H&E Equipment Services Inc. announced results for the third quarter ended September 30, 2013, showing revenues increasing 32.2% to $270.4 million versus $204.5 million a year ago.
John Engquist, H&E Equipment Services’ chief executive officer, said, “Our business performed exceptionally well during the third quarter as a result of our continued focus on solid execution, capitalizing on market cycle expansion and strong industrial market penetration. Total revenues increased significantly, up 32.2% from a year ago, primarily due to ongoing strength in our rental and new equipment businesses. Rental revenues grew 14.9% on rates that were 5.2% higher than a year ago and on a significantly larger fleet than a year ago. New and used equipment sales increased 84.1% and 47.2%, respectively, which we believe affirms a healthier economy and general construction market.”
Engquist concluded, “We believe the positive trends that we are seeing in our business will continue through the balance of this year and into 2014, where we anticipate additional fleet growth and market expansion in our industrial markets, where we believe there will be continued high demand, and in the commercial construction sector, where we believe there will be expanding opportunities.”
THIRD QUARTER 2013 HIGHLIGHTS:
- Net income was $14.0 million in the third quarter compared to $3.7 million a year ago. Net Income increased $3.1 million to $14.0 million compared to adjusted net income of $10.9 million a year ago.
- Adjusted EBITDA increased 25.2% to $70.0 million from $55.9 million, yielding a margin of 25.9% of revenues compared to 27.3% a year ago. Margins were impacted by revenue mix with a significant increase in new equipment sales compared to a year ago.
- Rental revenues increased 14.9%, or $11.6 million, to $89.4 million due to improved rates, a larger fleet compared to a year ago and strong demand.
- New equipment sales increased 84.1%, or $41.2 million, to $90.2 million, largely due to higher crane and earthmoving sales.
- Gross margin was 29.7% as compared to 32.7% a year ago. Rental gross margin increased to 49.6% compared to 48.9% a year ago.
- Average time utilization (based on original equipment cost) was 72.3% compared to 72.9% a year ago and 71.0% in the second quarter of 2013. Average time utilization (based on units available for rent) was 66.6% compared to 68.9% last year and 66.3% last quarter.
- Average rental rates increased 5.2% compared to a year ago and improved 0.7% compared to the second quarter of this year.
- Dollar utilization was consistent with the prior year at 36.7%.
- Average rental fleet age at September 30, 2013 was 35.0 months, down from 35.9 months at the end of the last quarter and younger than the industry average age of 45 months.
FINANCIAL DISCUSSION FOR THIRD QUARTER 2013:
Revenue
Total revenues increased 32.2% to $270.4 million from $204.5 million in the third quarter of 2012. Equipment rental revenues increased 14.9% to $89.4 million compared with $77.8 million in the third quarter of 2012. New equipment sales increased 84.1% to $90.2 million from $49.0 million in the third quarter of 2012. Used equipment sales increased 47.2% to$36.8 million compared to $25.0 million in the third quarter of 2012. Parts sales increased 2.0% to $26.6 million from $26.1 million in the third quarter of 2012. Service revenues decreased 4.9% to $13.7 million compared to $14.4 million a year ago.
Gross Profit
Gross profit increased 20.0% to $80.3 million from $66.9 million in the third quarter of 2012. Gross margin was 29.7% for the quarter ended September 30, 2013, compared to gross margin of 32.7% for the quarter ended September 30, 2012.
On a segment basis, third quarter 2013 gross margin on rentals was 49.6% in this quarter compared to 48.9% in the third quarter of 2012 due to higher average rental rates on new contracts in the period, strong fleet utilization and lower rental expenses as a percentage of equipment rental revenues. On average, rental rates increased 5.2% as compared to the third quarter of 2012. Time utilization (based on original equipment cost) was 72.3% in the third quarter of 2013 and 72.9% a year ago.
Gross margin on new equipment sales was 10.6% compared to 11.5% in the third quarter a year ago. Gross margin on used equipment sales was 26.3% compared to 26.4% a year ago. Gross margin on parts sales was 28.0% in this quarter and 26.7% a year ago. Gross margin on service revenues was 64.0% compared to 61.1% in the prior year.
Rental Fleet
At the end of the third quarter of 2013, the original acquisition cost of the Company’s rental fleet was $978.9 million, an increase of $107.9 million from $871.0 million at the end of the third quarter of 2012 and an increase of $95.9 million from$883.0 million at the end of 2012. Dollar utilization was 36.7% consistent with the third quarter of 2012.
Selling, General and Administrative Expenses
SG&A expenses for the third quarter of 2013 were $47.0 million compared with $42.4 million last year, a $4.6 million, or 10.8%, increase. For the third quarter of 2013, SG&A expenses as a percentage of total revenues were 17.4% compared to 20.7% a year ago.
Income from Operations
Income from operations for the third quarter of 2013 was $33.9 million, or 12.6% of revenues, compared with $25.0 million, or 12.2% of revenues, a year ago.
Interest Expense
Interest expense for the third quarter of 2013 was $13.2 million compared to $9.8 million in the third quarter of 2012.
Net Income and Adjusted Net Income
Net income for the third quarter of 2013 was $14.0 million, or $0.40 per diluted share, compared to net income of $3.7 million, or $0.11 per diluted share, a year ago. A year ago, adjusted net income was $10.9 million, or $0.31 per diluted share. The effective income tax rate was 33.5% compared to 29.7% a year ago.
EBITDA and Adjusted EBITDA
EBITDA for the third quarter of 2013 increased 53.0% to $70.0 million compared to $45.7 million a year ago and increased 25.2% compared to Adjusted EBITDA of $55.9 million a year ago. EBITDA, as a percentage of revenues, was 25.9% compared to 22.4% a year ago. Adjusted EBITDA, as a percentage of revenues, was 25.9% compared with 27.3% in the third quarter of 2012.
Non-GAAP Financial Measures
This press release contains certain Non-GAAP measures (EBITDA, Adjusted EBITDA and Adjusted Net Income). Please refer to our Current Report on Form 8-K for a description of these measures and a discussion of our use of these measures. EBITDA, Adjusted EBITDA, and Adjusted Net Income as calculated by the Company, are not necessarily comparable to similarly titled measures reported by other companies. Additionally, these Non-GAAP measures 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.
