Baton Rouge, LA - H&E Equipment Services Inc. first-quarter revenues grew in all segments, reflecting a 17.6% year-over-year increase to $134.9 million in total revenues. Nevertheless, the company posted a net loss of $6.5 million, or ($0.19) per diluted share. That loss was 46% less than the $12.1 million net loss in the first quarter of 2010.
First-Quarter 2011 Highlights
- Rental revenues increased 33.0% from a year ago to $48.5 million.
- Gross margins were 26.0% as compared to 20.8% a year ago.
- Rental gross margins increased to 35.4% compared to 21.7% a year ago.
- Average time utilization (based on units available for rent) increased to 61.0% compared to 49.7% last year.
- Average time utilization (based on original equipment cost) increased to 64.9% compared to 51.2% a year ago.
- Average rental rates turned positive in March on a year-over-year basis.
- Dollar utilization was 27.9% in the first quarter compared to 22.0% a year ago.
- Average rental fleet age at March 31, 2011 was 43.2 months compared to an industry average of approximately 53 months.
- EBITDA increased 93.6% to $21.3 million from $11.0 million, yielding a margin of 15.8% compared to 9.6% of revenues a year ago.
"We are extremely pleased with our first quarter results and the ongoing improvements in our business," said John Engquist, H&E Equipment Services' president and chief executive officer. "Despite normal seasonality that was compounded by historically inclement weather in many of our end markets, our business delivered solid year-over-year improvements in revenue, gross profit and EBITDA.
"The trends in our rental business remain particularly strong as revenue increased 33.0%, gross profit increased 116.7% and gross margins increased from 21.7% to 35.4% despite a slight decline in rental rates from a year ago. We were pleased to see rates turn positive on a year-over-year basis in the month of March. Furthermore, the second quarter has started on a positive note with solid year-over-year gains in April rental rates. Visibility in our distribution business remains limited. While new earthmoving equipment sales were strong, the lack of large crawler crane sales negatively impacted new equipment sales compared to the fourth quarter.
"Our outlook for the second quarter is positive as we expect the improvement in industrial construction markets to accelerate. However, we do not expect a broad recovery in non-residential construction markets to occur until 2012. In spite of this, we expect our losses to moderate for the remainder of 2011," Engquist said. "The activity in our industrial markets remains strong, especially in our Gulf Coast and Intermountain regions as a result of rising oil and commodity prices. Demand for early cycle earthmoving equipment continues to increase and we are beginning to see improved rental rates. With a solid capital structure and excellent liquidity, we believe we have positioned our business very well to take advantage of any improvements in market conditions."
Total first-quarter revenues increased 17.6% to $134.9 million from $114.7 million in the first quarter of 2010. Equipment rental revenues increased 33.0% to $48.5 million compared with $36.5 million in the first quarter of 2010. New equipment sales increased 6.9% to $29.2 million from $27.3 million a year ago. Used equipment sales increased 14.8% to $15.4 million compared to $13.4 million a year ago. Parts sales increased 9.9% to $21.6 million from $19.6 million in the first quarter of 2010. Service revenues increased 10.0% to $12.6 million compared with $11.5 million a year ago.
Gross profit increased 47.0% to $35.1 million from $23.9 million in the first quarter of 2010. Gross margin was 26.0% for the quarter ended March 31, 2011 as compared to 20.8% for the quarter ended March 31, 2010. In comparison to a year ago, the higher gross margin in the first quarter 2011 was largely the result of improved rental gross margins.
On a segment basis, gross margin on rentals increased to 35.4% from 21.7% in the first quarter of 2010. On average, rental rates were 1.1% lower than rates in the first quarter of 2010. However, average rental rates for the month of March improved 1.1% compared to March of last year. Time utilization (based on units available for rent) was 61.0% in the first quarter of 2011 as compared to 49.7% a year ago.
Gross margins on new equipment sales were 10.8% compared to 8.7% in the first quarter a year ago. Gross margins on used equipment sales were 25.1% compared to 20.0% a year ago. Gross margins on parts sales were 26.6% in the first quarter of 2011 and 27.4% last year. Gross margins on service revenues were 61.1% for the first quarter of 2011 compared to 61.9% in the first quarter of 2010.
At the end of the first quarter of 2011, the original acquisition cost of the company's rental fleet was $699.7 million, an increase of $39.7 million from $660.0 million at the end of the first quarter of 2010. Dollar utilization was 27.9% compared to 22.0% for the first quarter of 2010. Dollar returns improved reflecting higher time utilization as discussed above.
SG&A expenses for the first quarter of 2011 were $38.1 million compared with $35.9 million last year, a $2.2 million, or 6.2% increase. SG&A expenses in the first quarter of 2011 declined as a percentage of total revenues to 28.2% as compared to 31.3% last year. The increase in SG&A expenses was primarily attributable to higher commission and incentive pay on higher revenues and an increase in employee headcount.
Loss from operations for the first quarter of 2011 was $2.9 million, or 2.1% of revenues, compared with loss from operations of $11.9 million, or 10.4% of revenues, a year ago.
Interest expense for the first quarter of 2011 was $7.2 million compared with $7.3 million a year ago.
Net loss was $6.5 million, or ($0.19) per diluted share, in the first quarter of 2011 compared to a net loss of $12.1 million, or ($0.35) per diluted share, in the first quarter of 2010.
EBITDA for the first quarter of 2011 increased $10.3 million to $21.3 million from $11.0 million in the first quarter of 2010. EBITDA as a percentage of revenues was 15.8% compared with 9.6% in the first quarter of 2010.