Leasing of Noncore Equipment Grows as Increasingly Complex Maintenance Requirements and High Costs Drain Capital: a Wall Street Transcript Interview with "Best on the Street" Analyst Arthur W. Hatfield of Raymond James (RJF)

Wall Street Transcript

67 WALL STREET, New York - January 23, 2013 - The Wall Street Transcript has just published its Staffing, Outsourcing and Rental & Leasing Services Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Workforce Flexibility Requirements - Growth in Temporary Staffing Demand - Secular Trend Toward Temporary Staffing - Strong Demand For IT Staffing - Growth in Equipment Leasing Adoption Rates - Consolidation Potential in Fragmented Industry

Companies include: General Electric Co. (GE), CIT Group, Inc. (CIT), Ryder System, Inc. (R), TAL International Group, Inc. (TAL), Textainer Group Holdings Limit (TGH) and many others.

In the following excerpt from the Staffing, Outsourcing and Rental & Leasing Services Report, an award winning equipment leasing analyst from Raymond James discusses the outlook for the sector for investors:

TWST: What's going on from a general perspective at this point?

Mr. Hatfield: I think the biggest trend that we are seeing within all of these industries is that historically the companies that would buy equipment are starting to shift their focus away from allocating capital to equipment ownership, to leasing that equipment. And I will give you some examples of that.

Primarily, the customers of these companies, their primary business is not in transportation, but yet they use transportation within their business. The customer of Ryder (R) would be a good example. For instance, in food and beverage, they have a lot of customers who are beverage distributors, for instance, whether that's alcohol or nonalcoholic beverage distribution. These companies really wholesale and sell beverage, but they also deliver it to their customers. And so what they had done historically is in lot of cases would own the trucks necessary to do that, but as the world changed over the last four years, the credit crises of 2007/2008 people have started to look at that and say, "do I really need to spend over $100,000 on a truck and use my capital when I can go to a quality company like Ryder who will do everything from cradle to grave on that asset, all I need it for is to deliver my product to my customers?" So you've seen a shift away from ownership to what I would call it outsourcing. So we are seeing the small beginnings of an outsourcing trend.

TWST: Does this reflect capital tightening in general or is it really a recognition that this isn't a core competence and let's somebody else do it?

Mr. Hatfield: I think it is a lot of the latter. I think what's happening is vehicles, as they've become more complex with regards to technology - you have increasingly stringent emission standards that cause companies to - or cause the trucks to be more complex to maintain and operate. And I think given what companies are seeing, there is a cost to buy the truck, but then there is cost of ownership where you've got to maintain the vehicle, and you have to have people on staff to manage that fleet. And so I think people are recognizing that it may be much less expensive to actually lease the vehicle as opposed to own it. So I think it's more of a capital-allocation decision as opposed to lack of access to capital.

I think more importantly, and in a lot of cases when you think about the customers of these companies, these assets that they are either purchasing or leasing are actually a very small part of their overall cost structure. So let's take container leasing as another example...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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