BONITA SPRINGS, Fla
Herc Holdings Inc. (NYSE: HRI) (“Herc Holdings” or the “Company”) today reported financial results for the quarter ended June 30, 2017. Equipment rental revenues were $350.8 million and total revenues were $415.8 million in the second quarter of 2017, up from $327.9 million and $380.4 million, respectively, for the same period last year. The Company reported a net loss of $27.6 million, or $0.98 per diluted share, in the second quarter of 2017, compared to a net loss of $8.0 million, or $0.28 per diluted share, for the same period last year.
“We are pleased to note that our equipment rental revenue growth accelerated in the second quarter”
Equipment rental revenues increased 7.0%, average fleet at original equipment cost (OEC) increased 4.7%, and overall pricing improved 1.4% in the second quarter of 2017, versus the prior-year period. Rental revenues in key markets, excluding foreign currency, increased 8.9% and pricing in key markets improved 1.5% in the second quarter of 2017, compared to the prior-year period.
The second quarter results included impairment charges of $29.3 million, consisting primarily of a write-off related to the Company’s decision to discontinue the development of new information technology systems initiated prior to the Company’s spin-off last year. The quarter was also impacted by an increase of $18.3 million in interest expense related to debt issued in June 2016.
“We are pleased to note that our equipment rental revenue growth accelerated in the second quarter,” said Larry Silber, president and chief executive officer. “Demand and pricing continued to improve year-over-year and our initiatives to diversify our fleet and expand our customer base are driving top-line growth. Upstream oil and gas markets appear to be stabilizing after more than two years of year-over-year declines. In addition, overall dollar utilization improved to 34.0%, the first year-over-year improvement since the initial downturn in oil and gas markets.
“We have accomplished a great deal in our first year as a stand-alone company. We are continuing to complete the separation from our former parent and implement major initiatives to grow our business and improve our operating efficiencies. We are encouraged by improving fundamentals in the rental equipment industry and remain confident in our strategy.
“In the quarter, we decided to discontinue the development of new information technology systems initiated prior to the spin-off. We will transition the legacy industry-standard systems that we have been using and redirect our investments to upgrade and enhance their functionality. This decision puts us on a solid path to achieve what’s best for the business by leveraging our existing resources.”
Second Quarter Highlights
First Half Highlights
Capital Expenditures — Fleet
2017 Guidance
The Company is affirming its previous guidance.
The Company does not provide forward-looking guidance for certain financial measures on a GAAP basis or a reconciliation of forward-looking non-GAAP financial measures to the most directly comparable GAAP reported financial measures on a forward-looking basis because it is unable to predict certain items contained in the GAAP measures without unreasonable efforts. Certain items that impact net income (loss) cannot be predicted with reasonable certainty, such as restructuring and restructuring related charges, special tax items, borrowing levels (which affect interest expense), gains and losses from asset sales, the ultimate outcome of pending litigation and spin-related costs.
Earnings Call and Webcast Information
Herc Holdings’ second quarter 2017 earnings webcast will be held today at 8:30 a.m. U.S. Eastern Time. Interested U.S. parties may call +1-877-883-0383 and international participants should call + 1-412-902-6506, using the access code: 9596113. 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 + 1-877-344-7529 and international participants + 1-412-317-0088 and enter conference ID number 10110073.
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 275 company-operated locations, principally in North America. With more than 50 years of experience, Herc Holdings is a full-line equipment rental supplier in key markets, including commercial and residential construction, industrial and manufacturing, civil infrastructure, automotive, government and municipalities, energy, remediation, emergency response, facilities, entertainment and agriculture, as well as refineries and petrochemicals. The equipment rental business is supported by ProSolutionsTM (our industry-specific solutions-based services), and our professional grade tools, commercial vehicles, and pump, power and climate control product offerings, all of which are aimed at helping customers work more efficiently, effectively and safely. The Company has approximately 4,800 employees. Herc Holdings’ 2016 total revenues were approximately $1.6 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:
Basis of Presentation
The financial information included in this press release is based upon the condensed consolidated financial statements of the Company which are presented on in accordance with generally accepted accounting principles in the United States of America (U.S. GAAP). These financial statements and financial information represent only those operations, assets, liabilities and equity that form Herc Holdings on a stand-alone basis. Since the spin-off occurred on June 30, 2016, prior period amounts represent carve-out financial results.
Forward-Looking Statements
This release contains statements, including those under “2017 Guidance,” that are not statements of historical fact, but instead are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We caution readers not to place undue reliance on these statements, which speak only as of the date hereof. 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:
All forward-looking statements are expressly qualified in their entirety by such cautionary statements. We do not undertake any obligation to release publicly any update or revision to any of the forward-looking statements.
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 which is not calculated according to GAAP (“non-GAAP”), such as adjusted EBITDA. 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.
(See Accompanying Tables)
HERC HOLDINGS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In millions) |
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June 30, 2017 |
December 31, |
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ASSETS | (Unaudited) | ||||||
Cash and cash equivalents | $ | 12.0 | $ | 24.0 | |||
Restricted cash and cash equivalents | 10.3 | 7.0 | |||||
Receivables, net of allowance | 309.0 | 293.3 | |||||
Inventory | 25.9 | 24.1 | |||||
Prepaid expenses and other current assets | 28.0 | 23.3 | |||||
Total current assets | 385.2 | 371.7 | |||||
Revenue earning equipment, net | 2,449.0 | 2,390.0 | |||||
Property and equipment, net | 281.3 | 272.0 | |||||
Goodwill and intangible assets, net | 374.6 | 394.9 | |||||
Other long-term assets | 35.0 | 34.7 | |||||
Total assets | $ | 3,525.1 | $ | 3,463.3 | |||
LIABILITIES AND EQUITY | |||||||
Current maturities of long-term debt | $ | 16.0 | $ | 15.7 | |||
Accounts payable | 314.8 | 139.0 | |||||
Accrued liabilities | 79.6 | 78.2 | |||||
Taxes payable | 14.5 | 10.0 | |||||
Total current liabilities | 424.9 | 242.9 | |||||
Long-term debt, net | 2,145.4 | 2,178.6 | |||||
Deferred taxes | 657.2 | 692.1 | |||||
Other long-term liabilities | 38.8 | 32.0 | |||||
Total liabilities | 3,266.3 | 3,145.6 | |||||
Total equity | 258.8 | 317.7 | |||||
Total liabilities and equity | $ | 3,525.1 | $ | 3,463.3 | |||
HERC HOLDINGS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Unaudited (In millions, except per share data) |
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Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Revenues: | ||||||||||||||||
Equipment rentals | $ | 350.8 | $ | 327.9 | $ | 671.4 | $ | 635.7 | ||||||||
Sales of revenue earning equipment | 46.4 | 31.6 | 100.8 | 69.1 | ||||||||||||
Sales of new equipment, parts and supplies | 14.9 | 17.9 | 26.4 | 35.2 | ||||||||||||
Service and other revenues | 3.7 | 3.0 | 6.6 | 6.0 | ||||||||||||
Total revenues | 415.8 | 380.4 | 805.2 | 746.0 | ||||||||||||
Expenses: | ||||||||||||||||
Direct operating | 168.9 | 159.2 | 338.0 | 317.9 | ||||||||||||
Depreciation of revenue earning equipment | 94.3 | 84.2 | 187.2 | 166.0 | ||||||||||||
Cost of sales of revenue earning equipment | 51.4 | 38.7 | 106.3 | 84.1 | ||||||||||||
Cost of sales of new equipment, parts and supplies | 11.1 | 14.0 | 19.5 | 27.1 | ||||||||||||
Selling, general and administrative | 78.8 | 74.2 | 160.0 | 136.7 | ||||||||||||
Impairment | 29.3 | — | 29.3 | — | ||||||||||||
Interest expense, net | 31.6 | 13.3 | 69.4 | 19.8 | ||||||||||||
Other expense (income), net | 0.2 | (0.5 | ) | (0.4 | ) | (1.4 | ) | |||||||||
Total expenses | 465.6 | 383.1 | 909.3 | 750.2 | ||||||||||||
Loss before income taxes | (49.8 | ) | (2.7 | ) | (104.1 | ) | (4.2 | ) | ||||||||
Income tax benefit (provision) | 22.2 | (5.3 | ) | 37.3 | (5.3 | ) | ||||||||||
Net loss | $ | (27.6 | ) | $ | (8.0 | ) | $ | (66.8 | ) | $ | (9.5 | ) | ||||
Weighted average shares outstanding: | ||||||||||||||||
Basic | 28.3 | 28.3 | 28.3 | 28.3 | ||||||||||||
Diluted | 28.3 | 28.3 | 28.3 | 28.3 | ||||||||||||
Loss per share: | ||||||||||||||||
Basic | $ | (0.98 | ) | $ | (0.28 | ) | $ | (2.36 | ) | $ | (0.34 | ) | ||||
Diluted | $ | (0.98 | ) | $ | (0.28 | ) | $ | (2.36 | ) | $ | (0.34 | ) | ||||
HERC HOLDINGS INC. AND SUBSIDIARIES
|
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Six Months Ended June 30, | ||||||||
2017 | 2016 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (66.8 | ) | $ | (9.5 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
Depreciation of revenue earning equipment | 187.2 | 166.0 | ||||||
Depreciation of property and equipment | 22.1 | 18.6 | ||||||
Amortization of intangible assets | 2.2 | 2.5 | ||||||
Amortization of deferred financing costs | 3.2 | 2.4 | ||||||
Stock-based compensation charges | 4.5 | 2.7 | ||||||
Impairment | 29.3 | — | ||||||
Provision for receivables allowance | 21.9 | 24.4 | ||||||
Deferred taxes | (37.3 | ) | 5.3 | |||||
Loss on sale of revenue earning equipment | 5.5 | 15.0 | ||||||
Income from joint ventures | (0.7 | ) | (1.4 | ) | ||||
Other | 0.7 | 3.5 | ||||||
Changes in assets and liabilities: | ||||||||
Receivables | (31.7 | ) | (16.4 | ) | ||||
Inventory, prepaid expenses and other assets | (2.3 | ) | (7.6 | ) | ||||
Accounts payable | (15.6 | ) | (13.2 | ) | ||||
Accrued liabilities and other long-term liabilities | (3.3 | ) | 20.0 | |||||
Taxes receivable and payable | 3.7 | (4.2 | ) | |||||
Net cash provided by operating activities | 122.6 | 208.1 | ||||||
Cash flows from investing activities: | ||||||||
Net change in restricted cash and cash equivalents | (3.3 | ) | 5.6 | |||||
Revenue earning equipment expenditures | (160.8 | ) | (142.5 | ) | ||||
Proceeds from disposal of revenue earning equipment | 88.6 | 74.2 | ||||||
Non-rental capital expenditures | (26.0 | ) | (13.4 | ) | ||||
Proceeds from disposal of property and equipment | 1.7 | 2.8 | ||||||
Net cash used in investing activities | (99.8 | ) | (73.3 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from issuance of long-term debt |
— |
1,235.0 |
||||||
Repayments of long-term debt |
(123.5 | ) |
— |
|||||
Proceeds from revolving lines of credit | 279.4 |
1,619.0 |
||||||
Repayments on revolving lines of credit | (183.7 | ) | (780.0 | ) | ||||
Net financing activities with THC and affiliates | — | (2,142.2 | ) | |||||
Payment of debt financing costs | — | (41.1 | ) | |||||
Other financing activities, net | (7.5 | ) | 4.4 | |||||
Net cash used in financing activities | (35.3 | ) | (104.9 | ) | ||||
Effect of foreign exchange rate changes on cash and cash equivalents | 0.5 | 0.5 | ||||||
Net increase (decrease) in cash and cash equivalents during the period | (12.0 | ) | 30.4 | |||||
Cash and cash equivalents at beginning of period | 24.0 | 24.7 | ||||||
Cash and cash equivalents at end of period | $ | 12.0 | $ | 55.1 | ||||
Supplemental disclosure of non-cash investing activity: | ||||||||
Purchases of revenue earning equipment in accounts payable | $ | 176.9 | $ | 163.0 | ||||
Sales of revenue earning equipment in accounts receivable | $ | 4.4 | $ | — | ||||
Non-rental capital expenditures in accounts payable | $ | 13.2 | $ | 7.8 | ||||
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 for income taxes, interest expense, net, depreciation of revenue earning 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. These measures are frequently used by security analysts, institutional investors and other interested parties in the evaluation of companies in our industry. However, EBITDA and adjusted EBITDA do not purport to be alternatives to net earnings 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. The reconciliation of EBITDA and adjusted EBITDA to net income (loss) is presented below:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||||
Net loss | $ | (27.6 | ) | $ | (8.0 | ) | $ | (66.8 | ) | $ | (9.5 | ) | ||||||
Income tax provision (benefit) | (22.2 | ) | 5.3 | (37.3 | ) | 5.3 | ||||||||||||
Interest expense, net | 31.6 | 13.3 | 69.4 | 19.8 | ||||||||||||||
Depreciation of revenue earning equipment | 94.3 | 84.2 | 187.2 | 166.0 | ||||||||||||||
Non-rental depreciation and amortization | 12.6 | 10.6 | 24.3 | 21.1 | ||||||||||||||
EBITDA | 88.7 | 105.4 | 176.8 | 202.7 | ||||||||||||||
Restructuring charges | 0.4 | 3.1 | 1.0 | 3.4 | ||||||||||||||
Restructuring related charges | 1.8 | 2.7 | 1.8 | 2.7 | ||||||||||||||
Spin-Off costs | 9.1 | 17.7 | 16.7 | 26.9 | ||||||||||||||
Non-cash stock-based compensation charges | 3.0 | 1.7 | 4.5 | 2.7 | ||||||||||||||
Impairment | 29.3 | — | 29.3 | — | ||||||||||||||
Other | 0.8 | — | 0.8 | — | ||||||||||||||
Adjusted EBITDA | $ | 133.1 | $ | 130.6 | $ | 230.9 | $ | 238.4 | ||||||||||
HERC HOLDINGS INC. AND SUBSIDIARIES SUPPLEMENTAL SCHEDULES NET REVENUE EARNING EQUIPMENT EXPENDITURES Unaudited (In millions) |
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Six Months Ended June 30, | ||||||||
2017 | 2016 | |||||||
Revenue earning equipment expenditures | $ | 160.8 | $ | 142.5 | ||||
Proceeds from disposals of revenue earning equipment | (88.6 | ) | (74.2 | ) | ||||
Net revenue earning equipment expenditures | $ | 72.2 | $ | 68.3 | ||||
Herc Holdings Inc.
Paul Dickard, 239-301-1214
Vice President, Communications
pdickard@hercrentals.com
or
Elizabeth Higashi, CFA, 239-301-1024
Vice President, Investor Relations
ehigashi@hercrentals.com