Herc narrows losses, completes last step in separation from Hertz in Q2

Herc has completed its separation from Hertz.

Larry Silber, president and CEO of Herc Holdings, announced the pivotal milestone on Wednesday, as part of the company's earnings report for the second quarter.

The earnings report continued to show operational improvements: Losses narrowed and revenues rose markedly over the year.

Herc, a diversified rental equipment business based in Bonita Springs, split from rental car giant Hertz more than two years ago. Since then it has been working to find its own way as a stand-alone company.

The final separation of Herc's financial information technology systems from Hertz happened in late July.

It means the company no longer uses any support services from its former parent, and it's the final step in "establishing our independence," Silber said.

It had been the company's No. 1 priority; now there's a new one.

A new priority

"With the final separation now behind us, our full attention and resources can be applied to operational improvements," Silber said.

Within a year after the spinoff, most of the heavy lifting had been done. The final phase of the separation was very complicated but well-executed, Silber said in a conference call with analysts Wednesday.

"We are now fully self-sufficient in managing our financial systems, which allows us to control the further development of our technology in coordination with our customer market growth and operational priorities for improvement," he said.

A five year-plan for transformation

Silber has been executing a five-year plan to transform the business. The company is taking a four-pronged approach: to expand and diversify revenues, improve operating effectiveness, enhance customer experience and drive earnings growth through disciplined capital management.

Last earningsreport:Herc Holdings narrows losses in Q1, reports double- digit increase in revenue

The transformational plan is showing results, and it's reflected in the most recent quarterly results, Silber said.

Second-quarter highlights

Here are some of the highlights from the second quarter:

• Equipment rental revenue grew to $392.5 million, up from $350.8 million a year ago. 
• Pricing improved 2.9 percent, marking the ninth quarter of year-over-year improvement in a row. 
• Total revenue grew to $485.5 million, up from $415.8 million last year.

In the quarter, the company narrowed its losses to $300,000, or 1 cent a share, down from a loss of $27.6 million, or 98 cents a share, a year ago. While that was a big improvement, it didn't meet the expectations of analysts, who on average expected earnings of 1 cent a share.

Company executives attributed the improved results to the company's focus on fleet, customer and local market diversification, which is driving strong rental revenue growth across North America.

Overall Herc is benefitting from improved "volume, mix and price," Silber said.

Improved results in the second quarter also reflect the sale of $31.8 million worth of equipment.

Herc continues to invest in new products and categories, including its ProContractor rental tools for contractors and growing ProSolutions line, which includes portable chillers, air conditioning and heating units, and dehumidifiers.

The company's executives and management also continue to focus on growth in urban markets and cost reductions. 

Safety is a top priority

Safety remains a priority, with the goal of "the perfect day" without any recordable incidents for the Occupational Safety and Health Administration, "at fault" motor accidents, or Department of Transportation violations. Over the last year, the company's total recordable incident rate has declined 10 percent.

Based on its latest results, Herc said it still expects earnings in the range of $630 million to $660 million this year before interest, taxes, depreciation and amortization.

The company also still plans to make $525 million to $575 million in capital investments in its fleet this year, as previously announced.

Herc, one of the leading equipment rental suppliers in the U.S., has about 275 locations, mostly in North America. Its customers include commercial and residential contractors, manufacturers, automotive companies, governments and farmers. 

Shares closed at $51.35 on Wednesday. 

In case you missed it:Herc finds its own way as a stand-alone company