H&E Reports Results for First-Quarter of 2015 | Construction News

H&E Equipment Services recently reported its financial results for the first quarter of 2015.

John Engquist, H&E Equipment Services’ chief executive officer, said, “Overall, the first quarter approximated our expectations as we anticipated a challenging first quarter in certain areas of our business due to normal seasonality, extreme winter weather in many of our regions and the sharp decline in the oil and gas markets. Demand for rental equipment remained strong despite significant weather headwinds, with revenue increasing 17.6% from a year ago. Certain market indicators continue to validate an accelerating recovery in the commercial construction markets in spite of the ongoing weakness in the oil and gas industries. As we cautioned on our fourth quarter earnings call, a decline in new equipment sales, specifically cranes, was expected due to decreased oil and gas activities. While we did experience some decline in rental demand due to the softness in the oil patch, increased commercial construction activity in other markets helped mitigate the decreased activity and our strong fleet management systems and transferrable fleet mix allowed us to quickly and efficiently redeploy portions of our fleet into other regions.”

Engquist concluded, “We believe the healthy momentum in the commercial construction markets and significant industrial expansion in Louisiana and Texas will continue to drive further growth in 2015, especially in the back half of the year. Given the recent drop in the price of oil and gas and the difficulty investors may have in understanding the impact of such change on the trends in our business, we are providing 2015 guidance for revenue and EBITDA,” said Engquist. “We have no current intent to provide this type of guidance for periods beyond 2015. For 2015, we expect our revenues to range from $1.065 billion to $1.088 billion and EBITDA in the range of $334 million to $352 million.”

FIRST QUARTER 2015 SUMMARY

  • Revenues decreased 4.1% to $227.4 million versus $237.2 million a year ago.
  • Net income decreased to $6.1 million in the first quarter compared to net income of $7.4 million a year ago.
  • EBITDA increased 10.5% to $69.3 million from $62.7 million a year ago, yielding a margin of 30.5% compared to 26.4% of revenues a year ago.
  • Rental revenues increased 17.6%, or $15.2 million, to $101.4 million compared to a year ago.
  • Gross margin was 33.6% as compared to 30.7% a year ago.
  • Rental gross margins were 45.2% in the first quarter of 2015 and the first quarter a year ago.
  • Average time utilization (based on original equipment cost) was 67.5% compared to 69.2% a year ago. Average time utilization (based on units available for rent) was 64.2% compared to 64.5% last year.
  • Average rental rates increased 3.0% compared to a year ago.
  • Dollar utilization was 32.3% in the first quarter compared to 34.1% a year ago.
  • Average rental fleet age at March 31, 2015 was 32.5 months compared to an industry average age of 43.3 months.

 

FINANCIAL DISCUSSION FOR FIRST QUARTER 2015:

Revenue

Total revenues decreased 4.1% to $227.4 million in the first quarter of 2015 from $237.2 million in the first quarter of 2014. Equipment rental revenues increased to $101.4 million compared with $86.2 million in the first quarter of 2014. New equipment sales decreased 36.0% to $44.5 million from $69.5 million a year ago. Used equipment sales decreased 14.6% to $25.1 million compared to $29.3 million a year ago. Parts sales increased 5.0% to $27.1 million from $25.8 million in the first quarter of 2014. Service revenues increased 9.6% to $15.0 million compared with $13.6 million a year ago.

Gross Profit

Gross profit increased 4.9% to $76.3 million from $72.8 million in the first quarter of 2014. Gross margin was 33.6% for the quarter ended March 31, 2015, as compared to 30.7% for the quarter ended March 31, 2014. On a segment basis, gross margin on rentals was 45.2% in the first quarter of 2015 and 2014. On average, rental rates were 3.0% higher than rates in the first quarter of 2014. Time utilization (based on original equipment cost) was 67.5% in the first quarter of 2015 compared to 69.2% a year ago. Time utilization (based on units available for rent) was 64.2% in the first quarter of 2015 compared to 64.5% a year ago.

Gross margins on new equipment sales were 11.7% compared to 11.2% in the first quarter a year ago. Gross margins on used equipment sales were 32.6% compared to 30.4% a year ago. Gross margins on parts sales were 27.9% in the first quarter of 2015 and 29.1% in the first quarter of 2014. Gross margins on service revenues were 64.7% for the first quarter of 2015 compared to 65.3% in the first quarter of 2014.

Rental Fleet

At the end of the first quarter of 2015, the original acquisition cost of the Company’s rental fleet was $1,258.6 million, an increase of $234.5 million from $1,024.1 million at the end of the first quarter of 2014. Dollar utilization was 32.3% compared to 34.1% for the first quarter of 2014.

Selling, General and Administrative Expenses

SG&A expenses for the first quarter of 2015 were $53.5 million compared with $48.9 million last year, a $4.6 million, or 9.4% increase. SG&A expenses in the first quarter of 2015 increased as a percentage of total revenues to 23.5% compared to 20.6% last year. The increase in SG&A expenses is largely due to higher salaries and wages.

Income from Operations

Income from operations for the first quarter of 2015 was $23.3 million, or 10.3% of revenues, compared to $24.6 million, or 10.4% of revenues, a year ago.

Interest Expense

Interest expense for the first quarter of 2015 was $13.4 million compared with $12.7 million a year ago.

Net Income

Net income was $6.1 million, or $0.17 per diluted share, in the first quarter of 2015 compared to net income of $7.4 million, or $0.21 per diluted share, in the first quarter of 2014. The effective income tax rate was 40.6% in the first quarter compared to 39.3% a year ago.

EBITDA

EBITDA for the first quarter of 2015 increased 10.5%, or $6.6 million, to $69.3 million from $62.7 million in the first quarter of 2014. EBITDA as a percentage of revenues was 30.5% compared with 26.4% in the first quarter of 2014.

2015 Outlook

“We believe our business outlook remains positive due to the expected strength in the commercial construction markets and significant industrial expansion in Louisiana and Texas. Given the recent drop in the price of oil and gas and the difficulty investors may have in understanding the impact of such change on the trends in our business, we are providing 2015 guidance for revenue and EBITDA,” said Engquist. We have no current intent to provide this type of guidance for periods beyond 2015.

  • Revenue – The Company expects 2015 revenue in the range of $1.065 billion to $1.088 billion.
  • EBITDA – The Company expects 2015 EBITDA in the range of $334 million to $352 million.

H&E EQUIPMENT SERVICES, INC.

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

(Amounts in thousands, except per share amounts)

 

 

  

 

  
  

Three Months Ended

  

March 31,

  

2015

 

2014

      

 

Revenues:

      

Equipment rentals

 

$

101,389

  

$

86,224

 

New equipment sales

  

44,537

   

69,547

 

Used equipment sales

  

25,070

   

29,345

 

Parts sales

  

27,085

   

25,802

 

Service revenues

  

14,956

   

13,648

 

Other

 

 

14,373

 

 

 

12,663

 

Total revenues

 

 

227,410

 

 

 

237,229

 

      

 

Cost of revenues:

      

Rental depreciation

  

39,944

   

32,998

 

Rental expense

  

15,611

   

14,224

 

New equipment sales

  

39,319

   

61,734

 

Used equipment sales

  

16,886

   

20,418

 

Parts sales

  

19,519

   

18,282

 

Service revenues

  

5,277

   

4,741

 

Other

 

 

14,514

 

 

 

12,048

 

Total cost of revenues

 

 

151,070

 

 

 

164,445

 

      

 

Gross profit

  

76,340

   

72,784

 
      

 

Selling, general, and administrative expenses

  

53,466

   

48,856

 

Gain on sales of property and equipment, net

 

 

458

 

 

 

663

 

      

 

Income from operations

 

 

23,332

 

 

 

24,591

 

      

 

Interest expense

  

(13,445

)

  

(12,650

)

Other income, net

 

 

354

 

 

 

306

 

      

 

Income before provision for income taxes

  

10,241

   

12,247

 
      

 

Provision for income taxes

 

 

4,155

 

 

 

4,811

 

      

 

Net income

 

$

6,086

 

 

$

7,436

 

      

 

NET INCOME PER SHARE

      

Basic – Net income per share

 

$

0.17

 

 

$

0.21

 

Basic – Weighted average number of common shares outstanding

 

 

35,227

 

 

 

35,108

 

      

 

Diluted – Net income per share

 

$

0.17

 

 

$

0.21

 

Diluted – Weighted average number of common shares outstanding

 

 

35,286

 

 

 

35,218

 

Dividends declared per common share

 

$

0.25

 

 

$

-

 

        

 

 

 

 

  

 

  

H&E EQUIPMENT SERVICES, INC.

SELECTED BALANCE SHEET DATA (unaudited)

(Amounts in thousands)

      

 

      

 

  

March 31,

 

December 31,

  

2015

 

2014

      

 

Cash

 

$

4,552

 

$

15,861

Rental equipment, net

  

888,205

  

889,706

Total assets

  

1,345,699

  

1,358,804

Total debt (1)

  

894,899

  

892,018

Total liabilities

  

1,214,040

  

1,225,437

Stockholders’ equity

  

131,659

  

133,367

Total liabilities and stockholders’ equity

 

$

1,345,699

 

$

1,358,804

      

 

      

 

(1) Total debt consists of the amounts outstanding on the senior secured credit facility, capital lease obligations and the aggregate amount outstanding on the senior unsecured notes.

 

 

 

H&E EQUIPMENT SERVICES, INC.

UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(Amounts in thousands)

 

 

  

 

  
      

 

  

Three Months Ended

  

March 31,

  

2015

 

2014

      

 

Net income

 

$

6,086

 

$

7,436

Interest expense

  

13,445

  

12,650

Provision for income taxes

  

4,155

  

4,811

Depreciation

 

 

45,568

 

 

37,778

      

 

EBITDA

 

$

69,254

 

$

62,675