H&E Equipment Services Reports Fourth Quarter 2013 Results

  H&E Equipment Services Reports Fourth Quarter 2013 Results

Business Wire

BATON ROUGE, La. -- February 28, 2014

H&E Equipment Services, Inc. (NASDAQ: HEES) today announced results for the
fourth quarter and year ended December 31, 2013.

FOURTH QUARTER 2013 HIGHLIGHTS:

  *Revenues increased 3.8% to $259.6 million versus $250.1 million a year
    ago.
  *Net income was $14.6 million in the fourth quarter compared to $10.7
    million a year ago, an increase of $3.9 million, or 36.4% from a year ago.
  *EBITDA increased 17.5% to $70.9 million from $60.4 million, yielding a
    margin of 27.3% compared to 24.1% of revenues a year ago.
  *Rental revenues increased 12.0%, or $9.7 million, to $90.4 million due to
    a larger fleet and improved rates compared to a year ago. Demand remained
    strong during the fourth quarter.
  *Used equipment sales increased 28.9% to $38.0 million from $29.5 million a
    year ago.
  *Gross margin was 31.5% as compared to 29.4% a year ago. Rental gross
    margin increased to 48.9% compared to 48.1% a year ago and combined parts
    and services gross margin improved to 42.6% versus 39.2% a year ago.
  *Average time utilization (based on original equipment cost) was 71.9%
    compared to 71.8% a year ago and 72.3% in the third quarter of 2013.
    Average time utilization (based on units available for rent) was 66.0%
    compared to 66.6% last year and last quarter.
  *Average rental rates increased 5.6% compared to a year ago and improved
    0.4% compared to the third quarter of this year.
  *Dollar utilization was 36.2% compared to 36.4% a year ago.
  *Average rental fleet age at December 31, 2013 was 34.9 months, down from
    38.0 months at the end of the last year and approximately ten months
    younger than the current industry average age of 45 months.

“Our fourth quarter performance demonstrated across the board strength and
momentum that has continued in our business,” said John Engquist, H&E
Equipment Services’ chief executive officer. “Demand for rental equipment was
strong in the fourth quarter, driving higher consolidated margins and strong
utilization even while operating a significantly larger fleet. Our combined
distribution business remained solid as well, despite a lower level of
year-end buying of certain new cranes from a year ago, which we believe was
the result of reduced year-end tax incentives. We see our continued focus on
leveraging the increasing demand in our end user markets and our operational
efficiency reflected in our financial results for the quarter, with income
from operations and EBITDA increasing 18.6% and 17.5%, respectively, against
the prior year quarter.”

Engquist concluded, “We believe 2013 was a year of success and our outlook for
2014 is also positive as we believe there will be significant recovery in
non-residential construction over the next several years. We feel there is
reason to be optimistic regarding the outlook for our rental business given
the demand we are currently experiencing. From our perspective, end-user
demand for new and used equipment remains high and we expect this trend to
continue based on current activity levels. We are increasing our fleet size to
accommodate this anticipated growth. We also expect to benefit from the
industrial markets we serve, particularly along the Gulf Coast, where we see
the petrochemical, oil patch, refining, manufacturing and other related
industries operating at high capacity levels. It is being reported that
capital spending scheduled to begin in 2014 relating to these industries,
particularly in our Louisiana and Texas markets, may hit historically high
levels. We believe overall market conditions are encouraging, and we will
continue to focus on solid execution and improving our market position to
capitalize on all of these positive trends in 2014.”

FINANCIAL DISCUSSION FOR FOURTH QUARTER 2013:

Revenue

Total revenues increased 3.8% to $259.6 million from $250.1 million in the
fourth quarter of 2012. Equipment rental revenues increased 12.0% to $90.4
million compared with $80.7 million in the fourth quarter of 2012. New
equipment sales decreased 10.6% to $77.8 million from $87.0million in the
fourth quarter of 2012. Used equipment sales increased 28.9% to $38.0 million
compared to $29.5 million in the fourth quarter of 2012. Parts sales decreased
1.0% to $25.2 million from $25.5 million in the fourth quarter of 2012.
Services revenues decreased 2.0% to $14.6 million compared to $14.9 million a
year ago.

Gross Profit

Gross profit increased 11.1% to $81.6 million from $73.5 million in the fourth
quarter of 2012. Gross margin was 31.5% for the quarter ended December 31,
2013, compared to gross margin of 29.4% for the quarter ended December 31,
2012.

On a segment basis, fourth quarter 2013 gross margin on rentals was 48.9%
compared to 48.1% in the fourth quarter of 2012 due to higher average rental
rates on new contracts in the period, solid fleet utilization and lower rental
expenses as a percentage of equipment rental revenues. On average, rental
rates increased 5.6% compared to the fourth quarter of 2012. Time utilization
(based on original equipment cost) was 71.9% in the fourth quarter of 2013
compared to 71.8% a year ago.

Gross margin on new equipment sales was 10.7% this quarter compared to 11.2%
in the fourth quarter a year ago, and gross margin on used equipment sales was
29.7% compared to 30.2% a year ago. Gross margin on parts sales was 30.2% in
this quarter and 27.4% a year ago. Gross margin on service revenues was 63.9%
compared to 59.4% in the prior year.

Rental Fleet

At the end of the fourth quarter of 2013, the original acquisition cost of the
Company’s rental fleet was $1.0 billion, an increase of $117.8 million from
$883.0 million at the end of 2012. Dollar utilization was 36.2% compared to
36.4% for the fourth quarter of 2012.

Selling, General and Administrative Expenses

SG&A expenses for the fourth quarter of 2013 were $48.7 million compared with
$45.1 million last year, a $3.6 million increase, or 7.9%. The net increase in
SG&A expenses is primarily a result of increased wages, commission, incentive
pay and branch expansion expenses. For the fourth quarter of 2013, SG&A
expenses as a percentage of total revenues were 18.8% compared to 18.1% a year
ago.

Income from Operations

Income from operations for the fourth quarter of 2013 was $33.8 million, or
13.0% of revenues, compared with $28.5 million, or 11.4% of revenues a year
ago.

Interest Expense

Interest expense for the fourth quarter of 2013 was $12.9 million compared to
$11.9 million in the fourth quarter of 2012.

Net Income

Net income was $14.6 million, or $0.41 per diluted share, compared to net
income of $10.7 million, or $0.31 per diluted share, a year ago. The effective
income tax rate was 31.1% compared to 36.1% a year ago due to higher favorable
permanent differences in relation to pre-tax income.

EBITDA

EBITDA for the fourth quarter of 2013 increased 17.5% to $70.9 million
compared to $60.4 million a year ago. EBITDA, as a percentage of revenues, was
27.3% compared to 24.1% a year ago.

FINANCIAL DISCUSSION FOR THE YEAR ENDED DECEMBER 31, 2013:

Revenue

Total revenues increased 18.0% to $987.8 million from $837.3 million in 2012.
Equipment rental revenues increased 17.4% to $338.9 million compared with
$288.6 million in 2012. New equipment sales increased 22.0% to $294.8 million
from $241.7 million in 2012. Used equipment sales increased 35.4% to $141.6
million compared to $104.6 million in 2012. Parts sales increased 3.6% to
$103.2 million from $99.6 million in 2012. Services revenues increased to
$56.7 million compared with $56.6 million a year ago.

Gross Profit

Gross profit increased 17.3% to $301.8 million from $257.3 million in 2012.
Gross margin was 30.6% for 2013 as compared to 30.7% for 2012. This net
decline in gross margin is due to revenue mix.

On a segment basis, gross margin on rentals increased to 47.7% in 2013 from
47.0% in 2012 primarily due to increased average rental rates and lower rental
expense as a percentage of equipment rental revenues. On average, 2013 rental
rates increased 6.9% as compared to 2012. In 2013, time utilization (based on
original equipment cost) was 70.8% compared to 72.0% last year. In 2013, time
utilization (based on units available for rent) was 65.7% compared to 67.5% a
year ago.

Gross margin on new equipment sales was 10.8%, down from 11.4% in 2012. Gross
margin on used equipment sales decreased to 28.9% from 29.2%. Gross margin on
parts sales increased to 28.0% from 27.4%. Gross margin on service revenues
was 62.9% compared to 61.1% in 2012.

Selling, General and Administrative Expenses

SG&A expenses for 2013 were $189.1 million compared with $169.7 million last
year, a $19.4 million, or 11.3%, increase. The net increase in SG&A expenses
is primarily a result of increased wages, commission, incentive pay, health
insurance costs and branch expansion expenses. In 2013, SG&A expenses as a
percentage of total revenues were 19.1% compared to 20.3% in 2012.

Income from Operations

Income from operations in 2013 was $115.3 million, or 11.7% of revenues,
compared to $89.2 million, or 10.7% of revenues in 2012.

Interest Expense

Interest expense in 2013 was $51.4 million compared to $35.5 million in 2012.

Net Income and Adjusted Net Income

Net income was $44.1 million, or $1.26 per diluted share, compared to $28.8
million, or $0.82 per diluted share a year ago. 2012 Adjusted Net Income was
$35.4 million, or $1.01 per diluted share. The effective income tax rate was
32.3% in 2013 compared to 35.1% in 2012 due to higher favorable permanent
differences in relation to pre-tax income.

EBITDA and Adjusted EBITDA

EBITDA for 2013 increased $59.0 million to $255.5 million from $196.5 million
in 2012. EBITDA as a percentage of revenues was 25.9% compared to 23.5% in
2012. Adjusted EBITDA increased $48.8 million, or 23.6%, to $255.5 million
from $206.7 million in 2012. Adjusted EBITDA as a percentage of revenues was
25.9% compared with 24.7% in 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 fourth quarter
results today, February 28, 2014, at 10:00 a.m. (Eastern Time). To listen to
the call, participants should dial 719-325-2425 approximately 10 minutes prior
to the start of the call. A telephonic replay will be available after 1:00
p.m. (Eastern Time) on February 28, 2014, and will continue through March 14,
2014, by dialing 719-457-0820 and entering confirmation code 9766158.

The live broadcast of the Company’s quarterly conference call will be
available online at www.he-equipment.com on February 28, 2014, 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 69 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 services 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, 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 services 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. 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            Twelve Months Ended
                   December 31,                    December 31,
                   2013          2012            2013          2012
Revenues:
Equipment          $ 90,417        $ 80,700        $ 338,935       $ 288,641
rentals
New equipment        77,789          87,011          294,768         241,721
sales
Used equipment       37,971          29,463          141,560         104,563
sales
Parts sales          25,203          25,460          103,174         99,621
Service              14,644          14,939          56,694          56,554
revenues
Other               13,555        12,544        52,625        46,215  
Total revenues       259,579         250,117         987,756         837,315

Cost of
revenues:
Rental               32,269          28,239          121,948         102,966
depreciation
Rental expense       13,937          13,677          55,338          50,052
New equipment        69,434          77,252          262,887         214,197
sales
Used equipment       26,687          20,562          100,693         73,988
sales
Parts sales          17,581          18,497          74,241          72,323
Service              5,291           6,070           21,034          21,977
revenues
Other               12,736        12,327        49,779        44,510  
Total cost of       177,935       176,624       685,920       580,013 
revenues

Gross profit         81,644          73,493          301,836         257,302

Selling,
general, and         48,715          45,149          189,062         169,653
administrative
expenses
Gain on sales
of property         834           114           2,549         1,592   
and equipment,
net

Income from          33,763          28,458          115,323         89,241
operations

Loss on early
extinguishment       -               -               -               (10,180 )
of debt
Interest             (12,854 )       (11,873 )       (51,404 )       (35,541 )
expense
Other income,       283           177           1,228         928     
net
Income before
provision for        21,192          16,762          65,147          44,448
income taxes

Provision for       6,591         6,058         21,007        15,612  
income taxes

Net income         $ 14,601       $ 10,704       $ 44,140       $ 28,836  

NET INCOME PER
SHARE
Basic – Net
income per         $ 0.42         $ 0.31         $ 1.26         $ 0.83    
share
Basic –
Weighted
average number      35,099        34,958        35,041        34,890  
of common
shares
outstanding

Diluted – Net
income per         $ 0.41         $ 0.31         $ 1.26         $ 0.82    
share
Diluted –
Weighted
average number      35,194        35,022        35,146        34,978  
of common
shares
outstanding
                                                                             


H&E EQUIPMENT SERVICES, INC.
SELECTED BALANCE SHEET DATA (unaudited)
(Amounts in thousands)

                                               December      December
                                                     31,             31,
                                                     2013            2012

Cash                                                 $ 17,607        $ 8,894
Rental equipment, net                                  688,710         583,349
Total assets                                           1,090,340       942,399
Total debt ^ (1)                                       734,738         690,166
Total liabilities                                      995,528         893,763
Stockholders’ equity                                   94,812          48,636
Total liabilities and stockholders’ equity           $ 1,090,340     $ 942,399

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


H&E EQUIPMENT SERVICES, INC.
UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Amounts in thousands)

                      Three Months Ended             Twelve Months Ended
                      December 31,                   December 31,
                      2013             2012          2013            2012

Net income            $  14,601        $  10,704     $ 44,140        $ 28,836
Interest                 12,854           11,873       51,404          35,541
expense
Provision for            6,591            6,058        21,007          15,612
income taxes
Depreciation             36,869           31,723       138,903         116,447
Amortization of         -               -           -              66
intangibles

EBITDA                $  70,915        $  60,358     $ 255,454       $ 196,502

Loss on early
extinguishment          -               -           -              10,180
of debt

Adjusted EBITDA       $  70,915        $  60,358     $ 255,454       $ 206,682
                                                                     


H&E EQUIPMENT SERVICES, INC.
UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Amounts in thousands, except per share amounts)

                         Twelve Months Ended December 31, 2012
                           As Reported         Adjustment       Adjusted
                                                 ^(1)
Income before
provision for              $    44,448           $   10,180         $  54,628
income taxes

Provision for                  15,612              3,573            19,185
income taxes

Net income                 $    28,836           $   6,607          $  35,443

NET INCOME PER
SHARE
Basic – Net income         $    0.83                                $  1.02
per share
Diluted – Net              $    0.82                                $  1.01
income per share

Weighted average
number of common
shares outstanding

Basic                          34,890                                34,890
Diluted                        34,978                                34,978

^(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 periods presented.

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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