H&E EQUIPMENT SERVICES, INC. The following discussion summarizes the financial position ofH&E Equipment Services, Inc. and its subsidiaries as ofJune 30, 2021 , and its results of operations for the three and six month periods endedJune 30, 2021 , and should be read in conjunction with (i) the unaudited condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q and (ii) the audited consolidated financial statements and accompanying notes to our Annual Report on Form 10-K for the year endedDecember 31, 2020 . The following discussion contains, in addition to historical information, forward-looking statements that include risks and uncertainties (see discussion of "Forward-Looking Statements" included elsewhere in this Quarterly Report on Form 10-Q). Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those factors set forth under Item 1A - "Risk Factors" of our Annual Report on Form 10-K for the year endedDecember 31, 2020 . The outbreak of the COVID-19 pandemic continues to affect certain regions ofthe United States of America and the world. In response to the COVID-19 pandemic, we proactively implemented certain measures to strengthen cash flow, manage costs, strengthen liquidity and enhance employee safety. These measures included the reduction of payroll costs, a reduction in capital expenditures and other discretionary spending, the elimination of most business travel and restriction of visitors to our corporate office, enhanced cleaning and disinfection procedures and the promotion of social distancing at our corporate office and branch locations. We remain focused on the safety and well-being of our employees, customers and communities as we maintain a high-level of service to our customers. As the impact of COVID-19 became more widespread, our equipment rental utilization and sales volumes began to decline fromFebruary 2020 levels throughmid-April 2020 , where we began to see utilization and sales levels improve and stabilize for the remainder of 2020. We continue to see improvements with utilization levels beginning inMarch 2021 returning to approximate pre-COVID utilization levels. The timing and extent of any subsequent contraction in our equipment rental utilization and sales volumes due to COVID-19 will depend on a number of factors, including a widespread resurgence in COVID-19 infections, the rate of vaccinations, the impact to capital and financial markets and the related impact on our customers. For a discussion of liquidity, see Liquidity and Capital Resources below. Overview Background As one of the largest integrated equipment services companies inthe United States focused on heavy construction and industrial equipment, we rent, sell and provide parts and services support for four core categories of specialized equipment: (1) hi-lift or aerial work platform equipment; (2) cranes; (3) earthmoving equipment; and (4) material handling equipment. By providing equipment rental, sales, on-site parts, repair and maintenance functions under one roof, we are a one-stop provider for our customers' varied equipment needs. This full service approach provides us with multiple points of customer contact, enables us to maintain a high quality rental fleet, as well as an effective distribution channel for fleet disposal and provides cross-selling opportunities among our new and used equipment sales, rental, parts sales and services operations. As ofJuly 27, 2021 , we operated 106 full-service facilities throughout the Intermountain, Southwest,Gulf Coast ,West Coast , Southeast and Mid-Atlantic regions ofthe United States . Our work force includes distinct, focused sales forces for our new and used equipment sales and rental operations, highly skilled service technicians, product specialists and regional and district managers. We focus our sales and rental activities on, and organize our personnel principally by, our four core equipment categories. We believe this allows us to provide specialized equipment knowledge, improve the effectiveness of our rental and sales force and strengthen our customer relationships. In addition, we have branch managers for each location who are responsible for managing their assets and financial results. We believe this fosters accountability in our business and strengthens our local and regional relationships. Through our predecessor companies, we have been in the equipment services business for approximately 60 years.H&E L.L.C. was formed inJune 2002 through the business combination of Head & Engquist, a wholly-owned subsidiary of Gulf Wide, and ICM. Head & Engquist, founded in 1961, and ICM, founded in 1971, were two leading regional, integrated equipment service companies operating in contiguous geographic markets. In connection with our initial public offering inFebruary 2006 , we convertedH&E LLC intoH&E Equipment Services, Inc. , aDelaware corporation.
Critical Accounting Policies
Item 7, included in Part II of our Annual Report on Form 10-K for the year endedDecember 31, 2020 , presents the accounting policies and related estimates that we believe are the most critical to understanding our consolidated financial statements, financial condition, and results of operations and cash flows, and which require complex management judgment and assumptions, or involve uncertainties. There have been no significant changes to these critical accounting policies and estimates during the three and six month 18 -------------------------------------------------------------------------------- periods endedJune 30, 2021 . Our critical accounting policies include, among others, useful lives of rental equipment and property and equipment, acquisition and disposition accounting, goodwill, long-lived assets and income taxes. Information regarding our other significant accounting policies is included in note 2 to our consolidated financial statements in Item 8 of Part II of our Annual Report on Form 10-K for the year endedDecember 31, 2020 and in note 2 to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q. Business Segments We have five reportable segments because we derive our revenues from five principal business activities: (1) equipment rentals; (2) new equipment sales; (3) used equipment sales; (4) parts sales; and (5) repair and maintenance services. These segments are based upon how we allocate resources and assess performance. In addition, we also have non-segmented revenues and costs that relate to equipment support activities.
• Equipment Rentals. Our rental operation primarily rents our four core
types of construction and industrial equipment. We have a well-maintained
rental fleet and our own dedicated sales force, focused by equipment type.
We actively manage the size, quality, age and composition of our rental
fleet based on our analysis of key measures such as time utilization
(which we analyze as equipment usage based on: (1) a percentage of
original equipment cost; and (2) the number of rental equipment units
available for rent), rental rate trends and targets, rental equipment
dollar utilization, and maintenance and repair costs, which we closely
monitor. We maintain fleet quality through regional quality control
managers and our parts and services operations.
• New Equipment Sales. Our new equipment sales operation sells new equipment
in all of our four core product categories. We have a retail sales force
focused by equipment type that is separate from our rental sales force.
Manufacturer purchase terms and pricing are managed by our product
specialists.
• Used Equipment Sales. Our used equipment sales are generated primarily
from sales of used equipment from our rental fleet, as well as from sales
of inventoried equipment that we acquire through trade-ins from our
equipment customers and through selective purchases of high quality used
equipment. Used equipment is sold by our dedicated retail sales force. Our
used equipment sales are an effective way for us to manage the size and
composition of our rental fleet and provide a profitable distribution
channel for disposal of rental equipment.
• Parts Sales. Our parts business sells new and used parts for the equipment
we sell and also provides parts to our own rental fleet. To a lesser
degree, we also sell parts for equipment produced by manufacturers whose
products we neither rent nor sell. In order to provide timely parts and
services support to our customers as well as our own rental fleet, we
maintain an extensive parts inventory.
• Services. Our services operation provides maintenance and repair services
for our customers' equipment and to our own rental fleet at our facilities
as well as at our customers' locations. As the authorized distributor for
numerous equipment manufacturers, we are able to provide service to that
equipment that will be covered under the manufacturer's warranty.
Our non-segmented revenues and costs relate primarily to ancillary charges associated with equipment maintenance and repair services, and are not generally allocated to reportable segments.
For additional information about our business segments, see note 10 to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q.
Revenue Sources We generate all of our total revenues from our five business segments and our non-segmented equipment support activities. Equipment rentals account for more than half of our total revenues. For the six month period endedJune 30, 2021 , approximately 56.4% of our total revenues were attributable to equipment rentals, 14.8% of our total revenues were attributable to new equipment sales, 14.0% were attributable to used equipment sales, 8.9% were attributable to parts sales, 5.0% were attributable to our services revenues and 0.9% were attributable to non-segmented other revenues. The equipment that we sell, rent and service is principally used in the construction industry, as well as by companies for commercial and industrial uses such as plant maintenance and turnarounds, as well as in the petrochemical and energy sectors. As a result, our total revenues are affected by several factors including, but not limited to, the demand for and availability of rental equipment, rental rates and other competitive factors, the demand for new and used equipment, the level of construction and industrial activities, spending levels by our customers, adverse weather conditions and general economic conditions. Equipment Rentals. Our rental operation primarily rents our four core types of construction and industrial equipment. We have a well-maintained rental fleet and our own dedicated sales force, focused by equipment type. We actively manage the size, quality, 19
-------------------------------------------------------------------------------- age and composition of our rental fleet based on our analysis of key measures such as time utilization (which we analyze as equipment usage based on: (1) a percentage of original equipment cost; and (2) the number of rental equipment units available for rent), rental rate trends and targets, rental equipment dollar utilization, and maintenance and repair costs, which we closely monitor. We maintain fleet quality through regional quality control managers and our parts and services operations. New Equipment Sales. We seek to optimize revenues from new equipment sales by selling equipment through a professional in-house retail sales force focused by product type. While sales of new equipment are impacted by the availability of equipment from the manufacturer, we believe our status as a leading distributor for some of our key suppliers improves our ability to obtain equipment. New equipment sales are an important component of our integrated model due to customer interaction and service contact. New equipment sales also lead to future parts and services revenues. Used Equipment Sales. We generate the majority of our used equipment sales revenues by selling equipment from our rental fleet. The remainder of our used equipment sales revenues comes from the sale of inventoried equipment that we acquire through trade-ins from our equipment customers and selective purchases of high-quality used equipment. Our policy is not to offer specified price trade-in arrangements on equipment for sale. Sales of our rental fleet equipment allow us to manage the size, quality, composition and age of our rental fleet, and provide us with a profitable distribution channel for the disposal of rental equipment. Parts Sales. We generate revenues from the sale of new and used parts for equipment that we rent or sell, as well as for other makes of equipment. Our product support sales representatives are instrumental in generating our parts revenues. They are product specialists and receive performance incentives for achieving certain sales levels. Most of our parts sales come from our extensive in-house parts inventory. Our parts sales provide us with a relatively stable revenue stream that is generally less sensitive to the economic cycles that tend to affect our rental and equipment sales operations. Services. We derive our services revenues from maintenance and repair services to customers for their owned equipment. In addition to repair and maintenance on an as-needed or scheduled basis, we also provide ongoing preventative maintenance services to industrial customers. Our after-market service provides a high-margin, relatively stable source of revenue through changing economic cycles.
Our non-segmented revenues relate to equipment support activities that we provide to customers in connection with new and used equipment sales and parts and services revenues and are not generally allocated to reportable segments.
Principal Costs and Expenses
Our largest expenses are the costs to purchase the new equipment we sell, the costs associated with the used equipment we sell, rental expenses, rental depreciation and costs associated with parts sales and services, all of which are included in cost of revenues. For the six month period endedJune 30, 2021 , our total cost of revenues was approximately$389.8 million . Our operating expenses consist principally of selling, general and administrative expenses. For the six month period endedJune 30, 2021 , our selling, general and administrative expenses were$151.0 million . In addition, we have interest expense related to our debt instruments. Operating expenses and all other income and expense items below the gross profit line of our consolidated statements of operations are not generally allocated to our reportable segments.
We are also subject to federal and state income taxes. Future income tax examinations by state and federal agencies could result in additional income tax expense based on probable outcomes of such matters.
Cost of Revenues:
Rental Depreciation. Depreciation of rental equipment represents the depreciation costs attributable to rental equipment. Estimated useful lives vary based upon type of equipment. Generally, we depreciate cranes and aerial work platforms over a ten year estimated useful life, earthmoving over a five year estimated useful life with a 25% salvage value, and material handling equipment over a seven year estimated useful life. Attachments and other smaller type equipment are depreciated over a three year estimated useful life. We periodically evaluate the appropriateness of remaining depreciable lives assigned to rental equipment. Rental Expense. Rental expense represents the costs associated with rental equipment, including, among other things, the cost of repairing and maintaining our rental equipment, property taxes on our fleet and other miscellaneous costs of owning rental equipment. Rental Other. Rental other expenses consist primarily of equipment support activities that we provide our customers in connection with renting equipment, such as hauling services, damage waiver policies, environmental fees and other recovery fees.
New Equipment Sales. Cost of new equipment sold primarily consists of the equipment cost of the new equipment that is sold, net of any amount of credit given to the customer towards the equipment for trade-ins.
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Used Equipment Sales. Cost of used equipment sold consists of the net book value
of rental equipment for used equipment sold from our rental fleet, the equipment
costs for used equipment we purchase for sale or the trade-in value of used
equipment that we obtain from customers in equipment sales transactions.
Parts Sales. Cost of parts sales represents costs attributable to the sale of parts directly to customers.
Services Support. Cost of services revenues represents costs attributable to service provided for the maintenance and repair of customer-owned equipment and equipment then on-rent by customers.
Our non-segmented other expenses include costs associated with ancillary charges associated with equipment maintenance and repair services.
Selling, General and Administrative Expenses:
Our selling, general and administrative ("SG&A") expenses include sales and
marketing expenses, payroll and related benefit costs, including stock based
compensation, insurance expenses, legal and professional fees, rent and other
occupancy costs, property and other taxes, administrative overhead, depreciation
associated with property and equipment (other than rental equipment) and
amortization expense associated with intangible assets. These expenses are not
generally allocated to our reportable segments.
Interest Expense:
Interest expense for the periods presented represents the interest on our outstanding debt instruments, including aggregate amounts outstanding under our revolving Credit Facility, senior unsecured notes due 2028 and our finance lease obligations. Interest expense also includes interest on our outstanding manufacturer flooring plans payable, which are used to finance inventory and rental equipment purchases. Non-cash interest expense related to the amortization cost of deferred financing costs and the accretion/amortization of note discount/premium are also included in interest expense.
Principal Cash Flows
We generate cash primarily from our operating activities and, historically, we have used cash flows from operating activities, manufacturer floor plan financings and available borrowings under the Credit Facility as the primary sources of funds to purchase inventory and to fund working capital and capital expenditures, growth and expansion opportunities (see also "Liquidity and Capital Resources" below). Our management of our working capital is closely tied to operating cash flows, as working capital can be significantly impacted by, among other things, our accounts receivable activities, the level of new and used equipment inventories, which may increase or decrease in response to current and expected demand, and the size and timing of our trade accounts payable payment cycles.
Rental Fleet
A substantial portion of our overall value is in our rental fleet equipment. The net book value of our rental equipment atJune 30, 2021 was$1.1 billion , or approximately 55.2% of our total assets. Our rental fleet as ofJune 30, 2021 consisted of 41,136 units having an original acquisition cost (which we define as the cost originally paid to manufacturers) of approximately$1.8 billion . As ofJune 30, 2021 , our rental fleet composition was as follows (dollars in millions): % of % of Original Original Average Total Acquisition Acquisition Age in Units Units Cost Cost Months Hi-Lift or Aerial Work Platforms 21,397 52.0 %$ 695.3 37.7 % 49.4 Cranes 168 0.4 % 66.9 3.6 % 51.8 Earthmoving 5,002 12.2 % 443.1 24.0 % 22.4 Material Handling 6,536 15.9 % 508.1 27.5 % 40.2 Other 8,033 19.5 % 133.0 7.2 % 23.7 Total 41,136 100.0 %$ 1,846.4 100.0 % 39.7 Determining the optimal age and mix for our rental fleet equipment is subjective and requires considerable estimates and judgments by management. We constantly evaluate the mix, age and quality of the equipment in our rental fleet in response to current economic and market conditions, competition and customer demand. The mix and age of our rental fleet, as well as our cash flows, are impacted by sales of equipment from the rental fleet, which are influenced by used equipment pricing at the retail and secondary auction market levels, and the capital expenditures to acquire new rental fleet equipment. In making equipment acquisition decisions, we evaluate current economic and market conditions, competition, manufacturers' availability, pricing and return on investment over 21 -------------------------------------------------------------------------------- the estimated useful life of the specific equipment, among other things. As a result of our in-house service capabilities and extensive maintenance program, we believe our rental fleet is well-maintained. The original acquisition cost of our gross rental fleet increased by approximately$82.7 million , or 4.7%, for the six month period endedJune 30, 2021 , largely reflective of an increase in rental fleet capital expenditures. The average age of our rental fleet equipment decreased by approximately 1.2 months for the six month period endedJune 30, 2021 . Our average rental rates for the six month period endedJune 30, 2021 were 2.3% lower than the same period last year. See further discussion on rental rates in "Results of Operations" below. The rental equipment mix among our four core product lines for the six month period endedJune 30, 2021 was largely consistent with that of the prior year comparable period as a percentage of original acquisition cost.
Principal External Factors that Affect our Businesses
We are subject to a number of external factors that may adversely affect our businesses. These factors, and other factors, are discussed below and under the heading "Forward-Looking Statements," and in Item 1A - "Risk Factors" in our Annual Report on Form 10-K for the year endedDecember 31, 2020 .
• Economic downturns. The demand for our products is dependent on the
general economy, the stability of the global credit markets, the
industries in which our customers operate or serve, and other factors.
Downturns in the general economy or in the construction and manufacturing
industries, as well as adverse credit market conditions, can cause demand
for our products to materially decrease.
• Spending levels by customers. Rentals and sales of equipment to the
construction industry and to industrial companies constitute a significant
portion of our total revenues. As a result, we depend upon customers in
these businesses and their ability and willingness to make capital
expenditures to rent or buy specialized equipment. Accordingly, our
business is impacted by fluctuations in customers' spending levels oncapital expenditures and by the availability of credit to those customers.
• Adverse weather. Adverse weather in a geographic region in which we
operate may depress demand for equipment in that region. Our equipment is
primarily used outdoors and, as a result, prolonged adverse weather
conditions may prohibit our customers from continuing their work projects.
Adverse weather also has a seasonal impact in parts of our Intermountain
region, particularly in the winter months.
• Regional and Industry-Specific Activity and Trends. Expenditures by our
customers may be impacted by the overall level of construction activity in
the markets and regions in which they operate, the price of oil and other
commodities and other general economic trends impacting the industries in
which our customers and end users operate. As our customers adjust their
activity and spending levels in response to these external factors, our
rentals and sales of equipment to those customers will be impacted. For
example, high levels of industrial activity in our Gulf Coast andIntermountain regions have been a meaningful driver of recent growth in
our revenues. Conversely, declines in oil and natural gas prices and the
related downturn in oil industry activities can result in a significant
decrease in our new equipment sales, primarily the sale of new cranes, due
to lower demand. Most recently, in the first quarter of 2020, worldwide
crude oil and natural gas prices sharply declined as a result of the lack
of agreement on production levels by members of the Organization of the
Petroleum Exporting Countries and other oil- and gas-producing countries,
which resulted in production outstripping the demand for oil and gas.
Additionally, the effects of the COVID-19 pandemic, have decreased demand
for oil and gas products as companies and other organizations havesuspended or curtailed operations and travel. Although worldwide crude oil
and natural gas prices have partially recovered from the 2020 first
quarter decline, we believe the uncertainty regarding future oil and
natural gas prices continues to impact customer capital expenditure
decisions.
Results of Operations
The tables included in the period-to-period comparisons below provide summaries
of our revenues and gross profits for our business segments and non-segmented
revenues for the three and six month periods ended June 30, 2021 and 2020. The
period-to-period comparisons of our financial results are not necessarily
indicative of future results.
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Three Months EndedJune 30, 2021 Compared to the Three Months EndedJune 30, 2020 Revenues. Three Months Ended Total Total June 30, Dollar Percentage Increase Increase 2021 2020 (Decrease) (Decrease) (in thousands, except percentages) Segment Revenues: Equipment rentals Rentals$ 160,299 $ 140,776 $ 19,523 13.9 % Rentals other 18,738 15,018 3,720 24.8 % Total equipment rentals 179,037 155,794 23,243 14.9 % New equipment sales 49,919 43,947 5,972 13.6 % Used equipment sales 41,358 34,013 7,345 21.6 % Parts sales 27,424 26,220 1,204 4.6 % Services revenues 14,977 15,657 (680 ) (4.3 )% Non-Segmented revenues 3,048 2,705 343 12.7 % Total revenues$ 315,763 $ 278,336 $ 37,427 13.4 % Total Revenues. Our total revenues were approximately$315.8 million for the three month period endedJune 30, 2021 compared to$278.3 million for the three month period endedJune 30, 2020 , an increase of$37.4 million , or 13.4%. Revenues for all reportable segments and non-segmented other revenues are further discussed below. Equipment Rental Revenues. Our total revenues from equipment rentals for the three month period endedJune 30, 2021 increased approximately$23.2 million , or 14.9%, to$179.0 million from$155.8 million in the three month period endedJune 30, 2020 . The increase in equipment rental revenues was largely due to increased demand compared to the prior year COVID-19 economic downturn. Rentals. Rental revenues increased$19.5 million , or 13.9%, to$160.3 million for the three month period endedJune 30, 2021 compared to$140.8 million for the three month period endedJune 30, 2020 . Rental revenues from aerial work platform equipment increased$6.5 million , earthmoving equipment increased$6.4 million , material handling equipment increased$5.0 million and other equipment increased$3.2 million . Partially offsetting these increases, crane rental revenues decreased$1.6 million . Our average rental rates for the three month period endedJune 30, 2021 decreased 0.3% compared to the same three month period last year and increased approximately 1.0% from the three month period endedMarch 31, 2021 . Rental equipment dollar utilization (annual rental revenues divided by the average original rental fleet equipment costs) for the three month period endedJune 30, 2021 was 35.2% compared to 29.6% in the three month period endedJune 30, 2020 , an increase of 5.6%. The increase in comparative rental equipment dollar utilization was the net result of an increase in rental equipment time utilization, combined with a decrease in equipment rental rates as noted above. Rental equipment time utilization as a percentage of original equipment cost was approximately 68.3% for the three month period endedJune 30, 2021 compared to 59.5% in the three month period endedJune 30, 2020 , an increase of 8.8%. The increase in rental equipment time utilization as a percentage of original equipment cost was largely due to increased demand during the current year compared to COVID-19's impact on economic activity during the prior year. Rentals Other. Our rentals other revenue consists primarily of equipment support activities that we provide to customers in connection with renting equipment, such as hauling charges, damage waiver policies, environmental and other recovery fees. Rental other revenues for the three month period endedJune 30, 2021 were$18.7 million compared to$15.0 million for the three month period endedJune 30, 2020 , an increase of$3.7 million , or 24.8%, primarily due to the increase in equipment rental revenues as described above. New Equipment Sales Revenues. Our new equipment sales for the three month period endedJune 30, 2021 increased$6.0 million , or 13.6%, to$49.9 million from$43.9 million for the three month period endedJune 30, 2020 . This increase was largely due to an$8.2 million increase in new crane sales and a$3.7 million increase in other new equipment sales. These increases were partially offset by a$4.6 million decrease in new earthmoving equipment sales and a$0.9 million decrease in new aerial work platform equipment sales. 23 -------------------------------------------------------------------------------- Used Equipment Sales Revenues. Our used equipment sales increased$7.3 million , or 21.6%, to$41.4 million for the three month period endedJune 30, 2021 , from$34.0 million for the same three month period in 2020. This increase was driven by a$4.0 million increase in used material handling equipment sales, a$3.4 million increase in used aerial work platform equipment sales and a$2.0 million increase in used crane equipment sales, which was partially offset by a$2.0 million decrease in used earthmoving equipment sales. Parts Sales Revenues. Our parts sales revenues for the three month period endedJune 30, 2021 increased$1.2 million , or 4.6%, to$27.4 million from approximately$26.2 million for the same three month period last year. The increase in parts sales was attributable to increases across all equipment parts sales, with the exception of aerial work platform parts sales which decreased. Services Revenues. Our services revenues for the three month period endedJune 30, 2021 decreased$0.7 million , or 4.3%, to$15.0 million from$15.7 million for the same three month period last year. The decrease is primarily due to decreases in aerial work platform and other services revenues. Non-Segmented Other Revenues. Our non-segmented other revenues relate to equipment support activities that we provide to customers in connection with new and used equipment sales and parts and services revenues and are not generally allocated to reportable segments. For the three month period endedJune 30, 2021 , our other revenues were approximately$3.0 million , an increase of$0.3 million , or 12.7%, from$2.7 million in the same three month period in 2020. Gross Profit. Three Months Ended Total Total June 30, Dollar Percentage Increase Increase 2021 2020 (Decrease) (Decrease) (in thousands, except percentages) Segment Gross Profit: Equipment rentals Rentals$ 73,881 $ 58,356 $ 15,525 26.6 % Rentals other 7 792 (785 ) (99.1 )% Total equipment rentals 73,888 59,148 14,740 24.9 % New equipment sales 5,743 4,688 1,055 22.5 % Used equipment sales 14,350 10,731 3,619 33.7 % Parts sales 7,068 6,868 200 2.9 % Services revenues 10,188 10,484 (296 ) (2.8 )% Non-segmented revenues gross profit 128 151 (23 ) (15.2 )% Total gross profit$ 111,365 $ 92,070 $ 19,295 21.0 % Total Gross Profit. Our total gross profit was$111.4 million for the three month period endedJune 30, 2021 compared to$92.1 million for the same three month period in 2020, an increase of$19.3 million , or 21.0%. Total gross profit margin for the three month period endedJune 30, 2021 was approximately 35.3%, an increase of 2.2% from the 33.1% gross profit margin for the same three month period in 2020. Gross profit and gross margin for all reportable segments and non-segmented other revenues are further described below: Equipment Rentals Gross Profit. Our total gross profit from equipment rentals for the three month period endedJune 30, 2021 increased approximately$14.7 million , or 24.9%, to$73.9 million from$59.1 million in the same three month period in 2020. Total gross profit margin from equipment rentals for the three month periods endedJune 30, 2021 and 2020 was approximately 41.3% and 38.0%, respectively, an increase of 3.3%. See Rentals and Rentals Other below for additional information. Rentals: Rental revenues gross profit increased$15.5 million , or 26.6%, to$73.9 million for the three month period endedJune 30, 2021 compared to$58.4 million for the same three month period in 2020. The gross profit increase was the result of a$19.5 million increase in rental revenues for the three month period endedJune 30, 2021 compared to the same period last year and a$0.8 million decrease in rental equipment depreciation expense, which was partially offset by a$4.8 million increase in rental expenses. The original acquisition cost of our rental fleet atJune 30, 2021 decreased$40.7 million , or 2.2%, fromJune 30, 2020 . 24
-------------------------------------------------------------------------------- Gross profit margin on rentals for the three month periods endedJune 30, 2021 andJune 30, 2020 was approximately 46.1% and 41.5%, respectively. Depreciation expense was 36.4% of rental revenues for the three month period endedJune 30, 2021 compared to 42.0% for the same period in 2020, a decrease of 5.6%. The decrease in depreciation expense as a percentage of rental revenues are largely due to the increase in revenues in 2021 as compared to the same period in 2020. As a percentage of revenues, rental expenses were 17.5% for the three month period endedJune 30, 2021 compared to 16.5% for the same period last year, an increase of 1.0%. Rentals Other: Our rentals other revenue consists primarily of equipment support activities that we provide to customers in connection with renting equipment, such as hauling charges, damage waiver policies, environmental and other recovery fees. Rental other revenues gross profit for the three month period endedJune 30, 2021 was less than$0.1 million compared to$0.8 million for the same period in 2020, a decrease of$0.8 million . There was no gross profit margin for the three month period endedJune 30, 2021 compared to 5.3% for the same period last year. New Equipment Sales Gross Profit. Our new equipment sales gross profit for the three month period endedJune 30, 2021 increased$1.1 million , or 22.5%, to$5.7 million compared to$4.7 million for the same three month period in 2020 on a total new equipment sales increase of$6.0 million . Gross profit margin on new equipment sales was 11.5% for the three month period endedJune 30, 2021 , compared to 10.7% for the same period last year, an increase of 0.8%. The increase in gross profit margin was primarily due to the mix of new equipment sold and improving gross margins on new equipment sales. Used Equipment Sales Gross Profit. Our used equipment sales gross profit for the three month period endedJune 30, 2021 increased$3.6 million , or 33.7%, to$14.4 million from$10.7 million in the same period in 2020 on a used equipment sales increase of$7.3 million . Gross profit margin on used equipment sales for the three month period endedJune 30, 2021 was approximately 34.7%, up 3.1% from 31.6% for the same three month period in 2020. This increase was primarily a result of the mix of used equipment sold combined with the improved gross margins on the sale of used aerial work platforms, earthmoving and material handling equipment. Our used equipment sales from the rental fleet, which comprised 88.3% and 90.3% of our used equipment sales for the three month periods endedJune 30, 2021 and 2020, respectively, were approximately 161.3% and 153.2% of net book value for the three month periods endedJune 30, 2021 and 2020, respectively. Parts Sales Gross Profit. Our parts sales gross profit for the three month period endedJune 30, 2021 was approximately$7.1 million , an increase of$0.2 million , or 2.9%, from gross profit of$6.9 million for the same period last year on a parts sales increase of$1.2 million . Gross profit margin for the three month period endedJune 30, 2021 was 25.8%, a decrease of 0.4%, compared to a gross margin of 26.2% for the three month period endedJune 30, 2020 . The decrease in parts sales gross margin is due to the mix of parts sold. Services Revenues Gross Profit. For the three month period endedJune 30, 2021 , our services revenues gross profit decreased$0.3 million , or 2.8%, to approximately$10.2 million from$10.5 million for the same three month period in 2020 on a$0.7 million decrease in services revenues. Gross profit margin for the three month period endedJune 30, 2021 was 68.0%, a decrease of 1.0% from approximately 67.0% in the same three month period in 2020, as a result of services revenues mix. Non-Segmented Other Revenues Gross Profit. Our non-segmented other revenues relate to equipment support activities that we provide to customers in connection with new and used equipment sales and parts and services revenues and are not generally allocated to reportable segments. For the three month period endedJune 30, 2021 , our other revenues gross profit was approximately$0.1 million compared to a gross profit of$0.2 million in the same period in 2020, a decrease of$0.1 million . Selling, General and Administrative Expenses ("SG&A"). SG&A expenses increased$9.1 million , or 13.5%, to$77.0 million for the three month period endedJune 30, 2021 compared to$67.9 million for the three month period endedJune 30, 2020 . Employee salaries, wages, payroll taxes and related employee benefit and other employee related expenses increased$9.0 million , primarily as a result of higher commissions and incentive pay combined with headcount increases and increased employee hours in rebounding from the impact of the COVID-19 pandemic on our business. Facility rent expenses and repairs and maintenance costs increased$0.9 million . Partially offsetting these increases was a$1.1 million and$0.9 million decrease in liability insurance costs and bad debt expense, respectively. Approximately$3.2 million of the total increase in SG&A expenses was attributable to branches opened sinceJanuary 1, 2020 with less than three months of comparable operations in either or both of the three month periods endedJune 30, 2021 and 2020. SG&A expenses as a percentage of total revenues for both the three month periods endedJune 30, 2021 and 2020 were 24.4%. Gain on Sales of Property & Equipment (Net). We had net gains on sales of property and equipment of$0.7 million for the three month period endedJune 30, 2021 compared to$2.9 million for the same period last year, a decrease of$2.2 million . This decrease is primarily due to a prior year gain on a company-owned closed property in the normal course of business. 25 -------------------------------------------------------------------------------- Other Income (Expense). For the three month period endedJune 30, 2021 , our net other expenses decreased approximately$2.3 million to$12.6 million compared to$14.9 million for the same three month period in 2020, primarily as a result of lower interest expense. Interest expense decreased$2.1 million to$13.4 million for the three month period endedJune 30, 2021 compared to$15.6 million for the same period last year. This decrease was the result of lower interest expense on our Credit Facility as we had no borrowings under the Credit Facility during the second quarter of 2021 and lower interest expense on our senior unsecured notes, resulting from the Company's refinancing of its senior unsecured notes in the fourth quarter of 2020. Income Taxes. We recorded income tax expense of$6.0 million for the three month period endedJune 30, 2021 compared to income tax expense of$3.2 million for the three month period endedJune 30, 2020 . Our effective income tax rate for the three month period endedJune 30, 2021 was 27.5% compared to 26.9% for the same period in 2020. Based on available evidence, both positive and negative, we believe it is more likely than not that our federal deferred tax assets atJune 30, 2021 are fully realizable through future reversals of existing taxable temporary differences and future taxable income, and are not subject to any limitations. Six Months EndedJune 30, 2021 Compared to the Six Months EndedJune 30, 2020 Revenues. Six Months Ended Total Total June 30, Dollar Percentage Increase Increase 2021 2020 (Decrease) (Decrease) (in thousands, except percentages) Segment Revenues: Equipment rentals Rentals$ 300,240 $ 299,394 $ 846 0.3 % Rentals other 35,021 30,919 4,102 13.3 % Total equipment rentals 335,261 330,313 4,948 1.5 % New equipment sales 87,664 74,820 12,844 17.2 % Used equipment sales 83,124 65,231 17,893 27.4 % Parts sales 53,036 55,989 (2,953 ) (5.3 )% Services revenues 29,487 32,479 (2,992 ) (9.2 )% Non-Segmented revenues 5,636 5,426 210 3.9 % Total revenues$ 594,208 $ 564,258 $ 29,950 5.3 % Total Revenues. Our total revenues were approximately$594.2 million for the six month period endedJune 30, 2021 compared to$564.3 million for the six month period endedJune 30, 2020 , an increase of 30.0 million, or 5.3%. Our total revenues in 2021 were adversely impacted by inclement weather duringFebruary 2021 and decreased comparative demand from the impact of the COVID-19 economic downturn in the first half of the first quarter of 2021. Revenues for all reportable segments and non-segmented other revenues are further discussed below. Equipment Rental Revenues. Our total revenues from equipment rentals for the six month period endedJune 30, 2021 increased$4.9 million , or 1.5%, to$335.3 million from$330.3 million in the six month period endedJune 30, 2020 . The increase in equipment rental revenues was largely due to increased demand compared to the prior year impact of the COVID-19 economic downturn. Rentals. Rental revenues increased$0.8 million , or 0.3%, to$300.2 million for the six month period endedJune 30, 2021 compared to$299.4 million for the six month period endedJune 30, 2020 . Rental revenues from earthmoving equipment increased$3.5 million and other equipment increased$1.3 million . Partially offsetting these rental revenues increases were decreases on crane equipment of$3.8 million and material handling equipment of$0.3 million . Our average rental rates for the six month period endedJune 30, 2021 decreased 2.3% compared to the same period last year. As noted above, extreme winter weather inFebruary 2021 resulted in temporary branch closures in approximately 40% of our locations for up to one week. Rental equipment dollar utilization (annual rental revenues divided by the average original rental fleet equipment costs) for the six month period endedJune 30, 2021 was 33.6% compared to 31.4% in the six month period endedJune 30, 2020 , an increase of 2.2%. The increase in comparative rental equipment dollar utilization was the net result of an increase in rental equipment time utilization and the decrease in equipment rental rates as noted above. Rental equipment time utilization as a percentage of original equipment cost was approximately 65.9% for the six month period endedJune 30, 2021 compared to 61.9% in the six month period endedJune 30, 2020 , an increase of 4.0%. The increase in rental equipment time utilization as a percentage of original equipment cost was largely due to the increase in demand as opposed to the economic downturn surrounding the COVID-19 pandemic in the prior year. 26 -------------------------------------------------------------------------------- Rentals Other. Our rentals other revenue consists primarily of equipment support activities that we provide to customers in connection with renting equipment, such as hauling charges, damage waiver policies, environmental and other recovery fees. Rental other revenues for the six month period endedJune 30, 2021 were$35.0 million compared to$30.9 million for the six month period endedJune 30, 2020 , an increase of$4.1 million , or 13.3%. New Equipment Sales Revenues. Our new equipment sales for the six month period endedJune 30, 2021 increased$12.8 million , or 17.2%, to$87.7 million from$74.8 million for the six month period endedJune 30, 2020 . Sales of new cranes increased$14.2 million and other equipment increased$4.8 million . Sales of new earthmoving equipment, new material handling equipment and new aerial work platform equipment decreased$4.6 million ,$0.9 million and$0.6 million , respectively. Used Equipment Sales Revenues. Our used equipment sales increased$17.9 million , or 27.4%, to$83.1 million for the six month period endedJune 30, 2021 , from approximately$65.2 million for the same six month period in 2020. Sales of used material handling equipment increased$8.4 million and sales of used aerial work platform equipment increased$6.3 million . Sales of used cranes, used other and used earthmoving equipment increased$1.9 million ,$0.9 million and$0.5 million , respectively. Parts Sales Revenues. Our parts sales revenues for the six month period endedJune 30, 2021 decreased$3.0 million , or 5.3%, to$53.0 million from$56.0 million for the same six month period last year. The decrease in parts sales was primarily attributable to decreases in crane and aerial work platform equipment parts product lines, reflecting COVID-19's remaining impact on our parts business. Services Revenues. Our services revenues for the six month period endedJune 30, 2021 decreased$3.0 million , or 9.2%, to approximately$29.5 million from$32.5 million for the same six month period last year. The decrease in service revenues was primarily attributable to decreases across all product lines, which was partially offset by an increase in crane service revenues. Non-Segmented Other Revenues. Our non-segmented other revenues relate to equipment support activities that we provide to customers in connection with new and used equipment sales and parts and services revenues and are not generally allocated to reportable segments. For the six month periods endedJune 30, 2021 and 2020, our non-segmented other revenues were approximately$5.6 million and$5.4 million , respectively, an increase of$0.2 million , or 3.9%. Gross Profit. Six Months Ended Total Total June 30, Dollar Percentage Increase Increase 2021 2020 (Decrease) (Decrease) (in thousands, except
percentages)
Segment Gross Profit (Loss): Equipment rentals Rentals$ 132,785 $ 131,419 $ 1,366 1.0 % Rentals other (433 ) (112 ) (321 ) (286.6 )% Total equipment rentals 132,352 131,307 1,045 0.8 % New equipment sales 10,046 8,135 1,911 23.5 % Used equipment sales 27,751 21,511 6,240 29.0 % Parts sales 13,933 14,734 (801 ) (5.4 )% Services revenues 20,001 21,766 (1,765 ) (8.1 )% Non-segmented revenues gross profit 285 100 185 185.0 % Total gross profit$ 204,368 $ 197,553 $ 6,815 3.4 % Total Gross Profit. Our total gross profit was$204.4 million for the six month period endedJune 30, 2021 compared to$197.6 million for the same six month period in 2020, an increase of$6.8 million , or 3.4%. Total gross profit margin for the six month period endedJune 30, 2021 was approximately 34.4%, a decrease of 0.6% from the 35.0% gross profit margin for the same six month period in 2020. Gross profit and gross margin for all reportable segments and non-segmented other revenues are further described below: Equipment Rentals Gross Profit. Our total gross profit from equipment rentals for the six month period endedJune 30, 2021 increased$1.0 million , or 0.8%, to$132.4 million from$131.3 million in the same six month period in 2020. Total gross profit margin from equipment rentals for the six month period endedJune 30, 2021 was approximately 39.5% compared to 39.8% for the same period in 2020, a decrease of 0.3%. 27
-------------------------------------------------------------------------------- Rentals: Rental revenues gross profit increased$1.4 million , or 1.0%, to$132.8 million for the six month period endedJune 30, 2021 compared to$131.4 million for the same six month period in 2020. The gross profit increase was the result of a$0.8 million increase in rental revenues for the six month period endedJune 30, 2021 compared to the same period last year and a$5.5 million decrease in rental depreciation, which was partially offset by a$4.9 million increase in rental expenses. Gross profit margin on rentals for the six month period endedJune 30, 2021 was approximately 44.2% compared to 43.9% for the same period in 2020, an increase of 0.3%. Depreciation expense was 37.9% of rental revenues for the six month period endedJune 30, 2021 compared to 39.8% for the same period in 2020, a decrease of approximately 1.9%. As a percentage of revenues, rental expenses were 17.9% for the six month period endedJune 30, 2021 compared to 16.3% for the same period last year, an increase of approximately 1.6%. Rentals Other: Our rentals other revenue consists primarily of equipment support activities that we provide to customers in connection with renting equipment, such as hauling charges, damage waiver policies, environmental and other recovery fees. Rental other revenues gross loss for the six month period endedJune 30, 2021 was$0.4 million compared to gross loss of$0.1 million for the same period in 2020, a decrease of$0.3 million . Gross loss margin was 1.2% for the six month period endedJune 30, 2021 compared to a gross loss margin of 0.4% for the same period last year, a decrease of 0.8%. New Equipment Sales Gross Profit. Our new equipment sales gross profit for the six month period endedJune 30, 2021 increased$1.9 million , or 23.5%, to$10.0 million compared to approximately$8.1 million for the same six month period in 2020 on a total new equipment sales increase of$12.8 million . Gross profit margin on new equipment sales was 11.5% for the six month period endedJune 30, 2021 , compared to 10.9% for the same period last year, an increase of 0.6%. The increase in gross profit margin was primarily due to the mix of new equipment sold. Used Equipment Sales Gross Profit. Our used equipment sales gross profit for the six month period endedJune 30, 2021 increased$6.2 million , or 29.0%, to$27.8 million from$21.5 million in the same period in 2020 on a used equipment sales increase of$17.9 million . Gross profit margin on used equipment sales for the six month period endedJune 30, 2021 was approximately 33.4%, up 0.4% from 33.0% for the same six month period in 2020, primarily as a result of the mix of used equipment sold and higher used material handling equipment and used aerial work platform equipment gross margins. Our used equipment sales from the rental fleet, which comprised 90.6% and 91.6% of our used equipment sales for the six month periods endedJune 30, 2021 and 2020, respectively, were approximately 156.1% and 155.1% of net book value for the six month periods endedJune 30, 2021 and 2020, respectively. Parts Sales Gross Profit. Our parts sales gross profit for the six month period endedJune 30, 2021 was$13.9 million , a decrease of$0.8 million , or 5.4%, from gross profit of$14.7 million for the same period last year on a parts sales decrease of$3.0 million . Gross profit margin for both the six month period endedJune 30, 2021 and 2020 was 26.3%. Services Revenues Gross Profit. For the six month period endedJune 30, 2021 , our services revenues gross profit decreased$1.8 million , or 8.1%, to$20.0 million from$21.8 million for the same six month period in 2020 on a$3.0 million decrease in services revenues. Gross profit margin for the six month period endedJune 30, 2021 was 67.8%, an increase of 0.8% from approximately 67.0% in the same six month period in 2020, as a result of services revenues mix. Non-Segmented Other Revenues Gross Profit. Our non-segmented other revenues relate to equipment support activities that we provide to customers in connection with new and used equipment sales and parts and services revenues and are not generally allocated to reportable segments. For the six month period endedJune 30, 2021 , our other revenues gross profit was$0.3 million compared to a gross profit of$0.1 million in the same period in 2020, an increase of$0.2 million . Selling, General and Administrative Expenses ("SG&A"). SG&A expenses increased$3.5 million , or 2.4%, to$151.0 million for the six month period endedJune 30, 2021 compared to$147.5 million for the six month period endedJune 30, 2020 . Employee salaries, wages, payroll taxes and related employee benefit and other employee related expenses increased$5.6 million , primarily as a result of higher incentive pay combined with increased headcount and increased employee hours in rebounding from the impact of the COVID-19 pandemic on our business. Facility rent expenses and repairs and maintenance costs increased$1.2 million . These increases were partially offset by a$2.3 million decrease in bad debt expense and a$1.9 million decrease in liability insurance costs. Legal and professional fees decreased$0.3 million , offset by a$1.0 million increase in our litigation accrual. Approximately$5.5 million of the total increase in SG&A expenses was attributable to branches opened sinceJanuary 1, 2020 with less than six months of comparable operations in either or both of the six month periods endedJune 30, 2021 and 2020. SG&A expenses as a percentage of total revenues for the six month periods endedJune 30, 2021 and 2020 were 25.4% and 26.1%, respectively. 28 -------------------------------------------------------------------------------- Impairment ofGoodwill . Impairment of goodwill incurred in the six month period endedJune 30, 2020 was$62.0 million . The impairment was related to one of our six reporting units, Equipment Rental Component 2, during the first quarter of 2020. There was no impairment of goodwill for the six month period endedJune 30, 2021 . See note 2 to the consolidated financial statements for additional information. Gain on Sales of Property & Equipment (Net). We had net gains on sales of property and equipment of$0.8 million for the six month period endedJune 30, 2021 compared to$7.2 million for the same period last year, a decrease of$6.3 million . This decrease is primarily due to a prior year gain on a sale-leaseback transaction in the first quarter of 2020 and a prior year gain on a company-owned closed branch location in the second quarter of 2020. Other Income (Expense). For the six month period endedJune 30, 2021 , our net other expenses decreased approximately$4.9 million to$25.4 million compared to$30.3 million for the same six month period in 2020, primarily as a result of lower interest expense. Interest expense decreased approximately$4.7 million to$26.9 million for the six month period endedJune 30, 2021 compared to$31.6 million for the same period last year. This decrease was the result of lower interest expense on our Credit Facility as we had no borrowings under the Credit Facility during the first quarter of 2021 and lower interest expense on our senior unsecured notes, resulting from the Company's refinancing of its senior unsecured notes in the fourth quarter of 2020. Income Taxes. We recorded an income tax expense of$7.5 million for the six month period endedJune 30, 2021 compared to an income tax benefit of$7.1 million for the six month period endedJune 30, 2020 . Our effective income tax rate for the six month period endedJune 30, 2021 was 27.4% compared to 20.1% for the same period in 2021. The increase in our effective tax rate is primarily due to the net change in permanent differences in relation to profit before tax. Our rate for the six month period endedJune 30, 2020 includes the impact of 1.6% related to nondeductible goodwill impairment. Based on available evidence, both positive and negative, we believe it is more likely than not that our federal deferred tax assets atJune 30, 2021 are fully realizable through future reversals of existing taxable temporary differences and future taxable income. For the six months endedJune 30, 2021 , we have a valuation allowance of$6.4 million for certain state tax credits that may not be realized.
Liquidity and Capital Resources
Cash flow from operating activities. For the six month period endedJune 30, 2021 , the net cash provided by our operating activities was approximately$80.5 million . Our reported net income of$19.9 million , when adjusted for non-cash income and expense items, such as depreciation and amortization, deferred income taxes, net amortization (accretion) of note discount, provision for losses on accounts receivable, provision for inventory obsolescence, stock-based compensation expense and net gains on the sale of long-lived assets, provided positive cash flows of$139.5 million . These cash flows from operating activities were also positively impacted by a$7.6 million decrease in accounts receivable and a$23.8 million increase in accounts payable. Partially offsetting these positive cash flows were a$73.7 million increase in inventories, a$7.1 million increase in prepaid expenses and other assets, a$2.3 million decrease in manufacturing flooring plans payable, and a$7.3 million decrease in accrued expense payable and other liabilities. For the six month period endedJune 30, 2020 , the net cash provided by our operating activities was approximately$160.5 million . Our reported net loss of$28.2 million , when adjusted for non-cash income and expense items, such as depreciation and amortization, deferred income taxes, net amortization (accretion) of note discount (premium), provision for losses on accounts receivable, provision for inventory obsolescence, stock-based compensation expense, impairment of goodwill and net gains on the sale of long-lived assets, provided positive cash flows of$146.3 million . These cash flows from operating activities were also positively impacted by a$42.8 million decrease in accounts receivable and a$14.1 million increase in accounts payable. Partially offsetting these positive cash flows were a$12.4 million increase in inventories, an$8.5 million increase in prepaid expenses and other assets, an$8.5 million decrease in manufacturing flooring plans payable, and a$13.3 million decrease in accrued expense payable and other liabilities. Cash flow from investing activities. For the six month period endedJune 30, 2021 , our net cash used in our investing activities was approximately$168.3 million . Purchases of rental and non-rental equipment were$244.7 million and proceeds from the sale of rental and non-rental equipment were$76.4 million . For the six month period endedJune 30, 2020 , our net cash provided by our investing activities was approximately$1.2 million . Purchases of rental and non-rental equipment were$69.0 million and proceeds from the sale of rental and non-rental equipment were$70.1 million . Cash flow from financing activities. For the six month period endedJune 30, 2021 , our net cash provided by our financing activities was exceeded by our cash used in our financing activities, resulting in net cash used in our financing activities of$20.6 million . We netted borrowings and payments under our Credit Facility for the six month period endedJune 30, 2021 . Dividends paid totaled$19.9 million , or$0.55 per common share.Treasury stock purchases totaled$0.4 million , payments of deferred financing costs were$0.1 million and finance lease principal payments were$0.1 million . 29 -------------------------------------------------------------------------------- For the six month period endedJune 30, 2020 , our net cash provided by our financing activities was exceeded by our cash used in our financing activities, resulting in net cash used in our financing activities of$169.6 million . Net payments under our Credit Facility for the six month period endedJune 30, 2020 were$149.3 million and dividends paid totaled$19.7 million , or$0.55 per common share.Treasury stock purchases totaled$0.5 million and finance lease principal payments were$0.1 million .
Senior Unsecured Notes
OnDecember 14, 2020 , we completed the offering of our$1.25 billion , 3.875% senior unsecured notes due 2028 (the "New Notes"), and the settlement of a cash tender offer and redemption notice to repurchase or redeem all of our previously outstanding$950 million , 5.625% senior unsecured notes due 2025 (the "Old Notes"). No principal payments on the New Notes are due until their scheduled maturity date (December 15, 2028 ). The New Notes were issued byH&E Equipment Services, Inc. (the parent company) and are guaranteed byGNE Investments, Inc. and its wholly-owned subsidiariesGreat Northern Equipment, Inc. ,H&E Equipment Services (California), LLC ,H&E California Holding, Inc. ,H&E Equipment Services (Mid-Atlantic), Inc. andH&E Finance Corp (collectively, the guarantor subsidiaries). The guarantees, made on a joint and several basis, are full and unconditional (subject to subordination provisions and subject to a standard limitation which provides that the maximum amount guaranteed by each guarantor will not exceed the maximum amount that can be guaranteed without making the guarantee void under fraudulent conveyance laws). There are no restrictions on our ability to obtain funds from the guarantor subsidiaries by dividend or loan. There are no registration rights associated with the New Notes or the subsidiary guarantees.
Senior Secured Credit Facility
We and our subsidiaries are parties to a$750.0 million Credit Facility withWells Fargo Capital Finance, LLC as administrative agent, and the lenders named therein. AtJune 30, 2021 , we had no outstanding borrowings under the Credit Facility and we could borrow up to$741.3 million . AtJuly 27, 2021 , we had$741.3 million of available borrowings under our Credit Facility, net of an$8.7 million outstanding letter of credit. We do not anticipate any near-term impacts to our liquidity under the Credit Facility as a result of the COVID-19 pandemic, nor do we anticipate any covenant violations related to the Credit Facility.
Cash Requirements Related to Operations
Our principal sources of liquidity have been from cash provided by operating activities and the sales of new, used and rental fleet equipment, proceeds from the issuance of debt, and borrowings available under the Credit Facility. Our principal uses of cash historically have been to fund operating activities and working capital (including new and used equipment inventories), purchases of rental fleet equipment and property and equipment, fund payments due under facility operating leases and manufacturer flooring plans payable, and to meet debt service requirements. In the future, we may pursue additional strategic acquisitions and seek to open new start-up locations. The amount of our future capital expenditures will depend on a number of factors including general economic conditions and growth prospects. In response to changing economic conditions, we believe we have the flexibility to modify our capital expenditures by adjusting them (either up or down) to match our actual performance. Our gross rental fleet capital expenditures for the six month period endedJune 30, 2021 and 2020 were approximately$246.1 million and$73.9 million , respectively, including$17.7 million and$18.4 million , respectively, of non-cash transfers from new and used equipment to rental fleet inventory. This increase in rental fleet capital expenditures reflects our response to improved rental demand in 2021 compared to the decrease in our rental fleet capital expenditures in response to COVID-19. Our gross property and equipment capital expenditures for the six month period endedJune 30, 2021 and 2020 were$16.2 million and$13.5 million , respectively. To service our debt, we will require a significant amount of cash. Our ability to pay interest and principal on our indebtedness (including the Credit Facility, the New Notes and our other indebtedness), will depend upon our future operating performance and the availability of borrowings under the Credit Facility and/or other debt and equity financing alternatives available to us, which will be affected by prevailing economic conditions and conditions in the global credit and capital markets, as well as financial, business and other factors, some of which are beyond our control. Based on our current level of operations and given the current state of the capital markets, we believe our cash flow from operations, available cash and available borrowings under the Credit Facility will be adequate to meet our future liquidity needs for the foreseeable future. AtJune 30, 2021 , we have cash on hand of approximately$202.5 million . AtJune 30, 2021 , we had available borrowings of$741.3 million , net of$8.7 million of outstanding letters of credit, compared to$674.7 million atJune 30, 2020 , net of$7.7 million of outstanding letters of credit. This improvement in the amounts we have available for borrowing under the Credit Facility is substantially due to increased cash management. AtJuly 27, 2021 , we had$741.3 30
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million of available borrowings under the Credit Facility, net of an
Quarterly Dividend
OnMay 14, 2021 , the Company announced a quarterly dividend of$0.275 per share to stockholders of record, which was paid onJune 18, 2021 , totaling approximately$9.9 million . The Company intends to continue to pay regular quarterly cash dividends; however, the declaration of any subsequent dividends is discretionary and will be subject to a final determination by the Board of Directors each quarter after its review of, among other things, business and market conditions.
Contractual and Commercial Commitments
There have been no material changes from the information included in our Annual
Report on Form 10-K for the year ended
Off-Balance Sheet Arrangements
There have been no material changes from the information included in our Annual
Report on Form 10-K for the year ended
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