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.
Re: Essex Rental Corp. Reports Second Quarter 2012 Results
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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, Ill.--(BUSINESS WIRE)--
Essex Rental Corp. (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.”
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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