UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended ~~September~~June 30, ~~2016~~2017

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

For the transition period from _________ to _________

Commission File No. 001-36752

Neff Corporation

(Exact name of registrant as specified in its charter)



Delaware				37-1773826
(State or other jurisdiction of incorporation or organization)				(I.R.S. Employer Identification No.)

3750 N.W. 87th Avenue, Suite 400

Miami, FL 33178

(Address of principal executive offices) (zip code)

(305) 513-3350

(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨

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



Large accelerated filer	¨		Accelerated filer	ý
Non-accelerated filer	¨	(Do not check if a smaller reporting company)	Smaller reporting company	¨
			Emerging growth company	ý

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

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

Table of contents

As of ~~October 19, 2016,~~August 1, 2017, the number of shares of Class A common stock outstanding was ~~8,911,965~~8,892,798 and the number of shares of Class B common stock outstanding was 14,951,625.



	NEFF CORPORATION TABLE OF CONTENTS
10-Q Part and Item No.		Page No.

PART I	FINANCIAL INFORMATION
ITEM 1	Financial Statements	45
	Unaudited Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015~~	4
	~~Unaudited Condensed Consolidated Statements of Operations for the Three Months Ended September 30,~~ 2016 ~~and 2015~~	5
	Unaudited Condensed Consolidated Statements of Operations for the ~~Nine~~Three Months Ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016	6
	Unaudited Condensed Consolidated Statements of Operations for the Six Months Ended June 30, 2017 and 2016	7
	Unaudited Condensed Consolidated Statement of Stockholders' Deficit and Non-Controlling Interest for the Six Months Ended June 30, 2017	8
	Unaudited Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016	79
	Notes to Unaudited Condensed Consolidated Financial Statements	810
	Supplemental Unaudited Condensed Consolidating Financial Statements	1618

ITEM 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2427

ITEM 3	Quantitative and Qualitative Disclosures About Market Risk	3641

ITEM 4	Controls and Procedures	3641

PART II	OTHER INFORMATION

ITEM 1	Legal Proceedings	3843

ITEM 1A	Risk Factors	3843

ITEM 2	Unregistered Sales of Equity Securities and Use of Proceeds	3844

ITEM 3	Defaults Upon Senior Securities	3844

ITEM 4	Mine Safety Disclosures	3844

ITEM 5	Other Information	3844

ITEM 6	Exhibits	3945

Table of contents

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q contains certain "forward-looking statements" within the meaning of the federal securities laws. These forward-looking statements include statements regarding industry outlook, our expectations regarding the performance of our business, liquidity, our expected tax rate and benefits and estimated payments under our tax receivable agreement, expected capital expenditures, anticipated future indebtedness or financings, our pending merger transaction with H&E Equipment Services Inc. and other non-historical statements. We use words such as "could," "may," "might," "will," "expect," "likely," "believe," "continue," "anticipate," "estimate," "intend," "plan," "project" and other similar expressions to identify some but not all forward-looking statements. Forward-looking statements involve estimates and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. Accordingly, any such statements are qualified in their entirety by reference to the important factors described under the caption "Risk Factors" in our annual report on Form 10-K for the fiscal year ended December 31, ~~2015,~~2016, filed with the Securities and Exchange Commission (the “SEC”) on March ~~8, 2016~~6, 2017 (the ~~“2015~~“2016 10-K”). as supplemented by the risks and uncertainties described in "Risk Factors" set forth in this quarterly report on Form 10-Q.

The forward-looking statements contained in this quarterly report on Form 10-Q are based on assumptions that we have made in light of our industry experience and our perceptions of historical trends, current conditions, expected future developments and other important factors we believe are appropriate under the circumstances. As you read and consider this quarterly report on Form 10-Q, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties (many of which are beyond our control) and assumptions. Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many important factors could affect our actual operating and financial performance and cause our performance to differ materially from the performance anticipated in the forward-looking statements. We believe these important factors include, but are not limited to, those described under the captions "Risk Factors" in our ~~2015 10-K.~~2016 10-K as supplemented by the risks and uncertainties described in "Risk Factors" set forth in this quarterly report on Form 10-Q. Should one or more of these risks or uncertainties materialize, or should any of these assumptions prove incorrect, our actual operating and financial performance may vary in material respects from the performance projected in these forward-looking statements.

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

Table of contents

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

NEFF CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)


	September 30, 2016			December 31, 2015			June 30, 2017			December 31, 2016
ASSETS

Cash and cash equivalents	$	839		$	289		$	805		$	900
Accounts receivable, net of allowance for doubtful accounts of $2,057 in 2016 and $2,508 in 2015	64,478			70,328
Accounts receivable, net of allowance for doubtful accounts of $1,781 in 2017 and $2,481 in 2016							63,452			64,943
Inventories	1,843			1,766			2,252			1,867
Rental equipment, net	478,103			457,470			478,249			462,084
Property and equipment, net	36,177			33,473			38,631			35,534
Prepaid expenses and other assets	16,575			14,488			9,096			8,203
Goodwill	60,644			60,599			60,644			60,644
Intangible assets, net	14,513			15,314			13,807			14,246
Total assets	$	673,172		$	653,727		$	666,936		$	648,421

LIABILITIES AND STOCKHOLDERS' DEFICIT

Liabilities
Accounts payable	$	9,844		$	18,948		$	22,733		$	15,851
Accrued expenses and other liabilities	37,521			31,412			34,834			35,074
Revolving credit facility	260,000			253,600
Second lien loan, net of original issue discount	473,843			476,966
Revolving credit facility, net of debt issue costs							222,645			222,531
Second lien loan, net of debt issue costs and original issue discount							457,626			468,860
Payable pursuant to tax receivable agreement	31,032			29,133			29,621			29,505
Deferred tax liability, net	11,099			9,458			11,488			8,325
Total liabilities	823,339			819,517			778,947			780,146

Stockholders' deficit
Class A Common Stock; $.01 par value, 100,000,000 shares authorized, 8,911,965 and 10,380,781 shares issued and outstanding as of September 30, 2016 and December 31, 2015, respectively	89			104
Class B Common Stock; $.01 par value, 15,000,000 shares authorized, 14,951,625 shares issued and outstanding as of September 30, 2016 and December 31, 2015	150			150
Class A Common Stock; $.01 par value, 100,000,000 shares authorized, 8,892,798 and 8,859,662 shares issued and outstanding as of June 30, 2017 and December 31, 2016, respectively							89			88
Class B Common Stock; $.01 par value, 15,000,000 shares authorized, 14,951,625 shares issued and outstanding as of June 30, 2017 and December 31, 2016							150			150
Additional paid-in capital	(119,222		)	(112,058		)	(100,801		)	(102,216		)
Retained earnings	22,522			17,190			26,380			22,770
Total stockholders' deficit	(96,461		)	(94,614		)	(74,182		)	(79,208		)
Non-controlling interest	(53,706		)	(71,176		)	(37,829		)	(52,517		)
Total stockholders' deficit and non-controlling interest	(150,167		)	(165,790		)	(112,011		)	(131,725		)
Total liabilities and stockholders' deficit and non-controlling interest	$	673,172		$	653,727		$	666,936		$	648,421

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

Table of contents

NEFF CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)


	For the Three Months Ended September 30, 2016			For the Three Months Ended September 30, 2015			For the Three Months Ended June 30, 2017			For the Three Months Ended June 30, 2016
Revenues
Rental revenues	$	95,770		$	90,532		$	94,379		$	91,474
Equipment sales	6,264			5,559			6,306			4,941
Parts and service	3,433			3,333			3,440			3,245
Total revenues	105,467			99,424			104,125			99,660
Cost of revenues
Cost of equipment sold	4,152			3,474			3,993			2,963
Depreciation of rental equipment	21,912			21,553			22,795			22,761
Cost of rental revenues	23,311			21,186			22,815			21,675
Cost of parts and service	2,067			1,964			2,016			1,799
Total cost of revenues	51,442			48,177			51,619			49,198
Gross profit	54,025			51,247			52,506			50,462
Other operating expenses
Selling, general and administrative expenses	24,937			22,852			24,052			23,387
Other depreciation and amortization	2,158			2,678			2,286			2,594
Total other operating expenses	27,095			25,530			26,338			25,981
Income from operations	26,930			25,717			26,168			24,481
Other expenses (income)
Other expenses
Interest expense	10,620			10,907			11,000			10,846
Adjustment to tax receivable agreement	1,223			411			61			262
(Gain) loss on interest rate swap	(1,049		)	4,216
Amortization of debt issue costs	380			392
Total other expenses (income)	11,174			15,926
Loss on interest rate swap							587			1,828
Total other expenses							11,648			12,936
Income before income taxes	15,756			9,791			14,520			11,545
Provision for income taxes	(2,334		)	(347		)	(2,184		)	(1,606		)
Net income	13,422			9,444			12,336			9,939
Less: net income attributable to non-controlling interest	10,558			6,238			9,086			7,319
Net income attributable to Neff Corporation	$	2,864		$	3,206		$	3,250		$	2,620

Net income attributable to Neff Corporation per share of Class A common stock outstanding:
Basic	$	0.32		$	0.31		$	0.37		$	0.29
Diluted	$	0.31		$	0.27		$	0.34		$	0.28
Weighted average shares of Class A common stock outstanding:
Basic	8,980			10,494			8,878			9,158
Diluted	9,355			12,048			9,542			9,481

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

Table of contents

NEFF CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)


	For the Nine Months Ended September 30, 2016			For the Nine Months Ended September 30, 2015			For the Six Months Ended June 30, 2017			For the Six Months Ended June 30, 2016
Revenues
Rental revenues	$	268,421		$	249,493		$	179,877		$	172,651
Equipment sales	16,307			18,520			13,501			10,043
Parts and service	9,983			9,724			6,624			6,550
Total revenues	294,711			277,737			200,002			189,244
Cost of revenues
Cost of equipment sold	10,226			11,864			8,946			6,074
Depreciation of rental equipment	66,838			62,280			44,945			44,926
Cost of rental revenues	64,919			58,556			45,078			41,608
Cost of parts and service	5,671			5,534			3,813			3,604
Total cost of revenues	147,654			138,234			102,782			96,212
Gross profit	147,057			139,503			97,220			93,032
Other operating expenses
Selling, general and administrative expenses	72,846			67,610			48,594			47,909
Other depreciation and amortization	7,493			7,796			4,457			5,335
Total other operating expenses	80,339			75,406			53,051			53,244
Income from operations	66,718			64,097			44,169			39,788
Other expenses (income)
Other expenses
Interest expense	31,745			32,174			22,173			21,890
Adjustment to tax receivable agreement	1,899			(2,476		)	116			676
Loss on interest rate swap	5,433			4,097			212			6,482
Amortization of debt issue costs	1,145			1,144
Total other expenses (income)	40,222			34,939
Total other expenses							22,501			29,048
Income before income taxes	26,496			29,158			21,668			10,740
Provision for income taxes	(3,556		)	(1,692		)	(3,095		)	(1,222		)
Net income	22,940			27,466			18,573			9,518
Less: net income attributable to non-controlling interest	17,608			15,912			13,597			7,050
Net income attributable to Neff Corporation	$	5,332		$	11,554		$	4,976		$	2,468

Net income attributable to Neff Corporation per share of Class A common stock outstanding:
Basic	$	0.56		$	1.10		$	0.56		$	0.25
Diluted	$	0.55		$	0.96		$	0.52		$	0.25
Weighted average shares of Class A common stock outstanding:
Basic	9,508			10,484			8,869			9,755
Diluted	9,633			12,038			9,497			9,916

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

Table of contents

NEFF CORPORATION AND SUBSIDIARIES

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

FOR THE SIX MONTHS ENDED JUNE 30, 2017

(in thousands)



	Neff Corporation
	Class A Common Stock			Class B Common Stock
	Shares	Amount		Shares	Amount		Additional Paid-in Capital			Retained Earnings			Non-controlling interest			Total stockholders' deficit and non-controlling interest
BALANCE—December 31, 2016	8,860	$	88	14,952	$	150	$	(102,216	)	$	22,770		$	(52,517	)	$	(131,725	)
Equity-based compensation expense	—	—		—	—		1,399			—			—			1,399
Option exercises	33	1		—	—		16			(52		)	—			(35		)
Distributions to member	—	—		—	—		—			—			(44		)	(44		)
Tax impact of change in ownership percentage	—	—		—	—		—			(179		)	—			(179		)
Reallocation based on ending non-controlling interest percentage	—	—		—	—		—			(1,135		)	1,135			—
Net income	—	—		—	—		—			4,976			13,597			18,573
BALANCE—June 30, 2017	8,893	$	89	14,952	$	150	$	(100,801	)	$	26,380		$	(37,829	)	$	(112,011	)

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

Table of contents

NEFF CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)


	For the Nine Months Ended September 30, 2016			For the Nine Months Ended September 30, 2015			For the Six Months Ended June 30, 2017			For the Six Months Ended June 30, 2016
Cash Flows from Operating Activities
Net income	$	22,940		$	27,466		$	18,573		$	9,518
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	73,528			69,111			48,963			49,726
Amortization of debt issue costs	1,145			1,144			834			765
Amortization of intangible assets	803			965			439			535
Amortization of original issue discount	226			185			176			147
Gain on sale of equipment	(6,081		)	(6,656		)	(4,555		)	(3,969		)
Provision for bad debt	1,707			1,431			429			862
Equity-based compensation	1,509			901			1,399			1,098
Deferred income taxes	3,396			2,085			2,984			1,222
Adjustment to tax receivable agreement	1,899			(2,476		)	116			676
Unrealized loss on interest rate swap	4,785			3,852
Unrealized (gain) loss on interest rate swap							(286		)	6,183
Changes in operating assets and liabilities:
Accounts receivable	4,143			4,075			1,062			7,472
Inventories, prepaid expenses and other assets	(1,786		)	147			(1,278		)	(1,267		)
Accounts payable	(1,093		)	(1,271		)	931			(324		)
Accrued expenses and other liabilities	3,861			(1,270		)	(1,537		)	882
Net cash provided by operating activities	110,982			99,689			68,250			73,526
Cash Flows from Investing Activities
Purchases of rental equipment	(107,506		)	(138,959		)	(62,496		)	(76,557		)
Proceeds from sale of equipment	16,307			18,520			13,501			10,043
Purchases of property and equipment	(10,133		)	(11,742		)	(7,141		)	(8,648		)
Net cash used in investing activities	(101,332		)	(132,181		)	(56,136		)	(75,162		)
Cash Flows from Financing Activities
Repayments under revolving credit facility	(109,537		)	(95,239		)	(69,894		)	(66,400		)
Borrowings under revolving credit facility	115,937			128,039			69,594			82,500
Debt issue costs	(1,570		)	—			—			(1,570		)
Common stock repurchases	(10,443		)	—			—			(9,433		)
Proceeds from option exercises							17			—
Payment of withholding taxes for option exercises							(52		)	—
Distributions to member							(44		)	(138		)
Second Lien Loan prepayment	(3,349		)	—			(11,830		)	(3,349		)
Distribution to member	(138		)	—
Payment of costs directly associated with the issuance of Class A common stock	—			(283		)
Net cash (used in) provided by financing activities	(9,100		)	32,517			(12,209		)	1,610
Net increase in cash and cash equivalents	550			25
Net decrease in cash and cash equivalents							(95		)	(26		)
Cash and cash equivalents, beginning of period	289			207			900			289
Cash and cash equivalents, end of period	$	839		$	232		$	805		$	263

Supplemental Disclosures of Cash Flow Information
Cash paid for interest	$	31,971		$	32,190		$	21,128		$	21,464
Cash paid for interest rate swap settlements	648			245			495			299
Non-Cash Investing Activities
Purchases of rental equipment included in accounts payable and other accrued liabilities at period end	$	8,955		$	7,967		$	21,069		$	24,368

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

Table of contents

NEFF CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1—BUSINESS AND ORGANIZATION

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

The Company owns and operates equipment rental locations in the United States. The Company also sells used equipment, parts and merchandise and provides ongoing repair and maintenance services.

NOTE 2—BASIS OF PRESENTATION

Basis of Presentation

The accompanying condensed consolidated financial statements are unaudited and have been prepared in conformity with accounting principles generally accepted in the United States (“US GAAP”) and the rules and regulations of the SEC. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with US GAAP have been condensed or omitted. The accompanying unaudited condensed consolidated financial statements are presented on a consolidated basis. All intercompany accounts and transactions have been eliminated. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all normal and recurring adjustments necessary to present fairly the Company’s balance sheets as of ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, the results of its operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015 and~~2016, the cash flows for the ~~nine~~six months ended ~~September~~June 30, 2017 and 2016 and ~~2015.~~stockholders' deficit and non-controlling interest for the six months ended June 30, 2017. Interim results may not be indicative of full year performance. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto in the ~~2015~~2016 10-K.

Use of Estimates

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

Goodwill and Intangible Assets

Goodwill and trademarks and tradenames are reviewed at least annually for impairment. The Company conducts annual impairment tests on October 1 of each fiscal year or whenever an indicator of impairment exists. The customer list is amortized over its useful life (Note 5). The Company expenses costs to renew or extend the term of its recognized intangible assets.

Segment Reporting

The Company's operations consist of the rental and sale of equipment, and parts and services in five regions in the United States: Florida, Atlantic, Central, Southeastern and Western. The five regions are the Company's operating segments and are aggregated into one reportable segment because they rent similar products and have similar economic characteristics. The Company operates in the United States and had minimal international sales for each of the periods presented.

NEFF CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 2—BASIS OF PRESENTATION (Continued)

Comprehensive Income (Loss)

The Company had no items of other comprehensive income (loss) in any of the periods presented.

Recently Issued Accounting Pronouncements

Under the Jumpstart Our Business Startups Act (the "JOBS Act"), the Company meets the definition of an emerging growth company. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has irrevocably elected to avail itself of this exemption from adopting new or revised accounting standards and, therefore, will not be subject to new or revised accounting standards until such time as those standards apply to private companies. There were no significant new accounting pronouncements that the Company adopted during the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2017.

In ~~February 2016,~~May 2014, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No. 2014-09, Revenues for Contracts with Customers(Topic 606), ("ASU 2014-09") which provides guidance on recognizing revenue. The guidance includes steps an entity should apply to achieve the core principle that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The FASB has agreed to a one-year deferral of the original effective date of this guidance and as a result it will be effective for private companies for annual periods beginning after December 15, 2018 and interim periods beginning after December 15, 2019. The FASB's update allows entities to apply the new guidance as of the original effective date. The Company expects to adopt this guidance when effective for private companies and is currently evaluating the impact on the Company's financial statements and disclosures.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), ("ASU 2016-02") to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This guidance is effective for private companies for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020 and requires application on a modified retrospective basis. The modified retrospective basis includes a number of optional practical expedients that entities may elect to apply. The Company expects to adopt this guidance when effective for private companies and is currently evaluating the impact ~~of ASU 2016-02~~ on the Company's financial statements and disclosures.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of Emerging Issues Task Force), ("ASU 2016-15") to reduce the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230, Statement of Cash Flows, and other topics. This guidance is effective for private companies for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019 and requires application on a retrospective transition method to each period presented. If it is impracticable to apply the amendments retrospectively for some of the issues, the amendments for those issues would be applied prospectively as of the earliest date practicable. The Company expects to adopt this guidance when it becomes effective for private companies and does not expect this guidance to have a significant impact on the Company's financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, ("ASU 2017-04") which removes the step 2 requirement to perform a hypothetical purchase price allocation to measure goodwill impairment. Goodwill impairment will now be the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. This guidance is effective for public companies for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. As ASU 2017-04 will become effective after the expiration of the exemption period under the JOBS Act, the Company expects to adopt this guidance when it becomes effective for public companies. The Company does not expect this guidance to have a significant impact on the Company's financial statements.

In April 2015, the FASB issued ASU No. 2015-03, Interest-Imputation of Interest (Subtopic 835-30) - Simplifying the Presentation of Debt Issuance Costs, ("ASU 2015-03") which provides guidance on the presentation of debt issuance costs. This guidance requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction

NEFF CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 2—BASIS OF PRESENTATION (Continued)

from the carrying amount of that debt liability and amortization of debt issuance costs will be reported as interest expense. This guidance became effective for the Company as of the year ended December 31, 2016 and requires application on a retrospective

basis. As a result of adopting this guidance, interest expense for the three and six months ended June 30, 2016 changed as shown below (in thousands):



	For the Three Months Ended June 30, 2016		For the Six Months Ended June 30, 2016
Interest expense as previously reported	$	10,476	$	21,125
Reclassification of amortization of debt issue costs	370		765
Current presentation of interest expense	$	10,846	$	21,890

NOTE 3—NON-CONTROLLING INTEREST

Neff Corporation is the sole managing member of Neff Holdings. As a result, Neff Corporation operates and controls all of the business and affairs of Neff Holdings while owning a 37.3% minority economic interest in Neff Holdings. Neff Corporation consolidates the financial results of Neff Holdings and Neff Holdings' subsidiaries, Neff LLC and Neff Rental LLC, and records a non-controlling interest for the remaining 62.7% economic interest in Neff Holdings held by Wayzata. On a stand alone basis, Neff Corporation's only sources of cash flow from operations are distributions from Neff Holdings. Net income attributable to the non-controlling interest on the unaudited condensed consolidated statements of operations represents the portion of earnings attributable to the economic interest in Neff Holdings held by the non-controlling unitholders. The non-controlling interest on the unaudited condensed consolidated balance sheets represents the carryover basis of Wayzata's capital account in Neff Holdings. Non-controlling interest is adjusted to reflect the distributions to and income allocated to the non-controlling unitholders. The ownership of the Common Units is summarized as follows:

Non-controlling ownership of Common Units in Neff Holdings Neff Corporation ownership of Common Units in Neff Holdings Total
As of September 30, 2016 14,951,625
8,911,965
23,863,590
62.7 % 37.3 % 100.0 %



	Non-controlling ownership of Common Units in Neff Holdings		Neff Corporation ownership of Common Units in Neff Holdings		Total
As of June 30, 2017	14,951,625		8,892,798		23,844,423
	62.7	%	37.3	%	100.0	%

Non-controlling ownership of Common Units in Neff Holdings Neff Corporation ownership of Common Units in Neff Holdings Total
As of December 31, 2015 14,951,625
10,380,781
25,332,406
59.0 % 41.0 % 100.0 %

~~NEFF CORPORATION AND SUBSIDIARIES~~

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

~~NOTE 3—NON-CONTROLLING INTEREST (Continued)~~

On August 15, 2016, the Company filed a shelf registration statement on Form S-3 with the SEC, which was declared effective on September 9, 2016. Under this shelf registration statement, Wayzata Opportunities Fund II, L.P. and Wayzata Opportunities Fund Offshore II, L.P. may sell in the aggregate up to 14,951,625 shares of the Company's Class A Common Stock that may be issued to them pursuant to the redemption or exchange for the common units of Neff Holdings that they currently own.



	Non-controlling ownership of Common Units in Neff Holdings		Neff Corporation ownership of Common Units in Neff Holdings		Total
As of December 31, 2016	14,951,625		8,859,662		23,811,287
	62.8	%	37.2	%	100.0	%

The following table summarizes the activity in non-controlling interest from December 31, ~~2015~~2016 to ~~September~~June 30, ~~2016~~2017 (in thousands):

Balance of non-controlling interest as of December 31, 2015 $ (71,176 )
Net income attributable to non-controlling interest 17,608
Distribution to member (138 )
Balance of non-controlling interest as of September 30, 2016 $ (53,706 )



Balance of non-controlling interest as of December 31, 2016	$	(52,517	)
Net income attributable to non-controlling interest	13,597
Distributions to member	(44		)
Reallocation based on ending non-controlling interest percentage	1,135
Balance of non-controlling interest as of June 30, 2017	$	(37,829	)

Distributions for Taxes

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

NEFF CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 3—NON-CONTROLLING INTEREST (Continued)

Payable Pursuant to the Tax Receivable Agreement

As of ~~September~~June 30, ~~2016,~~2017, the Company recorded a liability of ~~$31.0~~$29.6 million, representing the estimated payments due to Wayzata and certain members of management of Neff Holdings and certain non-executive members of its board of managers (collectively, the "Prior LLC Owners") under the Tax Receivable Agreement with the Prior LLC Owners as a result of the special allocation of depreciation and amortization deductions in excess of the pro rata share of such items. The liability as of ~~September~~June 30, ~~2016~~2017 increased by ~~$1.9~~$0.1 million from December 31, ~~2015,~~2016, due to changes in estimated future payments as a result of the tax benefit Neff Corporation will obtain as a result of the special allocation of gain, to Wayzata, resulting from the sale of equipment that existed at the date of the IPO, in accordance with Section 704(c) of the Internal Revenue Code. The Company expects these changes from the special allocation of gain will likely occur quarterly.

~~No amounts were paid pursuant to the terms of the Tax Receivable Agreement during the nine months ended September 30, 2016.~~

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

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

No amounts were paid pursuant to the terms of the Tax Receivable Agreement during the six months ended June 30, 2017.

NOTE 4 - EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding during the period, including vested restricted stock units ("RSUs"). Diluted earnings per share is computed by dividing net income available to common stockholders by the weighted-average number of common shares plus the dilutive effect of potential common shares outstanding during the period. For RSUs with ~~performance-~~

~~NEFF CORPORATION AND SUBSIDIARIES~~

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

~~NOTE 4 - EARNINGS PER SHARE (Continued)~~

~~based~~performance-based vesting, no common equivalent shares are included in the computation of diluted earnings per share until the related performance criteria have been met. The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share amounts):


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,				For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2016		2015		2016		2015		2017		2016		2017		2016
Numerator:
Net income attributable to Neff Corporation	$	2,864	$	3,206	$	5,332	$	11,554	$	3,250	$	2,620	$	4,976	$	2,468
Denominator for net income per share of Class A common stock:
Weighted average shares of Class A common stock outstanding	8,980		10,494		9,508		10,484		8,878		9,158		8,869		9,755
Denominator for diluted net income per share of Class A common stock:
Weighted average shares of Class A common stock outstanding, diluted	9,355		12,048		9,633		12,038		9,542		9,481		9,497		9,916
Earnings per share of Class A common stock:
Net income attributable to Neff Corporation per share of Class A common stock, basic	$	0.32	$	0.31	$	0.56	$	1.10	$	0.37	$	0.29	$	0.56	$	0.25
Net income attributable to Neff Corporation per share of Class A common stock, diluted	$	0.31	$	0.27	$	0.55	$	0.96	$	0.34	$	0.28	$	0.52	$	0.25

~~Potentially dilutive stock options representing a total of 0.7 million~~The shares of Class AB common stock ~~for~~outstanding do not participate in the ~~three~~earnings of Neff Corporation and ~~nine months ended September 30, 2016 were excluded from the computation~~are therefore not participating securities. Accordingly, basic and diluted net income per share of ~~diluted weighted average shares outstanding due to their anti-dilutive effect.~~Class B common stock have not been presented.

NEFF CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 4 - EARNINGS PER SHARE (Continued)

In November 2015, the Company's board of directors authorized a share repurchase program pursuant to which the Company may purchase shares of its Class A common stock. Under the share repurchase program, the Company may acquire up to $25 million of shares of Class A common stock in open market and privately negotiated purchases from time to time, dependent on market conditions. During the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, the Company ~~repurchased 1.5 million~~did not repurchase any shares of Class A common ~~stock for $10.5 million, including commissions.~~stock. At ~~September~~June 30, ~~2016,~~2017, there were approximately ~~$13.7~~$13.2 million in remaining funds authorized under this program. ~~See Part II, Item 2, Unregistered Sales of Equity Securities and Use of Proceeds, for additional information.~~

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

NOTE 5—INTANGIBLE ASSETS

The carrying amount and accumulated amortization of intangible assets as of ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, consisted of the following (in thousands, except as noted):


		September 30, 2016								June 30, 2017
	Average Useful Life (in years)	Gross Carrying Amount		Accumulated Amortization			Net Book Value		Average Useful Life (in years)	Gross Carrying Amount		Accumulated Amortization			Net Book Value
Indefinite life:
Trademarks and tradenames	N/A	$	10,854	$	—		$	10,854	N/A	$	10,854	$	—		$	10,854
Finite life:
Customer list	12	13,987		(10,328		)	3,659		12	13,987		(11,034		)	2,953
Total intangible assets		$	24,841	$	(10,328	)	$	14,513		$	24,841	$	(11,034	)	$	13,807

~~NEFF CORPORATION AND SUBSIDIARIES~~

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

~~NOTE 5—INTANGIBLE ASSETS (Continued)~~


		December 31, 2015								December 31, 2016
	Average Useful Life (in years)	Gross Carrying Amount		Accumulated Amortization			Net Book Value		Average Useful Life (in years)	Gross Carrying Amount		Accumulated Amortization			Net Book Value
Indefinite life:
Trademarks and tradenames	N/A	$	10,854	$	—		$	10,854	N/A	$	10,854	$	—		$	10,854
Finite life:
Customer list	12	13,987		(9,527		)	4,460		12	13,987		(10,595		)	3,392
Total intangible assets		$	24,841	$	(9,527	)	$	15,314		$	24,841	$	(10,595	)	$	14,246

The customer list is amortized on an accelerated basis, based on estimated cash flows over the useful life of the customer list. Accumulated amortization and expected future annual amortization expense are as follows (in thousands):


Accumulated amortization at September 30, 2016	$	10,328
Accumulated amortization at June 30, 2017			$	11,034
Estimated amortization expense for:
Remainder of 2016	269
2017	877
Remainder of 2017			438
2018	719		719
2019	589		589
2020	483		483
2021 through 2022	722
2021			396
2022			328
Total	$	13,987	$	13,987

Amortization expense related to the customer list was $0.2 million and $0.3 million for the three months ended ~~September~~June 30, 2017 and 2016, ~~and 2015.~~respectively. Amortization expense related to the customer list was ~~$0.8~~$0.4 million and ~~$1.0~~$0.5 million for the ~~nine~~six months ended ~~September~~June 30, 2017 and 2016, ~~and 2015,~~ respectively.

~~NOTE 6—DEBT~~

~~Debt consisted of the following as of September 30, 2016 and December 31, 2015 (in thousands, except percent data):~~

September 30, 2016 December 31, 2015
Revolving Credit Facility with interest ranging from the lender's prime rate plus up to 1.0% to LIBOR plus up to 2.0% (2.38% at September 30, 2016) $ 260,000
$ 253,600
Second Lien Loan with interest of LIBOR plus 6.25%, with 1.0% LIBOR floor, net of unamortized discount of $1,808 in 2016 and $2,034 in 2015 (7.25% at September 30, 2016) 473,843
476,966
Total indebtedness $ 733,843
$ 730,566

On February 25, 2016, Neff Holdings, Neff LLC and Neff Rental LLC (collectively, the “Credit Parties”), amended and restated the revolving credit facility (the “2016 Amendment and Restatement”). The 2016 Amendment and Restatement, among other things, increased total maximum borrowing capacity from $425.0 million to $475.0 million, extended the maturity from November 20, 2018 to February 25, 2021, increased the amount that the Company could request (but the lenders under the revolving credit agreement have no obligation to provide) from $25.0 million to $100.0 million of incremental revolving loan commitments, reduced applicable margins applicable to loans and other credit extensions, modified excess availability requirements relating to cash dominion, and modified certain baskets, thresholds and ratios, including the consolidated total leverage ratio.

As of September 30, 2016, Neff Rental LLC and Neff LLC (subsidiaries of Neff Holdings) had an outstanding balance of $260.0 million under the senior secured revolving credit facility (the "Revolving Credit Facility"). Neff Rental LLC had $475.7 million of the second lien term loans (the "Second Lien Loan") outstanding as of September 30, 2016.

NEFF CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 6—DEBT ~~(Continued)~~

~~Accumulated amortization at September~~Debt consisted of the following as of June 30, ~~2016 for debt issue costs was $4.7 million~~2017 and ~~$1.4 million for the Revolving Credit Facility and Second Lien Loan, respectively. Accumulated amortization at~~ December 31, ~~2015 for debt issue costs was $4.1~~2016 (in thousands, except percent data):



	June 30, 2017		December 31, 2016
Revolving Credit Facility with interest ranging from the lender's prime rate plus up to 1.0% to LIBOR plus up to 2.0%, net of unamortized debt issue costs of $3,455 in 2017 and $3,869 in 2016 (2.8% at June 30, 2017)	$	222,645	$	222,531
Second Lien Loan with interest of LIBOR plus 6.25%, with 1.0% LIBOR floor, net of unamortized debt issue costs of $4,645 in 2017 and $5,065 in 2016 and unamortized discount of $1,550 in 2017 and $1,726 in 2016 (7.66% at June 30, 2017)	457,626		468,860
Total indebtedness	$	680,271	$	691,391

As of June 30, 2017, Neff Rental LLC and Neff LLC (subsidiaries of Neff Holdings) had an outstanding balance of $226.1 million ~~and $0.9~~under the senior secured revolving credit facility (the "Revolving Credit Facility"). Neff Rental LLC had $463.8 million ~~for~~of the ~~Revolving Credit Facility and Second~~second lien term loans (the "Second Lien ~~Loan, respectively.~~Loan") outstanding as of June 30, 2017.

The Revolving Credit Facility and the Second Lien Loan credit agreements contain various affirmative, negative and financial reporting covenants. The covenants, among other things, place restrictions on the Company’s ability to acquire and sell assets, incur additional indebtedness and prepay other indebtedness other than the Revolving Credit Facility. The Company is subject to certain financial covenants under its Revolving Credit Facility if availability declines below $47.5 million. The Company was in compliance with all financial covenants under the Revolving Credit Facility and the Second Lien Loan credit agreements as of ~~September~~June 30, ~~2016.~~2017.

The Company had $3.9 million ~~and $3.7 million~~ in outstanding letters of credit at ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015, respectively,~~2016 that were primarily associated with its insurance coverage. As of ~~September~~June 30, ~~2016,~~2017, total availability under the Revolving Credit Facility was ~~$210.7~~$244.8 million.

NOTE 7—EQUITY—BASED COMPENSATION

On November 7, 2014, the Company's board of directors adopted the Neff Corporation 2014 Incentive Award Plan (the "2014 Incentive Plan") and reserved 1,500,000 shares of Class A common stock for issuance. The 2014 Incentive Plan became effective on November 7, 2014 and provides for the grant of options, restricted stock awards, performance awards, dividend equivalent awards, deferred stock awards, deferred stock unit awards, stock payment awards or stock appreciation rights to employees, consultants and directors of the Company.

For the three months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, the Company recognized equity-based compensation expense of ~~$0.4~~$0.6 million and ~~$0.2~~$0.3 million, respectively. For the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, the Company recognized equity-based compensation expense of ~~$1.5~~$1.4 million and ~~$0.9~~$1.1 million, respectively. Each Common Unit held by Wayzata or acquired by individuals upon exercise of existing options granted by Neff Holdings will be redeemable, at the election of such member, for, at Neff Corporation's option, newly issued shares of Neff Corporation's Class A common stock on a 1-for-1 basis or for a cash payment equal to the market price of one share of Neff Corporation's Class A common stock.

The following table summarizes equity-based compensation activity for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 (in thousands):

NEFF CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 7—EQUITY—BASED COMPENSATION (Continued)


	Neff Corporation			Neff Holdings	Neff Corporation				Neff Holdings
	RSUs		Options	Options	RSUs		Options		Options
Balance as of January 1, 2016	243		696	1,265
Balance as of January 1, 2017					289		827		758
Granted	—		—	—	—		—		—
Exercised	(44	)	—	—	(24	)	(28	)	—
Forfeited	—		—	—	—		—		—
Balance as of September 30, 2016	199		696	1,265
Balance as of June 30, 2017					265		799		758

Vested	—		72	1,265	—		246		758
Unvested	199		624	—	265		553		—
Total	199		696	1,265	265		799		758

At ~~September~~June 30, ~~2016,~~2017, there were ~~0.5~~0.3 million additional shares of Class A common stock available for the Company to grant under the 2014 Incentive Plan.

~~NEFF CORPORATION AND SUBSIDIARIES~~

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

NOTE 8—DERIVATIVE FINANCIAL INSTRUMENTS

On March 24, 2015, the Company entered into an interest rate swap (the "Interest Rate Swap"), effectively converting a portion of its variable rate debt into fixed rate debt. The Interest Rate Swap is not accounted for as a hedge and changes in fair value are included directly in the unaudited condensed consolidated statement of operations. The Company adjusts the accrued swap asset or liability by the amount of the monthly net settlement as settlements are made. Under the terms of the Interest Rate Swap, a monthly net settlement is made on approximately the 8th of each month for the difference between the fixed rate (see the fixed rate schedule below) and the variable rate, based upon the one month LIBOR rate on the notional amount of the Interest Rate Swap. The Interest Rate Swap has a notional amount of $200.0 million through April 8, 2020.

The fixed rate follows the schedule below:



April 8, 2016 to April 9, 2017	1.1570	%
April 10, 2017 to April 8, 2018	1.6810	%
April 9, 2018 to April 7, 2019	1.9610	%
April 8, 2019 to April 8, 2020	2.1430	%

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

For the three months ended ~~September~~June 30, 2016, the Company recognized a gain on the Interest Rate Swap of $1.0 million which consisted of $1.4 million of unrealized gains related to the change in fair value of the Interest Rate Swap and a $0.4 million realized loss for the settlement payments made. For the three months ended September 30, 2015,2017, the Company recognized a loss on the Interest Rate Swap of ~~$4.2~~$0.6 million which consisted of ~~$4.1~~$0.3 million of unrealized losses related to the change in fair value of the Interest Rate Swap and a ~~$0.1~~$0.3 million realized loss for the settlement payments made.

For the ~~nine~~three months ended ~~September~~June 30, 2016, the Company recognized a loss on the Interest Rate Swap of ~~$5.4~~$1.8 million which consisted of $4.8 million of unrealized losses related to the change in fair value of the Interest Rate Swap and a $0.6 million related loss for the settlement payments made. For the nine months ended September 30, 2015, the Company recognized a loss on the Interest Rate Swap of $4.1 million which consisted of $3.9$1.6 million of unrealized losses related to the change in fair value of the Interest Rate Swap and a $0.2 million realized loss for the settlement payments made.

For the six months ended June 30, 2017, the Company recognized a loss on the Interest Rate Swap of $0.2 million which consisted of $0.3 million of unrealized gains related to the change in fair value of the Interest Rate Swap and a $0.5 million related loss for the settlement payments made. For the six months ended June 30, 2016, the Company recognized a loss on the Interest Rate Swap of $6.5 million which consisted of $6.2 million of unrealized losses related to the change in fair value of the Interest Rate Swap and a $0.3 million realized loss for the settlement payments made.

NEFF CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 8—DERIVATIVE FINANCIAL INSTRUMENTS (Continued)

The following tables provide details regarding the Company's derivative financial instruments (in thousands):

For the Three Months Ended September 30, For the Nine Months Ended September 30,
2016 2015 2016 2015
Gain Recognized in Earnings (a) Loss Recognized in Earnings(a) Loss Recognized in Earnings (a) Loss Recognized in Earnings(a)
Interest Rate Swap $ (1,049 ) $ 4,216
$ 5,433
$ 4,097



	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2017		2016		2017		2016
	Loss Recognized in Earnings (a)		Loss Recognized in Earnings (a)		Loss Recognized in Earnings (a)		Loss Recognized in Earnings(a)
Interest Rate Swap	$	587	$	1,828	$	212	$	6,482

September 30, 2016 December 31, 2015

Fair Value of
Derivative Liability(b)

Fair Value of
Derivative Liability(b)
Interest Rate Swap (Note 9) $ 6,665
$ 1,880



	June 30, 2017		December 31, 2016
	Fair Value of Derivative Liability(b)		Fair Value of Derivative Liability(b)
Interest Rate Swap (Note 9)	$	1,913	$	2,199


(a)	Classified in Other ~~expenses (income)—(Gain) loss~~expenses—Loss on interest rate swap


(b)	Classified in Liabilities—Accrued expenses and other liabilities

NOTE 9—FAIR VALUE DISCLOSURES

The carrying amounts for accounts receivable, accounts payable and accrued expenses and other liabilities approximate fair value due to their immediate to short-term maturity. The fair value of the Revolving Credit Facility and the Second Lien Loan approximate carrying value as of ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, as variable interest rates approximate market rates. The Company has classified these instruments in Level 2 of the fair value hierarchy as described below.

~~NEFF CORPORATION AND SUBSIDIARIES~~

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

~~NOTE 9—FAIR VALUE DISCLOSURES (Continued)~~

The Company used the following methods to measure the fair value of certain assets and liabilities:

Interest Rate Swap. The Interest Rate Swap is valued utilizing pricing models taking into account inputs such as interest rates and notional amounts.

The FASB has established a framework for measuring fair value and requires that assets and liabilities measured at fair value be classified and disclosed in one of the following three categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data

Level 3: Unobservable inputs that are not corroborated by market data

The following table provides fair value measurement information of the Company's financial liability measured on a recurring basis as of ~~September~~June 30, ~~2016~~2017 (in thousands):

Fair Value Measurements Using:
Quoted Prices in Active Markets Observable Inputs Unobservable Inputs
(Level 1) (Level 2) (Level 3)
Interest Rate Swap Liability $ —
$ 6,665
$ —



	Fair Value Measurements Using:
	Quoted Prices in Active Markets		Observable Inputs		Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)
Interest Rate Swap Liability	$	—	$	1,913	$	—

There were no transfers into or out of Level 1, 2 or 3 during the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015.~~2016.

NOTE 10—INCOME TAXES

Neff Corporation is required to file federal and applicable state corporate income tax returns and recognizes income taxes on its pre-tax income, which to date has consisted primarily of its share of Neff ~~Holdings'~~Holdings pre-tax income. Neff Holdings is a limited liability company that is treated as a partnership for federal and state income tax purposes. Neff Holdings is not subject to income taxes for federal and state purposes. Rather, taxable income or loss is included in the respective federal and state income tax returns of Neff Holdings' members.

NEFF CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 10—INCOME TAXES (Continued)

The Company's estimated annual effective tax rate for the year ended December 31, ~~2016~~2017 is expected to be ~~16.2%~~14.7% before discrete items. The Company's consolidated effective tax rate for the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, inclusive of discrete items is ~~13.4%~~14.0%. The ~~2.8%~~0.7% difference in these rates is primarily attributable to a benefit related to the special allocation of gain, to Wayzata, resulting from the sale of equipment that had a built in gain at the date of the IPO, in accordance with Section 704(c) of the Internal Revenue Code (Note 3) ~~reduced~~.

NOTE 11—SUBSEQUENT EVENT

On July 14, 2017, the Company and H&E Equipment Services, Inc. ("H&E") announced that they had entered into a definitive merger agreement under which H&E will acquire Neff Corporation. Under the terms of the agreement, which has been unanimously approved by the ~~deferred tax impact resulting from the reduction~~boards of directors of both companies, H&E will pay $21.07 in cash per share of Neff ~~Corporation's interest~~common stock, for a total enterprise value of approximately $1.2 billion which includes approximately $690 million of debt. The per share merger consideration payable to Neff stockholders is subject to certain downward adjustments, not to exceed $0.44 per share, in ~~Neff Holdings.~~the event that H&E incurs certain increased financing costs due to the transaction not being consummated on or prior to January 14, 2018. The merger transaction is subject to a go-shop period that will expire on 11:59 p.m. on August 20, 2017 during which the Company has the right to solicit, encourage or facilitate any inquiry or the making of any alternative acquisition proposal. The transaction is expected to close in the late third quarter or early fourth quarter of 2017, and is subject to customary closing conditions including Hart-Scott-Rodino Act clearance. In the event that the Company terminates the Merger Agreement in accordance with the go-shop provision described above to enter into a definitive agreement for a superior proposal, the Company will be required to pay H&E a cash termination fee in the amount of $13,165,000. In the event that the Company terminates the Merger Agreement under certain other specified circumstances, the Company will be required to pay H&E a cash termination fee in the amount of $18,430,000.

Table of contents

NEFF CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET

~~SEPTEMBER~~JUNE 30, ~~2016~~2017

(in thousands)


	Neff Rental LLC			Neff LLC		Neff Holdings LLC		Neff Corporation Stand Alone			Eliminations			Neff Corporation			Neff Rental LLC			Neff LLC		Neff Holdings LLC		Neff Corporation Stand Alone			Eliminations			Neff Corporation
ASSETS

Cash and cash equivalents	$	839		$	—	$	—	$	—		$	—		$	839		$	805		$	—	$	—	$	—		$	—		$	805
Accounts receivable, net	64,478			—		—		—			—			64,478			63,452			—		—		—			—			63,452
Inventories	1,843			—		—		—			—			1,843			2,252			—		—		—			—			2,252
Rental equipment, net	478,103			—		—		—			—			478,103			478,249			—		—		—			—			478,249
Property and equipment, net	36,177			—		—		—			—			36,177			38,631			—		—		—			—			38,631
Prepaid expenses and other assets	16,575			—		—		—			—			16,575			9,096			—		—		—			—			9,096
Goodwill	60,644			—		—		—			—			60,644			60,644			—		—		—			—			60,644
Investment in subsidiary	—			95,662		95,662		168,099			(359,423		)	—			—			135,475		135,475		188,923			(459,873		)	—
Intercompany	6,488			—		—		(6,488		)	—			—			10,625			—		—		(10,625		)	—			—
Intangible assets, net	14,513			—		—		—			—			14,513			13,807			—		—		—			—			13,807
Total assets	$	679,660		$	95,662	$	95,662	$	161,611		$	(359,423	)	$	673,172		$	677,561		$	135,475	$	135,475	$	178,298		$	(459,873	)	$	666,936

LIABILITIES AND STOCKHOLDERS' DEFICIT / MEMBERS' DEFICIT

Liabilities
Accounts payable	$	9,844		$	—	$	—	$	—		$	—		$	9,844		$	22,733		$	—	$	—	$	—		$	—		$	22,733
Accrued expenses and other liabilities	37,521			—		—		—			—			37,521			34,834			—		—		—			—			34,834
Revolving credit facility	260,000			—		—		—			—			260,000
Revolving credit facility, net																	222,645			—		—		—			—			222,645
Second lien loan, net	473,843			—		—		—			—			473,843			457,626			—		—		—			—			457,626
Payable pursuant to tax receivable agreement	—			—		—		31,032			—			31,032			—			—		—		29,621			—			29,621
Deferred tax liability, net	—			—		—		11,099			—			11,099			—			—		—		11,488			—			11,488
Total liabilities	$	781,208		$	—	$	—	$	42,131		$	—		$	823,339		$	737,838		$	—	$	—	$	41,109		$	—		$	778,947

Stockholders' deficit / members' deficit
Class A Common Stock	$	—		$	—	$	—	$	89		$	—		$	89		$	—		$	—	$	—	$	89		$	—		$	89
Class B Common Stock	—			—		—		150			—			150			—			—		—		150			—			150
Additional paid-in capital	—			—		—		26,921			(146,143		)	(119,222		)	—			—		—		45,342			(146,143		)	(100,801		)
Retained earnings	—			—		—		22,522			—			22,522			—			—		—		30,119			(3,739		)	26,380
Members' deficit	(197,210		)	—		—		—			197,210			—			(195,752		)	—		—		—			195,752			—
Accumulated surplus	95,662			95,662		95,662		—			(286,986		)	—			135,475			135,475		135,475		—			(406,425		)	—
Total stockholders' deficit / members' deficit	(101,548		)	95,662		95,662		49,682			(235,919		)	(96,461		)	(60,277		)	135,475		135,475		75,700			(360,555		)	(74,182		)
Non-controlling interest	—			—		—		69,798			(123,504		)	(53,706		)	—			—		—		61,489			(99,318		)	(37,829		)
Total stockholders' deficit / members' deficit and non-controlling interest	(101,548		)	95,662		95,662		119,480			(359,423		)	(150,167		)	(60,277		)	135,475		135,475		137,189			(459,873		)	(112,011		)
Total liabilities and stockholders' deficit / members' deficit and non-controlling interest	$	679,660		$	95,662	$	95,662	$	161,611		$	(359,423	)	$	673,172		$	677,561		$	135,475	$	135,475	$	178,298		$	(459,873	)	$	666,936

Table of contents

NEFF CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET

DECEMBER 31, ~~2015~~2016

(in thousands)


	Neff Rental LLC			Neff LLC		Neff Holdings LLC		Neff Corporation Stand Alone			Eliminations			Neff Corporation			Neff Rental LLC			Neff LLC		Neff Holdings LLC		Neff Corporation Stand Alone			Eliminations			Neff Corporation
ASSETS

Cash and cash equivalents	$	287		$	—	$	—	$	2		$	—		$	289		$	900		$	—	$	—	$	—		$	—		$	900
Accounts receivable, net	70,328			—		—		—			—			70,328			64,943			—		—		—			—			64,943
Inventories	1,766			—		—		—			—			1,766			1,867			—		—		—			—			1,867
Rental equipment, net	457,470			—		—		—			—			457,470			462,084			—		—		—			—			462,084
Property and equipment, net	33,473			—		—		—			—			33,473			35,534			—		—		—			—			35,534
Prepaid expenses and other assets	14,488			—		—		—			—			14,488			8,203			—		—		—			—			8,203
Goodwill	60,599			—		—		—			—			60,599			60,644			—		—		—			—			60,644
Investment in subsidiary	—			67,427		67,427		166,406			(301,260		)	—			—			113,750		113,750		179,096			(406,596		)	—
Intercompany	6,490			—		—		(6,490		)	—			—			10,258			—		—		(10,258		)	—			—
Intangible assets, net	15,314			—		—		—			—			15,314			14,246			—		—		—			—			14,246
Total assets	$	660,215		$	67,427	$	67,427	$	159,918		$	(301,260	)	$	653,727		$	658,679		$	113,750	$	113,750	$	168,838		$	(406,596	)	$	648,421

LIABILITIES AND STOCKHOLDERS' DEFICIT / MEMBERS' DEFICIT

Liabilities
Accounts payable	$	18,948		$	—	$	—	$	—		$	—		$	18,948		$	15,851		$	—	$	—	$	—		$	—		$	15,851
Accrued expenses and other liabilities	31,412			—		—		—			—			31,412			35,074			—		—		—			—			35,074
Revolving credit facility	253,600			—		—		—			—			253,600
Revolving credit facility, net																	222,531			—		—		—			—			222,531
Second lien loan, net	476,966			—		—		—			—			476,966			468,860			—		—		—			—			468,860
Payable pursuant to tax receivable agreement	—			—		—		29,133			—			29,133			—			—		—		29,505			—			29,505
Deferred tax liability, net	—			—		—		9,458			—			9,458			—			—		—		8,325			—			8,325
Total liabilities	$	780,926		$	—	$	—	$	38,591		$	—		$	819,517		$	742,316		$	—	$	—	$	37,830		$	—		$	780,146

Stockholders' deficit / members' deficit
Class A Common Stock	$	—		$	—	$	—	$	104		$	—		$	104		$	—		$	—	$	—	$	88		$	—		$	88
Class B Common Stock	—			—		—		150			—			150			—			—		—		150			—			150
Additional paid-in capital	—			—		—		34,085			(146,143		)	(112,058		)	—			—		—		43,927			(146,143		)	(102,216		)
Retained earnings	—			—		—		17,190			—			17,190			—			—		—		26,540			(3,770		)	22,770
Members' deficit	(188,138		)	—		—		—			188,138			—			(197,387		)	—		—		—			197,387			—
Accumulated surplus	67,427			67,427		67,427		—			(202,281		)	—			113,750			113,750		113,750		—			(341,250		)	—
Total stockholders' deficit / members' deficit	(120,711		)	67,427		67,427		51,529			(160,286		)	(94,614		)	(83,637		)	113,750		113,750		70,705			(293,776		)	(79,208		)
Non-controlling interest	—			—		—		69,798			(140,974		)	(71,176		)	—			—		—		60,303			(112,820		)	(52,517		)
Total stockholders' deficit / members' deficit and non-controlling interest	(120,711		)	67,427		67,427		121,327			(301,260		)	(165,790		)	(83,637		)	113,750		113,750		131,008			(406,596		)	(131,725		)
Total liabilities and stockholders' deficit / members' deficit and non-controlling interest	$	660,215		$	67,427	$	67,427	$	159,918		$	(301,260	)	$	653,727		$	658,679		$	113,750	$	113,750	$	168,838		$	(406,596	)	$	648,421

~~Table of contents~~

~~NEFF CORPORATION AND SUBSIDIARIES~~

~~SUPPLEMENTAL UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS~~

~~FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2016~~

~~(in thousands)~~

Neff Rental LLC Neff LLC Neff Holdings LLC Neff Corporation Stand Alone Eliminations Neff Corporation
Revenues
Rental revenues $ 95,770
$ —
$ —
$ —
$ —
$ 95,770
Equipment sales 6,264
—
—
—
—
6,264
Parts and service 3,433
—
—
—
—
3,433
Total revenues 105,467
—
—
—
—
105,467
Cost of revenues
Cost of equipment sold 4,152
—
—
—
—
4,152
Depreciation of rental equipment 21,912
—
—
—
—
21,912
Cost of rental revenues 23,311
—
—
—
—
23,311
Cost of parts and service 2,067
—
—
—
—
2,067
Total cost of revenues 51,442
—
—
—
—
51,442
Gross profit 54,025
—
—
—
—
54,025
Other operating expenses
Selling, general and administrative expenses 24,937
—
—
—
—
24,937
Other depreciation and amortization 2,158
—
—
—
—
2,158
Total other operating expenses 27,095
—
—
—
—
27,095
Income from operations 26,930
—
—
—
—
26,930
Other expenses (income)
Interest expense 10,620
—
—
—
—
10,620
Adjustment to tax receivable agreement —
—
—
1,223
—
1,223
Gain on interest rate swap (1,049 ) —
—
—
—
(1,049 )
Amortization of debt issue costs 380
—
—
—
—
380
Total other expenses (income) 9,951
—
—
1,223
—
11,174
Income (loss) before income taxes 16,979
—
—
(1,223 ) —
15,756
Equity earnings in subsidiaries —
16,869
16,869
6,311
(40,049 ) —
Provision for income taxes (110 ) —
—
(2,224 ) —
(2,334 )
Net income 16,869
16,869
16,869
2,864
(40,049 ) 13,422
Less: net income attributable to non-controlling interest —
—
10,558
—
—
10,558
Net income attributable to Neff Corporation $ 16,869
$ 16,869
$ 6,311
$ 2,864
$ (40,049 ) $ 2,864

Table of contents

NEFF CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED ~~SEPTEMBER~~JUNE 30, ~~2015~~2017

(in thousands)

Neff Rental LLC Neff LLC Neff Holdings LLC Neff Corporation Stand Alone Eliminations Neff Corporation
Revenues
Rental revenues $ 90,532
$ —
$ —
$ —
$ —
$ 90,532
Equipment sales 5,559
—
—
—
—
5,559
Parts and service 3,333
—
—
—
—
3,333
Total revenues 99,424
—
—
—
—
99,424
Cost of revenues
Cost of equipment sold 3,474
—
—
—
—
3,474
Depreciation of rental equipment 21,553
—
—
—
—
21,553
Cost of rental revenues 21,186
—
—
—
—
21,186
Cost of parts and service 1,964
—
—
—
—
1,964
Total cost of revenues 48,177
—
—
—
—
48,177
Gross profit 51,247
—
—
—
—
51,247
Other operating expenses
Selling, general and administrative expenses 22,852
—
—
—
—
22,852
Other depreciation and amortization 2,678
—
—
—
—
2,678
Total other operating expenses 25,530
—
—
—
—
25,530
Income from operations 25,717
—
—
—
—
25,717
Other expenses
Interest expense 10,907
—
—
—
—
10,907
Adjustment to tax receivable agreement —
—
—
411
—
411
Loss on interest rate swap 4,216
—
—
—
—
4,216
Amortization of debt issue costs 392
—
—
—
—
392
Total other expenses 15,515
—
—
411
—
15,926
Income (loss) before income taxes 10,202
—
—
(411 ) —
9,791
Equity earnings in subsidiaries —
10,608
10,608
4,370
(25,586 ) —
Benefit from (provision for) income taxes 406
—
—
(753 ) —
(347 )
Net income 10,608
10,608
10,608
3,206
(25,586 ) 9,444
Less: net income attributable to non-controlling interest 6,238
6,238
6,238
—
(12,476 ) 6,238
Net income attributable to Neff Corporation $ 4,370
$ 4,370
$ 4,370
$ 3,206
$ (13,110 ) $ 3,206

~~Table of contents~~

~~NEFF CORPORATION AND SUBSIDIARIES~~

~~SUPPLEMENTAL UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS~~

~~FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016~~

~~(in thousands)~~


	Neff Rental LLC			Neff LLC		Neff Holdings LLC		Neff Corporation Stand Alone			Eliminations			Neff Corporation			Neff Rental LLC			Neff LLC		Neff Holdings LLC		Neff Corporation Stand Alone			Eliminations			Neff Corporation
Revenues
Rental revenues	$	268,421		$	—	$	—	$	—		$	—		$	268,421		$	94,379		$	—	$	—	$	—		$	—		$	94,379
Equipment sales	16,307			—		—		—			—			16,307			6,306			—		—		—			—			6,306
Parts and service	9,983			—		—		—			—			9,983			3,440			—		—		—			—			3,440
Total revenues	294,711			—		—		—			—			294,711			104,125			—		—		—			—			104,125
Cost of revenues
Cost of equipment sold	10,226			—		—		—			—			10,226			3,993			—		—		—			—			3,993
Depreciation of rental equipment	66,838			—		—		—			—			66,838			22,795			—		—		—			—			22,795
Cost of rental revenues	64,919			—		—		—			—			64,919			22,815			—		—		—			—			22,815
Cost of parts and service	5,671			—		—		—			—			5,671			2,016			—		—		—			—			2,016
Total cost of revenues	147,654			—		—		—			—			147,654			51,619			—		—		—			—			51,619
Gross profit	147,057			—		—		—			—			147,057			52,506			—		—		—			—			52,506
Other operating expenses
Selling, general and administrative expenses	72,846			—		—		—			—			72,846			24,052			—		—		—			—			24,052
Other depreciation and amortization	7,493			—		—		—			—			7,493			2,286			—		—		—			—			2,286
Total other operating expenses	80,339			—		—		—			—			80,339			26,338			—		—		—			—			26,338
Income from operations	66,718			—		—		—			—			66,718			26,168			—		—		—			—			26,168
Other expenses
Interest expense	31,745			—		—		—			—			31,745			11,000			—		—		—			—			11,000
Adjustment to tax receivable agreement	—			—		—		1,899			—			1,899			—			—		—		61			—			61
Loss on interest rate swap	5,433			—		—		—			—			5,433			587			—		—		—			—			587
Amortization of debt issue costs	1,145			—		—		—			—			1,145
Total other expenses	38,323			—		—		1,899			—			40,222			11,587			—		—		61			—			11,648
Income (loss) before income taxes	28,395			—		—		(1,899		)	—			26,496			14,581			—		—		(61		)	—			14,520
Equity earnings in subsidiaries	—			28,235		28,235		10,627			(67,097		)	—			—			14,489		14,489		5,403			(34,381		)	—
Provision for income taxes	(160		)	—		—		(3,396		)	—			(3,556		)	(92		)	—		—		(2,092		)	—			(2,184		)
Net income	28,235			28,235		28,235		5,332			(67,097		)	22,940			14,489			14,489		14,489		3,250			(34,381		)	12,336
Less: net income attributable to non-controlling interest	—			—		17,608		—			—			17,608			—			—		9,086		—			—			9,086
Net income attributable to Neff Corporation	$	28,235		$	28,235	$	10,627	$	5,332		$	(67,097	)	$	5,332		$	14,489		$	14,489	$	5,403	$	3,250		$	(34,381	)	$	3,250

Table of contents

NEFF CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE ~~NINE~~THREE MONTHS ENDED ~~SEPTEMBER~~JUNE 30, ~~2015~~2016

(in thousands)


	Neff Rental LLC		Neff LLC		Neff Holdings LLC		Neff Corporation Stand Alone			Eliminations			Neff Corporation			Neff Rental LLC			Neff LLC		Neff Holdings LLC		Neff Corporation Stand Alone			Eliminations			Neff Corporation
Revenues
Rental revenues	$	249,493	$	—	$	—	$	—		$	—		$	249,493		$	91,474		$	—	$	—	$	—		$	—		$	91,474
Equipment sales	18,520		—		—		—			—			18,520			4,941			—		—		—			—			4,941
Parts and service	9,724		—		—		—			—			9,724			3,245			—		—		—			—			3,245
Total revenues	277,737		—		—		—			—			277,737			99,660			—		—		—			—			99,660
Cost of revenues
Cost of equipment sold	11,864		—		—		—			—			11,864			2,963			—		—		—			—			2,963
Depreciation of rental equipment	62,280		—		—		—			—			62,280			22,761			—		—		—			—			22,761
Cost of rental revenues	58,556		—		—		—			—			58,556			21,675			—		—		—			—			21,675
Cost of parts and service	5,534		—		—		—			—			5,534			1,799			—		—		—			—			1,799
Total cost of revenues	138,234		—		—		—			—			138,234			49,198			—		—		—			—			49,198
Gross profit	139,503		—		—		—			—			139,503			50,462			—		—		—			—			50,462
Other operating expenses
Selling, general and administrative expenses	67,610		—		—		—			—			67,610			23,387			—		—		—			—			23,387
Other depreciation and amortization	7,796		—		—		—			—			7,796			2,594			—		—		—			—			2,594
Total other operating expenses	75,406		—		—		—			—			75,406			25,981			—		—		—			—			25,981
Income from operations	64,097		—		—		—			—			64,097			24,481			—		—		—			—			24,481
Other expenses (income)
Other expenses
Interest expense	32,174		—		—		—			—			32,174			10,846			—		—		—			—			10,846
Adjustment to tax receivable agreement	—		—		—		(2,476		)	—			(2,476		)	—			—		—		262			—			262
Loss on interest rate swap	4,097		—		—		—			—			4,097			1,828			—		—		—			—			1,828
Amortization of debt issue costs	1,144		—		—		—			—			1,144
Total other expenses (income)	37,415		—		—		(2,476		)	—			34,939
Income before income taxes	26,682		—		—		2,476			—			29,158
Total other expenses																12,674			—		—		262			—			12,936
Income (loss) before income taxes																11,807			—		—		(262		)	—			11,545
Equity earnings in subsidiaries	—		27,061		27,061		11,149			(65,271		)	—			—			11,757		11,757		4,438			(27,952		)	—
Benefit from (provision for) income taxes	379		—		—		(2,071		)	—			(1,692		)
Provision for income taxes																(50		)	—		—		(1,556		)	—			(1,606		)
Net income	27,061		27,061		27,061		11,554			(65,271		)	27,466			11,757			11,757		11,757		2,620			(27,952		)	9,939
Less: net income attributable to non-controlling interest	15,912		15,912		15,912		—			(31,824		)	15,912			—			—		7,319		—			—			7,319
Net income attributable to Neff Corporation	$	11,149	$	11,149	$	11,149	$	11,554		$	(33,447	)	$	11,554		$	11,757		$	11,757	$	4,438	$	2,620		$	(27,952	)	$	2,620

Table of contents

NEFF CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2017

(in thousands)



	Neff Rental LLC			Neff LLC		Neff Holdings LLC		Neff Corporation Stand Alone			Eliminations			Neff Corporation
Revenues
Rental revenues	$	179,877		$	—	$	—	$	—		$	—		$	179,877
Equipment sales	13,501			—		—		—			—			13,501
Parts and service	6,624			—		—		—			—			6,624
Total revenues	200,002			—		—		—			—			200,002
Cost of revenues
Cost of equipment sold	8,946			—		—		—			—			8,946
Depreciation of rental equipment	44,945			—		—		—			—			44,945
Cost of rental revenues	45,078			—		—		—			—			45,078
Cost of parts and service	3,813			—		—		—			—			3,813
Total cost of revenues	102,782			—		—		—			—			102,782
Gross profit	97,220			—		—		—			—			97,220
Other operating expenses
Selling, general and administrative expenses	48,594			—		—		—			—			48,594
Other depreciation and amortization	4,457			—		—		—			—			4,457
Total other operating expenses	53,051			—		—		—			—			53,051
Income from operations	44,169			—		—		—			—			44,169
Other expenses
Interest expense	22,173			—		—		—			—			22,173
Adjustment to tax receivable agreement	—			—		—		116			—			116
Loss on interest rate swap	212			—		—		—			—			212
Total other expenses	22,385			—		—		116			—			22,501
Income (loss) before income taxes	21,784			—		—		(116		)	—			21,668
Equity earnings in subsidiaries	—			21,673		21,673		8,076			(51,422		)	—
Provision for income taxes	(111		)	—		—		(2,984		)	—			(3,095		)
Net income	21,673			21,673		21,673		4,976			(51,422		)	18,573
Less: net income attributable to non-controlling interest	—			—		13,597		—			—			13,597
Net income attributable to Neff Corporation	$	21,673		$	21,673	$	8,076	$	4,976		$	(51,422	)	$	4,976

Table of contents

NEFF CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2016

(in thousands)



	Neff Rental LLC			Neff LLC		Neff Holdings LLC		Neff Corporation Stand Alone			Eliminations			Neff Corporation
Revenues
Rental revenues	$	172,651		$	—	$	—	$	—		$	—		$	172,651
Equipment sales	10,043			—		—		—			—			10,043
Parts and service	6,550			—		—		—			—			6,550
Total revenues	189,244			—		—		—			—			189,244
Cost of revenues
Cost of equipment sold	6,074			—		—		—			—			6,074
Depreciation of rental equipment	44,926			—		—		—			—			44,926
Cost of rental revenues	41,608			—		—		—			—			41,608
Cost of parts and service	3,604			—		—		—			—			3,604
Total cost of revenues	96,212			—		—		—			—			96,212
Gross profit	93,032			—		—		—			—			93,032
Other operating expenses
Selling, general and administrative expenses	47,909			—		—		—			—			47,909
Other depreciation and amortization	5,335			—		—		—			—			5,335
Total other operating expenses	53,244			—		—		—			—			53,244
Income from operations	39,788			—		—		—			—			39,788
Other expenses
Interest expense	21,890			—		—		—			—			21,890
Adjustment to tax receivable agreement	—			—		—		676			—			676
Loss on interest rate swap	6,482			—		—		—			—			6,482
Total other expenses	28,372			—		—		676			—			29,048
Income (loss) before income taxes	11,416			—		—		(676		)	—			10,740
Equity earnings in subsidiaries	—			11,366		11,366		4,316			(27,048		)	—
Provision for income taxes	(50		)	—		—		(1,172		)	—			(1,222		)
Net income	11,366			11,366		11,366		2,468			(27,048		)	9,518
Less: net income attributable to non-controlling interest	—			—		7,050		—			—			7,050
Net income attributable to Neff Corporation	$	11,366		$	11,366	$	4,316	$	2,468		$	(27,048	)	$	2,468

Table of contents

NEFF CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE ~~NINE~~SIX MONTHS ENDED ~~SEPTEMBER~~JUNE 30, ~~2016~~2017

(in thousands)


	Neff Rental LLC			Neff LLC			Neff Holdings LLC			Neff Corporation Stand Alone			Eliminations			Neff Corporation			Neff Rental LLC			Neff LLC			Neff Holdings LLC			Neff Corporation Stand Alone			Eliminations			Neff Corporation
Cash Flows from Operating Activities
Net income	$	28,235		$	28,235		$	28,235		$	5,332		$	(67,097	)	$	22,940		$	21,673		$	21,673		$	21,673		$	4,976		$	(51,422	)	$	18,573
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	73,528			—			—			—			—			73,528			48,963			—			—			—			—			48,963
Amortization of debt issue costs	1,145			—			—			—			—			1,145			834			—			—			—			—			834
Amortization of intangible assets	803			—			—			—			—			803			439			—			—			—			—			439
Amortization of original issue discount	226			—			—			—			—			226			176			—			—			—			—			176
Gain on sale of equipment	(6,081		)	—			—			—			—			(6,081		)	(4,555		)	—			—			—			—			(4,555		)
Provision for bad debt	1,707			—			—			—			—			1,707			429			—			—			—			—			429
Equity-based compensation	1,509			—			—			—			—			1,509			1,399			—			—			—			—			1,399
Deferred income taxes	—			—			—			3,396			—			3,396			—			—			—			2,984			—			2,984
Adjustment to tax receivable agreement	—			—			—			1,899			—			1,899			—			—			—			116			—			116
Unrealized loss on interest rate swap	4,785			—			—			—			—			4,785
Unrealized gain on interest rate swap																			(286		)	—			—			—			—			(286		)
Equity earnings in subsidiaries	—			(28,235		)	(28,235		)	(10,627		)	67,097			—			—			(21,673		)	(21,673		)	(8,076		)	51,422			—
Changes in operating assets and liabilities:
Accounts receivable	4,143			—			—			—			—			4,143			1,062			—			—			—			—			1,062
Inventories, prepaid expenses and other assets	(1,786		)	—			—			—			—			(1,786		)	(1,278		)	—			—			—			—			(1,278		)
Accounts payable	(1,093		)	—			—			—			—			(1,093		)	931			—			—			—			—			931
Accrued expenses and other liabilities	3,861			—			—			—			—			3,861			(1,537		)	—			—			—			—			(1,537		)
Net cash provided by operating activities	110,982			—			—			—			—			110,982			68,250			—			—			—			—			68,250
Cash Flows from Investing Activities
Purchases of rental equipment	(107,506		)	—			—			—			—			(107,506		)	(62,496		)	—			—			—			—			(62,496		)
Proceeds from sale of equipment	16,307			—			—			—			—			16,307			13,501			—			—			—			—			13,501
Purchases of property and equipment	(10,133		)	—			—			—			—			(10,133		)	(7,141		)	—			—			—			—			(7,141		)
Net cash used in investing activities	(101,332		)	—			—			—			—			(101,332		)	(56,136		)	—			—			—			—			(56,136		)
Cash Flows from Financing Activities
Repayments under revolving credit facility	(109,537		)	—			—			—			—			(109,537		)	(69,894		)	—			—			—			—			(69,894		)
Borrowings under revolving credit facility	115,937			—			—			—			—			115,937			69,594			—			—			—			—			69,594
Debt issue costs	(1,570		)	—			—			—			—			(1,570		)
Common stock repurchases	—			—			—			(10,443		)	—			(10,443		)
Common unit sales/repurchases	(10,443		)	—			—			10,443			—			—
Proceeds from option exercises																			—			—			—			17			—			17
Payment of withholding taxes for option exercises																			—			—			—			(52		)	—			(52		)
Distributions to member																			(44		)	—			—			—			—			(44		)
Second Lien Loan prepayment	(3,349		)	—			—			—			—			(3,349		)	(11,830		)	—			—			—			—			(11,830		)
Distribution to member	(138		)	—			—			—			—			(138		)
Intercompany	2			—			—			(2		)	—			—			(35		)	—			—			35			—			—
Net cash used in financing activities	(9,098		)	—			—			(2		)	—			(9,100		)	(12,209		)	—			—			—			—			(12,209		)
Net increase (decrease) in cash and cash equivalents	552			—			—			(2		)	—			550
Net decrease in cash and cash equivalents																			(95		)	—			—			—			—			(95		)
Cash and cash equivalents, beginning of period	287			—			—			2			—			289			900			—			—			—			—			900
Cash and cash equivalents, end of period	$	839		$	—		$	—		$	—		$	—		$	839		$	805		$	—		$	—		$	—		$	—		$	805

Table of contents

NEFF CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE ~~NINE~~SIX MONTHS ENDED ~~SEPTEMBER~~JUNE 30, ~~2015~~2016

(in thousands)


	Neff Rental LLC			Neff LLC			Neff Holdings LLC			Neff Corporation Stand Alone			Eliminations			Neff Corporation			Neff Rental LLC			Neff LLC			Neff Holdings LLC			Neff Corporation Stand Alone			Eliminations			Neff Corporation
Cash Flows from Operating Activities
Net income	$	27,061		$	27,061		$	27,061		$	11,554		$	(65,271	)	$	27,466		$	11,366		$	11,366		$	11,366		$	2,468		$	(27,048	)	$	9,518
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	69,111			—			—			—			—			69,111			49,726			—			—			—			—			49,726
Amortization of debt issue costs	1,144			—			—			—			—			1,144			765			—			—			—			—			765
Amortization of intangible assets	965			—			—			—			—			965			535			—			—			—			—			535
Amortization of original issue discount	185			—			—			—			—			185			147			—			—			—			—			147
Gain on sale of equipment	(6,656		)	—			—			—			—			(6,656		)	(3,969		)	—			—			—			—			(3,969		)
Provision for bad debt	1,431			—			—			—			—			1,431			862			—			—			—			—			862
Equity-based compensation	901			—			—			—			—			901			1,098			—			—			—			—			1,098
Deferred income taxes	—			—			—			2,085			—			2,085			50			—			—			1,172			—			1,222
Adjustment to tax receivable agreement	—			—			—			(2,476		)	—			(2,476		)	—			—			—			676			—			676
Unrealized loss on interest rate swap	3,852			—			—			—			—			3,852			6,183			—			—			—			—			6,183
Equity earnings in subsidiaries	—			(27,061		)	(27,061		)	(11,149		)	65,271			—			—			(11,366		)	(11,366		)	(4,316		)	27,048			—
Changes in operating assets and liabilities:
Accounts receivable	4,075			—			—			—			—			4,075			7,472			—			—			—			—			7,472
Inventories, prepaid expenses and other assets	147			—			—			—			—			147			(1,267		)	—			—			—			—			(1,267		)
Accounts payable	(1,271		)	—			—			—			—			(1,271		)	(324		)	—			—			—			—			(324		)
Accrued expenses and other liabilities	(1,255		)	—			—			(15		)	—			(1,270		)	882			—			—			—			—			882
Net cash provided by (used in) operating activities	99,690			—			—			(1		)	—			99,689
Net cash provided by operating activities																			73,526			—			—			—			—			73,526
Cash Flows from Investing Activities
Purchases of rental equipment	(138,959		)	—			—			—			—			(138,959		)	(76,557		)	—			—			—			—			(76,557		)
Proceeds from sale of equipment	18,520			—			—			—			—			18,520			10,043			—			—			—			—			10,043
Purchases of property and equipment	(11,742		)	—			—			—			—			(11,742		)	(8,648		)	—			—			—			—			(8,648		)
Net cash used in investing activities	(132,181		)	—			—			—			—			(132,181		)	(75,162		)	—			—			—			—			(75,162		)
Cash Flows from Financing Activities
Repayments under revolving credit facility	(95,239		)	—			—			—			—			(95,239		)	(66,400		)	—			—			—			—			(66,400		)
Borrowings under revolving credit facility	128,039			—			—			—			—			128,039			82,500			—			—			—			—			82,500
Payment of costs directly associated with the issuance of Class A common stock	—			—			—			(283		)	—			(283		)
Debt issue costs																			(1,570		)	—			—			—			—			(1,570		)
Common stock repurchases																			—			—			—			(9,433		)	—			(9,433		)
Common unit sales/repurchases																			(9,433		)	—			—			9,433			—			—
Second Lien Loan prepayment																			(3,349		)	—			—			—			—			(3,349		)
Distribution to member																			(138		)	—			—			—			—			(138		)
Intercompany	(284		)	—			—			284			—			—			2			—			—			(2		)	—			—
Net cash provided by financing activities	32,516			—			—			1			—			32,517
Net increase in cash and cash equivalents	25			—			—			—			—			25
Net cash provided by (used in) financing activities																			1,612			—			—			(2		)	—			1,610
Net (decrease) increase in cash and cash equivalents																			(24		)	—			—			(2		)	—			(26		)
Cash and cash equivalents, beginning of period	205			—			—			2			—			207			287			—			—			2			—			289
Cash and cash equivalents, end of period	$	230		$	—		$	—		$	2		$	—		$	232		$	263		$	—		$	—		$	—		$	—		$	263

Table of contents


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

The following discussion and analysis should be read together with the unaudited condensed consolidated financial statements and notes thereto included elsewhere in this quarterly report on Form 10-Q. In addition, the statements in this discussion and analysis regarding industry outlook, our expectations regarding the performance of our business, our expected tax rate and benefits and estimated amounts payable pursuant to the Tax Receivable Agreement, liquidity, expected capital expenditures, anticipated future indebtedness or financings and other non-historical statements are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in "Risk Factors" set forth in our ~~2015~~2016 10-K for the year ended December 31, ~~2015.~~2016 as supplemented by the risks and uncertainties described in "Risk Factors" set forth in this quarterly report on From 10-Q. Our actual results may differ materially from those contained in or implied by any forward-looking statements.

Overview

We are a leading regional equipment rental company in the United States, focused on the fast-growing Sunbelt states. We offer a broad array of equipment rental solutions for our diverse customer base, including infrastructure, non-residential construction, oil and gas, municipal and residential construction customers. Our broad fleet of equipment includes earthmoving, material handling, aerial and other related rental equipment, which we package together to meet the specific needs of our customers. We consider the earthmoving equipment category to be a core competency of our Company and a key differentiator of our business.

Our revenues are affected primarily by the time utilization of the equipment in our rental fleet, the rental rates we can charge for that equipment and the amount of equipment we have in our fleet available for rent. See "—Key Performance Measures" for definitions of time utilization and rental rates. We generate revenues from the following three sources:

Rental revenues—this consists of rental revenues and related revenues such as the fees we charge for the pickup and delivery of equipment, damage waivers and other surcharges.

Equipment sales—this consists primarily of revenues from the sale of our used rental equipment and also includes sales of ancillary new equipment to our customers.

Parts and service—this includes revenues from customers for fuel and the repair of damaged rental equipment as well as from the sale of complementary parts, supplies and merchandise to our customers in conjunction with our equipment rental business.

Seasonality and Other External Factors That Affect Our Business

Our operating results are subject to annual and seasonal fluctuations resulting from a variety of factors, including:

the seasonality of rental activity by our customers, with lower activity levels during the winter;

the cyclicality of the construction industry;

the number of our significant competitors and the competitive supply of rental equipment;

general economic conditions; and

the price of oil and other commodities and other general economic trends impacting the industries in which our customers and end users operate.

In addition, our operating results may be affected by severe weather events and seismic conditions (such as hurricanes, tornadoes, flooding and earthquakes) in the regions we serve. Severe weather events can result in short-term reductions in construction activity levels, but after these periods of reduced construction activity, repair and reconstruction efforts have historically resulted in periods of increased demand for rental equipment.

Financial Highlights

For the past several years, we have executed a strategy focused on improving the profitability of our core rental business through revenue growth, a focus on operating leverage and margin expansion. In particular, we have focused on maximizing returns from improving construction activity in the markets we operate in by increasing rental revenues and by increasing the amount of rental equipment in our existing network of 6869 branch locations. ~~While our~~Our net income ~~decreased 16.5%~~increased to ~~$22.9~~$18.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016 as compared to the prior year, our~~2017. Our Adjusted EBITDA (as defined below) increased ~~5.2%~~4.5% to ~~$143.9~~$96.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 as compared to the prior year.

Table of contents

"EBITDA" is defined as net income plus interest expense, provision for income taxes, depreciation of rental equipment and other depreciation and ~~amortization and amortization of debt issue costs.~~amortization. "Adjusted EBITDA" is defined as EBITDA further adjusted to give effect to other items that we do not consider to be indicative of our ongoing operations, including for the periods presented rental split expense, equity-based compensation, adjustment to tax receivable agreement and ~~(gain)~~ loss on interest rate swap. EBITDA and Adjusted EBITDA are not measures of performance in accordance with US GAAP and should not be considered as an alternative to net income or operating cash flows determined in accordance with US GAAP. Additionally, EBITDA and Adjusted EBITDA are not intended to be measures of cash flow for management's discretionary use, as they exclude certain cash requirements such as interest payments, tax payments and debt service requirements. We believe that the inclusion of EBITDA and Adjusted EBITDA in this quarterly report on Form 10-Q is appropriate because securities analysts, investors and other interested parties use these non-US GAAP financial measures as important measures of assessing our operating performance across periods on a consistent basis. EBITDA and Adjusted EBITDA have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our results as reported under US GAAP. Some of these limitations are:

although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements;

they do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments;

they do not reflect changes in, or cash requirements for, our working capital needs;

they do not reflect the significant interest expense, or the cash requirements necessary, to service interest or principal payments on our significant amount of indebtedness; and

they do not reflect the impact of earnings or charges resulting from matters we do not consider to be indicative of our ongoing operations but may nonetheless have a material impact on our results of operations.

In addition, because not all companies use identical calculations, these presentations of EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures of other companies, including companies in our industry.

The following table reconciles EBITDA and Adjusted EBITDA to our net income for the periods indicated:


	For the Three Months Ended September 30,					For the Nine Months Ended September 30,					For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2016			2015		2016		2015			2017		2016		2017		2016
	(in thousands of dollars)
Net income	$	13,422		$	9,444	$	22,940	$	27,466		$	12,336	$	9,939	$	18,573	$	9,518
Interest expense	10,620			10,907		31,745		32,174			11,000		10,846		22,173		21,890
Provision for income taxes	2,334			347		3,556		1,692			2,184		1,606		3,095		1,222
Depreciation of rental equipment	21,912			21,553		66,838		62,280			22,795		22,761		44,945		44,926
Other depreciation and amortization	2,158			2,678		7,493		7,796			2,286		2,594		4,457		5,335
Amortization of debt issue costs	380			392		1,145		1,144
EBITDA	50,826			45,321		133,717		132,552			50,601		47,746		93,243		82,891
Rental split expense(a)	496			662		1,342		1,765			582		398		1,140		845
Equity-based compensation(b)	411			227		1,509		901			650		331		1,399		1,098
Adjustment to tax receivable agreement(c)	1,223			411		1,899		(2,476		)	61		262		116		676
(Gain) loss on interest rate swap(d)	(1,049		)	4,216		5,433		4,097
Loss on interest rate swap(d)											587		1,828		212		6,482
Adjusted EBITDA	$	51,907		$	50,837	$	143,900	$	136,839		$	52,481	$	50,565	$	96,110	$	91,992


(a)	Represents cash payments made to suppliers of equipment in connection with rental split expense, which payments are credited against the purchase price of the applicable equipment if the Company elects to purchase that equipment. See "—Results of Operations" for a discussion of rental split expense.


(b)	Represents non-cash equity-based compensation expense recorded in the periods presented in accordance with US GAAP.


(c)	Represents adjustment to tax receivable agreement related to changes in estimates used in the calculation of the tax receivable agreement.


(d)	Represents ~~(gain)~~ loss on interest rate swap related to adjustments to fair value.

~~Table of contents~~

Company Structure

Neff Corporation was formed as a Delaware corporation on August 18, 2014. On November 26, 2014, Neff Corporation completed an IPO of 10,476,190 shares of Class A common stock at a public offering price of $15.00 per share. A portion of the

Table of contents

gross proceeds received by Neff Corporation from the IPO were used to purchase Common Units in Neff Holdings which was wholly owned by private investment funds managed by Wayzata prior to the IPO. In November 2015, the Company's board of directors authorized a share repurchase program pursuant to which the Company may purchase shares of its Class A common stock. Under ~~the~~a share repurchase program, the Company may acquire up to $25 million of shares of Class A common stock in open market and privately negotiated purchases from time to time, dependent upon market conditions. Since the authorization of the share repurchase program, the Company has purchased ~~1.6~~1.7 million shares of Class A common stock for a total cost of ~~$11.3~~$11.8 million, including commissions. As of June 30, 2017, the number of shares of Class A common stock outstanding was 8,892,798.

The historical results of operations discussed in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" includes the consolidated results of the Company.

Neff Corporation, is the sole managing member of Neff Holdings and owns Common Units of Neff Holdings representing a 37.3% equity interest in Neff Holdings, as of ~~September~~June 30, ~~2016.~~2017. As the sole managing member of Neff Holdings, we control its business and affairs and, therefore, we consolidate its financial results with ours.

Wayzata retains Common Units in Neff Holdings representing a collective 62.7% economic interest and a non-controlling interest in Neff Holdings, and we reflect Wayzata's collective economic interest as a non-controlling interest in our unaudited condensed consolidated financial statements. As a result, net income attributable to us, after excluding the non-controlling interest of Wayzata, represents 37.3% of Neff Holdings' net income and our only material asset is our corresponding 37.3% economic interest and controlling interest in Neff Holdings. Neff Corporation is a holding company that conducts no operations and, as of the consummation of the IPO, its only material asset is the equity interests of its direct and indirect subsidiaries.

Neff Holdings has historically been and will continue to be treated as a partnership for U.S. federal income tax purposes and, as such, is not subject to any entity-level U.S. federal income tax. Rather, taxable income or loss is included in the respective U.S. federal income tax returns of Neff Holdings' members. Neff Corporation will be subject to income taxes as follows:

Provision For (Benefit From) Income Tax—We are a taxpayer subject to income taxes at rates generally applicable to C corporations, and therefore our results of operations are affected by the amount of accruals for tax benefits or payments that Neff Holdings (as a partnership for U.S. federal income tax purposes) historically has not reflected in its results of operations. Our combined statutory federal and state income tax rate for all periods presented in this Form 10-Q is approximately 39.0%.

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

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

~~Table of contents~~

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

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

Table of contents

to the extent we estimate that we will not realize the full benefit of a resulting deferred tax asset, based on an analysis that will consider, among other things, our expectation of future earnings, we will reduce the deferred tax asset with a valuation allowance; and

we will record 85.0% of the estimated realizable tax benefit as an increase to the liability associated with the future payments due under the Tax Receivable Agreement and the remaining 15.0% of the estimated realizable tax benefit as an increase to additional paid-in capital.

All of the effects of changes in any of our estimates after the date of the exchange will be included in net income (loss) for the period in which those changes occur. Similarly, the effect of subsequent changes in the enacted tax rates will be included in net income (loss) for the period in which the change occurs.

Key Performance Measures

From time to time, we use certain key performance measures in evaluating our business and results of operations and we may refer to one or more of these key performance measures in this "Management's Discussion and Analysis of Financial Condition and Results of Operations." These key performance measures, in addition to Adjusted EBITDA, include:

OEC—we present OEC, defined as the first cost of acquiring the equipment ("OEC"), or in the case of used equipment purchases and rental splits, an estimate of the first cost that would have been paid to acquire the equipment if it had been purchased new in its year of manufacture.

Rental rates—we define rental rates as the rates charged to our customers on rental contracts that typically are for a daily, weekly or monthly term. Rental rates change over time based on a combination of pricing, the mix of equipment on rent and the mix of rental terms with customers. Period over period changes in rental rates are calculated on a weighted average with the weighting based on prior period revenue mix.

Time utilization—we define time utilization as the daily average OEC of equipment on rent, divided by the OEC of all equipment in the rental fleet during the relevant period.

Recent Developments

On July 14, 2017, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with H&E Equipment Services, Inc. (“H&E”) and Yellow Iron Merger Co, a wholly-owned subsidiary of H&E (the “Merger Sub”) pursuant to which the Merger Sub will be merged with and into Neff Corporation with Neff Corporation continuing as the surviving corporation and as a wholly-owned subsidiary of H&E (the “Merger”). Under the terms of the Merger Agreement, which has been unanimously approved by our board of directors and the board of directors of H&E, H&E will pay $21.07 in cash per share of our Class A Common Stock, for a total enterprise value of approximately $1.2 billion, including approximately $690 million of net debt. The per share merger consideration payable to our stockholders is subject to certain downward adjustments, not to exceed $0.44 per share, in the event that H&E incurs certain increased financing costs due to the transaction not being consummated on or prior to January 14, 2018. Holders of vested stock options to purchase shares of Class A Common Stock shall receive an amount of cash equal to the product of the merger consideration minus the per share exercise price multiplied by the number of shares of Class A Common Stock subject to such stock option. Holders of vested restricted stock unit awards shall receive an amount of cash equal to the product of the merger consideration multiplied by the number of shares of Class A Common Stock with respect to which such restricted stock unit award was vested. Holders of unvested stock options shall receive a substitute stock option to purchase H&E common stock as set forth in the Merger Agreement. Holders of unvested restricted stock unit awards shall receive time-vesting restricted stock unit awards of H&E common stock as set forth in the Merger Agreement.

The Merger is subject to a go-shop period that will expire on 11:59 p.m. on August 20, 2017 during which we have the right to solicit, encourage or facilitate any inquiry or the making of any alternative acquisition proposal. The Merger is expected to close in the late third quarter or early fourth quarter of 2017, and is subject to customary closing conditions, including clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR"). The Merger Agreement contains certain customary termination rights, including that each of H&E and Neff Corporation has the right to terminate the Merger Agreement after January 14, 2018 if the Merger has not been consummated provided that if all of the conditions to closing have been satisfied other than having obtained HSR clearance, each of H&A and Neff Corporation may extend such outside date to April 10, 2018. In the event that we terminate the Merger Agreement in accordance with the go-shop provision described above to enter into a definitive agreement for a superior proposal, we will be required to pay H&E a cash termination fee in the amount of $13,165,000. In the event that we terminate the Merger Agreement under certain other specified circumstances, we will be required to pay H&E a cash termination fee in the amount of $18,430,000.

Table of contents

In connection with the transaction, Wayzata Opportunities Fund II, L.P. and Wayzata Opportunities Fund Offshore II, L.P. (collectively, the “Key Holders”), the beneficial owners of 14,951,625 shares of the Class B Common Stock, entered into a support agreement with H&E pursuant to which the Key Holders agreed to vote all of their shares of Company common stock against any action or agreement that is intended to prevent, interfere with, impair or delay the Merger but they are permitted to engage in go-shop activities to the extent those activities are permitted by us under the agreement. Additionally, the Key Holders entered into an exchange and termination agreement with Neff Corporation, H&E and Neff Holdings and the holders of options convertible into LLC units of Neff Holdings entered into an exchange and termination agreement with Neff Corporation, H&E, Neff Holdings and the management representative (as defined in the exchange and termination agreement) pursuant to which the Tax Receivable Agreement will be terminated immediately prior to the effective time of the Merger without any payment by us. Pursuant to the exchange and termination agreements, immediately prior to the effective time of the Merger, the Key Holders will receive shares of Class A Common Stock in exchange for the number of LLC units of Neff Holdings they own on a one-for-one basis and their shares of Class B Common Stock will be cancelled, and the holders of options convertible into LLC units of Neff Holdings will have their LLC options converted on a cashless basis into LLC units and the LLC units will be exchanged for shares of Class A Common Stock on a one-for-one basis.

On July 14, 2017, the Key Holders representing 62.7% of our outstanding common stock at such time executed a written consent adopting the Merger Agreement and approving the Merger. The written consent will terminate in the event that the support agreement is terminated in accordance with its terms. No further approval of our stockholders is required to adopt the Merger Agreement or approve the Merger. On July 25, 2017, we filed with the Securities and Exchange Commission a preliminary information statement describing the Merger Agreement and Merger transaction. When completed, a final information statement will be mailed to our stockholders.

Results of Operations

The following summary highlights the key elements of certain line items discussed further below in the period-over-period analysis of our results of operations:

Total Revenues:

Rental Revenues: relates primarily to revenues received from customers under leases for our rental equipment and includes related revenues such as the fees we charge for the pickup and delivery of equipment, damage waivers and other surcharges.

Equipment Sales: relates primarily to revenues received from third parties upon the sale of used equipment from our rental fleet, which generally increases in the winter months when customer activity and time utilization are comparatively lower. To a much lesser extent, this line item also includes revenues received upon the sale to customers of ancillary new equipment.

Parts and Service: relates primarily to revenues received from sales of complementary parts, supplies and merchandise in conjunction with our equipment rental business, as well as from services provided to repair rental equipment damaged by customers, which is billable to our customers, and fuel costs charged to customers.

Cost of Equipment Sold: relates primarily to the net book value of our used rental fleet that is sold in the ordinary course of our active fleet management. To a much lesser extent, this line item also includes the net book value of ancillary new equipment that is sold.

~~Table of contents~~

Depreciation of Rental Equipment: relates to the depreciation of the cost of equipment in our rental fleet and is generally calculated on a straight-line basis over the estimated service life of the asset (generally two to eight years with a 10% to 20% residual value).

Cost of Rental Revenues: relates primarily to the delivery and retrieval of rental equipment (including fuel), maintenance and repairs to our rental equipment fleet (including parts), and labor costs and related payroll expenses (such as insurance, benefits and overtime) for drivers and mechanics. This line item also includes the portion of rental revenues paid over to Original Equipment Manufacturers ("OEMs") under rental splits (described below) that we may have in place from time to time.

Cost of Parts and Service: relates primarily to costs attributable to the sale of parts and fuel directly to customers and service provided for the maintenance and repair of our equipment damaged by customers, which is billable to our customers.

Table of contents

Selling, General and Administrative Expenses: relates primarily to general selling, general overhead and administrative costs such as branch management and sales, accounting, finance, legal and marketing expenses. This line item also includes payments under leases for our headquarters and branch locations, expenses associated with software licenses, property taxes payable on our rental equipment and payroll, sales commission, bonus and benefits expenses allocable to executive, regional and branch management. This line item also includes provisions for bad debt expense and any ordinary course litigation expense.

Other Depreciation and Amortization: relates primarily to depreciation of non-rental property, plant and equipment, such as trucks and trailers used to transport rental equipment as well as office equipment and amortization of intangibles such as customer lists.

Interest Expense: relates primarily to interest expense incurred in connection with our long-term debt facilities and the amortization of the related original issue discount, in each case for the periods in which those debt obligations were outstanding.

We utilize rental splits in our operations. Rental splits are a consignment arrangement of new equipment by OEMs in which we hold their equipment in our rental fleet for a period of time (typically between three and 12 months) and agree to share with the OEM a percentage of the rental revenue we receive on the rental of that unit. We do not take title to the unit under this arrangement and we can return the unit to the OEM at any time, at no additional cost to us. We also can elect to purchase the unit from the OEM from time to time. The revenue we pay to the OEM under rental splits is expensed in cost of rental revenues on our unaudited condensed consolidated statements of operations, but added back to Adjusted EBITDA in order to maintain comparability to our results from period to period. If we exercise the option to purchase the unit, the unit becomes part of our rental fleet and is depreciated, with depreciation added back to Adjusted EBITDA. Before we exercise the option to purchase a unit, we count the unit as part of our rental fleet for OEC calculations but do not depreciate the unit.

Table of contents

Three Months Ended ~~September~~June 30, ~~2016~~2017 Compared to Three Months Ended ~~September~~June 30, ~~2015~~2016

The following table illustrates our operating activity for the three months ended ~~September~~June 30, ~~2016~~2017 and the three months ended ~~September~~June 30, ~~2015.~~2016.


	Three Months Ended September 30,								Three Months Ended June 30,
	2016			2015			% Change		2017			2016			% Change
	(in thousands of dollars)								(in thousands of dollars)
Revenues
Rental revenues	$	95,770		$	90,532		5.8		$	94,379		$	91,474		3.2
Equipment sales	6,264			5,559			12.7		6,306			4,941			27.6
Parts and service	3,433			3,333			3.0		3,440			3,245			6.0
Total revenues	105,467			99,424			6.1		104,125			99,660			4.5
Cost of revenues
Cost of equipment sold	4,152			3,474			19.5		3,993			2,963			34.8
Depreciation of rental equipment	21,912			21,553			1.7		22,795			22,761			0.1
Cost of rental revenues	23,311			21,186			10.0		22,815			21,675			5.3
Cost of parts and service	2,067			1,964			5.2		2,016			1,799			12.1
Total cost of revenues	51,442			48,177			6.8		51,619			49,198			4.9
Gross profit	54,025			51,247			5.4		52,506			50,462			4.1
Other operating expenses
Selling, general and administrative expenses	24,937			22,852			9.1		24,052			23,387			2.8
Other depreciation and amortization	2,158			2,678			(19.4	)	2,286			2,594			(11.9	)
Total other operating expenses	27,095			25,530			6.1		26,338			25,981			1.4
Income from operations	26,930			25,717			4.7		26,168			24,481			6.9
Other expenses (income)
Other expenses
Interest expense	10,620			10,907			(2.6	)	11,000			10,846			1.4
Adjustment to tax receivable agreement	1,223			411			nm		61			262			(76.7	)
(Gain) loss on interest rate swap	(1,049		)	4,216			nm
Amortization of debt issue costs	380			392			(3.1	)
Total other expenses (income)	11,174			15,926			(29.8	)
Loss on interest rate swap									587			1,828			(67.9	)
Total other expenses									11,648			12,936			(10.0	)
Income before income taxes	15,756			9,791			60.9		14,520			11,545			25.8
Provision for income taxes	(2,334		)	(347		)	nm		(2,184		)	(1,606		)	36.0
Net income	13,422			9,444			42.1		12,336			9,939			24.1
Less: net income attributable to non-controlling interest	10,558			6,238			69.3		9,086			7,319			24.1
Net income attributable to Neff Corporation	$	2,864		$	3,206		(10.7	)	$	3,250		$	2,620		24.0

"nm"—means not meaningful

Total Revenues. Total revenues for the three months ended ~~September~~June 30, ~~2016~~2017 increased ~~6.1%~~4.5% to ~~$105.5~~$104.1 million from ~~$99.4~~$99.7 million for the three months ended ~~September~~June 30, ~~2015.~~2016. The components of our revenues are rental revenues, equipment sales and parts and service, and the changes between periods in each of these components are discussed below.

Rental Revenues. Rental revenues for the three months ended ~~September~~June 30, ~~2016~~2017 increased ~~5.8%~~3.2% to ~~$95.8~~$94.4 million from ~~$90.5~~$91.5 million for the three months ended ~~September~~June 30, ~~2015.~~2016. The increase in rental revenues was due to an increase in the amount of equipment on rent as a result of an increase in the size of our rental fleet and an increase in rental rates. This increase in rental revenues was partially offset by a decrease in ~~the~~ time ~~utilization of the larger fleet and a decrease in rental rates.~~utilization. We estimate that our rental rates ~~decreased 0.2%~~increased 1.5%, as compared to the three months ended ~~September~~June 30, ~~2015.~~2016. For the three months ended ~~September~~June 30, ~~2016,~~2017, the average OEC of our rental fleet increased by ~~6.3%~~5.0% to ~~$829.2~~$857.7 million from ~~$780.2~~$816.7 million ~~at September~~for the three months ended June 30, ~~2015,~~2016, as a result of capital expenditures. Time utilization for the three months ended ~~September~~June 30, ~~2016~~2017 decreased ~~slightly~~ to ~~69.0%~~66.6% from ~~69.2%~~68.0% for the three months ended ~~September~~June 30, ~~2015.~~2016.

Table of contents

Equipment Sales. Equipment sales for the three months ended ~~September~~June 30, ~~2016~~2017 increased ~~12.7%~~27.6% to $6.3 million from ~~$5.6~~$4.9 million for the three months ended ~~September~~June 30, ~~2015.~~2016. The increase in equipment sales revenues was primarily due to increased volume of sales of used equipment.

Parts and Service. Revenues from the sales of parts and service ~~remained relatively consistent at~~increased by 6.0% to $3.4 million for the three months ended ~~September~~June 30, 2017 from $3.2 million for the three months ended June 30, 2016.

Cost of Equipment Sold. Costs associated with the sale of rental equipment increased ~~19.5%~~34.8% to ~~$4.2~~$4.0 million for the three months ended ~~September~~June 30, ~~2016~~2017 from ~~$3.5~~$3.0 million for the three months ended ~~September~~June 30, ~~2015.~~2016. The increase in costs associated with the sale of rental equipment was due primarily to the increase in equipment sales for the three months ended ~~September~~June 30, ~~2016.~~2017. This increase was partially offset by aan decrease in used equipment sales gross profit. Gross profit margin on used equipment sales for the three months ended ~~September~~June 30, ~~2016~~2017 decreased to ~~33.7%~~36.7% from ~~37.5%~~40.0% for the three months ended ~~September~~June 30, ~~2015,~~2016, primarily as a result of the mix of equipment sold.

Depreciation of Rental Equipment. Depreciation of rental equipment increased slightly by 1.7% to $21.9 million for the three months ended September 30, 2016 from $21.6 million for the three months ended September 30, 2015. The increased depreciation expense of rental equipment was primarily due to the increase in the number of units in our rental fleet and the related increase in the cost of our rental equipment.remained relatively consistent at $22.8 million. As a percentage of rental revenues, depreciation of rental equipment was ~~22.9%~~24.2% for the three months ended ~~September~~June 30, ~~2016~~2017 and was ~~23.8%~~24.9% for the three months ended ~~September~~June 30, ~~2015.~~2016.

Cost of Rental Revenues. Costs associated with our rental revenues increased ~~10.0%~~5.3% to ~~$23.3~~$22.8 million for the three months ended ~~September~~June 30, ~~2016~~2017 from ~~$21.2~~$21.7 million for the three months ended ~~September~~June 30, ~~2015.~~2016. The increase in cost of rental revenues was primarily a result of increased payroll and payroll related expenses, ~~and equipment~~ repair costs, ~~offset by decreases in~~ fuel and rental split expenses. As a percentage of rental revenues, cost of rental revenues increased to ~~24.3%~~24.2% for the three months ended ~~September~~June 30, ~~2016~~2017 from ~~23.4%~~23.7% for the three months ended ~~September~~June 30, ~~2015.~~2016.

Cost of Parts and Service. Costs associated with generating our parts and service revenues ~~remained relatively consistent at $2.1~~increased 12.1% to $2.0 million for the three months ended ~~September~~June 30, 2017 from $1.8 million for the three months ended June 30, 2016. The increase was due to increases in parts, repair and fuel billed to our customers.

Selling, General and Administrative Expenses. Selling, general and administrative expenses for the three months ended ~~September~~June 30, ~~2016~~2017 increased ~~$2.1~~$0.7 million, or ~~9.1%~~2.8%, to ~~$24.9~~$24.1 million from ~~$22.9~~$23.4 million for the three months ended ~~September~~June 30, ~~2015.~~2016. The net increase in selling, general and administrative expenses was ~~attributable~~primarily due to ~~several factors. Employee~~employee salaries, benefits and related employee expenses increased $1.5 million primarily as a result of higher headcount, salaries and payroll taxes. Rent and bad debt expenses also increased while public company expenses decreased $0.1 million year over year.expenses. As a percentage of total revenues, selling, general and administrative expenses ~~increased~~decreased to ~~23.6%~~23.1% for the three months ended ~~September~~June 30, ~~2016~~2017 from ~~23.0%~~23.5% for the three months ended ~~September~~June 30, ~~2015.~~2016.

Other Depreciation and Amortization. Other depreciation and amortization expense decreased ~~19.4%~~11.9% to ~~$2.2~~$2.3 million for the three months ended ~~September~~June 30, ~~2016~~2017 from ~~$2.7~~$2.6 million for the three months ended ~~September~~June 30, ~~2015.~~2016. The decrease was primarily due to a decrease in depreciation expense for property and equipment.

Interest Expense. Interest expense for the three months ended ~~September~~June 30, ~~2016 decreased 2.6%~~2017 increased 1.4% to ~~$10.6~~$11.0 million from ~~$10.9~~$10.8 million for the three months ended ~~September~~June 30, ~~2015.~~2016. The ~~decrease~~increase in interest expense was primarily due to ~~a decrease~~increases in the weighted average interest ~~rate of~~rates on our Revolving Credit Facility ~~in addition to a decrease in the balance outstanding on our~~and Second Lien Loan.

Adjustment to Tax Receivable Agreement. Adjustment to Tax Receivable Agreement for the three months ended ~~September~~June 30, ~~2016~~2017 was a ~~$1.2~~$0.1 million increase to the liability primarily due to changes in estimated future payments. The Adjustment to Tax Receivable Agreement for the three months ended ~~September~~June 30, ~~2015~~2016 was a ~~$0.4~~$0.3 million increase in the liability due to changes in estimated future payments.

~~(Gain)~~ Loss on Interest Rate Swap. ~~Gain~~Loss on interest rate swap for the three months ended ~~September~~June 30, ~~2016~~2017 was ~~$1.0~~$0.6 million and included ~~$1.4~~$0.3 million of unrealized ~~gains~~losses on the Interest Rate Swap related to the change in fair value and ~~a $0.4~~$0.3 million ~~realized loss for~~of settlement payments made. ~~In March 2015, the Company entered into and recorded the Interest Rate Swap on its unaudited condensed consolidated balance sheet.~~ The Interest Rate Swap is not accounted for as a hedge and changes in fair value are included directly in the unaudited condensed consolidated statement of operations. There was a loss on the Interest Rate Swap of ~~$4.2~~$1.8 million for the three months ended ~~September~~June 30, ~~2015.~~2016. The loss consisted of ~~$4.1~~$1.6 million of unrealized losses on the Interest Rate Swap related to the change in fair value ~~and a $0.1~~together with $0.2 million ~~realized loss~~in losses for the settlement payments made.

~~Amortization of Debt Issue Costs.~~ ~~Amortization of debt issue costs remained relatively consistent at $0.4 million for the three months ended September 30, 2016.~~

Table of contents

~~Nine~~Six Months Ended ~~September~~June 30, ~~2016~~2017 Compared to ~~Nine~~Six Months Ended ~~September~~June 30, ~~2015~~2016

The following table illustrates our operating activity for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and the ~~nine~~six months ended ~~September~~June 30, ~~2015.~~2016.


	Nine Months Ended September 30,								Six Months Ended June 30,
	2016			2015			% Change		2017			2016			% Change
	(in thousands of dollars)								(in thousands of dollars)
Revenues
Rental revenues	$	268,421		$	249,493		7.6		$	179,877		$	172,651		4.2
Equipment sales	16,307			18,520			(11.9	)	13,501			10,043			34.4
Parts and service	9,983			9,724			2.7		6,624			6,550			1.1
Total revenues	294,711			277,737			6.1		200,002			189,244			5.7
Cost of revenues
Cost of equipment sold	10,226			11,864			(13.8	)	8,946			6,074			47.3
Depreciation of rental equipment	66,838			62,280			7.3		44,945			44,926			—
Cost of rental revenues	64,919			58,556			10.9		45,078			41,608			8.3
Cost of parts and service	5,671			5,534			2.5		3,813			3,604			5.8
Total cost of revenues	147,654			138,234			6.8		102,782			96,212			6.8
Gross profit	147,057			139,503			5.4		97,220			93,032			4.5
Other operating expenses
Selling, general and administrative expenses	72,846			67,610			7.7		48,594			47,909			1.4
Other depreciation and amortization	7,493			7,796			(3.9	)	4,457			5,335			(16.5	)
Total other operating expenses	80,339			75,406			6.5		53,051			53,244			(0.4	)
Income from operations	66,718			64,097			4.1		44,169			39,788			11.0
Other expenses (income)
Other expenses
Interest expense	31,745			32,174			(1.3	)	22,173			21,890			1.3
Adjustment to tax receivable agreement	1,899			(2,476		)	nm		116			676			(82.8	)
Loss on interest rate swap	5,433			4,097			32.6		212			6,482			(96.7	)
Amortization of debt issue costs	1,145			1,144			0.1
Total other expenses (income)	40,222			34,939			15.1
Total other expenses									22,501			29,048			(22.5	)
Income before income taxes	26,496			29,158			(9.1	)	21,668			10,740			nm
Provision for income taxes	(3,556		)	(1,692		)	nm		(3,095		)	(1,222		)	nm
Net income	22,940			27,466			(16.5	)	18,573			9,518			95.1
Less: net income attributable to non-controlling interest	17,608			15,912			10.7		13,597			7,050			92.9
Net income attributable to Neff Corporation	$	5,332		$	11,554		(53.9	)	$	4,976		$	2,468		nm

"nm"—means not meaningful

Total Revenues. Total revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 increased ~~6.1%~~5.7% to ~~$294.7~~$200.0 million from ~~$277.7~~$189.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2015.~~2016. The components of our revenues are rental revenues, equipment sales and parts and service, and the changes between periods in each of these components are discussed below.

Rental Revenues. Rental revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 increased ~~7.6%~~4.2% to ~~$268.4~~$179.9 million from ~~$249.5~~$172.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2015.~~2016. The increase in rental revenues was primarily due to an increase in the amount of equipment on rent as a result of an increase in the size of our rental fleet and an increase in ~~the time utilization of the larger fleet.~~rental rates. This increase in rental revenues was ~~partially~~ offset by a decrease in ~~rental rates.~~time utilization . We estimate that our rental rates ~~decreased 0.8%~~increased 1.3%, as compared to the ~~nine~~six months ended ~~September~~June 30, ~~2015.~~2016. For the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, the average OEC of our rental fleet increased by ~~7.0%~~6.0% to ~~$808.0~~$845.1 million from ~~$755.0~~$797.4 million ~~at September~~for the six months ended June 30, ~~2015,~~2016, as a result of increased capital expenditures. Time utilization for the ~~nine~~six months ended ~~September~~June 30, ~~2016 increased~~2017 decreased to ~~67.4%~~64.8% from ~~66.7%~~66.6% for the ~~nine~~six months ended ~~September~~June 30, ~~2015 primarily due to improved time utilization in our oil and gas markets compared to the prior year.~~2016.

Table of contents

Equipment Sales. Equipment sales for the ~~nine~~six months ended ~~September~~June 30, ~~2016 decreased 11.9%~~2017 increased 34.4% to ~~$16.3~~$13.5 million from ~~$18.5~~$10.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2015.~~2016. The ~~decrease~~increase in equipment sales revenues was primarily due to ~~decreased~~increased sales volume of used equipment.

Parts and Service. Revenues from the sales of parts and service for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 increased ~~2.7%~~slightly to ~~$10.0 million from $9.7 million for the nine months ended September 30, 2015.~~$6.6 million. The increase in these revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 was primarily due to increased parts, repair and fuel costs ~~charged~~billed to our customers.

Cost of Equipment Sold. Costs associated with the sale of rental equipment ~~decreased 13.8%~~increased 47.3% to ~~$10.2~~$8.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 from ~~$11.9~~$6.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2015.~~2016. The ~~decrease~~increase in costs associated with the sale of rental equipment was due primarily to the ~~decrease~~increase in equipment sales. This ~~decrease~~increase was partially offset by ~~an increase~~a decrease in used equipment sales gross profit. Gross profit margin on used equipment sales for the ~~nine~~six months ended ~~September~~June 30, ~~2016 increased~~2017 decreased to ~~37.3%~~33.7% from ~~35.9%~~39.5% for the ~~nine~~six months ended ~~September~~June 30, ~~2015,~~2016, primarily as a result of the mix of equipment sold.

Depreciation of Rental Equipment. Depreciation of rental equipment increased 7.3% to $66.8 million for the nine months ended September 30, 2016 from $62.3 million for the nine months ended September 30, 2015. The increased depreciation expense of rental equipment was primarily due to the increase in the number of units in our rental fleet and the related increase in the cost of our rental equipment.remained relatively consistent at $44.9 million. As a percentage of rental revenues, depreciation of rental equipment was ~~24.9% for the nine months ended September 30, 2016 and was~~ 25.0% for the ~~nine~~six months ended ~~September~~June 30, ~~2015.~~2017 and was 26.0% for the six months ended June 30, 2016.

Cost of Rental Revenues. Costs associated with our rental revenues increased ~~10.9%~~8.3% to ~~$64.9~~$45.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 from ~~$58.6~~$41.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2015.~~2016. The increase in cost of rental revenues was primarily a result of increased payroll and payroll related expenses, repair costs, ~~and insurance expenses, partially offset by decreases in~~ fuel and rental split expenses. As a percentage of rental revenues, cost of rental revenues increased to ~~24.2%~~25.1% for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 from ~~23.5%~~24.1% for the ~~nine~~six months ended ~~September~~June 30, ~~2015.~~2016.

Cost of Parts and Service. Costs associated with generating our parts and service revenues ~~remained relatively consistent at $5.7~~increased 5.8% to $3.8 million for the ~~nine~~six months ended ~~September~~June 30, 2017 from $3.6 million for the six months ended June 30, 2016. The increase was due to increased in parts, repair and fuel billed to our customers.

Selling, General and Administrative Expenses. Selling, general and administrative expenses for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 increased ~~$5.2 million, or 7.7%,~~1.4% to ~~$72.8 million from $67.6~~$48.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2015. The net increase in selling, general and administrative expenses was attributable to several factors.~~2017 from $47.9 million for the six months ended June 30, 2016. Employee salaries, benefits and related employee expenses increased ~~$4.4~~$1.2 million primarily as a result of higher headcount, salaries and payroll taxes. ~~Rent and~~This increase was partially offset by a decrease in bad debt expenses ~~also increased while public company expenses decreased $1.3 million year over year.~~and professional fees. As a percentage of total revenues, selling, general and administrative expenses ~~increased~~decreased to ~~24.7% for the nine months ended September 30, 2016 from~~ 24.3% for the ~~nine~~six months ended ~~September~~June 30, ~~2015.~~2017 from 25.3% for the six months ended June 30, 2016.

Other Depreciation and Amortization. Other depreciation and amortization expense decreased ~~3.9%~~16.5% to ~~$7.5~~$4.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 from ~~$7.8~~$5.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2015.~~2016. The decrease was primarily due to a decrease in depreciation expense for property and equipment.

Interest Expense. Interest expense for the ~~nine~~six months ended ~~September~~June 30, ~~2016 decreased~~2017 increased 1.3% to ~~$31.7~~$22.2 million from ~~$32.2~~$21.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2015.~~2016. The ~~decrease~~increase in interest expense was primarily due to ~~a decrease~~increases in the weighted average interest ~~rate of~~rates on our Revolving Credit Facility ~~in addition to a decrease in the balance outstanding on our~~and Second Lien Loan.

Adjustment to Tax Receivable Agreement. Adjustment to Tax Receivable Agreement for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 consisted of a ~~$1.9~~$0.1 million increase to the liability primarily due to changes in estimated future payments. The Adjustment to Tax Receivable Agreement for the ~~nine~~six months ended ~~September~~June 30, ~~2015~~2016 was a ~~$2.5~~$0.7 million ~~decrease~~increase in the liability due to ~~the tax receivable agreement amendment and~~ changes in estimated future payments.

Loss on Interest Rate Swap. Loss on interest rate swap for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 was ~~$5.4~~$0.2 million and included ~~$4.8~~$0.3 million of unrealized ~~losses~~gains on the Interest Rate Swap related to the change in fair value and ~~$0.6~~$0.5 million of settlement payments made. ~~In March 2015, the Company entered into and recorded the Interest Rate Swap on its unaudited condensed consolidated balance sheet.~~ The Interest Rate Swap is not accounted for as a hedge and changes in fair value are included directly in the unaudited condensed consolidated statements of operations. There was a loss on Interest Rate Swap of ~~$4.1~~$6.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2015.~~2016. The loss consisted of ~~$3.9~~$6.2 million of unrealized losses on Interest Rate Swap related to the change in fair value and ~~a $0.2~~$0.3 million ~~realized loss for~~of settlement payments made.

Table of contents

~~Amortization of Debt Issue Costs.~~ ~~Amortization of debt issue costs remained relatively consistent at $1.1 million for the nine months ended September 30, 2016.~~

Liquidity and Capital Resources

Overview

Our principal needs for liquidity historically have been for the purchase of rental fleet, other capital expenditures, including delivery vehicles, funding startup costs for new branch locations and debt service. These will be our principal liquidity needs going forward, in addition to potential payments under the Tax Receivable Agreement ~~potential cash payments made at our election to the Prior LLC Owners for the redemption of Common Units for Class A common stock~~ and any share repurchases we make in the future under our share repurchase program.

Our largest use of liquidity has been and will continue to be for the acquisition of equipment for our rental fleet. Our large rental fleet requires a substantial ongoing commitment of capital. While we can manage the size and aging of our fleet generally over time, eventually we must retire older equipment and either allow our fleet to shrink or replace the older equipment in our fleet with newer models. For the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, our net rental fleet capital expenditures totaled approximately ~~$91.2~~$49.0 million and ~~$120.4~~$66.5 million, respectively. We have historically financed these net additions to our rental fleet using cash flow from operations and borrowings under our Revolving Credit Facility and we expect that to continue in the future.

We also use our liquidity to finance other non-rental equipment capital expenditures, typically consisting of delivery vehicles, property, plant and equipment and funding startup costs for new branch locations. The liquidity required to open a new branch location typically ranges from $5.0 million to $10.0 million, the majority of which consists of acquisitions of rental fleet for the new branch location.

For the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, our net purchases of property and equipment totaled approximately ~~$10.1~~$7.1 million and ~~$11.7~~$8.6 million, respectively. We have historically financed these net other non-rental capital expenditures using cash flow from operations and borrowings under our Revolving Credit Facility and we expect that to continue in the future.

In November 2015, the Company's board of directors authorized a share repurchase program pursuant to which the Company may purchase shares of its Class A common stock. Under the share repurchase program, the Company may acquire up to $25 million of shares of Class A common stock in open market and privately negotiated purchases from time to time, dependent upon market conditions. Since the authorization of the share repurchase program, the Company has purchased ~~1.6~~1.7 million shares of Class A common stock for a total cost of ~~$11.3~~$11.8 million, including commissions. During the six months ended June 30, 2017, the Company did not repurchase any shares of Class A common stock.

We may use liquidity going forward to make payments under the Tax Receivable Agreement. For the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, we did not make any payments under the Tax Receivable Agreement. We expect any eventual payments under the Tax Receivable Agreement could vary depending on a number of ~~factors.~~factors (see Tax Receivable Agreement under the Company Structure and Effects of the Organizational Transactions in the "Management's Discussions and Analysis of Financial Condition and Results of Operations").

As of December 31, ~~2015,~~2016, our total leverage ratio was ~~3.90.~~3.60 to 1.00. Under the terms of the Second Lien Loan, if the total leverage ratio is equal to or less than 4.00 to 1.00 but greater than 3.00 to 1.00 at the end of each fiscal year, we must make a mandatory prepayment equal to 25% of our excess cash flow. A mandatory prepayment of ~~$3.3~~$11.8 million was made during March 2017 for the year ended December 31, ~~2015,~~2016. A mandatory prepayment of $3.3 million was made during March ~~2016.~~2016 for the year ended December 31, 2015. The Company will determine whether any mandatory prepayments need to be made for the fiscal year ending December 31, ~~2016,~~2017, after year end. Other than mandatory prepayments under the terms of our Second Lien Loan as of ~~September~~June 30, ~~2016,~~2017, we are not required to make principal payments prior to the stated maturity of June 9, 2021. We expect to satisfy our debt service going forward, which will consist primarily of interest payments and mandatory prepayments under the current terms of the Second Lien Loan, out of cash flow from operations.

As of ~~September~~June 30, ~~2016,~~2017, our principal sources of liquidity consisted of ~~$111.0~~$68.3 million of cash generated from operations, $0.8 million of cash and cash equivalents and availability of ~~$210.7~~$244.8 million under our Revolving Credit Facility ~~subject~~(subject to customary borrowing ~~conditions.~~conditions). We believe that our cash flow from operations, available cash and cash equivalents and available borrowing capacity under the Revolving Credit Facility will be sufficient to meet our liquidity needs for at least the next 12 months; however, there can be no assurance that this will be the case. The borrowing capacity under our Revolving Credit Facility will depend on the amount of outstanding borrowings and letters of credit issued and will also depend on us remaining in compliance with the covenants under our Revolving Credit Facility and Second Lien Loan. We were in compliance with the covenants under our Revolving Credit Facility and Second Lien Loan as of ~~September~~June 30, ~~2016.~~2017.

We may from time to time seek to repurchase our Class A common stock or retire or repurchase our outstanding debt through cash purchases and/or exchanges of equity securities, in open market purchases, privately negotiated transactions, tender

~~Table of contents~~

offers or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.

Table of contents

To the extent we require additional liquidity, we anticipate that it will be funded through the incurrence of other indebtedness (which may include capital markets indebtedness, the incremental facility under the credit agreement for the Second Lien Loan or indebtedness under other credit facilities), equity financings or a combination thereof; however, there can be no assurance that ~~this~~we will be ~~the case.~~able to fund such additional liquidity needs on commercially acceptable terms or at all. Although we have no specific current plans to do so, if we decide to pursue one or more significant acquisitions, we may incur additional debt or sell additional equity to finance such acquisitions.

Cash Flows for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016

Net cash provided by operating activities was ~~$111.0~~$68.3 million as compared to ~~$99.7~~$73.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2015.~~2016. Net income of ~~$22.9~~$18.6 million when adjusted by various non-cash items, such as depreciation of $49.0 million, the gain on sale of equipment of ~~$6.1~~$4.6 million, unrealized ~~loss~~gain on interest rate swap of ~~$4.8 million, adjustment to the tax receivable agreement of $1.9 million and depreciation of $73.5~~$0.3 million, resulted in net cash provided by operating activities of ~~$111.0~~$68.3 million.

Net cash used in investing activities was ~~$101.3~~$56.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 as compared to ~~$132.2~~$75.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2015.~~2016. Cash used for the purchase of rental equipment was ~~$107.5~~$62.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, compared to ~~$139.0~~$76.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2015.~~2016. We received ~~$16.3~~$13.5 million in cash proceeds from the sale of equipment for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 compared to ~~$18.5~~$10.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2015.~~2016.

Net cash ~~(used in) provided by~~used in financing activities was ~~$9.1~~$12.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, compared to ~~$32.5~~$1.6 million provided by financing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2015.~~2016. The decrease in cash from financing activities was primarily due to ~~additional debt issue costs for the Revolving Credit Facility amendment, repurchases of Class A common stock made during the nine months ended September 30, 2016,~~an increase in the Second Lien Loan prepayment ~~and a decrease of~~compared to the prepayment made in the prior year as well as net ~~borrowings under~~repayments made to the Revolving Credit Facility as compared to net borrowings in prior year.

Revolving Credit Facility

On October 1, 2010, certain of our subsidiaries entered into the Revolving Credit Facility with a syndicate of banks and financial institutions including Bank of America, N.A. and Wells Fargo Capital Finance, LLC as the co-collateral agents. Bank of America, N.A. is the agent, swing-line lender and letter of credit issuer. The Revolving Credit Facility was amended and restated on November 20, 2013, amended on June 9, 2014 as part of a refinancing and further amended and restated on February 25, 2016.

The Revolving Credit Facility provides $475.0 million in commitments for revolving borrowings, including a $30.0 million sublimit for the issuance of letters of credit, and a $42.5 million sublimit for swing-line loans, subject to certain availability conditions. The aggregate amount of all borrowings available to us under the Revolving Credit Facility is the lesser of the aggregate commitments and the "borrowing base", which is a formula that applies certain advance rates against our eligible accounts receivable and our eligible rental equipment and, as a result of which, could result in us not being able to borrow all of the available commitments at any given time. As of ~~September~~June 30, ~~2016,~~2017, the borrowing base under the Revolving Credit Facility was ~~$475.0~~$452.9 million. As of June 30, 2017, we had $226.1 million in borrowings under the Revolving Credit Facility before an offset of $3.5 million. The Revolving Credit Facility matures on February 25, 2021. Borrowings under the Revolving Credit Facility bear interest, at our option, at either a LIBOR rate or base rate, in each case plus an applicable margin. LIBOR loans bear interest at the LIBOR rate plus (a) 200 basis points if the average availability for the period is less than $125.0 million, (b) 175 basis points if the average availability for the period is equal to or greater than $125.0 million but less than $225.0 million or (c) 150 basis points if the average availability for the period is greater than $225.0 million. The base rate loans bear interest at the sum of (a) (i) 100 basis points if the average availability for the period is less than $125.0 million, (ii) 75 basis points if the average availability for the period is equal to or greater than $125.0 million but less than $225.0 million or (iii) 50 basis points if the average availability for the period is greater than $225.0 million plus (b) the greatest of (i) the prime rate, (ii) the federal funds rate plus 50 basis points and (iii) LIBOR plus 100 basis points. The applicable margin for LIBOR loans and base rate loans will be subject to quarterly performance pricing adjustments based on our average availability and our consolidated total leverage ratio under the Revolving Credit Facility for the most recently completed quarter. The Revolving Credit Facility provides for the payment to the lenders of an unused line fee of 0.375% if less than 50% of the daily average unused portion under the Revolving Credit Facility is utilized and 0.250% if 50% or more is utilized. The unused line fee is payable on the daily average unused portion of the commitments under the Revolving Credit Facility (whether or not then available).

Neff Holdings and each of its subsidiaries is a borrower or a credit party under the Revolving Credit Facility. Neff Corporation is not a party to the Revolving Credit Facility. The Revolving Credit Facility is secured by first-priority liens on substantially all of the assets of the borrower and the guarantors. The credit agreement for the Revolving Credit Facility contains customary restrictive covenants applicable to each credit party, including, among others, restrictions on the ability to incur additional

~~Table of contents~~

indebtedness, create liens, make investments and declare or pay dividends. In addition, the Revolving Credit Facility contains

Table of contents

financial covenants, applicable at any time excess availability is less than the greater of $35.0 million and 10% of the aggregate commitments of all lenders, or $47.5 million as of ~~September~~June 30, ~~2016,~~2017, which require us to maintain (i) a consolidated total leverage ratio of not more than ~~5.00 to 1.00 for each fiscal quarter ended during the period from February 25, 2016 through and including December 31, 2016, stepping down to~~ 4.75 to 1.00 for each fiscal quarter ended during the period from January 1, 2017 through and including December 31, 2017, stepping down to 4.50 to 1.00 for each fiscal quarter ended during the period from January 1, 2018 and thereafter, and (ii) a fixed charge coverage ratio of not less than 1.00 to 1.00, in each case, until such time as excess availability exceeds the threshold described above for a period of at least 30 consecutive days. As of ~~September~~June 30, ~~2016,~~2017, we had availability based on our borrowing base as of such date under the Revolving Credit Facility of ~~$210.7~~$244.8 million and were in compliance with the applicable covenants in the Revolving Credit Facility.

Second Lien Loan

Our subsidiary, Neff Rental LLC, incurred the Second Lien Loan under a senior secured credit facility with Credit Suisse AG, as administrative agent and collateral agent, and the other lenders and agents thereto, on June 9, 2014. The credit agreement for the Second Lien Loan provides for (a) a $575.0 million term loan facility, all of which was drawn on June 9, 2014, and (b) an uncommitted incremental term loan facility not to exceed (together with any incremental equivalent debt) $75.0 million plus additional amounts that may be incurred subject to a pro forma total leverage ratio of 5.25:1.00 and certain other customary conditions. The Second Lien Loan matures on June 9, 2021. The Second Lien Loan bears interest, at our option, at either a LIBOR rate or base rate, in each case plus an applicable margin. LIBOR loans bear interest at the LIBOR rate plus 625 basis points and base rate loans bear interest at the sum of (a) 525 basis points plus (b) the greatest of (i) the prime rate, (ii) the federal funds rate plus 50 basis points and (iii) LIBOR plus 100 basis points. The LIBOR rate margin is subject to a "floor" of 100 basis points. We generally elect the LIBOR rate, and given that LIBOR currently is less than 1.00%, our interest rate as of ~~September~~June 30, ~~2016~~2017 under the Second Lien Loan was ~~7.25%~~7.66% per annum. We must make mandatory prepayments of principal on the Second Lien Loan if our total leverage ratio for any fiscal year, commencing with the fiscal year ending December 31, 2015, exceeds 3.00 to 1.00. These prepayment provisions require us to prepay an amount equal to (i) either 25% of our excess cash flow (if our total leverage ratio is equal to or less than 4.00 to 1.00 but greater than 3.00 to 1.00) or 50% of our excess cash flow (if our total leverage ratio is greater than 4.00 to 1.00) over (ii) the optional prepayment amount for such excess cash flow period. Additionally, we must make mandatory prepayments of principal on the Second Lien Loan if we receive net cash proceeds from asset sales (as defined in the Second Lien Loan) or the issuance or incurrence of indebtedness (except for permitted refinancing debt as defined in the Second Lien Loan). We prepaid $96.0 million of the principal amount of the Second Lien Loan with the net proceeds from the IPO on November 26, 2014 and paid approximately $1.9 million in prepayment premiums in connection with that prepayment. On March 17, 2016, we paid a mandatory prepayment of $3.3 million, equal to 25% of our excess cash flow for the year ended December 31, 2015. On March 13, 2017, we paid a mandatory prepayment of $11.8 million, equal to 25% of our excess cash flow for the year ended December 31, 2016. As of June 30, 2017, the balance outstanding on the Second Lien Loan was $457.6 million, net of unamortized original issue discount of $4.6 million and unamortized discount of $1.6 million.

Neff Holdings and each of its subsidiaries is a borrower or a credit party under the Second Lien Loan. Neff Corporation is not a party to the Second Lien Loan. The Second Lien Loan is secured by second-priority liens on substantially all of the assets of the borrower and the guarantors. The credit agreement for the Second Lien Loan contains customary incurrence-based restrictive covenants applicable to each credit party, including, among other things, restrictions on the ability to incur additional indebtedness, create liens, make investments and declare or pay dividends.

We have entered into an amendment to our Second Lien Loan to, among other things, reflect the changes in our structure as a result of the Organizational Transactions. We prepaid $96.0 million of the principal amount of the Second Lien Loan with the net proceeds from the IPO on November 26, 2014 and paid approximately $1.9 million in prepayment premiums in connection with that prepayment. On March 17, 2016, we paid a mandatory prepayment of $3.3 million, equal to 25% of our excess cash flow for the year ended December 31, 2015. As of September 30, 2016, the balance outstanding on the Second Lien Loan was $473.8 million, net of unamortized original issue discount of $1.8 million.

Certain Information Concerning Off-Balance Sheet Arrangements

As part of our ongoing business, we do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities referred to as structured finance or variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As of ~~September~~June 30, ~~2016,~~2017, we are not involved in any variable interest entities transactions and do not otherwise have any off-balance sheet arrangements.

In the normal course of our business activities, we lease real estate for our headquarters and branch locations and we may from time to time lease rental equipment and non-rental equipment under operating leases. See "—Contractual and Commercial Commitments."

~~Table of contents~~

Contractual and Commercial Commitments

There have been no material changes from the information included in our ~~2015~~2016 10-K for the year ended December 31, ~~2015.~~2016 regarding contractual and commercial commitments.

Table of contents

Inflation

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

Table of contents

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts and disclosures in the financial statements and accompanying notes. Actual results could differ from those estimates. Our Critical Accounting Policies and Estimates are disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates” in our ~~2015~~2016 10-K for the year ended December 31, ~~2015,~~2016, for which there were no material changes.

Recent Accounting Pronouncements

See Note 2 of our unaudited condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q for recently issued accounting pronouncements applicable to us and the effect of those standards on our consolidated financial statements and related disclosures.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

We are subject to interest rate risk in connection with our long-term indebtedness. Our principal interest rate exposure relates to loans outstanding under our Revolving Credit Facility and Second Lien Loan. All outstanding indebtedness under the Revolving Credit Facility and Second Lien Loan (subject to LIBOR floor) bears interest at a variable rate based on LIBOR. Each quarter point change in interest rates on the variable portion of indebtedness under our Revolving Credit Facility and Second Lien Loan would result in a change of ~~$0.7~~$0.6 million and $1.2 million, respectively, to our interest expense on an annual basis based on borrowings outstanding as of ~~September~~June 30, ~~2016.~~2017.

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

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

Item 4. CONTROLS AND PROCEDURES

Limitations on Effectiveness of Controls and Procedures

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

Evaluation of Disclosure Controls and Procedures

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

~~Table of contents~~

under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Our management, with the participation of our chief executive officer and chief financial officer, evaluated, as of the end of the period covered by this quarterly report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of ~~September~~June 30, ~~2016.~~2017.

Table of contents

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the three months ended ~~September~~June 30, ~~2016,~~2017, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Table of contents

PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

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

Item 1A. RISK FACTORS

~~There have been no material changes in~~Item 1A of Part I of our ~~risk factors since filing our 2015~~2016 Form 10-K for the year ended December 31, ~~2015.~~2016 includes a detailed discussion of the risk factors that could materially affect our business, financial condition or future prospects. The information below updates and supplements, and should be read in conjunction with, the risk factors in our 2016 Form 10-K

Risks Related to the Merger

There can be no assurance that the proposed Merger with H&E will be consummated. The announcement and pendency of the Merger, or the failure of the Merger to be consummated, could have an adverse effect on our stock price, business, financial condition, results of operations or prospects.

On July 14, 2017, we entered into the Merger Agreement with H&E and Merger Sub pursuant to which H&E will acquire Neff Corporation. The Merger is subject to a number of conditions to closing, including (i) no temporary restraining order, preliminary or permanent injunction or other law or order shall have been issued (and remain in effect) by a court or other governmental entity having the effect of making the Merger illegal, enjoining or otherwise prohibiting the consummation of the Merger or the other transactions contemplated by the Merger Agreement, and (ii) the expiration or termination of the waiting period (and any extension thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. If any of these closing conditions or the other closing conditions are not met or waived, we will not be able to complete the Merger. As a result, there can be no assurance that the Merger will be completed in a timely manner or at all.

Further, the announcement and pendency of the Merger could disrupt our businesses, in any of the following ways, among others:

our employees may experience uncertainty about their future roles with the combined company, which might adversely affect our ability to retain and hire key managers and other employees;

the attention of our management may be directed toward the completion of the Merger and transaction-related considerations and may be diverted from our day-to-day business operations; and

customers, suppliers or others may seek to modify or terminate their business relationships with us.

We may face additional challenges in competing for new business and retaining or renewing business. These disruptions could be exacerbated by a delay in the completion of the Merger or termination of the Merger Agreement.

For the foregoing reasons, there can be no assurance that the announcement and pendency of the Merger, or the failure of the Merger to be consummated, will not have an adverse effect on our stock price, business, financial condition, results of operations or prospects.

While the Merger Agreement is in effect, we are subject to restrictions on our business activities.

While the Merger Agreement is in effect, we are subject to restrictions on our business activities and must generally operate our business in the ordinary course consistent with past practice (subject to certain exceptions). These restrictions could prevent us from pursuing attractive business opportunities that arise prior to the completion of the Merger and are generally outside the ordinary course of business, and otherwise have a material adverse effect on our future results of operations or financial condition.

Table of contents

The Merger Agreement limits our ability to pursue an alternative acquisition proposal and requires us to pay a termination fee, if it does.

The Merger Agreement provides us with a go-shop period that will expire on 11:59 p.m. on August 20, 2017 during which we have the right to solicit, encourage or facilitate any inquiry or the making of any alternative acquisition proposal. In the event that the Company terminates the Merger Agreement in accordance with the go-shop provision to enter into a definitive agreement for a superior proposal, we will be required to pay H&E a cash termination fee in the amount of $13,165,000. In the event that we terminate the Merger Agreement under certain other specified circumstances, we will be required to pay H&E a cash termination fee in the amount of $18,430,000.

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

~~The following table provides information about acquisitions of Neff Corporation's Class A common stock by Neff Corporation during the third quarter of 2016:~~None.

Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Maximum Dollar Amount of Shares That May Yet Be Purchased Under the Program (1)
July 1, 2016 to July 31, 2016 —
$ —
—
$ 14,708,410
August 1, 2016 to August 31, 2016 88,816
8.84
88,816
13,922,865
September 1, 2016 to September 30, 2016 24,933
9.00
24,933
13,698,523
Total 113,749
$ 8.88
113,749
$ 13,698,523


~~(1)~~	On November 11, 2015, we announced that our Board approved on November 10, 2015, a share repurchase program authorizing up to $25 million dollars in share repurchases of Neff Corporation's Class A common stock in open market and negotiated purchases from time to time, dependent on market conditions.

Item 3. DEFAULTS UPON SENIOR SECURITIES

None.

Item 4. MINE SAFETY DISCLOSURES

None.

Item 5. OTHER INFORMATION

None.

Table of contents

Item 6. EXHIBITS EXHIBIT INDEX




Exhibit Number	Exhibit Description	Filed/ Furnished Herewith
31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer	*
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer	*
32.1	Section 1350 Certification of Chief Executive Officer	**
32.2	Section 1350 Certification of Chief Financial Officer	**
101.INS	XBRL Instance Document	*
101.SCH	XBRL Taxonomy Extension Schema Document	*
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document	*
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	*
101.LAB	XBRL Taxonomy Extension Label Linkbase Document	*
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document	*


*	Filed herewith.


**	Furnished herewith.

Table of contents

SIGNATURES

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



		NEFF CORPORATION
Date:	~~October 26, 2016~~August 3, 2017	By:	/s/ Graham Hood
			Graham Hood Chief Executive Officer and Director (Principal Executive Officer)
Date:	~~October 26, 2016~~August 3, 2017	By:	/s/ Mark Irion
			Mark Irion Chief Financial Officer

4046



Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Maximum Dollar Amount of Shares That May Yet Be Purchased Under the Program (1)
July 1, 2016 to July 31, 2016	—	$	—	—	$	14,708,410
August 1, 2016 to August 31, 2016	88,816	8.84		88,816	13,922,865
September 1, 2016 to September 30, 2016	24,933	9.00		24,933	13,698,523
Total	113,749	$	8.88	113,749	$	13,698,523