Essex Rental Corp. Reports 2010 Fourth Quarter and Year-End Results

BUFFALO GROVE, Ill.--()--Essex Rental Corp. (Nasdaq: ESSX) ("Essex") today announced its unaudited consolidated results for the fourth quarter and year ended December 31, 2010. The results are those of Essex Rental Corp. and its wholly owned subsidiaries, including Essex Crane Rental Corp. ("Essex Crane"), Essex Finance Corp. (“Essex Finance”), Coast Crane Company (“Coast Crane”, formerly known as CC Bidding Corp.) and Coast Crane Ltd. (“Coast Crane Ltd.”). Included below is a comparison of Essex's results of operations for the quarter and year ended December 31, 2010 to the corresponding results for the quarter and year ended December 31, 2009. Many of the explanations provided below relate to the impact of Coast Crane, which are comprised of the operations of Coast Crane and its wholly-owned subsidiary, Coast Crane Ltd. acquired on November 24, 2010. The financial tables included herein show the separate financial results of Coast Crane Company including its wholly-owned subsidiary, Coast Crane Ltd. These amounts are included in the consolidated results of operations for the fourth quarter and year-ended December 31, 2010, also included herein.

Management Comments on 2010

Ron Schad, President & CEO of Essex, stated, “The fourth quarter was an exciting and busy quarter for Essex Rental Corp. As previously announced, we completed the acquisition of Coast Crane’s assets in late November and we have been pleased with the acquisition to date. During the fourth quarter of 2010, Essex Crane experienced both increasing utilization rates and the stabilization of average rental rates.”

Mr. Schad continued, “During the fourth quarter, the cyclical upturn continued although we experienced moderate seasonal softness which is typical during the winter months. We continue to believe that we are well positioned to substantially increase utilization as we move through 2011.”

Fourth Quarter 2010 Overview

Equipment rental revenue for the fourth quarter of 2010 was $8.1 million compared to equipment rental revenue of $6.4 million for the quarter ended December 31, 2009. The increase in equipment rental revenue was related primarily due to equipment rental revenue of $1.7 million provided by Coast Crane during the five week post-acquisition period as well as an increase in utilization rates. The crawler crane utilization rate (on a days method) for the quarter ended December 31, 2010 equaled 44.7%, compared to 34.8% in the comparable period in 2009 and also improved sequentially from the 40.2% for the third quarter ended September 30, 2010. Partially offsetting the increase in equipment rental income due to the increase in utilization rates was a 19.2% decrease in the average monthly crane rental rate to $15,493 compared to the average monthly crane rental rate of $19,181 for the comparable period in 2009. The decrease in average crane rental rate was the result of a change in the mix of cranes on rent and lower rental rate pricing due to weakened demand caused by the slower economic recovery and difficult commercial credit environment. This was compounded by the expiration of existing rental agreements executed at higher rental rates in the prior years. Excluding any impact caused by the change in mix of cranes on rent, utilization rates appear to have stabilized.

Transportation revenue for the fourth quarter of 2010 was $1.6 million compared to transportation revenue of $1.0 million for the comparable period for the quarter ended December 31, 2009. The increase in transportation revenue was primarily due to the transportation revenue provided by Coast Crane during the five week post-acquisition period of $0.1 million and an increase in the mobilization of equipment. The increase in mobilization was attributable to increased utilization and was impacted by the combination of cranes and attachments rented and the specific distances that equipment had to move for various rentals.

Equipment repairs and maintenance revenue for the fourth quarter of 2010 was $1.9 million compared to equipment repairs and maintenance revenue of $1.3 million for the comparable period ended December 31, 2009. The increase in equipment repairs and maintenance revenue was primarily due to the equipment repairs and maintenance revenue provided by Coast Crane during the five week post-acquisition period of $0.8 million, which was partially offset by a decrease in equipment repairs and maintenance revenue at Essex Crane due to a decrease in equipment repair activity.

During the five week post-acquisition period ended December 31, 2010, Coast Crane contributed revenues of $1.2 million related to new and used retail equipment sales and $1.2 million related to retail parts sales.

Cost of revenues for the quarter ended December 31, 2010 was $13.1 million compared to $6.9 million for the same period in 2009. The increase in cost of revenues was primarily due to the cost of revenues incurred by Coast Crane during the five week post-acquisition period of $4.9 million. Excluding the non-cash costs of net book value of rental equipment sold and depreciation expense, costs were $7.9 million for the quarter ended December 31, 2010, compared to $3.7 million for the same period in 2009, with the increase primarily due to the activity of Coast Crane during the five week post-acquisition period and the expense of preparing the fleet for rental agreements starting during the quarter and in the near term as evidenced by the increase in the crawler crane utilization rate to 44.7% for the fourth quarter of 2010 from 34.8% for the comparable period in 2009.

During the five week post-acquisition period ended December 31, 2010, Coast Crane incurred costs related to retail equipment sales and parts sales of $1.0 million and $0.8 million, respectively.

Selling, general and administrative expenses increased to $5.1 million for the quarter ended December 31, 2010 from $1.8 million for the same period in the prior year. The increase was primarily due to selling, general and administrative expenses incurred by Coast Crane during the five week post-acquisition period of $1.4 million, transaction related expenses of $1.2 million incurred as a result of the acquisition of Coast Crane’s assets as well as an increase in legal and professional fees.

EBITDA before rental equipment sales, excluding the $1.2 million of selling, general and administrative expenses incurred as a result of the acquisition of Coast Crane’s assets was $2.3 million for the quarter ended December 31, 2010 compared to $3.1 million for the quarter ended December 31, 2009. A reconciliation of EBITDA before rental equipment sales to Income (Loss) from Operations, the closest comparable measure under generally accepted accounting principles, is provided herein.

Outlook for 2011

Mr. Schad continued, “We are excited about the opportunities that 2011 will provide based on increasing utilization and strong quoting activity, particularly to construction jobs that have already been awarded to contractors. In 2011, we will focus our efforts on implementing systems at Coast Crane that provide visibility into quote and order activity similar to what we have at Essex Crane. In addition, we will also focus on expanding the products that Coast Crane currently distributes and services to expand the retail sales and repair and maintenance lines of business. Based on the high utilization of certain classes of Coast Crane’s equipment and the continued improvement in demand for those assets, Essex’s Board of Directors has approved a capital investment of over $20 million in new equipment for Coast Crane’s rental fleet. In addition to our continuing distribution of Manitowoc’s Potain crane lines as discussed in our press release issued on February 18, 2011, Coast Crane will announce its representation of other crane manufacturers within the coming weeks.”

Mr. Schad concluded, “As previously announced, since December 31, 2010 Essex has received approximately $19.8 million in warrant exercise proceeds and has a substantial amount of liquidity in the form of our cash balances and amounts available under our revolving credit facilities. We are confident that the construction rental equipment, sales and service markets are improving and are optimistic about what the future holds for Essex Rental Corp. and its shareholders.”

Conference Call

Essex’s management team will conduct a conference call to discuss the operating results later this morning, March 14, 2010 at 9:00 a.m. ET. Interested parties may participate in the call by dialing 1 (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.essexcrane.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 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 fleet of over 1,000 cranes and 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 before rental equipment sales, 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 before rental equipment sales serves to enhance understanding of Essex's operating performance, EBITDA before rental equipment sales 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 before rental equipment sales has been presented as a supplemental disclosure because EBITDA is a widely used measure of performance and basis for valuation. A reconciliation of EBITDA before rental equipment sales to income from operations is included in the financial tables accompanying this release.

       
Essex Rental Corp. and Subsidiaries
Consolidated Statements of Operations
 
 
Three Months Ended December 31, Year Ended December 31,
2010 2009 2010 2009
 
(Unaudited) (Unaudited) (Unaudited)
REVENUES
Equipment rentals $ 8,142,374 $ 6,360,757 $ 25,049,779 $ 34,556,696
Retail equipment sales 1,238,722 - 1,238,722 -
Used rental equipment sales 1,317,301 403,875 4,255,761 6,478,197
Retail parts sales 1,184,042 - 1,184,042 -
Transportation 1,616,745 978,469 4,766,328 4,909,346
Equipment repairs and maintenance 1,927,347 1,345,013 5,036,828 6,140,153
       
TOTAL REVENUES 15,426,531 9,088,114 41,531,460 52,084,392

 

COST OF REVENUES
Salaries, payroll taxes and benefits 1,843,270 1,428,936 5,905,279 6,006,715
Depreciation 4,033,476 2,847,494 12,723,951 11,210,472
Retail equipment sales 994,119 - 994,119 -
Used rental equipment sales 1,201,910 290,937 3,551,891 5,584,784
Retail parts sales 775,338 - 775,338 -
Transportation 1,413,365 826,012 4,236,326 3,743,595
Equipment repairs and maintenance 2,475,657 1,162,342 5,833,945 4,873,005
Yard operating expenses 386,876 311,625 1,383,068 1,482,371
       
TOTAL COST OF REVENUES 13,124,011 6,867,346 35,403,917 32,900,942
 
GROSS PROFIT 2,302,520 2,220,768 6,127,543 19,183,450
 
Selling, general and administrative expenses 5,113,701 1,835,877 12,964,887 10,547,405
Other depreciation and amortization 326,112 180,633 954,602 781,751
       
 
INCOME (LOSS) FROM OPERATIONS (3,137,293 ) 204,258 (7,791,946 ) 7,854,294
 
OTHER INCOME (EXPENSES)
Other income 62,706 316 72,278 643
Interest expense (2,359,645 ) (1,654,101 ) (7,368,904 ) (6,681,740 )
Exchange gains/(losses) (2,471 ) - (2,471 ) -
Interest rate swaps   159,455     -     159,455     -  
TOTAL OTHER INCOME (EXPENSES)   (2,139,955 )   (1,653,785 )   (7,139,642 )   (6,681,097 )
 
INCOME (LOSS) BEFORE INCOME TAXES (5,277,248 ) (1,449,527 ) (14,931,588 ) 1,173,197
 
PROVISION (BENEFIT) FOR INCOME TAXES   (2,125,047 )   (830,758 )   (5,357,930 )   (22,609 )
 
NET INCOME (LOSS) $ (3,152,201 ) $ (618,769 ) $ (9,573,658 ) $ 1,195,806  
 
Weighted average shares outstanding:
Basic 18,530,159 14,117,714 16,102,339 14,110,789
Diluted 18,530,159 14,117,714 16,102,339 15,805,191
 
Earnings (loss) per share:
Basic $ (0.17 ) $ (0.04 ) $ (0.59 ) $ 0.08  
Diluted $ (0.17 ) $ (0.04 ) $ (0.59 ) $ 0.08  
 
 
Coast Crane and Subsidiary
Consolidated Statement of Operations
(Unaudited)
 
Post-Acquisition
Period
11/24/10 to 12/31/10
 
REVENUES
Equipment rentals $ 1,663,592
Retail equipment sales 1,238,722
Used rental equipment sales 369,601
Retail parts sales 1,184,042
Transportation 125,213
Equipment repairs and maintenance 822,381
 
TOTAL REVENUES 5,403,551
 
COST OF REVENUES
Salaries, payroll taxes and benefits 465,221
Depreciation 1,104,141
Retail equipment sales 994,119
Used rental equipment sales 322,829
Retail parts sales 775,338
Transportation 104,583
Equipment repairs and maintenance 1,043,781
Yard operating expenses 73,838
 
TOTAL COST OF REVENUES 4,883,850
 
GROSS PROFIT 519,701
 
Selling, general and administrative expenses 1,361,331
Other depreciation and amortization 117,920
 
 
LOSS FROM OPERATIONS (959,550 )
 
OTHER INCOME (EXPENSES)
Other income 12,354
Interest expense (458,565 )
Exchange (losses) (2,471 )
Interest rate swaps   159,455  
TOTAL OTHER INCOME (EXPENSES)   (289,227 )
 
LOSS BEFORE INCOME TAXES (1,248,777 )
 
BENEFIT FOR INCOME TAXES   (438,463 )
 
NET LOSS $ (810,314 )
 
       
Essex Crane Rental Corp.
Rental Rate and Utilization Statistics
(Unaudited)
 
 
Three Months Ended December 31, Year Ended December 31,
2010 2009 2010 2009

 

Average crawler crane rental rate per month $ 15,493 $ 19,181 $ 16,391 $ 21,081
 
Utilization Statistics - Crawler Cranes
"Days" Method Utilization 44.7% 34.8% 37.5% 43.6%
"Hits" Method Utilization 49.0% 38.5% 41.3% 48.2%
 
(See definitions in the quarterly and annual reports filed with the SEC)
 
 
Coast Crane Company
Utilization Statistics
For the Month of December 2010
(Unaudited)
 
"Days" Method
Utilization
 
Coast Crane Utilization Statistics
Rough Terrain Cranes 60.4%
Boom Trucks 50.8%
Tower Cranes 32.0%
Carry Decks and Other Equipment 42.2%
 
     
Reconciliation of Income (loss) from Operations
to Total EBITDA and EBITDA before Rental Equipment Sales
(Unaudited)  
        Coast Crane
Post-Acquisition
Three Months Ended December 31, Year Ended December 31, Period
2010 2009 2010 2009 11/24/10 to 12/31/10
 
Income (loss) from Operations $ (3,137,293 ) $ 204,258 $ (7,791,946 ) $ 7,854,294 $ (959,550 )
Add: Depreciation 4,033,476 2,847,494 12,723,951

11,210,472

1,104,141
Add: Other depreciation and amortization   326,112     180,633     954,602     781,751     117,920  
Total EBITDA 1,222,295 3,232,385 5,886,607 19,846,517 262,511
Minus: Used rental equipment sales (1,317,301 ) (403,875 ) (4,255,761 ) (6,478,197 ) (369,601 )
Add: Costs of used rental equipment sales   1,201,910     290,937     3,551,891     5,584,784     322,829  
EBITDA before rental equipment sales $ 1,106,904   $ 3,119,447   $ 5,182,737   $ 18,953,104   $ 215,739  
 
   
Essex Rental Corp. and Subsidiaries
Consolidated Balance Sheets
 
 
December 31, December 31,
2010 2009
 
(Unaudited)
ASSETS
 
CURRENT ASSETS
Cash and cash equivalents $ 3,474,314 $ 199,508
Accounts receivable, net of allowances 12,801,772 4,973,995
Other receivables 4,223,435 3,791,845
Deferred tax assets 2,328,678 1,724,621
Inventory
Equipment inventory 5,386,074 -
Retail spare parts, net 1,882,003 -
Prepaid expenses and other assets   3,069,976     410,198  
TOTAL CURRENT ASSETS 33,166,252 11,100,167
 
Rental equipment, net 330,378,792 260,767,678
Property and equipment, net 8,727,456 6,981,660
Spare parts inventory, net 3,540,360 3,556,236
Identifiable finite lived intangibles, net 3,143,063 2,160,239
Goodwill 1,796,126 -
Loan acquisition costs, net   2,220,878     1,897,177  
 
TOTAL ASSETS $ 382,972,927   $ 286,463,157  
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
CURRENT LIABILITIES
Accounts payable $ 2,810,672 $ 1,790,683
Accrued employee compensation and benefits 1,482,747 679,078
Accrued taxes 4,504,765 5,663,263
Accrued interest 436,947 303,186
Accrued other expenses 1,836,246 739,639
Unearned rental revenue and customer deposits 3,592,854 793,797
Short-term debt obligations 783,243 5,170,614
Current portion of capital lease obligation   6,718     6,269  
TOTAL CURRENT LIABILITIES 15,454,192 15,146,529
 
LONG-TERM LIABILITIES
Revolving credit facilities 214,959,971 131,919,701
Promissory notes 4,938,611 -
Other long-term debt obligations 2,982,920 -
Deferred tax liabilities 59,264,909 62,935,535
Interest rate swaps 5,266,586 2,306,294
Capital lease obligation   10,349     17,067  
TOTAL LONG-TERM LIABILITIES   287,423,346     197,178,597  
 
TOTAL LIABILITIES 302,877,538 212,325,126
 
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 20,472,489 shares at December 31, 2010 and
14,124,563 shares at December 31, 2009 2,047 1,412
Paid in capital 101,052,367 84,589,119
Accumulated deficit (18,596,255 ) (9,022,597 )
Accumulated other comprehensive loss, net of tax   (2,362,770 )   (1,429,903 )
TOTAL STOCKHOLDERS' EQUITY   80,095,389     74,138,031  
 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 382,972,927   $ 286,463,157  
 

Contacts

Essex Rental Corp.
Chief Financial Officer
Martin Kroll, 847-215-6502
mkroll@essexcrane.com
or
Investor Relations:
The Equity Group Inc.
Senior Account Executive
Melissa Dixon, 212-836-9613
mdixon@equityny.com
or
Senior Vice President
Devin Sullivan, 212-836-9608
dsullivan@equityny.com

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Contacts

Essex Rental Corp.
Chief Financial Officer
Martin Kroll, 847-215-6502
mkroll@essexcrane.com
or
Investor Relations:
The Equity Group Inc.
Senior Account Executive
Melissa Dixon, 212-836-9613
mdixon@equityny.com
or
Senior Vice President
Devin Sullivan, 212-836-9608
dsullivan@equityny.com