Acquisition Adds to H&E's Revenue

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H&E Equipment Services' (HEES Quote) Q3 FY08 revenue increased 3.0% to $278.65 million from $270.59 million when compared with the year-ago quarter. The latest quarter reflected three months results from the Burress Mid-Atlantic acquisition that added $38.80 million, compared to the prior year's quarter, which reflected only one month that added $10.10 million from the acquisition.

Looking at the company's business segments, equipment rentals revenue ascended 3.4% to $78.18 million from $75.60 million. The $2.60 million increase in total rental revenues is the net result of a $3.00 million increase in earthmoving equipment rentals, a $1.00 million increase in crane rentals, a $0.10 million increase in lift truck rentals and decreases in aerial work platform and other rentals of $1.30 million and $0.20 million, respectively. New equipment sales increased 3.3% to $97.80 million from $94.68 million led by the sales of new cranes and new lift trucks. Used equipment sales fell 10.4% to $39.87 million from $44.50 million a year ago due to a lower demand of used cranes, earth equipment. Parts sales revenues and services revenues increased 15.9% and 8.6% to $30.95 million and $18.33 million respectively due to an increase in customer demand.

During the quarter under review, gross profit margin contracted 64 basis points to 40.30% from 40.94% a year ago. The total cost of revenues climbed 5.1% to $196.15 million from $186.69 million. Selling, general, and administrative expenses augmented 9.5% to $45.56 million from $41.61 million. Hence, operating margin declined by 237 basis points to 13.26% from 15.63%. Interest expense climbed 5.4% to $9.50 million from $9.01 million. Subsequently, the interest coverage ratio descended to 3.89 from 4.70. Finally, net income for the quarter plunged 12.8% to $17.60 million or $0.50 per share from $20.19 million or $0.53 per share in the prior year's quarter.

HEES' cash and cash equivalents multiplied more than 6 times to $13.21 million from $1.92 million a year ago. Income from operations decreased 12.3% to $37.20 million compared to $42.40 million a year ago. Return on assets declined by 81 basis points to 6.12% from 6.93%. Similarly, return on equity fell 300 basis points to 21.00% from 24.00%. Total debt rose 1.1% to $501.94 million from $496.42 million. Stockholders' equity spiked 2.4% to $290.43 million from $283.69 million. Therefore, the debt-to-equity ratio improved marginally to 1.73 from 1.75.

The company repurchased during the nine months 2,843,794 shares for approx $42.40 million under its previously announced repurchase program of $100.00 million.

Looking forward to FY08, the company reiterated its earnings and revenue guidance. The company expects its earnings per share to be in the range of $1.60 to $1.68 and revenues to be in the range of $1.08 billion to $1.09 billion.

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