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Essex Rental Corp. (NASDAQ:ESSX)

Q2 2014 Results Earnings Conference Call

August 7, 2014 9:00 AM ET

Executives

Patrick Merola - Manager, Investor Relations

Nick Matthews - President and CEO

Kory Glen - Chief Financial Officer

Analysts

Scott Schneeberger - Oppenheimer

Jon Tanwanteng - CJS Securities

Matthew Dodson - JWest LLC

Tristan Thomas - Sidoti

Gregg Hillman - First Wilshire Securities Management

Operator

Good day, everyone. And welcome to the Essex Rental Corp. Second Quarter 2014 Conference Call. At this time, I would like to inform you that this conference is being recorded and all participants are currently in a listen-only mode.

I will now turn the conference over to Patrick Merola, Manager of Investor Relations of Essex Rental Corp. Please go ahead, sir.

Patrick Merola

… today will be Nick Matthews, President and CEO; and Kory Glen, Chief Financial Officer of Essex Rental Corp.

Before we get started, I’d like to review the company's Safe Harbor Statement. Remarks made on this call may contain forward-looking statements within the meaning of Section-27A of the Securities Act of 1933 as amended and Section 23E of the Securities Exchange Act as -- of 1934 as amended.

All forward-looking statements are inherently uncertain as they are based on current expectations and assumptions concerning future events or future performance of the company.

Listeners are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. In evaluating such statements, perspective investors should review carefully various risks and uncertainties identified in this conference call and matters set in the company's SEC filings. These risks and uncertainties could cause the company's actual results to differ materially from those indicated in the forward-looking statements.

Essex assumes no obligation to update or supplement forward-looking information discussed on this call, whether to reflect change assumptions, the occurrence of unanticipated events or changes in future operating results or financial conditions or otherwise.

I’d now like to turn the call over to Nick Matthews. Please go ahead, Nick.

Nick Matthews

Thank you, Patrick. Good morning. And welcome to our second quarter 2014 conference call. Before we discuss our financial results, I would like to give you an update on our key initiatives.

Our entire company believes that our success depends on our customers success. Our customers demand and want the highest levels of quality from our products and services. We are fully committed to an aggressive campaign of continues quality improvement, while we are still in the early stages of this campaign, the positive response from customers and the utilization improvement that we are experiencing is early validation of the strategic initiatives that the new management team has initiative are being well received.

One of management’s main priority is to increase utilization in our asset classes. Hydraulic crawler crane utilization has improved dramatically throughout the first half of 2014 and in the month of June was at its highest level since 2008.

Rough terrain crane utilization is also approaching prior peak levels. Management believes the significant portion of the improvement in utilization can be directly attributed to the initiatives put in place.

Specifically, we have made some adjustments to the language in our master rental contracts, which has opened the door to new customers and those prior customers that we haven’t done business with in the past two years.

We have also taken a more holistic approach to analyzing the specific rental transaction, including the overall return from the lease versus the profitability of each of the separate services that we might provide.

This holistic approach is similar to how our customers make their vendor selections. These modifications to our business practices have made us more competitive in our quoting process and improved our win rate.

We have also consolidated our two sales forces in May, our full product line available to the entire sales team versus the previous siloed approach. We feel that the single sales force has the potential to provide significant upside to improve utilization, provide our customers a more seamless product offering and help to reposition the fleet.

Over the last several months we have been successfully renting crawler cranes, rough terrain cranes and industrial cranes on the single job side as a bundled offering. Management believes that both crawler and rough terrain cranes have benefit the most from these utilization initiatives.

We are continuing to look at strategies to further improve crawler crane utilization, including cranes on barges, man rental offerings and flexible rental rate contracts driven by usage versus the straight monthly contract.

The second priority is our initiative to improve quality. We have progressed in creating a formal plan detailing the steps required to be successful and appointed the appropriate personal to implement this plan.

The short-term focus of this initiative includes implementing text support and training, cost train on the entire product line, creating a quality manual and implementing the appropriate metrics to monitor and manage our progress. This initiative is still in its early stages, but we have already had success in improving our quality.

During June of 2014, we have the highest monthly lease start activities since early 2007. We were able to successfully manage the delivery of over 30 crawler cranes with improved levels of quality in the short period of time.

The next initiative is reshaping our asset portfolio and repositioning the fleet, while we did not closed any meaningful traditional crawler crane sales in the second quarter of 2014. We have recent agreed on principals to terms related to a trade transaction, whereby we will sell 15 traditional crawler cranes over the next six months in exchange for a mix of heavy rough terrain cranes and hydraulic crawler cranes.

The values we expect to receive for our traditional crawler cranes will be superior to the values that we were offered and that we rejected in the auction earlier this year. The units to be purchased are in classes that have strong demand with no availability in our fleet.

The traditional crawler cranes being sold will no way impact the future rental revenue of the business as the units were excess capacity. We are still finalizing documentation, delivery schedules, and equipment and inspections in order to complete this transaction.

The final area of focus for management is developing a more customer centric and service-oriented culture throughout the company and improving our customer relationships.

The philosophical changes in our rental end process and adjustments made to some of the language in our rental contracts has opened the door to a new customer base and customers that we haven’t done business with in a long time. We have welcome back these customers and we will aggressively follow our quality initiative to ensure their satisfaction.

To continuously monitor our customer satisfaction, we have maintained an open dialogue with them both joining and after each rental is completed to continuously find ways to improve our service.

Second quarter results benefited from increases in the power and petrochemical end markets, the Pacific Northwest and Gulf Coast remained the most robust geographic regions and the Midwest has also displayed strong rental revenue growth year-over-year.

Overall, the year-over-year decrease in revenues and gross profit from the rental segment is fully attributed to the decrease in used rental equipment sales. We are encourage that the equipment rental and transportation revenues increased on the both the year-over-year and sequential quarterly basis.

The hydraulic crawler crane, rough terrain crane, and city and other tower crane fleet which collectively account for in excess of 70% of the ROE of our rental fleet, were the primary drives of the improvement.

We continue to gain momentum in our crawler crane fleet, albeit offer the lower bases than where we started in 2013. Within the crawler crane fleet, utilization of our heavy lifting hydraulic crawler crane class increased to 65.0% for the quarter ended June 30, 2014, compared to 57.5% for the quarter ended March 31, 2014, but despite a slight decrease when compared to 67.6% for the quarter ended June 30, 2013.

Utilization of the hydraulic crawler crane class increased each month throughout the second quarter of 2014 and equaled 76.6% in June, which was the highest monthly utilization level since 2008.

Utilization for the entire crawler crane fleet increased to 43.4% for the quarter ended June 30, 2014, compared to 40.9% for the quarter ended March 31, 2014, but also displayed the decrease when compared to 46.6% for the quarter ended June 30, 2013.

The lower utilization for the entire crawler crane fleet as compared with the strong and accelerating utilization of our hydraulic crawler cranes is attributed to the low utilization and the number of units in our traditional crane fleet.

As we successfully rebounds our asset portfolio, we will harvesting low utilized traditional cranes and paying down debt or investing in more highly utilized hydraulic crawler cranes or rough terrain cranes.

Average monthly crawler crane rental rate increased by $571 or 3.3% to $17,755 for the quarter ended June 30, 2014, compared to $17,184 for the second quarter ended June 30, 2013. This increase is primarily attributable to the mix of cranes on rent.

We are encouraged by our forward-looking indicators as well. Crawler crane quoting activity was up 22.8% in the first half of 2014 as compared to the prior year. Order intake in the second of 2014 was particularly strong as it displayed 151.3% increase in expected rental revenue as compared to the second quarter of 2013.

The strong order activity has result in an increase in our crawler crane rental backlog by 69.2% as of June 30, 2014, compared to the backlog as of June 30, 2013. Through July expected revenue from signed lease orders has increased by 50.0% year-to-date as compared to the prior year.

Utilization about rough terrain crane fleet was up significantly when compared to prior year, equaling 68.2% for the quarter ended June 30, 2014, compared to 60.3% for the quarter ended June 30, 2013. In addition utilization increased sequentially by 10.0 percentage points as compared to 58.2% for the quarter ended March 31, 2014.

Much like that hydraulic crawler crane fleet, utilization of the rough terrain cranes has increased each month within the second quarter and have been favorably impact by the initiatives in place. The rough terrain crane fleet benefits from the wide array of jobs that can be utilized on.

As such, it is encouraging that the sequential increase in utilization was provided by a broad improvement in most end markets. Additionally, we were able to rent rough terrain cranes on jobs together with crawlers, further leveraging the capabilities of ESSX Rental Corporation.

We are very focused on maintaining the quality of our rough terrain fleet, receipts of new units throughout the year will help us maintain a high quality for this portion of our fleet with the weighted average age of only four years old.

For the third quarter in the row our crawler crane fleet experienced a sequential increase in utilization, equaling 41.0% for the quarter ended June 30, 2014, as compared to 14.8% for the quarter ended March 31, 2014.

Within our tower crane fleet we experienced the sequential increase in utilization of our city and other crane, offset somewhat by a decrease in utilization of the self-erecting tower cranes.

City and other tower cranes typically have longer durations with high rental rates compared to the self-erecting tower cranes and make up approximately 86% of the value our tower crane fleet.

We continued to remain optimistic in our outlook for 2014 as it relates to the market for our tower cranes. But we are still not at early 2013 levels when utilization was 42.7% for the quarter ended June 30, 2013.

I will now turn the call over the Kory to discuss our financial results.

Kory Glen

Thank you, Nick. Equipment Rental segment revenue, which includes equipment rental, used rental equipment sale and transportation was $16.4 million for the quarter ended June 30, 2014, down 13.1%, compared to $18.9 million for the quarter ended June 30, 2013. The $2.5 million decrease was driven by $3.1 million decrease in used rental equipment sales partially offset by increases in equipment rental and transportation revenue.

The decline in Rental Equipment sales on a year-over-year basis is primarily driven by the sale of two large crawler cranes during the quarter ended June 30, 2013 for $2.5 million. It is encouraging to see both Equipment Rental and Transportation revenue displaying growth sequentially in year-over-year.

Specifically, Equipment Rental revenue increased by $300,000 or 2.7% year-over-year and $1.5 million or 13.3%, sequentially. The utilization improvement for crawler cranes as Nick mentioned earlier, occurred during the later part of the second quarter and therefore, the increase utilization is expect to have a more significant impact on the third quarter of 2014 in future period.

Equipment Rental segment gross profit decreased by $900,000 to $3.8 million for the quarter ended June 30, 2014, compared to $4.7 million for the quarter ended June 30, 2013.

The spike in rental start activity specifically on the crawler cranes increase segment cost by approximately $900,000. The net impact with the increase in rental revenue offset by the spike in rental stock cost, resulted in a $600,000 decrease in gross profit.

The remaining decrease was primarily due to a $400,000 reduction in gross profit from used rental equipment sales, partially offset by $100,000 increase in transportation gross profit.

The Equipment Distribution revenue, which included the retail distribution of new and used equipment, but excludes proceeds received from the sale of rental equipment increase by $2 million or 236.3% to $2.9 million for the quarter ended June 30, 2014, compared to $900,000 for the quarter ended June 30, 2013.

We remain optimistic about the growth of this segment and benefits that it will bring to the other lines business. Anticipated equipment inventory received throughout the second half of 2014 should have positive impact and increase revenue and gross profit generated from this segment.

Parts and Service revenue equaled $5.2 million for quarter ended June 30, 2014, down 4.7% compared to the same period in 2013. One of the strategies we’re employing in efforts to create more customer centric business environment is to relax certain rental and billing procedures. This was the primary reason for the year-over-year decrease in Parts and Service revenue.

Third-party customer parts and services was consisting year-over-year. We continue to focus on offsetting some of the decline in service work on our own equipment by driving more third-party part from service opportunities.

Selling, general and administrative expenses, excluding non-cash compensation and non-recurring expenses decreased by 1.6%, $100,000 to $5.4 million for the quarter ended June 30, 2014, compared to $5.5 million for the quarter ended June 30, 2013. The decrease is primarily related to a reduction in wages and salaries.

There was approximately $400,000 of non-cash compensation and non-recurring expenses for the quarter ended June 30, 2014, including approximately $200,000 of severance-related expanses.

There was approximately $800,000 of non-cash compensation and non-recurring expenses for the quarter ended June 30, 2014, including approximately $300,000 of severance-related expanses.

Adjusted EBITDA before non-cash compensation and non-recurring expenses for the quarter ended June 30, 2014 was $4.5 million as compared to $5.5 million for the quarter ended June 30, 2013, and $3.4 million for the quarter ended March 31, 2014.

We remained focus on the sale of rental fleet assets to both reduced debt and rebalance our fleet mix. During the quarter ended June 30, 2014, we sold $1.7 million of rental equipment at approximately 108.8 % of orderly liquidation value.

Consistent with our objective to reduce leverage and reshape our fleet portfolio, the proceeds receive from the sale of these assets were used to pay down debt and replenish rental assets. Our weighted average interest rate on all indebtedness as of June 30, 2014 was approximately 5.5%.

I will now turn the call back over to Nick.

Nick Matthews

Thanks Kory. The initial stages of execution on the initiatives place have helped improve our results. This improvement has reinforced our strategies and we will continue to expand on these initiatives as the year progresses. We anticipate stronger earnings on a sequential and year-over-year basis throughout the remainder of 2014 and are comfortable with 2014 guidance.

We would now like to open the call for questions.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from the line of Scott Schneeberger from Oppenheimer. Please proceed with your question.

Scott Schneeberger - Oppenheimer

Thank you. Good morning guys. First question the -- it sounds like you’re seeing nice pipeline and a good increase in activity as we head into the back half of the year. Could you address how much of that is market-driven as opposed to the company-specific initiatives? And then on the market-driven side -- you’ll able to differentiate my first question and then on the market driven side, where are you seeing this -- the increases -- I think you really do it a little bit geographically but if you could speak to the end market expense?

Nick Matthews

Sure Scott. This is Nick. As we mentioned, we are seeing a quote activity up roughly 22% that is largely in the Pacific Northwest in the Gulf Coast in terms of the end market. It still continues to be transportation, general building, slight increases in petrochemical, probably petrochemical has been one of the largest improvements year-over-year we’ve seen. In terms of our win rate, as we look at those opportunities, we have seen that our win rate has went up roughly 15% compared to what it was previously.

Scott Schneeberger - Oppenheimer

Excellent. I have two different questions here, asking both at the same time but they are somewhat unrelated. With regard to the new wins and what your pipeline looks like, are these one or two or three cranes at a time or are we seeing anything that could be a greater quality of crane on a specific job site. And then I will hold back ask the next one in a second?

Nick Matthews

Sure. So we’re seeing transactions of multiple sizes in duration and quantity. I would say probably largest job that we’ve seen and one was a fire crane job where we put fire cranes to work at one time for duration.

Scott Schneeberger - Oppenheimer

And what -- is that a transportation end market.

Nick Matthews

That job specifically was actually a new plant construction.

Scott Schneeberger - Oppenheimer

Thanks. I guess, swinging back onto the improvement on the initiatives, could you just speak a little bit to the anecdotal feedback. Obviously, you’re winning more customers and that’s what most important. But have you been conversing with the customer and getting feedback from them directly about the changes you made? Thanks.

Nick Matthews

Sure. Great question, Scott. So throughout our process, one of the things we mentioned is our continuous improvement quality initiative and we have put in steps throughout our process where we get feedback from our customer after the time we’re awarded the job to understand expectations after we deliver and rig up the crane to make sure that we met expectations there.

And then also touching base throughout the rental process and then after the rental concludes, to get feedback there on any thing we could have done better. So obviously we mentioned we had a large number of crawler cranes go up in June. So it’s a little early to get some of that feedback as to where we sit right now. But we will continue to monitor that and get feedback. So far the feedback we have received since we put that in place has been favorable as to the performance.

Scott Schneeberger - Oppenheimer

Thank you. And then finally, I’ll turn it over on -- could you provide any metrics on or just a directionally feel on with the quarter and utilization wise, maybe what you’ve seen through July with regard to typically on hydraulic and tradition crawlers in the crawler category and others if you could share that?

Nick Matthews

Sure. So directionally, we have seen continued strength into the third quarter on both rough terrains, hydraulic crawlers and tower cranes. The traditional cranes have remained relatively flat, which as we had mentioned is one of the reasons that we’re looking at some of the new initiatives, such as demand, such as putting cranes on barges to try to pick up utilization there for the interim period while we try to harvest that fleet and rebalance our portfolio.

Scott Schneeberger - Oppenheimer

Okay. Thanks so much. Any quarter utilization, I assume is outdated relative to quarter averages in the hydraulic certainly tower category?

Nick Matthews

Yes.

Scott Schneeberger - Oppenheimer

Okay. Thanks very much guys. I’ll turn over.

Operator

Thank you. Our next question comes from the line of Jon Tanwanteng with CJS Securities. Please proceed with your question.

Jon Tanwanteng - CJS Securities

Good morning guys. Thank you for taking my questions.

Nick Matthews

Good morning.

Jon Tanwanteng - CJS Securities

Just regarding the increased activity in bookings you’re seeing heading into Q3. The rate or terms or even project lengths different from what you’ve been doing historically over the past 12 months or so?

Nick Matthews

Yes, the rental durations are longer than what we have booked previously.

Jon Tanwanteng - CJS Securities

And is that a function of the initiative that you've been executing on or is it more just the projects that are actually coming out are bigger?

Nick Matthews

It’s really attributed, Jon, to the projects being longer.

Jon Tanwanteng - CJS Securities

Okay.

Nick Matthews

And the initiative that we put in place have given us the opportunity to participate more in those projects than perhaps we would have had in the past but the duration is really based upon the construction project in the duration.

Jon Tanwanteng - CJS Securities

Okay, great, thanks. And then I may have missed your comments on the used equipment sales going forward. So what are your expectations on that heading toward the back half?

Kory Glen

As you know, Jon, we’ve spoken about before the used equipment sales are difficult to predict because there usually isn’t a lot of lead time from when a customer wants to purchase an asset. But based on the comments that Nick made is part of the call script with the trade transaction. Our expectations are that we’ll see a meaningful increase in use for our equipment sales for the second half of the year.

Jon Tanwanteng - CJS Securities

Okay. Great. Thanks.

Operator

Thank you. Our next question comes from the line of Matthew Dodson with JWest, LLC. Please proceed with your question.

Matthew Dodson - JWest LLC

Hey, congratulations on the swap. It sounds like it’s a big deal. Can you help me understand going from these traditional crawler cranes that you guys are swapping out the hydraulic. What is the pick up in EBITDA?

Kory Glen

Matt, I think that potential pickup in EBITDA from the cranes that we’re purchasing are about $1.5 million per year on the new equipment. But I would caution that some of the assets that we’re purchasing may not go into the rental fleet and maybe sold in retail sales transaction.

Matthew Dodson - JWest LLC

And so what does this bring your traditional -- you said you are going to -- I believe you said 15 traditional crawlers, is that correct?

Nick Matthews

Correct.

Matthew Dodson - JWest LLC

What does that bring your total fleet down to now?

Nick Matthews

Sure Matt, we had 143 traditional cranes. So bring it down to 128.

Matthew Dodson - JWest LLC

And where do you want to get that size down to.

Nick Matthews

I think as we’ve laid out in some of the earlier calls, it’s always have been our goal over a long duration of time period to move that traditional crane fleet out and drive it down to a very small amount or zero and reposition that to newer technology hydraulic cranes. In the interim, we’ve said over the next 18 months, we’re trying to drive somewhere around 25 to 30 units down but we’re being very aggressive in trying to reduce that amount.

Matthew Dodson - JWest LLC

And do you guys expect that 25 to 30 units down, are you guys going to do more swaps out there or are you going to just sell them kind of one- off?

Nick Matthews

I think as we’ve laid out -- as we’ve followed up after the Hunyady Auction was unsuccessful and talked about some of the approaches we are taking. We have increased our scope and our reach in terms of direct sales. We have more resources selling direct sales right now. And we are continuing to have very good levels of cored activity, although we have not recognized any sales, traditional claims directly.

So we still are pursuing that approach and think we’ll get some meaningful results from that. At the same point, Mathew, we’re not opposed in anyway to doing another swap and hope that we’ll be able to leverage that with the OEMs accordingly.

Matthew Dodson - JWest LLC

Got you. Perfect. Congratulations on the great quarter.

Nick Matthews

Thank you, Matt.

Kory Glen

Thank you, Matt.

Operator

Thank you. Our next question comes from the line of Tristan Thomas with Sidoti. Please proceed with your question.

Tristan Thomas - Sidoti

Hey guys, how are you?

Nick Matthews

Good. Thank you.

Tristan Thomas - Sidoti

Okay. I just had a couple of questions just regarding some of the changes you’re making internally. I know, Kory mentioned to transition towards more customer-centric service orientated business, you’ve relaxed your billing policies. Could you maybe quantify a few of the other things specifically that you’ve done?

Nick Matthews

Sure. Tristan, this is Nick. So a lot of the feedback we got from customers, as it relates to the company was that we’re very rigid in our policies. And we’re not very flexible to do business with in addition to they didn’t like the surprises, I guess, if you will that they received at the end of the rental in terms of what we bill them. So some of the changes that we have made, really address to that point would become much more flexible in our terms and conditions, our return policies on equipment.

We have been much more, I would say, customer service focused with a lot of different touchpoints throughout the rental process in which we have communication with the customer to make sure if there are any issues that we proactively address them and work with customers to do that. And then as we mentioned, we’ve relaxed some of the end that we’re repairing billing practices that we got feedback for not being accepted well by our customer base.

Tristan Thomas - Sidoti

Okay. Got you. And then just one final question, regarding the consolidated sales team, did that impact the size of the sales force?

Nick Matthews

No, it did not. In an actuality, there probably are still some gaps in which we need to expand the sales group to cover some more territory than what we cover currently. But we will able to redeploy the mix of our resources.

Tristan Thomas - Sidoti

Okay. Got you. And then how many sales individuals you might have added?

Nick Matthews

I could get back to you on that but I think, we’ve really talking to a small number like one or two.

Tristan Thomas - Sidoti

Okay. Sounds good. Thanks.

Operator

Thank you. Our next question comes from the line of Gregg Hillman with First Wilshire Securities Management. Please proceed with your question.

Gregg Hillman - First Wilshire Securities Management

Yeah. Good morning, gentlemen. I had a question on, I guess about the billing. One time during the call you mentioned that you’re going to have a contract whereby people just pay when they use the cranes and does that mean you’re going to have like meters on the cranes or that when they’re not using it, they’re going to turn it back to you or could you explain that? Please.

Nick Matthews

This is Nick. We have GPS units on all of our crawler cranes and many of our tower cranes. And so the concept here would be we have some customer markets in which they’re not able to commit to a full monthly rental duration but they have spotty, I guess, if you’ll say utilization. And so we have these GPS readings in which we can tell a time in which the hours that the crane was turned on or running and when it was turned off and then bill them accordingly rather than a flat monthly rental rate.

And that’s really focused on our traditional cranes where we had lowered utilization. So we’ve been more flexible whereas on the higher utilized hydraulic cranes and larger tower cranes. We would not look to do something like this but in the area in which we have low utilization, we put forth these how to work recently. And we’re really monitoring the results and seeing if it still justifies putting the piece of equipment there, but the equipment actually stays on their site and then we just bill them as they use.

Gregg Hillman - First Wilshire Securities Management

Okay. That’s pretty neat. And then Nick, you were telling about quality during the call and I think it was -- you think about quality and conjunction with your service offering. So I was wondering if you were able to improve the quality of the cranes themselves in anyway that you recondition them better or some aspect of physical piece of equipment improving that quality?

Nick Matthews

Yeah. Sure. It’s a great question and we have been focused on both the quality of the offering and the services and the quality of the equipment when it gets to the customer. And probably, the largest area we’ve been able to impact in the short term is the quality of the equipment when it gets to the customer. And I think, Kory have mentioned during his remarks that we had some increased cost as we put a large number of cranes out.

During the second quarter, those cost were for couple reasons but one of them was that we did some preventative items to the cranes that hopefully will save them being down and having them -- have trouble potentially when they’re on the customers job site by taking care of those items. I think there is an opportunity for us to continue to look at the preventative maintenance of our equipment and spend dollars now that would potentially save a lot of customer future.

Gregg Hillman - First Wilshire Securities Management

Okay. That’s good. And you mentioned, five cranes at one plant, what kind of plant was being constructed? Was that a chemical plant?

Nick Matthews

No. It was a fertilizer facility.

Gregg Hillman - First Wilshire Securities Management

Okay. And then whole thing about more plant construction coming here to America due to lower natural gas prices, is that impacting you or do you have a list of all new plants that are being build in United States in the plant, feel great going up?

Nick Matthews

Yes. We are tracking through a number of areas, not only customer communication but also pack and dodge which tracks all the projects of new construction. I would say, the amounts that we’re seeing are slightly up. I have not quantified it or looked at it on that basis but we are seeing a favorable trend there.

Gregg Hillman - First Wilshire Securities Management

Okay. And then Nick, on the even resource side of your company, what are you doing to improve recruiting, retention of people and training programs for the workers and even management development programs?

Nick Matthews

Sure. That’s an area that we have a strong focus. I think, anytime we have an opportunity to hire someone. We have an opportunity to really increase the talent that we put into the organization. I would say, our retention level is very high. We have a very few people leaving the company or exiting the company, especially in the areas of management.

But we have not in the past really looked that kind of true succession planning. We do a lot of work in developing and improving our tax and actually have hired someone to just focus on training and adding that capability to our technical services and our employees in the field. We still have some work to do in terms of management development. We continue to promote and develop our management team.

Gregg Hillman - First Wilshire Securities Management

Okay. And then the trends of those three geographical regions you’re talking about, Mid-West, Northwest and Gulf. Are those -- in the Midwest what was that due to? What verticals or what industries?

Kory Glen

That was a power plant, still with clean coal work at our power facility primarily.

Gregg Hillman - First Wilshire Securities Management

Okay. And then Gulf, it just a natural after the BP -- I guess the Gulf activities just coming back in the Gulf now. And you said power in the Pacific Northwest, exactly what was that? You mentioned the Pacific Northwest?

Nick Matthews

Yeah. We mentioned the Pacific Northwest is one of our larger areas. I don't recall that we mentioned power in the Pacific Northwest specifically.

Gregg Hillman - First Wilshire Securities Management

Okay. Then what in verticals were in the Pacific Northwest that was causing the increased demand?

Nick Matthews

Its general building.

Gregg Hillman - First Wilshire Securities Management

General building. Okay. Thanks very much.

Nick Matthews

Thank you.

Operator

Thank you. At this time, there are no further questions in the queue. I would like to turn the call back over to management for any additional comments.

Nick Matthews

Thank you all for joining us today and for your continued interest and investment in Essex. If you have any additional questions, please feel free to contact us at anytime. Thank you and have a great day.

Operator

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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Source: Essex's (ESSX) CEO Nick Matthews on Q2 2014 Results - Earnings Call Transcript

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