RERMAG

Interview with Bill Thompson: Rental Rates Are Under Siege

RER recently interviewed dozens of rental people regarding 2010’s results and their expectations for 2011. Thompson Pump president Bill Thompson spoke with RER’s Michael Roth regarding the company’s improved rentals but soft sales, the rental rate crisis and why the economy is like his old Harley motorcycle.

RER: How has 2010 been for you compared with 2009?

Thompson: Although the final figures are not in yet, we project an overall increase in revenue, year over year, of about 8 percent. Our rental-related revenue showed the greatest improvement and may come in at 35 percent over 2009. Sales of pumps and equipment, although higher than 2009, were disappointing and the increases were minor.

I attribute the languishing of sales to the continued limited availability of financing for contractors, their lack of confidence in economic improvement in the short-term and the general decline in construction activity — especially underground utility work in the Southeast.

Yes, we saw some minor improvement in the second half of the year but it was sporadic, localized and not sustainable.

What are your expectations for 2011?

We might just see some improvement next year. So much of this rests with the confidence level of the American people as well as with their perception of the political environment. I anticipate increased activity with repairs and spare parts sales as our customers work to get their equipment off the side lines and back into the game. We should see a healthier level of rental activity but I do not project any substantial increase in pump and equipment sales until late in the year and maybe not until 2012.

Did you buy inventory/fleet in 2010? Do you expect to increase your capex on fleet in 2011? Approximately by what percentage (rough estimate)?

We did increase our rental fleet in 2010. However, we limited the additions to only those models that were showing reasonably high utilization. We are projecting similar increases in 2011 but these additions will not be of the same magnitude that we experienced in 2004-2006. A rough estimate would be a 10-percent increase in capex spending.

How were rental rates in 2010 and do you expect rate improvement in 2011?

Rental rates continue to be under siege. We have not seen any relief at all and I don’t expect to see any until utilization rates improve substantially. I doubt that 2011 will see any significant upward trend.

Did you make any changes in your business in 2010 — new markets, new software, increased or reduced staff, new equipment areas, new marketing techniques?

We continued to diversify our sales and marketing efforts into areas that showed us the most potential for success. We continued to “right-size” our staff to the varying levels of activity. Our R&D team devoted enormous efforts in developing and modifying our products to meet the Tier-4 EPA engine configurations. Getting more from less has been our mantra when it comes to marketing, advertising and promotions.

Are your customers more optimistic for 2011?

The attitude, expectations and confidence levels of our customers vary from “somewhat optimistic” to “just shoot me.” I just hope we issue fewer bullets in 2011.

What is your expectation for the economy in your regions in 2011; any expectations for the national economic picture?

I expect things to be like my old Harley and my little Yamaha outboard — they have been running erratically since they made me use ethanol in my gasoline. However, when I put some stabilizer additive in the tanks, they run just a little better but they’re certainly not the smooth-running, fine-tuned machines they used to be. Ill-advised government mandates caused the problems with my bike and my fishing boat and they’re causing problems with our recovery from the recession.

Do you plan to attend ARA Rental Show or ConExpo in 2011?

Yes, we’re going to exhibit at each show but, since they’re both in Vegas within a few weeks of each other, we’ve down-sized our presence at the ARA. I don’t want our customers to misinterpret this because we are still very much committed to, and believers in, the ARA. We just don’t think that our customers are going to attend both shows in full force due to financial considerations.

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