BONITA SPRINGS, Fla.--(BUSINESS WIRE)--Aug 8, 2018--Herc Holdings Inc. (NYSE:HRI) ("Herc Holdings" or the "Company") today reported financial results for the quarter ended June 30, 2018. Equipment rental revenue was $392.5 million and total revenues were $485.5 million in the second quarter of 2018, up from $350.8 million and $415.8 million, respectively, for the same period last year. The Company's net results improved by $27.3 million to a net loss of $0.3 million, or $0.01 per diluted share, in the second quarter of 2018, compared to a net loss of $27.6 million, or $0.98 per diluted share, in the same period in 2017.

Equipment rental revenue increased 11.9%, average fleet at original equipment cost (OEC) increased 5.7% and overall pricing improved 2.9% in the second quarter of 2018 over the prior-year period. Adjusted EBITDA increased 14.4% to $152.2 million in the second quarter compared to $133.1 million in the comparable period in 2017. See page A-4 for a description of the items excluded in calculating adjusted EBITDA.

“Our focus on fleet, customer and local market diversification continued to drive strong organic rental revenue growth across North America in the second quarter,” said Larry Silber, president and chief executive officer. “We delivered our fourth consecutive quarter of double-digit growth in equipment rental revenue over the prior-year period, benefiting from improved volume, mix and price.

"We also completed the final separation of our financial information technology systems from Hertz at the end of July. The successful completion of this project means we no longer use any support services from our former parent and establishes our independence. With the final separation now behind us, our full attention and resources can be applied to operational improvements."

Second Quarter Highlights

Equipment rental revenue in the second quarter of 2018 increased 11.9%, or $41.7 million, to $392.5 million compared to $350.8 million in the prior-year quarter. The double-digit gain reflected strong growth in rental revenue from local accounts, and ProSolutions TM and ProContractor categories over the prior year. Total revenues increased 16.8% to $485.5 million in the second quarter compared to $415.8 million in 2017. The $69.7 million year-over-year improvement included an increase in sales of revenue earning equipment of $31.8 million. The Company benefited from a strong used equipment market as it continued to focus on improving equipment mix and reducing fleet age. Pricing increased 2.9% in the second quarter of 2018 compared to the same period in 2017, and represented the ninth consecutive quarter of year-over-year improvement. Adjusted EBITDA in the second quarter of 2018 increased 14.4% to $152.2 million compared to $133.1 million in the second quarter of 2017. The increase reflected strong rental revenue growth in the quarter and improved pricing in the used equipment market. Dollar utilization of 35.4% in the second quarter of 2018 was up 140 basis points compared to the prior-year period, reflecting customer and fleet mix diversification and improved pricing. Direct operating expenses were $194.5 million in the second quarter of 2018 compared to $168.6 million in the prior-year period, primarily due to increased fleet and related expenses associated with higher equipment rental activity. Selling, general and administrative (SG&A) expenses decreased $1.5 million to $77.3 million in the second quarter of 2018 compared to $78.8 million in the prior-year period. The year-over-year decline resulted primarily from the reduction of professional fees and costs related to the spin-off. These decreases were partially offset by an increase in sales personnel and related commissions to drive revenue growth. Interest expense in the second quarter of 2018 increased to $32.4 million compared to $31.6 million in the prior-year period, primarily due to an increase in average outstanding borrowings and a higher average interest rate on the revolving credit facility during the quarter, compared with the same period last year. The increase was partially offset by lower average outstanding borrowings on senior secured second priority notes during the second quarter of 2018 as compared to the prior-year period. Net results improved $27.3 million to a net loss of $0.3 million in the second quarter of 2018 compared to a net loss of $27.6 million in the second quarter of 2017. Improved operating results and the prior-year's pretax impairment of $29.3 million, due to the write-off of intangible assets related to the development of information technology systems, were the primary factors.

First Half Highlights

Equipment rental revenue in the first half of 2018 increased 13.4%, or $90.2 million, to $761.6 million compared to $671.4 million in the prior-year quarter. The double-digit growth reflected strong growth in rental revenue from local accounts, and ProSolutions TM and ProContractor categories. Total revenues increased 13.9% to $916.8 million in the first half compared to $805.2 million in 2017. The $111.6 million year-over-year increase was aided by an increase in sales of revenue earning equipment of $24.7 million. The Company benefited from a strong used equipment market as it continued to focus on improving equipment mix and reducing fleet age. Pricing increased 2.8% in the first half of 2018 compared to the same period in 2017. Adjusted EBITDA in the first half of 2018 increased 23.4% to $284.9 million compared to $230.9 million in the first half of 2017. The increase was primarily due to strong rental revenue growth and improved pricing in the used equipment market. Direct operating expenses were $390.5 million in the first half of 2018 compared to $337.5 million in the prior-year period, primarily due to increased fleet and related expenses associated with higher equipment rental activity. Selling, general and administrative expense decreased $8.1 million to $151.8 million in the first half of 2018 compared to $159.9 million in the prior-year period. The year-over-year decline resulted primarily from the reduction of professional fees and costs related to the spin-off. These decreases were partially offset by an increase in sales personnel and related commissions to drive revenue growth. Interest expense in the first half of 2018 declined $5.0 million to $64.4 million from $69.4 million in the prior-year period primarily due to the absence of costs incurred for the partial redemption of the Company's senior secured second priority notes in March of 2017. Net results improved $56.4 million to a net loss of $10.4 million in the first half of 2018 compared to a net loss of $66.8 million in the comparable prior-year period. Improved operating results and a pretax impairment of $29.3 million in the prior-year second quarter, due to the write-off of intangible assets related to the development of new information technology systems, were the primary factors.

Capital Expenditures - Fleet

The Company reported net fleet capital expenditures of $170.4 million for the first half of 2018. Gross fleet capital expenditures were $300.5 million, and disposals were $130.1 million. See page A-5 for the calculation of net fleet capital expenditures. As of June 30, 2018, the Company's total fleet was approximately $3.87 billion at OEC, based on the American Rental Association guidelines. Average fleet at OEC increased 5.7% in the second quarter and 4.5% in the first half compared to the prior-year periods. Average fleet age declined to approximately 46 months as of June 30, 2018, compared with approximately 48 months in the prior-year period.

2018 Guidance

The Company affirmed its 2018 adjusted EBITDA and net fleet capital expenditures guidance.

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, special tax items, gains and losses from asset sales and the ultimate outcome of pending litigation.

Subsequent Event

On July 12, 2018, for the redemption period from June 1, 2018 to May 31, 2019, the Company redeemed $61 million in aggregate principal amount of the 7.5% senior secured second priority notes due 2022 and $62.5 million of the 7.75% senior secured second priority notes due 2024 at a redemption price of 103% plus accrued and unpaid interest. The Company had originally issued $610 million of the 2022 notes and $625 million of the 2024 notes in June 2016, and redeemed 10% of the original aggregate principal amount of each series of notes in both March 2017 and October 2017.

Earnings Call and Webcast Information

Herc Holdings' second quarter 2018 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: 9331261. 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 the replay access code: 10121581.

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 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 TM, our industry-specific solutions-based services, which includes pumping solutions, 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 4,900 employees. Herc Holdings’ 2017 total revenues were approximately $1.75 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:

Dollar utilization: calculated by dividing rental revenue by the average OEC of the equipment fleet for the relevant time period. OEC: original equipment cost based on the guidelines of the American Rental Association, which is calculated as the cost of the asset at the time it was first purchased plus additional capitalized refurbishment costs (with the basis of refurbished assets reset at the refurbishment date).

Forward-Looking Statements

This release contains statements, including those under "2018 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:

Risks related to material weaknesses in our internal control over financial reporting and the restatement of financial statements previously issued by Hertz Global Holdings, Inc. (in its form prior to the spin-off that effected the separation of the car rental business from us, “Hertz Holdings”), including that: we have identified material weaknesses in our internal control over financial reporting that may adversely affect our ability to report our financial condition and results of operations in a timely and accurate manner, which may adversely affect investor and lender confidence in us and, as a result, the value of our common stock and our ability to obtain future financing on acceptable terms, and we may identify additional material weaknesses; our efforts to design and implement an effective control environment may not be sufficient to remediate the material weaknesses, or to prevent future material weaknesses; such material weaknesses could result in a material misstatement of our consolidated financial statements that would not be prevented or detected; we continue to expend significant costs and devote management time and attention and other resources to matters related to our internal control over financial reporting; our material weaknesses could expose us to additional risks that could materially adversely affect our ability to execute our strategic plan and our financial position, results of operations and cash flows; any significant disruption or deficiency in the design of or implementing new information technology ("IT") systems, including the financial system migrated from Hertz Rental Car Holding Company, Inc., which has been re-named Hertz Global Holdings, Inc. ("New Hertz"), could materially adversely affect our ability to accurately maintain our books and records or otherwise operate our business; and Hertz Holdings' restatement has been costly and has resulted in government investigations and other legal actions, and could result in government enforcement actions and private litigation that could have a material adverse impact on our results of operations, financial condition, liquidity and cash flows; Business risks could have a material adverse effect on our business, results of operations, financial condition and/or liquidity, including: the cyclicality of our business and its dependence on levels of capital investment and maintenance expenditures by our customers; a slowdown in economic conditions or adverse changes in the level of economic activity or other economic factors specific to our customers or their industries, in particular, contractors and industrial customers;our business is heavily reliant upon communications networks and centralized IT systems and the concentration of our systems creates or increases risks for us, including the risk of the misuse or theft of information we possess, including as a result of cyber security breaches or otherwise, which could harm our brand, reputation or competitive position and give rise to material liabilities;we may fail to maintain, upgrade and consolidate our IT networks;we may fail to respond adequately to changes in technology and customer demands;intense competition in the industry, including from our own suppliers, that may lead to downward pricing or an inability to increase prices;our success depends on our ability to attract and retain key management and other key personnel, and the ability of new employees to learn their new roles;we may have difficulty obtaining the resources that we need to operate, or our costs to do so could increase significantly;any occurrence that disrupts rental activity during our peak periods, given the seasonality of the business, especially in the construction industry;doing business in foreign countries exposes us to additional risks, including under laws and regulations that may conflict with U.S. laws and those under anticorruption, competition, economic sanctions and anti-boycott regulations;some or all of our deferred tax assets could expire if we experience an “ownership change” as defined in the Internal Revenue Code;changes in the legal and regulatory environment that affect our operations, including with respect to taxes, consumer rights, privacy, data security and employment matters, could disrupt our business and increase our expenses;an impairment of our goodwill or our indefinite lived intangible assets could have a material non-cash adverse impact;other operational risks such as: any decline in our relations with our key national account customers or the amount of equipment they rent from us; our equipment rental fleet is subject to residual value risk upon disposition, and may not sell at the prices we expect; maintenance and repair costs associated with our equipment rental fleet could materially adversely affect us; we may be unable to protect our trade secrets and other intellectual property rights; we are exposed to a variety of claims and losses arising from our operations, and our insurance may not cover all or any portion of such claims; we may face issues with our union employees; environmental, health and safety laws and regulations and the costs of complying with them, or any change to them impacting our markets, could materially adversely affect us; and strategic acquisitions could be difficult to identify and implement and could disrupt our business or change our business profile significantly; Risks related to the spin-off, which effected our separation from New Hertz, such as: the liabilities we have assumed and will share with New Hertz in connection with the spin-off could have a material adverse effect on our business, financial condition and results of operations; if there is a determination that any portion of the spin-off transaction is taxable for U.S. federal income tax purposes, including for reasons outside of our control, then we and our stockholders could incur significant tax liabilities, and we could also incur indemnification liability if we are determined to have caused the spin-off to become taxable; if New Hertz fails to pay its tax liabilities under the tax matters agreement or to perform its obligations under the separation and distribution agreement, we could incur significant tax and other liability; we have limited operating history as a stand-alone public company, and our historical financial information for periods prior to July 1, 2016 is not necessarily representative of the results that we would have achieved as a separate, publicly traded company, and may not be a reliable indicator of our future results; our ability to engage in financings, acquisitions and other strategic transactions using equity securities is limited due to the tax treatment of the spin-off; and the spin-off may be challenged by creditors as a fraudulent transfer or conveyance; Risks related to our substantial indebtedness, such as: our substantial level of indebtedness exposes us or makes us more vulnerable to a number of risks that could materially adversely affect our financial condition, results of operations, cash flows, liquidity and ability to compete; the secured nature of our indebtedness, which is secured by substantially all of our consolidated assets, could materially adversely affect our business and holders of our debt and equity; an increase in interest rates or in our borrowing margin would increase the cost of servicing our debt and could reduce our profitability; and any additional debt we incur could further exacerbate these risks; Risks related to the securities market and ownership of our stock, including that: the market price of our common stock could decline as a result of the sale or distribution of a large number of our shares or the perception that a sale or distribution could occur and these factors could make it more difficult for us to raise funds through future stock offerings; provisions of our governing documents could discourage potential acquisition proposals and could deter or prevent a change in control; and the market price of our common stock may fluctuate significantly; and Other risks and uncertainties set forth in our Annual Report on Form 10-K for the year ended December 31, 2017 under Item 1A "Risk Factors," and in our other filings with the Securities and Exchange Commission.

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.

This article has been truncated. You can see the rest of this article by visiting http://www.businesswire.com/news/home/20180808005025/en.