e8vk
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): November 6, 2008
H&E Equipment Services, Inc.
(Exact name of registrant as specified in its charter)
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Delaware
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000-51759
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81-0553291 |
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(State or other jurisdiction
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(Commission
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(I.R.S. Employer |
of incorporation)
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File Number)
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Identification No.) |
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11100 Mead Road, Suite 200,
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Baton Rouge, Louisiana |
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70816 |
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(Address of principal executive offices)
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(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:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b)) |
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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 November 6, 2008, we issued a press release for the third quarter ended September 30, 2008. 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
seciton nor shall it be deemed incorporated by reference to 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) before interest expense, income taxes, depreciation and
amortization. We use 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 as a supplemental measure to evaluate a
companys overall operating performance. However, EBITDA has material limitations as an analytical
tool and you should not consider it in isolation, or as a substitute for analysis of our results as
reported under GAAP. We find EBITDA a useful tool to assist us in evaluating performance because it
eliminates items related to capital structure, taxes and non-cash charges. The items that we have
eliminated in determining EBITDA are interest expense, income taxes, depreciation of fixed assets
(which includes rental equipment and property and equipment) and amortization of intangible assets.
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 balance
sheet has material limitations as a performance measure. In light of the foregoing limitations, we
do not rely solely on EBITDA as a performance measure and also consider our GAAP results. EBITDA is
not a measurement of our financial performance under GAAP and should not be considered as an
alternative to net income, operating income or any other measures derived in accordance with GAAP.
Because EBITDA is not calculated in the same manner by all companies, it 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 November 6, 2008, announcing earnings for the third quarter ended
September 30, 2008.
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.
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H&E Equipment Services, Inc.
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November 6, 2008 |
By: |
/s/ Leslie S. Magee
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Name: |
Leslie S. Magee |
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Title: |
Chief Financial Officer and Secretary |
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exv99w1
Exhibit 99.1
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 Third Quarter 2008 Results
BATON ROUGE, Louisiana (Nov. 6, 2008) H&E Equipment Services, Inc. (NASDAQ: HEES) today
announced operating results for the third quarter ended September 30, 2008.
THIRD QUARTER 2008 SUMMARY
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Revenues increased 3.0% to $278.6 million versus $270.6 million a year ago, with the
Companys Mid-Atlantic acquisition contributing $38.8 million in the current quarter as
compared to $10.1 million a year ago. Third quarter 2007 results reflected one month
results from the acquisition which was completed September 1, 2007. |
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EBITDA decreased 2.9% to $67.2 million compared to $69.2 million of EBITDA a year
ago, with the Mid-Atlantic region contributing $3.4 million in the current quarter and
$1.7 million a year ago. |
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Income from operations decreased 12.3% to $37.2 million compared to $42.4 million a
year ago, with the Mid-Atlantic region contributing $1.8 million of income from
operations in the current quarter compared to $1.0 million a year ago. Depreciation
and amortization expense increased $2.9 million. |
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Net income decreased to $17.6 million, or $0.50 per diluted share, compared to $20.2
million, or $0.53 per diluted share. The effective income tax rate was 36.9% versus
39.4% a year ago. |
Our strong presence in regions with exposure to petrochemical, oil patch, mining and energy
sectors and our integrated business model are clearly helping to minimize the impact to our
business from the numerous macroeconomic issues occurring in the country today, said John
Engquist, H&E Equipment Services president and chief executive officer. There is no doubt the
non-residential construction industry has slowed as a result of the unstable credit markets and
other economic factors, yet our strong presence in the industrial sector resulted in solid
financial performance during the third quarter.
- MORE -
H&E Equipment Services Reports Third Quarter 2008 Results
Page 2
November 6, 2008
We believe our business is very well positioned to navigate the current conditions in the market,
Engquist continued. We have a strong balance sheet, are well capitalized and our debt carries a
low interest rate and maturity dates well into the future. While we expect a difficult market to
continue during the remainder of this year and into 2009 due to tight credit markets and economic
slowdown, we are confident in our ability to make the necessary business adjustments to maximize
our financial performance.
Although we are not seeing revenue growth as a result of the deterioration in the overall economy,
our margins for this quarter improved on a sequential basis at the gross profit, EBIT, EBITDA and
earnings per share level, commented Leslie Magee, H&E Equipment Services chief financial officer.
Our product support business continues to show strength. This segment of our business has
historically performed very well during periods of economic softness. We remain committed to
reducing our capital fleet expenditures which will generate additional free cash flow. We plan to
use excess cash to reduce debt and/or repurchase shares. With a challenging business climate,
weakening visibility into future market demand, and times of uncertain access to credit, our focus
continues to be cash generation and maintaining a strong, conservative balance sheet.
FINANCIAL DISCUSSION FOR THIRD QUARTER 2008
Revenue
Total revenues grew 3.0% to $278.6 million from $270.6 million in the third quarter of 2008. Third
quarter revenues included $38.8 million from the Mid-Atlantic region compared to $10.1 million a
year ago, reflecting one months results of the acquisition which closed on September 1, 2007.
Equipment rental revenues increased 3.4% to $78.2 million compared with $75.6 million in the third
quarter of 2007. Third quarter 2008 equipment rental revenues included $4.5 million of rental
revenues from the Mid-Atlantic region compared to $1.3 million a year ago. New equipment sales
increased 3.3% to $97.8 million from $94.7 million due to new equipment sales of $20.5 million from
the Mid-Atlantic region compared to $3.1 million of new equipment sales from the Mid-Atlantic
region a year ago. Used equipment sales decreased 10.3% to $39.9 million compared to $44.5 million
in the third quarter of 2007. The decrease in used equipment sales was partially offset by an
increase in used sales from the Mid-Atlantic region to $6.4 million from $2.9 million a year ago.
Parts sales grew 15.9% to $31.0 million from $26.7 million in the third quarter of 2007. Service
revenues increased 8.6% to $18.3 million compared with $16.9 million in the third quarter of 2007.
Product support revenue increased due to parts and service sales of $6.4 million in the
Mid-Atlantic region compared to $2.7 million a year ago and increased demand.
Gross Profit
Gross profit decreased 1.7% to $82.5 million from $83.9 million in the third quarter of 2007.
Gross margin was 29.6% for the quarter ended September 30, 2008 as compared to 31.0% for the
quarter ended September 30, 2007. The reduced gross margin percentage in the current quarter is
primarily due to the impact of a 16.9% gross margin on $38.8 million of revenues from the
Mid-Atlantic operations. This lower gross margin is largely due to business mix, a continued
challenging Mid-Atlantic market, and a lower margin rental segment in the Mid-Atlantic market due
to fleet mix, utilization and rates. The gross profit contribution from the Mid-Atlantic region
negatively impacted the Companys consolidated gross margin by 210 basis points.
On a segment basis, gross margin on rentals decreased to 50.3% from 52.9% in the third quarter of
2007 due to increased depreciation costs, declines in rental rates and time utilization, and the
impact from the Mid-Atlantic rental operations. On average and excluding rates in the
- MORE -
H&E Equipment Services Reports Third Quarter 2008 Results
Page 3
November 6, 2008
Mid-Atlantic
region, rental rates declined 2.0% as compared to the third quarter of 2007. Time utilization
decreased to 67.4% from 70.7% a year ago.
Gross margins on new equipment sales were 13.4% as compared to 13.9% in the third quarter a year
ago due to the mix of equipment sold. Gross margins on used equipment sales decreased to 23.3%
from 24.2% a year ago due to lower margin on fleet sales in the Mid-Atlantic region. Gross margin
on parts sales increased to 29.5% from 29.3%. Gross margin on service revenues increased to 64.0%
from 63.7% in the third quarter of 2007 due to revenue mix.
Rental Fleet
At the end of the third quarter of 2008, the original acquisition cost of the Companys rental
fleet was $806.3 million, up $26.4 million from $779.9 million at the end of the third quarter of
2007. Dollar utilization was 38.8%, including results from the Mid-Atlantic region, compared to
41.9% for the third quarter of 2007. Dollar utilization for the three months ended September 30,
2008 was 39.8% excluding the Mid-Atlantic region. Dollar returns decreased reflecting lower
year-over-year average rental rates and lower time utilization.
Selling, General and Administrative Expenses
SG&A expenses for the third quarter of 2008 were $45.6 million compared with $41.6 million last
year, a $4.0 million, or 9.5%, increase. Third quarter SG&A expenses included $4.8 million from
the Mid-Atlantic region. Costs have increased primarily due to labor and benefit costs to support
the growth of the Company. SG&A expenses also grew by $0.6 million due to the amortization of
intangibles associated with the acquisition in the Mid-Atlantic region. For the third quarter of
2008, SG&A expenses increased as a percentage of total revenues to 16.4% as compared with 15.4%
last year.
Income from Operations
Income from operations for the third quarter of 2008 decreased 12.3% to $37.2 million compared with
$42.4 million a year ago.
Interest Expense
Interest expense for the third quarter of 2008 increased $0.5 million to $9.5 million from $9.0
million primarily due to an increase in average borrowings on the Companys senior secured credit
facility.
Net Income
Net income decreased to $17.6 million, or $0.50 per diluted share, from $20.2 million, or $0.53 per
diluted share. The effective income tax rate decreased to 36.9% in the third quarter of 2008 as
compared to 39.4% last year.
EBITDA
EBITDA for the third quarter of 2008 decreased $2.0 million to $67.2 million from $69.2 million in
the third quarter of 2007. EBITDA as a percentage of revenues was 24.1% compared with 25.6% in the
third quarter of 2007. For the third quarter, the Mid-Atlantic region contributed $3.4 million of
EBITDA, or an 8.8% EBITDA margin compared to $1.7 million of EBITDA, or a 16.8%
EBITDA margin a year ago. Excluding the three month results from the Mid-Atlantic region, EBITDA
margins increased to 26.6% for the third quarter of 2008 compared to 25.9% a year ago.
- MORE -
H&E Equipment Services Reports Third Quarter 2008 Results
Page 4
November 6, 2008
2008 OUTLOOK
In spite of todays challenging and uncertain business environment, we are reaffirming our full
year guidance for EBITDA and EPS and we are lowering our revenue guidance primarily to adjust for
the expected delay in fourth quarter crane shipments, said Engquist.
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Revenue The Company now expects 2008 revenue in the range of $1.080 billion to $1.090
billion. |
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EBITDA The Company is narrowing its 2008 EBITDA to a range of $247 million to $253
million. |
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Earnings Per Diluted Share The Company is also narrowing its 2008 earnings per
diluted share to a range of $1.60 to $1.68 based on an estimated 35.6 million diluted
common shares outstanding and an estimated effective income tax rate of approximately
37.0%. The estimated diluted common shares outstanding reflect the impact of stock
repurchases through October 31, 2008. |
Non-GAAP Financial Measures
This press release contains certain Non-GAAP measures (EBITDA). Please refer to our Current Report
on Form 8-K for a description of our use of these measures. EBITDA as calculated by the Company is
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 third quarter results today,
November 6, 2008, at 10:00 a.m. (Eastern Time). To listen to the call, participants should dial
913-312-0411 approximately 10 minutes prior to the start of the call. A telephonic replay will
become available after 1:00 p.m. (Eastern Time) on November 6, 2008, and will continue through
November 14, 2008, by dialing 719-457-0820 and entering confirmation code 7320492.
The live broadcast of the Companys quarterly conference call will be available online at
www.he-equipment.com or www.earnings.com on November 6, 2008, 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
64 full-service facilities throughout the West Coast, Intermountain, Southwest, Gulf Coast,
Mid-Atlantic 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.
- MORE -
H&E Equipment Services Reports Third Quarter 2008 Results
Page 5
November 6, 2008
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 2008 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 and,
in particular, the conditions in our Mid-Atlantic, Southern California and Florida regions as well
as the impact of the current conditions of the capital markets and its effect on construction
activity and the economy in general; (2) relationships with new equipment suppliers; (3) increased
maintenance and repair costs; (4) our indebtedness; (5) the risks associated with the expansion of
our business; (6) our possible inability to effectively integrate any businesses we acquire; (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 most recent Annual Report on Form 10-K and Quarterly Report on
Form 10-Q. 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.
- MORE -
H&E Equipment Services Reports Third Quarter 2008 Results
Page 6
November 6, 2008
H&E EQUIPMENT SERVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(Amounts in thousands, except per share amounts)
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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2008 |
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2007 |
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2008 |
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2007 |
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Revenues: |
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Equipment rentals |
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$ |
78,181 |
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$ |
75,598 |
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$ |
224,626 |
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$ |
208,371 |
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New equipment sales |
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97,797 |
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94,675 |
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274,135 |
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240,910 |
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Used equipment sales |
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39,873 |
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44,503 |
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128,436 |
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110,190 |
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Parts sales |
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30,951 |
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26,716 |
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89,112 |
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73,803 |
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Service revenues |
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18,333 |
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16,877 |
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52,651 |
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46,599 |
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Other |
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13,512 |
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12,218 |
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38,097 |
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33,595 |
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Total revenues |
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278,647 |
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270,587 |
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807,057 |
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713,468 |
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Cost of revenues: |
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Rental depreciation |
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26,362 |
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24,468 |
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78,838 |
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68,132 |
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Rental expense |
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12,514 |
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11,173 |
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36,460 |
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33,802 |
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New equipment sales |
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84,739 |
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81,523 |
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237,449 |
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208,875 |
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Used equipment sales |
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30,578 |
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33,730 |
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97,960 |
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82,604 |
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Parts sales |
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21,809 |
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18,895 |
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62,815 |
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52,224 |
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Service revenues |
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6,592 |
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6,131 |
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19,016 |
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16,899 |
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Other |
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13,556 |
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10,768 |
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38,735 |
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30,112 |
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Total cost of revenues |
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196,150 |
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186,688 |
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571,273 |
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492,648 |
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Gross profit |
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82,497 |
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83,899 |
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235,784 |
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220,820 |
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Selling, general, and
administrative expenses |
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45,556 |
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41,609 |
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138,097 |
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117,124 |
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Gain on sale of property and equipment |
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219 |
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97 |
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515 |
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444 |
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Income from operations |
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37,160 |
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42,387 |
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98,202 |
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104,140 |
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Loss on early extinguishment of debt |
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(325 |
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(325 |
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Interest expense |
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(9,495 |
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(9,007 |
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(29,193 |
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(26,597 |
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Other income, net |
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250 |
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293 |
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731 |
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816 |
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Income before provision for income taxes |
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27,915 |
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33,348 |
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69,740 |
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78,034 |
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Provision for Income taxes |
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10,311 |
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13,154 |
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25,809 |
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30,480 |
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Net income |
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$ |
17,604 |
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$ |
20,194 |
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$ |
43,931 |
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$ |
47,554 |
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EARNINGS PER SHARE |
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Basic Earnings per share |
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$ |
0.50 |
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$ |
0.53 |
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$ |
1.22 |
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$ |
1.25 |
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Basic Weighted average number of
common shares outstanding |
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35,075 |
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38,095 |
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35,912 |
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38,090 |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings per share |
|
$ |
0.50 |
|
|
$ |
0.53 |
|
|
$ |
1.22 |
|
|
$ |
1.25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Weighted average number of
common shares outstanding |
|
|
35,090 |
|
|
|
38,095 |
|
|
|
35,918 |
|
|
|
38,090 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- MORE -
H&E Equipment Services Reports Third Quarter 2008 Results
Page 7
November 6, 2008
H&E EQUIPMENT SERVICES, INC.
SELECTED BALANCE SHEET DATA (unaudited)
(Amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
|
2008 |
|
2007 |
Cash |
|
$ |
13,207 |
|
|
$ |
14,762 |
|
Rental equipment, net |
|
|
582,347 |
|
|
|
577,628 |
|
Total assets |
|
|
996,559 |
|
|
|
1,012,853 |
|
|
|
|
|
|
|
|
|
|
Total debt (1) |
|
|
360,596 |
|
|
|
374,951 |
|
Total liabilities |
|
|
706,127 |
|
|
|
724,775 |
|
Stockholders equity |
|
|
290,432 |
|
|
|
288,078 |
|
Total liabilities and stockholders equity |
|
$ |
996,559 |
|
|
$ |
1,012,853 |
|
|
|
|
(1) |
|
Total debt consists of the aggregate amounts outstanding on the senior secured
credit facility, senior unsecured notes, capital lease obligation and notes payable obligations. |
H&E EQUIPMENT SERVICES, INC.
UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
Net income |
|
$ |
17,604 |
|
|
$ |
20,194 |
|
|
$ |
43,931 |
|
|
$ |
47,554 |
|
Interest expense |
|
|
9,495 |
|
|
|
9,007 |
|
|
|
29,193 |
|
|
|
26,597 |
|
Provision for income taxes |
|
|
10,311 |
|
|
|
13,154 |
|
|
|
25,809 |
|
|
|
30,480 |
|
Depreciation |
|
|
29,153 |
|
|
|
26,632 |
|
|
|
87,167 |
|
|
|
74,242 |
|
Amortization of intangibles |
|
|
641 |
|
|
|
258 |
|
|
|
2,108 |
|
|
|
270 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA |
|
$ |
67,204 |
|
|
$ |
69,245 |
|
|
$ |
188,208 |
|
|
$ |
179,143 |
|
- END -