Essex Rental Corp.
Nov 5, 2013

Essex Rental Corp. Reports Third Quarter 2013 Results

BUFFALO GROVE, Ill.--(BUSINESS WIRE)-- Essex Rental Corp. (Nasdaq: ESSX) ("Essex") today announced its unaudited consolidated results for the three months ended September 30, 2013.

Third Quarter 2013 Highlights

CEO Comments

Ron Schad, President and CEO of Essex stated, "While our year-to-date results display an ongoing economic recovery, our third quarter results reflect a softening in demand for certain end markets and customers that we serve."

"Despite decreases in utilization on some of our lighter lifting equipment, crawler crane utilization is at its highest level since the first quarter of 2009. Crawler cranes make up approximately 75% of the value of our rental fleet. Within our crawler crane fleet, utilization of our heavy lift hydraulic crawler crane class was 70.9%, which is the highest level this class has achieved since 2008. These hydraulic crawler cranes have high dollar rental rates and account for approximately 70% of the value of our crawler crane fleet and approximately 50% of the value of our total fleet."

Third Quarter 2013 Overview

Equipment rentals segment revenues were $14.4 million for the three month period ended September 30, 2013 versus $17.3 million for the three month period ended September 30, 2012. Equipment rentals segment revenues include rental, transportation and used rental equipment sales. The $2.9 million decrease is primarily driven by a $1.9 million decrease in used rental equipment sales and an $800,000 decrease in equipment rental revenues. Used rental equipment sales in the third quarter of 2012 included approximately $300,000 associated with aerial work platform units, which we completed the divestiture of in January 2013. The decrease in equipment rental revenues was driven by a decrease in utilization for our rough terrain, boom truck and tower crane fleet, partially offset by an increase in utilization of our crawler crane equipment.

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, increased by 206.2% to $3.8 million for the three month period ended September 30, 2013 compared to $1.2 million for the three month period ended September 30, 2012.

Parts and service revenue equaled $4.6 million for the three month period ended September 30, 2013 compared to $5.6 million for the three month period ended September 30, 2012. Parts and service segment revenues include retail parts sales, billable service work done on our own equipment and servicing customer owned equipment. Gross profit decreased to $1.3 million for the three month period ended September 30, 2013 compared to $1.7 million for the three month period ended September 30, 2012.

Total gross profit decreased 14.2% to $5.5 million for the three month period ended September 30, 2013 from $6.4 million for the three month period ended September 30, 2012. Gross profit margin decreased by approximately 2.4% to 23.9% for the three month period ended September 30, 2013 from 26.3% for the three month period ended September 30, 2012.

EBITDA before non-cash compensation decreased by 13.4% to $4.5 million for the three month period ended September 30, 2013 compared to $5.2 million for the three month period ended September 30, 2012. Non-cash compensation equaled $100,000 in the quarter ended September 30, 2013 and $400,000 in the quarter ended September 30, 2012.

Outlook for the remainder of 2013 and 2014

Mr. Schad continued, "Despite the softening in demand for some of our rental assets and parts and service business we experienced in the third quarter of 2013, we believe the construction market will continue its gradual recovery in 2014. The uncertainty within our government has slowed progress somewhat, but we are confident that the recovery will accelerate once we are provided more clarity. We continue to manage overhead in order to maximize the return on our invested capital. Selling, general and administrative expenses excluding non-cash compensation was down 10.5% in the third quarter of 2013 compared to the prior year. Adjusted EBITDA before non-cash compensation and non-recurring expenses was $19.5 million for the trailing twelve month period ended September 30, 2013 which was 20.2% of total revenues, compared to $14.3 million for the trailing twelve month period ended September 30, 2012 which was 14.7% of total revenues."

"Although our crawler crane fleet has achieved year over year improvements in utilization for the past six quarters, we have experienced a decline in utilization in the beginning of the fourth quarter, partially due to the delay in some project starts. Given the delay in the key drivers of our business and the fact that our fourth quarter is normally impacted by seasonality, we anticipate that 2013 EBITDA before non-cash compensation and non-recurring expenses will be in the range of $18 million to $21 million, which is lower than the earnings guidance that we provided at the beginning of this fiscal year, which was between $21 million to $26 million."

Conference Call

Essex's management team will conduct a conference call to discuss the operating results at 9:00 a.m. ET on Wednesday, November 6, 2013. 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, 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.essexrentalcorp.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 adjusted EBITDA, an unaudited financial measure of performance which is not calculated in accordance with generally accepted accounting principles, or GAAP. Adjusted EBITDA represents the sum of net income, tax benefit, foreign currency exchange gains and losses, interest expense, other income, depreciation and amortization. Adjusted EBITDA is used internally when evaluating our operating performance and, we believe, allows investors to make a more meaningful comparison between our core business operating results over different periods of time, as well as with those of other similar companies. Management believes that adjusted EBITDA, when viewed with the Company's results under GAAP and the accompanying reconciliation, provides useful information about operating performance and period-over-period growth, and provides additional information that is useful for evaluating the operating performance of our core business without regard to potential distortions. Additionally, management believes that adjusted EBITDA permits investors to gain an understanding of the factors and trends affecting our ongoing cash earnings. However, adjusted EBITDA is not a measure of financial performance or liquidity under GAAP and, accordingly, should not be considered as an alternative to net income or cash flow from operating activities as indicators of operating performance or liquidity. Adjusted EBITDA has been presented as a supplemental disclosure because adjusted EBITDA is a widely used measure of performance and basis for valuation. A reconciliation of adjusted EBITDA to net loss is included in the financial tables accompanying this release.

 
 
 
Essex Rental Corp. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
         
Three Months Ended September 30, Nine Months Ended September 30,
2013 2012 2013 2012
 
 
REVENUES
Equipment rentals $ 11,802,108 $ 12,555,822 $ 35,446,954 $ 33,740,727
Retail equipment sales 3,772,051 1,231,984 8,336,980 3,425,936
Used rental equipment sales 1,264,921 3,117,062 9,922,096 15,787,256
Retail parts sales 1,827,058 2,409,846 5,777,781 7,064,042
Transportation 1,349,316 1,601,592 4,420,306 5,076,221
Equipment repairs and maintenance 2,792,684 3,223,929 9,182,230 9,975,077
       
TOTAL REVENUES 22,808,138 24,140,235 73,086,347 75,069,259
 
COST OF REVENUES
Salaries, payroll taxes and benefits 2,672,555 2,651,730 8,173,718 8,357,781
Depreciation 4,652,113 5,102,680 13,980,856 15,488,491
Retail equipment sales 3,250,194 1,087,227 7,058,671 2,914,330
Used rental equipment sales 829,296 2,481,144 7,439,426 13,317,224
Retail parts sales 1,475,017 1,766,785 4,456,188 5,253,436
Transportation 1,399,513 1,526,528 4,340,788 4,561,182
Equipment repairs and maintenance 2,283,224 2,426,689 7,762,412 7,792,362
Yard operating expenses 789,977 737,556 2,332,253 2,293,875
       
TOTAL COST OF REVENUES 17,351,889 17,780,339 55,544,312 59,978,681
 
GROSS PROFIT 5,456,249 6,359,896 17,542,035 15,090,578
 
Selling, general and administrative expenses 5,722,543 6,625,267 18,116,553 20,158,088
Other depreciation and amortization 250,914 321,893 793,241 958,348
       
 
LOSS FROM OPERATIONS (517,208 ) (587,264 ) (1,367,759 ) (6,025,858 )
 
OTHER INCOME (EXPENSES)
Other income 553,469 30,435 559,058 32,861
Interest expense (3,075,077 ) (2,875,405 ) (8,575,553 ) (8,658,387 )
Foreign currency exchange gains (losses)   106,094     140,685     (222,375 )   85,605  
TOTAL OTHER INCOME (EXPENSES)   (2,415,514 )   (2,704,285 )   (8,238,870 )   (8,539,921 )
 
LOSS BEFORE INCOME TAXES (2,932,722 ) (3,291,549 ) (9,606,629 ) (14,565,779 )
 
BENEFIT FOR INCOME TAXES   (1,030,118 )   (1,231,923 )   (3,608,803 )   (4,917,814 )
 
NET LOSS $ (1,902,604 ) $ (2,059,626 ) $ (5,997,826 ) $ (9,647,965 )
 
Weighted average shares outstanding:
Basic 24,653,513 24,555,818 24,639,667 24,541,462
Diluted 24,653,513 24,555,818 24,639,667 24,541,462
 
Loss per share:
Basic $ (0.08 ) $ (0.08 ) $ (0.24 ) $ (0.39 )
Diluted $ (0.08 ) $ (0.08 ) $ (0.24 ) $ (0.39 )
 
 
 
Essex Rental Corp. and Subsidiaries
Utilization Statistics
(Unaudited)
     
Three Months Ended
September 30, June 30, September 30,
2013 2013 2012
 
Utilization Statistics - "Days" Utilization
Crawler Cranes - Hydraulic 70.9 % 67.6 % 63.5 %
Crawler Cranes - Traditional 31.4 % 30.5 % 28.7 %
Rough Terrain Cranes 50.5 % 60.3 % 69.3 %
Boomtrucks 52.0 % 60.4 % 61.9 %
Self-Erecting Tower Cranes 32.6 % 43.3 % 33.1 %
City & Other Tower Cranes 33.5 % 42.4 % 54.7 %
 
(See definitions in the quarterly and annual reports filed with the SEC)
 
 
 
Essex Rental Corp. and Subsidiaries
Segment Revenues and Gross Profit
(Unaudited)
       
Three Months Ended September 30, Nine Months Ended September 30,
2013 2012 2013 2012
Segment revenues
Equipment rentals $ 14,416,345 $ 17,274,476 $ 49,789,356 $ 54,604,204
Equipment distribution 3,772,051 1,231,984 8,336,980 3,425,936
Parts and service   4,619,742   5,633,775     14,960,011   17,039,119
 
Total revenues $ 22,808,138 $ 24,140,235   $ 73,086,347 $ 75,069,259
 
Segment gross profit (loss)
Equipment rentals $ 3,805,321 $ 4,680,065 $ 12,553,710 $ 10,459,460
Equipment distribution 368,143 (4,427 ) 806,861 60,237
Parts and service   1,282,785   1,684,258     4,181,464   4,570,881
 

Total gross profit

$ 5,456,249 $ 6,359,896   $ 17,542,035 $ 15,090,578
 
 
 
Essex Rental Corp and Subsidiaries
Reconciliation of Net Loss
to Adjusted EBITDA
(Unaudited)
       
Three Months Ended September 30, Nine Months Ended September 30,
2013 2012 2013 2012
 
Net loss $ (1,902,604 ) $ (2,059,626 ) $ (5,997,826 ) $ (9,647,965 )
 
Benefit for income taxes (1,030,118 ) (1,231,923 ) (3,608,803 ) (4,917,814 )
Foreign currency exchange (gains) losses (106,094 ) (140,685 ) 222,375 (85,605 )
Interest expense 3,075,077 2,875,405 8,575,553 8,658,387
Other income   (553,469 )   (30,435 )   (559,058 )   (32,861 )
 
Loss from Operations (517,208 ) (587,264 ) (1,367,759 ) (6,025,858 )
 
Depreciation 4,652,113 5,102,680 13,980,856 15,488,491
Other depreciation and amortization   250,914     321,893     793,241     958,348  
 
Adjusted EBITDA (1) $ 4,385,819   $ 4,837,309   $ 13,406,338   $ 10,420,981  
 

(1) Includes non-cash stock compensation and non-recurring expenses of $0.1 million and $0.4 million for the three months ended September 30, 2013 and 2012, respectively and $1.0 million and $1.8 million for the nine months ended September 30, 2013 and 2012, respectively.

 
 
 
Essex Rental Corp. and Subsidiaries
Consolidated Balance Sheets
   
 
September 30, December 31,
2013 2012
(Unaudited)
ASSETS
 
CURRENT ASSETS
Cash and cash equivalents $ 3,030,137 $ 8,389,321
Accounts receivable, net of allowances 13,993,135 14,658,198
Other receivables 2,237,217 2,282,104
Deferred tax assets 3,123,912 3,022,625
Inventory
Retail equipment 3,804,929 1,815,670
Retail spare parts, net 1,591,904 1,386,412
Prepaid expenses and other assets   1,427,489     1,494,751  
TOTAL CURRENT ASSETS 29,208,723 33,049,081
 
Rental equipment, net 292,140,274 306,892,373
Property and equipment, net 5,273,936 6,610,976
Spare parts inventory, net 3,254,460 3,145,129
Identifiable finite lived intangibles, net 1,152,857 1,403,571
Goodwill 1,796,126 1,796,126
Loan acquisition costs, net   6,605,143     1,170,354  
 
TOTAL ASSETS $ 339,431,519   $ 354,067,610  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
CURRENT LIABILITIES
Accounts payable $ 4,000,827 $ 5,342,637
Accrued employee compensation and benefits 1,921,634 1,999,143
Accrued taxes 3,997,851 3,211,400
Accrued interest 1,044,801 1,359,017
Accrued other expenses 976,810 1,358,036
Unearned rental revenue 1,692,382 1,520,701
Customer deposits 179,350 73,795
Term loan - short term 2,000,000 -
Purchase money security interest debt - short term 1,009,865 828,610
Promissory notes 5,202,968 5,130,870
Capital lease obligation   -     3,154  
TOTAL CURRENT LIABILITIES 22,026,488 20,827,363
 
LONG-TERM LIABILITIES
Revolving credit facilities 166,814,982 210,592,909
Term loan 37,000,000 -
Purchase money security interest debt 2,180,806 2,147,349
Deferred tax liabilities   42,405,015     46,258,254  
TOTAL LONG-TERM LIABILITIES   248,400,803     258,998,512  
 
TOTAL LIABILITIES 270,427,291 279,825,875
 
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 24,653,513 shares at September 30, 2013 and 24,555,818 shares at December 31, 2012

2,465 2,456
Paid in capital 125,226,630 124,460,238
Accumulated deficit (56,228,764 ) (50,230,938 )
Accumulated other comprehensive gain, net of tax   3,897     9,979  
TOTAL STOCKHOLDERS' EQUITY   69,004,228     74,241,735  
 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 339,431,519   $ 354,067,610  

Essex Rental Corp.
Kory Glen
Chief Financial Officer
(847) 215-6522 / kglen@essexrental.com
or
Patrick Merola
Manager of Investor Relations
(847) 215-6514 / pmerola@essexcrane.com

Source: Essex Rental Corp.

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