Management's discussion and analysis of financial condition and results of operations ("MD&A") should be read in conjunction with the unaudited condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of this Quarterly Report, 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 inthe United States of America ("U.S. GAAP") requires us to make estimates and assumptions that affect the reported amounts in our unaudited condensed consolidated financial statements and the accompanying notes including receivables allowances, depreciation of rental equipment, the recoverability of long-lived assets, useful lives and impairment of long-lived tangible and intangible assets including goodwill and trade name, pension and postretirement benefits, valuation of stock-based compensation, reserves for litigation and other contingencies, accounting for income taxes and other matters arising during the normal course of business. We apply our best judgment, our knowledge of existing facts and circumstances and our knowledge of actions that we may undertake in the future in determining the estimates that will affect our condensed consolidated financial statements. We evaluate our estimates on an ongoing basis using our historical experience, as well as other factors we believe appropriate under the circumstances, such as current economic conditions, and adjust or revise our estimates as circumstances change. As future events and their effects cannot be determined with precision, actual results may differ from these estimates.
OVERVIEW OF OUR BUSINESS AND OPERATING ENVIRONMENT
We are engaged principally in the business of renting equipment. Ancillary to our principal business of equipment rental, we also sell used rental equipment, sell new equipment and consumables and offer certain services and support to our customers. Our profitability is dependent upon a number of factors including the volume, mix and pricing of rental transactions and the utilization of equipment. Significant changes in the purchase price or residual values of equipment or interest rates can have a significant effect on our profitability depending on our ability to adjust pricing for these changes. Our business requires significant expenditures for equipment, and consequently we require substantial liquidity to finance such expenditures. See "Liquidity and Capital Resources" below.
Our revenues primarily are derived from rental and related charges and consist of:
•Equipment rental (includes all revenue associated with the rental of equipment including ancillary revenue from delivery, rental protection programs and fueling charges); •Sales of rental equipment and sales of new equipment, parts and supplies; and •Service and other revenue (primarily relating to training and labor provided to customers).
Our expenses primarily consist of:
•Direct operating expenses (primarily wages and related benefits, facility costs and other costs relating to the operation and rental of rental equipment, such as delivery, maintenance and fuel costs); •Cost of sales of rental equipment, new equipment, parts and supplies; •Depreciation expense relating to rental equipment; •Selling, general and administrative expenses; and •Interest expense.
Impacts of COVID-19
InDecember 2019 , a novel strain of coronavirus (COVID-19) was identified inChina and has since spread globally. InMarch 2020 , theWorld Health Organization characterized COVID-19 as a pandemic. Federal, state and local efforts to contain the spread of COVID-19 intensified inMarch 2020 when most states inthe United States , includingFlorida where we are headquartered, enacted shelter in place orders, declared states of emergency, took steps to restrict travel, enacted temporary closures of non-essential businesses and took other restrictive measures in response to the COVID-19 pandemic. Our business was deemed essential and was allowed to remain open, however, many industries in which our customers operate were required to temporarily close their facilities or delay or cancel projects and events. We have reduced our capital spending in the short- 23
--------------------------------------------------------------------------------
Table of Contents
HERC HOLDINGS INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
term and, where possible, we are also reducing operating expenses while ensuring ongoing safe and reliable operations. Additionally, as the timing of the removal of these measures and the residual economic impact of the pandemic remains unclear, we estimate that we will experience a year-over-year decrease in volume of fleet on rent of approximately 8% to 13% and this reduction in volume is likely to have a negative impact on our equipment rental revenue of approximately 10% to 15% during the second half of 2020. The impact of the COVID-19 pandemic continues to evolve as state and local governments are re-opening businesses in multiple phases and, in certain jurisdictions, reversing re-opening decisions. Therefore, we cannot predict the extent to which our financial condition, results of operations or cash flows will ultimately be impacted. We remain focused on the safety and well-being of our employees, customers and communities as we maintain a high-level of service to our customers. We continue to communicate frequently throughout the organization to reinforce our health and safety guidelines, based on theCenter for Disease Control recommendations. Within our operations, a number of adjustments have been made to minimize physical interactions. These include utilizing our information technology platforms to accommodate as many employees as possible to work remotely from their homes. At the operations level, we have implemented new policies to expand the washing of equipment and sanitization of high-touch areas such as dashboards and steering wheels. We have reduced access to or closed our customer showrooms and have implemented curb-side pick-up and drop-off of equipment at our branches requiring customers and vendors to call before they visit. We are supplying personal protective equipment for those employeeswho interact with customers and employed remediation companies to assist in cleaning branches where necessary.
Seasonality
Our business is usually seasonal, with demand for our rental equipment tending to be lower in the winter months, particularly in the northernUnited States andCanada . 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 specialty products that serve different industries with less seasonality and different business cycles. 24
--------------------------------------------------------------------------------
Table of Contents
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 June 30, Six Months Ended June 30, ($ in millions) 2020 2019 $ Change % Change 2020 2019 $ Change % Change Equipment rental$ 327.6 $ 407.6 $ (80.0) (19.6) %$ 714.1 $ 785.2 $ (71.1) (9.1) % Sales of rental equipment 31.4 51.3 (19.9) (38.8) 71.4 136.4 (65.0) (47.7) Sales of new equipment, parts and supplies 7.0 13.2 (6.2) (47.0) 14.0 24.1 (10.1) (41.9) Service and other revenue 2.0 3.0 (1.0) (33.3) 4.7 5.1 (0.4) (7.8) Total revenues 368.0 475.1 (107.1) (22.5) 804.2 950.8 (146.6) (15.4) Direct operating 144.7 188.5 (43.8) (23.2) 333.9 377.6 (43.7) (11.6) Depreciation of rental equipment 101.4 100.9 0.5 0.5 201.8 200.9 0.9 0.4 Cost of sales of rental equipment 29.6 50.0 (20.4) (40.8) 72.0 133.5 (61.5) (46.1) Cost of sales of new equipment, parts and supplies 5.1 10.4 (5.3) (51.0) 10.2 18.6 (8.4) (45.2) Selling, general and administrative 56.8 73.5 (16.7) (22.7) 126.6 145.0 (18.4) (12.7) Restructuring 0.7 7.8 (7.1) (91.0) 0.7 7.8 (7.1) (91.0) Impairment 3.2 - 3.2 100.0 9.5 - 9.5 100.0 Interest expense, net 23.3 31.6 (8.3) (26.3) 47.7 64.5 (16.8) (26.0) Other expense (income), net 3.1 (2.6) 5.7 NM 4.3 (2.3) 6.6 NM Income (loss) before income taxes 0.1 15.0 (14.9) (99.3) (2.5) 5.2 (7.7) (148.1) Income tax benefit (provision) 1.9 (5.3) 7.2 135.8 0.8 (2.2) 3.0 136.4 Net income ( loss)$ 2.0 $ 9.7 $ (7.7) (79.4) %$ (1.7) $ 3.0 $ (4.7) (156.7) % NM - not meaningful
Three Months Ended
Equipment rental revenue decreased$80.0 million , or 19.6%, during the second quarter of 2020 when compared to the second quarter of 2019. The decrease was primarily attributable to lower volume (including re-rent and delivery revenue) primarily related to the impact of the regulatory orders addressing COVID-19 ("COVID-19 Orders") as customers we serve that were not designated essential businesses were closed throughout a significant portion of the quarter. Additionally, pricing declined 0.3% during the second quarter of 2020. Sales of rental equipment decreased$19.9 million , or 38.8%, during the second quarter of 2020 when compared to the second quarter of 2019. During the second quarter of 2020, the volume of sales declined due to COVID-19 related impact to sales channels and decreased demand for used rental equipment. We expect continued reductions in the volume of sales for the remainder of 2020. The corresponding cost of sales of rental equipment as a percentage of the related revenue was 94.3% in the second quarter of 2020 compared to 97.5% in the second quarter of 2019. The increase in margin on sale of rental equipment in the second quarter of 2020 was primarily due to a lower proportion of sales through the lower-margin auction channel. Sales of new equipment, parts and supplies decreased$6.2 million , or 47.0%, during the second quarter of 2020 when compared to the second quarter of 2019, driven by the impact of the COVID-19 Orders. The cost of sales of new equipment, parts and supplies as a percentage of the related revenue was 72.9% for the second quarter of 2020 compared to 78.8% for the second quarter of 2019. The increase in margin was attributable to the mix of equipment sold. Direct operating expenses in the second quarter of 2020 decreased$43.8 million , or 23.2%, when compared to the second quarter of 2019, however, within direct operating expenses were the following fluctuations: •Fleet and related expenses decreased$27.1 million as a result of (i) a decrease in delivery and freight expenses of$9.7 million due to the decrease in deliveries related to the impact of the COVID-19 Orders and better management of transportation costs; (ii) a decrease in maintenance expense of$6.0 million as more rental equipment was idle during the second quarter of 2020; (iii) a decrease in re-rent expense of$5.0 million due to the decrease in re-rent revenue and 25
--------------------------------------------------------------------------------
Table of Contents
HERC HOLDINGS INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
(iv) a decrease in fuel expense of
•Personnel-related expenses decreased$16.2 million primarily due to a reduction in wages related to furloughs implemented during the second quarter of 2020 and limitations on overtime in response to reduced volume due to the COVID-19 Orders. •Other direct operating costs decreased$0.5 million primarily due to decreased field facilities expense resulting from rent abatements received from landlords during the quarter. Selling, general and administrative expenses decreased$16.7 million , or 22.7%, in the second quarter of 2020 when compared to the second quarter of 2019. The decline was primarily due to decreases in selling expense of$4.0 million , travel expense of$3.7 million and various other expenses due to cost containment measures management has taken primarily due to the decreased volume associated with the COVID-19 Orders. Restructuring expense was$0.7 million during the second quarter of 2020 related to personnel reductions and additional costs related to a prior restructuring plan. Restructuring expense was$7.8 million during the second quarter of 2019 as a result of our plan of restructuring inCanada , which included right-of-use ("ROU") assets and related leasehold improvement impairment of$5.5 million and severance charges of$2.3 million . Impairment expense was$3.2 million during the second quarter of 2020, including$1.5 million related to certain assets that were deemed held for sale atJune 30, 2020 , and$1.7 million related to an ROU asset impairment charge for two previously closed locations. Interest expense, net decreased$8.3 million , or 26.0%, during the three months endedJune 30, 2020 when compared with the same period in 2019 primarily due to the lower interest rates on our 2027 Notes and lower average outstanding balances on our ABL Credit Facility. Income tax benefit was$1.9 million during the three months endedJune 30, 2020 when compared with a provision of$5.3 million for the same period in 2019. The benefit in the second quarter of 2020 was primarily driven by the level of pre-tax income, offset by non-deductible expenses, stock-based compensation, valuation allowances recorded on losses generated by certain foreign loss jurisdictions,IRS audit adjustments and related refunds from foreign jurisdictions.
Six Months Ended
Equipment rental revenue decreased$71.1 million , or 9.1%, during the first half of 2020 when compared to the first half of 2019. The decrease was primarily attributable to lower volume (including re-rent and delivery revenue) primarily related to the impact of the COVID-19 Orders as customers we serve that were not designated essential businesses were closed throughout a significant portion of the second quarter of 2020. The decrease was partially offset by pricing increases of 1.1% during the first half of 2020. Sales of rental equipment decreased$65.0 million , or 47.7%, during the first half of 2020 when compared to the first half of 2019. During the first half of 2020, the volume of sales declined due to COVID-19 related impact to sales channels and decreased demand for used rental equipment. We expect continued reductions in the volume of sales for the remainder of 2020. The corresponding cost of sales of rental equipment as a percentage of the related revenue was 100.8% in the first half of 2020 compared to 97.9% in the first half of 2019. The reduction in margin on sale of rental equipment in the first half of 2020 was primarily due to a higher proportion of sales through the lower-margin auction channel during the first quarter of 2020. Sales of new equipment, parts and supplies decreased$10.1 million , or 41.9%, during the first half of 2020 when compared to the first half of 2019, driven by the impact of the COVID-19 Orders. The cost of sales of new equipment, parts and supplies as a percentage of the related revenue was 72.9% for the second quarter of 2020 compared to 77.2% for the second quarter of 2019. The increase in margin was attributable to the mix of equipment sold. 26
--------------------------------------------------------------------------------
Table of Contents
HERC HOLDINGS INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Direct operating expenses overall in the first half of 2020 decreased
•Fleet and related expenses decreased$33.8 million as a result of (i) a decrease in delivery and freight expenses of$17.1 million due to the decrease in deliveries related to the impact of the COVID-19 Orders and better management of transportation costs; (ii) a decrease in maintenance expense of$7.9 million as more rental equipment was idle during the second quarter of 2020; (iii) a decrease in re-rent of$4.7 million due to the decrease in re-rent revenue and (iv) a decrease in fuel expense of$3.9 million due to the decrease in volume of equipment on rent and a decrease in the price of fuel. •Personnel-related expenses decreased$12.4 million primarily due to a reduction in wages related to furloughs implemented during the second quarter of 2020 and a limitations on overtime in response to reduced volume due to the COVID-19 Orders. •Other direct operating costs increased$2.5 million primarily due to increased field facilities expenses of$1.0 million related to new branches that were opened during the second half of 2019 and increases due to recurring lease renewals on existing locations, partially offset by rent abatements received from landlords during the quarter. Selling, general and administrative expenses decreased$18.4 million , or 12.7%, in the first half of 2020 when compared to the first half of 2019. The decline was primarily due to decreases in selling expense of$3.7 million , travel expense of$3.7 million , professional fees of$3.5 million and commissions and incentives of$3.2 million due to cost containment measures management has taken primarily due to the decreased volume associated with the COVID-19 Orders. Restructuring expense was$0.7 million during the first half of 2020 related to personnel reductions and additional costs related to a prior restructuring plan. Restructuring expense was$7.8 million during the first half of 2019 as a result of our plan of restructuring inCanada which included right-of-use assets and related leasehold improvement impairment of$5.5 million and severance charges of$2.3 million . Impairment expense was$9.5 million during the first half of 2020 and consisted of$6.3 million related to the partial impairment of a long-term receivable related to the sale of our former joint venture,$1.7 million related to an ROU asset impairment charge for two previously closed locations and$1.5 million related to certain assets that were deemed held for sale atJune 30, 2020 . Interest expense, net decreased$16.8 million , or 26.3%, during the first half of 2020 when compared with the same period in 2019 primarily due to the lower interest rates on our 2027 Notes and lower average outstanding balances on our ABL Credit Facility. Income tax benefit was$0.8 million during the six months endedJune 30, 2020 when compared with a provision of$2.2 million for the same period in 2019. The benefit in the first half of 2020 was primarily driven by the level of pre-tax loss, non-deductible expenses, stock-based compensation, valuation allowances recorded on losses generated by certain foreign loss jurisdictions,IRS audit adjustments and related refunds from foreign jurisdictions.
LIQUIDITY AND CAPITAL RESOURCES
Our primary liquidity needs include the payment of operating expenses, purchases of rental equipment to be used in our operations and servicing of debt. Our primary sources of funding are operating cash flows, cash received from the disposal of equipment and borrowings under our debt arrangements. As ofJune 30, 2020 , we had approximately$2.0 billion of total nominal indebtedness outstanding. A substantial portion of our liquidity needs arise from debt service on our indebtedness and from the funding of our costs of operations and capital expenditures. Our liquidity as ofJune 30, 2020 consisted of cash and cash equivalents of$83.2 million and unused commitments of$1.2 billion under our ABL Credit Facility and AR Facility. See "Borrowing Capacity and Availability" below for further discussion. Our practice is to maintain sufficient liquidity through cash from operations, our ABL Credit Facility and our AR Facility to mitigate the impacts of any adverse financial market conditions on our operations. Based on the impacts of 27
--------------------------------------------------------------------------------
Table of Contents
HERC HOLDINGS INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
COVID-19, we expect to reduce our net rental equipment expenditures to approximately half of our 2019 levels to effectively manage our fleet and liquidity. Notwithstanding the COVID-19 pandemic, we believe that cash generated from operations and cash received from the disposal of equipment, together with amounts available under the ABL Credit Facility and the AR Facility or other financing arrangements will be sufficient to meet working capital requirements and anticipated reduced capital expenditures, and other strategic uses of cash, if any, and debt payments, if any, over the next twelve months.
Cash Flows
Significant factors driving our liquidity position include cash flows generated from operating activities and capital expenditures. Historically, we have generated and expect to continue to generate positive cash flow from operations. Our ability to fund our capital needs will be affected by our ongoing ability to generate cash from operations and access to capital markets. The following table summarizes the change in cash and cash equivalents for the periods shown (in millions): Six Months Ended June 30, 2020 2019 $ Change Cash provided by (used in): Operating activities$ 280.4 $ 272.6 $ 7.8 Investing activities (101.6) (147.9) 46.3 Financing activities (128.7) (125.0) (3.7) Effect of exchange rate changes 0.1 0.4
(0.3)
Net change in cash and cash equivalents
Operating Activities During the six months endedJune 30, 2020 , we generated$7.8 million more cash from operating activities compared with the same period in 2019. The increase was primarily related to improved collections on accounts receivable, partially offset by timing of payments on accounts payable during the six months endedJune 30, 2020 as compared to the same period in 2019.
Investing Activities
Cash used in investing activities decreased$46.3 million during the six months endedJune 30, 2020 when compared with the prior-year period. Our primary use of cash in investing activities is for the acquisition of rental equipment and non-rental capital expenditures, which we reduced during the first half of 2020 due to the impact of the COVID-19 pandemic. 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 used in financing activities increased$3.7 million during the six months endedJune 30, 2020 when compared with the prior-year period. Cash used in financing activities during the six months endedJune 30, 2020 primarily represents our changes in debt, which included net repayments of$119.7 million on our revolving lines of credit and securitization during the six months of 2020. Net repayments in the prior year period were$121.4 million , partially offset by proceeds from the sale-leaseback transaction in the first quarter of 2019 of$4.7 million . In order to reduce future cash interest payments, as well as future amounts due at maturity or upon redemption, we may from time to time repurchase our debt, including our notes, bonds, loans or other indebtedness, in privately negotiated, open market or other transactions and upon such terms and at such prices as we may determine. We will evaluate any such transactions in light of then-existing market conditions, taking into account our current liquidity and prospects for future access to capital. The repurchases may be material and could relate to a substantial proportion of a particular class or series, which could reduce the trading liquidity of such class or series. 28
--------------------------------------------------------------------------------
Table of Contents
HERC HOLDINGS INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Capital Expenditures Our capital expenditures relate largely to purchases of rental equipment, with the remaining portion representing purchases of property, equipment and information technology. The table below sets forth the capital expenditures related to our rental equipment and related disposals for the periods noted (in millions). Six Months Ended June 30, 2020 2019 Rental equipment expenditures$ 161.5 $ 257.1 Disposals of rental equipment (67.9) (123.7)
Net rental equipment expenditures$ 93.6 $
133.4
Net capital expenditures for rental equipment decreased$39.8 million during the six months endedJune 30, 2020 compared to the same period in 2019. During the first half of 2020, we reduced rental equipment expenditures and disposals to effectively manage our fleet and liquidity in light of the uncertainty surrounding the COVID-19 pandemic. We also reduced disposals during the first half of 2020 in response to improvements over the past year in the mix and age of equipment as part of our long-term capital expenditure plans. We expect to continue reductions in our net rental equipment expenditures for the remainder of 2020. Borrowing Capacity and Availability Our ABL Credit Facility and AR Facility (together, the "Facilities") provide our borrowing capacity and availability. Creditors under the Facilities have a claim on specific pools of assets as collateral as identified in each credit agreement. Our ability to borrow under the Facilities is a function of, among other things, the value of the assets in the relevant collateral pool. We refer to the amount of debt we can borrow given a certain pool of assets as the "Borrowing Base." The accounts receivable and other assets of the SPE are encumbered in favor of the lenders under our AR Facility. The SPE assets are owned by the SPE and are not available to settle the obligations of the Company or any of its other subsidiaries. Substantially all of the remaining assets of Herc and certain of itsU.S. and Canadian subsidiaries are encumbered in favor of our lenders under our ABL Credit Facility. None of such assets are available to satisfy the claims of our general creditors. See Note 10, "Debt" to the notes to our consolidated financial statements included in Part II, Item 8 "Financial Statements" included in our Annual Report on Form 10-K for the year endedDecember 31, 2019 , and Note 7, "Debt" included in Part I, Item 1 "Financial Statements" of this Report for more information. With respect to the Facilities, we refer to "Remaining Capacity" as the maximum principal amount of debt permitted to be outstanding under the Facilities (i.e., the amount of debt we could borrow assuming we possessed sufficient assets as collateral) less the principal amount of debt then-outstanding under the Facility. We refer to "Availability Under Borrowing Base Limitation" as the lower of Remaining Capacity or the Borrowing Base less the principal amount of debt then-outstanding under the Facility (i.e., the amount of debt we could borrow given the collateral we possess at such time).
As of
Availability Under Remaining Borrowing Base Capacity Limitation ABL Credit Facility$ 1,147.4 $ 1,147.4 AR Facility 45.0 13.4 Total$ 1,192.4 $ 1,160.8 As ofJune 30, 2020 ,$25.6 million of standby letters of credit were issued and outstanding under the ABL Credit Facility, none of which have been drawn upon. The ABL Credit Facility had$224.4 million available under the letter of credit facility sublimit, subject to borrowing base restrictions. 29
--------------------------------------------------------------------------------
Table of Contents
HERC HOLDINGS INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Covenants Our ABL Credit Facility, our AR Facility and our 2027 Notes contain a number of covenants that, among other things, limit or restrict our ability to dispose of assets, incur additional indebtedness, incur guarantee obligations, prepay certain indebtedness, make certain restricted payments (including paying dividends, redeeming stock or making other distributions), create liens, make investments, make acquisitions, engage in mergers, fundamentally change the nature of our business, make capital expenditures, or engage in certain transactions with certain affiliates. Under the terms of our ABL Credit Facility, our AR Facility and our 2027 Notes, we are not subject to ongoing financial maintenance covenants; however, under the ABL Credit Facility, failure to maintain certain levels of liquidity will subject us to a contractually specified fixed charge coverage ratio of not less than 1:1 for the four quarters most recently ended. As ofJune 30, 2020 , the appropriate levels of liquidity have been maintained, therefore this financial maintenance covenant is not applicable. Additional information on the terms of our 2027 Notes, ABL Credit Facility and AR Facility is included in Note 10, "Debt" to the notes to our consolidated financial statements included in Part II, Item 8 "Financial Statements" included in our Annual Report on Form 10-K for the year endedDecember 31, 2019 . For a discussion of the risks associated with our indebtedness, see Part I, Item 1A "Risk Factors" contained in our Annual Report on Form 10-K for the year endedDecember 31, 2019 . Dividends Our payment of dividends on our common stock will be determined by our board of directors in its sole discretion and will depend on our business conditions, financial condition, earnings, liquidity and capital requirements, contractual restrictions and other factors. The amounts available to pay cash dividends are restricted by our debt agreements. As of the date of this Report, we have no plans to pay dividends on our common stock.
CONTRACTUAL OBLIGATIONS
As ofJune 30, 2020 , there have been no material changes outside the ordinary course of business to our known contractual obligations as set forth in the Contractual Obligations table included in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the year endedDecember 31, 2019 .
OFF-BALANCE SHEET COMMITMENTS AND ARRANGEMENTS
As ofJune 30, 2020 , there have been no material changes to our indemnification obligations as disclosed in Note 16, "Commitments and Contingencies" in our Annual Report on Form 10-K for the year endedDecember 31, 2019 . For further information, see the discussion on indemnification obligations included in Note 11, "Commitments and Contingencies" in Part I, Item 1 "Financial Statements" of this Report.
For information concerning the ongoing securities litigation and other contingencies, including environmental contingencies and the amount currently held in reserve for environmental matters, see Note 11, "Commitments and Contingencies" in Part I, Item 1 "Financial Statements" of this Report.
RECENT ACCOUNTING PRONOUNCEMENTS
For a discussion of recent accounting pronouncements, see Note 2, "Basis of Presentation and Recently Issued Accounting Pronouncements" in Part I, Item 1 "Financial Statements" of this Report.
30
--------------------------------------------------------------------------------
Table of Contents
HERC HOLDINGS INC. AND SUBSIDIARIES
© Edgar Online, source