H&E Equipment Services, Inc. - Quarter Report: 2011 June (Form 10-Q)

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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


	Page
PART I. FINANCIAL INFORMATION		4

Item 1. Financial Statements:
Condensed Consolidated Balance Sheets as of June 30, 2011 (Unaudited) and December 31, 2010		4
Condensed Consolidated Statements of Operations (Unaudited) for the Three and Six Months Ended June 30, 2011 and 2010		5
Condensed Consolidated Statements of Cash Flows (Unaudited) for the Three and Six Months Ended June 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-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

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

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.

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.

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

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.

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

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

(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

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.

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.

(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

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 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

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	)

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	)

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	)

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

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

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.

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

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.

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

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.

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

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

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

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.

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

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

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.

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.

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.

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.

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.

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)

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.

H&E Equipment Services, Inc. - Quarter Report: 2011 June (Form 10-Q)

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Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents