H&E Equipment Services Inc. announced results for the fourth quarter and year ended December 31, 2016, reporting a 10.6-percent decrease in Q4 year-over-year revenues, but showing a positive outlook for the company and industry.
John Engquist, H&E Equipment Services’ chief executive officer, said, “2016 was a solid year for our company and industry as the strength in the nonresidential construction markets continued into the fourth quarter. Demand for rental equipment was healthy, with both revenues and margins up slightly from a year ago. Ongoing weakness in crane demand continued to negatively affect our distribution business, with new and used crane sales down $23.0 million on a combined basis.”
Engquist concluded, “We are extremely encouraged about the trends and opportunities for our business in 2017 and beyond. Customer sentiment was positive prior to the election but it has improved further post-election according to many metrics. While substantial uncertainty exists regarding the new administration’s proposed infrastructure stimulus plan in terms of total funding, project mix and timing, a material spend could fuel solid industry growth and extend the cycle for years. While it is unlikely the industry would benefit from any infrastructure spending until 2018 at the earliest, we do believe the new administration’s pro-business position could accelerate construction spending in 2017. The energy markets are also improving as shale drillers in the Permian and Eagle Ford Basins are ramping up exploration activity as they expect to generate positive returns at current oil prices. For the first time since 2014, we opportunistically moved fleet back into select energy focused markets during the fourth quarter.”
FOURTH QUARTER 2016 SUMMARY
- Revenues decreased 10.6% to $244.3 million versus $273.2 million a year ago.
- Net income was $12.4 million in the fourth quarter compared to net income of $12.0 million a year ago.
- EBITDA was $78.9 million in the fourth quarter compared to EBITDA of $81.3 million a year ago, yielding a margin of 32.3% of revenues compared to 29.8% a year ago.
- Rental revenues were $115.2 million in the fourth quarter compared to $115.0 million a year ago.
- New equipment sales decreased 28.5% to $44.9 million in the fourth quarter compared to $62.7 million a year ago.
- Used equipment sales decreased 29.2% to $24.9 million in the fourth quarter compared to $35.2 million a year ago.
- Gross margin was 34.6% compared to 33.0% a year ago.
- Rental gross margins were 47.7% in the fourth quarter of 2016 and 47.5% a year ago.
- Average time utilization (based on original equipment cost) was 70.3% compared to 72.0% a year ago. Average time utilization (based on units available for rent) was 67.6% compared to 69.3% last year.
- Average rental rates decreased 1.1% compared to a year ago.
- Dollar utilization was 34.3% in the fourth quarter compared to 35.5% a year ago.
- Average rental fleet age at December 31, 2016, was 33.0 months compared to an industry average age of 43.7 months.