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H&E Equipment Services Inc$39.01($.63)(1.59%)

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 H&E Equipment Services Reports Fourth Quarter 2015 Results
   Thursday, February 25, 2016 7:00:00 AM ET

H&E Equipment Services, Inc. (HEES ) today announced results for the fourth quarter and year ended December 31, 2015.

FOURTH QUARTER 2015 SUMMARY:

-- Revenues decreased 8.2% to $273.2 million versus $297.8 million a year ago with decreased revenues in the distribution business partially offset by increased revenues in the rental business.

-- Net income was $12.0 million in the fourth quarter compared to $16.7 million a year ago, a decrease of $4.7 million, or 28.2%, from a year ago. The effective income tax rate increased to 41.6% compared to 40.4% a year ago.

-- EBITDA decreased 6.6% to $81.3 million from $87.1 million, yielding a margin of 29.8% compared to 29.2% a year ago.

-- Rental revenues increased 3.7%, or $4.1 million, to $115.0 million due to a larger fleet. Average rental rates this quarter increased compared to both a year ago and to last quarter.

-- Gross margin increased to 33.0% and was 31.9% a year ago.

-- Average time utilization (based on original equipment cost) was 72.0% compared to 72.4% a year ago and 73.7% in the third quarter of 2015. Average time utilization (based on units available for rent) was 69.3% compared to 67.4% last year and 70.2% last quarter.

-- Average rental rates increased 0.6% compared to a year ago and improved 0.4% compared to the third quarter of this year.

-- Dollar utilization was 35.5% compared to 35.8% a year ago.

-- Average rental fleet age at December 31, 2015, was 31.4 months, down from 31.7 months at the end of the last year and younger than the current industry average age of 42.4 months.

John Engquist, H&E Equipment Services’ chief executive officer, said, "We delivered solid results for the quarter and year despite the turmoil in the oil patch, the historic flooding that occurred in May, and the exceptional rainfall we saw in many of our end markets in the fourth quarter. Our rental business continues to strengthen, with revenues increasing 3.7% for the quarter and 9.6% for the year, and helped offset the weakness in our distribution business, specifically new crane sales. Once again, we achieved positive rental rate growth both year over year and sequentially over last quarter, which we believe demonstrates the ongoing strength in the non-residential construction markets. We believe the uncertainty over the direction of the economy will help drive increased rental penetration as our customers believe it is more prudent to rent rather than make large capital purchases."

Engquist concluded, "In terms of 2016, non-residential construction activity remains strong across our footprint, especially in the Gulf Coast where a significant number of large capital projects remain on schedule to begin over the next several years. Furthermore, the Gulf Coast region continues to experience the highest levels of commercial construction starts and activity in the U.S. However, until the oil patch rebounds and stabilizes, we expect to continue to have limited visibility into our distribution business. At 31.4 months, we continue to utilize the youngest fleet in the industry, which allows us to take a conservative approach to capital spending in 2016. We intend to closely monitor manufacturer inventory levels and make our cap-ex decisions as close to the point of need as possible. We believe we can react to market demand, positive or negative, very quickly."

FINANCIAL DISCUSSION FOR FOURTH QUARTER 2015:

Revenue

Total revenues decreased 8.2% to $273.2 million from $297.8 million in the fourth quarter of 2014. Equipment rental revenues increased 3.7% to $115.0 million compared with $110.8 million in the fourth quarter of 2014. New equipment sales decreased 28.0% to $62.7 million from $87.2 million in the fourth quarter of 2014. Used equipment sales decreased 5.4% to $35.2 million compared to $37.2 million in the fourth quarter of 2014. Parts sales decreased 12.5% to $26.7 million from $30.6 million in the fourth quarter of 2014. Services revenues increased 3.7% to $16.5 million compared to $15.9 million a year ago.

Gross Profit

Gross profit decreased 5.1% to $90.2 million from $95.0 million in the fourth quarter of 2014 on lower revenues. Gross margin increased to 33.0% for the quarter ended December 31, 2015, compared to gross margin of 31.9% for the quarter ended December 31, 2014.

On a segment basis, fourth quarter 2015 gross margin on rentals was 47.5% compared to 49.3% in the fourth quarter of 2014 due to increased rental expenses as a percentage of comparative equipment rental revenues. On average, rental rates increased 0.6% compared to the fourth quarter of 2014. Time utilization (based on original equipment cost) was 72.0% in the fourth quarter of 2015 compared to 72.4% a year ago.

Gross margin on new equipment sales was 10.4% in the fourth quarter of 2015 compared to 11.9% in the fourth quarter a year ago, and gross margin on used equipment sales was 30.2% compared to 29.9% a year ago. Gross margin on parts sales was 26.7% in the fourth quarter of 2015 and 27.7% a year ago. Gross margin on service revenues was 65.6% compared to 64.6% in the prior year.

Rental Fleet

At the end of the fourth quarter of 2015, the original acquisition cost of the Company’s rental fleet was $1.3 billion, an increase of $43.2 million from $1.2 billion at the end of 2014. Dollar utilization was 35.5% during the fourth quarter of 2015 compared to 35.8% for the fourth quarter of 2014.

Selling, General and Administrative Expenses

SG&A expenses for the fourth quarter of 2015 were $57.6 million compared with $54.2 million last year, a $3.4 million increase, or 6.4%. The net increase in SG&A expenses is primarily a result of increased employee benefit costs, other employee costs, facility and related expenses, leasing costs, bad debt expense and depreciation expense. Of the $3.4 million increase, $1.8 million was attributable to new branch expenses compared to a year ago. For the fourth quarter of 2015, SG&A expenses as a percentage of total revenues were 21.1% compared to 18.2% a year ago.

Income from Operations

Income from operations for the fourth quarter of 2015 was $33.5 million, or 12.3% of revenues, compared with $41.2 million, or 13.8% of revenues, a year ago.

Interest Expense

Interest expense for the fourth quarter of 2015 was $13.4 million compared to $13.6 million in the fourth quarter of 2014.

Net Income

Net income was $12.0 million, or $0.34 per diluted share, compared to net income of $16.7 million, or $0.47 per diluted share, a year ago. The effective income tax rate increased to 41.6% compared to 40.4% a year ago due to lower favorable permanent differences in relation to pre-tax income.

EBITDA

EBITDA for the fourth quarter of 2015 decreased 6.6% to $81.3 million compared to $87.1 million a year ago. EBITDA, as a percentage of revenues, was 29.8% compared to 29.2% a year ago.

FINANCIAL DISCUSSION FOR THE YEAR ENDED DECEMBER 31, 2015:

Revenue

Total revenues decreased 4.6%, or $50.6 million, to $1.04 billion from $1.09 billion in 2014. Equipment rental revenues increased 9.6% to $443.0 million compared with $404.1 million in 2014. New equipment sales decreased 27.4% to $238.2 million from $328.0 million in 2014. Used equipment sales decreased 3.9% to $118.3 million compared to $123.2 million in 2014. Parts sales decreased 2.3% to $111.1 million from $113.7 million in 2014. Services revenues increased 4.3% to $64.0 million compared with $61.3 million a year ago.

Gross Profit

Gross profit decreased 0.6% to $345.7 million from $347.9 million in 2014 on lower revenues. Gross margin was 33.2% for 2015 as compared to 31.9% for 2014.

On a segment basis, gross margin on rentals decreased to 47.2% in 2015 from 48.5% in 2014 primarily due to increased depreciation and rental expense as a percentage of equipment rental revenues. On average, 2015 rental rates increased 1.3% as compared to 2014. In 2015, time utilization (based on original equipment cost) was 70.9% compared to 72.2% last year.

Gross margin on new equipment sales was 10.9%, down from 11.7% in 2014. Gross margin on used equipment sales increased to 31.3% from 31.0%. Gross margin on parts sales decreased to 27.3% from 28.7%. Gross margin on service revenues was 66.1% compared to 64.9% in 2014.

Selling, General and Administrative Expenses

SG&A expenses for 2015 were $220.2 million compared with $206.5 million last year, an increase of $13.7 million, or 6.7%. The net increase in SG&A expenses was primarily a result of increased salaries, wages, payroll taxes, related employee costs, facility costs, professional and service fees, leasing costs, liability insurance costs, depreciation expense, promotional expenses and bad debt expense. Of the $13.7 million increase, $4.4 million was attributable to new branch expenses compared to a year ago. In 2015, SG&A expenses as a percentage of total revenues were 21.2% compared to 18.9% in 2014.

Income from Operations

Income from operations in 2015 was $128.2 million, or 12.3% of revenues, compared to $143.7 million, or 13.2% of revenues, in 2014.

Interest Expense

Interest expense in 2015 was $54.0 million compared to $52.4 million in 2014.

Net Income

Net income was $44.3 million, or $1.25 per diluted share, compared to $55.1 million, or $1.56 per diluted share, a year ago. The effective income tax rate increased to 41.5% in 2015 compared to 40.5% in 2014 due to lower favorable permanent differences in relation to pre-tax income.

EBITDA

EBITDA for 2015 increased $4.6 million to $316.2 million from $311.6 million in 2014. EBITDA as a percentage of revenues was 30.4% in 2015 compared to 28.6% in 2014.

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 a discussion of our use of this measure. EBITDA 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 fourth quarter results today, February 25, 2016, at 10:00 a.m. (Eastern Time). To listen to the call, participants should dial 913-312-0844 approximately 10 minutes prior to the start of the call. A telephonic replay will be available after 1:00 p.m. (Eastern Time) on February 25, 2016, and will continue through March 5, 2016, by dialing 719-457-0820 and entering confirmation code 3494628.

The live broadcast of the Company’s quarterly conference call will be available online at www.he-equipment.com on February 25, 2016, 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 77 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" 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 inability to forecast trends in our business accurately, and the impact of economic downturns and economic uncertainty on the markets we serve; (3) the impact of conditions of the global credit and commodity markets and their effect on construction spending activity 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 effectively integrate any businesses we acquire; (9) competitive pressures; (10) compliance with laws and regulations, including those relating to environmental matters and corporate governance matters; and (11) 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                                                                                                                                  Twelve Months Ended
                                                                                                                                                                                                            December 31,                                                                                                                                                                              December 31,
                                                                                                                                           --------------------------------------------------------------------------------------------------------------------------------------                                                  ------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                                  2015                                                  2014                                                                                         2015                                                    2014
                                                                                                                                           -----------------------------------------------                                             -----------------------------------------------                                             -------------------------------------------------                                             -------------------------------------------------
Revenues:
  Equipment rentals                                                                                                                                           $ 114,952                                                                                   $ 110,834                                                                                   $   443,024                                                                                   $   404,110
  New equipment sales                                                                                                                                            62,707                                                                                      87,150                                                                                       238,172                                                                                       328,036
  Used equipment sales                                                                                                                                           35,225                                                                                      37,233                                                                                       118,338                                                                                       123,173
  Parts sales                                                                                                                                                    26,733                                                                                      30,550                                                                                       111,133                                                                                       113,732
  Service revenues                                                                                                                                               16,502                                                                                      15,920                                                                                        63,954                                                                                        61,292
  Other                                                                                                                                       17,089                                                16,074                                                  65,210                                                  60,069  
                                                                                                                                           -------------------- ------- --------------------                                           -------------------- ------- --------------------                                           -------------------- --------- --------------------                                           -------------------- --------- --------------------
  Total revenues                                                                                                                                                273,208                                                                                     297,761                                                                                     1,039,831                                                                                     1,090,412
 
Cost of revenues:
  Rental depreciation                                                                                                                                            40,968                                                                                      39,954                                                                                       162,089                                                                                       146,055
  Rental expense                                                                                                                                                 19,428                                                                                      16,230                                                                                        71,950                                                                                        61,916
  New equipment sales                                                                                                                                            56,167                                                                                      76,749                                                                                       212,235                                                                                       289,526
  Used equipment sales                                                                                                                                           24,577                                                                                      26,112                                                                                        81,338                                                                                        84,936
  Parts sales                                                                                                                                                    19,606                                                                                      22,078                                                                                        80,830                                                                                        81,106
  Service revenues                                                                                                                                                5,676                                                                                       5,643                                                                                        21,693                                                                                        21,507
  Other                                                                                                                                       16,635                                                15,975                                                  63,964            57,428  
                                                                                                                                           -------------------- ------- --------------------                                           -------------------- ------- --------------------                                           -------------------- --------- -------------------- -------------------- -------------------- -------------------- --------- --------------------
  Total cost of revenues                                                                                                                     183,057                                               202,741                                                 694,099                                                 742,474  
                                                                                                                                           -------------------- ------- --------------------                                           -------------------- ------- --------------------                                           -------------------- --------- --------------------                                           -------------------- --------- --------------------
 
Gross profit                                                                                                                                                     90,151                                                                                      95,020                                                                                       345,732                                                                                       347,938
 
Selling, general, and administrative expenses                                                                                                                    57,642                                                                                      54,156                                                                                       220,226                                                                                       206,480
Gain on sales of property and equipment, net                                                                                                     968                                                   354                                                   2,737                                                   2,286  
                                                                                                                                           -------------------- ------- --------------------                                           -------------------- ------- --------------------                                           -------------------- --------- --------------------                                           -------------------- --------- --------------------
 
Income from operations                                                                                                                                           33,477                                                                                      41,218                                                                                       128,243                                                                                       143,744
 
Interest expense                                                                                                                                                (13,355 )                                                                                   (13,610 )                                                                                     (54,030 )                                                                                     (52,353 )
Other income, net                                                                                                                                380                                                   350                                                   1,463                                                   1,293  
                                                                                                                                           -------------------- ------- --------------------                                           -------------------- ------- --------------------                                           -------------------- --------- --------------------                                           -------------------- --------- --------------------
Income before provision for income taxes                                                                                                                         20,502                                                                                      27,958                                                                                        75,676                                                                                        92,684
 
Provision for income taxes                                                                                                                     8,535                                                11,281                                                  31,371                                                  37,545  
                                                                                                                                           -------------------- ------- --------------------                                           -------------------- ------- --------------------                                           -------------------- --------- --------------------                                           -------------------- --------- --------------------
 
Net income                                                                                                                                                    $  11,967                                                                $  16,677                                                                $    44,305                                                                $    55,139  
                                                                                                                                           ==================== ======= ====================                                           ==================== ======= ====================                                           ==================== ========= ====================                                           ==================== ========= ====================
 
NET INCOME PER SHARE
Basic - Net income per share                                                                                                                     $    0.34                                                                $    0.47                                                                $      1.26                                                                $      1.57  
                                                                                                                                           ==================== ======= ====================                                           ==================== ======= ====================                                           ==================== ========= ====================                                           ==================== ========= ====================
Basic - Weighted average number of common shares outstanding                                                                     35,314                                                35,208                                                  35,272                                                  35,159  
                                                                                                                                           ==================== ======= ====================                                           ==================== ======= ====================                                           ==================== ========= ====================                                           ==================== ========= ====================
 
Diluted - Net income per share                                                                                                                   $    0.34                                                                $    0.47                                                                $      1.25                                                                $      1.56  
                                                                                                                                           ==================== ======= ====================                                           ==================== ======= ====================                                           ==================== ========= ====================                                           ==================== ========= ====================
Diluted - Weighted average number of common shares outstanding                                                                   35,421                                                35,272                                                  35,343                                                  35,249  
                                                                                                                                           ==================== ======= ====================                                           ==================== ======= ====================                                           ==================== ========= ====================                                           ==================== ========= ====================
Dividends declared per common share                                                                                                                           $   0.275                                                                $    0.25                                                                $      1.05                                                                $      0.50  
                                                                                                                                           ==================== ======= ====================                                           ==================== ======= ====================                                           ==================== ========= ====================                                           ==================== ========= ====================
 
 
 
 
 
 
                                                                                                                 H&E EQUIPMENT SERVICES, INC.
                                                                                                            SELECTED BALANCE SHEET DATA (unaudited)
                                                                                                                    (Amounts in thousands)
 
 
                                                                                                                                                                 December 31,                     December 31,
                                                                                                                                                                                        2015                                                2014
                                                                                                                                                                           -----------------------------                       -----------------------------
 
Cash                                                                                                                                                                                          $     7,159                                         $    15,861
Rental equipment, net                                                                                                                                                                             893,393                                             889,706
Total assets                                                                                                                                                                                    1,301,087                                           1,358,804
Total debt (1)                                                                                                                                                                                    816,764                                             892,018
Total liabilities                                                                                                                                                                               1,158,499                                           1,225,437
Stockholders’ equity                                                                                                                                                   142,588                                             133,367
Total liabilities and stockholders’ equity                                                                                                                         $ 1,301,087                                         $ 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                                                                                     Twelve Months Ended
                                                                                                       December 31,                                                                                           December 31,
                                                                     ----------------------------------------------------------------------------                          ------------------------------------------------------------------------------
                                                                                  2015                            2014                                               2015                                                2014
                                                                     ----------------------------                       ----------------------------                       -----------------------------                       -----------------------------
 
Net income                                                                              $   11,967                                         $   16,677                                         $    44,305                                         $    55,139
Interest expense                                                                            13,355                                             13,610                                              54,030                                              52,353
Provision for income taxes                                                                   8,535                                             11,281                                              31,371                                              37,545
Depreciation                                                             47,441                          45,500                          186,457                          166,514
                                                                     -------------------- --------                      -------------------- --------                      -------------------- ---------                      -------------------- ---------
 
EBITDA                                                                                  $   81,298                                         $   87,068                                         $   316,163                                         $   311,551
                                                                     ==================== ========                      ==================== ========                      ==================== =========                      ==================== =========
 
 
 
 

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20160225005128r1&sid=cmtx6&distro=nx&lang=en

View source version on businesswire.com: http://www.businesswire.com/news/home/20160225005128/en/

SOURCE: H&E Equipment Services, Inc.

H&E Equipment Services, Inc. 
Leslie S. Magee, 225-298-5261 
Chief Financial Officer 
lmagee@he-equipment.com 
or 
Corporate Communications, Inc. (CCI) 
Kevin S. Inda, 941-792-1680 
kevin.inda@cci-ir.com


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