FSS
#But like you, we're not counting on oil and gas coming back in 2016.
I think part of what you're seeing, <UNK>, is the second half of 2015, oil kept going down.
So, the pressure on the markets got worse.
And then in addition to that, you have the inventory effect, if you will, of the rental market, and the other equipment coming out of the oil and gas patch, and diluting ---+ just creating a glut of equipment, frankly.
It competes with our new equipment.
So, there has been a headwind.
Those numbers tend to fluctuate, depending on large fleet orders.
For example, in 2014, we had a number of large fleet orders, and those tend to be every couple of years, depending on the cycle.
And rental rates.
And there is a little bit of extra headwind in 2016.
So, I think we would expect the volume side to pull back as we move forward.
I think you also have to look at the mix issue.
Municipal margins are typically less than the industrial margins.
We are focused on both from an acquisition perspective and organic growth perspective, on growing that industrial business.
We have a number of initiatives to diversify our product offerings, particularly out of oil and gas.
So, I think that this is an unusually low year, and we're encouraged by where we are investing, and we think we're well positioned to grow.
Also, depending on what happens in oil and gas in 2017 and 2018, we think we are very well positioned to supply any demand there also.
That sounds about right, <UNK>
We expect ---+ it has generally run between $10 million and $15 million.
We expect 2016 to be in a similar range.
G&A is around $12 million.
The first thing I want to talk about ---+ this is not a distribution roll-up strategy.
We believe that the acquisition of Joe Johnson, in fact, helps us enhance our current municipal dealers.
We have had an opportunity this morning ---+ I've talked to three so far, of our major dealers, and they have really embraced the idea that they are going to have a rental fleet available to re-rent to their municipal customers.
So, we look at this as giving them another tool in their toolbox moving forward.
And we have limited conflicts between dealers.
So, one of the things, when you look at acquiring a dealer, they have a geography, and certainly on the municipal side, that's more contained.
And specifically, it gives us a distribution channel that allows us to grow our industrial market share through our Guzzler, Westech and Jetstream products.
JJE will operate within a division of ESG, and we typically don't talk about the division result, or break those out.
They had revenues last year of CAD154 million, so $112 million or so.
We'll have some offset to that, in that we sell to them.
So, we don't get to count that twice.
And then we expect them to grow at a pretty healthy pace, especially in some of their service businesses and their municipal businesses remain strong.
(Multiple speakers)
In the high single-digit range, yes.
I think that is a fair assumption at this point.
For 2016, we've assumed a modest adoption rate.
So, there is upside there.
We remain very committed to our new product development that requires R&D investment.
And just to give you some color, our R&D spend in 2015 was about $14 million, which was up 7% versus 2014.
We have the innovation team that is continuing to go out and study markets, and identify new product opportunities.
They work closely with our engineering group.
The feedback will be in full production on one of our purpose-built utility trucks by the beginning of the third quarter.
And the initial interest has been extremely high.
We've also introduced our Jetter product to our distribution network, and again, the interest is high.
And then, we think the patent recycling product that we are offering for our vacuum trucks presents significant growth opportunity.
We're not going to stop investing in new product development, and 2016 reflects that.
Yes, some of the contractors that utilize this equipment also use them for the construction markets.
We are assuming it's fairly flat, with the exception of hearing loss expense, which we are anticipating will probably be higher in 2016, based on the number of trials that we foresee at this point in time.
The trials are currently scheduled in the second half of the year.
Depending on whether they move forward or not, we would update our guidance accordingly.
Sure.
We entered the year with the low backlog.
We've talked about the mix; and the mix is less favorable.
Our municipal business remains strong.
We expect the first half of the year to be lower.
And the second half of the year, candidly, is a wait-and-see game.
We are seeing traction on our new product development and the adoption rate.
But we need to see more orders in order to give you a better picture in terms of what the second half of the year.
The hearing loss expense, as <UNK> previously mentioned, is also an issue.
We continue to be positive about both our municipal markets and some of the diversification we're doing on the industrial side.
So, it is a wait-and-see game for the second half.
Basically we don't know how long it will take for the overhang to work its way through.
We're anticipating in the second half that that has not really occurred yet.
To the extent that it does, we will feel better about it.
At this point in time, we just don't have good visibility for the second half.
Thanks, <UNK>.
There is seasonality in that business; they primarily sell to municipalities and government entities.
So, a lot of it depends on their buying cycles.
So, the summer months tend to be higher.
Are you talking about for Joe Johnson.
It's about 75/25 split between Canada and the US.
New equipment sales is the primary driver.
The parts and service has been growing impressively over the last couple of years, and we expect that to continue at relatively high margins.
The rental business is a smaller portion of that.
Smaller, but growing.
And it's primarily municipal.
Over 80% of their business right now is municipal markets.
So, they have very limited exposure to oil and gas.
So, it could be confusing.
They are primarily municipal today.
But one of the things we like about them is the opportunity that we can use to leverage them in the industrial markets.
It has not been in the past.
The rental business, if it grows, will be more capital-intensive, to a certain extent.
They also have some cyclicality to it; they tend to build up on their working capital and their inventory through the winter months, and then bring it down as they have higher sales in the summer periods.
At this point, <UNK>, that is a great question and a hard one to answer.
I think at this point, we are assuming we would be using our balance sheet, and we're evaluating opportunities to make sure they have good returns and provide a solid opportunity for us.
It's harder to go outside and do financing of those things in today's world.
Right now, we believe they currently have a rental fleet of about [$50 million]; we think that is generally sufficient to meet the current market needs.
We do plan on supplementing that rental fleet with some industrial products, particularly our Guzzler, our Jetstream and our Westech brands.
So, we estimate that to be somewhere between $15 million and $20 million in 2016, if, in fact, the market supports it.
We continue to be committed to, or close to, our core, in terms of where can we leverage our existing capabilities, either in adjacent markets and new geographies, within the margin targets that we've set.
And we have a ---+ right now ---+ we have been working diligently on that.
We have a good pipeline of opportunities that we'll continue to pursue in a disciplined way.
Thank you.
So, the sale proceeds are about $88 million, and we'll get most of that this quarter.
There is a post-closing adjustment that might increase or decrease that number a little bit.
And then we will end up paying taxes on the gain.
So, there is a little bit of a reduction for that.
It's a fairly good-sized tax piece, but the proceeds will still be north of ---+ easily north of $60 million.
We have $69 million remaining on the authorization.
And our Board would be flexible on that, so I wouldn't view that as a cap or a limit or anything.
We will look at that.
And Joe Johnson acquisition is a good return on our money; our stock would be a good return on our money right now, too, I think.
In closing, I want to thank <UNK> for his significant contribution to the Company over the last five years.
I am fortunate to have him both as a mentor and a friend.
We look forward to working together in our new roles.
I also want to emphasize that we remain committed to growing our Business and leveraging our profitability.
Our strong fourth-quarter and annual results are a product of the hard work of our employees, the dedication of our distributors and dealers, and the depth of our relationship with customers.
Thank you.
We remain optimistic about the long-term prospects for our businesses, and we'll look forward to talking with you again after the first quarter.
