HERC’s Equipment Rental Volumes Jump 15.7 Percent in Q1

Hertz Equipment Rental Corp. posted worldwide equipment rental revenues of $351 million in the first quarter, a 16.2-percent increase compared to 2012. Equipment rental volumes increased 15.7 percent, the company said, along with a 3.6-percent increase in pricing. Volume increased on strong industrial and improving construction performance.

Adjusted pre-tax income for worldwide equipment rental for the first quarter was $45.8 million, an improvement of $19.9 million compared to $25.9 million in the prior-year period. In addition to increased volume and better rental rates, cost management initiatives contributed to the improved results.

Worldwide equipment rental achieved an adjusted pre-tax margin of 13 percent and a corporate EBITDA margin of 39.6 percent for the quarter.

The average acquisition cost of rental equipment operated during the first quarter of 2013 increased by 12.8 percent year-over-year and net revenue earning equipment as of March 31 was $2,269.5 million, compared to $1,911.1 million as of March 31, 2012.

“Equipment rental’s string of year-over-year double-digit growth continued with rental revenue excluding currency up 17.5 percent worldwide and 20 percent in North America in the first quarter,” said Hertz Corp. chairman Mark Frissora on the company’s conference call. “Based on the equipment rental market’s projected 6-percent to 7-percent growth rate this year, according to the American Rental Association, we believe we significantly outperformed the North America market’s growth rate.

“The top line increase is being driven by the beginning of the non-res recovery and continued strength in oil and gas, industrial and specialty markets. With North American construction revenue up 24 percent in the first quarter and continued upward trend of the Architectural Billings Index and increases in commercial loan activity, we believe the nonresidential construction recovery is starting to pick up, and we are well positioned to take advantage of the upturn with the fleet investments we made last year.”

Frissora added that national accounts represented 52 percent of first-quarter rental revenue.

“Total U.S. pricing was 4.1 percent,” added Frissora. “The higher demand benefited from greater overall rental penetration as more companies turn to renting versus buying equipment. Additionally, further penetration of the less cyclical industrial, specialty markets and equipment services segments is driving revenue growth and better fleet utilization. In the quarter, time utilization improved by 240 basis points in North America, while dollar utilization increased by 170 basis points. Corporate EBITDA in North America increased 32.3 percent, resulting in a 420 basis points margin expansion.

“For the full year, we still expect flow through to be in the range of 55 to 60 percent as we continue to invest in development programs for employees, add sales force, new Greenfield locations for our clients and markets and technology to drive customer satisfaction. Overall, for the company in total, our first-quarter results exceeded our expectations, keeping us on track to deliver our 2013 financial goals.”

Hertz Equipment Rental Corp., based in Park Ridge, N.J., is No. 4 on the RER 100.