Essex Rental Corp. rental-related revenue was $7.3 million for the first quarter compared with $15.3 million for the first quarter last year, a 52.3-percent decrease. The company attributed the plunge to lower utilization rates on cranes and attachments and a 23-percent decline in the average monthly crane rental rate of $17,562, compared with $22,794 for the same period in 2009.
The company said demand was “anemic” because of the weak economy and the difficult commercial credit environment compounded by the expiration of existing rental agreements executed in the past at higher rental rates.
“As expected, the first-quarter 2010 operating results were significantly less than prior-year results due to the material decreases in utilization and average rental rates attributable to the weakened economy,” said Ron Schad, president and CEO of Essex. “Despite the decline in utilization and average rental rates that we have been experiencing, the company generated positive cash flows from operations of $400,000 for the quarter ended March 31.
“During the quarter, we continued to take advantage of opportunities to liquidate rental equipment with lighter lifting capacities and lower utilization rates and invested in rental equipment that we believe will be in greater demand with higher rental rates as utilization improves.”
Schad said the company sold two used cranes with an average lifting capacity of 175 tons at an average price of more than 120 percent or orderly liquidation value, and acquired one new crane with related attachments with a lifting capacity of more than 400 tons.
“At quarter end, the company had in excess of $48 million available on our revolving credit facility, which provides liquidity for future growth opportunities,” added Schad.
Schad was optimistic that fleet utilization will improve throughout 2010. “However, the lower average rental rates we have experienced over the preceding 15 months will continue to impact rental EBITDA until we achieve rates of utilization that approach 60 percent,” he added. “We continue to remain optimistic about the opportunities that we are seeing in certain of the crawler crane rental sub-markets including the petrochemical turnaround repair and expansion, levee construction and wind power sub-markets.
“Throughout 2010 and going forward, Essex will continue to focus its efforts on managing the business to maximize free cash flow and return on invested capital for our stockholders. The underlying value of our rental equipment is stable and has been recently appraised at a value in excess of $265 million, which is significantly in excess of the $138.4 million of our total debt obligations outstanding.”
Based in Buffalo Grove, Ill., Essex Crane Rental is No. 30 on the RER 100.