05.03.2009

H&E rises 6.5%

Baton Rouge, Louisiana, based H&E Equipment, previously Head & Engquist and incorporating JW Burris, has reported fully year 2008 revenues up 6.5 percent to $1.07 billion.

Pre Tax profits slipped 34 percent to $69.4 million, including a $22.7 million goodwill impairment, if this is excluding the fall in profits was just 12 percent. Revenues were up in all sectors including rental, new and used sales.

The fourth quarter however was less rosy with the company reporting revenues, down over nine percent to $270 million. The fall occurred in all sectors except for parts and service.

Fourth quarter Pre-Tax profits were down from $17 million to a loss of $630,000, however this was entirely brought about by the good will impairment, without this Pre Tax profits would have been above those of the same period last year.

The company says that it has reduced its capital expenditure on new equipment by 67 percent and may well reduce further this year, it has also reduced its head count by 10 percent over the year in order to adapts to current demand levels,

John Engquist, president and chief executive said: “H&E Equipment again delivered solid financial results in the fourth quarter in spite of the extraordinary economic challenges that occurred throughout the year. The current economic situation and lack of future visibility is clearly impacting all of our customers and their industries at some level. The continuing credit crisis and virtual inability to access lending is resulting in more and more project cancellations and delays.”

“Given the current economic conditions and future uncertainty, our primary focus is protecting our balance sheet and cash generation. We are taking the necessary steps to protect our performance by reducing capital expenditures and closely monitoring our inventory levels.”

“We have also conducted a staged workforce reduction and hiring freeze which has resulted in a 10 percent reduction in staff over the last year. We remain confident in our business and ability to adapt to the current environment; however, with our current lack of visibility into our customers’ demand for our products and services due primarily to the frozen credit markets and volatile commodity prices, we do not believe it would be appropriate to provide 2009 guidance at this time.”

Chief financial officer Leslie Magee, added: “One of the strengths of our business model lies in our ability to manage assets and generate strong cash flow in an economic downturn. As a result, we will continue to protect our balance sheet, reduce our debt and maintain low leverage. At year-end, availability under our senior secured credit facility was in excess of $230 million. We continue to maintain a significant cushion in the fixed charge covenant ratio, which is only triggered if availability falls below $25 million.”

Vertikal Comment

This is a very solid set of results from H&E and clearly indicates that it is outperforming the general rental companies thanks to its concentration on heavier equipment, including cranes and aerial lifts. The company operates a fleet of 13,663 aerials and 442 cranes, along with heavier end earthmoving equipment.

The company looks to be in relatively good shape and should benefit from the promised increases in infrastructure spending.