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Press release from Business Wire

H&E Equipment Services Reports Second Quarter 2011 Results

Thursday, August 04, 2011

H&E Equipment Services Reports Second Quarter 2011 Results07:00 EDT Thursday, August 04, 2011 BATON ROUGE, La. (Business Wire) -- H&E Equipment Services, Inc. (NASDAQ: HEES) today announced results for the second quarter ended June 30, 2011. SECOND QUARTER 2011 HIGHLIGHTS: Revenues increased 40.7% to $184.3 million versus $131.0 million a year ago. Growth was achieved in all operating segments. Net income increased to $2.7 million in the second quarter compared to a net loss of $7.1 million a year ago. EBITDA increased 89.1% to $35.2 million from $18.6 million, yielding a margin of 19.1% compared to 14.2% of revenues a year ago. New equipment sales increased 100.0% from a year ago driven by increased crane and earthmoving sales. Rental revenues increased 33.8%, or $14.1 million to $55.8 million on higher time utilization, better rates, and a larger fleet compared to a year ago. Gross margins were 25.9% as compared to 24.7% a year ago. Rental gross margins increased to 40.7% compared to 31.1% a year ago. Average time utilization (based on units available for rent) increased to 67.1% compared to 54.9% last year and 61.0% last quarter. Average time utilization (based on original equipment cost) increased to 70.0% compared to 57.9% a year ago and 64.9% in the first quarter of 2011. Achieved positive year-over-year and sequential rental pricing in the quarter. Average rental rates increased 6.4% compared to a year ago and improved 4.2% from the first quarter of this year. Dollar utilization was 31.0% as compared to 25.3% a year ago. Average rental fleet age at June 30, 2011 was 43 months, down slightly from the end of the last quarter and significantly younger than the industry average age of 53 months. “With 41% revenue growth on a year-over-year basis and 37% on a sequential basis, the current trends in our business are particularly encouraging despite a commercial construction environment that remains relatively dormant,” said John Engquist, H&E Equipment Services' president and chief executive officer. “The momentum in our rental business continued as revenue climbed 33.8%, gross profit increased 75.3%, and gross margins grew to 40.7% compared to 31.1% a year ago. We were pleased with the progress that we made on rental rates during the quarter. Rental rates increased 6.4% from a year ago and 4.2% from the first quarter. Our new equipment sales were particularly strong in the second quarter as strong demand for cranes and earthmoving machines resulted in a 100.0%, or $29.0 million, revenue increase from a year ago. As a result of significant revenue growth in all of our operating segments, gross profit increased 47.6%, EBITDA grew 89.1% and we achieved bottom line profitability with EPS improving $0.28 from a year ago.” “Due to the timing of certain crane and earthmoving deliveries, we expected the second quarter to potentially be our strongest sales period of the year,” Engquist commented. “While we expect continued sequential and year over year improvement in our rental business through the third quarter, we are more cautious and have less visibility on the distribution side of our business.” FINANCIAL DISCUSSION FOR SECOND QUARTER 2011:Revenue Total revenues increased 40.7% to $184.3 million from $131.0 million in the second quarter of 2010. Equipment rental revenues increased 33.8% to $55.8 million compared with $41.7 million in the second quarter of 2010. New equipment sales increased 100.0% to $57.9 million from $29.0 million in the second quarter of 2010. Used equipment sales increased 28.6% to $23.1 million compared to $17.9 million in the second quarter of 2010. Parts sales increased 9.5% to $24.9 million from $22.8 million in the second quarter of 2010. Service revenues increased 5.4% to $13.2 million compared to $12.6 million a year ago. Gross Profit Gross profit increased 47.6% to $47.8 million from $32.4 million in the second quarter of 2010. Gross margin was 25.9% for the quarter ended June 30, 2011, compared to gross margin of 24.7% for the quarter ended June 30, 2010. On a segment basis, second quarter of 2011 gross margin on rentals was 40.7% compared to 31.1% in the second quarter of 2010 due to higher average rental rates on new contracts in the period and improved fleet utilization. On average, rental rates increased 6.4% as compared to the second quarter of 2010. Time utilization (based on units) was 67.1% in the second quarter of 2011 and 54.9% a year ago. Gross margin on new equipment sales was 11.7% as compared to 9.9% in the second quarter a year ago driven primarily by improved crane margins. Gross margin on used equipment sales was 21.7% compared to 22.7% a year ago which was lower due to the mix of used equipment sold. Gross margin on parts sales increased to 26.8% from 26.1%. Gross margin on service revenues decreased to 61.2% from 66.2% in the prior year due primarily to revenue mix. Rental Fleet At the end of the second quarter of 2011, the original acquisition cost of the Company's rental fleet was $724.9 million, an increase of $67.2 million from $657.7 million at the end of the second quarter of 2010 and an increase of $39.8 million from $685.1 million at the end of 2010. Dollar utilization was 31.0% compared to 25.3% for the second quarter of 2010. Dollar returns increased reflecting higher year-over-year average rental rates and improved time utilization. Selling, General and Administrative Expenses SG&A expenses for the second quarter of 2011 were $37.5 million compared with $36.8 million last year, a $0.7 million, or 2.1%, increase. For the second quarter of 2011, SG&A expenses as a percentage of total revenues were 20.4% as compared to 28.1% a year ago. Income (Loss) from Operations Income from operations for the second quarter of 2011 was $10.3 million, or 5.6% of revenues, compared with loss from operations of $4.3 million, or 3.2% of revenues, a year ago. Interest Expense Interest expense for the second quarter of 2011 and 2010 was $7.2 million in each period. Net Income (Loss) Net income was $2.7 million, or $0.08 per diluted share, compared to net loss of $7.1 million, or ($0.20) per diluted share, a year ago. The effective income tax rate was 18.7% compared to 37.5% a year ago. EBITDA EBITDA for the second quarter of 2011 increased 89.1% to $35.2 million compared to $18.6 million a year ago. EBITDA, as a percentage of revenues, was 19.1% compared to 14.2% a year ago. Non-GAAP Financial Measures This press release contains certain Non-GAAP measures (EBITDA). Please refer to our Current Report on Form 8-K for a description of our use of these measures. EBITDA, as calculated by the Company, is 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 second quarter results today, August 4, 2011, at 10:00 a.m. (Eastern Time). To listen to the call, participants should dial 719-325-2190 approximately 10 minutes prior to the start of the call. A telephonic replay will be available after 1:00 p.m. (Eastern Time) on August 4, 2011, and will continue through August 13, 2011, by dialing 719-457-0820 and entering confirmation code 3639996. The live broadcast of the Company's quarterly conference call will be available online at www.he-equipment.com or www.earnings.com on August 4, 2011, 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 65 full-service facilities throughout the West Coast, Intermountain, Southwest, Gulf Coast, Mid-Atlantic and Southeast regions of the United States. 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 about our beliefs and expectations and 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 that 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 activity in the markets where we operate in North America as well as the impact of the recent macroeconomic downturn and current conditions of the global credit markets and its effect on construction activity and the economy in general; (2) relationships with new 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 integrate any businesses we acquire; (7) competitive pressures; (8) compliance with laws and regulations, including those relating to environmental 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 OPERATIONS (unaudited)(Amounts in thousands, except per share amounts)       Three Months Ended     Six Months EndedJune 30,June 30,2011     20102011     2010   Revenues: Equipment rentals $ 55,772 $ 41,675 $ 104,250 $ 78,128 New equipment sales 57,913 28,962 87,086 56,255 Used equipment sales 23,066 17,931 38,483 31,362 Parts sales 24,942 22,782 46,519 42,414 Service revenues 13,244 12,571 25,881 24,054 Other   9,398     7,085     17,024     13,479     Total revenues 184,335 131,006 319,243 245,692   Cost of revenues: Rental depreciation 21,507 19,353 42,070 38,632 Rental expense 11,569 9,372 22,308 18,619 New equipment sales 51,118 26,103 77,148 51,013 Used equipment sales 18,058 13,862 29,620 24,607 Parts sales 18,261 16,847 34,101 31,094 Service revenues 5,137 4,252 10,048 8,628 Other   10,890     8,838     21,037     16,835     Total cost of revenues   136,540     98,627     236,332     189,428     Gross profit 47,795 32,379 82,911 56,264   Selling, general, and administrative expenses 37,546 36,765 75,639 72,639 Gain on sales of property and equipment   52     135     149     199     Income (loss) from operations 10,301 (4,251 ) 7,421 (16,176 )   Interest expense (7,178 ) (7,203 ) (14,385 ) (14,494 ) Other income, net   185     106     508     156   Income (loss) before provision (benefit) for income taxes 3,308 (11,348 ) (6,456 ) (30,514 )   Provision (benefit) for income taxes   619     (4,255 )   (2,672 )   (11,343 )   Net income (loss) $ 2,689   $ (7,093 ) $ (3,784 ) $ (19,171 )   NET INCOME (LOSS) PER SHARE Basic – Net income (loss) per share $ 0.08   $ (0.20 ) $ (0.11 ) $ (0.55 ) Basic – Weighted average number of common shares outstanding   34,725     34,642     34,713     34,634     Diluted – Net income (loss) per share $ 0.08   $ (0.20 ) $ (0.11 ) $ (0.55 ) Diluted – Weighted average number of common shares outstanding   34,906     34,642     34,713     34,634     H&E EQUIPMENT SERVICES, INC.SELECTED BALANCE SHEET DATA (unaudited)(Amounts in thousands)       June 30,     December 31,20112010   Cash $ 5,686 $ 29,149 Rental equipment, net 445,502 426,637 Total assets 731,384 734,421   Total debt(1) 267,905 252,754 Total liabilities 480,719 480,171 Stockholders' equity 250,665 254,250 Total liabilities and stockholders' equity $ 731,384 $ 734,421   (1) Total debt consists of the aggregate amounts outstanding on the senior secured credit facility, senior unsecured notes and capital lease obligations.     H&E EQUIPMENT SERVICES, INC.UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES(Amounts in thousands)       Three Months EndedSix Months EndedJune 30,June 30,2011     201020112010   Net income (loss) $ 2,689 $ (7,093 ) $ (3,784 ) $ (19,171 ) Interest expense 7,178 7,203 14,385 14,494 Provision (benefit) for income taxes 619 (4,255 ) (2,672 ) (11,343 ) Depreciation 24,622 22,628 48,317 45,339 Amortization of intangibles   123   147     247     295     EBITDA $ 35,231 $ 18,630 $ 56,493 $ 29,614 H&E Equipment Services, Inc.Leslie S. Magee, 225-298-5261Chief Financial Officerlmagee@he-equipment.comorCorporate Communications, Inc. (CCI)Kevin S. Inda, 407-566-1180kevin.inda@cci-ir.com