Burris Revenues Boost H&E’s First Quarter Increase

May 9, 2008
H&E Equipment Services increased 17.2 percent to $245.8 million in first-quarter revenue, compared with $209.7 million in the first quarter last year. The company’s recent acquisition of J.W. Burress in the mid-Atlantic region contributed $27.6 million of the $36.1 increase. EBITDA jumped 7.8 percent to $56.4 million compared with $52.3 million in the same period last year, with Mid-Atlantic contributing $1.4 million.

H&E Equipment Services increased 17.2 percent to $245.8 million in first-quarter revenue, compared with $209.7 million in the first quarter last year. The company’s recent acquisition of J.W. Burress in the mid-Atlantic region contributed $27.6 million of the $36.1 increase. EBITDA jumped 7.8 percent to $56.4 million compared with $52.3 million in the same period last year, with Mid-Atlantic contributing $1.4 million.

Equipment rental revenues increased 12.7 percent to $71.2 million for the quarter, including $2.7 million from the mid-Atlantic region, and the benefits of a larger fleet.

“Our first-quarter performance was strong and exceeded our expectations due to our continued concentration on high-growth industries and regions,” said John Engquist, H&E Equipment Services’ president and CEO. “Despite the continued softness in our mid-Atlantic, Southern California and Florida regions combined with seasonal weather issues, we achieved solid growth in revenue and EBITDA. Demand for our equipment and services remains strong in our Gulf Coast and Intermountain regions as the petrochemical, oil patch, energy and mining industries continues to prosper. Prices for oil, coal, precious metals and other commodities are at record levels and we expect continued growth within these industries well into the future.”

Engquist said the company expects growth in its Gulf Coast operations “as the monies budgeted for Katrina-related hurricane storm protection and rebuilding work begin to be spent. Estimated construction costs for these efforts are as much as $10 billion.”

Engquist’s outlook for 2008 is positive while adjusting to economic challenges. “We are making steady, across-the-board improvements in our mid-Atlantic region and fully expect the mid-Atlantic operations to be a strong contributor to our performance in the long term as we complete the expansion of their rental operations and the transition from Hitachi to Link-Belt,” he said. “We have also implemented changes in our Southern California and Florida markets to adjust for the recent softness, which we believe is now stabilizing. The strength of our integrated business model, with our multiple sources of revenue, continues to drive strong financial performance for our business despite the current uncertain economic conditions.”

H&E was bullish in describing its prospects for rental in 2008. “Demands for our rental equipment remains solid outside of the West Coast, Florida and mid-Atlantic markets,” said Leslie Magee, H&E’s chief financial officer. “Revenue grew in these other areas by 17.7 percent and rental gross margins in these regions remained consistent with last year. In addition, the cash-on-cash returns in the business remain exceptionally strong at greater than 30 percent and the business as a whole has strengthened month after month since the beginning of the year.”

Gross profit increased 10.7 percent to $72.7 million from $65.8 million in the first quarter of 2007. Gross margin was 29.6 percent for the quarter ended March 31, compared to 31.3 percent for year-ago period. The reduced gross margin in the result of the impact of a 14 percent gross margin on $27.6 million of revenues from the mid-Atlantic operations, largely because of the lower margin rental segment in that market because of fleet mix, utilization and rates.

At the end of the first quarter, the original acquisition cost of the company’s rental fleet was $798.8 million, up $145.8 million from $653 million at the end of Q107. Dollar utilization was 35.5 percent, including first-quarter results from the mid-Atlantic region, compared to 38.8 percent in the year-ago quarter. Dollar utilization for the first quarter was 37.4 percent excluding the mid-Atlantic region.

Based in Baton Rouge, La., H&E Equipment Services is No. 9 on the new RER 100.