Neff Corporation reported its financial results for the second quarter ended June 30, 2015, showing record rental revenues of $94.2 million, up 2% from the second quarter last year.
Graham Hood, Chief Executive Officer of Neff Corporation, commented, “Despite challenging weather conditions and the headwinds from Oil and Gas activities we achieved record rental revenues in the second quarter of 2015. Adjusted EBITDA was down by 2.9% year over year, due largely to public company related expenditures. We remain highly focused on managing our fleet and executing our strategy as we continue into the seasonally strong summer months of rental demand in a positive construction environment.”
Second Quarter 2015 Highlights
- Revenues increased 2.0% to $94.2 million in the quarter from $92.4 million in the second quarter of 2014.
- Rental revenues increased 1.6%, or $1.3 million, to $84.8 million in the second quarter of 2015.
- The average original equipment cost ("OEC") of our rental fleet increased by 10.9% to $762.5 million for the second quarter of 2015.
- Rental rate growth was 1.7% in the quarter compared to 7.4% in the second quarter of 2014.
- Time utilization was 67.1% in the second quarter of 2015 compared to 72.2% in the prior-year period.
- Adjusted EBITDA decreased 2.9% to $47.0 million in the second quarter of 2015 from $48.4 million in the prior-year quarter. Adjusted EBITDA as a percentage of revenues was 49.9% compared to 52.4% in the second quarter of 2014.
Second Quarter 2015 Financial Results
Revenue
Total revenues increased 2.0% to $94.2 million from $92.4 million in the second quarter of 2014. Rental revenues increased 1.6% to $84.8 million compared to $83.5 million in the second quarter of 2014. Equipment sales increased to $6.2 million from$5.5 million in the second quarter of 2014. Parts and service revenues decreased to $3.2 million in the second quarter of 2015 from $3.4 million in the prior-year period.
Adjusted EBITDA
Adjusted EBITDA, a non-US GAAP ("US GAAP" means accounting principles generally accepted in the United States) financial measure that includes the adjustments noted in the reconciliation below, in the second quarter of 2015 was $47.0 millioncompared to $48.4 million in the second quarter of 2014. Adjusted EBITDA, as a percentage of revenues, was 49.9% compared to 52.4% in the second quarter of 2014.
Net Income
Net income for the quarter increased to $14.7 million for the second quarter of 2015 from a loss of $22.9 million in the second quarter of 2014. Net income increased primarily because the transaction bonus and extinguishment of debt which occurred in the second quarter of 2014 did not occur in 2015.
Return on Invested Capital ("ROIC")
ROIC was 11.5% for the twelve months ended June 30, 2015, an increase of 100 basis points from the twelve months ended June 30, 2014. The Company’s ROIC metric uses after-tax operating income for the trailing 12 months divided by average stockholders’ equity (deficit) and debt, net of average cash. To mitigate the volatility related to fluctuations in the company’s tax rate from period to period, a federal statutory tax rate of 35% is used to calculate after-tax operating income.
Fleet Size
The size of the rental fleet was $775.4 million of OEC as of June 30, 2015, compared to $708.3 million at June 30, 2014.
Six Months 2015 Financial Results
- Revenues increased 4.8% to $178.3 million from $170.1 million for the same period last year.
- Adjusted EBITDA increased 3.4% to $86.0 million from $83.2 million in the prior year period. Adjusted EBITDA as a percentage of revenues was 48.2% compared to 48.9% in the prior year period.
- Rental revenues increased 4.2%, or $6.3 million, to $159.0 million for the current year period from $152.6 million in the same period last year.
- The average original equipment cost ("OEC") of our rental fleet increased by 12.7% to $742.3 million in the current year period.
- Rental rate growth was 2.7% in the current year compared to 7.2% in the same period last year.
- Time utilization was 65.4% compared to 70.3% in the prior-year period.
2015 Financial Outlook
The Company has updated its 2015 full year outlook as follows:
- Total revenue is forecast to be in the range of $385 million to $395 million, compared to the prior guidance of $390 million to $400 million.
- Adjusted EBITDA is forecast to be in a range of $190 million to $195 million, compared to the prior guidance range of$200 million to $205 million.
- Year-over-year rental rate increase is expected to be approximately 3.0%, compared to prior guidance of 4.5%.
- Time utilization is unchanged from prior guidance of 66%.
- Net capital expenditures are expected to be in the range of $130 million to $135 million, compared to the prior guidance range of $125 million to $135 million.
