As it returns to normal commerce, Ahern Rentals Inc. expects an improving economy and its restructuring strategy to yield a run of several strong years.
Projections built into its Chapter 11 bankruptcy reorganization plan, approved by a judge on Wednesday, show revenues rising 31.6 percent over the next four years and profits jumping 136 percent. This would not only be enough to cover daily operations but the new loans Ahern took out to repay everyone in full.
While the company has experienced growth spurts in the past, propelled by contractors renting or buying its heavy construction equipment, one component will change markedly — the reliance on hometown Las Vegas. As recently as 2006, the company drew 35 percent of its revenues from the valley, according to company documents, but that had shrunk to 14 percent last year with no signs of rebounding significantly in the future.
But as major clients such as CityCenter were complete and with little new work to replace them, Ahern nearly doubled its branch network to 75 and established itself in 22 states as far away as New Jersey. This not only discovered paying customers for equipment that was gathering dust in Las Vegas, but diversified the sales base away from the long-standing reliance on the Southwest, including Southern California and Arizona.
At the same time, the company laid off 125 people, slimmed its inventory by 2,400 pieces to the current 36,900 and hung on to them longer before selling them used.
Revenues had dropped to $284.3 million in 2009, the last year Ahern publicly reported complete financial results, and a net loss of $70.9 million. The losses continued into the next year, drying up the cash flow needed to repay the loans used to buy the equipment and sending the company into bankruptcy in December 2011.
This year, Ahern expects revenues of $393.7 million and rising steadily to $527 million in 2017. During the same span, net income is projected to jump from $26.1 million to $61.7 million.
Besides internal efforts, Ahern benefited from a tailwind in the form of rebounding construction in other parts of the country. According to the trade magazine Rental Equipment Register, rental revenue grow 15.7 percent last year to $14 billion on top of the 17.6 percent gain in 2011.
But in a survey of the top 100 rental companies, in which Ahern ranked sixth, profit margins remained under pressure as companies faced resistance in raising rates even as the prices they paid for new equipment rose.
To emerge from bankruptcy, with the transactions that will formally release Ahern to come at an unspecified date, the company signed two new credit agreements for as much as $740 million. CEO and majority owner Don Ahern added $5 million from his personal savings as one of the conditions to the new loans. Neither Ahern nor chief financial officer Howard Brown returned calls seeking comment for this story.
Many of the pieces fell into place just in the last month, as the company faced an in-court takeover battle from one group of lenders. As it stands, those lenders will not only receive all of the $268 million they were owed but could get a $25 million bonus if they company is sold in the next two years.
Don Ahern will keep his 97 percent stake with his brother, John Paul Ahern Jr., retaining the other 3 percent.
“It has been a long road,” said attorney William Noall on Wednesday, the company’s bankruptcy counsel.
Contact reporter Tim O’Reiley at
email@example.com or 702-387-5290.