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| 8-K - 8-K - HERC HOLDINGS INC | herc2017q18-kearnings.htm |
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Herc Holdings Inc.
First Quarter Earnings Conference Call
for the period ending March 31, 2017
May 9, 2017
Agenda
2NYSE: HRI
Welcome and Introductions Elizabeth Higashi
Vice President, Investor Relations
Strategic Update and Industry
Outlook
Larry Silber
President and Chief Executive Officer
Q1 Financial Review Barbara Brasier
Senior Vice President and Chief Financial Officer
Q&A
Larry Silber
Barbara Brasier
Bruce Dressel
Senior Vice President and Chief Operating Officer
Safe Harbor Statements
3NYSE: HRI
Basis of Presentation
The financial information included in this presentation is based upon the condensed consolidated financial statements of the Company which are presented on a
basis of accounting that reflects a change in reporting entity and have been adjusted for the effects of the spin-off, which effected our separation from Hertz Rental
Car Holding Company, Inc. (“New Hertz”). These financial statements and financial information represent only those operations, assets, liabilities and equity that
form Herc Holdings Inc. on a stand-alone basis. Since the spin-off occurred on June 30, 2016, prior period amounts represent carve-out financial results.
Forward-Looking Statements
This presentation contains statements, including those related to 2017 guidance, that are not statements of historical fact, but instead are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995. We caution readers not to place undue reliance on these statements, which speak only as
of the date hereof. There are a number of risks, uncertainties and other important factors that could cause our actual results to differ materially from those suggested
by our forward-looking statements, including:
• Risks related to material weaknesses in our internal control over financial reporting and the restatement of financial statements previously issued by Hertz Global
Holdings, Inc. (in its form prior to the spin-off, “Hertz Holdings”), including that: we have identified material weaknesses in our internal control over financial
reporting that may adversely affect our ability to report our financial condition and results of operations in a timely and accurate manner, which may adversely affect
investor and lender confidence in us and, as a result, the value of our common stock and our ability to obtain future financing on acceptable terms, and we may
identify additional material weaknesses as we continue to assess our processes and controls as a stand-alone company with lower levels of materiality; such
material weaknesses could result in a material misstatement of our consolidated financial statements that would not be prevented or detected; we receive certain
transition services from New Hertz pursuant to the transition services agreement covering information technology services and other areas, which impact our
control environment and, therefore, our internal control over financial reporting; we continue to expend significant costs and devote management time and attention
and other resources to matters related to our internal control over financial reporting and our material weaknesses and Hertz Holdings' restatement could adversely
affect our ability to execute our strategic plan; our efforts to design and implement an effective control environment may not be sufficient to remediate the material
weaknesses or prevent future material weaknesses; our material weaknesses and Hertz Holdings' restatement could expose us to additional risks that could
materially adversely affect our financial position, results of operations and cash flows, including as a result of events of default under the agreements governing our
indebtedness and/or government investigations, regulatory inquiries and private actions; we may experience difficulties implementing new information technology
systems to maintain our books and records and provide operational information to our management team; if we decide to not implement the new operational
system for our back office processes, we could need to expense items that were previously capitalized, which could have a material adverse effect on our results of
operations; we could experience disruptions to our control environment in connection with the relocation of our Shared Services Center, including as a result of the
failure to retain key employees who possess specific knowledge or expertise necessary for the timely preparation of our financial statements; and Hertz Holdings'
restatement has resulted in government investigations, books and records demands, and private litigation and could result in government enforcement actions and
private litigation that could have a material adverse impact on our results of operations, financial condition, liquidity and cash flows;
Safe Harbor Statements - Continued
4NYSE: HRI
• Risks related to the spin-off, which effected our separation from New Hertz, such as: we have limited operating history as a stand-alone public company, and our
historical financial information for periods prior to July 1, 2016, is not necessarily representative of the results that we would have achieved as a separate, publicly
traded company, and may not be a reliable indicator of our future results; the liabilities we have assumed and will share with New Hertz in connection with the spin-
off could have a material adverse effect on our business, financial condition and results of operations; if there is a determination that any portion of the spin-off
transaction is taxable for U.S. federal income tax purposes, including for reasons outside of our control, then we and our stockholders could incur significant tax
liabilities, and we could also incur indemnification liability if we are determined to have caused the spin-off to become taxable; if New Hertz fails to pay its tax
liabilities under the tax matters agreement or to perform its obligations under the separation and distribution agreement, we could incur significant tax and other
liability; our ability to engage in financings, acquisitions and other strategic transactions using equity securities is limited due to the tax treatment of the spin-off; the
loss of the Hertz brand and reputation could materially adversely affect our ability to attract and retain customers; the spin-off may be challenged by creditors as a
fraudulent transfer or conveyance; and if the spin-off is not a legal dividend, it could be held invalid by a court and have a material adverse effect on our business,
financial condition and results of operations;
• Business risks could have a material adverse effect on our business, results of operations, financial condition and/or liquidity, including:
o the cyclicality of our business, a slowdown in economic conditions or adverse changes in the economic factors specific to the industries in which we operate,
in particular industrial and construction;
o the dependence of our business on the levels of capital investment and maintenance expenditures by our customers, which in turn are affected by numerous
factors, including the level of economic activity in their industries, the state of domestic and global economies, global energy demand, the cyclical nature of their
markets, expectations regarding government spending on infrastructure improvements or expansions, their liquidity and the condition of global credit and capital
markets;
o we may have difficulty obtaining the resources that we need to operate, or our costs to do so could increase significantly;
o intense competition in the industry, including from our own suppliers, that may lead to downward pricing or an inability to increase prices;
o any occurrence that disrupts rental activity during our peak periods given the seasonality of the business, especially in the construction industry;
o doing business in foreign countries exposes us to additional risks, including under laws and regulations that may conflict with U.S. laws and those under
anticorruption, competition, economic sanctions and anti-boycott regulations;
o our success as an independent company will depend on our new senior management team, the ability of other new employees to learn their new roles, and
our ability to attract and retain key management and other key personnel;
o some or all of our deferred tax assets could expire if we experience an “ownership change” as defined in the Internal Revenue Code;
o changes in the legal and regulatory environment that affect our operations, including with respect to taxes, consumer rights, privacy, data security and
employment matters, could disrupt our business and increase our expenses;
o an impairment of our goodwill or our indefinite lived intangible assets could have a material non-cash adverse impact;
Safe Harbor Statements - Continued
5NYSE: HRI
o other operational risks such as: any decline in our relations with our key national account customers or the amount of equipment they rent from us; our
equipment rental fleet is subject to residual value risk upon disposition, and may not sell at the prices we expect; we may be unable to protect our trade secrets
and other intellectual property rights; we may fail to respond adequately to changes in technology and customer demands; our business is heavily reliant upon
communications networks and centralized information technology systems and the concentration of our systems creates or increases risks for us, including the
risk of the misuse or theft of information we possess, including as a result of cyber security breaches or otherwise, which could harm our brand, reputation or
competitive position and give rise to material liabilities; failure to maintain, upgrade and consolidate our information technology networks could materially
adversely affect us; we may face issues with our union employees; we are exposed to a variety of claims and losses arising from our operations, and our
insurance may not cover all or any portion of such claims; environmental, health and safety laws and regulations and the costs of complying with them, or any
change to them impacting our customers’markets could materially adversely affect us; decreases in government spending could materially adversely affect us
and a lack of or delay in additional infrastructure spending may have a material adverse effect on our share price; maintenance and repair costs associated with
our equipment rental fleet could materially adversely affect us; and strategic acquisitions could be difficult to identify and implement and could disrupt our
business or change our business profile significantly;
• Risks related to our substantial indebtedness, such as: our substantial level of indebtedness exposes us or makes us more vulnerable to a number of risks that
could materially adversely affect our financial condition, results of operations, cash flows, liquidity and ability to compete; the secured nature of our indebtedness,
which is secured by substantially all of our consolidated assets, could materially adversely affect our business and holders of our debt and equity; an increase in
interest rates or in our borrowing margin would increase the cost of servicing our debt and could reduce our profitability; and any additional debt we incur could
further exacerbate these risks;
• Risks related to the securities market and ownership of our stock, including that: the market price of our common stock may fluctuate significantly; the market
price of our common stock could decline as a result of the sale or distribution of a large number of our shares or the perception that a sale or distribution could
occur and these factors could make it more difficult for us to raise funds through future stock offerings; and provisions of our governing documents could
discourage potential acquisition proposals and could deter or prevent a change in control; and
• Other risks and uncertainties set forth in our Annual Report on Form 10-K for the year ended December 31, 2016, under Item 1A "Risk Factors" and in our other
filings with the Securities and Exchange Commission (“SEC”).
All forward-looking statements are expressly qualified in their entirety by such cautionary statements. We do not undertake any obligation to release publicly any
update or revision to any of the forward-looking statements.
Information Regarding Non-GAAP Financial Measures
In addition to results calculated according to accounting principles generally accepted in the United States (“GAAP”), the Company has provided certain
information in this presentation which is not calculated according to GAAP (“non-GAAP”), such as adjusted EBITDA, free cash flow and normalized selling,
general and administrative expenses. Management uses these non-GAAP measures to evaluate operating performance and period-over-period performance of
our core business without regard to potential distortions, and believes that investors will likewise find these non-GAAP measures useful in evaluating the
Company’s performance. These measures are frequently used by security analysts, institutional investors and other interested parties in the evaluation of
companies in our industry.
Non-GAAP measures should not be considered in isolation or as a substitute for our reported results prepared in accordance with GAAP and, as calculated, may
not be comparable to similarly titled measures of other companies. For the definitions of these terms, further information about management’s use of these
measures as well as a reconciliation of these non-GAAP measures to the most comparable GAAP financial measures, please see the Appendix to this
presentation.
6NYSE: HRI
Q1 Key Takeaways
Our strategy is
driving strong top-
line growth
We are making
investments to
transform the
business
We are investing in
the activities to
support a stand-
alone public
company
We are affirming
our 2017 guidance
and are on track
with our five-year
business
transformation
We remain confident in our strategy
7
Financial Highlights – Q1 2017
8NYSE: HRI
1 Excluding impact of foreign currency translation.
2 Key markets are defined as markets we currently serve outside of upstream oil and gas markets, overall refers to all markets.
3 For a reconciliation to the most comparable GAAP financial measure, see the Appendix beginning on slide 24.
4 Herc Holdings does not provide forward-looking guidance for certain financial measures on a GAAP basis or a reconciliation of forward-looking non-GAAP
financial measures to the most directly comparable GAAP reported financial measures on a forward-looking basis because it is unable to predict certain items
contained in the GAAP measures without unreasonable efforts. Certain items that impact net income (loss) cannot be predicted with reasonable certainty,
such as restructuring and restructuring related charges, special tax items, borrowing levels (which affect interest expense), gains and losses from asset sales,
the ultimate outcome of pending litigation and spin-related costs
5 For a calculation of net fleet capital expenditures, see slide 21.
Equipment Rental Revenues $320.6 million
Equipment Rental Revenue Growth1
+ 8.5% in Key Markets2
85% of total
+ 3.8% YoY Overall2
Pricing
+ 1.7% YoY in Key Markets
+ 1.1% YoY Overall
Net Income (Loss) ($39.2) million
Adjusted EBITDA3
$97.8 million
25.1% margin
Affirmed 2017 Guidance4
Adjusted EBITDA: $550 to $590 million
Net Fleet Capital Expenditures5 : $275 to $325 million
Strategic Direction
Disciplined
Capital
Management
Expand and
Diversify
Revenues
Improve
Operating
Effectiveness
Enhance
Customer
Experience
On the Path Forward
• Broaden
customer base
• Expand
products and
services
• Increase
density
• Grow ancillary
revenues
• Focus on safety
and labor
productivity
• Improve vendor
management
and fleet
availability
• Drive operating
performance
through mix and
volume
• Provide
premium
products and
services
• Introduce
innovative
technology
solutions
• Drive EBITDA
margin growth
• Emphasize
fleet
management
• Improve key
financial
metrics
9NYSE: HRI
Expand and Diversify Revenues: Q1 2017 Highlights
• Rental revenue growth accelerated throughout
the first quarter
• The West and Southeast were especially
strong; the Midwest region is also improving
• Pricing was strong in key markets, particularly
in the U.S. in both national and local
accounts
• New account signings and re-activations were
at a record monthly high in March1
• Local rental revenues increased at a faster
rate than national rental revenues
• Ancillary revenue increased 8% in 2017
compared with 2016
• Positioning ProSolutions and ProContractor for
growth
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
Key Markets Overall
Year-Over-Year Price Change by Quarter3
10NYSE: HRI
Year-Over-Year Rental Revenue Growth by Market2,3
(5.0%)
0.0%
5.0%
10.0%
15.0%
Key Markets Overall
12.2%
8.1% 7.2%
6.2%
8.5%
(0.8%)
0.1%
1.4% 1.3%
3.8%
Q1-16 Q2-16 Q3-16 Q4-16 Q1-17
1.6%
1.7% 1.8%
1.5%
1.7%
(0.5%)
0.5% 0.5% 0.5%
1.1%
Q1-16 Q2-16 Q3-16 Q4-16 Q1-17
1 Although management considers the number of new account signings and re-activations as
an indicator of the momentum of our business and effectiveness of our sales organization, the
number of new account signings and re-activations is not indicative of future revenues
2 Excludes the impact of foreign currency
3 North America
Improve Operating Effectiveness: Q1 2017 Highlights
• Safety performance continued to improve in the
first quarter compared with prior year – with the
YTD total recordable incident rate (TRIR) declining
approximately 14%
• Opened three greenfield locations
• Made additional investment in sales and
training programs for our sales and branch
operations teams
• Focused on improving branch efficiencies
through broader operating process applications
• Kept direct operating expense as a % of total
revenues in the first quarter flat compared with a
year ago
• FUR was 13.0% in March 2017 compared to 12.4%
in March 2016, primarily reflecting the timing of
seasonal equipment that came off rent in Canada
due to an early spring this year
11NYSE: HRI
Enhance Customer Experience: Q1 2017 Highlights
• New Customer Care and telesales initiatives
are paying off through increased sales and
new leads
• We are continuing to:
– Expand ProSolutions Centers of Excellence -
now in 32 locations
– Upgrade branches to showcase
ProContractor equipment
o 35 branch locations now updated
o More than 50% of targeted branches to
be completed by year-end
– Shift core OEC categories to premium
equipment with broader customer appeal
particularly to professional contractors
– Expand ProControl™ telematics to strategic
customers
• Introducing new e-Apply online credit
application
12NYSE: HRI
Industry Outlook Highlights
Positive market growth and further penetration of rental solutions expected to continue
1 The American Institute of Architects (AIA).
2 ARA / IHS Global Insight as of May 2017, excludes Party & Event data.
3 Dodge Analytics.
4 Industrial information resources.
($ in billions)
as of May 2017
N.A. Equipment Rental Market 2
Non-Residential Starts 3
Architecture Billings Index 1
Industrial Spending 4
$299.2
$306.4
2016 2017E
J
a
n
-9
6
J
a
n
-0
0
J
a
n
-0
4
J
a
n
-0
8
J
a
n
-1
2
J
a
n
-1
6
50
$235
$249
$272
$281
$
2016 2017E 2018E 2019E
($ in billions)
a$3s5 0 of April 2017
13NYSE: HRI
Mar
54.3
as of April 2017
($ in billions)
as of April 2017
• Key industry metrics
remain positive – non-
residential construction
growth of 4.6% projected
through 2019
• American Rental
Association (ARA)
forecasts North
American equipment
rental growth of 4.5%
through 2021
• Industrial spending is
expected to grow 2.4%
in 2017
• Continuing shift from
ownership to rental will
fuel growth
$38
$31 $32
$35
$38
$41
$44
$47 $49
$51 $53
$56 $59
$61
08 09 10 11 12 13 14 15 16 17E 18E 19E 20E 21E
Transformation in Process
Executing our strategy and driving
improvements in operating performance
Rebranding of U.S. locations is nearly 90%
complete
Successfully diversifying fleet mix to higher
dollar utilization equipment categories
Achieving above market growth in major urban
locations
Growing local rental revenues faster than
national accounts
Broadening Herc Rentals Operating Model to
improve branch efficiency
Reducing equipment, parts and service costs
through better vendor management
Enhancing customer service through key
initiatives such as premium brands and new
technologies
14NYSE: HRI
Financial Overview
15
Q1 Financial Summary
16NYSE: HRI
1 For a reconciliation to the most comparable GAAP financial measure, see the Appendix beginning on slide 24.
$ in millions, except EPS Three Months Ended March 31,
2017 2016
Equipment Rental Revenues $ 320.6 $ 307.8
Total Revenues 389.4 365.6
Net Income (Loss) (39.2) (1.5)
Diluted Earnings (Loss) Per Share (1.39) (0.05)
Adjusted EBITDA1 $ 97.8 $ 107.8
Q1 Equipment Rental Revenues
$ in millions
• Overall equipment rental revenues increased
4.2%
• Equipment rental revenue increased
+8.5% in key markets, excluding
currency
• Key markets represented 85% of rental
revenue
− Traction of urban market strategy
• Key markets increase attributable to:
– Strong growth in the West and
Southeast
– ProSolutions growth year-over- year
• Pricing increased 1.7% YoY in key markets
and 1.1% overall
Q1 Equipment Rental Revenue Bridge Q1 Summary
17NYSE: HRI
$ 320.6
$9.6$1.0
$21.4
$307.8
150
170
190
210
230
250
270
290
310
330
350
2016 Currency translation Key markets Oil and gas 2017
• Total revenues for the first quarter were
$389 million compared with $366 million
in 2016, an increase of 6.5%
• Higher sales of revenue earning
equipment was related to aggressive fleet
management to achieve our strategic
goals
• New equipment sales were lower due to
the focus on higher-margin rental
activities
Q1 Total Revenue Bridge
$ in millions
Q1 Summary
Q1 Total Revenues
18NYSE: HRI
$389.4
$6.0$11.8
$365.6 $1.2
$16.8
250
270
290
310
330
350
370
390
410
430
2016 Currency
translation
Equipment rental
revenue
Sales of revenue
earning equipment
Sales of new
equipment and
other
2017
$ in millions
• Interest expense reflects debt on a stand-
alone basis and includes $5.8 million
related to the cost of the redemption of
10% of the senior notes in the first quarter
• All Other includes the impact of increases
in SG&A and DOE as well as declines in oil
and gas contribution
• Fleet depreciation increased due to
fleet growth and carry over effect of
normal course rate adjustments made
in 2016
Q1 Summary
Q1 Net Income
Q1 Net Income Bridge
19NYSE: HRI
1 Excludes the impact of currency translation.
$(39.2)
$0.2
$31.3
$10.8
$12.1
$15.1
$1.6
($1.5)
(45)
(35)
(25)
(15)
(5)
5
15
25
2016 Currency
Translation
Income tax
benefit
Spin-off costs Interest
expense
Depreciation
of REE
All Other 2017
1
11
0
20
40
60
100
140
$ in millions
Q1 Adjusted EBITDA Bridge
Q1 Adjusted EBITDA1
• The improvement in the results of the
sales of revenue earning equipment
and key markets added positively to
adjusted EBITDA in the quarter
• Upstream oil and gas results were
impacted by continued headwinds
resulting in lower adjusted EBITDA
compared with 2016
• Business transformation costs totaled
$4.2 million
• Stand-alone public company costs
increased $5.5 million in the quarter
compared with 2016
• Professional fees related to year-end
reporting drove $4 million of additional
costs
• $2.3 million charge related to the
bankruptcy filing of a large customer
was recorded in the quarter
1 For a reconciliation to the most comparable GAAP financial measure, see the Appendix beginning on slide 24.
20NYSE: HRI
$97.8$5.5
$4.0 $2.3 $4.2 $5.6
$0.2
$7.4
$4.0$107.8
0
20
40
60
80
100
120
140
2016 Currency
translation
Loss on sales
of revenue
earning
equipment
Stand-alone
costs
Year-end
reporting
Customer
bankruptcy
Business
transformation
costs
Key
markets
Oil and gas 2017
Q1 SG&A was approximately $75 million, excluding
year-end reporting costs and the customer bankruptcy
charge1.
Q1 Summary
NYSE: HRI 21
1 Cash Flow Basis
2 Based on ARA guidelines.
Fleet Capital Expenditures
• Cash expenditures for revenue earning equipment were $56.2 million as we continued
to make progress in shifting fleet into high dollar utilization categories
• Cash proceeds from disposals was $44.7 million, resulting in net fleet capital expenditures of
$11.5 million
• Rental equipment at OEC 2 remained unchanged from year-end at $3.56 billion
• Average rental equipment at OEC2 for the quarter ended March 31, 2017, grew 5.3% versus
the prior year’s first quarter
$ in millions Three Months Ended March 31,
2017 2016 $ Variance
Total Revenue Earning Equipment Expenditures $ 56.2 $ 36.7 $ 19.5
Revenue Earning Equipment Disposals $ (44.7) $ (41.7) $ (3.0)
Net Fleet Capital Expenditures 1 $ 11.5 $ (5.0) $ 16.5
NYSE: HRI 22
Debt and Liquidity
Debt Ample Liquidity
$ in millions, as of 03/31/17
ABL Credit
Facility
$978.8
Senior Secured
Second Priority Notes
$549.0 $562.5
'17 '18 '19 '20 '21 '22 '23 '24
• Stable debt with long dated maturities provide financial flexibility
Total long-term debt of $2.2 billion as of March 31, 2017
• Utilizing borrowings under our ABL Credit Facility, we redeemed 10% or $123.5 million of the
outstanding senior notes and recorded a $5.8 million loss on the early extinguishment of debt
• Maintained ample liquidity during the quarter with $773 million as of March 31, 2017
• Net cash from operating activities totaled $86.2 million with free cash flow1 for the first quarter of $59
million positively impacted by changes in working capital
Capital
Leases
$66.5
1 For a reconciliation to the most comparable GAAP financial measure, see the Appendix beginning on slide 24.
Total Liquidity $ 772.6
Cash and Cash Equivalents
ABLAvailability
24.3
748.3
Facility
Outstanding
Letters of Credit
1,750.0
(978.8)
(22.9)
NYSE: HRI 23
Our strategy is
driving strong top-
line growth
We are making
investments to
transform the
business
We are investing in
the activities to
support a stand-
alone public
company
We are affirming
our 2017 guidance
and are on track
with our five-year
business
transformation
We remain confident in our strategy
Q1 Key Takeaways
NYSE: HRI 24
Appendix
24
25NYSE: HRI
1 OEC: Original Equipment Cost which is an operating measure based on the guidelines of the American Rental
Association, which is calculated as the cost of the asset at the time it was first purchased plus additional capitalized
refurbishment costs (with the basis of refurbished assets reset at the refurbishment date).
2
Fleet Age: The OEC weighted age of the entire fleet.
Net Fleet Capital Expenditures: Capital expenditures of revenue earning equipment minus the proceeds from
disposal of revenue earning equipment.
3
Dollar Utilization ($ Ute): Dollar utilization is an operating measure calculated by dividing rental revenue by the
average OEC of the equipment fleet for the relevant time period.
4
Pricing: Change in pure pricing achieved in one period versus another period. This is applied both to year-over-year
and sequential comparisons. Rental rates are calculated based on the category class rate variance achieved either
year-over-year or sequentially for any fleet that qualifies for the fleet base and weighted by the prior year revenue mix.
5
FUR: Fleet unavailable for rent.
6
Glossary of Terms Commonly Used in the Industry
26NYSE: HRI
Reconciliation of Net Income to EBITDA and Adjusted EBITDA
EBITDA and Adjusted EBITDA are not recognized terms under GAAP and should not be
considered in isolation or as a substitute for our reported results prepared in accordance with GAAP.
Further, since all companies do not use identical calculations, our definition and presentation of
these measures may not be comparable to similarly titled measures reported by other companies.
EBITDA and Adjusted EBITDA - EBITDA represents the sum of net income (loss), provision for
income taxes, interest expense, net, depreciation of revenue earning equipment and non-rental
depreciation and amortization. Adjusted EBITDA represents EBITDA plus the sum of merger and
acquisition related costs, restructuring and restructuring related charges, spin-off costs, non-cash
stock based compensation charges, loss on extinguishment of debt (which is included in interest
expense, net), impairment charges, gain on disposal of a business and certain other items.
Management uses EBITDA and Adjusted EBITDA to evaluate operating performance and period-over-
period performance of our core business without regard to potential distortions, and believes that
investors will likewise find these non- GAAP measures useful in evaluating the Company’s
performance. These measures are frequently used by security analysts, institutional investors and
other interested parties in the evaluation of companies in our industry. However, EBITDA and Adjusted
EBITDA do not purport to be alternatives to net earnings as an indicator of operating performance.
Additionally, neither measure purports to be an alternative to cash flows from operating activities as a
measure of liquidity, as they do not consider certain cash requirements such as interest payments and
tax payments.
27NYSE: HRI
Reconciliation of Net Income to EBITDA and Adjusted EBITDA
$ in millions Three months ended
March 31,
2017 2016
Net income (loss) $ (39.2) $ (1.5)
Provision for income taxes (15.1) -
Interest expense, net 37.8 6.5
Depreciation of revenue earning equipment 92.9 81.8
Non-rental depreciation and amortization 11.7 10.5
EBITDA 88.1 97.3
Restructuring charges 0.6 0.3
Spin-off costs 7.6 9.2
Non-cash stock-based compensation charges 1.5 1.0
Adjusted EBITDA $ 97.8 $ 107.8
Total Revenues $ 389.4 $365.6
Adjusted EBITDA $ 97.8 $ 107.8
Adjusted EBITDA Margin 25.1% 29.5%
28NYSE: HRI
Reconciliation of Free Cash Flow
Free cash flow is not a recognized term under GAAP and should not be considered in isolation or
as a substitute for our reported results prepared in accordance with GAAP. Further, since all
companies do not use identical calculations, our definition and presentation of this measure may
not be comparable to similarly titled measures reported by other companies.
Free cash flow represents net cash provided by (used in) operating activities less revenue
earning equipment expenditures, proceeds from disposal of revenue earning equipment, property
and equipment expenditures, proceeds from disposal of property and equipment and other
investing activities. Free cash flow is used by management in analyzing the Company’s ability to
service and repay its debt and to forecast future periods. However, this measure does not
represent funds available for investment or other discretionary uses since it does not deduct cash
used to service debt or for other non-discretionary expenditures.
29NYSE: HRI
Reconciliation of Free Cash Flow
$ in millions Three Months Ended March 31,
2017 2016
Net cash provided by operating activities $ 86.2 $102.6
Revenue earning equipment expenditures ( (56.2) (36.7)
Proceeds from disposal of revenue earning equipment 44.7 41.7
Property and equipment expenditures (17.9) (4.7)
Proceeds from disposal of property and equipment 0.5 1.2
Other investing activities 1.4 2.9
Free Cash Flow $ 58.7 $107.0
30NYSE: HRI
Normalized Selling, General and Administrative Expenses
$ in millions Three Months Ended
March 31, 2017
Selling, general and administrative expenses $ 81.2
Less: Year-end reporting expenses (4.0)
Customer bankruptcy (2.3)
Normalized selling, general and administrative expenses $ 74.9
Normalized selling, general and administrative expenses is not a recognized term under GAAP
and should not be considered in isolation or as a substitute for our reported results prepared in
accordance with GAAP. Management uses normalized selling, general and administrative
expenses to evaluate operating performance and predict future performance without regard to
potential distortions, and believes that investors will likewise find this non-GAAP measure useful in
evaluating and predicting the Company’s performance.
Diversifying the Fleet to Maximize Dollar Utilization
31NYSE: HRI
Aerial - Booms
19.3%
Aerial -
Scissors &
Other
6.4%
Earthmoving -
Heavy
10.7%
Earthmoving -
Compact
7.5%Material Handling-
Telehandlers
13.5%
Material
Handling -
Industrial
3.2%
Trucks and
Trailers
12.9%
ProSolutions
13.4%
ProContractor
4.7%
Air Compressors
3.0%
Other
2.0%
Lighting
1.7% Compaction
1.7% Aerial -
Booms
19.1%
Aerial -
Scissors &
Other
6.8%
Earthmoving -
Heavy
10.1%
Earthmoving -
Compact
7.4%Material Handling-
Telehandlers
12.8%
Material
Handling -
Industrial
4.0%
Trucks and
Trailers
12.6%
ProSolutions
13.5%
ProContractor
5.2%
Air Compressors
3.0%
Other
2.0%
Lighting
1.8% Compaction
1.7%
OEC as of 12/31/2016 OEC as of 3/31/2017
Increased
• Aerial – Scissor Lifts
• Material Handling - Industrial
• ProContractorTM and ProSolutionsTM
Reduced
• Aerial – Booms
• Earthmoving - Heavy
• Material Handling - Telehandlers
32NYSE: HRI