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 9, 2007 |
H&E Equipment Services, Inc.
__________________________________________
(Exact name of registrant as specified in its charter)
Delaware | 000-51759 | 81-0553291 |
_____________________ (State or other jurisdiction |
_____________ (Commission |
______________ (I.R.S. Employer |
of incorporation) | File Number) | Identification No.) |
11100 Mead Road, Suite 200, Baton Rouge, Louisiana | 70816 | |
_________________________________ (Address of principal executive offices) |
___________ (Zip Code) |
Registrants telephone number, including area code: | (225) 298-5200 |
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))
Item 2.02 Results of Operations and Financial Condition.
On August 9, 2007, we issued a press release announcing our financial results for the second quarter ended June 30, 2007. A copy of the press release is attached as Exhibit 99.1.
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 or otherwise subject to the liability of that section nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.
Item 8.01 Other Events.
We define "EBITDA" as net income (loss) from continuing operations before interest expense, income taxes, and depreciation and amortization.
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 these measures in isolation, or as substitutes for analysis of our results as reported under GAAP. We find EBITDA and Adjusted EBITDA useful tools to assist us in evaluating performance because they eliminate items related to capital structure, taxes and non-cash charges. The items that we have eliminated in determining EBITDA and Adjusted EBITDA 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 as EBITDA as adjusted for the management services agreement termination fee that was recorded in the first quarter ended March 31, 2006. 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 asse
ts on our 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 should not be considered as alternatives to net income, operating income or any other measures derived in accordance with GAAP. Because EBITDA and Adjusted EBITDA are not calculated in the same manner by all companies, EBITDA and Adjusted EBITDA may not be comparable to other similarly titled measures used by other companies.
Item 9.01 Financial Statements and Exhibits.
d) Exhibits
99.1 Press Release, dated August 9, 2007, announcing earnings for the second quarter ended June 30, 2007.
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.
H&E Equipment Services, Inc. | ||||
August 9, 2007 | By: |
/s/ Leslie S. Magee
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Name: Leslie S. Magee | ||||
Title: Chief Financial Officer |
Exhibit Index
Exhibit No. | Description | |
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99.1
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Press Release, dated August 9, 2007, announcing earnings for the second quarter ended June 30, 2007. |
Exhibit 99.1
News Release
Contacts:
Leslie S. Magee
Chief Financial Officer
225-298-5261
lmagee@he-equipment.com
Kevin S. Inda
Corporate Communications, Inc.
407-566-1180
kevin.Inda@cci-ir.com
H&E Equipment Services Reports Second Quarter Results
BATON ROUGE, Louisiana (Aug. 9, 2007) H&E Equipment Services, Inc. (NASDAQ: HEES) today announced operating results for the second quarter ended June 30, 2007.
Second Quarter 2007 Summary
| Revenues increased 15.1% to $233.1 million versus $202.5 million a year ago. |
| EBITDA (as defined below) increased 2.5% to $57.6 million compared to $56.2 million of EBITDA a year ago. |
| Income from operations decreased 6.0% to $32.9 million compared to $35.0 million a year ago. |
| Net income decreased 23.2% to $15.2 million compared to net income of $19.8 million a year ago. |
| Total gross margin decreased to 30.5% compared to 33.7% a year ago. |
We are pleased with our top line growth, achieving record quarterly revenue during the second quarter. Demand for new equipment, especially cranes, was extremely strong, which had a negative effect on our consolidated margins as this component of our business generates lower margins than our other segments. This shift in revenue mix, combined with record year-over-year comps, impacted our bottom line performance for the quarter as compared to a year ago, said John Engquist, H&E Equipment Services president and chief executive officer. Dollar utilization was 41.5% for the quarter compared to 42.2% a year ago. Our returns were negatively impacted by softness in time utilization early in the quarter, partly due to the completion of hurricane related work in Florida. Our time utilization returned to normal levels in the second half of the quarter due to strong demand in our other markets. We are also seeing increased spending in Coastal Louisiana as a result of Hurricane Katrina and expect this spending to accelerate in the third and fourth quarters. We remain encouraged about the trends in the non-residential construction markets we serve and our outlook for both the near and long term.
Our revenue growth for the quarter was primarily the result of a 38.0% increase in new equipment sales. Even with the softness in utilization during the first part of the quarter, rental revenues grew 8.7% and our combined parts and service revenues reflected growth of 12.7%, commented Leslie Magee, H&E Equipment Services chief financial officer.
Our gross margin remained strong at 30.5% compared to 33.7% a year ago when we posted record top and bottom line growth. The majority of the decline in gross margin is attributable to the combination of revenue mix and lower utilization of our rental fleet. Sequentially, gross margin decreased slightly from 31.3% in the first quarter of this year, which is also a result of continued growth in new equipment sales, said Ms. Magee. Overall, we remain positive about the current trends in our business and we expect the trend in revenue mix to continue for the remainder of the year.
2007 Outlook
Our outlook for 2007 remains very positive and as a result, we are raising our top-line estimates, said Mr. Engquist. Non-residential construction activity remains strong across our footprint. We are very encouraged by the activity we see in the major industries we serve including the petrochemical sector, energy sector and mining industry. The demand for new equipment, particularly cranes, is extremely strong and gives us confidence in the non-residential construction cycle. Although we see many positives for our business as a result of the strong demand for new equipment, we expect our earnings will be negatively impacted by the change in revenue mix. In addition, we have revised our earnings to reflect increased depreciation expense as a result of de-aging our fleet.
| Revenue The Company expects 2007 revenue in the range of $935 million to $953 million. |
| EBITDA The Company expects 2007 EBITDA in the range of $233 million to $240 million. |
| Earnings Per Share The Company expects 2007 earnings per share in the range of $1.59 to $1.67 per share based on 38.2 million diluted common shares outstanding and an effective tax rate of approximately 38.5%. Relative to the Companys 2006 results, its 2007 guidance is based on a significantly higher effective tax rate, 38.5% versus 22.9%, and an increase in common shares outstanding given the effective date of the initial public offering in February 2006. |
FINANCIAL DISCUSSION FOR SECOND QUARTER ENDED JUNE 30, 2007
| Revenues Total second quarter revenues increased $30.6 million to $233.1 million from $202.5 million in the second quarter of 2006. The following is revenue by business segment for the second quarter versus the second quarter of 2006: |
| Equipment rentals Equipment rental revenues were $69.6 million compared with $64.0 million, reflecting an increase of $5.6 million, or 8.7%. At the end of the second quarter of 2007, the original acquisition cost of the rental fleet was $678.1 million, up $63.8 million from $614.3 million at the end of the second quarter of 2006. Dollar utilization was 41.5% compared to 42.2%. |
| New equipment sales New equipment sales were $78.5 million compared with $56.9 million, reflecting an increase of $21.6 million, or 38.0%. |
| Used equipment sales Used equipment sales were $34.7 million compared to $36.1 million, reflecting a decrease of $1.4 million, or 3.9%. |
| Parts sales - Parts sales were $23.9 million, representing a $2.7 million, or 12.7%, increase compared with $21.2 million. |
| Service revenues - Service revenues were $15.1 million, representing a $1.7 million, or 12.7%, increase compared with $13.4 million. |
| Gross Profit Total gross profit for the second quarter of 2007 was $71.2 million compared with $68.3 million for the second quarter of 2006, reflecting an increase of $2.9 million, or 4.2%. Second quarter gross profit margin decreased to 30.5% from 33.7% for the second quarter of 2006, primarily as a result of revenue mix and lower time utilization. The following is gross profit by business segment for the second quarter versus the second quarter of 2006: |
| Equipment Rentals Gross profit from equipment rentals increased to $35.4 million from $34.4 million. |
| New equipment sales New equipment sales gross profit increased to $10.1 million from $7.2 million. |
| Used equipment sales Used equipment sales gross profit decreased to $8.4 million compared to $10.3 million. |
| Parts sales Gross profit from parts sales increased to $6.9 million from $6.2 million. |
| Service revenues Gross profit from service revenues increased to $9.5 million from $8.6 million. |
| Selling, General And Administrative Expenses Selling, general and administrative expenses for the second quarter of 2007 were $38.4 million compared with $33.4 million last year, a $5.0 million, or 14.9%, increase. As a percentage of total revenues, selling, general and administrative expenses for the second quarter of this year were 16.5%, consistent with the second quarter of last year. |
| Income From Operations The Company reported income from operations of $32.9 million compared to $35.0 million in the second quarter of last year, reflecting a decrease of $2.1 million, or 6.0%. |
| Net Income Net income decreased to $15.2 million, or 23.2%, from net income of $19.8 million in the second quarter of last year. |
| EBITDA EBITDA for the second quarter increased 2.5% to $57.6 million compared with $56.2 million during the second quarter of 2006. EBITDA as a percentage of revenues decreased to 24.7% compared with 27.8% in the second quarter of 2006. |
Non-GAAP Financial Measures
This press release contains certain Non-GAAP measures (EBITDA and Adjusted EBITDA). Please refer
to our Current Report on Form 8-K for a description of our use of these measures. EBITDA and
Adjusted EBITDA 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 Companys other financial information determined under GAAP.
Conference Call
The Companys management will hold a conference call to discuss second quarter results today,
Thursday, August 9, 2007, at 10:00 a.m. (Eastern Time). To listen to the call, participants should
dial 913-312-1292 approximately 10 minutes prior to the start of the call. A telephonic replay
will become available after 1:00 p.m. (Eastern Time) on Thursday, August 9, 2007, and will continue
through August 16, 2007, by dialing 719-457-0820 and entering confirmation code 9994868.
The live broadcast of the Companys quarterly conference call will be available online at www.he-equipment.com or www.earnings.com on August 9, 2007, beginning at 10:00 a.m. (Eastern Time) and will continue to be available for 30 days. Related presentation materials will be posted to the Investor Relations section of the Companys 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
50 full-service facilities throughout the West Coast, Intermountain, Southwest, Gulf Coast, and
Southeast regions of the United States. The Company is focused on heavy construction and industrial
equipment and rents, sells and provides parts and service support for four core categories of
specialized equipment: (1) hi-lift or aerial platform equipment; (2) cranes; (3) earthmoving
equipment; and (4) industrial lift trucks. By providing equipment rental, sales, and on-site parts,
repair 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, rental, parts sales and service operations.
Forward-Looking Statements
Certain statements in this press release are forward-looking statements within the meaning of the
federal securities laws. Statements about our beliefs and expectations and statements containing
the words may, could, would, should, believe, expect, anticipate, plan, estimate,
target, project, intend and similar expressions constitute forward-looking statements. Among
the forward-looking statements included in this release is the information provided under the
heading 2007 Outlook. Forward-looking statements involve known and unknown risks and
uncertainties, which could cause actual results that differ materially from those contained in any
forward-looking statement. Such factors include, but are not limited to, the following: (1) general
economic conditions and construction activity in the markets where we operate in North America; (2)
relationships with new equipment suppliers; (3) increased maintenance and repair costs; (4) our
substantial leverage; (5) the risks associated with the expansion of our business; (6) our possible
inability to integrate any businesses we acquire, including the potential acquisition of J.W
Burress, Incorporated; (7) competitive pressures; (8) compliance with laws and regulations,
including those relating to environmental matters; and (9) other factors discussed in our public
filings, including the risk factors included in the Companys Annual Report on Form 10-K for the
year ended December 31, 2006. 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 SEC, we are
under no obligation to publicly update or revise any forward-looking statements after the date of
this release.
H&E EQUIPMENT SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(Amounts in thousands, except per share amounts)
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||||||||||||||||||
Revenues: |
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Equipment rentals |
$ | 69,572 | $ | 64,011 | $ | 132,773 | $ | 118,006 | ||||||||||||||||||||||||
New equipment sales |
78,465 | 56,945 | 146,235 | 112,660 | ||||||||||||||||||||||||||||
Used equipment sales |
34,747 | 36,065 | 65,687 | 67,719 | ||||||||||||||||||||||||||||
Parts sales |
23,951 | 21,237 | 47,087 | 40,550 | ||||||||||||||||||||||||||||
Service revenues |
15,099 | 13,374 | 29,722 | 25,708 | ||||||||||||||||||||||||||||
Other |
11,311 | 10,904 | 21,377 | 20,103 | ||||||||||||||||||||||||||||
Total revenues |
233,145 | 202,536 | 442,881 | 384,746 | ||||||||||||||||||||||||||||
Cost of revenues: |
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Rental depreciation |
22,321 | 19,170 | 43,664 | 36,030 | ||||||||||||||||||||||||||||
Rental expense |
11,842 | 10,476 | 22,629 | 21,088 | ||||||||||||||||||||||||||||
New equipment sales |
68,378 | 49,733 | 127,352 | 98,294 | ||||||||||||||||||||||||||||
Used equipment sales |
26,354 | 25,746 | 48,874 | 49,545 | ||||||||||||||||||||||||||||
Parts sales |
17,060 | 15,080 | 33,329 | 28,604 | ||||||||||||||||||||||||||||
Service revenues |
5,628 | 4,731 | 10,768 | 9,298 | ||||||||||||||||||||||||||||
Other |
10,352 | 9,305 | 19,344 | 17,569 | ||||||||||||||||||||||||||||
Total cost of revenues |
161,935 | 134,241 | 305,960 | 260,428 | ||||||||||||||||||||||||||||
Gross profit |
71,210 | 68,295 | 136,921 | 124,318 | ||||||||||||||||||||||||||||
Selling, general and administrative expenses |
38,360 | 33,384 | 75,515 | 74,427 | ||||||||||||||||||||||||||||
Gain on sale of property and equipment |
39 | 60 | 347 | 159 | ||||||||||||||||||||||||||||
Income from operations |
32,889 | 34,971 | 61,753 | 50,050 | ||||||||||||||||||||||||||||
Interest expense |
(8,887 | ) | (10,115 | ) | (17,590 | ) | (20,282 | ) | ||||||||||||||||||||||||
Other income, net |
386 | 355 | 523 | 430 | ||||||||||||||||||||||||||||
Income before provision for income taxes |
24,388 | 25,211 | 44,686 | 30,198 | ||||||||||||||||||||||||||||
Provision for income taxes |
9,162 | 5,408 | 17,326 | 6,475 | ||||||||||||||||||||||||||||
Net income |
$ | 15,226 | $ | 19,803 | $ | 27,360 | $ | 23,723 | ||||||||||||||||||||||||
EARNINGS PER SHARE: |
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Basic Earnings per share |
$ | 0.40 | $ | 0.52 | $ | 0.72 | $ | 0.66 | ||||||||||||||||||||||||
Basic Weighted average number of common
shares outstanding |
38,095 | 38,070 | 38,088 | 35,777 | ||||||||||||||||||||||||||||
Diluted Earnings per share |
$ | 0.40 | $ | 0.52 | $ | 0.72 | $ | 0.66 | ||||||||||||||||||||||||
Diluted Weighted average number of common
shares outstanding |
38,161 | 38,096 | 38,159 | 35,790 | ||||||||||||||||||||||||||||
H&E EQUIPMENT SERVICES, INC.
SELECTED BALANCE SHEET DATA (unaudited)
(Amounts in thousands)
June 30, | December 31, | |||||||
2007 | 2006 | |||||||
Cash and cash equivalents |
$ | 34,967 | $ | 9,303 | ||||
Rental equipment, net |
470,181 | 440,454 | ||||||
Total assets |
833,437 | 759,942 | ||||||
Total debt (1) |
256,479 | 265,965 | ||||||
Total liabilities |
570,260 | 524,358 | ||||||
Stockholders equity |
263,177 | 235,584 | ||||||
Total liabilities and stockholders equity |
$ | 833,437 | $ | 759,942 |
(1) Total debt consists of the aggregate amounts outstanding on the senior secured credit facility, senior unsecured notes, senior secured notes and notes payable obligations, net of original issue discount, where applicable.
H&E EQUIPMENT SERVICES, INC.
UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Amounts in thousands)
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Net income |
$ | 15,226 | $ | 19,803 | $ | 27,360 | $ | 23,723 | ||||||||
Interest expense |
8,887 | 10,115 | 17,590 | 20,282 | ||||||||||||
Provision for income taxes |
9,162 | 5,408 | 17,326 | 6,475 | ||||||||||||
Depreciation and amortization |
24,353 | 20,876 | 47,622 | 39,316 | ||||||||||||
EBITDA |
$ | 57,628 | $ | 56,202 | $ | 109,898 | $ | 89,796 | ||||||||
Management services agreement termination fee (1) |
¯ | ¯ | ¯ | 8,000 | ||||||||||||
Adjusted EBITDA |
$ | 57,628 | $ | 56,202 | $ | 109,898 | $ | 97,796 | ||||||||
(1) Adjustment relates to a non-recurring charge of $8.0 million for the termination of a management services agreement in connection with the Companys initial public offering in February 2006.