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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 ~~June~~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 ~~July 16,~~October 15, 2021, there were ~~29,646,245~~29,658,403 shares of the registrant's common stock, $0.01 par value, outstanding.

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HERC HOLDINGS INC. AND SUBSIDIARIES

TABLE OF CONTENTS



		Page
PART I. FINANCIAL INFORMATION
ITEM 1.	Financial Statements	2
	Condensed Consolidated Balance Sheets as of ~~June~~September 30,, 2021 and December 31, 2020	2
	Condensed Consolidated Statements of Operations for the Three and ~~and Six~~Nine Months Ended ~~June~~September 3 0 ,30, 2021 and 2020	3
	Condensed Consolidated Statements of Comprehensive Income ~~(Loss)~~ for the Three and Nine ~~and Six~~ Months Ended ~~June~~September 3 0 ,30, 2021 and 2020	4
	Condensed Consolidated Statements of Changes in Equity for the Three and ~~and Six~~ Nine Months Ended ~~June~~September 3 0 ,30, 2021 and 2020	5
	Condensed Consolidated Statements of Cash Flows for the ~~Six~~Nine Months Ended ~~June~~September 3 0 ,30, 2021 and 2020	67
	Notes to Condensed Consolidated Financial Statements	89
ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2023
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	2730
ITEM 4.	Controls and Procedures	2730
PART II. OTHER INFORMATION
ITEM 1.	Legal Proceedings	2831
ITEM 1A.	Risk Factors	2831
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2831
ITEM 5.	Other Information	2831
ITEM 6.	Exhibits	2932
SIGNATURE		3033

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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 ~~June~~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)


		June 30, 2021		December 31, 2020			September 30, 2021		December 31, 2020
ASSETS	ASSETS	(Unaudited)				ASSETS	(Unaudited)
Cash and cash equivalents	Cash and cash equivalents	$	34.6	$	33.0	Cash and cash equivalents	$	35.2	$	33.0
Receivables, net of allowances of $16.3 and $15.5, respectively		312.8		301.2
Receivables, net of allowances of $14.7 and $15.5, respectively						Receivables, net of allowances of $14.7 and $15.5, respectively	373.7		301.2
Other current assets	Other current assets	32.3		32.9		Other current assets	39.5		32.9
Total current assets	Total current assets	379.7		367.1		Total current assets	448.4		367.1
Rental equipment, net	Rental equipment, net	2,308.7		2,260.4		Rental equipment, net	2,506.1		2,260.4
Property and equipment, net	Property and equipment, net	276.4		290.4		Property and equipment, net	300.4		290.4
Right-of-use lease assets	Right-of-use lease assets	290.2		255.9		Right-of-use lease assets	362.2		255.9
Intangible assets, net	Intangible assets, net	303.2		295.9		Intangible assets, net	349.2		295.9
Goodwill	Goodwill	108.2		100.5		Goodwill	150.6		100.5
Other long-term assets	Other long-term assets	16.2		18.2		Other long-term assets	15.7		18.2
Total assets	Total assets	$	3,682.6	$	3,588.4	Total assets	$	4,132.6	$	3,588.4
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Current maturities of long-term debt and financing obligations	Current maturities of long-term debt and financing obligations	$	13.9	$	15.8	Current maturities of long-term debt and financing obligations	$	15.8	$	15.8
Current maturities of operating lease liabilities	Current maturities of operating lease liabilities	34.9		32.1		Current maturities of operating lease liabilities	36.3		32.1
Accounts payable	Accounts payable	190.6		125.8		Accounts payable	201.8		125.8
Accrued liabilities	Accrued liabilities	152.8		154.3		Accrued liabilities	172.8		154.3
Total current liabilities	Total current liabilities	392.2		328.0		Total current liabilities	426.7		328.0
Long-term debt, net	Long-term debt, net	1,539.2		1,651.5		Long-term debt, net	1,792.0		1,651.5
Financing obligations, net	Financing obligations, net	112.6		114.5		Financing obligations, net	111.6		114.5
Operating lease liabilities	Operating lease liabilities	267.1		234.1		Operating lease liabilities	337.9		234.1
Deferred tax liabilities	Deferred tax liabilities	491.4		474.0		Deferred tax liabilities	511.9		474.0
Other long term liabilities	Other long term liabilities	44.7		44.3		Other long term liabilities	43.3		44.3
Total liabilities	Total liabilities	2,847.2		2,846.4		Total liabilities	3,223.4		2,846.4
Commitments and contingencies (Note 11)		0		0
Commitments and contingencies (Note 13)						Commitments and contingencies (Note 13)	0		0
Equity:	Equity:					Equity:
Preferred stock, $0.01 par value, 13.3 shares authorized, no shares issued and outstanding	Preferred stock, $0.01 par value, 13.3 shares authorized, no shares issued and outstanding	0		0		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, 32.3 and 32.1 shares issued and 29.6 and 29.4 shares outstanding		0.3		0.3
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						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	Additional paid-in capital	1,825.3		1,818.2		Additional paid-in capital	1,830.9		1,818.2
Accumulated deficit	Accumulated deficit	(197.5)		(277.5)		Accumulated deficit	(125.2)		(277.5)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(100.7)		(107.0)		Accumulated other comprehensive loss	(104.8)		(107.0)
Treasury stock, at cost, 2.7 shares and 2.7 shares	Treasury stock, at cost, 2.7 shares and 2.7 shares	(692.0)		(692.0)		Treasury stock, at cost, 2.7 shares and 2.7 shares	(692.0)		(692.0)
Total equity	Total equity	835.4		742.0		Total equity	909.2		742.0
Total liabilities and equity	Total liabilities and equity	$	3,682.6	$	3,588.4	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 June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2021		2020		2021		2020
Revenues:	Revenues:									Revenues:
Equipment rental	Equipment rental	$	448.0	$	327.6	$	848.4	$	714.1	Equipment rental	$	519.6	$	402.3	$	1,368.0	$	1,116.4
Sales of rental equipment	Sales of rental equipment	30.3		31.4		74.5		71.4		Sales of rental equipment	16.6		45.3		91.1		116.7
Sales of new equipment, parts and supplies	Sales of new equipment, parts and supplies	7.8		7.0		13.9		14.0		Sales of new equipment, parts and supplies	8.6		6.2		22.5		20.2
Service and other revenue	Service and other revenue	4.8		2.0		7.9		4.7		Service and other revenue	5.6		2.9		13.5		7.6
Total revenues	Total revenues	490.9		368.0		944.7		804.2		Total revenues	550.4		456.7		1,495.1		1,260.9
Expenses:	Expenses:									Expenses:
Direct operating	Direct operating	203.0		144.7		386.0		333.9		Direct operating	225.9		169.4		611.9		503.3
Depreciation of rental equipment	Depreciation of rental equipment	101.1		101.4		201.5		201.8		Depreciation of rental equipment	105.4		101.9		306.9		303.7
Cost of sales of rental equipment	Cost of sales of rental equipment	24.7		29.6		63.1		72.0		Cost of sales of rental equipment	13.7		46.3		76.8		118.3
Cost of sales of new equipment, parts and supplies	Cost of sales of new equipment, parts and supplies	4.9		5.1		9.1		10.2		Cost of sales of new equipment, parts and supplies	6.5		4.4		15.6		14.6
Selling, general and administrative	Selling, general and administrative	74.0		56.8		139.5		126.6		Selling, general and administrative	81.5		61.0		221.0		187.6
Impairment	Impairment	0.4		3.2		0.4		9.5		Impairment	—		—		0.4		9.5
Interest expense, net	Interest expense, net	21.0		23.3		42.4		47.7		Interest expense, net	21.4		22.4		63.8		70.1
Other (income) expense, net	Other (income) expense, net	0		3.8		(0.2)		5.0		Other (income) expense, net	(0.1)		(0.3)		(0.3)		4.7
Total expenses	Total expenses	429.1		367.9		841.8		806.7		Total expenses	454.3		405.1		1,296.1		1,211.8
Income (loss) before income taxes		61.8		0.1		102.9		(2.5)
Income tax benefit (provision)		(14.7)		1.9		(22.9)		0.8
Net income (loss)		$	47.1	$	2.0	$	80.0	$	(1.7)
Income before income taxes										Income before income taxes	96.1		51.6		199.0		49.1
Income tax provision										Income tax provision	(23.8)		(11.7)		(46.7)		(10.9)
Net income										Net income	$	72.3	$	39.9	$	152.3	$	38.2
Weighted average shares outstanding:	Weighted average shares outstanding:									Weighted average shares outstanding:
Basic	Basic	29.6		29.1		29.5		29.0		Basic	29.6		29.2		29.6		29.1
Diluted	Diluted	30.4		29.2		30.3		29.0		Diluted	30.5		29.5		30.4		29.3
Earnings (loss) per share:
Earnings per share:										Earnings per share:
Basic	Basic	$	1.59	$	0.07	$	2.71	$	(0.06)	Basic	$	2.44	$	1.37	$	5.15	$	1.31
Diluted	Diluted	$	1.55	$	0.07	$	2.64	$	(0.06)	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 ~~(LOSS)~~

Unaudited

(In millions)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2021		2020		2021		2020
Net income (loss)		$	47.1	$	2.0	$	80.0	$	(1.7)
Net income										Net income	$	72.3	$	39.9	$	152.3	$	38.2
Other comprehensive income (loss):	Other comprehensive income (loss):									Other comprehensive income (loss):
Foreign currency translation adjustments	Foreign currency translation adjustments	3.1		7.7		5.5		(13.4)		Foreign currency translation adjustments	(4.9)		5.2		0.6		(8.2)
Reclassification of foreign currency items to other (income) expense, net	Reclassification of foreign currency items to other (income) expense, net	0		2.1		0		2.1		Reclassification of foreign currency items to other (income) expense, net	—		—		—		2.1
Unrealized gains and losses on hedging instruments:	Unrealized gains and losses on hedging instruments:									Unrealized gains and losses on hedging instruments:
Reclassification into net income (loss)		0		0		0		(1.5)
Reclassification into net income										Reclassification into net income	—		—		—		(1.5)
Income tax provision related to hedging instruments	Income tax provision related to hedging instruments	0		0		0		0.3		Income tax provision related to hedging instruments	—		—		—		0.3
Pension and postretirement benefit liability adjustments:	Pension and postretirement benefit liability adjustments:									Pension and postretirement benefit liability adjustments:
Amortization of net losses included in net periodic pension cost	Amortization of net losses included in net periodic pension cost	0.5		0.4		1.0		0.8		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	Income tax provision related to defined benefit pension plans	(0.1)		(0.1)		(0.2)		(0.2)		Income tax provision related to defined benefit pension plans	(0.1)		(0.1)		(0.3)		(0.3)
Total other comprehensive income (loss)	Total other comprehensive income (loss)	3.5		10.1		6.3		(11.9)		Total other comprehensive income (loss)	(4.1)		5.4		2.2		(6.5)
Total comprehensive income (loss)		$	50.6	$	12.1	$	86.3	$	(13.6)
Total comprehensive income										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			Common Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total Equity
		Shares	Amount													Shares	Amount
Balance at December 31, 2020	Balance at December 31, 2020	29.4	$	0.3	$	1,818.2	$	(277.5)	$	(107.0)	$	(692.0)	$	742.0	Balance at December 31, 2020	29.4	$	0.3	$	1,818.2	$	(277.5)	$	(107.0)	$	(692.0)	$	742.0
Net income	Net income	—	—		—		32.9		—		—		32.9		Net income	—	—		—		32.9		—		—		32.9
Other comprehensive income	Other comprehensive income	—	—		—		—		2.8		—		2.8		Other comprehensive income	—	—		—		—		2.8		—		2.8
Net settlement on vesting of equity awards	Net settlement on vesting of equity awards	0.2	—		(7.1)		—		—		—		(7.1)		Net settlement on vesting of equity awards	0.2	—		(7.1)		—		—		—		(7.1)
Stock-based compensation charges	Stock-based compensation charges	—	—		5.3		—		—		—		5.3		Stock-based compensation charges	—	—		5.3		—		—		—		5.3
Employee stock purchase plan	Employee stock purchase plan	—	—		0.6		—		—		—		0.6		Employee stock purchase plan	—	—		0.6		—		—		—		0.6
Exercise of stock options	Exercise of stock options	—	—		1.5		—		—		—		1.5		Exercise of stock options	—	—		1.5		—		—		—		1.5
Balance at March 31, 2021	Balance at March 31, 2021	29.6	0.3		1,818.5		(244.6)		(104.2)		(692.0)		778.0		Balance at March 31, 2021	29.6	0.3		1,818.5		(244.6)		(104.2)		(692.0)		778.0
Net income	Net income	—	—		—		47.1		—		—		47.1		Net income	—	—		—		47.1		—		—		47.1
Other comprehensive income	Other comprehensive income	—	—		—		—		3.5		—		3.5		Other comprehensive income	—	—		—		—		3.5		—		3.5
Net settlement on vesting of equity awards	Net settlement on vesting of equity awards	—	—		(1.1)		—		—		—		(1.1)		Net settlement on vesting of equity awards	—	—		(1.1)		—		—		—		(1.1)
Stock-based compensation charges	Stock-based compensation charges	—	—		7.1		—		—		—		7.1		Stock-based compensation charges	—	—		7.1		—		—		—		7.1
Employee stock purchase plan	Employee stock purchase plan	—	—		0.6		—		—		—		0.6		Employee stock purchase plan	—	—		0.6		—		—		—		0.6
Exercise of stock options	Exercise of stock options	—	—		0.2		—		—		—		0.2		Exercise of stock options	—	—		0.2		—		—		—		0.2
Balance at June 30, 2021	Balance at June 30, 2021	29.6	$	0.3	$	1,825.3	$	(197.5)	$	(100.7)	$	(692.0)	$	835.4	Balance at June 30, 2021	29.6	0.3		1,825.3		(197.5)		(100.7)		(692.0)		835.4
Net income															Net income	—	—		—		72.3		—		—		72.3
Other comprehensive loss															Other comprehensive loss	—	—		—		—		(4.1)		—		(4.1)
Net settlement on vesting of equity awards															Net settlement on vesting of equity awards	—	—		(0.5)		—		—		—		(0.5)
Stock-based compensation charges															Stock-based compensation charges	—	—		5.5		—		—		—		5.5
Employee stock purchase plan															Employee stock purchase plan	0.1	—		0.6		—		—		—		0.6
Exercise of stock options															Exercise of stock options	—	—		—		—		—		—		—
Balance at September 30, 2021															Balance at September 30, 2021	29.7	$	0.3	$	1,830.9	$	(125.2)	$	(104.8)	$	(692.0)	$	909.2

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

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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)


		Six Months Ended June 30,					Nine Months Ended September 30,
		2021		2020			2021		2020
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income (loss)		$	80.0	$	(1.7)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Net income						Net income	$	152.3	$	38.2
Adjustments to reconcile net income to net cash provided by operating activities:						Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of rental equipment	Depreciation of rental equipment	201.5		201.8		Depreciation of rental equipment	306.9		303.7
Depreciation of property and equipment	Depreciation of property and equipment	26.9		27.7		Depreciation of property and equipment	40.9		41.2
Amortization of intangible assets	Amortization of intangible assets	4.9		3.8		Amortization of intangible assets	8.0		5.8
Amortization of deferred debt and financing obligations costs	Amortization of deferred debt and financing obligations costs	1.6		1.7		Amortization of deferred debt and financing obligations costs	2.4		2.6
Stock-based compensation charges	Stock-based compensation charges	12.4		4.9		Stock-based compensation charges	17.9		10.3
Impairment	Impairment	0.4		9.5		Impairment	0.4		9.5
Provision for receivables allowances	Provision for receivables allowances	14.3		23.5		Provision for receivables allowances	20.6		28.2
Deferred taxes	Deferred taxes	16.3		1.0		Deferred taxes	37.4		12.7
(Gain) loss on sale of rental equipment	(Gain) loss on sale of rental equipment	(11.4)		0.6		(Gain) loss on sale of rental equipment	(14.3)		1.6
Other	Other	1.9		5.7		Other	2.4		4.2
Changes in assets and liabilities:	Changes in assets and liabilities:					Changes in assets and liabilities:
Receivables	Receivables	(27.8)		32.3		Receivables	(81.2)		(14.5)
Other assets	Other assets	0.2		(2.6)		Other assets	(5.9)		(4.4)
Accounts payable	Accounts payable	6.2		(16.1)		Accounts payable	7.7		(1.9)
Accrued liabilities and other long-term liabilities	Accrued liabilities and other long-term liabilities	0.5		(11.7)		Accrued liabilities and other long-term liabilities	7.7		(13.2)
Net cash provided by operating activities	Net cash provided by operating activities	327.9		280.4		Net cash provided by operating activities	503.2		424.0
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Rental equipment expenditures	Rental equipment expenditures	(239.3)		(161.5)		Rental equipment expenditures	(447.0)		(273.2)
Proceeds from disposal of rental equipment	Proceeds from disposal of rental equipment	71.0		67.9		Proceeds from disposal of rental equipment	86.1		114.1
Non-rental capital expenditures	Non-rental capital expenditures	(20.9)		(25.5)		Non-rental capital expenditures	(31.1)		(32.0)
Proceeds from disposal of property and equipment	Proceeds from disposal of property and equipment	2.4		2.2		Proceeds from disposal of property and equipment	3.4		4.2
Acquisitions		(17.9)		0
Acquisitions, net of cash acquired						Acquisitions, net of cash acquired	(225.2)		—
Proceeds from disposal of business	Proceeds from disposal of business	0		15.3		Proceeds from disposal of business	—		15.3
Net cash used in investing activities	Net cash used in investing activities	(204.7)		(101.6)		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)


		Six Months Ended June 30,					Nine Months Ended September 30,
		2021		2020			2021		2020
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Proceeds from revolving lines of credit and securitization	Proceeds from revolving lines of credit and securitization	165.0		388.0		Proceeds from revolving lines of credit and securitization	482.9		473.0
Repayments on revolving lines of credit and securitization	Repayments on revolving lines of credit and securitization	(275.0)		(507.7)		Repayments on revolving lines of credit and securitization	(355.0)		(694.7)
Principal payments under capital lease and financing obligations	Principal payments under capital lease and financing obligations	(6.7)		(7.4)		Principal payments under capital lease and financing obligations	(9.7)		(10.4)
Payment of debt financing costs						Payment of debt financing costs	(0.1)		(0.2)
Proceeds from exercise of stock options	Proceeds from exercise of stock options	1.7		0		Proceeds from exercise of stock options	1.7		1.5
Proceeds from employee stock purchase plan	Proceeds from employee stock purchase plan	1.2		1.2		Proceeds from employee stock purchase plan	1.8		1.7
Net settlement on vesting of equity awards	Net settlement on vesting of equity awards	(8.2)		(2.8)		Net settlement on vesting of equity awards	(8.7)		(3.0)
Net cash used in financing activities		(122.0)		(128.7)
Net cash provided by (used in) financing activities						Net cash provided by (used in) financing activities	112.9		(232.1)
Effect of foreign exchange rate changes on cash and cash equivalents	Effect of foreign exchange rate changes on cash and cash equivalents	0.4		0.1		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	Net increase in cash and cash equivalents during the period	1.6		50.2		Net increase in cash and cash equivalents during the period	2.2		20.8
Cash and cash equivalents cash at beginning of period	Cash and cash equivalents cash at beginning of period	33.0		33.0		Cash and cash equivalents cash at beginning of period	33.0		33.0
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	34.6	$	83.2	Cash and cash equivalents at end of period	$	35.2	$	53.8

Supplemental disclosure of cash flow information:	Supplemental disclosure of cash flow information:					Supplemental disclosure of cash flow information:
Cash paid for interest	Cash paid for interest	$	40.8	$	47.6	Cash paid for interest	$	78.0	$	86.0
Cash paid for income taxes, net	Cash paid for income taxes, net	$	10.8	$	2.6	Cash paid for income taxes, net	$	13.3	$	4.0
Supplemental disclosure of non-cash investing activity:	Supplemental disclosure of non-cash investing activity:					Supplemental disclosure of non-cash investing activity:
Purchases of rental equipment in accounts payable	Purchases of rental equipment in accounts payable	$	63.9	$	33.9	Purchases of rental equipment in accounts payable	$	67.2	$	13.0
Equipment acquired through finance leases						Equipment acquired through finance leases	$	19.1	$	1.4
Note receivable on disposals	Note receivable on disposals	$	0	$	8.9	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 ~~280~~approximately 295 locations in North America at ~~June~~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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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 ~~91.6%~~92.5% and ~~91.9%~~92.3% of total revenue for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively, compared to ~~92.0%~~91.6% and ~~90.9%~~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 ~~six~~nine months ended ~~June~~September 30, 2021 and 2020 (in millions):


		Three Months Ended June 30,													Three Months Ended September 30,
		2021						2020							2021						2020
		Topic 842		Topic 606		Total		Topic 842		Topic 606		Total			Topic 842		Topic 606		Total		Topic 842		Topic 606		Total
Revenues:	Revenues:													Revenues:
Equipment rental	Equipment rental	$	405.4	$	0	$	405.4	$	298.0	$	0	$	298.0	Equipment rental	$	468.0	$	—	$	468.0	$	362.4	$	—	$	362.4
Other rental revenue:	Other rental revenue:													Other rental revenue:
Delivery and pick-up	Delivery and pick-up	0		25.6		25.6		0		17.9		17.9		Delivery and pick-up	—		31.4		31.4		—		23.7		23.7
Other	Other	17.0		0		17.0		11.7		0		11.7		Other	20.2		—		20.2		16.2		—		16.2
Total other rental revenues	Total other rental revenues	17.0		25.6		42.6		11.7		17.9		29.6		Total other rental revenues	20.2		31.4		51.6		16.2		23.7		39.9
Total equipment rental	Total equipment rental	422.4		25.6		448.0		309.7		17.9		327.6		Total equipment rental	488.2		31.4		519.6		378.6		23.7		402.3
Sales of rental equipment	Sales of rental equipment	0		30.3		30.3		0		31.4		31.4		Sales of rental equipment	—		16.6		16.6		—		45.3		45.3
Sales of new equipment, parts and supplies	Sales of new equipment, parts and supplies	0		7.8		7.8		0		7.0		7.0		Sales of new equipment, parts and supplies	—		8.6		8.6		—		6.2		6.2
Service and other revenues	Service and other revenues	0		4.8		4.8		0		2.0		2.0		Service and other revenues	—		5.6		5.6		—		2.9		2.9
Total revenues	Total revenues	$	422.4	$	68.5	$	490.9	$	309.7	$	58.3	$	368.0	Total revenues	$	488.2	$	62.2	$	550.4	$	378.6	$	78.1	$	456.7

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited


		Six Months Ended June 30,													Nine Months Ended September 30,
		2021						2020							2021						2020
		Topic 842		Topic 606		Total		Topic 842		Topic 606		Total			Topic 842		Topic 606		Total		Topic 842		Topic 606		Total
Revenues:	Revenues:													Revenues:
Equipment rental	Equipment rental	$	770.2	$	0	$	770.2	$	651.5	$	0	$	651.5	Equipment rental	$	1,238.1	$	—	$	1,238.1	$	1,013.9	$	—	$	1,013.9
Other rental revenue:	Other rental revenue:													Other rental revenue:
Delivery and pick-up	Delivery and pick-up	0		46.5		46.5		0		38.8		38.8		Delivery and pick-up	—		78.0		78.0		—		62.5		62.5
Other	Other	31.7		0		31.7		23.8		0		23.8		Other	51.9		—		51.9		40.0		—		40.0
Total other rental revenues	Total other rental revenues	31.7		46.5		78.2		23.8		38.8		62.6		Total other rental revenues	51.9		78.0		129.9		40.0		62.5		102.5
Total equipment rental	Total equipment rental	801.9		46.5		848.4		675.3		38.8		714.1		Total equipment rental	1,290.0		78.0		1,368.0		1,053.9		62.5		1,116.4
Sales of rental equipment	Sales of rental equipment	0		74.5		74.5		0		71.4		71.4		Sales of rental equipment	—		91.1		91.1		—		116.7		116.7
Sales of new equipment, parts and supplies	Sales of new equipment, parts and supplies	0		13.9		13.9		0		14.0		14.0		Sales of new equipment, parts and supplies	—		22.5		22.5		—		20.2		20.2
Service and other revenues	Service and other revenues	0		7.9		7.9		0		4.7		4.7		Service and other revenues	—		13.5		13.5		—		7.6		7.6
Total revenues	Total revenues	$	801.9	$	142.8	$	944.7	$	675.3	$	128.9	$	804.2	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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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

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 June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2021		2020		2021		2020
Sales of rental equipment	Sales of rental equipment	$	30.3	$	31.4	$	74.5	$	71.4	Sales of rental equipment	$	16.6	$	45.3	$	91.1	$	116.7
Sales of new equipment	Sales of new equipment	1.8		3.1		3.7		6.1		Sales of new equipment	2.7		2.4		6.4		8.5
Sales of parts and supplies	Sales of parts and supplies	6.0		3.9		10.2		7.9		Sales of parts and supplies	5.9		3.8		16.1		11.7
Total	Total	$	38.1	$	38.4	$	88.4	$	85.4	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 ~~$11.9~~$12.1 million and $13.8 million as of ~~June~~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 ~~six~~nine months ended ~~June~~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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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

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 ~~six~~nine months ended ~~June~~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 ~~June~~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):


		June 30, 2021		December 31, 2020			September 30, 2021		December 31, 2020
Rental equipment	Rental equipment	$	3,747.8	$	3,613.5	Rental equipment	$	4,018.9	$	3,613.5
Less: Accumulated depreciation	Less: Accumulated depreciation	(1,439.1)		(1,353.1)		Less: Accumulated depreciation	(1,512.8)		(1,353.1)
Rental equipment, net	Rental equipment, net	$	2,308.7	$	2,260.4	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 12 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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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

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 1 location in California. In September 2021, the Company completed the acquisition of Dwight Crane Ltd. ("Dwight Crane") with 1 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 57 —Impairment

During ~~June~~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 ~~March~~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 6—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 June 30,				Six Months Ended June 30,						Three Months Ended September 30,				Nine Months Ended September 30,
		Classification	2021		2020		2021		2020			Classification	2021		2020		2021		2020
Operating lease cost(a)	Operating lease cost(a)	Direct operating	$	27.6	$	17.4	$	51.4	$	41.7	Operating lease cost(a)	Direct operating	$	30.6	$	17.7	$	82.0	$	59.4
Finance lease cost:	Finance lease cost:										Finance lease cost:
Amortization of ROU assets	Amortization of ROU assets	Depreciation and amortization(b)	2.9		2.8		5.2		5.9		Amortization of ROU assets	Depreciation and amortization(b)	4.5		2.6		9.8		8.5
Interest on lease liabilities	Interest on lease liabilities	Interest expense, net	0.3		0.4		0.6		0.8		Interest on lease liabilities	Interest expense, net	0.3		0.4		0.9		1.2
Sublease income	Sublease income	Equipment rental revenue	(18.6)		(8.0)		(32.0)		(23.1)		Sublease income	Equipment rental revenue	(19.7)		(9.1)		(51.7)		(32.2)
Net lease cost	Net lease cost		$	12.2	$	12.6	$	25.2	$	25.3	Net lease cost		$	15.7	$	11.6	$	41.0	$	36.9

(a) Includes short-term leases of ~~$13.7~~$16.2 million and ~~$22.5~~$38.7 million for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively, and ~~$5.2~~$4.6 million and ~~$17.2~~$21.8 million for the three and ~~six~~nine months ended ~~June~~September 30, 2020, respectively, and variable lease costs of ~~$0.8~~$1.5 million and ~~$2.5~~$4.0 million for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and ~~$0.7~~$1.4 million and ~~$1.5~~$2.9 million for the three and ~~six~~nine months ended ~~June~~September 30, 2020, respectively.

(b) Depreciation and amortization are included with selling, general and administrative expense.

Note 7—9—Debt

The Company's debt consists of the following (in millions):


		Weighted Average Effective Interest Rate at June 30, 2021	Weighted Average Stated Interest Rate at June 30, 2021	Fixed or Floating Interest Rate	Maturity	June 30, 2021		December 31, 2020			Weighted Average Effective Interest Rate at September 30, 2021	Weighted Average Stated Interest Rate at September 30, 2021	Fixed or Floating Interest Rate	Maturity	September 30, 2021		December 31, 2020
Senior Notes	Senior Notes									Senior Notes
2027 Notes	2027 Notes	5.61%	5.50%	Fixed	2027	$	1,200.0	$	1,200.0	2027 Notes	5.61%	5.50%	Fixed	2027	$	1,200.0	$	1,200.0
Other Debt	Other Debt									Other Debt
ABL Credit Facility	ABL Credit Facility	N/A	1.35%	Floating	2024	145.0		255.0		ABL Credit Facility	N/A	1.34%	Floating	2024	357.9		255.0
AR Facility	AR Facility	N/A	0.96%	Floating	2021	175.0		175.0		AR Facility	N/A	0.84%	Floating	2022	200.0		175.0
Finance lease liabilities	Finance lease liabilities	3.19%	N/A	Fixed	2021-2027	36.0		40.8		Finance lease liabilities	2.83%	N/A	Fixed	2021-2027	52.6		40.8
Unamortized Debt Issuance Costs(a)	Unamortized Debt Issuance Costs(a)					(6.6)		(7.1)		Unamortized Debt Issuance Costs(a)					(6.4)		(7.1)
Total debt	Total debt					1,549.4		1,663.7		Total debt					1,804.1		1,663.7
Less: Current maturities of long-term debt	Less: Current maturities of long-term debt					(10.2)		(12.2)		Less: Current maturities of long-term debt					(12.1)		(12.2)
Long-term debt, net	Long-term debt, net					$	1,539.2	$	1,651.5	Long-term debt, net					$	1,792.0	$	1,651.5

(a) Unamortized debt issuance costs totaling ~~$6.0~~$5.6 million and $7.1 million related to the ABL Credit Facility and AR Facility (as each is defined below) as of ~~June~~September 30, 2021 and December 31, 2020, respectively, and are included in "Other long-term assets" in the condensed consolidated balance sheets.

The effective interest rate for the fixed rate 2027 Notes (as defined below) includes the stated interest on the notes and the amortization of any debt issuance costs.

Senior Notes

On July 9, 2019, the Company issued $1.2 billion aggregate principal amount of its 5.50% Senior Notes due 2027 (the "2027 Notes"). Interest on the 2027 Notes accrues at the rate of 5.50% per annum and is payable semi-annually in arrears on January 15 and July 15. The 2027 Notes will mature on July 15, 2027. Additional information about the 2027 Notes is included in Note ~~11, "Debt" to the Company's financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2020.~~

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11, "Debt" to the Company's financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2020.

ABL Credit Facility

On July 31, 2019, Herc Holdings, Herc and certain other subsidiaries of Herc Holdings entered into a credit agreement with respect to a senior secured asset-based revolving credit facility (the "ABL Credit Facility"). The ABL Credit Facility provides (subject to availability under a borrowing base) for aggregate maximum borrowings of up to $1,750 million under a revolving loan facility. Up to $250 million of the revolving loan facility is available for the issuance of letters of credit, subject to certain conditions including issuing lender participation. Subject to the satisfaction of certain conditions and limitations, the ABL Credit Facility allows for the addition of incremental revolving commitments and/or incremental term loans. The ABL Credit Facility matures on July 31, 2024. Additional information about the ABL Credit Facility is included in Note 11, "Debt" to the Company's financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2020.

Accounts Receivable Securitization Facility

In September 2018, the Company entered into an accounts receivable securitization facility (the "AR Facility") ~~with aggregate commitments of $175 million.~~. The AR Facility was amended in ~~September 2020~~August 2021 to extend the maturity date to August 31, ~~2021.~~2022 and increase the aggregate commitments from $175 million to $200 million. In connection with the AR Facility, Herc and one of its wholly-owned subsidiaries sell their accounts receivables on an ongoing basis to Herc Receivables U.S. LLC, a wholly-owned special-purpose entity (the "SPE"). The SPE's sole business consists of the purchase by the SPE of accounts receivable from Herc and the Herc subsidiary seller and borrowing by the SPE against the eligible accounts receivable from the lenders under the facility. The borrowings are secured by liens on the accounts receivable and other assets of the SPE. Collections on the accounts receivable are used to service the borrowings. The SPE is a separate legal entity that is consolidated in the Company's financial statements. The SPE assets are owned by the SPE and are not available to settle the obligations of the Company or any of its other subsidiaries. Herc is the servicer of the accounts receivable under the AR Facility. All of the obligations of the Herc subsidiary seller and the servicer and certain indemnification obligations of the SPE under the agreements governing the AR Facility are guaranteed by Herc pursuant to a performance guarantee. The AR Facility is excluded from current maturities of long-term debt as the Company has the intent and ability to consummate refinancing and extend the term of the agreement.

Borrowing Capacity and Availability

After outstanding borrowings, the following was available to the Company under the ABL Credit Facility and AR Facility as of ~~June~~September 30, 2021 (in millions):


		Remaining Capacity		Availability Under Borrowing Base Limitation			Remaining Capacity		Availability Under Borrowing Base Limitation
ABL Credit Facility	ABL Credit Facility	$	1,580.2	$	1,480.8	ABL Credit Facility	$	1,367.3	$	1,367.3
AR Facility	AR Facility	0		0		AR Facility	—		—
Total	Total	$	1,580.2	$	1,480.8	Total	$	1,367.3	$	1,367.3

Letters of Credit

As of ~~June~~September 30, 2021, $24.8 million of standby letters of credit were issued and outstanding, ~~NaN~~none of which have been drawn upon. The ABL Credit Facility had $225.2 million available under the letter of credit facility sublimit, subject to borrowing base restrictions.

Note 8—10—Financing Obligations

In October 2017, Herc consummated a sale-leaseback transaction pursuant to which it sold 42 of its properties located in the U.S. for gross proceeds of approximately $119.5 million, and during the fourth quarter of 2018, entered into sale-leaseback transactions with respect to 2 additional properties for gross proceeds of $6.4 million. The sale of the properties did not qualify for sale-leaseback accounting due to continuing involvement with the properties. Therefore, the book value of the buildings and land remains on the Company's consolidated balance sheet.

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During March 2019, Herc entered into a sale-leaseback transaction for certain service vehicles that did not qualify for sale-leaseback accounting, therefore the book value of the vehicles remains on the Company's consolidated balance sheet. Gross proceeds from the sale-leaseback transaction were $4.7 million.

The Company's financing obligations consist of the following (in millions):


		Weighted Average Effective Interest Rate at June 30, 2021	Maturities	June 30, 2021		December 31, 2020			Weighted Average Effective Interest Rate at September 30, 2021	Maturities	September 30, 2021		December 31, 2020
Financing obligations	Financing obligations	5.11%	2026-2038	$	118.6	$	120.5	Financing obligations	5.11%	2026-2038	$	117.5	$	120.5
Unamortized financing issuance costs	Unamortized financing issuance costs			(2.3)		(2.4)		Unamortized financing issuance costs			(2.2)		(2.4)
Total financing obligations	Total financing obligations			116.3		118.1		Total financing obligations			115.3		118.1
Less: Current maturities of financing obligations	Less: Current maturities of financing obligations			(3.7)		(3.6)		Less: Current maturities of financing obligations			(3.7)		(3.6)
Financing obligations, net	Financing obligations, net			$	112.6	$	114.5	Financing obligations, net			$	111.6	$	114.5

Note 9—11—Income Taxes

Income tax provision was ~~$14.7~~$23.8 million and ~~$22.9~~$46.7 million for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively, compared to ~~an income tax benefit of $1.9~~$11.7 million and ~~$0.8~~$10.9 million for the three and ~~six~~nine months ended ~~June~~September 30, 2020. The provision in 2021 was primarily driven by the level of pre-tax income, offset by non-deductible expenses and stock-based compensation.

Note ~~10—~~12—Accumulated Other Comprehensive Income (Loss)

The changes in the accumulated other comprehensive income (loss) balance by component (net of tax) for the ~~six~~nine months ended ~~June~~September 30, 2021 are presented in the table below (in millions).


		Pension and Other Post-Employment Benefits		Foreign Currency Items		Accumulated Other Comprehensive Income (Loss)			Pension and Other Post-Employment Benefits		Foreign Currency Items		Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2020	Balance at December 31, 2020	$	(17.9)	$	(89.1)	$	(107.0)	Balance at December 31, 2020	$	(17.9)	$	(89.1)	$	(107.0)
Other comprehensive income before reclassification	Other comprehensive income before reclassification	0		5.5		5.5		Other comprehensive income before reclassification	—		0.6		0.6
Amounts reclassified from accumulated other comprehensive income	Amounts reclassified from accumulated other comprehensive income	0.8		0		0.8		Amounts reclassified from accumulated other comprehensive income	1.6		—		1.6
Net current period other comprehensive income	Net current period other comprehensive income	0.8		5.5		6.3		Net current period other comprehensive income	1.6		0.6		2.2
Balance at June 30, 2021		$	(17.1)	$	(83.6)	$	(100.7)
Balance at September 30, 2021								Balance at September 30, 2021	$	(16.3)	$	(88.5)	$	(104.8)

Note ~~11—~~13—Commitments and Contingencies

Legal Proceedings

In re Hertz Global Holdings, Inc. Securities Litigation - In November 2013, a putative shareholder class action, Pedro Ramirez, Jr. v. Hertz Global Holdings, Inc., et al., was commenced in the U.S. District Court for the District of New Jersey naming Hertz Holdings and certain of its officers as defendants and alleging violations of the federal securities laws. On March 31, 2021, the plaintiffs filed with the U.S. District Court for the District of New Jersey a notice of voluntary dismissal with prejudice, and an order dismissing the case with prejudice was entered on April 1, 2021.

The complaint alleged that Hertz Holdings made material misrepresentations and/or omission of material fact in its public disclosures during the period from February 25, 2013 through November 4, 2013, in violation of Section 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 10b-5 promulgated thereunder. The complaint sought unspecified monetary damages on behalf of the purported class and an award of costs and expenses, including counsel fees and expert fees. In June 2014, Hertz Holdings moved to dismiss the amended complaint. In October 2014, the court granted Hertz Holdings’ motion to dismiss without prejudice, allowing the plaintiff to amend the complaint a second time. In November 2014, plaintiff filed a second amended complaint which shortened the putative class period and made allegations that were not substantively very different than the allegations in the prior complaint. In early 2015, Hertz Holdings moved to

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dismiss the second amended complaint. In July 2015, the court granted Hertz Holdings’ motion to dismiss without prejudice, allowing plaintiff to file a third amended complaint. In August 2015, plaintiff filed a third amended complaint which included additional allegations, named additional then-current and former officers as defendants and expanded the putative class period to extend from February 14, 2013 to July 16, 2015. In November 2015, Hertz Holdings moved to dismiss the third amended complaint. The plaintiff then sought leave to add a new plaintiff because of challenges to the standing of the first plaintiff. The court granted plaintiff leave to file a fourth amended complaint to add the new plaintiff, and the new complaint was filed on March 1, 2016. Hertz Holdings and the individual defendants moved to dismiss the fourth amended complaint with prejudice on March 24, 2016. In April 2017, the court granted Hertz Holdings' and the individual defendants' motions to dismiss and dismissed the action with prejudice. In May 2017, plaintiff filed a notice of appeal and, in June 2018, oral argument was conducted before the U.S. Court of Appeals for the Third Circuit. In September 2018, the court affirmed the dismissal of the action with prejudice. On February 5, 2019, plaintiff filed a motion to set aside the judgment against it, and for leave to file a fifth amended complaint. The proposed amended complaint would add allegations related to New Hertz’s December 31, 2018 settlement with the SEC that, among other things, ordered New Hertz to cease and desist from violating certain of the federal securities laws and imposed a civil penalty of $16.0 million. On February 26, 2019, New Hertz filed an opposition to plaintiff’s motion for relief from judgment and leave to file a fifth amended complaint. On March 8, 2019, plaintiff filed a reply in support of that motion. On September 30, 2019, the court denied plaintiff’s motion for relief from judgment and leave to file a fifth amended complaint. On October 30, 2019, plaintiff filed a notice of appeal with the U.S. Court of Appeals for the Third Circuit. On October 13, 2020, the U.S. Court of Appeals for the Third Circuit affirmed the denial of the plaintiff's motion for relief from judgement with respect to the former officers. On March 30, 2021, the plaintiffs filed with the U.S. Court of Appeals for the Third Circuit an unopposed motion for voluntary dismissal of the putative shareholder class action with prejudice, which was granted on April 5, 2021. On March 31, 2021, the plaintiffs filed with the U.S. District Court for the District of New Jersey a notice of voluntary dismissal with prejudice, and an order dismissing the case with prejudice was entered on April 1, 2021.

In addition, the Company is subject to a number of claims and proceedings that generally arise in the ordinary conduct of its business. These matters include, but are not limited to, claims arising from the operation of rented equipment and workers' compensation claims. The Company does not believe that the liabilities arising from such ordinary course claims and proceedings will have a material adverse effect on the Company's consolidated financial position, results of operations or cash flows.

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The Company has established reserves for matters where the Company believes the losses are probable and can be reasonably estimated. For matters where a reserve has not been established, the ultimate outcome or resolution cannot be predicted at this time, or the amount of ultimate loss, if any, cannot be reasonably estimated. Litigation is subject to many uncertainties and there can be no assurance as to the outcome of the individual litigated matters. It is possible that certain of the actions, claims, inquiries or proceedings could be decided unfavorably to the Company or any of its subsidiaries involved. Accordingly, it is possible that an adverse outcome from such a proceeding could exceed the amount accrued in an amount that could be material to the Company's consolidated financial condition, results of operations or cash flows in any particular reporting period.

Off-Balance Sheet Commitments

Indemnification Obligations

In the ordinary course of business, the Company executes contracts involving indemnification obligations customary in the relevant industry and indemnifications specific to a transaction such as the sale of a business or assets or a financial transaction. These indemnification obligations might include claims relating to the following: accuracy of representations; compliance with covenants and agreements by the Company or third parties; environmental matters; intellectual property rights; governmental regulations; employment-related matters; customer, supplier and other commercial contractual relationships; condition of assets; and financial or other matters. Performance under these indemnification obligations would generally be triggered by a breach of terms of the contract or by a third-party claim. The Company regularly evaluates the probability of having to incur costs associated with these indemnification obligations and has accrued for expected losses that are probable and estimable. The types of indemnification obligations for which payments are possible include the following:

The Spin-Off

In connection with the Spin-Off, pursuant to the separation and distribution agreement, the Company has assumed the liability for, and control of, all pending and threatened legal matters related to its equipment rental business and related assets, as well as assumed or retained liabilities, and will indemnify New Hertz for any liability arising out of or

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resulting from such assumed legal matters. The separation and distribution agreement also provides for certain liabilities to be shared by the parties. The Company is responsible for a portion of these shared liabilities (typically 15%), as set forth in that agreement. New Hertz is responsible for managing the settlement or other disposition of such shared liabilities. Pursuant to the tax matters agreement, the Company has agreed to indemnify New Hertz for any resulting taxes and related losses if the Company takes or fails to take any action (or permits any of its affiliates to take or fail to take any action) that causes the Spin-Off and related transactions to be taxable, or if there is an acquisition of the equity securities or assets of the Company or of any member of the Company’s group that causes the Spin-Off and related transactions to be taxable.

Guarantee

The Company has guaranteed an outstanding bank loan in connection with a previous joint venture. The Company has determined the maximum potential payment amount under the guarantee is approximately ~~$4.3~~$3.6 million; however, the probability of any payment is remote and therefore the Company has not recorded a liability on its balance sheet as of ~~June~~September 30, 2021. The bank loan is collateralized by the rental equipment and other assets of the joint venture entity and has maturities through 2023.

Note ~~12—~~14—Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The fair value of accounts receivable, accounts payable and accrued liabilities, to the extent the underlying liability will be settled in cash, approximates the carrying values because of the short-term nature of these instruments.

Cash Equivalents

Cash equivalents, when held, primarily consist of money market accounts which are classified as Level 1 assets which the Company measures at fair value on a recurring basis. The Company determines the fair value of cash equivalents using a

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market approach based on quoted prices in active markets. The Company had 0 cash equivalents at ~~June~~September 30, 2021 or December 31, 2020.

Debt Obligations

The fair values of the Company's ABL Credit Facility, AR Facility and finance lease liabilities approximated their book values as of ~~June~~September 30, 2021 and December 31, 2020. The fair value of the Company's 2027 Notes are estimated based on quoted market rates as well as borrowing rates currently available to the Company for loans with similar terms and average maturities (Level 2 inputs) (in millions).

June 30, 2021 December 31, 2020
Nominal Unpaid Principal Balance Aggregate Fair Value Nominal Unpaid Principal Balance Aggregate Fair Value
2027 Notes $ 1,200.0 $ 1,262.0 $ 1,200.0 $ 1,276.4


	September 30, 2021				December 31, 2020
	Nominal Unpaid Principal Balance		Aggregate Fair Value		Nominal Unpaid Principal Balance		Aggregate Fair Value
2027 Notes	$	1,200.0	$	1,257.0	$	1,200.0	$	1,276.4

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Note ~~13—~~15—Earnings ~~(Loss)~~ Per Share

Basic earnings ~~(loss)~~ per share has been computed based upon the weighted average number of common shares outstanding. Diluted earnings ~~(loss)~~ per share has been computed based upon the weighted average number of common shares outstanding plus the effect of all potentially dilutive common stock equivalents, except when the effect would be anti-dilutive.

The following table sets forth the computation of basic and diluted earnings ~~(loss)~~ per share (in millions, except per share data).


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2021		2020		2021		2020
Basic and diluted earnings (loss) per share:
Basic and diluted earnings per share:										Basic and diluted earnings per share:
Numerator:	Numerator:									Numerator:
Net income (loss), basic and diluted		$	47.1	$	2.0	$	80.0	$	(1.7)
Net income, basic and diluted										Net income, basic and diluted	$	72.3	$	39.9	$	152.3	$	38.2
Denominator:	Denominator:									Denominator:
Basic weighted average common shares	Basic weighted average common shares	29.6		29.1		29.5		29.0		Basic weighted average common shares	29.6		29.2		29.6		29.1
Stock options, RSUs and PSUs	Stock options, RSUs and PSUs	0.8		0.1		0.8		0		Stock options, RSUs and PSUs	0.9		0.3		0.8		0.2
Weighted average shares used to calculate diluted earnings (loss) per share		30.4		29.2		30.3		29.0
Earnings (loss) per share:
Weighted average shares used to calculate diluted earnings per share										Weighted average shares used to calculate diluted earnings per share	30.5		29.5		30.4		29.3
Earnings per share:										Earnings per share:
Basic	Basic	$	1.59	$	0.07	$	2.71	$	(0.06)	Basic	$	2.44	$	1.37	$	5.15	$	1.31
Diluted	Diluted	$	1.55	$	0.07	$	2.64	$	(0.06)	Diluted	$	2.37	$	1.35	$	5.01	$	1.30
Antidilutive stock options, RSUs and PSUs	Antidilutive stock options, RSUs and PSUs	0		0.8		0		0.9		Antidilutive stock options, RSUs and PSUs	—		0.3		—		0.5

Note ~~14—~~16—Related Party Transactions

Agreements with Carl C. Icahn

The Company is subject to the Nomination and Standstill Agreement, dated September 15, 2014 (the "Nomination and Standstill Agreement"), with Carl C. Icahn and certain related entities and individuals. In connection with their appointments or nomination, as applicable, to the Company’s board of directors (the "Board"), each of Jonathan Frates, Andrew N. Langham and Andrew J. Teno (collectively, the "Icahn Designees," and, together with Carl C. Icahn and the other parties to the Nomination and Standstill Agreements, the "Icahn Group") executed a Joinder Agreement agreeing to become bound as a party to the terms and conditions of the Nomination and Standstill Agreement (such Joinder Agreements, together with the Nomination and Standstill Agreement, are collectively referred to herein as the "Icahn Agreements").

Pursuant to the Icahn Agreements, the Icahn Designees were appointed or nominated to the Company’s Board. Pursuant to the Icahn Agreements, so long as an Icahn Designee is a member of the Board, the Board will not be expanded beyond its current

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

size without approval from the Icahn Designees then on the Board. In addition, pursuant to the Icahn Agreements, subject to certain restrictions and requirements, the Icahn Group will have certain replacement rights in the event an Icahn Designee resigns or is otherwise unable to serve as a director (other than as a result of not being nominated by the Company for an annual meeting).

In addition, until the date that no Icahn Designee is a member of the Board (or otherwise deemed to be on the Board pursuant to the terms of the Icahn Agreements), the Icahn Group agrees to vote all of its shares of the Company’s common stock in favor of the election of all of the Company’s director nominees at each annual or special meeting of the Company’s stockholders, and, subject to limited exceptions, the Icahn Group further agrees to (i) adhere to certain standstill obligations, including the obligation to not solicit proxies or consents or influence others with respect to the same, and (ii) not acquire or otherwise beneficially own more than 20% of the Company’s outstanding voting securities.

Pursuant to the Icahn Agreements, the Company will not create a separate executive committee of the Board so as long as an Icahn Designee is a member of the Board. Under the Icahn Agreements, if the Icahn Group ceases to hold a “net long position,”

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~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Unaudited~~

as defined in the Nomination and Standstill Agreement, in at least 1,900,000 shares of the Company’s common stock, the Icahn Group will cause one Icahn Designee to resign from the Board; if the Icahn Group’s holdings are further reduced to specified levels, additional Icahn Designees are required to resign.

In addition, pursuant to the Icahn Agreements, the Company entered into a registration rights agreement, effective June 30, 2016 (the "Registration Rights Agreement"), with certain entities related to Carl C. Icahn on behalf of any person who is a member of the "Icahn group" (as such term is defined therein) who owns applicable securities at the relevant time and is or has become a party to the Registration Rights Agreement. The Registration Rights Agreement provides for customary demand and piggyback registration rights and obligations.

Note ~~15—~~17—Arrangements with New Hertz

In connection with the Spin-Off, the Company entered into a separation and distribution agreement (the "Separation Agreement") with New Hertz. In connection therewith, the Company also entered into various other ancillary agreements with New Hertz to effect the Spin-Off and provide a framework for its relationship with New Hertz. The following summarizes some of the most significant agreements and relationships that Herc Holdings continues to have with New Hertz.

Separation and Distribution Agreement

The Separation Agreement sets forth the Company's agreements with New Hertz regarding the principal actions taken in connection with the Spin-Off. It also sets forth other agreements that govern aspects of the Company's relationship with New Hertz following the Spin-Off including (i) the manner in which legal matters and claims are allocated and certain liabilities are shared between the Company and New Hertz; (ii) other matters including transfers of assets and liabilities, treatment or termination of intercompany arrangements and releases of certain claims between the parties and their affiliates; (iii) mutual indemnification clauses; and (iv) allocation of Spin-Off expenses between the parties.

Tax Matters Agreement

The Company entered into a tax matters agreement with New Hertz that governs the parties' rights, responsibilities and obligations after the Spin-Off with respect to tax liabilities and benefits, tax attributes, tax contests and other tax matters regarding income taxes, other taxes and related tax returns.

Employee Matters Agreement

The Company and New Hertz entered into an employee matters agreement to allocate liabilities and responsibilities relating to employment matters, employee compensation, benefit plans and programs and other related matters for current and former employees of the vehicle rental business and the equipment rental business.

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Unaudited

Intellectual Property Agreement

The Company and New Hertz entered into an intellectual property agreement (the “Intellectual Property Agreement”) that provides for ownership, licensing and other arrangements regarding the trademarks and related intellectual property that New Hertz and the Company use in conducting their businesses. The Intellectual Property Agreement allocates ownership between New Hertz and the Company of all trademarks, domain names and certain copyrights that Hertz Holdings or its subsidiaries owned immediately prior to the Spin-Off.

Note 18—Subsequent Event

In October 2021, the Company entered into a purchase agreement to acquire Toronto-based Rapid Equipment Rental Limited ("Rapid Equipment") for approximately $80 million. The transaction is subject to customary closing conditions with a plan to close in the fourth quarter of 2021. Rapid Equipment, a full-service general equipment rental company founded in 2013, comprises approximately 110 employees and 7 locations serving construction and industrial customers throughout the Greater Toronto Area.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s discussion and analysis of financial condition and results of operations ("MD&A") should be read in conjunction with the unaudited condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of this Report, which include additional information about our accounting policies, practices and the transactions underlying our financial results. The preparation of our unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") requires us to make estimates and assumptions that affect the reported amounts in our unaudited condensed consolidated financial statements and the accompanying notes including 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, pension and postretirement benefits, valuation of stock-based compensation, reserves for litigation and other contingencies, accounting for income taxes and other matters arising during the normal course of business. We apply our best judgment, our knowledge of existing facts and circumstances and our knowledge of actions that we may undertake in the future in determining the estimates that will affect our condensed consolidated financial statements. We evaluate our estimates on an ongoing basis using our historical experience, as well as other factors we believe appropriate under the circumstances, such as current economic conditions, and adjust or revise our estimates as circumstances change. As future events and their effects cannot be determined with precision, actual results may differ from these estimates.

OVERVIEW OF OUR BUSINESS AND OPERATING ENVIRONMENT

We are engaged principally in the business of renting equipment. Ancillary to our principal business of equipment rental, we also sell used rental equipment, sell new equipment and consumables and offer certain services and support to our customers. Our profitability is dependent upon a number of factors including the volume, mix and pricing of rental transactions and the utilization of equipment. Significant changes in the purchase price or residual values of equipment or interest rates can have a significant effect on our profitability depending on our ability to adjust pricing for these changes. Our business requires significant expenditures for equipment, and consequently we require substantial liquidity to finance such expenditures. See "Liquidity and Capital Resources" below.

Our revenues primarily are derived from rental and related charges and consist of:

•Equipment rental (includes all revenue associated with the rental of equipment including ancillary revenue from delivery, rental protection programs and fueling charges);

•Sales of rental equipment and sales of new equipment, parts and supplies; and

•Service and other revenue (primarily relating to training and labor provided to customers).

Our expenses primarily consist of:

•Direct operating expenses (primarily wages and related benefits, facility costs and other costs relating to the operation and rental of rental equipment, such as delivery, maintenance and fuel costs);

•Cost of sales of rental equipment, new equipment, parts and supplies;

•Depreciation expense relating to rental equipment;

•Selling, general and administrative expenses; and

•Interest expense.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

COVID-19 Update

In December 2019, a novel strain of coronavirus ~~(COVID-19)~~("COVID-19") was identified and has spread globally. In March 2020, the World Health Organization characterized COVID-19 as a pandemic. Since March 2020, federal, state, provincial and local governments have implemented various measures in an effort to contain the virus, including physical distancing, travel restrictions, border closures, limitations on public gatherings, work from home, supply chain logistical changes and closure of non-essential businesses.

We remain focused on the safety and well-being of our employees, customers and communities as we maintain a high-level of service to our customers. We continue to communicate frequently throughout the organization to reinforce our health and safety guidelines, based on the Center for Disease Control recommendations. As the administration of vaccine programs continues ~~and cases decline,~~ we continue to evaluate our plans regarding the remote work environment and resumption of business travel for our employees.

We have seen economic recovery within our industry and our business since the second quarter of 2020 and we have positioned ourselves for growth ~~in 2021~~ by opening greenfield locations and returning to more normalized rental equipment capital expenditures by adding fleet in high growth ~~regions.~~markets. Despite the recovery we are seeing, the impact of the COVID-19 pandemic continues to evolve and the economic recovery could be slowed or reversed by a number of factors, including a widespread resurgence in COVID-19 infections, whether due to the spread of variants of the virus or otherwise, the rate of vaccinations, labor constraints, the strength of the global supply chain, and the rate in which governments are re-opening businesses or, in certain jurisdictions, reversing re-opening decisions. We cannot predict the extent to which our financial condition, results of operations or cash flows will ultimately be impacted, however, we believe we are well-positioned to operate effectively through the present environment.

Seasonality

Our business is usually seasonal, with demand for our rental equipment tending to be lower in the winter months, particularly in the northern United States and Canada. Our equipment rental business, especially in the construction industry, has historically experienced decreased levels of business from December until late spring and heightened activity during our third and fourth quarters until December. We have the ability to manage certain costs to meet market demand, such as fleet capacity, the most significant portion of our cost structure. For instance, to accommodate increased demand, we increase our available fleet and staff during the second and third quarters of the year. A number of our other major operating costs vary directly with revenues or transaction volumes; however, certain operating expenses, including rent, insurance and administrative overhead, remain fixed and cannot be adjusted for seasonal demand, typically resulting in higher profitability in periods when our revenues are higher, and lower profitability in periods when our revenues are lower. To reduce the impact of seasonality, we are focused on expanding our customer base through products that serve different industries with less seasonality and different business cycles.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

RESULTS OF OPERATIONS


		Three Months Ended June 30,								Six Months Ended June 30,									Three Months Ended September 30,								Nine Months Ended September 30,
($ in millions)	($ in millions)	2021		2020		$ Change		% Change		2021		2020		$ Change		% Change		($ in millions)	2021		2020		$ Change		% Change		2021		2020		$ Change		% Change
Equipment rental	Equipment rental	$	448.0	$	327.6	$	120.4	36.8	%	$	848.4	$	714.1	$	134.3	18.8	%	Equipment rental	$	519.6	$	402.3	$	117.3	29.2	%	$	1,368.0	$	1,116.4	$	251.6	22.5	%
Sales of rental equipment	Sales of rental equipment	30.3		31.4		(1.1)		(3.5)		74.5		71.4		3.1		4.3		Sales of rental equipment	16.6		45.3		(28.7)		(63.4)		91.1		116.7		(25.6)		(21.9)
Sales of new equipment, parts and supplies	Sales of new equipment, parts and supplies	7.8		7.0		0.8		11.4		13.9		14.0		(0.1)		(0.7)		Sales of new equipment, parts and supplies	8.6		6.2		2.4		38.7		22.5		20.2		2.3		11.4
Service and other revenue	Service and other revenue	4.8		2.0		2.8		140.0		7.9		4.7		3.2		68.1		Service and other revenue	5.6		2.9		2.7		93.1		13.5		7.6		5.9		77.6
Total revenues	Total revenues	490.9		368.0		122.9		33.4		944.7		804.2		140.5		17.5		Total revenues	550.4		456.7		93.7		20.5		1,495.1		1,260.9		234.2		18.6
Direct operating	Direct operating	203.0		144.7		58.3		40.3		386.0		333.9		52.1		15.6		Direct operating	225.9		169.4		56.5		33.4		611.9		503.3		108.6		21.6
Depreciation of rental equipment	Depreciation of rental equipment	101.1		101.4		(0.3)		(0.3)		201.5		201.8		(0.3)		(0.1)		Depreciation of rental equipment	105.4		101.9		3.5		3.4		306.9		303.7		3.2		1.1
Cost of sales of rental equipment	Cost of sales of rental equipment	24.7		29.6		(4.9)		(16.6)		63.1		72.0		(8.9)		(12.4)		Cost of sales of rental equipment	13.7		46.3		(32.6)		(70.4)		76.8		118.3		(41.5)		(35.1)
Cost of sales of new equipment, parts and supplies	Cost of sales of new equipment, parts and supplies	4.9		5.1		(0.2)		(3.9)		9.1		10.2		(1.1)		(10.8)		Cost of sales of new equipment, parts and supplies	6.5		4.4		2.1		47.7		15.6		14.6		1.0		6.8
Selling, general and administrative	Selling, general and administrative	74.0		56.8		17.2		30.3		139.5		126.6		12.9		10.2		Selling, general and administrative	81.5		61.0		20.5		33.6		221.0		187.6		33.4		17.8
Impairment	Impairment	0.4		3.2		(2.8)		(87.5)		0.4		9.5		(9.1)		(95.8)		Impairment	—		—		—		—		0.4		9.5		(9.1)		(95.8)
Interest expense, net	Interest expense, net	21.0		23.3		(2.3)		(9.9)		42.4		47.7		(5.3)		(11.1)		Interest expense, net	21.4		22.4		(1.0)		(4.5)		63.8		70.1		(6.3)		(9.0)
Other expense (income), net	Other expense (income), net	—		3.8		(3.8)		(100.0)		(0.2)		5.0		(5.2)		(104.0)		Other expense (income), net	(0.1)		(0.3)		0.2		(66.7)		(0.3)		4.7		(5.0)		(106.4)
Income before income taxes	Income before income taxes	61.8		0.1		61.7		NM		102.9		(2.5)		105.4		NM		Income before income taxes	96.1		51.6		44.5		86.2		199.0		49.1		149.9		NM
Income tax provision	Income tax provision	(14.7)		1.9		(16.6)		NM		(22.9)		0.8		(23.7)		NM		Income tax provision	(23.8)		(11.7)		(12.1)		103.4		(46.7)		(10.9)		(35.8)		NM
Net income (loss)		$	47.1	$	2.0	$	45.1	NM		$	80.0	$	(1.7)	$	81.7	NM
Net income																		Net income	$	72.3	$	39.9	$	32.4	81.2	%	$	152.3	$	38.2	$	114.1	NM

NM - not meaningful

Three Months Ended ~~June~~September 30, 2021 Compared with Three Months Ended ~~June~~September 30, 2020

Equipment rental revenue increased ~~$120.4~~$117.3 million, or ~~36.8%~~29.2%, during the ~~second~~third quarter of 2021 when compared to the ~~second~~third quarter of 2020 primarily due to higher volume of equipment on rent of 16.0% and positive pricing of ~~1.9%~~2.8% during the ~~second~~third quarter of 2021 over the same period in the prior year.

Sales of rental equipment decreased ~~$1.1~~$28.7 million, or ~~3.5%~~63.4%, during the ~~second~~third quarter of 2021 when compared to the ~~second~~third quarter of 2020. During the ~~second~~third quarter of 2021, the decline in volume of sales was related to the increase in utilization of rental equipment and management of the mix of rental equipment as part of our long-term strategy. The corresponding cost of sales of rental equipment as a percentage of the related revenue was ~~81.5%~~82.5% in the ~~second~~third quarter of 2021 compared to ~~94.3%~~102.2% in the ~~second~~third quarter of 2020. The increase in margin on sale of rental equipment in the ~~second~~third quarter of 2021 was due to a larger proportion of overall volume of sales through higher margin sales channels.

Direct operating expenses in the ~~second~~third quarter of 2021 increased ~~$58.3~~$56.5 million, or ~~40.3%~~33.4%, when compared to the ~~second~~third quarter of 2020 primarily related to increases in (i) personnel-related expenses of ~~$20.4~~$22.1 million asresulting from merit increases and bonus incentives; additionally, there were ~~furloughs and~~ limitations on overtime and furloughs in place during the ~~second~~third quarter of 2020, (ii) delivery and freight expenses of ~~$10.4~~$8.8 million due to an increased volume of transactions in the ~~second~~third quarter of 2021, (iii) maintenance expense of ~~$9.2~~$6.4 million related to initiatives to service more equipment with in-house resources and (iv) re-rent expense of ~~$8.0~~$11.5 million due to the corresponding increase in re-rent revenue.

Selling, general and administrative expenses increased ~~$17.2~~$20.5 million, or ~~30.3%~~33.6%, in the ~~second~~third quarter of 2021 when compared to the ~~second~~third quarter of 2020. The increase was primarily due to selling expense, including commissions and bonus incentives, of ~~$7.0~~$8.5 million, ~~stock compensation expense~~general payroll and benefits increases of ~~$5.3~~$3.7 million and travel expense of ~~$2.3~~$2.6 million as business travel resumes. ~~The increase was partially offset by a decrease~~

Interest expense, net decreased $1.0 million, or 4.5%, during the third quarter of 2021 when compared with the same period in ~~bad debt expense of $3.3 million~~2020 due to lower average outstanding balances and lower weighted average interest rates on the ~~continued improvements in collections.~~ABL Credit Facility.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Impairment expense in the second quarter of 2021 was $0.4 million related to a right-of-use ("ROU") asset impairment charge for a previously closed location. In 2020, impairment expense was $3.2 million including $1.5 million related to certain assets that were deemed held for sale at June 30, 2020 and $1.7 million related to an ROU asset impairment charge for two previously closed locations.

Interest expense, net decreased $2.3 million, or 9.9%, during the second quarter of 2021 when compared with the same period in 2020 due to lower average outstanding balances and lower weighted average interest rates on the ABL Credit Facility.

Income tax provision was ~~$14.7~~$23.8 million during the ~~second~~third quarter of 2021 compared to ~~a benefit of $1.9~~$11.7 million in 2020. The provision in the ~~second~~third quarter of 2021 was primarily driven by the level of pre-tax income, offset by non-deductible expenses and stock-based compensation.

~~Six~~Nine Months Ended ~~June~~September 30, 2021 Compared with ~~Six~~Nine Months Ended ~~June~~September 30, 2020

Equipment rental revenue increased ~~$134.3~~$251.6 million, or ~~18.8%~~22.5%, during the ~~first half of~~nine months ended September 30, 2021 when compared to the ~~first half of 2020~~prior-year period primarily due to higher volume of equipment on rent of 11.3% and positive pricing of ~~0.9%~~1.6% over the same period in the prior year.

Sales of rental equipment ~~increased $3.1~~decreased $25.6 million, or ~~4.3%~~21.9%, during the ~~first half of~~nine months ended September 30, 2021 when compared to the ~~first half of 2020.~~prior-year period. During the ~~first half of~~nine months ended September 30, 2021, the volume of sales was driven by the increase in utilization of rental equipment and selling certain classes of equipment to continue to improve our equipment mix. The corresponding cost of sales of rental equipment as a percentage of the related revenue was ~~84.7%~~84.3% in the ~~first half of~~nine months ended September 30, 2021 compared to ~~100.8%~~101.4% in the ~~first half of 2020.~~prior-year period. The increase in margin on sale of rental equipment in the ~~first half of~~nine months ended September 30, 2021 was due to a larger proportion of overall volume of sales through higher margin sales channels.

Direct operating expenses in the ~~first half of~~nine months ended September 30, 2021 increased ~~$52.1~~$108.6 million, or ~~15.6%~~21.6%, when compared to the ~~first half of 2020~~prior-year period primarily related to (i) personnel-related expenses of ~~$14.8~~$36.9 million asresulting from merit increases and bonus incentives; additionally, there were ~~furloughs and~~ limitations on overtime and furloughs in place during the second ~~quarter~~and third quarters of 2020, (ii) delivery and freight expenses of ~~$14.5~~$23.2 million due to an increased volume of transactions in the ~~first half of~~nine months ended September 30, 2021 compared to the ~~first half of 2020,~~prior-year period, (iii) maintenance expense of ~~$7.2~~$13.7 million related to initiatives to service more equipment with in-house resources and (iv) re-rent expense of ~~$5.4~~$16.9 million due to the corresponding increase in re-rent revenue.

Selling, general and administrative expenses increased ~~$12.9~~$33.4 million, or ~~10.2%~~17.8%, in the ~~first half of~~nine months ended September 30, 2021 when compared to the ~~first half of 2020.~~prior-year period. The increase was primarily due to selling expense, including commissions and bonus incentives, of ~~$7.4~~$15.9 million, general payroll and benefits increases of $14.9 million, which includes an increase in stock compensation expense of ~~$7.4~~$7.5 million, partially offset by a decrease in bad debt expense of ~~$7.1~~$5.4 million due to the continued improvements in collections.

Impairment expense induring the ~~first half of~~nine months ended September 30, 2021 was $0.4 million related to a ROU asset impairment charge for a previously closed location. Impairment expense was $9.5 million during the ~~first half of~~nine months ended September 30, 2020 and consisted of $6.3 million related to the partial impairment of a long-term receivable related to the sale of our former joint venture, $1.7 million related to an ROU asset impairment charge for two previously closed locations and $1.5 million related to certain assets that were deemed held for sale at June 30, 2020.

Interest expense, net decreased ~~$5.3~~$6.3 million, or ~~11.1%~~9.0%, during the ~~first half of~~nine months ended September 30, 2021 when compared ~~with~~to the ~~same~~prior-year period ~~in 2020~~ due to lower average outstanding balances and lower weighted average interest rates on the ABL Credit Facility.

Income tax provision was ~~$22.9~~$46.7 million during the ~~first half of~~nine months ended September 30, 2021 ~~and a benefit of $0.8~~compared to $10.9 million during the same period in 2020. The provision in the ~~first half of~~nine months ended 2021 was primarily driven by the level of pre-tax income, offset by non-deductible expenses and stock-based compensation.

LIQUIDITY AND CAPITAL RESOURCES

Our primary liquidity needs include the payment of operating expenses, purchases of rental equipment to be used in our operations, servicing of debt, funding acquisitions and ~~funding acquisitions.~~payment of dividends. Our primary sources of funding are operating cash flows, cash received from the disposal of equipment and borrowings under our debt arrangements. As of ~~June~~September 30, 2021, we had approximately ~~$1.6~~$1.8 billion of total nominal indebtedness outstanding. A substantial portion of our liquidity needs arise from debt service on our indebtedness and from the funding of our costs of operations, capital expenditures, acquisitions and payment of dividends.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

billion of total nominal indebtedness outstanding. A substantial portion of our liquidity needs arise from debt service on our indebtedness and from the funding of our costs of operations and capital expenditures.

Our liquidity as of ~~June~~September 30, 2021 consisted of cash and cash equivalents of ~~$34.6~~$35.2 million and unused commitments of approximately ~~$1.5~~$1.4 billion under our ABL Credit Facility. See "Borrowing Capacity and Availability" below for further discussion. Our practice is to maintain sufficient liquidity through cash from operations, our ABL Credit Facility and our AR Facility to mitigate the impacts of any adverse financial market conditions on our operations. We believe that cash generated from operations and cash received from the disposal of equipment, together with amounts available under the ABL Credit Facility and the AR Facility or other financing arrangements will be sufficient to meet working capital requirements and anticipated capital expenditures, and other strategic uses of cash, if any, and debt payments, if any, over the next twelve months.

Cash Flows

Significant factors driving our liquidity position include cash flows generated from operating activities and capital expenditures. Historically, we have generated and expect to continue to generate positive cash flow from operations. Our ability to fund our capital needs will be affected by our ongoing ability to generate cash from operations and access to capital markets.

The following table summarizes the change in cash and cash equivalents for the periods shown (in millions):


		Six Months Ended June 30,							Nine Months Ended September 30,
		2021		2020		$ Change			2021		2020		$ Change
Cash provided by (used in):	Cash provided by (used in):							Cash provided by (used in):
Operating activities	Operating activities	$	327.9	$	280.4	$	47.5	Operating activities	$	503.2	$	424.0	$	79.2
Investing activities	Investing activities	(204.7)		(101.6)		(103.1)		Investing activities	(613.8)		(171.6)		(442.2)
Financing activities	Financing activities	(122.0)		(128.7)		6.7		Financing activities	112.9		(232.1)		345.0
Effect of exchange rate changes	Effect of exchange rate changes	0.4		0.1		0.3		Effect of exchange rate changes	(0.1)		0.5		(0.6)
Net change in cash and cash equivalents	Net change in cash and cash equivalents	$	1.6	$	50.2	$	(48.6)	Net change in cash and cash equivalents	$	2.2	$	20.8	$	(18.6)

Operating Activities

During the ~~six~~nine months ended ~~June~~September 30, 2021, we generated ~~$47.5~~$79.2 million more cash from operating activities compared with the same period in 2020. The increase was related to improved operating results primarily resulting from higher revenues coupled with continued cost control measures. Additionally, the improvement in operating activities was related to timing of payments on accounts payable and other liabilities during the ~~six~~nine months ended ~~June~~September 30, 2021 as compared to the same period in 2020.

Investing Activities

Cash used in investing activities increased ~~$103.1~~$442.2 million during the ~~six~~nine months ended ~~June~~September 30, 2021 when compared with the prior-year period. Our primary use of cash in investing activities is for the acquisition of rental equipment, non-rental capital expenditures and acquisitions. Generally, we rotate our equipment and manage our fleet of rental equipment in line with customer demand and continue to invest in our information technology, service vehicles and facilities. Changes in our net capital expenditures are described in more detail in the "Capital Expenditures" section below. Additionally, we closed on ~~two~~four acquisitions ~~in April~~during the nine months ended September 30, 2021 and finalized the working capital adjustment for a prior acquisition for a net cash outflow of ~~$17.9~~$225.2 million.

Financing Activities

Cash ~~used in~~provided by financing activities ~~decreased $6.7~~was $112.9 million during the ~~six~~nine months ended ~~June~~September 30, 2021 ~~when~~ compared with cash used of $232.1 million in the prior-year period. ~~Cash used in financing~~Financing activities primarily represents our changes in debt, which included net ~~repayments~~borrowings of ~~$110.0~~$127.9 million on our revolving lines of credit and securitization during the ~~first half~~nine months ended of ~~2021.~~2021, which were used primarily to fund acquisitions during the period. Net repayments in the prior year period were ~~$119.7~~$221.7 million.

In order to reduce future cash interest payments, as well as future amounts due at maturity or upon redemption, we may from time to time repurchase our debt, including our notes, bonds, loans or other indebtedness, in privately negotiated, open market

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

or other transactions and upon such terms and at such prices as we may determine. We will evaluate any such transactions in light of then-existing market conditions, taking into account our current liquidity and prospects for future access to capital. The repurchases may be material and could relate to a substantial proportion of a particular class or series, which could reduce the trading liquidity of such class or series.

Capital Expenditures

Our capital expenditures relate largely to purchases of rental equipment, with the remaining portion representing purchases of property, equipment and information technology. The table below sets forth the capital expenditures related to our rental equipment and related disposals for the periods noted (in millions).


		Six Months Ended June 30,					Nine Months Ended September 30,
		2021		2020			2021		2020
Rental equipment expenditures	Rental equipment expenditures	$	239.3	$	161.5	Rental equipment expenditures	$	447.0	$	273.2
Disposals of rental equipment	Disposals of rental equipment	(71.0)		(67.9)		Disposals of rental equipment	(86.1)		(114.1)
Net rental equipment expenditures	Net rental equipment expenditures	$	168.3	$	93.6	Net rental equipment expenditures	$	360.9	$	159.1

Net capital expenditures for rental equipment increased ~~$74.7~~$201.8 million during the ~~six~~nine months ended ~~June~~September 30, 2021 compared to the same period in 2020. During the ~~six~~nine months ended ~~June~~September 30, 2021, we increased rental equipment expenditures back to pre-pandemic levels to add select fleet in high growth ~~regions~~markets as part of our long-term capital expenditure plans and managed disposals to respond to a tightening market to effectively manage our fleet.

Borrowing Capacity and Availability

Our ABL Credit Facility and AR Facility (together, the "Facilities") provide our borrowing capacity and availability. Creditors under the Facilities have a claim on specific pools of assets as collateral as identified in each credit agreement. Our ability to borrow under the Facilities is a function of, among other things, the value of the assets in the relevant collateral pool. We refer to the amount of debt we can borrow given a certain pool of assets as the "Borrowing Base."

The accounts receivable and other assets of the SPE are encumbered in favor of the lenders under our AR Facility. The SPE assets are owned by the SPE and are not available to settle the obligations of the Company or any of its other subsidiaries. Substantially all of the remaining assets of Herc and certain of its U.S. and Canadian subsidiaries are encumbered in favor of our lenders under our ABL Credit Facility. None of such assets are available to satisfy the claims of our general creditors. See Note 11, "Debt" to the notes to our consolidated financial statements included in Part II, Item 8 "Financial Statements" included in our Annual Report on Form 10-K for the year ended December 31, 2020, and Note 7,9, "Debt" included in Part I, Item 1 "Financial Statements" of this Report for more information.

With respect to the Facilities, we refer to "Remaining Capacity" as the maximum principal amount of debt permitted to be outstanding under the Facilities (i.e., the amount of debt we could borrow assuming we possessed sufficient assets as collateral) less the principal amount of debt then-outstanding under the Facility. We refer to "Availability Under Borrowing Base Limitation" as the lower of Remaining Capacity or the Borrowing Base less the principal amount of debt then-outstanding under the Facility (i.e., the amount of debt we could borrow given the collateral we possess at such time).

As of ~~June~~September 30, 2021, the following was available to us (in millions):


		Remaining Capacity		Availability Under Borrowing Base Limitation			Remaining Capacity		Availability Under Borrowing Base Limitation
ABL Credit Facility	ABL Credit Facility	$	1,580.2	$	1,480.8	ABL Credit Facility	$	1,367.3	$	1,367.3
AR Facility	AR Facility	—		—		AR Facility	—		—
Total	Total	$	1,580.2	$	1,480.8	Total	$	1,367.3	$	1,367.3

As of ~~June~~September 30, 2021, $24.8 million of standby letters of credit were issued and outstanding under the ABL Credit Facility, none of which have been drawn upon. The ABL Credit Facility had $225.2 million available under the letter of credit facility sublimit, subject to borrowing base restrictions.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Covenants

Our ABL Credit Facility, our AR Facility and our 2027 Notes contain a number of covenants that, among other things, limit or restrict our ability to dispose of assets, incur additional indebtedness, incur guarantee obligations, prepay certain indebtedness, make certain restricted payments (including paying dividends, redeeming stock or making other distributions), create liens, make investments, make acquisitions, engage in mergers, fundamentally change the nature of our business, make capital expenditures, or engage in certain transactions with certain affiliates.

Under the terms of our ABL Credit Facility, our AR Facility and our 2027 Notes, we are not subject to ongoing financial maintenance covenants; however, under the ABL Credit Facility, failure to maintain certain levels of liquidity will subject us to a contractually specified fixed charge coverage ratio of not less than 1:1 for the four quarters most recently ended. As of ~~June~~September 30, 2021, the appropriate levels of liquidity have been maintained, therefore this financial maintenance covenant is not applicable.

Additional information on the terms of our 2027 Notes, ABL Credit Facility and AR Facility is included in Note 11, "Debt" to the notes to our consolidated financial statements included in Part II, Item 8 "Financial Statements" included in our Annual Report on Form 10-K for the year ended December 31, 2020. For a discussion of the risks associated with our indebtedness, see Part I, Item 1A "Risk Factors" contained in our Annual Report on Form 10-K for the year ended December 31, 2020.

Dividends

~~Our~~On September 20, 2021, the Company declared a quarterly dividend of $0.50 per share to record holders as of October 20, 2021, with payment date of November 4, 2021. The declaration of dividends on our common stock is discretionary and will be determined by our board of directors in its sole discretion and will depend on our business conditions, financial condition, earnings, liquidity and capital requirements, contractual restrictions and other factors. The amounts available to pay cash dividends are restricted by our debt agreements.

CONTRACTUAL OBLIGATIONS

As of ~~June~~September 30, 2021, there have been no material changes outside the ordinary course of business to our known contractual obligations as set forth in the Contractual Obligations table included in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the year ended December 31, 2020.

OFF-BALANCE SHEET COMMITMENTS AND ARRANGEMENTS

As of ~~June~~September 30, 2021, there have been no material changes to our indemnification obligations as disclosed in Note 17, “Commitments and Contingencies” in our Annual Report on Form 10-K for the year ended December 31, 2020. For further information, see the discussion on indemnification obligations included in Note ~~11,~~13, "Commitments and Contingencies" in Part I, Item 1 "Financial Statements" of this Report.

For information concerning the securities litigation and other contingencies, see Note ~~11,~~13, "Commitments and Contingencies" in Part I, Item 1 "Financial Statements" of this Report.

RECENT ACCOUNTING PRONOUNCEMENTS

For a discussion of recent accounting pronouncements, see Note 2, "Basis of Presentation and Recently Issued Accounting Pronouncements" in Part I, Item 1 "Financial Statements" of this Report.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to a variety of market risks, including the effects of changes in interest rates (including credit spreads), foreign currency exchange rates and fluctuations in fuel prices. We manage our exposure to these market risks through our regular operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments. Derivative financial instruments are viewed as risk management tools and have not been used for speculative or trading purposes. In addition, derivative financial instruments are entered into with a diversified group of major financial institutions in order to manage our exposure to counterparty nonperformance on such instruments.

As of ~~June~~September 30, 2021, there has been no material change in the information reported under Part II, Item 7A, "Quantitative and Qualitative Disclosures About Market Risk," in our Annual Report on Form 10-K for the year ended December 31, 2020.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our senior management has evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as defined under Exchange Act Rules 13a-15(e) and 15d-15(e), as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of ~~June~~September 30, 2021, our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended ~~June~~September 30, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

For a description of certain pending legal proceedings see Note ~~11,~~13, "Commitments and Contingencies" to the notes to our condensed consolidated financial statements in Part I, Item 1 "Financial Statements" of this Report.

ITEM 1A. RISK FACTORS

There have been no material changes to our risk factors from those previously disclosed under Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2020.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Share Repurchase Program

In March 2014, Hertz Holdings announced a $1.0 billion share repurchase program (the "Share Repurchase Program"), which replaced an earlier program. The Share Repurchase Program permits us, as the successor to Hertz Holdings, to purchase shares through a variety of methods, including in the open market or through privately negotiated transactions, in accordance with applicable securities laws. We are not obligated to make any repurchases at any specific time or in any specific amount. The timing and extent to which we repurchase shares will depend upon, among other things, market conditions, share price, liquidity targets, contractual restrictions and other factors. Share repurchases may be commenced or suspended at any time or from time to time, subject to legal and contractual requirements, without prior notice. There were no share repurchases during the ~~six~~nine months ended ~~June~~September 30, 2021. As of ~~June~~September 30, 2021, the approximate dollar value that remains available for share purchases under the Share Repurchase Program is $395.9 million.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS


Exhibit Number			Description
3.1.1			Amended and Restated Certificate of Incorporation of Herc Holdings (Incorporated by reference to Exhibit 3.1 to the Annual Report on Form 10-K of Hertz Global Holdings, Inc. (File No. 001-33139), as filed on March 30, 2007).
3.1.2			Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Herc Holdings, effective as of May 14, 2014 (Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of Hertz Global Holdings, Inc. (File No. 001-33139), as filed on May 14, 2014).
3.1.3			Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Herc Holdings, dated June 30, 2016 (reflecting the registrant’s name change to “Herc Holdings Inc.”) (Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of Herc Holdings (File No. 001-33139), as filed on July 6, 2016).
3.1.4			Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Herc Holdings, dated June 30, 2016 (Incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K of Herc Holdings (File No. 001-33139), as filed on July 6, 2016).
3.2			Amended and Restated By-Laws of Herc Holdings Inc., effective May 17, 2018 (Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of Herc Holdings Inc. (File No. 001-33139), as filed on May 23, 2018).
10.1			Amendment No. 2 to Receivables Financing Agreement, among Herc Receivables U.S. LLC, The Additional Canadian Borrower to the Extent Added as a Party Thereto, Herc Rentals Inc., the Lenders and Managing Agents from time to time party thereto, and Credit Agricole Corporate and Investment Bank, as Administrative Agent (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Herc Holdings (File No. 001-33139) as filed on August 31, 2021).
10.2*			Form of Amended Director Restricted Stock Unit Agreement.
10.3*			Form of Amended Executive Officer Performance Stock Unit Agreement.
10.4*			Form of Amended Executive Officer Restricted Stock Unit Agreement.
31.1*			Certification of the Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002 of 2002
31.2*			Certification of the Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) under the Securities and Exchange Act of 1934, as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002
32.1**			18 U.S.C. Section 1350 Certifications of Principal Executive Officer and the Principal Financial Officer
101.INS*			XBRL Instance Document - the instance document does not appear in the Interactive Data File because ~~its~~ XBRL tags are embedded within the Inline XBRL document
101.SCH*			Inline XBRL Taxonomy Extension Schema Document
101.CAL*			Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*			Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*			Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*			Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*Filed herewith

**Furnished herewith

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Date:	~~July 22,~~October 21, 2021	HERC HOLDINGS INC. (Registrant)
		By:	/s/ MARK IRION
			Mark Irion Senior Vice President and Chief Financial Officer

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