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| 8-K - PRIMARY DOCUMENT - General Finance CORP | form_8k.htm |
EXHIBIT
99.1
GENERAL FINANCE CORPORATION REPORTS SECOND QUARTER RESULTS FOR
FISCAL YEAR 2020
PASADENA,
CA – February 10, 2020 – 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 second quarter and six
months (“YTD”) ended December 31, 2019.
Second Quarter 2020 Highlights
●
Leasing revenues,
excluding the oil and gas sector and foreign currency exchange
rates, increased by 9%.
●
Leasing revenues
were $60.8 million, compared to $63.5 million for the second
quarter of fiscal year 2019.
●
Leasing revenues
comprised 67% of total non-manufacturing revenues for both
periods.
●
Total revenues were
$92.1 million, compared to $98.0 million for the second quarter of
fiscal year 2019.
●
Adjusted EBITDA was
$26.4 million, compared to $29.7 million for the second quarter of
fiscal year 2019.
●
Adjusted EBITDA
margin was 29%, compared to 30% in the second quarter of fiscal
year 2019.
●
Net income
attributable to common shareholders was $9.5 million, or $0.30 per
diluted share, compared to a net loss attributable to common
shareholders of $5.1 million, or $0.17 per diluted share, for the
second quarter of fiscal year 2019. Included in these results were
a non-cash benefit of $3.9 million and a non-cash charge of $9.3
million in fiscal years 2020 and 2019, respectively, for the change
in valuation of stand-alone bifurcated derivatives.
●
Average fleet unit
utilization was 77%, compared to 84% in the second quarter of
fiscal year 2019.
●
Consistent with our
organic growth strategy, we entered two new markets, opening one
greenfield location in North America and one in the Asia-Pacific
region.
YTD 2020 Highlights
●
Leasing revenues,
excluding the oil and gas sector and foreign currency exchange
rates, increased by approximately 12%.
●
Leasing revenues
were $119.7 million, compared to $121.8 million for the first six
months of fiscal year 2019.
●
Leasing revenues
comprised 67% of total non-manufacturing revenues versus 64% for
the first six months of fiscal year 2019.
●
Total revenues were
$182.0 million, compared to $195.8 million for the first six months
of fiscal year 2019.
●
Adjusted EBITDA was
$51.5 million, compared to $56.7 million for the first six months
of fiscal year 2019.
●
Adjusted EBITDA
margin was 28%, compared to 29% for the first six months of fiscal
year 2018.
●
Net income
attributable to common shareholders was $14.5 million, or $0.46 per
diluted share, compared to a net loss attributable to common
shareholders of $14.2 million, or $0.50 per diluted share, for the
first six months of fiscal year 2019. Included in these results
were a non-cash benefit of $4.9 million and a non-cash charge of
$21.7 million in fiscal years 2020 and 2019, respectively, for the
change in valuation of stand-alone bifurcated
derivatives.
●
Average fleet unit
utilization was 77%, compared to 83% in the first six months of
fiscal year 2019.
●
Entered three new
markets, opening one greenfield location in North America and two
in the Asia-Pacific region.
Management Commentary
“Our
core North American leasing operations again delivered strong
quarterly performance,” said Jody Miller, President and Chief
Executive Officer. “Pac-Van continues to generate exceptional
results, delivering an 11% year-over-year increase in leasing
revenues, driven by strength across nearly all sectors. However,
offsetting this growth was continued softness in our liquid
containment business at Lone Star, which recorded lower results for
the quarter due to decreased oil and gas activity in Texas. At
Royal Wolf, our second quarter results were impacted by moderately
lower revenues and a declining Australian dollar relative to the
U.S. dollar.”
Mr.
Miller added, “While our hearts and support go to the people
of Australia, we are fortunate to report that none of our staff or
property has been significantly impacted by the recent bushfires.
We are not seeing, nor do we expect to see, any material decline in
demand from customers and as we move into the recovery phase there
may well be increased opportunities for
leasing.”
Charles
Barrantes, Executive Vice President and Chief Financial Officer,
added, “Despite modestly lower adjusted EBITDA in our second
quarter, our cash from operating activities improved and we
maintained a net leverage ratio at below four times, demonstrating
our disciplined approach to capital allocation. We have reduced our
cost of capital and enhanced our financing flexibility over the
past couple of years and will continue doing so over the remainder
of this calendar year.”
1
Second Quarter 2020 Operating Summary
North America
Revenues
from our North American leasing operations for the second quarter
of fiscal year 2020 totaled $60.6 million, compared with $63.9
million for the second quarter of fiscal year 2019, a decrease of
5%. Leasing revenues decreased by 6% on a year-over-year basis. The
decrease in leasing revenues was primarily in the oil and gas
sector, substantially all attributable to Lone Star, while being
partially offset by increases in the construction, commercial,
retail and industrial sectors. Sales revenues decreased by 3%,
primarily in the industrial, education and services sectors, while
being partially offset by increases in the construction and
commercial sectors. Adjusted EBITDA was $19.9 million for the
second quarter of fiscal year 2020, as compared with $22.0 million
for the prior year’s quarter, a decrease of approximately 9%.
Adjusted EBITDA from Pac-Van increased by 14% to $17.6 million,
from $15.4 million in the second quarter of fiscal year 2019, and
adjusted EBITDA from Lone Star decreased by 65% to $2.3 million,
from $6.6 million in the year-ago quarter.
North
American manufacturing revenues for the second quarter of fiscal
year 2020 totaled $3.1 million and included intercompany sales of
$1.5 million from products sold to our North American leasing
operations. This compares to $3.6 million of total sales, including
intercompany sales of $0.9 million during the second quarter of
fiscal year 2019. On a stand-alone basis, prior to intercompany
adjustments, adjusted EBITDA was an approximate $97,000 loss in the
second quarter of fiscal year 2020, compared with adjusted EBITDA
of $228,000 for the year-ago quarter.
Asia-Pacific
Revenues
from the Asia-Pacific region for the second quarter of fiscal year
2020 totaled $29.9 million, compared with $31.4 million for the
second quarter of fiscal year 2018, a decrease of 5%. On a local
currency basis, total revenues decreased by less than 1%. The
relatively comparable revenues in local dollars was driven
primarily by increased revenues in the transportation, industrial
and government sectors, and was substantially offset by decreases
in the moving and storage, construction, consumer and utilities
sectors. Leasing revenues increased slightly on a year-over-year
basis, but increased by 5% on a local currency basis, driven
primarily by increases across almost all sectors, partially offset
by slight decreases in the agricultural and energy sectors.
Adjusted EBITDA for the second quarter of 2020 was $7.9 million, as
compared to $8.6 million for the year-ago quarter, a decrease of
approximately 8%. On a local currency basis, adjusted EBITDA
decreased by approximately 4%.
Balance Sheet and Liquidity Overview
At
December 31, 2019, the Company had total debt of $398.4 million and
cash and cash equivalents of $10.1 million, compared with $411.1
million and $10.4 million at June 30, 2019, respectively. At
December 31, 2019, our North American leasing operations had $73.5
million available to borrow under its senior credit facility, and
our Asia-Pacific leasing operations had, including cash at the
bank, $21.7 million (A$31.0 million), available to borrow under its
senior credit facility.
During
the first six months of fiscal year 2020, the Company generated
cash from operating activities of $37.5 million, as compared to
$19.4 million for the year-ago quarter. For the first six months of
fiscal year 2020, the Company invested a net $17.9 million ($17.3
million in North America and $0.6 million in the Asia-Pacific) in
the lease fleet, as compared to $21.7 million in net fleet
investment ($16.6 million in North America and $5.1 million in the
Asia-Pacific) in the first six months of fiscal year
2019.
Receivables
were $51.4 million at December 31, 2019, as compared to $56.2
million at June 30, 2019. Days sales outstanding in receivables at
December 31, 2019, for our Asia-Pacific and North American leasing
operations were 39 and 40 days, as compared to 34 and 46 days,
respectively, as of June 30, 2019.
Outlook
On our
first quarter earnings conference call, we stated that consolidated
revenues for fiscal year 2020 were expected to be in the range of
$370 million to $390 million and that consolidated adjusted EBITDA
was expected to be in the range of plus or minus 4% in fiscal year
2020 from fiscal year 2019. Based on our year-to-date results, we
now expect that consolidated revenues for fiscal year 2020 will be
in the range of $365 million to $375 million and that consolidated
adjusted EBITDA will be in the range of minus 2% to minus 8% in
fiscal year 2020 from fiscal year 2019. This outlook does not take
into account the impact of any acquisitions that may occur in
fiscal year 2020.
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 8388017. 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 February 24,
2020 by dialing (800) 585-8367 (U.S.) or (404) 537-3406
(international), using conference ID number 8388017.
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.
2
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)
and Lone Star Tank Rental Inc. (www.lonestartank.com),
providers of portable storage, office and liquid storage tank
containers, mobile offices and modular buildings. 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-related 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, 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
Clark
Financial
Profiles, Inc.
310-622-8223
-Financial
Tables Follow-
3
GENERAL FINANCE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)
|
|
Quarter
Ended December 31,
|
Six
Months Ended December 31,
|
||
|
|
2018
|
2019
|
2018
|
2019
|
|
Revenues
|
|
|
|
|
|
Sales:
|
|
|
|
|
|
Lease inventories
and fleet
|
$31,813
|
$29,741
|
$67,449
|
$58,532
|
|
Manufactured
units
|
2,671
|
1,583
|
6,509
|
3,756
|
|
|
34,484
|
31,324
|
73,958
|
62,288
|
|
Leasing
|
63,509
|
60,785
|
121,827
|
119,718
|
|
|
97,993
|
92,109
|
195,785
|
182,006
|
|
|
|
|
|
|
|
Costs
and expenses
|
|
|
|
|
|
Cost of
sales:
|
|
|
|
|
|
Lease inventories
and fleet (exclusive of the items shown separately
below)
|
23,289
|
21,600
|
50,110
|
41,816
|
|
Manufactured
units
|
2,271
|
1,637
|
5,369
|
3,464
|
|
Direct costs of
leasing operations
|
23,574
|
22,761
|
45,928
|
45,619
|
|
Selling and general
expenses
|
20,350
|
20,483
|
39,663
|
41,138
|
|
Depreciation and
amortization
|
11,054
|
8,609
|
21,055
|
18,020
|
|
|
|
|
|
|
|
Operating
income
|
17,455
|
17,019
|
33,660
|
31,949
|
|
|
|
|
|
|
|
Interest
income
|
33
|
180
|
81
|
366
|
|
Interest
expense
|
(8,868)
|
(6,930)
|
(17,493)
|
(14,254)
|
|
Change
in valuation of bifurcated derivatives in Convertible
Note
|
(9,332)
|
3,902
|
(21,698)
|
4,894
|
|
Foreign exchange
and other
|
(1,782)
|
264
|
(3,293)
|
(309)
|
|
|
(19,949)
|
(2,584)
|
(42,403)
|
(9,303)
|
|
|
|
|
|
|
|
Income
(loss) before provision for income taxes
|
(2,494)
|
14,435
|
(8,743)
|
22,646
|
|
|
|
|
|
|
|
Provision for
income taxes
|
1,712
|
3,994
|
3,627
|
6,254
|
|
|
|
|
|
|
|
Net
income (loss)
|
(4,206)
|
10,441
|
(12,370)
|
16,392
|
|
|
|
|
|
|
|
Preferred stock
dividends
|
(922)
|
(922)
|
(1,844)
|
(1,844)
|
|
Net
income (loss) attributable to common
stockholders
|
$(5,128)
|
$9,519
|
$(14,214)
|
$14,548
|
|
|
|
|
|
|
|
Net income (loss)
per common share:
|
|
|
|
|
|
Basic
|
$(0.17)
|
$0.31
|
$(0.50)
|
$0.48
|
|
Diluted
|
(0.17)
|
0.30
|
(0.50)
|
0.46
|
|
|
|
|
|
|
|
Weighted average
shares outstanding:
|
|
|
|
|
|
Basic
|
29,907,679
|
30,253,075
|
28,649,451
|
30,229,164
|
|
Diluted
|
29,907,679
|
31,537,637
|
28,649,451
|
31,433,274
|
4
GENERAL FINANCE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(Unaudited)
|
|
June 30, 2019
|
December 31, 2019
|
|
Assets
|
|
|
|
Cash
and cash equivalents
|
$10,359
|
$10,067
|
|
Trade
and other receivables, net
|
56,204
|
51,372
|
|
Inventories
|
29,077
|
31,436
|
|
Prepaid
expenses and other
|
9,823
|
9,383
|
|
Property,
plant and equipment, net
|
22,895
|
24,578
|
|
Lease
fleet, net
|
456,822
|
466,274
|
|
Operating
lease assets
|
—
|
70,149
|
|
Goodwill
|
111,323
|
111,275
|
|
Other
intangible assets, net
|
21,809
|
19,743
|
|
Total assets
|
$718,312
|
$794,277
|
|
|
|
|
|
Liabilities
|
|
|
|
Trade
payables and accrued liabilities
|
$48,460
|
$43,843
|
|
Income
taxes payable
|
506
|
302
|
|
Unearned
revenue and advance payments
|
22,671
|
29,028
|
|
Operating
lease liabilities
|
—
|
70,727
|
|
Senior
and other debt, net
|
411,141
|
398,423
|
|
Fair value of bifurcated derivatives in
Convertible Note
|
19,782
|
14,888
|
|
Deferred
tax liabilities
|
38,711
|
44,114
|
|
Total liabilities
|
541,271
|
601,325
|
|
|
|
|
|
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; 30,471,406
shares issued and outstanding at June 30, 2019 and 30,604,348 at
December 31, 2019
|
3
|
3
|
|
Additional
paid-in capital
|
183,933
|
183,555
|
|
Accumulated
other comprehensive loss
|
(18,755)
|
(18,858)
|
|
Accumulated
deficit
|
(28,744)
|
(12,352)
|
|
Total
General Finance Corporation stockholders’ equity
|
176,537
|
192,448
|
|
Equity
of noncontrolling interests
|
504
|
504
|
|
Total equity
|
177,041
|
192,952
|
|
Total liabilities and equity
|
$718,312
|
$794,277
|
5
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 (loss) on a consolidated basis and
from operating income (loss) for our geographic segments (in
thousands):
|
|
Quarter
Ended December 31,
|
Six
Months Ended December 31,
|
||
|
|
2018
|
2019
|
2018
|
2019
|
|
Net income
(loss)
|
$(4,206)
|
$10,441
|
$(12,370)
|
$16,392
|
|
Add (deduct)
—
|
|
|
|
|
|
Provision
for income taxes
|
1,712
|
3,994
|
3,627
|
6,254
|
|
Change
in valuation of bifurcated derivatives in
Convertible
Note
|
9,332
|
(3,902)
|
21,698
|
(4,894)
|
|
Foreign
exchange and other
|
1,782
|
(264)
|
3,293
|
309
|
|
Interest
expense
|
8,868
|
6,930
|
17,493
|
14,254
|
|
Interest
income
|
(33)
|
(180)
|
(81)
|
(366)
|
|
Depreciation
and amortization
|
11,155
|
8,706
|
21,258
|
18,218
|
|
Share-based
compensation expense
|
663
|
685
|
1,341
|
1,368
|
|
Refinancing
costs not capitalized
|
448
|
--
|
448
|
--
|
|
Adjusted
EBITDA
|
$29,721
|
$26,410
|
$56,707
|
$51,535
|
|
|
Quarter
Ended December 31, 2018
|
Quarter
Ended December 31, 2019
|
||||||
|
|
Asia-Pacific
|
North
America
|
Asia-Pacific
|
North
America
|
||||
|
|
Leasing
|
Leasing
|
Manufacturing
|
Corporate
|
Leasing
|
Leasing
|
Manufacturing
|
Corporate
|
|
Operating income
(loss)
|
$3,437
|
$15,228
|
$121
|
$(1,458)
|
$4,646
|
$14,062
|
$(203)
|
$(1,717)
|
|
Add -
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
5,016
|
6,227
|
101
|
3
|
3,056
|
5,732
|
97
|
3
|
|
Share-based
compensation Xexpense
|
192
|
81
|
6
|
384
|
183
|
118
|
9
|
375
|
|
Refinancing
costs not capitalized
|
-
|
448
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Adjusted
EBITDA
|
$8,645
|
$21,984
|
$228
|
$(1,071)
|
$7,885
|
$19,912
|
$(97)
|
$(1,339)
|
|
Intercompany
adjustments
|
|
|
|
$(65)
|
|
|
|
$49
|
|
|
Six
Months Ended December 31, 2018
|
Six
Months Ended December 31, 2019
|
||||||
|
|
Asia-Pacific
|
North
America
|
Asia-Pacific
|
North
America
|
||||
|
|
Leasing
|
Leasing
|
Manufacturing
|
Corporate
|
Leasing
|
Leasing
|
Manufacturing
|
Corporate
|
|
Operating income
(loss)
|
$5,853
|
$29,830
|
$609
|
$(2,924)
|
$7,349
|
$27,731
|
$(27)
|
$(3,383)
|
|
Add -
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
9,173
|
12,255
|
203
|
12
|
7,009
|
11,369
|
198
|
6
|
|
Share-based
compensation Xexpense
|
384
|
162
|
12
|
366
|
235
|
18
|
749
|
|
|
Refinancing
costs not capitalized
|
-
|
448
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Adjusted
EBITDA
|
$15,410
|
$42,695
|
$824
|
$(2,129)
|
$14,724
|
$39,335
|
$189
|
$(2,628)
|
|
Intercompany
adjustments
|
|
|
|
$(93)
|
|
|
|
$(85)
|
6