H&E Equipment Services Earnings 2020-09-30

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

hees-10q_20200930.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 000-51759

H&E Equipment Services, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware		81-0553291
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

7500 Pecue Lane,		70809
Baton Rouge, Louisiana		(ZIP Code)
(Address of Principal Executive Offices)

Registrant’s Telephone Number, Including Area Code: (225) 298-5200

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


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

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non‑accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	☑	Accelerated Filer	☐	Non-Accelerated Filer	☐

Smaller Reporting Company	☐	Emerging Growth Company	☐

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of October 21, 2020, there were 36,094,654 shares of H&E Equipment Services, Inc. common stock, $0.01 par value, outstanding.

H&E EQUIPMENT SERVICES, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

September 30, 2020

		Page
PART I. FINANCIAL INFORMATION		5

Item 1. Financial Statements:		5
Condensed Consolidated Balance Sheets as of September 30, 2020 (Unaudited) and December 31, 2019		5
Condensed Consolidated Statements of Operations (Unaudited) for the Three and Nine Months Ended September 30, 2020 and 2019		6
Condensed Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2020 and 2019		7
Notes to Condensed Consolidated Financial Statements (Unaudited)		9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		31
Item 3. Quantitative and Qualitative Disclosures About Market Risk		45
Item 4. Controls and Procedures		45

PART II. OTHER INFORMATION		46

Item 1. Legal Proceedings		46
Item 1A. Risk Factors		46
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		47
Item 3. Defaults upon Senior Securities		47
Item 4. Mine Safety Disclosures		47
Item 5. Other Information		47
Item 6. Exhibits		48

Signatures		49

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains 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. Forward-looking statements include statements preceded by, followed by or that include the words “may”, “could”, “would”, “should”, “believe”, “expect”, “anticipate”, “plan”, “estimate”, “target”, “project”, “intend”, “foresee” and similar expressions. These statements include, among others, statements regarding our expected business outlook, anticipated financial and operating results, our business strategy and means to implement the strategy, our objectives, the amount and timing of capital expenditures, the likelihood of our success in expanding our business, financing plans, budgets, working capital needs and sources of liquidity. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future.

Forward-looking statements are only predictions and are not guarantees of performance. These statements are based on our management’s beliefs and assumptions, which in turn are based on currently available information. Important assumptions relating to the forward-looking statements include, among others, assumptions regarding demand for our products, the expansion of product offerings geographically or through new marketing applications, the timing and cost of planned capital expenditures, competitive conditions and general economic conditions. These assumptions could prove inaccurate. Forward-looking statements also involve known and unknown risks and uncertainties, which could cause actual results to differ materially from those contained in any forward-looking statement. In addition, even if our actual results are consistent with the forward-looking statements contained in this Quarterly Report on Form 10-Q, those results may not be indicative of results or developments in subsequent periods. Many of these factors are beyond our ability to control or predict. Such factors include, but are not limited to, the following:

•

risks related to the impact of the COVID-19 global pandemic, such as the scope and duration of the outbreak, government actions and restrictive measures implemented in response, material delays and cancellations of construction or infrastructure projects, supply chain disruptions and other impacts to the business;

•

general economic conditions and construction and industrial activity in the markets where we operate in North America;

•

our ability to forecast trends in our business accurately, and the impact of economic downturns and economic uncertainty on the markets we serve (including as a result of current uncertainty due to COVID-19);

•

the impact of conditions in the global credit and commodity markets (including as a result of current volatility and uncertainty in credit and commodity markets due to COVID-19) and their effect on construction spending and the economy in general;

•

trends in oil and natural gas could adversely affect the demand for our services and products;

•

relationships with equipment suppliers;

•

increased maintenance and repair costs as we age our fleet and decreases in our equipment’s residual value;

•

our indebtedness;

•

risks associated with the expansion of our business and any potential acquisitions we may make, including any related capital expenditures, or our ability to consummate such acquisitions;

•

our possible inability to integrate any businesses we acquire;

•

competitive pressures;

•

security breaches and other disruptions in our information technology systems;

•

adverse weather events or natural disasters;

•

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

•

other factors discussed under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019 and in Item 1A — “Risk Factors” in this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2020.

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 (“SEC”), we are under no obligation to publicly update or revise any forward-looking statements after we file this Quarterly Report on Form 10-Q, whether as a result of any new information, future events or otherwise. Investors, potential investors 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. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results or performance.

For a more detailed discussion of some of the foregoing risks and uncertainties, see Item 1A — “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019 and Item 1A — “Risk Factors” in this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2020, as well as other reports and registration statements filed by us with the SEC. These factors should not be construed as exhaustive and should be read with other cautionary statements in this Quarterly Report on Form 10-Q and our other public filings. All of our annual, quarterly and current reports, and any amendments thereto, filed with or furnished to the SEC are available on our Internet website under the Investor Relations link. For more information about us and the announcements we make from time to time, visit our Internet website at www.he-equipment.com.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

H&E EQUIPMENT SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share amounts)

	Balances at
	September 30, 2020			December 31, 2019
	(Unaudited)
ASSETS
Cash	$	11,997		$	14,247
Receivables, net of allowance for doubtful accounts of $4,963 and $5,236, respectively		167,595			192,204
Inventories, net of reserves for obsolescence of $318 and $331, respectively		72,871			85,478
Prepaid expenses and other assets		11,597			10,262
Rental equipment, net of accumulated depreciation of $705,944 and $676,376, respectively		1,078,403			1,217,673
Property and equipment, net of accumulated depreciation and amortization of $160,637 and $156,782, respectively		122,173			130,564
Operating lease right-of-use assets, net of accumulated amortization of $20,497 and $11,197, respectively		165,479			156,570
Finance lease right-of-use assets, net of accumulated amortization of $2,173 and $2,051, respectively		244			365
Deferred financing costs, net of accumulated amortization of $14,944 and $14,419, respectively		2,332			2,857
Intangible assets, net of accumulated amortization of $9,747 and $6,952, respectively		29,953			32,948
Goodwill		68,851			131,442
Total assets	$	1,731,495		$	1,974,610
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Amounts due on senior secured credit facility	$	17,986		$	216,879
Accounts payable		69,805			58,853
Manufacturer flooring plans payable		11,646			25,201
Accrued expenses payable and other liabilities		73,764			78,382
Dividends payable		135			171
Senior unsecured notes, net of unaccreted discount of $2,334 and $2,691 and deferred financing costs of $1,511 and $1,743, respectively		946,155			945,566
Operating lease right-of-use liabilities		168,952			159,265
Finance lease right-of-use liabilities		368			550
Deferred income taxes		178,752			180,126
Deferred compensation payable		2,173			2,098
Total liabilities		1,469,736			1,667,091
Commitments and Contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value, 25,000,000 shares authorized; no shares issued		—			—
Common stock, $0.01 par value, 175,000,000 shares authorized; 40,245,706 and 39,921,838 shares issued at September 30, 2020 and December 31, 2019, respectively, and 36,096,814 and 35,848,089 shares outstanding at September 30, 2020 and December 31, 2019, respectively		401			398
Additional paid-in capital		239,139			235,844
Treasury stock at cost, 4,148,892 and 4,073,749 shares of common stock held at September 30, 2020 and December 31, 2019, respectively		(66,159	)		(64,783	)
Retained earnings		88,378			136,060
Total stockholders’ equity		261,759			307,519
Total liabilities and stockholders’ equity	$	1,731,495		$	1,974,610

The accompanying notes are an integral part of these condensed consolidated financial statements.

H&E EQUIPMENT SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Amounts in thousands, except per share amounts)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
Revenues:
Equipment rentals	$	165,849		$	204,132		$	496,162		$	572,563
New equipment sales		37,248			65,010			112,068			177,709
Used equipment sales		40,000			31,180			105,231			96,942
Parts sales		27,853			31,499			83,842			93,798
Services revenues		15,637			18,105			48,116			50,398
Other		2,673			3,071			8,099			8,822
Total revenues		289,260			352,997			853,518			1,000,232
Cost of revenues:
Rental depreciation		58,083			63,065			177,225			181,647
Rental expense		25,628			27,889			74,461			79,676
Rental other		16,816			18,620			47,847			52,742
		100,527			109,574			299,533			314,065
New equipment sales		33,124			57,475			99,809			156,638
Used equipment sales		27,872			21,409			71,592			63,742
Parts sales		20,925			23,171			62,180			68,750
Services revenues		5,198			5,898			15,911			16,261
Other		2,547			3,342			7,873			10,167
Total cost of revenues		190,193			220,869			556,898			629,623
Gross profit		99,067			132,128			296,620			370,609
Selling, general and administrative expenses		70,040			77,296			217,525			233,783
Impairment of goodwill		—			—			61,994			—
Merger costs		150			47			308			314
Gain on sales of property and equipment, net		2,102			718			9,260			2,339
Income from operations		30,979			55,503			26,053			138,851
Other income (expense):
Interest expense		(14,887	)		(17,331	)		(46,489	)		(51,453	)
Other, net		990			588			2,262			1,609
Total other expense, net		(13,897	)		(16,743	)		(44,227	)		(49,844	)
Income (loss) before provision (benefit) for income taxes		17,082			38,760			(18,174	)		89,007
Provision (benefit) for income taxes		6,979			10,329			(124	)		23,719
Net income (loss)	$	10,103		$	28,431		$	(18,050	)	$	65,288
Net income (loss) per common share:
Basic	$	0.28		$	0.79		$	(0.50	)	$	1.82
Diluted	$	0.28		$	0.79		$	(0.50	)	$	1.81
Weighted average common shares outstanding:
Basic		36,110			35,893			36,035			35,835
Diluted		36,249			36,046			36,035			36,012
Dividends declared per common share outstanding	$	0.275		$	0.275		$	0.825		$	0.825

The accompanying notes are an integral part of these condensed consolidated financial statements.

H&E EQUIPMENT SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Price	28.62	EPS	3
Shares	36	P/E	11
MCap	1,032	P/FCF	5
Net Debt	-11	EBIT	166
TEV	1,021	TEV/EBIT	6
TTM 2019-09-30, in MM, except price, ratios

10-Q	2020-09-30	Filed 2020-10-28
10-Q	2020-06-30	Filed 2020-08-04
10-Q	2020-03-31	Filed 2020-05-08
10-K	2019-12-31	Filed 2020-02-20
10-Q	2019-09-30	Filed 2019-10-25
10-Q	2019-06-30	Filed 2019-07-25
10-Q	2019-03-31	Filed 2019-04-26
10-K	2018-12-31	Filed 2019-02-21
10-Q	2018-09-30	Filed 2018-10-25
10-Q	2018-06-30	Filed 2018-07-26
10-Q	2018-03-31	Filed 2018-04-27
10-K	2017-12-31	Filed 2018-02-22
10-Q	2017-09-30	Filed 2017-10-26
10-Q	2017-06-30	Filed 2017-07-27
10-Q	2017-03-31	Filed 2017-04-27
10-K	2016-12-31	Filed 2017-02-23
10-Q	2016-09-30	Filed 2016-10-27
10-Q	2016-06-30	Filed 2016-07-28
10-Q	2016-03-31	Filed 2016-04-28
10-K	2015-12-31	Filed 2016-02-25
10-Q	2015-09-30	Filed 2015-10-29
10-Q	2015-06-30	Filed 2015-07-30
10-Q	2015-03-31	Filed 2015-04-30
10-K	2014-12-31	Filed 2015-02-26
10-Q	2014-09-30	Filed 2014-10-30
10-Q	2014-06-30	Filed 2014-07-31
10-Q	2014-03-31	Filed 2014-05-01
10-K	2013-12-31	Filed 2014-02-28
10-Q	2013-09-30	Filed 2013-11-01
10-Q	2013-06-30	Filed 2013-08-01
10-Q	2013-03-31	Filed 2013-05-02
10-K	2012-12-31	Filed 2013-03-05
10-Q	2012-09-30	Filed 2012-11-01
10-Q	2012-06-30	Filed 2012-08-02
10-Q	2012-03-31	Filed 2012-05-03
10-K	2011-12-31	Filed 2012-03-02
10-Q	2011-09-30	Filed 2011-11-03
10-Q	2011-06-30	Filed 2011-08-04
10-Q	2011-03-31	Filed 2011-05-05
10-K	2010-12-31	Filed 2011-03-03
10-Q	2010-09-30	Filed 2010-11-05
10-Q	2010-06-30	Filed 2010-08-06
10-Q	2010-03-31	Filed 2010-05-07
10-K	2009-12-31	Filed 2010-03-05

8-K	2020-11-30	Other Events, Exhibits
8-K	2020-11-30	Enter Agreement, Other Events, Exhibits
8-K	2020-11-10	Regulation FD, Exhibits
8-K	2020-10-28	Earnings, Other Events, Exhibits
8-K	2020-08-11	Regulation FD, Exhibits
8-K	2020-08-04	Earnings, Other Events, Exhibits
8-K	2020-05-19
8-K	2020-05-19
8-K	2020-05-08
8-K	2020-02-20
8-K	2020-02-14
8-K	2019-11-12
8-K	2019-10-24
8-K	2019-09-11
8-K	2019-08-29
8-K	2019-08-14
8-K	2019-07-25
8-K	2019-05-15
8-K	2019-05-10
8-K	2019-05-10
8-K	2019-04-25
8-K	2019-03-06
8-K	2019-02-21
8-K	2019-02-08
8-K	2019-02-01
8-K	2018-11-07
8-K	2018-11-06
8-K	2018-10-25
8-K	2018-08-15
8-K	2018-08-07
8-K	2018-07-26
8-K	2018-05-15
8-K	2018-05-15
8-K	2018-05-08
8-K	2018-04-26
8-K	2018-03-09
8-K	2018-02-22
8-K	2018-02-16

EX-31.1	hees-ex311_6.htm
EX-31.2	hees-ex312_7.htm
EX-32.1	hees-ex321_8.htm

HEES 10Q Quarterly Report

H&E Equipment Services Earnings 2020-09-30