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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM
10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the quarterly period ended
September 30,
2022
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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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)
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Delaware
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81-0553291
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(State or Other Jurisdiction of
Incorporation or Organization)
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(I.R.S. Employer
Identification No.)
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7500 Pecue Lane,
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70809
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Baton Rouge,
Louisiana
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(ZIP Code)
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(Address of Principal Executive Offices)
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Registrant’s Telephone Number, Including Area Code:
(225)
298-5200
Securities registered pursuant to Section 12(b) of the
Act:
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Title of Each Class
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Trading Symbol(s)
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Name of Each Exchange on Which Registered
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Common Stock, par value $0.01 per share
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HEES
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Nasdaq Global Market
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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
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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.
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Large Accelerated Filer
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Accelerated
Filer
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Non-Accelerated Filer
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☐
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Smaller Reporting Company
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☐
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Emerging
Growth Company
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☐
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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 October 20, 2022,
there were
36,310,190
shares of H&E Equipment Services, Inc. common stock, $0.01 par
value, outstanding.
H&E EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
September 30, 2022
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;
•
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;
•
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
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
2022
|
|
|
2021
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
220,479
|
|
|
$
|
357,296
|
|
|
Receivables, net of allowance for doubtful accounts of
$5,039 and
$4,178,
respectively
|
|
|
203,166
|
|
|
|
157,226
|
|
|
Inventories, net of reserves for obsolescence of
$86 and
$73,
respectively
|
|
|
117,447
|
|
|
|
75,299
|
|
|
Prepaid expenses and other assets
|
|
|
21,321
|
|
|
|
21,081
|
|
|
Rental equipment, net of accumulated depreciation of
$837,794 and
$722,646,
respectively
|
|
|
1,280,123
|
|
|
|
1,116,456
|
|
|
Property and equipment, net of accumulated depreciation and
amortization of $176,379 and
$161,913,
respectively
|
|
|
129,636
|
|
|
|
112,281
|
|
|
Operating lease right-of-use assets, net of accumulated
amortization of $47,387 and
$36,884,
respectively
|
|
|
158,833
|
|
|
|
151,222
|
|
|
Finance lease right-of-use assets, net of accumulated amortization
of $64
|
|
|
1,586
|
|
|
|
—
|
|
|
Deferred financing costs, net of accumulated amortization of
$16,343 and
$15,818,
respectively
|
|
|
933
|
|
|
|
1,458
|
|
|
Intangible assets, net of accumulated amortization of
$17,687 and
$14,709,
respectively
|
|
|
22,013
|
|
|
|
24,991
|
|
|
Goodwill
|
|
|
63,137
|
|
|
|
63,137
|
|
|
Total assets
|
|
$
|
2,218,674
|
|
|
$
|
2,080,447
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
121,917
|
|
|
|
95,604
|
|
|
Manufacturer flooring plans payable
|
|
|
16,624
|
|
|
|
20,924
|
|
|
Accrued expenses payable and other liabilities
|
|
|
90,567
|
|
|
|
63,908
|
|
|
Dividends payable
|
|
|
217
|
|
|
|
128
|
|
|
Senior unsecured notes, net of unaccreted discount of
$7,272 and
$8,151 and
deferred financing costs of $1,679 and
$1,882,
respectively
|
|
|
1,241,049
|
|
|
|
1,239,967
|
|
|
Operating lease liabilities
|
|
|
163,322
|
|
|
|
155,303
|
|
|
Finance lease liabilities
|
|
|
1,619
|
|
|
|
—
|
|
|
Deferred income taxes
|
|
|
225,633
|
|
|
|
201,231
|
|
|
Total liabilities
|
|
|
1,860,948
|
|
|
|
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;
40,567,876 and
40,353,299 shares
issued at September 30, 2022 and December 31, 2021, respectively,
and
36,310,190 and
36,141,667 shares
outstanding at September 30, 2022 and December 31, 2021,
respectively
|
|
|
405
|
|
|
|
403
|
|
|
Additional paid-in capital
|
|
|
249,553
|
|
|
|
244,638
|
|
|
Treasury stock at cost,
4,257,686 and
4,211,632 shares
of common stock held at September 30, 2022 and December 31, 2021,
respectively
|
|
|
(69,925
|
)
|
|
|
(68,294
|
)
|
|
Retained earnings
|
|
|
177,693
|
|
|
|
126,635
|
|
|
Total stockholders’ equity
|
|
|
357,726
|
|
|
|
303,382
|
|
|
Total liabilities and stockholders’ equity
|
|
$
|
2,218,674
|
|
|
$
|
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
|
|
|
Nine Months Ended
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
|
2022
|
|
|
2021
|
|
|
2022
|
|
|
2021
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment rentals
|
|
$
|
253,564
|
|
|
$
|
197,184
|
|
|
$
|
680,366
|
|
|
$
|
526,014
|
|
|
Used equipment sales
|
|
|
20,300
|
|
|
|
31,071
|
|
|
|
60,659
|
|
|
|
105,746
|
|
|
New equipment sales
|
|
|
23,491
|
|
|
|
19,355
|
|
|
|
71,013
|
|
|
|
70,161
|
|
|
Parts sales
|
|
|
16,745
|
|
|
|
17,503
|
|
|
|
48,976
|
|
|
|
49,939
|
|
|
Services revenues
|
|
|
8,610
|
|
|
|
8,624
|
|
|
|
25,633
|
|
|
|
24,694
|
|
|
Other
|
|
|
1,570
|
|
|
|
1,699
|
|
|
|
4,754
|
|
|
|
4,991
|
|
|
Total revenues
|
|
|
324,280
|
|
|
|
275,436
|
|
|
|
891,401
|
|
|
|
781,545
|
|
|
Cost of revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental depreciation
|
|
|
65,952
|
|
|
|
58,339
|
|
|
|
188,261
|
|
|
|
168,305
|
|
|
Rental expense
|
|
|
33,543
|
|
|
|
28,326
|
|
|
|
93,117
|
|
|
|
80,900
|
|
|
Rental other
|
|
|
25,989
|
|
|
|
20,510
|
|
|
|
70,775
|
|
|
|
55,394
|
|
|
|
|
|
125,484
|
|
|
|
107,175
|
|
|
|
352,153
|
|
|
|
304,599
|
|
|
Used equipment sales
|
|
|
9,396
|
|
|
|
19,383
|
|
|
|
31,815
|
|
|
|
68,426
|
|
|
New equipment sales
|
|
|
20,249
|
|
|
|
16,946
|
|
|
|
60,849
|
|
|
|
61,576
|
|
|
Parts sales
|
|
|
11,881
|
|
|
|
13,209
|
|
|
|
35,417
|
|
|
|
36,715
|
|
|
Services revenues
|
|
|
3,165
|
|
|
|
3,000
|
|
|
|
9,122
|
|
|
|
8,193
|
|
|
Other
|
|
|
2,222
|
|
|
|
1,815
|
|
|
|
6,248
|
|
|
|
4,896
|
|
|
Total cost of revenues
|
|
|
172,397
|
|
|
|
161,528
|
|
|
|
495,604
|
|
|
|
484,405
|
|
|
Gross profit
|
|
|
151,883
|
|
|
|
113,908
|
|
|
|
395,797
|
|
|
|
297,140
|
|
|
Selling, general and administrative expenses
|
|
|
87,871
|
|
|
|
74,403
|
|
|
|
248,813
|
|
|
|
213,259
|
|
|
Merger and other
|
|
|
547
|
|
|
|
9
|
|
|
|
547
|
|
|
|
115
|
|
|
Gain on sales of property and equipment, net
|
|
|
529
|
|
|
|
6,166
|
|
|
|
2,911
|
|
|
|
6,951
|
|
|
Income from operations
|
|
|
63,994
|
|
|
|
45,662
|
|
|
|
149,348
|
|
|
|
90,717
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(13,548
|
)
|
|
|
(13,430
|
)
|
|
|
(40,495
|
)
|
|
|
(40,298
|
)
|
|
Other, net
|
|
|
883
|
|
|
|
615
|
|
|
|
2,656
|
|
|
|
2,026
|
|
|
Total other expense, net
|
|
|
(12,665
|
)
|
|
|
(12,815
|
)
|
|
|
(37,839
|
)
|
|
|
(38,272
|
)
|
|
Income from operations before provision for income taxes
|
|
|
51,329
|
|
|
|
32,847
|
|
|
|
111,509
|
|
|
|
52,445
|
|
|
Provision for income taxes
|
|
|
12,953
|
|
|
|
8,119
|
|
|
|
28,967
|
|
|
|
13,611
|
|
|
Net income from continuing operations
|
|
$
|
38,376
|
|
|
$
|
24,728
|
|
|
$
|
82,542
|
|
|
$
|
38,834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations before provision
(benefit) for income taxes
|
|
$
|
—
|
|
|
$
|
6,411
|
|
|
$
|
(2,049
|
)
|
|
$
|
14,246
|
|
|
Provision (benefit) for income taxes
|
|
|
—
|
|
|
|
1,602
|
|
|
|
(525
|
)
|
|
|
3,626
|
|
|
Net income (loss) from discontinued operations
|
|
$
|
—
|
|
|
$
|
4,809
|
|
|
$
|
(1,524
|
)
|
|
$
|
10,620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
38,376
|
|
|
$
|
29,537
|
|
|
$
|
81,018
|
|
|
$
|
49,454
|
|
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
|
|
|
Nine Months Ended
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
|
2022
|
|
|
2021
|
|
|
2022
|
|
|
2021
|
|
|
Net income from continuing operations per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.05
|
|
|
$
|
0.68
|
|
|
$
|
2.27
|
|
|
$
|
1.07
|
|
|
Diluted
|
|
$
|
1.05
|
|
|
$
|
0.68
|
|
|
$
|
2.26
|
|
|
$
|
1.07
|
|
|
Net income (loss) from discontinued operations per common
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
—
|
|
|
$
|
0.13
|
|
|
$
|
(0.04
|
)
|
|
$
|
0.29
|
|
|
Diluted
|
|
$
|
—
|
|
|
$
|
0.13
|
|
|
$
|
(0.04
|
)
|
|
$
|
0.29
|
|
|
Net income per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.05
|
|
|
$
|
0.81
|
|
|
$
|
2.23
|
|
|
$
|
1.36
|
|
|
Diluted
|
|
$
|
1.05
|
|
|
$
|
0.81
|
|
|
$
|
2.22
|
|
|
$
|
1.36
|
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
36,462
|
|
|
|
36,296
|
|
|
|
36,402
|
|
|
|
36,232
|
|
|
Diluted
|
|
|
36,553
|
|
|
|
36,436
|
|
|
|
36,544
|
|
|
|
36,420
|
|
|
Dividends declared per common share outstanding
|
|
$
|
0.275
|
|
|
$
|
0.275
|
|
|
$
|
0.825
|
|
|
$
|
0.825
|
|
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)
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
|
September 30,
|
|
|
|
|
2022
|
|
|
2021
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
Net income
|
|
$
|
81,018
|
|
|
$
|
49,454
|
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
Depreciation and amortization of property and equipment
|
|
|
20,889
|
|
|
|
20,661
|
|
|
Depreciation of rental equipment
|
|
|
188,261
|
|
|
|
172,025
|
|
|
Amortization of finance lease right-of-use assets
|
|
|
64
|
|
|
|
122
|
|
|
Amortization of intangible assets
|
|
|
2,978
|
|
|
|
2,978
|
|
|
Amortization of deferred financing costs
|
|
|
728
|
|
|
|
729
|
|
|
Accretion of note discount, net of premium amortization
|
|
|
879
|
|
|
|
879
|
|
|
Non-cash operating lease expense
|
|
|
10,503
|
|
|
|
11,145
|
|
|
Provision for losses on accounts receivable
|
|
|
2,289
|
|
|
|
1,200
|
|
|
Provision for inventory obsolescence
|
|
|
32
|
|
|
|
54
|
|
|
Change in deferred income taxes
|
|
|
24,402
|
|
|
|
14,445
|
|
|
Stock-based compensation expense
|
|
|
4,915
|
|
|
|
3,600
|
|
|
Loss on sale of discontinued operations
|
|
|
1,917
|
|
|
|
—
|
|
|
Gain from sales of property and equipment, net
|
|
|
(2,911
|
)
|
|
|
(7,000
|
)
|
|
Gain from sales of rental equipment, net
|
|
|
(28,126
|
)
|
|
|
(39,274
|
)
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
Receivables
|
|
|
(47,827
|
)
|
|
|
3,210
|
|
|
Inventories
|
|
|
(84,518
|
)
|
|
|
(46,684
|
)
|
|
Prepaid expenses and other assets
|
|
|
(240
|
)
|
|
|
(5,494
|
)
|
|
Accounts payable
|
|
|
26,315
|
|
|
|
1,132
|
|
|
Manufacturer flooring plans payable
|
|
|
(4,300
|
)
|
|
|
7,928
|
|
|
Accrued expenses payable and other liabilities
|
|
|
13,934
|
|
|
|
10,954
|
|
|
Net cash provided by operating activities
|
|
|
211,202
|
|
|
|
202,064
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
Closing adjustment on sale of discontinued operations
|
|
|
(2,256
|
)
|
|
|
—
|
|
|
Purchases of property and equipment
|
|
|
(36,327
|
)
|
|
|
(24,723
|
)
|
|
Purchases of rental equipment
|
|
|
(337,156
|
)
|
|
|
(338,463
|
)
|
|
Proceeds from sales of property and equipment
|
|
|
3,561
|
|
|
|
11,014
|
|
|
Proceeds from sales of rental equipment
|
|
|
55,692
|
|
|
|
106,494
|
|
|
Net cash used in investing
activities
|
|
|
(316,486
|
)
|
|
|
(245,678
|
)
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
Borrowings on senior secured credit facility
|
|
|
895,845
|
|
|
|
962,358
|
|
|
Payments on senior secured credit facility
|
|
|
(895,845
|
)
|
|
|
(962,358
|
)
|
|
Dividends paid
|
|
|
(29,871
|
)
|
|
|
(29,809
|
)
|
|
Purchases of treasury stock
|
|
|
(1,631
|
)
|
|
|
(2,105
|
)
|
|
Payments of deferred financing costs
|
|
|
—
|
|
|
|
(136
|
)
|
|
Payments of finance lease obligations
|
|
|
(31
|
)
|
|
|
(194
|
)
|
|
Net cash used in financing
activities
|
|
|
(31,533
|
)
|
|
|
(32,244
|
)
|
|
Net decrease in cash and cash equivalents
|
|
|
(136,817
|
)
|
|
|
(75,858
|
)
|
|
Cash and cash equivalents, beginning of period
|
|
|
357,296
|
|
|
|
310,882
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
220,479
|
|
|
$
|
235,024
|
|
8
H&E EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
(Unaudited)
(Amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
|
September 30,
|
|
|
|
|
2022
|
|
|
2021
|
|
|
Supplemental schedule of non-cash investing and financing
activities:
|
|
|
|
|
|
|
|
Non-cash asset purchases:
|
|
|
|
|
|
|
|
Assets transferred from used and new inventory to rental
fleet
|
|
$
|
42,338
|
|
|
$
|
18,497
|
|
|
Purchases of property and equipment included in accrued expenses
payable and other liabilities
|
|
$
|
(2,567
|
)
|
|
$
|
(9
|
)
|
|
Operating lease assets obtained in exchange for new operating lease
liabilities
|
|
$
|
18,114
|
|
|
$
|
14,201
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
|
|
Interest
|
|
$
|
26,729
|
|
|
$
|
26,728
|
|
|
Income taxes paid, net of refunds received
|
|
$
|
2,550
|
|
|
$
|
2,224
|
|
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 nine months
ended September 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, 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
110
branch locations across 26
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 nine months ended September 30, 2022, there were no significant
changes to those accounting policies.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and highly liquid
investments with an original maturity of three months or
less.
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 nine months ended September 30, 2022 and 2021 are
summarized by type and by the applicable accounting
standard.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
|
|
2022
|
|
|
2021
|
|
|
|
|
Topic 842
|
|
|
Topic 606
|
|
|
Total
|
|
|
Topic 842
|
|
|
Topic 606
|
|
|
Total
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned equipment rentals
|
|
$
|
215,599
|
|
|
$
|
86
|
|
|
$
|
215,685
|
|
|
$
|
166,847
|
|
|
$
|
75
|
|
|
$
|
166,922
|
|
|
Re-rent revenue
|
|
|
8,441
|
|
|
|
—
|
|
|
|
8,441
|
|
|
|
9,733
|
|
|
|
—
|
|
|
|
9,733
|
|
|
Ancillary and other rental revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Delivery and pick-up
|
|
|
—
|
|
|
|
15,646
|
|
|
|
15,646
|
|
|
|
—
|
|
|
|
11,005
|
|
|
|
11,005
|
|
|
Other
|
|
|
13,792
|
|
|
|
—
|
|
|
|
13,792
|
|
|
|
9,524
|
|
|
|
—
|
|
|
|
9,524
|
|
|
Total ancillary rental revenues
|
|
|
13,792
|
|
|
|
15,646
|
|
|
|
29,438
|
|
|
|
9,524
|
|
|
|
11,005
|
|
|
|
20,529
|
|
|
Total equipment rental revenues
|
|
|
237,832
|
|
|
|
15,732
|
|
|
|
253,564
|
|
|
|
186,104
|
|
|
|
11,080
|
|
|
|
197,184
|
|
|
Used equipment sales
|
|
|
—
|
|
|
|
20,300
|
|
|
|
20,300
|
|
|
|
—
|
|
|
|
31,071
|
|
|
|
31,071
|
|
|
New equipment sales
|
|
|
—
|
|
|
|
23,491
|
|
|
|
23,491
|
|
|
|
—
|
|
|
|
19,355
|
|
|
|
19,355
|
|
|
Parts sales
|
|
|
—
|
|
|
|
16,745
|
|
|
|
16,745
|
|
|
|
—
|
|
|
|
17,503
|
|
|
|
17,503
|
|
|
Service revenues
|
|
|
—
|
|
|
|
8,610
|
|
|
|
8,610
|
|
|
|
—
|
|
|
|
8,624
|
|
|
|
8,624
|
|
|
Other
|
|
|
—
|
|
|
|
1,570
|
|
|
|
1,570
|
|
|
|
—
|
|
|
|
1,699
|
|
|
|
1,699
|
|
|
Total revenues
|
|
$
|
237,832
|
|
|
$
|
86,448
|
|
|
$
|
324,280
|
|
|
$
|
186,104
|
|
|
$
|
89,332
|
|
|
$
|
275,436
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
2022
|
|
|
2021
|
|
|
|
|
Topic 842
|
|
|
Topic 606
|
|
|
Total
|
|
|
Topic 842
|
|
|
Topic 606
|
|
|
Total
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned equipment rentals
|
|
$
|
580,032
|
|
|
$
|
272
|
|
|
$
|
580,304
|
|
|
$
|
444,203
|
|
|
$
|
239
|
|
|
$
|
444,442
|
|
|
Re-rent revenue
|
|
|
22,247
|
|
|
|
—
|
|
|
|
22,247
|
|
|
|
26,570
|
|
|
|
—
|
|
|
|