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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 000-51759

 

H&E Equipment Services, Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

 

Delaware

 

81-0553291

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

7500 Pecue Lane,

 

70809

Baton Rouge, Louisiana

 

(ZIP Code)

(Address of Principal Executive Offices)

 

 

 

Registrant’s Telephone Number, Including Area Code: (225) 298-5200

 

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol(s)

Name of Each Exchange on Which Registered

Common Stock, par value $0.01 per share

HEES

Nasdaq Global Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non‑accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer

                         Accelerated Filer

Non-Accelerated Filer

 

 

 

 

 

Smaller Reporting Company

                         Emerging Growth Company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

As of July 21, 2022, there were 36,159,738 shares of H&E Equipment Services, Inc. common stock, $0.01 par value, outstanding.

 

 

 


 

H&E EQUIPMENT SERVICES, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

June 30, 2022

 

 

 

Page

PART I. FINANCIAL INFORMATION

 

5

 

 

 

Item 1. Financial Statements:

 

5

Condensed Consolidated Balance Sheets as of June 30, 2022 (Unaudited) and December 31, 2021

 

5

Condensed Consolidated Statements of Income (Unaudited) for the Three and Six Months Ended June 30, 2022 and 2021

 

6

Condensed Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 2022 and 2021

 

8

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

10

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

21

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

32

Item 4. Controls and Procedures

 

32

 

 

 

PART II. OTHER INFORMATION

 

33

 

 

 

Item 1. Legal Proceedings

 

33

Item 1A. Risk Factors

 

33

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

33

Item 3. Defaults upon Senior Securities

 

33

Item 4. Mine Safety Disclosures

 

33

Item 5. Other Information

 

33

Item 6. Exhibits

 

34

 

 

 

Signatures

 

35

 

 

2


 

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains 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. Forward-looking statements include statements preceded by, followed by or that include the words “may,” “could,” “would,” “should,” “believe,” “expect,” “anticipate,” “plan,” “estimate,” “target,” “project,” “intend,” “foresee” and similar expressions. These statements include, among others, statements regarding our expected business outlook, anticipated financial and operating results, our business strategy and means to implement the strategy, our objectives, the amount and timing of capital expenditures, the likelihood of our success in expanding our business, financing plans, budgets, working capital needs and sources of liquidity. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future.

Forward-looking statements are only predictions and are not guarantees of performance. These statements are based on our management’s beliefs and assumptions, which in turn are based on currently available information. Important assumptions relating to the forward-looking statements include, among others, assumptions regarding demand for our products, the expansion of product offerings geographically or through new marketing applications, the timing and cost of planned capital expenditures, competitive conditions and general economic conditions. These assumptions could prove inaccurate. Forward-looking statements also involve known and unknown risks and uncertainties, which could cause actual results to differ materially from those contained in any forward-looking statement. In addition, even if our actual results are consistent with the forward-looking statements contained in this Quarterly Report on Form 10-Q, those results may not be indicative of results or developments in subsequent periods. Many of these factors are beyond our ability to control or predict. Such factors include, but are not limited to, the following:

risks related to the impact of the COVID-19 global pandemic, such as the scope and duration of the outbreak, government actions and restrictive measures implemented in response to the pandemic, material delays and cancellations of construction or infrastructure projects, labor shortages, supply chain disruptions and other impacts to the business;
general economic conditions and construction and industrial activity in the markets where we operate in North America;
our ability to forecast trends in our business accurately, and the impact of economic downturns and economic uncertainty on the markets we serve (including as a result of current uncertainty due to COVID-19 and inflation);
the impact of conditions in the global credit and commodity markets (including as a result of current volatility and uncertainty in credit and commodity markets due to COVID-19) and their effect on construction spending and the economy in general;
trends in oil and natural gas which could adversely affect the demand for our services and products;
relationships with equipment suppliers;
increased maintenance and repair costs as we age our fleet and decreases in our equipment’s residual value;
our indebtedness;
risks associated with the expansion of our business and any potential acquisitions we may make, including any related capital expenditures, or our ability to consummate such acquisitions;
our possible inability to integrate any businesses we acquire;
competitive pressures;
security breaches and other disruptions in our information technology systems;
adverse weather events or natural disasters;
compliance with laws and regulations, including those relating to environmental matters, corporate governance matters and tax matters, as well as any future changes to such laws and regulations; and
other factors discussed under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021.

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 (“SEC”), we are under no obligation to publicly update or revise any forward-looking statements after we file this Quarterly Report on Form 10-Q, whether as a result of any new information, future events or otherwise. Investors, potential investors 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. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results or performance.

 

3


 

For a more detailed discussion of some of the foregoing risks and uncertainties, see Item 1A — “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, as well as other reports and registration statements filed by us with the SEC. These factors should not be construed as exhaustive and should be read with other cautionary statements in this Quarterly Report on Form 10-Q and our other public filings. All of our annual, quarterly and current reports, and any amendments thereto, filed with or furnished to the SEC are available on our Internet website under the Investor Relations link. For more information about us and the announcements we make from time to time, visit our Internet website at www.he-equipment.com.

 

 

4


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

H&E EQUIPMENT SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share and per share amounts)

 

 

 

 

Balances at

 


 

 

June 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

 

 

(Unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

Cash

 

$

278,831

 

 

$

357,296

 

Receivables, net of allowance for doubtful accounts of $4,775 and $4,178, respectively

 

 

183,520

 

 

 

157,226

 

Inventories, net of reserves for obsolescence of $54 and $73, respectively

 

 

122,048

 

 

 

75,299

 

Prepaid expenses and other assets

 

 

27,818

 

 

 

21,081

 

Rental equipment, net of accumulated depreciation of $797,344 and $722,646, respectively

 

 

1,190,778

 

 

 

1,116,456

 

Property and equipment, net of accumulated depreciation and amortization of $170,841 and $161,913, respectively

 

 

123,012

 

 

 

112,281

 

Operating lease right-of-use assets, net of accumulated amortization of $43,678 and $36,884, respectively

 

 

157,538

 

 

 

151,222

 

Finance lease right-of-use assets, net of accumulated amortization of $24

 

 

1,626

 

 

 

 

Deferred financing costs, net of accumulated amortization of $16,168 and $15,818, respectively

 

 

1,108

 

 

 

1,458

 

Intangible assets, net of accumulated amortization of $16,694 and $14,709, respectively

 

 

23,006

 

 

 

24,991

 

Goodwill

 

 

63,137

 

 

 

63,137

 

Total assets

 

$

2,172,422

 

 

$

2,080,447

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

Accounts payable

 

 

136,874

 

 

 

95,604

 

Manufacturer flooring plans payable

 

 

21,507

 

 

 

20,924

 

Accrued expenses payable and other liabilities

 

 

65,931

 

 

 

63,908

 

Dividends payable

 

 

57

 

 

 

128

 

Senior unsecured notes, net of unaccreted discount of $7,565 and $8,151 and deferred financing costs of $1,747 and $1,882, respectively

 

 

1,240,688

 

 

 

1,239,967

 

Operating lease liabilities

 

 

161,842

 

 

 

155,303

 

Finance lease right-of-use liabilities

 

 

1,626

 

 

 

 

Deferred income taxes

 

 

215,042

 

 

 

201,231

 

Total liabilities

 

 

1,843,567

 

 

 

1,777,065

 

Commitments and Contingencies

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.01 par value, 25,000,000 shares authorized; no shares issued

 

 

 

 

 

 

Common stock, $0.01 par value, 175,000,000 shares authorized; 40,380,308 and 40,353,299 shares issued at June 30, 2022 and December 31, 2021, respectively, and 36,159,738 and 36,141,667 shares outstanding at June 30, 2022 and December 31, 2021, respectively

 

 

403

 

 

 

403

 

Additional paid-in capital

 

 

247,627

 

 

 

244,638

 

Treasury stock at cost, 4,220,570 and 4,211,632 shares of common stock held at June 30, 2022 and December 31, 2021, respectively

 

 

(68,637

)

 

 

(68,294

)

Retained earnings

 

 

149,462

 

 

 

126,635

 

Total stockholders’ equity

 

 

328,855

 

 

 

303,382

 

Total liabilities and stockholders’ equity

 

$

2,172,422

 

 

$

2,080,447

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

5


 

H&E EQUIPMENT SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(Amounts in thousands, except per share amounts)

 

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Equipment rentals

 

$

227,577

 

 

$

175,611

 

 

$

426,802

 

 

$

328,830

 

Used equipment sales

 

 

18,833

 

 

 

35,821

 

 

 

40,359

 

 

 

74,675

 

New equipment sales

 

 

21,486

 

 

 

27,633

 

 

 

47,522

 

 

 

50,806

 

Parts sales

 

 

16,172

 

 

 

16,880

 

 

 

32,231

 

 

 

32,436

 

Services revenues

 

 

8,889

 

 

 

8,059

 

 

 

17,023

 

 

 

16,070

 

Other

 

 

1,714

 

 

 

1,673

 

 

 

3,184

 

 

 

3,292

 

Total revenues

 

 

294,671

 

 

 

265,677

 

 

 

567,121

 

 

 

506,109

 

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Rental depreciation

 

 

62,288

 

 

 

56,513

 

 

 

122,309

 

 

 

109,966

 

Rental expense

 

 

30,815

 

 

 

27,509

 

 

 

59,574

 

 

 

52,574

 

Rental other

 

 

23,873

 

 

 

18,390

 

 

 

44,786

 

 

 

34,884

 

 

 

 

116,976

 

 

 

102,412

 

 

 

226,669

 

 

 

197,424

 

Used equipment sales

 

 

9,871

 

 

 

22,683

 

 

 

22,419

 

 

 

49,043

 

New equipment sales

 

 

18,271

 

 

 

24,231

 

 

 

40,600

 

 

 

44,630

 

Parts sales

 

 

11,832

 

 

 

12,353

 

 

 

23,536

 

 

 

23,506

 

Services revenues

 

 

3,143

 

 

 

2,578

 

 

 

5,957

 

 

 

5,193

 

Other

 

 

2,244

 

 

 

1,600

 

 

 

4,026

 

 

 

3,081

 

Total cost of revenues

 

 

162,337

 

 

 

165,857

 

 

 

323,207

 

 

 

322,877

 

Gross profit

 

 

132,334

 

 

 

99,820

 

 

 

243,914

 

 

 

183,232

 

Selling, general and administrative expenses

 

 

82,664

 

 

 

70,711

 

 

 

160,942

 

 

 

138,856

 

Merger and other

 

 

 

 

 

6

 

 

 

 

 

 

106

 

Gain on sales of property and equipment, net

 

 

996

 

 

 

631

 

 

 

2,382

 

 

 

785

 

Income from operations

 

 

50,666

 

 

 

29,734

 

 

 

85,354

 

 

 

45,055

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(13,500

)

 

 

(13,425

)

 

 

(26,947

)

 

 

(26,868

)

Other, net

 

 

893

 

 

 

750

 

 

 

1,773

 

 

 

1,411

 

Total other expense, net

 

 

(12,607

)

 

 

(12,675

)

 

 

(25,174

)

 

 

(25,457

)

Income from operations before provision for income taxes

 

 

38,059

 

 

 

17,059

 

 

 

60,180

 

 

 

19,598

 

Provision for income taxes

 

 

10,189

 

 

 

4,808

 

 

 

16,014

 

 

 

5,492

 

Net income from continuing operations

 

$

27,870

 

 

$

12,251

 

 

$

44,166

 

 

$

14,106

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Discontinued Operations:

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from discontinued operations before provision (benefit) for income taxes

 

$

(2,049

)

 

$

4,683

 

 

$

(2,049

)

 

$

7,835

 

Provision (benefit) for income taxes

 

 

(525

)

 

 

1,168

 

 

 

(525

)

 

 

2,024

 

Net income (loss) from discontinued operations

 

$

(1,524

)

 

$

3,515

 

 

$

(1,524

)

 

$

5,811

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

26,346

 

 

$

15,766

 

 

$

42,642

 

 

$

19,917

 

 

 

 

 

 

 

6


 

H&E EQUIPMENT SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Continued)

(Unaudited)

(Amounts in thousands, except per share amounts)

 

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net income from continuing operations per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.77

 

 

$

0.34

 

 

$

1.21

 

 

$

0.39

 

Diluted

 

$

0.76

 

 

$

0.34

 

 

$

1.21

 

 

$

0.39

 

Net income (loss) from discontinued operations per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.04

)

 

$

0.10

 

 

$

(0.04

)

 

$

0.16

 

Diluted

 

$

(0.04

)

 

$

0.10

 

 

$

(0.04

)

 

$

0.16

 

Net income per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.72

 

 

$

0.44

 

 

$

1.17

 

 

$

0.55

 

Diluted

 

$

0.72

 

 

$

0.43

 

 

$

1.17

 

 

$

0.55

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

36,382

 

 

 

36,216

 

 

 

36,373

 

 

 

36,200

 

Diluted

 

 

36,541

 

 

 

36,437

 

 

 

36,540

 

 

 

36,412

 

Dividends declared per common share outstanding

 

$

0.275

 

 

$

0.275

 

 

$

0.550

 

 

$

0.550

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

7


 

H&E EQUIPMENT SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Amounts in thousands)

 

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

42,642

 

 

$

19,917

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization of property and equipment

 

 

13,881

 

 

 

14,001

 

Depreciation of rental equipment

 

 

122,309

 

 

 

113,686

 

Amortization of finance lease right-of-use assets

 

 

24

 

 

 

81

 

Amortization of intangible assets

 

 

1,985

 

 

 

1,985

 

Amortization of deferred financing costs

 

 

485

 

 

 

486

 

Accretion of note discount, net of premium amortization

 

 

586

 

 

 

586

 

Non-cash operating lease expense

 

 

6,794

 

 

 

7,426

 

Provision for losses on accounts receivable

 

 

1,360

 

 

 

787

 

Provision for inventory obsolescence

 

 

 

 

 

38

 

Change in deferred income taxes

 

 

13,811

 

 

 

5,869

 

Stock-based compensation expense

 

 

2,989

 

 

 

2,543

 

Loss on sale of discontinued operations

 

 

1,917

 

 

 

 

Gain from sales of property and equipment, net

 

 

(2,382

)

 

 

(834

)

Gain from sales of rental equipment, net

 

 

(17,341

)

 

 

(27,070

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Receivables

 

 

(27,252

)

 

 

7,555

 

Inventories

 

 

(87,557

)

 

 

(73,651

)

Prepaid expenses and other assets

 

 

(6,737

)

 

 

(7,137

)

Accounts payable

 

 

41,270

 

 

 

23,804

 

Manufacturer flooring plans payable

 

 

583

 

 

 

(2,289

)

Accrued expenses payable and other liabilities

 

 

(5,178

)

 

 

(7,324

)

Net cash provided by operating activities

 

 

104,189

 

 

 

80,459

 

Cash flows from investing activities:

 

 

 

 

 

 

Closing adjustment on sale of discontinued operations

 

 

(2,256

)

 

 

 

Purchases of property and equipment

 

 

(24,457

)

 

 

(16,227

)

Purchases of rental equipment

 

 

(174,775

)

 

 

(228,453

)

Proceeds from sales of property and equipment

 

 

2,794

 

 

 

1,088

 

Proceeds from sales of rental equipment

 

 

36,293

 

 

 

75,302

 

     Net cash used in investing activities

 

 

(162,401

)

 

 

(168,290

)

Cash flows from financing activities:

 

 

 

 

 

 

Borrowings on senior secured credit facility

 

 

573,197

 

 

 

620,584

 

Payments on senior secured credit facility

 

 

(573,197

)

 

 

(620,584

)

Dividends paid

 

 

(19,886

)

 

 

(19,865

)

Purchases of treasury stock

 

 

(343

)

 

 

(435

)

Payments of deferred financing costs

 

 

 

 

 

(136

)

Payments of finance lease obligations

 

 

(24

)

 

 

(128

)

     Net cash used in financing activities

 

 

(20,253

)

 

 

(20,564

)

Net decrease in cash

 

 

(78,465

)

 

 

(108,395

)

Cash, beginning of period

 

 

357,296

 

 

 

310,882

 

Cash, end of period

 

$

278,831

 

 

$

202,487

 

 

 

8


 

H&E EQUIPMENT SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Unaudited)

(Amounts in thousands)

 

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2022

 

 

2021

 

Supplemental schedule of noncash investing and financing activities:

 

 

 

 

 

 

Noncash asset purchases:

 

 

 

 

 

 

Assets transferred from used and new inventory to rental fleet

 

$

40,808

 

 

$

17,679

 

Purchases of property and equipment included in accrued expenses payable and other liabilities

 

$

(567

)

 

$

3

 

Operating lease assets obtained in exchange for new operating lease liabilities

 

$

13,110

 

 

$

12,868

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

 

Interest

 

$

30,426

 

 

$

25,946

 

Income taxes paid (refunds received), net

 

$

1,891

 

 

$

1,545

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

 

9


 

H&E EQUIPMENT SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1) Organization and Nature of Operations

Basis of Presentation

Our condensed consolidated financial statements include the financial position and results of operations of H&E Equipment Services, Inc. and its wholly-owned subsidiaries H&E Finance Corp., GNE Investments, Inc., Great Northern Equipment, Inc., H&E California Holding, Inc., H&E Equipment Services (California), LLC and H&E Equipment Services (Mid-Atlantic), Inc., collectively referred to herein as “we”, “us”, “our” or the “Company.”

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such regulations. In the opinion of management, all adjustments (consisting of all normal and recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022, and therefore, the results and trends in these interim condensed consolidated financial statements may not be the same for the entire year. These interim condensed consolidated financial statements should be read in conjunction with the annual audited consolidated financial statements and related notes in our Annual Report on Form 10-K for the year ended December 31, 2021, from which the consolidated balance sheet amounts as of December 31, 2021 were derived. All significant intercompany accounts and transactions have been eliminated in these condensed consolidated financial statements.

On October 1, 2021, the Company sold its crane business (the “Crane Sale”). The results of operations of the Crane Sale are reported in discontinued operations in the Condensed Consolidated Statements of Income for all periods presented. The Condensed Consolidated Statements of Cash Flows include cash flows related to the discontinued operations and accordingly, cash flow amounts for discontinued operations are disclosed in Note 3 “Acquisitions and Dispositions”. All results and information in the consolidated financial statements are presented as continuing operations and exclude the Crane Sale unless otherwise noted specifically as discontinued operations. For additional information, refer to Note 3.

The nature of our business is such that short-term obligations are typically met by cash flows generated from long-term assets. Consequently, and consistent with industry practice, the accompanying condensed consolidated balance sheets are presented on an unclassified basis.

Nature of Operations

Founded in 1961, H&E Equipment Services, Inc. is one of the largest rental equipment companies in the nation, serving customers at our 106 branch locations across 25 states. The Company’s fleet is comprised of aerial work platforms, earthmoving, material handling, and other general and specialty lines. H&E serves a diverse set of end markets in many high-growth geographies including branches throughout the Pacific Northwest, West Coast, Intermountain, Southwest, Gulf Coast, Southeast, Midwest and Mid-Atlantic regions.

(2) Significant Accounting Policies

We describe our significant accounting policies in Note 2 of the notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2021. During the three and six months ended June 30, 2022, there were no significant changes to those accounting policies.

Use of Estimates

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, which requires management to use its judgment to make estimates and assumptions that affect the reported amounts of assets and liabilities and related disclosures at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reported period. These assumptions and estimates could have a material effect on our condensed consolidated financial statements. Actual results may differ materially from those estimates. We review our estimates on an ongoing basis based on information currently available, and changes in facts and circumstances may cause us to revise these estimates.

 

10


 

Revenue Recognition

We recognize revenue in accordance with two different Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) standards: 1) Topic 606 and 2) Topic 842.

Under Topic 606, Revenue from Contracts with Customers, revenue is recognized when control of the promised goods or services are transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Revenue is measured based on the consideration specified in the contract with the customer, and excludes any sales incentives and amounts collected on behalf of third parties. A performance obligation is a promise in a contract to transfer a distinct good or service to a customer. Our contracts with customers generally do not include multiple performance obligations. We recognize revenue when we satisfy a performance obligation by transferring control over a product or service to a customer. The amount of revenue recognized reflects the consideration we expect to be entitled to in exchange for such products or services.

Under Topic 842, Leases, we account for equipment rental contracts as operating leases. We recognize revenue from equipment rentals in the period earned, regardless of the timing of billing to customers. A rental contract includes rates for daily, weekly or monthly use, and rental revenues are earned on a daily basis as rental contracts remain outstanding. Because the rental contracts can extend across multiple reporting periods, we record unbilled rental revenues and deferred rental revenues at the end of reporting periods so rental revenues earned is appropriately stated for the periods presented.

In the table below, revenues as presented in our condensed consolidated statements of income for the three and six months ended June 30, 2022 and 2021 are summarized by type and by the applicable accounting standard.

 

 

 

Three Months Ended June 30,

 

 

 

2022

 

 

2021

 

 

 

Topic 842

 

 

Topic 606

 

 

Total

 

 

Topic 842

 

 

Topic 606

 

 

Total

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owned equipment rentals

 

$

193,704

 

 

$

77

 

 

$

193,781

 

 

$

147,894

 

 

$

111

 

 

$

148,005

 

Re-rent revenue

 

 

7,462

 

 

 

 

 

 

7,462

 

 

 

9,206

 

 

 

 

 

 

9,206

 

Ancillary and other rental revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Delivery and pick-up

 

 

 

 

 

13,899

 

 

 

13,899

 

 

 

 

 

 

9,749

 

 

 

9,749

 

Other

 

 

12,435

 

 

 

 

 

 

12,435

 

 

 

8,651

 

 

 

 

 

 

8,651

 

Total ancillary rental revenues

 

 

12,435

 

 

 

13,899

 

 

 

26,334

 

 

 

8,651

 

 

 

9,749

 

 

 

18,400

 

Total equipment rental revenues

 

 

213,601

 

 

 

13,976

 

 

 

227,577

 

 

 

165,751

 

 

 

9,860

 

 

 

175,611

 

Used equipment sales

 

 

 

 

 

18,833

 

 

 

18,833

 

 

 

 

 

 

35,821

 

 

 

35,821

 

New equipment sales

 

 

 

 

 

21,486

 

 

 

21,486

 

 

 

 

 

 

27,633

 

 

 

27,633

 

Parts sales

 

 

 

 

 

16,172

 

 

 

16,172

 

 

 

 

 

 

16,880

 

 

 

16,880

 

Service revenues

 

 

 

 

 

8,889

 

 

 

8,889

 

 

 

 

 

 

8,059

 

 

 

8,059

 

Other

 

 

 

 

 

1,714

 

 

 

1,714

 

 

 

 

 

 

1,673

 

 

 

1,673

 

Total revenues

 

$

213,601

 

 

$

81,070

 

 

$

294,671

 

 

$

165,751

 

 

$

99,926

 

 

$

265,677

 

 

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

 

 

Topic 842

 

 

Topic 606

 

 

Total

 

 

Topic 842

 

 

Topic 606

 

 

Total

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owned equipment rentals

 

$

364,433

 

 

$

186

 

 

$

364,619

 

 

$

277,359

 

 

$

163

 

 

$

277,522

 

Re-rent revenue

 

 

13,806

 

 

 

 

 

 

13,806

 

 

 

16,835

 

 

 

 

 

 

16,835

 

Ancillary and other rental revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Delivery and pick-up

 

 

 

 

 

24,999

 

 

 

24,999

 

 

 

 

 

 

17,935

 

 

 

17,935

 

Other

 

 

23,378

 

 

 

 

 

 

23,378

 

 

 

16,538

 

 

 

 

 

 

16,538

 

Total ancillary rental revenues

 

 

23,378

 

 

 

24,999

 

 

 

48,377

 

 

 

16,538

 

 

 

17,935