UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q



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

For the quarterly period ended September 30, 2019

~~For the quarterly period ended September 30, 2017~~

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

Commission File Number 001-33139

HERC HOLDINGS INC.

(Exact name of registrant as specified in its charter)



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

27500 Riverview Center Blvd.

Bonita Springs, Florida 34134

~~(239)~~ (239) 301-1000

(Address, including Zip Code, and telephone number,

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

Not Applicable

(Former name, former address and former fiscal year,

if changed since last report)

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



Title of each class	Trading Symbol(s)	Name of exchange on which registered
Common Stock, par value $0.01 per share	HRI	New York Stock Exchange

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

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 x☒No o

☐

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



Large accelerated filer	x☒		Accelerated filer	o☐

Non-accelerated filer	o☐	~~(Do not check if a smaller reporting company)~~	Smaller reporting company	o☐

			Emerging growth company	o☐

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

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

~~Indicate the number~~As of October 18, 2019, there were 28,822,275 shares ~~outstanding of each~~ of the ~~issuer's classes of~~registrant's common stock, ~~as of the latest practicable date.~~$0.01 par value, outstanding.



~~Class~~		~~Shares Outstanding at November 3, 2017~~
~~Common Stock, par value $0.01 per share~~		~~28,370,805~~

Table of Contents

HERC HOLDINGS INC. AND SUBSIDIARIES

TABLE OF CONTENTS




		Page
PART I. FINANCIAL INFORMATION
ITEM 1.	Financial Statements	13
	Condensed Consolidated Balance Sheets as of September 30, ~~2017~~2019 and December 31, ~~2016~~2018	13
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, ~~2017~~2019 and ~~2016~~2018	24
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, ~~2017~~2019 and ~~2016~~2018	35
	Condensed Consolidated ~~Statement~~Statements of Changes in Equity for the Three and Nine Months Ended September 30, ~~2017~~2019 and 2018	46
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, ~~2017~~2019 and ~~2016~~	5
	~~Notes to Condensed Consolidated Financial Statements~~2018	7
	~~ITEM 2.~~Notes to Condensed Consolidated Financial Statements	9
ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2427
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	33
ITEM 4.	Controls and Procedures	34
PART II. OTHER INFORMATION
ITEM 1.	Legal Proceedings	3635
ITEM 1A.	Risk Factors	3635
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
ITEM 5.	Other Information	35
ITEM 6.	Exhibits	36
~~ITEM 5.~~		~~Other Information~~	36
~~ITEM 6.~~	~~Exhibits~~SIGNATURE	37
~~SIGNATURE~~		38

Table of Contents

HERC HOLDINGS INC. AND SUBSIDIARIES

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this "Report") includes "forward-looking statements," as that term is defined by the federal securities laws. Forward-looking statements include statements concerning our plans, intentions, objectives, strategies, future events, future revenue, future effective tax rates, profitability, performance or cash flows, future capital expenditures, future accounting changes, financing needs, business trends and other information that is not historical information. When used in this Report, the words "estimates," "expects," "anticipates," "projects," "plans," "intends," "believes," "forecasts," and future or conditional verbs, such as "will," "should," "could" or "may," as well as variations of such words or similar expressions are intended to identify forward-looking statements, although not all forward-looking statements are so designated. All forward-looking statements are based upon our current expectations and various assumptions, and there can be no assurance that our current expectations will be achieved. There are a number of risks, uncertainties and other important factors that could cause our actual results to differ materially from those suggested by our forward-looking statements, including:

the cyclicality of our business and its dependence on levels of capital investment and maintenance expenditures by our customers;

a slowdown in economic conditions or adverse changes in the level of economic activity or other economic factors specific to our customers or their industries, in particular, contractors and industrial customers;

our reliance upon communications networks and centralized IT systems;

the misuse or theft of information we possess, including as a result of cyber security breaches or otherwise;

our response to changes in technology and customer demands;

intense competition in the industry, including from our own suppliers, that may lead to downward pricing or an inability to increase prices;

our ability to attract and retain key management and other key personnel, and the ability of new employees to learn their new roles;

any occurrence that disrupts rental activity during our peak periods, especially in the construction industry;

some or all of our deferred tax assets could expire if we experience an "ownership change" as defined in the Internal Revenue Code;

changes in the legal and regulatory environment that affect our operations, including with respect to taxes, consumer rights, privacy, data security and employment matters;

an impairment of our goodwill or our indefinite lived intangible assets;

a decline in our relations with our key national account customers or the amount of equipment they rent from us;

maintenance and repair costs associated with our equipment rental fleet, and the residual value risk upon disposition;

our inability to protect our trade secrets and other intellectual property rights;

our exposure to a variety of claims and losses arising from our operations, some of which may not be covered by insurance;

issues we face with our union employees;

issues we face with environmental, health and safety laws and regulations and the costs of complying with them;

difficulty in identifying, implementing and integrating strategic acquisitions and the disruption in our business therefrom;

the liabilities we have assumed and share with Hertz Global Holdings, Inc., formerly known as Hertz Rental Car Holding Company, Inc., in connection with the spin-off;

HERC HOLDINGS INC. AND SUBSIDIARIES

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS (CONTINUED)

our substantial level of indebtedness, which is secured by substantially all of our consolidated assets, exposes us or makes us more vulnerable to a number of risks;

an increase in interest rates or in our borrowing margin would increase the cost of servicing our debt and could reduce our profitability and any additional debt we incur could further exacerbate these risks;

the sale of a large number of our shares or the perception that a sale could occur could cause the market price of our shares to decline, and these factors could make it more difficult for us to raise funds through future stock offerings;

provisions of our governing documents could discourage potential acquisition proposals and could deter or prevent a change in control;

the market price of our common stock may fluctuate significantly; and

other risks and uncertainties set forth in our Annual Report on Form 10-K for the year ended December 31, 2018 under Item 1A "Risk Factors," and in our other filings with the SEC.

All forward-looking statements are expressly qualified in their entirety by such cautionary statements. We undertake no obligation to update or revise forward-looking statements that have been made to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events.

Table of Contents

PART I—FINANCIAL INFORMATION

ITEM l. FINANCIAL STATEMENTS

HERC HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except par value)


	September 30, 2017			December 31, 2016			September 30, 2019			December 31, 2018
ASSETS	(Unaudited)						(Unaudited)
Cash and cash equivalents	$	19.1		$	24.0		$	34.5		$	27.8
Restricted cash and cash equivalents	7.1			7.0
Receivables, net of allowances of $31.8 and $24.9, respectively	347.9			293.3
Taxes receivable	4.4			7.4
Inventory	26.7			24.1
Prepaid and other current assets	19.2			15.9
Receivables, net of allowances of $24.8 and $21.5, respectively							316.4			332.4
Other current assets							30.9			40.2
Total current assets	424.4			371.7			381.8			400.4
Revenue earning equipment, net	2,465.5			2,390.0
Rental equipment, net							2,625.0			2,504.7
Property and equipment, net	287.3			272.0			302.7			282.5
Right-of-use lease assets							186.8			—
Intangible assets, net	284.4			303.9			292.1			293.5
Goodwill	91.1			91.0			91.0			91.0
Other long-term assets	36.2			34.7			23.7			38.1
Total assets	$	3,588.9		$	3,463.3		$	3,903.1		$	3,610.2
LIABILITIES AND EQUITY
Current maturities of long-term debt	$	17.2		$	15.7
Current maturities of long-term debt and financing obligations							$	33.0		$	29.9
Current maturities of operating lease liabilities							30.3			—
Accounts payable	246.3			139.0			212.0			147.0
Accrued liabilities	105.6			78.2			120.9			122.3
Taxes payable	18.6			10.0
Total current liabilities	387.7			242.9			396.2			299.2
Long-term debt, net	2,212.3			2,178.6			2,149.1			2,129.9
Deferred taxes	661.8			692.1
Financing obligations, net							118.2			116.3
Operating lease liabilities							161.5			—
Deferred tax liabilities							441.2			448.3
Other long-term liabilities	38.3			32.0			43.9			43.8
Total liabilities	3,300.1			3,145.6			3,310.1			3,037.5
Commitments and contingencies (Note 10)
Equity:
Preferred stock, $0.01 par value, 13.3 shares authorized, no shares issued and outstanding	—			—			—			—
Common stock, $0.01 par value, 133.3 shares authorized, 31.1 and 31.0 shares issued and 28.3 and 28.3 shares outstanding	0.3			0.3
Common stock, $0.01 par value, 133.3 shares authorized, 31.5 and 31.2 shares issued and 28.8 and 28.5 shares outstanding							0.3			0.3
Additional paid-in capital	1,758.1			1,753.3			1,789.2			1,777.9
Accumulated deficit	(679.2		)	(625.2		)	(386.3		)	(391.1		)
Accumulated other comprehensive loss	(98.4		)	(118.7		)	(118.2		)	(122.4		)
Treasury stock, at cost, 2.7 shares and 2.7 shares	(692.0		)	(692.0		)	(692.0		)	(692.0		)
Total equity	288.8			317.7			593.0			572.7
Total liabilities and equity	$	3,588.9		$	3,463.3		$	3,903.1		$	3,610.2

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

Table of Contents

HERC HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Unaudited

(In millions, except per share data)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,					Nine Months Ended September 30,
	2017			2016			2017			2016			2019		2018			2019			2018
Revenues:
Equipment rentals	$	413.1		$	360.3		$	1,084.5		$	996.0
Sales of revenue earning equipment	27.7			24.9			128.5			94.0
Equipment rental													$	459.6	$	449.0		$	1,244.8		$	1,210.6
Sales of rental equipment													35.4		50.1			171.8			175.6
Sales of new equipment, parts and supplies	13.9			15.7			40.3			50.9			10.0		14.2			34.1			36.4
Service and other revenues	2.9			2.7			9.5			8.7
Service and other revenue													3.1		2.9			8.2			10.4
Total revenues	457.6			403.6			1,262.8			1,149.6			508.1		516.2			1,458.9			1,433.0
Expenses:
Direct operating	188.2			169.9			526.2			487.8			197.7		194.4			575.3			584.9
Depreciation of revenue earning equipment	96.3			89.1			283.5			255.1
Cost of sales of revenue earning equipment	28.6			27.5			134.9			111.6
Depreciation of rental equipment													102.7		98.3			303.6			288.6
Cost of sales of rental equipment													36.7		51.1			170.2			168.9
Cost of sales of new equipment, parts and supplies	10.8			12.1			30.3			39.2			7.2		10.6			25.8			27.7
Selling, general and administrative	84.6			66.8			244.6			203.5			76.2		78.4			221.2			229.2
Impairment	—			—			29.3			—
Restructuring													—		—			7.8			1.0
Interest expense, net	32.4			32.3			101.8			52.1			81.9		38.6			146.4			103.0
Other expense (income), net	(1.9		)	(0.8		)	(2.3		)	(2.2		)
Other income, net													0.5		(0.4		)	(1.8		)	(0.8		)
Total expenses	439.0			396.9			1,348.3			1,147.1			502.9		471.0			1,448.5			1,402.5
Income (loss) before income taxes	18.6			6.7			(85.5		)	2.5
Income tax benefit (provision)	(5.8		)	(3.7		)	31.5			(9.0		)
Net income (loss)	$	12.8		$	3.0		$	(54.0	)	$	(6.5	)
Income before income taxes													5.2		45.2			10.4			30.5
Income tax benefit													4.2		1.0			2.0			5.3
Net income													$	9.4	$	46.2		$	12.4		$	35.8
Weighted average shares outstanding:
Basic	28.3			28.3			28.3			28.3			28.7		28.5			28.7			28.4
Diluted	28.6			28.3			28.3			28.3			29.1		28.9			29.1			28.9
Income (loss) per share:
Earnings per share:
Basic	$	0.45		$	0.11		$	(1.91	)	$	(0.23	)	$	0.33	$	1.62		$	0.43		$	1.26
Diluted	$	0.45		$	0.11		$	(1.91	)	$	(0.23	)	$	0.32	$	1.60		$	0.43		$	1.24

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

Table of Contents

HERC HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Unaudited

(In millions)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016			2019			2018			2019			2018
Net income (loss)	$	12.8		$	3.0		$	(54.0	)	$	(6.5	)
Net income													$	9.4		$	46.2		$	12.4		$	35.8
Other comprehensive income (loss):
Foreign currency translation adjustments	12.8			(0.6		)	21.5			23.3			(3.6		)	8.6			5.8			(5.6		)
Unrealized gains and losses on hedging instruments:
Unrealized gains (losses) on hedging instruments	0.5			—			(0.4		)	—			(0.4		)	0.2			(3.4		)	3.2
Income tax (provision) benefit related to hedging instruments	(0.2		)	—			0.2			—
Income tax benefit (provision) related to hedging instruments													0.2			—			0.9			(0.8		)
Pension and postretirement benefit liability adjustments:
Amortization of net losses included in net periodic pension cost	0.2			0.5			1.1			1.4			0.4			0.3			1.2			0.8
Pension and postretirement benefit liability adjustments arising during the period	—			—			(2.7		)	(7.8		)
Income tax (provision) benefit related to defined benefit pension plans	(0.1		)	(0.2		)	0.6			2.4
Income tax provision related to defined benefit pension plans													(0.1		)	(0.1		)	(0.3		)	(0.2		)
Total other comprehensive income (loss)	13.2			(0.3		)	20.3			19.3			(3.5		)	9.0			4.2			(2.6		)
Total comprehensive income (loss)	$	26.0		$	2.7		$	(33.7	)	$	12.8
Total comprehensive income													$	5.9		$	55.2		$	16.6		$	33.2

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

Table of Contents

HERC HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED ~~STATEMENT~~STATEMENTS OF CHANGES IN EQUITY

Unaudited

(In millions)



	Three Months Ended September 30, 2019
	Common Stock			Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total Equity
Balance at:	Shares	Amount		Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total Equity
June 30, 2019	28.7	$	0.3	$	1,785.8		$	(395.7	)	$	(114.7	)	$	(692.0	)	$	583.7
Net income	—	—		—			9.4			—			—			9.4
Other comprehensive income	—	—		—			—			(3.5		)	—			(3.5		)
Net settlement on vesting of equity awards	0.1	—		(1.7		)	—			—			—			(1.7		)
Stock-based compensation charges	—	—		4.3			—			—			—			4.3
Employee stock purchase plan	—	—		0.6			—			—			—			0.6
Exercise of stock options	—	—		0.2			—			—			—			0.2
September 30, 2019	28.8	$	0.3	$	1,789.2		$	(386.3	)	$	(118.2	)	$	(692.0	)	$	593.0



	Nine Months Ended September 30, 2019
	Common Stock			Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total Equity
Balance at:	Shares	Amount		Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total Equity
December 31, 2018	28.5	$	0.3	$	1,777.9		$	(391.1	)	$	(122.4	)	$	(692.0	)	$	572.7
Net income	—	—		—			12.4			—			—			12.4
Adoption of new accounting pronouncement (Note 2)	—	—		—			(7.6		)	—			—			(7.6		)
Other comprehensive income	—	—		—			—			4.2			—			4.2
Net settlement on vesting of restricted stock	0.3	—		(3.7		)	—			—			—			(3.7		)
Stock-based compensation charges	—	—		12.5			—			—			—			12.5
Employee stock purchase plan	—	—		1.8			—			—			—			1.8
Exercise of stock options	—	—		0.7			—			—			—			0.7
September 30, 2019	28.8	$	0.3	$	1,789.2		$	(386.3	)	$	(118.2	)	$	(692.0	)	$	593.0



	Three Months Ended September 30, 2018
	Common Stock			Additional Paid-In Capital		Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total Equity
Balance at:	Shares	Amount		Additional Paid-In Capital		Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total Equity
June 30, 2018	28.5	$	0.3	$	1,770.0	$	(472.8	)	$	(110.2	)	$	(692.0	)	$	495.3
Net income	—	—		—		46.2			—			—			46.2
Other comprehensive loss	—	—		—		—			9.0			—			9.0
Stock-based compensation charges	—	—		3.3		—			—			—			3.3
Employee stock purchase plan	—	—		0.5		—			—			—			0.5
September 30, 2018	28.5	$	0.3	$	1,773.8	$	(426.6	)	$	(101.2	)	$	(692.0	)	$	554.3

Common Stock Additional
Paid-In Capital Accumulated
Deficit Accumulated
Other
Comprehensive
Income (Loss) Treasury Stock Total
Equity
Balance at: Shares Amount
December 31, 2016 28.3
$ 0.3
$ 1,753.3
$ (625.2 ) $ (118.7 ) $ (692.0 ) $ 317.7
Net loss —
—
—
(54.0 ) —
—
(54.0 )
Other comprehensive income —
—
—
—
20.3
—
20.3
Stock-based compensation charges —
—
7.5
—
—
—
7.5
Employee stock purchase plan —
—
0.7
—
—
—
0.7
Exercise of stock options and other —
—
0.2
—
—
—
0.2
Net transfers with THC —
—
(3.6 ) —
—
—
(3.6 )
September 30, 2017 28.3
$ 0.3
$ 1,758.1
$ (679.2 ) $ (98.4 ) $ (692.0 ) $ 288.8



	Nine Months Ended September 30, 2018
	Common Stock			Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total Equity
Balance at:	Shares	Amount		Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total Equity
December 31, 2017	28.3	$	0.3	$	1,763.1		$	(462.4	)	$	(98.6	)	$	(692.0	)	$	510.4
Net income	—	—		—			35.8			—			—			35.8
Other comprehensive loss	—	—		—			—			(2.6		)	—			(2.6		)
Net settlement on vesting of equity awards	0.1	—		(1.1		)	—			—			—			(1.1		)
Stock-based compensation charges	—	—		9.9			—			—			—			9.9
Employee stock purchase plan	—	—		1.4			—			—			—			1.4
Exercise of stock options	0.1	—		0.5			—			—			—			0.5
September 30, 2018	28.5	$	0.3	$	1,773.8		$	(426.6	)	$	(101.2	)	$	(692.0	)	$	554.3

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

Table of Contents

HERC HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited

(In millions)


	Nine Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2019			2018
Cash flows from operating activities:
Net loss	$	(54.0	)	$	(6.5	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation of revenue earning equipment	283.5			255.1
Net income							$	12.4		$	35.8
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of rental equipment							303.6			288.6
Depreciation of property and equipment	34.0			29.1			39.3			38.2
Amortization of intangible assets	3.7			3.8			5.2			3.6
Amortization of deferred financing costs	4.7			4.2
Amortization of deferred debt and financing obligations costs							4.3			4.7
Loss on extinguishment of debt							53.6			5.4
Stock-based compensation charges	7.5			3.8			12.5			9.9
Impairment	29.3			—
Provision for receivables allowance	39.4			33.1
Restructuring							5.5			—
Provision for receivables allowances							40.2			41.0
Deferred taxes	(31.5		)	9.0			(5.6		)	(6.4		)
Loss on sale of revenue earning equipment	6.4			17.6
Gain on sale of rental equipment							(1.6		)	(6.7		)
Income from joint ventures	(1.3		)	(2.1		)	(0.3		)	(1.3		)
Other	2.1			6.5			5.6			8.0
Changes in assets and liabilities:
Receivables	(98.6		)	(49.1		)	(37.0		)	(46.7		)
Inventory, prepaid and other assets	(6.7		)	(16.7		)
Other assets							2.8			(2.2		)
Accounts payable	(3.4		)	25.1			(1.6		)	(3.5		)
Accrued liabilities and other long-term liabilities	22.9			56.3			2.3			6.6
Taxes receivable and payable	11.9			1.7
Net cash provided by operating activities	249.9			370.9			441.2			375.0
Cash flows from investing activities:
Net change in restricted cash and cash equivalents	(0.1		)	3.7
Revenue earning equipment expenditures	(356.3		)	(325.7		)
Proceeds from disposal of revenue earning equipment	121.6			99.0
Rental equipment expenditures							(506.7		)	(617.5		)
Proceeds from disposal of rental equipment							156.9			189.1
Non-rental capital expenditures	(57.1		)	(29.2		)	(34.9		)	(58.5		)
Proceeds from disposal of property and equipment	2.8			4.1			5.0			3.9
Other							4.0			—
Net cash used in investing activities	(289.1		)	(248.1		)	(375.7		)	(483.0		)

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

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HERC HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

Unaudited

(In millions)

Nine Months Ended September 30,
2017 2016
Cash flows from financing activities:
Proceeds from issuance of long-term debt —
1,235.0
Repayments of long-term debt (123.5 ) —
Proceeds from revolving lines of credit 405.9
1,646.0
Repayments on revolving lines of credit (238.7 ) (794.0 )
Principal payments under capital lease obligations (11.6 ) (8.7 )
Proceeds from exercise of stock options and other 0.2
10.0
Net settlement on vesting of equity awards —
(0.5 )
Proceeds from employee stock purchase plan 0.7
—
Distribution and net transfers to THC —
(2,073.5 )
Net financing activities with affiliates —
(67.4 )
Payment of debt financing costs —
(41.5 )
Net cash provided by (used in) in financing activities 33.0
(94.6 )
Effect of foreign exchange rate changes on cash and cash equivalents 1.3
0.4
Net increase (decrease) in cash and cash equivalents during the period (4.9 ) 28.6
Cash and cash equivalents at beginning of period 24.0
24.7
Cash and cash equivalents at end of period $ 19.1
$ 53.3

Supplemental disclosure of cash flow information:
Cash paid for interest $ 74.9
$ 15.2
Cash paid (refunded) for income taxes, net $ (3.1 ) $ 1.1
Supplemental disclosure of non-cash investing activity:
Purchases of revenue earning equipment in accounts payable $ 106.7
$ 119.1
Non-rental capital expenditures in accounts payable $ 1.3
$ 8.8
Supplemental disclosure of non-cash financing activity:
Non-cash settlement of transactions with THC through equity $ 3.6
$ 97.9
Supplemental disclosure of non-cash investing and financing activity:
Equipment acquired through capital lease $ 0.3
$ 20.3



	Nine Months Ended September 30,
	2019			2018
Cash flows from financing activities:
Proceeds from issuance of long-term debt	1,200.0			—
Repayments of long-term debt	(864.5		)	(123.5		)
Proceeds from revolving lines of credit and securitization	1,134.3			650.8
Repayments on revolving lines of credit and securitization	(1,465.5		)	(424.5		)
Proceeds from financing obligations	4.7			—
Principal payments under capital lease and financing obligations	(11.9		)	(13.1		)
Debt redemption premium payment	(41.5		)	(3.7		)
Payment of debt financing costs	(13.3		)	(1.0		)
Proceeds from exercise of stock options	0.7			0.5
Proceeds from employee stock purchase plan	1.8			1.4
Net settlement on vesting of equity awards	(3.7		)	(1.1		)
Net cash used in financing activities	(58.9		)	85.8
Effect of foreign exchange rate changes on cash and cash equivalents	0.1			(1.3		)
Net increase in cash and cash equivalents during the period	6.7			(23.5		)
Cash and cash equivalents cash at beginning of period	27.8			41.5
Cash and cash equivalents at end of period	$	34.5		$	18.0

Supplemental disclosure of cash flow information:
Cash paid for interest, including premium payment	$	121.2		$	90.2
Cash paid for income taxes, net	$	0.7		$	12.0
Supplemental disclosure of non-cash investing activity:
Purchases of rental equipment in accounts payable	$	63.8		$	80.6
Non-rental capital expenditures in accounts payable	$	7.3		$	5.6
Note receivable on disposal of joint venture	$	19.0		$	—

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

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HERC HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Unaudited

Note 1—Background

Herc Holdings Inc. ("we," "us," "our," "Herc Holdings," "the Company" or, as the context requires, "its") is one of the leading equipment rental suppliers with approximately ~~275 company-operated~~270 locations at September 30, ~~2017,~~2019, principally in North America. The Company conducts substantially all of its operations through subsidiaries, including Herc Rentals Inc. ("Herc"). Operations are conducted under the Herc Rentals brand in the United States and Canada and under the Hertz Equipment Rental brand in ~~Canada and~~ other international locations. ~~The~~With over 50 years of experience, the Company ~~has been in the equipment rental business since 1965 and~~ is a full-line equipment rental supplier ~~in key markets, including commercial~~offering a broad portfolio of equipment for rent. In addition to its principal business of equipment rental, the Company sells used equipment and ~~residential~~contractor supplies such as construction ~~industrial~~consumables, tools, small equipment and ~~manufacturing, civil infrastructure, automotive, government~~safety supplies; provides repair, maintenance, equipment management services and ~~municipalities, energy, remediation, emergency response, facilities, entertainment~~safety training to certain of its customers; offers equipment re-rental services and ~~agriculture,~~provides on-site support to its customers; and provides ancillary services such as ~~well as refineries~~equipment transport, rental protection, cleaning, refueling and ~~petrochemicals.~~ labor.

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

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

For accounting purposes, due to the relative significance of New Hertz to Hertz Holdings, New Hertz was considered the spinnor or divesting entity in the Spin-Off and Herc Holdings was considered the spinnee or divested entity. As a result, despite the legal form of the transaction, New Hertz was the "accounting successor" to Hertz Holdings. Under the accounting rules, the historical financial information of New Hertz is required to reflect the financial information of Hertz Holdings, as if New Hertz spun off Herc Holdings in the Spin-Off. In contrast, the historical financial information of Herc Holdings, for the first half of 2016 which is included in certain information presented in these condensed consolidated financial statements, reflects the financial information of the equipment rental business and certain parent legal entities of Herc as historically operated as part of Hertz Holdings, as if Herc Holdings was a stand-alone company for such period. The historical financial information of Herc Holdings presented in these condensed consolidated financial statements is not necessarily indicative of what Herc Holdings’ financial position or results of operations actually would have been had Herc Holdings operated as a separate, independent company for all periods presented.

Note 2—Basis of Presentation and Recently Issued Accounting Pronouncements

Basis of Presentation

The Company prepares its condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP"). In the opinion of management, the condensed consolidated financial statements reflect all adjustments of a normal recurring nature that are necessary for a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year. The year-end condensed consolidated balance sheet data was derived from audited financial statements, ~~but does~~however, these condensed consolidated financial statements do not include all of the disclosures required byfor complete annual financial statements and, accordingly, certain information, footnotes and disclosures normally included in annual financial statements, prepared in accordance with U.S. ~~GAAP.~~GAAP, have been condensed or omitted in accordance with Securities and Exchange Commission ("SEC") rules and regulations. The Company believes that the disclosures made are adequate to make the information not misleading. Accordingly, the condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on February 28, 2019.

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

Significant estimates inherent in the preparation of the condensed consolidated financial statements include receivables allowances, depreciation of ~~revenue earning~~rental equipment, ~~pension and postretirement benefits,~~ the recoverability of long-lived assets, useful lives and impairment of long-lived tangible and intangible assets including goodwill and trade name, ~~accounting for income taxes,~~pension and postretirement benefits, valuation of stock-based compensation, reserves for litigation and other contingencies ~~allowances~~and accounting for ~~receivables and, prior to the Spin-Off, allocated general corporate expenses from THC,~~income taxes, among others.

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HERC HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

Since the Spin-Off occurred on June 30, 2016, the financial statements included in this Quarterly Report on Form 10-Q (this "Report") represent the carve-out financial results for the first six months of 2016 and the actual results for the three months ended September 30, 2016.

Principles of Consolidation

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

Transactions between the Company and THC and its affiliates prior to the Spin-Off are herein referred to as “related party” or “affiliated” transactions. Effective with the Spin-Off on June 30, 2016, all transactions with THC and its affiliates were settled and paid in full. Effective upon the Spin-Off, the Company entered into certain agreements with New Hertz, including a transition services agreement ("TSA"). See Note 15, "Arrangements with New Hertz" for further information.

For periods prior to the Spin-Off, the condensed consolidated financial statements include net interest expense on loans receivable and payable to affiliates and expense allocations for certain corporate functions historically performed by THC, including, but not limited to, general corporate expenses related to finance, legal, information technology, human resources, communications, employee benefits and incentives, insurance and stock-based compensation. These expenses were allocated to the Company on the basis of direct usage when identifiable, with the remainder allocated on the basis of revenues, operating expenses, headcount or other relevant measures. Management believes the assumptions underlying the condensed consolidated financial statements, including the assumptions regarding the allocation of corporate expenses from THC, are reasonable. Nevertheless, the condensed consolidated financial statements may not include all of the expenses that would have been incurred had the Company been a stand-alone company during the periods presented and may not reflect the Company's condensed consolidated financial position, results of operations and cash flows had the Company been a stand-alone company during the periods presented. Actual costs that would have been incurred if the Company had been a stand-alone company would have depended on multiple factors, including organizational structure and strategic decisions made in various areas, including information technology and infrastructure. For additional information related to costs allocated to the Company by THC, see Note 14, "Related Party Transactions."

~~Reclassification of Prior Period Presentation~~

Certain prior period amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on the reported condensed consolidated balance sheets, results of operations, equity or cash flows for any period presented.

~~Correction of Errors~~

The Company revised its condensed consolidated statement of operations for the nine months ended September 30, 2016 to correct the recording of $3.0 million of expense from direct operating expense into selling, general and administrative expense, which did not impact net income. The correction resulted from incorrect mapping of certain expense accounts to the financial statement line items.

During the first quarter of 2017, the Company identified an error related to its classification of certain restricted cash. Accordingly, the Company revised its consolidated balance sheet as of December 31, 2016 to correct the classification of $12.4 million from restricted cash to cash and cash equivalents as the cash was determined to be available for use in general operations. This correction also impacted the condensed consolidated statements of cash flows for the nine months ended September 30, 2016 by increasing cash used in investing activities by $7.6 million and increasing cash and cash equivalents at the beginning and end of the period by $9.0 million and $1.4 million, respectively. The Company will also correct its previously reported financial statements in its future filings. The Company assessed the materiality of the error from qualitative and quantitative perspectives and concluded the adjustments were not material to its previously issued annual and interim financial statements. There was no impact of this error to the condensed consolidated statements of operations, condensed consolidated statements of other comprehensive income (loss) or condensed consolidated statement of equity presented in this Report or for any period.

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~~HERC HOLDINGS INC. AND SUBSIDIARIES~~

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

~~Unaudited~~

Recently Issued Accounting Pronouncements

Adopted

~~Simplifying the Subsequent Measurement of Inventory~~Leases

In ~~July 2015,~~February 2016, the Financial Accounting Standards Board ("FASB") issued new leasing guidance ("Topic 842") that requires inventory to be measured at the lower of cost and net realizable value (rather than cost or market), excluding inventory measured using the last-in, first-out method or the retail inventory method. Net realizable value is defined as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The Company adopted this guidance on January 1, 2017 in accordance with the effective date. Adoption of this guidance did not impact the Company's financial position, results of operations or cash flows.

~~Simplifying the Transition to the Equity Method of Accounting~~

In March 2016, the FASB issued guidance that eliminates the requirement to apply the equity method of accounting retrospectively when significant influence over a previously held investment is obtained. Rather, the guidance requires the investor to add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method of accounting. The Company adopted this guidance on January 1, 2017 in accordance with the effective date. Adoption of this guidance did not impact the Company's financial position, results of operations or cash flows.

~~Improvements to Employee Share-Based Payment Accounting~~

In March 2016, the FASB issued guidance that simplifies several areas of employee share-based payment accounting, including: (i) eliminating tracking of tax "windfalls" in a separate pool within additional paid-in capital; instead, excess tax benefits and tax deficiencies are recorded within income tax expense; (ii) eliminating the requirement that excess tax benefits be realized before they can be recognized, which is required to be recorded as an adjustment to opening retained earnings; however, the impact to the Company upon adoption was immaterial; (iii) presentation of excess tax benefits as an operating activity on the statement of cash flows, which had no impact on the Company; (iv) presentation of employee taxes paid directly to a taxing authority when directly withholding shares for tax-withholding purposes as a financing activity on the statement of cash flows, which had no impact as the Company has historically followed this presentation and (v) making a policy election regarding treatment of forfeitures, with respect to which the Company will continue to estimate forfeitures. The Company adopted this guidance on January 1, 2017 in accordance with the effective date. Adoption of this guidance did not impact the Company's consolidated statement of operations.

~~Improvements to Accounting for Hedging Activities~~

In August 2017, the FASB issued guidance that amends the hedge accounting recognition and presentation requirements to improve the transparency and understandability of information conveyed to the financial statement users about an entity’s risk management activities. The guidance is effective for fiscal years beginning after December 15, 2018 and interim periods therein; however, early adoption is permitted. The Company adopted this guidance in the third quarter of 2017 using a modified retrospective approach, as required, which did not have a significant impact on its financial position, results of operations or cash flows.

~~Not Yet Adopted~~

~~Revenue from Contracts with Customers~~

In May 2014, the FASB issued guidance that will replace most existing revenue recognition guidance in U.S. GAAP. The new guidance applies to all contracts with customers except for leases, insurance contracts, financial instruments, certain nonmonetary exchanges and certain guarantees. The core principle of the guidance is that an entity should recognize revenue for the transfer of goods or services equal to the amount that it expects to be entitled to receive for those goods or services. The new principles-based revenue recognition model requires an entity to perform five steps in its analysis: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. Under the new guidance, performance obligations in a contract will be separately identified, which may impact the timing of recognition

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~~HERC HOLDINGS INC. AND SUBSIDIARIES~~

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

~~Unaudited~~

of the revenue allocated to each obligation. The measurement of revenue recognized may also be impacted by identification of new performance obligations and other matters, such as collectability and variable consideration. Also, additional disclosures are required about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. The new guidance may be adopted on either a full or modified retrospective basis. As originally issued, the guidance was effective for annual reporting periods beginning after December 15, 2016, including interim periods within those reporting periods. However in July 2015, the FASB agreed to defer the effective date until annual and interim reporting periods beginning after December 15, 2017.

In March 2016, the FASB issued clarifying guidance on assessing whether an entity is a principal or an agent in a revenue transaction, which impacts whether an entity reports revenue on a gross or net basis. In April 2016, the FASB issued guidance that reduces the complexity for identifying performance obligations and clarifies the implementation guidance on licensing for intellectual property. In May 2016, the FASB issued guidance that clarifies the collectability criterion, the presentation of sales taxes and non-cash consideration, and provides additional implementation practical expedients.

The Company believes the accounting for equipment rental revenue is primarily outside of the scope of the new revenue guidance and will be evaluated under the new lease guidance, which is described further under the heading "Leases" below. The Company's review of its revenue accounting with respect to sales of revenue earning equipment, sales of new equipment, parts and supplies and service and other revenues is ongoing; however, the Company does not believe this guidance will have a significant impact on its financial statements. The Company anticipates adopting the new revenue guidance using the modified retrospective approach, but a final determination on the selected adoption approach has not yet been made. Additionally, the Company is evaluating the disclosure requirements of the new revenue guidance, as well as its impact on the Company's internal control over financial reporting.

~~Leases~~

~~In February 2016, the FASB issued guidance that replaces~~replaced the existing lease ~~guidance. The new~~ guidance ~~establishes~~("Topic 840"). Topic 842 established a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and lease liability on the balance sheet for all leases with terms longer than 12 months. Leases ~~will be~~are classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. This guidance also ~~expands~~expanded the requirements for lessees to record leases embedded in other arrangements and the required quantitative and qualitative disclosures surrounding leases. Accounting guidance for lessors is largely unchanged. ~~This guidance is~~

The Company adopted Topic 842 on its effective ~~for annual periods beginning after December 15, 2018 and interim periods within those annual periods~~date of January 1, 2019 using a modified retrospective transition ~~approach.~~approach; as such, Topic 842 was not applied to periods prior and the adoption had no impact on the Company's previously reported results. The Company ~~is in the process~~recognized operating lease liabilities of ~~assessing the potential impacts of adopting this guidance~~$165.3 million upon adoption, with corresponding ROU assets on its ~~financial position,~~balance sheet. This guidance did not have a material impact on its results of operations and cash flows.

~~Statement~~The Company took advantage of ~~Cash Flows: Classification~~the transition package of ~~Certain Cash Receipts~~practical expedients permitted within Topic 842 which allowed the Company not to reassess (i) whether any expired or existing lease contracts are or contain leases, (ii) the historical lease classification for any expired or existing leases and ~~Cash Payments~~(iii) initial direct costs for any existing leases. The Company has elected not to combine lease and non-lease components for its real estate leases and allocates the consideration in the contract based on relative stand-alone prices of each component.

Additionally, as discussed in Note 3, "Revenue Recognition," most of the Company's equipment rental revenues were accounted for under Topic 840 until the adoption of Topic 842. The Company recognized a cumulative-effect adjustment to the opening balance of retained earnings related to these items of $7.6 million. The adoption of Topic 842 will not have a significant impact on future revenues. The Company also elected the practical expedient that allows lessors to treat the lease and non-lease components as a single lease component where the non-lease component would otherwise be accounted for under Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers (“Topic 606”), astiming and pattern of transfer for the lease component and non-lease components associated with that lease component are the same.

Not Yet Adopted

Compensation - Retirement Benefits

In August ~~2016,~~2018, the FASB issued guidance ~~to eliminate the diversity in practice~~that adds, removes, and modifies disclosure requirements related to defined benefit pension and other postretirement plans in order to improve the ~~classification of certain cash receipts and payments in the statement of cash flows, by adding or clarifying guidance on eight specific cash flow issues. This~~disclosure effectiveness. The guidance is effective for ~~annual and interim reporting periods~~fiscal years beginning after December 15, ~~2017,~~2020 and should be applied on a retrospective basis to all periods presented, with early adoption permitted. The Company ~~plans~~expects to adopt the new and modified disclosures requirements of this ~~guidance upon its effective date of January 1, 2018 and is in the process of evaluating the potential impacts of adopting this~~new guidance on its ~~consolidated statements of cash flows.~~effective date.

Fair Value Measurement

~~Statement of Cash Flows: Restricted Cash~~

In ~~November 2016,~~August 2018, the FASB issued new guidance ~~requiring restricted cash~~that modifies disclosure requirements on fair value measurements, removing and ~~cash equivalents to be included with cash and cash equivalents on the statement of cash flows. This~~modifying certain disclosures, while adding other disclosures. The guidance is effective for ~~annual~~fiscal years, and interim ~~reporting~~ periods within those fiscal years, beginning after December 15, ~~2017,~~2019, with early adoption permitted. The Company ~~plans~~expects to adopt ~~this guidance upon its effective date of January 1, 2018 and does not expect~~ the ~~guidance to have a significant impact on its cash flows.~~

~~Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory~~

In October 2016, the FASB issued guidance requiring an entity to recognize upon transfer the income tax consequences of an intra-entity transfer of an asset other than inventory, eliminating the current recognition exception. Two common examples of assets included in the scope of this standard are intellectual property and property, plant and equipment. This guidance is effective for annual and interim reporting periods beginning after December 15, 2017. The Company plans to adopt this guidance upon itsnew

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HERC HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

~~effective date of January 1, 2018 and is in the process of evaluating the potential impacts of adopting this~~ guidance on its ~~financial position, results of operations and cash flows.~~

~~Simplifying the Test for Goodwill Impairment~~

In January 2017, the FASB issued guidance to simplify the subsequent measurement of goodwill by removing the second step of the two-step impairment test. The guidance requires that an entity recognize an impairment charge for the amount by which the carrying amount of the reporting unit exceeds the reporting unit’s fair value. This guidance is effective for annual and interim periods beginning after December 15, 2019, with early adoption permitted. The Company plans to adopt the new guidance in the fourth quarter of 2017 when it performs its annual goodwill impairment test as of October 1, 2017. Adoption of the guidance will not impact the Company's financial position, results of operations or cash flows.

~~Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Costs~~

In March 2017, the FASB issued guidance on the presentation of net periodic pension and postretirement benefit costs in the income statement and on the components eligible for capitalization. The guidance requires the reporting of the service cost component of the net periodic benefit costs in the same income statement line item as other components of net periodic costs arising from services rendered by an employee during the period, and that non-service-cost components be presented in the income statement separately from the service cost components and outside a subtotal of income from operations. The guidance also allows for the capitalization of the service cost components, when applicable. This guidance is effective for annual and interim periods beginning after December 15, 2017. The Company plans to adopt this guidance upon its effective date ~~of January 1, 2018. Adoption of this guidance will~~and adoption is not expected to have a ~~significant~~material impact on the Company's ~~results of operations.~~financial statement disclosures.

~~Compensation - Stock Compensation~~

In May 2017, the FASB issued guidance pursuant to which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. Under the updated guidance, a modification is defined as a change in the terms or conditions of a share-based payment award, and an entity should account for the effects of a modification unless all of the following are met:


1.	The fair value of the modified award is the same as the fair value of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation techniques that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification.


2.	~~The vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified.~~


3.	~~The classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified.~~

This guidance requires prospective adoption and is effective for annual and interim periods beginning after December 15, 2017, with early adoption permitted. The Company plans to adopt this guidance upon its effective date of January 1, 2018 and does not expect the guidance to have a significant impact on its financial position, results of operations or cash flows.

Note 3—Revenue ~~Earning Equipment~~Recognition

~~Revenue earning~~The Company is principally engaged in the business of renting equipment. Ancillary to the Company’s principal equipment ~~consists~~rental business, the Company also sells used rental equipment, new equipment and parts and supplies and offers certain services to support its customers. The Company’s business is primarily focused in North America with revenue from the United States representing approximately 90.0% and 89.5% of total revenue for the three and nine months ended September 30, 2019, respectively, compared to 89.6% and 88.7% for the same periods in 2018.

The Company’s rental transactions are principally accounted for under Topic 842. Prior to the adoption of Topic 842, the Company accounted for rental transactions under Topic 840. The Company’s sale of rental and new equipment, parts and supplies along with certain services provided to customers are accounted for under Topic 606. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer. The amount of revenue recognized reflects the consideration the Company expects to be entitled to in exchange for such products or services.

The following tables summarizes the applicable accounting guidance for the Company’s revenues for the three and nine months ended September 30, 2019 and 2018, respectively (in millions):



	Three Months Ended September 30,
	2019						2018
	Topic 842		Topic 606		Total		Topic 840		Topic 606		Total
Revenues:
Equipment rental	$	416.0	$	—	$	416.0	$	404.8	$	—	$	404.8
Other rental revenue:
Delivery and pick-up	—		27.6		27.6		—		25.5		25.5
Other	16.0		—		16.0		18.7		—		18.7
Total other rental revenues	16.0		27.6		43.6		18.7		25.5		44.2
Total equipment rentals	432.0		27.6		459.6		423.5		25.5		449.0
Sales of rental equipment	—		35.4		35.4		—		50.1		50.1
Sales of new equipment, parts and supplies	—		10.0		10.0		—		14.2		14.2
Service and other revenues	—		3.1		3.1		—		2.9		2.9
Total revenues	$	432.0	$	76.1	$	508.1	$	423.5	$	92.7	$	516.2

September 30, 2017 December 31, 2016
Revenue earning equipment $ 3,858.1
$ 3,695.5
Less: Accumulated depreciation (1,392.6 ) (1,305.5 )
Revenue earning equipment, net $ 2,465.5
$ 2,390.0

During the second quarter of 2017, the Company deemed certain revenue earning equipment, with a net book value of approximately $3.8 million, to be held for sale and reclassified such equipment to "Prepaid and other current assets" in the condensed consolidated



	Nine Months Ended September 30,
	2019						2018
	Topic 842		Topic 606		Total		Topic 840		Topic 606		Total
Revenues:
Equipment rental	$	1,134.2	$	—	$	1,134.2	$	1,101.6	$	—	$	1,101.6
Other rental revenue:
Delivery and pick-up	—		71.6		71.6		—		63.9		63.9
Other	39.0		—		39.0		45.1		—		45.1
Total other rental revenues	39.0		71.6		110.6		45.1		63.9		109.0
Total equipment rentals	1,173.2		71.6		1,244.8		1,146.7		63.9		1,210.6
Sales of rental equipment	—		171.8		171.8		—		175.6		175.6
Sales of new equipment, parts and supplies	—		34.1		34.1		—		36.4		36.4
Service and other revenues	—		8.2		8.2		—		10.4		10.4
Total revenues	$	1,173.2	$	285.7	$	1,458.9	$	1,146.7	$	286.3	$	1,433.0

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~~balance sheet.~~ Topic 842 revenues

Equipment Rental Revenue

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

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

Other

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

Topic 606 revenues

Delivery and pick-up

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

Sales of Rental Equipment, New Equipment, Parts and Supplies

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



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Sales of rental equipment	$	35.4	$	50.1	$	171.8	$	175.6
Sales of new equipment	4.8		5.1		16.0		15.5
Sales of parts and supplies	5.2		9.1		18.1		20.9
Total	$	45.4	$	64.3	$	205.9	$	212.0

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

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

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

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Under Topic 606, the accounts receivable balance, prior to allowances for doubtful accounts, for the sale of rental equipment, new equipment, parts and supplies, was approximately $16.3 million and $19.5 million as of September 30, 2019 and December 31, 2018, respectively.

Service and other revenues

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

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

Receivables and contract assets and liabilities

Most of ~~$3.1 million~~the Company's equipment rental revenue is accounted for under Topic 842. The customers that are responsible for the remaining equipment rental revenue that is accounted for under Topic 606 are generally the same customers that rent the Company's equipment. Concentration of credit risk with respect to the Company's accounts receivable is limited because a large number of geographically diverse customers makes up its customer base. No single customer makes up more than 3% of the Company's equipment rental revenue or accounts receivable balance for the last three years. The Company manages credit risk associated with its accounts receivable at the customer level through credit approvals, credit limits and other monitoring procedures. The Company maintains allowances for doubtful accounts that reflect the Company's estimate of the amount of receivables that the Company will be unable to collect based on its historical write-off experience.

The Company does not have material contract assets or contract liabilities associated with customer contracts. The Company's contracts with customers do not generally result in material amounts billed to customers in excess of recognizable revenue. The Company did not recognize material revenue during the three and nine months ended September 30, ~~2017.~~

~~Note 4—Intangible Asset Impairment~~

~~The Company had been~~2019 that was included in the ~~process of developing a new financial system and point of sale system~~contract liability balance as ~~part~~ of the ~~separation from New Hertz that was initiated prior to~~beginning of such period.

Performance obligations

Most of the ~~Spin-Off. During June 2017,~~Company's revenue recognized under Topic 606 is recognized at a point-in-time, rather than over time. Accordingly, in any particular period, the Company ~~made~~does not generally recognize a significant amount of revenue from performance obligations satisfied (or partially satisfied) in previous periods, and the ~~decision to discontinue developing these new systems based on~~amount of such revenue recognized during the ~~inability to provide the anticipated substantive service potential~~three and ~~significantly higher costs than were originally expected to develop the systems. As a result, the Company recorded an impairment charge of $26.2 million during the~~ nine months ended September 30, ~~2017.~~2019 was not material. We also do not expect to recognize material revenue in the future related to performance obligations that are unsatisfied (or partially unsatisfied) as of September 30, 2019.

Contract estimates and judgments

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

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

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

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

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

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

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Note 4—Rental Equipment

Rental equipment consists of the following (in millions):



	September 30, 2019			December 31, 2018
Rental equipment	$	3,993.3		$	3,840.7
Less: Accumulated depreciation	(1,368.3		)	(1,336.0		)
Rental equipment, net	$	2,625.0		$	2,504.7

Note 5—~~Debt~~Leases

The Company leases real estate, office equipment and service vehicles. The Company's leases have remaining lease terms of up to 15 years, some of which include options to extend the leases for up to 20 years. The Company has included the initial lease term in the case where there are options to extend as it has determined that it is not reasonably certain that the Company would exercise those options.

Leases are classified as either finance or operating at inception of the lease, with classification affecting the pattern of expense recognition in the income statement. Operating leases result in the recognition of ROU assets and lease liabilities on the balance sheet. ROU assets represent the Company's right to use the leased asset for the lease term and lease liabilities represent the obligation to make lease payments. The liability is calculated as the present value of the remaining minimum rental payments for existing operating leases using either the rate implicit in the lease or, if none exists, the Company's incremental borrowing rate. The Company's capital leases are accounted for as finance leases; no significant changes have been made for the accounting of such leases.

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

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



	Classification	Three Months Ended September 30, 2019			Nine Months Ended September 30, 2019
Operating lease cost^(a)	Direct operating	$	25.3		$	70.0
Finance lease cost:
Amortization of ROU assets	Depreciation and amortization^(b)	1.8			5.5
Interest on lease liabilities	Interest expense, net	0.4			1.1
Sublease income	Equipment rental revenue	(17.3		)	(46.4		)
Net lease cost		$	10.2		$	30.2

(a) Includes short-term leases of $13.7 million and $36.8 million for the three and nine months ended September 30, 2019, and variable lease costs of $0.8 million and $3.1 million for the three and nine months ended September 30, 2019, respectively.

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

During the second quarter of 2019, the Company entered into a plan of restructuring with respect to certain branches in Canada. As part of the plan, certain of its leased locations were closed and the Company recorded a ROU asset impairment of $4.8 million. Additionally, the Company recorded related leasehold improvement impairments of $0.7 million and severance charges of $2.3 million.

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Balance sheet information related to leases consists of the following (in millions):



	Classification	September 30, 2019
Assets
Operating lease ROU assets	Right-of-use assets	$	186.8
Finance lease ROU assets	Property and equipment, net^(a)	52.8
Total leased assets		$	239.6
Liabilities
Current
Operating	Current maturities of operating lease liabilities	$	30.3
Finance	Current maturities of long-term debt and financing obligations	22.9
Non-current
Operating	Operating lease liabilities	161.5
Finance	Long-term debt, net	30.1
Total lease liabilities		$	244.8

Weighted average remaining lease term
Operating leases		7.4
Finance leases		5.4
Weighted average discount rate
Operating leases		4.05		%
Finance leases		2.97		%

(a) Finance lease right-of-use assets are recorded net of accumulated amortization of $56.3 million.

Cash flow information related to leases consists of the following (in millions):



	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	9.7	$	29.3
Operating cash flows from finance leases	0.4		1.1
Financing cash flows from finance leases	3.0		9.3
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	26.9		48.4
Finance leases	24.9		27.3

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Maturities of lease liabilities are as follows (in millions):



	Operating Leases			Finance Leases
2019	$	7.5		$	13.2
2020	39.7			16.4
2021	33.5			5.5
2022	28.4			5.3
2023	24.3			4.8
After 2024	90.6			11.4
Total lease payments	224.0			56.6
Less: Interest	(32.2		)	(3.6		)
Present value of lease liabilities	$	191.8		$	53.0

Note 6—Debt

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



	Weighted Average Effective Interest Rate at September 30, 2019	Weighted Average Stated Interest Rate at September 30, 2019	Fixed or Floating Interest Rate	Maturity	September 30, 2019			December 31, 2018
Senior Notes
2027 Notes	5.61%	5.50%	Fixed	2027	$	1,200.0		$	—
Senior Secured Second Priority Notes
2022 Notes	N/A	N/A	N/A	N/A	—			427.0
2024 Notes	N/A	N/A	N/A	N/A	—			437.5
Other Debt
New ABL Credit Facility	N/A	3.49%	Floating	2024	752.0			—
ABL Credit Facility	N/A	N/A	N/A	N/A	—			1,085.2
AR Facility	N/A	2.77%	Floating	2020	175.0			175.0
Finance lease liabilities	2.97%	N/A	Fixed	2019-2027	53.0			38.1
Other borrowings	N/A	4.79%	Floating	2020	6.8			4.6
Unamortized Debt Issuance Costs^(a)					(8.1		)	(10.6		)
Total debt					2,178.7			2,156.8
Less: Current maturities of long-term debt					(29.6		)	(26.9		)
Long-term debt, net					$	2,149.1		$	2,129.9

Weighted Average Effective Interest Rate at September 30, 2017 Weighted Average Stated Interest Rate at September 30, 2017 Fixed or Floating Interest Rate Maturity September 30,
2017 December 31,
2016
Senior Secured Second Priority Notes
2022 Notes 7.88% 7.50% Fixed 2022 $ 549.0
$ 610.0
2024 Notes 8.06% 7.75% Fixed 2024 562.5
625.0
Other Debt
ABL Credit Facility N/A 2.96% Floating 2021 1,075.0
910.0
Capital leases 4.01% N/A Fixed 2017-2021 57.9
70.3
Other borrowings N/A 4.79% Floating 2018 2.1
—
Unamortized Debt Issuance Costs^(a)
(17.0 ) (21.0 )
Total debt 2,229.5
2,194.3
Less: Current maturities of long-term debt (17.2 ) (15.7 )
Long-term debt, net $ 2,212.3
$ 2,178.6

(a)

Unamortized debt issuance costs totaling ~~$14.2~~$9.9 million related to the New ABL Credit Facility and ~~$17.1~~AR Facility (as each is defined below) as of September 30, 2019 and $10.4 million related to the ABL Credit Facility (as defined below) and the AR Facility as of December 31, 2018 are included in "Other long-term assets" in the condensed consolidated balance ~~sheets as of September 30, 2017 and December 31, 2016, respectively.~~sheets.

The effective interest ~~rates~~rate for the fixed rate ~~2022 Notes and 2024~~2027 Notes (as defined below) ~~include~~includes the stated interest on the notes and the amortization of any debt issuance costs.

Senior Notes

On July 9, 2019, the Company issued $1.2 billion aggregate principal amount of its 5.50% Senior Notes due 2027 (the “2027 Notes”). The net proceeds were used to redeem the remaining 2022 Notes and 2024 Notes (as defined below) and repay a portion of the indebtedness outstanding under the then existing ABL Credit Facility. Interest on the 2027 Notes accrues at the rate of 5.50%

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per annum and will be payable semi-annually in arrears on January 15 and July 15, commencing on January 15, 2020. The 2027 Notes will mature on July 15, 2027.

Ranking; Guarantees

The 2027 Notes are the Company’s senior unsecured obligations, ranking equally in right of payment with all of the Company’s existing and future senior indebtedness, effectively junior to any of the Company’s existing and future secured indebtedness, including the New ABL Credit Facility (as defined below), to the extent of the value of the assets securing such indebtedness, and senior in right of payment to any of the Company’s existing and future subordinated indebtedness. The 2027 Notes will be guaranteed on a senior unsecured basis, subject to limited exceptions including special purpose securitization subsidiaries, by the Company’s current and future domestic subsidiaries.

Redemption

The Company may redeem the 2027 Notes, in whole or in part, at any time prior to July 15, 2022, at a price equal to 100% of the aggregate principal amount thereof, plus the applicable make-whole premium and accrued and unpaid interest, if any, to, but excluding, the redemption date. The Company may redeem the 2027 Notes, in whole or in part, at any time (i) on or after July 15, 2022 and prior to July 15, 2023, at a price equal to 102.750% of the principal amount of the 2027 Notes, (ii) on or after July 15, 2023 and prior to July 15, 2024, at a price equal to 101.833% of the principal amount of the 2027 Notes, (iii) on or after July 15, 2024 and prior to July 15, 2025, at a price equal to 100.917% of the principal amount of the 2027 Notes and (iv) on or after July 15, 2025, at a price equal to 100.000% of the principal amount of the 2027 Notes, in each case, plus accrued and unpaid interest, if any, to, but not including, the applicable redemption date. In addition, at any time on or prior to July 15, 2022, the Company may, at its option, redeem up to 40% of the original aggregate principal amount of the 2027 Notes with the proceeds of one or more equity offerings at a redemption price of 105.500% of the principal amount of the 2027 Notes, plus accrued and unpaid interest, if any, to, but excluding, the date of redemption.

Covenants

The indenture governing the 2027 Notes contains certain covenants applicable to the Company and its restricted subsidiaries, including limitations on liens, indebtedness, mergers, consolidations and acquisitions, sales, transfers and other dispositions of assets, loans and other investments, dividends and other distributions, stock repurchases and redemptions and other restricted payments, restrictions affecting subsidiaries, transactions with affiliates and designations of unrestricted subsidiaries. Upon the occurrence of certain events constituting a change of control triggering event, the Company is required to make an offer to repurchase all of the 2027 Notes (unless otherwise redeemed) at a purchase price equal to 101% of their principal amount, plus accrued and unpaid interest, if any to (but excluding) the repurchase date. If the Company sells assets under certain circumstances, it must use the proceeds to make an offer to purchase the 2027 Notes at a price equal to 100% of their principal amount, plus accrued and unpaid interest, if any, to, but excluding, the repurchase date.

Events of Default

The indenture also provides for customary events of default, including the following (subject to any applicable cure period): nonpayment, breach of covenants in the indenture, payment defaults under or acceleration of certain other indebtedness, failure to discharge certain judgments and certain events of bankruptcy, insolvency and reorganization. If an event of default occurs or is continuing, the trustee or the holders of at least 30% in aggregate principal amount of the 2027 Notes then outstanding may declare the principal of, premium, if any, and accrued and unpaid interest, if any, to be due and payable immediately.

Senior Secured Second Priority Notes

In June 2016, Herc issued $610.0 million aggregate principal amount of 7.50% senior secured second priority notes due 2022 (the "2022 Notes") and $625.0 million aggregate principal amount of 7.75% senior secured second priority notes due 2024 (the "2024 Notes" and, together with the 2022 Notes, the "Notes"). Interest on the 2022 Notes accrues at the rate of 7.50% per annum and is payable semi-annually in arrears on June 1 and December 1. The 2022 Notes mature on June 1, 2022. Interest on the 2024 Notes accrues at the rate of 7.75% per annum and is payable semi-annually in arrears on June 1 and December 1. The 2024 Notes mature on June 1, 2024.

In March 2017, October 2017 and July 2018, Herc drew down on its ABL Credit Facility (as defined below) and cumulatively redeemed ~~$61.0~~$183.0 million in aggregate principal amount of the 2022 Notes and ~~$62.5~~$187.5 million in aggregate principal amount of the 2024 Notes and recorded a $5.8 million loss on the early extinguishment of debt, comprised of a 3% cash premium totaling $3.7 million and a non-cash charge of $2.1 million for the write-off of unamortized debt issuance costs. The loss on early extinguishment of debt is included in "Interest expense, net” in the Company's condensed consolidated statement of operations.Notes.

~~See Note 16, "Subsequent Events" regarding an additional partial redemption of the Notes.~~

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On July 9, 2019, Herc redeemed the remaining $427.0 million outstanding principal amount of its 2022 Notes and the remaining $437.5 million outstanding principal amount of its 2024 Notes. The Notes were redeemed at a redemption price of 103.750% in the case of the 2022 Notes and 105.813% in the case of the 2024 Notes, plus interest accrued to, but excluding, July 9, 2019. The Company used a portion of the net proceeds from its offering of the 2027 Notes to redeem the Notes and to pay related fees and expenses. The Company recorded a loss on early extinguishment of debt of $51.0 million comprised of the cash premiums paid of $41.5 million and unamortized debt issuance costs of $9.5 million.

New ABL Credit Facility

On July 31, 2019, Herc Holdings, Herc and certain other subsidiaries of Herc Holdings entered into a credit agreement with respect to a new senior secured asset-based revolving credit facility (the “New ABL Credit Facility”), which refinances in full and replaces the then existing asset-based credit facility ("ABL Credit Facility") and related guarantee and collateral/security agreements. On July 31, 2019, Herc Holdings borrowed $722.0 million under the New ABL Credit Facility and repaid all amounts outstanding under the ABL Credit Facility.

The New ABL Credit Facility provides (subject to availability under a borrowing base) for aggregate maximum borrowings of up to $1,750 million under a revolving loan facility. Up to $250 million of the revolving loan facility is available for the issuance of letters of credit, subject to certain conditions including issuing lender participation. Subject to the satisfaction of certain conditions and limitations, the New ABL Credit Facility allows for the addition of incremental revolving commitments and/or incremental term loans.

Maturity

The New ABL Credit Facility matures on July 31, 2024.

Guarantees; Collateral/Security

The obligations of each of the borrowers under the New ABL Credit Facility are guaranteed by each of Herc Holdings’ direct and indirect U.S. and Canadian subsidiaries, with certain exceptions, including special purpose securitization subsidiaries. The obligations of the borrowers under the New ABL Credit Facility and the guarantees thereof are secured by security interests in substantially all of the assets of each borrower and guarantor, including pledges of all the capital stock of all of their direct subsidiaries, with certain exceptions. The liens securing the New ABL Credit Facility are subject to certain exceptions. Also, subject to certain limitations and conditions, the New ABL Credit Facility permits the incurrence of future secured debt on a basis either pari passu with, or subordinated to, the liens securing the New ABL Credit Facility.

Interest

The interest rates applicable to any loans under the New ABL Credit Facility are based, at the option of the borrowers, on (i) a floating rate based on LIBOR (for loans denominated in U.S. dollars) or CDOR (for loans denominated in Canadian dollars) plus an initial margin of 1.50% per annum or (ii) a base rate plus an initial margin of 0.50%, in each case, where margin is adjusted under the New ABL Credit Facility based on the quarterly average excess availability under the New ABL Credit Facility.

Covenants

The New ABL Credit Facility contains a number of covenants that, among other things, limit or restrict the ability of the borrowers and their subsidiaries to incur additional indebtedness, prepay other indebtedness, make dividends and other restricted payments, create or incur liens, make acquisitions and other investments, engage in mergers, consolidations or sales of assets, engage in certain transactions with affiliates, and enter into certain restrictive agreements limiting the ability to create or incur liens. In addition, under the New ABL Credit Facility, upon excess availability falling below certain levels, the borrowers will be required to comply with a minimum fixed charge coverage ratio of no less than 1.00:1.00.

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Events of Default

The New ABL Credit Facility provides that the occurrence of any of the following events will constitute an event of default: payment default, breach of representation or warranty, covenant breach, cross default to other material indebtedness, certain bankruptcy events, dissolution, invalidity of the credit agreement or any intercreditor agreement (if any), judgment in excess of a certain monetary threshold, any security or guarantee documents cease to be in effect, an ERISA event, pension event or a change of control. Upon the occurrence and during the continuation of an event of default, the agent may exercise remedies on behalf of the lenders, including accelerating the repayment of outstanding loans under the New ABL Credit Facility.

ABL Credit Facility

The Company's ~~asset-based revolving credit agreement,~~ABL Credit Facility, executed by its Herc subsidiary, ~~provides~~provided for senior secured revolving loans up to a maximum aggregate principal amount of $1,750 million (subject to availability under a borrowing base), including revolving loans in an aggregate principal amount of $350 million available to Canadian borrowers and U.S. borrowers, ~~(the "ABL Credit Facility").~~that had a maturity date of June 30, 2021. Up to $250 million of the revolving loan facility iswas available for the issuance of letters of credit, subject to certain conditions including issuing lender participation. ~~Extensions of credit~~On July 31, 2019, Herc Holdings borrowed $722.0 million under the New ABL Credit Facility and repaid all amounts outstanding under the ABL Credit Facility. The Company recorded a loss on early extinguishment of debt of $2.6 million comprised of unamortized debt issuance costs.

Accounts Receivable Securitization Facility

In September 2018, the Company entered into an accounts receivable securitization facility (the "AR Facility") with aggregate commitments of $175 million that matures on September 16, 2020. In connection with the AR Facility, ~~are limited by~~Herc and one of its wholly-owned subsidiaries sell their accounts receivables on an ongoing basis to Herc Receivables U.S. LLC, a ~~borrowing base calculated periodically based on specified percentages~~wholly-owned special-purpose entity (the "SPE"). The SPE's sole business consists of the ~~value~~purchase by the SPE of ~~eligible rental equipment, eligible service vehicles, eligible spare parts~~accounts receivable from Herc and ~~merchandise,~~the Herc subsidiary seller and borrowing by the SPE against the eligible accounts receivable ~~and eligible unbilled~~from the lenders under the facility. The borrowings are secured by liens on the accounts ~~subject to certain reserves~~receivable and other ~~adjustments. Subject~~assets of the SPE. Collections on the accounts receivable are used to service the ~~satisfaction~~borrowings. The SPE is a separate legal entity that is consolidated in the Company's financial statements. The SPE assets are owned by the SPE and are not available to settle the obligations of ~~certain conditions and limitations,~~ the ~~ABL Credit Facility allows for~~Company or any of its other subsidiaries. Herc is the ~~addition~~servicer of ~~incremental revolving and/or term loan commitments. In addition,~~ the ~~ABL Credit Facility permits Herc to increase the amount of commitments~~accounts receivable under the ~~ABL Credit Facility with~~AR Facility. All of the ~~consent~~obligations of ~~each lender providing an additional commitment, subject to satisfaction~~the Herc subsidiary seller and the servicer and certain indemnification obligations of ~~certain conditions. The ABL Credit Facility matures on June 30, 2021.~~

~~The interest rates applicable to~~ the ~~loans~~SPE under the ~~ABL Credit~~agreements governing the AR Facility are ~~based on~~guaranteed by Herc pursuant to a ~~fluctuating rate~~performance guarantee. The AR Facility is excluded from current maturities of ~~interest measured by reference~~long-term debt as the Company has the intent and ability to ~~either, at~~consummate refinancing and extend the ~~borrowers’ option, (i) an adjusted London inter-bank offered rate, plus a borrowing margin or (ii) an alternate base rate, plus a borrowing margin (or, in the case~~term of the Canadian borrowers, a rate equal to the rate on bankers’ acceptances with the same maturity, plus a borrowing margin). The borrowing margin on the ABL Credit Facility is determined based on a pricing grid that is bifurcated based on corporate credit ratings, with levels within the grid based on available commitments. Customary fees are also payable in respect of the ABL Credit Facility, including a commitment fee on the unutilized portion thereof.agreement.

Other Borrowings

~~In June 2017, the~~The Company's subsidiary in China ~~entered into~~has uncommitted credit agreements ~~with a bank~~ for up to ~~the~~an aggregate principal amount of $10.0 million. Interest accrues on the loans drawn under these facilities at a rate of 110% of the prevailing base lending rates published by People's Bank of China and is payable quarterly. As of September 30, ~~2017,~~2019, the Company had short-term borrowings under these facilities totaling ~~$2.1~~$6.8 million.

~~Covenants~~Borrowing Capacity and Availability

~~Notes~~

~~The indenture governing~~After outstanding borrowings, the ~~Notes contains covenants that, among other things, limit~~following was available to the ability of Herc to incur additional indebtedness, guarantee indebtedness or issue certain preferred shares; pay dividends on, redeem or repurchase stock or make other distributions in respect of its capital stock; repurchase, prepay or redeem subordinated indebtedness; make loans and investments; create liens; transfer or sell assets; consolidate, merge or sell or otherwise dispose of all or substantially all of its assets; enter into certain transactions with affiliates; and designate subsidiaries as unrestricted subsidiaries.

~~ABL Credit Facility~~

~~The~~Company under the New ABL Credit Facility ~~contains a number of negative covenants that, among other things, limit or restrict the ability of the borrowers~~ and in certain cases, their restricted subsidiaries to dispose of assets, incur additional indebtedness, incur guarantee obligations, prepay certain indebtedness, make certain dividends, create liens, make investments, make acquisitions, engage in mergers, change the nature of their business, engage in certain transactions with affiliates and enter into certain restrictive agreements.

Failure to maintain certain levels of liquidity will subject the Herc credit group to a contractually specified fixed charge coverage ratio of not less than 1:1 for the four quarters most recently ended. AsAR Facility as of September 30, ~~2017,~~2019 (in millions):



	Remaining Capacity		Availability Under Borrowing Base Limitation
New ABL Credit Facility	$	976.5	$	976.5
AR Facility	—		—
Total	$	976.5	$	976.5

In addition, as of September 30, 2019, the ~~Company~~Company's subsidiary in China had uncommitted credit facilities of which $3.2 million was ~~not subject to the fixed charge coverage ratio test.~~available for borrowing.

Covenants in the ABL Credit Facility restrict payment of cash dividends to any parent of Herc, including Herc Holdings, except in an aggregate amount, taken together with certain investments, acquisitions and optional prepayments, not to exceed $200 million. Herc may also pay additional cash dividends under the ABL Credit Facility under certain circumstances.

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~~The ABL Credit Facility also contains certain affirmative covenants, including financial and other reporting requirements.~~

~~Borrowing Capacity and Availability~~

~~After outstanding borrowings, the following was available to the Company under the ABL Credit Facility as of September 30, 2017 (in millions):~~

Remaining
Capacity

Availability Under
Borrowing Base
Limitation
ABL Credit Facility $ 652.5
$ 652.5

~~In addition, as of September 30, 2017, the Company's subsidiary in China had uncommitted credit facilities of which $7.9 million was unutilized.~~

Letters of Credit

As of September 30, ~~2017, the~~2019, $21.5 million of standby letters of credit were issued and outstanding, NaN of which have been drawn upon. The New ABL Credit Facility had ~~$227.5~~$228.5 million available under the letter of credit facility sublimit, subject to borrowing base ~~restrictions, as $22.5 million of standby letters of credit were issued and outstanding, none of which have been drawn upon.~~restrictions.

Note ~~6—Employee Retirement Benefits~~7—Financing Obligations

In ~~July 2016,~~October 2017, Herc consummated a sale-leaseback transaction pursuant to which it sold 42 of its properties located in the ~~Company established~~U.S. for gross proceeds of approximately $119.5 million, and during the fourth quarter of 2018, entered into sale-leaseback transactions with respect to 2 additional properties for gross proceeds of $6.4 million. Herc ~~Holdings Retirement Plan (the "Plan"). Prior~~entered into a master lease agreement pursuant to ~~the Spin-Off, the Company participated in~~which it has continued operations at those properties as a tenant. The ~~Hertz Corporation Account Balance Defined Benefit Pension Plan (the "Hertz Plan").~~triple net lease agreement has an initial term of 20 years, subject to extension, at Herc's option, for up to 5 additional periods of five years each. The ~~majority of assets and liabilities attributable to current and former employees~~sale of the ~~equipment rental business were transferred~~properties did not qualify for sale-leaseback accounting due to continuing involvement with the properties. Therefore, the book value of the buildings and land remains on the Company's consolidated balance sheet.

During March 2019, Herc entered into a sale-leaseback transaction for certain service vehicles that did not qualify for sale-leaseback accounting, therefore the book value of the vehicles remains on the Company's consolidated balance sheet. Gross proceeds from the ~~Hertz Plan to the Plan following the Spin-Off based on a preliminary allocation. The final allocations and transfers~~sale-leaseback transaction were completed in April and August 2017 and were $3.6 million lower than the preliminary allocation, resulting in an increase to the pension liability funded status and a corresponding offset to additional paid-in capital.$4.7 million.

The ~~following table sets forth~~Company's financing obligations consist of the ~~net periodic pension cost (benefit)~~following (in millions):



	Weighted Average Effective Interest Rate at September 30, 2019	Maturities	September 30, 2019			December 31, 2018
Financing obligations	4.89%	2026-2038	$	124.2		$	122.1
Unamortized financing issuance costs			(2.6		)	(2.8		)
Total financing obligations			121.6			119.3
Less: Current maturities of financing obligations			(3.4		)	(3.0		)
Financing obligations, net			$	118.2		$	116.3

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Components of Net Periodic Pension Cost (Benefit):
Interest cost $ 1.6
$ 1.3
$ 4.6
$ 4.4
Expected return on plan assets (1.6 ) (1.9 ) (4.7 ) (5.9 )
Net amortizations of actuarial net loss 0.2
0.5
1.1
1.4
Net periodic pension cost (benefit) $ 0.2
$ (0.1 ) $ 1.0
$ (0.1 )

Note ~~7—Stock-Based Compensation~~8—Income Taxes

~~During~~Income tax benefit was $4.2 million and $2.0 million for the three and nine months ended September 30, ~~2017, under~~2019, respectively, which were primarily driven by an income tax benefit of approximately $6.3 million related to the ~~Herc Holdings Inc. 2008 Omnibus Incentive Plan (the "Omnibus Plan")~~debt transactions described in Note 6, "Debt", partially offset by the ~~Company granted 20,385 restricted stock units ("RSUs")~~level of pre-tax income, non-deductible expenses, foreign taxes and ~~4,587 performance stock units ("PSUs") at~~taxes related to foreign sourced income.

Income tax benefit was $1.0 million and $5.3 million for the three and nine months ended September 30, 2018, respectively, as a ~~weighted average grant date fair value of $43.72 per unit.~~

~~A summary~~result of the ~~total compensation expense~~reduction in the Company's estimate of its one-time transition tax determined in accordance with the Tax Cuts and ~~associated~~Jobs Act of 2017 by $24.5 million, resulting in a net $14.8 million benefit after consideration of the Company's net operating loss carryforwards. The Company's estimate was finalized at December 31, 2018. The tax benefit was partially offset by the level of pre-tax income, ~~tax benefits recognized under the Omnibus Plan are as follows (in millions):~~non-deductible expenses, foreign taxes and taxes related to foreign sourced income.

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Compensation expense $ 3.0
$ 1.1
$ 7.5
$ 3.8
Income tax benefit (1.1 ) (0.4 ) (2.9 ) (1.5 )
Total $ 1.9
$ 0.7
$ 4.6
$ 2.3

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Stock-based compensation expense includes expense attributable to the Company based on the terms of the awards granted under the Omnibus Plan to the participants in the Omnibus Plan. Additionally, during the nine months ended September 30, 2016, stock-based compensation expense includes an allocation of THC's corporate and shared functional employee expenses of $2.0 million on a pre-tax basis.

As of September 30, 2017, there was $20.1 million of total unrecognized compensation cost related to non-vested stock options, RSUs and PSUs granted under the Omnibus Plan. The total unrecognized compensation cost is expected to be recognized over the remaining 2.0 years, on a weighted average basis, of the requisite service period that began on the grant dates.

~~Employee Stock Purchase Plan~~

In connection with the Spin-Off, Herc Holdings inherited the Hertz Global Holdings, Inc. Employee Stock Purchase Plan (the "ESPP"). At the date of the Spin-Off, the ESPP had been suspended; however, the Company reinstated the ESPP on January 1, 2017, which was amended and restated as the Herc Holdings Inc. Employee Stock Purchase Plan.

The ESPP enables eligible employees to purchase the Company's common stock at a price per share equal to 85% of the fair market value of a share at the acquisition date. Payment for shares is made through payroll deductions based on a predetermined contribution amount established by the individual employee. During the three and nine months ended September 30, 2017, the Company recognized compensation expense of $0.1 million and $0.3 million, respectively, related to the ESPP.

~~Note 8—Income Taxes~~

Income tax provision of $5.8 million for the third quarter of 2017 was primarily driven by pre-tax income and non-deductible expenses and valuation allowances recorded on losses generated by foreign loss jurisdictions. Income tax benefit of $31.5 million for the nine months ended September 30, 2017 was primarily driven by pre-tax losses, partially offset by non-deductible expenses and valuation allowances recorded on losses generated by foreign loss jurisdictions.

Income tax provision of $3.7 million in the third quarter of 2016 was primarily driven by certain nondeductible charges within the quarter. Income tax provision of $9.0 million for the nine months ended September 30, 2016 was primarily due to $6.4 million of tax expense related to state taxes incurred as a result of the Spin-Off. The effective tax rate for the 2017 fiscal year is expected to be approximately 37%.

In connection with the Spin-Off, net operating loss carryforwards were split between the Company and New Hertz pursuant to the Internal Revenue Code and regulations. While not expected to be significant, the split of net operating loss carryforwards may be further adjusted as income tax returns are finalized through 2017.

Note 9—Accumulated Other Comprehensive Income (Loss)

The changes in the accumulated other comprehensive income (loss) balance by component (net of tax) for the nine months ended September 30, ~~2017~~2019 are presented in the table below (in millions).



	Pension and Other Post-Employment Benefits			Unrealized Gains (Loss) on Hedging Instruments			Foreign Currency Items			Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2018	$	(18.7	)	$	2.7		$	(106.4	)	$	(122.4	)
Other comprehensive income (loss) before reclassification	—			(2.5		)	5.8			3.3
Amounts reclassified from accumulated other comprehensive loss	0.9			—			—			0.9
Net current period other comprehensive income (loss)	0.9			(2.5		)	5.8			4.2
Balance at September 30, 2019	$	(17.8	)	$	0.2		$	(100.6	)	$	(118.2	)

Pension and Other Post-Employment Benefits Unrealized Losses on Hedging Instruments Foreign Currency Items Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2016 $ (14.6 ) $ —
$ (104.1 ) $ (118.7 )
Other comprehensive income (loss) before reclassification (1.7 ) (0.2 ) 21.5
19.6
Amounts reclassified from accumulated other comprehensive loss 0.7
—
—
0.7
Net current period other comprehensive income (loss) (1.0 ) (0.2 ) 21.5
20.3
Balance at September 30, 2017 $ (15.6 ) $ (0.2 ) $ (82.6 ) $ (98.4 )

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~~HERC HOLDINGS INC. AND SUBSIDIARIES~~

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

~~Unaudited~~

Amounts reclassified from accumulated other comprehensive income (loss) to net ~~income (loss)~~loss were as follows (in millions):



		Three Months Ended September 30,						Nine Months Ended September 30,
Pension and other postretirement benefit plans	Statement of Operations Caption	2019			2018			2019			2018
Amortization of actuarial losses	Selling, general and administrative	$	0.4		$	0.3		$	1.2		$	0.8
Tax benefit	Income tax benefit	(0.1		)	(0.1		)	(0.3		)	(0.2		)
Total reclassifications for the period		$	0.3		$	0.2		$	0.9		$	0.6

Three Months Ended September 30, Nine Months Ended September 30,
Pension and other postretirement benefit plans Statement of Operations Caption 2017 2016 2017 2016
Amortization of actuarial losses Selling, general and administrative $ 0.2
$ 0.5
$ 1.1
$ 1.4
Tax benefit Income tax benefit —
(0.2 ) (0.4 ) (0.5 )
Total reclassifications for the period $ 0.2
$ 0.3
$ 0.7
$ 0.9

Note 10—Commitments and Contingencies

Legal Proceedings

~~From time to time the Company is a party to various legal proceedings. Summarized below are the most significant legal proceedings to which the Company is a party.~~

In re Hertz Global Holdings, Inc. Securities Litigation - In November 2013, a putative shareholder class action, Pedro Ramirez, Jr. v. Hertz Global Holdings, Inc., et al., was commenced in the U.S. District Court for the District of New Jersey naming Hertz Holdings and certain of its officers as defendants and alleging violations of the federal securities laws. The complaint alleged that Hertz Holdings made material misrepresentations and/or omission of material fact in its public disclosures during the period from February 25, 2013 through November 4, 2013, in violation of Section 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 10b-5 promulgated thereunder. The complaint sought unspecified monetary damages on behalf of the purported class and an award of costs and expenses, including counsel fees and expert fees. In June 2014, Hertz Holdings moved to dismiss the amended complaint. In October 2014, the court granted Hertz Holdings’ motion to dismiss without prejudice, allowing the plaintiff to amend the complaint a second time. In November 2014, plaintiff filed a second amended complaint which shortened the putative class period and made allegations that were not substantively very different than the allegations in the prior complaint. In early 2015, Hertz Holdings moved to dismiss the second amended complaint. In July 2015, the court granted Hertz Holdings’ motion to dismiss without prejudice, allowing plaintiff to file a third amended complaint. In August 2015, plaintiff filed a third amended complaint which included additional allegations, named additional then-current and former officers as defendants and expanded the putative class period to extend from February 14, 2013 to July 16, 2015. In November 2015, Hertz Holdings moved to dismiss the third amended complaint. The plaintiff then sought leave to add a new plaintiff because of challenges to the standing of the first plaintiff. The court granted plaintiff leave to file a fourth amended complaint to add the new plaintiff, and the new complaint was filed on March 1, 2016. Hertz Holdings and the individual defendants moved to dismiss the fourth amended complaint with prejudice on March 24, 2016. In April 2017, the court granted Hertz Holdings' and the individual defendants' motions to dismiss and dismissed the action with prejudice. In May 2017, plaintiff filed a notice of appeal and, in ~~October 2017,~~June 2018, oral argument was conducted before the U.S. Court of Appeals for the Third ~~Circuit issued a briefing schedule. The plaintiff/appellant's initial brief is due in November 2017 and briefing is scheduled to conclude in January 2018.~~

~~Governmental Investigations~~ -Circuit. In ~~June 2014, Hertz Holdings was advised by~~September 2018, the ~~staff~~court affirmed the dismissal of the action with prejudice. On February 5, 2019, plaintiff filed a motion to set aside the judgment against it, and for leave to file a fifth amended complaint. The proposed amended complaint would add allegations related to New ~~York Regional Office~~Hertz’s December 31, 2018 settlement with the SEC that, among other things, ordered New Hertz to cease and desist from violating certain of the ~~Securities~~federal securities laws and ~~Exchange Commission ("SEC") that it is investigating the events disclosed in certain~~imposed a civil penalty of Hertz Holdings’ filings with the SEC. In addition, in December 2014 a state securities regulator requested information from Hertz Holdings regarding the same or similar events. In May 2017, the state securities regulator advised$16.0 million. On February 26, 2019, New Hertz ~~that it had closed its investigation. Starting in June 2016, Hertz Holdings~~filed an opposition to plaintiff’s motion for relief from judgment and New Hertz have had communications with the United States Attorney’s Office for the District of New Jersey regarding the same or similar events. New Hertz is responsible for managing these matters. The investigations and communications generally involve the restatements included in Hertz Holdings’ 2014 Form 10-K and related accounting for prior periods. Among other matters, the restatements included in Hertz Holdings’ 2014 Form 10-K addressedleave to file a variety of accounting matters involving THC's former Brazil vehicle rental operations. Hertz Holdings identified certain activities by THC's former vehicle rental operations in Brazil that may raise issues under the Foreign Corrupt Practices Act and other federal and local laws. THC has self-reported these issues to appropriate government entities, and these issues continue to be investigated. The Company has and intends to continue to cooperate with all governmental requests related to the foregoing. At this time, the Company is currently unable tofifth amended complaint. On March 8, 2019, plaintiff

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~~predict~~filed a reply in support of that motion. On September 30, 2019, the ~~outcome of these proceedings~~court denied plaintiff’s motion for relief from judgment and ~~issues or~~leave to ~~reasonably estimate the range of possible losses, which could be material.~~file a fifth amended complaint.

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

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

Off-Balance Sheet Commitments

Indemnification Obligations

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

The Spin-Off

In connection with the Spin-Off, pursuant to the separation and distribution agreement (as discussed in Note 15, ~~"Arrangements~~"Arrangements with New ~~Hertz"~~Hertz"), the Company has assumed the liability for, and control of, all pending and threatened legal matters related to its equipment rental business and related assets, as well as assumed or retained liabilities, and will indemnify New Hertz for any liability arising out of or resulting from such assumed legal matters. The separation and distribution agreement also provides for certain liabilities to be shared by the parties. The Company is responsible for a portion of these shared liabilities (typically 15%), as set forth in that agreement. New Hertz is responsible for managing the settlement or other disposition of such shared liabilities. Pursuant to the tax matters agreement, the Company has agreed to indemnify New Hertz for any resulting taxes and related losses if the Company takes or fails to take any action (or permits any of its affiliates to take or fail to take any action) that causes the Spin-Off and related transactions to be taxable, or if there is an acquisition of the equity securities or assets of the Company or of any member of the Company’s group that causes the Spin-Off and related transactions to be taxable.

Environmental

The Company has indemnified various parties for the costs associated with remediating numerous hazardous substance storage, recycling or disposal sites in many states and, in some instances, for natural resource damages. The amount of any such expenses or related natural resource damages for which the Company may be held responsible could be substantial. The probable expenses that the Company expects to incur for such matters have been accrued, and those expenses are reflected in the Company's consolidated financial statements. As of September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, the aggregate amounts accrued for environmental liabilities, including liability for environmental indemnities, reflected in the Company's consolidated balance sheets in "Accrued liabilities" were ~~$0.1~~$0.2 million and ~~$0.2~~$0.1 million, respectively. The accrual generally represents the estimated cost to study potential environmental issues at sites deemed to require investigation or clean-up activities, and the estimated cost to implement remediation actions, including on-

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going maintenance, as required. Cost estimates are developed by site. Initial cost estimates are based on historical experience at similar sites and are refined over time on the basis of in-depth studies of the sites. For many sites, the remediation costs and other damages for which the Company ultimately may be responsible cannot be reasonably estimated because of uncertainties with respect to factors such as the Company's connection to the site, the materials there, the involvement of other potentially responsible parties, the application of laws and other standards or regulations, site conditions, and the nature and scope of investigations, studies, and remediation to be undertaken (including the technologies to be required and the extent, duration, and success of remediation).

Guarantee

The Company has guaranteed an outstanding bank loan in connection with a previous joint venture. The Company has determined the maximum potential payment amount under the guarantee is approximately $7.7 million; however, the probability of any payment is remote and therefore the Company has not recorded a liability on its balance sheet as of September 30, 2019. The bank loan is collateralized by the rental equipment and other assets of the joint venture entity and has maturities through 2023.

Note 11—Financial Instruments

The Company established risk management policies and procedures, which seek to reduce the Company’s risk exposure to fluctuations in foreign currency exchange rates and interest rates. However, there can be no assurance that these policies and procedures will be successful. Although the instruments utilized involve varying degrees of credit, market and interest risk, the counterparties to the agreements are expected to perform fully under the terms of the agreements. The Company monitors counterparty credit risk, including lenders, on a regular basis, but cannot be certain that all risks will be discerned or that its risk management policies and procedures will always be effective. Additionally, in the event of default under the Company’s master derivative agreements, the non-defaulting party has the option to set-off any amounts owed with regard to open derivative positions.

Foreign Currency Exchange Rate Risk

The Company’s objective in managing exposure to foreign currency fluctuations is to limit the exposure of certain cash flows and earnings to foreign currency exchange rate changes through the use of various derivative contracts. The Company experiences foreign currency risks in its global operations as a result of various factors, including intercompany local currency denominated loans, rental operations in various currencies and purchasing fleet in various currencies.

Interest Rate Swap Arrangement

~~The~~In March 2017, the Company entered into a three-year LIBOR-based interest rate swap arrangement on a portion of its outstanding ABL Credit Facility and, subsequent to the debt transactions discussed in Note 6, "Debt", the New ABL Credit Facility. The aggregate amount of the swap is equal to a portion of the U.S. dollar principal amount of the New ABL Credit Facility and the payment dates of the swap coincide with the interest payment dates of the New ABL Credit Facility. The swap contract provides for the Company to pay a fixed interest rate and receive a floating rate. The variable interest rate resets monthly. The swap has been accounted for as a cash flow hedge of a portion of the New ABL Credit Facility.

The following table summarizes the outstanding interest rate swap arrangement as of September 30, ~~2017~~2019 (dollars in millions):



	Aggregate Notional Amount		Receive Rate	Receive Rate		Pay Rate
New ABL Credit Facility	$	350.0	1-month LIBOR + 1.50%	3.5	%	3.2	%

Aggregate Notional Amount Receive Rate Receive Rate as of September 30, 2017 Pay Rate
ABL Credit Facility $ 350.0
1 month LIBOR + 1.75% 3.0 % 3.5 %

The following table summarizes the estimated fair value of the Company's financial instruments (in millions):



	Fair Value of Financial Instruments
	September 30, 2019				December 31, 2018
	Other Current Assets		Accrued Liabilities		Other Long-Term Assets		Accrued Liabilities
Derivatives Designated as Hedging Instruments
Interest rate swap	$	0.2	$	—	$	3.6	$	—

Fair Value of Financial Instruments
Prepaid & Other Current Assets Accrued Liabilities
September 30,
2017 December 31,
2016 September 30,
2017 December 31,
2016
Derivatives Designated as Hedging Instruments
Interest rate swap $ —
$ —
$ 0.4
$ —
Derivatives Not Designated as Hedging Instruments

Foreign currency forward contracts $ —
$ 0.1
$ —
$ —

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

The following table summarizes the gains and losses on derivative instruments for the periods indicated. Gains and losses recognized on foreign currency forward contracts and the effective portion of interest rate swaps are included in the condensed consolidated statements of operations together with the corresponding offsetting gains and losses on the underlying hedged transactions. All gains and losses recognized are included in "Selling, general and administrative" in the condensed consolidated statements of operations (in millions).



	Gain Recognized
	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Derivatives Not Designated as Hedging Instruments
Foreign currency forward contracts	$	—	$	—	$	—	$	0.2

Loss Recognized
Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Derivatives Not Designated as Hedging Instruments
Foreign currency forward contracts $ (0.4 ) $ (2.6 ) $ (4.0 ) $ (2.7 )

Note 12—Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

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

Cash Equivalents

Cash equivalents, when held, primarily consist of money market accounts which are classified as Level 1 assets which the Company measures at fair value on a recurring basis. The Company determines the fair value of cash equivalents using a market approach based on quoted prices in active markets. The Company had no0 cash equivalents at September 30, ~~2017~~2019 or December 31, ~~2016.~~2018.

Financial Instruments

The fair value of the Company's financial instruments as of September 30, ~~2017~~2019 and December 31, ~~2016 are~~2018 is shown in Note 11, "Financial Instruments." The Company's financial instruments are classified as Level 2 assets and liabilities and are priced using quoted market prices for similar assets or liabilities in active markets.

Debt Obligations

The fair values of the Company's New ABL Credit Facility, ABL Credit Facility, AR Facility, finance lease liabilities and other borrowings approximated their book values as of September 30, 2019 and December 31, 2018. The fair value of ~~debt is~~the Company's 2027 Notes, 2022 Notes and 2024 Notes are estimated based on quoted market rates as well as borrowing rates currently available to the Company for loans with similar terms and average maturities (Level 2 inputs) (in millions).



	September 30, 2019				December 31, 2018
	Nominal Unpaid Principal Balance		Aggregate Fair Value		Nominal Unpaid Principal Balance		Aggregate Fair Value
2027 Notes	$	1,200.0	$	1,248.0	$	—	$	—
2022 Notes and 2024 Notes	—		—		864.5		901.2

September 30, 2017 December 31, 2016
Nominal Unpaid Principal Balance Aggregate Fair Value Nominal Unpaid Principal Balance Aggregate Fair Value
Debt $ 2,246.5
$ 2,334.1
$ 2,215.3
$ 2,275.5

Note 13—Earnings ~~(Loss)~~ Per Share

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

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



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Basic and diluted earnings per share:
Numerator:
Net income, basic and diluted	$	9.4	$	46.2	$	12.4	$	35.8
Denominator:
Basic weighted average common shares	28.7		28.5		28.7		28.4
Stock options, RSUs and PSUs	0.4		0.4		0.4		0.5
Weighted average shares used to calculate diluted earnings (loss) per share	29.1		28.9		29.1		28.9
Earnings per share:
Basic	$	0.33	$	1.62	$	0.43	$	1.26
Diluted	$	0.32	$	1.60	$	0.43	$	1.24
Antidilutive stock options, RSUs and PSUs	0.2		0.2		0.3		0.2

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Basic and diluted income (loss) per share:
Numerator:
Net income (loss), basic and diluted $ 12.8
$ 3.0
$ (54.0 ) $ (6.5 )
Denominator:
Basic weighted average common shares 28.3
28.3
28.3
28.3
Stock options, RSUs and PSUs 0.3
—
—
—
Weighted average shares used to calculate diluted loss per share 28.6
28.3
28.3
28.3
Income (loss) per share:
Basic $ 0.45
$ 0.11
$ (1.91 ) $ (0.23 )
Diluted $ 0.45
$ 0.11
$ (1.91 ) $ (0.23 )
Antidilutive stock options, RSUs and PSUs 0.4
0.3
0.7
0.2

Note 14—Related Party Transactions

Transactions between the Company and THC and its affiliates prior to the Spin-Off are herein referred to as "related party" or "affiliated" transactions. Effective with the Spin-Off on June 30, 2016, all transactions with THC and its affiliates were settled and paid in full. Effective upon the Spin-Off, the Company entered into, among other things, a transition services agreement with New Hertz. See Note 15, "Arrangements with New Hertz" for further information.

~~Loans with Affiliates~~

Prior to the Spin-Off, the Company entered into various loan agreements with affiliates as part of a centralized approach to the financing of worldwide operations by THC. The amounts due to and from other affiliates had various interest rates and maturity dates but were generally short-term in nature. Effective with the Spin-Off on June 30, 2016, any loans with affiliates were settled and paid in full, including any accrued interest.

~~Intercompany Transactions~~

Prior to the Spin-Off, all significant intercompany payable and receivable balances between the Company and THC were considered to be effectively settled for cash in the consolidated financial statements at the time the transaction was recorded.

~~Corporate Allocations~~

Prior to the Spin-Off, THC provided services to and funded certain expenses for the Company that were recorded at the THC level. As discussed in Note 2, "Basis of Presentation and Recently Issued Accounting Pronouncements," the financial information in these condensed consolidated financial statements includes, in periods prior to June 30, 2016, direct costs of the Company incurred by THC on the Company’s behalf and an allocation of general corporate expenses of THC which were not historically allocated to the Company for certain support functions that were provided on a centralized basis within THC and not recorded at the business unit level, such as expenses related to finance, human resources, information technology, facilities and legal, among others, and that would have been incurred had the Company been a separate, stand-alone entity.

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~~HERC HOLDINGS INC. AND SUBSIDIARIES~~

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

~~Unaudited~~

Costs incurred and allocated by THC that were included in the condensed consolidated statements of operations are shown in the following table (in millions). No costs were allocated by THC after the Spin-Off occurred on June 30, 2016.

Nine Months Ended September 30,
2016
Direct operating $ 0.6
Selling, general and administrative 18.0
Total allocated expenses $ 18.6

Agreements with Carl C. Icahn

The Company is subject to the Nomination and Standstill Agreement, dated September 15, 2014 (the "Nomination and Standstill Agreement"), with Carl C. Icahn, High River Limited Partnership, Hopper Investments LLC, Barberry Corp., Icahn Partners LP, Icahn Partners Master Fund LP, Icahn Enterprises G.P. Inc., Icahn Enterprises Holdings L.P., IPH GP LLC, Icahn Capital LP, Icahn Onshore LP, Icahn Offshore LP, Beckton Corp., Vincent J. Intrieri, Samuel Merksamer and Daniel A. Ninivaggi (collectively, the "Original Icahn Group"). In connection with their appointments or nomination, as applicable, to the Company’s board of directors (the "Board"), each of Courtney Mather, Louis J. Pastor, ~~and~~ Stephen A. Mongillo, Nicholas F. Graziano and Jonathan Frates (collectively, the "Icahn Designees," and, together with the Original Icahn Group, the "Icahn Group") executed a Joinder Agreement agreeing to become bound as a party to the terms and conditions of the Nomination and Standstill Agreement (such Joinder Agreements, together with the Nomination and Standstill Agreement, are collectively referred to herein as the "Icahn Agreements").

Pursuant to the Icahn Agreements, ~~the Icahn Designees~~Messrs. Mather, Pastor and Mongillo were appointed to the Company’s ~~board of directors~~Board effective June 30, ~~2016.~~2016, Mr. Graziano was elected to the Board at the Company's 2018 annual meeting of stockholders in place of Mr. Mongillo and Mr. Frates was appointed to the Board on August 16, 2019 to replace Mr. Mather, who resigned from the Board effective August 15, 2019. Pursuant to the Icahn Agreements, so long as an Icahn Designee is a member of the ~~board of directors,~~Board, the ~~board of directors~~Board will not be expanded beyond its current size of 11 members without approval from the Icahn Designees then on the ~~board of directors.~~Board. In addition, pursuant to the Icahn Agreements, subject to certain restrictions and requirements, the Icahn Group will have certain replacement rights in the event an Icahn Designee resigns or is otherwise unable to serve as a director (other than as a result of not being nominated by the Company for an annual meeting).

In addition, until the date that no Icahn Designee is a member of the Board (or otherwise deemed to be on the Board pursuant to the terms of the Icahn Agreements) ~~(the “Board Representation Period”)~~, the Icahn Group agrees to vote all of its shares of the Company’s common stock in favor of the election of all of the Company’s director nominees at each annual or special meeting of the Company’s stockholders, and, subject to limited exceptions, the Icahn Group further agrees to (i) adhere to certain standstill obligations, including the obligation to not solicit proxies or consents or influence others with respect to the same, and (ii) not acquire or otherwise beneficially own more than 20% of the Company’s outstanding voting securities. Under the Icahn Agreements, if the Icahn Group ceases to hold a “net long position,” as defined in the Nomination and Standstill Agreement, in at least 1,900,000 shares of the Company’s common stock, the Icahn Group will cause one Icahn Designee to resign from the ~~Company’s board of directors;~~Board; if the Icahn Group’s holdings are further reduced to specified levels, additional Icahn Designees are required to resign.

In addition, pursuant to the Icahn Agreements, the Company entered into a registration rights agreement, effective June 30, 2016 (the "Registration Rights Agreement"), with High River Limited Partnership, Icahn Partners LP and Icahn Partners Master Fund

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HERC HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

LP, on behalf of any person who is a member of the "Icahn group" (as such term is defined therein) who owns applicable securities at the relevant time and is or has become a party to the Registration Rights Agreement. The Registration Rights Agreement provides for customary demand and piggyback registration rights and obligations.

Note 15—Arrangements with New Hertz

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

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~~HERC HOLDINGS INC. AND SUBSIDIARIES~~

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

~~Unaudited~~

Separation and Distribution Agreement

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

Transition Services Agreement

The Company entered into a ~~TSA~~transition services agreement ("TSA"), pursuant to which New Hertz or its affiliates ~~provide~~provided, during the three and nine months ended September 30, 2018, specified services, primarily consisting of IT support, to the Company on a transitional basis to help ensure an orderly transition following the Spin-Off. ~~The TSA generally provides for a term of up to two years following the Spin-Off, though the recipient of the services may elect to terminate a service at any time upon advance written notice.~~ During the three and nine months ended September 30, ~~2017,~~2018, the Company incurred expenses of ~~$4.2~~$0.6 million and ~~$14.3~~$6.3 million, respectively, under the TSA which isare included in "Direct operating" and "Selling, general and administrative" expenses in the Company's condensed consolidated statements of operations. ~~During~~Effective upon the ~~three and nine months ended September 30, 2016,~~migration of the Company’s financial systems from the New Hertz system to a stand-alone system in July 2018, the Company ~~incurred $5.6 million~~receives no further services from New Hertz under the TSA.

Tax Matters Agreement

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

Employee Matters Agreement

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

Intellectual Property Agreement

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

~~Real Estate Arrangements~~

The Company and New Hertz entered into certain real estate lease agreements pursuant to which the Company leases certain office space from New Hertz and New Hertz leases certain rental facilities space from the Company. Rent payments were negotiated based on comparable fair market rental rates.

~~Note 16—Subsequent Events~~

~~Sale-leaseback Transaction~~

On October 10, 2017, Herc consummated a sale-leaseback transaction pursuant to which it sold 42 of its properties located in the U.S. for gross proceeds of approximately $119.5 million, and entered into a master lease agreement pursuant to which it will continue operations at those properties as a tenant. The lease agreement has an initial term of 20 years, subject to extension, at Herc's option, for up to five additional periods of five years each. The sale of the properties does not qualify for sale-leaseback

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HERC HOLDINGS INC. AND SUBSIDIARIES

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

~~Unaudited~~

~~accounting. Therefore, the book value of the buildings and land will remain on the Company’s condensed consolidated balance sheet.~~

~~Notes Redemption~~

On October 20, 2017, pursuant to the terms of the supplemental indentures governing the Notes, for the redemption period from June 1, 2017 to May 31, 2018, Herc redeemed $61.0 million in aggregate principal amount of the 2022 Notes and $62.5 million in aggregate principal amount of the 2024 Notes at a redemption price of 103% of the aggregate principal amount plus accrued and unpaid interest thereon, if any, to, but not including, the date of redemption. Herc drew down on its ABL Credit Facility to fund the redemption.

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~~HERC HOLDINGS INC. AND SUBSIDIARIES~~


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

Management’s discussion and analysis of financial condition and results of operations ("MD&A") should be read in conjunction with the unaudited condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of this Quarterly Report, ~~on Form 10-Q (this "Report"),~~ which include additional information about our accounting policies, practices and the transactions underlying our financial results. The preparation of our unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") requires us to make estimates and assumptions that affect the reported amounts in our unaudited condensed consolidated financial statements and the accompanying notes including ~~reserves~~allowance for ~~litigation and other contingencies, accounting for income taxes, pension and postretirement benefits,~~accounts receivable, depreciation of ~~revenue earning~~rental equipment, the recoverability of long-lived assets, useful lives and impairment of long-lived tangible and intangible assets including goodwill and trade name, pension and postretirement benefits, valuation of stock-based compensation, ~~allowances~~reserves for ~~accounts receivable~~litigation and other contingencies, accounting for income taxes and other matters arising during the normal course of business. We apply our best judgment, our knowledge of existing facts and circumstances and our knowledge of actions that we may undertake in the future in determining the estimates that will affect our ~~unaudited~~ condensed consolidated financial statements. We evaluate our estimates on an ongoing basis using our historical experience, as well as other factors we believe appropriate under the circumstances, such as current economic conditions, and adjust or revise our estimates as circumstances change. As future events and their effects cannot be determined with precision, actual results may differ from these estimates.

OVERVIEW OF OUR BUSINESS AND OPERATING ENVIRONMENT

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

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

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

Sales of ~~revenue earning~~rental equipment and sales of new equipment, parts and supplies; and

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

Our expenses primarily consist of:

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

Cost of sales of ~~revenue earning~~rental equipment, new equipment, parts and supplies;

Depreciation expense relating to ~~revenue earning~~rental equipment;

Selling, general and administrative expenses; and

Interest expense.

Seasonality

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

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HERC HOLDINGS INC. AND SUBSIDIARIES


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

and cannot be adjusted for seasonal demand, typically resulting in higher profitability in periods when our revenues are higher, and lower profitability in periods when our revenues are lower. ~~In an effort to~~To reduce the ~~impacts~~impact of seasonality, we are focused on expanding our customer base through specialty products that serve different industries with less seasonality and different business cycles.

RESULTS OF OPERATIONS

Three Months Ended September 30, Nine Months Ended September 30,
($ in millions) 2017 2016 $ Change % Change 2017 2016 $ Change % Change
Equipment rentals $ 413.1
$ 360.3
$ 52.8
14.7 % $ 1,084.5
$ 996.0
$ 88.5
8.9 %
Sales of revenue earning equipment 27.7
24.9
2.8
11.2
128.5
94.0
34.5
36.7
Sales of new equipment, parts and supplies 13.9
15.7
(1.8 ) (11.5 ) 40.3
50.9
(10.6 ) (20.8 )
Service and other revenues 2.9
2.7
0.2
7.4
9.5
8.7
0.8
9.2
Total revenues 457.6
403.6
54.0
13.4
1,262.8
1,149.6
113.2
9.8
Direct operating 188.2
169.9
18.3
10.8
526.2
487.8
38.4
7.9
Depreciation of revenue earning equipment 96.3
89.1
7.2
8.1
283.5
255.1
28.4
11.1
Cost of sales of revenue earning equipment 28.6
27.5
1.1
4.0
134.9
111.6
23.3
20.9
Cost of sales of new equipment, parts and supplies 10.8
12.1
(1.3 ) (10.7 ) 30.3
39.2
(8.9 ) (22.7 )
Selling, general and administrative 84.6
66.8
17.8
26.6
244.6
203.5
41.1
20.2
Impairment —
—
—
—
29.3
—
29.3
NM
Interest expense, net 32.4
32.3
0.1
0.3
101.8
52.1
49.7
95.4
Other expense (income), net (1.9 ) (0.8 ) (1.1 ) NM
(2.3 ) (2.2 ) (0.1 ) 4.5
Income (loss) before income taxes 18.6
6.7
11.9
NM
(85.5 ) 2.5
(88.0 ) NM
Income tax benefit (provision) (5.8 ) (3.7 ) (2.1 ) 56.8
31.5
(9.0 ) 40.5
NM
Net income (loss) $ 12.8
$ 3.0
$ 9.8
NM
$ (54.0 ) $ (6.5 ) $ (47.5 ) NM



	Three Months Ended September 30,										Nine Months Ended September 30,
($ in millions)	2019		2018			$ Change			% Change		2019			2018			$ Change			% Change
Equipment rental	$	459.6	$	449.0		$	10.6		2.4	%	$	1,244.8		$	1,210.6		$	34.2		2.8	%
Sales of rental equipment	35.4		50.1			(14.7		)	(29.3	)	171.8			175.6			(3.8		)	(2.2	)
Sales of new equipment, parts and supplies	10.0		14.2			(4.2		)	(29.6	)	34.1			36.4			(2.3		)	(6.3	)
Service and other revenue	3.1		2.9			0.2			6.9		8.2			10.4			(2.2		)	(21.2	)
Total revenues	508.1		516.2			(8.1		)	(1.6	)	1,458.9			1,433.0			25.9			1.8
Direct operating	197.7		194.4			3.3			1.7		575.3			584.9			(9.6		)	(1.6	)
Depreciation of rental equipment	102.7		98.3			4.4			4.5		303.6			288.6			15.0			5.2
Cost of sales of rental equipment	36.7		51.1			(14.4		)	(28.2	)	170.2			168.9			1.3			0.8
Cost of sales of new equipment, parts and supplies	7.2		10.6			(3.4		)	(32.1	)	25.8			27.7			(1.9		)	(6.9	)
Selling, general and administrative	76.2		78.4			(2.2		)	(2.8	)	221.2			229.2			(8.0		)	(3.5	)
Restructuring	—		—			—			—		7.8			1.0			6.8			NM
Interest expense, net	81.9		38.6			43.3			112.2		146.4			103.0			43.4			42.1
Other income, net	0.5		(0.4		)	0.9			NM		(1.8		)	(0.8		)	(1.0		)	NM
Income before income taxes	5.2		45.2			(40.0		)	(88.5	)	10.4			30.5			(20.1		)	(65.9	)
Income tax benefit	4.2		1.0			3.2			NM		2.0			5.3			(3.3		)	(62.3	)
Net income	$	9.4	$	46.2		$	(36.8	)	(79.7	)%	$	12.4		$	35.8		$	(23.4	)	(65.4	)%

NM - Not Meaningful

Three Months Ended September 30, ~~2017~~2019 Compared with Three Months Ended September 30, ~~2016~~2018

Equipment rental ~~revenues~~revenue increased ~~$52.8~~$10.6 million, or ~~14.7%~~2.4%, in the three months ended September 30, 2017 when compared with the prior-year period. The increase was attributable to a higher level of revenue earning equipment on rent resulting from diversifying and growing our customer base through increases in our ProSolutions^TM ~~and ProContractorproduct offerings. Additionally, pricing increased by 1.7%~~ during the third quarter of ~~2017 as~~2019 when compared to the third quarter of ~~2016.~~2018. The increase was attributable to pricing increases of 4.5% during the third quarter of 2019. The increase was partially offset by a strategic reduction in re-rent revenue.

Sales of ~~revenue earning~~rental equipment ~~increased $2.8~~decreased $14.7 million, or ~~11.2%~~29.3%, during the third quarter of ~~2017 as~~2019 when compared to ~~the prior-year period. During~~ the third quarter of ~~2017,~~2018. The volume of sales during the ~~level~~third quarter of ~~revenue earning~~2019 declined in response to improvements over the past year in the mix and age of equipment ~~sold increased compared~~and timing of sales related to the ~~same period~~strength of the used equipment rental market in ~~2016 as part~~the third quarter of ~~our strategy to shift the mix of our fleet.~~2018. The corresponding cost of sales of ~~revenue earning~~rental equipment as a percentage of the related revenue was ~~103.2%~~103.7% in the third quarter of ~~2017~~2019 compared to ~~110.4%~~102.0% in the third quarter of ~~2016.~~2018. The ~~improvement~~reduction in margin ison sale of rental equipment in the third quarter of 2019 was primarily due to a ~~reduction in the volume~~higher proportion of sales ~~made~~ through the lower-margin auction ~~channel and a shift toward the wholesale~~ channel.

~~Sales of new equipment, parts and supplies decreased $1.8~~Direct operating expenses increased $3.3 million, or ~~11.5%~~1.7%, ~~during~~in the third quarter of ~~2017~~2019 when compared ~~with the prior-year period. This decrease was driven by our implementation of changes~~ to ~~de-emphasize new equipment sales programs. The cost of sales of new equipment, parts and supplies as a percentage of the related revenue was 77.7% for~~ the third quarter of ~~2017 compared~~2018 primarily due to ~~77.1% for~~ the ~~third quarter~~following:

Fleet and related expenses decreased $4.2 million primarily as a result of ~~2016.~~a decrease in re-rent expense of $3.5 million directly related to the decrease in re-rent revenue. Additionally, delivery and freight expenses decreased $2.2 million due to an increase in internal delivery personnel and better management of transportation costs.

Personnel-related expenses increased $2.3 million primarily due to an increase in wages of $4.3 million related to personnel and related costs including overtime. The increase was partially offset by a decrease in benefits of $1.6 million due to ~~the mix of the new equipment sold.~~improved claims experience.


•	Other direct operating costs increased $5.2 million primarily due to increased field facilities expenses of $3.1 million

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HERC HOLDINGS INC. AND SUBSIDIARIES


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

~~Direct operating expenses~~related to new branches that were opened during the second half of 2018 and increases due to recurring renewals on existing locations.

Depreciation of rental equipment increased ~~$18.3~~$4.4 million, or ~~10.8%~~4.5%, in the third quarter of ~~2017~~2019 when compared with the same period in 2018. The increase was primarily due to depreciation recognized on rental equipment with higher cost due to capital expenditures and the sale of older equipment with lower depreciation.

Selling, general and administrative expenses decreased $2.2 million, or 2.8%, in the third quarter of 2019 when compared to the third quarter of ~~2016~~2018. The decline was primarily due to ~~the following:~~

~~Fleet~~a decrease in professional fees of $3.5 million and Spin-Off related costs of $1.3 million, partially offset by a $2.3 million increase for increased sales compensation and related ~~expenses increased $11.0 million primarily as a result of higher delivery, freight~~commissions and ~~maintenance expense of $10.4 million due to an increase in deliveries associated with higher equipment rental revenues.~~

~~Personnel-related expenses increased $5.2 million as a result of an increase in salary expense primarily associated with continued investment in branch management~~incentives to drive ~~operational improvements and investments in branch operating personnel to support~~ revenue growth.

~~Other direct operating costs~~Interest expense, net increased ~~$2.1 million primarily due to higher depreciation of $1.4 million resulting from the addition of new service vehicles and higher facilities expense of $1.2 million related to new locations.~~

~~Depreciation of revenue earning equipment increased $7.2~~$43.3 million, or ~~8.1%~~112.2%, in the third quarter of ~~2017~~2019 when compared ~~with~~to the ~~same period in 2016.~~third quarter of 2018. The increase was primarily due to a ~~larger fleet size~~loss on extinguishment of debt of $53.6 million related to the extinguishment of the 2022 Notes, 2024 Notes and the refinancing of the ABL Credit Facility in July 2019 as compared to a loss on extinguishment of debt of $5.4 million in the third quarter of ~~2017 as compared~~2018 related to the ~~same period in 2016 and an increase of $3.9 million due to the impact~~partial redemption of the ~~2016 reduction~~2022 Notes and 2024 Notes. This increase was partially offset by a decrease in ~~residual values and~~interest expense on the ~~planned holding period~~ABL Credit Facility of ~~certain classes of equipment.~~$3.5 million.

~~Selling, general and administrative expenses increased $17.8~~Income tax benefit was $4.2 million ~~or 26.6%, in~~for the third quarter of ~~2017~~2019 compared to the prior-year period. The increase is primarily due to a $6.2 million increase in provision for bad debt attributable to higher revenue and levels of receivables, a $4.8 million increase for additional sales personnel and related commissions to drive revenue growth, and higher information technology costs related to the Spin-Off of $4.0 million.

~~Income tax provision was $5.8 million for the three months ended September 30, 2017 compared to $3.7~~$1.0 million for the same period in ~~2016. Income~~2018. The income tax ~~provision~~benefit in ~~2017~~2019 was primarily driven by ~~pre-tax income,~~a benefit of approximately $6.3 million related to the debt transactions described in Note 6, "Debt", partially offset by the level of pre-tax income, non-deductible expenses, foreign taxes and ~~valuation allowances recorded on losses generated by~~ foreign ~~loss jurisdictions. Income~~sourced income. The income tax ~~provision~~benefit in ~~the comparable period of 2016~~2018 was primarily driven by the level of pre-tax income, which was offset by discrete items due to a revision in the one-time estimated transition tax on earnings of certain ~~nondeductible charges within the quarter.~~foreign subsidiaries.

Nine Months Ended September 30, ~~2017~~2019 Compared with Nine Months Ended September 30, ~~2016~~2018

Equipment rental ~~revenues~~revenue increased ~~$88.5~~$34.2 million, or ~~8.9%~~2.8%, during the nine months ended September 30, ~~2017~~2019 when compared with the prior-year period. The increase was primarily attributable to pricing increases of 4.3%. The increase was partially offset by a ~~higher level of revenue earning equipment on rent resulting from higher demand from existing customers as well as diversifying and growing our customer base through increases~~strategic reduction in ~~our ProSolutions~~^TM ~~and ProContractorproduct offerings. Additionally, pricing increased by 1.4% during the nine months ended September 30, 2017 as compared to the same period in 2016.~~re-rent revenue.

Sales of ~~revenue earning~~rental equipment ~~increased $34.5~~decreased $3.8 million, or ~~36.7%~~2.2%, during the nine months ended September 30, ~~2017~~2019 when compared towith the prior-year period. ~~During 2017,~~The volume of sales during the ~~level of revenue earning equipment sold increased as part of our strategy~~nine months ended September 30, 2019 declined in response to ~~shift~~improvements over the past year in the mix and age of ~~our fleet as well as higher~~equipment and timing of sales ~~due~~related to the ~~rotation~~strength of ~~our revenue earning~~the used equipment ~~based on normal holding periods.~~rental market in 2018. The corresponding cost of sales of ~~revenue earning~~rental equipment as a percentage of the related revenue was ~~105.0% in 2017~~99.1% during the nine months ended September 30, 2019 compared to ~~118.7%~~96.2% in ~~2016. Losses~~the prior-year period. The reduction in margin on ~~the~~ sale of ~~revenue earning~~rental equipment ~~decreased~~ in ~~2017 as the volume~~2019 was primarily due to a higher proportion of sales ~~made~~ through the lower-margin auction ~~channel was reduced and shifted toward the wholesale~~ channel. The loss on sale of revenue earning equipment in 2016 was primarily due to the higher level of sales through the auction channel of equipment used in the upstream oil and gas markets and equipment manufactured by certain suppliers as we reduced the number of brands of equipment we carry in our fleet.

~~Sales of new equipment, parts and supplies~~Direct operating expenses decreased ~~$10.6~~$9.6 million, or ~~20.8%~~1.6%, during the nine months ended September 30, ~~2017~~2019 when compared with the prior-year period. This decrease was driven by our implementation of changes to de-emphasize new equipment sales programs, including the elimination of certain equipment dealerships. The cost of sales of new equipment, parts and supplies as a percentage of the related revenue was 75.2% for the nine months ended September 30, 2017 compared to 77.0% for the same period ~~of 2016. The decrease was~~primarily due to the ~~mix~~following:

Fleet and related expenses decreased $23.0 million primarily due to the decline in re-rent expense of $11.7 million mainly due to the decrease in re-rent revenue. Maintenance expenses decreased $9.1 million due to a reduction in fleet age and increased maintenance efficiency and delivery and freight expense decreased $2.1 million due to an increase in internal delivery personnel and better management of transportation costs.

Personnel-related expenses increased $2.9 million primarily due to an increase in wages of $6.9 million related to personnel and related costs including overtime. The increase was partially offset by a decrease in benefits of $2.9 million due to improved claims experience.

Other direct operating costs increased $10.5 million primarily due to increased field facilities expenses of $7.0 million primarily related to new ~~equipment sold.~~

branches that were opened during 2018 and increases due to recurring renewals on existing locations.

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HERC HOLDINGS INC. AND SUBSIDIARIES


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

~~Direct operating expenses increased $38.4 million, or 7.9%, in the nine months ended September 30, 2017 when compared to the prior-year period primarily due to the following:~~

Fleet and related expenses increased $18.4 million primarily as a result of higher delivery and freight expense of $12.9 million mainly due to an increase in deliveries associated with higher equipment rental revenues. Additionally, fuel expense increased by $4.1 million driven by higher gas prices and sales volume during the nine months ended September 30, 2017 as compared to the prior-year period.

Personnel-related expenses increased $14.9 million as a result of an increase in salary expense of $12.9 million primarily associated with continued investment in branch management to drive operational improvements and investments in branch operating personnel to support revenue growth. Additionally, there was an increase in benefits expense of $1.5 million primarily due to higher healthcare insurance costs as a stand-alone company.

Other direct operating costs increased $5.1 million primarily due to increased depreciation of $5.1 million related to the increase in service vehicles and higher facilities expense of $4.4 million due to new locations. These increases were partially offset by a decrease in restructuring expense of $2.4 million resulting from charges taken for several location closures during 2015 and 2016.

Depreciation of ~~revenue earning~~rental equipment increased ~~$28.4~~$15.0 million, or ~~11.1%~~5.2%, during the nine months ended September 30, ~~2017~~2019 when compared with the prior-year period. The increase was primarily due to ~~a larger fleet size in the nine months ended September 30, 2017 as compared to the same period in 2016 and an increase of $16.3 million~~depreciation recognized on rental equipment with higher cost due to ~~the impact of the 2016 reduction in residual values~~capital expenditures and the ~~planned holding period~~sale of ~~certain classes of equipment.~~older equipment with lower depreciation.

Selling, general and administrative expenses ~~increased $41.1~~decreased $8.0 million, or ~~20.2%~~3.5%, during the nine months ended September 30, ~~2017~~2019 when compared towith the prior-year period. The ~~increase is~~decline was primarily due to ~~higher stand-alone public company~~a decrease in Spin-Off related costs ~~during the first half~~ of ~~2017~~$9.9 million and ~~information technology costs related to the Spin-Off~~professional fees of ~~$21.4~~$9.3 million, partially offset by a ~~$10.9~~$5.6 million increase for ~~additional~~increased sales ~~personnel~~compensation and related commissions and incentives to drive revenue growth and an ~~$8.4~~increase of $2.9 million ~~increase~~ in ~~provision for bad debt attributable to higher revenue~~advertising and ~~levels of receivables.~~travel expenses.

Impairment charges of $29.3 million were recorded during the nine months ended September 30, 2017. The impairments related to the write-off of intangible assets previously capitalized as part of the development of new financial and point of sale systems of $26.2 million and the impairment of certain revenue earning equipment of $3.1 million thatRestructuring expense was deemed held for sale at September 30, 2017. See Note 4, "Intangible Asset Impairment" and Note 3, "Revenue Earning Equipment," respectively, to the notes to our condensed consolidated financial statements for further information.

~~Interest expense, net increased $49.7~~$7.8 million during the nine months ended September 30, ~~2017 compared to the prior-year period due to interest incurred on the Notes issued~~2019 as a result of our plan of restructuring in ~~June 2016, a loss on the early extinguishment~~Canada which included right-of-use assets and related leasehold improvement impairment of ~~10%~~$5.5 million and severance expense of the Notes, and borrowings under the ABL Credit Facility. The increases were partially offset by decreases in interest on the Predecessor ABL Facility and loans from THC and its affiliates, which were settled as part of the Spin-Off in June 2016.$2.3 million.

~~Income tax benefit was $31.5~~Interest expense, net increased $43.4 million, ~~for the nine months ended September 30, 2017 compared to an income tax provision of $9.0 million for the same period in 2016. The income tax benefit~~or 42.1%, during the nine months ended September 30, ~~2017~~2019 when compared with the same period in 2018. The increase was primarily due to a loss on extinguishment of debt of $53.6 million related to the extinguishment of the 2022 Notes, 2024 Notes and the refinancing of the ABL Credit Facility in July 2019 as compared to a loss on extinguishment of debt of $5.4 million in the third quarter of 2018 related to the partial redemption of the 2022 Notes and 2024 Notes. This increase was partially offset by a decrease in interest expense due to a reduction in interest rates related to the debt transactions described in Note 6, "Debt".

Income tax benefit was $2.0 million during the nine months ended September 30, 2019 when compared with $5.3 million for the same period in 2018. The income tax benefit in 2019 was primarily driven by ~~pre-tax losses,~~a benefit of approximately $6.3 million related to the debt transactions described in Note 6, "Debt", partially offset by the level of pre-tax income, non-deductible expenses, foreign taxes and ~~valuation allowances recorded~~taxes on ~~losses generated by~~ foreign ~~loss jurisdictions. Income~~sourced income. The income tax ~~provision~~benefit in ~~the comparable period of 2016~~2018 was primarily driven by ~~$6.4 million~~the level of pre-tax income, which was offset by discrete items due to a revision in the one-time estimated transition tax ~~expense related to state taxes incurred as a result~~on earnings of ~~the Spin-Off. The effective tax rate for the 2017 fiscal year is expected to be approximately 37%.~~certain foreign subsidiaries.

LIQUIDITY AND CAPITAL RESOURCES

Our primary liquidity needs include the payment of operating expenses, purchases of rental equipment to be used in our operations and servicing of debt. Our primary sources of funding are operating cash flows, cash received from the disposal of equipment and borrowings under our debt arrangements. As of September 30, ~~2017,~~2019, we had approximately $2.2 billion of total nominal indebtedness outstanding. We are highly leveraged and a substantial portion of our liquidity needs arise from debt service on our indebtedness and from the funding of our costs of operations and capital expenditures.

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~~HERC HOLDINGS INC. AND SUBSIDIARIES~~


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

Our liquidity as of September 30, ~~2017~~2019 consisted of cash and cash equivalents and unused commitments under our New ABL Credit Facility. See "Borrowing Capacity and Availability" below. Our practice is to maintain sufficient liquidity through cash from operations, our New ABL Credit Facility and our ~~ABL Credit~~AR Facility to mitigate the impacts of any adverse financial market conditions on our operations. We believe that cash generated from operations and cash received from the disposal of equipment, together with amounts available under the New ABL Credit Facility and the AR Facility, will be adequate to permit us to meet our obligations over the next twelve months.

Cash Flows

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

Prior to the Spin-Off in 2016, as a subsidiary of Hertz Holdings, Herc's cash was swept regularly by Hertz Holdings at its discretion. Hertz Holdings also funded Herc's operating and investing activities as needed. Cash flows related to first half 2016 financing activities included changes in Hertz Holdings' investments in Herc. Transfers of cash to and from Hertz Holdings in the first half of 2016 are reflected within financing activities in our consolidated statements of cash flows.HERC HOLDINGS INC. AND SUBSIDIARIES


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

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


	Nine Months Ended September 30,									Nine Months Ended September 30,
	2017			2016			$ Change			2019			2018			$ Change
Cash provided by (used in):
Operating activities	$	249.9		$	370.9		$	(121.0	)	$	441.2		$	375.0		$	66.2
Investing activities	(289.1		)	(248.1		)	(41.0		)	(375.7		)	(483.0		)	107.3
Financing activities	33.0			(94.6		)	127.6			(58.9		)	85.8			(144.7		)
Effect of exchange rate changes	1.3			0.4			0.9			0.1			(1.3		)	1.4
Net change in cash and cash equivalents	$	(4.9	)	$	28.6		$	(33.5	)	$	6.7		$	(23.5	)	$	30.2

Operating Activities

During the nine months ended September 30, ~~2017,~~2019, we generated ~~$121.0~~$66.2 million ~~less~~more cash from operating activities compared with the same period in ~~2016.~~2018. The ~~decrease~~increase was ~~primarily~~ related to ~~a $59.7 million increase in interest payments as well as lower~~improved operating ~~income~~results primarily resulting from higher ~~information technology~~revenues, lower professional fees, lower maintenance and delivery costs and timing on collection of receivables and other ~~stand-alone public company costs, including the timing of collections of accounts receivable and payments of liabilities~~working capital improvements during the nine months ended September 30, ~~2017~~2019 as compared to the same period in ~~2016.~~2018.

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~~HERC HOLDINGS INC. AND SUBSIDIARIES~~


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

Investing Activities

Cash used in investing activities ~~increased $41.0~~decreased $107.3 million ~~for~~during the nine months ended September 30, ~~2017 as~~2019 when compared towith the ~~same period in 2016.~~prior-year period. Our primary use of cash in investing activities is for the acquisition of ~~revenue earning~~rental equipment and non-rental capital ~~expenditures, which increased primarily due to investments in our information technology, service vehicles and facilities as well as investments in rental earning equipment.~~expenditures. We ~~renew~~rotate our equipment and manage our fleet of rental equipment in line with customer ~~demand.~~demand and continue to invest in our information technology, service vehicles and facilities. Changes in our net capital expenditures are described in more detail in the "Capital Expenditures" section below.

Financing Activities

Cash ~~flows from~~used in financing activities increased ~~$127.6~~$144.7 million ~~for~~during the nine months ended September 30, ~~2017 as~~2019 when compared towith the ~~same period~~prior-year period. Cash used in ~~2016. Cash flows from~~ financing activities during the nine months ended September 30, ~~2017~~2019 primarily represents our changes in debt, which included ~~the~~ net ~~draw down~~repayments of ~~$167.2~~$331.2 million on our revolving lines of credit ~~partially offset by~~and securitization during the ~~redemption~~nine months of ~~$123.5~~2019 compared to $226.3 million ~~of our Notes. Cash used in financing activities in 2016 mainly related to $2.1 billion of financing and transfer activities~~when compared with ~~Hertz Holdings, which primarily funded our operations prior to~~ the ~~Spin-Off and was settled using total proceeds of $2.0 billion, net of issuance costs, from our Notes and ABL Credit Facility.~~prior-year period.

Capital Expenditures

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

Nine Months Ended September 30,
2017 2016
Revenue earning equipment expenditures $ 356.3
$ 325.7
Disposals of revenue earning equipment (121.6 ) (99.0 )
Net revenue earning equipment expenditures $ 234.7
$ 226.7



	Nine Months Ended September 30,
	2019			2018
Rental equipment expenditures	$	506.7		$	617.5
Disposals of rental equipment	(156.9		)	(189.1		)
Net rental equipment expenditures	$	349.8		$	428.4

Net capital expenditures for ~~revenue earning~~rental equipment ~~increased $8.0~~decreased $78.6 million during the nine months ended September 30, ~~2017~~2019 compared to the same period in ~~2016.~~2018. During 2019, we reduced rental equipment expenditures to improve utilization and also reduced the ~~2017 period, we purchased more revenue earning~~volume of rental equipment ~~as part~~sales based on the improvements seen in the mix and age of ~~our fleet mix transformation out of large earthmoving~~ equipment and ~~into more compact earthmoving, ProSolutions~~^TM ~~and ProContractor~~timing related to the strength of the used equipment ~~which resulted in both higher expenditures and disposals during the period.~~rental market.

In ~~fiscal 2017,~~2019, we expect our net ~~revenue earning~~rental equipment capital expenditures to be in the range of ~~$355~~$400.0 million to ~~$365~~$410.0 million.

HERC HOLDINGS INC. AND SUBSIDIARIES


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

Borrowing Capacity and Availability

~~Our~~In July 2019, the Company issued $1.2 billion aggregate principal amount of 2027 Notes. The funds were used to redeem the remaining 2022 Notes and 2024 Notes and repay a portion of the indebtedness outstanding under the then existing ABL Credit Facility. Additionally, Herc Holdings, Herc and certain other subsidiaries of Herc Holdings entered into the New ABL Credit Facility, ~~provides~~which refinances in full and replaces the ABL Credit Facility. See Note 6, "Debt" included in Part I, Item 1 "Financial Statements" of this Report for more information.

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

The accounts receivable and other assets of the SPE are encumbered in favor of the lenders under our AR Facility. The SPE assets are owned by the SPE and are not available to settle the obligations of the Company or any of its other subsidiaries. Substantially all of the remaining assets of Herc and certain of its U.S. and Canadian subsidiaries are encumbered in favor of our lenders under our New ABL Credit ~~Facility and the Notes.~~Facility. None of such assets are available to satisfy the claims of our general creditors. See Note 8,9, "Debt" to the notes to our consolidated financial statements included in Part II, Item 8 "Financial Statements" included in our Annual Report on Form 10-K for the ~~period~~year ended December 31, ~~2016~~2018, and Note 6, "Debt" included in Part I, Item 1 "Financial Statements" of this Report for more information.

~~As of September 30, 2017, the following was available to us (in millions):~~

Remaining
Capacity

Availability Under
Borrowing Base
Limitation
ABL Credit Facility $ 652.5
$ 652.5

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~~HERC HOLDINGS INC. AND SUBSIDIARIES~~


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

~~In addition, as of September 30, 2017, the Company's subsidiary in China had uncommitted credit facilities of which $7.9 million was unutilized.~~

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

As of September 30, ~~2017,~~2019, the following was available to us (in millions):



	Remaining Capacity		Availability Under Borrowing Base Limitation
New ABL Credit Facility	$	976.5	$	976.5
AR Facility	—		—
Total	$	976.5	$	976.5

In addition, as of September 30, 2019, the Company's subsidiary in China had uncommitted credit facilities of which $3.2 million was available for borrowing.

As of September 30, 2019, $21.5 million of standby letters of credit were issued and outstanding under the New ABL Credit Facility, none of which have been drawn upon. The New ABL Credit Facility had ~~$227.5~~$228.5 million available under the letter of credit facility sublimit, subject to borrowing base restrictions. ~~As of September 30, 2017, $22.5 million of stand by letters of credit were issued and outstanding under the~~

Covenants

Our New ABL Credit Facility, ~~none of which have been drawn upon.~~

~~Covenants~~

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

Under the terms of our New ABL Credit Facility, our AR Facility and our 2027 Notes, we are not subject to ongoing financial maintenance covenants; however, under the New ABL Credit Facility, failure to maintain certain levels of liquidity will subject us to a contractually specified fixed charge coverage ratio of not less than 1:1 for the four quarters most recently ended. ~~We are in compliance with our covenants as~~As of

HERC HOLDINGS INC. AND SUBSIDIARIES


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

September 30, ~~2017.~~

~~At September 30, 2017, Herc Holdings' balance sheet was substantially identical to that~~2019, the appropriate levels of Herc, the borrower, with the exception of the components of shareholders equity. For the three and nine months ended September 30, 2017, the statement of operations of Herc Holdings and Herc were identical. For the three and nine months ended September 30, 2016, the statement of operations of Herc Holdings was substantially identical to that of Herc except for approximately $3.8 million, of interest expense to Hertz Holdings that is included in Herc Holdings' statement of operations for the nine months ended September 30, 2016, butliquidity have been maintained, therefore this financial maintenance covenant is not ~~included in Herc's statement of operations.~~applicable.

~~For further~~Additional information on the terms of our Notes, ABL Credit Facility and ~~China credit facilities, see Note 5, "Debt" to the notes to our condensed consolidated financial statements included in this Report. Additional information on the terms of our Notes and ABL Credit~~AR Facility is ~~also~~ included in Note 8,9, "Debt" to the notes to our consolidated financial statements included in Part II, Item 8 "Financial Statements" included in our Annual Report on Form 10-K for the ~~period~~year ended December 31, ~~2016.~~2018. Additional information on the terms of our 2027 Notes and New ABL Credit Facility are included in Note 6, "Debt" included in Part I, Item 1 "Financial Statements" of this Report. For a discussion of the risks associated with our significant indebtedness, see Part I, Item 1A "Risk Factors" contained in our Annual Report on Form 10-K for the ~~period~~year ended December 31, ~~2016.~~2018.

Dividends

~~Hertz Holdings did not historically pay dividends on the common stock.~~ Our payment of dividends on our common stock will be determined by our board of directors in its sole discretion and will depend on our business conditions, financial condition, earnings, liquidity and capital requirements, contractual restrictions and other factors. The amounts available to pay cash dividends are restricted by our debt agreements. As of the date of this Report, we have no plans to pay dividends on our common stock.

CONTRACTUAL OBLIGATIONS

Changes to our aggregate indebtedness, including related interest and terms for new issuances are described in Note 6, "Debt" in Part I, Item 1 "Financial Statements" of this Report. As of September 30, ~~2017,~~2019, there have been no other material changes outside of the ordinary course of business to our known contractual obligations as set forth in the Contractual Obligations table included in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" ~~included in~~of our Annual Report on Form 10-K for the ~~period~~year ended December 31, ~~2016.~~2018.

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~~HERC HOLDINGS INC. AND SUBSIDIARIES~~


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

OFF-BALANCE SHEET COMMITMENTS AND ARRANGEMENTS

As of September 30, ~~2017,~~2019, there have been no material changes to our indemnification obligations as disclosed in Note ~~14,~~16, “Commitments and Contingencies” in our Annual Report on Form 10-K for the ~~period~~year ended December 31, ~~2016.~~2018. For further information, see the discussion on indemnification obligations included in Note 10, "Commitments and Contingencies" in Part I, Item 1 "Financial Statements" of this Report.

~~The~~For information concerning the ongoing securities litigation ~~governmental investigations~~ and other contingencies, including environmental contingencies and the amount currently held in reserve for environmental matters, ~~contained in~~see Note 10, "Commitments and Contingencies" ~~to our unaudited condensed consolidated financial statements included~~ in Part I, Item 1 "Financial Statements" of this ~~Report is incorporated herein by reference.~~Report.

RECENT ACCOUNTING PRONOUNCEMENTS

For a discussion of recent accounting pronouncements, see Note 2, "Basis of Presentation and Recently Issued Accounting Pronouncements" ~~to the notes to our condensed consolidated financial statements included~~ in Part I, Item 1 "Financial Statements" of this Report.

~~CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS~~

This Report includes "forward-looking statements," as that term is defined by the federal securities laws. Forward-looking statements include statements concerning our plans, intentions, objectives, goals, strategies, forecasts, future events, future revenue or performance, capital expenditures, financing needs, business trends and other information that is not historical information. When used in this Report, the words "estimates," "expects," "anticipates," "projects," "plans," "intends," "believes," "forecasts," and future or conditional verbs, such as "will," "should," "could" or "may," as well as variations of such words or similar expressions are intended to identify forward-looking statements, although not all forward-looking statements are so designated. All forward-looking statements, including, without limitation, management's examination of historical operating trends and data, are based upon our current expectations and various assumptions, and apply only as of the date of this Report. Our expectations, beliefs and projections are expressed in good faith and we believe there is a reasonable basis for them. However, there can be no assurance that management's expectations, beliefs and projections will be achieved.

There are a number of risks, uncertainties and other important factors that could cause our actual results to differ materially from those suggested by our forward-looking statements, including those set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 in Part I under Item 1A “Risk Factors,” including:

Risks related to material weaknesses in our internal control over financial reporting and the restatement of financial statements previously issued by Hertz Holdings, including that: we have identified material weaknesses in our internal control over financial reporting that may adversely affect our ability to report our financial condition and results of operations in a timely and accurate manner, which may adversely affect investor and lender confidence in us and, as a result, the value of our common stock and our ability to obtain future financing on acceptable terms, and we may identify additional material weaknesses as we continue to assess our processes and controls as a stand-alone company with lower levels of materiality; our efforts to design and implement an effective control environment may not be sufficient to remediate the material weaknesses, or to prevent future material weaknesses; such material weaknesses could result in a material misstatement of our consolidated financial statements that would not be prevented or detected; we receive certain transition services from New Hertz pursuant to the transition services agreement covering information technology services and other areas, which impact our control environment and, therefore, our internal control over financial reporting; we continue to expend significant costs and devote management time and attention and other resources to matters related to our internal control over financial reporting; our material weaknesses and Hertz Holdings' restatement could expose us to additional risks that could materially adversely affect our ability to execute our strategic plan and our financial position, results of operations and cash flows, including as a result of events of default under the agreements governing our indebtedness and/or government investigations, regulatory inquiries and private actions; we may experience difficulties implementing new information technology systems, including the migration of systems from New Hertz; we could experience disruptions to our control environment in connection with the relocation of our Shared Services Center, including as a result of the failure to retain key employees who possess specific knowledge or expertise necessary for the timely preparation of our financial statements; and Hertz Holdings' restatement has resulted in government investigations, books and records demands, and private litigation and could result in government enforcement actions and private

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~~HERC HOLDINGS INC. AND SUBSIDIARIES~~


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

~~litigation that could have a material adverse impact on our results of operations, financial condition, liquidity and cash flows;~~

Risks related to the Spin-Off, which effected our separation from New Hertz, such as: we have limited operating history as a stand-alone public company, and our historical financial information for periods prior to July 1, 2016, is not necessarily representative of the results that we would have achieved as a separate, publicly traded company, and may not be a reliable indicator of our future results; the liabilities we have assumed and will share with New Hertz in connection with the Spin-Off could have a material adverse effect on our business, financial condition and results of operations; if there is a determination that any portion of the Spin-Off transaction is taxable for U.S. federal income tax purposes, including for reasons outside of our control, then we and our stockholders could incur significant tax liabilities, and we could also incur indemnification liability if we are determined to have caused the Spin-Off to become taxable; if New Hertz fails to pay its tax liabilities under the Tax Matters Agreement or to perform its obligations under the Separation and Distribution Agreement, we could incur significant tax and other liability; our ability to engage in financings, acquisitions and other strategic transactions using equity securities is limited due to the tax treatment of the Spin-Off; the loss of the Hertz brand and reputation could materially adversely affect our ability to attract and retain customers; the Spin-Off may be challenged by creditors as a fraudulent transfer or conveyance; and if the Spin-Off is not a legal dividend, it could be held invalid by a court and have a material adverse effect on our business, financial condition and results of operations;

~~Business risks could have a material adverse effect on our business, results of operations, financial condition and/or liquidity, including:~~

~~the cyclicality of our business, a slowdown in economic conditions or adverse changes in the economic factors specific to the industries in which we operate, in particular industrial and construction;~~

the dependence of our business on the levels of capital investment and maintenance expenditures by our customers, which in turn are affected by numerous factors, including the level of economic activity in their industries, the state of domestic and global economies, global energy demand, the cyclical nature of their markets, expectations regarding government spending on infrastructure improvements or expansions, their liquidity and the condition of global credit and capital markets;

we may experience significant difficulties, delays and/or significant costs from a number of information technology systems projects, including the movement of our point of sale system from the New Hertz system to our own and the migration of our financial system from the New Hertz system to a stand-alone system, each of which will continue to require significant investment of human and financial resources, and any significant disruption from either migration could materially adversely affect our business, results of operations, financial condition, cash flows, ability to report accurate financial results and our control environment;

~~we may have difficulty obtaining the resources that we need to operate, or our costs to do so could increase significantly;~~

~~intense competition in the industry, including from our own suppliers, that may lead to downward pricing or an inability to increase prices;~~

~~any occurrence that disrupts rental activity during our peak periods given the seasonality of the business, especially in the construction industry;~~

doing business in foreign countries exposes us to additional risks, including under laws and regulations that may conflict with U.S. laws and those under anticorruption, competition, economic sanctions and anti-boycott regulations;

our success as an independent company will depend on our new senior management team, the ability of other new employees to learn their new roles, and our ability to attract and retain key management and other key personnel;

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~~HERC HOLDINGS INC. AND SUBSIDIARIES~~


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

~~some or all of our deferred tax assets could expire if we experience an “ownership change” as defined in the Internal Revenue Code;~~

changes in the legal and regulatory environment that affect our operations, including with respect to taxes, consumer rights, privacy, data security and employment matters, could disrupt our business and increase our expenses;

~~an impairment of our goodwill or our indefinite lived intangible assets could have a material non-cash adverse impact;~~

other operational risks such as: any decline in our relations with our key national account customers or the amount of equipment they rent from us; our equipment rental fleet is subject to residual value risk upon disposition, and may not sell at the prices we expect; we may be unable to protect our trade secrets and other intellectual property rights; we may fail to respond adequately to changes in technology and customer demands; our business is heavily reliant upon communications networks and centralized information technology systems and the concentration of our systems creates or increases risks for us, including the risk of the misuse or theft of information we possess, including as a result of cyber security breaches or otherwise, which could harm our brand, reputation or competitive position and give rise to material liabilities; failure to maintain, upgrade and consolidate our information technology networks could materially adversely affect us; we may face issues with our union employees; we are exposed to a variety of claims and losses arising from our operations, and our insurance may not cover all or any portion of such claims; environmental, health and safety laws and regulations and the costs of complying with them, or any change to them impacting our customers’ markets, could materially adversely affect us; decreases in government spending could materially adversely affect us and a lack of or delay in additional infrastructure spending may have a material adverse effect on our share price; maintenance and repair costs associated with our equipment rental fleet could materially adversely affect us; and strategic acquisitions could be difficult to identify and implement and could disrupt our business or change our business profile significantly;

Risks related to our substantial indebtedness, such as: our substantial level of indebtedness exposes us or makes us more vulnerable to a number of risks that could materially adversely affect our financial condition, results of operations, cash flows, liquidity and ability to compete; the secured nature of our indebtedness, which is secured by substantially all of our consolidated assets, could materially adversely affect our business and holders of our debt and equity; an increase in interest rates or in our borrowing margin would increase the cost of servicing our debt and could reduce our profitability; and any additional debt we incur could further exacerbate these risks;

Risks related to the securities market and ownership of our stock, including that: the market price of our common stock may fluctuate significantly; the market price of our common stock could decline as a result of the sale or distribution of a large number of our shares or the perception that a sale or distribution could occur and these factors could make it more difficult for us to raise funds through future stock offerings; and provisions of our governing documents could discourage potential acquisition proposals and could deter or prevent a change in control; and

~~Other risks and uncertainties set forth in our Annual Report on Form 10-K for the year ended December 31, 2016, in this Report and in our other filings with the SEC.~~

All forward-looking statements are expressly qualified in their entirety by such cautionary statements. We do not undertake any obligation to release publicly any update or revision to any of the forward-looking statements.

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~~HERC HOLDINGS INC. AND SUBSIDIARIES~~

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

~~There is~~As of September 30, 2019, there has been no material change in the information reported under Part II, Item 7A, "Quantitative and Qualitative Disclosures About Market Risk," in our Annual Report on Form 10-K for the period ended December 31, ~~2016.~~2018.

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HERC HOLDINGS INC. AND SUBSIDIARIES

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our senior management has evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as defined under ~~the~~ Exchange Act Rules 13a-15(e) and 15d-15(e), as of the end of the period covered by this ~~Report.~~report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of September 30, 2017, due to the identification of material weaknesses in our internal control over financial reporting previously identified and reported in our Annual Report on Form 10-K for the year ended December 31, 2016 (the “2016 Form 10-K”),2019, our disclosure controls and procedures were ~~not~~ effective to provide reasonable assurance that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act ~~and the rules promulgated thereunder,~~ is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

~~Previously Reported Material Weaknesses~~Changes in Internal Control ~~over~~Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). As reported in our 2016 Form 10-K, we did not maintain effective internal control over financial reporting as of December 31, 2016 as a result of material weaknesses in the Control Environment, Risk Assessment and Monitoring areas which continue to exist as of September 30, 2017. A material weakness (as defined in Rule 12b-2 under the Exchange Act) is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Refer to Item 9A in our 2016 Form 10-K for a description of our material weaknesses and remediation efforts undertaken by management.

~~Remediation Efforts and Status of Previously Reported Material Weaknesses~~

~~Our material weaknesses~~There were not remediated at September 30, 2017; however, during the nine months ended September 30, 2017, we have undertaken steps toward remediation of the material weaknesses identified in our internal control over financial reporting. Our Board of Directors and management take internal control over financial reporting and the integrity of the Company’s financial statements seriously and believe that the steps described below are essential to implementing strong and effective internal control over financial reporting and a strong internal control environment.

Our management continues to strengthen our internal control over financial reporting and to remediate the material weaknesses identified in the 2016 Form 10-K, including assessing the additional remediation steps needed and implementing measures to remediate the underlying causes that gave rise to the material weaknesses.

~~The following steps are among the measures taken by the Company in addition to continuing the remediation efforts described in Item 9A in our 2016 Form 10-K:~~

We are continuing efforts to improve our complement of personnel with the requisite skillsets in certain areas integral to financial reporting. We enhanced the accounting and finance team by increasing the number of roles and hiring additional individuals with appropriate knowledge, skills and experience commensurate with the financial reporting complexities of the organization. Two key accounting positions, Controller and Chief Accounting Officer and Assistant Controller, have been filled or replaced by the Company and other senior accounting personnel have been

~~HERC HOLDINGS INC. AND SUBSIDIARIES~~

~~ITEM 4. CONTROLS AND PROCEDURES (continued)~~

hired during the nine months ended September 30, 2017. Additionally, we reorganized our accounting team and reassigned responsibilities to strengthen the performance and review of processes and to evaluate, implement and maintain enhancements to our internal control over financial reporting.

We have provided, and will continue to provide, ongoing training for dedicated resources with assigned responsibility and accountability for financial reporting processes and internal controls. Training has included comprehensive internal controls training and training focused on upgrading the skills of our accounting personnel with respect to the application of U.S. GAAP updates.

We have established a task force and assigned a working group to each of the material weaknesses, as appropriate. These groups are focused on improving the design and operating effectiveness of the controls. The groups meet regularly and include members of senior management to strengthen accountability and prioritization of corrective actions.

We are continuing our efforts in performing enterprise-wide risk assessment to identify, design, implement and re-evaluate our control activities related to internal control over financial reporting, including monitoring controls related to the design and operating effectiveness of certain control activities.

We have been actively engaged in and are continuing the process of designing, developing, implementing and testing processes and procedures, and will continue to devote significant time and attention to the remediation of our material weaknesses.

We continue to enhance our risk-based internal audit function, which reports directly to our Audit Committee. It has been staffed with qualified and seasoned professionals through direct hiring and a co-sourcing partnership to augment our internal resources. An enterprise-wide internal audit plan was established which includes operational, financial and compliance audits as well as addressing items that may be raised via the ethics hotline.

We are continuing efforts to address the material weakness identified regarding payroll. We have added incremental qualified resources and enhanced our policies and procedures over administering payroll to establish controls that are properly executed, supported by adequate documentation and are independently reviewed and approved.

The Audit Committee of the Board of Directors is monitoring management's ongoing remediation efforts. With the Audit Committee's oversight, management has dedicated significant resources and efforts to improve our internal control environment to remedy the identified material weaknesses. As we continue to evaluate and implement improvements to our internal control over financial reporting, our management may decide to take additional measures to address our control deficiencies or to modify the remediation efforts undertaken. Because the reliability of the internal control process requires repeatable execution, our material weaknesses cannot be considered fully remediated until all remedial processes and procedures (including additional remediation efforts identified by our senior management as necessary) have been implemented, each applicable control has operated for a sufficient period of time, and management has concluded, through testing, that the controls are operating effectively. Until all identified material weaknesses are remediated, we will not be able to assert that our internal controls are effective. Further, management may identify other material weaknessesno changes in our internal control over financial reporting during ~~this process.~~

~~Changes in Internal Control over Financial Reporting~~

~~Except for~~ the changes noted above, there were no additional changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the three monthsquarter ended September 30, ~~2017~~2019, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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HERC HOLDINGS INC. AND SUBSIDIARIES

PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

For a description of certain pending legal proceedings see Note 10, "Commitments and Contingencies" to the notes to our condensed consolidated financial statements in Part I, Item 1 "Financial Statements" of this Report.

ITEM 1A. RISK FACTORS

There have been no material changes to the Company's risk factors from those previously disclosed under Part I, Item 1A, " Risk Factors" in our Annual Report on Form 10-K for the ~~period~~year ended December 31, ~~2016.~~2018.

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

Share Repurchase Program

In March 2014, the Board approved a $1 billion share repurchase program (the "share repurchase program"). There were no share repurchases in the ~~three~~nine months ended September 30, ~~2017.~~2019. As of September 30, ~~2017,~~2019, the approximate dollar value that remains available for purchases under the 2014 share repurchase program is $395.9 million. The program does not obligate us to make any repurchases at any specific time or in any specific situation. Share repurchases may be commenced or suspended at any time or from time to time, subject to legal and contractual requirements, without prior notice. For more information on the share repurchase program, see Note ~~18,~~19, "Equity and Earnings (Loss) Per Share" to our ~~condensed~~ consolidated financial statements in Part II, Item 8 "Financial ~~Statements"~~Statements and Supplementary Data" in our Annual Report on Form 10-K for the ~~period~~year ended December 31, ~~2016.~~2018.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS



Exhibit Number	Description
3.1.1	Amended and Restated Certificate of Incorporation of Herc Holdings (Incorporated by reference to Exhibit 3.1 to the Annual Report on Form 10-K of Hertz Global Holdings, Inc. (File No. 001-33139), as filed on March 30, 2007).
3.1.2	Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Herc Holdings, effective as of May 14, 2014 (Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of Hertz Global Holdings, Inc. (File No. 001-33139), as filed on May 14, 2014).
3.1.3	Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Herc Holdings, dated June 30, 2016 (reflecting the registrant’s name change to “Herc Holdings Inc.”) (Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of Herc Holdings (File No. 001-33139), as filed on July 6, 2016).
3.1.4	Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Herc Holdings, dated June 30, 2016 (Incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K of Herc Holdings (File No. 001-33139), as filed on July 6, 2016).
3.2	Amended and Restated By-Laws of Herc Holdings Inc., effective ~~June 30, 2016~~May 17, 2018 (Incorporated by reference to Exhibit ~~3.3~~3.1 to the Current Report on Form 8-K of Herc Holdings Inc. (File No. 001-33139), as filed on ~~July 6, 2016)~~May 23, 2018).
31.1*	Certification of the ~~Chief~~Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of the ~~Chief~~Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) under the Securities and Exchange Act of 1934, as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002
32.1**	18 U.S.C. Section 1350 Certifications of ~~Chief~~Principal Executive Officer and the ~~Chief~~Principal Financial Officer
101.INS*	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH*	Inline XBRL Taxonomy Extension Schema Document
101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*Filed herewith

**Furnished herewith

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HERC HOLDINGS INC. AND SUBSIDIARIES

SIGNATURE

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



Date:	~~November 8, 2017~~October 23, 2019	HERC HOLDINGS INC. (Registrant)
		By:	/s/ ~~BARBARA L. BRASIER~~MARK IRION
			~~Barbara L. Brasier~~Mark Irion Senior Vice President and Chief Financial Officer

3837



	September 30, 2017			December 31, 2016
Revenue earning equipment	$	3,858.1		$	3,695.5
Less: Accumulated depreciation	(1,392.6		)	(1,305.5		)
Revenue earning equipment, net	$	2,465.5		$	2,390.0



	Pension and Other Post-Employment Benefits			Unrealized Losses on Hedging Instruments			Foreign Currency Items			Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2016	$	(14.6	)	$	—		$	(104.1	)	$	(118.7	)
Other comprehensive income (loss) before reclassification	(1.7		)	(0.2		)	21.5			19.6
Amounts reclassified from accumulated other comprehensive loss	0.7			—			—			0.7
Net current period other comprehensive income (loss)	(1.0		)	(0.2		)	21.5			20.3
Balance at September 30, 2017	$	(15.6	)	$	(0.2	)	$	(82.6	)	$	(98.4	)



	Aggregate Notional Amount		Receive Rate	Receive Rate as of September 30, 2017		Pay Rate
ABL Credit Facility	$	350.0	1 month LIBOR + 1.75%	3.0	%	3.5	%



	Fair Value of Financial Instruments
	Prepaid & Other Current Assets				Accrued Liabilities
	September 30, 2017		December 31, 2016		September 30, 2017		December 31, 2016
Derivatives Designated as Hedging Instruments
Interest rate swap	$	—	$	—	$	0.4	$	—
Derivatives Not Designated as Hedging Instruments
Foreign currency forward contracts	$	—	$	0.1	$	—	$	—



	Loss Recognized
	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Derivatives Not Designated as Hedging Instruments
Foreign currency forward contracts	$	(0.4	)	$	(2.6	)	$	(4.0	)	$	(2.7	)