H&E Equipment Services(US:HEES)2025-04-29 20:45PART I. FINANCIAL INFORMATION This section provides the company's unaudited condensed consolidated financial statements and management's discussion and analysis for the quarter Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements, detailing a net loss, reduced revenues, improved operating cash flow, and lower investing activities Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific points in time | Metric (in thousands) | March 31, 2025 | December 31, 2024 | Change (in thousands) | % Change | | :-------------------- | :------------- | :---------------- | :-------------------- | :------- | | Total assets | $2,678,060 | $2,795,530 | $(117,470) | (4.2%) | | Cash | $10,322 | $16,413 | $(6,091) | (37.1%) | | Receivables, net | $213,001 | $248,643 | $(35,642) | (14.3%) | | Rental equipment, net | $1,753,700 | $1,841,855 | $(88,155) | (4.8%) | | Total liabilities | $2,074,178 | $2,173,050 | $(98,872) | (4.5%) | | Senior secured credit facility | $114,473 | $199,304 | $(84,831) | (42.6%) | | Total stockholders' equity | $603,882 | $622,480 | $(18,598) | (3.0%) | Condensed Consolidated Statements of Operations This section details the company's financial performance over a period, showing revenues, expenses, and net income or loss | Metric (in thousands, except per share) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change (in thousands) | % Change | | :------------------------------------ | :-------------------------------- | :-------------------------------- | :-------------------- | :------- | | Total revenues | $319,455 | $371,357 | $(51,902) | (14.0%) | | Gross profit | $123,594 | $164,865 | $(41,271) | (25.0%) | | Income (loss) from operations | $5,845 | $52,020 | $(46,175) | (88.8%) | | Net income (loss) | $(6,208) | $25,889 | $(32,097) | (123.9%) | | Basic net income (loss) per common share | $(0.17) | $0.72 | $(0.89) | (123.6%) | | Diluted net income (loss) per common share | $(0.17) | $0.71 | $(0.88) | (123.9%) | Condensed Consolidated Statements of Cash Flows This section reports the cash generated and used by the company across operating, investing, and financing activities | Metric (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change (in thousands) | % Change | | :-------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | :------- | | Net cash provided by operating activities | $97,799 | $83,350 | $14,449 | 17.3% | | Net cash used in investing activities | $(3,576) | $(142,289) | $138,713 | (97.5%) | | Net cash provided by (used in) financing activities | $(100,314) | $59,515 | $(159,829) | (268.5%) | | Net increase (decrease) in cash | $(6,091) | $576 | $(6,667) | (1157.5%) | | Cash, end of period | $10,322 | $9,076 | $1,246 | 13.7% | - The significant decrease in cash used in investing activities for Q1 2025 compared to Q1 2024 is primarily due to the absence of business acquisitions in the current period, whereas Q1 2024 included a $121.6 million acquisition18152 Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and additional information supporting the condensed consolidated financial statements - H&E Equipment Services, Inc. (H&E Rentals), founded in 1961, operates 160 branch locations across 31 states, specializing in aerial work platforms, earthmoving, and material handling equipment25 - On February 19, 2025, the company entered into a merger agreement with Herc Holdings Inc. to be acquired for $78.75 in cash and 0.1287 shares of Herc common stock per share, with the transaction expected to close mid-year 2025. This followed the termination of a prior merger agreement with United Rentals, Inc., for which Herc paid a $63.5 million termination fee on H&E's behalf2627284951 - Transaction expenses related to the Herc Merger amounted to $9.8 million for the three months ended March 31, 202555 - The company adopted ASU No. 2023-07, Segment Reporting, on January 1, 2024, which improved disclosures about reportable segments, with no significant changes to other accounting policies in Q1 20252948 - As of March 31, 2025, the company had $114.5 million outstanding under its $750.0 million Senior Secured Credit Facility, with $620.7 million available for borrowing, and a weighted average interest rate of approximately 5.5%81 - The company's $1.25 billion, 3.875% Senior Unsecured Notes are due in 2028, with a balance of $1,244,655 thousand at March 31, 20258384 Segment Revenues (in thousands) | Segment | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change (in thousands) | % Change | | :---------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | :------- | | Equipment rentals | $274,032 | $295,325 | $(21,293) | (7.2%) | | Sales of rental equipment | $23,919 | $48,115 | $(24,196) | (50.3%) | | Sales of new equipment | $7,425 | $10,412 | $(2,987) | (28.7%) | | Parts, service and other | $14,079 | $17,505 | $(3,426) | (19.6%) | | Total revenues | $319,455 | $371,357 | $(51,902) | (14.0%) | Segment Gross Profit (in thousands) | Segment | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change (in thousands) | % Change | | :---------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | :------- | | Equipment rentals | $104,796 | $127,897 | $(23,101) | (18.1%) | | Sales of rental equipment | $14,116 | $30,286 | $(16,170) | (53.4%) | | Sales of new equipment | $1,402 | $1,773 | $(371) | (20.9%) | | Parts, service and other | $3,280 | $4,909 | $(1,629) | (33.2%) | | Total gross profit | $123,594 | $164,865 | $(41,271) | (25.0%) | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes the company's financial condition and operational results, noting significant declines in revenues and gross profit, a net loss, improved operating cash flow, and strong liquidity - H&E Equipment Services, operating as H&E Rentals, is one of the largest rental equipment companies in the U.S., with 160 branch locations across 31 states, focusing on equipment rentals, sales of rental equipment, new equipment, parts, and services99100101 - The company's primary focus is equipment rentals, which accounted for approximately 86% of total revenues for the three months ended March 31, 2025110 - Total revenues decreased by 14.0% to $319.5 million for Q1 2025, from $371.4 million in Q1 2024, with equipment rental revenues declining 7.2% due to decreased utilization and rental rates, partly attributed to increased workforce turnover related to the pending merger132133134 - Sales of rental equipment revenues decreased significantly by 50.3% to $23.9 million, reflecting the company's fleet management strategy136 - Total gross profit decreased by 25.0% to $123.6 million, with the gross profit margin falling to 38.7% from 44.4% in the prior year139 - Selling, General and Administrative (SG&A) expenses decreased by 2.4% to $111.6 million, but increased as a percentage of total revenues to 34.9% from 30.8%146 - Transaction expenses related to the Herc Merger amounted to $9.8 million in Q1 2025147 - The company reported a net loss of $6.2 million for Q1 2025, compared to a net income of $25.9 million in Q1 202415 - Net cash provided by operating activities increased by 17.3% to $97.8 million in Q1 2025. Net cash used in investing activities decreased substantially to $3.6 million from $142.3 million in Q1 2024, primarily due to the absence of large business acquisitions149151152 - Gross rental fleet capital expenditures decreased significantly to $31.1 million in Q1 2025 from $74.4 million in Q1 2024, influenced by fleet management strategy and the upcoming Herc Merger159 - The company maintains a strong liquidity position with $620.7 million in available borrowings under its Senior Secured Credit Facility at March 31, 2025, in addition to $10.3 million cash on hand157160 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's earnings are primarily exposed to market risk from interest rate changes on its variable-rate Senior Secured Credit Facility, with no other significant changes identified - Earnings may be affected by changes in interest rates due to the variable interest expense on the Senior Secured Credit Facility162 - There have been no other significant changes in the company's exposure to market risk during the three months ended March 31, 2025163 Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2025, with no material changes in internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2025165 - No material changes in internal control over financial reporting occurred during the three months ended March 31, 2025167 PART II. OTHER INFORMATION This section provides additional information not covered in the financial statements, including legal proceedings, risk factors, and equity security sales Item 1. Legal Proceedings The company is involved in various claims and legal actions in the ordinary course of business, including those related to the pending Herc Merger Agreement - The company is involved in various claims and legal actions in the ordinary course of business, including those related to the upcoming Herc Merger Agreement168 Item 1A. Risk Factors No material changes to the company's risk factors were reported compared to those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes to the company's risk factors were reported as of the date of this Quarterly Report on Form 10-Q, compared to those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024170 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 54,203 shares of common stock at an average price of $98.14 per share in February 2025, primarily for withholding taxes related to restricted stock unit vesting Issuer Purchases of Equity Securities (Three Months Ended March 31, 2025) | Period | Total Number of Shares Purchased | Average Price Per Share | | :----------------- | :----------------------------- | :---------------------- | | February 1-28, 2025 | 54,203 | $98.14 | - The shares were repurchased as payment for withholding taxes related to the vesting of restricted stock units171 Item 3. Defaults upon Senior Securities The company reported no defaults upon senior securities for the period - There were no defaults upon senior securities172 Item 4. Mine Safety Disclosures This item is not applicable to the company - Mine Safety Disclosures are not applicable to the company173 Item 5. Other Information No other information was reported under this item - No other information was reported174 Item 6. Exhibits This section lists the exhibits filed with the Quarterly Report, including certifications and XBRL documents - Exhibits include certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, and Inline XBRL documents176 Signatures This section contains the required signatures for the Quarterly Report on Form 10-Q