H&E Equipment Services, Inc. (NASDAQ: HEES) today announced results for
the fourth quarter and year ended December 31, 2012.
FOURTH QUARTER 2012 HIGHLIGHTS:
-
Revenues increased 15.3% to $250.1 million versus $217.0 million a
year ago.
-
Net income was $10.7 million in the fourth quarter compared to $7.9
million a year ago.
-
EBITDA increased 39.2% to $60.4 million from $43.4 million, yielding a
margin of 24.1% compared to 20.0% of revenues a year ago.
-
Rental revenues increased 28.9%, or $18.1 million, to $80.7 million
due to a larger fleet and improved rates compared to a year ago.
Demand remained strong during the fourth quarter.
-
New equipment sales were consistent at $87.0 million compared to a
year ago.
-
Gross margin was 29.4% as compared to 25.8% a year ago. Rental gross
margin increased to 48.1% compared to 44.5% a year ago.
-
Average time utilization (based on original equipment cost) was 71.8%
compared to 72.3% a year ago and 72.9% in the third quarter of 2012.
Average time utilization (based on units available for rent) was 66.6%
compared to 67.3% last year and 68.9% last quarter.
-
Average rental rates increased 10.1% compared to a year ago and
improved 0.4% compared to the third quarter of this year.
-
Dollar utilization was 36.4% as compared to 33.9% a year ago.
-
Average rental fleet age at December 31, 2012 was 38.0 months, down
from 38.6 months at the end of the last quarter and significantly
younger than the industry average age of 48 months.
“The momentum in our business continued in the fourth quarter, where we
delivered 15.3% revenue growth and impressive EBITDA growth of 39.2%,”
said John Engquist, H&E Equipment Services’ chief executive officer.
“Demand for rental equipment continued at high levels and we
successfully capitalized on the opportunity as rental revenues increased
28.9% compared to a year ago. While our rental business continued to
benefit from the secular shift occurring, every segment of our business
delivered year-over-year increases in revenue and gross profit. As a
result, we delivered bottom line growth of 36.2% in the fourth quarter.”
Engquist concluded, “Our business performed well in 2012. As we move
into 2013, we continue to invest in our fleet, expand our geographic
footprint and strengthen our foothold in the industrial sector to
leverage improving market opportunities. The extension in the bonus
depreciation deduction should prove to be positive for our distribution
business. Lastly, we recently completed a successful add-on notes
offering of $100 million of 7% senior unsecured notes due 2022, which
priced at 108.5% of par. This notes offering enhances our liquidity
profile and was leverage neutral, with the proceeds used to pay down a
portion of the senior secured credit facility. From operations to
capitalization, our Company is well positioned for continued growth in
2013.”
FINANCIAL DISCUSSION FOR FOURTH QUARTER 2012:
Revenue
Total revenues increased 15.3% to $250.1 million from $217.0 million in
the fourth quarter of 2011. Equipment rental revenues increased 28.9% to
$80.7 million compared with $62.6 million in the fourth quarter of 2011.
New equipment sales increased 0.5% to $87.0 million from $86.6 million
in the fourth quarter of 2011. Used equipment sales increased 49.6% to
$29.5 million compared to $19.7 million in the fourth quarter of 2011.
Parts sales increased 9.1% to $25.5 million from $23.3 million in the
fourth quarter of 2011. Service revenues increased 7.6% to $14.9 million
compared to $13.9 million a year ago.
Gross Profit
Gross profit increased 31.1% to $73.5 million from $56.1 million in the
fourth quarter of 2011. Gross margin was 29.4% for the quarter ended
December 31, 2012, compared to gross margin of 25.8% for the quarter
ended December 31, 2011.
On a segment basis, fourth quarter 2012 gross margin on rentals was
48.1% in this quarter compared to 44.5% in the fourth quarter of 2011
due to higher average rental rates on new contracts in the period and
lower rental expenses as a percentage of equipment rental revenues. On
average, rental rates increased 10.1% as compared to the fourth quarter
of 2011. Time utilization (based on original equipment cost) was 71.8%
in the fourth quarter of 2012 and 72.3% a year ago.
Gross margin on new equipment sales was 11.2% compared to 10.0% in the
fourth quarter a year ago. Gross margin on used equipment sales was
30.2% compared to 25.9% a year ago. Gross margin on parts sales was
27.4% in this quarter and 27.0% a year ago. Gross margin on service
revenues was 59.4% compared to 60.2% in the prior year.
Rental Fleet
At the end of the fourth quarter of 2012, the original acquisition cost
of the Company’s rental fleet was $883.0 million, an increase of $146.4
million from $736.6 million at the end of 2011. Dollar utilization was
36.4% compared to 33.9% for the fourth quarter of 2011. Dollar returns
increased reflecting higher year-over-year average rental rates.
Selling, General and Administrative Expenses
SG&A expenses for the fourth quarter of 2012 were $45.1 million compared
with $38.7 million last year, a $6.4 million, or 16.7%, increase. The
net increase in SG&A expenses is largely a result of increased
commission and incentive pay that resulted from higher rental and sales
revenues. For the fourth quarter of 2012, SG&A expenses as a percentage
of total revenues were 18.1% compared to 17.8% a year ago.
Income from Operations
Income from operations for the fourth quarter of 2012 was $28.5 million,
or 11.4% of revenues, compared with $17.7 million, or 8.1% of revenues,
a year ago.
Interest Expense
Interest expense for the fourth quarter of 2012 was $11.9 million
compared to $7.1 million in the fourth quarter of 2011.
Net Income
Net income was $10.7 million, or $0.31 per diluted share, compared to
net income of $7.9 million, or $0.23 per diluted share, a year ago. The
effective income tax rate was 36.1% compared to 26.0% a year ago.
EBITDA
EBITDA for the fourth quarter of 2012 increased 39.2% to $60.4 million
compared to $43.4 million a year ago. EBITDA, as a percentage of
revenues, was 24.1% compared to 20.0% a year ago.
FINANCIAL DISCUSSION FOR THE YEAR ENDED
DECEMBER 31, 2012:
Revenue
Total revenues increased 16.2% to $837.3 million from $720.6 million in
2011. Equipment rental revenues increased 26.6% to $288.6 million
compared with $228.0 million in 2011. New equipment sales increased 9.8%
to $241.7 million from $220.2 million in 2011. Used equipment sales
increased 22.5% to $104.6 million compared to $85.3 million in 2011.
Parts sales increased 5.4% to $99.6 million from $94.5 million in 2011.
Service revenues increased 4.8% to $56.6 million compared with $54.0
million a year ago.
Gross Profit
Gross profit increased 33.5% to $257.3 million from $192.7 million in
2011. Gross margin was 30.7% for 2012 as compared to 26.7% for 2011.
This increase in gross margin is primarily due to higher gross margins
on rental revenues, used equipment sales and other gross margins.
On a segment basis, gross margin on rentals increased to 47.0% from
41.5% in 2011 primarily due to higher average time utilization and
increased average rental rates. On average, 2012 rental rates increased
10.5% as compared to 2011. In 2012, time utilization (based on original
equipment cost) increased to 72.0% compared to 69.7% last year. In 2012,
time utilization (based on units available for rent) increased to 67.5%
from 66.2% a year ago.
Gross margin on new equipment sales was 11.4%, up from 10.9% in 2011.
Gross margin on used equipment sales increased to 29.2% from 23.8%.
Gross margin on parts sales increased to 27.4% from 26.8%. Gross margin
on service revenues was 61.1% compared to 61.0% in 2011.
Selling, General and Administrative Expenses
SG&A expenses for 2012 were $169.7 million compared with $153.4 million
last year, a $16.3 million, or a 10.6%, increase. In 2012, SG&A expenses
as a percentage of total revenues were 20.3% compared to 21.3% in 2011.
Income from Operations
Income from operations in 2012 was $89.2 million, or 10.7% of revenues,
compared to $40.1 million, or 5.6% of revenues in 2011.
Interest Expense
Interest expense in 2012 was $35.5 million compared to $28.7 million in
2011.
Net Income and Adjusted Net Income
Net Income was $28.8 million, or $0.82 per diluted share, compared to
$8.9 million, or $0.26 per diluted share in 2011. Adjusted Net Income
was $35.4 million, or $1.01 per diluted share in 2012. The effective
income tax rate was 35.1% in 2012 as compared to 26.5% in 2011.
EBITDA and Adjusted EBITDA
EBITDA for 2012 increased $56.2 million to $196.5 million from $140.3
million in 2011. EBITDA as a percentage of revenues was 23.5% compared
to 19.5% in 2011. Adjusted EBITDA increased $66.4 million, or 47.4%, to
$206.7 million from $140.3 million in 2011. Adjusted EBITDA as a
percentage of revenues was 24.7% compared with 19.5% in 2011.
Non-GAAP Financial Measures
This press release contains certain Non-GAAP measures (EBITDA, Adjusted
EBITDA and Adjusted Net Income). Please refer to our Current Report on
Form 8-K for a description of these measures and a discussion of our use
of these measures. EBITDA, Adjusted EBITDA, and Adjusted Net Income as
calculated by the Company, are not necessarily comparable to similarly
titled measures reported by other companies. Adjusted Net Income
provides useful information concerning future profitability.
Additionally, these Non-GAAP measures are not measurements 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 fourth
quarter results today, March 5, 2013, at 10:00 a.m. (Eastern Time). To
listen to the call, participants should dial 719-325-4761 approximately
10 minutes prior to the start of the call. A telephonic replay will be
available after 1:00 p.m. (Eastern Time) on March 5, 2013, and will
continue through March 18, 2013, by dialing 719-457-0820 and entering
confirmation code 1740789.
The live broadcast of the Company’s quarterly conference call will be
available online at www.he-equipment.com
or www.earnings.com
on March 5, 2013, 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 66 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 service 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, and 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 service 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” 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, as well as the depth and duration of the
macroeconomic downturn related to decreases in construction and
industrial activities, and the impact of conditions of the global credit
markets and their effect on construction spending activity and the
economy in general; (2) relationships with equipment suppliers; (3)
increased maintenance and repair costs as we age our fleet and decreases
in our equipments’ residual value; (4) our indebtedness; (5) the risks
associated with the expansion of our business; (6) our possible
inability to effectively integrate any businesses we acquire; (7)
competitive pressures; (8) compliance with laws and regulations,
including those relating to environmental matters and corporate
governance matters; and (9) 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 December
31,
|
|
Twelve Months Ended December
31,
|
|
|
|
|
2012
|
|
|
|
2011
|
|
|
|
|
2012
|
|
|
|
2011
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Equipment rentals
|
|
|
$
|
80,700
|
|
|
$
|
62,598
|
|
|
|
$
|
288,641
|
|
|
$
|
228,038
|
|
New equipment sales
|
|
|
|
87,011
|
|
|
|
86,582
|
|
|
|
|
241,721
|
|
|
|
220,211
|
|
Used equipment sales
|
|
|
|
29,463
|
|
|
|
19,692
|
|
|
|
|
104,563
|
|
|
|
85,347
|
|
Parts sales
|
|
|
|
25,460
|
|
|
|
23,345
|
|
|
|
|
99,621
|
|
|
|
94,511
|
|
Service revenues
|
|
|
|
14,939
|
|
|
|
13,882
|
|
|
|
|
56,554
|
|
|
|
53,954
|
|
Other
|
|
|
|
12,544
|
|
|
|
10,920
|
|
|
|
|
46,215
|
|
|
|
38,490
|
|
Total revenues
|
|
|
|
250,117
|
|
|
|
217,019
|
|
|
|
|
837,315
|
|
|
|
720,551
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues:
|
|
|
|
|
|
|
|
|
|
Rental depreciation
|
|
|
|
28,239
|
|
|
|
22,635
|
|
|
|
|
102,966
|
|
|
|
86,781
|
|
Rental expense
|
|
|
|
13,677
|
|
|
|
12,115
|
|
|
|
|
50,052
|
|
|
|
46,599
|
|
New equipment sales
|
|
|
|
77,252
|
|
|
|
77,881
|
|
|
|
|
214,197
|
|
|
|
196,152
|
|
Used equipment sales
|
|
|
|
20,562
|
|
|
|
14,598
|
|
|
|
|
73,988
|
|
|
|
65,042
|
|
Parts sales
|
|
|
|
18,497
|
|
|
|
17,048
|
|
|
|
|
72,323
|
|
|
|
69,222
|
|
Service revenues
|
|
|
|
6,070
|
|
|
|
5,525
|
|
|
|
|
21,977
|
|
|
|
21,024
|
|
Other
|
|
|
|
12,327
|
|
|
|
11,166
|
|
|
|
|
44,510
|
|
|
|
43,028
|
|
Total cost of revenues
|
|
|
|
176,624
|
|
|
|
160,968
|
|
|
|
|
580,013
|
|
|
|
527,848
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
73,493
|
|
|
|
56,051
|
|
|
|
|
257,302
|
|
|
|
192,703
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general, and administrative expenses
|
|
|
|
45,149
|
|
|
|
38,673
|
|
|
|
|
169,653
|
|
|
|
153,354
|
|
Gain on sales of property and equipment, net
|
|
|
|
114
|
|
|
|
272
|
|
|
|
|
1,592
|
|
|
|
793
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
|
28,458
|
|
|
|
17,650
|
|
|
|
|
89,241
|
|
|
|
40,142
|
|
|
|
|
|
|
|
|
|
|
|
Loss on early extinguishment of debt
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
(10,180
|
)
|
|
|
-
|
|
Interest expense
|
|
|
|
(11,873
|
)
|
|
|
(7,120
|
)
|
|
|
|
(35,541
|
)
|
|
|
(28,727
|
)
|
Other income, net
|
|
|
|
177
|
|
|
|
100
|
|
|
|
|
928
|
|
|
|
726
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes
|
|
|
|
16,762
|
|
|
|
10,630
|
|
|
|
|
44,448
|
|
|
|
12,141
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
|
6,058
|
|
|
|
2,768
|
|
|
|
|
15,612
|
|
|
|
3,215
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$
|
10,704
|
|
|
$
|
7,862
|
|
|
|
$
|
28,836
|
|
|
$
|
8,926
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME PER SHARE
|
|
|
|
|
|
|
|
|
|
Basic – Net income per share
|
|
|
$
|
0.31
|
|
|
$
|
0.23
|
|
|
|
$
|
0.83
|
|
|
$
|
0.26
|
|
Basic – Weighted average number of common shares outstanding
|
|
|
|
34,958
|
|
|
|
34,806
|
|
|
|
|
34,890
|
|
|
|
34,759
|
|
|
|
|
|
|
|
|
|
|
|
Diluted – Net income per share
|
|
|
$
|
0.31
|
|
|
$
|
0.23
|
|
|
|
$
|
0.82
|
|
|
$
|
0.26
|
|
Diluted – Weighted average number of common shares outstanding
|
|
|
|
35,022
|
|
|
|
34,898
|
|
|
|
|
34,978
|
|
|
|
34,887
|
|
Dividends declared per common share
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
$
|
7.00
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
H&E EQUIPMENT SERVICES, INC.
|
SELECTED BALANCE SHEET DATA (unaudited)
|
(Amounts in thousands)
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
|
2012
|
|
2011
|
Cash
|
|
|
$
|
8,894
|
|
$
|
24,215
|
Rental equipment, net
|
|
|
|
583,349
|
|
|
450,877
|
Total assets
|
|
|
|
942,399
|
|
|
753,305
|
Total debt (1) |
|
|
|
690,166
|
|
|
268,660
|
Total liabilities
|
|
|
|
893,763
|
|
|
489,098
|
Stockholders’ equity
|
|
|
|
48,636
|
|
|
264,207
|
Total liabilities and stockholders’ equity
|
|
|
$
|
942,399
|
|
$
|
753,305
|
|
|
|
|
|
|
(1) Total debt consists of the aggregate amounts outstanding
on the senior secured credit facility, senior unsecured notes and
capital lease obligations. Total debt as presented as of December 31,
2012 includes $8.9 million of unaccreted note discount related to the
Company’s senior unsecured notes.
H&E EQUIPMENT SERVICES, INC.
|
UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
|
(Amounts in thousands)
|
|
|
|
|
Three Months Ended December 31
|
|
Twelve Months Ended December 31
|
|
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$
|
10,704
|
|
$
|
7,862
|
|
$
|
28,836
|
|
$
|
8,926
|
Interest expense
|
|
|
|
11,873
|
|
|
7,120
|
|
|
35,541
|
|
|
28,727
|
Provision for income taxes
|
|
|
|
6,058
|
|
|
2,768
|
|
|
15,612
|
|
|
3,215
|
Depreciation
|
|
|
|
31,723
|
|
|
25,580
|
|
|
116,447
|
|
|
99,036
|
Amortization of intangibles
|
|
|
|
-
|
|
|
25
|
|
|
66
|
|
|
362
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
|
$
|
60,358
|
|
$
|
43,355
|
|
$
|
196,502
|
|
$
|
140,266
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on early extinguishment of debt
|
|
|
|
-
|
|
|
-
|
|
|
10,180
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
|
$
|
60,358
|
|
$
|
43,355
|
|
$
|
206,682
|
|
$
|
140,266
|
|
|
|
|
|
|
|
|
|
|
H&E EQUIPMENT SERVICES, INC.
|
UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
|
(Amounts in thousands, except per share amounts)
|
|
|
|
|
Twelve Months Ended December 31, 2012
|
|
|
|
As Reported
|
|
Adjustment (1)
|
|
Adjusted
|
Income before provision for income taxes
|
|
|
$44,448
|
|
$10,180
|
|
$54,628
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
|
15,612
|
|
|
3,573
|
|
|
19,185
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$
|
28,836
|
|
$
|
6,607
|
|
$
|
35,443
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME PER SHARE
|
|
|
|
|
|
|
|
Basic – Net income per share
|
|
|
$
|
0.83
|
|
|
|
$
|
1.02
|
Diluted – Net income per share
|
|
|
$
|
0.82
|
|
|
|
$
|
1.01
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding
|
|
|
|
|
|
|
|
Basic
|
|
|
|
34,890
|
|
|
|
|
34,890
|
Diluted
|
|
|
|
34,978
|
|
|
|
|
34,978
|
|
|
|
|
|
|
|
|
(1) Adjustment includes premium paid to repurchase or redeem
the Company’s 8 3/8% senior unsecured notes and the write-off of
unamortized deferred transaction costs.