Over the years, to millions of people who have visited there and millions more who wish to move there, southern California, Arizona and Florida have been magnets for many. The states have benefited from robust economic conditions, unparalleled growth, and great weather — depending on whether you like it humid, dry or somewhere in between. But in the 2008-2009 aftermath of the housing and credit crash, these states were the last place you'd want to be doing business.

While the overall RER 100 (1-100 only) fell only about one-third of a percentage point (0.36 percent to be precise — see graph on page 34), companies based in California and Florida that primarily operate in those states combined to drop 17 and 18.2 percent respectively (see graphs page 42). The aftermath of the inflated housing bubble has turned these growth magnets into the poster children for the housing collapse and the resulting effect on rental companies is no surprise, although some are still doing reasonably well. That said, those areas have always been resilient and as long as human beings are attracted to warm weather, they will continue to flock there and those economies will rebound in the future.

The rental industry — and the RER 100 — is going to have to be resilient given the severe hit it is taking right now. The numbers for 2008, overall, aren't bad. Most RER 100 listees reported decent enough business for the first nine months of 2008. Performance was, for the most part, down from the 2005-2007 boom years, but still respectable. It was in the fourth quarter when the bottom dropped out, in many cases rather dramatically, a drop-off that, for the most part, has continued into 2009.

“In the fourth quarter the slope was pretty steep going downward and it's not getting any better in the first quarter,” Gerry Plescia, CEO of Hertz Equipment Rental Corp. (No. 4) told RER in a recent interview.

“Things have gotten tough since the fourth quarter of 2008,” adds Al Kropp of Kropp Equipment (99). “The first three quarters of 2008 we were even and even a little ahead of 2007, but we dropped in the fourth quarter. 2009 is going to be challenging to say the least; we are experiencing very low utilization for the first two-and-a-half months — 35 percent off of 2008's pace.”

Kropp and HERC aren't alone. This year has started poorly for most companies (with a few exceptions) and for the majority, the unsettling aspect of it is not having a clear sense of when it will turn around, based on extensive querying of their own customer base. The consensus is that there isn't a consensus; the answer is they don't know.

“The core problem is the credit crisis and the consequential lack of private work,” says Jamie Cowin of Cowin Equipment (63). “Many contractors have no work left now. Or will be finishing up jobs in a couple of months and have nothing coming down the pike after that. Whether large or small, developers and entrepreneurs are either getting turned down by their lenders, or are themselves reluctant to take a risk, so there is just not much activity out there.”

Some RER 100 executives say they don't really expect an uptick before 2011. A more common expectation is an improvement some time in 2010. Others say the fourth quarter of this year, or even earlier, suggesting that we've reached bottom or are about to do so. Some say the spring warm weather is already signaling an improvement, with more calls and inquiries. But the most common sentiment is not really knowing, or hoping and wishing. The vagueness reflects customer uncertainty.

“The business climate will only improve when there is stability in the financial markets and credit is more readily available,” adds Mike Rolls of Rolls Scaffolding and High Reach (85) in an opinion voiced by many. And what exactly is the timetable for that stability and resolution? The answer is unclear.

So, what to do in the face of these obstacles? The answers to that were pretty consistent. Start with reducing fleet, complicated by the fact that with everybody else trying to dump used fleet and not a lot of people looking to add inventory, used equipment prices don't always lend themselves to tidy profits for the seller. Another is reducing staff, usually with reluctance but accompanied by the sense that if 10 or 15 percent of the company lose their jobs, it's better than 100 percent. It's happening in all industries and perhaps the bright side is, for those companies that need to hire in particular areas, there is talent available. Continue reading...

At the back of the minds of many, as they reluctantly cut staff they worked hard to develop and train, is not wanting to lose good people they might need and not wanting to compromise on the quality of service they offer.

“You have to run a rental company like a very good hotel,” says Larry Workman of Illini Hi-Reach (97). “You are on full staff almost all the time because you are waiting for the rush of business that books a lot of your rooms at any given moment and still have to quickly serve your existing customers as well. Anticipating manpower needs can be difficult, here or at the Hyatt Regency.”

A major concern voiced by many is rates. In some areas, RER 100 executives say, rental rates have dropped by as much as 50 percent. But generally lacking is the self-righteous tone that often arises in discussions of rates where somebody blames all his competition for the rate woes. While a couple of major players are being blamed more than others, there isn't a lot of finger-pointing going on as many openly admit they have had to cut their rates too, or face a disastrous plunge in utilization.

“In 2008, you had a choice whether or not to participate in the rate wars,” says David Schmid, president and CEO of Ecco Equipment (65). “In 2009, you don't.”

“Although we have seen similar rental rate erosion in the past during other recessionary times, I have never seen this rapid a rate of deterioration,” adds Bob Kendall of Star Rentals (37).

Compounding the rate issue is a maddening inconsistency. “Everyone seems desperate in the marketplace to get the deal, and the rate environment is erratic and difficult to gauge,” says Joel Theros of Theros Equipment (106). “Cost-covering and long-term strategy do not seem to enter into the judgment equation. The competition is where they should be on one deal, and completely the opposite on the next. Contractors are happy about the cheap prices, but frustrated by the incessant cold-calling and price under-cutting going on out there.”

Given all the difficulties, business does go on and for some companies it goes on quite well. Some of the more fortunate have been niche players; some said the going was good in '08 but they didn't expect the same in '09.

For most rental companies, 2009 is a time for serious introspection; a time to examine what is working in one's business and what isn't, and how to make it better and less expensive. “2009 will not be business as usual,” says Rolls. “This year will require one to review and reinvent ones' company to survive the slowdown brought on by this recession.”

For most, the current downturn means expansion plans put on hold. But some companies have seen opportunities in under-utilization of fleet and rather than sell off too many of the surplus assets — especially while used equipment values aren't at their highest — why not put them to use? Ahern Rentals, for example, took excess fleet and opened branches in Texas, Charlotte, N.C., Atlanta and plans others in the Southeast at a time when many larger companies are closing stores. On a more modest level, companies such as Sunstate Equipment, Amquip Crane, Wagner Rents, Sims Crane & Equipment, MacAllister Rents, Dean Rental Services, Cashman Equipment, Stephenson's Rental Services, Skyworks, Spider, Venetor Group, North Central Rentals, RentalOne, Star Rentals, Gregory Poole Equipment, Hugg & Hall, Acme Lift, B&G Equipment, Louisiana Rents, SMS Rents and Trico Lift are just some of the companies that have opened branches in 2008 and early 2009, or have plans to do so soon. Clearly many of the RER 100 companies didn't become successful because they were afraid to take risks in challenging times. Others have added to sales staff, invested in improved systems, and made aggressive moves in other areas.

Even though the severity of the slowdown has dictated prudence and caution, most RER 100 executives sense that the current economy is the way it's going to be for a while and that they cannot expect business to dramatically return to boom times and solve their problems. There is also a strong hope through the industry that federal stimulus packages will fund projects in their regions and stimulate activity.

“The stimulus package, politically correct or incorrect, has some positives for our industry,” says HERC's Plescia. “There are specific projects that when they say ‘shovel-ready’ it all depends on how those monies flow right down to the project management and when those activities will begin, but in 2009 the industry should see some positives related to projects getting funded that were halted, or state governments get more funding toward specific infrastructure and other projects that would positively impact the rental industry. It's just a matter of how significant the flow is and what the timing is.”

While many issues remain uncertain, most RER 100 executives agree that this time next year we'll be reading about smaller volumes. And with that, a search for the positives.

“Downturns are good in that they force a good business to realize its strengths and focus on the basics,” adds Theros. “During a hot economy, it is easy to be tempted and try to be everything to everyone. This causes the need for additional overhead and personnel. A downturn corrects all of that.”

The World is Flat

Total rental volume for the RER 100 listing (Nos. 1-100 only, not including extended listings 101-115) was essentially flat year-over-year, dropping a little more than one-third of 1 percent.

Year Rental Revenue (in millions) % Change
2008 $13,802.5 -0.36
2007 $13,853.6 +4.3
2006 $13,282.5 +14.5
2005 $11,599.4 +15.1
2004 $10,075.6 +12.2
2003 $8.98 +1
2002 $8.86 -6
2001 $9.41 +7
2000 $8.79 +25
1999 $7.01 +59
1998 $4.41 -1
1997 $4.45 ---

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Lonelier at the Top

The 10 largest rental companies dropped 3.3 percent. It was the 8th consecutive year that the top 10 fared less successfully, in terms of cumulative rental volume, than the total 100 listing.

Year Rental Revenue (in millions) % Change
2008 $8,906.8 -3.3
2007 $9,208.2 +2.8
2006 $8,961.0 +13.4
2005 $7,903.7 +12.9
2004 $7,001.9 +8.9
2003 $6.43 -0.5
2002 $6.46 -6
2001 $6.89 +6
2000 $6.49 +32
1999 $4.94 +56
1998 $3.16 +36
1997 $2.32 +55
1996 $1.50 +25
1995 $1.20 +20

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De-Listed

Company (Last Year's Rank) Reason
Waco Scaffolding (75) Waco sold its forming, shoring and contractor supply business in early 2008, refocusing its business as a scaffolding sale, rental and erection company.
Rebel Rents (77) Went into bankruptcy and liquidated its assets.
A Tool Shed (106) Doing business in the slumping area south of the San Francisco Bay Area, rental volume dropped 19 percent to $8.1 million. Still a vital player, poised to recover with region's economy.
American Equipment Rentals (83) Acquired in sp

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California Dreamin'?

2008 was not a good year for California- or Florida-based companies. Here is a look at how California-based and Florida-based companies, that did the majority of their business in those states, fared in 2008.

Florida

Rental Volume in Millions (*) RER estimate 2008 2007
Company (rank in parenthesis)
Ring Power (20) $120.0* $154.0*
Sims Crane (39) $49.0 $52.7
Kelly Tractor (48) $36.4* $44.5*
Total $205.4 $251.2
Percentage Decline = 18.2

California

Rental Volume in Millions (*) RER estimate 2008 2007
Company (rank in parenthesis)
Hawthorne Rent-It Services (58) $29.9 $41.4
Clairemont Equipment (60) $28.4 $32.7
Ecco Equipment (65) $26.7 $39.6
Peterson Rents (66) $25.8* $24.9*
Holt of California (68) $25.6* $33.9*
Red Mountain Machinery (80) $20.3* $22.6
Rolls Scaffold and High Reach (85) $19.2 $18.7
Max Equipment (106) $11.0 $11.4
California High Reach (108) $10.7* $11.3*
PDQ Rentals (111) $9.5 $11.9
All Star Rents (113) $9.4 $13.1
Coastline Equipment (115) $8.9 $9.9
A Tool Shed (--) $8.1 $10.0
Totals $233.5 $281.4
Percentage Decline = 17

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Year Over Year

The total volume of companies 1-100 was essentially flat from 2007 to 2008, dropping .36 percent. But the complexion of the listing changed with nine companies debuting or returning to the 1-100 listing, and three companies that last year were listed between 101-110 added to this year's 100.

Here's a comparison of companies that were listed on the 1-100 listing both years.

Total Volume 2007 (in millions) = $13,660.3

Total Volume 2008 (in millions) = $13,385.6

Variance = -2%

RER 100 fast fact:

Did you know that Aggreko international chief executive Rupert Soames is Winston Churchill's grandson?

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