Essex Rental Corp. last week posted an 18.5-percent sequential increase in rental-related revenue, coming in at $8.6 million for the third quarter compared with $7.3 million for the second quarter. However, year-over-year results in the third quarter were down 11 percent from $9.7 million in the same period of 2009.
The year-over-year decline, the company said, was primarily because of lower equipment rental revenue, which represented 72.4 percent of total revenue, or $6.3 million for the quarter ended Sept. 30, 2010, compared to 64.0 percent of total revenue, or $7.1 million for the comparable period in 2009. The decline in equipment rental income was related primarily to a 22.1-percent decrease in the average monthly crane rental rate to $16,137 compared to the average monthly crane rental rate of $20,716 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 caused by weak demand driven by the anemic economy and difficult commercial credit environment. This was compounded by the expiration of existing rental agreements executed at higher rental rates in the prior years.
“Third-quarter results were consistent with our expectations, and we continued to see some of our end markets recover and, accordingly, demand for our heavy-lifting equipment increase,” said Ron Schad, president and CEO of Essex. “During the quarter, we witnessed the continued stabilization of rental rates. However, our average monthly rental rate declined marginally primarily due to the mix of cranes on rent. More importantly, on a sequential quarter basis we experienced a meaningful increase in utilization rates when compared to the three months ended June 30, 2010.
“Infrastructure-related projects, including levee reconstruction, continue to be the largest contributor to increasing utilization, but we have seen some increases in fleet utilization in a diverse group of sub-markets and locations in which we operate.”
Partially offsetting the decrease in equipment rental revenue due to the decline in average monthly crane rental rate was the increase in utilization rates. The crane utilization rate (on a days method) for the quarter ended Sept. 30, equaled 40.2 percent, compared to 38.6 percent in the comparable period in 2009 and was considerably improved from the 35.1 percent for the quarter ended June 30, 2010.
Rental EBITDA was $1.7 million for the third quarter compared to $3.0 million in the year-ago period. Rental EBITDA of $1.7 million for the third quarter of 2010 improved meaningfully from rental EBITDA of $1.0 million for the second quarter of this year, the company reported.
“Our outlook for the remainder of this year and for 2011 is upbeat as we expect utilization rates to continue their upward trend and we believe that utilization rates will reach levels that will allow us to achieve higher rental rates in the foreseeable future,” said Schad. “Essex believes that our continued improvement in fleet utilization combined with the leveling off of declining rental rates is our best indication of the ongoing recovery taking place in the heavy lift crane rental business sectors that we serve. This strong indication of a recovery reinforces our confidence that there is a positive future for Essex.”
In other Essex news, the company recently submitted a bid to acquire the assets of Coast Crane Co., a provider of specialty lifting solutions and crane rental services on the West Coast. The acceptance of Essex’s bid and the consummation of the acquisition of Coast are subject to, among other things, Essex having the highest and best offer for the assets and approval by the Bankruptcy Court. If Essex’s bid is determined to be qualified under the bidding standards applicable to Coast’s bankruptcy proceeding, Essex will participate in an auction scheduled for Nov. 8. A hearing in the Bankruptcy Court is scheduled to be held on Nov. 12, to determine whether Essex’s offer constitutes the highest and best bid in the auction.
Headquartered in Buffalo Grove, Ill., Essex Crane Rental Corp., is No. 40 on the RER 100.