Repayment of more than $100 million in debt and the acquisition of top 10 rental company Brambles were the highlights of what NES CEO Kevin Rodgers called "a tough and disappointing year" for National Equipment Services.
The Evanston, Ill.-based company, No. 6 on the RER 100 and now North America's fourth largest rental company, last week reported a 2 percent drop in total revenues in 2001, with $611 million down from $624 million in 2000. Earnings before interest, taxes, depreciation and amortization totaled $168 million in 2001, allowing the company to pay down $102 million in debt.
"A main goal for 2001 was to repay debt from operating cash flow," said Rodgers. "And while EBITDA was short of 2000, we achieved that debt reduction by doing a better job in managing our inventories and our rental fleet, particularly accounts receivables where days outstanding was brought down by nine days, translating into a $20 million lower balance at the end of the year from the previous year. We also picked up more than $20 million in lower fleet depreciation, as a result of reconfiguring the rental fleet."
Chief operating officer Steve Shaughnessy said the company disposed of a significant number of older obsolete units, enabling the company to start the new year in a better position, with the average fleet age increasing only slightly from three years at the end of 2000 to 3.2 years at the end of 2001.
The company's second major achievement in 2001 was the acquisition of Brambles, a deal that was finalized December 31. Brambles, with $166 million in total revenue and 39 branch locations, was particularly strong in the industrial sector, with strong relationships in the automotive industry, a sector that has not decreased despite the overall economic downturn. Shaughnessy said the company will net $10 million in synergistic savings as a result of the acquisition and integration. NES plans to close facilities in a dozen markets where both companies had branches.
Rental revenues decreased year-over-year from $470.2 million to $454.4 million, operating income dropped from $95 million to $30 million, while net income dropped from $6 million in 2000 to a loss of $30.9 million in 2001. EBITDA dropped from $215.3 million to $168 million. Fourth quarter rental revenues decreased year-over-year from $125.2 million to $106.4 million, with total Q4 revenue sliding from $163.3 million to $143.4. Still, NES' prospects for 2002 appear much brighter, Rodgers said, as a result of debt reduction, improved management and more efficient operating systems. "We expect EBITDA to increase to $210 million in 2002 and we expect operating income to jump from $30 million to $88 million, and that's assuming a 6 percent drop in total revenue in 2002," Rodgers added. "So a slight uptick in demand or even getting back to where we were in 2001 would cause significant improvement to what we forecasted."