Ahern Rentals sees market improvement, but not in Las Vegas

Ahern Rentals has seen demand for its construction equipment increase in many parts of the country, but not in its hometown.

In reporting the company's third-quarter results, CEO Don Ahern said, "Las Vegas is a shrinking market as I sit here today. ... I would have to kind of put a negative outlook on Las Vegas."

Elsewhere, however, the company has begun to see increased demand for its lifts and groundwork machinery.

"Our customers in general are feeling better (about) economic conditions," he said.

During the quarter, Ahern's revenues rose 10.6 percent from a year earlier to $80.2 million, benefiting from more rental income and an increased pace of surplus equipment sales. However, the net loss widened to $19.7 million from $16.5 million a year ago due to higher interest costs on its debt.

Not only has privately funded work picked up, he said, but federal stimulus-funded projects also have increased. However, much of the stimulus work focuses on roads, while more than half of Ahern's rentals involve high-reach equipment.

Although the company is privately held, owned by Don Ahern and his brother John Paul Ahern Jr., the company must follow Securities and Exchange Commission reporting rules because some of its debt is publicly traded.

Ahern, started in 1953, is one of the oldest locally based companies and has long been a major presence in the construction industry. As recently as 2006, the company drew 35 percent of its revenues from projects in the valley.

But since the boom deflated, that share has dropped to 18 percent, In response, Ahern has opened 24 new branches across the country, one-third of its total network, to redeploy equipment including the 4,500 pieces used on the CityCenter project from storage lots to new markets not as badly battered by recession. At this point, Ahern has halted the expansion.

With improving business conditions, Ahern has seen the amount of time its equipment is in use lengthen but at prices that are still lower than last year.

Despite its heavy debt, the company had been reluctant to dump a lot of surplus equipment because so many others were doing so and prices plunged. Since then, the retail market for used equipment has improved and the company more than doubled its sales, but auctions still yield negative profit margins.

Even if the company has seen the worst of the downturn, company executives must still face what Deutsche Bank analyst Philip Volpicelli termed "the 800-pound gorilla in the room" -- a loan now standing at $286 million that comes due in August. Company executives said they have been negotiating with lenders over how to restructure the loans, but declined to detail any progress.

In July, Ahern retained the investment firm Oppenheimer & Co. to evaluate unspecified financial alternatives. Don Ahern said he was not looking to sell the company and Executive Vice President Evan Ahern added, "We are not buyers, either."

Contact reporter Tim O'Reiley at
toreiley@reviewjournal.com or 702-387-5290.