Herc Rentals Boosts Rental Revenue in Key Markets in Third Quarter
In its first full quarter as a standalone equipment rental company Herc Rentals reported $360.3 million in equipment rental revenues, compared with $373.2 million in the third quarter, a 3.5-percent dip. Total revenue was $403.6 million for the quarter, compared to $431.8 million in the year-ago period. Year-over-year volume comparisons were primarily affected by the absence of operations in France and Spain, which Hertz divested in October 2015, as well as continuing headwinds in upstream oil and gas markets and spin-off costs.
"We continued to make good progress on our strategic initiatives in our first quarter as a stand-alone public company and remain confident that we are on track to achieve our long term operational and financial performance targets," said Larry Silber, president and CEO. "Of note, for the third quarter, in our key markets we achieved rental revenue growth of 7.2 percent and realized improved pricing of 1.8 percent. "The ongoing rollout of our ProContractor Tools and ProSolutions equipment and services continues to expand and diversify our fleet and revenue mix and contributed to improved pricing during the quarter. Our focus on operating efficiency produced another solid quarter in fleet available for rent, which enables us to meet more of our customers' equipment needs. Overall, our third quarter performance reinforced our confidence in our business strategy, our people and the growth opportunities ahead.”
Excluding divested foreign operations and currency, equipment rental revenue in key markets increased 7.2 percent and accounted for 84 percent of the total. Herc defined key markets as those outside of upstream oil and gas markets. Adjusted EBITDA in the third quarter was $152.1 million, a decline of $8.0 million or 5 percent, versus the prior year period primarily because of divested foreign operations and currency. Growth in key markets more than offset the impact of lower results in upstream oil and gas markets.
Continued improvement in branch operating efficiencies reduced average fleet unavailable for rent to 13 percent in the month of September 2016 compared with 13.8 percent in September 2015.
Dollar utilization increased to 35.4 percent in the third quarter of 2016, an improvement of 190 basis points from the second quarter. Compared with the third quarter of 2015, dollar utilization declined 60 basis points, impacted by lower results in upstream oil and gas markets.
Equipment rental revenue in the first nine months of 2016 was $996.0 million compared with $1.05 billion in the comparable period in 2015, a decline of 5.4 percent, which was attributable to divested foreign operations and currency. Revenue growth in key markets offset lower revenues in upstream oil and gas markets. Excluding divested foreign operations and currency, equipment rental revenue in key markets increased 8.9 percent and accounted for 83.0 percent of the total.
Herc Rentals reported net fleet capital expenditures of $360 million for the nine-month period, on track with its full year guidance. At the end of the third quarter, Herc had rental equipment of approximately $3.62 billion, at original equipment cost. The average OEC for the third quarter increased 4.4 percent compared to the year-ago frame.
Herc Holdings confirmed that is expects adjusted EBITDA for the full year to be in the range of $520 million to $560 million.
Headquartered in Bonita Springs, Fla., Herc Rentals is No. 3 on the RER 100.
About the Author
Michael Roth
Editor
Michael Roth has covered the equipment rental industry full time for RER since 1989 and has served as the magazine’s editor in chief since 1994. He has nearly 30 years experience as a professional journalist. Roth has visited hundreds of rental centers and industry manufacturers, written hundreds of feature stories for RER and thousands of news stories for the magazine and its electronic newsletter RER Reports. Roth has interviewed leading executives for most of the industry’s largest rental companies and manufacturers as well as hundreds of smaller independent companies. He has visited with and reported on rental companies and manufacturers in Europe, Central America and Asia as well as Mexico, Canada and the United States. Roth was co-founder of RER Reports, the industry’s first weekly newsletter, which began as a fax newsletter in 1996, and later became an online newsletter. Roth has spoken at conventions sponsored by the American Rental Association, Associated Equipment Distributors, California Rental Association and other industry events and has spoken before industry groups in several countries. He lives and works in Los Angeles when he’s not traveling to cover industry events.