H&E Equipment Services, Inc. (NASDAQ: HEES) today announced
results for the first quarter ended March 31, 2017.
FIRST QUARTER 2017
SUMMARY
- Revenues decreased 8.2% to $226.8
million versus $247.0 million a year ago.
- Net income was $5.4 million in the
first quarter compared to net income of $5.6 million a year
ago.
- EBITDA was $68.8 million in the first
quarter compared to EBITDA of $69.1 million a year ago, yielding a
higher margin of 30.3% of revenues compared to 28.0% a year
ago.
- Rental revenues increased 4.4% to
$107.3 million in the first quarter compared to $102.8 million a
year ago.
- New equipment sales decreased 40.1% to
$34.3 million in the first quarter compared to $57.2 million a year
ago.
- Used equipment sales increased 4.7% to
$28.9 million in the first quarter compared to $27.6 million a year
ago.
- Gross margin was 34.2% compared to
32.9% a year ago.
- Rental gross margins were 44.8% in the
first quarter of 2017 compared to 45.3% a year ago.
- Average time utilization (based on
original equipment cost) was 68.5% compared to 66.3% a year ago.
Average time utilization (based on units available for rent) was
66.0% compared to 64.6% last year.
- Average rental rates decreased 0.5%
compared to a year ago.
- Dollar utilization was 32.4% in the
first quarter compared to 32.2% a year ago.
- Average rental fleet age at March 31,
2017, was 34.1 months compared to an industry average age of 41.9
months.
John Engquist, H&E Equipment Services’ chief executive
officer, said, “The first quarter results along with the current
trends in our business have reinforced our expectations for 2017.
Our rental business performed well in the first quarter, with
revenues increasing 4.4% from a year ago, margins holding solid at
44.8% and rates down only 0.5% year-over-year. As we anticipated,
the ongoing challenges in the new equipment component of our
distribution business persisted, due primarily to weak crane
demand. We also expect our used equipment sales to trend down
during the balance of this year as we intentionally sell less of
our rental fleet as a result of higher anticipated rental demand in
our non-residential construction markets.”
Engquist concluded, “We believe the opportunities that exist for
our business in 2017 are encouraging as demand for rental equipment
is increasing throughout the regions we serve. The environment in
our Gulf Coast region remains positive as a result of several
factors. Texas, our largest market, continues to experience a very
healthy economy that is driving an array of non-residential
projects. The energy markets are also improving as a result of
increased shale drilling activity. In both Texas and Louisiana, a
solid lineup of large industrial projects are either underway, at
breaking ground stage, or scheduled for construction over the next
few years.”
FINANCIAL DISCUSSION FOR FIRST QUARTER
2017:
Revenue
Total revenues decreased 8.2% to $226.8 million in the first
quarter of 2017 from $247.0 million in the first quarter of 2016.
Equipment rental revenues increased 4.4% to $107.3 million compared
with $102.8 million in the first quarter of 2016. New equipment
sales decreased 40.1% to $34.3 million from $57.2 million a
year ago. Used equipment sales increased 4.7% to $28.9 million
compared to $27.6 million a year ago. Parts sales decreased 9.4% to
$25.3 million from $28.0 million in the first quarter of 2016.
Service revenues decreased 7.5% to $15.1 million compared with
$16.3 million a year ago.
Gross Profit
Gross profit decreased 4.3% to $77.7 million from $81.1 million
in the first quarter of 2016. Gross margin was 34.2% for the
quarter ended March 31, 2017, as compared to 32.9% for the quarter
ended March 31, 2016. On a segment basis, gross margin on rentals
was 44.8% in the first quarter of 2017 compared to 45.3% in the
first quarter of 2016. On average, rental rates were 0.5% lower
than rates in the first quarter of 2016. Time utilization (based on
original equipment cost) was 68.5% in the first quarter of 2017
compared to 66.3% a year ago. Time utilization (based on units
available for rent) was 66.0% in the first quarter of 2017 compared
to 64.6% a year ago.
Gross margins on new equipment sales decreased to 11.4% in the
first quarter compared to 11.7% a year ago. Gross margins on used
equipment sales decreased to 31.2% compared to 32.9% a year ago.
Gross margins on parts sales increased to 28.1% in the first
quarter of 2017 compared to 27.6% in the first quarter of 2016.
Gross margins on service revenues decreased to 66.9% for the first
quarter of 2017 compared to 67.5% in the first quarter of 2016.
Rental Fleet
At the end of the first quarter of 2017, the original
acquisition cost of the Company’s rental fleet was $1.3 billion, an
increase of $58.0 million from the end of the first quarter of
2016. Dollar utilization was 32.4% compared to 32.2% for the first
quarter of 2016.
Selling, General and Administrative
Expenses
SG&A expenses for the first quarter of 2017 were $57.3
million compared with $59.4 million the prior year, a $2.1 million,
or 3.5%, decrease. SG&A expenses in the first quarter of 2017
increased as a percentage of total revenues to 25.3% compared to
24.0% the prior year. Expenses related to new branch expansions
increased $0.5 million compared to a year ago.
Income from Operations
Income from operations for the first quarter of 2017 was $21.3
million, or 9.4% of revenues, compared to $22.4 million, or 9.1% of
revenues, a year ago.
Interest Expense
Interest expense for the first quarter of 2017 was $13.2 million
compared to $13.4 million a year ago.
Net Income
Net income was $5.4 million, or $0.15 per diluted share, in the
first quarter of 2017 compared to net income of $5.6 million, or
$0.16 per diluted share, in the first quarter of 2016. The
effective income tax rate decreased to 36.8% in the first quarter
compared to 41.0% a year ago due to an increase in favorable
permanent items and lower state income taxes.
EBITDA
EBITDA for the first quarter of 2017 was $68.8 million compared
to $69.1 million in the first quarter of 2016. EBITDA as a
percentage of revenues was 30.3% compared with 28.0% in the first
quarter of 2016.
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
first quarter results today, April 27, 2017, at 10:00 a.m. (Eastern
Time). To listen to the call, participants should dial 719-325-2291
approximately 10 minutes prior to the start of the call. A
telephonic replay will become available after 1:00 p.m. (Eastern
Time) on April 27, 2017, and will continue through May 6, 2017, by
dialing 719-457-0820 and entering the confirmation code
4897432.
The live broadcast of the Company’s quarterly conference call
will be available online at www.he-equipment.com on April 27, 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
March 31,
2017
2016
Revenues: Equipment rentals $ 107,317 $ 102,838 New
equipment sales 34,274 57,179 Used equipment sales 28,863 27,574
Parts sales 25,331 27,969 Service revenues 15,080 16,301 Other
15,963 15,149 Total revenues 226,828 247,010
Cost of revenues: Rental depreciation 40,903 39,497 Rental expense
18,374 16,763 New equipment sales 30,381 50,474 Used equipment
sales 19,861 18,512 Parts sales 18,213 20,263 Service revenues
4,999 5,301 Other 16,425 15,056 Total cost of
revenues 149,156 165,866 Gross profit 77,672
81,144
Selling, general, and administrative
expenses
57,318 59,374
Gain on sales of property and equipment,
net
971 662 Income from operations 21,325 22,432
Interest expense (13,232 ) (13,407 ) Other income, net
437 430
Income before provision for income
taxes
8,530 9,455 Provision for income taxes 3,140
3,881 Net income $ 5,390 $ 5,574 NET INCOME PER SHARE
Basic – Net income per share $ 0.15 $ 0.16
Basic – Weighted average number of common
shares outstanding
35,465 35,341 Diluted – Net income per share $
0.15 $ 0.16
Diluted – Weighted average number of
common shares outstanding
35,621 35,398 Dividends declared per common share $
0.275 $ 0.275
H&E EQUIPMENT SERVICES,
INC.
SELECTED BALANCE SHEET DATA
(unaudited)
(Amounts in thousands)
March 31,
December 31,
2017
2016
Cash $ 5,040 $ 7,683 Rental equipment, net 877,477 893,816
Total assets 1,262,686 1,241,611 Total debt (1) 784,011 794,346
Total liabilities 1,122,263 1,098,846 Stockholders’ equity 140,423
142,765 Total liabilities and stockholders’ equity $ 1,262,686 $
1,241,611
(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
March 31,
2017
2016
Net income $ 5,390 $ 5,574 Interest expense 13,232 13,407
Provision for income taxes 3,140 3,881 Depreciation 46,998
46,199 EBITDA $ 68,760 $ 69,061
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version on businesswire.com: http://www.businesswire.com/news/home/20170427005204/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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