H&E Equipment Services Reports Third Quarter 2013 Results

H&E Equipment Services, Inc. (NASDAQ: HEES) today announced results for the third quarter ended September 30, 2013.

THIRD QUARTER 2013 HIGHLIGHTS:
  • Revenues increased 32.2% to $270.4 million versus $204.5 million a year ago.
  • Net income was $14.0 million in the third quarter compared to $3.7 million a year ago. Net Income increased $3.1 million to $14.0 million compared to adjusted net income of $10.9 million a year ago.
  • Adjusted EBITDA increased 25.2% to $70.0 million from $55.9 million, yielding a margin of 25.9% of revenues compared to 27.3% a year ago. Margins were impacted by revenue mix with a significant increase in new equipment sales compared to a year ago.
  • Rental revenues increased 14.9%, or $11.6 million, to $89.4 million due to improved rates, a larger fleet compared to a year ago and strong demand.
  • New equipment sales increased 84.1%, or $41.2 million, to $90.2 million, largely due to higher crane and earthmoving sales.
  • Gross margin was 29.7% as compared to 32.7% a year ago. Rental gross margin increased to 49.6% compared to 48.9% a year ago.
  • Average time utilization (based on original equipment cost) was 72.3% compared to 72.9% a year ago and 71.0% in the second quarter of 2013. Average time utilization (based on units available for rent) was 66.6% compared to 68.9% last year and 66.3% last quarter.
  • Average rental rates increased 5.2% compared to a year ago and improved 0.7% compared to the second quarter of this year.
  • Dollar utilization was consistent with the prior year at 36.7%.
  • Average rental fleet age at September 30, 2013 was 35.0 months, down from 35.9 months at the end of the last quarter and younger than the industry average age of 45 months.

John Engquist, H&E Equipment Services’ chief executive officer, said, “Our business performed exceptionally well during the third quarter as a result of our continued focus on solid execution, capitalizing on market cycle expansion and strong industrial market penetration. Total revenues increased significantly, up 32.2% from a year ago, primarily due to ongoing strength in our rental and new equipment businesses. Rental revenues grew 14.9% on rates that were 5.2% higher than a year ago and on a significantly larger fleet than a year ago. New and used equipment sales increased 84.1% and 47.2%, respectively, which we believe affirms a healthier economy and general construction market.”

Engquist concluded, “We believe the positive trends that we are seeing in our business will continue through the balance of this year and into 2014, where we anticipate additional fleet growth and market expansion in our industrial markets, where we believe there will be continued high demand, and in the commercial construction sector, where we believe there will be expanding opportunities.”

FINANCIAL DISCUSSION FOR THIRD QUARTER 2013:

Revenue

Total revenues increased 32.2% to $270.4 million from $204.5 million in the third quarter of 2012. Equipment rental revenues increased 14.9% to $89.4 million compared with $77.8 million in the third quarter of 2012. New equipment sales increased 84.1% to $90.2 million from $49.0 million in the third quarter of 2012. Used equipment sales increased 47.2% to $36.8 million compared to $25.0 million in the third quarter of 2012. Parts sales increased 2.0% to $26.6 million from $26.1 million in the third quarter of 2012. Service revenues decreased 4.9% to $13.7 million compared to $14.4 million a year ago.

Gross Profit

Gross profit increased 20.0% to $80.3 million from $66.9 million in the third quarter of 2012. Gross margin was 29.7% for the quarter ended September 30, 2013, compared to gross margin of 32.7% for the quarter ended September 30, 2012.

On a segment basis, third quarter 2013 gross margin on rentals was 49.6% in this quarter compared to 48.9% in the third quarter of 2012 due to higher average rental rates on new contracts in the period, strong fleet utilization and lower rental expenses as a percentage of equipment rental revenues. On average, rental rates increased 5.2% as compared to the third quarter of 2012. Time utilization (based on original equipment cost) was 72.3% in the third quarter of 2013 and 72.9% a year ago.

Gross margin on new equipment sales was 10.6% compared to 11.5% in the third quarter a year ago. Gross margin on used equipment sales was 26.3% compared to 26.4% a year ago. Gross margin on parts sales was 28.0% in this quarter and 26.7% a year ago. Gross margin on service revenues was 64.0% compared to 61.1% in the prior year.

Rental Fleet

At the end of the third quarter of 2013, the original acquisition cost of the Company’s rental fleet was $978.9 million, an increase of $107.9 million from $871.0 million at the end of the third quarter of 2012 and an increase of $95.9 million from $883.0 million at the end of 2012. Dollar utilization was 36.7% consistent with the third quarter of 2012.

Selling, General and Administrative Expenses

SG&A expenses for the third quarter of 2013 were $47.0 million compared with $42.4 million last year, a $4.6 million, or 10.8%, increase. For the third quarter of 2013, SG&A expenses as a percentage of total revenues were 17.4% compared to 20.7% a year ago.

Income from Operations

Income from operations for the third quarter of 2013 was $33.9 million, or 12.6% of revenues, compared with $25.0 million, or 12.2% of revenues, a year ago.

Interest Expense

Interest expense for the third quarter of 2013 was $13.2 million compared to $9.8 million in the third quarter of 2012.

Net Income and Adjusted Net Income

Net income for the third quarter of 2013 was $14.0 million, or $0.40 per diluted share, compared to net income of $3.7 million, or $0.11 per diluted share, a year ago. A year ago, adjusted net income was $10.9 million, or $0.31 per diluted share. The effective income tax rate was 33.5% compared to 29.7% a year ago.

EBITDA and Adjusted EBITDA

EBITDA for the third quarter of 2013 increased 53.0% to $70.0 million compared to $45.7 million a year ago and increased 25.2% compared to Adjusted EBITDA of $55.9 million a year ago. EBITDA, as a percentage of revenues, was 25.9% compared to 22.4% a year ago. Adjusted EBITDA, as a percentage of revenues, was 25.9% compared with 27.3% in the third quarter of 2012.

Non-GAAP Financial Measures

This press release contains certain Non-GAAP measures (EBITDA, Adjusted EBITDA and Adjusted Net Income). Please refer to our Current Report on Form 8-K for a description of these measures and a discussion of our use of these measures. EBITDA, Adjusted EBITDA, and Adjusted Net Income as calculated by the Company, are not necessarily comparable to similarly titled measures reported by other companies. Additionally, these Non-GAAP measures are not measurements of financial performance or liquidity under GAAP and should not be considered as alternatives to the Company's other financial information determined under GAAP.

Conference Call

The Company’s management will hold a conference call to discuss third quarter results today, November 1, 2013, at 10:00 a.m. (Eastern Time). To listen to the call, participants should dial 719-325-2180 approximately 10 minutes prior to the start of the call. A telephonic replay will be available after 1:00 p.m. (Eastern Time) on November 1, 2013, and will continue through November 16, 2013, by dialing 719-457-0820 and entering confirmation code 6761373.

The live broadcast of the Company’s quarterly conference call will be available online at www.he-equipment.com on November 1, 2013, beginning at 10:00 a.m. (Eastern Time) and will continue to be available for 30 days. Related presentation materials will be posted to the “Investor Relations” section of the Company’s web site at www.he-equipment.com prior to the call. The presentation materials will be in Adobe Acrobat format.

About H&E Equipment Services, Inc.

The Company is one of the largest integrated equipment services companies in the United States with 68 full-service facilities throughout the West Coast, Intermountain, Southwest, Gulf Coast, Mid-Atlantic and Southeast regions. The Company is focused on heavy construction and industrial equipment and rents, sells and provides parts and service support for four core categories of specialized equipment: (1) hi-lift or aerial platform equipment; (2) cranes; (3) earthmoving equipment; and (4) industrial lift trucks. By providing equipment rental, sales, and on-site parts, repair and maintenance functions under one roof, the Company is a one-stop provider for its customers' varied equipment needs. This full service approach provides the Company with multiple points of customer contact, enabling it to maintain a high quality rental fleet, as well as an effective distribution channel for fleet disposal and provides cross-selling opportunities among its new and used equipment sales, rental, parts sales and service operations.

Forward-Looking Statements

Certain statements in this press release are “forward-looking statements” within the meaning of the federal securities laws. Statements that are not historical facts, including statements about our beliefs and expectations are forward-looking statements. Statements containing the words “may”, “could”, “would”, “should”, “believe”, “expect”, “anticipate”, “plan”, “estimate”, “target”, “project”, “intend” and similar expressions constitute forward-looking statements. Forward-looking statements involve known and unknown risks and uncertainties, which could cause actual results to differ materially from those contained in any forward-looking statement. Such factors include, but are not limited to, the following: (1) general economic conditions and construction and industrial activity in the markets where we operate in North America as well as the depth and duration of the macroeconomic downturn related to decreases in construction and industrial activities, and the impact of conditions of the global credit markets and their effect on construction spending activity and the economy in general; (2) relationships with equipment suppliers; (3) increased maintenance and repair costs as we age our fleet and decreases in our equipments’ residual value; (4) our indebtedness; (5) the risks associated with the expansion of our business; (6) our possible inability to effectively integrate any businesses we acquire; (7) competitive pressures; (8) compliance with laws and regulations, including those relating to environmental matters and corporate governance matters; and (9) other factors discussed in our public filings, including the risk factors included in the Company's most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q. Investors, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. Except as required by applicable law, including the securities laws of the United States and the rules and regulations of the SEC, we are under no obligation to publicly update or revise any forward-looking statements after the date of this release.
 

H&E EQUIPMENT SERVICES, INC.

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

(Amounts in thousands, except per share amounts)
 
 

 
   

Three Months Ended

Nine Months Ended

September 30,

September 30,
 
 

2013
     

2012
   

2013
   

2012
 
 
Revenues:
Equipment rentals $ 89,420 $ 77,808 $ 248,518 $ 207,941
New equipment sales 90,220 49,009 216,979 154,710
Used equipment sales 36,779 24,990 103,589 75,100
Parts sales 26,571 26,058 77,971 74,161
Service revenues 13,729 14,436 42,050 41,615
Other   13,730     12,208     39,070     33,671  
Total revenues 270,449

204,509

728,177
587,198
 
Cost of revenues:
Rental depreciation 31,527 27,150 89,679 74,727
Rental expense 13,550 12,579 41,401 36,375
New equipment sales 80,659 43,367 193,453 136,945
Used equipment sales 27,086 18,399 74,006 53,426
Parts sales 19,123 19,092 56,660 53,826
Service revenues 4,943 5,615 15,743 15,907
Other   13,261     11,384     37,043     32,183  
Total cost of revenues   190,149     137,586     507,985     403,389  
 
Gross profit 80,300 66,923 220,192 183,809
 

Selling, general, and administrative expenses
46,977 42,402 140,347 124,504

Gain on sales of property and equipment, net
  609     514     1,715     1,478  
 
Income from operations 33,932 25,035 81,560 60,783
 
Loss on early extinguishment of debt - (10,180 )

-

 

(10,180

)

 
Interest expense (13,193 ) (9,825 ) (38,550 ) (23,668 )
Other income, net   237     243     945     751  

Income before provision for income taxes
20,976 5,273 43,955 27,686
 
Provision for income taxes   7,023     1,564     14,416     9,554  
 
Net income $ 13,953   $ 3,709   $ 29,539   $ 18,132  
 
NET INCOME PER SHARE
Basic – Net income per share $ 0.40  

$

0.11
 

$

0.84
 

$

0.52
 

Basic – Weighted average number of common shares outstanding
  35,099     34,958     35,022     34,867  
 
Diluted – Net income per share $ 0.40   $ 0.11   $ 0.84   $ 0.52  

Diluted – Weighted average number of common shares outstanding
  35,169     34,974     35,130     34,963  
 

H&E EQUIPMENT SERVICES, INC.

SELECTED BALANCE SHEET DATA (unaudited)

(Amounts in thousands)
 

September 30,
 

December 31,

2013

2012
 
Cash $ 6,666 $ 8,894
Rental equipment, net 672,057 583,349
Total assets 1,075,021 942,399
Total debt (1) 767,401 690,166
Total liabilities 995,239 893,763
Stockholders’ equity 79,782 48,636
Total liabilities and stockholders’ equity $ 1,075,021 $ 942,399
 

(1) Total debt consists of the amounts outstanding on the senior secured credit facility, capital lease obligations and the aggregate amounts outstanding on the senior unsecured notes.
 

H&E EQUIPMENT SERVICES, INC.

UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(Amounts in thousands)

 
 

Three Months EndedSeptember 30,
 

Nine Months EndedSeptember 30,
 

2013
   

2012
 

2013
   

2012
 
Net income $ 13,953 $ 3,709 $ 29,539 $ 18,132
Interest expense 13,193 9,825 38,550 23,668
Provision for income taxes 7,023 1,564 14,416 9,554
Depreciation 35,805 30,609 102,034 84,724
Amortization of intangibles   -   16   -   66
 
EBITDA $ 69,974 $ 45,723 $ 184,539 $ 136,144
 
Loss on early extinguishment of debt   -   10,180   -   10,180
 
Adjusted EBITDA $ 69,974 $

55,903

$
184,539 $ 146,324
 

H&E EQUIPMENT SERVICES, INC.

UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(Amounts in thousands, except per share amounts)
         

Three Months Ended September 30, 2012

As Reported
 

Adjustment (1)
 

Adjusted

 

Income before provision for income taxes
$ 5,273 $ 10,180 $ 15,453
 
Provision for income taxes   1,564  

3,019
 

4,583
 
Net income $ 3,709 $ 7,161 $ 10,870
 
NET INCOME PER SHARE
Basic – Net income per share $ 0.11 $ 0.31
Diluted – Net income per share $ 0.11 $ 0.31
 

Weighted average number of common shares outstanding
Basic   34,958   34,958
Diluted   34,974   34,974
 
 

Nine Months Ended September 30, 2012

As Reported
 

Adjustment (1)
 

Adjusted

Income before provision for income taxes
$ 27,686 $ 10,180 $ 37,866
 
Provision for income taxes   9,554   3,512   13,066
 
Net income $ 18,132 $ 6,668 $ 24,800
 
NET INCOME PER SHARE
Basic – Net income per share $ 0.52 $ 0.71
Diluted – Net income per share $ 0.52 $ 0.71
 

Weighted average number of common shares outstanding
Basic   34,867   34,867
Diluted   34,963   34,963
 

(1) Adjustment includes premium paid to repurchase or redeem the Company’s 8 3/8% senior unsecured notes and the write-off of unamortized deferred transaction costs in the prior three and nine month periods ended September 30, 2012.

Copyright Business Wire 2010

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