UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549  

Form 8-K   

CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event Reported): March 10, 2020

NESCO HOLDINGS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware
 
001-38186
 
84-2531628
(State or Other Jurisdiction
of Incorporation)
 
(Commission
File Number)
 
(I.R.S. Employer
Identification Number)
 
 
 
6714 Pointe Inverness Way, Suite 220
Fort Wayne, Indiana
 
46804
(Address of principal executive offices)
 
(Zip code)
(800) 252-0043
(Registrant’s telephone number, including area code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report) 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
 
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17CFR 240.14a-12) 
 
 
 
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) 
 
 
 
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) 
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
 
Trading Symbol(s)
 
Name of Exchange on Which Registered
Common Stock, $0.0001 par value
 
NSCO
 
New York Stock Exchange
Redeemable warrants, exercisable for Common Stock, $0.0001 par value
 
NSCO.WS
 
New York Stock Exchange
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). 
Emerging growth company x
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐





Item 1.01. Entry into a Material Definitive Agreement.
On March 10, 2020, Capitol Intermediate Holdings, LLC, a Delaware limited liability company (“Holdings”), Capitol Intermediate Holdings, LLC, a Delaware limited liability company (the “Borrower”), both subsidiaries of Nesco Holdings, Inc., entered into an Incremental Agreement and Amendment No. 1 (the “Incremental Amendment”) with JPMorgan Chase Bank, N.A., as administrative agent and collateral agent (the “Administrative Agent”) and the other lenders party thereto and MUFG Bank, Ltd., as “Increasing Lender”, pursuant to which the Increasing Lender has agreed to provide additional U.S. revolving credit commitments of $35 million (the “ABL Commitment Increase”) under the Credit Agreement dated as of July 31, 2019 (the “Credit Agreement”), among Holdings, the Borrower, the Administrative Agent, Fifth Third Bank as the Additional Collateral Agent, the other agents, arrangers and bookrunners party thereto.
Pursuant to the ABL Commitment Increase, the aggregate amount available under the Credit Agreement was increased to $385 million (subject to availability under a borrowing base). The ABL Commitment Increase is subject to the same terms and conditions as all other revolving credit commitments under the Credit Agreement. The terms of the Incremental Amendment do not modify the Credit Agreement other than to provide the ABL Commitment Increase and to amend the frequency of appraisals. The ABL Facility matures on the earlier of (x) July 31, 2024 and (y) if Capitol Investment Merger Sub 2, LLC’s, a Delaware limited liability company and indirect subsidiary of the Company, 10% senior secured notes are outstanding on May 1, 2024, May 1, 2024.
Item 2.02. Results of Operations and Financial Condition.
On March 12, 2020, Nesco Holdings, Inc. (the "Company") issued a press release announcing its financial results for the fourth quarter and year ended December 31, 2019. The press release is being furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.

This item 2.02 and 99.1 hereto shall be deemed “furnished” and not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, and shall not be deemed to be incorporated by reference into any of the Company’s filings under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof and regardless of any general incorporation language in such filings, except to the extent expressly set forth by specific reference in such a filing.

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
Information set forth in Item 1.01 above is incorporated by reference into this Item 2.03.
Item 9.01.
Financial Statements and Exhibits.
(d)    Exhibits.
Exhibit No.
 
Description
 
 






SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
Date:
March 12, 2020
Nesco Holdings, Inc.
 
 
 
 
 
/s/ Bruce Heinemann
 
 
Bruce Heinemann
Chief Financial Officer and Secretary


 




Exhibit
Exhibit 10.1

INCREMENTAL AGREEMENT AND AMENDMENT NO. 1
INCREMENTAL AGREEMENT AND AMENDMENT NO. 1 dated as of March 10, 2020 (this “Incremental Agreement”), by and among CAPITOL INTERMEDIATE HOLDINGS, LLC, a Delaware limited liability company (“Holdings”), CAPITOL INVESTMENT MERGER SUB 2, LLC, a Delaware limited liability company (the “Borrower”), JPMORGAN CHASE BANK, N.A., as Administrative Agent and Collateral Agent (in such capacities, the “Administrative Agent”) under the Credit Agreement (as defined below), each Letter of Credit Issuer, the Swingline Lender, MUFG UNION BANK, N.A., as “Increasing Lender” (the “Increasing Lender”) and the Lenders party hereto.
WHEREAS, reference is hereby made to the Credit Agreement dated as of July 31, 2019 (as amended, amended and restated, supplemented or otherwise modified from time to time in accordance with the terms thereof, the “Credit Agreement”), among Holdings, the Borrower, the Administrative Agent, Fifth Third Bank as the Additional Collateral Agent, the other agents, arrangers and bookrunners party thereto and each Lender from time to time party thereto;
WHEREAS, pursuant to Section 2.6 of the Credit Agreement, the Borrower may obtain a “Revolving Credit Commitment Increase” by, among other things, entering into an “Incremental Agreement” in accordance with the terms and conditions of the Credit Agreement;
WHEREAS, the Borrower has notified the Administrative Agent that it is requesting a “Revolving Credit Commitment Increase” in the amount of $35,000,000 (the “Revolving Credit Commitment Increase”) pursuant to Section 2.6(a) of the Credit Agreement;
WHEREAS, the Increasing Lender party to this Incremental Agreement as a lender with respect to the Revolving Credit Commitment Increase set forth on Schedule 1.1 hereto has indicated its willingness to provide such Revolving Credit Commitment Increase on the terms and subject to the conditions herein;
WHEREAS, in accordance with Section 12.1(a), the Borrower and the Required Lenders have agreed that four Appraisals per twelve (12) month period may be conducted at the Borrower’s expense; and
WHEREAS, the Required Lenders have agreed to amend Section 8.4 of the Credit Agreement and the parties hereto have indicated their willingness to amend certain other terms of the Credit Agreement as set forth herein.
NOW, THEREFORE, in consideration of the premises and agreements, provisions and covenants herein contained, the parties hereto agree as follows:
Section 1.Defined Terms; References. Unless otherwise specifically defined herein, each term used herein which is defined in the Credit Agreement has the meaning assigned to such term in the Credit Agreement. Each reference to “hereof”, “hereunder”, “herein” and “hereby” and each other similar reference and each reference to “this Agreement” and each other similar reference contained in the Credit Agreement shall, after this Incremental Agreement becomes effective, refer to the Credit Agreement as amended hereby. This Incremental Agreement is a “Loan Document” and an “Incremental Agreement,” each as defined under the Credit Agreement.
Section 2.Revolving Credit Commitment Increase.
(a)    The Borrower and the Increasing Lender hereby agree that, subject to the satisfaction of the conditions in Section 6 hereof, on the Commitment Effective Date (as defined below), the Revolving Credit Commitment Increase of the Increasing Lender shall become effective and the Commitments shall be deemed increased by the amount of the Revolving Credit Commitment Increase of the Increasing Lender. Pursuant to Section 2.6 of the Credit Agreement, the Revolving Credit Commitment Increase shall be a Commitment for all purposes under the Credit Agreement and each of the other Loan Documents and shall have terms identical to the Commitments outstanding under the Credit Agreement immediately prior to the date hereof.
(b)    The Increasing Lender acknowledges and agrees that upon the Commitment Effective Date, the Increasing Lender shall be a “Lender” under, and for all purposes of, the Credit Agreement and the other Loan Documents, and shall be subject to and bound by the terms thereof, and shall perform all the obligations of and shall have all rights of a Lender thereunder.
(c)    Upon the Commitment Effective Date, Schedule 1.1 of the Credit Agreement will be amended and restated in its entirety by Schedule 1.1 hereto.
Section 3.Reallocation. The reallocation of the Lenders’ Revolving Loans contemplated by Section 2.6(f)(ii) of the Credit Agreement with respect to any Revolving Credit Commitment Increase shall occur with respect to the Revolving Credit Commitment Increase contemplated hereby on the Commitment Effective Date, and the Increasing Lender shall make such Revolving Loans on the Commitment Effective Date as may be required to effectuate such reallocation. Furthermore, on the Commitment Effective Date, all participations in Letters of Credit and Swingline Loans shall be reallocated as contemplated by Section 2.6(f)(ii) of the Credit Agreement pro rata among the Lenders after giving effect to the Revolving Credit Commitment Increase contemplated hereby. Each Lender party hereto hereby agrees to waive reimbursement of any costs incurred by such Lender in connection with such reallocation pursuant to Section 5.4 of the Credit Agreement.
Section 4.Amendments. The Borrower and the Required Lenders hereby agree that the third sentence of Section 8.4(c) of the Credit Agreement shall be amended and restated in its entirety to read as follows:
“Absent the continuance of a Specified Event of Default, during each period of twelve (12) consecutive calendar months commencing on or after the Agreement Date, the Agent and the Co-Collateral Agents may, collectively, at the Borrower’s expense, conduct (i) Appraisals of the Inventory not more than four (4) times during any such period and (ii) Appraisals of the Equipment not more than four (4) times during any such period.”
Section 5.Representations Correct. By its execution of this Incremental Agreement, the Borrower hereby certifies that:
(a)    The execution, delivery and performance of this Incremental Agreement has been duly authorized by all necessary corporate or other organizational action of, and has been duly executed and delivered by, each Obligor that is a party hereto and constitutes a legal, valid and binding obligation of such Obligor, enforceable against such Obligor in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, winding up, moratorium and other similar Laws relating to or affecting creditors’ rights generally and by general equitable principles (whether considered in a proceeding in equity or at law) and implied covenants of good faith and fair dealing; and
(b)    the execution, delivery and performance of this Incremental Agreement by each Obligor that is a party hereto and the other documents executed by such Persons in connection herewith (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except for such as (i) have been obtained or made and are in full force and effect, or (ii) the failure of which to obtain would not reasonably be expected to result in a Material Adverse Effect, (b) will not violate any Requirement of Law applicable to such Obligor or the Charter Documents of such Obligor, except to the extent that such violation would not reasonably be expected to result in a Material Adverse Effect, (c) will not violate or result in a default under any Material Indebtedness and (d) will not result in the imposition of any Lien on any asset of any Obligor (other than Permitted Liens).
Section 6.Effectiveness of this Incremental Agreement. This Incremental Agreement shall become effective as of the date on which the following conditions have been satisfied (the “Commitment Effective Date”, which for the avoidance of doubt occurred on March 10, 2020):
(a)    The Administrative Agent (or its counsel) shall have received from (i) the Borrower, (ii) Holdings, (iii) the Increasing Lender, (iv) the Issuing Lenders, (v) the Swingline Lender, (vi) the Required Lenders and (vii) the Administrative Agent, either (x) counterparts of this Incremental Agreement signed on behalf of such parties or (y) written evidence satisfactory to the Administrative Agent (which may include facsimile or other electronic transmissions of signed signature pages) that such parties have signed counterparts of this Incremental Agreement.
(b)    Immediately before and immediately after giving effect to the Incremental Revolving Credit Commitment Increase on such date, (i) no Event of Default has occurred and is continuing or would result therefrom and (ii) the representations and warranties (x) of each Obligor set forth in the Loan Documents and (y) in Section 5 of this Incremental Agreement shall be true and correct in all material respects as of such date (it being understood that, to the extent that any such representation and warranty specifically refers to an earlier date, it shall be true and correct in all material respects as of such earlier date and any such representation and warranty that is qualified as to “materiality,” Material Adverse Effect or similar language shall be true and correct in all respects (after giving effect to any such qualification therein)).
(c)    The Administrative Agent shall have received a certificate of an appropriate officer of the Borrower certifying that the conditions set forth in Section 6(b) of this Incremental Agreement and the conditions to the Revolving Credit Commitment Increase set forth in Section 2.6(e) of the Credit Agreement, in each case, are satisfied as of the Commitment Effective Date.
(d)    The Administrative Agent shall have received a duly executed certificate of an appropriate officer of each Obligor party to the Credit Agreement, certifying (i)that the copies of such Obligor’s Charter Documents (x) as previously certified and delivered to the Administrative Agent, remain in full force and effect as of the Commitment Effective Date without modification or amendment since such previous delivery or (y) as attached to such officer’s certificate are true, correct and complete and in full force and effect as of the Commitment Effective Date and, with respect to any applicable Charter Document, certified as of a recent date by an appropriate Governmental Authority of the jurisdiction of such Obligor’s organization or formation, (ii) that the copies of such Obligor’s resolutions approving and adopting the Loan Documents to which it is party, the transactions contemplated herein, and authorizing the execution and delivery thereof, as attached to such officer’s certificate, are true, correct and complete copies and in full force and effect as of the Commitment Effective Date, (iii) as to incumbency certificates identifying the officers of such Obligor that are authorized to execute the Incremental Agreement and who will execute the Incremental Agreement and (iv) certificates of good standing or the equivalent (if any) for each Obligor party to the Credit Agreement from such Obligor’s jurisdiction of organization or formation, in each case certified as of a recent date by the appropriate Governmental Authority .
(e)    The Administrative Agent shall have received on or prior to such date, in immediately available funds, payment or reimbursement (or the Borrower shall have made arrangements reasonably satisfactory to the Administrative Agent for such payment or reimbursement) of all reasonable and documented or invoiced out-of-pocket costs and expenses then due and payable to it under Section 14.7 of the Credit Agreement in connection with this Incremental Agreement, including all reasonable and invoiced fees and expenses of Cahill Gordon & Reindel LLP, as counsel to the Administrative Agent, in each case, to the extent invoiced at least (3) Business Days prior to the Commitment Effective Date (or such later date as the Borrower may agree).
(f)    If the Borrower qualifies as a “legal entity customer” under the Beneficial Ownership Regulation and the Increasing Lender has provided its electronic delivery requirements, the Increasing Lender requesting a certification regarding beneficial ownership in relation to the Borrower as required by the Beneficial Ownership Regulation (the “Beneficial Ownership Certification”) shall have received prior to the Commitment Effective Date, the Beneficial Ownership in relation to the Borrower.
(g)    The Borrower shall have paid (or shall have made arrangements reasonably satisfactory to the Increasing Lender for such payment) to the Increasing Lender an upfront fee equal to 0.25% of the aggregate principal amount of the Revolving Credit Commitment Increase.
Section 7.Acknowledgments. The Borrower and each other Obligor party to the Credit Agreement hereby expressly acknowledges the terms of this Incremental Agreement and reaffirms, as of the date hereof, (i) the covenants and agreements contained in each Loan Document to which it is a party, including, in each case, such covenants and agreements as in effect immediately after giving effect to this Incremental Agreement and the transactions contemplated hereby, (ii) its guarantee of the Obligations (including, without limitation, the Obligations that may arise pursuant to the Revolving Credit Commitment Increase) under the Security Documents and (iii) its grant of Liens on the Collateral to secure the Obligations (including, without limitation, the Obligations that may arise pursuant to the Revolving Credit Commitment Increase) pursuant to the Security Documents.
Section 8.Amendment, Modification and Waiver. This Incremental Agreement may not be amended, modified or waived except pursuant to Section 12.1 of the Credit Agreement.  
Section 9.Liens Unimpaired. After giving effect to this Incremental Agreement, neither the modification of the Credit Agreement effected pursuant to this Incremental Agreement nor the execution, delivery, performance or effectiveness of this Incremental Agreement:
(a)    impairs the validity, effectiveness or priority of the Liens granted pursuant to any Security Document, and such Liens continue unimpaired with the same priority (subject to Permitted Liens) to secure repayment of all Obligations, whether heretofore or hereafter incurred; or
(b)    requires that any new filings be made or other action taken to perfect or to maintain the perfection of such Liens.
Section 10.Entire Agreement. This Incremental Agreement, the Credit Agreement and the other Loan Documents constitute the entire agreement among the parties hereto with respect to the subject matter hereof and thereof and supersede all other prior agreements and understandings, both written and verbal, among the parties hereto with respect to the subject matter hereof. Except as expressly set forth herein, this Incremental Agreement shall not by implication or otherwise limit, impair, constitute a waiver of, or otherwise affect the rights and remedies of any party under, the Credit Agreement, nor (except as expressly contemplated hereby) alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement, all of which are ratified and affirmed in all respects and shall continue in full force and effect. It is understood and agreed that each reference in each Loan Document to the Credit Agreement, whether direct or indirect, shall hereafter be deemed to be a reference to the Credit Agreement as amended hereby and that this Incremental Agreement is a Loan Document.
Section 11.GOVERNING LAW. THIS INCREMENTAL AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTIONS 14.3(b), 14.3(c) AND 14.4 OF THE CREDIT AGREEMENT ARE HEREBY INCORPORATED BY REFERENCE INTO THIS INCREMENTAL AGREEMENT AND SHALL APPLY HERETO. 
Section 12.Severability. If any provision of this Incremental Agreement is held to be illegal, invalid or unenforceable, the legality, validity and enforceability of the remaining provisions of this Incremental Agreement shall not be affected or impaired thereby. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
Section 13.Counterparts. This Incremental Agreement may be signed in any number of counterparts, each of which shall be deemed an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. Delivery by facsimile or other electronic means of an executed counterpart of a signature page to this Incremental Agreement shall be effective as delivery of an original executed counterpart of this Incremental Agreement.
Section 14.Headings. The headings of this Incremental Agreement are for purposes of reference only and shall not limit or otherwise affect the meaning hereof.
[Remainder of Page Intentionally Left Blank]
A.
IN WITNESS WHEREOF, the parties hereto have caused this Incremental Agreement to be duly executed and delivered by their respective authorized signatories as of the day and year first above written.

CAPITOL INTERMEDIATE HOLDINGS, LLC, as Holdings
By:
        
Name:    Bruce Heinemann
Title:    Chief Financial Officer
CAPITOL INVESTMENT MERGER SUB 2, LLC, as Borrower
By:
        
Name:    Bruce Heinemann
Title:    Chief Financial Officer



JPMORGAN CHASE BANK, N.A., as Administrative Agent, a Lender, a Swingline Lender and a Letter of Credit Issuer
By:
        
Name:    
Title:    
MUFG UNION BANK, N.A., as an Increasing Lender and a Lender
By:
        
Name:    
Title:    


FIFTH THIRD BANK, as a Letter of Credit Issuer and a Lender
By:
        
Name:    
Title:    

MORGAN STANLEY SENIOR FUNDING, INC., as a Letter of Credit Issuer and a Lender
By:
        
Name:    
Title:    

DEUTSCHE BANK AG NEW YORK BRANCH, as a Letter of Credit Issuer and a Lender
By:
        
Name:    
Title:    

CITIBANK, N.A., as a Letter of Credit Issuer and a Lender
By:
        
Name:    
Title:    



                        
SCHEDULE 1.1
TO INCREMENTAL AGREEMENT
Schedule 1.1
As of as of March 10, 2020:

Lenders’ Commitments

Lender
Revolving Credit Commitment
Applicable Percentage
JPMorgan Chase Bank, N.A.
$100,000,000.00
25.974%
Fifth Third Bank
$100,000,000.00
25.974%
Morgan Stanley Senior Funding, Inc.
$50,000,000.00
12.987%
Deutsche Bank AG New York Branch
$50,000,000.00
12.987%
Citibank, N.A.
$50,000,000.00
12.987%
MUFG Union Bank, N.A.
$35,000,000.00
9.091%
Total
$385,000,000.00
100.000%


Letter of Credit Commitments

Letter of Credit Issuer
Letter of Credit Commitments
Applicable Percentage
JPMorgan Chase Bank, N.A.
$29,000,000.00
29%
Fifth Third Bank
$29,000,000.00
29%
Morgan Stanley Senior Funding, Inc.
$14,000,000.00
14%
Deutsche Bank AG New York Branch
$14,000,000.00
14%
Citibank, N.A.
$14,000,000.00
14%
Total
$100,000,000.00
100%




Exhibit
Exhibit 99.1

NESCO HOLDINGS, INC. REPORTS FOURTH QUARTER AND FULL YEAR 2019 FINANCIAL RESULTS
FORT WAYNE, IN., March 12, 2020 – Nesco Holdings, Inc. (NYSE: NSCO, “Nesco” or the “Company”), a leading provider of specialty rental equipment to the electric utility, telecom, and rail infrastructure end-markets, today reported financial results for the fourth quarter and full year ended December 31, 2019.
FULL YEAR 2019 HIGHLIGHTS
Total revenue of $264.0 million (+7.2% from 2018)
Equipment rental revenue of $182.7 million (+5.5% from 2018)
Equipment sales revenue of $34.1 million (-23.2% from 2018)
Parts, tools, and accessories revenue of $47.2 million (+64.8% from 2018)
Consolidated net loss of $27.1 million (includes $15.9 million of transaction and process improvement costs)
Adjusted EBITDA of $127.5 million (+4.8% from 2018)
Adjusted EBITDA including a full year of Truck Utilities of $134.5 million
Closed acquisition of Truck Utilities on November 4, 2019
Lee Jacobson, Chief Executive Officer of Nesco, said, “The fourth quarter capped off another year of solid growth for Nesco. Our core specialty rental equipment remains in high demand in each of our end-markets, as evidenced by more than 8% year-over-year equipment rental revenue growth in the fourth quarter, excluding the impact from Truck Utilities and another quarter of record equipment on rent, which is also up more than 8% year-over-year in the fourth quarter. Parts, tools and accessories segment revenue increased more than 70% on a year-over-year basis in the fourth quarter, excluding Truck Utilities, driven by a combination of new regional locations and increased spend within our equipment rental customer base.”
“Demand within our core electrical transmission and distribution, telecom and rail end markets remain robust,” continued Jacobson. “Our largest contractor customers reported another quarter of record, or near record, revenue backlogs in our core end markets and our average customer rental contract period exceeded 13 months for most of 2019, a record for Nesco. Looking ahead, we expect 2020 will be a period of strong growth for our business. Our recent investment in new fleet will allow us to capture many previously lost rental opportunities due to equipment availability. We will also benefit from the investment we made in expanding our parts, tools and accessories service locations from two to seven in 2019 and one additional expected in 2020; and a full year of contribution from the Truck Utilities acquisition. We plan to take a measured approach toward capital spending in 2020 in order to generate positive free cash flow, reduce leverage and focus on maintaining high fleet utilization.”
FULL YEAR 2019 RESULTS 
Total Revenue
Total revenue in 2019 was $264.0 million, an increase of $17.7 million, or 7.2%, from 2018. Excluding equipment sales, revenue grew $28.0 million or 13.9%, from 2018. Truck Utilities contributed $8.5 million to revenue since the acquisition was completed in November 2019, split nearly evenly between both the Equipment Rental and Sales ("ERS") and Parts Tools and Accessories ("PTA") segments.
ERS segment revenue declined 0.4% to $216.8 million in 2019, compared to $217.6 million for the same period in 2018. Equipment rental revenue increased 5.5% to $182.7 million, primarily due to a 6.1% increase in average equipment on rent, which grew to $477.5 million in 2019, compared to $450.2 million in 2018. Fleet utilization was 80.7% in 2019, compared to 82.3% in 2018. After adjusting for new units that have not yet entered into service, Truck Utilities and the prior year’s benefit from storm recovery in Puerto Rico, utilization was down 0.4% year-over-year. Equipment sales revenue of $34.1 million was a reduction from the prior year of $10.3 million or 23.2% leading to an overall decline in ERS revenue for the year. Equipment sales can be lumpy in nature, but any timing difference that may reduce used sales provides Nesco with the opportunity to continue to rent this equipment.
PTA segment revenue grew 64.8% to $47.2 million in 2019, compared to $28.7 million in 2018. PTA revenue growth was driven by increased penetration of Nesco's equipment rental customer base and a ramping of revenues at the new PTA locations.




Net Loss
The Company reported a net loss in 2019 of $27.1 million, compared to a net loss of $15.5 million for the same period in 2018. The year-over-year increase in net loss was primarily driven by a $13.3 million increase in deal-related transaction and business acquisition expenses.
Adjusted EBITDA
Adjusted EBITDA increased $5.8 million, or 4.8%, from $121.7 million for the year ended December 31, 2018 to $127.5 million for the year ended December 31, 2019.  Adjusted EBITDA including a full year of Truck Utilities was $134.5 million for the year ended December 31, 2019.  The year over year increase in Adjusted EBITDA was primarily driven by an $11.6 million, or 8.6%, increase in core rental gross profit, excluding depreciation to $147.2 million ($76.6 million, including depreciation), compared to $135.5 million ($71.4 million, including depreciation) in 2018. This increase was partially offset by an increase in selling, general and administrative expenses due largely to increased expenses related to becoming a public company.

FOURTH QUARTER 2019 RESULTS 
Total Revenue
Total revenue in the fourth quarter was $77.2 million, an increase of $8.6 million or 12.5% from the fourth quarter 2018. Excluding equipment sales, revenue grew $14.4 million or 27.6% from the fourth quarter 2018. Truck Utilities contributed $8.5 million to revenue since the acquisition was completed in November 2019, split nearly evenly between both segments.
ERS segment revenue declined 1.2% to $60.8 million in the fourth quarter, compared to $61.5 million for the same period in 2018. Equipment rental revenue increased 11.3% (or 8.1% excluding Truck Utilities) to $50.0 million. This growth is primarily due to a 10.0% increase in average equipment on rent, which grew to $508.7 million in the fourth quarter, compared to $462.4 million in the same quarter of 2018. Fleet utilization was 81.5% in the fourth quarter compared to 83.5% in the same period of 2018. After adjusting for new units that have not yet entered into service and Truck Utilities, utilization was approximately flat year-over-year. The Company's average rental rate per day was $138 and $140 in the fourth quarter of 2019 and 2018, respectively. The Company continues to realize gains in pricing by product line, but average reported rate remains relatively constant due to a changing fleet mix as a result of increased investment in relatively lower cost telecom and rail equipment. Equipment sales revenue of $10.8 million was a reduction from the prior year quarter of 34.9% (or 51.7% excluding Truck Utilities) leading to an overall decline in ERS revenue for the quarter.
PTA segment revenue grew 129.9% (or 70.6% excluding Truck Utilities) to $16.4 million in the fourth quarter, compared to $7.1 million for the same period in 2018. PTA revenue growth was driven by increased penetration of Nesco's equipment rental customer base and a ramping of revenues at the newer PTA locations.
Net Loss
The Company reported net income in the fourth quarter of $3.1 million, compared to a net loss of $3.4 million for the same period in 2018. The year-over-year increase in net earnings was primarily driven by an income tax benefit of $7.3 million due to tax valuation allowance reductions from the rental equipment acquired in the Truck Utilities acquisition.
Adjusted EBITDA
Adjusted EBITDA increased slightly to $35.6 million, as compared to the same period in 2018.  Adjusted EBITDA reflects a $4.5 million or 12.5% increase in core rental gross profit excluding depreciation to $40.8 million ($21.5 million, including depreciation), compared to $36.3 million ($18.7 million, including depreciation) in 2018. This increase was partially offset by an increase in selling, general and administrative expenses due largely to increased expenses related to becoming a public company.

Liquidity and Capitalization
On March 10, 2020, the Company completed an increase in the size of its asset-based lending facility from $350 million to $385 million with the addition of MUFG Bank, Ltd. as a new lender under the facility. Nesco made significant investments in its fleet and acquired Truck Utilities in 2019. The increase in facility size expands liquidity, enabling continued flexibility for Nesco to grow its fleet and opportunistically pursue mergers and acquisitions.
As of December 31, 2019, the Company had total cash of $6.3 million and availability on its asset-based lending facility of $96.9 million, which does not reflect the impact of the increased size of the asset-based facility. Total debt outstanding, including capital leases, was $756.6 million at the end of the fourth quarter 2019.




Investing Activities
Average fleet count increased to 4,172 units in 2019, from 3,839 units in 2018. Total purchases of rental fleet and property and equipment in 2019 was $109.7 million, including $36.7 million of maintenance expenditures and $73.0 million of growth expenditures. Nesco accelerated the timing of some capital expenditures planned for 2020 into the fourth quarter of 2019 in order to capture potential upside from market demand in 2019 and is reducing 2020 target capital expenditures as a result. The Company received $28.5 million from sale of rental equipment and parts and insurance proceeds from damaged equipment in 2019, resulting in total net capital expenditures of $81.3 million.
FINANCIAL OUTLOOK
The Company's current expectations for the full year 2020 are as follows:
Total revenue of $330 to $360 million (25% to 36% growth)
Adjusted EBITDA(1) of $142 to $154 million (11% to 21% growth)
Net capital expenditures (after proceeds from equipment sales)(2) of $45 to $55 million

(1)
Adjusted EBITDA is a non-GAAP financial measure. Further information including both historical and forward-looking reconciliations for this non-GAAP measure to the most directly comparable financial measure under GAAP is included at the end of this press release.
(2)
Net capital expenditures is a non-GAAP financial measure. Please see the historical non-GAAP reconciliation tables included at the end of this press release.
This outlook includes anticipated results from Truck Utilities Inc. This guidance is subject to risks and uncertainties, including those described in "Forward-Looking Statements" below.
NEW INDEPENDENT BOARD MEMBER
On March 2, 2020, the Company announced that it had appointed Gerard E. Holthaus to serve as an independent director. Mr. Holthaus is the non-executive Chairman of the Board of WillScot Corp, a leading provider of modular space solutions in North America. He is the former non-executive chairman of Algeco Scotsman Global S.à.r.l., the leading global provider of modular space solutions. He previously served as executive chairman and CEO of Algeco Scotsman, where he was responsible for its North American and European operations, and as executive chairman, president and CEO of WSII prior to its acquisition by Algeco Scotsman in 2007. Mr. Holthaus is also a former director of BakerCorp International, Inc. and Neff Corporation, two equipment rental companies that completed strategic sales. Mr. Holthaus is also currently Non-Executive Chairman of FTI Consulting.
"As Nesco continues to grow so does the breadth and expertise of our board, and we are eager to welcome Gerry's voice and insight to the organization. Gerry brings a proven track record of success in the specialty equipment rental arena most recently as Chairman of WillScot. His specialty rental industry expertise is complemented by his strong financial background and makes him a perfect addition to our board," said William Plummer, Chairman of the Board.
NON-GAAP FINANCIAL MEASURES
The Company uses a variety of operational and financial metrics, including non-GAAP financial measures such as Adjusted EBITDA, free cash flow, fleet utilization, original equipment cost on rent, among other metrics, to enable it to analyze its performance and financial condition. The Company utilizes these financial measures to manage its business on a day-to-day basis and believes that they are the most relevant measures of performance. Some of these measures are commonly used in the specialty rentals industry to evaluate performance. The Company believes these non-GAAP measures provide expanded insight to assess revenue and cost performance, in addition to the standard GAAP-based financial measures. There are no specific rules or regulations for determining non-GAAP measures, and as such, they may not be comparable to measures used by other companies within the industry. The presentation of non-GAAP financial information should not be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. The definitions of non-GAAP financial measures along with a reconciliation of non-GAAP financial information to GAAP are included in the supplemental financial schedules.




CONFERENCE CALL INFORMATION
The Company has scheduled a conference call at 8:30 A.M. Eastern Time on March 12, 2020, to discuss the fourth quarter and full year 2019 financial results. The conference call can be accessed by dialing 866-211-4094 (United States) or 647-689-6722 (International) using the conference ID 1032839. A replay of the call will be available on the Company’s investor relations website at investors.nescospecialty.com.
ABOUT NESCO
Nesco is one of the largest providers of specialty equipment, parts, tools, accessories and services to the electric utility transmission and distribution, telecommunications and rail markets in North America. Nesco offers its specialized equipment to a diverse customer base for the maintenance, repair, upgrade and installation of critical infrastructure assets including electric lines, telecommunications networks and rail systems. Nesco's coast-to-coast rental fleet of approximately 4,600 units includes aerial devices, boom trucks, cranes, digger derricks, pressure drills, stringing gear, hi-rail equipment, repair parts, tools, and accessories. For more information, please visit investors.nescospecialty.com.
FORWARD-LOOKING STATEMENTS
This press release includes “forward-looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995 and within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. When used in this press release, the words “estimates,” “projected,” “expects,” “anticipates,” “forecasts,” “plans,” “intends,” “believes,” “seeks,” “may,” “will,” “should,” “future,” “propose” and variations of these words or similar expressions (or the negative versions of such words or expressions) are intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance, conditions or results, and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside Nesco’s management’s control, that could cause actual results or outcomes to differ materially from those discussed in this press release. This press release is based on certain assumptions that Nesco has made in light of its experience in the industry as well as Nesco’s perceptions of historical trends, current conditions, expected future developments and other factors Nesco believes are appropriate in these circumstances. As you read and consider this press release, you should understand that these statements are not guarantees of performance or results. Many factors could affect Nesco’s actual performance and results and could cause actual results to differ materially from those expressed in this press release. All forward-looking statements attributable to Nesco or persons acting on their behalf are expressly qualified in their entirety by the foregoing cautionary statements. Important factors, among others, that may affect actual results or outcomes include: Nesco’s ability to execute on its plans to develop and market new products and the timing of these development programs; Nesco’s estimates of the size of the markets for its solutions; the rate and degree of market acceptance of Nesco’s solutions; the success of other competing technologies that may become available; Nesco’s ability to identify and integrate acquisitions, including Nesco’s ability to integrate its acquisition of Truck Utilities and realize the anticipated benefits thereof (including Nesco’s estimates of the Adjusted EBITDA impact of contributions from Truck Utilities); the performance and security of Nesco’s services; potential litigation involving Nesco; and general economic and market conditions impacting demand for Nesco’s services. For a more complete description of these and other possible risks and uncertainties, please refer to Capitol’s final prospectus and definitive proxy statement filed with the Securities and Exchange Commission on June 4, 2019 (as supplemented on June 24, 2019 and July 11, 2019, the "Proxy Statement/Prospectus") and incorporated by reference in the Current Report on Form 8-K filed with the SEC on August 1, 2019, as well as to our subsequent filings with the SEC. The forward-looking statements contained herein speak only as of the date hereof, and Nesco undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
INVESTOR CONTACT
Noel Ryan, IRC
720.778.2415
investors@nescospecialty.com






Table 1: Unaudited Condensed Consolidated Balance Sheets

Nesco Holdings, Inc.
Condensed Consolidated Balance Sheets (unaudited)
(in $000s, except share data)
December 31, 2019
 
December 31, 2018
Assets
 
 
 
Current Assets
 
 
 
Cash
$
6,302

 
$
2,140

Accounts receivable, net of allowance of $4,654 and $7,562, respectively
71,323

 
52,559

Inventory
33,001

 
11,435

Prepaid expenses and other
5,217

 
2,483

Total current assets
115,843

 
68,617

Property and equipment, net
6,561

 
2,763

Rental equipment, net
383,420

 
320,722

Goodwill and other intangibles, net
308,747

 
299,454

Notes receivable
713

 

Total Assets
$
815,284

 
$
691,556

Liabilities and Stockholders’ Deficit
 
 
 
Current Liabilities
 
 
 
Accounts payable
$
41,172

 
$
20,867

Accrued expenses
27,590

 
20,383

Deferred rent income
2,270

 
4,762

Current maturities of long-term debt
1,280

 
2,531

Current portion of capital lease obligations
5,451

 
4,866

Total current liabilities
77,763

 
53,409

Long-term debt, net
713,023

 
756,872

Capital leases
22,631

 
28,418

Deferred tax liabilities
12,288

 
11,191

Other liabilities
1,709

 
422

Total long-term liabilities
749,651

 
796,903

Commitments and contingencies

 

Stockholders’ Deficit
 
 
 
Common stock - $0.0001 par value, 250,000,000 shares authorized, 49,033,903 and 21,660,638 shares issued and outstanding, at December 31, 2019 and December 31, 2018, respectively
5

 
2

Additional paid-in capital
432,577

 
259,298

Accumulated deficit
(444,712
)
 
(417,660
)
Accumulated other comprehensive loss

 
(396
)
Total stockholders’ deficit
(12,130
)
 
(158,756
)
Total Liabilities and Stockholders’ Deficit
$
815,284

 
$
691,556







Table 2: Unaudited Condensed Consolidated Statements of Operations

Nesco Holdings, Inc.
Condensed Consolidated Statements of Operations (unaudited)
 
Three Months Ended December 31,
 
Year Ended December 31,
(in $000s, except share and per share data)
2019
 
2018
 
2019
 
2018
Revenue
 
 
 
 
 
 
 
Rental revenue
$
54,125

 
$
47,785

 
$
197,996

 
$
184,563

Sales of rental equipment
8,600

 
10,457

 
23,767

 
26,019

Sales of new equipment
2,232

 
6,182

 
10,308

 
18,349

Parts sales and services
12,289

 
4,264

 
31,964

 
17,366

Total revenue
77,246

 
68,688

 
264,035

 
246,297

Cost of Revenue
 
 
 
 
 
 
 
Cost of rental revenue
13,313

 
11,512

 
50,829

 
49,023

Depreciation of rental equipment
19,270

 
17,576

 
70,568

 
64,093

Cost of rental equipment sales
7,649

 
8,636

 
20,302

 
21,689

Cost of new equipment sales
1,902

 
5,460

 
8,520

 
16,099

Cost of parts sales and services
10,131

 
3,091

 
25,052

 
12,339

Major repair disposals
694

 
375

 
2,216

 
1,436

Total cost of revenue
52,959

 
46,650

 
177,487

 
164,679

Gross Profit
24,287

 
22,038

 
86,548

 
81,618

Operating Expenses
 
 
 
 
 
 
 
Selling, general, and administrative expenses
9,960

 
8,307

 
34,667

 
32,718

Licensing and titling expenses
690

 
567

 
2,617

 
2,241

Amortization and non-rental depreciation
858

 
781

 
3,122

 
3,045

Transaction expenses
247

 
277

 
7,641

 
440

Asset impairment

 

 
657

 

Other operating expenses
613

 
10

 
1,826

 
10

Total operating expenses
12,368

 
9,942

 
50,530

 
38,454

Operating Income
11,919

 
12,096

 
36,018

 
43,164

Other Expense
 
 
 
 
 
 
 
Loss on extinguishment of debt

 

 
4,005

 

Interest expense, net
16,985

 
15,049

 
63,361

 
56,698

Other expense, net
(855
)
 
1

 
1,690

 
287

Total other expenses
16,130

 
15,050

 
69,056

 
56,985

Loss Before Income Taxes
(4,211
)
 
(2,954
)
 
(33,038
)
 
(13,821
)
Income Tax Expense (Benefit)
(7,316
)
 
452

 
(5,986
)
 
1,705

Net Income (Loss)
$
3,105

 
$
(3,406
)
 
$
(27,052
)
 
$
(15,526
)
Income (Loss) per share:
 
 
 
 
 
 
 
    Basic and diluted
$
0.06

 
$
(0.16
)
 
$
(0.82
)
 
$
(0.72
)
Weighted-average common shares outstanding:
 
 
 
 
 
 
 
    Basic and diluted
49,033,903

 
21,660,638

 
33,066,165

 
21,660,638






Table 3: Unaudited Condensed Consolidated Statements of Cash Flows

Nesco Holdings, Inc.
Condensed Consolidated Statements of Cash Flows (unaudited)
 
 
Year Ended December 31,
(in $000s)
 
2019
 
2018
Operating Activities
 
 
 
 
Net loss
 
$
(27,052
)
 
$
(15,526
)
Adjustments to reconcile net loss to net cash flow from operating activities:
 
 
 
 
Depreciation
 
71,548

 
64,312

Amortization - intangibles
 
3,008

 
2,826

Amortization - financing costs
 
2,913

 
3,537

Provision for losses on accounts receivable
 
3,292

 
4,302

Share-based payments
 
1,014

 
1,130

Gain on sale of rental equipment and parts
 
(5,542
)
 
(3,644
)
Gain on insurance proceeds - damaged equipment
 
(538
)
 

Major repair disposal
 
2,216

 
1,436

Loss on extinguishment of debt
 
4,005

 

Change in fair value of derivative
 
1,709

 

Asset impairment and loss on asset acquisition
 
657

 

Deferred tax (benefit) expense
 
(6,861
)
 
1,096

Changes in assets and liabilities:
 
 
 
 
Accounts receivable
 
(17,073
)
 
(5,185
)
Inventory
 
(22,683
)
 
(8,023
)
Prepaid expenses and other
 
(2,578
)
 
351

Accounts payable
 
7,547

 
(4,307
)
Accrued expenses and other liabilities
 
6,560

 
(1,203
)
Unearned income
 
(3,350
)
 
(62
)
Net cash flow from operating activities
 
18,792

 
41,040

 
 
 
 
 
Investing Activities
 
 
 
 
Cash paid for business acquisition, net of cash acquired
 
(48,425
)
 
(1,524
)
Purchase of equipment - rental fleet
 
(106,641
)
 
(58,519
)
Proceeds from sale of rental equipment and parts
 
26,794

 
33,321

Insurance proceeds from damaged equipment
 
1,658

 

Purchase of other property and equipment
 
(3,065
)
 
(716
)
Net cash flow from in investing activities
 
(129,679
)
 
(27,438
)
Financing Activities
 
 
 
 
Proceeds from debt
 
475,000

 

Borrowings under revolving credit facilities
 
313,000

 
49,000

Repayments under revolving credit facilities
 
(272,000
)
 
(50,000
)
Repayments of notes payable
 
(527,531
)
 
(1,658
)
Capital lease payments
 
(5,201
)
 
(8,119
)
Proceeds from merger and recapitalization
 
147,269

 

Finance fees paid
 
(15,488
)
 
(1,645
)
Net cash flow from financing activities
 
115,049

 
(12,422
)
 
 
 
 
 
 
 
 
 
 
Net Change in Cash
 
4,162

 
1,180

Cash at Beginning of Period
 
2,140

 
960

Cash at End of Period
 
$
6,302

 
$
2,140

 
 
 
 
 
 
 
 
 
 





 
 
Year Ended December 31,
(in $000s)
 
2019
 
2018
Supplemental Cash Flow Information
 
 
 
 
Cash paid for interest
 
$
53,595

 
$
53,763

Cash paid for income taxes
 
455

 
526

Non-Cash Investing and Financing Activities
 
 
 
 
Transfer of parts inventory to leased equipment
 
5,804

 
6,014

Rental equipment and property and equipment purchases in accounts payable
 
21,643

 
10,712

Rental equipment sales in accounts receivable
 
4,684

 
2,750

Rental equipment on capital lease
 

 
15,388

Customer note receivable
 
972

 

Settlement of note payable with common stock
 
25,000

 

Acquisition
 

 
3,546








Table 4: Unaudited Adjusted EBITDA Reconciliation

Nesco Holdings, Inc. 
Adjusted EBITDA Reconciliation (unaudited)

 
Three Months Ended December 31,
 
Year Ended December 31,
(in $000s)
2019
 
2018
 
2019
 
2018
Net income (loss)
$
3,105

 
$
(3,406
)
 
$
(27,052
)
 
$
(15,526
)
Interest expense
16,985

 
15,049

 
63,361

 
56,698

Income tax expense (benefit)
(7,316
)
 
452

 
(5,986
)
 
1,705

Depreciation expense
19,444

 
17,634

 
71,548

 
64,312

Amortization expense
836

 
723

 
3,008

 
2,826

EBITDA
33,054

 
30,452

 
104,879

 
110,015

   Adjustments:
 
 
 
 
 
 
 
   Non-cash purchase accounting impact (1)
940

 
1,324

 
1,802

 
3,631

   Transaction and process improvement costs (2)
1,190

 
535

 
15,866

 
2,536

   Major repairs (3)
694

 
375

 
2,216

 
1,436

   Share-based payments (4)
551

 
280

 
1,014

 
1,130

   Other non-recurring items (5)

 
2,609

 

 
2,909

Change in fair value of derivative (6)
(843
)
 

 
1,709

 

Adjusted EBITDA
$
35,586

 
$
35,575

 
$
127,486

 
$
121,657

Adjusted EBITDA is defined as net income (loss) plus interest expense, provision for income taxes, depreciation, and amortization, and further adjusted for (1) non-cash purchase accounting impact, (2) transaction and process improvement costs, including the effect of the cessation of operations in Mexico, (3) major repairs, (4) share-based payments, (5) other non-recurring items, and (6) the change in fair value of derivative instruments. This non-GAAP measure is subject to certain limitations.
(1)
Represents the non-cash impact of purchase accounting, net of accumulated depreciation, on the cost of equipment sold. The equipment acquired received a purchase step-up in basis, which is a non-cash adjustment to the equipment cost pursuant to the credit agreement governing the Company’s asset-based lending facility (the “credit agreement”).
(2)
For the years ended December 31, 2019 and 2018, represents transaction costs related to the agreement and plan of merger with Capitol, which are comprised of professional consultancy fees, transaction costs, and the loss on extinguishment of debt. Additionally, pursuant to the credit agreement, the cost of undertakings to effect such cost savings, operating expense reductions and other synergies, as well as any expenses incurred in connection with acquisitions, are amounts to be included in the calculation of Adjusted EBITDA. For the year ended December 31, 2019, these costs include startup expenses associated with the new PTA locations (which include training, travel, and process setup costs), transaction expenses related to the acquisition of Truck Utilities, Inc. and expenses associated with the Company’s closure of its Mexican equipment rental and sales operations.
(3)
Represents the undepreciated cost of replaced chassis components from heavy maintenance, repair and overhaul activities associated with our fleet, which is an adjustment pursuant to our credit agreement.
(4)
Represents non-cash stock compensation expense associated with the issuance of stock options and restricted stock units in 2019 and the Class B Profits Interest Awards by NESCO Holdings, LP (our ultimate parent) on February 26, 2014, which is an adjustment pursuant to our credit agreement.
(5)
For the year ended December 31, 2018, represents other adjustments pursuant to the credit agreement: Rental expense incurred in 2018 for fleet equipment that had been rented under the terms of an operating lease that was terminated in 2018.
(6)
Represents the charge to earnings for our interest rate collar (which is an undesignated hedge) in the year ended December 31, 2019.







Table 5: Reconciliation of Adjusted EBITDA including a Full Year of Truck Utilities (Unaudited)
 
 
 
 
(in $000s)
 
Year Ended December 31, 2019
 
Adjusted EBITDA(1)
 
$
127,486

 
   Truck Utilities Adjusted EBITDA since acquisition (2)
 
(936
)
 
   Truck Utilities Adjusted EBITDA for the year ended September 30, 2019 (3)
 
7,983

 
Adjusted EBITDA including a full year of Truck Utilities
 
$
134,533

 

(1)
See the unaudited Adjusted EBITDA reconciliation for the year ended December 31, 2019 in Table 4.
(2)
Represents Truck Utilities contribution included in Nesco’s reported Adjusted EBITDA in Table 4 from November 4, 2019 (the date of acquisition) to December 31, 2019. A reconciliation of Adjusted EBITDA to the most comparable GAAP measure is as follows:    
(in $000s)
Three Months Ended December 31, 2019
Net loss
$
(699
)
Depreciation
907

Amortization
111

EBITDA
319

Adjustments:
 
Non-cash purchase accounting impact
490

Transaction costs
127

Adjusted EBIDA
$
936

(3)
Derived from Truck Utilities' audited financial statements for the year ended September 30, 2019. Adjusted EBITDA for Truck Utilities presented above may not be reflective of the actual Adjusted EBITDA for Truck Utilities for the year ended December 31, 2019. A reconciliation of Adjusted EBITDA to the most comparable GAAP measure is as follows:    
(in $000s)
Year Ended September 30, 2019
Net income
$
1,620

Interest expense
116

Income tax expense
697

Depreciation
4,313

EBITDA
6,746

Adjustments:
 
Transaction costs
160

Other costs (a)
1,077

Adjusted EBIDA
$
7,983


(a)
Represents the reduction in annual compensation that was paid to the selling shareholders pursuant to employment agreements executed with Nesco effective November 4, 2019.                





Table 6: Fleet Metrics
 
Three Months Ended December 31,
 
Year Ended December 31,
 
2019
 
2018
 
2019
 
2018
Average equipment on rent (in $000s)
$
508,658

 
$
462,365

 
$
477,493

 
$
450,195

Average fleet count
4,466

 
3,864

 
4,172

 
3,839

Average fleet utilization
81.5
%
 
83.5
%
 
80.7
%
 
82.3
%
Average rental rate per day
$
137.69

 
$
140.08

 
$
137.49

 
$
139.63

OPERATIONAL AND FINANCIAL METRICS
Average equipment on rent is the average original equipment cost of units on rent during the period. The measure provides a value dimension to the fleet utilization statistics. This metric has been adjusted to exclude Mexico, for which the Company commenced exit activities in 2019.
Average fleet count is the average number of units in the fleet during the period. This metric has been adjusted to exclude Mexico, for which the Company commenced exit activities in 2019.
Average fleet utilization for the period is calculated as the total number of invoiced days divided by the total number of available equipment days. This metric has been adjusted to exclude Mexico, for which the Company commenced exit activities in the third quarter of 2019.
Average rental rate per day for the period is calculated as total rental revenue excluding freight and damaged billings divided by the total rental days, which represents the number of billable days in the period aggregated across all units in the fleet. This metric has been adjusted to exclude Mexico, for which the Company commenced exit activities in 2019.






Table 7: Segment Performance

 
Three Months Ended December 31,
 
Three Months Ended December 31,
 
2019
 
2018
(in $000s)
ERS
 
PTA
 
Total
 
ERS
 
PTA
 
Total
Rental revenue
$
49,985

 
$
4,140

 
$
54,125

 
$
44,904

 
$
2,881

 
$
47,785

Sales of rental equipment
8,600

 

 
8,600

 
10,457

 

 
10,457

Sales of new equipment
2,232

 

 
2,232

 
6,182

 

 
6,182

Parts sales and services

 
12,289

 
12,289

 

 
4,264

 
4,264

Total revenues
$
60,817

 
$
16,429

 
$
77,246

 
$
61,543

 
$
7,145

 
$
68,688

Cost of revenue
21,279

 
12,410

 
33,689

 
25,244

 
3,830

 
29,074

Depreciation of rental equipment
18,030

 
1,240

 
19,270

 
16,548

 
1,028

 
17,576

Gross profit
$
21,508

 
$
2,779

 
$
24,287

 
$
19,751

 
$
2,287

 
$
22,038


 
Year ended December 31,
 
Year ended December 31,
 
2019
 
2018
(in $000s)
ERS
 
PTA
 
Total
 
ERS
 
PTA
 
Total
Rental revenue
$
182,720

 
$
15,276

 
$
197,996

 
$
173,267

 
$
11,296

 
$
184,563

Sales of rental equipment
23,767

 

 
23,767

 
26,019

 

 
26,019

Sales of new equipment
10,308

 

 
10,308

 
18,349

 

 
18,349

Parts sales and services

 
31,964

 
31,964

 

 
17,366

 
17,366

Total revenues
$
216,795

 
$
47,240

 
$
264,035

 
$
217,635

 
$
28,662

 
$
246,297

Cost of revenue
76,573

 
30,346

 
106,919

 
84,509

 
16,077

 
100,586

Depreciation of rental equipment
66,228

 
4,340

 
70,568

 
60,436

 
3,657

 
64,093

Gross profit
$
73,994

 
$
12,554

 
$
86,548

 
$
72,690

 
$
8,928

 
$
81,618










Table 8: Net Capital Expenditures
 
Year Ended December 31,
(in $000s)
2019
 
2018
Purchase of equipment - rental fleet
$
106,641

 
$
58,519

Purchase of other property and equipment
3,065

 
716

Total capital expenditures
109,706

 
59,235

Less: Proceeds from sale of rental equipment and parts
(26,794
)
 
(33,321
)
Less: Insurance proceeds from damaged equipment
(1,658
)
 

Net capital expenditures
$
81,254

 
$
25,914







Table 9: Reconciliation of 2020 Adjusted EBITDA Guidance
(in $millions)
Full Year 2020
 
 
 
 
 
 
Net loss
$
(8.0
)
 
to
 
$
3.0

Interest expense
63.0

 
to
 
62.0

Income tax expense
2.0

 
to
 
2.0

Depreciation and amortization
83.0

 
to
 
84.0

Share-based payments
1.0

 
to
 
1.0

Other
1.0

 
to
 
2.0

Adjusted EBITDA
$
142.0

 
to
 
$
154.0