Stephenson's Rental Services Income Fund

Stephenson's Rental Services Income Fund

November 09, 2005 08:56 ET

Stephenson's Rental Services Income Fund Announces Results for First Reporting Period

TORONTO, ONTARIO--(CCNMatthews - Nov. 9, 2005) -

- Distributable cash of $2.2 million during 65-day period to September 30, 2005

- 82.4% payout ratio

- EBITDA up 6.1% compared to prior year

Stephenson's Rental Services Income Fund ("Stephenson's" or the "Fund") (TSX:RNT.UN) announced today results for the period ended September 30, 2005. The results are the first to be issued by the Fund and reflect Stephenson's operations as an income trust for the 65-day period from July 28, 2005, the date of completion of the Fund's initial public offering (the "IPO"), to September 30, 2005.

As the Fund commenced operations on July 28, 2005, no comparative information is provided in the Fund's interim consolidated financial statements. However, certain financial and operating results of the Fund are compared to the operating results of Stephenson's during the same 65-day period in 2004.

EBITDA for the 65-day period was up 6.1% to $2.5 million compared to $2.4 million in 2004. Rental revenue, a key indicator, grew by 3% to $7.0 million. Used equipment sales were down $0.5 million, resulting in total revenue of $8.2 million an overall decline of 3.3% from 2004.

"The operational performance and financial results posted by the Fund in its first 65 days are consistent with the positive historical performance detailed during our initial public offering process, and are a direct result of leveraging our competitive advantages to successfully execute our business plan. Our positive results also demonstrate the benefits of a number of recent specific initiatives undertaken by the Fund's management team, including significant capital expenditures in the first half of 2005, an addition to our store branch network and recent management appointments," said William Swisher, President and Chief Executive Officer of the Fund.

During the period July 28 to September 30, 2005, the Fund generated $2.2 million of distributable cash available to the Fund's A and B units and the Series 1 and 2 exchangeable shares. A reconciliation of EBITDA to distributable cash is provided below.

(expressed in thousands of 65-day period
Canadian Dollars except per unit amounts) ending
(Unaudited) September 30, 2005
EBITDA $2,539
Interest on long-term debt (149)
Income taxes (2)
Maintenance capital expenditures (net) (174)
Gain on sale of equipment (35)
Distributable Cash $2,179
Distributable cash per unit (diluted)(1) $0.2368
Distributions declared per unit (diluted)(1) $0.1952
Payout ratio 82.4%


(1) The number of units used in calculating distributable cash per unit and distributions/amounts set aside per unit is diluted as it includes the issued and outstanding Class A and Class B units of the Fund and the Series 1 and Series 2 Exchangeable Shares of the Fund.

As outlined above, distributable cash for the period was $2.2 million, from which the Fund declared distributions equivalent to an annual yield of 11.0% based upon the IPO price of $10.00 per unit, totalling $1.8 million or approximately 82.4% of total distributable cash. There are some elements of seasonality that have contributed to this payout ratio, as the Fund's third quarter EBITDA (the period July to September) is historically 7%-10% more than a simple average for the entire year, due to a seasonal increase in construction activity during this time.

The Fund, under GAAP, incurred a net loss after income taxes and non-controlling interest of $4.8 million during the period. There is no comparable number for 2004. Included in the net loss is a write-off of costs incurred on IPO of $8.4 million, net of income taxes of $3.0 million and interest/distributions on Class A units of $1.4 million which under GAAP is recorded as an expense. A reconciliation of the net loss to EBITDA is provided as follows:

(expressed in thousands of 65 day period
Canadian Dollars except per unit amounts) ending
(Unaudited) September 30, 2005
Net loss for the period $(4,820)
Depreciation on rental fleet and property,
plant & equipment 948
Amortization of deferred charges and identifiable
intangible assets 900
Interest on long term debt 149
Distributions/interest in Class A units 1,380
Write-off of initial public offering expenses 8,362
Income taxes (3,351)
Non-Controlling interest (1,029)
EBITDA $2,539

During the 65-day period ended September 30, 2005, the Fund had cash flow from operating activities of $0.2 million. This period is shorter than the Fund's normal working capital cycle and may not be representative of the Fund's cash flow over a normal cycle. The Fund had $6.1 million of working capital as at September 30, 2005.

Stephenson's Rental Services Income Fund will hold an analyst conference call at 11:00 a.m. EST on November 10, 2005, to discuss these financial results and current industry conditions. Please dial 1-877-407-0778 to access the call. You will be required to identify yourself and your organization. A recording of this call will be made available beginning at 1:00 p.m. EST. To access the recording, please call 1-877-660-6853, Account Number 286, Conference I.D. Number 177377. The recording will also be available at

Stephenson's is the leading general tool and equipment rental company in Toronto and the surrounding areas. Over the last 50 years, the Company has grown from a single location into one of the top ten equipment rental businesses in Canada.

Through its 20 branches, Stephenson's provides rental equipment and sells related merchandise to a diverse base of over 30,000 customers, including: (i) commercial trades; (ii) home and condominium builders; (iii) general contractors; (iv) do-it-yourself customers; and (v) institutional and industrial customers.

Further information, including the Fund's unaudited consolidated financial statements and management's discussion and analysis as at and for the 65-day period ended September 30, 2005 is available at

Non-GAAP Measures

References to "EBITDA" are to earnings before interest, taxes, depreciation and amortization distributions/interest on Class A units, write-off public company expenses and non-controlling interest. Management believes that in addition to net income or loss, EBITDA is a useful supplemental measure of cash available for distribution prior to debt service, changes in working capital, capital expenditures and taxes. However, EBITDA is not a recognized measure under Canadian GAAP. Investors are cautioned that EBITDA should not be construed as an alternative to net income or loss determined in accordance with GAAP as an indicator of the Fund's performance or as an alternative to cash flows from operating, investing and financing activities as a measure of the Fund's liquidity and cash flows. The Fund's method of calculating EBITDA may differ from the methods used by other issuers and, accordingly, the Fund's EBITDA may not be comparable to similarly titled measures used by other issuers.

The Fund believes that presentation of EBITDA enhances an understanding of financial condition, results of operations and cash flows because EBITDA is used by the Fund to satisfy its debt service obligations, its capital expenditures and other operational needs, as well as to provide funds for customer account growth. In addition, EBITDA is used by lenders and the investment community to determine the current borrowing capacity and to estimate the long-term value of companies with recurring cash flows from operations.

Distributable cash is not a defined term under Canadian GAAP but is determined by the Fund as EBITDA reduced by interest expense, taxes, capital expenditures and gain on sale of equipment. Management believes that distributable cash is a useful measure of performance as it provides investors with an indication of the cash available for distribution to unitholders. Investors are cautioned, however, that distributable cash should not be construed as an alternate to using net earnings as a measure of profitability or the statement of cash flows. Furthermore, the Fund's method of calculating distributable cash may not be comparable to other similarly named calculations.

Forward-Looking Statements:

Certain statements in this press release may constitute "forward-looking" statements which involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Fund and its subsidiary entities, or the industry, to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. When used in this press release, such statements use words such as "may", "will", "expect", believe", "plan" and other similar terminology. These statements reflect management's current expectations regarding future events and operating performance and speak only as of the date of the press release. These forward-looking statements involve a number of risks and uncertainties, including those set out under the heading "Risk Factors" in the Fund's prospectus dated July 20, 2005. New risk factors may arise from time to time and is not possible for management of the Fund to predict all of those risk factors or the extend to which any factor or combination of factors may cause actual results, performance or achievements of the Fund to be materially different from those contained in forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Although the forward-looking statements contained in this press release are based upon what management believes to be reasonable assumptions, the Fund cannot assure investors that actual results will be consistent with these forward-looking statements. These forward-looking statements are made as of the date of the press release, and the Fund assumes no obligations to update or revise them to reflect new events or circumstances.

Contact Information

  • Stephenson's Rental Services Income Fund
    Jim McInnis
    Chief Financial Officer
    (905) 507-3650 x-205