Herc Rentals reported equipment rental revenue of $327.6 million for the second quarter of 2020, compared to $407.6 million in the second quarter last year, a 19.6-percent decline, obviously the result of the COVID-19 pandemic. Total revenues for the quarter were $368 million compared to $475.1 million in the year-ago quarter, a 22.5-percent plunge.
Net income for the quarter was $2 million, or $0.07 per diluted share, compared to $9.7 million and $0.33 per diluted share a year ago. Pricing was down slightly, dropping 0.3 percent in the quarter compared to the second quarter of 2019. Dollar utilization was 30.8 percent in the second quarter compared to 38 percent in Q219, as a result of lower volume and flat pricing.
"We maintained rates and did an excellent job of controlling costs in a challenging quarter," said Larry Silber, president and CEO. "We took actions in 2019 to focus on disciplined capital expenditures and margin improvements, and with these programs in place, we were in a good position when the COVID-19 pandemic hit to intensify our cost control initiatives in line with business conditions. Despite the significant impact to our revenues, we were able to improve adjusted EBITDA margin by 380 basis points to 40.6 percent in the second quarter compared to the prior-year period.
"Our highest priority remains the safety of our employees and our customers and we have continued to maintain strict adherence to the Centers for Disease Control and Prevention's guidelines in our operations and interactions with customers. Our strategy to diversify our customers and fleet through specialty services has partially offset the overall impact of the pandemic on rental revenue. We are very pleased with the performance of our ProSolutions team in particular, as they continued to generate strong year-over-year growth during this healthcare crisis."
Direct operating expenses were $144.7 million in the second quarter, 23.2-percent less than the year-ago quarter. The $43.8 million decline reflected savings in nearly every category of expense, primarily because of lower transportation and maintenance costs as well as personnel-related costs because of furloughs implemented in the quarter.
Selling, general and administrative expenses decreased 22.7 percent to $56.8 million in the quarter compared to $73.5 million in Q219. The drop was primarily because of reductions in selling expenses and companywide cost-control initiatives.
Restructuring expenses were $0.7 million primarily related to personnel reductions in Q2, compared with $7.8 million associated with closures of under-performing branches in Q219.
Herc had impairment expense of $3.2 million during the second quarter related to the closure of two branch locations last year and the anticipated sale of two additional branch locations this year.
Adjusted EBITDA in the second quarter of 2020 declined 14.6 percent to $149.4 million compared to $174.9 million in the prior-year period. The decrease was primarily because of lower volume and flat pricing. Adjusted EBITDA margin increased 380 basis points to 40.6 percent in the second quarter of 2020, compared with 36.8 percent in the prior-year quarter.
Equipment rental revenue in the first half of 2020 declined 9.1 percent or $71.1 million to $714.1 million compared to $785.2 million in the first half of 2019. Lower volume because of the impact of COVID-19 impacted year-over-year results.
Total revenues were $804.2 million in the first half of 2020 compared to $950.8 million in the first half of 2019, a 15.4-percent tumble. The company posted lower equipment rental revenue, a decline in sales of new equipment, parts and supplies.
The company reported net fleet capital expenditures of $93.6 million for the first half of 2020. Gross fleet capital expenditures were $161.5 million compared with $257.1 million in the comparable prior year period. Proceeds from disposals were $67.9 million compared with $123.7 million last year. As of June 30, 2020, Herc’s total fleet was approximately $3.75 billion at original equipment cost.
Looking at expectations for the second half, while fleet on rent has increased from the trough in April, future business conditions related to COVID-19 are uncertain. The company estimates the volume of fleet on rent in the second half is likely to decline approximately 8 percent to 13 percent year-over-year, as the typical seasonal ramp is starting from a lower base going into the balance of the year. As a result, Herc Rentals estimates equipment rental revenue in the second half will be down about 10 to 15 percent year-over-year.
"Our leadership team's experience contributed to better than anticipated second quarter operating results and reflect our ability to manage through challenging times," said Silber. "Construction and business activity began to improve in early June and continues to trend slowly upward. We have managed our costs and taken steps to substantially reduce our capital expenditures to conserve capital. We generated free cash flow of approximately $179 million in the first half of 2020 and as of June 30, 2020, we had ample liquidity of $1.2 billion.
"Our Herc Rentals team continues to demonstrate their professionalism and resiliency as we serve our customers every day. We are ready to support our customers in whatever capacity they need, with the understanding that we must prove ourselves every day."
Based in Bonita Springs, Fla., Herc Rentals is No. 3 on the RER 100.
