Barclays Industrial Select Conference

Feb 18, 2016

Thanks everybody for joining us, and thanks to you for coming. We have United Rentals here, management team Michael Kneeland and Bill Plummer, CFO, CEO, CFO. Thank you, gentlemen, for joining us. Appreciate you coming down. Thank you. If you wouldn't mind, I'd like just to start off with, obviously, there's a lot of volatility out there, particularly in your shares. I'd like to start out with where you see the industry right now, splitting the U.S. and Canada. What do you think the current state of the affairs is? Well, we agree with the American Rental Association, in particular, the global insight that we see several years of growth ahead of us. Having said that, I would strip out Canada for a moment. Canada, which is very commodity reliant, has been impacted significantly. We saw that as we went through the year, and particularly in the fourth quarter. You would expect very little to almost flat growth or maybe even a little bit of a contraction in Canada this year. If you look at the U.S. separate then, obviously there's some headwinds in oil and gas. We've talked a lot about that over the last year or so. Are you seeing generalized weakness spreading across the U.S., or is it really just more pockets in oil and gas this week and everything else is still doing okay? It is more related around oil and gas. As I mentioned, what we saw in Canada. If you take the Midwest and then parts of Texas that are not in a metropolitan area, but more in the rural areas where they're reliant on fracking and oil discovery, they would be impacted. But there's a lot of other industries that are doing quite well. Yeah. During the call, we mentioned that when we look at the U.S., it's East Coast, West Coast doing very strong, very well. Texas being in the middle, again being a growth, it's been moderated. But it's not the old Texas that when oil prices go down, someone's flicking the lights off. Yeah. All right, let's just talk a little bit about what you're doing as an industry leader with your CapEx budget and with what you're doing. So, growth is okay. Maybe just walk through the numbers briefly. You're talking about cutting more sharply in one Q, that gives you maybe a little bit of flexibility either way in the back half. That's right. The overall plan is for $1.2 billion of gross capital spend. Within that, we're funding growth in our specialty businesses and basically zero growth in our Gen Rent business, after excluding the impact of inflation and some of the GPS and other investments that we're making in technology. That's the overall approach. We wanted to give ourselves the most flexibility that we could throughout the course of the year, so we pulled back pretty significantly in the first quarter. We'll spend less than half of what we did last year. Really truth told, I don't think there'll be any question about being less than half in the first quarter. That sets us up then to see how the second quarter starts out before we start on a pace of significant spend to see if it's justified, given the path of growth that we're on at that point. That's really the strategy, is preserve as much flexibility in the capital plan as we can. You've been relatively vocal about that. Is it your impression that some of the smaller guys who maybe ran right up to the cliff last cycle, with spending up into a construction recession, is it your impression that they're starting to cut back? That they may cut back? Do you have a sense of what competition is doing so far? We get reports back from Rouse. Yeah. I think a lot of the audience has copies of those as well. As we went through the fourth quarter, and particularly November, December, we saw where there was a significant drop-off of orders being placed. That also, when you look at or listen to the OEMs, what they're saying, it all ties together. We do believe that there has been a significant reduction in CapEx spending. It doesn't mean it's everyone. There are always going to be pockets where people will continue to grow. But I think on balance, a lot of the industry has tempered their purchases. Perfect. Let's just do a couple of the audience response questions. There's a couple of them I really want to see, and I wanted to get into the implications. So question one, you should all have devices. You know how this works by now. So just key in your answer. Do you currently own the stock? Yes. Overweight? Yes. Equal weight? Yes. Underweight or not at all? I think we can guess, given the share price direction, how this is going to trend versus prior years, but we'll see. Whole new concept. All right. Most people not invested. Actually, I'm sorry, first year we've had you, so we don't have the stack up. Yeah. That is not uncommon for the space I cover. That is good. Let us go to question two, the corollary to it. What is your general bias towards the stock right now? Positive, negative, or neutral? That might be a better skew than a couple of the others we have had so far. Given the valuation, that is not a huge surprise. Let me get into what I get repeatedly asked. You are one of the three overweight rated names we follow. We like the valuation a lot. The question we get asked a lot is, what happens when you hit a steep recession, and what happens if we go back to 2008? 2008 may not be the best benchmark as it was rather severe, but could you talk a little bit about the operational changes, improvements, differences, industry structure that you think is better now, or not, than in 2008? Sure. I'll start. I think, clearly, there's somewhat less fragmentation now than there was at the start of the last recession. Not the least because we acquired RSC, the number two player. But that's a relative statement, right? There's less fragmentation, but it's still a very fragmented industry. I don't know that the fragmentation dynamic is significantly different. I think what is different is the approach, the mindset that we, and I think some others, are bringing into the next cycle. The last time was pretty painful. I think people are thinking more actively about what is the plan for capital investment. How do I think about that and modify my thought as we get deeper into the up part of a cycle, as we get closer to the peak and the downturn? To Mike's point, I think people are now being more conscious of their capital investment decision than maybe they were the last time around. So at the margin, that helps. The question is how much. Operationally, can you talk about how you're different? You've made a lot of improvements throughout, and you talk about continuing to invest in technology and sort of leaning out, if you want to say that, the store footprints. Gross margins start out several hundred basis points higher this cycle than last cycle. So, what have you done differently that'll keep your margin structure, if you believe it's higher? Yeah. Well, I think we were very focused on repositioning our fixed cost structure in the last downturn. We took out something like $250 million worth of fixed costs in that downturn, and we've been very conscious about not letting it come back easily. The RSC transaction in 2012 helped, I think, really position us even better for the fixed cost versus variable cost in our business. So, we've done that, and it does show in the margins that we've delivered. We've been very conscious also about the variable cost and how can we be more efficient in the variable cost that we incur. A lot of the lean initiatives that we've talked about the last few years have helped better position us there. One specific action that we've taken is to really leverage more fleet per location than we've had in the past. If you look at the average amount of OEC in each of our locations today versus where it was prior to RSC, we are up 35% in fleet per location. So that is a significant advantage as you think about leveraging your investment over the cycle. So it is things like that that I think have put us in a better position so that the next downturn, it will hurt, right? We are in a cyclical business, but it will not hurt nearly as much as it used to. Perfect. Can you talk a little bit about the dynamic of Tier 4, which applies to some of your mix, not all of it, right? But cost inflation, rental rates are back to roughly 2008 levels, I think, across the industry. Cost inflation across equipment categories has been 10%-20%, depending on the category. You have a slide on this. Right. I mean, you can pick your category, it is slightly different. Does that give you confidence that rental rates should stay more stable? What do you think your competition, especially the smaller competition, has done on that road to re-fleeting into that higher cost fleet? Whether they really need the rates in order to stay afloat, let us say. Yeah. My view is that it certainly has helped. The Tier 4 dynamic has helped give the industry a greater reason and maybe more courage to continue. Any structural pricing differences between now and last cycle? Then talk about your customer segmentation with your focus on national accounts. I don't know whether you're willing to give any major insight into small customers versus big, who's doing better, whether the short end of the market is still healthier than the long end. Well, I think that we pride ourselves on the fact that we have a national account footprint, and we maximize that. It is also a big revenue. That's part of our diversity. Our portfolio is a strong portion of us. We believe that over time, they will have the lion's share of the work because they're well-funded. They have low debt. They have deep resources, bench strength, and purchasing power. So from a construction standpoint, we see that as a longer-term play. From an industrial standpoint, they are longer term. By the way, as they mature and you see these fluctuations in the marketplace, it also helps shift people away from owning to renting. So that is another dynamic that plays out for us. As far as, we don't give specifics on pricing, but it would be safe to say that obviously if you keep it longer and you have a larger portfolio of business, everything is reflective in your price. But it's also the things that we have to offer. On our specialty businesses, we see significant growth there because we're entangling our customers. We see that as how can we leverage not just our footprint, but how can we leverage our current portfolio of customers? One way we're doing that is the growth you're seeing and that we reported in all of our specialty segments. Let's go to audience response, and then I'll circle around. So maybe bring a mic down here, and we'll go to the next question. In your opinion, true cycle EPS growth for United Rentals will be above peers, in line, or below peers? A few thoughts, but we're trying not to bias the answers. I like this idea. There's a couple of. I've always wanted to ask some questions. This is a nice spread. Basically, inline mix. I mean, you have the obvious. Yeah structural pressure of rental winning and you guys perhaps winning within rentals. You do see that. Can you talk about what you need to see the start of Q2 to execute on your CapEx plan, in terms of rates and utilization and what that means on a CapEx side? How high can CapEx go, and how low can CapEx go this year? Sure. We've got a plan that's laid out by month in our annual planning cycle. I think rates would have to continue to progress sequentially versus that plan as we expected in order for us to keep forward with the capital plan. That would have to, though, be in conjunction with the amount of demand continuing to develop the way that we expect. Does that mean in April may not show the expected increase on rates compared to beyond the Not necessarily. The seasonal dip usually is a January, February, and sort of March kind of thing. April, it could be slightly down sequentially, it could be flat sequentially, it could be up a tenth or 2 sequentially. So April is sort of a wildcard month. It's going to have to be looking at not only at rate, but what we see on rent and other factors of our business, right? Things that we hear from customers, other economic indicators, all kind of supporting the view of modest growth that we had when we put our plan together. If all of that's coming together, then we'll spend the next slug of capital starting in that April and May timeframe. How low can you go on CapEx? How low can you go on CapEx is the question. Reasonably, I think we could peel another few hundred million dollars out of it before we start to really challenge some of the growth plans that we have in some of our specialty areas. Could we go to $1 billion, $900 million? I think we could do that pretty easily. If we wanted to push, we could go below that even. But the question is, how strong is the evidence that you are likely to see to warrant that kind of a cut from what is already a pretty low level of CapEx, right, at $1.2 billion? We are just trying to take advantage of the flexibility that we have as a business to get as much evidence as we can about the path that we are on before we make big commitments about the capital program for this year. That is the philosophy. Question over here. I had two questions. One, of the $700 million net CapEx, how much of that is going to specialty? What would the comparative number be for last year? That's the first question. Then I'll have one more. Yeah, we haven't given the specific numbers about specialty. I think it's fair to say that we're going to fund specialty growth commensurate with what we've been delivering in that business, right? Last year, our Power HVAC and trench businesses combined were up in the neighborhood of 20%. Guys, help me. My memory's gone at this point. But we may not get quite that much growth in those divisions this year, but it's going to be robust growth. So we're going to support that with capital as necessary. We're going to be more cautious on the Gen Rent side. Okay, thanks. Second question is, if you look at specialty versus the core business, how much customer overlap is there? Of those that are only buying from you or renting from you one and not the other, how much cross-sell progress have you made, and what's the plan there? Thank you. I think we've made a lot of progress. This is something that we learned during the RSC integration, because we had some specialty products, and we were able to write into our contracts on both sides very easily of increasing that. We think there's a significant upside for us to continue on that path. Where the final number is, I don't know that we've pegged that final number. But to Bill's point, we still see, we saw strong double-digit growth last year. It's consistent with the year before. We would be looking for nice growth into this year as well. By the way, there could be other products that we could bring in to our customer base. We listen to them, we react to it, and we're finding other ways to make ourselves more entangled with them. But it's higher return, and it's no secret. We've been very blunt about it. We see that as a catalyst for continuous growth in our portfolio. Let me just circle on that, and then I see a question in the back, but I want to circle back on that. Specialty has a little bit of a catch-all aspect to it, or at least the term does. You've mentioned in the future that you may want to grow structurally by acquisition, strategically, organically, always in specialty. What is it really that you're finding in these niches? There's just a lower competitive balance. Is it because it's higher barriers where people can't really get into it? Is it expertise? Is it just under-invested areas? What's the secret sauce here, and then how much really room do you have to grow? Well, it's offering a consistent level of service to a broader footprint. We have the customers, a good portion of the customers. There's always new accounts. But just take our existing accounts for a moment spread across North America. We've got a broad footprint. We've got great customer relationships. What we're bringing to them is a product that's consistent, is with our technology, we're adding to it as well. So whether it be Total Control or GPS systems, we're wrapping it in as a total package for them. I would say that it's consistent levels of service. It's offering it in a more broader arena than what they're used to, as opposed to, "I'm going to deal with six vendors. Now I can deal with one." I don't like to be the one shop for everybody. We want to earn their business every day. It is about the levels of services that we can bring. I think if I had to say, it's footprint, consistency, and it's our levels of service that we raise the bar. Is that going to be just by nature, a higher ROIC opportunity set for you than acquiring somebody in the traditional side of the business and further consolidating an industry? I mean, you're a leader there. Is there a chance you go bigger into that, or is it really going to be a high bar? There could be. But there's not a lot of individual players out there that are of any magnitude. By the way, they may not be the type of culture that we want. So we would be very selective as we would do with any acquisition. It'd be on its own merit. But it's not unusual for us to see us play in the bolt-on and do organic growth, similar to what we're doing with the pump business. We see pump continuing to add long-term value to our customers. Perfect. I think there's- Can I ask on refinery turnarounds? There's some indication that that's actually improving, and it's clearly a big business for RSC. Have you seen anything this year to indicate that turnarounds might be normalizing? Short answer, yes. To your point, in the fourth quarter, particularly the back half of last year, a lot of those shutdowns were pushed out. They were pushed out because they were running as fast as they could to produce more gas. Those shutdowns, you can't push them off forever. Otherwise, it becomes a major capital investment. Yeah, you would see that play out in this year. We expect it. We're seeing it, and we're planning for it. Maybe just one more. Could you ballpark for us what total specialty is as a percent of EBITDA? I know it's larger than the percentage that you report in that broken-out segment, but maybe could you just ballpark for us what exactly that is? I mean, is it north of 20% or 25% of total EBITDA for what you consider specialty? We haven't broken out the share of EBITDA. The share of revenue is, what is it, 18%, Fred? Help me out. 18%. They do have a disproportionate margin. You can infer from that, but we haven't given a specific number. Let's see. Scott. Thank you. Could you just talk a little bit about the debt side of the business? With high yield rates increasing, that's been one of the concerns on the equity has been the increased cost of debt, which is critical to your business. Maybe you can just spend a little bit of time talking about all the aspects. How much debt you have. What's the plan for rollover? What's the interest rates you guys seeing in the market on the asset-backed side, on the unsecured side, and what's the plan over the next year or so or year or two years in a mild recession, how that plays out into your business. How do you do the trade-off between debt paydown versus stock buyback if the business is slowing down? I mean, I get it if the business doesn't slow down, you buy back a lot of stock because you don't want to reduce the amount of debt, et cetera. It's a lot of questions there, but it's basically the same thought process. Sure. We have roughly $8 billion of net debt that is arrayed across a number of maturities out to, I believe, 2024 and 2025. We feel like we've gotten ourselves pretty well positioned in terms of the maturity profile of that debt. We don't have another significant maturity until 2020. Even there, it's not a very large maturity relative to the overall debt structure. The maturity profile, we think, is very well set for the next number of years. We have plenty of liquidity in the debt structure with our asset-based loan facility that has, as we sit, roughly $1.5 billion worth of availability on it. A lot of liquidity should the need arise for immediate access to funding. We do have a couple of high coupon issues in the debt structure that we are looking at as refinancing opportunities. In particular, the 8 and a quarters are sitting out there. Only $300 million of that is in this Cap structure. But it's an opportunity at a very high coupon level. We've got a 7 and three-eighths issue that's a little shorter, a little larger that we would also argue is subject to perhaps refinancing in the near term. That refinancing decision is really going to be driven by the net present value of refinancing, which is heavily influenced by the rate that you could issue at. Rates right here and now are not as attractive as they were several months ago, as I'm sure it surprises no one here. But we continue to monitor the market on a daily basis to see if and when a refinancing transaction might make sense. We are also considering using that ABL capacity as capacity for buying in some of the higher coupon debt as their calls become available. We do have a call currently available on that 8.25% issue. It is just a matter of deciding when the right time is to either exercise that call or do something else to take out that issue. We will have another call available on that other high coupon issue that I mentioned, the 7 and three-eighths, that comes available in May. We think we are well-positioned overall with regards to the debt profile. We have some opportunities to improve it further still, and we will continue to evaluate it every day as we do. Hopefully that is useful. If not, come back and ask another question for more specifics. Let us actually go to the ARS because it touches on this. I want to see the audience response for a couple of next questions. In your opinion, what should United Rentals do with its excess cash, bolt-on M&A, larger M&A, share repo, dividends, debt paydown, or internal investment? That is an interesting skew. Debt paydown, roughly 78%. It is a really interesting challenge here, right? Because the market is obviously pricing in a relatively dire outcome on your end markets that is not evident yet. I mean, obviously we have some weakness, there is no question, right? But it is pricing in a really dire outcome. Yet you can make a lot of progress on taking in the share count by doing stuff. What do you hear from shareholders when you talk to? Is that skew of debt paydown reflected, and what is your own internal tolerance for saying, "Hey, we see more data than you do, and we are going to buy back a little bit more"? We get this question all the time now. I guess that paydown percentage is higher as a percentage than I expected, but I am certainly not surprised that it is the largest percentage among the choices there. Our view is pretty simple. Given our view of the cycle and what we expect in the marketplace, we do think that on balance, a share repurchase of the scale that we have been talking about makes sense. That is the path that we have been on. If we see a material change in the expectation for that cycle, then we have the flexibility to pivot more toward debt paydown and less toward share repurchase. The way that we're preserving flexibility to do that is by buying shares on a fairly steady pace, not making a big bet right here and now saying, "Oh, our share price in the 40s is where we want to spend the remainder of the billion dollars that we've got authorized." So we've been on a fairly steady pace of buying back shares. It's averaged down the price over time. We think that's a prudent approach, unless and until our view of the cycle changes. We've had the comment made, why not get ahead of it, right? Why not just take some of the risk of leverage off the table, given the uncertainty about the cycle? That's a reasonable point of view. But I guess if you spend all your time trying to get ahead of things, the question is, how well are you guessing what actually ends up happening? My view is that none of us are great at calling the cycles. So let's keep doing what we think is a reasonable, prudent path until we have more evidence that says we should change. It's building that flexibility. We have that flexibility. It's something that, look, we've made changes before. People didn't think we'd take CapEx down. We took CapEx down. We will do what we think is, as Bill mentioned, the prudent thing to do, and we remain that flexibility. Let's get a question up here. Yeah, I have a slightly different question about just leverage strategy in general, which is that the question is: How do you incorporate the volatility of high-yield spreads into your analysis? The reason I am asking this question is, as a business, you can have an overall fundamental volatility of the business with leverage, but the equity can have a lot higher volatility when you base in the fact that high-yield spreads can go from 400 to 300 up to 800. That changes the dynamics, and then it changes the dynamics of investor sentiment, which causes you to then maybe make decisions that may not fundamentally be the one you want to do, but you are getting so much shareholder pressure to do one thing over another. One answer to that is if you actually are incorporating volatility of high-yield spreads over a cycle, you actually run a lower leverage ratio, which may not fundamentally be as good for the growth of the business, but then moderates that equity volatility, which then causes you to, over time, have a higher risk-adjusted return for your actual stock as opposed to the business. So that is just a comment, and appreciate your comments on that. Sure. We do not have a lot of explicit discussion about high-yield spreads and how that is impacting our thinking about the capital structure at any given point in time. Obviously, it is implicit in the volatility of the stock. That is certainly something that we get at implicitly. Really, our starting point for thinking about how to manage volatility is volatility in demand and pricing in our marketplace, right? That is the starting point. Then we reason from there to say, okay, with a given sense of what the volatility is in our market, how should we manage the capital structure in response to that? We tend to keep it flowing in that direction rather than from the direction of volatility in the stock, volatility in high-yield spreads, and what does that say about the capital structure, which is working upstream? Our view of market volatility is that we have got the ability to respond to manage cash flow by the level of capital spend that we invest and the level of used equipment that we sell. If we have got that lever for cash flow, then that gives us the ability to manage leverage directly. in a way that's appropriate for our business. If high yield spreads are moving up and down, that may have an impact on our ability to access markets at a given point in time, or the desirability to access markets at a given point in time. But it's a secondary consideration for us. Hopefully that's responsive. If not, ask another question. Let's go to ARS, and then we'll go back to the audience. We've got a bunch of questions people want to ask. In your opinion, on what multiple of 2016 earnings should United Rentals trade? Less than 10 to 12, 13 to 15, 16 to 18 to 21, 19 to 21, higher than 21. A little bit of a loaded question in this case. Two good questions. It's almost like a TV show. Yeah. That's a little better than it could be, given where your valuation is at. True. Given where the sentiment is, there's some real sentiment, 40%, 43%, 10-12, that's not quite all the way bought into the doom and gloom. Do we have a question over here? Just a competitive question. So obviously, there's been a big international competitor trying to grow aggressively in the U.S. The question is just, have you seen any impact in certain markets where you have high market share, or generally is the fragmentation of the industry so high they're taking it from the other smaller players? Yeah, no, it's always been a competitive marketplace. To your point, each individual company has different strategies. All I can tell you is putting fleet into a market that has what we saw last year, an excess amount of fleet because utilization numbers actually dropped, just puts more complexity into it. But there's a lot of opportunity out there for everybody. That's why, as Bill mentioned, the more seasonal swings that we would see this go around and last go around, because quite honestly, there's no real oil to prop us up in the fourth and first quarter. So different strategies, and we understand that. We have our strategy. We think it's the right one for us, and that's the one we're going to follow. Can I ask just a follow-up on that one? Because we get this question all the time. Sure. I might as well just try and be blunt about it. Do you think that there's a bifurcation in outlook there, or attitude or something there, let's say, towards how the markets are going because of different mix, because of you not competing as well, or because of different measurements of the same metrics and there's just a different take on it? Yeah. I think some of it's different metrics. I think some of it is the fact that it's just a matter of amount of capital you're putting in for growth. There's also a different dynamic that there's a lot of green space for others, and the one you're talking about first is us. We are the largest in North America. We are in all 10 Canadian provinces. Like it or not, Canada is Canada. It's been very good to us. It'll be good again. But we have to go through those cycles. Again, it's two different types of strategies. Could I put more CapEx into our system? Could I put it out on rent? Absolutely. There isn't a time that my team would not relish the fact of just, "Give me more, I'll put it out there." But on the flip side, it would impact rates. That's something that we just say, "We're not going to play." We want to be a value-added competitor, and that's who we are, until we change. Let's finish out the ARS questions, and then we'll go to the audience again. What do you see as the most significant investment issue for United Rentals? Core growth, margin performance, capital deployment, or execution on strategy? The answer is? Core growth. Core growth. It's an interesting one. That's been the overwhelming response, I guess, amongst all the companies. For me, again, on the inbound questions I get, it's what can your downside margins be, and what's my floor on risk here? Let's just do the last one, then we'll wrap up. In your opinion, how well is United Rentals positioned for the new normal economy as defined by a strong U.S. dollar, low commodity prices, and slow emerging market growth? Better than peers, in line with peers, and below peers. New normal. Is there such a thing? A fairly balanced spread. Better in line and below. I guess the oil exposure is obvious, and the Canada exposure is obvious. Other than that, you're in a relatively stable part of the world, I would say. Questions from the audience? I thought I saw a couple more hands. Given the concern about over-fleeting, if there is such a thing, what is your opinion about what the used equipment market is telling us about whether there really is over-fleeting or not? We've seen, as you mentioned, a little bit of softness. Are you seeing a real decline, or is it not? We haven't seen a real decline. Look, when you have a disruption like you did in oil, it's not surprising. In fact, I told a lot of investors, "Don't be shocked to see used prices come down." That being said, they haven't dropped off significantly. I would separate it by saying there's been a large We were just at the Ritchie Bros. Auction up in Orlando, which is ongoing this week. We saw a lot of cranes and a lot of large earth-moving Which to me relates to a lot of that type of environment that we talked about with oil and other areas. But aerial was there. It wasn't as prominent, at least from what I could see, in years past. But again, tier 3 engines have value. Yeah. It also is going to bolster used prices. When the credit market changes, and it changed more rapidly this go around, I think they are smarter when people ask the question, what dynamics are playing out? If you go back in the last several recessions, 2001, we saw people, basically, where OEMs actually opened up their balance sheets to help fund. Do not see that now. We see creditors being more astute and more responsive to lending practices. We think all those things will play out. I have not seen it. We still see very good margins in the used environment for us. Yeah, just maybe two data points. If you look at our own retail sales of used equipment, the pricing year-over-year for the month of December compared to December of 2014, pricing, same make, same model, same year, down 2%. Second point, we sold, last year, used equipment at an average of over 53% of the original cost of the equipment. So 53% of OEC for equipment that was seven years into its average life. That is a pretty robust market pricing environment. To Mike's point, margins are still pretty good for us, even though they may be down from the absolute peak. The demand is still pretty good. While it has softened a little bit from the absolute peak, it is still a very robust used equipment market. Perfect. Anything else from the audience? I wanted to see if we can put a floor on Canada as a separate entity. I do not believe in a 2008 recession, construction recession for the U.S. I mean, that is a very dramatic outcome, and we have a lot of other issues if that happens. Canada is a little bit of another story with the resource-based economy really falling apart. Can you tell us, are you seeing just steady, steady downtrend and maybe the competitive environment allows for a higher floor than we saw in the U.S. last time? Or maybe just any sense on when we might see a bottom there? Yeah. Just the trend, I think it is fair to say that the decline accelerated in the fourth quarter, in Canada. There is momentum to the downside, as you might expect right here and now. The question of where it goes is one that is very difficult to answer. I mean, what we are trying to do is to say, look, there are pressures that are not going to abate anytime soon. Certainly oil and gas, but other commodity-related pressures that are subject to all kinds of different factors around the globe. So let us be prudent in how we respond to that environment. Let us assume that Canada is going to continue to be a pressure point for us, and let us adjust our investment plan there. Let us get the cost structure right, and let us keep looking at where we can find pockets of opportunity across the country. Is your equipment fleet as fungible between Canada and the U.S. as it was between the U.S. trouble spots and other places? Is the competitive environment in Canada versus the U.S. any structural difference? In terms of the fungibility, not as fungible as the equipment here in the U.S., but we can still move equipment out of Canada into the U.S. with some more challenges. You have to make maybe some compromises for the way the equipment is spec'd. You've got to have cold weather packages on the equipment that really needs it in Canada. That makes it a little bit harder to move it from Canada to Florida, say, at economically attractive returns. It's a little bit tougher, but you can still do it, and that's something that we're very focused on right here and now. The competitive environment, Mike, I don't know if you want to offer any thoughts, but I think everybody's suffering the same challenges competitively in Canada. I don't know that the competitive environment is significantly different than it is here in the U.S. Some of the dynamics that we talked about earlier for the green guys may be slightly different, just given their initial position in Canada. I think the other players up there are still all scrambling to find pockets of demand. It's going to remain a competitive environment. Perfect. All right. Any final ones from the audience? If not, we're going to wrap with many thanks. Oh, thank you. Thank you.