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| 8-K - FORM 8-K - Essex Rental Corp. | v320656_8k.htm |
FOR IMMEDIATE RELEASE
ESSEX RENTAL CORP. REPORTS SECOND QUARTER 2012 RESULTS
EBITDA before non-cash compensation and non-recurring expenses for the quarter increased by
138.9% and 65.3% compared to the quarters ended June 30, 2011 and March 31, 2012, respectively.
BUFFALO GROVE, IL – August 7, 2012 – Essex Rental Corp. (Nasdaq: ESSX) ("Essex") today announced its unaudited consolidated results for the three months ended June 30, 2012.
Second Quarter 2012 Highlights
| · | Total revenue was $27.2 million for the three months ended June 30, 2012, a 21.7% increase from $22.3 million for the three months ended June 30, 2011; |
| · | EBITDA before non-cash compensation and non-recurring expenses for the three months ended June 30, 2012 increased to $4.3 million as compared to $1.8 million and $2.6 million for the three month periods ended June 30, 2011 and March 31, 2012, respectively; |
| · | Average monthly crawler crane rental rates increased by $808 or 5.0% to $17,041 on a sequential quarterly basis, compared to $16,233 for the three month period ended March 31, 2012. On a year over year basis, average monthly crawler crane rental rate increased $1,694 or 11.0% from $15,347 for the three months ended June 30, 2011. Average monthly crawler crane rental rates are at their highest level since the first quarter of 2010; |
| · | Excluding the impact of the levee project that was active in 2011, utilization of crawler cranes increased to 39.4% in the second quarter of 2012, compared to 34.8% for the comparable quarter in 2011; |
| · | Utilization of rough terrain cranes increased to 67.6% in the second quarter of 2012, compared to 54.8% for the first quarter of 2012; |
| · | Utilization of heavy tower cranes and elevator lifts increased to 55.1% in the second quarter of 2012, compared to 47.9% for the first quarter of 2012; |
| · | New, used and rental equipment sales totaled $8.6 million for the three month period ended June 30, 2012, a 61.4% increase from $5.3 million for the three month period ended June 30, 2011; and |
| · | Total debt decreased by $7.9 million over the six months ended June 30, 2012, due in part to the disposition of excess rental equipment at an average of 108.2% of Orderly Liquidation Value (“OLV”). |
CEO Comments
Ron Schad, President and CEO of Essex stated, “We are satisfied with the results achieved during the second quarter of 2012 and believe that the results represent a validation of our decision to broaden our equipment portfolio to include rough terrain cranes, boom trucks and tower cranes as well as add predictable business lines such as third party aftermarket parts and service sales. Much of the increase in earnings on both a sequential quarter and year over year basis is as a result of operating improvements that have been implemented over the last six months. Utilization in equipment categories that represent the majority of our OLV continues to improve gradually, albeit off a low base. Specifically, in the second quarter of 2012 we experienced sequential quarterly increases in utilization for crawler cranes, rough terrain cranes and large tower cranes, which are our three largest equipment types as measured by original equipment cost. Rental rates are trending higher across many of our primary equipment categories. We were pleased with the level of rental fleet asset sales, particularly of non-core assets including aerial work platforms and forklifts that were acquired as part of the Coast acquisition. Proceeds from these sales were used to reduce debt.”
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Second Quarter 2012 Overview
Equipment rentals segment revenues were $21.6 million for the three months ended June 30, 2012 versus $14.6 million for the three months ended June 30, 2011. Equipment rentals segment revenues include rental, transportation, used rental equipment sales and repairs and maintenance of rental equipment. The 48.0% year-over-year increase in equipment rentals segment revenues is due to an increase in days on rent for our crawler crane, tower crane, and rough terrain equipment and an increase in used rental equipment sales of $5.6 million.
Equipment distribution revenue, which includes the retail distribution of new and used equipment, but excludes the proceeds received from the sale of used rental equipment, was $1.3 million for the three months ended June 30, 2012 compared to $3.6 million for the three months ended June 30, 2011. The decline in equipment distribution revenue is due to the lower sales volume and smaller size of transactions consummated in the current period.
Parts and service revenue increased 3.7% to $4.3 million for the three months ended June 30, 2012 as compared to $4.1 million for the three months ended June 30, 2011. Several operating initiatives have been implemented in this segment over the past six months aimed at increasing volume and we continue to achieve improved profitability as compared to historical performance.
Gross profit increased 86.2% to $5.3 million for the three months ended June 30, 2012 from $2.9 million for the three months ended June 30, 2011. Gross profit margin increased by approximately 6.8% to 19.6% for the three months ended June 30, 2012 from 12.8% for the three months ended June 30, 2011, fueled by higher margin percentages in the rental and parts and service segments.
EBITDA before non-cash compensation and non-recurring expenses increased by 138.9% to $4.3 million for the three months ended June 30, 2012 compared to $1.8 million for the three months ended June 30, 2011. EBITDA before non-cash compensation and non-recurring expenses for the three months ended June 30, 2012 increased by 65.3% as compared to $2.6 million for the three months ended March 31, 2012.
Outlook for 2012
Mr. Schad continued, “Demand for our equipment continues to improve, particularly for infrastructure and maintenance related energy projects. The expected duration of new crawler crane orders year to date through July has increased 15.5% compared to the prior year’s orders. The increased average crawler crane lease duration is providing greater visibility, and if this trend continues, is likely to have a positive impact on utilization for the remainder of 2012 and 2013. Utilization trends have remained strong thus far in the third quarter and as a result, we believe an opportunity exists over the next 6 months to continue to increase rental rates on a selective basis on certain asset classes where utilization exceeds 60.0%. Management expects that the impact of operating initiatives that have been implemented thus far in 2012 will become more pronounced over the next 12 months, which when combined with improving utilization and rental rates are expected to result in continued earnings growth.
We continue to identify opportunities to sell rental fleet assets and use the proceeds to reduce outstanding debt. The rental assets being actively marketed for sale are non-core assets such as aerial work platforms and forklifts, where we lack a competitive advantage and do not leverage our crane expertise, and crawler cranes that were underutilized during historic peak demand periods. During the first six months of 2012, we have sold $12.7 million of non-core and excess rental fleet assets at approximately 108.2% of OLV.”
Mr. Schad concluded, “Liquidity has increased by $5.1 million to $49.2 million on a sequential quarterly basis, which includes $8.9 million in cash. Due to our improved operating results and the sale of non-core and excess rental fleet assets, we have reduced our consolidated revolving debt balance by $7.9 million or 3.4% since the end of 2011 and we intend to continue to focus on debt reduction for the remainder of the year.”
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Conference Call
Essex’s management team will conduct a conference call to discuss the operating results at 9:00 a.m. ET on Wednesday, August 8, 2012. Interested parties may participate in the call by dialing (877) 407-8291 (Domestic) and (201) 689-8345 (International). Please call in 10 minutes before the call is scheduled to begin, and ask for the Essex Rental Corp. call.
The conference call will be webcast live via the Investor Relations section ("Events and Presentations") of the Essex Rental Corp. website at www.essexrentalcorp.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.
Essex, through its subsidiaries, Essex Crane Rental Corp. and Coast Crane Company, is one of North America's largest providers of rental and distribution for mobile cranes (including lattice-boom crawler cranes, truck cranes and rough terrain cranes), self-erecting cranes, stationary tower cranes, elevators and hoists, and other lifting equipment used in a wide array of construction projects. In addition, the Company provides product support including installation, maintenance, repair, and parts and services for equipment provided and other equipment used by its construction industry customers. With a large fleet, consisting primarily of cranes, as well as other construction equipment and unparalleled customer service and support, Essex supplies a wide variety of innovative lifting solutions for construction projects related to power generation, petro-chemical, refineries, water treatment and purification, bridges, highways, hospitals, shipbuilding, offshore oil fabrication and industrial plants, and commercial and residential construction.
Some of the statements in this press release and other written and oral statements made from time to time by Essex 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, 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 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 EBITDA serves to enhance understanding of Essex's operating performance, 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 operating performance. EBITDA has been presented as a supplemental disclosure because EBITDA is a widely used measure of performance and basis for valuation. A reconciliation of EBITDA to income from operations is included in the financial tables accompanying this release.
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CONTACT:
Essex Rental Corp.
Martin Kroll
Chief Financial Officer
(847) 215-6502 / mkroll@essexcrane.com
OR
Kory Glen
Director of Finance
(847) 215-6522 / kglen@essexcrane.com
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Essex Rental Corp. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| REVENUES | ||||||||||||||||
| Equipment rentals | $ | 11,133,146 | $ | 10,185,995 | $ | 21,417,468 | $ | 20,552,848 | ||||||||
| Retail equipment sales | 1,277,506 | 3,591,291 | 2,193,952 | 7,289,655 | ||||||||||||
| Used rental equipment sales | 7,341,332 | 1,747,249 | 12,670,194 | 2,190,775 | ||||||||||||
| Retail parts sales | 2,089,391 | 2,546,880 | 4,421,633 | 5,463,189 | ||||||||||||
| Transportation | 2,130,566 | 1,386,307 | 3,474,629 | 2,760,903 | ||||||||||||
| Equipment repairs and maintenance | 3,218,898 | 2,886,783 | 6,751,148 | 5,574,305 | ||||||||||||
| TOTAL REVENUES | 27,190,839 | 22,344,505 | 50,929,024 | 43,831,675 | ||||||||||||
| COST OF REVENUES | ||||||||||||||||
| Salaries, payroll taxes and benefits | 2,822,915 | 2,495,507 | 5,706,051 | 4,833,527 | ||||||||||||
| Depreciation | 5,139,624 | 5,219,272 | 10,385,811 | 10,378,212 | ||||||||||||
| Retail equipment sales | 1,107,288 | 2,997,447 | 1,827,103 | 6,124,393 | ||||||||||||
| Used rental equipment sales | 6,132,181 | 1,493,494 | 10,836,080 | 1,891,338 | ||||||||||||
| Retail parts sales | 1,600,625 | 2,098,142 | 3,486,651 | 4,367,340 | ||||||||||||
| Transportation | 1,897,681 | 1,360,799 | 3,034,654 | 2,653,569 | ||||||||||||
| Equipment repairs and maintenance | 2,395,681 | 3,256,673 | 5,365,673 | 6,264,620 | ||||||||||||
| Yard operating expenses | 768,261 | 562,886 | 1,556,319 | 1,109,855 | ||||||||||||
| TOTAL COST OF REVENUES | 21,864,256 | 19,484,220 | 42,198,342 | 37,622,854 | ||||||||||||
| GROSS PROFIT | 5,326,583 | 2,860,285 | 8,730,682 | 6,208,821 | ||||||||||||
| Selling, general and administrative expenses | 6,544,866 | 7,161,105 | 13,532,821 | 14,539,195 | ||||||||||||
| Other depreciation and amortization | 310,051 | 312,407 | 636,455 | 641,930 | ||||||||||||
| LOSS FROM OPERATIONS | (1,528,334 | ) | (4,613,227 | ) | (5,438,594 | ) | (8,972,304 | ) | ||||||||
| OTHER INCOME (EXPENSES) | ||||||||||||||||
| Other income | 17,986 | 110,355 | 2,426 | 274,723 | ||||||||||||
| Interest expense | (2,874,300 | ) | (2,856,904 | ) | (5,782,982 | ) | (5,721,230 | ) | ||||||||
| Foreign currency exchange gains (losses) | (90,619 | ) | (7,139 | ) | (55,080 | ) | 70 | |||||||||
| TOTAL OTHER INCOME (EXPENSES) | (2,946,933 | ) | (2,753,688 | ) | (5,835,636 | ) | (5,446,437 | ) | ||||||||
| LOSS BEFORE INCOME TAXES | (4,475,267 | ) | (7,366,915 | ) | (11,274,230 | ) | (14,418,741 | ) | ||||||||
| BENEFIT FOR INCOME TAXES | (1,583,270 | ) | (2,840,883 | ) | (3,685,891 | ) | (5,230,457 | ) | ||||||||
| NET LOSS | $ | (2,891,997 | ) | $ | (4,526,032 | ) | $ | (7,588,339 | ) | $ | (9,188,284 | ) | ||||
| Weighted average shares outstanding: | ||||||||||||||||
| Basic | 24,543,308 | 24,428,092 | 24,534,205 | 23,210,137 | ||||||||||||
| Diluted | 24,543,308 | 24,428,092 | 24,534,205 | 23,210,137 | ||||||||||||
| Loss per share: | ||||||||||||||||
| Basic | $ | (0.12 | ) | $ | (0.19 | ) | $ | (0.31 | ) | $ | (0.40 | ) | ||||
| Diluted | $ | (0.12 | ) | $ | (0.19 | ) | $ | (0.31 | ) | $ | (0.40 | ) | ||||
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Essex Rental Corp. & Subsidiaries
Segment Revenues and Gross Profit
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| Segment revenues | ||||||||||||||||
| Equipment rentals | $ | 21,612,254 | $ | 14,606,977 | $ | 39,728,756 | $ | 27,854,403 | ||||||||
| Equipment distribution | 1,277,506 | 3,591,291 | 2,193,952 | 7,289,655 | ||||||||||||
| Parts and service | 4,301,079 | 4,146,237 | 9,006,316 | 8,687,617 | ||||||||||||
| Total revenues | $ | 27,190,839 | $ | 22,344,505 | $ | 50,929,024 | $ | 43,831,675 | ||||||||
| Segment gross profit | ||||||||||||||||
| Equipment rentals | $ | 3,993,885 | $ | 1,693,438 | $ | 6,004,535 | $ | 3,541,236 | ||||||||
| Equipment distribution | 18,719 | 378,331 | 64,867 | 787,583 | ||||||||||||
| Parts and service | 1,313,979 | 788,516 | 2,661,280 | 1,880,002 | ||||||||||||
| Total gross profit | $ | 5,326,583 | $ | 2,860,285 | $ | 8,730,682 | $ | 6,208,821 | ||||||||
Essex Rental Corp & Subsidiaries
Reconciliation of Loss from Operations
to Total EBITDA
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| Loss from Operations | $ | (1,528,334 | ) | $ | (4,613,227 | ) | $ | (5,438,594 | ) | $ | (8,972,304 | ) | ||||
| Add: Depreciation | 5,139,624 | 5,219,272 | 10,385,811 | 10,378,212 | ||||||||||||
| Add: Other depreciation and amortization | 310,051 | 312,407 | 636,455 | 641,930 | ||||||||||||
| Total EBITDA (1) | 3,921,341 | 918,452 | 5,583,672 | 2,047,838 | ||||||||||||
(1) Includes non-cash stock compensation and non-recurring expenses of $0.4 million and $0.9 million for the three months ended June 30, 2012 and 2011, respectively and $1.3 million and $1.9 million for the six months ended June 30, 2012 and 2011, respectively.
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Essex Rental Corp. and Subsidiaries
Consolidated Balance Sheets
| June 30, | December 31, | |||||||
| 2012 | 2011 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | 8,918,878 | $ | 9,030,383 | ||||
| Accounts receivable, net of allowances | 16,076,485 | 14,311,343 | ||||||
| Other receivables | 2,350,269 | 2,712,353 | ||||||
| Deferred tax assets | 2,091,193 | 3,478,114 | ||||||
| Inventory | ||||||||
| Retail equipment inventory | 1,009,484 | 2,212,530 | ||||||
| Retail spare parts, net | 1,037,779 | 1,506,680 | ||||||
| Prepaid expenses and other assets | 1,807,046 | 1,944,068 | ||||||
| TOTAL CURRENT ASSETS | 33,291,134 | 35,195,471 | ||||||
| Rental equipment, net | 312,465,946 | 328,955,023 | ||||||
| Property and equipment, net | 7,143,107 | 7,876,432 | ||||||
| Spare parts inventory, net | 3,208,145 | 3,380,090 | ||||||
| Identifiable finite lived intangibles, net | 1,570,714 | 1,893,920 | ||||||
| Goodwill | 1,796,126 | 1,796,126 | ||||||
| Loan acquisition costs, net | 1,568,355 | 1,803,167 | ||||||
| TOTAL ASSETS | $ | 361,043,527 | $ | 380,900,229 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | 4,535,508 | $ | 4,893,500 | ||||
| Accrued employee compensation and benefits | 1,810,990 | 1,750,956 | ||||||
| Accrued taxes | 3,300,800 | 3,592,912 | ||||||
| Accrued interest | 904,258 | 833,642 | ||||||
| Accrued other expenses | 991,966 | 830,295 | ||||||
| Unearned rental revenue | 1,450,746 | 1,106,781 | ||||||
| Customer deposits | 574,612 | 142,581 | ||||||
| Short-term debt obligations | 673,403 | 673,403 | ||||||
| Interest rate swaps | 1,028,525 | 2,470,779 | ||||||
| Current portion of capital lease obligation | 6,812 | 7,199 | ||||||
| TOTAL CURRENT LIABILITIES | 15,277,620 | 16,302,048 | ||||||
| LONG-TERM LIABILITIES | ||||||||
| Revolving credit facilities | 214,523,808 | 222,088,941 | ||||||
| Promissory notes | 5,082,805 | 5,034,741 | ||||||
| Other long-term debt obligations | 1,515,157 | 1,851,859 | ||||||
| Deferred tax liabilities | 46,735,257 | 51,650,482 | ||||||
| Capital lease obligation | - | 3,150 | ||||||
| TOTAL LONG-TERM LIABILITIES | 267,857,027 | 280,629,173 | ||||||
| TOTAL LIABILITIES | 283,134,647 | 296,931,221 | ||||||
| Commitments and Contingencies | ||||||||
| 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 24,555,818 shares at June 30, 2012 and 24,428,092 shares at December 31, 2011 | 2,456 | 2,443 | ||||||
| Paid in capital | 123,695,266 | 122,815,398 | ||||||
| Accumulated deficit | (45,166,322 | ) | (37,577,983 | ) | ||||
| Accumulated other comprehensive loss, net of tax | (622,520 | ) | (1,270,850 | ) | ||||
| TOTAL STOCKHOLDERS' EQUITY | 77,908,880 | 83,969,008 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 361,043,527 | $ | 380,900,229 | ||||
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