Market Overview

H&E Equipment Services Reports Fourth Quarter 2019 and Full Year 2019 Results and Announces Non-Cash Goodwill Impairment Charge

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H&E Equipment Services, Inc. (NASDAQ:HEES) today announced results for the fourth quarter and year ended December 31, 2019, including a $12.2 million non-cash goodwill impairment charge.

FOURTH QUARTER 2019 SUMMARY

  • Revenues increased 0.6% to $348.1 million versus $346.0 million a year ago.
  • Included in fourth quarter 2019 net income was a $12.2 million pre-tax non-cash goodwill impairment charge. Net income decreased 12.5% to $21.9 million in the fourth quarter compared to net income of $25.1 million a year ago. Excluding the impairment charge, net income was $31.9 million, an increase of 27.2%, or $6.8 million. The effective income tax rate was 18.4% in the fourth quarter of 2019 and 27.9% in the fourth quarter of 2018.
  • Adjusted EBITDA increased 10.7% to $126.8 million in the fourth quarter compared to $114.6 million a year ago, yielding a margin of 36.4% of revenues compared to 33.1% a year ago.
  • Total equipment rental revenues for the fourth quarter of 2019 were $193.8 million, an increase of $14.0 million, or 7.8%, compared to $179.8 million a year ago (as adjusted).(1) Rental revenues (as previously reported) for the fourth quarter of 2019 were $176.3 million, an increase of $13.3 million, or 8.2%, compared to $163.0 million in the fourth quarter of 2018.(1)
  • New equipment sales decreased 23.0% to $61.4 million in the fourth quarter compared to $79.7 million a year ago.
  • Used equipment sales increased 12.1% to $42.4 million in the fourth quarter compared to $37.8 million a year ago.
  • Gross margin was 36.9% compared to 35.6% a year ago. The increase in gross margin was largely the result of a shift in revenue mix to rentals and higher margins on used equipment sales which were partially offset by lower margins in other business segments.
____________________

(1)

For a reconciliation of adjustments to prior year data and historical presentations, see page 10.

  • Total equipment rental gross margins were 45.6% in the fourth quarter of 2019 compared to 46.7% in the fourth quarter of 2018 (as adjusted).(1) Rental gross margins (as previously reported) were 50.3% in the fourth quarter of 2019 compared to 51.5% a year ago primarily due to lower time utilization.
  • Average time utilization (based on original equipment cost) was 69.0% compared to 72.9% a year ago. The size of the Company's rental fleet based on original acquisition cost increased 10.2% from a year ago, to $1.9 billion.
  • Average rental rates increased 1.7% compared to a year ago and declined 0.1% sequentially.
  • Dollar utilization was 36.0% in the fourth quarter compared to 37.0% a year ago.
  • Average rental fleet age at December 31, 2019, was 36.3 months compared to an industry average age of 46.8 months.

The non-cash goodwill impairment charge of $12.2 million was identified in connection with the Company's annual fourth quarter 2019 goodwill impairment test. The $12.2 million goodwill impairment charge consists of a $10.7 million impairment to our new equipment goodwill reporting unit and a $1.5 million impairment to our service revenues goodwill reporting unit. Our goodwill reporting units related to rental revenues, used equipment revenues and parts revenues were not impaired. The impairment charge will not result in any cash expenditures and will not affect the Company's cash position, liquidity, availability or covenant test under its senior secured credit facility.

Brad Barber, H&E Equipment Services' chief executive officer and president, said, "With seasonality, the balancing of supply and demand and a challenging comparable in the year ago quarter, the year finished as we expected during the fourth quarter. We produced solid results for the quarter despite these factors – growing revenues, gross profit and Adjusted EBITDA. The strength in our rental business continued with rental revenues increasing 8.2% from a year ago and we again achieved rate growth, which increased 1.7%. Our performance for the full year of 2019 was also positive as we delivered an 8.8% increase in revenues and a 16.7% increase in Adjusted EBITDA. The metrics for our rental business were impressive as rental revenues for the year increased 17.3% from 2018. Average physical utilization for the year remained solid at 70.4% and average rates were 2.1% higher than in 2018. Overall, we are pleased with our execution and results for 2019."

Barber concluded, "Based on current industry indicators and customer sentiment, the non-residential construction markets we serve are expected to be stable in 2020. Increasing the scale and scope of our rental business through selective acquisitions and organic expansion remains one of our highest priorities."

FINANCIAL DISCUSSION FOR FOURTH QUARTER 2019:

Revenue

Total revenues increased 0.6% to $348.1 million in the fourth quarter of 2019 from $346.0 million in the fourth quarter of 2018. Total equipment rental revenues increased 7.8% to $193.8 million compared to $179.8 million in the fourth quarter of 2018 (as adjusted).(1) Rental revenues (as previously reported) increased 8.2% to $176.3 million compared to $163.0 million in the fourth quarter of 2018.(1) New equipment sales were $61.4 million compared to $79.7 million a year ago. Used equipment sales increased 12.1% to $42.4 million compared to $37.8 million a year ago. Parts sales were $30.1 million compared to $30.5 million a year ago. Service revenues increased 15.1% to $17.5 million compared to $15.2 million a year ago.

____________________

(1)

For a reconciliation of adjustments to prior year data and historical presentations, see page 10. 

 

Gross Profit

Gross profit increased 4.4% to $128.6 million from $123.1 million in the fourth quarter of 2018. Gross margin was 36.9% for the quarter ended December 31, 2019, as compared to 35.6% for the quarter ended December 31, 2018. On a segment basis, gross margin on total equipment rentals was 45.6% in the fourth quarter of 2019 compared to 46.7% in the fourth quarter of 2018 (as adjusted).(1) Rental margins (as previously reported) were 50.3% in the fourth quarter of 2019 compared to 51.5% a year ago.(1) On average, rental rates were 1.7% higher than rates in the fourth quarter of 2018. Time utilization (based on original equipment cost) was 69.0% in the fourth quarter of 2019 compared to 72.9% a year ago.

Gross margins on new equipment sales were 10.8% in the fourth quarter compared to 12.7% a year ago. Gross margins on used equipment sales were 33.3% compared to 29.1% a year ago. Gross margins on parts sales were 26.1% in the fourth quarter of 2019 compared to 26.0% a year ago. Gross margins on service revenues were 67.6% for the fourth quarter of 2019 compared to 67.9% in the fourth quarter of 2018.

Rental Fleet

At the end of the fourth quarter of 2019, the original acquisition cost of the Company's rental fleet was $1.9 billion, a 10.2%, or $179.3 million increase from the end of the fourth quarter of 2018. Dollar utilization for the fourth quarter of 2019 was 36.0% compared to 37.0% for the fourth quarter of 2018.

Selling, General and Administrative Expenses

SG&A expenses for the fourth quarter of 2019 were $77.2 million compared with $73.0 million the prior year, a $4.2 million, or 5.8%, increase. SG&A expenses in the fourth quarter of 2019 as a percentage of total revenues were 22.2% compared to 21.1% a year ago. Employee salaries, wages, payroll taxes and related employee benefit and other employee related expenses increased $1.4 million, primarily as a result of our acquisition since December 31, 2018, and a larger workforce and higher incentive compensation related to increased profitability. Facility related expenses, primarily rent expense, increased $1.0 million. Outside services increased $0.9 million. Depreciation and amortization increased $0.8 million. Expenses related to Greenfield branch expansions increased $0.4 million compared to a year ago.

Income from Operations

Income from operations for the fourth quarter of 2019 decreased 18.8% to $41.3 million, or 11.9% of revenues, compared to $50.9 million, or 14.7% of revenues, a year ago. Excluding the impairment charge, income from operations was $53.5 million, an increase of 5.1%, or 15.4% of revenues compared to a year ago.

Interest Expense

Interest expense was $16.8 million for the fourth quarter of 2019 compared to $16.6 million a year ago.

Net Income

Net income was $21.9 million, or $0.61 per diluted share, in the fourth quarter of 2019 compared to net income of $25.1 million, or $0.70 per diluted share, in the fourth quarter of 2018. Excluding the impairment charge, net income was $31.9 million, or $0.88 per diluted share. The effective income tax rate was 18.4% in the fourth quarter of 2019 and 27.9% in the fourth quarter of 2018 due to discrete items in the current period.

Adjusted EBITDA

Adjusted EBITDA for the fourth quarter of 2019 increased 10.7% to $126.8 million compared to $114.6 million in the fourth quarter of 2018. Adjusted EBITDA as a percentage of revenues was 36.4% compared with 33.1% in the fourth quarter of 2018.

____________________

(1)

For a reconciliation of adjustments to prior year data and historical presentations, see page 10.

 

FINANCIAL DISCUSSION FOR THE YEAR ENDED DECEMBER 31, 2019:

Revenue

Total revenues increased 8.8%, or $109.4 million, to $1.3 billion in 2019 from $1.2 billion in 2018. Total equipment rental revenues increased 16.9% to $766.4 million compared to $655.3 million in 2018 (as adjusted).(2) Rental revenues (as previously reported) increased 17.3% to $694.5 million compared to $592.2 million in 2018.(2) New equipment sales decreased 9.1% to $239.1 million from $262.9 million a year ago. Used equipment sales increased 11.4% to $139.3 million compared to $125.1 million a year ago. Parts sales increased 2.8% to $123.9 million from $120.5 million in 2018. Service revenues increased 7.0% to $67.9 million from $63.5 million a year ago.

Gross Profit

Gross profit increased 13.8%, or $60.6 million, to $499.2 million from $438.5 million in 2018. Gross margin was 37.0% for 2019 compared to 35.4% for 2018. On a segment basis, gross margin on total equipment rentals was 45.3% compared to 45.1% in 2018 (as adjusted).(2) Rental margins (as previously reported) were 49.8% compared to 49.7% a year ago.(2) On average, 2019 rental rates increased 2.1% compared to 2018. In 2019, time utilization (based on original equipment cost) was 70.4% compared to 71.6% a year ago.

Gross margins on new equipment sales were 11.6% from 11.7% a year ago. Gross margins on used equipment sales increased to 34.0% compared to 31.2% a year ago. Gross margins on parts sales were 26.6% compared to 26.7% a year ago. Gross margins on service revenues increased to 67.7% in 2019 from 66.4% in 2018.

Selling, General and Administrative Expenses

SG&A expenses for 2019 were $311.0 million compared with $278.3 million in 2018, an increase of $32.7 million, or 11.8%. In 2019, SG&A expenses as a percentage of total revenues were 23.1% compared to 22.5% a year ago. The increase in SG&A expenses was attributable to higher labor, wages, incentives, related employee benefits costs and other employee expenses of $16.8 million due to a larger workforce and higher compensation related to our improved profitability. Facility related expenses increased $5.3 million. Depreciation and amortization increased $2.6 million. Legal and professional fees increased $2.4 million. Promotional expenses increased $1.5 million. Liability insurance cost increased $1.4 million. Expenses related to Greenfield branch expansions increased $3.4 million compared to a year ago.

Approximately, $10.6 million of the total increase in SG&A was attributable to branches opened since January 1, 2018, with less than a full year of comparable operations in either or both of the years ended December 31, 2019 and 2018. Included in the $10.6 million is $0.8 million of amortization expense associated with the recognition of intangibles resulting from acquisitions.

Income from Operations

Income from operations for 2019 increased 8.1% to $180.2 million, or 13.4% of revenues, compared to $166.6 million, or 13.5% of revenues, a year ago. Excluding the impairment charge, income from operations was $192.3 million, an increase of 15.4%, or 14.3% of revenues compared to year ago.

Interest Expense

Interest expense in 2019 was $68.3 million, a $4.6 million increase from $63.7 million a year ago.

____________________

(2)

For a reconciliation of adjustments to prior year data and historical presentations, see page 11. 

 

Net Income

Net income was $87.2 million, or $2.42 per diluted share, compared to net income of $76.6 million, or $2.13 per diluted share, in 2018. Excluding the impairment charge, net income was $96.4 million, or $2.67 per diluted share. The effective income tax rate was 24.7% in 2019 compared to 26.8% in 2018.

Adjusted EBITDA

Adjusted EBITDA for 2019 increased 16.7% to $473.2 million from $405.4 million in 2018. Adjusted EBITDA as a percentage of revenues was 35.1% compared with 32.7% in 2018.

Non-GAAP Financial Measures

This press release contains certain Non-GAAP measures (EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income per share and recasting of certain revenue and cost of revenue numbers detailed below). Please refer to our Current Report on Form 8-K 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 fourth quarter and full-year 2019 results today, February 20, 2020 at 10:00 a.m. (Eastern Time). To listen to the call, participants should dial 323-794-2551 approximately 10 minutes prior to the start of the call. A telephonic replay will become available after 1:00 p.m. (Eastern Time) on February 20, 2020, and will continue through February 29, 2020, by dialing 719-457-0820 and entering the confirmation code 1716921.

The live broadcast of H&E Equipment Services' quarterly conference call will be available online at www.he-equipment.com on February 20, 2020, 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 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 94 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) industrial lift trucks. 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 that are not historical facts, including statements about our beliefs and expectations are forward-looking statements. 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) general economic conditions and construction and industrial activity in the markets where we operate in North America; (2) our ability to forecast trends in our business accurately, and the impact of economic downturns and economic uncertainty in the markets we serve; (3) the impact of conditions in the global credit and commodity markets and their effect on construction spending and the economy in general; (4) relationships with equipment suppliers; (5) increased maintenance and repair costs as we age our fleet and decreases in our equipment's residual value; (6) our indebtedness; (7) 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; (8) our possible inability to integrate any businesses we acquire; (9) competitive pressures; (10) security breaches and other disruptions in our information technology systems; (11) adverse weather events or natural disasters; (12) 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 (13) 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.

 

H&E EQUIPMENT SERVICES, INC.

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

(Amounts in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Twelve Months Ended

 

 

Dec. 31,

 

Dec. 31,

 

Dec. 31,

 

Dec. 31,

 

 

2019

 

2018

 

2019

 

2018

Revenues:

 

 

 

 

 

 

 

 

Equipment rentals

 

$

193,791

 

 

$

172,014

 

 

$

766,354

 

 

$

627,181

 

New equipment sales

 

 

61,382

 

 

 

79,683

 

 

 

239,091

 

 

 

262,948

 

Used equipment sales

 

 

42,407

 

 

 

37,838

 

 

 

139,349

 

 

 

125,125

 

Parts sales

 

 

30,057

 

 

 

30,538

 

 

 

123,855

 

 

 

120,454

 

Service revenues

 

 

17,543

 

 

 

15,238

 

 

 

67,941

 

 

 

63,488

 

Other

 

 

2,953

 

 

 

10,663

 

 

 

11,775

 

 

 

39,765

 

Total revenues

 

 

348,133

 

 

 

345,974

 

 

 

1,348,365

 

 

 

1,238,961

 

 

 

 

 

 

 

 

 

 

Cost of revenues:

 

 

 

 

 

 

 

 

Equipment rentals

 

 

 

 

 

 

 

 

Rental depreciation

 

 

62,133

 

 

 

55,753

 

 

 

243,780

 

 

 

208,453

 

Rental expense

 

 

25,403

 

 

 

23,239

 

 

 

105,079

 

 

 

89,520

 

Rental other

 

 

17,871

 

 

 

14,812

 

 

 

70,613

 

 

 

55,449

 

 

 

 

105,407

 

 

 

93,804

 

 

 

419,472

 

 

 

353,422

 

New equipment sales

 

 

54,734

 

 

 

69,592

 

 

 

211,372

 

 

 

232,057

 

Used equipment sales

 

 

28,279

 

 

 

26,831

 

 

 

92,021

 

 

 

86,052

 

Parts sales

 

 

22,213

 

 

 

22,586

 

 

 

90,963

 

 

 

88,263

 

Service revenues

 

 

5,685

 

 

 

4,898

 

 

 

21,946

 

 

 

21,328

 

Other

 

 

3,254

 

 

 

5,147

 

 

 

13,421

 

 

 

19,305

 

Total cost of revenues

 

 

219,572

 

 

 

222,858

 

 

 

849,195

 

 

 

800,427

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

 

128,561

 

 

 

123,116

 

 

 

499,170

 

 

 

438,534

 

 

 

 

 

 

 

 

 

 

Selling, general, and administrative expenses

 

 

77,243

 

 

 

73,026

 

 

 

311,026

 

 

 

278,298

 

Merger costs

 

 

102

 

 

 

269

 

416

 

708

 

Gain on sales of property and equipment, net

 

 

2,278

 

 

 

1,078

 

 

 

4,617

 

 

 

7,118

 

Impairment of goodwill

 

 

12,184

 

 

 

-

 

 

 

12,184

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Income from Operations

 

 

41,310

 

 

 

50,899

 

 

 

180,161

 

 

 

166,646

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(16,824

)

 

 

(16,646

)

 

 

(68,277

)

 

 

(63,707

)

Other income, net

 

 

2,368

 

 

 

502

 

 

 

3,977

 

 

 

1,724

 

Income before provision for income taxes

 

 

26,854

 

 

 

34,755

 

 

 

115,861

 

 

 

104,663

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

 

4,931

 

 

 

9,695

 

 

 

28,650

 

 

 

28,040

 

 

 

 

 

 

 

 

 

 

Net income

 

$

21,923

 

 

$

25,060

 

 

$

87,211

 

 

$

76,623

 

 

 

 

 

 

 

 

 

 

NET INCOME PER SHARE:

 

 

 

 

 

 

 

 

Basic – Net income per share

 

$

0.61

 

 

$

0.70

 

 

$

2.43

 

 

$

2.15

 

Basic – Weighted average number of common shares outstanding

 

 

35,930

 

 

 

35,764

 

 

 

35,859

 

 

 

35,667

 

Diluted – Net income per share

 

$

0.61

 

 

$

0.70

 

 

$

2.42

 

 

$

2.13

 

Diluted – Weighted average number of common shares outstanding

 

 

36,098

 

 

 

35,901

 

 

 

36,033

 

 

 

35,903

 

Dividends declared per common share

 

$

0.275

 

 

$

0.275

 

 

$

1.10

 

 

$

1.10

 

 

H&E EQUIPMENT SERVICES, INC.

SELECTED BALANCE SHEET DATA (unaudited)

(Amounts in thousands)

 

 

 

 

 

 

 

December 31,

 

December 31,

 

 

2019

 

2018

Cash

 

$

14,247

 

$

16,677

Rental equipment, net

 

 

1,217,673

 

 

1,141,498

Total assets

 

 

1,974,610

 

 

1,727,181

Total debt (1)

 

 

1,167,429

 

 

1,121,487

Total liabilities

 

 

1,667,091

 

 

1,470,378

Stockholders' equity

 

 

307,519

 

 

256,803

Total liabilities and stockholders' equity

 

$

1,974,610

 

$

1,727,181

(1)

Total debt consists of the aggregate amounts on the senior secured credit facility, senior unsecured notes and finance or capital lease obligations.

H&E EQUIPMENT SERVICES, INC.

UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(Amounts in thousands, except per share amounts)

 

 

 

 

 

Three Months Ended December 31,

 

 

2019

 

 

 

2019

 

 

As Reported

 

Adjustment

 

As Adjusted

 

 

 

 

 

 

 

Gross profit

 

$

128,561

 

 

 

 

$

128,561

 

Selling, general and administrative expenses

 

 

77,243

 

 

 

 

 

77,243

 

Impairment of goodwill

 

 

12,184

 

 

 

(12,184

)

 

 

Gain on sale of property and equipment, net

 

 

2,278

 

 

 

 

 

2,278

 

Merger costs

 

 

102

 

 

 

 

 

102

 

Income from operations

 

 

41,310

 

 

 

12,184

 

 

 

53,494

 

Interest expense

 

 

(16,824

)

 

 

 

 

(16,824

)

Other income, net

 

 

2,368

 

 

 

 

 

2,368

 

Income before benefit for income taxes

 

 

26,854

 

 

 

12,184

 

 

 

39,038

 

Provision for income taxes

 

 

4,931

 

 

 

2,237

 

 

 

7,168

 

Net income

 

$

21,923

 

 

$

9,947

 

 

$

31,870

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31,

 

 

2019

 

 

 

2019

 

 

As Reported

 

Adjustment

 

As Adjusted

 

 

 

 

 

 

 

NET INCOME PER SHARE(1)

 

 

 

 

 

 

Basic – Net income per share

 

$

0.61

 

 

$

0.28

 

 

$

0.89

 

Basic – Weighted average number of common shares outstanding

 

 

35,930

 

 

 

35,930

 

 

 

35,930

 

Diluted – Net income per share

 

$

0.61

 

 

$

0.28

 

 

$

0.88

 

Diluted – Weighted average number of common shares outstanding

 

 

36,098

 

 

 

36,098

 

 

 

36,098

 

(1)

Because of the method used in calculating per share data, the summation of the above per share data may not necessarily total to the as adjusted per share data. 

 

 

 

Twelve Months Ended December 31,

 

 

2019

 

 

 

2019

 

 

As Reported

 

Adjustment

 

As Adjusted

 

 

 

 

 

 

 

Gross profit

 

$

499,170

 

 

 

 

$

499,170

 

Selling, general and administrative expenses

 

 

311,026

 

 

 

 

 

311,026

 

Impairment of goodwill

 

 

12,184

 

 

 

(12,184

)

 

 

Gain on sale of property and equipment, net

 

 

4,617

 

 

 

 

 

4,617

 

Merger costs

 

 

416

 

 

 

 

 

416

 

Income from operations

 

 

180,161

 

 

 

12,184

 

 

 

192,345

 

Interest expense

 

 

(68,277

)

 

 

 

 

(68,277

)

Other income, net

 

 

3,977

 

 

 

 

 

3,977

 

Income before benefit for income taxes

 

 

115,861

 

 

 

12,184

 

 

 

128,045

 

Provision for income taxes

 

 

28,650

 

 

 

3,013

 

 

 

31,663

 

Net income

 

$

87,211

 

 

$

9,171

 

 

$

96,382

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Twelve Months Ended December 31,

 

 

2019

 

 

 

2019

 

 

As Reported

 

Adjustment

 

As Adjusted

 

 

 

 

 

 

 

NET INCOME PER SHARE(1)

 

 

 

 

 

 

Basic – Net income per share

 

$

2.43

 

 

$

0.26

 

 

$

2.69

 

Basic – Weighted average number of common shares outstanding

 

 

35,859

 

 

 

35,859

 

 

 

35,859

 

Diluted – Net income per share

 

$

2.42

 

 

$

0.25

 

 

$

2.67

 

Diluted – Weighted average number of common shares outstanding

 

 

36,033

 

 

 

36,033

 

 

 

36,033

 

(1)

Because of the method used in calculating per share data, the summation of the above per share data may not necessarily total to the as adjusted per share data.

H&E EQUIPMENT SERVICES, INC.

UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(Amounts in thousands)

 

 

 

Three Months Ended

December 31,

 

Twelve Months Ended

December 31,

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income

 

$

21,923

 

$

25,060

 

$

87,211

 

$

76,623

Interest Expense

 

 

16,824

 

 

16,646

 

 

68,277

 

 

63,707

Provision for income taxes

 

 

4,931

 

 

9,695

 

 

28,650

 

 

28,040

Depreciation

 

 

69,758

 

 

61,979

 

 

272,368

 

 

233,046

Amortization of intangibles

 

 

1,041

 

 

905

 

 

4,132

 

 

3,320

 

 

 

 

 

 

 

 

 

EBITDA

 

$

114,477

 

$

114,285

 

$

460,638

 

$

404,736

 

 

 

 

 

 

 

 

 

Merger costs

 

 

102

 

 

269

 

 

416

 

 

708

Impairment of goodwill

 

 

12,184

 

 

-

 

 

12,184

 

 

-

Adjusted EBITDA

 

$

126,763

 

$

114,554

 

$

473,238

 

$

405,444

 

H&E EQUIPMENT SERVICES, INC.

UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(Amounts in thousands)

 

Three Months Ended 12/31/18(1)

 

Three Months

Ended 12/31/19

 

As

Previously

Reported

Hauling

Fees(a)

As Currently

Reported

Other

Rental

Fees(b)

As Adjusted

As Currently

Reported

REVENUES

 

 

 

 

 

 

 

 

 

 

 

 

Equipment rentals(2)

 

 

Rentals

 

$

162,966

 

$

-

 

$

162,966

 

$

-

 

$

162,966

 

 

$

176,253

 

Rentals other

 

 

-

 

 

9,048

 

 

9,048

 

 

7,741

 

 

16,789

 

 

 

17,538

 

Total equipment rentals

 

 

162,966

 

 

9,048

 

 

172,014

 

 

7,741

 

 

179,755

 

 

 

193,791

 

New equipment sales

 

 

79,683

 

 

-

 

 

79,683

 

 

-

 

 

79,683

 

 

 

61,382

 

Used equipment sales

 

 

37,838

 

 

-

 

 

37,838

 

 

-

 

 

37,838

 

 

 

42,407

 

Parts sales

 

 

30,538

 

 

-

 

 

30,538

 

 

-

 

 

30,538

 

 

 

30,057

 

Services revenues

 

 

15,238

 

 

-

 

 

15,238

 

 

-

 

 

15,238

 

 

 

17,543

 

Other

 

 

19,711

 

 

(9,048

)

 

10,663

 

 

(7,741

)

 

2,922

 

 

 

2,953

 

Total revenues

 

 

345,974

 

 

-

 

 

345,974

 

 

-

 

 

345,974

 

 

 

348,133

 

 

 

COST OF REVENUES

 

 

Rental depreciation

 

 

55,753

 

 

-

 

 

55,753

 

 

-

 

 

55,753

 

 

 

62,133

 

Rental expense

 

 

23,239

 

 

-

 

 

23,239

 

 

-

 

 

23,239

 

 

 

25,403

 

Rental other

 

 

-

 

 

14,812

 

 

14,812

 

 

1,932

 

 

16,744

 

 

 

17,871

 

 

 

78,992

 

 

14,812

 

 

93,804

 

 

1,932

 

 

95,736

 

 

 

105,407

 

New equipment sales

 

 

69,592

 

 

-

 

 

69,592

 

 

-

 

 

69,592

 

 

 

54,734

 

Used equipment sales

 

 

26,831

 

 

-

 

 

26,831

 

 

-

 

 

26,831

 

 

 

28,279

 

Parts sales

 

 

22,586

 

 

-

 

 

22,586

 

 

-

 

 

22,586

 

 

 

22,213

 

Services revenues

 

 

4,898

 

 

-

 

 

4,898

 

 

-

 

 

4,898

 

 

 

5,685

 

Other

 

 

19,959

 

 

(14,812

)

 

5,147

 

 

(1,932

)

 

3,215

 

 

 

3,254

 

Total cost of revenues

 

 

222,858

 

 

-

 

 

222,858

 

 

-

 

 

222,858

 

 

 

219,572

 

 

 

GROSS PROFIT

 

 

Equipment rentals

 

 

Rentals

 

 

83,974

 

 

-

 

 

83,974

 

 

-

 

 

83,974

 

 

 

88,717

 

Rentals other

 

 

-

 

 

(5,764

)

 

(5,764

)

 

5,809

 

 

45

 

 

 

(333

)

 

 

83,974

 

 

(5,764

)

 

78,210

 

 

5,809

 

 

84,019

 

 

 

88,384

 

New equipment sales

 

 

10,091

 

 

-

 

 

10,091

 

 

-

 

 

10,091

 

 

 

6,648

 

Used equipment sales

 

 

11,007

 

 

-

 

 

11,007

 

 

-

 

 

11,007

 

 

 

14,128

 

Parts sales

 

 

7,952

 

 

-

 

 

7,952

 

 

-

 

 

7,952

 

 

 

7,844

 

Services revenues

 

 

10,340

 

 

-

 

 

10,340

 

 

-

 

 

10,340

 

 

 

11,858

 

Other

 

 

(248

)

 

5,764

 

 

5,516

 

 

(5,809

)

 

(293

)

 

 

(301

)

Total gross profit

 

$

123,116

 

$

-

 

$

123,116

 

$

-

 

$

123,116

 

 

$

128,561

 

 

 

GROSS MARGIN

 

 

Equipment rentals

 

 

Rentals

 

 

51.5

%

 

-

 

 

51.5

%

 

-

 

 

51.5

%

 

 

50.3

%

Rentals other

 

 

-

 

 

-63.7

%

 

-63.7

%

 

75.0

%

 

0.3

%

 

 

-1.9

%

 

 

51.5

%

 

-63.7

%

 

45.5

%

 

75.0

%

 

46.7

%

 

 

45.6

%

New equipment sales

 

 

12.7

%

 

-

 

 

12.7

%

 

-

 

 

12.7

%

 

 

10.8

%

Used equipment sales

 

 

29.1

%

 

-

 

 

29.1

%

 

-

 

 

29.1

%

 

 

33.3

%

Parts sales

 

 

26.0

%

 

-

 

 

26.0

%

 

-

 

 

26.0

%

 

 

26.1

%

Services revenues

 

 

67.9

%

 

-

 

 

67.9

%

 

-

 

 

67.9

%

 

 

67.6

%

Other

 

 

-1.3

%

 

63.7

%

 

51.7

%

 

-75.0

%

 

-10.0

%

 

 

-10.2

%

Total gross margin

 

 

35.6

%

 

-

 

 

35.6

%

 

-

 

 

35.6

%

 

 

36.9

%

(1) 

(a) We have recast the prior year period information to conform to the current year presentation of hauling fees and related cost of revenues included within Equipment Rentals rather than included within Other Revenues as previously reported.

(b) Upon our adoption of the new lease accounting guidance (ASC 842), certain ancillary fees associated with our equipment rental activities, such as damage waiver income, environmental fees and fuel and other recovery fees, are properly included within our Rental Revenue segment rather than Other Revenues as previously reported. Because we elected to not recast prior periods upon ASC 842 adoption, the table above recasts these amounts on an "As Adjusted" basis to conform to the current year presentation.

(2)

 

Pursuant to SEC Regulation S-X, our equipment rental revenues are aggregated and presented in our unaudited consolidated statements of income in this press release as a single line item, "Equipment Rentals". The above table disaggregates our equipment rental revenues for discussion and analysis purposes only.

H&E EQUIPMENT SERVICES, INC.

UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(Amounts in thousands)

 

Twelve Months Ended 12/31/18(1)

 

Twelve Months

Ended 12/31/19

 

As

Previously

Reported

Hauling

Fees(a)

As Currently

Reported

Other

Rental

Fees(b)

As Adjusted

As Currently

Reported

REVENUES

 

 

 

 

 

 

 

 

 

 

 

 

Equipment rentals(2)

 

 

Rentals

 

$

592,193

 

$

-

 

$

592,193

 

$

-

 

$

592,193

 

 

$

694,547

 

Rentals other

 

 

-

 

 

34,988

 

 

34,988

 

 

28,152

 

 

63,140

 

 

 

71,807

 

Total equipment rentals

 

 

592,193

 

 

34,988

 

 

627,181

 

 

28,152

 

 

655,333

 

 

 

766,354

 

New equipment sales

 

 

262,948

 

 

-

 

 

262,948

 

 

-

 

 

262,948

 

 

 

239,091

 

Used equipment sales

 

 

125,125

 

 

-

 

 

125,125

 

 

-

 

 

125,125

 

 

 

139,349

 

Parts sales

 

 

120,454

 

 

-

 

 

120,454

 

 

-

 

 

120,454

 

 

 

123,855

 

Services revenues

 

 

63,488

 

 

-

 

 

63,488

 

 

-

 

 

63,488

 

 

 

67,941

 

Other

 

 

74,753

 

 

(34,988

)

 

39,765

 

 

(28,152

)

 

11,613

 

 

 

11,775

 

Total revenues

 

 

1,238,961

 

 

-

 

 

1,238,961

 

 

-

 

 

1,238,961

 

 

 

1,348,365

 

 

 

COST OF REVENUES

 

 

Rental depreciation

 

 

208,453

 

 

-

 

 

208,453

 

 

-

 

 

208,453

 

 

 

243,780

 

Rental expense

 

 

89,520

 

 

-

 

 

89,520

 

 

-

 

 

89,520

 

 

 

105,079

 

Rental other

 

 

-

 

 

55,449

 

 

55,449

 

 

6,572

 

 

62,021

 

 

 

70,613

 

 

 

297,973

 

 

55,449

 

 

353,422

 

6,572

 

 

359,994

 

 

 

419,472

 

New equipment sales

 

 

232,057

 

 

-

 

 

232,057

 

 

-

 

 

232,057

 

 

 

211,372

 

Used equipment sales

 

 

86,052

 

 

-

 

 

86,052

 

 

-

 

 

86,052

 

 

 

92,021

 

Parts sales

 

 

88,263

 

 

-

 

 

88,263

 

 

-

 

 

88,263

 

 

 

90,963

 

Services revenues

 

 

21,328

 

 

-

 

 

21,328

 

 

-

 

 

21,328

 

 

 

21,946

 

Other

 

 

74,754

 

 

(55,449

)

 

19,305

 

 

(6,572

)

 

12,733

 

 

 

13,421

 

Total cost of revenues

 

 

800,427

 

 

-

 

 

800,427

 

 

-

 

 

800,427

 

 

 

849,195

 

 

 

GROSS PROFIT

 

 

Equipment rentals

 

 

Rentals

 

 

294,220

 

 

-

 

 

294,220

 

 

-

 

 

294,220

 

 

 

345,688

 

Rentals other

 

 

-

 

 

(20,461

)

 

(20,461

)

 

21,580

 

 

1,119

 

 

 

1,194

 

 

 

294,220

 

 

(20,461

)

 

273,759

 

 

21,580

 

 

295,339

 

 

 

346,882

 

New equipment sales

 

 

30,891

 

 

-

 

 

30,891

 

 

-

 

 

30,891

 

 

 

27,719

 

Used equipment sales

 

 

39,073

 

 

-

 

 

39,073

 

 

-

 

 

39,073

 

 

 

47,328

 

Parts sales

 

 

32,191

 

 

-

 

 

32,191

 

 

-

 

 

32,191

 

 

 

32,892

 

Services revenues

 

 

42,160

 

 

-

 

 

42,160

 

 

-

 

 

42,160

 

 

 

45,995

 

Other

 

 

(1

)

 

20,461

 

 

20,460

 

 

(21,580

)

 

(1,120

)

 

 

(1,646

)

Total gross profit

 

$

438,534

 

$

-

 

$

438,534

 

$

-

 

$

438,534

 

 

$

499,170

 

 

 

GROSS MARGIN

 

 

Equipment rentals

 

 

Rentals

 

 

49.7

%

 

-

 

 

49.7

%

 

-

 

 

49.7

%

 

 

49.8

%

Rentals other

 

 

-

 

 

-58.5

%

 

-58.5

%

 

76.7

%

 

1.8

%

 

 

1.7

%

 

 

49.7

%

 

-58.5

%

 

43.6

%

 

76.7

%

 

45.1

%

 

 

45.3

%

New equipment sales

 

 

11.7

%

 

-

 

 

11.7

%

 

-

 

 

11.7

%

 

 

11.6

%

Used equipment sales

 

 

31.2

%

 

-

 

 

31.2

%

 

-

 

 

31.2

%

 

 

34.0

%

Parts sales

 

 

26.7

%

 

-

 

 

26.7

%

 

-

 

 

26.7

%

 

 

26.6

%

Services revenues

 

 

66.4

%

 

-

 

 

66.4

%

 

-

 

 

66.4

%

 

 

67.7

%

Other

 

 

0.0

%

 

58.5

%

 

51.5

%

 

-76.7

%

 

-9.6

%

 

 

-14.0

%

Total gross margin

 

 

35.4

%

 

-

 

 

35.4

%

 

-

 

 

35.4

%

 

 

37.0

%

(1)

(a) We have recast the prior year period information to conform to the current year presentation of hauling fees and related cost of revenues included within Equipment Rentals rather than included within Other Revenues as previously reported.

 

(b) Upon our adoption of the new lease accounting guidance (ASC 842), certain ancillary fees associated with our equipment rental activities, such as damage waiver income, environmental fees and fuel and other recovery fees, are properly included within our Rental Revenue segment rather than Other Revenues as previously reported. Because we elected to not recast prior periods upon ASC 842 adoption, the table above recasts these amounts on an "As Adjusted" basis to conform to the current year presentation.

(2)

 

Pursuant to SEC Regulation S-X, our equipment rental revenues are aggregated and presented in our unaudited consolidated statements of income in this press release as a single line item, "Equipment Rentals". The above table disaggregates our equipment rental revenues for discussion and analysis purposes only.

 

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