H&E Equipment Services last week announced that it will restate its unaudited interim financial statements for the quarterly period ended March 31, 2006 to reflect the reclassification of a one-time, nonrecurring payment made in connection with the company's recently completed initial public offering of common stock.

The payment that is the subject of the correction is the previously reported $8 million payment that the company made in connection with its initial public offering of common stock in February 2006 to terminate its management services agreement with affiliates of two principal stockholders. Management accounted for this payment as a direct cost of the company's initial public offering, and as such, the payment was reflected as a charge to stockholders' equity in the company's unaudited interim financial statements for the three months ended March 31, 2006.

Management concluded, after further review and discussion with its auditors, that the termination fee should not be accounted for as a direct cost of the initial public offering and should instead be reflected as an expense on the company's consolidated income statement for the three months ended March 31, 2006. Total revenues and gross profit as previously reported are not affected by the correction. However, the company estimates that correcting this one-time payment as a selling, general and administrative expense on its unaudited interim consolidated income statement for the three months ended March 31, 2006 will have the following principal effects:

• SG&A will increase from the previously reported $33 million to approximately $41 million;
• Net income will decrease from the previously reported $9.9 million to approximately $3.9 million;
• Earnings per common share will decrease from the previously reported 29 cents per share to 12 cents per share; and
• EBITDA will decrease from the previously announced $41.6 million to approximately $33.6 million.

The company has discussed the accounting adjustment and related restatement with the agent for the lenders under its revolving credit facility, and they have waived the non-compliance by the company. Accordingly, the company has full access to its revolving credit facility.

The company will include the full restated results for the three months ended March 31, 2006 in an amendment on Form 10-Q/A to the company's previously filed Form 10-Q for the same period.

Baton Rouge, La.-based H& E Equipment Services is No. 11 on the RER 100.