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. (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."

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."

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.

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	)

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.

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

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

Source: Essex Rental Corp.

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