WALTHAM, Mass. — Mac-Gray Corp. experienced a decline in core laundry facilities management business revenue of less than 5% for the third quarter of 2009, despite record-level apartment vacancies, according to the company’s financial results for the quarter ended Sept. 30, 2009.
Mac-Gray reported third-quarter 2009 revenue of $87.4 million, compared to $98 million in the same period last year. Net loss for the third quarter of 2009 was $386,000, or $0.03 per share, compared to net income of $653,000, or $0.05 per diluted share, for the third quarter of 2008.
Excluding all gains and losses relating to derivative instruments, adjusted net loss for the third quarter of 2009 was $409,000, or $0.03 per share, compared with adjusted net income of $745,000, or $0.05 per diluted share, for the third quarter of 2008.
Mac-Gray’s earnings before interest expense, provision for income taxes, depreciation and amortization expense (EBITDA), excluding all gains and losses relating to derivative instruments, was $16.6 million for the third quarter of 2009, compared to $19.9 million in the same period last year.
“Apartment vacancies nationwide are at their highest levels since 1986,” says Stewart G. MacDonald, Mac-Gray’s chief executive officer. “As a result of record vacancy levels, our core business revenue declined by 4.6% for the quarter. It appears that apartments will not begin to increase overall occupancy until employment levels begin to improve.”
Because Mac-Gray’s operations are spread out across the nation, where employment and apartment occupancy rates and trends vary, the company’s exposure is somewhat balanced, MacDonald adds.
“In our commercial laundry equipment business, the downturn is a combination of a lack of new Laundromats opening due to the difficulties of obtaining financing, and older equipment not being replaced as quickly by Laundromat operators and multi-housing self operators,” says MacDonald. “As a result, year-to-date, product sales revenue is down 16% from the same period in 2008, slightly better than our annual guidance.”
During the third quarter of 2009, Mac-Gray reduced its funded debt by more than $6 million, bringing year-to-date debt reduction to more than $28 million.
“In light of the challenging environment, our strategy in recent quarters has centered on capital management and allocation and debt reduction,” says MacDonald. “During the quarter, we continued to carefully manage our capital expenditures and pursue operational efficiencies in order to maximize our cash flow. Despite the fact that third-quarter revenue is seasonally our weakest because of our concentration in the academic sector, we still lowered our funded debt by more than $6 million. As a result, we have reduced our year-over-year interest expense in the third quarter by 15%.”