HERC HOLDINGS INC [HRI] Filings

10-Q 1 hri-20210930.htm 10-Q hri-20210930

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_______________________________________________________________________________

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021


OR
☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-33139

HERC HOLDINGS INC.

(Exact name of registrant as specified in its charter)


Delaware						20-3530539
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)

27500 Riverview Center Blvd.

Bonita Springs, Florida 34134

(239) 301-1000

(Address, including Zip Code, and telephone number,

including area code, of registrant's principal executive offices)

Not Applicable

(Former name, former address and former fiscal year,

if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of exchange on which registered

Common Stock, par value $0.01 per share

HRI

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Smaller reporting company

☐

Accelerated filer

☐

Emerging growth company

☐

Non-accelerated filer

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 15, 2021, there were 29,658,403 shares of the registrant's common stock, $0.01 par value, outstanding.

Table of Contents

HERC HOLDINGS INC. AND SUBSIDIARIES

TABLE OF CONTENTS



		Page
PART I. FINANCIAL INFORMATION
ITEM 1.	Financial Statements	2
	Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020	2
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2021 and 2020	3
	Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2021 and 2020	4
	Condensed Consolidated Statements of Changes in Equity for the Three and Nine Months Ended September 30, 2021 and 2020	5
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020	7
	Notes to Condensed Consolidated Financial Statements	9
ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	23
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	30
ITEM 4.	Controls and Procedures	30
PART II. OTHER INFORMATION
ITEM 1.	Legal Proceedings	31
ITEM 1A.	Risk Factors	31
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
ITEM 5.	Other Information	31
ITEM 6.	Exhibits	32
SIGNATURE		33

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HERC HOLDINGS INC. AND SUBSIDIARIES

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q for the period ended September 30, 2021 (this "Report") includes "forward-looking statements," as that term is defined by the federal securities laws. Forward-looking statements include statements concerning our business plans and strategy, projected profitability, performance or cash flows, future capital expenditures, our growth strategy, anticipated financing needs, business trends, the impact of and our response to COVID-19 and other information that is not historical information. Forward looking statements are generally identified by the words "estimates," "expects," "anticipates," "projects," "plans," "intends," "believes," "forecasts," "looks," and future or conditional verbs, such as "will," "should," "could" or "may," as well as variations of such words or similar expressions. All forward-looking statements are based upon our current expectations and various assumptions and apply only as of the date of this Report. Our expectations, beliefs and projections are expressed in good faith and we believe there is a reasonable basis for them. However, there can be no assurance that our expectations, beliefs and projections will be achieved.

There are a number of risks, uncertainties and other important factors that could cause our actual results to differ materially from those suggested by our forward-looking statements, including those set forth in our Annual Report on Form 10-K for the year ended December 31, 2020 under Item 1A "Risk Factors," in Part II, Item 1A of this Report, and in our other filings with the Securities and Exchange Commission. All forward-looking statements are expressly qualified in their entirety by such cautionary statements. We undertake no obligation to update or revise forward-looking statements that have been made to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events.

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PART I—FINANCIAL INFORMATION

ITEM l. FINANCIAL STATEMENTS

HERC HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except par value)


	September 30, 2021		December 31, 2020
ASSETS	(Unaudited)
Cash and cash equivalents	$	35.2	$	33.0
Receivables, net of allowances of $14.7 and $15.5, respectively	373.7		301.2
Other current assets	39.5		32.9
Total current assets	448.4		367.1
Rental equipment, net	2,506.1		2,260.4
Property and equipment, net	300.4		290.4
Right-of-use lease assets	362.2		255.9
Intangible assets, net	349.2		295.9
Goodwill	150.6		100.5
Other long-term assets	15.7		18.2
Total assets	$	4,132.6	$	3,588.4
LIABILITIES AND EQUITY
Current maturities of long-term debt and financing obligations	$	15.8	$	15.8
Current maturities of operating lease liabilities	36.3		32.1
Accounts payable	201.8		125.8
Accrued liabilities	172.8		154.3
Total current liabilities	426.7		328.0
Long-term debt, net	1,792.0		1,651.5
Financing obligations, net	111.6		114.5
Operating lease liabilities	337.9		234.1
Deferred tax liabilities	511.9		474.0
Other long term liabilities	43.3		44.3
Total liabilities	3,223.4		2,846.4
Commitments and contingencies (Note 13)
Equity:
Preferred stock, $0.01 par value, 13.3 shares authorized, no shares issued and outstanding	—		—
Common stock, $0.01 par value, 133.3 shares authorized, 32.4 and 32.1 shares issued and 29.7 and 29.4 shares outstanding	0.3		0.3
Additional paid-in capital	1,830.9		1,818.2
Accumulated deficit	(125.2)		(277.5)
Accumulated other comprehensive loss	(104.8)		(107.0)
Treasury stock, at cost, 2.7 shares and 2.7 shares	(692.0)		(692.0)
Total equity	909.2		742.0
Total liabilities and equity	$	4,132.6	$	3,588.4

The accompanying notes are an integral part of these financial statements.

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HERC HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Unaudited

(In millions, except per share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenues:
Equipment rental	$	519.6	$	402.3	$	1,368.0	$	1,116.4
Sales of rental equipment	16.6		45.3		91.1		116.7
Sales of new equipment, parts and supplies	8.6		6.2		22.5		20.2
Service and other revenue	5.6		2.9		13.5		7.6
Total revenues	550.4		456.7		1,495.1		1,260.9
Expenses:
Direct operating	225.9		169.4		611.9		503.3
Depreciation of rental equipment	105.4		101.9		306.9		303.7
Cost of sales of rental equipment	13.7		46.3		76.8		118.3
Cost of sales of new equipment, parts and supplies	6.5		4.4		15.6		14.6
Selling, general and administrative	81.5		61.0		221.0		187.6
Impairment	—		—		0.4		9.5
Interest expense, net	21.4		22.4		63.8		70.1
Other (income) expense, net	(0.1)		(0.3)		(0.3)		4.7
Total expenses	454.3		405.1		1,296.1		1,211.8
Income before income taxes	96.1		51.6		199.0		49.1
Income tax provision	(23.8)		(11.7)		(46.7)		(10.9)
Net income	$	72.3	$	39.9	$	152.3	$	38.2
Weighted average shares outstanding:
Basic	29.6		29.2		29.6		29.1
Diluted	30.5		29.5		30.4		29.3
Earnings per share:
Basic	$	2.44	$	1.37	$	5.15	$	1.31
Diluted	$	2.37	$	1.35	$	5.01	$	1.30

The accompanying notes are an integral part of these financial statements.

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HERC HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Unaudited

(In millions)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net income	$	72.3	$	39.9	$	152.3	$	38.2
Other comprehensive income (loss):
Foreign currency translation adjustments	(4.9)		5.2		0.6		(8.2)
Reclassification of foreign currency items to other (income) expense, net	—		—		—		2.1
Unrealized gains and losses on hedging instruments:
Reclassification into net income	—		—		—		(1.5)
Income tax provision related to hedging instruments	—		—		—		0.3
Pension and postretirement benefit liability adjustments:
Amortization of net losses included in net periodic pension cost	0.9		0.3		1.9		1.1
Income tax provision related to defined benefit pension plans	(0.1)		(0.1)		(0.3)		(0.3)
Total other comprehensive income (loss)	(4.1)		5.4		2.2		(6.5)
Total comprehensive income	$	68.2	$	45.3	$	154.5	$	31.7

The accompanying notes are an integral part of these financial statements.

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HERC HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Unaudited

(In millions)


	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total Equity
	Shares	Amount
Balance at December 31, 2020	29.4	$	0.3	$	1,818.2	$	(277.5)	$	(107.0)	$	(692.0)	$	742.0
Net income	—	—		—		32.9		—		—		32.9
Other comprehensive income	—	—		—		—		2.8		—		2.8
Net settlement on vesting of equity awards	0.2	—		(7.1)		—		—		—		(7.1)
Stock-based compensation charges	—	—		5.3		—		—		—		5.3
Employee stock purchase plan	—	—		0.6		—		—		—		0.6
Exercise of stock options	—	—		1.5		—		—		—		1.5
Balance at March 31, 2021	29.6	0.3		1,818.5		(244.6)		(104.2)		(692.0)		778.0
Net income	—	—		—		47.1		—		—		47.1
Other comprehensive income	—	—		—		—		3.5		—		3.5
Net settlement on vesting of equity awards	—	—		(1.1)		—		—		—		(1.1)
Stock-based compensation charges	—	—		7.1		—		—		—		7.1
Employee stock purchase plan	—	—		0.6		—		—		—		0.6
Exercise of stock options	—	—		0.2		—		—		—		0.2
Balance at June 30, 2021	29.6	0.3		1,825.3		(197.5)		(100.7)		(692.0)		835.4
Net income	—	—		—		72.3		—		—		72.3
Other comprehensive loss	—	—		—		—		(4.1)		—		(4.1)
Net settlement on vesting of equity awards	—	—		(0.5)		—		—		—		(0.5)
Stock-based compensation charges	—	—		5.5		—		—		—		5.5
Employee stock purchase plan	0.1	—		0.6		—		—		—		0.6
Exercise of stock options	—	—		—		—		—		—		—
Balance at September 30, 2021	29.7	$	0.3	$	1,830.9	$	(125.2)	$	(104.8)	$	(692.0)	$	909.2

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HERC HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Continued)

Unaudited

(In millions)


	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total Equity
	Shares	Amount
Balance at December 31, 2019	28.8	$	0.3	$	1,796.9	$	(351.2)	$	(109.7)	$	(692.0)	$	644.3
Net loss	—	—		—		(3.7)		—		—		(3.7)
Other comprehensive loss	—	—		—		—		(22.0)		—		(22.0)
Net settlement on vesting of equity awards	0.3	—		(2.5)		—		—		—		(2.5)
Stock-based compensation charges	—	—		3.2		—		—		—		3.2
Employee stock purchase plan	—	—		0.6		—		—		—		0.6
Balance at March 31, 2020	29.1	0.3		1,798.2		(354.9)		(131.7)		(692.0)		619.9
Net income	—	—		—		2.0		—		—		2.0
Other comprehensive income	—	—		—		—		10.1		—		10.1
Net settlement on vesting of equity awards	—	—		(0.3)		—		—		—		(0.3)
Stock-based compensation charges	—	—		1.7		—		—		—		1.7
Employee stock purchase plan	—	—		0.6		—		—		—		0.6
Balance at June 30, 2020	29.1	0.3		1,800.2		(352.9)		(121.6)		(692.0)		634.0
Net income	—	—		—		39.9		—		—		39.9
Other comprehensive income	—	—		—		—		5.4		—		5.4
Net settlement on vesting of equity awards	—	—		(0.2)		—		—		—		(0.2)
Stock-based compensation charges	—	—		5.4		—		—		—		5.4
Employee stock purchase plan	—	—		0.5		—		—		—		0.5
Exercise of stock options	0.1	—		1.5		—		—		—		1.5
Balance at September 30, 2020	29.2	$	0.3	$	1,807.4	$	(313.0)	$	(116.2)	$	(692.0)	$	686.5

The accompanying notes are an integral part of these financial statements.

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HERC HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited

(In millions)


	Nine Months Ended September 30,
	2021		2020
Cash flows from operating activities:
Net income	$	152.3	$	38.2
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of rental equipment	306.9		303.7
Depreciation of property and equipment	40.9		41.2
Amortization of intangible assets	8.0		5.8
Amortization of deferred debt and financing obligations costs	2.4		2.6
Stock-based compensation charges	17.9		10.3
Impairment	0.4		9.5
Provision for receivables allowances	20.6		28.2
Deferred taxes	37.4		12.7
(Gain) loss on sale of rental equipment	(14.3)		1.6
Other	2.4		4.2
Changes in assets and liabilities:
Receivables	(81.2)		(14.5)
Other assets	(5.9)		(4.4)
Accounts payable	7.7		(1.9)
Accrued liabilities and other long-term liabilities	7.7		(13.2)
Net cash provided by operating activities	503.2		424.0
Cash flows from investing activities:
Rental equipment expenditures	(447.0)		(273.2)
Proceeds from disposal of rental equipment	86.1		114.1
Non-rental capital expenditures	(31.1)		(32.0)
Proceeds from disposal of property and equipment	3.4		4.2
Acquisitions, net of cash acquired	(225.2)		—
Proceeds from disposal of business	—		15.3
Net cash used in investing activities	(613.8)		(171.6)

The accompanying notes are an integral part of these financial statements.

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HERC HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

Unaudited

(In millions)


	Nine Months Ended September 30,
	2021		2020
Cash flows from financing activities:
Proceeds from revolving lines of credit and securitization	482.9		473.0
Repayments on revolving lines of credit and securitization	(355.0)		(694.7)
Principal payments under capital lease and financing obligations	(9.7)		(10.4)
Payment of debt financing costs	(0.1)		(0.2)
Proceeds from exercise of stock options	1.7		1.5
Proceeds from employee stock purchase plan	1.8		1.7
Net settlement on vesting of equity awards	(8.7)		(3.0)
Net cash provided by (used in) financing activities	112.9		(232.1)
Effect of foreign exchange rate changes on cash and cash equivalents	(0.1)		0.5
Net increase in cash and cash equivalents during the period	2.2		20.8
Cash and cash equivalents cash at beginning of period	33.0		33.0
Cash and cash equivalents at end of period	$	35.2	$	53.8

Supplemental disclosure of cash flow information:
Cash paid for interest	$	78.0	$	86.0
Cash paid for income taxes, net	$	13.3	$	4.0
Supplemental disclosure of non-cash investing activity:
Purchases of rental equipment in accounts payable	$	67.2	$	13.0
Equipment acquired through finance leases	$	19.1	$	1.4
Note receivable on disposals	$	—	$	8.9

The accompanying notes are an integral part of these financial statements.

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HERC HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Unaudited

Note 1—Background

Herc Holdings Inc. ("we," "us," "our," "Herc Holdings," or "the Company") is one of the leading equipment rental suppliers with approximately 295 locations in North America at September 30, 2021. The Company conducts substantially all of its operations through subsidiaries, including Herc Rentals Inc. ("Herc"). With over 56 years of experience, the Company is a full-line equipment rental supplier offering a broad portfolio of equipment for rent. In addition to its principal business of equipment rental, the Company sells used equipment and contractor supplies such as construction consumables, tools, small equipment and safety supplies; provides repair, maintenance, equipment management services and safety training to certain of its customers; offers equipment re-rental services and provides on-site support to its customers; and provides ancillary services such as equipment transport, rental protection, cleaning, refueling and labor.

The Company's classic fleet includes aerial, earthmoving, material handling, trucks and trailers, air compressors, compaction and lighting. The Company's equipment rental business is supported by ProSolutions®, its industry-specific solutions-based services, which includes power generation, climate control, remediation and restoration, and studio and production equipment, and its ProContractor professional grade tools.

On June 30, 2016, the Company, in its previous form as the holding company of both the existing equipment rental operations as well as the former vehicle rental operations (in its form prior to the Spin-Off, "Hertz Holdings"), completed a spin-off (the "Spin-Off") of its global vehicle rental business through a dividend to stockholders of all of the issued and outstanding common stock of Hertz Rental Car Holding Company, Inc., which was re-named Hertz Global Holdings, Inc. ("New Hertz") in connection with the Spin-Off. New Hertz is an independent public company and continues to operate its global vehicle rental business through its operating subsidiaries including The Hertz Corporation ("THC"). The Company began operating as an independent company and changed its name to Herc Holdings Inc. on June 30, 2016.

Note 2—Basis of Presentation and Recently Issued Accounting Pronouncements

Basis of Presentation

The Company prepares its condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP"). In the opinion of management, the condensed consolidated financial statements reflect all adjustments of a normal recurring nature that are necessary for a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year. The year-end condensed consolidated balance sheet data was derived from audited financial statements, however, these condensed consolidated financial statements do not include all of the disclosures required for complete annual financial statements and, accordingly, certain information, footnotes and disclosures normally included in annual financial statements, prepared in accordance with U.S. GAAP, have been condensed or omitted in accordance with Securities and Exchange Commission ("SEC") rules and regulations. The Company believes that the disclosures made are adequate to make the information not misleading. Accordingly, the condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on February 18, 2021.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and footnotes. Actual results could differ materially from those estimates.

Significant estimates inherent in the preparation of the condensed consolidated financial statements include receivables allowances, depreciation of rental equipment, the recoverability of long-lived assets, useful lives and impairment of long-lived tangible and intangible assets including goodwill and trade name, valuation of acquired intangible assets, pension and postretirement benefits, valuation of stock-based compensation, reserves for litigation and other contingencies and accounting for income taxes, among others.

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HERC HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

Principles of Consolidation

The condensed consolidated financial statements include the accounts of Herc Holdings and its wholly owned subsidiaries. In the event that the Company is a primary beneficiary of a variable interest entity, the assets, liabilities and results of operations of the variable interest entity are included in the Company's condensed consolidated financial statements. The Company accounts for investments in joint ventures using the equity method when it has significant influence but not control and is not the primary beneficiary. All significant intercompany transactions have been eliminated in consolidation.

Recently Issued Accounting Pronouncements

Adopted

Facilitation of the Effects of Reference Rate Reform on Financial Reporting

In March 2020, the Financial Accounting Standards Board ("FASB") issued guidance that provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of the London Interbank Offered Rate (“LIBOR”) or by another reference rate expected to be discontinued. The Company adopted this guidance during the first quarter of 2021 and it did not have a material impact on its financial position, results of operations or cash flows.

Note 3—Revenue Recognition

The Company is principally engaged in the business of renting equipment. Ancillary to the Company’s principal equipment rental business, the Company also sells used rental equipment, new equipment and parts and supplies and offers certain services to support its customers. The Company operates in North America with revenue from the United States representing approximately 92.5% and 92.3% of total revenue for the three and nine months ended September 30, 2021, respectively, compared to 91.6% and 91.2% for the same periods in 2020.

The Company’s rental transactions are accounted for under Accounting Standards Codification ("ASC") Topic 842, Leases ("Topic 842"). The Company’s sale of rental and new equipment, parts and supplies along with certain services provided to customers are accounted for under ASC Topic 606, Revenue from Contracts with Customers ("Topic 606"). The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer. The amount of revenue recognized reflects the consideration the Company expects to be entitled to in exchange for such products or services.

The following tables summarizes the applicable accounting guidance for the Company’s revenues for the three and nine months ended September 30, 2021 and 2020 (in millions):


	Three Months Ended September 30,
	2021						2020
	Topic 842		Topic 606		Total		Topic 842		Topic 606		Total
Revenues:
Equipment rental	$	468.0	$	—	$	468.0	$	362.4	$	—	$	362.4
Other rental revenue:
Delivery and pick-up	—		31.4		31.4		—		23.7		23.7
Other	20.2		—		20.2		16.2		—		16.2
Total other rental revenues	20.2		31.4		51.6		16.2		23.7		39.9
Total equipment rental	488.2		31.4		519.6		378.6		23.7		402.3
Sales of rental equipment	—		16.6		16.6		—		45.3		45.3
Sales of new equipment, parts and supplies	—		8.6		8.6		—		6.2		6.2
Service and other revenues	—		5.6		5.6		—		2.9		2.9
Total revenues	$	488.2	$	62.2	$	550.4	$	378.6	$	78.1	$	456.7

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HERC HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited


	Nine Months Ended September 30,
	2021						2020
	Topic 842		Topic 606		Total		Topic 842		Topic 606		Total
Revenues:
Equipment rental	$	1,238.1	$	—	$	1,238.1	$	1,013.9	$	—	$	1,013.9
Other rental revenue:
Delivery and pick-up	—		78.0		78.0		—		62.5		62.5
Other	51.9		—		51.9		40.0		—		40.0
Total other rental revenues	51.9		78.0		129.9		40.0		62.5		102.5
Total equipment rental	1,290.0		78.0		1,368.0		1,053.9		62.5		1,116.4
Sales of rental equipment	—		91.1		91.1		—		116.7		116.7
Sales of new equipment, parts and supplies	—		22.5		22.5		—		20.2		20.2
Service and other revenues	—		13.5		13.5		—		7.6		7.6
Total revenues	$	1,290.0	$	205.1	$	1,495.1	$	1,053.9	$	207.0	$	1,260.9

Topic 842 revenues

Equipment Rental Revenue

The Company offers a broad portfolio of equipment for rent on a daily, weekly or monthly basis, with substantially all rental agreements cancellable upon the return of the equipment. Virtually all customer contracts can be canceled by the customer with no penalty by returning the equipment within one day; therefore, the Company does not allocate the transaction price between the different contract elements.

Equipment rental revenue includes revenue generated from renting equipment to customers and is recognized on a straight-line basis over the length of the rental contract. As part of this straight-line methodology, when the equipment is returned, the Company recognizes as incremental revenue the excess, if any, between the amount the customer is contractually required to pay, which is based on the rental contract period applicable to the actual number of days the equipment was out on rent, over the cumulative amount of revenue recognized to date. In any given accounting period, the Company will have customers return equipment and be contractually required to pay more than the cumulative amount of revenue recognized to date under the straight-line methodology. Also included in equipment rental revenue is re-rent revenue in which the Company will rent specific pieces of equipment from vendors and then re-rent that equipment to its customers. Provisions for discounts, rebates to customers and other adjustments are provided for in the period the related revenue is recorded.

Other

Other equipment rental revenue is primarily comprised of fees for the Company’s rental protection program and environmental charges. Fees paid for the rental protection program allow customers to limit the risk of financial loss in the event the Company’s equipment is damaged or lost. Fees for the rental protection program and environmental recovery fees are recognized on a straight-line basis over the length of the rental contract.

Topic 606 revenues

Delivery and pick-up

Delivery and pick-up revenue associated with renting equipment is recognized when the services are performed.

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Sales of Rental Equipment, New Equipment, Parts and Supplies

The Company sells its used rental equipment, new equipment, parts and supplies. Revenues recorded for each category are as follows (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Sales of rental equipment	$	16.6	$	45.3	$	91.1	$	116.7
Sales of new equipment	2.7		2.4		6.4		8.5
Sales of parts and supplies	5.9		3.8		16.1		11.7
Total	$	25.2	$	51.5	$	113.6	$	136.9

The Company recognizes revenue from the sale of rental equipment, new equipment, parts and supplies when control of the asset transfers to the customer, which is typically when the asset is picked up by or delivered to the customer and when significant risks and rewards of ownership have passed to the customer. Sales and other tax amounts collected from customers and remitted to government authorities are accounted for on a net basis and, therefore, excluded from revenue.

The Company routinely sells its used rental equipment in order to manage repair and maintenance costs, as well as the composition, age and size of its fleet. The Company disposes of used equipment through a variety of channels including retail sales to customers and other third parties, sales to wholesalers, brokered sales and auctions.

The Company also sells new equipment, parts and supplies. The types of new equipment that the Company sells vary by location and include a variety of ProContractor tools and supplies, small equipment (such as work lighting, generators, pumps, compaction equipment and power trowels), safety supplies and expendables.

Under Topic 606, the accounts receivable balance, prior to allowances for doubtful accounts, for the sale of rental equipment, new equipment, parts and supplies, was approximately $12.1 million and $13.8 million as of September 30, 2021 and December 31, 2020, respectively.

Service and other revenues

Service and other revenues primarily include revenue earned from equipment management and similar services for rental customers which includes providing customer support functions such as dedicated in-plant operations, plant management services, equipment and safety training, and repair and maintenance services particularly to industrial customers who request such services.

The Company recognizes revenue for service and other revenues as the services are provided. Service and other revenues are typically invoiced together with a customer’s rental amounts and, therefore, it is not practical for the Company to separate the accounts receivable amount related to services and other revenues that are accounted for under Topic 606; however, such amount is not considered material.

Receivables and contract assets and liabilities

Most of the Company's equipment rental revenue is accounted for under Topic 842. The customers that are responsible for the remaining equipment rental revenue that is accounted for under Topic 606 are generally the same customers that rent the Company's equipment. Concentration of credit risk with respect to the Company's accounts receivable is limited because a large number of geographically diverse customers makes up its customer base. The Company manages credit risk associated with its accounts receivable at the customer level through credit approvals, credit limits and other monitoring procedures. The Company maintains allowances for doubtful accounts that reflect the Company's estimate of the amount of receivables that the Company will be unable to collect based on its historical write-off experience.

The Company does not have material contract assets or contract liabilities associated with customer contracts. The Company's contracts with customers do not generally result in material amounts billed to customers in excess of recognizable revenue. The Company did not recognize material revenue during the three and nine months ended September 30, 2021 and 2020 that was included in the contract liability balance as of the beginning of each such period.

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Performance obligations

Most of the Company's revenue recognized under Topic 606 is recognized at a point-in-time, rather than over time. Accordingly, in any particular period, the Company does not generally recognize a significant amount of revenue from performance obligations satisfied (or partially satisfied) in previous periods, and the amount of such revenue recognized during the three and nine months ended September 30, 2021 and 2020 was not material. We also do not expect to recognize material revenue in the future related to performance obligations that are unsatisfied (or partially unsatisfied) as of September 30, 2021.

Contract estimates and judgments

The Company's revenues accounted for under Topic 606 generally do not require significant estimates or judgments, primarily for the following reasons:

•The transaction price is generally fixed and stated on the Company's contracts;

•As noted above, the Company's contracts generally do not include multiple performance obligations, and accordingly do not generally require estimates of the standalone selling price for each performance obligation;

•The Company's revenues do not include material amounts of variable consideration; and

•Most of the Company's revenue is recognized as of a point-in-time and the timing of the satisfaction of the applicable performance obligations is readily determinable. As noted above, the revenue recognized under Topic 606 is generally recognized at the time of delivery to, or pick-up by, the customer.

The Company monitors and reviews its estimated standalone selling prices on a regular basis.

Note 4—Rental Equipment

Rental equipment consists of the following (in millions):


	September 30, 2021		December 31, 2020
Rental equipment	$	4,018.9	$	3,613.5
Less: Accumulated depreciation	(1,512.8)		(1,353.1)
Rental equipment, net	$	2,506.1	$	2,260.4

Note 5—Business Combinations

In August 2021, the Company completed the acquisition of substantially all of the assets of Contractors Building Supply Co. LLC ("CBS"). CBS was a full-service general equipment rental company comprising approximately 190 employees and twelve locations serving construction and industrial customers throughout Texas, as well as a location in New Mexico and Tennessee. The acquisition expands the Company's presence in Texas to 38 physical locations, which collectively provide general and specialty equipment rental solutions and related services. The aggregate consideration paid was approximately $190.3 million and is subject to a potential working capital adjustment. The acquisition and related fees and expenses were funded through available cash and drawings on the senior secured asset-based revolving credit facility.

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The following table summarizes the purchase price allocation of the assets acquired and liabilities assumed (in millions):


Accounts receivable	$	11.1
Other current assets	1.8
Rental equipment	99.3
Property and equipment	7.6
Intangibles(a)	38.2
Total identifiable assets acquired	158.0
Current liabilities	3.3
Net identifiable assets acquired	154.7
Goodwill(b)	35.6
Net assets acquired	$	190.3

(a) The following table reflects the fair values and useful lives of the acquired intangible assets identified (in millions):


	Fair value		Life (years)
Customer relationships	$	35.0	14
Non-compete agreements	3.2		5
	$	38.2

(b) The level of goodwill that resulted from the acquisition is primarily reflective of operational synergies that the Company expects to achieve that are not associated with identifiable assets, the value of CBS's assembled workforce and new customer relationships expected to arise from the acquisition. All of the goodwill is expected to be deductible for income tax purposes.

The assets and liabilities were recorded as of August 30, 2021 and the results of operations are included in the Company's consolidated results of operations as of that date. Pro-forma operating results, as if the Company had completed the acquisition at the beginning of the periods presented, are not significant to the Company's consolidated statements of operations and are not presented.

In addition to the acquisition of CBS, the Company completed the acquisitions of San Mateo Rentals ("San Mateo") and Jim-N-I Rentals, Inc. ("Jim-N-I") in April 2021; each with one location in California. In September 2021, the Company completed the acquisition of Dwight Crane Ltd. ("Dwight Crane") with one location in Ajax, Ontario, Canada along with its U.S. based affiliate, LRX LLC.

Note 6—Goodwill and Intangible Assets

Goodwill

The following summarizes the Company's goodwill (in millions):


	September 30, 2021		December 31, 2020
Balance at the beginning of the period:
Goodwill	$	775.4	$	768.5
Accumulated impairment losses	(674.9)		(674.9)
	100.5		93.6

Additions	50.1		6.9

Balance at the end of the period:
Goodwill	825.5		775.4
Accumulated impairment losses	(674.9)		(674.9)
	$	150.6	$	100.5

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Intangible Assets

Intangible assets, net, consisted of the following major classes (in millions):


	September 30, 2021
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
Finite-lived intangible assets:
Customer-related and non-compete agreements(a)	$	72.7	$	(12.4)	$	60.3
Internally developed software(b)	47.2		(28.9)		18.3
Total	119.9		(41.3)		78.6
Indefinite-lived intangible assets:
Trade name	270.6		—		270.6
Total intangible assets, net	$	390.5	$	(41.3)	$	349.2

(a) Includes intangible assets with a preliminary value of approximately $8.0 million. The amount is subject to change as the valuation has not been finalized due to the proximity of the acquisition to the balance sheet date of September 30, 2021.

(b) Includes capitalized costs of $5.6 million yet to be placed into service.


	December 31, 2020
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
Finite-lived intangible assets:
Customer-related and non-compete agreements	$	18.7	$	(10.0)	$	8.7
Internally developed software(a)	39.9		(23.3)		16.6
Total	58.6		(33.3)		25.3
Indefinite-lived intangible assets:
Trade name	270.6		—		270.6
Total intangible assets, net	$	329.2	$	(33.3)	$	295.9

(a) Includes capitalized costs of $1.2 million yet to be placed into service.

Amortization of intangible assets was $3.1 million and $8.0 million for the three and nine months ended September 30, 2021, respectively, and $2.0 million and $5.8 million for the three and nine months ended September 30, 2020, respectively.

Note 7 —Impairment

During the second quarter of 2021, an impairment charge of $0.4 million was recorded related to a right-of-use ("ROU") asset for a leased location closed in the second quarter of 2019.

During the second quarter of 2020, the Company recorded an ROU asset impairment charge of $1.7 million related to two leased locations that were closed during the second quarter of 2019 and a $1.5 million charge in connection with assets classified as held for sale at June 30, 2020.

During the first quarter of 2020, the Company recorded an impairment charge of $6.3 million on a long-term receivable related to a previous joint venture sale, the remaining balances of $3.5 million and $8.2 million are included in "Other current assets" and "Other long-term assets," respectively, in the condensed consolidated balance sheets.

Note 8—Leases

The Company leases real estate, office equipment and service vehicles. The Company's leases have remaining lease terms of up to 18 years, some of which include options to extend the leases for up to 20 years. The Company has included the initial lease term and, in the case where there are options to extend, will include the option to extend if it has determined that it is reasonably certain that the Company would exercise those options.

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The Company also leases certain equipment that it rents to its customers where the payments vary based upon the amount of time the equipment is on rent. There are no fixed payments on these leases and, therefore, no lease liability or ROU assets have been recorded. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Lease expense for these leases is recognized on a straight-line basis over the lease term.

The components of lease expense consist of the following (in millions):

Three Months Ended September 30,