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| 8-K - 8-K - H&E Equipment Services, Inc. | d277372d8k.htm |
Exhibit 99.1
News Release
Contacts:
Leslie S. Magee
Chief Financial Officer
225-298-5261
lmagee@he-equipment.com
Kevin S. Inda
Vice President of Investor Relations
225-298-5318
kinda@he-equipment.com
H&E Equipment Services Reports Third Quarter 2016 Results
BATON ROUGE, Louisiana — (October 27, 2016) — H&E Equipment Services, Inc. (NASDAQ: HEES) today announced results for the third quarter ended September 30, 2016.
THIRD QUARTER 2016 SUMMARY
| • | Revenues decreased 11.6% to $244.7 million versus $276.9 million a year ago. |
| • | Net income was $11.7 million in the third quarter compared to net income of $14.8 million a year ago. |
| • | EBITDA was $81.9 million in the third quarter compared to EBITDA of $86.2 million a year ago, yielding a margin of 33.5% of revenues compared to 31.1% a year ago. |
| • | Rental revenues were $118.5 million in the third quarter compared to $118.1 million a year ago. |
| • | New equipment sales decreased 32.7% to $44.8 million in the third quarter compared to $66.6 million a year ago. |
| • | Used equipment sales decreased 29.1% to $20.6 million in the third quarter compared to $29.1 million a year ago. |
| • | Gross margin was 36.0% compared to 33.5% a year ago. |
| • | Rental gross margins were 49.5% in the third quarter of 2016 and 49.0% a year ago. |
| • | Average time utilization (based on original equipment cost) was 72.1% compared to 73.7% a year ago. Average time utilization (based on units available for rent) was 68.0% compared to 70.2% last year. |
| • | Average rental rates decreased 0.7% compared to a year ago. |
| • | Dollar utilization was 35.4% in the third quarter compared to 36.4% a year ago. |
| • | Average rental fleet age at September 30, 2016, was 31.5 months compared to an industry average age of 42.4 months. |
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H&E Equipment Services Reports Third Quarter 2016 Results
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October 27, 2016
John Engquist, H&E Equipment Services’ chief executive officer, said, “Weather had an impact on our operations as Louisiana experienced a ‘1,000 year’ flooding event in mid-August. Our business incurred a short pause as construction projects were temporarily delayed but has since recovered. Our rental business generated revenues of $118.5 million, up 9.1% sequentially over last quarter and margins were strong at 49.5%. Solid demand for aerial work platforms and earthmoving equipment resulted in strong utilization, at 72.1% based on OEC. Rental rates decreased 0.7% from a year ago but increased 1.0% sequentially over last quarter.”
Engquist concluded, “As we expected, our distribution business remained soft during the quarter as new equipment sales continued to be pressured by very low crane demand. When the energy markets rebound on a sustained basis, we believe there will be substantial pent up demand for cranes. We continue to believe that the non-residential construction markets remain healthy based on current bidding activity levels, solid backlogs, positive customer sentiment and the robust activity associated with ongoing large projects.”
FINANCIAL DISCUSSION FOR THIRD QUARTER 2016:
Revenue
Total revenues decreased 11.6% to $244.7 million in the third quarter of 2016 from $276.9 million in the third quarter of 2015. Equipment rental revenues were $118.5 million compared with $118.1 million in the third quarter of 2015. New equipment sales decreased 32.7% to $44.8 million from $66.6 million a year ago. Used equipment sales decreased 29.1% to $20.6 million compared to $29.1 million a year ago. Parts sales decreased 5.6% to $27.3 million from $29.0 million in the third quarter of 2015. Service revenues decreased 3.9% to $16.1 million compared with $16.7 million a year ago.
Gross Profit
Gross profit decreased 5.1% to $88.1 million from $92.8 million in the third quarter of 2015. Gross margin was 36.0% for the quarter ended September 30, 2016, as compared to 33.5% for the quarter ended September 30, 2015. On a segment basis, gross margin on rentals was 49.5% in the third quarter of 2016 and 49.0% in the third quarter of 2015. On average, rental rates were 0.7% lower than rates in the third quarter of 2015. Time utilization (based on original equipment cost) was 72.1% in the third quarter of 2016 compared to 73.7% a year ago. Time utilization (based on units available for rent) was 68.0% in the third quarter of 2016 compared to 70.2% a year ago.
Gross margins on new equipment sales increased to 10.3% compared to 9.8% in the third quarter a year ago. Gross margins on used equipment sales were 30.4%, the same as a year ago. Gross margins on parts sales were 27.9% in the third quarter of 2016 and 27.2% in the third quarter of 2015. Gross margins on service revenues were 66.1% for the third quarter of 2016 compared to 66.6% in the third quarter of 2015.
Rental Fleet
At the end of the third quarter of 2016, the original acquisition cost of the Company’s rental fleet was $1,348.0 million, an increase of $43.0 million from $1,305.0 million at the end of the third quarter of 2015. Dollar utilization was 35.4% compared to 36.4% for the third quarter of 2015.
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H&E Equipment Services Reports Third Quarter 2016 Results
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October 27, 2016
Selling, General and Administrative Expenses
SG&A expenses for the third quarter of 2016 were $56.0 million compared with $54.7 million last year, a $1.3 million, or 2.3% increase. SG&A expenses in the third quarter of 2016 increased as a percentage of total revenues to 22.9% compared to 19.8% last year. Of the $1.3 million increase, $1.2 million was attributable to new branch expansions compared to a year ago.
Income from Operations
Income from operations for the third quarter of 2016 was $33.1 million, or 13.5% of revenues, compared to $38.5 million, or 13.9% of revenues, a year ago.
Interest Expense
Interest expense for the third quarter of 2016 was $13.5 million, the same as a year ago.
Net Income
Net income was $11.7 million, or $0.33 per diluted share, in the third quarter of 2016 compared to net income of $14.8 million, or $0.42 per diluted share, in the third quarter of 2015. The effective income tax rate was 41.7% in the third quarter compared to 42.1% a year ago.
EBITDA
EBITDA for the third quarter of 2016 was $81.9 million compared to $86.2 million in the third quarter of 2015. EBITDA as a percentage of revenues was 33.5% compared with 31.1% in the third quarter of 2015.
Non-GAAP Financial Measures
This press release contains a certain Non-GAAP measure (EBITDA). Please refer to our Current Report on Form 8-K for a description of this measure and of our use of this measure. This measure as calculated by the Company is not necessarily comparable to similarly titled measures reported by other companies. Additionally, this Non-GAAP measure is not a measurement of financial performance or liquidity under GAAP and should not be considered as an alternative 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, October 27, 2016, at 10:00 a.m. (Eastern Time). To listen to the call, participants should dial 913-312-1377 approximately 10 minutes prior to the start of the call. A telephonic replay will become available after 1:00 p.m. (Eastern Time) on October 27, 2016, and will continue through November 5, 2016, by dialing 719-457-0820 and entering the confirmation code 2822053.
The live broadcast of the Company’s quarterly conference call will be available online at www.he-equipment.com on October 27, 2016, 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 76 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.
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H&E Equipment Services Reports Third Quarter 2016 Results
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October 27, 2016
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”, “foresee” 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; (2) our ability to forecast trends in our business accurately, and the impact of economic downturns and economic uncertainty in the markets we serve; (3) the impact of conditions in the global credit and commodity markets and their effect on construction spending and the economy in general; (4) relationships with equipment suppliers; (5) increased maintenance and repair costs as we age our fleet and decreases in our equipment’s residual value; (6) our indebtedness; (7) risks associated with the expansion of our business; (8) our possible inability to integrate any businesses we acquire; (9) competitive pressures; (10) compliance with laws and regulations, including those relating to environmental matters and corporate governance matters; and (11) 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.
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H&E Equipment Services Reports Third Quarter 2016 Results
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October 27, 2016
H&E EQUIPMENT SERVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(Amounts in thousands, except per share amounts)
| Three Months Ended September 30, |
Nine Months Ended September 30, |
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| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Revenues: |
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| Equipment rentals |
$118,535 | $ | 118,055 | $ | 330,023 | $ | 328,072 | |||||||||
| New equipment sales |
44,764 | 66,552 | 151,836 | 175,465 | ||||||||||||
| Used equipment sales |
20,630 | 29,111 | 71,973 | 83,113 | ||||||||||||
| Parts sales |
27,335 | 28,968 | 81,958 | 84,400 | ||||||||||||
| Service revenues |
16,076 | 16,727 | 49,322 | 47,452 | ||||||||||||
| Other |
17,346 | 17,440 | 48,679 | 48,121 | ||||||||||||
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| Total revenues |
244,686 | 276,853 | 733,791 | 766,623 | ||||||||||||
| Cost of revenues: |
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| Rental depreciation |
41,528 | 40,963 | 120,700 | 121,121 | ||||||||||||
| Rental expense |
18,378 | 19,210 | 53,162 | 52,522 | ||||||||||||
| New equipment sales |
40,147 | 60,000 | 135,152 | 156,068 | ||||||||||||
| Used equipment sales |
14,364 | 20,262 | 49,751 | 56,761 | ||||||||||||
| Parts sales |
19,708 | 21,098 | 59,184 | 61,224 | ||||||||||||
| Service revenues |
5,445 | 5,582 | 16,736 | 16,017 | ||||||||||||
| Other |
16,991 | 16,901 | 48,129 | 47,329 | ||||||||||||
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| Total cost of revenues |
156,561 | 184,016 | 482,814 | 511,042 | ||||||||||||
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| Gross profit |
88,125 | 92,837 | 250,977 | 255,581 | ||||||||||||
| Selling, general, and administrative expenses |
55,962 | 54,704 | 172,385 | 162,584 | ||||||||||||
| Gain on sales of property and equipment, net |
927 | 339 | 2,301 | 1,769 | ||||||||||||
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| Income from operations |
33,090 | 38,472 | 80,893 | 94,766 | ||||||||||||
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| Interest expense |
(13,469 | ) | (13,481 | ) | (40,229 | ) | (40,675 | ) | ||||||||
| Other income, net |
386 | 501 | 1,505 | 1,083 | ||||||||||||
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| Income before provision for income taxes |
20,007 | 25,492 | 42,169 | 55,174 | ||||||||||||
| Provision for income taxes |
8,342 | 10,720 | 17,427 | 22,836 | ||||||||||||
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| Net income |
$ | 11,665 | $ | 14,772 | $ | 24,742 | $ | 32,338 | ||||||||
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| NET INCOME PER SHARE |
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| Basic – Net income per share |
$ | 0.33 | $ | 0.42 | $ | 0.70 | $ | 0.92 | ||||||||
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| Basic – Weighted average number of common shares outstanding |
35,424 | 35,308 | 35,373 | 35,258 | ||||||||||||
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| Diluted – Net income per share |
$ | 0.33 | $ | 0.42 | $ | 0.70 | $ | 0.92 | ||||||||
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| Diluted – Weighted average number of common shares outstanding |
35,504 | 35,350 | 35,461 | 35,317 | ||||||||||||
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| Dividends declared per common share |
$ | 0.275 | $ | 0.275 | $ | 0.825 | $ | 0.775 | ||||||||
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H&E Equipment Services Reports Third Quarter 2016 Results
Page 6
October 27, 2016
H&E EQUIPMENT SERVICES, INC.
SELECTED BALANCE SHEET DATA (unaudited)
(Amounts in thousands)
| September 30, 2016(1) |
December 31, 2015(1) |
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| Cash |
$ | 7,034 | $ | 7,159 | ||||
| Rental equipment, net |
922,486 | 893,393 | ||||||
| Total assets |
1,291,825 | 1,299,511 | ||||||
| Total debt (2) |
841,518 | 816,764 | ||||||
| Total liabilities |
1,152,413 | 1,156,923 | ||||||
| Stockholders’ equity |
139,412 | 142,588 | ||||||
| Total liabilities and stockholders’ equity |
$ | 1,291,825 | $ | 1,299,511 | ||||
| (1) | Amounts presented herein reflect the Company’s adoption of ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs, on January 1, 2016, which was applied on a retrospective basis. |
| (2) | 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 September 30, |
Nine Months Ended September 30, |
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| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Net income |
$ | 11,665 | $ | 14,772 | $ | 24,742 | $ | 32,338 | ||||||||
| Interest expense |
13,469 | 13,481 | 40,229 | 40,675 | ||||||||||||
| Provision for income taxes |
8,342 | 10,720 | 17,427 | 22,836 | ||||||||||||
| Depreciation |
48,385 | 47,204 | 141,021 | 139,016 | ||||||||||||
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| EBITDA |
$ | 81,861 | $ | 86,177 | $ | 223,419 | $ | 234,865 | ||||||||
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