H&E Equipment Services Revenues Rise 13% on 26% Increase in Rental

Approaching record levels of time utilization and surpassing prior peak fleet size with Gulf-Coast energy market strength and commercial construction recovery

H&E Equipment Services' (NASDAQ: HEES) revenues increased 13.4% to $209 million in the second quarter ended June 30, 2012 compared to Q2 2011 as rental revenues rose 26.4% to $70.5 million on higher time utilization, better rates, and a larger fleet.

"Our second quarter performance was very strong as we continued to experience solid demand in all of our end user markets, particularly in our Gulf Coast markets where energy-related activity remains very healthy," said John Engquist, H&E Equipment Services’ president and chief executive officer. "A modest recovery in commercial construction activity is also driving higher demand for rentals."

Other Q2 Highlights

  • Net income increased to $10.5 million in Q2 compared to net income of $2.7 million a year ago;
  • EBITDA increased 46.8% to $51.7 million from $35.2 million, yielding a margin of 24.7% compared to 19.1% in Q2 2011;
  • Gross margins were 30.7% as compared to 25.9% in Q2 2011. Rental gross margins increased to 47.5% compared to 40.7%;
  • Average time utilization (based on units available for rent) increased to 68.7% compared to 67.1% last year and 65.8% last quarter. Average time utilization (based on original equipment cost) increased to 73.5% compared to 70.0% a year ago and 69.5% in the first quarter of 2012;
  • Achieved positive year-over-year and sequential rental pricing in the second quarter. Average rental rates increased 11.0% compared to a year ago and improved 5.0% from the first quarter of this year;
  • Dollar utilization was 35.6% as compared to 31.0% in Q2 2011;
  •  Average rental fleet age at June 30, 2012 was 40.4 months, down slightly from the end of the last quarter and significantly younger than the industry average age of 50 months.

"We are approaching our prior record levels of time utilization and our strong dollar returns allow us to continue to increase our fleet size, which as of June 30th, has surpassed our prior peak levels," said Engquist. "Based on the strong demand and improved rental pricing, we plan to further expand our fleet through the remainder of this year.

"Rental rates improved 11% from a year ago and 5% from the first quarter," said Engquist. "New equipment sales remain difficult to predict, but bidding activity for hydraulic cranes used in the energy sector is encouraging.

"We are especially pleased with our bottom line improvement," said Engquist. "While the overall economic environment is hard to predict, the trends in the markets we serve remain positive and the momentum in our business is continuing. We are opening two new locations in Texas to expand our presence and we continue to evaluate expansion opportunities in other markets as well."

At the end of the second quarter of 2012, the original acquisition cost of the H&E rental fleet was $809.3 million, an increase of $84.4 million from $724.9 million at the end of the second quarter of 2011.

SG&A expenses for the second quarter of 2012 were $41.4 million compared with $37.5 million last year, a $3.9 million, or 10.3%, increase. For the second quarter of 2012, SG&A expenses as a percentage of total revenues were 19.8% as compared to 20.4% a year ago.