ESTERO, Fla., May 14, 2015 /PRNewswire/ -- Hertz Global
Holdings, Inc. (NYSE: HTZ) ("Hertz" or "the Company") today
released 2015 first quarter operating results and updated the
status of its fleet renewal and capacity plans, $200 million annual cost reduction program,
senior management hiring initiatives and financial restatement
process.
John P. Tague, President and
Chief Executive Officer of Hertz, said, "While the first quarter
financial results were unsatisfactory, we have made progress that
will lead to a stronger second half performance in 2015 and
position us well for 2016. We are on a clear path toward improving
our revenue execution capabilities, modernizing and aligning our
fleet more closely with demand trends, and pursuing our previously
announced cost savings opportunities. While we anticipate the
second quarter performance will continue to be challenging, by year
end we expect that the actions we have made in each of these key
areas will give us significant momentum as we work toward realizing
our full potential."
During the first quarter, the Company made progress in the
following areas:
- The U.S. fleet has been significantly renewed since late
September with a 47% improvement in the number of vehicles at or
below 30,000 miles.
- An aggressive disposition program as well as new fleet
acquisitions have culminated in improved product quality.
- Customer confidence is returning as a result of the younger
fleet and investments in service delivery. Hertz's U.S. car rental
Net Promoter Score, a measure of customer satisfaction, eclipsed
last year's level and continues to improve.
- Hertz has further strengthened its leadership team by adding
expertise in the areas of revenue management, sales, customer
service, information technology, and fleet and procurement, which
will enable the Company to deliver on its performance improvement
plan.
- Data management and forecasting systems have been enhanced for
more reliable visibility to fleet, pricing and demand trends.
- The cost structure is improving as the Company has made
significant progress toward its goal of delivering $200 million in annualized cost savings by year
end 2015.
As part of the Company's continued, comprehensive review of the
profitability of its operations, it has conducted a
location-by-location assessment of its U.S. off-airport retail
store profitability. While the Company remains committed to
its off-airport operation, by the end of the 2015 second quarter,
it will have closed approximately 200 stores, representing 5% of
the total off-airport locations and less than 1% of the vehicle
fleet. Closing these stores will result in approximately
$10 million in annual savings. The
Company will continue to rigorously review new store openings
and the ongoing profitability of the existing locations on a
quarterly basis.
FINANCIAL STATEMENT RESTATEMENT
As previously announced, the previously issued financial
statements must be restated and should no longer be relied upon. As
a result of the completion of Management's examination of
additional accounts in connection with our accounting review and
investigation, the Company has identified an additional
$30 million in errors above that
which had been previously identified. As a result, the impact on
GAAP pre-tax income of cumulative errors identified to date, on an
unaudited basis, is approximately $42
million, $85 million and
$56 million for 2013, 2012 and 2011,
respectively, inclusive of $9 million
in 2012 and $19 million in 2011,
previously disclosed and reflected in the financials included in
the Company's 2013 Form 10-K/A. The review and investigation of the
Company's financial records are ongoing, and amounts are therefore
subject to change. The financial information set forth in this
release is subject to change based on the completion of the
investigation and review, and such changes may be significant.
The Company anticipates filing a Form 10-K for 2014 that will
contain audited restated financial statements for 2012 and 2013 and
audited financial statements for 2014, as well as selected restated
financial information for 2011. This 2014 Form 10-K will also
contain quarterly information for the quarters in 2014 and we
intend to seek waivers from certain of our lenders in connection
with using this format. Hertz continues to expect that it will not
be able to file this 2014 Form 10-K, as well as its first quarter
2015 Form 10-Q, before mid-2015, and there can be no assurance that
the process will be completed at that time, or that no additional
adjustments will be identified.
2015 FIRST QUARTER OPERATING HIGHLIGHTS
U.S. Car Rental
Total U.S. car rental revenue was
$1.5 billion in the 2015 first
quarter, down 3% from the 2014 first quarter as a result of a 1%
decline in transaction days and a 2% decline in Total Revenue Per
Day (Total RPD). Excluding lower fuel prices on ancillary revenue,
Total RPD was down 1% compared to the 2014 first quarter.
The U.S. car rental Total RPD decline was driven predominantly
by lower fuel-related ancillary revenue, a higher mix of
off-airport business and a lower mix of higher-rate international
inbound business. Excluding the impact of the lower fuel
prices and adjusting for the airport and off-airport volume mix,
Total RPD was flat compared with the 2014 first quarter.
Transaction days were impacted by a decrease in airport rental
volume, driven largely by lower discretionary leisure rentals,
disruptions from winter storms, and lower international inbound
tour business. The lower airport volume was partially offset
by an increase in off-airport volume.
Based on expected industry demand and associated capacity needs,
Hertz has moderated its calendar 2015 U.S. fleet plan to reflect a
capacity increase of 1.5% to 2.5% over 2014 levels. The Company is
committed to maintaining supply consistent with correlated demand
drivers, such as GDP and airline passenger volume.
To achieve its targeted supply growth in calendar 2015, Hertz
will reduce the amount of new model year 2015 vehicles purchased
and increase the amount of vehicles sold out of the existing
inventory. In keeping with the revised capacity plan, in the first
quarter the Company disposed of 43% more used vehicles compared
with the prior year, of which 67% were sold through alternative
disposition channels.
For the 2015 first quarter, the Company expects that U.S. car
rental monthly depreciation will be within a range of $290 to $300 per unit. U.S. fleet efficiency was
approximately 73% in the 2015 first quarter, unchanged from a year
ago.
Based on our revised fleet capacity plan combined with expected
strong seasonal demand, the Company implemented a broad-based price
increase for its Hertz, Dollar and Thrifty brands at U.S. rental
locations for pick ups starting on June 14, 2015, and for all
dates forward. U.S. airport retail car rentals increased
$5 per day and $20 per week. Off-airport retail car rentals
increased $3 per day and $10 per week. Weekend rates also reflect price
increases of $5 per day for airport
rentals and $3 per day for
off-airport rentals.
International Car Rental
International car rental
segment revenue was $436 million,
down 9% in the first quarter due to negative currency translation,
but up 5% excluding currency effects, compared to the 2014 first
quarter. Total International transaction days were up 4% on a 1%
increase in Total RPD, excluding currency effects. Excluding lower
fuel prices on ancillary revenue and currency effects, Total
International RPD was up 2% compared to the 2014 first quarter.
Europe revenue, which
represents 67% of International revenue, was up 7% as compared to
the prior-year period, excluding currency effects. Europe transaction days increased 5% on strong
demand in Spain, Italy and the UK. Total RPD increased 1% in
the quarter, excluding currency effects, driven mainly by an
improved business mix from U.S.-source rentals. Excluding the
impact of fuel and currency effects, Europe Total RPD was up
3%.
The Asia Pacific operation,
which is primarily comprised of Australia and New
Zealand, reported 4% year-over-year revenue growth before
currency effects driven by a 3% increase in transaction days and a
1% increase in Total RPD, excluding currency effects.
International fleet capacity is expected to be up 1% to 2%
compared with 2014.
For the 2015 first quarter, the Company expects that
International segment monthly depreciation per vehicle will be
within a range of $230 to $240 per
unit. International fleet efficiency improved by nearly 200 basis
points to approximately 75% in the 2015 first quarter.
Worldwide Equipment Rental
Worldwide equipment rental
segment revenue of $355 million
decreased 1% in the 2015 first quarter, but was up 2% excluding
currency effects, compared with the prior year. Worldwide rental
and rental-related revenue was flat in the first quarter due to
negative currency exchange rates, but grew 3% excluding currency
effects.
In North America in the first
quarter, total equipment rental revenue remained flat at
$334 million year-over-year, but was
3% higher excluding currency effects. Revenue growth was tempered
by accelerating weakness in oil and gas regions as well as a lower
level of new equipment and parts sales. Of total North American
equipment rental revenue, the U.S. represented 82% with
Canada making up the balance.
North America rental and
rental-related revenue increased 1%, but was up 3% excluding
currency effects. Volume in North
America increased 4% in the 2015 first quarter. Equipment
rental pricing was 2% higher compared with the 2014 first quarter.
North American time utilization was 62% which was flat year over
year. Dollar utilization at 35% was also flat year over year in the
first quarter.
Upstream oil and gas revenue represented roughly 15% of North
American equipment rental and rental-related revenue in the first
quarter of 2015. Upstream revenue was down 13% in the first
quarter, excluding currency effects, as major oil producers reduce
spending. In contrast, all other North American rental and
rental-related revenue increased 6% excluding currency effects.
Brian MacDonald, President and
Chief Executive Officer of Hertz Equipment Rental Corporation,
said, "The pressure from upstream oil and gas weakness came on
faster than our internal forecast, impacting both revenue and
profitability in the latest quarter. Our exposure in Northern Alberta, West Texas and Oklahoma is overshadowing the progress we have
made in diversifying our top line into growth markets. As a result,
we are reducing operating costs and capital spending to reflect our
revised demand outlook."
Hertz Equipment Rental Corporation Separation
Hertz remains committed to the separation of its equipment rental
business and is continuing to advance those plans, although the
actual separation will not occur until after the Company has
completed its accounting review, filed its financial statements
with the SEC, and has completed the audited carve out financial
statements for the equipment rental business and requisite SEC
filing activities for the separation.
All Other Operations
The Company has grouped
information about Donlen fleet leasing and management services
together with its other business activities under "all other
operations." All other operations first quarter segment revenue
increased 4% over the same period last year. The Company's Donlen
leasing operation's revenue was up 4% year over year.
FIRST QUARTER 2015 CORPORATE EBITDA ESTIMATE
Although the Company is still working to determine how the
accounting issues will impact its profitability for 2015, the
Company expects its consolidated Corporate EBITDA for the first
quarter will likely be between $200 million
and $215 million.
As previously stated, 2015 will represent a transitional year
for the Company and therefore will not reflect the full potential
of the business.
2015 FOREIGN CURRENCY EFFECTS
The Company does not hedge its operating results against
currency movements as they are primarily translational in nature.
At foreign currency forward rates as of April 1, 2015, the Company expects currency
translation to negatively impact full year 2015 revenue growth by
approximately 4.5% or $485 million
versus 2014. Currency translation effects are expected to
negatively impact 2015 Corporate EBITDA by approximately
$85 million versus 2014.
NET PROPERTY AND EQUIPMENT EXPENDITURES
Net property and equipment expenditures were $79 million in the latest quarter. The Company
expects full year 2015 non-fleet capital expenditures will be
between $275 million and $295
million, which is lower than the 2014 spend, and includes
approximately $70 million to complete
the build out of the Company's new headquarters facility by year
end.
For the first quarter ended March 31,
2015, the Company is providing the following operating
highlights:
Unaudited Revenue
and Selected Operating Data by Segment*
|
|
|
|
Three Months
Ended
March
31,
|
|
Percent
Increase/
(Decrease)
|
(in millions,
except Total RPD)
|
2015
|
|
2014
|
|
Consolidated
Revenues
|
$
|
2,441
|
|
|
$
|
2,527
|
|
|
(3)%
|
|
|
|
|
|
|
U.S. Car Rental
Segment
|
|
|
|
|
|
Total
Revenue
|
$
|
1,507
|
|
|
$
|
1,550
|
|
|
(3)%
|
Transaction Days (in
thousands)
|
32,036
|
|
|
32,360
|
|
|
(1)%
|
Total RPD
|
$
|
47.04
|
|
|
$
|
47.90
|
|
|
(2)%
|
Average
Fleet
|
489,300
|
|
|
491,500
|
|
**
|
—%
|
International Car
Rental Segment
|
|
|
|
|
|
Total
Revenue
|
$
|
436
|
|
|
$
|
481
|
|
|
(9)%
|
Foreign Currency
Adjustment***
|
23
|
|
|
(45)
|
|
|
NM
|
Revenue for Total
RPD
|
$
|
459
|
|
|
$
|
436
|
|
|
5%
|
Transaction Days (in
thousands)
|
9,775
|
|
|
9,395
|
|
|
4%
|
Total RPD
|
$
|
46.96
|
|
|
$
|
46.41
|
|
|
1%
|
Average
Fleet
|
144,000
|
|
|
141,400
|
|
|
2%
|
Worldwide
Equipment Rental
|
|
|
|
|
|
Total
Revenue
|
$
|
355
|
|
|
$
|
358
|
|
|
(1)%
|
Less: Equipment Sales
and Other
|
(23)
|
|
|
(26)
|
|
|
(12)%
|
Foreign Currency
Adjustment***
|
4
|
|
|
(6)
|
|
|
NM
|
Rental and
Rental-Related Revenue
|
$
|
336
|
|
|
$
|
326
|
|
|
3%
|
Average acquisition
cost of rental equipment operated during the period
|
$
|
3,500
|
|
|
$
|
3,512
|
|
|
—%
|
All Other
Operations
|
|
|
|
|
|
Total
Revenue
|
$
|
143
|
|
|
$
|
138
|
|
|
4%
|
Average Fleet
(Donlen)
|
168,600
|
|
|
176,800
|
|
|
(5)%
|
NM - Not
Meaningful
|
* Preliminary unaudited
results; actuals subject to change upon completion of the Financial
Statement Restatement.
|
** 2014
Q1 US car rental average fleet includes 11,000 and 1,000 Advantage
sublease and Hertz On Demand vehicles, respectively, that do not
correspondingly have transaction days associated with them and thus
are excluded when calculating fleet efficiency.
|
*** Amounts shown are
based on December 31, 2014 foreign exchange rates.
|
Selected Unaudited
Financial Information*
|
|
|
|
|
Three Months
Ended
March
31,
|
(in
millions)
|
2015
|
|
2014
|
Net Capital
Expenditures:**
|
|
|
|
Net Revenue Earning
Equipment Expenditures
|
|
|
|
U.S. Car
Rental
|
$
|
1,038
|
|
|
$
|
568
|
|
International Car
Rental
|
(150)
|
|
|
(100)
|
|
Worldwide Equipment
Rental
|
56
|
|
|
88
|
|
All Other
Operations
|
160
|
|
|
164
|
|
Total Net Revenue
Earning Equipment Expenditures
|
1,104
|
|
|
720
|
|
Net Property and
Equipment Expenditures
|
79
|
|
|
57
|
|
Total Net Capital
Expenditures
|
$
|
1,183
|
|
|
$
|
777
|
|
|
|
|
|
Debt:
|
March 31,
2015
|
|
December 31,
2014
|
Corporate
Debt
|
$
|
6,434
|
|
|
$
|
6,431
|
|
Fleet Debt
|
9,917
|
|
|
9,562
|
|
Total Debt
|
$
|
16,351
|
|
|
$
|
15,993
|
|
|
|
|
|
Liquidity:
|
March 31,
2015
|
|
December 31,
2014
|
Senior ABL Facility
Borrowing Capacity and Availability
|
$
|
933
|
|
|
$
|
1,019
|
|
Cash and Cash
Equivalents
|
594
|
|
|
521
|
|
Corporate
Liquidity
|
$
|
1,527
|
|
|
$
|
1,540
|
|
*
Preliminary unaudited results; actuals subject to change upon
completion of the Financial Statement Review.
|
** Amounts
represent capital expenditures net of (proceeds from
disposals).
|
ABOUT HERTZ
Hertz operates the Hertz, Dollar, Thrifty and Firefly car rental
brands in more than 10,300 corporate and licensee locations
throughout approximately 145 countries in North America, Europe, Latin
America, Asia, Australia, Africa, the Middle
East and New Zealand. Hertz is the largest worldwide
airport general use car rental company with more than 1,600 airport
locations in the U.S. and more than 1,300 airport locations
internationally. Product and service initiatives such as
Hertz Gold Plus Rewards, NeverLost®, Carfirmations, Mobile
Wi-Fi and unique vehicles offered through the Adrenaline, Dream,
Green and Prestige Collections set Hertz apart from the
competition. Additionally, Hertz owns the vehicle leasing and
fleet management leader Donlen Corporation, operates the Hertz 24/7
hourly car rental business and sells vehicles through its Rent2Buy
program. The Company also owns Hertz Equipment Rental
Corporation ("HERC"), one of the largest equipment rental
businesses with more than 350 locations worldwide offering a
diverse line of equipment and tools for rent and sale. HERC
primarily serves the construction, industrial, oil, gas,
entertainment and government sectors. For more information
about Hertz, visit: www.hertz.com.
NON-GAAP FINANCIAL MEASURES
Corporate EBITDA is a non-GAAP financial measure. Management
believes that Corporate EBITDA is useful in measuring the
comparable results of the Company period-over-period. The GAAP
measure most directly comparable to Corporate EBITDA is pre-tax
income. Because we are still working through the impact that the
accounting issues will have on the Company's preliminary pre-tax
income, specific quantifications or ranges of the amounts that
would be required to reconcile Corporate EBITDA are not available.
The Company believes that until it finalizes its accounting review
and audit there is a degree of volatility with respect to certain
of the Company's GAAP measures, certain adjustments made to arrive
at the relevant non-GAAP measures and the adjustments related to
the ongoing restatement, which preclude the Company from providing
accurate GAAP to non-GAAP reconciliations for the first quarter of
2015. 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 to preliminary first quarter
2015 pre-tax income would imply a degree of precision that would be
confusing or misleading to investors for the reasons identified
above. Once the accounting review and audit have been
completed, and the Company has determined its Corporate EBITDA for
the first quarter of 2015, a full reconciliation of its first
quarter 2015 Corporate EBITDA to pre-tax income will be provided in
the Company's Form 10-Q for the fiscal quarter ended March 31, 2015.
CAUTIONARY NOTE CONCERNING FORWARD LOOKING
STATEMENTS
Certain statements contained in this release, and in related
comments by the Company's management, include "forward-looking
statements." Forward-looking statements include information
concerning the Company's liquidity and its possible or assumed
future results of operations, including descriptions of its
business strategies. These statements often include words such as
"believe," "becoming," "expect," "project," "potential,"
"preliminary," "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 it believes are
appropriate in these circumstances. The Company believes these
judgments are reasonable, but you should understand that these
statements are not guarantees of performance or results, and the
Company's actual results could differ materially from those
expressed in the forward-looking statements due to a variety of
important factors, both positive and negative, that may be revised
or supplemented in subsequent reports on SEC Forms 10-K, 10-Q and
8-K. Some important factors that could affect the Company's
actual results include, among others, the thorough review and
investigation of the Company's internal financial records that is
being conducted, additional time that may be required to complete
the review, the ability of the Company to remediate any material
weaknesses in its internal control over financial reporting, the
ability of the Company's lenders to exercise any remedies under the
Company's indebtedness, the final results of the SEC's inquiry or
any other governmental inquiries or investigations, and those that
may be disclosed from time to time in subsequent reports filed with
the SEC and those described under "Risk Factors" set forth in Item
1A of the annual report on Form 10-K/A for the year ended
December 31, 2013 of the
Company. You should not place undue reliance on
forward-looking statements. All forward-looking statements
attributable to the Company or persons acting on its 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.
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SOURCE Hertz Global Holdings, Inc.