SOURCE: The Hertz Corporation
August 03, 2010 16:31 ET
Hertz Reports Improved Second Quarter Operating Results
PARK RIDGE, NJ--(Marketwire - August 3, 2010) - Hertz Global Holdings, Inc. (NYSE: HTZ)
-- Worldwide revenues for the quarter of $1.9 billion, an increase of 7.1%
year-over-year.
-- Worldwide car rental revenues for the quarter up 9.3% year over year,
with U.S. car rental revenues up 10.1%.
-- Record worldwide car rental adjusted pre-tax income(1) for the second
quarter increased 21.9%, representing a 120 basis point margin
improvement.
-- Adjusted diluted earnings per share(1) for the quarter of $0.14 versus
$0.12 in the prior year; GAAP diluted loss per share for the quarter
of $0.06 versus earnings per share of $0.01 in the prior year.
-- Cash flow after fleet growth(1) for the quarter improved $300.0
million, to $145.7 million, and cash flow from operations improved
$235.5 million from the prior year, to $749.4 million.
Hertz Global Holdings, Inc. (NYSE: HTZ) (with its subsidiaries, the
"Company" or "we") reported second quarter 2010 worldwide revenues of $1.9
billion, an increase of 7.1% year-over-year (a 7.5% increase excluding the
effects of foreign currency). Worldwide car rental revenues for the
quarter increased 9.3% (a 10.0% increase excluding the effects of foreign
currency) to $1.6 billion. Revenues from worldwide equipment rental for
the second quarter were $265.8 million, down 4.0% (a 5.9% decrease
excluding the effects of foreign currency) over the prior year period.
Second quarter 2010 adjusted pre-tax income(1) was $95.8 million, versus
$81.1 million in the same period in 2009, and loss before income taxes
("pre-tax loss"), on a GAAP basis, was $6.2 million, versus income of $30.7
million in the second quarter of 2009. The year-over-year decline in GAAP
pre-tax income for the second quarter is attributable primarily to a gain,
recorded in 2009, of $48.5 million related to the buyback of a portion of
our Senior Notes and Senior Subordinated Notes. Corporate EBITDA(1) for the
second quarter of 2010 was $281.4 million, an increase of 0.2% from the
same period in 2009.
Second quarter 2010 adjusted net income(1) was $58.5 million, versus $49.6
million in the same period of 2009, resulting in adjusted diluted earnings
per share for the quarter of $0.14, compared with $0.12 per share for the
second quarter of 2009. Second quarter 2010 net loss, on a GAAP basis, was
$25.1 million or a loss of $0.06 per share on a diluted basis, compared
with net income of $3.9 million, or earnings of $0.01 per share on a
diluted basis, for the second quarter of 2009.
Mark P. Frissora, the Company's Chairman and Chief Executive Officer, said,
"The best example of our successful growth and efficiency strategy is the
record second quarter 2010 performance of our largest business, U.S. car
rental. Compared with the pre-recession second quarter of 2007, U.S. RAC
generated $32.5 million higher adjusted pre-tax income this year,
representing a 350 bps margin improvement over 2007, on 7% lower revenues.
We have significantly reduced fleet and other costs while investing in 298
net new off-airport and 31 Advantage airport locations since April of 2009.
In the second quarter of 2010, U.S. car rental generated over 10% revenue
growth, with double-digit increases in off-airport, corporate and inbound
revenues, versus the same period in 2009, a result of our diversified
global growth strategy, and an 18.6% year-over-year increase in adjusted
pre-tax income. Furthermore, we believe our other two major businesses,
Europe RAC and Worldwide HERC, will achieve similar results when their
volume levels increase closer to 2007 levels," he added.
INCOME MEASUREMENTS, SECOND QUARTER 2010 & 2009
Q2 2010 Q2 2009
------------------------- -------------------------
Diluted
Pre-tax Net Earnings Pre-tax Net Diluted
(in millions, except Income Income (Loss) Income Income Earnings
per share amounts) (Loss) (Loss) Per Share (Loss) (Loss) Per Share
------- ------- ------- ------- ------- -------
Earnings Measures, as
reported (EPS
based on 411.8M and
349.2M diluted
shares,
respectively) $ (6.2) $ (25.1) $ (0.06) $ 30.7 $ 3.9 $ 0.01
======= ======= ======= ========
Adjustments:
Purchase accounting 22.5 21.8
Non-cash debt
charges 49.6 47.7
Restructuring and
related charges 22.3 33.3
Derivative (gain)
loss 0.6 (3.9)
Acquisition related
costs 7.0 -
Gain on debt
buyback - (48.5)
------- -------
Adjusted pre-tax
income 95.8 95.8 81.1 81.1
Assumed provision for
income taxes at 34% (32.6) (27.6)
Noncontrolling
interest (4.7) (3.9)
------- ------- ------- -------
Earnings Measures, as
adjusted (EPS based
on 410.0M and 407.7M
diluted shares,
respectively) $ 95.8 $ 58.5 $ 0.14 $ 81.1 $ 49.6 $ 0.12
======= ======= ======= ======= ======= ========
The Company took $22.3 million in restructuring and related charges in the
second quarter of 2010, primarily attributable to costs associated with the
closure of equipment rental locations and process reengineering. The
Company expects the restructuring and related charges to diminish
significantly throughout the remainder of 2010.
The Company ended the second quarter of 2010 with total debt of $11.69
billion and net corporate debt(1) of $3.64 billion, compared with total debt
of $10.39 billion and net corporate debt of $3.78 billion as of March 31,
2010. Total debt increased primarily due to seasonally higher fleet levels.
Net cash provided by operating activities was $749.4 million in the second
quarter of 2010, compared to $513.9 million last year.
WORLDWIDE CAR RENTAL
Worldwide car rental revenues were $1.6 billion for the second quarter of
2010, an increase of 9.3% (a 10.0% increase excluding the effects of
foreign currency) from the prior year period. Transaction days for the
quarter increased 8.9% [10.1% U.S.; 6.4% International]. U.S. off-airport
total revenues for the second quarter increased 13.7% year-over-year, and
transaction days increased 10.2%. Rental rate revenue per transaction day(1)
("RPD") for the quarter decreased 0.1% from the prior year period [(1.2)%
U.S.; 2.3% International].
Worldwide car rental adjusted pre-tax income for the second quarter of 2010
was $174.9 million, an increase of 21.9% from $143.5 million in the prior
year period. The result was driven by increased volume and strong cost
management performance. As a result, worldwide car rental achieved an
adjusted pre-tax margin, based on revenues, of 10.9% for the quarter,
versus 9.7% in the prior year period.
The worldwide average number of Company-operated cars for the second
quarter of 2010 was 448,100, an increase of 9.8% over the prior year
period.
WORLDWIDE EQUIPMENT RENTAL
Worldwide equipment rental revenues were $265.8 million for the second
quarter of 2010, a 4.0% decrease (a 5.9% decrease excluding the effects of
foreign currency) from the prior year period.
Adjusted pre-tax income for worldwide equipment rental for the second
quarter of 2010 was $14.4 million, versus $24.7 million in the prior year
period, primarily attributable to the effects of reduced volume and
pricing, partially offset by cost management initiatives.
The average acquisition cost of rental equipment operated during the second
quarter of 2010 decreased by 4.9% year-over-year and net revenue earning
equipment as of June 30, 2010 was $1,649.1 million, a 15.2% decrease from
the amount as of June 30, 2009.
OUTLOOK
The Company reaffirms its full year 2010 revenue, Corporate EBITDA,
adjusted pre-tax income and adjusted diluted earnings per share guidance,
provided on April 26, 2010. The Company expects to generate worldwide
revenues in the range of $7.5 billion to $7.7 billion, Corporate EBITDA in
the range of $1.080 billion to $1.095 billion, adjusted pre-tax income in
the range of $290 million to $305 million, and adjusted diluted earnings
per share in the range of $0.43 to $0.45 (using the normalized tax rate of
34% and 410 million shares). Additionally, the Company projects annualized,
incremental costs savings of $380 million in 2010, up from $300 million
forecasted in the guidance provided on April 26, 2010.(2)
RESULTS OF THE HERTZ CORPORATION
The Company's operating subsidiary, The Hertz Corporation ("Hertz"), posted
the same revenues for the second quarter as the Company. Hertz's second
quarter 2010 pre-tax income was $5.4 million versus the Company's pre-tax
loss of $6.2 million, primarily attributable to additional interest expense
recognized by the Company on its 5.25% Convertible Senior Notes issued in
May and June 2009.
(1) Levered after-tax cash flow after fleet growth, or "Cash flow after
fleet growth", adjusted pre-tax income (loss), Corporate EBITDA, adjusted
net income (loss), adjusted diluted earnings (loss) per share, net
corporate debt and rental rate revenue per transaction day are non-GAAP
measures. See the accompanying Tables and Exhibit for the reconciliations
and definitions for each of these non-GAAP measures and the reason the
Company's management believes that these measures provide useful
information to investors regarding the Company's financial condition and
results of operations.
(2) Management believes that Corporate EBITDA, adjusted pre-tax income and
adjusted diluted earnings per share are useful in measuring the comparable
results of the Company period-over-period. The GAAP measures most directly
comparable to Corporate EBITDA, adjusted pre-tax income and adjusted
diluted earnings per share are cash flows from operating activities,
pre-tax income and diluted earnings per share. Because of the
forward-looking nature of the Company's forecasted Corporate EBITDA,
adjusted
pre-tax income and adjusted diluted earnings per share, specific
quantifications of the amounts that would be required to reconcile
forecasted cash flows from operating activities, pre-tax income and diluted
earnings per share are not available. The Company believes that there is a
degree of volatility with respect to certain of the Company's GAAP
measures, primarily related to fair value accounting for its financial
assets (which includes the Company's derivative financial instruments), its
income tax reporting and certain adjustments made to arrive at the relevant
non-GAAP measures, which preclude the Company from providing accurate
forecasted GAAP to non-GAAP reconciliations. Based on the above, the
Company believes that providing estimates of the amounts that would be
required to reconcile the range of the non-GAAP Corporate EBITDA, adjusted
pre-tax income and adjusted diluted earnings per share to forecasted cash
flows from operating activities, pre-tax income and diluted earnings per
share would imply a degree of precision that would be confusing or
misleading to investors for the reasons indentified above.
CONFERENCE CALL INFORMATION
The Company's second quarter 2010 earnings conference call will be held on
Wednesday, August 4, 2010, at 10:00 a.m. (EDT). To access the conference
call live, dial 800-230-1093 in the U.S. and 612-288-0340 for international
callers using the passcode: 164596 or listen via webcast at
www.hertz.com/investorrelations. The conference call will be available for
replay one hour following the conclusion of the call until August 18, 2010
by calling 800-475-6701 in the U.S. or 320-365-3844 for international
callers with the passcode: 164596. The press release and related tables
containing the reconciliations of non-GAAP measures will be available on
our website, www.hertz.com/investorrelations.
ABOUT THE COMPANY
Hertz is the world's largest general use car rental brand, operating from
approximately 8,300 locations in 146 countries worldwide. Hertz is the
number one airport car rental brand in the U.S. and at 81 major airports in
Europe, operating both corporate and licensee locations in cities and
airports in North America, Europe, Latin America, Asia, Australia and New
Zealand. In addition, the Company has licensee locations in cities and
airports in Africa and the Middle East. Product and service initiatives
such as Hertz #1 Club Gold®, NeverLost® customized, onboard navigation
systems, SIRIUS XM Satellite Radio, and unique cars and SUVs offered
through the Company's Prestige, Fun and Green Collections, set Hertz apart
from the competition. In 2008, the Company launched Connect by Hertz,
entering the global car sharing market in London, New York City and Paris.
Hertz also operates one of the world's largest equipment rental businesses,
Hertz Equipment Rental Corporation, offering a diverse line of equipment,
including tools and supplies, as well as new and used equipment for sale,
to customers ranging from major industrial companies to local contractors
and consumers from approximately 325 branches in the United States, Canada,
China, France, Spain and Italy.
CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS
Certain statements contained in this press release and in related comments
by our management include "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. Examples of
forward-looking statements include information concerning the Company's
outlook, anticipated revenues and results of operations, as well as any
other statement that does not directly relate to any historical or current
fact. These forward-looking statements often include words such as
"believe," "expect," "project," "anticipate," "intend," "plan," "estimate,"
"seek," "will," "may," "would," "should," "could," "forecasts" or similar
expressions. These statements are based on certain assumptions that the
Company has made in light of its experience in the industry as well as its
perceptions of historical trends, current conditions, expected future
developments and other factors that the Company believes are appropriate in
these circumstances. We believe these judgments are reasonable, but you
should understand that these statements are not guarantees of performance
or results, and our actual results could differ materially from those
expressed in the forward-looking statements due to a variety of important
factors, both positive and negative.
Among other items, such factors could include: our ability to consummate
our contemplated acquisition of Dollar Thrifty Automotive Group, within the
timeframe and upon the terms contemplated by our management; the risk that
expected synergies, operational efficiencies and cost savings from the
Dollar Thrifty acquisition may not be fully realized or realized within the
expected time frame; the operational and profitability impact of
divestitures that may be required to be undertaken to secure regulatory
approval of the Dollar Thrifty acquisition; overall strength and stability
of general economic conditions, both in the United States and in global
markets; levels of travel demand, particularly with respect to airline
passenger traffic in the United States and in global markets; significant
changes in the competitive environment, including as a result of industry
consolidation, and the effect of competition in our markets, including on
our pricing policies or use of incentives; our ability to achieve cost
savings and efficiencies and realize opportunities to increase productivity
and profitability; an increase in our fleet costs as a result of an
increase in the cost of new vehicles and/or a decrease in the price at
which we dispose of used vehicles either in the used vehicle market or
under repurchase or guaranteed depreciation programs; our ability to
accurately estimate future levels of rental activity and adjust the size of
our fleet accordingly; our ability to maintain sufficient liquidity and the
availability to us of additional or continued sources of financing for our
revenue earning equipment and to refinance our existing indebtedness;
financial instability of insurance companies providing financial guarantees
for our asset-backed securities; safety recalls by the manufacturers of our
vehicles and equipment; a major disruption in our communication or
centralized information networks; financial instability of the
manufacturers of our vehicles and equipment; any impact on us from the
actions of our licensees, dealers and independent contractors; our ability
to maintain profitability during adverse economic cycles and unfavorable
external events (including war, terrorist acts, natural disasters and
epidemic disease); shortages of fuel and increases or volatility in fuel
costs; our ability to successfully integrate future acquisitions and
complete future dispositions; costs and risks associated with litigation;
risks related to our indebtedness, including our substantial amount of debt
and our ability to incur substantially more debt; our ability to meet the
financial and other covenants contained in our senior credit facilities,
our outstanding unsecured senior notes and certain asset-backed funding
arrangements; changes in accounting principles, or their application or
interpretation, and our ability to make estimates and the assumptions
underlying the estimates, which could have an effect on earnings; changes
in the existing, or the adoption of new laws, regulations, policies or
other activities of governments, agencies and similar organizations where
such actions may affect our operations, the cost thereof or applicable tax
rates; the effect of tangible and intangible asset impairment charges; and
the impact of our derivative instruments, which can be affected by
fluctuations in interest rates; our exposure to fluctuations in foreign
exchange rates. Additional information concerning these and other factors
can be found in our filings with the Securities and Exchange Commission,
including our most recent Annual Report on Form 10-K, Quarterly Reports on
Form 10-Q and Current Reports on Form 8-K.
The Company therefore cautions you against relying on these forward-looking
statements. All forward-looking statements attributable to the Company or
persons acting on the Company's behalf are expressly qualified in their
entirety by the foregoing cautionary statements. All such statements speak
only as of the date made, and the Company undertakes no obligation to
update or revise publicly any forward-looking statements, whether as a
result of new information, future events or otherwise.
Tables and Exhibit:
Table 1: Condensed Consolidated Statements of Operations for the Three and
Six Months Ended June 30, 2010 and 2009
Table 2: Condensed Consolidated Statements of Operations As Reported and
As Adjusted for the Three and Six Months Ended June 30, 2010 and
2009
Table 3: Segment and Other Information for the Three and Six Months Ended
June 30, 2010 and 2009
Table 4: Selected Operating and Financial Data as of or for the Three and
Six Months Ended June 30, 2010 compared to June 30, 2009 and
Selected Balance Sheet Data as of June 30, 2010 and December 31,
2009
Table 5: Non-GAAP Reconciliations of Adjusted Pre-Tax Income (Loss) and
Adjusted Net Income (Loss) for the Three and Six Months Ended
June 30, 2010 and 2009
Table 6: Non-GAAP Reconciliations of EBITDA, Corporate EBITDA, Unlevered
Pre-Tax Cash Flow, Levered After-Tax Cash Flow Before Fleet
Growth and Levered After-Tax Cash Flow After Fleet Growth for the
Three and Six Months Ended June 30, 2010 and 2009
Table 7: Non-GAAP Reconciliations of Operating Cash Flows to EBITDA for
the Three and Six Months Ended June 30, 2010 and 2009, Net
Corporate Debt, Net Fleet Debt and Total Net Debt as of June 30,
2010, 2009 and 2008, March 31, 2010 and 2009 and December 31,
2009 and 2008, Car Rental Rate Revenue per Transaction Day and
Equipment Rental and Rental Related Revenue for the Three and Six
Months Ended June 30, 2010 and 2009
Table 8: Non-GAAP Reconciliations of EBITDA, Corporate EBITDA, Unlevered
Pre-Tax Cash Flow, Levered After-Tax Cash Flow Before Fleet
Growth and Levered After-Tax Cash Flow After Fleet Growth for the
Twelve Months Ended June 30, 2010 and 2009
Table 9: Non-GAAP Reconciliation of Total Net Cash Flow for the Three, Six
and Twelve Months Ended June 30, 2010 and 2009
Exhibit 1: Non-GAAP Measures: Definitions and Use/Importance
Table 1
HERTZ GLOBAL HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share amounts)
Unaudited
Three Months Ended As a Percentage
June 30, of Total Revenues
-------------------- -------------------
2010 2009 2010 2009
--------- --------- -------- --------
Total revenues $ 1,879.6 $ 1,754.5 100.0 % 100.0 %
--------- --------- -------- --------
Expenses:
Direct operating 1,075.0 988.6 57.2 % 56.3 %
Depreciation of revenue
earning equipment 456.7 479.4 24.3 % 27.3 %
Selling, general and
administrative 172.0 141.5 9.2 % 8.1 %
Interest expense 188.9 163.9 10.0 % 9.3 %
Interest and other income, net (6.8) (49.6) (0.4)% (2.8)%
--------- --------- -------- --------
Total expenses 1,885.8 1,723.8 100.3 % 98.2 %
--------- --------- -------- --------
Income (loss) before income
taxes (6.2) 30.7 (0.3)% 1.8 %
Provision for taxes on income (14.2) (22.9) (0.8)% (1.4)%
--------- --------- -------- --------
Net income (loss) (20.4) 7.8 (1.1)% 0.4 %
Less: Net income attributable
to noncontrolling interest (4.7) (3.9) (0.2)% (0.2)%
--------- --------- -------- --------
Net income (loss) attributable
to Hertz Global Holdings, Inc.
and Subsidiaries' common
stockholders $ (25.1) $ 3.9 (1.3)% 0.2 %
========= ========= ======== ========
Weighted average number of
shares outstanding:
Basic 411.8 343.7
Diluted 411.8 349.2
Earnings (loss) per share
attributable to Hertz Global
Holdings, Inc. and
Subsidiaries' common
stockholders:
Basic $ (0.06) $ 0.01
Diluted $ (0.06) $ 0.01
Six Months Ended As a Percentage
June 30, of Total Revenues
-------------------- -------------------
2010 2009 2010 2009
--------- --------- -------- --------
Total revenues $ 3,540.5 $ 3,319.4 100.0 % 100.0 %
--------- --------- -------- --------
Expenses:
Direct operating 2,088.0 1,943.9 59.0 % 58.6 %
Depreciation of revenue
earning equipment 915.9 969.2 25.9 % 29.2 %
Selling, general and
administrative 339.8 308.2 9.6 % 9.3 %
Interest expense 370.0 329.0 10.4 % 9.9 %
Interest and other income, net (9.1) (51.6) (0.3)% (1.6)%
--------- --------- -------- --------
Total expenses 3,704.6 3,498.7 104.6 % 105.4 %
--------- --------- -------- --------
Loss before income taxes (164.1) (179.3) (4.6)% (5.4)%
Benefit (provision) for taxes
on income (3.2) 26.7 (0.1)% 0.8 %
--------- --------- -------- --------
Net loss (167.3) (152.6) (4.7)% (4.6)%
Less: Net income attributable
to noncontrolling interest (8.2) (7.0) (0.3)% (0.2)%
--------- --------- -------- --------
Net loss attributable to Hertz
Global Holdings, Inc. and
Subsidiaries' common
stockholders $ (175.5) $ (159.6) (5.0)% (4.8)%
========= ========= ======== ========
Weighted average number of
shares outstanding:
Basic 411.3 333.6
Diluted 411.3 333.6
Loss per share attributable to
Hertz Global Holdings, Inc.
and Subsidiaries' common
stockholders:
Basic $ (0.43) $ (0.48)
Diluted $ (0.43) $ (0.48)
Table 2
HERTZ GLOBAL HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions)
Unaudited
Three Months Ended June 30, 2010
-----------------------------------
As As
Reported Adjustments Adjusted
--------- --------- ---------
Total revenues $ 1,879.6 $ - $ 1,879.6
--------- --------- ---------
Expenses:
Direct operating 1,075.0 (39.0) (a) 1,036.0
Depreciation of revenue earning
equipment 456.7 (3.1) (b) 453.6
Selling, general and administrative 172.0 (10.3) (c) 161.7
Interest expense 188.9 (49.6) (d) 139.3
Interest and other income, net (6.8) - (6.8)
--------- --------- ---------
Total expenses 1,885.8 (102.0) 1,783.8
--------- --------- ---------
Income (loss) before income taxes (6.2) 102.0 95.8
Provision for taxes on income (14.2) (18.4) (e) (32.6)
--------- --------- ---------
Net income (loss) (20.4) 83.6 63.2
Less: Net income attributable to
noncontrolling interest (4.7) - (4.7)
--------- --------- ---------
Net income (loss) attributable to
Hertz Global Holdings, Inc. and
Subsidiaries' common stockholders $ (25.1) $ 83.6 $ 58.5
========= ========= =========
Three Months Ended June 30, 2009
-----------------------------------
As As
Reported Adjustments Adjusted
--------- --------- ---------
Total revenues $ 1,754.5 $ - $ 1,754.5
--------- --------- ---------
Expenses:
Direct operating 988.6 (40.2) (a) 948.4
Depreciation of revenue earning
equipment 479.4 (2.4) (b) 477.0
Selling, general and administrative 141.5 (8.6) (c) 132.9
Interest expense 163.9 (47.7) (d) 116.2
Interest and other income, net (49.6) 48.5 (f) (1.1)
--------- --------- ---------
Total expenses 1,723.8 (50.4) 1,673.4
--------- --------- ---------
Income before income taxes 30.7 50.4 81.1
Provision for taxes on income (22.9) (4.7) (e) (27.6)
--------- --------- ---------
Net income 7.8 45.7 53.5
Less: Net income attributable to
noncontrolling interest (3.9) - (3.9)
--------- --------- ---------
Net income attributable to Hertz
Global Holdings, Inc. and Subsidiaries'
common stockholders $ 3.9 $ 45.7 $ 49.6
========= ========= =========
Six Months Ended June 30, 2010
-----------------------------------
As As
Reported Adjustments Adjusted
--------- --------- ---------
Total revenues $ 3,540.5 $ - $ 3,540.5
--------- --------- ---------
Expenses:
Direct operating 2,088.0 (69.8) (a) 2,018.2
Depreciation of revenue earning
equipment 915.9 (5.8) (b) 910.1
Selling, general and administrative 339.8 (16.6) (c) 323.2
Interest expense 370.0 (98.4) (d) 271.6
Interest and other income, net (9.1) - (9.1)
--------- --------- ---------
Total expenses 3,704.6 (190.6) 3,514.0
--------- --------- ---------
Income (loss) before income taxes (164.1) 190.6 26.5
Provision for taxes on income (3.2) (5.8) (e) (9.0)
--------- --------- ---------
Net income (loss) (167.3) 184.8 17.5
Less: Net income attributable to
noncontrolling interest (8.2) - (8.2)
--------- --------- ---------
Net income (loss) attributable to
Hertz Global Holdings, Inc. and
Subsidiaries' common stockholders $ (175.5) $ 184.8 $ 9.3
========= ========= =========
Six Months Ended June 30, 2009
-----------------------------------
As As
Reported Adjustments Adjusted
--------- --------- ---------
Total revenues $ 3,319.4 $ - $ 3,319.4
--------- --------- ---------
Expenses:
Direct operating 1,943.9 (80.2) (a) 1,863.7
Depreciation of revenue earning
equipment 969.2 (9.7) (b) 959.5
Selling, general and administrative 308.2 (29.7) (c) 278.5
Interest expense 329.0 (72.7) (d) 256.3
Interest and other income, net (51.6) 48.5 (f) (3.1)
--------- --------- ---------
Total expenses 3,498.7 (143.8) 3,354.9
--------- --------- ---------
Income (loss) before income taxes (179.3) 143.8 (35.5)
Benefit (provision) for taxes on
income 26.7 (14.6) (e) 12.1
--------- --------- ---------
Net income (loss) (152.6) 129.2 (23.4)
Less: Net income attributable to
noncontrolling interest (7.0) - (7.0)
--------- --------- ---------
Net income (loss) attributable to
Hertz Global Holdings, Inc. and
Subsidiaries' common stockholders $ (159.6) $ 129.2 $ (30.4)
========= ========= =========
(a) Represents the increase in amortization of other intangible assets,
depreciation of property and equipment and accretion of certain
revalued liabilities relating to purchase accounting. For the three
months ended June 30, 2010 and 2009, also includes restructuring and
restructuring related charges of $19.7 million and $24.5 million,
respectively. For the six months ended June 30, 2010 and 2009, also
includes restructuring and restructuring related charges of $31.1
million and $47.0 million. For the three and six months ended June 30,
2009, also includes gasoline hedge gains of $3.9 million and $4.9
million, respectively.
(b) Represents the increase in depreciation of revenue earning equipment
based upon its revaluation relating to purchase accounting.
(c) Represents an increase in depreciation of property and equipment
relating to purchase accounting. For the three months ended June 30,
2010 and 2009, also includes restructuring and restructuring related
charges of $2.6 million and $8.8 million, respectively. For the six
months ended June 30, 2010 and 2009, also includes restructuring and
restructuring related charges of $7.2 and $24.7 million, respectively.
For all periods presented, also includes other adjustments which are
detailed in Table 5.
(d) Represents non-cash debt charges relating to the amortization of
deferred debt financing costs and debt discounts. For the three months
ended June 30, 2010 and 2009, also includes $18.0 million and $22.3
million, respectively, associated with the amortization of amounts
pertaining to the de-designation of our interest rate swaps as
effective hedging instruments. For the six months ended June 30, 2010
and 2009, also includes $38.9 million and $29.8 million, respectively,
associated with the amortization of amounts pertaining to the
de-designation of our interest rate swaps as effective hedging
instruments.
(e) Represents a provision for income taxes derived utilizing a normalized
income tax rate (34% for 2010 and 2009).
(f) Represents a gain (net of transaction costs) recorded in connection
with the buyback of portions of our Senior Notes and Senior
Subordinated Notes during the three months ended June 30, 2009.
Table 3
HERTZ GLOBAL HOLDINGS, INC.
SEGMENT AND OTHER INFORMATION
(In millions, except per share amounts)
Unaudited
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
2010 2009 2010 2009
--------- --------- --------- ---------
Revenues:
Car rental $ 1,611.4 $ 1,474.7 $ 3,033.1 $ 2,757.6
Equipment rental 265.8 277.0 502.8 556.5
Other reconciling items 2.4 2.8 4.6 5.3
--------- --------- --------- ---------
$ 1,879.6 $ 1,754.5 $ 3,540.5 $ 3,319.4
========= ========= ========= =========
Depreciation of property and
equipment:
Car rental $ 29.0 $ 31.1 $ 58.2 $ 58.4
Equipment rental 8.6 9.7 17.5 19.0
Other reconciling items 1.3 1.6 2.8 3.1
--------- --------- --------- ---------
$ 38.9 $ 42.4 $ 78.5 $ 80.5
========= ========= ========= =========
Amortization of other
intangible assets:
Car rental $ 7.8 $ 9.2 $ 15.6 $ 16.6
Equipment rental 8.2 8.2 16.5 16.3
Other reconciling items 0.3 0.2 0.6 0.2
--------- --------- --------- ---------
$ 16.3 $ 17.6 $ 32.7 $ 33.1
========= ========= ========= =========
Income (loss) before income
taxes:
Car rental $ 121.4 $ 80.3 $ 91.3 $ (9.9)
Equipment rental (15.8) (1.7) (39.2) (26.5)
Other reconciling items (111.8) (47.9) (216.2) (142.9)
--------- --------- --------- ---------
$ (6.2) $ 30.7 $ (164.1) $ (179.3)
========= ========= ========= =========
Corporate EBITDA (a):
Car rental $ 197.3 $ 173.6 $ 251.7 $ 162.7
Equipment rental 94.3 118.2 174.3 231.1
Other reconciling items (10.2) (11.1) (27.4) (21.2)
--------- --------- --------- ---------
$ 281.4 $ 280.7 $ 398.6 $ 372.6
========= ========= ========= =========
Adjusted pre-tax income (loss)
(a):
Car rental $ 174.9 $ 143.5 $ 202.0 $ 110.0
Equipment rental 14.4 24.7 9.4 25.4
Other reconciling items (93.5) (87.1) (184.9) (170.9)
--------- --------- --------- ---------
$ 95.8 $ 81.1 $ 26.5 $ (35.5)
========= ========= ========= =========
Adjusted net income (loss) (a):
Car rental $ 115.4 $ 94.7 $ 133.3 $ 72.6
Equipment rental 9.5 16.3 6.2 16.8
Other reconciling items (66.4) (61.4) (130.2) (119.8)
--------- --------- --------- ---------
$ 58.5 $ 49.6 $ 9.3 $ (30.4)
========= ========= ========= =========
Adjusted diluted number of
shares outstanding (a) 410.0 407.7 410.0 407.7
Adjusted diluted earnings
(loss) per share (a) $ 0.14 $ 0.12 $ 0.02 $ (0.07)
(a) Represents a non-GAAP measure, see the accompanying
reconciliations and definitions.
Note: "Other Reconciling Items" includes general corporate expenses,
certain interest expense (including net interest on corporate debt),
as well as other business activities such as our third-party claim
management services. See Tables 5 and 6.
Table 4
HERTZ GLOBAL HOLDINGS, INC.
SELECTED OPERATING AND FINANCIAL DATA
Unaudited
Percent Percent
Three change Six change
Months from Months from
Ended, or as prior Ended, or as prior
of June 30, year of June 30, year
2010 period 2010 period
--------- --------- --------- ---------
Selected Car Rental
Operating Data
Worldwide number of
transactions (in
thousands) 6,821 7.0 % 12,678 6.3 %
Domestic 5,021 8.5 % 9,418 8.6 %
International 1,800 3.1 % 3,260 0.2 %
Worldwide transaction
days (in thousands) 32,194 8.9 % 60,310 7.2 %
Domestic 22,061 10.1 % 42,001 9.2 %
International 10,133 6.4 % 18,309 2.9 %
Worldwide rental rate
revenue per transaction
day (a) $ 43.42 (0.1)% $ 43.24 0.1 %
Domestic $ 41.07 (1.2)% $ 41.49 (0.5)%
International (b) $ 48.52 2.3 % $ 47.26 1.8 %
Worldwide average number of
company-operated cars
during period 448,100 9.8 % 432,900 9.4 %
Domestic 300,000 10.8 % 296,800 11.9 %
International 148,100 7.9 % 136,100 4.3 %
Worldwide revenue earning
equipment, net (in
millions) $ 8,762.1 19.0 % $ 8,762.1 19.0 %
Selected Worldwide
Equipment Rental Operating
Data
Rental and rental related
revenue (in millions) (a)
(b) $ 239.4 (5.6)% $ 455.0 (12.2)%
Same store revenue decline,
including initiatives (a)
(b) (5.1)% N/M (11.4)% N/M
Average acquisition cost of
revenue earning equipment
operated during period (in
millions) $ 2,703.7 (4.9)% $ 2,741.3 (5.8)%
Worldwide revenue earning
equipment, net (in
millions) $ 1,649.1 (15.2)% $ 1,649.1 (15.2)%
Other Financial Data (in
millions)
Cash flows provided by
operating activities $ 749.4 45.8 % $ 1,050.6 50.4 %
Levered after-tax cash flow
before fleet growth (a) 260.1 (61.5)% 578.6 53.1 %
Levered after-tax cash flow
after fleet growth (a) 145.7 N/M (3.0) 98.4 %
Total net cash flow (a) (745.8) (482.7)% (1,127.6) N/M
EBITDA (a) 684.4 (6.5)% 1,218.4 (0.6)%
Corporate EBITDA (a) 281.4 0.2 % 398.6 7.0 %
Selected Balance Sheet Data
(in millions)
June 30, December 31,
2010 2009
--------- ---------
Cash and cash equivalents $ 896.8 $ 985.6
Total revenue earning
equipment, net 10,411.2 8,851.6
Total assets 17,855.8 16,002.4
Total debt 11,693.8 10,364.4
Net corporate debt (a) 3,636.6 3,633.6
Net fleet debt (a) 6,417.0 5,380.0
Total net debt (a) 10,053.6 9,013.6
Total equity 1,913.7 2,097.4
(a) Represents a non-GAAP measure, see the accompanying reconciliations and
definitions.
(b) Based on 12/31/09 foreign exchange rates.
N/M Percentage change not meaningful.
Table 5
HERTZ GLOBAL HOLDINGS, INC.
RECONCILIATION OF GAAP TO NON-GAAP EARNINGS MEASURES
(In millions, except per share amounts)
Unaudited
ADJUSTED PRE-TAX INCOME (LOSS) AND ADJUSTED NET INCOME (LOSS)
Three Months Ended June 30, 2010
------------------------------------------
Other
Car Equipment Reconciling
Rental Rental Items Total
--------- --------- --------- ---------
Total revenues: $ 1,611.4 $ 265.8 $ 2.4 $ 1,879.6
--------- --------- --------- ---------
Expenses:
Direct operating and selling,
general and administrative 1,010.2 204.4 32.4 1,247.0
Depreciation of revenue
earning equipment 389.7 67.0 - 456.7
Interest expense 96.9 10.2 81.8 188.9
Interest and other income, net (6.8) - - (6.8)
--------- --------- --------- ---------
Total expenses 1,490.0 281.6 114.2 1,885.8
--------- --------- --------- ---------
Income (loss) before income
taxes 121.4 (15.8) (111.8) (6.2)
Adjustments:
Purchase accounting (a):
Direct operating and selling,
general and administrative 9.7 8.9 0.8 19.4
Depreciation of revenue
earning equipment - 3.1 - 3.1
Non-cash debt charges (b) 37.7 2.2 9.7 49.6
Restructuring charges (c) 4.2 16.0 0.1 20.3
Restructuring related charges
(c) 1.9 - 0.1 2.0
Derivative losses (c) - - 0.6 0.6
Acquisition related costs (d) - - 7.0 7.0
--------- --------- --------- ---------
Adjusted pre-tax income (loss) 174.9 14.4 (93.5) 95.8
Assumed (provision) benefit for
income taxes of 34% (59.5) (4.9) 31.8 (32.6)
Noncontrolling interest - - (4.7) (4.7)
--------- --------- --------- ---------
Adjusted net income (loss) $ 115.4 $ 9.5 $ (66.4) $ 58.5
========= ========= ========= =========
Adjusted diluted number of
shares outstanding 410.0
Adjusted diluted earnings per
share $ 0.14
Three Months Ended June 30, 2009
------------------------------------------
Other
Car Equipment Reconciling
Rental Rental Items Total
--------- --------- --------- ---------
Total revenues: $ 1,474.7 $ 277.0 $ 2.8 $ 1,754.5
--------- --------- --------- ---------
Expenses:
Direct operating and selling,
general and administrative 920.6 189.8 19.7 1,130.1
Depreciation of revenue
earning equipment 404.2 75.2 - 479.4
Interest expense 70.2 13.7 80.0 163.9
Interest and other income, net (0.6) - (49.0) (49.6)
--------- --------- --------- ---------
Total expenses 1,394.4 278.7 50.7 1,723.8
--------- --------- --------- ---------
Income (loss) before income
taxes 80.3 (1.7) (47.9) 30.7
Adjustments:
Purchase accounting (a):
Direct operating and selling,
general and administrative 9.9 8.8 0.7 19.4
Depreciation of revenue
earning equipment - 2.4 - 2.4
Non-cash debt charges (b) 34.9 2.3 10.5 47.7
Restructuring charges (c) 9.8 12.8 (0.6) 22.0
Restructuring related charges
(c) 8.6 0.1 2.6 11.3
Derivative gains (c) - - (3.9) (3.9)
Gain on debt buyback (e) - - (48.5) (48.5)
--------- --------- --------- ---------
Adjusted pre-tax income (loss) 143.5 24.7 (87.1) 81.1
Assumed (provision) benefit for
income taxes of 34% (48.8) (8.4) 29.6 (27.6)
Noncontrolling interest - - (3.9) (3.9)
--------- --------- --------- ---------
Adjusted net income (loss) $ 94.7 $ 16.3 $ (61.4) $ 49.6
========= ========= ========= =========
Adjusted diluted number of
shares outstanding 407.7
Adjusted diluted earnings per
share $ 0.12
Six Months Ended June 30, 2010
------------------------------------------
Other
Car Equipment Reconciling
Rental Rental Items Total
--------- --------- --------- ---------
Total revenues: $ 3,033.1 $ 502.8 $ 4.6 $ 3,540.5
--------- --------- --------- ---------
Expenses:
Direct operating and selling,
general and administrative 1,986.5 383.7 57.6 2,427.8
Depreciation of revenue
earning equipment 778.0 137.9 - 915.9
Interest expense 186.2 20.4 163.4 370.0
Interest and other income, net (8.9) - (0.2) (9.1)
--------- --------- --------- ---------
Total expenses 2,941.8 542.0 220.8 3,704.6
--------- --------- --------- ---------
Income (loss) before income
taxes 91.3 (39.2) (216.2) (164.1)
Adjustments:
Purchase accounting (a):
Direct operating and selling,
general and administrative 19.5 17.7 1.6 38.8
Depreciation of revenue
earning equipment - 5.8 - 5.8
Non-cash debt charges (b) 74.7 4.1 19.6 98.4
Restructuring charges (c) 9.5 20.9 0.6 31.0
Restructuring related charges
(c) 7.0 0.1 0.2 7.3
Derivative losses (c) - - 2.3 2.3
Acquisition related costs (d) - - 7.0 7.0
--------- --------- --------- ---------
Adjusted pre-tax income (loss) 202.0 9.4 (184.9) 26.5
Assumed (provision) benefit for
income taxes of 34% (68.7) (3.2) 62.9 (9.0)
Noncontrolling interest - - (8.2) (8.2)
--------- --------- --------- ---------
Adjusted net income (loss) $ 133.3 $ 6.2 $ (130.2) $ 9.3
========= ========= ========= =========
Adjusted diluted number of
shares outstanding 410.0
Adjusted diluted earnings per
share $ 0.02
Six Months Ended June 30, 2009
------------------------------------------
Other
Car Equipment Reconciling
Rental Rental Items Total
--------- --------- --------- ---------
Total revenues: $ 2,757.6 $ 556.5 $ 5.3 $ 3,319.4
--------- --------- --------- ---------
Expenses:
Direct operating and selling,
general and administrative 1,825.8 380.9 45.4 2,252.1
Depreciation of revenue
earning equipment 795.3 173.9 - 969.2
Interest expense 147.9 28.3 152.8 329.0
Interest and other income, net (1.5) (0.1) (50.0) (51.6)
--------- --------- --------- ---------
Total expenses 2,767.5 583.0 148.2 3,498.7
--------- --------- --------- ---------
Income (loss) before income
taxes (9.9) (26.5) (142.9) (179.3)
Adjustments:
Purchase accounting (a):
Direct operating and selling,
general and administrative 19.3 17.6 1.2 38.1
Depreciation of revenue
earning equipment - 9.7 - 9.7
Non-cash debt charges (b) 54.2 4.6 13.9 72.7
Restructuring charges (c) 24.9 19.8 6.8 51.5
Restructuring related charges
(c) 17.2 0.2 2.8 20.2
Derivative gains (c) - - (4.9) (4.9)
Third party bankruptcy reserve
(f) 4.3 - - 4.3
Management transition costs
(f) - - 0.7 0.7
Gain on debt buyback (e) - - (48.5) (48.5)
--------- --------- --------- ---------
Adjusted pre-tax income (loss) 110.0 25.4 (170.9) (35.5)
Assumed (provision) benefit for
income taxes of 34% (37.4) (8.6) 58.1 12.1
Noncontrolling interest - - (7.0) (7.0)
--------- --------- --------- ---------
Adjusted net income (loss) $ 72.6 $ 16.8 $ (119.8) $ (30.4)
========= ========= ========= =========
Adjusted diluted number of
shares outstanding 407.7
Adjusted diluted loss per share $ (0.07)
(a) Represents the purchase accounting effects of the acquisition of all of
Hertz's common stock on December 21, 2005 on our results of operations
relating to increased depreciation and amortization of tangible and
intangible assets and accretion of workers' compensation and public
liability and property damage liabilities. Also represents the
purchase accounting effects of subsequent acquisitions on our results
of operations relating to increased amortization of intangible assets.
(b) Represents non-cash debt charges relating to the amortization of
deferred debt financing costs and debt discounts. For the three months
ended June 30, 2010 and 2009, also includes $18.0 million and $22.3
million, respectively, associated with the amortization of amounts
pertaining to the de-designation of our interest rate swaps as
effective hedging instruments. For the six months ended June 30, 2010
and 2009, also includes $38.9 million and $29.8 million, respectively,
associated with the amortization of amounts pertaining to the
de-designation of our interest rate swaps as effective hedging
instruments.
(c) Amounts are included within direct operating and selling, general and
administrative expense in our statement of operations.
(d) Represents costs incurred in connection with the potential acquisition
of Dollar Thrifty Automotive Group, Inc. which are included within
selling, general and administrative expense in our statement of
operations.
(e) Amount is included within interest and other income, net in our
statement of operations.
(f) Amounts are included within selling, general and administrative
expense in our statement of operations.
Table 6
HERTZ GLOBAL HOLDINGS, INC.
RECONCILIATION OF GAAP TO NON-GAAP EARNINGS MEASURES
(In millions)
Unaudited
EBITDA, CORPORATE EBITDA, UNLEVERED PRE-TAX CASH FLOW,
LEVERED AFTER-TAX CASH FLOW BEFORE
FLEET GROWTH AND AFTER FLEET GROWTH
Three Months Ended June 30, 2010
--------------------------------------
Other
Car Equipment Reconciling
Rental Rental Items Total
-------- -------- -------- --------
Income (loss) before income taxes $ 121.4 $ (15.8) $ (111.8) $ (6.2)
Depreciation, amortization and
other purchase accounting 427.4 83.9 1.9 513.2
Interest, net of interest income 90.1 10.2 81.8 182.1
Noncontrolling interest - - (4.7) (4.7)
-------- -------- -------- --------
EBITDA 638.9 78.3 (32.8) 684.4
Adjustments:
Car rental fleet interest (95.1) - - (95.1)
Car rental fleet depreciation (389.7) - - (389.7)
Non-cash expenses and charges (a) 37.1 - 15.4 52.5
Extraordinary, unusual or
non-recurring gains and losses (b) 6.1 16.0 7.2 29.3
-------- -------- -------- --------
Corporate EBITDA $ 197.3 $ 94.3 $ (10.2) 281.4
======== ======== ========
Equipment rental maintenance
capital expenditures, net (61.8)
Non-fleet capital expenditures,
net (25.6)
Changes in working capital 238.5
Changes in other assets and
liabilities (94.4)
--------
Unlevered pre-tax cash flow (c) 338.1
Corporate net cash interest (71.9)
Corporate cash taxes (6.1)
--------
Levered after-tax cash flow before
fleet growth (c) 260.1
Equipment rental fleet growth
capital expenditures 91.2
Car rental net fleet equity
requirement (205.6)
--------
Levered after-tax cash flow after
fleet growth (c) $ 145.7
========
Three Months Ended June 30, 2009
--------------------------------------
Other
Car Equipment Reconciling
Rental Rental Items Total
-------- -------- -------- --------
Income (loss) before income taxes $ 80.3 $ (1.7) $ (47.9) $ 30.7
Depreciation, amortization and
other purchase accounting 446.4 93.3 2.5 542.2
Interest, net of interest income 69.6 13.7 79.5 162.8
Noncontrolling interest - - (3.9) (3.9)
-------- -------- -------- --------
EBITDA 596.3 105.3 30.2 731.8
Adjustments:
Car rental fleet interest (71.4) - - (71.4)
Car rental fleet depreciation (404.2) - - (404.2)
Non-cash expenses and charges (a) 34.5 - 9.1 43.6
Extraordinary, unusual or
non-recurring gains and losses (b) 18.4 12.9 (50.4) (19.1)
-------- -------- -------- --------
Corporate EBITDA $ 173.6 $ 118.2 $ (11.1) 280.7
======== ======== ========
Equipment rental maintenance
capital expenditures, net (70.8)
Non-fleet capital expenditures,
net (33.4)
Changes in working capital 161.6
Changes in other assets and
liabilities 413.1
--------
Unlevered pre-tax cash flow (c) 751.2
Corporate net cash interest (69.5)
Corporate cash taxes (6.2)
--------
Levered after-tax cash flow before
fleet growth (c) 675.5
Equipment rental fleet growth
capital expenditures 61.3
Car rental net fleet equity
requirement (891.1)
--------
Levered after-tax cash flow after
fleet growth (c) $ (154.3)
========
Six Months Ended June 30, 2010
--------------------------------------
Other
Car Equipment Reconciling
Rental Rental Items Total
-------- -------- -------- --------
Income (loss) before income taxes $ 91.3 $ (39.2) $ (216.2) $ (164.1)
Depreciation, amortization and
other purchase accounting 853.6 172.1 4.1 1,029.8
Interest, net of interest income 177.3 20.4 163.2 360.9
Noncontrolling interest - - (8.2) (8.2)
-------- -------- -------- --------
EBITDA 1,122.2 153.3 (57.1) 1,218.4
Adjustments:
Car rental fleet interest (183.0) - - (183.0)
Car rental fleet depreciation (778.0) - - (778.0)
Non-cash expenses and charges (a) 74.0 - 21.9 95.9
Extraordinary, unusual or
non-recurring gains and losses (b) 16.5 21.0 7.8 45.3
-------- -------- -------- --------
Corporate EBITDA $ 251.7 $ 174.3 $ (27.4) 398.6
======== ======== ========
Equipment rental maintenance
capital expenditures, net (128.0)
Non-fleet capital expenditures,
net (47.1)
Changes in working capital 709.1
Changes in other assets and
liabilities (174.6)
--------
Unlevered pre-tax cash flow (c) 758.0
Corporate net cash interest (148.7)
Corporate cash taxes (30.7)
--------
Levered after-tax cash flow before
fleet growth (c) 578.6
Equipment rental fleet growth
capital expenditures 177.4
Car rental net fleet equity
requirement (759.0)
--------
Levered after-tax cash flow after
fleet growth (c) $ (3.0)
========
Six Months Ended June 30, 2009
--------------------------------------
Other
Car Equipment Reconciling
Rental Rental Items Total
-------- -------- -------- --------
Loss before income taxes $ (9.9) $ (26.5) $ (142.9) $ (179.3)
Depreciation, amortization and
other purchase accounting 872.2 209.4 4.0 1,085.6
Interest, net of interest income 146.4 28.2 151.3 325.9
Noncontrolling interest - - (7.0) (7.0)
-------- -------- -------- --------
EBITDA 1,008.7 211.1 5.4 1,225.2
Adjustments:
Car rental fleet interest (150.5) - - (150.5)
Car rental fleet depreciation (795.3) - - (795.3)
Non-cash expenses and charges (a) 53.4 - 16.5 69.9
Extraordinary, unusual or
non-recurring gains and losses (b) 46.4 20.0 (43.1) 23.3
-------- -------- -------- --------
Corporate EBITDA $ 162.7 $ 231.1 $ (21.2) 372.6
======== ======== ========
Equipment rental maintenance
capital expenditures, net (159.8)
Non-fleet capital expenditures,
net (35.0)
Changes in working capital 173.2
Changes in other assets and
liabilities 186.9
--------
Unlevered pre-tax cash flow (c) 537.9
Corporate net cash interest (146.0)
Corporate cash taxes (14.0)
--------
Levered after-tax cash flow before
fleet growth (c) 377.9
Equipment rental fleet growth
capital expenditures 235.0
Car rental net fleet equity
requirement (803.9)
--------
Levered after-tax cash flow after
fleet growth (c) $ (191.0)
========
(a) As defined in the credit agreements for the senior credit facilities,
Corporate EBITDA excludes the impact of certain non-cash expenses and
charges. The adjustments reflect the following:
NON-CASH EXPENSES AND CHARGES Three Months Ended June 30, 2010
--------------------------------------
Other
Car Equipment Reconciling
Rental Rental Items Total
-------- -------- -------- --------
Non-cash amortization of debt costs
included in car rental fleet
interest $ 37.1 $ - $ - $ 37.1
Non-cash stock-based employee
compensation charges - - 10.3 10.3
Non-cash charges for public
liability and property damage - - 4.5 4.5
Derivative losses - - 0.6 0.6
-------- -------- -------- --------
Total non-cash expenses and charges $ 37.1 $ - $ 15.4 $ 52.5
======== ======== ======== ========
NON-CASH EXPENSES AND CHARGES Three Months Ended June 30, 2009
--------------------------------------
Other
Car Equipment Reconciling
Rental Rental Items Total
-------- -------- -------- --------
Non-cash amortization of debt costs
included in car rental fleet
interest $ 34.5 $ - $ - $ 34.5
Non-cash stock-based employee
compensation charges - - 9.1 9.1
-------- -------- -------- --------
Total non-cash expenses and charges $ 34.5 $ - $ 9.1 $ 43.6
======== ======== ======== ========
NON-CASH EXPENSES AND CHARGES Six Months Ended June 30, 2010
--------------------------------------
Other
Car Equipment Reconciling
Rental Rental Items Total
-------- -------- -------- --------
Non-cash amortization of debt costs
included in car rental fleet
interest $ 74.0 $ - $ - $ 74.0
Non-cash stock-based employee
compensation charges - - 19.3 19.3
Non-cash charges for public
liability and property damage - - 0.3 0.3
Derivative losses - - 2.3 2.3
-------- -------- -------- --------
Total non-cash expenses and charges $ 74.0 $ - $ 21.9 $ 95.9
======== ======== ======== ========
NON-CASH EXPENSES AND CHARGES Six Months Ended June 30, 2009
--------------------------------------
Other
Car Equipment Reconciling
Rental Rental Items Total
-------- -------- -------- --------
Non-cash amortization of debt costs
included in car rental fleet
interest $ 53.4 $ - $ - $ 53.4
Non-cash stock-based employee
compensation charges - - 16.5 16.5
-------- -------- -------- --------
Total non-cash expenses and charges $ 53.4 $ - $ 16.5 $ 69.9
======== ======== ======== ========
(b) As defined in the credit agreements for the senior credit facilities,
Corporate EBITDA excludes the impact of extraordinary, unusual or
non-recurring gains or losses or charges or credits. The adjustments
reflect the following:
EXTRAORDINARY, UNUSUAL OR
NON-RECURRING ITEMS Three Months Ended June 30, 2010
--------------------------------------
Other
Car Equipment Reconciling
Rental Rental Items Total
-------- -------- -------- --------
Restructuring charges $ 4.2 $ 16.0 $ 0.1 $ 20.3
Restructuring related charges 1.9 - 0.1 2.0
Acquisition related costs - - 7.0 7.0
-------- -------- -------- --------
Total extraordinary, unusual or
non-recurring items $ 6.1 $ 16.0 $ 7.2 $ 29.3
======== ======== ======== ========
EXTRAORDINARY, UNUSUAL OR
NON-RECURRING ITEMS Three Months Ended June 30, 2009
--------------------------------------
Other
Car Equipment Reconciling
Rental Rental Items Total
-------- -------- -------- --------
Restructuring charges $ 9.8 $ 12.8 $ (0.6) $ 22.0
Restructuring related charges 8.6 0.1 2.6 11.3
Gain on debt buyback - - (48.5) (48.5)
Derivative gains - - (3.9) (3.9)
-------- -------- -------- --------
Total extraordinary, unusual or
non-recurring items $ 18.4 $ 12.9 $ (50.4) $ (19.1)
======== ======== ======== ========
EXTRAORDINARY, UNUSUAL OR
NON-RECURRING ITEMS Six Months Ended June 30, 2010
--------------------------------------
Other
Car Equipment Reconciling
Rental Rental Items Total
-------- -------- -------- --------
Restructuring charges $ 9.5 $ 20.9 $ 0.6 $ 31.0
Restructuring related charges 7.0 0.1 0.2 7.3
Acquisition related costs - - 7.0 7.0
-------- -------- -------- --------
Total extraordinary, unusual or
non-recurring items $ 16.5 $ 21.0 $ 7.8 $ 45.3
======== ======== ======== ========
EXTRAORDINARY, UNUSUAL OR
NON-RECURRING ITEMS Six Months Ended June 30, 2009
--------------------------------------
Other
Car Equipment Reconciling
Rental Rental Items Total
-------- -------- -------- --------
Restructuring charges $ 24.9 $ 19.8 $ 6.8 $ 51.5
Restructuring related charges 17.2 0.2 2.8 20.2
Third-party bankruptcy reserve 4.3 - - 4.3
Gain on debt buyback - - (48.5) (48.5)
Derivative gains - - (4.9) (4.9)
Management transition costs - - 0.7 0.7
-------- -------- -------- --------
Total extraordinary, unusual or
non-recurring items $ 46.4 $ 20.0 $ (43.1) $ 23.3
======== ======== ======== ========
(c) Amounts include the effect of fluctuations in foreign currency.
Table 7
HERTZ GLOBAL HOLDINGS, INC.
RECONCILIATION OF GAAP TO NON-GAAP EARNINGS MEASURES
(In millions, except as noted)
Unaudited
Three Months Ended Six Months Ended
RECONCILIATION FROM June 30, June 30,
OPERATING CASH FLOWS TO ---------------------- ----------------------
EBITDA: 2010 2009 2010 2009
---------- ---------- ---------- ----------
Net cash provided by
operating activities $ 749.4 $ 513.9 $ 1,050.6 $ 698.4
Amortization of debt costs (31.7) (25.3) (59.6) (42.8)
Provision for losses on
doubtful accounts (5.2) (8.3) (10.3) (16.6)
Derivative gains (losses) (4.3) 3.0 (6.0) 4.1
Gain on sale of property
and equipment 1.8 - 2.2 1.3
Amortization of cash flow
hedges (18.0) (22.3) (38.9) (29.8)
Stock-based compensation
charges (10.3) (9.1) (19.3) (16.5)
Asset writedowns (11.6) (10.0) (12.3) (13.1)
Noncontrolling interest (4.7) (3.9) (8.2) (7.0)
Deferred income taxes 36.1 (12.5) 3.8 (19.7)
Provision (benefit) for
taxes on income 14.2 22.9 3.2 (26.7)
Interest expense, net of
interest income 182.1 162.8 360.9 325.9
Changes in assets and
liabilities (213.4) 120.6 (47.7) 367.7
---------- ---------- ---------- ----------
EBITDA $ 684.4 $ 731.8 $ 1,218.4 $ 1,225.2
========== ========== ========== ==========
NET CORPORATE DEBT, NET June 30, March 31, December 31, June 30,
FLEET DEBT AND TOTAL NET 2010 2010 2009 2009
DEBT ---------- ---------- ---------- ----------
Corporate Debt
Debt, less: $ 11,693.8 $ 10,387.9 $ 10,364.4 $ 9,795.8
U.S Fleet Debt and
Pre-Acquisition Notes 5,217.4 4,284.5 4,058.3 3,370.2
International facilities 1,593.1 1,170.1 1,413.9 1,556.0
Fleet Financing Facility 162.5 162.3 147.2 144.5
Canadian Fleet Financing
Facility 115.2 96.3 55.6 53.0
---------- ---------- ---------- ----------
Fleet Debt $ 7,088.2 $ 5,713.2 $ 5,675.0 $ 5,123.7
========== ========== ========== ==========
Corporate Debt $ 4,605.6 $ 4,674.7 $ 4,689.4 $ 4,672.1
========== ========== ========== ==========
Corporate Restricted Cash
Restricted Cash, less: $ 743.4 $ 221.3 $ 365.2 $ 188.5
Restricted Cash Associated
with Fleet Debt (671.2) (129.6) (295.0) (95.3)
---------- ---------- ---------- ----------
Corporate Restricted Cash $ 72.2 $ 91.7 $ 70.2 $ 93.2
========== ========== ========== ==========
Net Corporate Debt
Corporate Debt, less: $ 4,605.6 $ 4,674.7 $ 4,689.4 $ 4,672.1
Cash and Cash Equivalents (896.8) (800.7) (985.6) (570.9)
Corporate Restricted Cash (72.2) (91.7) (70.2) (93.2)
---------- ---------- ---------- ----------
Net Corporate Debt $ 3,636.6 $ 3,782.3 $ 3,633.6 $ 4,008.0
========== ========== ========== ==========
Net Fleet Debt
Fleet Debt, less: $ 7,088.2 $ 5,713.2 $ 5,675.0 $ 5,123.7
Restricted Cash Associated
with Fleet Debt (671.2) (129.6) (295.0) (95.3)
---------- ---------- ---------- ----------
Net Fleet Debt $ 6,417.0 $ 5,583.6 $ 5,380.0 $ 5,028.4
========== ========== ========== ==========
Total Net Debt $ 10,053.6 $ 9,365.9 $ 9,013.6 $ 9,036.4
========== ========== ========== ==========
NET CORPORATE DEBT, NET March 31, December 31, June 30,
FLEET DEBT AND TOTAL NET 2009 2008 2008
DEBT ---------- ---------- ----------
Corporate Debt
Debt, less: $ 9,692.6 $ 10,972.3 $ 12,693.8
U.S Fleet Debt and
Pre-Acquisition Notes 3,679.5 4,254.5 4,698.0
International facilities 1,280.2 1,871.4 2,765.9
Fleet Financing Facility 159.4 149.3 158.1
Canadian Fleet Financing
Facility 72.7 111.6 245.0
---------- ---------- ----------
Fleet Debt $ 5,191.8 $ 6,386.8 $ 7,867.0
========== ========== ==========
Corporate Debt $ 4,500.8 $ 4,585.5 $ 4,826.8
========== ========== ==========
Corporate Restricted Cash
Restricted Cash, less: $ 323.4 $ 731.4 $ 161.4
Restricted Cash Associated
with Fleet Debt (233.4) (557.2) (58.4)
---------- ---------- ----------
Corporate Restricted Cash $ 90.0 $ 174.2 $ 103.0
========== ========== ==========
Net Corporate Debt
Corporate Debt, less: $ 4,500.8 $ 4,585.5 $ 4,826.8
Cash and Cash Equivalents (557.1) (594.3) (811.4)
Corporate Restricted Cash (90.0) (174.2) (103.0)
---------- ---------- ----------
Net Corporate Debt $ 3,853.7 $ 3,817.0 $ 3,912.4
========== ========== ==========
Net Fleet Debt
Fleet Debt, less: $ 5,191.8 $ 6,386.8 $ 7,867.0
Restricted Cash Associated
with Fleet Debt (233.4) (557.2) (58.4)
---------- ---------- ----------
Net Fleet Debt $ 4,958.4 $ 5,829.6 $ 7,808.6
========== ========== ==========
Total Net Debt $ 8,812.1 $ 9,646.6 $ 11,721.0
========== ========== ==========
Three Months Ended Six Months Ended
CAR RENTAL RATE REVENUE June 30, June 30,
PER TRANSACTION DAY(a) ---------------------- ----------------------
2010 2009 2010 2009
---------- ---------- ---------- ----------
Car rental segment revenues
(b) $ 1,611.4 $ 1,474.7 $ 3,033.1 $ 2,757.6
Non-rental rate revenue (c) (263.2) (225.5) (486.3) (422.6)
Foreign currency adjustment 49.6 35.6 61.2 94.2
---------- ---------- ---------- ----------
Rental rate revenue $ 1,397.8 $ 1,284.8 $ 2,608.0 $ 2,429.2
========== ========== ========== ==========
Transactions days (in
thousands) 32,194 29,574 60,310 56,257
Rental rate revenue per
Transaction day
(in whole dollars) $ 43.42 $ 43.44 $ 43.24 $ 43.18
Three Months Ended Six Months Ended
EQUIPMENT RENTAL AND RENTAL June 30, June 30,
RELATED REVENUE (a) ---------------------- ----------------------
2010 2009 2010 2009
---------- ---------- ---------- ----------
Equipment rental segment
revenues $ 265.8 $ 277.0 $ 502.8 $ 556.5
Equipment sales and other
revenue (28.7) (29.9) (50.8) (56.3)
Foreign currency adjustment 2.3 6.4 3.0 17.9
---------- ---------- ---------- ----------
Rental and rental related
revenue $ 239.4 $ 253.5 $ 455.0 $ 518.1
========== ========== ========== ==========
(a) Based on 12/31/09 foreign exchange rates.
(b) Includes U.S. off-airport revenues of $264.3 million and $232.5
million for the three months ended June 30, 2010 and 2009,
respectively, and $495.9 million and $445.1 million for the six months
ended June 30, 2010 and 2009, respectively.
(c) Consists of domestic revenues of $166.5 million and $140.8 million
and international revenues of $96.7 million and $84.7 million for the
three months ended June 30, 2010 and 2009, respectively, and domestic
revenues of $314.6 million and $267.5 million and international
revenues of $171.7 million and $155.1 million for the six months ended
June 30, 2010 and 2009, respectively.
Table 8
HERTZ GLOBAL HOLDINGS, INC.
RECONCILIATION OF GAAP TO NON-GAAP EARNINGS MEASURES
(In millions)
Unaudited
EBITDA, CORPORATE EBITDA, UNLEVERED PRE-TAX CASH FLOW, LEVERED
AFTER-TAX CASH FLOW BEFORE FLEET GROWTH AND AFTER FLEET GROWTH
Last
Twelve
Months Six Months Six Months Year Ended
Ended June Ended June Ended June December
30, 2010 30, 2010 30, 2009 31, 2009
---------- ---------- ---------- ----------
Loss before income taxes $ (155.8) $ (164.1) $ (179.3) $ (171.0)
Depreciation, amortization
and other purchase
accounting 2,106.6 1,029.8 1,085.6 2,162.4
Interest, net of interest
income 699.3 360.9 325.9 664.3
Noncontrolling interest (15.9) (8.2) (7.0) (14.7)
---------- ---------- ---------- ----------
EBITDA 2,634.2 1,218.4 1,225.2 2,641.0
Adjustments:
Car rental fleet interest (351.5) (183.0) (150.5) (319.0)
Car rental fleet
depreciation (1,596.9) (778.0) (795.3) (1,614.2)
Non-cash expenses and
charges 193.0 95.9 69.9 167.0
Non-cash expenses and
charges to arrive at LTM
(a) (0.3) - - -
Extraordinary, unusual or
non-recurring gains and
losses 127.1 45.3 23.3 105.1
---------- ---------- ---------- ----------
Corporate EBITDA 1,005.6 398.6 372.6 979.9
Equipment rental
maintenance capital
expenditures, net (262.6) (128.0) (159.8) (294.4)
Non-fleet capital
expenditures, net (104.0) (47.1) (35.0) (91.9)
Changes in working capital 294.9 709.1 173.2 (241.0)
Changes in other assets
and liabilities (122.7) (174.6) 186.9 238.8
Changes in other assets
and liabilities to arrive
at LTM (a) 0.3 - - -
---------- ---------- ---------- ----------
Unlevered pre-tax cash flow
(b) 811.5 758.0 537.9 591.4
Corporate net cash
interest (299.4) (148.7) (146.0) (296.7)
Corporate cash taxes (48.0) (30.7) (14.0) (31.3)
---------- ---------- ---------- ----------
Levered after-tax cash flow
before fleet growth (b) 464.1 578.6 377.9 263.4
Equipment rental fleet
growth capital
expenditures 285.8 177.4 235.0 343.4
Car rental net fleet
equity requirement (378.5) (759.0) (803.9) (423.4)
---------- ---------- ---------- ----------
Levered after-tax cash flow
after fleet growth (b) $ 371.4 $ (3.0) $ (191.0) $ 183.4
========== ========== ========== ==========
Last
Twelve
Months Six Months Six Months Year Ended
Ended June Ended June Ended June December
30, 2009 30, 2009 30, 2008 31, 2008
---------- ---------- ---------- ----------
Income (loss) before income
taxes $ (1,599.2) $ (179.3) $ 37.1 $ (1,382.8)
Depreciation, amortization
and other purchase
accounting 2,333.2 1,085.6 1,185.7 2,433.3
Interest, net of interest
income 769.0 325.9 402.1 845.2
Impairment charges 1,168.9 - - 1,168.9
Noncontrolling interest (17.3) (7.0) (10.5) (20.8)
---------- ---------- ---------- ----------
EBITDA 2,654.6 1,225.2 1,614.4 3,043.8
Adjustments:
Car rental fleet interest (398.9) (150.5) (202.3) (450.7)
Car rental fleet
depreciation (1,743.6) (795.3) (895.5) (1,843.8)
Non-cash expenses and
charges 148.2 69.9 34.7 113.0
Non-cash expenses and
charges to arrive at LTM
(a) (0.3) - - -
Extraordinary, unusual or
non-recurring gains and
losses 209.0 23.3 52.2 237.9
---------- ---------- ---------- ----------
Corporate EBITDA 869.0 372.6 603.5 1,100.2
Equipment rental
maintenance capital
expenditures, net (320.6) (159.8) (151.5) (312.3)
Non-fleet capital
expenditures, net (45.5) (35.0) (94.3) (104.8)
Changes in working capital (164.9) 173.2 331.3 (6.8)
Changes in other assets
and liabilities (276.3) 186.9 (95.2) (558.4)
Changes in other assets
and liabilities to arrive
at LTM (a) 0.3 - - -
---------- ---------- ---------- ----------
Unlevered pre-tax cash flow
(b) 62.0 537.9 593.8 117.9
Corporate net cash
interest (321.2) (146.0) (183.2) (358.4)
Corporate cash taxes (32.5) (14.0) (14.9) (33.4)
---------- ---------- ---------- ----------
Levered after-tax cash flow
before fleet growth (b) (291.7) 377.9 395.7 (273.9)
Equipment rental fleet
growth capital
expenditures 641.1 235.0 86.6 492.7
Car rental net fleet
equity requirement (445.0) (803.9) (410.0) (51.1)
---------- ---------- ---------- ----------
Levered after-tax cash flow
after fleet growth (b) $ (95.6) $ (191.0) $ 72.3 $ 167.7
========== ========== ========== ==========
(a) Adjustment necessary due to the nature of the calculation of non-cash
expenses and charges where, on a quarterly basis the cash payments for
a specific liability may exceed the related non-cash expense, but not
on a cumulative last twelve month basis.
(b) Amounts include the effect of fluctuations in foreign currency.
Table 9
HERTZ GLOBAL HOLDINGS, INC.
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(In millions)
Unaudited
TOTAL NET CASH FLOW
Three Three
Months Months Six Months Six Months
Ended June Ended June Ended June Ended June
30, 2010 30, 2009 30, 2010 30, 2009
---------- ---------- ---------- ----------
Net cash provided by
operating activities $ 749.4 $ 513.9 $ 1,050.6 $ 698.4
Net cash provided by (used
in) investing activities (1,957.5) (913.9) (2,483.0) 83.0
Net change in restricted
cash 529.1 (142.5) 389.2 (543.8)
Payment of financing costs (23.7) (5.3) (25.0) (6.8)
Payment of debt offering
costs - (15.0) - (15.0)
Proceeds from exercise of
stock options 1.6 1.8 2.3 2.7
Proceeds from employee
stock purchase plan 0.6 0.6 1.2 1.4
Distributions to
noncontrolling interest (4.7) (5.3) (7.6) (8.0)
Proceeds from sale of stock
and conversion feature on
debt - 446.8 - 446.8
Proceeds from disgorgement
of stockholder short-swing
profits 0.1 - 0.1 -
Net settlement on vesting
of restricted stock (0.4) - (5.7) -
Cash overdraft reclass (40.3) (9.1) (49.7) (25.9)
---------- ---------- ---------- ----------
Total net cash flow $ (745.8) $ (128.0) $ (1,127.6) $ 632.8
========== ========== ========== ==========
Twelve Six
Months Months Six Months Year Ended
Ended June Ended June Ended June December
30, 2010 30, 2010 30, 2009 31, 2009
---------- ---------- ---------- ----------
Net cash provided by
operating activities $ 2,127.2 $ 1,050.6 $ 698.4 $ 1,775.0
Net cash provided by (used
in) investing activities (3,855.8) (2,483.0) 83.0 (1,289.8)
Net change in restricted
cash 564.3 389.2 (543.8) (368.7)
Payment of financing costs (63.2) (25.0) (6.8) (45.0)
Payment of debt offering
costs (0.3) - (15.0) (15.3)
Gain on extinguishment of
debt 48.5 - - 48.5
Proceeds from exercise of
stock options 4.9 2.3 2.7 5.3
Proceeds from employee
stock purchase plan 2.2 1.2 1.4 2.4
Distributions to
noncontrolling interest (14.7) (7.6) (8.0) (15.1)
Proceeds from sale of stock
and conversion feature on
debt 200.1 - 446.8 646.9
Proceeds from disgorgement
of stockholder short-swing
profits 0.1 0.1 - -
Net settlement on vesting
of restricted stock (7.9) (5.7) - (2.2)
Cash overdraft reclass (32.4) (49.7) (25.9) (8.6)
---------- ---------- ---------- ----------
Total net cash flow $ (1,027.0) $ (1,127.6) $ 632.8 $ 733.4
========== ========== ========== ==========
Twelve Six
Months Months Six Months Year Ended
Ended June Ended June Ended June December
30, 2009 30, 2009 30, 2008 31, 2008
---------- ---------- ---------- ----------
Net cash provided by
operating activities $ 2,233.9 $ 698.4 $ 1,008.7 $ 2,544.2
Net cash provided by (used
in) investing activities (332.5) 83.0 (1,492.8) (1,908.3)
Net change in restricted
cash 29.6 (543.8) (501.6) 71.8
Payment of financing costs (57.5) (6.8) (10.5) (61.2)
Payment of debt offering
costs (15.0) (15.0) - -
Proceeds from exercise of
stock options 3.9 2.7 5.6 6.8
Proceeds from employee
stock purchase plan 1.4 1.4 - -
Distributions to
noncontrolling interest (26.2) (8.0) (6.0) (24.2)
Proceeds from sale of stock
and conversion feature on
debt 446.8 446.8 - -
Proceeds from disgorgement
of stockholder short-swing
profits (0.1) - 0.1 -
Cash overdraft reclass (42.3) (25.9) (19.6) (36.0)
---------- ---------- ---------- ----------
Total net cash flow $ 2,242.0 $ 632.8 $ (1,016.1) $ 593.1
========== ========== ========== ==========
Exhibit 1
Non-GAAP Measures: Definitions and Use/Importance
Hertz Global Holdings, Inc. ("Hertz Holdings") is our top-level holding
company. The Hertz Corporation ("Hertz") is our primary operating company.
The term "GAAP" refers to accounting principles generally accepted in the
United States of America.
Definitions of non-GAAP measures utilized in Hertz Holdings' August 3, 2010
Press Release are set forth below. Also set forth below is a summary of the
reasons why management of Hertz Holdings and Hertz believes that the
presentation of the non-GAAP financial measures included in the Press
Release provide useful information regarding Hertz Holdings' and Hertz's
financial condition and results of operations and additional purposes, if
any, for which management of Hertz Holdings and Hertz utilize the non-GAAP
measures.
1. Earnings Before Interest, Taxes, Depreciation and Amortization
("EBITDA") and Corporate EBITDA
We present EBITDA and Corporate EBITDA to provide investors with
supplemental measures of our operating performance and liquidity and, in
the case of Corporate EBITDA, information utilized in the calculation of
the financial covenants under Hertz's senior credit facilities. EBITDA is
defined as consolidated net income before net interest expense,
consolidated income taxes and consolidated depreciation and amortization.
Corporate EBITDA differs from the term "EBITDA" as it is commonly used.
Corporate EBITDA means "EBITDA" as that term is defined under Hertz's
senior credit facilities, which is generally consolidated net income before
net interest expense (other than interest expense relating to certain car
rental fleet financing), consolidated income taxes, consolidated
depreciation (other than depreciation related to the car rental fleet) and
amortization and before certain other items, in each case as more fully
defined in the agreements governing Hertz's senior credit facilities. The
other items excluded in this calculation include, but are not limited to:
non-cash expenses and charges; extraordinary, unusual or non-recurring
gains or losses; gains or losses associated with the sale or write-down of
assets not in the ordinary course of business; and earnings to the extent
of cash dividends or distributions paid from non-controlled affiliates.
Further, the covenants in Hertz's senior credit facilities are calculated
using Corporate EBITDA for the most recent four fiscal quarters as a whole.
As a result, the measure can be disproportionately affected by a
particularly strong or weak quarter. Further, it may not be comparable to
the measure for any subsequent four-quarter period or for any complete
fiscal year.
Management uses EBITDA and Corporate EBITDA as performance and cash flow
metrics for internal monitoring and planning purposes, including the
preparation of our annual operating budget and monthly operating reviews,
as well as to facilitate analysis of investment decisions. In addition,
both metrics are important to allow us to evaluate profitability and make
performance trend comparisons between us and our competitors. Further, we
believe EBITDA and Corporate EBITDA are frequently used by securities
analysts, investors and other interested parties in the evaluation of
companies in our industries.
EBITDA is also used by management and investors to evaluate our operating
performance exclusive of financing costs and depreciation policies.
Further, because we have two business segments that are financed
differently and have different underlying depreciation characteristics,
EBITDA enables investors to isolate the effects on profitability of
operating metrics such as revenue, operating expenses and selling, general
and administrative expenses. In addition to its use to monitor performance
trends, EBITDA provides a comparative metric to management and investors
that is consistent across companies with different capital structures and
depreciation policies. This enables management and investors to compare our
performance on a consolidated basis and on a segment basis to that of our
peers. In addition, our management uses consolidated EBITDA as a proxy for
cash flow available to finance fleet expenditures and the costs of our
capital structure on a day-to-day basis so that we can more easily monitor
our cash flows when a full statement of cash flows is not available.
Corporate EBITDA also serves as an important measure of our performance.
Corporate EBITDA for our car rental segment enables us to assess our
operating performance inclusive of fleet management performance,
depreciation assumptions and the cost of financing our fleet. In addition,
Corporate EBITDA for our car rental segment allows us to compare our
performance, inclusive of fleet mix and financing decisions, to the
performance of our competitors. Since most of our competitors utilize
asset-backed fleet debt to finance fleet acquisitions, this measure is
relevant for evaluating our operating efficiency inclusive of our fleet
acquisition and utilization. For our equipment rental segment, Corporate
EBITDA provides an appropriate measure of performance because the
investment in our equipment fleet is longer-term in nature than for our car
rental segment and therefore Corporate EBITDA allows management to assess
operating performance exclusive of interim changes in depreciation
assumptions. Further, unlike our car rental segment, our equipment rental
fleet is not financed through separate securitization-based fleet financing
facilities, but rather through our corporate debt. Corporate EBITDA for our
equipment rental segment is a key measure used to make investment decisions
because it enables us to evaluate return on investments. For both segments,
Corporate EBITDA provides a relevant profitability metric for use in
comparison of our performance against our public peers, many of whom
publicly disclose a comparable metric. In addition, we believe that
investors, analysts and rating agencies consider EBITDA and Corporate
EBITDA useful in measuring our ability to meet our debt service obligations
and make capital expenditures. Several of Hertz's material debt covenants
are based on financial ratios utilizing Corporate EBITDA and non-compliance
with those covenants could result in the requirement to immediately repay
all amounts outstanding under those agreements, which could have a material
adverse effect on our results of operations, financial position and cash
flows.
EBITDA and Corporate EBITDA are not recognized measurements under GAAP.
When evaluating our operating performance or liquidity, investors should
not consider EBITDA and Corporate EBITDA in isolation of, or as a
substitute for, measures of our financial performance and liquidity as
determined in accordance with GAAP, such as net income, operating income or
net cash provided by operating activities. EBITDA and Corporate EBITDA may
have material limitations as performance measures because they exclude
items that are necessary elements of our costs and operations. Because
other companies may calculate EBITDA and Corporate EBITDA differently than
we do, EBITDA may not be, and Corporate EBITDA as presented is not,
comparable to similarly titled measures reported by other companies.
Borrowings under Hertz's senior credit facilities are a key source of our
liquidity. Hertz's ability to borrow under these senior credit facilities
depends upon, among other things, the maintenance of a sufficient borrowing
base and compliance with the financial ratio covenants based on Corporate
EBITDA set forth in the credit agreements for Hertz's senior credit
facilities. Hertz's senior term loan facility requires the maintenance of a
specified consolidated leverage ratio and a consolidated interest expense
coverage ratio based on Corporate EBITDA, while its senior asset-based loan
facility requires that a specified consolidated leverage ratio and
consolidated fixed charge coverage ratio be maintained for periods during
which there is less than $200 million of available borrowing capacity under
the senior asset-based loan facility. These financial covenants became
applicable to Hertz beginning September 30, 2006, reflecting the four
quarter period ending thereon. Failure to comply with these financial ratio
covenants would result in a default under the credit agreements for Hertz's
senior credit facilities and, absent a waiver or an amendment from the
lenders, permit the acceleration of all outstanding borrowings under the
senior credit facilities. As of June 30, 2010, we performed the
calculations associated with the above noted financial covenants and
determined that Hertz is in compliance with such covenants.
2. Adjusted Pre-Tax Income
Adjusted pre-tax income is calculated as income before income taxes plus
non-cash purchase accounting charges, non-cash debt charges relating to the
amortization of debt financing costs and debt discounts and certain
one-time charges and non-operational items. Adjusted pre-tax income is
important to management because it allows management to assess operational
performance of our business, exclusive of the items mentioned above. It
also allows management to assess the performance of the entire business on
the same basis as the segment measure of profitability. Management
believes that it is important to investors for the same reasons it is
important to management and because it allows them to assess the
operational performance of the Company on the same basis that management
uses internally.
3. Adjusted Net Income
Adjusted net income is calculated as adjusted pre-tax income less a
provision for income taxes derived utilizing a normalized income tax rate
(34% in 2010 and 2009) and noncontrolling interest. The normalized income
tax rate is management's estimate of our long-term tax rate. Adjusted net
income is important to management and investors because it represents our
operational performance exclusive of the effects of purchase accounting,
non-cash debt charges, one-time charges and items that are not operational
in nature or comparable to those of our competitors.
4. Adjusted Diluted Earnings Per Share
Adjusted diluted earnings per share is calculated as adjusted net income
divided by, for 2010, 410.0 million which represents the approximate number
of shares outstanding at December 31, 2009, and for 2009, 407.7 million
which represents the actual diluted weighted average number of shares
outstanding for the year ended December 31, 2008 plus 85 million shares
offered in the 2009 common stock offerings. Adjusted diluted earnings per
share is important to management and investors because it represents a
measure of our operational performance exclusive of the effects of purchase
accounting adjustments, non-cash debt charges, one-time charges and items
that are not operational in nature or comparable to those of our
competitors.
5. Transaction Days
Transaction days represent the total number of days that vehicles were on
rent in a given period.
6. Car Rental Rate Revenue, Rental Rate Revenue Per Transaction Day and
Rental Rate Revenue Per Transaction
Car rental rate revenue consists of all revenue, net of discounts,
associated with the rental of cars including charges for optional insurance
products, but excluding revenue derived from fueling and concession and
other expense pass-throughs, NeverLost units in the U.S. and certain
ancillary revenue. Rental rate revenue per transaction day is calculated as
total rental rate revenue, divided by the total number of transaction days,
with all periods adjusted to eliminate the effect of fluctuations in
foreign currency. Rental rate revenue per transaction is calculated as
total rental rate revenue, divided by the total number of transactions,
with all periods adjusted to eliminate the effects of fluctuations in
foreign currency. Our management believes eliminating the effect of
fluctuations in foreign currency is appropriate so as not to affect the
comparability of underlying trends. These statistics are important to
management and investors as they represent the best measurements of the
changes in underlying pricing in the car rental business and encompass the
elements in car rental pricing that management has the ability to control.
The optional insurance products are packaged within certain negotiated
corporate, government and membership programs and within certain retail
rates being charged. Based upon these existing programs and rate packages,
management believes that these optional insurance products should be
consistently included in the daily pricing of car rental transactions. On
the other hand, non-rental rate revenue items such as refueling and
concession pass-through expense items are driven by factors beyond the
control of management (i.e. the price of fuel and the concession fees
charged by airports). Additionally, NeverLost units are an optional
revenue product which management does not consider to be part of their
daily pricing of car rental transactions.
7. Equipment Rental and Rental Related Revenue
Equipment rental and rental related revenue consists of all revenue, net of
discounts, associated with the rental of equipment including charges for
delivery, loss damage waivers and fueling, but excluding revenue arising
from the sale of equipment, parts and supplies and certain other ancillary
revenue. Rental and rental related revenue is adjusted in all periods to
eliminate the effect of fluctuations in foreign currency. Our management
believes eliminating the effect of fluctuations in foreign currency is
appropriate so as not to affect the comparability of underlying trends.
This statistic is important to our management and to investors as it is
utilized in the measurement of rental revenue generated per dollar invested
in fleet on an annualized basis and is comparable with the reporting of
other industry participants.
8. Same Store Revenue Growth/Decline
Same store revenue growth/decline represents the change in the current
period total same store revenue over the prior period total same store
revenue as a percentage of the prior period. The same store revenue amounts
are adjusted in all periods to eliminate the effect of fluctuations in
foreign currency. Our management believes eliminating the effect of
fluctuations in foreign currency is appropriate so as not to affect the
comparability of underlying trends.
9. Unlevered Pre-Tax Cash Flow
Unlevered pre-tax cash flow is calculated as Corporate EBITDA less
equipment rental fleet depreciation including gain (loss) on sale,
non-fleet capital expenditures, net of non-fleet disposals, plus changes in
working capital (accounts receivable, inventories, prepaid expenses,
accounts payable and accrued liabilities), and changes in other assets and
liabilities (including public liability and property damage, U.S. pension
liability, other assets and liabilities, equity and noncontrolling
interest). Unlevered pre-tax cash flow is important to management and
investors as it represents funds available to pay corporate interest and
taxes and to grow our fleet or reduce debt.
10. Levered After-Tax Cash Flow Before Fleet Growth
Levered after-tax cash flow before fleet growth is calculated as Unlevered
Pre-Tax Cash Flow less corporate net cash interest and corporate cash
taxes. Levered after-tax cash flow before fleet growth is important to
management and investors as it represents the funds available to grow our
fleet or reduce our debt.
11. Corporate Net Cash Interest (used in the calculation of Levered
After-Tax Cash Flow Before Fleet Growth)
Corporate net cash interest represents total interest expense, net of total
interest income, less car rental fleet interest expense, net of car rental
fleet interest income, and non-cash corporate interest charges. Non-cash
corporate interest charges represent the amortization of corporate debt
financing costs and corporate debt discounts. Corporate net cash interest
helps management and investors measure the ongoing costs of financing the
business exclusive of the costs associated with the fleet financing.
12. Corporate Cash Taxes (used in the calculation of Levered After-Tax Cash
Flow Before Fleet Growth)
Corporate cash taxes represents cash paid by the Company during the period
for income taxes.
13. Levered After-Tax Cash Flow After Fleet Growth
Levered after-tax cash flow after fleet growth is calculated as Levered
After-Tax Cash Flow Before Fleet Growth less equipment rental fleet growth
capital expenditures and less gross car rental fleet growth capital
expenditures plus car rental fleet financing. Levered after-tax cash flow
after fleet growth is important to management and investors as it
represents the funds available for the reduction of corporate debt.
14. Net Corporate Debt
Net corporate debt is calculated as total debt excluding fleet debt less
cash and equivalents and corporate restricted cash. Corporate debt
consists of senior notes issued prior to the acquisition of all of Hertz's
common stock on December 21, 2005; borrowings under our Senior Term
Facility; borrowings under our Senior ABL Facility; our Senior Notes; our
Senior Subordinated Notes; our 5.25% Convertible Senior Notes and certain
other indebtedness of our domestic and foreign subsidiaries. Net Corporate
Debt is important to management, investors and ratings agencies as it helps
measure our leverage. Net Corporate Debt also assists in the evaluation of
our ability to service our non-fleet-related debt without reference to the
expense associated with the fleet debt, which is fully collateralized by
assets not available to lenders under the non-fleet debt facilities.
15. Corporate Restricted Cash (used in the calculation of Net Corporate
Debt)
Total restricted cash includes cash and cash equivalents that are not
readily available for our normal disbursements. Total restricted cash and
equivalents are restricted for the purchase of revenue earning vehicles and
other specified uses under our Fleet Debt facilities, our like-kind
exchange programs and to satisfy certain of our self insurance regulatory
reserve requirements. Corporate restricted cash is calculated as total
restricted cash less restricted cash associated with fleet debt.
16. Net Fleet Debt
Net fleet debt is calculated as total fleet debt less restricted cash
associated with fleet debt. As of June 30, 2010, fleet debt consists of
our U.S. ABS Fleet Debt, the Fleet Financing Facility, Capital Leases
relating to revenue earning equipment, the International ABS Fleet
Financing Facility, the Brazilian Fleet Financing Facility, the Canadian
Fleet Financing Facility, Euro Notes, European Credit Facility and the
pre-Acquisition ABS Notes. This measure is important to management,
investors and ratings agencies as it helps measure our leverage.
17. Restricted Cash Associated with Fleet Debt (used in the calculation of
Net Fleet Debt and Corporate Restricted Cash)
Restricted cash associated with fleet debt is restricted for the purchase
of revenue earning vehicles and other specified uses under our Fleet Debt
facilities and our car rental like-kind exchange program.
18. Total Net Debt
Total net debt is calculated as net corporate debt plus net fleet debt.
This measure is important to management, investors and ratings agencies as
it helps measure our leverage.
19. Total Net Cash Flow
Total net cash flow is calculated as the change in the debt balances less
the change in cash and equivalents and restricted cash, adjusted for the
effects of foreign currency. Total net cash flow is important to
management, investors and rating agencies as it represents funds available
to grow our fleet or reduce our debt.