Herc Rentals posted $386.5 million in first quarter 2020 equipment rental revenues compared to $377.6 million in the first quarter of 2019, a 2.4-percent increase. However, total revenue declined from $475.7 million in last year’s first quarter to $436.2 million, an 8.3-percent decline. Herc reported a net loss of $3.7 million, or $0.13 per diluted share in the first quarter, compared to a net loss of $6.7 million, or $0.23 per diluted share in the first quarter of 2019.
First quarter 2020 adjusted net income was $1.1 million compared to a net loss of $6.5 million a year ago.
Strong year-over-year improvement in pricing was partially offset by lower volume, as the impact of COVID-19 related orders began to slow the typical upturn in seasonal volume in mid-March. Pricing increased 2.4 percent in the first quarter of 2020 compared to the same period in 2019. Dollar utilization increased to 35.7 percent in the first quarter of 2020, a slight improvement compared to the prior-year period, primarily reflecting improved pricing and fleet mix.
The $39.5 million decline in total revenue was related primarily to a reduction in sales of rental equipment of $45.1 million, and $3.9 million reduction in sales of new equipment, parts and supplies compared to the prior year. Those reductions were partially offset by an increase in equipment rental revenue of $8.9 million.
"Equipment rental revenue improved year-over-year in the first quarter primarily due to positive rate growth," said Larry Silber, president and CEO. "We controlled direct operating expenses and reduced selling, general and administrative expenses compared with last year, contributing to our growth in adjusted EBITDA and a 400-basis-point improvement in adjusted EBITDA margin in the first quarter.
"In response to the onset of the COVID-19 pandemic in North America, we communicated and implemented safety and operating procedures based on the Center for Disease Control and Prevention's guidelines to our employees and customers. We are proud to be providing essential support to customers in a diverse mix of critical infrastructure sectors and nearly all of our branches are open and operating. Our ProSolutions team has been especially busy providing critical support to medical centers, hospitals and additional patient facilities. Our foremost priorities are the health and safety of our team, customers and communities, while supporting the needs of critical services and operations throughout North America."
Direct operating expenses of $189.2 million in the first quarter of 2020 were flat compared to the prior-year period. The $0.1 million increase was primarily related to lower transportation and maintenance costs which were offset by higher personnel and facilities costs.
Selling, general and administrative expenses decreased 2.4 percent to $69.8 million in the first quarter of 2020 compared to $71.5 million in the prior-year period. The $1.7 million decline was primarily attributed to the reduction in professional fees in the quarter and offset by an increase in bad debt expense.
Herc reported net fleet capital expenditures of $48.4 million. Gross fleet capital expenditures were $83.0 million, and proceeds from disposals were $34.6 million. As of March 31, 2020, the company's total fleet was approximately $3.80 billion at original equipment cost. Average fleet at OEC increased 1.7 percent in the first quarter of 2020 compared with the prior-year comparable period. Average fleet age was 46 months as of March 31, 2020, the same age as the comparable period last year.
The company generated $39.2 million in free cash flow in the first quarter of 2020, compared with $107.7 million in the same period in 2019. Free cash flow in 2020 was impacted by lower sales of rental equipment and the timing of interest payments on Herc’s senior notes.
Because of the uncertainty surrounding COVID-19, Herc Holdings has withdrawn its guidance for the year ahead.
"We have cut variable costs and taken steps to substantially reduce our capital expenditures to conserve capital,” Silber said. “As of the end of the first quarter, we had ample liquidity of $1.1 billion. These unprecedented times make it difficult to predict the length of the economic slowdown related to the COVID-19 pandemic or the full impact on our business. As a result, we are withdrawing our 2020 guidance. Nonetheless, we believe the steps we have taken provide ample liquidity to fund our business in 2020 and beyond.
"I am proud of the 'can do' attitude of our Herc Rentals team as we work to navigate this challenging time together. Our business model is resilient, and our leadership team is experienced. We remain ready to support our customers' operations in whatever capacity we can during this uncertain time and especially when construction and business activities resume. We thank all of our team members for their professionalism and dedication in serving our customers and communities. Working together, we will emerge stronger and better."
Based in Bonita Springs, Fla., Herc Rentals is No. 3 on the RER 100.
