Herc Rentals Flat in Q4

Equipment rental revenues in the fourth quarter of 2016 were $356.7 million, compared to $359.2 million in the prior year quarter, a decline of 0.7%, which was attributable to lower revenues in upstream oil and gas markets.

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Herc Holdings Inc. announced preliminary financials for the fourth quarter and full year ended December 31, 2016, reporting flat year-over year results. Equipment rental revenues in the fourth quarter of 2016 were $356.7 million, compared to $359.2 million in the prior year quarter, a decline of 0.7%, which was attributable to lower revenues in upstream oil and gas markets, divested foreign operations and negative currency impacts. Revenue growth in key markets more than offset the impact of lower revenues in upstream oil and gas markets.

Total revenues were $405.2 million in the fourth quarter of 2016, compared with $422.4 million, respectively, for the same period last year. The Company reported a net loss of $14.0 million, or $0.49 per diluted share, for the fourth quarter, compared to net income of $78.2 million, or $2.68 per diluted share, for the same period last year.

The fourth quarter net loss was primarily attributed to increased costs resulting from the spin-off and stand-alone costs, including an increase in interest expense and depreciation. Although upstream oil and gas markets continued to be a challenge, the year-over-year decline in these markets in the fourth quarter was less than in the third quarter. In addition, in 2015, we recognized a gain of $50.9 million on the sale of operations in France and Spain, which were divested in October 2015.

“This year was a critical milestone in our ongoing business transformation process,” said Larry Silber, president and chief executive officer. “Our strategy, which includes a number of initiatives, programs and actions, is beginning to show results on behalf of our customers, employees and shareholders. In the fourth quarter, we achieved growth in equipment rental revenues in our key markets of 6.2% and improved pricing in those markets by 1.5% compared with the prior year.

“The ongoing shift in our fleet mix is positioning our business for long-term success. The rollout of our ProContractor Tools™ and ProSolutions™ equipment and services expands and diversifies our fleet and enhances our ability to provide a wide array of equipment to meet our customers’ equipment needs. In addition, new and upgraded technologies, including our ProControl™ telematics system that rolled out in the fourth quarter, further enhances the value we offer customers. We remain confident in our business strategy, our people and the growth opportunities ahead,” said Silber.

Fourth Quarter Highlights

  • Equipment rental revenues in the fourth quarter of 2016 were $356.7 million, compared to $359.2 million in the prior year quarter, a decline of 0.7%, which was attributable to lower revenues in upstream oil and gas markets, divested foreign operations and negative currency impacts. Revenue growth in key markets more than offset the impact of lower revenues in upstream oil and gas markets.

    • Excluding divested foreign operations and currency, equipment rental revenues in key markets increased 6.2% and accounted for 84% of total revenues. Key markets are defined as markets we currently serve outside of upstream oil and gas markets.
  • Pricing in key markets increased 1.5% and overall pricing increased 0.5% in the fourth quarter, compared to the same period in 2015.
  • Adjusted EBITDA in the fourth quarter was $145.7 million, a decline of $18.1 million or 11.1% versus the prior year period, primarily due to the impact of upstream oil and gas markets, stand-alone costs and additional headcount, primarily in operations and sales. See page A-4 for a description of the items excluded in calculating adjusted EBITDA.
  • Continued improvement in branch operating efficiencies reduced average fleet unavailable for rent (FUR) to 15.3% in the month of December 2016, compared with 15.9% in December 2015. December FUR reflects normal seasonality driven by lower rental activity in the period.
  • Dollar utilization of 34.1% in the fourth quarter was impacted by lower activity in upstream oil and gas markets, the ramp up of new locations and the addition of new fleet categories across our locations.
  • Interest expense in the fourth quarter was $32.1 million, an increase of $27.0 million compared with the prior year period, reflecting the increase in the Company’s debt on a stand-alone basis.
  • Spin-off costs totaled $11.5 million in the fourth quarter of 2016, compared with $6.1 million in the comparable period in 2015. The increase was related primarily to higher IT and professional expenses incurred in connection with the June 30, 2016 separation from the Hertz car rental business.

Full Year 2016 Highlights

  • Equipment rental revenues for the year ended 2016 were $1,352.7 million, a decline of 4.2% compared with $1,411.7 million in 2015, which was attributable to lower revenues in upstream oil and gas markets, divested foreign operations and negative currency impacts. Revenue growth in key markets more than offset lower revenues in upstream oil and gas markets.

    • Excluding divested foreign operations and currency, equipment rental revenues in key markets increased 8.1% and accounted for 83% of total revenues.
  • Pricing in key markets improved 1.6% and overall pricing was up 0.3% for 2016, compared to full year 2015.
  • Net loss for the year ended 2016 was $20.5 million, or $0.72 per diluted share, compared to net income of $111.3 million, or $3.69 per diluted share, in 2015. Net loss was significantly impacted by the increase in interest expense related to debt as a stand-alone company, the loss on the sale of revenue earning equipment and spin-off costs. In addition, in 2015, we recognized a gain of $50.9 million on the sale of operations in France and Spain.
  • Adjusted EBITDA for the year ended 2016 was $536.2 million, a decline of $64.4 million versus the prior year. The decline was primarily due to lower results in upstream oil and gas markets and losses related to the sale of revenue earning equipment, most of which occurred in the first half of 2016. Results in key markets offset most of the decline in upstream oil and gas markets. In addition, 2015 included ten months of results from divested foreign operations. See page A-4 for a description of the items excluded in calculating adjusted EBITDA.
  • Interest expense for the year ended 2016 was $84.2 million, an increase of $51.3 million compared with the prior year, reflecting the increase in the Company’s debt on a stand-alone basis.
  • Spin-off costs totaled $49.2 million for the year ended 2016, compared with $25.8 million in 2015. The increase was related primarily to higher IT and professional expenses incurred in connection with the June 30, 2016 separation from the Hertz car rental business.

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