Essex Rental Corp. (Nasdaq: ESSX; ESSXW; ESSXU) ("Essex")
today announced its consolidated results for the fourth quarter and
year ended December 31, 2009. The following results are those of
Essex Rental Corp. and its wholly owned subsidiaries, including
Essex Crane Rental Corp. ("Essex Crane"), its operating subsidiary,
which was acquired by Essex on October 31, 2008 through the
acquisition of Essex Holdings, LLC (“Essex Holdings”), the direct
parent of Essex Crane, and Essex Finance Corp., which was formed in
2009 to facilitate the acquisition of certain rental equipment.
Included below is a comparison of Essex's actual results of
operations for the quarter and year ended December 31, 2009 to the
unaudited pro forma results for the same periods in the prior year.
The pro forma results of operations assume that Essex acquired
Essex Holdings as of January 1, 2008, which we believe provides the
most meaningful comparison of our business’s results of operations
for the quarter and year ended December 31, 2008.
Management Comments on 2009
Ron Schad, President & CEO of Essex, stated, “While we are
disappointed with Essex’s results for 2009, in light of the current
economic conditions we were satisfied with our ability to
successfully manage costs thereby enabling us to optimize free cash
flow. The decrease in utilization rates and to a lesser extent
average rental rates had a significant negative impact on total
revenues. Despite the difficult operating environment, we had
positive cash flow from operations of approximately $15.1 million
or $0.96 per share on a fully diluted basis in 2009 and had $48.7
million of borrowing capacity under our revolving credit facility
at December 31, 2009.”
Fourth Quarter Overview
Essex’s total rental related revenue for the fourth quarter of
2009, which includes revenue from equipment rentals, repair and
maintenance, and transportation services, but excludes used rental
equipment sales, was $8.7 million compared to the pro forma total
rental related revenue of $19.8 million for the 2008 period. The
decline was primarily due to lower equipment rental revenue driven
by lower utilization rates on cranes and attachments which
represented 70.0% of total revenue, or $6.4 million for the quarter
ended December 31, 2009, compared to 73.8% of pro forma total
revenue, or $15.9 million for the comparable period in 2008.
Equipment rental income was also impacted by a 15.9% decrease in
the average monthly crane rental rate to $19,181 compared to the
average monthly crane rental rate of $22,805 for the comparable
period in 2008. The decrease in average crane rental rate was the
result of excess market supply of rental equipment compared to the
demand due to the weakening economy and the difficult commercial
credit environment compounded by the expiration of existing rental
agreements executed at higher rental rates in the prior year and
earlier.
The crane utilization rate (on a days method) for the fourth
quarter 2009 equaled 34.8%, compared to 73.0% in the comparable
period in 2008.
Cost of revenues for the quarter ended December 31, 2009 was
$6.9 million, compared to $9.6 million for the 2008 period. The
decrease in cost of revenues is due to the lower revenue level,
cost reduction initiatives previously mentioned, and a decrease in
the number of rental equipment items sold, which were offset by an
increase in depreciation expense related to rental equipment
purchased during 2009. Excluding the net book value of rental
equipment sold and depreciation expense, costs were $3.7 million
for the fourth quarter of 2009, compared to $5.8 million for the
same period in 2008.
Selling, general and administrative expenses were $1.8 million
for the fourth quarter of 2009, a decrease from $8.3 million for
the same period in the prior year. The decrease was primarily due
to $6.0 million of expensed acquisition related costs incurred
during the fourth quarter 2008 and a decrease in payroll related
expenses as a result of our previously discussed cost reduction
initiatives. Both of these expense reductions were partially offset
by an increase in costs in 2009 associated with being a public
company.
Rental EBITDA was $3.1 million for the quarter ended December
31, 2009, versus $5.7 million for the fourth quarter ended December
31, 2008 excluding the $23.9 million goodwill impairment charge
recorded in the prior period.
Full Year 2009 Overview
Essex’s total rental related revenue for the year ended December
31, 2009, which includes revenue from equipment rentals, repair and
maintenance, and transportation services, but excludes used rental
equipment sales, was $45.6 million compared to the pro forma total
rental related revenue of $77.4 million for the 2008 period. The
decline was primarily due to lower equipment rental revenue driven
by lower utilization rates on cranes and attachments which
represented 66.4% of total revenue, or $34.6 million for the year
ended December 31, 2009, compared to 72.0% of pro forma total
revenue, or $61.8 million for the comparable period in 2008. The
average monthly crane rental rate was $21,081 for the year ended
December 31, 2009 compared to $21,382 for the comparable period in
2008. The crane utilization rate (on a days method) for the year
ended December 31, 2009 equaled 43.6%, compared to 72.5% for the
year ended December 31, 2008. Crane utilization for Essex’s heavier
lifting equipment (equipment with lifting capacity in excess of 200
tons) meaningfully exceeded the utilization rate for the entire
fleet.
Cost of revenues for the year ended December 31, 2009 was $32.9
million, compared to $38.4 million for the comparable 2008 period.
The decrease in cost of revenues is due to the lower revenue level,
cost reduction initiatives, and a decrease in the number of rental
equipment items sold offset by an increase in the net book value of
rental equipment sold and an increase in depreciation expense
related to rental equipment purchased during 2009. Excluding the
net book value of rental equipment sold and depreciation expense,
costs were $16.1 million in 2009, compared to $23.3 million for the
2008 period.
Selling, general and administrative expenses were $10.5 million
in 2009, a decrease from $17.7 million in 2008. The decrease was
primarily due to $6.2 million of acquisition related expenses
incurred during 2008 in addition to a decrease in payroll related
expenses as a result of our cost reduction initiatives. Both of
these expense reductions were partially offset by a $2.2 million
increase in costs in 2009 associated with being a public
company.
Rental EBITDA was $19.0 million for the year ended December 31,
2009, versus $36.5 million for the year ended December 31, 2008,
excluding the $23.9 million goodwill impairment charge recorded in
the prior period.
Outlook for 2010
Mr. Schad continued, “We expect that our fleet utilization will
improve throughout 2010. Although we have begun 2010 with low
levels of utilization, our expectation for improvement should
result in 2010 average utilization near or above the average
utilization experienced in 2009. While we are not prepared to
provide full year 2010 earnings guidance, our first quarter fiscal
2010 Rental EBITDA is expected to be less than that in the
preceding quarter ended December 31, 2009 primarily due to lower
average rental rates. Notwithstanding, we have begun to experience
an increase in crane utilization. Specifically, we are encouraged
that new order commitments (in both quantity of cranes and total
dollar amount of bookings) through the first two months of 2010
have been greater than new order commitments received during the
entire quarter ended March 31, 2009. The quality of the new
business opportunities that we are quoting and the likelihood that
these opportunities will materialize are in part the basis for our
optimism that our utilization rates will improve throughout 2010.
Based on previous market cycles, we would expect that we will only
experience a rebound in average rental rates when an increase in
demand pushes utilization to higher levels.”
Mr. Schad concluded, “In 2010 and forward, Essex will continue
to focus its efforts on managing the business to maximize free cash
flow and return on invested capital through prudent growth. In
2009, our cost management efforts reduced our operating expenses by
over $5.0 million on an annualized basis. We will continue these
efforts in 2010 with similar levels of savings until the business
improves. In addition, due to lower utilization levels, we are
likely to reduce our investment in new crane purchases in 2010 to
maximize the returns on the nearly $40.0 million investment in new
rental equipment over the last 24 months. To date, the financial
return on this investment is not fully reflected in our reported
results. Opportunities for the sale of smaller capacity, older
cranes continue to exist at values in excess of our appraised
orderly liquidation value (OLV). We remain confident in the
underlying value of our assets which have remained stable. We
continue to believe that our strategy to sell underutilized lighter
lifting capacity equipment and reinvest into heavier lifting
capacity higher average monthly rental rate equipment positions us
well to meaningfully participate in the recovery.”
Conference Call
Essex’s management team will conduct a conference call to
discuss the operating results at 9:00 a.m. ET on Monday, March 15,
2010. Interested parties may participate in the call by dialing
706-902-1803. Please call in 10 minutes before the call is
scheduled to begin, and ask for the Essex Rental Corp. call
(conference ID# 54692863).
The conference call will be webcast live via the Investor
Relations section ("Events and Presentations") of the Essex Rental
Corp. website at www.essexcrane.com. To listen to the live call,
please go to the website at least 15 minutes early to register,
download and install any necessary audio software. If you are
unable to listen live, the conference call will be archived on the
website.
About Essex Rental Corp.
Headquartered outside of Chicago, Essex, through its subsidiary,
Essex Crane, is one of North America's largest providers of
lattice-boom crawler crane and attachment rental services. With
over 350 cranes and attachments in its fleet, Essex supplies cranes
for construction projects related to power generation,
petro-chemical, refineries, water treatment & purification,
bridges, highways, hospitals, shipbuilding, offshore oil
fabrication and industrial plants, and commercial construction.
Some of the statements in this press release and other written
and oral statements made from time to time by the Company and its
representatives are “forward-looking statements” within the meaning
of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended.
These statements include statements regarding the intent and belief
or current expectations of Essex and its management team and may be
identified by the use of words like "anticipate", "believe",
"estimate", "expect", "intend", "may", "plan", "will", "should",
"seek", the negative of these terms or other comparable
terminology. Investors are cautioned that any such forward-looking
statements are not guarantees of future performance and involve
risks and uncertainties, and that actual results may differ
materially from those projected in the forward-looking statements.
Important factors that could cause actual results to differ
materially from Essex’s expectations include, without limitation,
the continued ability of Essex to successfully execute its business
plan, the possibility of a change in demand for the products and
services that Essex provides (through its subsidiary, Essex Crane),
intense competition which may require us to lower prices or offer
more favorable terms of sale, our reliance on third party
suppliers, our indebtedness which could limit our operational and
financial flexibility, global economic factors including interest
rates, general economic conditions, geopolitical events and
regulatory changes, our dependence on our management team and key
personnel, as well as other relevant risks detailed in our Annual
Report on Form 10-K and other periodic reports filed with the
Securities and Exchange Commission and available on our website,
www.essexcrane.com. The factors listed here are not exhaustive.
Many of these uncertainties and risks are difficult to predict and
beyond management’s control. Forward-looking statements are not
guarantees of future performance, results or events. Essex assumes
no obligation to update or supplement forward-looking information
in this press release whether to reflect changed assumptions, the
occurrence of unanticipated events or changes in future operating
results or financial conditions, or otherwise.
This press release includes references to Rental EBITDA, an
unaudited financial measure of performance which is not calculated
in accordance with generally accepted accounting principles, or
GAAP. While management believes that the presentation of Rental
EBITDA serves to enhance understanding of Essex's and Essex Crane's
operating performance, Rental EBITDA should be considered in
addition to, but not as substitutes for, or more meaningful than,
income from operations, the most directly comparable GAAP measures,
as an indicator of Essex's and Essex Crane's operating performance.
Rental EBITDA has been presented as a supplemental disclosure
because EBITDA is a widely used measure of performance and basis
for valuation. A reconciliation of Rental EBITDA to income from
operations is included in the financial tables accompanying this
release.
Essex Rental Corp. Consolidated Statements of
Operations
Quarter Ended December 31, Year Ended
December 31, 2009
2008 (1)
2009
2008 (1)
(Unaudited) (Unaudited) (Unaudited) REVENUE
Equipment rentals $ 6,360,757 $ 15,855,119 $ 34,556,696 $
61,823,678 Used rental equipment sales 403,875 1,730,771 6,478,197
8,439,805 Transportation 978,469 1,985,791 4,909,346 8,163,171
Equipment repairs and maintenance 1,345,013 1,914,138 6,140,153
7,424,692 TOTAL REVENUE 9,088,114
21,485,819 52,084,392 85,851,346 COST OF REVENUES Salaries,
payroll taxes and benefits 1,428,936 2,136,217 6,006,715 8,041,998
Depreciation 2,847,494 2,302,994 11,210,472 10,561,967 Net book
value of rental equipment sold 290,937 1,439,677 5,584,784
4,625,783 Transportation 826,012 1,479,486 3,743,595 6,727,663
Equipment repairs and maintenance 1,162,342 1,696,971 4,873,005
6,647,754 Yard operating expenses 311,625 501,932 1,482,371
1,839,273 TOTAL COST OF REVENUES
6,867,346 9,557,277 32,900,942 38,444,438 GROSS PROFIT
2,220,768 11,928,542 19,183,450 47,406,908 Selling, general
and administrative expenses 1,835,877 8,283,988 10,547,405
17,698,297 Goodwill impairment - 23,895,733 - 23,895,733 Other
depreciation and amortization 180,633 362,366 781,751 995,324
INCOME (LOSS) FROM OPERATIONS 204,258
(20,613,545 ) 7,854,294 4,817,554 OTHER INCOME (EXPENSES)
Other income 316 179,065 643 - Interest expense (1,654,101 )
(1,497,936 ) (6,681,740 ) (9,524,943 ) TOTAL
OTHER INCOME (EXPENSES) (1,653,785 ) (1,318,871 )
(6,681,097 ) (9,524,943 ) INCOME (LOSS) BEFORE
INCOME TAXES (1,449,527 ) (21,932,416 ) 1,173,197 (4,707,389 )
PROVISION (BENEFIT) FOR INCOME TAXES (830,758 )
(7,512,682 ) (22,609 ) (1,068,388 ) NET
INCOME (LOSS) $ (618,769 ) $ (14,419,734 ) $ 1,195,806 $
(3,639,001 ) Weighted average shares outstanding: Basic
14,117,714 14,146,029 14,110,789 14,155,055 Diluted 14,117,714
14,146,029 15,805,191 14,155,055 Earnings (loss) per share:
Basic $ (0.04 ) $ (1.02 ) $ 0.08 $ (0.26 ) Diluted $ (0.04 )
$ (1.02 ) $ 0.08 $ (0.26 ) (1) On
October, 31, 2008, Essex Rental Corp. consummated the acquisition
of Essex Holdings, LLC and its wholly owned subsidiary, Essex Crane
Rental Corp. (collectively, the "Predecessor"). The consolidated
statements of operations for the quarter and year ended December
31, 2008 include unaudited pro forma results as if the acquisition
occurred as of January 1, 2008. Management believes comparison of
2009 actual results to 2008 pro forma results provides the most
meaningful comparison of Essex's results of operations. Additional
information regarding Essex Rental Corp.'s acquisition of the
Predecessor as well as information regarding proforma financial
information is available in our annual and quarterly reports filed
with the Securities and Exchange Commission.
Essex Rental
Corp. Rental and Utilization Statistics
(Unaudited)
Quarter Ended December 31,
Year Ended December 31, 2009
2008 2009
2008 Average crane rental rate per month $
19,181 $ 22,805 $ 21,081 $ 21,382 Utilization Statistics -
Cranes "Days" Method Utilization 34.8 % 73.0 % 43.6 % 72.5 % "Hits"
Method Utilization 38.5 % 76.8 % 48.2 % 77.0 % (See
definitions in the quarterly and annual reports filed with the SEC)
Reconciliation of Income from
Operations to Total EBITDA and Rental EBITDA
(Unaudited) Quarter Ended December 31,
Year Ended December 31, 2009
2008 2009
2008 Income (loss) from Operations $ 204,258 $
(20,613,545 ) $ 7,854,294 $ 4,817,554 Add: Depreciation 2,847,494
2,302,994 11,210,472 10,561,967 Add: Goodwill Impairment -
23,895,733 - 23,895,733 Add: Other depreciation and amortization
180,633 362,366 781,751
995,324 Total EBITDA 3,232,385 5,947,548 19,846,517
40,270,578 Minus: Used rental equipment sales (403,875 ) (1,730,771
) (6,478,197 ) (8,439,805 ) Add: Net book value of rental equipment
sold 290,937 1,439,677 5,584,784
4,625,783 Rental EBITDA $ 3,119,447 $
5,656,454 $ 18,953,104 $ 36,456,556
Essex Rental Corp. Consolidated Balance Sheets
December 31, December 31, 2009
2008 ASSETS CURRENT ASSETS Cash and
cash equivalents $ 199,508 $ 139,000 Accounts receivable, net of
allowances for doubtful accounts and credit memos of $1,545,000 and
$660,000, respectively 4,973,995 11,350,561 Other receivables
3,791,845 3,167,773 Deferred tax assets 1,724,621 1,859,071 Prepaid
expenses and other assets 410,198 440,879
TOTAL CURRENT ASSETS 11,100,167 16,957,284 Rental
equipment, net 260,767,678 255,692,116 Property and equipment, net
6,981,660 8,176,143 Spare parts inventory, net 3,556,236 3,276,858
Identifiable finite lived intangibles, net 2,160,239 3,518,667 Loan
acquisition costs, net 1,897,177 2,377,442
TOTAL ASSETS $ 286,463,157 $ 289,998,510
LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT
LIABILITIES Accounts payable $ 1,790,683 $ 2,510,564 Accrued
employee compensation and benefits 679,078 2,160,960 Accrued taxes
5,663,263 5,203,485 Accrued interest 303,186 440,667 Accrued other
expenses 739,639 1,390,864 Unearned rental revenue 793,797
2,176,906 Short-term debt obligations 5,170,614 - Current portion
of capital lease obligation 6,269 -
TOTAL CURRENT LIABILITIES 15,146,529 13,883,446 LONG-TERM
LIABILITIES Revolving credit facility 131,919,701 137,377,921
Deferred tax liabilities 62,935,535 63,266,773 Interest rate swap
2,306,294 3,424,613 Capital lease obligation 17,067
- TOTAL LONG-TERM LIABILITIES 197,178,597
204,069,307 TOTAL LIABILITIES
212,325,126 217,952,753 STOCKHOLDERS' EQUITY Preferred
stock, $.0001 par value, Authorized 1,000,000 shares, none issued -
- Common stock, $.0001 par value, Authorized 40,000,000 shares;
issued and outstanding 14,124,563 shares at December 31, 2009 and
14,106,886 shares at December 31, 2008 1,412 1,410 Paid in capital
84,589,119 84,383,579 Accumulated deficit (9,022,597 ) (10,218,403
) Accumulated other comprehensive loss, net of tax
(1,429,903 ) (2,120,829 ) TOTAL STOCKHOLDERS' EQUITY
74,138,031 72,045,757 TOTAL LIABILITIES
AND STOCKHOLDERS' EQUITY $ 286,463,157 $ 289,998,510
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