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H&E Equipment Services Reports Increases, Bagley Announces Retirement

H&E Equipment Services reported second quarter total revenues of $113.7 million compared to $104.9 million for the second quarter of 2003, an increase of $8.8 million, or 8.4 percent. Income from operations for the second quarter was $4.6 million compared to last year’s income from operations of $0.3 million. The 2004 second-quarter net loss was $5.1 million compared to a net loss of $9.5 million for the second quarter of last year. Earnings before interest, taxes, depreciation and amortization (EBITDA) for the second quarter of 2004 were $17.6 million compared to $15.2 million last year, an increase of $2.4 million, or 15.8 percent.

Second-quarter revenues from equipment rentals were $39.1 million compared to $37.8 million for the same time period last year, an increase of $1.3 million, or 3.4 percent. Equipment rentals revenue increased as a result of improved rental rates, higher time utilization and despite having reduced the overall gross rental fleet through the normal course of business activities. For the second quarter this year, dollar utilization was 32.5 percent compared to 28.5 percent last year. For the first half of 2004, revenues from equipment rentals were $74.6 million compared to $74.9 million last year. For the second quarter of 2004, gross profit from equipment rentals was $14.1 million compared to $11.3 million for the same time period last year, an increase of $2.8 million, or 24.8 percent. The increase is primarily a result of $1.3 million more in rental revenues combined with $1.5 million less in depreciation and other rental costs.

In other company news, Gary Bagley, former president and CEO of ICM Equipment Co. announced his retirement from H&E. Bagley will actively continue in his role as chairman of the board of directors and will provide consulting services to the company on an as needed basis. Bagley was CEO of ICM Equipment Co., playing the primary leadership role in that company since the late 1970s. Bagley was instrumental in completing the merger of ICM Equipment Co. and H&E Equipment Services in 2002.

“Our profitability continued to improve during the second quarter,” said John Engquist, president and CEO. “We saw improvement in all significant areas of our operations. The improvement is primarily a result of a continued emphasis on raising rental rates, higher time and dollar utilization, and pent-up customer demand for new and high-quality used equipment."

For the first half of 2004, the company reported total revenues of $225.7 million compared to $206.1 million for first half of 2003, an increase of $19.6 million or 9.5 percent. Income from operations for the first half of 2004 was $5.4 million compared to last year’s $0.8 million income from operations (excluding the $17 million loss from litigation recorded in the first six months of last year). The net loss for the first half of 2004 was $14.2 million compared to the net loss of $18.8 million for the same period last year (excluding the $17 million loss from litigation recorded in the first six months of last year). EBITDA for the first half of the year was $31.4 million compared to $30.5 million last year, an increase of $0.9 million, or 3 percent.

In contrast to most rental companies that have increased inventory in 2004, H&E has reduced its fleet size. “As of June 30, 2004, we had approximately $50 million less in rental fleet equipment than we did a year ago,” Lindsay Jones, H&E chief financial officer told RER.

“An essential element in our financial model is selling equipment out of the rental fleet. Current year sales of rental fleet equipment have increased approximately 23 percent compared to last year. This, coupled with extended lead times and/or limited availability from manufacturers, has led to the overall reduction in our fleet. Interestingly enough, the limited availability of new equipment has led to increased demand for our high quality, well-maintained used equipment.” New and used equipment sales for the second quarter this year were $44.8 million compared to $39.2 million for same period in 2003, an increase of $5.6 million, or 14.3 percent. New and used equipment sales increased across all product lines, except for a $2 million decrease in new and used earthmoving equipment sales. New earthmoving equipment sales declined due to the lack of availability of equipment, the company said. Parts sales and service revenues for the second quarter of 2004 were $23.8 million compared to $22.8 million last year, an increase of $1 million, or 4.4 percent.

New and used equipment sales for the first half of 2004 were $93.4 million compared to $77.9 million for same period in 2003, an increase of $15.5 million, or 19.9 percent. New and used equipment sales increased across the company’s four core product lines — cranes, aerial work platforms, earthmoving equipment and lift trucks. Parts sales and service revenues for the six months ended June 30, 2004, were $46.4 million compared to $43.6 million last year, an increase of $2.8 million, or 6.4 percent.

Baton Rouge, La.-based H&E Equipment Services is No. 10 on the RER 100.

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