HERC HOLDINGS INC MANAGEMENT REPORT ON FINANCIAL POSITION AND RESULTS OF OPERATIONS (Form 10-Q)

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 ACTIVITIES 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 income comes mainly from rents and related charges and consists of:

• Equipment rental (includes all revenue associated with equipment rental, including ancillary revenue from delivery, rental protection programs and refueling fees);

•Sales of rental equipment and sales of new equipment, parts and supplies; and

•Service and other revenue (primarily related to training and labor provided to customers).

Our expenses mainly 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 allowance relating to rental equipment;

•Selling, general and administrative expenses; and

•Interest charges.

COVID-19 Update

We continue to monitor the ongoing impact of the COVID-19 pandemic, including
the effects of recent notable variants of the virus. The health and safety of
our employees, customers, and the communities in which we operate remains our
top priority. 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, informed by the Center for Disease
Control recommendations.


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                      HERC HOLDINGS INC. AND SUBSIDIARIES

ITEM 2. MANAGEMENT REPORT ON FINANCIAL POSITION AND RESULTS OF OPERATIONS (CONTINUED)

During 2021, customer demand improved as the government rolled out the
distribution of vaccines and lifted COVID-19 related restrictions, which opened
up local economic activity. Demand in 2022 remains strong, however, despite the
recovery we are seeing, the impact of the COVID-19 pandemic continues to evolve
and the economic recovery could be slowed or reversed by a number of factors,
including a widespread resurgence in COVID-19 infections, whether due to the
spread of variants of the virus or otherwise, the rate and efficacy of
vaccinations, labor constraints, the strength of the global supply chain, and
government actions. We cannot predict the extent to which our financial
condition, results of operations or cash flows will ultimately be impacted,
however, we believe we are well-positioned to operate effectively through the
present environment.

Seasonality

Our business is usually 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.

RESULTS OF OPERATIONS

                                                                            Three Months Ended March 31,
($ in millions)                                             2022                 2021           $ Change            % Change
Equipment rental                                     $    526.8               $ 400.4          $  126.4                  31.6  %
Sales of rental equipment                                  27.7                  44.2             (16.5)                (37.3)
Sales of new equipment, parts and supplies                  7.7                   6.1               1.6                  26.2
Service and other revenue                                   5.1                   3.1               2.0                  64.5
Total revenues                                            567.3                 453.8             113.5                  25.0
Direct operating                                          246.2                 183.0              63.2                  34.5
Depreciation of rental equipment                          119.3                 100.4              18.9                  18.8
Cost of sales of rental equipment                          18.5                  38.4             (19.9)                (51.8)
Cost of sales of new equipment, parts and supplies          5.3                   4.2               1.1                  26.2
Selling, general and administrative                        89.4                  65.5              23.9                  36.5

Interest expense, net                                      22.5                  21.4               1.1                   5.1
Other expense (income), net                                (1.0)                 (0.2)             (0.8)                      NM
Income before income taxes                                 67.1                  41.1              26.0                  63.3
Income tax provision                                       (8.6)                 (8.2)             (0.4)                  4.9
Net income                                           $     58.5               $  32.9          $   25.6                  77.8  %


NM - Not Meaningful

Three months completed March 31, 2022 Compared to the three months ended March 31, 2021

Equipment rental revenue increased $126.4 million, or 31.6%, during the first
quarter of 2022 when compared to the first quarter of 2021 primarily due to
higher volume of equipment on rent of 29.0% and positive pricing of 4.3% during
the first quarter of 2022 over the same period in the prior year.

Sales of rental equipment decreased $16.5 million, or 37.3%, during the first
quarter of 2022 when compared to the first quarter of 2021. During the first
quarter of 2022, the decline in volume of sales was related to the increase in
utilization and the
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                      HERC HOLDINGS INC. AND SUBSIDIARIES

ITEM 2. MANAGEMENT REPORT ON FINANCIAL POSITION AND RESULTS OF OPERATIONS (CONTINUED)

strategic management of our rental equipment to maximize fleet size as part of
our long-term strategy. The margin on sales of rental equipment was 33.2% in
2022 compared to 13.1% in 2021. The increase in margin on sale of rental
equipment in 2022 was due to a larger proportion of overall volume of sales
through higher margin sales channels and better pricing due to the overall
strong market for used equipment.

Direct operating expenses in the first quarter of 2022 increased $63.2 million,
or 34.5%, when compared to the first quarter of 2021 primarily related to
increases in (i) personnel-related expenses of $26.8 million primarily resulting
from increased headcount and increased payroll and benefits, (ii) fleet related
expenses including fuel and maintenance expense of $18.0 million related to our
increased fleet size and higher average fuel prices in 2022, (iii) re-rent
expense of $6.5 million due to the corresponding increase in re-rent revenue,
(iv) facilities expense of $4.5 million as we have added more locations through
acquisitions and opening greenfield locations.

Depreciation of rental equipment increased $18.9 millionor 18.8%, in the first quarter of 2022 compared to the first quarter of 2021 due to the increase in average fleet size.

Selling, general and administrative expenses increased $23.9 million, or 36.5%,
in the first quarter of 2022 when compared to the first quarter of 2021. The
increase was primarily due to selling expense, including commissions and other
variable compensation increases, of $11.5 million and general payroll and
benefits of $4.1 million. Travel expense also increased by $3.2 million.

Interest expense, net increased $1.1 million, or 5.1%, during the first quarter
of 2022 when compared with the same period in 2021 due to higher average
outstanding balances and slightly higher weighted average interest rates on the
ABL Credit Facility and AR Facility.

Income tax provision was $8.6 million during the first quarter of 2022 compared
to $8.2 million in 2021. The provision in each period was driven by the level of
pre-tax income, offset primarily by a benefit related to stock-based
compensation of $8.1 million and $2.5 million for three months ended March 31,
2022 and 2021, respectively, and non-deductible expenses.

CASH AND CAPITAL RESOURCES

Our primary liquidity needs include the payment of operating expenses, purchases
of rental equipment to be used in our operations, servicing of debt, funding
acquisitions and payment of dividends. 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, 2022, we had
approximately $2.2 billion of total nominal indebtedness outstanding.

Our liquidity as of March 31, 2022 consisted of cash and cash equivalents of
$22.8 million and unused commitments of approximately $1.1 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, our ABL Credit Facility and our AR Facility to mitigate the impacts
of any adverse financial market conditions on our operations. We believe that
cash generated from operations and cash received from the disposal of equipment,
together with amounts available under the ABL Credit Facility and the AR
Facility or other financing arrangements will be sufficient to meet working
capital requirements and anticipated capital expenditures, and other strategic
uses of cash, if any, and debt payments, if any, over the next twelve months.

Cash flow

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.
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                      HERC HOLDINGS INC. AND SUBSIDIARIES

ITEM 2. MANAGEMENT REPORT ON FINANCIAL POSITION AND RESULTS OF OPERATIONS (CONTINUED)


The following table summarizes the change in cash and cash equivalents for the
periods shown (in millions):
                                                   Three Months Ended March 31,
                                                 2022              2021        $ Change
Cash provided by (used in):
Operating activities                      $    143.0             $ 134.7      $    8.3
Investing activities                          (346.7)              (62.2)       (284.5)
Financing activities                           191.4               (72.8)        264.2
Effect of exchange rate changes                    -                 0.2    

(0.2)

Net change in cash and cash equivalents   $    (12.3)            $  (0.1)     $  (12.2)



Operating Activities

During the three months ended March 31, 2022, we generated $8.3 million more
cash from operating activities compared with the same period in 2021. The
increase was related to improved operating results primarily resulting from
higher revenues coupled with continued cost control measures, partially offset
by the timing of payments on accounts payable as compared to the same period in
2021.

Investing Activities

Cash used in investing activities increased $284.5 million during the three
months ended March 31, 2022 when compared with the prior-year period. Our
primary use of cash in investing activities is for the acquisition of rental
equipment, non-rental capital expenditures and acquisitions. 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. Additionally, we
closed on three acquisitions during the three months ended March 31, 2022 for a
net cash outflow of $73.0 million.

Fundraising activities

Cash provided by financing activities increased $264.2 million during the three
months ended March 31, 2022 when compared with the prior-year period. Financing
activities primarily represents our changes in debt, which included net
borrowings of $226.6 million on our revolving lines of credit and
securitization, which were used primarily to fund acquisitions during the
period. Net repayments in the prior year period were $65.0 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).
                                                     Three Months Ended March 31,
                                                           2022                     2021
Rental equipment expenditures                $          286.8                     $ 90.9
Disposals of rental equipment                           (28.8)                     (40.3)
    Net rental equipment expenditures        $          258.0                     $ 50.6


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                      HERC HOLDINGS INC. AND SUBSIDIARIES

ITEM 2. MANAGEMENT REPORT ON FINANCIAL POSITION AND RESULTS OF OPERATIONS (CONTINUED)

Net capital expenditures for rental equipment increased $207.4 million during
the three months ended March 31, 2022 compared to the same period in 2021 as we
manage our fleet by continuing to invest in our fleet in high growth markets as
part of our long-term capital expenditure plans and manage disposals to respond
to a tightening market.

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
its U.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 11, "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 ended December 31, 2021, and Note
8, "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).

From March 31, 2022we had the following items (in millions):

                                                        Availability Under
                                         Remaining        Borrowing Base
                                         Capacity           Limitation
                ABL Credit Facility     $ 1,066.8      $          1,066.8
                AR Facility                     -                       -
                Total                   $ 1,066.8      $          1,066.8



As of March 31, 2022, $24.8 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 $225.2 million available under the letter of credit
facility sublimit, subject to borrowing base restrictions.

pacts

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 of March 31, 2022, 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 11, "Debt" to the notes to our consolidated
financial statements included in Part II, Item 8 "Financial Statements" included
in our Annual
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                      HERC HOLDINGS INC. AND SUBSIDIARIES

ITEM 2. MANAGEMENT REPORT ON FINANCIAL POSITION AND RESULTS OF OPERATIONS (CONTINUED)

Report on Form 10-K for the year ended December 31, 2021. 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 ended December 31,
2021.

Dividends

On February 8, 2022, the Company declared a quarterly dividend of $0.575 per
share to record holders as of February 23, 2022, with payment date of March 10,
2022. 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.

OFF-BALANCE SHEET COMMITMENTS AND ARRANGEMENTS

As of March 31, 2022, there have been no material changes to our indemnification
obligations as disclosed in Note 17, "Commitments and Contingencies" in our
Annual Report on Form 10-K for the year ended December 31, 2021. For further
information, see the discussion on indemnification obligations included in Note
12, "Commitments and Contingencies" in Part I, Item 1 "Financial Statements" of
this Report.

For information regarding contingencies, see Note 12, “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 significant accounting policies” in Part I, Item 1 “Financial statements” of this report.

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