Business Combinations

12 Months Ended

Dec. 31, 2024

Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract]

On July 16, 2024, the Company completed the acquisition of substantially all of the assets of Otay Mesa Sales ("Otay"). Otay was a full-service general equipment rental company comprised of approximately 135 employees and 4 locations serving construction and industrial customers throughout the metropolitan areas of San Diego, California and Phoenix and Yuma, Arizona. The aggregate consideration for the acquisition was approximately $273 million. The acquisition and related fees and expenses were funded through available cash and drawings on the senior secured asset-based revolving credit facility.

The following table summarizes the purchase price allocation of the assets acquired and liabilities assumed (in millions):



Accounts receivable	$	15

Rental equipment	129
Property and equipment	9
Intangibles(a)	65
Total identifiable assets acquired	218
Current liabilities	1

Net identifiable assets acquired	217
Goodwill(b)	56
Net assets acquired	$	273

(a) The following table reflects the fair values and useful lives of the acquired intangible assets identified (in millions):


	Otay		Life (years)
Customer relationships	$	61	14
Non-compete agreements	4		5
Total acquired intangible assets	$	65

(b) The level of goodwill that resulted from the acquisition is primarily reflective of operational synergies that the Company expects to achieve that are not associated with identifiable assets, the value of Otay's assembled workforce and new customer relationships expected to arise from the acquisition. All of the goodwill is expected to be deductible for income tax purposes.

The assets and liabilities for Otay were recorded as of July 16, 2024 and the results of operations have been included in the Company's consolidated results of operations since that date. Total revenue and income before taxes for Otay included in the consolidated statement of operations since the acquisition date are $35 million and $6 million, respectively.

Pro Forma Supplementary Data

The unaudited pro forma supplementary data presented in the table below (in millions) gives effect to the acquisition of Otay as if it had been included in the Company's condensed consolidated results for the entire period reflected. The unaudited pro forma supplementary data is provided for informational purposes only and is not indicative of the Company's results of operations had the acquisitions been included for the period presented, nor is it indicative of the Company's future results.


	Year Ended December 31, 2024					Year Ended December 31, 2023
	Herc	Otay		Total		Herc		Otay		Total
Historic/pro forma total revenues	3,568	$	41	$	3,609	$	3,282	$	73	$	3,355
Historic/combined pretax income	291	4		295		447		10		457
Pro forma adjustments to consolidated pretax income:
Impact of fair value adjustments/useful life changes on depreciation(a)		3		3				3		3
Intangible asset amortization(b)		(5)		(5)				(8)		(8)
Interest expense(c)		(10)		(10)				(18)		(18)
Elimination of historic interest(d)		3		3				5		5
Elimination of merger related costs(e)		2		2				—		—
Pro forma pretax income				$	288					$	439

(a) Depreciation of rental equipment was adjusted for the fair value at acquisition and changes in useful lives of equipment acquired.

(b) Intangible asset amortization was adjusted to include amortization of the acquired intangible assets.

(c) As discussed above, the Company funded the Otay acquisition primarily using drawings on its senior secured asset-based revolving credit facility. Interest expense was adjusted to reflect interest on such borrowings.

(d) Historic interest on debt that is not part of the combined entity was eliminated.

(e) Merger related direct costs primarily comprised of financial and legal advisory fees associated with the Otay acquisition were eliminated as they were assumed to have been recognized prior to the pro forma acquisition date.

Other Acquisitions

In addition to the acquisition of Otay disclosed above, during the year ended December 31, 2024, the Company acquired eight companies with a total of 24 branches. During the year ended December 31, 2023, the Company acquired 12 companies totaling 21 branches.