RER: On what have you been concentrating since taking over as CEO at NES?
Studdert: Along with my senior management team, I've been concentrating on the future of NES. Our goal is to offer customers the most reliable rental equipment at any time. And we're going to do it by having the industry's most efficient operations. We've spent a good portion of my first three months here completing a refinance of the company's debt so that we can move forward in the strongest financial position to accomplish that goal.
I've also been visiting our branches and studying the competition to see how we stack up. I'm extremely impressed with the knowledge, experience and customer-service focus of every NES employee. We've got the best people in the business.
You come to NES from the airline industry. What in your background and experience has prepared you for work in the equipment rental industry?
My experience in the airline industry demonstrated that great customer service and customer satisfaction begin with knowledgeable employees and superb operational efficiency. From both a customer-service and operations standpoint, I see many similarities between the airline and rental industries. I've learned that when a company maintains a smooth, uniform infrastructure and provides standardization for support functions, like maintenance, accounting, safety and environmental oversight, every customer receives better service.
Early in our history, each NES branch ran its own operational model. Today, our aim is to provide company-wide structure while fostering NES' independent and entrepreneurial philosophy in each rental outlet. NES is strengthening its company-wide equipment planning process, as evidenced by the recent creation of a single data center for all rental outlets. By standardizing operations throughout each branch, NES branch managers will have more time to focus on providing customers the safest, most reliable, best-maintained equipment in the industry.
What were some of the areas you focused on as chief operating officer with United Airlines and please tell us a bit more about your background.
Most of my career has been focused on improving customer service through operational excellence. Before joining the airline industry, I spent many years in banking. I served as executive vice president with First Interstate Bancorp during the time it was the nation's seventh largest bank. At various times, I was responsible for finance, marketing, operations and technology. My banking experience helps me better understand the financials and the structure of NES. Along with my airline industry experience, it also helps me deal with NES' multi-state operations, which include 141 branches throughout the United States and Canada.
During my time in the airline industry, I served in several roles with UAL. I came on as the company's chief technology officer, then directed maintenance and eventually was appointed chief operating officer. As COO, I lead the company to a record year in customer satisfaction.
That experience helps me understand how important the utilization of capital equipment is to a company like NES. It also made me intimately familiar with the complexities of moving equipment from point A to point B. This is a strategic challenge whether it involves aircraft or aerial lifts. That's why I've appointed a vice president of assets and planning to help manage the fleet across a company-wide system.
The longer I'm here, the more similarities I find between what I did before and what I'm doing now. Both my banking and airline industry experience have prepared me for my role at NES.
You just completed a major refinancing at NES. How will that benefit the company?
We see the refinancing as the beginning of a new era for NES. We now have an endorsement of our company's strength from the nation's best lenders, which include Bank of America Business Capital, Wachovia, Bear Stearns and GE Capital. We also have a $300 million credit facility with a $100 million line of undrawn credit to improve operations and build the fleet for our customers. On top of that, we have a $275 million second-lien term loan that provides long-term financial stability with the flexibility to grow.
The company was very highly leveraged before the restructuring and the new refinancing. What about now?
NES is now stronger than it's ever been. The restructuring was led by a team of people who understood that operations would need to be streamlined to provide the best customer service. I'm here because I share that philosophy and I want to see it through.
Refinancing was possible due to the restructuring of debt at favorable rates and terms. The refinancing takes away a significant number of covenants that had been placed on the company after bankruptcy, and we no longer have a principal payment due at year's end. The refinancing makes the company ready to go to that next level.
Some have remarked that in recent years NES lacked a clear identity, a clear differentiation from its competition. Is that a fair characterization?
I can't really tell you about the past, but I can tell you that we have a clear vision of our identity for the future. We'll distinguish ourselves by having the right rental fleet mix for our diverse customer base, by keeping our equipment well-maintained and competitively priced — and by making sure we deliver equipment on time when the customer needs it. We have the best people in the industry running our divisions and branches, and we have a management team committed to implementing uniform support functions. We'll excel by best providing the basic things that the customer needs.
Your second-quarter results were better than many expected. Any additional thoughts about them?
I'm happy with the rental rate improvement and the fleet utilization. The traffic safety division is doing quite well compared to what's going on in the industry; we were up year-over-year in the second quarter.
To what do you attribute the rate increase of 6 to 8 percent mentioned in your press release?
First, we're seeing some growth in the economy. Reports from the commerce department show that nonresidential construction is growing across the country. Second, we're executing a more disciplined pricing model, giving employees in the field an understanding of where price needs to be.
What about fleet age? Do you have a goal in mind?
By always performing solid, preventive and routine maintenance we'll provide our customers with the best fleet in the industry — and that's our goal. There's nothing more important to our customers than getting equipment that works, keeps working through a project and helps them meet their deadlines. But if properly maintained there's not a lot of difference between a six-month old scissorlift and one that is three years old.
If you take care of your equipment properly, do it right the first time, you don't have to perform a lot of field repair. Equipment maintenance is an extremely high priority for NES and our customers.
With your back-ground in technology, you should have a good sense of the company's IT capability.
We have successfully consolidated 17 separate information systems into a single IT database. We now have easy access to company-wide information that allows us to best manage the fleet and enhance customer service.
What are some of your impressions of the rental industry?
I think the industry is filled with dedicated, hard-working, friendly people. And I think there is an opportunity for NES to lead the industry to the next level, to create and implement the model for the future. That's what we will do. We plan to maximize operational efficiencies so we can always focus on giving our customers the best equipment and the best service in the rental industry.
Any other goals you'd like to share?
I plan to be CEO of a customer-driven, safety-focused company that is profitable and a great place to work.
