hri-20230930

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_______________________________________________________________________________

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023


OR
☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-33139

HERC HOLDINGS INC.

(Exact name of registrant as specified in its charter)


Delaware						20-3530539
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)

27500 Riverview Center Blvd.

Bonita Springs, Florida 34134

(239) 301-1000

(Address, including Zip Code, and telephone number,

including area code, of registrant's principal executive offices)

Not Applicable

(Former name, former address and former fiscal year,

if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of exchange on which registered

Common Stock, par value $0.01 per share

HRI

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Smaller reporting company

☐

Accelerated filer

☐

Emerging growth company

☐

Non-accelerated filer

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 20, 2023, there were 28,267,711 shares of the registrant's common stock, $0.01 par value, outstanding.

Table of Contents

HERC HOLDINGS INC. AND SUBSIDIARIES

TABLE OF CONTENTS



		Page
Cautionary Note Regarding Forward-Looking Statements		1
PART I. FINANCIAL INFORMATION
ITEM 1.	Financial Statements	2
	Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022	2
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2023 and 2022	3
	Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2023 and 2022	4
	Condensed Consolidated Statements of Changes in Equity for the Three and Nine Months Ended September 30, 2023 and 2022	5
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022	7
	Notes to Condensed Consolidated Financial Statements	9
ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	21
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	28
ITEM 4.	Controls and Procedures	28
PART II. OTHER INFORMATION
ITEM 1.	Legal Proceedings	29
ITEM 1A.	Risk Factors	29
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
ITEM 5.	Other Information	29
ITEM 6.	Exhibits	30
SIGNATURE		31

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HERC HOLDINGS INC. AND SUBSIDIARIES

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q for the period ended September 30, 2023 (this "Report") includes "forward-looking statements," as that term is defined by the federal securities laws. Forward-looking statements include statements concerning our business plans and strategy, projected profitability, performance or cash flows, future capital expenditures, our growth strategy, including our ability to grow organically and through M&A, anticipated financing needs, business trends, our capital allocation strategy, liquidity and capital management and other information that is not historical information. Forward looking statements are generally identified by the words "estimates," "expects," "anticipates," "projects," "plans," "intends," "believes," "forecasts," "looks," and future or conditional verbs, such as "will," "should," "could" or "may," as well as variations of such words or similar expressions. All forward-looking statements are based upon our current expectations and various assumptions and apply only as of the date of this Report. Our expectations, beliefs and projections are expressed in good faith and we believe there is a reasonable basis for them. However, there can be no assurance that our expectations, beliefs and projections 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 those set forth in our Annual Report on Form 10-K for the year ended December 31, 2022 under Item 1A "Risk Factors," in Part II, Item 1A of this Report, 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 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.

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PART I—FINANCIAL INFORMATION

ITEM l. FINANCIAL STATEMENTS

HERC HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except par value)


	September 30, 2023		December 31, 2022
ASSETS	(Unaudited)
Cash and cash equivalents	$	71	$	54
Receivables, net of allowances of $21 and $18, respectively	595		523
Other current assets	63		67
Total current assets	729		644
Rental equipment, net	3,990		3,485
Property and equipment, net	473		392
Right-of-use lease assets	670		552
Intangible assets, net	468		431
Goodwill	508		419
Other long-term assets	55		34
Total assets	$	6,893	$	5,957
LIABILITIES AND EQUITY
Current maturities of long-term debt and financing obligations	$	18	$	16
Current maturities of operating lease liabilities	43		42
Accounts payable	247		318
Accrued liabilities	230		228
Total current liabilities	538		604
Long-term debt, net	3,665		2,922
Financing obligations, net	105		108
Operating lease liabilities	648		528
Deferred tax liabilities	693		647
Other long term liabilities	45		40
Total liabilities	5,694		4,849
Commitments and contingencies (Note 11)
Equity:
Preferred stock, $0.01 par value, 13.3 shares authorized, no shares issued and outstanding	—		—
Common stock, $0.01 par value, 133.3 shares authorized, 33.1 and 32.7 shares issued and 28.3 and 28.9 shares outstanding	—		—
Additional paid-in capital	1,816		1,820
Retained earnings	425		224
Accumulated other comprehensive loss	(128)		(129)
Treasury stock, at cost, 4.8 shares and 3.8 shares	(914)		(807)
Total equity	1,199		1,108
Total liabilities and equity	$	6,893	$	5,957

The accompanying notes are an integral part of these financial statements.

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HERC HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Unaudited

(In millions, except per share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenues:
Equipment rental	$	765	$	706	$	2,121	$	1,838
Sales of rental equipment	124		21		278		68
Sales of new equipment, parts and supplies	11		10		29		27
Service and other revenue	8		8		22		20
Total revenues	908		745		2,450		1,953
Expenses:
Direct operating	288		278		851		752
Depreciation of rental equipment	167		140		480		389
Cost of sales of rental equipment	99		16		201		49
Cost of sales of new equipment, parts and supplies	7		6		19		16
Selling, general and administrative	115		112		332		298
Non-rental depreciation and amortization	29		25		83		69

Interest expense, net	60		33		162		81
Other expense (income), net	(3)		—		(2)		(1)
Total expenses	762		610		2,126		1,653
Income before income taxes	146		135		324		300
Income tax provision	(33)		(34)		(68)		(68)
Net income	$	113	$	101	$	256	$	232
Weighted average shares outstanding:
Basic	28.3		29.7		28.5		29.8
Diluted	28.5		30.2		28.8		30.3
Earnings per share:
Basic	$	3.99	$	3.41	$	8.98	$	7.79
Diluted	$	3.96	$	3.36	$	8.89	$	7.66

The accompanying notes are an integral part of these financial statements.

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HERC HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Unaudited

(In millions)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net income	$	113	$	101	$	256	$	232
Other comprehensive income (loss):
Foreign currency translation adjustments	(6)		(16)		—		(21)
Pension and postretirement benefit liability adjustments:
Amortization of net losses included in net periodic pension cost	—		—		1		1
Income tax provision related to defined benefit pension plans	—		—		—		(1)
Total other comprehensive income (loss)	(6)		(16)		1		(21)
Total comprehensive income	$	107	$	85	$	257	$	211

The accompanying notes are an integral part of these financial statements.

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HERC HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Unaudited

(In millions)


	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total Equity
	Shares	Amount
Balance at December 31, 2022	28.9	$	—	$	1,820	$	224	$	(129)	$	(807)	$	1,108
Net income	—	—		—		67		—		—		67
Other comprehensive income	—	—		—		—		2		—		2
Stock-based compensation charges	—	—		4		—		—		—		4
Dividends declared, $0.6325 per share	—	—		—		(19)		—		—		(19)
Net settlement on vesting of equity awards	0.3	—		(25)		—		—		—		(25)
Employee stock purchase plan	—	—		1		—		—		—		1
Exercise of stock options	—	—		1		—		—		—		1
Repurchase of common stock	(0.4)	—		—		—		—		(52)		(52)
Balance at March 31, 2023	28.8	—		1,801		272		(127)		(859)		1,087
Net income	—	—		—		76		—		—		76
Other comprehensive income	—	—		—		—		5		—		5
Stock-based compensation charges	—	—		5		—		—		—		5
Dividends declared, $0.6325 per share	—	—		—		(18)		—		—		(18)

Employee stock purchase plan	—	—		1		—		—		—		1
Exercise of stock options	—	—		1		—		—		—		1
Repurchase of common stock	(0.5)	—		—		—		—		(55)		(55)
Balance at June 30, 2023	28.3	—		1,808		330		(122)		(914)		1,102
Net income	—	—		—		113		—		—		113
Other comprehensive loss	—	—		—		—		(6)		—		(6)
Stock-based compensation charges	—	—		6		—		—		—		6
Dividends declared, $0.6325 per share	—	—		—		(18)		—		—		(18)

Employee stock purchase plan	—	—		1		—		—		—		1
Exercise of stock options	—	—		1		—		—		—		1

Balance at September 30, 2023	28.3	$	—	$	1,816	$	425	$	(128)	$	(914)	$	1,199

The accompanying notes are an integral part of these financial statements.

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HERC HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Continued)

Unaudited

(In millions)

Common Stock

Additional
Paid-In Capital

Retained Earnings (Accumulated Deficit)

Accumulated
Other
Comprehensive
Income (Loss)

Treasury Stock

Total
Equity

SEC Form 10-Q filed by Herc Holdings Inc.