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

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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

     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 October 31, 2011, there were 35,086,534 shares of H&E Equipment Services, Inc. common stock, $0.01 par value, outstanding.

 

 

H&E EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
SEPTEMBER 30, 2011

		Page
PART I. FINANCIAL INFORMATION			4
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets as of September 30, 2011 (Unaudited) and December 31, 2010			4
Condensed Consolidated Statements of Operations (Unaudited) for the Three and Nine Months Ended September 30, 2011 and 2010			5
Condensed Consolidated Statements of Cash Flows (Unaudited) for the Three and Nine Months Ended September 30, 2011 and 2010			6
Notes to Condensed Consolidated Financial Statements (Unaudited)			8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			21
Item 3. Quantitative and Qualitative Disclosures About Market Risk			34
Item 4. Controls and Procedures			34
PART II. OTHER INFORMATION			35
Item 1. Legal Proceedings			35
Item 1A. Risk Factors			35
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			35
Item 3. Defaults upon Senior Securities			35
Item 4. (Removed and Reserved)			35
Item 5. Other Information			35
Item 6. Exhibits			36
Signatures			37
EX-10.1
EX-31.1
EX-31.2
EX-32.1
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT

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.

PART I—FINANCIAL INFORMATION

Item 1.		Financial Statements.

H&E EQUIPMENT SERVICES, INC. AND SUBSIDIARIES

		Balances at
		September 30,				December 31,
		2011				2010
		(Unaudited)
ASSETS
Cash		$	4,894			$	29,149
Receivables, net of allowance for doubtful accounts of $5,512 and $6,004, respectively			99,737				99,139
Inventories, net of reserves for obsolescence of $1,109 and $1,105, respectively			77,272				72,156
Prepaid expenses and other assets			5,501				8,679
Rental equipment, net of accumulated depreciation of $273,269 and $254,662, respectively			447,425				426,637
Property and equipment, net of accumulated depreciation and amortization of $61,107 and $53,941, respectively			59,584				57,186
Deferred financing costs, net of accumulated amortization of $11,497 and $10,456, respectively			5,986				7,027
Intangible assets, net of accumulated amortization of $697 and $3,050, respectively			92				429
Goodwill			34,019				34,019
Total assets		$	734,510			$	734,421
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Amounts due on senior secured credit facility		$	13,580			$	—
Accounts payable			60,086				58,437
Manufacturer flooring plans payable			62,911				75,058
Accrued expenses payable and other liabilities			31,298				35,999
Senior unsecured notes			250,000				250,000
Capital leases payable			2,643				2,754
Deferred income taxes			55,988				55,919
Deferred compensation payable			1,992				2,004
Total liabilities			478,498				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; 38,808,941 and 38,699,666 shares issued at September 30, 2011 and December 31, 2010, respectively, and 35,086,534 and 35,029,804 shares outstanding at September 30, 2011 and December 31, 2010, respectively			387				386
Additional paid-in capital			210,362				209,111
Treasury stock at cost, 3,722,407 and 3,669,862 shares of common stock held at September 30, 2011 and December 31, 2010, respectively			(56,884	)			(56,330	)
Retained earnings			102,147				101,083
Total stockholders’ equity			256,012				254,250
Total liabilities and stockholders’ equity		$	734,510			$	734,421

The accompanying notes are an integral part of these condensed consolidated financial statements.

H&E EQUIPMENT SERVICES, INC. AND SUBSIDIARIES

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2011				2010				2011				2010
Revenues:
Equipment rentals		$	61,190			$	48,272			$	165,440			$	126,400
New equipment sales			46,543				47,697				133,629				103,952
Used equipment sales			27,172				14,700				65,655				46,062
Parts sales			24,647				22,599				71,166				65,013
Services revenues			14,191				12,412				40,072				36,466
Other			10,546				8,164				27,570				21,643
Total revenues			184,289				153,844				503,532				399,536
Cost of revenues:
Rental depreciation			22,076				19,628				64,146				58,260
Rental expense			12,176				10,552				34,484				29,171
New equipment sales			41,123				42,979				118,271				93,992
Used equipment sales			20,824				11,083				50,444				35,690
Parts sales			18,073				16,710				52,174				47,804
Services revenues			5,451				5,177				15,499				13,805
Other			10,825				9,795				31,862				26,630
Total cost of revenues			130,548				115,924				366,880				305,352
Gross profit			53,741				37,920				136,652				94,184
Selling, general and administrative expenses			39,042				36,594				114,681				109,233
Gain on sales of property and equipment, net			372				125				521				324
Income (loss) from operations			15,071				1,451				22,492				(14,725	)
Other income (expense):
Interest expense			(7,222	)			(7,287	)			(21,607	)			(21,781	)
Other, net			118				10				626				166
Total other expense, net			(7,104	)			(7,277	)			(20,981	)			(21,615	)
Income (loss) before provision for income taxes			7,967				(5,826	)			1,511				(36,340	)
Provision (benefit) for income taxes			3,119				(2,046	)			447				(13,389	)
Net income (loss)		$	4,848			$	(3,780	)		$	1,064			$	(22,951	)
Net income (loss) per common share:
Basic		$	0.14			$	(0.11	)		$	0.03			$	(0.66	)
Diluted		$	0.14			$	(0.11	)		$	0.03			$	(0.66	)
Weighted average common shares outstanding:
Basic			34,804				34,700				34,743				34,656
Diluted			34,860				34,700				34,884				34,656

The accompanying notes are an integral part of these condensed consolidated financial statements.

H&E EQUIPMENT SERVICES, INC. AND SUBSIDIARIES

		Nine Months Ended
		September 30,
		2011				2010
Cash flows from operating activities:
Net income (loss)		$	1,064			$	(22,951	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization on property and equipment			9,310				9,946
Depreciation on rental equipment			64,146				58,260
Amortization of loan discounts and deferred financing costs			1,042				1,060
Amortization of intangible assets			337				435
Provision for losses on accounts receivable			2,186				2,425
Provision for inventory obsolescence			170				192
Decrease in deferred income taxes			69				(11,443	)
Stock-based compensation expense			994				741
Gain on sales of property and equipment, net			(521	)			(324	)
Gain on sales of rental equipment, net			(14,103	)			(9,327	)
Changes in operating assets and liabilities:
Receivables, net			(2,784	)			(28,390	)
Inventories, net			(32,985	)			(24,092	)
Prepaid expenses and other assets			3,177				(2,246	)
Accounts payable			1,649				33,076
Manufacturer flooring plans payable			(12,147	)			(17,365	)
Accrued expenses payable and other liabilities			(4,700	)			(4,039	)
Deferred compensation payable			(12	)			47
Net cash provided by (used in) operating activities			16,892				(13,995	)
Cash flows from investing activities:
Purchases of property and equipment			(11,950	)			(3,262	)
Purchases of rental equipment			(90,669	)			(31,942	)
Proceeds from sales of property and equipment			763				434
Proceeds from sales of rental equipment			47,537				34,705
Net cash used in investing activities			(54,319	)			(65	)
Cash flows from financing activities:
Excess tax benefit from stock-based awards			257				—
Purchases of treasury stock			(554	)			(212	)
Borrowings on senior secured credit facility			352,711				—
Payments on senior secured credit facility			(339,131	)			—
Payments on deferred financing costs			—				(2,888	)
Payments of capital lease obligations			(111	)			(1,320	)
Net cash provided by (used in) financing activities			13,172				(4,420	)
Net decrease in cash			(24,255	)			(18,480	)
Cash, beginning of period			29,149				45,336
Cash, end of period		$	4,894			$	26,856

H&E EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
(Amounts in thousands)

		Nine Months Ended
		September 30,
		2011				2010
Supplemental schedule of noncash investing and financing activities:
Noncash asset purchases:
Assets transferred from new and used inventory to rental fleet		$	27,699			$	26,415
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest		$	25,793			$	25,925
Income taxes paid, net of refunds received		$	(1,635	)		$	64

The accompanying notes are an integral part of these condensed consolidated financial statements.

H&E EQUIPMENT SERVICES, INC. AND SUBSIDIARIES

(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 nine months ended September 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 nine month periods ended September 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

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.

     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 occurred and indicated 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.

     In September 2011, the FASB issued ASU 2011-08, Intangibles—Goodwill and Other (Topic 350)—Testing Goodwill for Impairment (“ASU 2011-08”), to allow entities to first use a qualitative approach to test goodwill for impairment. ASU 2011-08 permits an entity to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If it is concluded that this is the case, the currently prescribed two-step goodwill impairment test must be performed. Otherwise, the two-step goodwill impairment test is not required. Entities are not required to perform the qualitative assessment and are permitted to skip the qualitative assessment for any reporting unit in any period and proceed directly to Step 1 of the two-step goodwill impairment test. ASU 2011-08 is effective for us in fiscal 2012 and earlier adoption is permitted. Adoption of this guidance is not expected to have a material effect on the Company’s 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):

		September 30, 2011
		Carrying				Fair
		Amount				Value
Manufacturer flooring plans payable with interest computed at 7.00%		$	62,911			$	50,941
Senior unsecured notes with interest compounded at 8.375%			250,000				250,000
Capital leases payable with interest computed at 5.929% to 9.55%			2,643				2,251
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

(4) Stockholders’ Equity

     The following table summarizes the activity in Stockholders’ Equity for the nine month period ended September 30, 2011 (amounts in thousands, except share data):

										Additional												Total
		Common Stock								Paid-in				Treasury				Retained				Stockholders’
		Shares 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			—				—				994				—				—				994
Tax benefits associated with stock-based awards											257												257
Issuance of common stock			109,275				1				—				—				—				1
Repurchase of 42,016 shares of restricted common stock			—				—				—				(554	)			—				(554	)
Net income			—				—				—				—				1,064				1,064
Balances at September 30, 2011			38,808,941			$	387			$	210,362			$	(56,884	)		$	102,147			$	256,012

(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 3,829,079 shares as of September 30, 2011.

     Non-vested Stock

     The following table summarizes our non-vested stock activity for the nine month period ended September 30, 2011:

						Weighted Average
						Grant Date Fair
		Number of Shares				Value
Non-vested stock at December 31, 2010			329,937			$	8.57
Granted			109,275			$	14.46
Vested			(148,252	)		$	8.69
Forfeited			(10,529	)		$	9.37
Non-vested stock at September 30, 2011			280,431			$	10.77

     As of September 30, 2011, we had unrecognized compensation expense of approximately $2.4 million related to non-vested stock that we expect to be recognized over a weighted-average period of 2.2 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 nine months ended September 30, 2011 and 2010 (amounts in thousands):

		For the Three Months Ended								For the Nine Months Ended
		September 30,								September 30,
		2011				2010				2011				2010
Compensation expense		$	334			$	301			$	994			$	732

Stock Options

     At September 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 nine months ended September 30, 2011 and 2010 (amounts in thousands):

		For the Three Months Ended								For the Nine Months Ended
		September 30,								September 30,
		2011				2010				2011				2010
Compensation expense		$	—			$	—			$	—			$	9

     The following table represents stock option activity for the nine month period ended September 30, 2011:

										Weighted Average
						Weighted Average				Contractual Life
		Number of Shares				Exercise Price				In Years
Outstanding options at December 31, 2010			51,000			$	24.80
Granted			—				—
Exercised			—				—
Canceled, forfeited or expired			—				—
Outstanding options at September 30, 2011			51,000			$	24.80				4.8
Options exercisable at September 30, 2011			51,000			$	24.80				4.8

     The closing price of our common stock on September 30, 2011 was $8.25. All options outstanding at September 30, 2011 have grant date fair values which exceed the September 30, 2011 closing stock price.

(6) Income (Loss) per Share

     Income (loss) per common share for the three and nine month periods ended September 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 nine month periods ended September 30, 2011 and 2010 (amounts in thousands, except per share amounts):

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2011				2010				2011				2010
Basic net income (loss) per share:
Net income (loss)		$	4,848			$	(3,780	)		$	1,064			$	(22,951	)
Weighted average number of shares of common stock outstanding			34,804				34,700				34,743				34,656
Net income (loss) per share of common stock — basic		$	0.14			$	(0.11	)		$	0.03			$	(0.66	)
Diluted net income (loss) per share:
Net income (loss)		$	4,848			$	(3,780	)		$	1,064			$	(22,951	)
Weighted average number of shares of common stock outstanding			34,804				34,700				34,743				34,656
Effect of dilutive securities:
Effect of dilutive stock options			—				—				—				—
Effect of dilutive non-vested restricted stock			56				—				141				—
Weighted average number of shares of common stock outstanding — diluted			34,860				34,700				34,884				34,656
Net income (loss) per share of common stock — diluted		$	0.14			$	(0.11	)		$	0.03			$	(0.66	)
Common shares excluded from the denominator as anti-dilutive:
Stock options			51				51				51				51
Non-vested restricted stock			52				167				—				224

(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.

     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								Nine Months Ended
		September 30,								September 30,
		2011				2010				2011				2010
Revenues:
Equipment rentals		$	61,190			$	48,272			$	165,440			$	126,400
New equipment sales			46,543				47,697				133,629				103,952
Used equipment sales			27,172				14,700				65,655				46,062
Parts sales			24,647				22,599				71,166				65,013
Services revenues			14,191				12,412				40,072				36,466
Total segmented revenues			173,743				145,680				475,962				377,893
Non-segmented revenues			10,546				8,164				27,570				21,643
Total revenues		$	184,289			$	153,844			$	503,532			$	399,536
Gross Profit (Loss):
Equipment rentals		$	26,938			$	18,092			$	66,810			$	38,969
New equipment sales			5,420				4,718				15,358				9,960
Used equipment sales			6,348				3,617				15,211				10,372
Parts sales			6,574				5,889				18,992				17,209
Services revenues			8,740				7,235				24,573				22,661
Total segmented gross profit			54,020				39,551				140,944				99,171
Non-segmented gross loss			(279	)			(1,631	)			(4,292	)			(4,987	)
Total gross profit		$	53,741			$	37,920			$	136,652			$	94,184

		Balances at
		September 30,				December 31,
		2011				2010
Segment identified assets:
Equipment sales		$	63,142			$	57,540
Equipment rentals			447,425				426,637
Parts and services			14,129				14,617
Total segment identified assets			524,696				498,794
Non-segment identified assets			209,814				235,627
Total assets		$	734,510			$	734,421

     The Company operates primarily in the United States and our sales to international customers for the three and nine month periods ended September 30, 2011 were 1.5% and 2.4%, respectively, of total revenues compared to 1.8% and 2.5% for the three and nine month periods ended September 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.

(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 September 30, 2011
		H&E Equipment				Guarantor
		Services, Inc.				Subsidiaries				Elimination				Consolidated
						(Amounts in thousands)
Assets:
Cash		$	4,894			$	—			$	—			$	4,894
Receivables, net			86,197				13,540				—				99,737
Inventories, net			64,045				13,227				—				77,272
Prepaid expenses and other assets			5,349				152				—				5,501
Rental equipment, net			360,530				86,895				—				447,425
Property and equipment, net			49,097				10,487				—				59,584
Deferred financing costs, net			5,986				—				—				5,986
Intangible assets, net			—				92				—				92
Investment in guarantor subsidiaries			(24,328	)			—				24,328				—
Goodwill			4,493				29,526				—				34,019
Total assets		$	556,263			$	153,919			$	24,328			$	734,510
Liabilities and Stockholders’ Equity:
Amounts due on senior secured credit facility		$	13,580			$	—			$	—			$	13,580
Accounts payable			56,614				3,472				—				60,086
Manufacturer flooring plans payable			62,791				120				—				62,911
Accrued expenses payable and other liabilities			30,397				901				—				31,298
Intercompany balances			(171,111	)			171,111				—				—
Senior unsecured notes			250,000				—				—				250,000
Capital lease payable			—				2,643				—				2,643
Deferred income taxes			55,988				—				—				55,988
Deferred compensation payable			1,992				—				—				1,992
Total liabilities			300,251				178,247				—				478,498
Stockholders’ equity (deficit)			256,012				(24,328	)			24,328				256,012
Total liabilities and stockholders’ equity		$	556,263			$	153,919			$	24,328			$	734,510

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

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

		Three Months Ended September 30, 2011
		H&E Equipment				Guarantor
		Services, Inc.				Subsidiaries				Elimination				Consolidated
						(Amounts in thousands)
Revenues:
Equipment rentals		$	48,565			$	12,625			$	—			$	61,190
New equipment sales			42,175				4,368				—				46,543
Used equipment sales			22,471				4,701				—				27,172
Parts sales			20,935				3,712				—				24,647
Services revenues			12,411				1,780				—				14,191
Other			8,610				1,936				—				10,546
Total revenues			155,167				29,122				—				184,289
Cost of revenues:
Rental depreciation			17,328				4,748				—				22,076
Rental expense			9,520				2,656				—				12,176
New equipment sales			37,193				3,930				—				41,123
Used equipment sales			16,882				3,942				—				20,824
Parts sales			15,416				2,657				—				18,073
Services revenues			4,786				665				—				5,451
Other			8,580				2,245				—				10,825
Total cost of revenues			109,705				20,843				—				130,548
Gross profit (loss):
Equipment rentals			21,717				5,221				—				26,938
New equipment sales			4,982				438				—				5,420
Used equipment sales			5,589				759				—				6,348
Parts sales			5,519				1,055				—				6,574
Services revenues			7,625				1,115				—				8,740
Other			30				(309	)			—				(279	)
Gross profit			45,462				8,279				—				53,741
Selling, general and administrative expenses			32,217				6,825				—				39,042
Equity in loss of guarantor subsidiaries			(759	)			—				759				—
Gain on sales of property and equipment, net			250				122				—				372
Income from operations			12,736				1,576				759				15,071
Other income (expense):
Interest expense			(4,870	)			(2,352	)			—				(7,222	)
Other, net			101				17				—				118
Total other expense, net			(4,769	)			(2,335	)			—				(7,104	)
Income (loss) before income taxes			7,967				(759	)			759				7,967
Income tax expense			3,119				—				—				3,119
Net income (loss)		$	4,848			$	(759	)		$	759			$	4,848

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

		Three Months Ended September 30, 2010
		H&E Equipment				Guarantor
		Services, Inc.				Subsidiaries				Elimination				Consolidated
						(Amounts in thousands)
Revenues:
Equipment rentals		$	37,617			$	10,655			$	—			$	48,272
New equipment sales			44,125				3,572				—				47,697
Used equipment sales			13,034				1,666				—				14,700
Parts sales			19,055				3,544				—				22,599
Services revenues			10,951				1,461				—				12,412
Other			6,732				1,432				—				8,164
Total revenues			131,514				22,330				—				153,844
Cost of revenues:
Rental depreciation			15,229				4,399				—				19,628
Rental expense			8,371				2,181				—				10,552
New equipment sales			39,841				3,138				—				42,979
Used equipment sales			9,839				1,244				—				11,083
Parts sales			14,115				2,595				—				16,710
Services revenues			4,623				554				—				5,177
Other			7,639				2,156				—				9,795
Total cost of revenues			99,657				16,267				—				115,924
Gross profit (loss):
Equipment rentals			14,017				4,075				—				18,092
New equipment sales			4,284				434				—				4,718
Used equipment sales			3,195				422				—				3,617
Parts sales			4,940				949				—				5,889
Services revenues			6,328				907				—				7,235
Other			(907	)			(724	)			—				(1,631	)
Gross profit			31,857				6,063				—				37,920
Selling, general and administrative expenses			30,331				6,263				—				36,594
Equity in loss of guarantor subsidiaries			(2,620	)			—				2,620				—
Gain on sales of property and equipment, net			108				17				—				125
Loss from operations			(986	)			(183	)			2,620				1,451
Other income (expense):
Interest expense			(4,845	)			(2,442	)			—				(7,287	)
Other, net			5				5				—				10
Total other expense, net			(4,840	)			(2,437	)			—				(7,277	)
Loss before income taxes			(5,826	)			(2,620	)			2,620				(5,826	)
Income tax benefit			(2,046	)			—				—				(2,046	)
Net loss		$	(3,780	)		$	(2,620	)		$	2,620			$	(3,780	)