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RSC Holdings May Be Number-Two In Size In The Equipment Rental
Industry, But They Have The Highest Growth Rate And Financial Performance And The Best
Service In The Industry
Services
Rental & Leasing Services
(RRR-NYSE)
RSC Holdings, Inc.
6929 East Greenway Parkway, Suite 200
Scottsdale, AZ 85254
Phone: 480-905-3300
Erik Olsson
President and CEO
Interview conducted by:
Lynn Fosse, Senior Editor
CEOCFOinterviews.com
Published – October 26, 2007
BIO:
Erik Olsson
Chief Executive Officer and President
Erik Olsson has served as President and Chief Executive Officer of
RSC since August 2006. Mr. Olsson joined RSC in 2001 as Chief Financial Officer and in
2005 became RSC’s Chief Operating Officer. During the 13 years prior to 2001, Mr.
Olsson held various senior financial management positions at Atlas Copco Group in Sweden,
Brazil and the United States, most recently serving as Chief Financial Officer for
Milwaukee Electric Tool Corporation in Milwaukee, Wisconsin, an Atlas Copco Group owned
company at that time, from 1998 to 2000.
Company Profile:
About RSC
Holdings Inc. (NYSE: RRR) and RSC Equipment Rental, Inc.
Based in Scottsdale, Ariz., RSC Holdings Inc. is
the holding company for the operating entity, RSC Equipment Rental, Inc., which is one of
the largest equipment rental providers in North America servicing construction and
industrial markets with an original equipment fleet cost of more than $2.5 billion. RSC
Equipment Rental offers superior levels of equipment availability, reliability and service
to customers through an integrated network of more than 465 rental locations across 39
states in the United States and in four Canadian provinces. With more than 5,300 employees
committed to continuous safety and 24x7 customer care, RSC Equipment Rental delivers the
loyal customer support needed to build the future.
CEOCFO: Mr. Olsson:, what was your vision when you became
CEO of RSC, and where are you today?
Mr. Olsson: “My vision was to establish RSC in a
leadership position in the equipment rental industry, and doing that by establishing a
consistent high level of growth and profitability. We would achieve that through a strong
customer service focus. I believe we are well on our way to achieving this goal and have
significantly strengthened our business. As a result, we consider ourselves to be the
leader in this industry today. We are number two in size and increasing our market share.
We have the highest growth rate and financial performance and the best service in the
industry.”
CEOCFO: What is your growth strategy?
Mr. Olsson: “The strategy is to go after growth
along four different avenues. First, we want to drive strong same-store sales growth; that
is our most profitable growth, where we really get the cost leverage that exists in our
business. We do that by adding more sales people to be able to go after more customers,
service existing customers, as well as adding new accounts. Our second priority is to open
new branches; we have 467 branches across the US, but the rental industry is a very local
industry, so you need a large network of stores. We like to open new stores in networks,
not necessarily far from home across the map, but close to home in areas adjacent to where
we already have a successful operation. We can add another branch, take advantage of
knowing the market dynamics, and share some resources. The third avenue of growth is with
tuck-in or complementary type acquisitions to fill-in more rental locations in high
potential areas. The acquisition approach drives growth and we look at them as an
alternative to opening up new branches through organic growth to expand our network.
Lastly, we have opportunities to add new product lines to some extent, product areas we
are not in today. We are also looking at new geographic areas. We are in a very good
position in that we have a lot of different avenues of growth.”
CEOCFO: Please tell us about your customer base.
Mr. Olsson: “Our largest customer segment is
non-residential contractors. It could be anybody that is a small contractor to a large
construction company. This non-residential segment is two thirds of our revenues;
Secondly, just under a third of our revenue is from industrial accounts where we service
industrial companies mainly for their maintenance and repair work that is necessary for
their ongoing operations. This is the segment where we have our largest individual
customers, several very big industrial organizations. Lastly we have a small six percent
or so of our revenues that come from the residential construction of single-family
homes.”
CEOCFO: Why should a larger commercial builder want to rent
as opposed to own the equipment and why should they be renting from RSC?
Mr. Olsson: “There are very few times where it is
actually more profitable to own the equipment for our customers. That is if you have to
use the equipment very heavily, like 70% or more of the time. The reason it is that if you
rent instead, you only pay for it when you truly use and need it. You do not have to have
rental space for storage; you do not need drivers or trucks to move the equipment. In
addition, you do not require mechanics on staff to service the equipment. We take care of
all of that. You get very specific equipment that you need for that specific job; even if
you did own the equipment, it may not be suitable for the next building you construct or
the next project you go after. We have over $2.5 billion of construction equipment, so in
1400 different categories we can deliver exactly what the customer needs. The reason they
should rent from us is we do provide the best customer service in this industry.
When we turned to or defined our growth strategy we said, ‘how are we going to find
sustainable growth in this industry?’ We know we can go after it in four different
ways and we decided to make customer service our number one priority and growth driver. We
have focused time, money, and resources to improve our offerings along three key customer
requirements. First is availability of fleet, we should have the fleet when the customer
needs it; planning horizons are very short for our customers so it is important to be able
to supply the fleet in a timely manner. We have very efficient flow of equipment. We have
a lot of fleet sharing across our company which means a customer doing business with one
of our branches is not only looking at the fleet availability in that branch but the fleet
availability in the neighboring district. The second key requirement is reliability of the
fleet, because fleet breaking down on jobsites is a costly delay. We put a lot of emphasis
on preventative maintenance and following the manufacturers’ preventative maintenance
instructions. We have the youngest fleet in this industry, it is 25 months old on average
and that is good for productivity and reliability. Lastly, customers want a hassle-free
experience. They want to work with a company that does what it says it is going to do.
We take that to heart and for example, we have invested in satellite technology so that we
can deliver on time to avoid costly delays or having job crews standing around waiting for
equipment. We have our own in-house 24/7 customer care center where you can call and talk
to RSC employees or pull up your account and provide a good resolution to issues that
arise. We work hard to ensure accuracy in our invoicing and billing. There is no doubt
that we are growing fast and it is because of the focus on these three key
attributes.”
CEOCFO: Are there new trends in equipment?
Mr. Olsson: “There are no huge leaps and bounds.
We have a young fleet and we turn our equipment an average of nearly every five years, so
we do get the more modern things in. There is a lot of focus on environmental issues today
and I think that is another reason why it is good to be with rental companies. Advances in
fuel consumption are better with a young fleet.”
CEOCFO: What is the financial picture at RSC?
Mr. Olsson: “We have very strong results. From
2003-2006 we had a compound of revenue growth of 15%. We have shown very strong growth. We
have had an EBITDA, which is one profit measure we use to compare to others in the
industry, and we have moved our EBITDA margins from 29% in 2003, to 44% at the end of 2006
and to 46% on a trailing 12-month basis at the end of June this year. It is a very healthy
financial performance. We have 25% return on operating capital employed. This is an asset
intensive business, so at the end of the day the return on capital is really
important.”
CEOCFO: You had a recent IPO, why was this the time?
Mr. Olsson: “A multinational company owned us up
through last year and we were taken private in November of 2006. After the sale and once
we had secured financing, we saw that the public market was healthy and that there was an
opportunity for us to take the company public. If you look at the size and the stability
and performance of our company, we certainly should have been public a long time ago. I
think it is good for us from a brand recognition point of view as well to be in the public
limelight.”
CEOCFO: You mentioned acquisitions; is there a trend toward
consolidation in the industry?
Mr. Olsson: “It is a very fragmented market. The
top ten players in the industry are only 25% of the market so there are many smaller
companies out there. I think there are a lot of consolidation opportunities from the
smaller end of the market.”
CEOCFO: Why should potential investors be interested and
what might they miss about RSC that should jump out?
Mr. Olsson: “If you look at our financial
performance there is no doubt that an investor will see that we are a very efficient
company, with high level productivity and we have strong results. I think what we have to
do more of is to educate our investor base and demonstrate the flexibility of our business
model. We are not like a manufacturing company that is concerned about the cycle turning
down, leaving them with a lot of excess capacity. We have a very liquid asset in our fleet
that we can de-fleet or right-size our fleet to the market demand at hand and continue to
operate at high levels of performance. Furthermore, and it may not be intuitive; the
rental industry is counter cyclical in its cash generation. We may consume a lot of cash
right now because we are growing fast but when the growth slows just a bit, and we do not
have to invest so much in fleet, then we are going to start to generate significant cash
flow. The final aspect that people do not always understand is that how late the rental
industry is in the cycle. We are probably one of the last industries to feel the effects
of an economic downturn."
CEOCFO: What should people remember about RSC?
Mr. Olsson: “I hope that people would understand
and remember that we are a strong company operating in a great industry and that it is a
fast-growing industry because of the benefits of renting vs. owning. We are perfectly
positioned with leading profit margins and the youngest fleet, to take advantage of any
market opportunity or whatever happens in the marketplace.”
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