arms around right now but it's something we watch very closely because there is going to be some pent up demand there.

A lot of our end-user have their fleets parked and they are just not spending money on it. When that equipment goes back to work there is going to be some pent up demand. So we do believe that will be a strong leading indicator for us.

Okay, great. That is very helpful. Thank you.

(Operator Instructions) David Wells, Thompson Research Group.

Good morning, everyone. First off, I wanted to spend a little bit of time talking about the crane business and your commentary with regards to margins on new crane sales being tough. Just wondered if you could give some more color, if that is breaking our by specific product classes or categories or if it's more broad-based in nature.

Well, I think it's more broad based. As you know, the crane markets have come way, way down. Now there is some pretty good activity in Asia and South America, Brazil specifically, but the domestic market here has come way down.

This whole crane sector turned down so fast that the distribution organizations were caught with a lot of inventory, including us. So there is some crane business here domestically but when you are on a crane deal the price pressures are tremendous because of the inventories people are seeing.

And I guess we have heard some commentary about some of the OEMs about potentially seeing the crane distribution side of the world needing to take some [inventory] (technical difficulty) on as we work in to 2010. What is your perspective on your crane inventory? Do you think that is a sentiment that you would reflect from your side or do you feel like there is more room to work that down further?

Well, we have worked our inventory down significantly very significantly. We have come way down from where we were mid-year of 2009 so we have made great progress on that. And, yes, I think we are going to be placing some orders but it's going to be specific to certain project groups. Larger RTs there is still pretty good demand; smaller RT is really weak right now so it's kind of product specific.

But we have cleaned a lot of our inventory up and we will be placing some orders, because the big rough terrain cranes are still in strong demand.

That is helpful. From a seasonality perspective, would we expect time utilization to be -- on a [percentage] basis to see a bottoming in the Q4 and Q1 timeframe? And then as the construction season restarts you would expect to -- assuming a more normalized environment, you would expect some build-off of that? Is that the right way to think about that?

Absolutely. I think we are going to see a bottom in our -- well, we probably saw a bottom in December would be my guess. I can tell you the first quarter is going to really be soft. One, you got the weak economic environment and the weather conditions have just been brutal, really unlike anything I have ever seen.

Typically I don't like to talk about weather; I think the impact is hard to quantify. But this has been a very difficult winter that has had a material impact, so I anticipate sequential improvement quarter two, quarter three in our physical utilization.

Okay, that is helpful. Then, lastly, as you look at your rental rates at the new locations that you are opening versus the corporate average is there a significant differential there?

I guess my concern is that if you are moving fleet into markets where you haven't had a presence up to this point, the easiest way to get that fleet out on rent is to be aggressive on pricing. Are you seeing a significant disparity relative to corporate overall or is that dynamic just not a factor at this point?

I am not going to say it's not a factor but there is not a significant disparity. I think your comments are valid. You enter a new market and you probably tend to be a little more aggressive on rates, but I don't think it's significant.

All right, great. Thank you very much.

Seth Weber, RBC Capital Markets.

Good morning, everybody. Just looking at your balance sheet has there been an appraisal done on your fleet recently? Is that a current number for the fleet value?

Yes. We just got our most recent appraisal in which the valuation date was 12/31 and there was stabilization in the appraisal value from the previous one which was a June 30 date. So there was no change really other than the fact that the fleet has shrunk in overall size.

Right. Okay, thank you. Then, John, I know you are not giving first-quarter guidance here but we are two months into it here. I mean, just directionally is it appropriate to think about the metrics kind of looking like they were in the fourth quarter as far as margins and slope of the decline year over year? Is that fair?

Well, I think the first quarter is going to be difficult I can tell you. Again, it's historically always our weakest quarter and I don't ever remember a time when the first quarter wasn't softer than the fourth quarter. We have got the weather impact on top of that so the first quarter is going to be difficult.

Okay. Then as you look at your fleet, the aerial fleet is now I think 42 months, is that right? Is there a number that you are looking at? How high do you think that number can go that you are comfortable with?

We have got a lot of room there, Seth. I am not at all concerned about our fleet age right now. I think at some point we are going to be spending a little replacement CapEx and whatnot but we have gone a long way to go on fleet age. I am very comfortable with where we are.

Okay. So we really shouldn't expect to see anything different than what we saw in the fourth quarter for the next at least couple quarters as far as net CapEx?

Yes. We are not going to be spending any significant money on fleet. Anything we spend will be replacement. And we intend to continue to shrink our fleet somewhat until we see demand pick up.

Okay. And then just lastly, just going back to the crane discussion. I am sorry if I missed this, but did you breakout the crane rental rates? Specifically, did you give rates by product? I might have missed it.

No, we don't usually give that level of detail. I would just say that aerials are the largest part of the fleet so they are usually the most significant driver in the overall rate computation. But cranes were down in the single-digit range year over year.

Okay. Was earthmoving up?

No, at year over year all product lines were down to get to the 18.5%.

Okay. I thought we had talked last quarter about earthmoving getting relatively better.

Sequentially there is stabilization there, there was in the fourth quarter compared to the third quarter, but on a year-over-year basis no. [I think that you are] thinking more on a sequential basis.

Yes, sequentially we are seeing some stabilization and some improvement. And we expect that trend to continue.

Right, okay. And then just last question, did you close any stores in the quarter?

No.

Okay. Thanks very much, guys.

Chris Doherty, Oppenheimer.

Leslie, just a couple of housekeeping items. The first, what is the manufacturing [for non-financing] at the end of the quarter?

$93 million.

And what is going to be the gain that is shown on the sale of the used fleet in the cash flow statement for the quarter?

A little shy of $4 million, $3.7 million I believe.

$3.7 million for the quarter?

Yes.

John, in terms of CapEx going forward, if you look at where your time utilization is right now, call it mid-50s LTM, where you historically have run probably high 60s. That would imply that you could probably take up another 26% demand without having to spend CapEx.

Is there anything that would change that? Is there a mix issue? Is there maybe some aging that you are going to have to deal with?

You know, we always are selling off the back-end of our fleets. That is just an ongoing process, good times or bad. But I agree; we have got plenty of room to increase revenue without spending money.

Do we have any mix issues? That is somewhat fluid. That changes in certain markets and we are continuing to tweak that, but for the near term we don't see any change in our capital spending. We are going to continue to stock our fleet back a little bit until we see an increase in demand.

And just to clarify the comments where you said you think that utilization probably bottomed in December, but yet Q1 was going to be a challenging, tough quarter. Does that mean you should expect time utilization to improve sequentially Q1 over Q4?

No, no. I think we will see some improvement over December levels but not over the average for the quarter. But we will see improvement over December levels which was, I believe, our bottom.

And then just lastly, you guys have taken [a lot of costs] out of the system. How much of those are permanent versus just variable costs that might return when volumes come back?

I can tell you we will be slow to add people. I would hope that a significant portion of that is permanent and that is going to be our goal. As Leslie stated in her comments, we have got a new ERP system in place that we hope is going to create efficiencies and expect it to. So I would hope that we can make some of these cuts permanent; a significant amount of these cuts permanent.

I can't give you a percentage figure but we are going to be very slow to add people, I can tell you that.

Thank you.

Adrienne Colby, Deutsche Bank.

Your used equipment margin was the strongest it has been all year in the fourth quarter. I understand that the yield transactions certainly weighed on the used equipment margins in the third quarter, but versus the first and second quarter I was wondering if you could comment on what levers were working there.

Well, one, I think that we are seeing some overall firming up of used equipment prices. I think if you look at any of the [Rouss] reports that have come out recently we are seeing some certainly more than stabilization of residual values. We are starting to see some improvement.

It's just something we focus on. We don't auction assets. As you know, we sell through our retail outlets and I think we do a real good job of selling equipment for what it's worth on a retail basis.

Okay. So it doesn't reflect any major changes then in what you are selling off in terms of mix?

No, no. Our mix has remained pretty constant.

Okay. A couple of housekeeping questions. Could you tell us how much fleet was transferred from inventory to the rental fleet in the quarter?

I think it was $2 million from new inventory to fleet as part of the CapEx number that I gave.

Okay. Did you say that the net PP&E CapEx was $3.9 million? Did I hear that right?

Yes, that is correct.

Could you tell us what operating cash flow was for the full year?

For the full year operating cash flow -- operating cash flow for the full year is $84 million.

Great. I am wondering if you have given any further consideration to stock renewal buybacks.

We have not. We have continued to discuss our cash build with our Board and what we are going to do with it. But, no, we have made no decision for stock repurchases at this point.

Okay, great. Just one final question, if I could. In terms of new openings are you still thinking you are going to be doing something more in the back half of 2010? I know you have talked about three in the current quarter. I am just wondering again if there are additional branch openings.

Yes, we are continuing to do market research and evaluate markets. I think you could see us open as many as -- a total, including what we have already done, of eight to 10 stores. I just think it's a real sound strategy to read deploy under-utilized fleet.

We don't have to invest any money to do it. Our cost of entry is extremely low and we are pretty comfortable we can get positive results. We are also comfortable that it will be a real driver of growth when this thing starts to turn around.

Great, thank you.

Philip Volpicelli.

If you could talk a little bit more about cranes, I think you mentioned the rental rates were down in the single digits in the fourth quarter but that there is I think you mentioned a lot of excess inventory in the distribution channel.

Do you think that this is a sector where we are going to see those rates drop even further as some of that inventory in the channel gets converted into the rental fleets or is it starting to kind of near a bottom?

I suspect crane rates are nearing a bottom. I don't see a lot of further deterioration there. And, again, inventory levels have definitely improved, and I am speaking more specifically to the Manitowoc Crane Group's distribution organization, but the inventory burn has been fairly significant and it has come down.

I can tell you our inventory position has improved dramatically on cranes so I don't see a lot of continued price pressure there. I think it's probably near bottom.

Right. Last call you mentioned that the backlog went from upwards of 100 down to 15 to 20. What is your backlog now? Is there anything in backlog for cranes?

Essentially nothing. It's very, very minimal.

Okay. And then as we think about possible share repurchases or buybacks now you have paid off the credit facility, what is your restricted payments capacity to be able to do that?

I don't --

Our restricted payments basket is currently negative right now.

Because of the write-downs on goodwill impairments?

Right.

Right.

Okay. And there is no carve out?

There is a general basket of about $25 million, but we haven't made any decisions to use a general basket for that.

Okay. And then last question from me, your Intermountain region that has exposure to Mining how is that business doing? We have heard about coal stockpiles being high. Can you give us just a little flavor of what you are seeing there in the mining side?

It got really, really ugly in 2009. It was bad but commodity prices have come back a long way and they are certainly at levels now that would spur investment in that sector. So we are seeing mines start to hire people again and we expect to see some increased activity there because you look at copper prices, gold prices, they are at pretty strong levels right now.

Great, thanks.

(Operator Instructions) Barry Haimes, Sage Asset Management.

Good morning. Had a question on utilization and the various strategies. You have talked about continuing to shrink fleet and you have talked about opening new branches as a way to redeploy fleet. Obviously the third thing would be if the economy got better.

But ex the economy, just on the first two how many points of utilization can you pick up this year from shrink and how many do you plan to pick up from redeploying fleet to new locations? Thank you.

Let me say this, we will shrink our fleet some but we are not going to be out sourcing auctions and dumping fleet. We will continue to do it through our retail sales organization, so we are not going to dump rental assets and lose that rental power.

I have not done that analysis but I don't see any huge change in our utilization. We are going to get seasonal improvement going into the second quarter, going into the third quarter. But I don't see us getting to prior peaks up around high 60%s or 70% range for some time. That is not in the cards for this year.

We are starting at a very low point this year. If you go back and look at our past financials on what we were doing at the beginning of 2009, we were generating a lot of rental revenue. We came in to 2009 with a lot of momentum on the rental side and we have seen a lot of deterioration there. So we are starting the year at a pretty low level.

Let me come at it a different way. Just simply when you set up another location how many dollars of fleet inventory do you move from an existing location to that new location? How much gets transferred per location, roughly?

It depends on market that we are going into but it could be $3 million or $4 million of fleet. It could be $5 million of fleet, just depending on the market size.

Okay, that helps. Thank you.

(Operator Instructions) This does conclude today's question-and-answer session. At this time I would like to turn the conference back to Mr. John Engquist for any closing remarks.

Thank you. We appreciate everybody attending the call. We think we have done a good job on our asset management, cash generation, and we think we are really well-positioned to take advantage of the recovery. Unfortunately, we think it's a few quarters away. It's going to be the latter part of 2010 before we start seeing it.

We are going to stay the course on managing this business and be ready to take advantage of this turnaround when it gets here. Thanks for being on the call.

This does conclude today's conference call. Thank you for your participation.