Herc Holdings(HRI) - 2025 Q2 - Quarterly Report

Cautionary Note Regarding Forward-Looking Statements The report includes forward-looking statements based on current expectations and assumptions, subject to risks that could cause actual results to differ materially - The report includes forward-looking statements based on current expectations and assumptions, which are subject to various risks and uncertainties that could cause actual results to differ materially[9][10] - Key factors that could cause actual results to differ include the cyclical nature and competitiveness of the industry, dependence on suppliers and IT systems, ability to attract talent, residual value risk of rental fleet, climate change impact, ability to execute strategic transactions (including H&E integration), and significant indebtedness[10][11] PART I. FINANCIAL INFORMATION This part presents the company's unaudited condensed consolidated financial statements and management's analysis of financial condition and operations ITEM 1. Financial Statements Unaudited condensed consolidated financial statements reflect significant H&E acquisition impacts, leading to increased assets, liabilities, and a net loss Condensed Consolidated Balance Sheets The condensed consolidated balance sheets show significant increases in assets, liabilities, and goodwill, primarily driven by the H&E acquisition Condensed Consolidated Balance Sheets (In millions) | Metric | June 30, 2025 | December 31, 2024 | | :--------------------------------------- | :-------------- | :---------------- | | Total Assets | $14,018 | $7,877 | | Rental equipment, net | $6,015 | $4,225 | | Intangible assets, net | $1,622 | $572 | | Goodwill | $2,901 | $670 | | Total Liabilities | $12,107 | $6,481 | | Long-term debt, net | $8,251 | $4,069 | | Total Equity | $1,911 | $1,396 | - Total assets increased by $6,141 million, or 78%, from December 31, 2024, to June 30, 2025, primarily driven by the H&E acquisition[14] - Goodwill increased by $2,231 million, or 333%, reflecting the significant impact of the H&E acquisition[14] Condensed Consolidated Statements of Operations The condensed consolidated statements of operations reflect a net loss for both the three and six months ended June 30, 2025, primarily due to increased expenses Condensed Consolidated Statements of Operations (In millions, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total Revenues | $1,002 | $848 | $1,863 | $1,652 | | Total Expenses | $1,048 | $755 | $1,917 | $1,478 | | Income (loss) before income taxes | $(46) | $93 | $(54) | $174 | | Net income (loss) | $(35) | $70 | $(53) | $135 | | Basic EPS | $(1.17) | $2.46 | $(1.82) | $4.77 | | Diluted EPS | $(1.17) | $2.46 | $(1.82) | $4.75 | - The company reported a net loss of $(35) million for the three months ended June 30, 2025, a 150% decrease from the net income of $70 million in the prior year, primarily due to increased transaction expenses, interest expense, and a loss on assets held for sale[17] - For the six months ended June 30, 2025, the company reported a net loss of $(53) million, a 139% decrease from the net income of $135 million in the prior year, driven by similar factors[17] Condensed Consolidated Statements of Comprehensive Income The condensed consolidated statements of comprehensive income show a total comprehensive loss for the three and six months ended June 30, 2025 Condensed Consolidated Statements of Comprehensive Income (In millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $(35) | $70 | $(53) | $135 | | Foreign currency translation adjustments | $17 | $(3) | $17 | $(9) | | Total comprehensive income (loss) | $(18) | $67 | $(36) | $126 | - Total comprehensive loss for the three months ended June 30, 2025, was $(18) million, compared to comprehensive income of $67 million in the prior year, primarily reflecting the net loss[19] Condensed Consolidated Statements of Changes in Equity The condensed consolidated statements of changes in equity show an increase in total equity, largely due to common stock issuance for the H&E acquisition Condensed Consolidated Statements of Changes in Equity (In millions) | Metric | Balance at Dec 31, 2024 | Net loss (6 months) | Stock-based compensation | Dividends declared | Issuance of common stock for H&E acquisition | Balance at June 30, 2025 | | :--------------------------------- | :-------------------- | :------------------ | :----------------------- | :----------------- | :------------------------------------------- | :--------------------- | | Total Equity | $1,396 | $(53) | $12 | $(40) | $584 | $1,911 | - Total equity increased by $515 million from December 31, 2024, to June 30, 2025, largely due to the issuance of $584 million in common stock for the H&E acquisition, partially offset by net losses and dividends[22] Condensed Consolidated Statements of Cash Flows The condensed consolidated statements of cash flows indicate significant cash usage in investing activities, offset by financing activities, primarily for the H&E acquisition Condensed Consolidated Statements of Cash Flows (In millions) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change | | :------------------------------------ | :----------------------------- | :----------------------------- | :----- | | Net cash provided by operating activities | $412 | $558 | $(146) | | Net cash used in investing activities | $(4,560) | $(700) | $(3,860) | | Net cash provided by financing activities | $4,118 | $141 | $3,977 | | Net change in cash and cash equivalents | $(30) | $(1) | $(29) | | Cash and cash equivalents at end of period | $53 | $70 | $(17) | - Cash used in investing activities increased significantly by $3,860 million, primarily due to $4,251 million for the H&E acquisition[24][180] - Cash provided by financing activities increased by $3,977 million, driven by new debt issuances totaling $3,467 million and $3,361 million from revolving lines of credit and securitization to fund the H&E acquisition[27][181] Notes to Condensed Consolidated Financial Statements Note 1—Organization and Description of Business Herc Holdings Inc. is a leading equipment rental supplier in North America, offering a broad portfolio of equipment and ancillary services - Herc Holdings Inc. is a leading equipment rental supplier with 622 locations in North America as of June 30, 2025[30] - The company offers a broad portfolio of equipment for rent, including aerial, earthmoving, material handling, and specialized solutions like ProSolutions® and ProContractor tools[30][31] - Ancillary services include sales of used equipment, new equipment, parts and supplies, repair, maintenance, equipment management, and safety training[30] Note 2—Basis of Presentation and Significant Accounting Policies The basis of financial statement presentation, significant accounting estimates, and evaluation of new accounting pronouncements are outlined - The condensed consolidated financial statements are prepared in conformity with U.S. GAAP, with certain disclosures condensed or omitted for interim reporting per SEC rules[32] - Management's significant estimates include receivables allowances, depreciation, recoverability of long-lived assets, goodwill valuation, and accounting for income taxes[34] - The company is evaluating new accounting pronouncements: ASU 2023-09 (Improvements to Income Tax Disclosures) effective after December 15, 2024, and ASU 2024-03 (Disaggregation of Income Statement Expenses) effective after December 15, 2026[37][38] Note 3—Revenue Recognition The company's revenue recognition policies, primarily from equipment rental and ancillary sales and services, with most revenue from the United States, are detailed - The company's primary revenue is from equipment rental (ASC Topic 842), with ancillary sales and services (ASC Topic 606)[39][40] - United States revenue represented approximately 93.5% and 93.6% of total revenue for the three and six months ended June 30, 2025, respectively[39] Revenue Breakdown (In millions) | Revenue Type | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Equipment rental (Topic 842) | $810 | $712 | $1,501 | $1,386 | | Delivery and pick-up (Topic 606) | $60 | $53 | $108 | $98 | | Sales of rental equipment (Topic 606) | $106 | $65 | $211 | $134 | | Sales of new equipment, parts & supplies (Topic 606) | $17 | $10 | $28 | $19 | | Service and other revenues (Topic 606) | $9 | $8 | $15 | $15 | | Total Revenues | $1,002 | $848 | $1,863 | $1,652 | Note 4—Rental Equipment Details on the net carrying value of rental equipment, which significantly increased due to acquisitions, are provided Rental Equipment, Net (In millions) | Metric | June 30, 2025 | December 31, 2024 | | :---------------------- | :-------------- | :---------------- | | Rental equipment (gross) | $8,325 | $6,423 | | Less: Accumulated depreciation | $(2,310) | $(2,198) | | Rental equipment, net | $6,015 | $4,225 | - The net carrying value of rental equipment increased by $1,790 million, or 42.4%, from December 31, 2024, to June 30, 2025, primarily due to acquisitions[56] Note 5—Business Combinations The acquisition of H&E Equipment Services, Inc. for $4.8 billion, funded by new debt, and its expected strategic benefits, are detailed - On June 2, 2025, the company completed the acquisition of H&E Equipment Services, Inc. for a total purchase price of $4.8 billion, including $2.9 billion in cash and $584 million in common stock[59][60] - The H&E acquisition was funded by new debt issuances and is expected to add scale, density, cross-sell opportunities, and increase equipment availability[59][60] H&E Acquisition Purchase Price Allocation (In millions) | Asset/Liability | Amount | | :---------------------------- | :----- | | Rental equipment | $1,830 | | Customer relationships intangible | $1,070 | | Goodwill | $2,211 | | Net identifiable assets acquired | $2,619 | | Net assets acquired | $4,830 | - The company also completed the acquisition of Otay Mesa Sales in July 2024 for approximately $273 million, with goodwill of $67 million[65][67] Pro Forma Supplementary Data (Six Months Ended June 30, 2025, In millions) | Metric | Herc | H&E | Total | | :-------------------------------- | :--- | :-- | :---- | | Historic/pro forma equipment rental revenue | $1,609 | $455 | $2,064 | | Historic/pro forma total revenues | $1,863 | $536 | $2,399 | | Pro forma pretax income | N/A | N/A | $7 | Note 6—Goodwill and Intangible Assets The significant increase in goodwill and intangible assets, primarily due to the H&E acquisition, and related amortization, are detailed Goodwill (In millions) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :-------------- | :---------------- | | Goodwill (net) | $2,901 | $670 | | Additions (primarily H&E acquisition) | $2,229 | $190 | Intangible Assets, Net (In millions) | Metric | June 30, 2025 | December 31, 2024 | | :--------------------------------------- | :-------------- | :---------------- | | Customer-related and non-compete agreements | $1,318 | $276 | | Internally developed software | $33 | $25 | | Trade name | $271 | $271 | | Total intangible assets, net | $1,622 | $572 | - Amortization of intangible assets increased to $31 million for the six months ended June 30, 2025, from $20 million in the prior year, primarily due to the H&E and Otay acquisitions[76] Note 7—Assets Held for Sale The classification of the Cinelease business as assets held for sale and the recorded loss due to market condition changes are explained - The Cinelease studio entertainment and lighting and grip equipment rental business is classified as assets held for sale, as its business model deviates from the company's growth strategy[77] - A $49 million loss was recorded during the second quarter of 2025 to adjust the carrying value of Cinelease net assets to fair value less estimated costs to sell, due to changed market conditions (labor strikes) and slower-than-anticipated return of productions[79] Assets and Liabilities Held for Sale (In millions) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :-------------- | :---------------- | | Total current assets held for sale | $23 | $17 | | Total long-term assets held for sale | $180 | $220 | | Total current liabilities held for sale | $19 | $15 | | Total long-term liabilities held for sale | $56 | $60 | Note 8—Leases The company's lease arrangements for real estate, equipment, and vehicles, and the components of its net lease cost, are described - The company leases real estate, office equipment, and service vehicles with terms up to 22 years, and also leases certain equipment for re-rental with variable payments not recorded on the balance sheet[81][82] Components of Lease Expense (In millions) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :----------------------------- | :----------------------------- | | Operating lease cost | $84 | $77 | | Finance lease cost | $10 | $9 | | Sublease income | $(34) | $(39) | | Net lease cost | $60 | $47 | - Net lease cost increased by $13 million, or 27.7%, for the six months ended June 30, 2025, compared to the prior year[83] Note 9—Debt The company's debt structure, including significant new issuances to fund the H&E acquisition, and its borrowing capacity, are detailed Company's Debt (In millions) | Debt Type | June 30, 2025 | December 31, 2024 | | :--------------------------------------- | :-------------- | :---------------- | | Senior Notes (2027, 2029, 2030, 2033) | $4,800 | $2,000 | | New ABL Credit Facility | $2,389 | — | | Prior ABL Credit Facility | — | $1,621 | | Term Loan Facility | $750 | — | | AR Facility | $357 | $400 | | Finance lease liabilities | $78 | $77 | | Unamortized debt issuance costs and discount | $(50) | $(12) | | Total debt | $8,274 | $4,086 | | Less: Current maturities of long-term debt | $(23) | $(17) | | Total long-term debt, net | $8,251 | $4,069 | - Total debt increased by $4,188 million, or 102.5%, from December 31, 2024, to June 30, 2025, primarily due to new debt issuances to fund the H&E acquisition[84] - New debt issued on June 2, 2025, includes $1.65 billion of 7.00% Senior Notes due 2030, $1.1 billion of 7.25% Senior Notes due 2033, and a $750 million Term Loan Facility, along with a New ABL Credit Facility of up to $4.0 billion[88][94][100][110] Borrowing Capacity and Availability (In millions, as of June 30, 2025) | Facility | Remaining Capacity | Availability Under Borrowing Base Limitation | | :---------------------- | :----------------- | :------------------------------------------- | | New ABL Credit Facility | $1,562 | $1,562 | | AR Facility | $43 | $16 | | Total | $1,605 | $1,578 | Note 10—Financing Obligations The company's financing obligations, primarily from non-qualifying sale-leaseback transactions, showing a slight decrease, are outlined Financing Obligations, Net (In millions) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------- | :-------------- | :---------------- | | Financing obligations (gross) | $105 | $107 | | Unamortized issuance costs | $(2) | $(2) | | Current maturities | $(5) | $(4) | | Financing obligations, net | $98 | $101 | - Financing obligations, primarily from non-qualifying sale-leaseback transactions, decreased slightly to $98 million net as of June 30, 2025[119] Note 11—Income Taxes The income tax benefit for the period, driven by pre-tax losses and non-deductible transaction costs, and the assessment of new tax legislation, are explained - The company reported an income tax benefit of $11 million for the three months ended June 30, 2025, compared to a provision of $23 million in the prior year, primarily due to the pre-tax loss and non-deductible transaction costs[120] - For the six months ended June 30, 2025, the income tax benefit was $1 million, compared to a provision of $39 million in the prior year, driven by similar factors[121] - The 'One Big Beautiful Bill Act' (OBBBA), enacted July 4, 2025, includes significant tax provisions, and the company is currently assessing its potential impacts on financial position, results of operations, and cash flows[122] Note 12—Accumulated Other Comprehensive Income (Loss) The components of accumulated other comprehensive income (loss), primarily influenced by foreign currency translation adjustments, are detailed Accumulated Other Comprehensive Income (Loss) (In millions) | Component | Balance at Dec 31, 2024 | Other comprehensive loss (6 months) | Balance at June 30, 2025 | | :-------------------------------- | :---------------------- | :-------------------------- | :--------------------- | | Pension and Other Post-Employment Benefits | $(19) | — | $(19) | | Foreign Currency Items | $(123) | $17 | $(106) | | Accumulated Other Comprehensive Income (Loss) | $(142) | $17 | $(125) | - Accumulated other comprehensive loss improved by $17 million, from $(142) million at December 31, 2024, to $(125) million at June 30, 2025, primarily due to positive foreign currency translation adjustments[124] Note 13—Commitments and Contingencies The company's legal claims, indemnification obligations from the 2016 Spin-Off, and tax matters agreements, are addressed - The company is subject to various legal claims in the ordinary course of business and has established reserves for probable and estimable losses[125][126] - Indemnification obligations include customary contractual indemnities and those specific to the 2016 Spin-Off from New Hertz, where the company assumed liabilities for its equipment rental business and a portion of shared liabilities[127][128] - Under the tax matters agreement, the company indemnifies New Hertz for taxes and related losses if its actions cause the Spin-Off to be taxable[128] Note 14—Fair Value Measurements The fair value measurements of financial instruments, including cash equivalents, notes, and term loans, are described - The fair value of cash, accounts receivable, accounts payable, and accrued liabilities approximates their carrying values due to their short-term nature[129] - Cash equivalents, primarily money market accounts, are classified as Level 1 assets and measured at fair value using quoted prices in active markets[130] Fair Value of Notes and Term Loan (In millions, as of June 30, 2025) | Debt Instrument | Nominal Unpaid Principal Balance | Aggregate Fair Value | | :---------------------- | :------------------------------- | :------------------- | | 2027 Notes | $1,200 | $1,200 | | 2029 Notes | $800 | $821 | | 2030 Notes | $1,650 | $1,718 | | 2033 Notes | $1,100 | $1,150 | | Term Loan Facility | $750 | $752 | | Total Notes and Term Loan | $5,500 | $5,641 | Note 15—Equity and Earnings (Loss) Per Share The issuance of common stock for the H&E acquisition and the reported basic and diluted earnings (loss) per share, are detailed - Approximately 4.7 million shares of common stock, valued at $584 million, were issued as part of the H&E acquisition on June 2, 2025[133] Earnings (Loss) Per Share (In millions, except per share data) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net income (loss), basic and diluted | $(35) | $70 | $(53) | $135 | | Basic weighted average common shares | 30.0 | 28.4 | 29.2 | 28.3 | | Diluted weighted average common shares | 30.0 | 28.5 | 29.2 | 28.4 | | Basic EPS | $(1.17) | $2.46 | $(1.82) | $4.77 | | Diluted EPS | $(1.17) | $2.46 | $(1.82) | $4.75 | - Both basic and diluted EPS reported a loss for the three and six months ended June 30, 2025, a significant decline from positive earnings in the prior year periods[136] Note 16—Arrangements with New Hertz The company's ongoing agreements with New Hertz, including the Separation and Distribution Agreement and Tax Matters Agreement, are described - The company maintains a Separation and Distribution Agreement with New Hertz, established after its 2016 Spin-Off, which allocates legal matters, shared liabilities, and other intercompany arrangements[137][139] - A Tax Matters Agreement governs the parties' rights and obligations regarding tax liabilities, benefits, attributes, and contests following the Spin-Off[140] Note 17—Segment Information The company operates as a single reportable segment: equipment rental, with the CEO as the Chief Operating Decision Maker - The company operates as a single reportable segment: equipment rental, which derives revenues from a broad and fungible fleet[141] - The Chief Executive Officer, as the Chief Operating Decision Maker, evaluates performance and allocates resources, particularly for new equipment purchases and capital allocation, using net income[142] ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations, highlighting the significant impact of the H&E acquisition on financial performance, liquidity, and capital structure OVERVIEW OF OUR BUSINESS AND OPERATING ENVIRONMENT An overview of the company's business, operating environment, and factors influencing profitability, including the H&E acquisition, is provided - The company's profitability is influenced by rental volume, mix, pricing, equipment utilization, equipment residual values, and interest rates[145] - The acquisition of H&E Equipment Services, Inc. for $4.8 billion significantly expanded the company's market presence with approximately 160 branches in over 30 U.S. states[146][147][150] - The operating environment is characterized by elevated interest rates and economic uncertainty, but the company's diversification across industries and project types contributes to business resiliency[151] - The 'One Big Beautiful Bill Act' (OBBBA), enacted July 4, 2025, includes significant tax provisions, and the company is assessing its potential impacts[153] - The business is seasonal, with lower demand in winter months and heightened activity in the third and fourth quarters, which the company mitigates by managing fleet capacity and expanding its customer base[154] RESULTS OF OPERATIONS An analysis of the company's financial performance for the three and six months ended June 30, 2025, compared to the prior year, is presented Three Months Ended June 30, 2025 Compared with Three Months Ended June 30, 2024 A comparison of the company's financial results for the three months ended June 30, 2025, against the prior year, highlighting revenue and expense changes, is presented Key Financial Highlights (Three Months Ended June 30, In millions) | Metric | 2025 | 2024 | Change | Change % | | :--------------------------------------- | :--- | :--- | :----- | :------- | | Total revenues | $1,002 | $848 | $154 | 18% | | Equipment rental revenue | $870 | $765 | $105 | 14% | | Sales of rental equipment | $106 | $65 | $41 | 63% | | Direct operating expenses | $379 | $326 | $53 | 16% | | Transaction expenses | $73 | $3 | $70 | NM | | Interest expense, net | $86 | $63 | $23 | 37% | | Loss on assets held for sale | $49 | — | $49 | NM | | Net income (loss) | $(35) | $70 | $(105) | (150)% | - Equipment rental revenue increased 14% to $870 million, driven by acquisitions, but on a pro forma basis, it decreased 4% due to H&E acquisition disruption and market moderation[156] - Sales of rental equipment increased 63% to $106 million, but the margin decreased to 19% (from 31% in 2024) due to normalization of used equipment pricing[157] - Transaction expenses surged by $70 million to $73 million, primarily due to advisory fees ($27 million) and commitment fees ($21 million) related to the H&E acquisition[162] Six Months Ended June 30, 2025 Compared with Six Months Ended June 30, 2024 A comparison of the company's financial results for the six months ended June 30, 2025, against the prior year, detailing revenue and expense changes, is presented Key Financial Highlights (Six Months Ended June 30, In millions) | Metric | 2025 | 2024 | Change | Change % | | :--------------------------------------- | :--- | :--- | :----- | :------- | | Total revenues | $1,863 | $1,652 | $211 | 13% | | Equipment rental revenue | $1,609 | $1,484 | $125 | 8% | | Sales of rental equipment | $211 | $134 | $77 | 57% | | Direct operating expenses | $706 | $633 | $73 | 12% | | Transaction expenses | $147 | $6 | $141 | NM | | Interest expense, net | $148 | $124 | $24 | 19% | | Loss on assets held for sale | $49 | — | $49 | NM | | Net income (loss) | $(53) | $135 | $(188) | (139)% | - Equipment rental revenue increased 8% to $1,609 million, but on a pro forma basis, it decreased 3.0% due to H&E acquisition disruption and market moderation[165] - Transaction expenses increased by $141 million to $147 million, including a $64 million termination fee for H&E, advisory fees, and commitment fees related to the Bridge Facility[171] - Interest expense, net, increased 19% to $148 million, driven by approximately $4.4 billion in increased borrowings for the H&E acquisition at a weighted average effective interest rate of 6.8%[172] LIQUIDITY AND CAPITAL RESOURCES The company's cash flows, capital expenditures, borrowing capacity, and debt covenants, emphasizing the impact of the H&E acquisition, are discussed Cash Flows An analysis of the company's cash flow activities, including operating, investing, and financing, with significant impacts from the H&E acquisition, is presented Cash Flow Summary (Six Months Ended June 30, In millions) | Cash Flow Activity | 2025 | 2024 | Change | | :------------------------------------ | :--- | :--- | :----- | | Operating activities | $412 | $558 | $(146) | | Investing activities | $(4,560) | $(700) | $(3,860) | | Financing activities | $4,118 | $141 | $3,977 | | Net change in cash and cash equivalents | $(30) | $(1) | $(29) | - Operating cash flow decreased by $146 million due to decreased profitability (transaction expenses) and timing of payments[179] - Investing cash flow increased by $3,860 million, primarily due to the $4,251 million cash portion of the H&E acquisition[180] - Financing cash flow increased by $3,977 million, driven by $3,467 million from long-term debt issuance and $3,361 million from revolving lines of credit and securitization to fund the H&E acquisition[181] Capital Expenditures Details on the company's capital expenditures for rental equipment, including acquisitions and disposals, and net expenditures, are provided Rental Equipment Capital Expenditures (Six Months Ended June 30, In millions) | Metric | 2025 | 2024 | | :-------------------------- | :--- | :--- | | Rental equipment expenditures | $421 | $468 | | Disposals of rental equipment | $(183) | $(125) | | Net rental equipment expenditures | $238 | $343 | - Net capital expenditures for rental equipment decreased by $105 million, or 30.6%, for the six months ended June 30, 2025, as the company returned to a normal seasonal cadence of equipment deliveries and disposals[185] Borrowing Capacity and Availability The company's borrowing capacity and availability under its credit facilities, subject to collateralized assets, are outlined - The company's borrowing capacity is determined by its New ABL Credit Facility and AR Facility, subject to the value of collateralized assets (Borrowing Base)[186] Borrowing Capacity and Availability (In millions, as of June 30, 2025) | Facility | Remaining Capacity | Availability Under Borrowing Base Limitation | | :---------------------- | :----------------- | :------------------------------------------- | | New ABL Credit Facility | $1,562 | $1,562 | | AR Facility | $43 | $16 | | Total | $1,605 | $1,578 | - As of June 30, 2025, $49 million of standby letters of credit were issued and outstanding, with $201 million available under the New ABL Credit Facility's sublimit[188] Covenants The covenants in the company's debt agreements, limiting certain financial and operational activities, are described - The company's debt agreements contain covenants limiting its ability to dispose of assets, incur additional indebtedness, make restricted payments (including dividends), create liens, and engage in certain transactions[189] - While not subject to ongoing financial maintenance covenants, a minimum fixed charge coverage ratio of 1:1 applies if liquidity falls below certain levels; this covenant was not applicable as of June 30, 2025, due to maintained liquidity[190] Dividends The declared quarterly dividend and the discretionary nature of future dividend declarations are reported - A quarterly dividend of $0.70 per share was declared on May 16, 2025, payable on June 13, 2025[194] - Future dividend declarations are discretionary and depend on business conditions, financial health, earnings, liquidity, capital requirements, and contractual restrictions[194] OFF-BALANCE SHEET COMMITMENTS AND ARRANGEMENTS No material changes to the company's off-balance sheet commitments and indemnification obligations are confirmed - There have been no material changes to the company's indemnification obligations as of June 30, 2025, as previously disclosed in its Annual Report on Form 10-K[195] RECENT ACCOUNTING PRONOUNCEMENTS Recent accounting pronouncements and their potential impact are discussed, referring to Note 2 - For a discussion of recent accounting pronouncements, refer to Note 2, 'Basis of Presentation and Significant Accounting Policies,' in Part I, Item 1 of this Report[197] ITEM 3. Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks from changes in interest rates, foreign currency exchange rates, and fuel prices, managed through operating and financing activities - The company is exposed to market risks including changes in interest rates (including credit spreads), foreign currency exchange rates, and fluctuations in fuel prices[198] - Market risks are managed through regular operating and financing activities, and, when appropriate, through the use of derivative financial instruments for risk management, not speculation[198] - As of June 30, 2025, there have been no material changes to the market risk disclosures from the Annual Report on Form 10-K for the year ended December 31, 2024[199] ITEM 4. Controls and Procedures The effectiveness of disclosure controls and procedures and changes in internal control over financial reporting, excluding the H&E acquisition, are addressed Evaluation of Disclosure Controls and Procedures The effectiveness of disclosure controls and procedures is confirmed, with the H&E acquisition excluded from the evaluation - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[200] - The H&E acquisition, completed on June 2, 2025, was excluded from the evaluation of disclosure controls and procedures, as permitted by SEC guidance during the first year of an acquisition[201] Changes in Internal Control Over Financial Reporting No material changes in internal control over financial reporting during the quarter are reported - There were no changes in internal control over financial reporting during the quarter ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[202] PART II. OTHER INFORMATION Additional information including legal proceedings, risk factors, equity security sales, and exhibits, is provided ITEM 1. Legal Proceedings Certain pending legal proceedings are described, referring to Note 13 - For a description of certain pending legal proceedings, refer to Note 13, 'Commitments and Contingencies,' in Part I, Item 1 of this Report[204] ITEM 1A. Risk Factors New risk factors primarily related to the H&E acquisition, including integration challenges and potential failure to realize benefits, are highlighted - No material changes to risk factors from the prior Annual Report on Form 10-K, except for those specifically related to the H&E acquisition[205] - Key risks of the H&E acquisition include the potential failure to realize anticipated benefits and synergies, difficulties in integrating operations and systems, and challenges in retaining key personnel and customer relationships[206][207][208] - These risks could lead to higher integration costs, longer timelines, and adverse impacts on the company's business, financial condition, operating results, and common stock price[207][208][211] ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds The company's share repurchase program is detailed, confirming no repurchases were made during the period - The company has a $1 billion Share Repurchase Program, with an approximate dollar value of $161 million remaining available for purchases as of June 30, 2025[212] - No share repurchases were made during the six months ended June 30, 2025[212] - The timing and extent of repurchases are discretionary and depend on strategic priorities, market conditions, share price, liquidity targets, and contractual/regulatory requirements[212] ITEM 5. Other Information No other information is reported under this item - No other information is reported under this item[213] ITEM 6. Exhibits All exhibits filed with the Form 10-Q, including merger agreements, debt indentures, and certifications, are listed - Exhibit 2.1: Agreement and Plan of Merger for H&E Equipment Services, Inc., dated February 19, 2025[215] - Exhibit 4.1: Indenture (including forms of Notes), dated June 2, 2025, related to new debt issuances[215] - Exhibits 10.1-10.6: Amended and Restated Credit Agreement for the New ABL Credit Facility and Credit Agreement for the Term Loan Facility, along with related guarantee and collateral agreements, dated June 2, 2025[215] - Exhibits 31.1 and 31.2: Certifications of the Principal Executive Officer and Principal Financial Officer pursuant to the Sarbanes-Oxley Act of 2002[215] SIGNATURE The report is signed by Mark Humphrey, Senior Vice President and Chief Financial Officer, on behalf of Herc Holdings Inc - The report was signed by Mark Humphrey, Senior Vice President and Chief Financial Officer of Herc Holdings Inc[220] - The signing date of the report was July 29, 2025[220]