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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

|ý                                                                                          | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
|------------------------------------------------------------------------------------------ | ----------------------------------------------------------------------------------------
|for the year ended December 31, 2002                                                      
|OR                                                                                        
|o                                                                                          | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|for the transition period
from                            to            
                .

COMMISSION FILE NUMBERS:

333-99587333-99589


H&E EQUIPMENT SERVICES L.L.C.(Exact name of registrant as specified in its charter)

|Louisiana(State of incorporation)                                                                                    |  | 72-1287046(I.R.S. Employer Identification No.)                    
|-------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------
|11100 Mead Road, Suite 200,
Baton Rouge, Louisiana 70816(Address of Principal Executive Offices,
including Zip Code) |  | (225) 298-5200(Registrant's Telephone Number,
Including Area Code)

Securities
Registered Pursuant to Section 12(b) of the Act:
NONE

Indicate
by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that it was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days. Yes ý    No o

Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's
knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

Indicate
by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act
Rule 12b-2). Yes o    No ý

The
aggregate market value of the Registrant's voting stock held by non-affiliates of the Registrant: Not applicable

H&E
Holdings L.L.C. owns 100% of our limited liability company interests.

DOCUMENTS INCORPORATED BY REFERENCE

Certain exhibits filed with the Registrant's Registration Statements on Form S-4 (File Nos. 333-99587 and 333-99589, as amended) are incorporated by reference
into Part III of the Report on Form 10-K.

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TABLE OF CONTENTS

|PART I         |  | 1       
|-------------- |  | --------
|               |  | Item 1. 
|               |  | Item 2. 
|               |  | Item 3. 
|               |  | Item 4. 
|PART II        |  | 13      
|               |  | Item 5. 
|               |  | Item 6. 
|               |  | Item 7. 
|               |  |         
|               |  | Item 7a.
|               |  | Item 8. 
|               |  | Item 9. 
|PART III       |  | 57      
|               |  | Item 10.
|               |  | Item 11.
|               |  | Item 12.
|               |  | Item 13.
|               |  | Item 14.
|               |  | Item 15.
|CERTIFICATIONS |  |         

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PART I

ITEM 1. BUSINESS

General

H&E Equipment Services L.L.C. and its subsidiaries (as used herein, the "Company", "H&E Equipment Services", "we", "us" and "our") is one of the largest
integrated equipment rental, service and sales companies in the United States. Unlike many of our competitors which focus primarily on renting equipment, we also sell new and used equipment and
provide extensive parts and service support. This integrated model enables us to effectively manage key aspects of our rental fleet through reduced equipment acquisition costs, efficient maintenance
and profitable disposition of rental equipment. Over the past 40 years, we have built an infrastructure that includes a network of 45 facilities, most of which have full-service
capabilities, and a workforce that includes a highly-skilled group of more than 500 service technicians and a distinct rental and equipment sales force. We generate a significant portion of our gross
profit from parts and service, which we believe provides us with a more stable operating profile than companies that focus solely on equipment rental.

Many
of our competitors in the equipment rental market follow a generalist approach, renting a wide variety of equipment. We believe that customers prefer our specialized strategy which
focuses our rental activities on and organizes our personnel principally by four core types of equipment (with their respective percentage of our rental fleet's original acquisition cost as of
December 31, 2002): (i) hi-lift (58.8%); (ii) cranes (21.1%); (iii) earthmoving (11.4%); and (iv) lift trucks (5.6%) (the remaining 3.1% is comprised of
miscellaneous equipment). We believe this strategy fills an important need for specialized equipment knowledge in the market, improves the effectiveness of our rental sales force and strengthens our
customer relationships. As of December 31, 2002, our total rental fleet (including equipment under operating leases) consisted of 15,651 pieces with an average age of 34.6 months and an
aggregate original acquisition cost of $549.0 million.

H&E
Equipment Services was formed through the combination of Head & Engquist Equipment, L.L.C. ("H&E"), a wholly-owned subsidiary of Gulf Wide Industries, L.L.C. ("Gulfwide") and ICM
Equipment Company L.L.C. ("ICM"), which were two leading, regional, integrated equipment rental, service and sales companies operating in contiguous geographical markets. In connection with the
combination of H&E and ICM, they were merged with and into Gulf Wide Industries, L.L.C., the parent of H&E, which was renamed H&E Equipment Services L.L.C. H&E, founded in 1961, is located in the Gulf
Coast region and operated 26 facilities, most of which were full-service, in Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, North Carolina and Texas. ICM, founded in 1971, operated in
the fast-growing Intermountain region, and operated 19 facilities, most of which were full-service, in Arizona, Colorado, Idaho, Montana, New Mexico, Nevada, Texas and Utah.

Industry Background

According to Manfredi & Associates, a leading industry consultant, the United States equipment rental industry has grown from approximately
$6.5 billion in annual rental revenues in 1990 to approximately $24.3 billion in 2002, representing a compound annual growth rate of approximately 17.3%. We believe this growth was
principally due to increased outsourcing by construction and industrial companies as they realized the economic benefits of renting rather than owning equipment. We believe that despite recent
consolidations in the rental industry, the market is still highly fragmented and consists mainly of a small number of multi-location regional or national operators and a large number of relatively
small, independent businesses serving discrete, local markets.

1

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Our Competitive Strengths

We believe that we benefit from the following competitive strengths:

Integrated Platform of Products and Services.We believe that our integrated equipment rental, service and sales model
provides us with: (i) multiple points of customer contact; (ii) a diversified revenue stream; (iii) an effective method to manage our rental fleet through reduced equipment
acquisition costs, efficient maintenance and profitable disposition of used equipment; and (iv) a more consistent performance throughout economic cycles. Key benefits that our integrated
product and service offerings provide to our rental activities include:



High-Margin, Stable Parts and Service Business.Our parts and service business is a key component of the
integrated offering we provide to both our customers and our own rental fleet. We believe that our aftermarket parts and service operations are less susceptible to economic and business cycles and
thus provide a stable, recurring, high-margin stream of revenues.

Well-Developed Infrastructure.Over the past 40 years, we have built an infrastructure that, after the
combination of H&E and ICM, includes a network of 45 facilities, most of which have full-service capabilities, and a workforce that includes a highly-skilled group of more than 500 service
technicians and a distinct rental and equipment sales force. In addition, our well-developed infrastructure helps us to better serve large multi-regional customers and provides an
advantage when competing for fleet and project management business.

Diverse Customer Base.We serve more than 26,000 customers in the industrial and commercial markets, including construction
and maintenance contractors, manufacturers, public utilities and municipalities.

Experienced Management Team.Senior management, led by Gary W. Bagley, our Chairman, and John M. Engquist, our President and
Chief Executive Officer, has an average of 22 years of experience in the industry and an average of 14 years of experience with H&E or ICM, as the case may be.

Our Business Strategy

Key components of our business strategy include:

Leveraging the Integrated Equipment Rental Model.Because our customers rarely just rent equipment, we believe that they
value our integrated approach to addressing their equipment rental, service and sales needs. In addition to renting equipment, many of our customers purchase new and

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used equipment from us and utilize our extensive parts and service support. We believe this integrated model helps us to develop and strengthen relationships with our customers.

Specializing in Rental of Core Equipment Types.Many of our competitors in the equipment rental market follow a generalist
approach, renting a wide variety of equipment. We believe that customers generally prefer our strategy which focuses our rental activities on and organizes our personnel by our four core types of
equipment: hi-lift, cranes, earthmoving, and lift trucks.

Leveraging Industry-Leading Parts and Service Operations.Our parts and service business is an important part of our
relationships with our suppliers and rental customers. Given their decreased project timelines and reliance on fewer pieces of equipment, we believe our customers increasingly place more importance on
effective and timely parts and service support for their own fleet of equipment as well as for equipment that they rent.

Optimizing Economics of Combined Fleet.We believe that there are significant opportunities to optimize our rental fleet
economics through the integration of the H&E and ICM fleets. As a result of the combination of H&E and ICM, we are able to move rental equipment between our expanded markets to: (i) more
profitably utilize our rental fleet to meet demand in a particular geography; (ii) manage our fleet utilization by cross-selling used equipment from our rental fleet across our
expanded retail network; and (iii) improve our ability to service large, multi-regional customers.

Expanding Fleet Management Capabilities and Project Management Operations.We intend to grow our revenues from fleet and
project management services by leveraging our broad infrastructure, full-service capabilities and strong reputation for reliable service. End users, particularly industrial accounts (e.g.,
manufacturing, mining, and distribution) for fleet management services and contractors for project management, increasingly outsource equipment management in order to focus on their core competencies,
achieve cost reductions and take advantage of our economies of scale. For example, as a result of the combination of H&E and ICM, we recently have been awarded a contract with a national construction
contractor to be the sole provider of its equipment needs, including equipment rental, new equipment, used equipment and related parts and service.

Pursue Complementary Acquisitions.Since 1998, we have been focused primarily on growing our business organically, opening 18
locations in 11 states. Over this period, we have made only one acquisition for $10.6 million, which expanded our presence in the crane rental, service and sales business in the Gulf Coast
region. Going forward, we may make strategic acquisitions that complement our existing products and services or strengthen our presence in a particular geographic market. We expect to face competition
for acquisition candidates, which may limit the number of acquisition opportunities and lead to higher acquisition costs. We may not have the financial resources necessary to consummate any
acquisitions or to successfully open new facilities in the future, or the ability to obtain the necessary funds on satisfactory terms. We currently have no planned acquisitions.

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Products and Services

Equipment Rental

We focus our rental activities on, and organize our personnel by, four core types of equipment (with their respective percentage of our fleet's original
acquisition cost as of December 31, 2002): (i) hi-lift equipment (58.8%); (ii) cranes (21.1%); (iii) earthmoving equipment (11.4%); and (iv) lift trucks
(5.6%) (the remaining 3.1% is comprised of miscellaneous equipment). We offer flexible rental terms, including hourly, daily, weekly and monthly rentals. We maintain a constant and extensive fleet
maintenance program through our in-house capabilities. The details of our rental fleet as of December 31, 2002 are as follows:

Units

Original
Acquisition Cost(1)

Average Age
(Months)(Dollars in thousands)Owned equipment:Hi-lift

8,250

$
241,589

35.2Cranes

466


100,819

43.0Earthmoving

874


62,500

28.7Lift trucks

1,349


30,320

38.0Other

2,050


17,269

35.8Total

12,989


452,497

35.4Equipment under operating leases:Hi-lift

2,587


81,711

30.0Cranes

59


14,762

58.1Lift trucks

11


266

68.3Other

5


189

67.0Total

2,662


96,928

30.8Grand total

15,651

$
549,425

34.6


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New Equipment Sales

We are one of the leading distributors of new products for nationally-recognized manufacturers. Typically under distribution agreements with these original
equipment manufacturers, we have exclusive responsibility for particular products in selected markets, although manufacturers retain the right to
appoint additional dealers and sell directly to national accounts and governmental agencies and can usually terminate the distribution agreements at any time upon written notice. We maintain an
experienced equipment sales force of over 75 people. Our new equipment distribution infrastructure facilitates a large, high-quality product support operation, creates a higher level of
partnering with manufacturers and adds a significant customer base which often leads to revenue from our rental and parts and service operations. The type of new equipment we sell varies by location.

Used Equipment Sales

We routinely sell used rental equipment in order to adjust the size and composition of our rental fleet to changing market conditions and to maintain a modern,
high-quality fleet. We believe we have a strategic advantage by being able to profitably dispose of used equipment from our rental fleet through our own retail sales infrastructure, as
compared to selling wholesale or through auctions. Our resale

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capabilities allow us to control the utilization and the age of our fleet, provide customers with a wider range of equipment options and leverage our equipment sales force infrastructure.

Parts and Service

We sell a wide range of OEMs' maintenance and replacement parts and related products as a complement to our core equipment rental and sales businesses. We
maintain in our facilities an extensive parts and merchandise inventory which we believe is important for timely parts and service support and helps minimize customer downtime for us and for our
customer. We are generally able to acquire nonstock or out-of-stock parts directly from manufacturers within one to two business days. We supply parts and general repair and
maintenance service for the complete line of equipment we rent and sell as well as for equipment produced by competitive manufacturers whose products we neither rent nor sell.

We
employ more than 500 highly-skilled service technicians. As part of our commitment to provide customers with knowledgeable parts assistance and high-quality service and
repair options, we devote significant resources to training and retaining these technical service employees. A typical service employee will attend approximately 80 hours of training in the first year
and 80-120 hours annually in subsequent years. We are able to attract and retain knowledgeable, highly-skilled service technicians due to our strong relationship with our service employees and ties to
the communities. Our aftermarket service provides a high-margin, stable source of revenue throughout changing economic cycles.

Customers

We serve more than 26,000 customers across 16 states. Our customers include a wide range of industrial and commercial companies and construction contractors,
manufacturers, public utilities, municipalities, maintenance contractors and a variety of other large industrial accounts. We believe that our integrated strategy enables us to satisfy customer
requirements and increase revenue per customer through cross-selling opportunities presented by the various products and services that we offer. In addition to maintaining our historically strong
relationship with local customers, our extensive, high-quality infrastructure allows us to focus on larger regional and national accounts. Our new and used equipment sales customers vary
from small, single machine owners to large contractors and industrial and commercial companies who typically operate under equipment and maintenance budgets and are excellent prospects for fleet
management services.

Sales and Marketing

We have separate sales forces specializing in equipment rentals and new and used equipment sales. We believe maintaining separate sales forces for rental and
sales is important to our customer service, allowing us to most effectively meet the demands of different types of customers.

Our
rental sales force and new and used equipment sales force, together comprising over 175 people, are divided into smaller, product focused teams which enhances the development of
in-depth product application and technical expertise. To further develop knowledge and experience, we provide our sales force with extensive training, including frequent factory and
in-house training by manufacturer representatives regarding the operational features, operator safety training and maintenance of new equipment. This training is essential, as our sales
personnel regularly call on contractors' job sites often assisting customers in assessing their immediate and ongoing equipment needs.

While
we believe that our specialized, well-trained sales force strengthens our customer relationships and fosters customer loyalty, we rely on additional marketing and
advertising tools, including direct mail campaigns and print advertising focused primarily on the Yellow Pages and industry trade publications. In addition, we have a commission-based compensation
program for our sales force.

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We
have implemented a national accounts program in order to develop national relationships and increase awareness of our extensive offering of industrial and construction equipment,
ancillary products, parts and services. Under this program, a portion of our sales force is assigned to call on corporate headquarters of our large customers, particularly those with a national or
multi-regional presence.

Suppliers

Currently, we purchase most of our equipment from the same manufacturers with whom we have distribution agreements. While we believe that we have alternative
sources of supply for the equipment we purchase in each of our principal product categories, termination of one or more of our relationships with any of our major suppliers of equipment could have a
material adverse effect on our business, financial condition or results of operation if we were unable to obtain adequate or timely rental and sales equipment.

Information Technology Systems

We have developed information systems that track: (i) rental inventory utilization statistics; (ii) maintenance and repair costs;
(iii) returns on investment for specific equipment types; and (iv) detailed operational and financial information for each piece of equipment. We believe that this provides us with a
competitive advantage over smaller independent rental companies which lack such systems. The point-of-sale aspect of the systems enables us to link all of our facilities,
permitting universal access to real-time data concerning equipment located at the individual facility locations and the rental status and maintenance history of each piece of equipment.
These business systems also include on-line contract generation, automated billing, local sales tax computation and automated rental purchase option calculation. In addition, we maintain
an extensive customer database which allows us to monitor the status and maintenance history of our customers' equipment and enables us to more effectively provide parts and service to meet their
needs.

Competition

The equipment rental industry is highly fragmented and competitive. Many of the markets in which we operate are served by numerous competitors, ranging from
national and multi-regional equipment rental companies to small, independent businesses with a limited number of locations. We believe that participants in the equipment rental industry compete on the
basis of availability and quality of equipment, service, delivery and price. In general, we believe that large operators enjoy substantial competitive advantages over small, independent rental
businesses that cannot afford to maintain the comprehensive rental equipment fleet and high level of maintenance and service that we offer.

Like
the rental industry, the retail sales and distribution industry is being redefined through consolidation and competition. Traditionally, equipment manufacturers distributed their
equipment and parts through a network of independent dealers with exclusive distribution agreements. As a result of the consolidation and competition, both manufacturers and distributors are seeking
to streamline their operations, improve their costs and gain market share. In addition, our established, integrated infrastructure enables us to compete directly with our competitors on either a
local, regional or national basis. Moreover, we believe customers are placing greater emphasis on value-added services
and teaming with equipment rental and sales companies who can meet all of their equipment parts and service needs.

Environmental and Safety Regulations

Our facilities and operations are subject to comprehensive and frequently changing federal, state and local environmental and occupational health and safety
requirements, including those relating to

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discharges of substances to the air, water and land, the handling, storage, use and disposal of hazardous materials and wastes and the cleanup of properties affected by pollutants. We do not
currently anticipate any material adverse effect on our business or financial condition or competitive position as a result of our efforts to comply with our liability under such requirements.
Although we have made and will continue to make capital and other expenditures to comply with environmental requirements, we do not expect to incur material capital expenditures for environmental
controls or compliance in this or the succeeding fiscal year.

In
the future, federal, state or local governments could enact new or more stringent laws or issue new or more stringent regulations concerning environmental and worker health and safety
matters, or effect a change in their enforcement of existing laws or regulations, that could effect our operations. Also, in the future, contamination may be found to exist at our facilities or
off-site locations where we have sent wastes. Many of our properties have been the subject of Phase I or Phase II Environmental Site Assessments, but there can be no assurance that we will
not discover previously unknown environmental non-compliance or contamination. We could be held liable for such newly-discovered non-compliance or contamination. It is possible
that changes in environmental and worker health and safety requirements or liabilities from newly-discovered non-compliance or contamination could have a material adverse effect on our
business, financial condition and results of operations.

Employees

As of December 31, 2002, we had approximately 1,447 employees. Of these employees, 457 are salaried personnel and 990 are hourly personnel. Our employees
perform the following functions: sales operations, parts operations, rental operations, technical service and office and administrative support. Collective bargaining agreements relating to four
separate locations cover approximately 97 of our employees. We believe our relations with our employees are good and we have never experienced a work stoppage.

RISK FACTORS

Sensitivity to Changes in Construction and Industrial Risk Factors Activities

Our equipment is principally used in connection with construction and industrial activities. Consequently, a downturn in construction or industrial activity may
lead to a decrease in the demand for our equipment or depress rental rates and the sales prices for the equipment we sell. We have identified below certain of the factors which may cause such a
downturn, either temporarily or long-term:



Fluctuating Operating Results

Our revenue and operating results have historically varied from quarter to quarter. Periods of decline could result in an overall decline in profitability and
make it more difficult for us to make payments on our debt. We expect our quarterly results to continue to fluctuate in the future due to a number of factors, including:



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

Substantial Indebtedness

We have a substantial amount of debt. As of December 31, 2002, our total indebtedness (consisting of the aggregate amounts outstanding on the senior
secured credit facility, senior secured notes, senior subordinated notes, and capital leases) was approximately $328.7 million, $76.7 million of which was first-priority secured debt and effectively
senior to our senior secured notes and senior subordinated notes. In addition, subject to restrictions in our senior secured credit facility and the indenture governing the senior secured notes, we
may incur additional first-priority secured borrowings under the senior secured credit facility. There is no limit to the amount of such additional debt. Further, the senior secured notes and senior
subordinated notes are effectively subordinated to our obligations under capitalized leases of which $10.8 million existed as of December 31, 2002, to the extent of the value of their
capitalized leases. Additionally, as of December 31, 2002, the senior secured notes and senior subordinated notes were effectively subordinated to our obligations under $55.1 million of
first-priority secured floor plan financing to the extent of the value of their collateral, $1.4 million in notes payable and $0.5 million in standby letters of credit.

The
level of our indebtedness could have important consequences, including:



Additional Capital

The cash that we generate from our business, together with cash that we may borrow under our senior secured credit facility, may not be sufficient to fund our
capital requirements. As a result, we may require additional capital for, among other purposes, purchasing equipment, completing acquisitions, establishing new locations and refinancing existing
indebtedness. We may not be able to obtain additional capital on acceptable terms, if at all. If we are unable to obtain sufficient additional capital in the future, our business could be adversely
affected by reducing our ability to increase revenues and profitability.

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Restrictive Covenants

The operating and financial restrictions and covenants in our debt agreements, including the senior secured credit facility and the indenture, may adversely
effect our ability to finance future operations or capital needs or to engage in other business activities. Our senior secured credit facility requires us to maintain specified financial ratios and
tests, including interest coverage and total leverage ratios and maximum capital expenditures, which may require that we take action to reduce debt or to act in a manner contrary to our business
objectives. In addition, the senior secured credit facility and the senior secured and senior subordinated notes restrict our ability to, among other things:



A
failure to comply with the restrictions contained in the senior secured credit facility could lead to an event of default which could result in an acceleration of the indebtedness.
Such an acceleration would constitute an event of default under the indenture governing the senior secured notes. A failure to comply with the restrictions in the senior secured notes indenture could
result in an event of default under the indenture. Our future operating results may not be sufficient to enable compliance with the covenants in the senior secured credit facility, the indenture or
other indebtedness or to remedy any such default. In addition, in the event of an acceleration, we may not have or be able to obtain sufficient funds to make any accelerated payments, including those
under the senior secured notes.

On
March 31, 2003, the senior secured credit facility was amended to extend the current year's requirement for filing the Company's audited financial statements to the earlier of April
15, 2003, or the date the Company files its annual report on Form 10-K with the Securities and Exchange Commission.

Dependence on Management

We are dependent on the experience and continued services of our senior management team. If we lose the services of any member of this team and are unable to find
a suitable replacement, we may not have the depth of senior management resources required to efficiently manage our business and execute our strategy.

Competition

The equipment rental and retail distribution industries are highly competitive and the equipment rental industry is highly fragmented. Many of the markets in
which we operate are served by numerous competitors, ranging from national and multi-regional equipment rental companies to small, independent businesses with a limited number of locations. We
generally compete on the basis of,

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among other things: (i) quality and breadth of service; (ii) expertise; (iii) reliability; and (iv) price. We may encounter increased competition from existing competitors
or new market entrants in the future, which could have a material adverse effect on our business, financial condition and results of operations.

Liability and Insurance

Our business exposes us to claims for personal injury, death or property damage resulting from the use of the equipment we rent or sell and from injuries caused
in motor vehicle accidents in which our delivery and service personnel are involved. We carry comprehensive insurance, subject to deductibles, at levels we believe are sufficient to cover existing and
future claims. Although we have not experienced any material losses that were not covered by insurance, our existing or future claims may exceed the level of our insurance, and such insurance may not
continue to be available on economically reasonable terms, or at all.

Environmental and Safety Regulations

Our operations, like those of other companies engaged in similar businesses, require the handling, use, storage and disposal of certain regulated materials. As a
result, we are subject to the requirements of federal, state and local environmental and occupational health and safety laws and regulations. We may not be at all times in complete compliance with all
such requirements. We are subject to potentially significant fines or penalties if we fail to comply with any of these requirements. We have made and will continue to make capital and other
expenditures in order to comply with these laws and regulations. However, the requirements of these laws and regulations are complex, change frequently, and could become more stringent in the future.
It is possible that these requirements will change or
that liabilities will arise in the future in a manner that could have a material adverse effect on our business, financial condition and results of operations.

FORWARD-LOOKING STATEMENTS

Certain statements in this Annual Report on our Form 10-K for the year ended December 31, 2002 are forward-looking statements, including, without
limitation, statements regarding future financial results and performance, potential sales revenue, legal contingencies and tax benefits. These statements are subject to various risks and
uncertainties, many of which are outside of our control, including the level of market demand for our products, competitive pressures, the ability to achieve reductions in operating costs,
environmental matters, the application of Federal and state tax laws and regulations, and other specific factors discussed herein and in other Securities and Exchange Commission filings by us. The
information contained herein represents our best judgement as of the date hereof based on information currently available; however, we do not intend to update this information except as required by
law, to reflect development or information obtained after the date hereof and disclaim any legal obligation to the contrary.

ITEM 2. PROPERTIES

We currently have a network of 45 facilities. We serve customers in the Gulf Coast region, including the states of Alabama, Arkansas, Florida, Georgia, Louisiana,
Mississippi, North Carolina and Texas and in the Intermountain region, including the states of Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah and Washington.

Facility
locations typically serve a 25 to a 100 mile radius. In our facilities, we rent, display and sell equipment, including tools and supplies, and provide maintenance and basic
repair work. We own four

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of our locations and lease 41 locations. Our leases provide for varying terms and renewal options. The following table provides data on our locations:

|City/State       |  | Date Opened(a) |  | Services
Offered(b) |  | Leased/Owned       |  | Approx. Square
Footage
|---------------- |  | -------------- |  | ------------------- |  | ------------------ |  | ----------------------
|Alabama          |  |                |  |                     |  |                    |  |                       
|Birmingham       |  | 1984           |  | S, P, SV, A         |  | Leased             |  | 26,000                
|Arizona          |  |                |  |                     |  |                    |  |                       
|Nogales          |  | 1998           |  | S, R, P, SV         |  | Leased             |  | 2,800                 
|Phoenix          |  | 1990           |  | S, R, P, SV, A      |  | Leased             |  | 40,000                
|Tucson           |  | 1991           |  | S, R, P, SV         |  | Leased             |  | 14,000                
|Arkansas         |  |                |  |                     |  |                    |  |                       
|Fort Smith       |  | 1995           |  | S, P, SV            |  | Leased             |  | 7,200                 
|Little Rock      |  | 1995           |  | S, R, P, SV, A      |  | Owned              |  | 30,000                
|Springdale       |  | 1996           |  | S, R, P, SV, A      |  | Owned              |  | 16,200                
|Colorado         |  |                |  |                     |  |                    |  |                       
|Denver           |  | 1985           |  | S, R, P, SV, A      |  | Leased             |  | 15,000                
|Colorado Springs |  | 2000           |  | S, R, P, SV         |  | Leased             |  | 13,000                
|Florida          |  |                |  |                     |  |                    |  |                       
|Fort Myers       |  | 2000           |  | S, R, P, SV         |  | Leased             |  | 7,000                 
|Orlando          |  | 2000           |  | S, R, P, SV, A      |  | Leased             |  | 27,500                
|Tampa            |  | 2000           |  | S, R, P, SV, A      |  | Leased             |  | 28,900                
|Georgia          |  |                |  |                     |  |                    |  |                       
|Atlanta          |  | 2000           |  | S, R, P, SV, A      |  | Leased             |  | 17,000                
|Idaho            |  |                |  |                     |  |                    |  |                       
|Boise            |  | 1997           |  | S, R, P, SV         |  | Leased             |  | 6,000                 
|Coeur D'Alene    |  | 1997           |  | S, R, P, SV         |  | Leased             |  | 5,000                 
|Louisiana        |  |                |  |                     |  |                    |  |                       
|Alexandria       |  | 1995           |  | S, R, P, SV, A      |  | Leased             |  | 6,500                 
|Baton Rouge      |  | 1961           |  | S, P, SV, A         |  | Leased             |  | 56,900                
|Belle Chasse(2)  |  | 1965           |  | S, P, SV, A         |  | Leased(1)/Owned(1) |  | 22,500                
|Gonzales         |  | 1995           |  | R, P, SV, A         |  | Leased             |  | 7,000                 
|Kenner           |  | 1978           |  | S, P, SV, A         |  | Leased             |  | 36,000                
|Lake Charles     |  | 1988           |  | S, R, P, SV, A      |  | Leased             |  | 10,500                
|Shreveport(2)    |  | 1985           |  | S, R, P, SV, A      |  | Leased(2)          |  | 39,600                
|Mississippi      |  |                |  |                     |  |                    |  |                       
|Jackson          |  | 1997           |  | S, P, SV, A         |  | Leased             |  | 15,000                
|Montana          |  |                |  |                     |  |                    |  |                       
|Billings         |  | 1981           |  | S, R, P, SV         |  | Leased             |  | 10,000                
|Bozeman          |  | 2000           |  | S, R, P, SV         |  | Leased             |  | 8,800                 
|Missoula         |  | 1984           |  | S, R, P, SV         |  | Leased             |  | 7,000                 
|New Mexico       |  |                |  |                     |  |                    |  |                       
|Albuquerque      |  | 1994           |  | S, R, P, SV         |  | Leased             |  | 7,100                 
|Farmington       |  | 1991           |  | S, R, P, SV         |  | Leased             |  | 5,000                 
|Nevada           |  |                |  |                     |  |                    |  |                       
|Las Vegas        |  | 1983           |  | S, R, P, SV, A      |  | Leased             |  | 78,000                
|Reno             |  | 1996           |  | S, R, P, SV         |  | Leased             |  | 30,000                
|North Carolina   |  |                |  |                     |  |                    |  |                       
|Charlotte        |  | 2000           |  | S, R, P, SV, A      |  | Leased             |  | 25,000                

11

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|Texas          |  |      |  |                |  |                    |  |        
|-------------- |  | ---- |  | -------------- |  | ------------------ |  | -------
|Dallas(2)      |  | 1948 |  | S, R, P, SV, A |  | Leased(2)          |  | 44,500 
|El Paso        |  | 1999 |  | S, P, SV       |  | Leased             |  | 12,000 
|Houston(3)     |  | 1947 |  | S, R, P, SV, A |  | Leased(2)/Owned(1) |  | 89,600 
|San Antonio    |  | 1996 |  | S, R, P, SV, A |  | Owned              |  | 13,000 
|Weslaco        |  | 2001 |  | S, R, P, SV, A |  | Leased             |  | 43,600 
|Utah           |  |      |  |                |  |                    |  |        
|Lindon         |  | 1999 |  | S, R, P, SV    |  | Leased             |  | 9,000  
|Ogden          |  | 1999 |  | S, R, P, SV    |  | Leased             |  | 9,000  
|Salt Lake City |  | 1971 |  | S, R, P, SV, A |  | Leased             |  | 119,000
|St. George     |  | 1997 |  | S, R, P, SV    |  | Leased             |  | 7,500  

---

Each
facility location has a manager who is responsible for day-to-day operations. In addition, facilities are typically staffed with approximately 10 to 50
people, who may include technicians, salesmen, rental operations staff and parts specialists. While facility offices are typically open five days a week, we provide 24 hour, seven day per week
service.

We
maintain a fleet of over 450 vehicles that are used for delivery, maintenance and sales functions. We own a portion of this fleet and lease the remainder.

Our
corporate headquarters are located in Baton Rouge, Louisiana, where we occupy approximately 18,400 square feet under a lease that extends until February 28, 2007.

ITEM 3. LEGAL PROCEEDINGS

As of Deceember 31, 2002, except for the legal proceeding referred to below, we were not subject to any legal proceedings that management believes could have a
material adverse effect on our business or financial condition.

In
July 2000, a complaint was filed in the General Court of Justice, Superior Court Division, State of North Carolina, County of Mecklenburg under the caption Sunbelt
Rentals, Inc. v. Head & Engquist Equipment, L.L.C., d/b/a H&E Hi-Lift, et al. The complaint was filed by a competitor of H&E, BPS Equipment, which was acquired by the
plaintiff in June 2000, against H&E, Robert W. Hepler, an executive officer, and other employees of H&E. The complaint alleges, among other things, breach of fiduciary duty, misappropriation of
trade secrets, unfair trade practices, interference with prospective advantage and civil conspiracy, in connection with the start-up of H&E's Hi-Lift division in
January 2000 and the hiring of former employees of BPS Equipment. The complaint seeks, among other things, an order to enjoin the defendants from using BPS Equipment's trade secrets, award the
plaintiff unspecified compensatory and punitive damages and award the plaintiff its costs and attorneys' fees. This case is currently being heard in the General Court of Justice, Superior Court
Division, State of North Carolina, County of Mecklenburg.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted to a vote of our security holders.

12

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PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Not Applicable.

ITEM 6. SELECTED FINANCIAL DATA

The selected historical data and other financial data set forth below, should be read in conjunction with our audited financial statements and the related notes
included elsewhere in this report. The Company's consolidated financial statements as of December 31, 1998, 1999, 2000 and 2001, and for the years ended December 31, 1998, 1999 and 2001
have been restated. For a further discussion of the restatement see "Management's Discussion and Analysis of Financial Condition and Results of OperationsRestatement of Financial
Statements," included herein within Item 7 of Part II, and the historical financial statements and the related notes including without limitation Note 20, included herein as
Item 8 of Part II.

|                                             |                                   | For the Year Ended December 31, |                       
|-------------------------------------------- | --------------------------------- | ------------------------------- | ----------------------
|
|
|
|Statement of operations data:                |                                   |                                 |                       
|Revenues:                                    |                                   |                                 |                       
|                                             | Equipment rentals                 |                                 | $                     
|                                             | New equipment sales               |                                 |                       
|                                             | Used equipment sales              |                                 |                       
|                                             | Parts sales                       |                                 |                       
|                                             | Service revenues                  |                                 |                       
|                                             | Other                             |                                 |                       
|                                             |                                   |                                 |                       
|                                             |                                   |                                 | Total revenues        
|Cost of revenues:                            |                                   |                                 |                       
|                                             | Equipment rentals                 |                                 |                       
|                                             | New equipment sales               |                                 |                       
|                                             | Used equipment sales              |                                 |                       
|                                             | Parts sales                       |                                 |                       
|                                             | Service revenues                  |                                 |                       
|                                             | Other                             |                                 |                       
|                                             |                                   |                                 |                       
|                                             |                                   |                                 | Total cost of revenues
|Gross profit:                                |                                   |                                 |                       
|                                             | Equipment rentals                 |                                 |                       
|                                             | New equipment sales               |                                 |                       
|                                             | Used equipment sales              |                                 |                       
|                                             | Parts sales                       |                                 |                       
|                                             | Service revenues                  |                                 |                       
|                                             | Other                             |                                 |                       
|                                             |                                   |                                 |                       
|                                             |                                   |                                 | Total gross profit    
|Selling, general and administrative expenses |                                   |                                 | 26,902                
|Gain on sale of property and equipment       |                                   |                                 | 5                     
|                                             |                                   |                                 |                       
|                                             |                                   | Income from operations          |                       
|Other income (expense):                      |                                   |                                 |                       
|                                             | Interest expense                  |                                 |                       
|                                             | Other                             |                                 |                       
|                                             |                                   |                                 |                       
|                                             |                                   |                                 | Total other expense   
|                                             | Income (loss) before income taxes |                                 |                       
|Provision (benefit) for income taxes         |                                   |                                 | 2,595                 
|                                             |                                   |                                 |                       
|                                             |                                   | Net income (loss)               |                       
|                                             |                                   |                                 |                       

13

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|                                 |                                                     | For the Year Ended December 31, |       
|-------------------------------- | --------------------------------------------------- | ------------------------------- | ------
|
|
|Other financial data:            |                                                     |                                 |       
|Depreciation and amortization(2) |                                                     | $                               | 25,268
|Statement of cash flows:         |                                                     |                                 |       
|                                 | Net cash (used in) provided by operating activities |                                 |       
|                                 | Net cash (used in) provided by investing activities |                                 |       
|                                 | Net cash provided by (used in) financing activities |                                 |       

|                             |  | As of December 31,
|---------------------------- |  | ------------------
|
|
|
|Balance sheet data:          |  |                   
|Cash                         |  | $                 
|Rental equipment, net        |  |                   
|Goodwill, net                |  |                   
|Total assets                 |  |                   
|Total debt                   |  |                   
|Members' equity (deficit)(3) |  |                   

---

ITEM 7. MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Certain statements in this Annual Report on our Form 10-K for the year ended December 31, 2002 are forward-looking statements, including, without
limitation, statements regarding future financial results and performance, potential sales revenue, legal contingencies and tax benefits. These statements are subject to various risks and
uncertainties, many of which are outside of our control, including the level of market demand for our products, competitive pressures, the ability to achieve reductions in operating costs,
environmental matters, the application of Federal and state tax laws and regulations, and other specific factors discussed herein and in other Securities and Exchange Commission filings by us. The
information contained herein represents our best judgement as of the date hereof based on information currently available; however, we do not intend to update this information except as required by
law, to reflect development or information obtained after the date hereof and disclaim any legal obligation to the contrary.

Managements'
Discussion and Analysis of Financial Condition and Results of Operations presented below reflects certain restatements to our previously reported consolidated audited
financial statements as of and for the years ended December 31, 2000 and 2001. The information set forth below should be read together with Company's audited consolidated financial statements
and related notes appearing elsewhere herein.

General

H&E Equipment Services is a wholly-owned subsidiary of H&E Holdings. H&E Holdings is principally a holding company conducting all of its operations through H&E
Equipment Services. The consolidated financial statements include the results of operations of H&E Equipment Services and its

14

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wholly-owned subsidiaries H&E Finance Corp., GNE Investments, Inc. and Great Northern Equipment, Inc.

H&E
Equipment Services is an integrated equipment rental, service and sales company located in the United States with an integrated network of 45 facilities, most of which have full
service capabilities, and a workforce that includes a group of service technicians and a separate rental and equipment sales force. In addition to renting equipment, we also sell new and used
equipment and provide extensive parts and service support. We generate a significant portion of our gross profit from parts sales and service revenues.

We
derive our revenues from the following sources: (i) rental of equipment; (ii) new equipment sales and distribution; (iii) used equipment sales and distribution;
and (iv) parts and service. Equipment rental, as well as new and used equipment sales, includes products such as hi-lift equipment, cranes, earthmoving equipment and industrial lift
trucks. Used equipment sales are primarily derived from our rental fleet. Our integrated approach leads to revenue for each source being partially driven by the activities of the other sources. Our
revenues are dependent on several factors, including the demand for rental equipment, rental fleet availability, rental rates, the demand for new and used equipment, the level of industrial and
construction activity and general economic conditions.

Cost
of revenues include cost of equipment sold, depreciation and maintenance costs of rental equipment and cost of parts and service. Cost of equipment sold consists of (i) the
net book value of rental equipment at the time of sale for used equipment and (ii) the cost for new equipment sales. Depreciation of rental equipment represents the depreciation costs
attributable to rental equipment and is generally calculated on a straight-line basis over the estimated service life of the asset (generally three to ten years with a 0% to 25% residual
value). Maintenance of rental equipment represents the costs of servicing and maintaining rental equipment on an ongoing basis. Cost of parts and service represents costs attributable to the sale of
parts directly to customers and service provided for the maintenance and repair of customer owned equipment.

Selling,
general and administrative expenses include sales and marketing expenses, payroll and related costs, professional fees, property, other taxes and administrative overhead,
depreciation associated with property and equipment (other than rental equipment).

Critical Accounting Policies and Estimates

We prepare our financial statements in accordance with accounting principles generally accepted in the United States. A summary of our significant accounting
policies is in the notes to our consolidated financial statements included elsewhere in this report. In applying many accounting principles, we need to make assumptions, estimates and/or judgments.
These assumptions, estimates and judgments are often subjective and may change based on changing circumstances or changes in our analysis. Material changes in these assumptions, estimates and
judgments have the potential to materially alter our results of operations. We have identified below those of our accounting policies that we believe could potentially produce materially different
results were we to change underlying assumptions, estimates and judgments.

Revenue Recognition.Rental revenue is recognized in the period in which it is earned over the contract term. Revenue from
the sale of equipment and parts is recognized at the time of delivery to, or pick-up by, the customer and when all obligations under the sales contract have been fulfilled and
collectability is reasonably assured. Service revenues are recognized at the time the services are rendered. Other revenues consist principally of billings to customers for rental equipment delivery
and damage waiver charges.

Allowance for Doubtful Accounts.We maintain allowances for doubtful accounts. This allowance reflects our estimate of the
amount of our receivables that we will be unable to collect. Our estimate could require change based on changing circumstances, including changes in the economy or in the

15

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particular circumstances of individual customers. Accordingly, we may be required to increase or decrease our allowance.

Useful Lives of Rental Equipment and Property and Equipment.We depreciate rental equipment and property and equipment over
their estimated useful lives, after giving effect to an estimated salvage value of 0% to 25% of cost. The useful life of an asset is determined based on our estimate of the period the asset will
generate revenues, and the salvage value is determined based on our estimate of the minimum value we could realize from the asset after such period. We may be required to change these estimates based
on changes in our industry or other changing circumstances. If these estimates change in the future, we may be required to recognize increased or decreased depreciation expense for these assets.

Impairment of Long-Lived Assets.Long-lived assets are recorded at the lower of amortized cost or fair value. The Company
reviews long-lived assets and certain identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted cash flows expected to be generated by the asset over the remaining
useful life. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

Restatement of Financial Statements

The Company's previously issued consolidated financial statements as of and for the year ended December 31, 2001 have been restated to correct errors
related to the calculation of unbilled rental revenue and deferred revenue related to rental contracts with terms that extend across reporting periods. As a result of the restatement, we also made
corrections to income tax accounts, members' equity, and other related items.

Our
policy is to recognize revenue from equipment rentals in the period earned, over the contract term, regardless of the timing of the billing to customers. A rental contract term can
be daily, weekly or monthly. Because the term of the contracts can extend across financial reporting periods, we record unbilled rental revenue and deferred revenue at the end of reporting periods so
rental revenue is appropriately stated in the periods presented in accordance with generally accepted accounting principles in the United States of America.

During
the preparation of the financial statements for the year ended December 31, 2002, we discovered certain errors related to the unbilled rental revenue and deferred revenue
balance sheet accounts, and to the timing of when rental revenue was recorded in the past. On a cumulative basis, as of December 31, 2001, we had recognized approximately $1.2 million of
after-tax rental revenue that should be recognized in subsequent periods. Of the $1.2 million, approximately $0.9 million related to years ended December 31, 1999 or
prior, and approximately $0.3 million related to the year ended December 31, 2001. The impact of the errors was not material to the consolidated statement of operations for the year
ended December 31, 2000.

16

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The
following table summarizes the effect of the restatement adjustments on our consolidated financial statements (in thousands):

|                             |                                                     | Previously
Reported |   | Restated |        
|---------------------------- | --------------------------------------------------- | ------------------- | - | -------- | -------
|Year ended December 31, 2001 |                                                     |                     |   |          |        
|                             | Revenues:                                           |                     |   |          |        
|                             |                                                     | Equipment rentals   |   | $        | 99,229 
|                             |                                                     | Total revenues      |   |          | 306,191
|                             | Gross Profit:                                       |                     |   |          |        
|                             |                                                     | Equipment rentals   |   |          | 46,071 
|                             |                                                     | Total gross profit  |   |          | 75,756 
|                             | Income from operations                              |                     |   | 23,115   |        
|                             | Income before income taxes                          |                     |   | 5,276    |        
|                             | Provision for income taxes                          |                     |   | 1,648    |        
|                             | Net income                                          |                     |   | 3,628    |        
|As of December 31, 2001      |                                                     |                     |   |          |        
|                             | Receivables, net of allowance for doubtful accounts |                     | $ | 37,819   |        
|                             | Total assets                                        |                     |   | 288,451  |        
|                             | Accrued expenses and other liabilities              |                     |   | 5,264    |        
|                             | Deferred income taxes                               |                     |   | 11,515   |        
|                             | Total liabilities                                   |                     |   | 257,345  |        
|                             | Total members' deficit                              |                     |   | (16,710  | )      
|                             | Total liabilities and members' deficit              |                     |   | 288,451  |        
|As of December 31, 2000      |                                                     |                     |   |          |        
|                             | Total members' deficit                              |                     | $ | (68,098  | )      
|As of December 31, 1999      |                                                     |                     |   |          |        
|                             | Total members' deficit                              |                     | $ | (54,324  | )      

Combination of H&E and ICM

H&E Equipment Services was formed through the combination of H&E and ICM, which were two leading, regional, integrated equipment rental, service and sales
companies operating in contiguous
geographical markets. In connection with the combination of H&E and ICM, H&E and ICM were merged with and into Gulf Wide, the parent of H&E, which was renamed H&E Equipment Services L.L.C. H&E,
founded in 1961, is located in the Gulf Coast region and operated 26 facilities, most of which were full-service, in Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, North
Carolina and Texas. ICM, founded in 1971, operated in the fast-growing Intermountain region, and operated 19 facilities, most of which were full-service, in Arizona, Colorado,
Idaho, Montana, New Mexico, Nevada, Texas and Utah.

Year ended December 31, 2002 compared to year ended December 31, 2001

Total revenues.Total revenues for fiscal year 2002 were $351.7 million compared to $309.5 million for fiscal
year ended 2001. Included in the increase is $93.8 million of revenues contributed by the locations associated with the ICM acquisition. The revenues during these periods were attributable to
the following sources:

Equipment Rental Revenues.Total revenues from equipment rentals increased $37.9 million, or 38.4%, to
$136.6 million for the year ended December 31, 2002 from $98.7 million for the year ended December 31, 2001. Included in the increase is $40.1 million of equipment
rental revenues contributed by rental locations associated with the ICM acquisition. Rental revenues, excluding revenues from the ICM locations, decreased $2.2 million for the year ended
December 31, 2002 compared to 2001. Total

17

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crane rental revenue for the year ended December 31, 2002 declined $3.6 million compared to the same period last year due primarily to the weakening of the industrial construction
market. The decline in crane equipment rental revenue was offset by an increase of $2.1 million in aerial equipment rental revenue and a $1.7 million increase in other equipment rental
volume.

Equipment Sales Revenues.Revenues from new equipment sales decreased $12.0 million, or 14.3% to $72.1 million
for the year ended December 31, 2002 from $84.1 million for the year ended December 31, 2001. Total new equipment sales attributable to the acquisition of ICM were
$19.2 million. The remaining $31.2 million decline in new equipment sales for the year ended December 31, 2002 compared to the year ended December 31, 2001 is attributable
primarily to a $34.8 million decline in new crane sales. Sales of new earthmoving equipment increased $1.6 million and sales of other miscellaneous new equipment decreased
$1.6 million while the sales of new aerial equipment increased $3.6 million. The increase in new aerial equipment sales is primarily from the sales of equipment to be used by contractors
in the building of power plants.

Revenues
from used equipment sales decreased $6.9 million, or 11.6% to $52.5 million for the year ended December 31, 2002 from $59.4 million for the year
ended December 31, 2001. Total used equipment sales attributable to the acquisition of ICM were $13.5 million. The remaining $20.4 million
decrease was attributable primarily to lower crane sales, which declined $17.8 million due to lower customer demand. Sales of used aerial equipment increased $2.3 million. Earthmoving
and other equipment sales also decreased by $4.9 million due to lower customer demand and the completion of the fleet rationalization program that took place during 2001.

The
overall decline in both new and used equipment sales is a result of significant customer declines in capital expenditures given the uncertainties in the economy throughout the year.

Parts and Service Revenues.Revenues from parts sales and service revenues increased $18.7 million, or 33.2% to
$75.0 million for the year ended December 31, 2002 from $56.3 million for the year ended December 31, 2001. Total parts sales and service revenues attributable to the
acquisition of ICM were $17.6 million. The remainder of the increase was attributable to growth in revenues from parts sales, which increased $0.9 million or 2.5%, due to increased parts
sales related to the hi-lift operations, and growth in service revenues, which increased $0.2 million, or 1.0%, as a result of an increase in the number of transactions and an
increase in charge out rates throughout the year.

Other Revenues.Other revenues consisted primarily of billings to customers for equipment support activities including
primarily transportation, hauling, parts freight, and damage waiver charges. Other revenues for the year ended December 31, 2002 increased $4.5 million, or 41.3% to $15.5 million
from $11.0 million for the year ended December 31, 2001. The acquisition of ICM accounted for $3.4 million of the total increase. The remaining $1.1 million increase was
primarily attributable to related growth in billing transportation activities and damage waiver charges among other things.

Total Gross Profit.Total gross profit for the year ended December 31, 2002 was $96.5 million compared to total
gross profit of $77.9 million for the year ended December 31, 2001. Total gross profit attributable to the acquisition of ICM was $28.3 million. For the year ended
December 31, 2002, gross profit contribution by segment as a percentage of total gross profit was 54.7% for equipment rentals, 6.3% for new equipment sales, 9.8% for used equipment sales and
30.6% for parts sales and service revenue and (1.4%) for other revenues.

Equipment Rentals Gross Profit.Gross profit from equipment rentals increased $7.2 million to $52.7 million for
the year ended December 31, 2002 from $45.5 million for the year ended December 31, 2001. Included in the increase is $15.2 million of equipment rental gross profit
generated by rental locations associated with the ICM acquisition. The remaining gross profit decreased $8.0 million, or 17.6% for the year ended December 31, 2002 to
$37.5 million from $45.5 million for the year ended December 31, 2001. The decline in equipment rental gross margin is primarily a result

18

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of downward pressures on aerial rental rates, slower economic activity, and higher total costs of rental operations in support of the growth in the hi-lift operations.

Total
rental cost of revenues, excluding the effect of the ICM acquisition, increased $6.2 million to $59.4 million for the year ended December 31, 2002 from
$53.2 million for the year ended December 31, 2001. The increase is attributable to a $3.2 million increase in depreciation due to the increase in hi-lift rental fleet
equipment and a $3.0 million increase in fleet repair costs. Certain hi-lift equipment is aging, exceeding the manufacturer warranty period and is now incurring repair and
maintenance costs.

Equipment Sales Gross Profit.Gross profit from new equipment sales decreased $0.6 million to $6.1 million for
the year ended December 31, 2002 from $6.7 million for the year ended December 31, 2001. Total new equipment gross profit for the year ended December 31, 2002 included
$2.3 million associated with the acquisition of ICM Equipment. The remaining $2.9 million decline in new equipment gross profit is a result of lower new equipment sales volume. Excluding
the increase related to the ICM acquisition, gross margin on new equipment sales decreased to 8.9% for the year ended December 31, 2002 from 9.5% for the year ended December 31, 2001.
The decrease in new equipment gross margin was attributable to declining sales volume and gross margins across all product lines sold.

The
gross profit from used equipment sales increased $1.4 million to $9.5 million for the year ended December 31, 2002 from $8.1 million for the year ended
December 31, 2001. Total used equipment gross profit for the year ended December 31, 2002 included $3.1 million associated with the acquisition of ICM. The remaining
$1.7 million decrease in used equipment gross profit is a result of lower used equipment sales volume. Despite the dollar decline in gross profit, excluding the increase related to the ICM
acquisition, gross margin on used equipment sales increased to 14.0% for the year ended December 31, 2002 from 11.4% for the year ended December 31, 2001. The improvement in gross profit
margin is attributable to the mix of used equipment sold.

Parts Sales and Service Revenues Gross Profit.Gross profit from parts sales and service revenues increased
$8.4 million to $29.5 million for the year ended December 31, 2002 from $21.1 million for the year ended December 31, 2001. Total parts sales and service revenue
gross profit for the year ended December 31, 2002 included $8.3 million associated with the acquisition of ICM. The gross margin from parts sales and service revenues for the year ended
December 31, 2002 decreased to 37.5% compared to 37.8% for the year ended December 31, 2001, excluding the effect of the ICM acquisition.

Excluding
the effect of the ICM acquisition, gross profit from parts sales increased $0.7 million and gross margin increased to 27.0% in 2002 from 25.9% in 2001. Excluding the
effect of the ICM acquisition, gross profit from service revenues remained stable and gross margin from service revenues decreased to 57.8% from 59.0% due to increased costs of internal labor and
material related to external service repair orders.

Depreciation and Amortization.Depreciation and amortization was $49.5 million and $32.2 million for fiscal years 2002 and
2001, respectively. The increase in depreciation and amortization expense was primarily attributable to the growth in rental fleet assets for the hi-lift operations and the acquisition of ICM's
assets.

Selling, General and Administrative Expenses.Selling, general and administrative (SG&A) expenses were $82.3 million,
or 23.4% of total revenues for the year ended December 31, 2002 and $55.4 million, or 17.9% of total revenues for the year ended December 31, 2001. Included in SG&A expense is
$22.1 million relating to the operations of ICM for the period subsequent to the acquisition. The remaining $4.8 million increase in SG&A expense, year-over-year,
is primarily due to the increased costs to support the significant expansion of the hi-lift operations initiated primarily in 2001.

Income from Operations.Based on the foregoing, income from operations decreased to $14.2 million for the year ended
December 31, 2002 from $22.6 million for the year ended

19

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December 31, 2001. The $8.4 million decrease was net of $6.1 million of income from operations for ICM included for the period subsequent to the acquisition.

Other Income (Expense).Other expense increased by $10.8 million to $28.6 million for the year ended
December 31, 2002 from $17.8 million for the year ended December 31, 2001. Interest expense for the year ended December 31, 2002 increased $11.0 million as a result
of the refinancing of the Company's total debt and the acquisition of ICM. Additionally, annual interest rates on the revolving credit facility averaged 5.8% for the year ended December 31,
2002 compared to 7.3% for the year ended December 31, 2001.

Income Tax Provision (Benefit).H&E Equipment Services is a limited liability company that has elected to be treated as a C
corporation for income tax purposes. Income taxes decreased by $2.7 million to a benefit of $1.3 million for the year ended December 31, 2002 from a provision of
$1.4 million for the year ended December 31, 2001. The change is a result of the Company incurring an $14.3 million loss before income taxes in 2002 compared to income before
income taxes in 2001. As of December 31, 2002, the Company has recorded a tax valuation allowance for its entire net deferred income tax assets. The valuation allowance was recorded given the
cumulative losses incurred by the Company and the Company's belief that it is more likely than not that the Company will be unable to recover the net deferred income tax assets.

Year ended December 31, 2001 compared to year ended December 31, 2000

Total Revenues.Total revenues in fiscal year 2001 were $309.5 million (restated), representing an increase of 31.9%
(restated) over total revenues in fiscal year 2000 of $234.6 million. The increase was attributable to the growth in equipment rentals, new and used equipment sales, parts sales and service
revenues.

Equipment Rental Revenues.Revenues from equipment rentals increased $28.1 million (restated), or 39.8% (restated), to
$98.7 million (restated) in fiscal year 2001 from $70.6 million in fiscal year 2000. The increase was attributable to the growth in the rentals in the hi-lift operations,
consisting of aerial work platform equipment. Hi-lift rentals increased by $30.8 million, or 130.0%, to $54.5 million in fiscal year 2001 from $23.7 million in fiscal
year 2000. Fiscal year 2001 was the first full year of operations for the hi-lift operations. Revenues from other equipment rentals decreased slightly to $44.2 million in fiscal
year 2001 from $46.9 million in fiscal year 2000, due to the decrease in net capital expenditures in the previous year as a result of management's initiative to eliminate under-performing
assets in order to improve utilization.

Equipment Sales Revenues.Revenues from new equipment sales increased $30.8 million, or 57.8%, to $84.1 million
in fiscal year 2001 from $53.3 million in fiscal year 2000. The increase was due primarily to a $29.6 million increase in crane sales.

Revenues
from used equipment sales increased $8.0 million, or 15.6%, to $59.4 million in fiscal year 2001 from $51.4 million in fiscal year 2000. The increase was
attributable in part to a $13.3 million increase in crane sales, resulting from sales of under-performing assets from the rental fleet, partially offset by a $3.0 million decrease in
earthmoving equipment and a $2.5 million decrease in aerial work platforms.

Parts Sales and Service Revenues.Revenues from parts sales and service revenues increased by $5.3 million, or 10.4%,
to $56.3 million in fiscal year 2001 from $51.0 million in fiscal year 2000. The increase was attributable to growth in parts revenues of $2.1 million, or 6.1%, resulting from
increased volume of parts sales transactions. The increase was also attributable to growth in service revenues which increased by $3.2 million, or 19.3%, as a result of an increase in the
number of service transactions to support the growth of the hi-lift and core divisions, as well as an increase from average service charge-out rates.

20

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Other Revenues.Revenues from other sales activities consisted primarily of billings to customers for equipment support
activities including transportation, hauling, parts freight and damage-waiver charges. Other revenues increased $2.7 million, or 32.9%, to $10.9 million in fiscal year 2001 as compared
to $8.2 million in fiscal year 2000. The increase was primarily attributable to growth in the transportation and hauling activities to support the growth of the hi-lift rental
operations.

Total Gross Profit.Total gross profit in fiscal year 2001 was $77.9 million (restated), representing an increase of
33.6% (restated) over total gross profit in fiscal year 2000 of $58.3 million. Total gross margin increased to 25.2% (restated) in fiscal year 2001 from 24.9% in fiscal year 2000.

Equipment Rentals Gross Profit.Gross profit from equipment rentals increased $14.4 million (restated) to
$45.5 million in fiscal year 2001 from $31.1 million in fiscal year 2000. Gross margin on equipment rentals increased to 46.1% (restated) in fiscal year 2001 from 44.1% in fiscal year
2000. The increase in gross profit was primarily attributable to the growth in the hi-lift rental operations in 2001. The increase in gross margin was attributable to a more favorable mix
of rental equipment following the elimination of lower performing assets in 2000.

Equipment Sales Gross Profit.Gross profit from new equipment sales increased $1.3 million to $6.7 million in
fiscal year 2001 from $5.4 million in fiscal year 2000. Gross margin on new equipment sales declined to 8.0% in fiscal year 2001 from 10.1% in fiscal year 2000. The increase in gross profit
reflected the growth in new crane sales in 2001. The decline in gross margin was primarily attributable to lower margins from crane sales containing volume-based discounts in 2001.

Gross
profit from used equipment sales increased $1.1 million to $8.1 million in fiscal year 2001 from $7.0 million in fiscal year 2000. Gross margin on used
equipment sales remained relatively unchanged at 13.6% in fiscal year 2001 compared to 13.6% in fiscal year 2000. The increase in gross profit reflected the increase in crane sales, offset by
decreases in earthmoving and aerial work platform equipment sales.

Parts Sales and Service Revenues Gross Profit.Gross profit from parts sales and service revenues increased
$3.1 million to $21.1 million in fiscal year 2001 from $18.0 million in fiscal year 2000. Gross margin on parts sales and service revenues increased to 37.5% in fiscal year 2001
from 35.3% in fiscal year 2000. Gross profit from parts sales increased by $0.9 million and gross margin from parts sales increased to 25.8% from 25.0%. The increase was due to increased
pricing on outsourced parts. Gross profit for service revenues increased by $2.3 million and gross margin from service revenues increased to 59.1% from 56.6%. The increase was due to growth in
the hi-lift operations in 2001 and also reflected the growth in service charge-out rates during 2001 over 2000 levels. The increase in gross margin was attributable to the
increase in higher margin service revenues in 2001.

Depreciation and Amortization.Depreciation and amortization was $32.2 million and $30.5 million for fiscal
years 2001 and 2000, respectively. The increase in depreciation and amortization expense was primarily attributable to the growth in rental fleet assets for the hi-lift operations.

Selling, General and Administrative Expenses.Selling, general and administrative ("SG&A") expenses were
$55.4 million, or 17.9% of total revenues, during fiscal year 2001 and $46.0 million, or 19.6% of total revenues, in fiscal year 2000. The increase in SG&A expenses was attributable to
fiscal year 2001 being the first full year of hi-lift operations. The decrease in SG&A expenses as a percentage of total revenues was due to volume growth in crane equipment sales
revenues.

Income from Operations.Based on the foregoing, income from operations increased 83.7% (restated) to $22.6 million
(restated) in fiscal year 2001 from $12.3 million in fiscal year 2000.

Other Income (Expense).Other expense decreased by $4.9 million to $17.8 million in fiscal year 2001 from
$22.7 million in fiscal year 2000. The decrease was due to a $4.9 million decrease in interest expense from fiscal year 2000 to 2001. Fiscal year 2000 included $1.3 million of
interest expense related to a beneficial conversion feature recorded in 1999 in connection with the 12% Convertible

21

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Subordinated Notes due 2005. These notes were converted to equity as part of the recapitalization of H&E in August 2001.

Income Tax Provision (Benefit).H&E Equipment Services is a limited liability company that has elected to be treated as a C
corporation for income tax purposes. Income tax provision increased from a tax benefit of $3.1 million in fiscal year 2000 to a $1.4 million (restated) tax provision in fiscal year 2001.
The effective tax rate was relatively unchanged between the fiscal years.

Liquidity and Capital Resources

Cash flow from operating activities.For the year ended December 31, 2002, cash provided by operations was
$19.7 million. The significant components of operating activities that provided cash were total property and equipment and rental fleet depreciation expense of $49.4 million and an
increase in accounts payable and accrued expenses of $10.9 million. Significant components of operating activities that used cash consisted of $13.1 million net loss, $1.3 million
for deferred taxes, gain on sale of both rental and non-rental equipment of $6.4 million, an increase in accounts receivable of $3.1 million, and an increase in inventories
of $21.3 million. The remaining $4.6 million of cash provided by operating activities related to the change in other assets and other liabilities.

Cash flow from investing activities.For the year ended December 31, 2002, cash used in investing activities was
$13.0 million. This is a result of purchasing $50.5 million in rental and non-rental equipment. The proceeds from the sale of rental and non-rental equipment was
$33.7 million. Cash acquired in the business combination was $3.6 million.

Cash flow from financing activities.For the year ended December 31, 2002, cash used in financing activities was
$7.5 million. For the year, total borrowings on the senior secured credit facility were $436.1 million (including an initial borrowing of $83.0 million on June 17, 2002)
and total payments on the senior secured credit facility were $658.5 million. On June 17, 2002, $304.4 million was a repayment on the balance outstanding on both the ICM Equipment and
H&E Equipment Service's previous lines of credit. Proceeds from the issuance of the senior secured notes were $198.5 million and proceeds from the issuance of the senior subordinated notes were
$50.0 million. Financing costs paid in cash for the
refinancing totaled $13.5 million. Payments on capital leases and other notes were $6.8 million. H&E Equipment Services paid $13.3 million to members for outstanding obligations
assumed in connection with the merger.

As
of March 31, 2003, the total balance outstanding on the senior secured credit facility was $77.9 million with $67.4 million available in additional borrowings net of
$4.7 million in standby letters of credit. Also at March 31, 2003, the total balance payable on capital lease obligations and notes payable were $9.7 million and $1.3 million,
respectively.

On
March 31, 2003, the senior secured credit facility was amended to extend the current year's requirement for filing the Company's audited financial statements to the earlier of April
15, 2003, or the date the Company files its annual report on Form 10-K with the Securities and Exchange Commission.

Liquidity

Our operating cash requirements consist principally of working capital requirements, scheduled payments of principal and interest on outstanding indebtedness and
capital expenditures.

We
used the net proceeds from the offering of senior subordinated and senior secured notes and borrowings under our senior secured credit facility to consummate the combination of H&E
and ICM, repay the existing indebtedness of H&E and ICM, pay certain obligations and pay related fees and expenses. The senior secured credit facility provides for borrowings in an aggregate principal
amount not to exceed $150.0 million, consisting of revolving loans and swing line loans. As of December 31, 2002, we had approximately $76.7 million in indebtedness outstanding
under the senior secured credit facility and $72.8 million of borrowing availability. We also had $0.5 million of outstanding letters of credit as of December 31, 2002.

22

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To service our debt, we will require a significant amount of cash. Our ability to pay interest and principal on our indebtedness (including the senior subordinated and senior secured
notes and obligations under the senior secured credit facility) and to satisfy our other debt obligations will depend upon our future operating performance and the availability of refinancing
indebtedness, which will be affected by prevailing economic conditions and financial, business and other factors, some of which are beyond our control. Based on our current level of operations and
anticipated cost savings and operating improvements, we believe our cash flow from operations, available cash and available borrowing under the senior secured credit facility will be adequate to meet
our future liquidity needs for at least the next twelve months.

We
cannot assure that our future cash flow will be sufficient to meet our obligations and commitments. If we are unable to generate sufficient cash flow from operations in the future to
service our indebtedness and to meet our other commitments, we will be required to adopt one or more alternatives, such as refinancing or restructuring our indebtedness, selling material assets or
operations or seeking to raise additional debt or equity capital. We cannot assure that any of these actions could be effected on a timely basis or on satisfactory terms or at all, or that these
actions would enable us to continue to satisfy our capital requirements. In addition, our existing or future debt agreements, including the indenture and the senior secured credit facility, may
contain restrictive covenants prohibiting us from adopting any of these alternatives. Our failure to comply with these covenants could result in an event of default which, if not cured or waived,
could result in the acceleration of all of our debts.

The
senior secured credit facility contains the following financial covenants, each of which is to be calculated in accordance with generally accepted accounting principles consistently
applied:



Off-Balance Sheet Arrangements.At December 31, 2002, we did not have any relationships with
unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of
facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. We are, therefore, not materially exposed to any financing, liquidity, market or credit risk
that could arise if we had engaged in such relationships.

23

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Contractual and Commercial Commitments Summary

The following summarizes our contractual obligations at December 31, 2002, and the effect such obligations are expected to have on our liquidity and cash
flow in future periods.

|                                                                                 |                                    | Payments Due by Year
|-------------------------------------------------------------------------------- | ---------------------------------- | --------------------
|
|
|Long-term debt (including subordinated notes payable and amounts due to members) |                                    | $                   
|Interest payments on senior secured notes                                        |                                    |                     
|Interest payments on senior subordinated notes                                   |                                    |                     
|Senior secured credit facility                                                   |                                    |                     
|Capital lease obligations                                                        |                                    |                     
|Operating leases(1)                                                              |                                    |                     
|Other long-term obligations(2)                                                   |                                    |                     
|                                                                                 |                                    |                     
|                                                                                 | Total contractual cash obligations |                     
|                                                                                 |                                    |                     

---

Additionally, we have a stand by letter of credit for $0.5 million that expires in 2003.

Recent Accounting Pronouncements

We adopted the provisions of Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets" effective
January 1, 2002. The provisions of SFAS No. 142 eliminate the amortization of goodwill and certain intangible assets that are deemed to have indefinite lives and require such assets to
be tested for impairment and to be written down to fair value, if necessary. Accordingly, we do not have goodwill amortization subsequent to December 31, 2001.

In
connection with the adoption of SFAS No. 142, we made an assessment of our goodwill for impairment based upon the new rules during the quarter ended June 30, 2002. Based
on the assessment, it does not appear that we will be required to adjust the carrying value of our goodwill. As of December 31, 2002, we had goodwill of approximately $3.2 million.

In
June 2001, the FASB released SFAS No. 143, "Accounting for Asset Retirement Obligations." This statement addresses the accounting treatment for obligations associated
with the retirement of tangible long-lived assets and the associated asset retirement costs. The provisions of the statement apply to legal obligations associated with the retirement of long-lived
assets that result from the acquisition, construction, development, or normal operation of a long-lived asset. The statement is effective for financial statements issued for fiscal years beginning
after June 15, 2002. We will adopt the provisions of SFAS No. 143 during 2003, but do not expect this statement to have a material impact on our consolidated operations or financial
position.

In
August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". This standard addresses financial accounting and
reporting for the impairment or disposal of long-lived assets and supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of". We adopted SFAS No. 144 on January 1, 2002. The adoption of SFAS No. 144 did not have a material effect on our consolidated
financial position or results of operations.

24

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In
July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." Under SFAS No. 146, a company will record a liability for a
cost associated with an exit or disposal activity when that liability is incurred and can be measured at fair value. A liability is incurred when an event obligates the entity to transfer or use
assets (i.e., when an event leaves the company little or no discretion to avoid transferring or using the assets in the future). Under previous accounting rules, if a company's management approved an
exit plan, the company generally could record the costs of that plan as a liability on the approval date, even if the company did not incur the costs until a later date. Under SFAS No. 146,
some of those costs might qualify for immediate recognition, others might be recorded during one or more quarters, and still others might not be recorded until incurred in a much later period. We are
currently reviewing the standard, which is effective for periods beginning after December 31, 2002, applied prospectively, and do not expect it to have a material impact on our results of
operations or financial position.

In
November 2002, the FASB issued Interpretation No. 45 ("FIN No. 45"), "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" which expands previously issued accounting guidance and disclosure requirements for certain guarantees. FIN 45 requires recognition of an
initial liability for the fair value of an obligation assumed by issuing a guarantee. Guarantees are required to be disclosed in the notes to the financial statements starting with the period ending
after December 15, 2002. For certain guarantees issued after December 31, 2002, the fair value of the obligation must be reported on the balance sheet. We adopted the disclosure
requirements. We do not expect the adoption of the accounting provisions of FIN No. 45 to have a material impact on our results of operations and financial position.

In
January 2003, the FASB issued Financial Interpretation No. 46 ("FIN No. 46"), "Consolidation of Variable Interest Entities, an Interpretation of ARB No.
51," which addresses the consolidation by business enterprises of variable interest entities as defined therein and applies immediately to variable interests in variable
interest entities created or obtained after January 31, 2003. We do not expect the adoption of FIN No. 46 to have a material impact on our results of operations and financial position.

Seasonality

Our business is seasonal with demand for our rental equipment tending to be lower in the winter months. The equipment rental activities are directly related to
commercial and industrial construction and maintenance activities. Therefore, equipment rental will be correlated to the levels of active construction activities. The severity of weather conditions
can have a temporary impact on the level of construction activities.

Equipment
sales cycles are also subject to seasonality with peak selling period during spring season and expending through summer. Parts and service activities are less affected by
changes in demand caused by seasonality.

Inflation

Although we cannot accurately anticipate the effect of inflation on our operations, we believe that inflation has not had, and is not likely in the foreseeable
future to have, a material impact on our results of operations.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our earnings are effected by changes in interest rates due to the fact that interest on the senior secured credit facility is calculated based upon LIBOR plus 300
basis points. We are also required to pay the lenders a commitment fee equal to 0.5% per annum in respect of undrawn commitments under the senior secured credit facility. At December 31, 2002,
and as a result of the refinancing we had variable rate debt representing 23.3% of total debt. A portion of our indebtedness bears interest at variable rates that are linked to changing market
interest rates. Based upon the balances outstanding at December 31, 2002, a one percent increase in market rates would increase our annual interest expense approximately $0.8 million. We
do not have significant exposure to the changing interest rates on our fixed-rate senior secured notes, senior subordinated notes or the capital lease obligations, which represented 76.7%
of total debt.

25

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ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Independent Auditors' Report

The
Board of Directors and Members
H&E Equipment Services L.L.C.:

We
have audited the accompanying consolidated balance sheets of H&E Equipment Services L.L.C. and subsidiaries as of December 31, 2002 and 2001, and the related consolidated
statements of operations, members' equity (deficit) and cash flows for the years then ended. In connection with our audits, we also have audited the 2002 and 2001 consolidated financial statement
schedules listed in Item 15.(a)2. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In
our opinion, the 2002 and 2001 consolidated financial statements referred to above present fairly, in all material respects, the financial position of H&E Equipment Services L.L.C.
and subsidiaries as of December 31, 2002 and 2001, and the results of their operations and their cash flows for the years then
ended in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the related consolidated financial statement schedule for the years ended
December 31, 2002 and 2001, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth
therein.

As
discussed in Note 20 to the accompanying consolidated financial statements, the Company has restated the consolidated balance sheet as of December 31, 2001, and the related
consolidated statements of operations, members' equity (deficit) and cash flows for the year then ended.

As
discussed in Note 2 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible
Assets" in the year ended December 31, 2002.

/s/
KPMG LLP

Salt
Lake City, Utah
April 7, 2003

26

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Independent Auditor's Report

To
the Members
H&E Equipment Services L.L.C.
Baton Rouge, Louisiana

We have audited the accompanying consolidated statements of operations, members' equity (deficit) and cash flows of H&E Equipment Services, L.L.C. (Formerly Gulf Wide Industries, L.L.C.) and
Subsidiary, Baton Rouge, Louisiana, for the year ended December 31, 2000. In connection with our audit we also have audited the 2000 consolidated financial statement schedule listed in
Item 15.(a)2:
These consolidated financial statements and the financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated
financial statements and the financial statement schedule based on our audit.

We
conducted our audit in accordance with auditing standards generally accepted in the United States of America. These standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audits provides a reasonable basis for our opinion.

In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated results of operations and cash flows of H&E Equipment
Services, L.L.C.(Formerly Gulf Wide Industries, L.L.C.) and Subsidiary, for the year ended December 31, 2000, in conformity with accounting principles generally accepted in the United States of
America. Also, in our opinion, the related consolidated financial statement schedule for the year ended December 31, 2000, when considered in relation to the basic consolidated financial statements
taken as a whole, presents fairly, in all material respects, the information set forth therein.

As
discussed in Note 20 to the accompanying consolidated financial statements, the Company has restated the consolidated statements of members' equity (deficit) and cash flows for the
year ended December 31, 2000.

Yours
truly,
/s/ Hawthorn, Waymouth & Carroll, L.L.P.
Baton Rouge, Louisiana

February
21, 2001
(except for Note 20 as
    to which the date is April 7, 2003)

27

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H&E EQUIPMENT SERVICES L.L.C.

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2002 and 2001

(Dollars in thousands, except share amounts)

Assets

|                                                                                                             |                                                                                                                              | 2002                                            |         | 2001    |        
|------------------------------------------------------------------------------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------- | ------- | ------- | -------
|
|Cash                                                                                                         |                                                                                                                              | $                                               | 3,398   |         | $      
|Receivables, net of allowance for doubtful accounts of $3,609 and $708, respectively                         |                                                                                                                              |                                                 | 65,145  |         |        
|Inventories                                                                                                  |                                                                                                                              |                                                 | 53,462  |         |        
|Prepaid expenses and other assets                                                                            |                                                                                                                              |                                                 | 1,945   |         |        
|Rental equipment, net of accumulated depreciation of $80,102 and $58,805, respectively                       |                                                                                                                              |                                                 | 309,697 |         |        
|Property and equipment, net of accumulated depreciation and amortization of $13,338 and $8,673, respectively |                                                                                                                              |                                                 | 19,156  |         |        
|Deferred financing costs, net of accumulated amortization of $854                                            |                                                                                                                              |                                                 | 12,612  |         |        
|Goodwill                                                                                                     |                                                                                                                              |                                                 | 3,204   |         |        
|                                                                                                             |                                                                                                                              |                                                 |         |         |        
|                                                                                                             |                                                                                                                              | Total assets                                    |         | $       | 468,619
|                                                                                                             |                                                                                                                              |                                                 |         |         |        
|Liabilities and Members' Equity (Deficit)                                                                    |                                                                                                                             
|Liabilities:                                                                                                 |                                                                                                                              |                                                 |         |         |        
|                                                                                                             | Senior secured credit facility                                                                                               |                                                 | $       | 76,724  |        
|                                                                                                             | Accounts payable                                                                                                             |                                                 |         | 91,488  |        
|                                                                                                             | Accrued expenses and other liabilities                                                                                       |                                                 |         | 12,329  |        
|                                                                                                             | Notes payable                                                                                                                |                                                 |         | 1,402   |        
|                                                                                                             | Senior secured notes, net of discount                                                                                        |                                                 |         | 198,570 |        
|                                                                                                             | Senior subordinated notes, net of discount                                                                                   |                                                 |         | 42,602  |        
|                                                                                                             | Capital lease obligations                                                                                                    |                                                 |         | 10,841  |        
|                                                                                                             | Deferred compensation                                                                                                        |                                                 |         | 10,233  |        
|                                                                                                             | Deferred income taxes                                                                                                        |                                                 |         |        |        
|                                                                                                             |                                                                                                                              |                                                 |         |         |        
|                                                                                                             |                                                                                                                              | Total liabilities                               |         |         | 444,189
|                                                                                                             |                                                                                                                              |                                                 |         |         |        
|Senior Exchangeable Preferred Units                                                                          |                                                                                                                              |                                                 |        |         |        
|Senior Subordinated Preferred Units                                                                          |                                                                                                                              |                                                 |        |         |        
|Commitments and contingencies (Note 15)                                                                      |                                                                                                                              |                                                 |         |         |        
|Members' equity (deficit):                                                                                   |                                                                                                                              |                                                 |         |         |        
|                                                                                                             | Series A Senior Preferred Units, $1 par value. Liquidation value $1,293. Authorized, issued and outstanding 1,235,299 shares |                                                 |         |        |        
|                                                                                                             | Junior Preferred Units, $1 par value. Liquidation value $5,157. Authorized, issued and outstanding 5,000 shares              |                                                 |         |        |        
|                                                                                                             | Class A Common Stock, $.01 par value. Authorized, issued and outstanding 115,152.8 shares                                    |                                                 |         |        |        
|                                                                                                             | Class B Common Stock, $.01 par value. Authorized, issued and outstanding 115,152.8 shares                                    |                                                 |         |        |        
|                                                                                                             | Additional paid-in-capital                                                                                                   |                                                 |         |        |        
|                                                                                                             | Accumulated deficit                                                                                                          |                                                 |         |        |        
|                                                                                                             | Member's interest                                                                                                            |                                                 |         | 24,430  |        
|                                                                                                             |                                                                                                                              |                                                 |         |         |        
|                                                                                                             |                                                                                                                              | Total members' equity (deficit)                 |         |         | 24,430 
|                                                                                                             |                                                                                                                              |                                                 |         |         |        
|                                                                                                             |                                                                                                                              | Total liabilities and members' equity (deficit) |         | $       | 468,619
|                                                                                                             |                                                                                                                              |                                                 |         |         |        

The accompanying notes are an intregral part of these consolidated statements.

28

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H&E EQUIPMENT SERVICES L.L.C.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 and 2000

(Dollars in thousands)

|                                             |                      | 2002                              |                        | 2001    |         | 2000    |        
|-------------------------------------------- | -------------------- | --------------------------------- | ---------------------- | ------- | ------- | ------- | -------
|
|Revenues:                                    |                      |                                   |                        |         |         |         |        
|                                             | Equipment rentals    |                                   | $                      | 136,624 |         | $       | 98,696 
|                                             | New equipment sales  |                                   |                        | 72,143  |         |         | 84,138 
|                                             | Used equipment sales |                                   |                        | 52,487  |         |         | 59,441 
|                                             | Parts sales          |                                   |                        | 47,218  |         |         | 36,524 
|                                             | Service revenues     |                                   |                        | 27,755  |         |         | 19,793 
|                                             | Other                |                                   |                        | 15,473  |         |         | 10,925 
|                                             |                      |                                   |                        |         |         |         |        
|                                             |                      |                                   | Total revenues         |         |         | 351,700 |        
|                                             |                      |                                   |                        |         |         |         |        
|Cost of Revenues:                            |                      |                                   |                        |         |         |         |        
|                                             | Rental depreciation  |                                   |                        | 46,471  |         |         | 30,004 
|                                             | Rental expense       |                                   |                        | 37,408  |         |         | 23,154 
|                                             | New equipment sales  |                                   |                        | 66,055  |         |         | 77,442 
|                                             | Used equipment sales |                                   |                        | 43,026  |         |         | 51,378 
|                                             | Parts sales          |                                   |                        | 34,011  |         |         | 27,076 
|                                             | Service revenues     |                                   |                        | 11,438  |         |         | 8,106  
|                                             | Other                |                                   |                        | 16,813  |         |         | 14,439 
|                                             |                      |                                   |                        |         |         |         |        
|                                             |                      |                                   | Total cost of revenues |         |         | 255,222 |        
|                                             |                      |                                   |                        |         |         |         |        
|                                             |                      |                                   | Gross profit           |         |         | 96,478  |        
|Selling, general and administrative expenses |                      |                                   | 82,294                 |         |         | 55,382  |        
|Gain on sale of property and equipment       |                      |                                   | 59                     |         |         | 46      |        
|                                             |                      |                                   |                        |         |         |         |        
|                                             |                      |                                   | Income from operations |         |         | 14,243  |        
|                                             |                      |                                   |                        |         |         |         |        
|Other income (expense)                       |                      |                                   |                        |         |         |         |        
|                                             | Interest expense     |                                   |                        | (28,955 | )       |         | (17,995
|                                             | Other, net           |                                   |                        | 372     |         |         | 156    
|                                             |                      |                                   |                        |         |         |         |        
|                                             |                      |                                   | Total other expense    |         |         | (28,583 | )      
|                                             |                      |                                   |                        |         |         |         |        
|                                             |                      | Income (loss) before income taxes |                        |         | (14,340 | )       |        
|Income tax provision (benefit)               |                      |                                   | (1,271                 | )       |         | 1,443   |        
|                                             |                      |                                   |                        |         |         |         |        
|                                             |                      | Net income (loss)                 |                        | $       | (13,069 | )       | $      
|                                             |                      |                                   |                        |         |         |         |        

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

29

---

H&E EQUIPMENT SERVICES, L.L.C.

CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY (DEFICIT)

FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 and 2000

(Dollars in thousands)

|                                                                                                                                                                                  |  | Series A
Senior
Preferred |        | Junior
Preferred |   | Class A
Common |   | Class B
Common |        | Additional
Paid-in-
Capital |   | Accumulated
Deficit |   | Member's
Interest |         | Total
Members'
Equity
(Deficit) |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------- | ------ | ---------------- | - | -------------- | - | -------------- | ------ | --------------------------- | - | ------------------- | - | ----------------- | ------- | ------------------------------- | -
|December 31, 1999 (as previously reported)                                                                                                                                        |  | $                         |       |                  | $ |               |   | $              | 1,961  |                             | $ |                    |   | $                 | 3,000   |                                 | $
|Prior period adjustments                                                                                                                                                          |  |                           |       |                  |   |               |   |                |       |                             |   |                    |   |                   |        |                                 |  
|                                                                                                                                                                                  |  |                           |        |                  |   |                |   |                |        |                             |   |                     |   |                   |         |                                 |  
|December 31, 1999 (restated)                                                                                                                                                      |  |                           |       |                  |   |               |   |                | 1,961  |                             |   |                    |   |                   | 3,000   |                                 |  
|Net loss                                                                                                                                                                          |  |                           |       |                  |   |               |   |                |       |                             |   |                    |   |                   |        |                                 |  
|Accretion of liquidation value on Preferred Units outside of equity                                                                                                               |  |                           |       |                  |   |               |   |                |       |                             |   |                    |   |                   |        |                                 |  
|                                                                                                                                                                                  |  |                           |        |                  |   |                |   |                |        |                             |   |                     |   |                   |         |                                 |  
|December 31, 2000 (restated)                                                                                                                                                      |  |                           |       |                  |   |               |   |                | 1,961  |                             |   |                    |   |                   | 3,000   |                                 |  
|Net income (restated)                                                                                                                                                             |  |                           |       |                  |   |               |   |                |       |                             |   |                    |   |                   |        |                                 |  
|Accretion of liquidation value on Preferred Units outside of equity                                                                                                               |  |                           |       |                  |   |               |   |                |       |                             |   |                    |   |                   |        |                                 |  
|Recapitalization and issuance of new securities                                                                                                                                   |  |                           | 1,235  |                  |   | 5,000          |   |                | (809   | )                           |   | 1,152               |   |                   | 47,090  |                                 |  
|Accretion of liquidation value on Preferred Units outside of equity                                                                                                               |  |                           |       |                  |   |               |   |                |       |                             |   |                    |   |                   |        |                                 |  
|                                                                                                                                                                                  |  |                           |        |                  |   |                |   |                |        |                             |   |                     |   |                   |         |                                 |  
|December 31, 2001 (restated)                                                                                                                                                      |  |                           | 1,235  |                  |   | 5,000          |   |                | 1,152  |                             |   | 1,152               |   |                   | 50,090  |                                 |  
|Net lossJanuary 1, 2002 to June 17, 2002                                                                                                                                         |  |                           |       |                  |   |               |   |                |       |                             |   |                    |   |                   |        |                                 |  
|Accretion of liquidation value on Preferred Units outside of equity through June 17, 2002                                                                                         |  |                           |       |                  |   |               |   |                |       |                             |   |                    |   |                   |        |                                 |  
|Members' equity issued with Senior Subordinated Notes at June 17, 2002                                                                                                            |  |                           |       |                  |   |               |   |                |       |                             |   |                    |   |                   |        |                                 |  
|Conversion of Senior Exchangeable Preferred Units at June 17, 2002                                                                                                                |  |                           |       |                  |   |               |   |                |       |                             |   |                    |   |                   |        |                                 |  
|Conversion of Senior Subordinated Preferred Units at June 17, 2002                                                                                                                |  |                           |       |                  |   |               |   |                |       |                             |   |                    |   |                   |        |                                 |  
|Conversion of series A Senior Preferred, Junior Preferred, Class A Common, Class B Common, Additional-Paid-In Capital and accumulated deficit to member's equity at June 17, 2002 |  |                           | (1,235 | )                |   | (5,000         | ) |                | (1,152 | )                           |   | (1,152              | ) |                   | (50,090 | )                               |  
|Net lossJune 18, 2002 to December 31, 2002                                                                                                                                       |  |                           |       |                  |   |               |   |                |       |                             |   |                    |   |                   |        |                                 |  
|                                                                                                                                                                                  |  |                           |        |                  |   |                |   |                |        |                             |   |                     |   |                   |         |                                 |  
|December 31, 2002                                                                                                                                                                 |  | $                         |       |                  | $ |               |   | $              |       |                             | $ |                    |   | $                 |        |                                 | $
|                                                                                                                                                                                  |  |                           |        |                  |   |                |   |                |        |                             |   |                     |   |                   |         |                                 |  

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

30

---

H&E EQUIPMENT SERVICES L.L.C.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 and 2000

(Dollars in thousands)

|                                                                                                   |                                                                           | Years Ended December 31, |                                                    
|-------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------- | ------------------------ | ---------------------------------------------------
|
|
|Cash Flows from operating activities:                                                              |                                                                           |                          |                                                    
|                                                                                                   | Net income (loss)                                                         |                          | $                                                  
|Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |                                                                           |                          |                                                    
|                                                                                                   | Depreciation on property and equipment                                    |                          |                                                    
|                                                                                                   | Depreciation on rental equipment                                          |                          |                                                    
|                                                                                                   | Amortization of loan discounts and deferred financing costs               |                          |                                                    
|                                                                                                   | Amortization of goodwill                                                  |                          |                                                    
|                                                                                                   | Amortization of beneficial conversion feature                             |                          |                                                    
|                                                                                                   | Provision for losses on accounts receivable                               |                          |                                                    
|                                                                                                   | Gain on sale of property and equipment                                    |                          |                                                    
|                                                                                                   | Gain on sale of rental equipment                                          |                          |                                                    
|                                                                                                   | Deferred income taxes                                                     |                          |                                                    
|                                                                                                   | Changes in operating assets and liabilities, net of business combination: |                          |                                                    
|                                                                                                   |                                                                           |                          | Receivables, net                                   
|                                                                                                   |                                                                           |                          | Inventories                                        
|                                                                                                   |                                                                           |                          | Prepaid expenses and other assets                  
|                                                                                                   |                                                                           |                          | Accounts payable                                   
|                                                                                                   |                                                                           |                          | Accrued expenses and other liabilities             
|                                                                                                   |                                                                           |                          | Deferred compensation                              
|                                                                                                   |                                                                           |                          |                                                    
|                                                                                                   |                                                                           |                          | Net cash provided by (used in) operating activities
|                                                                                                   |                                                                           |                          |                                                    
|Cash flows from investing activities:                                                              |                                                                           |                          |                                                    
|                                                                                                   | Purchases of property and equipment                                       |                          |                                                    
|                                                                                                   | Purchases of rental equipment                                             |                          |                                                    
|                                                                                                   | Proceeds from sale of property and equipment                              |                          |                                                    
|                                                                                                   | Proceeds from sale of rental equipment                                    |                          |                                                    
|                                                                                                   | Cash acquired in ICM business combination                                 |                          |                                                    
|                                                                                                   | Purchase of Coastal Equipment, net of cash acquired                       |                          |                                                    
|                                                                                                   |                                                                           |                          |                                                    
|                                                                                                   |                                                                           |                          |                                                    
|                                                                                                   |                                                                           |                          |                                                    
|Cash flows from financing activities:                                                              |                                                                           |                          |                                                    
|                                                                                                   | Net proceeds from issuance of senior secured notes                        |                          |                                                    
|                                                                                                   | Net proceeds from issuance of senior subordinated notes                   |                          |                                                    
|                                                                                                   | Payments of amounts due to members                                        |                          |                                                    
|                                                                                                   | Proceeds from issuance of senior exchangeable preferred units             |                          |                                                    
|                                                                                                   | Payment of deferred financing costs                                       |                          |                                                    
|                                                                                                   | Borrowings on senior secured credit facility                              |                          |                                                    
|                                                                                                   | Payments on senior secured credit facility                                |                          |                                                    
|                                                                                                   | Principal payments on notes payable                                       |                          |                                                    
|                                                                                                   | Payments on capital lease obligations                                     |                          |                                                    
|                                                                                                   |                                                                           |                          |                                                    
|                                                                                                   |                                                                           |                          | Net cash (used in) provided by financing activities
|                                                                                                   |                                                                           |                          |                                                    
|Net (decrease) increase in cash                                                                    |                                                                           |                          | (924                                               
|Cash, beginning of year                                                                            |                                                                           |                          | 4,322                                              
|                                                                                                   |                                                                           |                          |                                                    
|Cash, end of year                                                                                  |                                                                           | $                        | 3,398                                              
|                                                                                                   |                                                                           |                          |                                                    

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

31

---



|                                                                     |                                | Years Ended December 31,
|-------------------------------------------------------------------- | ------------------------------ | ------------------------
|
|Supplemental schedule of noncash investing and financing activities: |                                |                         
|                                                                     | Noncash asset purchases:       |                         
|                                                                     |                                |                         
|                                                                     |                                |                         
|                                                                     |                                |                         
|                                                                     |                                |                         
|                                                                     |                                |                         
|                                                                     |                                |                         
|Supplement disclosures of cash flow information:                     |                                |                         
|                                                                     | Cash paid during the year for: |                         
|                                                                     |                                |                         
|                                                                     |                                |                         

Supplemental Disclosures of Non-Cash Investing and Financing Activities:



| | Fair value of assets acquired                                    |  | $ | 187,781
| | ---------------------------------------------------------------- |  | - | -------
| | Excess of liabilities assumed over fair value of assets acquired |  |   |       
| |                                                                  | 
| | Liabilities assumed                                              |  | $ | 187,781
| |                                                                  | 

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

32

---

H&E EQUIPMENT SERVICES L.L.C.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)  ORGANIZATION AND NATURE OF OPERATIONS

Basis of Presentation

H&E
Equipment Services L.L.C. (H&E Equipment Services) is a wholly-owned subsidiary of H&E Holdings L.L.C. (H&E Holdings). H&E Holdings is principally a holding company conducting all of
its operations through H&E Equipment Services (see Note 3). The consolidated financial statements include the results of operations of H&E Equipment Services and its wholly-owned subsidiaries
H&E Finance Corp., GNE Investments, Inc. and Great Northern Equipment, Inc., collectively referred to herein as the "Company".

The
nature of the Company's business is such that short-term obligations are typically met by cash flows generated from long-term assets. Consequently, consistent
with industry practice, the accompanying consolidated balance sheets are presented on an unclassified basis.

Nature of Operations

The
Company is an integrated equipment rental, service and sales company located in the United States with an integrated network of 45 facilities, most of which have full service
capabilities, and a workforce that includes a group of service technicians and a separate rental and equipment sales force. In addition to renting equipment, the Company also sells new and used
equipment and provides extensive parts and service support. The Company generates a significant portion of its gross profit from parts sales and service revenues.

The
Company's operations are principally connected with construction and industrial activities. Consequently, a downturn in construction or industrial activity may lead to a decrease in
the demand for equipment or depressed rental rates and sales prices of equipment. The Company has a substantial amount of debt. In accordance with the terms of the current debt agreements, the Company
must comply with certain restrictive financial and operational covenants (see Note 13). Failure to comply with these covenants may adversely affect the Company's ability to finance future
operations or capital needs or to engage in business activities.

(2)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Basis of Presentation

The accompanying consolidated financial statements include the accounts of H&E Equipment Services L.L.C. and its subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.

Revenue Recognition

The
Company's policy is to recognize revenue from equipment rentals in the period earned, over the contract term, regardless of the timing of the billing to customers. A rental contract
term can be daily, weekly or monthly. Because the term of the contracts can extend across financial reporting periods, we
record unbilled rental revenue and deferred revenue at the end of reporting periods so rental revenue is appropriately stated in the periods presented. Revenue from the sale of equipment and parts is
recognized at the time of delivery to, or pick-up by, the customer and when all obligations under the sales contract have been fulfilled and collectability is reasonably assured. Service
revenues

33

---

are recognized at the time the services are rendered. Other revenues consist primarily of billings to customers for rental equipment delivery and damage waiver charges.

Inventories

New and used equipment is stated at the lower of cost or market by specific-identification. Parts and supplies are stated at the lower of the average cost or
market.

Rental Equipment

Rental
equipment purchased by the Company is stated at cost and is depreciated over the estimated useful lives of the equipment using the straight-line method. The range of
estimated useful lives for rental equipment depreciation is three to ten years, after giving effect to an estimated salvage value of 0% to 25% of cost.

Ordinary
repair and maintenance costs and property taxes are charged to operations as incurred. Expenditures for additions or improvements that extend the useful life of the asset are
capitalized in the period incurred. When rental equipment is sold or disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is
included in the Company's consolidated results of operations.

Property and Equipment

Property
and equipment are recorded at cost and are depreciated over the estimated useful lives using the straight-line method. The range of estimated useful lives for
property and equipment is three to ten
years. Ordinary repair and maintenance costs are charged to operations as incurred. Leasehold improvements are amortized using the straight-line method over their estimated useful lives or
the remaining life of the lease, whichever is shorter.

Long-lived Assets

Long-lived
assets are recorded at the lower of amortized cost or fair value. The Company reviews long-lived assets and certain identifiable intangibles for
impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of
the carrying amount of an asset to future undiscounted cash flows expected to be generated by the asset over the remaining useful life. If such assets are considered to be impaired, the impairment to
be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

Deferred Financing Costs and Initial Purchasers' Discounts

Deferred
financing costs and initial purchasers' discounts were recorded during 2002 in connection with entering into a new senior secured credit facility and issuing senior secured
notes and senior subordinated notes (see Note 13). The amounts are being amortized over the terms of the loans and notes, utilizing the effective interest method. The amortization expense of
deferred financing costs and initial purchasers' discounts is included with interest expense as an overall cost of the financing. During 2002, interest expense related to the amortization of these
costs totaled $1,091,000.

34

---

Goodwill

The $3.2 million of goodwill recorded in the accompanying consolidated balance sheets was established in connection with an acquisition in 1999. Prior to
the adoption of Statement of Financial Accounting Standards (SFAS) No. 142 on January 1, 2002, goodwill was being amortized over 40 years. Beginning January 1, 2002,
goodwill is no longer being amortized, but will be tested on at least an annual basis for impairment. See "Recent Accounting Pronouncements" for further information.

Advertising

Advertising costs are expensed as incurred and totaled $993,000, $763,000, and $710,000 for the years ended December 31, 2002, 2001 and 2000, respectively.

Shipping and Handling Fees and Costs

Shipping and handling fees billed to customers are recorded as revenues while the related shipping and handling costs are included in cost of revenues.

Income Taxes

The
Company files a consolidated federal income tax return with its wholly owned subsidiaries. As a Limited Liability Corporation, the Company has elected to be taxed as a C-Corporation
under the provisions of the Internal Revenue Code ("IRC"). Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Fair Value of Financial Instruments

The
carrying amounts reported in the accompanying consolidated balance sheets for accounts receivable, accounts payable, accrued liabilities, and deferred compensation approximate fair
value due to the immediate to short-term maturity of these financial instruments. The carrying amount of the senior secured credit facility approximates the fair value due to the fact that
the underlying instruments include provisions to adjust interest rates to approximate fair market value. The estimated fair value of

35

---

the Company's notes payable, senior secured and senior subordinated notes payable at December 31, 2002 are as follows (in thousands):

Carrying
Amount

Fair
ValueSenior secured notes with interest computed at 111/8%

$
198,570

$
156,000Senior subordinated notes with interest computed at 121/2%


42,602


39,220Notes payable to financial institution with interest rates ranging from 4.25% to 7.63%


1,018


759Notes payable to suppliers with interest computed at 2.9%


304


266Notes payable to finance companies with interest rates ranging from 91/2% to 101/2%


80


69$
242,574

$
196,314


Concentrations of Credit and Supplier Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of trade accounts receivable. Credit risk with
respect to trade accounts receivable is mitigated by the large number of geographically diverse customers and the Company's credit evaluation procedures. Although generally no collateral is required,
when feasible, mechanics' liens are filed and personal guarantees are signed to protect the Company's interests. The Company maintains reserves for potential losses.

The
Company records its trade receivables at sales value and establishes specific reserves for certain customer accounts identified as known collection problems due to insolvency,
disputes or other collection issues. The amounts of the specific reserves are estimated by management based on the
following assumptions and variables: customer's financial position, age of the customer's receivables and changes in payment schedules. In addition to the specific reserves, management establishes a
non-specific allowance for doubtful accounts by applying specific percentages to the different receivable aging categories (excluding the specifically reserved accounts). The percentage applied
against the aging categories increases as the accounts become further past due. The allowance for doubtful accounts is charged with the write-off of uncollectible customer accounts.

The
Company routinely acquires equipment from certain suppliers. Management believes that other suppliers could provide similar equipment with comparable terms.

Use of Estimates

The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions.
The use of estimates and assumptions may affect the amounts reported in the consolidated financial statements and accompanying notes. Significant estimates include allowance for doubtful accounts,
useful lives for depreciation, goodwill and other asset impairments, loss contingencies, and fair values of financial instruments. Actual results could differ from those estimates.

Recent Accounting Pronouncements

The Company adopted the provisions of SFAS No. 142, "Goodwill and Other Intangible Assets" effective January 1, 2002. The provisions of SFAS
No. 142 eliminate the amortization of goodwill and

36

---

certain intangible assets that are deemed to have indefinite lives and require such assets to be tested for impairment and to be written down to fair value, if necessary. Accordingly, the Company
does not have goodwill amortization subsequent to December 31, 2001.

In
connection with the adoption of SFAS No. 142, the Company made an assessment of its goodwill for impairment based upon the new rules during the year ended December 31,
2002. Based on the assessment, the Company was not required to adjust the carrying value of its goodwill. As of December 31, 2002, the Company had goodwill of approximately $3.2 million.

If
the provisions of SFAS No. 142 were in effect at January 1, 2000, the following pro forma financial results for the years ended December 31, 2001 and 2000 would
have resulted (in thousands):

2001

2000Selling general and administrative expense

$
52,437

$
44,323Income from operations


22,832


12,510Net income (loss)


3,453


(7,184
)


For
the years ended December 31, 2001 and 2000, the Company recorded goodwill amortization of $250,000 and $244,000, respectively.

In
June 2001, the FASB released SFAS No. 143, "Accounting for Asset Retirement Obligations." This statement addresses the accounting treatment for obligations associated
with the retirement of tangible long-lived assets and the associated asset retirement costs. The provisions of the statement apply to legal obligations associated with the retirement of long-lived
assets that result from the acquisition, construction, development, or normal operation of a long-lived asset. The statement is effective for financial statements issued for fiscal years beginning
after June 15, 2002. The Company will adopt the provisions of SFAS No. 143 during fiscal 2003, but does not expect this statement to have a material impact on it's consolidated results
of operations or financial position.

In
August 2001, the FASB issued SFAS No. 144,Accounting for the Impairment or Disposal of Long-Lived Assets(SFAS No. 144) SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. This Statement requires that
long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated
future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. SFAS No. 144 requires companies to separately
report discontinued operations and extends that reporting to a component of an entity that either has been disposed of (by sale, abandonment, or in a distribution to owners) or is classified as held
for sale. Assets to be disposed of are reported at the lower of the
carrying amount or fair value less costs to sell. The Company adopted SFAS No. 144 on January 1, 2002. The adoption of SFAS No. 144 did not have a material impact on it's
consolidated financial statements.

In
July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." Under SFAS No. 146, a company will record a liability for a
cost associated with an exit or disposal activity when that liability is incurred and can be measured at fair value. A liability is incurred when an event obligates the entity to transfer or use
assets (i.e., when an event leaves the company little or no discretion to avoid transferring or using the assets in the future). Under previous accounting rules, if a company's management approved an
exit plan, the company generally could

37

---

record the costs of that plan as a liability on the approval date, even if the company did not incur the costs until a later date. Under SFAS No. 146, some of those costs might qualify for
immediate recognition, others might be recorded during one or more quarters, and still others might not be recorded until incurred in a much later period. The Company is currently reviewing the
standard, which is effective for periods beginning after December 31, 2002, applied prospectively, and does not expect it to have a material impact on its results of operations or financial
position.

In
November 2002, the FASB issued Interpretation No. 45 (FIN No. 45), "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" which expands previously issued accounting guidance and disclosure requirements for certain guarantees. FIN 45 requires recognition of an
initial liability for the fair value of an obligation assumed by issuing a guarantee. Guarantees are required to be disclosed in the notes to the financial statements starting with the period ending
after December 15, 2002. For certain guarantees issued after December 31, 2002, the fair value of the obligation must be reported on the balance sheet. The Company has adopted the
disclosure requirements. The Company does not expect the adoption of the accounting provisions of FIN No. 45 to have a material impact on its results of operations and financial position.

In
January 2003, the FASB issued Financial Interpretation No. 46 ("FIN No. 46"), "Consolidation of Variable Interest Entities, and Interpretation of ARB No.
51," which addresses the consolidation by business enterprises of variable interest entities as defined therein and applies immediately to variable interests in variable
interest entities created or obtained after January 31, 2003. The Company does not expect the adoption of FIN No. 46 to have a material impact on its results of operations and financial position.

Reclassifications

Certain amounts in the prior-year consolidated financial statements have been reclassified for comparative purposes to conform to the presentation in the current-year consolidated financial
statements.

Restatement

The accompanying consolidated financial statements as of and for the year ended December 31, 2001 have been restated. (See Note 20).

(3)  REORGANIZATION AND ACQUISITION OF ICM EQUIPMENT COMPANY L.L.C.

On June 17, 2002, the equity holders of H&E Equipment Services L.L.C. (formerly Gulf Wide Industries L.L.C.) and ICM Equipment Company L.L.C. (ICM) formed H&E Holdings by executing a Limited
Liability Company Agreement of H&E Holdings and by contributing to H&E Holdings all of the outstanding equity securities and certain outstanding subordinated debt of the two companies to the members
of H&E Holdings in exchange for certain equity securities of H&E Holdings. Pursuant to a Contribution Agreement and Plan of Reorganization, H&E Holdings contributed all of the outstanding equity
securities of ICM to H&E Equipment Services, consummating the merger and making ICM a wholly-owned subsidiary of H&E Equipment Services. Head and Engquist L.L.C. is also a wholly-owned subsidiary of
H&E Equipment Services.

Pursuant
to the Contribution Agreement and Plan of Reorganization, H&E Holdings issued a series of preferred and common units in exchange for all the outstanding stock of ICM. The
acquisition was accounted for under the purchase method of accounting. H&E Equipment Services was considered

38

---

the acquirer for accounting purposes. Under the purchase method of accounting, the acquired assets and assumed liabilities have been recorded at their estimated fair values at the date of
acquisition. There was no goodwill or other intangible assets recorded in connection with the transaction. The operating results of ICM have been included in the accompanying 2002 consolidated
financial statements from the date of the acquisition.

The
following table summarizes the fair value of assets acquired and liabilities assumed as allocated in purchase accounting (in thousands):

Fair value of assets acquired:Cash

$
3,643Accounts receivable


27,020Inventories


12,082Rental equipment


129,554Property and equipment


4,966Deferred tax assets


9,454Other assets


1,062187,781Fair value of liabilities assumed:Outstanding borrowings on senior secured credit facility


117,493Accounts payable and accrued liabilities


50,092Amounts due to members


10,147Deferred compensation


9,743Capital lease obligations


306187,781Excess of liabilities assumed over fair value of assets acquired

$



The
consolidated results of operations data shown below is presented on an unaudited pro forma basis and represents the results of H&E Equipment Services had the business combination
occurred at the beginning of the periods presented (in thousands):

Years Ended December 31,2002

2001Revenues

$
431,721

$
515,262Net loss

$
(23,277
)
$
(8,777
)


The
unaudited pro forma net loss for the year ended December 31, 2002 includes a $1.2 million fee for early termination of the Company's previous credit facility that is
included in interest expense in the accompanying consolidated statement of operations. The unaudited pro forma financial information is presented for informational purposes only and is based upon
certain assumptions and estimates, which are subject to change. The results are not necessarily indicative of the operating results that would have occurred had the transaction been consummated at the
beginning of the periods presented, nor are they necessarily indicative of future operating results.

39

---



(4)  AUGUST 2001 RECAPITALIZATION

On August 10, 2001, the Company entered into a recapitalization agreement with BRS and the Minority Shareholder Group whereby a further investment was made
by BRS into the Company.

BRS
contributed $10.0 million in cash in exchange for $10.0 million of newly issued Senior Exchangeable Preferred Units. BRS also contributed its outstanding
Class A, B and C Preferred Units, with a cumulative liquidation value of approximately $37.6 million and its $7.0 million par value Convertible Subordinated Note, plus accrued
interest in exchange for $36.3 million of newly issued Senior Subordinated Preferred Units.

The
Minority Shareholder Group contributed its outstanding Class A, B, and C Preferred Units, with a cumulative liquidation value of approximately $19.9 million, its
Class A common units of $0.8 million and its $20.6 million Convertible Subordinated Note in exchange for $1.2 million of newly issued Series A Preferred Units,
$5.0 million of Junior Preferred Units and $1.2 million of Class B common stock.

Immediately
after these transactions, BRS had 115,152.8 shares of Class A common stock and the Minority Shareholder Group had 115,152.8 shares of Class B common stock. The
Class A common stock has 2 for 1 voting rights for every share of Class B common stock. This gave BRS 66.7% voting interest in the Company and the Minority Shareholder Group the
remaining 33.3%. The BRS investment and exchanges with the Minority Shareholder Group have been accounted for as a recapitalization in the accompanying consolidated financial statements as of
December 31, 2001.

(5) RECEIVABLES

Receivables
consisted of the following at December 31, 2002 and 2001 (in thousands):

2002

2001Trade receivables

$
63,935

$
34,302Income tax receivables


125


Unbilled rental revenue (restated in 2001)


3,255


1,690Sales-type leases


657


984Advances to officers and employees


120


149Affiliated companies


454


80Other


208


68,754


37,205Less allowance for doubtful accounts


(3,609
)

(708
)$
65,145

$
36,497


(6) INVENTORIES

Inventories
consisted of the following at December 31, 2002 and 2001 (in thousands):

2002

2001New equipment

$
23,242

$
9,997Used equipment


13,511


9,640Parts, supplies and other


16,709


12,008$
53,462

$
31,645


40

---

(7) PROPERTY AND EQUIPMENT

Property
and equipment consisted of the following at December 31, 2002 and 2001 (in thousands):

2002

2001Land

$
3,000

$
2,995Office and computer equipment


7,837


4,190Machinery and equipment


3,220


3,140Transportation equipment


9,521


5,203Building and leasehold improvements


8,916


5,881Construction in progress





70832,494


22,117Less accumulated depreciation and amortization


(13,338
)

(8,673
)$
19,156

$
13,444


(8) ACCOUNTS PAYABLE

Accounts
payable consisted of the following at December 31, 2002 and 2001 (in thousands):

2002

2001Trade accounts payable

$
36,387

$
11,083Manufacturer flooring plans payable


55,101


29,943Due to BRS





3,208$
91,488

$
44,234


Manufacturer
flooring plans payable are financing arrangements for inventory and rental equipment. The interest paid on the manufacturer flooring plans ranges between zero percent and
Prime Interest Rate plus 3.5 percent. Certain manufacturer flooring plans provide for a one to twelve month reduced
interest rate term or a deferred payment period. The Company makes payments in accordance with the original terms of the financing agreements. However, the Company routinely sells equipment that is
financed under manufacturer flooring plans and prior to the original maturity date of the financing agreement. The payable is paid at the time equipment being financed is sold. The flooring plans
payable are secured by the equipment being financed.

Maturities
(based on original financing terms) of the manufacturer flooring plans payable for each of the next five years ending December 31 are as follows (in thousands):

2003

$
15,4122004


11,8572005


8,8512006


16,0142007


2,967$
55,101


41

---

(9) ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued liabilities consisted of the following at December 31, 2002 and 2001 (in thousands):

2002

2001Payroll and related liabilities

$
5,368

$
2,434Sales, use, and property taxes


3,240


1,027Accrued interest


1,429


930Deferred revenue (2001 restated)


1,610


802Other


682


711$
12,329

$
5,904


(10) NOTES PAYABLE

A summary of notes payable as of December 31, 2002 and 2001 are as follows (in thousands):

2002

2001Notes payable to a financial institution maturing through 2008.Principal reductions approximate $21 a month plus interest ranging from4.25% to 7.63% at December 31, 2002, and 4.75% to 7.63% atDecember 31, 2001. Notes are collateralized by real estate.

$
1,018

$
1,504Notes payable to suppliers maturing through 2005. Payable in monthly installments of approximately $11. Interest is at 2.9%. Notes are collateralized by equipment


304


1,817Notes payable to finance companies maturing through 2006. Payable in monthly installments of $3. Interest ranges from 9.5% to 10.5%. Notes are collateralized by equipment


80


103$
1,402

$
3,424


Maturities
of notes payable for each of the next five years ending December 31, are as follows (in thousands):

2003

$
3482004


3352005


2582006


1842007


181Thereafter


96$
1,402


(11) CONVERTIBLE AND PREFERRED SECURITIES

Senior Exchangeable Preferred Units

In
connection with the August 10, 2001 recapitalization, BRS purchased for $10.0 million in cash 10,000 units of $1,000 par value Senior Exchangeable Preferred Units. These
units include a 10% liquidation
value compounded semi-annually from their issuance date. The liquidation value is to include the par value plus any accreted value to be paid. At any time prior to July 31, 2006,
the holders of the Senior Exchangeable Preferred Units could have exchanged any part of the liquidation value of

42

---

these units into a senior subordinated promissory note of either the Company or its subsidiary, at the election of the holder.

As
the redemption of the Senior Exchangeable Preferred Units was outside of the control of the Company, they were classified outside of members' equity in the accompanying consolidated
balance sheet as of December 31, 2001. The difference between the carrying value and liquidation value was accreted through periodic charges to accumulated deficit.

Senior Subordinated Preferred Units

In connection with the August 10, 2001 recapitalization, the Company issued 36,286,902 shares of $1,000 par value Senior Subordinated Preferred Units.
These units included an 8% liquidation value compounded semi-annually from their issuance date. The liquidation value as of December 31, 2001 included the par value plus any
accreted value to be paid under the terms Agreement. The Senior Subordinated Preferred Units could be redeemed at the discretion of the Company's board of directors. The Company's board of directors
is subject to voting control of BRS, who have voting control of the Company. As such, the Senior Subordinated Preferred Units were classified outside of members' equity (deficit) in the accompanying
consolidated balance sheet as of December 31, 2001. The difference between the carrying value and the liquidation value was accreted through periodic charges to accumulated deficit.

Series A Senior Preferred Units

In connection with the August 10, 2001 recapitalization, the Company issued 1,235,229 shares of $1,000 par value Senior Series A Preferred Units.
These units included a 12% liquidation value compounded semi-annually from their issuance date. The liquidation value was to include the par value plus any accreted value to be paid under
the terms Agreement. These units could be redeemed at the discretion of the Company's board of directors.

Junior Preferred Units

In connection with the August 10, 2001 recapitalization, the Company issued 5,000 shares of $1,000 par value Junior Preferred Units. These units included
an 8% liquidation value compounded semi-annually from their issuance date. The liquidation value was to include the par value plus any accreted value to
be paid under the terms Agreement. These units could be redeemed at the discretion of the Company's board of directors.

The
Series A Senior Preferred Units and the Junior Preferred Units were held by the Minority Shareholders and are included in members' equity (deficit) in the accompanying
consolidated balance sheet as of December 31, 2001.

In
connection with the Company's reorganization and acquisition of ICM in June 2002 (see Note 3), the Senior Exchangeable Preferred Units, the Senior Subordinated Preferred Units,
the Series A Senior Preferred Units and the Junior Preferred Units were converted to member's interest.

(12) CAPITAL LEASE OBLIGATIONS

The Company is the lessee of various equipment under capital leases expiring in various years through 2005. The assets and liabilities under capital leases are
recorded at the lower of the present value of the minimum lease payments or the fair value of the assets. The assets are amortized over estimated productive lives. Amortization of assets under capital
leases is included in depreciation expense.

43

---

Following
is a summary of assets held under capital leases at December 31, 2002 and 2001 (in thousands):

2002

2001Rental equipment

$
18,918

$
14,791Data processing equipment


278


2819,196


14,819Less accumulated amortization


(3,588
)

(1,298
)$
15,608

$
13,521


Future
minimum lease payments under capital leases as of December 31, 2002 are as follows (in thousands):

2003

$
9,0842004


1,3552005


1,288Total minimum lease payments


11,727Less amount representing interest


(886
)Total present value of minimum payments with interest ranging from 5% to 9.5%

$
10,841


(13) SENIOR SECURED NOTES, SENIOR SUBORDINATED NOTES AND SENIOR SECURED CREDIT FACILITY

In connection with the reorganization of the Company and acquisition of ICM (see Note 3), the Company issued $200.0 million aggregate principal
amount of 111/8% senior secured notes and $53.0 million aggregate principal amount of 121/2% senior subordinated notes and entered into a new senior secured credit
facility. The senior secured credit facility is comprised of a $150.0 million revolving line of credit. The proceeds from the senior secured notes, senior subordinated notes and senior secured
credit facility were used to payoff the existing credit facilities of the two companies which had aggregate outstanding balances of approximately $306.4 million, repay senior subordinated
promissory notes of approximately $13.3 million, and pay for financing costs of approximately $13.5 million. The deferred financing costs are being amortized to interest expense over the
life of the respective related debt.

Senior Secured Notes

On June 17, 2002, the Company issued $200.0 million aggregate principal amount of 111/8% Senior Secured Notes due 2012. The following
table reconciles the $200.0 million Senior Secured Notes to the December 31, 2002 balance (in thousands):

Aggregate principal amount issued

$
200,000Initial purchasers' discount


(1,474
)Initial purchasers' discount amortization (June 17, 2002 throughDecember 31, 2002)


44Senior Secured Notes balance at December 31, 2002

$
198,570


The
net proceeds from the sale of the notes were approximately $190.7 million (after deducting the initial purchasers' discount and related financing costs). Interest on the notes
will be paid semi-annually on June 15 and December 15 of each year, commencing on December 15, 2002. The notes mature on June 15, 2012 and are guaranteed by the
Company's domestic subsidiaries (see

44

---

Note 21). The notes are secured by junior security interests in substantially all of the assets of H&E Equipment Services. The Company, at its option, may redeem the notes on or after
June 15, 2007, at specified redemption prices, which range from 105.563% in 2007 to 100.0% in 2010 and thereafter. In addition, at any time on or prior to June 15, 2005, the Company may
redeem up to 35% of the outstanding notes at a redemption price of 111.125% with the net proceeds of certain equity offerings. The indenture governing the notes contains certain restrictive covenants
including limitations on (i) additional indebtedness, (ii) restricted payments, (iii) liens and guarantees, (iv) dividends and other payments, (v) preferred stock of
subsidiaries, (vi) transactions with affiliates, (vii) sale and leaseback transactions, and (viii) the Company's ability to consolidate, merge or sell all or substantially all of
its assets.

Senior Subordinated Notes

On June 17, 2002, the Company issued $53.0 million aggregate principal amount of 121/2% Senior Subordinated Notes due 2013. The
following table reconciles the $53.0 million Senior Subordinated Notes to the December 31, 2002 balance (in thousands):

Aggregate principal amount issued

$
53,000Initial purchasers' discount


(10,591
)Initial purchasers' discount amortization (June 17, 2002 through December 31, 2002)


193Senior Subordinated Notes balance at December 31, 2002

$
42,602


The
net proceeds from the sale of the notes were approximately $40.7 million (after deducting the initial purchasers' discount and related financing costs). Interest on the notes
will be paid semi-annually on June 15 and December 15 of each year, commencing on December 15, 2002. The notes mature on June 15, 2013 and are guaranteed by the
Company's domestic subsidiaries (see Note 21). The notes are senior to all other subordinated debt and are unsecured. The Company, at its option, may redeem the notes on or after
June 15, 2007, at specified redemption prices which range from 106.250% in 2007 to 100.0% in 2010 and thereafter. In addition, at any time prior to June 15, 2005, the Company may redeem
up to 35% of the outstanding notes at a redemption price of 112.50% with the net proceeds of certain equity offerings. The indenture governing the notes contains certain restrictive covenants
including limitations on (i) additional indebtedness, (ii) restricted payments, (iii) liens and guarantees, (iv) dividends and other payments, (v) preferred stock of
subsidiaries, (vi) transactions with affiliates, (vii) sale and leaseback transactions, and (viii) the Company's ability to consolidate, merge or sell all or substantially all of
its assets.

In
connection with and attached to the issuance of the senior subordinated notes, H&E Holdings issued approximately 553 shares of Series A preferred stock, 1,476 shares of
Series B preferred stock, 4,239 shares of Series C preferred stock, 2,613 shares of Series D preferred stock, 106,842 shares of Class A common stock, and 103,684 shares of
Class B common stock, all of which are limited liability company interests in H&E Holdings.

Also
in connection with the issuances of the senior secured notes and the senior subordinated notes, the Company recorded original issue discounts of $1.5 million and
$3.0 million, respectively. Additionally, $7.6 million of value was allocated to the H&E Holdings' limited liability company interest issued as
part of the offering of the senior subordinated notes. The value allocated to these interests has been accounted for as additional original issue discount. The value allocated to the limited liability
interests was based on an estimate of the relative fair values of these interests and the senior subordinated notes at the date of issuance. The original issue discounts are being amortized to
interest expense over the lives of the respective notes using the effective interest rate method.

45

---



Senior Secured Credit Facility

In accordance with the senior secured credit facility the Company may borrow up to $150 million depending upon the availability of borrowing base
collateral consisting of eligible trade receivables, inventories, property, plant and equipment, and other assets. The senior secured credit facility bears interest at LIBOR plus 300 basis points and
matures June 17, 2007. The credit facility is senior to all other outstanding debt, secured by substantially all the assets of the Company, and is guaranteed by the Company's domestic
subsidiaries (see Note 21). The balance outstanding on the senior secured credit facility as of December 31, 2002 was approximately $76.7 million. Additional borrowings available
under the terms of the senior secured credit facility as of December 31, 2002 totaled $72.8 million. The average interest rate on outstanding borrowings for the year ended December 31,
2002 was 5.8%.

If
at any time an event of default exists, the interest rate on the senior secured credit facility will increase by 2.0% per annum. The Company is also required to pay a commitment fee
equal to 0.5% per annum in respect of undrawn commitments under the revolving credit facility.

In
accordance with the terms of the senior secured credit facility, the Company must comply with certain restrictive financial covenants and must maintain certain financial ratios. The
Company is required to, among other things, satisfy certain financial tests relating to: (a) the maximum senior debt to tangible assets ratio, (b) maximum leverage ratio,
(c) maximum adjusted leverage ratio, (d) minimum utilization rate of equipment inventory ratio, (e) minimum adjusted interest coverage ratio and (f) maximum property and equipment
capital expenditures.

At
December 31, 2002, the Company was in compliance with the covenants and terms of the senior secured notes, senior subordinated notes, and the senior secured credit facility.

On
March 31, 2003, the senior secured credit facility was amended to extend the current year requirement for filing the Company's audited financial statements to the earlier of April 15,
2003, or
the date the Company files its annual report on Form 10-K with the Securities and Exchange Commission.

The
annual maturities of senior secured credit facility, senior secured notes and senior subordinated notes, as of December 31, 2002 are as follows (in thousands):

2007

$
76,724Thereafter


253,000329,724Less unamortized discount


(11,828
)$
317,896


46

---

(14) INCOME TAXES

Income tax provision (benefit) for the years ended December 31, 2002, 2001 (restated) and 2000 consists of (in thousands):

Current

Deferred

TotalYear ended December 31, 2002:U.S. Federal

$


$
(1,091
)
$
(1,091
)State


20


(200
)

(180
)$
20

$
(1,291
)
$
(1,271
)Year ended December 31, 2001 (restated):U.S. Federal

$


$
1,589

$
1,589State


(356
)

210


(146
)$
(356
)
$
1,799

$
1,443Year ended December 31, 2000:U.S. Federal

$


$
(2,758
)
$
(2,758
)State





(365
)

(365
)$


$
(3,123
)
$
(3,123
)


Significant
components of the Company's deferred income tax assets and liabilities as of December 31, 2002 and 2001 are as follows (in thousands):

2002

2001(Restated
See Note 20)Deferred tax assets:Accounts receivable

$
1,371

$
269Inventory


433


526Net operating losses


42,157


14,042AMT credit


832


832Sec. 263A costs


577


Non-deductible accrued liabilities


1,100


Goodwill


15,957


Deferred compensation


2,661


Accrued interest


1,227


Interest expensehigh yield debt


1,013


Sec. 754 adjustment


10,707


Other assets


307


34978,342


16,018Valuation allowance


(20,453
)

57,889


16,018Deferred tax liabilities:Property and equipment


(56,309
)

(26,711
)Investments


(1,520
)

Other


(60
)

(67
)(57,889
)

(26,778
)Net deferred taxes

$


$
(10,760
)


47

---

The
difference between income taxes computed using statutory federal income tax rates and the effective corporate rates are as follows for the years ended
December 31, 2002, 2001, and 2000 (in thousands):

2002

2001

2000(Restated
See Note 20)Computed tax at statutory rates

$
(4,877
)
$
1,605

$
(3,555
)Non-deductible expenses


577


240


133State income taxnet of federal tax effect


(119
)

(96
)

(241
)Beneficial conversion feature








425Increase in valuation allowance


3,107





Other


41


(306
)

115$
(1,271
)
$
1,443

$
(3,123
)


At
December 31, 2002, 2001, and 2000, the Company had available net operating loss carryforwards of approximately $110.9 million, $37.4 million, and
$36.9 million respectively, which expire in varying amounts from 2018 through 2022. The Company also had Federal alternative minimum tax credit carryforwards at December 31, 2002, 2001
and 2000 of approximately $0.8 million which do not expire. The utilization of all or some of these loss carryforwards will be limited pursuant to Internal Revenue Code Section 382 as a
result of ownership changes.

Management
has concluded that it is more likely than not that the Company will not have sufficient taxable income within the carryback and carryforward periods permitted by the current
law to allow for the utilization of certain carryforwards and other tax attributes. Therefore, a valuation allowance of $20.5 million has been established to reduce the deferred tax assets as
of December 31, 2002.

(15) COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company leases certain property and rental equipment under noncancelable operating lease agreements expiring at various dates through 2018. Rent expense on
property and rental equipment under noncancelable operating lease agreements for the years ended December 31, 2002, 2001 and 2000 amounted to approximately $21,023,000, $18,340,000 and
$5,986,000, respectively.

Future
minimum operating lease payments, in the aggregate, are as follows (in thousands):

Years ending December 31:2003

$
29,3662004


21,0982005


18,6602006


14,6852007


6,682Thereafter


9,935$
100,426


48

---

Legal Matters

In
July 2000, a complaint was filed in the General Court of Justice, Superior Court Division, State of North Carolina, County of Mecklenburg under the caption Sunbelt
Rentals, Inc. v. Head & Engquist Equipment, L.L.C. ("H&E"), d/b/a H&E Hi-Lift, et al. The complaint was filed by a competitor of H&E, BPS Equipment, which was acquired by the
plaintiff in June 2000, against H&E, Robert W. Hepler, an executive officer, and other employees of H&E. The complaint alleges, among other things, breach of fiduciary duty,
misappropriation of trade secrets, unfair trade practices, interference with prospective advantage and civil conspiracy, in connection with the start-up of H&E's Hi-Lift
division in January 2000 and the hiring of former employees of BPS Equipment. The complaint seeks, among other things, an order which enjoins the defendants from using BPS Equipment's trade
secrets, awards of unspecified compensatory and punitive damages to the plaintiff as well as awarding the plaintiff's costs and attorneys' fees.

The
Company is also involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, after consultation with legal counsel, the
ultimate disposition of all matters will not have a material adverse effect on the Company's consolidated financial position, results of operations, or liquidity.

Employment Contracts

The Company has entered into employment contracts with various officers and members, which provide for annual payments to the officers and members, subject to
their continued employment with the Company. The employment contracts mature in February 2003 and on December 31, 2006 and require aggregate annual payments of approximately $1,453,000 with bonuses at
the discretion of the board of directors.

Letter of Credit

The Company had outstanding letters of credit in the amount of $470,000 and $950,000 as of December 31, 2002 and 2001, respectively.

(16) EMPLOYEE BENEFIT PLANS

The Company offers its employees participation in a qualified 401(k)/profit-sharing plan which requires the Company to match employee contributions up to
predetermined limits for qualified employees as defined by the plan. For the years ended December 31, 2002, 2001 and 2000, the Company contributed $609,000, $250,000 and $212,000, respectively,
to this plan.

(17) DEFERRED COMPENSATION PLANS

In connection with the acquisition of ICM, the Company assumed a nonqualified executive deferred compensation plan under which certain employees had previously
elected to defer a portion of their annual compensation. Participants in the plan can no longer defer compensation. Compensation previously deferred under the plan is payable upon the termination,
disability, or death of the participants. The plan accumulates interest each year at a bank's prime rate in effect as of the beginning of January. This rate remains constant throughout the year. The
effective rate for the 2002 plan year was 4.75 percent. The aggregate deferred compensation (including accrued interest of $2,355,000) at December 31, 2002 was $4,343,000.

49

---

The
Company also assumed, in connection with the acquisition of ICM, a liability for subordinated deferred compensation for certain officers and members of the Company. Compensation
deferred is payable in December 2013 and is subordinate to all other debt. Interest is accrued quarterly at a rate of 13 percent per annum. The aggregate deferred compensation (including
accrued interest of $890,000) at December 31, 2002 was $5,890,000.

(18) RELATED PARTY TRANSACTIONS

For the three years ended December 31, 2002, the Company leased certain facilities from companies controlled by officers and members. The lease terms range
from 3 to 20 years with expiration dates ranging from 2003 to 2018. Total rent paid during the years ended December 31, 2002, 2001 and 2000 was $1,740,000, $471,000 and $533,000,
respectively.

The
Company purchased insurance from an insurance agency, related through common ownership, for $3,096,000, $2,017,000 and $1,657,000 for the years ended December 31, 2002, 2001
and 2000, respectively.

The
Company owed companies related through common ownership $7,000 and $3,207,000 at December 31, 2002 and 2001, respectively. The Company had no sales transactions with these
affiliated companies during 2002 and 2001.

The
Company rented equipment from an officer for $462,000 and $126,000 for the years ended December 31, 2001 and 2000, respectively. The equipment was purchased from the officer
for $3,000,000 during 2001.

The
Company had a management agreement with an affiliate, under which the Company was obligated to pay the greater of $500,000 or 1% of earnings before interest, taxes, depreciation and
amortization. The total paid for the years ended December 31, 2002, 2001 and 2000 was $670,000, $530,000 and $500,000, respectively.

In
connection with the acquisition of ICM, the Company entered into a management agreement with an affiliate payable in the greater of $2 million annually or 1.75% of annual
earnings before interest, taxes, depreciation, and amortization, excluding operating lease expense, plus all reasonable out-of-pocket expenses. The total amount paid to the affiliate under the
management agreement for 2002 was $1,085,000.

In
connection with the recapitalization of H&E in 1999, the Company entered into a consulting and non-competition agreement with a former stockholder of the Company for
$3,000,000, payable in monthly installments of $25,000 per month for ten years. The total amount paid was $300,000 for each of the years ended December 31, 2002, 2001 and 2000.

The
Company has consulting and noncompetition agreements with two former stockholders of Coastal Equipment, Inc. acquired in 1999 for $1,000,000, payable in four annual
installments of $250,000 beginning March 1, 2000.

During
the years ended December 31, 2002, 2001 and 2000, the Company paid approximately $255,000, $206,000 and $202,000, respectively, in fees to a charter aircraft company in
which the Chief Executive Officer has ownership. The Company had a receivable from the charter aircraft company of approximately $101,000 and $80,000 as of December 31, 2002 and 2001,
respectively.

During
the year ended December 31, 2002, the Company expensed $360,000 for interest earned under a deferred compensation plan for the chairman and an executive officer (see
Note 17).

50

---

(19) SEGMENT INFORMATION

The Company has identified five reportable segments: equipment rentals, new equipment sales, used equipment sales, sales of parts and services. These segments are
based upon how management of the Company allocates resources and assesses performance. Non-segmented revenues and non-segmented costs relate to equipment support activities
including transportation, hauling, parts freight and damage-
waiver charges and are not allocated to the other reportable segments. There were no sales between segments for any of the periods presented. Selling, general, and administrative expenses as well as
all other income and expense items below gross profit are not generally allocated to reportable segments. The Company does not compile discrete financial information by its segments other than the
information presented below. The following table presents information about the Company's reportable segments (in thousands):

Years Ended December 31,2002

2001

2000(Restated-
See Note 20)Revenues:Equipment rentals

$
136,624

$
98,696

$
70,625New equipment sales


72,143


84,138


53,345Used equipment sales


52,487


59,441


51,402Parts sales


47,218


36,524


34,435Service revenues


27,755


19,793


16,553Total segmented revenues


336,227


298,592


226,360Non-segmented revenues


15,473


10,925


8,236Total revenues

$
351,700

$
309,517

$
234,596Gross profit:Equipment rentals

$
52,745

$
45,538

$
31,080New equipment sales


6,088


6,696


5,435Used equipment sales


9,461


8,063


7,001Parts sales


13,207


9,448


8,589Service revenues


16,317


11,687


9,414Total gross profit from revenues


97,818


81,432


61,519Non-segmented gross loss


(1,340
)

(3,514
)

(3,252
)Total gross profit

$
96,478

$
77,918

$
58,267


Years Ended December 31,2002

2001

2000(RestatedSee Note 20)Segment identified assetsEquipment sales

$
36,753

$
19,637

$
29,907Equipment rentals


309,697


195,701


147,228Parts and service


16,709


12,008


12,320Total segment identified assets


363,159


227,346


189,455Non-segment identified assets


105,460


59,783


56,506Total assets

$
468,619

$
287,129

$
245,961


51

---

The
Company operates only in U.S. markets and had no international sales for any of the periods presented. No one customer accounted for more than 10% of the Company's sales on an
overall or segment basis for any of the periods presented.

(20) RESTATEMENT OF FINANCIAL STATEMENTS

Our previously issued consolidated financial statements as of and for the year ended December 31, 2001 have been restated to correct errors related to the
calculation of unbilled rental revenue and deferred revenue related to rental contracts with terms that extend across reporting periods. As a result of the restatement, we also made corrections to
income tax accounts, members' equity, and other related items.

The
Company's policy is to recognize revenue from equipment rentals in the period earned, over the contract term, regardless of the timing of the billing to customers. A rental contract
term can be daily, weekly or monthly. Because the term of the contracts can extend across financial reporting periods, we record unbilled rental revenue and deferred revenue at the end of reporting
periods so rental revenue is appropriately stated in the periods presented in accordance with generally accepted accounting principles in the United States of America.

During
the preparation of the financial statements for the year ended December 31, 2002, we discovered certain errors related to the unbilled rental revenue and deferred revenue
balance sheet accounts, and to the timing of when rental revenue was recorded in the past. On a cumulative basis, as of December 31, 2001, we had recognized approximately $1.2 million of
after-tax rental revenue that should be recognized in subsequent periods. Of the $1.2 million, approximately $0.9 million related to years ended December 31, 1999 or
prior, and approximately $0.3 million related to the year ended December 31, 2001. The impact of the errors was not material to the consolidated statement of operations for the year
ended December 31, 2000.

52

---

The
following table summarizes the effect of the restatement adjustments on our consolidated financial statements (in thousands):

|                             |                                                     | Previously
Reported |   | Restated |        
|---------------------------- | --------------------------------------------------- | ------------------- | - | -------- | -------
|Year ended December 31, 2001 |                                                     |                     |   |          |        
|                             | Revenues:                                           |                     |   |          |        
|                             |                                                     | Equipment rentals   |   | $        | 99,229 
|                             |                                                     | Total revenues      |   |          | 306,191
|                             | Gross profit:                                       |                     |   |          |        
|                             |                                                     | Equipment rentals   |   |          | 46,071 
|                             |                                                     | Total gross profit  |   |          | 75,756 
|                             | Income from operations                              |                     |   | 23,115   |        
|                             | Income before income taxes                          |                     |   | 5,276    |        
|                             | Provision for income taxes                          |                     |   | 1,648    |        
|                             | Net income                                          |                     |   | 3,628    |        
|As of December 31, 2001      |                                                     |                     |   |          |        
|                             | Receivables, net of allowance for doubtful accounts |                     | $ | 37,819   |        
|                             | Total assets                                        |                     |   | 288,451  |        
|                             | Accrued expenses and other liabilities              |                     |   | 5,264    |        
|                             | Deferred income taxes                               |                     |   | 11,515   |        
|                             | Total liabilities                                   |                     |   | 257,345  |        
|                             | Total members' deficit                              |                     |   | (16,710  | )      
|                             | Total liabilities and members' deficit              |                     |   | 288,451  |        
|As of December 31, 2000      |                                                     |                     |   |          |        
|                             | Total members' deficit                              |                     | $ | (68,098  | )      
|As of December 31, 1999      |                                                     |                     |   |          |        
|                             | Total members' deficit                              |                     | $ | (54,324  | )      

(21) CONDENSED CONSOLIDATING FINANCIAL INFORMATION OF GUARANTOR SUBSIDIARIES

All of the indebtedness of H&E Equipment Services, the parent co-issuer, is guaranteed by GNE Investments, Inc. and its wholly owned subsidiary
Great Northern Equipment, Inc. The guarantor subsidiaries are all wholly owned and the guarantees, made on a joint and several basis, are full and unconditional (subject to subordination
provisions and subject to a standard limitation which provides that the maximum amount guaranteed by each guarantor will not exceed the maximum amount that can be guaranteed without making the
guarantee void under fraudulent conveyance laws). There are no restrictions on H&E Equipment Services' ability to obtain funds from the guarantor subsidiaries by dividend or loan.

The
condensed consolidating financial information of H&E Equipment Services and its subsidiaries are included below. Because the business combination and the debt refinancing (guaranteed
by the subsidiaries) was consummated on June 17, 2002, condensed consolidating financial information as of December 31, 2002 is the only period presented. The condensed financial
information for H&E Finance Corp., the subsidiary co-issuer, is not presented because H&E Finance Corp. has no assets or operations.

53

---



|                                 |                                            | December 31, 2002                    
|-------------------------------- | ------------------------------------------ | -------------------------------------
|
|ASSETS:                          |                                            |                                      
|                                 | Cash                                       |                                      
|                                 | Receivables, net                           |                                      
|                                 | Inventories                                |                                      
|                                 | Prepaid expenses and other assets          |                                      
|                                 | Rental equipment, net                      |                                      
|                                 | Property and equipment, net                |                                      
|                                 | Deferred financing costs, net              |                                      
|                                 | Investment in guarantor subsidiaries       |                                      
|                                 | Goodwill                                   |                                      
|                                 |                                            |                                      
|                                 |                                            | Total assets                         
|                                 |                                            |                                      
|LIABILITIES AND MEMBERS' EQUITY: |                                            |                                      
|                                 | Senior secured credit facility             |                                      
|                                 | Accounts payable                           |                                      
|                                 | Accrued expenses and other liabilities     |                                      
|                                 | Notes payable                              |                                      
|                                 | Senior secured notes, net of discount      |                                      
|                                 | Senior subordinated notes, net of discount |                                      
|                                 | Capital lease obligations                  |                                      
|                                 | Deferred compensation                      |                                      
|                                 |                                            |                                      
|                                 |                                            | Total liabilities                    
|                                 |                                            | Member's interest                    
|                                 |                                            |                                      
|                                 |                                            | Total liabilities and member's equity
|                                 |                                            |                                      

54

---

H&E EQUIPMENT SERVICES L.L.C.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
(in thousands)

|                                             |                              | Year Ended December 31, 2002 |        
|-------------------------------------------- | ---------------------------- | ---------------------------- | -------
|
|Revenues:                                    |                              |                              |        
|                                             | Equipment rentals            |                              | $      
|                                             | New equipment sales          |                              |        
|                                             | Used equipment sales         |                              |        
|                                             | Parts sales                  |                              |        
|                                             | Service revenues             |                              |        
|                                             | Other                        |                              |        
|                                             |                              |                              |        
|                                             |                              | Total revenues               |        
|                                             |                              |                              |        
|Cost of Revenues:                            |                              |                              |        
|                                             | Rental depreciation          |                              |        
|                                             | Rental expense               |                              |        
|                                             | New equipment sales          |                              |        
|                                             | Used equipment sales         |                              |        
|                                             | Parts sales                  |                              |        
|                                             | Service revenues             |                              |        
|                                             | Other                        |                              |        
|                                             |                              |                              |        
|                                             |                              | Total cost of revenues       |        
|                                             |                              |                              |        
|Gross Profit:                                |                              |                              |        
|                                             | Equipment rentals            |                              |        
|                                             | New equipment sales          |                              |        
|                                             | Used equipment sales         |                              |        
|                                             | Parts sales                  |                              |        
|                                             | Service revenues             |                              |        
|                                             | Other                        |                              |        
|                                             |                              |                              |        
|                                             |                              | Total gross profit           |        
|                                             |                              |                              |        
|Selling, general and administrative expenses |                              |                              | 80,466 
|Equity in earnings of guarantor subsidiaries |                              |                              | 513    
|Gain on sale of property and equipment       |                              |                              | 45     
|                                             |                              |                              |        
|Income from operations                       |                              |                              | 14,274 
|                                             |                              |                              |        
|Other income (expense):                      |                              |                              |        
|                                             | Interest expense             |                              |        
|                                             | Other, net                   |                              |        
|                                             |                              |                              |        
|                                             | Total other income (expense) |                              |        
|                                             |                              |                              |        
|Income (loss) before income taxes            |                              |                              | (14,312
|Benefit for income taxes                     |                              |                              | (1,243 
|                                             |                              |                              |        
|Net income (loss)                            |                              | $                            | (13,069
|                                             |                              |                              |        

55

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|                                                                          |                                                                                          | Year Ended December 31, 2002                                |      
|------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------- | ----------------------------------------------------------- | -----
|
|Cash flows from operating activities:                                     |                                                                                          |                                                             |      
|                                                                          | Net income (loss)                                                                        |                                                             | $    
|                                                                          | Adjustments to reconcile net income (loss) to net cash provided by operating activities: |                                                             |      
|                                                                          |                                                                                          | Depreciation on property and equipment                      |      
|                                                                          |                                                                                          | Depreciation on rental equipment                            |      
|                                                                          |                                                                                          | Amortization of loan discounts and deferred financing costs |      
|                                                                          |                                                                                          | Provision for losses on accounts receivable                 |      
|                                                                          |                                                                                          | Gain on sale of property and equipment                      |      
|                                                                          |                                                                                          | Gain on sale of rental equipment                            |      
|                                                                          |                                                                                          | Deferred income taxes                                       |      
|                                                                          |                                                                                          | Equity in earnings of guarantor subsidiaries                |      
|Changes in operating assets and liabilities, net of business combination: |                                                                                          |                                                             |      
|                                                                          |                                                                                          | Receivables, net                                            |      
|                                                                          |                                                                                          | Inventories                                                 |      
|                                                                          |                                                                                          | Prepaid expenses and other assets                           |      
|                                                                          |                                                                                          | Accounts payable                                            |      
|                                                                          |                                                                                          | Accrued expenses and other liabilities                      |      
|                                                                          |                                                                                          | Deferred compensation                                       |      
|                                                                          |                                                                                          |                                                             |      
|                                                                          |                                                                                          | Net cash provided by operating activities                   |      
|                                                                          |                                                                                          |                                                             |      
|Cash flows from investing activities:                                     |                                                                                          |                                                             |      
|                                                                          | Purchases of property and equipment                                                      |                                                             |      
|                                                                          | Purchases of rental equipment                                                            |                                                             |      
|                                                                          | Proceeds from sale of property and equipment                                             |                                                             |      
|                                                                          | Proceeds from sale of rental equipment                                                   |                                                             |      
|                                                                          | Cash acquired in ICM business combination                                                |                                                             |      
|                                                                          |                                                                                          |                                                             |      
|                                                                          |                                                                                          | Net cash (used in) provided by investing activities         |      
|                                                                          |                                                                                          |                                                             |      
|Cash flows from financing activities:                                     |                                                                                          |                                                             |      
|                                                                          | Net proceeds from issuance of senior secured notes                                       |                                                             |      
|                                                                          | Net proceeds from issuance of senior subordinated notes                                  |                                                             |      
|                                                                          | Payments of amounts due to members                                                       |                                                             |      
|                                                                          | Payment of deferred financing costs                                                      |                                                             |      
|                                                                          | Borrowings on senior secured credit facility                                             |                                                             |      
|                                                                          | Payments on senior secured credit facility                                               |                                                             |      
|                                                                          | Principal payments of notes payable                                                      |                                                             |      
|                                                                          | Payments on capital lease obligations                                                    |                                                             |      
|                                                                          |                                                                                          |                                                             |      
|                                                                          |                                                                                          | Net cash used in financing activities                       |      
|                                                                          |                                                                                          |                                                             |      
|Net decrease in cash                                                      |                                                                                          |                                                             | (299 
|Cash, beginning of year                                                   |                                                                                          |                                                             | 3,630
|                                                                          |                                                                                          |                                                             |      
|Cash, end of year                                                         |                                                                                          | $                                                           | 3,331
|                                                                          |                                                                                          |                                                             |      

56

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|ITEM 9. |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|------- |  | ------------------------------------------------------------------------------------

None

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth the names, ages and titles, as well as a brief account of the business experience, of each person who is a director or executive
officer of H&E Equipment Services.

|Name                 |  | Age |  | Title                                          
|-------------------- |  | --- |  | -----------------------------------------------
|Gary W. Bagley       |  | 55  |  | Chairman and Director                          
|John M. Engquist     |  | 49  |  | President, Chief Executive Officer and Director
|Lindsay C. Jones     |  | 40  |  | Chief Financial Officer                        
|Terence L. Eastman   |  | 50  |  | Senior Vice President, Finance                 
|William W. Fox       |  | 58  |  | Vice President, Cranes and Earthmoving         
|Robert W. Hepler     |  | 46  |  | Vice President, Hi-Lift                        
|Kenneth R. Sharp, Jr |  | 57  |  | Vice President, Lift Trucks                    
|John D. Jones        |  | 45  |  | Vice President, Product Support                
|Dale W. Roesener     |  | 45  |  | Vice President, Fleet Management               
|Bradley W. Barber    |  | 29  |  | Vice President, Rental Operations              
|Bruce C. Bruckmann   |  | 49  |  | Director                                       
|Harold O. Rosser     |  | 54  |  | Director                                       
|J. Rice Edmonds      |  | 32  |  | Director                                       
|John T. Sawyer       |  | 58  |  | Director                                       
|Keith E. Alessi      |  | 48  |  | Director                                       
|Lawrence C. Karlson  |  | 60  |  | Director                                       

Gary W. Bagley, Chairman and Director, served as President of ICM since 1996 and Chief Executive Officer since 1998. Prior to 1996, he
held various positions at ICM, including Salesman, Sales Manager and General Manager. Prior to that, Mr. Bagley served as Vice President and ICM General Manager of Wheeler Machinery.
Mr. Bagley serves on a number of dealer advisory boards and industry association boards.

John M. Engquist, President, Chief Executive Officer and Director,served as President and Chief Executive Officer of H&E since 1995 and
as a director of Gulf Wide since 1999. From 1975 to 1994, he held various operational positions at H&E, starting as a mechanic's helper. Mr. Engquist serves on the board of directors of St.
Jude's Children's Hospital in Memphis, Tennessee, Cajun Contractors & Engineers, Inc. and Business Bank of Baton Rouge.

Lindsay C. Jones, Chief Financial Officer, joined ICM as Chief Financial Officer in October 1998. From 1994 to 1998,
Mr. Jones served as Chief Financial Officer and Treasurer for Midwest Office, Inc. Prior to that, Mr. Jones was a Manager with KPMG servicing clients in the retail and financial
service markets. Mr. Jones is a Certified Public Accountant. Mr. Jones is a member of the American Institute of Certified Public Accountants and the Utah Association of Certified Public
Accountants.

Terence L. Eastman, Senior Vice President, Finance, served as Chief Financial Officer of H&E since 1994. Prior to joining H&E,
Mr. Eastman was the regional controller for Rollins Environmental Services from 1987 to 1994. From 1974 to 1987, Mr. Eastman held various financial positions with CF&I Steel Corporation
in Pueblo, Colorado.

57

---

William W. Fox, Vice President, Cranes and Earthmoving,served as Executive Vice President and General Manager of H&E since 1995.
Mr. Fox served as President of South Texas Equipment Co., a subsidiary for H&E, from 1995 to 1997. Prior to that, Mr. Fox held various executive and managerial positions with the
Manitowoc Engineering Company. He was Executive Vice President/General Manager from 1989 to 1995, Vice President Sales from 1988 to 1989, and General Manager of the company for two years, from 1986 to
1988. Before joining Manitowoc, Mr. Fox worked for six years as Executive Vice President/General Manager at North Central Crane, from 1980 to 1986.

Robert W. Hepler, Vice President, Hi-Lift,served as President of Hi-Lift Division at H&E since 1999. From 1992 to
1999, he was President of BPS Equipment Division of Rentakil, plc. From 1988 to 1992, he
served as President of Booms & Scissors at BET Plant Services, which acquired the company he founded in 1982, Hepler Hi-Lift.

Kenneth R. Sharp, Jr., Vice President, Lift Trucks, began his career at ICM in 1973 and served as Executive Vice President of ICM since
1996. From 1989 to 1996, Mr. Sharp served as General Manager of the ICM Power Systems Division. From 1983 to 1989, he held various positions at ICM including Salesman, Sales Manager and Product
Support Manager.

John D. Jones, Vice President, Product Support,served as Vice President of Product Support Service at H&E since 1995. From 1991 to 1994,
he was General Manager of Product Support at Louisiana Machinery. From 1987 to 1991 he served as General Manager of the Parts Operation at Holt Company of Louisiana. From 1976 to 1987,
Mr. Jones worked in Product Support and Marketing for Boyce Machinery.

Dale W. Roesener, Vice President, Fleet Management, founded Southern Nevada Equipment Company in 1983 and served as its President and
Chief Executive Officer until 1998 when he joined ICM as Senior Vice President, Secretary and Fleet Manager.

Bradley W. Barber, Vice President, Rental Operations, was promoted to Vice President of Rental Operations in February 2003. Prior
to that, Mr. Barber served as Director of Rental Operations for Head and Engquist Equipment. Mr. Barber has previous experience in both outside sales and branch management for a regional
equipment company.

Bruce C. Bruckmann, Director, is a Managing Director of BRS. He was an officer of Citicorp Venture Capital Ltd. from 1983 through
1994. Mr. Bruckmann is a director of HealthPlus Corporation, HealthEssentials, Inc., Anvil Knitwear, Inc., California Pizza Kitchen, Inc., Penhall
International, Inc., Eurofresh, Inc., Mohawk Industries, Inc. and Town Sports International, Inc.

Harold O. Rosser, Director, is a Managing Director of BRS. He was an officer of Citicorp Venture Capital from 1987 through 1994.
Mr. Rosser is a director of American Paper Group, Inc., Acapulco Restaurants, Inc., Penhall International, Inc., California Pizza Kitchen, Inc., O'Sullivan
Industries, Il Fornaio (America) Corporation and McCormick & Schmick Restaurant Corporation.

J. Rice Edmonds, Director,is a Principal of BRS. Prior to joining BRS in 1996 he worked in the high yield finance group of Bankers Trust.
Mr. Edmonds is a director of Acapulco Restaurants, Inc., Il Fornaio (America) Corporation and McCormick & Schmick Restaurant Corporation.

John T. Sawyer, Director,joined as a Director in September 2002. Mr. Sawyer is President of Penhall. He joined Penhall in
1978 as the Estimating Manager of the Anaheim Division. In 1980, Mr. Sawyer was appointed Manager of Penhall's National Contracting Division, and in 1984, he assumed the position of Vice
President and became responsible for managing all construction services divisions. Mr. Swayer has been President of Penhall since 1989.

Keith E. Alessi, Director,joined as a Director and Chairman of the Audit Committee in November 2002. Mr. Alessi is Chairman
and Chief Executive Officer (and owner) of Lifestyles Improvement Centers LLC, a franchiser of hypnosis centers in the US and Canada. Mr. Alessi is also

58

---

an Adjunct Professor of Law at The Washington and Lee University School of Law and Adjunct Professor at The University of Michigan Graduate School of Business Administration. He is a director and the
Chairman of the Audit Committee for both Town Sports International (New York), a chain of health clubs and MWI Veterinary Supply (Boise), a leading veterinary supply wholesaler. He is the former
Chairman and CEO of Telespectrum Worldwide and Jackson Hewitt.

Lawrence C. Karlson, Director,joined as a Director in September 2002. Mr. Karlson has a Masters Degree in Business
Administration from the Wharton School of Business. In 1983, Mr. Karlson formed Nobel Electronics, Inc. In 1986, Nobel Electronics was reverse-merged into Pharos AB and
Mr. Karlson became President and Chief Executive Officer. In 1990 he was named Chairman. He retired in 1993. Mr. Karlson provides consulting services to a wide variety of business. He
currently sits on the Board of Directors of numerous public and private companies.

ITEM 11. EXECUTIVE COMPENSATION

The following table summarizes, for the periods indicated, the principal components of compensation for our Chief Executive Officer and the four highest
compensated executive officers (collectively, the "named executive officers") for the year ended December 31, 2002.

Summary Compensation Table

|                                                                 |  | Annual Compensation | 
|---------------------------------------------------------------- |  | ------------------- | 
|
|John M. Engquist
Chief Executive Officer, President and Director |  | 500,000             | 
|Gary W. Bagley
Chairman and Director                             |  | 200,000             | 
|Robert W. Hepler
Vice President                                  |  | 330,000             | 
|Kenneth R. Sharp, Jr.
Vice President                             |  | 185,000             | 
|William W. Fox
Vice President                                    |  | 192,500             | 

---

Executive Employment Agreements

H&E assumed an employment agreement with each of Gary W. Bagley and Kenneth R. Sharp, Jr. dated as of February 4, 1998. Such agreements, as amended on
May 26, 1999, as further amended on December 6, 1999 and June 14, 2002, provide for, among other things:



59

---



In
connection with the merger, H&E Holdings assumed a liability for subordinated deferred compensation for Mr. Bagley and Mr. Sharp. The deferred compensation agreements
provided, among other things, deferred signing bonuses in the amount of $3,638,000 and $1,882,000, which are included in deferred compensation accounts for Mr. Bagley and Mr. Sharp,
respectively. As of December 31, 2002, the aggregate deferred compensation (including annual interest of $890,000) was $5,890,000.

H&E
Holdings is obligated to pay Mr. Bagley and Mr. Sharp a cash payment in the amount equal to the then balance in their deferred compensation accounts 11 and
one-half years after June 17, 2002. Payments may also be made upon the occurrence of certain events including, cash distributions on the Series D Preferred Units of H&E
Holdings and an Approved Company Sale (as defined in the securityholders agreement).

In
connection with the acquisition if ICM, H&E Equipment Services assumed a nonqualified employee deferred compensation plan under which certain employees had previously elected to defer
a portion of their annual compensation. Participants in the plan can no longer defer compensation. Compensation deferred under the plan is payable upon the termination, disability, or death of the
participants. The plan accumulates interest each year at a bank's prime rate in effect as of the beginning of January. This rate remains constant throughout the year. The effective rate for the 2002
plan year was 4.75 percent. The aggregate deferred compensation (including accrued interest of $2,355,000) at December 31, 2002 was $4,343,000.

On
June 29, 1999, H&E, formerly Gulf Wide, entered into an employment agreement with John M. Engquist. Such agreement, as amended on August 10, 2001, provides for, among
other things:



60

---



On
August 3, 2001, the board of directors authorized H&E to pay Mr. Engquist supplemental bonuses of $250,000 during calendar year 2001 and $250,000 during calendar year
2002 (which was accrued as of December 31, 2002) which is in addition to any bonus Mr. Engquist is entitled to receive pursuant to the terms of his employment agreement.

Compensation of Directors

We reimburse directors for any out-of-pocket expenses incurred by them in connection with services provided in such capacity. In addition,
we may compensate directors who are not our employees for services provided in such capacity.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

H&E Holdings owns 100% of our limited liability company interests. The following tables set forth certain information with respect to the beneficial ownership of
H&E Holdings' Common Units and Voting Preferred Units by: (1) each person or entity that is the beneficial owner of more than 5% of any class of the voting securities of H&E Holdings;
(2) each named executive officer; (3) each of our directors; and (4) all of our directors and executive officers as a group. These limited liability company interests constituted
5% of each class of the total outstanding limited liability company interests in H&E Holdings.

Common Units Beneficial Ownership Table

|Name                                                         |  | Class A
Common Units
Beneficially
Owned |  | Percentage of
Class A
Common Units
Outstanding |   | Class B
Common Units
Beneficially
Owned |  | Percentage of
Class B
Common Units
Outstanding |   | Percentage of
Combined Voting
Power(1) |  
|------------------------------------------------------------ |  | --------------------------------------- |  | ---------------------------------------------- | - | --------------------------------------- |  | ---------------------------------------------- | - | -------------------------------------- | -
|BRSEC Co-Investment, L.L.C.(2)                               |  | 785,000.0                               |  | 36.7                                           | % |                                        |  |                                               |   | 24.7                                   | %
|BRSEC Co-Investment II, L.L.C.(3)                            |  | 1,245,000.0                             |  | 58.3                                           | % |                                        |  |                                               |   | 39.2                                   | %
|Bruce C. Bruckmann(4)                                        |  | 2,030,000.0                             |  | 95.0                                           | % |                                        |  |                                               |   | 64.0                                   | %
|Harold O. Rosser(5)                                          |  | 2,030,000.0                             |  | 95.0                                           | % |                                        |  |                                               |   | 64.0                                   | %
|J. Rice Edmonds(6)                                           |  | 2,030,000.0                             |  | 95.0                                           | % |                                        |  |                                               |   | 64.0                                   | %
|Gary W. Bagley(7)                                            |  |                                        |  |                                               |   | 85,813.7                                |  | 4.1                                            | % | 1.4                                    | %
|Terence L. Eastman(7)                                        |  |                                        |  |                                               |   |                                        |  |                                               |   |                                       |  
|John M. Engquist(7)                                          |  |                                        |  |                                               |   | 1,170,300.0                             |  | 56.4                                           | % | 18.4                                   | %
|Robert W. Hepler(7)                                          |  |                                        |  |                                               |   |                                        |  |                                               |   |                                       |  
|Dale W. Roesener(7)                                          |  |                                        |  |                                               |   | 164,325.6                               |  | 7.9                                            | % | 2.6                                    | %
|Kenneth R. Sharp, Jr.(7)                                     |  |                                        |  |                                               |   | 44,561.6                                |  | 2.1                                            | % | *                                      |  
|Don M. Wheeler(8)                                            |  |                                        |  |                                               |   | 263,735.7                               |  | 12.7                                           | % | 4.2                                    | %
|Kristan Engquist Dunne(9)                                    |  |                                        |  |                                               |   | 74,700.0                                |  | 3.6                                            | % | 1.2                                    | %
|All executive officers and directors as a group (12 persons) |  | 2,030,000.0                             |  | 95.0                                           | % | 1,465,000.9                             |  | 70.5                                           | % | 87.1                                   | %

---

61

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Voting Preferred Units Beneficial Ownership Table

The holders of the Common Units listed in the Common Units Beneficial Ownership Table are also the holders of H&E Holdings' Voting Preferred Units. For ease of
presentation we have not duplicated the names in the Voting Preferred Units Beneficial Ownership Table below and have presented the beneficial ownership information of such holders in the same order
as it appears in the Common Units Beneficial Ownership Table. The numbers presented in the table below reflect the beneficial ownership of H&E Holdings' Voting Preferred Units and have been rounded to
the nearest whole number. These limited liability company interests constituted 5% of each class of the total outstanding limited liability company interests in H&E Holdings as of the closing of the
offering of senior subordinated and senior secured notes.

|Series A Preferred
Units Beneficially
Owned |  | Percentage of
Series A
Preferred Units
Outstanding |   | Series B Preferred
Units Beneficially
Owned |  | Percentage of
Series B
Preferred Units
Outstanding |   | Series C Preferred
Units Beneficially
Owned |  | Percentage of
Series C
Preferred Units
Outstanding |   | Series D Preferred
Units Beneficially
Owned |  | Percentage of Series D
Preferred
Units
Outstanding |   | Percentage of
Combined
Voting
Power(10) |  
|------------------------------------------- |  | -------------------------------------------------- | - | ------------------------------------------- |  | -------------------------------------------------- | - | ------------------------------------------- |  | -------------------------------------------------- | - | ------------------------------------------- |  | -------------------------------------------------- | - | --------------------------------------- | -
|10,500                                      |  | 95.0                                               | % | 9,200                                       |  | 33.2                                               | % | 20,815                                      |  | 24.6                                               | % |                                             |  |                                                   |   | 22.8                                    | %
|                                           |  |                                                   |   | 10,882                                      |  | 36.9                                               | % | 42,485                                      |  | 50.1                                               | % | 17,200                                      |  | 32.9                                               | % | 39.7                                    | %
|10,500                                      |  | 95.0                                               | % | 20,082                                      |  | 68.0                                               | % | 63,300                                      |  | 74.7                                               | % | 17,200                                      |  | 32.9                                               | % | 62.5                                    | %
|10,500                                      |  | 95.0                                               | % | 20,082                                      |  | 68.0                                               | % | 63,300                                      |  | 74.7                                               | % | 17,200                                      |  | 32.9                                               | % | 62.5                                    | %
|10,500                                      |  | 95.0                                               | % | 20,082                                      |  | 68.0                                               | % | 63,300                                      |  | 74.7                                               | % | 17,200                                      |  | 32.9                                               | % | 62.5                                    | %
|                                           |  |                                                   |   |                                            |  |                                                   |   |                                            |  |                                                   |   |                                             |  |                                                   |   |                                        |  
|                                           |  |                                                   |   |                                            |  |                                                   |   |                                            |  |                                                   |   |                                             |  |                                                   |   |                                        |  
|                                           |  |                                                   |   |                                            |  |                                                   |   | 3,500                                       |  | 4.1                                                | % | 15,710                                      |  | 30.1                                               | % | 10.8                                    | %
|                                           |  |                                                   |   |                                            |  |                                                   |   |                                            |  |                                                   |   |                                             |  |                                                   |   |                                        |  
|                                           |  |                                                   |   | 800                                         |  | 2.7                                                | % | 1,607                                       |  | 1.9                                                | % |                                             |  |                                                   |   | 1.4                                     | %
|                                           |  |                                                   |   |                                            |  |                                                   |   |                                            |  |                                                   |   |                                             |  |                                                   |   |                                        |  
|                                           |  |                                                   |   | 5,400                                       |  | 18.3                                               | % | 12,135                                      |  | 14.3                                               | % | 10,390                                      |  | 19.9                                               | % | 15.7                                    | %
|                                           |  |                                                   |   | 1,756                                       |  | 6.0                                                | % |                                            |  |                                                   |   | 829                                         |  | 1.6                                                | % | 1.5                                     | %
|10,500                                      |  | 95.0                                               | % | 20,882                                      |  | 70.8                                               | % | 63,907                                      |  | 80.7                                               | % | 32,910                                      |  | 63.0                                               | % | 74.7                                    | %

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Management Agreements and Transaction Fees

Each of H&E and ICM were acquired by affiliates of Bruckmann, Rosser, Sherrill & Co., Inc. ("BRS") in 1999, pursuant to separate recapitalizations. In connection
with the recapitalizations of H&E and ICM, we entered into management agreements with each of BRS and Bruckmann, Rosser, Sherrill & Co., L.L.C. ("BRS L.L.C."), affiliates of BRS Equipment
Company and BRSEC Co-Investment II, L.L.C. ("BRSEC Co-Investment II") pursuant to which BRS and BRS L.L.C. have agreed to provide certain advisory and consulting services to us, relating
to business and organizational strategy, financial and investment management and merchant and investment banking. In exchange for such services we agreed to pay BRS and BRS L.L.C.
(i) $7.2 million of transaction fees in connection with the ICM and H&E recapitalizations, (ii) an annual fee during the term of these agreements equal to the lesser of
$2.0 million or 1.75% of our yearly EBITDA, excluding operating lease expense, plus all reasonable out-of-pocket fees and expenses and (iii) a transaction fee in
connection with each material acquisition, divestiture or financing or refinancing we enter into in an amount equal to 1.25% of the aggregate value of such transaction plus all reasonable
out-of-pocket fees and expenses.

Contribution Agreement

The contribution agreement contains customary provisions for such agreements, including representations and warranties with respect to each of Gulf Wide and ICM
equityholders, covenants with respect to the consummation of the combination of H&E and ICM and various closing conditions, including the execution of a registration rights agreement and
securityholders agreement, and the consummation of this offering.

Securityholders Agreement

In connection with the offering of senior subordinated and senior secured notes, H&E Holdings entered into a securityholders agreement with BRS
Co-Investment, BRSEC Co-Investment II, certain members of management and other members of H&E Holdings. The securityholders agreement: (i) restricts the transfer of the
equity interests of H&E Holdings; (ii) grants tag-along rights on certain transfers of the equity interests of H&E Holdings; (iii) requires the securityholders to consent to
a sale
of H&E Holdings to an independent third party if such sale is approved by the holders of a majority of the then-outstanding common equity interests held by BRSEC Co-Investment, L.L.C.
("BRS Co-Investment") and BRSEC Co-Investment II; and (iv) grants preemptive rights on certain issuances of the equity interests of H&E Holdings. The securityholders
agreement will terminate upon a sale of H&E Holdings approved by the holders of a majority of the then-outstanding common equity interests held by BRS Co-Investment and BRSEC
Co-Investment II.

Registration Rights Agreement

In connection with the offering of senior subordinated and senior secured notes, H&E Holdings entered into a registration rights agreement with BRS
Co-Investment, BRSEC Co-Investment II, certain members of management and other members of H&E Holdings. Pursuant to the terms of the registration rights agreement, the holders
of a majority of the then-outstanding common equity interests held by BRS Co-Investment and BRSEC Co-Investment II have the right to require H&E Holdings, subject
to certain conditions, to register any or all of their common equity interests under the Securities Act at H&E Holdings' expense. In addition, all holders of the common equity interests of H&E
Holdings are entitled to request the inclusion of any common equity interests subject to the registration rights agreement in any registration statement at the expense of H&E Holdings whenever H&E
Holdings proposes to register any of its common equity interests under the Securities Act. In

63

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connection with all such registrations, H&E Holdings has agreed to indemnify all holders of its common equity interests against certain liabilities, including liabilities under the Securities Act.

Limited Liability Company Agreement

In connection with the offering of senior subordinated and senior secured notes, BRS Co-Investment, BRSEC Co-Investment II, certain
members of management and the other members of H&E Holdings entered into a limited liability company agreement of H&E Holdings. This operating agreement governs the relative rights and duties of the
members of H&E Holdings.

Membership Interests.The ownership interests of the members in H&E Holdings consist of Preferred Units and Common Units. The Common Units
represent the common equity of H&E Holdings and consist of Class A Common Units and Class B Common Units. The Preferred Units consist of Series A Preferred Units, Series B
Preferred Units, Series C Preferred Units and Series D Preferred Units (the "Voting Preferred Units"). Each member is entitled to (x) two votes per Class A Common Unit held
by such member, (y) one vote per Class B Common Unit held by such member and (z) one vote for each Voting Preferred Unit held by such member. Holders of the Preferred Units are
entitled to return of capital contributions prior to any distributions made to holders of the Common Units.

Distributions.Subject to any restrictions contained in any agreements involving payments to third parties, the board of directors of H&E
Holdings (the "Board") may make distributions, whether in available cash or other assets of H&E Holdings, at any time or from time to time in the following order of priority:



The
limited liability company agreement places certain restrictions on the ability of H&E Holdings to make distributions attributable to the Preferred Units prior to June 30,
2022.

Board of Directors.Pursuant to the securityholders agreement, the holders of a majority of the common equity units held by
BRS Co-Investment and BRSEC Co-Investment II designate a majority of the directors of the Board. The Board consists of "Class A Directors" and "Class B
Directors." Each Class A Director is entitled to two votes and each Class B Director is entitled to one vote. The initial Board consists of three Class A Directors and two
Class B Directors. The initial Class A Directors are Bruce C. Bruckmann, Harold O. Rosser and J. Rice Edmonds, and the initial Class B Directors are John M. Engquist and Gary W.
Bagley. At no time will the authorized number of Class B Directors exceed that number which would provide all of the then authorized Class B Directors with a number of votes that exceeds
50% of the number of votes of the then authorized number of Class A Directors. The Class A Directors are elected by the members which own a majority of the number of votes of all

64

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Common Units then-outstanding. The Class B Directors are elected by the members which own a majority of the number of votes of all of the Voting Preferred Units
then-outstanding.

The BRS Purchase

In connection with the senior subordinated note offering, BRS was paid $7.2 million by H&E Equipment Services on account of $7.2 million of
obligations payable to BRS and its affiliates in connection with the recapitalizations of H&E and ICM and BRS purchased a portion of the securities issued in the senior subordinated note offering. In
connection with the senior subordinated note offering, BRS purchased notes having an accreted value of $7.2 million and a corresponding pro rata share of the limited liability company interests
included in the securities offered thereby.

Other Related Party Transactions

We
lease certain of our real estate facilities, charter an aircraft for business purposes and place a portion of our liability insurance through an agency in which John M. Engquist, our
Chief Executive Officer and President, and Thomas R. Engquist, the father of John M. Engquist, have an economic interest. In 2002, our payments for such transactions totaled $616,000, $255,000 and
$3,096,000, respectively.

We
lease certain of our facilities from entities controlled by Don M. Wheeler, an equityholder. In 2002, our lease payments to such entities totaled $688,000.

We
lease certain real estate from an entity controlled by Dale W. Roesener, an executive officer. In 2002, our lease payments to such entity totaled $255,000.

We
lease certain of our facilities from an equity owner and an employee. In 2002, our lease payments for these facilities totaled $181,000.

In
connection with the recapitalization of H&E in 1999, we entered into a consulting and non-competition agreement with Thomas R. Engquist, the father of John M. Engquist, our Chief
Executive Officer and President, with a term of ten years. In exchange for providing consulting services, Mr. Engquist will receive an aggregate amount of $3.0 million, to be paid in
$25,000 monthly increments.

The
Company owed companies related through common ownership $7,000 and $3,207,000 at December 31, 2002 and 2001, respectively. The Company had no sales transactions with these
affiliated companies during 2002 and 2001.

The
Company rented equipment from an officer for $462,000 and $126,000 for the years ended December 31, 2001 and 2000, respectively. The equipment was purchased from the officer
for $3,000,000 during 2001.

The
Company had a management agreement with a company related through common ownership, payable in the greater of $500,000 or 1% of earnings before interest, taxes, depreciation and
amortization. The total paid for the years ended December 31, 2002, 2001 and 2000, was $670,000, $530,000 and $500,000, respectively.

In
connection with the acquisition of ICM, the Company entered into a management agreement with an affiliate payable in the greater of $2 million annually or 1.75% of annual
earnings before interest, taxes, depreciation, and amortization, excluding operating lease expense, plus all reasonable out-of-pocket expenses. The total amount paid to the affiliate under the
management agreement for 2002 was $1,085,000.

65

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The Company has consulting and noncompetition agreements with two former stockholders of Coastal Equipment, Inc. acquired in 1999 for $1,000,000, payable in four annual installments of
$250,000 beginning March 1, 2000.

We
expensed $237,000 and $123,000 in 2002 to the deferred compensation accounts of Gary W. Bagley, our Chairman, and Kenneth R. Sharp, Jr., an executive officer, respectively.

ITEM 14. CONTROLS AND PROCEDURES



ITEM 15. FINANCIAL STATEMENT SCHEDULES, REPORTS ON FORM 8-K, AND EXHIBITS



1.
Financial Statements



Independent Auditors' Report (KPMG LLP)Independent Auditor's Report (Hawthorn, Waymouth and Carroll L.L.P.)Consolidated balance sheets at December 31, 2001 and 2002Consolidated statements of operations for the years ended December 31, 2002, 2001 and 2000Consolidated statements of members' equity (deficit) for the years ended December 31, 2002, 2001 and 2000Consolidated statements of cash flows for the years ended December 31, 2002, 2001 and 2000Notes to consolidated financial statements


2.
Financial statement schedules



66

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|3.1  |  | Articles of Organization of Gulf Wide Industries, L.L.C.*                                                                                                                                                                                               
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.2  |  | Amended and Restated Articles of Organization of Gulf Wide Industries, L.L.C.*                                                                                                                                                                          
|3.3  |  | Amended Articles of Organization of Gulf Wide Industries, L.L.C., Changing Its Name to H&E Equipment Services L.L.C.*                                                                                                                                   
|3.4  |  | Certificate of Incorporation of H&E Finance Corp.*                                                                                                                                                                                                      
|3.5  |  | Articles of Incorporation of Great Northern Equipment, Inc.*                                                                                                                                                                                            
|3.6  |  | Articles of Incorporation of Williams Bros. Construction, Inc.*                                                                                                                                                                                         
|3.7  |  | Articles of Amendment to Articles of Incorporation of Williams Bros. Construction, Inc. Changing its Name to GNE Investments, Inc.*                                                                                                                     
|3.8  |  | Amended and Restated Operating Agreement of H&E Equipment Services L.L.C.*                                                                                                                                                                              
|3.9  |  | Bylaws of H&E Finance Corp.*                                                                                                                                                                                                                            
|3.10 |  | Bylaws of Great Northern Equipment, Inc.*                                                                                                                                                                                                               
|3.11 |  | Bylaws of Williams Bros. Construction, Inc.*                                                                                                                                                                                                            
|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.*                                                                                                   
|4.2  |  | Registration Rights Agreement, among H&E Equipment Services L.L.C., H&E Finance Corp., the guarantors party thereto, Credit Suisse First Boston Corporation, Bank of America Securities L.L.C. and Fleet Securities, Inc., dated as of June 17,
2002.*  
|10.1 |  | Credit Agreement among Great Northern Equipment, Inc., H&E Equipment Services L.L.C., the other credit parties signatory thereto, General Electric Capital Corporation, Bank of America, N.A. and Fleet Capital Corporation, dated as of June 17,
2002.*
|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, L.L.C.*                                                                                                        
|10.3 |  | Securityholders Agreement, dated as of June 17, 2002 by and among H&E Holdings L.L.C., BRSEC Co-Investment, L.L.C., BRSEC Co-Investment II, L.L.C., certain members of management and other members of H&E Holdings L.L.C.*                             
|10.4 |  | Registration Rights Agreement, dated as of June 17, 2002 by and among H&E Holdings L.L.C., BRSEC Co-Investment, L.L.C., BRSEC Co-Investment II, L.L.C., certain members of management and other members of H&E Holdings L.L.C.*                         
|10.5 |  | Management Agreement, dated May 26, 1999, by and between Bruckman, Rosser, Sherrill & Co., Inc. and ICM Equipment Company, L.L.C.*                                                                                                                      
|10.6 |  | Management Agreement, dated as of August 10, 2001, by and among Bruckman, Rosser, Sherrill & Co., Inc., Head & Engquist Equipment, L.L.C. and Gulf Wide Industries, L.L.C.*                                                                             
|10.7 |  | First Amended and Restated Management Agreement, dated as of June 17, 2002, Bruckman, Rosser, Sherrill & Co., Inc., H&E Holdings, L.L.C. and H&E Equipment Services, L.L.C.*                                                                            
|10.8 |  | Employment Agreement, dated as of June 29, 1999, by and between Gulf Wide Industries, L.L.C., and John M. Engquist.*                                                                                                                                    
|     |  |                                                                                                                                                                                                                                                         

67

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|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.*                                                                                                            
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.10 |  | Employment Agreement, dated as of February 4, 1998, by and between ICM Equipment Company, L.L.C., and Gary Bagley.*                                                                                                                                   
|10.11 |  | First Amendment to the Employment Agreement, dated as of May 26, 1999, by and between ICM Equipment Company, L.L.C., and Gary Bagley.*                                                                                                                
|10.12 |  | Second Amendment to the Employment Agreement, dated as of December 6, 1999, by and between ICM Equipment Company, L.L.C., and Gary Bagley.*                                                                                                           
|10.13 |  | Third Amendment to the Employment Agreement, dated as of June 14, 2002, by and between ICM Equipment Company, L.L.C., and Gary Bagley.*                                                                                                               
|10.14 |  | Employment Agreement, dated as of February 4, 1998, between ICM Equipment Company and Kenneth Sharp, Jr.*                                                                                                                                             
|10.15 |  | First Amendment to the Employment Agreement, dated as of May 26, 1999, between ICM Equipment Company, L.L.C. and Kenneth Sharp, Jr.*                                                                                                                  
|10.16 |  | Second Amendment to the Employment Agreement, dated as of December 6, 1999, between ICM Equipment Company, L.L.C. and Kenneth Sharp, Jr.*                                                                                                             
|10.17 |  | Third Amendment to the Employment Agreement, dated as of June 14, 2002, between ICM Equipment Company, L.L.C. and Kenneth Sharp, Jr.*                                                                                                                 
|10.18 |  | Deferred Compensation Agreement made and entered into as of June 17, 2002. by and between Gary Bagley and H&E Holdings, L.L.C.*                                                                                                                       
|10.19 |  | Deferred Compensation Agreement made and entered into as of June 17, 2002. by and between Kenneth Sharp, Jr. and H&E Holdings, L.L.C.*                                                                                                                
|10.20 |  | Consulting and Noncompetition Agreement, dated as of June 29, 1999, between Head & Engquist Equipment, L.L.C. and Thomas R. Engquist.*                                                                                                                
|10.21 |  | Purchase Agreement, among H&E Equipment Services L.L.C., H&E Finance Corp., the guarantors party thereto, Credit Suisse First Boston Corporation, Bank of America Securities L.L.C. and Fleet Securities, Inc. dated June 3, 2002*                    
|10.22 |  | Amendment No. 1 to Purchase Agreement, among H&E Equipment Services L.L.C., H&E Finance Corp., the guarantors party thereto, Credit Suisse First Boston Corporation, Bank of America Securities L.L.C. and Fleet Securities, Inc. dated June 17,
2002*
|10.23 |  | Investor Rights Agreement by and among H&E Holdings, L.L.C. BRSEC Co-Investment, L.L.C., BRSEC Co-Investment II, L.L.C. and Credit Suisse First Boston Corporation, dated June 17, 2002.*                                                             
|10.24 |  | Security Agreement, dated June 17, 2002, between H&E Equipment Services L.L.C. and The Bank of New York.**                                                                                                                                            
|10.25 |  | Pledge Agreement, dated June 17, 2002, between H&E Equipment Services L.L.C. and The Bank of New York.**                                                                                                                                              
|10.26 |  | Trademark Security Agreement, dated June 17, 2002, between H&E Equipment Services L.L.C. and The Bank of New York.**                                                                                                                                  
|10.27 |  | Security Agreement, dated June 17, 2002, between H&E Finance Corp. and The Bank of New York.**                                                                                                                                                        
|      |  |                                                                                                                                                                                                                                                       

68

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|10.28 |  | Security Agreement, dated June 17, 2002, between GNE Investments, Inc. and The Bank of New York.**                   
|----- |  | ---------------------------------------------------------------------------------------------------------------------
|10.29 |  | Pledge Agreement, dated June 17, 2002, between GNE Investments, Inc. and The Bank of New York.**                     
|10.30 |  | Security Agreement, dated June 17, 2002, between Great Northern Equipment, Inc. and The Bank of New York.**          
|10.31 |  | Trademark Security Agreement, dated June 17, 2002, between Great Northern Equipment, Inc. and The Bank of New York.**
|10.32 |  | Patent Security Agreement, dated June 17, 2002, between Great Northern Equipment, Inc. and The Bank of New York.**   
|21.1  |  | Subsidiaries of the registrant.*                                                                                     

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69

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized on April 14, 2003.

| |  | H&E EQUIPMENT SERVICES L.L.C.
| |  | -----------------------------
| |  | By:                          

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities and on the dates indicated.

|Signature |  | Capacity                                  |  | Date                                           
|--------- |  | ----------------------------------------- |  | -----------------------------------------------
|          |  |                                           |  |                                                
|By:       |  | /s/GARY W. BAGLEY
Gary W. Bagley          |  | Chairman and Director                          
|By:       |  | /s/JOHN M. ENGQUISTJohn M. Engquist       |  | President, Chief Executive Officer and Director
|By:       |  | /s/LINDSAY C. JONESLindsay C. Jones       |  | Chief Financial Officer                        
|By:       |  | /s/BRUCE C. BRUCKMANNBruce C. Bruckmann   |  | Director                                       
|By:       |  | /s/HAROLD O. ROSSERHarold O. Rosser       |  | Director                                       
|By:       |  | /s/J. RICE EDMONDSJ. Rice Edmonds         |  | Director                                       
|By:       |  | /s/JOHN T. SAWYERJohn T. Sawyer           |  | Director                                       
|By:       |  | /s/KEITH E. ALESSIKeith E. Alessi         |  | Director                                       
|By:       |  | /s/LAWRENCE C. KARLSONLawrence C. Karlson |  | Director                                       

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CERTIFICATIONS

I, John M. Engquist, President and Chief Executive Officer of H&E Equipment Services L.L.C., certify that:





Date:
April 14, 2003

By:
/s/JOHN M. ENGQUIST

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John M. Engquist
President and Chief Executive Officer

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CERTIFICATIONS

I, Lindsay C. Jones, Chief Financial Officer of H&E Equipment Services L.L.C., certify that:





Date:
April 14, 2003

By:
/s/LINDSAY C. JONES

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Lindsay C. Jones
Chief Financial Officer

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SCHEDULE II: VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

(Dollars in thousands)

|Description                  |                                            | Balance at
Beginning
of Year |       | Additions
Charges to
Costs and
Expenses |   | Deductions |       | Impact of
Acquisition |        | Balance at
End
of Year
|---------------------------- | ------------------------------------------ | ---------------------------- | ----- | --------------------------------------- | - | ---------- | ----- | --------------------- | ------ | ----------------------
|Year Ended December 31, 2002 |                                            |                              |       |                                         |   |            |       |                       |        |                       
|                             | Allowance for doubtful accounts receivable |                              | $     | 708                                     |   | $          | 1,517 |                       | $      | (1,524                
|                             | Allowance for inventory obsolescence       |                              |       | 533                                     |   |            | 121   |                       |        | (6                    
|                             |                                            |                              |       |                                         |   |            |       |                       |        |                       
|                             |                                            | $                            | 1,241 |                                         | $ | 1,638      |       | $                     | (1,530 | )                     
|                             |                                            |                              |       |                                         |   |            |       |                       |        |                       
|Year Ended December 31, 2001 |                                            |                              |       |                                         |   |            |       |                       |        |                       
|                             | Allowance for doubtful accounts receivable |                              | $     | 708                                     |   | $          | 556   |                       | $      | (556                  
|                             | Allowance for inventory obsolescence       |                              |       | 291                                     |   |            | 271   |                       |        | (29                   
|                             |                                            |                              |       |                                         |   |            |       |                       |        |                       
|                             |                                            | $                            | 999   |                                         | $ | 827        |       | $                     | (585   | )                     
|                             |                                            |                              |       |                                         |   |            |       |                       |        |                       
|Year Ended December 31, 2000 |                                            |                              |       |                                         |   |            |       |                       |        |                       
|                             | Allowance for doubtful accounts receivable |                              | $     | 708                                     |   | $          | 708   |                       | $      | (708                  
|                             | Allowance for inventory obsolescence       |                              |       | 213                                     |   |            | 89    |                       |        | (11                   
|                             |                                            |                              |       |                                         |   |            |       |                       |        |                       
|                             |                                            | $                            | 921   |                                         | $ | 797        |       | $                     | (719   | )                     
|                             |                                            |                              |       |                                         |   |            |       |                       |        |                       
|                             |                                            |                              |       |                                         |   |            |       |                       |        |                       

See
accompanying independent auditors' reports.

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