Kevin S. Inda - Senior Vice President, Principal, and Head of Public Relations Practice John M. Engquist - Chief Executive Officer, Director and Member of Finance Committee Leslie S. Magee - Chief Financial Officer, Principal Accounting Officer and Secretary Bradley W. Barber - President and Chief Operating Officer.

Neil Frohnapple - Longbow Research LLC Philip Volpicelli - Deutsche Bank AG, Research Division Joe Box - KeyBanc Capital Markets Inc., Research Division Steven Fisher - UBS Investment Bank, Research Division Nicholas A.

Coppola - Thompson Research Group, LLC Daniel Politzer - RBC Capital Markets, LLC, Research Division Barry George Haimes - Sage Asset Management, LLC.

Good day, everyone, and welcome to H&E Equipment Services Third Quarter 2014 Earnings Conference Call. Today's call is being recorded. At this time, I would like to turn the conference over to Kevin Inda. Please go ahead..

Thank you, April, and welcome to H&E Equipment Services conference call to review the company's results for the third quarter ended September 30 which were released earlier this morning. The format for today's call includes a slide 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, Chief Executive Officer; Brad Barber, President and Chief Operating Officer; and Leslie Magee, Chief Financial Officer and Secretary. Please proceed to Slide 2.

During today's call, we'll refer to certain non-GAAP financial measures, and we've reconciled these measures to GAAP figures in our earnings release which is available on our website. Before we start, let me offer the cautionary note. This call contains forward-looking statements within the meaning of federal securities laws.

Statements about our beliefs and expectations and statements containing words such as may, could, believe, expect, anticipate and similar expressions constitute forward-looking statements.

Forward-looking statements involve known and unknown risks and uncertainties which could cause actual results to differ materially from those contained in any forward-looking statement. These 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, and good morning, everyone. Welcome to H&E Equipment Services Third Quarter 2014 Earnings Call. On the call with me today is Leslie Magee, our Chief Financial Officer; and Brad Barber, our President and Chief Operating Officer. Proceed to Slide 3, please.

This morning, I'll give an overview of our third quarter performance and also discuss activity within our regions and current market conditions. Leslie will then review our third quarter financial results in more detail. When Leslie concludes, I'll discuss our outlook for the balance of 2014. And after that, we'll be happy to take your questions.

Slide 5, please. Our business delivered another strong quarter as we continued to successfully leverage the recovery in our wide-ranging commercial construction end user markets.

In addition, we are benefiting from the increasing activity we're seeing in the energy and petrochemical sectors in our Gulf Coast markets and remain excited about the future opportunities for our business in this sector.

I would like to point out the solid leverage generated in our business with EBITDA increasing approximately 19% on single-digit revenue growth. We're very pleased with our results as well as both the short and long-term opportunities for our company.

The high demand for rentals continued in the third quarter as we achieved a 21% increase in rental revenue. Rental gross margins were 50.5% compared to 49.6% a year ago. Fleet utilization was 74.1% compared to 72.3% a year ago. Our utilization and rental rates also continued in an upward trend compared to a year ago.

We experienced lumpiness in our distribution business this quarter as we do on occasion. And I want to emphasize that we were up against some very tough comps on both a sequential and year-over-year basis for new equipment sales. Also, as we indicated on our last call, we expected used equipment sales to decline as a result of our young fleet age.

Both of these segments are still performing at high levels. Our combined parts and service businesses are delivering both strong revenues and margins as well. In terms of the financials, total revenues increased 1.7% to $275 million versus last year and gross margin was 33.1% compared to 29.7% a year ago.

Income from operations increased 17.9% to $40 million and EBITDA increased 18.8% to $83.1 million compared to a year ago. Net income for the quarter was $15.3 million or $0.43 per diluted share versus net income of $14 million or $0.40 per diluted share a year ago on a much higher effective tax rate in the current quarter.

Overall, it was another very strong quarter for our business. Proceed to Slide 6, please. Our Gulf Coast and Intermountain regions continue to account for the majority of our revenue and gross profit as a result of the high levels of activity in the energy, petrochemical and manufacturing sectors.

Given the recent decline in oil prices, I want to point out that oil exploration and production only accounts for approximately 12% of our total revenue. Based on industry sources, we also believe that oil prices would have to fall well below current levels to have a significant impact on this segment of our business.

It is our opinion that falling oil prices will have little to no impact on the industrial expansion taking place in Louisiana. These projects are driven by low natural gas prices. Proceed to Slide 7, please.

The singular point I want to reemphasize on this slide is that the current commercial construction environment in the United States is positive and is forecast to further strengthen in 2015. Nonresidential construction spending continues to grow.

And this is not only supported by what we are experiencing in our end user markets, but is also supported by important indicators such as the ABI and the Dodge Momentum Index. At this time, I'm going to turn the call over to Leslie for a more detailed financial review..

Good morning and thanks, John. I'll begin on Slide 9. We are pleased to discuss with you this morning, continued strong results. As John highlighted, total revenues increased 1.7% to $275 million and gross profit increased 13.4% to $91.1 million compared to the same period last year.

The strength in rental demand and solid growth in our parts and service businesses were the primary drivers of our consolidated revenue growth. Our top line growth was partially offset by declines in new and used equipment sales which I'll address further in a moment.

At this point, I'd like to review our results in more detail by first, covering revenue by segment, and then I'll discuss gross profit by segment. As for our rental business, the story is consistent with recent trends.

Our rental business continued to deliver impressive growth and improving return while investing in the fleet and maintaining industry-leading physical utilization. Rental revenues were $108.2 million for the quarter, a 21% increase over the same period a year ago.

As I mentioned, we've continued to invest in our fleet which has increased approximately $218.1 million or 22.3% from a year ago based on original equipment cost or OEC.

While our fleet size has grown significantly, we are operating at high utilization levels with average time utilization based on OEC of 74.1% for the quarter compared to 72.3% a year ago. In addition, based on number of units available for rent, average time utilization was 68.3% compared to 66.6% last year.

Also, average rental rates increased to 2.9% over a year ago and 1.3% over the second quarter of this year with positive rate trends in all product lines. And as a result, our dollar returns were 36.9% compared to 36.7% a year ago. New equipment sales were $80.8 million, down 10.5% from $90.2 million a year ago.

This was primarily the result of lower demand for earthmoving which decreased 22.5%, and for cranes which decreased 5.8% in each case over a year ago.

As we've emphasized to you many times, these period-to-period fluctuations are evidence of our ongoing challenge to predict customers' timing on equipment purchase which result in lumpiness in this segment.

Further, the third quarter a year ago was the peak quarter of new equipment sales in 2013 by at least 50%, and we generated the same volume of new equipment sales just this past quarter, resulting in a difficult comp both year-over-year and sequentially.

Used equipment sales were $25.2 million and $11.6 million or 31.5% decrease over the third quarter of 2013. The decrease was due to lower used crane, aerial and earthmoving sales. As we mentioned on our last call, we have, by design, a younger fleet, a consequence of which will be relatively flat to lower demand for fleet sales.

Sales from our rental fleet comprised 75.6% of total used equipment sales this quarter compared to 87.8% in the third quarter a year ago. For the second consecutive quarter, our parts and service segments delivered solid double-digit growth with a 10.7% increase in revenues to $44.6 million.

So now let's move on to a discussion of gross profit by segment. Our total gross profit for the quarter was $91.1 million compared to $80.3 million a year ago, an increase of 13.4% on a 1.7% increase in revenue. Consolidated margins were 33.1% compared to 29.7% a year ago, with every business segment delivering improved margins from a year ago.

Our rental business delivered margins of 50.5% compared to 49.6% a year ago, due primarily to lower rental expenses as a percentage of comparative revenue. Margins on new equipment sales were 11.3% compared to 10.6% in the same period last year, reflecting higher margins on new crane, earthmoving and aerial equipment sales.

Gross margins on used equipment sales were 31.1% compared to 26.3% in the same period last year. Margins on pure rental fleet sales which exclude the impact of margins on the sales of used inventory accounted for approximately 76% of total used equipment sales or 38.2% this quarter compared to 29.7% a year ago.

Parts gross margins were 28.6% compared to 28% a year ago and service gross margins were 65.7% versus 64% a year ago. Margins on other revenues were 5% compared to 3.4% in the third quarter of last year. Slide 10, please.

Income from operations for the third quarter increased 17.9% to $40 million or 14.5% margin compared to $33.9 million or a 12.6% margin a year ago. The driver of the increase was a strong performance of rental and our other business segments which each delivered improved gross margins compared to a year ago. Proceed to Slide 11.

Net income was $15.3 million or $0.43 per diluted share compared to $14 million or $0.40 per diluted share in the same period a year ago. As John mentioned earlier, our effective tax rate increased to 43.6% compared to 33.5% a year ago due to lower benefits from permanent items in the current quarter.

As a result of this reduction and previously forecasted [indiscernible] in relation to current year pretax income, our 2014 effective tax rate estimate is 40.3%. Please move to Slide 12. EBITDA was $83.1 million or an 18.8% increase over the same period last year and EBITDA margins were 30.2% compared to 25.9% a year ago.

And as John mentioned, we are extremely pleased with the leverage in our business with a double-digit increase in EBITDA on single-digit revenue growth. This EBITDA expansion is primarily driven by strong rental performance combined with solid performance from our other business segments. Next slide, 13.

SG&A was $51.6 million, a 9.8% increase over the same period last year, and SG&A as a percentage of revenue was 18.8% this quarter compared to 17.4% a year ago. We incurred increased wages, incentives and benefits of approximately $2.7 million, largely due to the growth in the business since a year ago.

Further, our greenfield initiatives added $0.3 million in SG&A this quarter compared to a year ago. The increase in SG&A as a percentage of revenues is largely as a result of the impact to our top line from the decline in new and used equipment sales this quarter.

The prior year's third quarter demonstrated significant operating leverage at the SG&A line due to the timing of those equipment sales last year. Also, SG&A expenses this quarter were similar to last quarter in both dollars and as a percentage of revenues.

Slide 14 and 15 include our rental statistics and our fleet based on original equipment costs at the end of the third quarter was $1.2 billion versus $978.9 million a year ago which is an increase of 22.3% or $218.1 million. And during the third quarter, we increased the size of our fleet by $80.1 million or 7.2% based on OEC.

Our gross fleet capital expenditures for the quarter were $117.4 million, including noncash transfers from inventory and our net rental fleet capital expenditures for the quarter were $98.3 million Gross PP&E CapEx was $14.4 million and net was $13.7 million. Our average fleet age as of September 30 was 31.8 months. Next, on Slide 16.

At the end of the third quarter, our outstanding balance under the ABL facility was $220.5 million and accordingly, we had $175.5 million of availability at quarter end under our ABL facility, net of $6.5 million of outstanding letters of credit.

At this point, I'll turn the call back over to John to discuss our current outlook and then we'll open the call for questions..

Thank you, Leslie, please proceed to Slide 18.

Before we open the call to questions, let me close by saying our business has performed very well during 2014 and outlook for the remainder of this year and into 2015 remains positive, as we believe our company will continue to benefit from the significant growth expected in the commercial construction markets in the U.S.

We believe we're in the right place at the right time and well-poised to benefit from the significant capital projects reported in the pipelines slated for our Gulf Coast region related to major chemical, energy and manufacturing projects beginning in 2015.

We anticipate further fleet investment during the fourth quarter based on the current demands in our end markets as well as an anticipation of these projects. And we believe this reflects the confidence we have in our strategy, financial strength and the positive conditions and opportunities in our marketplace.

The company remains focused on solid execution, greater productivity and returns for our shareholders. At this time, we'd like to take your questions. Operator, please provide instructions..

[Operator Instructions] And we'll first hear from Neil Frohnapple of Longbow Research..

John, regarding the drop in new equipment sales, I know you guys had a very difficult comp versus last year but should we think about your new equipment sales business kind of at peak-ish levels with maybe some lumpiness quarter-to-quarter? Or do you think that the capital projects spending that's forecasted to begin in the Gulf Coast should provide some growth in 2015 and beyond?.

I think when these projects in the Gulf Coast, Louisiana and Texas really get underway and gain traction, it's going to have a positive impact on equipment sales, rentals and really, all aspects of our business. The vast majority of those projects have yet to start.

There's some of them in the dirt phase right now, but by and large, we're going to see those start gaining traction between '15 and '17..

Great. That's helpful.

And then the used equipment sales decline, is that also a function of you guys holding on to more fleet due to the strong rental fleet utilization? I know you guys called out your guys -- the younger fleet age and then as a follow up, what are you seeing from a used equipment pricing standpoint and any particular equipment categories that stand out as outperformers or laggards?.

Yes. We will definitely slow our fleet sales by design. As you've seen, we've got an exceptionally young fleet age which we believe is a great investment in our future, but we certainly have no need to continue to de-age that fleet. I think you might see some of that just based on our future fleet investment.

But we will, by design, slow fleet sales down. As far as the used equipment markets, they're exceptionally strong, pricing is firm and I just -- I don't see anything that's going to change that for the foreseeable future..

Great. And then one last one for me, if I can. Nice double-digit growth in parts and service again.

Any color on what drove the strength this quarter and if you think that those types of growth can be sustainable for the next several quarters?.

I think the growth is sustainable. I think that Brad and his team have a very strong focus on parts and service. That's been an area of growth in the past -- in our recent past in our business, that we have not been satisfied with or pleased with and Brad's got a heavy focus on it, and I think we're seeing good results from that..

And next, we'll hear from Philip Volpicelli of Deutsche Bank..

First question is for Leslie.

What's the manufacturer's floor plan payables at the end of the quarter?.

$92.4 million..

Okay, great. And then as you guys -- you talked about more CapEx in the fourth quarter and then into '15.

Should we consider it's the same rate of growth, 20% growth? Or how do you guys frame your CapEx for fourth quarter and '15 expectations?.

Look, we're spending some money in the fourth quarter this year, third quarter and fourth quarter that's probably a little out of our normal buying cycle just based on heavy, heavy demand, particularly in Louisiana and Texas. These are markets that we don't think will show a whole lot of cyclicality or excuse me, seasonality.

So we are buying some equipment and we're able to put this stuff on rent quickly. We're in the middle of our budget process as we speak, so we need a little more time to answer your question about '15 as we conclude the budget process..

Okay. That's fine.

And then when you think about fleet versus growth versus rate growth, is there a balance that you can achieve there to get more rate growth? Or is it simply you're growing your fleet because the demand's there and the rate does what it does?.

Well, one, we are growing our fleet because the demand is phenomenal and we think that's going to continue, but I don't want you to think we're just saying the rate does what it does because we're very focused on rate.

We're pushing on our people very hard and we're not just interested in revenue growth, we're interested in the quality of the revenue. So we're going to be pushing hard on rates going forward..

Okay. And then the last one for me is on the new unit sales. Obviously, you have limited visibility there.

I mean, what kind of -- does someone make an order and they want the equipment next week or is it next month? How much visibility do you have in that order book?.

Neil, (sic) [Philip], this is Brad. It varies by product type, but all the above happens. We take orders every day that weren't anticipated with much advanced notice. And every day, we take orders that may arrive in 3, 6, 12 or more months, depending on the product type.

Generally, the lead times are longer on large crawler cranes and they're better or shorter on some of the smaller products. But the answer is it's all of the above..

And have you had a material change in people's outlook given the drop in oil and gas? I recognize it's not a large part of your business but....

We have not. We've actually been in front of many of our large oil and gas customers, and the outlook there is still very positive..

Our next question will come from Joe Box of KeyBanc Capital Markets..

A question for you on the fleet growth. A 7% sequential growth was a little bit more than I was expecting in 3Q. And now, it sounds like you're talking about maybe taking a little bit more fleet in 4Q than you normally might.

Can you just help us from a modeling standpoint, I mean, are we looking at similar sequential growth in 4Q? Are we looking at maybe more like low single-digit growth?.

I'm taking a look at that right now, Joe, give me a second..

Sure.

You want me to go on to the next question and you can come back to that?.

Yes, I think in the fourth quarter, it's more like mid-single-digit growth. We're not going to grow at the same level we did sequentially..

Okay.

So mid-single-digit sequential growth, but not quite the 7%?.

Right, yes..

Okay. Rental rates were a little better year-over-year.

Can you maybe just talk to the mix of contracts signed? Curious if you signed fewer long-term contracts or if we're just legitimately seeing pricing move up from here?.

No, I don't think our mix has changed. I think it's pretty much the same, and I think we are seeing improved pricing..

Joe, the only thing I would add is we saw positive rate increases in all product types for the quarter. And on a year-over-year basis, we're seeing positive rate improvements from every region in the company. So it's more the same.

The mix remains constant and we remain very focused on balancing this really nice fleet growth, really high utilization and keeping our finger on the pulse of great opportunity..

Understood. Okay. You guys have a number of megaprojects that are on the front end of starting in your backyard. I'm trying to determine how we should think about the timing of revenue for some of these projects.

Can you guys just give us a sense of, from a rental standpoint, are we looking at maybe some percentage of rental spend that typically comes on the front end of a project as opposed to the back end of the project like it's, let's just say, if it's a large petrochem project, do you see 30% on the front end, 70% on the back-end? And then, I guess, same question for the new equipment side, at what point would they typically place an order for a new piece of equipment?.

Well, I think it's -- when they start placing orders is based on the timing of the project and when the contracts start getting signed. We have one of our really good customers just sign a $300 million contract in Lake Charles. So they're going to start looking hard right now. Other projects aren't quite that far along.

They're in permitting and planning stages, so it just depends. But Joe, I could tell you at what point earth goes on a project versus aerials versus cranes, but to break it out in the percentage of revenues, I can't do that on this call. Brad, I don't think you'd have any more color than I do..

No, I don't. The only thing I would add is sometimes, it may be as important who the customers are performing on the projects because some folks move in more products or some folks want to rent more products on a particular project.

All of these will lead to a lot of parts and service opportunities for us to maintain both our rental fleet, new sales that we place, as well as existing customer owned equipment..

Okay, that's helpful. And then maybe let me ask it a little more specifically on the new equipment side.

Do most of your customers place an order for a new crane or a new dirt moving piece of equipment before even breaking ground on the project? Or is it usually at some point during the project? Just curious how lead times and everything play into that..

I think lead times play into that heavily. And typically, they want to have their contracts signed, everything in place and have some pretty good visibility when the job starts. And then they place orders, I think, based on lead time, primarily..

Okay. I'll leave it at that..

Joe. This is Leslie, I want to make one correction to the CapEx discussion. Our CapEx analysis wasn't formatted in the same view as your question. So just a correction, it's really our CapEx spending for the fourth quarter and it's going to be more like low-single digits..

Okay.

So low single-digits, sequential growth in 4Q from 3Q?.

Correct..

And is that in terms of fleet growth or CapEx spend? Just to be clear..

That's fleet growth..

And next we'll hear from Steve Fisher of UBS..

Just to follow up again on the Gulf Coast projects, trying to be fairly specific here.

When do you think the cranes will need to be delivered for these big Gulf Coast projects that have hit the dirt already? Do you think it's second half of 2015 or is it more like '16? I'm thinking like the projects like CPChem and Cameron and Freeport on the LNG side..

I would think we -- '16 may be the most velocity but I think second half of '15, we should see some benefit..

If you use our rule of thumb of 6 to 9 months on large projects from the time that the earthmoving starts, foundation, that type of work, 6 to 9 months later is when you would expect to see the cranes come in and start with steel erection..

Okay. And then It was interesting to see the rental revenue growth actually accelerated this quarter against the backdrop of the weaker sales.

Can you just talk about where you're actually seeing accelerating rental activity versus steady growth?.

Well, 2 things. I would object to the term weaker sales. I think our sales were very solid in the quarter. We had brutal comps if you go back and look at we did prior year end in the second quarter, but our distribution business is still very solid. As far as the rental side of our business, demand is exceptionally broad-based.

I mean, we got every region screaming for product, utilization is high across-the-board, so the demand is very broad-based. It's not just the energy sector or the oil patch. I mean, the current commercial construction markets or non-res markets have improved dramatically and they're continuing to improve. So rental demand is very broad-based..

Do you think you're seeing any incremental shift from owning equipment to rental in the marketplace that might be driving that as well?.

I do. I do..

And our next question will come from Nick Coppola from Thompson Research..

Looking at your rate growth year-over-year relative to a large competitor, I guess you've been softer in recent quarters or historically, you've been stronger. And I'm just wondering how you'd explain that.

And then kind of also, just how you benchmark yourself to what you're doing relative to the rest of the industry?.

Well, one, I don't think we're comparing apples-to-apples. Their methodology for measuring rates is different from ours. So that raises question in and of itself. I said on the last call, to really be fair in measuring us against other companies, I think you almost have to go back for 10 or 12 quarters or whatever and stack the rate gains.

Because I can tell you, when we were getting 10%, 12% rate gains, that competitor you talked about was getting 5% or 6%. And now, we're going up against a lot tougher comps and so I don't know that we're comparing apples-to-apples.

I would tell you, we're getting rate gains, we're going to continue to get rate gains and we are very, very focused on rate. That's something we're paying a lot of attention to..

Okay. So that's helpful. And then, I guess my follow-up. I heard you talk about broad-based rent in the rental business. I'm just wondering if you could dig in a little bit more to what's going on in commercial markets, whether or not there's any particular regions, trends that kind of standout.

And then, I guess just what types of projects are occurring?.

I mean, we're seeing everything from sporting facilities to hospitals. It's just -- it's broad based. There's some wind activity again, I mean....

It's municipal spending, white water. It's a broad based in every sense, Nick, and it also, as John stated, spans all of our regions. So there's no one particular area of the business that we feel is lagging. It's improved substantially on that side and continues to at a very steady pace.

But there's nothing particularly that I could call out for you that's lagging or leading. It feels pretty balanced right now..

There's office stuff going on. I mean, it's pretty broad-based. Multifamily, I mean in Florida, the condominium market is back in a big way. I mean, it's -- now that's not -- that's more residential type stuff, but I mean, it's pretty broad-based..

[Operator Instructions] From RBC Capital Markets, we'll go to Seth Weber..

This is actually Daniel Politzer on for Seth. So a couple of quick questions. One on crane rentals. Have you seen -- I think you mentioned you've seen rates increase.

So I guess, could you speak a little bit about how utilization has been tracking? And would you expect further rate increases down the line?.

We do. So utilization continues to track somewhere in the 80% physical utilization range, so it's very good. It's been at similar levels for some time now. Rate gains year-over-year were nice on the crane side, better than most other products.

But I'll tell you, with the headwinds of the replacement cost or new acquisition cost, it's still a difficult comp when we relate it back to dollar utilization. But the dynamics are there. Rates are improving. Utilization remains steady. That will continue. The opportunity is immense.

What we need are other competitors that are specific to the crane rental industry to raise the rental rates. And so we're seeing that happen. It's at a very slow pace. We're optimistic that it will continue at least the pace it's at and there's a potential that it could accelerate some..

Okay.

And then, have you ever -- can you, I guess, elaborate on the rough terrain inventory issues some of the OEMs have talked about? Are you guys seeing anything in your footprint or in your markets at all?.

Sure. So yes, again, I think we're a little immune to what you see across North America because of the projects we've been talking about within our footprint. Our inventory levels are healthy. Our opportunities remain very steady.

So what you're seeing from Terex and Manitowoc about their inventory levels really aren't represented in what we're seeing in our market opportunities..

I mean, RTs are probably our softest side of our crane business but just not near as soft as other parts of the country. We just have more opportunity here. We're very, very fortunate with our footprint today..

Okay. And just one last one.

On CapEx, are there any specific types of equipment that you're focused more on ramping up purchases in?.

Our fleet's complexion will remain fairly constant..

We'll go next to Barry Haimes of Sage Asset Management..

I had a question.

If we take all the large petrochemical projects in the Gulf that you talked about in the sort of '15 through '17 timeframe, in terms of the impact on your business, should we expect to see more of it in crane versus rental or similar increments to growth in both of the segments?.

I think it's going to impact all aspects of our business. We have a lot of big industrial contractors we deal with that they own and rent. They do a lot of both. So we expect it to impact our new equipment sales and it will definitely impact us on the rental side. And it's not just cranes.

I mean, early on in those projects, it'll impact our earthmoving business. And then later in the project, like Brad said, 6 to 9 months down the line, it will begin impacting the crane side and the aerial side of our business. So we're going to -- the benefit we're going to see is going to go across all of our business segments..

Our next question will come from Bob Franklin [ph] of Prudential Financial..

Last quarter, the last question on the call, you said that there are a lot of projects, a lot of engineering and permitting going on but not many shovels getting into the ground.

And it sounds like you're even more enthusiastic now but are there shovels in the ground or what makes you more enthusiastic?.

Well, there's been some contracts left let in Lake Charles relating to LNG and ethylene cracker projects that are very significant, very sizable projects. So there's activity there. They're in the dirt phase of those projects..

So those have actually begun at this point?.

That is correct. That is correct. And there's a lot of others that are coming. And look, some of these projects that have been announced won't happen. That's a given. But I can tell you, if half of them happen, it's going to be really, really special and probably unlike anything we've seen in this state. So we are enthusiastic. It's a question of timing..

Okay.

And on that topic, given where we are today versus the end of the last quarter, are you seeing -- I don't know what you see, but can you see things in terms of specific start dates pick up or more quota activity for specific projects than you did last quarter?.

Bob [ph], the answer is yes. I mean, we're getting more inquiries. We're having more customer conversations but these are customers who are still trying to position themselves to gain pieces of these overall contracts.

So that's part of our enthusiasm but the truth is it's still very difficult to handicap just the timing, the start date and then how it impacts us. While we would like to give better data, the truth is it's just going to be really good for us. We're well-positioned.

Not only are we the largest Manitowoc and Grove dealer in the world, we're also the Komatsu distributor in Louisiana and we've got this large rental fleet. So we're going to benefit in every segment and we certainly wish we could give better, clearer guidance.

And every day, we get one day closer to that, but we do see some shovels in the ground, to use your use your terminology. And we are hearing more feedback from customers who are working and negotiating on potential contracts. So I think every quarter, we're going to have a little more -- a little better data to share with you guys.

But right now, that's what we have..

Okay. And then a follow-up on the OEM question, if I may. You referred to some of the crane rental companies needing to raise their rates and moving in that direction.

Can you give us any more color about that?.

Sure. When we talk about the broader rental segment, our larger rental competitors away from the crane business are very sophisticated. They're working hard and very focused on raising rates, as are we.

When you get into the crane rental sector, some of the same sophistication systems analysis does not exist and it's been more of a cash flow approach to the business. And so when we're dealing with smaller, less sophisticated competition, it can hurt the opportunity for returns, and that's just the most simplistic way I can put it..

Okay.

Are they seeing their demand pick up? I'm trying to figure out the same kind of question I asked about the shovels in the ground, when maybe people start ordering more rough terrain or boom trucks?.

I think -- look, utilization levels, certainly across the Gulf Coast, are very, very strong. And I think if you looked at utilization levels on crane fleets across the country, they're probably running north of 70%, 75%. So we are in an environment where we should be getting rate increases.

We are but we're somewhat limited by what we can do by the overall market. But our expectation is, with utilization levels, that we'll continue to get rate increases there. It's lagged what we've seen in some areas over a 2-year period but we're gaining traction there..

And we'll take a follow-up question from Neil Frohnapple, Longbow Research..

Just 2 quick follow-ups.

First, can you remind us what you're planning for new branch openings in 2014? And just any initial thoughts on further branch expansion in 2015 to capture some of the activity you guys have highlighted?.

Sure. Neil, this is Brad. So what we have been saying is 4 to 5 locations. We're going to fall a little short of that this year. We've actually got -- so we've got Lubbock Texas we've opened this year. We've got 11 totaled we've done, 11 greenfields that we've opened so far in the last handful of years. We've got Lubbock that opened earlier this year.

We've got an opening that's going to occur on the 1st of November, one that's going to occur on the 1st of December, and then we're going to have what was hoped to be our fourth opening that's going to actually fall into early Q1. So we're going to get 3 this year and the anticipation is that we do 4 to 5 locations in 2015..

Great. That's helpful. And then just Leslie, on the tax rate for modeling purposes.

Should we be thinking more along the lines of 40% going forward or what you guys put up in the Q3 we should be thinking of more?.

No, you need to look the year-to-date which is the 40% is our estimate for the full year. So that's the right rate to use..

And we'll take a follow-up from Joe Box of KeyBanc Capital Markets..

I apologize if I missed this earlier, but did you guys say what percentage of your new equipment sales was dirt moving versus crane?.

Give us just a sec here..

About 70% this quarter was crane and approximately 20% was earth..

How did that compare maybe to last year, this time?.

Very similar, 65%, 20%, 25%..

[Operator Instructions] And it appears there are no further questions at this time. I'll turn the conference back over to our presenters for any additional or closing comments..

Well, I just want to thank everybody for attending the call. We're in a really solid environment right now and we feel good about the remainder of this year and 2015. So we look forward to talking to you on the next call. Thanks for attending..

That does conclude today's conference. Thank you, all, for your participation..