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Herc Holdings Reports 2019 Third Quarter and Nine Months Results

October 23, 2019

BONITA SPRINGS, Fla.--(BUSINESS WIRE)--Oct 23, 2019--

Herc Holdings Inc. (NYSE: HRI) (“Herc Holdings” or the “Company”) today reported financial results for the quarter ended September 30, 2019. Equipment rental revenue was $459.6 million and total revenues were $508.1 million in the third quarter of 2019, compared to $449.0 million and $516.2 million, respectively, for the same period last year. The Company reported net income of $9.4 million, or $0.32 per diluted share, in the third quarter of 2019, compared to $46.2 million, or $1.60 per diluted share, in the same 2018 period. Third quarter 2019 adjusted net income was $43.2 million, or $1.48 per diluted share, compared to $36.7 million, or $1.27 per diluted share, in 2018. See page A-5 for a description of the items excluded in calculating adjusted net income and adjusted earnings per share.

Equipment rental revenue increased 2.4%, average fleet at original equipment cost (OEC) was up 0.4% and overall pricing improved 4.5% in the third quarter of 2019, over the prior-year period. Adjusted EBITDA increased 3.9% to $209.4 million in the third quarter compared to $201.5 million in the comparable 2018 period. See page A-4 for a description of the items excluded in calculating adjusted EBITDA.

“The year-over-year improvement in our third quarter results reflect our continued focus on pricing and quality of earnings,” said Larry Silber, president and chief executive officer. “We improved pricing 4.5% and improved adjusted EBITDA margin by 220 basis points compared to the prior year’s third quarter.

“We have been taking a cautious approach regarding rental equipment expenditures and our balance sheet this year. Our ongoing focus on dollar utilization, along with strong end markets and positive expectations from national and local customers, support our 8% to 10% adjusted EBITDA growth assumptions for 2019, and form a solid base for improvement in 2020.”

Third Quarter Highlights

Nine Months Highlights

Capital Expenditures - Fleet

Balance Sheet - Refinancing Debt

2019 Guidance

“We updated our adjusted EBITDA guidance to reflect the strong pricing environment and our outlook for equipment rental demand in the fourth quarter, ” said Mr. Silber. “Our net fleet capital expenditure guidance is at the top of the range we provided earlier this year. Our expectation for improved operating results and lower year-over-year net fleet capital expenditures in 2019 are expected to generate strong positive free cash flow and improve our net leverage for the full year,” he added.

 

Previous

Current

 

Adjusted EBITDA

$735 million to $760 million

$740 million to $750 million

Net fleet capital expenditures

$370 million to $410 million

$400 million to $410 million

The Company does not provide forward-looking guidance for certain financial measures on a GAAP basis because certain items contained in the GAAP measures, which may be significant, cannot be reasonably estimated, such as restructuring and restructuring related charges, and gains and losses from asset sales.

Earnings Call and Webcast Information

Herc Holdings’ third quarter 2019 earnings webcast will be held today at 8:30 a.m. U.S. Eastern Time. Interested U.S. parties may call +1-800-309-1256 and international participants should call 1-786-789-4796, using the access code: 161272. Please dial in at least 10 minutes before the call start time to ensure that you are connected to the call and to register your name and company.

Those who wish to listen to the live conference call and view the accompanying presentation slides should visit the Events and Presentations tab of the Investor Relations section of the Company’s website at IR.HercRentals.com. The press release and presentation slides for the call will be posted to this section of the website prior to the call.

A replay of the conference call will be available via webcast on the company website at IR.HercRentals.com, where it will be archived for 90 days after the call. A telephonic replay will be available for one week. To listen to the archived call by telephone, U.S. participants should dial +1-888-203-1112 and international participants 1-719-457-0820 and enter the conference ID number: 1547286.

About Herc Holdings Inc.

Herc Holdings Inc., which operates through its Herc Rentals Inc. subsidiary, is one of the leading equipment rental suppliers with approximately 270 locations, principally in North America. With over 50 years of experience, we are a full-line equipment rental supplier offering a broad portfolio of equipment for rent. Our classic fleet includes aerial, earthmoving, material handling, trucks and trailers, air compressors, compaction and lighting. Our equipment rental business is supported by ProSolutions™, our industry-specific solutions-based services, which includes power generation, climate control, remediation and restoration, and studio and production equipment, and our ProContractor professional grade tools. Our product offerings and services are aimed at helping customers work more efficiently, effectively and safely. The Company has approximately 5,000 employees who equip our customers and communities to build a better world. Herc Holdings’ 2018 total revenues were approximately $1.98 billion. All references to “Herc Holdings” or the “Company” in this press release refer to Herc Holdings Inc. and its subsidiaries, unless otherwise indicated. For more information on Herc Holdings and its products and services, visit: www.HercRentals.com.

Certain Additional Information

In this release we refer to the following operating measures:

Forward-Looking Statements

This press release includes “forward-looking statements,” as that term is defined by the federal securities laws. Forward-looking statements include statements concerning our plans, intentions, objectives, strategies, future events, future revenue, profitability, performance or cash flows, future capital expenditures, future accounting changes, financing needs, business trends and other information that is not historical information. When used in this press release, the words “estimates,” “expects,” “anticipates,” “projects,” “plans,” “intends,” “believes,” “forecasts,” and future or conditional verbs, such as “will,” “should,” “could” or “may,” as well as variations of such words or similar expressions are intended to identify forward-looking statements, although not all forward-looking statements are so designated. All forward-looking statements are based upon our current expectations and various assumptions and, there can be no assurance that our current expectations will be achieved. There are a number of risks, uncertainties and other important factors that could cause our actual results to differ materially from those suggested by our forward-looking statements, including:

Forward-looking statements are expressly qualified in their entirety by such cautionary statements. We undertake no obligation to update or revise forward-looking statements that have been made to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events.

Information Regarding Non-GAAP Financial Measures

In addition to results calculated according to accounting principles generally accepted in the United States (“GAAP”), the Company has provided certain information in this release that is not calculated according to GAAP (“non-GAAP”), such as EBITDA, adjusted EBITDA, adjusted EBITDA margin and Adjusted earnings per diluted common share. Management uses these non-GAAP measures to evaluate operating performance and period-over-period performance of our core business without regard to potential distortions, and believes that investors will likewise find these non-GAAP measures useful in evaluating the Company’s performance. These measures are frequently used by security analysts, institutional investors and other interested parties in the evaluation of companies in our industry. Non-GAAP measures should not be considered in isolation or as a substitute for our reported results prepared in accordance with GAAP and, as calculated, may not be comparable to similarly titled measures of other companies. For the definitions of these terms, further information about management’s use of these measures as well as a reconciliation of these non-GAAP measures to the most comparable GAAP financial measures, please see the supplemental schedules that accompany this release.

HERC HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share data)

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

2019

 

2018

 

2019

 

2018

Revenues:

 

 

 

 

 

 

 

Equipment rental

$

459.6

 

 

$

449.0

 

 

$

1,244.8

 

 

$

1,210.6

 

Sales of rental equipment

35.4

 

 

50.1

 

 

171.8

 

 

175.6

 

Sales of new equipment, parts and supplies

10.0

 

 

14.2

 

 

34.1

 

 

36.4

 

Service and other revenue

3.1

 

 

2.9

 

 

8.2

 

 

10.4

 

Total revenues

508.1

 

 

516.2

 

 

1,458.9

 

 

1,433.0

 

Expenses:

 

 

 

 

 

 

 

Direct operating

197.7

 

 

194.4

 

 

575.3

 

 

584.9

 

Depreciation of rental equipment

102.7

 

 

98.3

 

 

303.6

 

 

288.6

 

Cost of sales of rental equipment

36.7

 

 

51.1

 

 

170.2

 

 

168.9

 

Cost of sales of new equipment, parts and supplies

7.2

 

 

10.6

 

 

25.8

 

 

27.7

 

Selling, general and administrative

76.2

 

 

78.4

 

 

221.2

 

 

229.2

 

Restructuring

 

 

 

 

7.8

 

 

1.0

 

Interest expense, net

81.9

 

 

38.6

 

 

146.4

 

 

103.0

 

Other income, net

0.5

 

 

(0.4

)

 

(1.8

)

 

(0.8

)

Total expenses

502.9

 

 

471.0

 

 

1,448.5

 

 

1,402.5

 

Income before income taxes

5.2

 

 

45.2

 

 

10.4

 

 

30.5

 

Income tax benefit

4.2

 

 

1.0

 

 

2.0

 

 

5.3

 

Net income

$

9.4

 

 

$

46.2

 

 

$

12.4

 

 

$

35.8

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

Basic

28.7

 

 

28.5

 

 

28.7

 

 

28.4

 

Diluted

29.1

 

 

28.9

 

 

29.1

 

 

28.9

 

Earnings per share:

 

 

 

 

 

 

 

Basic

$

0.33

 

 

$

1.62

 

 

$

0.43

 

 

$

1.26

 

Diluted

$

0.32

 

 

$

1.60

 

 

$

0.43

 

 

$

1.24

 

 

A-1

HERC HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

 

 

September 30,
2019

 

December 31,
2018

ASSETS

(Unaudited)

 

 

Cash and cash equivalents

$

34.5

 

 

$

27.8

 

Receivables, net of allowance

316.4

 

 

332.4

 

Other current assets

30.9

 

 

40.2

 

Total current assets

381.8

 

 

400.4

 

Rental equipment, net

2,625.0

 

 

2,504.7

 

Property and equipment, net

302.7

 

 

282.5

 

Right-of-use lease assets

186.8

 

 

 

Goodwill and intangible assets, net

383.1

 

 

384.5

 

Other long-term assets

23.7

 

 

38.1

 

Total assets

$

3,903.1

 

 

$

3,610.2

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

Current maturities of long-term debt and financing obligations

$

33.0

 

 

$

29.9

 

Current maturities of operating lease liabilities

30.3

 

 

 

Accounts payable

212.0

 

 

147.0

 

Accrued liabilities

120.9

 

 

122.3

 

Total current liabilities

396.2

 

 

299.2

 

Long-term debt, net

2,149.1

 

 

2,129.9

 

Financing obligations, net

118.2

 

 

116.3

 

Operating lease liabilities

161.5

 

 

 

Deferred tax liabilities

441.2

 

 

448.3

 

Other long-term liabilities

43.9

 

 

43.8

 

Total liabilities

3,310.1

 

 

3,037.5

 

Total equity

593.0

 

 

572.7

 

Total liabilities and equity

$

3,903.1

 

 

$

3,610.2

 

 

A-2

HERC HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

 

 

Nine Months Ended September 30,

 

2019

 

2018

Cash flows from operating activities:

 

 

 

Net income

$

12.4

 

 

$

35.8

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

Depreciation of rental equipment

303.6

 

 

288.6

 

Depreciation of property and equipment

39.3

 

 

38.2

 

Amortization of intangible assets

5.2

 

 

3.6

 

Amortization of deferred debt and financing obligations costs

4.3

 

 

4.7

 

Loss on extinguishment of debt

53.6

 

 

5.4

 

Stock-based compensation charges

12.5

 

 

9.9

 

Restructuring

5.5

 

 

 

Provision for receivables allowance

40.2

 

 

41.0

 

Deferred taxes

(5.6

)

 

(6.4

)

Gain on sale of rental equipment

(1.6

)

 

(6.7

)

Income from joint ventures

(0.3

)

 

(1.3

)

Other

5.6

 

 

8.0

 

Changes in assets and liabilities:

 

 

 

Receivables

(37.0

)

 

(46.7

)

Other assets

2.8

 

 

(2.2

)

Accounts payable

(1.6

)

 

(3.5

)

Accrued liabilities and other long-term liabilities

2.3

 

 

6.6

 

Net cash provided by operating activities

441.2

 

 

375.0

 

Cash flows from investing activities:

 

 

 

Rental equipment expenditures

(506.7

)

 

(617.5

)

Proceeds from disposal of rental equipment

156.9

 

 

189.1

 

Non-rental capital expenditures

(34.9

)

 

(58.5

)

Proceeds from disposal of property and equipment

5.0

 

 

3.9

 

Other

4.0

 

 

 

Net cash used in investing activities

(375.7

)

 

(483.0

)

Cash flows from financing activities:

 

 

 

Proceeds from issuance of long-term debt

1,200.0

 

 

 

Repayments of long-term debt

(864.5

)

 

(123.5

)

Proceeds from revolving lines of credit and securitization

1,134.3

 

 

650.8

 

Repayments on revolving lines of credit and securitization

(1,465.5

)

 

(424.5

)

Proceeds from financing obligations

4.7

 

 

 

Principal payments under capital lease and financing obligations

(11.9

)

 

(13.1

)

Debt redemption premium payment

(41.5

)

 

(3.7

)

Other financing activities, net

(14.5

)

 

(0.2

)

Net cash used in financing activities

(58.9

)

 

85.8

 

Effect of foreign exchange rate changes on cash and cash equivalents

0.1

 

 

(1.3

)

Net increase in cash and cash equivalents during the period

6.7

 

 

(23.5

)

Cash and cash equivalents cash at beginning of period

27.8

 

 

41.5

 

Cash and cash equivalents at end of period

$

34.5

 

 

$

18.0

 

 

A-3

HERC HOLDINGS INC. AND SUBSIDIARIES

SUPPLEMENTAL SCHEDULES

EBITDA AND ADJUSTED EBITDA RECONCILIATIONS

Unaudited

(In millions)

EBITDA and adjusted EBITDA are not recognized terms under GAAP and should not be considered in isolation or as a substitute for our reported results prepared in accordance with GAAP. Further, since all companies do not use identical calculations, our definition and presentation of these measures may not be comparable to similarly titled measures reported by other companies.

EBITDA and adjusted EBITDA - EBITDA represents the sum of net income (loss), provision (benefit) for income taxes, interest expense, net, depreciation of rental equipment and non-rental depreciation and amortization. Adjusted EBITDA represents EBITDA plus the sum of merger and acquisition related costs, restructuring and restructuring related charges, spin-off costs, non-cash stock-based compensation charges, loss on extinguishment of debt (which is included in interest expense, net), impairment charges, gain on the disposal of a business and certain other items. Management uses EBITDA and adjusted EBITDA to evaluate operating performance and period-over-period performance of our core business without regard to potential distortions, and believes that investors will likewise find these non-GAAP measures useful in evaluating the Company’s performance. However, EBITDA and adjusted EBITDA do not purport to be alternatives to net income as an indicator of operating performance. Additionally, neither measure purports to be an alternative to cash flows from operating activities as a measure of liquidity, as they do not consider certain cash requirements such as interest payments and tax payments.

Adjusted EBITDA Margin - Adjusted EBITDA Margin (Adjusted EBITDA/Total Revenues) is a commonly used profitability ratio. Adjusted EBITDA Margin does not purport to be an alternative to Net Margin (Net Income/Total Revenues as calculated under GAAP) as an indicator of profitability, as it does not account for GAAP reportable expenses such as depreciation and interest or the expense or benefit from income taxes.

These measures are frequently used by security analysts, institutional investors and other interested parties in the evaluation of companies in our industry.

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2019

 

2018

 

2019

 

2018

Net income

$

9.4

 

 

$

46.2

 

 

$

12.4

 

 

$

35.8

 

Income tax benefit

(4.2

)

 

(1.0

)

 

(2.0

)

 

(5.3

)

Interest expense, net

81.9

 

 

38.6

 

 

146.4

 

 

103.0

 

Depreciation of rental equipment

102.7

 

 

98.3

 

 

303.6

 

 

288.6

 

Non-rental depreciation and amortization

14.9

 

 

14.3

 

 

44.5

 

 

41.8

 

EBITDA

204.7

 

 

196.4

 

 

504.9

 

 

463.9

 

Restructuring

 

 

 

 

7.8

 

 

1.0

 

Spin-Off costs

0.4

 

 

1.7

 

 

0.7

 

 

10.5

 

Non-cash stock-based compensation charges

4.3

 

 

3.3

 

 

12.5

 

 

9.9

 

Other (1)

 

 

0.1

 

 

0.7

 

 

1.1

 

Adjusted EBITDA

$

209.4

 

 

$

201.5

 

 

$

526.6

 

 

$

486.4

 

 

 

 

 

 

 

 

 

Total revenues

$

508.1

 

 

$

516.2

 

 

$

1,458.9

 

 

$

1,433.0

 

Adjusted EBITDA

209.4

 

 

201.5

 

 

526.6

 

 

486.4

 

Adjusted EBITDA margin

41.2

%

 

39.0

%

 

36.1

%

 

33.9

%

 

(1) Comprised primarily of a one-time cash separation benefit paid to our former Chief Financial Officer as part of a Retirement and Separation Agreement for the nine months ended September 30, 2018.

 

A-4

HERC HOLDINGS INC. AND SUBSIDIARIES

SUPPLEMENTAL SCHEDULES

ADJUSTED NET INCOME AND ADJUSTED EARNINGS PER DILUTED SHARE

Unaudited

(In millions)

Adjusted Net Income and Adjusted Earnings Per Diluted Share - Adjusted Net Income represents the sum of net income (loss), restructuring and restructuring related charges, spin-off costs, loss on extinguishment of debt, impairment charges, gain on the disposal of a business and certain other items. Adjusted Earnings per Diluted Share represents Adjusted Net Income divided by diluted shares outstanding. Adjusted Net Income and Adjusted Earnings Per Diluted Share are important measures to evaluate our results of operations between periods on a more comparable basis and to help investors analyze underlying trends in our business, evaluate the performance of our business both on an absolute basis and relative to our peers and the broader market, provide useful information to both management and investors by excluding certain items that may not be indicative of our core operating results and operational strength of our business. Such measurements are not prepared in accordance with U.S. GAAP and should not be construed as an alternative to reported results determined in accordance with U.S. GAAP. The non-GAAP information provided is unique to our Company and may not be consistent with methodologies used by other companies.

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2019

 

2018

 

2019

 

2018

Net income

$

9.4

 

 

$

46.2

 

 

$

12.4

 

 

$

35.8

 

Loss on extinguishment of debt

53.6

 

 

5.4

 

 

53.6

 

 

5.4

 

Restructuring

 

 

 

 

7.8

 

 

1.0

 

Spin-Off costs

0.4

 

 

1.7

 

 

0.7

 

 

10.5

 

Other (1)

 

 

0.1

 

 

0.7

 

 

1.1

 

Tax impact of adjustments (2)

(20.2

)

 

(16.7

)

 

(22.4

)

 

(19.4

)

Adjusted net income

$

43.2

 

 

$

36.7

 

 

$

52.8

 

 

$

34.4

 

 

 

 

 

 

 

 

 

Diluted shares outstanding

29.1

 

 

28.9

 

 

29.1

 

 

28.9

 

 

 

 

 

 

 

 

 

Adjusted earnings per diluted share

$

1.48

 

 

$

1.27

 

 

$

1.81

 

 

$

1.19

 

(1) Comprised primarily of a one-time cash separation benefit paid to our former Chief Financial Officer as part of a Retirement and Separation Agreement for the nine months ended September 30, 2018.

(2)The tax rate applied for adjustments is 25.7% and reflects the statutory rates in the applicable entities. Additionally, the tax benefit of $6.3 million recognized in the three and nine month periods of 2019 related to the debt transactions and the tax benefit of $14.8 million recognized in the three and nine month periods of 2018 related to the Tax Cuts and Jobs Act of 2017, were also adjusted.

NET RENTAL EQUIPMENT EXPENDITURES

(In millions)

 

 

 

Nine Months Ended September 30,

 

 

2019

 

2018

Rental equipment expenditures

 

$

506.7

 

 

$

617.5

 

Proceeds from disposal of rental equipment

 

(156.9

)

 

(189.1

)

Net rental equipment expenditures

 

$

349.8

 

 

$

428.4

 

 

A-5

 

View source version on businesswire.com:https://www.businesswire.com/news/home/20191023005034/en/

CONTACT: Paul Dickard

Vice President, Communications

pdickard@hercrentals.com

239-301-1214Elizabeth Higashi, CFA

Vice President, Investor Relations

ehigashi@hercrentals.com

239-301-1024

KEYWORD: FLORIDA UNITED STATES NORTH AMERICA

INDUSTRY KEYWORD: OTHER CONSTRUCTION & PROPERTY RETAIL CONSTRUCTION & PROPERTY OTHER RETAIL

SOURCE: Herc Holdings Inc.

Copyright Business Wire 2019.

PUB: 10/23/2019 06:30 AM/DISC: 10/23/2019 06:30 AM

http://www.businesswire.com/news/home/20191023005034/en