General Finance Corporation (NASDAQ: GFN), a leading specialty
rental services company offering portable storage, modular space
and liquid containment solutions in North America and in the
Asia-Pacific region of Australia and New Zealand (the “Company”),
today announced its consolidated financial results for the first
quarter ended September 30, 2020.
First Quarter
2021
Highlights
- Rental revenues from our core non-liquid containment products
in North America increased by 5% from the first quarter of fiscal
year 2020.
- Leasing revenues were $52.3 million, compared to $58.9 million
for the first quarter of fiscal year 2020.
- Leasing revenues, excluding the oil and gas sector, increased
by approximately 1% in North America and declined by less than 1%
in local currency in the Asia-Pacific from the first quarter of
fiscal year 2020.
- Leasing revenues comprised 64% of total non-manufacturing
revenues versus 67% for the first quarter of fiscal year 2020.
- Total revenues were $82.4 million, compared to $89.8 million
for the first quarter of fiscal year 2020.
- Adjusted EBITDA was $21.1 million, compared to $25.1 million
for the first quarter of fiscal year 2020.
- Adjusted EBITDA margin was 26%, compared to 28% in the first
quarter of fiscal year 2020.
- Net income attributable to common shareholders was $3.2
million, or $0.10 per diluted share, compared to net income
attributable to common shareholders of $5.0 million, or $0.16 per
diluted share, for the first quarter of fiscal year 2020. Included
in these results were a non-cash charge of $0.7 million and a
non-cash benefit of $1.0 million in fiscal years 2021 and 2020,
respectively, for the change in valuation of stand-alone bifurcated
derivatives.
- Average fleet unit utilization was 73%, compared to 77% in the
first quarter of fiscal year 2020.
- Subsequent to quarter-end, the Company completed a $60.0
million public offering of 7.875% Senior Notes due 2025.
Management Commentary
“We expected challenges from the COVID-19 pandemic to lower our
first quarter results,” said Jody Miller, President and Chief
Executive Officer. “Despite these challenges, our core North
America leasing operations at Pac-Van remained relatively stable,
with revenues down only 2% from the first quarter of the prior
fiscal year, and the growth in revenues and adjusted EBITDA of our
Asia-Pacific operations exceeded our expectations. However,
reduced drilling activity and continuing uncertainty in the oil and
gas markets aggravated by the COVID-19 pandemic continue to
adversely affect Lone Star’s liquid containment business.
Conditions in the oil and gas market could improve, but we are
prepared for these ongoing challenges in the sector throughout our
fiscal year 2021.”
Mr. Miller concluded, “I want to reiterate that the physical
health and safety of our employees and customers remain our
foremost concern. We are considered an essential business and
our locations remain open, operating under flexible work practices
while maintaining the same level of safety and service that our
customers expect. We have a resilient business and
experienced managers who have navigated through past challenges and
are well prepared to continue to navigate effectively through this
environment.”
Charles Barrantes, Executive Vice President and Chief Financial
Officer, added, “Our better than expected first quarter results and
our management of working capital and fleet investment generated
free cash flow and reduced debt during the quarter. In addition, we
are pleased with the successful completion of a $60.0 million
public offering of 7.875% senior unsecured notes that mature on
October 31, 2025. In connection with the offering, we have granted
the underwriters an option for 30 days to purchase up to an
additional $9.0 million to cover overallotments, if any. The net
proceeds from the offering will be used to redeem a portion of our
outstanding 8.125% unsecured senior notes that mature on July 31,
2021.
Mr. Barrantes concluded, “We continue to evaluate financing
alternatives to refinance the remaining 8.125% senior unsecured
notes, with the goal of further lowering our overall cost of
financing. Our financial position and liquidity remain strong and
we expect to continue to generate free cash flow for the full
fiscal year.”
First Quarter
2021 Operating
Summary
North AmericaRevenues from our North American
leasing operations for the first quarter of fiscal year 2020
totaled $53.6 million, compared with $60.6 million for the first
quarter of fiscal year 2020, a decrease of approximately 12%.
Leasing revenues decreased by 16% on a year-over-year basis. The
decrease in leasing revenues occurred primarily in the oil and gas
sector, substantially attributable to Lone Star, as well as in the
services sector. This decrease was partially offset by increases in
the construction and industrial sectors. Sales revenues were
comparable between the periods. Adjusted EBITDA was approximately
$15.0 million for the first quarter of fiscal year 2021, as
compared with $19.4 million for the prior year’s quarter, a
decrease of 23%. Adjusted EBITDA from Pac-Van decreased by 8% to
$14.7 million, from $15.9 million in the first quarter of fiscal
year 2020, and adjusted EBITDA from Lone Star significantly
decreased to $0.3 million, from $3.5 million in the year-ago
quarter.
North American manufacturing revenues for the first quarter of
fiscal year 2021 totaled $1.6 million and included intercompany
sales of $1.3 million from products sold to our North American
leasing operations. This compares to $3.5 million of total sales,
including intercompany sales of $1.3 million during the first
quarter of fiscal year 2020. On a stand-alone basis, prior to
intercompany adjustments, adjusted EBITDA was a slight loss of $0.1
million the first quarter of fiscal year 2021, as compared with
adjusted EBITDA of $0.3 million for the year-ago quarter.
Asia-Pacific Revenues from the Asia-Pacific
region for the first quarter of fiscal year 2021 totaled $28.5
million, as compared with $27.1 million for the first quarter of
fiscal year 2020, an increase of 5%. The Australian dollar
strengthened against the U.S. dollar between the periods, so on a
local currency basis, total revenues increased by approximately 1%.
The slight increase in revenues in local dollars was driven
primarily by increased revenues in the utilities sector and was
partially offset by decreases in the government, education and
industrial sectors. Leasing revenues increased by 3% on a
year-over-year basis, but decreased slightly in local currency,
primarily due to decreases in the construction, education and
special events sectors; partially offset by increases in the
healthcare and government sectors. Adjusted EBITDA for the first
quarter of 2021 was $7.3 million, as compared with $6.8 million in
the year-ago quarter, an increase of approximately 8%. On a local
currency basis, adjusted EBITDA increased by 3%.
Balance Sheet and Liquidity
Overview
At September 30, 2020, the Company had total debt of $375.0
million and cash and cash equivalents of $17.3 million, compared
with $379.8 million and $17.5 million at June 30, 2020,
respectively. At September 30, 2020, our North American leasing
operations had $96.4 million available to borrow under its senior
credit facility, and our Asia-Pacific leasing operations had,
including cash at the bank, $31.6 million (A$44.2 million)
available to borrow under its senior credit facility.
During the first quarter of fiscal year 2021, the Company
generated cash from operating activities of $10.7 million, as
compared to $13.6 million for the year-ago quarter. In the first
quarter of fiscal year 2020, the Company realized net proceeds of
$0.2 million (investing $1.9 million in North America and realizing
net proceeds of $2.1 million in the Asia-Pacific) from the lease
fleet, as compared to $7.3 million in net fleet investment ($8.1
million in North America and realizing net proceeds of $0.8 million
in the Asia-Pacific) in the first quarter of fiscal year 2020.
Receivables were $42.2 million at September 30, 2020, as
compared to $44.1 million at June 30, 2020. Days sales outstanding
in receivables for our Asia-Pacific leasing operations decreased
from 43 days as of June 30, 2020 to 37 days as of September 30,
2020 and, for North American leasing operations, increased from 40
days as of June 30, 2020 to 42 days as of September 30, 2020.
Outlook
The impact of the COVID-19 pandemic continues to evolve and,
therefore, it is extremely difficult to reasonably predict the
extent to which our results of operations, liquidity and financial
condition will ultimately be impacted by the pandemic in fiscal
year 2021. However, based on our first quarter results and
depending on conditions in the oil and gas sector in Texas and the
translation effect of the Australian dollar to the U.S. dollar,
management estimates that consolidated revenues for fiscal year
2021 will be in the range of $310 million to $325 million and
consolidated adjusted EBITDA is expected to be 15% to 20% lower in
fiscal year 2021 than fiscal year 2020. This improved outlook does
not take into account the impact of any acquisitions that may occur
during fiscal year 2021.
Conference Call Details
Management will host a conference call today at 8:30 a.m.
Pacific Time (11:30 a.m. Eastern Time), to discuss the Company’s
operating results. The conference call number for U.S. participants
is (866) 901-5096 and the conference call number for participants
outside the U.S. is (706) 643-3717. The conference ID number for
both conference call numbers is 1288533. Additionally, interested
parties can listen to a live webcast of the call in the "Investor
Relations" section of the Company's website at
http://www.generalfinance.com.
A replay of the conference call may be accessed through November
23, 2020 by dialing (800) 585-8367 (U.S.) or (404) 537-3406
(international), using conference ID number 1288533.
After the replay has expired, interested parties can listen to
the conference call via webcast in the "Investor Relations" section
of the Company's website at http://www.generalfinance.com.
About General Finance Corporation
Headquartered in Pasadena, California, General Finance
Corporation (NASDAQ: GFN, www.generalfinance.com) is a leading
specialty rental services company offering portable storage,
modular space and liquid containment
solutions. Management’s expertise in these sectors
drives disciplined growth strategies, operational guidance,
effective capital allocation and capital markets support for the
Company’s subsidiaries. The
Company’s Asia-Pacific leasing operations
in Australia and New Zealand consist of
wholly-owned Royal Wolf (www.royalwolf.com.au), the leading
provider of portable storage solutions in those regions. The
Company’s North America leasing operations consist of
wholly-owned subsidiaries Pac-Van, Inc. (www.pacvan.com),
provider of primarily portable storage and office containers,
mobile offices and modular buildings, and Lone Star Tank
Rental Inc. (www.lonestartank.com), provider of liquid storage tank
containers. The Company also owns Southern Frac, LLC
(www.southernfrac.com), a manufacturer of portable liquid storage
tank containers and, under the trade name Southern Fabrication
Specialties (www.southernfabricationspecialties.com), other steel
products in North America.
Cautionary Statement about
Forward-Looking Statements
Statements in this news release that are not
historical facts 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.
Such forward-looking statements include, but are not limited to,
statements addressing management’s views with respect to future
financial and operating results, competitive pressures, increases
in interest rates for our variable rate indebtedness, our ability
to raise capital or borrow additional funds, changes in the
Australian, New Zealand or Canadian dollar relative to the U.S.
dollar, regulatory changes, customer defaults or insolvencies,
litigation, the acquisition of businesses that do not perform as we
expect or that are difficult for us to integrate or control, our
ability to procure adequate levels of products to meet customer
demand, our ability to procure adequate supplies for our
manufacturing operations, labor disruptions, adverse resolution of
any contract or other disputes with customers, declines in demand
for our products and services from key industries such as the
Australian resources industry or the U.S. oil and gas and
construction industries, the disruption of operations from
catastrophic or extraordinary events, including viral pandemics
such as the COVID-19 coronavirus, or a write-off of all or a part
of our goodwill and intangible assets. These risks and
uncertainties could cause actual outcomes and results to differ
materially from those described in our forward-looking statements.
We believe that the expectations represented by our forward-looking
statements are reasonable, yet there can be no assurance that such
expectations will prove to be correct. Furthermore, unless
otherwise stated, the forward-looking statements contained in this
press release are made as of the date of the press release, and we
do not undertake any obligation to update publicly or to revise any
of the included forward-looking statements, whether as a result of
new information, future events or otherwise unless required by
applicable law. The forward-looking statements contained in this
press release are expressly qualified by these cautionary
statements. Readers are cautioned that these forward-looking
statements involve certain risks and uncertainties, including those
contained in filings with the Securities and Exchange
Commission.
Investor Contact Larry
ClarkFinancial Profiles, Inc.310-622-8223
-Financial Tables Follow-
GENERAL FINANCE CORPORATION AND
SUBSIDIARIESCONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS(In
thousands, except share and per share
data)(Unaudited)
|
Quarter Ended September 30, |
|
2019 |
2020 |
Revenues |
|
|
Sales: |
|
|
Lease inventories and fleet |
$ |
28,791 |
$ |
29,665 |
Manufactured units |
|
2,173 |
|
357 |
|
|
30,964 |
|
30,022 |
Leasing |
|
58,933 |
|
52,338 |
|
|
89,897 |
|
82,360 |
|
|
|
Costs and
expenses |
|
|
Cost of Sales: |
|
|
Lease inventories and fleet (exclusive of the items shown
separately below) |
|
20,216 |
|
21,294 |
Manufactured units |
|
1,827 |
|
441 |
Direct costs of leasing
operations |
|
22,858 |
|
20,611 |
Selling and general
expenses |
|
20,655 |
|
19,643 |
Depreciation and
amortization |
|
9,411 |
|
9,066 |
|
|
|
Operating
income |
|
14,930 |
|
11,305 |
|
|
|
Interest income |
|
186 |
|
151 |
Interest expense |
|
(7,324) |
|
(5,697) |
Change in value of bifurcated
derivatives Convertible Note |
|
992 |
|
(683) |
Foreign exchange and
other |
|
(573) |
|
326 |
|
|
(6,719) |
|
(5,903) |
|
|
|
Income
before provision for income taxes |
|
8,211 |
|
5,402 |
|
|
|
Provision for income
taxes |
|
2,260 |
|
1,319 |
|
|
|
Net
income |
|
5,951 |
|
4,083 |
Preferred stock dividends |
|
(922) |
|
(922) |
|
|
|
Net
income attributable to common
stockholders |
$ |
5,029 |
$ |
3,161 |
|
|
|
Net income per common
share: |
|
|
Basic |
$ |
0.17 |
$ |
0.11 |
Diluted |
|
0.16 |
|
0.10 |
|
|
|
Weighted average shares
outstanding: |
|
|
Basic |
|
30,205,248 |
|
29,693,856 |
Diluted |
|
31,340,432 |
|
30,517,727 |
|
|
|
|
|
GENERAL FINANCE CORPORATION AND
SUBSIDIARIESCONDENSED
CONSOLIDATED BALANCE SHEETS(In thousands,
except share and per share
data)(Unaudited)
|
June 30, 2020 |
|
September 30, 2020 |
Assets |
|
|
|
Cash and cash equivalents |
$ |
17,478 |
|
$ |
17,297 |
Trade and other receivables,
net |
|
44,066 |
|
|
42,221 |
Inventories |
|
20,928 |
|
|
20,192 |
Prepaid expenses and
other |
|
8,207 |
|
|
13,660 |
Property, plant and equipment,
net |
|
24,396 |
|
|
24,064 |
Lease fleet, net |
|
458,727 |
|
|
459,107 |
Operating lease assets |
|
66,225 |
|
|
76,723 |
Goodwill |
|
97,224 |
|
|
98,234 |
Other intangible assets,
net |
|
18,771 |
|
|
17,920 |
Total
assets |
$ |
756,022 |
|
$ |
769,418 |
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
Trade payables and accrued
liabilities |
$ |
46,845 |
|
$ |
44,949 |
Income taxes payable |
|
645 |
|
|
360 |
Unearned revenue and advance
payments |
|
24,642 |
|
|
27,115 |
Operating lease
liabilities |
|
67,142 |
|
|
77,913 |
Senior and other debt,
net |
|
379,798 |
|
|
375,000 |
Fair value of bifurcated
derivatives in Convertible Note |
|
18,325 |
|
|
19,008 |
Deferred tax liabilities |
|
43,708 |
|
|
44,662 |
Total
liabilities |
|
581,105 |
|
|
589,007 |
|
|
|
|
|
|
Commitments and
contingencies |
|
— |
|
|
— |
|
|
|
|
|
|
Equity |
|
|
|
|
|
Cumulative preferred stock,
$.0001 par value: 1,000,000 shares authorized; 400,100 shares
issued and outstanding (in series) |
|
40,100 |
|
|
40,100 |
Common stock, $.0001 par
value: 100,000,000 shares authorized; 30,880,531 shares issued and
29,968,766 outstanding at June 30, 2020 and 31,086,990 shares
issued and 30,175,225 shares outstanding at September 30, 2020 |
|
3 |
|
|
3 |
Additional paid-in
capital |
|
183,051 |
|
|
182,796 |
Accumulated other
comprehensive loss |
|
(22,106) |
|
|
(20,440) |
Accumulated deficit |
|
(20,790) |
|
|
(16,707) |
Treasury stock, at cost;
911,765 shares |
|
(5,845) |
|
|
(5,845) |
Total General Finance
Corporation stockholders’ equity |
|
174,413 |
|
|
179,907 |
Equity of noncontrolling
interests |
|
504 |
|
|
504 |
Total
equity |
|
174,917 |
|
|
180,411 |
Total liabilities and
equity |
$ |
756,022 |
|
$ |
769,418 |
|
|
|
|
|
|
Explanation and Use of Non-GAAP
Financial Measures
Earnings before interest, income taxes, impairment, depreciation
and amortization and other non-operating costs and income
(“EBITDA”) and adjusted EBITDA are non-U.S. GAAP measures. We
calculate adjusted EBITDA to eliminate the impact of certain items
we do not consider to be indicative of the performance of our
ongoing operations. In addition, in evaluating adjusted EBITDA, you
should be aware that in the future, we may incur expenses similar
to the expenses excluded from our presentation of adjusted EBITDA.
Our presentation of adjusted EBITDA should not be construed as an
inference that our future results will be unaffected by unusual or
non-recurring items. We present adjusted EBITDA because we consider
it to be an important supplemental measure of our performance and
because we believe it is frequently used by securities analysts,
investors and other interested parties in the evaluation of
companies in our industry, many of which present EBITDA and a form
of adjusted EBITDA when reporting their results. Adjusted EBITDA
has limitations as an analytical tool, and should not be considered
in isolation, or as a substitute for analysis of our results as
reported under U.S. GAAP. We compensate for these limitations by
relying primarily on our U.S. GAAP results and using adjusted
EBITDA only supplementally. The following tables show our adjusted
EBITDA and the reconciliation from net income on a consolidated
basis and from operating income (loss) for our operating segments
(in thousands):
|
Quarter Ended September 30, |
|
2019 |
2020 |
Net income |
$ |
5,951 |
$ |
4,083 |
Add (deduct) — |
|
|
Provision for income taxes |
|
2,260 |
|
1,319 |
Change in valuation of bifurcated derivatives in Convertible
Note |
|
(992) |
|
683 |
Foreign exchange and other |
|
573 |
|
(326) |
Interest expense |
|
7,324 |
|
5,697 |
Interest income |
|
(186) |
|
(151) |
Depreciation and amortization |
|
9,512 |
|
9,165 |
Share-based compensation expense |
|
683 |
|
524 |
Refinancing costs not capitalized |
|
--- |
|
150 |
Adjusted
EBITDA |
$ |
25,125 |
$ |
21,144 |
|
|
|
|
|
|
Quarter Ended September 30,
2019 |
|
Quarter Ended September 30,
2020 |
|
Asia-Pacific |
North America |
|
Asia-Pacific |
North America |
|
Leasing |
Leasing |
Manufacturing |
Corporate |
|
Leasing |
Leasing |
Manufacturing |
Corporate |
Operating income (loss) |
$ |
2,703 |
$ |
13,669 |
$ |
176 |
$ |
(1,666) |
|
$ |
4,275 |
$ |
8,445 |
$ |
(217) |
$ |
(1,307) |
Add - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
3,953 |
|
5,637 |
|
101 |
|
3 |
|
|
3,029 |
|
6,216 |
|
99 |
|
3 |
Share-based compensation expense |
|
183 |
|
117 |
|
9 |
|
374 |
|
|
48 |
|
134 |
|
12 |
|
330 |
Refinancing costs not capitalized |
|
--- |
|
--- |
|
--- |
|
--- |
|
|
--- |
|
150 |
|
--- |
|
--- |
Adjusted
EBITDA |
$ |
6,839 |
$ |
19,423 |
$ |
286 |
$ |
(1,289) |
|
$ |
7,352 |
$ |
14,945 |
$ |
(106) |
$ |
(974) |
Intercompany
adjustments |
|
|
|
$ |
(134) |
|
|
|
|
$ |
(73) |
|
|
|
|
|
|
|
|
|
|
|
|
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