Herc Holdings(US:HRI)2021-07-21 16:00PART I. FINANCIAL INFORMATION Financial Statements The company's financial statements reflect a stronger financial position with significant year-over-year revenue and net income growth for Q2 and H1 2021 Condensed Consolidated Balance Sheets Total assets grew to $3.7 billion, driven by an increase in net rental equipment, while total equity increased to $835.4 million Condensed Consolidated Balance Sheet Highlights (in millions) | Account | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total current assets | $379.7 | $367.1 | | Rental equipment, net | $2,308.7 | $2,260.4 | | Total assets | $3,682.6 | $3,588.4 | | Total current liabilities | $392.2 | $328.0 | | Long-term debt, net | $1,539.2 | $1,651.5 | | Total liabilities | $2,847.2 | $2,846.4 | | Total equity | $835.4 | $742.0 | Condensed Consolidated Statements of Operations The company reported significant year-over-year revenue and net income growth for both the second quarter and first half of 2021 Statement of Operations Summary (in millions, except per share data) | Metric | Q2 2021 | Q2 2020 | YTD 2021 | YTD 2020 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $490.9 | $368.0 | $944.7 | $804.2 | | Equipment rental | $448.0 | $327.6 | $848.4 | $714.1 | | Income (loss) before taxes | $61.8 | $0.1 | $102.9 | $(2.5) | | Net income (loss) | $47.1 | $2.0 | $80.0 | $(1.7) | | Diluted EPS | $1.55 | $0.07 | $2.64 | $(0.06) | Condensed Consolidated Statements of Cash Flows Net cash from operations increased to $327.9 million for H1 2021, while investing activities increased due to higher equipment expenditures Cash Flow Summary for Six Months Ended June 30 (in millions) | Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $327.9 | $280.4 | | Net cash used in investing activities | $(204.7) | $(101.6) | | Rental equipment expenditures | $(239.3) | $(161.5) | | Net cash used in financing activities | $(122.0) | $(128.7) | | Net increase in cash | $1.6 | $50.2 | Notes to Condensed Consolidated Financial Statements The notes detail accounting policies for revenue recognition, the company's debt structure, and the dismissal of a significant securities litigation case - The company's revenue is primarily generated in the United States, accounting for approximately 91.6% of total revenue for Q2 202144 Revenue Breakdown by Accounting Standard (Q2 2021, in millions) | Standard | Revenue | Total Revenue | | :--- | :--- | :--- | | Topic 842 (Leases) | $422.4 | $490.9 | | Topic 606 (Contracts) | $68.5 | $490.9 | - A putative shareholder class action, In re Hertz Global Holdings, Inc. Securities Litigation, was dismissed with prejudice in April 2021, resolving a long-standing legal matter8082 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management attributes strong Q2 2021 performance to economic recovery, driving significant growth in equipment rental revenue and maintaining robust liquidity Results of Operations Q2 2021 revenue grew 33.4% year-over-year, driven by a 36.8% increase in equipment rental revenue from higher volume and positive pricing Key Performance Changes (Q2 2021 vs Q2 2020) | Metric | Q2 2021 | Q2 2020 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Equipment rental revenue | $448.0M | $327.6M | $120.4M | 36.8% | | Total revenues | $490.9M | $368.0M | $122.9M | 33.4% | | Direct operating expenses | $203.0M | $144.7M | $58.3M | 40.3% | | SG&A | $74.0M | $56.8M | $17.2M | 30.3% | | Net income | $47.1M | $2.0M | $45.1M | NM | - The increase in Q2 2021 equipment rental revenue was driven by higher volume of equipment on rent and positive pricing of 1.9% over the same period in 2020117 - The increase in Q2 2021 direct operating expenses was primarily due to higher personnel-related costs ($20.4M), delivery and freight ($10.4M), maintenance ($9.2M), and re-rent expenses ($8.0M)119 Liquidity and Capital Resources The company maintains a strong liquidity position with $1.5 billion in credit availability and has increased capital expenditures to support growth - As of June 30, 2021, the company had liquidity of $34.6 million in cash and cash equivalents and approximately $1.5 billion of unused commitments under its ABL Credit Facility133 Net Rental Equipment Capital Expenditures (Six Months Ended June 30, in millions) | Item | 2021 | 2020 | | :--- | :--- | :--- | | Rental equipment expenditures | $239.3 | $161.5 | | Disposals of rental equipment | $(71.0) | $(67.9) | | Net rental equipment expenditures | $168.3 | $93.6 | - The company is not subject to ongoing financial maintenance covenants under its credit facilities as of June 30, 2021, as it has maintained the appropriate levels of liquidity149 Quantitative and Qualitative Disclosures About Market Risk The company reports no material change in its exposure to market risks from its 2020 Annual Report - As of June 30, 2021, there has been no material change in the company's market risk disclosures from its 2020 Annual Report158 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2021, with no material changes to internal controls - Management concluded that as of June 30, 2021, the company's disclosure controls and procedures were effective159 - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2021, that have materially affected, or are reasonably likely to materially affect, internal controls160 PART II. OTHER INFORMATION Legal Proceedings This section refers to Note 11 for details on legal matters, highlighting the dismissal of a significant shareholder class action - For details on legal proceedings, the report refers to Note 11 in Part I, Item 1163 Risk Factors No material changes to the company's risk factors have been reported since its 2020 Annual Report on Form 10-K - No material changes to risk factors were reported compared to the 2020 Annual Report on Form 10-K164 Unregistered Sales of Equity Securities and Use of Proceeds The company made no share repurchases during H1 2021, with $395.9 million remaining available under its repurchase program - No share repurchases were made during the six months ended June 30, 2021165 - As of June 30, 2021, $395.9 million remains available for share purchases under the Share Repurchase Program165 Exhibits This section lists all exhibits filed with the Form 10-Q, including officer certifications and XBRL data files