H&E Equipment Services posted a 32.2-percent revenue leap in the third quarter, with $270.4 million in revenue compared with $204.5 million a year ago. Rental revenue increased 14.9 percent from $78.8 million to $89.4 million as a result of improved rates, a larger fleet compared to the year-ago period and strong demand.
Net income was $14 million in the quarter compared to $3.7 million a year ago. Adjusted EBITDA increased 25.2 percent to $70 million from $55.9 million, yielding a margin of 25.9 percent of revenues compared to 27.3 percent a year ago. Margins were impacted by revenue mix with a significant increase in new equipment sales compared to a year ago.
Average rental rates increased 5.2 percent compared to a year ago, and improved 0.7 percent compared to the second quarter of this year. Average fleet age on Sept. 30 was 35 months, compared to 35.9 months at the end of the previous quarter.
“Our business performed exceptionally well during the third quarter as a result of our continued focus on solid execution, capitalizing on market cycle expansion and strong industrial market penetration,” said John Engquist, CEO of H&E Equipment Services. “Total revenues increased significantly, up 32.2 percent from a year ago, primarily due to ongoing strength in our rental and new equipment businesses. Rental revenues grew 14.9 percent on rates that were 5.2-percent higher than a year ago and on a significantly larger fleet than a year ago. New and used equipment sales increased 84.1 percent and 47.2 percent, respectively, which we believe affirms a healthier economy and general construction market.
“We believe the positive trends that we are seeing in our business will continue through the balance of this year and into 2014, where we anticipate additional fleet growth and market expansion in our industrial markets, where we believe there will be continued high demand, and in the commercial construction sector, where we believe there will be expanding opportunities.”
At the end of the third quarter of 2013, the original acquisition cost of the company’s rental fleet was $978.9 million, an increase of $107.9 million from $871 million at the end of the third quarter of 2012 and an increase of $95.9 million from $883 million at the end of 2012. Dollar utilization was 36.7 percent, consistent with the third quarter of 2012.
“During the quarter, we opened a new service center in Pasadena, the heart of the petrochemical industry in Texas, just outside of Houston, where we're planning further expansion to capitalize on these opportunities,” Engquist told an investor conference call. “Oil patch and construction activity in our Intermountain region is strong, driving a significant share of our total revenue and gross profit.
“Improvements in the construction markets are benefiting our West Coast, Southwest, Southeast and Mid-Atlantic markets, with all of these regions delivering year-over-year growth. Specifically our branches in Arizona, California, Florida and Nevada are benefiting from increased spending on a wide range of construction projects. It is reported that Louisiana, where we're headquartered, is expected to be home to an industrial expansion with approximately $90 billion projected in the aggregate to be spent by national and international firms over the next five to six years to construct new manufacturing facilities and petrochemical plants in Louisiana. We believe this level of capital spend would be unprecedented for Louisiana. We believe we are well-positioned to capitalize on this significant industrial construction activity.”
On the conference call, Engquist added that H&E has plans to open about six new locations in 2014.
Based in Baton Rouge, La., H&E Equipment Services is No. 8 on the RER 100.
