Leslie S. Magee Chief Financial Officer 225-298-5261 lmagee@he-equipment.com
Kevin S. Inda Corporate Communications, Inc. 407-566-1180 kevin.Inda@cci-ir.com
H&E Equipment Services Reports Third Quarter Results
BATON ROUGE, Louisiana — (November 9, 2006) —H&E Equipment Services, Inc. (NASDAQ: HEES) today announced operating results for the third quarter ended September 30, 2006. The Company’s operating results include the previously announced significant non-recurring item as discussed below, which negatively impacted the Company’s earnings for the period.
Third Quarter 2006 Summary
•
Revenues increased 37.4% to $204.1 million versus $148.5 million a year ago.
•
Adjusted EBITDA (as defined below) increased 66.7% to $57.5 million compared to $34.5 million a year ago.
•
Income from operations increased 86.5% to $34.9 million compared to $18.7 million a year ago.
•
Net loss was $11.5 million (which includes the loss on early extinguishment of debt of $40.8 million, or $32.0 million after-tax) compared to net income of $8.2 million a year ago.
•
Rental rates increased approximately 5.0%, on average.
•
Total gross margin increased to 33.7%.
“The momentum in our business clearly continued through the third quarter,” said John Engquist, H&E Equipment Services’ president and chief executive officer. “While the loss on early extinguishment of debt significantly impacted our earnings this quarter, the core fundamentals of our operations remain very strong. Non-residential construction is extremely active in the markets we serve and we believe spending on the equipment and services we provide will remain strong as these positive trends are currently forecasted to continue. Total revenue increased $55.6 million from a year ago to another record level and our Adjusted EBITDA also reached record level, increasing $23.0 million to $57.5 million. Income from operations increased 86.5% to $34.9 million. Overall, our performance this quarter was consistent with the expectations for our business. We believe we are in the right markets with the right construction equipment and services, and the right business model, and the outlook for H&E remains strong.”
“Rental revenues continued to grow during the third quarter, increasing 33.5% to $67.3 million versus the prior year comparable period. Higher rental rates and fleet growth continue to drive the increase in rental revenues,” commented Leslie Magee, H&E Equipment Services’ chief financial officer. “New equipment sales also contributed to our revenue growth this quarter, increasing 67.7% or $24.5 million to $60.7 million from a year ago. Used equipment sales increased 10.8% from the same period a year ago. The primary driver of equipment sales was continued robust demand for both new and used cranes and aerial work platforms. Our combined parts and service revenues increased 28.1%, or $7.7 million, from a year ago and continue to be the result of higher new and used equipment sales as well as increased customer demand.”
“Gross margin remained strong during the third quarter at 33.7%, up from 31.5% a year ago and equal to the second quarter, with improved margins in rentals, used equipment sales and our service operations from a year ago. Gross margins remained essentially flat for both new equipment sales and parts sales from a year ago,” added Magee. “Overall, we are very pleased with our performance this quarter.”
2006 Outlook
“Our outlook remains positive for the remainder of this year and based upon currently available information, we are increasing our previously announced 2006 outlook and earnings guidance as disclosed at the end of the second quarter,” said Engquist. “While we are not prepared to provide any outlook on 2007, we expect revenue and earnings growth in 2007.”
•
Revenue- The Company is increasing its 2006 revenue outlook from its previously announced range of approximately $750 million to $780 million to approximately $780 million to $795 million.
•
EBITDA and Adjusted EBITDA- The Company is increasing its 2006 EBITDA guidance from $141 million to $151 million to an expected range of approximately $151 million to $161 million. Both previously announced and revised EBITDA guidance include the impact of non-recurring charges. These nonrecurring charges are comprised of a $40.8 million loss on early extinguishment of debt related to the Company’s debt refinancing (as discussed below) which was recorded in the third quarter and a one-time charge of $8.0 million to selling, general and administrative expenses associated with the termination of a management services agreement concurrent with the Company’s initial public offering recorded in the first quarter of 2006. In addition, the Company is increasing its guidance on Adjusted EBITDA (as defined below), which is adjusted to exclude the impact of the aforementioned nonrecurring items totaling an estimated $48.8 million, in the range of $200 million to $210 million. Previously announced Adjusted EBITDA guidance was a range of $190 million to $200 million.
•
Earnings Per Share- The Company is increasing its previously announced 2006 earnings guidance of $0.55 to $0.65 per share to a range of approximately $0.75 to $0.82 per share based on 37.0 million diluted common shares outstanding. Both previously announced and revised earnings guidance include the impact of non-recurring charges. The Company’s earnings guidance reflects the solid strength in its business and is offset by the impact of these significant nonrecurring items. The negative impact of the nonrecurring charges included in the Company’s revised guidance is approximately $1.04 per share (after-tax).
The Company’s revised guidance reflects an estimated annual effective income tax rate of approximately 21.5%. We define EBITDA as net income before interest expense, income taxes depreciation and amortization. We define Adjusted EBITDA for our annual guidance as discussed above as EBITDA adjusted for the $8.0 million fees paid in connection with the termination of a management services agreement in the first quarter of 2006 and the $40.8 million loss recorded in the third quarter on the early extinguishment of debt in connection with our refinancing which was completed on August 4, 2006.
FINANCIAL DISCUSSION FOR THIRD QUARTER ENDED SEPTEMBER 30, 2006
As previously announced, on August 4, 2006, the Company completed its cash tender offer and consent solicitation for their 11 1/8% Senior Secured Notes due 2012 and 12 1/2% Senior Subordinated Notes due 2013 (the “Notes”). The Company also closed on its previously announced private offering of $250 million aggregate principal amount of its 8 3/8% senior unsecured notes due 2016 (the “New Notes”). In connection with these refinancing transactions, the Company recorded a one-time loss on early extinguishment of debt in the quarterly period ended September 30, 2006 of approximately $40.8 million, or approximately $32.0 million after-tax, reflecting payment of tender premiums and other estimated costs in connection with the tender offer and consent solicitation, combined with the write off of unamortized deferred financing costs and unamortized original issue discount on the Notes. Our operating results, as discussed below, reflect this nonrecurring item.
•
Revenues– Total third quarter revenues increased $55.6 million to $204.1 million from $148.5 million in the third quarter of 2005. The following is revenue by business segment for the third quarter versus the third quarter of 2005:
–Equipment rentals– Equipment rental revenues were $67.3 million compared with $50.4 million, reflecting an increase of $16.9 million, or 33.5%. At the end of the third quarter of 2006, the original acquisition cost of the rental fleet was $648.1 million, up $137.5 million from $510.6 million at the end of the third quarter of 2005. For the third quarter of 2006, dollar utilization increased to 42.4% from 39.9% for the third quarter of 2005.
–New equipment sales– New equipment sales were $60.7 million compared with $36.2 million, reflecting an increase of $24.5 million, or 67.7%.
–Used equipment sales– Used equipment sales were $29.7 million, representing a $2.9 million, or 10.8%, increase from $26.8 million.
–Parts sales- Parts sales were $21.0 million, representing a $4.0 million, or 23.5%, increase compared with $17.0 million.
–Service revenues- Service revenues were $14.1 million, representing a $3.7 million, or 35.6%, increase compared with $10.4 million.
•
Gross Profit– Total gross profit for the third quarter of 2006 was $68.7 million compared with $46.8 million for the third quarter of 2005, reflecting an increase of $21.9 million, or 46.8%, on higher sales volume and improved margins in several major business segments. Third quarter gross profit margin increased to 33.7% from 31.5% for the third quarter of 2005. The following is gross profit by business segment for the third quarter versus the third quarter of 2005:
–Equipment Rentals– Gross profit from equipment rentals was $36.3 million compared to $24.0 million.
–New equipment sales– New equipment sales gross profit increased to $7.4 million from $4.4 million.
–Used equipment sales– Used equipment sales gross profit increased to $8.0 million from $6.4 million.
–Parts sales– Gross profit from parts sales was $6.1 million compared with $5.0 million a year ago.
–Service revenues– Gross profit from service revenues was $9.0 million compared with $6.4 million.
•
Selling, General And Administrative Expenses– Selling, general and administrative expenses for the third quarter of 2006 were $34.1 million compared with $28.2 million last year, a $5.9 million, or 21.0%, increase. As a percentage of total revenues, selling, general and administrative expenses for the third quarter of this year decreased to 16.7% from 19.0% in the third quarter of last year.
•
Income From Operations– The Company reported income from operations of $34.9 million compared to $18.7 million a year ago.
•
Net Income (Loss)– The loss on early extinguishment of debt of $40.8 million, or $32.0 million after-tax, resulted in the Company reporting a net loss of $11.5 million for the third quarter compared to net income of $8.2 million a year ago.
•
EBITDA and Adjusted EBITDA –EBITDA for the third quarter was $16.7 million compared with $34.5 million during the third quarter of 2005. Adjusted EBITDA increased 66.7% to $57.5 million from $34.5 million a year ago. Adjusted EBITDA as a percentage of total revenues increased to 28.2% compared with 23.2% in the third quarter of 2005.
Non-GAAP Financial Measures This press release contains certain Non-GAAP measures (EBITDA and Adjusted EBITDA). Please refer to our Current Report on Form 8-K for a description of our use of these measures. EBITDA and Adjusted EBITDA as calculated by the Company are not necessarily comparable to similarly titled measures reported by other companies. Additionally, EBITDA and Adjusted EBITDA 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 As previously announced, H&E Equipment Services, Inc. management will hold a conference call to discuss third quarter and nine-month results on Friday, November 10, 2006, at 10:00 a.m. (Eastern Time). To listen to the call, participants should dial 913-981-5520 approximately 10 minutes prior to the start of the call. A telephonic replay will become available after 1:00 p.m. (Eastern Time) on Friday, November 10, 2006, and will continue through November 17, 2006, by dialing 719-457-0820 and entering confirmation code 4185362.
The live broadcast of H&E Equipment Services’ quarterly conference call will be available online atwww.he-equipment.com orwww.earnings.com on November 10, 2006, beginning at 10:00 a.m. (Eastern Time) and will continue to be available for 30 days.
About H&E Equipment Services, Inc. The Company is one of the largest integrated equipment services companies in the United States with 47 full-service facilities throughout the Intermountain, Southwest, Gulf Coast, West Coast and Southeast regions of the United States. 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 about our beliefs and expectations and statements containing the words “may,” “could,” “would,” “should,” “believe,” “expect,” “anticipate,” “plan,” “estimate,” “target,” “project,” “intend” and similar expressions constitute forward-looking statements. Among the forward-looking statements included in this release is the information provided under the heading “2006 Outlook.” Forward-looking statements involve known and unknown risks and uncertainties, which could cause actual results that 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 activity in the markets where we operate in North America; (2) relationships with new equipment suppliers; (3) increased maintenance and repair costs; (4) our substantial leverage; (5) the risks associated with the expansion of our business; (6) our possible inability to integrate any businesses we acquire; (7) competitive pressures; (8) compliance with laws and regulations, including those relating to environmental matters; and (9) other factors discussed in our public filings, including the risk factors included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005 and in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2006. 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.
1
H&E EQUIPMENT SERVICES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (Amounts in thousands, except per share amounts)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2006
2005
2006
2005
Revenues:
Equipment rentals
$
67,327
$
50,409
$
185,333
$
136,576
New equipment sales
60,673
36,152
173,333
99,867
Used equipment sales
29,668
26,751
97,387
76,332
Parts sales
21,024
16,986
61,574
51,202
Service revenues
14,074
10,409
39,782
29,459
Other
11,369
7,749
31,472
21,300
Total revenues
204,135
148,456
588,881
414,736
Cost of revenues:
Rental depreciation
20,644
14,354
56,674
39,394
Rental expense
10,339
12,015
31,427
35,024
New equipment sales
53,321
31,783
151,615
87,803
Used equipment sales
21,708
20,325
71,253
58,043
Parts sales
14,895
11,972
43,499
36,105
Service revenues
5,045
3,980
14,343
10,973
Other
9,436
7,229
27,005
21,700
Total cost of revenues
135,388
101,658
395,816
289,042
Gross profit
68,747
46,798
193,065
125,694
Selling, general, and administrative expenses
34,118
28,219
108,545
81,342
Gain on sale of property and equipment
241
118
400
15
Income from operations
34,870
18,697
84,920
44,367
Loss on early extinguishment of debt
(40,771
)
—
(40,771
)
—
Interest expense
(9,060
)
(10,557
)
(29,342
)
(30,982
)
Other income, net
245
85
675
255
Income (loss) before income taxes
(14,716
)
8,225
15,482
13,640
Income tax provision (benefit)
(3,185
)
—
3,290
171
Net income (loss)
$
(11,531
)
$
8,225
$
12,192
$
13,469
EARNINGS PER SHARE
Basic – Earnings per share
$
(0.30
)
$
0.32
$
0.33
$
0.53
Basic — Weighted average common shares outstanding:
38,070
25,492
36,550
25,492
Diluted – Earnings per share
$
(0.30
)
$
0.32
$
0.33
$
0.53
Diluted — Weighted average common shares outstanding:
38,070
25,492
36,587
25,492
2
H&E EQUIPMENT SERVICES, INC. SELECTED BALANCE SHEET DATA (unaudited) (in thousands)
September 30,
December 31,
2006
2005
Cash
$
5,053
$
5,627
Rental equipment, net
429,219
308,036
Total assets
733,044
530,697
Total debt (1)
283,142
349,902
Total liabilities
518,292
535,837
Stockholders’ equity/members’ deficit
214,752
(5,140
)
Total liabilities and stockholders’ equity/members’ deficit
$
733,044
$
530,697
(1) Total debt consists of the aggregate amounts outstanding on the senior secured credit facility, senior unsecured notes (at September 30, 2006), senior secured notes, senior subordinated notes (at December 31, 2005) and notes payable obligations.
H&E EQUIPMENT SERVICES, INC. UNAUDITED RECONCILIATION OF EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION and AMORTIZATION (EBITDA) (in thousands)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2006
2005
2006
2005
Net income (loss)
$
(11,531
)
$
8,225
$
12,192
$
13,469
Interest expense
9,060
10,557
29,342
30,982
Income tax provision (benefit)
(3,185
)
—
3,290
171
Depreciation and amortization
22,402
15,719
61,718
43,228
EBITDA
$
16,746
$
34,501
$
106,542
$
87,850
Loss on early extinguishment of debt
40,771
—
40,771
—
Management services agreement termination fee
—
—
8,000
—
Adjusted EBITDA
$
57,517
$
34,501
$
155,313
$
87,850
3
We use cookies on this site to provide a more responsive and personalized service. Continuing to browse, clicking I Agree, or closing this banner indicates agreement. See our Cookie Policy for more information.
