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DELAWARE | 7350 | 81-0553291 | ||
(State or Other Jurisdiction of Incorporation or Organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification No.) |
Proposed Maximum | Proposed Maximum | Amount of | ||||||||||
Title of Each Class of | Amount | Offering | Offering | Registration | ||||||||
Securities to be Registered | to be Registered | Price per Share | Price(1) | Fee(1) | ||||||||
83/8% Senior Notes due 2016 | $250,000,000 | 100% | $250,000,000 | $26,750 | ||||||||
Guarantees(2) | $250,000,000 | — | — | N/A | ||||||||
(1) | Estimated pursuant to Rule 457(f) under the Securities Act of 1933 solely for purposes of calculating the registration fee. | |
(2) | Each of the subsidiary guarantors listed in the table of additional registrants below have guaranteed, jointly and severally and fully and unconditionally, the 83/8% Senior Notes due 2016 being registered hereby. The subsidiary guarantors are registering the guarantees. Pursuant to Rule 457(n) under the Securities Act of 1933, no registration fee is required with respect to the guarantees. |
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Primary | ||||||||||||
Standard | ||||||||||||
Jurisdiction of | Industrial | IRS Employer | ||||||||||
Incorporation or | Classification | Identification | ||||||||||
Name | Organization | Number | Number | |||||||||
GNE Investments, Inc. | Washington | 7350 | 41-1561043 | |||||||||
Great Northern Equipment, Inc. | Montana | 7350 | 81-0448694 | |||||||||
H&E California Holding, Inc. | California | 7350 | 33-0613371 | |||||||||
H&E Equipment Services (California), LLC | Delaware | 7350 | 20-1870322 | |||||||||
H&E Finance Corp. | Delaware | 7350 | 02-0602822 |
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The information in the prospectus is not complete and may be changed. We may not effect the exchange offer until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell the exchange notes, and it is not soliciting an offer to buy the exchange notes, in any state or jurisdiction where the offer or sale is not permitted. |
• | We will exchange all old notes that are validly tendered and not validly withdrawn prior to the expiration of the exchange offer for an equal principal amount of new notes which we have registered under the Securities Act. | |
• | You may withdraw tenders of old notes at any time prior to the expiration of the exchange offer. | |
• | We believe that the exchange of old notes will not be a taxable event for U.S. federal income tax purposes, but you should see “Material United States Federal Income Tax Consequences” on page 141 for more information. | |
• | We will not receive any proceeds from the exchange offer. | |
• | The terms of the new notes are substantially identical to the old notes, except that the new notes are being issued in a transaction registered under the Securities Act of 1933 and the transfer restrictions and registration rights applicable to the old notes will not apply to the new notes. | |
• | No public market currently exists for the new notes. We do not intend to apply for listing of the new notes on any securities exchange or to arrange for them to be quoted on any quotation system. | |
• | Interest on the new notes will be paid at the rate of 83/8% per annum and will be paid semi-annually in arrears on January 15 and July 15 of each year commencing on January 15, 2007. | |
• | The notes are fully and unconditionally guaranteed by each of the subsidiaries of H&E Equipment Services, Inc. |
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• | equipment rental; | |
• | new equipment sales; | |
• | used equipment sales; | |
• | parts sales; and | |
• | repair and maintenance services. |
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Revenue by Segment | Gross Profit by Segment | |
($ in millions) | ($ in millions) | |
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• | ability to strengthen customer relationships by providing a full range of products and services; | |
• | purchasing power gained through purchases for our new equipment sales and rental operations; | |
• | high quality rental fleet supported by our strong product support capabilities; | |
• | established retail sales network resulting in profitable disposal of our used equipment; and | |
• | mix of business activities that enables us to effectively operate through economic cycles. |
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Initial Offering of Old Notes | We issued and sold the old notes on August 4, 2006 to the initial purchasers. The initial purchasers subsequently resold the old notes to qualified institutional buyers pursuant to Rule 144A under the Securities Act. | |
Securities Offered | $250,000,000 aggregate principal amount of 83/8% Senior Notes due 2016. The terms of the new notes and old notes are identical in all material respects, except for certain transfer restrictions and registration rights relating to the old notes. | |
Registration Rights Agreement; Purpose of the Exchange Offer | In connection with the issuance of the old notes, we entered into a registration rights agreement. In the registration rights agreement, we agreed, among other things, to use our commercially reasonable efforts to complete a registered exchange offer for the old notes or cause to become effective a shelf registration statement covering resales of the old notes. | |
The exchange offer is intended to satisfy your rights under the registration rights agreement. After the exchange offer is complete, you will no longer be entitled to any exchange or registration rights with respect to your old notes, except under the limited circumstances described in the registration rights agreement. | ||
The Exchange Offer | We are offering the new notes to you in exchange for a like principal amount of old notes. Old notes may be exchanged only in principal amounts equal to $2,000 or integral multiples of $1,000 thereof. We intend by the issuance of the new notes to satisfy our obligations contained in the registration rights agreement. See “The Exchange Offer — Purpose of the Exchange Offer.” | |
Resales of the New Notes | Based on interpretive letters issued by the staff of the SEC to third parties in unrelated transactions, we believe that holders of old notes who exchange their old notes for new notes pursuant to the exchange offer generally may offer such new notes for resale, resell such new notes and otherwise transfer the new notes without compliance with the registration and prospectus delivery provisions of the Securities Act, provided: | |
• the new notes are acquired in the ordinary course of the holders’ business; | ||
• the holders have no arrangement with any person to participate in a distribution of such new notes; | ||
• neither the holder nor any other person is engaging in or intends to engage in a distribution of the new notes; and |
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• the holder is not our “affiliate” within the meaning of Rule 405 under the Securities Act. | ||
If any of these conditions are not satisfied and you transfer any of the new notes issued to you in the exchange offer without delivering a prospectus meeting the requirements of the Securities Act or without an exemption from the registration and prospectus delivery requirements, you may incur liability under the Securities Act. We will not assume, nor will we indemnify you against, any such liability. | ||
Each broker-dealer that receives new notes for its own account in exchange for old notes must acknowledge that it will deliver a prospectus in connection with any resale of the new notes. See “Plan of Distribution.” In addition, the securities laws of some jurisdictions may prohibit the offer or sale of the new notes unless they have been registered or qualified for sale in such jurisdiction or in compliance with an available exemption from registration or qualification. We have agreed, pursuant to the registration rights agreement, to register or qualify the new notes for offer or sale under the securities or blue sky laws of the applicable jurisdictions as any holder of the notes reasonably requests in writing. If a holder of old notes does not exchange the old notes for new notes pursuant to the exchange offer, the old notes will continue to be subject to the restrictions on transfer contained in the legend printed on the old notes. In general, the old notes may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. Holders of old notes do not have any appraisal or dissenters’ rights under the Delaware General Corporation Law in connection with the exchange offer. See “The Exchange Offer — Consequences of Failure to Exchange; Resales of New Notes.” | ||
The old notes are currently eligible for trading in the Private Offerings, Resales and Trading through Automated Linkages (PORTAL) market. Following the commencement of the exchange offer but prior to its completion, the old notes may continue to be traded in the PORTAL market. Following the completion of the exchange offer, the new notes will not be eligible for PORTAL trading. | ||
Expiration Date | The exchange offer will expire at 5:00 p.m. New York City time, on , 2006, unless we extend the exchange offer in our sole discretion, in which case the term “expiration date” means the latest date to which the exchange offer is extended. Any old notes not accepted for exchange for any reason will be returned without expense to the tendering holder thereof promptly after the expiration or termination of the exchange offer. | |
Conditions to the Exchange Offer | Our obligation to accept for exchange, or to issue new notes in exchange for, any old notes is subject to customary conditions relating to compliance with any applicable law or any applicable interpretation by the staff of the SEC, the receipt of any applicable governmental approvals and the absence of any actions or proceedings of any governmental agency or court which could materially |
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impair our ability to consummate the exchange offer. We currently expect that each of the conditions will be satisfied and that no waivers will be necessary. See “The Exchange Offer — Conditions to the Exchange Offer.” | ||
Procedures for Tendering Old Notes | The procedures for tendering old notes, as well as guaranteed delivery procedures, are described in “The Exchange Offer — Procedures for Tendering Old Notes” and “The Exchange Offer — Guaranteed Delivery Procedures.” | |
Withdrawal Rights | You may withdraw your tender of old notes at any time prior to 5:00 p.m. New York City time on the expiration date. See “The Exchange Offer — Withdrawal of Tenders.” | |
Material United States Federal Income Tax Consequences | We believe that the exchange of notes pursuant to the exchange offer will not be a taxable event for U.S. federal income tax purposes. See “Material United States Federal Income Tax Consequences.” | |
Use of Proceeds | We will not receive any proceeds from the exchange offer. | |
Exchange Agent | The Bank of New York Trust Company, N.A., the trustee under the indenture, is serving as the exchange agent in connection with the exchange offer. |
Issuer | H&E Equipment Services, Inc. | |
Securities Offered | $250.0 million aggregate principal amount of 83/8% Senior Notes due 2016. | |
Maturity Date | July 15, 2016. | |
Interest | 83/8% per annum, payable semiannually in arrears on January 15 and July 15 of each year commencing on January 15, 2007. The new notes will bear interest from the initial issuance date of the old notes tendered in exchange therefor. | |
Guarantees | The new notes will be fully and unconditionally guaranteed, jointly and severally, on an unsecured senior basis by all of our existing and future domestic restricted subsidiaries. See “Description of Notes — Note Guarantees.” | |
Ranking | The new notes and the new guarantees will be our and our guarantors’ unsecured senior obligations. The new notes will rank: | |
• equal in right of payment to all of our and our guarantors’ existing and future unsecured senior indebtedness; and | ||
• senior in right of payment to any of our or our guarantors’ future subordinated indebtedness. |
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The new notes will also be effectively junior in priority to our and our guarantors’ obligations under all of our existing and future secured indebtedness, including borrowings under our senior secured credit facility, our senior secured notes and any other secured obligations, in each case, to the extent of the value of the assets securing such obligations. | ||
The notes will also be effectively junior to all liabilities (including trade payables) of our non-guarantor subsidiaries, if any. | ||
As of August 31, 2006, the new notes and the new guarantees would have ranked effectively junior to approximately $122.8 million of our secured indebtedness of first-priority secured manufacturer floor plan financings to the extent of the value of their collateral, $18.8 million outstanding under our senior secured credit facility, $2.4 million in notes payable (which includes one capital lease obligation of $0.7 million), $4.5 million of senior secured notes and $8.3 million in standby letters of credit under our senior secured credit facility. | ||
Optional Redemption | We may redeem some or all of the new notes at any time on or after July 15, 2011, at the redemption prices listed under “Description of Notes — Optional Redemption” plus accrued and unpaid interest and additional interest, if any, to the date of redemption. In addition, we may redeem up to 35% of the aggregate principal amount of the new notes using net cash proceeds from equity offerings completed on or prior to July 15, 2009. | |
Change of Control | If we experience a change of control (as defined in the indenture governing the notes), we will be required to make an offer to repurchase the new notes at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest and additional interest, if any, to the date of purchase, subject to the rights of holders of new notes on the relevant record date to receive interest due on the relevant payment date. See “Description of Notes — Repurchase at the Option of Holders — Change of Control.” | |
Restrictive Covenants | The indenture governing the new notes contains certain covenants that, among other things, limits our ability and the ability of our restricted subsidiaries to: | |
• incur additional indebtedness, assume a guarantee or issue preferred stock; | ||
• pay dividends or make other equity distributions or payments to or affecting our subsidiaries; | ||
• purchase or redeem our capital stock; | ||
• make certain investments; | ||
• create liens; | ||
• sell or dispose of assets or engage in mergers or consolidations; | ||
• engage in certain transactions with subsidiaries and affiliates; | ||
• enter into sale leaseback transactions; and | ||
• engage in certain business activities. |
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Governing Law | New York | |
Trustee | The Bank of New York Trust Company, N.A. | |
All of these restrictive covenants are subject to a number of important exceptions and qualifications. See “Description of Notes — Certain Covenants.” |
For the Year Ended December 31, | For the Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||
2005 As | 2005 Pro | 2006 As | 2006 Pro | |||||||||||||||||||||||||||||||||||||
2001 | 2002 | 2003 | 2004 | 2005 | Adjusted(1) | Forma(2) | 2006 | Adjusted(1) | Forma(2) | |||||||||||||||||||||||||||||||
Earnings (deficiency to fixed charges) | $ | 4,743 | $ | (14,508 | ) | $ | (51,745 | ) | $ | (13,737 | ) | $ | 28,833 | $ | 35,131 | $ | 53,279 | $ | 30,198 | $ | 33,593 | $ | 41,612 | |||||||||||||||||
Ratio of earnings to fixed charges | 1.2 | x | — | — | — | 1.6 | x | 1.8 | x | 2.6 | x | 2.3x | 2.8 | x | 3.4 | x |
(1) | The as adjusted data for the year ended December 31, 2005 and six months ended June 30, 2006 have been prepared to give pro forma effect to the Refinancing as if it had occurred on January 1, 2005. | |
(2) | The pro forma data for the year ended December 31, 2005 and six months ended June 30, 2006 have been prepared to give pro forma effect to (1) the Eagle acquisition, (2) the Reorganization Transactions and our initial public offering of our common stock, including the application of net proceeds from that offering, and (3) the Refinancing, in each case as if they had occurred on January 1, 2005. |
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For the Year Ended December 31, | For the Six Months Ended June 30, | |||||||||||||||||||||||||||||||
2005 Pro | 2006 Pro | |||||||||||||||||||||||||||||||
2003 | 2004 | 2005 | Forma(1) | 2005 | 2006 | Forma(1) | ||||||||||||||||||||||||||
(Amounts in thousands, except per share data) | ||||||||||||||||||||||||||||||||
Statement of operations data(2): | ||||||||||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||||||
Equipment rentals | $ | 153,851 | $ | 160,342 | $ | 190,794 | $ | 219,126 | $ | 86,167 | $ | 118,006 | $ | 122,693 | ||||||||||||||||||
New equipment sales | 81,692 | 116,907 | 156,341 | 150,778 | 63,715 | 112,660 | 112,427 | |||||||||||||||||||||||||
Used equipment sales | 70,926 | 84,999 | 111,139 | 112,124 | 49,581 | 67,719 | 67,660 | |||||||||||||||||||||||||
Parts sales | 53,658 | 58,014 | 70,066 | 70,473 | 34,216 | 40,550 | 40,595 | |||||||||||||||||||||||||
Service revenue | 33,349 | 33,696 | 41,485 | 41,485 | 19,050 | 25,708 | 25,708 | |||||||||||||||||||||||||
Other | 20,510 | 24,214 | 30,385 | 31,539 | 13,551 | 20,103 | 20,349 | |||||||||||||||||||||||||
Total revenues | 413,986 | 478,172 | 600,210 | 625,525 | 266,280 | 384,746 | 389,432 | |||||||||||||||||||||||||
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For the Year Ended December 31, | For the Six Months Ended June 30, | |||||||||||||||||||||||||||||||
2005 Pro | 2006 Pro | |||||||||||||||||||||||||||||||
2003 | 2004 | 2005 | Forma(1) | 2005 | 2006 | Forma(1) | ||||||||||||||||||||||||||
(Amounts in thousands, except per share data) | ||||||||||||||||||||||||||||||||
Cost of revenues: | ||||||||||||||||||||||||||||||||
Rental depreciation | 55,244 | 49,590 | 54,534 | 67,017 | 25,040 | 36,030 | 38,612 | |||||||||||||||||||||||||
Rental expense | 49,696 | 50,666 | 47,027 | 39,551 | 23,009 | 21,088 | 21,554 | |||||||||||||||||||||||||
New equipment sales | 73,228 | 104,111 | 137,169 | 132,094 | 56,020 | 98,294 | 98,113 | |||||||||||||||||||||||||
Used equipment sales | 58,145 | 67,906 | 84,696 | 84,358 | 37,718 | 49,545 | 49,378 | |||||||||||||||||||||||||
Parts sales | 39,086 | 41,500 | 49,615 | 49,720 | 24,133 | 28,604 | 28,638 | |||||||||||||||||||||||||
Service revenue | 13,043 | 12,865 | 15,417 | 15,417 | 6,993 | 9,298 | 9,298 | |||||||||||||||||||||||||
Other | 26,433 | 28,246 | 30,151 | 33,317 | 14,471 | 17,569 | 18,205 | |||||||||||||||||||||||||
Total cost of revenues | 314,875 | 354,884 | 418,609 | 421,474 | 187,384 | 260,428 | 263,798 | |||||||||||||||||||||||||
Gross profit: | ||||||||||||||||||||||||||||||||
Equipment rentals | 48,911 | 60,086 | 89,233 | 112,558 | 38,118 | 60,888 | 62,527 | |||||||||||||||||||||||||
New equipment sales | 8,464 | 12,796 | 19,172 | 18,684 | 7,695 | 14,366 | 14,314 | |||||||||||||||||||||||||
Used equipment sales | 12,781 | 17,093 | 26,443 | 27,766 | 11,863 | 18,174 | 18,282 | |||||||||||||||||||||||||
Parts sales | 14,572 | 16,514 | 20,451 | 20,753 | 10,083 | 11,946 | 11,957 | |||||||||||||||||||||||||
Service revenue | 20,306 | 20,831 | 26,068 | 26,068 | 12,057 | 16,410 | 16,410 | |||||||||||||||||||||||||
Other | (5,923 | ) | (4,032 | ) | 234 | (1,778 | ) | (920 | ) | 2,534 | 2,144 | |||||||||||||||||||||
Total gross profit | 99,111 | 123,288 | 181,601 | 204,051 | 78,896 | 124,318 | 125,634 | |||||||||||||||||||||||||
Selling, general and administrative expenses | 93,054 | 97,525 | 111,409 | 121,571 | 53,123 | 74,427 | 68,723 | |||||||||||||||||||||||||
Loss from litigation | 17,434 | — | — | — | — | — | — | |||||||||||||||||||||||||
Related party expense | 1,275 | — | — | — | — | — | — | |||||||||||||||||||||||||
Gain (loss) on sale of property and equipment | 80 | 207 | 91 | 91 | (103 | ) | 159 | 159 | ||||||||||||||||||||||||
Income (loss) from operations | (12,572 | ) | 25,970 | 70,283 | 82,571 | 25,670 | 50,050 | 57,070 | ||||||||||||||||||||||||
Other income (expense): | ||||||||||||||||||||||||||||||||
Interest expense(3) | (39,394 | ) | (39,856 | ) | (41,822 | ) | (29,668 | ) | (20,425 | ) | (20,282 | ) | (15,888 | ) | ||||||||||||||||||
Other, net | 221 | 149 | 372 | 376 | 170 | 430 | 430 | |||||||||||||||||||||||||
Total other expense, net | (39,173 | ) | (39,707 | ) | (41,450 | ) | (29,292 | ) | (20,255 | ) | (19,852 | ) | (15,458 | ) | ||||||||||||||||||
Income (loss) before income taxes | (51,745 | ) | (13,737 | ) | 28,833 | 53,279 | 5,415 | 30,198 | 41,612 | |||||||||||||||||||||||
Income tax provision (benefit) | (5,694 | ) | — | 673 | 9,771 | 171 | 6,475 | 9,372 | ||||||||||||||||||||||||
Net income (loss) | $ | (46,051 | ) | $ | (13,737 | ) | $ | 28,160 | $ | 43,508 | $ | 5,244 | $ | 23,723 | $ | 32,240 | ||||||||||||||||
Net income (loss) per common share(4): | ||||||||||||||||||||||||||||||||
Basic | $ | (1.81 | ) | $ | (0.54 | ) | $ | 1.10 | $ | 1.15 | $ | 0.21 | $ | 0.66 | $ | 0.87 | ||||||||||||||||
Diluted | $ | (1.81 | ) | $ | (0.54 | ) | $ | 1.10 | $ | 1.15 | $ | 0.21 | $ | 0.66 | $ | 0.87 | ||||||||||||||||
Common shares used to compute net income (loss) per common share(4): | ||||||||||||||||||||||||||||||||
Basic | 25,492,019 | 25,492,019 | 25,492,019 | 37,703,467 | 25,492,019 | 35,776,895 | 37,057,949 | |||||||||||||||||||||||||
Diluted | 25,492,019 | 25,492,019 | 25,492,019 | 37,703,467 | 25,492,019 | 35,789,640 | 37,070,694 | |||||||||||||||||||||||||
Other financial data: | ||||||||||||||||||||||||||||||||
EBITDA(5) | $ | 46,808 | $ | 79,645 | $ | 130,515 | $ | 155,713 | $ | 53,349 | $ | 89,796 | $ | 99,460 | ||||||||||||||||||
Adjusted EBITDA(5) | 64,242 | 79,645 | 130,515 | 155,713 | 53,349 | 97,796 | 99,460 | |||||||||||||||||||||||||
Depreciation and amortization(6) | 59,159 | 53,526 | 59,860 | 72,766 | 27,509 | 39,316 | 41,960 | |||||||||||||||||||||||||
Total capital expenditures (gross)(7) | 41,923 | 86,790 | 190,908 | 200,513 | 85,638 | 137,473 | 138,115 | |||||||||||||||||||||||||
Total capital expenditures (net)(8) | (12,056 | ) | 21,045 | 102,920 | 110,235 | 45,620 | 82,701 | 83,173 |
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As of June 30, 2006 | ||||||||
Actual | As Adjusted(9) | |||||||
(Amounts in thousands) | ||||||||
Balance sheet data: | ||||||||
Cash | $ | 24,641 | $ | — | ||||
Rental equipment, net | 393,445 | 393,445 | ||||||
Goodwill | 30,454 | 30,454 | ||||||
Deferred financing costs | 7,286 | 11,369 | ||||||
Total assets | 707,341 | 686,783 | ||||||
Total debt(10) | 244,500 | 264,788 | ||||||
Stockholders’ equity | 225,976 | 193,840 |
(1) | The unaudited pro forma financial data for the year ended December 31, 2005 and six months ended June 30, 2006 have been prepared to give pro forma effect to (1) the Eagle acquisition, (2) the Reorganization Transactions and our initial public offering of our common stock, including the application of net proceeds from that offering, and (3) the Refinancing, in each case as if they had occurred on January 1, 2005. | |
(2) | See note 18 of the 2005 annual consolidated financial statements of H&E LLC included elsewhere in this prospectus discussing business segment information. | |
(3) | Interest expense is comprised of cash-pay interest (interest recorded on debt and other obligations requiring periodic cash payments) and non-cash pay interest. | |
(4) | In calculating historical shares of common stock outstanding, we give retroactive effect to the completion of the Reorganization Transactions as if the Reorganization Transactions had occurred as of the beginning of the earliest year presented with respect to statement of operations data. See “Certain Relationships and Related Party Transactions — Reorganization Transactions.” For pro forma purposes, we give retroactive effect to the completion of both the Reorganization Transactions and our initial public offering as if each had occurred on January 1, 2005. | |
(5) | We define EBITDA as net income (loss) from continuing operations before interest expense, income taxes, and depreciation and amortization. We define Adjusted EBITDA as EBITDA as adjusted for (1) with respect to the year ended December 31, 2003, the loss from litigation that was recorded in 2003 and (2) with respect to the six months ended June 30, 2006, as adjusted for the management services agreement termination fee that was recorded in the six month period ended June 30, 2006. We use EBITDA and Adjusted EBITDA in our business operations to, among other things, evaluate the performance of our business, develop budgets and measure our performance against those budgets. We also believe that analysts and investors use EBITDA and Adjusted EBITDA as supplemental measures to evaluate a company’s overall operating performance. However, EBITDA and Adjusted EBITDA have material limitations as analytical tools and you should not consider these in isolation, or as a substitute for analysis of our results as reported under GAAP. We find them as useful tools to assist us in evaluating our performance because they eliminate items related to capital structure, income taxes and non-cash charges. The items that we have eliminated in determining EBITDA and Adjusted EBITDA are interest expense, income taxes, depreciation of fixed assets (which includes rental equipment and property and equipment) and amortization of intangible assets and, in the case of Adjusted EBITDA, the loss from litigation or the termination fee, as applicable. However, some of these eliminated items are significant to our business. For example, (i) interest expense is a necessary element of our costs and ability to generate revenue because we incur a significant amount of interest expense related to our outstanding indebtedness; (ii) payment of income taxes is a necessary element of our costs; and (iii) depreciation is a necessary element of our costs and ability to generate revenue because rental equipment is the single largest component of our total assets and we recognize a significant amount of depreciation expense over the estimated useful life of this equipment. Any measure that eliminates components of our capital structure and costs associated with carrying significant amounts of fixed assets on our balance sheet has material limitations as a performance measure. In light of the foregoing limitations, we do not rely solely on |
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EBITDA and Adjusted EBITDA as performance measures and also consider our GAAP results. EBITDA and Adjusted EBITDA are not measurements of our financial performance under GAAP and should not be considered as alternatives to net income, operating income or any other measures derived in accordance with GAAP. Because EBITDA and Adjusted EBITDA are not calculated in the same manner by all companies, they may not be comparable to other similarly titled measures used by other companies. |
For the Year Ended December 31, | Six Months Ended June 30, | |||||||||||||||||||||||||||
2005 | 2006 | |||||||||||||||||||||||||||
2003 | 2004 | 2005 | Pro Forma(1) | 2005 | 2006 | Pro Forma(1) | ||||||||||||||||||||||
(Amounts in thousands) | ||||||||||||||||||||||||||||
Net income (loss) | $ | (46,051 | ) | $ | (13,737 | ) | $ | 28,160 | $ | 43,508 | $ | 5,244 | $ | 23,723 | $ | 32,240 | ||||||||||||
Income tax provision (benefit) | (5,694 | ) | — | 673 | 9,771 | 171 | 6,475 | 9,372 | ||||||||||||||||||||
Interest expense | 39,394 | 39,856 | 41,822 | 29,668 | 20,425 | 20,282 | 15,888 | |||||||||||||||||||||
Depreciation and amortization(6) | 59,159 | 53,526 | 59,860 | 72,766 | 27,509 | 39,316 | 41,960 | |||||||||||||||||||||
EBITDA | 46,808 | 79,645 | 130,515 | 155,713 | 53,349 | 89,796 | 99,460 | |||||||||||||||||||||
Loss from litigation | 17,434 | — | — | — | — | — | — | |||||||||||||||||||||
Management services agreement termination fee | — | — | — | — | — | 8,000 | — | |||||||||||||||||||||
Adjusted EBITDA | $ | 64,242 | $ | 79,645 | $ | 130,515 | $ | 155,713 | $ | 53,349 | $ | 97,796 | $ | 99,460 | ||||||||||||||
(6) | This amount excludes amortization of loan discounts and amortization of deferred financing costs included in interest expense. | |
(7) | Total capital expenditures (gross) include rental equipment purchases, assets transferred from new and used inventory to rental fleet and property and equipment purchases. | |
(8) | Total capital expenditures (net) include rental equipment purchases, assets transferred from new and used inventory to rental fleet and property and equipment purchases less proceeds from the sale of these assets. | |
(9) | The amounts shown in the “As Adjusted” column give pro forma effect to the Refinancing as if the Refinancing had occurred on June 30, 2006. | |
(10) | Actual total debt represents amounts outstanding under the senior secured credit facility, senior secured and senior subordinated notes, notes payable and capital leases. Total debt as adjusted represents amounts outstanding under the senior secured credit facility, the senior secured notes, the old notes, notes payable and capital leases. |
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• | a substantial portion of our cash flow from operations will be dedicated to debt service and may not be available for other purposes; | |
• | making it more difficult for us to satisfy our obligations with respect to the notes; | |
• | limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; | |
• | limiting our ability to obtain financing in the future for working capital, capital expenditures and general corporate purposes, including acquisitions, and may impede our ability to secure favorable lease terms; | |
• | making us more vulnerable to economic downturns and may limit our ability to withstand competitive pressures; and | |
• | placing us at a competitive disadvantage compared to our competitors with less indebtedness. |
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• | incur additional indebtedness, assume a guarantee or issue preferred stock; | |
• | pay dividends or make other equity distributions or payments to or affecting our subsidiaries; | |
• | purchase or redeem our capital stock; | |
• | make certain investments; | |
• | create liens; | |
• | sell or dispose of assets or engage in mergers or consolidations; | |
• | engage in certain transactions with subsidiaries and affiliates; | |
• | enter into sale leaseback transactions; and | |
• | engage in certain business activities. |
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• | was insolvent or rendered insolvent by reason of such incurrence; | |
• | was engaged in a business or transaction for which the guarantor’s remaining assets constituted unreasonably small capital; or | |
• | intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they mature. |
• | the sum of its debts, including contingent liabilities, was greater than the then fair saleable value of all of its assets; or | |
• | if the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or | |
• | it could not pay its debts as they become due. |
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• | the prevailing interest rates being paid by companies similar to us; | |
• | our ratings with major credit rating agencies; and | |
• | the overall condition of the financial and credit markets. |
• | a reduction in spending levels by customers; | |
• | a slow-down of the economy over the long-term; | |
• | adverse weather conditions which may affect a particular region; | |
• | an increase in interest rates; or | |
• | terrorism or hostilities involving the United States. |
• | seasonal sales and rental patterns of our construction customers, with sales and rental activity tending to be lower in the winter; | |
• | severe weather and seismic conditions temporarily affecting the regions where we operate; | |
• | cyclical nature of our customers’ business, particularly our construction customers; |
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• | changes in corporate spending for plants and facilities or changes in government spending for infrastructure products; | |
• | general economic conditions in the markets where we operate; | |
• | the effectiveness of integrating acquired businesses and new locations; | |
• | timing of acquisitions and new location openings and related costs. |
• | 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; and | |
• | general economic conditions. |
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• | the timing and manner of any sales or distributions by these stockholders of all or any portion of its ownership interest in us; | |
• | business opportunities that may be presented to BRS and its affiliates and to our directors associated with BRS; and | |
• | competition between BRS and its affiliates and us within the same lines of business. |
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• | general economic conditions and construction activity in the markets where we operate in North America; | |
• | relationships with new equipment suppliers; | |
• | increased maintenance and repair costs; | |
• | our substantial leverage; | |
• | the risks associated with the expansion of our business; | |
• | our possible inability to integrate any businesses we acquire; | |
• | competitive pressures; | |
• | compliance with laws and regulations, including those relating to environmental matters; and | |
• | other factors discussed under “Risk Factors” or elsewhere in this prospectus. |
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• | on an actual basis; and | |
• | as adjusted to reflect the Refinancing. |
As of June 30, 2006 | ||||||||
Actual | As Adjusted | |||||||
(Amounts in thousands) | ||||||||
Cash | $ | 24,641 | $ | — | ||||
Debt: | ||||||||
Senior secured credit facility(1) | — | 9,122 | ||||||
111/8% senior secured notes(2) | 198,934 | 4,476 | ||||||
121/2% senior subordinated notes(2) | 44,376 | — | ||||||
Old Notes | — | 250,000 | ||||||
Other debt(3) | 1,190 | 1,190 | ||||||
Total debt | 244,500 | 264,788 | ||||||
Stockholders’ equity(4) | 225,976 | 193,840 | ||||||
Total capitalization | $ | 470,476 | $ | 458,628 | ||||
(1) | At June 30, 2006, we had no outstanding borrowings under our senior secured credit facility with $156.7 million in additional borrowing availability, net of $8.3 million of issued standby letters of credit. On August 4, 2006, we entered into an Amended and Restated Credit Agreement (the “Amended Credit Agreement”) amending and restating the Company’s senior secured credit facility, pursuant to which, among other things, the principal amount of availability was increased from $165.0 million to $250.0 million. For further information on the Amended Credit Agreement, see “Description of Other Indebtedness.” At August 31, 2006, we had approximately $18.8 million outstanding under our senior secured credit facility. | |
(2) | Amounts shown are net of unamortized discount. | |
(3) | At June 30, 2006, other debt included approximately $1.2 million of notes payable, which includes a $0.8 million capital lease obligation. Amount does not include other liabilities reflected on our balance sheet as of June 30, 2006, including approximately $117.0 million of manufacturer flooring plans payable. At August 31, 2006, other debt included approximately $2.4 million of notes payable. At August 31, 2006, we also had approximately $122.8 million of manufacturer flooring plans payable. | |
(4) | Includes estimated loss on early extinguishment of debt on an as adjusted basis as of June 30, 2006 comprised of approximately $40.9 million for tender premiums, consent solicitation fees and the write-off of unamortized original issue discount and deferred financing costs related to the senior secured notes and senior subordinated notes, net of estimated tax effects. In connection with our use of proceeds from the offering and sale of the old notes to purchase our senior secured notes and senior subordinated notes in the Tender Offer, we expect to record a one-time loss on early retirement of debt in the quarterly period ended September 30, 2006 of approximately $40.9 million, or approximately $32.1 million after-tax, reflecting payment of the $25.3 million of tender premiums and other estimated costs of $0.6 million in connection with the Tender Offer, combined with the write off of approximately $5.4 million of unamortized deferred financing costs of the senior secured notes and the senior subordinated notes and $9.6 million of remaining unamortized original issue discount on the senior secured notes and the senior subordinated notes. Accordingly, this charge will reduce our net income for the third quarter and fiscal year 2006, with a corresponding negative impact on the earnings per common share. These negative consequences are not reflected in the pro forma financial information presented in this prospectus. |
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Year Ended December 31, 2005 | ||||||||||||||||||||||||
Reorganization | ||||||||||||||||||||||||
and Initial | ||||||||||||||||||||||||
H&E | Public Offering | Eagle | Acquisition | Refinancing | ||||||||||||||||||||
Historical | Adjustments | Historical(1) | Adjustments | Adjustments | Pro Forma | |||||||||||||||||||
(Amounts in thousands, except share and per share data) | ||||||||||||||||||||||||
Statement of operations data(2): | ||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||
Equipment rentals | $ | 190,794 | $ | — | $ | 28,546 | $ | (214 | )(3) | $ | — | $ | 219,126 | |||||||||||
New equipment sales | 156,341 | — | 1,157 | (6,720 | )(3) | — | 150,778 | |||||||||||||||||
Used equipment sales | 111,139 | — | 2,290 | (1,305 | )(3) | — | 112,124 | |||||||||||||||||
Parts sales | 70,066 | — | 456 | (49 | )(3) | — | 70,473 | |||||||||||||||||
Service revenue | 41,485 | — | — | — | — | 41,485 | ||||||||||||||||||
Other | 30,385 | — | 1,157 | (3 | )(3) | — | 31,539 | |||||||||||||||||
Total revenues | 600,210 | — | 33,606 | (8,291 | ) | — | 625,525 | |||||||||||||||||
Cost of revenues: | ||||||||||||||||||||||||
Rental depreciation | 54,534 | 6,020 | (4) | 7,774 | (1,311 | )(5) | — | 67,017 | ||||||||||||||||
Rental expense | 47,027 | (12,932 | )(4) | 5,456 | — | — | 39,551 | |||||||||||||||||
New equipment sales | 137,169 | — | 1,101 | (6,176 | )(3) | — | 132,094 | |||||||||||||||||
Used equipment sales | 84,696 | — | 843 | (1,181 | )(3) | — | 84,358 | |||||||||||||||||
Parts sales | 49,615 | — | 136 | (31 | )(3) | — | 49,720 | |||||||||||||||||
Service revenue | 15,417 | — | — | — | — | 15,417 | ||||||||||||||||||
Other | 30,151 | — | 3,166 | — | — | 33,317 | ||||||||||||||||||
Total cost of revenues | 418,609 | (6,912 | ) | 18,476 | (8,699 | ) | — | 421,474 | ||||||||||||||||
Gross profit: | ||||||||||||||||||||||||
Equipment rentals | 89,233 | 6,912 | 15,316 | 1,097 | — | 112,558 | ||||||||||||||||||
New equipment sales | 19,172 | — | 56 | (544 | ) | — | 18,684 | |||||||||||||||||
Used equipment sales | 26,443 | — | 1,447 | (124 | ) | — | 27,766 | |||||||||||||||||
Parts sales | 20,451 | — | 320 | (18 | ) | — | 20,753 | |||||||||||||||||
Service revenue | 26,068 | — | — | — | — | 26,068 | ||||||||||||||||||
Other | 234 | — | (2,009 | ) | (3 | ) | — | (1,778 | ) | |||||||||||||||
Total gross profit | 181,601 | 6,912 | 15,130 | 408 | — | 204,051 | ||||||||||||||||||
Selling, general and administrative expenses | 111,409 | (2,127 | )(6) | 12,289 | — | — | 121,571 | |||||||||||||||||
Gain on sale of property and equipment | 91 | — | — | — | — | 91 | ||||||||||||||||||
Income from operations(7) | 70,283 | 9,039 | 2,841 | 408 | — | 82,571 | ||||||||||||||||||
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Year Ended December 31, 2005 | ||||||||||||||||||||||||
Reorganization | ||||||||||||||||||||||||
and Initial | ||||||||||||||||||||||||
H&E | Public Offering | Eagle | Acquisition | Refinancing | ||||||||||||||||||||
Historical | Adjustments | Historical(1) | Adjustments | Adjustments | Pro Forma | |||||||||||||||||||
(Amounts in thousands, except share and per share data) | ||||||||||||||||||||||||
Other income (expense): | ||||||||||||||||||||||||
Interest expense(8) | (41,822 | ) | 4,989 | (9) | (1,557 | ) | 1,309 | (10) | 6,298 | (11) | (30,782 | ) | ||||||||||||
— | 1,114 | (12) | — | — | — | 1,114 | ||||||||||||||||||
Other, net | 372 | — | 4 | — | — | 376 | ||||||||||||||||||
Total other income (expense), net | (41,450 | ) | 6,103 | (1,553 | ) | 1,309 | 6,298 | (29,292 | ) | |||||||||||||||
Income before minority interest | 28,833 | 15,142 | 1,288 | 1,717 | 6,298 | 53,279 | ||||||||||||||||||
Minority interest in net income of subsidiary | — | — | (648 | ) | 648 | (13) | — | — | ||||||||||||||||
Income before income taxes | 28,833 | 15,142 | 640 | 2,365 | 6,298 | 53,279 | ||||||||||||||||||
Income tax provision | 673 | 5,765 | (14) | 16 | 919 | (14) | 2,398 | (14) | 9,771 | |||||||||||||||
Net income | $ | 28,160 | $ | 9,377 | $ | 624 | $ | 1,446 | $ | 3,900 | $ | 43,508 | ||||||||||||
Net income per common share(15): | ||||||||||||||||||||||||
Basic | $ | 1.10 | $ | 1.04 | $ | — | $ | 0.46 | $ | — | $ | 1.15 | ||||||||||||
Diluted | $ | 1.10 | $ | 1.04 | $ | — | $ | 0.46 | $ | — | $ | 1.15 | ||||||||||||
Common shares used to compute net income per common share(15): | ||||||||||||||||||||||||
Basic | 25,492,019 | 9,050,250 | — | 3,161,198 | — | 37,703,467 | ||||||||||||||||||
Diluted | 25,492,019 | 9,050,250 | — | 3,161,198 | — | 37,703,467 |
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Six Months Ended June 30, 2006 | ||||||||||||||||||||||||
Reorganization | ||||||||||||||||||||||||
and Initial | ||||||||||||||||||||||||
H&E | Public Offering | Eagle | Acquisition | Refinancing | ||||||||||||||||||||
Historical | Adjustments | Historical(1) | Adjustments | Adjustments | Pro Forma | |||||||||||||||||||
(Amounts in thousands, except share and per share data) | ||||||||||||||||||||||||
Statement of operations data(2): | ||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||
Equipment rentals | $ | 118,006 | $ | — | $ | 4,836 | $ | (149 | )(3) | $ | — | $ | 122,693 | |||||||||||
New equipment sales | 112,660 | — | 27 | (260 | )(3) | — | 112,427 | |||||||||||||||||
Used equipment sales | 67,719 | — | 170 | (229 | )(3) | — | 67,660 | |||||||||||||||||
Parts sales | 40,550 | — | 49 | (4 | )(3) | — | 40,595 | |||||||||||||||||
Service revenue | 25,708 | — | — | — | — | 25,708 | ||||||||||||||||||
Other | 20,103 | — | 246 | — | — | 20,349 | ||||||||||||||||||
Total revenues | 384,746 | — | 5,328 | (642 | ) | — | 389,432 | |||||||||||||||||
Cost of revenues: | ||||||||||||||||||||||||
Rental depreciation | 36,030 | 1,505 | (4) | 1,214 | (137 | )(5) | — | 38,612 | ||||||||||||||||
Rental expense | 21,088 | (1,047 | )(4) | 1,513 | — | — | 21,554 | |||||||||||||||||
New equipment sales | 98,294 | — | 19 | (200 | )(3) | — | 98,113 | |||||||||||||||||
Used equipment sales | 49,545 | — | 44 | (211 | )(3) | — | 49,378 | |||||||||||||||||
Parts sales | 28,604 | — | 37 | (3 | )(3) | — | 28,638 | |||||||||||||||||
Service revenue | 9,298 | — | — | — | — | 9,298 | ||||||||||||||||||
Other | 17,569 | — | 636 | — | — | 18,205 | ||||||||||||||||||
Total cost of revenues | 260,428 | 458 | 3,463 | (551 | ) | — | 263,798 | |||||||||||||||||
Gross profit: | ||||||||||||||||||||||||
Equipment rentals | 60,888 | (458 | ) | 2,109 | (12 | ) | — | 62,527 | ||||||||||||||||
New equipment sales | 14,366 | — | 8 | (60 | ) | — | 14,314 | |||||||||||||||||
Used equipment sales | 18,174 | — | 126 | (18 | ) | — | 18,282 | |||||||||||||||||
Parts sales | 11,946 | — | 12 | (1 | ) | — | 11,957 | |||||||||||||||||
Service revenue | 16,410 | — | — | — | — | 16,410 | ||||||||||||||||||
Other | 2,534 | — | (390 | ) | — | — | 2,144 | |||||||||||||||||
Total gross profit | 124,318 | (458 | ) | 1,865 | (91 | ) | — | 125,634 | ||||||||||||||||
Selling, general and administrative expenses | 74,427 | (186 | )(6) | 2,482 | — | — | 76,723 | |||||||||||||||||
— | (8,000 | )(7) | — | — | — | (8,000 | ) | |||||||||||||||||
Gain on sale of property and equipment | 159 | — | — | — | — | 159 | ||||||||||||||||||
Income (loss) from operations | 50,050 | 7,728 | (617 | ) | (91 | ) | — | 57,070 | ||||||||||||||||
Other income (expense): | ||||||||||||||||||||||||
Interest expense(8) | (20,282 | ) | 876 | (9) | (309 | ) | 271 | (10) | 3,395 | (11) | (16,049 | ) | ||||||||||||
161 | (12) | — | — | — | 161 | |||||||||||||||||||
Other, net | 430 | — | — | — | — | 430 | ||||||||||||||||||
Total other income (expense), net | (19,852 | ) | 1,037 | (309 | ) | 271 | 3,395 | (15,458 | ) | |||||||||||||||
Income (loss) before minority interest | 30,198 | 8,765 | (926 | ) | 180 | 3,395 | 41,612 | |||||||||||||||||
Minority interest in net loss of subsidiary | — | — | 391 | (391 | )(13) | — | — | |||||||||||||||||
Income (loss) before income taxes | 30,198 | 8,765 | (535 | ) | (211 | ) | 3,395 | 41,612 | ||||||||||||||||
Income tax provision (benefit) | 6,475 | 2,382 | (14) | 1 | (398 | )(14) | 912 | (14) | 9,372 | |||||||||||||||
Net income (loss) | $ | 23,723 | $ | 6,383 | $ | (536 | ) | $ | 187 | $ | 2,483 | $ | 32,240 | |||||||||||
Net income per common share(15): | ||||||||||||||||||||||||
Basic | $ | 0.66 | $ | — | $ | — | $ | — | $ | — | $ | 0.87 | ||||||||||||
Diluted | $ | 0.66 | $ | — | $ | — | $ | — | $ | — | $ | 0.87 | ||||||||||||
Common shares used to compute net income per common share: | ||||||||||||||||||||||||
Basic | 35,776,895 | 754,188 | — | 526,866 | — | 37,057,949 | ||||||||||||||||||
Diluted | 35,789,640 | 754,188 | — | 526,866 | — | 37,070,694 |
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As of June 30, 2006 | ||||||||||||
Refinancing | ||||||||||||
Pro Forma | As | |||||||||||
Actual | Adjustments | Adjusted(16) | ||||||||||
(Amounts in thousands) | ||||||||||||
Selected Balance sheet data: | ||||||||||||
Cash | $ | 24,641 | $ | (24,641 | ) | $ | — | |||||
Rental equipment, net | 393,445 | — | 393,445 | |||||||||
Goodwill | 30,454 | — | 30,454 | |||||||||
Deferred financing costs | 7,286 | 4,083 | (17) | 11,369 | ||||||||
Total assets | 707,341 | (20,558 | )(18) | 686,783 | ||||||||
Total debt(21) | 244,500 | 20,288 | (19) | 264,788 | ||||||||
Stockholders’ equity | 225,976 | (32,136 | )(20) | 193,840 |
(1) | Historically, Eagle has reported its financial results using June 30 as its fiscal year end. To conform to our fiscal year Eagle’s historical results have been recast to reflect the unaudited results for the six month period ended June 30, 2006 and for the year ended December 31, 2005. Accordingly, the amounts disclosed for Eagle in the unaudited pro forma condensed consolidated statements of operations will not agree with Eagle’s unaudited financial results appearing elsewhere in this prospectus. Since our acquisition of Eagle was consummated on February 28, 2006, Eagle’s historical results for the six months ended June 30, 2006 include only the period from January 1, 2006 through February 27, 2006. Historical data for Eagle includes certain reclassifications to conform to our presentation. | |
(2) | For the year ended December 31, 2005 and the six months ended June 30, 2006, other financial data was as follows (amounts in thousands): |
Reorganization | ||||||||||||||||||||||||
and Initial | ||||||||||||||||||||||||
H&E | Public Offering | Eagle | Acquisition | Refinancing | ||||||||||||||||||||
Historical | Adjustments | Historical(1) | Adjustments | Adjustments | Pro Forma | |||||||||||||||||||
For the year ended December 31, 2005: | ||||||||||||||||||||||||
EBITDA(a) | $ | 130,515 | $ | 15,059 | $ | 10,394 | $ | (255 | ) | $ | — | $ | 155,713 | |||||||||||
Adjusted EBITDA(a) | 130,515 | 15,059 | 10,394 | (255 | ) | — | 155,713 | |||||||||||||||||
Depreciation and amortization(b) | 59,860 | 6,020 | 8,197 | (1,311 | ) | — | 72,766 | |||||||||||||||||
Total capital expenditures (gross)(c) | 190,908 | — | 9,605 | — | — | 200,513 | ||||||||||||||||||
Total capital expenditures (net)(d) | 102,920 | — | 7,315 | — | — | 110,235 | ||||||||||||||||||
For the six months ended June 30, 2006: | ||||||||||||||||||||||||
EBITDA(a) | $ | 89,796 | $ | 9,233 | $ | 1,050 | $ | (619 | ) | $ | — | $ | 99,460 | |||||||||||
Adjusted EBITDA(a) | 97,796 | 1,233 | 1,050 | (619 | ) | — | 99,460 | |||||||||||||||||
Depreciation and amortization(b) | 39,316 | 1,505 | 1,276 | (137 | ) | — | 41,960 | |||||||||||||||||
Total capital expenditures (gross)(c) | 137,473 | — | 642 | — | — | 138,115 | ||||||||||||||||||
Total capital expenditures (net)(d) | 82,701 | — | 472 | — | — | 83,173 |
We define EBITDA as net income (loss) from continuing operations before interest expense, income taxes, and depreciation and amortization. We define Adjusted EBITDA for the periods presented as |
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EBITDA as adjusted for the fee paid in connection with the termination of a management services agreement that was recorded in the six month period ended June 30, 2006. We use EBITDA and Adjusted EBITDA in our business operations to, among other things, evaluate the performance of our business, develop budgets and measure our performance against those budgets. We also believe that analysts and investors use EBITDA and Adjusted EBITDA as supplemental measures to evaluate a company’s overall operating performance. However, EBITDA and Adjusted EBITDA have material limitations as analytical tools and you should not consider this in isolation, or as a substitute for analysis of our results as reported under GAAP. We find EBITDA and Adjusted EBITDA useful tools to assist us in evaluating performance because they eliminate items related to capital structure, income taxes and non-cash charges. The items that we have eliminated in determining EBITDA and Adjusted EBITDA are interest expense, income taxes, depreciation of fixed assets (which includes rental equipment and property and equipment) and amortization of intangible assets and, in the case of Adjusted EBITDA, as EBITDA as adjusted for the management services agreement termination fee. However, some of these eliminated items are significant to our business. For example, (i) interest expense is a necessary element of our costs and ability to generate revenue because we incur a significant amount of interest expense related to our outstanding indebtedness; (ii) payment of income taxes is a necessary element of our costs; and (iii) depreciation is a necessary element of our costs and ability to generate revenue because rental equipment is the single largest component of our total assets and we recognize a significant amount of depreciation expense over the estimated useful life of this equipment. Any measure that eliminates components of our capital structure and costs associated with carrying significant amounts of fixed assets on our balance sheet has material limitations as a performance measure. In light of the foregoing limitations, we do not rely solely on EBITDA and Adjusted EBITDA as performance measures and also consider our GAAP results. EBITDA and Adjusted EBITDA are not measurements of our financial performance under GAAP and should not be considered as an alternative to net income, operating income or any other measures derived in accordance with GAAP. Because EBITDA and Adjusted EBITDA are not calculated in the same manner by all companies, EBITDA and Adjusted EBITDA may not be comparable to other similarly titled measures used by other companies. | ||
Set forth below is a reconciliation of pro forma net income to Pro Forma EBITDA for the periods presented (amounts in thousands). |
Six Month | Twelve Month | |||||||||||
Year Ended | Period Ended | Period Ended | ||||||||||
December 31, | June 30, | June 30, | ||||||||||
2005 | 2006 | 2006 | ||||||||||
Pro forma net income | $ | 43,508 | $ | 32,240 | $ | 62,100 | ||||||
Income tax provision (benefit) | 9,771 | 9,372 | 13,833 | |||||||||
Interest expense(12) | 29,668 | 15,888 | 31,079 | |||||||||
Depreciation and amortization(b) | 72,766 | 41,960 | 81,990 | |||||||||
Pro Forma EBITDA | $ | 155,713 | $ | 99,460 | $ | 189,002 |
(a) | See note (5) to the “Summary — Summary Historical and Pro Forma Financial Data” for a reconciliation of EBITDA and Adjusted EBITDA for the periods presented. | |
(b) | This excludes amortization of loan discounts and amortization of deferred financing costs included in interest expense. | |
(c) | Total capital expenditures (gross) include rental equipment purchases, assets transferred from new and used inventory to rental fleet and property and equipment purchases. | |
(d) | Total capital expenditures (net) include rental equipment purchases, assets transferred from new and used inventory to rental fleet and property and equipment purchases less proceeds from the sale of these assets. |
(3) | The pro forma adjustment is made to reflect the elimination of transactions, primarily related to the acquisition of equipment, between us and Eagle. During the six month period ended June 30, 2006 and year ended December 31, 2005, we recorded revenue of approximately $0.6 million and $8.3 million, |
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respectively, related to transactions with Eagle, for which our costs were approximately $0.4 million and $7.4 million, respectively. | ||
(4) | Rental fleet under operating leases purchased with proceeds from our initial public offering is currently depreciated over a five-year estimated useful life. A pro forma adjustment to reflect additional depreciation expense of $1.5 million and $6.0 million for the six month period ended June 30, 2006 and the year ended December 31, 2005 has been made. Additionally, a pro forma adjustment of $1.0 million and $12.9 million for the six month period ended June 30, 2006 and the year ended December 31, 2005 has been made to eliminate historical lease rental expense on this equipment. | |
(5) | For pro forma purposes, we are estimating a fair value of the acquired Eagle rental fleet of $32.3 million and an estimated useful life for the fleet of five years. On a pro forma basis, depreciation expense would be approximately $1.1 million and $6.5 million for the period January 1, 2006 to February 28, 2006 (the date of the Eagle acquisition) and the year ended December 31, 2005, respectively. A pro forma adjustment has been made to reflect the decreases of approximately $0.1 million and approximately $1.3 million over the historical depreciation expense reported by Eagle for the period January 1, 2006 to February 28, 2006 (the date of the Eagle acquisition) and the year ended December 31, 2005, respectively. | |
(6) | In connection with our initial public offering, we terminated a management services agreement. A pro forma adjustment has been made to eliminate the historical expense related to this agreement of $0.2 million and $2.1 million for the six month period ended June 30, 2006 and the year ended December 31, 2005, respectively. | |
(7) | The pro forma adjustment is made to exclude the nonrecurring payment of $8.0 million to an affiliate of BRS to terminate a management services agreement in connection with and from the net proceeds of our initial public offering. | |
(8) | Interest expense is comprised of cash-pay interest (interest recorded on debt and other obligations requiring periodic payments) and non-cash pay interest. | |
(9) | Represents avoided interest expense of approximately $0.9 million and $5.0 million for the six month period ended June 30, 2006 and the year ended December 31, 2005, respectively, as a result of the use of proceeds from our initial public offering to pay down amounts outstanding under our senior secured credit facility. | |
(10) | The pro forma adjustment is made to reflect the elimination of interest expense of approximately $0.3 million and $1.3 million for the six month period ended June 30, 2006 and the year ended December 31, 2005, respectively, on Eagle’s line of credit of $24.5 million at February 28, 2006, which we did not assume. | |
(11) | Represents the net reduction in interest expense as a result of the issuance and sale of the old notes, the application of the net proceeds from such sale, and the borrowings under our senior secured credit facility to finance the Tender Offer. | |
(12) | The deferred compensation liability of approximately $8.6 million owed to one current executive and a former executive settled in connection with our initial public offering bears interest at 13%. A pro forma adjustment of approximately $0.2 million and approximately $1.1 million for the six month period ended June 30, 2006 and the year ended December 31, 2005, respectively, has been made to reflect the elimination of historical interest expense on deferred compensation liabilities. | |
(13) | Represents the elimination of minority interest. Eagle High Reach Equipment, Inc. (“Eagle Inc.”) held a 50% ownership interest in its subsidiary, Eagle High Reach Equipment, LLC (“Eagle LLC”) and SBN Eagle LLC held the remaining 50%. In the acquisition, we acquired 100% of the capital stock of Eagle Inc., and 100% of the equity interests of Eagle LLC (including the 50% interest held by SBN Eagle LLC). As a result, we have a 100% financial interest in both Eagle Inc. and Eagle LLC, and both Eagle Inc. and Eagle LLC will have been consolidated into our financial statements since February 28, 2006. | |
(14) | Pro forma amounts represent the estimated income tax effects of the Company’s Reorganization, initial public offering, the Eagle acquisition and the Refinancing, assuming each of these transactions occurred on January 1, 2005. The effective tax rates derived from these estimates are not indicative of expected or actual effective tax rates for the period in which such transactions occurred. |
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(15) | In calculating shares of our common stock outstanding and net income (loss) per share on a pro forma basis, we give retroactive effect to the completion of the Reorganization Transactions and the initial public offering as if each had occurred on January 1, 2005. | |
(16) | The amounts shown in the “As Adjusted” column give pro forma effect to the Refinancing. | |
(17) | Reflects the net increase in deferred financing costs resulting from the deferred financing costs incurred related to the Refinancing, net of the write-off of the unamortized deferred financing costs of the existing notes. | |
(18) | Represents the net change as a result of the adjustments above to cash and deferred financing costs. | |
(19) | See notes (2), (3) and (4) to “Capitalization” for a description of the adjustments above to total debt. | |
(20) | Includes estimated loss on early extinguishment of debt at June 30, 2006 comprised of approximately $40.9 million for tender premiums, consent solicitation fees and the write-off of unamortized original issue discount and deferred financing costs related to the senior secured notes and senior subordinated notes, net of estimated tax effects. As a result of these costs and expenses, we expect that we will recognize a substantial charge that will reduce our net income for the third quarter and fiscal year 2006, with a corresponding negative impact on earnings per common share. These negative consequences are not reflected in the pro forma financial information presented in this prospectus. | |
(21) | Actual total debt represents amounts outstanding under the senior secured credit facility, senior secured and senior subordinated notes, notes payable and capital leases. Total debt as adjusted represents amounts outstanding under the senior secured credit facility, the senior secured notes, the old notes, notes payable and capital leases. |
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For the Six Months | ||||||||||||||||||||||||||||
For the Year Ended December 31, | Ended June 30, | |||||||||||||||||||||||||||
2001 | 2002(1) | 2003 | 2004 | 2005 | 2005 | 2006(2) | ||||||||||||||||||||||
(Amounts in thousands, except share and per share data) | ||||||||||||||||||||||||||||
Statement of operations data(3): | ||||||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||
Equipment rentals | $ | 98,696 | $ | 136,624 | $ | 153,851 | $ | 160,342 | $ | 190,794 | 86,167 | $ | 118,006 | |||||||||||||||
New equipment sales | 84,138 | 72,143 | 81,692 | 116,907 | 156,341 | 63,715 | 112,660 | |||||||||||||||||||||
Used equipment sales | 59,441 | 52,487 | 70,926 | 84,999 | 111,139 | 49,581 | 67,719 | |||||||||||||||||||||
Parts sales | 36,524 | 47,218 | 53,658 | 58,014 | 70,066 | 34,216 | 40,550 | |||||||||||||||||||||
Service revenue | 19,793 | 27,755 | 33,349 | 33,696 | 41,485 | 19,050 | 25,708 | |||||||||||||||||||||
Other | 10,925 | 14,778 | 20,510 | 24,214 | 30,385 | 13,551 | 20.103 | |||||||||||||||||||||
Total revenues | 309,517 | 351,005 | 413,986 | 478,172 | 600,210 | 266,280 | 384,746 | |||||||||||||||||||||
Cost of revenues: | ||||||||||||||||||||||||||||
Rental depreciation | 30,004 | 46,627 | 55,244 | 49,590 | 54,534 | 25,040 | 36,030 | |||||||||||||||||||||
Rental expense | 23,154 | 37,706 | 49,696 | 50,666 | 47,027 | 23,009 | 21,088 | |||||||||||||||||||||
New equipment sales | 77,442 | 65,305 | 73,228 | 104,111 | 137,169 | 56,020 | 98,294 | |||||||||||||||||||||
Used equipment sales | 51,378 | 43,776 | 58,145 | 67,906 | 84,696 | 37,718 | 49,545 | |||||||||||||||||||||
Parts sales | 27,076 | 34,011 | 39,086 | 41,500 | 49,615 | 24,133 | 28,604 | |||||||||||||||||||||
Service revenue | 8,106 | 11,438 | 13,043 | 12,865 | 15,417 | 6,993 | 9,298 | |||||||||||||||||||||
Other | 14,439 | 19,774 | 26,433 | 28,246 | 30,151 | 14,471 | 17,569 | |||||||||||||||||||||
Total cost of revenues | 231,599 | 258,637 | 314,875 | 354,884 | 418,609 | 187,384 | 260,428 | |||||||||||||||||||||
Gross profit: | ||||||||||||||||||||||||||||
Equipment rentals | 45,538 | 52,291 | 48,911 | 60,086 | 89,233 | 38,118 | 60,888 | |||||||||||||||||||||
New equipment sales | 6,696 | 6,838 | 8,464 | 12,796 | 19,172 | 7,695 | 14,366 | |||||||||||||||||||||
Used equipment sales | 8,063 | 8,711 | 12,781 | 17,093 | 26,443 | 11,863 | 18,174 | |||||||||||||||||||||
Parts sales | 9,448 | 13,207 | 14,572 | 16,514 | 20,451 | 10,083 | 11,946 | |||||||||||||||||||||
Service revenue | 11,687 | 16,317 | 20,306 | 20,831 | 26,068 | 12,057 | 16,410 | |||||||||||||||||||||
Other Class | (3,514 | ) | (4,996 | ) | (5,923 | ) | (4,032 | ) | 234 | (920 | ) | 2,534 | ||||||||||||||||
Total gross profit | 77,918 | 92,368 | 99,111 | 123,288 | 181,601 | 78,896 | 124,318 | |||||||||||||||||||||
Selling, general and administrative expenses | 55,382 | 78,352 | 93,054 | 97,525 | 111,409 | 53,123 | 74,427 | |||||||||||||||||||||
Loss from litigation | — | — | 17,434 | — | — | — | — | |||||||||||||||||||||
Related party expense | — | — | 1,275 | — | — | — | — | |||||||||||||||||||||
Gain (loss) on sale of property and equipment | 46 | 59 | 80 | 207 | 91 | (103 | ) | 159 | ||||||||||||||||||||
Income (loss) from operations | 22,582 | 14,075 | (12,572 | ) | 25,970 | 70,283 | 25,670 | 50,050 | ||||||||||||||||||||
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For the Six Months | ||||||||||||||||||||||||||||
For the Year Ended December 31, | Ended June 30, | |||||||||||||||||||||||||||
2001 | 2002(1) | 2003 | 2004 | 2005 | 2005 | 2006(2) | ||||||||||||||||||||||
(Amounts in thousands, except share and per share data) | ||||||||||||||||||||||||||||
Other income (expense): | ||||||||||||||||||||||||||||
Interest expense(4) | (17,995 | ) | (28,955 | ) | (39,394 | ) | (39,856 | ) | (41,822 | ) | (20,425 | ) | (20,282 | ) | ||||||||||||||
Other, net | 156 | 372 | 221 | 149 | 372 | 170 | 430 | |||||||||||||||||||||
Total other expense, net | (17,839 | ) | (28,583 | ) | (39,173 | ) | (39,707 | ) | (41,450 | ) | (20,255 | ) | (19,852 | ) | ||||||||||||||
Income (loss) before taxes | 4,743 | (14,508 | ) | (51,745 | ) | (13,737 | ) | 28,833 | $ | 5,415 | $ | 30,198 | ||||||||||||||||
Income tax provision (benefit) | 1,443 | (6,287 | ) | (5,694 | ) | — | 673 | $ | 171 | 6,475 | ||||||||||||||||||
Net income (loss) | $ | 3,300 | $ | (8,221 | ) | $ | (46,051 | ) | $ | (13,737 | ) | $ | 28,160 | $ | 5,244 | $ | 23,273 | |||||||||||
Net income (loss) per common share(5): | ||||||||||||||||||||||||||||
Basic | $ | 0.13 | $ | (0.32 | ) | $ | (1.81 | ) | $ | (0.54 | ) | $ | 1.10 | $ | 0.21 | $ | 0.66 | |||||||||||
Diluted | $ | 0.13 | $ | (0.32 | ) | $ | (1.81 | ) | $ | (0.54 | ) | $ | 1.10 | $ | 0.21 | $ | 0.66 | |||||||||||
Common shares used to compute net income (loss) per common share(5): | ||||||||||||||||||||||||||||
Basic | 25,492,019 | 25,492,019 | 25,492,019 | 25,492,019 | 25,492,019 | 25,492,019 | 35,776,895 | |||||||||||||||||||||
Diluted | 25,492,019 | 25,492,019 | 25,492,019 | 25,492,019 | 25,492,019 | 25,492,019 | 35,789,640 | |||||||||||||||||||||
Other financial data: | ||||||||||||||||||||||||||||
Depreciation and amortization(6) | $ | 32,163 | $ | 49,659 | $ | 59,159 | $ | 53,526 | $ | 59,860 | $ | 27,509 | $ | 39,316 | ||||||||||||||
Statement of cash flows: | ||||||||||||||||||||||||||||
Net cash provided by operating activities | 30,115 | 25,319 | 19,344 | 5,639 | 35,904 | 10,615 | 36,685 | |||||||||||||||||||||
Net cash provided by (used in) investing activities | (37,846 | ) | (18,694 | ) | 20,908 | (11,753 | ) | (83,075 | ) | (27,543 | ) | (117,813 | ) | |||||||||||||||
Net cash provided by (used in) financing activities | 10,426 | (7,549 | ) | (39,759 | ) | 5,581 | 49,440 | 19,694 | 100,142 | |||||||||||||||||||
Balance sheet data: | ||||||||||||||||||||||||||||
Cash | $ | 4,322 | $ | 3,398 | $ | 3,891 | $ | 3,358 | $ | 5,627 | $ | 6,124 | $ | 24,641 | ||||||||||||||
Rental equipment, net | 195,701 | 322,271 | 261,154 | 243,630 | 308,036 | 271,004 | 393,445 | |||||||||||||||||||||
Goodwill | 3,204 | 8,572 | 8,572 | 8,572 | 8,572 | 8,572 | 30,454 | |||||||||||||||||||||
Deferred financing costs | — | 12,612 | 11,235 | 10,251 | 8,184 | 9,161 | 7,286 | |||||||||||||||||||||
Total assets | 287,129 | 476,119 | 409,393 | 408,669 | 530,697 | 451,089 | 707,341 | |||||||||||||||||||||
Total debt(7) | 196,332 | 330,139 | 292,042 | 299,392 | 349,902 | 319,571 | 244,500 | |||||||||||||||||||||
Stockholders’ equity/Members’ equity (deficit) | 29,899 | 26,487 | (19,563 | ) | (33,300 | ) | (5,140 | ) | (28,055 | ) | 225,976 |
(1) | H&E LLC is the result of the merger on June 17, 2002 of ICM Equipment Company LLC and its consolidated subsidiaries (“ICM”) and Head & Engquist Equipment, LLC (“Head & Engquist,” a wholly-owned subsidiary of Gulf Wide Industries, LLC (“Gulf Wide”)), with and into Gulf Wide. Accordingly, the historical statement of operations data for H&E LLC for the year ended December 31, 2002 reflects the results of operations of Head & Engquist from January 1, 2002, until the date of the merger and includes ICM’s results of operations from the date of the merger through December 31, 2002. | |
(2) | The historical results for the Company’s six-month period ended June 30, 2006, include Eagle’s results of operations for the period beginning February 28, 2006, the date of acquisition, through June 30, 2006. | |
(3) | See note 18 of the 2005 consolidated financial statements of H&E LLC included elsewhere in this prospectus discussing business segment information. | |
(4) | Interest expense is comprised of cash-pay interest (interest recorded on debt and other obligations requiring periodic cash payments) and non-cash pay interest. | |
(5) | In calculating shares of our common stock outstanding and net income (loss) per share, we give retroactive effect to the completion of the Reorganization Transactions as if the Reorganization Transactions had occurred at the beginning of the earliest year presented. | |
(6) | Excludes amortization of loan discounts and deferred financing costs included in interest expense. | |
(7) | Total debt represents the amounts outstanding under the senior secured credit facility, senior secured notes, senior subordinated notes, notes payable and capital leases. |
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FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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• | Equipment Rentals. Our rental operation primarily rents our four core types of construction and industrial equipment. We have an extremely well-maintained rental fleet and our own dedicated sales force, focused by equipment type. We actively manage the size, quality, age and composition of our rental fleet based on our analysis of key measures such as time utilization, rental rate trends and targets, and equipment demand which we closely monitor. We maintain fleet quality through regional quality control managers and our parts and services operations. | |
• | New Equipment Sales. Our new equipment sales operation sells new equipment in all four product categories. We have a retail sales force focused by equipment type that is separate from our rental sales force. Manufacturer purchase terms and pricing are managed by our product specialists. | |
• | Used Equipment Sales. Our used equipment sales are generated primarily from sales of used equipment from our rental fleet, as well as from sales of inventoried equipment that we acquire through trade-ins from our equipment customers and through selective purchases of high quality used equipment. Used equipment is sold by our dedicated retail sales force. Our used equipment sales are an effective way for us to manage the size and composition of our rental fleet and provides a profitable distribution channel for disposal of rental equipment. | |
• | Parts Sales. Our parts business sells new and used parts for the equipment we sell, and also provides parts to our own rental fleet. To a lesser degree, we also sell parts for equipment produced by manufacturers whose products we neither rent nor sell. In order to provide timely parts and service support to our customers as well as our own rental fleet, we maintain an extensive parts inventory. | |
• | Services. Our services operation provides maintenance and repair services for our customers’ equipment and to our own rental fleet at our facilities as well as at our customers’ locations. As the authorized distributor for numerous equipment manufacturers, we are able to provide service to that equipment that will be covered under the manufacturer’s warranty. As of June 30, 2006, we had over 650 highly skilled service technicians. |
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Revenue by Segment | Gross Profit by Segment | |
($ in millions) | ($ in millions) | |
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Original | % of Original | |||||||||||||||||||
% of Total | Acquisition | Acquisition | Average Age | |||||||||||||||||
Units | Units | Cost | Cost | in Months | ||||||||||||||||
Aerial Work Platforms | 13,255 | 75.3 | % | $ | 408.5 | 66.5 | % | 47.9 | ||||||||||||
Cranes | 352 | 2.0 | % | 75.2 | 12.2 | % | 46.4 | |||||||||||||
Earthmoving | 965 | 5.5 | % | 73.2 | 11.9 | % | 18.6 | |||||||||||||
Lift Trucks | 1,354 | 7.7 | % | 36.7 | 6.0 | % | 29.0 | |||||||||||||
Other | 1,671 | 9.5 | % | 20.7 | 3.4 | % | 37.7 | |||||||||||||
Total | 17,597 | 100 | % | $ | 614.3 | 100 | % | 43.9 | ||||||||||||
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• | Spending levels by customers. Rentals and sales of equipment to the construction industry and to industrial companies constitute a significant portion of our revenues. As a result, we depend upon customers in these businesses and their ability and willingness to make capital expenditures to rent or buy specialized equipment. Accordingly, our business is impacted by fluctuations in customers’ spending levels on capital expenditures. | |
• | Economic downturns. The demand for our products is dependent on the general economy, the industries in which our customers operate or serve and other factors. Downturns in the general economy or in the construction and manufacturing industries can cause demand for our products to materially decrease. Until recently, our business and profit margins were adversely affected by unfavorable economic conditions which resulted, among other things, in a decline in construction activity and overcapacity of available equipment. | |
• | 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. The adverse weather also has a seasonal impact in parts of our Intermountain region. |
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Aerial | ||||||||||||||||||||||||
Work | Earth- | Lift | ||||||||||||||||||||||
Platforms | Cranes | moving | Trucks | Other | Total | |||||||||||||||||||
($ in millions) | ||||||||||||||||||||||||
Impact of2-year change in useful life on results of operations for the year ended December 31, 2005: | ||||||||||||||||||||||||
Depreciation expense for the year ended December 31, 2005 | $ | 26.9 | $ | 8.9 | $ | 11.1 | $ | 4.5 | $ | 3.1 | $ | 54.5 | ||||||||||||
Increase of 2 years in useful life | 22.5 | 6.0 | 7.1 | 3.3 | 3.4 | 42.4 | ||||||||||||||||||
Decrease of 2 years in useful life | 33.8 | 9.0 | 16.6 | 5.9 | 3.1 | 68.4 |
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Three Months | ||||||||||||||||
Ended | Total | |||||||||||||||
June 30, | Total Dollar | Percentage | ||||||||||||||
2006 | 2005 | Change | Change | |||||||||||||
(In millions, except percentages) | ||||||||||||||||
Segment Revenues: | ||||||||||||||||
Equipment rentals | $ | 64.0 | $ | 45.6 | $ | 18.4 | 40.4 | % | ||||||||
New equipment sales | 56.9 | 33.4 | 23.5 | 70.4 | % | |||||||||||
Used equipment sales | 36.1 | 23.9 | 12.2 | 51.0 | % | |||||||||||
Parts sales | 21.2 | 17.8 | 3.4 | 19.1 | % | |||||||||||
Services revenues | 13.4 | 9.9 | 3.5 | 35.4 | % | |||||||||||
Non-Segmented revenues | 10.9 | 7.1 | 3.8 | 53.5 | % | |||||||||||
Total revenues | $ | 202.5 | $ | 137.7 | $ | 64.8 | 47.1 | % | ||||||||
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Three Months | ||||||||||||||||
Ended | Total | |||||||||||||||
June 30, | Total Dollar | Percentage | ||||||||||||||
2006 | 2005 | Change | Change | |||||||||||||
(In millions, except for percentages) | ||||||||||||||||
Segment Gross Profit: | ||||||||||||||||
Equipment rentals | $ | 34.4 | $ | 21.2 | $ | 13.2 | 62.3 | % | ||||||||
New equipment sales | 7.2 | 3.9 | 3.3 | 84.6 | % | |||||||||||
Used equipment sales | 10.3 | 6.0 | 4.3 | 71.7 | % | |||||||||||
Parts sales | 6.2 | 5.1 | 1.1 | 21.6 | % | |||||||||||
Services | 8.6 | 6.2 | 2.5 | 38.7 | % | |||||||||||
Non-Segmented gross profit (loss) | 1.6 | (0.2 | ) | 1.8 | 900.0 | % | ||||||||||
Total gross profit | $ | 68.3 | $ | 42.2 | $ | 26.1 | 61.8 | % | ||||||||
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Six Months | Total | Total | ||||||||||||||
Ended June 30 | Dollar | Percentage | ||||||||||||||
2006 | 2005 | Change | Change | |||||||||||||
(In millions, except percentages) | ||||||||||||||||
Segment Revenues: | ||||||||||||||||
Equipment rentals | $ | 118.0 | $ | 86.2 | $ | 31.8 | 36.9 | % | ||||||||
New equipment sales | 112.7 | 63.7 | 49.0 | 76.9 | % | |||||||||||
Used equipment sales | 67.7 | 49.6 | 18.1 | 36.5 | % | |||||||||||
Parts sales | 40.5 | 34.2 | 6.3 | 18.4 | % | |||||||||||
Service revenues | 25.7 | 19.1 | 6.6 | 34.6 | % | |||||||||||
Non-segmented revenues | 20.1 | 13.5 | 6.6 | 48.9 | % | |||||||||||
Total revenues | $ | 384.7 | $ | 266.3 | $ | 118.4 | 44.5 | % | ||||||||
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Six Months | Total | Total | ||||||||||||||
Ended June 30 | Dollar | Percentage | ||||||||||||||
2006 | 2005 | Change | Change | |||||||||||||
(In millions, except percentages) | ||||||||||||||||
Segment Gross Profit: | ||||||||||||||||
Equipment rentals | $ | 60.9 | $ | 38.1 | $ | 22.8 | 59.8 | % | ||||||||
New equipment sales | 14.4 | 7.7 | 6.7 | 87.0 | % | |||||||||||
Used equipment sales | 18.2 | 11.9 | 6.3 | 52.9 | % | |||||||||||
Parts sales | 11.9 | 10.1 | 1.8 | 17.8 | % | |||||||||||
Service revenues | 16.4 | 12.1 | 4.3 | 35.5 | % | |||||||||||
Non-Segmented gross profit | 2.5 | (1.0 | ) | 3.5 | 350.0 | % | ||||||||||
Total gross profit | $ | 124.3 | $ | 78.9 | $ | 45.4 | 57.5 | % | ||||||||
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For the Year Ended | Total | Total | ||||||||||||||
December 31, | Dollar | Percentage | ||||||||||||||
2005 | 2004 | Change | Change | |||||||||||||
(In millions, except percentages) | ||||||||||||||||
Segment Revenues: | ||||||||||||||||
Equipment rentals | $ | 190.8 | $ | 160.3 | $ | 30.5 | 19.0 | % | ||||||||
New equipment sales | 156.3 | 116.9 | 39.4 | 33.7 | % | |||||||||||
Used equipment sales | 111.1 | 85.0 | 26.1 | 30.7 | % | |||||||||||
Parts sales | 70.1 | 58.0 | 12.1 | 20.9 | % | |||||||||||
Service revenues | 41.5 | 33.7 | 7.8 | 23.1 | % | |||||||||||
Non-Segmented revenues | 30.4 | 24.3 | 6.1 | 25.1 | % | |||||||||||
Total revenues | $ | 600.2 | $ | 478.2 | $ | 122.0 | 25.5 | % | ||||||||
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For the Year Ended | Total | Total | ||||||||||||||
December 31, | Dollar | Percentage | ||||||||||||||
2005 | 2004 | Change | Change | |||||||||||||
(In millions, except percentages) | ||||||||||||||||
Segment Gross Profit: | ||||||||||||||||
Equipment rentals | $ | 89.3 | $ | 60.1 | $ | 29.2 | 48.6 | % | ||||||||
New equipment sales | 19.1 | 12.8 | 6.3 | 49.2 | % | |||||||||||
Used equipment sales | 26.4 | 17.1 | 9.3 | 54.4 | % | |||||||||||
Parts sales | 20.5 | 16.5 | 4.0 | 24.2 | % | |||||||||||
Service revenues | 26.1 | 20.8 | 5.3 | 25.5 | % | |||||||||||
Non-Segmented gross profit | 0.2 | (4.0 | ) | 4.2 | 105.0 | % | ||||||||||
Total gross profit | $ | 181.6 | $ | 123.3 | $ | 58.3 | 47.3 | % | ||||||||
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For the Year Ended | Total | Total | ||||||||||||||
December 31, | Dollar | Percentage | ||||||||||||||
2004 | 2003 | Change | Change | |||||||||||||
(In millions, except percentages) | ||||||||||||||||
Segment Revenues: | ||||||||||||||||
Equipment rentals | $ | 160.3 | $ | 153.9 | $ | 6.4 | 4.2 | % | ||||||||
New equipment sales | 116.9 | 81.7 | 35.2 | 43.1 | % | |||||||||||
Used equipment sales | 85.0 | 70.9 | 14.1 | 19.9 | % | |||||||||||
Parts sales | 58.0 | 53.7 | 4.3 | 8.0 | % | |||||||||||
Service | 33.7 | 33.3 | 0.4 | 1.2 | % | |||||||||||
Non-Segmented revenues | 24.3 | 20.5 | 3.8 | 18.5 | % | |||||||||||
Total revenues | $ | 478.2 | $ | 414.0 | $ | 64.2 | 15.5 | % | ||||||||
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For the Year Ended | Total | Total | ||||||||||||||
December 31, | Dollar | Percentage | ||||||||||||||
2004 | 2003 | Change | Change | |||||||||||||
($ in millions) | ||||||||||||||||
Segment Gross Profit: | ||||||||||||||||
Equipment rentals | $ | 60.1 | $ | 48.9 | $ | 11.2 | 22.9 | % | ||||||||
New equipment sales | 12.8 | 8.5 | 4.3 | 50.6 | % | |||||||||||
Used equipment sales | 17.1 | 12.8 | 4.3 | 33.6 | % | |||||||||||
Parts sales | 16.5 | 14.5 | 2.0 | 13.8 | % | |||||||||||
Service | 20.8 | 20.3 | 0.5 | 2.5 | % | |||||||||||
Non-Segmented revenues | (4.0 | ) | (5.9 | ) | 1.9 | 32.2 | % | |||||||||
Total gross profit | $ | 123.3 | $ | 99.1 | $ | 24.2 | 24.4 | % | ||||||||
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• | lowers interest rates according to a pricing grid based upon daily average excess availability for the immediately preceding fiscal month. We elect interest at either (1) the Index Rate (the higher of the prime rate, as determined pursuant to the senior secured credit agreement, and the federal funds rate plus 50 basis points) plus the applicable revolver Index margin per annum or the applicable LIBOR rate, or (2) LIBOR rate, plus the applicable revolver LIBOR margin per each calendar month. With daily average excess availability equal to or more than $40 million, the LIBOR margin will be 2.25% and the Index margin will be 0.75%. If availability falls below $40 million and is equal to or more than $25 million, the senior secured credit facility bears interest at a LIBOR margin of 2.50% and the Index margin will be 1.00%. If availability is less than $25 million, the LIBOR margin will be 2.75% and the Index margin will be 1.25%. The commitment fee equal to 0.5% per annum in respect to un-drawn commitments remains unchanged; | |
• | decreases the block on availability of assets from $30 million to $15 million based on the total borrowing base assets; and | |
• | increases the advance rate on rental fleet assets to 80% of orderly liquidation value. |
• | increases the aggregate revolving loan commitment from $150.0 million to $165.0 million; | |
• | increases the block on availability of assets from $15.0 million to $16.5 million, based on the total borrowing base assets; and | |
• | increases the lien basket for purchase money indebtedness and conditional sale or other title retention agreements with respect to equipment, from $90.0 million to $125.0 million. |
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Payments Due by Year | ||||||||||||||||||||
Total | 2006 | 2007-2008 | 2009-2010 | Thereafter | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Long-term debt (including senior secured and senior subordinated notes payable)(1) | $ | 253,505 | $ | 154 | $ | 303 | $ | 48 | $ | 253,000 | ||||||||||
Interest payments on senior secured notes(1)(2) | 144,625 | 22,250 | 44,500 | 22,250 | 55,625 | |||||||||||||||
Interest payments on senior subordinated notes(1)(2) | 49,688 | 6,625 | 13,250 | 6,625 | 23,188 | |||||||||||||||
Senior secured credit facility(3) | 106,451 | — | — | 106,451 | — | |||||||||||||||
Interest payments on senior secured credit facility(4) | 32,783 | 7,877 | 15,755 | 9,151 | — | |||||||||||||||
Related party obligation (including interest)(5) | 1,050 | 300 | 600 | 150 | — | |||||||||||||||
Operating leases(6) | 60,746 | 21,374 | 22,469 | 5,087 | 11,816 | |||||||||||||||
Other long-term obligations(7) | 107,730 | 19,870 | 46,756 | 37,104 | 4,000 | |||||||||||||||
Total contractual cash obligations | $ | 756,578 | $ | 78,450 | $ | 143,633 | $ | 186,866 | $ | 347,629 | ||||||||||
(1) | Long-term debt includes amounts due under our senior secured notes and senior subordinated notes outstanding on December 31, 2005. On August 4, 2006 we purchased $195.5 million in aggregate principal amount of the senior secured notes (representing approximately 97.8% of the previously outstanding senior secured notes) and $53.0 million in aggregate principal amount of the senior subordinated notes (representing 100% of the previously outstanding senior subordinated notes). At August 31, 2006, $4.5 million in aggregate principal amount of senior secured notes remained outstanding. | |
(2) | Future interest payments are calculated based on the assumption that all debt is outstanding until maturity. For debt instruments with variable interest rates, interest has been calculated for all periods using rates in effect on December 31, 2005. | |
(3) | In February 2006, we used a portion of the proceeds from our initial public offering to pay $96.6 million of the outstanding principal indebtedness related to the senior secured credit facility. On August 4, 2006, we used additional borrowings from the senior secured credit facility as well as proceeds from the offering of the old notes and cash on hand to fund the Tender Offer. At August 31, 2006, we had borrowings under our senior secured credit facility of approximately $18.8 million. | |
(4) | Future interest payments are calculated based on the assumption that all debt is outstanding until maturity. For debt instruments with variable interest rates, interest has been calculated for all future periods using rates in effect on December 31, 2005. | |
(5) | Payments under the consulting and non-competition agreement with Mr. Thomas Engquist. | |
(6) | This includes total operating lease rental payments (including interest) having initial or remaining non-cancelable lease terms longer than one year. In February 2006, we used a portion of the proceeds from our initial public offering to pay $30.3 million for the purchase of rental equipment under operating leases. |
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(7) | This includes: (i) Bruckmann, Rosser, Sherrill & Co., Inc.’s (“BRS Inc.”) annual management fees through 2012 (based upon the lesser of 1.75% of estimated earnings before interest, taxes, depreciation and amortization, excluding operating lease expense or $2.0 million per year) for $14.0 million; and (ii) payments for secured manufacturer floor plan financing for $93.7 million. In February 2006, we used a portion of the proceeds from our initial public offering to pay $8.0 million to terminate the management services agreement with BRS Inc. and Bruckmann, Rosser, Sherrill & Co., L.L.C. |
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• | equipment rental; | |
• | new equipment sales; | |
• | used equipment sales; | |
• | parts sales; and | |
• | repair and maintenance services. |
Revenue by Segment | Gross Profit by Segment | |
($ in millions) | ($ in millions) | |
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• | aggressively negotiate on purchase price; | |
• | use our customized information technology systems to closely monitor and analyze, among other things, time utilization (equipment usage based on customer demand), rental rate trends and targets and equipment demand; | |
• | maintain fleet quality through regional quality control managers and ouron-site parts and services support; and | |
• | dispose of rental equipment through our retail sales force. |
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• | ability to strengthen customer relationships by providing a full range of products and services; | |
• | purchasing power gained through purchases for our new equipment sales and rental operations; | |
• | high quality rental fleet supported by our strong product support capabilities; | |
• | established retail sales network resulting in profitable disposal of our used equipment; and | |
• | mix of business activities that enables us to effectively operate through economic cycles. |
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City/State | Leased/Owned | |
Alabama | ||
Birmingham | Leased | |
Arizona | ||
Phoenix | Leased | |
Tucson | Leased | |
Arkansas | ||
Little Rock | Owned | |
Springdale | Owned | |
California | ||
Bakersfield | Leased | |
La Mirada | Leased | |
San Diego | Leased | |
Santa Fe Springs | Owned | |
Colorado | ||
Denver | Leased | |
Colorado Springs | Leased | |
Florida | ||
Fort Myers | Leased | |
Jacksonville | Leased | |
Orlando | Leased | |
Tampa | Leased | |
Georgia | ||
Atlanta | Leased | |
Idaho | ||
Boise | Leased | |
Coeur D’Alene | Leased |
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City/State | Leased/Owned | |
Louisiana | ||
Alexandria | Leased | |
Baton Rouge | Leased | |
Belle Chasse(2) | Leased(1)/Owned(1) | |
Gonzales | Leased | |
Kenner | Leased | |
Lafayette | Leased | |
Lake Charles | Leased | |
Shreveport(2) | Leased(2) | |
Mississippi | ||
Jackson | Leased | |
Montana | ||
Billings | Leased | |
Belgrade | Leased | |
Missoula | Leased | |
New Mexico | ||
Albuquerque | Leased | |
Nevada | ||
Las Vegas | Leased | |
Reno | Leased | |
North Carolina | ||
Charlotte | Leased | |
Oklahoma | ||
Oklahoma City | Leased | |
Tulsa | Leased | |
Texas | ||
Dallas(2) | Leased(2) | |
Houston(2) | Leased(2) | |
San Antonio | Owned | |
Tennessee | ||
Memphis | Leased | |
Utah | ||
Ogden | Leased | |
Salt Lake City | Leased | |
St. George | Leased |
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Name | Age | Title | ||||
Gary W. Bagley | 59 | Chairman and Director | ||||
John M. Engquist | 52 | President, Chief Executive Officer and Director | ||||
Leslie S. Magee | 38 | Chief Financial Officer and Secretary | ||||
Bradley W. Barber | 33 | Executive Vice President and General Manager | ||||
William W. Fox | 62 | Vice President, Cranes and Earthmoving | ||||
Kenneth R. Sharp, Jr. | 61 | Vice President, Lift Trucks | ||||
John D. Jones | 48 | Vice President, Product Support | ||||
Dale W. Roesener | 49 | Vice President, Fleet Management | ||||
Keith E. Alessi | 51 | Director | ||||
Bruce C. Bruckmann | 53 | Director | ||||
Lawrence C. Karlson | 63 | Director | ||||
John T. Sawyer | 62 | Director |
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• | directly appointing, retaining, evaluating, compensating and terminating our independent auditors; | |
• | discussing with our independent registered public accounting firm auditors their independence from management; | |
• | reviewing with our independent registered public accounting firm auditors the scope and results of their audit; | |
• | pre-approving all audit and permissible non-audit services to be performed by the independent registered public accounting firm; | |
• | overseeing the financial reporting process and discussing with management and our independent registered public accounting firm the interim and annual financial statements that we file with the SEC; and | |
• | reviewing and monitoring our accounting principles, policies and financial and accounting controls. |
• | reviewing and recommending director compensation policies to the board of directors; | |
• | making recommendations, at least annually, to the board of directors regarding our policies relating to the amounts and terms of all compensation of our executive officers; and | |
• | administering and discharging the authority of the board of directors with respect to our equity plans. |
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• | selecting potential candidates to be nominated for election to the board of directors; | |
• | recommending potential candidates for election to the board of directors; | |
• | reviewing corporate governance matters; and | |
• | making recommendations to the board of directors concerning the structure and membership of other board committees. |
Annual Compensation | ||||||||||||||||||||
Other Annual | All Other | |||||||||||||||||||
Name and Principal Position | Year | Salary | Bonus | Compensation(a) | Compensation(b) | |||||||||||||||
John M. Engquist | 2005 | $ | 500,000 | $ | 500,000 | — | $ | 2,041 | ||||||||||||
Chief Executive Officer, | 2004 | 519,000 | 200,000 | — | 4,041 | |||||||||||||||
President and Director | 2003 | 500,000 | 250,000 | — | 3,041 | |||||||||||||||
Bradley W. Barber | 2005 | $ | 191,000 | $ | 150,000 | $ | 4,041 | |||||||||||||
Executive Vice President and | 2004 | 188,000 | 75,000 | — | 4,041 | |||||||||||||||
General Manager | 2003 | 148,000 | 35,000 | — | 2,041 | |||||||||||||||
William W. Fox | 2005 | $ | 234,000 | $ | 100,000 | — | $ | 4,041 | ||||||||||||
Vice President | 2004 | 237,000 | 100,000 | 4,041 | ||||||||||||||||
2003 | 208,000 | 62,000 | — | 4,041 | ||||||||||||||||
Dale W. Roesener | 2005 | $ | 300,000 | $ | — | — | $ | 4,041 | ||||||||||||
Vice President | 2004 | 182,000 | 71,000 | — | 4,041 | |||||||||||||||
2003 | 175,000 | — | — | 4,041 | ||||||||||||||||
Leslie S. Magee | 2005 | $ | 168,000 | $ | 150,000 | — | $ | 3,041 | ||||||||||||
Chief Financial Officer and | 2004 | 115,000 | 30,000 | — | 2,041 | |||||||||||||||
Secretary | 2003 | 70,000 | 18,000 | — | — |
(a) | Under the terms of Mr. Engquist’s employment agreement, we purchased a vehicle for Mr. Engquist’s use and also provide fuel for his vehicle. The other executive officers receive allowances for vehicles. In each case, the benefits are less than $50,000 and 10% of such officer’s salary. | |
(b) | “All Other Compensation” consists of: | |
• matching contributions to our 401(k) plan for each named executive officer; and | ||
• insurance premiums paid by us on behalf of each named executive officer. |
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Contribution | Premiums | |||||||
Name | 401(k) Matching | Insurance | ||||||
John M. Engquist | $ | 2,000 | 41 | |||||
Bradley W. Barber | 4,000 | 41 | ||||||
William W. Fox | 4,000 | 41 | ||||||
Dale W. Roesener | 4,000 | 41 | ||||||
Leslie S. Magee | 3,000 | 41 |
• | an initial term of five years renewable on a year to year basis, subject to mutual agreement of the parties; | |
• | a consulting fee of $150,000 per year plus reimbursement of all reasonable and actualout-of-pocket expenses; | |
• | payment of his subordinated deferred compensation; | |
• | welfare benefits, including medical, dental, life and disability insurance; and | |
• | confidentiality of information obtained during employment, non-competition and nonsolicitation. |
• | an initial term of employment expiring on December 31, 2006; thereafter employment may be terminated by either party upon 30 days written notice; | |
• | early termination by reason of Mr. Engquist’s death or disability, by H&E LLC for good cause or upon Mr. Engquist’s voluntary resignation with or without a constructive termination; | |
• | a severance payment in the case of early termination by H&E LLC for (x) other than cause or (y) a voluntary resignation other than due to a constructive termination, in an aggregate amount equal to (i) one year of Mr. Engquist’s base salary plus an amount equal to his most recent annual bonus, |
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payable in monthly installments through the one-year period commencing on the date of his termination, and (ii) that portion of Mr. Engquist’s bonus that would have accrued at the end of the calendar year in which such termination occurred through the period beginning on the first day of such calendar year and ending on the date of his termination; |
• | a base salary of $300,000 per year with increases of 5% annually and with an increase on August 1, 2001 to $500,000 per year, plus a cash bonus of an amount up to $500,000 per year as determined by the board of directors, based upon the attainment by H&E LLC of applicable performance targets for such year; | |
• | welfare benefits, including medical, dental, life and disability insurance; | |
• | fringe benefits, including use of two automobiles and professional memberships; and | |
• | confidentiality of information obtained during employment, non-competition and nonsolicitation. |
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Number of Securities | ||||||||||||
Remaining Available for | ||||||||||||
Number of Securities to | Future Issuance Under Equity | |||||||||||
be Issued Upon Exercise | Weighted-Average Exercise | Compensation Plans | ||||||||||
of Outstanding Options, | Price of Outstanding Options, | (Excluding Securities | ||||||||||
Warrants and Rights | Warrants and Rights | Reflected in Column (a)) | ||||||||||
(a) | (b) | (c) | ||||||||||
Equity compensation plans approved by security holders | 45,000 | $ | 24.60 | 4,401,467 | ||||||||
Equity compensation plans not approved by security holders | — | — | — | |||||||||
Total | 45,000 | $ | 24.60 | 4,401,467 | ||||||||
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OWNERS AND DIRECTORS AND OFFICERS
Amount and Nature of | ||||||||
Beneficial Ownership | ||||||||
Shares | Percentage | |||||||
Bruckmann, Rosser, Sherrill & Co., L.P.(1)(2) | 5,103,243 | 13.4 | % | |||||
Bruckmann, Rosser, Sherrill & Co., Inc.(1) | 30,313 | * | ||||||
Bruckmann, Rosser, Sherrill & Co. II, L.P.(1)(3) | 9,314,278 | 24.4 | % | |||||
Bruce C. Bruckmann(4) | 14,927,846 | 39.1 | % | |||||
John M. Engquist(5) | 4,511,250 | 11.8 | % | |||||
Gary W. Bagley(5)(7) | 314,559 | * | ||||||
Dale W. Roesener(5)(8) | 599,007 | 1.6 | % | |||||
Don M. Wheeler(7)(9) | 2,799,580 | 7.3 | % | |||||
Lawrence C. Karlson(5) | 5,500 | * | ||||||
Keith E. Alessi(5) | 5,500 | * | ||||||
John T. Sawyer(5) | — | * | ||||||
William W. Fox(5) | 1,600 | * | ||||||
Bradley W. Barber(5)(10) | 41,550 | * | ||||||
Leslie S. Magee(5)(10) | 41,250 | * | ||||||
All executive officers and directors as a group | 20,667,010 | 54.1 | % | |||||
All executive officers, directors, principal stockholders | 23,466,590 | 61.4 | % |
* | Less than 1%. |
(1) | The address of Bruckmann, Rosser, Sherrill & Co., L.P., Bruckmann, Rosser, Sherrill & Co., Inc. and Bruckmann, Rosser, Sherrill & Co. II, L.P. is c/o Bruckmann, Rosser, Sherrill & Co., Inc., 126 East 56th Street, 29th Floor, New York, New York 10022. | |
(2) | BRS Partners, L.P. (or BRS Partners) is the general partner of Bruckmann, Rosser, Sherrill & Co., L.P. (or BRS L.P.) and BRSE Associates, Inc. (or BRSE Associates) is the general partner of BRS Partners. Mr. Bruckmann is a stockholder and officer of BRSE Associates, and, together with Harold O. Rosser, Stephen C. Sherrill and Thomas J. Baldwin, shares the power to direct the voting or disposition of shares held by BRS L.P. However, none of these persons individually has the power to direct or veto the voting or disposition of shares held by BRS L.P. Further, BRS Partners, BRSE Associates, and Messrs. Bruckmann, Rosser, Sherrill and Baldwin expressly disclaim beneficial ownership of the shares held by BRS L.P. | |
(3) | BRSE LLC (or BRSE) is the general partner of Bruckmann, Rosser, Sherrill & Co. II, L.P. (or BRS II) and by virtue of such status may be deemed to be the beneficial owner of the shares held by BRS II. Mr. Bruckmann is a member and manager of BRSE LLC, and together with Messrs. Rosser, Sherrill and Baldwin, shares the power to direct the voting or disposition of shares held by BRS II. However, none of these persons individually has the power to direct or veto the voting or disposition of shares held by |
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BRSE and Messrs. Bruckmann, Rosser, Sherrill and Baldwin expressly disclaim beneficial ownership of the shares held by BRS II. | ||
(4) | Includes shares held by Bruckmann, Rosser, Sherrill & Co., L.P., Bruckmann, Rosser, Sherrill & Co., Inc., and Bruckmann, Rosser, Sherrill & Co. II, L.P. Mr. Bruckmann may be deemed to share beneficial ownership of the shares held by these entities by virtue of his status as a member or manager of these entities. Mr. Bruckmann expressly disclaims beneficial ownership of any shares held by such entities that exceed his pecuniary interest therein. These amounts also include 257,477 shares of common stock held by the following entities and individuals, for which Mr. Bruckmann holds a power of attorney in respect of such shares: The Estate of Donald J. Bruckmann, BCB Family Partners, L.P., NAZ Family Partners, L.P., Nancy A. Zweng, Harold O. Rosser, H. Virgil Sherrill, Stephen C. Sherrill, Paul D. Kaminski, John Rice Edmonds and Marilena Tibrea. Mr. Bruckmann disclaims beneficial ownership of all such shares except those owned by him directly. | |
(5) | Unless otherwise indicated, the address of each executive officer or director is c/o H&E Equipment Services, Inc., 11100 Mead Road, Suite 200, Baton Rouge, Louisiana 70816. | |
(6) | The address of Mr. Wheeler is 4899 West 2100 South, Salt Lake City, Utah 48120. | |
(7) | Includes 200,973 shares held by Bagley Family Investments, L.L.C. Mr. Bagley may be deemed to share beneficial ownership of these shares by virtue of his status as manager of Bagley Family Investments, L.L.C. Mr. Bagley expressly disclaims beneficial ownership of any shares held by Bagley Family Investments L.L.C. that exceed his pecuniary interest therein. | |
(8) | Includes 602,307 shares held by Southern Nevada Capital Corporation. Mr. Roesener may be deemed to share beneficial ownership of these shares by virtue of his status as President of Southern Nevada Capital Corporation. Mr. Roesener expressly disclaims beneficial ownership of any shares held by Southern Nevada Capital Corporation that exceed his pecuniary interest therein. | |
(9) | Includes 2,041,003 shares held by Wheeler Investments, Inc. Mr. Wheeler may be deemed to share beneficial ownership of these shares by virtue of his status as President of Wheeler Investments, Inc. Mr. Wheeler expressly disclaims beneficial ownership of any shares held by Wheeler Investments, Inc. that exceed his pecuniary interest therein. | |
(10) | Includes grant of 40,650 shares of restricted stock made on February 22, 2006, which vests over a three year period and is subject to certain restrictions, as described in the recipient’s Restricted Stock Grant Award Letter. |
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H&E Holdings Units | ||||||||
Owned Prior | Shares of Common | |||||||
to the | Stock Issued in the | |||||||
Reorganization | Reorganization | |||||||
Name | Transactions(1) | Transactions | ||||||
Bruckmann, Rosser, Sherrill & Co., L.P. | 769,617 | 5,103,243 | ||||||
Bruckmann, Rosser, Sherrill & Co., Inc. | 4,354 | 30,313 | ||||||
Bruckmann, Rosser, Sherrill & Co. II, L.P. | 1,312,202 | 9,314,278 | ||||||
Bruce C. Bruckmann | 2,151,203 | 14,872,046 | ||||||
John M. Engquist | 1,189,514 | 4,511,250 | ||||||
Gary W. Bagley | 87,064 | 314,559 | ||||||
Dale W. Roesener | 166,732 | 602,307 | ||||||
Kristan Engquist Dunne | 77,278 | 407,806 | ||||||
Don M. Wheeler | 287,661 | 2,799,580 | ||||||
Lawrence C. Karlson | — | — | ||||||
Keith E. Alessi | — | — | ||||||
John T. Sawyer | — | — | ||||||
Bradley W. Barber | — | — | ||||||
William W. Fox | — | — | ||||||
Leslie S. Magee | — | — |
(1) | Represents aggregate ownership of preferred units and common units (without regard to class or series). |
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• | prepare and file with the SEC on or before December 4, 2006 the registration statement of which this prospectus is a part; | |
• | use our commercially reasonable efforts to cause the registration statement to become effective on or before March 2, 2007; | |
• | consummate the registered exchange offer by April 11, 2007; and | |
• | file a shelf registration statement for the resale of the old notes if we cannot effect an exchange offer within the time periods listed above and in certain other circumstances. |
• | we are required to file a shelf registration statement and we fail to file the shelf registration statement with the SEC on or prior to the 90th day after such filing obligation arises; | |
• | we are required to file a shelf registration statement and the shelf registration statement is not declared effective by the SEC on or prior to the 210th day after the obligation to file a shelf registration statement arises, or | |
• | if either the exchange offer registration statement or the shelf registration statement is declared effective and such registration statement ceases to be effective or such registration statement or the related prospectus ceases to be usable in connection with the resales of the old notes during the periods specified, |
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• | additional interest will not accrue under more than one of the immediately preceding paragraphs at any one time; | |
• | the amount of additional interest accruing will not exceed 1.00% per annum; and | |
• | upon the filing of the exchange offer registration statement or a shelf registration statement; upon the effectiveness of the exchange offer registration statement or a shelf registration statement; or upon the effectiveness of the shelf registration statement which had ceased to remain effective, as applicable, |
• | it is acquiring the new notes in the ordinary course of its business; | |
• | it has no arrangement or understanding with any person to participate in the distribution of the new notes; | |
• | it is not an affiliate of us, as that term is interpreted by the SEC; and | |
• | if such holder is not a broker-dealer, then such holder is not engaged in and does not intend to engage in, a distribution of the new notes. |
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• | to delay accepting any old notes; | |
• | to extend the exchange offer; | |
• | to terminate the exchange offer; and | |
• | to waive any condition (other than any condition involving governmental approvals) or otherwise amend the terms of the exchange offer in any manner. |
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• | certificates for the old notes must be received by the exchange agent along with the letter of transmittal; | |
• | a timely confirmation of a book-entry transfer of such old notes, if that procedure is available, into the exchange agent’s account at the depositary pursuant to the procedure for book-entry transfer described below, must be received by the exchange agent prior to the expiration date; or | |
• | the holder must comply with the guaranteed delivery procedures described below. |
• | by a registered holder of the old notes who has not completed the box entitled “Special Issuance Instruction” or “Special Delivery Instruction” on the letter of transmittal; or | |
• | for the account of an eligible institution. |
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• | the new notes acquired pursuant to the exchange offer are being acquired in the ordinary course of business of the holder and any beneficial holder; | |
• | neither the holder nor any beneficial holder has an arrangement or understanding with any person to participate in the distribution of new notes; and | |
• | neither the holder nor any other person is an “affiliate,” as defined under Rule 405 of the Securities Act, of our company. |
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• | the tender is made through an eligible institution; | |
• | prior to the expiration date, the exchange agent receives from such eligible institution a properly completed and a duly executed letter of transmittal and notice of guaranteed delivery substantially in the form provided by us (by facsimile transmission, mail or hand delivery) setting forth the name and address of the holder, the certificate number(s) of such old notes and the principal amount of old notes tendered, stating that the tender is being made thereby and guaranteeing that, within five New York Stock Exchange trading days after the date of execution of the notice of guaranteed delivery, the certificate(s) representing the old notes in proper form for transfer or a book-entry confirmation, as the case may be, and any other documents required by the letter of transmittal will be deposited by the eligible institution with the exchange agent; and |
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• | the certificates representing all tendered old notes in proper form for transfer or a book-entry confirmation, as the case may be, and all other documents required by the letter of transmittal are received by the exchange agent within five New York Stock Exchange trading days after the date of execution of the notice of guaranteed delivery. |
• | specify the name of the person having deposited the old notes to be withdrawn; | |
• | identify the old notes to be withdrawn (including the certificate number or numbers and aggregate principal amount of such old notes); | |
• | where the certificates for old notes have been transmitted, specify the name in which such old notes are registered, if different from that of the withdrawing holder. |
• | the exchange offer (including the related prospectus) does not comply with any applicable law or any applicable interpretation of the staff of the SEC; | |
• | we have not received all applicable governmental approvals; or | |
• | any actions or proceedings of any governmental agency or court exist which could materially impair our ability to consummate the exchange offer. |
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By Registered or Certified Mail: | By Overnight Courier: | By Hand: | By Facsimile: | |||
The Bank of New York Trust Company, N.A. Corporate Trust Operations Reorganization Unit 101 Barclay Street, 7E New York, New York 10286 | The Bank of New York Trust Company, N.A. Corporate Trust Operations Reorganization Unit 101 Barclay Street, 7E New York, New York 10286 | The Bank of New York Trust Company, N.A. Corporate Trust Operations Reorganization Unit 101 Barclay Street, 7E New York, New York 10286 | The Bank of New York Trust Company, N.A. Reorganization Department (212) 298-1915 Attn: Confirm by telephone: (212) | |||
Attn: | Attn: | Attn: |
(212)
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• | could not rely on the applicable interpretations of the staff of the SEC; and | |
• | must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction. |
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• | will be general unsecured obligations of H&E; | |
• | will bepari passuin right of payment with all existing and future unsecured senior Indebtedness of H&E; | |
• | will be senior in right of payment to any future subordinated Indebtedness of H&E; and | |
• | will be unconditionally guaranteed by the Guarantors. |
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• | will be a general unsecured obligation of the Guarantor; | |
• | will bepari passuin right of payment with all existing and future unsecured senior Indebtedness of that Guarantor; and | |
• | will be senior in right of payment to any future subordinated Indebtedness of that Guarantor. |
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Year | Percentage | |||
2011 | 104.188% | |||
2012 | 102.792% | |||
2013 | 101.396% | |||
2014 and thereafter | 100.000% |
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• | upon deposit of each global note with DTC’s custodian, DTC will credit portions of the principal amount of the global note to the accounts of the DTC participants designated by the initial purchasers; and | |
• | ownership of beneficial interests in each global note will be shown on, and transfer of ownership of those interests will be effected only through, records maintained by DTC (with respect to interests of DTC participants) and the records of DTC participants (with respect to other owners of beneficial interests in the global note). |
• | a limited purpose trust company organized under the laws of the State of New York; | |
• | a “banking organization” within the meaning of the New York State Banking Law; | |
• | a member of the Federal Reserve System; | |
• | a “clearing corporation” within the meaning of the Uniform Commercial Code; and | |
• | a “clearing agency” registered under Section 17A of the Securities Exchange Act of 1934, as amended. |
• | will not be entitled to have notes represented by the global note registered in their names; | |
• | will not receive or be entitled to receive physical, certificated notes; and | |
• | will not be considered the owners or holders of the notes under the indenture for any purpose, including with respect to the giving of any direction, instruction or approval to the trustee under the indenture. |
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• | DTC notifies us at any time that it is unwilling or unable to continue as depositary for the global notes and a successor depositary is not appointed within 90 days; | |
• | DTC ceases to be registered as a clearing agency under the Securities Exchange Act of 1934 and a successor depositary is not appointed within 90 days; | |
• | we, at our option, notify the trustee that we elect to cause the issuance of certificated notes; or | |
• | certain other events provided in the indenture should occur. |
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• | The discussion does not purport to deal with all aspects of federal income taxation that may be relevant to your investment in the notes or your decision to exchange the old notes for new notes. | |
• | The discussion only covers you if you bought your old notes in the initial offering at their initial offering price. | |
• | The discussion only covers you if you hold your old notes as capital assets (that is, for investment purposes), and you are not a person in a special tax situation, such as a financial institution, an insurance company, an expatriate, a regulated investment company, a dealer in securities or currencies, a partnership or other entity treated as a partnership (or other pass-through entity) for federal income tax purposes (or its partners or members), a person holding the old notes as a hedge against currency risks, as a position in a “straddle” or as part of a “hedging” or “conversion” transaction for tax purposes or a U.S. holder (as defined below) whose functional currency is not the United States dollar. | |
• | The discussion does not cover tax consequences that depend upon your particular tax situation. | |
• | The discussion is based on current law. Changes in the law may change the tax treatment of the exchange of notes, and changes in the law can be retroactive. | |
• | The discussion does not cover state, local or foreign law. | |
• | The discussion does not address alternative minimum tax consequences, if any. | |
• | We have not requested a ruling from the Internal Revenue Service, or IRS, on any matter discussed herein. As a result, the IRS could disagree with portions of this discussion and may successfully assert a contrary position. |
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• | You will have taxable gain or loss equal to the difference between the amount received by you (to the extent such amount does not represent accrued but unpaid interest, which will be treated as such) and your adjusted tax basis in the note. Your adjusted tax basis in a new note generally will equal the cost of the old note exchanged by you. | |
• | Your gain or loss will be capital gain or loss, and will be long-term capital gain or loss if you held the note for more than one year. Your holding period in the new note will include the holding period that you had in your old note. Capital gains of individuals derived in respect of capital assets held for more than one year are eligible for reduced rates of taxation. The deductibility of capital losses is subject to limitations. |
• | you do not actually or constructively own 10% or more of the total combined voting power of all classes of our stock entitled to vote within the meaning of section 871(h)(3) of the Code and the regulations thereunder, | |
• | you are not a controlled foreign corporation that is related to us through stock ownership, | |
• | you are not a bank whose receipt of interest on the notes is described in section 881(c)(3)(A) of the Code, and | |
• | you satisfy the statement requirement (described generally below) set forth in section 871(h) and section 881(c) of the Code and the regulations thereunder. |
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• | IRSForm W-8BEN claiming an exemption from or reduction in withholding under the benefit of an applicable income tax treaty, or | |
• | IRSForm W-8ECI stating that interest paid on the notes is not subject to withholding tax because it is effectively connected with your conduct of a trade or business in the United States. |
• | you are an individual present in the U.S. for 183 days or more in the year of such sale, exchange or redemption and either (A) you have a “tax home” in the U.S. and certain other requirements are met, or (B) the gain from the disposition is attributable to your office or other fixed place of business in the U.S.; | |
• | the gain is effectively connected with your conduct of a trade or business in the U.S.; or | |
• | you are subject to provisions in the Internal Revenue Code applicable to certain U.S. expatriates. |
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• | you acquire the new notes in the ordinary course of your business; and | |
• | you are not engaged in, do not intend to engage in and have no arrangements or understanding with any person to participate in a distribution of such new notes within the meaning of the Securities Act. |
• | our “affiliate” within the meaning of Rule 405 under the Securities Act; or | |
• | a broker-dealer that acquired old notes directly from us. |
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H&E EQUIPMENT SERVICES, INC.
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H&E Equipment Services L.L.C. and Subsidiaries | ||||
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H&E Equipment Services, Inc. and Subsidiaries | ||||
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Eagle High Reach Equipment, Inc. and Subsidiary | ||||
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2005 | 2004 | |||||||
(Dollars in thousands) | ||||||||
ASSETS | ||||||||
Cash | $ | 5,627 | $ | 3,358 | ||||
Receivables, net of allowance for doubtful accounts of $2,364 and $2,732, respectively | 99,523 | 68,902 | ||||||
Inventories, net of reserve for obsolescence of $975 and $1,490, respectively | 81,093 | 56,811 | ||||||
Prepaid expenses and other assets | 1,378 | 1,044 | ||||||
Rental equipment, net of accumulated depreciation of $133,943 and $124,411, respectively | 308,036 | 243,630 | ||||||
Property and equipment, net of accumulated depreciation and amortization of $25,864 and $17,674, respectively | 18,284 | 16,101 | ||||||
Deferred financing costs, net of accumulated amortization of $7,250 and $5,092, respectively | 8,184 | 10,251 | ||||||
Goodwill | 8,572 | 8,572 | ||||||
Total assets | $ | 530,697 | $ | 408,669 | ||||
LIABILITIES AND MEMBERS’ DEFICIT | ||||||||
Liabilities: | ||||||||
Amount due on senior secured credit facility | $ | 106,451 | $ | 55,293 | ||||
Accounts payable | 149,901 | 92,592 | ||||||
Accrued expenses payable and other liabilities | 22,798 | 20,919 | ||||||
Accrued loss from litigation | — | 17,434 | ||||||
Related party obligation | 869 | 1,062 | ||||||
Notes payable | 521 | 727 | ||||||
Senior secured notes, net of discount | 198,873 | 198,761 | ||||||
Senior subordinated notes, net of discount | 44,057 | 43,491 | ||||||
Capital lease obligations | — | 1,120 | �� | |||||
Deferred income taxes | 645 | — | ||||||
Deferred compensation payable | 11,722 | 10,570 | ||||||
Total liabilities | 535,837 | 441,969 | ||||||
Commitments and contingent liabilities (see Note 12 of Consolidated Financial Statements) | ||||||||
Members’ deficit | (5,140 | ) | (33,300 | ) | ||||
Total liabilities and members’ deficit | $ | 530,697 | $ | 408,669 | ||||
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2005 | 2004 | 2003 | ||||||||||
(Dollars in thousands, except | ||||||||||||
per share data) | ||||||||||||
Revenues: | ||||||||||||
Equipment rentals | $ | 190,794 | $ | 160,342 | $ | 153,851 | ||||||
New equipment sales | 156,341 | 116,907 | 81,692 | |||||||||
Used equipment sales | 111,139 | 84,999 | 70,926 | |||||||||
Parts sales | 70,066 | 58,014 | 53,658 | |||||||||
Service revenue | 41,485 | 33,696 | 33,349 | |||||||||
Other | 30,385 | 24,214 | 20,510 | |||||||||
Total revenues | 600,210 | 478,172 | 413,986 | |||||||||
Cost of revenues: | ||||||||||||
Rental depreciation | 54,534 | 49,590 | 55,244 | |||||||||
Rental expense | 47,027 | 50,666 | 49,696 | |||||||||
New equipment sales | 137,169 | 104,111 | 73,228 | |||||||||
Used equipment sales | 84,696 | 67,906 | 58,145 | |||||||||
Parts sales | 49,615 | 41,500 | 39,086 | |||||||||
Service revenue | 15,417 | 12,865 | 13,043 | |||||||||
Other | 30,151 | 28,246 | 26,433 | |||||||||
Total cost of revenues | 418,609 | 354,884 | 314,875 | |||||||||
Gross profit | 181,601 | 123,288 | 99,111 | |||||||||
Selling, general and administrative expenses | 111,409 | 97,525 | 93,054 | |||||||||
Loss from litigation | — | — | 17,434 | |||||||||
Related party expense | — | — | 1,275 | |||||||||
Gain on sale of property and equipment | 91 | 207 | 80 | |||||||||
Income (loss) from operations | 70,283 | 25,970 | (12,572 | ) | ||||||||
Other income (expense): | ||||||||||||
Interest expense | (41,822 | ) | (39,856 | ) | (39,394 | ) | ||||||
Other, net | 372 | 149 | 221 | |||||||||
Total other expense, net | (41,450 | ) | (39,707 | ) | (39,173 | ) | ||||||
Income (loss) before income taxes | 28,833 | (13,737 | ) | (51,745 | ) | |||||||
Income tax provision (benefit) | 673 | — | (5,694 | ) | ||||||||
Net income (loss) | $ | 28,160 | $ | (13,737 | ) | $ | (46,051 | ) | ||||
Net income (loss) per common share-basic and diluted | $ | 1.10 | $ | (0.54 | ) | $ | (1.81 | ) | ||||
Weighted average common shares outstanding-basic and diluted | 25,492 | 25,492 | 25,492 | |||||||||
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Total | ||||||||
Members’ | ||||||||
Member’s | Equity | |||||||
Interest | (Deficit) | |||||||
(Dollars in thousands) | ||||||||
Balance, December 31, 2002 | $ | 26,488 | $ | 26,488 | ||||
Net loss | (46,051 | ) | (46,051 | ) | ||||
Balance, December 31, 2003 | (19,563 | ) | (19,563 | ) | ||||
Net loss | (13,737 | ) | (13,737 | ) | ||||
Balance, December 31, 2004 | (33,300 | ) | (33,300 | ) | ||||
Net income | 28,160 | 28,160 | ||||||
Balance, December 31, 2005 | $ | (5,140 | ) | $ | (5,140 | ) | ||
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2005 | 2004 | 2003 | ||||||||||
(Dollars in thousands) | ||||||||||||
Cash flows from operating activities: | ||||||||||||
Net income (loss) | $ | 28,160 | $ | (13,737 | ) | $ | (46,051 | ) | ||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||||||
Depreciation on property and equipment | 5,232 | 3,642 | 3,915 | |||||||||
Depreciation on rental equipment | 54,534 | 49,590 | 55,244 | |||||||||
Amortization of other intangible assets | 94 | 295 | — | |||||||||
Amortization of loan discounts and deferred financing costs | 2,744 | 2,627 | 2,394 | |||||||||
Provision for deferred income taxes | 645 | — | (5,717 | ) | ||||||||
Provision for losses on accounts receivable | 1,508 | 1,395 | 1,269 | |||||||||
Provision for obsolescence | 30 | 240 | 612 | |||||||||
Gain on sale of property and equipment | (91 | ) | (207 | ) | (80 | ) | ||||||
Gain on sale of rental equipment | (23,343 | ) | (15,230 | ) | (11,161 | ) | ||||||
Changes in operating assets and liabilities, net of effects of business combinations: | ||||||||||||
Receivables, net | (32,128 | ) | (7,682 | ) | 1,261 | |||||||
Inventories, net | (44,159 | ) | (22,263 | ) | (4,980 | ) | ||||||
Prepaid expenses and other assets | (335 | ) | 1,477 | (576 | ) | |||||||
Accounts payable | 57,309 | 1,146 | 233 | |||||||||
Accrued expenses payable and other liabilities | 1,986 | 4,674 | 4,882 | |||||||||
Accrued loss from litigation | (17,434 | ) | — | 17,434 | ||||||||
Deferred compensation payable | 1,152 | (328 | ) | 665 | ||||||||
Net cash provided by operating activities | 35,904 | 5,639 | 19,344 | |||||||||
Cash flows from investing activities: | ||||||||||||
Purchases of property and equipment | (8,283 | ) | (4,558 | ) | (2,483 | ) | ||||||
Purchases of rental equipment | (162,780 | ) | (72,940 | ) | (30,588 | ) | ||||||
Proceeds from sales of property and equipment | 960 | 349 | 2,700 | |||||||||
Proceeds from sales of rental equipment | 87,028 | 65,396 | 51,279 | |||||||||
Net cash provided by (used in) investing activities | (83,075 | ) | (11,753 | ) | 20,908 | |||||||
Cash flows from financing activities: | ||||||||||||
Payment of deferred financing costs | (92 | ) | (887 | ) | (1,089 | ) | ||||||
Borrowings on senior secured credit facility | 616,518 | 479,756 | 385,504 | |||||||||
Payments on senior secured credit facility | (565,360 | ) | (468,421 | ) | (418,270 | ) | ||||||
Payments of related party obligation | (300 | ) | (300 | ) | (75 | ) | ||||||
Principal payments on notes payable | (206 | ) | (336 | ) | (339 | ) | ||||||
Payments of capital lease obligations | (1,120 | ) | (4,231 | ) | (5,490 | ) | ||||||
Net cash provided by (used in) financing activities | 49,440 | 5,581 | (39,759 | ) | ||||||||
Net increase (decrease) in cash | 2,269 | (533 | ) | 493 | ||||||||
Cash, beginning of year | 3,358 | 3,891 | 3,398 | |||||||||
Cash, end of year | $ | 5,627 | $ | 3,358 | $ | 3,891 | ||||||
Supplemental schedule of noncash investing and financing activities: | ||||||||||||
Noncash asset purchases: | ||||||||||||
Assets transferred from new and used inventory to rental fleet | $ | 19,845 | $ | 9,292 | $ | 8,852 | ||||||
Supplemental disclosures of cash flow information: | ||||||||||||
Cash paid during the year for: | ||||||||||||
Interest | $ | 38,314 | $ | 33,648 | $ | 35,160 | ||||||
Income taxes, net of refunds received | 171 | 19 | 98 |
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(1) | Organization and Nature of Operations |
(2) | Summary of Significant Accounting Policies |
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Estimated | ||||
Category | Useful Life | |||
Transportation equipment | 5 years | |||
Buildings | 39 years | |||
Office equipment | 5 years | |||
Computer equipment | 3 years | |||
Machinery and equipment | 7 years |
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December 31, 2005 | ||||||||
Carrying | Fair | |||||||
Amount | Value | |||||||
Cash | $ | 5,627 | $ | 5,627 | ||||
Receivables | 99,523 | 99,523 | ||||||
Trade accounts payable | 56,173 | 56,173 | ||||||
Manufacturer flooring plans payable with interest computed at 8.25% | 93,728 | 66,545 | ||||||
Senior secured notes with interest computed at 111/8% | 198,873 | 222,000 | ||||||
Senior subordinated notes with interest computed at 121/2% | 44,057 | 59,095 | ||||||
Notes payable to financial institution with interest computed at 41/4% | 502 | 422 | ||||||
Notes payable to suppliers with interest computed at 7% to 7.25% | 16 | 16 | ||||||
Notes payable to finance companies with interest rates ranging from 91/2% to 101/2% | 3 | 3 | ||||||
Deferred compensation plans payable with interest rates ranging from 51/4% to 13% | 11,722 | 11,722 |
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December 31, 2004 | ||||||||
Carrying | Fair | |||||||
Amount | Value | |||||||
Cash | $ | 3,358 | $ | 3,358 | ||||
Receivables | 68,902 | 68,902 | ||||||
Trade accounts payable | 41,393 | 41,393 | ||||||
Manufacturer flooring plans payable with interest computed at 6.25% | 51,199 | 39,169 | ||||||
Senior secured notes with interest computed at 111/8% | 198,761 | 220,000 | ||||||
Senior subordinated notes with interest computed at 121/2% | 43,491 | 51,940 | ||||||
Notes payable to financial institution with interest computed at 41/4% | 654 | 516 | ||||||
Notes payable to suppliers with interest computed at 2.9% | 55 | 50 | ||||||
Notes payable to finance companies with interest rates ranging from 91/2% to 101/2% | 18 | 17 | ||||||
Deferred compensation plans payable with interest rates ranging from 4% to 13% | 10,570 | 10,570 |
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(3) | Receivables |
December 31, | ||||||||
2005 | 2004 | |||||||
Trade receivables | $ | 97,839 | $ | 68,704 | ||||
Unbilled rental revenue | 3,407 | 2,628 | ||||||
Income tax receivables | 445 | 218 | ||||||
Advances to employees | 19 | 21 | ||||||
Affiliated companies | 177 | 63 | ||||||
101,887 | 71,634 | |||||||
Less allowance for doubtful accounts | (2,364 | ) | (2,732 | ) | ||||
$ | 99,523 | $ | 68,902 | |||||
(4) | Inventories |
December 31, | ||||||||
2005 | 2004 | |||||||
New equipment | $ | 53,687 | $ | 33,598 | ||||
Used equipment | 8,657 | 6,331 | ||||||
Parts, supplies and other | 18,749 | 16,882 | ||||||
$ | 81,093 | $ | 56,811 | |||||
(5) | Property and Equipment |
December 31, | ||||||||
2005 | 2004 | |||||||
Land | $ | 1,079 | $ | 1,331 | ||||
Transportation equipment | 17,551 | 11,780 | ||||||
Building and leasehold improvements | 8,968 | 8,295 | ||||||
Office and computer equipment | 10,543 | 7,528 | ||||||
Machinery and equipment | 6,007 | 4,841 | ||||||
44,148 | 33,775 | |||||||
Less accumulated depreciation | (25,864 | ) | (17,674 | ) | ||||
$ | 18,284 | $ | 16,101 | |||||
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(6) | Accounts Payable |
December 31, | ||||||||
2005 | 2004 | |||||||
Trade accounts payable | $ | 56,173 | $ | 41,393 | ||||
Manufacturer flooring plans payable | 93,728 | 51,199 | ||||||
$ | 149,901 | $ | 92,592 | |||||
2006 | $ | 17,868 | ||
2007 | 25,245 | |||
2008 | 17,511 | |||
2009 | 18,603 | |||
2010 | 10,007 | |||
Thereafter | 4,494 | |||
$ | 93,728 | |||
(7) | Accrued Expenses Payable and Other Liabilities |
December 31, | ||||||||
2005 | 2004 | |||||||
Payroll and related liabilities | $ | 9,978 | $ | 6,788 | ||||
Sales, use and property taxes | 5,142 | 3,969 | ||||||
Accrued interest | 1,664 | 3,088 | ||||||
Accrued insurance | 3,755 | 2,532 | ||||||
Deferred revenue | 2,148 | 2,139 | ||||||
Other | 107 | 2,403 | ||||||
$ | 22,794 | $ | 20,919 | |||||
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(8) | Notes Payable |
December 31, | ||||||||
2005 | 2004 | |||||||
Notes payable to a financial institution maturing through 2009. Payable in monthly installments of approximately $19. Interest is at 4.25%. Notes are collateralized by real estate | $ | 502 | $ | 654 | ||||
Notes payable to suppliers maturing through 2005. Payable in monthly installments of approximately $16. Interest ranges from 7% to 7.25%. Notes are collateralized by equipment | 16 | 55 | ||||||
Notes payable to finance companies maturing through 2006. Payable in monthly installments of approximately $0.7. Interest ranges from 9.5% to 10.5%. Notes are collateralized by equipment | 3 | 18 | ||||||
$ | 521 | $ | 727 | |||||
2006 | $ | 171 | ||
2007 | 151 | |||
2008 | 151 | |||
2009 | 48 | |||
$ | 521 | |||
(9) | Capital Lease Obligations |
December 31, | ||||||||
2005 | 2004 | |||||||
Rental equipment | $ | — | $ | 4,182 | ||||
Less accumulated amortization | — | (1,471 | ) | |||||
$ | — | $ | 2,711 | |||||
(10) | Senior Secured Notes, Senior Subordinated Notes and Senior Secured Credit Facility |
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Aggregate principal amount issued on June 17, 2002 | $ | 200,000 | ||
Initial purchasers’ discount | (1,474 | ) | ||
Amortization through December 31, 2004 | 235 | |||
Balance at December 31, 2004 | 198,761 | |||
Amortization for the year ended December 31, 2005 | 112 | |||
Balance at December 31, 2005 | $ | 198,873 | ||
Aggregate principal amount issued on June 17, 2002 | $ | 53,000 | ||
Initial purchasers’ discount | (10,591 | ) | ||
Amortization through December 31, 2004 | 1,082 | |||
Balance at December 31, 2004 | 43,491 | |||
Amortization for the year ended December 31, 2005 | 566 | |||
Balance at December 31, 2005 | $ | 44,057 | ||
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• | lowers interest rates according to a pricing grid based upon daily average excess availability for the immediately preceding fiscal month. We elect interest at either (1) the Index rate (the higher of the prime rate, as determined pursuant to the amended credit agreement, and the federal funds rate plus 50 basis points) plus the applicable revolver Index margin per annum or the applicable LIBOR rate or (2) LIBOR rate, plus the applicable revolver LIBOR margin per each calendar month. With daily average excess availability equal to or more than $40 million, the LIBOR margin shall be 2.25% and the Index margin shall be .75%. If availability falls below $40 million and equal to or more than $25 million, the senior secured credit facility bears interest at a LIBOR margin of 2.50% and the Index margin shall be 1.00%. If availability is less than $25 million, the LIBOR margin will be 2.75% and |
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the Index margin shall be 1.25%. The commitment fee equal to .5% per annum in respect to un-drawn commitments remains unchanged; |
• | decreases the block on availability of assets from $30.0 million to $15.0 million based on the total borrowing base assets; and | |
• | increases the advance rate on rental fleet assets to 80% of orderly liquidation value as defined in the senior secured credit agreement. |
• | increases the aggregate revolving loan commitment from $150.0 million to our current amount of $165.0 million; | |
• | increases the block on availability of assets from $15.0 million to $16.5 million, based on the total borrowing base assets; and | |
• | increases the lien basket for purchase money indebtedness and conditional sale or other title retention agreements with respect to equipment, from $90.0 million to $125.0 million. |
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(11) | Income Taxes |
Current | Deferred | Total | ||||||||||
Year ended December 31, 2005: | ||||||||||||
U.S. Federal | $ | 25 | $ | 645 | $ | 670 | ||||||
State | 3 | — | 3 | |||||||||
$ | 28 | $ | 645 | $ | 673 | |||||||
Year ended December 31, 2004: | ||||||||||||
U.S. Federal | $ | — | $ | — | $ | — | ||||||
State | — | — | — | |||||||||
$ | — | $ | — | $ | — | |||||||
Year ended December 31, 2003: | ||||||||||||
U.S. Federal | $ | 67 | $ | (5,717 | ) | $ | (5,650 | ) | ||||
State | (44 | ) | — | (44 | ) | |||||||
$ | 23 | $ | (5,717 | ) | $ | (5,694 | ) | |||||
F-20
Table of Contents
December 31, | ||||||||
2005 | 2004 | |||||||
Deferred tax assets: | ||||||||
Accounts receivable | $ | 898 | $ | 1,038 | ||||
Inventories | 370 | 566 | ||||||
Net operating losses | 55,621 | 52,473 | ||||||
AMT credit | 857 | 832 | ||||||
Sec 263A costs | 885 | 629 | ||||||
Accrued liabilities | 1,997 | 8,906 | ||||||
Deferred compensation | 2,366 | 2,366 | ||||||
Accrued interest | 2,089 | 1,651 | ||||||
Interest expense-high yield debt | — | — | ||||||
Other assets | 401 | 520 | ||||||
65,484 | 68,981 | |||||||
Valuation allowance | (8,246 | ) | (19,099 | ) | ||||
57,238 | 49,882 | |||||||
Deferred tax liabilities: | ||||||||
Property and equipment | (55,718 | ) | (47,901 | ) | ||||
Investments | (1,520 | ) | (1,520 | ) | ||||
Goodwill | (645 | ) | (461 | ) | ||||
(57,883 | ) | (49,882 | ) | |||||
Net deferred tax liabilities | $ | (645 | ) | $ | — | |||
F-21
Table of Contents
December 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
Computed tax at statutory rate of 34% | $ | 9,803 | $ | (4,670 | ) | $ | (17,593 | ) | ||||
Permanent items — other | 501 | (629 | ) | 411 | ||||||||
Permanent Items — excess of tax deductible goodwill | (2,069 | ) | — | — | ||||||||
State income tax — net of federal tax effect | 1,147 | (594 | ) | (1,446 | ) | |||||||
Change in valuation allowance | (10,853 | ) | 5,643 | 13,456 | ||||||||
Prior year deferred tax revisions | 2,321 | — | — | |||||||||
Other | (177 | ) | 250 | (522 | ) | |||||||
$ | 673 | $ | — | $ | (5,694 | ) | ||||||
(12) | Commitments and Contingencies |
2006 | $ | 21,374 | ||
2007 | 18,144 | |||
2008 | 4,325 | |||
2009 | 2,705 | |||
2010 | 2,382 | |||
Thereafter | 11,816 | |||
$ | 60,746 | |||
F-22
Table of Contents
(13) | Employee Benefit Plan |
(14) | Deferred Compensation Plans |
F-23
Table of Contents
(15) | Related Party Transactions |
F-24
Table of Contents
(16) | Earnings per Share |
Year Ended December 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
Net income (loss) | $ | 28,160 | $ | (13,737 | ) | $ | (46,051 | ) | ||||
Weighted average number of common shares outstanding — basic and diluted | 25,492 | 25,492 | 25,492 | |||||||||
Net income (loss) per common share — basic and diluted | $ | 1.10 | $ | (0.54 | ) | $ | (1.81 | ) |
F-25
Table of Contents
(17) | Quarterly Financial Data (Unaudited) |
First | Second | Third | Fourth | |||||||||||||
Quarter | Quarter | Quarter | Quarter | |||||||||||||
2005: | ||||||||||||||||
Net revenues | $ | 128,550 | $ | 137,730 | $ | 148,456 | $ | 185,474 | ||||||||
Operating income | $ | 10,965 | $ | 14,705 | $ | 18,697 | $ | 25,916 | ||||||||
Net income | $ | 951 | $ | 4,293 | $ | 8,225 | $ | 14,691 | ||||||||
Net income per common share | $ | 0.04 | $ | 0.17 | $ | 0.32 | $ | 0.58 | ||||||||
2004: | ||||||||||||||||
Net revenues | $ | 111,956 | $ | 113,691 | $ | 120,974 | $ | 131,551 | ||||||||
Operating income | $ | 812 | $ | 4,627 | $ | 8,943 | $ | 11,588 | ||||||||
Net income (loss) | $ | (9,048 | ) | $ | (5,104 | ) | $ | (1,207 | ) | $ | 1,622 | |||||
Net income (loss) per common share | $ | (0.35 | ) | $ | (0.20 | ) | $ | (0.05 | ) | $ | 0.06 |
(18) | Segment Information |
F-26
Table of Contents
Years Ended December 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
Revenues: | ||||||||||||
Equipment rentals | $ | 190,794 | $ | 160,342 | $ | 153,851 | ||||||
New equipment sales | 156,341 | 116,907 | 81,692 | |||||||||
Used equipment sales | 111,139 | 84,999 | 70,926 | |||||||||
Parts sales | 70,066 | 58,014 | 53,658 | |||||||||
Service revenue | 41,485 | 33,696 | 33,349 | |||||||||
Total segmented revenues | 569,825 | 453,958 | 393,476 | |||||||||
Non-segmented revenues | 30,385 | 24,214 | 20,510 | |||||||||
Total revenues | $ | 600,210 | $ | 478,172 | $ | 413,986 | ||||||
Gross Profit: | ||||||||||||
Equipment rentals | $ | 89,233 | $ | 60,086 | $ | 48,911 | ||||||
New equipment sales | 19,172 | 12,796 | 8,464 | |||||||||
Used equipment sales | 26,443 | 17,093 | 12,781 | |||||||||
Parts sales | 20,451 | 16,514 | 14,572 | |||||||||
Service revenue | 26,068 | 20,831 | 20,306 | |||||||||
Total gross profit from revenues | 181,367 | 127,320 | 105,034 | |||||||||
Non-segmented gross profit (loss) | 234 | (4,032 | ) | (5,923 | ) | |||||||
Total gross profit | $ | 181,601 | $ | 123,288 | $ | 99,111 | ||||||
December 31, | ||||||||
2005 | 2004 | |||||||
Segment identified assets: | ||||||||
Equipment sales | $ | 62,344 | $ | 39,928 | ||||
Equipment rentals | 308,036 | 243,630 | ||||||
Parts and service | 18,749 | 16,882 | ||||||
Total segment identified assets | 389,129 | 300,440 | ||||||
Non-segment identified assets | 141,568 | 108,229 | ||||||
Total assets | $ | 530,697 | $ | 408,669 | ||||
F-27
Table of Contents
(19) | Condensed Consolidating Financial Information of Guarantor Subsidiaries |
F-28
Table of Contents
As of December 31, 2005 | ||||||||||||||||
H&E | ||||||||||||||||
Equipment | Guarantor | |||||||||||||||
Services | Subsidiaries | Elimination | Consolidated | |||||||||||||
ASSETS: | ||||||||||||||||
Cash | $ | 5,610 | $ | 17 | $ | — | $ | 5,627 | ||||||||
Receivables, net | 95,427 | 4,096 | — | 99,523 | ||||||||||||
Inventories, net | 76,533 | 4,560 | — | 81,093 | ||||||||||||
Prepaid expenses and other assets | 1,378 | — | — | 1,378 | ||||||||||||
Rental equipment, net | 298,708 | 9,328 | — | 308,036 | ||||||||||||
Property and equipment, net | 17,526 | 758 | — | 18,284 | ||||||||||||
Deferred financing costs, net | 8,184 | — | — | 8,184 | ||||||||||||
Investment in guarantor subsidiaries | 7,025 | — | (7,025 | ) | — | |||||||||||
Goodwill | 8,572 | — | — | 8,572 | ||||||||||||
Total assets | $ | 518,963 | $ | 18,759 | $ | (7,025 | ) | $ | 530,697 | |||||||
LIABILITIES AND MEMBER’S EQUITY (DEFICIT): | ||||||||||||||||
Amount due on senior secured credit facility | $ | 102,980 | $ | 3,471 | $ | — | $ | 106,451 | ||||||||
Accounts payable | 149,901 | — | — | 149,901 | ||||||||||||
Accrued expenses payable and other liabilities | 22,696 | 102 | — | 22,798 | ||||||||||||
Intercompany balance | (8,161 | ) | 8,161 | — | — | |||||||||||
Related party obligation | 869 | — | — | 869 | ||||||||||||
Notes payable | 521 | — | — | 521 | ||||||||||||
Senior secured notes, net of discount | 198,873 | — | — | 198,873 | ||||||||||||
Senior subordinated notes, net of discount | 44,057 | — | — | 44,057 | ||||||||||||
Deferred income taxes | 645 | — | — | 645 | ||||||||||||
Deferred compensation payable | 11,722 | — | — | 11,722 | ||||||||||||
Total liabilities | 524,103 | 11,734 | — | 535,837 | ||||||||||||
Members’ equity (deficit) | (5,140 | ) | 7,025 | (7,025 | ) | (5,140 | ) | |||||||||
Total liabilities and members’ equity (deficit) | $ | 518,963 | $ | 18,759 | $ | (7,025 | ) | $ | 530,697 | |||||||
F-29
Table of Contents
As of December 31, 2004 | ||||||||||||||||
H&E | ||||||||||||||||
Equipment | Guarantor | |||||||||||||||
Services | Subsidiaries | Elimination | Consolidated | |||||||||||||
ASSETS: | ||||||||||||||||
Cash | $ | 3,334 | $ | 24 | $ | — | $ | 3,358 | ||||||||
Receivables, net | 66,434 | 2,468 | — | 68,902 | ||||||||||||
Inventories, net | 52,641 | 4,170 | — | 56,811 | ||||||||||||
Prepaid expenses and other assets | 1,044 | — | — | 1,044 | ||||||||||||
Rental equipment, net | 231,330 | 12,300 | — | 243,630 | ||||||||||||
Property and equipment, net | 15,615 | 486 | — | 16,101 | ||||||||||||
Deferred financing costs, net | 10,251 | — | — | 10,251 | ||||||||||||
Investment in guarantor subsidiaries | 5,238 | — | (5,238 | ) | — | |||||||||||
Goodwill | 8,572 | — | — | 8,572 | ||||||||||||
Total assets | $ | 394,459 | $ | 19,448 | $ | (5,238 | ) | $ | 408,669 | |||||||
LIABILITIES AND MEMBER’S EQUITY (DEFICIT): | ||||||||||||||||
Amount due on senior secured credit facility | $ | 51,822 | $ | 3,471 | $ | — | $ | 55,293 | ||||||||
Accounts payable | 92,592 | — | — | 92,592 | ||||||||||||
Accrued expenses payable and other liabilities | 20,804 | 115 | — | 20,919 | ||||||||||||
Intercompany balance | (10,624 | ) | 10,624 | — | — | |||||||||||
Accrued loss from litigation | 17,434 | — | — | 17,434 | ||||||||||||
Related party obligation | 1,062 | — | — | 1,062 | ||||||||||||
Notes payable | 727 | — | — | 727 | ||||||||||||
Senior secured notes, net of discount | 198,761 | — | — | 198,761 | ||||||||||||
Senior subordinated notes, net of discount | 43,491 | — | — | 43,491 | ||||||||||||
Capital lease obligations | 1,120 | — | — | 1,120 | ||||||||||||
Deferred compensation payable | 10,570 | — | — | 10,570 | ||||||||||||
Total liabilities | 427,759 | 14,210 | — | 441,969 | ||||||||||||
Members’ equity (deficit) | (33,300 | ) | 5,238 | (5,238 | ) | (33,300 | ) | |||||||||
Total liabilities and members’ equity (deficit) | $ | 394,459 | $ | 19,448 | $ | (5,238 | ) | $ | 408,669 | |||||||
F-30
Table of Contents
Year Ended December 31, 2005 | ||||||||||||||||
H&E | ||||||||||||||||
Equipment | Guarantor | |||||||||||||||
Services | Subsidiaries | Elimination | Consolidated | |||||||||||||
Revenues: | ||||||||||||||||
Equipment rentals | $ | 183,391 | $ | 7,403 | $ | — | $ | 190,794 | ||||||||
New equipment sales | 150,593 | 5,748 | — | 156,341 | ||||||||||||
Used equipment sales | 103,961 | 7,178 | — | 111,139 | ||||||||||||
Parts sales | 67,877 | 2,189 | — | 70,066 | ||||||||||||
Service revenue | 40,176 | 1,309 | — | 41,485 | ||||||||||||
Other | 29,182 | 1,203 | — | 30,385 | ||||||||||||
Total revenues | 575,180 | 25,030 | — | 600,210 | ||||||||||||
Cost of revenues: | ||||||||||||||||
Rental depreciation | 52,177 | 2,357 | — | 54,534 | ||||||||||||
Rental expense | 45,995 | 1,032 | — | 47,027 | ||||||||||||
New equipment sales | 132,308 | 4,861 | — | 137,169 | ||||||||||||
Used equipment sales | 79,442 | 5,254 | — | 84,696 | ||||||||||||
Parts sales | 48,092 | 1,523 | — | 49,615 | ||||||||||||
Service revenue | 15,035 | 382 | — | 15,417 | ||||||||||||
Other | 28,940 | 1,211 | — | 30,151 | ||||||||||||
Total cost of revenues | 401,989 | 16,620 | — | 418,609 | ||||||||||||
Gross profit: | ||||||||||||||||
Equipment rentals | 85,219 | 4,014 | — | 89,233 | ||||||||||||
New equipment sales | 18,285 | 887 | — | 19,172 | ||||||||||||
Used equipment sales | 24,519 | 1,924 | — | 26,443 | ||||||||||||
Parts sales | 19,785 | 666 | — | 20,451 | ||||||||||||
Service revenue | 25,141 | 927 | — | 26,068 | ||||||||||||
Other | 242 | (8 | ) | — | 234 | |||||||||||
Gross profit | 173,191 | 8,410 | — | 181,601 | ||||||||||||
Selling, general and administrative expenses | 105,982 | 5,427 | — | 111,409 | ||||||||||||
Equity in loss of guarantor subsidiaries | 1,787 | — | (1,787 | ) | — | |||||||||||
Gain on sale of property and equipment | 58 | 33 | — | 91 | ||||||||||||
Income (loss) from operations | 69,054 | 3,016 | (1,787 | ) | 70,283 | |||||||||||
Other income (expense): | ||||||||||||||||
Interest expense | (40,583 | ) | (1,239 | ) | — | (41,822 | ) | |||||||||
Other, net | 362 | 10 | — | 372 | ||||||||||||
Total other expense, net | (40,221 | ) | (1,229 | ) | — | (41,450 | ) | |||||||||
Income before income taxes | 28,833 | 1,787 | (1,787 | ) | 28,833 | |||||||||||
Income tax provision | 673 | — | — | 673 | ||||||||||||
Net income | $ | 28,160 | $ | 1,787 | $ | (1,787 | ) | $ | 28,160 | |||||||
F-31
Table of Contents
Year Ended December 31, 2004 | ||||||||||||||||
H&E | ||||||||||||||||
Equipment | Guarantor | |||||||||||||||
Services | Subsidiaries | Elimination | Consolidated | |||||||||||||
Revenues: | ||||||||||||||||
Equipment rentals | $ | 154,333 | $ | 6,009 | $ | — | $ | 160,342 | ||||||||
New equipment sales | 112,790 | 4,117 | — | 116,907 | ||||||||||||
Used equipment sales | 80,248 | 4,751 | — | 84,999 | ||||||||||||
Parts sales | 56,331 | 1,683 | — | 58,014 | ||||||||||||
Service revenue | 32,607 | 1,089 | — | 33,696 | ||||||||||||
Other | 23,421 | 793 | — | 24,214 | ||||||||||||
Total revenues | 459,730 | 18,442 | — | 478,172 | ||||||||||||
Cost of revenues: | ||||||||||||||||
Rental depreciation | 47,650 | 1,940 | — | 49,590 | ||||||||||||
Rental expense | 49,520 | 1,146 | — | 50,666 | ||||||||||||
New equipment sales | 100,628 | 3,483 | — | 104,111 | ||||||||||||
Used equipment sales | 64,384 | 3,522 | — | 67,906 | ||||||||||||
Parts sales | 40,343 | 1,157 | — | 41,500 | ||||||||||||
Service revenue | 12,532 | 333 | — | 12,865 | ||||||||||||
Other | 27,084 | 1,162 | — | 28,246 | ||||||||||||
Total cost of revenues | 342,141 | 12,743 | — | 354,884 | ||||||||||||
Gross profit: | ||||||||||||||||
Equipment rentals | 57,163 | 2,923 | — | 60,086 | ||||||||||||
New equipment sales | 12,162 | 634 | — | 12,796 | ||||||||||||
Used equipment sales | 15,864 | 1,229 | — | 17,093 | ||||||||||||
Parts sales | 15,988 | 526 | — | 16,514 | ||||||||||||
Service revenue | 20,075 | 756 | — | 20,831 | ||||||||||||
Other | (3,663 | ) | (369 | ) | — | (4,032 | ) | |||||||||
Gross profit | 117,589 | 5,699 | — | 123,288 | ||||||||||||
Selling, general and administrative expenses | 93,499 | 4,026 | — | 97,525 | ||||||||||||
Loss from litigation | — | — | — | — | ||||||||||||
Related party expense | — | — | — | — | ||||||||||||
Equity in loss of guarantor subsidiaries | 774 | — | (774 | ) | — | |||||||||||
Gain on sale of property and equipment | 183 | 24 | — | 207 | ||||||||||||
Income from operations | 25,047 | 1,697 | (774 | ) | 25,970 | |||||||||||
Other income (expense): | ||||||||||||||||
Interest expense | (38,919 | ) | (937 | ) | — | (39,856 | ) | |||||||||
Other, net | 135 | 14 | — | 149 | ||||||||||||
Total other expense, net | (38,784 | ) | (923 | ) | — | (39,707 | ) | |||||||||
Income (loss) before income taxes | (13,737 | ) | 774 | (774 | ) | (13,737 | ) | |||||||||
Income tax provision | — | — | — | — | ||||||||||||
Net income (loss) | $ | (13,737 | ) | $ | 774 | $ | (774 | ) | $ | (13,737 | ) | |||||
F-32
Table of Contents
Year Ended December 31, 2003 | ||||||||||||||||
H&E | ||||||||||||||||
Equipment | Guarantor | |||||||||||||||
Services | Subsidiaries | Elimination | Consolidated | |||||||||||||
Revenues: | ||||||||||||||||
Equipment rentals | $ | 149,092 | $ | 4,759 | $ | — | $ | 153,851 | ||||||||
New equipment sales | 79,534 | 2,158 | — | 81,692 | ||||||||||||
Used equipment sales | 66,948 | 3,978 | — | 70,926 | ||||||||||||
Parts sales | 52,278 | 1,380 | — | 53,658 | ||||||||||||
Service revenue | 32,479 | 870 | — | 33,349 | ||||||||||||
Other | 19,940 | 570 | — | 20,510 | ||||||||||||
Total Revenues | 400,271 | 13,715 | — | 413,986 | ||||||||||||
Cost of revenues: | ||||||||||||||||
Rental depreciation | 53,447 | 1,797 | — | 55,244 | ||||||||||||
Rental expense | 48,762 | 934 | — | 49,696 | ||||||||||||
New equipment sales | 71,286 | 1,942 | — | 73,228 | ||||||||||||
Used equipment sales | 55,219 | 2,926 | — | 58,145 | ||||||||||||
Parts sales | 38,117 | 969 | — | 39,086 | ||||||||||||
Service revenue | 12,748 | 295 | — | 13,043 | ||||||||||||
Other | 25,685 | 748 | — | 26,433 | ||||||||||||
Total cost of revenues | 305,264 | 9,611 | — | 314,875 | ||||||||||||
Gross profit: | ||||||||||||||||
Equipment rentals | 46,883 | 2,028 | — | 48,911 | ||||||||||||
New equipment sales | 8,248 | 216 | — | 8,464 | ||||||||||||
Used equipment sales | 11,729 | 1,052 | — | 12,781 | ||||||||||||
Parts sales | 14,161 | 411 | — | 14,572 | ||||||||||||
Service revenue | 19,731 | 575 | — | 20,306 | ||||||||||||
Other | (5,745 | ) | (178 | ) | — | (5,923 | ) | |||||||||
Gross profit | 95,007 | 4,104 | — | 99,111 | ||||||||||||
Selling, general and administrative expenses | 89,379 | 3,675 | — | 93,054 | ||||||||||||
Loss from litigation | 17,434 | — | — | 17,434 | ||||||||||||
Related party expense | 1,275 | — | — | 1,275 | ||||||||||||
Equity in loss of guarantor subsidiaries | (377 | ) | — | 377 | — | |||||||||||
Gain on sale of property and equipment | 42 | 38 | — | 80 | ||||||||||||
Income (loss) from operations | (13,416 | ) | 467 | 377 | (12,572 | ) | ||||||||||
Other income (expense): | ||||||||||||||||
Interest expense | (38,547 | ) | (847 | ) | — | (39,394 | ) | |||||||||
Other, net | 218 | 3 | — | 221 | ||||||||||||
Total other expense, net | (38,329 | ) | (844 | ) | — | (39,173 | ) | |||||||||
Loss before income taxes | (51,745 | ) | (377 | ) | 377 | (51,745 | ) | |||||||||
Income tax provision | (5,694 | ) | — | — | (5,694 | ) | ||||||||||
Net loss | $ | (46,051 | ) | $ | (377 | ) | $ | 377 | $ | (46,051 | ) | |||||
F-33
Table of Contents
Year Ended December 31, 2005 | ||||||||||||||||
H&E | ||||||||||||||||
Equipment | Guarantor | |||||||||||||||
Services | Subsidiaries | Elimination | Consolidated | |||||||||||||
Cash flows from operating activities: | ||||||||||||||||
Net income | $ | 28,160 | $ | 1,787 | $ | (1,787 | ) | $ | 28,160 | |||||||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||||||||||
Depreciation on property and equipment | 5,023 | 209 | — | 5,232 | ||||||||||||
Depreciation on rental equipment | 52,177 | 2,357 | — | 54,534 | ||||||||||||
Amortization of other intangible assets | 94 | — | — | 94 | ||||||||||||
Amortization of loan discounts and deferred financing costs | 2,744 | — | — | 2,744 | ||||||||||||
Provision for losses on accounts receivable | 1,396 | 112 | — | 1,508 | ||||||||||||
Provision for obsolescence | 30 | — | — | 30 | ||||||||||||
Gain on sale of property and equipment | (124 | ) | 33 | — | (91 | ) | ||||||||||
Gain on sale of rental equipment | (25,164 | ) | 1,821 | — | (23,343 | ) | ||||||||||
Provision for deferred taxes | 645 | — | — | 645 | ||||||||||||
Equity in earnings of guarantor subsidiaries | (1,787 | ) | — | 1,787 | — | |||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||
Receivables, net | (30,388 | ) | (1,740 | ) | — | (32,128 | ) | |||||||||
Inventories, net | (33,578 | ) | (10,581 | ) | — | (44,159 | ) | |||||||||
Prepaid expenses and other assets | (335 | ) | — | — | (335 | ) | ||||||||||
Accounts payable | 57,309 | — | — | 57,309 | ||||||||||||
Accrued expenses payable and other liabilities | 1,999 | (13 | ) | — | 1,986 | |||||||||||
Intercompany balance | 2,463 | (2,463 | ) | — | — | |||||||||||
Accrued loss from litigation | (17,434 | ) | — | — | (17,434 | ) | ||||||||||
Deferred compensation payable | 1,152 | — | — | 1,152 | ||||||||||||
Net cash provided by (used in) operating activities | 44,382 | (8,478 | ) | — | 35,904 | |||||||||||
Cash flows from investing activities: | ||||||||||||||||
Purchases of property and equipment | (7,732 | ) | (551 | ) | — | (8,283 | ) | |||||||||
Purchases of rental equipment | (165,133 | ) | 2,353 | — | (162,780 | ) | ||||||||||
Proceeds from sale of property and equipment | 923 | 37 | — | 960 | ||||||||||||
Proceeds from sale of rental equipment | 80,396 | 6,632 | — | 87,028 | ||||||||||||
Net cash provided by (used in) investing activities | (91,546 | ) | 8,471 | — | (83,075 | ) | ||||||||||
Cash flows from financing activities: | ||||||||||||||||
Payment of deferred financing costs | (92 | ) | — | — | (92 | ) | ||||||||||
Borrowings on senior secured credit facility | 616,518 | — | — | 616,518 | ||||||||||||
Payments on senior secured credit facility | (565,360 | ) | — | — | (565,360 | ) | ||||||||||
Payment of related party obligation | (300 | ) | — | — | (300 | ) | ||||||||||
Principal payments of notes payable | (206 | ) | — | — | (206 | ) | ||||||||||
Payments on capital lease obligations | (1,120 | ) | — | — | (1,120 | ) | ||||||||||
Net cash provided by (used in) financing activities | 49,440 | — | — | 49,440 | ||||||||||||
Net (decrease) increase in cash | 2,276 | (7 | ) | — | 2,269 | |||||||||||
Cash, beginning of year | 3,334 | 24 | — | 3,358 | ||||||||||||
Cash, end of year | $ | 5,610 | $ | 17 | $ | — | $ | 5,627 | ||||||||
F-34
Table of Contents
Year Ended December 31, 2004 | ||||||||||||||||
H&E | ||||||||||||||||
Equipment | Guarantor | |||||||||||||||
Services | Subsidiaries | Elimination | Consolidated | |||||||||||||
Cash flows from operating activities: | ||||||||||||||||
Net income (loss) | $ | (13,737 | ) | $ | 774 | $ | (774 | ) | $ | (13,737 | ) | |||||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||||||||||
Depreciation on property and equipment | 3,493 | 149 | — | 3,642 | ||||||||||||
Depreciation on rental equipment | 46,666 | 2,924 | — | 49,590 | ||||||||||||
Amortization of other intangible assets | 295 | — | — | 295 | ||||||||||||
Amortization of loan discounts and deferred financing costs | 2,627 | — | — | 2,627 | ||||||||||||
Provision for losses on accounts receivable | 1,341 | 54 | — | 1,395 | ||||||||||||
Provision for obsolescence | 240 | — | — | 240 | ||||||||||||
Gain on sale of property and equipment | (183 | ) | (24 | ) | — | (207 | ) | |||||||||
Gain on sale of rental equipment | (14,112 | ) | (1,118 | ) | — | (15,230 | ) | |||||||||
Equity in loss of guarantor subsidiaries | (774 | ) | — | 774 | — | |||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||
Receivables, net | (6,457 | ) | (1,225 | ) | — | (7,682 | ) | |||||||||
Inventories, net | (14,752 | ) | (7,511 | ) | — | (22,263 | ) | |||||||||
Prepaid expenses and other assets | 1,477 | — | — | 1,477 | ||||||||||||
Accounts payable | 1,146 | — | — | 1,146 | ||||||||||||
Accrued expenses payable and other liabilities | 4,719 | (45 | ) | — | 4,674 | |||||||||||
Intercompany balance | (7,800 | ) | 7,800 | — | — | |||||||||||
Accrued loss from litigation | — | — | — | — | ||||||||||||
Deferred compensation payable | (328 | ) | — | — | (328 | ) | ||||||||||
Net cash provided by operating activities | 3,861 | 1,778 | — | 5,639 | ||||||||||||
Cash flows from investing activities: | ||||||||||||||||
Purchases of property and equipment | (4,176 | ) | (382 | ) | — | (4,558 | ) | |||||||||
Purchases of rental equipment | (68,117 | ) | (4,823 | ) | — | (72,940 | ) | |||||||||
Proceeds from sale of property and equipment | 322 | 27 | — | 349 | ||||||||||||
Proceeds from sale of rental equipment | 61,187 | 4,209 | — | 65,396 | ||||||||||||
Net cash used in investing activities | (10,784 | ) | (969 | ) | — | (11,753 | ) | |||||||||
Cash flows from financing activities: | ||||||||||||||||
Payment of deferred financing costs | (887 | ) | — | — | (887 | ) | ||||||||||
Borrowings on senior secured credit facility | 479,756 | — | — | 479,756 | ||||||||||||
Payments on senior secured credit facility | (467,613 | ) | (808 | ) | — | (468,421 | ) | |||||||||
Payment of related party obligation | (300 | ) | — | — | (300 | ) | ||||||||||
Principal payments of notes payable | (336 | ) | — | — | (336 | ) | ||||||||||
Payments on capital lease obligations | (4,231 | ) | — | — | (4,231 | ) | ||||||||||
Net cash provided by (used in) financing activities | 6,389 | (808 | ) | — | 5,581 | |||||||||||
Net (decrease) increase in cash | (534 | ) | 1 | — | (533 | ) | ||||||||||
Cash, beginning of year | 3,868 | 23 | 3,891 | |||||||||||||
Cash, end of year | $ | 3,334 | $ | 24 | $ | — | $ | 3,358 | ||||||||
F-35
Table of Contents
Year Ended December 31, 2003 | ||||||||||||||||
H&E | ||||||||||||||||
Equipment | Guarantor | |||||||||||||||
Services | Subsidiaries | Elimination | Consolidated | |||||||||||||
Cash flows from operating activities: | ||||||||||||||||
Net loss | $ | (46,051 | ) | $ | (377 | ) | $ | 377 | $ | (46,051 | ) | |||||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||||||||||
Depreciation on property and equipment | 3,827 | 88 | — | 3,915 | ||||||||||||
Depreciation on rental equipment | 53,447 | 1,797 | — | 55,244 | ||||||||||||
Amortization of loan discounts and deferred financing costs | 2,394 | — | — | 2,394 | ||||||||||||
Provision for losses on accounts receivable | 1,209 | 60 | — | 1,269 | ||||||||||||
Provision for obsolescence | 612 | — | — | 612 | ||||||||||||
Provision for deferred taxes | (5,717 | ) | — | — | (5,717 | ) | ||||||||||
Gain on sale of property and equipment | (42 | ) | (38 | ) | — | (80 | ) | |||||||||
Gain on sale of rental equipment | (10,200 | ) | (961 | ) | — | (11,161 | ) | |||||||||
Equity in loss of guarantor subsidiaries | 377 | — | (377 | ) | — | |||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||
Receivables, net | 2,215 | (954 | ) | — | 1,261 | |||||||||||
Inventories, net | (4,462 | ) | (518 | ) | — | (4,980 | ) | |||||||||
Prepaid expenses and other assets | (580 | ) | 4 | — | (576 | ) | ||||||||||
Accounts payable | 321 | (88 | ) | — | 233 | |||||||||||
Accrued expenses payable and other liabilities | 4,742 | 140 | — | 4,882 | ||||||||||||
Intercompany balance | (5,056 | ) | 5,056 | — | — | |||||||||||
Accrued loss from litigation | 17,434 | — | — | 17,434 | ||||||||||||
Deferred compensation payable | 665 | — | — | 665 | ||||||||||||
Net cash provided by operating activities | 15,135 | 4,209 | — | 19,344 | ||||||||||||
Cash flows from investing activities: | ||||||||||||||||
Purchases of property and equipment | (2,256 | ) | (227 | ) | — | (2,483 | ) | |||||||||
Purchases of rental equipment | (23,890 | ) | (6,698 | ) | — | (30,588 | ) | |||||||||
Proceeds from sale of property and equipment | 2,654 | 46 | — | 2,700 | ||||||||||||
Proceeds from sale of rental equipment | 47,707 | 3,572 | — | 51,279 | ||||||||||||
Net cash provided by (used in) investing activities | 24,215 | (3,307 | ) | — | 20,908 | |||||||||||
Cash flows from financing activities: | ||||||||||||||||
Payment of deferred financing costs | (1,089 | ) | — | — | (1,089 | ) | ||||||||||
Borrowings on senior secured credit facility | 385,504 | — | — | 385,504 | ||||||||||||
Payments on senior secured credit facility | (417,324 | ) | (946 | ) | — | (418,270 | ) | |||||||||
Payment of related party obligation | (75 | ) | — | — | (75 | ) | ||||||||||
Principal payments of notes payable | (339 | ) | — | — | (339 | ) | ||||||||||
Payments on capital lease obligations | (5,490 | ) | — | — | (5,490 | ) | ||||||||||
Net cash used in financing activities | (38,813 | ) | (946 | ) | — | (39,759 | ) | |||||||||
Net increase (decrease) in cash | 537 | (44 | ) | — | 493 | |||||||||||
Cash, beginning of year | 3,331 | 67 | — | 3,398 | ||||||||||||
Cash, end of year | $ | 3,868 | $ | 23 | $ | — | $ | 3,891 | ||||||||
F-36
Table of Contents
(20) | Subsequent Events (unaudited) |
• | $56.9 million to complete our acquisition of Eagle on February 28, 2006. For information on the Eagle acquisition, see “Summary — Recent Developments”; | |
• | $30.3 million to purchase rental equipment under operating leases; | |
• | $8.6 million to pay deferred compensation owed to one of our current executives and a former executive; and | |
• | $96.6 million to repay outstanding principal indebtedness under our senior secured credit facility. |
F-37
Table of Contents
Additions | ||||||||||||||||
Balance at | Charged to | Balance at | ||||||||||||||
Beginning of | Costs and | Recoveries | End of | |||||||||||||
Description | Year | Expenses | (Deductions) | Year | ||||||||||||
(Dollars in thousands) | ||||||||||||||||
Year Ended December 31, 2005 | ||||||||||||||||
Allowance for doubtful accounts receivable | $ | 2,732 | $ | 1,508 | $ | (1,876 | ) | $ | 2,364 | |||||||
Allowance for inventory obsolescence | 1,490 | 30 | (545 | ) | 975 | |||||||||||
Deferred tax asset reserve | 19,099 | 645 | (11,498 | ) | 8,246 | |||||||||||
$ | 23,321 | $ | 2,183 | $ | (13,919 | ) | $ | 11,585 | ||||||||
Year Ended December 31, 2004 | ||||||||||||||||
Allowance for doubtful accounts receivable | $ | 3,188 | $ | 1,395 | $ | (1,851 | ) | $ | 2,732 | |||||||
Allowance for inventory obsolescence | 1,235 | 240 | 15 | 1,490 | ||||||||||||
Deferred tax asset reserve | 13,456 | — | 5,643 | 19,099 | ||||||||||||
$ | 17,879 | $ | 1,635 | $ | (3,807 | ) | $ | 23,321 | ||||||||
Year Ended December 31, 2003 | ||||||||||||||||
Allowance for doubtful accounts receivable | $ | 3,609 | $ | 1,269 | $ | (1,690 | ) | $ | 3,188 | |||||||
Allowance for inventory obsolescence | 1,139 | 612 | (516 | ) | 1,235 | |||||||||||
Deferred tax asset reserve | — | (5,717 | ) | 19,173 | 13,456 | |||||||||||
$ | 4,748 | $ | (3,836 | ) | $ | (16,967 | ) | $ | 17,879 | |||||||
F-38
Table of Contents
Balances at | ||||||||
June 30, | December 31, | |||||||
2006 | 2005 | |||||||
(Unaudited) | ||||||||
(Amounts in thousands, except share amounts) | ||||||||
ASSETS | ||||||||
Cash and cash equivalents | $ | 24,641 | $ | 5,627 | ||||
Receivables, net of allowance for doubtful accounts of $2,586 and $2,364, respectively | 107,901 | 99,523 | ||||||
Inventories, net of reserve for obsolescence of $849 and $975, respectively | 112,366 | 81,093 | ||||||
Prepaid expenses and other assets | 3,126 | 1,378 | ||||||
Rental equipment, net of accumulated depreciation of $142,001 and $133,943, respectively | 393,445 | 308,036 | ||||||
Property and equipment, net of accumulated depreciation of $23,997 and $21,142, respectively | 28,122 | 18,284 | ||||||
Deferred financing costs and other intangible assets, net of accumulated amortization of $8,006 and $7,250, respectively | 7,286 | 8,184 | ||||||
Goodwill | 30,454 | 8,572 | ||||||
Total assets | $ | 707,341 | $ | 530,697 | ||||
LIABILITIES, MEMBERS’ DEFICIT AND STOCKHOLDERS’ EQUITY | ||||||||
Liabilities: | ||||||||
Amounts due on senior secured credit facility | $ | — | 106,451 | |||||
Accounts payable | 77,411 | 56,173 | ||||||
Manufacturer flooring plans payable | 116,983 | 93,728 | ||||||
Accrued expenses payable and other liabilities | 29,988 | 22,798 | ||||||
Related party obligation | 764 | 869 | ||||||
Notes payable | 1,190 | 521 | ||||||
Senior secured notes, net of original issue discount of $1,066 and $1,127, respectively | 198,934 | 198,873 | ||||||
Senior subordinated notes, net of original issue discount of $8,624 and $8,943, respectively | 44,376 | 44,057 | ||||||
Deferred income taxes | 8,561 | 645 | ||||||
Deferred compensation payable | 3,158 | 11,722 | ||||||
Total liabilities | $ | 481,365 | $ | 535,837 | ||||
Commitments and contingencies | ||||||||
Members’ deficit | — | (5,140 | ) | |||||
Stockholders’ equity: | ||||||||
Preferred stock, $0.01 par value, 25,000,000 shares authorized; no shares issued at June 30, 2006 and December 31, 2005, respectively | — | — | ||||||
Common stock, $0.01 par value, 175,000,000 shares authorized; 38,192,094 and no shares issued and outstanding at June 30, 2006 and December 31, 2005, respectively | 382 | — | ||||||
Additional paid-in capital | 204,021 | — | ||||||
Retained earnings | 21,573 | — | ||||||
Total stockholders’ equity | 225,976 | — | ||||||
Total liabilities, members’ deficit and stockholders’ equity | $ | 707,341 | $ | 530,697 | ||||
F-39
Table of Contents
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
(Unaudited) | ||||||||||||||||
(Amounts in thousands, except per share amounts) | ||||||||||||||||
Revenues: | ||||||||||||||||
Equipment rentals | $ | 64,011 | $ | 45,576 | $ | 118,006 | $ | 86,167 | ||||||||
New equipment sales | 56,945 | 33,417 | 112,660 | 63,715 | ||||||||||||
Used equipment sales | 36,065 | 23,962 | 67,719 | 49,581 | ||||||||||||
Parts sales | 21,237 | 17,792 | 40,550 | 34,216 | ||||||||||||
Service revenues | 13,374 | 9,887 | 25,708 | 19,050 | ||||||||||||
Other | 10,904 | 7,096 | 20,103 | 13,551 | ||||||||||||
Total revenues | 202,536 | 137,730 | 384,746 | 266,280 | ||||||||||||
Cost of revenues: | ||||||||||||||||
Rental depreciation | 19,170 | 12,876 | 36,030 | 25,040 | ||||||||||||
Rental expense | 10,476 | 11,490 | 21,088 | 23,009 | ||||||||||||
New equipment sales | 49,733 | 29,557 | 98,294 | 56,020 | ||||||||||||
Used equipment sales | 25,746 | 17,922 | 49,545 | 37,718 | ||||||||||||
Parts sales | 15,080 | 12,698 | 28,604 | 24,133 | ||||||||||||
Service revenues | 4,731 | 3,747 | 9,298 | 6,993 | ||||||||||||
Other | 9,305 | 7,274 | 17,569 | 14,471 | ||||||||||||
Total cost of revenues | 134,241 | 95,564 | 260,428 | 187,384 | ||||||||||||
Gross profit | 68,295 | 42,166 | 124,318 | 78,896 | ||||||||||||
Selling, general and administrative expenses | 33,384 | 27,317 | 74,427 | 53,123 | ||||||||||||
Gain (loss) on sales of property and equipment, net | 60 | (144 | ) | 159 | (103 | ) | ||||||||||
Income from operations | 34,971 | 14,705 | 50,050 | 25,670 | ||||||||||||
Other income (expense): | ||||||||||||||||
Interest expense | (10,115 | ) | (10,321 | ) | (20,282 | ) | (20,425 | ) | ||||||||
Other, net | 355 | 80 | 430 | 170 | ||||||||||||
Total other expense, net | (9,760 | ) | (10,241 | ) | (19,852 | ) | (20,255 | ) | ||||||||
Income before provision for income taxes | 25,211 | 4,464 | 30,198 | 5,415 | ||||||||||||
Provision for income taxes | 5,408 | 171 | 6,475 | 171 | ||||||||||||
Net income | $ | 19,803 | $ | 4,293 | $ | 23,723 | $ | 5,244 | ||||||||
Net income per common share: | ||||||||||||||||
Basic | $ | 0.52 | $ | 0.17 | $ | 0.66 | $ | 0.21 | ||||||||
Diluted | $ | 0.52 | $ | 0.17 | $ | 0.66 | $ | 0.21 | ||||||||
Weighted average common shares outstanding | ||||||||||||||||
Basic | 38,070 | 25,492 | 35,777 | 25,492 | ||||||||||||
Diluted | 38,096 | 25,492 | 35,790 | 25,492 | ||||||||||||
F-40
Table of Contents
Additional | Total | |||||||||||||||||||||||
Common Stock | Paid-in | Retained | Stockholders’ | Members’ | ||||||||||||||||||||
Shares | Amount | Capital | Earnings | Equity | Deficit | |||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||
(Amounts in thousands, except share amounts) | ||||||||||||||||||||||||
Balances at January 1, 2006 | — | $ | — | $ | — | $ | — | $ | — | $ | (5,140 | ) | ||||||||||||
Net income for the period January 1, 2006 through February 2, 2006 | — | — | — | — | — | 2,150 | ||||||||||||||||||
Effect of the Reorganization Transactions | 25,492,019 | 255 | (3,245 | ) | — | (2,990 | ) | 2,990 | ||||||||||||||||
Common stock issued on February 3, 2006 pursuant to initial public offering, net of $15,915 issue costs | 12,578,125 | 126 | 206,892 | — | 207,018 | — | ||||||||||||||||||
Issuance of common stock | 121,950 | 1 | — | — | 1 | — | ||||||||||||||||||
Stock-based compensation | — | — | 374 | — | 374 | — | ||||||||||||||||||
Net income for the period February 3, 2006 through June 30, 2006 | — | — | — | 21,573 | 21,573 | — | ||||||||||||||||||
Balances at June 30, 2006 | 38,192,094 | $ | 382 | $ | 204,021 | $ | 21,573 | $ | 225,976 | $ | — | |||||||||||||
F-41
Table of Contents
Six Months Ended | ||||||||
June 30, | ||||||||
2006 | 2005 | |||||||
(Unaudited) | ||||||||
(Amounts in thousands) | ||||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 23,723 | $ | 5,244 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation on property and equipment | 3,263 | 2.399 | ||||||
Depreciation on rental equipment | 36,030 | 25,041 | ||||||
Amortization of loan discounts and deferred financing costs | 1,445 | 1,355 | ||||||
Amortization of other intangible assets | 23 | 70 | ||||||
Provision for losses on accounts receivable | 1,001 | 630 | ||||||
Provision for inventory obsolescence | 17 | 30 | ||||||
Provision for deferred income taxes | 5,843 | — | ||||||
Non-cash compensation expense | 374 | — | ||||||
(Gain) loss on sales of property and equipment, net | (159 | ) | 102 | |||||
Gain on sales of rental equipment, net | (16,293 | ) | (10,386 | ) | ||||
Changes in operating assets and liabilities, net of impact of acquisition: | ||||||||
Receivables, net | (2,078 | ) | (3,001 | ) | ||||
Inventories | (52,224 | ) | (26,182 | ) | ||||
Prepaid expenses and other assets | (3,089 | ) | (1,833 | ) | ||||
Accounts payable | 20,750 | 7,000 | ||||||
Manufacturer flooring plans payable | 23,255 | 5,801 | ||||||
Accrued expenses payable and other liabilities | 3,368 | 3,769 | ||||||
Deferred compensation payable | (8,564 | ) | 576 | |||||
Net cash provided by operating activities | 36,685 | 10,615 | ||||||
Cash flows from investing activities: | ||||||||
Acquisition of businesses, net of cash acquired | (56,961 | ) | — | |||||
Purchases of property and equipment | (10,171 | ) | (4,159 | ) | ||||
Purchases of rental equipment | (105,453 | ) | (63,402 | ) | ||||
Proceeds from sales of property and equipment | 382 | 568 | ||||||
Proceeds from sales of rental equipment | 54,390 | 39,450 | ||||||
Net cash used in investing activities | (117,813 | ) | (27,543 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from issuance of common stock, net of issue costs | 207,018 | — | ||||||
Borrowings on senior secured credit facility | 487,673 | 284,316 | ||||||
Payments on senior secured credit facility | (594,124 | ) | (263,200 | ) | ||||
Payment of deferred financing costs | (190 | ) | (10 | ) | ||||
Payments of related party obligation | (150 | ) | (150 | ) | ||||
Principal payments of notes payable | (85 | ) | (142 | ) | ||||
Payments on capital lease obligations | — | (1,120 | ) | |||||
Net cash provided by financing activities | 100,142 | 19,694 | ||||||
Net increase in cash and cash equivalents | 19,014 | 2,766 | ||||||
Cash, beginning of period | 5,627 | 3,358 | ||||||
Cash and cash equivalents, end of period | $ | 24,641 | $ | 6,124 | ||||
Supplemental schedule of non cash investing activities: | ||||||||
Assets transferred from new and used inventory to rental fleet | $ | 21,849 | $ | 18,077 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Cash paid during the period for: | ||||||||
Interest | $ | 19,027 | $ | 19,731 | ||||
Income taxes | $ | 500 | $ | 171 | ||||
F-42
Table of Contents
(1) | Organization and Nature of Operations |
F-43
Table of Contents
(2) | Significant Accounting Policies |
F-44
Table of Contents
(3) | Initial Public Offering and Use of Proceeds |
• | $56.9 million to complete our acquisition of Eagle High Reach Equipment, Inc. and all of the equity interests of its subsidiary, Eagle High Reach Equipment, LLC (together, “Eagle”), on February 28, 2006. For information on the Eagle acquisition, see note 4 to the condensed consolidated financial statements. | |
• | $30.3 million to purchase rental equipment under operating leases; | |
• | $8.6 million to pay deferred compensation owed to one of our current executives and a former executive; and | |
• | $96.6 million to repay outstanding principal indebtedness under our senior secured credit facility. |
(4) | Acquisition |
F-45
Table of Contents
Cash | $ | 32 | ||
Receivables | 7,300 | |||
Inventories | 915 | |||
Rental equipment | 32,235 | |||
Property and equipment | 3,153 | |||
Prepaid expenses and other assets | 654 | |||
Goodwill | 21,883 | |||
Accounts payable | (483 | ) | ||
Accrued expenses payable and other liabilities | (2,349 | ) | ||
Deferred income taxes | (2,073 | ) | ||
Notes payable | (755 | ) | ||
Net assets acquired | $ | 60,512 | ||
Three Month Period Ended | Six Month Period Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
Total revenues | $ | 202,536 | $ | 146,056 | $ | 390,074 | $ | 281,761 | ||||||||
Gross profit | 68,295 | 45,117 | 126,092 | 86,608 | ||||||||||||
Operating income | 34,971 | 16,087 | 49,342 | 28,864 | ||||||||||||
Net income | 19,803 | 5,190 | 23,374 | 6,205 | ||||||||||||
Basic net income per common share | $ | 0.52 | $ | 0.20 | $ | 0.65 | $ | 0.24 | ||||||||
Diluted net income per common share | $ | 0.52 | $ | 0.20 | $ | 0.65 | $ | 0.24 |
F-46
Table of Contents
(5) | Stock-Based Compensation |
Risk-free interest rate | 5.00 | % | ||
Expected life of options (in years) | 6.0 | |||
Expected volatility | 35.00 | % | ||
Expected annual dividend yield | — |
F-47
Table of Contents
(6) | Earnings per Share |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | June 30, | June 30, | |||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
Basic net income per share: | ||||||||||||||||
Net income | $ | 19,803 | $ | 4,293 | $ | 23,723 | $ | 5,244 | ||||||||
Weighted average number of common shares outstanding | 38,070 | 25,492 | 35,777 | 25,492 | ||||||||||||
Net income per common share — basic | $ | 0.52 | $ | 0.17 | $ | 0.66 | $ | 0.21 | ||||||||
Diluted net income per share: | ||||||||||||||||
Net income | $ | 19,803 | $ | 4,293 | $ | 23,723 | $ | 5,244 | ||||||||
Weighted average number of common shares outstanding | 38,070 | 25,492 | 35,777 | 25,492 | ||||||||||||
Effect of dilutive securities: | ||||||||||||||||
Effect of dilutive stock options and non-vested stock | 26 | — | 13 | — | ||||||||||||
Weighted average number of shares outstanding — diluted | 38,096 | 25,492 | 35,790 | 25,492 | ||||||||||||
Net income per common share — diluted | $ | 0.52 | $ | 0.17 | $ | 0.66 | $ | 0.21 | ||||||||
(7) | Senior Secured Credit Facility |
F-48
Table of Contents
F-49
Table of Contents
(8) | Segment Information |
For the Three Months | For the Six Months | |||||||||||||||
Ended June 30, | Ended June 30, | |||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
Revenues: | ||||||||||||||||
Equipment rentals | $ | 64,011 | $ | 45,576 | $ | 118,006 | $ | 86,167 | ||||||||
New equipment sales | 56,945 | 33,417 | 112,660 | 63,715 | ||||||||||||
Used equipment sales | 36,065 | 23,962 | 67,719 | 49,581 | ||||||||||||
Parts sales | 21,237 | 17,792 | 40,550 | 34,216 | ||||||||||||
Service revenue | 13,374 | 9,887 | 25,708 | 19,050 | ||||||||||||
Total segmented revenues | 191,632 | 130,634 | 364,643 | 252,729 | ||||||||||||
Non-segmented revenues | 10,904 | 7,096 | 20,103 | 13,551 | ||||||||||||
Total revenues | $ | 202,536 | $ | 137,730 | $ | 384,746 | $ | 266,280 | ||||||||
Gross Profit: | ||||||||||||||||
Equipment rentals | $ | 34,365 | $ | 21,210 | $ | 60,888 | $ | 38,118 | ||||||||
New equipment sales | 7,212 | 3,860 | 14,366 | 7,695 | ||||||||||||
Used equipment sales | 10,319 | 6,040 | 18,174 | 11,863 | ||||||||||||
Parts sales | 6,157 | 5,094 | 11,946 | 10,083 | ||||||||||||
Service revenue | 8,643 | 6,140 | 16,410 | 12,057 | ||||||||||||
Total segmented gross profit | 66,696 | 42,344 | 121,784 | 79,816 | ||||||||||||
Non-segmented gross profit (loss) | 1,599 | (178 | ) | 2,534 | (920 | ) | ||||||||||
Total gross profit | $ | 68,295 | $ | 42,166 | $ | 124,318 | $ | 78,896 | ||||||||
F-50
Table of Contents
June 30, | December 31, | |||||||
2006 | 2005 | |||||||
Balances at | ||||||||
Segment identified assets: | ||||||||
Equipment sales | $ | 91,653 | $ | 62,344 | ||||
Equipment rentals | 393,446 | 308,036 | ||||||
Parts and service | 20,713 | 18,749 | ||||||
Total segment identified assets | 505,812 | 389,129 | ||||||
Non-segment identified assets | 201,529 | 141,568 | ||||||
Total assets | $ | 707,341 | $ | 530,697 | ||||
(9) | Condensed Consolidating Financial Information of Guarantor Subsidiaries |
F-51
Table of Contents
As of June 30, 2006 | ||||||||||||||||
H&E Equipment | Guarantor | |||||||||||||||
Services | Subsidiaries | Elimination | Consolidated | |||||||||||||
(Amounts in thousands) | ||||||||||||||||
Assets: | ||||||||||||||||
Cash and cash equivalents | $ | 24,504 | $ | 137 | $ | — | $ | 24,641 | ||||||||
Receivables, net | 98,409 | 9,492 | — | 107,901 | ||||||||||||
Inventories, net | 107,074 | 5,292 | — | 112,366 | ||||||||||||
Prepaid expenses and other assets | 2,717 | 409 | — | 3,126 | ||||||||||||
Rental equipment, net | 345,798 | 47,647 | — | 393,445 | ||||||||||||
Property and equipment, net | 24,103 | 4,019 | — | 28,122 | ||||||||||||
Deferred financing costs, net | 7,286 | — | — | 7,286 | ||||||||||||
Investment in guarantor subsidiaries | 8,852 | — | (8,852 | ) | — | |||||||||||
Goodwill | 30,454 | — | — | 30,454 | ||||||||||||
Total assets | $ | 649,197 | $ | 66,996 | $ | (8,852 | ) | $ | 707,341 | |||||||
Liabilities and Stockholders’ Equity: | ||||||||||||||||
Amount due on senior secured credit facility | $ | — | $ | — | $ | — | $ | — | ||||||||
Accounts payable | 77,266 | 145 | — | 77,411 | ||||||||||||
Manufacturer flooring plans payable | 116,983 | — | — | 116,983 | ||||||||||||
Accrued expenses payable and other liabilities | (27,260 | ) | 57,248 | — | 29,988 | |||||||||||
Intercompany balance | — | — | — | — | ||||||||||||
Related party obligation | 764 | — | — | 764 | ||||||||||||
Notes payable | 439 | 751 | — | 1,190 | ||||||||||||
Senior secured notes, net of discount | 198,934 | — | — | 198,934 | ||||||||||||
Senior subordinated notes, net of discount | 44,376 | — | — | 44,376 | ||||||||||||
Deferred income taxes | 8,561 | — | — | 8,561 | ||||||||||||
Deferred compensation payable | 3,158 | — | — | 3,158 | ||||||||||||
Total liabilities | 423,221 | 58,144 | — | 481,365 | ||||||||||||
Stockholders’ equity | 225,976 | 8,852 | (8,852 | ) | 225,976 | |||||||||||
Total liabilities and stockholders’ equity | $ | 649,197 | $ | 66,996 | $ | (8,852 | ) | $ | 707,341 | |||||||
F-52
Table of Contents
As of December 31, 2005 | ||||||||||||||||
H&E Equipment | Guarantor | |||||||||||||||
Services | Subsidiaries | Elimination | Consolidated | |||||||||||||
(Amounts in thousands) | ||||||||||||||||
Assets: | ||||||||||||||||
Cash | $ | 5,610 | $ | 17 | $ | — | $ | 5,627 | ||||||||
Receivables, net | 95,427 | 4,096 | — | 99,523 | ||||||||||||
Inventories, net | 76,533 | 4,560 | — | 81,093 | ||||||||||||
Prepaid expenses and other assets | 1,378 | — | — | 1,378 | ||||||||||||
Rental equipment, net | 298,708 | 9,328 | — | 308,036 | ||||||||||||
Property and equipment, net | 17,526 | 758 | — | 18,284 | ||||||||||||
Deferred financing costs, net | 8,184 | — | — | 8,184 | ||||||||||||
Investment in guarantor subsidiaries | 7,025 | — | (7,025 | ) | — | |||||||||||
Goodwill | 8,572 | — | — | 8,572 | ||||||||||||
Total assets | $ | 518,963 | $ | 18,759 | $ | (7,025 | ) | $ | 530,697 | |||||||
Liabilities and Member’s Equity (Deficit): | ||||||||||||||||
Amount due on senior secured credit facility | $ | 102,980 | $ | 3,471 | $ | — | $ | 106,451 | ||||||||
Accounts payable | 56,173 | — | — | 56,173 | ||||||||||||
Manufacturer flooring plans payable | 93,728 | — | — | 93,728 | ||||||||||||
Accrued expenses payable and other liabilities | 22,696 | 102 | — | 22,798 | ||||||||||||
Intercompany balance | (8,161 | ) | 8,161 | — | — | |||||||||||
Related party obligation | 869 | — | — | 869 | ||||||||||||
Notes payable | 521 | — | — | 521 | ||||||||||||
Senior secured notes, net of discount | 198,873 | — | — | 198,873 | ||||||||||||
Senior subordinated notes, net of discount | 44,057 | — | — | 44,057 | ||||||||||||
Deferred income taxes | 645 | — | — | 645 | ||||||||||||
Deferred compensation payable | 11,722 | — | — | 11,722 | ||||||||||||
Total liabilities | 524,103 | 11,734 | — | 535,837 | ||||||||||||
Members’ equity (deficit) | (5,140 | ) | 7,025 | (7,025 | ) | (5,140 | ) | |||||||||
Total liabilities and members’ equity (deficit) | $ | 518,963 | $ | 18,759 | $ | (7,025 | ) | $ | 530,697 | |||||||
F-53
Table of Contents
Three Months Ended June 30, 2006 | ||||||||||||||||
H&E Equipment | Guarantor | |||||||||||||||
Services | Subsidiaries | Elimination | Consolidated | |||||||||||||
(Amounts in thousands) | ||||||||||||||||
Revenues: | ||||||||||||||||
Equipment rentals | $ | 54,536 | $ | 9,475 | $ | — | $ | 64,011 | ||||||||
New equipment sales | 55,439 | 1,506 | — | 56,945 | ||||||||||||
Used equipment sales | 33,519 | 2,546 | — | 36,065 | ||||||||||||
Parts sales | 20,435 | 802 | — | 21,237 | ||||||||||||
Service revenue | 12,936 | 438 | — | 13,374 | ||||||||||||
Other | 9,660 | 1,244 | — | 10,904 | ||||||||||||
Total revenues | 186,525 | 16,011 | — | 202,536 | ||||||||||||
Cost of revenues: | ||||||||||||||||
Rental depreciation | 16,752 | 2,418 | — | 19,170 | ||||||||||||
Rental expense | 8,915 | 1,561 | — | 10,476 | ||||||||||||
New equipment sales | 48,529 | 1,204 | — | 49,733 | ||||||||||||
Used equipment sales | 23,865 | 1,881 | — | 25,746 | ||||||||||||
Parts sales | 14,544 | 536 | — | 15,080 | ||||||||||||
Service revenue | 4,600 | 131 | — | 4,731 | ||||||||||||
Other | 8,166 | 1,139 | — | 9,305 | ||||||||||||
Total cost of revenues | 125,371 | 8,870 | — | 134,241 | ||||||||||||
Gross profit: | ||||||||||||||||
Equipment rentals | 28,869 | 5,496 | — | 34,365 | ||||||||||||
New equipment sales | 6,910 | 302 | — | 7,212 | ||||||||||||
Used equipment sales | 9,654 | 665 | — | 10,319 | ||||||||||||
Parts sales | 5,891 | 266 | — | 6,157 | ||||||||||||
Service revenue | 8,336 | 307 | — | 8,643 | ||||||||||||
Other | 1,494 | 105 | — | 1,599 | ||||||||||||
Gross profit | 61,154 | 7,141 | — | 68,295 | ||||||||||||
Selling, general and administrative expenses | 28,870 | 4,514 | — | 33,384 | ||||||||||||
Equity in earnings of guarantor subsidiaries | 1,359 | — | (1,359 | ) | — | |||||||||||
Gain on sale of property and equipment | 60 | — | — | 60 | ||||||||||||
Income from operations | 33,703 | 2,627 | (1,359 | ) | 34,971 | |||||||||||
Other income (expense): | ||||||||||||||||
Interest expense | (8,839 | ) | (1,276 | ) | — | (10,115 | ) | |||||||||
Other, net | 347 | 8 | — | 355 | ||||||||||||
Total other expense, net | (8,492 | ) | (1,268 | ) | — | (9,760 | ) | |||||||||
Income before income taxes | 25,211 | 1,359 | (1,359 | ) | 25,211 | |||||||||||
Income tax provision | 5,408 | — | — | 5,408 | ||||||||||||
Net income | $ | 19,803 | $ | 1,359 | $ | (1,359 | ) | $ | 19,803 | |||||||
F-54
Table of Contents
Three Months Ended June 30, 2005 | ||||||||||||||||
H&E Equipment | Guarantor | |||||||||||||||
Services | Subsidiaries | Elimination | Consolidated | |||||||||||||
(Amounts in thousands) | ||||||||||||||||
Revenues: | ||||||||||||||||
Equipment rentals | $ | 43,808 | $ | 1,768 | $ | — | $ | 45,576 | ||||||||
New equipment sales | 31,571 | 1,846 | — | 33,417 | ||||||||||||
Used equipment sales | 21,814 | 2,148 | — | 23,962 | ||||||||||||
Parts sales | 17,212 | 580 | — | 17,792 | ||||||||||||
Service revenue | 9,537 | 350 | — | 9,887 | ||||||||||||
Other | 6,772 | 324 | — | 7,096 | ||||||||||||
Total revenues | 130,714 | 7,016 | — | 137,730 | ||||||||||||
Cost of revenues: | ||||||||||||||||
Rental depreciation | 12,321 | 555 | — | 12,876 | ||||||||||||
Rental expense | 11,255 | 235 | — | 11,490 | ||||||||||||
New equipment sales | 27,977 | 1,580 | — | 29,557 | ||||||||||||
Used equipment sales | 16,367 | 1,555 | — | 17,922 | ||||||||||||
Parts sales | 12,292 | 406 | — | 12,698 | ||||||||||||
Service revenue | 3,648 | 99 | — | 3,747 | ||||||||||||
Other | 6,960 | 314 | — | 7,274 | ||||||||||||
Total cost of revenues | 90,820 | 4,744 | — | 95,564 | ||||||||||||
Gross profit: | ||||||||||||||||
Equipment rentals | 20,232 | 978 | — | 21,210 | ||||||||||||
New equipment sales | 3,594 | 266 | — | 3,860 | ||||||||||||
Used equipment sales | 5,447 | 593 | — | 6,040 | ||||||||||||
Parts sales | 4,920 | 174 | — | 5,094 | ||||||||||||
Service revenue | 5,889 | 251 | — | 6,140 | ||||||||||||
Other | (188 | ) | 10 | — | (178 | ) | ||||||||||
Gross profit | 39,894 | 2,272 | — | 42,166 | ||||||||||||
Selling, general and administrative expenses | 25,854 | 1,463 | — | 27,317 | ||||||||||||
Equity in loss of guarantor subsidiaries | 513 | — | (513 | ) | — | |||||||||||
Gain on sale of property and equipment | (144 | ) | — | — | (144 | ) | ||||||||||
Income from operations | 14,409 | 809 | (513 | ) | 14,705 | |||||||||||
Other income (expense): | ||||||||||||||||
Interest expense | (10,024 | ) | (297 | ) | — | (10,321 | ) | |||||||||
Other, net | 79 | 1 | — | 80 | ||||||||||||
Total other expense, net | (9,945 | ) | (296 | ) | — | (10,241 | ) | |||||||||
Income before provision for income taxes | 4,464 | 513 | (513 | ) | 4,464 | |||||||||||
Provision for income taxes | 171 | — | — | 171 | ||||||||||||
Net income | $ | 4,293 | $ | 513 | $ | (513 | ) | $ | 4,293 | |||||||
F-55
Table of Contents
Six Months Ended June 30, 2006 | ||||||||||||||||
H&E Equipment | Guarantor | |||||||||||||||
Services | Subsidiaries | Elimination | Consolidated | |||||||||||||
(Amounts in thousands) | ||||||||||||||||
Revenues: | ||||||||||||||||
Equipment rentals | $ | 104,525 | $ | 13,481 | $ | — | $ | 118,006 | ||||||||
New equipment sales | 109,285 | 3,375 | — | 112,660 | ||||||||||||
Used equipment sales | 63,083 | 4,636 | — | 67,719 | ||||||||||||
Parts sales | 39,157 | 1,393 | — | 40,550 | ||||||||||||
Service revenue | 24,917 | 791 | — | 25,708 | ||||||||||||
Other | 18,264 | 1,839 | — | 20,103 | ||||||||||||
Total revenues | 359,231 | 25,515 | — | 384,746 | ||||||||||||
Cost of revenues: | ||||||||||||||||
Rental depreciation | 32,192 | 3,838 | — | 36,030 | ||||||||||||
Rental expense | 18,680 | 2,408 | — | 21,088 | ||||||||||||
New equipment sales | 95,433 | 2,861 | — | 98,294 | ||||||||||||
Used equipment sales | 46,274 | 3,271 | — | 49,545 | ||||||||||||
Parts sales | 27,670 | 934 | — | 28,604 | ||||||||||||
Service revenue | 9,061 | 237 | — | 9,298 | ||||||||||||
Other | 15,809 | 1,760 | — | 17,569 | ||||||||||||
Total cost of revenues | 245,119 | 15,309 | — | 260,428 | ||||||||||||
Gross profit: | ||||||||||||||||
Equipment rentals | 53,653 | 7,235 | — | 60,888 | ||||||||||||
New equipment sales | 13,852 | 514 | — | 14,366 | ||||||||||||
Used equipment sales | 16,809 | 1,365 | — | 18,174 | ||||||||||||
Parts sales | 11,487 | 459 | — | 11,946 | ||||||||||||
Service revenue | 15,856 | 554 | — | 16,410 | ||||||||||||
Other | 2,455 | 79 | — | 2,534 | ||||||||||||
Gross profit | 114,112 | 10,206 | — | 124,318 | ||||||||||||
Selling, general and administrative expenses | 67,879 | 6,548 | — | 74,427 | ||||||||||||
Equity in earnings of guarantor subsidiaries | 1,826 | — | (1,826 | ) | — | |||||||||||
Gain on sale of property and equipment | 129 | 30 | — | 159 | ||||||||||||
Income from operations | 48,188 | 3,688 | (1,826 | ) | 50,050 | |||||||||||
Other income (expense): | ||||||||||||||||
Interest expense | (18,416 | ) | (1,866 | ) | — | (20,282 | ) | |||||||||
Other, net | 426 | 4 | — | 430 | ||||||||||||
Total other expense, net | (17,990 | ) | (1,862 | ) | — | (19,852 | ) | |||||||||
Income before income taxes | 30,198 | 1,826 | (1,826 | ) | 30,198 | |||||||||||
Income tax provision | 6,475 | — | — | 6,475 | ||||||||||||
Net income | $ | 23,723 | $ | 1,826 | $ | (1,826 | ) | $ | 23,723 | |||||||
F-56
Table of Contents
Six Months Ended June 30, 2005 | ||||||||||||||||||||
H&E Equipment | Guarantor | |||||||||||||||||||
Services | Subsidiaries | Elimination | Consolidated | |||||||||||||||||
(Amounts in thousands) | ||||||||||||||||||||
Revenues: | ||||||||||||||||||||
Equipment rentals | $ | 83,187 | $ | 2,980 | $ | — | $ | 86,167 | ||||||||||||
New equipment sales | 61,115 | 2,600 | — | 63,715 | ||||||||||||||||
Used equipment sales | 45,736 | 3,845 | — | 49,581 | ||||||||||||||||
Parts sales | 33,221 | 995 | — | 34,216 | ||||||||||||||||
Service revenue | 18,431 | 619 | — | 19,050 | ||||||||||||||||
Other | 13,016 | 535 | — | 13,551 | ||||||||||||||||
Total revenues | 254,706 | 11,574 | — | 266,280 | ||||||||||||||||
Cost of revenues: | ||||||||||||||||||||
Rental depreciation | 24,012 | 1,028 | — | 25,040 | ||||||||||||||||
Rental expense | 22,483 | 526 | — | 23,009 | ||||||||||||||||
New equipment sales | 53,830 | 2,190 | — | 56,020 | ||||||||||||||||
Used equipment sales | 34,927 | 2,791 | — | 37,718 | ||||||||||||||||
Parts sales | 23,441 | 692 | — | 24,133 | ||||||||||||||||
Service revenue | 6,814 | 179 | — | 6,993 | ||||||||||||||||
Other | 13,892 | 579 | — | 14,471 | ||||||||||||||||
Total cost of revenues | 179,399 | 7,985 | — | 187,384 | ||||||||||||||||
Gross profit: | ||||||||||||||||||||
Equipment rentals | 36,692 | 1,426 | — | 38,118 | ||||||||||||||||
New equipment sales | 7,285 | 410 | — | 7,695 | ||||||||||||||||
Used equipment sales | 10,809 | 1,054 | — | 11,863 | ||||||||||||||||
Parts sales | 9,780 | 303 | — | 10,083 | ||||||||||||||||
Service revenue | 11,617 | 440 | — | 12,057 | ||||||||||||||||
Other | (876 | ) | (44 | ) | — | (920 | ) | |||||||||||||
Gross profit | 75,307 | 3,589 | — | 78,896 | ||||||||||||||||
Selling, general and administrative expenses | 50,572 | 2,551 | — | 53,123 | ||||||||||||||||
Equity in loss of guarantor subsidiaries | 499 | — | (499 | ) | — | |||||||||||||||
Gain (loss) on sale of property and equipment | (112 | ) | 9 | — | (103 | ) | ||||||||||||||
Income from operations | 25,122 | 1,047 | (499 | ) | 25,670 | |||||||||||||||
Other income (expense): | ||||||||||||||||||||
Interest expense | (19,875 | ) | (550 | ) | — | (20,425 | ) | |||||||||||||
Other, net | 168 | 2 | — | 170 | ||||||||||||||||
Total other expense, net | (19,707 | ) | (548 | ) | — | (20,255 | ) | |||||||||||||
Income before provision for income taxes | 5,415 | 499 | (499 | ) | 5,415 | |||||||||||||||
Provision for income taxes | 171 | — | — | 171 | ||||||||||||||||
Net income | $ | 5,244 | $ | 499 | $ | (499 | ) | $ | 5,244 | |||||||||||
F-57
Table of Contents
Six Months Ended June 30, 2006 | ||||||||||||||||
H&E Equipment | Guarantor | |||||||||||||||
Services | Subsidiaries | Elimination | Consolidated | |||||||||||||
(Amounts in thousands) | ||||||||||||||||
Cash flows from operating activities: | ||||||||||||||||
Net income | $ | 23,723 | $ | 1,826 | $ | (1,826 | ) | $ | 23,723 | |||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||
Depreciation on property and equipment | 2,978 | 285 | — | 3,263 | ||||||||||||
Depreciation on rental equipment | 32,251 | 3,779 | — | 36,030 | ||||||||||||
Amortization of other intangible assets | 23 | — | — | 23 | ||||||||||||
Amortization of loan discounts and deferred financing costs | 1,445 | — | — | 1,445 | ||||||||||||
Provision for losses on accounts receivable | 1,001 | — | — | 1,001 | ||||||||||||
Provision for inventory obsolescence | 17 | — | — | 17 | ||||||||||||
Gain on sale of property and equipment | (129 | ) | (30 | ) | — | (159 | ) | |||||||||
Gain on sale of rental equipment | (15,034 | ) | (1,259 | ) | — | (16,293 | ) | |||||||||
Provision for deferred taxes | 5,843 | — | — | 5,843 | ||||||||||||
Non-cash compensation expense | 374 | — | — | 374 | ||||||||||||
Equity in earnings of guarantor subsidiaries | (1,826 | ) | — | 1,826 | — | |||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||
Receivables, net | (4,120 | ) | 2,042 | — | (2,078 | ) | ||||||||||
Inventories, net | (42,829 | ) | (9,395 | ) | — | (52,224 | ) | |||||||||
Prepaid expenses and other assets | (1,338 | ) | (1,751 | ) | (3,089 | ) | ||||||||||
Accounts payable | 21,093 | (343 | ) | — | 20,750 | |||||||||||
Manufacturer flooring plans payable | 23,255 | — | — | 23,255 | ||||||||||||
Accrued expenses payable and other liabilities | 5,151 | (1,783 | ) | — | 3,368 | |||||||||||
Intercompany balance | (46,901 | ) | 46,901 | — | — | |||||||||||
Deferred compensation payable | (8,564 | ) | — | — | (8,564 | ) | ||||||||||
Net cash provided by (used in) operating activities | (3,587 | ) | 40,272 | — | 36,685 | |||||||||||
Cash flows from investing activities: | ||||||||||||||||
Acquisition of businesses, net of cash acquired | (19,673 | ) | (37,288 | ) | — | (56,961 | ) | |||||||||
Purchases of property and equipment | (9,784 | ) | (387 | ) | — | (10,171 | ) | |||||||||
Purchases of rental equipment | (102,280 | ) | (3,173 | ) | — | (105,453 | ) | |||||||||
Proceeds from sale of property and equipment | 358 | 24 | — | 382 | ||||||||||||
Proceeds from sale of rental equipment | 50,244 | 4,146 | — | 54,390 | ||||||||||||
Net cash used in investing activities | (81,135 | ) | (36,678 | ) | — | (117,813 | ) | |||||||||
Cash flows from financing activities: | ||||||||||||||||
Proceeds from issuance of common stock, net of costs | 207,018 | — | — | 207,018 | ||||||||||||
Payment of deferred financing costs | (190 | ) | — | — | (190 | ) | ||||||||||
Borrowings on senior secured credit facility | 487,673 | — | — | 487,673 | ||||||||||||
Payments on senior secured credit facility | (590,653 | ) | (3,471 | ) | — | (594,124 | ) | |||||||||
Payment of related party obligation | (150 | ) | — | — | (150 | ) | ||||||||||
Principal payments of notes payable | (82 | ) | (3 | ) | — | (85 | ) | |||||||||
Net cash provided by (used in) financing activities | 103,616 | (3,474 | ) | — | 100,142 | |||||||||||
Net increase in cash and cash equivalents | 18,894 | 120 | — | 19,014 | ||||||||||||
Cash, beginning of period | 5,610 | 17 | — | 5,627 | ||||||||||||
Cash and cash equivalents, end of period | $ | 24,504 | $ | 137 | $ | — | $ | 24,641 | ||||||||
F-58
Table of Contents
Six Months Ended June 30, 2005 | ||||||||||||||||
H&E Equipment | Guarantor | |||||||||||||||
Services | Subsidiaries | Elimination | Consolidated | |||||||||||||
(Amounts in thousands) | ||||||||||||||||
Cash flows from operating activities: | ||||||||||||||||
Net income (loss) | $ | 5,244 | $ | 499 | $ | (499 | ) | $ | 5,244 | |||||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||||||||||
Depreciation on property and equipment | 2,310 | 89 | — | 2,399 | ||||||||||||
Depreciation on rental equipment | 24,013 | 1,028 | — | 25,041 | ||||||||||||
Amortization of other intangible assets | 70 | — | — | 70 | ||||||||||||
Amortization of loan discounts and deferred financing costs | 1,355 | — | — | 1,355 | ||||||||||||
Provision for losses on accounts receivable | 540 | 90 | — | 630 | ||||||||||||
Provision for obsolescence | 30 | — | — | 30 | ||||||||||||
Gain on sale of property and equipment | 111 | (9 | ) | — | 102 | |||||||||||
Gain on sale of rental equipment | (9,396 | ) | (990 | ) | — | (10,386 | ) | |||||||||
Equity in earnings of guarantor subsidiaries | (499 | ) | — | 499 | — | |||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||
Receivables, net | (2,559 | ) | (442 | ) | — | (3,001 | ) | |||||||||
Inventories, net | (20,306 | ) | (5,876 | ) | — | (26,182 | ) | |||||||||
Prepaid expenses and other assets | (1,833 | ) | — | — | (1,833 | ) | ||||||||||
Accounts payable | 7,000 | — | — | 7,000 | ||||||||||||
Accrued expenses payable and other liabilities | 3,672 | 97 | — | 3,769 | ||||||||||||
Manufacturer flooring plans payable | 5,801 | — | — | 5,801 | ||||||||||||
Intercompany balance | (3,093 | ) | 3,093 | — | — | |||||||||||
Deferred compensation payable | 576 | — | — | 576 | ||||||||||||
Net cash used in operating activities | 13,036 | (2,421 | ) | — | 10,615 | |||||||||||
Cash flows from investing activities: | ||||||||||||||||
Purchases of property and equipment | (3,411 | ) | (748 | ) | — | (4,159 | ) | |||||||||
Purchases of rental equipment | (63,028 | ) | (374 | ) | — | (63,402 | ) | |||||||||
Proceeds from sale of property and equipment | 560 | 8 | — | 568 | ||||||||||||
Proceeds from sale of rental equipment | 35,925 | 3,525 | — | 39,450 | ||||||||||||
Net cash provided by investing activities | (29,954 | ) | 2,411 | — | (27,543 | ) | ||||||||||
Cash flows from financing activities: | ||||||||||||||||
Borrowings on senior secured credit facility | 284,316 | — | — | 284,316 | ||||||||||||
Payments on senior secured credit facility | (263,200 | ) | — | — | (263,200 | ) | ||||||||||
Payment of deferred financing costs | (10 | ) | — | — | (10 | ) | ||||||||||
Payment of related party obligation | (150 | ) | — | — | (150 | ) | ||||||||||
Principal payments of notes payable | (142 | ) | — | — | (142 | ) | ||||||||||
Payments on capital lease obligations | (1,120 | ) | — | — | (1,120 | ) | ||||||||||
Net cash provided by financing activities | 19,694 | — | — | 19,694 | ||||||||||||
Net increase (decrease) in cash | 2,776 | (10 | ) | — | 2,766 | |||||||||||
Cash, beginning of period | 3,334 | 24 | — | 3,358 | ||||||||||||
Cash, end of period | $ | 6,110 | $ | 14 | $ | — | $ | 6,124 | ||||||||
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(10) | Subsequent Events |
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F-61
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F-62
Table of Contents
2005 | 2004 | |||||||
(As restated) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 132,301 | $ | 490,936 | ||||
Accounts receivable (net of allowance for doubtful accounts of $325,899 and $618,252 respectively) | 5,566,897 | 5,024,569 | ||||||
Unbilled revenue | 1,133,729 | 942,060 | ||||||
Inventories and supplies | 1,549,895 | 1,673,089 | ||||||
Prepaid expenses and other current assets | 509,812 | 275,704 | ||||||
Total current assets | 8,892,634 | 8,406,358 | ||||||
Rental fleet equipment, at cost, net (Note 3) | 27,462,697 | 31,013,366 | ||||||
Property and equipment, at cost, net (Note 3) | 3,414,040 | 3,601,134 | ||||||
Other assets: | ||||||||
Due from stockholder, net of reserve of $3,063,852 (Notes 9 and 10) | 1,049,605 | |||||||
Other related-party receivables, long-term (Note 9) | 178,498 | 325,836 | ||||||
Deposits and other assets | 186,615 | 88,140 | ||||||
Total other assets | 365,113 | 1,463,581 | ||||||
Total assets | $ | 40,134,484 | $ | 44,484,439 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 1,311,610 | $ | 3,093,388 | ||||
Accrued interest payable | 104,785 | 1,149,044 | ||||||
Other accrued expenses (Note 11) | 1,862,910 | 2,095,379 | ||||||
Revolving note payable, current portion (Note 4) | 43,735,268 | |||||||
Term note payable, current portion (Note 5) | 18,325 | 16,604 | ||||||
Capital lease obligations, current portion (Note 6) | 467,125 | 8,038 | ||||||
Total current liabilities | 3,764,755 | 50,097,721 | ||||||
Long-term liabilities: | ||||||||
Revolving note payable, long-term portion (Note 4) | 21,533,571 | |||||||
Term note payable, long-term portion (Note 5) | 1,278,176 | 1,305,982 | ||||||
Capital lease obligations, long-term portion (Note 6) | 1,103,923 | 760,300 | ||||||
Other noncurrent liabilities (Notes 11 and 14) | 940,458 | 389,404 | ||||||
Deferred income taxes (Note 7) | 300,000 | |||||||
Total long-term liabilities | 24,856,128 | 2,755,686 | ||||||
Total liabilities | 28,620,883 | 52,853,407 | ||||||
Commitments and contingencies (Notes 8, 11 and 15) | ||||||||
Minority interest in subsidiary (Note 2) | 4,666,873 | |||||||
Stockholders’ equity (deficit): | ||||||||
Common stock, no par value, 100,000 shares authorized, 18,791 and 17,733 shares issued and outstanding, respectively (Note 10) | 927,624 | 2,610,820 | ||||||
Paid-in capital | 1,826,247 | |||||||
Retained earnings (accumulated deficit) (Note 14) | 4,092,857 | (10,979,788 | ) | |||||
Total stockholders’ equity (deficit) | 6,846,728 | (8,368,968 | ) | |||||
Total liabilities and stockholders’ equity (deficit) | $ | 40,134,484 | $ | 44,484,439 | ||||
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AND COMPREHENSIVE INCOME (LOSS)
2005 | 2004 | 2003 | ||||||||||
(As restated) | ||||||||||||
Rental revenue, equipment | $ | 28,018,045 | $ | 26,763,573 | $ | 25,283,050 | ||||||
Equipment sales | 2,608,955 | 1,925,923 | 2,062,923 | |||||||||
Total revenue | 30,627,000 | 28,689,496 | 27,345,973 | |||||||||
Cost of rental revenue, equipment | 8,344,412 | 8,693,676 | 7,065,768 | |||||||||
Cost of equipment sold | 1,430,003 | 1,202,411 | 1,116,403 | |||||||||
Total cost of revenue | 9,774,415 | 9,896,087 | 8,182,171 | |||||||||
Gross profit | 20,852,585 | 18,793,409 | 19,163,802 | |||||||||
Operating expenses (Note 14) | 21,537,076 | 21,585,170 | 17,756,912 | |||||||||
(Loss) income from operations | (684,491 | ) | (2,791,761 | ) | 1,406,890 | |||||||
Other income (expense): | ||||||||||||
Interest income | 581 | 132,638 | 97,231 | |||||||||
Interest expense | (2,167,012 | ) | (3,792,367 | ) | (3,496,033 | ) | ||||||
Allowance for uncollectible stockholder receivable (Notes 10 and 14) | (759,839 | ) | (2,304,014 | ) | ||||||||
Interest rate swap agreements termination expense (Note 13) | (2,809,175 | ) | ||||||||||
Gain on debt restructuring (Note 2) | 13,491,241 | |||||||||||
Total other income (expense) | 11,324,810 | (7,228,743 | ) | (5,702,816 | ) | |||||||
Income (loss) before minority interest in net loss of subsidiary and income tax (benefit) expense | 10,640,319 | (10,020,504 | ) | (4,295,926 | ) | |||||||
Minority interest in net loss of subsidiary (Note 2) | 320,000 | |||||||||||
Income (loss) before income tax (benefit) expense | 10,960,319 | (10,020,504 | ) | (4,295,926 | ) | |||||||
Income tax (benefit) expense (Note 7) | (299,200 | ) | 106,988 | (10,847 | ) | |||||||
Net income (loss) | $ | 11,259,519 | $ | (10,127,492 | ) | $ | (4,285,079 | ) | ||||
Other comprehensive income (loss): | ||||||||||||
Change in fair value of derivative financial instruments | 3,410,869 | (1,294,739 | ) | |||||||||
Comprehensive income (loss) | $ | 11,259,519 | $ | (6,716,623 | ) | $ | (5,579,818 | ) | ||||
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Retained | Accumulated | |||||||||||||||||||||||
Earnings | Other | Total | ||||||||||||||||||||||
Common Stock | Paid-in | (Accumulated | Comprehensive | Stockholders’ | ||||||||||||||||||||
Shares | Amount | Capital | Deficit) | Loss | Equity (Deficit) | |||||||||||||||||||
Balances, July 1, 2002 (as originally reported) | 17,733 | $ | 2,610,820 | $ | 7,983,651 | $ | 10,594,471 | |||||||||||||||||
Prior period adjustments (Note 14) | (4,083,066 | ) | $ | (2,116,130 | ) | (6,199,196 | ) | |||||||||||||||||
Balances, July 1, 2002 (as restated) | 17,733 | 2,610,820 | 3,900,585 | (2,116,130 | ) | 4,395,275 | ||||||||||||||||||
Distributions (Note 10) | (467,802 | ) | (467,802 | ) | ||||||||||||||||||||
Change in fair value of derivative financial instruments | (1,294,739 | ) | (1,294,739 | ) | ||||||||||||||||||||
Net loss | (4,285,079 | ) | (4,285,079 | ) | ||||||||||||||||||||
Balances, June 30, 2003 | 17,733 | 2,610,820 | (852,296 | ) | (3,410,869 | ) | (1,652,345 | ) | ||||||||||||||||
Change in fair value of derivative financial instruments (Note 13) | 3,410,869 | 3,410,869 | ||||||||||||||||||||||
Net loss (Note 14) | (10,127,492 | ) | (10,127,492 | ) | ||||||||||||||||||||
Balances, June 30, 2004 (as restated) | 17,733 | 2,610,820 | (10,979,788 | ) | (8,368,968 | ) | ||||||||||||||||||
Issuance of shares to employees (Note 10) | 13,148 | $ | 143,051 | 143,051 | ||||||||||||||||||||
Return of shares to the Company under settlement agreements (Note 10) | (12,090 | ) | (1,683,196 | ) | 1,683,196 | |||||||||||||||||||
Sale of 50% ownership interest in subsidiary (Note 2) | 3,813,126 | 3,813,126 | ||||||||||||||||||||||
Net income | 11,259,519 | 11,259,519 | ||||||||||||||||||||||
Balances, June 30, 2005 | 18,791 | $ | 927,624 | $ | 1,826,247 | $ | 4,092,857 | $ | — | $ | 6,846,728 | |||||||||||||
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2005 | 2004 | 2003 | ||||||||||
(As restated) | ||||||||||||
Cash flows from operating activities: | ||||||||||||
Net income (loss) (Note 14) | $ | 11,259,519 | $ | (10,127,492 | ) | $ | (4,285,079 | ) | ||||
Adjustments to reconcile net income (loss) to net cash and cash equivalents provided by operating activities: | ||||||||||||
Gain (loss) on disposal of rental fleet equipment and property and equipment | 255,784 | 491,746 | (195,880 | ) | ||||||||
Allowance for doubtful accounts | (292,353 | ) | 101,636 | 174,786 | ||||||||
Allowance for uncollectible stockholder receivable (Notes 9 and 14) | 759,839 | 2,304,014 | ||||||||||
Write-down of parts inventories (Note 14) | 876,743 | |||||||||||
Depreciation and amortization | 8,468,384 | 9,210,815 | 7,218,184 | |||||||||
Deferred income taxes (Note 7) | (300,000 | ) | 106,188 | (12,447 | ) | |||||||
Debt restructuring (Note 2) | (14,253,073 | ) | ||||||||||
Interest rate swap agreements termination expense (Note 13) | 2,809,175 | |||||||||||
Minority interest in net loss of subsidiary (Note 2) | (320,000 | ) | ||||||||||
Common stock issued to employees and board of directors (Note 10) | 143,051 | |||||||||||
Changes in operating assets and liabilities: | ||||||||||||
Accounts receivable | (249,975 | ) | 150,944 | (195,924 | ) | |||||||
Unbilled revenue | (191,669 | ) | 37,380 | (104,243 | ) | |||||||
Inventories and supplies | 123,194 | 448,444 | (316,930 | ) | ||||||||
Prepaid expenses | (234,108 | ) | (70,195 | ) | 564,649 | |||||||
Other receivables | 147,338 | (390,404 | ) | |||||||||
Deposits and other assets | (98,475 | ) | 214,329 | 50,582 | ||||||||
Accounts payable | (1,781,778 | ) | (2,798,522 | ) | 1,962,382 | |||||||
Accrued interest payable | (1,044,259 | ) | 799,589 | 73,258 | ||||||||
Other accrued expenses | (232,469 | ) | 775,517 | 869,552 | ||||||||
Other non-current liabilities | 551,054 | 74,922 | 61,484 | |||||||||
Net cash and cash equivalents provided by operating activities | 1,950,165 | 2,984,315 | 8,654,727 | |||||||||
Cash flows from investing activities: | ||||||||||||
Purchases of rental fleet equipment and property and equipment | (5,491,462 | ) | (1,983,486 | ) | (9,292,309 | ) | ||||||
Proceeds from sales of rental fleet equipment and property and equipment | 1,324,602 | 541,947 | 575,160 | |||||||||
Advances to stockholder, net (Note 9) | 1,049,605 | (759,839 | ) | (1,532,463 | ) | |||||||
Net cash and cash equivalents used in investing activities | (3,117,255 | ) | (2,201,378 | ) | (10,249,612 | ) | ||||||
Cash flows from financing activities: | ||||||||||||
Payments on term note payable | (26,085 | ) | (20,564 | ) | (31,012 | ) | ||||||
Payments on capital lease obligations | (16,835 | ) | (7,295 | ) | (6,648 | ) | ||||||
Payments on revolving notes payable (Note 4) | (37,802,225 | ) | (626,271 | ) | ||||||||
Proceeds from borrowings on revolving notes payable (Note 4) | 38,653,600 | 1,877,335 | ||||||||||
Distribution to stockholder (Note 10) | (32,360 | ) | ||||||||||
Net cash and cash equivalents provided by (used in) financing activities | 808,455 | (654,130 | ) | 1,807,315 | ||||||||
Net (decrease) increase in cash and cash equivalents | (358,635 | ) | 128,807 | 212,430 | ||||||||
Cash and cash equivalents, beginning of period | 490,936 | 362,129 | 149,699 | |||||||||
Cash and cash equivalents, end of period | $ | 132,301 | $ | 490,936 | $ | 362,129 | ||||||
Supplemental disclosures of cash flow information: | ||||||||||||
Cash paid for interest | $ | 1,379,487 | $ | 3,311,636 | $ | 3,528,029 | ||||||
Cash paid for income taxes | $ | 800 | $ | 800 | $ | 1,600 | ||||||
Supplemental disclosures of noncash investing and financing information: | ||||||||||||
Debt restructuring (Note 2) | $ | 8,800,000 | ||||||||||
Minority interest (Note 2) | $ | 4,986,873 | ||||||||||
Acquisition of rental fleet equipment under capital lease obligations (Note 6) | $ | 819,545 | ||||||||||
Refinancing of line of credit (Note 4) | $ | 40,926,093 | ||||||||||
Change in fair value of derivative financial instruments (Note 4 and 13) | $ | (3,410,869 | ) | $ | 1,294,739 | |||||||
Acquisition of land and building under note payable | $ | 1,354,500 | ||||||||||
Distribution to stockholders used to reduce other related party receivables (Note 10) | $ | 435,442 |
F-66
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1. | Summary of Significant Accounting Policies |
F-67
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June 30, | ||||||||
2005 | 2004 | |||||||
Beginning balance | $ | 618,252 | $ | 516,616 | ||||
Provision for doubtful accounts | 106,892 | 807,230 | ||||||
Write-off of doubtful accounts | (399,245 | ) | (705,594 | ) | ||||
Ending balance | $ | 325,899 | $ | 618,252 | ||||
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F-69
Table of Contents
2. | Restructuring |
F-70
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3. | Rental Fleet Equipment and Property and Equipment |
June 30, | ||||||||
2005 | 2004 | |||||||
Rental fleet equipment | $ | 69,502,017 | $ | 69,102,013 | ||||
Less accumulated depreciation | (42,039,320 | ) | (38,088,647 | ) | ||||
Rental fleet equipment, net | $ | 27,462,697 | $ | 31,013,366 | ||||
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June 30, | ||||||||
2005 | 2004 | |||||||
Automobiles, tractors and trailers | $ | 2,790,616 | $ | 3,644,416 | ||||
Office equipment and fixtures | 302,780 | 616,129 | ||||||
Service equipment | 328,065 | 573,248 | ||||||
Leasehold improvements | 961,872 | 1,082,476 | ||||||
Land | 1,084,910 | 1,084,910 | ||||||
Building and improvements | 1,454,219 | 1,448,507 | ||||||
6,922,462 | 8,449,686 | |||||||
Less accumulated depreciation | (3,508,422 | ) | (4,848,552 | ) | ||||
Property and equipment, net | $ | 3,414,040 | $ | 3,601,134 | ||||
4. | Revolving Note Payable |
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5. | Term Note Payable |
June 30, | ||||||||
2005 | 2004 | |||||||
Note to finance company, payable in monthly principal and interest payments of $12,353, with interest at 9.05% per annum. Collateralized by land and building, maturing in April 2028 | $ | 1,296,501 | $ | 1,322,586 | ||||
Less current portion | (18,325 | ) | (16,604 | ) | ||||
Total long-term portion | $ | 1,278,176 | $ | 1,305,982 | ||||
Year Ending June 30, | ||||
2006 | $ | 18,325 | ||
2007 | 20,224 | |||
2008 | 22,319 | |||
2009 | 24,631 | |||
2010 | 27,184 | |||
Thereafter | 1,183,818 | |||
$ | 1,296,501 | |||
6. | Capital Lease Obligations |
June 30, | ||||||||
2005 | 2004 | |||||||
Building and rental fleet equipment held under capital lease obligations | $ | 1,619,545 | $ | 800,000 | ||||
Less accumulated depreciation | (136,731 | ) | (105,000 | ) | ||||
Building and rental fleet equipment held under capital lease obligations, net | $ | 1,482,814 | $ | 695,000 | ||||
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Year Ending June 30, | ||||
2006 | $ | 539,368 | ||
2007 | 433,548 | |||
2008 | 81,084 | |||
2009 | 81,084 | |||
2010 | 81,084 | |||
Thereafter | 1,519,853 | |||
Net minimum lease payments | 2,736,021 | |||
Less amount representing interest | (1,164,973 | ) | ||
Present value of future minimum lease payments | 1,571,048 | |||
Less current portion | (467,125 | ) | ||
Total long-term portion | $ | 1,103,923 | ||
7. | Income Taxes |
For the Year Ended June 30, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
State of California: | ||||||||||||
Current | $ | 800 | $ | 800 | $ | 1,600 | ||||||
Deferred | (300,000 | ) | 106,188 | (12,447 | ) | |||||||
$ | (299,200 | ) | $ | 106,988 | $ | (10,847 | ) | |||||
2004 | ||||
Deferred income tax asset, long-term: | ||||
Net operating loss carryforward | $ | 57,550 | ||
Deferred income tax liability, long-term: | ||||
Depreciation | (357,550 | ) | ||
Net deferred income tax liability | $ | (300,000 | ) | |
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Table of Contents
8. | Operating Lease Commitments |
Year Ending June 30, | ||||
2006 | $ | 511,805 | ||
2007 | 471,329 | |||
2008 | 308,056 | |||
2009 | 289,023 | |||
2010 | 247,086 | |||
Thereafter | 5,492,955 | |||
$ | 7,320,254 | |||
9. | Related Party Transactions and Balances |
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10. | Common Stock |
F-76
Table of Contents
11. | Commitments and Contingencies |
12. | Employee Benefit Plan |
13. | Derivative Financial Instruments |
F-77
Table of Contents
Amount | Fixed Rate | Maturity Date | ||||
$22,000,000 | 5.821% | April 20, 2006 | ||||
$ 3,000,000 | 6.670% | June 14, 2006 | ||||
$10,000,000 | 4.740% | June 10, 2004 |
14. | Prior Period Adjustments |
June 30, 2004 | ||||||||||||
(As Originally | ||||||||||||
Reported) | Adjustments | (As Restated) | ||||||||||
Balance sheet: | ||||||||||||
Liabilities: | ||||||||||||
Other noncurrent liabilities | $ | 389,404 | $ | 389,404 | ||||||||
Stockholder’s deficit: | ||||||||||||
Beginning retained earnings (accumulated deficit) | $ | 8,375,412 | (9,227,708 | ) | (852,296 | ) | ||||||
Ending accumulated deficit | (10,590,384 | ) | (389,404 | ) | (10,979,788 | ) | ||||||
Income statement: | ||||||||||||
Operating expenses | 19,021,178 | 2,563,992 | 21,585,170 | |||||||||
Other income (expense) | (18,631,039 | ) | 11,402,296 | (7,228,743 | ) |
June 30, 2002 | ||||||||||||
(As Originally | ||||||||||||
Reported) | Adjustments | (As Restated) | ||||||||||
Balance sheet: | ||||||||||||
Property and equipment, net | $ | 43,390,198 | $ | (3,514,021 | ) | $ | 39,876,177 | |||||
Liabilities: | ||||||||||||
Accrued liabilities | 134,263 | 316,047 | 450,310 | |||||||||
Other noncurrent liabilities | 252,998 | 252,998 | ||||||||||
Derivative financial instruments | 2,116,130 | 2,116,130 | ||||||||||
Stockholder’s deficit: | ||||||||||||
Ending accumulated deficit | 7,983,651 | (4,083,066 | ) | 3,900,585 | ||||||||
Accumulated other comprehensive loss | (2,116,130 | ) | (2,116,130 | ) |
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F-79
Table of Contents
15. | Subsequent Events |
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Table of Contents
December 31, | June 30, | |||||||
2005 | 2005 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 273,954 | $ | 132,301 | ||||
Accounts receivable, net of allowance for doubtful accounts of $227,012 and $325,899, respectively | 6,237,304 | 5,566,897 | ||||||
Unbilled revenue | 1,073,737 | 1,133,729 | ||||||
Inventories and supplies | 1,621,286 | 1,549,895 | ||||||
Prepaid expenses and other current assets | 815,771 | 509,812 | ||||||
Total current assets | 10,022,052 | 8,892,634 | ||||||
Rental fleet equipment, at cost, net | 28,288,817 | 27,462,697 | ||||||
Property and equipment, at cost, net | 3,600,173 | 3,414,040 | ||||||
Other assets: | ||||||||
Other related-party receivables, long-term | 357,501 | 178,498 | ||||||
Deposits and other assets | 133,517 | 186,615 | ||||||
Total other assets | 491,018 | 365,113 | ||||||
Total assets | $ | 42,402,060 | $ | 40,134,484 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Book overdraft. | $ | 617,776 | ||||||
Accounts payable | 1,866,583 | $ | 1,311,610 | |||||
Accrued interest payable | 124,846 | 104,785 | ||||||
Other accrued expenses | 1,115,152 | 1,862,910 | ||||||
Term note payable, current portion | 30,056 | 18,325 | ||||||
Capital lease obligations, current portion | 9,271 | 467,125 | ||||||
Total current liabilities | 3,763,684 | 3,764,755 | ||||||
Long-term liabilities: | ||||||||
Revolving note payable, long-term portion | 21,785,164 | 21,533,571 | ||||||
Term note payable, long-term portion | 1,252,798 | 1,278,176 | ||||||
Capital lease obligations, long-term portion | 746,714 | 1,103,923 | ||||||
Other noncurrent liabilities | 1,542,637 | 940,458 | ||||||
Deferred income taxes | 80,474 | |||||||
Total long-term liabilities | 25,407,787 | 24,856,128 | ||||||
Total liabilities | 29,171,471 | 28,620,883 | ||||||
Commitments and contingencies | ||||||||
Minority interest in subsidiary | 5,634,641 | 4,666,873 | ||||||
Stockholders’ equity: | ||||||||
Common stock, no par value, 100,000 shares authorized, 18,791 shares issued and outstanding | 927,624 | 927,624 | ||||||
Paid-in capital | 1,826,247 | 1,826,247 | ||||||
Retained earnings | 4,842,077 | 4,092,857 | ||||||
Total stockholders’ equity | 7,595,948 | 6,846,728 | ||||||
Total liabilities and stockholders’ equity | $ | 42,402,060 | $ | 40,134,484 | ||||
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2005 | 2004 | |||||||
Rental revenue, equipment | $ | 15,867,705 | $ | 14,172,510 | ||||
Equipment sales | 2,257,162 | 973,479 | ||||||
Total revenue | 18,124,867 | 15,145,989 | ||||||
Cost of rental revenue, equipment | 4,096,475 | 4,059,523 | ||||||
Cost of equipment sold | 1,397,335 | 747,350 | ||||||
Total cost of revenue | 5,493,810 | 4,806,873 | ||||||
Gross profit | 12,631,057 | 10,339,116 | ||||||
Operating expenses | 10,010,143 | 11,245,988 | ||||||
Income (loss) from operations | 2,620,914 | (906,872 | ) | |||||
Other income (expense), net: | ||||||||
Interest expense | (811,522 | ) | (1,420,926 | ) | ||||
Interest income | 3,431 | |||||||
Gain on debt restructuring | 13,491,241 | |||||||
Total other (expense) income, net | (808,091 | ) | 12,070,315 | |||||
Income before minority interest in net income of subsidiary and income tax (expense) benefit | 1,812,823 | 11,163,443 | ||||||
Minority interest in net income of subsidiary | (967,768 | ) | ||||||
Income before income tax (expense) benefit | 845,055 | 11,163,443 | ||||||
Income tax (expense) benefit | (95,835 | ) | 219,256 | |||||
Net income | $ | 749,220 | $ | 11,382,699 | ||||
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2005 | 2004 | |||||||
Rental revenue, equipment | $ | 8,075,378 | $ | 7,194,802 | ||||
Equipment sales | 1,297,760 | 619,676 | ||||||
Total revenue | 9,373,138 | 7,814,478 | ||||||
Cost of rental revenue, equipment | 2,123,069 | 2,023,872 | ||||||
Cost of equipment sold | 816,545 | 449,552 | ||||||
Total cost of revenue | 2,939,614 | 2,473,424 | ||||||
Gross profit | 6,433,524 | 5,341,054 | ||||||
Operating expenses | 5,219,512 | 5,728,507 | ||||||
Income (loss) from operations | 1,214,012 | (387,453 | ) | |||||
Other income (expense): | ||||||||
Interest expense | (417,008 | ) | (958,000 | ) | ||||
Interest income | 3,431 | |||||||
Gain on debt restructuring | 13,491,241 | |||||||
Total other income (expense), net | (413,577 | ) | 12,533,241 | |||||
Income before minority interest in net income of subsidiary and income tax (expense) benefit | 800,435 | 12,145,788 | ||||||
Minority interest in net income of subsidiary | (443,775 | ) | ||||||
Income before income tax (expense) benefit | 356,660 | 12,145,788 | ||||||
Income tax (expense) benefit | (95,835 | ) | 144,256 | |||||
Net income | $ | 260,825 | $ | 12,290,044 | ||||
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2005 | 2004 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 749,220 | $ | 11,382,699 | ||||
Adjustments to reconcile net income to net cash and cash equivalents provided by (used in) operating activities: | ||||||||
Gain on debt restructuring | (13,491,241 | ) | ||||||
(Gain) loss on disposal of rental fleet equipment and property and equipment | (620,208 | ) | 245,984 | |||||
Allowance for doubtful accounts | (98,887 | ) | 48,000 | |||||
Depreciation and amortization | 3,915,817 | 4,190,936 | ||||||
Deferred income taxes | 80,474 | (219,256 | ) | |||||
Minority interest in net income of subsidiary | 967,768 | |||||||
Common stock issued to employees and board of directors | 143,051 | |||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (571,520 | ) | (1,282,865 | ) | ||||
Unbilled revenue | 59,992 | |||||||
Other receivables | (179,003 | ) | 97,619 | |||||
Inventories and supplies | (71,391 | ) | ||||||
Prepaid expenses | (305,959 | ) | (395,268 | ) | ||||
Deposits and other assets | 53,098 | (98,532 | ) | |||||
Accounts payable | 554,973 | (2,268,270 | ) | |||||
Accrued interest payable | 20,061 | |||||||
Other accrued expenses | (747,758 | ) | (311,107 | ) | ||||
Other non-current liabilities | 602,179 | 650,631 | ||||||
Net cash and cash equivalents provided by (used in) operating activities | 4,408,856 | (1,307,619 | ) | |||||
Cash flows from investing activities: | ||||||||
Purchases of rental fleet equipment and property and equipment | (5,390,704 | ) | (1,549,152 | ) | ||||
Proceeds from sales of rental fleet equipment and property and equipment | 1,082,841 | 338,456 | ||||||
Proceeds from collection of advances to stockholder | 1,049,605 | |||||||
Net cash and cash equivalents used in investing activities | (4,307,863 | ) | (161,091 | ) | ||||
Cash flows from financing activities: | ||||||||
Increase in book overdraft. | 617,776 | |||||||
Payments on term note payable | (13,647 | ) | (12,088 | ) | ||||
Payments on capital lease obligations | (815,062 | ) | (3,929 | ) | ||||
Proceeds from borrowings on revolving notes payable | 21,251,593 | 1,130,379 | ||||||
Payments on revolving notes payable | (21,000,000 | ) | ||||||
Net cash and cash equivalents provided by financing activities | 40,660 | 1,114,362 | ||||||
Net decrease in cash and cash equivalents | 141,653 | (354,348 | ) | |||||
Cash and cash equivalents, beginning of period | 132,301 | 490,936 | ||||||
Cash and cash equivalents, end of period | $ | 273,954 | $ | 136,588 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid for interest | $ | 791,461 | $ | 271,882 | ||||
Supplemental disclosures of noncash investing and financing information: | ||||||||
Debt restructuring | $ | 8,800,000 | ||||||
Minority interest | $ | (4,986,873 | ) | |||||
Refinancing of line of credit | $ | 40,926,093 |
F-84
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1. | Summary of Significant Accounting Policies |
F-85
Table of Contents
2. | Restructuring |
3. | Related Party Transactions and Balances |
F-86
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4. | Revolving Note Payable |
5. | Common Stock |
F-87
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6. | Settlements |
F-88
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Table of Contents
Item 20. | Indemnification of Directors and Officers |
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II-2
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Item 21. | Exhibits and Financial Statement Schedules |
Exhibit | ||||
Number | Description | |||
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 onForm 8-K of H&E Equipment Services, Inc. (FileNo. 000-51759), filed February 3, 2006). | ||
2 | .2 | 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 toForm 8-K of H&E Equipment Services L.L.C. (File Nos.333-99587 and333-99589), filed January 5, 2006). | ||
3 | .1 | Amended and Restated Certificate of Incorporation of H&E Equipment Services, Inc. (incorporated by reference to Exhibit 3.4 to Registration Statement onForm S-1 of H&E Equipment Services, Inc. (FileNo. 333-128996), filed January 20, 2006). | ||
3 | .2 | Amended and Restated Bylaws of H&E Equipment Services, Inc. (incorporated by reference to Exhibit 3.5 to Registration Statement onForm S-1 of H&E Equipment Services, Inc.(File No. 333-128996), filed January 20, 2006). | ||
3 | .3 | Amended and Restated Articles of Organization of Gulf Wide Industries, L.L.C. (incorporated by reference to Exhibit 3.2 to Registration Statement onForm S-4 of H&E Equipment Services L.L.C. (FileNo. 333-99589), filed September 13, 2002). | ||
3 | .4 | Amended Articles of Organization of Gulf Wide Industries, L.L.C., Changing Its Name To H&E Equipment Services L.L.C. (incorporated by reference to Exhibit 3.3 to Registration Statement onForm S-4 of H&E Equipment Services L.L.C. (FileNo. 333-99589), filed September 13, 2002). | ||
3 | .5 | Amended and Restated Operating Agreement of H&E Equipment Services L.L.C. (incorporated by reference to Exhibit 3.8 to Registration Statement onForm S-4 of H&E Equipment Services L.L.C. (FileNo. 333-99589), filed September 13, 2002). | ||
3 | .6 | Certificate of Incorporation of H&E Finance Corp. (incorporated by reference to Exhibit 3.4 to Registration Statement onForm S-4 of H&E Equipment Services L.L.C. (FileNo. 333-99589), filed September 13, 2002). | ||
3 | .7 | Certificate of Incorporation of Great Northern Equipment, Inc. (incorporated by reference to Exhibit 3.5 to Registration Statement onForm S-4 of H&E Equipment Services L.L.C.(File No. 333-99589), filed September 13, 2002). | ||
3 | .8 | Articles of Incorporation of Williams Bros. Construction, Inc. (incorporated by reference to Exhibit 3.6 to Registration Statement onForm S-4 of H&E Equipment Services L.L.C.(File No. 333-99589), filed September 13, 2002). | ||
3 | .9 | Articles of Amendment to Articles of Incorporation of Williams Bros. Construction, Inc. Changing its Name to GNE Investments, Inc. (incorporated by reference to Exhibit 3.7 to Registration Statement onForm S-4 of H&E Equipment Services L.L.C. (FileNo. 333-99589), filed September 13, 2002). | ||
3 | .10 | Bylaws of H&E Finance Corp. (incorporated by reference to Exhibit 3.9 to Registration Statement onForm S-4 of H&E Equipment Services L.L.C. (FileNo. 333-99589), filed September 13, 2002). | ||
3 | .11 | Bylaws of Great Northern Equipment, Inc. (incorporated by reference to Exhibit 3.10 to Registration Statement onForm S-4 of H&E Equipment Services L.L.C. (FileNo. 333-99589), filed September 13, 2002). |
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Exhibit | ||||
Number | Description | |||
3 | .12 | Bylaws of Williams Bros. Construction, Inc. (incorporated by reference to Exhibit 3.11 to Registration Statement onForm S-4 of H&E Equipment Services L.L.C. (FileNo. 333-99589), filed September 13, 2002). | ||
4 | .1 | Indenture, among H&E Equipment Services L.L.C., H&E Finance Corp., the guarantors party thereto and The Bank of New York, dated as of June 17, 2002 (incorporated by reference to Exhibit 4.1 to Registration Statement onForm S-4 of H&E Equipment Services L.L.C. (FileNo. 333-99587), filed on September 13, 2002). | ||
4 | .2 | Registration Rights Agreement, among H&E Equipment Services L.L.C., H&E Finance Corp., the guarantors party thereto and Credit Suisse First Boston Corporation, dated as of June 17, 2002 (incorporated by reference to Exhibit 4.2 to Registration Statement onForm S-4 of H&E Equipment Services L.L.C. (FileNo. 333-99589), filed September 13, 2002). | ||
4 | .3 | Form of H&E Equipment Services, Inc. common stock certificate (incorporated by reference to Exhibit 4.3 to Registration Statement onForm S-1 of H&E Equipment Services, Inc.(File No. 333-128996), filed January 5, 2006). | ||
4 | .4 | 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 onForm 8-K of H&E Equipment Services, Inc. (File No.000-51759), filed February 3, 2006). | ||
4 | .5 | 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 onForm 8-K of H&E Equipment Services, Inc. (File No.000-51759), filed February 3, 2006). | ||
4 | .6 | 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 onForm 8-K of H&E Equipment Services, Inc. (File No.000-51759), filed February 3, 2006). | ||
4 | .7 | Supplemental Indenture, dated as of February 3, 2006, among the Company, H&E LLC, H&E Finance Corp. and The Bank of New York (incorporated by reference to Exhibit 4.4 to Current Report onForm 8-K of H&E Equipment Services, Inc. (FileNo. 000-51759), filed February 3, 2006). | ||
4 | .8 | Supplemental Indenture, dated as of June 6, 2006, among H&E Equipment Services, Inc., H&E Finance Corp., the Guarantors and The Bank of New York (incorporated by reference to Exhibit 4.1 to Current Report onForm 8-K of H&E Equipment Services, Inc. (FileNo. 000-51759), filed June 7, 2006). | ||
4 | .9 | Indenture, among H&E Equipment Services, Inc., the guarantors party thereto and The Bank of New York Trust Company, N.A., dated as of August 4, 2006 (incorporated by reference to Exhibit 4.1 to Current Report onForm 8-K of H&E Equipment Services, Inc. (File No.000-51759), filed on August 8, 2006). | ||
4 | .10 | Registration Rights Agreement, among H&E Equipment Services, Inc., the guarantors party thereto, Credit Suisse Securities (USA), LLC and UBS Securities, LLC, dated as of August 4, 2006 (incorporated by reference to Exhibit 4.2 to Current Report onForm 8-K of H&E Equipment Services, Inc. (FileNo. 000-51759), filed on August 8, 2006). | ||
5 | .1 | Opinion of Dechert LLP regarding legality.* | ||
5 | .2 | Opinion of Garlington, Lohn & Robinson, PLLP regarding legality.* | ||
5 | .3 | Opinion of Ryan, Swanson & Cleveland, PLLC regarding legality.* | ||
10 | .1 | Amended and Restated Credit Agreement among H&E Equipment Services, Inc., Great Northern Equipment, Inc., H&E Equipment Services (California), LLC, H&E Finance Corp., H&E California Holding, Inc., General Electric Capital Corporation, as agent and the other lenders party thereto, dated as of August 4, 2006 (incorporated by reference to Exhibit 10.1 to Current Report onForm 8-K of H&E Equipment Services, Inc. (FileNo. 000-51759), filed on August 8, 2006). |
II-5
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Exhibit | ||||
Number | Description | |||
10 | .2 | Contribution Agreement and Plan of Reorganization, dated as of June 14, 2002, by and among H&E Holdings L.L.C., BRSEC Co-Investment II, LLC (incorporated by reference to Exhibit 10.2 to Registration Statement onForm S-4 of H&E Equipment Services L.L.C. (FileNo. 333-99589), filed September 13, 2002). | ||
10 | .3 | Securityholders Agreement, dated as of June 17, 2002, by and among H&E Holdings L.L.C., BRSEC Co-Investment, LLC, BRSEC Co-Investment II, LLC, certain members of management and other members of H&E Holdings LLC (incorporated by reference to Exhibit 10.3 to Registration Statement onForm S-4 of H&E Equipment Services L.L.C. (FileNo. 333-99589), filed September 13, 2002). | ||
10 | .4 | Registration Rights Agreement, dated as of June 17, 2002, by and among H&E Holdings L.L.C., BRSEC Co-Investment, LLC, BRSEC Co-Investment II, LLC, certain members of management and other members of H&E Holdings L.L.C. (incorporated by reference to Exhibit 10.4 to Registration Statement onForm S-4 of H&E Equipment Services L.L.C. (FileNo. 333-99589), filed September 13, 2002). | ||
10 | .7 | First Amended and Restated Management Agreement, dated as of June 17, 2002, Bruckmann, Rosser, Sherrill & Co., Inc., Bruckmann, Rosser, Sherrill & Co., L.L.C., H&E Holdings L.L.C. and H&E Equipment Services, L.L.C. (incorporated by reference to Exhibit 10.7 to Registration Statement onForm S-4 of H&E Equipment Services L.L.C. (FileNo. 333-99589), filed September 13, 2002). | ||
10 | .8 | Employment Agreement, dated as of June 29, 1999, by and between Gulf Wide Industries, L.L.C., and John M. Engquist (incorporated by reference to Exhibit 10.8 to Registration Statement onForm S-4 of H&E Equipment Services L.L.C. (FileNo. 333-99589), filed September 13, 2002). | ||
10 | .9 | First Amendment to the Employment Agreement, dated as of August 10, 2001, by and among Gulf Wide Industries, L.L.C. and John M. Engquist (incorporated by reference to Exhibit 10.9 to Registration Statement onForm S-4 of H&E Equipment Services L.L.C. (FileNo. 333-99589), filed September 13, 2002). | ||
10 | .10 | Consulting and Noncompetition Agreement, dated as of June 29, 1999, between Head & Engquist Equipment, L.L.C. and Thomas R. Engquist (incorporated by reference to Exhibit 10.20 to Registration Statement onForm S-4 of H&E Equipment Services L.L.C. (FileNo. 333-99589), filed September 13, 2002). | ||
10 | .11 | Purchase Agreement by and among H&E Equipment Services L.L.C., H&E Finance Corp., the guarantors party thereto and Credit Suisse First Boston Corporation, dated June 3, 2002 (incorporated by reference to Exhibit 10.21 to Registration Statement onForm S-4 of H&E Equipment Services L.L.C. (FileNo. 333-99587), filed September 13, 2002). | ||
10 | .12 | Purchase Agreement, among H&E Equipment Services L.L.C., H&E Finance Corp., H&E Holdings L.L.C., the guarantors party thereto and Credit Suisse First Boston Corporation, dated June 17, 2002 (incorporated by reference to Exhibit 10.21 to Registration Statement onForm S-4 of H&E Equipment Services L.L.C. (FileNo. 333-99589), filed September 13, 2002). | ||
10 | .13 | Investor Rights Agreement by and among H&E Holdings, L.L.C., BRSEC Co-Investment, LLC, BRSEC Co-Investment II, LLC and Credit Suisse First Boston Corporation, dated as of June 17, 2002 (incorporated by reference to Exhibit 10.22 to Registration Statement onForm S-4 of H&E Equipment Services L.L.C. (FileNo. 333-99589), filed September 13, 2002). | ||
10 | .14 | Security Agreement, dated June 17, 2002, between H&E Equipment Services L.L.C. and The Bank of New York (incorporated by reference to Exhibit 10.24 to Annual Report onForm 10-K of H&E Equipment Services L.L.C. for the year ended December 31, 2002 (FileNo. 333-99587), filed April 14, 2003). | ||
10 | .15 | Pledge Agreement, dated June 17, 2002, between H&E Equipment Services L.L.C. and The Bank of New York (incorporated by reference to Exhibit 10.25 to Annual Report onForm 10-K of H&E Equipment Services L.L.C. for the year ended December 31, 2002 (FileNo. 333-99587), filed April 14, 2003). | ||
10 | .16 | Trademark Security Agreement, dated June 17, 2002, between H&E Equipment Services L.L.C. and The Bank of New York (incorporated by reference to Exhibit 10.26 to Annual Report onForm 10-K of H&E Equipment Services L.L.C. for the year ended December 31, 2002 (FileNo. 333-99587), filed April 14, 2003). |
II-6
Table of Contents
Exhibit | ||||
Number | Description | |||
10 | .17 | Security Agreement, dated June 17, 2002, between H&E Finance Corp. and The Bank of New York (incorporated by reference to Exhibit 10.27 to Annual Report onForm 10-K of H&E Equipment Services L.L.C. for the year ended December 31, 2002 (FileNo. 333-99587), filed April 14, 2003). | ||
10 | .18 | Security Agreement, dated June 17, 2002, between GNE Investments, Inc. and The Bank of New York (incorporated by reference to Exhibit 10.28 to Annual Report onForm 10-K of H&E Equipment Services L.L.C. for the year ended December 31, 2002 (FileNo. 333-99587), filed April 14, 2003). | ||
10 | .19 | Pledge Agreement, dated June 17, 2002, between GNE Investments, Inc. and The Bank of New York (incorporated by reference to Exhibit 10.29 to Annual Report onForm 10-K of H&E Equipment Services L.L.C. for the year ended December 31, 2002 (FileNo. 333-99587), filed April 14, 2003). | ||
10 | .20 | Security Agreement, dated June 17, 2002, between Great Northern Equipment, Inc. and The Bank of New York (incorporated by reference to Exhibit 10.30 to Annual Report onForm 10-K of H&E Equipment Services L.L.C. for the year ended December 31, 2002 (FileNo. 333-99587), filed April 14, 2003). | ||
10 | .21 | Trademark Security Agreement, dated June 17, 2002, between Great Northern Equipment, Inc. and The Bank of New York (incorporated by reference to Exhibit 10.31 to Annual Report onForm 10-K of H&E Equipment Services L.L.C. for the year ended December 31, 2002 (FileNo. 333-99587), filed April 14, 2003). | ||
10 | .22 | Patent Security Agreement, dated June 17, 2002, between Great Northern Equipment, Inc. and The Bank of New York (incorporated by reference to Exhibit 10.32 to Annual Report onForm 10-K of H&E Equipment Services L.L.C. for the year ended December 31, 2002 (FileNo. 333-99587), filed April 14, 2003). | ||
10 | .23 | Severance and Consulting Agreement, dated March 1, 2004, between H&E Equipment Services, L.L.C. and Robert W. Hepler (incorporated by reference to Exhibit 10.33 to Annual Report onForm 10-K of H&E Equipment Services L.L.C. for the year ended December 31, 2004(File No. 333-99587), filed September 29, 2005). | ||
10 | .24 | Consulting and Noncompetition Agreement, dated as of July 31, 2004, between H&E Equipment Services L.L.C. and Gary W. Bagley (incorporated by reference to Exhibit 10.34 to Annual Report onForm 10-K of H&E Equipment Services L.L.C. for the year ended December 31, 2004(File Nos. 333-99587 and333-99589), filed September 29, 2005). | ||
10 | .25 | Stipulation of Settlement dated November 23, 2005 (incorporated by reference to Exhibit 10.1 toForm 8-K of H&E Equipment Services L.L.C. (FileNo. 333-99587), filed November 29, 2005). | ||
10 | .26 | H&E Equipment Services, Inc. 2006 Stock-Based Compensation Incentive Plan, as amended and restated, effective June 6, 2006 (incorporated by reference to Exhibit 10.1 toForm 8-K of H&E Equipment Services, Inc. (FileNo. 000-51759), filed June 8, 2006). | ||
12 | .1 | Computation of Ratio of Earnings to Fixed Charges. | ||
21 | .1 | Subsidiaries of H&E Equipment Services, Inc. | ||
23 | .1 | Consent of BDO Seidman, LLP. | ||
23 | .2 | Consent of Perry-Smith, LLP. | ||
23 | .3 | Consent of Dechert LLP (Included in Exhibit 5.1). * | ||
23 | .4 | Consent of Garlington, Lohn & Robinson, PLLP, Montana local counsel (Included in Exhibit 5.2).* | ||
23 | .5 | Consent of Ryan, Swanson & Cleveland, PLLC, Washington local counsel (Included in Exhibit 5.3).* | ||
24 | .1 | Power of Attorney (included on signature page). | ||
99 | .1 | Form of Letter of Transmittal. | ||
99 | .2 | Form of Notice of Guaranteed Delivery. | ||
99 | .3 | Form of Letter to Holders. | ||
99 | .4 | Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. | ||
99 | .5 | Form of Letter to Clients. | ||
99 | .6 | Guidelines for Certification of Taxpayer Identification Number on SubstituteForm W-9. |
* | To be filed by amendment. |
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Table of Contents
Item 22. | Undertakings |
II-8
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By: | /s/ John M. Engquist |
Signature | Title | Date | ||||
/s/ GARY W. BAGLEY Gary W. Bagley | Chairman of the Board of Directors and Director | October 3, 2006 | ||||
/s/ JOHN M. ENGQUIST John M. Engquist | President, Chief Executive Officer and Director (Principal Executive Officer) | October 3, 2006 | ||||
/s/ LESLIE S. MAGEE Leslie S. Magee | Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | October 3, 2006 | ||||
/s/ KEITH E. ALESSI Keith E. Alessi | Director | October 3, 2006 |
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Signature | Title | Date | ||||
/s/ BRUCE C. BRUCKMANN Bruce C. Bruckmann | Director | October 3, 2006 | ||||
Lawrence C. Karlson | Director | |||||
/s/ JOHN T. SAWYER John T. Sawyer | Director | October 3, 2006 |
II-10
Table of Contents
By: | /s/ John M. Engquist |
Name | Title | Date | ||||
/s/ JOHN M. ENGQUIST John M. Engquist | President, Chief Executive Officer and Director | October 3, 2006 | ||||
/s/ LESLIE S. MAGEE Leslie S. Magee | Chief Financial Officer and Director | October 3, 2006 | ||||
/s/ GARY W. BAGLEY Gary W. Bagley | Director | October 3, 2006 |
II-11
Table of Contents
By: | /s/ John M. Engquist |
Name | Title | Date | ||||
/s/ JOHN M. ENGQUIST John M. Engquist | President, Chief Executive Officer and Director | October 3, 2006 | ||||
/s/ LESLIE S. MAGEE Leslie S. Magee | Chief Financial Officer and Director | October 3, 2006 | ||||
/s/ GARY W. BAGLEY Gary W. Bagley | Director | October 3, 2006 |
II-12
Table of Contents
By: | /s/ John M. Engquist |
Name | Title | Date | ||||
/s/ JOHN M. ENGQUIST John M. Engquist | President, Chief Executive Officer and Director | October 3, 2006 | ||||
/s/ LESLIE S. MAGEE Leslie S. Magee | Chief Financial Officer and Director | October 3, 2006 | ||||
/s/ GARY W. BAGLEY Gary W. Bagley | Director | October 3, 2006 |
II-13
Table of Contents
By: | /s/ John M. Engquist |
Name | Title | Date | ||||
/s/ JOHN M. ENGQUIST John M. Engquist | President, Chief Executive Officer and Director | October 3, 2006 | ||||
/s/ LESLIE S. MAGEE Leslie S. Magee | Chief Financial Officer and Director | October 3, 2006 | ||||
/s/ GARY W. BAGLEY Gary W. Bagley | Director | October 3, 2006 |
II-14
Table of Contents
By: | /s/ John M. Engquist |
Name | Title | Date | ||||
/s/ JOHN M. ENGQUIST John M. Engquist | President, Chief Executive Officer and Director | October 3, 2006 | ||||
/s/ LESLIE S. MAGEE Leslie S. Magee | Chief Financial Officer and Director | October 3, 2006 | ||||
/s/ GARY W. BAGLEY Gary W. Bagley | Director | October 3, 2006 |
II-15
Table of Contents
Exhibit | ||||
Number | Description | |||
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 onForm 8-K of H&E Equipment Services, Inc. (FileNo. 000-51759), filed February 3, 2006). | ||
2 | .2 | 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 toForm 8-K of H&E Equipment Services L.L.C. (File Nos.333-99587 and333-99589), filed January 5, 2006). | ||
3 | .1 | Amended and Restated Certificate of Incorporation of H&E Equipment Services, Inc. (incorporated by reference to Exhibit 3.4 to Registration Statement onForm S-1 of H&E Equipment Services, Inc. (FileNo. 333-128996), filed January 20, 2006). | ||
3 | .2 | Amended and Restated Bylaws of H&E Equipment Services, Inc. (incorporated by reference to Exhibit 3.5 to Registration Statement onForm S-1 of H&E Equipment Services, Inc.(File No. 333-128996), filed January 20, 2006). | ||
3 | .3 | Amended and Restated Articles of Organization of Gulf Wide Industries, L.L.C. (incorporated by reference to Exhibit 3.2 to Registration Statement onForm S-4 of H&E Equipment Services L.L.C. (FileNo. 333-99589), filed September 13, 2002). | ||
3 | .4 | Amended Articles of Organization of Gulf Wide Industries, L.L.C., Changing Its Name To H&E Equipment Services L.L.C. (incorporated by reference to Exhibit 3.3 to Registration Statement onForm S-4 of H&E Equipment Services L.L.C. (FileNo. 333-99589), filed September 13, 2002). | ||
3 | .5 | Amended and Restated Operating Agreement of H&E Equipment Services L.L.C. (incorporated by reference to Exhibit 3.8 to Registration Statement onForm S-4 of H&E Equipment Services L.L.C. (FileNo. 333-99589), filed September 13, 2002). | ||
3 | .6 | Certificate of Incorporation of H&E Finance Corp. (incorporated by reference to Exhibit 3.4 to Registration Statement onForm S-4 of H&E Equipment Services L.L.C. (FileNo. 333-99589), filed September 13, 2002). | ||
3 | .7 | Certificate of Incorporation of Great Northern Equipment, Inc. (incorporated by reference to Exhibit 3.5 to Registration Statement onForm S-4 of H&E Equipment Services L.L.C.(File No. 333-99589), filed September 13, 2002). | ||
3 | .8 | Articles of Incorporation of Williams Bros. Construction, Inc. (incorporated by reference to Exhibit 3.6 to Registration Statement onForm S-4 of H&E Equipment Services L.L.C.(File No. 333-99589), filed September 13, 2002). | ||
3 | .9 | Articles of Amendment to Articles of Incorporation of Williams Bros. Construction, Inc. Changing its Name to GNE Investments, Inc. (incorporated by reference to Exhibit 3.7 to Registration Statement onForm S-4 of H&E Equipment Services L.L.C. (FileNo. 333-99589), filed September 13, 2002). | ||
3 | .10 | Bylaws of H&E Finance Corp. (incorporated by reference to Exhibit 3.9 to Registration Statement onForm S-4 of H&E Equipment Services L.L.C. (FileNo. 333-99589), filed September 13, 2002). | ||
3 | .11 | Bylaws of Great Northern Equipment, Inc. (incorporated by reference to Exhibit 3.10 to Registration Statement onForm S-4 of H&E Equipment Services L.L.C. (FileNo. 333-99589), filed September 13, 2002). | ||
3 | .12 | Bylaws of Williams Bros. Construction, Inc. (incorporated by reference to Exhibit 3.11 to Registration Statement onForm S-4 of H&E Equipment Services L.L.C. (FileNo. 333-99589), filed September 13, 2002). | ||
4 | .1 | Indenture, among H&E Equipment Services L.L.C., H&E Finance Corp., the guarantors party thereto and The Bank of New York, dated as of June 17, 2002 (incorporated by reference to Exhibit 4.1 to Registration Statement onForm S-4 of H&E Equipment Services L.L.C. (FileNo. 333-99587), filed on September 13, 2002). | ||
4 | .2 | Registration Rights Agreement, among H&E Equipment Services L.L.C., H&E Finance Corp., the guarantors party thereto and Credit Suisse First Boston Corporation, dated as of June 17, 2002 (incorporated by reference to Exhibit 4.2 to Registration Statement onForm S-4 of H&E Equipment Services L.L.C. (FileNo. 333-99589), filed September 13, 2002). |
Table of Contents
Exhibit | ||||
Number | Description | |||
4 | .3 | Form of H&E Equipment Services, Inc. common stock certificate (incorporated by reference to Exhibit 4.3 to Registration Statement onForm S-1 of H&E Equipment Services, Inc.(File No. 333-128996), filed January 5, 2006). | ||
4 | .4 | 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 onForm 8-K of H&E Equipment Services, Inc. (File No.000-51759), filed February 3, 2006). | ||
4 | .5 | 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 onForm 8-K of H&E Equipment Services, Inc. (File No.000-51759), filed February 3, 2006). | ||
4 | .6 | 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 onForm 8-K of H&E Equipment Services, Inc. (File No.000-51759), filed February 3, 2006). | ||
4 | .7 | Supplemental Indenture, dated as of February 3, 2006, among the Company, H&E LLC, H&E Finance Corp. and The Bank of New York (incorporated by reference to Exhibit 4.4 to Current Report onForm 8-K of H&E Equipment Services, Inc. (FileNo. 000-51759), filed February 3, 2006). | ||
4 | .8 | Supplemental Indenture, dated as of June 6, 2006, among H&E Equipment Services, Inc., H&E Finance Corp., the Guarantors and The Bank of New York (incorporated by reference to Exhibit 4.1 to Current Report onForm 8-K of H&E Equipment Services, Inc. (FileNo. 000-51759), filed June 7, 2006). | ||
4 | .9 | Indenture, among H&E Equipment Services, Inc., the guarantors party thereto and The Bank of New York Trust Company, N.A., dated as of August 4, 2006 (incorporated by reference to Exhibit 4.1 to Current Report onForm 8-K of H&E Equipment Services, Inc. (File No.000-51759), filed on August 8, 2006). | ||
4 | .10 | Registration Rights Agreement, among H&E Equipment Services, Inc., the guarantors party thereto, Credit Suisse Securities (USA), LLC and UBS Securities, LLC, dated as of August 4, 2006 (incorporated by reference to Exhibit 4.2 to Current Report onForm 8-K of H&E Equipment Services, Inc. (FileNo. 000-51759), filed on August 8, 2006). | ||
5 | .1 | Opinion of Dechert LLP regarding legality.* | ||
5 | .2 | Opinion of Garlington, Lohn & Robinson, PLLP regarding legality.* | ||
5 | .3 | Opinion of Ryan, Swanson & Cleveland, PLLC regarding legality.* | ||
10 | .1 | Amended and Restated Credit Agreement among H&E Equipment Services, Inc., Great Northern Equipment, Inc., H&E Equipment Services (California), LLC, H&E Finance Corp., H&E California Holding, Inc., General Electric Capital Corporation, as agent and the other lenders party thereto, dated as of August 4, 2006 (incorporated by reference to Exhibit 10.1 to Current Report onForm 8-K of H&E Equipment Services, Inc. (FileNo. 000-51759), filed on August 8, 2006). | ||
10 | .2 | Contribution Agreement and Plan of Reorganization, dated as of June 14, 2002, by and among H&E Holdings L.L.C., BRSEC Co-Investment II, LLC (incorporated by reference to Exhibit 10.2 to Registration Statement onForm S-4 of H&E Equipment Services L.L.C. (FileNo. 333-99589), filed September 13, 2002). | ||
10 | .3 | Securityholders Agreement, dated as of June 17, 2002, by and among H&E Holdings L.L.C., BRSEC Co-Investment, LLC, BRSEC Co-Investment II, LLC, certain members of management and other members of H&E Holdings LLC (incorporated by reference to Exhibit 10.3 to Registration Statement onForm S-4 of H&E Equipment Services L.L.C. (FileNo. 333-99589), filed September 13, 2002). | ||
10 | .4 | Registration Rights Agreement, dated as of June 17, 2002, by and among H&E Holdings L.L.C., BRSEC Co-Investment, LLC, BRSEC Co-Investment II, LLC, certain members of management and other members of H&E Holdings L.L.C. (incorporated by reference to Exhibit 10.4 to Registration Statement onForm S-4 of H&E Equipment Services L.L.C. (FileNo. 333-99589), filed September 13, 2002). |
Table of Contents
Exhibit | ||||
Number | Description | |||
10 | .7 | First Amended and Restated Management Agreement, dated as of June 17, 2002, Bruckmann, Rosser, Sherrill & Co., Inc., Bruckmann, Rosser, Sherrill & Co., L.L.C., H&E Holdings L.L.C. and H&E Equipment Services, L.L.C. (incorporated by reference to Exhibit 10.7 to Registration Statement onForm S-4 of H&E Equipment Services L.L.C. (FileNo. 333-99589), filed September 13, 2002). | ||
10 | .8 | Employment Agreement, dated as of June 29, 1999, by and between Gulf Wide Industries, L.L.C., and John M. Engquist (incorporated by reference to Exhibit 10.8 to Registration Statement onForm S-4 of H&E Equipment Services L.L.C. (FileNo. 333-99589), filed September 13, 2002). | ||
10 | .9 | First Amendment to the Employment Agreement, dated as of August 10, 2001, by and among Gulf Wide Industries, L.L.C. and John M. Engquist (incorporated by reference to Exhibit 10.9 to Registration Statement onForm S-4 of H&E Equipment Services L.L.C. (FileNo. 333-99589), filed September 13, 2002). | ||
10 | .10 | Consulting and Noncompetition Agreement, dated as of June 29, 1999, between Head & Engquist Equipment, L.L.C. and Thomas R. Engquist (incorporated by reference to Exhibit 10.20 to Registration Statement onForm S-4 of H&E Equipment Services L.L.C. (FileNo. 333-99589), filed September 13, 2002). | ||
10 | .11 | Purchase Agreement by and among H&E Equipment Services L.L.C., H&E Finance Corp., the guarantors party thereto and Credit Suisse First Boston Corporation, dated June 3, 2002 (incorporated by reference to Exhibit 10.21 to Registration Statement onForm S-4 of H&E Equipment Services L.L.C. (FileNo. 333-99587), filed September 13, 2002). | ||
10 | .12 | Purchase Agreement, among H&E Equipment Services L.L.C., H&E Finance Corp., H&E Holdings L.L.C., the guarantors party thereto and Credit Suisse First Boston Corporation, dated June 17, 2002 (incorporated by reference to Exhibit 10.21 to Registration Statement onForm S-4 of H&E Equipment Services L.L.C. (FileNo. 333-99589), filed September 13, 2002). | ||
10 | .13 | Investor Rights Agreement by and among H&E Holdings, L.L.C., BRSEC Co-Investment, LLC, BRSEC Co-Investment II, LLC and Credit Suisse First Boston Corporation, dated as of June 17, 2002 (incorporated by reference to Exhibit 10.22 to Registration Statement onForm S-4 of H&E Equipment Services L.L.C. (FileNo. 333-99589), filed September 13, 2002). | ||
10 | .14 | Security Agreement, dated June 17, 2002, between H&E Equipment Services L.L.C. and The Bank of New York (incorporated by reference to Exhibit 10.24 to Annual Report onForm 10-K of H&E Equipment Services L.L.C. for the year ended December 31, 2002 (FileNo. 333-99587), filed April 14, 2003). | ||
10 | .15 | Pledge Agreement, dated June 17, 2002, between H&E Equipment Services L.L.C. and The Bank of New York (incorporated by reference to Exhibit 10.25 to Annual Report onForm 10-K of H&E Equipment Services L.L.C. for the year ended December 31, 2002 (FileNo. 333-99587), filed April 14, 2003). | ||
10 | .16 | Trademark Security Agreement, dated June 17, 2002, between H&E Equipment Services L.L.C. and The Bank of New York (incorporated by reference to Exhibit 10.26 to Annual Report onForm 10-K of H&E Equipment Services L.L.C. for the year ended December 31, 2002 (FileNo. 333-99587), filed April 14, 2003). | ||
10 | .17 | Security Agreement, dated June 17, 2002, between H&E Finance Corp. and The Bank of New York (incorporated by reference to Exhibit 10.27 to Annual Report onForm 10-K of H&E Equipment Services L.L.C. for the year ended December 31, 2002 (FileNo. 333-99587), filed April 14, 2003). | ||
10 | .18 | Security Agreement, dated June 17, 2002, between GNE Investments, Inc. and The Bank of New York (incorporated by reference to Exhibit 10.28 to Annual Report onForm 10-K of H&E Equipment Services L.L.C. for the year ended December 31, 2002 (FileNo. 333-99587), filed April 14, 2003). | ||
10 | .19 | Pledge Agreement, dated June 17, 2002, between GNE Investments, Inc. and The Bank of New York (incorporated by reference to Exhibit 10.29 to Annual Report onForm 10-K of H&E Equipment Services L.L.C. for the year ended December 31, 2002 (FileNo. 333-99587), filed April 14, 2003). | ||
10 | .20 | Security Agreement, dated June 17, 2002, between Great Northern Equipment, Inc. and The Bank of New York (incorporated by reference to Exhibit 10.30 to Annual Report onForm 10-K of H&E Equipment Services L.L.C. for the year ended December 31, 2002 (FileNo. 333-99587), filed April 14, 2003). |
Table of Contents
Exhibit | ||||
Number | Description | |||
10 | .21 | Trademark Security Agreement, dated June 17, 2002, between Great Northern Equipment, Inc. and The Bank of New York (incorporated by reference to Exhibit 10.31 to Annual Report onForm 10-K of H&E Equipment Services L.L.C. for the year ended December 31, 2002 (FileNo. 333-99587), filed April 14, 2003). | ||
10 | .22 | Patent Security Agreement, dated June 17, 2002, between Great Northern Equipment, Inc. and The Bank of New York (incorporated by reference to Exhibit 10.32 to Annual Report onForm 10-K of H&E Equipment Services L.L.C. for the year ended December 31, 2002 (FileNo. 333-99587), filed April 14, 2003). | ||
10 | .23 | Severance and Consulting Agreement, dated March 1, 2004, between H&E Equipment Services, L.L.C. and Robert W. Hepler (incorporated by reference to Exhibit 10.33 to Annual Report onForm 10-K of H&E Equipment Services L.L.C. for the year ended December 31, 2004(File No. 333-99587), filed September 29, 2005). | ||
10 | .24 | Consulting and Noncompetition Agreement, dated as of July 31, 2004, between H&E Equipment Services L.L.C. and Gary W. Bagley (incorporated by reference to Exhibit 10.34 to Annual Report onForm 10-K of H&E Equipment Services L.L.C. for the year ended December 31, 2004(File Nos. 333-99587 and333-99589), filed September 29, 2005). | ||
10 | .25 | Stipulation of Settlement dated November 23, 2005 (incorporated by reference to Exhibit 10.1 toForm 8-K of H&E Equipment Services L.L.C. (FileNo. 333-99587), filed November 29, 2005). | ||
10 | .26 | H&E Equipment Services, Inc. 2006 Stock-Based Compensation Incentive Plan, as amended and restated, effective June 6, 2006 (incorporated by reference to Exhibit 10.1 toForm 8-K of H&E Equipment Services, Inc. (FileNo. 000-51759), filed June 8, 2006). | ||
12 | .1 | Computation of Ratio of Earnings to Fixed Charges. | ||
21 | .1 | Subsidiaries of H&E Equipment Services, Inc. | ||
23 | .1 | Consent of BDO Seidman, LLP. | ||
23 | .2 | Consent of Perry-Smith, LLP. | ||
23 | .3 | Consent of Dechert LLP (Included in Exhibit 5.1).* | ||
23 | .4 | Consent of Garlington, Lohn & Robinson, PLLP, Montana local counsel (Included in Exhibit 5.2).* | ||
23 | .5 | Consent of Ryan, Swanson & Cleveland, PLLC, Washington local counsel (Included in Exhibit 5.3).* | ||
24 | .1 | Power of Attorney (included on signature page). | ||
99 | .1 | Form of Letter of Transmittal. | ||
99 | .2 | Form of Notice of Guaranteed Delivery. | ||
99 | .3 | Form of Letter to Holders. | ||
99 | .4 | Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. | ||
99 | .5 | Form of Letter to Clients. | ||
99 | .6 | Guidelines for Certification of Taxpayer Identification Number on SubstituteForm W-9. |
* | To be filed by amendment. |