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H&E Equipment Services Reports Third Quarter 2013 Results

  H&E Equipment Services Reports Third Quarter 2013 Results

Business Wire

BATON ROUGE, La. -- November 1, 2013

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 $49.0million 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           190,149     137,586     507,985     403,389 
revenues
                                                                           
Gross profit             80,300        66,923        220,192       183,809
                                                                           
Selling, general,
and administrative       46,977        42,402        140,347       124,504
expenses
Gain on sales of
property and            609         514         1,715       1,478   
equipment, net
                                                                           
Income from              33,932        25,035        81,560        60,783
operations
                                                                           
Loss on early
extinguishment of        -             (10,180 )     -          (10,180   ) 
debt
Interest expense         (13,193 )     (9,825  )     (38,550 )     (23,668 )
Other income, net       237         243         945         751     
Income before
provision for income     20,976        5,273         43,955        27,686
taxes
                                                                           
Provision for income    7,023       1,564       14,416      9,554   
taxes
                                                                           
Net income             $ 13,953     $ 3,709      $ 29,539     $ 18,132  
                                                                           
NET INCOME PER SHARE
Basic – Net income     $ 0.40       $ 0.11       $ 0.84       $ 0.52    
per share
Basic – Weighted
average number of       35,099      34,958      35,022      34,867  
common shares
outstanding
                                                                           
Diluted – Net income   $ 0.40       $ 0.11       $ 0.84       $ 0.52    
per share
Diluted – Weighted
average number of       35,169      34,974      35,130      34,963  
common shares
outstanding


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                 $     1,075,021         $     942,399
stockholders’ equity
                                                              
(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 Ended   Nine Months Ended
                                   September 30,         September 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     -         10,180    -          10,180
debt
                                                                     
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          $    5,273            $      10,180          $  15,453
income taxes
                                                                    
Provision for              1,564                  3,019             4,583
income taxes
                                                                    
Net income             $    3,709            $      7,161           $  10,870
                                                                    
NET INCOME PER
SHARE
Basic – Net income     $    0.11                                    $  0.31
per share
Diluted – Net          $    0.11                                    $  0.31
income per share
                                                                    
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          $    27,686           $      10,180          $  37,866
income taxes
                                                                    
Provision for              9,554                  3,512             13,066
income taxes
                                                                    
Net income             $    18,132           $      6,668           $  24,800
                                                                    
NET INCOME PER
SHARE
Basic – Net income     $    0.52                                    $  0.71
per share
Diluted – Net          $    0.52                                    $  0.71
income per share
                                                                    
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.

Contact:

H&E Equipment Services, Inc.
Leslie S. Magee, 225-298-5261
Chief Financial Officer
lmagee@he-equipment.com
or
Corporate Communications, Inc. (CCI)
Kevin S. Inda, 941-792-1680
kevin.inda@cci-ir.com
 
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