H&E Equipment Services Reports Fourth Quarter And Full Year 2005 Results
BATON ROUGE, La.--March 8, 2006--H&E Equipment Services, Inc. today announced operating results for the fourth quarter and year ended December 31, 2005.Fourth Quarter 2005 Highlights
-- Revenues increased 41.0% to $185.5 million.
-- EBITDA (as defined below) increased 66.7% to $42.7 million.
-- Income from operations increased 123.6% to $25.9 million.
-- Net income increased $13.1 million to $14.7 million.
-- Rental rates increased approximately 13%.
-- Gross margin increased in new and used equipment sales, rentals and service.
"We are very pleased with our fourth quarter results as every segment of our business significantly outperformed last year's fourth quarter," said John Engquist, H&E Equipment Services president and chief executive officer. "Strong demand for construction equipment, the inherent advantages of our integrated model and solid execution by our management team contributed to our strong financial performance."
"New equipment sales during the quarter were particularly strong, up 55.6% from a year ago, driven by solid demand for new cranes, aerial work platforms and earthmoving equipment. Rental revenues were also up significantly in the fourth quarter, increasing 24.3% versus the fourth quarter of 2004. Approximately half of the increase in rental revenues was attributable to higher rental rates with the balance coming from fleet growth and greater equipment utilization. Strong demand for used cranes, aerial work platforms and earthmoving equipment resulted in a 51.3% increase in used equipment sales during the quarter. Higher new and used equipment sales also translated into stronger parts and service revenues, which increased 40.9% from a year ago," commented Leslie Magee, H&E Equipment Services chief financial officer.
"Gross margin on equipment rentals, new and used equipment sales, and service each increased versus the fourth quarter of 2004. Higher gross margins in these businesses translated to a 123.6% increase in our income from operations versus the same quarter last year," added Magee.
2006 Outlook
"Looking to 2006, we continue to see strong growth. We believe non-residential construction spending, the key driver of our business, is in the early stages of a multi-year expansion," said Engquist. "We also anticipate continued growth in construction spending in the regions where we have focused our operations - the southwest, southeast, gulf coast and intermountain regions of the nation."
For the year 2006, the Company expects total revenues in the range of approximately $675 million to $690 million, EBITDA in the range of approximately $170 million to $180 million and earnings per share in the range of approximately $1.00 to $1.15, assuming an effective tax rate of approximately 29%. The Company's 2006 guidance reflects the impact of the Eagle High Reach Equipment acquisition consummated on February 28, 2006, but does not reflect the impact that SFAS No. 123 (R), Share Based Payment, may have on the Company's results of operations or the dilution of earnings per share for any common stock equivalents that could be granted by the Company in 2006.
FINANCIAL DISCUSSION FOR FOURTH QUARTER ENDED DECEMBER, 31, 2005
-- Revenues - Total fourth quarter revenues increased $53.9 million to
$185.5 million from $131.6 million in the fourth quarter of 2004.
- Equipment rentals - Fourth quarter equipment rental revenues
were $54.2 million compared to $43.6 million for the fourth
quarter of 2004, reflecting an increase of $10.6 million, or
24.3%. At the end of the fourth quarter of 2005, the original
acquisition cost of the rental fleet was $522.4 million, up $52.6
million from $469.8 million at the end of the fourth quarter of
2004. For the fourth quarter of 2005, dollar utilization increased
to 42.0% from 36.9% for the fourth quarter 2004.
- New equipment sales - Fourth quarter new equipment sales were
$56.5 million compared to $36.3 million for the fourth quarter of
2004, reflecting an increase of $20.2 million, or 55.6%.
- Used equipment sales - Fourth quarter used equipment sales were
$34.8 million, representing an $11.8 million, or 51.3%, increase
from $23.0 million for the fourth quarter of 2004.
- Parts sales - Parts sales for the fourth quarter were $18.9
million, representing a $5.2 million, or 37.9%, increase compared
to $13.7 million for the fourth quarter of 2004.
- Service revenues - Service revenues for the fourth quarter of 2005
were $12.0 million, representing a $3.7 million, or 44.6%,
increase compared to $8.3 million for the fourth quarter of 2004.
-- Gross Profit - Total gross profit for the fourth quarter of
2005 was $55.9 million compared to $36.2 million for the fourth
quarter of 2004, reflecting an increase of $19.7 million, or 54.4%,
on higher sales volume and improved margins across all business
segments except for a slight decline in gross margin on parts
sales. Fourth quarter gross profit margin increased to 30.1% from
27.5% for the fourth quarter of 2004.
- Equipment rentals - Fourth quarter gross profit from equipment
rentals was $27.1 million compared to $18.9 million for the same
time period last year, reflecting an increase of $8.2 million.
- New equipment sales - New equipment sales gross profit for the
fourth quarter of 2005 increased to $7.1 million from $4.2 million
for the fourth quarter of 2004.
- Used equipment sales - Used equipment sales gross profit for the
fourth quarter increased to $8.1 million from $4.8 million for the
fourth quarter of 2004.
- Parts sales - Gross profit from parts sales for the fourth quarter
of 2005 was $5.4 million compared to $3.9 million.
- Service revenues - Gross profit from service revenues for the
fourth quarter was $7.6 million compared to $5.0 million for the
same time period in 2004.
-- Income From Operations - Income from operations during the fourth
quarter increased $14.3 million, or 123.6%, to $25.9 million
from $11.6 million in the fourth quarter of 2004 on higher revenues
and gross margins. Income from operations as a percentage of
revenues increased to 14.0% from 8.8% in the fourth quarter of
2004.
-- Net Income - Net income during the fourth quarter increased $13.1
million, or 805.7%, to $14.7 million from $1.6 million in the
fourth quarter of 2004. Net income as a percentage of revenues
increased to 7.9% from 1.2% in the fourth quarter of 2004.
-- Selling, General And Administrative Expenses - Selling, general and
administrative expenses for the fourth quarter of 2005 were $30.1
million compared to $24.6 million last year, a $5.4 million, or a
22.0%, increase. As a percentage of total revenues, selling,
general and administrative expenses for the fourth quarter of this
year decreased to 16.2% from 18.7% in the fourth quarter of last
year.
-- EBITDA - We define EBITDA as net income (loss) from continuing
operations before interest expense, income taxes and depreciation
and amortization. EBITDA for the fourth quarter increased $17.1
million, or 66.7%, to $42.7 million from $25.6 million in the
fourth quarter of 2004. EBITDA as a percentage of total revenues
increased to 23.0% compared to 19.5% in the fourth quarter of 2004.
FINANCIAL DISCUSSION FOR YEAR ENDED DECEMBER 31, 2005
-- Revenue - Total revenues for 2005 increased $122.0 million to
$600.2 million from $478.2 million in 2004.
- Equipment rentals - Equipment rental revenues for 2005 were $190.8
million compared to $160.3 million for 2004, reflecting an
increase of $30.5 million, or 19.0%. Dollar utilization for 2005
increased to 38.6% from 33.9% in 2004.
- New equipment sales - New equipment sales were $156.3 million
compared to $116.9 million for 2004, reflecting an increase of
$39.4 million, or 33.7%.
- Used equipment sales - Used equipment sales were $111.1 million,
representing a $26.1 million, or 30.8%, increase from $85.0
million in 2004.
- Parts sales - Parts sales in 2005 were $70.1 million, representing
a $12.1 million, or 20.8%, increase compared to $58.0 million in
2004.
- Service revenues - Service revenues in 2005 were $41.5 million,
representing a $7.8 million, or 23.1%, increase compared to $33.7
million in 2004.
-- Gross Profit - Total gross profit for 2005 was $181.6 million
compared to $123.3 million for 2004, reflecting an increase of
$58.3 million, or 47.3%, on higher sales volume and improved
margins across all business segments. Gross profit margin increased
to 30.3% from 25.8% for 2004.
- Equipment rentals - Gross profit from equipment rentals was $89.2
million compared to $60.1 million for 2004, reflecting an increase
of $29.1 million.
- New equipment sales - New equipment sales gross profit for 2005
increased to $19.2 million from $12.8 million in 2004.
- Used equipment sales - Used equipment sales gross profit for 2005
increased to $26.4 million from $17.1 million for 2004.
- Parts sales - Gross profit from parts sales for 2005 was $20.5
million compared to $16.5 million.
- Service revenues - Gross profit from service revenues for 2005 was
$26.1 million compared to $20.8 million for 2004.
-- Income From Operations - Income from operations during 2005
increased $44.3 million, or 170.6%, to $70.3 million from $26.0
million in 2004 on higher revenues and gross margins. Income from
operations as a percentage of revenues increased to 11.7% from 5.4%
for 2004.
-- Net Income - Net income during 2005 increased to $28.2 million, a
$41.9 million improvement from a net loss of $13.7 million in 2004.
Net income as a percentage of revenues increased to 4.7% from -2.9%
for 2004.
-- Selling, General And Administrative Expenses - Selling, general and
administrative expenses for 2005 were $111.4 million compared to
$97.5 million last year, a $13.9 million, or a 14.2%, increase. As
a percentage of total revenues, selling, general and administrative
expenses for 2005 decreased to 18.6% from 20.4% for 2004.
-- EBITDA - EBITDA for 2005 increased $50.9 million, or 63.9%, to
$130.5 million from $79.6 million in 2004. EBITDA as a percentage
of total revenues increased to 21.7% from 16.6% for 2004.
Non-GAAP Financial Measures
This press release contains certain Non-GAAP measures (EBITDA). Please refer to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission ("SEC") on March 8, 2006 for a description of our use of this measure. EBITDA as calculated by the Company is not necessarily comparable to similarly titled measures reported by other companies. Additionally, EBITDA is not a measure of financial performance or liquidity under GAAP and should not be considered an alternative to the Company's other financial information determined under GAAP.
Conference Call
As previously announced, H&E Equipment Services, Inc. management will hold a conference call to discuss fourth quarter and year-end results on Thursday, March 9, 2006 at 10:00 a.m. (Eastern Time). To listen to the call, participants should dial 913-981-5543 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, March 9, 2006 and will continue through March 16, 2006 by dialing 719-457-0820 and entering confirmation code 9514364.
The live broadcast of H&E Equipment Services' quarterly conference call will be available online at www.he-equipment.com or www.earnings.com on March 9, 2006, beginning at 10:00 a.m. (Eastern Time) and will continue to be available for 30 days.
About H&E Equipment Services, Inc.
H&E Equipment Services, Inc. is one of the largest integrated equipment services companies in the United States with 47 full-service facilities throughout the Intermountain, Southwest, Gulf Coast, West 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. The Company trades on the Nasdaq Stock Exchange under the symbol "HEES." For further information regarding H&E Equipment Services, Inc., please go to www.he-equipment.com and select "Investor Relations."
Forward-Looking Statements
Certain statements in this press release are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1933. Statements under the heading "2006 Outlook" above and 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. 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; (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 Company's Registration Statement on S-1 (File No. 333-128996). 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 L.L.C.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in thousands)
Three Months Ended
December 31,
------------------------
2005 2004
--------- ---------
Revenues:
Equipment rentals $54,218 $43,620
New equipment sales 56,474 36,337
Used equipment sales 34,807 23,015
Parts sales 18,864 13,679
Service revenues 12,026 8,250
Other 9,085 6,650
--------- ---------
Total revenues 185,474 131,551
Gross profit:
Equipment rentals 27,075 18,872
New equipment sales 7,108 4,171
Used equipment sales 8,154 4,844
Parts sales 5,354 3,945
Service revenues 7,582 5,024
Other 634 (671)
--------- ---------
Total gross profit 55,907 36,185
Selling, general, and
administrative expenses 30,067 24,647
Gain on sale of property
and equipment 76 51
--------- ---------
Income from operations 25,916 11,589
Interest expense (10,840) (10,020)
Other income, net 117 53
--------- ---------
Income (loss) before income taxes 15,193 1,622
Income tax provision 502 -
--------- ---------
Net income (loss) $14,691 $1,622
========= =========
Years Ended
December 31,
------------------------
2005 2004
--------- ---------
Revenues:
Equipment rentals $190,794 $160,342
New equipment sales 156,341 116,907
Used equipment sales 111,139 84,999
Parts sales 70,066 58,014
Service revenues 41,485 33,696
Other 30,385 24,214
--------- ---------
Total revenues 600,210 478,172
Gross profit:
Equipment rentals 89,233 60,086
New equipment sales 19,172 12,796
Used equipment sales 26,443 17,093
Parts sales 20,451 16,514
Service revenues 26,068 20,831
Other 234 (4,032)
--------- ---------
Total gross profit 181,601 123,288
Selling, general, and
administrative expenses 111,409 97,525
Gain on sale of property
and equipment 91 207
--------- ---------
Income from operations 70,283 25,970
Interest expense (41,822) (39,856)
Other income, net 372 149
--------- ---------
Income (loss) before income taxes 28,833 (13,737)
Income tax provision 673 -
--------- ---------
Net income (loss) $28,160 $(13,737)
========= =========
H&E EQUIPMENT SERVICES L.L.C.
SELECTED BALANCE SHEET DATA (unaudited)
(in thousands)
December 31, December 31,
2005 2004
------------ ------------
Cash $ 5,627 $ 3,358
Rental equipment, net 308,036 243,630
Total assets 530,697 408,669
Total debt (1) 349,902 299,392
Total liabilities 535,837 441,969
Members' deficit (5,140) (33,300)
Total liabilities and
members' deficit $ 530,697 $ 408,669
(1) Total debt consists of the aggregate amounts outstanding on
the senior secured credit facility, senior secured notes, senior
subordinated notes, notes payable and capital lease obligations.
H&E EQUIPMENT SERVICES L.L.C.
RECONCILIATION OF EARNINGS BEFORE INTEREST,
TAXES, DEPRECIATION and AMORTIZATION (EBITDA)
(in thousands)
Three Months Ended Years Ended
December 31, December 31,
------------------ ------------------
2005 2004 2005 2004
-------- -------- -------- --------
Net income (loss) $ 14,691 $ 1,622 $ 28,833 $(13,737)
Interest expense 10,840 10,020 41,822 39,856
Income tax provision
(benefit) 502 - - -
Depreciation and
amortization 16,632 13,950 59,860 53,526
-------- -------- -------- --------
EBITDA $ 42,665 $ 25,592 $130,515 $ 79,645
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