Herc Holdings reported fourth quarter equipment rental revenue of $414.5 million compared to $356.7 million in the fourth quarter of 2016, a 16.2-percent increase. Total revenue was $491.7 million, up from $405.2 million a year ago, a 21.3-percent hike.
Herc reported net income of $214.3 million in the fourth quarter compared with a net loss of $13.2 million in Q416.
The 16.2-percent fourth quarter equipment rental revenue was on a 3.6-percent increase in average fleet at original cost compared to the fourth quarter of 2016. Overall pricing improved 3 percent in the quarter and dollar utilization increased 360 basis points to 38.7 percent in the fourth quarter of 2017. Adjusted EBITDA increased 22 percent to $177.8 million in the fourth quarter, compared to $145.7 million in 2016.
“Our strong fourth quarter and full year 2017 results reflect the ongoing implementation of our strategic initiatives,” said Larry Silber, president and CEO. “Growth in rental revenue benefited from a combination of strong customer demand, improved fleet mix and pricing optimization as our strategic initiatives continued to focus on urban markets and customer diversification. The traction we are gaining with our own initiatives, together with the overall health of the economy and the potential for increased infrastructure spending and other investments resulting from tax reform, increase our confidence that we are on the right track.”
Direct operating expenses increased to $195.4 million in the fourth quarter of 2017 compared to $167.4 million in the year-ago period, primarily because of higher rental activity, which increased transportation and maintenance costs, and investments in branch operating personnel to support revenue growth.
For the full year of 2017, equipment rental revenue was $1,499 million compared to $1,352.7 million in 2016, a 10.8 percent year-over-year hike. Total revenue was $1,754.5 million compared to $1,554.8 million in 2016, a 12.8 percent increase.
Overall pricing increased year over year each quarter in 2017. Pricing was up 1.9 percent for the full year 2017 compared to 2016.
The company reported net income of $160.3 million for 2017, compared with a net loss of $19.7 million in 2016. Net income in 2017 included an estimated one-time net benefit of $2017.1 million related to the impact of the Tax Cuts and Jobs Act of 2017 in the fourth quarter, and impairment charges of $29.7 million, mostly recorded during the second quarter of 2017.
Adjusted EBITDA increased to $585.4 million for 2017, compared to $536.2 million in 2016. Dollar utilization increased 180 basis points to 35.9 percent for the full year of 2017, compared to 34.1 percent in 2016, reflecting improvement in customer and fleet mix, improved pricing and increased volume.
Herc reported net fleet capital expenditures of $341.3 million for the full year. Gross fleet capital expenditures were $501.4 million and proceeds from disposals were $160.1 million.
In January 2018, Herc signed an agreement to sell its joint venture interests in Saudi Arabia and Qatar, and is in the process of exiting its operations in the United Kingdom, reflecting the company’s decision to simplify its business to focus primarily on North America.
The company is expecting adjusted EBITDA of $620 million to $655 million, with net fleet capital expenditures in the range of $525 million to $575 million.
“Our 2018 guidance is based on forecasted strong rental market fundamentals and the positive impact of our strategic initiatives,” said Silber. “This year’s capital expenditure program reflects the typical rotation of disposal and replacement of equipment purchased approximately seven years ago, as the economy recovered from a severe recession. We plan to continue to grow and optimize our fleet allocation and customer mix to drive improvement in our dollar utilization rate. We are confident that we have the right strategy to grow and diversify our customers and revenues while improving our profitability and achieving adjusted EBITDA growth.”