H&E Equipment Services Inc (HEES) 2010 Q4 法說會逐字稿

Good day and welcome to today's H&E Equipment Services fourth quarter 2010 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, Ryan, and welcome to H&E Equipment Services conference call to review the Company's results for the fourth quarter and year ended December 31, 2010, which were released earlier this morning. The format for today's call includes PowerPoint Presentation which is posted on our website at www.he-equipment.com.

Please proceed to slide 1. 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 2. During today's call, we will refer to certain non-GAAP financial measures and we've reconciled these measures to GAAP figures in the earnings release which is available on our website.

Before we start, let me offer the cautionary note that this call contains forward-looking statements in the meaning of the federal securities laws. Statements about our beliefs and expectations, and statements containing the 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 any forward-looking statement. 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'll now turn the call over to John Engquist.

Thank you, Kevin. Good morning, everyone. Welcome to H&E Equipment Services' fourth quarter 2010 earnings call. On the call with me today is Leslie Magee, our Chief Financial Officer.

Please proceed to slide 3. This morning I'll give an overview of our fourth quarter performance, including an update on the specific regions we serve and provide our thoughts on the current market conditions. Leslie will summarize the quarter and full-year financial results. When Leslie concludes, I'll provide some outlook for 2011; and we'll then be happy to take your questions.

Slide 5, please. With significant gains on a year-over-year basis and continued sequential gains, we're extremely pleased with our performance during the fourth quarter. We continue to be encourage by the ongoing improvements in market conditions. Despite typical seasonal patterns in the latter part of the fourth quarter, our business delivered strong sequential improvement with double-digit increases in revenues, gross profit, and EBITDA. Both our rental and new equipment sales were particularly strong during the fourth quarter, driving a 26.8% increase in total revenue to $174.6 million versus a year ago.

Total revenues increased 13.5% from the third quarter. Continued strength in our rental business helped drive a 37.1% increase in EBITDA to $26.9 million; and EBITDA margins continued to improve to 15.4% compared to 14.2% a year ago. EBITDA also increased 9.9% from the third quarter.

Our bottom line continued to improve as well, as our net loss for the quarter was $2.5 million or $0.07 per share compared to an adjusted net loss of $6.6 million or $0.19 per share in the fourth quarter of 2009. Compared to the third quarter, our net loss improved 34.2%. The performance of our rental business and current conditions are particularly encouraging. Average fleet utilization increased to 62.7% based on units and 67% based on original equipment costs, compared to 53.3% and 55.4% a year ago.

As a result, our rental business posted solid year-over-year improvements with revenue increasing 26.3%, rental gross profit increasing 82.4%, rental gross margin up 12.1%, and dollar utilization up 6.3%. Our dollar utilization has increased to 30.2% in the fourth quarter from 29.2% in the third quarter.

This is the first sequential increase in dollar utilization from the third to fourth quarter that we have seen since 2004. This is the second consecutive quarter that our rental segment delivered positive year-over-year results. We're encouraged by the performance of our rental businesses as well as the improving conditions in our other business segments.

Lastly, I want to highlight the quality of our fleet, which we believe gives us a very distinct market advantage. At December 31, our fleet age was 43 months compared to an industry average near 53 months.

Proceed to slide 6, please. On a regional basis, we continue to see the strongest results in the same regions we've talked about for some time. The Gulf Coast remains our most productive and profitable region due to our significant exposure to the industrial sector, mainly the oil and gas and petrol chemical industries. The inter mountain region is our second-most productive region again due to industrial exposure, specifically mining and oil and gas. Utah continues to strengthen due to increased activity in oil patch and mining sectors and significant infrastructure projects.

Not surprisingly, Florida, Arizona, and Nevada and southern California continue to be our most challenging markets. We believe these markets will see a modest increase in demand as non-residential construction begins to recover in 2011. Due to better market conditions, we also expect increased demand and improved financial results from our mid-Atlantic region this year. As it relates specifically to the utilization of our fleet, all regions improved on a year-over-year basis.

Move to slide 7, please. While market conditions have improved the last three quarters, non-residential construction activity is still significantly off previous peak levels; and major challenges remain. Residential construction, which is not a major contributor to our business, is improving but still very weak. Lending for non-residential construction projects as well as equipment purchases remains tight.

We also have seen some historically inclement weather conditions in our markets during the first quarter; and these conditions could impact our performance in the first quarter. Lastly, while conditions and visibility are improving, it's still very limited for our sector. It's encouraging to see the number of market positives outnumber the list of current market negatives. Positive signs for our sector continue to emerge. Economic conditions are forecast to improve during the year.

We've already seen several of the major equipment manufacturers report positive results and positive 2011 outlooks, calling for increased capital spending and increases in equipment purchases by all of the major rental companies. Our business delivered solid year-over-year and sequential gains with particularly strong rentals and new equipment sales results. Used equipment pricing continues to improve and early cycle earth moving equipment demand remains strong.

Utilization is improving and rental rates are stabilizing and improving sequentially. Our focus on the industrial sector continues to benefit our business as these markets remain strong and are forecast to grow. Further, the architectural billing index was 54.2 in December, the third 50-plus reading in the past four months. Lastly, the ISM index is at a 20 year high. At this time, I'm going to turn the call over to Leslie for a more detailed financial review.

Thank you, John. As usual, my discussion this morning will include a more detailed review of our fourth quarter results; and I'll also summarize our 2010 results.

We were very pleased that our business continued to show improvement in many areas. For the first time in over two years, our overall results reflected year-over-year growth, yielding strong growth across multiple segments of our business. Further, in spite of typical seasonality due to the winter months and holidays, we generated continued sequential improvement.

We were especially encouraged by the strength in rental metrics on a sequential comparison. Even in times of peak demand, this is not the normal trend as the year closes. Our strong balance sheet and capital structure affords us the ability to reinvest in our fleet, based upon market demand and we are beginning to reap the benefits of our investment.

Slide 9, please. On slide 9, I'll discuss revenue by segment for the comparative periods; and then I'll address the changes in gross profit before proceeding to the next slide. First from a high level, total revenues were $174.6 million, an increase of 26.8% and yielding gross margins of 23.9% in the fourth quarter of 2010 versus 22.3% in the fourth quarter of 2009. Higher demand was driven primarily by equipment rentals and new equipment sales.

Sequentially, total revenues increased 13.5%, also driven primarily by higher new equipment sales and rentals. On a segment basis, rental revenues were $51.6 million for the quarter, a 26.3% increase over a year ago. 80% of the increase was due to higher earth moving and aerial rentals.

Our dollar returns were 30.2% for the fourth quarter of this year as compared to 23.9% in the fourth quarter of 2009, an improvement of 630 basis points. The fourth quarter's return exceeded quarterly returns in all of 2009 and was the highest return achieved in 2010. This was an improvement of 100 basis points over the third quarter.

Higher time utilization has continued to drive better dollar returns. Time utilization based on units increased 940 basis points to 62.7% compared to a year ago. With the exception of lift trucks, we experienced increased demand in all product lines versus last year. Sequentially, demand improved in all product lines except earth moving. Time utilization based on units of 62.7% this quarter compares to 62.3% in the third quarter and based on OEC time utilization with 67% this quarter versus 65.9% last quarter.

As for average rental rates, rates on new contracts were down only 1% in comparison to a year ago and continued to show deceleration. Rates were up 2.2% from the third quarter reflecting two consecutive quarters of sequential rate gains. New equipment sales were $63.4 million, a 71.7% increase over the prior-year period. Increased demand occurred in all core product lines, but with nearly 90% of the increase reflected new crane and new earth moving sales.

New sales were $16.2 million or an 8.3% decline over the fourth quarter of 2009 due primarily to lower use crane sales. Used sales increased to 10% from the third quarter. Business activity in our parts and service segment appears to have stabilized and was nearly flat with last year's volume on a combined basis. Revenues were down $100,000 or point 0.2% compared to a year ago. On an individual basis, we were encouraged to see our service business increase by 5% following seven consecutive periods of year-over-year decline.

Now I'll provide more details on gross profit changes in each of our segments. Total gross profit for the quarter was $41.8 million compared to $30.7 million a year ago. From a gross margin perspective, consolidated margins were 23.9% compare to 22.3%. Considering a significant shift in revenues from our product support business to new equipment sales, a lower margin business, this is solid improvement in profitability. Overall, higher margins in our rental business are driving the gross margin expansion.

Our rental business delivered margins of 39.2% compared to 27.1% in the prior-year period. These results are due to more efficient utilization of our fleet. Margins on new equipment sales were 10.5% this quarter compared to 9.6% in the prior year period, due mostly to improved crane margins. Gross margins on used equipment sales increased to 22.4% from 22% in the prior year period. Included in these results were margins on rental fleet sales of 27.8% versus 27% last year.

While the margins on the disposal of our fleet are strong and supported by continued strengthening of used pricing, it's also worth noting that we have consistently maintained rental fleet margins above 25% over our history. In our view, this speaks to the strength of our integrated model and one of its competitive advantages. Parts gross margins were 25.7% compared to 26.4%; and service gross margins were 62.4% versus 62.1% a year ago. Margins on other revenues, which are equipment support activities, declined due to higher transportation and freight costs.

Slide 10, please. For the second consecutive quarter, we recorded income from operations. Our results included income from operations of $2.8 million or a 1.6% margin compared to an adjusted loss from operations of $3.3 million or a negative 2.4% margin, a year ago. Margin results reflect the impact of the increase in our top line combined with improved profitability.

Proceed to slide 11. With fixed expense consistent in each period at $7.3 million and improved profitability through the EBIT line, our losses continue to moderate. For the quarter, our net loss was $2.5 million while loss of $0.07 per share compared to adjusted loss of $6.6 million or $0.19 per share a year ago.

Please move to slide 12. EBITDA was $26.9 million or 37.1% increase over last year, exceeding our revenue growth and resulting in margin gain. EBITDA margins were 15.4% compared to 14.2% a year ago. Sequentially, EBITDA grew 9.9%.

Next on slide 13. SG&A expenses declined of a percentage of revenue to 22.4% this quarter compared to 24.8% a year ago. SG&A increased $4.9 million or 14.4% to $39 million partly due to costs associated with our new ERP, such as depreciation and consulting costs. We also recorded higher salaries and wages primarily due to higher commission and incentive pay combined with an increase in head count compared to a year ago.

Slide 14. Let me briefly review our full year 2010 results. To summarize, it was a challenging year as recessionary conditions continued throughout the first halt of the year with very early signs of the recovery of our rental business in the second quarter. However, meaningful improvements in our results and conditions began in the third quarter. We were successful in scaling our business to adapt to the changing market environment.

Our focus continued on asset management, balance sheet protection and our capital structure, successfully amending and restating our ABL into July 2015. We began reinvesting in our business based upon demand and returns, as our focus shifted more towards growth and improved profitability. We grew our fleet by $10 million from the beginning of the year and invested $59 million in total net capital expenditures without utilizing our credit facility.

Our revenues for the year were $574.2 million, a decrease of $105.6 million or 15.5%. Gross profit decreased $29.6 million or 17.9% to $135.9 million and our gross margin was 23.7% compared to 24.3% a year ago. Loss from operations was $11.9 million or a negative 2.1% operating margin. Our net loss for the year was $25.5 million or $0.73 per diluted share. EBITDA decreased $40.5 million to $81 million.

One of the most significant highlights of the year was that we finished the year with momentum heading into 2011. We posted the first quarterly year-over-year gains in two years across many financial metrics along with continued sequential improvement.

Slide 15. With improved market conditions continuing in the fourth quarter, we increased the size of our fleet by $20 million during the quarter, while at the same time achieving higher average time utilization, rates, and dollar returns than in the third quarter. Our gross fleet capital expenditures for the quarter were $44.2 million, including non-cash transfers from inventory, and net fleet capital expenditures were $31.3 million.

For the quarter, gross PP&E CapEx was $1.4 million and net was $1.3 million. Our average fleet age at the end of December was 43.1 months as compared to 40 months at the beginning of this year.

Slide 16. Our fleet based on original equipment costs at the end of the quarter was $685.1 million versus $675.1 million at the end of 2009 and $665.5 million at the end of September.

On slides 17 and 18, we have included capital structure again, and there have been no material changes. As we've stated many times, our capital structure is solid with considerable flexibility and liquidity. As noted on slide 18, our debt maturities are well in the future, with the earliest maturity occurring in July of 2015. This facility is a $320 million ABL facility and a five year commitment. Today our availability is $313 million, net about same letters of credit of $7 million. We believe our facility supports future credit of our Company. With that, I'll now turn the call back to John to discuss our 2011 outlook.

Thanks, Leslie. In conclusion, 2010 was a very challenging year, but we believe we've successfully scaled our business to adapt to the difficult market conditions, and more importantly, positioned our business to take advantage of any market improvements which clearly began to occur in the third and fourth quarter. Our fourth quarter performance was extremely encouraging as are the current conditions, but visibility is still limited particularly in our distribution businesses. So, we are not providing specific guidance.

Our outlook for 2011 is positive as the industrial markets we serve remain very strong. Construction activity is slowly recovering in several of our markets that were hit the hardest by the recession; and overall economic conditions are expected to further improve during the year. All current indicators are pointing to improved conditions and performance during 2011. We expect year-over-year, top-line revenue growth to continue; and we expect to see improvements in other financial measures as well.

Our rental business is performing well with year-over-year improvements and we expect this performance to continue into 2011. Our parts and service business has stabilized, and we expect to see improvement in this segment of our business as well. Other segments of our business, particularly new equipment sales, remain very difficult to predict.

While we remain cautious due to the persistence of market and economic challenges. Our business has improved and our results indicate we have positioned our business to leverage any improvements in market conditions. With a very solid balance sheet and capital structure, we have the flexibility to take advantage of improved market conditions and opportunities. We are pleased with our performance and remain extremely focused on profitable growth.

Lastly, I want to thank our employees who have done a tremendous job of managing our business through this historic recession. At this time, we'd like to open the call up to questions. Operator, please provide instructions.

Thank you. (Operator Instructions)We'll take our first question from Henry Kirn with UBS.

Hi, good morning.

Good morning, Henry.

Now that we're two months into the quarter, can you talk a little bit about the sequential trends so far and just to gauge the seasonality?

I think we're seeing normal seasonality with the exception of weather. It's probably -- I think we've seen some historically inclement weather in certain markets, which I think is going to have some impact on our rental business in the first quarter. But, overall, we feel good about the way the market's trending.

That's helpful. And, on the crane side, you mentioned it in the new equipment sales commentary, but is it possible to talk a little bit about if this is lumpy or if you think that we could see some further improvement over the next year?

Henry, I would not want you to use our fourth quarter crane sales as any kind of run rate. We don't have a whole lot of visibility there. Obviously in 2010, the market fell to a very, very low level. We're definitely going to see improvement in '11, but there's not a whole lot of visibility; and that's the toughest area of our business to forecast right now. So, I would expect it to be somewhat lumpy.

And one last one, if I could, and then I'll pass the baton. On the fleet investment, you're saying higher fleet investment. Can you talk a little maybe -- I know you can't really give a magnitude -- but is it possible to talk a little bit about where you're focusing your CapEx?

Sure. It's broad-based, Henry, but we're investing in earth moving equipment. We're investing in cranes. During the boom, we really shrunk our crane fleet just because the sales demand was so high. So, we are putting some cranes into rental service, general rental stuff, and we're spending some money on aerials, particularly booms. But it's -- our spending is fairly broad-based. You can expect us to increase our capital spending and to spend some growth capital in 2011.

Thank you very much.

Thank you.

We'll take our next question from David Wells of Thompson Research Group.

Hi, good morning, everyone.

Good morning.

First off, I just wanted to -- I thought I heard this, but just to clarify, you saw utilization improve in all categories in the fourth quarter except for earth moving, is that right?

That's correct.

On the earth moving side, is that more just the seasonality there or were there some specific projects that didn't happen? Any thoughts on what drove the softness there?

It's primarily seasonality.

And as we think about utilization over the next 12 to 18 months, do you feel like -- do we need to continue to see utilization move up before we see rental rates turn positive? Or do you feel like there's enough demand that's starting to percolate in the marketplace where you can -- you've got the utilization piece more or less taken care of and now you can be more aggressive on the rate lever, if you will?

I think that utilization is to the level now that all the rental companies can start focusing on rates and we fully expect to see rate improvement in 2011.

And just, if you could remind us what the total rate decrease you saw from peak-to-trough was on a percentage basis.

Henry, I don't have that number in front of us, and it varies a lot by product category. Scissor lifts are one thing, booms went down a different level, crane -- I'd have to do some research. I don't have that in front of me, but it was significant.

Okay, okay.Then, lastly, we've seen a number of releases and announcements regarding M&A activity both on the crane rental side and on the general rental side. Just given the liquidity that you do have, what are your thoughts on acquisitions and growing the business here through an inorganic method, and are you seeing deals in the pipeline that look attractive, or/and if not, what's the hold-up here?

Well, I fully expect there's going to be M&A activity in our sector. We've got a fragmented sector. I think there's people out there that are struggling with lack of liquidity right now. We're not out aggressively pursuing acquisitions by any stretch of the imagination, but we do have a lot of liquidity and a strong balance sheet; and I would just say that we would be opportunistic., and if the right thing came along, we would certainly take a look at it. That's not one of our priorities to be out looking for acquisitions right now, but we would be opportunistic.

All right, thanks much.

Thanks, David.

We'll take our next question from Seth Weber of RBC Capital Markets.

Hi, good morning, good morning everybody.

Good morning.

I guess, I just wanted to circle back and press a little bit more on some of the questions that have been asked already. Was pricing up year over year in January and February?

No, it was not.

Was it up sequentially from December?

No, it was down a little bit.

And, is that due to the weather issue or -- ?

I think it's seasonality. Some of that is weather. And again, it varies greatly with product group. Aerial struggled a little bit more in the first quarter than our other products did, but a lot of that's just seasonality and weather.

Okay, so you wouldn't expect first quarter pricing to be up, to be positive, year over year, then.

No, I would not, but we certainly expect it to be so for the year.

Right, okay. And then just with respect to the comment about normal seasonality in the first quarter, does that mean -- typically I think you have rental revenues and margins come in a little bit 4Q to 1Q on the rental business. Is that what you're talking to?

That's correct. And that's something we would expect.

Okay. And then on the new sales, the strength of new sales, do you think any of that was related to tax purchases or depreciation, people trying to take advantage of depreciation or tax incentives that are out there?

Yes, that's possible. Again, I -- that's a very difficult area of our business to forecast right now, particularly on the crane side. We know we're going to see improvement in the crane markets this year, but to what degree is still a little hard for us to gauge right now.

Well, I guess -- in a different -- asked a different way, were there any kind of unusual or one off large orders in the -- ?

Yes, we had several large crane purchases that we had not forecast, so a couple of 18000 Manitowocs, a 2250 Manitowoc. Those are big crane purchase that fell out of the sky.

Right, okay. And then just lastly, it sounds -- it looks like the drilling moratorium has been lifted. Is that -- do you expect to see some benefits there?

I do, and we didn't see much benefit when the moratorium was lifted, because they just weren't issuing permits. We've very recently seen the first deep-water permit issued, and I expect to see that accelerate. So, that will certainly benefit our business, because that's a -- that had a negative impact on us, that drilling moratorium. So, we're encouraged by this first permit being issued.

Right, okay. That sounds great. Thanks very much, guys.

Thanks, Seth.

We'll take our next question from Philip Volpicelli with Deutsche Bank.

Hi there, this is [Sean Mondrak] sitting in for Philip.

Good morning.

I just have a question. I didn't see it in the press release. Can you give the balance on the manufacturing floor plan financing?

Sure, $75.1 million.

Okay, thank you very much.

You're welcome.

We'll take our next question from [Joe Mondillo] with Sidoti.

Good morning. I was wondering just to follow-up on the investing in your fleet, if I do the math correctly, is it about $70 million in the fourth quarter that you invested in the fleet on a gross level?

No. Our -- for the fourth quarter our growth CapEx was $44 million.

$44 million, okay. And that was up from roughly $20 million in the third?

That's about right. $30 million, I believe. $33 million growth spending in the third quarter.

Okay. Do you expect that to continue to trend up most likely, given the improvements in the markets?

Yes.

Yes, we would expect our spending to increase in 2011.

Okay, and then just in terms of the dynamic between utilization and the rental fleet expansion, could you just give a little more color on how you deal with that on a company level to try to maximize your benefits?

Well, if I understand your question right, we take a pretty short-term approach to our capital spending; and it's based on demand. So, what we want to be able to do is increase our fleet size and at the main -- and at the same time increase utilization and when you do that, your dollar returns take care of themselves.

Okay.

I hope I answered your question there.

Yes, I think it does. I'm just wondering in terms of an overall Company overview, dealing with all the different stores that you have in all the different regions, I was wondering if you'd just give a little more color on the management of that.

Well, obviously our capital spending starts at the branch level and they submit requests and forecasts, and then it goes up through the corporate level for review, and is reviewed by senior management, fleet manager division, vice presidents, but it starts at the branch level. So, there's a lot of thought and process goes in to our capital spending decisions.

Do you have a goal in sight in terms of the utilization?

The dollar utilization or physical utilization?

The physical utilization.

Yes, I mean, we would on an OEC basis, I think that we would expect to get in the 70% range and that's typically where we max out.

Okay, great. And then in terms of pricing and rental rates, could you just give a little more color on where we are in the cycle rental versus new machinery and do you have any quantitative budget in mind in terms of those rates going up on a year over year basis in 2011?

I don't want to give a hard number there. Some of our competitors have alluded to 5% improvement in rates over the course of the year; and I certainly don't think that's unreasonable. I don't want to give a hard number, but we feel very confident that across the sector, utilization levels are reaching the point that you're going to see a more disciplined approach to pricing and I think we will realize reasonable rate increases this year.

Okay, and then just in terms of the cycle, new equipment versus rental rates? Where are we in terms of pricing there?

Well, I think we're early in the cycle on both sides. We're seeing earth moving demand increase significantly. I think the crane business is going to improve this year, but from a very, very low level.

In 2008, there was 3600, 3700 cranes delivered into North America, and I'm speaking of hydraulic cranes. In 2010, there was maybe 800. So, you can see the falloff we had. So, we're going to see improvement this year, but it's just an improvement from a very low level, so I think we're very early in this cycle.

Have the new equipment -- has new equipment rebounded from the bottom yet or is it still trending around the bottom in terms of pricing?

I think it's starting to improve. We're coming out of the trough on new equipment and you're going to see improvement there.

Okay.

And obviously we're seeing very substantial improvement on the rental side of our business.

Okay, and then last question, I was just wondering if you have any sense of what your end market make-up is. I know you say 50% industrial production, 40% non-resident and maybe 10% residential. But in terms of that industrial production chunk, do you have any sense -- I guess you talked about oil and gas and mining doing well. Do you have any sense of how big these different end markets are?

Well, I think if you take the 50% from the industrial side, it's heavily weighted to petrochemical and oil and gas production and exploration. That's significant. And then from there, it would be mining, most specifically in the inter mountain region. Petrochem and oil and gas is big for us.

Okay. All right, great. Thanks a lot.

Thank you.

(Operator Instructions)We'll take our next question from Adrienne Colby with Deutsche Bank.

Hi, thanks for taking my question. I was hoping you could drill down a little bit more into the decline in used sale margins that you saw sequentially.

That's going to be mostly related to mix of used inventory versus rental fleet. And, so, the lower margin is due to some used inventory pieces versus the rental fleet.

And I think, maybe give a little more color on used equipment versus rental fleet -- used equipment typically is a machine that we take in on trade against a new sale. And, oftentimes, that'll just be a pass-through with no margin on it. So, that's the biggest driver there.

Thank you. That's helpful. And I was wondering if you could talk maybe about what percent of new sales were cranes. I know that earlier in the year, it had been around 75%, I think and then I think last quarter you'd said it was about 60% of the category?

Right.

I was wondering if you could give us an update for the fourth quarter.

Sure. It's about 65% for the fourth quarter.

Okay, that's great. And I guess, I'm wondering, too, how much you think head count has increased year over year and maybe how we should think about that as we move into 2011. Provided you that don't do any branch openings, are we pretty much at a steady run rate here or do -- or is there still some holes that you're filling in?

I think our head count's up about 3%. And, as revenue grows, we're going to be adding some technicians, and whatnot, to support that. As we see product support opportunities increase, we'll be adding some technicians, but I don't see any real significant growth from where we are. It just -- it'll be revenue driven, if -- whatever head count growth we have.

That's helpful. And, maybe just one last one. Could you tell us what operating cash flow was for the full year?

$47 million.

Great. Thank you very much.

Thank you.

(Operator Instructions)There are no further questions at this time. I would like to turn the conference back over to Mr. John Engquist for any additional or closing remark.

We'll, appreciate everybody being on the call. Clearly we're in a better environment than we've been, and things are trending in the right direction. And, we're looking forward to continued improvement in our business and look forward to talking to you on our next call. Thank you.

That concludes today's conference. Thank you for your participation.