Herc reports $1,543.7 million in equipment rental revenue for 2020 compared to $1,701.8 million in 2019, which is a 9.3 percent or $158.1 million decline primarily due to lower volume related to Covid-19.
Total revenues were $1,781.3 million compared to $1,999.0 million in the prior-year period. The economic slowdown related to the Covid-19 pandemic impacted all of the company's revenue streams in 2020. Lower equipment rental revenue and sales of rental equipment were the primary factors contributing to the 10.9 percent, or $217.7 million, decline compared to 2019.
Other full-year 2020 highlights
• Pricing increased 0.1 percent compared to the same period in 2019.
• Dollar utilization was 36.1 percent compared with 38.7 percent in the prior year, primarily a result of lower volume and mix.
• DOE fell 10.6 percent, or $81.9 million, to $689.2 million compared to the prior-year period. The decline was primarily related to lower transportation, re-rent, and maintenance expense, as well as lower personnel-related expense as a result of furloughs and lower overtime expense.
• SG&A decreased 12.7 percent to $257.4 million compared to $294.8 million in the prior-year period. The $37.4 million decline was primarily attributed to reductions in selling and travel expenses, as well as lower bad debt expense due to continued improvement in collections.
• The company recorded restructuring expense of $0.7 million primarily related to personnel reductions compared with $7.7 million in the prior-year period associated with closures of under-performing branches.
• Impairment expense was $15.4 million and consisted of partial impairment of a long-term receivable related to the sale of a former joint venture, the impairment of certain rental equipment and capitalized software related to financial systems, assets related to the closure of two branch locations in 2019, and the sale of two locations in 2020. Impairment expense of $5.1 million in 2019 was primarily related to certain international assets that were deemed held for sale as of December 31, 2019.
• Interest expense decreased to $92.6 million compared to $173.5 million in the prior-year period. The decrease was primarily related to the $53.6 million debt extinguishment expense in 2019, lower average outstanding balances on the company's ABL Credit Facility, and lower interest rates on the Company's ABL Credit Facility, and 2027 Notes in 2020.
• Income tax provision was $20.4 million compared with $16.1 million in the prior-year period.
• The company reported net income of $73.7 million, or $2.51 per diluted share, compared to $47.5 million, or $1.63 per diluted share, in the prior-year period. Adjusted net income was $88.5 million, or $3.01 per diluted share, compared to $91.6 million, or $3.15 per diluted share, in the prior-year period.
• Adjusted EBITDA declined 7.0 percent to $689.4 million compared to $741.0 million in the prior- year period. The decline was primarily due to lower volume.
• Adjusted EBITDA margin increased 160 basis points to 38.7 percent compared to 37.1 percent in the prior-year period.
Q4 2020 results
For the quarter ended December 31, 2020, equipment rental revenue was $427.3 million and total revenues were $520.4 million compared to $457.0 million and $540.1 million, respectively, for the same period last year. The company reported net income of $35.5 million, or $1.19 per diluted share, in the fourth quarter of 2020, compared to $35.1 million, or $1.20 per diluted share, in the same 2019 period. Fourth quarter 2020 adjusted net income was $40.2 million, or $1.35 per diluted share, compared to $38.9 million, or $1.33 per diluted share, in 2019.
"We exceeded our expectations for the fourth quarter and have good momentum going into 2021," said Larry Silber, president and CEO. "During the year, we adjusted fleet to respond to the declines in volume related to the impact of Covid-19 on our customers and focused on controlling costs. The quick implementation of those initiatives led to our improved adjusted EBITDA margin and excellent free cash flow for the full year. Our commitment to customer service and consistent implementation of a strategy to diversify our customer and industry base continues to demonstrate the strength of our business model."
Outlook for 2021
The company reported 2021 guidance ranges of:
Adjusted EBITDA: $730 million to $760 million.
Net rental equipment capital expenditures: $400 million to $450 million.
"Our goal for 2021 adjusted EBITDA is to exceed 2019 profitability levels," said Silber. "As we announced in January, we completed our first multilocation acquisition since going public. We intend to carefully invest in fleet and add locations in high growth urban markets to accelerate our top-line growth while continuing to control expenses," he added.