H&E Equipment Services Inc. announced results for the fourth quarter and year ended December 31, 2015, showing solid results despite upheaval in oil and gas markets.
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.”