ESTERO, Fla., July 16, 2015 /PRNewswire/ -- Hertz Global
Holdings, Inc. (NYSE: HTZ) ("Hertz" or "the Company") today
announced that it has filed its Annual Report on Form 10-K for the
fiscal year ending December 31, 2014,
which includes the restated results for 2012 and 2013 as well as
selected unaudited restated financial information for 2011.
In addition, the Company has filed its Quarterly Report on Form
10-Q for the period ending March 31,
2015. The Company is now up to date on all of its filings
with the Securities and Exchange Commission (the "SEC") and with
its NYSE listing requirements.
Hertz also announced today progress on its planned separation of
its equipment rental business (Hertz Equipment Rental Corporation
or "HERC") as well as its capital allocation, cost savings,
capacity plans and fleet refresh.
John Tague, Hertz president and
chief executive officer, said, "Today's filings are an important
step forward, and our attention is now on realizing Hertz's full
potential. While much work remains, I thank the Hertz team
for their efforts to bring our filings up to date while continuing
to remain focused on our customers and our future.
"Going forward, we are committed to developing a differentiated
customer experience and premium brand position for Hertz that is
number one in the industry, while revitalizing Dollar and Thrifty
into leading value brands. We aspire to be the best rental
car company in the world, recognized for the quality and
convenience of our products and services, as well as the value we
will create for shareholders.
"2015 is a transition year for Hertz. We are making
important investments in our fleet, systems and service, and adding
new talent to complement the existing expertise throughout the
Company. In addition, we are taking actions to rationalize the
Company's cost platform, dramatically improve customer satisfaction
and reset our capacity. These actions and early results are
indicative of the progress we are making across the organization.
Our commitment to the Company's share buyback program is reflective
of our confidence in driving operating performance that is
sustainable and enables us to return capital to shareholders."
Financial Restatement
As discussed in the Form 10-K filed today, the Company
identified accounting misstatements for the years 2011 through
2013. The following information summarizes the impact of
misstatements identified.
(In
millions)
|
Year Ended
December 31,
|
|
(Unaudited)
|
|
Increase/(Decrease)*
|
|
2011
|
2012
|
2013
|
As originally
filed
|
|
|
|
GAAP pre-tax
income
|
$324
|
$451
|
$663
|
GAAP net income
attributable to Hertz
|
$176
|
$243
|
$346
|
|
|
|
|
Misstatements
previously disclosed and included in the originally filed
10-K/A**
|
|
|
|
GAAP pre-tax
income
|
$(19)
|
$(9)
|
N/A
|
GAAP net income
attributable to Hertz
|
$(12)
|
$(4)
|
N/A
|
|
|
|
|
Additional
misstatements identified
|
|
|
|
GAAP pre-tax
income
|
$(54)
|
$(81)
|
$(72)
|
GAAP net income
attributable to Hertz
|
$(19)
|
$(58)
|
$(51)
|
|
|
|
|
Cumulative
misstatements (Misstatements previously revised in 10-K/A plus
additional errors identified)***
|
|
|
|
GAAP pre-tax
income
|
$(73)
|
$(90)
|
$(72)
|
GAAP net income
attributable to Hertz
|
$(31)
|
$(62)
|
$(51)
|
|
|
|
|
Cumulative
misstatements as a %
|
|
|
|
GAAP pre-tax
income
|
(23)%
|
(20)%
|
(11)%
|
|
|
|
|
GAAP net income
attributable to Hertz
|
(18)%
|
(26)%
|
(15)%
|
|
|
|
|
*Increase/Decrease
associated with misstatements and impact to GAAP pre-tax and GAAP
net income
** Amounts recorded
as a revision in the 2013 Form 10-K/A.
*** In addition, $114
and $87 in errors reducing GAAP pre-tax income and GAAP net income,
respectively, related to periods prior to 2011 were recorded as a
cumulative adjustment to opening retained earnings for 2011.
Of these amounts, $7 and $5 GAAP pre-tax and GAAP net income,
respectively, were recorded in the 2013 Form 10-K/A as a
revision.
|
|
|
|
The Form 10-K filed today contains audited restated financial
information for 2012 and 2013, audited financial information for
2014, and unaudited restated selected financial information for
2011. This Form 10-K also contains quarterly information for
the quarters in 2013, as restated, and 2014. The Form 10-Q
filed today contains quarterly information for the first quarter of
2015.
The Company noted that the filing of its Form 10-K cures the
filing deficiency notice from the New York Stock Exchange (the
"NYSE") as reported on March 24,
2015, and brings Hertz back into compliance with the NYSE
listing requirements.
$1 Billion Share Repurchase
Program
The Company reaffirmed its commitment to its previously
announced $1 billion share repurchase
program, and outlined its intent to execute consistent with
announced year-end leverage targets, cash flow generation and other
actions such as the contemplated sale of HERC operations in
France and Spain, and the ultimate spin off of HERC.
Hertz Equipment Rental Corporation Separation
Hertz remains committed to the separation of its equipment
rental business. With the Company's financial restatement
finalized, Hertz is now focused on completing the audited carve out
financial statements for HERC and requisite SEC filing activities
for the separation.
Net cash received in connection with the HERC separation will be
used to pay down Hertz debt and support additional share
repurchases.
At separation, it is expected that HERC will have a leverage
ratio of 3.5x to 4.0x net debt / Corporate EBITDA. HERC
expects to focus its capital allocation on fleet investment to
drive growth, opportunistic acquisitions and debt reduction.
The Company has put in place new leadership at HERC that is
focused on delivering performance improvement in the core business
and enabling profitable growth.
Capital Structure for Hertz Following HERC Separation
Post HERC separation, Hertz expects to have a year-end target
net corporate leverage ratio of between 2.5x to 3.5x net corporate
debt / Corporate EBITDA. The Company believes that this
target will support its existing credit rating while providing the
financial strength and flexibility to execute on planned
technology, customer experience and brand investments.
Cost Reduction Program
In late 2014, the Company established an annualized cost savings
goal of $100 million by year-end
2015. It subsequently increased that goal to $200 million in February 2015. As a result
of the Company's ongoing efforts to optimize costs and increase
operating efficiencies, Hertz now expects to achieve $300 million in annualized cost savings by
year-end 2015, with approximately $200
million being realized in calendar year 2015.
The identified cost savings are expected to come largely from
reductions in corporate and operations overhead, fleet management
efficiency, and disciplined sales and marketing spending.
Hertz expects to incur $30 million to
$35 million of costs in 2015 in connection with these
actions, of which $5 million to $10
million will be reflected in adjusted pre-tax income in
2015.
The Company's cost and operations review is ongoing, with the
potential for additional savings as a result of technology-enabled
efficiencies as well as other opportunities to improve productivity
and effectiveness across the Company.
U.S. Car Rental
The Company is continuing to make progress on its work to
modernize and align its car rental fleet more closely with customer
demand and to improve its revenue execution capabilities:
- Additional reductions in fleet capacity growth:
Hertz now expects full-year 2015 U.S. fleet growth of 0.5% to 1.5%
over 2014 compared to its previous estimate of 1.5% to 2.5%. This
reduction is, in part, enabled by improvements in fleet
utilization.
- Fleet refresh target realized: Hertz has largely
met its 2015 average fleet mileage targets through an aggressive
disposal program as well as new fleet acquisitions. As a result,
the Company's net promoter score related to vehicle condition, a
key measure of customer satisfaction, is now higher than both 2013
and 2014 levels.
- Systems capability enhancements: Data management
and forecasting systems have been enhanced to provide better
visibility into fleet, pricing and demand trends.
- New talent complements existing expertise: Hertz
has further strengthened its leadership team by adding expertise in
the areas of revenue management, sales, customer service,
information technology, human resources and fleet and procurement,
which will enable the Company to deliver on its performance
improvement plan.
Outlook
For the full year 2015, the Company forecasts the following:
|
Full Year 2015
Forecast
|
Consolidated
Corporate EBITDA
|
$1,450M -
$1,550M
|
HERC Corporate
EBITDA
|
$575M -
$625M
|
U.S. RAC Monthly
Depreciation per unit
|
$295 -
$305
|
U.S. RAC fleet
capacity growth1
|
0.5% -
1.5%
|
Net non-fleet
capex
|
$275M -
$295M
|
1 Excludes Advantage sublease and Hertz 24/7
vehicles
"We indicated in May that the second quarter performance would
be a continuation of the challenges we faced in the first three
months of the year, which is consistent with our expectation," said
Tague. "This is a transition year, and we are not going to be
satisfied with the results quarter-by-quarter. Progress on
our initiatives to reduce capacity, meet our fleet refresh targets
and capture cost savings will be evident in the third quarter,
which we believe will be an inflection point for the year.
And of course, we expect those benefits to become progressively
more visible in 2016."
Conference Call and Webcast at 8 a.m.
ET
Hertz will hold a conference call on Friday, July 17, 2015 at 8
a.m. ET to discuss today's news. To access the
conference call live, dial 800-230-1074 in the U.S. and
612-234-9960 for international callers using the passcode: 364881
or listen via webcast at IR.Hertz.com.
The conference call will be available for replay one hour
following the conclusion of the call until August 17, 2015 by calling 800-475-6701 in the
U.S. or 320-365-3844 for international callers with the passcode:
364881.
The press release and slide presentation will be available on
the Company's website, IR.Hertz.com.
Upcoming 2015 Events
The Company expects to announce its second quarter 2015 results
in August. The date and time for the associated conference
call and webcast will be announced shortly.
Hertz also expects to host an investor day in November 2015 to introduce its new leadership and
management team and provide additional details on its performance
improvement plan. The date, time and location for this
meeting will be forthcoming.
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
EBITDA, Corporate EBITDA, net corporate debt, net debt and
monthly depreciation per unit are non-GAAP financial
measures. Management believes that EBITDA and Corporate
EBITDA are useful in measuring the comparable results of the
Company period-over-period. The GAAP measure most directly
comparable to EBITDA and Corporate EBITDA is pre-tax income. Net
corporate debt is calculated as total debt excluding fleet debt
less cash and equivalents and corporate restricted cash. Corporate
debt consists of our Senior Term Facility; Senior ABL Facility;
Senior Notes; and certain other indebtedness of our domestic and
foreign subsidiaries. For HERC, net debt is calculated as total
debt less cash and equivalents and corporate restricted cash. Net
corporate debt and net debt are 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. Monthly depreciation per unit is important as
depreciation of revenue earning equipment and lease charges is one
of our largest expenses for the car rental business and monthly
depreciation per unit is reflective of how we are managing the
costs of our fleet. The GAAP measure most directly comparable
to monthly depreciation per unit is depreciation of revenue earning
equipment and lease charges, net.
The Company believes that there is a degree of volatility with
respect to certain of the Company's GAAP measures, in the case of
EBITDA and Corporate EBITDA, 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, and in the case of monthly depreciation per unit
primarily related to estimated residual values and fleet size and
composition, 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 EBITDA or
Corporate EBITDA to forecasted pre−tax income or non-GAAP monthly
depreciation per unit to depreciation of revenue earning equipment
and lease charges, net, would imply a degree of precision that
would be confusing or misleading to investors for the reasons
identified above.
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.
Among other items, such factors could include: the effect of the
restatement of our previously issued financial results and any
claims, investigations or proceedings arising as a result; our
ability to remediate material weaknesses in our internal controls
over financial reporting; levels of travel demand, particularly
with respect to airline passenger traffic in the United States and in global markets; the
effect of our proposed separation of our equipment rental business
and ability to obtain the expected benefits of any related
transaction; 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; occurrences that disrupt rental activity during
our peak periods; 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 and mix 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; our
ability to integrate the car rental operations of Dollar Thrifty
and realize operational efficiencies from the acquisition; our
ability to maintain access to third-party distribution channels,
including current or favorable prices, commission structures and
transaction volumes; the operational and profitability impact of
the divestitures that we agreed to undertake in order to secure
regulatory approval for the acquisition of Dollar Thrifty; an
increase in our fleet costs or disruption to our rental activity,
particularly during our peak periods, due to 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,
which could impact their ability to perform under agreements with
us and/or their willingness or ability to make cars available to us
or the rental car industry on commercially reasonable terms; any
impact on us from the actions of our licensees, franchisees,
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
acquisitions and complete dispositions; our ability to maintain
favorable brand recognition; costs and risks associated with
litigation and investigations; risks related to our indebtedness,
including our substantial amount of debt, our ability to incur
substantially more debt and increases in interest rates or in our
borrowing margins; our ability to meet the financial and other
covenants contained in our Senior Credit Facilities, our
outstanding unsecured Senior Notes and certain asset-backed and
asset-based arrangements; changes in accounting principles, or
their application or interpretation, and our ability to make
accurate 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; changes to our senior management team; the effect of
tangible and intangible asset impairment charges; our exposure to
uninsured claims in excess of historical levels; the impact of our
derivative instruments, which can be affected by fluctuations in
interest rates and commodity prices; and 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.
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.