e10vq
Table of Contents

 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
 
FORM 10-Q
 
     
þ   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2011.
     
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 number: 000-51759
 
H&E Equipment Services, Inc.
(Exact Name of Registrant as Specified in Its Charter)
 
     
Delaware   81-0553291
(State or Other Jurisdiction of Incorporation or Organization)   (I.R.S. Employer Identification No.)
     
11100 Mead Road, Suite 200,    
Baton Rouge, Louisiana   70816
(Address of Principal Executive Offices)   (ZIP Code)
(225) 298-5200
(Registrant’s Telephone Number, Including Area Code)
None
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
 
     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 þ No o
     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
     Yes þ No o
     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
             
Large Accelerated Filer o   Accelerated Filer þ   Non-Accelerated Filer o   Smaller Reporting Company o
        (Do not check if a smaller reporting company)    
     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
     Yes o No þ
     As of August 1, 2011, there were 35,090,202 shares of H&E Equipment Services, Inc. common stock, $0.01 par value, outstanding.
 
 

 


 

H&E EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
JUNE 30, 2011
         
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 EX-31.1
 EX-31.2
 EX-32.1
 EX-101 XBRL INSTANCE DOCUMENT
 EX-101 XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT
 EX-101 XBRL TAXONOMY EXTENSION CALCULATION LINKBASE DOCUMENT
 EX-101 XBRL TAXONOMY EXTENSION LABEL LINKBASE DOCUMENT
 EX-101 XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE DOCUMENT

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Forward-Looking Statements
     This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. Forward-looking statements include statements preceded by, followed by or that include the words “may,” “could,” “would,” “should,” “believe,” “expect,” “anticipate,” “plan,” “estimate,” “target,” “project,” “intend,” “foresee” and similar expressions. These statements include, among others, statements regarding our expected business outlook, anticipated financial and operating results, our business strategy and means to implement the strategy, our objectives, the amount and timing of capital expenditures, the likelihood of our success in expanding our business, financing plans, budgets, working capital needs and sources of liquidity.
     Forward-looking statements are only predictions and are not guarantees of performance. These statements are based on our management’s beliefs and assumptions, which in turn are based on currently available information. Important assumptions relating to the forward-looking statements include, among others, assumptions regarding demand for our products, the expansion of product offerings geographically or through new applications, the timing and cost of planned capital expenditures, competitive conditions and general economic conditions. These assumptions could prove inaccurate. Forward-looking statements also involve known and unknown risks and uncertainties, which could cause actual results to differ materially from those contained in any forward-looking statement. Many of these factors are beyond our ability to control or predict. Such factors include, but are not limited to, the following:
    general economic conditions and construction and industrial activity in the markets where we operate in North America, as well as the depth and duration of the recent macroeconomic downturn and related decreases in construction and industrial activities, which may continue to significantly affect our revenues and operating results;
 
    the impact of conditions in the global credit markets and their effect on construction spending and the economy in general;
 
    relationships with new equipment suppliers;
 
    increased maintenance and repair costs as we age our fleet and decreases in our equipment’s residual value;
 
    our indebtedness;
 
    the risks associated with the expansion of our business;
 
    our possible inability to integrate any businesses we acquire;
 
    competitive pressures;
 
    compliance with laws and regulations, including those relating to environmental matters and corporate governance matters; and
 
    other factors discussed under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2010.
     Except as required by applicable law, including the securities laws of the United States and the rules and regulations of the Securities and Exchange Commission (“SEC”), we are under no obligation to publicly update or revise any forward-looking statements after we file this Quarterly Report on Form 10-Q, whether as a result of any new information, future events or otherwise. Investors, potential investors and other readers are urged to consider the above mentioned factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results or performance.
     For a more detailed discussion of some of the foregoing risks and uncertainties, see Item 1A — “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2010, as well as other reports and registration statements filed by us with the SEC. All of our annual, quarterly and current reports, and any amendments thereto, filed with or furnished to the SEC are available on our Internet website under the Investor Relations link. For more information about us and the announcements we make from time to time, visit our Internet website at www.he-equipment.com.

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PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
H&E EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share amounts)
                 
    Balances at  
    June 30,     December 31,  
    2011     2010  
    (Unaudited)          
ASSETS
               
Cash
  $ 5,686     $ 29,149  
Receivables, net of allowance for doubtful accounts of $5,612 and $6,004, respectively
    97,562       99,139  
Inventories, net of reserves for obsolescence of $1,154 and $1,105, respectively
    76,759       72,156  
Prepaid expenses and other assets
    8,220       8,679  
Rental equipment, net of accumulated depreciation of $272,550 and $254,662, respectively
    445,502       426,637  
Property and equipment, net of accumulated depreciation and amortization of $59,145 and $53,941, respectively
    57,121       57,186  
Deferred financing costs, net of accumulated amortization of $11,150 and $10,456, respectively
    6,334       7,027  
Intangible assets, net of accumulated amortization of $3,298 and $3,050, respectively
    181       429  
Goodwill
    34,019       34,019  
 
           
Total assets
  $ 731,384     $ 734,421  
 
           
 
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
Liabilities:
               
Amounts due on senior secured credit facility
  $ 15,224     $  
Accounts payable
    54,513       58,437  
Manufacturer flooring plans payable
    66,466       75,058  
Accrued expenses payable and other liabilities
    36,710       35,999  
Senior unsecured notes
    250,000       250,000  
Capital leases payable
    2,681       2,754  
Deferred income taxes
    53,149       55,919  
Deferred compensation payable
    1,976       2,004  
 
           
Total liabilities
    480,719       480,171  
 
           
Commitments and contingent liabilities
               
 
               
Stockholders’ equity:
               
Preferred stock, $0.01 par value, 25,000,000 shares authorized; no shares issued
           
Common stock, $0.01 par value, 175,000,000 shares authorized; 38,706,668 and 38,699,666 shares issued at June 30, 2011 and December 31, 2010, respectively, and 34,995,895 and 35,029,804 shares outstanding at June 30, 2011 and December 31, 2010, respectively
    386       386  
Additional paid-in capital
    209,771       209,111  
Treasury stock at cost, 3,710,773 and 3,669,862 shares of common stock held at June 30, 2011 and December 31, 2010, respectively
    (56,791 )     (56,330 )
Retained earnings
    97,299       101,083  
 
           
Total stockholders’ equity
    250,665       254,250  
 
           
Total liabilities and stockholders’ equity
  $ 731,384     $ 734,421  
 
           
The accompanying notes are an integral part of these condensed consolidated financial statements.

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H&E EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Amounts in thousands, except per share amounts)
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2011     2010     2011     2010  
Revenues:
                               
Equipment rentals
  $ 55,772     $ 41,675     $ 104,250     $ 78,128  
New equipment sales
    57,913       28,962       87,086       56,255  
Used equipment sales
    23,066       17,931       38,483       31,362  
Parts sales
    24,942       22,782       46,519       42,414  
Services revenues
    13,244       12,571       25,881       24,054  
Other
    9,398       7,085       17,024       13,479  
 
                       
Total revenues
    184,335       131,006       319,243       245,692  
 
                       
Cost of revenues:
                               
Rental depreciation
    21,507       19,353       42,070       38,632  
Rental expense
    11,569       9,372       22,308       18,619  
New equipment sales
    51,118       26,103       77,148       51,013  
Used equipment sales
    18,058       13,862       29,620       24,607  
Parts sales
    18,261       16,847       34,101       31,094  
Services revenues
    5,137       4,252       10,048       8,628  
Other
    10,890       8,838       21,037       16,835  
 
                       
Total cost of revenues
    136,540       98,627       236,332       189,428  
 
                       
Gross profit
    47,795       32,379       82,911       56,264  
 
                               
Selling, general and administrative expenses
    37,546       36,765       75,639       72,639  
Gain on sales of property and equipment, net
    52       135       149       199  
 
                       
Income (loss) from operations
    10,301       (4,251 )     7,421       (16,176 )
 
                       
 
                               
Other income (expense):
                               
Interest expense
    (7,178 )     (7,203 )     (14,385 )     (14,494 )
Other, net
    185       106       508       156  
 
                       
Total other expense, net
    (6,993 )     (7,097 )     (13,877 )     (14,338 )
 
                       
 
                               
Income (loss) before provision for income taxes
    3,308       (11,348 )     (6,456 )     (30,514 )
Provision (benefit) for income taxes
    619       (4,255 )     (2,672 )     (11,343 )
 
                       
 
                               
Net income (loss)
  $ 2,689     $ (7,093 )   $ (3,784 )   $ (19,171 )
 
                       
Net income (loss) per common share:
                               
Basic
  $ 0.08     $ (0.20 )   $ (0.11 )   $ (0.55 )
 
                       
Diluted
  $ 0.08     $ (0.20 )   $ (0.11 )   $ (0.55 )
 
                       
Weighted average common shares outstanding:
                               
Basic
    34,725       34,642       34,713       34,634  
 
                       
Diluted
    34,906       34,642       34,713       34,634  
 
                       
The accompanying notes are an integral part of these condensed consolidated financial statements.

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H&E EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in thousands)
                 
    Six Months Ended  
    June 30,  
    2011     2010  
Cash flows from operating activities:
               
Net loss
  $ (3,784 )   $ (19,171 )
Adjustments to reconcile net loss to net cash used in operating activities:
               
Depreciation and amortization on property and equipment
    6,247       6,707  
Depreciation on rental equipment
    42,070       38,632  
Amortization of loan discounts and deferred financing costs
    694       710  
Amortization of intangible assets
    247       295  
Provision for losses on accounts receivable
    1,451       1,518  
Provision for inventory obsolescence
    139       70  
Decrease in deferred income taxes
    (2,770 )     (9,441 )
Stock-based compensation expense
    660       440  
Gain on sales of property and equipment, net
    (149 )     (199 )
Gain on sales of rental equipment, net
    (8,194 )     (5,951 )
Changes in operating assets and liabilities:
               
Receivables, net
    126       (8,681 )
Inventories, net
    (30,036 )     (3,282 )
Prepaid expenses and other assets
    459       (2,174 )
Accounts payable
    (3,925 )     10,916  
Manufacturer flooring plans payable
    (8,592 )     (15,522 )
Accrued expenses payable and other liabilities
    711       (2,094 )
Deferred compensation payable
    (28 )     32  
 
           
Net cash used in operating activities
    (4,674 )     (7,195 )
 
           
 
               
Cash flows from investing activities:
               
Purchases of property and equipment
    (6,293 )     (1,179 )
Purchases of rental equipment
    (54,333 )     (11,537 )
Proceeds from sales of property and equipment
    260       240  
Proceeds from sales of rental equipment
    26,887       23,016  
 
           
Net cash provided by (used in) investing activities
    (33,479 )     10,540  
 
           
 
               
Cash flows from financing activities:
               
Purchases of treasury stock
    (461 )     (176 )
Borrowings on senior secured credit facility
    170,540        
Payments on senior secured credit facility
    (155,316 )      
Payments of capital lease obligations
    (73 )     (1,285 )
 
           
Net cash provided by (used in) financing activities
    14,690       (1,461 )
 
           
 
               
Net increase (decrease) in cash
    (23,463 )     1,884  
Cash, beginning of period
    29,149       45,336  
 
           
Cash, end of period
  $ 5,686     $ 47,220  
 
           

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H&E EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
(Amounts in thousands)
                 
    Six Months Ended  
    June 30,  
    2011     2010  
Supplemental schedule of noncash investing and financing activities:
               
Noncash asset purchases:
               
Assets transferred from new and used inventory to rental fleet
  $ 25,294     $ 13,584  
 
           
Supplemental disclosures of cash flow information:
               
Cash paid during the period for:
               
Interest
  $ 13,699     $ 14,088  
 
           
Income taxes paid, net of refunds received
  $ (1,850 )   $ 64  
 
           
The accompanying notes are an integral part of these condensed consolidated financial statements.

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H&E EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Organization and Nature of Operations
Basis of Presentation
     Our condensed consolidated financial statements include the financial position and results of operations of H&E Equipment Services, Inc. and its wholly-owned subsidiaries H&E Finance Corp., GNE Investments, Inc., Great Northern Equipment, Inc., H&E California Holdings, Inc., H&E Equipment Services (California), LLC and H&E Equipment Services (Mid-Atlantic), Inc., collectively referred to herein as “we” or “us” or “our” or the “Company.”
     The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such regulations. In the opinion of management, all adjustments (consisting of all normal and recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011, and therefore, the results and trends in these interim condensed consolidated financial statements may not be the same for the entire year. These interim condensed consolidated financial statements should be read in conjunction with the annual audited consolidated financial statements and related notes in our Annual Report on Form 10-K for the year ended December 31, 2010, from which the balance sheet amounts as of December 31, 2010 were derived.
     All significant intercompany accounts and transactions have been eliminated in these condensed consolidated financial statements. Business combinations accounted for as purchases are included in the condensed consolidated financial statements from their respective dates of acquisition.
     The nature of our business is such that short-term obligations are typically met by cash flows generated from long-term assets. Consequently, and consistent with industry practice, the accompanying condensed consolidated balance sheets are presented on an unclassified basis.
Nature of Operations
     As one of the largest integrated equipment services companies in the United States focused on heavy construction and industrial equipment, we rent, sell and provide parts and service support for four core categories of specialized equipment: (1) hi-lift or aerial work platform equipment; (2) cranes; (3) earthmoving equipment; and (4) industrial lift trucks. By providing equipment sales, rental, on-site parts, and repair and maintenance functions under one roof, we are a one-stop provider for our customers’ varied equipment needs. This full-service approach provides us with multiple points of customer contact, enables us to maintain a high quality rental fleet, as well as an effective distribution channel for fleet disposal and provides cross-selling opportunities among our new and used equipment sales, rental, parts sales and service operations.
(2) Significant Accounting Policies
     We describe our significant accounting policies in note 2 of the notes to consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2010. During the three and six month periods ended June 30, 2011, there were no significant changes to those accounting policies.
     Use of Estimates
     We prepare our condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, which requires management to use its judgment to make estimates and assumptions that affect the reported amounts of assets and liabilities and related disclosures at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reported period. These assumptions and estimates could have a material effect on our condensed consolidated financial statements. Actual results may differ materially from those estimates. We review our estimates on an ongoing

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basis based on information currently available, and changes in facts and circumstances may cause us to revise these estimates.
     Recent Accounting Pronouncements
     In October 2009, the FASB issued ASU 2009-13, Multiple-Deliverable Revenue Arrangements (amendments to ASC 605, Revenue Recognition) (“ASU 2009-13”). ASU 2009-13 addresses how to determine whether an arrangement involving multiple deliverables contains more than one unit of accounting and requires entities to allocate revenue in an arrangement containing more than one unit of accounting using estimated selling prices of the delivered goods and services based on a selling price hierarchy. The amendments eliminate the residual method of revenue allocation and require revenue to be allocated using the relative selling price method. We adopted the provisions of ASU 2009-13 effective January 1, 2011, and such adoption did not have a material impact on our condensed consolidated financial statements for the quarter ended March 31, 2011.
     In December 2010, the FASB issued updated accounting guidance related to the calculation of the carrying amount of a reporting unit when performing the first step of a goodwill impairment test. More specifically, this update requires an entity to use an equity premise when performing the first step of a goodwill impairment test and if a reporting unit has a zero or negative carrying amount, the entity must assess and consider qualitative factors and whether it is more likely than not that a goodwill impairment exists. The new accounting guidance became effective for us on January 1, 2011 for impairment tests performed during fiscal 2011. We plan to adopt the new disclosures in conjunction with our annual impairment test as of October 1, 2011, or sooner if triggering events dictate that a goodwill impairment test should be performed. However, as we currently do not have any reporting units with a zero or negative carrying amount, we do not expect the application of this guidance to have an impact on our consolidated financial statements.
(3) Fair Value of Financial Instruments
     The carrying value of financial instruments reported in our accompanying condensed consolidated balance sheets for cash, accounts receivable, accounts payable and accrued expenses payable and other liabilities approximate fair value due to the immediate or short-term nature or maturity of these financial instruments. The determination of the fair value of our letters of credit is based on fees currently charged for similar agreements. The carrying amounts and fair values of our other financial instruments subject to fair value disclosures have been calculated based upon market quotes and present value calculations based on our current estimated incremental borrowing rates for similar types of borrowing arrangements, which are presented in the table below (amounts in thousands):
                 
    June 30, 2011  
    Carrying     Fair  
    Amount     Value  
Manufacturer flooring plans payable with interest computed at 7.00%
  $ 66,466     $ 54,133  
Senior unsecured notes with interest compounded at 8.375%
    250,000       262,500  
Capital leases payable with interest computed at 5.929% to 9.55%
    2,681       2,104  
Letters of credit
          192  
                 
    December 31, 2010  
    Carrying     Fair  
    Amount     Value  
Manufacturer flooring plans payable with interest computed at 7.00%
  $ 75,058     $ 63,105  
Senior unsecured notes with interest compounded at 8.375%
    250,000       251,250  
Capital leases payable with interest computed at 5.929% to 9.55%
    2,754       2,199  
Letters of credit
          216  

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(4) Stockholders’ Equity
     The following table summarizes the activity in Stockholders’ Equity for the six month period ended June 30, 2011 (amounts in thousands, except share data):
                                                 
    Common Stock                              
                    Additional                     Total  
    Shares             Paid-in     Treasury     Retained     Stockholders’  
    Issued     Amount     Capital     Stock     Earnings     Equity  
Balances at December 31, 2010
    38,699,666     $ 386     $ 209,111     $ (56,330 )   $ 101,083     $ 254,250  
Stock-based compensation
                660                   660  
Issuance of common stock
    7,002                                
Repurchase of 35,253 shares of restricted common stock
                      (461 )           (461 )
Net loss
                            (3,784 )     ( 3,784 )
 
                                   
Balances at June 30, 2011
    38,706,668     $ 386     $ 209,771     $ (56,791 )   $ 97,299     $ 250,665  
 
                                   
(5) Stock-Based Compensation
     We account for our stock-based compensation plan using the fair value recognition provisions of ASC 718, Stock Compensation (“ASC 718”). Under the provisions of ASC 718, stock-based compensation is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the requisite employee service period (generally the vesting period of the grant). Shares available for future stock-based payment awards under our 2006 Stock-Based Incentive Compensation Plan were 3,931,352 shares as of June 30, 2011.
Non-vested Stock
     The following table summarizes our non-vested stock activity for the six month period ended June 30, 2011:
                 
            Weighted Average  
            Grant Date Fair  
    Number of Shares     Value  
Non-vested stock at December 31, 2010
    329,937     $ 8.57  
Granted
    7,002     $ 12.86  
Vested
    (122,570 )   $ 7.99  
Forfeited
    (5,658 )   $ 8.62  
 
             
Non-vested stock at June 30, 2011
    208,711     $ 9.05  
 
             
     As of June 30, 2011, we had unrecognized compensation expense of $1.3 million related to non-vested stock that we expect to be recognized over a weighted-average period of 1.7 years. The following table summarizes compensation expense related to non-vested stock, which is included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations for the three and six months ended June 30, 2011 and 2010 (amounts in thousands):
                                 
    For the Three Months Ended     For the Six Months Ended  
    June 30,     June 30,  
    2011     2010     2011     2010  
Compensation expense
  $ 362     $ 227     $ 660     $ 431  
Stock Options
     At June 30, 2011, there is no unrecognized compensation expense as all stock option awards have fully vested. The following table summarizes compensation expense included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations for the three and six months ended June 30, 2011 and 2010 (amounts in thousands):
                                 
    For the Three Months Ended     For the Six Months Ended  
    June 30,     June 30,  
    2011     2010     2011     2010  
Compensation expense
  $     $ 4     $     $ 9  

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     The following table represents stock option activity for the six month period ended June 30, 2011:
                         
                    Weighted Average  
    Number of     Weighted Average     Contractual Life  
    Shares     Exercise Price     In Years  
Outstanding options at December 31, 2010
    51,000     $ 24.80          
Granted
                   
Exercised
                   
Canceled, forfeited or expired
                   
 
                     
Outstanding options at June 30, 2011
    51,000     $ 24.80       5.0  
 
                     
Options exercisable at June 30, 2011
    51,000     $ 24.80       5.0  
 
                     
     The closing price of our common stock on June 30, 2011 was $13.99. All options outstanding at June 30, 2011 have grant date fair values which exceed the June 30, 2011 closing stock price.
(6) Income (Loss) per Share
     Income (loss) per common share for the three and six month periods ended June 30, 2011 and 2010 are based on the weighted average number of common shares outstanding during the period. The effects of potentially dilutive securities that are anti-dilutive are not included in the computation of dilutive income (loss) per share. The following table sets forth the computation of basic and diluted net income (loss) per common share for the three and six month periods ended June 30, 2011 and 2010 (amounts in thousands, except per share amounts):
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2011     2010     2011     2010  
Basic net income (loss) per share:
                               
Net income (loss)
  $ 2,689     $ (7,093 )   $ (3,784 )   $ (19,171 )
Weighted average number of shares of common stock outstanding
    34,725       34,642       34,713       34,634  
 
                       
Net income (loss) per share of common stock — basic
  $ 0.08     $ (0.20 )   $ (0.11 )   $ (0.55 )
 
                       
Diluted net income (loss) per share:
                               
Net income (loss)
  $ 2,689     $ (7,093 )   $ (3,784 )   $ (19,171 )
Weighted average number of shares of common stock outstanding
    34,725       34,642       34,713       34,634  
Effect of dilutive securities:
                               
Effect of dilutive stock options
                       
Effect of dilutive non-vested restricted stock
    181                    
 
                       
Weighted average number of shares of common stock outstanding — diluted
    34,906       34,642       34,713       34,634  
 
                       
Net income (loss) per share of common stock — diluted
  $ 0.08     $ (0.20 )   $ (0.11 )   $ (0.55 )
 
                       
Common shares excluded from the denominator as anti-dilutive:
                               
Stock options
    51       51       51       51  
 
                       
Non-vested restricted stock
          242       209       253  
 
                       
(7) Segment Information
     We have identified five reportable segments: equipment rentals, new equipment sales, used equipment sales, parts sales and service revenues. These segments are based upon how management of the Company 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. There were no sales between segments for any of the periods presented. Selling, general and administrative expenses as well as all other income and expense items below gross profit are not generally allocated to reportable segments.

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     We do not compile discrete financial information by segments other than the information presented below. The following table presents information about our reportable segments (amounts in thousands):
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2011     2010     2011     2010  
Revenues:
                               
Equipment rentals
  $ 55,772     $ 41,675     $ 104,250     $ 78,128  
New equipment sales
    57,913       28,962       87,086       56,255  
Used equipment sales
    23,066       17,931       38,483       31,362  
Parts sales
    24,942       22,782       46,519       42,414  
Services revenues
    13,244       12,571       25,881       24,054  
 
                       
Total segmented revenues
    174,937       123,921       302,219       232,213  
Non-segmented revenues
    9,398       7,085       17,024       13,479  
 
                       
Total revenues
  $ 184,335     $ 131,006     $ 319,243     $ 245,692  
 
                       
Gross Profit (Loss):
                               
Equipment rentals
  $ 22,696     $ 12,950     $ 39,872     $ 20,877  
New equipment sales
    6,795       2,859       9,938       5,242  
Used equipment sales
    5,008       4,069       8,863       6,755  
Parts sales
    6,681       5,935       12,418       11,320  
Services revenues
    8,107       8,319       15,833       15,426  
 
                       
Total segmented gross profit
    49,287       34,132       86,924       59,620  
Non-segmented gross loss
    (1,492 )     (1,753 )     (4,013 )     (3,356 )
 
                       
Total gross profit
  $ 47,795     $ 32,379     $ 82,911     $ 56,264  
 
                       
                 
    Balances at  
    June 30,     December 31,  
    2011     2010  
Segment identified assets:
               
Equipment sales
  $ 60,992     $ 57,540  
Equipment rentals
    445,502       426,637  
Parts and services
    15,766       14,617  
 
           
Total segment identified assets
    522,260       498,794  
Non-segment identified assets
    209,124       235,627  
 
           
Total assets
  $ 731,384     $ 734,421  
 
           
     The Company operates primarily in the United States and our sales to international customers for the three and six month periods ended June 30, 2011 were 1.4% and 3.4%, respectively, of total revenues compared to 1.4% and 1.9% for the three and six month periods ended June 30, 2010. No one customer accounted for more than 10% of our revenues on an overall or segment basis for any of the periods presented.

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(8) Condensed Consolidating Financial Information of Guarantor Subsidiaries
     All of the indebtedness of H&E Equipment Services, Inc. is guaranteed by GNE Investments, Inc. and its wholly-owned subsidiary Great Northern Equipment, Inc., H&E Finance Corp., H&E Equipment Services (California), LLC, H&E California Holdings, Inc. and H&E Equipment Services (Mid-Atlantic), Inc. The guarantor subsidiaries are all wholly-owned and the guarantees, made on a joint and several basis, 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, Inc.’s ability to obtain funds from the guarantor subsidiaries by dividend or loan.
     The condensed consolidating financial statements of H&E Equipment Services, Inc. and its subsidiaries are included below. The financial statements for H&E Finance Corp. are not included within the condensed consolidating financial statements because H&E Finance Corp. has no assets or operations. The condensed consolidating balance sheet amounts as of December 31, 2010 included herein were derived from our annual audited consolidated financial statements and related notes in our Annual Report on Form 10-K for the year ended December 31, 2010.
CONDENSED CONSOLIDATING BALANCE SHEET
                                 
    As of June 30, 2011  
    H&E Equipment     Guarantor              
    Services, Inc.     Subsidiaries     Elimination     Consolidated  
            (Amounts in thousands)          
Assets:
                               
Cash
  $ 5,686     $     $     $ 5,686  
Receivables, net
    82,704       14,858             97,562  
Inventories, net
    62,093       14,666             76,759  
Prepaid expenses and other assets
    8,047       173             8,220  
Rental equipment, net
    354,677       90,825             445,502  
Property and equipment, net
    47,312       9,809             57,121  
Deferred financing costs, net
    6,334                   6,334  
Intangible assets, net
          181             181  
Investment in guarantor subsidiaries
    (23,570 )           23,570        
Goodwill
    4,493       29,526             34,019  
 
                       
Total assets
  $ 547,776     $ 160,038     $ 23,570     $ 731,384  
 
                       
 
                               
Liabilities and Stockholders’ Equity:
                               
Amounts due on senior secured credit facility
  $ 15,224     $     $     $ 15,224  
Accounts payable
    51,813       2,700             54,513  
Manufacturer flooring plans payable
    66,256       210             66,466  
Accrued expenses payable and other liabilities
    35,337       1,373             36,710  
Intercompany balances
    (176,644 )     176,644              
Senior unsecured notes
    250,000                   250,000  
Capital lease payable
          2,681             2,681  
Deferred income taxes
    53,149                   53,149  
Deferred compensation payable
    1,976                   1,976  
 
                       
Total liabilities
    297,111       183,608             480,719  
Stockholders’ equity (deficit)
    250,665       (23,570 )     23,570       250,665  
 
                       
Total liabilities and stockholders’ equity
  $ 547, 776     $ 160,038     $ 23,570     $ 731,384  
 
                       

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CONDENSED CONSOLIDATING BALANCE SHEET
                                 
    As of December 31, 2010  
    H&E Equipment     Guarantor              
    Services, Inc.     Subsidiaries     Elimination     Consolidated  
            (Amounts in thousands)          
Assets:
                               
Cash
  $ 29,149     $     $     $ 29,149  
Receivables, net
    87,629       11,510             99,139  
Inventories, net
    57,698       14,458             72,156  
Prepaid expenses and other assets
    8,479       200             8,679  
Rental equipment, net
    339,644       86,993             426,637  
Property and equipment, net
    47,301       9,885             57,186  
Deferred financing costs, net
    7,027                   7,027  
Intangible assets, net
          429             429  
Investment in guarantor subsidiaries
    (18,509 )           18,509        
Goodwill
    4,493       29,526             34,019  
 
                       
Total assets
  $ 526,911     $ 153,001     $ 18,509     $ 734,421  
 
                       
Liabilities and Stockholders’ Equity:
                               
Accounts payable
  $ 55,482     $ 2,955     $     $ 58,437  
Manufacturer flooring plans payable
    74,882       176             75,058  
Accrued expenses payable and other liabilities
    34,896       1,103             35,999  
Intercompany balances
    (164,522 )     164,522              
Senior unsecured notes
    250,000                   250,000  
Capital lease payable
          2,754             2,754  
Deferred income taxes
    55,919                   55,919  
Deferred compensation payable
    2,004                   2,004  
 
                       
Total liabilities
    308,661       171,510             480,171  
Stockholders’ equity (deficit)
    254,250       (18,509 )     18,509       254,250  
 
                       
Total liabilities and stockholders’ equity
  $ 562,911     $ 153,001     $ 18,509     $ 734,421  
 
                       

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CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
                                 
    Three Months Ended June 30, 2011  
    H&E Equipment     Guarantor              
    Services, Inc.     Subsidiaries     Elimination     Consolidated  
    (Amounts in thousands)  
Revenues:
                               
Equipment rentals
  $ 44,675     $ 11,097     $     $ 55,772  
New equipment sales
    51,271       6,642             57,913  
Used equipment sales
    19,503       3,563             23,066  
Parts sales
    20,990       3,952             24,942  
Services revenues
    11,632       1,612             13,244  
Other
    7,704       1,694             9,398  
 
                       
Total revenues
    155,775       28,560             184,335  
 
                       
Cost of revenues:
                               
Rental depreciation
    16,881       4,626             21,507  
Rental expense
    9,341       2,228             11,569  
New equipment sales
    45,276       5,842             51,118  
Used equipment sales
    15,059       2,999             18,058  
Parts sales
    15,371       2,890             18,261  
Services revenues
    4,592       545             5,137  
Other
    8,574       2,316             10,890  
 
                       
Total cost of revenues
    115,094       21,446             136,540  
 
                       
Gross profit (loss):
                               
Equipment rentals
    18,453       4,243             22,696  
New equipment sales
    5,995       800             6,795  
Used equipment sales
    4,444       564             5,008  
Parts sales
    5,619       1,062             6,681  
Services revenues
    7,040       1,067             8,107  
Other
    (870 )     (622 )           (1,492 )
 
                       
Gross profit
    40,681       7,114             47,795  
 
                               
Selling, general and administrative expenses
    31,402       6,144             37,546  
Equity in loss of guarantor subsidiaries
    (1,346 )           1,346        
Gain on sales of property and equipment, net
    35       17             52  
 
                       
Income from operations
    7,968       987       1,346       10,301  
 
                       
Other income (expense):
                               
Interest expense
    (4,839 )     (2,339 )           (7,178 )
Other, net
    179       6             185  
 
                       
Total other expense, net
    (4,660 )     (2,333 )           (6,993 )
 
                       
Income (loss) before income taxes
    3,308       (1,346 )     1,346       3,308  
Income tax expense
    619                   619  
 
                       
Net income (loss)
  $ 2,689     $ (1,346 )   $ 1,346     $ 2,689  
 
                       

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CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
                                 
    Three Months Ended June 30, 2010  
    H&E Equipment     Guarantor              
    Services, Inc.     Subsidiaries     Elimination     Consolidated  
    (Amounts in thousands)  
Revenues:
                               
Equipment rentals
  $ 32,760     $ 8,915     $     $ 41,675  
New equipment sales
    25,054       3,908             28,962  
Used equipment sales
    15,573       2,358             17,931  
Parts sales
    19,453       3,329             22,782  
Services revenues
    11,181       1,390             12,571  
Other
    5,812       1,273             7,085  
 
                       
Total revenues
    109,833       21,173             131,006  
 
                       
Cost of revenues:
                               
Rental depreciation
    15,227       4,126             19,353  
Rental expense
    7,582       1,790             9,372  
New equipment sales
    22,450       3,653             26,103  
Used equipment sales
    12,126       1,736             13,862  
Parts sales
    14,363       2,484             16,847  
Services revenues
    3,820       432             4,252  
Other
    6,912       1,926             8,838  
 
                       
Total cost of revenues
    82,480       16,147             98,627  
 
                       
Gross profit (loss):
                               
Equipment rentals
    9,951       2,999             12,950  
New equipment sales
    2,604       255             2,859  
Used equipment sales
    3,447       622             4,069  
Parts sales
    5,090       845             5,935  
Services revenues
    7,361       958             8,319  
Other
    (1,100 )     (653 )           (1,753 )
 
                       
Gross profit
    27,353       5,026             32,379  
 
                               
Selling, general and administrative expenses
    30,522       6,243             36,765  
Equity in loss of guarantor subsidiaries
    (3,486 )           3,486        
Gain on sales of property and equipment, net
    92       43             135  
 
                       
Loss from operations
    (6,563 )     (1,174 )     3,486       (4,251 )
 
                       
Other income (expense):
                               
Interest expense
    (4,894 )     (2,309 )           (7,203 )
Other, net
    109       (3 )           106  
 
                       
Total other expense, net
    (4,785 )     (2,312 )           (7,097 )
 
                       
Loss before income taxes
    (11,348 )     (3,486 )     3,486       (11,348 )
Income tax benefit
    (4,255 )                 (4,255 )
 
                       
Net loss
  $ (7,093 )   $ (3,486 )   $ 3,486     $ (7,093 )
 
                       

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CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
                                 
    Six Months Ended June 30, 2011  
    H&E Equipment     Guarantor              
    Services, Inc.     Subsidiaries     Elimination     Consolidated  
    (Amounts in thousands)  
Revenues:
                               
Equipment rentals
  $ 83,748     $ 20,502     $     $ 104,250  
New equipment sales
    75,925       11,161             87,086  
Used equipment sales
    31,823       6,660             38,483  
Parts sales
    39,299       7,220             46,519  
Services revenues
    22,777       3,104             25,881  
Other
    13,922       3,102             17,024  
 
                       
Total revenues
    267,494       51,749             319,243  
 
                       
Cost of revenues:
                               
Rental depreciation
    32,989       9,081             42,070  
Rental expense
    18,074       4,234             22,308  
New equipment sales
    67,296       9,852             77,148  
Used equipment sales
    24,175       5,445             29,620  
Parts sales
    28,834       5,267             34,101  
Services revenues
    8,998       1,050             10,048  
Other
    16,548       4,489             21,037  
 
                       
Total cost of revenues
    196,914       39,418             236,332  
 
                       
Gross profit (loss):
                               
Equipment rentals
    32,685       7,187             39,872  
New equipment sales
    8,629       1,309             9,938  
Used equipment sales
    7,648       1,215             8,863  
Parts sales
    10,465       1,953             12,418  
Services revenues
    13,779       2,054             15,833  
Other
    (2,626 )     (1,387 )           (4,013 )
 
                       
Gross profit
    70,580       12,331             82,911  
 
                               
Selling, general and administrative expenses
    62,839       12,800             75,639  
Equity in loss of guarantor subsidiaries
    (5,061 )           5,061        
Gain on sales of property and equipment, net
    128       21             149  
 
                       
Income (loss) from operations
    2,808       (448 )     5,061       7,421  
 
                       
Other income (expense):
                               
Interest expense
    (9,760 )     (4,625 )           (14,385 )
Other, net
    496       12             508  
 
                       
Total other expense, net
    (9,264 )     (4,613 )           (13,877 )
 
                       
Loss before income taxes
    (6,456 )     (5,061 )     5,061       (6,456 )
Income tax benefit
    (2,672 )                 (2,672 )
 
                       
Net loss
  $ (3,784 )   $ (5,061 )   $ 5,061     $ (3,784 )
 
                       

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CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
                                 
    Six Months Ended June 30, 2010  
    H&E Equipment     Guarantor              
    Services, Inc.     Subsidiaries     Elimination     Consolidated  
    (Amounts in thousands)  
Revenues:
                               
Equipment rentals
  $ 62,231     $ 15,897     $     $ 78,128  
New equipment sales
    49,096       7,159             56,255  
Used equipment sales
    26,624       4,738             31,362  
Parts sales
    35,888       6,526             42,414  
Services revenues
    21,069       2,985             24,054  
Other
    10,902       2,577             13,479  
 
                       
Total revenues
    205,810       39,882             245,692  
 
                       
Cost of revenues:
                               
Rental depreciation
    30,404       8,228             38,632  
Rental expense
    15,087       3,532             18,619  
New equipment sales
    44,406       6,607             51,013  
Used equipment sales
    20,985       3,622             24,607  
Parts sales
    26,305       4,789             31,094  
Services revenues
    7,697       931             8,628  
Other
    13,213       3,622             16,835  
 
                       
Total cost of revenues
    158,097       31,331             189,428  
 
                       
Gross profit (loss):
                               
Equipment rentals
    16,740       4,137             20,877  
New equipment sales
    4,690       552             5,242  
Used equipment sales
    5,639       1,116             6,755  
Parts sales
    9,583       1,737             11,320  
Services revenues
    13,372       2,054             15,426  
Other
    (2,311 )     (1,045 )           (3,356 )
 
                       
Gross profit
    47,713       8,551             56,264  
 
                               
Selling, general and administrative expenses
    60,782       11,857             72,639  
Equity in loss of guarantor subsidiaries
    (8,106 )           8,106        
Gain on sales of property and equipment, net
    156       43             199  
 
                       
Loss from operations
    (21,019 )     (3,263 )     8,106       (16,176 )
 
                       
Other income (expense):
                               
Interest expense
    (9,649 )     (4,845 )           (14,494 )
Other, net
    154       2             156  
 
                       
Total other expense, net
    (9,495 )     (4,843 )           (14,338 )
 
                       
Loss before income taxes
    (30,514 )     (8,106 )     8,106       (30,514 )
Income tax benefit
    (11,343 )                 (11,343 )
 
                       
Net loss
  $ (19,171 )   $ ( 8,106 )   $ 8,106     $ (19,171 )
 
                       

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CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
                                 
    Six Months Ended June 30, 2011  
    H&E Equipment     Guarantor              
    Services, Inc.     Subsidiaries     Elimination     Consolidated  
    (Amounts in thousands)  
Cash flows from operating activities:
                               
Net loss
  $ (3,784 )   $ (5,061 )   $ 5,061     $ (3,784 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
                               
Depreciation and amortization on property and equipment
    5,232       1,015             6,247  
Depreciation on rental equipment
    32,989       9,081             42,070  
Amortization of loan discounts and deferred financing costs
    694                   694  
Amortization of intangible assets
          247             247  
Provision for losses on accounts receivable
    1,803       (352 )           1,451  
Provision for inventory obsolescence
    139                   139  
Decrease in deferred income taxes
    (2,770 )                 (2,770 )
Stock-based compensation expense
    660                   660  
Gain on sales of property and equipment, net
    (128 )     (21 )           (149 )
Gain on sales of rental equipment, net
    (6,961 )     (1,233 )           (8,194 )
Equity in loss of guarantor subsidiaries
    5,061             (5,061 )      
Changes in operating assets and liabilities:
                               
Receivables, net
    3,122       (2,996 )           126  
Inventories, net
    (25,186 )     (4,850 )           (30,036 )
Prepaid expenses and other assets
    431       28             459  
Accounts payable
    (3,670 )     (255 )           (3,925 )
Manufacturer flooring plans payable
    (8,626 )     34             (8,592 )
Accrued expenses payable and other liabilities
    441       270             711  
Intercompany balances
    (12,122 )     12,122              
Deferred compensation payable
    (28 )                 (28 )
 
                       
Net cash provided by (used in) operating activities
    (12,703 )     8,029             (4,674 )
 
                       
Cash flows from investing activities:
                               
Purchases of property and equipment
    (5,315 )     (978 )           (6,293 )
Purchases of rental equipment
    (41,510 )     (12,823 )           (54,333 )
Proceeds from sales of property and equipment
    200       60             260  
Proceeds from sales of rental equipment
    21,102       5,785             26,887  
 
                       
Net cash used in investing activities
    (25,523 )     (7,956 )           (33,479 )
 
                       
Cash flows from financing activities:
                               
Purchases of treasury stock
    (461 )                 (461 )
Borrowings on senior secured credit facility
    170,540                   170,540  
Payments on senior secured credit facility
    (155,316 )                 (155,316 )
Payments on capital lease obligations
          (73 )           (73 )
 
                       
Net cash provided by (used in) financing activities
    14,763       (73 )           14,690  
 
                       
Net decrease in cash
    (23,463 )                 (23,463 )
Cash, beginning of period
    29,149                   29,149  
 
                       
Cash, end of period
  $ 5,686     $     $     $ 5,686  
 
                       

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CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
                                 
    Six Months Ended June 30, 2010  
    H&E Equipment     Guarantor              
    Services, Inc.     Subsidiaries     Elimination     Consolidated  
    (Amounts in thousands)  
Cash flows from operating activities:
                               
Net loss
  $ (19,171 )   $ (8,106 )   $ 8,106     $ (19,171 )
Adjustments to reconcile net loss to net cash used in operating activities:
                               
Depreciation and amortization on property and equipment
    5,713       994             6,707  
Depreciation on rental equipment
    30,404       8,228             38,632  
Amortization of loan discounts and deferred financing costs
    710                   710  
Amortization of intangible assets
          295             295  
Provision for losses on accounts receivable
    1,518                   1,518  
Provision for inventory obsolescence
    70                   70  
Decrease in deferred income taxes
    (9,441 )                 (9,441 )
Stock-based compensation expense
    440                   440  
(Gain) loss on sales of property and equipment, net
    (156 )     (43 )           (199 )
Gain on sales of rental equipment, net
    (4,846 )     (1,105 )           (5,951 )
Equity in loss of guarantor subsidiaries
    8,106             (8,106 )      
Changes in operating assets and liabilities:
                               
Receivables, net
    (13,348 )     4,667             (8,681 )
Inventories, net
    (6,686 )     3,404             (3,282 )
Prepaid expenses and other assets
    (2,044 )     (130 )           (2,174 )
Accounts payable
    9,887       1,029             10,916  
Manufacturer flooring plans payable
    (15,629 )     107             (15,522 )
Accrued expenses payable and other liabilities
    (2,444 )     350             (2,094 )
Intercompany balances
    11,461       (11,461 )            
Deferred compensation payable
    32                   32  
 
                       
Net cash used in operating activities
    (5,424 )     (1,771 )           (7,195 )
 
                       
Cash flows from investing activities:
                               
Purchases of property and equipment
    (1,124 )     (55 )           (1,179 )
Purchases of rental equipment
    (8,953 )     (2,584 )           (11,537 )
Proceeds from sales of property and equipment
    183       57             240  
Proceeds from sales of rental equipment
    18,604       4,412             23,016  
 
                       
Net cash provided by investing activities
    8,710       1,830             10,540  
 
                       
Cash flows from financing activities:
                               
Purchases of treasury stock
    (176 )                 (176 )
Payments on capital lease obligations
          (62 )           (62 )
Principal payments of notes payable
    (1,216 )     (7 )           (1,223 )
 
                       
Net cash used in financing activities
    (1,392 )     (69 )           (1,461 )
 
                       
Net increase (decrease) in cash
    1,894       (10 )           1,884  
Cash, beginning of period
    45,326       10             45,336  
 
                       
Cash, end of period
  $ 47,220     $     $     $ 47,220  
 
                       

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ITEM 2. — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
     The following discussion summarizes the financial position of H&E Equipment Services, Inc. and its subsidiaries as of June 30, 2011, and its results of operations for the three and six month periods ended June 30, 2011, and should be read in conjunction with (i) the unaudited condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q and (ii) the audited consolidated financial statements and accompanying notes to our Annual Report on Form 10-K for the year ended December 31, 2010. The following discussion contains, in addition to historical information, forward-looking statements that include risks and uncertainties (see discussion of “Forward-Looking Statements” included elsewhere in this Quarterly Report on Form 10-Q). Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those factors set forth under Item 1A — “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2010.
Overview
     Background
     As one of the largest integrated equipment services companies in the United States focused on heavy construction and industrial equipment, we rent, sell and provide parts and service support for four core categories of specialized equipment: (1) hi-lift or aerial work platform equipment; (2) cranes; (3) earthmoving equipment; and (4) industrial lift trucks. By providing equipment rental, sales, on-site parts, repair and maintenance functions under one roof, we are a one-stop provider for our customers’ varied equipment needs. This full service approach provides us with multiple points of customer contact, enables us to maintain a high quality rental fleet, as well as an effective distribution channel for fleet disposal and provides cross-selling opportunities among our new and used equipment sales, rental, parts sales and service operations.
     As of August 1, 2011, we operated 65 full-service facilities throughout the Intermountain, Southwest, Gulf Coast, West Coast, Southeast and Mid-Atlantic regions of the United States. Our work force includes distinct, focused sales forces for our new and used equipment sales and rental operations, highly skilled service technicians, product specialists and regional managers. We focus our sales and rental activities on, and organize our personnel principally by, our four core equipment categories. We believe this allows us to provide specialized equipment knowledge, improve the effectiveness of our rental and sales force and strengthen our customer relationships. In addition, we have branch managers for each location who are responsible for managing their assets and financial results. We believe this fosters accountability in our business, and strengthens our local and regional relationships.
     Through our predecessor companies, we have been in the equipment services business for approximately 50 years. H&E Equipment Services L.L.C. (“H&E LLC”) was formed in June 2002 through the business combination of Head & Engquist, a wholly-owned subsidiary of Gulf Wide, and ICM. Head & Engquist, founded in 1961, and ICM, founded in 1971, were two leading regional, integrated equipment service companies operating in contiguous geographic markets. In the June 2002 transaction, Head & Engquist and ICM were merged with and into Gulf Wide, which was renamed H&E LLC. Prior to the combination, Head & Engquist operated 25 facilities in the Gulf Coast region, and ICM operated 16 facilities in the Intermountain region of the United States.
     In connection with our initial public offering in February 2006, we converted H&E LLC into H&E Equipment Services, Inc. Prior to our initial public offering, our business was conducted through H&E LLC. In order to have an operating Delaware corporation as the issuer for our initial public offering, H&E Equipment Services, Inc. was formed as a Delaware corporation and wholly-owned subsidiary of H&E Holdings, and immediately prior to the closing of our initial public offering, on February 3, 2006, H&E LLC and H&E Holdings merged with and into us (H&E Equipment Services, Inc.), with us surviving the reincorporation merger as the operating company. Effective February 3, 2006, H&E LLC and Holdings no longer existed under operation of law pursuant to the merger reincorporation.
Critical Accounting Policies
     Item 7, included in Part II of our Annual Report on Form 10-K for the year ended December 31, 2010, presents the accounting policies and related estimates that we believe are the most critical to understanding our consolidated financial statements, financial condition, and results of operations and cash flows, and which require complex management judgment and assumptions, or involve uncertainties. There have been no changes to these critical accounting policies and estimates during the three and six month periods ended June 30, 2011. These policies include, among others, revenue recognition, the adequacy of the allowance for doubtful accounts, the propriety of our estimated useful life of rental equipment and property and equipment, the potential impairment of long-lived assets including goodwill and intangible assets, obsolescence reserves on inventory, the allocation of purchase price related to business combinations, reserves for claims, including self-insurance reserves, and deferred income taxes, including the valuation of any related deferred tax assets.

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     Information regarding our other significant accounting policies is included in note 2 to our consolidated financial statements in Item 8 of Part II of our Annual Report on Form 10-K for the year ended December 31, 2010 and in note 2 to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q.
     Business Segments
     We have five reportable segments because we derive our revenues from five principal business activities: (1) equipment rentals; (2) new equipment sales; (3) used equipment sales; (4) parts sales; and (5) repair and maintenance services. These segments are based upon how we allocate resources and assess performance. In addition, we also have non-segmented revenues and costs that relate to equipment support activities.
    Equipment Rentals. Our rental operation primarily rents our four core types of construction and industrial equipment. We have a well-maintained rental fleet and our own dedicated sales force, focused by equipment type. We actively manage the size, quality, age and composition of our rental fleet based on our analysis of key measures such as time utilization (which we analyze as equipment usage based on: (1) the number of rental equipment units available for rent, and (2) as a percentage of original equipment cost), rental rate trends and targets, rental equipment dollar utilization and maintenance and repair costs, which we closely monitor. We maintain fleet quality through regional quality control managers and our parts and services operations.
 
    New Equipment Sales. Our new equipment sales operation sells new equipment in all of our four core product categories. We have a retail sales force focused by equipment type that is separate from our rental sales force. Manufacturer purchase terms and pricing are managed by our product specialists.
 
    Used Equipment Sales. Our used equipment sales are generated primarily from sales of used equipment from our rental fleet, as well as from sales of inventoried equipment that we acquire through trade-ins from our equipment customers and through selective purchases of high quality used equipment. Used equipment is sold by our dedicated retail sales force. Our used equipment sales are an effective way for us to manage the size and composition of our rental fleet and provide a profitable distribution channel for disposal of rental equipment.
 
    Parts Sales. Our parts business sells new and used parts for the equipment we sell and also provides parts to our own rental fleet. To a lesser degree, we also sell parts for equipment produced by manufacturers whose products we neither rent nor sell. In order to provide timely parts and service support to our customers as well as our own rental fleet, we maintain an extensive parts inventory.
 
    Services. Our services operation provides maintenance and repair services for our customers’ equipment and to our own rental fleet at our facilities as well as at our customers’ locations. As the authorized distributor for numerous equipment manufacturers, we are able to provide service to that equipment that will be covered under the manufacturer’s warranty.
     Our non-segmented revenues and costs relate to equipment support activities that we provide, such as transportation, hauling, parts freight and damage waivers, and are not generally allocated to reportable segments.
     For additional information about our business segments, see note 7 to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q.
Revenue Sources
     We generate all of our total revenues from our five business segments and our non-segmented equipment support activities. Equipment rentals and new equipment sales account for more than half of our total revenues. For the six months ended June 30, 2011, 32.7% of our total revenues were attributable to equipment rentals, 27.3% of our total revenues were attributable to new equipment sales, 12.0% were attributable to used equipment sales, 14.6% were attributable to parts sales, 8.1% were attributable to our services revenues and 5.3% were attributable to non-segmented other revenues.
     The equipment that we sell, rent and service is principally used in the construction industry, as well as by companies for commercial and industrial uses such as plant maintenance and turnarounds. As a result, our total revenues are affected by several

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factors including, but not limited to, the demand for and availability of rental equipment, rental rates and other competitive factors, the demand for new and used equipment, the level of construction and industrial activities, spending levels by our customers, adverse weather conditions and general economic conditions. For a discussion of the impact of seasonality on our revenues, see “Seasonality” below.
     Equipment Rentals. Our rental operation primarily rents our four core types of construction and industrial equipment. We have a well-maintained rental fleet and our own dedicated sales force, focused by equipment type. We actively manage the size, quality, age and composition of our rental fleet based on our analysis of key measures such as time utilization (which we analyze: (1) as equipment usage based on the number of rental equipment units available for rent and (2) as a percentage of original equipment cost), rental rate trends and targets, rental equipment dollar utilization and maintenance and repair costs, which we closely monitor. We maintain fleet quality through regional quality control managers and our parts and services operations. We recognize revenue from equipment rentals in the period earned on a straight-line basis, over the contract term, regardless of the timing of the billing to customers.
     New Equipment Sales. We seek to optimize revenues from new equipment sales by selling equipment through a professional in-house retail sales force focused by product type. While sales of new equipment are impacted by the availability of equipment from the manufacturer, we believe our status as a leading distributor for some of our key suppliers improves our ability to obtain equipment. New equipment sales are an important component of our integrated model due to customer interaction and service contact and new equipment sales also lead to future parts and service revenues. We recognize revenue from the sale of new equipment 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.
     Used Equipment Sales. We generate the majority of our used equipment sales revenues by selling equipment from our rental fleet. The remainder of our used equipment sales revenues comes from the sale of inventoried equipment that we acquire through trade-ins from our equipment customers and selective purchases of high-quality used equipment. Our policy is not to offer specified price trade-in arrangements on equipment for sale. Sales of our rental fleet equipment allow us to manage the size, quality, composition and age of our rental fleet, and provide us with a profitable distribution channel for the disposal of rental equipment. We recognize revenue for the sale of used equipment 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.
     Parts Sales. We generate revenues from the sale of new and used parts for equipment that we rent or sell, as well as for other makes of equipment. Our product support sales representatives are instrumental in generating our parts revenues. They are product specialists and receive performance incentives for achieving certain sales levels. Most of our parts sales come from our extensive in-house parts inventory. Our parts sales provide us with a relatively stable revenue stream that is generally less sensitive to the economic cycles that tend to affect our rental and equipment sales operations. We recognize revenues from parts sales 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.
     Services. We derive our services revenues from maintenance and repair services to customers for their owned equipment. In addition to repair and maintenance on an as-needed or scheduled basis, we also provide ongoing preventative maintenance services to industrial customers. Our after-market service provides a high-margin, relatively stable source of revenue through changing economic cycles. We recognize services revenues at the time services are rendered and collectibility is reasonably assured.
     Non-Segmented Other Revenues. Our non-segmented other revenue consists of billings to customers for equipment support and activities including: transportation, hauling, parts freight, environmental fees and loss damage waiver charges. We recognize non-segmented other revenues at the time of billing and after the related services have been provided.
Principal Costs and Expenses
     Our largest expenses are the costs to purchase the new equipment we sell and rent, the costs associated with the used equipment we sell, rental expenses, rental depreciation and costs associated with parts sales and services, all of which are included in cost of revenues. For the six months ended June 30, 2011, our total cost of revenues was $236.3 million. Our operating expenses consist principally of selling, general and administrative expenses. For the six months ended June 30, 2011, our selling, general and administrative expenses were $75.6 million. In addition, we have interest expense related to our debt instruments. Operating expenses and all other income and expense items below the gross profit line of our consolidated statements of operations are not generally allocated to our reportable segments.

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     We are also subject to federal and state income taxes. We have been notified by the Internal Revenue Service (“IRS”) that our Federal Tax Returns for the tax years 2005, 2006, 2007, 2008 and 2009 have been selected for examination. We currently do not expect any material adjustment resulting from the IRS examination.
     Cost of Revenues:
     Rental Depreciation. Depreciation of rental equipment represents the depreciation costs attributable to rental equipment. Estimated useful lives vary based upon type of equipment. Generally, we depreciate cranes and aerial work platforms over a ten year estimated useful life, earthmoving over a five year estimated useful life with a 25% salvage value, and industrial lift-trucks over a seven year estimated useful life. Attachments and other smaller type equipment are depreciated over a three year estimated useful life.
     Rental Expense. Rental expense represents the costs associated with rental equipment, including, among other things, the cost of servicing and maintaining our rental equipment, property taxes on our fleet and other miscellaneous costs of rental equipment.
     New Equipment Sales. Cost of new equipment sold primarily consists of the equipment cost of the new equipment that is sold, net of any amount of credit given to the customer towards the equipment for trade-ins.
     Used Equipment Sales. Cost of used equipment sold consists of the net book value of rental equipment for used equipment sold from our rental fleet, the equipment costs for used equipment we purchase for sale or the trade-in value of used equipment that we obtain from customers in equipment sales transactions.
     Parts Sales. Cost of parts sales represents costs attributable to the sale of parts directly to customers.
     Services Support. Cost of services revenues represents costs attributable to service provided for the maintenance and repair of customer-owned equipment and equipment then on-rent by customers.
     Non-Segmented Other. These expenses include costs associated with providing transportation, hauling, parts freight, and damage waiver including, among other items, drivers’ wages, fuel costs, shipping costs, and our costs related to damage waiver policies.
     Selling, General and Administrative Expenses:
     Our selling, general and administrative (“SG&A”) expenses include sales and marketing expenses, payroll and related benefit costs, insurance expenses, professional fees, property and other taxes, administrative overhead, depreciation associated with property and equipment (other than rental equipment) and amortization expense associated with intangible assets. These expenses are not generally allocated to our reportable segments.
     Interest Expense:
     Interest expense for the periods presented represents the interest on our outstanding debt instruments. Interest expense also includes interest on our outstanding manufacturer flooring plans payable which are used to finance inventory and rental equipment purchases. Non-cash interest expense related to the amortization cost of deferred financing costs is also included in interest expense.
Principal Cash Flows
     We generate cash primarily from our operating activities and historically, we have used cash flows from operating activities, manufacturer floor plan financings and available borrowings under our revolving senior secured credit facility as the primary sources of funds to purchase our inventory and to fund working capital and capital expenditures (see also “Liquidity and Capital Resources” below).
Rental Fleet
     A significant portion of our overall value is in our rental fleet equipment. The net book value of rental equipment at June 30, 2011 was $445.5 million, or approximately 60.9% of our total assets. Our rental fleet, as of June 30, 2011, consisted of approximately

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16,919 units having an original acquisition cost (which we define as the cost originally paid to manufacturers or the original amount financed under operating leases) of approximately $724.9 million. As of June 30, 2011, our rental fleet composition was as follows (dollars in millions):
                                         
            % of     Original     % of Original     Average  
            Total     Acquisition     Acquisition     Age in  
    Units     Units     Cost     Cost     Months  
Hi-Lift or Aerial Work Platforms
    12,340       72.9 %   $ 433.0       59.7 %     48.7  
Cranes
    357       2.1 %     90.4       12.5 %     39.6  
Earthmoving
    1,819       10.8 %     160.9       22.2 %     28.8  
Industrial Lift Trucks
    558       3.3 %     19.7       2.7 %     28.6  
Other
    1,845       10.9 %     20.9       2.9 %     23.9  
 
                             
Total
    16,919       100.0 %   $ 724.9       100.0 %     43.0  
 
                             
     Determining the optimal age and mix for our rental fleet equipment is subjective and requires considerable estimates and judgments by management. We constantly evaluate the mix, age and quality of the equipment in our rental fleet in response to current economic and market conditions, competition and customer demand. The mix and age of our rental fleet, as well as our cash flows, are impacted by sales of equipment from the rental fleet, which are influenced by used equipment pricing at the retail and secondary auction market levels, and the capital expenditures to acquire new rental fleet equipment. In making equipment acquisition decisions, we evaluate current economic and market conditions, competition, manufacturers’ availability, pricing and return on investment over the estimated useful life of the specific equipment, among other things. As a result of our in-house service capabilities and extensive maintenance program, we believe our rental fleet is well-maintained.
     The original acquisition cost of our gross rental fleet increased by $39.8 million, or 5.8%, for the six month period ended June 30, 2011, primarily in response to improved equipment time utilization from the increase in demand. The average age of our rental fleet equipment increased approximately 0.1 months for the six months ended June 30, 2011.
     Our average rental rates for the six months ended June 30, 2011 were 6.4% higher than the comparative six month period ended June 30, 2010. On a sequential basis, our average rental rates for the three month period ended June 30, 2011 increased 4.2% compared to the three month period ended March 31, 2011.
     The rental equipment mix among our four core product lines for the six months ended June 30, 2011 was largely consistent with that of the prior year comparable period as a percentage of total units available for rent and as a percentage of original acquisition cost.
Principal External Factors that Affect our Businesses
     We are subject to a number of external factors that may adversely affect our businesses. These factors, and other factors, are discussed below and in Item 1A — “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2010:
    Economic downturns. The demand for our products is dependent on the general economy, the stability of the global credit markets, the industries in which our customers operate or serve, and other factors. Downturns in the general economy or in the construction and manufacturing industries, as well as adverse credit market conditions, can cause demand for our products to materially decrease. The recent macroeconomic downturn, including current conditions in the global credit markets, is a principal factor currently affecting our business.
 
    Spending levels by customers. Rentals and sales of equipment to the construction industry and to industrial companies constitute a significant portion of our total revenues. As a result, we depend upon customers in these businesses and their ability and willingness to make capital expenditures to rent or buy specialized equipment. Accordingly, our business is impacted by fluctuations in customers’ spending levels on capital expenditures and by the availability of credit to those customers.
 
    Adverse weather. Adverse weather in a geographic region in which we operate may depress demand for equipment in that region. Our equipment is primarily used outdoors and, as a result, prolonged adverse weather conditions may prohibit our customers from continuing their work projects. Adverse weather also has a seasonal impact in parts of our Intermountain region, primarily in the winter months.

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     We believe that our integrated business tempers the effects of downturns in a particular segment. For a discussion of seasonality, see “Seasonality” below.
Results of Operations
     The tables included in the period-to-period comparisons below provide summaries of our revenues and gross profits for our business segments and non-segmented revenues for the three and six month periods ended June 30, 2011 and 2010. The period-to-period comparisons of our financial results are not necessarily indicative of future results.
     During the years ended December 31, 2010 and 2009, our revenues and gross profits/margins were negatively impacted by lower customer demand resulting from several factors, including: (i) the decline in construction and industrial activities; (ii) the recent macroeconomic downturn; and (iii) unfavorable credit markets affecting end-user access to capital. Although our total gross profit margins have slowly trended downward since the year ended December 31, 2006, the rate of total gross profit margin decline was the most significant during the year ended December 31, 2009 and in the first quarter of 2010, as a result of the above factors. However, during the second, third and fourth quarters of 2010, as well the first two quarters of 2011, our operating segments generally realized either higher gross profit margins or improvements in the rate of gross profit margin decline on a year-over-year comparative quarterly basis. We cannot forecast with certainty whether these gross profit margin improvements during the recent quarters are indicative of a favorable trend in our business, nor can we forecast whether, or to what extent, we may experience any further declines, or whether our responses to ongoing or future unfavorable business conditions will be meaningful in mitigating or reversing the gross profit margin declines for the foreseeable future.
     Further deterioration or a continuation of current levels in the non-residential construction industry and the industrial sectors we serve could result in declining revenues and gross profits/margins and may have a material adverse effect on our financial position, results of operations and cash flows in the future. During the recent economic downturn, we proactively responded to these unfavorable business factors through various operational and strategic measures, including closing underperforming branches and redeploying rental fleet assets to existing branches with higher demand or to branches in new markets where demand is higher; minimizing rental fleet capital expenditures; reducing headcount; implementing cost reduction measures throughout the Company; and using some of the excess cash flow resulting from our planned reduction in capital expenditures to repay outstanding debt. We believe that these measures strengthened our balance sheet by improving our cash position. We will continue to evaluate and respond to business conditions as appropriate. While we cannot predict the timing, duration or the impact of an economic recovery and/or improved conditions within the construction and industrial sectors, we believe that our efforts have positioned us to take advantage of future opportunities when a prolonged economic and business recovery occurs.
Three Months Ended June 30, 2011 Compared to the Three Months Ended June 30, 2010
     Revenues.
                                 
    Three Months Ended     Total     Total  
    June 30,     Dollar     Percentage  
    2011     2010     Increase     Increase  
    (in thousands, except percentages)
Segment Revenues:
                               
Equipment rentals
  $ 55,772     $ 41,675     $ 14,097       33.8 %
New equipment sales
    57,913       28,962       28,951       100.0 %
Used equipment sales
    23,066       17,931       5,135       28.6 %
Parts sales
    24,942       22,782       2,160       9.5 %
Services revenues
    13,244       12,571       673       5.4 %
Non-Segmented revenues
    9,398       7,085       2,313       32.6 %
 
                       
Total revenues
  $ 184,335     $ 131,006     $ 53,329       40.7 %
 
                       
     Total Revenues. Our total revenues were $184.3 million for the three month period ended June 30, 2011 compared to $131.0 million for the same three month period in 2010, an increase of $53.3 million, or 40.7%. Revenues for all reportable segments and non-segmented revenues increased and are further discussed below.
     Equipment Rental Revenues. Our revenues from equipment rentals for the three month period ended June 30, 2011 increased $14.1 million, or 33.8%, to $55.8 million from $41.7 million in the same three month period in 2010. Rental revenues from aerial

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work platforms and earthmoving equipment increased $9.0 million and $2.3 million, respectively, while rental revenues from cranes and other equipment increased $1.3 million and $1.0 million, respectively. Lift truck rental revenues increased $0.5 million. Our average rental rates for the three month period ended June 30, 2011 increased 6.4% compared to the same three month period in 2010.
     Rental equipment dollar utilization (annual rental revenues divided by the average original rental fleet equipment costs) for the three month period ended June 30, 2011 improved to approximately 31.0% compared to 25.3% for the same three month period in 2010, an increase of 5.7%. The increase in comparative rental equipment dollar utilization was the result of a 12.2% increase in rental equipment time utilization (equipment usage based on the number of rental equipment units available for rent), combined with a 6.4% increase in average rental rates in the comparative period. Average rental rates for the three month period ended June 30, 2011 increased 4.2% compared to the prior three month period ended March 31, 2011. Rental equipment time utilization based on the number of rental equipment units available for rent was 67.1% for the three month period ended June 30, 2011 compared to 54.9% for the same three month period in 2010. Rental equipment time utilization as a percentage of original equipment cost was 70.0% for the three months ended June 30, 2011 compared to 57.9% for the same three month period in 2010, an increase of 12.1%.
     New Equipment Sales Revenues. Our new equipment sales for the three month period ended June 30, 2011 increased approximately $29.0 million, or 100.0%, to $57.9 million from approximately $29.0 million for the comparable period in 2010. Sales of new cranes increased $20.2 million and sales of new earthmoving equipment increased $7.5 million. Sales of new aerial work platform equipment and other equipment each increased approximately $1.0 million. These increases were partially offset by a decrease in new lift truck sales of approximately $0.6 million.
     Used Equipment Sales Revenues. Our used equipment sales increased $5.1 million, or 28.6%, to $23.1 million for the three month period ended June 30, 2011, from $17.9 million for the same three month period in 2010. Sales of used earthmoving equipment and used aerial work platform equipment increased $3.4 million and $1.3 million, respectively, while sales of used cranes increased $1.0 million. These increases were partially offset by decreases in sales of used lift trucks and other equipment of approximately $0.5 million and $0.2 million, respectively.
     Parts Sales Revenues. Our parts sales increased approximately $2.2 million, or 9.5%, to $24.9 million for the three month period ended June 30, 2011 from $22.8 million for the same three month period in 2010. The increase in parts revenues was due to higher demand for parts compared to last year.
     Services Revenues. Our services revenues for the three month period ended June 30, 2011 increased $0.7 million, or 5.4%, to $13.2 million from $12.6 million for the same three month period last year. The increase in service revenues was largely due to an increase in demand for services in conjunction with the improvements in our rental and sales businesses.
     Non-Segmented Other Revenues. Our non-segmented other revenues consisted primarily of equipment support activities including transportation, hauling, parts freight and damage waiver charges. For the three month period ended June 30, 2011, our other revenues were $9.4 million, an increase of $2.3 million, or 32.6%, from $7.1 million in the same three month period in 2010. The increase was primarily due to an increase in the volume of these services in conjunction with the related improvements of our primary business activities.
     Gross Profit.
                                 
                    Total     Total  
                    Dollar     Percentage  
    Three Months Ended     Change     Change  
    June 30,     Increase     Increase  
      2011     2010   (Decrease)     (Decrease)  
    (in thousands, except percentages)
Segment Gross Profit (Loss):
                               
Equipment rentals
  $ 22,696     $ 12,950     $ 9,746       75.3 %
New equipment sales
    6,795       2,859       3,936       137.7 %
Used equipment sales
    5,008       4,069       939       23.1 %
Parts sales
    6,681       5,935       746       12.6 %
Services revenues
    8,107       8,319       (212 )     (2.5 )%
Non-Segmented revenues
    (1,492 )     (1,753 )     261       14.9 %
 
                       
Total gross profit
  $ 47,795     $ 32,379     $ 15,416       47.6 %
 
                       
     Total Gross Profit. Our total gross profit was $47.8 million for the three month period ended June 30, 2011 compared to $32.4 million for the same three month period in 2010, an increase of $15.4 million, or 47.6%. Total gross profit margin for the three month

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period ended June 30, 2011 was 25.9%, an increase of 1.2% from the 24.7% gross profit margin for the same three month period in 2010. Gross profit (loss) and gross margin for all reportable segments are further described below:
     Equipment Rentals Gross Profit. Our gross profit from equipment rentals for the three month period ended June 30, 2011 increased $9.7 million, or 75.3%, to $22.7 million from approximately $13.0 million in the same three month period in 2010. The increase in equipment rentals gross profit was the net result of a $14.1 million increase in rental revenues for the three month period ended June 30, 2011, which was partially offset by a $2.2 million net increase in rental expenses and a $2.2 million increase in rental equipment depreciation expense. The net increase in rental expenses and rental equipment depreciation expense was primarily due to a larger fleet size in 2011 compared to 2010. As a percentage of equipment rental revenues, rental expenses were 20.7% for the three month period ended June 30, 2011 compared to 22.5% for the same three month period in 2010 and depreciation expense was 38.6% for the three month period ended June 30, 2011 compared to 46.4% for the same three month period in 2010.
     Gross profit margin for the three month period ended June 30, 2011 was approximately 40.7%, up 9.6% from 31.1% in the same three month period in 2010. This gross profit margin improvement was primarily due to the increase in comparative rental revenues and average rental rates, combined with the current year decreases in depreciation and rental expenses as a percentage of equipment rental revenues.
     New Equipment Sales Gross Profit. Our new equipment sales gross profit for the three month period ended June 30, 2011 increased $3.9 million, or 137.7%, to $6.8 million compared to $2.9 million for the same three month period in 2010 on a total new equipment sales increase of $29.0 million. Gross profit margin on new equipment sales for the three month period ended June 30, 2011 was 11.7%, an increase of approximately 1.8% from 9.9% in the same three month period in 2010, reflecting primarily improved margins on new crane sales in the current year period.
     Used Equipment Sales Gross Profit. Our used equipment sales gross profit for the three month period ended June 30, 2011 increased $0.9 million, or 23.1%, to $5.0 million from $4.1 million for the same three month period in 2010 on a used equipment sales increase of $5.1 million. Gross profit margin for the three month period ended June 30, 2011 was 21.7%, down 1.0% from 22.7% in the same three month period in 2010, primarily as a result of the mix of used equipment sold. Our used equipment sales from the rental fleet, which comprised approximately 65.3% and 67.6% of our used equipment sales for the three month periods ended June 30, 2011 and 2010, respectively, were approximately 145.0% of net book value for the three month period ended June 30, 2011 compared to 138.7% for the same three month period in 2010.
     Parts Sales Gross Profit. For the three month period ended June 30, 2011, our parts sales revenue gross profit increased approximately $0.7 million, or 12.6%, to $6.7 million from $5.9 million for the same three month period in 2010 on a $2.2 million increase in parts sales revenues. Gross profit margin for the three month period ended June 30, 2011 was 26.8%, an increase of 0.7% from 26.1% in the same three month period in 2010, as a result of the mix of parts sold.
     Services Revenues Gross Profit. For the three month period ended June 30, 2011, our services revenues gross profit decreased $0.2 million, or 2.5%, to $8.1 million from $8.3 million for the same three month period in 2010. Gross profit margin for the three month period ended June 30, 2011 was 61.2%, down 5.0% from 66.2% in the same three month period in 2010 as a result of service revenues mix.
     Non-Segmented Other Revenues Gross Loss. For the three month period ended June 30, 2011, our non-segmented other revenues realized a gross loss of $1.5 million compared to a gross loss of $1.8 million for the same three month period in 2010 on a $2.3 million increase in revenues as a result of higher hauling and freight costs resulting primarily from higher fuel costs. On a gross margin basis, the margin of gross loss improved to a gross loss margin of 15.9% from 24.7%.
     Selling, General and Administrative Expenses. SG&A expenses increased approximately $0.7 million, or 2.1%, to $37.5 million for the three month period ended June 30, 2011 compared to $36.8 million for the same three month period in 2010. The net increase in SG&A expenses was attributable to several factors. Employee salaries and wages and related employee expenses increased $0.8 million as a result higher salaries, wages and payroll taxes from increased employee headcount combined with commission and incentive pay that resulted from higher rental and sales revenues, which was partially offset by lower health insurance and workers compensation costs as a result of favorable claims experience in the current year quarter compared to the prior year quarter. Stock-based compensation expense was $0.4 million and $0.2 million for the three month periods ended June 30, 2011 and 2010, respectively. Marketing related costs increased $0.6 million. These increases were partially offset by a $0.5 million decrease in professional fees resulting primarily from data conversion costs and other consulting fees incurred last year related to our enterprise resource planning system implementation. Insurance costs decreased $0.3 million. As a percent of total revenues, SG&A expenses were 20.4% for the

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three months ended June 30, 2011, a decrease of 7.7% from 28.1% for the same three month period in 2010, primarily as a result of the current year increase in total revenues.
     Other Income (Expense). For the three month period ended June 30, 2011, our net other expenses decreased approximately $0.1 million to $7.0 million compared to $7.1 million for the same three month period in 2010. Interest expense was approximately $7.2 million for each of the three month periods ended June 30, 2011 and 2010. Miscellaneous other income increased approximately $0.1 million compared to the three month period ended June 30, 2010.
     Income Taxes. We recorded income tax expense of $0.6 million for the three month period ended June 30, 2011 compared to an income tax benefit of approximately $4.3 million for the three month period ended June 30, 2010. Our effective income tax rate for the three month period ended June 30, 2011 was 18.7% compared to 37.5% for the same three month period in 2010. The decrease in our effective tax rate was primarily the result of a favorable increase in permanent differences related to tax deductible goodwill. Based on available evidence, both positive and negative, we believe it is more likely than not that our deferred tax assets at June 30, 2011 are fully realizable through future reversals of existing taxable temporary differences and future taxable income, and are not subject to any limitations.
Six Months Ended June 30, 2011 Compared to the Six Months Ended June 30, 2010
     Revenues.
                                 
    Six Months Ended     Total     Total  
    June 30,     Dollar     Percentage  
    2011     2010     Increase     Increase  
    (in thousands, except percentages)  
Segment Revenues:
                               
Equipment rentals
  $ 104,250     $ 78,128     $ 26,122       33.4 %
New equipment sales
    87,086       56,255       30,831       54.8 %
Used equipment sales
    38,483       31,362       7,121       22.7 %
Parts sales
    46,519       42,414       4,105       9.7 %
Services revenues
    25,881       24,054       1,827       7.6 %
Non-Segmented revenues
    17,024       13,479       3,545       26.3 %
 
                       
Total revenues
  $ 319,243     $ 245,692     $ 73,551       29.9 %
 
                       
     Total Revenues. Our total revenues were $319.2 million for the six month period ended June 30, 2011 compared to $245.7 million for the same six month period in 2010, an increase of approximately $73.6 million, or 29.9%. Revenues for all reportable segments and non-segmented revenues increased and are further discussed below.
     Equipment Rental Revenues. Our revenues from equipment rentals for the six month period ended June 30, 2011 increased $26.1 million, or 33.4%, to approximately $104.3 million from $78.1 million in the same six month period in 2010. Rental revenues from aerial work platforms and earthmoving equipment increased $16.0 million and $4.6 million, respectively, while rental revenues from cranes and other equipment increased $2.3 million and $2.4 million, respectively. Lift truck rental revenues increased $0.8 million. Our average rental rates for the six month period ended June 30, 2011 increased 3.0% compared to the same six month period in 2010.
     Rental equipment dollar utilization (annual rental revenues divided by the average original rental fleet equipment costs) for the six month period ended June 30, 2011 improved to approximately 29.5% compared to 23.6% for the same six month period in 2010, an increase of 5.9%. The increase in comparative rental equipment dollar utilization was the net result of an 11.8% increase in rental equipment time utilization (equipment usage based on the number of rental equipment units available for rent), combined with a 3.0% increase in average rental rates in the comparative period. Rental equipment time utilization based on the number of rental equipment units available for rent was 64.1% for the six month period ended June 30, 2011 compared to 52.3% for the same six month period in 2010, an increase of 11.8%. Rental equipment time utilization as a percentage of original equipment cost was 67.4% for the six months ended June 30, 2011 compared to 54.6% for the same six month period in 2010, an increase of 12.8%.
     New Equipment Sales Revenues. Our new equipment sales for the six month period ended June 30, 2011 increased $30.8 million, or 54.8%, to $87.1 million from approximately $56.3 million for the comparable period in 2010. Sales of new cranes and earthmoving equipment increased $14.8 million and $14.3 million, respectively, while sales of new other equipment and new aerial work platform equipment increased $1.9 million and $0.7 million, respectively. These increases were partially offset by a decrease in new lift truck sales of $0.9 million.

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     Used Equipment Sales Revenues. Our used equipment sales increased $7.1 million, or 22.7%, to $38.5 million for the six month period ended June 30, 2011, from $31.4 million for the same six month period in 2010, indicative of an improved used equipment sales market. Sales of used earthmoving equipment and aerial work platform equipment increased $4.4 million and $2.3 million, respectively. Used crane sales increased $1.0 million. Used other equipment sales decreased $0.5 million while used lift truck sales decreased $0.1 million.
     Parts Sales Revenues. Our parts sales increased approximately $4.1 million, or 9.7%, to $46.5 million for the six month period ended June 30, 2011 from $42.4 million for the same six month period in 2010. The increase in parts revenues was due to higher demand for parts compared to last year.
     Services Revenues. Our services revenues for the six month period ended June 30, 2011 increased $1.8 million, or 7.6%, to $25.9 million from approximately $24.1 million for the same six month period last year. The increase in service revenues was largely due to an increase in demand for services in conjunction with the improvements in our rental and sales businesses.
     Non-Segmented Other Revenues. Our non-segmented other revenues consisted primarily of equipment support activities including transportation, hauling, parts freight and damage waiver charges. For the six month period ended June 30, 2011, our other revenues were $17.0 million, an increase of $3.5 million, or 26.3%, from $13.5 million in the same six month period in 2010. The increase was primarily due to an increase in the volume of these services in conjunction with the related improvements of our primary business activities.
     Gross Profit.
                                 
                    Total     Total  
                    Dollar     Percentage  
    Six Months Ended     Change     Change  
    June 30,     Increase     Increase  
    2011     2010     (Decrease)     (Decrease)  
    (in thousands, except percentages)
Segment Gross Profit (Loss):
                               
Equipment rentals
  $ 39,872     $ 20,877     $ 18,995       91.0 %
New equipment sales
    9,938       5,242       4,696       89.6 %
Used equipment sales
    8,863       6,755       2,108       31.2 %
Parts sales
    12,418       11,320       1,098       9.7 %
Services revenues
    15,833       15,426       407       2.6 %
Non-Segmented revenues
    (4,013 )     (3,356 )     (657 )     19.6 %
 
                       
Total gross profit
  $ 82,911     $ 56,264     $ 26,647       47.4 %
 
                       
     Total Gross Profit. Our total gross profit was $82.9 million for the six month period ended June 30, 2011 compared to $56.3 million for the same six month period in 2010, an increase of $26.6 million, or 47.4%. Total gross profit margin for the six month period ended June 30, 2011 was 26.0%, an increase of 3.1% from the 22.9% gross profit margin for the same six month period in 2010. Gross profit (loss) and gross margin for all reportable segments are further described below:
     Equipment Rentals Gross Profit. Our gross profit from equipment rentals for the six month period ended June 30, 2011 increased $19.0 million, or 91.0%, to $39.9 million from approximately $20.9 million in the same six month period in 2010. The increase in equipment rentals gross profit was the net result of a $26.1 million increase in rental revenues for the six month period ended June 30, 2011, which was partially offset by a $3.7 million net increase in rental expenses and a $3.4 million increase in rental equipment depreciation expense. The net increase in rental expenses and rental equipment depreciation expense was primarily due to a larger fleet size in 2011 compared to 2010. As a percentage of equipment rental revenues, rental expenses were 21.4% for the six month period ended June 30, 2011 compared to 23.8% for the same six month period in 2010 and depreciation expense was approximately 40.4% for the six month period ended June 30, 2011 compared to 49.4% for the same six month period in 2010. These percentage decreases were primarily attributable to the increase in comparative rental revenues.
     Gross profit margin for the six month period ended June 30, 2011 was 38.2%, up 11.5% from 26.7% in the same six month period in 2010. This gross profit margin improvement was primarily due to the increase in comparative rental revenues and average rental rates, combined with the current year decreases in depreciation and rental expenses as a percentage of equipment rental revenues.
     New Equipment Sales Gross Profit. Our new equipment sales gross profit for the six month period ended June 30, 2011 increased $4.7 million, or 89.6%, to $9.9 million compared to $5.2 million for the same six month period in 2010 on a total new equipment sales

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increase of $30.8 million. Gross profit margin on new equipment sales for the six month period ended June 30, 2011 was 11.4%, an increase of 2.1% from 9.3% in the same six month period in 2010, primarily reflecting improved margins on new crane sales in the current year period.
     Used Equipment Sales Gross Profit. Our used equipment sales gross profit for the six month period ended June 30, 2011 increased $2.1 million, or 31.2%, to approximately $8.9 million from approximately $6.7 million for the same six month period in 2010 on a used equipment sales increase of $7.1 million. Gross profit margin for the six month period ended June 30, 2011 was 23.0%, up 1.5% from 21.5% in the same six month period in 2010. Our used equipment sales from the rental fleet, which comprised approximately 69.9% and 73.4% of our used equipment sales for the six month periods ended June 30, 2011 and 2010, respectively, were approximately 143.8% of net book value for the six month period ended June 30, 2011 compared to 134.9% for the same six month period in 2010.
     Parts Sales Gross Profit. For the six month period ended June 30, 2011, our parts sales revenue gross profit increased $1.1 million, or 9.7%, to $12.4 million from $11.3 million for the same six month period in 2010 on a $4.1 million increase in parts sales revenues. Gross profit margin was 26.7% for both six month periods ended June 30, 2011 and 2010.
     Services Revenues Gross Profit. For the six month period ended June 30, 2011, our services revenues gross profit increased $0.4 million, or 2.6%, to $15.8 million from $15.4 million for the same six month period in 2010 on a $1.8 million increase in services revenues. Gross profit margin for the six month period ended June 30, 2011 was 61.2%, down approximately 2.9% from 64.1% in the same six month period in 2010 as a result of service revenues mix.
     Non-Segmented Other Revenues Gross Loss. For the six month period ended June 30, 2011, our non-segmented other revenues realized a gross loss of approximately $4.0 million compared to a gross loss of $3.4 million for the same six month period in 2010 as a result of higher hauling and freight costs resulting primarily from higher fuel costs. On a gross margin basis, the margin of gross loss improved to a gross loss margin of 23.6% from 24.9%.
     Selling, General and Administrative Expenses. SG&A expenses increased $3.0 million, or 4.1%, to $75.6 million for the six month period ended June 30, 2011 compared to $72.6 million for the same six month period in 2010. The net increase in SG&A expenses was attributable to several factors. Employee salaries and wages and related employee expenses increased $3.3 million as a result higher salaries, wages and payroll taxes from increased employee headcount combined with commission and incentive pay that resulted from higher rental and sales revenues, which was partially offset by lower health insurance and workers compensation costs as a result of favorable claims experience in the current year compared to the prior year. Stock-based compensation expense was $0.7 million and $0.4 million for the six month periods ended June 30, 2011 and 2010, respectively. Fuel and utility costs increased $0.5 million and marketing related costs increased $0.6 million. These increases were partially offset by a $1.2 million decrease in professional fees resulting primarily from data conversion costs and other consulting fees incurred last year related to our enterprise resource planning system implementation. As a percent of total revenues, SG&A expenses were 23.7% for the six months ended June 30, 2011, a decrease of 5.9% from 29.6% for the same six month period in 2010, primarily as a result of the current year increase in total revenues.
     Other Income (Expense). For the six month period ended June 30, 2011, our net other expenses decreased approximately $0.5 million to $13.9 million compared to $14.3 million for the same six month period in 2010. The decrease was the net result of a $0.1 million decrease in interest expense to $14.4 million for the six month period ended June 30, 2011 compared to $14.5 million for the same six month period in 2010. Miscellaneous other income increased approximately $0.4 million compared to the six month period ended June 30, 2010.
     Income Taxes. We recorded an income tax benefit of $2.7 million for the six month period ended June 30, 2011 compared to an income tax benefit of approximately $11.3 million for the six month period ended June 30, 2010. Our effective income tax rate for the six month period ended June 30, 2011 was 41.4% compared to 37.2% for the same six month period in 2010. The increase in our effective tax rate was primarily the result of a favorable increase in permanent differences related to tax deductible goodwill. Based on available evidence, both positive and negative, we believe it is more likely than not that our deferred tax assets at June 30, 2011 are fully realizable through future reversals of existing taxable temporary differences and future taxable income, and are not subject to any limitations.
Liquidity and Capital Resources
     Cash flow from operating activities. For the six month period ended June 30, 2011, our cash provided by our operating activities was exceeded by our cash used in our operating activities, resulting in net cash used in our operating activities of $4.7 million. Our

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reported net loss of $3.8 million, which, when adjusted for non-cash income and expense items, such as depreciation and amortization, deferred income taxes, provision for losses on accounts receivable, stock-based compensation expense and net gains on the sale of long-lived assets, provided positive cash flows of $36.6 million. These cash flows from operating activities were also positively impacted by a $0.7 million increase in accrued expenses and other liabilities and a $0.5 million decrease in prepaid expenses and other assets. Offsetting these positive cash flows were an increase of $30.0 million in net inventories, a $3.9 million decrease in accounts payable, and an $8.6 million decrease in manufacturing flooring plans payable.
     For the six month period ended June 30, 2010, our cash provided by our operating activities was exceeded by our cash used in our operating activities, resulting in net cash used in our operating activities of approximately $7.2 million. Our reported net loss of $19.2 million, which, when adjusted for non-cash income and expense items, such as depreciation and amortization, deferred income taxes, provision for losses on accounts receivable, stock-based compensation expense and net gains on the sale of long-lived assets, provided positive cash flows of approximately $13.6 million. These cash flows from operating activities were also positively impacted by an increase of $10.9 million in accounts payable. Offsetting these positive cash flows were a $15.5 million decrease in manufacturing flooring plans payable, an $8.7 million increase in net accounts receivable, a $3.3 million increase in net inventories, a $2.2 million increase in prepaid expenses and other assets and a $2.1 million decrease in accrued expenses payable and other liabilities.
     Cash flow from investing activities. For the six months ended June 30, 2011, cash provided by our investing activities was exceeded by our cash used in our investing activities, resulting in net cash used in our investing activities of approximately $33.5 million. This was a result of purchases of rental and non-rental equipment totaling $60.6 million, which was partially offset by proceeds from the sale of rental and non-rental equipment of approximately $27.1 million.
     For the six month period ended June 30, 2010, cash provided by our investing activities was $10.5 million. This was a net result of proceeds from the sale of rental and non-rental equipment of $23.3 million and purchases of rental and non-rental equipment totaling $12.7 million.
     Cash flow from financing activities. For the six month period ended June 30, 2011, cash provided by our financing activities was approximately $14.7 million, which included net borrowings under our senior secured credit facility of $15.2 million. We purchased approximately $0.5 million of treasury stock for the six month period ended June 30, 2011.
     For the six month period ended June 30, 2010, cash used in our financing activities was approximately $1.5 million, representing payments of our capital lease obligations and purchases of treasury stock of $1.3 million and $0.2 million, respectively.
Senior Secured Credit Facility
     We and our subsidiaries are parties to a $320.0 million senior secured credit facility with General Electric Capital Corporation as administrative agent, and the lenders named therein. The credit facility matures on July 29, 2015. The revolving loans under the credit facility bear interest, at our option, either at (i) the index rate plus an applicable margin ranging from 1.50% to 2.25% depending on our leverage ratio or (ii) the LIBOR rate plus an applicable margin of 2.50% to 3.25% depending on our leverage ratio. The unused commitment fee under the senior secured credit facility is 0.50%.
     Our senior secured credit facility requires us to maintain a minimum fixed charge coverage ratio in the event that our excess borrowing availability is below $40.0 million (as adjusted if the incremental facility is exercised). The credit facility also requires us to maintain a maximum total leverage ratio of 5.0 to 1.0, which is tested if excess availability is less than $40 million (as adjusted if the incremental facility is exercised). As of June 30, 2011, we were in compliance with our financial covenants under the senior secured credit facility.
     At June 30, 2011, the interest rate on the senior secured credit facility was LIBOR plus 275 basis points, or approximately 3.48%. At August 1, 2011, we had $285.9 million of available borrowings under our senior secured credit facility, net of $7.0 million of outstanding letters of credit.
Senior Unsecured Notes
     We currently have outstanding $250.0 million aggregate principal amount of 8 3/8% senior unsecured notes due 2016. The senior unsecured notes are guaranteed, jointly and severally, on an unsecured senior basis by all of our existing and future domestic restricted subsidiaries.
     We may redeem the senior unsecured notes at any time on or after July 15, 2011 at specified redemption prices plus accrued and unpaid interest and additional interest. In addition, if we experience a change of control, we will be required to make an offer to repurchase the senior unsecured notes at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest and additional interest.

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     The indenture governing our senior secured notes contains certain covenants that, among other things, limit our ability and the ability of our restricted subsidiaries to: (i) incur additional indebtedness, assume a guarantee or issue preferred stock; (ii) pay dividends or make other equity distributions or payments to or affecting our subsidiaries; (iii) purchase or redeem our capital stock; (iv) make certain investments; (v) create liens; (vi) sell or dispose of assets or engage in mergers or consolidation; (vii) engage in certain transactions with subsidiaries or affiliates; (viii) enter into sale leaseback transactions with subsidiaries or affiliates; (viii) enter into sale leaseback transactions; and (ix) engage in certain business activities. Each of the covenants is subject to exceptions and qualifications.
Cash Requirements Related to Operations
     Our principal sources of liquidity have been from cash provided by operating activities and the sales of new, used and rental fleet equipment, proceeds from the issuance of debt, and borrowings available under our senior secured credit facility. Our principal uses of cash have been to fund operating activities and working capital, purchases of rental fleet equipment and property and equipment, fund payments due under facility operating leases and manufacturer flooring plans payable, and to meet debt service requirements. In the future, we may pursue additional strategic acquisitions. In addition, we may use cash from working capital and/or borrowings under our senior secured credit facility should we repurchase Company securities. We anticipate that the above described uses will 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. Our gross rental fleet capital expenditures for the six month period ended June 30, 2011 were approximately $79.6 million, including approximately $25.3 million of non-cash transfers from new and used equipment to rental fleet inventory. Our gross property and equipment capital expenditures for the six month period ended June 30, 2011 were $6.3 million. 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 unsecured notes, the senior secured credit facility and our other indebtedness), will depend upon our future operating performance and the availability of borrowings under our senior secured credit facility and/or other debt and equity financing alternatives available to us, which will be affected by prevailing economic conditions and conditions in the global credit and capital markets, as well as financial, business and other factors, some of which are beyond our control. Based on our current level of operations and given the current state of the capital markets, we believe our cash flow from operations, available cash and available borrowings under our senior secured credit facility will be adequate to meet our future liquidity needs for the foreseeable future. As of August 1, 2011, we had $285.9 million of available borrowings under our senior secured credit facility, net of $7.0 million of outstanding letters of credit.
     We cannot provide absolute assurance that our future cash flow from operating activities will be sufficient to meet our long-term obligations and commitments. If we are unable to generate sufficient cash flow from operating activities 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. Given current economic and market conditions, including the significant disruptions in the global capital markets, we cannot assure investors 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 debt agreements, including the indenture governing our senior unsecured notes, and our senior secured credit facility, as well as any future debt agreements, contain or may contain restrictive covenants, which may prohibit 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 acceleration of all of our debt.
Seasonality
     Although we believe our business is not materially impacted by seasonality, the demand for our rental equipment tends to be lower in the winter months. The level of equipment rental activities are directly related to commercial and industrial construction and maintenance activities. Therefore, equipment rental performance will be correlated to the levels of current 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 some seasonality with the peak selling period during the spring season and extending through the summer. Typically, parts and service activities are less affected by changes in demand caused by seasonality.

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Contractual and Commercial Commitments
     There have been no material changes from the information included in our Annual Report on Form 10-K for the year ended December 31, 2010.
Off-Balance Sheet Arrangements
     There have been no material changes from the information included in our Annual Report on Form 10-K for the year ended December 31, 2010.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
     Our earnings may be affected by changes in interest rates since interest expense on our senior secured credit facility is currently calculated based upon the index rate plus an applicable margin of 1.50% to 2.25%, depending on the leverage ratio, in the case of index rate revolving loans and LIBOR plus an applicable margin of 2.50% to 3.25%, depending on the leverage ratio, in the case of LIBOR revolving loans. At June 30, 2011, we had total borrowings under our senior secured credit facility of $15.2 million. A 1.0% increase in the interest rate on the senior secured credit facility would result in approximately a $0.2 million increase in interest expense on an annualized basis. At August 1, 2011, we had $285.9 million of available borrowings under our senior secured credit facility, net of $7.0 million of outstanding letters of credit. We did not have significant exposure to changing interest rates as of June 30, 2011 on our fixed-rate senior unsecured notes or on our other notes payable. Historically, we have not engaged in derivatives or other financial instruments for trading, speculative or hedging purposes, though we may do so from time to time if such instruments are available to us on acceptable terms and prevailing market conditions are accommodating.
Item 4. Controls and Procedures
Management’s Quarterly Evaluation of Disclosure Controls and Procedures
     We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that the Company files or furnishes under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required financial disclosure.
     Our Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer, respectively) have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15e and 15d-15e promulgated under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our principal executive officer and principal financial officer have concluded that, as of June 30, 2011, our current disclosure controls and procedures were effective.
     The design of any system of control is based upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated objectives under all future events, no matter how remote, or that the degree of compliance with the policies or procedures may not deteriorate. Because of its inherent limitations, disclosure controls and procedures may not prevent or detect all misstatements. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.
Changes in Internal Control Over Financial Reporting
     There have been no changes in the Company’s internal control over financial reporting that occurred during the quarter ended June 30, 2011 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
     We are party to various litigation matters, in most cases involving normal ordinary course and routine claims incidental to our business. We cannot estimate with certainty our ultimate legal and financial liability with respect to such pending matters. However, we believe, based on our examination of such pending matters, that our ultimate liability for such matters will not have a material adverse effect on our business, financial condition and/or operating results.
Item 1A. Risk Factors.
     In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I, Item 1A — “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2010, which could materially affect our business, financial condition or future results.
     As of the date of this Quarterly Report on Form 10-Q, there have been no material changes with respect to the Company’s risk factors previously disclosed on Form 10-K for the year ended December 31, 2010.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
     Issuer Purchases of Equity Securities
     On June 1, 2011, 62,634 shares of non-vested stock that were issued in 2009 vested at $13.45 per share. Certain holders of those vested shares returned 20,377 shares of common stock to the Company during the quarter ended June 30, 2011 as payment for their respective employee withholding taxes. This resulted in an addition of 20,377 shares to Treasury Stock.
     On June 15, 2011, 53,237 shares of non-vested stock that were issued in 2010 vested at $12.59 per share. Certain holders of those vested shares returned 14,876 shares of common stock to the Company during the quarter ended June 30, 2011 as payment for their respective employee withholding taxes. This resulted in an addition of 14,876 shares to Treasury Stock.
Item 3. Defaults upon Senior Securities.
     None.
Item 4. (Removed and Reserved).
Item 5. Other Information.
     None.

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Item 6. 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.
32.1**
  Certification pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS**
  XBRL Instance Document
101.SCH**
  XBRL Taxonomy Extension Schema Document
101.CAL**
  XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF**
  XBRL Taxonomy Extension Definition Linkbase Document
101.LAB**
  XBRL Taxonomy Extension Label Linkbase Document
101.PRE**
  XBRL Taxonomy Extension Presentation Linkbase Document
 
*   - Filed herewith.
 
**   - Furnished herewith.

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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 thereunto duly authorized.
         
  H&E EQUIPMENT SERVICES, INC.
 
 
Dated: August 4, 2011  By:   /s/ John M. Engquist    
    John M. Engquist   
    President and Chief Executive Officer
(Principal Executive Officer) 
 
 
     
Dated: August 4, 2011  By:   /s/ Leslie S. Magee    
    Leslie S. Magee   
    Chief Financial Officer and Secretary
(Principal Financial and Accounting Officer) 
 

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EXHIBIT INDEX
     
31.1*
  Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
31.2**
  Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
32.1**
  Certification pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
101.INS**
  XBRL Instance Document
101.SCH**
  XBRL Taxonomy Extension Schema Document
101.CAL**
  XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF**
  XBRL Taxonomy Extension Definition Linkbase Document
101.LAB**
  XBRL Taxonomy Extension Label Linkbase Document
101.PRE**
  XBRL Taxonomy Extension Presentation Linkbase Document
 
*   - Filed herewith.
 
**   - Furnished herewith.

38

exv31w1
Exhibit 31.1
CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a)
AS ADOPTED PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, John M. Engquist, certify that:
1.   I have reviewed this quarterly report on Form 10-Q of H&E Equipment Services, Inc.;
 
2.   Based on my knowledge, this quarterly 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 quarterly 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 quarterly report;
 
4.   The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15e and 15d-15e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15f and 15d-15f) for the registrant and 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)   designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
  (c)   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
 
  (d)   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 officer 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 control over financial reporting.
         
     
Dated: August 4, 2011  By:   /s/ John M. Engquist    
    John M. Engquist   
    President and Chief Executive Officer
(Principal Executive Officer) 
 

 

exv31w2
         
Exhibit 31.2
CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a)
AS ADOPTED PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Leslie S. Magee, certify that:
1.   I have reviewed this quarterly report on Form 10-Q of H&E Equipment Services, Inc.;
 
2.   Based on my knowledge, this quarterly 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 quarterly 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 quarterly report;
 
4.   The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15e and 15d-15e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15f and 15d-15f) for the registrant and 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)   designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
  (c)   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
 
  (d)   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 officer 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 control over financial reporting.
         
     
Dated: August 4, 2011  By:   /s/ Leslie S. Magee    
    Leslie S. Magee   
    Chief Financial Officer and Secretary
(Principal Financial Officer) 
 

 

exv32w1
         
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
     In connection with the Quarterly Report of H&E Equipment Services, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John M. Engquist, President and Chief Executive Officer of the Company, and Leslie S. Magee, Chief Financial Officer and Secretary of the Company, each certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
  (1)   to my knowledge, the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
  (2)   the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
         
     
Dated: August 4, 2011  By:   /s/ John M. Engquist    
    John M. Engquist   
    President and Chief Executive Officer
(Principal Executive Officer) 
 
 
     
Dated: August 4, 2011  By:   /s/ Leslie S. Magee    
    Leslie S. Magee   
    Chief Financial Officer and Secretary
(Principal Financial Officer)