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, 2024
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 000-51759
H&E EQUIPMENT SERVICES, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
81-0553291
(State or Other Jurisdiction of
Incorporation or Organization)
(IRS Employer
Identification No.)
7500 Pecue Lane,
Baton Rouge, Louisiana 70809
(225) 298-5200
(Address of Principal Executive Offices, including Zip Code)
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
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(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 for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit 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
☒
Accelerated Filer
☐
Non-Accelerated Filer
☐
Smaller Reporting Company
☐
Emerging Growth 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 effectiveness 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 officers 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-affiliates of the registrant was approximately $1,613,235,044 (computed by reference to the closing sale
price of the registrant’s common stock on the Nasdaq Global Market on June 30, 2024, the last business day of the registrant’s most recently completed second fiscal
quarter).
As of February 13, 2025, there were 36,613,180 shares of common stock, par value $0.01 per share, of the registrant outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the document listed below have been incorporated by reference into the indicated parts of this Form 10-K, as specified in the responses to the item numbers
involved.
Auditor Firm Id:
243
Auditor Name:
BDO USA, P.C.
Auditor Location:
Dallas, Texas, USA
3
PART I
Item 1.
Business ............................................................................................................................................................
5
Item 1A.
Risk Factors ......................................................................................................................................................
11
Item 1B.
Unresolved Staff Comments .............................................................................................................................
30
Item 1C.
Cybersecurity ....................................................................................................................................................
30
Item 2.
Properties ..........................................................................................................................................................
31
Item 3.
Legal Proceedings .............................................................................................................................................
31
Item 4.
Mine Safety Disclosures ...................................................................................................................................
31
PART II
Item 5.
Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities ...........................................................................................................................................................
32
Item 6.
[Reserved] .........................................................................................................................................................
33
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations ............................
34
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk ..........................................................................
47
Item 8.
Financial Statements and Supplementary Data .................................................................................................
47
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ...........................
83
Item 9A.
Controls and Procedures ...................................................................................................................................
83
Item 9B.
Other Information .............................................................................................................................................
86
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections ..............................................................
86
PART III
Item 10.
Directors, Executive Officers and Corporate Governance ................................................................................
86
Item 11.
Executive Compensation ..................................................................................................................................
93
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters .........
107
Item 13.
Certain Relationships and Related Transactions, and Director Independence ..................................................
108
Item 14.
Principal Accountant Fees and Services ...........................................................................................................
110
PART IV
Item 15.
Exhibits and Financial Statement Schedules .....................................................................................................
111
Item 16.
Form 10-K Summary ........................................................................................................................................
114
SIGNATURES................................................................................................................................................................................
115
4
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,” “project,” “intend,” “foresee” and similar expressions. These statements include, among others, statements regarding our
expected business outlook, anticipated financial and operating results, our business strategy and means to implement the strategy, our
objectives, the amount and timing of capital expenditures, the likelihood of success in expanding our business, financing plans,
budgets, working capital 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 construed 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 available information. Important assumptions relating to
the forward-looking statements include, among others, assumptions regarding demand for our products, the expansion of product
offerings geographically or through new 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 actual results to differ materially from those contained in any forward-
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 subsequent periods. Many of these factors are
beyond our ability to control or predict. Such factors include, but are not limited to, the following:
•
general economic and geopolitical conditions in North America and elsewhere throughout the globe and construction and
industrial activity in the markets where we operate in North America;
•
our ability to forecast trends in our business accurately, and the impact of economic downturns 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 effect on construction spending and the
economy in general;
•
trends in oil and natural gas which could adversely affect the demand for our products and services;
•
our inability to obtain equipment and other supplies for our business from our key suppliers on acceptable terms or at all,
as a result of supply chain disruptions, insolvency, financial difficulties, supplier 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 outbreak, government
actions and restrictive measures implemented in response to the pandemic, material delays and cancellations of
construction or infrastructure projects, labor shortages, supply chain disruptions and other impacts to the business;
•
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 artificial intelligence technologies, failure to protect
personal information, compliance with data protection laws and other disruptions 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;
•
our ability to complete the pending transaction as contemplated by the Herc Merger Agreement (as defined below), the
parties’ ability to satisfy the conditions to the consummation of the Offer (as defined below) and the other conditions set
forth in the Merger Agreement;
•
risks associated with substantial costs and management resources required to consummate the Offer and Merger (as
defined below);
•
the impact of certain interim covenants that we are subject to under the Herc Merger Agreement, including those that
might discourage a potential third-party acquirer;
5
•
business uncertainties and contractual restrictions we are subject to during the pendency of the Offer and Merger, that
could disrupt our business and affect our relationships with existing and prospective employees, suppliers and other
business partners;
•
risks associated with failure to consummate the Merger; 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
Securities and Exchange Commission (“SEC”), we are under no obligation to publicly update or revise any forward-looking
statements after we file this Annual Report on Form 10-K, whether as a result of any new information, future events or otherwise.
Investors, potential investors and other readers are urged to consider the above mentioned factors carefully in evaluating the
forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. Although we believe
that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results or performance.
PART I
Item 1. Business
Our Company
Founded in 1961 through our predecessor companies, we have been in the equipment services business for approximately 63
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 subsidiary of Gulf Wide Industries, L.L.C., and ICM Equipment Company L.L.C. In connection
with our initial public offering in February 2006, we converted H&E LLC into H&E Equipment Services, Inc., a Delaware
corporation.
We have built an extensive infrastructure that as of December 31, 2024 includes 156 branch facilities located in 31 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 construction rental fleet is among the industry’s youngest with an equipment mix comprised of aerial work platforms,
earthmoving, material handling, and other general and specialty lines.
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 effective
method to manage our rental fleet through efficient maintenance and the profitable distribution of fleet. Our management, from the
corporate level down to the branch store level, has extensive industry experience. We believe that the operating experience and
extensive infrastructure we developed throughout our history as an integrated equipment services company provides us with a
competitive advantage to broaden our industry expansion and successfully operate as a pure-play rental company.
Recent Developments
In January 2025, we entered into an Agreement and Plan of Merger (the “United Merger Agreement”) with United Rentals, Inc., a
Delaware Corporation (“United Rentals” or “United”) and UR Merger Sub VII Corporation, a Delaware corporation and wholly
owned subsidiary of United (“United Merger Sub”), pursuant to which a cash tender offer (the “United Offer”) was commenced on
behalf of United to purchase all of the issued and outstanding shares of our common stock at $92.00 a share, following which United
Merger Sub would merge with and into the Company, with the Company surviving as a wholly owned subsidiary of United (the
“United Merger and, together with the United Offer, the “United Transactions”).
In February 2025, during the pendency of the United Offer, we received a proposal from Herc Holdings Inc., a Delaware
corporation (“Herc”, and such proposal, the “Herc Proposal”) to acquire all of the issued and outstanding shares of our common stock
for a combination of cash and Herc common stock, consisting of (i) $78.75 in cash, and (ii) 0.1287 shares of Herc common stock for
each share of our common stock. The combination of the cash and Herc common stock was equal to a total value of approximately
$104.89 per share based on Herc’s 10-day volume-weighted average price as of market close February 14, 2025. On February 16,
2025, our Board of Directors unanimously concluded that the Herc Proposal constituted a Superior Proposal (as defined in the United
Merger Agreement), and on February 19, 2025, we terminated the United Merger Agreement and Herc paid United the $63,523,892
termination fee pursuant to the United Merger Agreement on our behalf.
Also on February 19, 2025, immediately following the termination of the United Merger Agreement, we entered into an
Agreement and Plan of Merger (the “Herc Merger Agreement”) which provides for the acquisition of the Company by Herc in a two-
step transaction, consisting of an exchange offer, followed by a subsequent back-end merger. The Herc Merger Agreement, pursuant
to which HR Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Herc (“Merger Sub”) agreed to commence an
6
exchange offer (the “Offer”), to acquire all of the issued and outstanding shares of our common stock for the Offer Price (as defined
below) of (i) $78.75 in cash, and (ii) 0.1287 shares of Herc common stock for each share of our common stock (the “Offer Price”),
following which Merger Sub will merge with and into the Company, with the Company surviving as a wholly owned subsidiary of
Herc (the “Merger”) (and collectively, the “Transactions”). The Transactions are expected to close mid-year 2025.
The Transaction are subject to customary closing conditions, including a minimum tender of at least one share more than 50
percent of then-outstanding common shares, the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, the Form S-4 to be filed by Herc in connection with the issuance of shares of Herc common stock in the Merger having
become effective and not subject to any legal proceedings suspending such effectiveness and approval for listing on the New York
Stock Exchange (“NYSE”) of Herc’s common stock to be issued in the Offer and Merger.
If the Herc Merger is consummated, our common stock will be delisted from The NASDAQ Global market and deregistered
under Securities Exchange Act of 1934, as amended, as promptly as practicable following the effective time of the Merger.
The Herc Merger Agreement also contains certain termination rights for Herc and us and further provides that, upon termination
of the Herc Merger Agreement under specified circumstances, including certain terminations in connection with an alternative
business combination transaction as permitted by the terms of the Merger Agreement, we will be required to pay Herc a termination
fee of approximately $145 million in addition to refunding Herc for the termination fee of $63.5 million pursuant to the United Merger
Agreement if the Company enters into a superior proposal based on terms included in the Merger Agreement.
See Item 1A—Risk Factors—Risk Factors Relating to the Pending Transaction with Herc Holdings Inc. and the Company for
further discussion of the risks, conditions and potential expenses and fees associated with the pending Offer and Merger.
Industry Background
The construction equipment industry is driven by a broad range of economic factors including total U.S. non-residential
construction trends, construction machinery demand, demand for rental equipment and additional, region-specific factors.
Construction equipment is largely distributed to end users through two channels: equipment rental companies and equipment dealers.
Examples of equipment rental companies include United Rentals, Sunbelt Rentals, and Herc Rentals. Examples of equipment dealers
include Finning and Toromont. Historically, we operated substantially 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 support to
customers.
Products and Services
Equipment Rentals. We rent our construction equipment to our customers on a daily, weekly and monthly basis. We have a well-
maintained rental fleet that, at December 31, 2024, consisted of approximately 63,630 pieces of equipment having an original
acquisition cost (which we define as the cost originally paid to manufacturers) of approximately $2.9 billion and an average age of
approximately 41.7 months.
Sales of Rental Equipment. We sell used equipment primarily from our rental fleet. For the year ended December 31, 2024,
approximately 99.6% of our used sales revenues were derived from sales of rental fleet.
Sales of New Equipment. We sell new construction equipment and are a U.S. distributor for nationally recognized suppliers.
Parts Sales and Service Revenues. We provide parts to our own rental fleet and sell parts to customers for the equipment we sell.
Our parts operations enable us to maintain a high-quality rental fleet and provide additional product support to our end users. In
addition, 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 infrastructure that we believe would be
difficult for companies without the requisite resources and lead time to effectively replicate.
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 factory and in-house training by manufacturer representatives regarding the
operational features, 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, often assisting customers in assessing their immediate and ongoing equipment
needs. In addition, we have a commission-based compensation program for our sales force team.
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 efficiency of our sales representatives
7
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 industry data is complete.
We have developed strategies to identify target customers for equipment rentals in all markets. These strategies allow our sales
force to identify frequent rental users, function as advisors and problem solvers for our customers, and accelerate the sales process in
new operations.
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 industry
publications and associations, and our Company website at www.herentals.com. The information on our website is not a part of or
incorporated by reference into this Annual Report on Form 10-K.
Our Competitive Strengths
Integrated Platform of Equipment, Products and Services. We believe that our operating experience and the extensive
infrastructure we developed through years of operating as both an equipment rental company and equipment distributor provides us
with a competitive advantage. 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 transfer of our fleet across multiple locations to adjust to local customer
demand;
•
high quality rental fleet supported by our strong product support capabilities;
•
established retail sales network resulting in the profitable disposal of our used equipment;
•
purchasing power gained through purchases for our rental operations fleet; and
•
operational cost efficiencies across our organization, including with respect to purchasing, information technology,
back-office support and marketing.
High-Quality, Multipurpose 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 construction
equipment allows us to better provide the specialized knowledge and support that our customers demand when renting and purchasing
equipment. These core types of equipment are attractive because they have a long useful life, high residual value and generally strong
industry demand.
Diverse Customer Markets. We provide equipment rental services to customers in a wide variety of markets, including non-
residential construction, industrial, infrastructure, and other industries. We believe that the diversification of our customer base
reduces our end-market exposure to any one particular market.
Complementary Parts and Services Segments. Our parts and services businesses allow us to maintain our rental fleet in excellent
condition and to offer our customers high-quality rental equipment.
Well-Developed Infrastructure. We have built an infrastructure that as of December 31, 2024 included a network of 156 branch
facilities in 31 states. Our workforce included, as of December 31, 2024, a highly-skilled group of approximately 621 service
technicians and an aggregate of 381 sales people in our sales force. We believe that our well-developed infrastructure 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.
Strong Supplier Relationships. We have longstanding relationships with nationally-recognized equipment suppliers, including
JLG Industries, Gehl, Genie Industries (Terex), Komatsu, Takeuchi, Skyjack, JCB, Polaris and Case. These relationships improve our
ability to negotiate equipment acquisition pricing and allow us to purchase parts at wholesale costs.
Customized Information Technology Systems. 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
efficiency of our sales representatives and managers. We are expanding our proprietary, automated digital customer platform,
CONNECT, which offers comprehensive self-service capabilities allowing customers to reserve equipment, schedule delivery, make
payments, manage contracts, utilize telematics, customize reports, make service requests and access customer support. In addition, our
enterprise resource planning system enhances our ability to provide more timely and meaningful information to manage our business.
8
Strong Customer Relationships. We have a diverse base of approximately 42,400 customers as of December 31, 2024 who we
believe value our high level of service, knowledge and expertise. Our customer base includes a wide range of industrial and
commercial companies, construction contractors, manufacturers, 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 infrastructure enables us to effectively service multi-regional and national accounts. We believe that our expansive presence and
commitment to superior 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.
Experienced Management Team. Our senior management team is led by Bradley W. Barber, our Chief Executive Officer, who
has over 30 years of industry experience. Our senior and regional management team have approximately 27 years on average of
industry experience. Our branch, district and regional managers have extensive knowledge and industry experience as well.
Customers
We have a wide range of customers across diverse markets. We serve approximately 42,400 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, construction contractors, manufacturers, public utilities, maintenance
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 infrastructure enables us to effectively service multi-regional and national
accounts. Our contracts with customers vary in duration, but substantially all of our rental contracts include rates for daily, weekly or
monthly use and typically include cancellation clauses without termination penalties. In 2024, our largest customer accounted for less
than 3% of total revenues. No single customer accounted for more than 10% of our total revenue in 2024. Our top ten customers
combined accounted for approximately 7.1% of our total revenues in 2024.
Suppliers
We purchase a significant amount of equipment from leading, nationally-known original equipment manufacturers. We purchased
approximately 48.5% of our equipment from five manufacturers (Haulotte, Skyjack, JCB, Polaris, and JLG) during the year ended
December 31, 2024. These relationships improve our ability to negotiate equipment acquisition pricing. Additionally, we also
purchase equipment from nationally-recognized equipment suppliers including Gehl, Komatsu, Case and Takeuchi. While we believe
that we have alternative sources of supply for the equipment we purchase in each of our principal product categories, termination of
one or more of our relationships with any of our major suppliers of equipment could have a material adverse effect on our business,
financial condition or results of operations if we were unable to obtain adequate or timely equipment.
Competition
The equipment industry is generally comprised of either pure rental equipment companies or manufacturer dealer/distributorship
companies. We historically operated as an integrated equipment services company by renting, selling and providing parts and services
support. In recent years, we have strategically divested our distribution businesses and began operating as a pure-play rental company.
The equipment industry is generally 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,
United Rentals, Sunbelt Rentals and Herc Rentals) to small, independent businesses with a limited number of locations.
We believe that participants in the equipment rental industry generally compete on the basis of availability, quality, reliability,
delivery and price. In general, large operators enjoy substantial competitive advantages over small, independent rental businesses due
to a distinct price advantage. Many rental equipment companies’ parts and services offerings are limited and may prove difficult to
expand due to the training, infrastructure and management resources necessary to develop the breadth of service offerings and depth of
knowledge our service technicians are able to provide. Some of our competitors have significantly greater financial, marketing and
other resources than we do.
Seasonality
Although our business is not significantly impacted by seasonality, the demand for rental equipment tends to be lower in the
winter months. The level of equipment rental activities is directly related to non-residential and industrial construction and
maintenance activities. Therefore, equipment rental performance will be correlated to the levels of current construction activities. The
severity of weather conditions can have a temporary impact on the level of construction activities.
9
Equipment cycles are also subject to some seasonality with the peak rental periods occurring during the spring and summer
seasons and peak selling periods frequently occurring during the fourth quarter.
Environmental and Safety Regulations
Our facilities and operations are subject to comprehensive and frequently changing federal, state and local environmental and
occupational health and safety laws. These laws regulate (1) the handling, storage, use and disposal of hazardous materials and wastes
and, if any, the associated cleanup of properties affected 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 substances
for fueling and maintaining our equipment and vehicles. We have made, and will continue to make, capital and other expenditures to
comply with environmental requirements. We do not currently anticipate any material adverse effect on our business, financial
condition or competitive position as a result of our efforts 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 effect a change in
their enforcement of existing laws or regulations, that could affect our operations and increase our operational and compliance
expenditures. Due to uncertainty in the regulatory and legislative processes, as well as the scope of such requirements and initiatives,
we cannot currently determine the specific effect such regulations may have on our operations. Also, in the future, contamination may
be found to exist at our facilities or off-site locations where we have sent wastes. There can be no assurance that we, or various
environmental regulatory agencies, will not discover previously unknown environmental non-compliance or contamination. We could
be held liable for such newly-discovered non-compliance or contamination. It is possible that changes in environmental and worker
health and safety laws or liabilities from newly-discovered non-compliance or contamination could have a material adverse effect on
our business, financial condition and results of operations. See Item 1A — Risk Factors — “Climate change, climate change
regulations and greenhouse effects may materially adversely impact our operations and markets” for further background.
Human Capital
We believe our employees are our greatest asset. As of December 31, 2024, we had approximately 2,800 employees, of which
approximately 1,000 are salaried personnel and 1,800 are hourly personnel. A collective bargaining agreement relating to two branch
locations covers approximately 70 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 staffing level adjustments in response to align with customer demand.
H&E employees drive our business growth and success. Likewise, we strive to drive their own professional growth, success and
wellbeing. We do so by providing a workplace 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 workplace policies and initiatives aim to create a workplace of choice that attracts and retains the talent needed
to achieve our business objectives.
Health and Safety. 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 specific and regulatory 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 Occupational Safety and Health Administration (“OSHA”) standard metrics, in 2024 our lost time incident rate
was 0.15 and our total reportable incident rate was 0.95.
Employee Wellness and Benefits. 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 offer an array of comprehensive benefit options including retirement savings
plans, medical insurance, prescription drug benefits, dental insurance, vision insurance, flexible medical spending accounts, life and
disability insurance, accident and critical illness insurance and dependent care programs. We additionally provide paid time off,
bereavement leave, wellness credits and employee assistance programs. During 2024, the Company provided an additional tool to its
employees by developing a mental health training module, Mental Health and Hope. This training was created with the help of the
nation’s leading mental health experts and aims to provide information and resources regarding the mental health crisis our country is
10
facing. This training has been made available to all employees, as well as vendors, customers and other companies to spread
awareness and provide information on how to help yourself or others affected by this crisis.
Inclusion and Diversity. 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 every 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, disability, veteran status, religion, culture, background, and experiences. Our efforts focus on hiring and
supporting all groups, including historically underrepresented groups. As of December 31, 2024, approximately 29% of our
workforce were people of color and 13% of our workforce are female. During 2023, we began partnering with the Department of
Defense’s SkillBridge Program, which provides service members with the opportunity to participate in industry training programs
while transitioning out of their military careers. We intend to continue these and other efforts to further diversify our team as we build
a more inclusive workplace.
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 meaningful career
opportunities. We offer training in an array of categories such as management and leadership, rentals, sales, parts and service, safety,
technology and vehicle operations. Our talent development program includes a variety of training methodologies including field
experiences, on-the-job training, online/system supported training, classroom training and helpdesk support. Beginning in 2024, our
training program included a company developed mental health training module.
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 education 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 support to two innovative local high schools where
children of low-income parents can receive a college preparatory education 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
supports small businesses and employees in emergency situations and disaster recovery.
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. We have 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 we have continued to work with them on building our
ESG framework. Additionally, we have published an ESG page on our Company’s web page as part of our commitment to advancing
our ESG reporting and disclosures to customers, manufacturers, and investors alike.
We are working to identify and understand areas of the business in which we can reduce the environmental impact, including our
carbon footprint. As an example, we have deployed telematics tracking and strategies to improve the management of our
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 inventory 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 available, are successfully tested in the field of operation and as customer demand for them
increases. Our battery and electricity powered equipment currently comprise 34% of the units we rent as of December 31, 2024. 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: publicinfo@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 available free of charge through our internet website (www.herentals.com) as soon
as reasonably practicable after filing with the SEC. We use the Investor Relations section of our website as a means of disclosing
11
material non-public information 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
conference calls and webcasts.
Additionally, we make available 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 actually occur, our business, financial condition and
operating results could be adversely affected. As a result, the trading price of our securities could decline and you may lose part or all
of your investment. Except as otherwise noted, the following risk factors do not take into account the proposed Merger and assume
that we remain a stand-alone company.
SUMMARY RISK FACTORS
The following is a summary of the principal risks that could adversely affect our business, operations and financial results.
Operational and Competitive Risks
•
Our business could be adversely affected by declines in construction and industrial activities, or a downturn in general
economic or geopolitical condition, which could lead to decreased demand and equipment rental rates and lower sales
prices.
•
We face risks related to heightened inflation, which could adversely affect our business and financial condition.
•
We face risks related to financial and credit market disruptions, recession and other economic conditions.
•
Significant changes or developments in U.S. laws or policies, including changes in U.S. trade policies and tariffs and the
reaction of other countries thereto, may have a material adverse effect on our business and financial statements.
•
The inability to forecast trends accurately may have an adverse impact on our business and financial condition.
•
Our revenue and operating results may fluctuate, which could result in a decline in our profitability and make it more
difficult for us to grow our business.
•
The impacts of a global pandemic and similar health concerns, could have a significant impact on worldwide economic
conditions and could have a material adverse effect on our operations and financial results.
•
We are subject to competition, which may have a material adverse effect on our business by reducing our ability to
increase or maintain revenues or profitability.
•
We purchase a significant amount of our equipment from a limited number of manufacturers. Termination of one or more
of our relationships with any of those manufacturers could have a material adverse effect on our business.
•
Disruptions in our supply chain could result in adverse effects on our results of operations and financial performance.
•
The cost of new equipment that we purchase for use in our rental fleet may increase and therefore we may spend more for
such equipment. In some cases, we may not be able to procure equipment on a timely basis due to supplier constraints.
•
Our rental fleet is subject to residual value risk upon disposition.
•
If our rental fleet ages, our operating costs may increase, we may be unable to pass along such costs, and our earnings
may decrease. The costs of new equipment we use in our fleet may increase, requiring us to spend more for replacement
equipment or preventing us from procuring equipment on a timely basis.
12
•
We incur maintenance and repair costs associated with our rental fleet equipment that could have a material adverse effect
on our business in the event these costs are greater than anticipated.
•
Labor disputes could disrupt our ability to serve our customers and/or lead to higher labor costs.
•
Increases or fluctuations in fuel costs or reduced supplies of fuel could harm our business.
•
Climate change, climate change regulations and greenhouse effects may materially adversely impact our operations and
markets.
Strategic Risks
•
We may not be able to facilitate our growth strategy by identifying or completing transactions with attractive acquisition
candidates, which could limit our revenues and profitability. Future acquisitions may result in significant transaction
expenses and may involve significant costs. We may experience integration and consolidation risks associated with future
acquisitions.
•
We may not be able to facilitate our growth strategy by identifying and opening attractive start-up locations, which could
limit our revenues and profitability.
Liquidity and Capital Resource Risks
•
Unfavorable conditions or disruptions in the capital and credit markets may adversely impact business conditions and the
availability of credit.
•
Our substantial indebtedness could adversely affect our financial condition.
•
We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions
to satisfy our obligations under our indebtedness, which may not be successful.
•
Despite current indebtedness levels, we may still be able to incur more indebtedness, which could further exacerbate the
risks described above.
•
The agreements governing the Credit Facility and our senior unsecured notes restrict our business and our ability to
engage in certain corporate and financial transactions.
•
Variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase
significantly.
•
Our business could be hurt if we are unable to obtain additional capital as required, resulting in a decrease in our revenues
and profitability. In addition, our inability to refinance our indebtedness on favorable terms, or at all, could materially and
adversely affect our liquidity and our ongoing results of operations.
•
The continued payment of our quarterly dividend is subject to, among other things, the availability of funds and the
discretion of our board of directors.
Government Regulation Risks
•
We have operations throughout the United States, which exposes us to multiple federal, state and local regulations.
Changes in applicable law, regulations or requirements, or our material failure to comply with any of them, can increase
our costs and have other negative impacts on our business.
•
We could be adversely affected by environmental and safety requirements and regulations, including those regarding
climate change, which could subject us to increased operational costs that could materially and adversely impact our
liquidity and operating results.
•
Our business may be materially affected by changes to fiscal and tax policies.
•
Our business may be materially affected by changes to policies governing our products, technology and technological
development.
Risk Factors Relating to the Pending Transaction with Herc Holdings Inc.
•
The completion of the Offer and Merger is subject to conditions, some or all of which may not be satisfied or completed
on a timely basis, if at all. Failure to complete the Merger could have material adverse effects on the Company.
•
The Offer and Merger will involve substantial costs and will require substantial management resources. We may be
required to pay a significant fee if the Merger Agreement is terminated.
13
•
The Offer consideration payable to holders of our common stock will not be adjusted for changes in our business, assets
liabilities, prospects, outlook, financial condition or results of operations, or in the event of any change in the price of our
common stock.
•
The Company’s shareholders cannot be sure of the value of the stock consideration they will receive in the Herc Merger,
if completed, because the exchange ratio is fixed and the market price of Herc common stock has fluctuated and may
continue to fluctuate.
•
The Merger Agreement contains provisions that could discourage a potential competing acquirer.
•
Review under the HSR Act could prevent or delay the consummation of the Offer and Merger.
•
Stockholder litigation could prevent or delay the consummation of the Offer and Merger or otherwise negatively impact
our business, operating results and financial condition.
•
Our executive officers and directors may have interests in the Offer and the Merger that are different from, or in addition
to, those of our stockholders generally.
•
While the Offer and Merger is pending, we are subject to business uncertainties and contractual restrictions that could
disrupt our business, and the Offer and Merger may impair our ability to attract and retain qualified employees or retain
and maintain relationships with our suppliers and other business partners.
•
If the Merger is not consummated, we may need to raise additional capital to continue our operations.
General Business Risks
•
Fluctuations in the stock market, as well as general economic and market conditions, may impact the market price of our
common stock.
•
Security breaches and other disruptions in our information technology systems could limit our capacity to effectively
monitor and control our operations, compromise our or our customers’ and suppliers’ confidential information or
otherwise adversely affect our operating results or business reputation.
•
We are dependent on key personnel. A loss of key personnel could have a material adverse effect on our business.
•
If we fail to maintain an effective system of internal controls, we may not be able to accurately report financial results or
prevent fraud.
•
We are exposed to various risks related to legal proceedings or claims that could adversely affect our operating results.
The nature of our business exposes us to various liability claims, which may exceed the level of our insurance coverage
resulting in us not being fully protected.
Operational and Competitive Risks
Our business could be adversely affected by declines in construction and industrial activities, or a downturn in the economy or
geopolitical conditions in general, which could lead to decreased demand for equipment, depressed equipment rental rates and
lower sales prices, resulting in a decline in our revenues, gross margins and operating results.
Our equipment is principally used in connection with construction and industrial activities. Consequently, a downturn in
construction or industrial activities, or the economy in general, may lead to a decrease in the demand for equipment or depress rental
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;
•
unfavorable credit markets affecting end-user access to capital, as well as our access to capital when or if needed;
•
adverse changes in federal, state and local government infrastructure spending or the related regulatory regime;
•
an increase in costs, including the cost of construction materials, as a result of inflation or other factors;
•
significant changes or developments in U.S. laws or policies, including changes in U.S. trade policies and tariffs and our
ability to pass on such increased costs, if any, to our customers;
•
excess fleet in the equipment rental industry;
•
adverse weather conditions or natural disasters which may affect a particular region;
14
•
a decrease in the level of exploration, development, production activity and capital spending by oil and natural gas
companies;
•
a prolonged shutdown of the U.S. government;
•
an increase in interest rates;
•
supply chain disruptions;
•
geopolitical conditions and the proliferation of global and regional conflicts and political instability, including the war in
Ukraine, continued tensions between China and the United States and sustained conflicts in the Middle East;
•
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 availability 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 institutions and capital markets on terms favorable to us, or at all. Weakness or deterioration in the non-
residential construction and industrial sectors caused by these or other factors could have a material adverse effect on our financial
position, results of operations and cash flows in the future and may also have a material adverse effect on residual values realized on
the disposition of our rental fleet.
We face risks related to heightened inflation, which could adversely affect our business, financial condition and results of
operations.
Our financial results, operations and forecasts depend significantly on worldwide economic factors such as inflation, which may
increase our operating costs and have a negative impact on our business. Beginning in 2022, the U.S. experienced heightened
inflationary pressures and core inflation, the latter of which proved persistent during 2023 and 2024. While the global inflation rate
stabilized in 2023 and 2024 and, in some cases, declined and inflationary pressures eased in 2024, we cannot be sure that this trend
will continue. Many factors could jeopardize the efforts to stem inflationary pressures in the U.S., and such factors could ultimately
lead to further inflationary pressure on foreign goods. We have experienced and may continue to experience inflationary pressures,
including, but not limited to, cost increases related to equipment, fuel, labor and hauling expenses. 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 effect
on our results of operations. Furthermore, central banks across the globe significantly increased interest rates to stem inflation in
recent years, and such increases in interest rates could affect our customers’ liquidity due to higher debt service obligations on
instruments subject to variable rate indebtedness which, in turn, could harm their ability to make payments to us. In addition, if the
U.S. economy enters a recession, we may experience sales declines which could have an adverse effect on our business, operating
results and financial condition.
We face risks related to financial and credit market disruptions, recession and other economic conditions.
Our financial results, operations and forecasts also depend on other worldwide economic and geopolitical conditions, the demand
for our products and the financial condition of our customers and suppliers. Economic weakness and geopolitical uncertainty have in
the past resulted, and may result in the future, in reduced demand for products resulting in decreased sales, margins and earnings.
Similarly, disruptions in financial and/or credit markets may impact our ability to manage normal commercial relationships with our
customers, suppliers and creditors. For instance, in the event of a recession or threat of a recession, our customers and suppliers 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 availability and our ability to raise capital when needed. A
disruption in the financial markets could impair our banking or other business partners, on whom we rely for access to capital. In
addition, changes in tax or interest rates in the U.S. or other nations, whether due to recession, economic disruptions or other reasons,
could have an adverse effect on our operating results.
Economic weakness and geopolitical uncertainty may also lead us to take restructuring actions, adjust our operating strategy,
impair assets or reduce expenses in response to decreased sales or margins. We may not be able to adequately adjust our cost structure
in a timely fashion, which could have an adverse effect 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 effect on
our operating results.
15
Significant changes or developments in U.S. laws or policies, including changes in U.S. trade policies and tariffs and the reaction
of other countries thereto, may have a material adverse effect on our business and financial statements.
Significant changes or developments in U.S. laws and policies, such as laws and policies surrounding international trade, foreign
affairs, manufacturing and development and investment in the territories and countries where we, our customers or suppliers operate,
can materially adversely affect our business and financial statements. Previously, the imposition of significant tariffs and increased
trade tension between the United States and China greatly impacted domestic industries’ access to foreign markets. It is anticipated
that the United States intends to impose tariffs which could result in a trade war. The adoption or expansion of these tariffs in the
future, the occurrence of a trade war, or other governmental action related to tariffs, trade agreements or related policies may have a
material adverse effect on our supply chain and access to equipment, our costs and profit margins. This could cause our business and
financial results to suffer.
The inability to forecast trends accurately may have an adverse impact on our business and financial condition.
An economic downturn 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 construction activity
of our customers in those markets. Uncertainty regarding future equipment product demand could cause us to maintain excess
equipment fleet and increase our equipment inventory carrying 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 labor shortages and supply chain disruptions could cause a shortage of equipment for sale or
rental that could result in an inability to satisfy demand for our products and a loss of market shares.
Our revenue and operating results may fluctuate, which could result in a decline in our profitability and make it more difficult for
us to grow our business.
Our revenue and operating results have historically varied from quarter to quarter. Periods of decline could result in an overall
decline in profitability and make it more difficult for us to make payments on our indebtedness and grow our business. We expect our
quarterly results to continue to fluctuate in the future due to a number of factors, including:
•
general economic conditions in the markets where we operate;
•
the cyclical nature of our customers’ business, particularly our construction customers and customers in the oil and gas
industry;
•
sales and rental patterns of our construction customers, with sales and rental activity tending to be lower in the winter
months;
•
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;
•
changes to technological requirements in our equipment or in our rental platforms;
•
severe weather and seismic conditions temporarily affecting the regions where we operate;
•
supply chain or other disruptions that impact our ability to obtain equipment and other supplies for our business from our
key suppliers on acceptable terms or at all;
•
cost increases as a result of inflation;
•
changes in corporate spending for plants and facilities or changes in government spending for infrastructure 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, restructurings, or the refinancing of existing indebtedness;
•
uncertainty about the regulatory environment and the potential for consistent changes to that environment as a result of
recent U.S. Supreme Court decisions;
•
the effectiveness of integrating acquired businesses, or acquired assets, and new start-up locations; and
•
timing of acquisitions and new location openings and related costs.
16
In addition, we incur various costs when integrating newly acquired businesses or opening new start-up locations, and the
profitability of a new location is generally expected to be lower in the initial months of operation.
The impacts of a global pandemic and similar health concerns, could have a significant impact on worldwide economic conditions
and could have a material adverse effect on our operations and financial results.
A significant outbreak of epidemic, pandemic, or contagious diseases, could cause a widespread health crisis that could result in
an economic downturn, affecting the supply and/or demand for our equipment. Any quarantines, labor shortages or other disruptions
to us, our suppliers, or our customers would likely adversely impact our sales and operating results. The extent of any additional
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 outbreak, governmental limitations on business operations generally, and its and their impact
on potential customers, employees, and suppliers, 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 reasonably
estimated. In addition, to the extent that a global pandemic or similar health concerns adversely affect our results of operations or
financial position, it may also heighten the other risks described in this Item 1A-Risk Factors.
We are subject to competition, which may have a material adverse effect on our business by reducing our ability to increase or
maintain revenues or profitability.
The equipment rental industry 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 availability, quality, reliability, delivery, 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 effect on our business, financial condition and results of
operations.
Furthermore, competition may begin to emerge on the basis of information technology infrastructure. We expect our competitors
to continue to improve their information technology systems, including the use of artificial intelligence (“AI”) and machine learning
solutions, to further enhance operations and their rental platforms. Our ability to innovate our own technology infrastructure and
appropriately address user experience will affect our ability to compete.
We purchase a significant amount of our equipment from a limited number of manufacturers. Termination of one or more of our
relationships with any of those manufacturers could have a material adverse effect on our business, as we may be unable to obtain
equipment in an adequate or timely manner.
We purchase most of our equipment from leading, nationally-known original equipment manufacturers (“OEMs”). For the year
ended December 31, 2024, we purchased approximately 48.5% of our equipment from five manufacturers (Haulotte, Skyjack, JCB,
Polaris, and JLG). Although we believe that we have alternative sources of supply for the equipment we purchase in each of our core
product categories, termination of one or more of our relationships with any of these major suppliers could have a material adverse
effect on our business, financial condition or results of operations if we were unable to obtain equipment in an adequate or timely
manner. Additionally, if one of these manufacturers shuts down or if two or more of them consolidate operations, this could have a
significant effect on supply and pricing of equipment and thus could have a material adverse effect on our business, financial
condition or results of operations.
Disruptions in our supply chain could result in adverse effects on our results of operations and financial performance.
Supply chain disruptions could impact our ability to obtain equipment and other supplies for our business from our key suppliers
on acceptable terms or at all. To date, our historical supply chain disruptions related to the timing of receiving equipment orders,
which were moderate and did not extend beyond a significant period of time. We may experience additional or more severe supply
chain disruptions in the future or one or more supplier’s inability to manufacture or deliver equipment or parts, whether as a result of
raw material shortages, freight/shipping shortages or policy changes. Any suspension or delay in any of our suppliers’ ability to
provide us adequate equipment or supplies, or in our ability to procure equipment or supplies from other sources in a timely manner or
at all, could impair our ability to meet customer demand and therefore could have a material adverse effect on our business, financial
condition or results of operations.
The cost of new equipment that we purchase for use in our rental fleet may increase and therefore we may spend more for such
equipment. In some cases, we may not be able to procure equipment on a timely basis due to supplier constraints.
The cost of new equipment from manufacturers that we purchase for use in our rental fleet may increase as a result of increased
raw material costs, including increases in the cost of steel, which is a primary material used in most of the equipment we use, labor
shortages, inflation, supply chain disruptions or due to increased regulatory requirements, such as those related to emissions and
17
climate change. In addition, in an effort to combat climate change, our customers may require our rental equipment to meet certain
standards, which could increase equipment costs. If we are unable to meet such standards, then the expectations of our customers,
business and results of operations could be materially adversely affected. 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.
Our rental fleet is subject to residual value risk upon disposition.
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 construction season);
•
worldwide and domestic demands for used equipment;
•
advances in equipment technology and emission controls that may not be available for older equipment;
•
the supply 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, 2024, we sold used equipment from our rental fleet at an average selling price of
approximately 260.7% 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 effect on our business, financial condition, results of
operations or cash flows.
If our rental fleet ages, our operating costs may increase, we may be unable to pass along such costs, and our earnings may
decrease. The costs of new equipment we use in our fleet may increase, requiring us to spend more for replacement equipment or
preventing us from procuring equipment on a timely basis.
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 effects 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 suppliers,
including tariffs 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 repair costs associated with our rental fleet equipment that could have a material adverse effect on our
business in the event these costs are greater than anticipated.
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 subjective and requires considerable estimates by
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 affected because our
maintenance and repair costs may be higher than estimated and market values of used equipment may fluctuate.
Labor disputes could disrupt our ability to serve our customers and/or lead to higher labor costs.
As of December 31, 2024, we have approximately 70 employees in Utah, a territory in our Intermountain region, who are covered
by a collective bargaining agreement and approximately 2,806 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 efforts or
collective bargaining negotiations could potentially lead to work stoppages, slowdowns or strikes by certain of our employees, which
could adversely affect our ability to serve our customers. Further, settlement of actual or threatened labor disputes or an increase in the
number of our employees covered by collective bargaining agreements can have unknown effects on our labor costs, productivity and
flexibility.
18
Increases or fluctuations in fuel costs or reduced supplies of fuel could harm our business.
We in the past have been, and in the future could be, adversely affected by limitations on fuel supplies 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
cancel projects. A significant or protracted price fluctuation or disruption of fuel supplies could have an adverse effect on our financial
condition and results of operations. Additionally, potential climate change regulation, including a potential carbon tax, could increase
the overall cost of fuel to us and have a material adverse effect on us; see additional discussion of climate risks below.
Climate change, climate change regulations and greenhouse effects may materially adversely impact our operations and markets.
Climate change and its association with greenhouse gas (“GHG”) emissions is receiving increased attention from the scientific
and political communities.
The United States was recently a member of the Paris Agreement, a climate accord reached at the 21st Conference of the Parties
in Paris, that set new goals, and many related policies are still in development. The Paris Agreement mandates GHG emission
reduction goals every five years beginning in 2020. The United States withdrew from the Paris Agreement in November 2020,
rejoined in February 2021 and withdrew again in January 2025. The U.S.’s frequent withdrawal and rejoining of the Paris Agreement
in recent years has created uncertainty around the evolution of the United States’ regulatory requirements with regards to GHGs and
climate change, making it increasingly difficult to plan for future developments.
Nonetheless, future regulation could impose stringent standards to substantially reduce GHG emissions. 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 caps or taxes on GHG emissions from certain sectors or facility categories. See “We could be adversely affected by
environmental and safety requirements and regulations, including those regarding climate change, which could subject us to
increased operational costs that could materially and adversely impact our liquidity and operating results” for a discussion of the
Environmental Protection Agency’s (the “EPA”) newly issued final rule to reduce gas emissions.
Such new laws or regulations, or stricter enforcement 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 affect our results of operations. Failure to comply with any legislation or regulation could potentially result in substantial
fines, criminal sanctions or operational changes. While it is expected that the United States federal government may continue to pare
back environmental regulations, state and local environmental regulators may impose more stringent regulations in response. Due to
uncertainty in the regulatory and legislative processes, as well as the scope of such requirements and initiatives, we cannot currently
determine the effect such legislation and regulation may have on our operations, but it could be costly and difficult to implement.
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, or any adverse publicity regarding, the
effects of greenhouse gases could harm our reputation or reduce customer demand for our products and services.
Additionally, the SEC and several states are implementing new climate change disclosure rules and other federal or state agencies
may do the same. However, while the SEC adopted their new climate disclosure rules on March 6, 2024, following multiple petitions
for review, they voluntarily stayed the rules on April 4, 2024, pending judicial review. While it remains uncertain in what form the
climate disclosure rules will ultimately take effect, any new reporting rules or regulations may be difficult to comply with, increase
costs of operation (through implementation or through noncompliance penalties), adversely impact our reputation and influence
customer behavior.
Further, as severe weather events become increasingly common, our or our customers’ operations may be disrupted, which could
result in increased operational costs or reduced demand for our products and services and extended periods of disruptions could have
an adverse effect on our results of operations. In addition, climate change may also reduce the availability or increase the cost of
insurance for weather-related events as well as may impact the global economy, including as a result of disruptions to supply chains.
We anticipate that climate change-related risks will increase over time.
Strategic Risks
We may not be able to facilitate our growth strategy by identifying or completing transactions with attractive acquisition
candidates, which could limit our revenues and profitability. Future acquisitions may result in significant transaction expenses
and may involve significant costs. We may experience integration and consolidation risks associated with future acquisitions.
An element of our growth strategy is to selectively pursue, on an opportunistic basis, acquisitions of additional businesses or
assets of businesses, rental companies that complement our existing business and footprint. The success of this element of our growth
strategy depends on selecting strategic acquisition candidates at attractive prices and effectively integrating their businesses into our
own, including with respect to financial reporting and regulatory matters. We cannot assure you that we will be able to identify
19
attractive acquisition candidates or complete the acquisition of any identified 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 necessary to
consummate any acquisitions or the ability to obtain the necessary funds on satisfactory terms. Any future acquisitions may result in
significant transaction expenses and risks associated with entering new markets. We may also be subject 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 subject to claims by third parties and
by the buyers under the terms of our disposition agreements.
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 major difficulties
encountered in the evaluation, negotiation and integration of the businesses we acquire or sell could have a material adverse effect on
our business, financial condition or results of operations, which could decrease our profitability and make it more difficult for us to
grow our business. Among other things, these risks could include:
•
the loss of key employees;
•
the disruption 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 cultures and maintenance of employee morale;
•
inability to maintain and increase competitive presence;
•
customer loss and revenue loss;
•
possible inconsistencies in standards, control procedures 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 unidentified issues that we fail to discover during our due diligence
investigations or that are not subject to indemnification 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 capital;
•
integration of financial reporting and regulatory reporting functions, including with the SEC and pursuant to the Sarbanes-
Oxley Act of 2002, as amended (“SOX”); and/or
•
potential unknown liabilities.
Furthermore, general economic conditions, economic or geopolitical uncertainty, or unfavorable global capital and credit markets
could affect the timing and extent to which we successfully acquire and integrate new businesses or dispose of existing businesses,
which could limit our revenues and profitability.
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 liabilities and harm our business generally.
In addition, if we are unable to successfully 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 affect 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 available 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 effect 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 efforts, apart from acquisitions, in attempting to grow and enhance our rental business over the
past several years. These efforts place strains on our management and other personnel time and resources, and require timely and
20
continued investment in facilities, personnel and financial and management systems and controls. We may not be successful in
implementing all of the processes that are necessary to support any of our growth initiatives, which could result in our expenses
increasing disproportionately to our incremental revenues, causing our operating margins and profitability to be adversely affected.
We may not be able to facilitate our growth strategy by identifying and opening attractive start-up locations, which could limit our
revenues and profitability.
An element of our growth strategy is to selectively identify, 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 identify 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, real estate, management, financial and other resources to successfully open and operate new
locations. Any significant diversion of management’s attention or any major difficulties encountered in the locations that we open in
the future could have a material adverse effect on our business, financial condition or results of operations, which could decrease our
profitability and make it more difficult for us to grow our business. Furthermore, general economic conditions or unfavorable global
capital and credit markets could affect the timing and extent to which we open new start-up locations, which could limit our revenues
and profitability.
Liquidity and Capital Resource Risks
Unfavorable conditions or disruptions in the capital and credit markets may adversely impact business conditions and the
availability of credit.
Disruptions in the global capital and credit markets as a result of an economic downturn, economic or geopolitical uncertainty as
result of escalating and potential global conflicts, changing or significant regulatory uncertainty, increased regulation, reduced
alternatives or failures of significant financial institutions could adversely affect our customers’ ability to access capital and could
adversely affect our access to liquidity needed for business in the future. Additionally, unfavorable market conditions may depress
demand for our products and services or make it difficult for our customers to obtain financing and credit on reasonable terms.
Unfavorable market conditions also may cause more of our customers to be unable to meet their payment obligations to us, increasing
delinquencies and credit losses. If we are unable 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 affected. Delinquencies and credit losses generally can be expected to increase during economic slowdowns or recessions.
Moreover, our suppliers may be adversely impacted by unfavorable capital and credit markets, causing disruption or delay of product
availability. These events could negatively impact our business, financial position, results of operations and cash flows.
Our substantial indebtedness could adversely affect our financial condition.
We have a significant amount of indebtedness outstanding. As of December 31, 2024, we had total outstanding indebtedness of
approximately $1.5 billion, consisting of the amount outstanding under our senior unsecured notes, our senior secured credit facility
(“Credit Facility”) and our finance lease liabilities.
Our substantial indebtedness could have important consequences. For example, it could:
•
increase our vulnerability to general adverse economic, industry and competitive conditions;
•
require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby
reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions and other general
corporate purposes;
•
limit our flexibility in planning for, or reacting to, changes in our business and the industry 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
purposes.
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 affected 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 unable to repay
21
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 capital expenditures, sell assets, obtain additional debt or equity capital or restructure 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
be able to accomplish any of these alternatives on terms acceptable 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 February 13, 2025, we had borrowings of $149.4 million outstanding under our $750.0 million Credit
Facility leaving us with borrowing availability of $585.7 million, as a result of $14.8 million of letters of credit outstanding under the
facility.
We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy
our obligations under our indebtedness, which may not be successful.
Our ability to make scheduled payments or to refinance our debt obligations depends on our financial and operating performance,
which is subject 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
substantial 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 indenture 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 capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay
capital expenditures, sell assets or operations, seek additional capital or restructure or refinance our indebtedness. We cannot assure
you that we would be able to take any of these actions, that these actions would be successful and permit us to meet our scheduled
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 indenture governing the senior unsecured notes.
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 payable;
•
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 bankruptcy or liquidation.
Despite current indebtedness levels, we may still be able to incur more indebtedness, which could further exacerbate the risks
described above.
Under the terms of the agreements governing the Credit Facility and the senior unsecured notes, we and our subsidiaries may be
able to incur substantial indebtedness in the future.
Additionally, our Credit Facility provides revolving commitments of up to $750.0 million in the aggregate. As of February 13,
2025, we had $585.7 million of availability under the Credit Facility, as a result of $14.8 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 substantial indebtedness could
intensify.
The agreements governing the Credit Facility and our senior unsecured notes restrict our business and our ability to engage in
certain corporate and financial transactions.
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 subsidiaries’ ability to:
•
incur more debt;
•
pay dividends and make distributions;
•
issue preferred stock of subsidiaries;
•
make investments;
•
repurchase stock;
•
create liens;
22
•
enter into transactions with affiliates;
•
enter into sale and lease-back transactions;
•
execute dispositions;
•
merge or consolidate; and
•
transfer 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 affect our ability to meet these covenants. In addition, the Credit Facility requires us to meet certain
financial conditions tests and availability thereunder is subject to borrowing base availability.
Events beyond our control can affect 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 sufficient funds
available to pay the accelerated indebtedness and may not have the ability to refinance the accelerated indebtedness on terms favorable
to us or at all.
Variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.
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 Treasury securities.
Factors that also impact interest rates include, among others, governmental monetary policies, inflation, recession, changes in
unemployment, the money supply, international disorder and instability in domestic and foreign financial markets. If interest rates
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 effect
on our financial conditions and results of operations. Notably, after 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. In particular, while the
Federal Reserve raised interest rates with total increases of 450 basis points since March 2022, they did decrease rates in the second
half of 2024. However, there is no certainty as to whether interest rates will stabilize, continue to increase or decrease.
Our business could be hurt if we are unable to obtain additional capital as required, resulting in a decrease in our revenues and
profitability. In addition, our inability to refinance our indebtedness on favorable terms, or at all, could materially and adversely
affect our liquidity and our ongoing results of operations.
The cash that we generate from our business, together with cash that we may borrow under our Credit Facility, if available, may
not be sufficient to fund our capital requirements. We may require additional financing to obtain capital for, among other purposes,
purchasing equipment, completing acquisitions, establishing new locations and refinancing existing indebtedness. Any additional
indebtedness that we incur will make us more vulnerable to economic downturns and limit our ability to withstand competitive
pressures. Furthermore, any refinancing of our debt could be at higher interest rates and may require make-whole payments and
compliance with more onerous covenants, which could further restrict our business operations. Moreover, we may not be able to
obtain additional capital on acceptable terms, if at all. If we are unable to obtain sufficient additional financing in the future, our
business could be adversely affected by reducing our ability to increase revenues and profitability.
In addition, our ability to refinance indebtedness will depend in part on our operating and financial performance, which, in turn, is
subject to prevailing economic conditions and to financial, business, legislative, regulatory 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 affect our business, prospects, results of
operations, financial condition and cash flows, and make us vulnerable to adverse industry and general economic conditions. If we are
unable to refinance our indebtedness or obtain additional capital sufficient to fund our capital requirements, we may be forced, among
other things, to do one or more of the following: (i) sell certain of our assets, which could affect revenue generation and profitability;
23
(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 effect on current shareholders; or (vi) forgo business
opportunities, including acquisitions and joint ventures.
The continued payment of our quarterly dividend is subject to, among other things, the availability of funds and the discretion of
our board of directors.
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 Regulation Risks
We have operations throughout the United States, which exposes us to multiple federal, state and local regulations. Changes in
applicable law, regulations or requirements, or our material failure to comply with any of them, can increase our costs and have
other negative impacts on our business.
Our 156 branch locations, as of December 31, 2024, in the United States are located in 31 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 often 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, affect our reputation, limit our business, drain management’s time and attention or otherwise, generally impact our operations in
adverse ways.
In June 2024, the U.S. Supreme Court reversed its longstanding approach under the Chevron doctrine, which provided for judicial
deference to regulatory agencies. As a result of this decision, we cannot be sure whether there will be increased challenges to existing
agency regulations or how lower courts will apply the decision in the context of other regulatory schemes without more specific
guidance from the U.S. Supreme Court. For example, the U.S. Supreme Court’s decision could significantly impact environmental
regulation, consumer protection, advertising, privacy, artificial intelligence, and other regulatory regimes with which we are required
to comply.
New approaches to policymaking and legislation may also produce unintended harms for our business, which may impact our
ability to operate our business in the manner in which we are accustomed. Any of these regulations could negatively affect how we
market our offerings and increase our regulatory compliance costs. It will become increasingly difficult to predict which new laws will
apply to our business and when, especially with the potential for an increase in legal challenges to new laws. This uncertainty could, in
turn, have a material adverse effect on our business, financial condition and results of operations.
We could be adversely affected by environmental and safety requirements and regulations, including those regarding climate
change, which could subject us to increased operational costs that could materially and adversely impact our liquidity and
operating results.
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 subject to the requirements of federal, state and local environmental protection and
occupational 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 substances for fueling and maintaining our equipment and vehicles. Environmental laws also
impose obligations and liability for the cleanup of properties affected by hazardous substance spills or releases. These liabilities can be
imposed on the parties generating or disposing of such substances or the operator of the affected property, often without regard to
whether the owner or operator knew of, or was responsible for, the presence of hazardous substances. Accordingly, we may become
liable, either contractually or by operation of law, for remediation costs even if a contaminated property is not currently owned or
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 identified 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 liabilities, which may be material.
We are subject 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 affect 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
24
possible that these requirements will change or that liabilities will arise in the future in a manner that could have a material adverse
effect on our business, financial condition and results of operations.
In addition, the U.S. Congress and other state and federal legislative and regulatory authorities in the United States have
considered, and likely will continue to consider, numerous measures related to climate change, GHG emissions and other laws and
regulations affecting some of our end markets, such as oil, gas and other natural resource extraction. Should such laws and regulations
become effective, demand for our services could be affected, our fleet or other costs could increase and our business could be
materially adversely affected. For example, the Environmental Protection Agency (the “EPA”) recently issued a final rule that will
sharply 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 reconstructed sources, and Emissions Guidelines, which set procedures for states to follow as
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 submit 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, which could reduce demand for our services and have an
adverse impact on our business.
In addition to the evolving nature of the EPA rule’s impact, there is also increased unpredictability in the regulatory and
legislative processes, as well as the scope of such requirements and initiatives, due to the change in administration and the overturning
of the Chevron doctrine. The SEC’s new climate disclosure rules are another example of this regulatory uncertainty, which, while
adopted by the SEC, have been voluntarily stayed pending judicial review. The uncertainty around the evolution of the United States’
regulatory environment with regards to regulating GHGs and climate change issues renders it increasingly difficult to plan for future
developments. Ultimately, these future regulatory developments could increase costs of operations for us or our customers, reduce
demand and adversely impact our operations.
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 unable 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 effect 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 suppliers, along with existing factors such as price and affordability. If we are unable to
meet those additional requirements, we could be adversely impacted.
However, anti-ESG initiatives might serve as a counteracting concern in the future. In recent years anti-ESG sentiment has gained
momentum in the United States, with several states and Congress having proposed or enacted “anti-ESG” policies, legislation, or
initiatives or issued related legal opinions. Such related policies, legislation, initiatives, litigation, legal opinions, and scrutiny could
result in additional compliance obligations or becoming the subject of investigations or enforcement actions.
Our business may be materially affected by changes to fiscal and tax policies. Negative or unexpected tax consequences could
adversely affect our results of operations.
Adverse changes in the underlying profitability and financial outlook of our operations or future changes in tax law could lead to
changes in the value of tax assets or liabilities that we currently or in the future may hold, which could materially affect our results of
operations.
Our business may be materially affected by changes to other policies governing our products, technology and technological
development.
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 affect 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 subject 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.
25
Risk Factors Relating to the Pending Transaction with Herc Holdings Inc. and the Company
The completion of the Offer and Merger is subject to conditions, some or all of which may not be satisfied or completed on a timely
basis, if at all. Failure to complete the Merger could have material adverse effects on the Company.
On February 19, 2025, we entered into the Merger Agreement with Herc and HR Merger Sub Inc., a Delaware corporation and
wholly owned subsidiary of Herc (“Merger Sub”), pursuant to which Merger Sub agreed to commence an Offer to purchase all of the
issued and outstanding shares of our common stock, following which Merger Sub will merge with and into the Company, with the
Company surviving as a wholly owned subsidiary of Herc.
Consummation of the Offer is subject to various customary conditions set forth in the Merger Agreement beyond our control,
including, among other conditions, (1) at least one share more than 50% of shares of our common stock then outstanding being
tendered in the Offer; (2) the accuracy of our representations and warranties contained in the Merger Agreement (subject to customary
materiality qualifiers); (3) our performance in all material respects of our obligations under the Merger Agreement; (4) the absence of
a Company Material Adverse Effect (as defined in the Merger Agreement) that occurred after the date of the Merger Agreement that is
continuing; (5) the absence of any legal or regulatory restraint that prevents the consummation of the Offer or the Merger and the
expiration or termination of any waiting periods applicable to the Offer and the Merger under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the “HSR Act”); (6) the effectiveness of the registration statement on Form S-4 to register
under the Act the offer and sale of Herc common stock pursuant to the Offer and Merger (the “Form S-4”); (7) approval for listing on
NYSE of the shares of Herc Common Stock to be issued in the Offer and Merger; (8) the absence of a termination of the Merger
Agreement in accordance with its terms; and (9) the commencement and completion of the Marketing Period (as defined in the Merger
Agreement). There can be no assurance that the conditions to the completion of the Offer and the Merger will be satisfied or waived,
that the Offer will be successful or that the Merger will be consummated as contemplated by the Merger Agreement.
We cannot predict whether and when the conditions to the Offer will be satisfied. If one or more of these conditions are not
satisfied, and as a result, we do not complete the Offer and Merger, we would remain liable for significant transaction costs, and the
focus of our management would have been diverted from seeking other potential strategic opportunities, in each case without realizing
any benefits of the Offer and the Merger. Certain costs associated with the Offer and Merger have already been incurred or may be
payable even if the Offer and Merger are not consummated. We may also be subject to the risk of potential litigation related to any
failure to complete the Merger. Finally, any disruptions to our business resulting from the announcement and pendency of the Offer
and Merger, including any adverse changes in our relationships with our partners, vendors, suppliers, management and employees,
could continue or accelerate in the event that we fail to consummate the Offer and Merger.
The price of our common stock may also fluctuate significantly based on announcements by Herc, other third parties, or us
regarding the Offer and Merger or based on market perceptions and other conditions to the consummation of the Offer and Merger.
Such announcements may lead to perceptions in the market that the Offer and Merger may not be completed, which could cause our
share price to fluctuate or decline.
If we do not consummate the Offer and Merger, the price of our common stock may decline significantly from the current market
price, which may reflect a market assumption that the Offer and Merger will be consummated. Any of these events could have a
material adverse effect on our business, operating results and financial condition and could cause a decline in the price of our common
stock.
The Offer and Merger will involve substantial costs and will require substantial management resources. We may be required to pay
a significant fee if the Merger Agreement is terminated.
In connection with the consummation of the Offer and the Merger, management and financial resources have been diverted and
will continue to be diverted towards the completion of the Offer and the Merger. We expect to incur substantial costs and expenses
relating to, as well as the direction of management resources towards, the Offer and the Merger. Such costs, fees and expenses include
fees and expenses payable to financial advisors, other professional fees and expenses, fees and costs relating to regulatory filings and
filings with the SEC and notices and other transaction-related costs, fees and expenses. Further, if the Merger Agreement is terminated
by us under specified circumstances, we will be required to pay Herc a termination fee of approximately $145 million (in addition to
refunding Herc for the termination fee pursuant to the United Merger Agreement of $63,523,892). If the Offer and Merger are not
completed, we will have incurred substantial expenses and expended substantial management resources for which we will have
received little or no benefit if the closing of the Merger does not occur and may have to pay significant additional sums to Herc.
The Offer consideration payable to holders of our common stock will not be adjusted for changes in our business, assets liabilities,
prospects, outlook, financial condition or results of operations, or in the event of any change in the price of our common stock.
The Offer consideration payable to holders of our common stock will not be adjusted for changes in our business, assets,
liabilities, prospects, outlook, financial condition or results of operations, or changes in the market price of, analyst estimates of, or
projections relating to, our common stock. For example, if we experienced an improvement in our business, assets, liabilities,
26
prospects, outlook, financial condition or results of operations prior to the consummation of the Offer and Merger, there would be no
adjustment to the amount of the proposed Offer consideration.
The Company’s shareholders cannot be sure of the value of the Stock Offer Price they will receive in the Merger, if completed,
because the exchange ratio is fixed and the market price of Herc common stock has fluctuated and may continue to fluctuate.
If the Merger is completed, each eligible share of our common stock issued and outstanding immediately prior to the Merger will
automatically be converted into the right to receive the cash consideration and 0.1287 shares of Herc common stock). Because the
exchange ratio is fixed, the value of the stock consideration received in the Merger will depend on the market price of Herc common
stock at the time the Merger is completed. Prior to completion of the Merger, the market price of Herc common stock is also expected
to impact the market price of the Company's common stock. The value of Herc common stock has fluctuated since the date of the
announcement of the Merger Agreement and may continue to fluctuate. Accordingly, the Company's shareholders will not know or be
able to determine the market value of the Merger consideration they would receive upon completion of the Merger. Share price
changes may result from a variety of factors, including, among others, general market and economic conditions, commodity prices,
changes in Herc's and the Company's respective businesses, operations and prospects, market assessments of the likelihood that the
Merger will be completed and the timing of the Merger and regulatory considerations. Many of these factors are beyond Herc's and the
Company's control.
The Merger Agreement contains provisions that could discourage a potential competing acquirer.
The Merger Agreement provides that, upon the terms and subject to the conditions thereof, we and our representatives cannot
solicit or initiate discussions with third parties regarding other proposals to acquire the Company after the execution of the Merger
Agreement and we are subject to restrictions on our ability to respond to any unsolicited proposals, except as permitted under the
terms of the Merger Agreement. In the event that we receive an acquisition proposal from a third party, we must notify Herc of such
proposal and negotiate in good faith with Herc prior to terminating the Merger Agreement or effecting a change in the
recommendation of the Board to our stockholders with respect to the Offer and Merger. The Merger Agreement also contains certain
termination rights for Herc and us and further provides that, upon termination of the Merger Agreement under specified
circumstances, including certain terminations in connection with an alternative business combination transaction as permitted by the
terms of the Merger Agreement, we will be required to pay Herc a termination fee of approximately $145 million (in addition to
refunding Herc for the termination fee pursuant to the United Merger Agreement of $63,523,892). These provisions could discourage
a potential third-party acquirer that might have an interest in acquiring all or a significant portion of us from considering or proposing
that acquisition, even if it were prepared to pay consideration with a higher per share cash or market value than the market value
proposed to be received or realized in the transaction with Herc. These provisions also might result in a potential third-party acquirer
proposing to pay a lower price to our stockholders than it might otherwise have proposed to pay due to the added expense of the
termination fee that may become payable in certain circumstances. If the Merger Agreement is terminated and we determine to seek
another business combination, we may not be able to negotiate a transaction with another party on terms comparable to, or better than,
the terms of the Offer and Merger.
Review under the HSR Act could prevent or delay the consummation of the Offer and Merger.
Under the HSR Act and the related rules and regulations that have been issued by the Federal Trade Commission (“FTC”), certain
transactions having a value above specified thresholds may not be consummated until specified information and documentary material
(“Notification and Report Forms”) have been furnished to the FTC and the Antitrust Division of the Department of Justice (the
“Antitrust Division”) and certain waiting period requirements have been satisfied.
It is a condition to Herc’s obligation to accept for payment and pay for shares of our common stock exchanged pursuant to the
Offer that the waiting period (and any extension of the waiting period) applicable to the Offer under the HSR Act shall have expired or
been terminated. Under the HSR Act, the purchase of shares of our common stock in the Offer may not be undertaken until the
expiration of a 30-calendar day waiting period following the filing by Herc of a Notification and Report Form concerning the Offer
with the FTC and the Antitrust Division, unless the waiting period is earlier terminated by the FTC and the Antitrust Division. The
30-calendar day waiting period may be restarted if the acquiring person voluntarily withdraws and re-files its Notification and Report
Form (a “pull and refile.”). If within the 30-calendar day waiting period either the FTC or the Antitrust Division were to issue a
request for additional information and documentary material (a “Second Request”), the waiting period with respect to the Transactions
would be extended until 30-calendar days following the date of substantial compliance by Herc with that request, unless the FTC and
the Antitrust Division terminated the additional waiting period before its expiration. The 30-calendar day waiting period following
substantial compliance with the Second Request can be extended with the consent of Herc and the Company or by court order. The
FTC and the Antitrust Division may terminate the additional 30-day waiting period before its expiration. In practice, complying with a
Second Request can take a significant period of time.
The FTC and the Antitrust Division may scrutinize the legality under U.S. federal antitrust laws of transactions such as Buyer
Parties’ proposed acquisition of the Company. At any time before or after Buyer Parties’ acceptance for payment of shares of our
27
common stock pursuant to the Offer, notwithstanding the termination or expiration of the applicable waiting period under the HSR
Act, if the Antitrust Division or the FTC believes that the Offer would violate U.S. federal antitrust laws by substantially lessening
competition in any line of commerce affecting U.S. consumers, the FTC and the Antitrust Division could take such action as they
deem necessary under the applicable statutes, including seeking to enjoin the completion of the Transactions, seeking divestiture of
substantial assets of the parties, or requiring the parties to license, or hold separate, assets, to terminate existing relationships and
contractual rights, or to take other actions or agree to other restrictions limiting the freedom of action of the parties. At any time before
or after consummation of the Transactions, notwithstanding the termination or expiration of the applicable waiting period under the
HSR Act, U.S. state attorneys general and private persons may also bring legal action under the antitrust laws seeking similar relief or
seeking conditions to the completion of the Offer. There can be no assurance that a challenge to the Offer on antitrust grounds will not
be made or, if a challenge is made, what the result will be. If any such action is threatened or commenced by the FTC, the Antitrust
Division or any state or any other person, Herc may not be obligated to consummate the Offer or the Merger.
Herc and the Company expect to file their Premerger Notification and Report Forms with the FTC and Antitrust Division
promptly, which will begin an initial review period of 30 days. This period may change if the FTC or the Antitrust Division, as
applicable, grants early termination of the waiting period or issues a request for additional information or documentary material, or if
the parties voluntarily pull and refile.
Stockholder litigation could prevent or delay the consummation of the Offer and Merger or otherwise negatively impact our
business, operating results and financial condition.
Securities class action lawsuits and derivative lawsuits are often brought against public companies that have entered into
acquisition, merger, or other business combination agreements. Even if such a lawsuit is without merit, defending against or settlement
of these claims can result in substantial additional costs and diversion of management time and resources. Any such future lawsuit or
litigation may adversely affect our ability to complete the Offer and Merger. We could incur significant costs in connection with any
such litigation, including costs associated with an adverse judgement resulting in monetary damages and the indemnification of our
directors and officers, which could have a negative impact on our liquidity and financial position.
Furthermore, one of the conditions to the consummation of the Offer and Merger is the absence of any governmental order or law
preventing the consummation of the Offer and Merger or making the consummation of the Offer and Merger illegal. Consequently, if
a plaintiff were to secure injunctive or other relief prohibiting, delaying or otherwise adversely affecting our ability to complete the
consummation of the Offer and Merger, then such injunctive or other relief may prevent the Offer and Merger from becoming
effective within the expected time frame or at all.
Our executive officers and directors may have interests in the Offer and the Merger that are different from, or in addition to, those
of our stockholders generally.
Our executive officers and directors may have interests in the Offer and the Merger that are different from, or are in addition to,
those of our stockholders generally. These interests include direct or indirect ownership of our common stock and equity awards, the
acceleration of equity awards upon consummation of the transactions and other interests. Such interests of our directors and executive
officers are set forth in further detail in the Form 8-K filed with the SEC on February 19, 2025.
While the Offer and Merger is pending, we are subject to business uncertainties and contractual restrictions that could disrupt our
business, and the Offer and Merger may impair our ability to attract and retain qualified employees or retain and maintain
relationships with our suppliers and other business partners.
Whether or not the Offer and Merger are consummated, the Offer and Merger may disrupt our current plans and operations,
which could have an adverse effect on our business and financial results. The pendency of the Offer and Merger may also divert
management’s attention and our resources from ongoing business and operations and our employees and other key personnel may
have uncertainties about the effect of the Offer and Merger, and the uncertainties may impact our ability to retain, recruit and hire key
personnel while the Offer and Merger are pending or if it fails to close. Furthermore, if key personnel depart because of such
uncertainties, or because they do not wish to remain with the combined company after the consummation of the Offer and Merger, our
business and results of operations may be adversely affected. In addition, we cannot predict how our suppliers and other business
partners will view or react to the Offer and Merger upon consummation. If we are unable to reassure our suppliers and other business
partners to continue their business with us, our financial condition and results of operations may be adversely affected.
In addition, the Merger Agreement generally requires us to operate in the ordinary course of business in all material respects
consistent with past practice, pending consummation of the Offer and Merger, and restricts us from taking certain actions with respect
to our business and financial affairs without Herc’s consent. Such restrictions will be in place until either the Offer and Merger are
consummated or the Merger Agreement is terminated. These restrictions could restrict our ability to pursue, or prevent us from
pursuing, attractive business opportunities (if any) that arise prior to the consummation of the Offer and Merger.
28
In addition, since the consideration for the Merger will be in the form of both cash and common stock of Herc, our stock price
will be impacted by changes in Herc’s stock price. Changes to Herc’s stock price may result from a variety of factors, such as changes
in its business operations and outlook, changes in general market and economic conditions and regulatory considerations. These
factors are beyond our control. For these and other reasons, the pendency of the Offer and Merger could adversely affect our business,
operating results and financial condition.
If the Merger is not consummated, we may need to raise additional capital to continue our operations and execute our operating
plans.
If the Merger is not consummated, we may need to raise additional capital or we may need to delay, scale back or eliminate some
planned operations or reduce expenses, any of which would have a significant negative impact on our financial condition, as well as
the trading price of our common stock. There can be no assurance that we can raise capital when needed or on terms favorable to us
and our stockholders. Macroeconomic conditions and heightened global uncertainties may adversely affect general commercial
activity and the U.S. and global economies and financial markets, which increases uncertainty around our ability to access the capital
markets when needed and on acceptable terms.
General Business Risks
Fluctuations in the stock market, as well as general economic and market conditions, may impact the market price of our common
stock.
The market price of our common stock has been and may continue to be subject 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 ventures or
capital commitments;
•
changes in the price of oil and other commodities;
•
investor perceptions of us and the equipment rental and distribution industry; and
•
national or regional catastrophes or circumstances and natural disasters, hostilities and acts of terrorism.
Broad market and industry 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 often 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.
Security breaches and other disruptions in our information technology systems could limit our capacity to effectively monitor and
control our operations, compromise our or our customers’ and suppliers’ confidential information or otherwise adversely affect
our operating results or business reputation.
Our information technology systems, some of which are managed by third parties, facilitate our ability to monitor and control our
operations and adjust to changing market conditions, including processing, transmitting, storing, managing and supporting a variety of
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 disruption in any of these systems, including our
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 affect our operating results by limiting our capacity to effectively monitor and control our
operations and adjust to changing market conditions.
Additionally, we collect and store sensitive data, including proprietary business information and the proprietary business
information of our customers and suppliers, in data centers and on information technology networks, including cloud-based networks.
The secure operation of these information technology networks and the processing and maintenance of this information is critical to
our business operations and strategy. Furthermore, violation of privacy laws in the U.S. (especially in California), even if inadvertent,
can lead to significant financial consequences, including significant fines and sanctions. However, the techniques and sophistication
29
used to conduct cyberattacks and compromise information technology systems, as well as the sources and targets of these attacks,
change and are often 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 often conducted by capable, well-funded groups. The rapid evolution and increased
adoption of artificial intelligence technologies amplifies these concerns.
Despite security measures and business continuity plans, our information technology networks and infrastructure may be
vulnerable to damage, disruptions or shutdowns due to attacks by cyber criminals or breaches due to employee error or malfeasance or
other disruptions during the process of upgrading or replacing computer software or hardware, power outages, computer viruses,
telecommunication or utility failures, terrorist acts or natural disasters or other catastrophic events. Further, the growing use and rapid
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.
Any failure to effectively 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, liability or regulatory penalties
under laws protecting the privacy of personal information, disrupt operations, and damage our reputation, which could adversely affect
our business.
We are dependent on key personnel. A loss of key personnel could have a material adverse effect on our business, which could
result in a decline in our revenues and profitability.
Our senior and regional managers have an average of approximately 27 years of industry experience. Our branch managers have
extensive knowledge and industry 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 industry is generally significant. If we are unable to fill and
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 unable to find a suitable replacement in a timely manner, we may be challenged to effectively manage our business and execute
our strategy.
If we fail to maintain an effective system of internal controls, we may not be able to accurately report financial results or prevent
fraud.
Effective internal controls are necessary to provide reliable financial reports and to assist in the effective prevention of fraud. Any
inability to provide reliable financial reports or prevent fraud could harm our business. We must annually evaluate our internal
procedures to satisfy the requirements of Section 404 of SOX, which requires management and auditors to assess the effectiveness of
our internal controls. If we fail to remedy or maintain the adequacy of our internal controls, as such standards are modified,
supplemented or amended from time to time, we could be subject to regulatory scrutiny, civil or criminal penalties or stockholder
litigation.
In addition, failure to maintain effective 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 effective.
We are exposed to various risks related to legal proceedings or claims that could adversely affect our operating results. The nature
of our business exposes us to various liability claims, which may exceed the level of our insurance coverage resulting in us not
being fully protected.
We are a party to lawsuits in the normal course of our business. Litigation in general can be expensive, lengthy and disruptive to
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 often be expensive and time-consuming. Unfavorable outcomes from
these claims and/or lawsuits could adversely affect our business, results of operations, or financial condition, and we could incur
substantial monetary liability and/or be required to change our business practices.
Our business exposes us to claims for personal injury, death or property damage resulting from the use of the equipment we rent
or sell and from injuries caused in motor vehicle accidents in which our delivery and service personnel are involved and other
employee related matters. Additionally, we could be subject 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 disabilities,
employment, health, safety, security and other regulations under which we operate.
30
We carry comprehensive insurance, subject 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 affect 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. 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 available on economically reasonable terms, or at all. If we
are required to pay significantly higher premiums for insurance, are not able to maintain insurance coverage at affordable rates or if
we must pay amounts in excess of claims covered by our insurance, we could experience higher costs that could adversely affect our
financial condition and results of operations.
Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
We rely on our technology network infrastructure and information systems to operate our business, rent our equipment, interact
with vendors and customers, support and grow our customer base and bill, collect and make payments, among other functions. Our
internally developed infrastructure and systems, as well as those systems and processes provided by third-party vendors, may be
susceptible to damage or interruption from cybersecurity threats, which include any unauthorized access to our information systems
that may result in adverse effects on the confidentiality, integrity, or availability 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 the 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, identifying and managing material risks from cybersecurity threats that are
integrated into our overall risk management process. The Company utilizes the National Institute of Standards and Technology
(NIST) framework as the basis for our cybersecurity management approach. Under the supervision of the Chief Information Officer
(“CIO”), we review our cybersecurity insurance policy and regularly identify all computing assets including hardware, software, and
network infrastructure 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 identify risks, we complete vulnerability
assessments on a recurring basis to proactively identify potential weaknesses. We additionally employ third party external and internal
penetration testing on an annual basis to assist in identifying additional vulnerabilities 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 procedures 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 establishing a formal relationship and has
additional processes in place to continue to oversee and identify risks associated with the use of our third-party service providers once
a formal relationship is established. A cybersecurity incident is defined as any successful unauthorized access, disclosure, or misuse of
computing systems, data or networks, including hacking and theft, of any scope that may or may not have an impact to the
organization. We have a comprehensive incident response plan that outlines the appropriate procedures, communication flow and
response for potential cybersecurity incidents as well as categorizations of scope, incident and impact of such incidents. As of
December 31, 2024, risks from cybersecurity threats have not materially affected the Company’s financial condition or operations.
The Company’s information security and cybersecurity program is managed by our CIO whose team includes a VP of
Infrastructure and Director of IT Security (collectively, “the IT Security Team”), whom all have the necessary expertise, certifications
and experience to lead our enterprise-wide cybersecurity strategy, policy, architecture and processes. The CIO has over 26 years of
experience and has been a member and leader of our Company’s information systems and technological advancements for the past 22
years. The Director of IT Security, reporting to our VP of Infrastructure, is responsible for our overall network security and assessing
and managing cybersecurity risks and threats. The Director of IT Security has over 16 years of experience working in IT security and
holds CISSP and GIAC certifications. The VP of Infrastructure reports to our CIO, and has principal responsibility for our network
infrastructure and the operation of our cybersecurity program, network and system administration. The VP of Infrastructure has over
30 years of experience in system administration and has specialized in ERP systems and network infrastructure. Collectively, the IT
Security Team prepares updates and presentations for the Board of Directors, Audit Committee and executive management.
31
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 infrastructure and data integrity, and in accordance with our incident response plan, notify executive
management and the necessary finance, operations and legal team functions. The CIO additionally reports all cybersecurity incidents
to the Audit Committee of the Board. 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 discuss
impact, determine how to address it and whether or not the incident would require external reporting, if applicable.
The Company’s Board of Directors, specifically 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 industry to the Board of Directors on an annual basis and reports cybersecurity risk updates to the Audit
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 subsequently to the full Board of Directors.
Item 2. Properties
As of December 31, 2024, we had a network of 156 branch facilities in 31 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,
display and sell equipment, including tools and supplies, and provide maintenance and basic repair work. Of the 156 total facilities, we
lease 143 and own 13 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 table provides data on our locations:
State
Branch Count
State
Branch Count
Alabama
7
Mississippi
1
Arizona
4
Missouri
4
Arkansas
3
Montana
6
California
15
Nevada
2
Colorado
6
New Mexico
1
Delaware
1
North Carolina
10
Florida
14
Ohio
1
Georgia
6
Oklahoma
2
Idaho
3
Oregon
1
Illinois
3
Pennsylvania
1
Indiana
3
South Carolina
4
Iowa
1
Tennessee
6
Kansas
1
Texas
31
Kentucky
1
Utah
3
Louisiana
9
Virginia
3
Maryland
3
Each facility location has a branch manager who is responsible for day-to-day operations. In addition, branch operating facilities
are typically staffed with approximately 10 to over 50 people, who may include technicians, salespeople, rental operations staff and
parts specialists. While facility offices are typically open five days a week, we provide 24 hour, seven day per week service.
Our corporate headquarters employs approximately 400 people. Our corporate headquarters facility is on 3.1 acres of company-
owned land where we occupy a total of approximately 42,550 square feet.
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.
32
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, 2024, 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, 2024 and 2023, we paid quarterly cash dividends totaling $1.10 per share in each year, or
approximately $40.2 million and $40.0 million, respectively. We intend to continue to pay regular quarterly cash dividends; however,
the declaration of any subsequent dividends is discretionary and will be subject to a final determination by the Board of Directors each
quarter after its review of, 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.
Performance 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, 2019 and for each subsequent quarter period end through and including December 31,
2024, with the cumulative returns of the Russell 2000 Index and an industry peer group selected by us. The peer group we selected for
the years ended December 31, 2024 and 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.
The Performance Graph comparison assumes $100 was invested in our common stock and in each of the other indices described
above on December 31, 2019. 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.
33
12/31/19
12/31/20
12/31/21
12/31/22
12/31/23
12/31/24
H&E Equipment Services, Inc.
$ 100.00
$
93.77
$ 143.57
$ 151.52
$ 179.02
$ 171.14
Russell 2000 Index
100.00
119.96
137.74
109.59
128.14
142.93
Peer Group
100.00
130.02
188.06
169.92
226.87
254.33
This stock performance information is “furnished” and shall not be deemed to be “soliciting material” or subject to Rule 14A of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”), shall not be deemed “filed” for purposes of Section 18 of the
Exchange Act or otherwise subject to the liabilities 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 after 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.
Recent Sales of Unregistered Securities; Use of Proceeds From Registered Securities
None.
Issuer Purchases of Equity Securities
None.
Item 6. [Reserved]
Not applicable.
34
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 subsidiaries as of
December 31, 2024, and its results of operations for the year ended December 31, 2024, 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
(see discussion of “Forward-Looking Statements” included elsewhere in this Annual Report on Form 10-K). Our actual results may
differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those factors set
forth under Item 1A—Risk Factors of this Annual Report on Form 10-K.
Background
Founded in 1961 through our predecessor companies, we have been in the equipment services business for approximately 63
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 subsidiary of Gulf Wide Industries,
L.L.C., and ICM Equipment Company L.L.C. In connection with our initial public offering in February 2006, we converted H&E
L.L.C. into H&E Equipment Services, Inc., a Delaware corporation (d/b/a “H&E Rentals”).
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, 2024, we
operated 156 branch locations across 31 states throughout the United States.
While focusing primarily on equipment rentals, we additionally engage in sales of rental equipment, sales of new equipment, parts
sales and repair and maintenance services. The Company’s construction rental fleet is among the industry’s youngest with an
equipment mix comprised of aerial work platforms, earthmoving, material handling, and other general and specialty lines. We are
confident our operating experience and extensive infrastructure developed throughout our history as an integrated equipment services
company qualified us to successfully transition to a pure-play rental company. This experience and infrastructure continues to provide
us with a competitive advantage enabling us to broaden our industry 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 industry experience. We believe
this allows us to provide specialized equipment knowledge, improve the effectiveness 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.
Effective October 1, 2021, the Company sold its crane business to a wholly-owned subsidiary of The Manitowoc Company, Inc.
(“the Crane Sale”). The Crane Sale met the criteria for discontinued operations presentation.
Effective 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.
Effective 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, parts and supplies.
Effective November 1, 2023, the Company completed the acquisition of Giffin Equipment (“Giffin”), a privately-held equipment
rentals company with three branch locations in California.
Effective January 1, 2024, the Company completed the acquisition of Precision Rentals (“Precision”), an equipment rental
company with a branch located in each of Arizona and Colorado.
Effective May 1, 2024, the Company completed the acquisition of Lewistown Rentals (“Lewistown”), a privately-held equipment
rentals company with four branch locations in Montana.
Recent Developments
In January 2025, we entered into an Agreement and Plan of Merger (the “United Merger Agreement”) with United Rentals, Inc., a
Delaware Corporation (“United Rentals” or “United”) and UR Merger Sub VII Corporation, a Delaware corporation and wholly
owned subsidiary of United (“United Merger Sub”), pursuant to which a cash tender offer (the “United Offer”) was commenced on
behalf of United to purchase all of the issued and outstanding shares of our common stock at $92.00 a share, following which United
Merger Sub would merge with and into the Company, with the Company surviving as a wholly owned subsidiary of United (the
“United Merger and, together with the United Offer, the “United Transactions”).
In February 2025, during the pendency of the United Offer, we received a proposal from Herc Holdings Inc., a Delaware
corporation (“Herc”, and such proposal, the “Herc Proposal”) to acquire all of the issued and outstanding shares of our common stock
35
for a combination of cash and Herc common stock, consisting of (i) $78.75 in cash, and (ii) 0.1287 shares of Herc common stock for
each share of our common stock. The combination of the cash and Herc common stock was equal to a total value of approximately
$104.89 per share based on Herc’s 10-day volume-weighted average price as of market close February 14, 2025. On February 16,
2025, our Board of Directors unanimously concluded that the Herc Proposal constituted a Superior Proposal (as defined in the United
Merger Agreement) and resolved to terminate the United Merger Agreement absent any revision to the terms and conditions of the
United Merger Agreement. On February 17, 2025, United delivered a written notice to the Company stating that United did not intend
to submit a revised proposal and waiving URI’s four-business day match period under the United Merger Agreement. On February 18,
2025, our Board of Directors unanimously determined to authorize and approve the termination of the United Merger Agreement. The
Board of Directors also unanimously determined that it was advisable, fair to and in the best interests of the Company’s stockholders
that the Company enter into an Agreement and Plan of Merger (the “Herc Merger Agreement”) with Herc and HR Merger Sub, Inc., a
Delaware corporation and wholly owned subsidiary of Herc (“Merger Sub”) and resolved to adopt and approve the Herc Merger
Agreement and recommend that the Company’s stockholders tender their shares to Herc.
On February 19, 2025, we terminated the United Merger Agreement and Herc paid United the $63,523,892 termination fee
pursuant to the United Merger Agreement on our behalf. That same day, immediately following the termination of the United Merger
Agreement, we entered into the Herc Merger Agreement, pursuant to which Merger Sub agreed to commence an exchange offer (the
“Offer”), to acquire all of the issued and outstanding shares of our common stock for the Offer Price (as defined below) of (i) $78.75
in cash, and (ii) 0.1287 shares of Herc common stock for each share of our common stock (the “Offer Price”), following which
Merger Sub will merge with and into the Company, with the Company surviving as a wholly owned subsidiary of Herc (the “Merger”)
(and collectively, the “Transactions”). The Transactions are expected to close mid-year 2025.
The Transactions are subject to customary closing conditions, including a minimum tender of at least one share more than 50
percent of then-outstanding common shares, the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, the Form S-4 to be filed by Herc in connection with the issuance of shares of Herc common stock in the Merger having
become effective and not subject to any legal proceedings suspending such effectiveness and approval for listing on the New York
Stock Exchange (“NYSE”) of Herc’s common stock to be issued in the Offer and Merger.
If the Herc Merger is consummated, our common stock will be delisted from The NASDAQ Global market and deregistered
under Securities Exchange Act of 1934, as amended, as promptly as practicable following the effective time of the Merger.
The Herc Merger Agreement also contains certain termination rights for Herc and us and further provides that, upon termination
of the Herc Merger Agreement under specified circumstances, including certain terminations in connection with an alternative
business combination transaction as permitted by the terms of the Merger Agreement, we will be required to pay Herc a termination
fee of approximately $145 million in addition to refunding Herc for the termination fee pursuant to the United Merger Agreement if
the Company enters into a superior proposal based on terms included in the Merger Agreement.
See Item 1A—Risk Factors—Risk Factors Relating to the Pending Transaction with Herc Holdings Inc. and the Company for
further discussion of the risks, conditions and potential expenses and fees associated with the pending Offer and Merger.
Business Segments
We have four reportable segments because we derive our revenues from four business activities: (1) equipment rentals; (2) sales
of rental equipment; (3) sales of new equipment; (4) parts, service and other revenues. Our primary segment is equipment rentals.
These segments are based upon how we allocate resources and assess performance. We revised our reportable segments by
aggregating parts sales and service revenues into one segment during the quarter ended June 30, 2024 due to revised internal reporting
provided to our Chief Operating Decision Maker. For additional information about our business segments, see Note 16 to our
Consolidated Financial Statements in this Annual Report on Form 10-K.
•
Equipment Rentals. Our rental operation is our principal focus and we primarily rent our core types of construction and
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 reflection of
equipment usage based on customer demand and calculated as our fleet’s original equipment cost on-rent divided by our
fleet’s 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
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 Equipment. Our rental equipment sales are generated primarily from sales from our rental fleet. Sales of
our rental fleet equipment allow us to manage the size, quality, composition and age of our rental fleet, and provide us
with a profitable distribution channel for the disposal of rental equipment.
36
•
Sales of New Equipment. We sell equipment through a professional sales force. Sales of new equipment may be impacted
by the availability of equipment from the manufacturer.
•
Parts, Service and Other Revenues. 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 support to our rental fleet as well as our customers, we
maintain a parts inventory. 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 relate to costs
primarily related to ancillary charges associated with equipment maintenance and repair services.
Revenue Sources
We generate our total revenues from our four business activities and our other equipment support activities. Equipment rentals
accounts for the majority of our total revenues.
The pie charts below illustrate a breakdown of our revenues and gross profit for the year ended December 31, 2024 by source:
The equipment that we rent, sell and service is principally used in the construction industry, as well as by companies for
commercial and industrial uses such as plant maintenance and turnarounds, and in the petrochemical and energy sectors. As a result,
our total revenues are affected by several factors including, but not limited to, the demand for and availability of rental equipment,
rental rates and other competitive factors, the demand for used and new equipment, the level of construction and industrial activities,
spending levels by our customers, adverse weather conditions, supply chain disruptions, labor shortages and costs, inflation, the price
of oil and other commodities and general economic conditions.
Equipment Rentals. Our rental operation primarily represents revenues from renting owned equipment of our core types of
construction and industrial equipment (aerial work platforms, earthmoving equipment, material handling equipment and other
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 Equipment. We generate the majority of our rental equipment sales revenues by selling equipment from our rental
fleet.
Sales of New Equipment. Our sales of new equipment operation sells equipment across all of our core categories of equipment.
Parts, Service and Other. 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 ancillary charges associated with equipment maintenance and repair services.
Principal Costs and Expenses
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, 2024, our total cost of revenues was approximately $841.4 million. Our operating
expenses consist principally of selling, general and administrative expenses (“SG&A”). For year ended December 31, 2024, our
SG&A expenses were $455.6 million. In addition, we have interest expense primarily related to our debt instruments. Operating
37
expenses and all other income and expense items below the gross profit line of our Consolidated Statements of Income are not
generally allocated to our reportable segments.
We are also subject 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 Depreciation. Depreciation of rental equipment represents the depreciation costs attributable to rental equipment.
Estimated useful lives vary based upon type of equipment. Generally, we depreciate aerial work platforms over a ten year
estimated useful life, earthmoving equipment over a five year estimated useful life with a 25% salvage value, and material
handling equipment over a seven year estimated useful life. Attachments and other smaller type equipment are depreciated over a
three year estimated useful life. We periodically evaluate the appropriateness of remaining depreciable lives assigned to rental
equipment.
Rental Expense. 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 Other. Rental other expenses consist primarily of equipment support activities that we provide our customers in connection
with renting equipment, such as hauling services, damage waiver policies, environmental fees and other recovery fees.
Sales of Rental Equipment. Cost of rental equipment sold primarily consists of the net book value of rental equipment sold from
our rental fleet.
Sales of New Equipment. Cost of new equipment sold primarily consists of the equipment cost of the new equipment that is sold.
Parts, Service and Other. Cost of parts sales represents costs attributable to the sale of parts used in the maintenance and repair of
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.
Selling, General and Administrative Expenses:
Our SG&A expenses include sales and marketing expenses, payroll and related benefit costs, including stock compensation
expense, insurance expenses, professional fees, rent and other occupancy costs, property and other taxes, administrative overhead,
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 reportable segments.
Interest Expense:
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/premium are also included
in interest expense.
Principal Cash Flows
We generate cash primarily from our operating activities and, historically, we have used cash flows from operating activities and
available borrowings under the Credit Facility as the primary sources of funds to purchase new equipment and to fund working capital
and capital expenditures, growth and expansion opportunities (see also “Liquidity and Capital 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
receivable activities, the level of equipment inventory, which may increase or decrease in response to current and expected demand,
and the size and timing of our trade accounts payable payment cycles.
Rental Fleet
A substantial portion of our total assets is our rental fleet equipment. The net book value of our rental equipment at December 31,
2024 was $1.8 billion, or approximately 65.9% of our total assets. Our rental fleet as of December 31, 2024 consisted of 63,630 units
having an original acquisition cost (which we define as the cost originally paid to manufacturers) of approximately $2.9 billion. As of
December 31, 2024, our rental fleet composition was as follows (dollars in millions):
38
Units
% of
Total
Units
Original
Acquisition
Cost
% of
Original
Acquisition
Cost
Average
Age in
Months
Aerial Work Platforms
28,554
44.9 % $
975.0
33.1 %
52.9
Earthmoving
8,585
13.5 %
737.0
25.0 %
31.8
Material Handling Equipment
10,361
16.3 %
855.7
29.1 %
43.6
Other
16,130
25.3 %
376.6
12.8 %
26.0
Total
63,630
100.0 %
2,944.3
100.0 %
41.7
Determining the optimal age and mix for our rental fleet equipment is subjective and requires considerable estimates and
judgments by management. We constantly evaluate the mix, age and quality of the equipment in our rental fleet in response to current
economic and market conditions, competition and customer demand 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 availability of new equipment and the capital
expenditures to acquire fleet. In making equipment acquisition decisions, we evaluate current economic and market conditions,
competition, manufacturers’ availability, pricing and return on investment over the estimated useful life of the specific equipment,
among other things. As a result of our in-house service capabilities and extensive maintenance program, our rental fleet is well-
maintained.
The original acquisition cost of our gross rental fleet increased by approximately $153.3 million, or 5.5%, for the year ended
December 31, 2024. The average age of our rental fleet equipment increased by approximately 2.0 months for the year ended
December 31, 2024. Our average rental rates for the year ended December 31, 2024 were approximately 0.8% higher than the year
ended December 31, 2023 (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, 2024 was largely consistent with that of
the prior year as a percentage of total units available for rent and as a percentage of original acquisition cost.
Principal External Factors that Affect our Businesses
We are subject to a number of external factors that may adversely affect our businesses. These factors, and other factors, are
discussed below and under the heading “Forward-Looking Statements,” and in Item 1A—Risk Factors in this Annual Report on Form
10-K.
•
Economic downturns. The demand for our products is dependent on the general economy, which is in turn affected by
geopolitical conditions, the stability of the global credit markets, inflationary pressures, increasing interest rates, the
conditions of the industries in which our customers operate or serve, and other factors. Downturns in the general economy
or in the construction and industrial markets, as well as adverse credit market conditions, can cause demand for our
products to materially decrease. Our operations are also impacted by global economic conditions, including inflation,
increased interest rates and supply chain constraints. We have experienced and may continue to experience inflationary
pressures, including but not limited to cost increases related to equipment, fuel, labor costs and hauling expenses that we
attempt to mitigate through pricing and productivity initiatives.
•
Spending levels by customers. Rentals and sales of equipment to the construction industry and to industrial companies
constitute a significant portion of our total revenues. As a result, we depend upon customers in these businesses and their
ability and willingness to rent or buy equipment. Accordingly, our business is impacted by fluctuations in customers’
spending levels and seasonality, as discussed in Item 1.
•
Adverse weather. Adverse weather in a geographic region in which we operate may depress demand for equipment in that
region. Our equipment is primarily used outdoors and, as a result, prolonged adverse weather conditions may prohibit our
customers from continuing their work projects. Adverse weather also has a seasonal impact in parts of our Intermountain
region, particularly in the winter months.
•
Regional and Industry-Specific Activity and Trends. Expenditures by our customers may be impacted by the overall level
of construction activity in the markets and regions in which they operate, the price of oil and other commodities, the price
of materials, supply chain disruptions, labor shortages, interest rates and other general economic trends impacting the
industries in which our customers and end users operate. As our customers adjust their activity and spending levels in
response to these external factors, our rentals and sales of equipment to those customers will be impacted.
•
Climate Change and ESG Regulations. As discussed in Item 1—Environmental and Safety Regulations and Item 1A—
Risk Factors—"We could be adversely affected by environmental and safety requirements and regulations, including
39
those regarding climate change, which could subject us to increased operational costs that could materially and adversely
impact our liquidity and operating results”, our facilities and operations are subject to comprehensive and frequently
changing federal, state and local environmental and occupational 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 effect on our business, financial condition or competitive position as a result of our efforts to comply
with such requirements, new or more stringent laws or regulations regarding in environmental and worker health and
safety laws could affect 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 effect on our business,
financial condition and results of operations. Finally, it is also possible that the increased regulatory uncertainty could
increase the cost of compliance due to tension with conflicting federal, state and local regulations, and could thus have a
material adverse effect on our business, financial condition and results of operations.
•
Regulatory Uncertainty at the Federal Level. Significant changes or developments in U.S. laws and policies, such as laws
and policies surrounding international trade, foreign affairs, environmental impact, and diversity and inclusion, among
others, could materially adversely affect our business and financial condition.
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
affect the reported amounts of assets, liabilities, revenues and expenses in our consolidated financial statements. We base our
estimates and judgments on historical experience and other assumptions that we believe are reasonable under the circumstances. These
assumptions, estimates and/or judgments, however, are often subjective and they and our actual results may change based on changing
circumstances or changes in our analyses. If actual 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 produce 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.
Useful Lives of Rental Equipment and Property and Equipment. We depreciate rental equipment and property and equipment over
their estimated useful lives (generally three to ten years), after giving effect to an estimated salvage value ranging from 0% to 25% of
cost. The useful life of rental equipment is determined based on our estimate of the period the asset will generate revenues, and the
salvage value is determined based on our estimate of the minimum value we could realize from the asset after such period. We
periodically review the assumptions utilized in computing rates of depreciation. We may be required to change these estimates based
on changes in our industry or other changing circumstances. If these estimates change in the future, we may be required to recognize
increased or decreased depreciation expense for these assets.
The amount of depreciation expense we record is dependent upon the estimated useful lives and the salvage values assigned to
each category of rental equipment. Generally, we assign estimated useful lives to our rental fleet ranging from a three-year life, five-
year life with a 25% salvage value, seven-year life and a ten-year life. None of the useful lives assumptions have changed during the
prior or current period. Depreciation expense on our rental fleet as of December 31, 2024 was approximately $375.3 million. As of
December 31, 2024, the estimated depreciation assuming a change in estimated useful lives for each category of equipment by two
years was as follows:
Impact of 2-year change in useful life on results of operations as of
December 31, 2024
Aerial Work
Platforms
Earth-
moving
Material
Handling
Equipment
Other
Total
($ in millions)
Depreciation expense for the year ended December 31, 2024
$
98.2
$
119.5
$
91.4
$
66.2
$
375.3
Increase of 2 years in useful life
78.6
71.7
65.3
22.1
237.6
Decrease of 2 years in useful life
117.8
167.3
117.5
66.2
468.9
For purposes of the sensitivity analysis above, we elected not to decrease the useful lives of other equipment, which are primarily
three-year estimated useful life assets; rather, we have held the depreciation expense constant at the actual amount of depreciation
expense. We believe that decreasing the life of the other equipment by two years is an unreasonable estimate and would potentially
lead to the decision to expense, rather than capitalize, that portion of the subject 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 $68.8 million. Additionally, a one-year decrease in the estimated life 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 $46.8 million.
40
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 subjective and subject to change in the future based upon actual results at the time we dispose of the
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.
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 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, virtually all of the rental equipment that we have acquired through business combinations have been
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 availability of cost or market data. Goodwill is calculated as the excess of the fair value of consideration transferred
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 affected 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
typically include, but are not limited to, parts inventory, accounts receivable, accounts payable and other working capital items.
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 adjust 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 specifically 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 profit 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 Impairment. 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 carrying
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 taxable 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, and Parts,
Service and Other) represents a reporting unit, resulting in four total reporting units.
As of December 31, 2024, our goodwill was comprised of the following carrying values (amounts in thousands):
Reporting Unit
Carrying Value at
December 31, 2024
Equipment Rentals
$
126,722
Sales of Rental Equipment
8,447
Sales of New Equipment
—
Parts, Service and Other
—
Total Goodwill
$
135,169
During 2024, 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, therefore, did not perform the prescribed quantitative Step 1 goodwill impairment test. We considered various factors in
performing the qualitative test, including macroeconomic conditions, industry and market considerations, the overall financial
41
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.
During 2023, based on our evaluation of our Parts Sales reporting unit and operating segment during the third quarter, we
identified a triggering event requiring an interim impairment test. This triggering event related to a sustained parts segment decline in
volume and actual revenue and earnings compared with our planned revenue and earnings utilized in our most recent quantitative
goodwill impairment analysis following our business’s dispositions and strategic shift 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 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 business’s strategic shift 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, therefore, did not perform the prescribed quantitative goodwill impairment test. We considered various factors in
performing the qualitative test, including macroeconomic conditions, industry 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, therefore, did not perform the prescribed quantitative Step 1 goodwill impairment test. We considered various factors in
performing the qualitative test, including macroeconomic conditions, industry 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.
For purposes 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 capital (“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 capital to support
anticipated revenue growth. The WACC is an estimate of the overall after-tax rate of return required by equity and debt holders of a
business enterprise and represents the expected cost of new capital 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 affect the estimate of a
reporting unit’s fair value, and therefore could affect the likelihood and amount of potential impairment. Under the market approach,
we compare the reporting units to selected reasonably similar (or “guideline”) publicly-traded companies. Under this method,
valuation multiples are: (i) derived from the operating data of selected guideline companies; (ii) evaluated and adjusted 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
reasonably expected to be realized from the sale of the reporting unit.
Income Taxes. The Company files a consolidated federal income tax return with its wholly-owned subsidiaries. The Company is a
C-Corporation under the provisions of the Internal Revenue Code. We utilize the asset and liability approach to measure deferred tax
assets and liabilities based on temporary 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 liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
The effect 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 effect 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%
42
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 2021 and subsequent years remain subject to examination by tax authorities. We are also subject
to examination in various state jurisdictions for 2020 and subsequent years.
Results of Operations
The tables included in the period-to-period comparisons below provide summaries of our revenues and gross profits for the years
ended December 31, 2024 and 2023. 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.
Our prior year discussion for the years ended December 31, 2023 and 2022 can be found here, in Item 7 of our Annual Report on
Form 10-K for the year ended December 31, 2023, which is incorporated by reference herein.
Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023
Revenues.
For the Year Ended
December 31,
Total Dollar
Total
Percentage
2024
2023
Increase
(Decrease)
Increase
(Decrease)
(in thousands, except percentages)
Revenues:
Equipment rentals
Rentals
$
1,108,273
$
1,051,632
$
56,641
5.4 %
Rentals other
145,052
134,520
10,532
7.8 %
Total equipment rentals
1,253,325
1,186,152
67,173
5.7 %
Sales of rental equipment
139,201
165,074
(25,873)
(15.7 )%
Sales of new equipment
55,597
39,099
16,498
42.2 %
Parts, service and other
68,460
78,891
(10,431)
(13.2 )%
Total revenues
$
1,516,583
$
1,469,216
$
47,367
3.2 %
Total Revenues. Our total revenues were $1.5 billion for the year ended December 31, 2024 compared to $1.5 billion for the year
ended December 31, 2023, an increase of $47.4 million, or 3.2%. Revenues of our business activities are further discussed below.
Equipment Rental Revenues. Our total revenues from equipment rentals for the year ended December 31, 2024 increased $67.2
million, or 5.7%, to $1.3 billion from $1.2 billion in 2023. The increase in equipment rental revenues was primarily due to our larger
fleet compared to the prior year. See Rentals and Rentals Other below for additional information.
Rentals: Rental revenues increased $56.6 million, or 5.4%, to $1.1 billion for the year ended December 31, 2024. Rental revenues
from other equipment increased $30.7 million, aerial work platform equipment increased $18.9 million and material handling
equipment increased $4.9 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, 2024 increased 0.8% compared to the year ended
December 31, 2023. Our average rental rates do not include the impact of acquisitions completed within the last twelve months.
Rental equipment dollar utilization (annual rental revenues divided by the average original rental fleet equipment costs) for the year
ended December 31, 2024 decreased 2.0% to 38.3% from 40.3% in 2023. 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 66.0% for the year ended December 31, 2024
compared to 68.8% in the year ended December 31, 2023, a decrease of 2.8%.
Rentals Other: Our rentals other revenues consist primarily of equipment support 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, 2024 were $145.1 million compared to $134.5 million for the year ended
December 31, 2023, an increase of $10.5 million, or 7.8%, primarily due to the increase in equipment rental revenues as described
above.
43
Sales of Rental Equipment Revenues. Our sales of rental equipment for the year ended December 31, 2024 decreased $25.9
million, or 15.7%, to $139.2 million from $165.1 million in 2023. This decrease is reflective of our fleet management strategy. Sales
of earthmoving rental equipment decreased $34.8 million. Offsetting this decrease, sales of aerial work platform rental equipment and
material handling rental equipment increased $6.8 million and $1.9 million, respectively.
Sales of New Equipment Revenues. Our sales of new equipment increased $16.5 million, or 42.2%, to $55.6 million for the year
ended December 31, 2024, from $39.1 million for the same period in 2023. Sales of new material handling equipment increased $17.5
million as we capitalized on improved product line availability. Sales of aerial work platform equipment increased $8.1 million and
offsetting these increases, sales of new other equipment decreased $7.3 million.
Parts, Service and Other Revenues. Our parts, service and other revenues decreased $10.4 million, or 13.2%, to $68.5 million for
the year ended December 31, 2024 from $78.9 million for the same period in 2023. The decreases are primarily related to a decrease
in service revenue.
Gross Profit.
For the Year Ended
December 31,
Total Dollar
Total
Percentage
2024
2023
Increase
(Decrease)
Increase
(Decrease)
(in thousands, except percentages)
Gross Profit:
Equipment rentals
Rentals
$
558,949
$
547,792
$
11,157
2.0 %
Rentals other
2,618
5,647
(3,029)
(53.6 )%
Total equipment rentals
561,567
553,439
8,128
1.5 %
Sales of rental equipment
85,527
99,891
(14,364)
(14.4 )%
Sales of new equipment
10,005
5,530
4,475
80.9 %
Parts, service and other
18,101
25,601
(7,500)
(29.3 )%
Total gross profit
$
675,200
$
684,461
$
(9,261)
(1.4 )%
Total Gross Profit. Our total gross profit was $675.2 million for the year ended December 31, 2024 compared to $684.5 million
for the year ended December 31, 2023, a decrease of $9.3 million, or 1.4%. Total gross profit margin for the year ended December 31,
2024 was approximately 44.5%, a decrease of 2.1% from the 46.6% gross profit margin for the same period in 2023. Gross profits and
gross margins of our business activities are further described below.
Equipment Rentals Gross Profit. Our total gross profit from equipment rentals for the year ended December 31, 2024 increased
$8.1 million, or 1.5%, to approximately $561.6 million from $553.4 million in 2023. Total gross profit margin from equipment rentals
for the year ended December 31, 2024 was approximately 44.8% compared to 46.7% for the year ended December 31, 2023, a
decrease of 1.9%. See Rentals and Rentals Other below for additional information.
Rentals: Rental revenue gross profit increased $11.2 million to $558.9 million for the year ended December 31, 2024 compared to
$547.8 million for the year ended December 31, 2023. The increase in rentals gross profit was the result of a $56.6 million increase in
rental revenues for the year ended December 31, 2024 compared to last year, which was partially offset by a $28.3 million increase in
rental depreciation expense and a $17.2 million increase in rental expenses. The increase in both depreciation expense and rental
expense is primarily due to a larger fleet size in 2024 compared to 2023. Gross profit margin on rentals for the year ended
December 31, 2024 was approximately 50.4% compared to 52.1% in 2023, a decrease of 1.7%. As a percentage of rental revenues,
rental expenses were 15.7% and 14.9% for the years ended December 31, 2024 and 2023, respectively, an increase of 0.8%.
Depreciation expense was 33.9% of rental revenues for the year ended December 31, 2024 compared to 33.0% for the same period in
2023, an increase of 0.9%.
Rentals Other: Our rentals other revenue consists primarily of equipment support 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 profit for the year ended December 31, 2024 was $2.6 million compared to $5.6 million for the year ended
December 31, 2023, a decrease of $3.0 million. Gross profit margin was 1.8% for the year ended December 31, 2024 compared to
4.2% for the same period last year, a decrease of 2.4%.
Sales of Rental Equipment Gross Profit. Our sales of rental equipment gross profit for the year ended December 31, 2024
decreased $14.4 million, or 14.4%, to $85.5 million compared to $99.9 million in 2023 on decreased sales of rental equipment of
$25.9 million. Gross profit margin on sales of rental equipment for the year ended December 31, 2024 was approximately 61.4%, up
0.9% from 60.5% in 2023. Our sales from rental fleet comprised approximately 99.6% and 99.3% of our sales of rental equipment for
44
the years ended December 31, 2024 and 2023, respectively, and were approximately 260.7% and 255.0% of net book value for the
years ended December 31, 2024 and 2023, respectively.
Sales of New Equipment Gross Profit. Our sales of new equipment gross profit for the year ended December 31, 2024 increased
approximately $4.5 million, or 80.9%, to $10.0 million from $5.5 million in 2023, on increased sales of new equipment of $16.5
million. Gross profit margin on sales of new equipment for the year ended December 31, 2024 was 18.0% compared to 14.1% for the
year ended December 31, 2023, an increase of 3.9%.
Parts, Service and Other Gross Profit. For the year ended December 31, 2024, our parts, service and other revenues gross profit
decreased $7.5 million, or 29.3%, to $18.1 million from $25.6 million for the same period in 2023, on $10.4 million decreased parts,
service and other revenues. Gross profit margin on parts, service and other revenues for the year ended December 31, 2024 was
26.4%, a decrease of approximately 6.1% from 32.5% in the same period in 2023.
Selling, General and Administrative Expenses. SG&A expenses increased approximately $50.1 million, or 12.4%, to $455.6
million for the year ended December 31, 2024 compared to $405.4 million for the year ended December 31, 2023. The net increase in
SG&A expenses was attributable to several factors. Employee salaries, wages, incentive compensation, payroll taxes and related
employee benefits increased $17.1 million, primarily as a result of increased wages, commissions and health insurance. Depreciation
and amortization, facility expenses, professional fees and liability insurance costs increased $10.0 million, $9.8 million, $7.0 million
and $4.5 million, respectively. Approximately $44.5 million of incremental SG&A expenses in 2024 were attributable to branches
opened or acquired since January 1, 2023 with less than a full year of comparable operations in either or both of the years ended
December 31, 2024 and 2023. As a percentage of total revenues, SG&A expenses were 30.0% and 27.6% for the years ended
December 31, 2024 and 2023, respectively.
Gain on Sales of Property and Equipment, Net. During the year ended December 31, 2024, gain on sales of property and
equipment, net amounted to $9.7 million for the period, compared to $3.4 million for the year ended December 31, 2023, an increase
of approximately $6.3 million. This increase is due to fluctuations in the normal course of business.
Impairment of Goodwill. There was no impairment of goodwill in the year ended December 31, 2024. The prior year $5.7 million
impairment related to the Parts Sales reporting unit for the year ended December 31, 2023. See Note 2 to the Consolidated Financial
Statements for additional information.
Other Income (Expense). For the year ended December 31, 2024, our net other expenses increased approximately $13.3 million
to $66.8 million compared to $53.5 million for the same period in 2023. Interest expense increased approximately $12.1 million to
$73.0 million for the year ended December 31, 2024 compared to $60.9 million for the year ended December 31, 2023. The increase
in interest expense is largely due to higher borrowings on our Credit Facility.
Income Taxes. We recorded an income tax expense of $39.6 million for the year ended December 31, 2024 compared to an
income tax expense of approximately $53.9 million for the year ended December 31, 2023. Our effective income tax rate for the year
ended December 31, 2024 was 24.3% compared to 24.2% for the same period last year, an increase of 0.1%.
Based on available evidence, both positive and negative, we believe it is more likely than not that our federal deferred tax assets
at December 31, 2024 are fully realizable through future reversals of existing taxable temporary differences and future taxable income.
For the year ended December 31, 2024, we have a $0.6 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, 2024, the cash provided by our operating activities was
$495.6 million. Our reported net income of $123.0 million, when adjusted 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 receivable, provision for
inventory obsolescence, stock-based compensation expense, impairment of goodwill and net gains on the sale of long-lived assets,
provided positive cash flows of $532.5 million. These cash flows from operating activities were positively impacted by a $11.9
million decrease in inventories and a $0.2 million increase in accrued expenses and other liabilities. Partially offsetting these positive
cash flows were a $42.3 million decrease in accounts payable, a $2.7 million decrease in manufacturing flooring plans payable, a $2.5
million increase in prepaid expenses and other assets and a $1.5 million increase in receivables.
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 adjusted 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 receivable, provision for inventory obsolescence, stock-based
45
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 manufacturing flooring plans payable. Partially offsetting these positive cash flows were a
$76.9 million increase in inventories, a $44.0 million decrease in accounts payable, a $26.9 million increase in receivables and a $6.0
million decrease in accrued expenses and other liabilities.
Cash Flow from Investing Activities. For the year ended December 31, 2024, net cash used in our investing activities was
approximately $459.0 million. The aggregate cumulative cash consideration paid for the acquisitions of Lewistown and Precision was
approximately $157.8 million; see additional information on the acquisition in Note 3 to our Consolidated Financial Statements. The
purchases of rental and non-rental equipment totaled approximately $451.3 million and proceeds from the sale of rental and non-rental
equipment were approximately $150.0 million.
For the year ended December 31, 2023, net cash used in our investing activities was approximately $608.8 million. The
acquisition of Giffin totaled approximately $31.3 million; see additional information on the 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.
Cash Flow from Financing Activities. For the year ended December 31, 2024, 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 $28.6 million. Borrowings on
our Credit Facility amounted to $1.8 billion while payments on the facility also amounted to $1.8 billion for the year ended
December 31, 2024. Dividends paid were $40.2 million, or $1.10 per common share, treasury stock purchases were approximately
$5.8 million and payments on finance lease obligations were $0.3 million for the year ended December 31, 2024.
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.
Senior Unsecured Notes
On December 14, 2020, we completed the offering 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.
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 subsidiaries Great Northern Equipment, Inc., H&E Equipment Services (California), 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 subsidiaries). The guarantees, made on a joint and several basis, are full and unconditional
(subject to subordination provisions and subject to a standard limitation which provides that the maximum amount guaranteed by each
guarantor will not exceed the maximum amount that can be guaranteed without making the guarantee void under fraudulent
conveyance laws). There are no restrictions on H&E Equipment Services, Inc.’s ability to obtain funds from the guarantor subsidiaries
by dividend or loan. There are no registration rights associated with the notes or the subsidiary guarantees.
For additional information regarding our senior unsecured notes, see Note 9 to our Consolidated Financial Statements.
Senior Secured Credit Facility
We and our subsidiaries are parties to a $750.0 million senior secured credit facility (our “Credit Facility”) with Wells Fargo
Bank, National Association as administrative agent, and the lenders named therein. At December 31, 2024, we had $199.3 million
borrowed under the Credit Facility and we could borrow up to $535.9 million, which with cash on hand amounted to a liquidity
position of $552.3 million. As of February 13, 2025, we had borrowings of $149.4 million outstanding under our Credit Facility
leaving us with borrowing availability of $585.7 million, as a result of $14.8 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 Operations
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 available under the Credit Facility.
As of December 31, 2024, the Company held balances of cash totaling $16.4 million compared to December 31, 2023, when the
Company held balances of cash totaling $8.5 million. Our principal uses of cash historically have been to fund operating activities and
46
working capital (including equipment inventory), purchases of rental fleet and property and equipment, opening new branch locations,
fund payments due under facility operating leases and manufacturer flooring plans payable, and to meet debt service requirements. In
the future, we may pursue additional strategic acquisitions 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 capital expenditures
by adjusting them (either up or down) to match our actual performance. The consolidated statements of cash flows include the
payments for purchases of rental fleet, but does not reflect gross rental fleet capital expenditures which include items such as non-cash
components. Our gross rental fleet capital expenditures for the years ended December 31, 2024 and 2023 were approximately $385.5
million and $736.6 million, respectively. This decrease in rental fleet capital expenditures reflects the normalization of fleet
purchasing in the current year as compared to the prior year. Our gross property and equipment capital expenditures for the years
ended December 31, 2024 and 2023 were $106.6 million and $83.9 million, respectively. The increase in gross property and
equipment capital expenditures in the current year as compared to the prior year is attributable to branch expansion.
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 availability of borrowings under the Credit Facility and/or other debt and equity financing alternatives available
to us, which will be affected by prevailing economic conditions and conditions in the global credit and capital markets, as well as
financial, business and other factors, some of which are beyond our control. Based on our current level of operations and given the
current state of the capital markets, we believe our cash flow from operations, available cash and available borrowings under the
Credit Facility will be adequate to meet our future liquidity needs for the foreseeable future, both in the short-term (over the next 12
months) and beyond. At December 31, 2024, we have cash on hand of approximately $16.4 million. At December 31, 2024, we had
available borrowings of $535.9 million, net of $14.8 million of outstanding letters of credit and at December 31, 2023, we had
available borrowings of $556.0 million, net of $12.3 million of outstanding letters of credit. At February 13, 2025, we had $585.7
million of available borrowings under the Credit Facility, net of a $14.8 million of outstanding letters of credit.
Our contractual obligations and commercial commitments principally include obligations associated with our outstanding
indebtedness and interest payments. We have no off-balance sheet arrangements. In tabular format below, we have disclosed our
analysis of material cash requirements from known contractual and other obligations as of December 31, 2024.
Payments Due by Year
Total
2025
2026-2027 2028-2029 Thereafter
(Amounts in thousands)
Senior unsecured notes (1)
$ 1,250,000
$
—
$
—
$ 1,250,000
$
—
Interest payments on senior unsecured notes (2)
193,751
48,438
96,875
48,438
—
Senior secured credit facility (3)
199,304
—
—
199,304
—
Interest payments on senior secured credit facility (4)
47,238
15,313
30,625
1,300
—
Operating lease liabilities (5)
305,335
35,804
83,624
79,792
106,115
Other lease commitments (6)
52,858
2,702
9,562
10,106
30,488
Finance lease liabilities (7)
5,032
622
1,292
1,298
1,820
Total contractual cash obligations
$ 2,053,518
$ 102,879
$ 221,978
$ 1,590,238
$ 138,423
(1)
See Note 9 to our Consolidated Financial Statements for additional information regarding our Senior Notes.
(2)
Future interest payments are calculated based on the assumption that all of the senior unsecured notes remain outstanding
until maturity.
(3)
See Note 10 to our Consolidated Financial Statements for additional information regarding our Credit Facility.
(4)
This represents future interest payments calculated based on the assumption that all borrowings remain outstanding until
maturity, assumes the interest rate in effect at December 31, 2024 and includes unused commitment fees.
(5)
This includes total minimum operating lease rental payments having initial or remaining non-cancelable lease terms
longer than one year, including interest.
(6)
Represents total minimum operating lease rental payments for leases executed but not commenced as of December 31,
2024.
(7)
This includes total minimum finance lease rental payments having initial or remaining non-cancelable lease terms longer
than one year, including interest.
As of December 31, 2024, we had standby letters of credit issued under our Credit Facility totaling $14.8 million that expire in
May 2025.
47
Quarterly Dividend
On each of February 9, 2024, May 16, 2024, August 12, 2024 and November 15, 2024, the Company declared a quarterly
dividend of $0.275 per share to stockholders of record, which were paid on March 15, 2024, June 14, 2024, September 13, 2024 and
December 13, 2024, respectively, totaling approximately $40.2 million. On February 7, 2025, the Company declared a quarterly
dividend of $0.275 per share to stockholders of record as of the close of business on February 18, 2025, which is to be paid on
February 24, 2025.
The Company intends to continue to pay regular quarterly cash dividends; however, the declaration of any subsequent dividends
is discretionary and will be subject to a final determination by the Board of Directors each quarter after its review of, among other
things, business and market conditions.
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 footprint, and increase our density in existing markets.
Effective January 1, 2018, we completed the acquisition of CEC, a privately-held company focused on non-residential
construction equipment rentals serving the greater Denver, Colorado area out of three branch locations. Effective April 1, 2018, we
completed the acquisition of Rental Inc., an equipment rental and distribution company with five branch locations in Alabama and
Florida. Effective February 1, 2019, we completed the acquisition of WRI, an equipment rental company with six branch locations in
Central Texas. Effective October 1, 2022, we completed the acquisition of OSR, an equipment rental company with ten branch
locations in the Midwest. Effective November 1, 2023, we completed the acquisition of Giffin, an equipment rental company with
three branches in California. Effective January 1, 2024, the Company completed the acquisition of Precision Rentals (“Precision”), a
privately-held equipment rentals company with a branch location in each of Arizona and Colorado. Effective May 1, 2024, the
Company completed the acquisition of Lewistown Rentals (“Lewistown”), a privately-held equipment rentals company with four
branch locations in Montana. See Note 3 to our Consolidated Financial Statements for additional information on these acquisitions.
The success of our growth strategy depends, in part, on selecting strategic acquisition candidates at attractive prices and
identifying strategic start-up locations. We expect to face competition for acquisition candidates, which may limit the number of
acquisition opportunities and lead to higher acquisition costs. We may not have the financial resources necessary to consummate any
acquisitions or to successfully open any new facilities in the future or the ability to obtain the necessary funds on satisfactory terms.
For further information regarding our risks related to acquisitions, see Item 1A – Risk Factors of this Annual Report on Form 10-K.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Our earnings may be affected 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 Availability (as defined in the
Credit Facility), in the case of index rate revolving loans and (b) SOFR plus a credit spread adjustment and an applicable margin of
1.25% to 1.75%, depending on the Average Availability (as defined in the Credit Facility), in the case of SOFR revolving loans.
At December 31, 2024, we had $199.3 million in borrowings outstanding under the Credit Facility. At February 13, 2025, we had
$149.4 million in borrowings outstanding under the Credit Facility with $585.7 million of available borrowings, net of a $14.8 million
of outstanding letters of credit. We did not have significant exposure to changing interest rates as of December 31, 2024 on the fixed-
rate senior unsecured notes. Historically, we have not engaged in derivatives or other financial instruments for trading, speculative or
hedging purposes, though we may do so from time to time if such instruments are available to us on acceptable terms and prevailing
market conditions are accommodating.
Item 8. Financial Statements and Supplementary Data
Index to consolidated financial statements of H&E Equipment Services, Inc. and Subsidiaries
Page
Report of Independent Registered Public Accounting Firm .........................................................................................................
48
Consolidated Balance Sheets as of December 31, 2024 and 2023 ................................................................................................
50
Consolidated Statements of Income for the years ended December 31, 2024, 2023 and 2022 .....................................................
51
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2024, 2023 and 2022 ...............................
52
Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023 and 2022 ..............................................
53
Notes to Consolidated Financial Statements .................................................................................................................................
55
48
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,
2024 and 2023, the related consolidated statements of income, stockholders’ equity, and cash flows for each of the three years in the
period ended December 31, 2024, and the related notes and the schedule 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, 2024 and 2023, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of
America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”),
the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control –
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our
report dated February 21, 2025 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 reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to
error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures 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 reasonable 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, subjective, 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 Recognition for equipment rental, sales of rental equipment, and sales of new equipment
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 contractual 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 recognized when control of the promised good is transferred to the
customer based on contractual terms with the customer. 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, 2024.
49
We identified 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 effort in performing procedures relating to revenue
recognition for equipment rental, sales of rental equipment, and sales of new equipment.
The primary procedures we performed 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 effectiveness 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 selection of equipment rental transactions by agreeing the amounts recognized to source documents, such as rental
contracts, invoices, and subsequent cash receipts.
Testing a selection of sales of rental equipment and sales of new equipment transactions by agreeing the amounts recognized
to source documents, such as sales contracts, auction documents, invoices, delivery documents, and subsequent cash
receipts.
/s/ BDO USA, P.C.
We have served as the Company's auditor since 2004.
Dallas, Texas
February 21, 2025
50
H&E EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31,
2024
2023
(Amounts in thousands, except
share and per share amounts)
Assets
Cash
$
16,413
$
8,500
Receivables, net of allowance for doubtful accounts of $9,435 and $7,126, respectively
248,643
247,430
Inventories, net of reserves for obsolescence of $180 and $207, respectively
12,976
109,931
Prepaid expenses and other assets
11,214
8,740
Rental equipment, net of accumulated depreciation of $1,112,196 and $990,971,
respectively
1,841,855
1,756,578
Property and equipment, net of accumulated depreciation and amortization of $211,682
and $193,723, respectively
242,626
183,773
Operating lease right-of-use assets, net of accumulated amortization of $94,892 and
$71,021, respectively
215,990
176,703
Finance lease right-of-use assets, net of accumulated amortization of $790 and $345,
respectively
3,753
2,891
Deferred financing costs, net of accumulated amortization of $18,735 and $17,606,
respectively
3,480
4,609
Intangible assets, net of accumulated amortization of $36,089 and $25,824, respectively
63,411
32,576
Goodwill
135,169
108,155
Total assets
$
2,795,530
$
2,639,886
Liabilities and Stockholders’ Equity
Liabilities:
Senior secured credit facility
$
199,304
$
181,642
Accounts payable
45,149
85,486
Manufacturer flooring plans payable
—
2,708
Accrued expenses payable and other liabilities
94,856
87,929
Dividends payable
400
360
Senior unsecured notes, net of unaccreted discount of $4,635 and $5,807 and deferred
financing costs of $1,070 and $1,341, respectively
1,244,295
1,242,852
Operating lease liabilities
239,641
183,775
Finance lease liabilities
4,007
3,019
Deferred income taxes
345,398
317,826
Total liabilities
2,173,050
2,105,597
Commitments and Contingencies (Note 13)
Stockholders’ equity:
Preferred stock, $0.01 par value, 25,000,000 shares authorized; no shares issued
—
—
Common stock, $0.01 par value, 175,000,000 shares authorized; 41,086,358 and
40,823,375 shares issued at December 31, 2024 and December 31, 2023, respectively,
and 36,604,864 and 36,449,188 shares outstanding at December 31, 2024 and
December 31, 2023, respectively
411
408
Additional paid-in capital
273,163
261,927
Treasury stock at cost, 4,481,494 and 4,374,187 shares of common stock held at
December 31, 2024 and December 31, 2023, respectively
(81,798)
(76,017)
Retained earnings
430,704
347,971
Total stockholders’ equity
622,480
534,289
Total liabilities and stockholders’ equity
$
2,795,530
$
2,639,886
The accompanying notes are an integral part of these consolidated financial statements.
51
H&E EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31,
(Amounts in thousands, except per share amounts)
2024
2023
2022
(Amounts in thousands, except per share amounts)
Revenues:
Equipment rentals
$
1,253,325
$
1,186,152
$
956,042
Sales of rental equipment
139,201
165,074
90,885
Sales of new equipment
55,597
39,099
92,526
Parts, service and other
68,460
78,891
105,065
Total revenues
1,516,583
1,469,216
1,244,518
Cost of revenues:
Rental depreciation
375,330
347,022
267,395
Rental expense
173,994
156,818
128,850
Rental other
142,434
128,873
99,554
691,758
632,713
495,799
Sales of rental equipment
53,674
65,183
46,569
Sales of new equipment
45,592
33,569
79,430
Parts, service and other
50,359
53,290
67,557
Total cost of revenues
841,383
784,755
689,355
Gross profit
675,200
684,461
555,163
Selling, general and administrative expenses
455,554
405,432
343,845
Impairment of goodwill
—
5,714
—
Gain from sales of property and equipment, net
9,665
3,389
16,836
Income from operations
229,311
276,704
228,154
Other income (expense):
Interest expense
(72,954 )
(60,891 )
(54,033 )
Other, net
6,189
7,384
6,609
Total other expense, net
(66,765 )
(53,507 )
(47,424 )
Income from operations before provision for income taxes
162,546
223,197
180,730
Provision for income taxes
39,564
53,904
47,036
Net income from continuing operations
$
122,982
$
169,293
$
133,694
Discontinued Operations:
Loss from discontinued operations before benefit for income taxes
$
—
$
—
$
(2,049 )
Benefit for income taxes
—
$
—
(525 )
Net loss from discontinued operations
$
—
$
—
$
(1,524 )
Net income
$
122,982
$
169,293
$
132,170
Net income from continuing operations per common share:
Basic
$
3.39
$
4.69
$
3.72
Diluted
$
3.37
$
4.66
$
3.70
Net loss from discontinued operations per common share:
Basic
$
—
$
—
$
(0.04 )
Diluted
$
—
$
—
$
(0.04 )
Net income per common share:
Basic
$
3.39
$
4.69
$
3.68
Diluted
$
3.37
$
4.66
$
3.66
Weighted average common shares outstanding:
Basic
36,269
36,100
35,943
Diluted
36,505
36,329
36,089
The accompanying notes are an integral part of these consolidated financial statements.
52
H&E EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2024, 2023 AND 2022
(Amounts in thousands, except share and per share amounts)
Common Stock
Shares
Issued
Amount
Additional
Paid-in
Capital
Treasury
Stock
Retained
Earnings
Total
Stockholders’
Equity
Balances at December 31, 2021
40,353,299
$
403 $244,638
$ (68,294) $126,635
$ 303,382
Stock-based compensation
—
—
7,263
—
—
7,263
Cash dividends declared on common stock ($1.10 per
share)
—
—
—
—
(40,105)
(40,105)
Issuances of non-vested restricted common stock, net
of restricted stock forfeitures
214,577
2
—
—
—
2
Repurchases of 46,923 shares of restricted common
stock
—
—
—
(1,670)
—
(1,670)
Net income
—
—
—
—
132,170
132,170
Balances at December 31, 2022
40,567,876
405
251,901
(69,964)
218,700
401,042
Stock-based compensation
—
—
10,026
—
—
10,026
Cash dividends declared on common stock ($1.10 per
share)
—
—
—
—
(40,022)
(40,022)
Issuances of non-vested restricted common stock, net
of restricted stock forfeitures
255,499
3
—
—
—
3
Repurchases of 115,632 shares of restricted common
stock
—
—
—
(6,053)
—
(6,053)
Net income
—
—
—
—
169,293
169,293
Balances at December 31, 2023
40,823,375
408
261,927
(76,017)
347,971
534,289
Stock-based compensation
—
—
11,236
—
—
11,236
Cash dividends declared on common stock ($1.10 per
share)
—
—
—
—
(40,249)
(40,249)
Issuances of non-vested restricted common stock, net
of restricted stock forfeitures
262,983
3
—
—
—
3
Repurchases of 107,307 shares of restricted common
stock
—
—
—
(5,781)
—
(5,781)
Net income
—
—
—
—
122,982
122,982
Balances at December 31, 2024
41,086,358
$
411 $273,163
$ (81,798) $430,704
$ 622,480
The accompanying notes are an integral part of these consolidated financial statements.
53
H&E EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
2024
2023
2022
(Amounts in thousands)
Cash flows from operating activities:
Net income
$
122,982
$
169,293
$
132,170
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization of property and equipment
47,982
34,697
28,810
Depreciation of rental equipment
375,330
347,022
267,395
Amortization of intangible assets
10,265
6,455
4,660
Amortization of deferred financing costs
1,400
1,359
970
Accretion of note discount, net of premium amortization
1,172
1,172
1,172
Non-cash operating lease expense
23,871
19,602
14,535
Amortization of finance lease right-of-use assets
445
240
105
Provision for losses on accounts receivable
5,322
4,858
3,264
Provision for inventory obsolescence
51
178
32
Change in deferred income taxes
27,572
46,664
42,278
Stock-based compensation expense
11,236
10,026
7,263
Impairment of goodwill
—
5,714
—
Loss on sale of discontinued operations
—
—
1,917
Gain from sales of property and equipment, net
(9,665)
(3,389)
(16,836)
Gain from sales of rental equipment, net
(85,492)
(99,629)
(43,397)
Changes in operating assets and liabilities:
Receivables
(1,459)
(26,911)
(59,768)
Inventories
11,910
(76,922)
(75,375)
Prepaid expenses and other assets
(2,460)
12,724
(1)
Accounts payable
(42,331)
(43,988)
29,999
Manufacturer flooring plans payable
(2,708)
2,286
(20,502)
Accrued expenses payable and other liabilities
178
(5,968)
(5,453)
Net cash provided by operating activities
495,601
405,483
313,238
Cash flows from investing activities:
Acquisition of businesses
(157,779)
(31,265)
(135,710)
Closing adjustment on sale of discontinued operations
—
—
(2,256)
Purchases of property and equipment
(106,616)
(83,872)
(51,452)
Purchases of rental equipment
(344,642)
(661,960)
(464,434)
Proceeds from sales of property and equipment
11,303
4,449
23,626
Proceeds from sales of rental equipment
138,692
163,886
83,689
Net cash used in investing activities
(459,042)
(608,762)
(546,537)
Cash flows from financing activities:
Purchases of treasury stock
(5,781)
(6,053)
(1,670)
Borrowings on senior secured credit facility
1,784,992
1,790,187
1,278,182
Payments on senior secured credit facility
(1,767,330)
(1,608,545)
(1,278,182)
Payments of deferred financing costs
—
(4,939)
—
Dividends paid
(40,209)
(40,039)
(39,856)
Payments of finance lease obligations
(318)
(162)
(1,141)
Net cash provided by (used in) financing activities
(28,646)
130,449
(42,667)
Net increase (decrease) in cash
7,913
(72,830)
(275,966)
Cash, beginning of year
8,500
81,330
357,296
Cash, end of year
$
16,413
$
8,500
$
81,330
54
H&E EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
FOR THE YEARS ENDED DECEMBER 31,
2024
2023
2022
(Amounts in thousands)
Supplemental schedule of non-cash investing and financing activities:
Accrued acquisition purchase price consideration
$
—
$
—
$
803
Non-cash asset purchases:
Rental fleet in accounts payable and accrued expenses payable
and other liabilities
$
1,910
$
—
$
—
Assets transferred from inventory to rental fleet
$
84,994
$
74,655
$
43,321
Purchases of property and equipment included in accrued
expenses payable and other liabilities
$
1,433
$
(591) $
(1,213)
Operating lease assets obtained in exchange for new operating
lease liabilities
$
63,157
$
31,739
$
27,880
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest
$
70,617
$
56,582
$
51,828
Income taxes paid, net of refunds received
$
11,352
$
5,812
$
5,894
The accompanying notes are an integral part of these consolidated financial statements.
55
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 31 states. The Company’s fleet is 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.
Recent Developments
On February 19, 2025, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Herc Holdings Inc., a
Delaware corporation (“Herc”) and HR Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of Herc (“Merger
Sub”), pursuant to which Merger Sub agreed to commence an exchange offer (the “Offer”), to purchase all of the issued and
outstanding shares of our common stock, following which Merger Sub will merge with and into the Company, with the Company
surviving as a wholly owned subsidiary of Herc (the “Merger”) (and collectively, the “Transactions”).
The price per share of common stock in the Offer is a combination of cash and Herc common stock, consisting of (i) $78.75 in
cash, without interest, less any applicable withholding of taxes (the “Cash Offer Price”), and (ii) a fixed exchange ratio of 0.1287
shares of Herc common stock, without interest, per share (the “Stock Offer Price”). The combination of the Cash Offer Price and the
Stock Offer Price is equal to a total value of approximately $104.89 per share (the “Offer Price”) based on Herc’s 10-day volume-
weighted average price as of market close February 14, 2025.
The transaction is expected to close in the first half of 2025. The transaction is subject to customary closing conditions, including
a minimum tender of at least one share more than 50 percent of then-outstanding common shares, the expiration of the waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and approval for listing on the New York Stock Exchange
(“NYSE”) of Herc’s common stock to be issued in the Offer and Merger. See Note 17, Subsequent Events, for additional information.
(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 subsidiaries H&E Finance Corp., GNE Investments, Inc., Great Northern Equipment, Inc., H&E California
Holding, Inc., H&E Equipment Services (California), 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” and doing business as “H&E Rentals”.
On October 1, 2021, the Company sold its crane business (the “Crane Sale”) and during June 2022, closing adjustments were
finalized. The results of operations of the Crane Sale are reported in discontinued operations in the Consolidated Statements of Income
for the year ended December 31, 2022. 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 affect the reported
amounts of assets and liabilities and related disclosures at the date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reported period. These assumptions and estimates could have a material effect on our consolidated
financial statements. Actual results may differ materially from those estimates. We review our estimates on an ongoing basis based on
information currently available, and changes in facts and circumstances may cause us to revise these estimates.
56
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
is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or
services. Revenue is measured based on the consideration specified 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 transfer a distinct
good or service to a customer. Our contracts with customers generally do not include multiple performance obligations. We recognize
revenue when we satisfy a performance obligation by transferring control over a product or service to a customer. The amount of
revenue recognized reflects the consideration we expect to be entitled to in exchange for such products or services.
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 tables below summarize our revenues as presented in our Consolidated Statements of Income for the years ended
December 31, 2024, 2023 and 2022 by revenue type and by the applicable accounting standard (amounts in thousands).
Year Ended December 31, 2024
Topic 842
Topic 606
Total
Revenues:
Rental Revenues:
Owned equipment rentals
$
1,073,817
$
606
$
1,074,423
Re-rent revenue
33,850
—
33,850
Ancillary and other rental revenues:
Delivery and pick-up
—
79,391
79,391
Other
65,661
—
65,661
Total ancillary rental revenues
65,661
79,391
145,052
Total equipment rental revenues
1,173,328
79,997
1,253,325
Sales of rental equipment
—
139,201
139,201
Sales of new equipment
—
55,597
55,597
Parts, service and other
—
68,460
68,460
Total revenues
$
1,173,328
$
343,255
$
1,516,583
Year Ended December 31, 2023
Topic 842
Topic 606
Total
Revenues:
Rental Revenues:
Owned equipment rentals
$
1,017,012
$
498
$
1,017,510
Re-rent revenue
34,122
—
34,122
Ancillary and other rental revenues:
Delivery and pick-up
—
71,419
71,419
Other
63,101
—
63,101
Total ancillary rental revenues
63,101
71,419
134,520
Total equipment rental revenues
1,114,235
71,917
1,186,152
Sales of rental equipment
—
165,074
165,074
Sales of new equipment
—
39,099
39,099
Parts, service and other
—
78,891
78,891
Total revenues
$
1,114,235
$
354,981
$
1,469,216
57
Year Ended December 31, 2022
Topic 842
Topic 606
Total
Revenues:
Rental Revenues:
Owned equipment rentals
$
814,423
$
406
$
814,829
Re-rent revenue
32,726
—
32,726
Ancillary and other rental revenues:
Delivery and pick-up
—
56,303
56,303
Other
52,184
—
52,184
Total ancillary rental revenues
52,184
56,303
108,487
Total equipment rental revenues
899,333
56,709
956,042
Sales of rental equipment
—
90,885
90,885
Sales of new equipment
—
92,526
92,526
Parts, service and other
—
105,065
105,065
Total revenues
$
899,333
$
345,185
$
1,244,518
Revenues by reporting segment are presented in Note 16. 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 affected by economic factors.
Nature of goods and services
Lease revenues
Topic 842
Owned equipment rentals: 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. 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 subleases. The accounting for re-rent revenue is the same as the accounting for owned equipment
rentals described above.
Other equipment 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)
Substantially all of our revenues under Topic 606 are recognized at a point-in-time rather than over time.
Owned equipment rentals: 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 setup and configuration 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.
Delivery and pick-up: Delivery and pick-up revenue associated with renting equipment is recognized when the service is
performed.
Sales of rental equipment: Revenues from the sales of rental equipment are recognized at the time of delivery to, or pick-up by,
the customer, or when the bill-and-hold criteria are satisfied, which is when the customer obtains control of the promised good.
58
Sales of new equipment: Revenues from the sales of new equipment are recognized at the time of delivery to, or pick-up by, the
customer, which is when the customer obtains control of the promised good.
Parts, service, and other: Revenues from the sales of equipment parts are recognized at the time of pick-up 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 fulfillment 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 support activities that we
provide to customers in connection with sales of rental and new equipment and parts and services revenues.
Receivables and contract assets and liabilities
We manage credit risk associated with our accounts receivables 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 receivables is limited because our customer base is comprised of a
large number of geographically diverse customers. No single customer accounted for more than 10% of our total revenues for any of
the three years ended December 31, 2024. We manage credit risk through credit approvals, credit limits and other monitoring
procedures.
We maintain an allowance for doubtful 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 specific
customers, our understanding of our current economic circumstances, reasonable and supportable forecasts, and our own judgment as
to the likelihood of ultimate payment based upon available data. Our largest exposure to doubtful accounts is our rental operations,
which as discussed above is accounted for under Topic 842. For the year ended December 31, 2024, revenue under ASC 842
represents 77% of our total revenues and an approximate corresponding percentage of our receivables, net and associated allowance
for doubtful accounts. We perform credit evaluations of customers and establish 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 procedures. 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, 2024, 2023 and 2022 was
approximately 0.4%, 0.3% and 0.3%, respectively.
We do not have material contract assets, impairment losses associated therewith, or material contract liabilities associated with
contracts with customers. Our contracts with customers do not generally result in material amounts billed to customers in excess of
recognizable revenue. We did not recognize material revenues during the years ended December 31, 2024, 2023 or 2022 that was
included in the contract liability balance as of the beginning of such periods.
Performance obligations
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 significant amount of revenue from performance obligations satisfied (or partially satisfied) in previous
periods, and the amount of such revenue recognized during the years ended December 31, 2024, 2023 and 2022 was not material.
Payment 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 offered. The time between invoicing and when
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.
Sales tax amounts collected from customers are recorded on a net basis.
Contract costs
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. Substantially 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.
59
Contract estimates and judgments
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. Substantially 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-up by, the customer.
Discontinued Operations
In determining whether a group of assets which has been disposed of (or is to be disposed of) 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 purposes. In
addition, the Company considers whether the disposal represents a strategic shift that has or will have a major effect on the
Company’s operations and financial results. This strategic shift could include a disposal of a major geographical area, a major line of
business, a major equity method investment, or other major parts of an entity.
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 liabilities 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, 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.
Inventories
We measure inventory 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 reasonably predictable costs of completion, disposal and transportation. For used and new
equipment inventories, cost is determined by specific-identification. For inventories of parts and supplies, cost is determined by using
average cost.
Rental Equipment
The rental equipment we purchase is recorded in rental equipment on the Consolidated Balance Sheets and is stated at cost. Due
to the Company’s shift to operate as a pure-play rental company, as of the quarter ended June 30, 2024 purchases of equipment are
now disaggregated between inventory and rental equipment according to classification at the time of purchase as opposed to
considering all generally available for sale. Purchases of equipment designated for fleet are now recorded as rental equipment while
equipment designated for sale is recorded as inventory. Rental equipment is depreciated over the estimated useful life of the
equipment upon placed in service using the straight-line method and is included in rental depreciation within our Consolidated
Statements of Income. Estimated useful lives vary based upon type of equipment. Generally, we depreciate aerial work platforms over
a ten year estimated useful life, earthmoving equipment over a five year estimated useful life with a 25% salvage value, and material
handling equipment over a seven year estimated useful life. Attachments and other smaller type equipment are depreciated generally
over a three year estimated useful life. 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.
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 useful life of the asset are
capitalized in the period incurred. When rental equipment is sold or disposed of, the related cost and accumulated depreciation are
removed from the respective accounts and any gains or losses are included in gross profit in the Consolidated Statements of Income.
We receive individual offers for fleet on a continual basis, at which time we perform an analysis on whether or not to accept the offer.
The rental equipment is not transferred to inventory under the held for sale model as the equipment is used to generate revenues until
the equipment is sold.
Property and Equipment
Property and equipment are recorded at cost and are depreciated over the assets’ estimated useful 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 useful life of
the asset are capitalized in the period incurred. At the time assets are sold or disposed of, 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
60
from sales of property and equipment, net. We additionally capitalize certain costs associated with internally developed software and
cloud computing arrangements.
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 useful lives or the remaining term of the lease,
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 useful lives to these categories:
Category
Estimated
Useful Life
Transportation equipment
5 years
Buildings
39 years
Office equipment
5 years
Computer equipment
3 years
Machinery and equipment
7 years
When events or changes in circumstances indicate that the carrying amount of our rental fleet and property and equipment might
not be recoverable, the expected future undiscounted cash flows from the assets are estimated and compared with the carrying 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 support of our review for indicators of impairment,
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, 2024, 2023 or 2022.
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
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, virtually all of the rental equipment that we have acquired through business combinations have been 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
availability of cost or market data. Goodwill is calculated as the excess of the fair value of consideration transferred 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 affected 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.
In addition to long-lived fixed assets, we also acquire other assets and assume liabilities. These other assets and liabilities
typically include, but are not limited to, parts inventory, accounts receivable, accounts payable and other working capital items.
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 adjust 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 profit 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 transferred 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. We have identified that our four operating segments (Equipment
Rentals, Sales of Rental Equipment, Sales of New Equipment and Parts, Service and Other Revenues) each represent a reporting unit.
61
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
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.
We performed a qualitative assessment of goodwill impairment as of our annual testing date, October 1, for years ended
December 31, 2024, 2023, and 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, therefore, did not perform the prescribed quantitative goodwill
impairment test. We considered various factors in performing the qualitative test, including macroeconomic conditions, industry 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.
During the third quarter of 2023, based on our evaluation of our Parts Sales reporting unit and operating segment, we identified a
triggering event requiring an interim impairment test. This triggering event related to a sustained parts segment decline in volume and
actual revenue and earnings compared with our planned revenue and earnings utilized in our most recent quantitative goodwill
impairment analysis following our dispositions and strategic shift to be rental focused. Additional information on our dispositions is
included in Footnote 3. 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 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 shift 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.
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.
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, discount rates, industry price multiples, etc.)
could affect our fair value measurements and result in future impairments. If we are unable to achieve the financial forecasts used in
our impairment analysis, we may also be required to record an impairment charge to our goodwill.
The impairment charge described above is a non-cash item and does not affect our cash flows, liquidity or borrowing capacity
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, 2024 and 2023 is as follows (amounts
in thousands):
Equipment
Rentals
Sales of
Rental Eq.
Parts
Sales
Total
Balance at December 31, 2022 (1)
$
88,529
$
8,447
$
5,714
$
102,690
Increase (2)
29
—
—
29
Decrease (3)
—
—
(5,714)
(5,714)
Decrease (4)
(132 )
—
—
(132)
Increase (5)
11,282
—
—
11,282
Balance at December 31, 2023 (1)
99,708
8,447
—
108,155
Increase (6)
17,536
—
—
17,536
Decrease (7)
(100 )
—
—
(100)
Increase (8)
8,401
—
—
8,401
Increase (9)
651
—
—
651
Increase (10)
526
—
—
526
Balance at December 31, 2024 (1)
$
126,722
$
8,447
$
—
$
135,169
62
(1)
The total carrying amount of goodwill as of December 31, 2022 in the table above is reflected net of $92.7 million of
accumulated impairment charges. The total carrying amount of goodwill as of December 31, 2024 and 2023 in the table
above is reflected net of $98.4 million of accumulated impairment charges.
(2)
Increase is related to the closing adjustments of the OSR Acquisition during the first quarter of 2023.
(3)
Decrease is related to the Parts Sales goodwill impairment calculated during the third quarter of 2023.
(4)
Decrease is related to the final closing adjustment of the OSR Acquisition during the third quarter of 2023.
(5)
Increase due to the Giffin Equipment (“Giffin”) Acquisition during the fourth quarter of 2023.
(6)
Increase due to the Precision Rentals (“Precision”) Acquisition during the first quarter of 2024.
(7)
Decrease is related to the final purchase accounting adjustment of the Giffin Acquisition during the first quarter of 2024.
(8)
Increase due to Lewistown Rentals (“Lewistown”) Acquisition during the second quarter of 2024.
(9)
Increase is related to the final closing adjustment of the Precision Acquisition during the second quarter of 2024.
(10) Increase is related to the final closing adjustment of the Lewistown Acquisition during the third quarter of 2024.
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 useful lives of ten years, ten years and the length of agreement (typically one to five
years), respectively, from the date of acquisition, which approximates the period of economic benefit.
The gross carrying values, accumulated amortization and net carrying amounts of our major classes of intangible assets as of
December 31, 2024 and 2023 are as follows (dollar amounts in thousands):
December 31, 2024
December 31, 2023
Gross
Accumulated
Amortization
Net
Gross
Accumulated
Amortization
Net
Customer relationships
$
91,500
$
32,942
$
58,558
$
53,900
$
23,917
$
29,983
Noncompetition agreements
7,800
3,007
4,793
4,300
1,787
2,513
Leasehold interests
200
140
60
200
120
80
Total
$
99,500
$
36,089
$
63,411
$
58,400
$
25,824
$
32,576
The weighted-average remaining amortization period as of December 31, 2024 was 7 years for customer relationships, 4 years for
noncompetition agreements and 3 years for leasehold interests. The weighted-average remaining amortization period as of December
31, 2023 was 8 years for customer relationships, 5 years for noncompetition agreements and 4 years for leasehold interests.
Intangible assets are tested for impairment whenever events or circumstances indicate that the carrying amount of an asset may
not be recoverable. 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, 2024, 2023 and 2022 totaled $10.3 million, $6.5 million and $4.7
million, respectively, and is included within SG&A expenses on the Consolidated Statements of Income. The following table presents
the expected amortization expense for each of the next five years ending December 31 and thereafter for those intangible assets with
remaining carrying value as of December 31, 2024 (dollar amounts in thousands):
Amortization Expense
2025
$
10,390
2026
10,390
2027
10,390
2028
7,433
2029
5,271
Thereafter
19,537
$
63,411
Manufacturer Flooring Plans Payable
Manufacturer flooring plans payable are financing arrangements for inventory and rental equipment. The interest cost incurred on
the manufacturer flooring plans ranged from 0% to the prime rate (7.50% at December 31, 2024) plus an applicable margin. Certain
63
manufacturer 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 effective interest method. We make payments in accordance with the original terms of the financing
agreements. However, we may sell equipment that is financed under manufacturer flooring plans prior to the original maturity date of
the financing agreement. The related manufacturer flooring plan payable is then paid at the time the equipment being financed is sold.
The manufacturer flooring plans payable are secured by the equipment being financed.
As of December 31, 2024, there was no remaining balance on manufacturer flooring plans payable.
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 identified 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 contractual right to use a building for a specified period of time in
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 supply contracts. We analyze all arrangements with potential embedded leases to
determine if an identified asset is present, if substantive substitution rights are present, and if the arrangement provides the customer
control of the asset.
Our lease portfolio is substantially 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 liabilities 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 reasonably 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 after 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 subject 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 contractual 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 therefore,
such transactions are subject 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.
64
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 effective interest method.
Initial purchasers’ discount and bond premium is the differential between the price paid to an issuer for the new issue and the
prices (below and above, respectively) at which the securities are initially offered to the investing public. The amortization expense of
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 liability, 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-insurance. Claims for which
we self-insure include: (1) workers compensation claims; (2) general liability claims by third parties for injury or property damage
caused by our equipment or personnel; (3) automobile liability claims; and (4) employee health insurance claims. Losses that exceed
our deductibles and self-insured retentions are insured through various commercial lines of insurance policies. These types of claims
may take a substantial amount of time to resolve and, accordingly, the ultimate liability 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-insurance 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 history 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, 2024, our claims reserves
related to workers compensation, general liability and automobile liability, which are included in “Accrued expenses payable and
other liabilities” in our consolidated balance sheets, totaled $10.2 million and our health insurance reserves totaled $2.6 million. At
December 31, 2023, our claims reserves related to workers compensation, general liability and automobile liability totaled $9.9
million and our health insurance reserves totaled $2.3 million.
Advertising
Advertising costs are expensed as incurred and totaled $0.8 million, $1.1 million and $1.0 million for the years ended
December 31, 2024, 2023 and 2022, respectively.
Income Taxes
The Company files a consolidated federal income tax return with its wholly-owned subsidiaries. The Company is a C-Corporation
under the provisions of the Internal Revenue Code. We utilize the asset and liability approach to measure deferred tax assets and
liabilities based on temporary 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 liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The
effect of a change in tax rate is recognized as income or expense in the period that includes the enactment date of that rate.
The Company recognizes the effect 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 transfer a liability in an orderly
transaction between market participants at the measurement date. The FASB fair value measurement guidance established 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 liabilities in active markets or inputs that are observable for the asset or liability,
either directly or indirectly
65
Level 3 – Unobservable inputs for which little or no market data exists, therefore requiring a company to develop its own
assumptions
The carrying value of financial instruments reported in the accompanying consolidated balance sheets for cash, accounts
receivable, Senior Secured Credit Facility (the “Credit Facility”), accounts payable and accrued expenses payable and other liabilities
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 carrying amounts and fair values of our other financial instruments
subject to fair value disclosures as of December 31, 2024 and 2023 are presented in the table below (amounts in thousands).
December 31, 2024
Carrying
Amount
Fair
Value
Senior unsecured notes due 2028 with interest computed at 3.875% (Level 2)
$
1,244,295
$
1,145,738
December 31, 2023
Carrying
Amount
Fair
Value
Manufacturer flooring plans payable with interest computed at 8.75% (Level 3)
$
2,708
$
2,490
Senior unsecured notes due 2028 with interest computed at 3.875% (Level 2)
1,242,852
1,137,170
At December 31, 2024 and 2023, 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 unobservable inputs, we calculate a
discount rate for our manufacturer flooring plans payable based on the U.S. prime rate plus the applicable margin on our Credit
Facility. The discount rate is disclosed in the above table. The assets collateralized against the manufacturer flooring plans payable
approximate its carrying value.
During the years ended December 31, 2024 and 2023, there were no transfers of financial assets or liabilities in or out of Level 3
of the fair value hierarchy.
Fair Value Measurements on a Nonrecurring Basis
Our non-financial assets, such as goodwill, intangible assets, rental equipment and property and equipment, are adjusted 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 subject the Company to concentrations of credit risk consist primarily of cash deposits and
trade accounts receivable. Credit risk can be negatively impacted by adverse changes in the economy or by disruptions in the credit
markets.
The Company maintains its cash deposits with established 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 procedures. 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 receivables at sales value and establish specific reserves for certain customer accounts identified as
known collection problems due to insolvency, disputes or other collection issues. The amounts of the specific reserves estimated by
management are determined by a loss rate model based on delinquency, as further described above in receivables and contract assets
and liabilities.
We purchase a significant amount of equipment from leading, nationally-known original equipment manufacturers. During the
year ended December 31, 2024, we purchased approximately 48.5% of our equipment from five manufacturers (Haulotte, Skyjack,
JCB, Polaris, and JLG). We believe that while there are alternative sources of supply for the equipment we purchase in each of the
principal product categories, termination of one or more of our relationships with any of our major suppliers of equipment could have
66
a material adverse effect on our business, financial condition or results of operation if we were unable to obtain adequate or timely
rental equipment.
Income (loss) per Share
Income (loss) per common share for the years ended December 31, 2024, 2023 and 2022 is based on the weighted average
number of common shares outstanding during the period. The effects of potentially dilutive securities that are anti-dilutive are not
included in the computation of 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-forfeitable 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, 2024, 2023 and 2022 were less than 1% of total
outstanding shares for each of the years ended December 31, 2024, 2023 and 2022 and consequently, were immaterial to the basic and
diluted EPS calculations. Therefore, use of the two-class method had no impact on our basic and diluted EPS calculations as presented
for the years ended December 31, 2024, 2023 and 2022.
The following table 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):
2024
2023
2022
Net income from continuing operations
$
122,982
$
169,293
$
133,694
Net loss from discontinued operations
—
—
(1,524 )
Net income
$
122,982
$
169,293
$
132,170
Weighted average number of common shares outstanding:
Basic
36,269
36,100
35,943
Effect of dilutive non-vested restricted stock
236
229
146
Diluted
36,505
36,329
36,089
Income (loss) per share: (1)
Basic:
Continuing operations
$
3.39
$
4.69
$
3.72
Discontinued operations
—
—
(0.04 )
Net income per share
$
3.39
$
4.69
$
3.68
Diluted:
Continuing operations
$
3.37
$
4.66
$
3.70
Discontinued operations
—
—
(0.04 )
Net income per share
$
3.37
$
4.66
$
3.66
Common shares excluded from the denominator as anti-dilutive:
Non-vested restricted stock
53
51
81
Dividends declared per common share outstanding
$
1.10
$
1.10
$
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 four reportable segments because we derive our revenues from four business activities: (1) equipment rentals; (2) sales
of rental equipment; (3) sales of new equipment; (4) parts, service and other revenues. Our primary segment is equipment rentals.
These segments are based upon how we allocate resources and assess performance. We revised our reportable segments by
aggregating parts sales and service revenues into one segment during the quarter ended June 30, 2024 due to revised internal reporting
67
provided to our Chief Operating Decision Maker. See Note 16 to the consolidated financial statements regarding our segment
information.
Recent Accounting Pronouncements
Pronouncements Not Yet Adopted
Income Taxes
In December 2023, the FASB issued Accounting Standards Update (“ASU”) No. 2023-09, Income Taxes (Topic 740):
Improvements to Income Tax Disclosures, 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 specific categories in the rate reconciliation, provide additional
information for reconciling items that meet a 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 effective January 1,
2025 and is not expected to have an impact on our financial statements, but will result in expanded tax disclosures.
Income Statement Expenses
In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense
Disaggregation Disclosures (Subtopic 220-40), which is intended to improve expense disclosures, primarily by requiring disclosure of
disaggregated information about certain income statement expense line items on an annual and interim basis. The ASU does not
change the expense captions an entity presents on the face of the income statement; rather, it requires disaggregation of certain
expense captions into specified categories in disclosures within the footnotes to the financial statements. ASU 2024-03 becomes
effective January 1, 2027 and is not expected to have an impact on our financial statements, but will result in expanded expense
disclosures.
Recently Adopted Accounting Pronouncements
Segment Reporting
On January 1, 2024 we adopted ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment
Disclosures, which improved the disclosures about a public entity’s reportable segments and addresses requests for additional, more
detailed information about a reportable segment’s expenses. The amendments in this ASU required disclosure of incremental segment
information on an annual and interim basis for all public entities. The impact of this ASU did not have an impact on our financial
statements, but resulted in expanded reportable segment disclosures.
(3) Acquisitions and Dispositions
2024 Acquisitions
Lewistown Rentals
Effective May 1, 2024, we completed the acquisition of Lewistown Rentals (“Lewistown”), a Lewistown, Montana-based
equipment rental business and three of its affiliated rental operations in Havre, Glasgow and Great Falls, Montana. The acquisition
expands our presence in the Montana market.
The aggregate cash consideration paid was approximately $33.8 million. The acquisition and related fees and expenses were
funded from available cash and borrowings. Customary closing adjustments were finalized during the third quarter of 2024. The
following table summarizes the fair value of the assets acquired and liabilities assumed as of the acquisition date.
68
$’s in thousands
Accounts receivable
$
953
Prepaid expenses and other assets
1
Rental equipment
19,047
Property and equipment
1,177
Customer relationships intangible asset (1)
3,800
Total identifiable assets acquired
24,978
Accounts payable
(79)
Accrued expenses payable and other liabilities
(28)
Total liabilities assumed
(107)
Net identifiable assets acquired
24,871
Goodwill (2)
8,927
Net assets acquired
$
33,798
(1)
The following table reflects the fair values and useful lives of the acquired intangible assets:
Fair Value
(amounts in
thousands)
Life (years)
Customer relationships
$
3,800
10
(2)
The acquired goodwill has been allocated to the equipment rentals reporting unit.
The level of goodwill that resulted from the Lewistown acquisition is primarily reflective of Lewistown’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 purposes.
Acquisition costs for the year ended December 31, 2024 were $0.5 million included within SG&A expenses on the Consolidated
Statement of Income. Since our acquisition of Lewistown on May 1, 2024, significant amounts of rental equipment have been moved
between H&E locations and the acquired locations, and it is impractical to reasonably estimate the amount of Lewistown revenues and
earnings since the acquisition date.
The assets and liabilities were recorded as of May 1, 2024 and the results of operations are included in the Company's
consolidated results as of that date.
Precision Rentals
Effective January 1, 2024, we completed the acquisition of Precision Rentals (“Precision”), an equipment rental company with a
branch located in each of Arizona and Colorado. The acquisition expands our presence in both geographic markets.
The aggregate cumulative cash consideration paid was approximately $124.0 million, which includes $3.5 million of fair value
allocated to a noncompete agreement which is accounted for as a separate transaction from the net assets acquired in the business
combination. The acquisition and related fees and expenses were funded from available cash and borrowings. Customary closing
adjustments were finalized during the second quarter of 2024. The following table summarizes the fair value of the assets acquired and
liabilities assumed as of the acquisition date.
69
$’s in thousands
Accounts receivable
$
4,120
Prepaid expenses and other assets
26
Rental equipment
63,215
Property and equipment
2,122
Operating lease right-of-use assets
68
Customer relationships intangible asset (1)
33,700
Total identifiable assets acquired
103,251
Accounts payable
(57)
Accrued expenses payable and other liabilities
(832)
Operating lease liabilities
(68)
Total liabilities assumed
(957)
Net identifiable assets acquired
102,294
Goodwill (2)
18,187
Net assets acquired
120,481
Noncompetition agreement intangible asset (1)(3)
3,500
Total cumulative consideration
$
123,981
(1)
The following table reflects the fair values and useful lives of the acquired intangible assets:
Fair Value
(amounts in
thousands)
Weighted-
Average Life
(years)
Customer relationships
$
33,700
10
Noncompetition agreements
3,500
5
$
37,200
10
(2)
The acquired goodwill has been allocated to the equipment rentals reporting unit.
(3)
The fair value of the noncompetition agreements is considered to be a separate transaction under ASC 805 and as such,
has been excluded from the purchase price.
The level of goodwill that resulted from the Precision acquisition is primarily reflective of Precision’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 purposes.
Acquisition costs for the year ended December 31, 2024 were $0.4 million included within SG&A expenses on the Consolidated
Statement of Income. Since our acquisition of Precision on January 1, 2024, significant amounts of rental equipment have been moved
between H&E locations and the acquired locations, and it is impractical to reasonably estimate the amount of Precision revenues and
earnings since the acquisition date.
The assets and liabilities were recorded as of January 1, 2024 and the results of operations are included in the Company's
consolidated results as of that date.
2023 Acquisition
Giffin Equipment
Effective November 1, 2023, we completed the acquisition of Mel Giffin, Inc. (d/b/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 available cash and borrowings. Customary closing adjustments were finalized during the third quarter of 2024. The
following table summarizes the fair value of the assets acquired and liabilities assumed as of the acquisition date.
70
$’s in thousands
Accounts receivable
$
870
Prepaid expenses and other assets
10
Rental equipment
12,291
Property and equipment
431
Operating lease right-of-use assets
121
Intangible assets (1)
6,500
Total identifiable assets acquired
20,223
Accrued expenses payable and other liabilities
(19)
Operating lease liabilities
(121)
Total liabilities assumed
(140)
Net identifiable assets acquired
20,083
Goodwill (2)
11,182
Net assets acquired
$
31,265
(1)
The following table reflects the estimated fair values and useful lives of the acquired intangible assets identified based on
our purchase accounting assessments:
Fair Value
(amounts in
thousands)
Weighted-
Average Life
(years)
Customer relationships
$
3,900
10
Noncompetition agreements
2,600
5
$
6,500
8
(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 purposes.
Acquisition costs were $0.1 million and $0.3 million, respectively, and included within SG&A expenses on the Consolidated
Statements of Income during the year ended December 31, 2024 and 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 reasonably 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 Acquisition
One Source Equipment Rentals, Inc.
Effective 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 Kentucky.
The aggregate cash consideration paid was approximately $136.7 million. The acquisition and related fees and expenses were
funded from available cash. Customary closing adjustments 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 table summarizes the fair value of
the assets acquired and liabilities assumed as of the acquisition date.
71
$’s in thousands
Cash
$
337
Accounts receivable
10,406
Inventory
332
Prepaid expenses and other assets
374
Rental equipment
102,436
Property and equipment
4,216
Operating lease right-of-use assets
2,388
Intangible assets (1)
12,300
Total identifiable assets acquired
132,789
Accounts payable
(4,723)
Tax payable
(786)
Operating lease liabilities
(2,388)
Deferred income taxes
(27,653)
Total liabilities assumed
(35,550)
Net identifiable assets acquired
97,239
Goodwill (2)
39,451
Net assets acquired
$
136,690
(1)
The following table reflects the estimated fair values and useful lives of the acquired intangible assets identified based on
our purchase accounting assessments:
Fair Value
(amounts in
thousands)
Weighted-
Average Life
(years)
Customer relationships
$
10,600
10
Noncompetition agreements
1,700
1
$
12,300
9
(2)
The acquired goodwill has been allocated to the equipment rentals reporting unit.
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. Goodwill was not deductible for income tax purposes.
Acquisition costs were $0.8 million and included within 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 rental equipment have been
moved between H&E locations and the acquired locations, and it is impractical to reasonably 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 information (unaudited)
We completed the Giffin acquisition effective November 1, 2023. Therefore, 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.
Additionally, we completed the Precision and Lewistown acquisitions effective January 1, 2024 and May 1, 2024, respectively.
Therefore, our reported Consolidated Statement of Income for the year ended December 31, 2024 does not include Lewistown for the
period from January 1, 2024 through April 30, 2024.
The unaudited pro forma information in the table below (amounts in thousands) is for informational purposes only and gives
effect to the Giffin, Precision and Lewistown acquisitions had all been completed on January 1, 2023 (the “pro forma acquisition
date”). The unaudited 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 unaudited pro forma information
does not reflect any cost savings from operating efficiencies 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 adjustments
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.
72
Year Ended December 31,
2024
2023
Total revenues
$
1,519,490 $
1,520,017
Net income
$
123,147 $
166,710
2022 Disposition
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, subject to customary closing adjustments. 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, assets at a leased facility
in Bossier City, LA and certain other equipment, parts and supplies with a net book value of approximately $14.7 million. We
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 qualify for discontinued
operations as the divestiture does not meet the definition of a component.
2021 Disposition
Crane Sale
On July 19, 2021, the Company entered into a definitive agreement to sell its crane business to a wholly-owned subsidiary of The
Manitowoc Company, Inc. for $130.0 million in cash, which was subject to adjustment 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, subject to customary closing conditions, including regulatory approval under the Hart-Scott-Rodino Act, resulting in proceeds
of $135.9 million, which was subject to finalization of adjustments. Closing adjustments 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 shift to a pure-play rental business. In accordance with ASC 205-20, the
Company determined that discontinued operations presentation was met during the third quarter of fiscal year 2021. There is no
continuing involvement with the crane business. The crane business’s results are reported separately as discontinued operations in our
Consolidated Statements of Income for the year ended December 31, 2022. As permitted, the Company elected not to adjust the
Consolidated Statements of Cash Flows to exclude cash flows attributable to discontinued operations. Accordingly, we disclosed the
items related to the Crane Sale below.
The following tables (amounts in thousands) present the Crane Sale results as reported in income from discontinued operations
within our Consolidated Statements of Income.
Year Ended December 31,
2022
Total revenues
$
—
Total cost of revenues
—
Gross profit
—
Selling, general and administrative expenses
132
Loss on sales of property and equipment, net
—
Loss on sale of discontinued operations
(1,917 )
Loss from discontinued operations
(2,049 )
Other, net
—
Loss before benefit for income taxes
(2,049 )
Benefit for income taxes
(525 )
Net loss from discontinued operations
$
(1,524 )
Cash flows from discontinued operations was as follows (amounts in thousands):
Year Ended December 31,
2022
Operating activities of discontinued operations:
Loss on sale of discontinued operations
$
1,917
73
(4) Receivables
Receivables consisted of the following at December 31, (amounts in thousands):
2024
2023
Trade receivables
$
240,605
$
239,277
Unbilled rental revenue
16,428
14,022
Income tax receivables
1,008
1,048
Other
37
209
258,078
254,556
Less allowance for doubtful accounts
(9,435)
(7,126)
Total receivables, net
$
248,643
$
247,430
(5) Inventories
Inventories consisted of the following at December 31, (amounts in thousands):
2024
2023
Used equipment
$
—
$
212
New equipment
1,955
97,833
Parts, service and other
11,021
11,886
Total inventories, net
$
12,976
$
109,931
The above amounts are presented net of reserves for inventory obsolescence at December 31, 2024 and 2023 totaling
approximately $0.2 million.
(6) Property and Equipment
Net property and equipment consisted of the following at December 31, (amounts in thousands):
2024
2023
Land
$
7,053
$
6,852
Transportation equipment
229,976
184,739
Building and leasehold improvements
114,219
92,561
Office and computer equipment
53,049
51,058
Machinery and equipment
28,399
22,869
Construction in progress
21,612
19,417
454,308
377,496
Less accumulated depreciation and amortization
(211,682)
(193,723)
Total net property and equipment
$
242,626
$
183,773
Total depreciation and amortization on property and equipment was $48.0 million, $34.7 million and $28.8 million for the years
ended December 31, 2024, 2023 and 2022, respectively.
(7) Stock-Based Compensation
The Company issues time-based and performance-based restricted stock units (“RSU”) to certain officers and executives under
our stock-based compensation plan. The RSUs automatically convert to shares of common stock on a one-for-one basis as the awards
vest. The time-based RSUs typically vest over a three year vesting period beginning 12 months from the grant date and thereafter
annually on the anniversary of the grant date. The performance-based RSUs vest based on the achievement of the performance
conditions specific to certain financial metrics during the three year performance period. 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 forfeiture rate is based on historical
experience and revised, if necessary, in subsequent periods for actual forfeitures. For performance-based RSUs, compensation expense
is recognized to the extent that the satisfaction of the performance condition is considered probable.
74
Our Amended and Restated 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 subject to each award, the terms, conditions, performance measures, if any, and other provisions of the award.
Under the 2016 Plan, we may offer deferred shares or restricted shares of our common stock and grant options, including both
incentive stock options and nonqualified stock options, to purchase shares of our common stock. Shares available for future stock-
based payment awards under our 2016 Plan were 2,228,894 shares of common stock as of December 31, 2024.
Non-vested RSUs
The following table summarizes our non-vested RSU activity for the years ended December 31, 2024, 2023 and 2022:
Number of
Shares
Weighted
Average Grant
Date Fair Value
Non-vested RSUs at January 1, 2022
480,147
$
25.56
Granted
281,490
$
36.07
Vested
(160,868) $
27.46
Forfeited
(40,313) $
29.43
Non-vested RSUs at December 31, 2022
560,456
$
30.02
Granted
235,938
$
47.00
Vested
(283,332) $
25.04
Forfeited
(15,666) $
35.79
Non-vested RSUs at December 31, 2023
497,396
$
40.73
Granted
288,792
$
48.77
Vested
(269,318) $
37.86
Forfeited
(19,969) $
46.24
Non-vested RSUs at December 31, 2024
496,901
$
46.73
As of December 31, 2024, we had unrecognized compensation expense of approximately $12.6 million related to non-vested RSU
award payments that we expect to be recognized over a weighted average period of 2.0 years. Stock compensation expense, which is
included in SG&A expenses in the accompanying Consolidated Statements of Income, for the years ended December 31, 2024, 2023
and 2022 was $11.2 million, $10.0 million and $7.3 million, respectively. The total recognized tax benefit amounted to $0.9 million,
$0.7 million and $0.6 million for the years ended December 31, 2024, 2023 and 2022, respectively. The total fair value of vested stock
during the years ended December 31, 2024, 2023 and 2022 was $10.2 million, $7.1 million and $4.4 million, respectively.
Purchases of Company Common Stock
Purchases of our common stock are accounted for as treasury 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
Accrued expenses payable and other liabilities consisted of the following at December 31, (amounts in thousands):
2024
2023
Payroll and related liabilities
$
41,086
$
44,885
Sales, use, property and income taxes
13,832
13,853
Accrued interest
3,497
3,947
Accrued insurance
9,559
8,740
Deferred revenue
5,152
6,808
Other
21,730
9,696
Total accrued expenses payable and other liabilities
$
94,856
$
87,929
(9) Senior Unsecured Notes
On December 14, 2020, we completed an offering 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 subsidiary guarantors and BofA Securities, Inc. There are no registration rights associated with
the Senior Notes or the subsidiary guarantees.
75
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 indenture, dated as of December 14, 2020, by and among the Company, the subsidiary
guarantors named therein, and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Indenture”). Subsequent to
December 15, 2023, the Senior Notes may be redeemed pursuant to a declining schedule of redemption prices set forth in the
Indenture.
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 subordinated indebtedness. The Senior Notes are
unconditionally guaranteed on a senior unsecured basis by all of the Company’s current and future significant domestic subsidiaries
(the “Guarantors”). In addition, the Senior Notes are effectively subordinated to all of the Company’s and the guarantors’ existing and
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 structurally subordinated to all of the liabilities and preferred stock of any of the Company’s
subsidiaries 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 subsidiaries by dividend or loan.
If we experience a change of control, we will be required to offer to purchase the Senior Notes at a repurchase price equal to
101% of the principal amount, plus accrued and unpaid interest to the date of repurchase.
The indenture governing the Senior Notes contains certain covenants that, among other things, limit our ability and the ability of
our restricted subsidiaries 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 affiliates; (vii) merge or consolidate; and (viii) transfer and sell assets. Each of
the covenants is subject to exceptions and qualifications. As of December 31, 2024, we were in compliance with these covenants.
The following table reconciles our Senior Unsecured Notes to our Consolidated Balance Sheets (amounts in thousands):
Balance at December 31, 2022
$
1,241,409
Accretion of discount through December 31, 2023
1,172
Amortization of deferred financing costs through December 31, 2023
271
Balance at December 31, 2023
$
1,242,852
Accretion of discount through December 31, 2024
1,172
Amortization of deferred financing costs through December 31, 2024
271
Balance at December 31, 2024
$
1,244,295
(10) Senior Secured Credit Facility
We and our subsidiaries are parties to a $750.0 million asset based revolving Credit Facility with Wells Fargo Capital Finance,
LLC as administrative agent, and the lenders named therein (the “Credit Facility”).
On February 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 (California),
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
February 2, 2028 and (ii) amended the interest rate to SOFR plus a credit spread adjustment plus an applicable margin of 1.25% to
1.75%, depending on the Average Availability (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-facility, and a guaranty by certain of the Company’s subsidiaries of the obligations under the Credit Facility. In addition, the
Credit Facility remains secured by substantially all of the assets of the Company and certain of its subsidiaries.
At December 31, 2024, we had $199.3 million outstanding under the Credit Facility and could borrow up to approximately $535.9
million, net of a $14.8 million outstanding letter of credit. As of December 31, 2024, the weighted average interest rate under the
Credit Facility was approximately 6.6%. As of December 31, 2024, we were in compliance with our financial covenant under the
Amended and Restated Credit Agreement.
76
The aggregate amounts outstanding as of December 31, 2024 under both the Credit Facility and our Senior Secured Notes (Note
9) of $1,449.3 million mature during 2028.
(11) Leases
We use the rate implicit in the lease to discount lease payments to present value, when available, however, most of our leases do
not provide a readily determinable implicit rate. Therefore, we estimate our IBR to discount the lease payments based on information
available 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, 2024, the weighted average remaining lease term for operating leases was approximately 7.6 years and for
finance leases was approximately 7.8 years. The weighted average discount rate for operating and finance leases was approximately
6.3% and 6.0%, respectively, at December 31, 2024. 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.
The table below presents certain information related to lease costs, under Topic 842, for our operating and finance leases for the
years ended December 31, 2024, 2023 and 2022 (amounts in thousands):
Year Ended December 31,
Classification
2024
2023
2022
Operating lease cost
SG&A expenses
$
37,995
$
31,066
$
27,153
Finance lease costs
Amortization of leased assets
SG&A expenses
445
241
107
Interest on lease liabilities
Interest expense
217
120
52
Variable lease cost
SG&A expenses
3,395
2,607
1,834
Sublease income
Other, net
(3,604 )
(2,844 )
(2,074 )
Total lease cost
$
38,448
$
31,190
$
27,072
The table below presents supplemental cash flow information related to leases for the years ended December 31, 2024, 2023 and
2022 (amounts in thousands):
Year Ended December 31,
2024
2023
2022
Cash paid for amounts included in the measurements of lease
liabilities:
Operating cash flows for operating leases
$
21,272
$
28,409
$
26,407
Operating cash flows for finance leases
217
120
52
Finance cash flows for finance leases
318
162
1,141
The table 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 liabilities recorded on our consolidated balance sheet as of December 31, 2024 (amounts in thousands):
Operating Leases Finance Leases
2025
$
35,804
$
622
2026
42,126
638
2027
41,498
654
2028
41,306
671
2029
38,486
627
Thereafter
106,115
1,820
Total minimum lease payments
305,335
5,032
Less: amount of lease payments representing interest
(65,694)
(1,025)
Present value of future minimum lease payments
$
239,641
$
4,007
The future minimum lease payments of operating leases executed but not commenced as of December 31, 2024 are estimated to
be $2.7 million, $4.7 million, $4.8 million, $5.0 million and $5.1 million for the years ending December 31, 2025, 2026, 2027, 2028
and 2029, respectively, and $30.5 million thereafter. It is expected that these leases will primarily commence during 2025.
77
(12) Income Taxes
Our income tax provision (benefit) for the years ended December 31, 2024, 2023 and 2022, consists of the following (amounts in
thousands):
Current
Deferred
Total
Year Ended December 31, 2024
U.S. Federal
$
8,665
$
28,093
$
36,758
State
3,327
(521)
2,806
$
11,992
$
27,572
$
39,564
Year Ended December 31, 2023
U.S. Federal
$
2,238
$
44,581
$
46,819
State
5,002
2,083
7,085
$
7,240
$
46,664
$
53,904
Year ended December 31, 2022
U.S. Federal
$
—
$
37,680
$
37,680
State
4,306
5,050
9,356
$
4,306
$
42,730
$
47,036
Significant components of our deferred income tax assets and liabilities as of December 31 are as follows (amounts in thousands):
2024
2023
Deferred tax assets:
Accounts receivable
$
2,165 $
1,619
Inventories
44
52
Net operating losses
26,569
65,893
Tax credits
6,947
8,193
Sec 263A costs
92
780
Accrued liabilities
3,954
4,216
Operating lease liabilities
59,955
—
Deferred compensation
1,892
3,225
Interest expense
14,914
18,901
Stock-based compensation
242
182
Goodwill and intangible assets
7,242
8,519
Other assets
44
92
Total deferred tax assets
124,060
111,672
Valuation allowance
(620 )
(3,003 )
Total deferred tax assets, net of valuation allowance
123,440
108,669
Deferred tax liabilities:
Property and equipment
(408,325 )
(420,496 )
Operating lease right-of-use assets
(54,079 )
—
Investments
(1,134 )
(1,126 )
Goodwill and intangible assets
(5,300 )
(4,873 )
Total deferred tax liabilities
(468,838 )
(426,495 )
Net deferred tax liabilities
$
(345,398 ) $
(317,826 )
78
The reconciliation between income taxes computed using the statutory federal income tax rate of 21% to the actual income tax
expense (benefit) is below for the years ended December 31 (amounts in thousands):
2024
2023
2022
Computed tax at statutory rates
$
34,135 $
46,871 $
37,953
Permanent items – other
317
(230 )
850
Nondeductible executive compensation
2,897
2,530
833
Permanent items – impairment of goodwill
—
100
—
State income tax, net of federal tax effect
8,537
7,624
9,068
Change in valuation allowance
(2,384 )
(2,927 )
(1,668 )
Change in uncertain tax positions
1,640
(64 )
—
Change in state tax rates
(5,578 )
—
—
$
39,564 $
53,904 $
47,036
At December 31, 2024, we had available federal net operating loss carry forwards of approximately $119.1 million that do not
expire and state net operating loss carry forwards of approximately $36.8 million, of which $23.8 million expire in varying amounts
from 2025 to 2043 and $13.0 million do not expire. We also had state income tax credits of $11.0 million that expire in varying
amounts from 2025 to 2039.
Management has concluded that it is more likely than not that the federal deferred tax assets are fully realizable through future
reversals of existing taxable temporary differences and future taxable income. Therefore, a valuation allowance is not required to
reduce those deferred tax assets as of December 31, 2024. However, as of December 31, 2024, we have a valuation allowance of $0.6
million for certain state tax credits that are expected to expire prior to utilization. For the year ended December 31, 2024, we recorded
a net valuation allowance release of $2.4 million based on reassessment of scheduled reversals of deferred tax liabilities, projected
future taxable income, and legislative changes that indicate that it is more likely than not that these deferred tax assets will be realized.
A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits is as follows (in
thousands):
2024
2023
2022
Gross unrecognized tax benefits at January 1
$
372 $
1,425 $
—
Increases in tax positions taken in prior years
2,200
—
1,425
Decreases in tax positions taken in prior years
—
(972 )
—
Increases in tax positions taken in current years
—
—
—
Decreases in tax positions taken in current years
—
—
—
Settlements with taxing authorities
—
—
—
Lapse in statute of limitations
(124 )
(81 )
—
Gross unrecognized tax benefits at December 31
$
2,448 $
372 $
1,425
The gross amount of unrecognized tax benefits as of December 31, 2024, if recognized, would affect the effective 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 for the years ended December 31, 2024, 2023 and 2022 is $0.2 million, $0.1 million and
$0.1 million, respectively. We do not expect our unrecognized tax benefits to change materially in the next twelve months.
Our U.S. federal tax returns for 2021 and subsequent years remain subject to examination by tax authorities. We are also subject
to examination in various state jurisdictions for 2020 and subsequent 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-insured retentions, or self-insurance,
and claims arising from the upcoming merger agreement.
Losses that exceed our deductibles and self-insured retentions are insured through various commercial lines of insurance policies.
On November 26, 2024, our excess insurance carrier agreed in principle to settle a contingent liability for $8.0 million related to a
Company automobile liability claim. Pursuant to ASC 450, Contingencies, and other relevant guidance, when the contingency become
both probable and estimable, our consolidated balance sheets will reflect a liability for the total amount of estimated claim and an asset
79
for the portion of the claim recoverable through insurance. Our loss exposure related to this claim is limited to our insurance policy
deductible per claim, which is immaterial to our consolidated statement of operations.
Letters of Credit
The Company had outstanding standby letters of credit issued under its Credit Facility totaling $14.8 million and $12.3 million as
of December 31, 2024 and 2023, respectively. The $30.0 million letters of credit sub-facility expires in May 2025 and can be renewed
for a similar one-year term.
(14) Employee Retirement Benefit Plans
We offer substantially 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 qualified employees as defined by the plan. For the years ended December 31,
2024, 2023 and 2022, we contributed to the plan, net of employee forfeitures, $5.8 million, $5.4 million and $4.6 million, respectively.
We contribute to the Pension Trust 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, 2024, 2023 and 2022, 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 2023. As of the date
that our 2024 consolidated financial statements were issued, the Plan’s Form 5500 was not available for the Plan year ended
December 31, 2024.
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) If a participating employer stops contributing to the Plan, the unfunded obligations of the plan may be borne by the
remaining participating employers.
c) If we choose to stop participating in the Plan, we may be required to pay the Plan an amount based on the unfunded
status of the plan, referred to as withdrawal liability.
The Plan has a green zone status as of December 31, 2023, the most recent date for which a status determination has been made.
The Pension Protection Act of 2006 ranks the funded status of multi-employer pension plans depending upon a plan’s current and
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 status 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 actuary. The Company currently has no intention of withdrawing from the Plan.
(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,
2024, 2023 and 2022, has a 35.0% ownership interest in Perkins-McKenzie Insurance Agency, Inc. (“Perkins-McKenzie”), an
insurance brokerage firm. Mr. Engquist had a 48% ownership interest in Perkins-McKenzie for the years ended December 31, 2023
and 2022. Perkins-McKenzie brokers a substantial portion of our commercial liability 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 $1.4 million, $1.2 million and $1.1 million for the years
ended December 31, 2024, 2023 and 2022, 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, 2024, 2023 and 2022, our purchases totaled less than
$25 thousand, less than $20 thousand and less than $10 thousand, respectively, and our sales to B-C Equipment Sales, Inc. totaled
approximately less than $1 thousand, less than $10 thousand and $0.1 million, respectively.
80
(16) Segment Information
We have identified four reportable segments: equipment rentals, sales of rental equipment, sales of new equipment, and parts,
service and other revenues. These segments are based upon revenue streams and how management of the Company allocates resources
and assesses performance.
We revised our reportable segments by aggregating parts sales and service revenues into one segment during the quarter ended
June 30, 2024 due to revised internal reporting provided to our Chief Operating Decision Maker (“CODM”). The prior year
information has been recast as we previously reported five segments as noted in our Consolidated Financial Statements included as
Item 8 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
The reportable segments have varying revenue generating products and services. Equipment rentals derives revenues from renting
owned equipment to customers. Sales of rental equipment derives revenues by selling equipment from our rental fleet to customers.
Sales of new equipment derives revenues by selling new equipment from manufacturers to customers. Parts, service and other derives
revenues by selling parts to customers, performing maintenance and repair services on rented and owned equipment, and other
ancillary charges.
Our Chief Operating Officer is the Company’s CODM in accordance with ASC 280.
Gross profit is the measure of profit or loss utilized to assess segment performance and allocate resources that is provided to and
reviewed by the Company’s CODM. Cost of Revenues is the significant expense category for our reportable segments. The CODM
uses gross profit to allocate resources (employees, equipment, or capital resources) in operational reviews, forecasting and budgeting
processes. SG&A expenses, interest expense, income tax expense, as well as all other income and expense items below gross profit are
not allocated to our reportable segments and are not provided to or reviewed by our CODM. Segment gross profit is utilized to assess
segment performance while consolidated income from operations and income from operations before provision for income taxes is
utilized to assess company-wide performance.
Assets are identified on a segment basis for inventory, fleet and goodwill. No additional asset information is available on a
segment basis. The Company and its CODM do not utilize or review full financials on a segment basis as that is not how the Company
assesses performance or allocates resources.
The accounting policies of the segments are the same as those described in the summary of significant accounting policies and
there are no differences in accounting policy, basis of accounting or method of measurement between the individual segments and the
consolidated company. There were no sales or transactions between segments for any of the periods presented.
We do not compile discrete financial information by our segments other than the information presented below. The following
table presents information about our reportable segments (amounts in thousands):
81
Years Ended December 31,
2024
2023
2022
Segment Revenues:
Equipment rentals
$
1,253,325
$
1,186,152
$
956,042
Sales of rental equipment
139,201
165,074
90,885
Sales of new equipment
55,597
39,099
92,526
Parts, service and other
68,460
78,891
105,065
Total revenues
1,516,583
1,469,216
1,244,518
Segment Cost of Revenues:
Rental depreciation
375,330
347,022
267,395
Rental expense
173,994
156,818
128,850
Rental other
142,434
128,873
99,554
Equipment rentals
691,758
632,713
495,799
Sales of rental equipment
53,674
65,183
46,569
Sales of new equipment
45,592
33,569
79,430
Parts, service and other
50,359
53,290
67,557
Total cost of revenues
841,383
784,755
689,355
Segment Gross Profit:
Equipment rentals
561,567
553,439
460,243
Sales of rental equipment
85,527
99,891
44,316
Sales of new equipment
10,005
5,530
13,096
Parts, service and other
18,101
25,601
37,508
Total gross profit
675,200
684,461
555,163
Impairment of goodwill
Parts, service and other
—
5,714
—
Unallocated reconciling items:
Selling, general and administrative expenses
455,554
405,432
343,845
Gain from sales of property and equipment, net
9,665
3,389
16,836
Interest expense
(72,954 )
(60,891 )
(54,033 )
Other, net
6,189
7,384
6,609
Income from operations before provision for income taxes
$
162,546
$
223,197
$
180,730
December 31,
2024
2023
Segment identified assets:
Inventories, net of reserves for obsolescence
Sales of rental equipment
$
—
$
212
Sales of new equipment
1,955
97,833
Parts, service and other
11,021
11,886
Rental equipment, net of accumulated depreciation
Equipment rentals
1,841,855
1,756,578
Goodwill
Equipment rentals
126,722
99,708
Sales of rental equipment
8,447
8,447
Total segment identified assets
1,854,831
1,866,509
Unallocated reconciling assets
940,699
773,377
Total assets
$
2,795,530
$
2,639,886
82
Years Ended December 31,
2024
2023
2022
Cash flows from investing activities:
Equipment rentals
Purchase of rental equipment
$
(344,642) $
(661,960) $
(464,434)
Sales of rental equipment
Proceeds from sales of rental equipment
$
138,692
$
163,886
$
83,689
The Company operates primarily in the United States. Our sales to international customers for each of the three years ended
December 31, 2024 was less than 0.3% of total revenues. No one customer accounted for more than 10% of our total revenues for any
of the periods presented.
(17) Subsequent Events
On January 13, 2025, the Company entered into an Agreement and Plan of Merger (the “United Merger Agreement”) with United
Rentals, Inc., a Delaware Corporation (“United Rentals” or “United”) and UR Merger Sub VII Corporation, a Delaware corporation
and wholly owned subsidiary of United, pursuant to which a cash tender offer was commenced on behalf of United to purchase all of
the issued and outstanding shares of our common stock at $92.00 a share. Upon receiving a superior proposal from Herc Holdings
Inc., described in detail below, the United Merger Agreement was terminated on February 18, 2025.
On February 19, 2025, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among
Herc Holdings Inc., a Delaware corporation (“Herc”). The Merger Agreement provides for the acquisition of the Company by Herc in
a two-step transaction, consisting of an exchange offer, followed by a subsequent back-end merger. Pursuant to the Merger
Agreement, Herc will commence an exchange offer on or before March 19, 2025 to acquire any and all of the issued and outstanding
shares of the Company’s common stock, par value $0.01 per share, for a combination of cash and Herc common stock, consisting of
(i) $78.75 in cash, without interest, less any applicable withholding of taxes, and (ii) a fixed exchange ratio of 0.1287 shares of Herc
common stock, without interest, per share. The combination of cash and stock is equal to a total value of approximately $104.89 per
share (the “Offer Price”) based on Herc’s 10-day volume-weighted average price as of market close February 14, 2025. Following
completion of the exchange offer, Herc intends to acquire all remaining shares not exchanged in the offer at the same price
(combination of cash and stock) as in the exchange offer. The transaction is expected to close in the first half of 2025. The transaction
is subject to customary closing conditions, including a minimum tender of at least one share more than 50 percent of then-outstanding
common shares, the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and approval
for listing on the New York Stock Exchange (“NYSE”) of Herc’s common stock to be issued in the Offer and Merger. The Company
and Herc expect to file their Premerger Notification and Report Forms with the FTC and Antitrust Division promptly, which will
begin an initial review period of 30 days.
In February 2025, severance agreements were entered into between the Company and each of the Company’s named executive
officers (each, an “NEO”) (collectively, the “Executive Severance Agreements”). The Executive Severance Agreements provide for
severance payments and benefits in the event that an NEO’s employment is terminated by the Company (or its successor) without
“Cause” or an NEO resigns for “Good Reason”, as defined in the agreement, in either case, within two years following a “change in
control”.
If the Merger is consummated, our Common Stock will be delisted from The NASDAQ Global market and deregistered under
Securities Exchange Act of 1934, as amended, as promptly as practicable following the effective time of the Merger. The Merger
Agreement also contains certain termination rights for Herc and us and further provides that, upon termination of the Merger
Agreement under specified circumstances, including certain terminations in connection with an alternative business combination
transaction as permitted by the terms of the Merger Agreement, we will be required to pay Herc a termination fee of approximately
$145 million, in addition to refunding Herc for the termination fee of $63.5 million paid to United Rentals pursuant to the United
Merger Agreement, if the Company enters into a superior proposal based on terms included in the Merger Agreement.
On February 7, 2025, the Company declared a quarterly dividend of $0.275 per share to stockholders of record as of the close of
business on February 18, 2025, which is to be paid on February 24, 2025.
83
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 procedures that are designed to ensure that information required to be disclosed in the reports
that the Company files or furnishes under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the
Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions
regarding required financial disclosure.
Our Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer,
respectively) have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-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 officer and principal financial officer have concluded that, as of
December 31, 2024, our current disclosure controls and procedures were effective.
The design of any system of control is based upon certain assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated objectives under all future events, no matter how remote, or that the
degree of compliance with the policies or procedures may not deteriorate. Because of its inherent limitations, disclosure controls and
procedures may not prevent or detect all misstatements. Accordingly, even effective disclosure controls and procedures can only
provide reasonable assurance of achieving their control objectives.
Changes in Internal Control Over Financial Reporting
There were no changes in the Company’s internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f))
that occurred during the fourth quarter ended December 31, 2024 that have materially affected, or are reasonably likely to materially
affect, the Company’s internal control over financial reporting.
84
Management’s Report on Internal Control Over Financial Reporting
The management of H&E Equipment Services, Inc. is responsible for establishing 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 reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with U.S. generally accepted accounting principles.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to
be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Any evaluation or
projection of effectiveness to future periods is also subject to risk that controls may become inadequate due to changes in conditions,
or that the degree of compliance with the policies and procedures may deteriorate.
Under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial
Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2024,
based on the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of
the Treadway Commission (“COSO”). Based on that evaluation, management concluded that, as of December 31, 2024, our internal
control over financial reporting was effective based on these criteria.
The effectiveness of our internal control over financial reporting as of December 31, 2024, has been audited by BDO USA, P.C.,
an independent registered public accounting firm, as stated in their report, which is included herein.
Date: February 21, 2025
/s/ Bradley W. Barber
Bradley W. Barber
Chief Executive Officer and Director
/s/ Leslie S. Magee
Leslie S. Magee
Chief Financial Officer and Secretary
85
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, 2024,
based on criteria established 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, effective internal
control over financial reporting as of December 31, 2024, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”),
the consolidated balance sheets of the Company as of December 31, 2024 and 2023, the related consolidated statements of income,
stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2024, and the related notes and the
schedule appearing under Item 15(a)(2) and our report dated February 21, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of
the effectiveness 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 reasonable assurance about whether effective 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 effectiveness of internal control
based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable 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 reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable 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 reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ BDO USA, P.C.
Dallas, Texas
February 21, 2025
86
Item 9B. Other Information
During the fiscal quarter ended December 31, 2024, no director or officer of the Company adopted or terminated a "Rule 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 Officers and Corporate Governance
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the names, ages and titles of each person who is a current director or executive officer.
Name
Age
Title
John M. Engquist
71
Executive Chairman of the Board
Bradley W. Barber
52
Chief Executive Officer and Director
Leslie S. Magee
56
Chief Financial Officer and Secretary
John McDowell Engquist
46
Chief Operating Officer and President
Paul N. Arnold
78
Director
Gary W. Bagley
78
Lead Independent Director
Bruce C. Bruckmann
71
Director
Patrick L. Edsell
76
Director
Thomas J. Galligan III
80
Director
Lawrence C. Karlson
82
Director
Jacob Thomas
57
Director
Mary P. Thompson
62
Director
Suzanne H. Wood
65
Director
Directors
Paul N. Arnold has been a Director of the Company since November 2006. Mr. Arnold served as a director of Town Sports
International Holdings, Inc. from April 1997 through March 2015 and served as the non-executive Chairman of the Board of Directors
from May 2006 until February 2009. Mr. Arnold served as Chief Executive Officer of CORT Business Services, Inc., acquired by
Berkshire Hathaway in 2000, from 1992 until June 2012. From 1992 to 2000, Mr. Arnold also served as President and as a director of
CORT Business Services. Prior to 1992, Mr. Arnold held various positions over a twenty-four year period within CORT Furniture
Rental, a division of Mohasco Industries, Inc.
Mr. Arnold has experience leading a company with branch operations and also has extensive experience in the rental business and
with corporate transactions. As a director of other public companies, Mr. Arnold has experience with corporate governance,
compensation and audit committee matters. He currently serves as Chairman of the Company’s Compensation Committee and as a
member of the ESG Committee. Mr. Arnold is an independent director.
Gary W. Bagley was appointed as Lead Independent Director in May 2023 and has served as a Director of the Company since the
formation of the Company in September 2005. From September 2005 to December 31, 2018, Mr. Bagley served as Chairman of the
Board of the Company. Mr. Bagley served as President of ICM Equipment Company L.L.C. (“ICM”) since 1996 and Chief Executive
Officer from 1998 until ICM merged with and into H&E LLC in June 2002, when he became executive Chairman and a Director of
H&E LLC. He retired as an executive of H&E LLC in 2004. Prior to 1996, he held various positions at ICM, including Salesman,
Sales Manager and General Manager. Mr. Bagley also served as Vice President of Wheeler Machinery Co. Since our acquisition of
Eagle High Reach Equipment, LLC and Eagle High Reach Equipment, Inc. in February 2006, Mr. Bagley has served as a manager and
director, respectively, of Eagle High Reach Equipment, LLC (now H&E Equipment Services (California), LLC) and Eagle High
Reach Equipment, Inc. (now H&E California Holding, Inc.). Previously, Mr. Bagley served as interim Chief Executive Officer and as
a director of Eagle High Reach Equipment, Inc. from February 2004 to February 2006 and as Chief Executive Officer and as a director
of Eagle High Reach Equipment, LLC from December 2004 to February 2006. Mr. Bagley has served in the past on a number of
dealer advisory boards and industry association boards. Mr. Bagley currently serves as owner and manager of Bagley Family
Investments, DBA Cougar Ridge Lodge, located in Torrey, Utah.
87
Mr. Bagley has extensive experience both with the Company and in the construction equipment industry. He also had overall
responsibility as chief executive officer of the equipment company which merged with and into our Company’s predecessor in
2002. He currently serves as a member of the Company’s Finance Committee and ESG Committee. Mr. Bagley is an independent
director.
Bruce C. Bruckmann has been a Director of the Company since its formation in September 2005. He served as a Director of H&E
LLC from its formation in June 2002 until its merger with and into the Company in February 2006. Mr. Bruckmann served as a
director of both of the Company’s predecessor companies, Head & Engquist and ICM. Mr. Bruckmann is a founder and has been a
Managing Director of Bruckmann, Rosser, Sherrill & Co., Inc. since its formation in 1995. He served as an officer of Citicorp Venture
Capital Ltd. from 1983 through 1994. Prior to joining Citicorp Venture Capital, Mr. Bruckmann was an associate at the New York law
firm of Patterson, Belknap, Webb & Tyler. Mr. Bruckmann served as a director of MWI Veterinary Supply, Inc. from 2002 to
February 2015, as a director of TownSports International, Inc. from 1996 to April 2015 and as a director of Heritage-Crystal Clean,
Inc. from 2004 to October 2023. Mr. Bruckmann has served as a director of Mohawk Industries, Inc. since 1992. Mr. Bruckmann
previously served as a director of AmerisourceBergen, California Pizza Kitchen, Chromcraft Revington and Cort Business Services.
Mr. Bruckmann also currently serves as a director of a private company.
Mr. Bruckmann has extensive experience with corporate transactions, such as financings and acquisitions, as well as experience
as a board member of numerous public companies, including service on audit, compensation, executive, finance and nominating and
corporate governance committees. He also has significant experience with the Company’s business and operations and served as a
director of both of the Company’s predecessor companies. He currently serves as the Chairman of the Company’s Finance Committee
and as a member of the Company’s Corporate Governance and Nominating Committee. Mr. Bruckmann is an independent director.
Patrick L. Edsell has served as a Director of the Company since May 2011. Mr. Edsell has over 25 years of executive experience
and over 20 years of board experience. He previously served as acting Chief Financial Officer, on a part-time basis, for
SpectraSensors, Inc. from 2008 to 2010 and as Senior Vice President and General Manager of Avanex Corporation from 2007 to
2008. He was Chief Executive Officer of NP Photonics, Inc. from 2004 to 2007 and Gigabit Optics Corporation from 2002 to 2004.
Prior to that, he was Chairman, President and Chief Executive Officer of Spectra Physics, Inc. from 1997 to 2002 and President of
Spectra-Physics Lasers and Optics Group from 1990 to 1997. Mr. Edsell was Chief Financial Officer of Pharos AB from 1984 to 1991
and Vice President, Finance of GP Technologies from 1982 to 1984. He was a director and Chairman of the Audit Committee of
Captiva Software Systems from 2001 to 2005 and Chairman from 2004 to 2005. Prior to that, he was a director of FLIR Systems, Inc.
in 1998 and 1999.
Mr. Edsell is experienced in leading other companies and is also experienced with corporate transactions, such as financings and
acquisitions. As a director of other public and private companies, Mr. Edsell has experience with audit, corporate governance and
compensation committee matters. Mr. Edsell currently serves as Chairman of the Company’s Audit Committee and is a member of
the Compensation Committee. Mr. Edsell also serves the Board as an “audit committee financial expert” as defined under SEC rules
and is an independent director.
Thomas J. Galligan III has served as a Director since May 2011. Mr. Galligan served as Executive Chairman and a member of the
board of directors of Papa Gino’s Holdings Corp. (“Papa Gino’s”) from April 2009 until his retirement in February 2014. From
October 2008 until March 2009, Mr. Galligan was Chairman and Chief Executive Officer of Papa Gino’s and from May 1996 until
October 2008, Mr. Galligan served as Chairman, President and Chief Executive Officer. Prior to joining Papa Gino’s in March 1995
as Executive Vice President, Mr. Galligan held executive positions at Morse Shoe, Inc. and PepsiCo, Inc. Mr. Galligan currently
serves as a director of a private company.
Mr. Galligan has experience leading a company with branch operations and has extensive experience with corporate
transactions. As a director of other public and private companies, Mr. Galligan has experience with corporate governance,
compensation and audit committee matters. Mr. Galligan is the Chairman of the ESG Committee and a member of the Company’s
Audit Committee and Compensation Committee. Mr. Galligan also serves the Board as an “audit committee financial expert” as
defined under SEC rules and is an independent director.
Lawrence C. Karlson has been a Director of the Company since its formation in September 2005. He served as a Director of H&E
LLC from its formation in June 2002 until its merger with and into the Company in February 2006. He previously served as Chairman
and CEO of Berwind Financial Corporation from 2001 to 2004. Mr. Karlson also previously served as Chairman of Spectra-Physics
AB and President and CEO of Pharos AB. He served as a director of CDI Corporation from 1989 to September 2017. Previously he
was Chairman and a director of Mikron Infrared, Inc. and served as a director of the Campbell Soup Company from 2009 to
November 2015. Mr. Karlson currently serves as a board member of a private company. Mr. Karlson is the author of Corporate Value
Creation, published by John Wiley & Sons.
Mr. Karlson is experienced in leading other companies and is also experienced with corporate transactions. As a director of other
public companies, Mr. Karlson has experience with corporate governance, compensation and audit committee matters. He currently
serves as a member of the Company’s Corporate Governance and Nominating Committee and Compensation Committee. From 2005
88
through February 2020, Mr. Karlson also served as a member of the Company’s Audit Committee. Mr. Karlson is an independent
director.
Jacob Thomas has been a Director of the Company since September 2022. He currently serves as the Chief Executive Officer of
Grain & Protein Technologies. He recently served as the Chief Executive Officer of The Carlstar Group LLC from 2018 until March
of 2024. Mr. Thomas previously served as Group President, Engine Mobile Filtration and Executive Officer of CLARCOR, from 2015
to 2018, President, Diaphragm and Dosing Pumps Group, of IDEX Corporation, from 2014 to 2015, and President, Latin America,
and Senior Vice President, Global Marketing and Product Development, of Terex Corporation, from 2007 to 2014. Mr. Thomas
received his Master of Business Administration in Finance and Marketing from The University of Chicago, Booth School of Business,
his Master of Science in Mechanical Engineering from The Ohio State University, and his Bachelor of Science in Mechanical
Engineering from the Indian Institute of Technology.
Mr. Thomas has experience in the construction equipment industry, experience leading other companies and experience with
corporate transactions. Mr. Thomas is a member of the company’s Corporate Governance and Nominating Committee and is an
independent director.
Mary P. Thompson has been a Director of the Company since May 2021. Ms. Thompson previously served on the Board from
September 2019 to March 2021. Ms. Thompson serves as President of Titan Technologies, Inc. and has served as a consultant at
Bruckmann, Rosser, Sherrill & Co., a private equity firm, since 2019. Ms. Thompson previously served as the Chief Financial Officer
and Treasurer of Taronis Fuels, Inc. from November 2020 to December 2020 and from April 2021 to February 2022 and as a director
of Taronis during December 2020 and April 2021. Ms. Thompson previously served as the Senior Vice President of Finance of MWI
Animal Health Division of AmerisourceBergen Inc. from February 2015 to October 2018, and the Chief Financial Officer of MWI
Veterinary Supply, Inc. from June 2002 to February 2015. In addition, Ms. Thompson served as a board member of Winc, Inc. from
May 2021 to August 2023 and Heritage-Crystal Clean, Inc. from July 2022 to October 2023. Idaho Governor, Brad Little, appointed
Ms. Thompson on July 13, 2023 to the Idaho Endowment Fund Investment Board.
Ms. Thompson has experience leading other companies and is also experienced with corporate transactions. Ms. Thompson has
experience with audit committee matters and is currently serving the Board as an “audit committee financial expert” as defined under
the SEC rules and is an independent director. Ms. Thompson is the Chairperson of the Corporate Governance and Nominating
Committee and is a member of the company’s Audit Committee.
Suzanne H. Wood has been a Director of the Company since March 2023. Ms. Wood previously was Senior Vice President and
Chief Financial Officer of Vulcan Materials Company from September 2018 to August 2022 and also served as Secretary from
September 2019 to December 2019. From 2012 to 2018, she served as Group Finance Director and Chief Financial Officer of Ashtead
Group plc, a FTSE 50 international equipment rental company serving the construction industry and other markets. Prior to that, she
was Executive Vice President and Chief Financial Officer of Sunbelt Rentals, Inc., the North American subsidiary of Ashtead Group
plc. As a certified public accountant, she also previously held Chief Financial Officer positions at Tultex Corporation and Oakwood
Homes Corporation. She currently serves on the board of directors as the Senior Independent Director and is chair of the audit
committee of RELX Group, a FTSE 25 global professional information and analytics company. She also serves on the board of
directors and is chair of the audit committee of Ferguson plc, a leading distributor of plumbing and heating products in North
America.
Ms. Wood has extensive experience in the construction equipment industry. Ms. Wood additionally has experience leading a
company with branch operations and also has extensive experience with corporate transactions. As a director of other public and
private companies, Ms. Wood has experience with audit, corporate governance and compensation committee matters. Ms. Wood is a
member of the company’s Audit Committee, is currently serving the Board as an “audit committee financial expert” as defined under
the SEC rules and is an independent director.
Executive Officers
John M. Engquist was appointed Executive Chairman of the Board on January 1, 2019. Previously, Mr. Engquist served as Chief
Executive Officer and Director of the Company since its formation in September 2005. Mr. Engquist served as President of the
Company since its formation in September 2005 until November 2, 2012. He had served as President, Chief Executive Officer and
Director of H&E Equipment Services LLC (“H&E LLC”), the predecessor to the Company, from its formation in 2002 until its
merger with and into the Company in February 2006. He served as President and Chief Executive Officer of Head & Engquist
Equipment, LLC (“Head and Engquist”) from 1990 and director of Gulf Wide Industries, LLC (“Gulf Wide”) from 1995, both
predecessor companies of H&E LLC. From 1975 to 1990, he held various operational positions at Head & Engquist, starting as a
mechanic’s helper. He is a director and serves on several committees for the LSU Foundation Board of Directors. Mr. Engquist also
serves as a Director on the Board of Directors and as a member of the Finance Committee of Franciscan Ministries of Our Lady
Health System, based in Baton Rouge, Louisiana. Mr. Engquist also serves on the Board of Directors of Mohawk Industries, Inc., a
public company based in Calhoun, Georgia as well as on the Audit Committee and Corporate Governance Committee for Mohawk
Industries, Inc.
89
As Executive Chairman of the Board, Mr. Engquist leads the Company in its strategic planning, oversees merger and acquisition
opportunities on a full-time basis, and works with the Company’s Chief Financial Officer to ensure an appropriate capital structure to
support the Company’s growth plans while maintaining the financial health of the Company. Mr. Engquist’s long history with the
Company and its predecessors dating back to 1975 provides him with unparalleled experience with the Company’s operations,
industry and corporate transactions. He currently serves as a member of the Company’s Finance Committee.
Bradley W. Barber serves as Chief Executive Officer and a Director of the Company. Previously, Mr. Barber was appointed Chief
Executive Officer, President and Director of the Company on January 1, 2019. Mr. Barber resigned as President of the Company
effective January 1, 2021 as the Board approved the promotion of Mr. John McDowell Engquist to President and Chief Operating
Officer, effective as of such date. From November 2012 to December 31, 2018, Mr. Barber was President and Chief Operating Officer
of the Company, from June 2008 to November 2012, Mr. Barber was Executive Vice President and Chief Operating Officer of the
Company, and from November 2005 to May 2008, he was Executive Vice President and General Manager of the Company. Mr.
Barber served as Vice President, Rental Operations of H&E LLC from February 2003 to November 2005 and as Director of Rental
Operations for H&E LLC and its predecessor company, Head & Engquist. Prior to joining Head & Engquist in March 1998, Mr.
Barber worked in both outside sales and branch management for a regional equipment company.
Mr. Barber’s day-to-day leadership of the Company in a variety of senior management positions, as well as his long history with
the Company, provides him with unparalleled experience with the Company’s operations, industry and corporate transactions.
Leslie S. Magee has served as Chief Financial Officer and Secretary of the Company since its formation in September 2005. Ms.
Magee served as acting Chief Financial Officer of H&E LLC from December 2004 through August 2005, at which time she was
appointed Chief Financial Officer and Secretary. She continued as Chief Financial Officer and Secretary until H&E LLC’s merger
with and into the Company in February 2006. Previously, Ms. Magee served as Corporate Controller for H&E LLC and Head &
Engquist. Prior to joining Head & Engquist in 1995, Ms. Magee spent five years working for Hawthorn, Waymouth & Carroll, L.L.P,
an accounting firm based in Baton Rouge, Louisiana. Ms. Magee is a Certified Public Accountant and is a member of the American
Institute of Certified Public Accountants and the Louisiana Society of Certified Public Accountants.
John McDowell Engquist serves as President and Chief Operating Officer of the Company effective January 2021. Mr. Engquist
(McDowell) joined the company in June 2002 and has been employed in several job capacities, including Sales Representative,
Branch Manager, Regional and Senior Regional Vice President and most recently as the Company’s Executive Vice President, a
position he held from January 2018 through January 2021.
CORPORATE GOVERNANCE
In accordance with the Delaware General Corporation Law and the Company’s Amended and Restated Certificate of
Incorporation and Amended and Restated Bylaws, the Company’s business, property and affairs are managed under the direction of
the Board of Directors. Although the Company’s non-management directors are not involved in the day-to-day operating details, they
are kept informed of the Company’s business through reports and materials provided to them regularly, as well as by operating,
financial and other reports presented by the officers of the Company at meetings of the Board of Directors and committees of the
Board of Directors.
Board Leadership Structure and Lead Independent Director. On January 1, 2019, John M. Engquist was named Executive
Chairman of the Board upon the appointment of Bradley W. Barber as Chief Executive Officer and Director. The Board of Directors
retains the flexibility to determine whether the positions of Chief Executive Officer (“CEO”) and Chairman of the Board should be
combined or separated. This flexibility permits the Board to organize its functions and conduct its business in a manner it deems most
effective. By having Mr. Engquist serve as Executive Chairman, he acts as a bridge between the Board and the operating organization
and provides critical leadership for future strategic initiatives and challenges and the capitalization of the Company. Mr. Engquist’s
previous experience as CEO of the Company enables him to provide unique insight into the Company. This Board structure enables
the CEO, Mr. Barber, to focus on managing the Company’s business. Mr. Barber provides very hands-on leadership overseeing the
business on a day-to-day basis, and the Corporate Governance and Nominating Committee believes that currently it is most effective
to keep the principal executive officer and the Board chair positions separate. The Board believes that given the proven leadership
capabilities, breadth of industry experience and business success of both Mr. Engquist and Mr. Barber, the Company and its
stockholders are best served by this leadership structure.
The Board has a lead independent director (the “Lead Independent Director”) in connection with its oversight of the management
and business affairs of the Company. In circumstances where the Executive Chairman of the Board is not independent (as determined
by the Board in accordance with the corporate governance listing standards of the Nasdaq Stock Market), such as is presently the case,
the independent members of the Board will appoint from among their number a Lead Independent Director. The Lead Independent
Director generally assists in optimizing the effectiveness and independence of the Board by performing such duties as described in its
Charter on behalf of the Board, and such other duties as determined from time to time by the Board and/or its independent members.
These duties include presiding at and calling, when appropriate, meetings or “executive sessions” of the independent directors and of
90
the non-employee directors of the Board; presiding at meetings of the Board in the absence of the Chair or upon request of the Chair;
serving as a liaison between members of the Board, the Chair, and the CEO and to stockholders who request direct communications
and consultation with the Board; advising and consulting with the Chair and CEO on the general scope and type of information to be
provided in advance and/or at Board meetings and on Board meeting schedules and agenda items; and such other duties as the Board
sees fit. Mr. Bagley has served as Lead Independent Director effective May 2023.
We believe currently that this structure of a separate Board chair and principal executive officer, combined with a Lead
Independent Director, enables each person to focus on their respective areas of our Company’s leadership and reinforces the
independence of our Board as a whole. We believe this structure also results in an effective balancing of responsibilities, experience
and independent perspective; reinforces and preserves management accountability; provides a structure that allows the Board to set
objectives, monitor performance and oversee risk management; and enhances shareholder value.
The Board’s Role in Risk Oversight. The Board as a whole has responsibility for the general oversight of risk, and the Board’s
committees address and report to the Board on any individual risk areas within their purview. Risk and risk management is a
recurring agenda item at regular Board and Board Committee meetings, and the Board also discusses any specific risk topics as
applicable. The Company’s senior management makes presentations to the full Board as to the areas of principal risk, as well as on
the processes that the Company has in place to identify, assess and report such risks.
The Board committees report to the Board on their consideration of any risks within their respective areas of focus. The Audit
Committee primarily oversees risks relating to or arising from financial and disclosure controls and procedures, cybersecurity and
accounting and other financial matters. The Company’s Chief Financial Officer and Chief Information Officer report to the Audit
Committee on the applicable risks and related risk management, and the Company’s internal auditors, compliance manager, and
independent auditors each regularly provide reports at Audit Committee meetings. The Compensation Committee has considered
whether the Company’s compensation policies and practices create risks that are reasonably likely to have a material adverse effect on
the Company’s business or operations. The Corporate Governance and Nominating Committee, the Finance Committee and the
Environmental, Social and Governance (ESG) Committee review any risks that come within their respective areas of responsibility
(e.g., governance in the case of the Corporate Governance and Nominating Committee, in the case of the Finance Committee, any
extraordinary corporate transactions that such committee may consider, and environmental, social and governance oversight and
responsibility in the case of the ESG Committee).
Code of Conduct. The Company is committed to ethical business practices. We have a corporate Code of Conduct that applies
to all of the Company’s employees and directors and a code of ethics for the Company’s principal executive officer, principal financial
officer and principal accounting officer within the meaning of the SEC regulations adopted under the Sarbanes-Oxley Act of 2002, as
amended. The Company’s corporate Code of Conduct can be found on the Company’s Internet website at www.herentals.com under
the heading “Our Company/Investor Relations/Corporate Governance/Governance Documents”. Please note that none of the
information on the Company’s website is incorporated by reference in this report on Form 10-K.
Committees of the Board of Directors. The Board of Directors currently has five standing committees: Audit Committee,
Compensation Committee, Corporate Governance and Nominating Committee, Finance Committee and ESG Committee. Charters for
the Audit Committee, Compensation Committee, Corporate Governance and Nominating Committee and ESG Committee can be
found on the Company’s website at www.herentals.com under the heading “Our Company/Investor Relations/Corporate
Governance/Governance Documents”.
Audit Committee —The Audit Committee operates under a written charter adopted by the Board of Directors, which is available
on the Company’s Internet website. The Audit Committee provides assistance to the Board in fulfilling its oversight responsibility to
the stockholders, potential stockholders, the investment community, and others relating to (i) the integrity of the Company’s financial
statements and financial reporting processes; (ii) the Company’s systems of internal accounting and financial controls, including
internal controls over financial reporting and the Company's policies and procedures to assess, monitor, and manage business risk,
including cybersecurity and data privacy risks; (iii) performance of the Company’s internal auditors and independent registered public
accounting firm; (iv) the independent registered public accounting firm’s qualifications and independence; (v) the annual independent
audit of the Company’s consolidated financial statements; and (vi) the Company’s compliance with ethics policies, legal policies and
regulatory requirements, as applicable. In so doing, it is the responsibility of the Audit Committee to maintain free and open
communication among the Audit Committee, the independent registered public accounting firm, the internal auditors and Company
management. The Audit Committee is also directly supported in risk oversight by the Chief Financial Officer, who provides periodic
reports to the Audit Committee on risks arising from financial and disclosure controls and procedures, accounting and other financial
matters, and the Chief Information Officer, who provides periodic reports to the Audit Committee on risks arising from data privacy
and information and infrastructure security programs, including cybersecurity. In discharging its oversight role, the Audit Committee
is empowered to investigate any matter brought to its attention with full access to all books, records, facilities and personnel of the
Company and the power to retain at the expense of the Company independent outside counsel or other experts or advisers as it deems
91
necessary to carry out its duties. A detailed list of the Audit Committee’s functions is included in its charter, a copy of which can be
found on the Company’s Internet website.
The Company maintains a policy that the Audit Committee review transactions in which the Company and its directors, executive
officers or their immediate family members are participants to determine whether a related person has a direct or indirect material
interest. The Audit Committee is responsible for reviewing and, if appropriate, approving or ratifying any such related party
transaction. The Board has orally communicated this policy.
The members of the Audit Committee are currently Messrs. Edsell and Galligan and Ms. Thompson and Wood. Mr. Edsell is the
Chair of this committee. The Board has determined in its business judgment that each member of the Audit Committee is financially
literate and that Messrs. Edsell and Galligan and Ms. Thompson and Wood are “independent” as defined in the applicable NASDAQ
listing standards and the applicable rules under the Exchange Act. In addition, the Board has determined that Messrs. Edsell and
Galligan and Ms. Thompson and Wood are “audit committee financial experts” as that term is defined in Item 407(d)(5) of Regulation
S-K of the Exchange Act. The Audit Committee held five meetings in 2024.
Compensation Committee—The Compensation Committee operates under a written charter adopted by the Board of Directors, a
copy of which can be found on the Company’s Internet website. The Compensation Committee discharges the Board’s responsibilities
relating to the compensation of the Company’s Chief Executive Officer, the Company’s other executive officers and its directors. The
Compensation Committee has overall responsibility for evaluating and approving executive officer and director compensation plans,
policies and programs of the Company, as well as all equity-based compensation plans and policies, including the Company’s 2016
Stock-Based Incentive Compensation Plan (the “2016 Incentive Plan”). The Compensation Committee evaluates and addresses any
potential risks related to these compensation policies and practices that are reasonably likely to have a material adverse effect on the
Company’s business or operations.
On an annual basis, the Compensation Committee reviews and sets the compensation of the Chief Executive Officer taking into
account a variety of factors, as more fully described in the “Compensation Discussion and Analysis”. The Compensation Committee
also sets compensation for certain other executive officers after considering recommendations provided by the Chief Executive Officer
and a variety of other factors, as more fully described in the “Compensation Discussion and Analysis”.
On an as-needed basis, the Compensation Committee may retain independent compensation consultants to assist the
Compensation Committee in evaluating and structuring our executive compensation programs and making compensation
decisions. Pearl Meyer & Partners LLC (“Pearl Meyer”) served as a consultant to the Compensation Committee during fiscal year
2024.
The Compensation Committee is authorized to delegate any of its responsibilities to subcommittees, as the Compensation
Committee deems appropriate. To date, the Compensation Committee has not exercised this right. For additional description of the
Compensation Committee’s processes and procedures for consideration and determination of executive officer and director
compensation, see the “Compensation Discussion and Analysis”.
The current members of the Compensation Committee are Messrs. Arnold, Edsell, Galligan and Karlson, and Mr. Arnold is the
Chair of this committee. The Board has determined in its business judgment that Messrs. Arnold, Edsell, Galligan and Karlson are
“independent” as defined in the applicable NASDAQ listing standards. The members of the Compensation Committee are also non-
employee directors under SEC Rule 16b-3 and outside directors under Section 162(m) of the Internal Revenue Code of 1986, as
amended. The Compensation Committee met four times in 2024. For additional information on the Compensation Committee, see
“Compensation Discussion and Analysis”.
Corporate Governance and Nominating Committee—The Corporate Governance and Nominating Committee operates under a
written charter adopted by the Board of Directors, a copy of which can be found on the Company’s Internet website. The primary
functions of the Corporate Governance and Nominating Committee are (i) to assist the Board by identifying individuals qualified to
become Board members and members of Board committees, to recommend to the Board the director nominees for the next annual
meeting of stockholders, and to recommend to the Board nominees for each committee of the Board; (ii) to lead the Board in its
annual review of the Board’s, its committees’ and management’s performance; and (iii) to review, as appropriate, the Company’s
corporate governance structure and recommend any proposed changes to the Board. The Corporate Governance and Nominating
Committee identifies individuals, including those properly submitted and recommended by stockholders, believed to be qualified as
candidates for Board membership. The Corporate Governance and Nominating Committee has the authority to retain search firms to
assist it in identifying candidates to serve as directors. In addition to any other qualifications the Corporate Governance and
Nominating Committee may in its discretion deem appropriate, all director candidates should possess high personal and professional
ethics, integrity and values, and should have sufficient time available to devote to service on the Board and Board committees. A
majority of the Board must be comprised of independent directors. The Corporate Governance and Nominating Committee also
considers diversity, including with respect to gender, ethnicity, culture and experience as a consideration for potential candidates. In
identifying and recommending director candidates, the Corporate Governance and Nominating Committee considers each individual’s
specific experience and qualifications to determine that individual's desirability and suitability for service on the Company’s Board,
and also considers the qualifications and composition of the Board as a whole.
92
The Corporate Governance and Nominating Committee considers stockholder nominees for directors in the same manner as
nominees for director from other sources. Stockholder suggestions for nominees for director should be submitted to the Company’s
corporate Secretary no later than the date by which stockholder proposals for action must be submitted (see “Submission of
Stockholder Proposals and Director Nominations” below) and should include the following information: (a) the recommending
stockholder’s name, address, telephone number and the number of shares of the Company’s common stock held by such individual or
entity and (b) the recommended candidate’s biographical data, statement of qualification and written consent to nomination and to
serving as a director, if elected.
The current members of the Corporate Governance and Nominating Committee are Messrs. Bruckmann, Karlson and Thomas and
Ms. Thompson. Ms. Thompson is the Chair of this committee. The Board has determined in its business judgment that Messrs.
Bruckmann, Karlson and Thomas and Ms. Thompson are “independent”, as defined in the applicable NASDAQ listing standards. The
Corporate Governance and Nominating Committee held one meeting during 2024.
ESG Committee—The ESG Committee was established by the Board of Directors and operates under a written charter, a copy of
which can be found on the Company’s Internet website. The ESG Committee oversees and advises the Board on the Company’s goal
setting, strategies and commitments related to sustainability and ESG, including climate risks and opportunities, human rights and
human capital management, community and social impact, and diversity and inclusion. The Committee meets with the internal ESG
task force and other appropriate members of management regarding significant sustainability and ESG-related events and matters and
monitor the Company’s performance related to its sustainability and ESG goal setting, strategies and commitments. The Committee
reviews and oversees the policies and procedures used to prepare sustainability and ESG-related statements and disclosures, which are
published on our Company’s ESG page of our website, which we created as part of our commitment to advancing our ESG reporting
and disclosures, as well as any other duties assigned to it by the Board of Directors. We are committed to environmental stewardship
and social responsibility and the ESG Committee continues to oversee actions we take to further these objectives and meet our goals.
The current members of the ESG Committee are Messrs. Arnold, Bagley and Galligan, and Mr. Galligan is the Chair of this
committee. The ESG Committee held two meetings during 2024.
Finance Committee—The Finance Committee was established by the Board of Directors and operates under a written charter. The
Finance Committee oversees and reviews any significant financial affairs and policies of the Company and oversees and monitors all
material potential business and financial transactions, as well as any other duties assigned to it by the Board of Directors. The current
members of the Finance Committee are Messrs. Bagley, Bruckmann and Engquist, and Mr. Bruckmann is the Chair of this
committee. The Finance Committee met twelve times in 2024.
DELINQUENT SECTION 16(a) REPORTS
The rules of the SEC require the Company to disclose late filings of stock transaction reports by its executive officers and
directors and by certain beneficial owners of the Company’s common stock. Based on our records and other information, we believe
that each of our officers who are subject to Section 16(a), directors and certain beneficial owners of the Company’s common stock
complied with all Section 16(a) filing requirements applicable to them during 2024 on a timely basis.
The reports (Forms 3, 4 and 5) filed under Section 16(a) of the Exchange Act reflecting transactions in Company securities are
posted on our Internet website by the end of the business day after the report’s filing.
Compensation Committee Interlocks and Insider Participation
None of the Company’s executives serve as a member of the board of directors or compensation committee of an entity that has
an executive officer serving as a member of the Company’s Compensation Committee. None of the Company’s executives serve as a
member of the compensation committee of an entity that has an executive officer serving as a member of the Company’s Board of
Directors. All of the members of the Compensation Committee served on the Compensation Committee during all of the last
completed fiscal year of the Company. No member of the Compensation Committee is a former or current executive officer or
employee of the Company or any of its subsidiaries.
Family Relationships
Mr. Engquist’s son, John McDowell Engquist, is an employee of the Company and was appointed as President and Chief
Operating Officer of the Company, effective January 1, 2021. The annual total compensation of Mr. Engquist (McDowell) is reported
in our Summary Compensation Table.
Mr. Barber’s son and son-in-law are employees of the Company and received compensation totaling $62,943 and $203,587,
respectively, for the year ended December 31, 2024.
93
Item 11. Executive Compensation
2024 DIRECTOR COMPENSATION
The elements of the Company’s compensation program for non-employee directors are as follows:
•
Annual retainers of $100,000 for non-employee directors;
•
Annual stock awards with a grant date fair market value of $95,000 for all non-employee directors; and
•
Committee chair annual retainers of $10,000 for the chairs of the Finance Committee, Corporate Governance and
Nominating Committee and ESG Committee, $15,000 for the chair of the Compensation Committee and $20,000 for the
chair of the Audit Committee.
•
The Lead Independent Director will receive $25,000 as an annual retainer.
On February 1, 2024, in accordance with the above non-employee director compensation program, Messrs. Arnold, Bagley,
Bruckmann, Edsell, Galligan, Karlson and Thomas and Ms. Thompson and Wood each received grants of 1,767 shares of fully vested
common stock under the Company’s 2016 Incentive Plan. The determination of the number of shares of common stock to be issued to
each non-employee director was based on the Company’s closing stock price on January 31, 2024, the last trading day preceding the
grant date, on the NASDAQ, or $53.79 per share. The grants made to non-employee directors in 2024 are described in more detail in
the table and footnotes below.
The table below summarizes the compensation paid by the Company to each non-employee director for the year ended December
31, 2024. For the compensation of our employee directors during 2024 (Messrs. Barber and Engquist) see “Summary Compensation
Table”.
Director Compensation Tables
Name
Fees Earned or Paid
in Cash ($) (1)
Stock Awards
($) (2)
All Other
Compensation ($)
Total ($)
Paul N. Arnold
115,000
95,047
—
210,047
Gary W. Bagley
125,000
95,047
—
220,047
Bruce C. Bruckmann
110,000
95,047
—
205,047
Patrick L. Edsell
120,000
95,047
—
215,047
Thomas J. Galligan III
110,000
95,047
—
205,047
Lawrence C. Karlson
100,000
95,047
—
195,047
Jacob Thomas
100,000
95,047
—
195,047
Mary P. Thompson
110,000
95,047
—
205,047
Suzanne H. Wood
100,000
95,047
—
195,047
______
(1)
This column reflects fees paid to directors who served as directors in 2024. All non-employee directors received a retainer for the Board
and its committees and committee chairmanship retainers as described above. Mr. Engquist did not receive any additional compensation
for his service as Executive Chairman of the Board.
(2)
Amounts shown represent the grant date fair value of restricted common stock granted on February 1, 2024 (which fully vested
immediately upon issuance) as described above pursuant to the Financial Accounting Standards Board’s Accounting Standards
Codification Topic 718 (“ASC 718”).
Compensation Discussion and Analysis
This Compensation Discussion and Analysis (“CD&A”) provides an overview of the Company’s executive compensation
program together with a description of the material factors underlying the decisions which resulted in the compensation provided to
the Company’s Executive Chairman of the Board (“Executive Chairman”), Chief Executive Officer (“CEO”), Chief Financial Officer
and Secretary (“CFO”) and Chief Operating Officer and President (“COO”) (collectively, the named executive officers (“NEOs”)) for
2024 (as presented in the tables which follow this CD&A). The Company did not have any other executive officers during the year
ended December 31, 2024.
Executive Summary
The Company’s executive compensation program is designed to attract, retain and motivate a team of highly qualified senior
executives who will promote both the near-term and long-term interests of our stockholders, while simultaneously discouraging
excessive risk-taking by the Company’s management. The Company seeks to achieve these goals by compensating our executives
94
through a combination of base salary, annual cash bonus opportunities and long-term equity incentive awards. The Company is
committed to linking pay to performance on an individual and company-wide basis.
The Company’s compensation policies and decisions during fiscal year 2024 were influenced by a variety of factors, including the
macroeconomic conditions within our industry and market, including the NEO’s individual experience, level of responsibility and
performance as part of the Company’s senior management team, the recommendation of our Executive Chairman (as applicable) and
the Pearl Meyer Study (as defined below), as well as the continued achievements of the Company and executive management team as
a whole, including in such areas as operations, cash management, asset management, strategic acquisitions and transactions and their
integration, new branch openings and the Company’s other strategic growth initiatives. Based on these factors, the Compensation
Committee (the “Committee”) approved salary increases for the CEO, COO and CFO and bonuses for 2024 for each of the NEOs (as
further described below).
Compensation Committee
The Committee is currently composed of four non-employee directors, each of whom is an independent director under the
NASDAQ listing standards and the SEC rules. The Committee has responsibility for determining and implementing the Company’s
philosophy with respect to executive compensation. Accordingly, the Committee has overall responsibility for approving and
evaluating the various components of the Company’s executive compensation program. The Committee meets at least twice per year
(and more often as necessary) to discuss and review the compensation of the NEOs. The Committee annually reviews and approves
the compensation of the CEO, Executive Chairman, CFO and COO. In establishing and reviewing compensation for the NEOs, the
Committee considers, among other things, the financial results of the Company, recommendations of management, and financial and
compensation data for comparable companies.
Beginning in 2014, the Committee engaged Pearl Meyer as the Committee’s independent compensation consultant with respect to
compensation matters, and the Committee continued to engage Pearl Meyer during fiscal year 2024. In connection with its
engagement by the Committee, Pearl Meyer prepared a compensation study that encompassed all areas of compensation, including
salary ranges, bonus plans and long-term incentives (as amended and supplemented, the “Pearl Meyer Study”). Pearl Meyer continued
to update and refine its study from time to time at the request of the Compensation Committee. As described below in further detail,
the Committee referred to the Pearl Meyer Study in determining 2024 annual bonus opportunities for the NEOs.
The Committee operates under a written charter adopted by the Board of Directors of the Company, which is annually reviewed
by the Committee. A copy of this charter is available on our Internet website at www.herentals.com.
Executive Compensation Philosophy and Objectives
The Committee’s goals in structuring the Company’s compensation program for its NEOs are to:
•
provide incentives to achieve Company financial objectives;
•
provide long-term incentives for the executive officers;
•
set compensation levels competitively to attract and retain highly-qualified executives and to motivate them to contribute
to the Company’s success; and
•
align the interests of executives with the interests of our stockholders.
The Committee has determined that to achieve these objectives, the Company’s executive compensation program should reward
both individual and Company short-term and long-term performance. To this end, the Committee believes that executive
compensation arrangements provided by the Company to its executive officers should generally include both cash and stock-based
compensation. The Committee has increased the percentage of stock awards to be more heavily weighted to performance based
awards, rather than time based awards, and will continue to analyze the appropriate mix of time and performance based stock awards.
However, the Committee does not rely on any policy or formula in determining the appropriate mix of cash and equity compensation,
nor does it rely on any policy or formula in allocating long-term compensation to different forms of awards.
Setting Executive Compensation; Processes; Role of Management
The Committee also considers corporate performance, the collective performance of the executive management team, an
executive’s level of experience and responsibility and an executive’s current and past compensation levels. In addition, the Committee
reviews market data for comparable companies to develop a general sense of executive compensation levels at companies with which
the Company believes it competes when hiring management employees.
In determining annual bonuses for the NEOs in 2024, the Committee also took into account the Pearl Meyer Study, which
provided compensation data for comparable companies. While the Committee considers the Pearl Meyer Study in establishing the
compensation for the NEOs as a general check to ensure reasonable market comparability, it does not attempt to expressly benchmark
95
any element of compensation or mix of compensation against any specific peer group of companies or any specific percentile within
any such peer group. However, the Committee does periodically review information regarding compensation trends and levels from a
variety of sources in making compensation decisions, including supplemental information from Pearl Meyer.
Although the advisory stockholder vote on executive compensation is non-binding, the Committee also considered, and will
continue to consider, the outcome of the vote when making compensation decisions for the NEOs. At the 2024 Annual Meeting of
Stockholders held on May 16, 2024, approximately 94% of the affirmative votes of shares present, in person or by Proxy and entitled
to vote on the matter at the Annual Meeting. The Committee believes that the results of the say-on-pay vote constitute compelling
evidence of strong stockholder support of the Company’s existing compensation philosophy and objectives and the Committee’s
actions and decisions with respect to NEO compensation, and, therefore, the Committee did not make material changes to its
compensation philosophy and objectives as a result of such vote. The Company currently holds a say-on-pay vote on an annual basis
in accordance with the preference expressed by our stockholders at our 2023 Annual Meeting.
Clawback Policy
On October 2, 2023, the Board of Directors adopted a Clawback Policy intended to comply with the listing requirements of the
NASDAQ. The Clawback Policy requires the Company to clawback erroneously awarded incentive compensation “received” (i.e.,
earned) by the covered officers during the three fiscal years that precede the date on which the Company determines it is required to
prepare a “Big R” or “little r” accounting restatement. The Clawback Policy applies to those officers who are subject to Section 16(a)
of the Exchange Act and applies to incentive-based compensation (i.e., compensation that is earned in whole or in part based on the
attainment of financial performance measures). A copy of the Clawback Policy is included as an exhibit in the Company’s Annual
Report on Form 10-K for the year ended December 31, 2023.
2024 Executive Compensation Components
The Company’s executive compensation program is composed of three principal components:
•
base salary;
•
cash bonuses; and
•
long-term incentives, consisting of equity awards.
In making decisions with respect to any element of an NEO’s compensation, the Committee considers the total current
compensation that such NEO may be awarded. The Committee’s goal is to provide compensation that is reasonable in relation to the
Company’s compensation philosophy and objectives when all elements of potential compensation are considered.
The Company is not party to any employment agreements with its NEOs. The Company entered into restrictive covenant
agreements during 2015 with each of Mr. Barber and Ms. Magee and during 2022 with Mr. Engquist (McDowell). Each of the
restrictive covenant agreements provides that, during the NEO’s employment with the Company and for a period of 12 months
following a termination of employment for any reason, the executive will not engage in any business that competes with the business
of the Company, solicit customers or other business relationships of the Company or its affiliates or solicit the services of any person
who was an employee or independent contractor of the Company within six months prior to such solicitation. The restrictive covenant
agreements also include an assignment of intellectual property rights in favor of the Company and, during employment and for an
indefinite period thereafter, require the executive to keep confidential any confidential information relating to the Company or its
affiliates and cooperate in Company-related litigation. The agreements also prohibit the executives from making remarks that
disparage the Company and its affiliates during employment and for an indefinite period thereafter.
As described in more detail below, in January of 2025, the Compensation Committee approved the terms of severance agreements
to be entered into between the Company and each of the NEOs, and in consideration for entering into those severance agreements, the
NEOs have agreed to amend their existing restrictive covenant agreements, or enter into new restricted covenant agreement, providing
for a non-compete and non-solicit period of 24 months following the NEO’s termination of employment.
Base Salaries
In General. The Company provides NEOs with base salaries as a component of total remuneration to compensate them for
services rendered during the relevant fiscal year. In determining base salaries, the Committee takes into account several factors,
including:
•
historical information regarding compensation previously paid to NEOs;
•
the individual executive’s experience and level of responsibility; and
•
the performance of the Company and the executive management team.
96
In addition, the Committee considers base salaries paid by comparable companies. As noted above, the Committee uses peer
group data in a general sense to gauge the range of base salary levels of executive officers of such peer group companies in order to
assess the reasonableness of the base salaries of the NEOs and does not engage in benchmarking.
In the absence of a promotion or special circumstances, the Committee reviews and approves executive salaries on an annual
basis.
Consideration of 2024 Base Salaries. The Committee considered the following factors in setting the NEOs’ base salaries for
2024: the macroeconomic conditions within our industry and market; the Company’s long-term incentive plan design; the mix of cash
compensation and long-term equity compensation; the NEOs’ individual experience, level of responsibility and performance as part of
the Company’s senior management team; the collective performance of the executive management team as a whole, including in the
areas of operations, cash management, asset management, strategic transactions and their integration, new branch openings and the
Company’s other growth initiatives; the recommendations of the Executive Chairman for the other NEOs; and the Pearl Meyer Study.
Additionally, the Committee considered the changes to the management team of the Company in accordance with its succession plan.
Based on these factors, the Committee approved increases in base salary for 2024 for the CEO and CFO in an amount of
approximately 3% and for the COO in an amount of approximately 6%. The following table sets forth the NEOs’ base salaries for
2024 and compares them with the NEOs’ base salaries for 2023:
Executive
2024 Base Salary
As Compared to 2023 Base Salary
John M. Engquist
$
893,000
no increase from $893,000
Bradley W. Barber (1)
$
1,005,000
$30,000 or approximately 3%, increase from $975,000
Leslie S. Magee
$
540,000
$15,500 or approximately 3%, increase from $524,500
John McDowell Engquist
$
534,000
$30,000 or approximately 6%, increase from $504,000
____________
(1) Mr. Barber’s 2024 base salary was effective as of July 1, 2024.
Annual Bonuses
In General. Annual cash bonuses are included as part of the executive compensation program because the Committee believes
that a significant portion of each NEO’s compensation should be contingent on the annual performance of the Company, as well as the
collective annual performance of the executive management team. The Committee believes that this structure is appropriate because it
aligns the interests of management and stockholders by rewarding executives for strong annual performance by the Company.
The NEOs are eligible for an annual bonus payable at the discretion of the Committee. In determining bonuses, the Committee
typically takes into account bonus guidelines that are determined by the Committee in consultation with the Executive Chairman. The
guidelines, if adopted, are based on the Company’s achievement of financial targets. The Committee reviews and approves these
guidelines after discussion and in consultation with the Executive Chairman. Actual bonus amounts may differ from those provided
under the guidelines since the Committee retains full discretion in determining annual bonuses.
After the close of a fiscal year, the Committee generally determines and approves the amount of the annual bonus earned by each
NEO for such fiscal year. The bonus is typically paid in February or March following the fiscal year to which the annual bonus relates.
At the discretion of the Committee, a portion of the bonus may be deferred, which deferred portion generally will be paid in two equal
annual installments over the following two years and accrue interest at the prime rate, which is reset annually each January 1st to the
rate then in effect. The Committee determined that a portion of the 2024 discretionary bonuses for the NEOs would be deferred.
Consideration of 2024 Annual Bonus. For fiscal year 2024, the Committee approved bonus guidelines for the NEOs based on the
Company’s achievement of specified threshold and target levels of earnings before interest, taxes, depreciation and amortization
(EBITDA) and Rental Gross Profit, with a minimum return on gross net assets (ROGNA) level being obtained. For the Committee’s
purposes, ROGNA is defined as income (loss) from continuing operations before interest, taxes, depreciation and amortization
adjusted for non-recurring items (or Adjusted EBITDA) divided by the sum of the average of gross rental equipment, gross property
and equipment and net working capital. The Committee has determined these financial objectives to be the appropriate metrics to use
for the 2024 bonus guidelines because EBITDA and Rental Gross Profit are familiar to and targeted by the executive management
team and because ROGNA is a metric that demonstrates management’s efficiency at managing assets and costs to generate earnings.
These financial objectives are also consistent with the Committee’s compensation philosophy of linking executive performance to the
Company’s financial performance.
Under the 2024 bonus guidelines, separate bonus amounts were calculated based on actual EBITDA and Rental Gross Profit
levels, as compared to target EBITDA and Rental Gross Profit levels approved by the Committee, provided that a minimum ROGNA
level was required to be obtained before any bonus was paid. The Committee believes that a minimum ROGNA level underscores the
importance of the NEO’s continued management of Company assets. The bonus ranges based on EBITDA were given a weight of
65% and the bonus ranges based on Rental Gross Profit were given a weight of 35% in determining the recommended bonus amount.
The Committee believes the relative weight was appropriate to motivate management to achieve EBITDA at or above the budgeted
level, while at the same time managing Company assets. Bonus amounts are calculated as a percentage of base salary and increase
97
incrementally based on increases in EBITDA and Rental Gross Profit as compared to the target EBITDA and Rental Gross Profit
levels.
Under the 2024 guidelines, Mr. Engquist, Mr. Barber, Ms. Magee and Mr. Engquist (McDowell) had target bonuses of 100%,
100%, 75% and 75% of their respective base salaries, respectively, and maximum bonus potentials of 200%, 200%, 150% and 150%
of their respective base salaries, respectively. The Committee felt that these bonus ranges were set at a level that appropriately
reflected the Company’s budgeted targets and the economic landscape. The Company does not publicly disclose specific internal
income or operation objectives due to the competitive nature of its industry. In addition, specific targets under the management
incentive guidelines are not disclosed because (i) the Committee has discretion with respect to the guidelines and (ii) such disclosure
would signal where the Company places its strategic focus and would impair the Company’s ability to gain a competitive advantage
from its business plan. In addition, disclosing short-term compensation objectives would contradict the Company’s long-term financial
focus and could result in confusion for investors.
As described above, based upon the Company’s 2024 performance, the Committee determined to not pay discretionary cash
bonuses to each of Messrs. Engquist, Barber and Engquist (McDowell) and Ms. Magee, and approved bonus amounts of $0 for each
of the named executive officers, after taking into account the performance as compared to the bonus plan metrics. Prior year deferred
discretionary cash bonus payments, including interest, to the Executive Chairman, CEO, CFO and COO of $864,595, $876,175,
$347,687 and $356,212, respectively, are to be paid in cash in February 2025.
Long-Term Incentives
In General. The Committee believes that NEOs should be compensated in part with equity interests in the Company in order to
more closely align the long-term interests of stockholders and executives. The Committee also believes that equity awards are an
important means of attracting and retaining qualified executives. Accordingly, the Committee provides long-term incentives by means
of periodic grants of stock awards under the 2016 Incentive Plan. Stock awards available under the 2016 Incentive Plan include
restricted stock, restricted stock units, stock options, deferred stock and other stock-based awards.
All grants of equity compensation to NEOs are made by the Committee, and the Committee determines the size of long-term
incentive awards in its discretion based upon a number of factors. The Committee’s decisions regarding whether grants are made and
the type and size of any grants may be based upon Company performance, performance of the executive management team,
performance of an individual NEO, position held, years of service, level of experience and potential of future contribution to the
Company’s success, recommendations of the Executive Chairman, and the Pearl Meyer Study or any other compensation study
prepared by the Committee’s independent compensation consultant in the future. In making decisions about future grants, the
Committee may also consider long-term incentive grants previously awarded to the NEOs, long-term incentive grants given to other
executive officers throughout the Company’s history and grant practices at comparable companies.
2024 Time-Based Restricted Stock Grants (“Restricted Stock”). For 2024, the Committee approved grants of time-based
restricted stock as follows, effective August 1, 2024: Mr. Engquist — 9,108 shares; Mr. Barber — 32,504 shares; Ms. Magee — 6,405
shares; and Mr. Engquist (McDowell) — 6,596 shares. When awarding grants to the NEOs, the Committee considered a variety of
factors, as discussed above, including the performance of the executive management team and management’s leadership during the
macroeconomic conditions in our industry and market.
Each of these awards vests in equal annual installments on the first, second and third anniversaries of the date of grant,
conditioned on the executive’s continued employment with the Company on the applicable vesting date. The Committee believes that
this vesting schedule serves to motivate and retain the recipients, providing continuing benefits to the Company beyond those
achieved in the year of grant. Each of the awards granted to Messrs. Engquist, Barber and Engquist (McDowell) and Ms. Magee will
also vest in full upon a change in control of the Company, as described in more detail below under the heading “— Potential Payments
Upon Termination or Change in Control.”
Under the terms of these awards, in the event that an NEO’s employment with the Company is terminated for any reason, such
NEO will forfeit all of his or her unvested shares of restricted stock. In addition, in the event that an NEO’s employment with the
Company is terminated for cause, such NEO will forfeit all of his or her vested and unvested shares of restricted stock.
2024 Performance-Based Restricted Stock Unit Grants (“RSU”). In 2015, the Committee introduced a new component of its
long-term equity-based incentive program by making grants of restricted stock units, or RSUs, the vesting of which is based entirely
upon the achievement of performance goals, as described below. The purpose of granting performance-based RSUs was to more
closely align the interests of the Company’s NEOs with its stockholders, while being mindful of creating inappropriate incentives for
executives to engage in excessive risk-taking, by increasing the role that long-term equity incentives play in the Company’s overall
compensation program and making such equity incentives subject to the achievement of the Company’s financial performance over a
three-year period.
For 2024, the Committee approved grants of RSUs with target share amounts as follows, effective August 1, 2024: Mr. Engquist
— 13,663 shares; Mr. Barber — 39,196 shares; Ms. Magee — 9,560 shares; and Mr. Engquist (McDowell) — 9,942 shares. When
98
awarding grants of RSUs to the NEOs, the Committee considered a variety of factors, as discussed above with respect to the restricted
stock component.
The RSUs may vest with respect to a number of shares that is between 0% and 200% of the target number of shares specified in
the applicable award agreement. Vesting of RSUs occurs at the end of the three-year performance period, ending on December 31,
2026, based upon a weighted average of the Company’s achievement of pre-determined goals, during each of the three years of the
performance period, with respect to the Company’s EBITDA growth (40% weighting) and ROGNA performance (60%
weighting). The Committee reevaluates these components and weightings each year, and may elect to change one or more
components or the associated weightings in future years in an effort to better align the quantitative goals with the plan’s purpose.
If the threshold level of performance is not achieved, none of the RSUs will vest at the end of the performance period. If the
minimum threshold level of performance is achieved, 20% of the shares subject to the award will vest. If the target level of
performance is achieved, 100% of the shares subject to the award will vest. If the maximum level of performance is achieved, 200%
of the shares subject to the award will vest. If performance during any fiscal year falls between the minimum and target performance
levels, or between the target and maximum performance levels, with respect to any of the three performance categories, the weighting
for that category will be determined by linear interpolation.
Under the terms of the award agreements, at the conclusion of the performance period, the grants of RSUs shall be settled
exclusively in shares of the Company. The RSU grants do not automatically vest if a change in control of the Company occurs prior
to the end of the performance period. Further, if the executive’s employment terminates for any reason prior to the end of the
performance period, all RSUs subject to the award will be forfeited with no compensation due to the executive.
The Committee determined the approximate amount of the long-term incentive awards and awarded shares of restricted stock and
RSUs that had a fair market value on the date of grant that approximated such amount. The approximate grant date fair market value
of the restricted stock and RSUs granted to each executive in 2024 are reflected in the following table:
Executive
Restricted
Stock
(# shares)
Restricted
Stock
($) (1)
Minimum
RSUs
(#)
Minimum
RSUs
($) (1)
Target
RSUs
(#)
Target RSUs
($) (1)
Maximum
RSUs
(#)
Maximum
RSUs
($) (1)
John M. Engquist
9,108
476,348
2,733 142,936
13,663
714,575
27,326
1,429,150
Bradley W. Barber
32,504
1,699,959
7,839 409,980
39,196 2,049,951
78,392
4,099,902
Leslie S. Magee
6,405
334,982
1,912
99,998
9,560
499,988
19,120
999,976
John McDowell
Engquist
6,596
344,971
1,988 103,972
9,942
519,967
19,884
1,039,933
____________
(1)
Dollar amount represents the fair value of shares underlying the award on August 1, 2024, the grant date of the award, based on the per-
share closing price of the Company’s common stock on July 31, 2024, the last trading day immediately preceding the grant date, of
$52.30.
The Compensation Committee does not have a formal written policy relating to the grant of equity-based awards, but maintains a
general policy with respect to its equity grant practices. The Compensation Committee approves annual long-term incentive awards
for employees at approximately the same time every year, with awards granted effective in August each year, and the number of
awards being granted being based on the closing price of our common stock on the last business day preceding the grant date. Our
long-term incentive compensation does not currently include stock option grants and the Company has not granted stock options in
recent years. Outside of the annual grant cycle, the Company may make grants of restricted shares in connection with a new hire
package or other off-cycle awards. Equity awards are not granted in anticipation of the release of material non-public information,
and the release of material non-public information is not timed on the basis of equity grant dates.
Stock Ownership/Retention Guidelines. The Company does not require its NEOs to maintain a minimum ownership interest in
the Company.
Other Compensation and Perquisite Benefits
401(k) Plan. In addition to the principal categories of compensation described above, the NEOs are eligible to participate in the
Company’s broad-based health and welfare benefit plans on the same terms and conditions as are available to all employees generally,
including medical, dental, disability and life insurance. The Company also sponsors a 401(k) plan. The 401(k) plan is a tax-qualified
retirement savings plan pursuant to which all employees, including the NEOs, are able to contribute to the 401(k) plan up to the limit
prescribed by the Internal Revenue Code of 1986, as amended (the “Code”). The Company makes a matching contribution of 50% of
the first 10% of pay contributed by the employee to the 401(k) plan, subject to a Company match annual maximum amount. All
contributions made by a participant vest immediately and matching contributions made by the Company vest over the employee’s first
five years of eligible service, in annual increments of 25% beginning after the employee has completed two years of eligible service.
99
These benefits are not tied to any individual or corporate performance objectives and are intended to be part of an overall competitive
compensation program.
Other Benefits and Perquisites. The NEOs are not generally entitled to benefits that are not otherwise available to all of our
employees. In this regard it should be noted that the Company does not provide pension arrangements (other than the 401(k) plan),
nonqualified deferred compensation plans, post-retirement health coverage or similar benefits for its executives. However, the NEOs
are entitled to short-term and long-term disability benefits, annual automobile allowances and other automobile benefits, such as fuel
costs, which are noted in the “All Other Compensation” column in the Summary Compensation Table shown below.
Mr. Engquist does not receive an annual automobile allowance. Instead, Mr. Engquist is given use of an automobile which the
Company purchased in 2024. The Company also provides Mr. Engquist with certain automobile benefits, such as fuel and
maintenance costs, in connection with his use of this automobile. The Company and the Committee believe that the benefits described
above are consistent with the goal of attracting and retaining superior executive talent. No NEO is entitled to be “grossed up” by the
Company in connection with taxes incurred by the NEO in connection with the receipt of these perquisites.
Tax and Accounting Implications
Deductibility of Certain Compensation
Section 162(m) of the Code limits the amounts that may be deducted (for federal income tax purposes) by a public company for
compensation paid to certain individuals to $1,000,000, except that, in 2017 and prior years, compensation in excess of the $1,000,000
threshold could be deducted if it met the requirements to be considered “qualifying performance-based compensation” within the
meaning of Section 162(m) of the Code.
The Tax Cuts and Jobs Act, passed by Congress in December 2017, eliminated the “performance-based” compensation exemption
under Section 162(m) of the Code. Therefore, for 2018 and subsequent years, compensation paid to our CEO, our CFO, our COO and
to any other NEOs (each, a “covered employee”) generally will not be deductible for federal income tax purposes to the extent such
compensation exceeds $1,000,000, regardless of whether such compensation would have been considered “performance-based” under
prior law. This limitation on deductibility applies to each individual who is a “covered employee” (as defined in Section 162(m) of
the Code) in 2017 or who becomes a covered employee in any future year, and continues to apply to each such individual for all future
years, regardless of whether such individual remains an NEO. There is, however, a transition rule that allows “performance-based”
compensation in excess of $1,000,000 to continue to be deductible if the remuneration is provided pursuant to a binding contract
which was in effect on November 2, 2017 and which was not subsequently materially modified.
The Committee believes that our stockholders’ interests are best served by not restricting the Committee’s discretion in
structuring compensation programs, and thus the Committee intends to maintain flexibility to pay compensation that is not entirely
deductible when the best interests of the Company make that advisable. In approving the amount and form of compensation for the
NEOs, the Committee will continue to consider all elements of the cost to the Company of providing such compensation, including the
potential impact of Section 162(m) of the Code.
Section 409A
Section 409A of the Code imposes a 20% additional tax and interest on the recipient of “nonqualified deferred compensation” that
fails to satisfy the requirements of Section 409A of the Code with respect to the timing of deferral elections, the timing of payments
and certain other matters. Accordingly, as a general matter, the Company attempts to structure its compensation and benefit plans and
arrangements for all of its employees, including the NEOs, so that they are either exempt from, or satisfy the requirements of, Section
409A of the Code. No NEO is entitled to be “grossed up” by the Company for any additional tax or interest imposed on the executive
by Section 409A of the Code as a result of any compensation that is not exempt from, and does not satisfy the requirements of, Section
409A of the Code.
Section 280G
Section 280G of the Code imposes certain penalties on “excess parachute payments” made to certain executives and highly-
compensated employees in connection with a change in control. Stock options or restricted stock awards that are accelerated upon the
occurrence of a change in control of the Company may give rise, in whole or in part, to “excess parachute payments” within the
meaning of Section 280G of the Code. The Company is not permitted to take a deduction for any “excess parachute payments” and
Section 4999 of the Code imposes a 20% excise tax on the recipients of such payments. As described in more detail below under the
heading “— Potential Payments Upon Termination or Change in Control,” certain awards under the 2016 Incentive Plan to the NEOs
will vest upon a change in control of the Company and, therefore, may give rise, in whole or in part, to an “excess parachute
payment.” No NEO is entitled to be “grossed up” by the Company for any excise tax incurred by the NEO as a result of an “excess
parachute payment.”
100
Accounting Implications
The Committee considers the potential accounting impact in connection with equity compensation matters; however, these
considerations do not significantly affect decisions on grants of equity compensation.
Compensation Risk Assessment
The Committee conducted an assessment of risks associated with the Company’s compensation policies and practices for the year
ended December 31, 2024. This assessment included the: (i) review of programs, plans, policies, procedures and practices relating to
the components of executive officer and employee compensation; (ii) review of incentive-based equity and cash compensation; (iii)
identification of compensation design features that could potentially encourage excessive or imprudent risk taking; (iv) identification
of business risks that these features could potentially encourage; (v) consideration of the presence or absence of controls, oversight or
other factors that mitigate potential risks; (vi) assessment of potential risks; and (vii) consideration of the potential for such risks to
result in a material adverse effect on the Company and its subsidiaries taken as a whole. Based on the assessment and factors
described above, the Committee has determined that there are no risks arising from the Company’s compensation policies and
practices for its executive officers and employees that are reasonably likely to have a material adverse effect on its business or
operations.
SUMMARY COMPENSATION TABLE
The table below summarizes the total compensation paid or earned by each of our NEOs for the fiscal years ended December 31,
2024, 2023 and 2022.
Name and Principal Position
Year
Salary
($) (1)
Bonus
($) (2)
Stock Awards
($) (3)
Changes in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings ($)
All Other
Compensation
($) (4)
Total
($)
John M. Engquist
2024
893,000
—
1,190,923
—
74,925
2,158,848
Executive Chairman
2023
893,000
1,542,817
1,190,938
—
89,962
3,716,717
of the Board
2022
893,000
1,786,000
1,890,961
—
95,964
4,665,925
Bradley W. Barber
2024
988,846
—
3,749,910
—
106,371
4,845,127
Chief Executive Officer
2023
907,692
1,684,487
3,599,924
—
103,733
6,295,836
and Director
2022
815,308
1,700,000
2,729,978
—
89,527
5,334,813
Leslie S. Magee
2024
539,404
—
834,970
—
42,858
1,417,232
Chief Financial Officer
2023
523,712
634,317
794,914
—
50,209
2,003,152
and Secretary
2022
503,433
705,600
1,138,173
—
50,375
2,397,581
John McDowell Engquist
2024
532,846
—
864,938
—
41,269
1,439,053
Chief Operating Officer
2023
503,077
653,063
609,970
—
44,847
1,810,957
and President
2022
478,308
720,000
879,950
—
43,212
2,121,470
____________
(1)
Amounts represent base salaries paid for the NEOs for each applicable fiscal year before any reduction for contributions to any
retirement plan of the Company.
(2)
The 2023 bonus for each NEO was paid approximately 60% in cash during the first quarter of 2024. The remaining amount is to be paid
in equal installments during the first quarter of 2025 and the first quarter of 2026, together with accrued interest on the unpaid balances
at the prime rate in effect on January 1st of the then-current year.
The 2022 bonus for each NEO was paid approximately 50% in cash during the first quarter of 2023. The remaining amount is to be paid in equal
installments during the first quarter of 2024 and the first quarter of 2025, together with accrued interest on the unpaid balances at the prime rate
in effect on January 1st of the then-current year.
(3)
The amounts reported for each of the NEOs in “Stock Awards” are shown below. For additional discussion of the Company’s
accounting policies for restricted stock and performance-based RSUs, see Note 7 of the Company’s Annual Report on Form 10-K for
the year ended December 31, 2024.
101
Name
Year
Restricted Stock
($) (a)
Performance-Based
RSUs
($) (b)
Total
($)
John M. Engquist
2024
476,348
714,575
1,190,923
2023
476,375
714,563
1,190,938
2022
1,116,830
774,131
1,890,961
Bradley W. Barber
2024
1,699,959
2,049,951
3,749,910
2023
1,699,960
1,899,964
3,599,924
2022
1,605,497
1,124,481
2,729,978
Leslie S. Magee
2024
334,982
499,988
834,970
2023
317,956
476,958
794,914
2022
666,988
471,185
1,138,173
John McDowell Engquist
2024
344,971
519,967
864,938
2023
233,184
376,786
609,970
2022
503,181
376,769
879,950
_______________
(a)
Amounts represent the grant date fair value (computed in accordance with ASC 718) of restricted stock granted in 2024, 2023 and
2022.
(b)
Amounts represent the grant date fair value of the target number of shares underlying the performance-based RSUs granted in 2024,
2023 and 2022. Maximum grant values for performance-based RSUs granted to the NEOs in 2024, 2023 and 2022 are as follows: Mr.
Engquist: $1,429,150 (2024), $1,429,126 (2023) and $1,548,261 (2022); Mr. Barber: $4,099,902 (2024), $3,799,928 (2023) and
$2,248,961 (2022); Ms. Magee: $999,976 (2024), $953,917 (2023) and $942,370 (2022); and Mr. Engquist (McDowell): $1,039,933
(2024), $753,573 (2023) and $753,539 (2022).
(4)
The amounts reported for each of the NEOs in “All Other Compensation” are shown below:
Name
Year
Dividends
Received on
Unvested
Company Stock
($)(a)
Perquisites
and Other
Personal
Benefits
($)(b)
Insurance
Premiums
($)(c)
Company
Contributions
to 401(k) Plan
($)
Total
($)
John M. Engquist
2024
33,748
30,178
4,499
6,500
74,925
2023
47,317
31,563
4,582
6,500
89,962
2022
50,340
34,575
4,549
6,500
95,964
Bradley W. Barber
2024
77,551
17,210
5,110
6,500
106,371
2023
74,707
17,933
4,593
6,500
103,733
2022
59,080
19,616
4,331
6,500
89,527
Leslie S. Magee
2024
21,357
11,695
3,306
6,500
42,858
2023
28,465
11,997
3,247
6,500
50,209
2022
28,918
11,893
3,064
6,500
50,375
John McDowell Engquist
2024
16,865
14,622
3,282
6,500
41,269
2023
20,586
14,604
3,157
6,500
44,847
2022
19,390
14,357
2,965
6,500
43,212
_______________
(a)
Amounts represent Company common stock dividends received by the NEOs on unvested restricted stock previously granted pursuant
to the 2016 Incentive Plans. The Company as a matter of practice has paid its quarterly dividends on all outstanding common stock,
which includes outstanding unvested restricted stock granted to all employees of the Company (including NEOs).
(b)
Amounts shown in this column include the automobile-related perquisites for each NEO as set forth in the table below.
(c)
Includes payments by the Company on behalf of the NEOs of long-term disability, short-term disability and life insurance premiums.
102
Name
Year
Company Provided
Automobile
($) (d)
Automobile
Allowance
($)
Other Automobile
Benefits
($) (e)
Total Perquisites
and Other Personal
Benefits
($)
John M. Engquist
2024
24,500
—
5,678
30,178
2023
24,900
—
6,663
31,563
2022
24,900
—
9,675
34,575
Bradley W. Barber
2024
—
9,000
8,210
17,210
2023
—
9,000
8,933
17,933
2022
—
9,000
10,616
19,616
Leslie S. Magee
2024
—
9,000
2,695
11,695
2023
—
9,000
2,997
11,997
2022
—
9,000
2,893
11,893
John McDowell Engquist
2024
—
9,000
5,622
14,622
2023
—
9,000
5,604
14,604
2022
—
9,000
5,357
14,357
___________
(d)
The value of Mr. Engquist’s Company-provided automobile is calculated based on 100% of the annual lease value of the automobile.
(e)
Includes fuel and maintenance costs.
2024 GRANTS OF PLAN-BASED AWARDS TABLE
The table below sets forth information regarding grants of plan-based awards made to each of the NEOs during 2024.
Estimated Future Payouts under Equity
Incentive Plan Awards (3)
All Other Stock
Awards: Number of
Shares of
Grant Date Fair Value
of Stock and
Name
Grant Date of
Equity Award
Threshold
(#)
Target
(#)
Maximum
(#)
Stock or Units
(#)(4)
Option Awards
($)(5)
John M. Engquist
08/01/24
(1)
—
—
—
9,108
476,348
08/01/24
(2)
2,733
13,663
27,326
—
714,575
Bradley W. Barber
08/01/24
(1)
—
—
—
32,504
1,699,959
08/01/24
(2)
7,839
39,196
78,392
—
2,049,951
Leslie S. Magee
08/01/24
(1)
—
—
—
6,405
334,982
08/01/24
(2)
1,912
9,560
19,120
—
499,988
John McDowell
08/01/24
(1)
—
—
—
6,596
344,971
Engquist
08/01/24
(2)
1,988
9,942
19,884
—
519,967
_______________
(1)
Grant of restricted stock.
(2)
Grant of performance-based RSUs.
(3)
These amounts represent the range of stock-based compensation that might be realized under the 2024 grants of performance-based
RSUs granted under the 2016 Incentive Plan. The potential payouts are based on performance and are therefore at risk. The
performance measures are based upon the Company’s achievement of pre-determined goals with respect to the Company’s financial
performance over a three-year performance period, as described in “Compensation Discussion and Analysis – Long-Term Equity
Incentives” above. The performance-based RSUs granted in 2024 will vest on December 31, 2026, subject to the level of achievement
of pre-determined performance goals, and further conditioned on the NEO’s continuous employment through such date. Performance-
based RSUs do not automatically vest upon a “change in control” of the Company. Performance-based RSUs will be settled in shares
of the Company.
(4)
Represents shares of restricted stock granted in fiscal year 2024 under the 2016 Incentive Plan. One-third of the shares subject to the
awards will vest on each of the first three anniversaries of the grant date, conditioned on the NEO’s continued employment with the
Company through the applicable vesting date.
(5)
Amounts reported in this column represent, (i) with respect to each restricted stock award, the product of (x) the number of restricted
shares, multiplied by (y) the per-share closing price of the Company’s common stock on July 31, 2024, the last trading date
immediately preceding the grant date ($52.30), and (ii) with respect to each performance-based RSU award, the product of (x) the
number of target shares underlying such award, multiplied by (y) the per-share closing price of the Company’s common stock on July
31, 2024, the last trading day immediately preceding the grant date ($52.30).
103
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2024 TABLE
The table below sets forth the number of securities underlying outstanding plan awards for each NEO as of December 31, 2024.
Name
Number of Shares or
Units of
Stock That Have Not
Vested (#)
Market Value of
Shares or Units of
Stock That Have Not
Vested
($)(1)
Equity Incentive
Plan Awards:
Number of Unearned
Shares, Units or
Other Rights That
Have Not Vested (#)
Equity Incentive
Plan Awards:
Market or Payout
Value of Unearned
Shares, Units or
Other Rights That
Have Not Vested
($)(1)
John M. Engquist
10,414 (2)
509,869
6,538 (3)
320,100
9,108 (4)
445,928
21,654 (5)
1,060,180
14,709 (6)
720,153
13,663 (7)
668,940
Bradley W. Barber
14,970 (2)
732,931
23,329 (3)
1,142,188
32,504 (4)
1,591,396
31,454 (5)
1,539,988
39,110 (6)
1,914,826
39,196 (7)
1,919,036
Leslie S. Magee
6,219 (2)
304,482
4,364 (3)
213,661
6,405 (4)
313,589
13,180 (5)
645,293
9,818 (6)
480,689
9,560 (7)
468,058
John McDowell Engquist
4,692 (2)
229,720
3,200 (3)
156,672
6,596 (4)
322,940
10,539 (5)
515,989
7,756 (6)
379,734
9,942 (7)
486,760
_______________
(1)
Dollar values are based on the closing price of the Company’s common stock on December 31, 2024, the last trading day of 2024, or
$48.96 per share.
(2)
Represents restricted stock grants made on August 1, 2022 under the 2016 Incentive Plan. The number of shares that will vest based on
each NEO’s continued employment and the applicable vesting dates are reported in the supplemental table below.
(3)
Represents restricted stock grants made on August 1, 2023 under the 2016 Incentive Plan. The number of shares that will vest based on
each NEO’s continued employment and the applicable vesting dates are reported in the supplemental table below.
(4)
Represents restricted stock grants made on August 1, 2024 under the 2016 Incentive Plan. The number of shares that will vest based on
each NEO’s continued employment and the applicable vesting dates are reported in the supplemental table below.
(5)
Represents the target number of performance-based restricted stock units granted on August 1, 2022 under the 2016 Incentive
Plan. The actual number of shares that vest in accordance with such award is subject to the level of achievement and calculation
finalization of certain performance goals over a three-year performance period ending December 31, 2024, as described in “—Long
Term Incentives—2022 Performance-Based Restricted Stock Unit Grants” in the Company’s 2022 Proxy Statement.
(6)
Represents the target number of performance-based restricted stock units granted on August 1, 2023 under the 2016 Incentive
Plan. The actual number of shares that vest in accordance with such award is subject to the level of achievement of certain performance
goals over a three-year performance period ending December 31, 2025, as described in “—Long Term Incentives—2023 Performance-
Based Restricted Stock Unit Grants” in the Company’s 2023 Proxy Statement.
(7)
Represents the target number of performance-based restricted stock units granted on August 1, 2024 under the 2016 Incentive
Plan. The actual number of shares that vest in accordance with such award is subject to the level of achievement of certain performance
goals over a three-year performance period ending December 31, 2026, as described above in “—Long Term Incentives—2024
Performance-Based Restricted Stock Unit Grants”.
104
Supplemental Vesting Table for Restricted Stock and Restricted Stock Units
Name
Grant Date
Vesting Date
Number of Shares
Vesting (#) (3)
John M. Engquist
08/01/22
08/01/25
10,414
08/01/23
08/01/25
3,269
08/01/26
3,269
08/01/24
08/01/25
3,036
08/01/26
3,036
08/01/27
3,036
08/01/22
(1)
12/31/24
(2)
21,654
08/01/23
(1)
12/31/25
14,709
08/01/24
(1)
12/31/26
13,663
Bradley W. Barber
08/01/22
08/01/25
14,970
08/01/23
08/01/25
11,664
08/01/26
11,665
08/01/24
08/01/25
10,834
08/01/26
10,835
08/01/27
10,835
08/01/22
(1)
12/31/24
(2)
31,454
08/01/23
(1)
12/31/25
39,110
08/01/24
(1)
12/31/26
39,196
Leslie S. Magee
08/01/22
08/01/25
6,219
08/01/23
08/01/25
2,182
08/01/26
2,182
08/01/24
08/01/25
2,135
08/01/26
2,135
08/01/27
2,135
08/01/22
(1)
12/31/24
(2)
13,180
08/01/23
(1)
12/31/25
9,818
08/01/24
(1)
12/31/26
9,560
John McDowell Engquist
08/01/22
08/01/25
4,692
08/01/23
08/01/25
1,600
08/01/26
1,600
08/01/24
08/01/25
2,198
08/01/26
2,199
08/01/27
2,199
08/01/22
(1)
12/31/24
(2)
10,539
08/01/23
(1)
12/31/25
7,756
08/01/24
(1)
12/31/26
9,942
_______________
(1)
Represents an award of performance-based RSUs.
(2)
Represents target number of performance-based RSUs at vest subject to finalization and approval of award calculation as of December
31, 2024. The award resulted in a payout at 147%.
(3)
With respect to any award of performance-based RSUs, this column reflects the target number of shares subject to such award. The
actual number of shares that vest in accordance with such award is subject to the level of achievement of certain performance goals over
a three-year performance period.
105
2024 OPTION EXERCISES AND STOCK VESTED
Name
Number of Shares Acquired on Vesting (#)
Value Realized on Vesting ($)
John M. Engquist
4,667
(1)
214,682
10,413
(2)
507,946
3,268
(3)
159,413
39,043
(4)
2,295,338
Bradley W. Barber
5,266
(1)
242,236
14,970
(2)
730,237
11,664
(3)
568,970
44,057
(4)
2,590,111
Leslie S. Magee
2,860
(1)
131,560
6,219
(2)
303,363
2,181
(3)
106,389
23,929
(4)
1,406,786
John McDowell Engquist
1,991
(1)
91,586
4,692
(2)
228,876
1,600
(3)
78,048
16,652
(4)
978,971
__________________
(1)
Represents a restricted stock grant on August 2, 2021 to each of Mr. Engquist (13,999 shares), Mr. Barber (15,797 shares), Ms. Magee
(8,580 shares) and Mr. Engquist (McDowell) (5,971 shares) under the 2016 Incentive Plan. One-third of the shares subject to each grant
vested on August 2, 2024. Dollar values are based on the closing price of the Company’s common stock on August 2, 2024 of $46.00
per share.
(2)
Represents a restricted stock grant on August 1, 2022 to each of Mr. Engquist (31,240 shares), Mr. Barber (44,909 shares), Ms. Magee
(18,657 shares) and Mr. Engquist (McDowell) (14,075 shares) under the 2016 Incentive Plan. One-third of the shares subject to each
grant vested on August 1, 2024. Dollar values are based on the closing price of the Company’s common stock on August 1, 2024 of
$48.78 per share.
(3)
Represents a restricted stock grant on August 1, 2023 to each of Mr. Engquist (9,806 shares), Mr. Barber (34,993 shares), Ms. Magee
(6,545 shares) and Mr. Engquist (McDowell) (4,800 shares) under the 2016 Incentive Plan. One-third of the shares subject to each grant
vested on August 1, 2024. Dollar values are based on the closing price of the Company’s common stock on August 1, 2024 of $48.78
per share.
(4)
Represents a performance-based RSU grant on August 1, 2021 that vested on December 31, 2023. The actual number of shares that
vested was determined in accordance with such award based upon the level of achievement of certain performance goals over a three-
year performance period. Dollar values are based on the closing price of the Company’s common stock on March 4, 2024 (the issuance
date) of $58.79 per share.
2024 PAY RATIO
In accordance with Item 402(u) of Regulation S-K, we have calculated a pay ratio of Mr. Barber, the Company’s Chief Executive
Officer during 2024, and the median of the annual total compensation of all Company employees for 2024. This ratio was determined
to be 71:1 and was calculated using the annual total compensation of Mr. Barber as reported in the Total column of our 2024
Summary Compensation Table of $4,845,127, compared to the median of the annual total compensation of all employees, excluding
Mr. Barber, of $68,134.
To identify our median employee, we began with our entire active employee population of 2,780 as of December 31, 2024 (the
“determination date”). To identify the median employee from a compensation perspective, we used total compensation as reflected in
our payroll records and as reported to the Internal Revenue Service on the applicable form W-2s. Compensation was annualized for
part-time employees and full-time employees who were employed less than a full year. Using this methodology, we determined that
our median employee works as a driver at our branch in Chattanooga, Tennessee. We then determined the median employee’s annual
total compensation for 2024 in accordance with the rules applicable to the compensation elements included in the Summary
Compensation Table and compared such compensation to the compensation of Mr. Barber, as reported in the Summary Compensation
Table.
106
The SEC rules allow companies to use estimates, assumptions, adjustments, statistical sampling and unique definitions of
compensation to identify the median employee and calculate the pay ratio. Our estimated pay ratio may not be comparable to other
companies because of the differences in how pay ratios may be calculated at other companies.
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
Payments Upon Termination of Employment. None of our NEOs are, or were at any time during the 2024 fiscal year, party to an
employment agreement, severance agreement or any other type of agreement which provides benefits upon a termination of
employment. Upon termination of employment for any reason, all unvested shares of restricted stock and RSUs will be forfeited with
no compensation due to the executive.
In February 2025, and the Company and the NEOs each entered into an Executive Severance Agreement. The Executive
Severance Agreements provide for the following severance payments and benefits in the event that an NEO’s employment is
terminated by the Company (or its successor) without “Cause” or an NEO resigns for “Good Reason”, in either case, within two years
following a “change in control”: (i) a lump sum amount equal to two-times the NEO’s then-current base salary and target annual
bonus for the year of termination (not taking into account any reductions that may give rise to a claim of “Good Reason”), and (ii) if
continuation coverage is timely elected under COBRA, continued payment by the Company or an affiliate of the Company of the
employer-portion of COBRA premiums for up to 18 months following the date of termination of the NEO’s employment (collectively,
the “Severance Benefits”). The NEO’s receipt of the Severance Benefits is subject to the NEO’s execution and non-revocation of an
effective release of claims, and continued compliance with restrictive covenants. In connection with entering into the Executive
Severance Agreements, the NEOs and the Company modified the NEOs’ existing restrictive covenant arrangements (and with respect
to the Executive Chairman, entered into a new restrictive covenant agreement), providing for a non-compete and non-solicit period of
two years following the employment termination date.
For purposes of the Executive Severance Agreements, “Good Reason” is defined to include (i) a material diminution in the
NEO’s base salary or target annual bonus opportunity; (ii) any material diminution in the NEO’s position, authority, responsibilities or
reporting line; (iii) the Company’s material breach of the Executive Severance Agreement or any other agreement with NEO; or (iv) a
relocation of the NEO’s primary work location by more than 25 miles from the NEO’s primary work location. The Executive
Severance Agreements provide that, subject to the applicable NEO’s continued employment with the Company through the Closing,
and subject to and contingent upon the occurrence of the Closing, the NEOs’ employment will terminate at the Closing (or such later
date agreed to between United Rentals and the applicable NEO) and such termination will constitute a termination for “Good Reason”
under the Executive Severance Agreements.
Payments Upon Change in Control. Each restricted stock award granted under the 2016 Incentive Plan to our NEOs provides for
immediate vesting of all unvested shares of restricted stock in the event of a “change in control.” If a “change in control” occurred on
December 31, 2024, 26,060, 70,803, 16,988 and 14,488 shares of restricted stock would have vested for Mr. Engquist, Mr. Barber,
Ms. Magee and Mr. Engquist (McDowell), respectively. Based on the closing price of our common stock on December 31, 2024 of
$48.96 per share, the value of such shares held by Mr. Engquist, Mr. Barber, Ms. Magee and Mr. Engquist (McDowell) would have
been $1,275,897, $3,466,515, $831,732 and $709,332, respectively. Upon a change in control, awards of performance-based RSUs do
not automatically vest; however, the Compensation Committee may, in its discretion, fully vest such award, cause the surviving
corporation to assume or replace such award with a comparable award or take any other action with respect to the vesting of such
award as permitted under the 2016 Incentive Plan. If a “change in control” occurred on December 31, 2024 and assuming the target
performance-based RSUs were discretionarily vested, 50,026, 109,760, 32,558 and 17,698 shares of RSUs would have vested for Mr.
Engquist, Mr. Barber, Ms. Magee and Mr. Engquist (McDowell), respectively. Based on the closing price of our common stock on
December 31, 2024 of $48.96 per share, the value of such shares held by Mr. Engquist, Mr. Barber, Ms. Magee and Mr. Engquist
(McDowell) would have been $2,449,273, $5,373,850, $1,594,040 and $866,494, respectively.
Generally, a “change in control” is defined under the 2016 Incentive Plan as:
•
The acquisition of 35% or more of the Company’s voting securities;
•
A change in the composition of a majority of the Board of Directors;
•
A merger or consolidation where the Company’s stockholders immediately before the merger or consolidation own 70%
or less of the voting power of the surviving corporation immediately after the merger or consolidation;
•
A complete liquidation or dissolution of the Company, or a sale of substantially all of its assets; or
•
A share exchange in which the stockholders of the Company immediately before such exchange own 70% or less of the
voting power of the corporation resulting from such exchange.
107
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND DIRECTORS, DIRECTOR NOMINEES AND OFFICERS
The following table sets forth certain information with respect to beneficial ownership of the Company’s common stock as of
February 21, 2025, by (i) each person, or group of affiliated persons who is known by the Company to own more than 5% of its
common stock, (ii) each of the Company’s directors and named executive officers and (iii) all directors and executives of the
Company as a group. The information provided in the table is based on our records, information filed with the SEC and information
provided to the Company.
Beneficial ownership is determined in accordance with the rules of the SEC. To our knowledge, except as set forth in the
footnotes to the following table and subject to appropriate community property laws, the persons in this table have sole voting and
investment power with respect to all shares shown as beneficially owned by them.
Unless otherwise noted, the address of each person listed below is c/o H&E Equipment Services, Inc., 7500 Pecue Lane, Baton
Rouge, Louisiana 70809.
Amount and Nature of Beneficial
Ownership
Shares
Percentage
Stockholders of 5% or more (excludes Directors and Executive Officers)
The Vanguard Group (1)
3,679,763
10.1 %
BlackRock, Inc. (2)
2,848,619
7.8 %
Clearbridge Investments LLC (3)
2,119,455
5.8 %
Macquarie Group Limited (4)
2,243,103
6.1 %
American Century Investment Management, Inc. (5)
2,134,252
5.8 %
Directors (except Messrs. Barber and Engquist)
Bruce C. Bruckmann (6)
1,048,245
2.9 %
Paul N. Arnold (7)
75,279
*
Gary W. Bagley (7)
55,223
*
Lawrence C. Karlson (8)
50,619
*
Patrick L. Edsell (9)
37,234
*
Thomas J. Galligan III (7)
37,034
*
Mary P. Thompson (7)
12,491
*
Jacob Thomas (7)
4,706
*
Suzanne H. Wood (7)
2,839
*
Named Executive Officers
John M. Engquist (10)
2,479,707
6.8 %
Bradley W. Barber (10)
215,886
*
Leslie S. Magee (10)
136,613
*
John McDowell Engquist (10)
449,197
*
All executive officers and directors as a group (13 persons)
4,605,073
12.6 %
_____________
* Less than 1%.
(1)
The shares reported herein are beneficially owned by The Vanguard Group (“Vanguard”). Shares beneficially owned is based solely on
the Schedule 13F filed with the SEC on February 11, 2025 by Vanguard, which provides beneficial ownership as of December 31,
2024. The address of Vanguard is 100 Vanguard Blvd., Malvern, PA 19355.
(2)
The shares reported herein are beneficially owned by BlackRock, Inc. (“BlackRock”). Shares beneficially owned is based solely on the
Schedule 13F filed with the SEC on February 7, 2025 by BlackRock, which provides beneficial ownership as of December 31, 2024.
The address of BlackRock is 55 East 52ndStreet, New York, NY 10055.
(3)
The shares reported herein are beneficially owned by Clearbridge Investments, LLC (“Clearbridge”). Shares beneficially owned is
based solely on the Schedule 13G amendment filed with the SEC on February 11, 2025 by Clearbridge, which provides beneficial
ownership as of December 31, 2024. Clearbridge has sole dispositive power with respect to 2,119,455 shares and sole voting power
with respect to 2,035,399 shares. The address of Clearbridge is 620 8th Avenue, New York, NY 10018.
(4)
The shares reported herein are beneficially owned by Macquarie Group Limited, Macquarie Management Holdings Inc., and Macquarie
Investment Management Business Trust. Shares beneficially owned is based solely on the Schedule 13F filed with the SEC on February
14, 2025, which provides beneficial ownership as of December 31, 2024. The principal business address of Macquarie Group Limited is
108
50 Martin Place Sydney, New South Wales, Australia. The principal business address of Macquarie Investment Management Holdings
Inc. and Macquarie Investment Management Business Trust is 610 Market Street, Philadelphia, PA 19106.
(5)
The shares reported herein are beneficially owned by American Century Investment Management, Inc. (“American Century”). Shares
beneficially owned is based solely on the Schedule 13G jointly filed with the SEC on February 14, 2025 by American Century, which
provides beneficial ownership as of December 31, 2024. American Century has sole dispositive power with respect to 2,134,252 shares
and sole voting power with respect to 1,949,383 shares. The address of American Century is 4500 Main Street, Kansas City, MO
64111.
(6)
Includes the February 3, 2025 restricted stock grant of 1,072 shares, which vested immediately upon issuance. Also includes 73,344
shares held in a trust for the benefit of Mr. Bruckmann’s children, for which he is not a trustee, and 171,882 shares held in another trust
for the benefit of Mr. Bruckmann’s children, for which he is not a trustee. Mr. Bruckmann expressly disclaims beneficial ownership of
all shares except those owned by him directly.
(7)
Includes the February 3, 2025 restricted stock grant of 1,072 shares, which vested immediately upon issuance.
(8)
Includes the February 3, 2025 restricted stock grant of 1,072 shares, which vested immediately upon issuance. Also includes 2,375
shares held by Mr. Karlson’s spouse.
(9)
Includes the February 3, 2025 restricted stock grant of 1,072 shares, which vested immediately upon issuance. Also includes 200 shares
held by Mr. Edsell’s domestic partner.
(10) Includes the following restricted stock grants: (a) August 1, 2022: 31,240 shares, 44,909 shares, 18,657 shares and 14,075 shares to Mr.
Engquist, Mr. Barber, Ms. Magee and Mr. Engquist (McDowell), respectively; (b) August 1, 2023: 9,806 shares, 34,993 shares, 6,545
shares and 4,800 shares to Mr. Engquist, Mr. Barber, Ms. Magee and Mr. Engquist (McDowell), respectively; and (c) August 1, 2024:
9,108 shares, 32,504 shares, 6,405 shares and 6,596 shares to Mr. Engquist, Mr. Barber, Ms. Magee and Mr. Engquist (McDowell),
respectively. The shares for each stock grant vest over a three-year period and are subject to certain restrictions, as described in the
recipient’s applicable Restricted Stock Grant Award Letter.
Equity Compensation Plan Information
The following table summarizes our equity compensation plan information as of December 31, 2024.
Plan Category
Number of securities to be
issued upon exercise of
outstanding options, warrants
and rights
(a)
Weighted-average
exercise price of outstanding
options, warrants and rights
(b)
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a))
(c)
Equity compensation plans approved by
security holders
220,581
—
2,228,894 (1)
Equity compensation plans not approved by
security holders
—
—
—
Total
220,581
—
2,228,894
_______________
(1)
Comprised of shares remaining available for issuance under the Amended and Restated 2016 Stock-Based Incentive
Compensation Plan.
Item 13. Certain Relationships and Related Transactions, and Director Independence
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Registration Rights Agreement
In connection with certain transactions involving the Company and its predecessors (the “Prior Transactions”), a predecessor
company (“H&E Holdings”) entered into a registration rights agreement with affiliates of Bruckmann, Rosser, Sherrill & Co., Inc.
(“BRS”), certain members of management and certain other entities. In connection with our initial public offering in February 2006,
109
the parties amended and restated the registration rights agreement to provide that the registration rights agreement thereafter applies to
our common stock held by the parties.
Investor Rights Agreement
In connection with the Prior Transactions, H&E Holdings entered into an investor rights agreement with affiliates of BRS, Credit
Suisse First Boston Corporation and other members of H&E Holdings (the “Investors”). In connection with our initial public offering
in February 2006, the parties amended and restated the investor rights agreement to, among other things, provide that the investor
rights agreement thereafter applies to our common stock held by the parties. Pursuant to the terms of the restated investor rights
agreement, subject to certain conditions, Investors holding 33% or more of the equity interests issued to the Investors on the date of
the investor rights agreement (or successor securities) have the right on any two occasions to require us to register all or part of such
equity interests under the Securities Act of 1933 at our expense. In addition, the Investors are entitled to request the inclusion of any
equity interests subject to the investor rights agreement in any registration statement at our expense whenever we propose to register
any of our equity interests under the Securities Act. In connection with all such registrations, we agreed to indemnify the Investors
against certain liabilities, including liabilities under the Securities Act.
Related Party Transactions
The Company maintains a policy that the Audit Committee review transactions in which the Company and its directors, executive
officers or their immediate family members are participants to determine whether a related person has a direct or indirect material
interest. The Audit Committee is responsible for reviewing and, if appropriate, approving or ratifying any such related party
transaction. The Board has orally communicated this Policy.
In determining whether to approve, disapprove or ratify a related party transaction, the Audit Committee will take into account,
among other factors it deems appropriate, (1) whether the transaction is on terms no less favorable to the Company than terms that
would otherwise be generally available to the Company if the transaction was entered into under the same or similar circumstances
with a party unaffiliated with the Company and (2) the extent of the interest of the related party in the transaction.
Below are the related party transactions which occurred or were in effect during the year ended December 31, 2024. All such
related party transactions, if entered into after the Company’s initial public offering in February 2006, have been approved or ratified
by the Company’s Audit Committee or, if pursuant to contractual arrangements entered into prior to the Company’s initial public
offering in February 2006, have been reviewed annually by the Audit Committee.
Mr. Engquist, our current Executive Chairman of the Board, has a 35% ownership interest in Perkins-McKenzie Insurance
Agency, Inc. (“Perkins-McKenzie”), an insurance brokerage firm. Perkins-McKenzie brokers a substantial portion of our commercial
liability 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. In 2024, commissions paid to Perkins-McKenzie on our behalf as insurance broker totaled
$1,352,020.
We purchase products and services from, and sell products and services to, B-C Equipment Sales, Inc. (“B-C”), in which Mr.
Engquist has a 50% ownership interest. For the year ended December 31, 2024, our purchases from B-C totaled $21,883 and our sales
to B-C totaled $331. There was no accounts receivable or accounts payable balance at December 31, 2024 with B-C.
Mr. Engquist’s son, John McDowell Engquist, is an employee of the Company and was appointed as President and Chief
Operating Officer of the Company, effective January 1, 2021. The annual total compensation of Mr. Engquist (McDowell) is reported
in our Summary Compensation Table.
Mr. Barber’s son and son-in-law are employees of the Company and received compensation totaling $62,943 and $203,587,
respectively, for the year ended December 31, 2024.
Independence
The Board has determined that nine of the Company’s eleven directors are “independent” as defined in the applicable listing
standards of the NASDAQ Stock Market LLC, including that each such director is free of any relationship that the Board believes
would interfere with his or her individual exercise of independent judgment. As a part of the Board’s review of the independence of
directors, questionnaires are used on an annual basis (or when a new director is added) to gather input to assist the Corporate
Governance and Nominating Committee. The following directors were determined to be independent: Paul N. Arnold, Gary W.
Bagley, Bruce C. Bruckmann, Patrick L. Edsell, Thomas J. Galligan III, Lawrence C. Karlson, Jacob Thomas, Mary P. Thompson and
Suzanne H. Wood. Mr. Bagley serves as a manager of our wholly-owned subsidiary, H&E Equipment Services (California), LLC, but
is not an employee of the Company or any of its subsidiaries.
In making its determinations regarding director independence, the Board considered, among other things:
110
•
any material relationships with the Company, its subsidiaries or its management, aside from such director’s service as a
director;
•
transactions between the Company, on the one hand, and the directors and their respective affiliates, on the other hand;
•
transactions outside the ordinary course of business between the Company and companies at which some of its directors
are or have been executive officers or significant stakeholders, and the amount of any such transactions with these
companies; and
•
relationships among the directors with respect to common involvement with for-profit and non-profit organizations.
Item 14. Principal Accountant Fees and Services
The aggregate fees billed by our independent registered public accounting firm for professional services rendered in connection
with (i) the audit of our consolidated financial statements as set forth in our Annual Report on Form 10-K for the years ended
December 31, 2024 and 2023, (ii) the review of our quarterly consolidated financial statements as set forth in our Quarterly Reports on
Form 10-Q for each of our quarters during 2024 and 2023, and (iii) the 2024 and 2023 audit of our internal control over financial
reporting with the objective of obtaining reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects, as well as any fees paid to our independent registered public accounting firm for audit-related
work, tax compliance, tax planning and other consulting services are set forth in the table below:
2024
2023
Audit Fees (1)
$
1,469,809
$
1,009,000
Audit-Related Fees (2)
234,300
491,380
Tax Fees
—
—
All Other Fees
—
—
$
1,704,109
$
1,500,380
____________
(1)
Represents audit fees and expenses for professional services provided in connection with the annual audit of our consolidated financial
statements and the effectiveness of internal control over financial reporting, the review of our quarterly consolidated financial
statements and audit services provided in connection with other regulatory filings.
(2)
Consists of accounting due diligence services in connection with acquisitions and potential acquisitions.
Pre-approval of services
All audit and permissible non-audit services provided by the Company’s independent registered public accounting firm, BDO
USA, P.C., require pre-approval by the Audit Committee in accordance with the Audit Committee Charter. The Company’s Audit
Committee approves the independent registered public accounting firm’s engagement prior to the independent registered public
accounting firm rendering any non-audit services. The Audit Committee pre-approved 100% of the 2024 and 2023 fees.
111
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:
Page
Report of Independent Registered Public Accounting Firm—Internal Control over Financial Reporting ...................................
85
Report of Independent Registered Public Accounting Firm—Consolidated Financial Statements ..............................................
48
Consolidated Balance Sheets as of December 31, 2024 and 2023 ................................................................................................
50
Consolidated Statements of Income for the years ended December 31, 2024, 2023 and 2022 .....................................................
51
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2024, 2023 and 2022 ...............................
52
Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023 and 2022 ..............................................
53
Notes to Consolidated Financial Statements .................................................................................................................................
55
(2)
Financial Statement Schedule for the years ended December 31, 2024, 2023 and 2022:
Schedule II—Valuation and Qualifying Accounts ........................................................................................................................
114
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
Exhibit Index
2.1
Agreement and Plan of Merger, dated February 2, 2006, among the Company, H&E LLC and Holdings (incorporated by
reference to Exhibit 2.1 to Current Report on Form 8-K of H&E Equipment Services, Inc. (File No. 000-51759), filed
February 3, 2006).
2.2
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) (incorporated 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.
2.3
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) (incorporated 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 September 4, 2007).
2.4
Acquisition Agreement, dated as of January 4, 2005, among H&E Equipment Services, L.L.C., Eagle Merger Corp., Eagle
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. (incorporated 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).
2.5
Agreement and Plan of Merger, dated January 13, 2025, among the Company, United Rentals, Inc. and UR Merger Sub VII
Corporation (incorporated by reference to Exhibit 2.1 to Current Report on Form 8-K of H&E Equipment Services, Inc.
(File No. 000-51759), filed January 14, 2025).
2.6
Agreement and Plan of Merger, dated February 19, 2025, among the Company, Herc Holdings Inc. and HR Merger Sub
Inc. (incorporated by reference to Exhibit 2.1 to Current Report on Form 8-K of H&E Equipment Services, Inc. (File No.
000-51759), filed February 19, 2025).
112
3.1
Amended and Restated Certificate of Incorporation of H&E Equipment Services, Inc. (incorporated by reference to Exhibit
3.4 to Registration Statement on Form S-1 of H&E Equipment Services, Inc. (File No. 333-128996), filed January 20,
2006).
3.2
Amended and Restated Bylaws of the Company, dated as of March 13, 2023 (incorporated by reference to Exhibit 3.1 to
the Current Report on Form 8-K of H&E Equipment Services Inc. (File No. 000-51759), filed on March 14, 2023).
3.3
First Amendment to Amended and Restated Bylaws of the Company, dated as of January 13, 2025 (incorporated by
reference to Exhibit 3.1 to the Current Report on Form 8-K of H&E Equipment Services Inc. (File No. 000-51759), filed on
January 14, 2025).
4.1
Amended and Restated Security Holders Agreement, dated as of February 3, 2006, among the Company and certain other
parties thereto (incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K of H&E Equipment Services, Inc.
(File No. 000-51759), filed February 3, 2006).
4.2
Amended and Restated Investor Rights Agreement, dated as of February 3, 2006, among the Company and certain other
parties thereto (incorporated by reference to Exhibit 4.2 to Current Report on Form 8-K of H&E Equipment Services, Inc.
(File No. 000-51759), filed February 3, 2006).
4.3
Amended and Restated Registration Rights Agreement, dated as of February 3, 2006, among the Company and certain
other parties thereto (incorporated by reference to Exhibit 4.3 to Current Report on Form 8-K of H&E Equipment Services,
Inc. (File No. 000-51759), filed February 3, 2006).
4.4
Form of H&E Equipment Services, Inc. common stock certificate (incorporated by reference to Exhibit 4.3 to Registration
Statement on Form S-1 of H&E Equipment Services, Inc. (File No. 333-128996), filed January 5, 2006).
4.5
Indenture, dated December 14, 2020, by and among H&E Equipment Services, Inc., the guarantors party thereto and The
Bank of New York Mellon Trust Company, N.A, as Trustee, relating to the 3.8750% Senior Notes due 2028 (incorporated
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).
4.6
Description of H&E Equipment Services, Inc.’s Common Stock (incorporated by reference to Exhibit 4.6 to Annual Report
on Form 10-K of H&E Equipment Services, Inc. (File No. 000-51759), filed February 22, 2023).
10.1
Fifth Amended and Restated Credit Agreement, dated December 22, 2017, by and among the Company, Great Northern
Equipment, Inc., H&E Equipment Services (California), LLC and H&E Equipment Services (Mid-Atlantic), Inc.
(collectively, the “Borrowers”), Wells Fargo Capital 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 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of H&E
Equipment Services, Inc. (File No. 000-51759), filed December 27, 2017).
10.2
First Amendment to the Fifth Amended and Restated Credit Agreement, dated February 1, 2019, by and among the
Company, Great Northern Equipment, Inc., H&E Equipment Services (California), LLC and H&E Equipment Services
(Mid-Atlantic), Inc. (collectively, the “Borrowers”), Wells Fargo Capital 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 (incorporated by reference to Exhibit 10.1 to the Current Report
on Form 8-K of H&E Equipment Services, Inc. (File No. 000-51759, filed February 4, 2019).
10.3
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 (California), 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 Product Providers, and the joint lead arrangers, joint book runners, co-
syndication agents and documentation agent party thereto (incorporated by reference from Exhibit 10.1 to Form 10-Q of
H&E Equipment Services, Inc. (File No. 000-51759), filed November 2, 2021).
10.4
Sixth Amended and Restated Credit Agreement, dated February 2, 2023, by and among the Company, Great Northern
Equipment, Inc., H&E Equipment Services (California), 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 (incorporated by reference to Exhibit 10.4
to Form 10-K of H&E Equipment Services, Inc. (File No. 000-51759), filed February 22, 2023).
113
10.5
H&E Equipment Services, Inc. Amended and Restated 2016 Stock-Based Incentive Compensation Plan (incorporated by
reference to Exhibit 10.1 to the Definitive Proxy Statement of H&E Equipment Services, Inc. (File No. 000-51759), filed
April 2, 2024.†
10.6
Form of Restricted Stock Award Agreement for Officers of H&E Equipment Services, Inc. (incorporated by reference from
Exhibit 10.1 to Form 10-Q of H&E Equipment Services, Inc. (File No. 000-51759), filed November 3, 2011). †
10.7
Restrictive Covenant Agreement, dated August 14, 2015, by and between the Company and Bradley W. Barber
(incorporated by reference to Exhibit 10.1 to Form 10-Q of H&E Equipment Services, Inc. (File No. 000-51759), filed
October 29, 2015). †
10.8
Restrictive Covenant Agreement, dated October 12, 2015, by and between the Company and Leslie S. Magee (incorporated
by reference to Exhibit 10.12 to Form 10-K of H&E Equipment Services, Inc. (File No. 000-51579), filed on February 25,
2016).†
10.9
Restrictive Covenant Agreement, dated March 4, 2022, by and between the Company and John McDowell Engquist
(incorporated by reference to Exhibit 10.1 to Form 10-Q of H&E Equipment Services, Inc. (File No. 000-51579), filed on
April 27, 2022).†
10.10
Restrictive Covenant Agreement, dated February 20, 2025, by and between the Company and John M. Engquist*
10.11
Severance Agreement, dated February 20, 2025, by and between the Company and Bradley W. Barber (the “Barber
Severance Agreement”).*
10.12
Severance Agreement, dated February 20, 2025, by and between the Company and Leslie S. Magee (the “Magee Severance
Agreement”).*
10.13
Severance Agreement, dated February 20, 2025, by and between the Company and John McDowell Engquist (the “J. M.
Engquist Severance Agreement”).*
10.14
Severance Agreement, dated February 20, 2025, by and between the Company and John M. Engquist*
18.1
BDO Seidman, LLP Preferability Letter (incorporated by reference to Exhibit 18.1 to Form 10-K of H&E Equipment
Services, Inc. (File No. 000-51759), filed March 7, 2008).
19.1
Insider Trading Policy.*
21.1
Subsidiaries of the registrant.*
23.1
Consent of BDO USA, P.C.*
31.1
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1
Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.**
97
Clawback policy of H&E Equipment Services, Inc. filed February 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
114
SCHEDULE II: VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2024, 2023 AND 2022
(Amounts in thousands)
Description
Balance at
Beginning
of Year
Additions
Charged to
Costs and
Expenses
Deductions
Balance at
End
of Year
Year Ended December 31, 2024
Allowance for doubtful accounts receivable
$
7,126
$
5,322
$
(3,013 ) $
9,435
Allowance for inventory obsolescence
207
51
(78 )
180
Allowance for deferred tax assets
3,003
620
(3,003 )
620
$
10,336
$
5,993
$
(6,094 ) $
10,235
Year Ended December 31, 2023
Allowance for doubtful accounts receivable
$
6,637
$
4,858
$
(4,369 ) $
7,126
Allowance for inventory obsolescence
54
178
(25 )
207
Allowance for deferred tax assets
5,930
—
(2,927 )
3,003
$
12,621
$
5,036
$
(7,321 ) $
10,336
Year Ended December 31, 2022
Allowance for doubtful accounts receivable
$
4,178
$
3,264
$
(805 ) $
6,637
Allowance for inventory obsolescence
73
32
(51 )
54
Allowance for deferred tax assets
7,597
—
(1,667 )
5,930
$
11,848
$
3,296
$
(2,523 ) $
12,621
Item 16. Form 10-K Summary
None.
115
SIGNATURES
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 February 21, 2025.
H&E EQUIPMENT SERVICES, INC.
By: /s/ Bradley W. Barber
Bradley W. Barber
Chief Executive Officer 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: /s/ Bradley W. Barber
Chief Executive Officer and Director
February 21, 2025
Bradley W. Barber
(Principal Executive Officer)
By: /s/ Leslie S. Magee
Chief Financial Officer and Secretary
February 21, 2025
Leslie S. Magee
(Principal Financial and Accounting Officer)
By: /s/ John M. Engquist
Executive Chairman of the Board
February 21, 2025
John M. Engquist
By: /s/ Paul N. Arnold
Director
February 21, 2025
Paul N. Arnold
By: /s/ Gary W. Bagley
Lead Independent Director
February 21, 2025
Gary W. Bagley
By: /s/ Bruce C. Bruckmann
Director
February 21, 2025
Bruce C. Bruckmann
By: /s/ Patrick L. Edsell
Director
February 21, 2025
Patrick L. Edsell
By: /s/ Thomas J. Galligan III
Director
February 21, 2025
Thomas J. Galligan III
By: /s/ Lawrence C. Karlson
Director
February 21, 2025
Lawrence C. Karlson
By: /s/ Mary Pat Thompson
Director
February 21, 2025
Mary Pat Thompson
By: /s/ Jacob Thomas
Director
February 21, 2025
Jacob Thomas
By: /s/ Suzanne H. Wood
Director
February 21, 2025
Suzanne H. Wood
Exhibit 10.10
RESTRICTIVE COVENANT AGREEMENT
In consideration of the severance benefits (the “Severance Benefits”) to be provided to
John M. Engquist (the “Executive”) by H&E Equipment Services, Inc., a Delaware corporation
(the “Company”) pursuant to the Severance Agreement attached hereto as Exhibit A and for
other valuable consideration the sufficiency of which is hereby acknowledged, intending to be
legally bound, the Executive agrees to the terms and conditions set forth in this Restrictive
Covenant Agreement (this “Agreement”).
1.
Confidentiality. During the term of the Executive’s employment with the
Company (the “Term”) and at all times thereafter, the Executive shall, and shall cause his
affiliates and representatives to keep confidential and not disclose to any other person or entity or
use for his own benefit or the benefit of any other person or entity any confidential proprietary
information with respect to the business and activities of the Company or its affiliates, including
clients, customers, suppliers, employees, consultants, computer or other files, projects, products,
marketing plans, forecasts, formats, systems, data gathering methods, strategies, technology,
know-how, trade secrets (including all results of research and development), industrial designs or
other intellectual property (“Confidential Information”). The obligations of the Executive under
this Section 1 shall not apply to Confidential Information which (i) is or becomes generally
available to the public without breach of the commitment provided for in this Section 1; (ii) is
required to be disclosed by law, order or governmental authority; (iii) is independently developed
by the Executive after termination of all employment with the Company or its affiliates, without
the use of or reliance on any Confidential Information and (iv) becomes known to the Executive
after termination of all employment with the Company or its affiliates, on a non-confidential
basis from a third-party source if such source was not subject to any confidentiality obligation;
provided, however, that, in case of clause (ii), the Executive shall notify the Company as early as
reasonably practicable prior to disclosure to allow the Company or its affiliates to take
appropriate measures to preserve the confidentiality of such Confidential Information.
2.
Non-Competition; Non-Solicitation.
(a)
During the period beginning on the date hereof and ending twenty-
four (24) months following the date on which the Executive’s employment with the Company is
terminated for any reason (the “Non-Compete Period”), the Executive covenants and agrees not
to, and shall cause his affiliates not to, directly or indirectly anywhere in North America,
conduct, manage, operate, engage in or have an ownership interest in any business or enterprise
that (A) sells, rents, services, maintains or otherwise deals in or with construction equipment,
heavy industrial equipment, material handling equipment or utility equipment (new or used), or
related parts, implements or similar assets, (B) uses any trademarks, tradenames or slogans
similar to those of the Company or its affiliates; or (C) is engaged in any other activities that are
otherwise competitive with the business of the Company or its affiliates as conducted or
proposed to be conducted as of the termination date (collectively, the “Business”).
Notwithstanding the foregoing, nothing herein shall preclude the Executive from owning,
directly or indirectly, in the aggregate less than 2% of any business competitive with the
Company or its affiliates that is subject to the reporting obligations of the Securities Exchange
Act of 1934, as amended.
(b)
During the Non-Compete Period, the Executive shall not, and shall
cause his affiliates not to, directly or indirectly, call-on, solicit or induce any customer or other
business relationship of the Company or its affiliates for the provision of products or services
related to the business of the Company or in any other manner that would otherwise interfere
with the business relationship between the Company and its affiliates and their respective
customers and other business relationships.
(c)
During the Non-Compete Period, the Executive shall not, and shall
cause his affiliates not to, directly or indirectly, call-on, solicit or induce, any employee of the
Company or its affiliates to leave the employ of, or terminate its relationship with, the Company
or its affiliates for any reason whatsoever, nor shall the Executive offer or provide employment
(whether such employment is for the Executive or any other business or enterprise), either on a
full-time, part-time or consulting basis, to any person who then currently is, or within six (6)
months immediately prior thereto was, an employee or independent contractor of the Company;
provided, however, the foregoing shall not prohibit a general solicitation to the public through
general advertising or similar methods of solicitation not specifically directed at employees of
the Company.
(d)
The Executive acknowledges and agrees that the provisions of this
Section 2 are reasonable and necessary to protect the legitimate business interests of the
Company and its affiliates. The Executive shall not contest that the Company’s and its affiliates’
remedies at law for any breach or threat of breach by the Executive or any of his affiliates of the
provisions of this Section 2 will be inadequate, and that the Company and its affiliates shall be
entitled to an injunction or injunctions to prevent breaches of the provisions of this Section 2 and
to enforce specifically such terms and provisions, in addition to any other remedy to which the
Company or its affiliates may be entitled at law or equity. The restrictive covenants contained in
this Section 2 are covenants independent of any other provision of this Agreement or any other
agreement between the parties hereunder and the existence of any claim which the Executive
may allege against the Company under any agreement between the Executive and the Company
will not prevent the enforcement of these covenants.
(e)
If any of the provisions contained in this Section 2 shall for any
reason be held to be excessively broad as to duration, scope, activity or subject, then such
provision shall be construed by limiting and reducing it, so as to be valid and enforceable to the
maximum extent compatible with the applicable law or the determination by a court of
competent jurisdiction.
3.
Non-Disparagement. During the Term and at all times thereafter, the
Executive agrees not to, whether in writing or orally, in any forum, malign, denigrate or
disparage the Company and its subsidiaries and affiliates and any of their respective predecessors
or successors, or any of the current or former directors, officers, employees, agents or
representatives of any of the foregoing, with respect to any of their respective past or present
activities, or otherwise publish (whether in writing or orally) in any forum statements that tend to
portray any of the aforementioned parties in an unfavorable light.
4.
Cooperation with Litigation. The Executive agrees that, at any time
during the Term or thereafter, the Executive shall cooperate fully with the Company and its
subsidiaries and their counsel and make himself available to testify or provide other information
in connection with any legal proceeding or investigation regarding any event or occurrence that
occurred during the Executive’s employment with the Company; provided, however, that the
Executive will not have an obligation under this Section with respect to any claim in which the
Executive has filed directly against the Company or related persons or entities or the Company
has filed directly against Executive. The Executive shall render such cooperation in a timely
manner on reasonable notice from the Company. The Company will pay or reimburse any
expenses incurred by the Executive in connection with such cooperation.
5.
Work Product. Executive acknowledges that all discoveries, concepts,
ideas, inventions, innovations, improvements, developments, methods, processes, programs,
designs, analyses, drawings, reports, patent applications, copyrightable work and mask work
(whether or not including any Confidential Information) and all registrations or applications
related thereto, all other proprietary information and all similar or related information (whether
or not patentable) that relate to the Company’s or any affiliate of the Company’s actual or
anticipated business, research and development, or existing or future products or services and
that are conceived, developed, contributed to, made, or reduced to practice by Executive (either
solely or jointly with others) while employed by the Company (including any of the foregoing
that constitutes any proprietary information or records) (“Work Product”) belong to the
Company or any affiliate of the Company designated by the Company, and Executive hereby
assigns, and agrees to assign, all of the above Work Product to the Company or such affiliate of
the Company. Any copyrightable work prepared in whole or in part by Executive in the course
of Executive’s work for any of the foregoing entities shall be deemed a “work made for hire”
under the copyright laws, and the Company or such affiliate of the Company shall own all rights
therein. To the extent that any such copyrightable work is not a “work made for hire,” Executive
hereby assigns and agrees to assign to the Company or such affiliate of the Company all right,
title, and interest, including without limitation, copyright in and to such copyrightable work.
Executive shall promptly disclose such Work Product and copyrightable work to the Company
and perform all actions reasonably requested by the Company (whether during or after the term
of Executive’s employment) to establish and confirm the ownership of the Company or such
affiliate of the Company (including, without limitation, assignments, consents, powers of
attorney and other instruments).
6.
Returning Company Documents and Property. The Executive agrees that,
upon termination of his service with Company for any reason, he will deliver to the Company, or
its designee, and will not keep in his possession or deliver to anyone else, any and all records,
data, notes, reports, information, proposals, lists, correspondence, emails, specifications,
drawings, blueprints, sketches, materials, other documents, or reproductions or copies (including
but not limited to on computer discs or drives) of any aforementioned items either developed by
the Executive pursuant to his service with the Company or otherwise relating to the business of
the Company, retaining neither copies nor excerpts thereof. The Executive also agrees that, at
such time, or earlier upon request, the Executive will deliver to the Company, or its designee, all
Company property in the Executive’s possession, including cell phones, computers, computer
discs, drives and other equipment or devices, and that if the Executive fails to do so the
Company may withhold from the Executive’s compensation the replacement cost of any such
unreturned Company property.
7.
Survival. The obligations contained in this Agreement shall survive the
termination of the Executive’s employment or other relationship with the Company.
8.
Disclosure of Agreement. The Executive agrees to disclose the existence
and terms of this Agreement to any employer or other service recipient that the Executive may
render services to or for during the twelve (12) month period immediately following termination
of his service with the Company. The Executive further acknowledges and agrees that if he
breaches Section 2 of this Agreement in any respect, the restrictions contained in such Section
will be extended for a period equal to the period that the Executive was in breach thereof.
9.
Miscellaneous.
(a)
Neither the failure, nor any delay, on the part of the Company to
exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude
any other or further exercise of the same, or of any other right, remedy, power or privilege, nor
shall any waiver of any right, remedy, power or privilege with respect to any occurrence be
construed as a waiver of such right, remedy, power or privilege with respect to any other
occurrence. No waiver shall be effective unless it is in writing and is signed by the Company.
(b)
This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Delaware, without giving effect to any conflict of laws
provisions. Any court action instituted by the Executive or on the Executive’s behalf relating in
any way to this Agreement shall be filed exclusively in federal or state court, respectively in the
State of Delaware, and the Executive consents to the jurisdiction and venue of these courts in any
action instituted by the Company against the Executive. THE EXECUTIVE HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
RIGHT THE EXECUTIVE MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT.
(c)
This Agreement will be binding upon the Executive’s heirs,
executors, administrators and other legal representatives and may be assigned by the Company
and its successors to any person, including, but not limited to, any successor or parent of the
Company or any of its affiliates. The Company also may assign this Agreement in connection
with any sale or merger (whether a sale or merger of stock or assets or otherwise) of the
Company or the business of the Company. The Executive expressly consents to the assignment
of the restrictions and requirements set forth in this Agreement to any new owner of the
Company’s business or purchaser of the Company.
(d)
If any provision of this Agreement or application thereof to anyone
or under any circumstances is adjudicated to be invalid or unenforceable by an arbitrator or court
of competent jurisdiction, such invalidity or unenforceability shall not affect any other provision
or application of this Agreement which can be given effect without the invalid or unenforceable
provision or application and shall not invalidate or render unenforceable such provision or
application in any other jurisdiction.
(e)
This Agreement sets forth the entire agreement and understanding
between the Company and the Executive with respect to the subject matter hereof, and merges
and supersedes all prior agreements, understandings and/or discussions between the Company
and the Executive with regard to the matters addressed herein. No modification of or
amendment to this Agreement, nor any waiver of any rights under this Agreement, will be
effective unless in writing signed by the Executive and the Company. Any subsequent change or
changes in the terms and conditions of the Executive’s relationship with the Company, including,
but not limited to, the Executive’s duties or compensation, will not affect the validity or scope of
this Agreement.
(f)
The section headings in this Agreement are for convenience only,
form no part of this Agreement and shall not affect its interpretation.
10.
Acknowledgement. The Executive acknowledges and agrees that (a) he
has had the opportunity to consult with independent counsel of his own choice concerning this
Agreement and has been advised to do so by the Company, (b) he has read and understands the
Agreement, is fully aware of its legal effect, and has entered into it freely based on his own
judgment, (c) the duration and scope of this Agreement are reasonable and necessary to protect
the Company’s and its affiliates’ customer relationships, trade secrets, proprietary information
and other legitimate business interests, (d) the Company would not provide the Severance
Benefits to the Executive unless he agreed to be bound by the provisions of this Agreement, and
(e) the Executive has not relied on any agreements or representations, express or implied, that are
not set forth expressly in this Agreement.
Date: February 20, 2025
/s/ John M. Engquist
_________________________________________
John M. Engquist
EXHIBIT A
Severance Agreement
[See attached.]
Exhibit 10.11
SEVERANCE AGREEMENT
This SEVERANCE AGREEMENT (this “Agreement”) is made and entered into as of
February 20, 2025 by and between H&E Equipment Services, Inc. (the “Company”) and Bradley
W. Barber (the “Executive”). The Company and the Executive acknowledge and agree that this
Agreement shall replace in its entirety the Severance Agreement made and entered into as of
February 11, 2025 by and between the Company and the Executive (the “Prior Severance
Agreement”).
WHEREAS, the Company currently employs the Executive, and the Company desires to
continue to employ the Executive and provide him or her with a right to severance in the event of
a Qualifying Termination pursuant to the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained herein, and
intending to be legally bound hereby, the Company and the Executive agree as follows:
1.
Severance Benefits.
(a)
The Executive’s employment with the Company shall be at-will, meaning
that both the Executive and the Company will retain the right to terminate the Executive’s
employment at any time, with or without Cause or notice.
(b)
If the Company or an Affiliate of the Company terminates the Executive’s
employment without Cause or the Executive resigns for Good Reason, in each case, on or within
the two-year period immediately following a Change of Control (a “Qualifying Termination”),
then, subject to Section 2 and the other provisions of this Agreement, the Executive will receive
the following severance payments and benefits from the Company:
(i)
Accrued Benefits. Regardless of whether the Executive executes
the Release upon a Qualifying Termination, the Executive will be entitled to receive the following
(the “Accrued Benefits”): (i) payment of any earned but unpaid Base Salary and any accrued but
unused paid time off, in each case, through the date of the Qualifying Termination (the
“Termination Date”), to be paid no later than 30 days following the Termination Date (or such
earlier date as may be required by applicable law), (ii) reimbursement for any unreimbursed
business expenses incurred through the Termination Date, (iii) all other payments, benefits or
fringe benefits to which the Executive shall be entitled under the terms of any applicable
compensation arrangement or benefit, equity or fringe benefit plan or program or grant, payable
in accordance therewith, and (iv) any accrued but unpaid annual bonus due with respect to any
calendar year preceding the calendar year in which the Termination Date occurs and that has not
been deferred (which deferred bonuses shall be memorialized separately from this Agreement),
which amount shall be paid at the same time that annual bonuses are generally scheduled to be
paid to executives of the Company generally;
(ii)
Severance Payment. The Company or an Affiliate of the Company
will pay the Executive a severance payment in an amount equal to two-times the sum of (x) the
Executive’s Base Salary and (y) the Executive’s Target Annual Bonus (the “Severance Payment”).
- 3 -
The Severance Payment shall be made, less applicable taxes and withholdings, on the 60th day
following the Termination Date; and
(iii)
Continued Employee Benefits. If the Executive timely elects
continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended (“COBRA”) under both the Company’s and any successor’s benefit plans for the
Executive and, if applicable, the Executive’s eligible dependents, within the time period prescribed
pursuant to COBRA, the Company or an Affiliate of the Company will contribute to the premium
costs of the Executive’s COBRA continuation coverage at the same rate that it contributes from
time to time to group health insurance premiums (as applicable) for its active employees generally,
until the later of (i) the end of the (18) months following the Termination Date or (ii) the date the
Executive and the Executive’s dependents are no longer entitled to coverage under COBRA or
Company plans or the Executive otherwise begins other employment that provides for health
coverage benefits. Notwithstanding the foregoing, in the event that the Company’s payment of
the COBRA premium contributions, as described in this Section 1(b)(iii), would subject the
Company to any tax or penalty under either Section 105(h) of the Internal Revenue Code of 1986,
as amended, or the Patient Protection and Affordable Care Act, as amended, any regulations or
guidance issued thereunder, or any other applicable law, in each case, as determined by the
Company, then the Executive and the Company agree to work together in good faith to restructure
such benefit.
2.
Conditions to Severance.
(a)
Any obligation of the Company or an Affiliate of the Company to provide
the severance benefits described in Sections 1(ii) and (iii) (collectively, the “Severance Benefits”)
to the Executive is expressly conditioned on the Executive signing and returning to the Company,
without revoking, a timely and effective general release of claims in the form attached hereto as
Exhibit A (the “Release”). The Release must become effective, with all periods of revocation
therein having expired, no later than the 52nd calendar day following the Termination Date.
(b)
Any obligation of the Company to provide the Severance Benefits to the
Executive, and the Executive’s right to retain the same, are also expressly conditioned upon the
Executive’s continued compliance with the Protective Agreement (Non-Competition, Non-
Solicitation, Confidential Information and IP) attached hereto as Exhibit B (the “Restrictive
Covenant Agreement”); provided, that in consideration for the Company’s entry into this
Agreement, the Executive hereby acknowledges and agrees that Section 2(a) of the Restrictive
Covenant Agreement is hereby amended and restated in its entirety to read as follows:
(c)
“(a)
During the period beginning on the date hereof and ending twenty
four (24) months following the date on which the Executive's employment with the Company is
terminated for any reason (the "Non-Compete Period"), the Executive covenants and agrees not
to, and shall cause his affiliates not to, directly or indirectly anywhere in North America, conduct,
manage, operate, engage in or have an ownership interest in any business or enterprise that (A)
sells, rents, services, maintains or otherwise deals in or with construction equipment, heavy
industrial equipment, material handling equipment or utility equipment (new or used), or related
parts, implements or similar assets, (B) uses any trademarks, tradenames or slogans similar to
- 4 -
those of the Company or its affiliates; or (C) is engaged in any other activities that are otherwise
competitive with the business of the Company or its affiliates as conducted or proposed to be
conducted as of the termination date ( collectively, the "Business"). Notwithstanding the foregoing,
nothing herein shall preclude the Executive from owning, directly or indirectly, in the aggregate
less than 2% of any business competitive with the Company or its affiliates that is subject to the
reporting obligations of the Securities Exchange Act of 1934, as amended”.
(d)
Enforcement of Covenants. Executive acknowledges and agrees that a
breach of any provision of the Restrictive Covenant Agreement by the Executive will cause serious
and irreparable injury to the Company and its Affiliates and that it will be difficult to quantify and
that money damages alone will not adequately compensate the Company. In the event of a breach
or threatened or intended breach of this Agreement by the Executive, the Company shall be entitled
to seek injunctive relief, both temporary and final, enjoining and restraining such breach or
threatened or intended breach. The Executive further agrees that should the Executive breach the
Restrictive Covenant Agreement, the Company will be entitled to any and all other legal or
equitable remedies available to it, including the recovery and return of any amount paid to
Employee to enter into this Agreement.
3.
Timing of Payments and Section 409A.
(a)
Notwithstanding anything to the contrary in this Agreement, if at the time
the Executive’s employment terminates, the Executive is a “specified employee,” any and all
amounts payable under this Agreement on account of such separation from service that would (but
for this provision) be payable within six (6) months following the date of termination, shall instead
be paid on the next business day following the expiration of such six (6)-month period or, if earlier,
upon the Executive’s death; except (i) to the extent of amounts that do not constitute a deferral of
compensation within the meaning of Treasury regulation Section 1.409A-1(b) (including without
limitation by reason of the safe harbor set forth in Section 1.409A-1(b)(9)(iii), as determined by
the Company in its reasonable good faith discretion); (ii) benefits which qualify as excepted
welfare benefits pursuant to Treasury regulation Section 1.409A-1(a)(5); or (iii) other amounts or
benefits that are not subject to the requirements of Section 409A of the Internal Revenue Code of
1986, as amended (“Section 409A”).
(b)
For purposes of this Agreement, all references to “termination of
employment” and correlative phrases shall be construed to require a “separation from service” (as
defined in Section 1.409A-1(h) of the Treasury regulations after giving effect to the presumptions
contained therein), and the term “specified employee” means an individual determined by the
Company to be a specified employee under Treasury regulation Section 1.409A-1(i).
(c)
Each payment made under this Agreement shall be treated as a separate
payment and the right to a series of installment payments under this Agreement is to be treated as
a right to a series of separate payments.
(d)
In no event shall the Company have any liability relating to the failure or
alleged failure of any payment or benefit under this Agreement to comply with, or be exempt from,
the requirements of Section 409A.
- 5 -
4.
Acknowledgement of Qualifying Termination. The Company hereby
acknowledges and agrees that, subject to the Executive’s continued employment with the
Company through the Effective Time, and subject to and contingent upon the occurrence of the
Effective Time, the Executive’s employment will terminate at the Effective Time, or such later
date as may be agreed between Herc Holdings Inc. (“Herc”) and the Executive, and such
termination of employment shall constitute a Qualifying Termination for purposes of this
Agreement.
5.
Definitions. For purposes of this Agreement, the following definitions apply:
“Affiliates” means all persons and entities directly or indirectly controlling, controlled by
or under common control with the Company, where control may be by management authority,
equity interest or otherwise.
“Base Salary” means the Executive’s annual base salary as in effect immediately prior to
the Termination Date (without giving effect to any reduction or series of reductions giving rise to
Good Reason).
“Cause” means (1) any act of misappropriation, embezzlement, fraud, or similar
intentional misconduct by the Executive involving the Company or its Affiliates; (2) the
Executive’s conviction of, or the plea of nolo contendere (or the equivalent) to, a felony or a
misdemeanor involving moral turpitude; (3) willful or intentional conduct that causes, or is
reasonably likely to cause, material and demonstrable injury, monetarily or otherwise, to the
Company or its Affiliates; (4) breach of any material obligations contained in any written
agreement with the Company or any of its Affiliates, including, but not limited to, any restrictive
covenants or obligations of confidentiality contained therein; or (5) material breach of any policies
and procedures of the Company or its Affiliates that are applicable to the Executive, including
without limitation any Code of Conduct, which, in each case, if capable of cure (as determined by
the Company or its Affiliates in reasonable good faith) is not cured within 10 business days after
written notice of the conduct is delivered to the Executive by the Company (which notice shall
identify and describe such conduct with sufficient specificity to allow the Executive to respond).
“Change of Control” has the meaning set forth in the H&E Equipment Services, Inc.
Amended and Restated 2016 Stock-Based Incentive Compensation Plan as in effect immediately
prior to the date hereof; provided, that for the avoidance of doubt, the consummation of the Herc
Sale shall in all events be deemed to be Change of Control for purposes of this Agreement.
“Effective Time” has the meaning set forth in the Merger Agreement.
“Herc Sale” means the consummation of the transactions contemplated by that certain
Agreement and Plan of Merger, by and among Herc, HR Merger Sub Inc., and H&E Equipment
Services, Inc., dated as of February 19, 2025 (the “Merger Agreement”).
“Good Reason” means any of the following, taken without the Executive’s prior written
consent: (i) a material diminution in the Executive’s annual base salary or target annual bonus
opportunity; (ii) any material diminution in the Executive’s position, authority, responsibilities or
reporting line; (iii) the Company’s material breach of this Agreement or any other agreement with
- 6 -
the Executive Officer; or (iv) a relocation of the Executive’s primary work location by more than
25 miles from the Executive’s primary work location as of immediately prior to a Change of
Control. A resignation will only qualify as being for “Good Reason” if, within 30 days following
the initial existence of a condition listed above (or, if later, the time at which the Executive knew
or reasonably should have known of its existence), the Executive provides notice to the Company
of the existence of a supposedly qualifying condition, and within 30 days after such notice, the
Company does not remedy the condition and, within 30 days following the Company’s failure to
remedy the condition, the Executive actually resigns from employment with the Company.
“Person” means an individual corporation, partnership, trust, association, limited liability
company or any other entity or organization, including a government or political subdivision or an
agency or instrumentality thereof.
“Target Annual Bonus” means the Executive’s target annual bonus amount as in effect
immediately prior to the Termination Date (without giving effect to any reduction or series of
reductions giving rise to Good Reason).
6.
Withholding. All payments made by the Company under this Agreement shall be
reduced by any tax or other amounts required to be withheld by the Company to the extent required
by applicable law.
7.
Assignment. Neither the Executive nor the Company may make any assignment
of this Agreement or any interest in it, by operation of law or otherwise, without the prior written
consent of the other; provided, however, the Company may assign its rights and obligations under
this Agreement without the Executive’s consent to one of its Affiliates or to any Person with whom
the Company shall hereafter effect a reorganization, consolidate or merge, or to whom the
Company shall hereafter transfer all or substantially all of its properties or assets (in which event
the assignee shall be treated as the “Company” for all purposes under this Agreement). This
Agreement shall inure to the benefit of and be binding upon the Executive and the Company, and
each of their respective successors, executors, administrators, heirs and permitted assigns.
8.
Severability. If any portion or provision of this Agreement shall to any extent be
declared illegal or unenforceable by a court of competent jurisdiction, then the remainder of this
Agreement, or the application of such portion or provision in circumstances other than those as to
which it is so declared illegal or unenforceable, shall not be affected thereby, and each portion and
provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.
9.
Miscellaneous. This Agreement sets forth the entire agreement between the
Executive and the Company concerning the Executive’s eligibility for severance payments or other
severance benefits from the Company or any of its Affiliates, and replaces all prior and
contemporaneous communications, agreements and understandings on the topic, whether written
or oral, including without limitation the Prior Severance Agreement. The headings and captions
in this Agreement are for convenience only and in no way define or describe the scope or content
of any provision of this Agreement. This Agreement may be executed in two or more counterparts,
each of which shall be an original and all of which together shall constitute one and the same
instrument. This is a Delaware contract and shall be governed and construed in accordance with
- 7 -
the laws of the State of Delaware, without regard to any conflict of laws principles that would
result in the application of the laws of any other jurisdiction.
10.
Amendment. No provision of this Agreement may be amended, modified, waived
or discharged, unless such amendment, modification, waiver or discharge is agreed to in writing
and signed by the Executive and such officer or director of the Company as may be designated by
the Board.
11.
Assumption. This Agreement shall be binding upon the parties hereto and shall
inure to the benefit of the parties and their respective heirs, devisees, executors, administrators,
legal representatives, successors and assigns.
[Signature Page Follows Immediately]
- 8 -
IN WITNESS WHEREOF, this Agreement has been executed by the Company, by its duly
authorized representative, and by the Executive, as of the date first above written.
THE EXECUTIVE:
THE COMPANY:
/s/ Bradley W. Barber
By:
/s/ Leslie S. Magee
________________________
________________________
Bradley W. Barber
Leslie S. Magee
Exhibit A
[Attached]
CONFIDENTIAL
EXHIBIT A
RELEASE OF CLAIMS
1.
Terms of Release. This general release is entered into by and between [______]
(the “Executive”) and H&E Equipment Services, Inc. (the “Company”), as of the date hereof (this
“General Release”), pursuant to the terms of the Severance Agreement to which this General
Release is attached (the “Severance Agreement”), which provides the Executive with certain
significant benefits, subject to the Executive’s execution of this General Release. The Executive
acknowledges and agrees that the consideration provided for herein is adequate consideration for
the Executive’s obligations under this General Release.
2.
Released Claims. In exchange for and in consideration of the payments and
benefits described in the Severance Agreement that are expressly conditioned on the execution of
this Release, the Executive, on behalf of himself, his agents, representatives, heirs, devisees,
assignees, transferees, administrator, executors and legal representatives, past or present (as the
case may be, and collectively, the “Releasors”), hereby knowingly, voluntarily, irrevocably and
unconditionally releases, discharges, and acquits all of the Released Parties from any and all
claims, promises, demands, liabilities, contracts, debts, losses, damages, attorneys’ fees and causes
of action of every kind and nature, known and unknown, vested or contingent, whether known or
unknown (collectively, “Claims”), which the Executive may have against the Released Parties at
any time up to and including the Executive’s execution of this General Release (the “Execution”),
including but not limited to Claims or rights arising out of, or which might be considered to arise
out of or to be connected in any way with: (i) the Executive’s employment with the Company or
any of its subsidiaries, parent companies, successors or assigns, or the termination thereof; (ii) any
treatment of the Executive by any of the Released Parties in connection with his or her employment
or the termination thereof, which shall include, without limitation, any treatment or decisions with
respect to hiring, placement, promotion, work hours, discipline, transfer, termination,
compensation, performance review or training; (iii) any damages or injury that the Executive may
have suffered in connection with his or her employment or the termination thereof, including
without limitation, emotional or physical injury, or compensatory damages; (iv) employment
discrimination, which shall include, without limitation, any individual or class Claims of
discrimination on the basis of age, disability, sex, race, religion, national origin, citizenship status,
marital status, sexual preference, or any other basis whatsoever; (v) any Claims arising under,
including, without limitation, United States federal, state or local law and the national or local law
of any foreign country (statutory or decisional), for wrongful, abusive, constructive or unlawful
discharge or dismissal, for breach of any contract, or for discrimination based upon race, color,
ethnicity, sex, age, national origin, religion, disability, sexual orientation, or any other unlawful
criterion or circumstance, including rights or Claims under the Age Discrimination in Employment
Act of 1967, the Older Workers Benefit Protection Act of 1990, violations of the Equal Pay Act,
Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Americans with
Disabilities Act of 1991, the Employee Retirement Income Security Act of 1974 (“ERISA”), the
Fair Labor Standards Act, the Worker Adjustment Retraining and Notification Act, the Family and
Medical Leave Act, including all amendments to any of the aforementioned acts; violations of any
other federal, state, or municipal fair employment statutes or laws, including, without limitation,
violations of any other law, rule, regulation, or ordinance pertaining to employment, wages,
- 11 -
compensation, hours worked, or any other Claims for compensation or bonuses, whether or not
paid under any compensation plan or arrangement; breach of contract; tort and other common law
Claims; defamation; libel; slander; impairment of economic opportunity defamation; sexual
harassment; retaliation; attorneys’ fees; emotional distress; intentional infliction of emotional
distress; assault; battery; pain and suffering; and punitive or exemplary damages and (v) all such
other Claims that the Executive could assert against any, some, or all of the Released Parties in
any forum, accrued or unaccrued, liquidated or contingent, direct or indirect, including under any
federal, state, foreign or local law, ordinance and/or regulation, or pursuant to common law in
connection with Executive’s employment or the termination thereof (the “Released Claims”). The
payments and other rights of the Executive expressly provided for under the Severance Agreement,
as well as any rights that the Executive may have to be indemnified by the Company pursuant to
the Company’s Certificate of Incorporation, By-laws, any indemnification agreement entered into
by the Executive and the Company or any former parent of the Company, or directors and officers
liability insurance policies, any Claims for employee benefits under plans covered by ERISA to
the extent any such Claim may not lawfully be waived or for any payments or benefits under any
Company plans that have vested according to the terms of those plans, any Claims for payment of
amounts payable under any applicable workers’ compensation or unemployment compensation
law and any Claim that may not lawfully be waived are each excluded from this General Release.
The Executive further agrees to waive any and all rights under the laws of any jurisdiction in the
United States, or any other country, that limit a general release to those Claims that are known or
suspected to exist in the Executive’s favor as of the Execution. For the purpose of implementing
a full and complete release, the Executive expressly acknowledges and agrees that this General
Release releases all Claims existing or arising prior to the Executive signing this General Release
which the Executive has or may have against the Released Parties, whether such Released Claims
are known or unknown and suspected or unsuspected by the Executive and the Executive forever
waives all inquiries and investigations into any and all such Released Claims.
3.
Released Parties. The term “Released Parties” or “Released Party” as used herein
shall mean and include: (i) the Company; (ii) Herc Holdings Inc. (iii) each of their former, current
and future parents, subsidiaries, affiliates, shareholders, beneficial owners and lenders; (iv) each
predecessor, successor and affiliate of any person listed in clauses (i) through (iii); (v) each former,
current, and future officer, director, agent, attorney, representative, employee, servant, owner,
shareholder, partner, joint venturer, attorney, employee benefit plan, employee benefit plan
administrator, insurer, administrator, and fiduciary of any of the persons or entities listed in clauses
(i) through (iv); and (vi) any other person or entity acting by, through, under, or in concert with
any of the persons or entities listed in clauses (i) through (v).
4.
Acknowledgements. Pursuant to the Older Workers Benefit Protection Act of
1990, the Executive understands and acknowledges that by executing this General Release and
releasing all Claims against each and all of the Released Parties, the Executive has waived any and
all rights or Claims that the Executive has or could have against any Released Party under the Age
Discrimination in Employment Act, which includes, but is not limited to, any claim that any
Released Party discriminated against the Executive on account of his or her age. The Executive
also acknowledges the following: (i) the Company, by this General Release, has advised the
Executive to consult with an attorney prior to executing this General Release; (ii) the Executive
has had the opportunity to consult with his own attorney concerning this General Release; (iii) this
- 12 -
General Release does not include Claims arising from any act, omission, transaction or occurrence
which happens after the Execution, provided, however, that any Claims arising after the Execution
from the then-present effect of acts or conduct occurring on or before the Execution shall be
deemed released under this General Release; and (iv) the Company has provided the Executive
with the opportunity to review and consider this General Release for 45 days (the “Review Period”)
and any changes to this General Release will not restart the 45-day review period. At the
Executive’s option and sole discretion, the Executive may waive the Review Period and execute
this General Release before the expiration of 45 days. In electing to waive the Review Period, the
Executive acknowledges and admits that the Executive was given a reasonable period of time
within which to consider this General Release and the Executive’s waiver is made freely and
voluntarily, without duress or any coercion by any other person. The General Release shall be null
and void ab initio in the event the Executive does not execute and return this General Release to
the Company by [______].
5.
Revocation Period. The Executive may revoke this General Release within a period
of seven days after the Execution. The Executive agrees that any such revocation is not effective
unless it is made in writing and delivered to the attention of the Secretary of the Company by the
end of such seventh calendar day. Under any such valid revocation, the Executive shall not be
entitled to the payments or benefits described in the Severance Agreement. This General Release
becomes effective and irrevocable on the eighth calendar day after the Execution.
6.
No Right to File Action or Proceeding. Unless otherwise prohibited by law and
subject to Section 7 hereof, the Executive agrees that he will not, at any time hereafter, voluntarily
participate in any judicial proceeding of any kind against the Company or any other Released Party
(whether acting as agents for the Company or in their individual capacities), with respect to any
private Claims covered by this General Release. Notwithstanding the foregoing, this General
Release shall not affect the Executive’s rights under the Older Workers Benefit Protection Act of
1990 to have a judicial determination of the validity of this General Release and does not purport
to limit any right Employee may have to file a charge under the Age Discrimination in Employment
Act. This General Release does, however, waive and release any right to recover damages under
the Age Discrimination in Employment Actor other civil rights statute. Additionally,
notwithstanding the foregoing, nothing in this General Release shall be deemed to prohibit
Executive from (i) filing an unfair labor practice charge under the National Labor Relations Act
or participating or assisting in proceedings before the National Labor Relations Board; or (ii) filing
a charge or complaint of age or other employment-related discrimination with the Equal
Employment Opportunity Commission (“EEOC”) or state or local equivalent, or from
participating in any investigation or proceeding conducted by the EEOC or state or local
equivalent. However, in light of the foregoing Genera Release, Executive will not be entitled to
any individual relief in connection with such charge, complaint, investigation or proceeding. For
the avoidance of doubt, nothing herein shall be construed to prevent or limit Executive from
recovering a bounty or award for providing information to any governmental authority concerning
any suspected violation of law.
7.
Protected Activity. Notwithstanding anything to the contrary contained herein or
in the Severance Agreement, no provision of this General Release shall be interpreted so as to
impede the Executive (or any other individual) from initiating communications directly with,
- 13 -
providing information to, responding to any inquiries from or reporting possible violations of
federal law or regulation to any governmental agency or entity or self-regulatory authority,
including, but not limited to, the Department of Justice, the Securities and Exchange Commission,
Congress and any agency Inspector General, filing a charge with or participate in an investigation
conducted by any governmental agency or entity or self-regulatory authority or making other
disclosures under the whistleblower provisions of federal law or regulation. The Executive does
not need the prior authorization of the Company to make any such reports or disclosures, and the
Executive shall not be required to notify the Company that such reports or disclosures have been
made, a request for information from any governmental entity or self-regulatory authority that is
not directed to the Company has been made or that the Executive has decided to file a charge or
complaint with or participate in an investigation conducted by any governmental agency or entity
or self-regulatory authority. The Executive hereby acknowledges and agrees that nothing in this
General Release shall in any way limit or prohibit the Executive from engaging for a lawful
purpose in any Protected Activity. For purposes of this Agreement, “Protected Activity” shall
mean (i) filing a charge, complaint or report with, or otherwise communicating with, cooperating
with or participating in any investigation or proceeding that may be conducted by, any federal,
state or local government agency or commission, including, but not limited to, the Equal
Employment Opportunity Commission, the Department of Labor, the Occupational Safety and
Health Administration, and the National Labor Relations Board (the “Government Agencies”), or
(ii) any rights the Executive may have under Section 7 of the National Labor Relations Act or
equivalent state law to engage in concerted protected activity or to discuss the terms of
employment or working conditions with or on behalf of coworkers, or to bring such issues to the
attention of the Company at any time. The Executive understands that in connection with such
Protected Activity, the Executive is permitted to disclose documents or other information as
permitted by law, and without giving notice to, or receiving authorization from, the Company.
Notwithstanding the foregoing, the Executive agrees to take all reasonable precautions to prevent
any unauthorized use or disclosure of any information that may constitute Confidential
Information to any parties other than the relevant Government Agencies. The Executive further
understands that Protected Activity does not include the disclosure of any Company attorney-client
privileged communications or attorney work product doctrine. The Company does not waive any
applicable privileges or the right to continue to protect its privileged attorney-client information,
attorney work product, and other privileged information. In addition, the Executive agrees to waive
Executive’s right to recover monetary damages in connection with any charge, complaint or
lawsuit pertaining to the Released Claims filed by the Executive or anyone else on the Executive’s
behalf (whether involving a governmental entity or not); provided that the Executive is not
agreeing to waive, and this General Release shall not be read as requiring the Executive to waive,
any right the Executive may have to receive any bounty or monetary award from any governmental
entity or regulatory or law enforcement authority in connection with information provided to any
governmental entity or other protected “whistleblower” activity.
8.
Governing Law. To the extent not subject to federal law, the validity,
interpretation, construction and performance of this General Release shall be governed by and
construed in accordance with the laws of the State of Delaware without regard to its conflict of
laws provisions.
- 14 -
9.
Severability. If any provision of this General Release should be declared to be
unenforceable by any administrative agency or court of law, then the remainder of this General
Release shall remain in full force and effect.
10.
Captions; Section Headings. Captions and section headings used herein are for
convenience only and are not a part of this General Release and shall not be used in construing it.
11.
Fascimile Signatures. Any signature to this General Release delivered by
photographic, facsimile or PDF copy shall be deemed to be an original signature hereto.
THE EXECUTIVE ACKNOWLEDGES THAT THE EXECUTIVE CAREFULLY HAS READ
THIS GENERAL RELEASE; THAT THE EXECUTIVE HAS HAD THE OPPORTUNITY TO
THOROUGHLY DISCUSS ITS TERMS WITH COUNSEL OF HIS OR HER CHOOSING;
THAT THE EXECUTIVE FULLY UNDERSTANDS ITS TERMS AND ITS FINAL AND
BINDING EFFECT; THAT THE ONLY PROMISES MADE TO SIGN THIS GENERAL
RELEASE ARE THOSE STATED AND CONTAINED IN THIS GENERAL RELEASE; AND
THAT THE EXECUTIVE IS SIGNING THIS GENERAL RELEASE KNOWINGLY AND
VOLUNTARILY. THE EXECUTIVE STATES THAT HE OR SHE IS IN GOOD HEALTH
AND IS FULLY COMPETENT TO MANAGE HIS OR HER BUSINESS AFFAIRS AND
UNDERSTANDS THAT HE OR SHE MAY BE WAIVING SIGNIFICANT LEGAL RIGHTS
BY SIGNING THIS GENERAL RELEASE.
IN WITNESS WHEREOF, the parties have executed this General Release as of the respective
dates set forth below.
Executive
_____________________________________
By:
Title:
Date:_________________________________
COMPANY
_____________________________________
Date:_________________________________
Exhibit B
[Attached]
Exhibit 10.12
SEVERANCE AGREEMENT
This SEVERANCE AGREEMENT (this “Agreement”) is made and entered into as of
February 20, 2025 by and between H&E Equipment Services, Inc. (the “Company”) and Leslie S.
Magee (the “Executive”). The Company and the Executive acknowledge and agree that this
Agreement shall replace in its entirety the Severance Agreement made and entered into as of
February 11, 2025 by and between the Company and the Executive (the “Prior Severance
Agreement”).
WHEREAS, the Company currently employs the Executive, and the Company desires to
continue to employ the Executive and provide him or her with a right to severance in the event of
a Qualifying Termination pursuant to the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained herein, and
intending to be legally bound hereby, the Company and the Executive agree as follows:
1.
Severance Benefits.
(a)
The Executive’s employment with the Company shall be at-will, meaning
that both the Executive and the Company will retain the right to terminate the Executive’s
employment at any time, with or without Cause or notice.
(b)
If the Company or an Affiliate of the Company terminates the Executive’s
employment without Cause or the Executive resigns for Good Reason, in each case, on or within
the two-year period immediately following a Change of Control (a “Qualifying Termination”),
then, subject to Section 2 and the other provisions of this Agreement, the Executive will receive
the following severance payments and benefits from the Company:
(i)
Accrued Benefits. Regardless of whether the Executive executes
the Release upon a Qualifying Termination, the Executive will be entitled to receive the following
(the “Accrued Benefits”): (i) payment of any earned but unpaid Base Salary and any accrued but
unused paid time off, in each case, through the date of the Qualifying Termination (the
“Termination Date”), to be paid no later than 30 days following the Termination Date (or such
earlier date as may be required by applicable law), (ii) reimbursement for any unreimbursed
business expenses incurred through the Termination Date, (iii) all other payments, benefits or
fringe benefits to which the Executive shall be entitled under the terms of any applicable
compensation arrangement or benefit, equity or fringe benefit plan or program or grant, payable
in accordance therewith, and (iv) any accrued but unpaid annual bonus due with respect to any
calendar year preceding the calendar year in which the Termination Date occurs and that has not
been deferred (which deferred bonuses shall be memorialized separately from this Agreement),
which amount shall be paid at the same time that annual bonuses are generally scheduled to be
paid to executives of the Company generally;
(ii)
Severance Payment. The Company or an Affiliate of the Company
will pay the Executive a severance payment in an amount equal to two-times the sum of (x) the
Executive’s Base Salary and (y) the Executive’s Target Annual Bonus (the “Severance Payment”).
- 17 -
The Severance Payment shall be made, less applicable taxes and withholdings, on the 60th day
following the Termination Date; and
(iii)
Continued Employee Benefits. If the Executive timely elects
continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended (“COBRA”) under both the Company’s and any successor’s benefit plans for the
Executive and, if applicable, the Executive’s eligible dependents, within the time period prescribed
pursuant to COBRA, the Company or an Affiliate of the Company will contribute to the premium
costs of the Executive’s COBRA continuation coverage at the same rate that it contributes from
time to time to group health insurance premiums (as applicable) for its active employees generally,
until the later of (i) the end of the (18) months following the Termination Date or (ii) the date the
Executive and the Executive’s dependents are no longer entitled to coverage under COBRA or
Company plans or the Executive otherwise begins other employment that provides for health
coverage benefits. Notwithstanding the foregoing, in the event that the Company’s payment of
the COBRA premium contributions, as described in this Section 1(b)(iii), would subject the
Company to any tax or penalty under either Section 105(h) of the Internal Revenue Code of 1986,
as amended, or the Patient Protection and Affordable Care Act, as amended, any regulations or
guidance issued thereunder, or any other applicable law, in each case, as determined by the
Company, then the Executive and the Company agree to work together in good faith to restructure
such benefit.
2.
Conditions to Severance.
(a)
Any obligation of the Company or an Affiliate of the Company to provide
the severance benefits described in Sections 1(ii) and (iii) (collectively, the “Severance Benefits”)
to the Executive is expressly conditioned on the Executive signing and returning to the Company,
without revoking, a timely and effective general release of claims in the form attached hereto as
Exhibit A (the “Release”). The Release must become effective, with all periods of revocation
therein having expired, no later than the 52nd calendar day following the Termination Date.
(b)
Any obligation of the Company to provide the Severance Benefits to the
Executive, and the Executive’s right to retain the same, are also expressly conditioned upon the
Executive’s continued compliance with the Protective Agreement (Non-Competition, Non-
Solicitation, Confidential Information and IP) attached hereto as Exhibit B (the “Restrictive
Covenant Agreement”); provided, that in consideration for the Company’s entry into this
Agreement, the Executive hereby acknowledges and agrees that Section 2(a) of the Restrictive
Covenant Agreement is hereby amended and restated in its entirety to read as follows:
(c)
“(a)
During the period beginning on the date hereof and ending twenty
four (24) months following the date on which the Executive's employment with the Company is
terminated for any reason (the "Non-Compete Period"), the Executive covenants and agrees not
to, and shall cause his affiliates not to, directly or indirectly anywhere in North America, conduct,
manage, operate, engage in or have an ownership interest in any business or enterprise that (A)
sells, rents, services, maintains or otherwise deals in or with construction equipment, heavy
industrial equipment, material handling equipment or utility equipment (new or used), or related
parts, implements or similar assets, (B) uses any trademarks, tradenames or slogans similar to
- 18 -
those of the Company or its affiliates; or (C) is engaged in any other activities that are otherwise
competitive with the business of the Company or its affiliates as conducted or proposed to be
conducted as of the termination date ( collectively, the "Business"). Notwithstanding the foregoing,
nothing herein shall preclude the Executive from owning, directly or indirectly, in the aggregate
less than 2% of any business competitive with the Company or its affiliates that is subject to the
reporting obligations of the Securities Exchange Act of 1934, as amended”.
(d)
Enforcement of Covenants. Executive acknowledges and agrees that a
breach of any provision of the Restrictive Covenant Agreement by the Executive will cause serious
and irreparable injury to the Company and its Affiliates and that it will be difficult to quantify and
that money damages alone will not adequately compensate the Company. In the event of a breach
or threatened or intended breach of this Agreement by the Executive, the Company shall be entitled
to seek injunctive relief, both temporary and final, enjoining and restraining such breach or
threatened or intended breach. The Executive further agrees that should the Executive breach the
Restrictive Covenant Agreement, the Company will be entitled to any and all other legal or
equitable remedies available to it, including the recovery and return of any amount paid to
Employee to enter into this Agreement.
3.
Timing of Payments and Section 409A.
(a)
Notwithstanding anything to the contrary in this Agreement, if at the time
the Executive’s employment terminates, the Executive is a “specified employee,” any and all
amounts payable under this Agreement on account of such separation from service that would (but
for this provision) be payable within six (6) months following the date of termination, shall instead
be paid on the next business day following the expiration of such six (6)-month period or, if earlier,
upon the Executive’s death; except (i) to the extent of amounts that do not constitute a deferral of
compensation within the meaning of Treasury regulation Section 1.409A-1(b) (including without
limitation by reason of the safe harbor set forth in Section 1.409A-1(b)(9)(iii), as determined by
the Company in its reasonable good faith discretion); (ii) benefits which qualify as excepted
welfare benefits pursuant to Treasury regulation Section 1.409A-1(a)(5); or (iii) other amounts or
benefits that are not subject to the requirements of Section 409A of the Internal Revenue Code of
1986, as amended (“Section 409A”).
(b)
For purposes of this Agreement, all references to “termination of
employment” and correlative phrases shall be construed to require a “separation from service” (as
defined in Section 1.409A-1(h) of the Treasury regulations after giving effect to the presumptions
contained therein), and the term “specified employee” means an individual determined by the
Company to be a specified employee under Treasury regulation Section 1.409A-1(i).
(c)
Each payment made under this Agreement shall be treated as a separate
payment and the right to a series of installment payments under this Agreement is to be treated as
a right to a series of separate payments.
(d)
In no event shall the Company have any liability relating to the failure or
alleged failure of any payment or benefit under this Agreement to comply with, or be exempt from,
the requirements of Section 409A.
- 19 -
4.
Acknowledgement of Qualifying Termination. The Company hereby
acknowledges and agrees that, subject to the Executive’s continued employment with the
Company through the Effective Time, and subject to and contingent upon the occurrence of the
Effective Time, the Executive’s employment will terminate at the Effective Time, or such later
date as may be agreed between Herc Holdings Inc. (“Herc”) and the Executive, and such
termination of employment shall constitute a Qualifying Termination for purposes of this
Agreement.
5.
Definitions. For purposes of this Agreement, the following definitions apply:
“Affiliates” means all persons and entities directly or indirectly controlling, controlled by
or under common control with the Company, where control may be by management authority,
equity interest or otherwise.
“Base Salary” means the Executive’s annual base salary as in effect immediately prior to
the Termination Date (without giving effect to any reduction or series of reductions giving rise to
Good Reason).
“Cause” means (1) any act of misappropriation, embezzlement, fraud, or similar
intentional misconduct by the Executive involving the Company or its Affiliates; (2) the
Executive’s conviction of, or the plea of nolo contendere (or the equivalent) to, a felony or a
misdemeanor involving moral turpitude; (3) willful or intentional conduct that causes, or is
reasonably likely to cause, material and demonstrable injury, monetarily or otherwise, to the
Company or its Affiliates; (4) breach of any material obligations contained in any written
agreement with the Company or any of its Affiliates, including, but not limited to, any restrictive
covenants or obligations of confidentiality contained therein; or (5) material breach of any policies
and procedures of the Company or its Affiliates that are applicable to the Executive, including
without limitation any Code of Conduct, which, in each case, if capable of cure (as determined by
the Company or its Affiliates in reasonable good faith) is not cured within 10 business days after
written notice of the conduct is delivered to the Executive by the Company (which notice shall
identify and describe such conduct with sufficient specificity to allow the Executive to respond).
“Change of Control” has the meaning set forth in the H&E Equipment Services, Inc.
Amended and Restated 2016 Stock-Based Incentive Compensation Plan as in effect immediately
prior to the date hereof; provided, that for the avoidance of doubt, the consummation of the Herc
Sale shall in all events be deemed to be Change of Control for purposes of this Agreement.
“Effective Time” has the meaning set forth in the Merger Agreement.
“Herc Sale” means the consummation of the transactions contemplated by that certain
Agreement and Plan of Merger, by and among Herc, HR Merger Sub Inc., and H&E Equipment
Services, Inc., dated as of February 19, 2025 (the “Merger Agreement”).
“Good Reason” means any of the following, taken without the Executive’s prior written
consent: (i) a material diminution in the Executive’s annual base salary or target annual bonus
- 20 -
opportunity; (ii) any material diminution in the Executive’s position, authority, responsibilities or
reporting line; (iii) the Company’s material breach of this Agreement or any other agreement with
the Executive Officer; or (iv) a relocation of the Executive’s primary work location by more than
25 miles from the Executive’s primary work location as of immediately prior to a Change of
Control. A resignation will only qualify as being for “Good Reason” if, within 30 days following
the initial existence of a condition listed above (or, if later, the time at which the Executive knew
or reasonably should have known of its existence), the Executive provides notice to the Company
of the existence of a supposedly qualifying condition, and within 30 days after such notice, the
Company does not remedy the condition and, within 30 days following the Company’s failure to
remedy the condition, the Executive actually resigns from employment with the Company.
“Person” means an individual corporation, partnership, trust, association, limited liability
company or any other entity or organization, including a government or political subdivision or an
agency or instrumentality thereof.
“Target Annual Bonus” means the Executive’s target annual bonus amount as in effect
immediately prior to the Termination Date (without giving effect to any reduction or series of
reductions giving rise to Good Reason).
6.
Withholding. All payments made by the Company under this Agreement shall be
reduced by any tax or other amounts required to be withheld by the Company to the extent required
by applicable law.
7.
Assignment. Neither the Executive nor the Company may make any assignment
of this Agreement or any interest in it, by operation of law or otherwise, without the prior written
consent of the other; provided, however, the Company may assign its rights and obligations under
this Agreement without the Executive’s consent to one of its Affiliates or to any Person with whom
the Company shall hereafter effect a reorganization, consolidate or merge, or to whom the
Company shall hereafter transfer all or substantially all of its properties or assets (in which event
the assignee shall be treated as the “Company” for all purposes under this Agreement). This
Agreement shall inure to the benefit of and be binding upon the Executive and the Company, and
each of their respective successors, executors, administrators, heirs and permitted assigns.
8.
Severability. If any portion or provision of this Agreement shall to any extent be
declared illegal or unenforceable by a court of competent jurisdiction, then the remainder of this
Agreement, or the application of such portion or provision in circumstances other than those as to
which it is so declared illegal or unenforceable, shall not be affected thereby, and each portion and
provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.
9.
Miscellaneous. This Agreement sets forth the entire agreement between the
Executive and the Company concerning the Executive’s eligibility for severance payments or other
severance benefits from the Company or any of its Affiliates, and replaces all prior and
contemporaneous communications, agreements and understandings on the topic, whether written
or oral, including without limitation the Prior Severance Agreement. The headings and captions
in this Agreement are for convenience only and in no way define or describe the scope or content
of any provision of this Agreement. This Agreement may be executed in two or more counterparts,
- 21 -
each of which shall be an original and all of which together shall constitute one and the same
instrument. This is a Delaware contract and shall be governed and construed in accordance with
the laws of the State of Delaware, without regard to any conflict of laws principles that would
result in the application of the laws of any other jurisdiction.
10.
Amendment. No provision of this Agreement may be amended, modified, waived
or discharged, unless such amendment, modification, waiver or discharge is agreed to in writing
and signed by the Executive and such officer or director of the Company as may be designated by
the Board.
11.
Assumption. This Agreement shall be binding upon the parties hereto and shall
inure to the benefit of the parties and their respective heirs, devisees, executors, administrators,
legal representatives, successors and assigns.
[Signature Page Follows Immediately]
- 22 -
IN WITNESS WHEREOF, this Agreement has been executed by the Company, by its duly
authorized representative, and by the Executive, as of the date first above written.
THE EXECUTIVE:
THE COMPANY:
/s/ Leslie S. Magee
/s/ Bradley W. Barber
______________________
________________________
Leslie S. Magee
By:
Bradley W. Barber
Exhibit A
[Attached]
CONFIDENTIAL
EXHIBIT A
RELEASE OF CLAIMS
1.
Terms of Release. This general release is entered into by and between [______]
(the “Executive”) and H&E Equipment Services, Inc. (the “Company”), as of the date hereof (this
“General Release”), pursuant to the terms of the Severance Agreement to which this General
Release is attached (the “Severance Agreement”), which provides the Executive with certain
significant benefits, subject to the Executive’s execution of this General Release. The Executive
acknowledges and agrees that the consideration provided for herein is adequate consideration for
the Executive’s obligations under this General Release.
2.
Released Claims. In exchange for and in consideration of the payments and
benefits described in the Severance Agreement that are expressly conditioned on the execution of
this Release, the Executive, on behalf of himself, his agents, representatives, heirs, devisees,
assignees, transferees, administrator, executors and legal representatives, past or present (as the
case may be, and collectively, the “Releasors”), hereby knowingly, voluntarily, irrevocably and
unconditionally releases, discharges, and acquits all of the Released Parties from any and all
claims, promises, demands, liabilities, contracts, debts, losses, damages, attorneys’ fees and causes
of action of every kind and nature, known and unknown, vested or contingent, whether known or
unknown (collectively, “Claims”), which the Executive may have against the Released Parties at
any time up to and including the Executive’s execution of this General Release (the “Execution”),
including but not limited to Claims or rights arising out of, or which might be considered to arise
out of or to be connected in any way with: (i) the Executive’s employment with the Company or
any of its subsidiaries, parent companies, successors or assigns, or the termination thereof; (ii) any
treatment of the Executive by any of the Released Parties in connection with his or her employment
or the termination thereof, which shall include, without limitation, any treatment or decisions with
respect to hiring, placement, promotion, work hours, discipline, transfer, termination,
compensation, performance review or training; (iii) any damages or injury that the Executive may
have suffered in connection with his or her employment or the termination thereof, including
without limitation, emotional or physical injury, or compensatory damages; (iv) employment
discrimination, which shall include, without limitation, any individual or class Claims of
discrimination on the basis of age, disability, sex, race, religion, national origin, citizenship status,
marital status, sexual preference, or any other basis whatsoever; (v) any Claims arising under,
including, without limitation, United States federal, state or local law and the national or local law
of any foreign country (statutory or decisional), for wrongful, abusive, constructive or unlawful
discharge or dismissal, for breach of any contract, or for discrimination based upon race, color,
ethnicity, sex, age, national origin, religion, disability, sexual orientation, or any other unlawful
criterion or circumstance, including rights or Claims under the Age Discrimination in Employment
Act of 1967, the Older Workers Benefit Protection Act of 1990, violations of the Equal Pay Act,
Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Americans with
Disabilities Act of 1991, the Employee Retirement Income Security Act of 1974 (“ERISA”), the
Fair Labor Standards Act, the Worker Adjustment Retraining and Notification Act, the Family and
Medical Leave Act, including all amendments to any of the aforementioned acts; violations of any
other federal, state, or municipal fair employment statutes or laws, including, without limitation,
violations of any other law, rule, regulation, or ordinance pertaining to employment, wages,
- 25 -
compensation, hours worked, or any other Claims for compensation or bonuses, whether or not
paid under any compensation plan or arrangement; breach of contract; tort and other common law
Claims; defamation; libel; slander; impairment of economic opportunity defamation; sexual
harassment; retaliation; attorneys’ fees; emotional distress; intentional infliction of emotional
distress; assault; battery; pain and suffering; and punitive or exemplary damages and (v) all such
other Claims that the Executive could assert against any, some, or all of the Released Parties in
any forum, accrued or unaccrued, liquidated or contingent, direct or indirect, including under any
federal, state, foreign or local law, ordinance and/or regulation, or pursuant to common law in
connection with Executive’s employment or the termination thereof (the “Released Claims”). The
payments and other rights of the Executive expressly provided for under the Severance Agreement,
as well as any rights that the Executive may have to be indemnified by the Company pursuant to
the Company’s Certificate of Incorporation, By-laws, any indemnification agreement entered into
by the Executive and the Company or any former parent of the Company, or directors and officers
liability insurance policies, any Claims for employee benefits under plans covered by ERISA to
the extent any such Claim may not lawfully be waived or for any payments or benefits under any
Company plans that have vested according to the terms of those plans, any Claims for payment of
amounts payable under any applicable workers’ compensation or unemployment compensation
law and any Claim that may not lawfully be waived are each excluded from this General Release.
The Executive further agrees to waive any and all rights under the laws of any jurisdiction in the
United States, or any other country, that limit a general release to those Claims that are known or
suspected to exist in the Executive’s favor as of the Execution. For the purpose of implementing
a full and complete release, the Executive expressly acknowledges and agrees that this General
Release releases all Claims existing or arising prior to the Executive signing this General Release
which the Executive has or may have against the Released Parties, whether such Released Claims
are known or unknown and suspected or unsuspected by the Executive and the Executive forever
waives all inquiries and investigations into any and all such Released Claims.
3.
Released Parties. The term “Released Parties” or “Released Party” as used herein
shall mean and include: (i) the Company; (ii) Herc Holdings Inc., (iii) each of their former, current
and future parents, subsidiaries, affiliates, shareholders, beneficial owners and lenders; (iv) each
predecessor, successor and affiliate of any person listed in clauses (i) through (iii); (v) each former,
current, and future officer, director, agent, attorney, representative, employee, servant, owner,
shareholder, partner, joint venturer, attorney, employee benefit plan, employee benefit plan
administrator, insurer, administrator, and fiduciary of any of the persons or entities listed in clauses
(i) through (iv); and (vi) any other person or entity acting by, through, under, or in concert with
any of the persons or entities listed in clauses (i) through (v).
4.
Acknowledgements. Pursuant to the Older Workers Benefit Protection Act of
1990, the Executive understands and acknowledges that by executing this General Release and
releasing all Claims against each and all of the Released Parties, the Executive has waived any and
all rights or Claims that the Executive has or could have against any Released Party under the Age
Discrimination in Employment Act, which includes, but is not limited to, any claim that any
Released Party discriminated against the Executive on account of his or her age. The Executive
also acknowledges the following: (i) the Company, by this General Release, has advised the
Executive to consult with an attorney prior to executing this General Release; (ii) the Executive
has had the opportunity to consult with his own attorney concerning this General Release; (iii) this
- 26 -
General Release does not include Claims arising from any act, omission, transaction or occurrence
which happens after the Execution, provided, however, that any Claims arising after the Execution
from the then-present effect of acts or conduct occurring on or before the Execution shall be
deemed released under this General Release; and (iv) the Company has provided the Executive
with the opportunity to review and consider this General Release for 45 days (the “Review Period”)
and any changes to this General Release will not restart the 45-day review period. At the
Executive’s option and sole discretion, the Executive may waive the Review Period and execute
this General Release before the expiration of 45 days. In electing to waive the Review Period, the
Executive acknowledges and admits that the Executive was given a reasonable period of time
within which to consider this General Release and the Executive’s waiver is made freely and
voluntarily, without duress or any coercion by any other person. The General Release shall be null
and void ab initio in the event the Executive does not execute and return this General Release to
the Company by [______].
5.
Revocation Period. The Executive may revoke this General Release within a period
of seven days after the Execution. The Executive agrees that any such revocation is not effective
unless it is made in writing and delivered to the attention of the Secretary of the Company by the
end of such seventh calendar day. Under any such valid revocation, the Executive shall not be
entitled to the payments or benefits described in the Severance Agreement. This General Release
becomes effective and irrevocable on the eighth calendar day after the Execution.
6.
No Right to File Action or Proceeding. Unless otherwise prohibited by law and
subject to Section 7 hereof, the Executive agrees that he will not, at any time hereafter, voluntarily
participate in any judicial proceeding of any kind against the Company or any other Released Party
(whether acting as agents for the Company or in their individual capacities), with respect to any
private Claims covered by this General Release. Notwithstanding the foregoing, this General
Release shall not affect the Executive’s rights under the Older Workers Benefit Protection Act of
1990 to have a judicial determination of the validity of this General Release and does not purport
to limit any right Employee may have to file a charge under the Age Discrimination in Employment
Act. This General Release does, however, waive and release any right to recover damages under
the Age Discrimination in Employment Actor other civil rights statute. Additionally,
notwithstanding the foregoing, nothing in this General Release shall be deemed to prohibit
Executive from (i) filing an unfair labor practice charge under the National Labor Relations Act
or participating or assisting in proceedings before the National Labor Relations Board; or (ii) filing
a charge or complaint of age or other employment-related discrimination with the Equal
Employment Opportunity Commission (“EEOC”) or state or local equivalent, or from
participating in any investigation or proceeding conducted by the EEOC or state or local
equivalent. However, in light of the foregoing Genera Release, Executive will not be entitled to
any individual relief in connection with such charge, complaint, investigation or proceeding. For
the avoidance of doubt, nothing herein shall be construed to prevent or limit Executive from
recovering a bounty or award for providing information to any governmental authority concerning
any suspected violation of law.
7.
Protected Activity. Notwithstanding anything to the contrary contained herein or
in the Severance Agreement, no provision of this General Release shall be interpreted so as to
impede the Executive (or any other individual) from initiating communications directly with,
- 27 -
providing information to, responding to any inquiries from or reporting possible violations of
federal law or regulation to any governmental agency or entity or self-regulatory authority,
including, but not limited to, the Department of Justice, the Securities and Exchange Commission,
Congress and any agency Inspector General, filing a charge with or participate in an investigation
conducted by any governmental agency or entity or self-regulatory authority or making other
disclosures under the whistleblower provisions of federal law or regulation. The Executive does
not need the prior authorization of the Company to make any such reports or disclosures, and the
Executive shall not be required to notify the Company that such reports or disclosures have been
made, a request for information from any governmental entity or self-regulatory authority that is
not directed to the Company has been made or that the Executive has decided to file a charge or
complaint with or participate in an investigation conducted by any governmental agency or entity
or self-regulatory authority. The Executive hereby acknowledges and agrees that nothing in this
General Release shall in any way limit or prohibit the Executive from engaging for a lawful
purpose in any Protected Activity. For purposes of this Agreement, “Protected Activity” shall
mean (i) filing a charge, complaint or report with, or otherwise communicating with, cooperating
with or participating in any investigation or proceeding that may be conducted by, any federal,
state or local government agency or commission, including, but not limited to, the Equal
Employment Opportunity Commission, the Department of Labor, the Occupational Safety and
Health Administration, and the National Labor Relations Board (the “Government Agencies”), or
(ii) any rights the Executive may have under Section 7 of the National Labor Relations Act or
equivalent state law to engage in concerted protected activity or to discuss the terms of
employment or working conditions with or on behalf of coworkers, or to bring such issues to the
attention of the Company at any time. The Executive understands that in connection with such
Protected Activity, the Executive is permitted to disclose documents or other information as
permitted by law, and without giving notice to, or receiving authorization from, the Company.
Notwithstanding the foregoing, the Executive agrees to take all reasonable precautions to prevent
any unauthorized use or disclosure of any information that may constitute Confidential
Information to any parties other than the relevant Government Agencies. The Executive further
understands that Protected Activity does not include the disclosure of any Company attorney-client
privileged communications or attorney work product doctrine. The Company does not waive any
applicable privileges or the right to continue to protect its privileged attorney-client information,
attorney work product, and other privileged information. In addition, the Executive agrees to waive
Executive’s right to recover monetary damages in connection with any charge, complaint or
lawsuit pertaining to the Released Claims filed by the Executive or anyone else on the Executive’s
behalf (whether involving a governmental entity or not); provided that the Executive is not
agreeing to waive, and this General Release shall not be read as requiring the Executive to waive,
any right the Executive may have to receive any bounty or monetary award from any governmental
entity or regulatory or law enforcement authority in connection with information provided to any
governmental entity or other protected “whistleblower” activity.
8.
Governing Law. To the extent not subject to federal law, the validity,
interpretation, construction and performance of this General Release shall be governed by and
construed in accordance with the laws of the State of Delaware without regard to its conflict of
laws provisions.
- 28 -
9.
Severability. If any provision of this General Release should be declared to be
unenforceable by any administrative agency or court of law, then the remainder of this General
Release shall remain in full force and effect.
10.
Captions; Section Headings. Captions and section headings used herein are for
convenience only and are not a part of this General Release and shall not be used in construing it.
11.
Fascimile Signatures. Any signature to this General Release delivered by
photographic, facsimile or PDF copy shall be deemed to be an original signature hereto.
THE EXECUTIVE ACKNOWLEDGES THAT THE EXECUTIVE CAREFULLY HAS READ
THIS GENERAL RELEASE; THAT THE EXECUTIVE HAS HAD THE OPPORTUNITY TO
THOROUGHLY DISCUSS ITS TERMS WITH COUNSEL OF HIS OR HER CHOOSING;
THAT THE EXECUTIVE FULLY UNDERSTANDS ITS TERMS AND ITS FINAL AND
BINDING EFFECT; THAT THE ONLY PROMISES MADE TO SIGN THIS GENERAL
RELEASE ARE THOSE STATED AND CONTAINED IN THIS GENERAL RELEASE; AND
THAT THE EXECUTIVE IS SIGNING THIS GENERAL RELEASE KNOWINGLY AND
VOLUNTARILY. THE EXECUTIVE STATES THAT HE OR SHE IS IN GOOD HEALTH
AND IS FULLY COMPETENT TO MANAGE HIS OR HER BUSINESS AFFAIRS AND
UNDERSTANDS THAT HE OR SHE MAY BE WAIVING SIGNIFICANT LEGAL RIGHTS
BY SIGNING THIS GENERAL RELEASE.
IN WITNESS WHEREOF, the parties have executed this General Release as of the respective
dates set forth below.
Executive
_____________________________________
By:
Title:
Date:_________________________________
COMPANY
_____________________________________
Date:_________________________________
Exhibit B
[Attached]
Exhibit 10.13
SEVERANCE AGREEMENT
This SEVERANCE AGREEMENT (this “Agreement”) is made and entered into as of
February 20, 2025 by and between H&E Equipment Services, Inc. (the “Company”) and John
McDowell Engquist (the “Executive”). The Company and the Executive acknowledge and agree
that this Agreement shall replace in its entirety the Severance Agreement made and entered into
as of February 11, 2025 by and between the Company and the Executive (the “Prior Severance
Agreement”).
WHEREAS, the Company currently employs the Executive, and the Company desires to
continue to employ the Executive and provide him or her with a right to severance in the event of
a Qualifying Termination pursuant to the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained herein, and
intending to be legally bound hereby, the Company and the Executive agree as follows:
1.
Severance Benefits.
(a)
The Executive’s employment with the Company shall be at-will, meaning
that both the Executive and the Company will retain the right to terminate the Executive’s
employment at any time, with or without Cause or notice.
(b)
If the Company or an Affiliate of the Company terminates the Executive’s
employment without Cause or the Executive resigns for Good Reason, in each case, on or within
the two-year period immediately following a Change of Control (a “Qualifying Termination”),
then, subject to Section 2 and the other provisions of this Agreement, the Executive will receive
the following severance payments and benefits from the Company:
(i)
Accrued Benefits. Regardless of whether the Executive executes
the Release upon a Qualifying Termination, the Executive will be entitled to receive the following
(the “Accrued Benefits”): (i) payment of any earned but unpaid Base Salary and any accrued but
unused paid time off, in each case, through the date of the Qualifying Termination (the
“Termination Date”), to be paid no later than 30 days following the Termination Date (or such
earlier date as may be required by applicable law), (ii) reimbursement for any unreimbursed
business expenses incurred through the Termination Date, (iii) all other payments, benefits or
fringe benefits to which the Executive shall be entitled under the terms of any applicable
compensation arrangement or benefit, equity or fringe benefit plan or program or grant, payable
in accordance therewith, and (iv) any accrued but unpaid annual bonus due with respect to any
calendar year preceding the calendar year in which the Termination Date occurs and that has not
been deferred (which deferred bonuses shall be memorialized separately from this Agreement),
which amount shall be paid at the same time that annual bonuses are generally scheduled to be
paid to executives of the Company generally;
(ii)
Severance Payment. The Company or an Affiliate of the Company
will pay the Executive a severance payment in an amount equal to two-times the sum of (x) the
Executive’s Base Salary and (y) the Executive’s Target Annual Bonus (the “Severance Payment”).
- 31 -
The Severance Payment shall be made, less applicable taxes and withholdings, on the 60th day
following the Termination Date; and
(iii)
Continued Employee Benefits. If the Executive timely elects
continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended (“COBRA”) under both the Company’s and any successor’s benefit plans for the
Executive and, if applicable, the Executive’s eligible dependents, within the time period prescribed
pursuant to COBRA, the Company or an Affiliate of the Company will contribute to the premium
costs of the Executive’s COBRA continuation coverage at the same rate that it contributes from
time to time to group health insurance premiums (as applicable) for its active employees generally,
until the later of (i) the end of the (18) months following the Termination Date or (ii) the date the
Executive and the Executive’s dependents are no longer entitled to coverage under COBRA or
Company plans or the Executive otherwise begins other employment that provides for health
coverage benefits. Notwithstanding the foregoing, in the event that the Company’s payment of
the COBRA premium contributions, as described in this Section 1(b)(iii), would subject the
Company to any tax or penalty under either Section 105(h) of the Internal Revenue Code of 1986,
as amended, or the Patient Protection and Affordable Care Act, as amended, any regulations or
guidance issued thereunder, or any other applicable law, in each case, as determined by the
Company, then the Executive and the Company agree to work together in good faith to restructure
such benefit.
2.
Conditions to Severance.
(a)
Any obligation of the Company or an Affiliate of the Company to provide
the severance benefits described in Sections 1(ii) and (iii) (collectively, the “Severance Benefits”)
to the Executive is expressly conditioned on the Executive signing and returning to the Company,
without revoking, a timely and effective general release of claims in the form attached hereto as
Exhibit A (the “Release”). The Release must become effective, with all periods of revocation
therein having expired, no later than the 52nd calendar day following the Termination Date.
(b)
Any obligation of the Company to provide the Severance Benefits to the
Executive, and the Executive’s right to retain the same, are also expressly conditioned upon the
Executive’s continued compliance with the Protective Agreement (Non-Competition, Non-
Solicitation, Confidential Information and IP) attached hereto as Exhibit B (the “Restrictive
Covenant Agreement”); provided, that in consideration for the Company’s entry into this
Agreement, the Executive hereby acknowledges and agrees that Section 2(a) of the Restrictive
Covenant Agreement is hereby amended and restated in its entirety to read as follows:
(c)
“(a)
During the period beginning on the date hereof and ending twenty
four (24) months following the date on which the Executive's employment with the Company is
terminated for any reason (the "Non-Compete Period"), the Executive covenants and agrees not
to, and shall cause his affiliates not to, directly or indirectly anywhere in North America, conduct,
manage, operate, engage in or have an ownership interest in any business or enterprise that (A)
sells, rents, services, maintains or otherwise deals in or with construction equipment, heavy
industrial equipment, material handling equipment or utility equipment (new or used), or related
parts, implements or similar assets, (B) uses any trademarks, tradenames or slogans similar to
- 32 -
those of the Company or its affiliates; or (C) is engaged in any other activities that are otherwise
competitive with the business of the Company or its affiliates as conducted or proposed to be
conducted as of the termination date ( collectively, the "Business"). Notwithstanding the foregoing,
nothing herein shall preclude the Executive from owning, directly or indirectly, in the aggregate
less than 2% of any business competitive with the Company or its affiliates that is subject to the
reporting obligations of the Securities Exchange Act of 1934, as amended”.
(d)
Enforcement of Covenants. Executive acknowledges and agrees that a
breach of any provision of the Restrictive Covenant Agreement by the Executive will cause serious
and irreparable injury to the Company and its Affiliates and that it will be difficult to quantify and
that money damages alone will not adequately compensate the Company. In the event of a breach
or threatened or intended breach of this Agreement by the Executive, the Company shall be entitled
to seek injunctive relief, both temporary and final, enjoining and restraining such breach or
threatened or intended breach. The Executive further agrees that should the Executive breach the
Restrictive Covenant Agreement, the Company will be entitled to any and all other legal or
equitable remedies available to it, including the recovery and return of any amount paid to
Employee to enter into this Agreement.
3.
Timing of Payments and Section 409A.
(a)
Notwithstanding anything to the contrary in this Agreement, if at the time
the Executive’s employment terminates, the Executive is a “specified employee,” any and all
amounts payable under this Agreement on account of such separation from service that would (but
for this provision) be payable within six (6) months following the date of termination, shall instead
be paid on the next business day following the expiration of such six (6)-month period or, if earlier,
upon the Executive’s death; except (i) to the extent of amounts that do not constitute a deferral of
compensation within the meaning of Treasury regulation Section 1.409A-1(b) (including without
limitation by reason of the safe harbor set forth in Section 1.409A-1(b)(9)(iii), as determined by
the Company in its reasonable good faith discretion); (ii) benefits which qualify as excepted
welfare benefits pursuant to Treasury regulation Section 1.409A-1(a)(5); or (iii) other amounts or
benefits that are not subject to the requirements of Section 409A of the Internal Revenue Code of
1986, as amended (“Section 409A”).
(b)
For purposes of this Agreement, all references to “termination of
employment” and correlative phrases shall be construed to require a “separation from service” (as
defined in Section 1.409A-1(h) of the Treasury regulations after giving effect to the presumptions
contained therein), and the term “specified employee” means an individual determined by the
Company to be a specified employee under Treasury regulation Section 1.409A-1(i).
(c)
Each payment made under this Agreement shall be treated as a separate
payment and the right to a series of installment payments under this Agreement is to be treated as
a right to a series of separate payments.
(d)
In no event shall the Company have any liability relating to the failure or
alleged failure of any payment or benefit under this Agreement to comply with, or be exempt from,
the requirements of Section 409A.
- 33 -
4.
Acknowledgement of Qualifying Termination. The Company hereby
acknowledges and agrees that, subject to the Executive’s continued employment with the
Company through the Effective Time, and subject to and contingent upon the occurrence of the
Effective Time, the Executive’s employment will terminate at the Effective Time, or such later
date as may be agreed between Herc Holdings Inc. (“Herc”) and the Executive, and such
termination of employment shall constitute a Qualifying Termination for purposes of this
Agreement.
5.
Definitions. For purposes of this Agreement, the following definitions apply:
“Affiliates” means all persons and entities directly or indirectly controlling, controlled by
or under common control with the Company, where control may be by management authority,
equity interest or otherwise.
“Base Salary” means the Executive’s annual base salary as in effect immediately prior to
the Termination Date (without giving effect to any reduction or series of reductions giving rise to
Good Reason).
“Cause” means (1) any act of misappropriation, embezzlement, fraud, or similar
intentional misconduct by the Executive involving the Company or its Affiliates; (2) the
Executive’s conviction of, or the plea of nolo contendere (or the equivalent) to, a felony or a
misdemeanor involving moral turpitude; (3) willful or intentional conduct that causes, or is
reasonably likely to cause, material and demonstrable injury, monetarily or otherwise, to the
Company or its Affiliates; (4) breach of any material obligations contained in any written
agreement with the Company or any of its Affiliates, including, but not limited to, any restrictive
covenants or obligations of confidentiality contained therein; or (5) material breach of any policies
and procedures of the Company or its Affiliates that are applicable to the Executive, including
without limitation any Code of Conduct, which, in each case, if capable of cure (as determined by
the Company or its Affiliates in reasonable good faith) is not cured within 10 business days after
written notice of the conduct is delivered to the Executive by the Company (which notice shall
identify and describe such conduct with sufficient specificity to allow the Executive to respond).
“Change of Control” has the meaning set forth in the H&E Equipment Services, Inc.
Amended and Restated 2016 Stock-Based Incentive Compensation Plan as in effect immediately
prior to the date hereof; provided, that for the avoidance of doubt, the consummation of the Herc
Sale shall in all events be deemed to be Change of Control for purposes of this Agreement.
“Effective Time” has the meaning set forth in the Merger Agreement.
“Herc Sale” means the consummation of the transactions contemplated by that certain
Agreement and Plan of Merger, by and among Herc, HR Merger Sub Inc., and H&E Equipment
Services, Inc., dated as of February 19, 2025 (the “Merger Agreement”).
“Good Reason” means any of the following, taken without the Executive’s prior written
consent: (i) a material diminution in the Executive’s annual base salary or target annual bonus
- 34 -
opportunity; (ii) any material diminution in the Executive’s position, authority, responsibilities or
reporting line; (iii) the Company’s material breach of this Agreement or any other agreement with
the Executive Officer; or (iv) a relocation of the Executive’s primary work location by more than
25 miles from the Executive’s primary work location as of immediately prior to a Change of
Control. A resignation will only qualify as being for “Good Reason” if, within 30 days following
the initial existence of a condition listed above (or, if later, the time at which the Executive knew
or reasonably should have known of its existence), the Executive provides notice to the Company
of the existence of a supposedly qualifying condition, and within 30 days after such notice, the
Company does not remedy the condition and, within 30 days following the Company’s failure to
remedy the condition, the Executive actually resigns from employment with the Company.
“Person” means an individual corporation, partnership, trust, association, limited liability
company or any other entity or organization, including a government or political subdivision or an
agency or instrumentality thereof.
“Target Annual Bonus” means the Executive’s target annual bonus amount as in effect
immediately prior to the Termination Date (without giving effect to any reduction or series of
reductions giving rise to Good Reason).
6.
Withholding. All payments made by the Company under this Agreement shall be
reduced by any tax or other amounts required to be withheld by the Company to the extent required
by applicable law.
7.
Assignment. Neither the Executive nor the Company may make any assignment
of this Agreement or any interest in it, by operation of law or otherwise, without the prior written
consent of the other; provided, however, the Company may assign its rights and obligations under
this Agreement without the Executive’s consent to one of its Affiliates or to any Person with whom
the Company shall hereafter effect a reorganization, consolidate or merge, or to whom the
Company shall hereafter transfer all or substantially all of its properties or assets (in which event
the assignee shall be treated as the “Company” for all purposes under this Agreement). This
Agreement shall inure to the benefit of and be binding upon the Executive and the Company, and
each of their respective successors, executors, administrators, heirs and permitted assigns.
8.
Severability. If any portion or provision of this Agreement shall to any extent be
declared illegal or unenforceable by a court of competent jurisdiction, then the remainder of this
Agreement, or the application of such portion or provision in circumstances other than those as to
which it is so declared illegal or unenforceable, shall not be affected thereby, and each portion and
provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.
9.
Miscellaneous. This Agreement sets forth the entire agreement between the
Executive and the Company concerning the Executive’s eligibility for severance payments or other
severance benefits from the Company or any of its Affiliates, and replaces all prior and
contemporaneous communications, agreements and understandings on the topic, whether written
or oral, including without limitation the Prior Severance Agreement. The headings and captions
in this Agreement are for convenience only and in no way define or describe the scope or content
of any provision of this Agreement. This Agreement may be executed in two or more counterparts,
- 35 -
each of which shall be an original and all of which together shall constitute one and the same
instrument. This is a Delaware contract and shall be governed and construed in accordance with
the laws of the State of Delaware, without regard to any conflict of laws principles that would
result in the application of the laws of any other jurisdiction.
10.
Amendment. No provision of this Agreement may be amended, modified, waived
or discharged, unless such amendment, modification, waiver or discharge is agreed to in writing
and signed by the Executive and such officer or director of the Company as may be designated by
the Board.
11.
Assumption. This Agreement shall be binding upon the parties hereto and shall
inure to the benefit of the parties and their respective heirs, devisees, executors, administrators,
legal representatives, successors and assigns.
[Signature Page Follows Immediately]
- 36 -
IN WITNESS WHEREOF, this Agreement has been executed by the Company, by its duly
authorized representative, and by the Executive, as of the date first above written.
THE EXECUTIVE:
THE COMPANY:
/s/ John McDowell Engquist
/s/ Leslie S. Magee
________________________
_________________________
John McDowell Engquist
By: Leslie S. Magee
Exhibit A
[Attached]
CONFIDENTIAL
EXHIBIT A
RELEASE OF CLAIMS
1.
Terms of Release. This general release is entered into by and between [______]
(the “Executive”) and H&E Equipment Services, Inc. (the “Company”), as of the date hereof (this
“General Release”), pursuant to the terms of the Severance Agreement to which this General
Release is attached (the “Severance Agreement”), which provides the Executive with certain
significant benefits, subject to the Executive’s execution of this General Release. The Executive
acknowledges and agrees that the consideration provided for herein is adequate consideration for
the Executive’s obligations under this General Release.
2.
Released Claims. In exchange for and in consideration of the payments and
benefits described in the Severance Agreement that are expressly conditioned on the execution of
this Release, the Executive, on behalf of himself, his agents, representatives, heirs, devisees,
assignees, transferees, administrator, executors and legal representatives, past or present (as the
case may be, and collectively, the “Releasors”), hereby knowingly, voluntarily, irrevocably and
unconditionally releases, discharges, and acquits all of the Released Parties from any and all
claims, promises, demands, liabilities, contracts, debts, losses, damages, attorneys’ fees and causes
of action of every kind and nature, known and unknown, vested or contingent, whether known or
unknown (collectively, “Claims”), which the Executive may have against the Released Parties at
any time up to and including the Executive’s execution of this General Release (the “Execution”),
including but not limited to Claims or rights arising out of, or which might be considered to arise
out of or to be connected in any way with: (i) the Executive’s employment with the Company or
any of its subsidiaries, parent companies, successors or assigns, or the termination thereof; (ii) any
treatment of the Executive by any of the Released Parties in connection with his or her employment
or the termination thereof, which shall include, without limitation, any treatment or decisions with
respect to hiring, placement, promotion, work hours, discipline, transfer, termination,
compensation, performance review or training; (iii) any damages or injury that the Executive may
have suffered in connection with his or her employment or the termination thereof, including
without limitation, emotional or physical injury, or compensatory damages; (iv) employment
discrimination, which shall include, without limitation, any individual or class Claims of
discrimination on the basis of age, disability, sex, race, religion, national origin, citizenship status,
marital status, sexual preference, or any other basis whatsoever; (v) any Claims arising under,
including, without limitation, United States federal, state or local law and the national or local law
of any foreign country (statutory or decisional), for wrongful, abusive, constructive or unlawful
discharge or dismissal, for breach of any contract, or for discrimination based upon race, color,
ethnicity, sex, age, national origin, religion, disability, sexual orientation, or any other unlawful
criterion or circumstance, including rights or Claims under the Age Discrimination in Employment
Act of 1967, the Older Workers Benefit Protection Act of 1990, violations of the Equal Pay Act,
Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Americans with
Disabilities Act of 1991, the Employee Retirement Income Security Act of 1974 (“ERISA”), the
Fair Labor Standards Act, the Worker Adjustment Retraining and Notification Act, the Family and
Medical Leave Act, including all amendments to any of the aforementioned acts; violations of any
other federal, state, or municipal fair employment statutes or laws, including, without limitation,
violations of any other law, rule, regulation, or ordinance pertaining to employment, wages,
- 39 -
compensation, hours worked, or any other Claims for compensation or bonuses, whether or not
paid under any compensation plan or arrangement; breach of contract; tort and other common law
Claims; defamation; libel; slander; impairment of economic opportunity defamation; sexual
harassment; retaliation; attorneys’ fees; emotional distress; intentional infliction of emotional
distress; assault; battery; pain and suffering; and punitive or exemplary damages and (v) all such
other Claims that the Executive could assert against any, some, or all of the Released Parties in
any forum, accrued or unaccrued, liquidated or contingent, direct or indirect, including under any
federal, state, foreign or local law, ordinance and/or regulation, or pursuant to common law in
connection with Executive’s employment or the termination thereof (the “Released Claims”). The
payments and other rights of the Executive expressly provided for under the Severance Agreement,
as well as any rights that the Executive may have to be indemnified by the Company pursuant to
the Company’s Certificate of Incorporation, By-laws, any indemnification agreement entered into
by the Executive and the Company or any former parent of the Company, or directors and officers
liability insurance policies, any Claims for employee benefits under plans covered by ERISA to
the extent any such Claim may not lawfully be waived or for any payments or benefits under any
Company plans that have vested according to the terms of those plans, any Claims for payment of
amounts payable under any applicable workers’ compensation or unemployment compensation
law and any Claim that may not lawfully be waived are each excluded from this General Release.
The Executive further agrees to waive any and all rights under the laws of any jurisdiction in the
United States, or any other country, that limit a general release to those Claims that are known or
suspected to exist in the Executive’s favor as of the Execution. For the purpose of implementing
a full and complete release, the Executive expressly acknowledges and agrees that this General
Release releases all Claims existing or arising prior to the Executive signing this General Release
which the Executive has or may have against the Released Parties, whether such Released Claims
are known or unknown and suspected or unsuspected by the Executive and the Executive forever
waives all inquiries and investigations into any and all such Released Claims.
3.
Released Parties. The term “Released Parties” or “Released Party” as used herein
shall mean and include: (i) the Company; (ii) Herc Holdings Inc. (iii) each of their former, current
and future parents, subsidiaries, affiliates, shareholders, beneficial owners and lenders; (iv) each
predecessor, successor and affiliate of any person listed in clauses (i) through (iii); (v) each former,
current, and future officer, director, agent, attorney, representative, employee, servant, owner,
shareholder, partner, joint venturer, attorney, employee benefit plan, employee benefit plan
administrator, insurer, administrator, and fiduciary of any of the persons or entities listed in clauses
(i) through (iv); and (vi) any other person or entity acting by, through, under, or in concert with
any of the persons or entities listed in clauses (i) through (v).
4.
Acknowledgements. Pursuant to the Older Workers Benefit Protection Act of
1990, the Executive understands and acknowledges that by executing this General Release and
releasing all Claims against each and all of the Released Parties, the Executive has waived any and
all rights or Claims that the Executive has or could have against any Released Party under the Age
Discrimination in Employment Act, which includes, but is not limited to, any claim that any
Released Party discriminated against the Executive on account of his or her age. The Executive
also acknowledges the following: (i) the Company, by this General Release, has advised the
Executive to consult with an attorney prior to executing this General Release; (ii) the Executive
has had the opportunity to consult with his own attorney concerning this General Release; (iii) this
- 40 -
General Release does not include Claims arising from any act, omission, transaction or occurrence
which happens after the Execution, provided, however, that any Claims arising after the Execution
from the then-present effect of acts or conduct occurring on or before the Execution shall be
deemed released under this General Release; and (iv) the Company has provided the Executive
with the opportunity to review and consider this General Release for 45 days (the “Review Period”)
and any changes to this General Release will not restart the 45-day review period. At the
Executive’s option and sole discretion, the Executive may waive the Review Period and execute
this General Release before the expiration of 45 days. In electing to waive the Review Period, the
Executive acknowledges and admits that the Executive was given a reasonable period of time
within which to consider this General Release and the Executive’s waiver is made freely and
voluntarily, without duress or any coercion by any other person. The General Release shall be null
and void ab initio in the event the Executive does not execute and return this General Release to
the Company by [______].
5.
Revocation Period. The Executive may revoke this General Release within a period
of seven days after the Execution. The Executive agrees that any such revocation is not effective
unless it is made in writing and delivered to the attention of the Secretary of the Company by the
end of such seventh calendar day. Under any such valid revocation, the Executive shall not be
entitled to the payments or benefits described in the Severance Agreement. This General Release
becomes effective and irrevocable on the eighth calendar day after the Execution.
6.
No Right to File Action or Proceeding. Unless otherwise prohibited by law and
subject to Section 7 hereof, the Executive agrees that he will not, at any time hereafter, voluntarily
participate in any judicial proceeding of any kind against the Company or any other Released Party
(whether acting as agents for the Company or in their individual capacities), with respect to any
private Claims covered by this General Release. Notwithstanding the foregoing, this General
Release shall not affect the Executive’s rights under the Older Workers Benefit Protection Act of
1990 to have a judicial determination of the validity of this General Release and does not purport
to limit any right Employee may have to file a charge under the Age Discrimination in Employment
Act. This General Release does, however, waive and release any right to recover damages under
the Age Discrimination in Employment Actor other civil rights statute. Additionally,
notwithstanding the foregoing, nothing in this General Release shall be deemed to prohibit
Executive from (i) filing an unfair labor practice charge under the National Labor Relations Act
or participating or assisting in proceedings before the National Labor Relations Board; or (ii) filing
a charge or complaint of age or other employment-related discrimination with the Equal
Employment Opportunity Commission (“EEOC”) or state or local equivalent, or from
participating in any investigation or proceeding conducted by the EEOC or state or local
equivalent. However, in light of the foregoing Genera Release, Executive will not be entitled to
any individual relief in connection with such charge, complaint, investigation or proceeding. For
the avoidance of doubt, nothing herein shall be construed to prevent or limit Executive from
recovering a bounty or award for providing information to any governmental authority concerning
any suspected violation of law.
7.
Protected Activity. Notwithstanding anything to the contrary contained herein or
in the Severance Agreement, no provision of this General Release shall be interpreted so as to
impede the Executive (or any other individual) from initiating communications directly with,
- 41 -
providing information to, responding to any inquiries from or reporting possible violations of
federal law or regulation to any governmental agency or entity or self-regulatory authority,
including, but not limited to, the Department of Justice, the Securities and Exchange Commission,
Congress and any agency Inspector General, filing a charge with or participate in an investigation
conducted by any governmental agency or entity or self-regulatory authority or making other
disclosures under the whistleblower provisions of federal law or regulation. The Executive does
not need the prior authorization of the Company to make any such reports or disclosures, and the
Executive shall not be required to notify the Company that such reports or disclosures have been
made, a request for information from any governmental entity or self-regulatory authority that is
not directed to the Company has been made or that the Executive has decided to file a charge or
complaint with or participate in an investigation conducted by any governmental agency or entity
or self-regulatory authority. The Executive hereby acknowledges and agrees that nothing in this
General Release shall in any way limit or prohibit the Executive from engaging for a lawful
purpose in any Protected Activity. For purposes of this Agreement, “Protected Activity” shall
mean (i) filing a charge, complaint or report with, or otherwise communicating with, cooperating
with or participating in any investigation or proceeding that may be conducted by, any federal,
state or local government agency or commission, including, but not limited to, the Equal
Employment Opportunity Commission, the Department of Labor, the Occupational Safety and
Health Administration, and the National Labor Relations Board (the “Government Agencies”), or
(ii) any rights the Executive may have under Section 7 of the National Labor Relations Act or
equivalent state law to engage in concerted protected activity or to discuss the terms of
employment or working conditions with or on behalf of coworkers, or to bring such issues to the
attention of the Company at any time. The Executive understands that in connection with such
Protected Activity, the Executive is permitted to disclose documents or other information as
permitted by law, and without giving notice to, or receiving authorization from, the Company.
Notwithstanding the foregoing, the Executive agrees to take all reasonable precautions to prevent
any unauthorized use or disclosure of any information that may constitute Confidential
Information to any parties other than the relevant Government Agencies. The Executive further
understands that Protected Activity does not include the disclosure of any Company attorney-client
privileged communications or attorney work product doctrine. The Company does not waive any
applicable privileges or the right to continue to protect its privileged attorney-client information,
attorney work product, and other privileged information. In addition, the Executive agrees to waive
Executive’s right to recover monetary damages in connection with any charge, complaint or
lawsuit pertaining to the Released Claims filed by the Executive or anyone else on the Executive’s
behalf (whether involving a governmental entity or not); provided that the Executive is not
agreeing to waive, and this General Release shall not be read as requiring the Executive to waive,
any right the Executive may have to receive any bounty or monetary award from any governmental
entity or regulatory or law enforcement authority in connection with information provided to any
governmental entity or other protected “whistleblower” activity.
8.
Governing Law. To the extent not subject to federal law, the validity,
interpretation, construction and performance of this General Release shall be governed by and
construed in accordance with the laws of the State of Delaware without regard to its conflict of
laws provisions.
- 42 -
9.
Severability. If any provision of this General Release should be declared to be
unenforceable by any administrative agency or court of law, then the remainder of this General
Release shall remain in full force and effect.
10.
Captions; Section Headings. Captions and section headings used herein are for
convenience only and are not a part of this General Release and shall not be used in construing it.
11.
Fascimile Signatures. Any signature to this General Release delivered by
photographic, facsimile or PDF copy shall be deemed to be an original signature hereto.
THE EXECUTIVE ACKNOWLEDGES THAT THE EXECUTIVE CAREFULLY HAS READ
THIS GENERAL RELEASE; THAT THE EXECUTIVE HAS HAD THE OPPORTUNITY TO
THOROUGHLY DISCUSS ITS TERMS WITH COUNSEL OF HIS OR HER CHOOSING;
THAT THE EXECUTIVE FULLY UNDERSTANDS ITS TERMS AND ITS FINAL AND
BINDING EFFECT; THAT THE ONLY PROMISES MADE TO SIGN THIS GENERAL
RELEASE ARE THOSE STATED AND CONTAINED IN THIS GENERAL RELEASE; AND
THAT THE EXECUTIVE IS SIGNING THIS GENERAL RELEASE KNOWINGLY AND
VOLUNTARILY. THE EXECUTIVE STATES THAT HE OR SHE IS IN GOOD HEALTH
AND IS FULLY COMPETENT TO MANAGE HIS OR HER BUSINESS AFFAIRS AND
UNDERSTANDS THAT HE OR SHE MAY BE WAIVING SIGNIFICANT LEGAL RIGHTS
BY SIGNING THIS GENERAL RELEASE.
IN WITNESS WHEREOF, the parties have executed this General Release as of the respective
dates set forth below.
Executive
_____________________________________
By:
Title:
Date:_________________________________
COMPANY
_____________________________________
Date:_________________________________
Exhibit B
[Attached]
Exhibit 10.14
SEVERANCE AGREEMENT
This SEVERANCE AGREEMENT (this “Agreement”) is made and entered into as of
February 20, 2025 by and between H&E Equipment Services, Inc. (the “Company”) and John M.
Engquist (the “Executive”). The Company and the Executive acknowledge and agree that this
Agreement shall replace in its entirety the Severance Agreement made and entered into as of
February 11, 2025 by and between the Company and the Executive (the “Prior Severance
Agreement”).
WHEREAS, the Company currently employs the Executive, and the Company desires to
continue to employ the Executive and provide him or her with a right to severance in the event of
a Qualifying Termination pursuant to the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained herein, and
intending to be legally bound hereby, the Company and the Executive agree as follows:
1.
Severance Benefits.
(a)
The Executive’s employment with the Company shall be at-will, meaning
that both the Executive and the Company will retain the right to terminate the Executive’s
employment at any time, with or without Cause or notice.
(b)
If the Company or an Affiliate of the Company terminates the Executive’s
employment without Cause or the Executive resigns for Good Reason, in each case, on or within
the two-year period immediately following a Change of Control (a “Qualifying Termination”),
then, subject to Section 2 and the other provisions of this Agreement, the Executive will receive
the following severance payments and benefits from the Company:
(i)
Accrued Benefits. Regardless of whether the Executive executes
the Release upon a Qualifying Termination, the Executive will be entitled to receive the following
(the “Accrued Benefits”): (i) payment of any earned but unpaid Base Salary and any accrued but
unused paid time off, in each case, through the date of the Qualifying Termination (the
“Termination Date”), to be paid no later than 30 days following the Termination Date (or such
earlier date as may be required by applicable law), (ii) reimbursement for any unreimbursed
business expenses incurred through the Termination Date, (iii) all other payments, benefits or
fringe benefits to which the Executive shall be entitled under the terms of any applicable
compensation arrangement or benefit, equity or fringe benefit plan or program or grant, payable
in accordance therewith, and (iv) any accrued but unpaid annual bonus due with respect to any
calendar year preceding the calendar year in which the Termination Date occurs and that has not
been deferred (which deferred bonuses shall be memorialized separately from this Agreement),
which amount shall be paid at the same time that annual bonuses are generally scheduled to be
paid to executives of the Company generally;
(ii)
Severance Payment. The Company or an Affiliate of the Company
will pay the Executive a severance payment in an amount equal to two-times the sum of (x) the
Executive’s Base Salary and (y) the Executive’s Target Annual Bonus (the “Severance Payment”).
- 45 -
The Severance Payment shall be made, less applicable taxes and withholdings, on the 60th day
following the Termination Date; and
(iii)
Continued Employee Benefits. If the Executive timely elects
continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended (“COBRA”) under both the Company’s and any successor’s benefit plans for the
Executive and, if applicable, the Executive’s eligible dependents, within the time period prescribed
pursuant to COBRA, the Company or an Affiliate of the Company will contribute to the premium
costs of the Executive’s COBRA continuation coverage at the same rate that it contributes from
time to time to group health insurance premiums (as applicable) for its active employees generally,
until the later of (i) the end of the (18) months following the Termination Date or (ii) the date the
Executive and the Executive’s dependents are no longer entitled to coverage under COBRA or
Company plans or the Executive otherwise begins other employment that provides for health
coverage benefits. Notwithstanding the foregoing, in the event that the Company’s payment of
the COBRA premium contributions, as described in this Section 1(b)(iii), would subject the
Company to any tax or penalty under either Section 105(h) of the Internal Revenue Code of 1986,
as amended, or the Patient Protection and Affordable Care Act, as amended, any regulations or
guidance issued thereunder, or any other applicable law, in each case, as determined by the
Company, then the Executive and the Company agree to work together in good faith to restructure
such benefit.
2.
Conditions to Severance.
(a)
Any obligation of the Company or an Affiliate of the Company to provide
the severance benefits described in Sections 1(ii) and (iii) (collectively, the “Severance Benefits”)
to the Executive is expressly conditioned on the Executive signing and returning to the Company,
without revoking, a timely and effective general release of claims in the form attached hereto as
Exhibit A (the “Release”). The Release must become effective, with all periods of revocation
therein having expired, no later than the 52nd calendar day following the Termination Date.
(b)
Any obligation of the Company to provide the Severance Benefits to the
Executive, and the Executive’s right to retain the same, are also expressly conditioned upon the
Executive’s continued compliance with the Restrictive Covenant Agreement attached hereto as
Exhibit B (the “Restrictive Covenant Agreement”).
(c)
Enforcement of Covenants. Executive acknowledges and agrees that a
breach of any provision of the Restrictive Covenant Agreement by the Executive will cause serious
and irreparable injury to the Company and its Affiliates and that it will be difficult to quantify and
that money damages alone will not adequately compensate the Company. In the event of a breach
or threatened or intended breach of this Agreement by the Executive, the Company shall be entitled
to seek injunctive relief, both temporary and final, enjoining and restraining such breach or
threatened or intended breach. The Executive further agrees that should the Executive breach the
Restrictive Covenant Agreement, the Company will be entitled to any and all other legal or
equitable remedies available to it, including the recovery and return of any amount paid to
Employee to enter into this Agreement.
- 46 -
3.
Timing of Payments and Section 409A.
(a)
Notwithstanding anything to the contrary in this Agreement, if at the time
the Executive’s employment terminates, the Executive is a “specified employee,” any and all
amounts payable under this Agreement on account of such separation from service that would (but
for this provision) be payable within six (6) months following the date of termination, shall instead
be paid on the next business day following the expiration of such six (6)-month period or, if earlier,
upon the Executive’s death; except (i) to the extent of amounts that do not constitute a deferral of
compensation within the meaning of Treasury regulation Section 1.409A-1(b) (including without
limitation by reason of the safe harbor set forth in Section 1.409A-1(b)(9)(iii), as determined by
the Company in its reasonable good faith discretion); (ii) benefits which qualify as excepted
welfare benefits pursuant to Treasury regulation Section 1.409A-1(a)(5); or (iii) other amounts or
benefits that are not subject to the requirements of Section 409A of the Internal Revenue Code of
1986, as amended (“Section 409A”).
(b)
For purposes of this Agreement, all references to “termination of
employment” and correlative phrases shall be construed to require a “separation from service” (as
defined in Section 1.409A-1(h) of the Treasury regulations after giving effect to the presumptions
contained therein), and the term “specified employee” means an individual determined by the
Company to be a specified employee under Treasury regulation Section 1.409A-1(i).
(c)
Each payment made under this Agreement shall be treated as a separate
payment and the right to a series of installment payments under this Agreement is to be treated as
a right to a series of separate payments.
(d)
In no event shall the Company have any liability relating to the failure or
alleged failure of any payment or benefit under this Agreement to comply with, or be exempt from,
the requirements of Section 409A.
4.
Acknowledgement of Qualifying Termination. The Company hereby
acknowledges and agrees that, subject to the Executive’s continued employment with the
Company through the Effective Time, and subject to and contingent upon the occurrence of the
Effective Time, the Executive’s employment will terminate at the Effective Time, or such later
date as may be agreed between Herc Holdings Inc. (“Herc”) and the Executive, and such
termination of employment shall constitute a Qualifying Termination for purposes of this
Agreement.
5.
Definitions. For purposes of this Agreement, the following definitions apply:
“Affiliates” means all persons and entities directly or indirectly controlling, controlled by
or under common control with the Company, where control may be by management authority,
equity interest or otherwise.
“Base Salary” means the Executive’s annual base salary as in effect immediately prior to
the Termination Date (without giving effect to any reduction or series of reductions giving rise to
Good Reason).
- 47 -
“Cause” means (1) any act of misappropriation, embezzlement, fraud, or similar
intentional misconduct by the Executive involving the Company or its Affiliates; (2) the
Executive’s conviction of, or the plea of nolo contendere (or the equivalent) to, a felony or a
misdemeanor involving moral turpitude; (3) willful or intentional conduct that causes, or is
reasonably likely to cause, material and demonstrable injury, monetarily or otherwise, to the
Company or its Affiliates; (4) breach of any material obligations contained in any written
agreement with the Company or any of its Affiliates, including, but not limited to, any restrictive
covenants or obligations of confidentiality contained therein; or (5) material breach of any policies
and procedures of the Company or its Affiliates that are applicable to the Executive, including
without limitation any Code of Conduct, which, in each case, if capable of cure (as determined by
the Company or its Affiliates in reasonable good faith) is not cured within 10 business days after
written notice of the conduct is delivered to the Executive by the Company (which notice shall
identify and describe such conduct with sufficient specificity to allow the Executive to respond).
“Change of Control” has the meaning set forth in the H&E Equipment Services, Inc.
Amended and Restated 2016 Stock-Based Incentive Compensation Plan as in effect immediately
prior to the date hereof; provided, that for the avoidance of doubt, the consummation of the Herc
Sale shall in all events be deemed to be Change of Control for purposes of this Agreement.
“Effective Time” has the meaning set forth in the Merger Agreement.
“Herc Sale” means the consummation of the transactions contemplated by that certain
Agreement and Plan of Merger, by and among Herc, HR Merger Sub Inc., and H&E Equipment
Services, Inc., dated as of February 19, 2025 (the “Merger Agreement”).
“Good Reason” means any of the following, taken without the Executive’s prior written
consent: (i) a material diminution in the Executive’s annual base salary or target annual bonus
opportunity; (ii) any material diminution in the Executive’s position, authority, responsibilities or
reporting line; (iii) the Company’s material breach of this Agreement or any other agreement with
the Executive Officer; or (iv) a relocation of the Executive’s primary work location by more than
25 miles from the Executive’s primary work location as of immediately prior to a Change of
Control. A resignation will only qualify as being for “Good Reason” if, within 30 days following
the initial existence of a condition listed above (or, if later, the time at which the Executive knew
or reasonably should have known of its existence), the Executive provides notice to the Company
of the existence of a supposedly qualifying condition, and within 30 days after such notice, the
Company does not remedy the condition and, within 30 days following the Company’s failure to
remedy the condition, the Executive actually resigns from employment with the Company.
“Person” means an individual corporation, partnership, trust, association, limited liability
company or any other entity or organization, including a government or political subdivision or an
agency or instrumentality thereof.
“Target Annual Bonus” means the Executive’s target annual bonus amount as in effect
immediately prior to the Termination Date (without giving effect to any reduction or series of
reductions giving rise to Good Reason).
- 48 -
6.
Withholding. All payments made by the Company under this Agreement shall be
reduced by any tax or other amounts required to be withheld by the Company to the extent required
by applicable law.
7.
Assignment. Neither the Executive nor the Company may make any assignment
of this Agreement or any interest in it, by operation of law or otherwise, without the prior written
consent of the other; provided, however, the Company may assign its rights and obligations under
this Agreement without the Executive’s consent to one of its Affiliates or to any Person with whom
the Company shall hereafter effect a reorganization, consolidate or merge, or to whom the
Company shall hereafter transfer all or substantially all of its properties or assets (in which event
the assignee shall be treated as the “Company” for all purposes under this Agreement). This
Agreement shall inure to the benefit of and be binding upon the Executive and the Company, and
each of their respective successors, executors, administrators, heirs and permitted assigns.
8.
Severability. If any portion or provision of this Agreement shall to any extent be
declared illegal or unenforceable by a court of competent jurisdiction, then the remainder of this
Agreement, or the application of such portion or provision in circumstances other than those as to
which it is so declared illegal or unenforceable, shall not be affected thereby, and each portion and
provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.
9.
Miscellaneous. This Agreement sets forth the entire agreement between the
Executive and the Company concerning the Executive’s eligibility for severance payments or other
severance benefits from the Company or any of its Affiliates, and replaces all prior and
contemporaneous communications, agreements and understandings on the topic, whether written
or oral, including without limitation the Prior Severance Agreement. The headings and captions
in this Agreement are for convenience only and in no way define or describe the scope or content
of any provision of this Agreement. This Agreement may be executed in two or more counterparts,
each of which shall be an original and all of which together shall constitute one and the same
instrument. This is a Delaware contract and shall be governed and construed in accordance with
the laws of the State of Delaware, without regard to any conflict of laws principles that would
result in the application of the laws of any other jurisdiction.
10.
Amendment. No provision of this Agreement may be amended, modified, waived
or discharged, unless such amendment, modification, waiver or discharge is agreed to in writing
and signed by the Executive and such officer or director of the Company as may be designated by
the Board.
11.
Assumption. This Agreement shall be binding upon the parties hereto and shall
inure to the benefit of the parties and their respective heirs, devisees, executors, administrators,
legal representatives, successors and assigns.
[Signature Page Follows Immediately]
- 49 -
IN WITNESS WHEREOF, this Agreement has been executed by the Company, by its duly
authorized representative, and by the Executive, as of the date first above written.
THE EXECUTIVE:
THE COMPANY:
/s/ John M. Engquist
By:
/s/ Leslie S. Magee
John M. Engquist
Leslie S. Magee
Exhibit A
[Attached]
CONFIDENTIAL
EXHIBIT A
RELEASE OF CLAIMS
1.
Terms of Release. This general release is entered into by and between [______]
(the “Executive”) and H&E Equipment Services, Inc. (the “Company”), as of the date hereof (this
“General Release”), pursuant to the terms of the Severance Agreement to which this General
Release is attached (the “Severance Agreement”), which provides the Executive with certain
significant benefits, subject to the Executive’s execution of this General Release. The Executive
acknowledges and agrees that the consideration provided for herein is adequate consideration for
the Executive’s obligations under this General Release.
2.
Released Claims. In exchange for and in consideration of the payments and
benefits described in the Severance Agreement that are expressly conditioned on the execution of
this Release, the Executive, on behalf of himself, his agents, representatives, heirs, devisees,
assignees, transferees, administrator, executors and legal representatives, past or present (as the
case may be, and collectively, the “Releasors”), hereby knowingly, voluntarily, irrevocably and
unconditionally releases, discharges, and acquits all of the Released Parties from any and all
claims, promises, demands, liabilities, contracts, debts, losses, damages, attorneys’ fees and causes
of action of every kind and nature, known and unknown, vested or contingent, whether known or
unknown (collectively, “Claims”), which the Executive may have against the Released Parties at
any time up to and including the Executive’s execution of this General Release (the “Execution”),
including but not limited to Claims or rights arising out of, or which might be considered to arise
out of or to be connected in any way with: (i) the Executive’s employment with the Company or
any of its subsidiaries, parent companies, successors or assigns, or the termination thereof; (ii) any
treatment of the Executive by any of the Released Parties in connection with his or her employment
or the termination thereof, which shall include, without limitation, any treatment or decisions with
respect to hiring, placement, promotion, work hours, discipline, transfer, termination,
compensation, performance review or training; (iii) any damages or injury that the Executive may
have suffered in connection with his or her employment or the termination thereof, including
without limitation, emotional or physical injury, or compensatory damages; (iv) employment
discrimination, which shall include, without limitation, any individual or class Claims of
discrimination on the basis of age, disability, sex, race, religion, national origin, citizenship status,
marital status, sexual preference, or any other basis whatsoever; (v) any Claims arising under,
including, without limitation, United States federal, state or local law and the national or local law
of any foreign country (statutory or decisional), for wrongful, abusive, constructive or unlawful
discharge or dismissal, for breach of any contract, or for discrimination based upon race, color,
ethnicity, sex, age, national origin, religion, disability, sexual orientation, or any other unlawful
criterion or circumstance, including rights or Claims under the Age Discrimination in Employment
Act of 1967, the Older Workers Benefit Protection Act of 1990, violations of the Equal Pay Act,
Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Americans with
Disabilities Act of 1991, the Employee Retirement Income Security Act of 1974 (“ERISA”), the
Fair Labor Standards Act, the Worker Adjustment Retraining and Notification Act, the Family and
Medical Leave Act, including all amendments to any of the aforementioned acts; violations of any
other federal, state, or municipal fair employment statutes or laws, including, without limitation,
violations of any other law, rule, regulation, or ordinance pertaining to employment, wages,
- 52 -
compensation, hours worked, or any other Claims for compensation or bonuses, whether or not
paid under any compensation plan or arrangement; breach of contract; tort and other common law
Claims; defamation; libel; slander; impairment of economic opportunity defamation; sexual
harassment; retaliation; attorneys’ fees; emotional distress; intentional infliction of emotional
distress; assault; battery; pain and suffering; and punitive or exemplary damages and (v) all such
other Claims that the Executive could assert against any, some, or all of the Released Parties in
any forum, accrued or unaccrued, liquidated or contingent, direct or indirect, including under any
federal, state, foreign or local law, ordinance and/or regulation, or pursuant to common law in
connection with Executive’s employment or the termination thereof (the “Released Claims”). The
payments and other rights of the Executive expressly provided for under the Severance Agreement,
as well as any rights that the Executive may have to be indemnified by the Company pursuant to
the Company’s Certificate of Incorporation, By-laws, any indemnification agreement entered into
by the Executive and the Company or any former parent of the Company, or directors and officers
liability insurance policies, any Claims for employee benefits under plans covered by ERISA to
the extent any such Claim may not lawfully be waived or for any payments or benefits under any
Company plans that have vested according to the terms of those plans, any Claims for payment of
amounts payable under any applicable workers’ compensation or unemployment compensation
law and any Claim that may not lawfully be waived are each excluded from this General Release.
The Executive further agrees to waive any and all rights under the laws of any jurisdiction in the
United States, or any other country, that limit a general release to those Claims that are known or
suspected to exist in the Executive’s favor as of the Execution. For the purpose of implementing
a full and complete release, the Executive expressly acknowledges and agrees that this General
Release releases all Claims existing or arising prior to the Executive signing this General Release
which the Executive has or may have against the Released Parties, whether such Released Claims
are known or unknown and suspected or unsuspected by the Executive and the Executive forever
waives all inquiries and investigations into any and all such Released Claims.
3.
Released Parties. The term “Released Parties” or “Released Party” as used herein
shall mean and include: (i) the Company; (ii) Herc Holdings Inc., (iii) each of their former, current
and future parents, subsidiaries, affiliates, shareholders, beneficial owners and lenders; (iv) each
predecessor, successor and affiliate of any person listed in clauses (i) through (iii); (v) each former,
current, and future officer, director, agent, attorney, representative, employee, servant, owner,
shareholder, partner, joint venturer, attorney, employee benefit plan, employee benefit plan
administrator, insurer, administrator, and fiduciary of any of the persons or entities listed in clauses
(i) through (iv); and (vi) any other person or entity acting by, through, under, or in concert with
any of the persons or entities listed in clauses (i) through (v).
4.
Acknowledgements. Pursuant to the Older Workers Benefit Protection Act of
1990, the Executive understands and acknowledges that by executing this General Release and
releasing all Claims against each and all of the Released Parties, the Executive has waived any and
all rights or Claims that the Executive has or could have against any Released Party under the Age
Discrimination in Employment Act, which includes, but is not limited to, any claim that any
Released Party discriminated against the Executive on account of his or her age. The Executive
also acknowledges the following: (i) the Company, by this General Release, has advised the
Executive to consult with an attorney prior to executing this General Release; (ii) the Executive
has had the opportunity to consult with his own attorney concerning this General Release; (iii) this
- 53 -
General Release does not include Claims arising from any act, omission, transaction or occurrence
which happens after the Execution, provided, however, that any Claims arising after the Execution
from the then-present effect of acts or conduct occurring on or before the Execution shall be
deemed released under this General Release; and (iv) the Company has provided the Executive
with the opportunity to review and consider this General Release for 45 days (the “Review Period”)
and any changes to this General Release will not restart the 45-day review period. At the
Executive’s option and sole discretion, the Executive may waive the Review Period and execute
this General Release before the expiration of 45 days. In electing to waive the Review Period, the
Executive acknowledges and admits that the Executive was given a reasonable period of time
within which to consider this General Release and the Executive’s waiver is made freely and
voluntarily, without duress or any coercion by any other person. The General Release shall be null
and void ab initio in the event the Executive does not execute and return this General Release to
the Company by [______].
5.
Revocation Period. The Executive may revoke this General Release within a period
of seven days after the Execution. The Executive agrees that any such revocation is not effective
unless it is made in writing and delivered to the attention of the Secretary of the Company by the
end of such seventh calendar day. Under any such valid revocation, the Executive shall not be
entitled to the payments or benefits described in the Severance Agreement. This General Release
becomes effective and irrevocable on the eighth calendar day after the Execution.
6.
No Right to File Action or Proceeding. Unless otherwise prohibited by law and
subject to Section 7 hereof, the Executive agrees that he will not, at any time hereafter, voluntarily
participate in any judicial proceeding of any kind against the Company or any other Released Party
(whether acting as agents for the Company or in their individual capacities), with respect to any
private Claims covered by this General Release. Notwithstanding the foregoing, this General
Release shall not affect the Executive’s rights under the Older Workers Benefit Protection Act of
1990 to have a judicial determination of the validity of this General Release and does not purport
to limit any right Employee may have to file a charge under the Age Discrimination in Employment
Act. This General Release does, however, waive and release any right to recover damages under
the Age Discrimination in Employment Actor other civil rights statute. Additionally,
notwithstanding the foregoing, nothing in this General Release shall be deemed to prohibit
Executive from (i) filing an unfair labor practice charge under the National Labor Relations Act
or participating or assisting in proceedings before the National Labor Relations Board; or (ii) filing
a charge or complaint of age or other employment-related discrimination with the Equal
Employment Opportunity Commission (“EEOC”) or state or local equivalent, or from
participating in any investigation or proceeding conducted by the EEOC or state or local
equivalent. However, in light of the foregoing Genera Release, Executive will not be entitled to
any individual relief in connection with such charge, complaint, investigation or proceeding. For
the avoidance of doubt, nothing herein shall be construed to prevent or limit Executive from
recovering a bounty or award for providing information to any governmental authority concerning
any suspected violation of law.
7.
Protected Activity. Notwithstanding anything to the contrary contained herein or
in the Severance Agreement, no provision of this General Release shall be interpreted so as to
impede the Executive (or any other individual) from initiating communications directly with,
- 54 -
providing information to, responding to any inquiries from or reporting possible violations of
federal law or regulation to any governmental agency or entity or self-regulatory authority,
including, but not limited to, the Department of Justice, the Securities and Exchange Commission,
Congress and any agency Inspector General, filing a charge with or participate in an investigation
conducted by any governmental agency or entity or self-regulatory authority or making other
disclosures under the whistleblower provisions of federal law or regulation. The Executive does
not need the prior authorization of the Company to make any such reports or disclosures, and the
Executive shall not be required to notify the Company that such reports or disclosures have been
made, a request for information from any governmental entity or self-regulatory authority that is
not directed to the Company has been made or that the Executive has decided to file a charge or
complaint with or participate in an investigation conducted by any governmental agency or entity
or self-regulatory authority. The Executive hereby acknowledges and agrees that nothing in this
General Release shall in any way limit or prohibit the Executive from engaging for a lawful
purpose in any Protected Activity. For purposes of this Agreement, “Protected Activity” shall
mean (i) filing a charge, complaint or report with, or otherwise communicating with, cooperating
with or participating in any investigation or proceeding that may be conducted by, any federal,
state or local government agency or commission, including, but not limited to, the Equal
Employment Opportunity Commission, the Department of Labor, the Occupational Safety and
Health Administration, and the National Labor Relations Board (the “Government Agencies”), or
(ii) any rights the Executive may have under Section 7 of the National Labor Relations Act or
equivalent state law to engage in concerted protected activity or to discuss the terms of
employment or working conditions with or on behalf of coworkers, or to bring such issues to the
attention of the Company at any time. The Executive understands that in connection with such
Protected Activity, the Executive is permitted to disclose documents or other information as
permitted by law, and without giving notice to, or receiving authorization from, the Company.
Notwithstanding the foregoing, the Executive agrees to take all reasonable precautions to prevent
any unauthorized use or disclosure of any information that may constitute Confidential
Information to any parties other than the relevant Government Agencies. The Executive further
understands that Protected Activity does not include the disclosure of any Company attorney-client
privileged communications or attorney work product doctrine. The Company does not waive any
applicable privileges or the right to continue to protect its privileged attorney-client information,
attorney work product, and other privileged information. In addition, the Executive agrees to waive
Executive’s right to recover monetary damages in connection with any charge, complaint or
lawsuit pertaining to the Released Claims filed by the Executive or anyone else on the Executive’s
behalf (whether involving a governmental entity or not); provided that the Executive is not
agreeing to waive, and this General Release shall not be read as requiring the Executive to waive,
any right the Executive may have to receive any bounty or monetary award from any governmental
entity or regulatory or law enforcement authority in connection with information provided to any
governmental entity or other protected “whistleblower” activity.
8.
Governing Law. To the extent not subject to federal law, the validity,
interpretation, construction and performance of this General Release shall be governed by and
construed in accordance with the laws of the State of Delaware without regard to its conflict of
laws provisions.
- 55 -
9.
Severability. If any provision of this General Release should be declared to be
unenforceable by any administrative agency or court of law, then the remainder of this General
Release shall remain in full force and effect.
10.
Captions; Section Headings. Captions and section headings used herein are for
convenience only and are not a part of this General Release and shall not be used in construing it.
11.
Fascimile Signatures. Any signature to this General Release delivered by
photographic, facsimile or PDF copy shall be deemed to be an original signature hereto.
THE EXECUTIVE ACKNOWLEDGES THAT THE EXECUTIVE CAREFULLY HAS READ
THIS GENERAL RELEASE; THAT THE EXECUTIVE HAS HAD THE OPPORTUNITY TO
THOROUGHLY DISCUSS ITS TERMS WITH COUNSEL OF HIS OR HER CHOOSING;
THAT THE EXECUTIVE FULLY UNDERSTANDS ITS TERMS AND ITS FINAL AND
BINDING EFFECT; THAT THE ONLY PROMISES MADE TO SIGN THIS GENERAL
RELEASE ARE THOSE STATED AND CONTAINED IN THIS GENERAL RELEASE; AND
THAT THE EXECUTIVE IS SIGNING THIS GENERAL RELEASE KNOWINGLY AND
VOLUNTARILY. THE EXECUTIVE STATES THAT HE OR SHE IS IN GOOD HEALTH
AND IS FULLY COMPETENT TO MANAGE HIS OR HER BUSINESS AFFAIRS AND
UNDERSTANDS THAT HE OR SHE MAY BE WAIVING SIGNIFICANT LEGAL RIGHTS
BY SIGNING THIS GENERAL RELEASE.
IN WITNESS WHEREOF, the parties have executed this General Release as of the respective
dates set forth below.
Executive
_____________________________________
By:
Title:
Date:_________________________________
COMPANY
_____________________________________
Date:_________________________________
Exhibit B
[Attached]
Exhibit 19.1
H&E EQUIPMENT SERVICES, INC.
INSIDER TRADING
POLICY
ADOPTED: February 22, 2006
REVISED: August 16, 2011
REVISED: February 12, 2015
REVISED: February 7, 2025
i
TABLE OF CONTENTS
Page
I.
SUMMARY OF THE COMPANY POLICY CONCERNING INSIDER TRADING
................................................................................................................................................................
1
II. TRADING GUIDELINES .............................................................................................................
1
A.
Nondisclosure. .....................................................................................................................
1
B.
Trading in the Company’s Securities. ..........................................................................
2
C.
Avoid Speculation. .............................................................................................................
2
D.
Trading in Other Securities..............................................................................................
2
E.
Restrictions on the Window Group. ..............................................................................
3
F.
Trading pursuant to a 10b5-1 Plan. ...............................................................................
3
G.
Trading within the 401(k) Plan. .....................................................................................
5
III. THE USE OF INSIDE INFORMATION IN CONNECTION WITH TRADING IN
SECURITIES .....................................................................................................................................
6
A.
General Rule. .......................................................................................................................
6
B.
Who Does the Policy Apply To? ...................................................................................
7
C.
Other Companies’ Stocks.................................................................................................
8
D.
Margin Accounts and Pledging Company Securities. .............................................
8
E.
Insider Trading Compliance Officer. ............................................................................
8
F.
Procedures for Approving Trades by Section 16 Individuals, Key Employees
and Hardship Cases. ...........................................................................................................
9
IV. OTHER LIMITATIONS ON SECURITIES TRANSACTIONS ......................................
10
A.
Public Resales — Rule 144. ............................................................................................
10
B.
Private Resales. ...................................................................................................................
12
C.
Underwriter Lock-Up Agreements. ...............................................................................
12
D.
Restrictions on Purchases of Company Securities. ...................................................
12
E.
Disgorgement of Profits on Short-Swing Transactions — Section 16(b). .........
12
F.
Prohibition of Short Sales. ...............................................................................................
13
G.
Filing Requirements. .........................................................................................................
13
I.
SUMMARY OF THE COMPANY POLICY CONCERNING INSIDER TRADING
This Statement covers a fundamental principle which each employee and director must
follow: It is the Company’s policy that it will without exception comply with the securities laws
of the United States. Each employee and each director is expected to abide by this policy. When
carrying out Company business, employees and directors must avoid any activity that violates
applicable state and federal securities laws or regulations.
The foregoing principle is described in more detail below. A description of certain
applicable securities laws and related policies is set forth in Sections III and IV of the Statement.
The Statement does not describe every securities law or regulation which will affect the
Company and its business, but attempts to familiarize employees and directors with the securities
laws to which they must pay particular attention to ensure the Company’s compliance with those
laws. Of course, employees and directors are expected to comply with all applicable laws.
In meeting the standards set forth in this Statement, it is essential that each employee and
director conduct the Company’s business with honesty and integrity. Each employee and each
director contributes to the Company’s overall reputation. Therefore, each employee and each
director must accept individual responsibility for ensuring that these standards are implemented.
II.
TRADING GUIDELINES
The following guidelines should be followed in order to ensure compliance with
applicable antifraud laws and with the Company’s policies:
A.
Nondisclosure. The Company’s material inside information must not be disclosed
to anyone, except to persons within the Company whose positions require them to know it. Care
should be taken so that material inside information is kept secure. No one may “tip” or disclose
material inside information concerning the Company to any outside person (including, but not
limited to family members, analysts, individual investors, and members of the investment
community and news media), unless required as part of that person’s regular duties for the
Company and authorized by the Compliance Officer and/or the Board of Directors. In any
instance in which such information is disclosed to outsiders, the Company will take such steps as
are necessary to preserve the confidentiality of the information, including requiring the outsider
to agree in writing to comply with the terms of this policy and/or to sign a confidentiality
agreement. All inquiries from outsiders regarding material inside information about the
Company must be forwarded to the Compliance Officer.
No one may give trading advice of any kind about the Company to anyone while
possessing material inside information about the Company, except to advise others not to trade if
doing so might violate the law or this policy. The Company strongly discourages all directors,
officers and related parties from giving trading advice concerning the Company to third parties
even when the director or officer does not possess material inside information about the
Company.
2
B.
Trading in the Company’s Securities. No employee, director or related party
should place a purchase or sale order, or recommend that another person place a purchase or sale
order in the Company’s securities, when he or she has knowledge of material, non-public
information concerning the Company. This includes orders for purchases and sales of stock and
convertible securities, such as options, puts and calls. The exercise of employee and non-
employee director stock options and warrants is not subject to this policy, whether the exercise
price is paid in cash, or, pursuant to a contractual right, by either the surrender of securities by
the holder of the option or warrant or the withholding by the Company of a portion of the
underlying securities. However, stock that was acquired upon exercise of a stock option or
warrant will be treated like any other stock, and may not be sold by an employee, director or
related party who is in possession of material inside information. Employees, directors or related
parties who possess material inside information should wait until after the close of the second
trading day after the information has been publicly released before trading. In addition, the
Company prohibits directors, employees and related parties from effecting “short sales” of the
Company’s equity securities (see “Prohibition of Short Sales,” below). Directors and executive
officers of the Company are also prohibited by Section 306 of the Sarbanes-Oxley Act of 2002
from purchasing, selling or otherwise acquiring or transferring the Company’s equity securities
during any blackout period under any individual account plan maintained by the Company,
including the Company’s 401(k) plan. However, trading may be permitted while in possession
of, but not on the basis of, material inside information, pursuant to a validly created and
approved 10b5-1 Plan adopted in compliance with Rule 10b5-1 ("Rule 10b5-1") promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and this
Statement.
C.
Avoid Speculation. Investing in the Company’s Common Stock provides an
opportunity to share in the future growth of the Company. But investment in the Company and
sharing in the growth of the Company does not mean short range speculation based on
fluctuations in the market. Such activities put the personal gain of the employee or director in
conflict with the best interests of the Company and its stockholders. Although this policy does
not mean that employees or directors may never sell shares, the Company encourages
employees, directors and related parties to avoid frequent trading in Company stock.
Speculating in Company stock is not part of the Company culture.
D.
Trading in Other Securities. No employee, director or related party should place
a purchase or sale order, or recommend that another person place a purchase or sale order, in the
securities of another corporation, if the employee or director learns in the course of his or her
employment material, inside information about the other corporation that is likely to affect the
value of those securities. For example, it would be a violation of the securities laws if an
employee or director learned through Company sources that the Company intended to purchase
assets from a company, and then bought or sold stock in that other company because of the likely
increase or decrease in the value of its securities.
3
E.
Restrictions on the Window Group. Except for trades made pursuant to a validly
created and approved 10b5-1 Plan, the Window Group (as defined in III.B) is subject to the
following additional restrictions on trading in Company securities:
• trading is permitted from the close of the second trading day following an
earnings release with respect to the preceding fiscal period until the close of
trading on the twenty-second day of the third month of the current fiscal
quarter (each, a “Window”), subject to the restrictions below;
• all trades are subject to prior review;
• clearance for all trades must be obtained from the Company’s Compliance
Officer;
• no trading in Company securities even during a Window while in the
possession of material inside information. Persons possessing such
information may trade during a Window only after the close of trading on the
second trading day following the Company’s widespread public release of
such material inside information;
• no trading in Company securities outside of a Window or during any special
blackout periods that the Compliance Officer may designate. No one may
disclose to any outside third party that a special blackout period has been
designated; and
• the Compliance Officer may, on a case-by-case basis, authorize trading in
Company securities outside of a Window (but not during special blackout
periods) due to financial hardship or other hardships.
F.
Trading pursuant to a 10b5-1 Plan. Rule 10b5-1 provides officers and directors
with an affirmative defense for insider trading liability under Rule 10b-5 for transactions made
pursuant to a previously established contract, plan or instruction (a “10b5-1 Plan”). A valid
10b5-1 Plan presents an opportunity for insiders to establish arrangements to sell Company stock
without regard to a Window or when the insider has material inside information. In order to be a
valid 10b5-1 Plan, the arrangement must satisfy the requirements of Rule 10b5-1, including
documenting a previously established (at a time when the insider did not possess material inside
information, which is the insider’s responsibility to determine), bona fide plan that specifies the
price, amount and date of trades, or provides a formula or mechanism to determine such
information.
As a condition of the affirmative defense before trading can commence under a 10b5-1
Plan, a cooling-off period is required for directors and officers until the later of: (1) 90 days
following the 10b5-1 Plan adoption (or modification); or (2) two business days following the
filing of the Form 10-Q or Form 10-K, as applicable, for the fiscal quarter in which the 10b5-1
Plan was adopted or modified (but not to exceed 120 days after adopting or modifying the 10b5-
1 Plan). Persons other than directors or officers (such as employees) must comply with a 30-day
cooling-off period. The cooling-off period applies to the adoption of a 10b5-1 Plan and also to
4
the modification of a 10b5-1 Plan that changes the amount, price or timing of the purchase or
sale of the securities under the 10b5-1 Plan.
An insider must act in good faith and not enter into a 10b5-1 Plan as part of a plan or
scheme to evade the insider trading laws. When adopting a new or modified 10b5-1 Plan, as a
condition to the availability of the affirmative defense, a director or officer must include in the
10b5-1 Plan a written representation certifying that at the time of the adoption of a new or
modified 10b5-1 Plan:
• That the insider is not aware of material inside information about the Company or its
securities; and
• That the insider is adopting the contract, instruction, or plan in good faith and not as
part of a plan or scheme to evade the prohibitions of Rule 10b-5.
Insiders may not utilize the affirmative defense for (1) trades under a 10b5-1 Plan when
the insider maintains another 10b5-1 Plan, or subsequently enters into an additional overlapping
10b5-1 Plan, for open market purchases or sales of any class of securities of the Company, or (2)
a single-trade plan if the insider had, within a 12-month period, purchased or sold securities of the
Company pursuant to another single-trade plan. Overlapping 10b5-1 Plans may be permitted where
an individual (1) enters into more than one 10b5-1 Plan with different broker-dealers or other
agents and treats the 10b5-1 Plans as a single 10b5-1 Plan so long as the 10b5-1 Plan complies
with Rule 10b-5, (2) adopts a 10b5-1 Plan where the later-commencing plan has a cooling-off
period that starts when the first plan terminates, or (3) enters into an additional 10b5-1 Plan solely
to sell securities as necessary to satisfy tax withholding obligations arising solely from the vesting
of a compensatory award.
An insider must enter into a 10b5-1 Plan in good faith and continue to act in good faith
with respect to a 10b5-1 Plan. As such, an insider may not cancel or modify a 10b5-1 Plan in an
effort to evade any limitations or influence timing of a corporate disclosure to occur before or after
a planned trade to make such trade more profitable or to avoid or reduce a loss.
The Company requires 10b5-1 Plans and any amendments thereto to be approved in
advance by the Compliance Officer, and for members of the Window Group, a 10b5-1 Plan and
any amendments thereto may be adopted and approved only during a Window. Prior to such
approval, the person establishing or amending such 10b5-1 Plan must certify to the Compliance
Officer that (i) he or she is not in possession of material inside information concerning the
Company, and (ii) he or she has received and read this Statement of Policy Regarding Trading
Policies and had the opportunity to ask the Compliance Officer questions regarding the
Statement. The Compliance Officer may exercise his or her absolute discretion in approving or
disapproving a 10b5-1 Plan or any amendments thereto. Even with a validly created and
approved 10b5-1 Plan, however, an insider is subject to the liability that may arise under Section
16 and must comply with Rule 144.
The cooling-off period, certification requirement and single plan limitation described
above do not apply to Rule 10b5-1 Plans entered into prior to February 27, 2023, unless modified
after such date.
5
G.
Trading within the 401(k) Plan. In the event that the Company has a Company
stock account in its 401(k) plan, the following provisions will be applicable. Most transactions
under the 401(k) Plan (the “Plan”) are not subject to the Section 16(b) short-swing profits rule
(described at III.E. below) or the Section 16(a) reporting requirements (described at III.G below).
An example of an exempt, non-reportable transaction would be a contribution to the Plan, such
as any employee pre-tax or after-tax contributions and any Company match or profit sharing
contributions, even if the participant for whose benefit the contributions are made has the right to
direct that some or all of the contributions will be invested in the Plan’s Company stock fund.
Similarly, cash distributions from the Plan’s Company stock fund to a participant by reason of
the participant’s retirement or other termination of employment would be an exempt, non-
reportable transaction.
In contrast, discretionary transactions by a participant in the Plan who is a Section 16
Individual are subject to the Section 16(a) reporting requirements. Discretionary transactions
include (1) a participant’s election to transfer part or all of the participant’s Plan balance into (or
out of) the Company stock fund (after such monies are originally contributed to the Plan and
invested, when contributed, in the Company stock fund) and (2) any voluntary request by a
participant for a cash withdrawal from the Company’s stock fund on an occasion other than the
participant’s retirement or other termination of employment (e.g., a hardship withdrawal
request).
Discretionary transactions by a Plan participant who is a Section 16 Individual will be
exempt from the Section 16(b) short-swing profits rule only if the participant’s election to effect
the transaction (e.g., the election to move out of the Company stock fund or the request for a
hardship withdrawal) occurs at least six months after the participant’s most recent discretionary
“opposite-way” purchase or sale election under the Plan. The election by a Plan participant who
is a Section 16 Individual to effect a discretionary transaction under the Plan less than six months
before or after an opposite-way discretionary transaction under the Plan will be subject to
Section 16(b). For instance, if a participant elected to move some of his Plan account balance
into the Company stock fund in October after he had elected to move some of his Plan account
out of the Company stock fund in August, the transaction would be subject to the Section 16(b)
short-swing profits rule as well as to the Section 16(a) reporting requirements. Plan participants
who are Section 16 Individuals are urged to consult with the Company’s Compliance Officer
prior to engaging in any Plan transaction that would be treated as a discretionary transaction.
The general prohibition against trading based on inside information (described at II.B.
above) is equally applicable to Plan transactions. Therefore, discretionary transactions, including
changes by a participant in the amount invested in the Company stock fund, while the participant
is in possession of material inside information are prohibited. Additionally, Window Group
members are prohibited from making changes in Plan designations outside of a Window or
during any other blackout period, even if the participant is not in possession of material inside
information. Plan participants who are Window Group members are urged to consult with the
Company’s Compliance Officer prior to making any changes in Plan designations outside of a
Window.
6
III.
THE USE OF INSIDE INFORMATION IN CONNECTION WITH TRADING IN
SECURITIES
A.
General Rule.
The U.S. securities laws regulate the sale and purchase of securities in the interest
of protecting the investing public. U.S. securities laws give the Company, its officers and
directors, and other employees the responsibility to ensure that information about the Company
is not used unlawfully in the purchase and sale of securities.
All employees and directors should pay particularly close attention to the laws
against trading on “inside” information. These laws are based upon the belief that all persons
trading in a company’s securities should have equal access to all “material” information about
that company. For example, if an employee or a director of a company knows material inside
financial information, that employee or director is prohibited from buying or selling stock in the
company until the information has been disclosed to the public. This is because the employee or
director knows information that will probably cause the stock price to change, and it would be
unfair for the employee or director to have an advantage (knowledge that the stock price will
change) that the rest of the investing public does not have. In fact, it is more than unfair. It is
considered to be fraudulent and illegal. Civil and criminal penalties for this kind of activity are
severe.
The general rule can be stated as follows: It is a violation of the federal securities
laws for a corporate insider to buy or sell securities if he or she is in possession of material inside
information. Information is material if it could affect a person’s decision whether to buy, sell or
hold the securities. It is inside information if it has not been publicly disclosed. Furthermore, it is
illegal for any person in possession of material inside information to provide other people with
such information or to recommend that they buy or sell the securities. (This is called “tipping”.)
In that case, they may both be held liable. While it is not possible to identify all information that
would be deemed “material,” the following types of information ordinarily would be considered
material:
• Financial performance, especially quarterly and year-end results of operations, and
significant changes in financial performance, conditions or liquidity.
• Company projections and strategic plans.
• Potential mergers and acquisitions or the sale of Company assets or subsidiaries.
• New major contracts, collaborations, orders, suppliers, customers, or finance sources,
or the loss thereof.
• Significant changes or developments in products or product lines.
• Significant changes or developments in supplies or inventory, including significant
product defects, recalls or product returns. Significant pricing changes.
7
• Stock splits, public or private securities/debt offerings, or changes in Company
dividend policies or amounts.
• Significant changes in senior management. Significant labor disputes or negotiations.
• Actual or threatened major litigation, or the resolution of such litigation.
The rule applies to any and all transactions in the Company’s securities, including
its common stock and options and warrants to purchase common stock (other than the exercise of
employee stock options or warrants, but including the sale of shares acquired upon the exercise
of employee stock options or warrants), and any other type of securities that the Company may
issue, such as notes, preferred stock, convertible debentures, warrants and exchange-traded
options or other derivative securities.
The Securities and Exchange Commission (the “SEC”), the stock exchanges and
plaintiffs’ lawyers focus on uncovering insider trading. A breach of the insider trading laws
could expose the insider to criminal fines up to $5,000,000 and imprisonment of up to twenty
years, in addition to civil penalties (up to three times the profits earned), and injunctive actions.
In addition, punitive damages may be imposed under applicable state laws. Securities laws also
subject controlling persons to civil penalties for illegal insider trading by employees, including
employees located outside the United States. Controlling persons include directors, officers, and
supervisors. These persons may be subject to penalties of up to the greater of $1,000,000 or three
times the profit realized or loss avoided by the insider trader. Inside information does not belong
to the individual directors, officers or other employees who may handle it or otherwise become
knowledgeable about it. It is an asset of the Company. For any person to use such information
for personal benefit or to disclose it to others outside the Company violates the Company’s
interests. More particularly, in connection with trading in the Company securities, it is a fraud
against members of the investing public and against the Company. However, trading may be
permitted while in possession of, but not on the basis of, material inside information, pursuant to
a validly created and approved 10b5-1 Plan (described at II.F above) adopted in compliance with
Rule 10b5-1 and this Statement.
B.
Who Does the Policy Apply To?
The prohibition against trading on inside information applies to directors, officers
and all other employees, and to other people who gain access to that information. Because of
their access to confidential information on a regular basis, Company policy subjects its directors,
certain employees and related parties (the “Window Group” as defined below) to additional
restrictions on trading in the Company securities. The restrictions for the Window Group are
discussed in II.E above. In addition, directors and certain employees with inside knowledge of
material information may be subject to ad hoc restrictions on trading from time to time.
Additionally, the Company has designated those persons listed on Exhibit A
attached hereto (“Section 16 Individuals”) as the directors and officers who are subject to the
reporting provisions and trading restrictions of Section 16 of the Exchange Act. Except for those
trades made pursuant to a validly created and approved 10b5-1 Plan, Section 16 Individuals must
obtain prior approval of all trades in Company securities from the Compliance Officer in
8
accordance with the procedures set forth in Section F below. The Company will amend Exhibit A
from time to time as necessary to reflect the addition, resignation or departure of Section 16
Individuals.
The Company has designated those persons listed on Exhibit B attached hereto as
“Key Employees” because of their position with the Company as officers and/or their access to
material inside information. Except for those trades made pursuant to a validly created and
approved 10b5-1 Plan, Key Employees must obtain the prior approval of all trades in Company
securities from the Compliance Officer in accordance with the procedures set forth in Section F
below. The Company will amend Exhibit B from time to time as necessary to reflect the addition,
resignation or departure of Key Employees.
The Window Group consists of (i) the persons listed on Exhibit A attached hereto,
(ii) the persons listed on Exhibit B attached hereto, and (iii) such other persons as may be
designated from time to time and informed of such status by the Company’s Compliance Officer.
All references to members of the Window Group or “related parties” of a person in this
Statement apply also to such persons’ spouses, members of their immediate families sharing the
same household and any trust, partnership or other entity the investments of which any of the
foregoing exercise discretion or investment influence or have direct or indirect power to control
or, with respect to trusts only, have a beneficial interest.
C.
Other Companies’ Stocks.
The same rules against insider trading apply to other companies’ stocks.
Employees, directors and related parties who learn material information about suppliers,
customers, or competitors through their work at the Company should keep it confidential and not
buy or sell stock in such companies until the information becomes public. Employees, directors
and related parties should not give tips about such stocks.
D.
Margin Accounts and Pledging Company Securities.
Securities held in a margin account may be sold by the broker without the
customer’s consent if the customer fails to meet a margin call. Likewise, securities pledged to a
bank or financial institution may be sold without the customer’s consent if the customer fails to
repay the obligation secured by the pledge. Because such sales may occur at a time when an
employee or a director had material inside information or is otherwise not permitted to trade in
Company securities, the Company prohibits employees, directors and related parties from
purchasing Company securities on margin, holding Company securities in a margin account or
pledging Company securities.
E.
Insider Trading Compliance Officer.
The Company has designated Leslie S. Magee as its insider trading Compliance
Officer (the “Compliance Officer”) (the Company, through the Board of Directors, may
subsequently designate other persons to serve as the Compliance Officer). The Compliance
Officer will review and either approve or prohibit all proposed trades by Section 16 Individuals
and Key Employees in accordance with the procedures set forth in Section F below.
9
In addition to the trading approval duties described in Section F below, the duties
of the Compliance Officer will include the following:
1.
Administering this policy and monitoring and enforcing compliance with
all policy provisions and procedures.
2.
Responding to all inquiries relating to this policy and its procedures.
3.
Designating and announcing special trading blackout periods during which
no Window Group members may trade in Company securities, except for those trades made
pursuant to a validly created and approved 10b5-1 Plan.
4.
Providing copies of this policy and other appropriate materials to all
current and new directors, officers and employees, and such other persons who the Compliance
Officer determines have access to material inside information concerning the Company.
5.
Administering, monitoring and enforcing compliance with all federal and
state insider trading laws and regulations, including without limitation Sections 10(b), 16, 20A
and 21A of the Exchange Act and the rules and regulations promulgated thereunder, and Rule
144 under the Securities Act of 1933, as amended (the “Securities Act”); and assisting in the
preparation and filing of all required SEC reports relating to insider trading in Company
securities, including without limitation Forms 3, 4, 5 and 144 and Schedules 13D and 13G.
6.
Revising the policy as necessary to reflect changes in federal or state
insider trading laws and regulations.
7.
Maintaining as Company records originals or copies of all documents
required by the provisions of this policy or the procedures set forth herein, and copies of all
required SEC reports relating to insider trading, including without limitation Forms 3, 4, 5 and
144 and Schedules 13D and 13G.
8.
Maintaining the accuracy of the list of Section 16 Individuals and Key
Employees as attached on Exhibits A and B, and updating them periodically as necessary to
reflect additions to or deletions from each category of individuals.
9.
Reviewing and approving 10b5-1 Plans and any amendments thereto that
are established by insiders.
The Compliance Officer may designate one or more individuals, which may
include outside counsel, who may perform the Compliance Officer’s duties.
F.
Procedures for Approving Trades by Section 16 Individuals, Key Employees and
Hardship Cases.
1.
Section 16 Individual/Key Employee Trades. Except for trades made
pursuant to a validly created and approved 10b5-1 Plan, no Section 16 Individual or Key
Employee may trade in Company securities until
10
(1)
the person trading has notified the Compliance Officer of the
proposed trade(s) in the format required by the Compliance Officer,
(2)
the person trading has certified to the Compliance Officer that (i)
he or she is not in possession of material inside information concerning the Company, and (ii) he
or she has received and read this Statement of Policy Concerning Trading Policies and had the
opportunity to ask the Compliance Officer questions regarding the Statement, and
(3)
the Compliance Officer has approved the trade(s), and has certified
the approval in writing. Written approval can be by mail, facsimile transmission or email.
2.
Hardship Trades. The Compliance Officer may, on a case-by-case basis,
authorize trading in Company securities outside of a Window due to financial hardship or other
hardships only after
(1)
the person trading has notified the Compliance Officer in writing
of the circumstances of the hardship and the amount and nature of the proposed trade(s),
(2)
in addition to any applicable requirements set forth in Section F.1.
above, the person trading has certified to the Compliance Officer in writing no earlier than two
business days prior to the proposed trades(s) that he or she is not in possession of material inside
information concerning the Company, and
(3)
the Compliance Officer confirms the absence of material inside
information and has approved the trade(s) and has certified the approval in writing.
3.
No Obligation to Approve Trades. The existence of the foregoing approval
procedures does not in any way obligate the Compliance Officer to approve any trades requested
by Section 16 Individuals, Key Employees or hardship applicants. The Compliance Officer may
reject any trading requests at his/her sole discretion.
4.
Trades pursuant to a 10b5-1 Plan. The Compliance Officer must review
and approve an insider’s 10b5-1 Plan. Once the Plan has received all necessary approvals and
has become effective, trades made pursuant to the Plan do not need the Compliance Officer’s
approval before taking place. The Compliance Officer does, however, need notice of trades made
pursuant to the Plan to ensure compliance with Section 16 and Rule 144.
5.
Underwritten Offerings. The prohibitions on trading outside of a Window
and procedures for approving trades of Section 16 Individuals and Key Employees are not
applicable to sales pursuant to an underwritten offering registered with the SEC.
IV.
OTHER LIMITATIONS ON SECURITIES TRANSACTIONS
A.
Public Resales — Rule 144.
The Securities Act requires every person who offers or sells a security to register
such transaction with the SEC unless an exemption from registration is available. Rule 144 under
the Securities Act is the exemption typically relied upon (i) for public resales by any person of
11
“restricted securities” (i.e., securities acquired in a private offering) and (ii) for public resales by
officers, directors and other control persons of a company (known as “affiliates”) of any of the
Company’s securities, whether restricted or unrestricted.
Rule 144 contains five conditions, although the applicability of some of these
conditions will depend on the circumstances of the sale. The conditions described in (3), (4) and
(5) below do not have to be complied with by holders of restricted securities who (i) are not, and
were not at any time during the three months preceding the resale of restricted securities,
affiliates of the Company, and (ii) have held (and fully paid for in cash) their restricted shares for
at least six months, provided, however, that the Company continues to satisfy the “current public
information” requirement for an additional six months after the six-month holding period
requirement is met:
(1)
Current Public Information. Current information about the
Company must be publicly available at the time of sale. The Company’s periodic reports filed
with the SEC ordinarily satisfy this requirement.
(2)
Holding Period. Restricted securities of a company who files
reports with the SEC must be held and fully paid for by the seller for a period of six months prior
to the sale, provided, however, that the Company must continue to satisfy the “current public
information” requirement for an additional six months after the six-month holding period
requirement is met. The holding period requirement, however, does not apply to securities held
by affiliates that were acquired either in the open market or in a public offering of securities
registered under the Securities Act. If the seller acquired the securities from someone other than
the Company or an affiliate of the Company, the holding period of the person from whom the
seller acquired such securities can be “tacked” to the seller’s holding period.
(3)
Volume Limitations. If the seller of restricted securities is an
affiliate of the Company (or was an affiliate at any time during the preceding three months), the
amount of securities which can be sold during any three month period cannot exceed the greater
of (1) one percent of the outstanding shares of the class or (ii) the average weekly reported
trading volume for shares of the class on the Nasdaq Global Market during the four calendar
weeks preceding the filing of the notice of sale referred to below or, if no such notice is required,
the date of the receipt of the order to execute the transaction.
(4)
Manner of Sale. If the seller of restricted securities is an affiliate of
the Company (or was an affiliate at any time during the preceding three months), the securities
must be sold in unsolicited brokers’ transactions or directly to a market-maker.
(5)
Notice of Sale. A seller of restricted securities who is an affiliate of
the Company (or was an affiliate at any time during the preceding three months) must file a
notice of the proposed sale with the SEC at the time the order to sell is placed with the broker,
unless the amount to be sold during any three months neither exceeds 5,000 shares nor involves
an aggregate sale price greater than $50,000. See “Filing Requirements.”
12
Bona fide gifts are not deemed to involve sales of stock for purposes of Rule 144,
so they can be made at any time without limitation on the amount of the gift. However, a donor
must include for purposes of determining any applicable volume limitations the amount of
securities sold by the donee during any three-month period within six months after the donation.
B.
Private Resales.
Directors and officers also may sell securities in a private transaction without
registration. Although there is no statutory provision or SEC rule expressly dealing with private
sales, the general view is that such sales can safely be made by affiliates if the party acquiring
the securities understands he is acquiring restricted securities that must be held for at least one
year before the securities will be eligible for resale to the public under Rule 144. Private resales
raise certain documentation and other issues and must be reviewed in advance by the Company’s
Compliance Officer.
C.
Underwriter Lock-Up Agreements.
Some holders of the Company’s Common Stock outstanding immediately prior to
any future underwritten public offering of the Company may be asked to agree not to offer, sell,
contract to sell or otherwise dispose of any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock for an agreed upon period of
time from the date of the public offering without the prior written consent of the underwriters of
the offering. The terms of any such lock-up agreements vary, and anyone who signs a lock-up
agreement will be responsible for complying with its terms.
D.
Restrictions on Purchases of Company Securities.
In order to prevent market manipulation, the SEC has adopted Regulation M and
Rule 10b-18 under the Exchange Act. Regulation M generally prohibits the Company or any of
its affiliates from buying Company stock in the open market during certain periods while a
public offering is taking place. Rule 10b-18 sets forth guidelines for purchases of Company stock
by the Company or its affiliates while a stock buyback program is occurring. While the
guidelines are optional, compliance with them provides immunity from a stock manipulation
charge. You should consult with the Company’s Compliance Officer if you desire to make
purchases of Company stock during any period that the Company is making a public offering or
buying stock from the public.
E.
Disgorgement of Profits on Short-Swing Transactions — Section 16(b).
Section 16 of the Exchange Act applies to directors and officers of the Company
and to any person owning more than ten percent of any registered class of the Company’s equity
securities. The section is intended to deter such persons (collectively referred to below as
“insiders”) from misusing confidential information about their companies for personal trading
gain. Section 16(a) requires insiders to publicly disclose any changes in their beneficial
ownership of the Company’s equity securities (see “Filing Requirements,” below). Section 16(b)
requires insiders to disgorge to the Company any “profit” resulting from “short-swing” trades, as
discussed more fully below. Section 16(c) effectively prohibits insiders from engaging in short
sales (see “Prohibition of Short Sales,” below).
13
Under Section 16(b), any profit realized by an insider on a “short-swing”
transaction (i.e., a purchase and sale, or sale and purchase, of the Company’s equity securities
within a period of less than six months) must be disgorged to the Company upon demand by the
Company or a stockholder acting on its behalf. By law, the Company cannot waive or release
any claim it may have under Section 16(b), or enter into an enforceable agreement to provide
indemnification for amounts recovered under the section.
Liability under Section 16(b) is imposed in a mechanical fashion without regard
to whether the insider intended to violate the section. Good faith, therefore, is not a defense. All
that is necessary for a successful claim is to show that the insider realized “profits” on a short-
swing transaction; however, profit, for this purpose, is calculated as the difference between the
sale price and the purchase price in the matching transactions, and may be unrelated to the actual
gain on the shares sold. When computing recoverable profits on multiple purchases and sales
within a six month period, the courts maximize the recovery by matching the lowest purchase
price with the highest sale price, the next lowest purchase price with the next highest sale price,
and so on. The use of this method makes it possible for an insider to sustain a net loss on a series
of transactions while having recoverable profits. The terms “purchase” and “sale” are construed
under Section 16(b) to cover a broad range of transactions, including acquisitions and
dispositions in tender offers and certain corporate reorganizations. Moreover, purchases and
sales by an insider may be matched with transactions by any person (such as certain family
members) whose securities are deemed to be beneficially owned by the insider.
The Section 16 rules are complicated and present ample opportunity for
inadvertent error. To avoid unnecessary costs and potential embarrassment for insiders and the
Company, officers and directors are strongly urged to consult with the Company’s Compliance
Officer prior to engaging in any transaction or other transfer of Company equity securities
regarding the potential applicability of Section 16(b).
F.
Prohibition of Short Sales.
Under Section 16(c), insiders are prohibited from effecting “short sales” of the
Company’s equity securities. A “short sale” is one involving securities which the seller does not
own at the time of sale, or, if owned, are not delivered within 20 days after the sale or deposited
in the mail or other usual channels of transportation within five days after the sale. No Section 16
Individuals should engage in any short sales of the Company’s equity securities. Wholly apart
from Section 16(c), the Company prohibits directors, employees and related parties from selling
the Company’s stock short. This type of activity is inherently speculative in nature and it will
arouse suspicion in the eyes of the SEC that the person was trading on the basis of inside
information, particularly when the trading occurs before a major Company announcement or
event.
G.
Filing Requirements.
1.
Forms 3, 4 and 5. Under Section 16(a) of the Exchange Act, insiders must
file with the SEC and the New York Stock Exchange public reports disclosing their holdings of
and transactions involving the Company’s equity securities. Copies of these reports must also be
submitted to the Company. An initial report on Form 3 must be filed by every insider within 10
14
days after election or appointment disclosing all equity securities of the Company beneficially
owned by the reporting person on the date he became an insider. Even if no securities were
owned on that date, the insider must file a report. Any subsequent change in the nature or amount
of beneficial ownership by the insider (including changes due to sales under 10b5-1 plans and
gifts of equity securities) must be reported on Form 4 (although the acquisition of gifts may be
reported on Form 5 or voluntarily on Form 4) and filed before the end of the second business day
following the day on which the transaction causing such change is executed, as such date of
execution is determined by Rule 16a-3 under the Exchange Act. Certain exempt transactions may
be reported on Form 5 within 45 days after the end of the fiscal year. The fact that no securities
were owned after the transactions were completed does not provide a basis for failing to report.
All changes in the amount or the form (i.e., direct or indirect) of beneficial ownership (not just
purchases and sales) must be reported. Thus, such transactions as gifts and stock dividends
ordinarily are reportable. Moreover, an officer or director who has ceased to be an officer or
director must report any transactions after termination which occurred within six months of a
transaction that occurred while the person was an insider. The Compliance Officer will retain on
file copies of each of Forms 3, 4 and 5, respectively.
The reports under Section 16(a) are intended to cover all securities beneficially
owned either directly by the insider or indirectly through others. An insider is considered the
direct owner of all Company equity securities held in his or her own name or held jointly with
others. An insider is considered the indirect owner of any securities from which he obtains
benefits substantially equivalent to those of ownership. Thus, equity securities of the Company
beneficially owned through partnerships, corporations, trusts, estates, and by family members
generally are subject to reporting. Absent countervailing facts, an insider is presumed to be the
beneficial owner of securities held by his or her spouse and other family members sharing the
same home. But an insider is free to disclaim beneficial ownership of these or any other
securities being reported if the insider believes there is a reasonable basis for doing so.
It is important that reports under Section 16(a) be prepared properly and filed on a
timely basis. The reports must be received at the SEC by the filing deadline. There is no
provision for an extension of the filing deadlines, and the SEC can take enforcement action
against insiders who do not comply fully with the filing requirements. In addition, the Company
is required to disclose in its annual proxy statement the names of insiders who failed to file
Section 16(a) reports properly during the fiscal year, along with the particulars of such instances
of noncompliance. Accordingly, the Company strongly urges all directors and officers to notify
the Company’s Compliance Officer prior to any transactions or changes in their or their family
members’ beneficial ownership involving Company stock, and to avail themselves of the
assistance available from Dechert LLP, the Company’s outside counsel, or their own counsel in
satisfying the reporting requirements.
2.
Schedule 13D and 13G. Section 13(d) of the Exchange Act requires the
filing of a statement on Schedule 13D or 13G by any person or group which acquires beneficial
ownership of more than five percent of a class of equity securities registered under the Exchange
Act. The threshold for reporting is met if the stock owned, when coupled with the amount of
stock subject to options exercisable within 60 days, exceeds the five percent limit.
15
Reports on Schedule 13D and 13G are required to be filed with the SEC and
submitted to the Company within ten days after the reporting threshold is reached. If a material
change occurs in the facts set forth in the Schedule 13D or 13G, such as an increase or decrease
of one percent or more in the percentage of stock beneficially owned, an amendment disclosing
the change must be filed promptly.
A person is deemed the beneficial owner of securities for purposes of Section
13(d) if such person has or shares voting power (i.e., the power to vote or direct the voting of the
securities) or dispositive power (i.e., the power to sell or direct the sale of the securities). As is
true under Section 16(a) of the Exchange Act, a person filing a Schedule 13D or 13G may
disclaim beneficial ownership of any securities attributed to him or her if he or she believes there
is a reasonable basis for doing so. The Compliance Officer will retain on file copies of each of
Schedule 13D and Schedule 13G, respectively.
3.
Form 144. As described above under the discussion of Rule 144, a seller
relying on Rule 144 who is an affiliate of the Company must file a notice of proposed sale with
the SEC at the time the order to sell is placed with the broker unless the amount to be sold during
any three month period neither exceeds 5,000 shares nor involves an aggregate sales price
greater than $50,000. The Compliance Officer will retain on file copies of the form of notice of
proposed sale under Rule 144.
16
ACKNOWLEDGMENT OF RECEIPT
I have received a copy of the Insider Trading Policy of H&E Equipment Services, Inc. As
an employee/ officer/ director (circle as applicable), I understand and agree that it is my
responsibility to read, familiarize myself with and adhere to the policies and procedures related to
this matter.
Date Signature
Printed Name
17
H&E EQUIPMENT SERVICES, INC.
Securities Trading Notification Form
Please provide the following information:
Name:
(Last)
(Middle)
(First)
Residence address:
Position/title:
Number of securities intended to be acquired/disposed of:
Aggregate amount of securities beneficially owned by you (prior to acquisition/disposition)
Name of brokerage firm, if any, through whom the securities will be acquired/disposed of:_____
The undersigned acknowledges that he/she has received a copy of the Company’s Insider
Trading Policy, dated February 22, 2006 (as revised), and further acknowledges that he/she had
read and understands such policy.
The undersigned represents and warrants to the Company that he/she is not in the possession of
any material, non-public information, whether positive or negative, that if publicly disclosed
might have an effect on the market for Company securities generally or that an investor might
consider important in deciding whether to buy, sell or hold Company securities.
The undersigned represents and warrants that the foregoing information, representations and
warranties are true and complete as of the date hereof, and will immediately advise the Company
if, prior to the completion of the above-described securities transactions, any of such
information, representations and warranties are no longer true and complete.
Date:
Signature
Printed Name
***************************************************************************
18
The above-proposed securities transaction is approved. 1
Date:
Name:
Title:
1
Approval is required only for a transaction by Section 16
Individuals or Key Employees.
19
Exhibit A
Individuals subject to reporting provisions and trading restrictions of Section 16 of the
Exchange Act of 1934.
Directors
[List Retained by Compliance Officer]
Officers
[List Retained by Compliance Officer]
20
Exhibit B
Key Employees who must obtain prior approval from the Compliance Officer of all trades
in Company securities.
Key Employees of the Company
[List Retained by Compliance Officer]
Exhibit 21.1
Table of Subsidiaries of Registrant
Name
Jurisdiction of
Incorporation
H&E Finance Corp.
DE
GNE Investments, Inc.
WA
Great Northern Equipment, Inc.
MT
H&E California Holding, Inc.
CA
H&E Equipment Services (California), LLC
DE
H&E Equipment Services (Midwest), Inc.
IN
H&E Equipment Services (Mid-Atlantic), Inc.
VA
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-280149 and No. 333-212802)
of H&E Equipment Services, Inc. (the Company) of our reports dated February 21, 2025, relating to the consolidated financial statements
and schedule, and the effectiveness of the Company’s internal control over financial reporting, which appear in this Annual Report on
Form 10-K.
/s/ BDO USA, P.C.
Dallas, Texas
February 21, 2025
Exhibit 31.1
Certification Pursuant to Rule 13a-14(a)/15d-14(a)
as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Bradley W. Barber, certify that:
1.
I have reviewed this annual report on Form 10-K of H&E Equipment Services, Inc.;
2.
Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this annual report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this annual report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report
is being prepared;
(b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
(c)
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
(d)
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons
performing the equivalent functions):
(a)
all significant deficiencies and material weaknesses in the design or operation of internal controls over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
(b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Dated: February 21, 2025
By: /s/ Bradley W. Barber
Bradley W. Barber
Chief Executive Officer and Director
(Principal Executive Officer)
Exhibit 31.2
Certification Pursuant to Rule 13a-14(a)/15d-14(a)
as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Leslie S. Magee, certify that:
1.
I have reviewed this annual report on Form 10-K of H&E Equipment Services, Inc.;
2.
Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this annual report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this annual report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report
is being prepared;
(b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
(c)
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
(d)
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons
performing the equivalent functions):
(a)
all significant deficiencies and material weaknesses in the design or operation of internal controls over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
(b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Dated: February 21, 2025
By: /s/ Leslie S. Magee
Leslie S. Magee
Chief Financial Officer and Secretary
(Principal Financial Officer)
Exhibit 32.1
Certification Pursuant to 18 U.S.C. Section 1350 as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Annual Report of H&E Equipment Services, Inc. (the “Company”) on Form 10-K for the period ending
December 31, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Bradley W. Barber,
Chief Executive Officer and Director of the Company, and Leslie S. Magee, Chief Financial Officer and Secretary of the Company,
each certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
to my knowledge, the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange
Act of 1934; and
(2)
the information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Dated: February 21, 2025
By: /s/ Bradley W. Barber
Bradley W. Barber
Chief Executive Officer and Director
(Principal Executive Officer)
Dated: February 21, 2025
By: /s/ Leslie S. Magee
Leslie S. Magee
Chief Financial Officer and Secretary
(Principal Financial Officer)