H&E Equipment Services, Inc. (NASDAQ: HEES) today announced
results for the fourth quarter and year ended December 31,
2016.
FOURTH QUARTER 2016
SUMMARY
- Revenues decreased 10.6% to $244.3
million versus $273.2 million a year ago.
- Net income was $12.4 million in the
fourth quarter compared to net income of $12.0 million a year
ago.
- EBITDA was $78.9 million in the fourth
quarter compared to EBITDA of $81.3 million a year ago, yielding a
margin of 32.3% of revenues compared to 29.8% a year ago.
- Rental revenues were $115.2 million in
the fourth quarter compared to $115.0 million a year ago.
- New equipment sales decreased 28.5% to
$44.9 million in the fourth quarter compared to $62.7 million a
year ago.
- Used equipment sales decreased 29.2% to
$24.9 million in the fourth quarter compared to $35.2 million a
year ago.
- Gross margin was 34.6% compared to
33.0% a year ago.
- Rental gross margins were 47.7% in the
fourth quarter of 2016 and 47.5% a year ago.
- Average time utilization (based on
original equipment cost) was 70.3% compared to 72.0% a year ago.
Average time utilization (based on units available for rent) was
67.6% compared to 69.3% last year.
- Average rental rates decreased 1.1%
compared to a year ago.
- Dollar utilization was 34.3% in the
fourth quarter compared to 35.5% a year ago.
- Average rental fleet age at December
31, 2016, was 33.0 months compared to an industry average age of
43.7 months.
John Engquist, H&E Equipment Services’ chief executive
officer, said, “2016 was a solid year for our company and industry
as the strength in the non-residential construction markets
continued into the fourth quarter. Demand for rental equipment was
healthy, with both revenues and margins up slightly from a year
ago. Ongoing weakness in crane demand continued to negatively
affect our distribution business, with new and used crane sales
down $23.0 million on a combined basis.”
Engquist concluded, “We are extremely encouraged about the
trends and opportunities for our business in 2017 and beyond.
Customer sentiment was positive prior to the election but it has
improved further post-election according to many metrics. While
substantial uncertainty exists regarding the new administration’s
proposed infrastructure stimulus plan in terms of total funding,
project mix and timing, a material spend could fuel solid industry
growth and extend the cycle for years. While it is unlikely the
industry would benefit from any infrastructure spending until 2018
at the earliest, we do believe the new administration’s
pro-business position could accelerate construction spending in
2017. The energy markets are also improving as shale drillers in
the Permian and Eagle Ford Basins are ramping up exploration
activity as they expect to generate positive returns at current oil
prices. For the first time since 2014, we opportunistically moved
fleet back into select energy focused markets during the fourth
quarter.”
FINANCIAL DISCUSSION FOR FOURTH QUARTER
2016:
Revenue
Total revenues decreased 10.6% to $244.3 million in the fourth
quarter of 2016 from $273.2 million in the fourth quarter of 2015.
Equipment rental revenues were $115.2 million compared with $115.0
million in the fourth quarter of 2015. New equipment sales
decreased 28.5% to $44.9 million from $62.7 million a year
ago. Used equipment sales decreased 29.2% to $24.9 million compared
to $35.2 million a year ago. Parts sales increased 1.7% to $27.2
million from $26.7 million in the fourth quarter of 2015. Service
revenues decreased 7.0% to $15.4 million compared with
$16.5 million a year ago.
Gross Profit
Gross profit decreased 6.1% to $84.6 million from $90.2 million
in the fourth quarter of 2015. Gross margin was 34.6% for the
quarter ended December 31, 2016, as compared to 33.0% for the
quarter ended December 31, 2015. On a segment basis, gross margin
on rentals was 47.7% in the fourth quarter of 2016 and 47.5% in the
fourth quarter of 2015. On average, rental rates were 1.1% lower
than rates in the fourth quarter of 2015. Time utilization (based
on original equipment cost) was 70.3% in the fourth quarter of 2016
compared to 72.0% a year ago. Time utilization (based on units
available for rent) was 67.6% in the fourth quarter of 2016
compared to 69.3% a year ago.
Gross margins on new equipment sales decreased to 9.9% compared
to 10.4% in the fourth quarter a year ago. Gross margins on used
equipment sales increased to 31.9% compared to 30.2% a year ago.
Gross margins on parts sales increased to 27.2% in the fourth
quarter of 2016 compared to 26.7% in the fourth quarter of 2015.
Gross margins on service revenues increased to 66.8% for the fourth
quarter of 2016 compared to 65.6% in the fourth quarter of
2015.
Rental Fleet
At the end of the fourth quarter of 2016, the original
acquisition cost of the Company’s rental fleet was $1.3 billion, an
increase of $47.4 million from the end of the fourth quarter of
2015. Dollar utilization was 34.3% compared to 35.5% for the fourth
quarter of 2015.
Selling, General and Administrative
Expenses
SG&A expenses for the fourth quarter of 2016 were $55.7
million compared with $57.6 million the prior year, a $1.9 million,
or 3.3%, decrease. SG&A expenses in the fourth quarter of 2016
increased as a percentage of total revenues to 22.8% compared to
21.1% the prior year. Expenses related to new branch expansions
increased $0.9 million compared to a year ago.
Income from Operations
Income from operations for the fourth quarter of 2016 was $29.9
million, or 12.2% of revenues, compared to $33.5 million, or 12.3%
of revenues, a year ago.
Interest Expense
Interest expense for the fourth quarter of 2016 was $13.4
million, the same as a year ago.
Net Income
Net income was $12.4 million, or $0.35 per diluted share, in the
fourth quarter of 2016 compared to net income of $12.0 million, or
$0.34 per diluted share, in the fourth quarter of 2015. The
effective income tax rate decreased to 26.3% in the fourth quarter
compared to 41.6% a year ago due to decreases in the Company’s
apportionment factors and state statutory income tax rates.
EBITDA
EBITDA for the fourth quarter of 2016 was $78.9 million compared
to $81.3 million in the fourth quarter of 2015. EBITDA as a
percentage of revenues was 32.3% compared with 29.8% in the fourth
quarter of 2015.
FINANCIAL DISCUSSION FOR THE YEAR ENDED
DECEMBER 31, 2016:
Revenue
Total revenues decreased 5.9%, or $61.7 million, to $978.1
million from $1.04 billion in 2015. Equipment rental revenues
increased 0.5% to $445.2 million compared with $443.0 million in
2015. New equipment sales decreased 17.4% to $196.7 million from
$238.2 million in 2015. Used equipment sales decreased 18.1% to
$96.9 million from $118.3 million in 2015. Parts sales decreased
1.8% to $109.1 million from $111.1 million in 2015. Services
revenues increased 1.1% to $64.7 million compared with $64.0
million a year ago.
Gross Profit
Gross profit decreased 2.9% to $335.6 million from $345.7
million in 2015 on lower revenues. Gross margin was 34.3% for 2016
compared to 33.2% for 2015.
On a segment basis, gross margin on rentals increased to 47.4%
in 2016 from 47.2% in 2015. On average, 2016 rental rates decreased
0.6% compared to 2015. In 2016, time utilization (based on original
equipment cost) was 69.7% compared to 70.9% the prior year. Time
utilization (based on units available for rent) was 67.0% in 2016
compared to 67.9% the prior year.
Gross margin on new equipment sales was 10.7%, down from 10.9%
in 2015. Gross margin on used equipment sales decreased to 31.1%
from 31.3%. Gross margin on parts sales increased to 27.7% from
27.3%. Gross margin on service revenues was 66.2% compared to 66.1%
in 2015.
Selling, General and Administrative
Expenses
SG&A expenses for 2016 were $228.1 million compared with
$220.2 million in 2015, an increase of $7.9 million, or 3.6%. The
net increase in SG&A expenses was primarily a result of
increased salaries, wages, payroll taxes, related employee costs,
facility costs, professional and service fees, property taxes and
depreciation expenses. Of the $7.9 million increase, $6.3 million
was attributable to new branch expenses compared to the prior year.
In 2016, SG&A expenses as a percentage of total revenues were
23.3% compared to 21.2% in 2015.
Income from Operations
Income from operations in 2016 was $110.8 million, or 11.3% of
revenues, compared to $128.2 million, or 12.3% of revenues, in
2015.
Interest Expense
Interest expense in 2016 was $53.6 million compared to $54.0
million in 2015.
Net Income
Net income was $37.2 million, or $1.05 per diluted share,
compared to $44.3 million, or $1.25 per diluted share, in 2015. The
effective income tax rate decreased to 37.0% in 2016 compared to
41.5% in 2015 due to decreases in the Company’s apportionment
factors and state statutory income tax rates.
EBITDA
EBITDA for 2016 decreased 4.4% or $13.8 million to $302.3
million from $316.2 million in 2015. EBITDA as a percentage of
revenues increased to 30.9% in 2016 compared to 30.4% in 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
fourth quarter results today, February 23, 2017, at 10:00 a.m.
(Eastern Time). To listen to the call, participants should dial
913-981-5519 approximately 10 minutes prior to the start of
the call. A telephonic replay will become available after 1:00 p.m.
(Eastern Time) on February 23, 2017, and will continue through
March 5, 2017, by dialing 719-457-0820 and entering the
confirmation code 1349060.
The live broadcast of the Company’s quarterly conference call
will be available online at www.he-equipment.com on February 23,
2017, 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 78 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”, “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) security breaches and other disruptions in our
information technology systems; (11) adverse weather events or
natural disasters; (12) compliance with laws and regulations,
including those relating to environmental matters and corporate
governance matters; and (13) 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,
2016
2015
2016
2015
Revenues: Equipment rentals $ 115,204 $ 114,952 $ 445,227 $
443,024 New equipment sales 44,852 62,707 196,688 238,172 Used
equipment sales 24,937 35,225 96,910 118,338 Parts sales 27,189
26,733 109,147 111,133 Service revenues 15,351 16,502 64,673 63,954
Other 16,813 17,089 65,492 65,210 Total
revenues 244,346 273,208 978,137 1,039,831 Cost of revenues:
Rental depreciation 41,715 40,968 162,415 162,089 Rental expense
18,532 19,428 71,694 71,950 New equipment sales 40,404 56,167
175,556 212,235 Used equipment sales 16,987 24,577 66,738 81,338
Parts sales 19,782 19,606 78,966 80,830 Service revenues 5,103
5,676 21,839 21,693 Other 17,189 16,635 65,318
63,964 Total cost of revenues 159,712 183,057
642,526 694,099 Gross profit 84,634 90,151
335,611 345,732
Selling, general, and administrative
expenses
55,744 57,642 228,129 220,226
Gain on sales of property and equipment,
net
984 968 3,285 2,737 Income from
operations 29,874 33,477 110,767 128,243 Interest expense
(13,375 ) (13,355 ) (53,604 ) (54,030 ) Other income, net
362 380 1,867 1,463
Income before provision for income
taxes
16,861 20,502 59,030 75,676 Provision for income taxes
4,431 8,535 21,858 31,371 Net
income $ 12,430 $ 11,967 $ 37,172 $ 44,305 NET INCOME PER
SHARE Basic – Net income per share $
0.35
$
0.34 $ 1.05 $ 1.26
Basic – Weighted average number of common
shares outstanding
35,451 35,314 35,393 35,272
Diluted – Net income per share $
0.35
$
0.34
$
1.05 $ 1.25
Diluted – Weighted average number of
common shares outstanding
35,552 35,421 35,480 35,343 Dividends
declared per common share $ 0.275 $ 0.275 $ 1.10 $ 1.05
H&E EQUIPMENT SERVICES,
INC.
SELECTED BALANCE SHEET DATA (unaudited) (Amounts in
thousands)
December 31,
December 31,
2016(1)
2015(1)
Cash $ 7,683 $ 7,159 Rental equipment, net 893,816 893,393
Total assets 1,241,611 1,299,511
Total debt (2)
794,346 816,764 Total liabilities 1,098,846 1,156,923 Stockholders’
equity 142,765 142,588 Total liabilities and stockholders’ equity $
1,241,611 $ 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
Twelve Months Ended
December 31,
December 31,
2016
2015
2016
2015
Net income $ 12,430 $ 11,967 $ 37,172 $ 44,305 Interest
expense 13,375 13,355 53,604 54,030 Provision for income taxes
4,431 8,535 21,858 31,371 Depreciation 48,676 47,441
189,697 186,457 EBITDA $ 78,912 $ 81,298 $
302,331 $ 316,163
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version on businesswire.com: http://www.businesswire.com/news/home/20170223005455/en/
H&E Equipment Services, Inc.Leslie S. Magee,
225-298-5261Chief Financial Officerlmagee@he-equipment.comorKevin
S. Inda, 225-298-5318Vice President of Investor
Relationskinda@he-equipment.com
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