Essex Rental Corp.last week announced its unaudited results for the second quarter ended June 30, including Essex Crane Rental Corp., its operating subsidiary. Essex’s total rental-related revenue for the second quarter of 2010, which includes revenue from equipment rentals, repair and maintenance, and transportation services, but excludes used rental equipment sales, was $7.3 million compared to total rental-related revenue of $11.9 million for the quarter ended June 30, 2009, a decline of 38.6 percent. The decline was primarily due to lower equipment rental revenue driven by both lower utilization rates and rental rate pricing on cranes and attachments which represented 60.1 percent of total revenue, or $5.4 million for the quarter ended June 30, 2010, compared to 61.0 percent of total revenue, or $8.9 million for the comparable period in 2009.
Equipment rental income was also impacted by a 24.3-percent decrease in the average monthly crane rental rate to $16,372 compared to the average monthly crane rental rate of $21,633 for the comparable period in 2009. The decrease in average crane rental rate was the result of lower rental rate pricing caused by anemic demand driven by the weak 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, as well as a change in the mix of cranes on rent. Approximately one-third of the $5,261 decline in average monthly crane rental rate is the result of a change in the mix of cranes on rent.
“We are continuing to focus on managing our costs after experiencing the impacts of the worst construction recession in recent history,” said Ron Schad, president & CEO of Essex. “Although second-quarter 2010 results are down compared to second-quarter 2009, we are beginning to see signs of recovery from the recession and a very soft construction cycle. Business is trending upwards, and we expect to generate improved operating results during the second half of 2010 as compared to the first six months of this year. Longer term, we believe that the investments we have made in our fleet during 2009 and the beginning of 2010 position us to surpass historic high profitability marks when the construction market recovers.”
The crane utilization rate (on a days method) for the second quarter equaled 35.1 percent, compared to 43.9 percent in the comparable period in 2009. Despite this decrease in utilization between the two periods, we have experienced five consecutive months of increasing utilization rates through June 2010 as illustrated by the increase in the crane utilization rate to 35.1 percent for the 2Q10 from the low 30.0-percent rate for the first quarter ended March 31.
Selling, general and administrative expenses declined to $2.6 million for the second quarter from $2.7 million for the same period in the prior year. Rental EBITDA was $1.0 million for the second quarter compared to $5.1 million for the year-ago quarter.
“We expect the second half of 2010 to generate higher revenue and have improved operating results as compared to the first half of 2010,” Schad said. “Infrastructure-related projects, including levee reconstruction, continue to be the largest contributor to increasing utilization, but we have seen small increases in utilization rates in almost all sub-markets in which we operate. We believe that wind power projects will provide good opportunities for growth in the future, but we don’t believe that we will see significant increases to business levels in this niche sub-market until 2011.
“In the short-term, our business is benefiting from the early stages of a recovery and we believe that we have weathered the worst of the challenges that this recent downturn presented. As we have said in the past, operating results will not return to historical levels until utilization rates significantly increase, enabling rental rates to rise. We remain confident in the long-term growth of the infrastructure and energy markets in which we operate, and believe that there will be significant demand for our assets for many years to come.”
Headquartered in Buffalo Grove, Ill., Essex, through its subsidiary, Essex Crane Rental Corp., is No. 40 on the RER 100.
