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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

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FORM 10-Q

(Mark one)
ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2004
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                        to

Commission file numbers:		333-99587
		333-99589

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H&E EQUIPMENT SERVICES L.L.C.
(Exact name of registrant as specified in its charter)

Louisiana (State of Incorporation)		72-1287046 (I.R.S. Employer Identification No.)
11100 Mead Road, Suite 200, Baton Rouge, Louisiana (Address of principal executive offices)		70816 (Zip Code)

Registrant's telephone number, including area code (225) 298-5200

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        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes o    No ý

        Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

        H&E Holdings L.L.C. owns 100% of the registrant's limited liability company interests.

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H&E EQUIPMENT SERVICES L.L.C.

TABLE OF CONTENTS

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H&E EQUIPMENT SERVICES L.L.C.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

				March 31, 2004			December 31, 2003
				(In thousands)
ASSETS
	Cash			$	2,836		$	3,891
	Receivables, net of allowance for doubtful accounts of $3,196 and $3,188, respectively				66,484			62,615
	Inventories, net				41,784			44,078
	Prepaid expenses and other assets				4,031			2,521
	Rental equipment, net of accumulated depreciation of $110,904 and $113,546, respectively				242,453			259,282
	Property and equipment, net of accumulated depreciation of $14,625 and $13,906, respectively				14,685			15,128
	Deferred financing costs and other intangible assets, net of accumulated amortization of $3,251 and $2,751, respectively				11,954			11,235
	Goodwill, net				3,204			3,204
		Total assets		$	387,431		$	401,954
LIABILITIES AND MEMBER'S DEFICIT
Liabilities:
	Amount due on senior secured credit facility			$	45,281		$	43,958
	Accounts payable				78,697			91,446
	Accrued expenses payable and other liabilities				24,873			15,901
	Accrued loss from litigation				17,434			17,434
	Related party obligation				1,193			1,235
	Notes payable				961			1,063
	Senior secured notes, net of discount				198,684			198,660
	Senior subordinated notes, net of discount				43,123			43,010
	Capital lease obligations				2,086			5,351
	Deferred compensation payable				11,157			10,898
		Total liabilities			423,489			428,956
Member's deficit					(36,058	)		(27,002	)
		Total liabilities and member's deficit		$	387,431		$	401,954

See notes to condensed consolidated financial statements.

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H&E EQUIPMENT SERVICES L.L.C.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

				Three Months Ended March 31,
				2004			2003
				(In thousands)
Revenues:
	Equipment rentals			$	35,552		$	37,028
	New equipment sales				25,297			20,370
	Used equipment sales				23,262			18,410
	Parts sales				13,908			12,205
	Service revenue				8,610			8,587
	Other				5,311			4,622
		Total revenues			111,940			101,222
Cost of Revenues:
	Rental depreciation				12,251			13,791
	Rental expense				13,404			12,151
	New equipment sales				22,874			18,579
	Used equipment sales				18,564			14,598
	Parts sales				9,972			8,929
	Service revenue				3,282			3,353
	Other				5,114			4,605
		Total cost of revenues			85,461			76,006
		Gross profit			26,479			25,216
Selling, general and administrative expenses					25,702			24,746
Loss from litigation					—			17,000
Gain (loss) on sale of property and equipment					27			(27	)
		Income (loss) from operations			804			(16,557	)
Other Income (Expense):
	Interest expense				(9,887	)		(9,813	)
	Other, net				27			21
		Total other expense, net			(9,860	)		(9,792	)
		Net loss		$	(9,056	)	$	(26,349	)

See notes to condensed consolidated financial statements.

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H&E EQUIPMENT SERVICES L.L.C.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

					Three Months Ended March 31,
					2004			2003
					(In thousands)
Cash flows from operating activities:
	Net loss				$	(9,056	)	$	(26,349	)
Adjustments to reconcile net loss to net cash used in operating activities:
	Depreciation on property and equipment					917			1,020
	Depreciation on rental equipment					12,251			13,791
	Amortization of loan discounts and deferred financing costs					637			636
	Provision for losses on accounts receivable					364			55
	Loss (gain) on sale of property and equipment					(27	)		27
	Gain on sale of rental equipment					(4,169	)		(2,520	)
	Changes in operating assets and liabilities:
		Receivables, net				(4,233	)		2,205
		Inventories, net				(2,674	)		1,066
		Prepaid expenses and other assets				(1,510	)		(2,155	)
		Accounts payable				(12,749	)		(18,034	)
		Accrued expenses payable and other liabilities				8,673			8,297
		Accrued loss from litigation				—			17,000
		Deferred compensation payable				259			237
			Net cash used in operating activities			(11,317	)		(4,724	)
Cash flows from investing activities:
	Purchases of property and equipment					(543	)		(683	)
	Purchases of rental equipment					(4,195	)		(8,584	)
	Proceeds from sale of property and equipment					96			1,736
	Proceeds from sale of rental equipment					17,910			11,868
			Net cash provided by investing activities			13,268			4,337
Cash flows from financing activities:
	Borrowings on senior secured credit facility					107,708			106,328
	Payments on senior secured credit facility					(106,385	)		(105,112	)
	Payment of deferred financing costs					(887	)		(227	)
	Payments of related party obligation					(75	)		—
	Principal payments on notes payable					(102	)		(67	)
	Payments on capital lease obligations					(3,265	)		(1,166	)
			Net cash used in financing activities			(3,006	)		(244	)
Net decrease in cash						(1,055	)		(631	)
Cash, beginning of period						3,891			3,398
Cash, end of period					$	2,836		$	2,767

See notes to condensed consolidated financial statements.

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				Three Months Ended March 31,
				2004			2003
				(In thousands)
Supplemental schedule of noncash investing activities:
		Assets transferred from new and used inventory to rental fleet		$	4,968		$	4,659
Supplemental disclosures of cash flow information:
	Cash paid during the period for:
		Interest		$	1,804		$	2,061
		Income taxes			—			97

        As of March 31, 2004 and December 31, 2003, the Company had $47.7 and $51.8 million, respectively, in manufacturer flooring plans payable outstanding, which were used to finance purchases of inventory and rental equipment.

        As of March 1, 2004, the Company entered into a twelve month, non-competition agreement with a former vice-president. Accordingly, the Company recorded a $0.3 million intangible asset and accrued liability. The intangible asset will be amortized using the straight-line method over the term of the agreement.

See notes to condensed consolidated financial statements.

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H&E EQUIPMENT SERVICES L.L.C.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.    Organization and Nature of Operations

Basis of Presentation

        H&E Equipment Services L.L.C. (H&E Equipment Services or the Company) is a wholly-owned subsidiary of H&E Holdings L.L.C. (H&E Holdings). H&E Holdings is principally a holding company conducting all of its operations through H&E Equipment Services. The condensed consolidated financial statements include the results of operations of H&E Equipment Services and its wholly-owned subsidiaries H&E Finance Corp., GNE Investments, Inc. and Great Northern Equipment, Inc., collectively referred to herein as the Company.

        The nature of the the Company's business is such that short-term obligations are typically met by cash flows generated from long-term assets. Consequently, consistent with industry practice, the accompanying condensed consolidated balance sheets are presented on an unclassified basis.

Nature of Operations

        H&E Equipment Services L.L.C. and its subsidiaries (as used herein, the "Company" and "H&E Equipment Services") is one of the largest integrated equipment rental, sales and service companies in the United States of America (United States). Unlike many of its competitors, which focus primarily on renting equipment, the Company also sells new and used equipment and provides extensive parts and service support. This integrated model enables the Company to effectively manage key aspects of its rental fleet through reduced equipment acquisition costs, efficient maintenance and profitable disposition of rental fleet equipment. Over the past 41 years, the Company has built an infrastructure that includes a network of 40 facilities, most of which have full-service capabilities, and a workforce that includes a highly-skilled group of nearly 500 service technicians and separate and distinct rental and equipment sales forces. The Company generates a significant portion of its gross profit from its parts and service operations, which management believes, provides the Company with a more stable operating profile than companies that focus solely on renting equipment.

        The Company's operations are principally connected with construction and industrial activities. Consequently, a downturn in construction or industrial activity may lead to a decrease in the demand for equipment or depressed rental rates and sales prices for the equipment the Company sells.

        The accompanying condensed consolidated financial statements are unaudited and, in the opinion of management, such financial statements reflect all adjustments, consisting only of normal recurring adjustments necessary to present fairly the results of the interim periods presented. Interim financial statements do not require all disclosures normally presented in year-end financial statements prepared in accordance with accounting principles generally accepted in the United States, and, accordingly, certain disclosures have been omitted. Results of operations for the three-month period ended March 31, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004. The information included in this report should be read in conjunction with the financial statements and related notes included in the the Company's Form 10-K for the year ended December 31, 2003.

        The Company prepares the financial statements in accordance with accounting principles generally accepted in the United States. In applying many accounting principles, management makes assumptions, estimates and/or judgments. These assumptions, estimates and/or judgments are often subjective and may change based on changing circumstances or changes in management's analysis.

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Material changes in these assumptions, estimates and/or judgments have the potential to materially alter the Company's results of operations.

Reclassifications

        Certain amounts in the prior-period condensed consolidated financial statements have been reclassified for comparative purposes to conform to the presentation in the current-period condensed consolidated financial statements.

2.    Litigation

        The Company is party to various litigation matters, in most cases (except for the legal proceeding referred to below) involving ordinary and routine claims incidental to the Company's business. The Company cannot estimate with certainty the ultimate legal and financial liability with respect to such pending matters (excluding the legal proceeding referred to below). However, management believes, based on their examination of such matters, that the Company's ultimate liability will not have a material adverse effect on its business or financial condition.

        In July 2000, a complaint was filed by a competitor of the Company in the General Court of Justice, Superior Court Division, State of North Carolina, County of Mecklenburg (the Court). On May 2, 2003, the Court handed down an Order and Opinion in favor of the plaintiff. In conjunction therewith, the Company recorded a $17.4 million loss for estimated damages, plaintiff's attorneys fees and other costs in 2003.

        On September 11, 2003, the Company filed a notice of appeal. In conjunction with the appeal and in accordance with the Court's order, the Company issued an irrevocable standby letter of credit for $19.0 million, representing the amount of the judgment plus $1.6 million in anticipated statutory interest for the sixteen months while the judgment is being appealed. If, at the end of sixteen months, the appeal is still pending, the Company will be required to extend the maturity of the irrevocable standby letter of credit for eight additional months and increase the amount by $0.8 million (eight months additional statutory interest at 8.0%). The Company will expense any additional statutory interest as interest expense in the statement of operations. For the duration of the letter of credit, the Company pays a 300 basis point fee on the amount available for issuance.

        While the Company is appealing this judgment, management believes that even if there is a reduction in the amount of damages awarded to the plaintiff on appeal, the judgment could have a material adverse effect on its business or financial condition.

3.    Senior Secured Credit Facility

        On February 10, 2004, the Company amended its senior secured credit agreement dated June 17, 2002, governing its senior secured credit facility. Principally, this amendment:

1.

extended the maturity date of the amended senior secured credit facility to February 2009;



2.

eliminated the maximum leverage ratio covenant;



3.

increased the adjusted maximum leverage ratio covenant from 5.2x to 5.8x for each quarter in the first year; 5.7x for each quarter in the second year; 5.4x for each quarter in the third year; 5.3x for each quarter in the fourth year; and 5.2x for each quarter in the fifth year. The

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minimum adjusted interest coverage ratio is set at 1.25x for each quarter through 2005; 1.35x for each quarter in 2006 and 2007; and 1.40x for each quarter in 2008 and through the remaining term of the agreement;

4.

increased the block on availability of assets from $20.0 million to $30.0 million based on the total borrowing base assets; and



5.

reduced the advance rate on rental fleet assets to 75 percent from 80 percent of the orderly liquidation value.

        The Company paid a loan amendment fee of $0.8 million that is being amortized over the remaining term of the loan. Based on these covenant changes, the Company's availability under the amended senior secured credit facility was approximately $80.2 million as of March 31, 2004. As of March 31, 2004, the Company was in compliance with the financial covenants in place at that time.

4.    Segment Information

        The Company has identified five reportable segments; equipment rentals, new equipment sales, used equipment sales, parts sales and service revenues. These segments are based upon how management allocates resources and assesses performance. Non-segmented revenues and non-segmented costs relate to equipment support activities including transportation, hauling, parts freight and damage-waiver charges and are not allocated to the other reportable segments. Selling, general, and administrative expenses and all other income and expense items below gross profit are not generally allocated to reportable segments. The Company does not compile discrete financial information by its segments other than the information presented below. The following table presents unaudited information about the Company's reportable segments (in thousands):

				For the Three Months Ended March 31,
				2004			2003
Revenues:
	Equipment rentals			$	35,552		$	37,028
	New equipment sales				25,297			20,370
	Used equipment sales				23,262			18,410
	Parts sales				13,908			12,205
	Service revenue				8,610			8,587
		Total segmented revenues			106,629			96,600
	Non-segmented revenues				5,311			4,622
		Total revenues		$	111,940		$	101,222
Gross Profit:
	Equipment rentals			$	9,897		$	11,086
	New equipment sales				2,423			1,791
	Used equipment sales				4,698			3,812
	Parts sales				3,936			3,276
	Service revenue				5,328			5,234
		Total gross profit from revenues			26,282		$	25,199
	Non-segmented gross profit				197			17
		Total gross profit		$	26,479		$	25,216

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				As of March 31,			As of December 31,
				2004			2003
Segment Identified Assets:
	Equipment sales, net			$	26,578		$	29,091
	Equipment rentals, net				242,453			259,282
	Parts sales and service revenue				15,206			14,987
		Total segment identified assets			284,237			303,360
	Non-segment identified assets				103,194			98,594
		Total assets		$	387,431		$	401,954

        The Company operates in the United States and had minimal international sales for any of the periods presented. No one customer accounted for more than 10% of the Company's sales on an overall or segment basis for any of the periods presented.

5.    Condensed Consolidating Financial Information of Guarantor Subsidiaries

        All of the indebtedness of H&E Equipment Services is guaranteed by GNE Investments, Inc. and its wholly-owned subsidiary Great Northern Equipment, Inc. These guarantor subsidiaries are all wholly-owned and the guarantees are made on a joint and several basis and are full and unconditional (subject to subordination provisions and subject to a standard limitation which provides that the maximum amount guaranteed by each guarantor will not exceed the maximum amount that can be guaranteed without making the guarantee void under fraudulent conveyance laws). There are no restrictions on H&E Equipment Services' ability to obtain funds from the guarantor subsidiaries by dividend or loan.

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        The condensed consolidating financial information of H&E Equipment Services and its subsidiaries are included below. The condensed consolidating financial statements for H&E Finance Corp., the subsidiary co-issuer, is not presented because H&E Finance Corp. has no assets or operations.

CONDENSED CONSOLIDATING BALANCE SHEET
(In thousands)

				As of March 31, 2004
				H&E Equipment Services			Guarantor Subsidiaries			Elimination			Consolidated
ASSETS
	Cash			$	2,823		$	13		$	—		$	2,836
	Receivables, net				64,497			1,987			—			66,484
	Inventories, net				40,990			794			—			41,784
	Prepaid expenses and other assets				4,031			—			—			4,031
	Rental equipment, net				233,207			9,246			—			242,453
	Property and equipment, net				14,391			294			—			14,685
	Deferred financing costs and other intangible assets, net				11,954			—			—			11,954
	Investment in guarantor subsidiaries				4,175			—			(4,175	)		—
	Goodwill, net				3,204			—			—			3,204
		Total assets		$	379,272		$	12,334		$	(4,175	)	$	387,431
LIABILITIES AND MEMBER'S EQUITY (DEFICIT)
Liabilities:
	Amount due on senior secured credit facility			$	41,158		$	4,123		$	—		$	45,281
	Accounts payable				78,697			—			—			78,697
	Accrued expenses payable and other liabilities				24,792			81			—			24,873
	Accrued loss from litigation				17,434			—			—			17,434
	Related party obligation				1,193			—			—			1,193
	Inter-company balance				(3,955	)		3,955			—			—
	Notes payable				961			—			—			961
	Senior secured notes, net of discount				198,684			—			—			198,684
	Senior subordinated notes, net of discount				43,123			—			—			43,123
	Capital lease obligations				2,086			—			—			2,086
	Deferred compensation payable				11,157			—			—			11,157
		Total liabilities			415,330			8,159			—			423,489
Member's equity (deficit)					(36,058	)		4,175			(4,175	)		(36,058	)
		Total liabilities and member's equity (deficit)		$	379,272		$	12,334		$	(4,175	)	$	387,431

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CONDENSED CONSOLIDATING BALANCE SHEET
(In thousands)

				As of December 31, 2003
				H&E Equipment Services			Guarantor Subsidiaries			Elimination			Consolidated
ASSETS
	Cash			$	3,868		$	23		$	—		$	3,891
	Receivables, net				61,318			1,297			—			62,615
	Inventories, net				42,783			1,295			—			44,078
	Prepaid expenses and other assets				2,521			—			—			2,521
	Rental equipment, net				250,426			8,856			—			259,282
	Property and equipment, net				14,872			256			—			15,128
	Deferred financing costs, net				11,235			—			—			11,235
	Investment in guarantor subsidiaries				4,464			—			(4,464	)		—
	Goodwill, net				3,204			—			—			3,204
		Total assets		$	394,691		$	11,727		$	(4,464	)	$	401,954
LIABILITIES AND MEMBER'S EQUITY (DEFICIT)
Liabilities:
	Amount due on senior secured credit facility			$	39,679		$	4,279		$	—		$	43,958
	Accounts payable				91,446			—			—			91,446
	Accrued expenses payable and other liabilities				15,741			160			—			15,901
	Intercompany balance				(2,824	)		2,824			—			—
	Accrued loss from litigation				17,434			—			—			17,434
	Related party obligation				1,235			—			—			1,235
	Notes payable				1,063			—			—			1,063
	Senior secured notes, net of discount				198,660			—			—			198,660
	Senior subordinated notes, net of discount				43,010			—			—			43,010
	Capital lease obligations				5,351			—			—			5,351
	Deferred compensation payable				10,898			—			—			10,898
		Total liabilities			421,693			7,263			—			428,956
Member's equity (deficit)					(27,002	)		4,464			(4,464	)		(27,002	)
		Total liabilities and member's equity (deficit)		$	394,691		$	11,727		$	(4,464	)	$	401,954

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CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
(In thousands)

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CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
(In thousands)

				Three Months Ended March 31, 2003
				H&E Equipment Services			Guarantor Subsidiaries			Elimination			Consolidated
Revenues:
	Equipment rentals			$	36,207		$	821		$	—		$	37,028
	New equipment sales				20,128			242			—			20,370
	Used equipment sales				17,682			730			—			18,410
	Parts sales				11,927			278			—			12,205
	Service revenue				8,359			227			—			8,587
	Other				4,540			81			—			4,622
		Total revenues			98,843			2,379			—			101,222
Cost of Revenues:
	Rental depreciation				13,365			426			—			13,791
	Rental expense				11,896			252			—			12,151
	New equipment sales				18,379			201			—			18,579
	Used equipment sales				14,059			541			—			14,598
	Parts sales				8,736			193			—			8,929
	Service revenue				3,281			72			—			3,353
	Other				4,502			103			—			4,605
		Total cost of revenues			74,218			1,788			—			76,006
		Gross profit			24,625			591			—			25,216
	Selling, general and administrative expenses				24,002			744			—			24,746
	Loss from litigation				17,000			—			—			17,000
	Gain (loss) on sale of property and equipment				(44	)		17			—			(27	)
	Equity in loss of guarantor subsidiaries				(340	)		—			340			—
		Loss from operations			(16,761	)		(136	)		340			(16,557	)
Other Income (Expense):
	Interest expense				(9,610	)		(203	)		—			(9,813	)
	Other, net				22			(1	)		—			21
		Total other expense			(9,588	)		(204	)		—			(9,792	)
		Net loss		$	(26,349	)	$	(340	)	$	340		$	(26,349	)

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CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
(In thousands)

					Three Months Ended March 31, 2004
					H&E Equipment Services			Guarantor Subsidiaries			Elimination			Consolidated
Cash flows from operating activities:
	Net loss				$	(9,056	)	$	(289	)	$	289		$	(9,056	)
Adjustment to reconcile net loss to net cash (used in) provided by operating activities:
	Depreciation on property and equipment					885			32			—			917
	Depreciation on rental equipment					11,820			431			—			12,251
	Amortization of loan discounts and deferred financing costs					637			—			—			637
	Provision for losses on accounts receivable					311			53			—			364
	Gain on sale of property and equipment					(26	)		(1	)		—			(27	)
	Gain on sale of rental equipment					(3,818	)		(351	)		—			(4,169	)
	Deficit in earnings of guarantor subsidiaries					289			—			(289	)		—
	Changes in operating assets and liabilities:
		Receivables, net				(3,490	)		(743	)		—			(4,233	)
		Inventories, net				(3,087	)		413			—			(2,674	)
		Prepaid expenses and other assets				(1,510	)		—			—			(1,510	)
		Accounts payable				(12,749	)		—			—			(12,749	)
		Accrued expenses payable and other liabilities				8,752			(79	)		—			8,673
		Intercompany balance				(1,131	)		1,131			—			—
		Deferred compensation payable				259			—			—			259
			Net cash (used in) provided by operating activities			(11,914	)		597			—			(11,317	)
Cash flows from investing activities:
	Purchases of property and equipment					(473	)		(70	)		—			(543	)
	Purchases of rental equipment					(2,473	)		(1,722	)		—			(4,195	)
	Proceeds from sale of property and equipment					95			1			—			96
	Proceeds from sale of rental equipment					16,570			1,340			—			17,910
			Net cash provided by (used in) investing activities:			13,719			(451	)		—			13,268
Cash flows from financing activities:
	Borrowings on senior secured credit facility					107,708			—			—			107,708
	Payments on senior secured credit facility					(106,229	)		(156	)		—			(106,385	)
	Payment of deferred financing costs					(887	)		—			—			(887	)
	Payments on related party obligation					(75	)		—			—			(75	)
	Principal payments on notes payable					(102	)		—			—			(102	)
	Payments on capital lease obligations					(3,265	)		—			—			(3,265	)
			Net cash used in financing activities			(2,850	)		(156	)		—			(3,006	)
Net decrease in cash						(1,045	)		(10	)		—			(1,055	)
Cash, beginning of period						3,868			23			—			3,891
Cash, end of period					$	2,823		$	13		$	—		$	2,836

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CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
(In thousands)

					Three Months Ended March 31, 2003
					H&E Equipment Services			Guarantor Subsidiaries			Elimination			Consolidated
Cash flows from operating activities:
	Net loss				$	(26,349	)	$	(340	)	$	340		$	(26,349	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
	Depreciation on property and equipment					1,002			18			—			1,020
	Depreciation on rental equipment					13,365			426			—			13,791
	Amortization of loan discounts and deferred financing costs					636			—			—			636
	Provision for losses on accounts receivables					55			—			—			55
	Loss (gain) on sale of property and equipment					44			(17	)		—			27
	Gain on sale of rental equipment					(2,351	)		(169	)		—			(2,520	)
	Equity in earnings of guarantor subsidiaries					340			—			(340	)		—
	Changes in operating assets and liabilities:
		Receivables, net				1,994			211			—			2,205
		Inventories, net				838			228			—			1,066
		Prepaid expenses and other assets				(2,159	)		4			—			(2,155	)
		Accounts payable				(17,946	)		(88	)		—			(18,034	)
		Accrued expenses payable and other liabilities				8,220			77			—			8,297
		Intercompany balance				(1,972	)		1,972			—			—
		Accrued loss from litigation				17,000			—			—			17,000
		Deferred compensation payable				237			—			—			237
			Net cash (used in) provided by operating activities			(7,046	)		2,322			—			(4,724	)
Cash flows from investing activities:
	Purchases of property and equipment					(645	)		(38	)		—			(683	)
	Purchases of rental equipment					(6,089	)		(2,495	)		—			(8,584	)
	Proceeds from sale of property and equipment					1,719			17			—			1,736
	Proceeds from sale of rental equipment					11,273			595			—			11,868
			Net cash provided by (used in) investing activities			6,258			(1,921	)		—			4,337
Cash flows from financing activities:
	Borrowings on senior secured credit facility					106,328			—			—			106,328
	Payments on senior secured credit facility					(104,796	)		(316	)		—			(105,112	)
	Payment of deferred financing costs					(227	)		—			—			(227	)
	Principal payments on notes payable					(67	)		—			—			(67	)
	Payments on capital lease obligations					(1,166	)		—			—			(1,166	)
			Net cash provided by (used in) financing activities			72			(316	)		—			(244	)
Net (decrease) increase in cash						(716	)		85			—			(631	)
Cash, beginning of period						3,331			67			—			3,398
Cash, end of period					$	2,615		$	152		$	—		$	2,767

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

        The following discussion reviews our operations for the three months ended March 31, 2004 and 2003 and should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included herein. The following discussion and analysis should also be read in conjunction with the financial statements and management's discussion and analysis of financial condition and results of operations included in our Form 10-K for the year ended December 31, 2003.

Overview

        We are an integrated equipment rental, sales and service company located in the United States of America (United States) with a network of 40 facilities, most of which have full-service capabilities, and a workforce that includes a highly-skilled group of service technicians and separate and distinct rental and equipment sales forces. In addition to renting equipment, we also sell new and used equipment and provide extensive parts and service support. We generate a significant portion of our gross profit from parts sales and service revenue.

        Our integrated approach leads to revenue for each source being partially driven by the activities of the other revenue sources. Our revenues are dependent on several factors, including the demand for rental equipment, rental fleet availability, rental rates, the demand for new and used equipment, the level of industrial and construction activity and general economic conditions.

        We derive our revenues primarily from the following sources:

(i)

Rental of Equipment—This category includes revenues from renting equipment. We offer flexible rental terms, including daily, weekly and monthly rentals. We focus our rental activities on, and organize our personnel by, four core types of equipment:



a.

Aerial work platforms;



b.

Cranes;



c.

Earthmoving; and



d.

Lift trucks.

Equipment rental revenue is impacted by time utilization (the equipment usage based on customer demand) and rental rates. Rental rates are significantly impacted by the competition in a specific geographical location.

(ii)

Sales of New Equipment—This category includes revenues from selling new equipment. We are one of the leading distributors of new products for nationally-recognized manufacturers in our four core product lines. Our new equipment distribution infrastructure facilitates a large, high-quality product support operation, creates a higher level of partnering with manufacturers and adds to our customer base, which often leads to additional rental, parts and service revenue.



(iii)

Sales of Used Equipment—This category includes revenues from selling used equipment. In the normal course of business activities, we routinely sell our used rental fleet equipment in order to adjust the size, composition and age of our rental fleet in response to changing market conditions and to maintain a modern, high-quality fleet.



(iv)

Parts Sales and Service Revenue—This category includes revenues from parts sales and maintenance and repair services to customers for their owned equipment.

        Our cost of revenues includes depreciation, maintenance, property taxes, equipment lease expense, and other miscellaneous costs of rental equipment, cost of equipment sold and cost of parts sales and service revenue.

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        We believe a significant portion of our overall value is in the rental fleet equipment. Our rental fleet as of March 31, 2004, consisted of 12,969 units having an original acquisition cost (defined as the cost originally paid to manufacturers) of approximately $471.7 million and an average age of 42.5 months. This includes equipment financed with operating leases.

        Determining the optimal age and mix for our rental fleet equipment is subjective and requires considerable estimates by management. We are constantly evaluating the mix, age and quality of the equipment in our rental fleet in response to current economic conditions, competition and customer demand. We reduced our overall gross rental fleet, through the normal course of business activities, by approximately $83 million over the last five quarters. While we reduced the size of our equipment rental fleet, the mix among our four core product lines remained consistent with that of prior years. With our in-house service capabilities and extensive maintenance program, we believe our fleet is one of the best maintained and the newest in the industry.

        Not only is mix and age of our rental fleet impacted by the normal sales of used equipment from the rental fleet and the capital expenditures to acquire new rental fleet equipment, but so are our cash flows. During the first quarter of 2004, we continued to monitor our capital expenditures. In making acquisition decisions, we evaluated current market conditions, competition, manufacturers' availablity, pricing and return on investment over the estimated life of the specific equipment, among other things.

        With the short supply and high-cost of steel, our challenge now is getting new equipment. Lead times from manufacturers have lengthened and some manufacturers are placing dealers on allocations. Because of the timing and availability of new equipment, our first quarter capital expenditures for rental fleet equipment were less than anticipated, although we have placed orders and expect to take delivery in the second quarter of this year. We strive to manage our rental fleet relative to the current market demand.

Critical Accounting Policies and Estimates

        We prepare our financial statements in accordance with accounting principles generally accepted in the United States. In applying many accounting principles, we need to make assumptions, estimates and/or judgments. These assumptions, estimates and/or judgments are often subjective and may change based on changing circumstances or changes in our analysis. Material changes in these assumptions, estimates and/or judgments have the potential to materially alter our results of operations. We have identified below those of our accounting polices that we believe could potentially produce materially different results were we to change underlying assumptions, estimates and/or judgments.

        Revenue Recognition.    Our policy is to recognize revenue from equipment rentals in the period earned, over the contract term, regardless of the timing of the billing to customers. A rental contract term can be daily, weekly or monthly. Because the term of the contracts can extend across financial reporting periods, we record unbilled rental revenue and deferred rental revenue at the end of reporting periods so rental revenue is appropriately stated in the periods presented. Revenue from the sale of equipment and parts is recognized at the time of delivery to, or pick-up by, the customer and when all obligations under the sales contract have been fulfilled and collectibility is reasonably assured. Service revenue is recognized at the time the services are rendered. Other revenues consist primarily for rental equipment delivery and damage waiver charges.

        Allowance for Doubtful Accounts.    We maintain an allowance for doubtful accounts. This allowance reflects our estimate of the amount of our receivables that we will be unable to collect. Our estimate could change based on changing circumstances, including changes in the economy or in the particular circumstances of individual customers. Accordingly, we may be required to increase or decrease our allowance.

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        Useful Lives of Rental Equipment and Property and Equipment.    We depreciate rental equipment and property and equipment over their estimated useful lives, after giving effect to an estimated salvage value of 0% to 25% of cost. The useful life of an asset is determined based on our estimate of the period the asset will generate revenues, and the salvage value is determined based on our estimate of the minimum value we could realize from the asset after such period. We may be required to change these estimates based on changes in our industry or other changing circumstances. If these estimates change in the future, we may be required to recognize increased or decreased depreciation expense for these assets.

        Impairment of Long-Lived Assets.    Long-lived assets are recorded at that lower of amortized cost or fair value. We review long-lived assets and certain identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted cash flows expected to be generated by the asset over the remaining useful life. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

Results of Operations

Three months ended March 31, 2004 compared to three months ended March 31, 2003

        The following table sets forth selected statement of operations revenue data for the periods indicated (dollars in millions):

					Three Months Ended March 31,
											Total Dollar Change			Total Percent Change
					2004			2003
Revenues:
	Equipment rentals:
		Cranes			$	4.6		$	5.6		$	(1.0	)	(17.9	)%
		Aerial work platforms				21.4			21.2			0.2		0.9	%
		Earthmoving				5.0			5.2			(0.2	)	(3.8	)%
		Lift trucks				1.9			2.1			(0.2	)	(9.5	)%
		Other				2.7			2.9			(0.2	)	(6.9	)%
			Total equipment rentals			35.6			37.0			(1.4	)	(3.8	)%
	New equipment sales:
		Cranes				13.0			12.0			1.0		8.3	%
		Aerial work platforms				2.6			1.5			1.1		73.3	%
		Earthmoving				6.7			2.5			4.2		168.0	%
		Lift trucks				2.3			2.5			(0.2	)	(8.0	)%
		Other				0.7			1.9			(1.2	)	(63.2	)%
			Total new equipment sales			25.3			20.4			4.9		24.0	%
	Used equipment sales:
		Cranes				7.2			7.1			0.1		1.4	%
		Aerial work platforms				3.2			2.7			0.5		18.5	%
		Earthmoving				8.0			5.7			2.3		40.4	%
		Lift trucks				2.9			1.9			1.0		52.6	%
		Other				2.0			1.0			1.0		100.0	%
			Total used equipment sales			23.3			18.4			4.9		26.6	%
	Parts sales					13.9			12.2			1.7		13.9	%
	Service revenue					8.6			8.6			—		0.0	%
	Other					5.2			4.6			0.6		13.0	%
			Total revenues		$	111.9		$	101.2		$	10.7		10.6	%

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        Total Revenues.    Our first quarter 2004 total revenues were $111.9 million compared to $101.2 million in the first quarter of 2003, an increase of $10.7 million or 10.6%. Our revenues are attributable to:

1.

Equipment Rental Revenues.    Our revenues from equipment rentals decreased $1.4 million, or 3.8% to $35.6 million for the first quarter of 2004 from $37.0 million for the first quarter of 2003. The decrease is primarily attributable to having reduced the overall gross rental fleet (through the normal course of our business activities) by approximately $83 million over the last 15 months and due to lower time utilization for cranes. Rental equipment dollar utilization (quarterly rental revenues annualized, divided by the average quarterly original rental fleet equipment cost of $481.7 million and $543.9 million for 2004 and 2003, respectively) was approximately 29.6% for the first quarter of 2004 compared to approximately 27.2% for the first quarter of 2003.

2.

New Equipment Sales Revenues.    Our new equipment sales increased $4.9 million, or 24.0% to $25.3 million for the first quarter of 2004 from $20.4 million for the first quarter of 2003. During 2004, our sales of new cranes, aerial work platforms and earthmoving equipment improved but were offset by lower sales of lift truck and other new equipment. Sales of new equipment fluctuate based upon customer demand for their projects.

3.

Used Equipment Sales Revenues.    Our used equipment sales increased $4.9 million, or 26.6%, to $23.3 million for the first quarter of 2004 from $18.4 million for the first quarter of 2003. In 2004, we sold our used equipment at approximately 125% of net book value compared to 126% in 2003.

4.

Parts Sales and Service Revenue.    Our parts sales and service revenue increased $1.7 million, or 8.2%, to $22.5 million for the first quarter of 2004 from $20.8 million for the first quarter of 2003. The $1.7 million increase was attributable to increased parts sales.

5.

Other Revenues.    Our other revenues consisted primarily of equipment support activities including transportation, hauling, parts freight and damage waiver charges. Our other revenues increased $0.6 million during the first quarter of 2004.

        The following table sets forth selected statement of operations gross profit data for the periods indicated (dollars in millions):

					Three Months Ended March 31,
											Total Dollar Change			Total Percent Change
					2004			2003
Gross Profit:
	Equipment rentals				$	9.9		$	11.1		$	(1.2	)	(10.8	)%
	New equipment sales:
		Cranes				1.3			1.1			0.2		18.2	%
		Aerial work platforms				0.3			0.2			0.1		50.0	%
		Earthmoving				1.0			0.4			0.6		150.0	%
		Lift trucks				0.2			0.1			0.1		100.0	%
		Other				(0.4	)		—			(0.4	)	—	%
			Total new equipment sales			2.4			1.8			0.6		33.3	%
	Used equipment sales:
		Cranes				1.4			1.4			—		0.0	%
		Aerial work platforms				0.5			0.6			(0.1	)	(16.7	)%
		Earthmoving				1.4			1.1			0.3		27.3	%
		Lift trucks				0.8			0.5			0.3		60.0	%
		Other				0.6			0.2			0.4		200.0	%
			Total used equipment sales			4.7			3.8			0.9		23.7	%
	Parts sales					3.9			3.3			0.6		18.2	%
	Service revenue					5.3			5.2			0.1		1.9	%
	Other					0.3			—			0.3		—	%
			Total gross profit		$	26.5		$	25.2		$	1.3		5.2	%

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        Total Gross Profit.    Our first quarter of 2004 total gross profit was $26.5 million compared to $25.2 million in the first quarter of 2003, an increase of $1.3 million, or 5.2%. Following is information concerning our gross profit:

1.

Equipment Rentals Gross Profit.    Our equipment rentals gross profit decreased $1.2 million, or 10.8%, for the first quarter of 2004 compared to the first quarter of 2003. The decrease is primarily due to lower equipment rental revenues, as previously discussed, higher maintenance and repair expenses and higher taxes on the rental fleet equipment, offset by lower depreciation expense.

Depreciation expense on our rental equipment is recorded in equipment rentals cost of revenues. Total rental fleet depreciation expense decreased approximately $1.5 million as a result of having less rental fleet. For the first quarter of 2004, our maintenance and repair expense increased approximately $0.4 million, primarily a result of aging the rental fleet. Taxes on the rental fleet increased $0.4 million. Re-rent expense increased $0.5 million. If customers need equipment that we do not have in our fleet and we do not want to purchase it, we will often rent it from other sources. Other miscellaneous rental expense, including fuel costs, increased approximately $0.3 million.

2.

New Equipment Sales Gross Profit.    Our new equipment sales gross profit increased $0.6 million, or 33.3%, to $2.4 million for the first quarter of 2004 compared to $1.8 million for the first quarter of 2003. The increase in new equipment sales gross profit is attributable primarily to increased revenues.



3.

Used Equipment Sales Gross Profit.    Our used equipment sales gross profit increased $0.9 million, or 23.7%, to $4.7 million for the first quarter of 2004 from $3.8 million for the first quarter of 2003. The increase in used equipment sales gross profit is attributable primarily to increased revenues and the mix of equipment sold.



4.

Parts Sales and Service Revenue Gross Profit.    Our parts sales and service revenue gross profit increased $0.7 million, or 8.2%, to $9.2 million for the first quarter of 2004 from $8.5 million for the first quarter of 2003, primarily related to a parts sales increase of $0.6 million (due to increased revenues).

        Selling, General and Administrative Expenses.    Selling, general and administrative (SG&A) expenses increased $1.0 million, or 4.0%, to $25.7 million for the first quarter of 2004 from $24.7 million for the first quarter of 2003. However, SG&A expenses, as a percent of total revenues, were 23.0% for the first quarter of 2004 compared to 24.4% for the first quarter of 2003. Approximately $0.7 million of the increase relates to manager and sales commissions, incentives, benefits and other costs associated with improved revenues. The Company recorded $0.3 million more in self-insurance claim expenses, due primarily to higher automobile and hauling vehicle insurance expenses in the first quarter of 2004 than in the first quarter of 2003. Depreciation expense on property and equipment is recorded in SG&A expense and was $0.8 million for the first quarter of 2004 compared to $0.9 million for the first quarter of 2003.

        Loss from Litigation.    In July 2000, a complaint was filed by one of our competitors in the General Court of Justice, Superior Court Division, State of North Carolina, County of Mecklenburg (the Court). On May 2, 2003, the Court handed down an Order and Opinion in favor of the plaintiff. In conjunction therewith, we recorded a $17.4 million loss for estimated damages, plaintiff's attorneys fees and other costs in 2003.

        On September 11, 2003, we filed a notice of appeal. In conjunction with the appeal and in accordance with the Court's order, we issued an irrevocable standby letter of credit for $19.0 million, representing the amount of the judgment plus $1.6 million in anticipated statutory interest for the sixteen months while the judgment is being appealed. If, at the end of sixteen months, the appeal is

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still pending, we will be required to extend the maturity of the irrevocable standby letter of credit for eight additional months and increase the amount by $0.8 million (eight months additional statutory interest at 8.0%). We will expense any additional statutory interest as interest expense in the statement of operations. For the duration of the letter of credit, we pay a 300 basis point fee on the amount available for issuance.

        While we are appealing this judgment, we believe that even if there is a reduction in the amount of damages awarded to the plaintiff on appeal, the judgment could have a material adverse effect on our business or financial condition.

        Income Taxes.    We are a limited liability company that has elected to be treated as a C Corporation for income tax purposes. At the end of the first quarter of 2004 and 2003, we have recorded a tax valuation allowance for the entire amount of our net deferred income tax assets. The valuation allowance was recorded given the cumulative losses we have incurred and our belief that it is more likely than not that we will be unable to recover the net deferred income tax assets.

Liquidity and Capital Resources

Senior Secured Credit Facility Amendments

        On February 10, 2004, we amended the senior secured credit agreement dated June 17, 2002, governing our senior secured credit facility. Principally, this amendment:

1.

extended the maturity date of the amended senior secured credit facility to February 2009;



2.

eliminated the maximum leverage ratio covenant;



3.

increased the adjusted maximum leverage ratio covenant from 5.2x to 5.8x for each quarter in the first year; 5.7x for each quarter in the second year; 5.4x for each quarter in the third year; 5.3x for each quarter in the fourth year; and 5.2x for each quarter in the fifth year. The minimum adjusted interest coverage ratio is set at 1.25x for each quarter through 2005; 1.35x for each quarter in 2006 and 2007; and 1.40x for each quarter in 2008 and through the remaining term of the agreement;



4.

increased the block on availability of assets from $20.0 million to $30.0 million based on the total borrowing base assets; and



5.

reduced the advance rate on rental fleet assets to 75 percent from 80 percent of the orderly liquidation value.

        We paid a loan amendment fee of $0.8 million that is being amortized over the remaining term of the loan. Based on these covenant changes, our availability under the amended senior secured credit facility was approximately $80.2 million as of March 31, 2004. As of March 31, 2004, we were in compliance with the financial covenants in place at that time.

Cash Requirements Related to Operations

        Our principal sources of liquidity have been from cash provided by operations and the sales of used equipment, proceeds from the issuance of debt, and borrowings available under our amended senior secured credit facility. As of March 31, 2004, the total balance outstanding on the amended senior secured credit facility was $45.3 million, with $80.2 million net available in additional borrowings (taking into account the $24.5 million in standby letters of credit). Also on March 31, 2004, our total balance payable on capital lease obligations and notes payable were $2.1 million and $1.0 million, respectively

        Our principal uses of cash have been to fund operating activities and working capital, finance the purchase of rental fleet equipment, fund payments due under operating leases and manufacturer

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flooring plans payable and to meet debt service requirements. We anticipate that these uses will continue to be the principal demands on our cash in the future.

        The amount of our future capital expenditures will depend on a number of factors including general economic conditions and growth prospects. We anticipate that we will fund rental fleet capital expenditures with the proceeds from the sales of used equipment, cash from operations and, if required, from borrowings under our amended senior secured credit facility. In response to changing economic conditions, we believe we have the flexibility to modify our capital expenditures by adjusting them (either up or down) to match our actual performance.

        To service our debt, we will require a significant amount of cash. Our ability to pay interest and principal on our indebtedness (including the senior subordinated and senior secured notes and obligations under the amended senior secured credit facility) and to satisfy our other debt obligations will depend upon our future operating performance and the availability of refinancing indebtedness, which will be affected by prevailing economic conditions and financial, business and other factors, some of which are beyond our control. Based on our current level of operations, we believe our cash flow from operations, available cash and available borrowings under the amended senior secured credit facility will be adequate to meet our future liquidity needs for at least the next twelve months.

        We cannot assure that our future cash flow will be sufficient to meet our long-term obligations and commitments. If we are unable to generate sufficient cash flow from operations in the future to service our indebtedness and to meet our other commitments, we will be required to adopt one or more alternatives, such as refinancing or restructuring our indebtedness, selling material assets or operations or seeking to raise additional debt or equity capital. We cannot assure that any of these actions could be affected on a timely basis or on satisfactory terms or at all, or that these actions would enable us to continue to satisfy our capital requirements. In addition, our existing or future debt agreements, including the indentures and the amended senior secured credit facility, may contain restrictive covenants prohibiting us from adopting any of these alternatives. Our failure to comply with these covenants could result in an event of default which, if not cured or waived, could result in the accelerations of all of our debt.

Certain Information Concerning Off-Balance Sheet Arrangements

        At March 31, 2004, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. We are, therefore, not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

        In the normal course of our business activities, we lease real estate, rental equipment and non-rental fleet equipment under operating leases. See "Contractual and Commercial Commitments Summary" below.

Sources and Uses of Cash

        Cash flow from operating activities.    For the first quarter of 2004, our cash used in operating activities was $11.3 million. The significant components of our operating activities that provided cash were depreciation expense of $13.2 million, an increase in accrued expenses payable and other liabilities of $8.6 million and a net decrease in other assets and other liabilities of $1.3 million. Significant components of our operating activities that used cash consisted of an $9.1 million net loss, gain on sale of both rental and non-rental equipment of $4.2 million, a $4.2 million increase in accounts receivable, a $12.7 million decrease in accounts payable and accrued expenses payable, an increase in inventories of $2.7 million and a $1.5 million increase in prepaid expenses and other assets.

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        Cash flow from investing activities.    For the first quarter of 2004, cash provided by our investing activities was $13.3 million. This is a result of proceeds from the sale of rental and non-rental equipment of $18.0 million offset by purchasing $4.7 million in rental and non-rental equipment.

        Cash flow from financing activities.    For the first quarter of 2004, cash used in our financing activities was $3.0 million. For the quarter, our total borrowings under the amended senior secured credit facility were $107.7 million and total payments under the amended senior secured credit facility were $106.4 million. Financing costs paid in cash for the refinancing totaled $0.9 million. Payments on capital leases and other notes were $3.4 million.

Contractual and Commercial Commitments Summary

        The following summarizes our contractual obligations at March 31, 2004, and the effect such obligations are expected to have on our liquidity and cash flow in future periods.

			Payments Due by Year
			Total			2004			2005-2006			2007-2008			Thereafter
			(Dollars in thousands)
Long-term debt (including subordinated notes payable)			$	253,961		$	240		$	443		$	278		$	253,000
Interest payments on senior secured notes				189,126			16,688			44,500			44,500			83,438
Interest payments on senior subordinated notes				62,938			4,969			13,250			13,250			31,469
Senior secured credit facility				45,281			—			—			—			45,281
Capital lease obligations (including interest)				2,309			1,021			1,288			—			—
Related party obligation (including interest)				1,650			225			600			600			225
Operating leases(1)				76,973			17,736			38,215			11,795			9,227
Other long-term obligations(2)				59,503			12,719			27,766			13,780			5,238
	Total contractual cash obligations		$	691,741		$	53,598		$	126,062		$	84,203		$	427,878

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⁽¹⁾

This includes total operating lease rental payments (including interest) having initial or remaining non-cancelable lease terms longer than one year.

⁽²⁾

This includes: (i) Bruckmann, Rosser, Sherrill & Co., Inc's annual management fees through 2012 (based upon the lesser of 1.75% of estimated Earnings Before Interest, Taxes, Depreciation, and Amortization excluding operating lease expense or $2.0 million per year) for $11.5 million,
(ii) payments under a non-competition agreement with a former vice-president for $0.3 million and (iii) payments for secured floor plan financing for $47.7 million.

        Additionally, as of March 31, 2004, we have standby letters of credit totaling $24.5 million that expire in September 2004 and January 2005.

Seasonality

        Our business is seasonal with demand for our rental equipment tending to be lower in the winter months. The level of equipment rental operations is directly related to commercial and industrial construction and maintenance activities. Therefore, equipment rental performance will be correlated to the levels of construction activities. The severity of weather conditions can have a temporary impact on the level of construction activities.

        Equipment sales cycles are also subject to seasonality with the peak selling period during spring season and expanding through summer. Parts and service activities are less affected by changes in demand caused by seasonality.

24

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Inflation

        Although we cannot accurately anticipate the effect of inflation on our operations, we believe that inflation has not had, and is not likely in the foreseeable future to have, a material impact on our results of operations.

Acquisitions

        We periodically engage in evaluations of potential acquisitions and start-up facilities. Currently, there are no definitive agreements or letters of intent with respect to any material acquisition. The success of our growth strategy depends, in part, on selecting strategic acquisition candidates at attractive prices and identifying strategic start-up locations. We expect to face competition for acquisition candidates, which may limit the number of acquisition opportunities and lead to higher acquisition costs. We may not have the financial resources necessary to consummate any acquisitions or to successfully open any new facilities in the future or the ability to obtain the necessary funds on satisfactory terms.

Forward-Looking Statements

        Certain of the statements contained in this report are forward-looking in nature. Such statements can be identified by the use of forward-looking terminology such as "believe," "expect," "may," "will," "should," "seek," "on-track," "plan," "intend," or "anticipate" or the negative thereof or comparable terminology, or by discussions of strategy. You are cautioned that our business and operations are subject to a variety of risks and uncertainties and, consequently, our actual results may materially differ from those projected by any forward-looking statements. Certain of these factors are discussed in our Form 10-K for the year ended December 31, 2003. We make no commitment to revise or update any forward-looking statements in order to reflect events or circumstances after the date any such statement is made.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

        Our earnings are effected by changes in interest rates due to the fact that interest on the revolving line of credit is calculated based upon LIBOR plus 300 basis points. We are also required to pay the lenders a commitment fee equal to 0.5% per annum in respect of undrawn commitments under the revolving credit facility. At March 31, 2004, we had variable rate debt representing 15.7% of total debt. A portion of our indebtedness bears interest at variable rates that are linked to changing market interest rates. Based upon the balances outstanding at March 31, 2004, a one percent increase in market rates would increase our annual interest expense approximately $0.9 million. We do not have significant exposure to the changing interest rates on our fixed-rate senior secured notes, senior subordinated notes or the capital lease obligations, which represented 84.3% of total debt. The annual interest rates on our senior secured credit facility averaged 6.8% in 2004 compared to 5.1% in 2003.

Item 4. Controls and Procedures

(a)

Within the 90 days prior to the date of filing this Form 10-Q, we carried out an evaluation, under the supervision and with the participation of management, including our President and Chief Executive Officer along with the Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, our President and Chief Executive Officer along with the Chief Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in our periodic SEC filings.



(b)

There have been no significant changes in our internal controls or in other factors which could significantly affect internal controls subsequent to the date we carried out our evaluation.

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PART II OTHER INFORMATION

Item 1. Legal Proceedings

        We are party to various litigation matters, in most cases (except for the legal proceeding referred to below) involving ordinary and routine claims incidental to our business. We cannot estimate with certainty our ultimate legal and financial liability with respect to such pending matters (excluding the legal proceeding referred to below). However, we believe, based on our examination of such matters, that our ultimate liability will not have a material adverse effect on our business or financial condition.

        In July 2000, a complaint was filed by one of our competitors in the General Court of Justice, Superior Court Division, State of North Carolina, County of Mecklenburg (the Court). On May 2, 2003, the Court handed down an Order and Opinion in favor of the plaintiff. In conjunction therewith, we recorded a $17.4 million loss for estimated damages, plaintiff's attorneys fees and other costs in 2003.

        On September 11, 2003, we filed a notice of appeal. In conjunction with the appeal and in accordance with the Court's order, we issued an irrevocable standby letter of credit for $19.0 million, representing the amount of the judgment plus $1.6 million in anticipated statutory interest for the sixteen months while the judgment is being appealed. If, at the end of sixteen months, the appeal is still pending, we will be required to extend the maturity of the irrevocable standby letter of credit for eight additional months and increase the amount by $0.8 million (eight months additional statutory interest at 8.0%). We will expense any additional statutory interest as interest expense in the statement of operations. For the duration of the letter of credit, we pay a 300 basis point fee on the amount available for issuance.

        While we are appealing this judgment, we believe that even if there is a reduction in the amount of damages awarded to the plaintiff on appeal, the judgment could have a material adverse effect on our business or financial condition.

Item 2. Changes in Securities and Use of Proceeds.

        None.

Item 3. Defaults upon Senior Securities.

        None.

Item 4. Submission of Matters to a Vote of Security Holders.

        None.

Item 5. Other information.

        None.

Item 6. Exhibits and reports on Form 8-K.

a)

Exhibits



31.1

Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002



31.2

Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002



b)

Reports on Form 8-K

Form 8-K filed on February 10, 2004

Form 8-K filed on March 10, 2004

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SIGNATURES

        Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		H&E EQUIPMENT SERVICES L.L.C.
Dated: May 17, 2004		By:	/s/  JOHN M. ENGQUIST       John M. Engquist Chief Executive Officer (Principal Executive Officer)
Dated: May 17, 2004		By:	/s/  LINDSAY C. JONES       Lindsay C. Jones Chief Financial Officer (Principal Financial and Accounting Officer)

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H&E EQUIPMENT SERVICES L.L.C. TABLE OF CONTENTS
H&E EQUIPMENT SERVICES L.L.C. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
H&E EQUIPMENT SERVICES L.L.C. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
H&E EQUIPMENT SERVICES L.L.C. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
H&E EQUIPMENT SERVICES L.L.C. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING BALANCE SHEET (In thousands)
CONDENSED CONSOLIDATING BALANCE SHEET (In thousands)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (In thousands)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (In thousands)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (In thousands)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (In thousands)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Item 4. Controls and Procedures

PART II OTHER INFORMATION

Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds.
Item 3. Defaults upon Senior Securities.
Item 4. Submission of Matters to a Vote of Security Holders.
Item 5. Other information.
Item 6. Exhibits and reports on Form 8-K.

SIGNATURES

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Exhibit 31.1

CERTIFICATIONS

        I, John M. Engquist, President and Chief Executive Officer of H&E Equipment Services L.L.C., certify that:

1.

I have reviewed this quarterly report on Form 10-Q of H&E Equipment Services L.L.C.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.

Date: May 17, 2004

By:	/s/  JOHN M. ENGQUIST       John M. Engquist President and Chief Executive Officer

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Exhibit 31.1

CERTIFICATIONS

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Exhibit 31.2

CERTIFICATIONS

        I, Lindsay C. Jones, Chief Financial Officer of H&E Equipment Services L.L.C., certify that:

1.

I have reviewed this quarterly report on Form 10-Q of H&E Equipment Services L.L.C.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting

Date: May 17, 2004

By:

/s/  LINDSAY C. JONES       Lindsay C. Jones Chief Financial Officer

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Exhibit 31.2

CERTIFICATIONS