HERC HOLDINGS INC (HRI)
SIC breadcrumb: Services > Business Services > SIC 7350 Services-Miscellaneous Equipment Rental & Leasing
SEC company page: https://www.sec.gov/edgar/browse/?CIK=1364479. Latest filing source: 0001364479-26-000050.
Selected Fundamentals
| Metric | Value | Unit | FY | Filed |
|---|---|---|---|---|
| Revenue | 4,376,000,000 | USD | 2025 | 2026-02-17 |
| Net income | 1,000,000 | USD | 2025 | 2026-02-17 |
| Assets | 13,776,000,000 | USD | 2025 | 2026-02-17 |
Financials
Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-02-17. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001364479.json. Derived margins, ratios, and free cash flow are computed from the extracted annual SEC facts.
| Metric | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenue | 8,299,300,000 | 9,013,000,000 | 10,775,000,000 | 11,046,000,000 | 10,535,000,000 | 2,073,000,000 | 2,740,000,000 | 3,282,000,000 | 3,568,000,000 | 4,376,000,000 | |||||
| Net income | -19,700,000 | 160,300,000 | 69,100,000 | 47,500,000 | 73,700,000 | 224,000,000 | 330,000,000 | 347,000,000 | 211,000,000 | 1,000,000 | |||||
| Diluted EPS | -0.70 | 5.60 | 2.39 | 1.63 | 2.51 | 7.37 | 10.92 | 12.09 | 7.40 | 0.03 | |||||
| Operating cash flow | 433,400,000 | 349,100,000 | 559,100,000 | 635,600,000 | 610,900,000 | 743,000,000 | 917,000,000 | 1,086,000,000 | 1,225,000,000 | 1,085,000,000 | |||||
| Capital expenditures | 47,800,000 | 74,600,000 | 77,600,000 | 56,900,000 | 41,400,000 | 47,000,000 | 104,000,000 | 156,000,000 | 161,000,000 | 157,000,000 | |||||
| Dividends paid | 0.00 | 0.00 | 15,000,000 | 68,000,000 | 73,000,000 | 77,000,000 | 87,000,000 | ||||||||
| Share buybacks | 0.00 | 604,500,000 | 0.00 | 0.00 | 0.00 | 0.00 | 115,000,000 | 120,000,000 | 0.00 | 0.00 | |||||
| Assets | 3,466,000,000 | 3,549,700,000 | 3,610,200,000 | 3,817,000,000 | 3,588,400,000 | 4,490,400,000 | 5,957,000,000 | 7,061,000,000 | 7,877,000,000 | 13,776,000,000 | |||||
| Liabilities | 3,148,300,000 | 3,039,300,000 | 3,037,500,000 | 3,172,700,000 | 2,846,400,000 | 3,513,500,000 | 4,849,000,000 | 5,788,000,000 | 6,481,000,000 | 11,828,000,000 | |||||
| Stockholders' equity | 317,700,000 | 510,400,000 | 572,700,000 | 644,300,000 | 742,000,000 | 977,000,000 | 1,108,000,000 | 1,273,000,000 | 1,396,000,000 | 1,948,000,000 | |||||
| Cash and cash equivalents | 24,000,000 | 41,500,000 | 27,800,000 | 33,000,000 | 33,000,000 | 35,100,000 | 54,000,000 | 71,000,000 | 83,000,000 | 52,000,000 | |||||
| Free cash flow | 385,600,000 | 274,500,000 | 481,500,000 | 578,700,000 | 569,500,000 | 696,000,000 | 813,000,000 | 930,000,000 | 1,064,000,000 | 928,000,000 |
Ratios
| Metric | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Net margin | 10.81% | 12.04% | 10.57% | 5.91% | 0.02% | ||||||||||
| Return on equity | -6.20% | 31.41% | 12.07% | 7.37% | 9.93% | 22.93% | 29.78% | 27.26% | 15.11% | 0.05% | |||||
| Return on assets | -0.57% | 4.52% | 1.91% | 1.24% | 2.05% | 4.99% | 5.54% | 4.91% | 2.68% | 0.01% | |||||
| Liabilities / equity | 9.91 | 5.95 | 5.30 | 4.92 | 3.84 | 3.60 | 4.38 | 4.55 | 4.64 | 6.07 | |||||
| Current ratio | 1.53 | 1.63 | 1.34 | 1.24 | 1.12 | 0.89 | 1.07 | 1.44 | 1.38 | 1.31 |
Financial Charts
Quarterly
Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-04-28. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001364479.json.
| Quarter | End Date | Revenue | Net Income | Diluted EPS | Method |
|---|---|---|---|---|---|
| 2015-Q3 | 2015-09-30 | 2,976,000,000 | reported discrete quarter | ||
| 2015-Q4 | 2015-12-31 | 2,413,000,000 | derived Q4 = FY annual - nine-month YTD | ||
| 2016-Q1 | 2016-03-31 | 2,311,000,000 | reported discrete quarter | ||
| 2022-Q2 | 2022-06-30 | 2.38 | reported discrete quarter | ||
| 2022-Q3 | 2022-09-30 | 3.36 | reported discrete quarter | ||
| 2023-Q1 | 2023-03-31 | 2.28 | reported discrete quarter | ||
| 2023-Q2 | 2023-03-31 | 67,000,000 | reported discrete quarter | ||
| 2023-Q2 | 2023-06-30 | 2.66 | reported discrete quarter | ||
| 2023-Q3 | 2023-06-30 | 76,000,000 | reported discrete quarter | ||
| 2023-Q3 | 2023-09-30 | 3.96 | reported discrete quarter | ||
| 2023-Q4 | 2023-12-31 | 91,000,000 | derived Q4 = FY annual - nine-month YTD | ||
| 2024-Q1 | 2024-03-31 | 804,000,000 | 65,000,000 | 2.29 | reported discrete quarter |
| 2024-Q2 | 2024-03-31 | 65,000,000 | reported discrete quarter | ||
| 2024-Q2 | 2024-06-30 | 848,000,000 | 2.46 | reported discrete quarter | |
| 2024-Q3 | 2024-06-30 | 70,000,000 | reported discrete quarter | ||
| 2024-Q3 | 2024-09-30 | 965,000,000 | 4.28 | reported discrete quarter | |
| 2024-Q4 | 2024-12-31 | 951,000,000 | -46,000,000 | derived Q4 = FY annual - nine-month YTD | |
| 2025-Q1 | 2025-03-31 | 861,000,000 | -18,000,000 | -0.63 | reported discrete quarter |
| 2025-Q2 | 2025-03-31 | -18,000,000 | reported discrete quarter | ||
| 2025-Q2 | 2025-06-30 | 1,002,000,000 | -1.17 | reported discrete quarter | |
| 2025-Q3 | 2025-06-30 | -35,000,000 | reported discrete quarter | ||
| 2025-Q3 | 2025-09-30 | 1,304,000,000 | 0.90 | reported discrete quarter | |
| 2025-Q4 | 2025-12-31 | 1,209,000,000 | 24,000,000 | derived Q4 = FY annual - nine-month YTD | |
| 2026-Q1 | 2026-03-31 | 1,139,000,000 | -24,000,000 | -0.72 | reported discrete quarter |
Quarterly Charts
Macro Cross-References
- CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
- UNRATE - Unemployment Rate
- FEDFUNDS - Federal Funds Effective Rate
- CES0500000003 - Average Hourly Earnings of All Employees, Total Private
- DFEDTARU - Federal Funds Target Range - Upper Limit
- DFEDTARL - Federal Funds Target Range - Lower Limit
- DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
- DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
- DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
- DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
- T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
- CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
- CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
- CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
- CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
- PCEPI - Personal Consumption Expenditures: Chain-type Price Index
- PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
- PPIACO - Producer Price Index by Commodity: All Commodities
- T10YIE - 10-Year Breakeven Inflation Rate
- U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
- PAYEMS - All Employees, Total Nonfarm
- CIVPART - Labor Force Participation Rate
- EMRATIO - Employment-Population Ratio
- UNEMPLOY - Unemployed
- CE16OV - Employment Level
- ICSA - Initial Claims
- JTSJOL - Job Openings: Total Nonfarm
- JTSQUR - Quits: Total Nonfarm
- GDPC1 - Real Gross Domestic Product
- A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
- INDPRO - Industrial Production: Total Index
- TCU - Capacity Utilization: Total Index
- HOUST - New Privately-Owned Housing Units Started: Total Units
- PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
- RSAFS - Advance Retail Sales: Retail Trade
- PCE - Personal Consumption Expenditures
- DSPIC96 - Real Disposable Personal Income
- PSAVERT - Personal Saving Rate
- M2SL - M2
- BOPGSTB - U.S. International Trade in Goods and Services: Balance
- MSPUS - Median Sales Price of Houses Sold for the United States
- HSN1F - New One Family Houses Sold: United States
- RHORUSQ156N - Homeownership Rate in the United States
- TTLCONS - Total Construction Spending: Total Construction in the United States
- RRVRUSQ156N - Rental Vacancy Rate in the United States
- TOTALSL - Total Consumer Credit Owned and Securitized
- REVOLSL - Revolving Consumer Credit Owned and Securitized
- DRCCLACBS - Delinquency Rate on Credit Card Loans, All Commercial Banks
- GDP - Gross Domestic Product
- GPDI - Gross Private Domestic Investment
- GCE - Government Consumption Expenditures and Gross Investment
- PCEC - Personal Consumption Expenditures
- NETEXP - Net Exports of Goods and Services
- GFDEBTN - Federal Debt: Total Public Debt
- GFDEGDQ188S - Federal Debt: Total Public Debt as Percent of Gross Domestic Product
- FYFSD - Federal Surplus or Deficit
- FGRECPT - Federal Government Current Receipts
- FGEXPND - Federal Government: Current Expenditures
- MANEMP - All Employees, Manufacturing
- USCONS - All Employees, Construction
- USTRADE - All Employees, Retail Trade
- USFIRE - All Employees, Financial Activities
- USGOVT - All Employees, Government
- AWHAETP - Average Weekly Hours of All Employees, Total Private
- DGORDER - Manufacturers' New Orders: Durable Goods
- NEWORDER - Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
- BUSINV - Total Business Inventories
- EXPGS - Exports of Goods and Services
- IMPGS - Imports of Goods and Services
- IR - Import Price Index (End Use): All Commodities
- PPIFIS - Producer Price Index by Commodity: Final Demand
Latest quarter (10-Q)
Latest 10-Q source: 0001364479-26-000085.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management’s discussion and analysis of financial condition and results of operations ("MD&A") should be read in conjunction with the unaudited condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of this Report, which include additional information about our accounting policies, practices and the transactions underlying our financial results. The preparation of our unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") requires us to make estimates and assumptions that affect the reported amounts in our unaudited condensed consolidated financial statements and the accompanying notes including receivables allowances, depreciation of rental equipment, the recoverability of long-lived assets, useful lives and impairment of long-lived tangible and intangible assets including goodwill and trade name, pension and postretirement benefits, valuation of stock-based compensation, reserves for litigation and other contingencies, accounting for income taxes and other matters arising during the normal course of business. We apply our best judgment, our knowledge of existing facts and circumstances and our knowledge of actions that we may undertake in the future in determining the estimates that will affect our condensed consolidated financial statements. We evaluate our estimates on an ongoing basis using our historical experience, as well as other factors we believe appropriate under the circumstances, such as current economic conditions, and adjust or revise our estimates as circumstances change. As future events and their effects cannot be determined with precision, actual results may differ from these estimates.
OVERVIEW OF OUR BUSINESS AND OPERATING ENVIRONMENT
We are engaged principally in the business of renting equipment. Ancillary to our principal business of equipment rental, we also sell used rental equipment, sell new equipment and consumables and offer certain services and support to our customers. Our profitability is dependent upon a number of factors including the volume, mix and pricing of rental transactions and the utilization of equipment. Significant changes in the purchase price or residual values of equipment or interest rates can have a significant effect on our profitability depending on our ability to adjust pricing for these changes. Our business requires significant expenditures for equipment, and consequently we require substantial liquidity to finance such expenditures. See "Liquidity and Capital Resources" below.
Our revenues primarily are derived from rental and related charges and consist of:
•Equipment rental (includes all revenue associated with the rental of equipment including ancillary revenue from delivery, rental protection programs and fueling charges);
•Sales of rental equipment and sales of new equipment, parts and supplies; and
•Service and other revenue (primarily relating to training and labor provided to customers).
Our operating expenses primarily consist of:
•Direct operating expenses (primarily wages and related benefits, facility costs and other costs relating to the operation and rental of rental equipment, such as delivery, maintenance and fuel costs);
•Cost of sales of rental equipment, new equipment, parts and supplies;
•Depreciation expense relating to rental equipment;
•Selling, general and administrative expenses;
•Transaction expenses;
•Non-rental depreciation and amortization; and
•Interest expense.
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HERC HOLDINGS INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Recent Developments and Economic Conditions
Local markets continue to be impacted by the elevated interest rate environment and continued economic uncertainty. Our diversification across industries and project types has contributed to the resiliency of our business and we believe the operating environment continues to favor equipment rental companies of scale.
We actively monitor the impact of the dynamic macroeconomic environment and manage our business to adjust to such conditions, including the impact of inflation, potential tariffs, interest rate fluctuations or supply chain disruptions, including:
•Monitoring our exposure to inflationary pressures and passing on cost increases to customers where appropriate, although, some costs have less direct pass-through to customers, such as repairs and maintenance, and labor;
•Reevaluating our capital allocation strategy as necessary to address exposure to floating rate debt;
•Planning our equipment purchases and having various suppliers from which to source equipment.
Currently, we do not expect any direct impact of current macroeconomic conditions on our procurement costs in 2026, however, we cannot predict the extent to which our financial condition, results of operations or cash flows will ultimately be impacted by these ongoing economic conditions. We believe we are well-positioned to operate effectively through the present environment.
Seasonality
Our business is seasonal, with demand for our rental equipment tending to be lower in the winter months, particularly in the northern United States and Canada. Our equipment rental business, especially in the construction industry, has historically experienced decreased levels of business from December until late spring and heightened activity during our third and fourth quarters until December. We have the ability to manage certain costs to meet market demand, such as fleet capacity, the most significant portion of our cost structure. For instance, to accommodate increased demand, we increase our available fleet and staff during the second and third quarters of the year. A number of our other major operating costs vary directly with revenues or transaction volumes; however, certain operating expenses, including rent, insurance and administrative overhead, remain fixed and cannot be adjusted for seasonal demand, typically resulting in higher profitability in periods when our revenues are higher, and lower profitability in periods when our revenues are lower. To reduce the impact of seasonality, we are focused on expanding our customer base through products that serve different industries with less seasonality and different business cycles.
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HERC HOLDINGS INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS
Three Months Ended March 31,
2026
2025
Change
Change
Equipment rental
$
981
$
739
$
242
33
%
Sales of rental equipment
138
105
33
31
Sales of new equipment, parts and supplies
13
11
2
18
Service and other revenue
7
6
1
17
Total revenues
1,139
861
278
32
Direct operating
453
327
126
39
Depreciation of rental equipment
242
172
70
41
Cost of sales of rental equipment
109
76
33
43
Cost of sales of new equipment, parts and supplies
9
8
1
13
Selling, general and administrative
146
118
28
24
Transaction expenses
5
74
(69)
(93)
Non-rental depreciation and amortization
73
33
40
121
Interest expense, net
128
62
66
106
Other income, net
(3)
(1)
(2)
(200)
Loss before income taxes
(23)
(8)
(15)
(188)
Income tax provision
(1)
(10)
9
90
Net loss
$
(24)
$
(18)
$
(6)
(33)
%
Three Months Ended March 31, 2026 Compared with Three Months Ended March 31, 2025
Equipment rental revenue increased $242 million, or 33%, during the first quarter of 2026 reflecting an increase in average OEC on rent, which includes the impact of the June 2025 acquisition of H&E. On a pro forma basis including the standalone, pre-acquisition results of H&E, equipment rental revenue decreased 3% year-over-year partially resulting from ongoing moderation in certain local markets where H&E's customer base was heavily concentrated.
Sales of rental equipment increased $33 million, or 31%, during the first quarter of 2026 when compared to the first quarter of 2025 as we increased the volume of sales as we continue to improve the equipment mix and utilization. The margin on sales of rental equipment was 21% in 2026 compared to 28% in 2025. The decrease in margin on sale of rental equipment in 2026 was due to the fair value markup of the acquisition fleet sold.
Direct operating expenses in the first quarter of 2026 increased $126 million, or 39%, when compared to the first quarter of 2025. Direct operating expenses were 46.2% of equipment rental revenue in 2026, compared to 44.2% in the prior-year period. The increase as a percent of rental revenue is primarily related to the impact of the H&E acquisition and related greenfields that take more time to mature. Specifically, maintenance expense increased $23 million as average fleet size has increased, facilities expense increased $21 million as we have added more locations through acquisitions and opening greenfield locations, delivery and fuel expenses increased $13 million and $9 million, respectively, due to increased volume of rentals.
Depreciation of rental equipment increased $70 million, or 41%, during the first quarter of 2026 when compared to the first quarter of 2025 due to an increase in average fleet size primarily as a result of the H&E acquisition. Non-rental depreciation and amortization increased $40 million, or 121%, primarily due to amortization of intangible assets related to the H&E acquisition and non-rental asset depreciation resulting from the growth of the business.
Selling, general and administrative expenses increased $28 million, or 24%, in the first quarter of 2026 when compared to the first quarter of 2025. Selling, general and administrative expenses were 14.9% and 16.0% of equipment rental revenue in 2026 compared to 2025, respectively, as a result of continued focus on improving operating leverage, including achievement of acquisition cost synergies, while expanding revenues.
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HERC HOLDINGS INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Interest expense, net increased $66 million, or 106%, during the first quarter of 2026 when compared with the first quarter of 2025 due to the new debt issued to fund the H&E acquisition in June 2025.
Income tax provision was $1 million during the first quarter of 2026 compared to $10 million in the same period of 2025. The effective tax rate in the current period was primarily driven by certain non-deductible costs, tax credits and foreign tax assessments.
LIQUIDITY AND CAPITAL RESOURCES
Our primary uses of liquidity include the payment of operating expenses, purchases of rental equipment to be used in our operations, servicing of debt, funding acquisitions, payment of dividends, and share repurchases. Our primary sources of funding are operating cash flows, cash received from the disposal of equipment and borrowings under our debt arrangements. As of March 31, 2026, we had approximately $8.0 billion of total nominal indebtedness outstanding.
Our liquidity as of March 31, 2026 consisted of cash and cash equivalents of $43 million and unused commitments of approximately $1.9 billion under our ABL Credit Facility. See "Borrowing Capacity and Availability" below for further discussion. Our practice is to maintain sufficient liquidity through cash from operations in combination with our ABL Credit Facility and AR Facility (together, the "Facilities") to mitigate the impacts of any adverse financial market conditions on our operations. We believe that cash generated from operations and cash received from the disposal of equipment, together with amounts available
[Excerpt truncated for page length; source filing is linked above.]
Latest 10-K MD&A
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management’s discussion and analysis of financial condition and results of operations ("MD&A") should be read in conjunction with the consolidated financial statements and accompanying notes included in Item 8 of this Report, which include additional information about our accounting policies, practices and the transactions underlying our financial results. The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") requires us to make estimates and assumptions that affect the reported amounts in our consolidated financial statements and the accompanying notes including receivables allowances, depreciation of rental equipment, the recoverability of long-lived assets, useful lives and impairment of long-lived tangible and intangible assets including goodwill and trade name, pension and postretirement benefits, valuation of stock-based compensation, reserves for litigation and other contingencies, accounting for income taxes and other matters arising during the normal course of business. We apply our best judgment, our knowledge of existing facts and circumstances and our knowledge of actions that we may undertake in the future in determining the estimates that will affect our consolidated financial statements. We evaluate our estimates on an ongoing basis using our historical experience, as well as other factors we believe appropriate under the circumstances, such as current economic conditions, and adjust or revise our estimates as circumstances change. As future events and their effects cannot be determined with precision, actual results may differ from these estimates.
OVERVIEW OF OUR BUSINESS AND OPERATING ENVIRONMENT
We are engaged principally in the business of renting equipment. Ancillary to our principal business of equipment rental, we also sell used rental equipment, sell new equipment and consumables and offer certain services and support to our customers. Our profitability is dependent upon a number of factors including the volume, mix and pricing of rental transactions and the utilization of equipment. Significant changes in the purchase price or residual values of equipment or interest rates can have a significant effect on our profitability depending on our ability to adjust pricing for these changes. Our business requires significant expenditures for equipment, and consequently we require substantial liquidity to finance such expenditures. See "Liquidity and Capital Resources" below.
Our revenues are primarily derived from rental and related charges and consist of:
•Equipment rental (includes all revenue associated with the rental of equipment including ancillary revenue from delivery, rental protection programs and fueling charges);
•Sales of rental equipment and sales of new equipment, parts and supplies; and
•Service and other revenue (primarily relating to training and labor provided to customers).
Our expenses primarily consist of:
•Direct operating expenses (primarily wages and related benefits, facility costs and other costs relating to the operation and rental of rental equipment, such as delivery, maintenance and fuel costs);
•Cost of sales of rental equipment, new equipment, parts and supplies;
•Depreciation expense relating to rental equipment;
•Selling, general and administrative expenses;
•Transaction expenses;
•Non-rental depreciation and amortization; and
•Interest expense.
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HERC HOLDINGS INC. AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Recent Developments and Economic Conditions
Local markets continue to be impacted by the elevated interest rate environment and continued economic uncertainty. Our diversification across industries and project types have contributed to the resiliency of our business and we believe the operating environment continues to favor equipment rental companies of scale. We actively monitor the impact of the dynamic macroeconomic environment and manage our business to adjust to such conditions. We accelerated our growth strategy in 2025 with the acquisition of H&E, adding approximately 160 branches, while also opening 26 new greenfield locations, achieving greater density and scale in select urban markets to better serve both our local and national customers.
We invested in our rental equipment as part of our long-term capital expenditure plans, adding rental equipment strategically throughout our network in response to customer demand and to position ourselves for growth into 2026. We have returned to a more normalized cadence of rental equipment expenditures and disposals, remaining mindful of the possibility we may experience supply chain disruptions in the future. Although inflation appears to have stabilized, we have experienced and expect to continue to experience inflationary pressures, potentially as a result of tariffs imposed, a portion of which may be passed on to customers. Currently, we do not expect material direct impact of tariffs on our procurement costs in 2026. There are also costs for which the pass through to customers is less direct, such as repairs and maintenance, and labor. We cannot predict the extent to which our financial condition, results of operations or cash flows will ultimately be impacted by these ongoing economic conditions, however, we believe we are well-positioned to operate effectively through the present environment.
Capital Structure
We took a number of actions related to our capital structure on June 2, 2025 to finance the acquisition of H&E including:
•Issued $1.65 billion aggregate principal amount of 7.00% Senior Notes due 2030 and $1.1 billion aggregate principal amount of 7.25% Senior Notes due 2033
•Entered into a credit agreement with respect to a new senior secured asset-based revolving credit facility that provides for aggregate maximum borrowings of up to $4.0 billion (subject to availability under a borrowing base) and replaced the prior senior secured asset-based revolving credit facility entered into in 2019
•Entered into a credit agreement with respect to a senior secured term loan facility of $750 million
Supporting our financial flexibility, liquidity and continued investment in our business, we also took the following actions during 2025:
•Amended and extended our account receivable securitization facility on August 29, 2025, extending maturity to August 31, 2026. On December 1, 2025 aggregate commitments were increased from $400 million to $475 million
•Redeemed $1.2 billion outstanding principal of the 2027 Notes on December 16, 2025 at a redemption price of 100.00% using the combined net proceeds from offering of $600 million aggregate principal amount of 5.75% Senior Notes due 2031 and $600 million aggregate principal amount of 6.00% Senior Notes due 2034
Finally, as part of our capital allocation strategy, we have continued to pay quarterly dividends at $0.70 per share throughout 2025.
Acquisition of H&E Equipment Services, Inc.
On June 2, 2025, we completed the acquisition of H&E by acquiring all of the outstanding common stock of H&E in exchange for $78.75 in cash and 0.1287 shares of our common stock on a per-H&E share basis. The total purchase price was $4.8 billion including cash payment of $2.9 billion and the issuance of approximately 4.7 million shares of our common stock to H&E's shareholders, valued at $584 million.
H&E was a full-service equipment rental company that provided its customers with a mix of high-quality general rental fleet including aerial, earthmoving, material handling, and other lines of equipment. H&E served a diverse mix of customers across both construction and industrial markets through its network of approximately 160 branches in over 30 U.S. states.
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HERC HOLDINGS INC. AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Divestiture of Cinelease
On July 31, 2025, we completed the divestiture of the Cinelease studio entertainment business for initial cash consideration of $100 million, subject to customary post-closing adjustments, and agreed upon earnouts pursuant to the purchase and sale agreement. We recognized a pre-tax gain on the divestiture of $1 million and used the net proceeds from the sale of Cinelease to repay indebtedness.
RESULTS OF OPERATIONS
Years Ended December 31,
($ in millions)
2025
2024
$ Change
% Change
Equipment rental
$
3,770
$
3,189
$
581
18
%
Sales of rental equipment
509
311
198
64
%
Sales of new equipment, parts and supplies
63
37
26
70
%
Service and other revenue
34
31
3
10
%
Total revenues
4,376
3,568
808
23
%
Direct operating
1,602
1,291
311
24
%
Depreciation of rental equipment
856
679
177
26
%
Cost of sales of rental equipment
418
224
194
87
%
Cost of sales of new equipment, parts and supplies
42
24
18
75
%
Selling, general and administrative
564
469
95
20
%
Transaction expenses
199
11
188
NM
Non-rental depreciation and amortization
224
127
97
76
%
Interest expense, net
416
260
156
60
%
Loss on assets held for sale
48
194
(146)
(75)
%
Other expense (income), net
6
(2)
8
NM
Income before income taxes
1
291
(290)
(100)
%
Income tax provision
—
(80)
80
100
%
Net income
$
1
$
211
$
(210)
(100)
%
NM - Not meaningful
Year Ended December 31, 2025 Compared with Year Ended December 31, 2024
Equipment rental revenue increased $581 million, or 18%, during 2025 primarily due to an increase in average OEC on rent, which includes the impact of the June 2025 acquisition of H&E. On a pro forma basis including the standalone, pre-acquisition results of H&E and Otay, equipment rental revenue decreased 6% year-over-year partially resulting from ongoing moderation in certain local markets where H&E's customer base was heavily concentrated. In addition, acquisition disruption at H&E, particularly within the salesforce, prior to the close of the acquisition contributed to the year-over-year decline, however, through initiatives post-close, this stabilized during the third quarter. The divestiture of Cinelease on July 31, 2025 also contributed to the year-over-year decline.
Sales of rental equipment increased $198 million, or 64%, during 2025 when compared with 2024 as we increased the volume of sales to improve the equipment mix and utilization focusing on acquisition fleet. The margin on sales of rental equipment was 18% in 2025 compared to 28% in 2024. The decrease in margin sale of rental equipment in 2025 resulted from the fair value markup of the acquisition fleet sold, a larger volume of sales through the lower margin auction channel and continued normalization of used equipment pricing in the market.
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Direct operating expenses increased $311 million, or 24%. Direct operating expenses were 42.5% of equipment rental revenue in 2025, compared to 40.5% in the prior-year period. The increase as a percent of rental revenue related to lower fixed cost absorption due to the impact of the ongoing moderation in certain local markets and the H&E acquisition, primarily with respect to field wages and benefits, facilities expense, maintenance, delivery and fuel. Total company field wages and benefits increased $120 million and facilities expense increased $60 million as we have added team members and locations through the acquisition of H&E and opened 26 greenfield locations. Maintenance expense increased $62 million as total fleet size has increased, delivery expense increased $21 million and fuel increased $20 million on increased volume of rentals.
Depreciation of rental equipment increased $177 million, or 26%, during 2025 due to the increase in average fleet size primarily the result of the H&E acquisition. Non-rental depreciation and amortization increased $97 million, or 76%, primarily due to amortization of intangible assets related to the H&E and Otay acquisitions and an increase in non-rental asset depreciation resulting from the growth of the business.
Selling, general and administrative expenses increased $95 million, or 20%. Selling, general and administrative expenses were 15.0% of equipment rental revenue in 2025 compared to 14.7% in the prior-year period. The increase as a percent of equipment rental revenue was primarily related to an increase of $28 million in sales compensation and related commissions and incentives to drive revenue growth, an increase in stock compensation expense and other general administrative costs of $31 million, partially offset by initial cost synergies related to reduction of H&E corporate overhead as well as overall cost control measures introduced to mitigate the impact of ongoing moderation in certain local markets.
Transaction expenses were $199 million in 2025 compared to $11 million in 2024 due to costs incurred related to the acquisition of H&E, primarily the one-time termination fee paid on behalf of H&E of $64 million, advisory fees of $27 million, commitment fees related to the Bridge Facility of $21 million, and various other financial consulting, professional and legal fees.
Interest expense, net increased $156 million, or 60%, during 2025 when compared with 2024 primarily due to the new debt facilities issued to fund the H&E acquisition at a weighted average effective interest rate of 6.7%.
Loss on assets held for sale was $48 million during 2025 to adjust the carrying value of Cinelease net assets to its fair value less estimated costs to sell prior to its divestiture on July 31, 2025.
Due to the level of pretax income, the income tax provision and effective tax rate were zero during 2025. The income tax provision was $80 million with an effective tax rate of 27% in 2024. The effective tax rate in 2024 was driven by non-deductible goodwill impairment of $14 million, a benefit of $3 million related to stock-based compensation and certain other non-deductible expenses.
LIQUIDITY AND CAPITAL RESOURCES
Our primary uses of liquidity include the payment of operating expenses, purchases of rental equipment to be used in our operations, servicing of debt, funding acquisitions, payment of dividends, and share repurchases. Our primary sources of funding are operating cash flows, cash received from the disposal of equipment and borrowings under our debt arrangements. As of December 31, 2025, we had approximately $8.1 billion of total nominal indebtedness outstanding.
Our liquidity as of December 31, 2025 consisted of cash and cash equivalents of $52 million and unused commitments of approximately $1.9 billion under our New ABL Credit Facility. See "Borrowing Capacity and Availability" below for further discussion. Our practice is to maintain sufficient liquidity through cash from operations, our New ABL Credit Facility and AR Facility (together, the "Facilities") to mitigate the impacts of any adverse financial market conditions on our operations. We believe that cash generated from operations and cash received from the disposal of equipment, together with amounts available under the Facilities or other financing arrangements will be sufficient to meet working capital requirements, anticipated capital expenditures, payment of dividends, and debt payments, if any, over the next twelve months.
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In conjunction with the acquisition of H&E, we issued new debt consisting of $2.8 billion in senior unsecured notes with maturities in 2030 and 2033, a $750 million term loan facility and $2.5 billion of borrowings on a new asset based revolving credit facility, of which approximately $1.6 billion was used to repay borrowings on the prior asset-based revolving credit facility. The combined weighted average interest rate on the new debt instruments upon issuance at June 2, 2025 was 6.8%. The term loan facility was amended in December 2025 to reduce the interest rate margin applicable thereunder while the principal amount remained unchanged. The term loan facility requires quarterly payments in an aggregate amount equal to 1.00% per annum beginning March 15, 2026, with the balance due at the maturity of the facility June 2, 2032. Also in December, we redeemed our senior unsecured notes due 2027 and issued $600 million each of senior unsecured notes due 2031 and 2034. The senior unsecured notes currently outstanding and our new asset-based revolving credit facility do not have any principal payment requirements prior to their maturity dates. See Note 11, "Debt" included in Part II, Item 8 "Financial Statements and Supplementary Data" of this Report for more information.
Cash Flows
Significant factors driving our liquidity position include cash flows generated from operating activities and capital expenditures. Historically, we have generated and expect to continue to generate positive cash flow from operations. Our ability to fund our capital needs will be affected by our ongoing ability to generate cash from operations and access to capital markets.
The following table summarizes the change in cash and cash equivalents for the periods shown (in millions):
Years Ended December 31,
2025
2024
$ Change
Cash provided by (used in):
Operating activities
$
1,085
$
1,225
$
(140)
Investing activities
(4,944)
(1,511)
(3,433)
Financing activities
3,827
299
3,528
Effect of exchange rate changes
1
(1)
2
Net change in cash and cash equivalents
$
(31)
$
12
$
(43)
Year Ended December 31, 2025 Compared with Year Ended December 31, 2024
Operating Activities
During the year ended December 31, 2025, we generated $140 million less cash from operating activities compared with the same period in 2024. The decrease was primarily related to decreased profitability, cash paid for transaction expenses incurred and additional interest expense payments related to the additional borrowings for the acquisition of H&E.
Investing Activities
Cash used in investing activities increased $3.4 billion during 2025 when compared with the prior-year period. Our primary use of cash in investing activities in 2025 was for acquisitions, the acquisition of rental equipment, and non-rental capital expenditures. Acquisition expenditures of $4.3 billion were related to the cash portion of the H&E acquisition. Generally, we rotate our equipment and manage our fleet of rental equipment in line with customer demand and continue to invest in our information technology, service vehicles and facilities. Changes in our net capital expenditures are described in more detail in the "Capital Expenditures" section below.
Financing Activities
Cash provided by financing activities increased $3.5 billion during 2025 when compared with the prior-year. Financing activities primarily represent our changes in debt. During 2025, we issued $3.95 billion in senior unsecured notes, a $750 million term loan facility and borrowed $4.59 billion on our revolving lines of credit and securitization which were used primarily to fund the acquisition of H&E and invest in rental equipment. Repayments totaled $4.1 billion including extinguishment of the prior revolving line of credit and redemption of $1.2 billion of our senior unsecured notes due 2027. We
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also used the proceeds from the Cinelease divestiture and operating cash flow to make repayments on the revolving line of credit throughout the year. Net repayments in the prior year period were $391 million.
In order to reduce future cash interest payments, as well as future amounts due at maturity or upon redemption, we may from time to time repurchase our debt, including our notes, bonds, loans or other indebtedness, in privately negotiated, open market or other transactions and upon such terms and at such prices as we may determine. We will evaluate any such transactions in light of then-existing market conditions, taking into account our current liquidity and prospects for future access to capital. The repurchases may be material and could relate to a substantial proportion of a particular class or series, which could reduce the trading liquidity of such class or series.
Capital Expenditures
Our capital expenditures relate largely to purchases of rental equipment, with the remaining portion representing purchases of property, equipment and information technology. The table below sets forth the capital expenditures related to our rental equipment and related disposals for the periods noted (in millions).
Years Ended December 31,
2025
2024
Rental equipment expenditures
$
1,097
$
1,048
Disposals of rental equipment
(448)
(288)
Net rental equipment expenditures
$
649
$
760
Net capital expenditures for rental equipment decreased $111 million during the year ended December 31, 2025 compared to the same period in 2024. Rental equipment expenditures and disposals have increased in the current year to shift the mix of fleet, drive revenue synergies and improve utilization.
Borrowing Capacity and Availability
Our Facilities provide our borrowing capacity and availability. Creditors under the Facilities have a claim on specific pools of assets as collateral as identified in each credit agreement. Our ability to borrow under the Facilities is a function of, among other things, the value of the assets in the relevant collateral pool. We refer to the amount of debt we can borrow given a certain pool of assets as the "Borrowing Base."
In connection with the AR Facility, we sell accounts receivable on an ongoing basis to a wholly-owned special-purpose entity (the "SPE"). The accounts receivable and other assets of the SPE are encumbered in favor of the lenders under our AR Facility. The SPE assets are owned by the SPE and are not available to settle the obligations of the Company or any of its other subsidiaries. Substantially all of the remaining assets of Herc and certain of its U.S. and Canadian subsidiaries are encumbered in favor of our lenders under our New ABL Credit Facility. None of such assets are available to satisfy the claims of our general creditors. See Note 11, "Debt" included in Part II, Item 8 "Financial Statements and Supplementary Data" of this Report for more information.
With respect to the Facilities, we refer to "Remaining Capacity" as the maximum principal amount of debt permitted to be outstanding under the Facilities (i.e., the amount of debt we could borrow assuming we possessed sufficient assets as collateral) less the principal amount of debt then-outstanding under the Facility. We refer to "Availability Under Borrowing Base Limitation" as the lower of Remaining Capacity or the Borrowing Base less the principal amount of debt then-outstanding under the Facility (i.e., the amount of debt we could borrow given the collateral we possess at such time).
As of December 31, 2025, the following was available to us (in millions):
Remaining
Capacity
Availability Under
Borrowing Base
Limitation
New ABL Credit Facility
$
1,900
$
1,880
AR Facility
—
—
Total
$
1,900
$
1,880
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During 2025, we amended the AR Facility in August to extend the maturity to August 31, 2026 and in December aggregate commitments were increased from $400 million to $475 million. See Note 11, "Debt" included in Part II, Item 8 "Financial Statements and Supplementary Data" of this Report for more information.
As of December 31, 2025, $53 million of standby letters of credit were issued and outstanding, none of which have been drawn upon. The New ABL Credit Facility had $197 million available under the letter of credit facility sublimit, subject to borrowing base restrictions.
Covenants
Our New ABL Credit Facility, our AR Facility, our Term Loan Facility and our 2029 Notes, our 2030 Notes, our 2031 Notes, our 2033 Notes, and our 2034 Notes (collectively, the "Notes") contain a number of covenants that, among other things, limit or restrict our ability to dispose of assets, incur additional indebtedness, incur guarantee obligations, prepay certain indebtedness, make certain restricted payments (including paying dividends, redeeming stock or making other distributions), create liens, make investments, make acquisitions, engage in mergers, fundamentally change the nature of our business, make capital expenditures, or engage in certain transactions with certain affiliates.
Under the terms of our New ABL Credit Facility, our AR Facility, our Term Loan Facility and our Notes, we are not subject to ongoing financial maintenance covenants; however, under the New ABL Credit Facility, failure to maintain certain levels of liquidity will subject us to a contractually specified fixed charge coverage ratio of not less than 1:1 for the four quarters most recently ended. As of December 31, 2025, the appropriate levels of liquidity have been maintained, therefore this financial maintenance covenant is not applicable.
At December 31, 2025, Herc Holdings' balance sheet was substantially identical to that of Herc, with the exception of the debt held by Herc Holdings (Notes, Term Loan Facility and New ABL Credit Facility) and certain components of shareholders equity. For the years ended December 31, 2025 and 2024, the statements of operations of Herc Holdings and Herc were identical with the exception of interest expense on the debt held at Herc Holdings that is not reflected in the statement of operations of Herc.
For further information on the terms of our Notes, New ABL Credit Facility, Term Loan Facility and AR Facility see Note 11, "Debt" included in Part II, Item 8 "Financial Statements and Supplementary Data" of this Report. For a discussion of the risks associated with our indebtedness, see Part I, Item 1A "Risk Factors" contained in this Report.
Dividends
On December 5, 2025, we declared a quarterly dividend of $0.70 per share to record holders as of December 15, 2025, with payment date of December 26, 2025. The declaration of dividends on our common stock is discretionary and will be determined by our board of directors in its sole discretion and will depend on our business conditions, financial condition, earnings, liquidity and capital requirements, contractual restrictions and other factors. The amounts available to pay cash dividends are restricted by our debt agreements.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of the consolidated financial statements requires management to make estimates and judgments that affect the reported amounts in our consolidated financial statements and accompanying notes.
Certain of our accounting policies, as discussed below, involve a higher degree of judgment and complexity in their application and, therefore, represent the critical accounting policies used in the preparation of our financial statements. If different assumptions or conditions were to prevail, the results could be materially different from our reported results. For additional discussion of our critical accounting policies and estimates, as well as our significant accounting policies, see Note 2, "Basis of
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Presentation and Significant Accounting Policies" to the notes to our consolidated financial statements included in Part II, Item 8 of this Report.
Rental Equipment
Our principal assets are rental equipment, which represented 42.7% and 53.6% of our total assets as of December 31, 2025 and 2024, respectively. Rental equipment consists of equipment utilized in our equipment rental operations. When rental equipment is acquired, we use historical experience, industry residual value guidebooks and the monitoring of market conditions to set depreciation rates. Generally, we estimate the period that we will hold the asset, primarily based on historical measures of the amount of equipment usage and the targeted age of equipment at the time of disposal. We also estimate the residual value of the applicable rental equipment at the expected time of disposal. The residual value for rental equipment is affected by factors which include equipment age and amount of usage. Depreciation is recorded over the estimated holding period. Depreciation rates are reviewed regularly based on management's ongoing assessment of present and estimated future market conditions, their effect on residual values at the time of disposal and the estimated holding periods. To the extent that the useful lives of all of our rental equipment were to increase or decrease by one year, we estimate that our annual depreciation expense would decrease or increase by approximately $75 million or $100 million, respectively. Market conditions for used equipment sales also can be affected by external factors such as the economy, natural disasters, fuel prices, supply of similar used equipment, the market price for similar new equipment and incentives offered by manufacturers. As a result of this ongoing assessment, we make periodic adjustments to depreciation rates of rental equipment in response to changing market conditions. During the years ended December 31, 2025 and 2024, there were no material adjustments to our depreciation rates.
Defined Benefit Pension Obligations
The Herc Holdings Retirement Plan is a U.S. qualified defined benefit pension plan that has been frozen to new employees since it was established in 2016. Additionally, pursuant to various collective bargaining agreements, certain union-represented employees participate in multiemployer pension plans.
Employee pension costs and obligations are dependent on assumptions used by actuaries in calculating such amounts. These assumptions include discount rates, salary growth, long-term return on plan assets, retirement rates, mortality rates and other factors. Actual results that differ from our assumptions are accumulated and amortized over future periods and, therefore, generally affect our recognized expense in such future periods. While we believe that the assumptions used are appropriate, significant differences in actual experience or significant changes in assumptions would affect our pension costs and obligations. The various employee-related actuarial assumptions (e.g., retirement rates, mortality rates and salary growth) used in determining pension costs and plan liabilities are reviewed periodically by management, assisted by the enrolled actuary, and updated as warranted. The discount rate used to value the pension liabilities and related expenses and the expected rate of return on plan assets are the two most significant assumptions impacting pension expense. The discount rate used is a market-based rate as of the valuation date. For the expected return on assets assumption, we use a forward-looking rate that is based on the expected return for each asset class (including the value added by active investment management), weighted by the target asset allocation. The past annualized long-term performance of the Plan's assets has generally been in line with the long-term rate of return assumption.
Business Combinations
We have made multiple acquisitions and may continue to make acquisitions in the future. The assets acquired and liabilities assumed are recorded based on their respective fair values at the date of acquisition. Determining the fair value of the assets and liabilities acquired is judgmental in nature and can involve the use of significant estimates and assumptions. Long-lived assets (principally rental equipment), goodwill and other intangible assets generally represent the largest components of the acquisitions. Rental equipment is valued utilizing either a cost or market approach, or a combination of these methods, depending on the asset being valued and the availability of market data. The intangible assets acquired are non-compete agreements, customer relationships and trade names and associated trademarks. The estimated fair values of these intangible assets reflect various assumptions about discount rates, revenue growth rates, operating margins, terminal values, useful lives and other prospective financial information. Goodwill is calculated as the excess of the cost of the acquired entity over the net of the fair value of the assets acquired and the liabilities assumed. Non-compete agreements, customer relationships and trade
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names and associated trademarks are valued based on an excess earnings or income approach based on projected cash flows and may be amortized over the useful life if they are determined to be finite-lived intangible assets.
As part of an acquisition, we will also acquire other assets and assume liabilities. These other assets and liabilities typically include, but are not limited to, parts inventory, accounts receivable, accounts payable and other working capital items. Because of their short-term nature, the fair values of these other assets and liabilities generally approximate the book values on the acquired entities' balance sheets.
Goodwill and Indefinite-Lived Intangible Assets
On an annual basis and at interim periods when circumstances require, we test the recoverability of our goodwill. Goodwill impairment is deemed to exist if the carrying value of goodwill of a reporting unit exceeds its fair value. A reporting unit is an operating segment or a business one level below that operating segment (the component level) if discrete financial information is prepared and regularly reviewed by segment management. However, components are aggregated as a single reporting unit if they have similar economic characteristics. We have assessed the guidance and performed our analysis using our one reporting unit, equipment rental.
Pursuant to Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 350, Intangibles-Goodwill and Other, an entity may first assess qualitative factors to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the quantitative goodwill impairment test. Various factors are considered in performing the qualitative test, including macroeconomic conditions, industry and market considerations, the overall financial performance of our reporting unit, our stock price and the excess amount between our reporting unit’s fair value and carrying value as indicated on our most recent quantitative assessment.
When assessing the fair value of our reporting units using a quantitative approach, we estimate the fair value using a combination of an income approach on the present value of estimated future cash flows and a market approach based on published earnings multiples of comparable entities with similar operations and economic characteristics as well as acquisition multiples paid in recent transactions. The key assumptions used in the discounted cash flow valuation model for impairment testing include discount rates, growth rates, cash flow projections and terminal value rates. Discount rates are set by using the weighted average cost of capital ("WACC") methodology. The WACC methodology considers market and industry data as well as company specific risk factors for each reporting unit in determining the appropriate discount rates to be used. The discount rate utilized for each reporting unit is indicative of the return an investor would expect to receive for investing in such a business. The cash flows represent management's most recent planning assumptions. These assumptions are based on a combination of industry outlooks, views on general economic conditions and our expected pricing plans. Terminal value rate determination follows common methodology of capturing the present value of perpetual cash flow estimates beyond the last projected period assuming a constant WACC and low long-term growth rates. If the carrying value of the reporting unit is greater than its fair value, we recognize an impairment charge for the amount equal to that excess. A significant decline in the projected cash flows or a change in the WACC used to determine fair value could result in a future goodwill impairment charge.
Indefinite-lived intangible assets, primarily trade names, are not amortized but are evaluated annually for impairment and whenever events or changes in circumstances indicate that the carrying amount of this asset may exceed its fair value. If the carrying value of an indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.
In connection with our impairment analysis for goodwill and indefinite-lived intangible assets conducted as of October 1, 2025, we assessed qualitative factors as described above to determine if it is more likely than not that goodwill and indefinite-lived assets may be impaired and concluded that there was no impairment related to such assets at such date.
Finite-Lived Intangible and Long-Lived Assets
Finite-lived intangible assets include technology, customer relationships, and other intangibles. Intangible assets with finite lives are amortized over the estimated economic lives of the assets, which range from two to 15 years. These assets are primarily amortized using the straight-line method, however, certain assets may be amortized using an accelerated method that
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reflects the economic benefit to us. Long-lived assets, including intangible assets with finite lives, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. Measurement of an impairment loss for long-lived assets that management expects to hold and use is based on the estimated fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or estimated fair value less costs to sell. During the year ended December 31, 2025, we recorded an asset impairment charge related to Cinelease of $49 million as discussed further in Note 8, "Assets Held for Sale." In 2024, we recorded an asset impairment charge related to Cinelease of $194 million, and there were no asset impairment charges for the year ended December 31, 2023.
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are determined based on differences between the financial statement carrying amounts and net bases of assets and liabilities and are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates is recognized in the statement of operations in the period that includes the enactment date. Valuation allowances are recorded to reduce deferred tax assets by the
amount that is more likely than not to be realized. Subsequent changes to enacted tax rates will result in changes to deferred taxes and any related valuation allowances. We have recorded a deferred tax asset for unutilized net operating loss carryforwards in various tax jurisdictions.
We have determined not to assert that earnings from foreign operations are permanently reinvested. Therefore, we recognize deferred taxes on foreign earnings as appropriate. We have asserted that future earnings associated with the potential stock sale or liquidation of foreign subsidiaries is permanently reinvested. Accordingly, we have not recorded any deferred tax liabilities associated with these book-to-tax differences. We regularly review our cash positions and our determination of permanent reinvestment of foreign earnings. If we determine that all or a portion of such foreign earnings are repatriated, we may be subject to additional foreign withholding taxes and U.S. state income taxes. Many foreign jurisdictions impose taxes on distributions to other jurisdictions. Due to the variations and complexities of these laws, we believe it would be impractical to calculate and accrue these taxes beyond the normal earnings and profits standard for U.S. tax purposes.
In accordance with ASC Topic 740, Income Taxes, we recognize, in its consolidated financial statements, the impact of our tax positions that are more likely than not to be sustained upon examination. We will determine whether it is more likely than not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. In evaluating whether a tax position has met the more-likely-than-not recognition threshold, we presume that the position will be examined by the appropriate taxing authority with full knowledge of all relevant information. Upon determination that a tax position meets the more-likely-than-not recognition threshold, it is measured to determine the amount of benefit to recognize in the financial statements.
We are subject to ongoing tax examinations and assessments in various jurisdictions. Accordingly, accruals for tax contingencies are established based on the probable outcomes of such matters. Our ongoing assessments of the probable outcomes of the examinations and related tax accruals require judgment and could increase or decrease our effective tax rate as well as impact our operating results.
RECENT ACCOUNTING PRONOUNCEMENTS
For a discussion of recent accounting pronouncements, see Note 2, "Basis of Presentation and Significant Accounting Policies" to the notes to our consolidated financial statements included in Part II, Item 8 "Financial Statements and Supplementary Data" of this Report.
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