Exhibit 99.1
| | |
| | News Release |
Contacts:
Leslie S. Magee
Chief Financial Officer
225-298-5261
lmagee@he-equipment.com
Kevin S. Inda
Vice President of Investor Relations
225-298-5318
kinda@he-equipment.com
H&E Equipment Services Reports First Quarter 2017 Results
BATON ROUGE, Louisiana — (April 27, 2017) — H&E Equipment Services, Inc. (NASDAQ: HEES) today announced results for the first quarter ended March 31, 2017.
FIRST QUARTER 2017 SUMMARY
| | • | | Revenues decreased 8.2% to $226.8 million versus $247.0 million a year ago. |
| | • | | Net income was $5.4 million in the first quarter compared to net income of $5.6 million a year ago. |
| | • | | EBITDA was $68.8 million in the first quarter compared to EBITDA of $69.1 million a year ago, yielding a higher margin of 30.3% of revenues compared to 28.0% a year ago. |
| | • | | Rental revenues increased 4.4% to $107.3 million in the first quarter compared to $102.8 million a year ago. |
| | • | | New equipment sales decreased 40.1% to $34.3 million in the first quarter compared to $57.2 million a year ago. |
| | • | | Used equipment sales increased 4.7% to $28.9 million in the first quarter compared to $27.6 million a year ago. |
| | • | | Gross margin was 34.2% compared to 32.9% a year ago. |
| | • | | Rental gross margins were 44.8% in the first quarter of 2017 compared to 45.3% a year ago. |
| | • | | Average time utilization (based on original equipment cost) was 68.5% compared to 66.3% a year ago. Average time utilization (based on units available for rent) was 66.0% compared to 64.6% last year. |
| | • | | Average rental rates decreased 0.5% compared to a year ago. |
| | • | | Dollar utilization was 32.4% in the first quarter compared to 32.2% a year ago. |
| | • | | Average rental fleet age at March 31, 2017, was 34.1 months compared to an industry average age of 41.9 months. |
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John Engquist, H&E Equipment Services’ chief executive officer, said, “The first quarter results along with the current trends in our business have reinforced our expectations for 2017. Our rental business performed well in the first quarter, with revenues increasing 4.4% from a year ago, margins holding solid at 44.8% and rates down only 0.5% year-over-year. As we anticipated, the ongoing challenges in the new equipment component of our distribution business persisted, due primarily to weak crane demand. We also expect our used equipment sales to trend down during the balance of this year as we intentionally sell less of our rental fleet as a result of higher anticipated rental demand in our non-residential construction markets.”
Engquist concluded, “We believe the opportunities that exist for our business in 2017 are encouraging as demand for rental equipment is increasing throughout the regions we serve. The environment in our Gulf Coast region remains positive as a result of several factors. Texas, our largest market, continues to experience a very healthy economy that is driving an array of non-residential projects. The energy markets are also improving as a result of increased shale drilling activity. In both Texas and Louisiana, a solid lineup of large industrial projects are either underway, at breaking ground stage, or scheduled for construction over the next few years.”
FINANCIAL DISCUSSION FOR FIRST QUARTER 2017:
Revenue
Total revenues decreased 8.2% to $226.8 million in the first quarter of 2017 from $247.0 million in the first quarter of 2016. Equipment rental revenues increased 4.4% to $107.3 million compared with $102.8 million in the first quarter of 2016. New equipment sales decreased 40.1% to $34.3 million from $57.2 million a year ago. Used equipment sales increased 4.7% to $28.9 million compared to $27.6 million a year ago. Parts sales decreased 9.4% to $25.3 million from $28.0 million in the first quarter of 2016. Service revenues decreased 7.5% to $15.1 million compared with $16.3 million a year ago.
Gross Profit
Gross profit decreased 4.3% to $77.7 million from $81.1 million in the first quarter of 2016. Gross margin was 34.2% for the quarter ended March 31, 2017, as compared to 32.9% for the quarter ended March 31, 2016. On a segment basis, gross margin on rentals was 44.8% in the first quarter of 2017 compared to 45.3% in the first quarter of 2016. On average, rental rates were 0.5% lower than rates in the first quarter of 2016. Time utilization (based on original equipment cost) was 68.5% in the first quarter of 2017 compared to 66.3% a year ago. Time utilization (based on units available for rent) was 66.0% in the first quarter of 2017 compared to 64.6% a year ago.
Gross margins on new equipment sales decreased to 11.4% in the first quarter compared to 11.7% a year ago. Gross margins on used equipment sales decreased to 31.2% compared to 32.9% a year ago. Gross margins on parts sales increased to 28.1% in the first quarter of 2017 compared to 27.6% in the first quarter of 2016. Gross margins on service revenues decreased to 66.9% for the first quarter of 2017 compared to 67.5% in the first quarter of 2016.
Rental Fleet
At the end of the first quarter of 2017, the original acquisition cost of the Company’s rental fleet was $1.3 billion, an increase of $58.0 million from the end of the first quarter of 2016. Dollar utilization was 32.4% compared to 32.2% for the first quarter of 2016.
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Selling, General and Administrative Expenses
SG&A expenses for the first quarter of 2017 were $57.3 million compared with $59.4 million the prior year, a $2.1 million, or 3.5%, decrease. SG&A expenses in the first quarter of 2017 increased as a percentage of total revenues to 25.3% compared to 24.0% the prior year. Expenses related to new branch expansions increased $0.5 million compared to a year ago.
Income from Operations
Income from operations for the first quarter of 2017 was $21.3 million, or 9.4% of revenues, compared to $22.4 million, or 9.1% of revenues, a year ago.
Interest Expense
Interest expense for the first quarter of 2017 was $13.2 million compared to $13.4 million a year ago.
Net Income
Net income was $5.4 million, or $0.15 per diluted share, in the first quarter of 2017 compared to net income of $5.6 million, or $0.16 per diluted share, in the first quarter of 2016. The effective income tax rate decreased to 36.8% in the first quarter compared to 41.0% a year ago due to an increase in favorable permanent items and lower state income taxes.
EBITDA
EBITDA for the first quarter of 2017 was $68.8 million compared to $69.1 million in the first quarter of 2016. EBITDA as a percentage of revenues was 30.3% compared with 28.0% in the first quarter of 2016.
Non-GAAP Financial Measures
This press release contains a certain Non-GAAP measure (EBITDA). Please refer to our Current Report on Form 8-K for a description of this measure and of our use of this measure. This measure as calculated by the Company is not necessarily comparable to similarly titled measures reported by other companies. Additionally, this Non-GAAP measure is not a measurement of financial performance or liquidity under GAAP and should not be considered as an alternative to the Company’s other financial information determined under GAAP.
Conference Call
The Company’s management will hold a conference call to discuss first quarter results today, April 27, 2017, at 10:00 a.m. (Eastern Time). To listen to the call, participants should dial 719-325-2291 approximately 10 minutes prior to the start of the call. A telephonic replay will become available after 1:00 p.m. (Eastern Time) on April 27, 2017, and will continue through May 6, 2017, by dialing 719-457-0820 and entering the confirmation code 4897432.
The live broadcast of the Company’s quarterly conference call will be available online atwww.he-equipment.com on April 27, 2017, 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 atwww.he-equipment.com prior to the call. The presentation materials will be in Adobe Acrobat format.
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About H&E Equipment Services, Inc.
The Company is one of the largest integrated equipment services companies in the United States with 78 full-service facilities throughout the West Coast, Intermountain, Southwest, Gulf Coast, Mid-Atlantic and Southeast regions. The Company is focused on heavy construction and industrial equipment and rents, sells and provides parts and services support for four core categories of specialized equipment: (1) hi-lift or aerial platform equipment; (2) cranes; (3) earthmoving equipment; and (4) industrial lift trucks. By providing equipment rental, sales,on-site parts, repair and maintenance functions under one roof, the Company is a one-stop provider for its customers’ varied equipment needs. This full service approach provides the Company with multiple points of customer contact, enabling it to maintain a high quality rental fleet, as well as an effective distribution channel for fleet disposal and provides cross-selling opportunities among its new and used equipment sales, rental, parts sales and services operations.
Forward-Looking Statements
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”, “foresee” and similar expressions constitute forward-looking statements. Forward-looking statements involve known and unknown risks and uncertainties, which could cause actual results to differ materially from those contained in any forward-looking statement. Such factors include, but are not limited to, the following: (1) general economic conditions and construction and industrial activity in the markets where we operate in North America; (2) our ability to forecast trends in our business accurately, and the impact of economic downturns and economic uncertainty in the markets we serve; (3) the impact of conditions in the global credit and commodity markets and their effect on construction spending and the economy in general; (4) relationships with equipment suppliers; (5) increased maintenance and repair costs as we age our fleet and decreases in our equipment’s residual value; (6) our indebtedness; (7) risks associated with the expansion of our business; (8) our possible inability to integrate any businesses we acquire; (9) competitive pressures; (10) security breaches and other disruptions in our information technology systems; (11) adverse weather events or natural disasters; (12) compliance with laws and regulations, including those relating to environmental matters and corporate governance matters; and (13) other factors discussed in our public filings, including the risk factors included in the Company’s most recent Annual Report on Form 10-K. Investors, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. Except as required by applicable law, including the securities laws of the United States and the rules and regulations of the SEC, we are under no obligation to publicly update or revise any forward-looking statements after the date of this release.
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H&E EQUIPMENT SERVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(Amounts in thousands, except per share amounts)
| | | | | | | | |
| | | Three Months Ended
March 31, | |
| | | 2017 | | | 2016 | |
Revenues: | | | | | | | | |
Equipment rentals | | $ | 107,317 | | | $ | 102,838 | |
New equipment sales | | | 34,274 | | | | 57,179 | |
Used equipment sales | | | 28,863 | | | | 27,574 | |
Parts sales | | | 25,331 | | | | 27,969 | |
Service revenues | | | 15,080 | | | | 16,301 | |
Other | | | 15,963 | | | | 15,149 | |
| | | | | | | | |
Total revenues | | | 226,828 | | | | 247,010 | |
| | |
Cost of revenues: | | | | | | | | |
Rental depreciation | | | 40,903 | | | | 39,497 | |
Rental expense | | | 18,374 | | | | 16,763 | |
New equipment sales | | | 30,381 | | | | 50,474 | |
Used equipment sales | | | 19,861 | | | | 18,512 | |
Parts sales | | | 18,213 | | | | 20,263 | |
Service revenues | | | 4,999 | | | | 5,301 | |
Other | | | 16,425 | | | | 15,056 | |
| | | | | | | | |
Total cost of revenues | | | 149,156 | | | | 165,866 | |
| | | | | | | | |
Gross profit | | | 77,672 | | | | 81,144 | |
Selling, general, and administrative expenses | | | 57,318 | | | | 59,374 | |
Gain on sales of property and equipment, net | | | 971 | | | | 662 | |
| | | | | | | | |
Income from operations | | | 21,325 | | | | 22,432 | |
Interest expense | | | (13,232 | ) | | | (13,407 | ) |
Other income, net | | | 437 | | | | 430 | |
| | | | | | | | |
Income before provision for income taxes | | | 8,530 | | | | 9,455 | |
Provision for income taxes | | | 3,140 | | | | 3,881 | |
| | | | | | | | |
Net income | | $ | 5,390 | | | $ | 5,574 | |
| | | | | | | | |
NET INCOME PER SHARE | | | | | | | | |
Basic – Net income per share | | $ | 0.15 | | | $ | 0.16 | |
| | | | | | | | |
Basic – Weighted average number of common shares outstanding | | | 35,465 | | | | 35,341 | |
| | | | | | | | |
Diluted – Net income per share | | $ | 0.15 | | | $ | 0.16 | |
| | | | | | | | |
Diluted – Weighted average number of common shares outstanding | | | 35,621 | | | | 35,398 | |
| | | | | | | | |
Dividends declared per common share | | $ | 0.275 | | | $ | 0.275 | |
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H&E EQUIPMENT SERVICES, INC.
SELECTED BALANCE SHEET DATA (unaudited)
(Amounts in thousands)
| | | | | | | | |
| | | March 31, | | | December 31, | |
| | | 2017 | | | 2016 | |
Cash | | $ | 5,040 | | | $ | 7,683 | |
Rental equipment, net | | | 877,477 | | | | 893,816 | |
Total assets | | | 1,262,686 | | | | 1,241,611 | |
Total debt (1) | | | 784,011 | | | | 794,346 | |
Total liabilities | | | 1,122,263 | | | | 1,098,846 | |
Stockholders’ equity | | | 140,423 | | | | 142,765 | |
Total liabilities and stockholders’ equity | | $ | 1,262,686 | | | $ | 1,241,611 | |
| (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, | |
| | | 2017 | | | 2016 | |
Net income | | $ | 5,390 | | | $ | 5,574 | |
Interest expense | | | 13,232 | | | | 13,407 | |
Provision for income taxes | | | 3,140 | | | | 3,881 | |
Depreciation | | | 46,998 | | | | 46,199 | |
| | | | | | | | |
EBITDA | | $ | 68,760 | | | $ | 69,061 | |
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