Good afternoon. My name is Sara and I will be your conference operator today. At this time, I would like to welcome everyone to the RSC Equipment Rental First [ph] quarter results conference call. (Operator instructions) Thank you. Mr. Gould, you may begin your conference.

Thank you, Sara. Good evening, everybody, and welcome to the RSC Holdings second quarter '09 results conference call. Joining me today from the company are Erik Olsson, President and CEO; David Mathieson, Senior Vice President and CFO. We published our second quarter 2009 results and updated 2009 guidance in a press release we issued approximately 45 minutes ago. There is also a press release regarding our revolving credit facility and a slide presentation that accompanies this earnings call. These press releases, as well as this webcast and its accompanying slide presentation, and any non-GAAP reconciliation tables that are wanted can all be accessed on our website at www.rscrental.com in the Investors section under the About Us tab. This conference call is being recorded for replay purposes. If you have any questions, please call me after the call is over. Please turn to slide 2. Before the presentation and the comments begin, RSC would like to alert you that some of the comments such as the company's outlook and responses to your questions include forward-looking statements. As such, they are based on certain assumptions of future events and are subject to a number of risks and uncertainties that may not prove to be accurate. Actual future results may vary materially. In addition, the factors forward looking [ph] the company's outlook are dynamic and subject to change; and, therefore, this outlook and all the other information mentioned today speak only as of today and RSC does not intend to update this information to reflect future events or circumstances. RSC encourages you to read the risks and uncertainties discussed in our Annual Report on Form 10-K for the year ended December 31, 2008, and our other SEC filings. I will turn the call over to Erik Olsson.

Thank you, Gerry. Good afternoon and welcome, everyone to RSC's second quarter 2009 earnings call. As usual, I will go over some highlights of the quarter and David will then talk in more detail about our financials including comments about our recent financing transactions. I will also talk about the outlook for the third quarter and we will end with a Q&A. Please turn to slide number 3. Over the last several quarters, we have been very clear in communicating what our priorities are, namely customer service, cash flow generation, cost management, and growing our already strong industrial business. I'm very pleased to note that with focus, discipline, and strong execution from every level of RSC, we have once again delivered on these priorities in spite of a tough environment. First, our $95 million of free cash flow in the second quarter brought us to $207 million for the year-to-date. This was an excellent first half of the year with $158 million improvement over the first half of ’08 and we are right on tract to realize our full-year ’09 guidance of $340 million to $370 million of free cash flow and we are reaffirming that guidance today. Second, we reduced total debt by another $100 million in the second quarter, bringing our total reduction to $212 million in the first half of ’09 using our entire free cash flow to debt paydown. We also took significant steps to address our capital structure, which we'll address in the next slide and later in the presentation. Third, we continued executing on our cost reduction efforts with great results. $42 million of lower operating costs in the second quarter as compared with the second quarter of ’08 and $67 million lower in the first half of ’09 versus ’08. Again, we are…

Thank you, Erik, and good afternoon, everyone. Turning to slide 12, the rental volumes declined 25.5% and year-over-year rental rates were down 7.7% in the second quarter. Our objective is to continue to remain disciplined and manage rates tightly on a daily basis, to focus on value selling and service as opposed to trace competition and thereby protect profit margins as much as possible. This becomes much more difficult when others in our industry show such a lack of discipline and chase utilization at almost any trade. The good news is that we have many examples where customers come back to us when they discover what they are paying for does not work. On slide 13, the cost of rental dropped by $37 million or 21% in the second quarter. We reduced costs while being careful to maintain metrics that are important to our customers. Our fleet is down 11% from its third quarter 2008 peak as a result of lower CapEx and increased used equipment sales. So depreciation came down $7 million in the second quarter versus the second quarter last year. Continuing to slide 14, second quarter SG&A expenses were down $5 million versus prior year and down 20% from peak quarter three 2008 level. Excluding bad debt, SG&A is down $10 million from the first half of 2009. You can also see that as with rental equipment, we have reduced our non-rental processes and increased the level of their sales, so our non-rental depreciation is declining. On slide 15, operating costs, as we define them here, came down by $42 million from last year's second quarter level and $67 million exclusive of costs incurred for closures and severance from last year's first half level. That rate of cost reduction means we are on track to exceed our…

Thank you, David. I will update you on our outlook and then we will proceed to Q&A. Our practice is to provide quarterly outlooks on revenues, adjusted EBITDA, and free cash flow, as well as an outlook range for annual free cash flow as we believe this is a key metric for understanding and evaluating our performance. As already noted, business activity in our market has been down sharply on a year-over-year basis in the first half of 2009. While these declines seems to have moderated on a sequential basis and we have seen sequential stability in our fleet on rent and utilization trending up during the second quarter and in July. Year-over-year comparisons however will remain tough. We are still burdened by the impact of pricing from significant industry-wide rental rate declines. We expect these trends to continue into the third quarter and as a result, year-over-year comparisons will continue to be negative. However, in this unique environment and recession that we are in, the sequential developments, whether price or volume, are much more relevant than year-over-year comparisons and there are early signs of at least sequential stabilization of rates when we look at the month of July. Please turn to slid number 27. For the third quarter, we expect rental revenues to be in the range of $255 million to $270 million. Demand for used equipment is expected to remain steady due to the young age and high quality of our fleet although margins will remain low as supply is greater than demand and higher than normal reliance on auctions will continue. We expect $310 million to $325 million of total revenues, resulting in adjusted EBITDA range of $100 million to $115 million. And we expect free cash flow to be in the $90 million to $100 million range for the quarter. Recent cost reduction efforts are working as planned and we expect full-year cost reductions in excess of $150 million. We are reaffirming our free cash flow range for the year at between $340 million to $370 million and we expect to use it to further reduce debt. With that, I would like to turn the call over to Sara for instructions on the Q&A.

(Operator instructions) And your first question comes from the line of Adrienne Colby.

Thanks for taking my question. I was wondering if you could give us an update on your national account initiative. How quickly it’s growing? And I'm also wondering if you are seeing increasing competition and maybe some pressure price given that some of your peers are also actively pursuing growing their national accounts.

We have – we are making a big push on national accounts and we have been quite successful, specifically on industrial national accounts. We don’t like to release any specific numbers. We think that's competitive sensitive information, but we are doing I'd say very, very well on that side, especially signing up customers for the use of our proprietary software product to go with that. We hear a lot about other competitors focusing on specifically the industrial market, but we don’t really see many new entrants there or see the presence of lot more players. It's usually – it's the same old competitors that we have always seen.

Okay, great. And if I could quickly ask a housekeeping question, could you tell me what the stock comp expense was for the quarter? I think it was close to $1 million both year-ago quarter and also in the first quarter.

It's $1.2 million.

Great. Thank you very much.

Your next question comes from the line of Emily Shanks of Barclays Capital.

Hi, good afternoon guys. This is Jason Riehle [ph] in for Emily.

Hi, how are you?

Good. Just a question around your de-fleeting plan. So given the plan not to de-fleet aggressively going forward, what do you expect with used equipment sales going into the fourth quarter and then in 2010? Do we see those drop off significantly from the recent quarters, maybe third quarter as well?

Yes. I think we made a push these last couple of quarters to move out fleet. We would expect to see a little bit less in the coming quarters, but still on a relatively high level compared to 2008, but somewhat less than the last couple of quarters.

All right, great. That's helpful. And then just lastly, with the shift towards more auction sales, where do you think used equipment margins can go? Can they stay positive or could they possibly go negative as we finish de-fleeting and as the industry still tries to right size for the current environment?

Anything is possible of course, but we are certainly trying to manage this very closely and make some matches best as we can and obviously try to maximize our retail channels where do we get much better pricing. So we don’t anticipate them going negative at this point in time, but anything is possible obviously.

Understood. Thank you very much for the details. I appreciate it.

Thank you.

Your next question comes from the line of Vance Edelson with Morgan Stanley.

Hi, thanks a lot. Just want to make sure I'm clear on the recent utilization trends with the utilization trending higher toward the end of the quarter. Was that strictly because the amount of fleet went down or was there any real uptick in demand, in other words, the amount of fleet on upside?

There is a marginal uptick in demand, but – and it's obviously a combination of selling off fleets.

Okay.

It’s not a dramatic change in any way, but we have to look for every positive sign that we can find.

I'm with you. And then, could you tell us anything on a more granular basis about the growth of the non-construction, industrial services business? You mentioned that you had important contract wins, but that business is still 55% of the total and since total revenues shrink, we would have to assume that this business has declined a bit too during the quarter. Am I thinking about that right?

Yes, yes. Overall industrial activity is down, of course in the general economy and as a result, most of these customers rent less equipment at this point in time, but the important thing is that we are signing up accounts, we are winning contracts, we are taking away accounts from competition, we are implementing more and more sites with our proprietary software. So, there is no question that we are building a very solid, large foundation for future growth. Once the economy turns and these companies swing back into full production of their businesses, I think we are going to see a – lots of rentals coming our way.

Okay, great. And just one more for you. It seems to be a sign of optimism, maybe I'm reading too much into it, that you are opening more locations than you are closing and the decision not to de-fleet as aggressively although still de-fleeting, but at the same time you are talking about possibly having to age the fleet to the mid-40s, which sounds quite pessimistic in comparison. So could you just reconcile the two for me?

Sure. The footprint is of course a medium, long-term decision that we look at markets and see if there are markets we want to enter, markets we want to stay and be in, and we evaluate our store performances now on cash flow generation and so forth and we have very few stores that don’t generate positive cash flow today. So what we are doing is we are looking – we are opening mainly industrial locations that position us really well for the market – market turn when that comes. The fleet size is more the fact that we have 58% utilization at the end of the quarter or for the second quarter. That means that we have a lot of growth that we can get from the existing fleet. That's why we don’t need to buy more fleet at this point in time. It's also very well maintained and relatively young, which means that the replacement need is low and that means that we can sit on this fleet, age it, and use it to – for growth, again when the market turns.

Okay, that will make sense. Thanks a lot.

Your next question comes from the line of Henry Kirn with UBS.

Hi guys.

Hi, Henry.

I’m going to glue a couple of similar ones together first. If you could talk a little about – on a like for like basis, how much of a premium do you charge compared to your national competitors and then, maybe any details you can give about rental rate changes for the industrial and the non-construction market? I know you said that industrial wasn’t down much, but is there any way you could quantify it a little better?

Right. The premium to competition is hard to nail down as each rental transaction is a new transaction. We certainly as – our strategy is to be the highest price or is to get paid for what we believe is a superior service. When we do our secret shopper calls and other analysis of the marketplace, we do come out higher than our competitors, but it’s a moving target as I said. The – on the industrial versus the construction side, we do see price pressure on both markets, much less though on the industrial market as opposed to the non-residential construction market.

Is there any way you can quantify that a little better?

I don’t know if we have those numbers.

Well, I think industrial declined in the late half.

Yes. I think it's – one is low-single digits and the other one is high-single digits.

Yes.

Okay, that's helpful. And I guess if you were to take the fleet up to the mid-40s, could you talk a little about the extra maintenance costs on a quarterly or monthly basis that would be required to do that?

Yes. First of all, we – in the last downturn, we were in the mid-40s with our fleet. So we know quite well what that means. We don’t expect it to have any major impact on our repair and maintenance costs. There will be some, but the key is to understand that our focus on preventive maintenance means that we will have less major repairs or less catastrophic breakdowns, et cetera as the fleet ages. So there will be some impact on the maintenance and repair costs, but really quite marginal.

Okay, that's helpful. Thanks a lot.

Your next question comes from the line of David Manthey with Robert W. Baird.

Thanks, good afternoon. I was wondering if you could remind the margin characteristics of industrial versus construction. I know they tend to have longer engagements, but how profitable is industrial relative to construction?

Industrial tends to be actually lower gross margin than non-residential construction, but we need less SG&A to service in our most industrialized region. We can almost double the fleet on rent from the sales force. So we are dealing with a very sophisticated buyer obviously, in oil and gas, in chemical, and manufacturing and so on, but the cost to service is less, David

Does that mean that at the operating income line, it washes out it fairly equal?

Yes.

Yes, fairly equal to marginally higher, I would say, for the industrial side.

Okay. And then, when we look at closed location and fleet sales and headcount reductions and utilization, a lot of these factors seem to have slowed or stabilized from the first quarter to second quarter and I'm wondering is that a reflection of a dropping here or are there seasonal factors that play that we might see a reacceleration or reversal on those trends by the time we get to the end of this year?

Well, it certainly is a stabilization that I think the – that we have found the bottom here in the market at this point in time. That doesn’t mean that there won’t be seasonality. Still, we have a fourth quarter and a first quarter coming up where I think we will see the normal seasonal slowdowns. So that's something we will have to get through at that point in time, but from a demand point of view, I think we are seeing a bottom here.

Okay. And then, the last question as it relates to SG&A coming down pretty nicely from first quarter to second quarter, can you talk about the key areas that drove that reduction and then, should we expect a further decline in SG&A dollars in the third quarter relative to the second?

Yes. It's everywhere in the P&L, it's in corporate, there is less sales force, so every single line in the P&L is being registered and again, just tied as well on the industrial side, one of our real big benefit for us is it's not seasonal, industrial business and that’s really helpful as the run rate is very seasonal in terms of our regions.

Your next question comes from the line of Manish Somaiya with Citi.

Good afternoon and congratulations to everyone executing the transactions.

Thank you.

Lot of my questions have been answered, but I do have two questions. One is on cost savings. How much of these cost savings are permanent?

That's a great question. We've challenged our regions on that very topic and what they have done is they've come back to us and said, I would say a range of 20% to 25% of what we are thinking will stay at and I want you to hold this to that Manish.

And just a follow-up, Erik, you mentioned several times that data seems to be pointing to a stability in the business, but how much of the actions that you have taken on the operational front take into account a potential double dip in the economy? Clearly, your capital structure actions take into account a worst case scenario for the economy, but I just wanted to get a sense of how you have planned for the operational changes.

Well, if there would be a second leg down here in the economy, we would just keep doing what we have been doing and thus do further store cancellations or headcount reductions in line with that. It's nothing that we see coming, but if it does, we can continue to reduce costs in line with the business environment around us.

But you are also right to point out, Manish, that these transactions have really helped improving – in pushing back maturities and improving availability.

Okay, great. Thank you so much.

Thank you.

Your next question comes from the line of Scott Schneeberger with Oppenheimer.

Thanks. Good afternoon. Guys, the last few questions have focused on the stability and we just how a retrenchment in architectural billings. So the chance of a double dip down is certainly out there. Your guidance – revenue guidance – rental revenue guidance for third quarter versus second if flat to up. You said there is – you weren’t seeing any seasonality indications in second quarter. Could you address the seasonality versus macro question, especially in the near term?

I think – I mean, we haven’t – obviously we haven’t seen the seasonal part that we usually see in the second quarter or – and we don’t except to see much of them. I think we – like I said, we have seen there is a bottom here at the low level, but I'm talking about what we see for RSC. That obviously has to do with our mix of industrial revenues versus non-residential construction revenues. I think the ABI, as you referred to, is – the most recent ratings are quite low and I think non-residential construction will continue to be depressed for quite sometime to come and specifically, the commercial construction, which will in all likelihood will be down for most of 2010 as well. But importantly, the non-residential construction is now the smaller piece of our revenue generation. So we are offsetting that as much as we can with the industrial growth.

Thanks, it’s helpful. And just following up on that, the seven new location adds, I presume since most of your new adds of recent have been in industrial locations, I guess the first part of question is, is that in fact true here and since the mix was 55% industrial last quarter and remains there, maybe that's not the truth, but what is your target mix going out a few quarters from here?

Yes, the seven locations are mainly industrial locations. The target mix is to move the industrial up as much as we can. We like to grow both legs of our business of course, but we like to be viewed as mainly as an industrial services rental company.

Your next question comes from the line of Chris Doherty with Oppenheimer.

Good evening. Couple of questions. One, I guess on Q3 guidance. Could you bridge that from Q2 a little bit? I mean, you talk about rates stabilizing in June and July, but yet the guidance is at the high end where you came in for Q2 on a rental revenue basis. Can you just talk about – maybe bridge that a little bit?

There is a range of expectations in there, Chris. We certainly don’t want to get into too much detail in rates and so on.

But the other answer is of course that rates continued to drop during the second quarter, so we enter Q3 with lower rates than we entered Q2. And that –

That’s what I was trying to get to. Another question and I guess in trying to understand what I believe your philosophy is in terms of holding margin. What is the transparency in market pricing? Do you – your various customers – does that become public information, I mean do they understand where other – where their competitors are being priced from you?

It's different. Some contracts or projects go out for bid and they shop around. Other are contracts or business that we have where a competitor knocks on the door and says that, "I'll do this for 20% lower rates," or a sales person visiting a job site and ask the job supervisor, "how much are you paying RSC for that forklift and I'm willing to rent it for you for 25% less." So it's – the absolute price transparency is relatively low, but low prices spread like wildfire through – thanks to or due to sales people.

Your next question comes from the line of Yilma Abebe with JP Morgan.

Thank you. Good afternoon. If I can go to a comment about a sequential improvement and stability, can you talk about that in the reports, I guess firstly, can you point to any drivers that would explain, I guess, the sequential stability and improvement? And secondly, is there any part of your business that's outperforming as it relates to this uptick?

Any parts of our business outperforming? Yes. We do have regions that do better than other regions and mainly to do with our market share. So there are some regions that do better than others. Drivers to sequential improvement would be that gradually the industry would get its utilization up basically. That is what we are waiting to see. If utilization improves, then pricing should improve. And our utilization is beginning to inch up somewhat. So we would expect that in others as well.

Your next question comes from the line of Joel Tiss with Buckingham.

Hi guys, how is it going?

Hi, Joe.

Hi, Joe.

Just a couple of – you've done a great job of answering, thank you. Is there any way to get a sense of what the volumes declines would have been on a same-store sales basis?

I think we quote that Joel, it's down 32.4%.

Okay, okay. And then, just probably a little too nuance to whatever, but do you think that push into the industrial market so hard sort of takes you out of the – it dilutes your ability to really get a lot of benefit if we finally do see some stimulus money coming through?

No, not at all. We are ready for whatever comes our way there as well. So – we haven’t given up on the non-residential side as a whole, but we believe shifting our business over to more non-construction is good, it's good right now, it's good for the long term, but we are certainly tracking and following the stimulus money as much as we can.

Your next question comes from the line of Philip Volpicelli with Cantor Fitzgerald.

Thank you very much. Good afternoon.

Hi, Phil. I was just wondering, with the amendment you've done now to the credit agreement, did you by chance increase the RP basket to buyback, some of your subordinated debt as a discount?

No, I don’t believe we did that at all.

Okay. So, it's about $20 million is what you could potentially buy back?

I believe that's correct, but I can get back to you separately.

Okay, that’s great. And then in terms of the industrial versus the construction, you gave us very good color in terms of rates, one being down in the high-single digits, the other being down in the low-single digits. Is the volume differential the same, the whole business is down about 25%, is it 5 percentage point plus or minus for industrial versus construction?

I think it's probably a 10% actually.

And your last question comes from the line of Manish Somaiya with Citi.

Again, one follow-up, Erik. I guess in an environment where I'm sure most of your customers are hurting, how do you manage pricing discipline versus keeping your largest and best customers?

Well, obviously our pricing is down 7.7% year-over-year. So we have been forced to take some price cuts to defend the fort if you like or defend some critical or key customer rollouts. We – good news is though that we find that we don’t have to stoop down to the competitors' price levels to maintain those accounts. The customers do recognize that there is a big service or quality differential in dealing with us. For the rest, we have since years – long, long time have software discipline, training, tools, follow-up reports, et cetera, et cetera for our people in the field to take the right price decision and not lose discipline. So – and that's how we manage this and that’s why we are only down 7% year-over-year whereas the industry as a whole is down somewhere in the mid-teens.

Just one last point. The 7% is an average; would you have any regions in your portfolio where you would be seeing pricing declines in line with the industry?

Not as bad as – I think we may have some areas with double-digit declines, but not as bad. And obviously, since it's an average that means that we have some regions that are better than the 7% also.

And at this time, there are no further questions. Mr. Olsson, do you have any closing remarks?

Well, thank you, operator. As you have heard during this call and can see in our results, we are managing our business tight, executing very well on the things that are within our control and delivering on our priorities. We will continue to do so as we move forward in what will remain a tough environment, but one in which leadership, strategy, and execution really matters and that is where we believe we had a significant advantage in this industry. We have attached our business model and priorities to the appendix of our webcast for those of you who are interested. And we believe our flexible business model and strategy will deliver industry-leading results at any point in the cycle and create shareholder value. We appreciate your interest and support. So thank you very much and have a great evening. Sara, that concludes the call.

And this does conclude the call. Ladies and gentlemen, you may now disconnect.