Essex Rental Corp. Reports 2015 Third Quarter Results

BUFFALO GROVE, Ill.--(BUSINESS WIRE)--

Essex Rental Corp. ESSX ("Essex" or the "Company") today announced its consolidated results for the third quarter ended September 30, 2015.

Third Quarter 2015 Highlights

• Hydraulic crawler crane utilization remained strong at 79.2% for the three month period ended September 30, 2015 compared to 79.6% for the three month period ended September 30, 2014;
• City and other tower crane utilization increased to 82.3% for the three month period ended September 30, 2015 compared to 52.7% for the three month period ended September 30, 2014. Rental revenue generated from tower cranes continued its positive trend and was at its highest quarterly level since we acquired these assets;
• Coast Crane rental segment gross profit increased by approximately $600,000 or 15.0% for the three month period ended September 30, 2015 compared to the three month period ended September 30, 2014;
• Parts and service gross profit increased by approximately $100,000 or 10.1% for the three month period ended September 30, 2015 compared to the three month period ended September 30, 2014;
• Gross profit increased by $400,000 to $6.9 million for the three month period ended September 30, 2015 compared to $6.5 million for the three month period ended September 30, 2014;
• Selling, general & administrative expenses excluding non-cash compensation and non-recurring expenses decreased by approximately $200,000 year over year and $300,000 sequentially; and
• Adjusted EBITDA increased by approximately $500,000 or 10.1% and $1.3 million or 29.6% for the three month period ended September 30, 2015 compared to the three month periods ended September 30, 2014 and June 30, 2015, respectively.

Nick Matthews, President and CEO of Essex stated, "Despite a challenging equipment sales market, the Company generated its highest adjusted EBITDA excluding non-cash compensation and non-recurring costs since the acquisition of Coast Crane in late 2010. The strategic initiatives put in place last year continue to benefit the company and it is encouraging to see the early results of the cost savings initiatives that were implemented during the third quarter of 2015. We anticipate the full impact of these initiatives will become more apparent as we move forward."

Mr. Matthews continued, "As our core business continues to improve and become more efficient, the restructuring of the Essex Crane subsidiary is progressing. This collaborative process is aimed at strategically positioning the subsidiary to ultimately provide value for all of its stakeholders."

Third Quarter 2015 Overview

Essex Crane equipment rentals segment revenues were $9.5 million for the three month period ended September 30, 2015 versus $11.4 million for the three month period ended September 30, 2014. Essex Crane equipment rentals segment revenues include equipment rentals, transportation and used rental equipment sales revenue generated from the Essex Crane subsidiary. The $1.9 million decrease was primarily driven by a $1.3 million decrease in used rental equipment sales and a $400,000 decrease in transportation revenue. Used rental equipment sales in the third quarter of 2014 included the sale of 4 traditional crawler cranes related to the previously announced trade. Despite the decrease in revenue, gross profit from the equipment rentals segment remained flat, driven by improved margins from the used rental equipment sales and transportation.

Coast Crane equipment rentals segment revenues were $9.6 million for the three month period ended September 30, 2015 versus $10.3 million for the three month period ended September 30, 2014. Coast Crane equipment rentals segment revenues include equipment rentals, transportation and used rental equipment sales revenue generated from the Coast Crane subsidiary. The $700,000 decrease was driven by a $1.4 million decrease in used rental equipment sales, partially offset by a $600,000 increase in equipment rental revenue and a $100,000 increase in transportation revenue. Despite the decrease in revenue, gross profit increased by $600,000 or 15.0% due primarily to stronger margins from equipment rentals and transportation.

Equipment distribution segment revenues, which includes the retail distribution of new and used equipment, but excludes the proceeds received from the sale of used rental equipment, were $300,000 for the three month period ended September 30, 2015 compared to $2.8 million for the three month period ended September 30, 2014.

Parts and service segment revenues were $4.7 million for the three month period ended September 30, 2015 compared to $5.1 million for the three month period ended September 30, 2014. Parts and service segment revenues include retail parts sales, billable service work done on our own equipment and service on customer-owned equipment.

Total gross profit increased 6.2% to $6.9 million for the three month period ended September 30, 2015 from $6.5 million for the three month period ended September 30, 2014. The increase is primarily due to the increase in gross profit generated from the Coast Crane equipment rentals segment and the parts and service segment. Gross profit margin increased to 28.7% for the three month period ended September 30, 2015 from 22.0% for the three month period ended September 30, 2014.

Selling, general and administrative expenses excluding non-cash compensation and non-recurring expenses decreased by $200,000 to $5.6 million for the three month period ended September 30, 2015 as compared to $5.8 million for the three month period ended September 30, 2014. The decrease is primarily related to the previously disclosed corporate governance changes.

EBITDA before non-cash compensation and non-recurring expenses was $5.8 million for the three month period ended September 30, 2015 compared to $5.3 million for the three month period ended September 30, 2014. Non-cash compensation and non-recurring expenses were $900,000 for the three month period ended September 30, 2015 and $200,000 for the three month period ended September 30, 2014. Non-recurring expenses for the three month period ended September 30, 2015 were primarily made up of severance and restructuring related expenses.

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 4, 2015. Interested parties may participate in the call by dialing (877) 407-8291 (Domestic) and (201) 689-8345 (International). Please dial 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 and any actions of our lenders in relation to events of default under our indebtedness, 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, amortization and impairment expense. 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 & Subsidiaries
Condensed Consolidated Statements of Operations
(Amounts in thousands, except share and per share data)
(Unaudited)
			Three Months Ended September 30,								Nine Months Ended September 30,
			2015				2014				2015				2014
REVENUES
	Equipment rentals		$	14,068			$	13,640			$	38,211			$	37,202
	Retail equipment sales			319				2,760				6,441				6,938
	Used rental equipment sales			3,301				6,024				6,137				10,089
	Retail parts sales			1,689				2,165				5,708				6,707
	Transportation			1,743				2,056				4,917				6,021
	Equipment repairs and maintenance			2,970				2,936				9,957				8,219
	TOTAL REVENUES			24,090				29,581				71,371				75,176
COST OF REVENUES
	Salaries, payroll taxes and benefits			3,155				3,021				9,132				8,399
	Depreciation			4,473				4,538				13,385				13,755
	Retail equipment sales			289				2,425				6,011				6,117
	Used rental equipment sales			2,781				5,074				4,700				8,253
	Retail parts sales			1,348				1,691				4,586				5,287
	Transportation			1,519				2,082				4,282				5,906
	Equipment repairs and maintenance			2,738				3,234				8,848				8,886
	Yard operating expenses			863				999				2,584				2,601
	TOTAL COST OF REVENUES			17,166				23,064				53,528				59,204
	GROSS PROFIT			6,924				6,517				17,843				15,972
Selling, general and administrative expenses				6,526				5,939				19,574				17,686
Impairment - rental equipment, held for sale				-				771				-				771
Other depreciation and amortization				170				195				521				708
	INCOME (LOSS) FROM OPERATIONS			228				(388	)			(2,252	)			(3,193	)
OTHER INCOME (EXPENSES)
	Other income (expense)			2				(3	)			3				(1	)
	Interest expense			(4,921	)			(3,669	)			(12,710	)			(10,243	)
	Foreign currency exchange losses			(306	)			(172	)			(557	)			(225	)
	TOTAL OTHER INCOME (EXPENSES)			(5,225	)			(3,844	)			(13,264	)			(10,469	)
LOSS BEFORE INCOME TAXES				(4,997	)			(4,232	)			(15,516	)			(13,662	)
BENEFIT FOR INCOME TAXES				(2,034	)			(1,834	)			(6,146	)			(5,354	)
	NET LOSS		$	(2,963	)		$	(2,398	)		$	(9,370	)		$	(8,308	)
Weighted average shares outstanding:
	Basic			25,047,223				24,813,619				24,969,196				24,801,537
	Diluted			25,047,223				24,813,619				24,969,196				24,801,537
Loss per share:
	Basic		$	(0.12	)		$	(0.10	)		$	(0.38	)		$	(0.33	)
	Diluted		$	(0.12	)		$	(0.10	)		$	(0.38	)		$	(0.33	)

Essex Rental Corp. & Subsidiaries
Utilization Statistics
(Unaudited)
		Three Months Ended
		September 30,		June 30,		September 30,
		2015		2015		2014
Utilization Statistics - "Days" Utilization
Crawler Cranes - Hydraulic		79.2%		75.2%		79.6%
Crawler Cranes - Traditional		26.0%		21.9%		30.0%
Rough Terrain Cranes		62.2%		55.6%		65.9%
Boom Trucks		50.1%		50.9%		49.8%
Self-Erecting Tower Cranes		44.1%		30.8%		42.9%
City & Other Tower Cranes		82.3%		60.8%		52.7%
(See definitions in the quarterly and annual reports filed with the SEC)

Essex Rental Corp. & Subsidiaries
Segment Revenues and Gross Profit
(Amounts in thousands)
(Unaudited)
		Three Months Ended September 30,							Nine Months Ended September 30,
		2015				2014			2015				2014
Segment revenues
Essex Crane equipment rentals		$	9,532			$	11,428		$	25,629			$	28,584
Coast Crane equipment rentals			9,580				10,292			23,636				24,728
Equipment distribution			319				2,760			6,441				6,938
Parts and service			4,659				5,101			15,665				14,926
Total revenues		$	24,090			$	29,581		$	71,371			$	75,176
Segment gross profit
Essex Crane equipment rentals		$	1,514			$	1,483		$	3,161			$	3,219
Coast Crane equipment rentals			4,217				3,667			10,166				8,606
Equipment distribution			(135	)			161			(70	)			335
Parts and service			1,328				1,206			4,586				3,812
Total gross profit		$	6,924			$	6,517		$	17,843			$	15,972

Essex Rental Corp & Subsidiaries
Reconciliation of Net Loss to Adjusted EBITDA
(Amounts in thousands)
(Unaudited)
			Three Months Ended September 30,								Nine Months Ended September 30,
			2015				2014				2015				2014
Net loss			$	(2,963	)		$	(2,398	)		$	(9,370	)		$	(8,308	)
Benefit for income taxes				(2,034	)			(1,834	)			(6,146	)			(5,354	)
Foreign currency exchange losses				306				172				557				225
Interest expense				4,921				3,669				12,710				10,243
Other (income) expense				(2	)			3				(3	)			1
Income (Loss) from operations				228				(388	)			(2,252	)			(3,193	)
Depreciation				4,473				4,538				13,385				13,755
Impairment - rental equipment, held for sale				-				771				-				771
Other depreciation and amortization				170				195				521				708
Adjusted EBITDA (1)			$	4,871			$	5,116			$	11,654			$	12,041

(1) Includes non-cash stock compensation and non-recurring expenses of $0.9 million and $0.2 million for the three months ended September 30, 2015 and 2014, respectively and $2.0 million and $1.1 million for the nine months ended September 30, 2015 and 2014, respectively.

Essex Rental Corp. and Subsidiaries
Condensed Consolidated Balance Sheets
(Amounts in thousands, except share data)
(Unaudited)
		September 30,				December 31,
		2015				2014
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	1,281			$	1,087
Accounts receivable, net of allowances			16,419				16,981
Other receivables			1,674				1,700
Deferred tax assets			3,703				3,504
Inventory
Retail equipment			16,311				12,030
Retail spare parts, net			1,741				1,725
Rental equipment, held for sale			-				790
Prepaid expenses and other assets			1,736				1,516
TOTAL CURRENT ASSETS			42,865				39,333
Rental equipment, net			253,833				270,465
Property and equipment, net			4,642				4,613
Spare parts inventory, net			3,898				3,816
Identifiable finite lived intangibles, net			484				735
Goodwill			1,796				1,796
Loan acquisition costs, net			3,354				5,132
TOTAL ASSETS		$	310,872			$	325,890
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable		$	4,979			$	4,966
Accrued employee compensation and benefits			1,897				2,008
Accrued taxes			3,529				3,694
Accrued interest			1,639				870
Accrued other expenses			796				1,031
Unearned rental revenue			1,677				1,849
Customer deposits			628				350
Revolving credit facilities - short-term			141,941				142,709
Term loans - short-term			32,349				2,000
Promissory notes - short-term			1,655				-
Purchase money security interest debt - short-term			1,422				1,655
Capital lease obligation - short-term			78				35
TOTAL CURRENT LIABILITIES			192,590				161,167
LONG-TERM LIABILITIES
Revolving credit facility			2,049				1,781
Term loans			33,000				64,500
Promissory notes			-				1,655
Purchase money security interest debt			7,451				6,652
Deferred tax liabilities			28,619				34,487
Capital lease obligation			323				162
TOTAL LONG-TERM LIABILITIES			71,442				109,237
TOTAL LIABILITIES			264,032				270,404
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 25,186,791 shares at September 30, 2015
and 24,824,614 shares at December 31, 2014			3				2
Paid in capital			127,136				126,510
Accumulated deficit			(80,447	)			(71,077	)
Accumulated other comprehensive income			148				51
TOTAL STOCKHOLDERS' EQUITY			46,840				55,486
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	310,872			$	325,890

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