Essex Rental Corp. doubled its equipment rental revenue for the first quarter of 2011, posting $10.4 million, compared with $5.1 million for last year’s first quarter. The increase was primarily the result of equipment rental revenue of $4.3 million generated by recently acquired Coast Crane during the period as well as an increase in utilization rates.
Equipment rental revenue specific to Essex’s crawler crane fleet increased 18.2 percent or $900,000 compared with the year-ago quarter. The crawler crane utilization rate for the quarter was 42.8 percent, compared with 30 percent a year ago. Partially offsetting the increase in equipment rental revenue was an 11.7-percent decrease in the average monthly crawler crane rental rate, which dropped to $15,516 compared with $17,562 during last year’s first quarter. The decrease in the average crawler crane rental rate was the result of a change in the mix of cranes on rent and lower rental rate pricing caused by weakened demand, the result of the slow economic recovery and difficult commercial credit environment, compounded by the expiration of existing rental agreements, which were executed at higher rental rates.
Transportation revenue for the first quarter of 2011 was $1.4 million compared with $1 million for the year-ago quarter. The increase was the result of $0.2 million in transportation revenue generated by Coast Crane during the quarter, and the increase in the mobilization of crawler cranes of $200,000.
Equipment repairs and maintenance revenue for the first quarter was $2.7 million compared to $1.1 million for the year-ago quarter, the result of $1.6 million in repair and maintenance revenue generated by Coast Crane.
During the first quarter, Coast Crane generated revenues of $3.7 million from new and used retail equipment sales and $2.9 million from retail parts sales.
“The first quarter was a busy and productive period for Essex,” said Ron Schad, president and CEO. “While utilization of crawler cranes declined slightly on a sequential quarterly basis, it significantly improved when compared to the same period in the prior year. The marginal decline in utilization on a sequential quarterly basis is due to seasonality, the completion of stimulus-funded construction projects and the conclusion of certain levee contracts. However, we did experience a modest sequential increase in average rental rates of crawler cranes compared to the fourth quarter of 2010. As previously announced, we completed the acquisition of Coast Crane’s assets in late November 2010. To date, we are pleased with the quality of people at Coast Crane, and believe that their strengths have been exhibited while transitioning through the realignment of its management team.
“While there are short-term challenges associated with any acquisition, we are encouraged by the early indications including the steady increase in rental equipment utilization of the rental assets that make up the majority of our investment in Coast Crane, the stability of its parts and service business, and the new distribution agreements that we have put in place. We continue to believe that we have an excellent opportunity to capitalize on Coast Crane’s market position to generate highly attractive shareholder returns. During the first quarter of 2011, we were active in negotiating and executing new distribution contracts with Tadano, Manitex, Broderson, Mantis and Terex.”
Schad added that the company is optimistic about 2011 based on strong quoting activity, particularly to construction jobs that have already been awarded to contractors, as well as stabilizing rental rates, increased utilization and new distribution agreements.
“While competitive behavior remains challenging, we believe that in the long term, our strategy of disciplined pricing, a broad fleet of bare rental cranes, and our expanded service, sales and distribution capabilities will provide attractive growth opportunities,” Schad said. “We have already begun the process of implementing new systems at Coast Crane that will provide visibility into quote and order activity similar to what we have used very effectively at Essex Crane. In addition, we are also focused on expanding the products and services that Coast Crane currently distributes in our effort to grow both the retail sales and the repair and maintenance lines of business.”
Schad added that Essex’s board of directors has approved a capital investment of more than $20 million in new equipment for Coast Crane’s rental fleet.
Essex Crane Rental is No. 61 on the new RER 100; Coast Crane is No. 51.