Table of contents



 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended SeptemberJune 30, 20152016

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

For the transition period from _________ to _________

Commission File No. 001-36752
Neff Corporation
(Exact name of registrant as specified in its charter)
 
Delaware
37-1773826
(State or other jurisdiction of
incorporation or organization)
   
37-1773826
(I.R.S. Employer
Identification No.)
 
3750 N.W. 87th Avenue, Suite 400
3750 N.W. 87th Avenue, Suite 400
Miami, FL 33178
(Address of principal executive offices) (zip code)
(Address of registrant's principal executive offices) (zip code)

(305) 513-3350
(305) 513-3350
(Registrant’s telephone number, including area code)
 

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 ý No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).     Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. 
Large accelerated filer¨ Accelerated filer¨ý
Non-accelerated filerý¨(Do not check if a smaller reporting company)Smaller reporting company¨

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

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.         Yes ý No ¨

As of November 5, 2015,July 21, 2016, the number of shares of Class A Common Stockcommon stock outstanding was 10,494,1919,025,714 and the number of shares of Class B Common Stockcommon stock outstanding was 14,951,625.


 
NEFF CORPORATION
TABLE OF CONTENTS
 
10-Q Part and Item No. Page No.
   
PART IFINANCIAL INFORMATION 
ITEM 1
Financial Statements
4
 
Unaudited Condensed Consolidated Balance Sheets as of SeptemberJune 30, 20152016 and December 31, 20142015
4
 
Unaudited Condensed Consolidated Statements of Operations for the Three Months Ended SeptemberJune 30, 20152016 and 20142015
5
 
Unaudited Condensed Consolidated Statements of Operations for the NineSix Months Ended SeptemberJune 30, 20152016 and 20142015
6
Unaudited Condensed Consolidated Statement Of Stockholders' Deficit and Non-Controlling Interest for the Nine Months Ended September 30, 2015
7
 
Unaudited Condensed Consolidated Statements of Cash Flows for the NineSix Months Ended SeptemberJune 30, 20152016 and 20142015
87
 
Notes to Unaudited Condensed Consolidated Financial Statements
98
 
Supplemental Unaudited Condensed Consolidating Financial Statements
2116
   
ITEM 2
Management’s Discussion and Analysis of Financial Condition and Results of Operations
2624
   
ITEM 3
Quantitative and Qualitative Disclosures About Market Risk
3936
   
ITEM 4
Controls and Procedures
3936
   
PART IIOTHER INFORMATION 
   
ITEM 1
Legal Proceedings
4038
   
ITEM 1A
Risk Factors
4038
   
ITEM 2
Unregistered Sales of Equity Securities and Use of Proceeds
4038
   
ITEM 3
Defaults Upon Senior Securities
4038
   
ITEM 4
Mine Safety Disclosures
4038
   
ITEM 5
Other Information
4038
   
ITEM 6
Exhibits
4139


2
Table of contents



CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q contains certain "forward-looking statements" within the meaning of the federal securities laws. These forward-looking statements include statements regarding industry outlook, our expectations regarding the performance of our business, liquidity, our expected tax rate and benefits and estimated payments under our tax receivable agreement, expected capital expenditures, anticipated future indebtedness or financings and other non-historical statements. We use words such as "could," "may," "might," "will," "expect," "likely," "believe," "continue," "anticipate," "estimate," "intend," "plan," "project" and other similar expressions to identify some but not all forward-looking statements. Forward-looking statements involve estimates and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. Accordingly, any such statements are qualified in their entirety by reference to the important factors described under the caption "Risk Factors" in our annual report on Form 10-K for the fiscal year ended December 31, 2014,2015, filed with the Securities and Exchange Commission (the “SEC”) on March 13, 20158, 2016 (the “2014“2015 10-K”).

The forward-looking statements contained in this quarterly report on Form 10-Q are based on assumptions that we have made in light of our industry experience and our perceptions of historical trends, current conditions, expected future developments and other important factors we believe are appropriate under the circumstances. As you read and consider this quarterly report on Form 10-Q, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties (many of which are beyond our control) and assumptions. Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many important factors could affect our actual operating and financial performance and cause our performance to differ materially from the performance anticipated in the forward-looking statements. We believe these important factors include, but are not limited to, those described under the captions "Risk Factors" in our 20142015 10-K. Should one or more of these risks or uncertainties materialize, or should any of these assumptions prove incorrect, our actual operating and financial performance may vary in material respects from the performance projected in these forward-looking statements.

Further, any forward-looking statement speaks only as of the date on which it is made, and except as required by law, we undertake no obligation to update any forward-looking statement contained in this quarterly report on Form 10-Q to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. New important factors that could cause our business not to develop as we expect emerge from time to time, and it is not possible for us to predict all of them.


3
Table of contents



PART I. FINANCIAL INFORMATION

Item 1.     FINANCIAL STATEMENTS

NEFF CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
September 30, 2015 December 31, 2014June 30, 2016 December 31, 2015
ASSETS

  


  
      
Cash and cash equivalents$232
 $207
$263
 $289
Accounts receivable, net of allowance for doubtful accounts of $2,197 in 2015 and $2,125 in 201460,869
 66,375
Accounts receivable, net of allowance for doubtful accounts of $1,929 in 2016 and $2,508 in 201561,994
 70,328
Inventories2,244
 2,005
2,066
 1,766
Rental equipment, net468,534
 420,245
488,388
 457,470
Property and equipment, net34,637
 30,210
36,825
 33,473
Prepaid expenses and other assets15,429
 16,959
16,213
 14,488
Goodwill58,765
 58,765
60,644
 60,599
Intangible assets, net15,635
 16,600
14,781
 15,314
Total assets$656,345
 $611,366
$681,174
 $653,727
      
LIABILITIES AND STOCKHOLDERS' DEFICIT   
   
      
Liabilities   
   
Accounts payable$9,338
 $27,389
$23,324
 $18,948
Accrued expenses and other liabilities33,555
 31,203
38,692
 31,412
Revolving credit facility278,000
 245,200
269,700
 253,600
Second lien loan, net of original issue discount476,898
 476,713
473,764
 476,966
Payable pursuant to tax receivable agreement29,081
 31,557
29,809
 29,133
Deferred tax liability, net7,490
 5,405
8,957
 9,458
Total liabilities834,362
 817,467
844,246
 819,517
      
Stockholders' deficit   
   
Class A Common Stock; $.01 par value, 100,000,000 shares authorized, 10,494,191 and 10,476,190 shares issued and outstanding as of September 30, 2015 and December 31, 2014, respectively105
 105
Class B Common Stock; $.01 par value, 15,000,000 shares authorized, 14,951,625 shares issued and outstanding as of September 30, 2015 and December 31, 2014150
 150
Class A Common Stock; $.01 par value, 100,000,000 shares authorized, 9,025,714 and 10,380,781 shares issued and outstanding as of June 30, 2016 and December 31, 2015, respectively90
 104
Class B Common Stock; $.01 par value, 15,000,000 shares authorized, 14,951,625 shares issued and outstanding as of June 30, 2016 and December 31, 2015150
 150
Additional paid-in capital(111,567) (112,185)(118,706) (112,058)
Retained earnings13,153
 1,599
19,658
 17,190
Total stockholders' deficit(98,159) (110,331)(98,808) (94,614)
Non-controlling interest(79,858) (95,770)(64,264) (71,176)
Total stockholders' deficit and non-controlling interest(178,017) (206,101)(163,072) (165,790)
Total liabilities and stockholders' deficit and non-controlling interest$656,345
 $611,366
$681,174
 $653,727
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4
Table of contents



NEFF CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
For the Three Months Ended September 30, 2015 For the Three Months Ended September 30, 2014For the Three Months Ended June 30, 2016 For the Three Months Ended June 30, 2015
Revenues   
   
Rental revenues$90,532
 $87,736
$91,474
 $84,820
Equipment sales5,559
 6,561
4,941
 6,174
Parts and service3,333
 3,450
3,245
 3,233
Total revenues99,424
 97,747
99,660
 94,227
Cost of revenues   
   
Cost of equipment sold3,474
 3,758
2,963
 4,058
Depreciation of rental equipment21,553
 18,342
22,761
 21,213
Cost of rental revenues21,186
 22,045
21,675
 19,511
Cost of parts and service1,964
 2,064
1,799
 1,807
Total cost of revenues48,177
 46,209
49,198
 46,589
Gross profit51,247
 51,538
50,462
 47,638
Other operating expenses   
   
Selling, general and administrative expenses22,852
 21,081
23,387
 22,468
Other depreciation and amortization2,678
 2,441
2,594
 2,657
Total other operating expenses25,530
 23,522
25,981
 25,125
Income from operations25,717
 28,016
24,481
 22,513
Other expenses   
Other expenses (income)   
Interest expense10,907
 13,194
10,476
 10,753
Adjustment to tax receivable agreement411
 —
262
 (3,408)
Loss on interest rate swap4,216
 —
Loss (gain) on interest rate swap1,828
 (1,007)
Amortization of debt issue costs392
 356
370
 381
Total other expenses15,926
 13,550
Total other expenses (income)12,936
 6,719
Income before income taxes9,791
 14,466
11,545
 15,794
(Provision for) benefit from income taxes(347) 4,848
Provision for income taxes(1,606) (1,100)
Net income9,444
 19,314
9,939
 14,694
Less: net income attributable to non-controlling interest6,238
 19,314
7,319
 7,275
Net income attributable to Neff Corporation$3,206
 $—
$2,620
 $7,419
      
Net income attributable to Neff Corporation per share of Class A common stock:   
Net income attributable to Neff Corporation per share of Class A common stock outstanding:   
Basic$0.31
  $0.29
 $0.71
Diluted$0.27
  $0.28
 $0.62
Weighted average shares of Class A common stock outstanding:   
   
Basic10,494
  9,158
 10,482
Diluted12,048
  9,481
 12,036

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

5
Table of contents



NEFF CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
For the Nine Months Ended September 30, 2015 For the Nine Months Ended September 30, 2014For the Six Months Ended June 30, 2016 For the Six Months Ended June 30, 2015
Revenues   
   
Rental revenues$249,493
 $240,362
$172,651
 $158,961
Equipment sales18,520
 17,355
10,043
 12,961
Parts and service9,724
 10,125
6,550
 6,391
Total revenues277,737
 267,842
189,244
 178,313
Cost of revenues   
   
Cost of equipment sold11,864
 9,877
6,074
 8,390
Depreciation of rental equipment62,280
 54,831
44,926
 40,727
Cost of rental revenues58,556
 59,669
41,608
 37,370
Cost of parts and service5,534
 6,158
3,604
 3,570
Total cost of revenues138,234
 130,535
96,212
 90,057
Gross profit139,503
 137,307
93,032
 88,256
Other operating expenses   
   
Selling, general and administrative expenses67,610
 61,453
47,909
 44,758
Other depreciation and amortization7,796
 7,149
5,335
 5,118
Transaction bonus—
 24,506
Total other operating expenses75,406
 93,108
53,244
 49,876
Income from operations64,097
 44,199
39,788
 38,380
Other expenses (income)   
   
Interest expense32,174
 28,313
21,125
 21,267
Adjustment to tax receivable agreement(2,476) —
676
 (2,887)
Loss on extinguishment of debt—
 15,896
Loss on interest rate swap4,097
 —
Loss (gain) on interest rate swap6,482
 (119)
Amortization of debt issue costs1,144
 2,695
765
 752
Total other expenses (income)34,939
 46,904
29,048
 19,013
Income (loss) before income taxes29,158
 (2,705)
(Provision for) benefit from income taxes(1,692) 4,610
Income before income taxes10,740
 19,367
Provision for income taxes(1,222) (1,345)
Net income27,466
 1,905
9,518
 18,022
Less: net income attributable to non-controlling interest15,912
 1,905
7,050
 9,674
Net income attributable to Neff Corporation$11,554
 $—
$2,468
 $8,348
      
Net income attributable to Neff Corporation per share of Class A common stock:   
Net income attributable to Neff Corporation per share of Class A common stock outstanding:   
Basic$1.10
  $0.25
 $0.80
Diluted$0.96
  $0.25
 $0.69
Weighted average shares of Class A common stock outstanding:   
   
Basic10,484
  9,755
 10,479
Diluted12,038
  9,916
 12,033

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

6
Table of contents



NEFF CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
AND NON-CONTROLLING INTEREST

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015
(in thousands)
 Class A Common Stock Class B Common Stock Additional Paid-In Retained Non-Controlling Total Stockholders' Deficit
 Shares Amount Shares Amount Capital Earnings Interest and Non-Controlling Interest
BALANCE—December 31, 201410,476
 $105
 14,952
 $150
 $(112,185) $1,599
 $(95,770) $(206,101)
Payment of costs directly associated with the issuance of Class A common stock—
 —
 —
 —
 (283) —
 —
 (283)
Equity-based compensation—
 —
 —
 —
 901
 —
 —
 901
Stock issued for restricted stock units18
 —
 —
 —
 —
 —
 —
 —
Net income—
 —
 —
 —
 —
 11,554
 15,912
 27,466
BALANCE—September 30, 201510,494
 $105
 14,952
 $150
 $(111,567) $13,153
 $(79,858) $(178,017)

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

7
Table of contents



NEFF CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the Nine Months Ended September 30, 2015 For the Nine Months Ended September 30, 2014For the Six Months Ended June 30, 2016 For the Six Months Ended June 30, 2015
Cash Flows from Operating Activities   
   
Net income$27,466
 $1,905
$9,518
 $18,022
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation69,111
 60,849
49,726
 45,202
Amortization of debt issue costs1,144
 2,695
765
 752
Amortization of intangible assets965
 1,131
535
 643
Amortization of original issue discount185
 70
147
 120
Gain on sale of equipment(6,656) (7,478)(3,969) (4,571)
Provision for bad debt1,431
 1,929
862
 825
Equity-based compensation901
 792
1,098
 674
Deferred income taxes2,085
 —
1,222
 1,212
Adjustment to tax receivable agreement(2,476) —
676
 (2,887)
Unrealized loss on interest rate swap3,852
 —
Loss on extinguishment of debt—
 15,896
Unrealized loss (gain) on interest rate swap6,183
 (218)
Changes in operating assets and liabilities:      
Accounts receivable4,075
 (5,293)7,472
 6,060
Inventories, prepaid expenses and other assets147
 (2,904)(1,267) (955)
Accounts payable(1,271) (856)(324) (2,271)
Accrued expenses and other liabilities(1,270) (380)882
 (1,905)
Net cash provided by operating activities99,689
 68,356
73,526
 60,703
Cash Flows from Investing Activities   
   
Purchases of rental equipment(138,959) (135,930)(76,557) (111,095)
Proceeds from sale of equipment18,520
 17,355
10,043
 12,961
Purchases of property and equipment(11,742) (11,729)(8,648) (10,068)
Net cash used in investing activities(132,181) (130,304)(75,162) (108,202)
Cash Flows from Financing Activities   
   
Repayments under revolving credit facility(95,239) (464,939)(66,400) (53,111)
Borrowings under revolving credit facility128,039
 502,739
82,500
 100,911
Proceeds from second lien loan, net—
 572,125
Distribution to members—
 (329,885)
Repayments of senior secured notes—
 (200,000)
Call premiums—
 (7,218)
Debt issue costs—
 (9,065)(1,570) —
Common stock repurchases(9,433) —
Second Lien Loan prepayment(3,349) —
Distribution to member(138) —
Payment of costs directly associated with the issuance of Class A common stock(283) —
—
 (283)
Net cash provided by financing activities32,517
 63,757
1,610
 47,517
Net increase in cash and cash equivalents25
 1,809
Net (decrease) increase in cash and cash equivalents(26) 18
Cash and cash equivalents, beginning of period207
 190
289
 207
Cash and cash equivalents, end of period$232
 $1,999
$263
 $225
      
Supplemental Disclosures of Cash Flow Information      
Cash paid for interest$32,190
 $27,790
$21,464
 $21,325
Cash paid for interest rate swap settlements245
 —
299
 99
Non-Cash Investing Activities      
Purchases of rental equipment included in accounts payable and other accrued liabilities at period end$7,967
 $7,764
$24,368
 $22,017

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

8
Table of contents



NEFF CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1—BUSINESS AND ORGANIZATION

Neff Corporation was formed as a Delaware corporation on August 18, 2014. On November 26, 2014, Neff Corporation completed an initial public offering (the "IPO") of 10,476,190 shares of Class A common stock at a public offering price of $15.00 per share. A portion of the gross proceeds received by Neff Corporation from the IPO were used to purchase common membership units ("Common Units") in Neff Holdings LLC, ("Neff Holdings") which was wholly owned by private investment funds managed by Wayzata Investment Partners ("Wayzata") prior to the IPO. We refer to these transactions as the “Organizational Transactions”. Neff Corporation's only business is to act as the sole managing member of Neff Holdings. As a result, Neff Corporation consolidates Neff Holdings for all periods presented (see Supplemental Unaudited Condensed Consolidating Financial Statements). Neff Corporation and its consolidated subsidiaries, including Neff Holdings and Neff Holdings' subsidiaries, Neff LLC and Neff Rental LLC, are referred to as the "Company", "we" or "us".

The Company owns and operates equipment rental locations in the United States. The Company also sells used equipment, parts and merchandise and provides ongoing repair and maintenance services.
NOTE 2—BASIS OF PRESENTATION
Basis of Presentation

The accompanying condensed consolidated financial statements are unaudited and have been prepared in conformity with accounting principles generally accepted in the United States (“US GAAP”) and the rules and regulations of the SEC. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with US GAAP have been condensed or omitted. The accompanying unaudited condensed consolidated financial statements are presented on a consolidated basis. All significant intercompany accounts and transactions have been eliminated. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all normal and recurring adjustments necessary to present fairly the Company’s balance sheets as of SeptemberJune 30, 20152016 and December 31, 2014,2015, the results of its operations for the three and ninesix months ended SeptemberJune 30, 2016 and 2015 and 2014, the cash flows for the ninesix months ended SeptemberJune 30, 20152016 and 2014 and the changes in its stockholders’ deficit and non-controlling interest for the nine months ended September 30, 2015. Interim results may not be indicative of full year performance. The Company believes that the disclosures herein are adequate so that the information presented is not misleading; however, theseThese unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto in the 20142015 10-K.

Unaudited Condensed Consolidated Financial Statements
Balance Sheets - The assets, liabilities and equity of Neff Corporation and Neff Holdings have been consolidated and carried forward at historical values;
Statements of Operations - The consolidated statements of operations include the historical consolidated statements of operations of Neff Holdings consolidated with the statement of operations of Neff Corporation;
Statement of Stockholders' Deficit and Non-Controlling Interest - Following the IPO, Wayzata retained a portion of its economic interest in Neff Holdings directly through the ownership of Neff Holdings Common Units and these interests are included within non-controlling interest subsequent to the IPO; and
Statements of Cash Flows - The statements of cash flows include the historical consolidated statements of cash flows of Neff Holdings consolidated with the statement of cash flows of Neff Corporation.

Use of Estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company considers critical accounting estimates to be those that require more significant judgments in the preparation of the unaudited condensed consolidated financial statements including those related to depreciation, bad debts, income taxes, self-insurance reserves, goodwill and intangible assets derivative financial instruments, contingencies and amounts payable pursuant to the tax receivable agreement, as amended (Note 3) ("Tax Receivable Agreement"). Management relies on historical experience and other assumptions, believed


9
Table of Contents
NEFF CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


NOTE 2—BASIS OF PRESENTATION (Continued)
to be reasonable under the circumstances, in making its judgments and estimates. Actual results could differ from those judgments and estimates.

Goodwill and Intangible Assets

Goodwill and trademarks and tradenames are reviewed at least annually for impairment. The Company conducts annual impairment tests on October 1 of each fiscal year or whenever an indicator of impairment exists. The customer list is amortized over its useful life (Note 5). The Company expenses costs to renew or extend the term of its recognized intangible assets.
Segment Reporting
The Company's operations consist of the rental and sale of equipment, and parts and services in five regions in the United States: Florida, Atlantic, Central, Southeastern and Western. The five regions are the Company's operating segments and are aggregated into one reportable segment because they rent similar products and have similar economic characteristics. The Company operates in the United States and had minimal international sales for each of the periods presented.



NEFF CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


NOTE 2—BASIS OF PRESENTATION (Continued)

Comprehensive Income (Loss)

The Company had no items of other comprehensive income (loss) in any of the periods presented.
Recently Issued Accounting Pronouncements
Under the Jumpstart Our Business Startups Act (the “JOBS Act”"JOBS Act"), the Company meets the definition of an emerging growth company. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has irrevocably elected to avail itself of this exemption from adopting new or revised accounting standards and, therefore, will not be subject to new or revised accounting standards until such time as those standards apply to private companies. There were no significant new accounting pronouncements that the Company adopted during the ninesix months ended SeptemberJune 30, 2015.2016.

In April 2015,February 2016, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No. 2015-032016-02, Interest-Imputation of Interest (Subtopic 835-30) - Simplifying the Presentation of Debt Issuance CostsLeases (Topic 842), ("ASU 2015-03"2016-02") which provides guidanceto increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the presentation of debt issuance costs. This guidance requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability and amortization of debt issuance costs will be reported as interest expense. This guidance is effective for private companies for fiscal years after December 15, 2015, and interim periods within fiscal years beginning after December 15, 2016, and requires application on a retrospective basis. The Company expects to adopt this guidance when effective for private companies, and does not expect this guidance to have a material impact on its financial statements, although it will change the financial statement classification of debt issuance costs. As of September 30, 2015, $9.3 million of debt issuance costs were included in total assets in the Company's unaudited condensed consolidated balance sheet.

In July 2015, the FASB issued ASU No. 2015-11 Inventory (Topic 330) - Simplifying the Measurement of Inventory ("ASU 2015-11") which requires an entity to measure inventory at the lower of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Current US GAAP requires that an entity measure inventory at the lower of cost or market. Market under current US GAAP could be replacement cost, net realizable value or net realizable value less a normal profit margin.disclosing key information about leasing arrangements. This guidance is effective for private companies for fiscal years beginning after December 15, 20162019, and interim periods within fiscal years beginning after December 15, 2017. This update should be applied prospectively.2020 and requires application on a modified retrospective basis. The modified retrospective basis includes a number of optional practical expedients that entities may elect to apply. The Company expects to adopt this guidance when effective for private companies and does not expect this guidance to have a significantis currently evaluating the impact of ASU 2016-02 on the Company's financial statements.statements and disclosures.

NOTE 3—NON-CONTROLLING INTEREST

Following the IPO, Neff Corporation became Neff Holdingsis the sole managing member.member of Neff Holdings. As a result, Neff Corporation operates and controls all of the business and affairs of Neff Holdings while owning a 41.2%37.6% minority economic interest in Neff Holdings. Therefore, on November 26, 2014, Neff Corporation began to consolidateconsolidates the financial results of Neff Holdings and Neff Holdings' subsidiaries, Neff LLC and Neff Rental LLC, and to recordrecords a non-controlling interest for the remaining 58.8%


10
Table of Contents
NEFF CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


NOTE 3—NON-CONTROLLING INTEREST (Continued)

62.4% economic interest in Neff Holdings held by Wayzata. On a stand alone basis, Neff Corporation's only sources of cash flow from operations are distributions from Neff Holdings. Net income attributable to the non-controlling interest on the unaudited condensed consolidated statements of operations represents the portion of earnings attributable to the economic interest in Neff Holdings held by the non-controlling unitholders. The non-controlling interest on the unaudited condensed consolidated balance sheets represents the carryover basis of Wayzata's capital account in Neff Holdings. Non-controlling interest is adjusted to reflect the distributions to and income allocated to the non-controlling unitholders. The ownership of the Common Units is summarized as follows:
 Non-controlling ownership of Common Units in Neff Holdings Neff Corporation ownership of Common Units in Neff Holdings Total
As of September 30, 201514,951,625
 10,494,191
 25,445,816
 58.8% 41.2% 100.0%
 Non-controlling ownership of Common Units in Neff Holdings Neff Corporation ownership of Common Units in Neff Holdings Total
As of June 30, 201614,951,625
 9,025,714
 23,977,339
 62.4% 37.6% 100.0%
 Non-controlling ownership of Common Units in Neff Holdings Neff Corporation ownership of Common Units in Neff Holdings Total
As of December 31, 201414,951,625
 10,476,190
 25,427,815
 58.8% 41.2% 100.0%
 Non-controlling ownership of Common Units in Neff Holdings Neff Corporation ownership of Common Units in Neff Holdings Total
As of December 31, 201514,951,625
 10,380,781
 25,332,406
 59.0% 41.0% 100.0%

The following table summarizes the activity in non-controlling interest from December 31, 20142015 to SeptemberJune 30, 20152016 (in thousands):
Balance of non-controlling interest as of December 31, 2014$(95,770)
Net income attributable to non-controlling interest15,912
Balance of non-controlling interest as of September 30, 2015$(79,858)
Balance of non-controlling interest as of December 31, 2015$(71,176)
Net income attributable to non-controlling interest7,050
Distribution to member(138)
Balance of non-controlling interest as of June 30, 2016$(64,264)



NEFF CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


NOTE 3—NON-CONTROLLING INTEREST (Continued)

Distributions for Taxes

As a limited liability company (treated as a partnership for income tax purposes), Neff Holdings does not incur significant federal or state and local income taxes, as these taxes are primarily the obligationobligations of the members of Neff Holdings. As authorized by the Neff Holdings LLC agreement, Neff Holdings is required to distribute cash, generally, on a pro rata basis, to its members to the extent necessary to cover the members’ tax liabilities, if any, with respect to their share of Neff Holdings' earnings. During the six months ended June 30, 2016, Neff Holdings' distributed $0.1 million for a tax liability attributable to a Wayzata fund.

Payable Pursuant to the Tax Receivable Agreement

As of SeptemberJune 30, 2015,2016, the Company recorded a liability of $29.1$29.8 million, representing the estimated payments due to Wayzata and certain members of management of Neff Holdings and certain non-executive members of its board of managers (collectively, the "Prior LLC Owners") under the Tax Receivable Agreement with the Prior LLC Owners as a result of the special allocation of depreciation and amortization deductions in excess of the pro rata share of such items. The liability as of SeptemberJune 30, 2015 decreased2016 increased by $2.5$0.7 million from December 31, 2014,2015, due to the Tax Receivable Agreement Amendment (defined below) and changes in estimated future payments as a result of the tax benefit Neff Corporation will obtain as a result of the special allocation of gain, to Wayzata, resulting from the sale of equipment that existed at the date of the IPO, in accordance with Section 704(c) of the Internal Revenue Code. The Company expects these changes from the special allocation of gain will likely occur quarterly.

On June 2, 2015, the Company, Wayzata and the Prior LLC Owners entered into an amendment to the Tax Receivable Agreement (the "Tax Receivable Agreement Amendment"), dated as of May 27, 2015. The Tax Receivable Agreement Amendment amended the Tax Receivable Agreement to eliminate any benefit to Wayzata and the Prior LLC Owners relating to tax adjustments arising from state, local or foreign taxes in order to relieve the substantial burden on the Company to calculate such benefit.

No amounts were paid pursuant to the terms of the Tax Receivable Agreement during the three and ninesix months ended SeptemberJune 30, 2015.



11
Table of Contents
NEFF CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


NOTE 3—NON-CONTROLLING INTEREST (Continued)2016.

Payments are anticipated to be made under the Tax Receivable Agreement when Neff Corporation utilizes a benefit. The payments are to be made in accordance with the terms of the Tax Receivable Agreement. The timing of the payments is subject to certain contingencies including Neff Corporation having sufficient taxable income to utilize the tax benefits defined in the Tax Receivable Agreement.

Obligations pursuant to the Tax Receivable Agreement, are obligations of Neff Corporation and are not obligations of Neff Holdings. They do not impact the balance of non-controlling interest. These obligations are not income tax obligations and have no impact on the tax provision or the allocation of taxes. In general, items of income, gain, loss and deduction are allocated on the basis of members' respective ownership interests pursuant to the Neff Holdings LLC agreement after taking into consideration all relevant sections of the Internal Revenue Code.

NOTE 4 - EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding during the period, including vested restricted stock units ("RSUs"). Diluted earnings per share is computed by dividing net income available to common stockholders by the weighted-average number of common shares plus the dilutive effect of potential common shares outstanding during the period. For RSUs with performance-based vesting, no common equivalent shares are included in the computation of diluted earnings per share until the related performance criteria have been met. The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share amounts):









NEFF CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


NOTE 4 - EARNINGS PER SHARE (Continued)
For the Three Months Ended June 30, For the Six Months Ended June 30,
For the Three Months Ended September 30, 2015 For the Nine Months Ended September 30, 20152016 2015 2016 2015
Numerator:          
Net income attributable to Neff Corporation$3,206
 $11,554
$2,620
 $7,419
 $2,468
 $8,348
Denominator for basic net income per share of Class A common stock:          
Weighted average shares of Class A common stock outstanding10,494
 10,484
9,158
 10,482
 9,755
 10,479
Denominator for diluted net income per share of Class A common stock:          
Weighted average shares of Class A common stock outstanding10,494
 10,484
Add dilutive effect of the following:  
Neff Holdings options (redeemable for cash or Class A common stock)1,265
 1,265
Neff Corporation stock options289
 289
Weighted average shares of Class A common stock outstanding, diluted12,048
 12,038
9,481
 12,036
 9,916
 12,033
Earnings per share of Class A common stock:          
Net income attributable to Neff Corporation per share of Class A common stock, basic$0.31
 $1.10
$0.29
 $0.71
 $0.25
 $0.80
Net income attributable to Neff Corporation per share of Class A common stock, diluted$0.27
 $0.96
$0.28
 $0.62
 $0.25
 $0.69

Potentially dilutive stock options representing a total of 0.7 million shares of Class A common stock for the three and six months ended June 30, 2016 were excluded from the computation of diluted weighted average shares outstanding due to their anti-dilutive effect.

In November 2015, the Company's board of directors authorized a share repurchase program pursuant to which the Company may purchase shares of its Class A common stock. Under the share repurchase program, the Company may acquire up to $25 million of shares of Class A common stock in open market and privately negotiated purchases from time to time, dependent on market conditions. During the six months ended June 30, 2016, the Company repurchased 1,399,275 shares of Class A common stock for $9.4 million. At June 30, 2016, there were approximately $14.7 million in remaining funds authorized under this program. See Part II, Item 2, Unregistered Sales of Equity Securities and Use of Proceeds, for additional information.

The shares of Class B common stock outstanding do not participate in the earnings of Neff Corporation and are therefore not participating securities. Accordingly, basic and diluted net income per share of Class B common stock have not been presented.

NOTE 5—INTANGIBLE ASSETS
The carrying amount and accumulated amortization of intangible assets as of June 30, 2016 and December 31, 2015, consisted of the following (in thousands, except as noted):
   June 30, 2016
 Average
Useful Life
(in years)		 Gross
Carrying
Amount		 Accumulated
Amortization		 Net
Book Value
Indefinite life:   
  
  
Trademarks and tradenamesN/A $10,854
 $—
 $10,854
Finite life:   
  
  
Customer list12 13,987
 (10,060) 3,927
Total intangible assets  $24,841
 $(10,060) $14,781






12
Table of Contents
NEFF CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


NOTE 5—INTANGIBLE ASSETS
The carrying amount and accumulated amortization of intangible assets as of September 30, 2015 and December 31, 2014, consisted of the following (in thousands, except as noted): (Continued)
   September 30, 2015
 Average
Useful Life
(in years)		 Gross
Carrying
Amount		 Accumulated
Amortization		 Net
Book Value
Indefinite life:   
  
  
Trademarks and tradenamesN/A $10,854
 $—
 $10,854
Finite life:   
  
  
Customer list12 13,987
 (9,206) 4,781
Total intangible assets  $24,841
 $(9,206) $15,635
 December 31, 2014 December 31, 2015
Average
Useful Life
(in years)		 Gross
Carrying
Amount		 Accumulated
Amortization		 Net
Book Value		Average
Useful Life
(in years)		 Gross
Carrying
Amount		 Accumulated
Amortization		 Net
Book Value
Indefinite life:   
  
  
   
  
  
Trademarks and tradenamesN/A $10,854
 $—
 $10,854
N/A $10,854
 $—
 $10,854
Finite life:   
  
  
   
  
  
Customer list12 13,987
 (8,241) 5,746
12 13,987
 (9,527) 4,460
Total intangible assets  $24,841
 $(8,241) $16,600
  $24,841
 $(9,527) $15,314
The customer list is amortized on an accelerated basis, based on estimated cash flows over the useful life of the customer list. Accumulated amortization and expected future annual amortization expense are as follows (in thousands):
Accumulated amortization at September 30, 2015$9,206
Accumulated amortization at June 30, 2016$10,060
Estimated amortization expense for: 
 
Remainder of 2015321
20161,070
Remainder of 2016537
2017877
877
2018719
719
2019589
589
2020 through 20221,205
2020483
2021 through 2022722
Total$13,987
$13,987
Amortization expense related to the customer list was $0.3 million and $0.4 million for the three months ended SeptemberJune 30, 20152016 and 2014, respectively.2015. Amortization expense related to the customer list was $1.0$0.5 million and $1.1$0.6 million for the ninesix months ended SeptemberJune 30, 2016 and 2015, respectively.
NOTE 6—DEBT
Debt consisted of the following as of June 30, 2016 and 2014, respectively.

December 31, 2015 (in thousands, except percent data):
13
 June 30, 2016 December 31, 2015
Revolving Credit Facility with interest ranging from the lender's prime rate plus up to 1.0% to LIBOR plus up to 2.0% (2.28% at June 30, 2016)$269,700
 $253,600
Second Lien Loan with interest of LIBOR plus 6.25%, with 1.0% LIBOR floor, net of unamortized discount of $1,887 in 2016 and $2,034 in 2015 (7.25% at June 30, 2016)473,764
 476,966
Total indebtedness$743,464
 $730,566
TableOn February 25, 2016, Neff Holdings, Neff LLC and Neff Rental LLC (collectively, the “Credit Parties”), amended and restated the revolving credit facility (the “2016 Amendment and Restatement”).  The 2016 Amendment and Restatement, among other things, increased total maximum borrowing capacity from $425.0 million to $475.0 million, extended the maturity from November 20, 2018 to February 25, 2021, increased the amount that the Company could request (but the lenders under the revolving credit agreement have no obligation to provide) from $25.0 million to $100.0 million of Contentsincremental revolving loan commitments, reduced applicable margins applicable to loans and other credit extensions, modified excess availability requirements relating to cash dominion, and modified certain baskets, thresholds and ratios, including the consolidated total leverage ratio.

As of June 30, 2016, Neff Rental LLC and Neff LLC (subsidiaries of Neff Holdings) had an outstanding balance of $269.7 million under the senior secured revolving credit facility (the "Revolving Credit Facility"). Neff Rental LLC had $475.7 million of the second lien term loans (the "Second Lien Loan") outstanding as of June 30, 2016.

NEFF CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


NOTE 6—DEBT
Debt consisted of the following as of September 30, 2015 and December 31, 2014 (in thousands, except percent data):
 September 30, 2015 December 31, 2014
Revolving Credit Facility with interest ranging from the lender's prime rate plus up to 1.5% to LIBOR plus up to 2.5% (2.5% at September 30, 2015)$278,000
 $245,200
Second Lien Loan with interest of LIBOR plus 6.25%, with 1.0% LIBOR floor, net of unamortized discount of $2,102 in 2015 and $2,287 in 2014 (7.25% at September 30, 2015)476,898
 476,713
Total indebtedness$754,898
 $721,913
On October 1, 2010, Neff Rental LLC and Neff LLC (subsidiaries of Neff Holdings) entered into a senior secured revolving credit facility (the “Revolving Credit Facility”) as co-borrowers. The obligations under the Revolving Credit Facility are guaranteed by Neff Holdings. The Revolving Credit Facility is secured by a first priority security interest in substantially all of the Company’s assets. Interest on any base rate loans under the Revolving Credit Facility is due quarterly and interest on any LIBOR rate loans under the Revolving Credit Facility is due at three month intervals or, if shorter, at the end of the selected LIBOR period. Availability under the Revolving Credit Facility is subject to a borrowing base formula consisting of eligible accounts receivable and eligible rental fleet.

In May 2011, Neff Rental LLC and Neff Rental Finance Corp. (then a wholly-owned subsidiary of Neff Holdings), as co-issuers, completed a private offering of $200.0 million aggregate principal amount of 9.625% Senior Secured Notes (the “Senior Secured Notes”). The terms of the Senior Secured Notes were governed by an indenture. The obligations under the Senior Secured Notes were guaranteed by Neff Holdings and Neff LLC and were secured by a second priority security interest in substantially all of the Company’s assets. Interest on the Senior Secured Notes was payable in cash semi-annually in arrears on May 15 and November 15 of each year. The Senior Secured Notes maturity date was May 15, 2016. The Senior Secured Notes were repaid in full on June 9, 2014. Following the repayment of the Senior Secured Notes, Neff Rental Finance Corp. was dissolved on July 18, 2014.

On March 12, 2012, the Revolving Credit Facility was amended (the “March 2012 Amendment”). The March 2012 Amendment increased total borrowing capacity to $200.0 million, provided for a mechanism whereby the Company could request (but the lenders under the Revolving Credit Facility have no obligation to provide) up to $100.0 million of incremental revolving loan commitments under the Revolving Credit Facility, reduced applicable margins applicable to loans and other credit extensions, extended the maturity to the earlier of March 12, 2016 and ninety days prior to the maturity date of the Senior Secured Notes and modified the excess availability requirements relating to cash dominion and the implementation of certain financial covenants.

On October 25, 2012, the Revolving Credit Facility was amended (the “October 2012 Amendment”). The October 2012 Amendment increased total maximum borrowing capacity from $200.0 million to $225.0 million.

On November 20, 2013, the Revolving Credit Facility was amended and restated (the “2013 Amendment and Restatement”). Among other things, the 2013 Amendment and Restatement increased total maximum borrowing capacity from $225.0 million to $375.0 million and permitted the payment of a $110.0 million cash distribution to the members of Neff Holdings (the “2013 Distribution”), extended the maturity to the earlier of November 20, 2018 and ninety days prior to the maturity date of the Senior Secured Notes and modified the excess availability requirements relating to cash dominion and the implementation of certain financial covenants and covenants relating to appraisals and field audits. Following the repayment of the Senior Secured Notes, the maturity date of the Revolving Credit Facility is November 20, 2018.

On June 9, 2014, Neff Rental LLC entered into a second lien credit agreement (the “Second Lien Credit Agreement”) as borrower. Under the terms of the Second Lien Credit Agreement, Neff Rental LLC borrowed $575.0 million of second lien term loans (the “Second Lien Loan”).

The obligations under the Second Lien Credit Agreement are guaranteed by Neff Holdings and Neff LLC and are secured by a second priority security interest in substantially all of the Company’s assets. The Second Lien Loan included $2.9 million of original issue discount that is being amortized as interest expense over the term of the Second Lien Loan. The Second Lien Loan has a maturity date of June 9, 2021.



14
Table of Contents
NEFF CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


NOTE 6—DEBT (Continued)

The Company used the net proceeds from the Second Lien Loan to redeem the outstanding Senior Secured Notes, to pay a $329.9 million cash distribution to the members of Neff Holdings (the “June 2014 Distribution”), to pay incentive bonuses earned in connection with consummation of the refinancing (the "Refinancing") to management and certain members of Neff Holdings’ board of managers (the “Transaction Bonus”) and to pay fees and expenses. As a result of the repayment of the Senior Secured Notes, the Company recorded a loss on extinguishment of debt of $15.9 million (including $8.7 million of unamortized debt issue costs and $7.2 million for call premiums).

On June 9, 2014, in connection with entering into the Second Lien Credit Agreement and repayment of the Senior Secured Notes, the Revolving Credit Facility was further amended (the “June 2014 Amendment”). Among other things, the June 2014 Amendment increased total maximum borrowing capacity from $375.0 million to $425.0 million, permitted the payment of the June 2014 Distribution, permitted the payment of the Transaction Bonus, permitted the repayment of the Senior Secured Notes and modified the consolidated total leverage ratio covenant.

On October 14, 2014, the Revolving Credit Facility and Second Lien Loan were amended in anticipation of and conditional upon completion of the IPO (the "October 2014 Amendments"). The October 2014 Amendments, among other things, reflected the changes in the Company's structure as a result of the Organization Transactions and the IPO. The Company also prepaid $96.0 million of the principal amount of the Second Lien Loan with the net proceeds from the IPO.
Accumulated amortization at SeptemberJune 30, 20152016 for debt issue costs was $3.9$4.5 million and $0.8$1.3 million for the Revolving Credit Facility and Second Lien Loan, respectively. Accumulated amortization at December 31, 20142015 for debt issue costs was $3.2$4.1 million and $0.3$0.9 million for the Revolving Credit Facility and Second Lien Loan, respectively.

The Revolving Credit Facility and the Second Lien Credit AgreementLoan credit agreements contain various affirmative, negative and financial reporting covenants. The covenants, among other things, place restrictions on the Company’s ability to acquire and sell assets, incur additional indebtedness and prepay other indebtedness other than the Revolving Credit Facility. The Company is subject to certain financial covenants under its Revolving Credit Facility if availability declines below $42.5$47.5 million. The Company was in compliance with all financial covenants under the Revolving Credit Facility and the Second Lien Credit AgreementLoan credit agreements as of SeptemberJune 30, 2015.2016.
As of December 31, 2015, our total leverage ratio was 3.90. Under the terms of the Second Lien Loan, if the total leverage ratio is equal to or less than 4.00 to 1.00 but greater than 3.00 to 1.00 at the end of each fiscal year, the Company must make a mandatory prepayment equal to 25% of its excess cash flow. A mandatory prepayment of $3.3 million was made for the year ended December 31, 2015, during March 2016. The Company will determine whether any mandatory prepayments need to be made for the fiscal year ending December 31, 2016, after year end.

The Company had $3.7$3.9 million and $4.5$3.7 million in outstanding letters of credit at SeptemberJune 30, 20152016 and December 31, 2014,2015, respectively, that were primarily associated with its insurance coverage. As of SeptemberJune 30, 2015,2016, total availability under the Revolving Credit Facility was $143.2$201.2 million.
NOTE 7—EQUITY—BASED COMPENSATION
On November 7, 2014, the Company's board of directors adopted the Neff Corporation 2014 Incentive Award Plan (the "2014 Incentive Plan"). and reserved 1,500,000 shares of Class A common stock for issuance. The 2014 Incentive Plan became effective on November 7, 2014 and provides for the grant of options, restricted stock awards, performance awards, dividend equivalent awards, deferred stock awards, deferred stock unit awards, stock payment awards or stock appreciation rights to employees, consultants and directors of the Company.

For the three months ended SeptemberJune 30, 20152016 and 2014,2015, the Company recognized equity-based compensation expense of $0.2 million and $0.3 million, respectively.million. For the ninesix months ended SeptemberJune 30, 20152016 and 2014,2015, the Company recognized equity-based compensation expense of $0.9$1.1 million and $0.8$0.7 million, respectively. Each Common Unit held by Wayzata or acquired by individuals upon exercise of existing options granted by Neff Holdings will be redeemable, at the election of such member, for, at Neff Corporation's option, newly issued shares of Neff Corporation's Class A common stock on a 1-for-1 basis or for a cash payment equal to the market price of one share of Neff Corporation's Class A common stock.


The following table summarizes equity-based compensation activity for the six months ended June 30, 2016 (in thousands):
  Neff Corporation Neff Holdings
  RSUs Options Options
Balance as of January 1, 2016 243
 696
 1,265
Granted —
 —
 —
Exercised (44) —
 —
Forfeited —
 —
 —
Balance as of June 30, 2016 199
 696
 1,265
       
Vested —
 72
 1,265
Unvested 199
 624
 —
Total 199
 696
 1,265





15
TableAt June 30, 2016, there were 0.5 million additional shares of ContentsClass A common stock available for the Company to grant under the 2014 Incentive Plan.
NEFF CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


NOTE 7—EQUITY—BASED COMPENSATION (Continued)
The following table summarizes equity-based compensation activity for the nine months ended September 30, 2015 (in thousands):
  Neff Corporation Neff Holdings
  RSUs Options Options
Balance as of January 1, 2015 85
 270
 1,265
Granted 4
 19
 —
Exercised (18) —
 —
Forfeited —
 —
 —
Balance as of September 30, 2015 71
 289
 1,265
       
Vested —
 —
 1,261
Unvested 71
 289
 4
Total 71
 289
 1,265

At September 30, 2015, there were 1.1 million additional shares available for the Company to grant under the 2014 Incentive Plan.

NOTE 8—DERIVATIVE FINANCIAL INSTRUMENTS
On March 24, 2015, the Company entered into an interest rate swap (the "Interest Rate Swap"), effectively converting a portion of its variable rate debt into fixed rate debt. The Interest Rate Swap is not accounted for as a hedge and changes in fair value are included directly in the unaudited condensed consolidated statement of operations. The Company adjusts the accrued swap asset or liability by the amount of the monthly net settlement as settlements are made. Under the terms of the Interest Rate Swap, a monthly net settlement is made on approximately the 8th of each month for the difference between the fixed rate (see the fixed rate schedule below) and the variable rate, based upon the one month LIBOR rate on the notional amount of the Interest Rate Swap. The Interest Rate Swap has a notional amount of $200.0 million through April 8, 2020.
The fixed rate follows the schedule below:
April 8, 2015 to April 7, 20160.4726%
April 8, 2016 to April 9, 20171.1570%
April 10, 2017 to April 8, 20181.6810%
April 9, 2018 to April 7, 20191.9610%
April 8, 2019 to April 8, 20202.1430%
The Company's transactions in derivative financial instruments are authorized and executed pursuant to its regularly reviewed policies and procedures, which prohibit the use of derivative financial instruments for trading or speculative purposes.
For the three months ended SeptemberJune 30, 2015,2016, the Company recognized a loss on the Interest Rate Swap of $4.2$1.8 million which consisted of $4.1 million of unrealized losses related to the change in fair value of the Interest Rate Swap and a $0.1 million realized loss for the settlement payments made. The Company did not record a gain or loss on the Interest Rate Swap for the three months ended September 30, 2014. For the nine months ended September 30, 2015, the Company recognized a loss on the Interest Rate Swap of $4.1 million which consisted of $3.9$1.6 million of unrealized losses related to the change in fair value of the Interest Rate Swap and a $0.2 million realized loss for the settlement payments made. TheFor the three months ended June 30, 2015, the Company did not recordrecognized a gain oron the Interest Rate Swap of $1.0 million which consisted of $1.1 million of unrealized gains related to the change in fair value of the Interest Rate Swap and a $0.1 million realized loss for the settlement payments made.
For the six months ended June 30, 2016, the Company recognized a loss on the Interest Rate Swap of $6.5 million which consisted of $6.2 million of unrealized losses related to the change in fair value of the Interest Rate Swap and a $0.3 million related loss for the ninesettlement payments made. For the six months ended SeptemberJune 30, 2014.






16
Table2015, the Company recognized a gain on the Interest Rate Swap of Contents
NEFF CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


NOTE 8—DERIVATIVE FINANCIAL INSTRUMENTS (Continued)$0.1 million which consisted of $0.2 million of unrealized gains related to the change in fair value of the Interest Rate Swap and a $0.1 million realized loss for the settlement payments made.
The following tables provide details regarding the Company's derivative financial instruments (in thousands):
  For the Three Months Ended September 30, 2015 For the Three Months Ended September 30, 2014 For the Nine Months Ended September 30, 2015 For the Nine Months Ended September 30, 2014
  Loss Recognized in Earnings (a) Loss Recognized in Earnings Loss Recognized in Earnings (a) Loss Recognized in Earnings
Interest Rate Swap $4,216
 $—
 $4,097
 $—
  For the Three Months Ended June 30, For the Six Months Ended June 30,
  2016 2015 2016 2015
  Loss Recognized in Earnings (a) Gain Recognized in Earnings(a) Loss Recognized in Earnings (a) Gain Recognized in Earnings(a)
Interest Rate Swap $1,828
 $1,007
 $6,482
 $119

  September 30, 2015 December 31, 2014
  
Fair Value of
Derivative (b)
 
Fair Value of
Derivative
Interest Rate Swap (Note 9) $3,852
 $—
  June 30, 2016 December 31, 2015
  
Fair Value of
Derivative(b)
 
Fair Value of
Derivative(b)
Interest Rate Swap (Note 9) $8,063
 $1,880
 
(a)
Classified in Other expenses (income)—Loss (gain) on interest rate swap
(b)Classified in Liabilities—Accrued expenses and other liabilities
NOTE 9—FAIR VALUE DISCLOSURES
The carrying amounts for accounts receivable, accounts payable and accrued expenses and other liabilities approximate fair value due to their immediate to short-term maturity. The fair value of the Revolving Credit Facility and the Second Lien Loan approximate carrying value as of SeptemberJune 30, 20152016 and December 31, 2014,2015, as variable interest rates approximate market rates. The Company has classified these instruments in Level 2 of the fair value hierarchy.hierarchy as described below.

NEFF CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


NOTE 9—FAIR VALUE DISCLOSURES (Continued)
The Company used the following methods to measure the fair value of certain assets and liabilities:
Interest Rate Swap.   The Interest Rate Swap is valued utilizing pricing models taking into account inputs such as interest rates and notional amounts.
The FASB has established a framework for measuring fair value and requires that assets and liabilities measured at fair value be classified and disclosed in one of the following three categories:
Level 1: Quoted market prices in active markets for identical assets or liabilities
Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data
Level 3: Unobservable inputs that are not corroborated by market data
The following table provides fair value measurement information of the Company's financial liability measured on a recurring basis as of SeptemberJune 30, 20152016 (in thousands):
 Fair Value Measurements Using:
 Quoted Prices in Active Markets Observable Inputs Unobservable Inputs
 (Level 1) (Level 2) (Level 3)
Interest Rate Swap$—
 $3,852
 $—
 Fair Value Measurements Using:
 Quoted Prices in Active Markets Observable Inputs Unobservable Inputs
 (Level 1) (Level 2) (Level 3)
Interest Rate Swap$—
 $8,063
 $—
There were no transfers into or out of Level 1, 2 or 3 during the ninesix months ended SeptemberJune 30, 20152016 and 2014.2015.

17
Table of Contents
NEFF CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


NOTE 10—INCOME TAXES
Neff Corporation is required to file federal and applicable state corporate income tax returns and recognizes income taxes on its pre-tax income, which to date has consisted primarily of its share of Neff Holdings' pre-tax income. Neff Holdings is a limited liability company that is treated as a partnership for federal and state income tax purposes. Neff Holdings is not subject to income taxes for federal and state purposes. Rather, taxable income or loss is included in the respective federal and state income tax returns of Neff Holdings' members.
The components of provision for (benefit from) income taxes included in the unaudited condensed consolidated statements of operationsCompany's estimated annual effective tax rate for the three and nineyear ended December 31, 2016 is expected to be 15.6% before discrete items. The Company's consolidated effective tax rate for the six months ended SeptemberJune 30, 2015 and 2014 were as follows (in thousands):
 For the Three Months Ended September 30, 2015 For the Three Months Ended September 30, 2014 For the Nine Months Ended September 30, 2015 For the Nine Months Ended September 30, 2014
Current expense       
Federal$—
 $—
 $—
 $—
State and local(527) (4,848) (393) (4,610)
Total current expense$(527) $(4,848) $(393) $(4,610)
Deferred expense       
Federal$1,265
 $—
 $2,520
 $—
State and local(391) —
 (435) —
Total deferred expense874
 —
 2,085
 —
Total$347
 $(4,848) $1,692
 $(4,610)

2016, inclusive of discrete items is 11.4%. The following table summarizes4.2% difference in these rates is primarily attributable to a benefit related to the differences betweenspecial allocation of gain, to Wayzata, resulting from the statutory federal income tax rate andsale of equipment that had a built in gain at the Company’s effective income tax rate (percent data):

 For the Three Months Ended September 30, 2015 For the Three Months Ended September 30, 2014 For the Nine Months Ended September 30, 2015 For the Nine Months Ended September 30, 2014
U.S. federal statutory income tax rate35.0 % 35.0 % 35.0 % 35.0 %
Increase (decrease) in tax rate resulting from:       
State and local income taxes, net of federal benefit(1.2) —
 (0.3) —
Uncertain tax positions(5.9) (33.5) (2.0) 170.4
Permanent book/tax differences(2.7) —
 (7.9) —
Change in tax rate—
 —
 0.1
 —
Non-controlling interest(20.6) (35.0) (18.6) (35.0)
Other(1.2) —
 (0.6) —
Effective tax rate3.4 % (33.5)% 5.7 % 170.4 %







18
Table of Contents
NEFF CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


NOTE 10—INCOME TAXES (Continued)
The components of deferred income tax assets (liabilities) are as follows (in thousands):
 September 30, 2015 December 31, 2014
Deferred Tax Assets   
Net operating loss carryforwards$10,534
 $2,535
Provision for bad debt346
 336
Accrued liabilities592
 902
Equity-based compensation238
 139
Loss on interest rate swap606
 —
Insurance/parts reserves525
 543
Straight-line rent adjustment97
 100
Uncertain tax positions—
 104
Subtotal12,938
 4,659
Less: valuation allowance—
 —
Total deferred tax assets$12,938
 $4,659
Deferred Tax Liabilities   
Intangible assets$(3,310) $(2,841)
Deferred debt costs(333) (230)
Depreciation(16,785) (6,993)
Total deferred tax liabilities$(20,428) $(10,064)
    
Deferred Tax Liability, net$(7,490) $(5,405)

Management periodically assesses the recoverability of its deferred tax assets based upon expected future earnings, future deductibilitydate of the asset and changesIPO, in applicable tax laws and other factors. If management determines that it is not probable thataccordance with Section 704(c) of the Internal Revenue Code (Note 3) reduced by the deferred tax asset will be fully recoverable inimpact resulting from the future, a valuation allowance may be established for the difference between the asset balance and the amount expected to be recoverable in the future. The allowance will result in a charge to the Company’s unaudited condensed consolidated statements of operations. Based on management’s assessment of the available positive and negative evidence, including future reversal of taxable temporary differences, we believe it is more likely than not that the deferred tax assets will be realized.
On October 1, 2010, Neff Holdings purchased substantially all of the assetsreduction of Neff Holdings Corp. and certain of its affiliates (collectively, the "Predecessor")Corporation's interest in connection with the Predecessor's bankruptcy cases under Chapter 11 of Title 11 of the United States Bankruptcy Code (the "Acquisition").
In connection with the Acquisition, uncertain tax liabilities were assumed by Neff Holdings and are recorded in the Company's accrued expenses as of December 31, 2014. As a taxable entity, the Company recognizes tax benefits for uncertain tax positions only if it is more likely than not that the position is sustainable based on its technical merits. At December 31, 2014, the amount of uncertain tax positions recorded in accrued expenses was approximately $0.4 million. There were no uncertain tax positions as of September 30, 2015.Holdings.
The Company's practice is to recognize interest and penalties on uncertain tax positions in income tax expense. The Company recognized accrued interest and penalties of $0.3 million as of December 31, 2014. During the third quarter of 2015, as a result of the expiration of statute of limitations, the Company reversed $0.4 million and $0.3 million in uncertain tax positions and interest and penalties, respectively. During the third quarter of 2014, as a result of the expiration of statute of limitations, the Company reversed $3.2 million and $1.7 million in uncertain tax positions and interest and penalties, respectively.

19
Table of Contents
NEFF CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


NOTE 11—SUBSEQUENT EVENTS

On November 10, 2015, the Company’s board of directors authorized a share repurchase program pursuant to which the Company may purchase shares of its Class A common stock. Under the share repurchase program, the Company may acquire up to $25.0 million of shares of Class A common stock in open market and negotiated purchases from time to time, dependent upon market conditions.

The repurchases will be subject to market conditions, applicable legal requirements, the ability of the Company to receive restricted payments from its operating subsidiaries, and other factors. The share repurchase program does not obligate the Company to acquire any minimum amount of common stock, and the program may be modified, limited, extended, suspended or terminated at any time at the Company’s discretion without prior notice. The Company currently expects that repurchases under the program will be made in compliance with the SEC's Rule 10b-18.


20
Table of contents



NEFF CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET
SEPTEMBERJUNE 30, 20152016
(in thousands)
Neff Rental LLC Neff LLC Neff Holdings LLC Neff Corporation Eliminations TotalNeff Rental LLC Neff LLC Neff Holdings LLC Neff Corporation Stand Alone Eliminations Neff Corporation
ASSETS                      
                      
Cash and cash equivalents$230
 $—
 $—
 $2
 $—
 $232
$263
 $—
 $—
 $—
 $—
 $263
Accounts receivable, net60,869
 —
 —
 —
 —
 60,869
61,994
 —
 —
 —
 —
 61,994
Inventories2,244
 —
 —
 —
 —
 2,244
2,066
 —
 —
 —
 —
 2,066
Rental equipment, net468,534
 —
 —
 —
 —
 468,534
488,388
 —
 —
 —
 —
 488,388
Property and equipment, net34,637
 —
 —
 —
 —
 34,637
36,825
 —
 —
 —
 —
 36,825
Prepaid expenses and other assets15,429
 —
 —
 —
 —
 15,429
16,213
 —
 —
 —
 —
 16,213
Goodwill58,765
 —
 —
 —
 —
 58,765
60,644
 —
 —
 —
 —
 60,644
Investment in subsidiary—
 52,688
 52,688
 160,841
 (266,217) —
—
 78,793
 78,793
 162,387
 (319,973) —
Intercompany6,490
 —
 —
 (6,490) —
 —
6,488
 —
 —
 (6,488) —
 —
Intangible assets, net15,635
 —
 —
 —
 —
 15,635
14,781
 —
 —
 —
 —
 14,781
Total assets$662,833
 $52,688
 $52,688
 $154,353
 $(266,217) $656,345
$687,662
 $78,793
 $78,793
 $155,899
 $(319,973) $681,174
                      
LIABILITIES AND STOCKHOLDERS' DEFICIT / MEMBERS' DEFICIT
                      
Liabilities                      
Accounts payable$9,338
 $—
 $—
 $—
 $—
 $9,338
$23,324
 $—
 $—
 $—
 $—
 $23,324
Accrued expenses and other liabilities33,555
 —
 —
 —
 —
 33,555
38,692
 —
 —
 —
 —
 38,692
Revolving credit facility278,000
 —
 —
 —
 —
 278,000
269,700
 —
 —
 —
 —
 269,700
Second lien loan, net476,898
 —
 —
 —
 —
 476,898
473,764
 —
 —
 —
 —
 473,764
Payable pursuant to tax receivable agreement—
 —
 —
 29,081
 —
 29,081
—
 —
 —
 29,809
 —
 29,809
Deferred tax liability, net—
 —
 —
 7,490
 —
 7,490
—
 —
 —
 8,957
 —
 8,957
Total liabilities797,791
 —
 —
 36,571
 —
 834,362
$805,480
 $—
 $—
 $38,766
 $—
 $844,246
                      
Stockholders' deficit / members' deficit                      
Class A Common Stock—
 —
 —
 105
 —
 105
$—
 $—
 $—
 $90
 $—
 $90
Class B Common Stock—
 —
 —
 150
 —
 150
—
 —
 —
 150
 —
 150
Additional paid-in capital—
 —
 —
 34,576
 (146,143) (111,567)—
 —
 —
 27,437
 (146,143) (118,706)
Retained earnings—
 —
 —
 13,153
 —
 13,153
—
 —
 —
 19,658
 —
 19,658
Members' deficit(187,646) —
 —
 —
 187,646
 —
(196,611) —
 —
 —
 196,611
 —
Accumulated surplus52,688
 52,688
 52,688
 —
 (158,064) —
78,793
 78,793
 78,793
 —
 (236,379) —
Total stockholders' deficit / members' deficit(134,958) 52,688
 52,688
 47,984
 (116,561) (98,159)(117,818) 78,793
 78,793
 47,335
 (185,911) (98,808)
Non-controlling interest—
 —
 —
 69,798
 (149,656) (79,858)—
 —
 —
 69,798
 (134,062) (64,264)
Total stockholders' deficit / members' deficit and non-controlling interest(134,958) 52,688
 52,688
 117,782
 (266,217) (178,017)(117,818) 78,793
 78,793
 117,133
 (319,973) (163,072)
Total liabilities and stockholders' deficit / members' deficit and non-controlling interest$662,833
 $52,688
 $52,688
 $154,353
 $(266,217) $656,345
$687,662
 $78,793
 $78,793
 $155,899
 $(319,973) $681,174

21
Table of contents



NEFF CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 20142015
(in thousands)
Neff Rental LLC Neff LLC Neff Holdings LLC Neff Corporation Eliminations TotalNeff Rental LLC Neff LLC Neff Holdings LLC Neff Corporation Stand Alone Eliminations Neff Corporation
ASSETS          

           
                      
Cash and cash equivalents$205
 $—
 $—
 $2
 $—
 $207
$287
 $—
 $—
 $2
 $—
 $289
Accounts receivable, net66,375
 —
 —
 —
 —
 66,375
70,328
 —
 —
 —
 —
 70,328
Inventories2,005
 —
 —
 —
 —
 2,005
1,766
 —
 —
 —
 —
 1,766
Rental equipment, net420,245
 —
 —
 —
 —
 420,245
457,470
 —
 —
 —
 —
 457,470
Property and equipment, net30,210
 —
 —
 —
 —
 30,210
33,473
 —
 —
 —
 —
 33,473
Prepaid expenses and other assets16,959
 —
 —
 —
 —
 16,959
14,488
 —
 —
 —
 —
 14,488
Goodwill58,765
 —
 —
 —
 —
 58,765
60,599
 —
 —
 —
 —
 60,599
Investment in subsidiary—
 25,627
 25,627
 148,791
 (200,045) —
—
 67,427
 67,427
 166,406
 (301,260) —
Intercompany6,206
 —
 —
 (6,206) —
 —
6,490
 —
 —
 (6,490) —
 —
Intangible assets, net16,600
 —
 —
 —
 —
 16,600
15,314
 —
 —
 —
 —
 15,314
Total assets$617,570
 $25,627
 $25,627
 $142,587
 $(200,045) $611,366
$660,215
 $67,427
 $67,427
 $159,918
 $(301,260) $653,727
                      
LIABILITIES AND STOCKHOLDERS' DEFICIT / MEMBERS' DEFICIT
                      
Liabilities                      
Accounts payable$27,389
 $—
 $—
 $—
 $—
 $27,389
$18,948
 $—
 $—
 $—
 $—
 $18,948
Accrued expenses and other liabilities31,188
 —
 —
 15
 —
 31,203
31,412
 —
 —
 —
 —
 31,412
Revolving credit facility245,200
 —
 —
 —
 —
 245,200
253,600
 —
 —
 —
 —
 253,600
Second lien loan, net476,713
 —
 —
 —
 —
 476,713
476,966
 —
 —
 —
 —
 476,966
Payable pursuant to tax receivable agreement—
 —
 —
 31,557
 —
 31,557
—
 —
 —
 29,133
 —
 29,133
Deferred tax liability, net—
 —
 —
 5,405
 —
 5,405
—
 —
 —
 9,458
 —
 9,458
Total liabilities780,490
 —
 —
 36,977
 —
 817,467
$780,926
 $—
 $—
 $38,591
 $—
 $819,517
                      
Stockholders' deficit / members' deficit                      
Class A Common Stock—
 —
 —
 105
 —
 105
$—
 $—
 $—
 $104
 $—
 $104
Class B Common Stock—
 —
 —
 150
 —
 150
—
 —
 —
 150
 —
 150
Additional paid-in capital—
 —
 —
 33,958
 (146,143) (112,185)—
 —
 —
 34,085
 (146,143) (112,058)
Retained earnings—
 —
 —
 1,599
 —
 1,599
—
 —
 —
 17,190
 —
 17,190
Members' deficit(188,547) —
 —
 —
 188,547
 —
(188,138) —
 —
 —
 188,138
 —
Accumulated surplus25,627
 25,627
 25,627
 —
 (76,881) —
67,427
 67,427
 67,427
 —
 (202,281) —
Total stockholders' deficit / members' deficit(162,920) 25,627
 25,627
 35,812
 (34,477) (110,331)(120,711) 67,427
 67,427
 51,529
 (160,286) (94,614)
Non-controlling interest—
 —
 —
 69,798
 (165,568) (95,770)—
 —
 —
 69,798
 (140,974) (71,176)
Total stockholders' deficit / members' deficit and non-controlling interest(162,920) 25,627
 25,627
 105,610
 (200,045) (206,101)(120,711) 67,427
 67,427
 121,327
 (301,260) (165,790)
Total liabilities and stockholders' deficit / members' deficit and non-controlling interest$617,570
 $25,627
 $25,627
 $142,587
 $(200,045) $611,366
$660,215
 $67,427
 $67,427
 $159,918
 $(301,260) $653,727





22
Table of contents



NEFF CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBERJUNE 30, 20152016
(in thousands)
Neff Rental LLC Neff LLC Neff Holdings LLC Neff Corporation Eliminations TotalNeff Rental LLC Neff LLC Neff Holdings LLC Neff Corporation Stand Alone Eliminations Neff Corporation
Revenues                      
Rental revenues$90,532
 $—
 $—
 $—
 $—
 $90,532
$91,474
 $—
 $—
 $—
 $—
 $91,474
Equipment sales5,559
 —
 —
 —
 —
 5,559
4,941
 —
 —
 —
 —
 4,941
Parts and service3,333
 —
 —
 —
 —
 3,333
3,245
 —
 —
 —
 —
 3,245
Total revenues99,424
 —
 —
 —
 —
 99,424
99,660
 —
 —
 —
 —
 99,660
Cost of revenues                      
Cost of equipment sold3,474
 —
 —
 —
 —
 3,474
2,963
 —
 —
 —
 —
 2,963
Depreciation of rental equipment21,553
 —
 —
 —
 —
 21,553
22,761
 —
 —
 —
 —
 22,761
Cost of rental revenues21,186
 —
 —
 —
 —
 21,186
21,675
 —
 —
 —
 —
 21,675
Cost of parts and service1,964
 —
 —
 —
 —
 1,964
1,799
 —
 —
 —
 —
 1,799
Total cost of revenues48,177
 —
 —
 —
 —
 48,177
49,198
 —
 —
 —
 —
 49,198
Gross profit51,247
 —
 —
 —
 —
 51,247
50,462
 —
 —
 —
 —
 50,462
Other operating expenses                      
Selling, general and administrative expenses22,852
 —
 —
 —
 —
 22,852
23,387
 —
 —
 —
 —
 23,387
Other depreciation and amortization2,678
 —
 —
 —
 —
 2,678
2,594
 —
 —
 —
 —
 2,594
Total other operating expenses25,530
 —
 —
 —
 —
 25,530
25,981
 —
 —
 —
 —
 25,981
Income from operations25,717
 —
 —
 —
 —
 25,717
24,481
 —
 —
 —
 —
 24,481
Other expenses                      
Interest expense10,907
 —
 —
 —
 —
 10,907
10,476
 —
 —
 —
 —
 10,476
Adjustment to tax receivable agreement—
 —
 —
 411
 —
 411
—
 —
 —
 262
 —
 262
Loss on interest rate swap4,216
 —
 —
 —
 —
 4,216
1,828
 —
 —
 —
 —
 1,828
Amortization of debt issue costs392
 —
 —
 —
 —
 392
370
 —
 —
 —
 —
 370
Total other expenses15,515
 —
 —
 411
 —
 15,926
12,674
 —
 —
 262
 —
 12,936
Income (loss) before income taxes10,202
 —
 —
 (411) —
 9,791
11,807
 —
 —
 (262) —
 11,545
Equity earnings in subsidiaries—
 10,608
 10,608
 4,370
 (25,586) —
—
 11,757
 11,757
 4,438
 (27,952) —
Benefit from (provision for) income taxes406
 —
 —
 (753) —
 (347)
Provision for income taxes(50) —
 —
 (1,556) —
 (1,606)
Net income10,608
 10,608
 10,608
 3,206
 (25,586) 9,444
11,757
 11,757
 11,757
 2,620
 (27,952) 9,939
Less: net income attributable to non-controlling interest6,238
 6,238
 6,238
 —
 (12,476) 6,238
—
 —
 7,319
 —
 —
 7,319
Net income attributable to Neff Corporation$4,370
 $4,370
 $4,370
 $3,206
 $(13,110) $3,206
$11,757
 $11,757
 $4,438
 $2,620
 $(27,952) $2,620

23
Table of contents



NEFF CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE NINETHREE MONTHS ENDED SEPTEMBERJUNE 30, 2015
(in thousands)
Neff Rental LLC Neff LLC Neff Holdings LLC Neff Corporation Eliminations TotalNeff Rental LLC Neff LLC Neff Holdings LLC Neff Corporation Stand Alone Eliminations Neff Corporation
Revenues                      
Rental revenues$249,493
 $—
 $—
 $—
 $—
 $249,493
$84,820
 $—
 $—
 $—
 $—
 $84,820
Equipment sales18,520
 —
 —
 —
 —
 18,520
6,174
 —
 —
 —
 —
 6,174
Parts and service9,724
 —
 —
 —
 —
 9,724
3,233
 —
 —
 —
 —
 3,233
Total revenues277,737
 —
 —
 —
 —
 277,737
94,227
 —
 —
 —
 —
 94,227
Cost of revenues                      
Cost of equipment sold11,864
 —
 —
 —
 —
 11,864
4,058
 —
 —
 —
 —
 4,058
Depreciation of rental equipment62,280
 —
 —
 —
 —
 62,280
21,213
 —
 —
 —
 —
 21,213
Cost of rental revenues58,556
 —
 —
 —
 —
 58,556
19,511
 —
 —
 —
 —
 19,511
Cost of parts and service5,534
 —
 —
 —
 —
 5,534
1,807
 —
 —
 —
 —
 1,807
Total cost of revenues138,234
 —
 —
 —
 —
 138,234
46,589
 —
 —
 —
 —
 46,589
Gross profit139,503
 —
 —
 —
 —
 139,503
47,638
 —
 —
 —
 —
 47,638
Other operating expenses                      
Selling, general and administrative expenses67,610
 —
 —
 —
 —
 67,610
22,468
 —
 —
 —
 —
 22,468
Other depreciation and amortization7,796
 —
 —
 —
 —
 7,796
2,657
 —
 —
 —
 —
 2,657
Total other operating expenses75,406
 —
 —
 —
 —
 75,406
25,125
 —
 —
 —
 —
 25,125
Income from operations64,097
 —
 —
 —
 —
 64,097
22,513
 —
 —
 —
 —
 22,513
Other expenses (income)                      
Interest expense32,174
 —
 —
 —
 —
 32,174
10,753
 —
 —
 —
 —
 10,753
Adjustment to tax receivable agreement—
 —
 —
 (2,476) —
 (2,476)—
 —
 —
 (3,408) —
 (3,408)
Loss on interest rate swap4,097
 —
 —
 —
 —
 4,097
Gain on interest rate swap(1,007) —
 —
 —
 —
 (1,007)
Amortization of debt issue costs1,144
 —
 —
 —
 —
 1,144
381
 —
 —
 —
 —
 381
Total other expenses (income)37,415
 —
 —
 (2,476) —
 34,939
10,127
 —
 —
 (3,408) —
 6,719
Income before income taxes26,682
 —
 —
 2,476
 —
 29,158
12,386
 —
 —
 3,408
 —
 15,794
Equity earnings in subsidiaries—
 27,061
 27,061
 11,149
 (65,271) —
—
 12,373
 12,373
 5,098
 (29,844) —
Benefit from (provision for) income taxes379
 —
 —
 (2,071) —
 (1,692)
Provision for income taxes(13) —
 —
 (1,087) —
 (1,100)
Net income27,061
 27,061
 27,061
 11,554
 (65,271) 27,466
12,373
 12,373
 12,373
 7,419
 (29,844) 14,694
Less: net income attributable to non-controlling interest15,912
 15,912
 15,912
 —
 (31,824) 15,912
7,275
 7,275
 7,275
 —
 (14,550) 7,275
Net income attributable to Neff Corporation$11,149
 $11,149
 $11,149
 $11,554
 $(33,447) $11,554
$5,098
 $5,098
 $5,098
 $7,419
 $(15,294) $7,419

24
Table of contents



NEFF CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2016
(in thousands)
 Neff Rental LLC Neff LLC Neff Holdings LLC Neff Corporation Stand Alone Eliminations Neff Corporation
Revenues           
Rental revenues$172,651
 $—
 $—
 $—
 $—
 $172,651
Equipment sales10,043
 —
 —
 —
 —
 10,043
Parts and service6,550
 —
 —
 —
 —
 6,550
Total revenues189,244
 —
 —
 —
 —
 189,244
Cost of revenues           
Cost of equipment sold6,074
 —
 —
 —
 —
 6,074
Depreciation of rental equipment44,926
 —
 —
 —
 —
 44,926
Cost of rental revenues41,608
 —
 —
 —
 —
 41,608
Cost of parts and service3,604
 —
 —
 —
 —
 3,604
Total cost of revenues96,212
 —
 —
 —
 —
 96,212
Gross profit93,032
 —
 —
 —
 —
 93,032
Other operating expenses           
Selling, general and administrative expenses47,909
 —
 —
 —
 —
 47,909
Other depreciation and amortization5,335
 —
 —
 —
 —
 5,335
Total other operating expenses53,244
 —
 —
 —
 —
 53,244
Income from operations39,788
 —
 —
 —
 —
 39,788
Other expenses           
Interest expense21,125
 —
 —
 —
 —
 21,125
Adjustment to tax receivable agreement—
 —
 —
 676
 —
 676
Loss on interest rate swap6,482
 —
 —
 —
 —
 6,482
Amortization of debt issue costs765
 —
 —
 —
 —
 765
Total other expenses28,372
 —
 —
 676
 —
 29,048
Income (loss) before income taxes11,416
 —
 —
 (676) —
 10,740
Equity earnings in subsidiaries—
 11,366
 11,366
 4,316
 (27,048) —
Provision for income taxes(50) —
 —
 (1,172) —
 (1,222)
Net income11,366
 11,366
 11,366
 2,468
 (27,048) 9,518
Less: net income attributable to non-controlling interest—
 —
 7,050
 —
 —
 7,050
Net income attributable to Neff Corporation$11,366
 $11,366
 $4,316
 $2,468
 $(27,048) $2,468
Table of contents



NEFF CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2015
(in thousands)
 Neff Rental LLC Neff LLC Neff Holdings LLC Neff Corporation Stand Alone Eliminations Neff Corporation
Revenues           
Rental revenues$158,961
 $—
 $—
 $—
 $—
 $158,961
Equipment sales12,961
 —
 —
 —
 —
 12,961
Parts and service6,391
 —
 —
 —
 —
 6,391
Total revenues178,313
 —
 —
 —
 —
 178,313
Cost of revenues           
Cost of equipment sold8,390
 —
 —
 —
 —
 8,390
Depreciation of rental equipment40,727
 —
 —
 —
 —
 40,727
Cost of rental revenues37,370
 —
 —
 —
 —
 37,370
Cost of parts and service3,570
 —
 —
 —
 —
 3,570
Total cost of revenues90,057
 —
 —
 —
 —
 90,057
Gross profit88,256
 —
 —
 —
 —
 88,256
Other operating expenses           
Selling, general and administrative expenses44,758
 —
 —
 —
 —
 44,758
Other depreciation and amortization5,118
 —
 —
 —
 —
 5,118
Total other operating expenses49,876
 —
 —
 —
 —
 49,876
Income from operations38,380
 —
 —
 —
 —
 38,380
Other expenses (income)           
Interest expense21,267
 —
 —
 —
 —
 21,267
Adjustment to tax receivable agreement—
 —
 —
 (2,887) —
 (2,887)
Gain on interest rate swap(119) —
 —
 —
 —
 (119)
Amortization of debt issue costs752
 —
 —
 —
 —
 752
Total other expenses (income)21,900
 —
 —
 (2,887) —
 19,013
Income before income taxes16,480
 —
 —
 2,887
 —
 19,367
Equity earnings in subsidiaries—
 16,453
 16,453
 6,779
 (39,685) —
Provision for income taxes(27) —
 —
 (1,318) —
 (1,345)
Net income16,453
 16,453
 16,453
 8,348
 (39,685) 18,022
Less: net income attributable to non-controlling interest9,674
 9,674
 9,674
 —
 (19,348) 9,674
Net income attributable to Neff Corporation$6,779
 $6,779
 $6,779
 $8,348
 $(20,337) $8,348

Table of contents



NEFF CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 2015

2016
(in thousands)
Neff Rental LLC Neff LLC Neff Holdings LLC Neff Corporation Eliminations TotalNeff Rental LLC Neff LLC Neff Holdings LLC Neff Corporation Stand Alone Eliminations Neff Corporation
Cash Flows from Operating Activities                      
Net income$27,061
 $27,061
 $27,061
 $11,554
 $(65,271) $27,466
$11,366
��$11,366
 $11,366
 $2,468
 $(27,048) $9,518
Adjustments to reconcile net income to net cash provided by (used in) operating activities:           
Adjustments to reconcile net income to net cash provided by operating activities:           
Depreciation69,111
 —
 —
 —
 —
 69,111
49,726
 —
 —
 —
 —
 49,726
Amortization of debt issue costs1,144
 —
 —
 —
 —
 1,144
765
 —
 —
 —
 —
 765
Amortization of intangible assets965
 —
 —
 —
 —
 965
535
 —
 —
 —
 —
 535
Amortization of original issue discount185
 —
 —
 —
 —
 185
147
 —
 —
 —
 —
 147
Gain on sale of equipment(6,656) —
 —
 —
 —
 (6,656)(3,969) —
 —
 —
 —
 (3,969)
Provision for bad debt1,431
 —
 —
 —
 —
 1,431
862
 —
 —
 —
 —
 862
Equity-based compensation901
 —
 —
 —
 —
 901
1,098
 —
 —
 —
 —
 1,098
Deferred income taxes—
 —
 —
 2,085
 —
 2,085
50
 —
 —
 1,172
 —
 1,222
Adjustment to tax receivable agreement—
 —
 —
 (2,476) —
 (2,476)—
 —
 —
 676
 —
 676
Unrealized loss on interest rate swap3,852
 —
 —
 —
 —
 3,852
6,183
 —
 —
 —
 —
 6,183
Equity earnings in subsidiaries—
 (27,061) (27,061) (11,149) 65,271
 —
—
 (11,366) (11,366) (4,316) 27,048
 —
Changes in operating assets and liabilities:                      
Accounts receivable4,075
 —
 —
 —
 —
 4,075
7,472
 —
 —
 —
 —
 7,472
Inventories, prepaid expenses and other assets147
 —
 —
 —
 —
 147
(1,267) —
 —
 —
 —
 (1,267)
Accounts payable(1,271) —
 —
 —
 —
 (1,271)(324) —
 —
 —
 —
 (324)
Accrued expenses and other liabilities(1,255) —
 —
 (15) —
 (1,270)882
 —
 —
 —
 —
 882
Net cash provided by (used in) operating activities99,690
 —
 —
 (1) —
 99,689
Net cash provided by operating activities73,526
 —
 —
 —
 —
 73,526
Cash Flows from Investing Activities                      
Purchases of rental equipment(138,959) —
 —
 —
 —
 (138,959)(76,557) —
 —
 —
 —
 (76,557)
Proceeds from sale of equipment18,520
 —
 —
 —
 —
 18,520
10,043
 —
 —
 —
 —
 10,043
Purchases of property and equipment(11,742) —
 —
 —
 —
 (11,742)(8,648) —
 —
 —
 —
 (8,648)
Net cash used in investing activities(132,181) —
 —
 —
 —
 (132,181)(75,162) —
 —
 —
 —
 (75,162)
Cash Flows from Financing Activities                      
Repayments under revolving credit facility(95,239) —
 —
 —
 —
 (95,239)(66,400) —
 —
 —
 —
 (66,400)
Borrowings under revolving credit facility128,039
 —
 —
 —
 —
 128,039
82,500
 —
 —
 —
 —
 82,500
Payment of costs directly associated with the issuance of Class A common stock—
 —
 —
 (283) —
 (283)
Debt issue costs(1,570) —
 —
 —
 —
 (1,570)
Common stock repurchases—
 —
 —
 (9,433) —
 (9,433)
Common unit sales/repurchases(9,433) —
 —
 9,433
 —
 —
Second Lien Loan prepayment(3,349) —
 —
 —
 —
 (3,349)
Distribution to member(138) —
 —
 —
 —
 (138)
Intercompany(284) —
 —
 284
 —
 —
2
 —
 —
 (2) —
 —
Net cash provided by financing activities32,516
 —
 —
 1
 —
 32,517
Net increase in cash and cash equivalents25
 —
 —
 —
 —
 25
Net cash provided by (used in) financing activities1,612
 —
 —
 (2) —
 1,610
Net decrease in cash and cash equivalents(24) —
 —
 (2) —
 (26)
Cash and cash equivalents, beginning of period205
 —
 —
 2
 —
 207
287
 —
 —
 2
 —
 289
Cash and cash equivalents, end of period$230
 $—
 $—
 $2
 $—
 $232
$263
 $—
 $—
 $—
 $—
 $263


25Table of contents



NEFF CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2015
(in thousands)
 Neff Rental LLC Neff LLC Neff Holdings LLC Neff Corporation Stand Alone Eliminations Neff Corporation
Cash Flows from Operating Activities           
Net income$16,453
 $16,453
 $16,453
 $8,348
 $(39,685) $18,022
Adjustments to reconcile net income to net cash provided by (used in) operating activities:           
Depreciation45,202
 —
 —
 —
 —
 45,202
Amortization of debt issue costs752
 —
 —
 —
 —
 752
Amortization of intangible assets643
 —
 —
 —
 —
 643
Amortization of original issue discount120
 —
 —
 —
 —
 120
Gain on sale of equipment(4,571) —
 —
 —
 —
 (4,571)
Provision for bad debt825
 —
 —
 —
 —
 825
Equity-based compensation674
 —
 —
 —
 —
 674
Deferred income taxes—
 —
 —
 1,212
 —
 1,212
Adjustment to tax receivable agreement—
 —
 —
 (2,887) —
 (2,887)
Unrealized gain on interest rate swap(218) —
 —
 —
 —
 (218)
Equity earnings in subsidiaries—
 (16,453) (16,453) (6,779) 39,685
 —
Changes in operating assets and liabilities:           
Accounts receivable6,060
 —
 —
 —
 —
 6,060
Inventories, prepaid expenses and other assets(955) —
 —
 —
 —
 (955)
Accounts payable(2,271) —
 —
 —
 —
 (2,271)
Accrued expenses and other liabilities(2,010) —
 —
 105
 —
 (1,905)
Net cash provided by (used in) operating activities60,704
 —
 —
 (1) —
 60,703
Cash Flows from Investing Activities           
Purchases of rental equipment(111,095) —
 —
 —
 —
 (111,095)
Proceeds from sale of equipment12,961
 —
 —
 —
 —
 12,961
Purchases of property and equipment(10,068) —
 —
 —
 —
 (10,068)
Net cash used in investing activities(108,202) —
 —
 —
 —
 (108,202)
Cash Flows from Financing Activities           
Repayments under revolving credit facility(53,111) —
 —
 —
 —
 (53,111)
Borrowings under revolving credit facility100,911
 —
 —
 —
 —
 100,911
Payment of costs directly associated with the issuance of Class A common stock—
 —
 —
 (283) —
 (283)
Intercompany(284) —
 —
 284
 —
 —
Net cash provided by financing activities47,516
 —
 —
 1
 —
 47,517
Net increase in cash and cash equivalents18
 —
 —
 —
 —
 18
Cash and cash equivalents, beginning of period205
 —
 —
 2
 —
 207
Cash and cash equivalents, end of period$223
 $—
 $—
 $2
 $—
 $225

Table of contents



Item 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read together with the unaudited condensed consolidated financial statements and notes thereto included elsewhere in this quarterly report on Form 10-Q. The historical financial data discussed below reflects the historical results of operations and financial condition of Neff Holdings and its consolidated subsidiaries prior to Neff Corporation’s IPO completed on November 26, 2014 and Neff Corporation and its consolidated subsidiaries, including Neff Holdings and Neff Holdings' subsidiaries, Neff LLC and Neff Rental LLC, subsequent to the IPO. In addition, the statements in this discussion and analysis regarding industry outlook, our expectations regarding the performance of our business, our expected tax rate and benefits and estimated amounts payable pursuant to the Tax Receivable Agreement, liquidity, expected capital expenditures, anticipated future indebtedness or financings and other non-historical statements are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in "Risk Factors" set forth in our 20142015 10-K for the year ended December 31, 2014.2015. Our actual results may differ materially from those contained in or implied by any forward-looking statements.
Overview
We are a leading regional equipment rental company in the United States, focused on the fast-growing Sunbelt states. We offer a broad array of equipment rental solutions for our diverse customer base, including infrastructure, non-residential construction, oil and gas, municipal and residential construction customers. Our broad fleet of equipment includes earthmoving, material handling, aerial and other related rental equipment, which we package together to meet the specific needs of our customers. We consider the earthmoving equipment category to be a core competency of our Company and a key differentiator of our business.
Our revenues are affected primarily by the time utilization of the equipment in our rental fleet, the rental rates we can charge for that equipment and the amount of equipment we have in our fleet available for rent. See "—Key Performance Measures" for definitions of time utilization and rental rates. We generate revenues from the following three sources:
Rental revenues—this consists of rental revenues and related revenues such as the fees we charge for the pickup and delivery of equipment, damage waivers and other surcharges.
Equipment sales—this consists primarily of revenues from the sale of our used rental equipment and also includes sales of ancillary new equipment to our customers.
Parts and service—this includes revenues from customers for fuel and the repair of damaged rental equipment as well as from the sale of complementary parts, supplies and merchandise to our customers in conjunction with our equipment rental business.
Seasonality and Other External Factors That Affect Our Business
Our operating results are subject to annual and seasonal fluctuations resulting from a variety of factors, including:
the seasonality of rental activity by our customers, with lower activity levels during the winter;
the cyclicality of the construction industry;
the number of our significant competitors and the competitive supply of rental equipment;
general economic conditions; and
the price of oil and other commodities and other general economic trends impacting the industries in which our customers and end users operate.
In addition, our operating results may be affected by severe weather events and seismic conditions (such as hurricanes, tornadoes, flooding and flooding)earthquakes) in the regions we serve. Severe weather events can result in short-term reductions in construction activity levels, but after these periods of reduced construction activity, repair and reconstruction efforts have historically resulted in periods of increased demand for rental equipment.
Financial Highlights
For the past several years, we have executed a strategy focused on improving the profitability of our core rental business through revenue growth, a focus on operating leverage and margin expansion. In particular, we have focused on maximizing returns from improving construction activity in the markets we operate in by increasing rental rates and by increasing the amount of rental equipment in our existing network of 68 branch locations. While our net income decreased 47.2% to $9.5 million for the six months ended June 30, 2016 as compared to the prior year, our Adjusted EBITDA (as defined below) increased 7.0% to $92.0 million for the six months ended June 30, 2016 as compared to the prior year.

26
Table of contents



of rental equipment in our existing network of 64 branch locations. As a result, our Adjusted EBITDA (as defined below) increased 2.6% to $136.8 million for the nine months ended September 30, 2015 as compared to the prior year.

"EBITDA" is defined as net income (loss) plus interest expense, provision for (benefit from) income taxes, depreciation of rental equipment, other depreciation and amortization and amortization of debt issue costs. "Adjusted EBITDA" is defined as EBITDA further adjusted to give effect to non-cash items and other items that we do not consider to be indicative of our ongoing operations.operations, including for the periods presented rental split expense, equity-based compensation, adjustment to tax receivable agreement and loss (gain) on interest rate swap. EBITDA and Adjusted EBITDA isare not a measuremeasures of performance in accordance with US GAAP and should not be considered as an alternative to net income (loss) or operating cash flows determined in accordance with US GAAP. Additionally, EBITDA and Adjusted EBITDA isare not intended to be a measuremeasures of cash flow for management's discretionary use, as it excludesthey exclude certain cash requirements such as interest payments, tax payments and debt service requirements. We believe that the inclusion of EBITDA and Adjusted EBITDA in this quarterly report on Form 10-Q is appropriate because securities analysts, investors and other interested parties use these non-US GAAP financial measures as important measures of assessing our operating performance across periods on a consistent basis. EBITDA and Adjusted EBITDA hashave limitations as an analytical tooltools and should not be considered in isolation or as a substitute for analysis of our results as reported under US GAAP. Some of these limitations are:
although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and EBITDA and Adjusted EBITDA doesdo not reflect any cash requirements for such replacements;
it doesthey do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments;
it doesthey do not reflect changes in, or cash requirements for, our working capital needs;
it doesthey do not reflect the significant interest expense, or the cash requirements necessary, to service interest or principal payments on our significant amount of indebtedness; and
it doesthey do not reflect the impact of earnings or charges resulting from matters we do not consider to be indicative of our ongoing operations but may nonetheless have a material impact on our results of operations.

In addition, because not all companies use identical calculations, these presentations of EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures of other companies, including companies in our industry.
The following table reconciles EBITDA and Adjusted EBITDA to our net income for the periods indicated:
For the Three Months Ended June 30, For the Six Months Ended June 30,
For the Three Months Ended September 30, 2015 For the Three Months Ended September 30, 2014 For the Nine Months Ended September 30, 2015 For the Nine Months Ended September 30, 20142016 2015 2016 2015
(in thousands of dollars)(in thousands of dollars)
Net income$9,444
 $19,314
 $27,466
 $1,905
$9,939
 $14,694
 $9,518
 $18,022
Interest expense10,907
 13,194
 32,174
 28,313
10,476
 10,753
 21,125
 21,267
Provision for (benefit from) income taxes347
 (4,848) 1,692
 (4,610)
Provision for income taxes1,606
 1,100
 1,222
 1,345
Depreciation of rental equipment21,553
 18,342
 62,280
 54,831
22,761
 21,213
 44,926
 40,727
Other depreciation and amortization2,678
 2,441
 7,796
 7,149
2,594
 2,657
 5,335
 5,118
Amortization of debt issue costs392
 356
 1,144
 2,695
370
 381
 765
 752
EBITDA45,321
 48,799
 132,552
 90,283
47,746
 50,798
 82,891
 87,231
Loss on extinguishment of debt(a)—
 —
 —
 15,896
Transaction bonus(b)—
 —
 —
 24,506
Rental split expense(c)662
 1,131
 1,765
 1,876
Equity-based compensation(d)227
 263
 901
 792
Adjustment to tax receivable agreement(e)411
 —
 (2,476) —
Loss on interest rate swap(f)4,216
 —
 4,097
 —
Rental split expense(a)398
 299
 845
 1,103
Equity-based compensation(b)331
 322
 1,098
 674
Adjustment to tax receivable agreement(c)262
 (3,408) 676
 (2,887)
Loss (gain) on interest rate swap(d)1,828
 (1,007) 6,482
 (119)
Adjusted EBITDA$50,837
 $50,193
 $136,839
 $133,353
$50,565
 $47,004
 $91,992
 $86,002
 
(a)Represents expenses and realized losses that were incurred in connection with the redemption of our Senior Secured Notes.
(b)Represents payments made in connection with the consummation of the Refinancing to management and certain members of Neff Holdings' board of managers.
(c)Represents cash payments made to suppliers of equipment in connection with rental split expense, which payments are credited against the purchase price of the applicable equipment if the Company elects to purchase that equipment. See "—Results of Operations" for a discussion of rental split expense.
(d)(b)Represents non-cash equity-based compensation expense recorded in the periods presented in accordance with US GAAP.
(e)(c)Represents adjustment to tax receivable agreement related to changes in estimates used in the calculation of the tax receivable agreement.
(f)(d)Represents loss (gain) on interest rate swap related to adjustments to fair value.


27


Table of contents



Company Structure
Neff Corporation was formed as a Delaware corporation on August 18, 2014. On November 26, 2014, Neff Corporation completed an IPO of 10,476,190 shares of Class A common stock at a public offering price of $15.00 per share. A portion of the gross proceeds received by Neff Corporation from the IPO were used to purchase Common Units in Neff Holdings which was wholly owned by private investment funds managed by Wayzata prior to the IPO. In November 2015, the Company's board of directors authorized a share repurchase program pursuant to which the Company may purchase shares of its Class A common stock. Under the share repurchase program, the Company may acquire up to $25 million of shares of Class A common stock in open market and privately negotiated purchases from time to time, dependent upon market conditions. Since the authorization of the share repurchase program, the Company has purchased 1,512,685 shares of Class A common stock for a total cost of $10.3 million, including commissions.

The historical results of operations discussed in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" includes the consolidated results of the Company.
Neff Corporation, is the sole managing member of Neff Holdings and owns Common Units of Neff Holdings representing a 41.2%37.6% equity interest in Neff Holdings, as of SeptemberJune 30, 2015.2016. As the sole managing member of Neff Holdings, we control its business and affairs and, therefore, we consolidate its financial results with ours.

Wayzata retains Common Units in Neff Holdings representing a collective 58.8%62.4% economic interest and a non-controlling interest in Neff Holdings, and we reflect Wayzata's collective economic interest as a non-controlling interest in our unaudited condensed consolidated financial statements. As a result, net income (loss) attributable to us, after excluding the non-controlling interest of Wayzata, represents 41.2%37.6% of Neff Holdings' net income (loss) and our only material asset is our corresponding 41.2%37.6% economic interest and controlling interest in Neff Holdings. Neff HoldingsCorporation is a holding company that conducts no operations and, as of the consummation of the IPO, its only material asset is the equity interests of its direct and indirect subsidiaries.

Neff Holdings has historically been and will continue to be treated as a partnership for U.S. federal income tax purposes and, as such, is not subject to any entity-level U.S. federal income tax. Rather, taxable income or loss is included in the respective U.S. federal income tax returns of Neff Holdings' members. Neff Corporation will be subject to income taxes as follows:
Provision For (Benefit From) Income Tax—We are a taxpayer subject to income taxes at rates generally applicable to C corporations, and therefore our results of operations are affected by the amount of accruals for tax benefits or payments that Neff Holdings (as a partnership for U.S. federal income tax purposes) historically has not reflected in its results of operations. Our combined statutory federal and state income tax rate for all periods presented in this Form 10-Q is approximately 39.0%.

Potential Tax Benefit Due to Special Allocations in connection with the IPO and Future Step-up In Basis—As a result of the Organizational Transactions and pursuant to U.S. Treasury regulations governing the purchase of an equity interest in a partnership (including a limited liability company such as Neff Holdings that is taxed as a partnership) at a time when the assets of the partnership have a fair market value in excess of the tax basis, our purchase of Neff Holdings' Common Units directly from Neff Holdings with a portion of the proceeds from the IPO resulted in certain special allocations of Neff Holdings' items of loss or deduction to us over time that are in excess of our pro rata share of such items of loss or deduction pursuant to Section 704(c) of the Internal Revenue Code. The principles of Section 704(c) may also serve to allocate items of income or gain to Wayzata as a result of subsequent dispositions of assets to take into account the difference between the fair market value and basis difference at the time of the Organizational Transactions. We may obtain an increase in our share of the tax basis of the assets of Neff Holdings in the future, when each Prior LLC Owner receives shares of our Class A common stock or cash at our election in connection with an exercise of such Prior LLC Owner's right to have Common Units in Neff Holdings held by such Prior LLC Owner redeemed by Neff Holdings or, at the election of Neff Corporation, exchanged (which we intend to treat as our direct purchase of Common Units from such Prior LLC Owner for U.S. federal income and other applicable tax purposes, regardless of whether such Common Units are surrendered by a Prior LLC Owner to Neff Holdings for redemption or sold to us upon the exercise of our election to acquire such Common Units directly). The special allocations and step-up in tax basis described above may result in a reduction in the amount of taxes that we are required to pay relative to the amount of taxes payable by other members of Neff Holdings who are similarly situated but who do not receive a similar step-up in basis or special allocations.

Tax Receivable Agreement—Under the Tax Receivable Agreement with our Prior LLC Owners, we are obligated to pay to our Prior LLC Owners 85.0% of the amount of tax benefits, if any, that we actually realize (or in some circumstances are deemed to realize) as a result of the step-up in basis and special allocations discussed above. We account for the
Table of contents



effects of these increases in tax basis and associated payments under the Tax Receivable Agreement arising from future redemptions or exchanges as follows:

we will record a change in the deferred tax accounts for the estimated income tax effects of the increases in tax basis based on enacted federal and state tax rates at the date of the redemption or exchange;

28
Table of contents



to the extent we estimate that we will not realize the full benefit of a resulting deferred tax asset, based on an analysis that will consider, among other things, our expectation of future earnings, we will reduce the deferred tax asset with a valuation allowance; and
we will record 85%85.0% of the estimated realizable tax benefit as an increase to the liability associated with the future payments due under the Tax Receivable Agreement and the remaining 15.0% of the estimated realizable tax benefit as an increase to additional paid-in capital.
All of the effects of changes in any of our estimates after the date of the exchange will be included in net income (loss) for the period in which those changes occur. Similarly, the effect of subsequent changes in the enacted tax rates will be included in net income (loss) for the period in which the change occurs.

Key Performance Measures
From time to time, we use certain key performance measures in evaluating our business and results of operations and we may refer to one or more of these key performance measures in this "Management's Discussion and Analysis of Financial Condition and Results of Operations." These key performance measures, in addition to Adjusted EBITDA, include:
OEC—we present OEC, defined as the first cost of acquiring the equipment, or in the case of used equipment purchases and rental splits, an estimate of the first cost that would have been paid to acquire the equipment if it had been purchased new in its year of manufacture.
Rental rates—we define rental rates as the rates charged to our customers on rental contracts that typically are for a daily, weekly or monthly term. Rental rates change over time based on a combination of pricing, the mix of equipment on rent and the mix of rental terms with customers. Period over period changes in rental rates are calculated on a weighted average with the weighting based on prior period revenue mix.
Time utilization—we define time utilization as the daily average OEC of equipment on rent, divided by the OEC of all equipment in the rental fleet during the relevant period.
Results of Operations
The following summary highlights the key elements of certain line items discussed further below in the period-over-period analysis of our results of operations:
Total Revenues:
Rental Revenues:  relates primarily to revenues received from customers under leases for our rental equipment and includes related revenues such as the fees we charge for the pickup and delivery of equipment, damage waivers and other surcharges.
Equipment Sales:  relates primarily to revenues received from third parties upon the sale of used equipment from our rental fleet, which generally increases in the winter months when customer activity and time utilization are comparatively lower. To a much lesser extent, this line item also includes revenues received upon the sale to customers of ancillary new equipment.
Parts and Service:  relates primarily to revenues received from sales of complementary parts, supplies and merchandise in conjunction with our equipment rental business, as well as from services provided to repair rental equipment damaged by customers, which is billable to our customers, and fuel costs charged to customers.
Cost of Equipment Sold:  relates primarily to the net book value of our used rental fleet that is sold in the ordinary course of our active fleet management. To a much lesser extent, this line item also includes the net book value of ancillary new equipment that is sold.
Table of contents



Depreciation of Rental Equipment:  relates to the depreciation of the cost of equipment in our rental fleet and is generally calculated on a straight-line basis over the estimated service life of the asset (generally two to eight years with a 10% to 20% residual value).
Cost of Rental Revenues:  relates primarily to the delivery and retrieval of rental equipment (including fuel), maintenance and repairs to our rental equipment fleet (including parts), and labor costs and related payroll expenses (such as insurance, benefits and overtime) for drivers and mechanics. This line item also includes the portion of

29
Table of contents



rental revenues paid over to Original Equipment Manufacturers ("OEMs") under rental splits (described below) that we may have in place from time to time.
Cost of Parts and Service:  relates primarily to costs attributable to the sale of parts and fuel directly to customers and service provided for the maintenance and repair of our equipment damaged by customers, which is billable to our customers.
Selling, General and Administrative Expenses:  relates primarily to general selling, general overhead and administrative costs such as branch management and sales, accounting, finance, legal and marketing expenses. This line item also includes payments under leases for our headquarters and branch locations, expenses associated with software licenses, property taxes payable on our rental equipment and payroll, sales commission, bonus and benefits expenses allocable to executive, regional and branch management. This line item also includes provisions for bad debt expense and any ordinary course litigation expense.
Other Depreciation and Amortization:  relates primarily to depreciation of non-rental property, plant and equipment, such as trucks and trailers used to transport rental equipment as well as office equipment and amortization of intangibles such as customer lists.
Interest Expense:  relates primarily to interest expense incurred in connection with our long-term debt facilities and the amortization of the related original issue discount, in each case for the periods in which those debt obligations were outstanding.
We utilize rental splits in our operations. Rental splits are a consignment arrangement of new equipment by OEMs in which we hold their equipment in our rental fleet for a period of time (typically between three and 12 months) and agree to share with the OEM a percentage of the rental revenue we receive on the rental of that unit. We do not take title to the unit under this arrangement and we can return the unit to the OEM at any time, at no additional cost to us. We also can elect to purchase the unit from the OEM from time to time. The revenue we pay to the OEM under rental splits is expensed in cost of rental revenues on our unaudited condensed consolidated statements of operations, but added back to Adjusted EBITDA in order to maintain comparability to our results from period to period. If we exercise the option to purchase the unit, the unit becomes part of our rental fleet and is depreciated, with depreciation added back to Adjusted EBITDA. Before we exercise the option to purchase a unit, we count the unit as part of our rental fleet for OEC calculations but do not depreciate the unit.


30
Table of contents



Three Months Ended SeptemberJune 30, 20152016 Compared to Three Months Ended SeptemberJune 30, 20142015

The following table illustrates our operating activity for the three months ended SeptemberJune 30, 20152016 and the three months ended SeptemberJune 30, 2014.2015.
Three Months Ended September 30,Three Months Ended June 30,
2015 2014 % Change2016 2015 % Change
(in thousands of dollars)(in thousands of dollars)
Revenues 
  
  
 
  
  
Rental revenues$90,532
 $87,736
 3.2
$91,474
 $84,820
 7.8
Equipment sales5,559
 6,561
 (15.3)4,941
 6,174
 (20.0)
Parts and service3,333
 3,450
 (3.4)3,245
 3,233
 0.4
Total revenues99,424
 97,747
 1.7
99,660
 94,227
 5.8
Cost of revenues   
     
  
Cost of equipment sold3,474
 3,758
 (7.6)2,963
 4,058
 (27.0)
Depreciation of rental equipment21,553
 18,342
 17.5
22,761
 21,213
 7.3
Cost of rental revenues21,186
 22,045
 (3.9)21,675
 19,511
 11.1
Cost of parts and service1,964
 2,064
 (4.8)1,799
 1,807
 (0.4)
Total cost of revenues48,177
 46,209
 4.3
49,198
 46,589
 5.6
Gross profit51,247
 51,538
 (0.6)50,462
 47,638
 5.9
Other operating expenses   
     
  
Selling, general and administrative expenses22,852
 21,081
 8.4
23,387
 22,468
 4.1
Other depreciation and amortization2,678
 2,441
 9.7
2,594
 2,657
 (2.4)
Total other operating expenses25,530
 23,522
 8.5
25,981
 25,125
 3.4
Income from operations25,717
 28,016
 (8.2)24,481
 22,513
 8.7
Other expenses   
  
Other expenses (income)   
  
Interest expense10,907
 13,194
 (17.3)10,476
 10,753
 (2.6)
Adjustment to tax receivable agreement411
 —
 nm
262
 (3,408) nm
Loss on interest rate swap4,216
 —
 nm
Loss (gain) on interest rate swap1,828
 (1,007) nm
Amortization of debt issue costs392
 356
 10.1
370
 381
 (2.9)
Total other expenses15,926
 13,550
 17.5
Total other expenses (income)12,936
 6,719
 92.5
Income before income taxes9,791
 14,466
 (32.3)11,545
 15,794
 (26.9)
(Provision for) benefit from income taxes(347) 4,848
 nm
Provision for income taxes(1,606) (1,100) 46.0
Net income$9,444
 $19,314
 (51.1)$9,939
 $14,694
 (32.4)

"nm"—means not meaningful

Total Revenues.    Total revenues for the three months ended SeptemberJune 30, 20152016 increased 1.7%5.8% to $99.4$99.7 million from $97.7$94.2 million for the three months ended SeptemberJune 30, 2014.2015. The components of our revenues are rental revenues, equipment sales and parts and service, and the changes between periods in each of these components are discussed below.

Rental Revenues.    Rental revenues for the three months ended SeptemberJune 30, 20152016 increased 3.2%7.8% to $90.5$91.5 million from $87.7$84.8 million for the three months ended SeptemberJune 30, 2014.2015. The increase in rental revenues was primarily due to an increase in the amount of equipment on rent as a result of an increase in the size of our rental fleet partially offset by a decreaseand an increase in the time utilization of the larger fleet. This increase in rental revenues was partially offset by a decrease in rental rates. We estimate that our rental rates decreased 0.1%1.1%, as compared to the three months ended SeptemberJune 30, 2014.2015. For the three months ended SeptemberJune 30, 2015,2016, the average OEC of our rental fleet increased by 8.5%7.1% to $780.2$816.7 million from $718.9$762.4 million at SeptemberJune 30, 2014,2015, as a result of increased capital expenditures. Time utilization for the three months ended SeptemberJune 30, 2015 decreased2016 increased slightly to 69.2%68.0% from 70.9%67.1% for the three months ended SeptemberJune 30, 2014.2015 primarily due to improved time utilization in our oil and gas markets compared to the prior year.
Table of contents



Equipment Sales.    Equipment sales for the three months ended SeptemberJune 30, 20152016 decreased 15.3%20.0% to $5.6$4.9 million from $6.6$6.2 million for the three months ended SeptemberJune 30, 2014.2015. The decrease in equipment sales revenues was primarily due to decreased volume of sales of used equipment.

31
Table of contents



Parts and Service.    Revenues from the sales of parts and service for the three months ended September 30, 2015 decreased 3.4% to $3.3 million from $3.5remained relatively consistent at $3.2 million for the three months ended SeptemberJune 30, 2014. The decrease in these revenues for the three months ended September 30, 2015 was primarily due to decreased parts, repair and fuel costs charged to customers.2016.
Cost of Equipment Sold.    Costs associated with the sale of rental equipment decreased 7.6%27.0% to $3.5$3.0 million for the three months ended SeptemberJune 30, 20152016 from $3.8$4.1 million for the three months ended SeptemberJune 30, 2014.2015. The decrease in costs associated with the sale of rental equipment was due primarily to the decrease in equipment sales for the three months ended SeptemberJune 30, 2015.2016. This decrease was partially offset by an increase in used equipment sales gross profit. Gross profit margin on used equipment sales for the three months ended June 30, 2016 increased to 40.0% from 34.3% for the three months ended June 30, 2015, primarily as a result of the mix of equipment sold.
Depreciation of Rental Equipment.    Depreciation of rental equipment increased 17.5%7.3% to $21.6$22.8 million for the three months ended SeptemberJune 30, 20152016 from $18.3$21.2 million for the three months ended SeptemberJune 30, 2014.2015. The increased depreciation expense of rental equipment was primarily due to the increase in the number of units in our rental fleet and the related increase in the cost of our rental equipment. As a percentage of rental revenues, depreciation of rental equipment was 23.8%24.9% for the three months ended SeptemberJune 30, 20152016 and was 20.9%25.0% for the three months ended SeptemberJune 30, 2014. The increase in depreciation of rental equipment as a percentage of rental revenues was primarily due to an increase in the size of our rental fleet and the lack of a corresponding increase in rental revenues which was impacted by decreased rental activity among our customers operating in the oil and gas markets.2015.
Cost of Rental Revenues.    Costs associated with our rental revenues decreased 3.9%increased 11.1% to $21.2$21.7 million for the three months ended SeptemberJune 30, 20152016 from $22.0$19.5 million for the three months ended SeptemberJune 30, 2014.2015. The decreaseincrease in cost of rental revenues was primarily a result of decreases in fuel, insurance and rental split expenses offset partially by increased payroll and payroll related expenses, rental split expenses and insurance expenses, partially offset by a decrease in repair costs and fuel expenses. As a percentage of rental revenues, cost of rental revenues decreasedincreased to 23.4%23.7% for the three months ended SeptemberJune 30, 20152016 from 25.1%23.0% for the three months ended SeptemberJune 30, 2014. This decrease was primarily attributable to the increase in comparative rental revenues, since cost of rental revenues includes fixed costs that generally do not increase at the same rate as the increase in rental revenue.2015.
Cost of Parts and Service.    Costs associated with generating our parts and service revenues decreased 4.8% to $2.0remained relatively consistent at $1.8 million for the three months ended SeptemberJune 30, 2015 from $2.1 million for the three months ended September 30, 2014 primarily due to decreased fuel costs.2016.
Selling, General and Administrative Expenses.    Selling, general and administrative expenses for the three months ended SeptemberJune 30, 20152016 increased $1.8$0.9 million, or 8.4%4.1%, to $22.9$23.4 million from $21.1$22.5 million for the three months ended SeptemberJune 30, 2014.2015. The net increase in selling, general and administrative expenses was attributable to several factors. Employee salaries, benefits and related employee expenses increased $0.6$1.3 million primarily as a result of higher headcount, salaries and increased commissions. Public company expenses in the form of professional fees, investor relationspayroll taxes. Rent and director and officer insurancesoftware licensing expenses also increased by $0.6 million.while public company expenses decreased $1.1 million year over year. As a percentage of total revenues, selling, general and administrative expenses were 23.0%decreased to 23.5% for the three months ended SeptemberJune 30, 2015, an increase of 6.5%2016 from 21.6%23.8% for the three months ended SeptemberJune 30, 2014, primarily as a result of the increases in public company expenses and payroll and payroll related expenses.2015.
Other Depreciation and Amortization.    Other depreciation and amortization expense increased 9.7%decreased 2.4% to $2.6 million for the three months ended June 30, 2016 from $2.7 million for the three months ended SeptemberJune 30, 2015 from $2.4 million for the three months ended September 30, 2014.2015. The increasedecrease was primarily due to an increasea decrease in depreciation expense for property and equipment.
Interest Expense.    Interest expense for the three months ended SeptemberJune 30, 20152016 decreased 17.3%2.6% to $10.9$10.5 million from $13.2$10.8 million for the three months ended SeptemberJune 30, 2014.2015. The decrease in interest expense was primarily due to thea decrease in the weighted average interest rate of our Revolving Credit Facility in addition to a decrease in the balance outstanding debt as a result of the prepayment of $96.0 million of the principal amount of theon our Second Lien Loan with the net proceeds from the IPO.Loan.

Adjustment to Tax Receivable Agreement. Adjustment to Tax Receivable Agreement for the three months ended SeptemberJune 30, 20152016 was $0.4 million. The adjustment was primarily duea $0.3 million increase to the Tax Receivable Agreement Amendment andliability primarily due to changes in estimated future payments. There was no adjustmentThe Adjustment to the Tax Receivable Agreement for the three months ended SeptemberJune 30, 2014.2015 was a $3.4 million decrease in the liability due to the tax receivable agreement amendment and changes in estimated future payments.

Loss on Interest Rate Swap. Loss on interest rate swap for the three months ended SeptemberJune 30, 20152016 was $4.2 million which consisted of $4.1 million of unrealized losses related to the change in fair value of the Interest Rate Swap and a $0.1 million realized loss for the settlement payments made. In March 2015, the Company entered into and recorded the Interest Rate Swap on its unaudited condensed consolidated balance sheet. The Interest Rate Swap is not accounted for as a hedge and changes in fair value are included directly in the unaudited condensed consolidated statement of operations. There was no gain or loss on the Interest Rate Swap for the three months ended September 30, 2014.

32
Table of contents



Amortization of Debt Issue Costs.    Amortization of debt issue costs for the three months ended September 30, 2015 increased 10.1% to $0.4 million for the three months ended September 30, 2014. The increase in amortization of debt issue costs was primarily due to debt issue costs related to amendments to our Second Lien Loan and Revolving Credit Facility made in connection with our IPO.
Nine Months Ended September 30, 2015 Compared to Nine Months Ended September 30, 2014

The following table illustrates our operating activity for the nine months ended September 30, 2015 and the nine months ended September 30, 2014.
 Nine Months Ended September 30,
 2015 2014 % Change
 (in thousands of dollars)
Revenues 
  
  
Rental revenues$249,493
 $240,362
 3.8
Equipment sales18,520
 17,355
 6.7
Parts and service9,724
 10,125
 (4.0)
Total revenues277,737
 267,842
 3.7
Cost of revenues   
  
Cost of equipment sold11,864
 9,877
 20.1
Depreciation of rental equipment62,280
 54,831
 13.6
Cost of rental revenues58,556
 59,669
 (1.9)
Cost of parts and service5,534
 6,158
 (10.1)
Total cost of revenues138,234
 130,535
 5.9
Gross profit139,503
 137,307
 1.6
Other operating expenses   
  
Selling, general and administrative expenses67,610
 61,453
 10.0
Other depreciation and amortization7,796
 7,149
 9.1
Transaction bonus—
 24,506
 nm
Total other operating expenses75,406
 93,108
 (19.0)
Income from operations64,097
 44,199
 45.0
Other expenses (income)   
  
Interest expense32,174
 28,313
 13.6
Adjustment to tax receivable agreement(2,476) —
 nm
Loss on extinguishment of debt—
 15,896
 nm
Loss on interest rate swap4,097
 —
 nm
Amortization of debt issue costs1,144
 2,695
 (57.6)
Total other expenses (income)34,939
 46,904
 (25.5)
Income (loss) before income taxes29,158
 (2,705) nm
(Provision for) benefit from income taxes(1,692) 4,610
 nm
Net income$27,466
 $1,905
 nm

"nm"—means not meaningful

Total Revenues.    Total revenues for the nine months ended September 30, 2015 increased 3.7% to $277.7 million from $267.8 million for the nine months ended September 30, 2014. The components of our revenues are rental revenues, equipment sales and parts and service, and the changes between periods in each of these components are discussed below.

Rental Revenues.    Rental revenues for the nine months ended September 30, 2015 increased 3.8% to $249.5 million from $240.4 million for the nine months ended September 30, 2014. The increase in rental revenues was primarily due to an increase in the amount of equipment on rent as a result of an increase in the size of our rental fleet and an increase in rental rates, partially offset by a decrease in the time utilization of the larger fleet. We estimate that our rental rates

33
Table of contents



increased 1.8%, as compared to the nine months ended September 30, 2014. For the nine months ended September 30, 2015, the average OEC of our rental fleet increased by 11.2% to $755.0 million from $678.8 million at September 30, 2014, as a result of increased capital expenditures. Time utilization for the nine months ended September 30, 2015 decreased to 66.7% from 70.5% for the nine months ended September 30, 2014 primarily due to extreme weather conditions in several of our regions combined with decreased rental activity among our customers operating in the oil and gas markets.
Equipment Sales.    Equipment sales for the nine months ended September 30, 2015 increased 6.7% to $18.5 million from $17.4 million for the nine months ended September 30, 2014. The increase in equipment sales revenues was primarily due to increased volume and mix of sales of used equipment.
Parts and Service.    Revenues from the sales of parts and service for the nine months ended September 30, 2015 decreased 4.0% to $9.7 million from $10.1 million for the nine months ended September 30, 2014. The decrease in these revenues for the nine months ended September 30, 2015 was primarily due to decreased parts, repair and fuel costs charged to customers.
Cost of Equipment Sold.    Costs associated with the sale of rental equipment increased 20.1% to $11.9 million for the nine months ended September 30, 2015 from $9.9 million for the nine months ended September 30, 2014. The increase in costs associated with the sale of rental equipment was due primarily to the increase in equipment sales for the nine months ended September 30, 2015.
Depreciation of Rental Equipment.    Depreciation of rental equipment increased 13.6% to $62.3 million for the nine months ended September 30, 2015 from $54.8 million for the nine months ended September 30, 2014. The increased depreciation expense of rental equipment was primarily due to the increase in the number of units in our rental fleet and the related increase in the cost of our rental equipment. As a percentage of rental revenues, depreciation of rental equipment was 25.0% for the nine months ended September 30, 2015 and was 22.8% for the nine months ended September 30, 2014. The increase in depreciation of rental equipment as a percentage of rental revenues was primarily due to increases in the size of our rental fleet and the lack of a corresponding increase in rental revenues which was impacted by extreme weather and decreased rental activity among our customers operating in the oil and gas markets.
Cost of Rental Revenues.    Costs associated with our rental revenues decreased 1.9% to $58.6 million for the nine months ended September 30, 2015 from $59.7 million for the nine months ended September 30, 2014. The decrease in cost of rental revenues was primarily a result of decreases in fuel and insurance expenses and rental splits, partially offset by increased payroll and payroll related expenses. As a percentage of rental revenues, cost of rental revenues decreased to 23.5% for the nine months ended September 30, 2015 from 24.8% for the nine months ended September 30, 2014. This decrease was primarily attributable to the increase in comparative rental revenues, since cost of rental revenues includes fixed costs that generally do not increase at the same rate as the increase in rental revenue.
Cost of Parts and Service.    Costs associated with generating our parts and service revenues decreased 10.1% to $5.5 million for the nine months ended September 30, 2015 from $6.2 million for the nine months ended September 30, 2014 primarily due to decreased fuel and repair costs.
Selling, General and Administrative Expenses.    Selling, general and administrative expenses for the nine months ended September 30, 2015 increased $6.2 million, or 10.0%, to $67.6 million from $61.5 million for the nine months ended September 30, 2014. The net increase in selling, general and administrative expenses was attributable to several factors. Employee salaries, benefits and related employee expenses increased $1.8 million primarily as a result of higher salaries, payroll taxes and increased commissions. Public company expenses in the form of professional fees, investor relations and director and officer insurance expenses also increased by $3.2 million. As a percentage of total revenues, selling, general and administrative expenses were 24.3% for the nine months ended September 30, 2015, an increase of 6.1% from 22.9% for the nine months ended September 30, 2014, primarily as a result of the increase in public company expenses.
Other Depreciation and Amortization.    Other depreciation and amortization expense increased 9.1% to $7.8 million for the nine months ended September 30, 2015 from $7.1 million for the nine months ended September 30, 2014. The increase was primarily due to an increase in depreciation expense for property and equipment.
Transaction Bonus. Transaction bonus expense for the nine months ended September 30, 2014 was $24.5 million. This amount reflects payments made in connection with the consummation of the Refinancing. There was no transaction bonus for the nine months ended September 30, 2015.

34
Table of contents



Interest Expense.    Interest expense for the nine months ended September 30, 2015 increased 13.6% to $32.2 million from $28.3 million for the nine months ended September 30, 2014. The increase in interest expense was primarily due to the increase in outstanding debt as a result of the Refinancing.
Adjustment to Tax Receivable Agreement. Adjustment to Tax Receivable Agreement for the nine months ended September 30, 2015 was $2.5 million. The adjustment was primarily due to the Tax Receivable Agreement Amendment and to changes in estimated future payments. There was no adjustment to the Tax Receivable Agreement for the nine months ended September 30, 2014.
Loss on Extinguishment of Debt. Loss on extinguishment of debt was $15.9 million for the nine months ended September 30, 2014. The loss on extinguishment of debt included the write-off of $8.7 million in unamortized debt issue costs on the Senior Secured Notes, as well as $7.2 million paid in call premiums, paid in connection with the redemption of the Senior Secured Notes. There was no loss on extinguishment of debt for the nine months ended September 30, 2015.
Loss on Interest Rate Swap. Loss on interest rate swap for the nine months ended September 30, 2015 was $4.1 million and included $3.9$1.6 million of unrealized losses on the Interest Rate Swap related to the change in fair value and $0.2 million of settlement payments made. In March 2015, the Company entered into and recorded the Interest Rate Swap on its unaudited condensed consolidated balance sheet. The Interest Rate Swap is not accounted for as a hedge and changes in fair value are included directly in the unaudited condensed consolidated statement of operations. There was noa gain or loss on the Interest Rate Swap of $1.0 million for the ninethree months ended SeptemberJune 30, 2014.2015. The gain consisted of $1.1 million of unrealized gains on the Interest Rate Swap related to the change in fair value offset by $0.1 million for the settlement payments made.
Amortization of Debt Issue Costs.    Amortization of debt issue costs for the nine months ended September 30, 2015 decreased 57.6% to $1.1 million from $2.7remained relatively consistent at $0.4 million for the ninethree months ended SeptemberJune 30, 2014.2016.
Table of contents



Six Months Ended June 30, 2016 Compared to Six Months Ended June 30, 2015

The following table illustrates our operating activity for the six months ended June 30, 2016 and the six months ended June 30, 2015.
 Six Months Ended June 30,
 2016 2015 % Change
 (in thousands of dollars)
Revenues 
  
  
Rental revenues$172,651
 $158,961
 8.6
Equipment sales10,043
 12,961
 (22.5)
Parts and service6,550
 6,391
 2.5
Total revenues189,244
 178,313
 6.1
Cost of revenues   
  
Cost of equipment sold6,074
 8,390
 (27.6)
Depreciation of rental equipment44,926
 40,727
 10.3
Cost of rental revenues41,608
 37,370
 11.3
Cost of parts and service3,604
 3,570
 1.0
Total cost of revenues96,212
 90,057
 6.8
Gross profit93,032
 88,256
 5.4
Other operating expenses   
  
Selling, general and administrative expenses47,909
 44,758
 7.0
Other depreciation and amortization5,335
 5,118
 4.2
Total other operating expenses53,244
 49,876
 6.8
Income from operations39,788
 38,380
 3.7
Other expenses (income)   
  
Interest expense21,125
 21,267
 (0.7)
Adjustment to tax receivable agreement676
 (2,887) nm
Loss (gain) on interest rate swap6,482
 (119) nm
Amortization of debt issue costs765
 752
 1.7
Total other expenses (income)29,048
 19,013
 52.8
Income before income taxes10,740
 19,367
 (44.5)
Provision for income taxes(1,222) (1,345) (9.1)
Net income$9,518
 $18,022
 (47.2)

"nm"—means not meaningful

Total Revenues.    Total revenues for the six months ended June 30, 2016 increased 6.1% to $189.2 million from $178.3 million for the six months ended June 30, 2015. The components of our revenues are rental revenues, equipment sales and parts and service, and the changes between periods in each of these components are discussed below.

Rental Revenues.    Rental revenues for the six months ended June 30, 2016 increased 8.6% to $172.7 million from $159.0 million for the six months ended June 30, 2015. The increase in rental revenues was primarily due to an increase in the amount of equipment on rent as a result of an increase in the size of our rental fleet and an increase in the time utilization of the larger fleet. This increase in rental revenues was partially offset by a decrease in rental rates. We estimate that our rental rates decreased 1.2%, as compared to the six months ended June 30, 2015. For the six months ended June 30, 2016, the average OEC of our rental fleet increased by 7.4% to $797.4 million from $742.3 million at June 30, 2015, as a result of increased capital expenditures. Time utilization for the six months ended June 30, 2016 increased to 66.6% from 65.4% for the six months ended June 30, 2015 primarily due to improved time utilization in our oil and gas markets compared to the prior year.
Table of contents



Equipment Sales.    Equipment sales for the six months ended June 30, 2016 decreased 22.5% to $10.0 million from $13.0 million for the six months ended June 30, 2015. The decrease in equipment sales revenues was primarily due to decreased sales volume of used equipment.
Parts and Service.    Revenues from the sales of parts and service for the six months ended June 30, 2016 increased 2.5% to $6.6 million from $6.4 million for the six months ended June 30, 2015. The increase in these revenues for the six months ended June 30, 2016 was primarily due to increased parts, repair and fuel costs charged to customers.
Cost of Equipment Sold.    Costs associated with the sale of rental equipment decreased 27.6% to $6.1 million for the six months ended June 30, 2016 from $8.4 million for the six months ended June 30, 2015. The decrease in costs associated with the sale of rental equipment was due primarily to the decrease in equipment sales. This decrease was partially offset by an increase in used equipment sales gross profit. Gross profit margin on used equipment sales for the six months ended June 30, 2016 increased to 39.5% from 35.3% for the six months ended June 30, 2015, primarily as a result of the mix of equipment sold.
Depreciation of Rental Equipment.    Depreciation of rental equipment increased 10.3% to $44.9 million for the six months ended June 30, 2016 from $40.7 million for the six months ended June 30, 2015. The increased depreciation expense of rental equipment was primarily due to the increase in the number of units in our rental fleet and the related increase in the cost of our rental equipment. As a percentage of rental revenues, depreciation of rental equipment was 26.0% for the six months ended June 30, 2016 and was 25.6% for the six months ended June 30, 2015.
Cost of Rental Revenues.    Costs associated with our rental revenues increased 11.3% to $41.6 million for the six months ended June 30, 2016 from $37.4 million for the six months ended June 30, 2015. The increase in cost of rental revenues was primarily a result of increased payroll and payroll related expenses, repair costs and insurance expenses, partially offset by decreases in fuel and rental split expenses. As a percentage of rental revenues, cost of rental revenues increased to 24.1% for the six months ended June 30, 2016 from 23.5% for the six months ended June 30, 2015.
Cost of Parts and Service.    Costs associated with generating our parts and service revenues remained relatively consistent at $3.6 million for the six months ended June 30, 2016.
Selling, General and Administrative Expenses.    Selling, general and administrative expenses for the six months ended June 30, 2016 increased $3.2 million, or 7.0%, to $47.9 million from $44.8 million for the six months ended June 30, 2015. The net increase in selling, general and administrative expenses was attributable to several factors. Employee salaries, benefits and related employee expenses increased $2.9 million primarily as a result of higher headcount, salaries and payroll taxes. Rent and bad debt expenses also increased while public company expenses decreased $1.2 million year over year. As a percentage of total revenues, selling, general and administrative expenses increased to 25.3% for the six months ended June 30, 2016 from 25.1% for the six months ended June 30, 2015.
Other Depreciation and Amortization.    Other depreciation and amortization expense increased 4.2% to $5.3 million for the six months ended June 30, 2016 from $5.1 million for the six months ended June 30, 2015. The increase was primarily due to an increase in depreciation expense for property and equipment.
Interest Expense.    Interest expense for the six months ended June 30, 2016 decreased 0.7% to $21.1 million from $21.3 million for the six months ended June 30, 2015. The decrease in interest expense was primarily due to a decrease in the weighted average interest rate of our Revolving Credit Facility in addition to a decrease in the balance outstanding on our Second Lien Loan.
Adjustment to Tax Receivable Agreement. Adjustment to Tax Receivable Agreement for the six months ended June 30, 2016 consisted of a $0.7 million increase to the liability primarily due to changes in estimated future payments. The Adjustment to Tax Receivable Agreement for the six months ended June 30, 2015 was a $2.9 million decrease in the liability due to the tax receivable agreement amendment and changes in estimated future payments.
Loss on Interest Rate Swap. Loss on interest rate swap for the six months ended June 30, 2016 was $6.5 million and included $6.2 million of unrealized losses on the Interest Rate Swap related to the change in fair value and $0.3 million of settlement payments made. In March 2015, the Company entered into and recorded the Interest Rate Swap on its unaudited condensed consolidated balance sheet. The Interest Rate Swap is not accounted for as a hedge and changes in fair value are included directly in the unaudited condensed consolidated statements of operations. There was a gain on Interest Rate Swap of $0.1 million for the six months ended June 30, 2015. The gain consisted of $0.2 million of unrealized gains on Interest Rate Swap related to the change in fair value offset by $0.1 million for settlement payments made.
Amortization of Debt Issue Costs.    Amortization of debt issue costs was primarily due to debt issue costs related toremained relatively consistent at $0.8 million for the Second Lien Loan being amortized over a longer term than the debt issue costs related to the Senior Secured Notes.six months ended June 30, 2016.
Table of contents



Liquidity and Capital Resources
Overview
Our principal needs for liquidity historically have been for the purchase of rental fleet, equipment, other capital expenditures, including delivery vehicles, funding startup costs for new branch locations and debt service. These will be our principal liquidity needs going forward, in addition to payments under the Tax Receivable Agreement and any share repurchases we make in the future under our newly announced share repurchase program.
Our largest use of liquidity has been and will continue to be for the acquisition of equipment for our rental fleet. Our large rental fleet requires a substantial ongoing commitment of capital. While we can manage the size and aging of our fleet generally over time, eventually we must retire older equipment and either allow our fleet to shrink or replace the older equipment in our fleet with newer models. For the ninesix months ended SeptemberJune 30, 20152016 and 2014,2015, our net capital expenditures totaled approximately $120.4$66.5 million and $118.6$98.1 million, respectively. We have historically financed these net additions to our rental fleet using cash flow from operations and borrowings under our Revolving Credit Facility and we expect that to continue in the future.
We also use our liquidity to finance other non-rental equipment capital expenditures, typically consisting of delivery vehicles, property, plant and equipment and funding startup costs for new branch locations. The liquidity required to open a new branch location typically ranges from $5.0 million to $10.0 million, the majority of which consists of acquisitions of rental fleet equipment for the new branch location.
For the ninesix months ended SeptemberJune 30, 2016 and 2015, and 2014, our purchases of property, plant and equipment totaled approximately $11.7 million. We expectnet other capital expenditures for the full years 2015totaled approximately $8.6 million and 2016 to be in a similar range.$10.1 million, respectively. We have historically financed these net other capital expenditures using cash flow from operations and borrowings under our Revolving Credit Facility and we expect that to continue in the future.
We will use liquidity going forward to make any required payments under the Tax Receivable Agreement. Payments for tax benefits related to the Tax Receivable Agreement for the year ended December 31, 2015 are currently estimated to be as much as $11.9 million and would be paid in 2016. However, we expect the actual payments under the Tax Receivable Agreement could vary depending on a number of factors. 
In November 2015, the Company's board of directors authorized a share repurchase program pursuant to which the Company may purchase shares of its Class A common stock. Under the share repurchase program, the Company may acquire up to $25 million of shares of Class A common stock in open market and privately negotiated purchases from time to time, dependent upon market conditions.

35
Table Since the authorization of contentsthe share repurchase program, the Company has purchased 1,512,685 shares of Class A common stock for a total cost of $10.3 million, including commissions.

We may use liquidity going forward to make payments under the Tax Receivable Agreement. For the six months ended June 30, 2016, we did not make any payments under the Tax Receivable Agreement. We expect the actual payments under the Tax Receivable Agreement could vary depending on a number of factors. 


Absent an event triggeringAs of December 31, 2015, our total leverage ratio was 3.90. Under the terms of the Second Lien Loan, if the total leverage ratio is equal to or less than 4.00 to 1.00 but greater than 3.00 to 1.00 at the end of each fiscal year, we must make a mandatory prepayment equal to 25% of our excess cash flow. A mandatory prepayment of $3.3 million was made for the year ended December 31, 2015, during March 2016. The Company will determine whether any mandatory prepayments need to be made for the fiscal year ending December 31, 2016, after year end. Other than mandatory prepayments under the terms of our Second Lien Loan as of SeptemberJune 30, 2015,2016, we are not required to make principal payments prior to the stated maturity of June 9, 2021. We expect to satisfy our debt service going forward, which will consist primarily of interest payments and mandatory prepayments under the current terms of the Second Lien Loan, out of cash flow from operations.
As of SeptemberJune 30, 2015,2016, our principal sources of liquidity consisted of $0.2cash generated from operations, $0.3 million of cash and cash equivalents and availability of $143.2$201.2 million under our Revolving Credit Facility, subject to customary borrowing conditions. We believe that our cash flow from operations, available cash and cash equivalents and available borrowing capacity under the Revolving Credit Facility will be sufficient to meet our liquidity needs for at least the next 12 months.months; however, there can be no assurance that this will be the case. The borrowing capacity under our Revolving Credit Facility will depend on the amount of outstanding borrowings and letters of credit issued and will also depend on us remaining in compliance with the covenants under our Revolving Credit Facility and Second Lien Loan. We were in compliance with the covenants under our Revolving Credit Facility and Second Lien Loan as of June 30, 2016.

We may from time to time seek to retire or repurchase our outstanding debt through cash purchases and/or exchanges of equity securities, in open market purchases, privately negotiated transactions, tender offers or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.

To the extent we require additional liquidity, we anticipate that it will be funded through the incurrence of other indebtedness (which may include capital markets indebtedness, the incremental facility under the credit agreement for the Second Lien Loan or indebtedness under other credit facilities), equity financings or a combination thereof.thereof; however, there can be no
Table of contents



assurance that this will be the case. Although we have no specific current plans to do so, if we decide to pursue one or more significant acquisitions, we may incur additional debt or sell additional equity to finance such acquisitions.

Cash Flows for the NineSix Months Ended SeptemberJune 30, 20152016 and 20142015

For the ninesix months ended SeptemberJune 30, 2015,2016, our operating activities provided net cash flow of $99.7$73.5 million as compared to $68.4$60.7 million for the ninesix months ended SeptemberJune 30, 2014. The increase2015. Net income of $9.5 million when adjusted by various non-cash items, such as the gain on sale of equipment of $4.0 million, unrealized loss on interest rate swap of $6.2 million, adjustment to the tax receivable agreement of $0.7 million and depreciation of $49.7 million, resulted in net cash flows fromprovided by operating activities was due primarily to the payment of the Transaction Bonus earned in connection with the consummation of the Refinancing to management and certain members of Neff Holdings' board of managers which was paid in the nine months ended September 30, 2014 and was not paid in the nine months ended September 30, 2015.$73.5 million.
Cash used in investing activities was $132.2$75.2 million for the ninesix months ended SeptemberJune 30, 20152016 as compared to $130.3$108.2 million for the ninesix months ended SeptemberJune 30, 2014.2015. Cash used for the purchase of rental equipment was $139.0$76.6 million for the ninesix months ended SeptemberJune 30, 2015,2016, compared to $135.9$111.1 million for the ninesix months ended SeptemberJune 30, 2014.2015. We received $18.5$10.0 million in cash proceeds from the sale of equipment for the ninesix months ended SeptemberJune 30, 20152016 compared to $17.4$13.0 million for the ninesix months ended SeptemberJune 30, 2014.2015.
Net cash provided by financing activities was $32.5$1.6 million for the ninesix months ended SeptemberJune 30, 2015,2016, compared to $63.8$47.5 million provided by financing activities for the ninesix months ended SeptemberJune 30, 2014.2015. The decrease in cash from financing activities was primarily due to the Refinancing which provided cashadditional debt issue costs for the nineRevolving Credit Facility amendment, repurchases of Class A common stock made during the six months ended SeptemberJune 30, 2014.2016, the Second Lien Loan prepayment and a decrease of net borrowings under the Revolving Credit Facility as compared to prior year.

Revolving Credit Facility
On October 1, 2010, certain of our subsidiaries entered into the Revolving Credit Facility with a syndicate of banks and financial institutions including Bank of America, N.A. and Wells Fargo Capital Finance, LLC as the co-collateral agents. Bank of America, N.A. is the agent, swing-line lender and letter of credit issuer. The Revolving Credit Facility was amended and restated on November 20, 2013, and further amended on June 9, 2014 as part of the Refinancing.a refinancing and further amended and restated on February 25, 2016.
The Revolving Credit Facility provides $425.0$475.0 million in commitments for revolving borrowings, including a $30.0 million sublimit for the issuance of letters of credit, and a $42.5 million sublimit for swing-line loans, subject to certain availability conditions. The aggregate amount of all borrowings available to us under the Revolving Credit Facility is the lesser of the aggregate commitments and the "borrowing base", which is a formula that applies certain advance rates against our eligible accounts receivable and our eligible rental equipment and, as a result of which, could result in us not being able to borrow all of the available commitments at any given time. As of SeptemberJune 30, 2015,2016, the borrowing base under the Revolving Credit Facility was $425.0$475.0 million. The Revolving Credit Facility matures on November 20, 2018.February 25, 2021. Borrowings under the Revolving Credit Facility bear interest, at our option, at either a LIBOR rate or base rate, in each case plus an applicable margin. LIBOR loans bear interest at the LIBOR rate plus 250(a) 200 basis points andif the average availability for the period is less than $125.0 million, (b) 175 basis points if the average availability for the period is equal to or greater than $125.0 million but less than $225.0 million or (c) 150 basis points if the average availability for the period is greater than $225.0 million. The base rate loans bear interest at the sum of (a) 150(i) 100 basis points if the average availability for the period is less than $125.0 million, (ii) 75 basis points if the average availability for the period is equal to or greater than $125.0 million but less than $225.0 million or (iii) 50 basis points if the average availability for the period is greater than $225.0 million plus (b) the greatest of (i) the prime rate, (ii) the federal funds rate plus 50 basis points and (iii) LIBOR plus 100 basis points. The applicable margin for LIBOR loans and base rate loans will be subject to quarterly performance pricing adjustments based on our average availability and our consolidated total leverage ratio under the Revolving Credit Facility for the most recently completed quarter. The Revolving Credit Facility provides for the payment to the lenders of an unused line fee of 0.50%0.375% if less than 33%50% of the daily average unused portion under the Revolving Credit Facility is utilized 0.375%and 0.250% if less than 66% but at least 33% is utilized, and 0.25% if 66%50% or more is utilized. The unused line fee is payable on the daily average unused portion of the commitments under the Revolving Credit Facility (whether or not then available).
Neff Holdings and each of its subsidiaries is a borrower or a credit party under the Revolving Credit Facility. Neff Corporation is not a party to the Revolving Credit Facility. The Revolving Credit Facility is secured by first-priority liens on

36
Table of contents



substantially all of the assets of the borrower and the guarantors. The credit agreement for the Revolving Credit Facility contains customary restrictive covenants applicable to each credit party, including, among others, restrictions on the ability to incur additional indebtedness, create liens, make investments and declare or pay dividends. In addition, the Revolving Credit Facility contains financial covenants, applicable at any time excess availability is less than the greater of $35.0 million and 10% of the aggregate commitments of all lenders, or $42.5$47.5 million as of SeptemberJune 30, 2015,2016, which require us to maintain (i) a consolidated total leverage ratio of not more than 5.25 to 1.00 for each fiscal quarter ended during the period from July 1, 2015 through and including September 30, 2015, stepping down to 5.00 to 1.00 for each fiscal quarter ended during the period from October 1, 2015February 25, 2016 through and including December 31, 2015,2016, stepping down to 4.75 to 1.00 for each fiscal quarter ended during the period from January 1, 20162017 through
Table of contents



and including June 30, 2016,December 31, 2017, stepping down to 4.50 to 1.00 for each fiscal quarter ended during the period from September 30, 2016January 1, 2018 and thereafter, and (ii) a fixed charge coverage ratio of not less than 1.00 to 1.00, in each case, until such time as excess availability exceeds the threshold described above for a period of at least 30 consecutive days. As of SeptemberJune 30, 2015,2016, we had availability based on our borrowing base as of such date under the Revolving Credit Facility of $143.2$201.2 million and were in compliance with the applicable covenants in the Revolving Credit Facility.
We entered into an amendment to our Revolving Credit Facility to, among other things, reflect the changes in our structure as a result of the Organizational Transactions.
Second Lien Loan
Our subsidiary, Neff Rental LLC, incurred the Second Lien Loan under a senior secured credit facility with Credit Suisse AG, as administrative agent and collateral agent, and the other lenders and agents thereto, on June 9, 2014. The credit agreement for the Second Lien Loan provides for (a) a $575.0 million term loan facility, all of which was drawn on June 9, 2014, and (b) an uncommitted incremental term loan facility not to exceed (together with any incremental equivalent debt) $75.0 million plus additional amounts that may be incurred subject to a pro forma total leverage ratio of 5.25:1.00 and certain other customary conditions. The Second Lien Loan matures on June 9, 2021. The Second Lien Loan bears interest, at our option, at either a LIBOR rate or base rate, in each case plus an applicable margin. LIBOR loans bear interest at the LIBOR rate plus 625 basis points and base rate loans bear interest at the sum of (a) 525 basis points plus (b) the greatest of (i) the prime rate, (ii) the federal funds rate plus 50 basis points and (iii) LIBOR plus 100 basis points. The LIBOR rate margin is subject to a "floor" of 100 basis points. We generally elect the LIBOR rate, and given that LIBOR currently is less than 1.00%, our interest rate as of SeptemberJune 30, 20152016 under the Second Lien Loan was 7.25% per annum. We must make mandatory prepayments of principal on the Second Lien Loan if our total leverage ratio for any fiscal year, commencing with the fiscal year ending December 31, 2015, exceeds 3.00 to 1.00. These prepayment provisions require us to prepay an amount equal to (i) either 25% of our excess cash flow (if our total leverage ratio is equal to or less than 4.00 to 1.00 but greater than 3.00 to 1.00) or 50% of our excess cash flow (if our total leverage ratio is greater than 4.00 to 1.00) over (ii) the optional prepayment amount for such excess cash flow period. Additionally, we must make mandatory prepayments of principal on the Second Lien Loan if we receive net cash proceeds from asset sales (as defined in the Second Lien Loan) or the issuance or incurrence of indebtedness (except for permitted refinancing debt as defined in the Second Lien Loan).
Neff Holdings and each of its subsidiaries is a borrower or a credit party under the Second Lien Loan. Neff Corporation is not a party to the Second Lien Loan. The Second Lien Loan is secured by second-priority liens on substantially all of the assets of the borrower and the guarantors. The credit agreement for the Second Lien Loan contains customary incurrence-based restrictive covenants applicable to each credit party, including, among other things, restrictions on the ability to incur additional indebtedness, create liens, make investments and declare or pay dividends.
We have entered into an amendment to our Second Lien Loan to, among other things, reflect the changes in our structure as a result of the Organizational Transactions. We prepaid $96.0 million of the principal amount of the Second Lien Loan with the net proceeds from the IPO on November 26, 2014 and paid approximately $1.9 million in prepayment premiums in connection with that prepayment. On March 17, 2016, we paid a mandatory prepayment of $3.3 million, equal to 25% of our excess cash flow for the year ended December 31, 2015. As of June 30, 2016, the balance outstanding on the Second Lien Loan was $473.8 million, net of unamortized original issue discount of $1.9 million.
Certain Information Concerning Off-Balance Sheet Arrangements
As part of our ongoing business, we do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities referred to as structured finance or variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As of SeptemberJune 30, 2015,2016, we are not involved in any variable interest entities transactions and do not otherwise have any off-balance sheet arrangements.
In the normal course of our business activities, we lease real estate for our headquarters and branch locations and we may from time to time lease rental equipment and non-rental equipment under operating leases. See "—Contractual and Commercial Commitments."

37
Table of contents



Contractual and Commercial Commitments
There have been no material changes from the information included in our 20142015 10-K for the year ended December 31, 2014.2015.

Inflation
Although we cannot accurately anticipate the effect of inflation on our operations, we believe that inflation has not had and is not likely in the foreseeable future to have, a material impact on our results of operations.
Table of contents



Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts and disclosures in the financial statements and accompanying notes. Actual results could differ from those estimates. Our Critical Accounting JudgmentsPolicies and Estimates are disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates” in our 20142015 10-K for the year ended December 31, 2014. The only change made to our critical accounting policies and estimates during the nine months ended September 30, 2015, was the addition of payable pursuant to tax receivable agreement to the following listing of our critical accounting policies and estimates:for which there were no material changes.

Valuation of accounts receivable;
Useful lives and salvage value of rental equipment;
Goodwill and intangibles with indefinite useful lives;
Valuation of long-lived assets and intangibles with finite useful lives;
Income taxes;
Equity-based compensation;
Reserve for claims; and
Payable pursuant to tax receivable agreement.
Recent Accounting Pronouncements
We meet the definitionSee Note 2 of an emerging growth company under the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have irrevocably elected to avail ourselves of this exemption from adopting new or revised accounting standards and, therefore, will not be subject to new or revised accounting standards until such time as those standards apply to private companies. There were no significant new accounting pronouncements that the Company adopted during the nine months ended September 30, 2015.

In April 2015, the FASB issued ASU 2015-03 which provides guidance on the presentation of debt issuance costs. This guidance requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability and amortization of debt issuance costs will be reported as interest expense. This guidance is effective for private companies for fiscal years after December 15, 2015, and interim periods within fiscal years beginning after December 15, 2016, and requires application on a retrospective basis. We expect to adopt this guidance when effective for private companies, and do not expect this guidance to have a material impact on our financial statements, although it will change the financial statement classification of debt issuance costs. As of September 30, 2015, $9.3 million of debt issuance costs were included in total assets in our unaudited condensed consolidated balance sheet.

In July 2015,financial statements included elsewhere in this quarterly report on Form 10-Q for recently issued accounting pronouncements applicable to us and the FASB issued ASU 2015-11 which requires an entity to measure inventory at the lowereffect of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Current US GAAP requires that an entity measure inventory at the lower of cost or market. Market under current US GAAP could be replacement cost, net realizable value or net realizable value less a normal profit margin. This guidance is effective for private companies for fiscal years beginning after December 15, 2016 and interim periods within fiscal years beginning after December 15, 2017. This update should be applied prospectively. We expect to adopt this guidance when effective for private companies and do not expect this guidance to have a significant impactthose standards on our consolidated financial statements.statements and related disclosures.

38
Table of contents



Item 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk
We are subject to interest rate risk in connection with our long-term indebtedness. Our principal interest rate exposure relates to loans outstanding under our Revolving Credit Facility and Second Lien Loan. All outstanding indebtedness under the Revolving Credit Facility and Second Lien Loan (subject to LIBOR floor) bears interest at a variable rate.rate based on LIBOR. Each quarter point change in interest rates on the variable portion of indebtedness under our Revolving Credit Facility and Second Lien Loan would result in a change of $0.7 million and $1.2 million, respectively, to our interest expense on an annual basis.basis based on borrowings outstanding as of June 30, 2016.

The variable nature of our obligations under the Revolving Credit Facility and Second Lien Loan creates interest rate risk. In order to mitigate this risk, in March 2015, we entered into the Interest Rate Swap in the notional amount of $200.0 million to hedge the variable rate on the Revolving Credit Facility for the period between April 8, 2015 and April 8, 2020.

All transactions in derivative financial instruments are authorized and executed pursuant to regularly reviewed policies and procedures, which prohibit the use of derivative financial instruments for trading or speculative purposes.


Item 4.    CONTROLS AND PROCEDURES

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Evaluation of Disclosure Controls and Procedures

We maintain "disclosure controls and procedures," as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Our management, with the participation of our chief executive officer and chief financial officer, evaluated, as of the end of the period covered by this quarterly report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”))Act). Based on that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of SeptemberJune 30, 2015.2016.

Table of contents




Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the three months ended SeptemberJune 30, 2015,2016, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

39
Table of contents




PART II. OTHER INFORMATION

Item 1.        LEGAL PROCEEDINGS

We are party to various litigation matters in the ordinary course of our business. We cannot estimate with certainty our ultimate legal and financial liability with respect to our pending litigation matters. However, we believe, based on our examination of such matters, that our ultimate liability with respect to these matters will not have a material adverse effect on our financial position, results of operations or cash flows.

Item 1A.    RISK FACTORS

Item 1A of Part I ofThere have been no material changes in our 2014 10-K includes a detailed discussion of the risk factors that could materially affectsince filing our business, financial condition or future prospects. The information below updates, and should be read in conjunction with,2015 10-K for the risk factors in our 2014 Form 10-K. We encourage you to read these risk factors in their entirety.year ended December 31, 2015.

We cannot assure our stockholders that our share repurchase program will enhance long-term stockholder value. Share repurchases, if any, could increase the volatility of the price of our Class A common stock and could increase our debt.

In November 2015, our board of directors authorized a share repurchase program. Under the program, we are authorized to repurchase shares of common stock in open market or privately negotiated transactions for an aggregate purchase price not to exceed $25 million. Although the Board of Directors has authorized a share repurchase program, the share repurchase program does not obligate the Company to repurchase any specific dollar amount or to acquire any specific number of shares. The existence of a share repurchase program could cause our stock price to be higher than it would be in the absence of such a program and could potentially reduce the market liquidity for our stock. The timing and actual number of shares repurchased, if any, will depend on a variety of factors including market and business conditions, the trading price of the Company's Class A Common Stock, the nature of other investment or strategic opportunities, the rate of dilution of our equity compensation program, the availability of adequate funds, and other factors.

Any repurchases of our common stock pursuant to our share repurchase program could affect our stock price and increase its volatility. Additionally, repurchases under our share repurchase program will increase our debt, which could impact our ability to pursue possible future strategic opportunities and acquisitions and could result in lower overall returns on our cash balances. There can be no assurance that any share repurchases will enhance stockholder value because the market price of our common stock may decline below the levels at which we repurchased shares of stock. Although our share repurchase program is intended to enhance long-term stockholder value, short-term stock price fluctuations could reduce the program’s effectiveness. The repurchase program may in the future be limited, suspended or discontinued at any time without prior notice and any such limitation, suspension or discontinuation could cause the market price of our Class A Common Stock to decline. There can be no assurance that we will repurchase shares of our Class A Common Stock under our share repurchase program or that any future repurchases will have a positive impact on the trading price of our Class A Common Stock or earnings per share.

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

None.The following table provides information about acquisitions of Neff Corporation's Class A common stock by Neff Corporation during the second quarter of 2016:
Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Maximum Dollar Amount of Shares That May Yet Be Purchased Under the Program (1)
April 1, 2016 to April 30, 2016 278,706
 $7.55
 278,706
 $16,761,996
May 1, 2016 to May 31, 2016 219,085
 8.81
 219,085
 14,832,601
June 1, 2016 to June 30, 2016 13,800
 9.00
 13,800
 14,708,410
Total 511,591
 $8.13
 511,591
 $14,708,410
(1)On November 11, 2015, we announced that our Board approved on November 10, 2015, a share repurchase program authorizing up to $25 million dollars in share repurchases of Neff Corporation's Class A common stock in open market and negotiated purchases from time to time, dependent on market conditions.

Item 3.        DEFAULTS UPON SENIOR SECURITIES

None.

Item 4.        MINE SAFETY DISCLOSURES

None.

Item 5.        OTHER INFORMATION

None.

40
Table of contents





Item 6.        EXHIBITS                              EXHIBIT INDEX
    Incorporated by reference  
Exhibit Number Exhibit Description Form File No. Exhibit 
Filing
Date
 
Filed/
Furnished
Herewith
31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer         *
31.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer         *
32.1 Section 1350 Certification of Chief Executive Officer         **
32.2 Section 1350 Certification of Chief Financial Officer         **
101.INS XBRL Instance Document         *
101.SCH XBRL Taxonomy Extension Schema Document         *
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document         *
101.DEF XBRL Taxonomy Extension Definition Linkbase Document         *
101.LAB XBRL Taxonomy Extension Label Linkbase Document         *
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document         *

 
*Filed herewith.
**Furnished herewith.



41
Table of contents



SIGNATURES
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.

  NEFF CORPORATION
Date:November 12, 2015July 29, 2016By:  /s//s/ Graham Hood
  

Graham Hood
 Chief Executive Officer and Director (Principal Executive Officer)
Date:November 12, 2015July 29, 2016By:  /s//s/ Mark Irion
 
  Mark Irion
Chief Financial Officer



4240