H&E EQUIPMENT SERVICES, INC. MANAGEMENT REPORT AND ANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTS (Form 10-Q)

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The following discussion summarizes the financial position of H&E Equipment
Services, Inc. and its subsidiaries as of June 30, 2022, and its results of
operations for the three and six months ended June 30, 2022, and should be read
in conjunction with (i) the unaudited condensed consolidated financial
statements and notes thereto included elsewhere in this Quarterly Report on Form
10-Q and (ii) the audited consolidated financial statements and accompanying
notes to our Annual Report on Form 10-K for the year ended December 31, 2021.
The following discussion contains, in addition to historical information,
forward-looking statements that include risks and uncertainties (see discussion
of "Forward-Looking Statements" included elsewhere in this Quarterly Report on
Form 10-Q). Our actual results may differ materially from those anticipated in
these forward-looking statements as a result of certain factors, including those
factors set forth under Item 1A - "Risk Factors" of our Annual Report on Form
10-K for the year ended December 31, 2021.

Insight

Background

Founded in 1961, we have been in the equipment services business for 61 years
and are one of the largest rental equipment companies in the nation. H&E L.L.C.
was formed in June 2002 through the business combination of Head & Engquist, a
wholly-owned subsidiary of Gulf Wide, and ICM. Head & Engquist, founded in 1961,
and ICM, founded in 1971, were two leading regional, integrated equipment
service companies operating in contiguous geographic markets. In connection with
our initial public offering in February 2006, we converted H&E LLC into H&E
Equipment Services, Inc., a Delaware corporation.

H&E serves a diverse set of end markets in many high growth geographies across the Pacific Northwest, Western coastIntermountain, South-West, Gulf Coast, Southeast, Midwest and Mid-Atlantic regions. From June 30, 2022we operated 106 branches in 25 states across United States.

We engage in five principal business activities in these equipment categories:
equipment rentals, used equipment sales, new equipment sales, parts sales and
repair and maintenance services. The Company's construction rental fleet is
among the industry's youngest and is comprised of aerial work platforms,
earthmoving, material handling, and other general and specialty lines. We
believe that the operating experience and extensive infrastructure we developed
throughout our history as an integrated equipment services company provides us
with a competitive advantage to broaden our industry expansion and successfully
transition to a pure-play rental company. Our management, from the corporate
level down to the branch store level, has extensive industry experience. We
believe this allows us to provide specialized equipment knowledge, improve the
effectiveness of our rental and sales force and strengthen our customer
relationships. In addition, we operate our day-to-day business on a branch
basis, which allows us to more closely service our customers, fosters management
accountability at local levels and strengthens our local and regional
relationships.

Effective October 1, 2021, the Company sold its crane business to a wholly-owned
subsidiary of The Manitowoc Company, Inc. for $130 million in cash ("the Crane
Sale"). The Crane Sale met the criteria for discontinued operations presentation
and as such, the results of operations of the Crane Sale are reported in
discontinued operations in the Consolidated Statements of Income for all periods
presented. The financial results and information below are presented on a
continuing operations basis and exclude the Crane Sale, unless otherwise noted
specifically as discontinued operations.

Critical accounting policies

Item 7, included in Part II of our Annual Report on Form 10-K for the year ended
December 31, 2021, presents the accounting policies and related estimates that
we believe are the most critical to understanding our consolidated financial
statements, financial condition, and results of operations and cash flows, and
which require complex management judgment and assumptions, or involve
uncertainties. There have been no significant changes to these critical
accounting policies and estimates during the three and six months ended June 30,
2022. Our critical accounting policies include, among others, useful lives of
rental equipment and property and equipment, acquisition accounting, goodwill,
long-lived assets and income taxes.

Information regarding our other significant accounting policies is included in
Note 2 to our Consolidated Financial Statements in Item 8 of Part II of our
Annual Report on Form 10-K for the year ended December 31, 2021 and in Note 2 to
the Condensed Consolidated Financial Statements in this Quarterly Report on Form
10-Q.

Business Segments

We have five reportable segments because we derive our revenues from five
principal business activities: (1) equipment rentals; (2) used equipment sales;
(3) new equipment sales; (4) parts sales; and (5) repair and maintenance
services. These segments are based upon how we allocate resources and assess
performance. In addition, we also have non-segmented revenues and costs that
relate to equipment support activities.

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Equipment Rentals. Our rental operation primarily rents our core types of
construction and industrial equipment. We have a well-maintained rental fleet
and our own dedicated sales force, focused by equipment type. We actively manage
the size, quality, age and composition of our rental fleet based on our analysis
of key measures such as time utilization (which we analyze as equipment usage
based on: (1) a percentage of original equipment cost; and (2) the number of
rental equipment units available for rent), rental rate trends and targets,
rental equipment dollar utilization, and maintenance and repair costs, which we
closely monitor. We maintain fleet quality through quality control inspections
and our parts and services operations.

Used Equipment Sales. Our used equipment sales are generated primarily from
sales from our rental fleet, as well as from sales of inventoried equipment that
we acquire through trade-ins from our equipment customers. Used equipment is
sold by our retail sales force. Sales of our rental fleet equipment allow us to
manage the size, quality, composition and age of our rental fleet, and provide
us with a profitable distribution channel for the disposal of rental equipment.

New Equipment Sales. We seek to optimize revenues from new equipment sales by
selling equipment through a professional in-house retail sales force. While
sales of new equipment are impacted by the availability of equipment from the
manufacturer, we believe our relationships with some of our key suppliers
improves our ability to obtain equipment.

Parts Sales. Our parts business provides parts to our own rental fleet and sells
parts for the equipment we sell. In order to provide timely parts and services
support to our rental fleet as well as our customers, we maintain a parts
inventory.

Services. Our services operation provides maintenance and repair services to our
own rental fleet and for our customers' equipment at our facilities as well as
at our customers' locations. In addition to repair and maintenance on an
as-needed or scheduled basis, we also provide ongoing preventative maintenance
services to industrial customers.

Our non-segment revenues and costs relate primarily to incidental costs associated with equipment maintenance and repair services and are generally not allocated to reportable segments.

For more information about our business segments, see Note 11 to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q.

Revenue Sources

We generate all of our total revenues from our five business segments and our
non-segmented equipment support activities. Equipment rentals account for more
than half of our total revenues. For the six months ended June 30, 2022, of our
total revenues, approximately 75.3% were attributable to equipment rentals, 7.1%
were attributable to used equipment sales, 8.4% were attributable to new
equipment sales, 5.7% were attributable to parts sales, 3.0% were attributable
to our services revenues and 0.5% were attributable to our non-segmented other
revenues.

The equipment that we rent, sell and service is principally used in the
construction industry, as well as by companies for commercial and industrial
uses such as plant maintenance and turnarounds, and in the petrochemical and
energy sectors. As a result, our total revenues are affected by several factors
including, but not limited to, the demand for and availability of rental
equipment, rental rates and other competitive factors, the demand for used and
new equipment, the level of construction and industrial activities, spending
levels by our customers, adverse weather conditions, supply chain disruptions
and general economic conditions.

Equipment Rentals. Our rental operation primarily represents revenues from
renting owned equipment of our core types of construction and industrial
equipment (aerial work platforms, earthmoving equipment, material handling
equipment and other general and specialty lines). We primarily account for these
rental contracts as operating leases. We recognize revenue from equipment
rentals in the period earned, regardless of the timing of billing to customers.
A rental contract includes rates for daily, weekly or monthly use, and rental
revenues are earned on a daily basis as rental contracts remain outstanding. We
have a well-maintained rental fleet and we actively manage the size, quality,
age and composition of our rental fleet.

Used Equipment Sales. We generate the majority of our used equipment sales
revenues by selling equipment from our rental fleet. The remainder of our used
equipment sales revenues comes from the sale of inventoried equipment that we
acquire through trade-ins from our equipment customers.

Sale of new equipment. Our new equipment sales business sells new equipment in all of our major equipment categories, primarily in our earth moving products category.

Parts sales. We primarily generate revenue from the sale of pieces of equipment that we rent or sell.

Services. Our services revenue is derived primarily from maintenance and repair services for equipment that we lease or sell and customer-owned equipment.

Our non-segmented revenues for the periods presented in this Quarterly Report on
Form 10-Q relate primarily to ancillary charges associated with equipment
maintenance and repair services, and are not generally allocated to reportable
segments.

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Main costs and expenses

Our largest expenses are rental expenses, rental depreciation, the costs
associated with the used equipment we sell, the costs to purchase new equipment
we sell, and costs associated with parts sales and services, all of which are
included in cost of revenues. For the six months ended June 30, 2022, our total
cost of revenues was $323.2 million. Our operating expenses consist principally
of selling, general and administrative ("SG&A") expenses. For the six months
ended June 30, 2022, our SG&A expenses were $160.9 million. In addition, we have
interest expense related to our debt instruments. Operating expenses and all
other income and expense items below the gross profit line of our consolidated
statements of income are not generally allocated to our reportable segments.

We are also subject to federal and state income taxes. Future income tax audits by state and federal agencies could result in additional income tax expense depending on the potential outcome of these matters.

Revenue cost

Rental Depreciation. Depreciation of rental equipment represents the
depreciation costs attributable to rental equipment. Estimated useful lives vary
based upon type of equipment. Generally, we depreciate aerial work platforms
over a ten year estimated useful life, earthmoving equipment over a five year
estimated useful life with a 25% salvage value, and material handling equipment
over a seven year estimated useful life. Attachments and other smaller type
equipment are depreciated over a three year estimated useful life. We
periodically evaluate the appropriateness of remaining depreciable lives
assigned to rental equipment.

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

Rental Other. Rental other expenses consist primarily of equipment support
activities that we provide our customers in connection with renting equipment,
such as hauling services, damage waiver policies, environmental fees and other
recovery fees.

Used Equipment Sales. Cost of used equipment sold consists of the net book value
of rental equipment for used equipment sold from our rental fleet, the equipment
costs for used equipment we purchase for sale or the trade-in value of used
equipment that we obtain from customers in equipment sales transactions.

Sale of new equipment. The cost of new equipment sold primarily comprises the equipment cost of new equipment sold, net of any credit given to the customer for the trade-in equipment.

Parts Sales. Cost of parts sales represents costs attributable to the sale of
parts used in the maintenance and repair of equipment on-rent by customers and
directly to customers for their owned equipment.

Service Support. Service cost revenue represents costs attributable to service provided for the maintenance and repair of customer-leased and customer-owned equipment.

Our other non-segment expenses include costs associated with incidental costs associated with equipment maintenance and repair services.

Selling, general and administrative expenses

Our SG&A expenses include sales and marketing expenses, payroll and related
benefit costs, including stock compensation expense, insurance expenses,
professional fees, rent and other occupancy costs, property and other taxes,
administrative overhead, depreciation associated with property and equipment
(other than rental equipment) and amortization expense associated with
intangible assets. These expenses are not generally allocated to our reportable
segments.

Interest Expense

Interest expense for the periods presented represents the interest on our
outstanding debt instruments, including aggregate amounts outstanding under our
revolving $750.0 million senior secured credit facility (the "Credit Facility"),
our $1.25 billion, 3.875% senior unsecured notes due 2028 (the "Senior Unsecured
Notes") and finance lease obligations. Interest expense also includes interest
on our outstanding manufacturer flooring plans payable, which are used to
finance inventory and rental equipment purchases. Non-cash interest expense
related to the amortization cost of deferred financing costs and the
accretion/amortization of note discount/premium are also included in interest
expense.

Principal Cash Flows

We generate cash primarily from our operating activities and, historically, we
have used cash flows from operating activities, manufacturer floor plan
financings and available borrowings under the Credit Facility as the primary
sources of funds to purchase inventory and to fund working capital and capital
expenditures, growth and expansion opportunities (see also "Liquidity and
Capital

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Resources" below). The management of our working capital is closely tied to
operating cash flows, as working capital can be significantly impacted by, among
other things, our accounts receivable activities, the level of used and new
equipment inventories, which may increase or decrease in response to current and
expected demand, and the size and timing of our trade accounts payable payment
cycles.

Rental Fleet

A substantial portion of our overall value is in our rental fleet equipment. The
net book value of our rental equipment at June 30, 2022 was $1.2 billion, or
approximately 54.8% of our total assets. Our rental fleet as of June 30, 2022
consisted of 45,822 units having an original acquisition cost (which we define
as the cost originally paid to manufacturers) of $2.0 billion. As of June 30,
2022, our rental fleet composition was as follows (dollars in millions):

                                                                              % of
                                            % of          Original          Original          Average
                                            Total        Acquisition       Acquisition        Age in
                              Units         Units           Cost              Cost            Months
Hi-Lift or Aerial Work
Platforms                      22,692          49.5 %   $       729.3              36.3 %          52.9
Earthmoving                     6,427          14.0 %           552.8              27.6 %          23.2
Material Handling               7,393          16.2 %           562.0              28.0 %          40.6
Other                           9,310          20.3 %           163.6               8.1 %          25.5
Total                          45,822           100 %   $     2,007.7               100 %          41.2


Determining the optimal age and mix for our rental fleet equipment is subjective
and requires considerable estimates and judgments by management. We constantly
evaluate the mix, age and quality of the equipment in our rental fleet in
response to current economic and market conditions, competition and customer
demand. The mix and age of our rental fleet, as well as our cash flows, are
impacted by sales of equipment from the rental fleet, which are influenced by
used equipment pricing at the retail and secondary auction market levels, the
demand for our rental fleet, the availability of new equipment and the capital
expenditures to acquire new rental fleet equipment. In making equipment
acquisition decisions, we evaluate current economic and market conditions,
competition, manufacturers' availability, pricing and return on investment over
the estimated useful life of the specific equipment, among other things. As a
result of our in-house service capabilities and extensive maintenance program,
our rental fleet is well-maintained.

The original acquisition cost of our gross rental fleet increased by
approximately $147.8 million, or 7.9%, for the six months ended June 30, 2022.
The average age of our rental fleet equipment increased by approximately 0.9
months for the six months ended June 30, 2022. Our average rental rates for the
six months ended June 30, 2022 were approximately 8.1% higher than last year
(see further discussion on rental rates in "Results of Operations" below).

With the exception of the Crane Sale and our crane product line, the rental
equipment mix among our core product lines for the six months ended June 30,
2022 was largely consistent with that of the prior year comparable period as a
percentage of total units available for rent and as a percentage of original
acquisition cost.

Main external factors affecting our business

We are subject to a number of external factors that may adversely affect our
businesses. These factors, and other factors, are discussed below and under the
heading "Forward-Looking Statements," and in Item 1A-Risk Factors in our Annual
Report on Form 10-K for the year ended December 31, 2021.

Economic downturns. The demand for our products is dependent on the general
economy, the stability of the global credit markets, the industries in which our
customers operate or serve, and other factors. Downturns in the general economy
or in the construction and industrial markets, as well as adverse credit market
conditions, can cause demand for our products to materially decrease.

Spending levels by customers. Rentals and sales of equipment to the construction
industry and to industrial companies constitute a significant portion of our
total revenues. As a result, we depend upon customers in these businesses and
their ability and willingness to make capital expenditures to rent or buy
specialized equipment. Accordingly, our business is impacted by fluctuations in
customers' spending levels on capital expenditures and by the availability of
credit to those customers.

Adverse weather. Adverse weather in a geographic region in which we operate may
depress demand for equipment in that region. Our equipment is primarily used
outdoors and, as a result, prolonged adverse weather conditions may prohibit our
customers from continuing their work projects. Adverse weather also has a
seasonal impact in parts of our Intermountain region, particularly in the winter
months.

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Regional and Industry-Specific Activity and Trends. Expenditures by our
customers may be impacted by the overall level of construction activity in the
markets and regions in which they operate, the price of oil and other
commodities, the price of materials, supply chain disruptions and other general
economic trends impacting the industries in which our customers and end users
operate. As our customers adjust their activity and spending levels in response
to these external factors, our rentals and sales of equipment to those customers
will be impacted.

Results of Operations

The tables included in the period-to-period comparisons below provide summaries
of our revenues and gross profits for our business segments and non-segmented
revenues for the three and six months ended June 30, 2022 and 2021. The
period-to-period comparisons of our financial results are not necessarily
indicative of future results. All financial results and metrics discussed below
are on a continuing operations basis.

As discussed further in Note 1 and Note 3 to our Condensed Consolidated
Financial Statements, on October 1, 2021, the Company sold its crane business.
The results of operations of the Crane Sale are reported in discontinued
operations in the Condensed Consolidated Statements of Income for all periods
presented. The Condensed Consolidated Statements of Cash Flows includes cash
flows related to the discontinued operations and accordingly, cash flow amounts
for discontinued operations are disclosed in Note 3 "Acquisitions and
Dispositions".

Three Months Ended June 30, 2022 Compared to the Three Months Ended June 30,
2021

Revenues.

                            Three Months Ended            Total            Total
                                 June 30,                Dollar          Percentage
                                                        Increase          Increase
                            2022          2021          (Decrease)       (Decrease)
                                      (in thousands, except percentages)
Segment Revenues:
Equipment rentals
Rentals                   $ 201,243     $ 157,211     $      44,032             28.0 %
Rentals other                26,334        18,400             7,934             43.1 %
Total equipment rentals     227,577       175,611            51,966             29.6 %
Used equipment sales         18,833        35,821           (16,988 )          (47.4 )%
New equipment sales          21,486        27,633            (6,147 )          (22.2 )%
Parts sales                  16,172        16,880              (708 )           (4.2 )%
Services revenues             8,889         8,059               830             10.3 %
Non-Segmented revenues        1,714         1,673                41              2.5 %
Total revenues            $ 294,671     $ 265,677     $      28,994             10.9 %




Total Revenues. Our total revenues were $294.7 million for the three months
ended June 30, 2022 compared to $265.7 million for the three months ended June
30, 2021, an increase of $29.0 million, or 10.9%. Revenues for all reportable
segments and non-segmented other revenues are further discussed below.

Equipment Rental Revenues. Our total revenues from equipment rentals for the
three months ended June 30, 2022 increased $52.0 million, or 29.6%, to $227.6
million from $175.6 million in the three months ended June 30, 2021. The
increase in equipment rental revenues was primarily due to our larger fleet,
increased demand and increased rental rates as compared to the prior year. See
Rentals and Rentals Other below for additional information.

Rentals: Rental revenues increased $44.0 million, or 28.0%, to $201.2 million
for the three months ended June 30, 2022 compared to $157.2 million for the
three months ended June 30, 2021. Rental revenues from earthmoving equipment
increased $17.2 million, material handling equipment increased $12.1 million and
aerial work platform equipment increased $9.9 million. Rental revenues on other
equipment increased $4.8 million. Our average rental rates for the three months
ended June 30, 2022 increased 9.4% compared to the same three months last year
and increased 3.5% from the three months ended March 31, 2022. Rental equipment
dollar utilization (annual rental revenues divided by the average original
rental fleet equipment costs) for the three months ended June 30, 2022 was 40.9%
compared to 35.9% in the three months ended June 30, 2021, an increase of 5.0%.
The increase in comparative rental equipment dollar utilization was the result
of the increase in equipment rental rates and an increase in rental equipment
time utilization. Rental equipment time utilization as a percentage of original
equipment cost was 73.2% for the three months ended June 30, 2022 compared to
68.7% in the three months ended June 30, 2021, an increase of 4.5%. The increase
in rental equipment time utilization as a percentage of original equipment cost
was largely due to increased demand in the current year.

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Rentals Other: Our rentals other revenues consists primarily of equipment
support activities that we provide to customers in connection with renting
equipment, such as hauling charges, damage waiver policies, environmental and
other recovery fees. Rental other revenues for the three months ended June 30,
2022 were $26.3 million compared to $18.4 million for the three months ended
June 30, 2021, an increase of approximately $7.9 million, or 43.1%.

Used Equipment Sales Revenues. Our used equipment sales decreased $17.0 million,
or 47.4%, to $18.8 million for the three months ended June 30, 2022, from $35.8
million for the same three months in 2021. This decrease is reflective of the
increased rental demand and our decision to capitalize on high equipment
utilization during the quarter. Sales of used material handling equipment, used
aerial work platform equipment and used earthmoving equipment decreased $7.8
million, $5.2 million and $3.1 million, respectively.

New Equipment Sales Revenues. Our new equipment sales for the three months ended
June 30, 2022 decreased $6.1 million, or 22.2%, to $21.5 million from $27.6
million for the three months ended June 30, 2021. Sales of new other equipment,
new earthmoving equipment and new aerial work platform equipment sales decreased
$4.1 million, $1.5 million, and $0.7 million, respectively.

Parts Sales Revenues. Our parts sales revenues for the three months ended June
30, 2022 decreased $0.7 million, or 4.2%, to $16.2 million from $16.9 million
for the same three months last year.

Services Revenues. Our services revenues for the three months ended June 30,
2022 increased $0.8 million, or 10.3%, to $8.9 million from $8.1 million for the
same three months last year.

Non-Segmented Other Revenues. Our non-segmented other revenues relate to
equipment support activities that we provide to customers in connection with new
and used equipment sales and parts and services revenues and are not generally
allocated to reportable segments. For the three months ended June 30, 2022, our
other revenues were $1.7 million, an increase of 2.5% from the same three months
in 2021.

Gross Profit.

                                                Three Months Ended            Total            Total
                                                     June 30,                Dollar          Percentage
                                                                            Increase          Increase
                                                2022          2021          (Decrease)       (Decrease)
                                                         (in thousands, except percentages)
Segment Gross Profit (Loss):
Equipment rentals
Rentals                                      $  108,140     $  73,189     $      34,951             47.8 %
Rentals other                                     2,461            10             2,451          24510.0 %
Total equipment rentals                         110,601        73,199            37,402             51.1 %
Used equipment sales                              8,962        13,138            (4,176 )          (31.8 )%
New equipment sales                               3,215         3,402              (187 )           (5.5 )%
Parts sales                                       4,340         4,527              (187 )           (4.1 )%
Services revenues                                 5,746         5,481               265              4.8 %

Gross profit (loss) from non-segment revenue (530 ) 73

       (603 )         (826.0 )%
Total gross profit                           $  132,334     $  99,820     $      32,514             32.6 %




Total Gross Profit. Our total gross profit was $132.3 million for the three
months ended June 30, 2022 compared to $99.8 million for the same three months
in 2021, an increase of $32.5 million, or 32.6%. Total gross profit margin for
the three months ended June 30, 2022 was approximately 44.9%, an increase of
7.3% from the 37.6% gross profit margin for the same three months in 2021. Gross
profit and gross margin for all reportable segments and non-segmented other
revenues are further described below.

Equipment Rentals Gross Profit. Our total gross profit from equipment rentals
for the three months ended June 30, 2022 increased $37.4 million, or 51.1%, to
$110.6 million from $73.2 million in the same three months in 2021. Total gross
profit margin from equipment rentals for the three months ended June 30, 2022
was 48.6% compared to 41.7% for the same period in 2021, an increase of
approximately 6.9%. See Rentals and Rentals Other below for additional
information.

Rentals: Rental revenues gross profit increased $35.0 million, or 47.8%, to
$108.1 million for the three months ended June 30, 2022 compared to $73.2
million for the same three months in 2021. The increased gross profit was due to
increased rental revenues of $44.0 million for the three months ended June 30,
2022 compared to the same period last year, partially offset by a $5.8 million
increase in rental equipment depreciation expense and a $3.3 million increase in
rental expenses. The increase in depreciation expense is primarily due to a
larger fleet size in the current year as compared to the prior year. Our fleet
size, based on original equipment cost, at June 30, 2022 was $228.2 million, or
12.8%, larger than our fleet at June 30, 2021. Gross profit margin on equipment
rentals for the

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three months ended June 30, 2022 was 53.7% compared to 46.6% for the same period
in 2021, an increase of 7.1%. Depreciation expense was 31.0% of equipment rental
revenues for the three months ended June 30, 2022 compared to 35.9% for the same
period in 2021, a decrease of approximately 4.9%, resulting primarily from the
increase in rental revenues. As a percentage of revenues, rental expenses were
15.3% for the three months ended June 30, 2022 compared to 17.5% for the same
period last year, a decrease of 2.2%, resulting primarily from the increase in
rental revenues.

Rentals Other: Our rentals other revenues consists primarily of equipment
support activities that we provide to customers in connection with renting
equipment, such as hauling charges, damage waiver policies, environmental and
other recovery fees. Rental other revenues gross profit for the three months
ended June 30, 2022 was $2.5 million, an increase of $2.5 million as compared to
the same period in 2021. The gross margin was 9.3% for the three months ended
June 30, 2022 compared to a gross margin of 0.1% for the same period last year.

Used Equipment Sales Gross Profit. Our used equipment sales gross profit for the
three months ended June 30, 2022 decreased $4.2 million, or 31.8%, to $9.0
million from $13.1 million in the same period in 2021, as used equipment sales
revenues decreased $17.0 million. Gross profit margin on used equipment sales
for the three months ended June 30, 2022 was approximately 47.6%, up 10.9% from
36.7% for the same three months in 2021, primarily as a result of higher gross
margins across all product lines. Our used equipment sales from the rental
fleet, which comprised 88.0% and 96.4% of our used equipment sales for the three
months ended June 30, 2022 and 2021, respectively, were approximately 203.7% and
160.7% of net book value for the three months ended June 30, 2022 and 2021,
respectively.

New Equipment Sales Gross Profit. Our new equipment sales gross profit for the
three months ended June 30, 2022 decreased $0.2 million, or 5.5%, to $3.2
million compared to $3.4 million for the same three months in 2021. Gross profit
margin on new equipment sales was 15.0% for the three months ended June 30,
2022, compared to 12.3% for the same period last year, an increase of 2.7%. The
increase in gross profit was primarily due to increased gross profit in
earthmoving equipment sales.

Parts Sales Gross Profit. Our parts sales gross profit for the three months
ended June 30, 2022 was $4.3 million, a decrease of 4.1%, from gross profit of
$4.5 million for the same period last year on parts sales that decreased $0.7
million. Gross profit margin for both the three months ended June 30, 2022 and
2021 was 26.8%.

Services Revenues Gross Profit. For the three months ended June 30, 2022, our
services revenues gross profit increased $0.3 million, or 4.8%, to $5.7 million
from $5.5 million for the same three months in 2021 on service revenues that
increased $0.8 million. Gross profit margin for the three months ended June 30,
2022 was 64.6%, a decrease of 3.4% from 68.0% in the same three months in 2021,
as a result of services revenues mix.

Non-Segmented Other Revenues Gross Profit. Our non-segmented other revenues
relate to equipment support activities that we provide to customers in
connection with used and new equipment sales and parts and services revenues and
are not generally allocated to reportable segments. For the three months ended
June 30, 2022, our other revenues gross loss was $0.5 million compared to a
gross profit of $0.1 million, in the same period in 2021, a decrease of $0.6
million.

Selling, General and Administrative Expenses. SG&A expenses increased $12.0
million, or 16.9%, to $82.7 million for the three months ended June 30, 2022
compared to $70.7 million for the three months ended June 30, 2021. Employee
salaries, wages, payroll taxes and other employee related expenses increased
$7.5 million due to increased commissions, wages, headcount and incentive pay.
Facility expenses increased $1.1 million, professional fees increased $0.8
million and liability insurance costs increased $0.7 million. Approximately $2.2
million of comparative incremental SG&A expenses in the three months ended June
30, 2022 was attributable to branches opened since January 1, 2021 with less
than three months of comparable operations in either or both of the three months
ended June 30, 2022 and 2021. SG&A expenses as a percentage of total revenues
for the three months ended June 30, 2022 and 2021 were 28.1% and 26.6%,
respectively, an increase of 1.5%.

Gain on Sales of Property & Equipment (Net). We had net gains on sales of
property and equipment of $1.0 million compared to $0.6 million for the same
period last year, an increase of $0.4 million. This increase is due to gains on
the sale of property and equipment in the normal course of business.

Other Income (Expense). For the three months ended June 30, 2022, our net other
expenses decreased approximately $0.1 million to $12.6 million compared to $12.7
million for the same three months in 2021. Interest expense was $13.5 million
for the three months ended June 30, 2022 and $13.4 million for the three months
ended June 30, 2021.

Income Taxes. We recorded income tax expense of $10.2 million for the three
months ended June 30, 2022 compared to an income tax expense of $4.8 million for
the three months ended June 30, 2021. Our effective income tax rate for the
three months ended June 30, 2022 was 26.8% compared to 28.2% for the same period
in 2021. Based on available evidence, both positive and negative, we believe it
is more likely than not that our federal deferred tax assets at June 30, 2022
are fully realizable through future

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reversals of existing taxable temporary differences and future taxable income.
As of June 30, 2022, we have a valuation allowance of $7.6 million for certain
state tax credits that may not be realized.

Six Months Ended June 30, 2022 Compared to the Six Months Ended June 30, 2021

Revenues.

                             Six Months Ended            Total            Total
                                 June 30,                Dollar         Percentage
                                                        Increase         Increase
                            2022          2021         (Decrease)       (Decrease)
                                     (in thousands, except percentages)
Segment Revenues:
Equipment rentals
Rentals                   $ 378,425     $ 294,357     $     84,068             28.6 %
Rentals other                48,377        34,473           13,904             40.3 %
Total equipment rentals     426,802       328,830           97,972             29.8 %
Used equipment sales         40,359        74,675          (34,316 )          (46.0 )%
New equipment sales          47,522        50,806           (3,284 )           (6.5 )%
Parts sales                  32,231        32,436             (205 )           (0.6 )%
Services revenues            17,023        16,070              953              5.9 %
Non-Segmented revenues        3,184         3,292             (108 )           (3.3 )%
Total revenues            $ 567,121     $ 506,109     $     61,012             12.1 %




Total Revenues. Our total revenues were $567.1 million for the six months ended
June 30, 2022 compared to $506.1 million for the six months ended June 30, 2021,
an increase of $61.0 million, or 12.1%. Revenues for all reportable segments and
non-segmented other revenues are further discussed below.

Equipment Rental Revenues. Our total revenues from equipment rentals for the six
months ended June 30, 2022 increased $98.0 million, or 29.8%, to $426.8 million
from $328.8 million in the six months ended June 30, 2021. The increase in
equipment rental revenues was primarily due to our larger fleet, increased
rental demand and increased rental rates as compared to the prior year.

Rentals. Rental revenues increased $84.1 million, or 28.6%, to $378.4 million
for the six months ended June 30, 2022 compared to $294.4 million for the six
months ended June 30, 2021. Rental revenues from earthmoving equipment increased
$32.2 million, material handling equipment increased $22.6 million, aerial work
platform equipment increased $19.4 million and other equipment increased $9.8
million. Our average rental rates for the six months ended June 30, 2022
increased 8.1% compared to the same period last year. Rental equipment dollar
utilization (annual rental revenues divided by the average original rental fleet
equipment costs) for the six months ended June 30, 2022 was 39.3% compared to
34.3% in the six months ended June 30, 2021, an increase of 5.0%. The increase
in comparative rental equipment dollar utilization was the result of an increase
in rental equipment time utilization and increase in equipment rental rates.
Rental equipment time utilization as a percentage of original equipment cost was
71.8% for the six months ended June 30, 2022 compared to 66.4% in the six months
ended June 30, 2021, an increase of 5.4%. The increase in rental equipment time
utilization as a percentage of original equipment cost was largely due to the
increase in demand.

Rentals Other. Our rentals other revenue consists primarily of equipment support
activities that we provide to customers in connection with renting equipment,
such as hauling charges, damage waiver policies, environmental and other
recovery fees. Rental other revenues for the six months ended June 30, 2022 were
$48.4 million compared to $34.5 million for the six months ended June 30, 2021,
an increase of $13.9 million, or 40.3%. The increase was primarily related to
the increase in rental revenues discussed above.

Used Equipment Sales Revenues. Our used equipment sales decreased $34.3 million,
or 46.0%, to $40.4 million for the six months ended June 30, 2022 from $74.7
million for the six months ended June 30, 2021. This decrease is reflective of
the increased rental demand and our decision to capitalize on high equipment
utilization during the quarter. Sales of used material handling equipment
decreased $15.7 million, sales of used aerial work platform equipment decreased
$9.5 million and sales of used earthmoving equipment decreased $8.0 million.

New Equipment Sales Revenues. Our new equipment sales for the six months ended
June 30, 2022 decreased $3.3 million, or 6.5%, to $47.5 million from $50.8
million for the six months ended June 30, 2021. Sales of new aerial work
platform equipment decreased $1.9 million, sales of new earthmoving equipment
decreased $1.6 million and sales of other equipment decreased $1.2 million.
Partially offsetting these decreases is the sales of material handling equipment
which increased $1.5 million.

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Parts Sales Revenues. Our parts sales revenues for the six months ended June 30,
2022 decreased $0.2 million, or 0.6%, to $32.2 million from $32.4 million for
the six months ended June 30, 2021. The decreased parts sales was primarily
attributable to decreases in our earthmoving equipment parts sales, partially
offset by our aerial work platform equipment parts sales.

Services Revenues. Our services revenues for the six months ended June 30, 2022
increased approximately $1.0 million, or 5.9%, to $17.0 million from $16.1
million for the six months ended June 30, 2021. The increased service revenue
was primarily attributable to our earthmoving equipment and material handling
equipment product lines.

Non-Segmented Other Revenues. Our non-segmented other revenues relate to
equipment support activities that we provide to customers in connection with
used and new equipment sales and parts and services revenues and are not
generally allocated to reportable segments. For the six months ended June 30,
2022 and 2021, our non-segmented other revenues were $3.2 million and $3.3
million, respectively, a decrease of $0.1 million.

Gross Profit.

                                                Six Months Ended            Total            Total
                                                    June 30,                Dollar         Percentage
                                                                           Increase         Increase
                                               2022          2021         (Decrease)       (Decrease)
                                                        (in thousands, except percentages)
Segment Gross Profit (Loss):
Equipment rentals
Rentals                                      $ 196,542     $ 131,817     $     64,725             49.1 %
Rentals other                                    3,591          (411 )          4,002            973.7 %
Total equipment rentals                        200,133       131,406           68,727             52.3 %
Used equipment sales                            17,940        25,632           (7,692 )          (30.0 )%
New equipment sales                              6,922         6,176              746             12.1 %
Parts sales                                      8,695         8,930             (235 )           (2.6 )%
Services revenues                               11,066        10,877              189              1.7 %

Gross profit (loss) from non-segment revenue (842 ) 211

    (1,053 )         (499.1 )%
Total gross profit                           $ 243,914     $ 183,232     $     60,682             33.1 %




Total Gross Profit. Our total gross profit was $243.9 million for the six months
ended June 30, 2022 compared to $183.2 million for the six months ended June 30,
2021, an increase of $60.7 million, or 33.1%. Total gross profit margin for the
six months ended June 30, 2022 was 43.0%, an increase of 6.8% from the 36.2%
gross profit margin for the six months ended June 30, 2021. Gross profit and
gross margin for all reportable segments and non-segmented other revenues are
further described below.

Equipment Rentals Gross Profit. Our total gross profit from equipment rentals
for the six months ended June 30, 2022 increased $68.7 million, or 52.3%, to
$200.1 million from $131.4 million in the six months ended June 30, 2021. Total
gross profit margin from equipment rentals for the six months ended June 30,
2022 was 46.9% compared to 40.0% for the same period in 2021, an increase of
6.9%.

Rentals: Rental revenues gross profit increased $64.7 million, or 49.1%, to
$196.5 million for the six months ended June 30, 2022 compared to $131.8 million
for the six months ended June 30, 2021. The increased gross profit was the
result of increased rental revenues of $84.1 million for the six months ended
June 30, 2022 compared to the same period last year, which was partially offset
by a $12.3 million increase in rental depreciation and a $7.0 million increase
in rental expenses. The increase in depreciation expense is primarily due to a
larger fleet size in the current year as compared to the prior year. Gross
profit margin on rentals for the six months ended June 30, 2022 was 51.9%
compared to 44.8% for the six months ended June 30, 2021, an increase of 7.1%.
Depreciation expense was 32.3% of rental revenues for the six months ended June
30, 2022 compared to 37.4% for the same period in 2021, a decrease of 5.1%. As a
percentage of revenues, rental expenses were 15.7% for the six months ended June
30, 2022 compared to 17.9% for the same period last year, a decrease of 2.2%.

Rentals Other: Our rentals other revenue consists primarily of equipment support
activities that we provide to customers in connection with renting equipment,
such as hauling charges, damage waiver policies, environmental and other
recovery fees. Rental other revenues gross profit for the six months ended June
30, 2022 was $3.6 million compared to a gross loss of $0.4 million for the same
period in 2021, an increase of $4.0 million. Gross profit margin was 7.4% for
the six months ended June 30, 2022 compared to a gross loss margin of 1.2% for
the same period last year, an increase of 8.6%.

Used Equipment Sales Gross Profit. Our used equipment sales gross profit for the
six months ended June 30, 2022 decreased $7.7 million, or 30.0%, to $17.9
million from $25.6 million in the same period in 2021 on a decreased used
equipment sales of $34.3 million. Gross profit margin on used equipment sales
for the six months ended June 30, 2022 was approximately 44.5%, up 10.2%

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from 34.3% for the six months ended June 30, 2021, primarily as a result of
higher used equipment gross margins across our core product lines. Our used
equipment sales from the rental fleet, which comprised 89.9% and 95.4% of our
used equipment sales for the six months ended June 30, 2022 and 2021,
respectively, were approximately 191.5% and 155.5% of net book value for the six
months ended June 30, 2022 and 2021, respectively.

New Equipment Sales Gross Profit. Our new equipment sales gross profit for the
six months ended June 30, 2022 increased $0.7 million, or 12.1%, to $6.9 million
compared to $6.2 million for the six months ended June 30, 2021 on decreased new
equipment sales of $3.3 million. Gross profit margin on new equipment sales was
14.6% for the six months ended June 30, 2022, compared to 12.2% for the same
period last year, an increase of 2.4%.

Parts Sales Gross Profit. Our parts sales gross profit for the six months ended
June 30, 2022 was $8.7 million, a decrease of $0.2 million, or 2.6%, from a
gross profit of $8.9 million for the same period last year on decreased parts
sales of $0.2 million. Gross profit margin for the six months ended June 30,
2022 and 2021 was 27.0% and 27.5%, respectively.

Services Revenues Gross Profit. For the six months ended June 30, 2022, our
services revenues gross profit increased $0.2 million, or 1.7%, to $11.1 million
from $10.9 million for the six months ended June 30, 2021 on increased services
revenues of $1.0 million. Gross profit margin for the six months ended June 30,
2022 was 65.0%, a decrease of 2.7% from 67.7% in the six months ended June 30,
2021, as a result of services revenues mix.

Non-Segmented Other Revenues Gross Profit. Our non-segmented other revenues
relate to equipment support activities that we provide to customers in
connection with used and new equipment sales and parts and services revenues and
are not generally allocated to reportable segments. For the six months ended
June 30, 2022, our other revenues gross loss was $0.8 million compared to a
gross profit of $0.2 million in the same period in 2021, a decrease of $1.1
million.

Selling, General and Administrative Expenses. SG&A expenses increased $22.1
million, or 15.9%, to $160.9 million for the six months ended June 30, 2022
compared to $138.9 million for the six months ended June 30, 2021. Employee
salaries, wages, payroll taxes and other employee related expenses increased
$13.6 million, primarily as a result of increased incentive pay combined with
higher headcount and commissions and increased employee hours. Facility rent
expenses and repairs and maintenance costs increased $2.5 million, professional
fees increased $1.7 million, liability insurance costs increased $1.2 million
and fuel and utilities costs increased $0.6 million. Approximately $6.5 million
of the total increase in SG&A expenses was attributable to branches opened since
January 1, 2021 with less than six months of comparable operations in either or
both of the six months ended June 30, 2022 and 2021. SG&A expenses as a
percentage of total revenues for the six months ended June 30, 2022 and 2021
were 28.4% and 27.4%, respectively.

Gain on Sales of Property & Equipment (Net). We had net gains on sales of
property and equipment of $2.4 million for the six months ended June 30, 2022
compared to $0.8 million for the same period last year, an increase of $1.6
million. This increase is due to gains on the sale of property and equipment in
the normal course of business.

Other Income (Expense). For the six months ended June 30, 2022, our net other
expenses were $25.2 million compared to $25.5 million for the six months ended
June 30, 2021. Interest expense was $26.9 million for both of the six months
ended June 30, 2022 and 2021.

Income Taxes. We recorded an income tax expense of $16.0 million for the six
months ended June 30, 2022 compared to an income tax expense of $5.5 million for
the six months ended June 30, 2021. Our effective income tax rate for the six
months ended June 30, 2022 was 26.6% compared to 28.0% for the same period in
2021. Based on available evidence, both positive and negative, we believe it is
more likely than not that our federal deferred tax assets at June 30, 2022 are
fully realizable through future reversals of existing taxable temporary
differences and future taxable income. As of June 30, 2022, we have a valuation
allowance of $7.6 million for certain state tax credits that may not be
realized.

Cash and capital resources

Cash Flow From Operating Activities. For the six months ended June 30, 2022, the
net cash provided by our operating activities was $104.2 million. Our reported
net income of $42.6 million, when adjusted for non-cash income and expense
items, such as depreciation and amortization, deferred income taxes, net
amortization (accretion) of note discount (premium), provision for losses on
accounts receivable, impairment of goodwill, provision for inventory
obsolescence, stock-based compensation expense, loss on sale of discontinued
operations and net gains on the sale of long-lived assets, provided positive
cash flows of $189.1 million. These cash flows from operating activities were
also positively impacted by a $41.3 million increase in accounts payable and a
$0.6 million increase in manufacturing flooring plans payable. Partially
offsetting these positive cash flows were an $87.6 million increase in
inventories, a $27.3 million increase in accounts receivables, a $6.7 million
increase in prepaid expenses and other assets and a $5.2 million decrease in
accrued expenses payable and other liabilities.

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For the six months ended June 30, 2021, the net cash provided by our operating
activities was $80.5 million. Our reported net income of $19.9 million, when
adjusted for non-cash income and expense items, such as depreciation and
amortization, deferred income taxes, net amortization (accretion) of note
discount (premium), provision for losses on accounts receivable, impairment of
goodwill, provision for inventory obsolescence, stock-based compensation expense
and net gains on the sale of long-lived assets, provided positive cash flows of
$139.5 million. These cash flows from operating activities were also positively
impacted by a $7.6 million decrease in accounts receivables and a $23.8 million
increase in accounts payable. Partially offsetting these positive cash flows
were a $73.7 million increase in inventories, a $7.1 million increase in prepaid
expenses and other assets, a $2.3 million decrease in manufacturing flooring
plans payable, and a $7.3 million decrease in accrued expenses payable and other
liabilities. Net cash provided from operating activities was not adjusted to
exclude net cash provided by discontinued operations. Discontinued operations
accounted for $8.0 million of depreciation and amortization and $5.1 million of
net gains on the sale of long-lived assets included above.

Cash Flow From Investing Activities. For the six months ended June 30, 2022, our
net cash used in our investing activities was $162.4 million. Purchases of
rental and non-rental equipment were $199.2 million and proceeds from the sale
of rental and non-rental equipment were $39.1 million. A $2.3 million payment
related to the sale of discontinued operations was made upon the execution of
the final closing statement.

For the six months ended June 30, 2021, our net cash used in our investing
activities was $168.3 million. Purchases of rental and non-rental equipment were
$244.7 million and proceeds from the sale of rental and non-rental equipment
were $76.4 million. Net cash provided by our investing activities was not
adjusted to exclude net cash provided by discontinued operations. Discontinued
operations accounted for $7.6 million of purchases of rental equipment and $11.7
million of proceeds from the sale of rental and non-rental equipment included
above.

Cash Flow From Financing Activities. For the six months ended June 30, 2022, our
net cash provided by our financing activities was exceeded by our cash used in
our financing activities, resulting in net cash used in our financing activities
of $20.3 million. We netted borrowings and payments under our Credit Facility
for the six months ended June 30, 2022. Dividends paid totaled $19.9 million, or
$0.55 per common share, and treasury stock purchases totaled $0.3 million.

For the six months ended June 30, 2021, our net cash provided by our financing
activities was exceeded by our cash used in our financing activities, resulting
in net cash used in our financing activities of $20.6 million. We netted
borrowings and payments under our Credit Facility for the six months ended June
30, 2021. Dividends paid totaled $19.9 million, or $0.55 per common share.
Treasury stock purchases totaled $0.4 million, payments of deferred financing
costs were $0.1 million and finance lease principal payments were $0.1 million.

Senior Unsecured Notes

On December 14, 2020, we completed the offering of our Senior Unsecured Notes of
$1.25 billion. No principal payments on the Senior Unsecured Notes are due until
their scheduled maturity date of December 15, 2028.

The Senior Unsecured Notes were issued by H&E Equipment Services, Inc. (the
parent company) and are guaranteed by GNE Investments, Inc. and its wholly-owned
subsidiaries Great Northern Equipment, Inc., H&E Equipment Services
(California), LLC, H&E California Holding, Inc., H&E Equipment Services
(Mid-Atlantic), Inc. and H&E Finance Corp (collectively, the guarantor
subsidiaries). The guarantees, made on a joint and several basis, are full and
unconditional (subject to subordination provisions and subject to a standard
limitation which provides that the maximum amount guaranteed by each guarantor
will not exceed the maximum amount that can be guaranteed without making the
guarantee void under fraudulent conveyance laws). There are no restrictions on
H&E Equipment Services, Inc.'s ability to obtain funds from the guarantor
subsidiaries by dividend or loan. There are no registration rights associated
with the notes or the subsidiary guarantees.

Senior Secured Credit Facility

We and our subsidiaries are parties to a $750.0 million Credit Facility with
Wells Fargo Capital Finance, LLC as administrative agent, and the lenders named
therein. At June 30, 2022, we had no outstanding borrowings under the Credit
Facility and we could borrow up to $740.3 million, which with cash on hand
amounted to a liquidity position of $1.0 billion. On October 1, 2021, we sold
our crane business and the disposition had no impact on our borrowing
availability. For further information on the Crane Sale, see Note 3 to our
Condensed Consolidated Financial Statements. We did not have any negative
impacts to our liquidity position under the Credit Facility as a result of
discontinued operations or the COVID-19 pandemic, nor do we have any covenant
violations related to the Credit Facility. At July 21, 2022, we had $740.3
million of available borrowings under our Credit Facility, net of a $9.7 million
outstanding letter of credit.

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Cash requirements related to operations

Our principal sources of liquidity have been from cash provided by operating
activities and the sales of used, new and rental fleet equipment, proceeds from
the issuance of debt, and borrowings available under the Credit Facility. Our
principal uses of cash historically have been to fund operating activities and
working capital (including used and new equipment inventories), purchases of
rental fleet equipment and property and equipment, open new branch locations,
fund payments due under facility operating leases and manufacturer flooring
plans payable, and to meet debt service requirements. In the future, we may
pursue additional strategic acquisitions.

The amount of our future capital expenditures will depend on a number of factors
including general economic conditions and growth prospects. In response to
changing economic conditions, we believe we have the flexibility to modify our
capital expenditures by adjusting them (either up or down) to match our actual
performance. Our gross rental fleet capital expenditures for the six months
ended June 30, 2022 and for both continuing and discontinued operations for the
six months ended June 30, 2021 were approximately $215.6 million and $246.1
million, respectively, including $40.8 million and $17.7 million, respectively,
of non-cash transfers from used and new equipment to rental fleet inventory.
This increase in rental fleet capital expenditures reflects our response to
improved rental demand. Our gross property and equipment capital expenditures
for the six months ended June 30, 2022 and for both continuing and discontinued
operations for the six months ended June 30, 2021 were $24.5 million and $16.2
million, respectively.

To service our debt, we will require a significant amount of cash. Our ability
to pay interest and principal on our indebtedness (including the Credit
Facility, the Senior Unsecured Notes and our other indebtedness) will depend
upon our future operating performance and the availability of borrowings under
the Credit Facility and/or other debt and equity financing alternatives
available to us, which will be affected by prevailing economic conditions and
conditions in the global credit and capital markets, as well as financial,
business and other factors, some of which are beyond our control. Based on our
current level of operations and given the current state of the capital markets,
we believe our cash flow from operations, available cash and available
borrowings under the Credit Facility will be adequate to meet our future
liquidity needs for the foreseeable future. At June 30, 2022, we had cash on
hand of $278.8 million and had available borrowings of $740.3 million, net of
$9.7 million of outstanding letters of credit. At July 21, 2022, we had $740.3
million of available borrowings under the Credit Facility, net of $9.7 million
of outstanding letters of credit.

Quarterly dividend

On May 13, 2022, the Company announced a quarterly dividend of $0.275 per share
to stockholders of record, which was paid on June 10, 2022, totaling
approximately $9.9 million. The Company intends to continue to pay regular
quarterly cash dividends; however, the declaration of any subsequent dividends
is discretionary and will be subject to a final determination by the Board of
Directors each quarter after its review of, among other things, business and
market conditions.

Contractual and commercial commitments

There have been no material changes from the information included in our Annual Report on Form 10-K for the year ended December 31, 2021.

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