RERMAG

Neff Rental Revenue Drops 3.3 Percent in ’07

Miami-based Neff Rentals dropped 3.3 percent in rental revenue in 2007, posting $266.4, compared with $275.4 in 2006. Total revenue declined 0.1 percent, from $330.2 million in 2006 to $329.9 million in 2007. With a 15.3-percent increase in total cost of revenues, gross profit for the year decreased $25.8 million, or 15.8 percent, to $137.9 million in 2007, compared with $263.7 million in 2006.

According to Neff management, the decrease in rental revenues was primarily the result of a 2.9-percent year-over-year decrease in rental rates and a decrease in the percentage of equipment on rent. Dollar utilization for 2007 was 49 percent, compared with 52.5 percent in 2006.

With nearly 50 percent of its inventory devoted to earth-moving equipment, Neff Rental is more affected by the slowdown in the home-construction market than some companies with a larger percentage of equipment devoted to aerial equipment, although the company said less than 10 percent of its revenue is tied to the home construction market.

“A change in economic conditions in a number of our key equipment rental markets has had an adverse effect on our financial performance in 2007,” said CEO Graeme Hood. “We experienced lower demand for rental equipment, especially in earthmoving equipment, in Florida and western regions which together represent about 45 percent of our rental revenue. During 2007 we met our asset management goals and generated free cash flow, continued to paid down debt, retain customers and gain new business.”

EBITDA was 41.6 percent for 2007, compared to 45.5 percent in 2006. However, operating cash flow increased 39.3 percent year over year. The company paid down $24 million in debt since June 2007.

“Even in a challenging market, our business model has enabled us to generate significant free cash flow and maintain liquidity,” added Hood.

In June 2007, Lightyear Capital LLC acquired Neff Rental from Odyssey Business Partners. Neff Rental is No. 8 on the RER 100.

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