Herc Holdings(HRI) - 2022 Q4 - Annual Report

Revenue and Market Dynamics - The company's revenues are significantly affected by the cyclical nature of the construction and industrial sectors, with a decline in these areas leading to decreased demand for rental equipment [69]. - A substantial portion of revenues is derived from non-residential construction and industrial customers, making the company vulnerable to fluctuations in construction activity and oil and gas prices [70]. - The rental equipment market is highly fragmented, with price being a primary competitive factor, affecting revenue and operational results [93]. - Equipment rental revenues for 2022 reached $2.6 billion, a 33.6$665.7 million, or 32.1%, to $2.738 billion in 2022 compared to 2021 [172]. - The company’s revenues are primarily derived from equipment rental and related charges, including ancillary revenue from delivery and rental protection programs [161][162]. Financial Performance - Net income for 2022 was$329.9 million, up 47.2% from $224.1 million in 2021 [172][180]. - Earnings per share (diluted) increased to$10.92 in 2022, compared to $7.37 in 2021, reflecting a 48$172.7 million to $916.7 million in 2022 compared to 2021 [185]. - The company reported a total comprehensive income of$301.6 million for 2022, compared to $230.9 million in 2021, marking a 30$1,027.7 million in 2022, up from $782.3 million in 2021, reflecting higher operational costs [251]. Capital Expenditures and Investments - Capital expenditures for rental equipment amounted to$1.168 billion in 2022, a significant increase from $593.8 million in 2021 [192]. - The company expects net rental equipment capital expenditures for 2023 to be between$1.0 billion and $1.2 billion [193]. - Rental equipment expenditures rose significantly to$1,168.5 million in 2022, compared to $593.8 million in 2021, indicating a focus on expanding rental capacity [260]. Debt and Financial Risks - As of December 31, 2022, the company had total outstanding debt of approximately$2.9 billion, which significantly impacts cash flow and profitability [124]. - The company faces risks related to its significant indebtedness, which could adversely affect its financial condition and operational flexibility [124]. - An increase in interest rates could raise the cost of servicing debt, negatively impacting profitability [128]. - The company may incur additional debt in the future, which could exacerbate existing financial risks [130]. Operational Challenges - Supply chain disruptions, exacerbated by the COVID-19 pandemic, have led to delays in receiving equipment, potentially impairing the company's ability to meet customer needs [75]. - The company is heavily reliant on IT systems and third-party technologies, making it vulnerable to cybersecurity threats that could disrupt operations and harm its reputation [78]. - The company may experience inefficiencies due to competition for talent in the North American workforce, impacting business continuity and operational efficiency [95]. - Seasonal fluctuations in the construction industry could lead to lower profitability during off-peak periods, particularly from December until late spring [97]. Regulatory and Environmental Factors - The company is exposed to risks from government regulations and policies that could impact capital investments in infrastructure and energy sectors [71]. - Climate change and regulatory responses may negatively impact the company's business and operational results, requiring capital expenditures to meet customer standards [110]. - Environmental liabilities accrued as of December 31, 2022, were $0.4 million, reflecting potential costs related to compliance and remediation [109]. Shareholder Returns and Stock Performance - The company declared a quarterly dividend of$0.6325 per share on February 8, 2023, with a payment date of March 9, 2023 [202]. - The company maintained quarterly dividends of $0.575 per share and repurchased approximately 1.1 million shares for$115.2 million in 2022 [167]. - The company has a $1.0 billion share repurchase program, allowing for purchases through various methods, subject to market conditions and strategic priorities [153]. Strategic Growth and Acquisitions - The company completed 18 acquisitions and opened 21 new greenfield locations in 2022, resulting in a net cash outflow of$515.2 million [165]. - The company is pursuing strategic transactions, including acquisitions and divestitures, to enhance or expand its business operations [113]. Asset Management - Rental equipment represented 58.5% of total assets as of December 31, 2022, indicating a significant investment in this area [205]. - The company recorded asset impairment charges of $3.5 million,$3.2 million, and $15.4 million for the years ended December 31, 2022, 2021, and 2020, respectively [219].