Now that we've had the opportunity to look at the characteristics of an equipment dealer and the characteristics of a rental company, and we see that rental companies were primarily a customer of equipment dealers, they were considered a market segment, and they were undercapitalized and not quite as professional as dealers, how in the world did this group of rental companies, small and undercapitalized, how did they become such a force in the area of distribution? So in the 1980s, more and more people were interested in rental, so customers were starting to develop a demand for this. They liked the idea, they liked the consistency, they liked the terms and conditions, they liked the convenience factor. They didn't have to risk as much capital. They could use newer technology. There was a lot of reasons why customers were very interested in rental. So not only in the 1980s was there 4,500 new startups, but equipment dealers began to rent equipment. So by the end of the 1980s, there were 15,000 rental companies in North America. The industry at that time was boasting about $5 billion in revenues. So it continued into the 90s, and in the 90s, we saw some new players come on the horizon. We saw people like RSC. We saw Sunbelt. Home Depot got in the rental business. Ashtead Group from the U.K. came over to the U.S. Consolidation began to happen, and so that meant that equity was starting to come into this fragmented industry and buy out a bunch of privately held companies, network those companies together, create a bigger buying group. They could get better pricing from manufacturers. Manufacturers were interested in dealing with them direct. They could focus on a particular region in the country. They could gain leverage by moving assets around just in time according to project development. So industry consolidation started to ramp up what was a market segment and start to make it a legitimate channel for distribution. So this continued through the 90s, and we saw United Rentals show up in the late 90s. They merged with U.S. Rental, became the largest rental company in North America. Caterpillar rolled out a program, I believe, in 1997 for their dealers to get in rental, primarily to attract that smaller customer. Caterpillar was rolling out mini excavators and skid-steer loaders, which primarily had been rental items, and it made a lot of sense for them to get in front of smaller contractors with these smaller items. We saw RSC and Sunbelt continue to acquire companies. Then Nations Rent, they were a group out of Florida, South Florida, that started going around and buying up some very nice large regional rental companies and networking them together. Hertz continued their growth. They actually started buying some companies rather than just Greenfield, which they had traditionally done. Atlas Copco, a manufacturer, decided to buy a network of rental stores' prime equipment. All of a sudden, there is lots of money coming towards the rental industry, and everything from manufacturers to equity companies are interested. So, we continue this consolidation. The industry at this time, right around 2000, is boasting about $20 billion in revenues. Now, contrast that with the late 80s, and it was about $5 billion. So, 400% increase in literally less than 15 years. Consolidation is the driver. Money is coming. The whole industry is becoming more professional. Customers are getting a higher level of service, more consistent. The equipment in the fleets are newer. It put a lot of pressure on people, everything from systems to transportation to marketing, employment. Prior to this, it was hard for a college graduate to consider going to work for a mom-and-pop rental company. There wasn't any positions for that. Now, you need people that know logistics, need to know finance, asset management, leadership, multiple location manager capabilities. The whole industry was morphing right before our eyes. So, we continue to have a maturing market, even yet today. Mergers and acquisitions will continue. You'll see many of these names you recognize. And the most recent numbers out in the industry suggest that we're at about $38 billion in revenues. In the last 15 years, we've gone from $20 billion to $38.5 billion. What you need to know is that with regards to what we are focused on, which is construction and industrial rental equipment and rental revenues, that that makes up about two-thirds of the industry numbers. So, when you see, whether it's in a trade magazine or you read something online, and you see industry numbers, just know that the construction and industrial portion of that is probably about two-thirds of the number you're hearing. So, where's the industry going? It continues to grow. The projections are strong. Probably anywhere between 5% and 8% per year is the projection. So, that means that customer demand for rental is going to continue. So, this continues to drive development of rental fleets, not only by equity companies, by rental companies, by manufacturers putting in their own rental fleets. We've got people that are in the crane business, people that are in the dewatering industrial pump business. We've got people in welding. We've got people in access equipment that are manufacturers. And now, to keep up with demand and make sure they get a share of the pie, they're creating their own rental fleets. And so, rental is here to stay, and it is a significant channel of distribution of product to end users. So, let's look at our map one more time. So, we had the dealer-distributor selling to the rental store. The rental store starts to grow up a little bit. They can buy directly from the OEM, and they improve their services to the end user. Now, these mom-and-pop rental stores get purchased, and now all of a sudden there's a national rental company. They're not going to buy from a dealer-distributor typically. They're going to want the relationship straight with the manufacturer so they can provide to the end user, generally either at a lower cost or they're going to be more profitable than the smaller mom-and-pop rental company. So, now you've got some OEMs going direct, as I mentioned. Generally, manufacturers are not very good at retail. They don't really have much business being at a retail level. They know about manufacturing. They may know a little bit about distribution, but for them to work directly with a customer, that is a different kind of business. So, that puts the manufacturer in a position that they have got to have a rental channel strategy. What does that mean? That means they're going to talk to their dealer-distributors and say, are you doing business with all the rental companies in your area? If not, why not? Are you growing your own rental fleet, Mr. Dealer? You need to be in that business. A manufacturer needs to decide, are they going to try to get in the game with a national rental company? Are they going to sell them direct? Are they potentially going to fund fleet of their own product and either go out and try to run front-line rental operations or potentially hire a third-party management company to do it for them? So, at the end of the day, the customers have more choices than they've ever had before. Their expectations are changing. Value add comes in so many ways to them now. If they buy equipment, they want a company to support them and give them the product support. They need ways to finance that stuff. If they want to buy used equipment, now they can not only look at a dealer-distributor, they can look at a rental store and they can buy used equipment from them. And it may be potentially a better deal. Rental companies are now offering finance programs, so it doesn't necessarily have to be a retail dealer-distributor that is providing the retail finance. Rental stores, national rental companies, have generally an allied finance partner that works with them on that. So, end users have more choices than ever before. Their expectations about service and product support are growing every day. As we come to the end of the first module, I would remind you to go back and look at the participant workbook. There is quite a few questions there for you to ponder and answer, and I believe that it will really help you gain a deeper understanding of all the things that we've covered over the last few slides. So, please take advantage of that, and we will move on to Module 2.

rental companies

growth

convenience

consolidation

professional