For the quarter ending September 30, 2017, Herc Holdings Inc. reports a 14.7% increase in rental revenues to $413.1 million, a 3.2% increase in average fleet at original equipment cost (OEC), and overall price improvement of 1.7% compared to the third quarter of 2016.
Total revenues were up 13.4% to $457.6 million in 2017's third quarter,. The Hertz equipment rental company reported net income of $12.8 million, or $0.45 per diluted share, in the third quarter of 2017, compared to net income of $3.0 million, or $0.11 per diluted share, for the same period last year.
Herc reported net income of $12.8 million, or $0.45 per diluted share, in the third quarter of 2017, compared to net income of $3.0 million, or $0.11 per diluted share, for the same period last year.
Adjusted EBITDA increased 16.2% to $176.7 million in the third quarter, compared to $152.1 million in the prior-year period. (See items excluded in calculating adjusted EBITDA on page A-4 of the linked document.)
"Our strategy to expand our fleet and diversify our customer mix drove our double-digit increase in third quarter rental revenues over the prior year," said Larry Silber, president and chief executive officer. "Higher levels of equipment on rent and improved pricing also contributed positively to our year-over-year increase in dollar utilization, which increased 350 basis points to 38.7%.
"Our third quarter results validate our strategic initiatives and business transformation efforts, which enabled solid rental revenue growth throughout North America. Construction trends and leading economic indicators support estimates of continued strength in the rental equipment industry and contribute to the confidence we have in our business strategy," said Silber.
Third Quarter Highlights
- Equipment rental revenues in the third quarter of 2017 increased 14.7% to $413.1 million, compared to $360.3 million in the prior-year quarter. The double-digit gain reflected growth across all of our regions.
- Pricing increased 1.7% in the third quarter of 2017, compared to the same period in 2016, reflecting the sixth consecutive quarter of improvement in year-over-year gains.
- Adjusted EBITDA in the third quarter of 2017 increased 16.2% to $176.7 million, compared to $152.1 million in the third quarter of 2016, reflecting strong rental revenue growth in the quarter and improved flowthrough compared to the prior-year period.
- Average fleet unavailable for rent (“FUR”) was 12.9% in the month of September 2017, compared to 13.1% in September 2016, reflecting continued focus on equipment turnaround times.
- Dollar utilization of 38.7% in the third quarter of 2017 was up 350 basis points compared to the prior-year period, and up 470 basis points from the second quarter.
- Direct operating expenses were $188.2 million in the third quarter of 2017, compared to $169.9 million in the prior-year period, primarily due to higher rental activity, which increased transportation and maintenance costs, and investments in branch operating personnel to support revenue growth.
- Selling, general and administrative expense (SG&A) increased to $84.6 million in the third quarter of 2017, compared to $66.8 million in the prior-year period. The increase was driven by variable costs associated with higher revenues, including provision for bad debt and additional sales personnel and commissions. We also incurred higher information technology costs related to the spin-off.
- Interest expense in the third quarter of 2017 of $32.4 million was flat compared to the prior-year period.
Nine Months Highlights
- Equipment rental revenues in the nine months of 2017 increased 8.9% to $1,084.5 million, compared to $996.0 million in the prior-year period.
- Overall pricing increased 1.4% in the nine months of 2017, compared to the same period in 2016.
- The Company reported a net loss for the nine months of 2017 of $54.0 million, which included impairment charges of $29.3 million recorded during the second quarter of 2017, compared with a net loss of $6.5 million in the prior-year period.
- Adjusted EBITDA in the nine months of 2017 increased 4.4% to $407.6 million compared to $390.5 million in the comparable period in 2016.
- Direct operating expenses were $526.2 million in the nine months of 2017, compared to $487.8 million in the prior-year period, primarily due to higher rental revenue-related costs such as transportation expense and investments in branch operating personnel to support revenue growth.
- Selling, general and administrative expense (SG&A) increased to $244.6 million in the nine months of 2017, compared to $203.5 million in the same period of 2016. The increase was driven by stand-alone public company costs in the first half of 2017 and information technology costs related to the spin-off, as well as variable costs associated with higher revenues as discussed above.
- Interest expense in the nine months of 2017 was $101.8 million, an increase of $49.7 million compared to the prior-year period, primarily reflecting the increase in the Company's debt on a stand-alone basis.
Capital Expenditures -- Fleet
- The Company reported net fleet capital expenditures of $234.7 million for the nine months of 2017. Gross fleet capital expenditures were $356.3 million and disposals were $121.6 million. See page A-5 for the calculation of net fleet capital expenditures.
- At September 30, 2017, the Company had rental equipment of approximately $3.75 billion at original equipment cost (OEC), based on the American Rental Association guidelines. Average OEC increased 3.2% in the third quarter of 2017, and 4.4% in the nine months of 2017, compared to the prior-year periods. Average fleet age was approximately 49 months as of September 30, 2017.