H&E Equipment Services Earnings 2020-06-30

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

hees-10q_20200630.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 June 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 July 28, 2020, there were 35,913,416 shares of H&E Equipment Services, Inc. common stock, $0.01 par value, outstanding.

H&E EQUIPMENT SERVICES, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

June 30, 2020

		Page
PART I. FINANCIAL INFORMATION		5

Item 1. Financial Statements:		5
Condensed Consolidated Balance Sheets as of June 30, 2020 (Unaudited) and December 31, 2019		5
Condensed Consolidated Statements of Operations (Unaudited) for the Three and Six Months Ended June 30, 2020 and 2019		6
Condensed Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended June 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		30
Item 3. Quantitative and Qualitative Disclosures About Market Risk		44
Item 4. Controls and Procedures		44

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 June 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 June 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
	June 30, 2020			December 31, 2019
	(Unaudited)
ASSETS
Cash	$	6,251		$	14,247
Receivables, net of allowance for doubtful accounts of $5,001 and $5,236, respectively		146,490			192,204
Inventories, net of reserves for obsolescence of $245 and $331, respectively		79,453			85,478
Prepaid expenses and other assets		18,784			10,262
Rental equipment, net of accumulated depreciation of $709,487 and $676,376, respectively		1,133,857			1,217,673
Property and equipment, net of accumulated depreciation and amortization of $158,592 and $156,782, respectively		126,291			130,564
Operating lease right-of-use assets, net of accumulated amortization of $17,315 and $11,197, respectively		165,529			156,570
Finance lease right-of-use assets, net of accumulated amortization of $2,132 and $2,051, respectively		284			365
Deferred financing costs, net of accumulated amortization of $14,769 and $14,419, respectively		2,507			2,857
Intangible assets, net of accumulated amortization of $8,754 and $6,952, respectively		30,946			32,948
Goodwill		68,851			131,442
Total assets	$	1,779,243		$	1,974,610
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Amounts due on senior secured credit facility	$	67,561		$	216,879
Accounts payable		72,333			58,853
Manufacturer flooring plans payable		16,677			25,201
Accrued expenses payable and other liabilities		70,467			78,382
Dividends payable		115			171
Senior unsecured notes, net of unaccreted discount of $2,453 and $2,691 and deferred financing costs of $1,589 and $1,743, respectively		945,958			945,566
Operating lease right-of-use liabilities		168,771			159,265
Finance lease right-of-use liabilities		430			550
Deferred income taxes		172,915			180,126
Deferred compensation payable		2,148			2,098
Total liabilities		1,517,375			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; 40,013,557 and 39,921,838 shares issued at June 30, 2020 and December 31, 2019, respectively, and 35,913,416 and 35,848,089 shares outstanding at June 30, 2020 and December 31, 2019, respectively		399			398
Additional paid-in capital		238,500			235,844
Treasury stock at cost, 4,100,141 and 4,073,749 shares of common stock held at June 30, 2020 and December 31, 2019, respectively		(65,253	)		(64,783	)
Retained earnings		88,222			136,060
Total stockholders’ equity		261,868			307,519
Total liabilities and stockholders’ equity	$	1,779,243		$	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 June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Revenues:
Equipment rentals	$	155,794		$	192,302		$	330,313		$	368,431
New equipment sales		43,947			53,596			74,820			112,699
Used equipment sales		34,013			36,128			65,231			65,762
Parts sales		26,220			31,871			55,989			62,299
Services revenues		15,657			16,725			32,479			32,293
Other		2,705			2,975			5,426			5,751
Total revenues		278,336			333,597			564,258			647,235
Cost of revenues:
Rental depreciation		59,156			61,434			119,142			118,582
Rental expense		23,264			27,019			48,833			51,787
Rental other		14,226			17,847			31,031			34,122
		96,646			106,300			199,006			204,491
New equipment sales		39,259			47,064			66,685			99,163
Used equipment sales		23,282			23,321			43,720			42,333
Parts sales		19,352			23,290			41,255			45,579
Services revenues		5,173			5,359			10,713			10,363
Other		2,554			3,482			5,326			6,825
Total cost of revenues		186,266			208,816			366,705			408,754
Gross profit		92,070			124,781			197,553			238,481
Selling, general and administrative expenses		67,861			77,840			147,485			156,487
Impairment of goodwill		—			—			61,994			—
Merger costs		118			148			158			267
Gain on sales of property and equipment, net		2,894			880			7,158			1,621
Income (loss) from operations		26,985			47,673			(4,926	)		83,348
Other income (expense):
Interest expense		(15,572	)		(17,267	)		(31,602	)		(34,122	)
Other, net		642			489			1,272			1,021
Total other expense, net		(14,930	)		(16,778	)		(30,330	)		(33,101	)
Income (loss) before provision (benefit) for income taxes		12,055			30,895			(35,256	)		50,247
Provision (benefit) for income taxes		3,240			8,281			(7,103	)		13,390
Net income (loss)	$	8,815		$	22,614		$	(28,153	)	$	36,857
Net income (loss) per common share:
Basic	$	0.24		$	0.63		$	(0.78	)	$	1.03
Diluted	$	0.24		$	0.63		$	(0.78	)	$	1.02
Weighted average common shares outstanding:
Basic		36,031			35,826			35,998			35,807
Diluted		36,107			36,016			35,998			35,994
Dividends declared per common share outstanding	$	0.275		$	0.275		$	0.55		$	0.55

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

(Unaudited)

(Amounts in thousands)

	Six Months Ended June 30,
	2020			2019
Cash flows from operating activities:
Net income (loss)	$	(28,153	)	$	36,857
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization of property and equipment		14,769			13,627
Depreciation of rental equipment

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	2020-06-30	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	2020-08-11	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_8.htm
EX-31.2	hees-ex312_7.htm
EX-32.1	hees-ex321_6.htm

HEES 10Q Quarterly Report

H&E Equipment Services Earnings 2020-06-30