Kevin Inda - Vice President, Investor Relations John Engquist - Chief Executive Officer Brad Barber - President and Chief Operating Officer Leslie Magee - Chief Financial Officer and Secretary.

Nick Coppola - Thompson Research Group Seth Weber - RBC Capital Markets Steven Fisher - UBS Joe Box - KeyBanc Ross Gilardi - Bank of America/Merrill Lynch.

Good morning and welcome to the H&E Equipment Services Third Quarter 2017 Earnings Conference Call. Today’s call is being recorded. At this time, I would like to turn the conference over to Mr. Kevin Inda, Vice President, Investor Relations. Please go ahead, sir..

Thank you, Chris and welcome to H&E Equipment Services conference call to review the company’s results for the third quarter ended September 30, 2017, which were released earlier this morning. The format for today’s call includes the slide presentation, which is posted on our website at www.he-equipment.com. Please proceed to Slide 2.

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 3.

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

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

Forward-looking statements involve known and unknown risks and uncertainties, which could cause actual results to differ materially from those contained in any forward-looking statement.

A summary of these uncertainties is included in the Safe Harbor statement contained in the company slide presentation for today’s call and also included in the risks described in the risk factors in the company’s most recent annual reports on Form 10-K and other periodic reports.

Investors, potential investors and other listeners are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements.

The company does not undertake to publicly update or revise any forward-looking statements after the date of this conference call. With that stated, I will now turn the call over to John Engquist..

Thank you, Kevin and good morning everyone. On the call with me today are Leslie Magee, our Chief Financial Officer; Brad Barber, our President and Chief Operating Officer; and Kevin Inda, our Vice President of Investor Relations.

I will direct my comments this morning to our third quarter results, our business and overall market conditions, and then Leslie will review our financial results for the quarter. When Leslie finishes, I will close with a few brief comments, after which we will be happy to take your questions. Proceed to Slide 6, please.

In summary, a very solid quarter as our rental business performed well and benefited from the strong broad-based demand in the non-residential construction markets we serve. Total revenues increased 5.9% or $14.5 million to $259.2 million. Margins grew to 36.3% compared to 36% a year ago.

Adjusted EBITDA was also solid, increasing 8.1% to $88.5 million compared to $81.9 million a year ago. For the third quarter, on an adjusted basis, we generated net income of $27.1 million or $0.76 per diluted share compared to $11.7 million or $0.33 per share a year ago on an effective tax rate of negative 11.7% compared to 41.7% a year ago.

Slide 7, please. Demand for rental equipment is strong as evidenced by an increase of 120 basis points in time utilization to 73.3% compared to a year ago. Dollar utilization expanded to 36% from 35.4% a year ago. And we achieved positive rates for the second consecutive quarter up 0.3% year-over-year and 1%, sequentially.

As a result, rental revenues increased 6% to $125.6 million and rental gross margins were solid at 49.7% in the third quarter. The charts on this slide illustrate the cadence on rate and utilization trends for the past year and the current quarter certainly appears to represent a positive inflection point.

Let me make a few comments regarding Hurricane Harvey and Irma. First, our thoughts and prayers are with everyone impacted by these historic and devastating storms. We were very fortunate with both storms as none of our branches were flooded or significantly damaged, and only a very small amount of equipment was flooded during Harvey.

Our employees did an extremely good job of working with our customers to move equipment from flood-prone areas prior to Harvey’s flooding in the Houston and surrounding areas.

Given our high utilization, we are not moving significant amounts of fleet from other branches into the affected areas of both storms, rather making some select equipment purchases for our branches in these markets to support the cleanup and rebuilding efforts.

Long term, there will be a tremendous amount of work that will be a net benefit to us and the entire industry. But at this point, it’s impossible to quantify. Slide 8, please. This slide illustrates our nationwide footprint, various regions, 79 branch locations and 17 Greenfield sites that we have opened since the beginning of 2013.

In early August, we opened a new branch in Durham, North Carolina, bringing our branch count to 5 in the state. Let me elaborate on our current growth strategy. We are focused on identifying and acquiring rental companies to complement our existing business, broaden our geographic footprint, and increase our density in existing markets.

We are also continuing our Greenfield program. Accordingly, we expect this map number location and markets service to expand over the next year. Slide 9, please. I want to provide some color on our end-user markets and fleet.

The nonresidential construction markets, in general, have been the primary driver of our business, representing 63% of our total revenue for the last 12 months ending September 30. Our equipment is used in a wide variety of non-residential construction projects.

Our end-user markets are well diversified spanning a wide range of industrial and commercial projects, including data and distribution centers, airports, infrastructure, warehouses, hospitals, schools, convention centers, mining and agriculture and numerous other projects.

The industrial sector represented only 12% of our revenues for the last 12 months, including, in the industrial component, is megaproject activity, which we have stated previously, is not a material driver of our overall revenue. Oil patch activity remained solid for the third quarter.

Our total oil patch exposure was just over 5% of our total revenues, the same as the second quarter, but still significantly below our total exposure of 13% at the last peak in 2014. Utilization in our four largest Texas oilfield markets also remained high, averaging 76.9% during the quarter.

In terms of our fleet, we continue to have one of the youngest in the industry at 34.3 months compared to an industry average of 43.4 months. We believe our fleet age and mix provide us with both an advantage in the marketplace as well as significant advantages from a CapEx perspective. Slide 10, please.

The data on this slide reflects the positive environment in nonresidential and construction markets in general. Based on the current trends in our business and industry indicators, the nonresidential construction markets are strong and forecast to reaccelerate in 2018.

At this time, I am going to turn the call over to Leslie for the financial results..

Good morning, everyone. Thank you, John. I will begin on Slide 12 to discuss our financials in greater detail. As John indicated, our third quarter results were positive from several respects and demand in our end-user markets is high.

I’d like to call your attention to one-time items this quarter related to the notes offering and termination of the previously proposed Neff transaction, which were also discussed in this morning’s earnings release. I’ll elaborate further on these items in my discussion.

To summarize, total revenues increased 5.9% or $14.5 million in the third quarter compared to the same period a year ago to $259.2 million, driven primarily by the strength in our rental business as well by improvements in our distribution business.

Gross profit increased 6.7% or $5.9 million to $94 million, compared to year ago, on higher margins of 36.3% compared to 36% a year ago. Rental revenues increased to 6% to $125.6 million.

And as John pointed out, our physical utilization increased 120 basis points with average time utilization based on OEC of 73.3% for the quarter compared to 72.1% a year ago. Demand for AWPs was exceptionally strong at 76.1% of OEC, up from 73.6% a year ago.

This increase was partially offset by declines in crane and earthmoving utilization of 230 and 380 basis points compared to a year ago, respectively. We were very pleased to announce that rental rates improved again this quarter 0.3% year-over-year and 1%, sequentially. New equipment sales increased 9.3% or $4.2 million to $48.9 million.

The improvement in new equipment sales was largely due to higher new crane sales, which increased 29.6% or $5.6 million to $24.3 million. Sales of new earthmoving equipment declined 22.8% or $4 million during the quarter, partially offsetting the overall improvement.

Used equipment sales increased to 7.9% or $1.6 million to $22.2 million largely as a result of higher used crane and earthmoving sales. Sales from our rental fleet comprised 91% of total used equipment sales this quarter compared to 86% a year ago.

Our parts and service segments delivered $43.9 million in revenue on a combined basis, up 1% from a year ago. Our total gross profit for the quarter was $94 million compared to $88.1 million a year ago, an increase of 6.7% on a 5.9% increase in revenue.

Our consolidated margins were 36.3% compared to 36% a year ago, driven by solid margin performance in our rentals and equipment sales. A little more gross margin detail by segment, rental gross margins for the quarter were 49.7% compared to 49.5% last year, primarily due to higher utilization and rates.

And margins on new equipment sales were 10.9% for the third quarter compared to 10.3% a year ago and largely due to higher margins on new crane sales. Used equipment sales, gross margins were 32.1% compared to 30.4% last year. Margins on pure rental fleet-only sales were consistent in both comparative periods at 33.7%.

Parts and service gross margins on a combined basis were 41.4% compared to 42.1% a year ago. Slide 13, please.

Income from operations for the third quarter of 2017 increased 44% to $47.7 million or 18.4% of revenues compared to $33.1 million or 13.5% of revenues a year ago, but included $8.7 million of merger breakup fee proceeds net of merger costs related to the termination of our previously proposed acquisition of Neff Corporation.

Excluding the breakup fee proceeds, income from operations increased 17.7% to $39 million or 15% of revenues compared to 13.5% of revenues. The increase in income from operations is primarily a result of higher revenues, improved gross margins, and operating leverage compared to a year ago. Proceed to Slide 14, please.

As reported, net income was $8.5 million or $0.24 per diluted share in the third quarter, compared to $11.7 million or $0.33 per diluted share in the same period a year ago.

On an adjusted basis, excluding the merger breakup fee proceeds and the loss from early extinguishment of debt in connection with our recent notes offering, net income was $27.1 million or $0.76 per diluted share.

Our effective tax rate declined to a negative 11.7% compared to 41.7% a year ago, which contributed to the increase in earnings per share compared to a year ago.

The income tax benefit is primarily due to a net $5.3 million discrete tax benefit, resulting from the reversal of an unrecognized tax benefit due to the expiration of the statute of limitations in the third quarter ended September 30, 2017. Please move to Slide 15.

Adjusted EBITDA was $88.5 million in the third quarter compared to $81.9 million a year ago. Margins were 34.2% compared to 33.5% a year ago, an increase of 70 basis points due to solid operating performance and SG&A leverage.

EBITDA for the current year period was adjusted for the merger breakup fee proceeds, net of merger costs of $8.7 million and a $25.4 million loss on early extinguishment of debt related to the notes offering. Next, on Slide 16. Our SG&A was $55.2 million, a $0.8 million or 1.4% decrease over the same period last year.

SG&A as a percentage of revenue was 21.3% this quarter compared to 22.9% a year ago.

The net decrease was largely the result of the reversal of $2.2 million of merger and acquisition transaction costs related to our previously proposed acquisition of Neff Corporation, included in SG&A in the second quarter, which expenses were reclassified to merger breakup fee proceeds this quarter.

Excluding this $2.2 million impact to SG&A expenses in the quarter, our total SG&A expenses would have increased approximately $1.4 million compared to the third quarter of 2016. Also, our branch expansion cost increased $1.1 million compared to a year ago.

Excluding the $2.2 million impact to SG&A expenses, total SG&A as a percentage of revenue was 22.1% compared to 22.9%. Next on Slide 17, our gross fleet capital expenditures during the third quarter were $71.4 million including non-cash transfers from inventory, and our net rental fleet capital expenditures for the quarter were $51.1 million.

Gross PP&E CapEx for the quarter was $3.9 million and net was $0.3 million. Our average fleet age as of September 30 was 34.3 months. Cash flow for the third quarter was $12.9 million compared to a use of $28.2 million a year ago, and excluding the merger breakup fees proceeds of $8.7 million, cash flow was $4.2 million.

And we’ve included a free cash flow GAAP reconciliation to net cash provided by operating activities for the periods presented in the appendix of the presentation. Next on Slide 18. At the end of the third quarter, the size of our rental fleet based on OEC was $1.4 billion, a 4.1% or $55.7 million increase from a year ago.

And our average dollar utilization was 36% compared to 35.4% a year ago. Slide 19. At the end of the third quarter, our outstanding balance under our $602.5 million ABL facility was $77.2 million and therefore, we had $517.6 million of availability at quarter end, which was net of $7.7 million of outstanding letters of credit.

On August 24, we closed on an offering of $750 million aggregate principal amount of 5.625% senior notes due 2025 and an unregistered offering through a private placement and the settlement of a cash tender offer with respect to our previously outstanding 7% senior notes due 2022.

Any old notes not tendered were redeemed pursuant to their terms in September 2017.

Given our new notes were issued on August 24, 2017, while approximately $300.3 million of old notes remained outstanding until September 25 redemption date, interest expense was $15.1 million for the third quarter of 2017, an 11.8% or $1.6 million increase from a year ago.

In conclusion, our balance is strong and can easily support our growth strategy, which John discussed earlier. And so at this time, I’ll turn the call back to John..

Thank you, Leslie. Please proceed to Slide 21. To conclude, our third quarter performance was solid and the strength in our end-user market is continuing into the fourth quarter. We believe there is currently significant momentum in the marketplace and the forecast called for continued expansion in nonresidential construction into 2018.

Our rental business is performing well, capitalizing on the high demand for rental equipment. We are focused on an accelerated growth strategy combining both acquisitions and Greenfields. Lastly, we paid our 13th consecutive quarterly cash dividend on September 11. As always, future dividends are subject to board review and approval each quarter.

At this time we like to take your questions. Operator, please provide instructions..

Thank you. [Operator Instructions] And we will take our first question from Nick Coppola of Thompson Research Group..

Hi, good morning..

Good morning..

So, wanted to start out on rates and certainly good to see second quarter and consecutive of year-over-year improvement.

Can you just talk about how you think about rate going forward, given the strength that you are seeing in end markets and then maybe coupled with a competitive environment?.

Yes. Look, we feel very good about rates going forward. We expect to continue to get rate increases. We think they will continue to improve. The competitive environment everyone is running very solid utilization levels. United reported positive rates, which I think was a really, really positive sign. So we are running record utilization levels right now.

We expect to continue to get positive rates..

Okay, that’s great to hear. And then I wanted to talk about CapEx a little bit as well. I think you talked about accelerating investment and again end-markets doing well, utilization 73.3%.

Is there any way that you can help frame up how we should think about CapEx for next year?.

Nick, we don’t give CapEx guidance. I can tell you we’re going to have some fleet growth next year. I mean, we’re going through the budget process right now. So I mean – it remains to be seen exactly what that will be, but we had some negative impact from the storms in the third quarter.

We reported little over 73% time utilization, and that’s in spite of a 250 point decline when the 2 storms Harvey and Irma hit. Since then, our utilization has exploded. It’s really running at the highest levels I have ever seen and I have been around here forever. So the rental business is very strong. You can anticipate some fleet growth next year.

Our utilization is going to call for that. And again, we’re currently in a budget process, and we’ll define that, but you can expect us to grow our fleet..

And do you think you will grow fleet at a higher rate than you did this year?.

Again, I don’t want to give CapEx, but I think with the current utilization levels that’s certainly likely..

Alright. Then I wanted to follow-up on one of the comments you made about the hurricanes. I guess one of your public competitors called out some benefit in Q3 and Q4.

Is that – and I guess you said it a drag, is that because of a fleet issue or did you see any benefit in Q3, how do you think about that?.

Let me be clear, when the storms hit, our utilization declined about 250 basis points. We have about 17% of our fleet in that greater Houston and Florida market. Okay. So when the storm hit, it’s natural and it’s normal. You get an immediate negative impact and we saw that.

Since then, we are getting a very strong benefit from the storms and we are going to continue for some time to get a benefit. Again, we are currently running between 76% and 77% utilization that’s as high as we have ever been. So short-term negative, it’s a long-term benefit..

Got it. Alright. Thanks for taking my questions..

We will go next to Seth Weber of RBC Capital Markets..

Hey, good morning..

Good morning, Seth..

I am trying to tie together the commentary on the cranes business, to start I guess. So sales up 30%, but the commentary and the release about market demand continuing to be weak, can you frame that up for us? Because I think sales were up in the second quarter as well.

And I know these are relatively small numbers and big percentage to growth, but can you just sort of explain what you are seeing in the crane market? Thanks..

Yes, Seth. Look, there is no question we have got more activity. And our sales are up nicely from a very, very low level. I think I would frame it that we are seeing light at the end of the tunnel. We are getting a lot more inquiries. And our expectation is that we see material improvement in our crane business in 2018..

Okay.

And that’s based on inquiries that you are having today or do you think that things just accelerate next year?.

Both. I mean our inquiries are definitely up. We’ve got a lot more people talking about purchases. And the oil patches – at least the markets we play in, the shale plays that we’re active in, are solid. We’re seeing some new demand there. So it’s all of the above. We’re seeing light at the end of the tunnel right now.

We expect some improvement in the crane markets next year..

Okay. I mean, because one of the things that we look at as an indicator, your parts and service business is only up, I think, 1% here for the second consecutive quarter. So I would think that, that would start to accelerate as a leading indicator of crane demand, and that doesn’t really seem to be happening.

So I’m trying to – would you expect parts and service to pick up here over the next quarter or two or is that not the only way to think about it?.

Seth, this is Brad. You are thinking about it the right way and that’s part of the trepidation in our commentary. The anecdotal conversations, the interactions we are having with our customers, is very much more positive today than it was any time in the recent years. We’re not sitting on a bunch of big POs that we’re waiting for things to land.

And part of our concern internally has been that we are not seeing the ramp up in parts and services on crane side of the business. Now within that segment, we are also starting to have some conversations that we think could lead to additional activity in parts and service, and that, traditionally, would be the leading indicator.

I think you’re very aware that crane segment can pop right up and it can fall right off. And so we are looking, we are paying attention. We are not predicting that the light switch is going to pop back on, and that we’re going to be back to historic sale levels in the next 6 months. But we feel a whole lot better today than we did a year ago.

We are seeing some additional opportunities. I would note that our crane utilization has also improved dramatically, recently, back to kind of more historical levels. Cranes are running in the 80-plus percent utilization.

I’d also note, however, that our crane fleet has decreased in size by about $20 million year-over-year as we were waiting to see that come into balance. So, we could be at the crossroads of things starting to improve consistently and that’s our hope, but that’s not something we are going to hang our hat on just yet..

Okay, that makes sense. Thanks Brad. And then if I could just flip over to the earthmoving category for a second.

It sounded like – I think I heard earthmoving utilization was down 380 basis points and earthmoving sales were down, is that right and is there a reason for that?.

Go ahead, Brad..

There is – Seth, there is a product that was most impacted by the hurricanes in the short term. It was earthmoving, right. The stuff is in the dirt, right. It kind of speaks for itself, but there were multiple issues. So on the rental side, earthmoving had lagged slightly, year-over-year, just slightly. And we had moved ahead year-over-year.

When the hurricanes hit, we fell back down for that short period of time, the disruption John was speaking of. And as of this week, earthmoving was up about 420 basis points year-over-year. So it’s recovered. Now, let me speak to the new earthmoving sales. We had, I think, a 20% something decline in new earthmoving sales. That was a two-fold issue.

Again, we are a Komatsu dealer in two states, which is where the majority of our earthmoving sales come from Louisiana and Arkansas, Louisiana being the leading state. Again, part of that’s disruption the other portion of it is, is that North America as well as the world, is it really increasing right now with earthmoving products.

And so Komatsu has found themselves in a position where they couldn’t provide some products to us that we could have sold. So you take the disruption, you take a handful of products that we couldn’t get in time, kind of netted us down for the quarter.

I’ll tell you that earthmoving is going to remain strong, and will likely increase as we move forward..

Yes, Seth. And just to emphasize what Brad said. This is not a market situation. The market – the earthmoving market didn’t fall off at all. We had some delivery issues, some availability issues that we missed a couple of sizeable packages on, but it’s not a market issue. No..

Okay, alright. Appreciate it, guys. Thank you..

Thank you..

From UBS, we go next to Steven Fisher. And Mr. Fisher, your line is open. Please check your mute button.

Can you hear me?.

Yes. Sorry about that. How broad-based is the increased activity in crane increase and demand.

I think, you mentioned the oil patch, is it exclusive to that or are you seeing it across all your end markets and geographies?.

No, it would be across all our end-markets and geographies. It’s broad-based – it’s broad-based by region, and it’s fairly broad-based in even product categories. I mean, we’re seeing increased demand in certain rough terrain accounts and certain all-terrain accounts. It’s pretty broad-based..

And to what extent do you think any of this is in anticipation of infrastructure activity or is it really just sort of on the ground activity, at the moment?.

I think it’s mostly current activity..

Okay. And related to rates, how would you say your rates compared to what they were the last time you had utilization as high as it currently is, maybe up at the quarter level, not the 76% to 77% you called out. But I think the quarter’s utilization rates were similar to what you had in 2015.

So how do your rates actually compare to that time?.

Steve, we don’t typically offer that type of analysis. I would tell you that the dynamics that exist today in our view, as John stated earlier, is that rates will continue to march forward. We will gain incremental improvements as we move forward.

How they compare to different points in times can be heavily weighted on mix and geography, and so we stay away from that type of analysis..

Okay. And then maybe just on the CapEx, it had been growing year-to-date year-over-year through the second quarter.

And I know last quarter you had – it might be down this quarter, but I guess I am wondering why it was down given the robust environment?.

Well, the availability is not great. And we are buying equipment right now to support this hurricane rebuild. We are getting what we can, but the availability is an issue....

I would tell you that our internal CapEx plan has been right on plan. And that we have said throughout the year that we are going to continue to grow, but we are going to be very focused on the quality of our revenues via rates being the indicator. We are exceptionally proud of our group.

We are also happy to what’s going on with other competitors within the marketplace as it pertains to discipline on pricing. Q3 is typically one of our better rental quarters. It’s also – as we move into the seasonality of Q4. So it would be unusual to see large growth in Q3 and of course, Q4. I think within any rental business.

I would just tell you that it’s not a reflection of the opportunity we see. It’s a reflection of the discipline we had stated we were going to use. And now that we’re actually achieving what we expected to, we’ll continue to evaluate and consider additional growth into 2018..

Okay, thanks a lot..

And our next question comes from Joe Box of KeyBanc..

Hey, good morning, everyone..

Good morning, Joe..

So we can go through and noodle around with what the 250 basis point hit to utilization might have actually meant to the quarter.

But I’ll just come out and ask, I mean, what did that ultimately translate to on a revenue-loss basis? And I guess, the natural follow-up to that would be how should we think about the cost headwinds just from the hurricane?.

Cost headwinds.

Explain what you mean by cost headwinds?.

Yes. I mean, clearly, you had some disruption, right. You had locations that were down for a week or so. Obviously you probably didn’t have the revenue flow-through, but you still had some cost..

Yes, no question. I mean that’s always the case. Joe, I don’t think we can quantify that and give you a good number, but I mean, you are right, like I said, I think 17% of our stores are in that greater Houston area and Florida.

And you know they had an impact, and we had stores shut down for a period of time, and it impacted our utilization for a period of time. Since then, I mean, things have turned around in a big way, and we’re seeing a real benefit from those storms right now.

And I think that’s going to continue for foreseeable future, but for me to give you a number say it cost us this in rev, I am not in a position to do that..

So when I look at the volume of fleet on rent in the quarter, it was only up 5.6%. It was up 11% in 2Q.

Is it safe to say just based off of the resurgence that we have seen post 3Q, is it safe to say that, that shortfall in 3Q versus 2Q was solely the hurricane?.

Well, it certainly was the big end of it, yes..

Based off of your view the answer would be yes. You know, look, these are things you know, Joe, but our rates are up year-over-year. Our rates were up almost 1%, sequentially. Rates improved. We have 8 regions within the country.

They improved in every single region sequentially with the exception of one region and that’s our crane-only region, only had 4 locations. Our utilization today is 450 basis points ahead of last year. As John stated, I think we hit all-time high of 77.3% last week on rent - for the company. Our indicators are very strong right now.

And our sentiment’s positive. Job activity is strong. The job activity going into Q4 remains strong. So I don’t know if that’s helpful. I think, again, you’re aware of most of that information. But our opportunity to grow our fleet while we are increasing rates, it remains very positive..

That is helpful, Brad. I mean, obviously, the story isn’t necessarily the 5.6% in 3Q. The story is 76% to 77%, currently. Not to beat a dead horse here, but that 76% to 77%, obviously, that’s extreme.

Any sense for how much of that is cleanup versus just ongoing activity?.

Look, it’s broad-based. Look, we have gone – our utilization in those impacted areas has probably increased 600 basis points since the storm, maybe a little better than that. But the strength of our rental business is broad-based. I think the lowest utilization we have in any region is around 72%.

I glanced at that this morning, and the highest is bumping 80%. So I mean, the strength of our rental business is very broad-based..

Understood. Okay..

It’s not just those hurricane-affected areas, although those areas are very strong and they are going to be strong for some time..

Our lowest utilization of any region this week was about 73.5%. And it’s the lowest by a margin compared to the rest of the group..

And so if you were to just look outside of those affected regions, it sounds like you are implying that utilization today would have been up nicely over the prior year?.

Absolutely, without a doubt..

Let me say that every region in the company, year-over-year, as I look at this week, is up – well, again, we are up 450 basis points, but every one of them are up more than 100 basis points and most are up in the 300 to 400 basis point range..

Okay, that’s great color..

This is not – let me be very clear. Our utilization today is not masked or artificially high because of two regions who are benefiting from hurricane cleanup..

So, changing gears then, really, you talked about some deals that you guys would be willing to do I guess relative to the businesses that you would be willing to look at.

Can you give us a sense for just preference of what you would like to do? Whether it’s small bolt-ons in an existing geography that you are in or would you prefer to be expanding the footprint? Can you maybe also just talk about what the pipeline looks like? Obviously, there has been a lot of deal activity, recently..

Well, look, we have been very pleased with the opportunity we are seeing for smaller tuck-in acquisitions both from the number of businesses that are out there that we think may be opportunities and also from the quality of the businesses we are seeing. So I mean there’s definitely opportunity out there.

We would definitely like to contiguously expand our footprint through acquisitions, but we would certainly do a fill-in to increase density in the given market. I think you’re going to see us continue our Greenfield program.

And I think that will be heavily weighted to increasing density in existing markets, be it in Atlanta or Houston or markets like that. But I would say all of the above. But we are very pleased with the opportunities we are seeing right now..

Got it. Thank you, guys..

[Operator Instructions] And we will go next to Ross Gilardi of Bank of America/Merrill Lynch..

Hey, good morning, guys..

Good morning..

Yes. Most of my questions have been answered. But just to confer a little more color on a few things. You know, on rates, you clearly seem optimistic. But from a seasonal perspective, the industry, I don’t think would normally get sequential rate in the fourth quarter versus the third quarter.

But given how tight the market is, I mean, do you think rates could actually move up in Q4 versus Q3 this year?.

It’s possible. I don’t know that we want to state in a way that we’re guaranteeing that we’re certain of that, but it’s absolutely possible. I think it will depend on the rhythm and how long we can carry this momentum with 75%, 76%, 77% utilization. As long as our utilization remains at those levels, you bet we are going to raise rates.

So, it’s possible..

It’s a fact that seasonality is going to hit. I mean, we get around Thanksgiving, your utilization is going to start coming down. That’s just a fact of life in the rental business. But man, we’re running exceptional levels of utilization right now. And we are going to push hard on rates for just as long as we can..

Thank you.

And then just on parts and services, what portion of it is actually cranes related? And if you stripped out cranes, would you actually be up a little bit more or is crane – it is just like everything kind of running flattish together?.

Leslie can provide the breakdown. It’s a heavy portion, it’s crane-related. But I suspect from looking at some of the segments that it’s very similar.

Leslie?.

Cranes are about 35% to 40% of our parts and services on a combined basis..

Got it. Thanks. I mean, what do you think is the long-term rate? I mean, parts and services like collectively look they have just been kind of flattish for like several years now.

I mean, should that? And once cranes starts to turn, if you see follow through on some of the anecdotal improvement? I mean, should that business grow like 3% to 5% a year, longer term?.

Well, look when the cranes side turns and we start getting rebuild work, again, yes. I mean, that’s probably conservative. I mean, we would expect at least that. But what we’re missing right now is the major rebuild stuff where we have a customer bring us an older crawler crane or a GMK and we take it down to the frame and rebuild it.

I mean, that’s a lots of labor and lots of parts, and we’re just not getting that business right now. When that comes back, I think those growth rates would be very reasonable..

Got it. Thank you. And then just lastly, your free cash flow is down $25 million year-to-date through the third quarter.

Do you think that’s roughly the delta you will finish with for all of 2017? Like in other words, your free cash flow is like, I think, $65 million last – on your slide, was $63 million in 2016, so I am basically asking you, you think you will finish $25 million or $30 million or so this year?.

We typically don’t give cash flow guidance, but I mean, there is a lot of moving parts in there with this refinancing and whatnot, Leslie is glancing at some stuff right now..

Yes.

So what is your delta, again, Ross, that you are suggesting?.

Right now, Leslie, you are showing $5 million year-to-date versus $30 million in year-to-date last year, so – you are down about $25 million year-to-date.

So I am wondering if like when the year is finished, I mean, you think that’s roughly the delta you are going to carry versus all of 2016, which was $63 million?.

No. I think we will make up some ground in the fourth quarter. I don’t think we will finish with that much of a delta..

Okay.

Were any of those one-time issues around refinancing and the deal and so forth sizable – or there is sizable cash components with any of that?.

Well, I gave the number stripping that out. So I think it’s just really timing based on us typically pulling in some CapEx in the fourth quarter relative to some timing and how we spent CapEx last year I think is the big difference..

We always generate the bulk of our cash in the fourth quarter..

Got it. Okay, thank you very much..

Thank you..

With no additional questions remaining, I would like to turn the conference back to Mr. Engquist for additional or concluding remarks..

I appreciate everybody being on the call. Look, obviously, we are in a good environment. We feel good about our business, feel good about 2018 and we look forward to talking to you guys on our next call. Thank you..

And this does conclude today’s presentation. Thank you all for your participation. You may now disconnect..