Goldman Sachs Global Industrials Conference

Nov 2, 2011

Slides

Good afternoon, everyone. I'm Jerry Revich, and thank you very much for joining us. We're pleased to have with us from United Rentals, the full team here, Michael Kneeland, CEO, Bill Plummer, Chief Financial Officer, and Fred Bratman, Director of Investor Relations. Any follow-up, Fred's in the front here. To start, Michael will step us through a couple of minutes of prepared remarks, and then we'll jump into our discussion. Michael, the floor is yours. Thank you very much for joining us. Great. I want to thank Jerry and Goldman for having us here, and we're very happy to be able to have a fireside chat with everybody. United Rentals, as you know, over the last several years, has been marching towards transformation. We've been trying to. Bill and myself and other members of the management team have been clearly focused on transforming the company, leveraging our size. Over our beginning of our history, we had over 250 acquisitions over a six-year time span. We saw that as an opportunity to leverage our size, to drive efficiencies, and to also refocus our initiatives around our customer. As a result of that, we changed our go-to-market strategy, starting in the beginning of 2009, we call Operation United, and we went from having territory management to account management. Today, as we stand, we have about 53% of our business comes from key accounts, which is our single point of contact, and we've had nice growth on a year-over-year basis. We're clearly focused on the customer. We measure ourselves in the eyes of our customer on a daily basis. We're one of the only companies that I'm aware of that has a scorecard that breaks it down right specifically per customer so that we can measure ourselves for any one individual. We have been focusing on growing, what we call profitable growth. We look at it from several angles. One is our sales go-to-market strategy. The other is our technology and leveraging technology to drive efficiencies and taking cost out of the business, and we'll talk more about that. The other one is our capital structure, which is part of our strategy. Bill will go into more detail. I want to thank everybody for being here, and that's all I've got to say, Jerry. Perfect. Well, thank you very much for the prepared remarks. On the point that you just touched on, Michael, in terms of the operating cost improvement we've seen in your business over the past couple of years, can you touch on the biggest opportunities you see over the next 12 months? I think you're planning on ramping up FAST and maybe if you could touch on a couple of other initiatives and then help us quantify what kind of payback we can expect from those efforts relative to the already sharp improvement we've seen in the business over the past, call it two to three years. Sure. Jerry mentioned one, which was FAST, which is our Field Automation Strategy and Technology. To put it into simple terms, it's about logistics. It's about picking up our assets, delivering our assets in the most efficient way possible. Today, that is a very manual process, not only for us, but the industry. We see technology as a leverage to drive those efficiencies. Currently today, we have roughly an estimated 300 of our branches in some form of FAST. We call Full FAST and FAST Light. We're actually bringing it in in waves so that individuals can get acclimated to the change in technology. It's a handheld, it's wireless, it's paperless. It's a communication device for our truck drivers all the way back to our dispatchers, and it shows real-time reporting, not only for ourselves, but also for our customers. We see that as a significant opportunity. Beyond that, we're also working on looking at our footprint. We've been very proactive on optimizing our footprint, but we still see there's opportunities for more of like a hub and spoke, and particularly in metropolitan areas, where we can drive further efficiencies. Jerry, we haven't quantified the saves at this point. But as we progress, we will come forward with those numbers. But it's safe to say that Bill and I both believe that they are significant. If you look at our operating expenses, there's the SG&A portion, but there's also the general operating, and it's a significant amount of money that we spend there, and we see that as an opportunity. Maybe you gentlemen can approach the question this way. I believe you've rolled out FAST at 375 or so branches already. Can you talk about the average savings you've seen per branch? Also, I think you might be considering some branch consolidations on a select basis. Just remind us what the typical payback period has been of those types of actions. What was that? A year and a half or two years ago? Mm-hmm. In terms of quantifying the impact of FAST, we haven't talked about that explicitly. We certainly, in aggregate, expect a material improvement in cost. What's material? We'll have to talk more about how far we want to go in talking about FAST impact specifically. The reason that it's not easy is that FAST is not in and of itself the driver of improvement. It's about leveraging that technology to change processes to get at a cost improvement. It's hard to say, FAST is worth $X million a quarter. We have elements that we can measure, things like idle time improvement, like miles driven, that we are monitoring, and we see material impacts from FAST from those kinds of specific measurements. But we haven't quantified the overall impact to date, and we'll talk about how much more that we might want to say about that going forward. In terms of the branch footprint optimization and what that means to us and how that played out over time previously. Again, it's hard to just break out and say, well, by consolidating X number of branches, we realized Y amount of savings. But it was certainly a significant contributor to the overall cost saves that we've realized in the last several years. We talked about, since 2009, roughly half a billion dollars or so of cost saves, and a significant portion of that was costs like facility costs from facility rents, and headcount reductions that flowed from the reduction in the number of branches. To the extent that we have branch footprint reduction going forward, that's going to play out again in a similar way. And can you gentlemen compare and contrast for us the pricing cycle that we're seeing this time around versus what we saw over the past couple of cycles? Specifically, we've seen pricing continue to pick up until demand has rolled over. Clearly, we haven't even seen meaningful end market demand pick up yet. Should we think of pricing continuing at pretty good levels from here? Then just broadly touch on where pricing is relative to utilization levels currently compared to past cycles when we would've seen higher pricing at these same levels of utilization where the industry sits today. The price cycle is developing nicely overall as a statement for us. We've said we're going to realize about 6% price for the full year of 2011. Well on our way to delivering that in 2011. If 2011 finishes out the way we expect, we will have a nice carryover benefit going into 2012. We've said that will be something like 2.25%-2.5%, assuming no price improvement over the entirety of 2012. That's a great starting point. Whether we get more than that, call it 2.5% carryover benefit, depends on the external environment. That is, as you all know, open to question these days. But if you assume that 2012 looks like 2011, I would expect that we would be able to realize a nice price improvement in that kind of environment. It's hard to say here that it would be another 6%, say, or more next year because you'd be comparing to a higher base off of what you've done in 2011. But certainly, it would give us the opportunity to drive higher than just pure carryover benefit. If you want to peg it as somewhere between 2.5% and 6%, that's probably a good starting point. Then obviously, if next year is a robust year, I guess that's still a possibility these days. If it's a real strong year next year, then we might be able to talk about driving beyond what we've delivered this year in terms of year-over-year price improvement. I think that's how we frame the thinking about price looking forward. I think the key takeaway that investors should have from us is we're going to get all the price that's available in the market, whatever it happens to be. We feel very good about the processes that we've defined to help us manage price. And those processes work whatever the market environment is to get you the best price you can. Jerry Revich, I would just say, just to add on to what Bill Plummer said, what's different between this time versus last time is that we've been able to raise rates inside of a declining market. Our non-res construction has been down, and we've been able to raise rental rates, which I think is unique in comparison to some of the other cycles that we saw. That would be number one. Number two, just to give a plug for the ARA standards. We will be changing our rate calculation that Bill Plummer outlined on the call starting in 2012. We'll finish out this year, and we'll conform to next year, which we're very excited about. And hopefully the industry will adopt overall. In terms of your business, we've seen cycle-over-cycle improvement in your utilization rates because of what you've done on the efficiency side. But as we take a look across the rental industry broadly, businesses are at cyclical highs from a utilization standpoint, yet everyone's looking at pricing that's, call it 10%-12% below where pricing was in the last cycle when utilization was at the same level. So should we take that to mean you have a lot of headroom in front of you to move pricing higher, and it's just a function of how fast you can pick up pricing relative to your customers? Or has anything changed structurally that would drive the industry to be less aggressive on price at the same utilization rates? I would say the former rather than the latter. I think the fact that we're at these levels of utilization but still materially below the peak in pricing suggests to me that there is upside available in price. How much is the key question. The last time we realized the peak in pricing was during a speculative blowout in construction. It was being driven by low financing costs and a general belief that real estate is never going to hurt you. We all know that's not the case anymore, and so I don't think you could expect that kind of a speculative blowout in the amount of construction that's going on in the U.S. economy. That's the environment in which we're trying to realize higher price, even at record levels of utilization. It'll come. It's just going to take a while to come, is at least Bill Plummer's belief. The key for us is to say, how do we generate good returns as a business while we try to build back the price that we've seen at previous peaks? In my view, it will be a matter of time, but we can't wait for peak pricing to come back to be able to generate and deliver the kinds of returns that our investors expect. Bill, to get to the high end of the possible pricing outcome next year, you would need winter pricing to stay intact. Can you talk about how customer discussions over price are going in November and December? Are your competitors being disciplined and holding the line on price in that seasonally weak period? It'll be an interesting phenomenon to see how November and December play out. But as we've experienced so far in October, we've seen continued solid momentum in pricing. I would not point to any noteworthy deterioration in the behavior of our competitors as it relates to price. I'm encouraged going into the last part of the year and the early part of next year that we're not going to see a significant deterioration in competitive behavior on price. Hopefully, that means that we'll have the opportunity to manage the price realization that we got in our forecast. Any questions from the audience? Yes. Can you give us a commentary on where you're directing your capital spend, which categories are putting in the Sure. The question was, can we give commentary on where our capital spend is going in terms of categories within the fleet? We talked about our desire in our fleet to shift the mix relatively more toward earthmoving and our gen rent categories, and relatively less toward aerial work platforms. All of this is at the margin. This is a percent or 2 or a few percentage points of shift in our fleet mix. We've been spending our CapEx in alignment with that desire to shift the mix. We have been underspending AWP's share in our purchases over the last number of quarters. In the third quarter, I think the number was of our total capital spend in the third quarter, we only spent about 39% on aerial work platforms, whereas AWP represented over 48% of our overall fleet. You can see that we're de-emphasizing in our spend there. Conversely, we spent something like 19% on earthmoving, whereas earthmoving was only about 13% or so of our overall fleet. So we're emphasizing there. We're emphasizing in other gen rent categories like generators, compressors, other general equipment trucks that are used in our gen rent activities. So we're emphasizing those cat classes more as we go forward. And as you think about your replacement budget for 2012, clearly a bigger part of your fleet is aerials than the CapEx you allocated to aerials in 2011. Should we think of your CapEx direction increasing towards aerials from what you saw in your CapEx spending in 2011? No, I think it's fair to say that we're going into 2012 and the 2012 spend with the same approach that we've used in 2011. So we'll probably underspend as a share of new purchases, underspend the AWP fleet share in 2012 as well. Yes. Can you comment on the thinking that as you kind of why shifting everything to the ground starts more from aerial and ground starts into and then being in the front or used more in the front half of the cycle versus Please. Yeah, I was just going to say, you're right, earthmoving is used in the front side of a cycle. We do believe that at some point we're going to see an upcycle in construction. Safe to say, I think right now we're kind of bouncing along the bottom. But it's really going after our customers. It's really the customers that we're changing our portfolio and making sure that we have the right product for them. So as we gain those customers and gain more share of their wallet, we want to be able to meet their needs. And as a result of that, we need to have more earthmoving. We have the largest aerial fleet in the world. And Bill mentioned a concentration around that. It's not just going to say we're going to just de-fleet it as opposed that we're going to grow some of the other segments up. As we do that, it's our customer shift that we're going after. They're industrial accounts, they're national accounts that we think are very accretive to our business. That's why we're focusing on those categories of equipment. Can you talk about who those accounts are? I mean, you mentioned those 53%. Who are you talking about that are moving you in that direction? Well, it's a plethora. In our national account portfolio alone, it's roughly around 1,200 accounts. We have the strategic accounts. Strategic accounts, the way in which we measure them, are multi-state, but usually within a captive region area. Our national accounts is multi-regional. We've got the assigned accounts, which are in local. To give you an example, the Kiewit of the world is a type of customer that we're talking about. Granite Construction, the Fluor of the world. Those are some of the companies that we have a relationship with that have the depth and knowledge of various types of equipment and jobs. As they grow and they expand in their portfolio, we want to be able to earn more share of their wallet. As a result of that, we need to have a product to serve them. Have they traditionally been a big part of your portfolio? They have been national accounts, but it's safe to say that we're earning more share of their wallet on a year-over-year basis. As you think about the level of utilization that you're comfortable with from a customer availability standpoint, now that you hit or will hit an all-time record in 2011, talk about how high you'd be comfortable taking utilization from here, and how should we think about balancing getting good efficiency as you increase the utilization rate versus having lower availability for some of your better customers when that happens? I can try that one. I don't see it as a trade-off between better availability versus lower efficiency. I think the key, the challenge for us is to figure out how do we do both. My view is that over time, there's still a couple of points of greater utilization that we can achieve as a company, even though we're at record levels today. The trick is going to be figuring out how to allocate that fleet so that you don't have availability problems to the key customers that we're focused on. And we're still learning how to do that. That means that we've got to understand the mix of customers. We've got to better understand the demands that they have, better understand whether there's significant seasonality in the demands that they have, so that we can make the choices that make the fleet available to them and allow us to keep it more fully utilized than we do today. And that's the opportunity going forward. I think Mike would agree, hopefully would agree, that there's another couple of points of utilization that we think we can squeeze out. We might discuss exactly how long it might take us to get there. But in order to achieve that, we can't just say, "Oh, we're just going to have availability deteriorate for all of our customers." We can't afford to do that. It's about making sure the availability is still good for those key customers, and that might mean shifting where that fleet is put to use. Jerry, I agree with Bill. It's not an either/or. We've got to do both. Give you an example. We've got, on any given day, about 5% of our fleet is in transport. It's in some form of transport and pick-up. If I can just reduce that down by a point, that's capital that can be deployed and put to use. That just gives you a kind of quick and dirty metric that you can focus in on. There are other things available that I think that we should be able to focus on. Turning our equipment around faster or do that differently. It's going to require a different view, and that's why we're talking about possibility of doing some sort of hub and spoke. There's a lot of industries that are like industries. The trucking industry is an example where it's not unusual for them to have a hub where they can bring a truck in and work on it overnight, have it ready next thing the following morning. We already own the buildings. The question is there a way in which we can drive those ones to further efficiency? It's up to us to think those through and to figure out a way, if it makes sense. Those are the things that is going to force us to continue to look at ways to drive those efficiencies. Bill, on the last earnings call, you mentioned that you feel comfortable with your ability to deliver 60% incremental margins next year. This year, on six points of pricing, you're going to do, in your guidance, 62%-67% incremental margins. Can you talk about whether it's fair for us to assume you need pretty good pricing to get to 60% incrementals next year, or an acceleration in cost savings from the efforts that we discussed at the beginning of our conversation? We certainly need price. If you told me that I get no price improvement next year, just the carryover, 60% starts to look a little bit more aggressive than if you allow me a little bit more price than that. Not a dramatic price improvement, but certainly we would need some price to get there. I think the important point is that we still have opportunities on the cost front that we think we can deliver on in 2012. As we do that, we'll be able to support that kind of a flow-through next year. I beg with you, please don't force me to put a flow-through number on 2013 or further there out, but certainly as we look at next year, we've got enough confidence for me to be saying it. We'll run at it hard. And the level of cost saves from these efforts in 2012 versus 2011, is it fair to say they're smaller in magnitude than we're going to see 2011 versus 2010? Or is there any accelerated pickup? It's very hard to think about accelerating the year-over-year improvement, given the magnitude of what we've done already. So they'll be smaller in absolute dollar magnitude. But they are real, and they are benefits that we have a lot of confidence that we can deliver. And they'll help drive us to that 60% flow-through next year. We had a question here? Yeah. How do you think about adding to the fleet, outright new purchases versus M&A? And if you're looking at, would you rule out M&A or is it just tuck-ins geographically or certain fleets? How do you think about that? I'll take the M&A, and I'll let Bill handle the fleet. The M&A is, we don't look at it from a standpoint of just buying fleet. We buy probably as better than anybody in the industry as far as purchasing. How we do that, Bill will talk about that. From the M&A standpoint, we've been very clear about why we do M&A. It really has to be strategic around our process of what we're looking to do. I mentioned about expanding our portfolio of customers. If you take a look at the companies that we acquired, one of the areas that we've been expanding into is the industrial side of the business. The acquisitions we had ranged from 30% all the way up to like 85% of their business was industrial. Then we took a look at and said, "Is the internal rate of return going to be positive?" And the answer is yes. Also, which is a very important viewpoint from our perspective on M&A, is the culture. Is the culture in line with what we believe in and our core beliefs around the customer and how we go to market? It has to answer those three things before we go forward. We have passed on numerous deals that have been passed in front of us for the simple reason, the only thing I'm doing is buying equipment. Again, I can buy assets as good as anyone. In terms of how do you look at CapEx versus M&A or even share repurchase, those are the main three ways that you could deploy capital. Share repurchase is probably the bottom of the, not probably, it is the bottom of the three in terms of use of capital right now. Talk to me again a year and a half, two years down the road, and I may have a different answer, but right now it's about CapEx versus M&A in deploying additional capital. I think it's fair to say that we look at how do we support the strategy in making a decision about which comes first. Given the focus on key customers, growing with those customers, solidifying the relationship, winning greater share of wallet, realizing a better profit opportunity. Certainly, capital is going to be a huge part of executing that strategy as far as the customers are concerned. So that's a pretty high priority for us. But we can also execute that strategy supported by M&A, as Mike just articulated. So maybe it's one and 1A, with perhaps CapEx being one and acquisition being 1A. But certainly, we're continually trying to evaluate where is the best way to support the strategy between those two. The discipline that Mike talked about around M&A, I think, means that they're going to be less routine, whereas every day we've got the challenge of figuring out how much capital to deploy. So that's probably why I would call CapEx one and M&A 1A, but they're both focused on supporting the strategy. I think if you look at what we've done so far in both areas, I feel like we've done a pretty good job of managing the capital of the company. Bill, can you say more about the last point you talked about over the past couple of acquisitions that you've done, how much you've been able to enhance the earnings power, whether we think about EBITDA or EBIT, whatever you're most comfortable with, relative to what the business was able to do on a standalone basis? Perhaps talk about the last two or three deals you've done. Sure. I think I said this in the earnings call or maybe among investors in one-on-ones, but if you look at the three acquisitions that we've done this year and just look at what they contributed in revenue in the third quarter and profitability, the revenue contribution from the three acquired companies was about $23 million. The EBITDA was at a margin of about north of 50%. So in the third quarter, that contribution was very significant. That's the kind of acquisition that we really think makes a lot of sense in supporting the strategy as well as driving forward the returns that the business can deliver. The EBITDA margin starting point for these businesses, was it any different than your base business? I know a couple of these are specialty products, so They were all well-performing businesses before we bought them, and I think it's fair to say that we improved them since we bought them. Realizing some synergies of cost, being able to shore up their presence with their customers in terms of supporting them with CapEx, and just generally driving the businesses better. Early days, but I feel very comfortable in saying that the businesses that we bought run better today, and they were pretty good when we bought them. We feel very good about the acquisitions. A lot of these companies that you're buying, are they capital constrained? Would you say that's smart? I would say all three of the acquisitions that we have made benefited from the ability to fund more CapEx. Either they were able to really pursue new growth opportunities with more capital, or we were able to more efficiently capitalize the opportunities they were already pursuing by replacing re-rents, and realizing a better margin that way. I think the ability to put capital into these businesses was an important benefit for them. Yes, question in the back. raised the CapEx guidance in 2011. Early in the year, you talked about what your focus is spending on. Can you talk about the motivation behind that raised CapEx? Was it opportunistic because the business was higher than you expected, like many years? Or are you taking out a 2012 CapEx to some degree to bring it into 2011 and it's pacing easing? Can you talk a little about the motivation for why it happened? Shall I? Go ahead. I hesitate to use the word opportunistic because it sounds more temporary than what we believe we were able to invest in. All along 2011, from very early in the year, we have heard our customers say we have more and more need. And in fact, you've seen it in our increase in utilization of our fleet. And we have all along been saying, let's make sure that that demand is sustainable over a longer period. Let's not go chasing after that demand with new fleet investment if it's just for this year. As we've gone through the year, we've gotten greater and greater confidence that the demand that we're seeing from our customers is sustainable. So as we've gotten later into the year, we've ratcheted up and up and up our expectation for the amount of capital that we're going to spend in 2011. It's opportunistic in the sense that we've gotten comfortable that the demand is sustainable over a longer period, and so we've invested more into it. Does it represent an acceleration of 2012? Yeah, I guess you can think about it that way, because we're still trying to make sure that 2012 is solid. If 2012 works out the way 2011 did, then I would say, no, it's not an acceleration of 2012. We'll just spend more in 2012. But if 2012 represents a slowdown and sort of the macro backdrop is an open question still at this point, then I would say, yeah, it did represent an acceleration of 2012 because we're not going to spend more in 2012. That's how we've been thinking about it, but I think the key point is that it's been driven by the demand that we've seen from our customer base and our growing confidence that that demand is sustainable over a longer period of time. Yes. What specifically that you're hearing from your customers gives you that set of confidence? Is it the length of projects they're involved in? Do you have greater transparency further out? Is there quality changes, or what is it? It's a combination of both, but more importantly, we have been very proactive in listening to our customers. We went out and we actually polled them and asked them to rank this year and then compare it to next year from a scale of 1 to 7 being it's going to be much better than 2011, all the way down to 1, which is much worse. When we went through that, we do that on a quarterly basis with all of our operators. They came back just before the end of the third quarter. 2,700, 2,800 respondents came back, and basically said 80% said that they see 2012 to be equal to or better than 2011. Only 16% basically said they would see it go down, and 4% was, we just don't know. That is a better number than we saw last year. We actually go to our customers. As far as some of the projects, we have been in tune with these customers to figure out where their work is coming from, and some of it is larger work, some of it is energy-related work, some of it is just work that is still ongoing from the past year. It is all the above. Yes. Do you ever have discussions where you tell your customers you will buy more equipment if they will sign long-term contracts, or is that just not part of your business? Typically, it is not, because we rent day, week, and month, and we have a plethora of 2,900 different types of categories of equipment. But we have, from time to time, where some customers have gotten into a bind, and they say, "Hey, listen, we need this type of equipment." We have signed a deal with them where they will take it for an extended period of time. But that is more the exception than it is the rule. Yes. You guys and some of your competitors have talked about some of your customers shifting from renting to buying as part of the reason you guys have seen great growth. The economy gets better the next couple of years. Do you see those people shifting back to buying versus maybe CapEx where you guys are on pricing and utilization? Or do you think that transition is something else? I personally believe, 33 years in this business, when I started, I used to have to tow around a JLG lift just to compete against a scaffold. By then, JLG only made like three products. Today, they make a wide variety of products. I see it as not going down. I see it continue. Keep in mind, we're talking about the construction industry as a whole as being one of the drivers. That's part of it. But the industrial sector is coming online. Then the government sector, which really hasn't even scratched the surface, I think has a huge potential for using rental. They don't today. They're very good at buying equipment, but they don't know the concept of renting. I think that people don't change overnight. I think that the downturn that we went through was severe, and I think that the uncertainty is going to be out there for some period of time. We've all been debating about the macro environment and unemployment. I think it's all safe to say that unemployment in the high single digits is here for a while. As a result of that, I think that the rental process or the rental concept will continue to grow. I see that as an opportunity. Earlier today, we had two of your bigger suppliers sitting in these seats swearing up and down they're going to get 4.5%-5% price increases next year across their product lines. On your last earnings call, you were very clear that you're only going to get one point of inflation. Can you just help us bridge the gap between the two different sets of messages? I don't know what to say to that. We're a very large customer, a very large buyer, and we're not shy about leveraging that position with our suppliers. I don't doubt that they're going to realize what they say they're going to realize. They just ain't going to realize it from us. Look, we have national accounts, right? The national accounts get a different price than the customers who just call us up today. It's a blended number. I agree with Bill. I think that they will clearly get their price over time. But we'll just have to wait and see. Bill, on the last call, you mentioned you're going to be thinking about 2012 in halves. Can you talk about for the first half where you plan to do a big chunk of your replacement spending? Are you comfortable with your ability to sell the used equipment through existing channels, or should we look for an allocation to some auction selling? Then just comment broadly on the level of CapEx that you mean when you say replacement for the first half relative to how you've spoken about replacement CapEx for your business in the past. Sure. So just to be crystal clear, what I've said is between $500 million and $600 million of replacement at OEC value next year. I did not say, at least I hope I did not say, that we would do all of that in the first half. That's the full-year replacement that we see for 2012. We're thinking about the year in halves in the sense of let's position ourselves so that we can buy the purchase side of that replacement transaction predominantly in the first half. Then we will think about the sales side of that replacement transaction spread out across the year so that we'll have a negative cash flow, if you will, or net cash flow in the first half. As the first half unfolds, we'll make a decision about whether we buy anything beyond replacement in the second half, but we're certainly going to be working at the sales side of that replacement during the second half. So just to be clear about how that might play out in timing. The absolute dollars will depend on the external environment. So if the market is really weak and it starts out eroding in that first half, we're going to look at it and we're going to say, "Wow, the replacement spend, what we haven't done to that point, maybe we'll dial back on that a little bit." Certainly, any growth, we would say we're going to wait until the market looks a little better. But if the year starts out slow, we might accelerate the amount of the sales side of our management activity in the first half as well to try and get the sales off at more attractive pricing. So the key is just to think about the decision points in the first half, and that will guide how we execute those full-year objectives that I've talked about over the course of the year. Hopefully that adds some clarity. But if not, ask another question, please. And Bill, the comment on sales channels specifically. So as you step up your used sales over the course of next year, how comfortable are you with the ability to push them through retail versus having to go to auctions or vendor programs or other lower margin alternatives? I haven't set that plan yet, and we're going through our planning process as we speak. I do think given the scale of what we're doing, that we're certainly going to look at using the vendor channel, in a way, maybe comparable to what we did this year. So there might be some more there. We want to stay away from auction, in any way possible. But we may have to resort to some more auction. But I think the key point is that our retail activity gets stronger and stronger as time goes on. And so we feel like we can flow more through our retail channel in terms of absolute dollars. Whether it represents the kind of share of what we sell next year to do this year, it's a little early for us to say. And just to make sure I'm connecting the dots right on the point you made earlier, $500 million or $600 million of replacement needs next year. Your point is you're going to spend the CapEx part of it pretty much in the first half of the year, and the sales over the course of the year. So we're looking at pretty big CapEx in the first half. Well, certainly that's the thought process right now. Start to spend the purchase side of that because we feel like we need to do it. We need to replace the fleet, and you might as well get that in earlier so that you're positioned to take advantage of it during the seasonal peak of the year. We're going to start that process earlier in the year. Then the used sales side of it, you really can't bundle that much used sales activity in a half. We want to manage that spread across the entire year. But every month, as we go through the early part of the year, we're going to be watching the external environment and making a separate decision about, well, is it going as well as we expected or going slower than expected? Then we'll make a separate decision at that point. But that's the thought process is spend it a little bit earlier in the year, manage the used sales, over the entire year, but in either case, be ready to flex based on what the market's doing. Perfect. Well, please join me in thanking Bill, Mike, and Fred for their time. Gentlemen, thank you so much for joining us. Thank you.