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Press release from Business Wire

H&E Equipment Services Reports Third Quarter 2012 Results

Thursday, November 01, 2012

H&E Equipment Services Reports Third Quarter 2012 Results07:00 EDT Thursday, November 01, 2012 BATON ROUGE, La. (Business Wire) -- H&E Equipment Services, Inc. (NASDAQ: HEES) today announced results for the third quarter ended September 30, 2012. In the third quarter of 2012, the Company completed its successful offering of new 10-year 7% senior unsecured notes, the repurchase and redemption of its then-outstanding 8 3/8% senior unsecured notes and the payment of a dividend to shareholders of approximately $246 million. The Company's operating results for this quarter include a $10.2 million non-recurring item associated with the premium paid to repurchase and redeem the old notes and the write-off of unamortized deferred transaction costs associated therewith. THIRD QUARTER 2012 HIGHLIGHTS: Revenues increased 11.0% to $204.5 million versus $184.3 million a year ago. Net income was $3.7 million in the third quarter compared to $4.8 million a year ago. Adjusted Net Income increased $6.1 million to $10.9 million compared to net income of $4.8 million a year ago. Adjusted EBITDA increased 38.3% to $55.9 million from $40.4 million, yielding a margin of 27.3% compared to 21.9% of revenues a year ago. Rental revenues increased 27.2%, or $16.6 million, to $77.8 million due to improved rates, a larger fleet compared to a year ago and strong demand. New equipment sales increased 5.3%, or $2.5 million, to $49.0 million, largely due to higher crane sales. Gross margin was 32.7% as compared to 29.2% a year ago. Rental gross margins increased to 48.9% compared to 44.0% a year ago. Average time utilization (based on original equipment cost) increased to 72.9% compared to 71.8% a year ago and 73.5% in the second quarter of 2012. Average time utilization (based on units available for rent) was 68.9% compared to 68.9% last year and 68.7% last quarter. Average rental rates increased 10.2% compared to a year ago and improved 2.9% compared to the second quarter of this year. Dollar utilization was 36.7% as compared to 33.7% a year ago. Average rental fleet age at September 30, 2012 was 38.6 months, down from 40.4 months at the end of the last quarter and significantly younger than the industry average age of 48 months. Successful notes offering of $530 million of new 10-year 7% senior unsecured notes. Proceeds were used primarily to repurchase or redeem our then-outstanding 8 3/8% senior unsecured notes and fund a dividend to shareholders of approximately $246 million. “Our rental business remained very strong in the third quarter and we believe this is indicative of a secular shift occurring in the market that will continue into 2013,” said John Engquist, H&E Equipment Services' president and chief executive officer. “As a result of increasing demand across all our end user markets, we invested more than $60 million in our fleet, which marked the second consecutive quarter of record levels of fleet investment in our company. Our fleet was approximately 18% larger at the end of the third quarter than at the end of 2011. Despite our record fleet investment this year, utilization is strong and rental rate gains are robust. The distribution side of our business continues to perform solidly as well, with new equipment sales up 5.3% from a year ago. As we move into year end, there is the possibility we could experience increased demand as our customers may look to take advantage of tax incentives before the end of the year.” Engquist concluded, “Based on the current trends in our business, our outlook for the fourth quarter and 2013 remains positive. All segments of our business are performing well and the industrial segments our business serves remain strong. We are also experiencing solid improvement in our markets that were hit the hardest during the recession. With our significant fleet investment and integrated, full-service strategy, we are well positioned to benefit from improvements in market conditions. Lastly, we are pleased to have completed our successful notes offering which allowed us to pay a $246 million dividend to our shareholders, extend our long-term debt maturity profile until 2022 and enhance our liquidity under the senior credit facility for future investment in our business.” FINANCIAL DISCUSSION FOR THIRD QUARTER 2012:Revenue Total revenues increased 11.0% to $204.5 million from $184.3 million in the third quarter of 2011. Equipment rental revenues increased 27.2% to $77.8 million compared with $61.2 million in the third quarter of 2011. New equipment sales increased 5.3% to $49.0 million from $46.5 million in the third quarter of 2011. Used equipment sales decreased 8.0% to $25.0 million compared to $27.2 million in the third quarter of 2011. Parts sales increased 5.7% to $26.1 million from $24.6 million in the third quarter of 2011. Service revenues increased 1.7% to $14.4 million compared to $14.2 million a year ago. Gross Profit Gross profit increased 24.5% to $66.9 million from $53.7 million in the third quarter of 2011. Gross margin was 32.7% for the quarter ended September 30, 2012, compared to gross margin of 29.2% for the quarter ended September 30, 2011. On a segment basis, third quarter 2012 gross margin on rentals was 48.9% in this quarter compared to 44.0% in the third quarter of 2011 due to higher average rental rates on new contracts in the period, improved fleet utilization (based on original equipment cost) and lower rental expenses as a percentage of equipment rental revenues. On average, rental rates increased 10.2% as compared to the third quarter of 2011. Time utilization (based on original equipment cost) was 72.9% in the third quarter of 2012 and 71.8% a year ago. Gross margin on new equipment sales was 11.5% compared to 11.6% in the third quarter a year ago. Gross margin on used equipment sales was 26.4% compared to 23.4% a year ago. Gross margin on parts sales was 26.7% in this quarter and a year ago. Gross margin on service revenues was 61.1% compared to 61.6% in the prior year. Rental Fleet At the end of the third quarter of 2012, the original acquisition cost of the Company's rental fleet was $871.0 million, an increase of $144.9 million from $726.1 million at the end of the third quarter of 2011 and an increase of $134.4 million from $736.6 million at the end of 2011. Dollar utilization was 36.7% compared to 33.7% for the third quarter of 2011. 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 third quarter of 2012 were $42.4 million compared with $39.0 million last year, a $3.4 million, or 8.6%, increase. The net increase in SG&A expenses is largely a result of increased commission and incentive pay that resulted from higher rental and sales revenues. For the third quarter of 2012, SG&A expenses as a percentage of total revenues were 20.7% compared to 21.2% a year ago. Income from Operations Income from operations for the third quarter of 2012 was $25.0 million, or 12.2% of revenues, compared with $15.1 million, or 8.2% of revenues, a year ago. Interest Expense Interest expense for the third quarter of 2012 was $9.8 million compared to $7.2 million in the third quarter of 2011. Net Income and Adjusted Net Income Net income was 3.7 million, or $0.11 per diluted share, compared to net income of $4.8 million, or $0.14 per diluted share, a year ago. Adjusted Net Income was $10.9 million, or $0.31 per diluted share. The effective income tax rate was 29.7% compared to 39.1% a year ago. EBITDA and Adjusted EBITDA EBITDA for the third quarter of 2012 increased 13.1% to $45.7 million compared to $40.4 million a year ago. EBITDA, as a percentage of revenues, was 22.4% compared to 21.9% a year ago. Adjusted EBITDA increased 38.3% to $55.9 million from $40.4 million a year ago. Adjusted EBITDA as a percentage of total revenues increased to 27.3% compared with 21.9% in the third quarter of 2011. 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. Adjusted Net Income provides useful information concerning future profitability. 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, 2012, at 10:00 a.m. (Eastern Time). To listen to the call, participants should dial 719-325-2286 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, 2012, and will continue through November 14, 2012, by dialing 719-457-0820 and entering confirmation code 4757181. The live broadcast of the Company's quarterly conference call will be available online at www.he-equipment.com or www.earnings.com on November 1, 2012, 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 66 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 EndedSeptember 30,September 30,2012     20112012     2011   Revenues: Equipment rentals $ 77,808 $ 61,190 $ 207,941 $ 165,440 New equipment sales 49,009 46,543 154,710 133,629 Used equipment sales 24,990 27,172 75,100 65,655 Parts sales 26,058 24,647 74,161 71,166 Service revenues 14,436 14,191 41,615 40,072 Other   12,208     10,546     33,671     27,570   Total revenues 204,509 184,289 587,198 503,532   Cost of revenues: Rental depreciation 27,150 22,076 74,727 64,146 Rental expense 12,579 12,176 36,375 34,484 New equipment sales 43,367 41,123 136,945 118,271 Used equipment sales 18,399 20,824 53,426 50,444 Parts sales 19,092 18,073 53,826 52,174 Service revenues 5,615 5,451 15,907 15,499 Other   11,384     10,825     32,183     31,862   Total cost of revenues   137,586     130,548     403,389     366,880     Gross profit 66,923 53,741 183,809 136,652   Selling, general, and administrative expenses 42,402 39,042 124,504 114,681 Gain on sales of property and equipment, net   514     372     1,478     521     Income from operations 25,035 15,071 60,783 22,492   Loss on early extinguishment of debt (10,180 ) - (10,180 ) - Interest expense (9,825 ) (7,222 ) (23,668 ) (21,607 ) Other income, net   243     118     751     626     Income before provision for income taxes 5,273 7,967 27,686 1,511   Provision for income taxes   1,564     3,119     9,554     447     Net income $ 3,709   $ 4,848   $ 18,132   $ 1,064     NET INCOME PER SHARE Basic – Net income per share $ 0.11   $ 0.14   $ 0.52   $ 0.03   Basic – Weighted average number of common shares outstanding   34,958     34,804     34,867     34,743     Diluted – Net income per share $ 0.11   $ 0.14   $ 0.52   $ 0.03   Diluted – Weighted average number of common shares outstanding   34,974     34,860     34,963     34,884       H&E EQUIPMENT SERVICES, INC.SELECTED BALANCE SHEET DATA (unaudited)(Amounts in thousands)       September 30,     December 31,20122011   Cash $ 3,250 $ 24,215 Rental equipment, net 571,936 450,877 Total assets 940,226 753,305 Total debt (1) 663,212 268,660 Total liabilities 902,933 489,098 Stockholders' equity 37,293 264,207 Total liabilities and stockholders' equity $ 940,226 $ 753,305   (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 EndedNine Months EndedSeptember 30,September 30,2012     201120122011   Net income $ 3,709 $ 4,848 $ 18,132 $ 1,064 Interest expense 9,825 7,222 23,668 21,607 Provision for income taxes 1,564 3,119 9,554 447 Depreciation 30,609 25,139 84,724 73,456 Amortization of intangibles   16   90   66   337   EBITDA $ 45,723 $ 40,418 $ 136,144 $ 96,911   Loss on early extinguishment of debt   10,180   -   10,180   -   Adjusted EBITDA $ 55,903 $ 40,418 $ 146,324 $ 96,911     H&E EQUIPMENT SERVICES, INC.UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES(Amounts in thousands, except per share amounts)       Three Months Ended September 30, 2012As 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, 2012As ReportedAdjustment (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. 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