Mississauga, Ontario-based Stephenson's Rental Services Income Fund last week announced results for the three months ended March 31, 2006. Because the fund commenced operations with the completion of its initial public offering in July 2005, there are no comparative figures representing the operations of the fund in prior periods. Comparative information was compiled from selected unaudited comparative figures for the period ended March 31, 2005 from the fund's predecessor companies.
Total revenue for the three months ended March 31, 2006 increased 9.3 percent to CD $10.0 million from the first quarter of 2005, primarily due to higher rental revenue generated by a larger rental fleet and price increases implemented in late 2005 and the current quarter. Revenue from equipment rental represented approximately 76 percent of total revenue for the quarter ended March 31, 2006 as compared to 74 percent of total revenue for the same quarter in 2005. Revenue from consumables and new equipment was CD $1.9 million, a decrease of 11.3 percent compared to the same period in 2005. This decline primarily resulted from a decrease in fuel sales related to Stephenson's heating products business attributable to warmer-than-normal temperatures during the first quarter of 2006. Revenue from the sale of used equipment, typically a more discretionary revenue stream, increased in the first quarter of 2006 due to the timing of industry equipment auctions attended during the quarter.
EBITDA for three months ended March 31, 2006 decreased to CD $1.2 million from CD $1.4 million during the same quarter in 2005. This decline, despite an overall increase in revenue compared to 2005, is the result of a higher proportion of total revenue being derived from the sale of used equipment at a lower margin than 2005 and certain cost increases in the first quarter of 2006 as compared to the same period in 2005 in human resources, delivery (as a result of higher fuel costs) and insurance. Selling, general and administrative expenses were also higher in the first quarter of 2006 as compared to the same period in 2005 primarily due to the costs related to becoming a publicly traded entity.
The fund, under Canadian generally accepted accounting principles, incurred a net loss after income taxes and non-controlling interest of CD $1.9 million for the quarter ended March 31, 2006. There is no comparable result for the same period in 2005.
"We were pleased with the internal growth generated in the quarter as we continue to successfully execute our strategies to build our business," said William Swisher, president and CEO. "As expected, the seasonal nature of our business impacted our results in the first quarter, however we anticipate we will generate distributable cash for the full year that is consistent with that amount outlined at the time of the IPO, and that our financial performance will continue to grow over the long term."
In related news, Stephenson’s last week outlined additional potential synergies of its recent acquisition of Toronto-based A1 Equipment Rental, which has a rental fleet with an original cost of $26 million generating an annual dollar utilization of approximately 50 percent, as compared to Stephenson's 61 percent on similar rental fleet product categories. Stephenson's "hub and spoke" branch operating model will provide opportunity to improve A1's dollar utilization. "The acquisition of our largest independent competitor will significantly expand the scope and scale of our business, and is expected to be immediately accretive to our distributable cash prior to the realization of future synergies," said Swisher. "At the time of our IPO, we articulated our intention to complete accretive acquisitions as an important component of our strategy to grow our business and increase distributable cash for unitholders. A1, which has been a formidable competitor for many years, fits all the criteria we outlined as factors we would be considering in evaluating acquisition targets. We are very excited to be adding A1's impressive customer base, rental fleet and employees to our operation and look forward to building on the combined entity to continue to grow our business."
Stephenson’s Rental Service is No. 48 on the RER 100.
