Herc Holdings completes acquisition of Rapid Equipment Rental; Also announces acquisition of SkyKing Lift Rentals
Herc Holdings Inc. , a North American equipment rental supplier operating through Herc Rentals Inc., announced that it has completed the acquisition of Toronto-based Rapid Equipment Rental Limited. Rapid Equipment is a full-service general equipment rental company comprising approximately 110 employees and seven locations serving construction and industrial customers throughout the Greater Toronto Area (GTA) — one of the largest equipment rental markets in North America. The company also announced that it has acquired Chicago-area SkyKing Lift Rentals, a single-location equipment rental business specializing in mobile elevating work platforms, including scissor and boom lifts. The addition of SkyKing expands the company’s Chicago-area presence to six physical locations. “I am pleased to welcome Rapid Equipment and SkyKing to Team Herc,” said Larry Silber, president and chief executive officer. “With both teams now on board, we have significantly improved our coverage in the dynamic Toronto and Chicago equipment rental markets as we continue to serve a diverse mix of construction, industrial, and government customers.”
American Rental Association named Best Place to Work
Quad City headquarters sets the standard for workforce culture The American Rental Association (ARA) has been honored as the Best Place to Work 2021 by the Quad City Times. The recognition is based on an employee nomination and employee voting. The ARA topped the list of Best Places to work in a region with a strong manufacturing legacy. The area is also a business hub with more than 150 companies on Fortune’s 500 and 1000 lists. The ARA consists of 64 employees with headquarters in Moline, Illinois. The central goal of the organization is to support the success of 11,000 members across 52 countries and advance the rental industry through strategic pillars that include education, technology, market intelligence, consumer awareness, and workforce development. The designation as a Best Place to Work showcases the ARA’s commitment to workforce development by modeling the culture and support for employees. The result is a strong sense of pride and drive to contribute to the goals of the association. “There is a positive vibe within the organization and a positive attitude shared by all our employees and staff. That comes through to our members and makes people proud to be a part of the ARA,” said Keith Pearson, Rental Industry Workforce Development Director. “When you have a strong belief in the industry that you are a part of, and a belief in supporting that industry, you take pride in what you do.” The ARA has been a staple in the Quad Cities community since 1955, which includes Davenport and Bettendorf, Iowa, and Moline and Rock Island, Illinois.
Herc Holdings acquires New Hampshire-based Equipment Rental Business
Herc Holdings Inc., a North American equipment rental supplier operating through Herc Rentals Inc., has announced that it has acquired substantially all the assets of Reliable Equipment, LLC, a New Hampshire-based equipment rental business with branch operations in Dover and Londonderry, NH. Terms were not disclosed. Reliable Equipment is a full-service provider of equipment rentals with a fleet that includes aerial, material handling, and earthmoving equipment, as well as specialty climate control and power generation equipment. Founded in 2010, the business has more than 50 employees and service coverage from Boston to Portland, ME. “The addition of Reliable Equipment expands our New England presence to eight physical locations, allowing us to serve existing and new customers with a larger fleet and improved responsiveness while also providing greater scale to operate more efficiently across the Northeast U.S.,” said Larry Silber, president and chief executive officer. “This transaction supports one of our key strategic initiatives to expand our presence in urban markets across North America. In particular, Reliable Equipment is well-positioned in the north Boston metropolitan area and to achieve growth in this dynamic market. “I am pleased to welcome the Reliable Equipment team to Team Herc. Our combined teams and resources position Herc Rentals to be a preeminent equipment rental partner throughout New England, serving a diverse mix of construction, industrial, and government customers.”
Herc Holdings reports Third Quarter and Nine Months 2021 results
Equipment rental revenue increased 29.2% to $519.6 million Total revenues increased 20.5% to $550.4 million Net income increased to $72.3 million or $2.37 per diluted share Adjusted EBITDA expanded 25.0% to $245.9 million Adjusted EBITDA margin rose 160 basis points to 44.7% Pricing improved 2.8% Year-to-date free cash flow was $114.6 million The Company affirmed its full-year 2021 guidance range for adjusted EBITDA of $870 million to $890 million and net capital fleet expenditures of $500 million to $550 million The Company declared its first quarterly dividend of $0.50 per share, to holders of record as of October 20, 2021, and payable on November 4, 2021 Herc Holdings Inc. has reported financial results for the quarter ended September 30, 2021. Equipment rental revenue was $519.6 million and total revenues were $550.4 million in the third quarter of 2021, compared to $402.3 million and $456.7 million, respectively, for the same period last year. The Company reported a net income of $72.3 million, or $2.37 per diluted share, in the third quarter of 2021, compared to $39.9 million, or $1.35 per diluted share, in the same 2020 period. Third-quarter 2021 adjusted net income was $72.7 million, or $2.38 per diluted share, compared to $39.8 million, or $1.35 per diluted share, in 2020. See page A-5 for the adjusted net income and adjusted earnings per share calculations. “Our third-quarter performance illustrates how Herc Rentals is shifting into high gear to capitalize on the benefits of operating leverage and scale that we discussed at our Investor Day,” said Larry Silber, president and chief executive officer. “We achieved another record for total revenues and adjusted EBITDA in the third quarter of 2021. Total revenues increased 21% and adjusted EBITDA grew 25% compared to the same period last year. Dollar utilization was also a record 46.0%, enhanced by steady demand in our markets and a positive operating environment. Our long-term strategy is driving results and we are positioned for a record year in 2021.” 2021 Third Quarter Financial Results Equipment rental revenue increased 29.2% to $519.6 million compared to $402.3 million in the prior-year period. Total revenues increased 20.5% to $550.4 million compared to $456.7 million in the prior-year period. The year-over-year increase of $93.7 million was related primarily to an increase in equipment rental revenue of $117.3 million, partially offset by a decrease of $28.7 million in sales of rental equipment. Pricing increased2.8% compared to the same period in 2020. Dollar utilization increased to 46.0% compared to 37.6% in the prior year period. Direct operating expenses (DOE) of $225.9 million increased 33.4% compared to the prior-year period. The $56.5 million increase was primarily due to higher personnel-related costs, and increases related to higher year-over-year volume such as delivery and freight, maintenance, and re-rent expense. Selling, general and administrative expenses (SG&A) increased 33.6% to $81.5 million compared to $61.0 million in the prior-year period. The $20.5 million increase was primarily attributed to increases in selling expenses, including commissions and bonus incentives, and travel expenses as business travel returned to pre-pandemic levels. Interest expense decreased to $21.4 million compared to $22.4 million in the prior-year period. The decrease was primarily related to both lower interest rates and balances of the Company’s ABL Credit Facility in 2021. The income tax provision was $23.8 million compared to $11.7 million for the prior-year period. The increase was driven primarily by the level of pre-tax income. The Company reported a net income of $72.3 million compared to $39.9 million in the prior-year period. Adjusted net income was $72.7 million compared to $39.8 million in the prior-year period. Adjusted EBITDA increased 25.0% to $245.9 million compared to $196.7 million in the prior-year period. Adjusted EBITDA margin increased 160 basis points to 44.7% compared to 43.1% in the prior-year period. 2021 Nine Months Financial Results Equipment rental revenue increased 22.5% to $1,368.0 million compared to $1,116.4 million in the prior-year period. Total revenues increased 18.6% to $1,495.1 million compared to $1,260.9 million in the prior-year period. The year-over-year increase of $234.2 million was related primarily to an increase in equipment rental revenue of $251.6 million, partially offset by a decline in sales of rental equipment of $25.6 million. Pricing increased1.6% compared to the same period in 2020. Dollar utilization increased to 42.4% compared to 34.7% in the prior year period. Direct operating expenses (DOE) of $611.9 million increased 21.6% compared to the prior-year period. The $108.6 million increase was primarily due to higher personnel-related costs and increases related to higher volume such as delivery and freight expenses, maintenance, and re-rent expense. Selling, general and administrative expenses (SG&A) increased 17.8% to $221.0 million compared to $187.6 million in the prior-year period. The $33.4 million increase was primarily attributed to selling expenses, including commissions and bonus incentives, general payroll, and benefit increases including higher stock compensation expense, offset by a reduction in bad debt expense due to continued improvement in collections. Interest expense decreased to $63.8 million compared to $70.1 million in the prior-year period. The decrease was primarily related to both lower interest rates and balances of the Company’s ABL Credit Facility in 2021. The income tax provision was $46.7 million compared to $10.9 million for the prior-year period. The provision in the nine months ended September 30, 2021, was primarily driven by the level of pre-tax income. The Company reported a net income of $152.3 million compared to $38.2 million in the prior-year period. Adjusted net income was $153.6 million compared to $48.2 million in the prior year period. Adjusted EBITDA increased 29.3% to $638.2 million compared to $493.7 million in the prior-year period. Adjusted EBITDA margin increased 350 basis points to 42.7% compared to 39.2% in the prior-year period. Capital Expenditures The Company reported net rental equipment capital expenditures of $360.9 million for the nine months of 2021. Gross rental equipment capital expenditures were $447.0 million compared to $273.2 million in the comparable prior-year period. Proceeds from disposals were $86.1 million compared to $114.1 million last year. See page A-5 for the calculation of net rental equipment capital expenditures. As of September 30, 2021, the Company’s total fleet was approximately $4.1 billion at OEC. The average fleet at OEC in the third quarter increased year-over-year by 4.3% compared to the prior-year period. The average fleet age was 48 months as of September 30, 2021, compared to 47 months in the comparable prior-year period. Disciplined Capital Management The Company generated $114.6 million in free cash
Herc Holdings to acquire Toronto-based Rapid Equipment Rental Limited
Herc Holdings Inc., a North American equipment rental supplier operating as Herc Rentals Inc., has announced that it has entered a purchase agreement to acquire Toronto-based Rapid Equipment Rental Limited (Rapid Equipment). The transaction is subject to customary closing conditions with a plan to close in the fourth quarter of 2021. Terms were not disclosed. Rapid Equipment, a full-service general equipment rental company founded in 2013, comprises approximately 110 employees and seven locations serving construction and industrial customers throughout the Greater Toronto Area (GTA) — one of the largest equipment rental markets in North America. “I look forward to welcoming Rapid Equipment to Team Herc,” said Larry Silber, president and chief executive officer. “Led by equipment rental veterans with substantial industry experience, Rapid Equipment has established a strong reputation throughout the GTA for exceptional customer service, top-quality equipment, and operational excellence. Our combined teams and resources position Herc Rentals to be a preeminent equipment rental partner across the GTA. “The addition of Rapid Equipment supports our long-term strategy to achieve greater density and scale in select urban markets across North America to better serve both our local and multi-geography customers. In particular, the GTA represents a strong growth opportunity with a potential market size exceeding $1 billion in equipment rental revenue. “We expect the acquisition to be accretive to earnings in the first year. We remain well-positioned to pursue growth through acquired operations, greenfield branches, and investment in key fleet categories as we continue to seek improved scale, profitability, and shareholder returns.”
ARA forecast continues to call for significant increases in revenue and investment
Outlook for equipment rental revenue remains positive for 2021 and beyond The outlook for equipment rental revenue, comprised of the construction/industrial and general tool segments, remains positive for 2021 and beyond. The updated third-quarter forecast released by the American Rental Association (ARA) today at The ARA Show™ 2021 in Las Vegas, shows equipment rental revenue to exceed $47.6 billion in 2021, a 3 percent increase over 2020. While that number is slightly less than the second-quarter forecast, 2022 revenue now is expected to grow at a 9.9 percent clip to reach $52.4 billion, which will be a record for the equipment rental industry, topping the $50.9 billion recorded in 2019. The forecast also calls for equipment revenue increases of 5.5 percent in 2023, 2.5 percent in 2024, and 3.3 percent in 2025 to reach $58.6 billion. Construction equipment rental revenue leads the way with a 12.3 percent increase expected in 2022 to reach $38.7 billion while the general tool segment is forecast to grow 3.7 percent in 2022 to $13.66 billion. The forecast does not include the possible positive impact should Congress pass the Infrastructure Investment and Jobs Act of 2021 (IIJA). Scott Hazelton, director, economics and country risk, IHS Markit, Andover, Mass., says that as long as the timing of the infrastructure spending remains unclear, it makes it difficult to assess the rental forecast implications over time, but that the company, which provides data and analysis for the ARA Rentalytics forecasting service, expects infrastructure spending to have a positive impact on future rental revenue forecast updates. John McClelland, Ph.D., ARA vice president for government affairs and chief economist, agrees. “While there is uncertainty in Washington, D.C., about when the bipartisan infrastructure bill will pass, many Washington insiders believe it is only a matter of time. However, most of the benefits of increased infrastructure spending will not occur in 2022 because it takes time for projects to be approved and funding obligated. Once we have a clear indication of final passage, the team at IHS plans to incorporate that spending into the ARA Rentalytics forecast.” In addition, IHS Markit also is monitoring the market to see to what degree inflation, which has not been an issue for well over a decade, gets reflected in rental rate increases. For now, Hazelton says the outlook this quarter remains positive because the forecast for nonresidential construction has been steady and the American Institute of Architects billings index has moved into positive territory. “When that index indicates expansion for three consecutive months, there is a high likelihood that nonresidential construction will pick up 12 to 18 months later. While this only moves the nonresidential forecast from roughly flat to modest growth, it is enough to move rental equipment demand up,” Hazelton says. Equipment rental companies significantly cut investment in equipment in 2020 during the coronavirus (COVID-19) pandemic, like those in the construction and general tool segments spent 44.4 percent less in 2020, dropping investment in equipment to $7.64 billion. However, the forecast shows that investment in 2021 should grow by 36.2 percent to $10.4 billion, followed by another 36 percent increase in 2022 to total $14.2 billion and to increase 10.9 percent in 2023, 2.3 percent in 2024, and 3.8 percent in 2025 to total more than $16.6 billion. In Canada, equipment rental revenue is following a similar trend. According to the ARA forecast, construction and general tool rental revenue combined is expected to grow 18.9 percent in 2021 to reach $4.24 billion, topping the previous record total of $4.04 billion in 2018. Equipment rental revenue in Canada is expected to grow another 7.9 percent in 2022, 4.5 percent in 2023, 2 percent in 2024, and 1.9 percent in 2025 to reach $4.97 billion.
Briggs Equipment Parent Company Sammons Industrial launches SitePro Rentals
Sammons Industrial, a wholly-owned subsidiary of Sammons Enterprises Inc. and parent company of Briggs Equipment and others has launched Dallas-based SitePro Rentals, a general equipment rental company with nine locations in Texas, Louisiana, and Georgia. SitePro enters the equipment rental market with a value proposition built around service, customer relationships, and technology. Rental industry veteran Tim Rule has been appointed president of the new company, a spinoff of Sammons Industrial’s contractor equipment rental business. Prior to the spinoff, general equipment rentals were marketed by Sammons Industrial’s material handling solutions provider, Briggs Equipment. “Separating equipment rental from our material handling solutions business allows us to provide the focus that equipment rental requires,” said Darron Ash, CEO of Sammons Industrial. “We see equipment rental as an attractive and growing market and are committed to investing in the long-term success of SitePro. In addition, we’re really excited to have an innovative leader like Tim Rule leading the business.” “SitePro’s operating model and value proposition are built around addressing customer pain points and improving uptime,” said Rule. “Since we’re building the company from the ground up, with all new systems and technology, we’re not encumbered by outdated legacy systems and processes like other industry players. As a result, we’re able to combine our understanding of customer needs with cutting-edge technologies to create an industry-leading customer experience.” SitePro is beginning with branches in College Station, Dallas, Houston, Laredo, McAllen, and San Antonio, Texas; Baton Rouge and Broussard, La., and Atlanta. It plans to add additional locations in Corpus Christi, Denton, and Fort Worth, Texas; Lafayette La; and Memphis, Tenn. SitePro Rentals said it will carry top equipment brands and be managed by a team of rental industry veterans, employing cutting-edge telematics and mobility technology to provide customers with service and tools to manage their fleet and increase uptime.
H&E relocates with rental focus in the Little Rock area
Effective September 20, 2021, H&E Equipment Services Inc. (H&E) announces the relocation of its Little Rock branch to 11618 Otter Creek South Road, Mabelvale, AR 72103-1658, phone 501-568-7867. The newly renovated 6,450-square-foot facility sits on 1.77 acres with a fully fenced yard area, offices, parts warehouse, and a repair shop with six service bays. It is capable of handling a variety of construction and general industrial equipment for customers in central Arkansas. “To best serve customer demand, we recently sold our Komatsu dealership rights in Arkansas along with our former Little Rock property to focus specifically on rentals, the largest growth area of our business. Our plan is to aggressively grow our rental fleet and expand our product offering of quality equipment with competitive rates throughout the central Arkansas area,” says Branch Manager Trent Taylor. “With easy access to I-30, we can deliver to job sites quickly and efficiently. But even more important than the improvements we are making is maintaining the relationships we have cultivated. Our team is committed to providing exceptional service and is ready to supply whatever equipment solutions our customers may need for the life of their project.” The Little Rock branch specializes in the rental of aerial lifts, telescopic forklifts, earthmoving machinery, compaction equipment, generators, compressors, and more and represents the following manufacturers: Allmand, Atlas Copco, Blue Diamond, Bomag, Case, Club Car, Gehl, Generac Mobile, Genie, Hamm, Husqvarna, JCB, JLG, John Deere, Komatsu, Kubota, LayMor, Ledwell, Link-Belt Excavators, MEC, Miller, Multiquip, Okada, Polaris, Skyjack, SkyTrak, Sullair, Sullivan-Palatek, Takeuchi, Towmaster Trailers, Wacker Neuson, Wirtgen, Yanmar and others.
The ARA Show 2021 prepares for Las Vegas
Exhibitors prepare to engage attendees at the industry’s largest equipment and event rental trade show The American Rental Association (ARA) is preparing for an in-person return to Las Vegas for its annual trade show and convention. Rescheduled for October 17-20, 2021, at the Las Vegas Convention Center, The ARA Show™ 2021 was previously scheduled for February 2021 in New Orleans. The ARA Show is the largest equipment and event rental trade show and convention in the world. The event provides a unique opportunity for those in the rental industry to meet with their peers for targeted education, networking, and a three-day trade show featuring more than 600 exhibitors. For the first time in many years, there will be both indoor and outdoor exhibit space at the show. This year’s show is designed to address attendees’ ever-changing business needs. Whether they are a business owner or work within the rental industry, attendees will be able to gain insight into the latest innovations and trends through educational opportunities and while exploring the show floor. In addition, hundreds of exclusive Show-Only Specials will be provided, offering attendees an opportunity to refresh and expand their rental inventories. Specials often include pricing discounts, free shipping, or other incentives. Education sessions are included with full registration and will take place on Sunday, October 17, covering a wide range of topics for rental industry professionals, exhibitors, and independent manufacturer representatives alike. These sessions, which will take place at the brand-new Resorts World property located near the Las Vegas Convention Center, will feature professional speakers, industry experts, and rental peers. “ARA is committed to an in-person event for The ARA Show 2021 that includes the education, networking, product introductions, and technology that our members have come to expect,” said, ARA Vice President Association Services/Events. “We are excited to be back and are ready to help position rental businesses for the future.” To comply with the state’s health and safety requirements, local protocols, and a commitment to provide a Clean. Safe. Essential. show, ARA continues to monitor all leading sources for public health information. A live-streaming option for education and keynote sessions is planned for exhibitors and attendees who have purchased a full registration but prefer to attend remotely. Registration for the show is open to both current ARA members and prospective members, and hotel reservations are being managed through onPeak.
Herc Holdings acquires Toronto-area Entertainment Equipment Rental Business
Herc Holdings Inc., an North American equipment rental supplier operating as Herc Rentals Inc., announced that it has acquired Dwight Crane Ltd. and its U.S. affiliate, LRX LLC. Dwight Crane is an entertainment equipment rental business based in Ajax, Ontario, Canada that also has operations in Los Angeles. Terms were not disclosed. Dwight Crane is a full-service provider of equipment and lighting rentals with more than 40 years of serving Ontario’s film, event, and commercial production community. The company’s rental fleet includes aerial lifts and vehicles, lighting and mounts, cranes, and lighting trucks. “With the acquisition of Dwight Crane, we continue to expand our entertainment-related rental portfolio, which also includes the industry-leading brands of Herc Entertainment Services®, Cinelease®, and Cinelease Studios,” said Larry Silber, president and chief executive officer. “Like our existing North American entertainment equipment rental operations, Dwight Crane has developed an unmatched reputation for quality and expertise while serving one of the largest entertainment markets in North America. In addition, Dwight Crane brings industry-leading technologies that we look forward to introducing across our specialty entertainment rental network. “Through our entertainment-specific brands, our ProSolutions® specialty rental equipment, and our full line of equipment and services offerings, Herc Rentals remains well-positioned as a preeminent partner to North America’s film, TV, and live event production enterprises. Dwight Crane’s long-standing ties to Ontario’s entertainment clientele and its industry-leading LRX brand lighting technologies bring additional strength to our team and reinforce our long-term commitment to the growing entertainment segment.”
American Rental Association launches RentalHQ Mobile App
Need it? Rent it! The New RentalHQ app makes finding your next equipment rental easier on-the-go The new RentalHQ mobile app makes finding local rental equipment and rental partners fast and easy for construction contractors and professionals. The popular online rental store locator RentalHQ.com is now available as a mobile app – putting the most comprehensive rental store locator at your fingertips for on-the-go rental equipment needs. The RentalHQ app, developed by the American Rental Association (ARA), features easy-to-use search functions with fields for equipment type and location. Searches deliver a list of local ARA-member rental partners carrying the equipment — such as lifts and scaffolding, loaders, backhoes, dump trucks, and mini excavators — with mapped location, contact information, and a website link for each store. With the new RentalHQ app, finding rental construction equipment can be done right from the job site. Whether working in town or traveling in the field, contractors can locate reliable rental partners in the area when equipment is needed now. The app functions seamlessly with Wi-Fi and data connection so you don’t need to worry about signal strength in the field. The RentalHQ app is available for both Apple and Android users. “Contractors are busy people who don’t have time to search for rental equipment when it’s needed now. Our purpose with the RentalHQ app is to provide technology that makes the equipment rental experience as easy, fast, and reliable as possible,” said Debby Schaller, Vice President of Marketing for ARA. “By using the app, construction professionals will be quickly matched with nearby rental partners they can work with for a clean and safe rental experience.” In addition to the easy-to-use search function, app users will also find helpful articles and tips on equipment best practices with new topics being added often. Each year, more than 750,000 visitors access RentalHQ for fast and easy help finding rental equipment. The new RentalHQ mobile app puts the largest and most comprehensive rental store locator at your fingertips. Construction professionals can download the RentalHQ app from the App Store and Google Play.
Herc Holdings completes acquisition of Texas-based CBS Rentals
Herc Holdings Inc., a North American equipment rental supplier operating as Herc Rentals Inc., announced that it has completed the acquisition of substantially all the assets of Texas-based CBS Rentals (CBS). CBS is a full-service general equipment rental company comprising approximately 190 employees and 12 locations serving construction and industrial customers throughout Texas, as well as locations in Carlsbad, NM, and Kingsport, TN. The addition of CBS expands Herc Rentals’ presence in Texas — one of the largest equipment rental markets in North America — to 38 physical locations, which collectively provide general and specialty equipment rental solutions and related services. “I am pleased to welcome CBS Rentals to Team Herc,” said Larry Silber, president and chief executive officer. “Our combined teams and resources position Herc Rentals to be a preeminent equipment rental partner across Texas, serving a diverse mix of construction, industrial, and government customers.”
ARA forecasts 3.5 percent increase for the rental equipment industry
The outlook for equipment rental revenue, comprised of the construction/industrial and general tool segments, has improved over the last quarter. The updated second-quarter forecast released by the American Rental Association (ARA) now calls for equipment rental revenue to exceed $47.8 billion in 2021, nearly a 3.5 percent increase over 2020 and greater than last quarter’s forecast that called for a 3.1 percent increase this year. Overall, the ARA forecast calls for a 9.68 percent increase in revenue in 2022 to reach nearly $52.5 billion, surpassing the equipment rental industry’s previous peak revenue of nearly $51 billion in 2019. Growth is expected to be 3.9 percent in 2023, 2.4 percent in 2024, and 3.5 percent in 2025 to total $57.7 billion. The revenue increases are fueled by the expected strong demand for construction and industrial equipment rental, particularly in 2022, when the segment’s revenues are expected to jump 11.9 percent to $38.9 billion, surpassing the record $37.7 billion in revenue set in 2019. Also, with the likely passage of the Infrastructure Investment and Jobs Act of 2021 (IIJA) by the U.S. Congress, the future forecast for equipment rental revenue in 2022 and beyond could be even more robust. “Once final passage occurs, we will have more specific analysis built into future forecasts, but at first glance, it looks like the IIJA could increase rental revenues by about $8 billion over the eight-year spending program the IIJA authorizes,” says John McClelland, ARA vice president for government affairs and chief economist. “That would roughly amount to an increase in rental revenues for construction and industrial equipment of 7.8 percent over the current forecast. While we need details on how and when the money will be spent to provide a more complete forecast on the IIJA’s impact on the equipment and event rental industry, early analysis is quite positive,” McClelland says. Scott Hazelton, director, economics and country risk, IHS Markit, says the timing of the infrastructure spending remains unclear, making it difficult to assess the rental forecast implications over time, but that the company, which provides data and analysis for the ARA Rentalytics forecasting service, expects to start incorporating the details into the next quarterly rental revenue forecast update. For now, Hazelton says the outlook this quarter is more positive than the first quarter because the forecast for nonresidential construction has improved and the American Institute of Architects billings index has moved into positive territory. “When that index indicates expansion for three consecutive months, there is a high likelihood that nonresidential construction will pick up 12 to 18 months later. While this only moves the nonresidential forecast from roughly flat to modest growth, it is enough to move rental equipment demand up,” Hazelton says. In addition, he says some of the $350 billion in undesignated funds to state and municipal governments in the American Rescue Plan is expected to be used for construction projects, which also translates into more demand for equipment rental. Perhaps the most interesting figures included in the forecast concern the outlook for investment. According to ARA Rentalytics, those in the construction and industrial segment are expected to increase investment this year by 48.1 percent to $7.2 billion and another 40 percent in 2022 to reach nearly $10.1 billion, surpassing the peak industry investment in equipment of $9.95 billion in 2019. “Investment in new equipment dropped precipitously — 51 percent — in 2020 and is now expected to rebound by 48 percent in 2021 and 40 percent in 2022. This forecast is supported by our analysis of industry metrics that show increases in physical utilization, fleet age, and fleet turnover,” McClelland says. “These measures suggest that there has been defleeting and aging of the fleet during the pandemic as a reaction to the resulting economic downturn. With the economy now in recovery, demand for rental equipment is increasing. With physical utilization already high, rental companies much make significant investments in the new fleet to meet that demand,” he says. In addition, investment in general tool equipment is expected to increase by 19.5 percent this year to reach $3.31 billion and then grow another 22. 1 percent in 2022 to teach $4.04 billion.
Financial markets and how it will affect you
This is our annual review of the Banking, Rental, and Leasing markets. Where they are and where they are going. All in all, things look pretty good with a qualifier regarding inflation, interest rates, and a potentially dangerous upswing in the new COVID-19 variant. Boy, that is quite a swing in expectations which basically suggests you plan conservatively, take advantage of short-term opportunities and keep looking over your shoulder to see what is creeping up on you. Let’s start with the BANKS. A fair percentage of banks are loosening up their credit standards for commercial loans, real estate loans, and consumer loans. But, on the other hand, many are reluctant to work with problem loans as they may have in the past. In short, trusting your bank right now may not be a smart thing to do, and maybe you should be shopping around to see which bank may have more interest in your company, is familiar with the industry and understands the industry cycles we all go through, cycle after cycle after cycle and still make it to the other side. You would be amazed how many bankers lack the knowledge of how your cycles work and what you do to manage them. Today, at the first sign of trouble their first thought is to send the loan to the “work-out” section who will suggest you sell everything and send the proceeds to them. Sounds like 2008-09 to me. With interest rates what they are I would suggest you look at refinancing any loan with more than a 3-4% rate attached to it. You don’t get it unless you ask. That would go for vehicles, real estate, inventory loans, and rental equipment. There is a lot of money out there looking for a home. I would also ask what they could do with customer equipment financing if they are offering up attractive rates. And if you have the ability to “buy down” the rate to make your major proposals more attractive that could be a good thing. A recent experience I had kind of indicates what is happening out there. My SUV 36-month lease was ending with a $17,000 residual if I wanted to buy it out. Not being able to find anything I liked with the current vendor. I searched around other vendors and found another 36-month lease where the car had a 67% residual. Not bad! And then I took my current vehicle to CARMAX for an appraisal and they said the trade was worth $22,000. I could not believe it. So, then I marched into the dealer and said I need another $4,000 on the trade and got it. In the end, I wound up with a 36-month lease car payment of $315 with a sticker price of $31000. The high residual and 2.3% interest rate in the lease did the trick. As I said, don’t ask…. don’t get. No matter how your finance your inventory and rental fleets you will doing yourself a favor keeping track of the FMV and OLV of the units you own. Needless to say, the banks got really scared when equipment values tanked and are still not to where they were pre-pandemic. You know it and I know they will come back to where they belong, especially with a shortage of new units which forces up values of both units owned as well as rental rates. I suggest an annual valuation of all owned units which support your bank loans as well as provide any “built-in” equity you have in the fleet. Having these values handy not only helps you out but also your customers who need to supply a value for units they are purchasing from you. On to Leasing Companies Leasing companies seem ready to rock and roll, believe that both construction equipment and material handling equipment are ready to entertain a healthy period of growth. Nice of them to believe that but it really comes down to each dealer’s customer mix to see if the growth potential falls into their individual market. It may or may not. The point here is not to assume and make financial decisions thinking the industry will grow over the next 12-18 months without doing your homework within your market that will support that belief. Leasing still has a benefit over purchasing because there are numerous ways to structure a lease that you could probably not do through bank financing, not to mention the cash savings available with a lease over a bank loan. Some of those benefits, however, will be diminished when lessees need to be capitalized on your financial statements (supposed to start this year I believe). As indicated by my auto deal the current interest rates available kind of makes the buy-lease question a non-starter. And once the leases are reflected on your balance sheet it is time to trust your bank because they told you not to worry about it because this accounting change will not impact your covenants. Somehow, I do not believe that. As I have mentioned in the past you may want to review this question now before the new format hits your statement and their underwriting desks. Rentals took a hit in 2020 and are finally recovering in 2021 with an expected catch-up carrying over into 2022. I am expecting an increase in overall rental activity because with the new technology being added to equipment every year it makes more sense for users without sophisticated maintenance facilities to rent versus buy the units, also supported by a lack of skilled employees to maintain the equipment. In addition, many users are more balance sheet conscious and wish to avoid debt service and invest instead in more technology to make operations more efficient and more profitable. Cannot say I disagree with this approach which should support your lease with maintenance programs going forward. Out of the three segments of the financing world we are discussing rental took the biggest hit from the bankers. When the
Herc Holdings to acquire Texas-based CBS Rentals
Herc Holdings Inc., a North American equipment rental supplier operating as Herc Rentals Inc., has announced that it has entered a purchase agreement to acquire substantially all the assets of Texas-based CBS Rentals (CBS). The transaction, which is subject to customary closing conditions and regulatory approvals, is expected to close prior to the end of 2021. Terms were not disclosed. CBS is a full-service general equipment rental company comprising approximately 190 employees and 12 locations serving construction and industrial customers throughout Texas, as well as locations in Carlsbad, NM, and Kingsport, TN. The addition of CBS expands Herc Rentals’ presence in Texas — one of the largest equipment rental markets in North America — to 38 physical locations, which collectively provide general and specialty equipment rental solutions and related services. “I look forward to welcoming CBS Rentals to Team Herc,” said Larry Silber, president and chief executive officer. “Like Herc Rentals, CBS has more than 56 years of history, substantial equipment rental experience, and a strong reputation for exceptional customer service, top-quality equipment, and operational excellence.” “Our combined teams and resources position Herc Rentals to be a preeminent equipment rental partner across Texas serving a diverse mix of construction, industrial, and government customers. With many of its locations in major metropolitan markets, the addition of CBS supports our long-term strategy to achieve greater density and scale in select urban markets across North America to better serve both our local and national customers.” “We expect the acquisition to be accretive to earnings in the first year. We remain well-positioned to pursue growth through a variety of initiatives, including investment in key fleet categories, greenfield branches, and acquired operations while maintaining our commitment to a sound financial footing.”
BakerCorp rebrands to United Rentals
BakerCorp, a fluid solution provider has announced that it will be rebranded under the United Rentals name starting September 1, 2021. “We are excited to become United Rentals and offer our customers a wider range of solutions under one powerful umbrella,” said Jurgen Verschoor, Region Vice President. “Building on our nearly 80-year BakerCorp legacy, as United Rentals we remain committed to safety, quality, service, and rapid response.” As United Rentals, the company also announced a product expansion to include power rental solutions. Diesel generators, fuel tanks, distribution boards, and cables will be added to its core offerings which include tanks, pumps, and filtration. “We have an aggressive expansion plan to build from our core fluid solutions offerings,” said Verschoor. “We are adding power solutions with new equipment, new branches, and a team of experts to allow us to better serve our customers.” BakerCorp was acquired by United Rentals in 2018. The rebrand will align all European branch operations with United Rentals business, which also operates in the United States and Canada.
H&E Equipment Services reports 2021 second quarter results
H&E Equipment Services, Inc. released its results for the second quarter ended June 30, 2021, reporting strong year-over-year performance as activity in the rental equipment industry displays further improvement. Second Quarter 2021 Summary: Revenues increased 13.4% to $315.8 million versus $278.3 million a year ago. Net income was $15.8 million compared to $8.8 million a year ago. The effective income tax rate was 27.5% in the second quarter of 2021 and 26.9% in the second quarter of 2020. Adjusted EBITDA increased 7.4% to $102.3 million in the second quarter of 2021 compared to $95.3 million a year ago, yielding a margin of 32.4% of revenues compared to 34.2% a year ago. Total equipment rental revenues for the second quarter of 2021 were $179.0 million, an increase of $23.2 million, or 14.9%, compared to $155.8 million a year ago. Rental revenues for the second quarter of 2021 were $160.3 million, an increase of approximately $19.5 million, or 13.9%, compared to $140.8 million in the second quarter of 2020. New equipment sales increased 13.6% to $49.9 million in the second quarter of 2021 compared to $43.9 million a year ago. Used equipment sales increased 21.6% to $41.4 million in the second quarter of 2021 compared to $34.0 million a year ago. The gross margin was 35.3% compared to 33.1% a year ago. Total equipment rental gross margins were 41.3% in the second quarter of 2021 compared to 38.0% a year ago. Rental gross margins were 46.1% in the second quarter of 2021 compared to 41.5% a year ago. Average time utilization (based on original equipment cost) was 68.3% compared to 59.5% a year ago. The size of the Company’s rental fleet based on original acquisition cost decreased 2.2% from a year ago, to $1.8 billion. On a sequential basis, the rental fleet grew 5.4% when compared to the first quarter of 2021. Average rental rates declined 0.3% compared to a year ago and improved 1.0% when compared to the first quarter of 2021. Dollar utilization was 35.2% in the second quarter of 2021 compared to 29.6% a year ago. The average rental fleet age on June 30, 2021, was 39.7 months compared to an industry average age of 52.1 months. Announced the pending sale of the crane business for $130 million in cash. Paid regular quarterly cash dividend of $0.275 per share of common stock. Addressing the strong financial results for the second quarter of 2021, Brad Barber, Chief Executive Officer of H&E Equipment Services, Inc., stated, “Physical utilization of 68.3% was 880 basis points ahead of the same quarter in 2020 when worsening economic conditions caused by the onset of the COVID-19 global pandemic drove the metric to its lowest level since 2010. On a sequential basis, our second-quarter utilization exceeded the first-quarter result by 480 basis points at a time when we grew our fleet by more than 5%. The rising demand from customers led to a 1% improvement in second-quarter rental rates when compared to the preceding quarter, representing the first sequential quarterly improvement since late-2019. With improving utilization, rising rental rates, and fleet growth, we are increasingly encouraged by the prospects for our industry as we enter the second half of 2021.” Mr. Barber elaborated on the improving industry outlook, noting, “Customer inquiries addressing current equipment needs remain strong and we expect the elevated demand to persist for the foreseeable future. Key industry indices, which in some cases are near record levels, point to a continuation of project expansion into 2022, especially in the non-residential construction market. Physical utilization of our fleet remains on a favorable trend, closing August 1, 2021, at 71.9%, reflecting the increasing demand for our young rental fleet.” Providing a final comment on the Company’s success with strategic initiatives, Mr. Barber said, “Our recent disclosure regarding the pending sale of our crane business represents a transformative event for H&E. Following the close of the transaction, expected during the fourth quarter of 2021, we expect to fortify our position in the rental equipment business and in turn benefit from a more stable revenue base and margin appreciation while positioning the Company to capture incremental opportunities resulting from the highly favorable industry trends. In addition, proceeds from the sale are expected to be utilized in numerous ways, including further growth in our rental fleet, expansion of branch operations, and other strategic growth initiatives that should advantageously position H&E for the expected industry expansion. Further steps have been taken in support of our transition to a pure-play equipment rental business. Recently, we reached an agreement to sell two earthmoving distribution branches in Arkansas and plan to start a new rental-only branch in the Greater Little Rock market.” FINANCIAL DISCUSSION FOR SECOND QUARTER 2021: Revenue Total revenues increased 13.4% to $315.8 million in the second quarter of 2021 from $278.3 million in the second quarter of 2020. Total equipment rental revenues increased 14.9% to $179.0 million compared to $155.8 million in the second quarter of 2020. Rental revenues increased 13.9% to $160.3 million compared to $140.8 million in the second quarter of 2020. New equipment sales increased 13.6% to $49.9 million compared to $43.9 million a year ago. Used equipment sales increased 21.6% to $41.4 million compared to $34.0 million a year ago. Parts sales increased 4.6% to $27.4 million compared to $26.2 million a year ago. Service revenues decreased 4.3% to $15.0 million compared to $15.7 million a year ago. Gross Profit Gross profit increased 21.0% to $111.4 million from $92.1 million in the second quarter of 2020. The gross margin was 35.3% for the second quarter of 2021, as compared to 33.1% for the second quarter of 2020. On a segment basis, the gross margin on total equipment rentals was 41.3% in the second quarter of 2021 compared to 38.0% in the second quarter of 2020. Rental margins were 46.1% in the second quarter of 2021 compared to 41.5% for the second quarter of 2020. On average, rental rates in the second quarter of 2021 were 0.3% lower than rental rates in the second quarter of 2020. Time utilization (based on original equipment cost) was 68.3% in the second quarter of 2021 compared to 59.5% in the second quarter of 2020. Gross margins on new equipment sales were 11.5% in the second quarter of 2021 compared to 10.7% in the second quarter of 2020. Gross margins on used
Riekes Equipment relocates operations in Sioux Falls to support growth
Riekes Equipment, a warehouse solution, and material handling equipment provider have announced the relocation of its sales and service center in Sioux Falls to support its continued growth. “We are very excited about our move as it will provide much-needed space to grow our business and allow greater efficiencies and innovation in our operation,” said Dave Hartnett, Executive Vice President. “This expansion ensures we maintain the level of service our customers demand. Our client base will benefit from greater capacity in our expanded service center and broader availability of our local rental fleet.” Riekes will relocate on August 2nd into the new building, which is located at 47171 Dominic Street in the Renner Industrial Park in Sioux Falls, South Dakota. The property includes approximately 16,640 square feet of space, a dock-high door, and two ground-level doors, allowing for future growth. In addition, Riekes will be building out additional office space and a state-of-the-art conference room for meetings and training. Previously located at 47068 104th St. in Tea, South Dakota, the Riekes Service Center has been in business for 28 years.
H&E opens new branch in Fresno, CA
H&E Equipment Services Inc. (H&E) just announced the opening of a new rental branch in Fresno, CA, bringing the number of H&E California facilities to 11. The new location is at 4199 E. Jefferson Avenue, Fresno, CA 93725-9707, phone 559-570-6700. The 10,000-square-foot facility sits on six acres with a fully fenced yard area, offices, parts warehouse, and a repair shop with five service bays. It is capable of servicing a variety of construction and general industrial equipment and joins the H&E facility in Lodi in serving central California and the San Joaquin Valley. “This new location just off the Golden State Highway will provide even greater coverage for our central California customers, especially when paired with nearby H&E facilities. Fresno will bridge the gap between our Lodi branch to the north and the Bakersfield location to the south. Centrally locating this new facility is about taking care of our loyal customers in Merced, Mariposa, Fresno, Kings, and Tulare counties, but we can also now reach farther and invite others to experience the H&E difference too,” says Branch Manager Ed Sollid. “We have built a team that is customer-oriented, aggressive and running on all cylinders. We are like a well-oiled machine that is built to last. We’re ready to assist with any project in the area, including highway, rail, and commercial construction.” The branch specializes in the rental of aerial lifts, telescopic forklifts, earthmoving machinery, compaction equipment, generators, compressors, and more and represents the following manufacturers: Atlas Copco, Blue Diamond, Bobcat, Bomag, Case, Club Car, Doosan, Gehl, Generac Mobile, Genie, Hamm, Hy-Brid Lifts, JCB, JLG, John Deere, Kubota, LayMor, Ledwell, Lincoln Electric, Link-Belt Excavators, MEC, Miller, Multiquip, Okada, Polaris, Skyjack, SkyTrak, Sullair, Sullivan-Palatek, Takeuchi, Towmaster Trailers, Valew, Wacker Neuson, Yanmar, and others. In addition to a large rental equipment fleet, the facility provides expanded new and used equipment sales, parts availability within 24 hours for most items, in-shop and mobile service repairs, training, and other value-added services.
H&E Equipment Services sells crane business for $130 million
The transaction supports H&E’s transformation to a pure-play equipment rental company will promote H&E’s strategic focus on geographic expansion and fleet investment H&E Equipment Services, Inc., (“H&E”), announced that it has entered into a definitive agreement to sell its crane business to a wholly-owned subsidiary of The Manitowoc Company, Inc., a global manufacturer of cranes and lifting solutions, for $130 million in cash. The transaction is expected to close during the fourth quarter of 2021, subject to customary closing conditions, including regulatory approval under the Hart-Scott-Rodino Act. “This transaction marks an important step in H&E Equipment’s transition to a pure-play equipment rental company,” said Brad Barber, H&E’s Chief Executive Officer. “We expect our continued migration to higher margin rentals will promote our strategic focus on geographic expansion and fleet investment, drive outsized revenue and profitability growth, and enable us to take full advantage of opportunities created by favorable industry and macro trends.” “H&E has a long history and excellent reputation for serving the lifting industry, and we look forward to welcoming the H&E crane team to Manitowoc,” commented Aaron H. Ravenscroft, president and Chief Executive Officer of The Manitowoc Company, Inc. As a result of the transaction, H&E will fully exit the crane distribution business. This divestiture, which was unanimously approved by H&E’s Board of Directors, is expected to increase, and further stabilize the Company’s EBITDA margin as it intensifies its focus on the higher-margin equipment rental business. H&E’s equipment rental business has shown consistent growth, with a compound annual growth rate of 11 percent in the five years leading up to 2020. This rapid growth has seen the rental portion of H&E’s business expand from 32 percent of revenues 10 years ago to 51 percent in 2020. The overall demand for equipment rentals has continued to expand and has proven to be more stable and resilient to market disruptions than the distribution business. Possible uses of proceeds from the transaction include but are not necessarily limited to, further expansion of new facilities, investment in the rental fleet, and the delivery of a differentiated customer experience through enhanced technology capabilities. In addition, the proceeds will fortify the Company’s strong cash position while supporting strategic growth initiatives and ongoing dividends.