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 Second Quarter 2017 Results
BATON ROUGE, Louisiana — (July 27, 2017)— H&E Equipment Services, Inc. (NASDAQ: HEES) today announced results for the second quarter ended June 30, 2017.
SECOND QUARTER 2017 SUMMARY
| | • | | Revenues increased 3.0% to $249.4 million versus $242.1 million a year ago. |
| | • | | Net income was $9.9 million in the second quarter compared to net income of $7.5 million a year ago. |
| | • | | Adjusted EBITDA increased 9.1% to $79.1 million in the second quarter compared to $72.5 million a year ago, yielding a higher margin of 31.7% of revenues compared to 29.9% a year ago. |
| | • | | Rental revenues increased 8.9% to $118.4 million in the second quarter compared to $108.7 million a year ago. |
| | • | | New equipment sales decreased 8.5% to $45.7 million in the second quarter compared to $49.9 million a year ago. |
| | • | | Used equipment sales increased 1.4% to $24.1 million in the second quarter compared to $23.8 million a year ago. |
| | • | | Gross margin was 35.0% compared to 33.8% a year ago. |
| | • | | Rental gross margins were 47.6% in the second quarter of 2017 compared to 46.9% a year ago. |
| | • | | Average time utilization (based on original equipment cost) was 72.2% compared to 70.1% a year ago. Average time utilization (based on units available for rent) was 69.9% compared to 67.5% last year. |
| | • | | Average rental rates increased 0.3% compared to a year ago and 0.3% sequentially. |
-MORE-
H&E Equipment Services Reports Second Quarter 2017 Results
Page 2
July 27, 2017
| | • | | Dollar utilization was 34.9% in the second quarter compared to 33.9% a year ago. |
| | • | | Average rental fleet age at June 30, 2017, was 33.8 months compared to an industry average age of 43.2 months. |
John Engquist, H&E Equipment Services’ chief executive officer, said, “Demand in thenon-residential construction markets we serve was strong during the second quarter and as a result, rental revenues increased 8.9%, physical utilization increased 210 basis points, and rental gross margins increased to 47.6%. We also achieved a 0.3% positive increase in rental rates compared to a year ago and compared to the first quarter of this year. We were very pleased to see positive rates this early in the year.”
Engquist concluded, “As we move into the second half of the year, we believe the trends in our business and the optimism in ourend-user markets remain positive. We are also extremely excited about our pending acquisition of Neff Corporation, which we expect will significantly penetrate and grow our business in strategic business segments.”
FINANCIAL DISCUSSION FOR SECOND QUARTER 2017:
Revenue
Total revenues increased 3.0% to $249.4 million in the second quarter of 2017 from $242.1 million in the second quarter of 2016. Equipment rental revenues increased 8.9% to $118.4 million compared with $108.7 million in the second quarter of 2016. New equipment sales decreased 8.5% to $45.7 million from $49.9 million a year ago. Used equipment sales increased 1.4% to $24.1 million compared to $23.8 million a year ago. Parts sales increased 4.9% to $28.0 million from $26.7 million in the second quarter of 2016. Service revenues decreased 5.9% to $15.9 million compared with $16.9 million a year ago.
Gross Profit
Gross profit increased 6.9% to $87.3 million from $81.7 million in the second quarter of 2016. Gross margin was 35.0% for the quarter ended June 30, 2017, as compared to 33.8% for the quarter ended June 30, 2016. On a segment basis, gross margin on rentals was 47.6% in the second quarter of 2017 compared to 46.9% in the second quarter of 2016. On average, rental rates were 0.3% higher than rates in the second quarter of 2016. Time utilization (based on original equipment cost) was 72.2% in the second quarter of 2017 compared to 70.1% a year ago. Time utilization (based on units available for rent) was 69.9% in the second quarter of 2017 compared to 67.5% a year ago.
Gross margins on new equipment sales increased to 11.4% in the second quarter compared to 10.7% a year ago. Gross margins on used equipment sales increased to 29.5% compared to 29.0% a year ago. Gross margins on parts sales decreased to 27.2% in the second quarter of 2017 compared to 27.9% in the second quarter of 2016. Gross margins on service revenues increased to 66.7% for the second quarter of 2017 compared to 64.7% in the second quarter of 2016.
Rental Fleet
At the end of the second quarter of 2017, the original acquisition cost of the Company’s rental fleet was $1.4 billion, an increase of $73.8 million from the end of the second quarter of 2016. Dollar utilization was 34.9% compared to 33.9% for the second quarter of 2016.
-MORE-
H&E Equipment Services Reports Second Quarter 2017 Results
Page 3
July 27, 2017
Selling, General and Administrative Expenses
SG&A expenses for the second quarter of 2017 were $59.8 million compared with $57.0 million the prior year, a $2.8 million, or 4.8%, increase. SG&A expenses in the second quarter of 2017 increased as a percentage of total revenues to 24.0% compared to 23.6% the prior year. Expenses related to new branch expansions increased $0.8 million compared to a year ago. Excluding transaction costs of $2.2 million related to the Neff acquisition, SG&A expenses for the second quarter were $57.6 million and 23.1% as a percentage of total revenues.
Income from Operations
Income from operations for the second quarter of 2017 increased 13.0% to $28.7 million, or 11.5% of revenues, compared to $25.4 million, or 10.5% of revenues, a year ago.
Interest Expense
Interest expense was $13.4 million for the second quarters of both 2017 and 2016.
Net Income
Net income was $9.9 million, or $0.28 per diluted share, in the second quarter of 2017 compared to net income of $7.5 million, or $0.21 per diluted share, in the second quarter of 2016. The effective income tax rate decreased to 37.0% in the second quarter of 2017 compared to 41.0% a year ago due primarily to an increase in favorable permanent differences and lower state income taxes.
Adjusted EBITDA
Adjusted EBITDA for the second quarter of 2017 increased 9.1% to $79.1 million compared to $72.5 million in the second quarter of 2016. Adjusted EBITDA as a percentage of revenues was 31.7% compared with 29.9% in the second quarter of 2016.
Non-GAAP Financial Measures
This press release contains certainNon-GAAP measures (Adjusted EBITDA and EBITDA). Please refer to our Current Report onForm 8-K for a description of these measures and of our use of these measures. These measures as calculated by the Company are not necessarily comparable to similarly titled measures reported by other companies. Additionally, theseNon-GAAP measures are not a measurement 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 second quarter results today, July 27, 2017, at 10:00 a.m. (Eastern Time). To listen to the call, participants should dial719-325-2458 approximately 10 minutes prior to the start of the call. A telephonic replay will become available after 1:00 p.m. (Eastern Time) on July 27, 2017, and will continue through August 2, 2017, by dialing719-457-0820 and entering the confirmation code 3245669.
The live broadcast of the Company’s quarterly conference call will be available online atwww.he-equipment.com on July 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.
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
-MORE-
H&E Equipment Services Reports Second Quarter 2017 Results
Page 4
July 27, 2017
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 aone-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; (13) the anticipated benefits of our proposed merger with Neff Corporation and the impact of the proposed merger on our earnings, capital structure, strategic plan and results of operations; (14) the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement, the failure of the closing conditions included in the merger agreement to be satisfied (or any material delay in satisfying conditions), a failure to obtain the necessary financing to consummate the merger or any other failure to consummate the transactions contemplated thereby, including as a result of Neff receiving a superior offer during the“go-shop” period; (15) the significant indebtedness of the combined company, including the indebtedness to be incurred in the proposed financing of the merger, and the amount of the costs, fees, expenses and charges related to the merger; and (16) other factors discussed in our public filings, including the risk factors included in the Company’s most recent Annual Report on Form10-K and other periodic reports. 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.
-MORE-
H&E Equipment Services Reports Second Quarter 2017 Results
Page 5
July 27, 2017
H&E EQUIPMENT SERVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(Amounts in thousands, except per share amounts)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
June 30, | | | Six Months Ended
June 30, | |
| | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
Revenues: | | | | | | | | | | | | | | | | |
Equipment rentals | | $ | 118,370 | | | $ | 108,650 | | | $ | 225,687 | | | $ | 211,488 | |
New equipment sales | | | 45,669 | | | | 49,893 | | | | 79,943 | | | | 107,072 | |
Used equipment sales | | | 24,106 | | | | 23,769 | | | | 52,969 | | | | 51,343 | |
Parts sales | | | 27,969 | | | | 26,654 | | | | 53,300 | | | | 54,623 | |
Service revenues | | | 15,944 | | | | 16,945 | | | | 31,024 | | | | 33,246 | |
Other | | | 17,305 | | | | 16,184 | | | | 33,268 | | | | 31,333 | |
| | | | | | | | | | | | | | | | |
Total revenues | | | 249,363 | | | | 242,095 | | | | 476,191 | | | | 489,105 | |
| | | | |
Cost of revenues: | | | | | | | | | | | | | | | | |
Rental depreciation | | | 41,838 | | | | 39,675 | | | | 82,741 | | | | 79,172 | |
Rental expense | | | 20,162 | | | | 18,021 | | | | 38,536 | | | | 34,784 | |
New equipment sales | | | 40,450 | | | | 44,531 | | | | 70,831 | | | | 95,005 | |
Used equipment sales | | | 17,002 | | | | 16,875 | | | | 36,863 | | | | 35,387 | |
Parts sales | | | 20,358 | | | | 19,213 | | | | 38,571 | | | | 39,476 | |
Service revenues | | | 5,332 | | | | 5,990 | | | | 10,331 | | | | 11,291 | |
Other | | | 16,881 | | | | 16,082 | | | | 33,306 | | | | 31,138 | |
| | | | | | | | | | | | | | | | |
Total cost of revenues | | | 162,023 | | | | 160,387 | | | | 311,179 | | | | 326,253 | |
| | | | | | | | | | | | | | | | |
Gross profit | | | 87,340 | | | | 81,708 | | | | 165,012 | | | | 162,852 | |
| | | | |
Selling, general, and administrative expenses | | | 59,807 | | | | 57,049 | | | | 117,125 | | | | 116,423 | |
Gain on sales of property and equipment, net | | | 1,135 | | | | 712 | | | | 2,106 | | | | 1,374 | |
| | | | | | | | | | | | | | | | |
Income from operations | | | 28,668 | | | | 25,371 | | | | 49,993 | | | | 47,803 | |
| | | | |
Interest expense | | | (13,373 | ) | | | (13,353 | ) | | | (26,605 | ) | | | (26,760 | ) |
Other income, net | | | 373 | | | | 689 | | | | 810 | | | | 1,119 | |
| | | | | | | | | | | | | | | | |
Income before provision for income taxes | | | 15,668 | | | | 12,707 | | | | 24,198 | | | | 22,162 | |
| | | | |
Provision for income taxes | | | 5,790 | | | | 5,204 | | | | 8,930 | | | | 9,085 | |
| | | | | | | | | | | | | | | | |
Net income | | $ | 9,878 | | | $ | 7,503 | | | $ | 15,268 | | | $ | 13,077 | |
| | | | | | | | | | | | | | | | |
NET INCOME PER SHARE | | | | | | | | | | | | | | | | |
Basic – Net income per share | | $ | 0.28 | | | $ | 0.21 | | | $ | 0.43 | | | $ | 0.37 | |
| | | | | | | | | | | | | | | | |
Basic – Weighted average number of common shares outstanding | | | 35,473 | | | | 35,354 | | | | 35,469 | | | | 35,347 | |
| | | | | | | | | | | | | | | | |
Diluted – Net income per share | | $ | 0.28 | | | $ | 0.21 | | | $ | 0.43 | | | $ | 0.37 | |
| | | | | | | | | | | | | | | | |
Diluted – Weighted average number of common shares outstanding | | | 35,631 | | | | 35,480 | | | | 35,626 | | | | 35,439 | |
| | | | | | | | | | | | | | | | |
Dividends declared per common share | | $ | 0.275 | | | $ | 0.275 | | | $ | 0.55 | | | $ | 0.55 | |
| | | | | | | | | | | | | | | | |
-MORE-
H&E Equipment Services Reports Second Quarter 2017 Results
Page 6
July 27, 2017
H&E EQUIPMENT SERVICES, INC.
SELECTED BALANCE SHEET DATA (unaudited)
(Amounts in thousands)
| | | | | | | | |
| | | June 30, | | | December 31, | |
| | | 2017 | | | 2016 | |
Cash | | $ | 6,995 | | | $ | 7,683 | |
Rental equipment, net | | | 902,378 | | | | 893,816 | |
Total assets | | | 1,292,061 | | | | 1,241,611 | |
Total debt(1) | | | 796,449 | | | | 794,346 | |
Total liabilities | | | 1,150,840 | | | | 1,098,846 | |
Stockholders’ equity | | | 141,221 | | | | 142,765 | |
Total liabilities and stockholders’ equity | | $ | 1,292,061 | | | $ | 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 OFNON-GAAP FINANCIAL MEASURES
(Amounts in thousands)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Six Months Ended | |
| | | June 30, | | | June 30, | |
| | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
Net income | | $ | 9,878 | | | $ | 7,503 | | | $ | 15,268 | | | $ | 13,077 | |
Interest expense | | | 13,373 | | | | 13,353 | | | | 26,605 | | | | 26,760 | |
Provision for income taxes | | | 5,790 | | | | 5,204 | | | | 8,930 | | | | 9,085 | |
Depreciation | | | 47,858 | | | | 46,437 | | | | 94,856 | | | | 92,636 | |
| | | | | | | | | | | | | | | | |
EBITDA | | $ | 76,899 | | | $ | 72,497 | | | $ | 145,659 | | | $ | 141,558 | |
| | | | |
Transaction costs - NEFF | | | 2,200 | | | | — | | | | 2,200 | | | | — | |
| | | | |
Adjusted EBITDA | | $ | 79,099 | | | $ | 72,497 | | | $ | 147,859 | | | $ | 141,558 | |
-END-
