H&E Equipment Services Annual Report 2023

FY2023 Annual Report · H&E Equipment Services
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PERFORMANCE, GROWTH, VALUE

2023 ANNUAL REPORT

FINANCIAL METRICS
2023 KEY FINANCIAL HIGHLIGHTS

Revenue 
$1,469.2M, up 18.1% from 2022

Gross Proﬁt 
$684.5M, up 23.3% from 2022 and 
representing 46.6% of revenue

Income from Operations 
$276.7M, up 21.3% from 2022

Net Income 
$169.3M, up 26.6% from 2022

Adjusted EBITDA(2) 
$688.2M, or 46.8% of revenue, 
up 320 basis points from 2022

Increase in Fleet
Original Equipment Cost

18.3%

Increase in 
Rental Rates

5.6%

Financial Results(1) ($ in millions)

Revenue

Gross Proﬁt

Adjusted EBITDA(2)

$1,007.0

$1,062.8

$357.1

$359.4

$415.3

$393.6

$1,469.2

$1,244.5

$684.5

$688.2

$555.2

$543.0

2020

2021

2022

2023

RECORD FINANCIAL PERFORMANCE

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and strong branch expansion contributed to another year of 
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from rental equipment exceeded $1.0 billion following the
transition to a pure rental focus.  

INDUSTRY LEADING EXPANSION

The Company added a record 17 new locations in 2023, combining the success of its accelerated branch expansion strategy with 
an acquisition. Since 2020, on a continuing operations basis, the Company has grown its branch network by 48.9%, establishing 
greater branch density throughout its geographic footprint and increased opportunities for customer engagement.

137 BRANCHES
IN 30 STATES

137

120

92

102

2020(1)

2021

2022

2023

150

120

90

60

30

0

(1) On a continuing operations basis. 

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A LETTER FROM OUR CEO
ANOTHER YEAR OF RECORD PERFORMANCE

STRATEGIC INITIATIVES SERVE AS A STRONG 
GROWTH CATALYST  

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Bradley W. Barber, CEO, pictured with John M. Engquist, Executive Chairman

DEAR SHAREHOLDERS,

H&E Equipment Services, Inc. (“H&E”) continued to
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H&E EQUIPMENT SERVICES, INC.   2   2023 ANNUAL REPORT

SOUND INDUSTRY FUNDAMENTALS COMPLEMENT 
STRATEGIC INITIATIVES

CONTINUING OUR FOCUS ON GROWTH AND 
EXPANSION

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(cid:90)(cid:91)(cid:76)(cid:72)(cid:75)(cid:96)(cid:3)(cid:89)(cid:80)(cid:90)(cid:76)(cid:3)(cid:80)(cid:85)(cid:3)(cid:80)(cid:85)(cid:91)(cid:76)(cid:89)(cid:76)(cid:90)(cid:91)(cid:3)(cid:89)(cid:72)(cid:91)(cid:76)(cid:90)(cid:21)(cid:3)(cid:40)(cid:74)(cid:74)(cid:86)(cid:89)(cid:75)(cid:80)(cid:85)(cid:78)(cid:3)(cid:91)(cid:86)(cid:3)(cid:91)(cid:79)(cid:76)(cid:3)U.S. Census 
Bureau(cid:19)(cid:3)(cid:91)(cid:79)(cid:76)(cid:3)(cid:93)(cid:72)(cid:83)(cid:92)(cid:76)(cid:3)(cid:86)(cid:77)(cid:3)(cid:74)(cid:86)(cid:85)(cid:90)(cid:91)(cid:89)(cid:92)(cid:74)(cid:91)(cid:80)(cid:86)(cid:85)(cid:3)(cid:90)(cid:87)(cid:76)(cid:85)(cid:75)(cid:80)(cid:85)(cid:78)(cid:3)(cid:80)(cid:85)(cid:3)(cid:25)(cid:23)(cid:25)(cid:26)(cid:3)(cid:89)(cid:86)(cid:90)(cid:76)(cid:3)
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(cid:90)(cid:92)(cid:87)(cid:87)(cid:83)(cid:96)(cid:3)(cid:75)(cid:80)(cid:90)(cid:89)(cid:92)(cid:87)(cid:91)(cid:80)(cid:86)(cid:85)(cid:90)(cid:21)

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(cid:96)(cid:76)(cid:72)(cid:89)(cid:3)(cid:86)(cid:77)(cid:3)(cid:90)(cid:91)(cid:76)(cid:83)(cid:83)(cid:72)(cid:89)(cid:3)(cid:196)(cid:85)(cid:72)(cid:85)(cid:74)(cid:80)(cid:72)(cid:83)(cid:3)(cid:87)(cid:76)(cid:89)(cid:77)(cid:86)(cid:89)(cid:84)(cid:72)(cid:85)(cid:74)(cid:76)(cid:21)(cid:3)(cid:59)(cid:79)(cid:76)(cid:3)(cid:77)(cid:86)(cid:83)(cid:83)(cid:86)(cid:94)(cid:80)(cid:85)(cid:78)(cid:3)
(cid:90)(cid:92)(cid:84)(cid:84)(cid:72)(cid:89)(cid:96)(cid:3)(cid:90)(cid:76)(cid:89)(cid:93)(cid:76)(cid:90)(cid:3)(cid:91)(cid:86)(cid:3)(cid:79)(cid:80)(cid:78)(cid:79)(cid:83)(cid:80)(cid:78)(cid:79)(cid:91)(cid:3)(cid:91)(cid:79)(cid:76)(cid:3)(cid:80)(cid:84)(cid:87)(cid:89)(cid:86)(cid:93)(cid:76)(cid:84)(cid:76)(cid:85)(cid:91)(cid:3)(cid:80)(cid:85)(cid:3)(cid:74)(cid:76)(cid:89)(cid:91)(cid:72)(cid:80)(cid:85)(cid:3)
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• Total revenues improved 18.1% to a record $1.5 billion.

• Total equipment rental revenue grew 24.1% to a record $1.2 billion. 

• Consolidated gross profit improved 23.3% to a record $684.5 million, 

resulting in a record gross profit margin of 46.6%.  

• Adjusted EBITDA(1) grew 26.7% to a record $688.2 million.

)

• Income from operations improved 21.3% to $276.7 million.    

• Net income from continuing operations rose 26.6% to $169.3 million.  

• Net cash provided by operating activities improved 29.4% to 

$405.5 million. 

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H&E EQUIPMENT SERVICES, INC.   3   2023 ANNUAL REPORT

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CONFIDENCE IN INDUSTRY FUNDAMENTALS 
CONTINUES INTO 2024

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Network(cid:3)(cid:87)(cid:89)(cid:86)(cid:81)(cid:76)(cid:74)(cid:91)(cid:80)(cid:85)(cid:78)(cid:3)(cid:72)(cid:3)(cid:30)(cid:12)(cid:3)(cid:96)(cid:76)(cid:72)(cid:89)(cid:20)(cid:86)(cid:93)(cid:76)(cid:89)(cid:20)(cid:96)(cid:76)(cid:72)(cid:89)(cid:3)(cid:80)(cid:84)(cid:87)(cid:89)(cid:86)(cid:93)(cid:76)(cid:84)(cid:76)(cid:85)(cid:91)
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Bradley W. Barber
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H&E EQUIPMENT SERVICES, INC.   4   2023 ANNUAL REPORT

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

FORM 10-K

(Mark One)
☒☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2023

or

☐☐ TRANSRR

ITION 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
(State or Other Jurisdiction of
Incorporation or Organization)

7500 Pecue Lane,
Baton Rouge, Louisiana 70809
(Address of Principal Executive Offiff ces, including Zip Code)

81-0553291
(IRS Employer
Identification No.)

(225) 298-5200
(Registrant’s Telephone Number, Including Area Code)

Title of Each Class

Trading Symbol(s)

Name of Each Exchange on Which Registered

Common Stock, par value $0.01 per share

HEES

Nasdaq Global Market

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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 forff
days. Yes ☒ No ☐

such shorter period that the registrant was required to file such reports), and (2) has been subju ect to such filing requirements for the past 90

Indicate by check mark whether the registrant has submu
(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submu

Interactive Data File required to be submu

itted electronically everyrr

itted pursuant to Rule 405 of Regulation S-T

it such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging
growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the
Exchange Act:

Large Accelerated Filer

Non-Accelerated Filer

Emerging Growth Company

☒

☐

☐

Accelerated Filer

Smaller Reporting Company

☐

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effeff ctiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the
correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the
registrant’s executive offiff cers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The aggregate market value of the common stock held by non-affiff liates of the registrant was approximately $1,664,306,676 (computed by reference to the closing sale
price of the registrant’s common stock on the Nasdaq Global Market on June 30, 2023, the last business day of the registrant’s most recently completed second fiscal
quarter).

As of Februarr

ry 15, 2024, there were 36,464,701 shares of common stock, par value $0.01 per share, of the registrant outstanding.

DOCUMENTS INCORPORATRR ED BY REFERENCE

Portions of the document listed below have been incorporated by reference into the indicated parts of this Form 10-K, as specifieff d in the responses to the item numbers
involved.

Part III The registrant’s definitive proxy statement, for use in connection with the Annual Meeting of Stockholders, to be filed within 120 days afteff
fiscal year ended December 31, 2023.

r the registrant’s

Auditor Firm Id:

243

Auditor Name:

BDO USA, P.C.

Auditor Location:

Dallas, Texas, USA

PART I
Item 1.
Item 1A.
Item 1B.
Item 1C.
Item 2.
Item 3.
Item 4.

PART II
Item 5.

Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C.

PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.

Business..............................................................................................................................................................
Risk Factors........................................................................................................................................................
Unresolved Staffff Comments ..............................................................................................................................
Cybersecurity......................................................................................................................................................
Properties............................................................................................................................................................
Legal Proceedings ..............................................................................................................................................
Mine Safety Disclosures.....................................................................................................................................

Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities ............................................................................................................................................................
[Reserved] ..........................................................................................................................................................
Management’s Discussion and Analysis of Financial Condition and Results of Operations ............................
Quantitative and Qualitative Disclosures About Market Risk ...........................................................................
Financial Statements and Suppl
ementary Data ..................................................................................................
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ............................
Controls and Procedurd es.....................................................................................................................................
Other Information...............................................................................................................................................
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections ...............................................................

u

Directors, Executive Offiff cers and Corporate Governance .................................................................................
Executive Compensation....................................................................................................................................
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ..........
Certain Relationships and Related Transactions, and Director Independence...................................................
Principal Accountant Fees and Services ............................................................................................................

PART IV
Exhibits and Financial Statement Schedules......................................................................................................
Item 15.
Item 16.
Form 10-K Summary..........................................................................................................................................
SIGNATURES .................................................................................................................................................................................

5
11
23
23
24
25
25

25
26
26
40
40
74
74
77
77

77
77
77
77
77

78
81
82

3

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements within the meaning of the federal securities laws.
Statements that are not historical facts, including statements about H&E Equipment Services, Inc.’s (“H&E”, the “Company”, “our”,
“we” and “us”) 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,” “projeo ct,” “intend,” “forff esee” 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 capia tal expenditures, the likelihood of success in expanding our business, financing plans,
budgets, working capia tal needs and sources of liquidity. By their nature, forward-looking statements involve risks and uncertainties
because they relate to events and depend on circumstances that may or may not occur in the future. We believe that these risks and
uncertainties include, but are not limited to, those described in the “Risk Factors” section of this Annual Report on Form 10-K. These
factors should not be construerr d as exhaustive and should be read with the other cautionary statements in this Annual Report on Form
10-K.

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 availabla e information. Important assumptions relating to
the forward-looking statements include, among others, assumptions regarding demand for our products, the expansion of product
offeff
rings geographically or through new marketing 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 actuat
looking statement. In addition, even if our actual results are consistent with the forward-looking statements contained in this Annual
Report on Form 10-K, those results may not be indicative of results or developments in subsu equent periods. Many of these factors are
beyond our ability to control or predict. Such factors include, but are not limited to, the following:

l results to differ materially from those contained in any forward-

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

general economic and geopolitical conditions in North America and elsewhere throughout the globe and construcr
industrial activity in the markets where we operate in North America;

tion and

our ability to forecast trends in our business accurately, and the impact of economic downturt ns and economic uncertainty
on the markets we serve (including as a result of current uncertainty due to inflation and increasing interest rates);

the impact of conditions in the global credit and commodity markets and their effeff ct on construcr
economy in general;

tion spending and the

trends in oil and natural gas which could adversely affeff ct the demand for our services and products;

our inability to obtain equipment and other suppl
as a result of suppl

y chain disrupt

u

u

r

ies for our business from our key suppl

u

iers on acceptabla e terms or at all,

ions, insolvency, financial difficulties, suppl

u

ier relationships or other factors;

increased maintenance and repair costs as our fleet ages and decreases in our equipment’s residual value;

risks related to a global pandemic and similar health concerns, such as the scope and duration of the outbrt eak, government
actions and restrictive measures implemented in response to the pandemic, material delays and cancellations of
construcr

ions and other impacts to the business;

tion or infrastructurt e projects, labor

shortages, suppl

y chain disrupt

u

a

rr

our indebtedness;

risks associated with the expansion of our business and any potential acquisitions we may make, including any related
capital expenditures, or our ability to consummate such acquisitions;

our ability to integrate any businesses or assets we acquire;

competitive pressures;

security breaches, cybersecurity attacks, increased adoption of artificff
personal information, compliance with data protection laws and other disrupt

rr

ial intelligence technologies, failure to protect

ions in our information technology systems;

adverse weather events or natural disasters;

risks related to climate change and climate change regulation;

compliance with laws and regulations, including those relating to environmental matters, corporate governance matters
and tax matters, as well as any future changes to such laws and regulations; and

other factors discussed under Item 1A – Risk Factors or elsewhere in this Annual Report on Form 10-K.

Except as required by applicable law, including the securities laws of the United States and the rules and regulations of the

r we file this Annual Report on Form 10-K, whether as a result of any new information, future events or otherwise.

Securities and Exchange Commission (“SEC”), we are under no obligation to publicly update or revise any forward-looking
statements afteff
Investors, potential investors and other readers are urged to consider the above mentioned factors carefulff
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 reasonabla e, we cannot guarantee future results or performance.

ly in evaluating the

4

Item 1. Business

Our Company

PART I

Founded in 1961 through our predecessor companies, we have been in the equipment services business for approximately 62

years. H&E Equipment Services L.L.C. (“H&E LLC”) was formed in June 2002 through the combination of Head & Engquist
Equipment, LLC, a wholly-owned subsu idiary of Gulf Wide Industries, L.L.C., and ICM Equipment Company L.L.C. In connection
with our initial public offeff
corporation.

ry 2006, we converted H&E LLC into H&E Equipment Services, Inc., a Delaware

ring in Februar

We have built an extensive infrastructurt e that as of December 31, 2023 includes 137 branch facilities located in 30 states
throughout the United States. H&E serves a diverse set of end markets in many high-growth geographies including branches
throughout the Pacific Northwest, West Coast, Intermountain, Southwest, Gulf Coast, Southeast, Midwest and Mid-Atlantic regions.
The Company’s construcrr
earthmoving, material handling, and other general and specialty lines.

s youngest with an equipment mix comprised of aerial work platforms,

tion rental fleet is among the industry’rr

While we primarily focus on providing rental equipment to our customers, we additionally sell rental and new equipment, parts,
repair and maintenance functions to our customers. This approach provides us with multiple points of customer contact, an effeff ctive
method to manage our rental fleet through effiff cient maintenance and the profitff able distribution of fleet. Our management, from the
corporate level down to the branch store level, has extensive industryrr experience. We believe that the operating experience and
extensive infrastructurt e we developed throughout our historyrr as an integrated equipment services company provides us with a
ly transition to operate as a pure-play rental company.
competitive advantage to broaden our industryrr expansion and successfulff

Industry Background

Although there has been some consolidation within the industryrr over a number of years, including the acquisitions of NES

tion equipment distribution and rental
remains highly fragmented and consists mainly of a small number of multi-location regional or national operators and a large

Rentals, Neff Corporation and Ahern Rentals by United Rentals, Inc. (“URI”), the U.S. construcr
industryrr
number of relatively small, independent businesses serving discrete local markets. The industryrr
economic factors including total U.S. non-residential construcr
equipment and additional, region-specific factors. Construcr
equipment rental companies and equipment dealers. Examples of equipment rental companies include URI, Sunbelt Rentals, and Herc
Rentals. Examples of equipment dealers include Finning and Toromont. Historically, we operated subsu tantially in both channels, but
in recent years we have transitioned to operate purely as an equipment rental company. Many pure equipment rental companies also
provide parts and service suppor

is driven by a broad range of
tion machineryrr demand, demand for rental

tion equipment is largely distributed to end users through two channels:

tion trends, construcrr

t to customers.

u

Products and Services

Equipmi

ent Rentals.ll We rent our construcr

tion equipment to our customers on a daily, weekly and monthly basis. We have a well-

maintained rental fleet that, at December 31, 2023, consisted of approximately 61,044 pieces of equipment having an original
acquisition cost (which we define as the cost originally paid to manufact
approximately 39.7 months.

urt ers) of approximately $2.8 billion and an average age of

ff

Sales of Rental Equipmi

ent. We sell used equipment primarily from our rental fleet. For the year ended December 31, 2023,

approximately 99.3% of our used sales revenues were derived from sales of rental fleet.

Sales of New Equipmi

ent. We sell new construcr

tion equipment and are a U.S. distributor for nationally recognized suppl

u

iers

including Takeuchi, JLG Industries, Gehl, and Genie Industries (Terex).

Partstt Sales. We provide parts to our own rental fleet and sell parts to customers for the equipment we sell. We maintain a parts

inventoryrr
operations enable us to maintain a high-quality rental fleet and provide additional product suppor

in order to provide timely parts and service suppor

u

u

t to our own rental fleet as well as to our customers. In addition, our parts

t to our end users.

Service Support. We provide maintenance and repair services to our own rental fleet and for our customers’ owned equipment.

We devote resources to training our technical service employees and over time, we have built a service infrastructurt e that we believe
would be difficult for companies without the requisite resources and lead time to effeff ctively replicate.

In addition to our principal business activities mentioned above, we provide ancillaryrr equipment suppor

u

t activities including

transportation, hauling, parts shipping and loss damage waivers.

5

Sales and Marketing

We have a sales force which specializes in equipment rentals and sales. To further develop knowledge and experience, we provide
our sales force with extensive training, including frequent factoryrr and in-house training by manufact
urt er representatives regarding the
operational featurt es, operator safety training and maintenance of the equipment that we rent and sell. This training is essential, as our
sales personnel regularly call on customers’ job sites, ofteff n assisting customers in assessing their immediate and ongoing equipment
needs. In addition, we have a commission-based compensation program for our sales force team.

ff

We maintain a proprietary customer relationship management system. We believe that this comprehensive customer and sales
management tool enhances our regional territory operations by increasing the productivity and effiff ciency of our sales representatives
and sales managers as they are provided real-time access to critical jobsite information. We are partnered with some of the world’s
most advanced data information companies to assure our industryrr data is complete.

We have developed strategies to identify target customers for equipment rentals in all markets. These strategies allow our sales

force to identifyff
new operations.

frequent rental users, function as advisors and problem solvers for our customers, and accelerate the sales process in

While our specialized, well-trained sales force strengthens our customer relationships and fosters customer loyalty, we also

promote our business through marketing and advertising, including digital marketing, direct mail campaigns, select industryrr
publications and associations, and our Company website at www.he-equipment.com.

q p

Our Competitive Strengths

Integre ated Platfot rm of Equipmi

ent, Products and Services. We believe that our operating experience and the extensive

infrastructurt e we have developed through years of operating as both an equipment rental company and equipment distributor provides
us with a competitive advantage to broaden our industryrr expansion and successfulff
ly transition to a primarily rental-focused company.
Key strengths of ours include:

•

•

•

•

•

•

the ability to provide premium brands and a comprehensive line of equipment and services;

the ability to track utilization and facilitate the transferff
demand;

of our fleet across multiple locations to adjud st to local customer

high quality rental fleet suppor

u

ted by our strong product suppor

u

t capabilities;

establa ished retail sales network resulting in the profitaff

bla e disposal of our used equipment;

purchasing power gained through purchases for our rental operations fleet; and

operational cost effiff ciencies across our organization, including with respect to purchasing, information technology,
back-office suppor

t and marketing.

u

High-

i Quality,yy Multipurpos

rr

e Fleet. Our equipment fleet represents a significant investment and reflects our commitment to

providing an array of rental equipment to our customers in a variety of industries. Our focus on our core types of construcr
equipment allows us to better provide the specialized knowledge and suppor
equipment. These core types of equipment are attractive because they have a long usefulff
industryrr demand.

t that our customers demand when renting and purchasing
life,ff high residual value and generally strong

tion

u

Diverserr Customer Marketkk s.tt We provide equipment rental services to customers in a wide variety of markets, including non-

residential construcrr
reduces our end-market exposure to any one particular market.

tion, industrial, infrastructurt e, and other industries. We believe that the diversificff ation of our customer base

Complementaryr Partstt and Services Segme

ents. Our parts and services businesses allow us to maintain our rental fleet in excellent

condition and to offeff

r our customers high-quality rental equipment.

Well-Developeo d Infrn astructure. We have built an infrastructurt e that as of December 31, 2023 included a network of 137 branch

facilities in 30 states. Our workforce included, as of December 31, 2023, a highly-skilled group of approximately 613 service
technicians and an aggregate of 332 sales people in our sales force. We believe that our well-developed infrastructurt e helps us to
better serve large multi-regional customers and provides an advantage when competing for lucrative fleet and project management
business as well as the ability to quickly capitalize on new opportunities.

6

Strong Supplier Relationshipsi

. We have longstanding relationships with nationally-recognized equipment suppl

u

iers, including

JLG Industries, Gehl, Genie Industries (Terex), Komatsu, Takeuchi, JCB, John Deere, Yanmar, Skyjkk ack, Sany and Case. These
relationships improve our ability to negotiate equipment acquisition pricing and allow us to purchase parts at wholesale costs.

Customized Infon rmation Technology Systyy ems. Our information systems allow us to actively manage our business and our rental

fleet. We have a customer relationship management system that provides our sales force with real-time access to critical jobsite
information. This comprehensive sales management tool enhances our regional territory operations by increasing the productivity and
effiff ciency of our sales representatives and managers. We are expanding our proprietary, automated digital customer platform,
CONNECT, which offeff
payments, manage contracts, utilize telematics, customize reports, make service requests and access customer suppor
enterprise resource planning system enhances our ability to provide more timely and meaningfulff

rs comprehensive self-sff ervice capaa bia lities allowing customers to reserve equipment, schedule delivery, make

t. In addition, our
information to manage our business.

u

Strong Customer Relationshipsi

. We have a diverse base of approximately 44,200 customers as of December 31, 2023 who we

believe value our high level of service, knowledge and expertise. Our customer base includes a wide range of industrial and
commercial companies, construcrr
tion contractors, manufacturt ers, public utilities, municipalities, maintenance contractors and
numerous and diverse other large industrial accounts. Our branches enable us to closely service local and regional customers, while
our infrastructurt e enables us to effeff ctively service multi-regional and national accounts. We believe that our expansive presence and
commitment to supeu rior service at all levels of the organization is a key differentiator to many of our competitors. As a result, we
spend a significant amount of time and resources to train all key personnel to be responsive and deliver high quality customer service
and well-maintained equipment so that we can maintain and grow our customer relationships.

Expex

rienced Management Team. Our senior management team is led by Bradley W. Barber, our Chief Executive Offiff cer, who

has over 29 years of industryrr experience. Our senior and regional management team have approximately 26 years on average of
industryrr experience. Our branch managers have extensive knowledge and industryrr experience as well.

Our Business Strategy

Our business strategy includes, among other things, managing the life cycle of our rental equipment, expanding our rental product
rings through branch expansion and pursuing selective acquisitions. However,
rings, increasing the availabia lity of our product offeff

offeff
the timing and extent to which we implement these various aspects of our strategy depend on a variety of factors, many of which are
outside our control, such as general economic and geopolitical conditions and construcr

tion activity in the U.S.

Managing the Lifei Cycle of Our Rental Equipmi

ent. We actively manage the size, quality, age and composition of our rental fleet,

employing a “cradle through grave” approach. During the lifeff of our rental equipment, we (1) aggressively negotiate on purchase
price; (2) use our customized information technology systems to closely monitor and analyze, among other things, time utilization
(equipment usage based on customer demand and calculated as our fleet’s original equipment cost on-rent divided by our fleet’s total
original equipment cost, averaged over the time period), rental rate trends and pricing optimization and equipment demand; (3)
continuously adjud st our fleet mix and pricing; (4) maintain fleet quality through quality control inspections and our on-site parts and
services suppor
competitive prices, optimally utilize our fleet, cost-effecff
equipment at the end of its usefulff

t; and (5) dispose of fleet through sales of rental equipment. This allows us to purchase our rental equipment at
tively maintain our equipment quality and maximize the value of our

life.

u

Expandi

x

ng our Rental Product Offeff rings. We intend to expand our product offeff

rings to customers by offeff

ring specialty rental

product solutions. Recently, we introduced trench safety product solutions and pump and power equipment in selected markets. It is
our intention to expand these specialty rental offeff
typically provide higher margin opportunities than general rental products.

rings throughout our geographic footprt

int. Specialty rental product offeff

rings

Increasing the Availability of our Product Offeff rings through Branch Expans

x

ion. We intend to expand our network of branch

locations, thereby increasing the availabia lity of rental products to our customers to meet their specific needs. Our branch expansion
strategy focuses on expanding in markets where we have a presence and benefit from name and brand recognition. Expanding our
branch network allows us to grow our margins and improve profitff ability through revenue mix and by leveraging our fixed costs.

Executing Strategie c Divestitures. We are now a pure-play rental company transitioning over the past few years from our historical

operations as an integrated equipment services company by completing strategic divestiturt es of our distribution channels. We
completed one divesturt e during the year ended December 31, 2022 and two divestitures during the year ended December 31, 2021. On
December 15, 2022, we sold our Komatsu distribution rights in Louisiana to Waukesha-Pearce Industries, LLC. On September 17,
2021, we sold our Little Rock, Arkansas and Springdale, Arkansas owned-branches to Bramco, Inc. and relinquished our related
territory distribution rights with equipment manufact
our crane business to a wholly-owned subsu idiary of The Manitowoc Company, Inc. The crane business sale represents our strategic
shiftff to a pure-play rental business and qualifieff d for discontinued operations accounting treatment.

urt ers Komatsu, Wirtgen Group and Takeuchi. Effeff ctive October 1, 2021, we sold

ff

7

Pursuing Selective Acquisiii

tions. We intend to continue to evaluate and pursue, on an opportunistic basis, acquisitions that meet

bia lity. We have completed five acquisitions over the last six years. Effeff ctive January 1, 2018, we completed the acquisition of

our selection criteria with the objective of increasing our revenues, improving our profitaff
bia lity, and strengthening our competitive
position. We are focused on identifying and acquiring rental companies, including general rental and specialty rental companies, to
complement our existing business, broaden our geographic footprt
int, and increase our density in existing markets, as well enter new
markets where feasible expansion opportunities may exist. Growth through acquisitions allows us to leverage our fixed costs and grow
profitaff
Contractors Equipment Center, LLC. Effeff ctive April 1, 2018, we completed the acquisition of Rental Inc. Effeff ctive Februar
we completed the acquisition of Cobra Equipment Rentals, LLC, dba We-Rent-It. Effeff ctive October 1, 2022, we completed the
acquisition of One Source Equipment Rentals, Inc. (“OSR”), a privately-held equipment rentals company with 10 branch locations
primarily in the Midwest. Effeff ctive November 1, 2023, we completed the acquisition of Giffin Equipment Rentals, a privately-held
equipment rentals company with three branch locations in Califorff nia.

ry 1, 2019,

Customers

We have a wide range of customers across diverse markets. We serve approximately 44,200 customers in the United States,
primarily in the Pacific Northwest, West Coast, Intermountain, Southwest, Gulf Coast, Southeast, Midwest and Mid-Atlantic regions.
Our customers include industrial and commercial companies, construcrr
contractors, municipalities and numerous and diverse other large industrial accounts. They range from individuals to large contractors
and industrial and commercial companies who typically operate under equipment and maintenance budgets. Our branches enable us to
closely service local and regional customers, while our infrastructurt e enables us to effeff ctively service multi-regional and national
accounts. Our contracts with customers vary in duration, but subsu tantially all of our rental contracts include rates for daily, weekly or
monthly use and typically include cancellation clauses without termination penalties. In 2023, our largest customer accounted for less
than 4% of total revenues. No single customer accounted for more than 10% of our total revenue in 2023. Our top ten customers
combined accounted for approximately 7.6% of our total revenues in 2023.

urt ers, public utilities, maintenance

tion contractors, manufact

ff

Suppliers

We purchase a significant amount of equipment from leading, nationally-known original equipment manufacff

turers. We purchased

approximately 52.8% of our equipment from five manufact
ended December 31, 2023. These relationships improve our ability to negotiate equipment acquisition pricing. Additionally, we also
purchase equipment from nationally-recognized equipment suppl
iers including JLG Industries, Gehl, Komatsu, Case and Takeuchi.
While we believe that we have alternative sources of supplu
categories, termination of one or more of our relationships with any of our majoa r suppl
effeff ct on our business, financial condition or results of operations if we were unabla e to obtain adequate or timely equipment.

y for the equipment we purchase in each of our principal product

urt ers (JCB, Skyjkk ack, Sany, John Deere, and SkyTkk

iers of equipment could have a material adverse

rak) during the year

u

u

ff

Competition

The equipment industryrr

t. Although there has been some consolidation within the equipment industryrr

istributorship
is generally comprised of either pure rental equipment companies or manufact
companies. We historically operated as an integrated equipment services company by renting, selling and providing parts and services
suppor
u
highly fragmented and consists mainly of a small number of multi-location regional or national operators and a large number of
relatively small, independent businesses serving discrete local markets. Many of the markets in which we operate are served by
numerous competitors, ranging from national and multi-regional equipment rental companies (for example, URI, Sunbelt Rentals and
Herc Rentals) to small, independent businesses with a limited number of locations.

in recent years, the equipment industryrr

urt er dealer/drr

remains

ff

We believe that participants in the equipment rental industryrr generally compete on the basis of availabia lity, quality, reliability,
deliveryrr and price. In general, large operators enjon y subsu tantial competitive advantages over small, independent rental businesses due
to a distinct price advantage. Many rental equipment companies’ parts and services offeff
expand due to the training, infrastructurt e and management resources necessary to develop the breadth of service offeff
knowledge our service technicians are able to provide. Some of our competitors have significantly greater financial, marketing and
other resources than we do.

rings are limited and may prove difficult to

rings and depth of

Traditionally, equipment manufacff

turers distributed their equipment and parts through a network of independent dealers with

distribution agreements. As a result of consolidation and competition, both manufacff
turers and distributors sought to streamline their
operations, improve their costs and gain market share. Our establa ished, integrated infrastructurt e enables us to compete directly with
our competitors on either a local, regional or national basis. We believe customers place greater emphasis on value-added services,
teaming with equipment rental and sales companies who can meet all of their equipment, parts and services needs.

8

Seasonality

Although our business is not significantly impacted by seasonality, the demand for our rental equipment tends to be lower in the

winter months. The level of equipment rental activities is directly related to non-residential and industrial construcr
maintenance activities. Thereforff e, equipment rental performance will be correlated to the levels of current construcrr
severity of weather conditions can have a temporaryrr

impact on the level of construcr

tion activities.

tion and
tion activities. The

Equipment cycles are also subju ect to some seasonality with the peak rental periods occurring during the spring and summer

seasons and peak selling periods occurring during the fourth quarter.

Environmental and Safety Regulations

Our facilities and operations are subju ect to comprehensive and frequently changing federal, state and local environmental and
occupau tional health and safety laws. These laws regulate (1) the handling, storage, use and disposal of hazardous materials and wastes
and, if any, the associated cleanupu of properties affeff cted by pollutants; (2) air quality (emissions); and (3) wastewater. While our
operations generally do not raise significant environmental risks, we use petroleum products, solvents and other hazardous subsu tances
for fueling and maintaining our equipment and vehicles. We have made, and will continue to make, capia tal and other expenditures to
comply with environmental requirements. We do not currently anticipate any material adverse effeff ct on our business, financial
condition or competitive position as a result of our effoff

rts to comply with such requirements.

In the future, federal, state or local governments could enact new or more stringent laws or issue new or more stringent

regulations concerning environmental and worker health and safety matters, reporting and disclosure obligations, or effeff ct a change in
their enforcement of existing laws or regulations, that could affeff ct our operations and increase our operational and compliance
expenditures. Also, in the future, contamination may be found to exist at our facilities or off-sff
There can be no assurance that we, or various environmental regulatoryrr agencies, will not discover previously unknown
environmental non-compliance or contamination. We could be held liabla e for such newly-discovered non-compliance or
contamination. It is possible that changes in environmental and worker health and safety laws or liabia lities from newly-discovered
non-compliance or contamination could have a material adverse effeff ct on our business, financial condition and results of operations.

ite locations where we have sent wastes.

Human Capital

We believe our employees are our greatest asset. As of December 31, 2023, we had approximately 2,765 employees, of which
977 are salaried personnel and 1,788 are hourly personnel. A collective bargaining agreement relating to two branch locations covers
approximately 75 of our employees. We believe our relations with our employees are favorable and we have never experienced a work
stoppage. Generally, the total number of employees remains relatively consistent throughout the year. Acquisition activity or the
opening of new branches may increase the number of our employees or fluctuations in the level of our business activity could require
some staffiff ng level adjud stments in response to align with customer demand.

H&E employees drive our business growth and success. Likewise, we strive to drive their own profesff

sional growth, success and

wellbeing. We do so by providing a workplkk ace in which safety, diversity, inclusion, talent development, training, competitive pay and
quality benefits are prioritized. As an equipment company run by equipment people, our culture is one built on integrity, cooperation
and teamwork. H&E workplkk ace policies and initiatives aim to create a workplkk ace of choice that attracts and retains the talent needed
to achieve our business objectives.

Health and Safetff y.tt The health and safety of our employees is an unwavering core value and is prioritized through our LIVESAFE

program, which focuses on employee safety at work, home, and play. Senior operational leaders play a vital role in the
communication, implementation, and follow-through of our safety program and we require accountability, commitment and
compliance from all employees. Behavioral safety is the foundation of our safety culture, which incorporates elements such as job
safety observations, near miss reporting, safety meetings and ride-along programs, among others. We also require all new hires to
perform job specificff
training. Additionally, we require all employees to participate in annual safety training. These
proactive measures in conjunction with the full implementation of stop-work authority at all levels helps to set a culture of safety at
branch locations. Assessments and standard safety performance metrics provide for transparency and accountability at all levels of our
organization while incentive programs focus on accident prevention and behavior safety improvements to reward employee safety
performance. Utilizing Occupau tional Safety and Health Administration (“OSHA”) standard metrics, in 2023 our lost time incident rate
was 0.10 and our total reportable incident rate was 0.98.

and regulatoryrr

Emplm oyee Wellness and Benefie ts. We equip our employees with the benefits and tools they need to lead healthy, secure and

balanced lives to help them perform at their best. We offeff
plans, medical insurance, prescription drugr
disabia lity insurance, accident and critical illness insurance and dependent care programs. We additionally provide paid time off,ff
bereavement leave, wellness credits and employee assistance programs.

r an array of comprehensive benefit options including retirement savings
benefits, dental insurance, vision insurance, flexible medical spending accounts, lifeff and

9

Inclusion and Diversity.tt We strive to build a team that reflects the wide diversity of customers and communities that we serve
across the country. Moreover, we want to create a work environment in which everyrr employee feels welcome, included and valued for
their unique perspectives and experiences. The Company is committed to a full spectrum of diversity inclusive of gender, ethnicity,
race, sexual orientation, age, disabia lity, veteran statust
suppor
ting all groups, including historically underrepresented groups. As of December 31, 2023, approximately 29% of our
u
workforce were people of color and 14% of our workforce are female. During 2023, we partnered with the Department of Defense’s
SkillBridge Program, which provides service members with the opportunity to participate in industryrr
transitioning out of their military careers. We intend to continue these and other effoff
more inclusive workplk ace.

, religion, culturt e, background, and experiences. Our effoff

rts to further diversifyff our team as we build a

training programs while

rts focus on hiring and

Training and Development. Development and advancement opportunities are one of the most important factors in retaining our

employees. Programs to develop and enhance skills improve our business performance and provide employees with meaningfulff
opportunities. We offeff
technology and vehicle operations. Our talent development program includes a variety of training methodologies including field
experiences, on-the-jo- b training, online/system suppor
full-time employees average 54 hours of training and development per year.

r training in an array of categories such as management and leadership, rentals, sales, parts and service, safety,

ted training, classroom training and helpdesk suppor

t. On an annual basis, our

u

u

career

Social Responsibility. We believe strong businesses and strong communities depend upon one another. We share our success by

giving back to communities and, in turn, they provide us with the talent required to drive our business success. We encourage our
branches to pursue outreach opportunities that best meet the needs of their respective communities and interests of their employees.
At the corporate level, we focus on the educd ation of disadvantaged youth, outreach programs and community awareness to aid
individuals and families seeking treatment and recovery services and mental health resources in our headquarters community of Baton
Rouge, Louisiana. In recent years, we have provided philanthropic and volunteer suppor
t to two innovative local high schools where
children of low-income parents can receive a college preparatoryrr educd ation and assisted to fund an outreach program providing
community awareness for mental health and recovery services. We also administer a business and employee assistance fund that
u
suppor

ts small businesses and employees in emergency situations and disaster recovery.

u

Sustainability

H&E recognizes the importance of environmental stewardship, social responsibility and transparent governance. We are
committed to advancing each of these through our business conduct and operations. A cross-functional environmental, social and
governance (“ESG”) task force of senior management leads this work with oversight from the ESG Committee of the Company’s
Board of Directors. During 2022, we engaged an external resource to begin initial development of an ESG strategy and ESG
programs and policies that will serve as a blueprint to guide our progress going forward, and during 2023 we continued to work with
them on building our ESG framework. Additionally in 2023, we published an ESG page on our Company’s web page as part of our
commitment to advancing our ESG reporting and disclosures to customers, manufact

urt ers, and investors alike.

ff

We are working to identifyff and understand areas of the business in which we can reduce the environmental impact, including our

footprt

carbon
int. As an example, we have deployed telematics tracking and strategies to improve the management of our
r
transportation fleet, which has resulted in our ability to reduce the idle time of our transportation vehicles, saving fuel consumption.
While to date we have not completed an inventoryrr of our greenhouse gas emissions, we realize that use of rental equipment by
customers is a significant component. To address this, we are committed to evaluating alternative fuel and electric products for our
rental fleet as these technologies become availabla e, are successfully tested in the field of operation and as customer demand for them
increases. Our batteryrr and electricity powered equipment currently comprise 34% of the units we rent as of December 31, 2023. Our
environmentally friendly fleet includes a range of battery-powered and hybrid equipment such as scissor lifts, boom lifts and material
handling equipment.

Available Information

We file electronically with the SEC annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K
and amendments to those reports filed or furnished pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. The SEC
maintains an Internet site (www.sec.gov) that contains reports, proxy and information statements, and other information regarding
issuers that file electronically with the SEC. Copies of these reports, proxy and information statements and other information may be
obtained by electronic request at the following e-mail address: publu icinfo@sec.gov. Copies of our annual report on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K, ownership reports for insiders and any exhibits to and amendments to
these reports filed with or furnished to the SEC are availabla e free of charge through our internet website (www.he-equipment.com) as
soon as reasonabla y practicable afteff
r filing with the SEC. We use the Investor Relations section of our website as a means of disclosing
material non-public inforff mation and for complying with our disclosure obligations under Regulation FD. Accordingly, investors
should monitor the Investor Relations section of our website, in addition to following press releases, SEC filings and public
conferff ence calls and webcasts.

q p

10

Additionally, we make availabla e free of charge on our internet website:

•

•

•

•

•

our Code of Conduct and Ethics;

the charter of our Corporate Governance and Nominating Committee;

the charter of our Compensation Committee;

the charter of our Environmental, Social and Governance (ESG) Committee; and

the charter of our Audit Committee.

Item 1A. Risk Factors

Investing in our securities involves a high degree of risk. You should consider carefully the following risk factors and the other
information in this Annual Report on Form 10-K, including our consolidated financial statements and related notes, before making any
investment decisions regarding our securities. If any of the following risks actuat
operating results could be adversely affeff cted. As a result, the trading price of our securities could decline and you may lose part or all
of your investment.

lly occur, our business, financial condition and

skk
Operational and Competitive Riskii

p

p

ss couldll be adverserr

Our busineii
geopolitll ictt al conditidd ons in general, which couldll
ent, depree
lower sales prices,s resultintt g in a declinll e in our revenues, gross margins and operating results.

by declinll es in construction and industritt al activities, or a downturn in the economy or
rates and

lead to decreased demand for equipmii

essed equipmii

ly affeff ctedtt

ent rentaltt

Our equipment is principally used in connection with construcrr

tion and industrial activities. Consequently, a downturt n in

tion or industrial activities, or the economy in general, may lead to a decrease in the demand for equipment or depress rental

construcr
rates and the sales prices for our equipment. Our business may also be negatively impacted, either temporarily or long-term, by:

•

•

•

•

•

•

•

•

•

•

•

•

•

a reduction in spending levels by customers;

unfavff orable credit markets affeff cting end-user access to capital, as well as our access to capital when or if needed;

adverse changes in federal, state and local government infrastructurt e spending or the related regulatoryrr

regime;

an increase in costs, including the cost of construcrr

tion materials, as a result of inflation or other factors;

excess fleet in the equipment rental industry;rr

adverse weather conditions or natural disasters which may affeff ct a particular region;

a decrease in the level of exploration, development, production activity and capia tal spending by oil and natural gas
companies;

a prolonged shutdown of the U.S. government;

an increase in interest rates;

u
suppl

y chain disrupt

r

ions;

geopolitical conditions, including the war in Ukraine and escalation of conflicff
Israel/Hamas war;

ts in the Middle East, including the

public health crises and epidemics and similar health concerns; or

terrorism or hostilities involving the United States.

These factors have in the past, and could in the future, among other things, cause weakness in our end-markets and impact
customer demand for equipment rentals, reduce the availabia lity and productivity of our employees, increase our costs, result in
delayed payments from our customers and uncollectible accounts, impact previously announced strategic plans or impact our ability to
access funds from financial institutt
residential construcrr
position, results of operations and cash flows in the future and may also have a material adverse effeff ct on residual values realized on
the disposition of our rental fleet.

tion and industrial sectors caused by these or other factors could have a material adverse effeff ct on our financial

ions and capia tal markets on terms favorable to us, or at all. Weakness or deterioration in the non-

11

We face riskii

skk related to heightgg entt

ed infln atll

iott n, recession, finaii ncial and creditdd market disruii

ptu iott ns and othett

r economic conditdd iott ns.

Our financial results, operations and forecasts depend significantly on worldwide economic and geopolitical conditions, the

u

u

ions in demand, suppl

demand for our products, and the financial condition of our customers and suppl
have in the past resulted, and may result in the future, in reduced demand for products resulting in decreased sales, margins and
earnings. In 2022, the U.S. experienced significantly heightened inflationary pressures and subsu equent economic recovery, causing
markets. The general economy in 2022 was also affeff cted by the war in Ukraine and
r
disrupt
associated increase in energy costs. While the global inflation rate began to stabilize and, in some cases decline, in 2023 as a result of
central bank policy tightening, core inflation has proved persistent as a result of the preceding factors, in addition to others such as the
escalating number of significant confliff cts throughout the globe. We may not be able to fully mitigate the impact of inflation through
price increases, productivity initiatives and cost savings, which could have an adverse effeff ct on our results of operations. In addition,
if the U.S. economy enters a recession, we may experience sales declines which could have an adverse effeff ct on our business,
operating results and financial condition.

iers. Economic weakness and geopolitical uncertainty

y chains, and labor

a

rr

u

ions in financial and/or credit markets may impact our ability to manage normal commercial relationships with
iers and creditors. For instance, in the event of a recession or threat of a recession, our customers and suppl

Similarly, disrupt
our customers, suppl
may suffer their own financial and economic challenges and as a result they may demand pricing accommodations, delay payment, or
become insolvent, which could harm our ability to meet our customer demands or collect revenue or otherwise could harm our
business. An economic or credit crisis could occur and impair credit availabia lity and our ability to raise capia tal when needed. A
disrupt
r
addition, changes in tax or interest rates in the U.S. or other nations, whether due to recession, economic disrupt
could have an adverse effeff ct on our operating results.

ion in the financial markets could impair our banking or other business partners, on whom we rely for access to capital. In

ions or other reasons,

iers

u

rr

Economic weakness and geopolitical uncertainty may also lead us to impair assets, take restructurt

ing actions or adjud st our

operating strategy and reduce expenses in response to decreased sales or margins. We may not be able to adequately adjud st our cost
structurt e in a timely fashion, which could have an adverse effeff ct on our operating results and financial condition. Uncertainty about
economic conditions may increase foreign currency volatility in markets in which we transact business, which could have an adverse
effeff ct on our operating results.

The inabiliii tyii

to forecast trends accurately maya have an adverserr

impact on our busineii

ss and finaii ncial conditiodd

n.

An economic downturt n or economic uncertainty makes it difficult for us to forecast trends, our future operating performance,

cash flows and financial position, which could have an adverse impact on our business and financial condition. Additionally,
uncertainty regarding future oil and natural gas prices have negatively impacted the exploration, production and construcrr
of our customers in those markets. Uncertainty regarding future equipment product demand could cause us to maintain excess
equipment inventoryrr and increase our equipment inventoryrr carryirr ng costs. Failure to accurately forecast these trends could cause us to
change or re-evaluate certain of our strategies, including as it relates to acquisitions or opening of new branch locations. Alternatively,
this forecasting difficulty in addition to laboa
rental that could result in an inability to satisfyff demand for our products and a loss of market shares.

ions could cause a shortage of equipment for sale or

r shortages and suppl

y chain disrupt

tion activity

u

rr

Our revenue and operatingii
us to grow our busineii

ss.

resultstt maya fluctuate,tt which couldll result in a declinll e in our profitaff

ii ytt and make it more diffi
bilit

i

cult for

Our revenue and operating results have historically varied from quarter to quarter. Periods of decline could result in an overall

decline in profitaff
quarterly results to continue to fluctuate in the future due to a number of factors, including:

bia lity and make it more difficult for us to make payments on our indebtedness and grow our business. We expect our

•

•

•

•

•

•

•

•

general economic conditions in the markets where we operate;

the cyclical nature of our customers’ business, particularly our construcr
industry;rr

tion customers and customers in the oil and gas

sales and rental patterns of our construcr
months;

tion customers, with sales and rental activity tending to be lower in the winter

changes in the size of our rental fleet and/or in the rate at which we sell used equipment from our fleet;

changes in customer, fleet, geographic and segment mix;

an overcapacity of fleet in the equipment rental industry;rr

changes to technological requirements in our equipment or in our rental platforms;

severe weather and seismic conditions temporarily affeff cting the regions where we operate;

12

•

•

•

•

•

•

•

suppl
y chain or other disrupr
u
u
key suppl

iers on acceptabla e terms or at all;

tions that impact our ability to obtain equipment and other suppl

u

ies for our business from our

cost increases as a result of inflation;

changes in corporate spending for plants and facilities or changes in government spending for infrastructurt e projects;

changes in interest rates and related changes in our interest expense and our debt service obligations;

the possible need, from time to time, to record goodwill impairment charges or other write-offs or charges due to a variety
of occurrences, such as the impairment of assets, rental location divestitures, dislocation in the equity and/or credit
markets, consolidations or closings, restructurt

ings, or the refinancing of existing indebtedness;

the effeff ctiveness of integrating acquired businesses, or acquired assets, and new start-up locations; and

timing of acquisitions and new location openings and related costs.

In addition, we incur various costs when integrating newly acquired businesses or opening new start-up locations, and the
bia lity of a new location is generally expected to be lower in the initial months of operation.

profitaff

The impacm ts of a global
and couldll have a material adverserr

ll

pandemic and simi

ii

laii r healthll

concerns,s couldll have a signi
effeff ct on our operations and finaii ncial results.

ificff ant impacm t on worldwll

idedd economic conditiodd

ns

u

u

A significant outbrt eak of epidemic, pandemic, or contagious diseases, could cause a widespread health crisis that could result in
ions

shortages or other disrupt
y and/or demand for our equipment. Any quarantines, labor
iers, or our customers would likely adversely impact our sales and operating results. The extent of any additional

an economic downturt n, affeff cting the suppl
to us, our suppl
impact from a pandemic on the Company’s operational and financial performance and liquidity will depend on various developments,
including the duration and spread of the outbrt eak, governmental limitations on business operations generally, and its and their impact
on potential customers, employees, and suppl
iers, vendors and distribution partners. As we cannot predict the potential future impact
of the duration or scope of a global pandemic or similar health concerns, any resulting future financial impact cannot be reasonabla y
estimated. In addition, to the extent that a global pandemic or similar health concerns adversely affeff ct our results of operations or
financial position, it may also heighten the other risks described in this Item 1A-Risk Factors.

u

a

r

We are subject to competiti
maintain revenues or profitaff

.yy
bilityii

tt on, which maya have a material adverserr

effeff ct on our busineii

ss by reducingii

our abiliii tyii

to increase or

The equipment rental industryrr

is highly competitive and highly fragmented. Many of the markets in which we operate are served

by numerous competitors, ranging from global, national and multi-regional equipment rental companies to small, independent
businesses with a limited number of locations. We generally compete on the basis of availabia lity, quality, reliabia lity, delivery,rr price,
technology and environmental friendliness. Some of our competitors have significantly greater financial, marketing and other
resources than we do, and may be able to reduce rental rates. We may encounter increased competition from existing competitors or
new market entrants in the future, which could have a material adverse effeff ct on our business, financial condition and results of
operations.

Furthermore, competition may begin to emerge on the basis of information technology infrastructurt e. We expect our competitors
ial intelligence (“AI”) and machine learning

to continue to improve their information technology systems, including the use of artificff
solutions, to further enhance operations and their rental platforms. Our ability to innovate our own technology infrastructure and
appropriately address user experience will affeff ct our ability to compete.

We purchase a signi
relationshipsii withii
equipmii

ent in an adequatett or timeii

ly manner.rr

ififf cant amount of our equipmii
anyn of those manufau cturersrr couldll have a material adverserr

ent from a limite

ii

d number of manufacff

turers. Terminatiott n of one or more of our
to obtaitt nii
ss, as we maya be unablell

effeff ct on our busineii

We purchase most of our equipment from leading, nationally-known original equipment manufact

ff

ended December 31, 2023, we purchased approximately 52.8% of our equipment from five manufact
Deere, and SkyTkk
rak). Although we believe that we have alternative sources of suppl
core product categories, termination of one or more of our relationships with any of these majoa r suppl
adverse effeff ct on our business, financial condition or results of operations if we were unabla e to obtain equipment in an adequate or
urt ers shuts down or if two or more of them consolidate operations, this could
timely manner. Additionally, if one of these manufact
have a significant effeff ct on suppu
ly and pricing of equipment and thus could have a material adverse effeff ct on our business, financial
condition or results of operations.

y for the equipment we purchase in each of our

iers could have a material

u

u

ff

ff

urt ers (“OEMs”). For the year
urt ers (JCB, Skyjkk ack, Sany, John

13

Disruii

ptu iott ns in our supplu

yll chainii couldll result in adverserr

effeff ctstt on our resultstt of operations and finaii ncial perforff marr

nce.

u
Suppl

y chain disrupt

r

ions could impact our ability to obtain equipment and other suppl
r

ies for our business from our key suppl
ions related to the timing of receiving equipment orders, which have

on acceptable terms or at all. To date, our suppl
y chain disrupt
been moderate and did not extend beyond a significant period of time. We may experience more severe suppl
future or one or more suppl
ies from other sources
u
suppl
in a timely manner or at all, could impair our ability to meet customer demand and thereforff e could have a material adverse effeff ct on
our business, financial condition or results of operations.

urt e or deliver equipment or parts. Any suspension or delay in any of our

iers’ ability to provide us adequate equipment or supplu

ies, or in our ability to procure equipment or suppl

ier’s inability to manufact

y chain disrupt

u

u

u

u

u

u

ff

rr

iers

ions in the

The cost of new equipmii
equipmii

ent. In some cases, we maya not be ablell

ent that we purchase for use in our rentaltt
to procure equipmii

fleet
ll maya increase and thereforff
ent on a timely basis due to supplu

e we maya spend more for such
s.tt
iell r constraintii

ff

The cost of new equipment from manufact

urt ers that we purchase for use in our rental fleet may increase as a result of increased
r

raw material costs, including increases in the cost of steel, which is a primary material used in most of the equipment we use, laboa
shortages, inflation, suppl
rr
climate change. In addition, in an effoff
standards. If we are unabla e to meet such standards, then the expectations of our customers, business and results of operations could be
materially adversely affeff cted. These increases could materially impact our financial condition or results of operations in future periods
if we are not able to pass such cost increases through to our customers.

rt to combat climate change, our customers may require our rental equipment to meet certain

requirements, such as those related to emissions and

ions or due to increased regulatoryrr

y chain disrupt

u

Our rentaltt

ll
fleet

is subject to residual value riskii

upon dispii ositiott n.

The market value of any given piece of rental equipment could be less than its depreciated value at the time it is sold. The market

value of used rental equipment depends on several factors, including:

•

•

•

•

•

•

•

the market price for new equipment of a like kind;

wear and tear on the equipment relative to its age;

the time of year that it is sold (prices are generally higher during the construcr

tion season);

worldwide and domestic demands for used equipment;

advances in equipment technology and emission controls that may not be availabla e for older equipment;

u
the suppl

y of used equipment on the market; and

general economic conditions.

We include in operating income the difference between the sales price and the depreciated value of an item of equipment sold.

Although for the year ended December 31, 2023, we sold used equipment from our rental fleet at an average selling price of
approximately 255.0% of net book value, we cannot assure you that used equipment selling prices will not decline. Any significant
decline in the selling prices for used equipment could have a material adverse effeff ct on our business, financial condition, results of
operations or cash flows.

ll
fleet

If our rentaltt
decrease.ee The coststt of new equipmii
preventing us from procuring equipmii

ent we use in our fleet

ent on a timelyll basis.

ages, our operating coststt maya increase,e we maya be unablell

to pass alonll
ll maya increase,e requiring us to spend more for replee acll

g such costs,tt and our earnings maya
ement equipmii

ent or

If our rental equipment ages, the costs of maintaining such equipment, if not replaced within a certain period of time, will likely
increase. The costs of maintenance may materially increase in the future and could lead to material adverse effeff cts on our results of
operations. In addition, older equipment may not be as attractive to our customers.

The cost of new equipment for use in our rental fleet could also increase due to increased material costs for our suppl

u

iers

(including tariffsff on raw materials) or other factors beyond our control. Such increases could materially adversely impact our financial
condition and results of operations in future periods. Furthermore, changes in customer demand could cause certain of our existing
equipment to become obsolete and require us to purchase new equipment at increased costs.

We incur maintenance and repaee
busineii

ir coststt associatedtt withii
ii

ss in the event these coststt are greater than anticipat

our rentaltt
.dd
edtt

ll
fleet

equipmii

ent that couldll have a material adverserr

effeff ct on our

As our fleet of rental equipment ages, the cost of maintaining such equipment, if not replaced within a certain period of time,

generally increases. Determining the optimal age for our rental fleet equipment is subju ective and requires considerable estimates by

14

management. We have made estimates regarding the relationship between the age of our rental fleet equipment, maintenance and
repair costs, and the market value of used equipment. Our future operating results could be adversely affeff cted because our
maintenance and repair costs may be higher than estimated and market values of used equipment may fluctuate.

Labor dispii utestt

couldll disruii

ptu our abilityii

to serve our customtt

ersrr and/or//

lead to highi

er labor costs.tt

As of December 31, 2023, we have approximately 75 employees in Utah, a significant territory in our Intermountain region, who

are covered by a collective bargaining agreement and approximately 2,690 employees who are not represented by unions or covered
by collective bargaining agreements. Various unions periodically seek to organize certain of our nonunion employees. Union
organizing effoff
certain of our employees, which could adversely affeff ct our ability to serve our customers. Further, settlement of actuat
a
labor
on our labor

l or threatened
disputes or an increase in the number of our employees covered by collective bargaining agreements can have unknown effeff cts

rts or collective bargaining negotiations could potentially lead to work stoppages and/or slowdowns or strikes by

costs, productivity and flexibility.

a

Increases or fluctuatiott ns in fuel coststt or reduced supplu

iell s of fuff

el couldll harm our busineii

ss.

We in the past have been, and in the future could be, adversely affeff cted by limitations on fuel suppl

u

ies or significant increases in

fuel prices that result in higher costs to us for transporting equipment from one branch to another branch or one region to another
region. In addition, the cost of fuel could cause our clients to change capital allocation decisions and may even cause them to delay or
ies could have an adverse effeff ct on our financial
cancel projects. A significant or protracted price fluctuation or disrupt
r
r
condition and results of operations. Additionally, potential climate change regulation, including a potential carbon
the overall cost of fuel to us and have a material adverse effeff ct on us; see additional discussion of climate risks below.

tax, could increase

ion of fuel suppl

u

Climll

atett change,e clima

ll

te change regue

lations and greenhouse effeff ctstt maya materiallyll adverserr

ly impacm t our operations and markets.tt

Climate change and its association with greenhouse gas emissions is receiving increased attention from the scientificff

and political
communities. The U.S. federal government, certain U.S. states and certain other countries and regions have adopted or are considering
legislation or regulation imposing overall capsa
“WeWW could be adverserr
change, which could subject us to increased operational coststt
results” for a discussion of the Environmental Protection Agency’s (the “EPA”) newly issued final rule to reduce gas emissions.
Additionally, the SEC is considering implementing new climate change disclosure rules and other federal or state agencies may do the
same. These new reporting rules may be difficult to comply with, increase costs of operation and influence customer behavior and
demand.

or taxes on greenhouse gas emissions from certain sectors or facility categories. See

ly affeff cted by environmental and safea ty requirementstt and regul

ly impacm t our liquidity and operating

that could materially and adverserr

ations, including those regar

ding climate

e

e

Such new laws or regulations, or stricter enforff cement of existing laws and regulations, could increase the costs of operating our
businesses, reduce the demand for our products and services and impact the prices we charge our customers, any or all of which could
adversely affeff ct our results of operations. Failure to comply with any legislation or regulation could potentially result in subsu tantial
fines, criminal sanctions or operational changes. Moreover, even without such legislation or regulation, the perspectives of our
customers, stockholders, employees and other stakeholders regarding climate change are continuing to evolve, and increased
awareness of,ff or any adverse publicity regarding, the effeff cts of greenhouse gases could harm our reputation or reduce customer
demand for our products and services.

ed, which
Additionally, as severe weather events become increasingly common, our or our customers’ operations may be disrupt
could result in increased operational costs or reduced demand for our products and services and extended periods of disrupt
ions could
have an adverse effeff ct on our results of operations. In addition, climate change may also reduce the availabia lity or increase the cost of
insurance for weather-related events as well as may impact the global economy, including as a result of disrupt
y chains.
We anticipate that climate change-related risks will increase over time.

ions to supplu

r
r

rr

g
Strategie c Riskii
skk

We maya not be able to faciliii taii
ii
limit
candiddd atdd estt
and maya involve signi

,s which couldll

te our growth stratt
our revenues and profitaff

by idendd
transactiott ns withii
ii y.tt Future acquisitions maya result in signi
bilit

ing or completingii

tegye

tifyi

attrtt active acquisition
ificff ant transactiott n expexx nses

ificff ant costs.tt We maya expexx rience integre atiott n and consolidll atdd iott n riskii

skk associatedtt withii

future acquisitions.

An element of our growth strategy is to selectively pursue, on an opportunistic basis, acquisitions of additional businesses or

assets of businesses, in particular rental companies that complement our existing business and footprt
our growth strategy depends, in part, on selecting strategic acquisition candidates at attractive prices and effeff ctively integrating their
businesses into our own, including with respect to financial reporting and regulatoryrr matters. We cannot assure you that we will be
able to identifyff attractive acquisition candidates or complete the acquisition of any identifieff d candidates at favorable prices and upon
advantageous terms and conditions, including financing alternatives. We expect to face competition for acquisition candidates, which
may limit the number of acquisition opportunities and lead to higher acquisition costs. We may not have the financial resources

int. The success of this element of

15

necessary to consummate any acquisitions or the ability to obtain the necessaryrr
terms. Any future acquisitions
may result in significant transaction expenses and risks associated with entering new markets. We may also be subju ect to claims by
third parties related to the operations of these businesses prior to our acquisition and by sellers under the terms of our acquisition
agreements. We also regularly review other potential strategic transactions, including dispositions, which are also subju ect to claims by
third parties and by the buyers under the terms of our disposition agreements.

funds on satisfact

oryrr

ff

We may not have sufficient management, financial and other resources to integrate or disintegrate any future acquisitions or
dispositions. Any significant diversion of management’s and other personnel’s attention, time and resources or any majoa r difficulties
encountered in the evaluation, negotiation and integration of the businesses we acquire or sell could have a material adverse effeff ct on
our business, financial condition or results of operations, which could decrease our profitff ability and make it more difficult for us to
grow our business. Among other things, these risks could include:

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

the loss of key employees;

the disrupt

r

ion of operations and business;

the retention of the existing clients and the retention or transition of customers and vendors;

systems integration, as well as, the integration of corporate culturt es and maintenance of employee morale;

inability to maintain and increase competitive presence;

customer loss and revenue loss;

possible inconsistencies in standards, control procedurd es and policies;

unexpected problems with costs, operations, personnel, technology and credit;

problems with the assimilation of new operations, sites or personnel, which could divert resources from our regular
operations;

unrecorded liabilities of acquired companies and unidentifieff d issues that we fail to discover during our due diligence
investigations or that are not subju ect to indemnificff ation or reimbursement by the seller;

inherent risk associated with entering a geographic area or line of business in which we have no or limited experience;

impairment of goodwill or other acquisition-related intangible assets;

failure to achieve anticipated synergies or receiving an inadequate return of capia tal;

integration of financial reporting and regulatoryrr
Oxley Act of 2002, as amended (“SOX”); and/or

reporting functions, including with the SEC and pursuant to the Sarbanes-

potential unknown liabia lities.

Furthermore, general economic conditions, economic or geopolitical uncertainty, or unfavorable global capital and credit markets

could affeff ct the timing and extent to which we successfulff
which could limit our revenues and profitaff bia lity.

ly acquire and integrate new businesses or dispose of existing businesses,

Our failure to address these risks or other problems encountered in connection with any past or future acquisition could cause us

to fail to realize the anticipated benefits of the acquisitions, cause us to incur unanticipated liabia lities and harm our business generally.
In addition, if we are unabla e to successfulff
ly integrate our acquisitions with our existing business, we may not obtain the advantages
that the acquisitions were intended to create, which may materially and adversely affeff ct our business, results of operations, financial
condition, cash flows, our ability to introduce new services and products and the market price of our stock.

We would expect to pay for any future acquisitions using cash or availabla e borrowings, but to the extent that our existing sources

of cash or borrowings are not sufficient, we would expect to need additional debt or equity financing, which involves its own risks,
such as the dilutive effeff ct on shares held by our stockholders if we financed acquisitions by issuing convertible debt or equity
securities, or the risks associated with debt incurrence, such as increase debt service obligations and covenant compliance
requirements.

We have also spent resources and effoff

rts, apart from acquisitions, in attempting to grow and enhance our rental business over the

past few years. These effoff
continued investment in facilities, personnel and financial and management systems and controls. We may not be successfulff
implementing all of the processes that are necessary to suppor
increasing disproportionately to our incremental revenues, causing our operating margins and profitaff

rts place strains on our management and other personnel time and resources, and require timely and
in
t any of our growth initiatives, which could result in our expenses

bia lity to be adversely affeff cted.

u

16

We maya not be able to faciliii taii
revenues and profitaff

ii y.tt
bilit

te our growth stratt

tegye

by idendd

tifyi

ing and openingii

attrtt active startt

t-up locations,s which couldll

limit our

An element of our growth strategy is to selectively identify,ff

source and implement start-up locations in order to add new

customers. The success of this element of our growth strategy depends, in part, on identifying strategic start-up locations.

We also cannot assure you that we will be able to identifyff attractive start-up locations. Opening start-up locations may involve

significant costs and limit our ability to expand our operations. Start-up locations may involve risks associated with entering new
markets and we may face significant competition.

We may not have sufficient labor

a

, real estate, management, financial and other resources to successfulff

ly open and operate new

locations. Any significant diversion of management’s attention or any majoa r difficulties encountered in the locations that we open in
the future could have a material adverse effeff ct on our business, financial condition or results of operations, which could decrease our
profitaff
bia lity and make it more difficult for us to grow our business. Furthermore, general economic conditions or unfavff orable global
capital and credit markets could affeff ct the timing and extent to which we open new start-up locations, which could limit our revenues
and profitff ability.

p
Liquidity and Capia tal Resource Riskii
skk

q

y

Unfan vorablell conditidd ons or disruii
of creditdd .tt
availaii bilityii

ptu iott ns in the capia taii

l and creditdd marketstt maya adverserr

ly impact busineii

ss conditidd ons and the

r
Disrupt

ions in the global capital and credit markets as a result of an economic downturt n, economic or geopolitical uncertainty as

ts, including those in Ukraine, the Middle East and China, changing or increased

result of escalating and potential global conflicff
regulation, reduced alternatives or failures of significant financial institutions could adversely affeff ct our customers’ ability to access
capital and could adversely affeff ct our access to liquidity needed for business in the future. Additionally, unfavff orable market
conditions may depress demand for our products and services or make it difficult for our customers to obtain financing and credit on
reasonabla e terms. Unfavorabla e market conditions also may cause more of our customers to be unabla e to meet their payment
obligations to us, increasing delinquencies and credit losses. If we are unabla e to manage credit risk adequately, or if a large number of
customers should have financial difficulties at the same time, our credit losses could increase above historical levels and our operating
results would be adversely affeff cted. Delinquencies and credit losses generally can be expected to increase during economic
slowdowns or recessions. Moreover, our suppl
disrupt
r
and cash flows.

ion or delay of product availabia lity. These events could negatively impact our business, financial position, results of operations

iers may be adversely impacted by unfavff orable capia tal and credit markets, causing

u

Our substantiatt

l indebtedtt nedd

ss couldll adverserr

ly affeff ct our finaii ncial conditiodd

n.

We have a significant amount of indebtedness outstanding. As of December 31, 2023, we had total outstanding indebtedness of
approximately $1.4 billion, consisting of the amount outstanding under our senior unsecured notes, our senior secured credit facility
(“Credit Facility”) and our finance lease liabia lities.

Our subsu tantial indebtedness could have important consequences. For example, it could:

•

•

•

•

•

increase our vulnerabia lity to general adverse economic, industryrr and competitive conditions;

require us to dedicate a subsu tantial portion of our cash flow from operations to payments on our indebtedness, thereby
reducing the availabia lity of our cash flow to fund working capital, capital expenditures, acquisitions and other general
corporate purpos

es;

r

limit our flexibility in planning for, or reacting to, changes in our business and the industryrr

in which we operate;

place us at a competitive disadvantage compared to our competitors that have less debt; and

limit our ability to obtain additional financing for working capital, capital expenditures, acquisitions or general corporate
r
purpos

es.

We expect to use cash flow from operations and borrowings under our Credit Facility to meet our current and future financial
obligations, including funding our operations, debt service and capital expenditures. Our ability to make these payments depends on
our future performance, which will be affeff cted by financial, business, economic and other factors, many of which we cannot control.
Our business may not generate sufficient cash flow from operations in the future, which could result in our being unabla e to repay
indebtedness, or to fund other liquidity needs. If we do not have enough capital, we may be forced to reduce or delay our business
activities and capia tal expenditures, sell assets, obtain additional debt or equity capia tal or restructurt e or refinance all or a portion of our
debt, including the senior unsecured notes and our Credit Facility, on or before maturity. We cannot make any assurances that we will

17

be able to accomplish any of these alternatives on terms acceptabla e to us, or at all. In addition, the terms of existing or future
indebtedness, including the agreements governing the senior unsecured notes and the Credit Facility, may limit our ability to pursue
any of these alternatives. As of Februar
us with borrowing availabia lity of $460.3 million, as a result of $12.3 million of letters of credit outstanding under the facility.

ry 15, 2024, we had borrowings of $277.3 million outstanding under our Credit Facility leaving

We maya not be able to generate suffu icff
our indebtedtt nedd
our obligll atiott ns underdd

ient cash to service allll of our indebtedtt nedd
.ll
ss, which maya not be successfulff

ss and maya be forced to take othett

r actions to satisfii yff

Our ability to make scheduled payments or to refinance our debt obligations depends on our financial and operating performance,

which is subju ect to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our
control. We cannot make assurances that we will maintain a level of cash flows from operating activities sufficient to permit us to pay
the principal, premium, if any, and interest on our indebtedness. In the absence of such operating results and resources, we could face
subsu tantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other
obligations. The Credit Facility and the indenturt e governing the senior unsecured notes restrict our ability to dispose of assets and use
the proceeds from the disposition. We may not be able to consummate those dispositions or to obtain the proceeds which we could
realize from such dispositions. Any proceeds we do receive from a disposition may not be adequate to meet any debt service
obligations then due.

If our cash flows and capia tal resources are insufficff

ient to fund our debt service obligations, we may be forced to reduce or delay
capital expenditures, sell assets or operations, seek additional capital or restructurt e or refinance our indebtedness. We cannot assure
you that we would be able to take any of these actions, that these actions would be successfulff
debt service obligations or that these actions would be permitted under the terms of our existing or future debt agreements, including
the Credit Facility or the indenturt e governing the senior unsecured notes.

and permit us to meet our scheduled

If we cannot make scheduled payments on our debt, we will be in default and, as a result:

•

•

•

our debt holders could declare all outstanding principal and interest to be due and payabla e;

the lenders under our credit facilities, including the Credit Facility, could terminate their commitments to lend us money
and foreclose against the assets securing our outstanding borrowings under their facility; and

we could be forced into bankrupt

r

cy or liquidation.

Despite current indebtedtt nedd
described above.

ss levels,ll we maya stiltt lll be ablell

to incur more indebtedtt nedd

ss, which couldll

furthett

r exacerbatett

skk
the riskii

Under the terms of the agreements governing the Credit Facility and the senior unsecured notes, we and our subsu idiaries may be

able to incur subsu tantial indebtedness in the future.

Additionally, our Credit Facility provides revolving commitments of up to $750.0 million in the aggregate. As of Februarr

ry 15,

2024, we had $460.3 million of availabia lity under the Credit Facility, as a result of $12.3 million of letters of credit outstanding under
the facility. If new debt is added to our current debt levels, the risks that we now face relating to our subsu tantial indebtedness could
intensify.ff

The agreements governirr ngii
certain corporatett and finaii ncial transactiott ns.

the Creditdd Faciliii tyii and our senior unsecured notes restritt ct our busineii

ss and our abiliii tyii

to engage in

The agreements governing the Credit Facility and the senior unsecured notes contain certain covenants that, among other things,

restrict or limit our and our restricted subsu idiaries’ ability to:

•

•

•

•

•

•

•

•

incur more debt;

pay dividends and make distributions;

issue preferff

red stock of subsu idiaries;

make investments;

repurchase stock;

create liens;

enter into transactions with affiff liates;

enter into sale and lease-back transactions;

18

•

•

•

execute dispositions;

merge or consolidate; and

transferff

and sell assets.

Our ability to borrow under the Credit Facility depends upon compliance with the restrictions contained in the Credit Facility.
Events beyond our control could affeff ct our ability to meet these covenants. In addition, the Credit Facility requires us to meet certain
financial conditions tests and availabia lity thereunder is subju ect to borrowing base availabia lity.

Events beyond our control can affeff ct our ability to meet these financial conditions tests and to comply with other provisions
governing the Credit Facility and the senior unsecured notes. Our failure to comply with obligations under the agreements governing
the Credit Facility and the senior unsecured notes may result in an event of default under the agreements governing the Credit Facility
and the senior unsecured notes, respectively. A default, if not cured or waived, may permit acceleration of this indebtedness and our
other indebtedness. We may not be able to remedy these defaults. If our indebtedness is accelerated, we may not have sufficff
ient funds
availabla e to pay the accelerated indebtedness and may not have the ability to refinance the accelerated indebtedness on terms favorabla e
to us or at all.

Variablell rate indebtedtt nedd

ss subjectstt us to interest rate riskii

,k which couldll cause our debt service obligll atiott ns to increase signi

ificff antly.yy

Borrowings under the Credit Facility are at variable rates of interest, based on the U.S. prime rate and the Secured Overnight
Financing Rate (“SOFR”), and expose us to interest rate risk. As such, our financial results are sensitive to movements in interest
rates.

There are many economic factors outside our control that have in the past impacted, and may in the future impact, rates of
interest, including publicly announced indices that underlie our interest obligations related to borrowings under the Credit Facility
based on SOFR. SOFR is a broad measure of the cost of borrowing cash overnight collateralized by Treasuryrr securities.

u

Factors that also impact interest rates include, among others, governmental monetary policies, inflation, recession, changes in
y, international disorder and instability in domestic and foreign financial markets. If interest rates

unemployment, the money suppl
increase, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remained the
same, and our results of operations would be adversely impacted. Such increases in interest rates could have a material adverse effeff ct
on our financial conditions and results of operations. Notabla y, afteff
r years of a low interest rate environment, central banks across the
globe significantly increased interest rates to stem inflation and as a result, global inflation began to stabilize. However, there is no
certainty as to whether interest rates will stabilize, continue to increase or decrease.

Our busineii
profitaff
biliii tyii
affeff ct our liquii

ss couldll be hurt if we are unablell
.yy In additioii n, our inabilityii

to obtaitt nii additioii nal capia taii

to refie naii nce our indebtedtt nedd

l as required,dd resulting in a decrease in our revenues and
ly

terms, or at all,ll couldll materiallyll and adverserr

ss on favorablell

iditydd

and our ongoingii

resultstt of operations.

The cash that we generate from our business, together with cash that we may borrow under our Credit Facility, if availabla e, may

not be sufficient to fund our capia tal requirements. We may require additional financing to obtain capia tal for, among other purpos
purchasing equipment, completing acquisitions, establa ishing new locations and refinancing existing indebtedness. Any additional
indebtedness that we incur will make us more vulnerabla e to economic downturt ns and limit our ability to withstand competitive
pressures. Moreover, we may not be able to obtain additional capital on acceptabla e terms, if at all. If we are unabla e to obtain sufficff
additional financing in the future, our business could be adversely affeff cted by reducing our ability to increase revenues and
profitaff

bia lity.

rr

es,

ient

In addition, our ability to refinance indebtedness will depend in part on our operating and financial performance, which, in turn, is

subju ect to prevailing economic conditions and to financial, business, legislative, regulatoryrr and other factors beyond our control. In
addition, prevailing interest rates or other factors at the time of refinancing could increase our interest expense. A refinancing of our
indebtedness could also require us to comply with more onerous covenants and further restrict our business operations. Our inability to
refinance our indebtedness or to do so upon attractive terms could materially and adversely affeff ct our business, prospects, results of
operations, financial condition and cash flows, and make us vulnerabla e to adverse industryrr and general economic conditions. If we are
unabla e to refinance our indebtedness or obtain additional capital sufficient to fund our capia tal requirements, we may be forced, among
other things, to do one or more of the following: (i) sell certain of our assets, which could affeff ct revenue generation and profitaff bia lity;
(ii) reduce the size of our rental fleet, which could have a similar impact; (iii) reduce or delay capital expenditures; (iv) reduce or
eliminate our dividend; (v) issue additional equity, which could have a dilutive effeff ct on current shareholders; or (vi) forgo business
opportunities, including acquisitions and joint venturt es.

19

The contintt ued payment of our quarterlyll dividend is subject to, among othett
our board of direii ctortt

s.rr

r things,s the availaii bilityii

of fuff

ndsdd and the discii

retion of

The payment of future dividends and the amount thereof is uncertain, at the sole discretion of our board of directors and

considered by the board of directors each quarter. The payment of dividends is dependent upon, among other things, operating cash
flow generated by our business, financial requirements for our operations, the execution of our growth strategy, the restrictions and
covenants pursuant to our Credit Facility and senior unsecured notes, and the satisfaction of solvency tests imposed by the Delaware
General Corporation Law and other applicable law for the declaration and payment of dividends.

Governmental Regul

g
e

skk
ation Riskii

We have operations throughogg ut the Unitedtt
applicll ablell
e
r negat
othett

law, regue
ivtt e impacts on our busineii

ss.

lations or requirements,s or our material failure to comply withii

Stattt estt

,s which expos

xx

es us to multiptt

le federal, stattt ett and local regue

lations. Changes in
anyn of them, can increase our coststt and have

Our 137 branch locations, as of December 31, 2023, in the United States are located in 30 different states, which exposes us to a
host of different federal, state and local regulations. These laws and requirements address multiple aspects of our operations, such as
worker safety, consumer rights, privacy, employee benefits, gas emissions and more, and can ofteff n have different requirements in
different jurisdictions. Changes in these requirements, or any material failure by our branches to comply with them, could increase our
costs, affeff ct our reputation, limit our business, drain management’s time and attention or otherwise, generally impact our operations in
adverse ways.

We couldll be adverserr
change,e which couldll subject us to increased operational coststt
operating results.

ly affeff ctedtt

by enviroi nmental and safea ty requirements and regue

that couldll materiallyll and adverserr

lations, includindd g those regae

rdindd g clima
ly impact our liquidityii and

ll

te

Our operations, like those of other companies engaged in similar businesses, require the handling, use, storage and disposal of
certain regulated materials. As a result, we are subju ect to the requirements of federal, state and local environmental protection and
occupau tional health and safety laws and regulations. These laws regulate issues such as wastewater, stormwater, solid and hazardous
waste and materials, and air quality. While our operations generally do not raise significant environmental risks, we use petroleum
products, solvents and other hazardous subsu tances for fueling and maintaining our equipment and vehicles. Environmental laws also
impose obligations and liability for the cleanup of properties affeff cted by hazardous subsu tance spills or releases. These liabia lities can be
imposed on the parties generating or disposing of such subsu tances or the operator of the affeff cted property, ofteff n without regard to
whether the owner or operator knew of,ff or was responsible for, the presence of hazardous subsu tances. Accordingly, we may become
liabla e, either contractuat
operated by us, or if the contamination was caused by third parties during or prior to our ownership or operation of the property. As
such, there can be no assurance that prior site assessments or investigations have identifieff d all potential instances of soil or
groundwater contamination. Future events, such as changes in existing laws or policies or their enforcement, or the discovery of
currently unknown contamination, may give rise to additional remediation liabia lities, which may be material.

lly or by operation of law, for remediation costs even if a contaminated property is not currently owned or

We are subju ect to potentially significant civil or criminal fines or penalties if we fail to comply with any of these requirements.
We have made and will continue to make capital and other expenditures in order to comply with these laws and regulations. These
include climate change regulation, which could materially affeff ct our operating results through increased compliance costs. The
requirements of these laws and regulations are complex, change frequently, and could become more stringent in the future. It is
possible that these requirements will change or that liabia lities will arise in the future in a manner that could have a material adverse
effeff ct on our business, financial condition and results of operations.

In addition, the U.S. Congress and other state and federal legislative and regulatoryrr authorities in the United States have
considered, and likely will continue to consider, numerous measures related to climate change, greenhouse gas emissions and other
laws and regulations affeff cting some of our end markets, such as oil, gas and other natural resource extraction. Should such laws and
regulations become effeff ctive, demand for our services could be affeff cted, our fleet or other costs could increase and our business could
be materially adversely affeff cted. For example, the Environmental Protection Agency (the “EPA”) recently issued a final rule that will
sharplrr y reduce emissions of methane and other harmful air pollution from oil and natural gas operations, including from existing
sources nationwide. The final rule includes New Source Performance Standards, to reduce methane and smog-forming volatile organic
compounds from new, modified and reconstrucr
they develop plans to limit methane from existing sources, including oil and natural gas operations. While we cannot be certain of this
rule’s impact as we wait for states to submu
it their plans to the EPA for approval, we anticipate that this could adversely impact the
operations of our customers, specifically those in the oil and gas industry,rr which could reduce demand for our services and have an
adverse impact on our business.

ted sources, and Emissions Guidelines, which set procedurd es for states to follow as

20

Further, investors are placing a greater emphasis on non-financial factors, including climate risk and other ESG issues, when
evaluating investment opportunities. If we are unabla e to provide sufficient disclosure about ESG practices or if we fail to achieve ESG
goals, investors may not view us as an attractive investment, which could have a negative effeff ct on our stock price and business.
Additionally, customers are becoming increasingly focused on ESG and climate related matters and have started considering and
incorporating these factors when choosing suppl
meet those additional requirements, we could be adversely impacted.

iers, along with existing factors such as price and affoff

rdability. If we are unabla e to

u

Our busineii
adverserr

ss maya be materiallyll affeff ctedtt
ly affeff ct our resultstt of operations.

by changes to fiscii al and taxaa policll

ies. Negat

e

ivtt e or unexpexx ctedtt

taxaa consequences couldll

Adverse changes in the underlying profitff ability and financial outlook of our operations or future changes in tax law could lead to
changes in the value of tax assets or liabia lities that we currently or in the future may hold, which could materially affeff ct our results of
operations.

Our busineii
developmll

ent.

ss maya be materiallyll affeff ctedtt

by changes to othett

r policll

ies governingii

our products,tt

technologyo

and technologio cal

As we grow through acquisitions and advance our technology platforms, we could be required to comply with additional

regulations which, if we fail to comply with, could affeff ct the technological developments, in particular, and our company, as a whole.
For instance, it is expected that laws and regulations around the use of AI and machine learning tools will increase over the next few
years but it is unknown at this time what these laws and regulations will address and how and whether they will be adopted globally. If
we introduce AI or machine learning into our information technology systems (as well as those of our customers through our
technology platform), we could become subju ect to these new regulations, which may be difficult to comply with. Some of our
competitors may not be required to comply, which would put us at a competitive disadvantage. In addition, we may find we do not
have the right employee expertise for the advancement of AI and machine learning initiatives or that we that we haven’t provided the
appropriate training to our team. Further, if we fail to adopt these new technologies we may face price pressure from competitors
using lower-cost AI systems.

skk
General Business Riskii

Fluctuatiott ns in the stoctt k market,tt as well as general economic and market conditiodd
stoctt k.

ns,s maya impacm t the market price of our common

The market price of our common stock has been and may continue to be subju ect to significant fluctuations in response to general

economic changes and other factors including, but not limited to:

•

•

•

•

•

•

•

variations in our quarterly operating results or results that vary from investor expectations;

changes in the strategy and actions taken by our competitors, including pricing changes;

securities analysts’ elections to discontinue coverage of our common stock, changes in financial estimates by analysts or a
downgrade of our common stock or of our sector by analysts;

announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships, joint venturt es or
capital commitments;

changes in the price of oil and other commodities;

investor perceptions of us and the equipment rental and distribution industry;rr

and

national or regional catastrophes or circumstances and natural disasters, hostilities and acts of terrorism.

Broad market and industryrr

factors may materially reduce the market price of our common stock, regardless of or in a manner that

is disproportionate to any related impact on our operating performance. The stock market historically has experienced price and
volume fluctuations that ofteff n have been unrelated or disproportionate to the operating performance of companies. These fluctuations,
as well as general economic and market conditions, including those listed above and others, may harm the market price of our
common stock.

21

l our operations,s compromise our or our customtt

ers’rr and supplpp iell rs’ confidff endd

r disrii uptions in our infon rmatiott n technologyo

systemtt

s couldll

Securityii breaches and othett
contrott
our operating resultstt or busineii

ss repuee

tation.

limit our capac
tial infon rmatiott n or othett

to effeff ctivtt elyll monitoii
rwise adverserr

itytt

a

ly affeff ct

r and

Our information technology systems, some of which are managed by third parties, facilitate our ability to monitor and control our
ting a variety of

operations and adjud st to changing market conditions, including processing, transmitting, storing, managing and suppor
business processes, activities and information. Further, we are expanding and improving our information technologies, resulting in a
larger technological presence and corresponding exposure to cybersecurity risk. Any disrupt
customer relationship management system, or the failure of any of these systems to operate as expected, could, depending on the
magnitude of the problem, adversely affeff ct our operating results by limiting our capacity to effeff ctively monitor and control our
operations and adjud st to changing market conditions.

ion in any of these systems, including our

u

rr

Additionally, we collect and store sensitive data, including proprietary business information and the proprietary business

u

iers, in data centers and on information technology networks, including cloud-based networks.

information of our customers and suppl
The secure operation of these information technology networks and the processing and maintenance of this information is critical to
our business operations and strategy. However, the techniques and sophistication used to conduct cyberattacks and compromise
information technology systems, as well as the sources and targets of these attacks, change and are ofteff n not recognized until such
attacks are launched or have been in place for some time. In addition, there has been an increase in state sponsored cyberattacks which
are ofteff n conducted by capaa bla e, well-funded groups. The rapia d evolution and increased adoption of artificff
ial intelligence technologies
amplifieff s these concerns.

rr

r

Despite security measures and business continuity plans, our information technology networks and infrastructurt e may be
ions or shutdowns due to attacks by cyber criminals or breaches due to employee error or malfeaff

ions during the process of upgrading or replacing computer software or hardware, power outages, computer viruses,

vulnerabla e to damage, disrupt
other disrupt
telecommunication or utility failures, terrorist acts or natural disasters or other catastrophic events. Further, the growing use and rapia d
evolution of technology, including mobile devices, has heightened the risk of unintentional data breaches or leaks. The occurrence of
any of these events could compromise our networks, and the information stored there could be accessed, publicly disclosed, lost or
stolen. In addition, as security threats continue to evolve, we may need to invest additional resources to protect the security of our
systems or to comply with privacy, data security, cybersecurity and data protection laws applicable to our business.

sance or

Any failure to effeff ctively prevent, detect and/or recover from any such access, disclosure or other loss of information, or to
comply with any such current or future law related thereto, could result in legal claims or proceedings, liabia lity or regulatoryrr penalties
under laws protecting the privacy of personal information, disrupt
operations, and damage our reputation, which could adversely affeff ct
our business.

r

We are depeee ndendd
result in a declinll e in our revenues and profitaff

.yy
biliii tyii

t on keye personnel. A loss of keye personnel couldll have a material adverserr

effeff ct on our busineii

ss, which couldll

Our senior and regional managers have an average of approximately 26 years of industryrr experience. Our branch managers have

extensive knowledge and industryrr experience as well. Our success is dependent, in part, on the experience and skills of our
management team. Competition for top management talent within our industryrr
keep filled all of our senior management positions, or if we lose the services of any key member of our senior management team and
are unabla e to find a suitable replacement in a timely manner, we may be challenged to effeff ctively manage our business and execute
our strategy.

is generally significant. If we are unabla e to fill and

If we fail to maintain an effeff ctivtt e systemtt
fraud.

of internal contrott

ls,s we maya not be ablell

to accurately repor

ee

t finaii ncial results or prevent

Effeff ctive internal controls are necessaryrr

to provide reliable financial reports and to assist in the effeff ctive prevention of fraud. Any

inability to provide reliabla e financial reports or prevent fraud could harm our business. We must annually evaluate our internal
procedurd es to satisfyff
our internal controls. If we fail to remedy or maintain the adequacy of our internal controls, as such standards are modified,
suppl
u
litigation.

emented or amended from time to time, we could be subju ect to regulatoryrr scrutiny, civil or criminal penalties or stockholder

the requirements of Section 404 of SOX, which requires management and auditors to assess the effeff ctiveness of

In addition, failure to maintain effeff ctive internal controls could result in financial statements that do not accurately reflect our
financial condition or results of operations. There can be no assurance that we will be able to maintain a system of internal controls
that fully complies with the requirements of SOX or that our management and independent registered public accounting firm will
continue to conclude that our internal controls are effeff ctive.

22

xx

ed to various riskii
We are expos
ss expos
of our busineii
xx
.dd
edtt
being fully protect

skk related to legae
es us to various liabiliii tyii

tt

l proceedindd gs or claill msii
claill msii

,s which maya exceed the level of our insurance coverage resultitt ngii

in us not

that couldll adverserr

ly affeff ct our operating results.tt The nature

We are a party to lawsuits in the normal course of our business. Litigation in general can be expensive, lengthy and disrupt
normal business operations. Moreover, the results of complex legal proceedings are difficult to predict. Responding to lawsuits
brought against us, or legal actions that we may initiate, can ofteff n be expensive and time-consuming. Unfavorable outcomes from
these claims and/or lawsuits could adversely affeff ct our business, results of operations, or financial condition, and we could incur
subsu tantial monetary liability and/or be required to change our business practices.

r

ive to

Our business exposes us to claims for personal injun ry, death or property damage resulting from the use of the equipment we rent

or sell and from injun ries caused in motor vehicle accidents in which our deliveryrr and service personnel are involved and other
employee related matters. Additionally, we could be subju ect to potential litigation associated with compliance with various laws and
governmental regulations at the federal, state or local levels, such as those relating to the protection of persons with disabia lities,
employment, health, safety, security and other regulations under which we operate.

We carry comprehensive insurance, subju ect to deductibles, at levels we believe are sufficient to cover existing and future claims

made during the respective policy periods. However, we may be exposed to multiple claims, and, as a result, we could incur
significant out-of-pocket costs before reaching the deductible amount which could adversely affeff ct our financial condition and results
of operations. In addition, the cost of such insurance policies may increase significantly upon renewal of those policies as a result of
general rate increases for the type of insurance we carry as well as our historical experience and experience in our industry.rr Although
we have not experienced any material losses that were not covered by insurance, our existing or future claims may exceed the
coverage level of our insurance, and such insurance may not continue to be availabla e on economically reasonabla e terms, or at all. If we
are required to pay significantly higher premiums for insurance, are not able to maintain insurance coverage at affoff
rdable rates or if
we must pay amounts in excess of claims covered by our insurance, we could experience higher costs that could adversely affeff ct our
financial condition and results of operations.

Item 1B. Unresolved Staffff Comments

None.

Item 1C. Cybersecurity

We rely on our technology network infrastructurt e and information systems to operate our business, rent our equipment, interact
ort and grow our customer base and bill, collect and make payments, among other functions. Our

with vendors and customers, suppu
internally developed infrastructurt e and systems, as well as those systems and processes provided by third-party vendors, may be
susceptible to damage or interruptu ion from cybersecurity threats, which include any unauthorized access to our information systems
that may result in adverse effeff cts on the confidff entiality, integrity, or availabia lity of such systems or the related information. Such
attacks have become more sophisticated over time, especially as threat actors have become increasingly well-funded by, or themselves
include, governmental actors with significant means. We expect that sophistication of cyber-threats will continue to evolve as threat
actors increase their use of AI and machine-learning technologies.

The Company has robust processes for assessing, identifyiff ng and managing material risks from cybersecurity threats that are

integrated into our overall risk management process. The Company utilizes the National Institutt e of Standards and Technology
(NIST) framework as the basis for our cybersecurity management approach. Under the supeu rvision of the Chief Information Offiff cer
(“CIO”), we review our cybersecurity insurance policy and regularly identify all computing assets including hardware, software, and
network infrastructurt e for a comprehensive risk assessment. We consider threats that may originate from both internal and external
sources and build in technical security controls based on a defense-in-depth strategy. To identifyff
assessments on a recurring basis to proactively identifyff potential weaknesses. We additionally employ third party external and internal
penetration testing on an annual basis to assist in identifyiff ng additional vulnerabia lities in our environment. We also perform disaster
recovery exercises throughout the organization annually by our in-house team. In connection with our threat management and overall
risk management process, we receive recurring threat intelligence from our partners that help us recognize the updated tactics,
techniques, and procedurd es being utilized by threat actors and apply the MITRE ATT&CK framework to review defensive coverage
against cybersecurity attacks. Employees at H&E receive mandatory recurring cybersecurity training and phishing exercises to reduce
the likelihood of success by threat actors. Our managed detection and response partner provides 24/7 monitoring and detection of our
cybersecurity environment, which allows us to timely respond to cybersecurity events with the goal of reducing its potential impact.
The Company performs an IT security assessment of critical third-party vendors prior to establa ishing a formal relationship and has
additional processes in place to continue to oversee and identifyff
a formal relationship is establa ished. We additionally have a comprehensive incident response plan that outlines the appropriate
procedurd es, communication flow and response for potential cybersecurity incidents as well as categorizations of scope, incident and
impact of such incidents.

risks associated with the use of our third-party service providers once

risks, we complete vulnerabia lity

23

The Company’s information security and cybersecurity program is managed by our CIO whose team includes a VP of

Infrastructurt e and Director of IT Security (collectively, “the IT Security Team”), whom all have the necessary expertise, certificff ations
and experience to lead our enterprise-wide cybersecurity strategy, policy, architecturt e and processes. The CIO has over 25 years of
experience and has been a member and leader of our Company’s information systems and technological advancements for the past 21
years. The Director of IT Security, reporting to our VP of Infrastrucr
ture, is responsible for our overall network security and assessing
and managing cybersecurity risks and threats. The Director of IT Security has over 15 years of experience working in IT security and
holds CISSP and GIAC certificff ations. The VP of Infrastructurt e reports to our CIO, and has principal responsibility for our network
infrastructurt e and the operation of our cybersecurity program, network and system administration. The VP of Infrastructurt e has over
29 years of experience in system administration and has specialized in ERP systems and network infrastructurt e. Collectively, the IT
Security Team prepares updates and presentations for the Board of Directors, Audit Committee and executive management.

The IT Security team reports the detection, mitigation and remediation of cybersecurity incidents to executive management and

the Audit Committee of the Board of Directors. If we were to experience a cybersecurity incident, our Director of IT Security will
inform the rest of the IT Security Team, which will then evaluate and assess the materiality of the incident to the Company, its
information technology infrastructurt e and data integrity, and in accordance with our incident response plan, notifyff executive
management and the necessary finance, operations and legal team functions. The CIO would determine whether the cybersecurity
incident should be reported to the Audit Committee of the Board in advance of the next scheduled cybersecurity update. Once a
cybersecurity incident is reported to the Audit Committee of the Board and potentially the overall Board of Directors, the Audit
Committee, with the input of the IT Security Team and executive management, will determine how to address it and whether or not
the incident would require external reporting.

The Company’s Board of Directors, specificff ally the Audit Committee, is responsible for oversight and governance related to our
cybersecurity processes and risk management. The CIO reports the results of the annual comprehensive risk assessment, including the
evaluation of cybersecurity risks, the actions we have taken to mitigate these risks and an analysis of cybersecurity threats and
incidents across the industryrr
Committee on a semi-annual basis, or more frequently should a cybersecurity risk or event emerge requiring additional
communication. The Audit Committee will report on the cybersecurity risk updates it receives from the CIO to the Board of Directors
or as needed have the CIO report subsu equently to the full Board of Directors.

to the Board of Directors on an annual basis and reports cybersecurity risk updates to the Audit

Item 2. Properties

As of December 31, 2023, we had a network of 137 branch facilities in 30 states in the Pacific Northwest, West Coast,

Intermountain, Southwest, Gulf Coast, Southeast, Midwest and Mid-Atlantic regions of the United States. In our facilities, we rent,
ies, and provide maintenance and basic repair work. Of the 137 total facilities, we
display and sell equipment, including tools and suppl
lease 125 and own 12 of our locations. No one location is material to our business as a whole. Our leases typically provide for varying
terms and renewal options. The following tabla e provides data on our locations:

u

State
Alabama
Arizona
Arkansas
Califorff nia
Colorado
Delaware
Florida
Georgia
Idaho
Illinois
Indiana
Kansas
Kentuct ky
Louisiana
Maryland

Branch Count
6
3
2
15
6
1
13
6
2
3
3
1
1
9
2

State
Mississippi
Missouri
Montana
Nevada
New Mexico
North Carolina
Oklahoma
Oregon
Pennsylvania
South Carolina
Tennessee
Texas
Utah
Virginia
Washington

Branch Count
1
2
2
2
1
10
2
1
1
3
6
25
3
3
2

Each facility location has a branch manager who is responsible for day-to-day operations. In addition, branch operating facilities

are typically staffeff d with approximately 10 to over 50 people, who may include technicians, salespeople, rental operations staffff and
parts specialists. While facility offiff ces are typically open five days a week, we provide 24 hour, seven day per week service.

Our corporate headquarters employs approximately 381 people. Our corporate headquarters facility is on 3.1 acres of company-

owned land where we occupyu

a total of approximately 42,550 square feet.

24

Item 3. Legal Proceedings

For information on Company legal proceedings, see Note 13 to our Consolidated Financial Statements included in Part II, Item 8,

of this Annual Report on Form 10-K.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

Our common stock, par value $0.01 per share, trades on the Nasdaq Global Market (“Nasdaq”) under the symbol “HEES.”

Holders

As of December 31, 2023, there were 53 stockholders of record of our common stock. This does not include beneficial owners of

our common stock whose stock is held in nominee or “street name”.

Dividends

During the years ended December 31, 2023 and 2022, we paid quarterly cash dividends totaling $1.10 per share in each year, or

approximately $40.0 million and $39.9 million, respectively. We intend to continue to pay regular quarterly cash dividends; however,
the declaration of any subsu equent dividends is discretionary and will be subju ect to a final determination by the Board of Directors each
quarter afteff

r its review of,ff among other things, business and market conditions.

Securities Authorized for Issuance Under Equity Compensation Plans

For certain information concerning securities authorized for issuance under our equity compensation plan, see Item 12 — Security

Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters, which notes that the information
required by this Item is incorporated herein by reference from the Proxy Statement (as defined in Item 1 — Directors, Executive
Offiff cers and Corporate Governance).

Perforff mance Graph

The Performance Graph below compares the cumulative five year total stockholder return on H&E Equipment Services, Inc.’s

common stock beginning on December 31, 2018 and for each subsu equent quarter period end through and including December 31,
2023, with the cumulative returns of the Russell 2000 Index and an industryrr peer group selected by us. The Company updated its peer
group during the year ended December 31, 2023 to increase the size of its peer group and align with the Company’s recent transition
to a pure-play rental business. As such, the peer group we selected for the year ended December 31, 2023 is comprised of the
following companies: United Rentals, Inc., Herc Holdings Inc., The Ashtead Group, PLC, GATX Corporation, McGrath RentCorp,
WillScot Mobile Mini Holdings Corp., Astec Industries, Inc., Alta Equipment Group Inc., RB Global, Inc., DXP Enterprises, Inc.,
Arcosa, Inc., and Flowserve Corporation. Our historical peer group we selected for the years prior to the year ended December 31,
2023 is comprised of the following companies: United Rentals, Inc., Herc Holdings Inc., Toromont Industries, Ltd., Finning
International, Inc., and The Ashtead Group, PLC.

The Performance Graph comparison assumes $100 was invested in our common stock and in each of the other indices described

above on December 31, 2018. Dividend reinvestment has been assumed and returns have been weighted to reflect relative stock
market capitalization. The stock performance shown on the graph below is not necessarily indicative of future price performance.

25

H&E Equipment Services, Inc...................................... $
Russell 2000 Index........................................................
Peer Group 2023 ...........................................................
Peer Group 2022 ...........................................................

100.00
100.00
100.00
100.00

$

170.37
125.52
151.12
148.58

$

159.75
150.58
196.57
205.05

$

244.59
172.90
284.31
319.78

$

258.13
137.56
256.90
275.92

$

304.99
160.85
342.99
382.05

12/31/18

12/31/19

12/31/20

12/31/21

12/31/22

12/31/23

This stock performance information is “furff nished” and shall not be deemed to be “soliciting material” or subju ect to Rule 14A of

the Securities Exchange Act of 1934, as amended (the “Exchange Act”), shall not be deemed “fileff d” for purpos
Exchange Act or otherwise subju ect to the liabia lities of that section, and shall not be deemed incorporated by reference in any filing
under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or afteff
r the date of this Annual Report on
Form 10-K and irrespective of any general incorporation by reference language in any such filing, except to the extent that we
specifically incorporate this information by reference.

es of Section 18 of the

rr

Recent Sales of Unregistered Securities; Use of Proceeds From Registered Securities

None.

Issuer Purchases of Equity Securities

None.

Item 6. [Reserved]

Not applicable.

Item 7. 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 subsu idiaries as of

December 31, 2023, and its results of operations for the year ended December 31, 2023, and should be read in conjunction with our
consolidated financial statements and the accompanying notes thereto included elsewhere in this Annual Report on Form 10-K. The
following discussion contains, in addition to historical information, forward-looking statements that include risks and uncertainties
l results may
(see discussion of “Forward-Looking Statements” included elsewhere in this Annual Report on Form 10-K). Our actuat

26

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 this Annual Report on Form 10-K.

Backgrk ound

Founded in 1961 through our predecessor companies, we have been in the equipment services business for approximately 62
years and are one of the largest rental equipment companies in the nation. H&E Equipment Services L.L.C. (“ H&E L.L.C.”) was
formed in June 2002 through the business combination of Head & Engquist, a wholly-owned subsu idiary of Gulf Wide Industries,
L.L.C., and ICM Equipment Company L.L.C. In connection with our initial public offeff
ry 2006, we converted H&E
L.L.C. into H&E Equipment Services, Inc., a Delaware corporation.

ring in Februar

H&E serves a diverse set of end markets in many high-growth geographies including branches throughout the Pacific Northwest,

West Coast, Intermountain, Southwest, Gulf Coast, Southeast, Midwest and Mid-Atlantic regions. As of December 31, 2023, we
operated 137 branch locations across 30 states throughout the United States.

While focusing primarily on equipment rentals, we additionally engage in sales of rental equipment, sales of new equipment, parts

tion rental fleet is among the industry’rr

sales and repair and maintenance services. The Company’s construcrr
equipment mix comprised of aerial work platforms, earthmoving, material handling, and other general and specialty lines. We are
confidff ent our operating experience and extensive infrastructurt e developed throughout our historyrr as an integrated equipment services
company qualifieff d us to successfulff
ly transition to a pure-play rental company. This experience and infrastructurt e continues to provide
us with a competitive advantage enabling us to broaden our industryrr expansion. Our workforce includes an outside and inside sales
force for our rental operations and equipment sales, highly skilled service technicians, transportation drivers and regional and district
managers. Our management, from the corporate level down to the branch store level, has extensive industryrr experience. We believe
this allows us to provide specialized equipment knowledge, improve the effeff ctiveness of our sales force and strengthen our customer
relationships. In addition, we operate our day-to-day business on a branch basis, which allows us to more closely service our
customers, fosters management accountability at local levels and strengthens our local and regional relationships.

s youngest with an

Effeff ctive September 17, 2021, the Company sold its Little Rock, Arkansas and Springdale, Arkansas owned-branches. The sale
included the land, building, furniture and fixturt es, and shop equipment for the two branches and we relinquished the majoa rity of our
Arkansas territory distribution rights with equipment manufact

urt ers Komatsu, Wirtgen Group and Takeuchi.

ff

Effeff ctive October 1, 2021, the Company sold its crane business to a wholly-owned subsu idiary of The Manitowoc Company, Inc.
(“the Crane Sale”). The Crane Sale met the criteria for discontinued operations presentation and as such, the results of operations of
the Crane Sale are reported in discontinued operations in the Consolidated Statements of Income for the years ended December 31,
2022 and 2021. The financial results and information below are presented on a continuing operations basis and exclude the Crane
Sale, unless otherwise noted specifically as discontinued operations.

Effeff ctive October 1, 2022, the Company completed the acquisition of One Source Equipment Rentals, Inc. (“OSR”), a privately-

held equipment rentals company with 10 branch locations primarily in the Midwest.

Effeff ctive December 15, 2022, the Company sold its Komatsu distributorship in Louisiana. The sale included a branch location in

Kenner, LA, a branch in Shreveport, LA and accompanying new equipment inventory,rr

parts and suppl

u

ies.

Effeff ctive November 1, 2023, the Company completed the acquisition of Giffin Equipment (“Giffin”), a privately-held equipment

rentals company with three branch locations in California.

Busineii

ss Segme

ents

We have five reportabla e segments because we derive our revenues from five business activities: (1) equipment rentals; (2) sales of

rental equipment; (3) sales of new equipment; (4) parts sales; and (5) services revenue. Our primary segment is equipment rentals. In
addition, we also have non-segmented other revenues and costs that relate to equipment suppor
t activities. These segments are based
upon how we allocate resources and assess performance.

u

•

ent Rentals.ll Our rental operation is our principal focus and we primarily rent our core types of construcrr
Equipmi
industrial equipment (aerial work platforms, earthmoving equipment, material handling equipment and other general and
specialty lines). We have a well-maintained rental fleet and a dedicated sales team. We actively manage the size, quality,
age and composition of our rental fleet based on our analysis of key measures such as time utilization (a refleff ction of
equipment usage based on customer demand and calculated as our fleet’s original equipment cost on-rent divided by our
fleet’s total original equipment cost, averaged over the time period), rental rate trends and targets, rental equipment dollar
utilization, and maintenance and repair costs, which we closely monitor. Given the use of these measures by management,
we believe that investors’ understanding of our performance is enhanced by the disclosure of the measures as it allows

tion and

27

investors to view performance from management’s perspective. Additionally, we maintain fleet quality through quality
control inspections and our parts and services operations.

Sales of Rental Equipmi
equipment allow us to manage the size, quality, composition and age of our rental fleet, and provide us with a profitaff bla e
distribution channel for the disposal of rental equipment.

ent. Our used sales are generated primarily from sales from our rental fleet. Sales of our rental fleet

Sales of New Equipmi
impacted by the availabia lity of equipment from the manufacff
supplu

iers improves our ability to obtain equipment.

ent. We sell equipment through a profesff

sional sales force. While sales of new equipment are
turer, we believe our relationship with some of our key

Partstt Sales. Our parts business provides parts to our own rental fleet and sells parts for the equipment we sell. In order to
provide timely parts and services suppor

t to our rental fleet as well as our customers, we maintain a parts inventory.rr

u

Services. Our services operation provides maintenance and repair services to our own rental fleet and for our customers’
equipment at our facilities as well as at our customers’ locations.

•

•

•

•

Our other revenues are non-segmented and relate to costs primarily related to ancillary charges associated with equipment

maintenance and repair services, and are not generally allocated to reportabla e segments.

For additional information about our business segments, see Note 16 to our Consolidated Financial Statements in this Annual

Report on Form 10-K.

Revenue Sources

We generate all of our total revenues from our five business activities and our other equipment suppor

u

t activities. Equipment

rentals accounts for the majoa rity of our total revenues.

The pie charts below illustrate a breakdown of our revenues and gross profitff

for the year ended December 31, 2023 by source:

The equipment that we rent, sell and service is principally used in the construcr

tion industry,rr

as well as by companies for

commercial and industrial uses such as plant maintenance and turnarounds, and in the petrochemical and energy sectors. As a result,
our total revenues are affeff cted by several factors including, but not limited to, the demand for and availabia lity of rental equipment,
rental rates and other competitive factors, the demand for used and new equipment, the level of construcr
spending levels by our customers, adverse weather conditions, suppl

ions and general economic conditions.

tion and industrial activities,

y chain disrupt

u

r

ent Rentals.ll Our rental operation primarily represents revenues from renting owned equipment of our core types of
tion and industrial equipment (aerial work platforms, earthmoving equipment, material handling equipment and other

Equipmi
construcr
general and specialty lines). We primarily account for these rental contracts as operating leases. We recognize revenue from
equipment rentals in the period earned, regardless of the timing of billing to customers. A rental contract includes rates for daily,
weekly or monthly use, and rental revenues are earned on a daily basis as rental contracts remain outstanding. We have a well-
maintained rental fleet and we actively manage the size, quality, age and composition of our rental fleet.

Sales of Rental Equipmi

ent. We generate the majoa rity of our used sales revenues by selling equipment from our rental fleet.

Sales of New Equipmi

ent. Our sales of new equipment operation sells equipment across all of our core categories of equipment.

28

Parts,tt Service and Othett
r. We primarily generate revenues from the sale of parts for equipment that we rent or sell. We primarily
derive our services revenues from maintenance and repair services for equipment that we rent or sell and from customers' owned
equipment. Our other revenues relate primarily to ancillaryrr charges associated with equipment maintenance and repair services.

ii
Principal

Coststt and Expexx nses

Our largest expenses are rental expenses, rental depreciation, rental other expenses, the costs associated with the used equipment

we sell, the costs to purchase new equipment and costs associated with parts sales and services, all of which are included in cost of
revenues. For the year ended December 31, 2023, our total cost of revenues was approximately $784.8 million. Our operating
expenses consist principally of selling, general and administrative expenses (“SG&A”). For year ended December 31, 2023, our
SG&A expenses were $405.4 million. In addition, we have interest expense primarily related to our debt instruments. Operating
expenses and all other income and expense items below the gross profitff
generally allocated to our reportabla e segments.

line of our Consolidated Statements of Income are not

We are also subju ect to federal and state income taxes. Future income tax examinations by state and federal agencies could result

in additional income tax expense based on potential outcomes of such matters.

Cost of Revenues:

Rental Depre
Estimated usefulff
estimated usefulff
handling equipment over a seven year estimated usefulff
three year estimated usefulff
equipment.

eciation. Depreciation of rental equipment represents the depreciation costs attributable to rental equipment.
lives vary based upon type of equipment. Generally, we depreciate aerial work platforms over a ten year
life with a 25% salvage value, and material
life, earthmoving equipment over a five year estimated usefulff

life.ff We periodically evaluate the appropriateness of remaining depreciable lives assigned to rental

life. Attachments and other smaller type equipment are depreciated over a

Rental Expex nse. Rental expense represents the costs associated with rental equipment, including, among other things, the cost of
repairing and maintaining our rental equipment, property taxes on our fleet and other miscellaneous costs of owning rental
equipment.

Rental Othett
with renting equipment, such as hauling services, damage waiver policies, environmental fees and other recovery fees.

r. Rental other expenses consist primarily of equipment suppor

t activities that we provide our customers in connection

u

Sales of Rental Equipmi
equipment sold from our rental fleet.

ent. Cost of used equipment sold primarily consists of the net book value of rental equipment for used

Sales of New Equipmi

ent. Cost of new equipment sold primarily consists of the equipment cost of the new equipment that is sold.

r. Cost of parts sales represents costs attributable to the sale of parts used in the maintenance and repair of

Parts,tt Service and Othett
equipment on-rent by customers and directly to customers for their owned equipment. Cost of services revenues represents costs
attributable to service provided for the maintenance and repair of equipment on-rent by customers and of customer-owned
equipment. Our other expenses include costs associated with ancillary charges associated with equipment maintenance and repair
services.

Sellingii

,gg General and Admidd niii

stii ratt

tive Expexx nses:

Our SG&A expenses include sales and marketing expenses, payroll and related benefit costs, including stock compensation

expense, insurance expenses, profesff
acquisition costs, 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 reportabla e segments.

sional fees, rent and other occupau ncy costs, property and other taxes, administrative overhead,

Interest Expexx nse:

Interest expense for the periods presented represents the interest on our outstanding debt instruments, including aggregate
amounts outstanding under our revolving $750.0 million senior secured credit facility (the “Credit Facility”), our $1.25 billion,
3.875% senior unsecured notes due 2028 (the “Senior Unsecured Notes”) and finance lease obligations. Non-cash interest expense
related to the amortization cost of deferred financing costs and the accretion/amortization of note discount/ptt
in interest expense.

remium are also included

ii
Principal

Cash Flowll

s

We generate cash primarily from our operating activities and, historically, we have used cash flows from operating activities and
availabla e borrowings under the Credit Facility as the primary sources of funds to purchase new equipment and to fund working capital

29

and capia tal expenditures, growth and expansion opportunities (see also “Liquidity and Capia tal Resources” below). The management of
our working capital is closely tied to operating cash flows, as working capital can be impacted by, among other things, our accounts
receivabla e activities, the level of equipment inventory,rr which may increase or decrease in response to current and expected demand,
and the size and timing of our trade accounts payabla e payment cycles.

t
Rentaltt Fleell

A subsu tantial portion of our overall value is in our rental fleet equipment. The net book value of our rental equipment at

December 31, 2023 was $1.8 billion, or approximately 66.5% of our total assets. Our rental fleet as of December 31, 2023 consisted of
61,044 units having an original acquisition cost (which we define as the cost originally paid to manufact
billion. As of December 31, 2023, our rental fleet composition was as follows (dollars in millions):

urt ers) of approximately $2.8

ff

Aerial Work Platforms ..........................................................
Earthmoving ..........................................................................
Material Handling Equipment ...............................................
Other......................................................................................
Total ......................................................................................

% of
Total
Units

Original
Acquisition
Cost

44.6% $
14.1%
16.7%
24.6%
100.0%

924.3
744.0
816.7
306.0
2,791.0

% of
Original
Acquisition
Cost

Average
Age in
Months

33.1%
26.7%
29.3%
10.9%
100.0%

51.5
23.7
39.6
27.4
39.7

Units

27,244
8,604
10,212
14,984
61,044

Determining the optimal age and mix for our rental fleet equipment is subju ective 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 as part of our fleet management strategy. The mix and age of our
rental fleet, as well as our cash flows, are impacted by sales of rental equipment, which are influenced by used equipment pricing at
the retail and secondary auction market levels, the demand for our rental fleet, the availabia lity of new equipment and the capia tal
expenditures to acquire fleet. In making equipment acquisition decisions, we evaluate current economic and market conditions,
competition, manufacturt ers’ availabia lity, pricing and return on investment over the estimated usefulff
among other things. As a result of our in-house service capabilities and extensive maintenance program, our rental fleet is well-
maintained.

lifeff of the specificff

equipment,

The original acquisition cost of our gross rental fleet increased by approximately $432.6 million, or 18.3%, for the year ended
December 31, 2023, largely reflective of an increase in rental fleet capital expenditures. The average age of our rental fleet equipment
decreased by approximately 3.9 months for the year ended December 31, 2023. Our average rental rates for the year ended
December 31, 2023 were approximately 5.6% higher than the year ended December 31, 2022 (see further discussion on rental rates in
“Results of Operations” below).

The rental equipment mix among our core product lines for the year ended December 31, 2023 was largely consistent with that of

the prior year as a percentage of total units availabla e for rent and as a percentage of original acquisition cost.

ii
Principal

External Factortt

srr that Affeff ct our Busineii

sses

We are subju ect to a number of external factors that may adversely affeff ct our businesses. These factors, and other factors, are
discussed below and under the heading “Forward-Looking Statements,” and in Item 1A—Risk Factors in this Annual Report on Form
10-K.

•

•

tion and industrial markets, as well as adverse credit market conditions, can cause demand for our products to

Economic downturns. The demand for our products is dependent on the general economy, which is in turn affeff cted by
geopolitical conditions, the stability of the global credit markets, inflationary pressures, increasing interest rates, the
industries in which our customers operate or serve, and other factors. Downturns in the general economy or in the
construcrr
materially decrease. Our operations are also impacted by global economic conditions, including inflation, increased
interest rates and suppl
ions have been limited and related to the
u
timing of receiving equipment orders, which have been moderate and did not extend beyond a significant period of time.
We have experienced and may continue to experience inflationary pressures, including but not limited to cost increases
related to equipment, fuel and hauling expenses that we attempt to mitigate through pricing and productivity initiatives.

y chain constraints. To date, our suppl

y chain disrupt

u

rr

Spending levels by customers.rr Rentals and sales of equipment to the construcrr
constitute a significant portion of our total revenues. As a result, we depend upon customers in these businesses and their
ability and willingness to rent or buy equipment. Accordingly, our business is impacted by fluctuations in customers’
spending levels and seasonality, as discussed in Item 1.

tion industryrr and to industrial companies

30

•

•

•

serr weathett

Adverdd
r. 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, particularly in the winter months.

Activity and Trends. Expenditures by our customers may be impacted by the overall level
tion activity in the markets and regions in which they operate, the price of oil and other commodities, the price

Regie onal and Industry-r Specifici
of construcrr
of materials, suppl
which our customers and end users operate. As our customers adjud st their activity and spending levels in response to these
external factors, our rentals and sales of equipment to those customers will be impacted.

r shortages and other general economic trends impacting the industries in

y chain disruprr

tions, laboa

u

e

ations. As discussed in Item 1—Environmental and Safety Regulations and Item 1A—

Climate Change and ESG Regul
Risk Factors—"We could be adversely affeff cted by environmental and safety requirements and regulations, including
those regarding climate change, which could subju ect us to increased operational costs that could materially and adversely
impact our liquidity and operating results”, our facilities and operations are subju ect to comprehensive and frequently
changing federal, state and local environmental and occupau tional health and safety laws. We have made, and will continue
to make, capital and other expenditures to comply with environmental requirements. While we do not currently anticipate
any material adverse effeff ct on our business, financial condition or competitive position as a result of our effort
s to comply
with such requirements, new or more stringent laws or regulations regarding in environmental and worker health and
safety laws could affeff ct our operations and increase our operational and compliance expenditures. It is also possible that
liabilities from newly-discovered non-compliance or contamination could have a material adverse effeff ct on our business,
financial condition and results of operations.

ff

Critical Accounting Estimates

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United
States of America. The application of many accounting principles requires us to make assumptions, estimates and/or judgments that
affeff ct the reported amounts of assets, liabia lities, revenues and expenses in our consolidated financial statements. We base our
estimates and judgments on historical experience and other assumptions that we believe are reasonabla e under the circumstances. These
l results may change based on changing
assumptions, estimates and/or judgments, however, are ofteff n subju ective and they and our actuat
circumstances or changes in our analyses. If actuat
l amounts are ultimately different from our estimates, the revisions are included in
our results of operations for the period in which the actual amounts first become known. We believe the following critical accounting
estimates could potentially producd e materially different results if we were to change underlying assumptions, estimates and/or
judgments. See also Note 2 to our Consolidated Financial Statements for a summary of our significant accounting policies.

Usefulff Lives of Rental Equipmi

ent and Propertytt and Equipmi

lives (generally three to ten years), afteff

lifeff of rental equipment is determined based on our estimate of the period the asset will generate revenues, and the

their estimated usefulff
cost. The usefulff
salvage value is determined based on our estimate of the minimum value we could realize from the asset afteff
periodically review the assumptions utilized in computing rates of depreciation. We may be required to change these estimates based
on changes in our industryrr or other changing circumstances. If these estimates change in the future, we may be required to recognize
increased or decreased depreciation expense for these assets.

r such period. We

ent. We depreciate rental equipment and property and equipment over
r giving effeff ct to an estimated salvage value ranging from 0% to 25% of

The amount of depreciation expense we record is dependent upon the estimated usefulff

lives and the salvage values assigned to

each categoryrr of rental equipment. Generally, we assign estimated usefulff
year life with a 25% salvage value, seven-year lifeff and a ten-year life.ff None of the usefulff
prior or current period. Depreciation expense on our rental fleet as of December 31, 2023 was approximately $347.0 million. As of
lives for each categoryrr of equipment by two
December 31, 2023, the estimated depreciation assuming a change in estimated usefulff
years was as follows:

lives to our rental fleet ranging from a three-year life, five-
lives assumptions have changed during the

Impacm t of 2-ye- ar change in usefulff
of December 31, 2023

lifei on results of operations as

Aerial Work
Platforms

Earth-
moving

Material
Handling
Equipment
($ in millions)

Other

Total

Depreciation expense for the year ended December 31,
2023........................................................................................ $
ff
life .
Increase of 2 years in usefulff
life .ff
Decrease of 2 years in usefulff

...........................................
..........................................

$

101.9
77.0
115.5

$

112.8
79.7
186.0

$

82.0
90.7
163.3

$

50.3
61.2
50.3

347.0
308.7
515.2

31

For purpos

r

es of the sensitivity analysis above, we elected not to decrease the usefulff

lives of other equipment, which are primarily

three-year estimated usefulff
lifeff assets; rather, we have held the depreciation expense constant at the actuat
expense. We believe that decreasing the lifeff of the other equipment by two years is an unreasonabla e estimate and would potentially
lead to the decision to expense, rather than capitalize, that portion of the subju ect asset class. In general terms, a one-year increase in
the estimated life across all classes of our rental equipment will give rise to an approximate decrease in our annual depreciation
expense of approximately $19.2 million. Additionally, a one-year decrease in the estimated lifeff across all classes of our rental
equipment (with the exception of other equipment as discussed above) will give rise to an approximate increase in our annual
depreciation expense of approximately $84.1 million.

l amount of depreciation

Another assumption used in our calculation of depreciation expense is the estimated salvage value assigned to our earthmoving
equipment. Based on our historical data and recent experience, we have used a 25% factor of the equipment’s original cost to estimate
its salvage value. This factor is subju ective and subju ect to change in the future based upon actuat
equipment. A change of 5%, either increase or decrease, in the estimated salvage value would result in a change in our annual
depreciation expense of approximately $7.4 million.

l results at the time we dispose of the

Acquisiii

tion Accounting. We have made a number of acquisitions in the past and we may continue to make additional acquisitions

lly all of the rental equipment that we have acquired through business combinations have been

in the future. The assets acquired and liabilities assumed are recorded based on their respective fair values at the date of acquisition.
Long-lived assets (principally rental equipment), goodwill and other intangible assets generally represent the largest component of our
acquisitions. Historically, virtuat
classified as “To be Used,” rather than as “To be Sold.” Rental equipment that we acquire and classify as “To be Used” is recorded at
fair value and is valued utilizing either a cost or market approach, or a combination of these methods, depending on the asset being
valued and the availabia lity of cost or market data. Goodwill is calculated as the excess of the fair value of consideration transferff
red
over the net of the fair value of the assets acquired and the liabilities assumed. Such fair market value assessments require judgments
and estimates that can be affeff cted by various factors over time, which may cause final amounts to differ materially from original
estimates. The identification of assets acquired, inputs utilized for determining the fair value of assets acquired and liabilities assumed
and applicable fair value methodologies, discussed more below, all include significant judgment. We have not changed our
assumption methodologies during the current or prior period.

In addition to long-lived fixed assets, we also acquire other assets and assume liabilities. These other assets and liabilities

accounts receivabla e, accounts payabla e and other working capia tal items.

typically include, but are not limited to, parts inventory,rr
Because of their short-term nature, the fair values of these assets and liabilities generally approximate the carrying values reflected on
the acquired entities balance sheets. However, when appropriate, we adjud st these carrying values for factors such as collectability and
existence. The intangible assets that we have acquired generally consist primarily of the goodwill recognized. Depending upon the
applicable purchase agreement and the particular facts and circumstances of the business acquired, we may identify other intangible
assets, such as trade names or trademarks, noncompetition agreements and customer-related intangibles (specifically, customer
relationships). A trademark has a fair value equal to the present value of the royalty income attributable to it. The royalty income
attributable to a trademark represents the hypothetical cost savings that are derived from owning the trademark instead of paying
royalties to license the trademark from another owner. When specificff ally negotiated by the parties in the applicable purchase
agreements, we base the value of noncompetition agreements on the amounts assigned to them in the purchase agreements as these
amounts represent the amounts negotiated in an arm’s length transaction. When not negotiated by the parties in the applicable
purchase agreements, the fair value of noncompetition agreements is estimated based on an income approach since their values are
representative of the current and future revenue and profitff erosion protection they provide. Customer relationships are generally
valued based on an excess earnings or income approach with consideration to projected cash flows.

Evaluation of Goodwill Impaim rment. We evaluate goodwill for impairment annually or more frequently if triggering events occur

or other impairment indicators arise that would more likely than not reduce the fair value of a reporting unit below its carryirr ng
amount. A triggering event analysis and identification may include judgments.

Application of the goodwill impairment test requires judgment, including: the identification of reporting units; assignment of
assets and liabilities to reporting units; assignment of goodwill to reporting units; determination of the fair value of each reporting
unit; fair value methodologies and assumptions, and an assumption as to the form of the transaction in which the reporting unit would
be acquired by a market participant (either a taxabla e or nontaxable transaction). Impairment of goodwill is evaluated at the reporting
unit level. A reporting unit is defined as an operating segment or one level below an operating segment (i.e., a component). We have
determined that each of our operating segments (Equipment Rentals, Sales of Rental Equipment, Sales of New Equipment, Parts, and
Services) represents a reporting unit, resulting in five total reporting units.

32

As of December 31, 2023, our goodwill was comprised of the following carrying values (amounts in thousands):

Reporting Unit
Equipment Rentals ..............................................................................................................................................
Sales of Rental Equipment..................................................................................................................................
Sales of New Equipment.....................................................................................................................................
Parts Sales ...........................................................................................................................................................
Services Revenues ..............................................................................................................................................
Total Goodwill ................................................................................................................................................

$

$

Carrying Value at
December 31, 2023

99,708
8,447
—
—
—
108,155

During 2023, based on our evaluation of our Parts Sales reporting unit and operating segment during the third quarter, we

l revenue and earnings compared with our planned revenue and earnings utilized in our most recent quantitative

identified a triggering event requiring an interim impairment test. This triggering event related to a sustained parts segment decline in
volume and actuat
goodwill impairment analysis following our business’s dispositions and strategic shiftff to be rental focused. No triggering event was
identified related to our Equipment Rental and Sales of Rental Equipment reporting units. We estimated the fair value of our Parts
Sales reporting unit by weighting results from the income approach and the market approach and concluded that our Parts Sales
reporting unit had a fair value less than its carryirr ng value, resulting in a $5.7 million impairment charge. The impairment was largely
due to a current year decrease in parts revenues as a result of our business’s strategic shiftff and recent dispositions. This revenue
decline, combined with our forecasted parts revenues growth rate and operating results assumptions for the forecast period under the
income approach, resulted in a fair value determination, that when combined with the weighted fair value of the reporting unit
determined under the market approach, was less than the reporting unit’s carrying value.

We performed a qualitative assessment of goodwill impairment as of our annual testing date, October 1, 2023. We determined

that it was more likely than not that the fair value of each of our reporting units containing goodwill was not less than its carrying
value and, thereforff e, did not perform the prescribed quantitative goodwill impairment test. We considered various factors in
performing the qualitative test, including macroeconomic conditions, industryrr and market considerations, the overall financial
performance of our reporting units, the Company’s stock price and the excess amount between our reporting unit’s fair value and
carrying value as indicated on our most recent interim quantitative assessment.

During 2022, we performed, as of October 1, our annual impairment testing date, a Step 0 qualitative assessment and determined

that it was more likely than not that the fair value of each of our reporting units containing goodwill was not less than its carrying
value and, thereforff e, did not perform the prescribed quantitative Step 1 goodwill impairment test. We considered various factors in
performing the qualitative test, including macroeconomic conditions, industryrr and market considerations, the overall financial
performance of our reporting units, the Company’s stock price and the excess amount between our reporting unit’s fair value and
carrying value as indicated on our most recent quantitative assessment.

As of October 1, 2021, our annual impairment test date, we performed a Step 1 quantitative assessment of goodwill impairment
for all reporting units containing goodwill. For these reporting units, we compared the carrying values of each reporting unit, inclusive
of goodwill and definite-lived intangible assets, to its fair value. We estimated the fair value of these reporting units by weighting
results from the income approach and the market approach, as further described below. Based on this quantitative test, we determined
that our Equipment Rentals, Sales of Rental Equipment and Parts Sales reporting units were not impaired as of the October 1, 2021
annual impairment testing date as their respective fair values exceeded their respective carrying values by approximately 50%, 98%
and 9%, respectively. Based on the excess of fair values over the carrying values, a sensitivity analysis completed on the assumptions
utilized would not result in a varying conclusion of the goodwill quantitative assessment.

For purpos

r

es of performing the quantitative impairment tests described above, we estimate the fair value of our reporting units by

utilizing fair value techniques consistent with the income approach and market approach. When performing the income approach for
each reporting unit, we use a discounted cash flow analysis based on our internal projected results of operations, weighted average
cost of capia tal (“WACC”) and terminal value assumptions. Our cash flow projections are based on ten-year financial forecasts
developed by management that include revenue projections, capital spending trends, and investment in working capia tal to suppor
t
anticipated revenue growth. The WACC is an estimate of the overall afteff
business enterprise and represents the expected cost of new capia tal likely to be used by market participants. The WACC is used to
discount our combined future cash flows. The inputs and variables used in determining the fair value of a reporting unit require
management to make certain assumptions regarding the impact of operating and macroeconomic changes, as well as estimates of
future cash flows. Our estimates regarding future cash flows are based on historical experience and projections of future operating
performance, including revenues, margins and operating expenses. We also make certain forecasts about future economic conditions,
interest rates and other market data. Many of the factors used in assessing fair value are outside the control of management, and these
assumptions and estimates may change in future periods. Changes in assumptions or estimates could materially affeff ct the estimate of a
reporting unit’s fair value, and thereforff e could affeff ct the likelihood and amount of potential impairment. Under the market approach,
we compare the reporting units to selected reasonabla y similar (or “guideline”) publicly-traded companies. Under this method,

r-tax rate of return required by equity and debt holders of a

u

33

valuation multiples are: (i) derived from the operating data of selected guideline companies; (ii) evaluated and adjud sted based on the
strengths and weaknesses of our reporting unit relative to the selected guideline companies; and (iii) applied to the operating data of
our reporting unit to arrive at an indication of value. The application of the market approach results in an estimate of the price
reasonabla y expected to be realized from the sale of the reporting unit.

Income Taxesaa

. The Company files a consolidated federal income tax return with its wholly-owned subsu idiaries. The Company is a

C-Corporation under the provisions of the Internal Revenue Code. We utilize the asset and liabia lity approach to measure deferred tax
assets and liabilities based on temporaryrr differences existing at each balance sheet date using currently enacted tax rates. Deferred tax
assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabia lities are measured using enacted
tax rates expected to apply to taxabla e income in the years in which those temporaryrr differences are expected to be recovered or settled.
The effeff ct of a change in tax rate is recognized as income or expense in the period that includes the enactment date of that tax rate.

The Company recognizes the effeff ct of an income tax position only if it is more likely than not (a likelihood of greater than 50%)

that such position will be sustained. Recognized income tax positions are measured at the largest amount that is greater than 50%
likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.
The Company recognizes both interest and penalties related to uncertain tax positions in net other income (expense).

Our deferred tax calculation requires management to make certain estimates about future operations. Deferred tax assets are

reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the
deferred tax assets will not be realized. These estimates involve judgment. There has been no change to the assumption methodology
during the current or prior period.

Our U.S. federal tax returns for 2020 and subsu equent years remain subju ect to examination by tax authorities. We are also subju ect

to examination in various state jurisdictions for 2019 and subsu equent years.

Results of Operations

The tabla es included in the period-to-period comparisons below provide summaries of our revenues and gross profitff s for the years
ended December 31, 2023 and 2022. The period-to-period comparisons of our financial results are not necessarily indicative of future
results. All financial results and metrics discussed below are on a continuing operations basis.

As discussed further in Note 2 and Note 3 to our Consolidated Financial Statements, on October 1, 2021, the Company sold its

crane business and during the second quarter of 2022 the Company finalized closing adjud stments. The results of operations of the
Crane Sale are reported in discontinued operations in the Consolidated Statements of Income for the years ended December 31, 2022
and 2021. The Consolidated Statements of Cash Flows includes cash flows related to the discontinued operations and accordingly,
cash flow amounts for discontinued operations are disclosed in Note 3 “Acquisitions and Dispositions”.

Our prior year discussion for the years ended December 31, 2022 and 2021 can be found here, in Item 7 of our Annual Report on

Form 10-K for the year ended December 31, 2022, which is incorporated by reference herein.

Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022

Revenues.

Revenues:

Equipment rentals

For the Year Ended
December 31,

2023

2022

Total Dollar
Increase
(Decrease)

Total
Percentage
Increase
(Decrease)

Rentals ...................................................................................... $ 1,051,632
134,520
Rentals other .............................................................................
1,186,152
Total equipment rentals .......................................................
165,074
Sales of rental equipment...............................................................
39,099
Sales of new equipment .................................................................
78,891
Parts, service and other ..................................................................
Total revenues............................................................................ $ 1,469,216

$

$

847,555
108,487
956,042
90,885
92,526
105,065
1,244,518

$

$

204,077
26,033
230,110
74,189
(53,427)
(26,174)
224,698

24.1%
24.0%
24.1%
81.6%
(57.7)%
(24.9)%
18.1%

Total Revenues. Our total revenues were $1.5 billion for the year ended December 31, 2023 compared to $1.2 billion for the year

ended December 31, 2022, an increase of $224.7 million, or 18.1%. Revenues of our business activities are further discussed below.

34

Equipmi

ent Rental Revenues. Our total revenues from equipment rentals for the year ended December 31, 2023 increased $230.1

million, or 24.1%, to $1.2 billion from $956.0 million in 2022. The increase in equipment rental revenues was primarily due to our
larger fleet and increased rental rates as compared to the prior year. See Rentals and Rentals Other below for additional information.

Rentals:ll Rental revenues increased $204.1 million, or 24.1%, to $1.1 billion for the year ended December 31, 2023 compared to

$847.6 million for the year ended December 31, 2022. Rental revenues from material handling equipment increased $65.4 million,
aerial work platform equipment increased $60.0 million, earthmoving equipment increased $49.2 million and other equipment
increased $29.5 million as compared to the prior period. Our average rental rates, based on the American Rental Association’s
calculation methodology, for the year ended December 31, 2023 increased 5.6% compared to the year ended December 31, 2022.
Rental equipment dollar utilization (annual rental revenues divided by the average original rental fleet equipment costs) for the year
ended December 31, 2023 decreased 0.6% to 40.3% from 40.9% in 2022. The decrease in comparative rental equipment dollar
utilization was the net result of a decrease in rental equipment time utilization and an increase in equipment rental rates. Rental
equipment time utilization as a percentage of original equipment cost was approximately 68.8% for the year ended December 31, 2023
compared to 72.3% in the year ended December 31, 2022, a decrease of 3.5%.

Rentalsll Othett

r: Our rentals other revenues consist primarily of equipment suppor

u

t activities that we provide to customers in

connection with renting equipment, such as hauling charges, damage waiver policies, environmental and other recovery fees. Rental
other revenues for the year ended December 31, 2023 were $134.5 million compared to $108.5 million for the year ended
December 31, 2022, an increase of $26.0 million, or 24.0%, primarily due to the increase in equipment rental revenues as described
above.

Sales of Rental Equipmi

ent Revenues. Our sales of rental equipment for the year ended December 31, 2023 increased $74.2

million, or 81.6%, to $165.1 million from $90.9 million in 2022. This increase is reflective of our fleet management strategy and our
decision to capitalize on the high demand for used equipment. Sales of used earthmoving equipment, material handling equipment and
aerial work platform equipment increased $32.5 million, $21.1 million and $13.7 million, respectively.

Sales of New Equipmi

ent Revenues. Our sales of new equipment decreased $53.4 million, or 57.7%, to $39.1 million for the year

ended December 31, 2023, from $92.5 million for the same period in 2022. This decrease is primarily reflective of the sale of our
Komatsu Earthmoving Distributorship during the fourth quarter of 2022, as a result of which sales of new earthmoving equipment
decreased $52.4 million. Additionally, sales of new material handling equipment and other equipment decreased $2.1 million and $1.6
million, respectively. Offsff etting these decreases, sales of new aerial work platform equipment increased $2.7 million.

Parts,tt Service and Othett

r Revenues. Our parts, service and other revenues decreased $26.2 million, or 24.9%, to $78.9 million for

the year ended December 31, 2023 from $105.1 million for the same period in 2022. The decreases in parts and service sales were
largely attributable to decreases related to earthmoving equipment following the sale of our Komatsu Earthmoving Distributorship
during the fourth quarter of 2022.

Gross Profitff .tt

Gross Profitff :

Equipment rentals

For the Year Ended
December 31,

2023

Total Dollar
Increase
(Decrease)
(in thousands, except percentages)

2022

Total
Percentage
Increase
(Decrease)

Rentals ....................................................................................... $
Rentals other..............................................................................
Total equipment rentals ........................................................
Sales of rental equipment ...............................................................
Sales of new equipment..................................................................
Parts, service and other...................................................................

Total gross profitff

........................................................................ $

547,792
5,647
553,439
99,891
5,530
25,601
684,461

$

$

451,310
8,933
460,243
44,316
13,096
37,508
555,163

$

$

96,482
(3,286)
93,196
55,575
(7,566)
(11,907)
129,298

21.4%
(36.8)%
20.2%
125.4%
(57.8)%
(31.7)%
23.3%

Total Gross Profit.

ff Our total gross profitff was $684.5 million for the year ended December 31, 2023 compared to $555.2 million

for the year ended December 31, 2022, an increase of $129.3 million, or 23.3%. Total gross profitff margin for the year ended
December 31, 2023 was approximately 46.6%, an increase of 2.0% from the 44.6% gross profitff margin for the same period in 2022.
Gross profitff s and gross margins of our business activities are further described below.

Equipmi

ent Rentalsll Gross Profit.ff Our total gross profitff

from equipment rentals for the year ended December 31, 2023 increased

$93.2 million, or 20.2%, to approximately $553.4 million from $460.2 million in 2022. Total gross profitff margin from equipment

35

rentals for the year ended December 31, 2023 was approximately 46.7% compared to 48.1% for the year ended December 31, 2022, a
decrease of 1.4%. See Rentals and Rentals Other below for additional information.

Rentals:ll Rental revenue gross profitff

increased $96.5 million to $547.8 million for the year ended December 31, 2023 compared to

$451.3 million for the year ended December 31, 2022. The increase in rentals gross profitff was the result of a $204.1 million increase
in rental revenues for the year ended December 31, 2023 compared to last year, which was partially offsff et by a $79.6 million increase
in rental depreciation expense and a $28.0 million increase in rental expenses. The increase in both depreciation expense and rental
expense is primarily due to a larger fleet size in 2023 compared to 2022. Gross profitff margin on rentals for the year ended
December 31, 2023 was approximately 52.1% compared to 53.2% in 2022, a decrease of 1.1%. As a percentage of rental revenues,
rental expenses were 14.9% and 15.2% for the years ended December 31, 2023 and 2022, respectively, a decrease of 0.3%.
Depreciation expense was 33.0% of rental revenues for the year ended December 31, 2023 compared to 31.5% for the same period in
2022, an increase of 1.5%.

Rentalsll Othett

r: Our rentals other revenue consists primarily of equipment suppor

u

t activities that we provide to customers in

connection with renting equipment, such as hauling charges, damage waiver policies, environmental and other recovery fees. Rental
other revenues gross profitff
December 31, 2022, a decrease of $3.3 million. Gross profitff margin was 4.2% for the year ended December 31, 2023 compared to
8.2% for the same period last year, a decrease of 4.0%.

for the year ended December 31, 2023 was $5.6 million compared to $8.9 million for the year ended

ent Gross Profit.

Sales of Rental Equipmi

ff Our sales of rental equipment gross profitff
increased $55.6 million, or 125.4%, to $99.9 million compared to $44.3 million in 2022 on increased sales of rental equipment of
$74.2 million. Gross profitff margin on sales of rental equipment for the year ended December 31, 2023 was approximately 60.5%, up
11.7% from 48.8% in 2022, primarily as a result of higher gross margins across all product lines. Our sales from rental fleet comprised
approximately 99.3% and 92.1% of our sales of rental equipment for the years ended December 31, 2023 and 2022, respectively, and
were approximately 255.0% and 207.7% of net book value for the years ended December 31, 2023 and 2022, respectively.

for the year ended December 31, 2023

Sales of New Equipmi

ent Gross Profit.ff Our sales of new equipment gross profitff

for the year ended December 31, 2023 decreased

approximately $7.6 million, or 57.8%, to $5.5 million from $13.1 million in 2022, on decreased sales of new equipment of $53.4
million. Gross profitff margin on sales of new equipment for the year ended December 31, 2023 was 14.1% compared to 14.2% for the
year ended December 31, 2022.

Parts,tt Service and Othett

r Gross Profitff . For the year ended December 31, 2023, our parts, service and other revenues gross profitff

decreased $11.9 million, or 31.7%, to $25.6 million from $37.5 million for the same period in 2022, on $26.2 million decreased parts,
service and other revenues. Gross profitff margin on parts, service and other revenues for the year ended December 31, 2023 was
32.5%, a decrease of approximately 3.2% from 35.7% in the same period in 2022.

Sellingii

,gg General and Admidd niii

stii ratt

tive Expexx nses. SG&A expenses increased approximately $61.6 million, or 17.9%, to $405.4

million for the year ended December 31, 2023 compared to $343.8 million for the year ended December 31, 2022. The net increase in
SG&A expenses was attributable to several factors. Employee salaries, wages, incentive compensation, payroll taxes and related
employee benefits increased $34.8 million, primarily as a result of increased wages, commissions, health insurance and incentive pay
related to increased revenues. Facility expenses, depreciation and amortization expenses, profesff
sional fees, promotional expenses and
liabia lity insurance costs increased $6.2 million, $4.7 million, $4.4 million, $2.8 million and $2.3 million, respectively. Approximately
$31.0 million of incremental SG&A expenses in 2023 were attributable to branches opened since January 1, 2022 with less than a full
year of comparable operations in either or both of the years ended December 31, 2023 and 2022. As a percentage of total revenues,
SG&A expenses were 27.6% for both years ended December 31, 2023 and 2022.

Gain on Sales of Propertytt and Equipmii

ent, Net. During the year ended December 31, 2023, gain on sales of property and

equipment, net amounted to $3.4 million for the period, compared to $16.8 million for the year ended December 31, 2022, a decrease
of approximately $13.4 million. This decrease is primarily due to the Company's prior year sale of our earthmoving distributorship
business during the fourth quarter of 2022. For additional information on the sale, see Note 3 to our Consolidated Financial
Statements.

Impaim rmii

ent of Goodwill.ll

Impairment of goodwill incurred in the year ended December 31, 2023 was $5.7 million. The

impairment related to one of our five reporting units, Parts Sales. There was no impairment of goodwill for the year ended
December 31, 2022. See Note 2 to the Consolidated Financial Statements for additional information.

Othett

r Income (ExpeEE

nse). For the year ended December 31, 2023, our net other expenses increased approximately $6.1 million to

$53.5 million compared to $47.4 million for the same period in 2022. Interest expense increased approximately $6.9 million to $60.9
million for the year ended December 31, 2023 compared to $54.0 million for the year ended December 31, 2022.

36

Income Taxeaa s. We recorded an income tax expense of $53.9 million for the year ended December 31, 2023 compared to an
income tax expense of approximately $47.0 million for the year ended December 31, 2022. Our effeff ctive income tax rate for the year
ended December 31, 2023 was 24.2% compared to 26.0% for the same period last year, a decrease of 1.8%. The decrease in our
effeff ctive tax rate is primarily due to the reduction in valuation allowance.

Based on availabla e evidence, both positive and negative, we believe it is more likely than not that our federal deferred tax assets
at December 31, 2023 are fully realizable through future reversals of existing taxabla e temporaryrr differences and future taxabla e income.
For the year ended December 31, 2023, we have a $3.0 million valuation allowance for certain state tax credits that may not be
realized.

Liquidity and Capital Resources

Cash Flow from Operating Activities. For the year ended December 31, 2023, the cash provided by our operating activities was

$405.5 million. Our reported net income of $169.3 million, when adjud sted for non-cash income and expense items, such as
depreciation and amortization (including net amortization (accretion) of note discount (premium)), deferred income taxes, non-cash
operating lease expense, amortization of finance lease right-of-use assets, provision for losses on accounts receivabla e, provision for
inventoryrr obsolescence, stock-based compensation expense, impairment of goodwill and net gains on the sale of long-lived assets,
provided positive cash flows of $544.3 million. These cash flows from operating activities were positively impacted by a $12.7
million decrease in prepaid expenses and other assets and a $2.3 million increase in manufact
offsff etting these positive cash flows were a $76.9 million increase in inventories, a $44.0 million decrease in accounts payabla e, a $26.9
million increase in receivabla es and a $6.0 million decrease in accruerr d expenses and other liabia lities.

ing flooring plans payabla e. Partially

urt

ff

For the year ended December 31, 2022, the cash provided by our operating activities was $313.2 million. Our reported net income

for both continuing and discontinued operations of $132.2 million, when adjud sted for non-cash income and expense items, such as
depreciation and amortization (including net amortization (accretion) of note discount (premium)), deferred income taxes, non-cash
operating lease expense, amortization of finance lease right-of-use assets, provision for losses on accounts receivabla e, provision for
inventoryrr obsolescence, stock-based compensation expense, loss on sale of discontinued operations and net gains on the sale of long-
lived assets, provided positive cash flows of $444.3 million. These cash flows from operating activities were positively impacted by a
$30.0 million increase in accounts payabla e. Partially offsff etting these positive cash flows were a $75.4 million increase in inventories, a
$59.8 million increase in receivabla es, a $20.5 million decrease in manufact
ing flooring plans payabla e and a $5.5 million decrease in
accruer d expenses and other liabilities.

urt

ff

Cash Flow from Investing Activities. For the year ended December 31, 2023, net cash used in our investing activities was
totaled approximately $31.3 million; see additional information on the

approximately $608.8 million. The acquisition of Giffinff
acquisition in Note 3 to our Consolidated Financial Statements. The purchases of rental and non-rental equipment totaled
approximately $745.8 million and proceeds from the sale of rental and non-rental equipment were approximately $168.3 million.

For the year ended December 31, 2022, net cash used in our investing activities was approximately $546.5 million. The

acquisition of OSR totaled approximately $135.7 million (net of cash acquired); see additional information on the acquisition in Note
3 to our Consolidated Financial Statements. The purchases of rental and non-rental equipment totaled approximately $515.9 million
and proceeds from the sale of rental and non-rental equipment were approximately $107.3 million. A $2.3 million payment related to
the sale of discontinued operations was made upon the execution of the final closing statement; see additional information on the
Crane Sale in Note 3 to our Consolidated Financial Statements.

Cash Flow from Financing Activities. For the year ended December 31, 2023, our net cash provided by our financing activities

was $130.4 million. Borrowings on our Credit Facility amounted to $1.8 billion while payments on the facility amounted to $1.6
billion for the year ended December 31, 2023. Dividends paid were $40.0 million, or $1.10 per common share, treasury stock
purchases were approximately $6.1 million and payments on finance lease obligations were $0.2 million for the year ended
December 31, 2023. Payments on deferred financing costs related to the amended and restated Credit Facility totaled $4.9 million.

For the year ended December 31, 2022, our cash provided by our financing activities was exceeded by our cash used in financing

activities, resulting in net cash used in our financing activities of $42.7 million. Borrowings and payments offsff et one another under
our Credit Facility for the year ended December 31, 2022. Dividends paid were $39.9 million, or $1.10 per common share, treasury
stock purchases were approximately $1.7 million and payments on finance lease obligations were $1.1 million for the year ended
December 31, 2022.

Senior Unsecured Notes

On December 14, 2020, we completed the offeff

ring of our Senior Unsecured Notes of $1.25 billion. No principal payments on the

Senior Unsecured Notes are due until their scheduled maturity date of December 15, 2028.

37

The Senior Unsecured Notes were issued by H&E Equipment Services, Inc. (the parent company) and are guaranteed by GNE
Investments, Inc. and its wholly-owned subsu idiaries Great Northern Equipment, Inc., H&E Equipment Services (Califorff nia), LLC,
H&E California Holding, Inc., H&E Equipment Services (Midwest), Inc., H&E Equipment Services (Mid-Atlantic), Inc. and H&E
Finance Corp (collectively, the guarantor subsu idiaries). The guarantees, made on a joint and several basis, are full and unconditional
(subject to subor
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 subsu idiaries
by dividend or loan. There are no registration rights associated with the notes or the subsu idiary guarantees.

dination provisions and subju ect to a standard limitation which provides that the maximum amount guaranteed by each

u

For additional information regarding our senior unsecured notes, see Note 9 to our Consolidated Financial Statements.

Senior Secured Creditdd Facilityii

We and our subsu idiaries are parties to a $750.0 million Credit Facility with Wells Fargo Bank, National Association as

administrative agent, and the lenders named therein. At December 31, 2023, we had $181.6 million borrowed under the Credit Facility
and we could borrow up to $556.0 million, which with cash and cash equivalents on hand amounted to a liquidity position of $564.5
million. On October 1, 2021, we sold our crane business and the disposition had no impact on our borrowing availabia lity. For further
information on the sale of our crane business, see Note 3 to our Consolidated Financial Statements. We did not have any negative
impacts to our liquidity position under the Credit Facility as a result of discontinued operations, nor do we have any covenant
violations related to the Credit Facility. As of Februar
ry 15, 2024, we had borrowings of $277.3 million outstanding under our Credit
Facility leaving us with borrowing availabia lity of $460.3 million, as a result of $12.3 million of letters of credit outstanding under the
facility.

For additional information regarding our senior secured credit facility, see Note 10 to our Consolidated Financial Statements.

Cash Requirements Related to Operatiott ns

Our principal sources of liquidity have been from cash provided by operating activities and the revenue from our rental operations

and sales of rental fleet and new equipment, proceeds from the issuance of debt, and borrowings availabla e under the Credit Facility.
As of December 31, 2023, the Company held balances of cash and cash equivalents totaling $8.5 million. As of December 31, 2022,
the Company held balances of cash and cash equivalents totaling $81.3 million. Our principal uses of cash and cash equivalents
, purchases of rental fleet and
historically have been to fund operating activities and working capia tal (including equipment inventory)rr
property and equipment, opening new branch locations, fund payments due under facility operating leases and manufact
urt er flooring
ff
plans payabla e, and to meet debt service requirements. In the future, we may pursue additional strategic acquisitions and seek to open
new branch locations.

The amount of our future capital expenditures will depend on a number of factors including general economic conditions and
growth prospects. In response to changing economic conditions, we believe we have the flexibility to modify our capia tal expenditures
by adjud sting them (either up or down) to match our actual performance. Our gross rental fleet capia tal expenditures for the years ended
December 31, 2023 and 2022 were approximately $736.6 million and $507.8 million, respectively, including $74.7 million and $43.3
million, respectively, of non-cash transferff s from inventoryrr
to rental fleet. This increase in rental fleet capia tal expenditures reflects our
branch expansion growth strategy. Our gross property and equipment capital expenditures for the years ended December 31, 2023 and
2022 were $83.9 million and $51.5 million, respectively.

To service our debt, we will require a significant amount of cash. Our ability to pay interest and principal on our indebtedness

(including the Credit Facility, the Senior Unsecured Notes and our other indebtedness), will depend upon our future operating
performance and the availabia lity of borrowings under the Credit Facility and/or other debt and equity financing alternatives availabla e
to us, which will be affeff cted 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 capia tal markets, we believe our cash flow from operations, availabla e cash and cash equivalents and availabla e
borrowings under the Credit Facility will be adequate to meet our future liquidity needs for the foreseeabla e future, both in the short-
term (over the next 12 months) and beyond. At December 31, 2023, we have cash and cash equivalents on hand of approximately $8.5
million. At December 31, 2023, we had availabla e borrowings of $556.0 million, net of $12.3 million of outstanding letters of credit
and at December 31, 2022, we had availabla e borrowings of $739.4 million, net of $10.6 million of outstanding letters of credit. At
Februar
ry 15, 2024, we had $460.3 million of availabla e borrowings under the Credit Facility, net of a $12.3 million of outstanding
letters of credit.

Our contractuat

indebtedness and interest payments. We have no off-bff
analysis of material cash requirements from known contractuat

a
l and other obligations as of December 31, 2023.

l obligations and commercial commitments principally include obligations associated with our outstanding
alance sheet arrangements. In tabul

ar format below, we have disclosed our

38

Senior unsecured notes (1) ...................................................... $ 1,250,000
242,188
Interest payments on senior unsecured notes (2).....................
181,642
Senior secured credit facility (3) .............................................
61,609
Interest payments on senior secured credit facility (4)............
234,222
Operating lease liabia lities (5) ..................................................
29,799
Other lease commitments (6) ..................................................
3,871
Finance lease liabia lities (7)......................................................
2,708
Other long-term obligations (8)...............................................
l cash obligations .......................................... $ 2,006,039
Total contractuat

$

$

Total

2024

2027-2028

Payments Due by Year
2025-2026
(Amounts in thousands)
— $

48,438
—
15,082
25,875
1,427
423
2,708
93,953

$

— $ 1,250,000
96,875
181,642
16,363
61,690
5,245
915
—
$ 1,612,730

96,875
—
30,164
66,454
4,904
874
—
199,271

Thereafter

$

$

—
—
—
—
80,203
18,223
1,659
—
100,085

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

See Note 9 to our Consolidated Financial Statements for additional information regarding our Senior Notes.
Future interest payments are calculated based on the assumption that all of the senior unsecured notes remain outstanding
until maturity.
See Note 10 to our Consolidated Financial Statements for additional information regarding our Credit Facility.
This represents future interest payments calculated based on the assumption that all borrowings remain outstanding until
maturity, assumes the interest rate in effeff ct at December 31, 2023 and includes unused commitment fees.
This includes total minimum operating lease rental payments having initial or remaining non-cancelable lease terms
longer than one year, including interest.
Represents total minimum operating lease rental payments for leases executed but not commenced as of December 31,
2023.
This includes total minimum finance lease rental payments having initial or remaining non-cancelable lease terms longer
than one year, including interest.
Represents amounts due on manufact
equipment inventoryrr and rental equipment.

urt er flooring plans payabla e, which are used to finance certain purchases of new

ff

As of December 31, 2023, we had standby letters of credit issued under our Credit Facility totaling $12.3 million that expire in

May 2024.

Quarterly Dividend

On each of Februar

ry 10, 2023, May 12, 2023, August 11, 2023 and November 9, 2023, the Company declared a quarterly

dividend of $0.275 per share to stockholders of record, which were paid on March 10, 2023, June 9, 2023, September 15, 2023 and
December 15, 2023, respectively, totaling approximately $40.0 million. On Februarr
dividend of $0.275 per share to stockholders of record as of the close of business on Februarr
15, 2024.

ry 9, 2024, the Company declared a quarterly

ry 23, 2024, which is to be paid on March

The Company intends to continue to pay regular quarterly cash dividends; however, the declaration of any subsu equent dividends

is discretionary and will be subju ect to a final determination by the Board of Directors each quarter afteff
things, business and market conditions.

r its review of,ff among other

Acquisitions and Start-up Facilities

We periodically engage in evaluations of potential acquisitions and start-up facilities. We intend to continue to evaluate and
pursue, on an opportunistic basis, acquisitions that meet our selection criteria, and we are focused on identifying and acquiring rental
companies to complement our existing business, broaden our geographic footprt

int, and increase our density in existing markets.

Effeff ctive January 1, 2018, we completed the acquisition of CEC, a privately-held company focused on non-residential

tion equipment rentals serving the greater Denver, Colorado area out of three branch locations. Effeff ctive April 1, 2018, we
construcr
completed the acquisition of Rental Inc., an equipment rental and distribution company with five branch locations in Alabama and
Florida. Effeff ctive Februarr
Central Texas. Effeff ctive October 1, 2022, we completed the acquisition of OSR, an equipment rental company with ten branch
locations in the Midwest. Effeff ctive November 1, 2023, we completed the acquisition of Giffin, an equipment rental company with
three branches in California. See Note 3 to our Consolidated Financial Statements for additional information on these acquisitions.

ry 1, 2019, we completed the acquisition of WRI, an equipment rental company with six branch locations in

The success of our growth strategy depends, in part, on selecting strategic acquisition candidates at attractive prices and
identifying strategic start-up locations. We expect to face competition for acquisition candidates, which may limit the number of
acquisition opportunities and lead to higher acquisition costs. We may not have the financial resources necessary to consummate any

39

acquisitions or to successfulff
terms.
For further information regarding our risks related to acquisitions, see Item 1A – Risk Factors of this Annual Report on Form 10-K.

ly open any new facilities in the future or the ability to obtain the necessary funds on satisfactoryrr

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Our earnings may be affeff cted by changes in interest rates since interest expense on the Credit Facility is currently calculated
based upon (a) the Base Rate plus an applicable margin of 0.25% to 0.75%, depending on the Average Availabia lity (as defined in the
Credit Facility), in the case of index rate revolving loans and (b) SOFR plus a credit spread adjud stment and an applicable margin of
1.25% to 1.75%, depending on the Average Availabia lity (as defined in the Credit Facility), in the case of SOFR revolving loans.

At December 31, 2023, we had $181.6 million in borrowings outstanding under the Credit Facility. At Februar

ry 15, 2024, we had
$277.3 million in borrowings outstanding under the Credit Facility with $460.3 million of availabla e borrowings, net of a $12.3 million
of outstanding letters of credit. We did not have significant exposure to changing interest rates as of December 31, 2023 on the fixed-
rate senior unsecured notes. Historically, we have not engaged in derivatives or other financial instruments for trading, speculative or
hedging purpos
market conditions are accommodating.

es, though we may do so from time to time if such instruments are availabla e to us on acceptabla e terms and prevailing

r

Item 8. Financial Statements and Supplementary Data

Index to consolidated financial statements of H&E Equipment Services, Inc. and Subsu idiaries

Report of Independent Registered Publu ic Accounting Firm ..........................................................................................................
Consolidated Balance Sheets as of December 31, 2023 and 2022.................................................................................................
Consolidated Statements of Income for the years ended December 31, 2023, 2022 and 2021 .....................................................
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2023, 2022 and 2021 ...............................
Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022 and 2021 ..............................................
Notes to Consolidated Financial Statements ..................................................................................................................................

Page

41
43
44
45
46
48

40

Report of Independent Registered Public Accounting Firm

Shareholders and Board of Directors
H&E Equipment Services, Inc.
Baton Rouge, Louisiana

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of H&E Equipment Services, Inc. (the “Company”) as of December 31,
2023 and 2022, the related consolidated statements of income, stockholders’ equity, and cash flows for each of the three years in the
period ended December 31, 2023, and the related notes and schedule of valuation and qualifyiff ng accounts for each of the three years in
the period ended December 31, 2023 appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at
December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December
31, 2023, in conforff mity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Publu ic Company Accounting Oversight Board (United States) (“PCAOB”),
the Company's internal control over financial reporting as of December 31, 2023, based on criteria establa ished in Internal Control –
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our
report dated Februarr

ry 22, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonabla e assurance about whether the consolidated financial statements are free of material misstatement, whether due to
error or fraud.

Our audits included performing procedurd es to assess the risks of material misstatement of the consolidated financial statements, whether
due to error or fraud, and performing procedurd es that respond to those risks. Such procedurd es included examining, on a test basis,
evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements. We believe that our audits provide a reasonabla e basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements
that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are
material to the consolidated financial statements and (2) involved our especially challenging, subju ective, or complex judgments. The
communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole,
and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.

Revenue Recogno

itiott n for equipmii

ent rentaltt

,ll sales of rentaltt

equipmii

ent, and sales of new equipmii

ent

As described in Note 2 to the consolidated financial statements, the Company’s revenue is generated from renting equipment, as well as
the sale of goods or services, to customers. Revenue from equipment rental transactions is generally accounted for under Topic 842 in
the period earned based on contractuat
l terms of the rental contract with the customer. A rental contract includes rates for daily, weekly
or monthly use, and equipment rental revenues are earned on a daily basis as rental contracts remain outstanding. Revenue from the sale
of rental and new equipment is accounted for under Topic 606 and is generally recognized when control of the promised good is
transferff
l terms with the customer. The processing and recording of the Company’s revenue
transactions involves a combination of automated and manual processes. The Company’s consolidated net revenue from equipment
rentals, sale of rental equipment and sale of new equipment was $1.4 billion for the fiscal year ended December 31, 2023.

red to the customer based on contractuat

41

We identifieff d revenue recognition for equipment rental, sales of rental equipment, and sales of new equipment as a critical audit matter.
The principal consideration for our determination was the significant audit effoff
rt in performing procedurd es relating to revenue
recognition for equipment rental, sales of rental equipment, and sales of new equipment.

The primaryrr procedurd es we perforff med to address this critical audit matter included:

•

•

•

•

Obtaining an understanding of the nature of the revenue recognition process for equipment rental, sales of rental equipment
and sales of new equipment, through walkthrough of individual transactions, and review of contracts with the customers.

Testing the design, implementation, and operating effeff ctiveness of relevant controls relating to the revenue recognition
process for equipment rental, sales of rental equipment and sales of new equipment, including IT general controls for the
systems used in the revenue recognition process, as well as manual and automated business process controls.

Testing a sample of equipment rental transactions by agreeing the amounts recognized to source documents, such as rental
contracts, invoices, and subsu equent cash receipts.

Testing a sample of sales of rental equipment and sales of new equipment transactions by agreeing the amounts recognized
to source documents, such as sales contracts, invoices, delivery documents, and subsu equent cash receipts.

/s/ BDO USA, P.C.

We have served as the Company's auditor since 2004.

Dallas, Texas

Februar

ry 22, 2024

42

H&E EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31,

Assets

Cash and cash equivalents.................................................................................................. $
Receivabla es, net of allowance for doubtful accounts of $7,126 and $6,637, respectively.
Inventories, net of reserves for obsolescence of $207 and $54, respectively ....................
Prepaid expenses and other assets ......................................................................................
Rental equipment, net of accumulated depreciation of $990,971 and $884,740,
respectively.........................................................................................................................
Property and equipment, net of accumulated depreciation and amortization of
$193,723 and $177,017, respectively.................................................................................
Operating lease right-of-use assets, net of accumulated amortization of $71,021 and
$51,419, respectively..........................................................................................................
Finance lease right-of-use assets, net of accumulated amortization of $345 and $105,
respectively.........................................................................................................................
Deferred financing costs, net of accumulated amortization of $17,606 and $16,518,
respectively.........................................................................................................................
Intangible assets, net of accumulated amortization of $25,824 and $19,369,
respectively.........................................................................................................................
Goodwill.............................................................................................................................

Total assets ..................................................................................................................... $

Liabilities and Stockholders’ Equity

Liabilities:

ff

Senior secured credit facility.............................................................................................. $
Accounts payabla e ...............................................................................................................
Manufact
urt er flooring plans payabla e .................................................................................
Accruer d expenses payabla e and other liabia lities..................................................................
Dividends payabla e ..............................................................................................................
Senior unsecured notes, net of unaccreted discount of $5,807 and $6,979 and deferred
financing costs of $1,341 and $1,612, respectively ...........................................................
Operating lease liabia lities ...................................................................................................
Finance lease liabia lities ......................................................................................................
Deferred income taxes........................................................................................................
Total liabia lities................................................................................................................

Commitments and Contingencies (Note 13)
Stockholders’ equity:

2023
2022
(Amounts in thousands, except
share and per share amounts)

$

8,500
247,430
109,931
8,740

81,330
225,294
107,842
21,455

1,756,578

1,418,951

183,773

176,703

2,891

4,609

32,576
108,155
2,639,886

181,642
85,486
2,708
87,929
360

1,242,852
183,775
3,019
317,826
2,105,597

$

$

134,637

164,566

1,545

758

32,631
102,690
2,291,699

—
129,482
422
77,142
377

1,241,409
169,069
1,594
271,162
1,890,657

red stock, $0.01 par value, 25,000,000 shares authorized; no shares issued............

Preferff
Common stock, $0.01 par value, 175,000,000 shares authorized; 40,823,375 and
40,567,876 shares issued at December 31, 2023 and December 31, 2022, respectively,
and 36,449,188 and 36,309,321 shares outstanding at December 31, 2023 and
December 31, 2022, respectively .......................................................................................
Additional paid-in capia tal...................................................................................................
Treasuryrr stock at cost, 4,374,187 and 4,258,555 shares of common stock held at
December 31, 2023 and December 31, 2022, respectively ................................................
Retained earnings ...............................................................................................................
Total stockholders’ equity ..............................................................................................
Total liabia lities and stockholders’ equity ....................................................................... $

—

—

408
261,927

(76,017)
347,971
534,289
2,639,886

$

405
251,901

(69,964)
218,700
401,042
2,291,699

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

43

H&E EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31,
(Amounts in thousands, except per share amounts)

2023

2022
(Amounts in thousands, except per share amounts)

2021

Revenues:

Equipment rentals ................................................................................
Sales of rental equipment .....................................................................
Sales of new equipment .......................................................................
Parts, service and other ........................................................................
Total revenues .................................................................................

$

1,186,152
165,074
39,099
78,891
1,469,216

$

956,042
90,885
92,526
105,065
1,244,518

$

729,700
135,245
92,677
105,175
1,062,797

Cost of revenues:

Rental depreciation ..............................................................................
Rental expense.....................................................................................
Rental other .........................................................................................

Sales of rental equipment .....................................................................
Sales of new equipment .......................................................................
Parts, service and other ........................................................................
Total cost of revenues ......................................................................
Gross profitff ......................................................................................
Selling, general and administrative expenses ............................................
Impairment of goodwill............................................................................
Gain from sales of property and equipment, net........................................
Income from operations ...................................................................

Other income (expense):

Interest expense ...................................................................................
Other, net.............................................................................................
Total other expense, net ...................................................................
Income from operations before provision for income taxes .......................
Provision for income taxes .......................................................................
Net income from continuing operations............................................

Discontinued Operations:
Income (loss) from discontinued operations before provision (benefitff ) for
income taxes............................................................................................
Provision (benefitff ) for income taxes .........................................................
Net income (loss) from discontinued operations ...............................

Net income ......................................................................................

Net income from continuing operations per common share:

Basic ...............................................................................................
Diluted ............................................................................................

Net income (loss) from discontinued operations per common share:

Basic ...............................................................................................
Diluted ............................................................................................

Net income per common share:

Basic ...............................................................................................
Diluted ............................................................................................

Weighted average common shares outstanding:

Basic ...............................................................................................
Diluted ............................................................................................

$

$

$

$

$
$

$
$

$
$

347,022
156,818
128,873
632,713
65,183
33,569
53,290
784,755
684,461
405,432
5,714
3,389
276,704

(60,891)
7,384
(53,507)
223,197
53,904
169,293

—
—
—

169,293

4.69
4.66

—
—

4.69
4.66

36,100
36,329

$

$

$

$

$
$

$
$

$
$

267,395
128,850
99,554
495,799
46,569
79,430
67,557
689,355
555,163
343,845
—
16,836
228,154

(54,033)
6,609
(47,424)
180,730
47,036
133,694

(2,049)
(525)
(1,524)

132,170

3.72
3.70

(0.04)
(0.04)

3.68
3.66

35,943
36,089

$

$

$

$

$
$

$
$

$
$

227,772
109,365
76,934
414,071
86,323
80,822
66,218
647,434
415,363
290,791
—
7,748
132,320

(53,758)
3,162
(50,596)
81,724
21,160
60,564

55,948
13,972
41,976

102,540

1.67
1.66

1.16
1.15

2.83
2.81

36,261
36,451

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

44

H&E EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021
(Amounts in thousands, except share and per share amounts)

Balances at December 31, 2020 ..................................
Stock-based compensation ......................................
Cash dividends declared on common stock ($1.10
per share).................................................................
Issuances of non-vested restricted common stock,
net of restricted stock forfeiturt es ............................
Repurchases of 61,476 shares of restricted
common stock .........................................................
Net income ..............................................................
Balances at December 31, 2021 ..................................
Stock-based compensation ......................................
Cash dividends declared on common stock ($1.10
per share).................................................................
Issuances of non-vested restricted common stock,
net of restricted stock forfeiturt es ............................
Repurchases of 46,923 shares of restricted
common stock .........................................................
Net income ..............................................................
Balances at December 31, 2022 ..................................
Stock-based compensation ......................................
Cash dividends declared on common stock ($1.10
per share).................................................................
Issuances of non-vested restricted common stock,
net of restricted stock forfeiturt es ............................
Repurchases of 115,632 shares of restricted
common stock .........................................................
Net income ..............................................................
Balances at December 31, 2023 ..................................

Common Stock

Shares
Issued
40,242,711
—

$

—

110,588

—
—
40,353,299
—

—

214,577

—
—
40,567,876
—

—

255,499

Amount

401
—

—

2

—
—
403
—

—

2

—
—
405
—

—

3

Additional
Paid-in
Capital
$ 240,206
4,432

Treasury
Stock

Retained
Earnings

$ (66,188) $ 63,814
—

—

Total
Stockholders’
Equity
$ 238,233
4,432

—

—

—
—
244,638
7,263

—

—

—
—
251,901
10,026

—

—

—

—

(39,719)

(39,719)

—

2

(2,106)

—
— 102,540
126,635
—

(68,294)
—

(2,106)
102,540
303,382
7,263

—

—

(40,105)

(40,105)

—

2

(1,670)

—
— 132,170
218,700
—

(69,964)
—

(1,670)
132,170
401,042
10,026

—

—

(40,022)

(40,022)

—

3

—
—
40,823,375

$

—
—
408

—
—
$ 261,927

(6,053)

—
— 169,293
$ (76,017) $ 347,971

(6,053)
169,293
$ 534,289

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

45

H&E EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,

Cash flows from operating activities:
Net income......................................................................................................... $
Adjud stments to reconcile net income to net cash provided

by operating activities:
Depreciation and amortization of property and equipment ...........................
Depreciation of rental equipment ..................................................................
Amortization of intangible assets ..................................................................
Amortization of deferred financing costs ......................................................
Accretion of note discount, net of premium amortization .............................
Non-cash operating lease expense .................................................................
Amortization of finance lease right-of-use assets..........................................
Provision for losses on accounts receivable ..................................................
Provision for inventoryrr obsolescence ............................................................
Deferred income taxes ...................................................................................
Stock-based compensation expense...............................................................
Impairment of goodwill .................................................................................
Loss (gain) on sale of discontinued operations..............................................
Gain from sales of property and equipment, net............................................
Gain from sales of rental equipment, net.......................................................
Changes in operating assets and liabilities, net of acquisitions:

Receivabla es ................................................................................................
Inventories .................................................................................................
Prepaid expenses and other assets .............................................................
Accounts payabla e.......................................................................................
Manufact
urt er flooring plans payabla e.........................................................
Accruer d expenses payabla e and other liabia lities .........................................
Net cash provided by operating activities..............................................

ff

2023

2022
(Amounts in thousands)

2021

169,293

$

132,170

$

102,540

34,697
347,022
6,455
1,359
1,172
19,602
240
4,858
178
46,664
10,026
5,714
—
(3,389)
(99,629)

(26,911)
(76,922)
12,724
(43,988)
2,286
(5,968)
405,483

28,810
267,395
4,660
970
1,172
14,535
105
3,264
32
42,278
7,263
—
1,917
(16,836)
(43,397)

(59,768)
(75,375)
(1)
29,999
(20,502)
(5,453)
313,238

27,347
231,492
3,970
971
1,172
12,964
122
1,892
54
30,221
4,432
—
(42,072)
(7,797)
(50,756)

2,868
(56,535)
(10,923)
11,208
11,309
(14,907)
259,572

Cash flows from investing activities:

Acquisition of business, net of cash acquired................................................
Closing adjud stment on sale of discontinued operations.................................
Proceeds from the sale of discontinued operations........................................
Purchases of property and equipment............................................................
Purchases of rental equipment .......................................................................
Proceeds from sales of property and equipment............................................
Proceeds from sales of rental equipment .......................................................
Net cash used in investing activities ..........................................................

Cash flows from financing activities:

Purchases of treasuryrr stock............................................................................
Borrowings on senior secured credit facility .................................................
Payments on senior secured credit facility ....................................................
Payments of deferred financing costs ............................................................
Dividends paid ...............................................................................................
Payments of finance lease obligations ...........................................................
Net cash provided by (used in) financing activities...................................
Net increase (decrease) in cash and cash equivalents........................................
Cash and cash equivalents, beginning of year ...................................................
Cash and cash equivalents, end of year ............................................................. $

(31,265)
—
—
(83,872)
(661,960)
4,449
163,886
(608,762)

(6,053)
1,790,187
(1,608,545)
(4,939)
(40,039)
(162)
130,449
(72,830)
81,330
8,500

$

(135,710)
(2,256)
—
(51,452)
(464,434)
23,626
83,689
(546,537)

(1,670)
1,278,182
(1,278,182)
—
(39,856)
(1,141)
(42,667)
(275,966)
357,296
81,330

$

—
—
135,945
(34,622)
(418,082)
11,884
133,900
(170,975)

(2,106)
1,417,770
(1,417,770)
(135)
(39,748)
(194)
(42,183)
46,414
310,882
357,296

46

H&E EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
FOR THE YEARS ENDED DECEMBER 31,

emental schedule of non-cash investing and financing

u
Suppl
activities:

Accruer d acquisition purchase price consideration ........................... $
Non-cash asset purchases:

red from inventoryrr

to rental fleet.......................... $

Assets transferff
Change in purchases of property and equipment included in
accruer d expenses payabla e and other liabia lities............................. $
Operating lease assets obtained in exchange for new operating
lease liabilities .............................................................................. $
emental disclosures of cash flow information:

u
Suppl
Cash paid during the year for:

Interest .......................................................................................... $
Income taxes paid, net of refunds received .................................. $

2023

2022
(Amounts in thousands)

2021

— $

803

74,655

(591)

31,739

56,582
5,812

$

$

$

$
$

43,321

(1,213)

27,880

51,828
5,894

$

$

$

$

$
$

—

18,669

425

13,565

51,748
4,810

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

47

H&E EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Organization and Nature of Operations

Founded in 1961, H&E Equipment Services, Inc. (or “the Company”, “we”, “us”, or “our”) is one of the largest rental equipment

companies in the nation, serving customers across 30 states. The Company’s fleet is versatile with an equipment mix comprised of
aerial work platforms, earthmoving, material handling, and other general and specialty lines. H&E serves a diverse set of end markets
in many high-growth geographies including branches throughout the Pacific Northwest, West Coast, Intermountain, Southwest, Gulf
Coast, Southeast, Midwest and Mid-Atlantic regions.

(2) Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

Our consolidated financial statements include the financial position and results of operations of H&E Equipment Services, Inc.

and its wholly-owned subsu idiaries H&E Finance Corp., GNE Investments, Inc., Great Northern Equipment, Inc., H&E Califorff nia
Holding, Inc., H&E Equipment Services (Califorff nia), LLC, H&E Equipment Services (Midwest), Inc. and H&E Equipment Services
(Mid-Atlantic), Inc., collectively referred to herein as “we”, “us”, “our” or the “Company.”

On October 1, 2021, the Company sold its crane business (the “Crane Sale”) and during June 2022, closing adjud stments were

finalized. The results of operations of the Crane Sale are reported in discontinued operations in the Consolidated Statements of
Operations for the years ended December 31, 2022 and 2021. All results and information in the consolidated financial statements are
presented as continuing operations and exclude the Crane Sale unless otherwise noted specifically as discontinued operations. The
Consolidated Statements of Cash Flows includes cash flows related to the discontinued operations and accordingly, cash flow amounts
for discontinued operations are disclosed in Note 3 “Acquisitions and Dispositions”. For additional information, refer to Note 3.

All significant intercompany accounts and transactions have been eliminated in these consolidated financial statements. Business

combinations are included in the 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, the accompanying consolidated balance sheets are presented on an unclassified basis.

Use of Estimates

We prepare our 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 affeff ct 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 effeff ct on our consolidated
financial statements. Actual results may differ materially from those estimates. We review our estimates on an ongoing basis based on
information currently availabla e, and changes in facts and circumstances may cause us to revise these estimates.

Reclassifications

Certain reclassifications have been made to prior period amounts in the Consolidated Statements of Income to conforff m to the

current period presentation. These reclassifications did not have a material impact on previously reported amounts.

Revenue Recognition

We recognize revenue in accordance with two different Financial Accounting Standards Board (“FASB”) Accounting Standards

Codification (“ASC”) standards: 1) Topic 606 and 2) Topic 842.

Under Topic 606, Revenue from Contracts with Customers, revenue is recognized when control of the promised goods or services

red to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or

is transferff
services. Revenue is measured based on the consideration specifieff d in the contract with the customer, and excludes any sales
incentives and amounts collected on behalf of third parties. A performance obligation is a promise in a contract to transferff
good or service to a customer. Our contracts with customers generally do not include multiple performance obligations. We recognize
revenue when we satisfyff a performance obligation by transferff
revenue recognized refleff cts the consideration we expect to be entitled to in exchange for such products or services.

ring control over a product or service to a customer. The amount of

a distinct

48

Under Topic 842, Leases, we account for equipment rental contracts as operating leases. We recognize revenue from equipment

rentals in the period earned, regardless of the timing of billing to customers. A rental contract includes rates for daily, weekly or
monthly use, and rental revenues are earned on a daily basis as rental contracts remain outstanding. Because the rental contracts can
extend across multiple reporting periods, we record unbilled rental revenues and deferred rental revenues at the end of reporting
periods so rental revenues earned is appropriately stated for the periods presented.

The tabla es below summarize our revenues as presented in our Consolidated Statements of Income for the years ended

December 31, 2023, 2022 and 2021 by revenue type and by the applicable accounting standard (amounts in thousands).

Year Ended December 31, 2023

Topic 842

Topic 606

Total

Revenues:
Rental Revenues:

Owned equipment rentals..................................................................... $
Re-rent revenue ....................................................................................

1,017,012
34,122

$

$

498
—

Ancillary and other rental revenues:

Deliveryrr and pick-up .u ...........................................................................
Other.....................................................................................................
Total ancillary rental revenues .................................................................
Total equipment rental revenues ..............................................................
Sales of rental equipment .........................................................................
Sales of new equipment............................................................................
Parts, service and other.............................................................................
Total revenues .......................................................................................... $

—
63,101
63,101
1,114,235
—
—
—
1,114,235

$

71,419
—
71,419
71,917
165,074
39,099
78,891
354,981

$

1,017,510
34,122

71,419
63,101
134,520
1,186,152
165,074
39,099
78,891
1,469,216

Year Ended December 31, 2022

Topic 842

Topic 606

Total

Revenues:
Rental Revenues:

Owned equipment rentals..................................................................... $
Re-rent revenue ....................................................................................

814,423
32,726

$

$

406
—

Ancillary and other rental revenues:

Deliveryrr and pick-up .u ...........................................................................
Other.....................................................................................................
Total ancillary rental revenues .................................................................
Total equipment rental revenues ..............................................................
Sales of rental equipment .........................................................................
Sales of new equipment............................................................................
Parts, service and other.............................................................................
Total revenues .......................................................................................... $

—
52,184
52,184
899,333
—
—
—
899,333

$

56,303
—
56,303
56,709
90,885
92,526
105,065
345,185

$

814,829
32,726

56,303
52,184
108,487
956,042
90,885
92,526
105,065
1,244,518

Year Ended December 31, 2021
Topic 606

Total

Topic 842

Revenues:
Rental Revenues:

Owned equipment rentals..................................................................... $
Re-rent revenue ....................................................................................

617,831
34,819

$

$

354
—

Ancillary and other rental revenues:

Deliveryrr and pick-up .u ...........................................................................
Other.....................................................................................................
Total ancillary rental revenues .................................................................
Total equipment rental revenues ..............................................................
Sales of rental equipment .........................................................................
Sales of new equipment............................................................................
Parts, service and other.............................................................................
Total revenues .......................................................................................... $

—
36,173
36,173
688,823
—
—
—
688,823

$

40,523
—
40,523
40,877
135,245
92,677
105,175
373,974

$

618,185
34,819

40,523
36,173
76,696
729,700
135,245
92,677
105,175
1,062,797

49

Revenues by reporting segment are presented in Note 16, using the revenue capta ions reflected in our Consolidated Statements of

Income. We believe that the disaggregation of our revenues from contracts to customers as reflected above, coupled with further
discussion below and the reporting segment in Note 16, depicts how the nature, amount, timing and uncertainty of our revenues and
cash flows are affeff cted by economic factors.

Nature of goods and services

Lease revenues

Topic 842

p

Owned equipmi

ent rentalsll : Owned equipment rentals represent revenues from renting equipment. We account for these rental

contracts as operating leases. We recognize revenue from equipment rentals in the period earned, regardless of the timing of billing
to customers. A rental contract includes rates for daily, weekly or monthly use, and rental revenues are earned on a daily basis as
rental contracts remain outstanding. Our equipment is generally rented for short periods of time (less than a year). Because the rental
contracts can extend across multiple reporting periods, we record unbilled rental revenues and deferred rental revenues at the end of
reporting periods so rental revenues earned is appropriately stated for the periods presented. The lease terms are included in our
contracts, and the determination of whether our contracts contain leases generally does not require significant assumptions or
judgments. In some cases, a rental contract may contain a rental purchase option, whereby the customer has an option to purchase
the rented equipment at the end of the term for a specifieff d price. Revenues related to the rental contract will be accounted for as an
operating lease as the option to purchase is not reasonabla y certain to be exercised. Lessees do not provide residual value guarantees
on rented equipment.

Re-rent revenue: Re-rent revenue reflects revenues from equipment that we rent from vendors and then rent to our customers.

We account for such rentals as sublu eases. The accounting for re-rent revenue is the same as the accounting for owned equipment
rentals described above.

Other equipmi

ent rental revenue: Other equipment rental revenue is primarily comprised of (i) revenue from customers who
purchase insurance to protect against potential damages or loss to the equipment they rent, (ii) environmental charges associated
with the rental of equipment, and (iii) fuel recovery fees charged to customers. Fuel consumption charges are recognized upon return
of the rental equipment when fuel consumption by the customer, if any, can be measured. Income from environmental fees and
damage waiver insurance policies are recognized when earned over the period the equipment is rented.

)
Revenues from contracts with customers (Topic 606)

p

(

Subsu tantially all of our revenues under Topic 606 are recognized at a point-in-time rather than over time.

Owned equipmi

ent rentals:ll An insignificant portion of our total equipment rental revenues are recognized pursuant to Topic 606
rather than pursuant to Topic 842. These revenues represent services performed by us in connection with the rental of equipment and
are comprised of customer training fees on rented equipment and setupu and configff uration services on rental equipment. Revenues for
these services are recognized upon completion of such services. See discussion above regarding rental revenues recognized pursuant
to Topic 842.

Deliveryr and pick-up: Delivery and pick-upu revenue associated with renting equipment is recognized when the service is

performed.

Sales of rental equipmi

ent: Revenues from the sales of rental equipment are recognized at the time of deliveryrr

to, or pick-upu by,

the customer, which is when the customer obtains control of the promised good.

Sales of new equipmi

ent: Revenues from the sales of new equipment are recognized at the time of delivery to, or pick-upu by, the

customer, which is when the customer obtains control of the promised good.

Parts,tt

service, and othett

r: Revenues from the sales of equipment parts are recognized at the time of pick-upu by the customer for
parts counter sales transactions. For parts that are shipped to a customer, we made an accounting policy election permitted by Topic
606 to treat such shipping activities as fulfilff lment costs, which results in the fees for shipping activities being included in the parts
sales transaction price. Service revenues is derived primarily from maintenance and repair services to customers for equipment that
we rent or sell and from customers owned equipment. We recognize services revenues at the time such services are completed,
which is when the customer obtains control of the promised service. Other revenues relate to equipment suppor
u
provide to customers in connection with sales of rental and new equipment and parts and services revenues.

t activities that we

50

Receivablesll

and contratt

ct assets and liabilit

iett s

ii

We manage credit risk associated with our accounts receivabla es at the customer level. Because the same customers typically

generate the revenues that are accounted for under both Topic 606 and Topic 842, the discussions below on credit risk and our
allowances for doubtful accounts address our total revenues from Topic 606 and Topic 842.

We believe concentration of credit risk with respect to our receivabla es is limited because our customer base is comprised of a
large number of geographically diverse customers. Our largest customer accounted for less than four percent of total revenues for the
years ended December 31, 2023, 2022 and 2021. No single customer accounted for more than 10% of our total revenues for any of the
three years ended December 31, 2023. We manage credit risk through credit approvals, credit limits and other monitoring procedurd es.

Pursuant to Topic 842 and Topic 326 for rental and non-rental receivabla es, respectively, we maintain an allowance for doubtful

tabla e forecasts, and our own judgment as to the likelihood of ultimate payment based

accounts that reflects our estimate of our expected credit losses. Our allowance is estimated using a loss rate model based on
delinquency. The estimated loss rate is based on our historical experience with specificff
economic circumstances, reasonable and suppor
u
upon availabla e data. Our largest exposure to doubtful accounts is our rental operations, which as discussed above is accounted for
under Topic 842 and as of December 31, 2023 represents 81% of our total revenues and an approximate corresponding percentage of
our receivabla es, net and associated allowance for doubtful accounts. We perform credit evaluations of customers and establa ish credit
limits based on reviews of our customers’ current credit information and payment histories. We believe our credit risk is somewhat
mitigated by our geographically diverse customer base and our credit evaluation procedurd es. The actual rate of future credit losses,
however, may not be similar to past experience. Our estimate of doubtful accounts could change based on changing circumstances,
including changes in the economy or in the particular circumstances of individual customers. Accordingly, we may be required to
increase or decrease our allowance for doubtful accounts. Bad debt expense as a percentage of total revenues for the years ended
December 31, 2023, 2022 and 2021 was approximately 0.3%, 0.3% and 0.2%, respectively.

customers, our understanding of our current

We do not have material contract assets, impairment losses associated therewith, or material contract liabia lities associated with
contracts with customers. Our contracts with customers do not generally result in material amounts billed to customers in excess of
recognizabla e revenue. We did not recognize material revenues during the years ended December 31, 2023, 2022 or 2021 that was
included in the contract liabia lity balance as of the beginning of such periods.

Perforff marr

nce obligll atiott ns

Most of our Topic 606 revenue is recognized at a point-in-time, rather than over time. Accordingly, in any particular period, we
do not generally recognize a significff ant amount of revenue from performance obligations satisfieff d (or partially satisfied) in previous
periods, and the amount of such revenue recognized during the years ended December 31, 2023, 2022 and 2021 was not material.

Payma

ent terms

Our Topic 606 revenues do not include material amounts of variable consideration. Our payment terms are typically net 30 days,

but can vary by the type and location of our customer and the products or services offeff
payment is due is not significant. Our contracts do not generally include a significant financing component. Our contracts with
customers do not generally result in significant obligations associated with returns, refunds or warranties. See above for a discussion
of how we manage credit risk.

red. The time between invoicing and when

Sales tax amounts collected from customers are recorded on a net basis.

Contratt

ct coststt

We do not recognize any assets associated with the incremental costs of obtaining a contract with a customer (for example, a sales
commission) that we expect to recover. Subsu tantially all of our revenue is recognized at a point-in-time or over a period of one year or
less, and we use the practical expedient that allows us to recognize the incremental costs of obtaining a contract as an expense when
incurred if the amortization period of the asset that we otherwise would have recognized is one year or less.

Contratt

ct estimaii

tes and judgmegg

ntstt

Our revenues accounted for under Topic 606 generally do not require significant estimates or judgments as the transaction price is

generally fixed and stated on our contracts. Our contracts generally do not include multiple performance obligations, and accordingly
do not generally require estimates of the standalone selling price for each performance obligation. Also, our revenues do not include
material amounts of variable consideration. Subsu tantially all of our revenues are recognized at a point-in-time and the timing of the
satisfaction of the applicable performance obligations is readily determinable. As noted above, our Topic 606 revenues are generally
recognized at the time of delivery to, or pick-upu by, the customer.

51

Discontinued Operations

In determining whether a group of assets which has been disposed of (or is to be disposed of)ff should be presented as discontinued

operations, the Company analyzes whether the group of assets being disposed of represents a component of the entity. A component
typically has historic operations and cash flows that are clearly distinguishable for both operations and financial reporting purpos
addition, the Company considers whether the disposal represents a strategic shiftff that has or will have a majoa r effeff ct on the
Company’s operations and financial results. This strategic shiftff could include a disposal of a majoa r geographical area, a majoa r line of
business, a majoa r equity method investment, or other majoa r parts of an entity.

r

es. In

The Company reports financial results for discontinued operations separately from continuing operations to distinguish the
financial impact of disposal transactions from ongoing operations. The assets and liabia lities of a discontinued operation held for sale,
other than goodwill, are measured at the lower of its carrying amount or fair value less cost to sell. When a portion of a reporting unit
that constitutes a business is to be disposed of,ff the goodwill associated with that business is included in the carrying amount of the
business based on the relative fair values of the business to be disposed of and the portion of the reporting unit that will be retained.
See Note 3 for additional information.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and highly liquid investments with an original maturity of three months or less.

Inventories

We measure inventoryrr at the lower of cost or net realizable value; where net realizable value is considered to be estimated selling
price in the ordinary course of business, less reasonabla y predictabla e costs of completion, disposal and transportation. For used and new
equipment inventories, cost is determined by specificff
ies, cost is determined by using
average cost.

-identificff ation. For inventories of parts and suppl

u

Rental Equipment

The rental equipment we purchase is stated at cost and is depreciated over the estimated usefulff

lifeff of the equipment using the

straight-line method and is included in rental depreciation within our Consolidated Statements of Income. Estimated usefulff
based upon type of equipment. Generally, we depreciate aerial work platforms over a ten year estimated usefulff
equipment over a five year estimated usefulff
estimated usefulff
life. Attachments and other smaller type equipment are depreciated generally over a three year estimated usefulff
We periodically evaluate the appropriateness of remaining depreciable lives and any salvage value assigned to rental equipment.
Depreciation expense on rental equipment is reflected in rental depreciation in cost of revenues on the Consolidated Statements of
Income.

lifeff with a 25% salvage value, and material handling equipment over a seven year

earthmoving

life,ff

lives vary

life.

Ordinary repair and maintenance costs and property taxes are reflected in rental expenses in cost of revenues on the Consolidated

Statements of Income. However, expenditures for additions or improvements that significantly extend the usefulff
capitalized in the period incurred. When rental equipment is sold or disposed of,ff the related cost and accumulated depreciation are
removed from the respective accounts and any gains or losses are included in gross profitff
We receive individual offeff
The rental equipment is not transferff
the equipment is sold.

in the Consolidated Statements of Income.
rs for fleet on a continual basis, at which time we perform an analysis on whether or not to accept the offeff
r.
red to inventoryrr under the held for sale model as the equipment is used to generate revenues until

lifeff of the asset are

Property and Equipment

Property and equipment are recorded at cost and are depreciated over the assets’ estimated usefulff

lives using the straight-line

method. Ordinary repair and maintenance costs are included in selling, general and administrative (“SG&A”) expenses on our
Consolidated Statements of Income. However, expenditures for additions or improvements that significantly extend the usefulff
the asset are capitalized in the period incurred. At the time assets are sold or disposed of,ff the cost and accumulated depreciation are
removed from their respective accounts and the related gains or losses are reflected in the Consolidated Statements of Income in gains
from sales of property and equipment, net. We additionally capia talize certain costs associated with internally developed software and
cloud computing arrangements.

life of

We periodically evaluate the appropriateness of remaining depreciable lives assigned to property and equipment. Leasehold

improvements are amortized using the straight-line method over their estimated usefulff
whichever is shorter. Depreciation expense on property and equipment is included in SG&A expenses on our Consolidated Statements
of Income. Generally, we assign the following estimated usefulff

lives or the remaining term of the lease,

lives to these categories:

52

Category
Transportation equipment................................................................
Buildings .........................................................................................
Offiff ce equipment.............................................................................
Computer equipment .......................................................................
Machineryrr and equipment ...............................................................

Estimated
Usefulff Life

5 years
39 years
5 years
3 years
7 years

When events or changes in circumstances indicate that the carrying amount of our rental fleet and property and equipment might
not be recoverabla e, the expected future undiscounted cash flows from the assets are estimated and compared with the carryirr ng amount
of the assets. If the sum of the estimated undiscounted cash flows is less than the carrying amount of the assets, an impairment loss is
recorded. The impairment loss is measured by comparing the fair value of the assets with their carrying amounts. Fair value is
determined based on discounted cash flows or appraised values, as appropriate. In suppor
we perform a review of our long-lived assets at the branch level relative to branch performance and conclude whether indicators of
impairment exist. We did not record any impairment losses related to our rental equipment or property and equipment during the years
ended December 31, 2023, 2022 or 2021.

t of our review for indicators of impairment,

u

Acquisition Accounting

We have made a number of acquisitions in the past and we may continue to make additional acquisitions in the future. The assets

lly all of the rental equipment that we have acquired through business combinations have been classified as “To be

acquired and liabia lities assumed are recorded based on their respective fair values at the date of acquisition. Long-lived assets
(principally rental equipment), goodwill and other intangible assets generally represent the largest component of our acquisitions.
Historically, virtuat
Used,” rather than as “To be Sold.” Rental equipment that we acquire and classify as “To be Used” is recorded at fair value and is
valued utilizing either a cost or market approach, or a combination of these methods, depending on the asset being valued and the
availabia lity of cost or market data. Goodwill is calculated as the excess of the fair value of consideration transferff
fair value of the assets acquired and the liabilities assumed. Such fair market value assessments require judgments and estimates that
can be affeff cted by various factors over time, which may cause final amounts to differ materially from original estimates. The
identification of assets acquired, inputs utilized for determining the fair value of assets acquired and liabilities assumed and applicable
fair value methodologies all include significant judgment.

red over the net of the

In addition to long-lived fixed assets, we also acquire other assets and assume liabilities. These other assets and liabilities

accounts receivabla e, accounts payabla e and other working capia tal items.

typically include, but are not limited to, parts inventory,rr
Because of their short-term nature, the fair values of these assets and liabilities generally approximate the carrying values reflected on
the acquired entities balance sheets. However, when appropriate, we adjud st these carrying values for factors such as collectability and
existence. The intangible assets that we have acquired consist primarily of the goodwill recognized. Depending upon the applicable
purchase agreement and the particular facts and circumstances of the business acquired, we may identify other intangible assets, such
as trade names or trademarks, noncompetition agreements and customer-related intangibles (specifically, customer relationships). A
trademark has a fair value equal to the present value of the royalty income attributable to it. The royalty income attributable to a
trademark represents the hypothetical cost savings that are derived from owning the trademark instead of paying royalties to license
the trademark from another owner. The fair value of noncompetition agreements is estimated based on an income approach since their
values are representative of the current and future revenue and profitff erosion protection they provide. Customer relationships are
generally valued based on an excess earnings or income approach with consideration to projected cash flows.

Goodwill

Goodwill is recorded as the excess of the consideration transferff

red plus the fair value of any non-controlling interest in the

acquiree at the acquisition date over the fair values of the identifiable net assets acquired.

We evaluate goodwill for impairment at least annually, as of October 1, or more frequently if triggering events occur or other

impairment indicators arise that would more likely than not reduce the fair value of a reporting unit below its carrying amount.
Impairment of goodwill is evaluated at the reporting unit level. A reporting unit is defined as an operating segment (i.e., before
aggregation or combination), or one level below an operating segment (i.e., a component). A component of an operating segment is a
reporting unit if the component constitutes a business for which discrete financial information is availabla e and segment management
regularly reviews the operating results of that component. We have identifieff d that our five operating segments (Equipment Rentals,
Sales of Rental Equipment, Sales of New Equipment, Parts Sales and Service Revenues) each represent a reporting unit.

Topic 350 consists of a one-step assessment to determine whether goodwill is impaired requiring an entity to compare each
reporting unit’s carrying value, including goodwill, with its fair value. An entity should recognize a goodwill impairment charge for
the amount by which the carrying amount exceeds the reporting unit’s fair value, limited to the total amount of goodwill allocated to

53

the reporting unit. An entity also has an option to perform a qualitative assessment to determine if the quantitative impairment test is
necessary. Considerable judgment is required by management in performing the qualitative assessment to determine whether it is more
likely than not that the fair value of a reporting unit is less than its carrying value.

Based on our evaluation of our Parts Sales reporting unit and operating segment during the third quarter of 2023, we identifieff d a
triggering event requiring an interim impairment test. This triggering event related to a sustained parts segment decline in volume and
l revenue and earnings compared with our planned revenue and earnings utilized in our most recent quantitative goodwill
actuat
impairment analysis following our dispositions and strategic shiftff to be rental focused. Additional information on our dispositions is
included in Footnote 3. No triggering event was identifieff d related to our Equipment Rental and Sales of Rental Equipment reporting
units.

We estimated the fair value of our Parts Sales reporting unit by weighting results from the income approach and the market
approach and concluded that our Parts Sales reporting unit had a fair value less than its carrying value, resulting in a $5.7 million
impairment charge. The impairment was largely due to a current year decrease in parts revenues as a result of our strategic shiftff and
recent dispositions. This revenue decline, combined with our forecasted parts revenues growth rate and operating results assumptions
for the forecast period under the income approach, resulted in a fair value determination, that when combined with the weighted fair
value of the reporting unit determined under the market approach, was less than the reporting unit’s carrying value.

We performed a qualitative assessment of goodwill impairment as of our annual testing date, October 1, 2023. We determined

that it was more likely than not that the fair value of each of our reporting units containing goodwill was not less than its carrying
value and, thereforff e, did not perform the prescribed quantitative goodwill impairment test. We considered various factors in
performing the qualitative test, including macroeconomic conditions, industryrr and market considerations, the overall financial
performance of our reporting units, the Company’s stock price and the excess amount between our reporting unit’s fair value and
carrying value as indicated on our most recent interim quantitative assessment.

We performed a qualitative assessment of goodwill impairment as of our annual testing date, October 1, 2022. We determined

that it was more likely than not that the fair value of each of our reporting units containing goodwill was not less than its carrying
value and, thereforff e, did not perform the prescribed quantitative goodwill impairment test. We considered various factors in
performing the qualitative test, including macroeconomic conditions, industryrr and market considerations, the overall financial
performance of our reporting units, the Company’s stock price and the excess amount between our reporting unit’s fair value and
carrying value as indicated on our most recent quantitative assessment.

We performed a quantitative assessment of goodwill impairment as of our annual testing date, October 1, 2021, for all reporting
units containing goodwill. For these reporting units, we compared the carrying values of each reporting unit, inclusive of goodwill, if
applicable, and definite-lived intangible assets, to its fair value. We estimated the fair value of these reporting units by weighting
results from the income approach and the market approach. Based on this quantitative test, we determined that our Equipment Rentals,
Sales of Rental Equipment and Parts Sales reporting units were not impaired as of October 1, 2021 as their respective fair values
exceeded their respective carrying values by approximately 50%, 98% and 9%, respectively.

Significant assumptions inherent in the valuation methodologies for goodwill are employed and include, prospective financial

information, growth rates, terminal value, discount rates, and comparable multiples from publicly traded companies in our industry.rr
The inputs and variables used in determining the fair value of a reporting unit require management to make certain assumptions
regarding the impact of operating and macroeconomic changes, as well as estimates of future cash flows. Our estimates regarding
future cash flows are based on historical experience and projections of future operating performance, including revenues, margins and
operating expenses. We also make certain forecasts about future economic conditions, such as the timing and duration of economic
expansion or contraction cycles in our business, interest rates, and other market data. Many of the factors used in assessing fair value
are outside the control of management, and these assumptions and estimates may change in future periods. An adverse change in any
of the assumptions used in our impairment testing (e.g., projected revenue and profit,ff
could affeff ct our fair value measurements and result in future impairments. If we are unabla e to achieve the financial forecasts used in
our impairment analysis, we may also be required to record an impairment charge to our goodwill.

discount rates, industryrr price multiples, etc.)

The impairment charge described above is a non-cash item and does not affeff ct our cash flows, liquidity or borrowing capaa

city

under the Credit Facility, and the impairment charge is excluded from our financial results in evaluating our financial covenants under
the Credit Facility.

The carrying amount of goodwill for our reporting units for the years ended December 31, 2023 and 2022 is as follows (amounts

in thousands):

54

Equipment
Rentals

Sales of
Rental Eq.

Sales of
New Eq.

Parts
Sales

Service
Revenues

Balance at December 31, 2021 (1)............. $
Increase (2).................................................
Balance at December 31, 2022 (1).............
Increase (3).................................................
Decrease (4) ...............................................
Decrease (5) ...............................................
Increase (6).................................................
Balance at December 31, 2023 (1)............. $

48,976
39,553
88,529
29
—
(132)
11,282
99,708

$

$

8,447
—
8,447
—
—
—
—
8,447

$

$

— $
—
—
—
—
—
—
— $

$

5,714
—
5,714
—
(5,714)
—
—
— $

— $
—
—
—
—
—
—
— $

Total

63,137
39,553
102,690
29
(5,714)
(132)
11,282
108,155

(2)

(1)

The total carrying amount of goodwill as of December 31, 2021 and 2022 in the tabla e above is reflected net of $92.7
million of accumulated impairment charges. The total carrying amount of goodwill as of December 31, 2023 in the tabla e
above is reflected net of $98.4 million of accumulated impairment charges.
Increase due to the One Source Equipment Rentals, Inc. (“OSR”) Acquisition.
Increase is related to the closing adjud stments of the OSR Acquisition during the first quarter of 2023.
(3)
(4) Decrease is related to the Parts Sales goodwill impairment calculated during the third quarter of 2023.
(5) Decrease is related to the final closing adjud stment of the OSR Acquisition during the third quarter of 2023.
(6)

Increase due to the Giffin Equipment (“Giffin”) Acquisition during the fourth quarter of 2023.

Intangible assets

Our intangible assets include customer relationships, tradenames and leasehold interests that we acquired in recent acquisitions
(see Note 3 for further acquisition information). The customer relationships, leasehold interests and noncompetition agreements are
amortized on a straight-line basis over estimated usefulff
years), respectively, from the date of acquisition, which approximates the period of economic benefit.

lives of ten years, ten years and the length of agreement (typically one to five

The gross carrying values, accumulated amortization and net carrying amounts of our majoa r classes of intangible assets as of

December 31, 2023 and 2022 are as follows (dollar amounts in thousands):

Customer relationships ...... $
Noncompetition
agreements .........................
Leasehold interests.............

Total ............................... $

December 31, 2023
Accumulated
Amortization

Gross

Net

Gross

December 31, 2022
Accumulated
Amortization

Net

53,900

$

23,917

$

29,983

$

50,100

$

18,844

$

31,256

4,300
200
58,400

$

1,787
120
25,824

$

2,513
80
32,576

$

1,700
200
52,000

$

425
100
19,369

$

1,275
100
32,631

Intangible assets are tested for impairment whenever events or circumstances indicate that the carrying amount of an asset may

not be recoverabla e. An impairment loss would be recognized when the carrying amount of the asset exceeds the estimated
undiscounted future cash flows expected to result from the use of the asset and its eventual disposition. The impairment loss to be
recorded would be the excess of the asset’s carrying value over its fair value. Fair value is generally determined using a discounted
cash flow analysis or other valuation technique.

Total amortization expense for the years ended December 31, 2023, 2022 and 2021 totaled $6.5 million, $4.7 million and $4.0
million, respectively, and is included within SG&A expenses on the Consolidated Statements of Income. The following tabla e presents
the expected amortization expense for each of the next five years ending December 31 and thereafteff
remaining carrying value as of December 31, 2023 (dollar amounts in thousands):

r for those intangible assets with

2024 ................................................................................
2025 ................................................................................
2026 ................................................................................
2027 ................................................................................
2028 ................................................................................
Thereafter .......................................................................

$

$

Amortization Expense

5,930
5,930
5,930
5,930
2,973
5,883
32,576

55

Manufacff

turer Flooring Plans Payable

ff

urt er flooring plans payabla e are financing arrangements for inventoryrr and rental equipment. The interest cost incurred on
Manufact
ff
the manufact
urt er flooring plans ranged from 0% to the prime rate (8.50% at December 31, 2023) plus an applicable margin. Certain
manufacff
turer flooring plans provide for a one to twelve-month reduced interest rate term or a deferred payment period. We recognize
interest expense based on the effeff ctive interest method. We make payments in accordance with the original terms of the financing
urt er flooring plans prior to the original maturity date of
agreements. However, we may sell equipment that is financed under manufact
the financing agreement. The related manufacturt er flooring plan payabla e is then paid at the time the equipment being financed is sold.
The manufact

urt er flooring plans payabla e are secured by the equipment being financed.

ff

ff

Manufact

ff

urt er flooring plans payabla e as of December 31, 2023 have maturities (based on original financing terms) during the year

ended December 31, 2024.

Leases

The Company as Lessee

We determine whether an arrangement is a lease at the inception of the arrangement based on the terms and conditions in the
contract. A contract contains a lease if there is an identifieff d asset and we have the right to control the asset for a period of time in
exchange for consideration. Lease arrangements can take several forms. Some arrangements are clearly within the scope of lease
accounting, such as a real estate contract that provides an explicit contractuat
exchange for consideration. However, the right to use an asset can also be conveyed through arrangements that are not leases in form,
such as leases embedded within service and suppl
determine if an identified asset is present, if subsu tantive subsu titution rights are present, and if the arrangement provides the customer
control of the asset.

y contracts. We analyze all arrangements with potential embedded leases to

l right to use a building for a specified period of time in

u

Our lease portfolff

io is subsu tantially comprised of operating leases related to leases of real estate and improvements at our branch

locations. From time to time, we may also lease various types of small equipment and vehicles.

Operating lease right-of-use (“ROU”) assets represent our right to use an individual asset for the lease term and lease liabilities
represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabia lities are recognized at
the commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide the
lessor’s implicit rate, we use our incremental borrowing rate (“IBR”) at the commencement date in determining the present value of
lease payments by assuming the rate for a fully collateralized and amortizing loan with the same term as the lease.

Lease terms include options to extend the lease when it is reasonably certain those options will be exercised. For leases with terms

greater than 12 months, we record the related asset and obligation at the present value of lease payments over the term. Many of our
leases include rental escalation clauses, renewal options and/or termination options that are factored into our determination of lease
payments when such renewal options and/or termination options are reasonabla y certain of exercise. We do not separate lease and non-
lease components of contracts. Variable lease payments, which represent lease payments that vary due to changes in facts or
circumstances occurring afteff
r the commencement date other than the passage of time, are expensed in the period in which the
obligation for these payments was incurred.

A ROU asset is subju ect to the same impairment guidance as assets categorized as plant, property, and equipment. As such, any

impairment loss on ROU assets is presented in the same manner as an impairment loss recognized on other long-lived assets.

A lease modification is a change to the terms and conditions of a contract that change the scope or consideration of a lease. For
example, a change to the terms and conditions to the contract that adds or terminates the right to use one or more underlying assets, or
extends or shortens the contractuat
l lease term, is a modification. Depending on facts and circumstances, a lease modification may be
accounted as either: (1) the original lease plus the lease of a separate asset(s) or (2) a modified lease. A lease will be remeasured if
there are changes to the lease contract that do not give rise to a separate lease.

See Note 11 related to the required lease disclosures.

The Company as Lessor

Our equipment rental business involves rental contracts with customers whereby we are the lessor in the transaction and thereforff e,

such transactions are subju ect to Topic 842. We account for such rental contracts as operating leases. We recognize revenue from
equipment rentals in the period earned, regardless of the timing of billing to customers. A rental contract includes rates for daily,
weekly or monthly use, and rental revenues are earned on a daily basis as rental contracts remain outstanding. Because the rental
contracts can extend across multiple reporting periods, we record unbilled rental revenues and deferred rental revenues at the end of
reporting periods so rental revenues earned is appropriately stated for the periods presented.

56

Deferred Financing Costs and Initial Purchasers’ Discounts

Deferred financing costs include legal, accounting and other direct costs incurred in connection with the issuance and
amendments thereto, of the Company’s debt. These costs are amortized over the terms of the related debt using the straight-line
method which approximates amortization using the effeff ctive interest method.

Initial purchasers’ discount and bond premium is the differential between the price paid to an issuer for the new issue and the

red to the investing public. The amortization expense of
prices (below and above, respectively) at which the securities are initially offeff
deferred financing costs and bond premium and accretion of initial purchasers’ discounts are included in interest expense as an overall
cost of the related financings. Such costs are presented in the balance sheet as a direct deduction from the carrying value of the
associated debt liabia lity, consistent with the presentation of a debt discount.

Reserves for Claims

We are exposed to various claims relating to our business, including those for which we provide self-iff nsurance. Claims for which

we self-iff nsure include: (1) workers compensation claims; (2) general liabia lity claims by third parties for injun ry or property damage
caused by our equipment or personnel; (3) automobile liabia lity claims; and (4) employee health insurance claims. Losses that exceed
our deductibles and self-iff nsured retentions are insured through various commercial lines of insurance policies. These types of claims
may take a subsu tantial amount of time to resolve and, accordingly, the ultimate liabia lity associated with a particular claim, including
claims incurred but not reported as of a period-end reporting date, may not be known for an extended period of time. Our methodology
for developing self-iff nsurance reserves is based on management estimates. Our estimation process considers, among other matters, the
cost of known claims over time, cost inflation and incurred but not reported claims. These estimates may change based on, among
other things, changes in our claim historyrr or receipt of additional information relevant to assessing the claims. Further, these estimates
may prove to be inaccurate due to factors such as adverse judicial determinations or other claim settlements at higher than estimated
amounts. Accordingly, we may be required to increase or decrease our reserve levels. At December 31, 2023, our claims reserves
related to workers compensation, general liability and automobile liabia lity, which are included in “Accruer d expenses payabla e and
other liabilities” in our consolidated balance sheets, totaled $9.9 million and our health insurance reserves totaled $2.3 million. At
December 31, 2022, our claims reserves related to workers compensation, general liability and automobile liabia lity totaled $9.1
million and our health insurance reserves totaled $1.9 million.

Advertising

Advertising costs are expensed as incurred and totaled $1.1 million, $1.0 million and $1.1 million for the years ended

December 31, 2023, 2022 and 2021, respectively.

Income Taxes

The Company files a consolidated federal income tax return with its wholly-owned subsu idiaries. The Company is a C-Corpor
under the provisions of the Internal Revenue Code. We utilize the asset and liabia lity approach to measure deferred tax assets and
liabia lities based on temporaryrr differences existing at each balance sheet date using currently enacted tax rates. Deferred tax assets and
liabia lities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts
of existing assets and liabia lities and their respective tax bases. Deferred tax assets and liabia lities are measured using enacted tax rates
expected to apply to taxabla e income in the years in which those temporaryrr differences are expected to be recovered or settled. The
effeff ct of a change in tax rate is recognized as income or expense in the period that includes the enactment date of that rate.

ration

The Company recognizes the effeff ct of income tax positions only if those positions are more likely than not of being sustained.
Recognized income tax provisions are measured at the largest amount that is greater than 50% likely of being realized. Changes in
recognition or measurement are reflected in the period in which the change in judgment occurs. The Company recognizes both interest
and penalties related to uncertain tax positions in net other income (expense).

Our deferred tax calculation requires management to make certain estimates about future operations. Deferred tax assets are

reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the
deferred tax assets will not be realized.

Fair Value of Financial Instruments

Fair value is defined as the amount that would be received for selling an asset or paid to transferff

a liability in an orderly

transaction between market participants at the measurement date. The FASB fair value measurement guidance establa ished a fair value
hierarchy that prioritizes the inputs used to measure fair value. The three broad levels of the fair value hierarchy are as follows:

Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities

Level 2 – Quoted prices for similar assets and liabia lities in active markets or inputs that are observabla e for the asset or liabia lity,
either directly or indirectly

57

Level 3 – Unobservabla e inputs for which little or no market data exists, thereforff e requiring a company to develop its own
assumptions

The carrying value of financial instruments reported in the accompanying consolidated balance sheets for cash and cash

equivalents, accounts receivable, Credit Facility, accounts payabla e and accruer d expenses payabla e and other liabia lities approximate fair
value due to the immediate or short-term nature, maturity or market interest rate of these financial instruments. The Company’s
outstanding obligations on its Credit Facility are deemed to be at fair value as the interest rates are variable and consistent with
prevailing rates, which are considered Level 2 inputs. The carryirr ng amounts and fair values of our other financial instruments subju ect
to fair value disclosures as of December 31, 2023 and 2022 are presented in the tabla e below (amounts in thousands).

ff

Manufact
Senior unsecured notes due 2028 with interest computed at 3.875% (Level 2) ....................

urt er flooring plans payabla e with interest computed at 8.75% (Level 3)................. $

ff

Manufact
Senior unsecured notes due 2028 with interest computed at 3.875% (Level 2) ....................

urt er flooring plans payabla e with interest computed at 7.75% (Level 3)................. $

December 31, 2023

Carrying
Amount

Fair
Value

2,708
1,242,852

$

2,490
1,137,170

December 31, 2022

Carrying
Amount

Fair
Value

422
1,241,409

$

392
1,070,088

At December 31, 2023 and 2022, the fair value of our senior unsecured notes due 2028 (the “Senior Unsecured Notes”),
respectively, were based on quoted bond trading market prices for those notes. For our Level 3 unobservabla e inputs, we calculate a
discount rate for our manufacturt er flooring plans payabla e based on the U.S. prime rate plus the applicable margin on our Credit
Facility. The discount rate is disclosed in the above tabla e. The assets collateralized against the manufact
approximate its carryirr ng value.

urt er flooring plans payabla e

ff

During the years ended December 31, 2023 and 2022, there were no transferff s of financial assets or liabilities in or out of Level 3

of the fair value hierarchy.

Fair Value Measurements on a Nonrecurring Basisii

Our non-financial assets, such as goodwill, intangible assets and property and equipment, are adjud sted to fair value only when an

impairment charge is recognized or the underlying investment is sold. Such fair value measurements are based predominately on
Level 3 inputs. The result of our third quarter 2023 goodwill impairment quantitative test indicated that the fair value of the Parts
Sales reporting unit was less than the carrying value of the reporting unit, resulting in a goodwill impairment of $5.7 million.

Concentrations of Credit and Supplier Risk

Financial instruments that potentially subju ect the Company to concentrations of credit risk consist primarily of cash deposits and

trade accounts receivabla e. Credit risk can be negatively impacted by adverse changes in the economy or by disrupt
markets.

r

ions in the credit

The Company maintains its cash deposits with establa ished commercial banks. At times, balances may exceed federally insured

limits. We have not experienced any losses in such accounts and do not believe that we are exposed to any significant credit risk
associated with our cash deposits.

We believe that credit risk with respect to trade accounts receivable is somewhat mitigated by our large number of geographically

diverse customers and our credit evaluation procedurd es. Although generally no collateral is required, when feasible, mechanics’ liens
are filed and personal guarantees are signed to protect the Company’s interests. We maintain reserves for potential losses.

We record trade accounts receivabla es at sales value and establa ish specific reserves for certain customer accounts identifieff d as

known collection problems due to insolvency, disputes or other collection issues. The amounts of the specificff
reserves estimated by
management are determined by a loss rate model based on delinquency, as further described above in receivabla es and contract assets
and liabilities.

We purchase a significant amount of equipment from leading, nationally-known original equipment manufacff

turers. During the

year ended December 31, 2023, we purchased appr
John Deere, and SkyTkk
principal product categories, termination of one or more of our relationships with any of our majoa r suppl

rak). We believe that while there are alternative sources of suppl

turers (JCB, Skyjkk ack, Sany,
y for the equipment we purchase in each of the
iers of equipment could have

oximately 52.8% of our equipment from five manufacff

u

u

a

58

a material adverse effeff ct on our business, financial condition or results of operation if we were unabla e to obtain adequate or timely
rental equipment.

Income (loss) per Share

Income (loss) per common share for the years ended December 31, 2023, 2022 and 2021 is based on the weighted average
number of common shares outstanding during the period. The effeff cts of potentially dilutive securities that are anti-dilutive are not
included in the computation of diluted income (loss) per share. We include all common shares granted under our incentive
compensation plan which remain unvested (“restricted common shares”) and contain non-forfeitabla e rights to dividends or dividend
equivalents, whether paid or unpaid (“participating securities”), in the number of shares outstanding in our basic and diluted EPS
calculations using the two-class method. All of our restricted common shares are currently participating securities.

Under the two-class method, earnings per common share are computed by dividing the sum of distributed earnings allocated to

common shareholders and undistributed earnings allocated to common shareholders by the weighted average number of common
shares outstanding for the period. In applying the two-class method, distributed and undistributed earnings are allocated to both
common shares and restricted common shares based on the total weighted average shares outstanding during the period. The number
of restricted common shares outstanding during the years ended December 31, 2023, 2022 and 2021 were less than 1% of total
outstanding shares for each of the years ended December 31, 2023, 2022 and 2021 and consequently, were immaterial to the basic and
diluted EPS calculations. Thereforff e, use of the two-class method had no impact on our basic and diluted EPS calculations as presented
for the years ended December 31, 2023, 2022 and 2021.

The following tabla e sets forth the computation of basic and diluted net income (loss) per common share for the years ended

December 31, (amounts in thousands, except per share amounts):

2023

2022

2021

Net income from continuing operations ............................................................ $
Net income (loss) from discontinued operations ............................................... $
Net income......................................................................................................... $

169,293

$
— $
$

169,293

133,694

$
(1,524) $
$

132,170

Weighted average number of common shares outstanding:

Basic...............................................................................................................
Effeff ct of dilutive non-vested restricted stock ................................................
Diluted ...........................................................................................................

36,100
229
36,329

35,943
146
36,089

Income (loss) per share: (1)
Basic:

Continuing operations.................................................................................... $
Discontinued operations ................................................................................
Net income per share ..................................................................................... $

Diluted:

Continuing operations.................................................................................... $
Discontinued operations ................................................................................
Net income per share ..................................................................................... $

Common shares excluded from the denominator as anti-dilutive:

Non-vested restricted stock............................................................................

$

$

$

$

4.69
—
4.69

4.66
—
4.66

51

$

$

$

$

3.72
(0.04)
3.68

3.70
(0.04)
3.66

81

Dividends declared per common share outstanding .......................................... $

1.10

$

1.10

$

60,564
41,976
102,540

36,261
190
36,451

1.67
1.16
2.83

1.66
1.15
2.81

23

1.10

(1)

Because of the method used in calculating per share data, the summations may not necessarily total to the per share data
computed for the total company due to rounding.

Segment Reporting

We have five reportabla e segments. We derive our revenues from five principal business activities: (1) equipment rentals; (2) sales

of rental equipment; (3) sales of new equipment; (4) parts sales; and (5) repair and maintenance services. These segments are based
upon how we allocate resources and assess performance. See Note 16 to the consolidated financial statements regarding our segment
information.

59

Recent Accounting Pronouncements

Pronouncements Not Yet Adopt

dd

ed

Segment Reporting

In November 2023, the FASB issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280):
Improvements to Reportabla e Segment Disclosures, which improves the disclosures about a public entity’s reportabla e segments and
addresses requests for additional, more detailed information about a reportabla e segment’s expenses. The amendments in this ASU
require disclosure of incremental segment information on an annual and interim basis for all public entities. The amendments are
effeff ctive for fiscal years beginning afteff
2024. ASU 2023-07 became effeff ctive on January 1, 2024 and are not expected to have an impact on our financial statements, but will
result in expanded reportable segment disclosures.

r December 15, 2023, and interim periods within fiscal years beginning afteff

r December 15,

Income Taxes

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures,

categories in the rate reconciliation, provide additional information for reconciling items that meet a

which should improve the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of
information in the rate reconciliation and income taxes paid disaggregated by jurisdiction. The ASU requires that public entities on an
annual basis disclose specificff
quantitative threshold and the following information about income taxes paid: the amount of income taxes paid disaggregated by
federal (national), state, and foreign taxes and the amount of income taxes paid disaggregated by individual jurisdictions. Lastly, the
amendments in this ASU require that entities disclose income (or loss) from continuing operations before income tax expense (or
benefit) disaggregated between domestic and foreign and income tax expense (or benefit) from continuing operations disaggregated by
federal (national), state, and foreign. ASU 2023-09 becomes effeff ctive January 1, 2025 and are not expected to have an impact on our
financial statements, but will result in expanded tax disclosures.

Recently Adopt

dd

ed Accounting Pronouncements

Reference Rate Reform

On January 1, 2023 we adopted Accounting Standards Update (“ASU”) No. 2020-04, Reference Rate Reform (Topic 848):
Facilitation of the Effeff cts of Reference Rate Reform on Financial Reporting, which provided optional guidance for a limited time to
ease the potential burden in accounting for or recognizing the effeff cts of reference rate reform, particularly, the risk of cessation of the
London Interbank Offeff
limited to the interest expense and certain fees we incur on balances outstanding under our Senior Secured Credit Facility (the “Credit
Facility”). We amended and restated our Credit Facility to transition to Secured Overnight Financing Rate (“SOFR”) as of Februar
ry 2,
2023. The impact from the cessation of LIBOR as a reference rate did not have a material impact on our consolidated financial
statements.

red Rate (“LIBOR”) on financial reporting. Our exposure related to the expected cessation of LIBOR was

(3) Acquisitions and Dispositions

2023 Acquisiii

tion

Giffiff n Equipment

Effeff ctive November 1, 2023, we completed the acquisition of Mel Giffinff

, Inc. (d/bdd /a Giffin Equipment) (“Giffin”), an equipment

rental company with three branches located in California. The acquisition expands our presence in the California market.

The aggregate cash consideration paid was approximately $31.3 million. The acquisition and related fees and expenses were

funded from availabla e cash and borrowings. The following tabla e summarizes the fair value of the assets acquired and liabia lities
assumed as of the acquisition date. The opening balance sheet amounts presented below are preliminary and subju ect to change as we
obtain additional information during the acquisition measurement period and finalize customaryrr closing adjud stments with the seller.

60

Accounts receivable............................................................................................................................................
Prepaid expenses and other assets ......................................................................................................................
Rental equipment................................................................................................................................................
Property and equipment......................................................................................................................................
Operating lease right-of-use assets.....................................................................................................................
Intangible assets (1).............................................................................................................................................
Total identifiaff bla e assets acquired ...................................................................................................................
Accruerr d expenses payabla e and other liabia lities..................................................................................................
Operating lease liabia lities ...................................................................................................................................
Total liabia lities assumed .................................................................................................................................
Net identifiaff bla e assets acquired ......................................................................................................................
Goodwill (2) ........................................................................................................................................................
Net assets acquired .........................................................................................................................................

$

$

$’s in thousands

870
10
12,291
431
121
6,400
20,123
(19)
(121)
(140)
19,983
11,282
31,265

(1) The following tabla e reflects the estimated fair values and usefulff

lives of the acquired intangible assets identified based on our

purchase accounting assessments:

Customer relationships .............................................................. $
Noncompetition agreements ......................................................

$

Fair Value
(amounts in
thousands)

3,800
2,600
6,400

Life (years)

10
5

(2) The acquired goodwill has been allocated to the equipment rentals reporting unit.

The level of goodwill that resulted from the Giffin acquisition is primarily reflective of Giffin’s going-concern value, the value of

assembled workforce, new customer relationships expected to arise from the acquisition and expected synergies from combining
operations. We currently expect the goodwill recognized to be 100% deductible for income tax purpos

es.

r

Total acquisition costs were $0.3 million and included within selling, general and administrative (“SG&A”) expenses on the
Consolidated Statement of Income during the year ended December 31, 2023. Since our acquisition of Giffin on November 1, 2023,
significant amounts of equipment rental fleet have been moved between H&E locations and the acquired locations, and it is
impractical to reasonabla y estimate the amount of Giffin revenues and earnings since the acquisition date.

The assets and liabilities were recorded as of November 1, 2023 and the results of operations are included in the Company's

consolidated results as of that date.

2022 Acquisiii

tion

One Source Equipment Rentals, Inc.

Effeff ctive October 1, 2022, we acquired 100% of the equity of One Source Equipment Rentals, Inc. (“OSR”), an equipment rental
company with ten branches located in the Midwest. The acquisition expands our presence in the surrounding market, including initial
locations in Illinois, Indiana, and Kentuct ky.

The aggregate cash consideration paid was approximately $136.7 million. The acquisition and related fees and expenses were
funded from availabla e cash. Customaryrr closing adjud stments were finalized during the first quarter of 2023 and the update of a tax
estimate upon filing the final tax returns concluded during the third quarter of 2023. The following tabla e summarizes the fair value of
the assets acquired and liabia lities assumed as of the acquisition date.

61

Cash ....................................................................................................................................................................
Accounts receivable............................................................................................................................................
Inventory.rr
............................................................................................................................................................
Prepaid expenses and other assets ......................................................................................................................
Rental equipment................................................................................................................................................
Property and equipment......................................................................................................................................
Operating lease right-of-use assets.....................................................................................................................
Intangible assets (1).............................................................................................................................................
Total identifiaff bla e assets acquired ...................................................................................................................
Accounts payabla e................................................................................................................................................
Tax payabla e ........................................................................................................................................................
Operating lease liabia lities ...................................................................................................................................
Deferred income taxes........................................................................................................................................
Total liabia lities assumed .................................................................................................................................
Net identifiaff bla e assets acquired ......................................................................................................................
Goodwill (2) ........................................................................................................................................................
Net assets acquired .........................................................................................................................................

$

$

$’s in thousands

337
10,406
332
374
102,436
4,216
2,388
12,300
132,789
(4,723)
(786)
(2,388)
(27,653)
(35,550)
97,239
39,451
136,690

(1) The following tabla e reflects the estimated fair values and usefulff

lives of the acquired intangible assets identified based on our

purchase accounting assessments:

Customer relationships............................................................... $
Noncompetition agreements ......................................................

$

Fair Value
(amounts in
thousands)

10,600
1,700
12,300

Life (years)

10
1

(2) The acquired goodwill has been allocated to the equipment rentals reporting unit.

Included in the total goodwill amount of $39.5 million is approximately $0.8 million of accruer d purchase price consideration to

be paid to the sellers pursuant to the terms of the purchase agreement among the parties named thereto. The level of goodwill that
resulted from the OSR acquisition is primarily reflective of OSR’s going-concern value, the value of assembled workforce, new
customer relationships expected to arise from the acquisition and expected synergies from combining operations.

Total acquisition costs were $0.8 million and included within selling, general and administrative (“SG&A”) expenses on the
Consolidated Statement of Income during the year ended December 31, 2022. Since our acquisition of OSR on October 1, 2022,
significant amounts of equipment rental fleet have been moved between H&E locations and the acquired locations, and it is
impractical to reasonabla y estimate the amount of OSR revenues and earnings since the acquisition date.

The assets and liabilities were recorded as of October 1, 2022 and the results of operations are included in the Company's

consolidated results as of that date.

Pro forma financial infon rmation (unaudited)

We completed the OSR acquisition effeff ctive October 1, 2022. Thereforff e, our reported Consolidated Statement of Income for the
year ended December 31, 2022 does not include OSR for the period from January 1, 2022 through September 30, 2022. Additionally,
we completed the Giffin acquisition effeff ctive November 1, 2023. Thereforff e, our reported Consolidated Statement of Income for the
year ended December 31, 2023 does not include Giffin for the period from January 1, 2023 through October 31, 2023.

The pro forma information for the years ended December 31, 2023 and 2022 in the tabla e below (amounts in thousands) is for

r

es only and gives effeff ct to the OSR and Giffinff

informational purpos
“pro forma acquisition date”). The pro forma information is not necessarily indicative of our results of operations had the acquisition
been completed on the pro forma acquisition date, nor is it necessarily indicative of our future results. The pro forma information does
not reflect any cost savings from operating effiff ciencies or synergies that could result from the acquisition, nor does it reflect additional
revenue opportunities following the acquisition. The unaudited pro forma financial information includes adjud stments primarily related
to the incremental depreciation and amortization expense of the rental equipment and intangible assets acquired, the elimination of
interest expense related to historical debt as well as other expenses that are not part of the combined entity and transaction expenses.

acquisitions as if it had been completed on January 1, 2022 (the

62

Total revenues .......................................................................................................................... $
Net income ............................................................................................................................... $

Year Ended December 31,

2023

1,479,360 $
171,075 $

2022

1,299,409
141,516

2022 Dispii osition

Komatsu Earthmoving Distributorship

On December 15, 2022, we sold our Komatsu earthmoving distribution business to Houston, Texas based Waukesha-Pearce

Industries, LLC (“WPI”) for $29.2 million, subju ect to customaryrr closing adjud stments. The WPI sale included the rights to the
distribution of Komatsu earthmoving equipment in the state of Louisiana and counties located in southwestern Arkansas, a branch
location and its associated property, plant and equipment in Kenner, LA, Komatsu new equipment inventory,rr
in Bossier City, LA and certain other equipment, parts and suppl
recorded a gain of $12.9 million within gain from sales of property and equipment, net and a gain of $2.5 million within other income
on the Consolidated Statement of Income for the year ended December 31, 2022. The WPI sale did not qualifyff
operations as the divestiture does not meet the definition of a component.

ies with a net book value of approximately $14.7 million. We

assets at a leased facility

for discontinued

u

2021 Dispii ositions

Crane Sale

On July 19, 2021, the Company entered into a definitive agreement to sell its crane business to a wholly-owned subsu idiary of The
Manitowoc Company, Inc. for $130.0 million in cash, which was subju ect to adjud stment based on actual amounts of net working capital
and crane rental fleet net book value delivered at transaction closing. The Company executed the transaction closing on October 1,
2021, subju ect to customaryrr closing conditions, including regulatoryrr approval under the Hart-Scott-Rodino Act, resulting in proceeds
of $135.9 million, which was subju ect to finalization of adjud stments. Closing adjud stments of $1.9 million were recorded as a loss from
discontinued operations on the Consolidated Statement of Income during the second quarter of 2022.

This disposition represents the Company’s strategic shiftff to a pure-play rental business. In accordance with ASC 360, Property,
Plant, and Equipment, the Company ceased recording depreciation and amortization for Crane Sale related rental fleet, property, plant
and equipment, and right of use lease assets upon qualifyiff ng as held for sale. In accordance with ASC 205-20, the Company
determined that discontinued operations presentation was met during the third quarter of fiscal year 2021. As part of the divestiturt e,
we entered into a transition services agreement with the buyer to assist them in the transition of certain functions, including, but not
limited to, information technology, accounting and human resources for a period of sixty days up to six months. Aside from these
customaryrr

transition services, there will be no continuing involvement with the crane business afteff

r its disposal.

The Company reported financial results of the crane business within all of our segments: equipment rentals, sales of rental
equipment, sales of new equipment, parts sales and service revenues. Additionally, the crane business was included within the
equipment rental component 2, sales of rental equipment, sales of new equipment, parts sales and service revenues goodwill reporting
units.

As a result of the agreement to sell the Company’s crane business, its results are reported separately as discontinued operations in

our Consolidated Statements of Income for the years ended December 31, 2022 and 2021. As permitted, the Company elected not to
adjud st the Consolidated Statements of Cash Flows to exclude cash flows attributable to discontinued operations. Accordingly, we
disclosed the depreciation, capia tal expenditures and significant operating and investing non-cash items related to the Crane Sale
below.

The following tabla es (amounts in thousands) present the Crane Sale results as reported in income from discontinued operations

within our Consolidated Statements of Income.

63

Year Ended December 31,

2022

2021

Revenues:

Equipment rentals ........................................................................................
Sales of rental equipment ............................................................................
Sales of new equipment...............................................................................
Parts, service and other................................................................................
Total revenues ........................................................................................

$

Cost of revenues:

Rental depreciation ......................................................................................
Rental expense.............................................................................................
Rental other .................................................................................................

Sales of rental equipment ............................................................................
Sales of new equipment...............................................................................
Parts, service and other................................................................................
Total cost of revenues............................................................................
Gross profitff .............................................................................................
Selling, general and administrative expenses ..................................................
Gain on sales of property and equipment, net .................................................
(Loss) gain on sale of discontinued operations ...............................................
Income (loss) from discontinued operations ...............................................
Other, net .........................................................................................................
for income taxes .........................
Provision (benefitff ) for income taxes ...............................................................
Net income (loss) from discontinued operations.........................................

Income (loss) before provision (benefit)ff

$

Cash flows from discontinued operations was as follows (amounts in thousands):

— $
—
—
—
—

—
—
—
—
—
—
—
—
—
132
—
(1,917)
(2,049)
—
(2,049)
(525)
(1,524)

$

p

p

g

Operating activities of discontinued operations:
Depreciation and amortization of property and equipment ....................................... $
Depreciation of rental equipment ..............................................................................
Loss (gain) on sale of discontinued operations..........................................................
Gain from sales of property and equipment, net........................................................
Gain from sales of rental equipment, net...................................................................

g

Investing activities of discontinued operations:
Purchases of rental equipment ...................................................................................
Proceeds from sales of property and equipment........................................................
Proceeds from sales of rental equipment ...................................................................

p

Year Ended December 31,

2022

2021

— $
—
1,917
—
—

—
—
—

10,321
11,545
52,286
57,878
132,030

3,720
1,947
1,000
6,667
8,713
46,725
35,223
97,328
34,702
20,937
49
42,072
55,886
62
55,948
13,972
41,976

1,083
3,720
(42,072)
(49)
(2,203)

(2,431)
43
5,929

Arkansas Sale

On September 17, 2021, the Company sold our Little Rock, Arkansas and Springdale, Arkansas owned-branches to Bramco, Inc.

(“Bramco”) for $9.0 million (the “Arkansas Sale”). The Arkansas Sale included the land, building, building improvements, offiff ce
equipment, furniture and fixturt es, and shop equipment for the two branches with a net book value of approximately $3.7 million. We
recorded a gain of $5.3 million within sales from property and equipment, net on the Consolidated Statement of Income. As a
turers Komatsu, Wirtgen Groupu and
condition of closing, we relinquished our territory distribution rights with equipment manufacff
Takeuchi. Our current distribution territory for these two branches includes the entire state of Arkansas, with the exception of five
counties in Arkansas (Miller, Lafayette, Columbia, Union and Little River) as these counties are currently served by our Shreveport,
Louisiana branch. The Arkansas Sale did not qualifyff
for discontinued operations as the divestiture does not meet the definition of a
component.

The Company purchased a site in Little Rock, Arkansas to operate a rental-focused branch location in the area. The branch

opening coincided with the sale to Bramco.

64

(4) Receivables

Receivabla es consisted of the following at December 31, (amounts in thousands):

Trade receivabla es........................................................................ $
Unbilled rental revenue ..............................................................
Income tax receivabla es ...............................................................
Other ...........................................................................................

Less allowance for doubtful accounts ........................................
Total receivabla es, net.................................................................. $

2023
239,277 $
14,022
1,048
209
254,556
(7,126)
247,430 $

2022
216,280
12,872
2,577
202
231,931
(6,637)
225,294

(5) Inventories

Inventories consisted of the following at December 31, (amounts in thousands):

Used equipment .......................................................................... $
New equipment...........................................................................
ies and other .............................................................
Parts, suppl
Total inventories, net .................................................................. $

u

2023

212 $

97,833
11,886
109,931 $

2022

12
94,906
12,924
107,842

The above amounts are presented net of reserves for inventoryrr obsolescence at December 31, 2023 and 2022 totaling

approximately $0.2 million and $0.1 million, respectively.

(6) Property and Equipment

Net property and equipment consisted of the following at December 31, (amounts in thousands):

Land ............................................................................................ $
Transportation equipment...........................................................
Building and leasehold improvements .......................................
Office and computer equipment .................................................
Machinery and equipment ..........................................................
tion in progress.............................................................
Construcr

Less accumulated depreciation and amortization.......................
Total net property and equipment............................................... $

2023

6,852 $

184,739
92,561
51,058
22,869
19,417
377,496
(193,723)
183,773 $

2022

6,852
147,171
67,181
54,099
17,241
19,110
311,654
(177,017)
134,637

Total depreciation and amortization on property and equipment was $34.7 million, $28.8 million and $26.3 million for the years

ended December 31, 2023, 2022 and 2021, respectively.

(7) Stock-Based Compensation

Stock-based compensation is measured at the grant date, based on the calculated fair value of the award, net of an estimated
forfeiture rate, and is recognized as an expense over the requisite employee service period (generally the vesting period of the grant).
The estimated forfeiturt e rate is based on historical experience and revised, if necessary, in subsu equent periods for actuat

l forfeitures.

Our 2016 Stock-Based Incentive Compensation Plan (the “2016 Plan”) is administered by the Compensation Committee of our
Board of Directors, which selects persons eligible to receive awards and determines the number of shares and/or options subju ect to
each award, the terms, conditions, perforff mance measures, if any, and other provisions of the award. Under the 2016 Plan, we may
offeff
r deferred shares or restricted shares of our common stock and grant options, including both incentive stock options and
nonqualifieff d stock options, to purchase shares of our common stock. Shares availabla e for future stock-based payment awards under
our 2016 Plan were 743,877 shares of common stock as of December 31, 2023.

65

Non-vested Stoctt k

From time to time, we issue shares of non-vested stock typically with vesting terms of three years. The following tabla e

summarizes our non-vested stock activity for the years ended December 31, 2023, 2022 and 2021:

Number of
Shares

Weighted
Average Grant
Date Fair
Value

Non-vested stock at January 1, 2021..........................................
Granted .......................................................................................
Vested.........................................................................................
Forfeited .....................................................................................
Non-vested stock at December 31, 2021....................................
Granted .......................................................................................
Vested.........................................................................................
Forfeited .....................................................................................
Non-vested stock at December 31, 2022....................................
Granted .......................................................................................
Vested.........................................................................................
Forfeited .....................................................................................
Non-vested stock at December 31, 2023....................................

524,876 $
202,687 $
(186,042) $
(61,374) $
480,147 $
281,490 $
(160,868) $
(40,313) $
560,456 $
235,938 $
(283,332) $
(15,666) $
497,396 $

23.00
33.28
26.83
25.31
25.56
36.07
27.46
29.43
30.02
47.00
25.04
35.79
40.73

As of December 31, 2023, we had unrecognized compensation expense of approximately $14.6 million related to non-vested
stock award payments that we expect to be recognized over a weighted average period of 1.9 years. Stock compensation expense,
which is included in SG&A expenses in the accompanying Consolidated Statements of Income, for the years ended December 31,
2023, 2022 and 2021 was $10.0 million, $7.3 million and $4.4 million, respectively.

Purchases of Companyn Common Stoctt k

Purchases of our common stock are accounted for as treasuryrr stock in the accompanying consolidated balance sheets using the

cost method. Repurchased stock is included in authorized shares, but is not included in shares outstanding.

(8) Accrued Expenses Payable and Other Liabilities

Accruer d expenses payabla e and other liabia lities consisted of the following at December 31, (amounts in thousands):

Payroll and related liabilities ...................................................... $
Sales, use, property and income taxes ........................................
Accruer d interest ..........................................................................
Accruer d insurance ......................................................................
Deferred revenue ........................................................................
Other ...........................................................................................
Total accruer d expenses payabla e and other liabilities.................. $

44,885 $
13,853
3,947
8,740
6,808
9,696
87,929 $

40,367
13,202
2,290
7,641
6,661
6,981
77,142

2023

2022

(9) Senior Unsecured Notes

On December 14, 2020, we completed an offeff

ring of $1,250 million aggregate principal amount of 3.875% senior notes due 2028
(the “Senior Notes”). The Senior Notes were sold in a private placement pursuant to a purchase agreement, dated November 30, 2020,
by and among the Company, certain subsu idiary guarantors and BofA Securities, Inc. There are no registration rights associated with
the Senior Notes or the subsu idiary guarantees.

The Senior Notes were issued at par and require semiannual interest payments on June 15th and December 15th of each year,

commencing on June 15, 2021. No principal payments are due until maturity (December 15, 2028).

The Senior Notes were issued under an indenturt e, dated as of December 14, 2020, by and among the Company, the subsu idiary

guarantors named therein, and The Bank of New York Mellon Trusrr
December 15, 2023, the Senior Notes may be redeemed pursuant to a declining schedule of redemption prices set forth in the
Indenturt e. Transaction costs incurred in connection with the offeff
presented as a direct deduction from the face amount of the related liability in our Consolidated Balance Sheets.

ring of the Senior Notes totaled approximately $11.4 million and are

tee (the “Indenturt e”). Subsu equent to

t Company, N.A., as trusr

66

The Senior Notes are senior unsecured obligations of the Company and rank equally in right of payment to all of the Company’s

existing and future senior indebtedness and rank senior to any of the Company’s subor
unconditionally guaranteed on a senior unsecured basis by all of the Company’s current and future significant domestic subsu idiaries
(the “Guarantors”). In addition, the Senior Notes are effeff ctively subor
u
future secured indebtedness, including the Company’s existing senior secured credit facility, to the extent of the value of the assets
securing such indebtedness, and are structurt ally subor
red stock of any of the Company’s
subsu idiaries that do not guarantee the Senior Notes. There are no restrictions on H&E Equipment Services, Inc.’s ability to obtain
funds from the guarantor subsu idiaries by dividend or loan.

dinated to all of the Company’s and the guarantors’ existing and

dinated indebtedness. The Senior Notes are

dinated to all of the liabia lities and preferff

u

u

If we experience a change of control, we will be required to offeff

r to purchase the Senior Notes at a repurchase price equal to

101% of the principal amount, plus accruer d and unpaid interest to the date of repurchase.

The indenturt e governing the Senior Notes contains certain covenants that, among other things, limit our ability and the ability of
our restricted subsu idiaries to: (i) incur additional debt; (ii) pay dividends or make distributions; (iii) make investments; (iv) repurchase
stock; (v) create liens; (vi) enter into transactions with affiff liates; (vii) merge or consolidate; and (viii) transferff
and sell assets. Each of
the covenants is subju ect to exceptions and qualifications. As of December 31, 2023, we were in compliance with these covenants.

The following tabla e reconciles our Senior Unsecured Notes to our Consolidated Balance Sheets (amounts in thousands):

Balance at December 31, 2021 ........................................................................................ $
Accretion of discount through December 31, 2022 .........................................................
Amortization of deferred financing costs through December 31, 2022...........................
Balance at December 31, 2022 ........................................................................................ $
Accretion of discount through December 31, 2023 .........................................................
Amortization of deferred financing costs through December 31, 2023...........................
Balance at December 31, 2023 ........................................................................................ $

1,239,967
1,172
270
1,241,409
1,172
271
1,242,852

(10) Senior Secured Credit Facility

We and our subsu idiaries are parties to a $750.0 million asset based revolving Credit Facility with Wells Fargo Capia tal Finance,

LLC as administrative agent, and the lenders named therein (the “Credit Facility”).

On December 22, 2017, we amended, extended and restated the Credit Facility by entering into the Fifth Amended and Restated

Credit Agreement (the “Amended and Restated Credit Agreement”) by and among the Company, Great Northern Equipment, Inc.,
H&E Equipment Services (Califorff nia), LLC, H&E Equipment Services (Mid-Atlantic), LLC, the other credit parties named therein,
the lenders named therein, Wells Fargo Capia tal Finance, LLC, as administrative agent, the other credit parties named therein, the
lenders named therein, and the joint lead arrangers, joint book runners, co-syndication agents and documentation agent named therein.

The Amended and Restated Credit Agreement, among other things, (i) extended the maturity date of the credit facility to

December 22, 2022, (ii) increased the commitments under the senior secured asset based revolver provided for therein to $750 million,
(iii) increased the uncommitted incremental revolving capaa
city to $250 million, (iv) provided that the unused line fee margin will be
either 0.375% or 0.25%, depending on the Average Revolver Usage (as defined in the Amended and Restated Credit Agreement) of
the borrowers, (v) lowered the interest rate (a) in the case of base rate revolving loans, to the base rate plus an applicable margin of
0.50% to 1.00% depending on the Average Availabia lity (as defined in the Amended and Restated Credit Agreement) and (b) in the
case of LIBOR revolving loans, to LIBOR (as defined in the Amended and Restated Credit Agreement) plus an applicable margin of
1.50% to 2.00%, depending on the Average Availabia lity, (vi) lowered the margin applicable to the letter of credit fee to between
1.50% and 2.00%, depending on the Average Availabia lity, and (vii) permitted, subju ect to certain conditions, an unlimited amount of
Permitted Acquisitions, Restricted Payments and prepayments of Indebtedness (in each case, as defined in the Amended and Restated
Credit Agreement).

On Februar

ry 1, 2019, we further amended and extended the Amended and Restated Credit Agreement with the First Amendment

to the Fifth Amended and Restated Credit Agreement (the “First Amendment”) by and among the Company, Great Northern
Equipment, Inc., H&E Equipment Services (Califorff nia), LLC, H&E Equipment Services (Mid-Atlantic), LLC, the other credit parties
named therein, the lenders named therein, Wells Fargo Capia tal Finance, LLC, as administrative agent, the other credit parties named
therein, the lenders named therein, and the joint lead arrangers, joint book runners, co-syndication agents and documentation agent
named therein.

The First Amendment, among other things, (i) extended the maturity date of the credit facility from December 22, 2022 to
January 31, 2024, and (ii) lowered the interest rate in the case of LIBOR revolving loans, to LIBOR plus an applicable margin of
1.25% to 1.75%, depending on the Average Availabia lity and (iii) lowered the interest rate in the case of Base Rate loans, to the Base

67

Rate (as defined in the Amended and Restated Credit Agreement) plus an applicable margin of 0.25% to 0.75%, depending on the
Average Availabia lity.

On September 14, 2021, the Company further amended and extended the Amended and Restated Credit Agreement with the
Second Amendment to the Fifth Amended and Restated Credit Agreement (the “Second Amendment”) by and among the Company,
Great Northern Equipment, Inc., H&E Equipment Services (Califorff nia), LLC, H&E Equipment Services (Mid-Atlantic), LLC, the
other credit parties named therein, the lenders named therein, Wells Fargo Bank National Association, as administrative agent, and the
joint lead arrangers, joint book runners, co-syndication agents and documentation agent named therein.

The Second Amendment (i) amended the permitted dispositions of the credit facility, specifically the Crane Sale, and (ii) included

benchmark language for a transition away from LIBOR.

On Februar

ry 2, 2023, we amended, extended and restated the $750.0 million Credit Facility by entering into the Sixth Amended
and Restated Credit Agreement by and among the Company, Great Northern Equipment, Inc., H&E Equipment Services (Califorff nia),
LLC, H&E Equipment Services (Mid-Atlantic), LLC, H&E Equipment Services (Midwest), LLC, the other credit parties named
therein, the lenders named therein, Wells Fargo Bank, National Association, as administrative agent, the other credit parties named
therein, the lenders named therein, and the joint lead arrangers, joint book runners, co-syndication agents and documentation agent
named therein.

The Sixth Amended and Restated Credit Agreement, among other things, (i) extended the maturity date of the credit facility to
ry 2, 2028 and (ii) amended the interest rate to SOFR plus a credit spread adjud stment plus an applicable margin of 1.25% to

Februar
1.75%, depending on the Average Availabia lity (as defined in the Amended and Restated Credit Agreement).

As amended, the Amended and Restated Credit Agreement continues to provide for, among other things, a $30.0 million letter of
credit sub-u facility, and a guaranty by certain of the Company’s subsu idiaries of the obligations under the Credit Facility. In addition, the
Credit Facility remains secured by subsu tantially all of the assets of the Company and certain of its subsu idiaries.

At December 31, 2023, we had $181.6 million under the Credit Facility and could borrow up to approximately $556.0 million, net

of a $12.3 million outstanding letter of credit. As of December 31, 2023, the weighted average interest rate under the Credit Facility
was approximately 7.1%. As of December 31, 2023, we were in compliance with our financial covenant under the Amended and
Restated Credit Agreement.

The aggregate amounts outstanding as of December 31, 2023 under both the Credit Facility and our Senior Secured Notes (Note

9) of $1,431.6 million mature during 2028.

(11) Leases

We use the rate implicit in the lease to discount lease payments to present value, when availabla e, however, most of our leases do
not provide a readily determinable implicit rate. Thereforff e, we estimate our IBR to discount the lease payments based on information
availabla e at lease commencement. Our IBR represents the rate we would expect to pay under a fully collateralized rate and amortizing
loan with the same term as the lease.

At December 31, 2023, the weighted average remaining lease term for operating leases was approximately 7.5 years and for
finance leases was approximately 8.6 years. The weighted average discount rate for operating and finance leases was approximately
6.4% and 5.9%, respectively, at December 31, 2023. At December 31, 2022, the weighted average remaining lease term for operating
leases was approximately 8.0 years and for finance leases was approximately 9.5 years. The weighted average discount rate for
operating and finance leases was approximately 6.3% and 5.0%, respectively, at December 31, 2022.

The tabla e below presents certain information related to lease costs, under Topic 842, for our operating and finance leases for the

years ended December 31, 2023, 2022 and 2021. (in thousands).

Classification
Operating lease cost ............................ SG&A expenses
Finance lease costs

Amortization of leased assets......... SG&A expenses
Interest expense
Interest on lease liabia lities..............
Variable lease cost .............................. SG&A expenses
Sublu ease income.................................. Other income
Total lease cost....................................

$

$

2023

Year Ended December 31,
2022

2021

31,066

$

27,153

$

241
120
2,607
(2,844)
31,190

$

107
52
1,834
(2,074)
27,072

$

24,347

122
9
1,046
(1,379)
24,145

68

The tabla e below presents suppl

u

emental cash flow information related to leases for the years ended December 31, 2023, 2022 and

2021. (in thousands).

Cash paid for amounts included in the measurements of lease
liabia lities:

Operating cash flows for operating leases............................ $
Operating cash flows for finance leases ...............................
Finance cash flows for finance leases ..................................

2023

Year Ended December 31,
2022

2021

$

28,409
120
162

$

26,407
52
1,141

23,527
9
194

The tabla e below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years to the

operating and finance lease liabia lities recorded on our consolidated balance sheet as of December 31, 2023 (in thousands).

2024 ........................................................................................................................................ $
2025 ........................................................................................................................................
2026 ........................................................................................................................................
2027 ........................................................................................................................................
2028 ........................................................................................................................................
Thereafter................................................................................................................................
Total minimum lease payments ..............................................................................................
Less: amount of lease payments representing interest............................................................
Present value of future minimum lease payments .................................................................. $

25,875
33,444
33,010
31,914
29,776
80,203
234,222
(50,447)
183,775

$

$

423
432
442
452
463
1,659
3,871
(852)
3,019

Operating Leases

Finance Leases

The future minimum lease payments of operating leases executed but not commenced as of December 31, 2023 are estimated to
be $1.4 million, $2.4 million, $2.5 million, $2.6 million and $2.7 million for the years ending December 31, 2024, 2025, 2026, 2027
and 2028, respectively, and $18.2 million thereafter. It is expected that these leases will commence during 2024.

(12) Income Taxes

Our income tax provision (benefitff ) for the years ended December 31, 2023, 2022 and 2021, consists of the following (amounts in

thousands):

Year Ended December 31, 2023

U.S. Federal .......................................................................... $
State ......................................................................................

$

Year Ended December 31, 2022

U.S. Federal .......................................................................... $
State ......................................................................................

$

Year ended December 31, 2021:

U.S. Federal .......................................................................... $
State ......................................................................................

$

Current

ff
Deferre

d

Total

2,238
5,002
7,240

$

$

— $

4,306
4,306

$

— $

2,574
2,574

$

44,581
2,083
46,664

37,680
5,050
42,730

16,513
2,073
18,586

$

$

$

$

$

$

46,819
7,085
53,904

37,680
9,356
47,036

16,513
4,647
21,160

69

Significant components of our deferred income tax assets and liabia lities as of December 31 are as follows (amounts in thousands):

Deferred tax assets:

Accounts receivable .............................................................................. $
Inventories.............................................................................................
Net operating losses ..............................................................................
Tax credits.............................................................................................
Sec 263A costs ......................................................................................
Accruer d liabilities .................................................................................
Deferred compensation .........................................................................
Interest expense.....................................................................................
Stock-based compensation ....................................................................
Goodwill and intangible assets..............................................................
Other assets ...........................................................................................

Valuation allowance..................................................................................

Deferred tax liabia lities:

Property and equipment ........................................................................
Investments ...........................................................................................
Goodwill and intangible assets..............................................................

Net deferred tax liabia lities......................................................................... $

2023

2022

$

1,619
52
65,893
8,193
780
4,216
3,225
18,901
182
8,519
92
111,672
(3,003)
108,669

(420,496)
(1,126)
(4,873)
(426,495)
(317,826) $

1,497
13
74,931
7,040
764
3,431
2,794
12,238
242
7,842
86
110,878
(5,930)
104,948

(370,404)
(1,109)
(4,597)
(376,110)
(271,162)

The reconciliation between income taxes computed using the statutt oryrr

federal income tax rate of 21% to the actuat

l income tax

expense (benefit)ff

is below for the years ended December 31 (amounts in thousands):

rates ................................................ $

Computed tax at statutt oryrr
Permanent items – other ...........................................................
Permanent items – impairment of goodwill .............................
State income tax, net of federal tax effeff ct ................................
Change in valuation allowance.................................................
Change in uncertain tax positions.............................................

$

2023

2022

2021

46,871
2,300
100
7,624
(2,927)
(64)
53,904

$

$

37,953
1,683
—
9,068
(1,668)
—
47,036

$

$

17,162
406
—
2,390
1,202
—
21,160

At December 31, 2023, we had availabla e federal net operating loss carryrr

forwards of approximately $285.9 million that do not

expire and state net operating loss carry forwards of approximately $120.2 million, of which $42.3 million expire in varying amounts
from 2024 to 2043 and $77.9 million do not expire. We also had state income tax credits of $10.4 million that expire in varying
amounts from 2024 to 2033.

Management has concluded that it is more likely than not that the federal deferred tax assets are fully realizable through future

reversals of existing taxabla e temporaryrr differences and future taxabla e income. Thereforff e, a valuation allowance is not required to
reduce those deferred tax assets as of December 31, 2023. However, as of December 31, 2023, we have a valuation allowance of $3.0
million for certain state tax credits that are expected to expire prior to utilization.

A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits is as follows (in

thousands):

Gross unrecognized tax benefits at January 1 ........................................... $
Increases in tax positions taken in prior years ..........................................
Decreases in tax positions taken in prior years .........................................
Increases in tax positions taken in current years.......................................
Decreases in tax positions taken in current years......................................
Settlements with taxing authorities ...........................................................
Lapsa
e in statutt e of limitations ...................................................................
Gross unrecognized tax benefits at December 31 ..................................... $

1,425
—
(972)
—
—
—
(81)
372

$

$

—
—
—
1,425
—
—
—
1,425

2023

2022

70

The gross amount of unrecognized tax benefits as of December 31, 2023, if recognized, would affeff ct the effeff ctive income tax

rate. To the extent we incur interest income, interest expense, or penalties related to unrecognized income tax benefits, it will be
recorded within net other income (expense) on the Consolidated Statements of Income. The amount of interest and penalties recorded
related to unrecognized income tax benefits is $0.1 million for the years ended December 31, 2023 and 2022. We do not expect our
unrecognized tax benefits to change materially in the next twelve months.

Our U.S. federal tax returns for 2020 and subsu equent years remain subju ect to examination by tax authorities. We are also subju ect

to examination in various state jurisdictions for 2019 and subsu equent years.

(13) Commitments and Contingencies

Legal Matters

From time to time, we are involved in various claims and legal actions arising in the ordinary course of our business, including

claims for which we retain portions of the losses through the application of deductibles and self-iff nsured retentions, or self-iff nsurance.
Losses that exceed our deductibles and self-iff nsured retentions are insured through various commercial lines of insurance policies. In
the opinion of management, afteff
material adverse effeff ct on the Company’s consolidated financial position, results of operations or liquidity.

r consultation with legal counsel, the ultimate disposition of these various matters will not have a

Letters of Credit

The Company had outstanding standby letters of credit issued under its Credit Facility totaling $12.3 million as of December 31,
2023 and $10.6 million as of December 31, 2022. The letters of credit expire in May 2024 and are expected to be renewed for similar
one-year terms.

(14) Employee Retirement Benefit Plans

We offeff

r subsu tantially all of our non-union employees’ participation in a qualified 401(k)/profit-sharing plan in which we match
employee contributions up to predetermined limits for qualifieff d employees as defined by the plan. For the years ended December 31,
2023 and 2022, and for both continuing and discontinued operations for the year ended December 31, 2021, we contributed to the
plan, net of employee forfeitures, $5.4 million, $4.6 million and $4.4 million, respectively.

We contribute to the Pension Trusrr

t Fund Operating Engineers Annuity Plan (EIN: 94-6090764, Plan No. 002), a multi-employer

pension plan (“the Plan”), under the terms of a Collective Bargaining Agreement (“CBA”) that expires on October 31, 2025, and
covers our union-represented employees and requires contribution amounts as set forth within the CBA. The Company contributed
approximately $0.4 million in each of the years ended December 31, 2023, 2022 and 2021 and the Company has paid no surcharges in
any period presented. These contributions represent less than five percent of the Plan’s total contributions in 2022. As of the date that
our 2023 consolidated financial statements were issued, the Plan’s Form 5500 was not availabla e for the Plan year ended December 31,
2023.

The risks of participating in a multi-employer pension plan is different from the risks associated with single-employer plans in the

following respects.

a) Assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of other

participating employers.

b)

c)

If a participating employer stops contributing to the Plan, the unfunde
remaining participating employers.

ff

d obligations of the plan may be borne by the

If we choose to stop participating in the Plan, we may be required to pay the Plan an amount based on the unfunde
d
statust

of the plan, referred to as withdrawal liabia lity.

ff

The Plan has a green zone statust

as of December 31, 2022, the most recent date for which a statust

determination has been made.

The Pension Protection Act of 2006 ranks the funded statust
projected funding. A plan is in the Red Zone (Critical) if it has a current funded percentage less than 65 percent. A plan is in the
Yellow Zone (Endangered) if it has a current funded percentage of less than 80 percent or projects a credit balance deficit within seven
years. A plan is in the Green Zone (Healthy) if it has a current funded percentage greater than 80 percent and does not have a projected
credit balance deficit within seven years. The zone statust
is based on the Plan’s year-end and is based on information that we received
from the Plan and is certified by the Plan’s actuat

ry. The Company currently has no intention of withdrawing from the Plan.

of multi-employer pension plans depending upon a plan’s current and

71

(15) Related Party Transactions

Mr. John M. Engquist, who has served as the Company’s Executive Chairman of the Board for the years ended December 31,

2023, 2022 and 2021, has a 48.0% ownership interest in Perkins-McKenzie Insurance Agency, Inc. (“Perkins-McKenzie”), an
insurance brokerage firm. Perkins-McKenzie brokers a subsu tantial portion of our commercial liabia lity insurance. As the broker,
Perkins-McKenzie receives from our insurance provider as a commission a portion of the premiums we pay to the insurance provider.
Commissions paid to Perkins-McKenzie on our behalf as insurance broker totaled approximately $1.2 million, $1.1 million and $0.9
million for the years ended December 31, 2023, 2022 and 2021, respectively.

We purchase products and services from, and sell products and services to, B-C Equipment Sales, Inc., in which Mr. Engquist has

a 50% ownership interest. In each of the years ended December 31, 2023, 2022 and 2021, for both continuing and discontinued
operations, our purchases totaled less than $20 thousand, less than $10 thousand and $0.1 million, respectively, and our sales to B-C
Equipment Sales, Inc. totaled approximately less than $10 thousand, $0.1 million and $0.2 million, respectively.

(16) Segment Information

We have identifieff d five reportabla e segments: equipment rentals, sales of rental equipment, sales of new equipment, parts sales and

service revenues. These segments are based upon revenue streams and how management of the Company allocates resources and
assesses performance. Our non-segmented other revenues and costs relate primarily to ancillary charges associated with equipment
repair services, and are not generally allocated to the 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 profitff are not
generally allocated to our reportabla e segments.

We do not compile discrete financial information by our segments other than the information presented below. The following

tabla e presents information about our reportable segments (amounts in thousands):

Years Ended December 31,
2022

2021

2023

Segment Revenues:

Equipment rentals ................................................................. $ 1,186,152
165,074
Sales of rental equipment .....................................................
39,099
Sales of new equipment........................................................
47,341
Parts sales .............................................................................
27,507
Services revenues .................................................................
1,465,173
Total segmented revenues ................................................
4,043
Non-Segmented other revenues................................................
Total revenues .............................................................. $ 1,469,216

$

956,042
90,885
92,526
64,646
34,226
1,238,325
6,193
$ 1,244,518

$

729,700
135,245
92,677
65,623
33,034
1,056,279
6,518
$ 1,062,797

Segment Gross Profit:ff

Equipment rentals ................................................................. $
Sales of rental equipment .....................................................
Sales of new equipment........................................................
Parts sales .............................................................................
Services revenues .................................................................
from segmented revenues ....................
Non-Segmented other gross loss ..............................................

Total gross profitff

Total gross profitff

.......................................................... $

553,439
99,891
5,530
13,142
16,831
688,833
(4,372)
684,461

$

$

460,243
44,316
13,096
18,035
21,998
557,688
(2,525)
555,163

$

$

315,629
48,922
11,855
17,277
21,797
415,480
(117)
415,363

December 31,

2023

2022

Segment identifieff d assets:

Equipment rentals................................................................... $ 1,756,578 $ 1,418,951
94,918
Equipment sales......................................................................
Parts and service.....................................................................
12,924
1,526,793
Total segment identified assets ..........................................
764,906
Non-Segmented identifieff d assets ...............................................
Total assets ..................................................................... $ 2,639,886 $ 2,291,699

98,045
11,886
1,866,509
773,377

72

The Company operates primarily in the United States. Our sales to international customers for the three years ended

December 31, 2023 were 0.1% of total revenues. No one customer accounted for more than 10% of our total revenues for any of the
periods presented.

(17) Subsequent Events

Effeff ctive January 1, 2024, afteff

r the period covered by this report, we completed the acquisition of Precision Rentals (“Precision”)

for a purchase price of $117.6 million in cash, before customaryrr adjud stments. Precision is a provider of non-residential construcr
and industrial equipment and expands our presence with two branch locations operating in Arizona and Colorado. The acquisition and
related fees and expenses were funded using availabla e cash and borrowings. As of Februarr
fair value of the Precision purchase price had yet to be completed and consequently, including such disclosures in this annual report on
Form 10-K is impractical. Disclosure of the allocation of the purchase price to the Precision balance sheet line items and the pro forma
presentation reflecting the impact of the acquisition will be disclosed in our subsu equent Form 10-Q filing.

ry 22, 2024, a preliminaryrr allocation of the

tion

On Februar
business on Februar

ry 9, 2024, the Company declared a quarterly dividend of $0.275 per share to stockholders of record as of the close of

ry 23, 2024, which is to be paid on March 15, 2024.

73

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Disclosure Controls and Procedures.

We maintain disclosure controls and procedurd es 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 specifieff d in the SEC’s rules and forms, and that such information is accumulated and communicated to the
Company’s management, including its Chief Executive Offiff cer and Chief Financial Offiff cer, as appropriate, to allow timely decisions
regarding required financial disclosure.

Our Chief Executive Offiff cer and Chief Financial Offiff cer (our principal executive offiff cer and principal financial offiff cer,

respectively) have evaluated the effeff ctiveness of our disclosure controls and procedurd es (as defined in Rule 13a-15(e) and 15d-15(e)
promulgated under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Annual Report on
Form 10-K. Based on this evaluation, our principal executive offiff cer and principal financial offiff cer have concluded that, as of
December 31, 2023, our current disclosure controls and procedurd es were effeff ctive.

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 procedurd es may not deteriorate. Because of its inherent limitations, disclosure controls and
procedurd es may not prevent or detect all misstatements. Accordingly, even effeff ctive disclosure controls and procedurd es can only
provide reasonabla e assurance of achieving their control objectives.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f))ff
that occurred during the fourth quarter ended December 31, 2023 that have materially affeff cted, or are reasonabla y likely to materially
affeff ct, the Company’s internal control over financial reporting.

74

Management’s Report on Internal Control Over Financial Reporting

The management of H&E Equipment Services, Inc. is responsible for establa ishing and maintaining adequate internal control over
financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Our internal control system was designed
to provide reasonabla e assurance regarding the reliability of financial reporting and the preparation of financial statements for external
rr
purpos

es in accordance with U.S. generally accepted accounting principles.

All internal control systems, no matter how well designed, have inherent limitations. Thereforff e, even those systems determined to
be effeff ctive can provide only reasonabla e assurance with respect to financial statement preparation and presentation. Any evaluation or
projection of effeff ctiveness to future periods is also subju ect to risk that controls may become inadequate due to changes in conditions,
or that the degree of compliance with the policies and procedurd es may deteriorate.

Under the supeu rvision and with the participation of management, including our Chief Executive Offiff cer and Chief Financial
Offiff cer, we conducted an evaluation of the effeff ctiveness of our internal control over financial reporting as of December 31, 2023,
based on the framework in Internal Control – Integre ated Frameworkrr (2013) issued by the Committee of Sponsoring Organizations of
the Treadway Commission (“COSO”). Based on that evaluation, management concluded that, as of December 31, 2023, our internal
control over financial reporting was effeff ctive based on these criteria.

The effeff ctiveness of our internal control over financial reporting as of December 31, 2023, has been audited by BDO USA, P.C.,

an independent registered public accounting firm, as stated in their report, which is included herein.

Date: Februar

ry 22, 2024

/s/ Bradley W. Barber
Bradley W. Barber
Chief Executive Offiff cer and Director

/s/ Leslie S. Magee
Leslie S. Magee
Chief Financial Offiff cer and Secretaryrr

75

Report of Independent Registered Public Accounting Firm

Shareholders and Board of Directors
H&E Equipment Services, Inc.
Baton Rouge, Louisiana

Opinion on Internal Control over Financial Reporting

We have audited H&E Equipment Services, Inc.’s (the “Company’s”) internal control over financial reporting as of December 31, 2023,
based on criteria establa ished in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission (the “COSO criteria”). In our opinion, the Company maintained, in all material respects, effeff ctive internal
control over financial reporting as of December 31, 2023, based on the COSO criteria.

We also have audited, in accordance with the standards of the Publu ic Company Accounting Oversight Board (United States) (“PCAOB”),
the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of income,
stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and
schedule of valuation and qualifyiff ng accounts and our report dated Februarr

ry 22, 2024 expressed an unqualifieff d opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effeff ctive internal control over financial reporting and for its assessment of
the effeff ctiveness of internal control over financial reporting, included in the accompanying Item 9A, Management’s Report on Internal
Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting
based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.

We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. Those standards
require that we plan and perform the audit to obtain reasonabla e assurance about whether effeff ctive internal control over financial reporting
was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, and testing and evaluating the design and operating effeff ctiveness of internal control
based on the assessed risk. Our audit also included performing such other procedurd es as we considered necessary in the circumstances.
We believe that our audit provides a reasonabla e basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonabla e assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purpos
es in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedurd es that (1) pertain to the
maintenance of records that, in reasonabla e detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonabla e assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonabla e assurance regarding prevention
or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effeff ct on the
financial statements.

r

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effeff ctiveness to future periods are subju ect to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedurd es may deteriorate.

/s/ BDO USA, P.C.

Dallas, Texas

Februar

ry 22, 2024

76

Item 9B. Other Information

During the fiscal quarter ended December 31, 2023, no director or offiff cer of the Company adopted or terminated a "RulRR e 10b5-1

trading arrangement" or "non-Rule 10b5-1 trading arrangement," as the terms are defined in Item 408(a) of Regulation S-K.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

PART III

Item 10. Directors, Executive Offiff cers and Corporate Governance

The information required by this Item is incorporated herein by reference from the Company’s definitive proxy statement for use
r the end of the

in connection with the 2024 Annual Meeting of Stockholders (the “Proxy Statement”) to be filed within 120 days afteff
Company’s fiscal year ended December 31, 2023.

We have adopted a code of conducd t that applies to our Chief Executive Offiff cer and Chief Financial Offiff cer. This code of conduct

is availabla e on the Company’s internet website at www.he-equipment.com. The information on our website is not a part of or
q p
incorporated by reference into this Annual Report on Form 10-K. If the Company makes any amendments to this code other than
technical, administrative or other non-subsu tantive amendments, or grants any waivers, including implicit waivers, from a provision of
this code to the Company’s Chief Executive Offiff cer or Chief Financial Offiff cer, the Company will disclose the nature of the
amendment or waiver, its effeff ctive date and to whom it applies by posting such information on the Company’s internet website at
q p
www.he-equipment.com.

Item 11. Executive Compensation

The information required by this Item is incorporated herein by reference from the Proxy Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this Item is incorporated herein by reference from the Proxy Statement.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required by this Item is incorporated herein by reference from the Proxy Statement.

Item 14. Principal Accountant Fees and Services

The information required by this Item is incorporated herein by reference from the Proxy Statement.

77

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a) Documents filed as part of this report:

(1)

Financial Statements

The Company’s Consolidated Financial Statements listed below have been filed as part of this report:

Report of Independent Registered Publu ic Accounting Firm—Imm nternal Control over Financial Reporting....................................
Report of Independent Registered Publu ic Accounting Firm—Cmm
onsolidated Financial Statements...............................................
Consolidated Balance Sheets as of December 31, 2023 and 2022.................................................................................................
Consolidated Statements of Income for the years ended December 31, 2023, 2022 and 2021 .....................................................
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2023, 2022 and 2021 ...............................
Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022 and 2021 ..............................................
Notes to Consolidated Financial Statements ..................................................................................................................................

Page

76
41
43
44
45
46
48

(2)

Financial Statement Schedule for the years ended December 31, 2023, 2022 and 2021:

Schedule II—Valuation and Qualifyiff ng Accounts.........................................................................................................................

81

All other schedules are omitted because they are not applicable or not required, or the information appears in the Company’s

Consolidated Financial Statements or notes thereto.

(3)

Exhibits: The exhibits to this report are listed in the exhibit index below.

(b) Description of exhibits

78

2.1

2.2

2.3

2.4

3.1

3.2

4.1

4.2

4.3

4.4

4.5

4.6

10.1

10.2

Exhibit Index

Agreement and Plan of Merger, dated Februarr
reference to Exhibit 2.1 to Current Report on Form 8-K of H&E Equipment Services, Inc. (File No. 000-51759), filed
Februar

ry 2, 2006, among the Company, H&E LLC and Holdings (incorpor

ry 3, 2006).

rated by

Agreement and Plan of Merger, dated as of May 15, 2007, by and among H&E Equipment Services, Inc., HE-JWB
Acquisition, Inc., J.W. Burress, Incorporated, the Burress Shareholders (as defined therein), and Richard S. Dudley, as
Burress Shareholders Representative (as defined therein) (incorpor
ated by reference to Exhibit 2.1 to Current Report on
Form 8-K of H&E Equipment Services, Inc. (File No. 000-51759), filed on May 17, 2007.

r

Amendment No. 1 to Agreement and Plan of Merger, dated as of August 31, 2007, by and among H&E Equipment
Services, Inc., HE-JWB Acquisition, Inc., J.W. Burress, Incorporated, the Burress Shareholders (as defined therein), and
Richard S. Dudley, as Burress Shareholders Representative (as defined therein) (incorpor
Current Report on Form 8-K of H&E Equipment Services, Inc. (File No. 000-51759), filed on September 4, 2007).

ated by reference to Exhibit 2.1 to

rr

, Eagle
Acquisition Agreement, dated as of January 4, 2005, among H&E Equipment Services, L.L.C., Eagle Merger Corp.rr
High Reach Equipment, LLC, Eagle High Reach Equipment, Inc., SBN Eagle LLC, SummitBridge National Investments,
LLC and the shareholders of Eagle High Reach Equipment, Inc. (incorpor
ated by reference to Exhibit 2.1 to Form 8-K of
H&E Equipment Services L.L.C. (File Nos. 333-99587 and 333-99589), filed January 5, 2006).

r

Amended and Restated Certificff ate of Incorporation of H&E Equipment Services, Inc. (incorpor
3.4 to Registration Statement on Form S-1 of H&E Equipment Services, Inc. (File No. 333-128996), filed January 20,
2006).

ated by reference to Exhibit

rr

Amended and Restated Bylaws of the Company, dated as of March 13, 2023 (incorpor
the Current Report on Form 8-K of H&E Equipment Services Inc. (File No. 000-51759), filed on March 14, 2023).

ated by reference to Exhibit 3.1 to

r

Amended and Restated Security Holders Agreement, dated as of Februarr
parties thereto (incorpor
(File No. 000-51759), filed Februar

ry 3, 2006, among the Company and certain other
ated by reference to Exhibit 4.1 to Current Report on Form 8-K of H&E Equipment Services, Inc.

ry 3, 2006).

r

Amended and Restated Investor Rights Agreement, dated as of Februar
parties thereto (incorpor
(File No. 000-51759), filed Februar

ry 3, 2006).

r

ated by reference to Exhibit 4.2 to Current Report on Form 8-K of H&E Equipment Services, Inc.

ry 3, 2006, among the Company and certain other

Amended and Restated Registration Rights Agreement, dated as of Februarr
other parties thereto (incorpor
Inc. (File No. 000-51759), filed Februarr

ry 3, 2006).

r

ated by reference to Exhibit 4.3 to Current Report on Form 8-K of H&E Equipment Services,

ry 3, 2006, among the Company and certain

Form of H&E Equipment Services, Inc. common stock certificate (incorpor
Statement on Form S-1 of H&E Equipment Services, Inc. (File No. 333-128996), filed January 5, 2006).

ated by reference to Exhibit 4.3 to Registration

r

Indenturt e, dated December 14, 2020, by and among H&E Equipment Services, Inc., the guarantors party thereto and The
Bank of New York Mellon Trusr
tee, relating to the 3.8750% Senior Notes due 2028 (incorpor
by reference to Exhibit 4.1 to the Current Report on Form 8-K of H&E Equipment Services, Inc. (File No. 000-51759),
filed December 16, 2020).

t Company, N.A, as Trusrr

r

ated

Description of H&E Equipment Services, Inc.’s Common Stock (incorpor
Report on Form 10-K of H&E Equipment Services, Inc. (File No. 000-51759), filed Februar

r

ated by reference to Exhibit 4.6 to Annual

ry 22, 2023).

Fifth Amended and Restated Credit Agreement, dated December 22, 2017, by and among the Company, Great Northern
Equipment, Inc., H&E Equipment Services (Califorff nia), LLC and H&E Equipment Services (Mid-Atlantic), Inc.
(collectively, the “Borrowers”), Wells Fargo Capia tal Finance, LLC, as administrative agent for each member of the Lender
Group and the Bank Product Providers, and the joint lead arrangers, joint book runners, co-syndication agents and
documentation agent party thereto (incorpor
Equipment Services, Inc. (File No. 000-51759), filed December 27, 2017).

ated by reference to Exhibit 10.1 to the Current Report on Form 8-K of H&E

rr

First Amendment to the Fifth Amended and Restated Credit Agreement, dated Februar
Company, Great Northern Equipment, Inc., H&E Equipment Services (Califorff nia), LLC and H&E Equipment Services
(Mid-Atlantic), Inc. (collectively, the “Borrowers”), Wells Fargo Capia tal Finance, LLC, as administrative agent for each
member of the Lender Group and the Bank Producd t Providers, and the joint lead arrangers, joint book runners, co-
syndication agents and documentation agent party thereto (incorpor
on Form 8-K of H&E Equipment Services, Inc. (File No. 000-51759, filed Februarr

ated by reference to Exhibit 10.1 to the Current Report

ry 1, 2019, by and among the

ry 4, 2019).

r

79

10.3

10.4

10.5

10.6

10.7

10.8

10.9

18.1

21.1

23.1

31.1

31.2

32.1

Second Amendment to the Fifth Amended and Restated Credit Agreement, dated September 14, 2021, by and among the
Company, Great Northern Equipment, Inc., H&E Equipment Services (Califorff nia), LLC and H&E Equipment Services
(Mid-Atlantic), Inc. (collectively, the “Borrowers”), Wells Fargo Bank National Association, as administrative agent for
each member of the Lender Group and the Bank Producd t Providers, and the joint lead arrangers, joint book runners, co-
syndication agents and documentation agent party thereto (incorpor
ated by reference from Exhibit 10.1 to Form 10-Q of
H&E Equipment Services, Inc. (File No. 000-51759), filed November 2, 2021).

r

Sixth Amended and Restated Credit Agreement, dated Februarr
Equipment, Inc., H&E Equipment Services (Califorff nia), LLC, H&E Equipment Services (Midwest), Inc. and H&E
Equipment Services (Mid-Atlantic), Inc. (collectively, the “Borrowers”), Wells Fargo Bank, National Association, as
administrative agent for each member of the Lender Group and the Bank Product Providers, and the joint lead arrangers,
joint book runners, co-syndication agents and documentation agent party thereto (incorpor
to Form 10-K of H&E Equipment Services, Inc. (File No. 000-51759), filed Februar

ry 2, 2023, by and among the Company, Great Northern

ated by reference to Exhibit 10.4

ry 22, 2023).

rr

H&E Equipment Services, Inc. 2016 Stock-Based Incentive Compensation Plan (incorpor
to the Definitive Proxy Statement of H&E Equipment Services, Inc. (File No. 000-51759), filed April 1, 2016.†

ated by reference to Appendix A

r

Form of Restricted Stock Award Agreement for Offiff cers of H&E Equipment Services, Inc. (incorpor
ated by reference
from Exhibit 10.1 to Form 10-Q of H&E Equipment Services, Inc. (File No. 000-51759), filed November 3, 2011). †

r

Restrictive Covenant Agreement, dated August 14, 2015, by and between the Company and Bradley W. Barber
r
(incorpor
October 29, 2015). †

ated by reference to Exhibit 10.1 to Form 10-Q of H&E Equipment Services, Inc. (File No. 000-51759), filed

Restrictive Covenant Agreement, dated October 12, 2015, by and between the Company and Leslie S. Magee
r
(incorpor
Februar

ated by reference to Exhibit 10.12 to Form 10-K of H&E Equipment Services, Inc. (File No. 000-51579), filed on

ry 25, 2016).†

Restrictive Covenant Agreement, dated March 4, 2022, by and between the Company and John McDowell Engquist
(incorpor
r
April 27, 2022).†

ated by reference to Exhibit 10.1 to Form 10-Q of H&E Equipment Services, Inc. (File No. 000-51579), filed on

BDO Seidman, LLP Preferff ability Letter (incorpor
Services, Inc. (File No. 000-51759), filed March 7, 2008).

rr

ated by reference to Exhibit 18.1 to Form 10-K of H&E Equipment

Subsu idiaries of the registrant.*

Consent of BDO USA, P.C.*

Certificff ation Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

Certificff ation Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

Certificff ations of Chief Executive Offiff cer and Chief Financial Offiff cer Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.**

97

Clawback policy of H&E Equipment Services, Inc. filed Februar

ry 22, 2024.*

101.INS

Inline XBRL Instance Document*

101.SCH Inline XBRL Taxonomy Extension Schema with Embedded Linkbase Documents*

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Filed herewith
** Furnished herewith
†Management contract or compensatory plan or arrangement

80

Item 16. Form 10-K Summary

None.

SCHEDULE II: VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021
(Amounts in thousands)

Description
Year Ended December 31, 2023

Allowance for doubtful accounts receivable ................................ $
Allowance for inventoryrr obsolescence .........................................

$

Year Ended December 31, 2022

Allowance for doubtful accounts receivable ................................ $
Allowance for inventoryrr obsolescence .........................................

$

Year Ended December 31, 2021

Allowance for doubtful accounts receivable (a) ........................... $
Allowance for inventoryrr obsolescence (b) ...................................

$

Balance at
Beginning
of Year

Additions
Charged to
Costs and
Expenses

Deductions

Balance at
End
of Year

6,637
54
6,691

4,178
73
4,251

4,741
350
5,091

$

$

$

$

$

$

4,858
178
5,036

3,264
32
3,296

1,892
54
1,946

$

$

$

$

$

$

(4,369)
(25)
(4,394)

(805)
(51)
(856)

(2,455)
(331)
(2,786)

$

$

$

$

$

$

7,126
207
7,333

6,637
54
6,691

4,178
73
4,251

a)

b)

Allowance for doubtful accounts receivables includes $252 related to discontinued operations for the balance at the
beginning of the year ended December 31, 2021.
Allowance for inventoryrr obsolescence includes $120 related to discontinued operations for the balance at the beginning of
the year ended December 31, 2021.

81

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this

report to be signed on its behalf by the undersigned, thereunto duly authorized, on Februar

ry 22, 2024.

SIGNATURES

H&E EQUIPMENT SERVICES, INC.

By:

/s/ Bradley W. Barber
Bradley W. Barber
Its: Chief Executive Offiff cer and Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons

on behalf of the Registrant in the capacities and on the dates indicated.

Signature

Capacity

Date

By:

By:

By:

By:

By:

By:

By:

By:

By:

By:

By:

By:

/s/ Bradley W. Barber
Bradley W. Barber

/s/ Leslie S. Magee
Leslie S. Magee

/s/ John M. Engquist
John M. Engquist

/s/ Paul N. Arnold
Paul N. Arnold

/s/ Gary W. Bagley
Gary W. Bagley

Chief Executive Offiff cer and Director
(Principal Executive Offiff cer)

Chief Financial Offiff cer and Secretaryrr
(Principal Financial and Accounting Offiff cer)

Februar

ry 22, 2024

Februar

ry 22, 2024

Executive Chairman of the Board

Februaryrr 22, 2024

Director

Februar

ry 22, 2024

Lead Independent Director

Februar

ry 22, 2024

/s/ Brucr
Brucrr

e C. Brucr kmann

e C. Brucr kmann

/s/ Patrick L. Edsell
Patrick L. Edsell

/s/ Thomas J. Galligan III
Thomas J. Galligan III

/s/ Lawrence C. Karlson
Lawrence C. Karlson

/s/ Mary Pat Thompson
Mary Pat Thompson

/s/ Jacob Thomas
Jacob Thomas

/s/ Suzanne H. Wood
Suzanne H. Wood

Februaryrr 22, 2024

Februaryrr 22, 2024

Februaryrr 22, 2024

Februaryrr 22, 2024

Februar

ry 22, 2024

Februar

ry 22, 2024

Februar

ry 22, 2024

Director

Director

Director

Director

Director

Director

Director

82

H&E Equipment Services, Inc.

Supplu

emental Schedules

Non-GAAP Financial Measures
This Annual Report contains certain non-GAAP measures (EBITDA and Adjud sted EBITDA) as defined
under the rules of the Securities and Exchange Commission ("SEC"). We define Adjud sted EBITDA for the
periods presented as EBITDA adjud sted for non-cash stock-based compensation expense, the impairment of
goodwill, merger and other and the loss on early extinguishment of debt.

u

We use EBITDA and Adjud sted EBITDA in our business operations to, among other things, evaluate the
performance of our business, develop budgets and measure our performance against those budgets. We also
believe that analysts and investors use EBITDA and Adjud sted EBITDA as suppl
emental measures to
evaluate a company’s overall operating performance. However, EBITDA and Adjud sted EBITDA have
material limitations as analytical tools and you should not consider them in isolation, or as subsu titutes for
analysis of our results as reported under GAAP. We consider them usefulff
tools to assist us in evaluating
performance because it eliminates items related to components of our capital structure, taxes and non-cash
charges. The items that we have eliminated in determining EBITDA for the periods presented are interest
expense, income taxes, depreciation of fixed assets (which includes rental equipment and property and
equipment) and amortization of intangible assets and, in the case of Adjud sted EBITDA, any other non-
recurring items described above applicable to the particular period. However, some of these eliminated
items are significff ant to our business. For example, (i) interest expense is a necessary element of our costs
and ability to generate revenue because we incur a significant amount of interest expense related to our
outstanding indebtedness; (ii) payment of income taxes is a necessary element of our costs; and (iii)
depreciation is a necessary element of our costs and ability to generate revenue because rental equipment
is the single largest component of our total assets and we recognize a significant amount of depreciation
expense over the estimated usefulff
lifeff of this equipment. Any measure that eliminates components of our
capital structure and costs associated with carrying significant amounts of fixed assets on our consolidated
balance sheet has material limitations as a performance measure. In light of the foregoing limitations, we
do not rely solely on EBITDA and Adjud sted EBITDA as performance measures and also consider our
GAAP results. EBITDA and Adjud sted EBITDA are not measurements of our financial performance or
liquidity under GAAP and, accordingly, should not be considered alternatives to net income, operating
income or any other measures derived in accordance with GAAP. Because EBITDA and Adjud sted EBITDA
may not be calculated in the same manner by all companies, these measures may not be comparable to other
similarly titled measures used by other companies.

Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial
measures can be found in the table below.

H&E Equipment Services, Inc.

Supplu

emental Schedules

H&E EQUIPMENT SERVICES, INC.
UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Amounts in thousands)

Year Ended December 31,

2023

2022

2021

2020

Net Income (Loss)
Net Income (Loss) from discontinued operations
Net Income (Loss) from continuing operations
Interest Expense
Provision (benefit)ff
Depreciation
Amortization of intangibles

for income taxes

$

$

169,293
—
169,293
60,891
53,904
381,959
6,455

$

132,170
(1,524)
133,694
54,033
47,036
296,310
4,660

102,540
41,976
60,564
53,758
21,160
254,158
3,970

$

(32,667)
13,729
(46,396)
61,790
(13,428)
252,681
3,987

EBITDA from continuing operations

$

672,502

$

535,733

$

393,610

$

258,634

Impairment of goodwill
Loss on early extinguishment of debt
Non-cash stock-based compensation expense
Merger and other

5,714
—
10,026
—

—
—
7,263
—

—
—
—
—

55,664
44,630
—
503

Adjud sted EBITDA from continuing operations

$

688,242

$

542,996

$

393,610

$

359,431

CORPORATE INFORMATION

Board of Directors
John M. Engquist
Executive Chairman

Bruce C. Bruckmann
(cid:43)(cid:80)(cid:89)(cid:76)(cid:74)(cid:91)(cid:86)(cid:89)(cid:3)

Bradley W. Barber
(cid:42)(cid:79)(cid:80)(cid:76)(cid:77)(cid:3)(cid:44)(cid:95)(cid:76)(cid:74)(cid:92)(cid:91)(cid:80)(cid:93)(cid:76)(cid:3)(cid:54)(cid:585)(cid:74)(cid:76)(cid:89)(cid:3)(cid:72)(cid:85)(cid:75)(cid:3)(cid:43)(cid:80)(cid:89)(cid:76)(cid:74)(cid:91)(cid:86)(cid:89)

Patrick L. Edsell
(cid:43)(cid:80)(cid:89)(cid:76)(cid:74)(cid:91)(cid:86)(cid:89)

Paul N. Arnold 
(cid:43)(cid:80)(cid:89)(cid:76)(cid:74)(cid:91)(cid:86)(cid:89)

Gary W. Bagley
(cid:51)(cid:76)(cid:72)(cid:75)(cid:3)(cid:48)(cid:85)(cid:75)(cid:76)(cid:87)(cid:76)(cid:85)(cid:75)(cid:76)(cid:85)(cid:91)(cid:3)(cid:43)(cid:80)(cid:89)(cid:76)(cid:74)(cid:91)(cid:86)(cid:89)

Management
John M. Engquist
Executive Chairman

Thomas J. Galligan III
(cid:43)(cid:80)(cid:89)(cid:76)(cid:74)(cid:91)(cid:86)(cid:89)

Lawrence C. Karlson
(cid:43)(cid:80)(cid:89)(cid:76)(cid:74)(cid:91)(cid:86)(cid:89)

John McDowell Engquist
President and Chief 
(cid:54)(cid:87)(cid:76)(cid:89)(cid:72)(cid:91)(cid:80)(cid:85)(cid:78)(cid:3)(cid:54)(cid:585)(cid:74)(cid:76)(cid:89)(cid:3)

Bradley W. Barber 
(cid:42)(cid:79)(cid:80)(cid:76)(cid:77)(cid:3)(cid:44)(cid:95)(cid:76)(cid:74)(cid:92)(cid:91)(cid:80)(cid:93)(cid:76)(cid:3)(cid:54)(cid:585)(cid:74)(cid:76)(cid:89)(cid:3)
(cid:72)(cid:85)(cid:75)(cid:3)(cid:43)(cid:80)(cid:89)(cid:76)(cid:74)(cid:91)(cid:86)(cid:89)(cid:3)

Leslie S. Magee
(cid:42)(cid:79)(cid:80)(cid:76)(cid:77)(cid:3)(cid:45)(cid:80)(cid:85)(cid:72)(cid:85)(cid:74)(cid:80)(cid:72)(cid:83)(cid:3)(cid:54)(cid:585)(cid:74)(cid:76)(cid:89)(cid:3)(cid:72)(cid:85)(cid:75)
Secretary

Corporate Office

Investor Relations Contact

H&E Equipment Services, Inc.
7500 Pecue Lane
Baton Rouge, Louisiana 70809
(225) 298-5200
www.he-equipment.com

Jeffrey L. Chastain  
Vice President of Investor Relations
H&E Equipment Services, Inc.
(225) 952-2308
(cid:81)(cid:74)(cid:79)(cid:72)(cid:90)(cid:91)(cid:72)(cid:80)(cid:85)(cid:39)(cid:79)(cid:76)(cid:20)(cid:76)(cid:88)(cid:92)(cid:80)(cid:87)(cid:84)(cid:76)(cid:85)(cid:91)(cid:21)(cid:74)(cid:86)(cid:84)

Stock

Transfer Agent

H&E Equipment Services, Inc.
Stock Symbol: HEES
(cid:58)(cid:91)(cid:86)(cid:74)(cid:82)(cid:3)(cid:59)(cid:89)(cid:72)(cid:75)(cid:76)(cid:75)(cid:3)(cid:86)(cid:85)(cid:3)(cid:53)(cid:40)(cid:58)(cid:43)(cid:40)(cid:56)(cid:3)
(cid:46)(cid:83)(cid:86)(cid:73)(cid:72)(cid:83)(cid:3)(cid:52)(cid:72)(cid:89)(cid:82)(cid:76)(cid:91)

Computershare
P.O. Box 43006
Providence, RI 02940-3006
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www.computershare.com/investor

About the cover

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(cid:72)(cid:87)(cid:87)(cid:89)(cid:86)(cid:95)(cid:80)(cid:84)(cid:72)(cid:91)(cid:76)(cid:83)(cid:96)(cid:3)(cid:25)(cid:30)(cid:12)(cid:3)(cid:86)(cid:77)(cid:3)(cid:91)(cid:79)(cid:76)(cid:3)(cid:42)(cid:86)(cid:84)(cid:87)(cid:72)(cid:85)(cid:96)(cid:187)(cid:90)(cid:3)(cid:86)(cid:89)(cid:80)(cid:78)(cid:80)(cid:85)(cid:72)(cid:83)(cid:3)(cid:76)(cid:88)(cid:92)(cid:80)(cid:87)(cid:84)(cid:76)(cid:85)(cid:91)(cid:3)(cid:74)(cid:86)(cid:90)(cid:91)(cid:3)(cid:72)(cid:90)(cid:3)(cid:86)(cid:77)(cid:3)(cid:43)(cid:76)(cid:74)(cid:76)(cid:84)(cid:73)(cid:76)(cid:89)(cid:3)(cid:26)(cid:24)(cid:19)(cid:3)(cid:25)(cid:23)(cid:25)(cid:26)(cid:21)

Jacob Thomas
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Mary P. Thompson
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Suzanne H. Wood
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Form 10-K

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(cid:77)(cid:86)(cid:89)(cid:3)(cid:196)(cid:90)(cid:74)(cid:72)(cid:83)(cid:3)(cid:96)(cid:76)(cid:72)(cid:89)(cid:3)(cid:76)(cid:85)(cid:75)(cid:76)(cid:75)(cid:3)
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is included with this 
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(cid:45)(cid:86)(cid:89)(cid:84)(cid:3)(cid:24)(cid:23)(cid:20)(cid:50)(cid:19)(cid:3)(cid:196)(cid:83)(cid:76)(cid:75)(cid:3)(cid:94)(cid:80)(cid:91)(cid:79)(cid:3)(cid:91)(cid:79)(cid:76)(cid:3)
Securities and Exchange 
Commission, is available by 
contacting H&E Equipment 
Services, Inc., 
Investor Relations, 
7500 Pecue Lane, 
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(cid:24)(cid:23)(cid:20)(cid:50)(cid:3)(cid:72)(cid:85)(cid:75)(cid:3)(cid:86)(cid:91)(cid:79)(cid:76)(cid:89)(cid:3)(cid:196)(cid:85)(cid:72)(cid:85)(cid:74)(cid:80)(cid:72)(cid:83)
information are available at 
www.he-equipment.com 
under the “Investor 
Relations” tab.

H&E Equipment Services, Inc. 
7500 Pecue Lane 
Baton Rouge, Louisiana 70809 
(225) 298-5200 
www.he-equipment.com