United Rentals reports a 16% decrease in rental revenue in the latest quarter
United Rentals, Inc. just reported their financial results for the second quarter of 2020 and reintroduced full-year 2020 guidance. They generated $1.642 billion in rental revenue in the second quarter of 2020 compared to $1.960 billion in the same quarter a year ago, a 16.2-percent decrease. Total revenue for the second quarter was $1.939 billion, compared to $2.290 billion, a 15.3-decline. Fleet productivity decreased 13.6 percent year over year, reflecting the impact of COVID-19 on volumes. Net income was $212 million with a net income margin of 10.9 percent. Adjust EBITDA was $899 million, with an adjusted EBITDA margin of 46.4 percent, helped by aggressive cost management. The company reported $817 million of net cash from operating activities; free cash flow was $817 million, including gross rental capital spending of $145 million. Total liquidity on June 30, 2020 was $3.823 billion. United Rentals reinstituted guidance with the new outlook being for revenue in the range between $8.05 billion to $8.45 billion, compared to 2019 actual total revenue $9.351 billion. “We’re pleased with our second-quarter results, which reflect both the flexibility and resiliency of our business model,” said United Rentals CEO Matthew Flannery. “Our employees did an outstanding job of executing our cost initiatives while helping our customers operate safely in the midst of the pandemic. I’m inspired by our team’s commitment to our company and the communities we serve. We saw a steady recovery in volume beginning in mid-April, which gave us good momentum into the start of our busy season. While visibility is still limited, near-term indicators suggest that the second half of 2020 may track to seasonal patterns in the majority of our markets. Based on this, we have reintroduced guidance. Should things change, our continued focus on cost and capital discipline, along with our strong balance sheet and robust cash generation, will allow us to respond swiftly.”
FASB offers reprieve from updated Lease and Revenue Recognition Rules
If you’re feeling burned out from coping with extreme circumstances brought on by the COVID-19 pandemic, you’re not alone. Fortunately, the Financial Accounting Standards Board (FASB) and Congress are offering some compliance-related relief for certain entities Deferral of Revenue Recognition Rules Let’s start with Accounting Standards Update (ASU) No. 2020-05, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842): Effective Dates for Certain Entities. It postpones the effective dates to two standards. First, ASU 2014-09, Revenue from Contracts with Customers (Topic 606), grants a one-year deferral for privately-owned companies and nonprofits that haven’t yet adopted the standard. Under the deferral, private companies and not-for-profit organizations that qualify can choose to apply the updated revenue recognition rules to annual reporting periods beginning after December 15, 2019. Qualifying entities also can defer the rules for interim reporting periods within annual reporting periods beginning after December 15, 2020. Early adoption is allowed. The updated revenue recognition guidance was issued in 2014 to replace hundreds of industry-specific accounting rules with a principles-based five-step model for reporting revenues earned from certain types of customer contracts. This is the second delay granted for the revenue recognition standard. CARES Act Defers CECL Standard for Large Banks On March 27, President Trump signed the Coronavirus Aid, Relief and Economic Security (CARES) Act. One provision of this law will allow large public banks to temporarily postpone the current expected credit loss (CECL) standard. Accounting Standards Update (ASU) No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, was issued in response to the financial crisis of 2007–2009. The updated guidance relies on estimates of probable future losses, rather than the incurred-loss model that’s used under existing guidance. The change was originally scheduled to go into effect for most public companies in 2020. Now, under the CARES Act, large public insured depository institutions (including credit unions), bank holding companies, and their affiliates can choose to postpone implementation of the CECL standard until the earlier of: The end of the national emergency declaration related to the COVID-19 crisis, or December 31, 2020. Many public banks have made significant investments in systems and processes to comply with the CECL standard, and they’ve communicated with investors about the changes. So, some may decide to stay the course. But many large banks are expected to take advantage of the option to delay implementation. This is the second time the CECL has been delayed. In October 2019, the Financial Accounting Standards Board (FASB) extended the deadlines for smaller reporting companies (SRCs) from 2021 to 2023, and for private entities and nonprofits from 2022 to 2023. Today’s uncertain lending environment could create significant credit losses for some banks. To measure those losses under the updated guidance, banks must forecast into the foreseeable future to predict losses over the life of a loan and immediately book those losses. Making estimates could prove challenging. Fortunately, the CARES Act gives large banks extra breathing room during the pandemic. The FASB issued the previous deferral in 2015. It allowed public companies to apply the updated guidance to annual reporting periods beginning after December 15, 2017, and private companies to apply it to annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. Public companies and some nonprofits have already adopted the rules. But, when the COVID-19 pandemic hit, many private companies were in the process of preparing their first annual financial statements under the updated guidance. So, the FASB approved an additional deferral. Deferral of Lease Rules The second deferral under ASU 2020-05 applies to the updated lease guidance. Specifically, it grants a one-year delay of ASU No. 2016-12, Leases (Topic 842), for the following entities: All private companies, Private not-for-profit organizations, and Public nonprofits that haven’t yet adopted the rules. Under the deferral, private companies and private not-for-profit organizations can choose to apply the standard to fiscal years beginning after December 15, 2021, and to interim periods within fiscal years beginning after December 15, 2022. Public not-for-profit organizations that haven’t yet issued (or made available to issue) financial statements reflecting the adoption of the lease guidance can choose to apply the standard to fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is allowed. The updated lease guidance was issued in 2016 to require companies — for the first time — to record the full magnitude of their long-term lease liabilities and assets on the balance sheet. Public companies had to adopt the rules for fiscal years beginning after December 15, 2018, and it would have taken effect for private companies with fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Previously, the FASB had issued a one-year deferral in November 2019 for private companies. Proposal to Defer Long-Term Insurance Standard On July 9, the FASB issued a proposal to defer the updated guidance for long-term insurance contracts to help insurers navigate hurdles brought by the COVID-19 pandemic. If approved, the proposal would provide a one-year deferral of ASU No. 2018-12, Financial Services-Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts. The deferral would postpone the effective dates of ASU 2018-12 for large public companies until 2023, for smaller reporting companies (SRCs) until 2025, and for private companies and not-for-profit organizations until 2025. Earlier adoption is encouraged. ASU 2018-12 provides simpler, more transparent ways to report technical aspects of life insurance, disability income, long-term care, and annuity payouts. If approved, the proposal will be the second delay granted to insurance companies. In November 2019, the FASB deferred the updated guidance after the American Council of Life Insurers said that companies needed more time to put software systems in place, educate investors and staff, and work on other troublesome matters.
Epax Systems forms new lease and rental division
Epax Systems of Los Angeles, CA, announces the formation of a new lease and rental division. Operating as Eco Rentals, the new division will focus on providing waste compaction solutions to businesses across North America. Leasing or renting equipment is an economical alternative that allows users to gain the benefits of compaction with no capital investment. With a large inventory of new, demo and pre-owned equipment, Eco Rentals can supply a wide range of compaction equipment including self-contained compactors, stationary compactors, vertical compactors, apartment compactors, as well as horizontal and vertical balers. In addition to conventional systems, the company also offers solutions for open-top containers and dumpsters with its line of Ropax Rolling Compactors. These unique compactors use a heavy rolling drum with large metal teeth attached to an articulating boom. As the drum rolls back and forth it crushes, rips, tears, macerates and compresses waste in the dumpster. “Historically, interest in leasing and rentals surges in times of economic uncertainty,” said Chief Operating Officer, Stefan Nielsen. “We are happy to be able to accommodate the demand.” Waste compactors can significantly increase the amount of trash that can fit in a container meaning fewer “hauls” by the waste disposal contractor and leading to significant cost savings. Eco Rental systems can be installed anywhere in the continental United States. Shipping, installation, setup, and routine maintenance are all covered in the low monthly maintenance fee. Rental rates start at as low as $235 per month.
United Rentals launches Digital Learning Series focused on improving worksite performance
Webinars explore how companies can unlock smarter worksites United Rentals, Inc. has announced a digital learning series on improving worksite performance, which takes place in five weekly sessions from June 30 to July 28. These free educational events provide advice, safety guidance, and innovation from the experts and leaders across multiple industries to help navigate these changing times. In today’s already-complex worksites, safety and work practices can change frequently, and requirements are even more stringent. The webinars – with all sessions conducted online – will provide helpful and practical tips to identify and mitigate those risks. Decision-makers, owners, contractors, and consultants can gain insights from the team to update their best practices to unlock opportunities for a more productive – and profitable – worksite. “Companies face a major challenge in managing worksite complexity and see a huge opportunity to improve performance,” said Ty Campbell, Director, Sales and Online Services at United Rentals. “This learning series will provide companies with actionable information to take control of equipment fleets to improve how they consume and utilize equipment, and deliver real savings to the business.” Digital Learning Series Schedule Anyone can attend the educational sessions offered in this learning series. To register, please go to https://www.unitedrentals.com/our-company/webinar-series#/. Here are the webinar session topics and schedule: Frictionless Fleet Management: Accelerating Opportunities for Cost Savings. Managing fleet and equipment rental needs across multiple projects, worksites and departments is inherently complex. This session explores how using a single-source, an online platform to manage owned and rented fleet helps tame that complexity and alleviate friction points in the process. It will show how to access insightful information and deliver actionable data and context to teams. Offered: June 30 at 1 p.m. EDT. The New Normal: Safety and Productivity in a Changing Environment. Equipment cleanliness is a foundational element to a successful safety culture. As companies look to rent equipment to address worksite needs, they need to have confidence an equipment rental provider adheres to best practices for disinfecting equipment touchpoints. This session reviews steps companies can take to safeguard equipment fleet is sanitary and ready for use. Offered: July 7 at 1 p.m. EDT. The Data Said So: Using Analytics to Drive Process Improvement and Cost Savings. Updating processes and changing the way business gets done on-site can be challenging, but when done correctly, it is extremely rewarding. Data and analytics can be a catalyst to change, and ultimately, success. This session examines one company’s process improvement lifecycle and provide insights into how they used analytics to drive double-digit equipment fleet cost savings. Offered: July 14 at 1 p.m. EDT. Why Now? Effective Change Management in a Remote World. Adoption and implementation of change can be a challenge for any organization and can be even more challenging when team members are working remotely. This session discusses best practices to guide companies through the change management process smoothly. It will look at tools and resources available to help companies adopt cloud-based workforce performance management. Offered: July 21 at 1 p.m. EDT. Better Together: Success Through System Integration. System integration can help a company streamline business processes and create efficiencies. This session reviews the different types of solution integrations and how they are applicable. It addresses the multiple points in the procure to pay process, from ordering management of on-rent items, all the way to invoicing and payment. Offered: July 28 at 1 p.m. EDT. Total Control Solution United Rentals Total Control is a cloud-based worksite performance management solution that helps companies make the most of an equipment fleet to utilize assets better and cut annual equipment rental costs by up to one-third. It provides a single system of record delivering visibility to manage both rented and owned equipment fleet, including excavators, trenchers, backhoe loaders, and other pieces of equipment. Total Control allows companies to get a handle on what equipment they have, where it is located, how much they are paying for it, how often it is being used and when they need to return it. They can pinpoint the exact location of any piece of connected equipment, and measure and track its utilization to boost performance.
Sunbelt Rentals Group climbs 12.3 percent in Fiscal 2020
Sunbelt Rentals posted £1.125 billion (about U.S. $1.415 billion) in fiscal fourth-quarter 2020 revenue, up slightly from £1.106 billion in the fiscal fourth quarter of 2019. The total figure includes Sunbelt Rentals U.S., Sunbelt Canada, and the newly branded Sunbelt U.K., formerly known as A-Plant. Operating profit, however, declined from £250 million to £155 million, a 38-percent tumble. For the full fiscal year ended April 30, Sunbelt Rentals U.S. posted $5.490 billion in revenue compared to $4.989 billion a year ago, a 10-percent increase. Sunbelt Canada reported CDN $420.7 million in fiscal 2020 compared to CDN $344 million a year ago, a 22.3-percent boost, with considerable contributions from acquisitions. Sunbelt UK had a revenue of £469.2 million compared to £475.1 million a year ago, a 1.2-percent decrease. Group revenue totaled £5.054 billion compared to £4.500 billion a year ago, a 12.3-percent increase. The fourth quarter was impacted by the COVID-19 pandemic; therefore, the fourth-quarter increase was 2 percent. Although COVID-19 has influenced the group’s short-term planning and actions, the company’s strategy remains unchanged with long-term growth being driven by organic investment (same-store and greenfield) supplemented by bolt-on acquisitions. In the U.S. the company posted 10 percent rental-only revenue growth, while Canada had 30 percent. In the U.K., rental-only revenue dropped 2 percent, reflecting the more competitive landscape within a more uncertain U.K. market and a period of realignment for the U.K. business. Canada’s recent acquisitions, including its purchase of William F. White in December 2019, played a major role in its rental-revenue jump. The company said that despite the unprecedented impact of COVID-19, with the U.S. fleet on rent falling 15 percent in a five-week period, overall results are still strong. “There has, of course, been an impact on our fourth-quarter results, but the underlying strength of the business and our performance in the first three-quarters of 2019/20 mean we have continued to perform well overall,” the company said in a statement. “Our business is robust and we remain open for our customers in all our geographies.” Rental revenue for Sunbelt U.S. was 3 percent higher in March, compared to the previous year, but 12 percent lower in April. The general tool business dropped 15 percent in April, year over year, while the specialty businesses, excluding oil and gas, jumped 9 percent. The decline in the general tool was driven by a decline in volume, not a drop in rental rates. Since April 10, the U.S. fleet on rent has stabilized and then increased as markets adjusted to new working practices and restrictions gradually eased. The trend has been similar in the U.K. and Canada. May rental revenue declined by 14 percent year over year. “I am extraordinarily proud of and grateful for, our team members and their response during a time when our communities were in need,” said Sunbelt CEO. “All levels of the organization quickly adapted our operations to continue servicing our customers while keeping our leading value of safety at the forefront of all we do. While no one could have foreseen the global impact of COVID-19, our business model, and capital structure are designed to withstand the cyclical nature of some of our end markets. We took prompt actions to optimize cash flow, reducing capital expenditure and operating costs, and strengthen further our liquidity position. In these unprecedented times, the results of our long-term strategy to mature our business through diversity and scale came through in our performance. “Looking forward, I am certain these swift actions combined with the strength of our cash flow and balance sheet will serve the group well. The diversity of our products, services, and end markets coupled with ongoing structural change opportunities put the board in a position of confidence to look to the coming year as one of strong cash generation and strengthening our market position. Based on this confidence, the board has decided to maintain its progressive dividend policy and to recommend a final dividend of 33.5p.”
Kohler Power names new Group President
The Kohler Company has named Brian Melka as group president – power. He reports to David Kohler, president and CEO of Kohler Company. Before being promoted, Melka had been president – engines since February 2019. As president of the power group, Melka provides full-scope strategic and operational leadership and is responsible for accelerating the growth and profitability of the global Power Group businesses: Power Systems, Kohler Engines, Clarke Energy, and Kohler Uninterruptible Power. Melka joined Kohler in 2013 as vice president of Kohler Engines Americas, where he delivered consistent results and the best run of profitable growth in the history of the Engines business. In his most recent role as president of Engines, Melka led the global engines business, including Engines Americas, Engines China, and Engines EMEA, executing strategic plans both for the gasoline and diesel markets. His career includes senior leadership with Rexnord Inc. and Textron Inc., including vice president of global mining and product management, and director of product management and service. Melka holds a bachelor’s degree in finance from the University of Wisconsin-Madison, an MBA from the University of Wisconsin-Whitewater, and International Business Certification from Thunderbird School of Global Management. He is also a certified Six Sigma Master Black Belt and Change Management coach.
ARA releases Healthy Work Practices Guide for protection against COVID-19
The American Rental Association (ARA) has released the ARA Healthy Work Practices Guide for construction equipment rental companies, part of a new “Clean. Safe. Essential.” program designed to help ARA members continue to ensure a safe rental experience The American Rental Association (ARA) has released the ARA Healthy Work Practices Guide for construction equipment rental companies — part of a new “Clean. Safe. Essential.” program designed to help ARA members continue to ensure a safe rental experience through the COVID-19 pandemic and beyond. The ARA Healthy Work Practices Guide provides member stores with consistent, practical guidance on measures to minimize exposure to the coronavirus for customers, staff, vendors, and guests. Based on expertise from the U.S. Centers for Disease Control and Prevention (CDC), World Health Organization (WHO), rental operators and equipment manufacturers, the guide adds to ARA’s ongoing safety efforts. “Our industry has always been committed to safety — providing contractor partners with safe equipment and the training to use it properly is what ARA members do,” said Tony Conant, ARA CEO. “But 2020 is redefining the word ‘safe.’ ARA is putting tremendous resources and energy into helping rental stores — which are essential to customer success — continue to provide a safe equipment rental experience in our new normal.” The ARA Healthy Work Practices Guide offers general information about microbes and viruses; personal protective equipment (PPE) considerations; cleaning supplies and equipment needed for social distancing; how to prepare a facility, vehicles, and employees for work; testing employees; cleaning equipment and more. While the guide is based on medical science and operational expertise, ARA directs rental stores to comply with the latest local/city, state/province, and country laws and government regulations, and to conform with guidance provided by government health agencies. If government guidance is more stringent than what is found in the document, ARA says that stores should follow government guidance. More elements of the “Clean. Safe. Essential.” program will be rolled out in the weeks ahead as ARA continues to support members and the vitality of the rental industry through the pandemic.
Now what?
Good question. Who the hell knows? But whatever it is we all need to be prepared to address the permanent changes we can expect as a result of this medical and economic event we are currently living with. Last month I addressed the seven major issues facing your industry. The article was prepared pretty much before the spread of the virus along with the mediation policies were adopted to the full extent. Consequently, I believe I may have a bit aggressive when I mentioned a three to six-month timeframe before we get back to normal. Since then I have both extended my “normalcy” date to at least 24 months while at the same time not knowing exactly what the new normal or new reality will look like. But one thing is certain. You will be doing business differently. The dealer business will change. How you deal with suppliers and OEM’s will change. Interacting with employees will change. And how you communicate with and service both potential and existing customers will require new programs, policies, infrastructure, and technology. Here is what I personally see happening: DIGITAL IS HERE TO STAY. EMPLOYEES WORKED FROM HOME AND LIKED IT. OFF-SITE WORKING CAN BENEFIT YOUR COMPANY YOU WILL HAVE TO DO MORE WITH LESS GROWTH OPPORTUNITIES WILL SURFACE TOP OF THE LINE CUSTOMER SERVICE A MUST THE MARKET TO REPRICE VALUE OF GOODS AND SERVICES TAX SAVING OPPORTUNITIES AVAILABLE. That is my initial list. You can add or subtract as you see fit and I would like to hear what you added to the list. Let me know. Looking at my list now I can see where many items on the list interact with other list items and three main themes stick out. A TOP OF THE LINE DIGITAL ONLINE PRESENCE IS A MUST BECAUSE OF THE MARKET TURMOIL YOU WILL NEED TO REVIEW EVERY ASPECT OF YOUR BUSINESS EMPLOYEE RELATIONSHIPS WILL CHANGE. Notice that I did not mention any of the Government stimulus programs. Hopefully, you were on top of the issue and obtained capital to keep the business running. Just make sure you follow the rules associated with the funding which will be reviewed when you seek forgiveness. I am amazed at how fast those programs were developed and implemented. The Payroll Protection Program opened on April 3rd and I had my application filed at 8:30 pm on the 3rd and received the funding ten days later. Amazing. Back to the future. As far as customers are concerned, I think that we can surmise that they are also dealing with a new set of fears, uncertainly, and trust issues. Dealers who can address these issues NOW have an opportunity to increase market share. Customers are looking for seamless service, new ideas, pricing considerations, and in general any assistance you can provide including your industry expertise for their type of business. Can you provide this level of service? Because of what your customers are going through and will continue to go through I can well anticipate changes in your expected profit centers which overall will produce both a profit and cash flow squeeze. Consequently, it may be time to rethink your entire business and revenue model. What will sell going forward? Where and how to market. Investments to make in technology. Manpower adjustments. Employee involvement. Taking all the changes into account most dealers if they hope to maintain a healthy bottom line and cash flow will need to do more with less. Fewer assets and less cost. In other words, clean up the balance sheet and resolve not to add to the left side of the balance sheet. In terms of cost, it is time to review all current processes and policies in place to see if they still work and fit current customer needs. What especially needs to be reviewed is the digital presence and how it is used to streamlines customer service and add values to the relationship. If it does not you are going to be in trouble if your competitors do. The best thing you can do is to fully explore a work from home program. They work. Employees like it. Adequate controls are in place to secure data and workflow. And they are cost-effective. You supply a company only laptop and printer to your employee, invest in a program that supplies a company the only network for this type of work and employees have access to all files in the cloud, can communicate with other employees and customers without dialing a phone, can participate in meetings visually and use conference calls when necessary. Now what work from home really does for you allow you to engage permanent part-time contractors with higher-level skills than you currently have in your workforce to work on certain aspects of the business to improve the systems, profitability, and cash flows. In short, you can eliminate less talented full-time people and substitute expertise where and when you need it. The result is more productivity and less cost, which is just what the doctor ordered if you need to do more with less. One last thing. If you did not read Steve Pierson’s column last month dealing with the tax opportunities available by recent changes to the tax code, please do. There are MAJOR beneficial changes available with the use of operating losses and interest expense deductions plus many more. Steve has been involved in the dealer business with me for many years. If there is money to be found he can find it.
Eberhart Capital acquires The Equipment Source, LLC
Eberhart Capital, LLC, a Scottsdale, Ariz.-based private equity firm, has acquired Naples, Fla.-based The Equipment Source, LLC, a tool and equipment rental company for contractors and consumers. The Equipment Source was founded in 1999 by Billy Martinez, who originally ran the business from his backyard. Today, the southwest Florida store provides a wide range of equipment for large commercial contracts and home projects. The Equipment Source is the exclusive provider for Manitou and Mustang equipment in Collier and Lee Counties. It also is Collier County’s KOBELCO mini excavator dealer. “In the best and worst of times, The Equipment Source has been a reliable partner to help their customers run a smooth worksite,” said Dan K. Eberhart, Managing Director of Eberhart Capital. “Today, when reliability is needed more than ever, The Equipment Source is reinforcing everything that they’ve stood for. This acquisition gives us another incredible team focused on helping America rebuild.” Through this acquisition, The Equipment Source joins sister Eberhart Capital company, Contractor Sales & Service of Des Moines, Iowa. Like Contractor Sales & Service, The Equipment Source will benefit from the ability to provide more complete solutions to clients and expanded services. Terms of the deal were not disclosed. The company also announced that with the close of the acquisition, it has successfully completed its management transition from Martinez to Steve Acquafresca, who is now General Manager of The Equipment Source. The acquisition by Eberhart Capital is the beginning of a positive new chapter for The Equipment Source and its customers, Acquafresca said. “The Eberhart Capital leadership team seems very customer-service oriented,” Acquafresca said. “That’s how I built my reputation in the 25 years I’ve been renting equipment in Collier County: providing strong service and making sure the customer is happy.” Acquafresca played an important role in allowing The Equipment Source to continue meeting customers’ needs after the COVID-19 pandemic forced the business to temporarily close its doors. He developed a contactless drive-up service that allows customers to order and pay for items in advance and call the business when they arrive for pickup. The store has re-opened since then, but the drive-up service is still available.
ALL Crane announces Shared Equipment Program (SEP)
GC acts as a primary renter, subs coordinate usage, projects save time and money Today’s construction jobsites are evolving, and project owners demand partner companies that embrace new methods to drive down costs without negatively impacting quality. It is with this in mind that the ALL Family of Companies announces its Shared Equipment Program (SEP), a new approach to equipment rental that can shave millions of dollars and many months off construction projects. Here’s how it works: a project’s general contractor acts as the primary renter of all lifting equipment for the job and then rents it to the subcontractors— a method that helps to eliminate waste, cuts costs, improves productivity, and creates positive outcomes. More than just equipment, the project also gets support from the ALL team, including mechanics who conduct regular maintenance to keep machines in “rent-ready” condition as they change hands between subcontractors. When multiple subcontractors arrange for their own equipment, depending on the job site, the ALL Family of Companies’ SEP Program can eliminate redundancy and waste, which can be as much as one-third of the total project cost. And equipment redundancy does more than add costs—it adds a level of congestion to job sites where space is a premium, which can affect everything from traffic to safety. The SEP addresses all these concerns, as ALL works with the general contractor to maximize efficient usage of lift equipment. ALL developed the program to reinforce its unique blend of resources afforded general contractors, including a broad continental footprint, and an extensive and varied fleet. The program works best when all subcontractors have ready access to equipment that meets their needs, from steelworkers who may require hefty all-terrain equipment to painting and electrical contractors whose finishing work requires access equipment like scissor lifts. ALL’s equipment lineup includes crane types as small and versatile as mini/spider cranes or as large as 900-ton ATs and 1,000-ton crawlers, plus tower cranes, boom lifts/aerials/MEWPs, and boom trucks. Beyond these extensive equipment resources, the company has the experience and willingness to collaborate both initially and then ongoing, which helps make the equipment-sharing process successful. ALL has already executed projects using SEP, saving project owners tens of millions of dollars, and helping to complete projects months ahead of schedule. To find out how ALL’s Shared Equipment Program can help your jobsite, click here.
ARA requests further aid for equipment and event rental businesses
Petition for additional SBA funding sent to Congress In continued efforts to assist members of the American Rental Association (ARA), an additional request for federal funding has been sent to Congress. A proposed two-fold approach asks for an incremental $300 billion to make additional Economy Injury Disaster Loans (EIDL) and that these funds be processed by the banks that are currently processing Payroll Protection Program (PPP) loans to facilitate efficiencies and timeliness in funding. “More than 90 percent of our membership is comprised of small businesses and without further assistance, many of them may be forced to close their doors permanently,” says Tony Conant, ARA CEO. In March, ARA sent a letter to Capitol Hill petitioning for financial provisions to be added to what has come to be the Coronavirus Aid Relief and Economic Security (CARES) Act. While many businesses in the equipment and event rental industry benefitted from this funding, financial burdens still exist for many. “Equipment and event rental businesses are capital intensive, buying equipment and supplies from other small businesses as well as from larger suppliers. These purchases are often financed through loans and other credit arrangements. The inability of ARA members and other small businesses to make payments on their loans or credit facilities will soon lead to a second financial crisis within the small business community,” says John McClelland, ARA vice president of government affairs and chief economist.
United Rentals adds drive-up service due to COVID-19
United Rentals is now adding a drive-up service to over 1,100 branch locations when renting equipment due to the COVID-19 crisis. In addition to the newly added drive-up service, United Rentals employees are conducting a variety of safety and mechanical checks to assure the equipment functions correctly and safely. The company also disinfects and follows manufacturers’ instructions on the application to spray and/or wipe commonly touched surfaces necessary to operate tools and machinery. If United Rentals is dropping the equipment off to the customer, drivers will now perform a “last touch” precautionary disinfecting of the equipment. They will use an EPA-approved disinfectant and will spray or wipe the surfaces touched by the driver when delivering the equipment. United Rentals has communicated with employees on disinfecting equipment, practicing good personal hygiene and social distancing, and the proper disposal of wipes, towels, and any other personal protection equipment they use in connection with delivering the equipment. For specific questions about these procedures, or on any topic associated with how United Rentals is handling the COVID-19 crisis, email CovidCustomerQuestions@ur.com or reach out to your United Rentals representative.
California Rental Association Executive Director dies of brain injury
The California Rental Association (CRA) executive director and owner of Sacramento based Aba Daba Rents died at age 65 from complications of a serve brain injury. Dale Blackwell was a well know figure in the rental business as executive director of CRA and a second-generation owner with his brother Bob when they purchased the business, Aba Daba, from their parents Gene and Betty in 2000. Blackwell served on the Board of Directors and became CRA’s Executive Director in 2006 and served until his death. A statement from CRA said, “He loved watching his grandchildren and spending time with family. Dale was known for his infectious laugh, amazing advice, and his kind and generous spirit.” To cherish his memory is his wife Victoria (Vicky) and five children, Kerri Costarella, Scott, Jeffery, Randall, and Jena. He is also survived by his parents, Gene and Betty, his three younger siblings Bob, Dianne and Christine, four grandchildren and several nieces and nephews. In lieu of flowers, the family asked that donations can be made to Rental Services Industry Foundation or to your local animal shelter.
Baird/RER survey suggests Rental Revenue to dip
Equipment rental activity started to slow toward the end of the first quarter of 2020, impacted by COVID-19 related disruptions and a slowdown in oil and gas activity, according to the 1Q Baird/RER equipment rental survey. Revenue is expected to decline slightly in 2020, the survey shows. The previous low forward revenue projection was in the third quarter of 2016 when respondents predicted a 3.5 percent revenue increase. Average rental rates were down 0.2 percent year over year, similar to the second quarter of 2015 through the first quarter of 2017 period. Rate pressure was originating from lower demand due to COVID-19 and plunging oil prices. Rates expected to be slightly lower in 2020 vs. 2019. Rental rates are expected to decline 1.0 percent in 2020, the first time the survey’s forward expectations have been negative year over year. The majority of respondents expect COVID-19 to have a negative impact on the rental business. 58 percent of respondents (weighted by revenue) expect COVID-19 to have a negative impact on the overall rental business (the vast majority of remaining respondents believe it’s too early to tell). Equal weighted, 73 percent of respondents expect a negative impact (i.e., smaller respondents more likely to expect a negative impact).
BigRentz closes $15 Million private investment and acquires Atlanta-based EMG
BigRentz, the nation’s largest construction equipment rental network, has announced it closed $15 million in private funding that will enable it to broaden its rental category expansion and maintain business continuity. The investment was used to acquire Atlanta-based Equipment Management Group (EMG), a national site services provider, and the previously announced merger with Lizzy Lift. The funding comes from private investors and new lead investor, ITOCHU Corporation, a Global Fortune 500 company with assets totaling over $90 billion. “While we are cognizant of the current health and economic landscape, we have ambitious growth plans and believe ITOCHU is the ideal investment partner to help execute our 10-year strategy,” commented Scott Cannon, Chairman, and CEO at BigRentz. “Part of that strategy is acquiring more customers and expanding our offerings. EMG greatly compliments the BigRentz network with its site services equipment, such as waste management, storage containers, and portable toilets. Additionally, their expansive long-term client base will now benefit from our best in class rental technology.” BigRentz is carving a significant share of the re-rental market due to its ability to provide greater geographic and inventory coverage than any other provider. BigRentz has a digitally automated network of more than 8,500 rental yards and an estimated $50 billion in assets available for rental. Globally, the annual construction equipment rental market represents a significant opportunity for BigRentz as it is projected to reach $121.6 billion by 2024. ITOCHU is positioned to step up its investment with BigRentz to support BigRentz’s organic growth and acquisition plans. Masa Yoshikawa, Manager, Construction Machinery Section, Construction Machinery & Industrial Machinery Department, will join BigRentz’s Board of Directors. “The success of our portfolio stems from making long-term investments in areas where we can leverage our distinctive strengths and add value through organic growth,” remarked Masa. “BigRentz has been on our radar for some time and believes it is positioned to make an impact in other rental markets throughout the world.” ITOCHU reinvents its businesses by investing in next-generation technologies and new business models. Through its alliance with BigRentz, ITOCHU will create new value in the field of construction equipment rental with the use of both networks, IoT and big data. Additionally, ITOCHU will share its business know-how and global network with BigRentz so it can expand its network and create new solutions with the ultimate goal of increasing corporate value. The terms of the acquisition were not disclosed. EMG’s Atlanta office will now operate as a BigRentz regional office.
ARA petitions for assistance for the equipment and event rental industry
Request for assistance sent to Capitol Hill on behalf of ARA members The American Rental Association (ARA) is taking steps to seek federal support and funding to aid businesses in the equipment and event rental industry. In a letter that was submitted to Capitol Hill on Friday, March 20, ARA asked for $20 billion in financial aid provisions for the equipment and event rental industry be added to the financial relief bill that was negotiated in the United States Senate. The House is scheduled to vote on the bill today that was approved in the Senate late last night 96-0. “ARA has been in communication with Capitol Hill as well as the Administration regarding relief efforts for our industry. This letter is one example of how ARA reaches out to policymakers in support of our members. Right now, there is an overwhelming need for the federal government to aid all businesses – but, especially small businesses – in the equipment and event rental industry,” says John McClelland, ARA vice president of government affairs and chief economist. Prior to the coronavirus (COVID-19) outbreak, the equipment and event industry was projected to exceed $60 billion in revenue in 2020. “Like many industries, the equipment and event rental industry is being severely affected. The shelter in place directives and social distancing recommendations have caused virtually every planned event to be canceled. These wide-sweeping conditions have shuttered many event rental operations and most companies have laid off all staff as we wait on recovery measures. As states continue to tighten restrictions on business activities, it’s likely that our general tool and construction members will also be negatively impacted. It’s imperative that we take every possible measure to assist members and we’re hopeful to see some relief from our Administration,” says Tony Conant, ARA CEO. A previous statement was sent to the Administration on March 11 requesting Small Business Administration (SBA) loan and disaster relief programs for the equipment and event rental industry.
ARA reports that Coronavirus (COVID-19) will significantly impact their membership
ARA reports results from a recent industry impact survey The effects of the coronavirus (COVID-19) are significantly impacting the equipment and event rental industry. According to a recent survey of the American Rental Association (ARA) membership, rental revenues are declining and are projected to significantly deteriorate in the coming months. All party and event rental business respondents indicate event cancelations leading to a loss of revenue when compared to 2019. Nearly 55 percent report revenue loss in excess of 60 percent and 15.63 percent of respondents experiencing 46-60 percent loss of revenue. Of these cancelations, the majority are corporate, private, festival and charitable events. The survey results representing construction/industrial and general tool/DIY members indicate a lesser economic impact, albeit concerning. As of March 16, 37 percent have indicated no revenue loss, 32.92 percent experiencing up to 15 percent revenue loss and less than three percent reporting loss of more than 60 percent of rental revenue. “This is a dire time for our industry. We’re putting the needs of our members in the rental community first. ARA and ARA Insurance have put initiatives in place to ease the financial stress on our members as it relates to membership dues and insurance premiums. Our goal is to continue assisting our members and keep them informed on resources that are available to help them manage through these unprecedented times,” says Tony Conant, ARA CEO. Some rental operations have temporarily closed, but those that remain open indicate that they are taking every precaution to protect employees and customers by implementing recommendations from the Centers for Disease Control and Prevention (CDC) and extra cleaning and sanitizing of equipment. Many rental operations remain open in order to provide necessary equipment and services for customers that continue work as well as providing tents, tables, chairs and other items needed for drive-through and pickup areas for restaurants, grocery stores, government agencies and more. ARA member surveys will be deployed weekly in an effort to continually monitor the impact the virus, legislation, regulations and social distancing are having on our industry. All industry employees are encouraged to join the ARA Coronavirus Discussion Group on Facebook to engage in discussion and understand how others are coping during this time. More information on coronavirus (COVID-19) can be found at ARArental.org.
Former CFO from United Rentals joins Cisco Equipment as Chairman of the Board
Cisco Equipment, a Texas-based equipment solutions provider and rental company with a dominant presence in the Permian Basin, has named Bill Plummer, former chief financial officer and executive vice president of United Rentals, as chairman of its board of directors. In addition to Cisco’s presence in Texas, it has a national and global presence through its Project Services division. During his tenure at United Rentals, Plummer brought his significant expertise to bear on behalf of the business. He was instrumental in helping the company execute a strategy of strong organic growth and acquisitions, strengthening the company’s capital structure, and improving free cash flow. He was also responsible for leading the company’s safety function, its data and analytics efforts and several key profit improvement initiatives, all of which combined to created substantial shareholder value. Plummer was also instrumental in transforming United Rentals into a more broadly focused comprehensive equipment solutions and services company. “We are thrilled to have Bill’s experience and guidance as we expand the services focus of our company,” said Cisco Equipment CEO CJ Sibert. “Our goal is not to only be thought of as an equipment supplier but to provide unmatched equipment solutions and services to our customers and Bill is the right person to help lead us there.” Cisco is excited to welcome Plummer to its board of directors and expects that he will provide critical advice and guidance as the company pursues an aggressive organic expansion and acquisition plan to become the premier equipment solutions provider to the infrastructure and energy infrastructure construction markets. Cisco Equipment was recently acquired by CJ Sibert in partnership with Stellex Capital Management LP from his father Scott Sibert. Since the acquisition, Cisco has pursued an aggressive growth strategy designed to consolidate its position in the Permian Basin and energy infrastructure construction market, while expanding its Project Services division to serve existing and new customers on a national basis. Cisco was founded by Scott Sibert in 1978 and has grown over the last four decades to become one of the nation’s leading providers of equipment, services, parts, and supplies to the midstream infrastructure, general construction, agriculture, and general industrial markets. The company’s specialized service capabilities, diverse and versatile suite of equipment for rent or sale and strategic footprint are integral to its customers’ exacting operating requirements. Cisco is recognized for its project services, maintenance and repair solutions, technical expertise, operational flexibility, and customer service.
LiuGong acquires Hertz China
Herc Holdings Inc. has sold all of its interest in Hertz Equipment Rental Company Limited (AKA Hertz China), to Guangxi LiuGong Machinery Co., Ltd. Terms of the transaction have not been announced. The transaction is subject to the approval of relevant government authorities in China and is expected to close within 60 days. “The sale of our business in China completes the disposition of all of our international operations to better focus on the North American market,” said Larry Silber, president and chief executive officer of Herc Holdings Inc. “We are pleased that the business will transition to LiuGong, a leader in the construction equipment and material handling industries in China. We believe that LiuGong will offer a significant growth platform for the Hertz China team.” Kevin Thieneman, Guangxi LiuGong Machinery Vice President, said “For construction equipment, rental is the largest industry segment in Europe and North America and is projected to become a significant portion of the industry in China. Rental already represents more than 90% of the industry for aerial work platforms in China. We are pleased to acquire a business led by an experienced team trained in the business methodologies of one of the world’s leading rental companies. The Hertz China business will enable LiuGong and our dealers to accelerate the development of rental solutions both in China and globally.”
Herc Holdings reports 2019 Fourth Quarter and Full Year 2019 results
Equipment rental revenue increased 2.1% to $457.0 million in the fourth quarter and rose 2.6% to $1,701.8 million for the full year Total revenues were $540.1 million in the fourth quarter and $1,999.0 million for the full year Pricing improved by 3.3% in the fourth quarter and 4.0% for the full year Net income increased to $35.1 million, or $1.20 per diluted share, in the fourth quarter and $47.5 million, or $1.63 per diluted share, for the full year Adjusted EBITDA increased 8.1% to $214.4 million in the fourth quarter, and 8.2% to $741.0 million for the full year Net cash provided by operating activities increased by 13.7% to $635.6 million in 2019 Free cash flow improved nearly $180 million to $172.0 million in 2019 Initiated 2020 adjusted EBITDA guidance range of $760 million to $790 million Herc Holdings Inc. (“Herc Holdings” or the “Company”) has reported financial results for the quarter ended December 31, 2019. Equipment rental revenue was $457.0 million and total revenues were $540.1 million in the fourth quarter of 2019, compared to $447.7 million and $543.7 million, respectively, for the same period last year. The Company reported net income of $35.1 million, or $1.20 per diluted share, in the fourth quarter of 2019, compared to $33.3 million, or $1.16 per diluted share, in the same 2018 period. Fourth-quarter 2019 adjusted net income was $38.9 million, or $1.33 per diluted share, compared to $33.4 million, or $1.16 per diluted share, in 2018. See page A-5 for a description of the items excluded in calculating adjusted net income and adjusted earnings per share. “We generated $172.0 million in free cash flow in 2019, a positive swing of nearly $180 million from last year,” said Larry Silber, president, and chief executive officer. “Our strategic initiatives continue to deliver strong year-over-year pricing and we achieved major improvements in operating efficiency and dollar utilization in the fourth quarter and a full year. We focused on the quality of earnings throughout the year, and the fourth-quarter adjusted EBITDA margin rose 320 basis points to 39.7%, the highest fourth-quarter margin we have achieved since the spin-off in 2016. ” “Our disciplined capital management initiatives reduced our net leverage ratio significantly in three-and-half years, to just 2.8x as of December 31, 2019. Targeted branch openings, controlled fleet additions, and self-help initiatives are expected to drive future profitability. Leading economic indicators continue to suggest positive momentum in our end markets and support our favorable outlook.” Equipment rental revenue increased 2.1%, the average fleet at original equipment cost (OEC) was up 0.7% and overall pricing improved 3.3% in the fourth quarter of 2019, over the prior-year period. Adjusted EBITDA increased by 8.1% to $214.4 million in the fourth quarter compared to $198.4 million in the comparable 2018 period. See page A-4 for a description of the items excluded in calculating adjusted EBITDA. Net cash provided by operating activities increased 13.7% to $635.6 million in 2019 compared to $559.1 million in the prior year. Free cash flow rose to $172 million in 2019 compared to a negative cash flow of $7.9 million in 2018. See page A-6 for a reconciliation from net cash provided by operating activities and free cash flow. Fourth Quarter Highlights Equipment rental revenue in the fourth quarter of 2019 increased by 2.1% to $457.0 million compared to $447.7 million in the prior-year quarter. Strong year-over-year improvements in pricing were partially offset by lower volume. Total revenues decreased by 0.7% to $540.1 million in the fourth quarter compared to $543.7 million in 2018. The $3.6 million declines was related to a planned reduction of $9.6 million in sales of rental equipment, and a $3.0 million reductions in sales of new equipment, parts, and supplies compared to the prior year. Those reductions were partially offset by an increase in equipment rental revenue of $9.3 million. Pricing increased 3.3% in the fourth quarter of 2019 compared to the same period in 2018, the 15th consecutive quarter of year-over-year improvement. Dollar utilization increased 80 basis points to 40.5% in the fourth quarter of 2019 compared to the prior-year period, reflecting improved pricing and customer and fleet mix diversification. Direct operating expenses (DOE) decreased by 2.2% to $195.8 million in the fourth quarter of 2019 compared to $200.3 million in the prior-year period. The $4.5 million decreases was primarily related to lower transportation, insurance, and personnel-related expenses, offset by an increase in facilities and maintenance costs. Selling, general and administrative expenses (SG&A) decreased 10.1% to $73.6 million in the fourth quarter of 2019 compared to $81.9 million in the prior-year period. The $8.3 million declines were primarily attributed to the reduction in spin-off costs, bad debt, and professional fees, partially offsetting an increase in personnel and personnel-related expenses. Interest expense in the fourth quarter of 2019 decreased to $27.1 million compared to $34.0 million in the prior-year period. The decrease was primarily related to lower interest expense related to the refinancing of the Company’s Notes and ABL Credit Facility during the third quarter of 2019. The provision for income taxes in the fourth quarter was $18.1 million compared to $5.0 million in the previous year, which included a $6.0 million tax benefit related to the enactment of the Tax Cuts and Jobs Act of 2017 (“2017 Tax Act”). Net income increased 5.4% to $35.1 million in the fourth quarter of 2019 compared to $33.3 million in the prior-year period. Adjusted net income was $38.9 million compared to $33.4 million in the prior-year quarter. Adjusted EBITDA in the fourth quarter of 2019 increased by 8.1% to $214.4 million compared to $198.4 million in the prior-year period. The increase was primarily due to strong equipment rental revenue pricing and lower DOE and SG&A, partially offset by losses on the sale of rental equipment. The adjusted EBITDA margin increased to 39.7% in the fourth quarter of 2019, compared with 36.5% in the prior-year quarter. Full Year 2019 Highlights: Equipment rental revenue in the year increased 2.6% to $1,701.8 million compared to $1,658.3 million in 2018. The $43.5 million increase was primarily related to improvement in pricing and increases in transportation revenue, partially offset by strategic reductions in re-rent revenue and lower volume. Total revenues increased 1.1% to $1,999.0 million in 2019 compared to $1,976.7