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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported):  August 3, 2021

 

H&E Equipment Services, Inc.

(Exact name of registrant as specified in its charter)

 

Commission File Number:  000-51759

 

Delaware		81-0553291
(State or other jurisdiction of		(IRS Employer
incorporation)		Identification No.)

 

7500 Pecue Lane

Baton Rouge, LA 70809

(Address of principal executive offices, including zip code)

 

(225) 298-5200

(Registrant’s telephone number, including area code)

 

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: 

 

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, par value $0.01 per share	HEES	Nasdaq Global Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐ 

 

 

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Item 2.02    Results of Operations and Financial Condition.

 

On August 3, 2021, we issued a press release announcing our financial results for the three month period ended June 30, 2021. A copy of the press release is attached as Exhibit 99.1 and is incorporated herein by reference.

 

The information in this Form 8-K and the attached exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

 

Item 8.01    Other Events.

 

EBITDA and Adjusted EBITDA are non-GAAP measures as defined under the rules of the Securities and Exchange Commission. We define EBITDA for the periods presented as net income (loss) before interest expense, income taxes, depreciation and amortization. We define Adjusted EBITDA for the periods presented as EBITDA adjusted for the following: (1) merger and other costs and (2) impairment of goodwill.

 

We use EBITDA and Adjusted EBITDA in our business operations to, among other things, evaluate the performance of our business, develop budgets and measure our performance against those budgets. We also believe that analysts and investors use EBITDA and Adjusted EBITDA as supplemental measures to evaluate a company’s overall operating performance. However, EBITDA and Adjusted EBITDA have material limitations as analytical tools and you should not consider them in isolation, or as substitutes for analysis of our results as reported under GAAP. We consider them useful tools to assist us in evaluating performance because they eliminate items related to components of our capital structure, taxes and non-cash charges. The items that we have eliminated in determining EBITDA for the periods presented are interest expense, income taxes, depreciation of fixed assets (which includes rental equipment and property and equipment) and amortization of intangible assets and, in the case of Adjusted EBITDA, any other non-recurring items described above applicable to the particular period. However, some of these eliminated items are significant to our business. For example, (i) interest expense is a necessary element of our costs and ability to generate revenue because we incur a significant amount of interest expense related to our outstanding indebtedness; (ii) payment of income taxes is a necessary element of our costs; and (iii) depreciation is a necessary element of our costs and ability to generate revenue because rental equipment is the single largest component of our total assets and we recognize a significant amount of depreciation expense over the estimated useful life of this equipment. Any measure that eliminates components of our capital structure and costs associated with carrying significant amounts of fixed assets on our consolidated balance sheet has material limitations as a performance measure. In light of the foregoing limitations, we do not rely solely on EBITDA and Adjusted EBITDA as performance measures and also consider our GAAP results. EBITDA and Adjusted EBITDA are not measurements of our financial performance under GAAP and, accordingly, should not be considered alternatives to net income, operating income or any other measures derived in accordance with GAAP. Because EBITDA and Adjusted EBITDA may not be calculated in the same manner by all companies, these measures may not be comparable to other similarly titled measures used by other companies.

 

We use Adjusted Income (Loss) from Operations, Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per Share in our business operations to, among other things, analyze our financial performance on a comparative period basis without the effects of significant one-time, non-recurring items. We define Adjusted Income (Loss) from Operations, Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per Share for the period presented as Income (Loss) from Operations, Net Income (Loss) and Net Income (Loss) per Share, respectively, adjusted for the impairment of goodwill. Additionally, we believe Adjusted Income (Loss) from Operations, Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per Share provide useful information concerning future profitability. However, Adjusted Income (Loss) from Operations, Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per Share are not measurements of our financial performance under GAAP and, accordingly, should not be considered as alternatives to GAAP Income (Loss) from Operations, Net Income (Loss) and Net Income (Loss) per Share. Because Adjusted Income (Loss) from Operations, Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per Share may not be calculated in the same manner by all companies, these measures may not be comparable to other similarly titled measures used by other companies.

 

 

 

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Item 9.01    Financial Statements and Exhibits.

 

Exhibit 99.1

Press Release, dated August 3, 2021, announcing financial results for the three month period ended June 30, 2021.

Exhibit 104

Cover Page Interactive Data File (embedded within the Inline XBRL document).

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date: August 3, 2021	By:	/s/ Leslie S. Magee
		Leslie S. Magee
		Chief Financial Officer

 

 

 

  

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Exhibit 99.1

News Release

 

 

 

 

 

Contacts:

 

Leslie S. Magee

Chief Financial Officer

225-298-5261

lmagee@he-equipment.com

 

Jeffrey L. Chastain

Vice President of Investor Relations

225-952-2308

Jchastain@he-equipment.com

 

H&E Equipment Services Reports Second Quarter 2021 Results

 

BATON ROUGE, Louisiana -- (August 3, 2021) -- H&E Equipment Services, Inc. (NASDAQ: HEES) today announced results for the second quarter ended June 30, 2021, reporting strong year-over-year performance as activity in the rental equipment industry displays further improvement.   

 

SECOND QUARTER 2021 SUMMARY

 

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Addressing the strong financial results for the second quarter of 2021, Brad Barber, Chief Executive Officer of H&E Equipment Services, Inc., stated, “Physical utilization of 68.3% was 880 basis points ahead of the same quarter in 2020, when worsening economic conditions caused by the onset of the COVID-19 global pandemic drove the metric to its lowest level since 2010. On a sequential basis, our second quarter utilization exceeded the first quarter result by 480 basis points at a time when we grew our fleet by more than 5%. The rising demand from customers led to a 1% improvement in second quarter rental rates when compared to the preceding quarter, representing the first sequential quarterly improvement since late-2019. With improving utilization, rising rental rates and fleet growth, we are increasingly encouraged by the prospects for our industry as we enter the second half of 2021.”

 

Mr. Barber elaborated on the improving industry outlook, noting, “Customer inquiries addressing current equipment needs remain strong and we expect the elevated demand to persist for the foreseeable future. Key industry indices, which in some cases are near record levels, point to a continuation of project expansion into 2022, especially in the non-residential construction market. Physical utilization of our fleet remains on a favorable trend, closing August 1, 2021 at 71.9%, reflecting the increasing demand for our young rental fleet.”

 

Providing a final comment on the Company’s success with strategic initiatives, Mr. Barber said, “Our recent disclosure regarding the pending sale of our crane business represents a transformative event for H&E. Following the close of the transaction, expected during the fourth quarter of 2021, we expect to fortify our position in the rental equipment business and in turn benefit from a more stable revenue base and margin appreciation while positioning the Company to capture incremental opportunities resulting from the highly favorable industry trends. In addition, proceeds from the sale are expected to be utilized in numerous ways, including further growth in our rental fleet, expansion of branch operations and other strategic growth initiatives that should advantageously position H&E for the expected industry expansion. Further steps have been taken in support of our transition to a pure-play equipment rental business. Recently, we reached an agreement to sell two earthmoving distribution branches in Arkansas and plan to start a new rental-only branch in the Greater Little Rock market.”

 

FINANCIAL DISCUSSION FOR SECOND QUARTER 2021:

 

Revenue

Total revenues increased 13.4% to $315.8 million in the second quarter of 2021 from $278.3 million in the second quarter of 2020.  Total equipment rental revenues increased 14.9% to $179.0 million compared to $155.8 million in the second quarter of 2020. Rental revenues increased 13.9% to $160.3 million compared to $140.8 million in the second quarter of 2020.  New equipment sales increased 13.6% to $49.9 million compared to $43.9 million a year ago.  Used equipment sales increased 21.6% to $41.4 million compared to $34.0 million a year ago.  Parts sales increased 4.6% to $27.4 million compared to $26.2 million a year ago.  Service revenues decreased 4.3% to $15.0 million compared to $15.7 million a year ago.

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Gross Profit

Gross profit increased 21.0% to $111.4 million from $92.1 million in the second quarter of 2020.  Gross margin was 35.3% for the second quarter of 2021, as compared to 33.1% for the second quarter of 2020. On a segment basis, gross margin on total equipment rentals was 41.3% in the second quarter of 2021 compared to 38.0% in the second quarter of 2020.  Rental margins were 46.1% in the second quarter of 2021 compared to 41.5% for the second quarter of 2020.  On average, rental rates in the second quarter of 2021 were 0.3% lower than rental rates in the second quarter of 2020.  Time utilization (based on original equipment cost) was 68.3% in the second quarter of 2021 compared to 59.5% in the second quarter of 2020. Gross margins on new equipment sales were 11.5% in the second quarter of 2021 compared to 10.7% in the second quarter of 2020.  Gross margins on used equipment sales were 34.7% compared to 31.6% in the second quarter of 2020.  Gross margins on parts sales were 25.8% in the second quarter of 2021 compared to 26.2% in the second quarter of 2020.  Gross margins on service revenues were 68.0% for the second quarter of 2021 compared to 67.0% in the second quarter of 2020.  

 

Rental Fleet

At the end of the second quarter of 2021, the original acquisition cost of the Company’s rental fleet was $1.8 billion, which represented a 2.2%, or $40.7 million, decrease from the end of the second quarter of 2020.  Dollar utilization for the second quarter of 2021 was 35.2% compared to 29.6% for the second quarter of 2020.

 

Selling, General and Administrative Expenses

SG&A expenses for the second quarter of 2021 were $77.0 million compared with $67.9 million in the comparable quarter in 2020, a $9.1 million, or 13.5% increase.  SG&A expenses in the second quarter of 2021 as a percentage of total revenues were 24.4%, unchanged from the second quarter in 2020.  Employee salaries, wages, payroll taxes and related employee benefits, and other employee related expenses increased $9.0 million. Also, facilities and promotion expenses increased $0.9 million and $0.6 million, respectively, due in part to an increase in the Company’s total branch count. Partially offsetting these increases were a $1.1 million decrease in liability insurance and a $0.9 million decrease in bad debt expense. Approximately $3.2 million of SG&A expenses were attributable to warm start branches opened since January 1, 2021.

 

Income from Operations

Income from operations for the second quarter of 2021 was $34.4 million, or 10.9% of revenues, compared to $27.0 million, or 9.7% of revenues, for the second quarter of 2020.    

 

Interest Expense

Interest expense was $13.4 million for the second quarter of 2021 compared to $15.6 million for the second quarter of 2020.

 

Net Income

Net income was $15.8 million, or $0.43 per diluted share, in the second quarter of 2021 compared to net income of $8.8 million, or $0.24 per diluted share, in the second quarter of 2020.  The effective income tax rate was 27.5% in the second quarter of 2021 compared to 26.9% in the second quarter of 2020.

 

 

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Non-GAAP Financial Measures

This press release contains certain Non-GAAP measures (EBITDA, Adjusted EBITDA, Adjusted Income from Operations, Adjusted Net Income, Adjusted Net Income per share and the disaggregation of equipment rental revenues and cost of sales numbers) detailed below.  Please refer to our Current Report on Form 8-K filed with the Securities and Exchange Commission filed on August 3, 2021, for a description of these measures and of our use of these measures.  These measures as calculated by the Company are not necessarily comparable to similarly titled measures reported by other companies.  Additionally, these Non-GAAP measures are not a measurement of financial performance or liquidity under GAAP and should not be considered as alternatives to the Company's other financial information determined under GAAP.

 

Conference Call

The Company’s management will hold a conference call to discuss second quarter 2021 results today, August 3, 2021 at 10:00 a.m. (Eastern Time).  To listen to the call, participants should dial 877-317-6789 approximately 10 minutes prior to the start of the call.  A telephonic replay will become available after 1:00 p.m. (Eastern Time) on August 3, 2021, and will continue through August 10, 2021, by dialing 877-344-7529 and entering the confirmation code 10158067.

 

A live broadcast of the Company’s quarterly conference call will be available online at www.he-equipment.com on August 3, 2021, beginning at 10:00 a.m. (Eastern Time) and will remain available for 30 days.  Related presentation materials will be posted to the “Investor Relations” section of the Company’s web site at www.he-equipment.com prior to the call.  The presentation materials will be in Adobe Acrobat format.

 

About H&E Equipment Services, Inc.

The Company is one of the largest integrated equipment services companies in the United States with 106 full-service facilities throughout the West Coast, Intermountain, Southwest, Gulf Coast, Mid-Atlantic and Southeast regions.  The Company is focused on heavy construction and industrial equipment, and rents, sells, and provides parts and services support for four core categories of specialized equipment: (1) hi-lift or aerial platform equipment; (2) cranes; (3) earthmoving equipment; and (4) material handling equipment.  By providing equipment rental, sales, on site parts, repair services, and maintenance functions under one roof, the Company is a one-stop provider for its customers’ varied equipment needs.  This full-service approach provides the Company with multiple points of customer contact, enabling it to maintain a high quality rental fleet, as well as an effective distribution channel for fleet disposal, and provides cross-selling opportunities among its new and used equipment sales, rentals, parts sales, and services operations.

 

Forward-Looking Statements

Statements contained in this press release that are not historical facts, including statements about H&E’s beliefs and expectations, are “forward-looking statements” within the meaning of the federal securities laws. Statements containing the words “may”, “could”, “would”, “should”, “believe”, “expect”, “anticipate”, “plan”, “estimate”, “target”, “project”, “intend”, “foresee” and similar expressions constitute forward-looking statements. Forward-looking statements involve known and unknown risks and uncertainties, which could cause actual results to differ materially from those contained in any forward-looking statement. Such factors include, but are not limited to, the following: (1) risks related to the impact of the COVID-19 global pandemic, such as the scope and duration of the outbreak, government actions and restrictive measures implemented in response to the pandemic, material delays and cancellations of construction or infrastructure projects, supply chain disruptions and other impacts to the business; (2) general economic conditions and construction and industrial activity in the markets where we operate in North America; (3) our ability to forecast trends in our business accurately, and the impact of economic downturns and economic uncertainty in the markets we serve (including as a result of current uncertainty due to COVID-19); (4) trends in oil and natural gas could adversely affect the demand for our services

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and products; (5) the impact of conditions in the global credit and commodity markets (including as a result of current volatility and uncertainty in credit and commodity markets due to COVID-19) and their effect on construction spending and the economy in general; (6) relationships with equipment suppliers; (7) increased maintenance and repair costs as we age our fleet and decreases in our equipment’s residual value; (8) our indebtedness; (9) risks associated with the expansion of our business and any potential acquisitions we may make, including any related capital expenditures, or our inability to consummate such acquisitions; (10) our possible inability to integrate any businesses we acquire; (11) competitive pressures; (12) security breaches and other disruptions in our information technology systems; (13) adverse weather events or natural disasters; (14) compliance with laws and regulations, including those relating to environmental matters, corporate governance matters and tax matters, as well as any future changes to such laws and regulations; and (15) other factors discussed in our public filings, including the risk factors included in the Company’s most recent Annual Report on Form 10-K. Investors, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. Except as required by applicable law, including the securities laws of the United States and the rules and regulations of the Securities and Exchange Commission, we are under no obligation to publicly update or revise any forward-looking statements after the date of this release. These statements are based on the current beliefs and assumptions of H&E’s management, which in turn are based on currently available information and important, underlying assumptions. H&E is under no obligation to publicly update or revise any forward-looking statements after this press release, whether as a result of any new information, future events or otherwise. Investors, potential investors, security holders and other readers are urged to consider the above-mentioned factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements.

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