H&E Equipment Services, Inc. (NASDAQ: HEES) today announced
results for the first quarter ended March 31, 2018.
FIRST QUARTER 2018
SUMMARY
- Revenues increased 14.8% to $260.5
million versus $226.8 million a year ago. Included in total
revenues was $11.7 million from the legacy CEC business (“CEC”)
which we acquired on January 1, 2018.
- Net income was $9.5 million in the
first quarter compared to net income of $5.4 million a year ago.
The effective income tax rate was 27.5% in the first quarter of
2018 and 36.8% in the first quarter of 2017.
- Adjusted EBITDA increased 17.7% to
$80.9 million in the first quarter compared to $68.8 million a year
ago, yielding a margin of 31.1% of revenues compared to 30.3% a
year ago. CEC contributed EBITDA of $7.7 million with a margin of
66.5%.
- Rental revenues increased 20.5% to
$129.4 million in the first quarter compared to $107.3 million a
year ago.
- New equipment sales increased 35.7% to
$46.5 million in the first quarter compared to $34.3 million a year
ago.
- Used equipment sales decreased 13.9% to
$24.9 million in the first quarter compared to $28.9 million a year
ago.
- Gross margin was 35.5% compared to
34.2% a year ago.
- Rental gross margins were 47.6% in the
first quarter of 2018 compared to 44.8% a year ago.
- Average time utilization (based on
original equipment cost) was 70.4% compared to 68.5% a year
ago.
- Average rental rates increased 2.1%
compared to a year ago and 0.2% sequentially.
- Dollar utilization was 34.7% in the
first quarter compared to 32.4% a year ago.
- Average rental fleet age at March 31,
2018, was 34.9 months compared to an industry average age of 44.8
months.
- Acquired Rental Inc. on April 1, 2018,
increasing branch count to 88.
John Engquist, H&E Equipment Services’ chief executive
officer, said, “The momentum in our rental business continued
during the first quarter with revenues increasing 20.5% and margins
increasing 280 basis points to 47.6% compared to the first quarter
of last year. Physical utilization remained above year-ago levels,
increasing to 70.4% compared to 68.5%, while rates increased 2.1%.
The strong demand in our non-residential markets resulted in growth
in the size of our rental fleet.”
Engquist concluded, “We are excited about 2018 for our business
and industry. Demand in the non-residential construction markets we
serve is above year-ago levels and broad-based throughout our
geographic footprint. In addition to solid general project
activity, energy-related work in our Gulf Coast region is strong,
benefitting both our rental and distribution businesses. With our
recent acquisitions of CEC and Rental Inc., we have added eight
branches thus far this year. Rapidly executing on our stated growth
strategy is a high priority and we are continuing to explore
additional acquisitions and market expansion through Greenfields
and warm starts.”
FINANCIAL DISCUSSION FOR FIRST QUARTER
2018:
Revenue
Total revenues increased 14.8% to $260.5 million in the first
quarter of 2018 from $226.8 million in the first quarter of 2017.
Equipment rental revenues increased 20.5% to $129.4 million
compared with $107.3 million in the first quarter of 2017. CEC
contributed $10.7 million in rental revenue during the quarter. New
equipment sales increased 35.7% to $46.5 million from
$34.3 million a year ago. Used equipment sales decreased 13.9%
to $24.9 million compared to $28.9 million a year ago. Parts sales
increased 4.3% to $28.2 million from $27.0 million in the first
quarter of 2017. Service revenues were $15.0 million compared to
$15.1 million a year ago.
Gross Profit
Gross profit increased 19.2% to $92.6 million from $77.7 million
in the first quarter of 2017. Gross margin was 35.5% for the
quarter ended March 31, 2018, as compared to 34.2% for the quarter
ended March 31, 2017. On a segment basis, gross margin on rentals
was 47.6% in the first quarter of 2018 compared to 44.8% in the
first quarter of 2017. On average, rental rates were 2.1% higher
than rates in the first quarter of 2017. Time utilization (based on
original equipment cost) was 70.4% in the first quarter of 2018
compared to 68.5% a year ago.
Gross margins on new equipment sales increased to 12.1% in the
first quarter compared to 11.4% a year ago. Gross margins on used
equipment sales were 31.9% compared to 31.2% a year ago. Gross
margins on parts sales decreased to 26.8% in the first quarter of
2018 compared to 28.0% in the first quarter of 2017. Gross margins
on service revenues were 66.4% for the first quarter of 2018
compared to 66.9% in the first quarter of 2017.
Rental Fleet
At the end of the first quarter of 2018, the original
acquisition cost of the Company’s rental fleet was $1.5 billion, an
increase of $175.3 million from the end of the first quarter of
2017. Dollar utilization was 34.7% compared to 32.4% for the first
quarter of 2017.
Selling, General and Administrative
Expenses
SG&A expenses for the first quarter of 2018 were $65.9
million compared with $57.3 million the prior year, an $8.6
million, or 14.9% increase. SG&A expenses in the first quarter
of 2018 as a percentage of total revenues were 25.3%, the same as a
year ago. The increase in SG&A was largely attributable to
higher labor, wages, incentives and other employee benefits costs
of $4.1 million. Also, our results for the first quarter of 2018
included three months of CEC’s operations totaling $2.2 million in
SG&A expenses combined with $0.7 million of amortization of
intangibles associated with the purchase price allocation of CEC.
Expenses related to Greenfield branch expansions increased $1.1
million compared to a year ago.
Income from Operations
Income from operations for the first quarter of 2018 increased
28.1% to $27.3 million, or 10.5% of revenues, compared to $21.3
million, or 9.4% of revenues, a year ago.
Interest Expense
Interest expense was $14.7 million for the first quarter of 2018
compared to $13.2 million a year ago.
Net Income
Net income was $9.5 million, or $0.26 per diluted share, in the
first quarter of 2018 compared to net income of $5.4 million, or
$0.15 per diluted share, in the first quarter of 2017. Our
effective income tax rate was 27.5% in the first quarter of 2018
compared to 36.8% in the year ago period.
Adjusted EBITDA
Adjusted EBITDA for the first quarter of 2018 increased 17.7% to
$80.9 million compared to $68.8 million in the first quarter of
2017. Adjusted EBITDA as a percentage of revenues was 31.1%
compared with 30.3% in the first quarter of 2017.
Non-GAAP Financial Measures
This press release contains certain Non-GAAP measures (EBITDA
and Adjusted EBITDA). Please refer to our Current Report on Form
8-K for a description of these measures and of our use of these
measures. These measures as calculated by the Company are not
necessarily comparable to similarly titled measures reported by
other companies. Additionally, these Non-GAAP measures are not a
measurement 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
first quarter results today, April 26, 2018 at 10:00 a.m. (Eastern
Time). To listen to the call, participants should dial 719-457-0349
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 26, 2018, and will continue through May 5, 2018, by
dialing 719-457-0820 and entering the confirmation code
7988744.
The live broadcast of the Company’s quarterly conference call
will be available online at www.he-equipment.com on April 26, 2018,
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 88 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
Statements contained in this press release that are not
historical facts, including statements about H&E’s beliefs and
expectations, 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 and any
potential acquisitions we may make, including any related capital
expenditures, or our inability to consummate such acquisitions; (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 Securities and
Exchange Commission, we are under no obligation to publicly update
or revise any forward-looking statements after the date of this
release. These statements are based on the current beliefs and
assumptions of H&E’s management, which in turn are based on
currently available information and important, underlying
assumptions. H&E is under no obligation to publicly update or
revise any forward-looking statements after this press release,
whether as a result of any new information, future events or
otherwise. Investors, potential investors, security holders and
other readers are urged to consider the above mentioned factors
carefully in evaluating the forward-looking statements and are
cautioned not to place undue reliance on such forward-looking
statements.
H&E EQUIPMENT SERVICES,
INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(Amounts in thousands, except per share
amounts)
Three Months Ended
March 31,
2018
2017
Revenues: Equipment rentals $ 129,361 $ 107,317 New
equipment sales 46,493 34,274 Used equipment sales 24,853 28,863
Parts sales 28,151 27,000 Service revenues 15,036 15,080 Other
16,588 14,294 Total revenues 260,482 226,828 Cost of
revenues: Rental depreciation 46,469 40,903 Rental expense 21,272
18,374 New equipment sales 40,845 30,381 Used equipment sales
16,937 19,861 Parts sales 20,617 19,436 Service revenues 5,050
4,999 Other 16,707 15,202 Total cost of revenues 167,897 149,156
Gross profit 92,585 77,672
Selling, general, and administrative
expenses
65,880 57,318 Merger costs 152 -
Gain on sales of property and equipment,
net
(773) (971) Income from operations 27,326 21,325
Interest expense (14,653) (13,232) Other income, net 395 437
Income before provision for income
taxes
13,068 8,530 Provision for income taxes 3,590 3,140
Net income $ 9,478 $ 5,390 NET INCOME PER SHARE Basic – Net
income per share $ 0.27 $ 0.15
Basic – Weighted average number of common
shares outstanding
35,592 35,465 Diluted – Net income per share $ 0.26 $ 0.15
Diluted – Weighted average number of
common shares outstanding
35,879 35,621 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,
2018
2017
Cash $ 38,084 $ 165,878 Rental equipment, net 954,080
904,824 Total assets 1,517,298 1,467,717 Total debt (1) 951,430
951,486 Total liabilities 1,299,553 1,250,924 Stockholders’ equity
217,745 216,793 Total liabilities and stockholders’ equity $
1,517,298 $ 1,467,717
(1)
Total debt consists of the aggregate amounts outstanding on
the senior unsecured notes and capital lease obligations.
H&E EQUIPMENT SERVICES,
INC.
UNAUDITED RECONCILIATION OF NON-GAAP
FINANCIAL MEASURES
(Amounts in thousands)
Three Months Ended
March 31,
2018
2017
Net income $ 9,478 $ 5,390 Interest expense 14,653 13,232
Provision for income taxes 3,590 3,140 Depreciation and
amortization of intangibles 53,058 46,998 EBITDA $ 80,779 $
68,760 Merger costs 152 - Adjusted EBITDA $ 80,931 $
68,760
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version on businesswire.com: https://www.businesswire.com/news/home/20180426005546/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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