UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________________________________________________________________
FORM 10-Q
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||||||
| For the quarterly period ended | ||||||||
| OR | ||||||||
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||||||
| For the transition period from _________ to _________ | ||||||||
| Commission File Number | Exact Name of Registrant as Specified in its Charter, Principal Executive Office Address, Zip Code and Telephone Number | State of Incorporation | I.R.S. Employer Identification No. | |||||||||||||||||||||||||||||
| Securities registered pursuant to Section 12(b) of the Act: | ||||||||||||||||||||||||||
| Title of each class | Trading Symbol(s) | Name of each exchange on which Registered | ||||||||||||||||||||||||
| Hertz Global Holdings, Inc. | Par value $0.01 per share | The | ||||||||||||||||||||||||
| Hertz Global Holdings, Inc. | Each exercisable for one share of Hertz Global Holdings, Inc. common stock at an exercise price of $13.80 per share, subject to adjustment | The | ||||||||||||||||||||||||
| The Hertz Corporation | None | None | None | |||||||||||||||||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Hertz Global Holdings, Inc. Yes ☒ No ☐
The Hertz Corporation1 Yes ☐ No ☒
1As a voluntary filer, The Hertz Corporation is not subject to the filing requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"). The Hertz Corporation has filed all reports pursuant to Section 13 or 15(d) of the Exchange Act during the preceding 12 months as if it was subject to such filing requirements.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Hertz Global Holdings, Inc. Yes ☒ No ☐
The Hertz Corporation Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| Hertz Global Holdings, Inc. | ☒ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | |||||||||||||||
| Smaller reporting company | Emerging growth company | |||||||||||||||||||
| If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | ☐ | |||||||||||||||||||
| The Hertz Corporation | Large accelerated filer | ☐ | Accelerated filer | ☐ | ☒ | |||||||||||||||
| Smaller reporting company | Emerging growth company | |||||||||||||||||||
| If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | ☐ | |||||||||||||||||||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Hertz Global Holdings, Inc. Yes ☐ No ☒
The Hertz Corporation Yes ☐ No ☒
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐
Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date.
| Class | Shares Outstanding as of | April 18, 2024 | ||||||||||||||||||
| Hertz Global Holdings, Inc. | Common Stock, | par value $0.01 per share | ||||||||||||||||||
The Hertz Corporation(1) | Common Stock, | par value $0.01 per share | ||||||||||||||||||
(1)(100% owned by Rental Car Intermediate Holdings, LLC) | ||||||||||||||||||||
HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
| Page | ||||||||
HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Index
| Page | ||||||||
| Hertz Global Holdings, Inc. and Subsidiaries | ||||||||
| The Hertz Corporation and Subsidiaries | ||||||||
| Notes to the Condensed Consolidated Financial Statements | ||||||||
1
HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited
(In millions, except par value and share data)
| March 31, 2024 | December 31, 2023 | ||||||||||
| ASSETS | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash and cash equivalents: | |||||||||||
| Vehicle | |||||||||||
| Non-vehicle | |||||||||||
| Total restricted cash and cash equivalents | |||||||||||
| Total cash and cash equivalents and restricted cash and cash equivalents | |||||||||||
| Receivables: | |||||||||||
| Vehicle | |||||||||||
Non-vehicle, net of allowance of $ | |||||||||||
| Total receivables, net | |||||||||||
| Prepaid expenses and other assets | |||||||||||
| Revenue earning vehicles: | |||||||||||
| Vehicles | |||||||||||
| Less: accumulated depreciation | ( | ( | |||||||||
| Total revenue earning vehicles, net | |||||||||||
| Property and equipment, net | |||||||||||
| Operating lease right-of-use assets | |||||||||||
| Intangible assets, net | |||||||||||
| Goodwill | |||||||||||
Total assets(1) | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
| Accounts payable: | |||||||||||
| Vehicle | $ | $ | |||||||||
| Non-vehicle | |||||||||||
| Total accounts payable | |||||||||||
| Accrued liabilities | |||||||||||
| Accrued taxes, net | |||||||||||
| Debt: | |||||||||||
| Vehicle | |||||||||||
| Non-vehicle | |||||||||||
| Total debt | |||||||||||
| Public Warrants | |||||||||||
| Operating lease liabilities | |||||||||||
| Self-insured liabilities | |||||||||||
| Deferred income taxes, net | |||||||||||
Total liabilities(1) | |||||||||||
| Commitments and contingencies | |||||||||||
| Stockholders' equity: | |||||||||||
Preferred stock, $ | |||||||||||
Common stock, $ | |||||||||||
Treasury stock, at cost, | ( | ( | |||||||||
| Additional paid-in capital | |||||||||||
| Retained earnings (Accumulated deficit) | |||||||||||
| Accumulated other comprehensive income (loss) | ( | ( | |||||||||
| Total stockholders' equity | |||||||||||
| Total liabilities and stockholders' equity | $ | $ | |||||||||
(1) Hertz Global Holdings, Inc.'s consolidated total assets as of March 31, 2024 and December 31, 2023 include total assets of variable interest entities (“VIEs”) of $1.4 billion and $1.7 billion, respectively, which can only be used to settle obligations of the VIEs. Hertz Global Holdings, Inc.'s consolidated total liabilities as of March 31, 2024 and December 31, 2023 include total liabilities of VIEs of $1.4 billion and $1.7 billion, respectively, for which the creditors of the VIEs have no recourse to Hertz Global Holdings, Inc. See "Pledges Related to Vehicle Financing" in Note 5, "Debt," for further information.
The accompanying notes are an integral part of these financial statements.
2
HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(In millions, except per share data)
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Revenues | $ | $ | |||||||||
| Expenses: | |||||||||||
| Direct vehicle and operating | |||||||||||
| Depreciation of revenue earning vehicles and lease charges, net | |||||||||||
| Non-vehicle depreciation and amortization | |||||||||||
| Selling, general and administrative | |||||||||||
| Interest expense, net: | |||||||||||
| Vehicle | |||||||||||
| Non-vehicle | |||||||||||
| Interest expense, net | |||||||||||
| Other (income) expense, net | |||||||||||
| (Gain) on sale of non-vehicle capital assets | ( | ||||||||||
| Change in fair value of Public Warrants | ( | ||||||||||
| Total expenses | |||||||||||
Income (loss) before income taxes | ( | ||||||||||
Income tax (provision) benefit | |||||||||||
| Net income (loss) | $ | ( | $ | ||||||||
| Weighted-average common shares outstanding: | |||||||||||
| Basic | |||||||||||
| Diluted | |||||||||||
| Earnings (loss) per common share: | |||||||||||
| Basic | $ | ( | $ | ||||||||
| Diluted | $ | ( | $ | ||||||||
The accompanying notes are an integral part of these financial statements.
3
HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Unaudited
(In millions)
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Net income (loss) | $ | ( | $ | ||||||||
| Other comprehensive income (loss): | |||||||||||
| Foreign currency translation adjustments | ( | ||||||||||
| Total other comprehensive income (loss) | ( | ||||||||||
| Total comprehensive income (loss) | $ | ( | $ | ||||||||
The accompanying notes are an integral part of these financial statements.
4
HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Unaudited
(In millions)
| Preferred Stock Shares | Preferred Stock Amount | Common Stock Shares | Common Stock Amount | Additional Paid-In Capital | Retained Earnings (Accumulated deficit) | Accumulated Other Comprehensive Income (Loss) | Treasury Stock Shares | Treasury Stock Amount | Total Stockholders' Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2022 | $ | $ | $ | $ | ( | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Net settlement on vesting of restricted stock | — | — | — | — | ( | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation charges | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Share repurchases | — | — | ( | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||
| March 31, 2023 | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred Stock Shares | Preferred Stock Amount | Common Stock Shares | Common Stock Amount | Additional Paid-In Capital | Retained Earnings (Accumulated deficit) | Accumulated Other Comprehensive Income (Loss) | Treasury Stock Shares | Treasury Stock Amount | Total Stockholders' Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2023 | $ | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | — | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net settlement on vesting of restricted stock | — | — | — | ( | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation charges | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation forfeitures(1) | — | — | — | — | ( | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| March 31, 2024 | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(1) Represents former chief executive officer ("CEO") awards forfeited in March 2024. See also Note 9, "Stock-Based Compensation."
The accompanying notes are an integral part of these financial statements.
5
HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(In millions)
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income (loss) | $ | ( | $ | ||||||||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | |||||||||||
| Depreciation and reserves for revenue earning vehicles, net | |||||||||||
| Depreciation and amortization, non-vehicle | |||||||||||
| Amortization of deferred financing costs and debt discount (premium) | |||||||||||
| Stock-based compensation charges | |||||||||||
| Stock-based compensation forfeitures | ( | ||||||||||
| Provision for receivables allowance | |||||||||||
| Deferred income taxes, net | ( | ( | |||||||||
| (Gain) loss on sale of non-vehicle capital assets | ( | ||||||||||
| Change in fair value of Public Warrants | ( | ||||||||||
| Changes in financial instruments | |||||||||||
| Other | ( | ||||||||||
| Changes in assets and liabilities: | |||||||||||
| Non-vehicle receivables | ( | ( | |||||||||
| Prepaid expenses and other assets | ( | ( | |||||||||
| Operating lease right-of-use assets | |||||||||||
| Non-vehicle accounts payable | ( | ( | |||||||||
| Accrued liabilities | |||||||||||
| Accrued taxes, net | |||||||||||
| Operating lease liabilities | ( | ( | |||||||||
| Self-insured liabilities | ( | ||||||||||
| Net cash provided by (used in) operating activities | |||||||||||
| Cash flows from investing activities: | |||||||||||
| Revenue earning vehicles expenditures | ( | ( | |||||||||
| Proceeds from disposal of revenue earning vehicles | |||||||||||
| Non-vehicle capital asset expenditures | ( | ( | |||||||||
| Proceeds from disposal of non-vehicle capital assets | |||||||||||
| Return of (investment in) equity investments | ( | ||||||||||
| Net cash provided by (used in) investing activities | ( | ( | |||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from issuance of vehicle debt | |||||||||||
| Repayments of vehicle debt | ( | ( | |||||||||
| Proceeds from issuance of non-vehicle debt | |||||||||||
| Repayments of non-vehicle debt | ( | ( | |||||||||
| Payment of financing costs | ( | ||||||||||
| Share repurchases | ( | ||||||||||
The accompanying notes are an integral part of these financial statements.
6
HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(In millions)
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Other | ( | ( | |||||||||
| Net cash provided by (used in) financing activities | |||||||||||
| Effect of foreign currency exchange rate changes on cash and cash equivalents and restricted cash and cash equivalents | ( | ||||||||||
| Net increase (decrease) in cash and cash equivalents and restricted cash and cash equivalents during the period | ( | ( | |||||||||
| Cash and cash equivalents and restricted cash and cash equivalents at beginning of period | |||||||||||
| Cash and cash equivalents and restricted cash and cash equivalents at end of period | $ | $ | |||||||||
| Supplemental disclosures of cash flow information: | |||||||||||
| Cash paid during the period for: | |||||||||||
| Interest, net of amounts capitalized: | |||||||||||
| Vehicle | $ | $ | |||||||||
| Non-vehicle | |||||||||||
| Income taxes, net of refunds | |||||||||||
| Supplemental disclosures of non-cash information: | |||||||||||
| Purchases of revenue earning vehicles included in accounts payable, net of incentives | $ | $ | |||||||||
| Sales of revenue earning vehicles included in vehicle receivables | |||||||||||
| Purchases of non-vehicle capital assets included in accounts payable | |||||||||||
| Revenue earning vehicles and non-vehicle capital assets acquired through finance lease | |||||||||||
| Accrual for purchases of treasury shares | |||||||||||
The accompanying notes are an integral part of these financial statements.
7
THE HERTZ CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited
(In millions, except par value and share data)
| March 31, 2024 | December 31, 2023 | ||||||||||
| ASSETS | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash and cash equivalents: | |||||||||||
| Vehicle | |||||||||||
| Non-vehicle | |||||||||||
| Total restricted cash and cash equivalents | |||||||||||
| Total cash and cash equivalents and restricted cash and cash equivalents | |||||||||||
| Receivables: | |||||||||||
| Vehicle | |||||||||||
Non-vehicle, net of allowance of $ | |||||||||||
| Total receivables, net | |||||||||||
| Prepaid expenses and other assets | |||||||||||
| Revenue earning vehicles: | |||||||||||
| Vehicles | |||||||||||
| Less: accumulated depreciation | ( | ( | |||||||||
| Total revenue earning vehicles, net | |||||||||||
| Property and equipment, net | |||||||||||
| Operating lease right-of-use assets | |||||||||||
| Intangible assets, net | |||||||||||
| Goodwill | |||||||||||
Total assets(1) | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDER'S EQUITY | |||||||||||
| Accounts payable: | |||||||||||
| Vehicle | $ | $ | |||||||||
| Non-vehicle | |||||||||||
| Total accounts payable | |||||||||||
| Accrued liabilities | |||||||||||
| Accrued taxes, net | |||||||||||
| Debt: | |||||||||||
| Vehicle | |||||||||||
| Non-vehicle | |||||||||||
| Total debt | |||||||||||
| Operating lease liabilities | |||||||||||
| Self-insured liabilities | |||||||||||
| Deferred income taxes, net | |||||||||||
Total liabilities(1) | |||||||||||
| Commitments and contingencies | |||||||||||
| Stockholder's equity: | |||||||||||
Common stock, $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Retained earnings (Accumulated deficit) | ( | ( | |||||||||
| Accumulated other comprehensive income (loss) | ( | ( | |||||||||
| Total stockholder's equity | |||||||||||
| Total liabilities and stockholder's equity | $ | $ | |||||||||
(1) The Hertz Corporation's consolidated total assets as of March 31, 2024 and December 31, 2023 include total assets of VIEs of $1.4 billion and $1.7 billion, respectively, which can only be used to settle obligations of the VIEs. The Hertz Corporation's consolidated total liabilities as of March 31, 2024 and December 31, 2023 include total liabilities of VIEs of $1.4 billion and $1.7 billion, respectively, for which the creditors of the VIEs have no recourse to The Hertz Corporation. See "Pledges Related to Vehicle Financing" in Note 5, "Debt," for further information.
The accompanying notes are an integral part of these financial statements.
8
THE HERTZ CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(In millions)
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Revenues | $ | $ | |||||||||
| Expenses: | |||||||||||
| Direct vehicle and operating | |||||||||||
| Depreciation of revenue earning vehicles and lease charges, net | |||||||||||
| Non-vehicle depreciation and amortization | |||||||||||
| Selling, general and administrative | |||||||||||
| Interest expense, net: | |||||||||||
| Vehicle | |||||||||||
| Non-vehicle | |||||||||||
| Interest expense, net | |||||||||||
| Other (income) expense, net | |||||||||||
| (Gain) on sale of non-vehicle capital assets | ( | ||||||||||
| Total expenses | |||||||||||
Income (loss) before income taxes | ( | ||||||||||
Income tax (provision) benefit | |||||||||||
Net income (loss) | $ | ( | $ | ||||||||
The accompanying notes are an integral part of these financial statements.
9
THE HERTZ CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Unaudited
(In millions)
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Net income (loss) | $ | ( | $ | ||||||||
| Other comprehensive income (loss): | |||||||||||
| Foreign currency translation adjustments | ( | ||||||||||
| Total other comprehensive income (loss) | ( | ||||||||||
| Total comprehensive income (loss) | $ | ( | $ | ||||||||
The accompanying notes are an integral part of these financial statements.
10
THE HERTZ CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
Unaudited
(In millions, except share data)
| Common Stock Shares | Common Stock Amount | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Total Stockholder's Equity | ||||||||||||||||||||||||||||||
| Balance as of: | |||||||||||||||||||||||||||||||||||
| December 31, 2022 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | — | |||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | |||||||||||||||||||||||||||||||
| Stock-based compensation charges | — | — | — | — | |||||||||||||||||||||||||||||||
| Dividends paid to Hertz Holdings | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||
| March 31, 2023 | ( | ( | |||||||||||||||||||||||||||||||||
| Common Stock Shares | Common Stock Amount | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Total Stockholder's Equity | ||||||||||||||||||||||||||||||
| Balance as of: | |||||||||||||||||||||||||||||||||||
| December 31, 2023 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
| Stock-based compensation charges | — | — | — | — | |||||||||||||||||||||||||||||||
Stock-based compensation forfeitures(1) | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||
| Dividends paid to Hertz Holdings | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||
| March 31, 2024 | ( | ( | |||||||||||||||||||||||||||||||||
(1) Represents former CEO awards forfeited in March 2024. See also Note 9, "Stock-Based Compensation."
The accompanying notes are an integral part of these financial statements.
11
THE HERTZ CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(In millions)
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income (loss) | $ | ( | $ | ||||||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | |||||||||||
| Depreciation and reserves for revenue earning vehicles, net | |||||||||||
| Depreciation and amortization, non-vehicle | |||||||||||
| Amortization of deferred financing costs and debt discount (premium) | |||||||||||
| Stock-based compensation charges | |||||||||||
| Stock-based compensation forfeitures | ( | ||||||||||
| Provision for receivables allowance | |||||||||||
| Deferred income taxes, net | ( | ( | |||||||||
| (Gain) loss on sale of non-vehicle capital assets | ( | ||||||||||
| Changes in financial instruments | |||||||||||
| Other | ( | ( | |||||||||
| Changes in assets and liabilities: | |||||||||||
| Non-vehicle receivables | ( | ( | |||||||||
| Prepaid expenses and other assets | ( | ( | |||||||||
| Operating lease right-of-use assets | |||||||||||
| Non-vehicle accounts payable | ( | ( | |||||||||
| Accrued liabilities | |||||||||||
| Accrued taxes, net | |||||||||||
| Operating lease liabilities | ( | ( | |||||||||
| Self-insured liabilities | ( | ||||||||||
| Net cash provided by (used in) operating activities | |||||||||||
| Cash flows from investing activities: | |||||||||||
| Revenue earning vehicles expenditures | ( | ( | |||||||||
| Proceeds from disposal of revenue earning vehicles | |||||||||||
| Non-vehicle capital asset expenditures | ( | ( | |||||||||
| Proceeds from disposal of non-vehicle capital assets | |||||||||||
| Return of (investment in) equity investments | ( | ||||||||||
| Net cash provided by (used in) investing activities | ( | ( | |||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from issuance of vehicle debt | |||||||||||
| Repayments of vehicle debt | ( | ( | |||||||||
| Proceeds from issuance of non-vehicle debt | |||||||||||
| Repayments of non-vehicle debt | ( | ( | |||||||||
| Payment of financing costs | ( | ||||||||||
| Dividends paid to Hertz Holdings | ( | ( | |||||||||
| Net cash provided by (used in) financing activities | |||||||||||
The accompanying notes are an integral part of these financial statements.
12
THE HERTZ CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(In millions)
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Effect of foreign currency exchange rate changes on cash and cash equivalents and restricted cash and cash equivalents | ( | ||||||||||
| Net increase (decrease) in cash and cash equivalents and restricted cash and cash equivalents during the period | ( | ( | |||||||||
| Cash and cash equivalents and restricted cash and cash equivalents at beginning of period | |||||||||||
| Cash and cash equivalents and restricted cash and cash equivalents at end of period | $ | $ | |||||||||
| Supplemental disclosures of cash flow information: | |||||||||||
| Cash paid during the period for: | |||||||||||
| Interest, net of amounts capitalized: | |||||||||||
| Vehicle | $ | $ | |||||||||
| Non-vehicle | |||||||||||
| Income taxes, net of refunds | |||||||||||
| Supplemental disclosures of non-cash information: | |||||||||||
| Purchases of revenue earning vehicles included in accounts payable, net of incentives | $ | $ | |||||||||
| Sales of revenue earning vehicles included in vehicle receivables | |||||||||||
| Purchases of non-vehicle capital assets included in accounts payable | |||||||||||
| Revenue earning vehicles and non-vehicle capital assets acquired through finance lease | |||||||||||
The accompanying notes are an integral part of these financial statements.
13
HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
Note 1—Background
Hertz Global Holdings, Inc. ("Hertz Global" when including its subsidiaries and VIEs and "Hertz Holdings" when excluding its subsidiaries and VIEs) was incorporated in Delaware in 2015 to serve as the top-level holding company for Rental Car Intermediate Holdings, LLC, which wholly owns The Hertz Corporation ("Hertz" and interchangeably with Hertz Global, the "Company"), Hertz Global's primary operating company. Hertz was incorporated in Delaware in 1967 and is a successor to corporations that have been engaged in the vehicle rental and leasing business since 1918.
Hertz operates its vehicle rental business globally primarily through the Hertz, Dollar and Thrifty brands from company-operated and franchisee locations in the United States ("U.S."), Europe, Africa, Asia, Australia, Canada, the Caribbean, Latin America, the Middle East and New Zealand. The Company also sells vehicles through Hertz Car Sales.
Note 2—Basis of Presentation and Recently Issued Accounting Pronouncements
Basis of Presentation
This Quarterly Report on Form 10-Q ("Quarterly Report") combines the quarterly reports on Form 10-Q for the quarterly period ended March 31, 2024 of Hertz Global and Hertz. Hertz Global consolidates Hertz for financial statement purposes and, therefore, disclosures that relate to activities of Hertz also apply to Hertz Global. In the sections that combine disclosure of Hertz Global and Hertz, this report refers to actions as being actions of the Company, or Hertz Global, which is appropriate because the business is one enterprise and Hertz Global operates the business through Hertz. When appropriate, Hertz Global and Hertz are named specifically for their individual disclosures and any significant differences between the operations and results of Hertz Global and Hertz are separately disclosed and explained.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”). In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments of a normal recurring nature that are necessary for a fair presentation of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year. The Company's vehicle rental operations are typically a seasonal business, with decreased levels of business in the winter months and heightened activity during the spring and summer months for the majority of countries where the Company generates revenues.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and footnotes. Actual results could differ materially from those estimates.
The December 31, 2023 unaudited condensed consolidated balance sheet data is derived from the audited financial statements at that date but does not include all disclosures required by U.S. GAAP. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with information included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023 (the "2023 Form 10-K"), as filed with the Securities and Exchange Commission ("SEC") on February 12, 2024.
Principles of Consolidation
The unaudited condensed consolidated financial statements of Hertz Global include the accounts of Hertz Global, its wholly owned and majority owned U.S. and international subsidiaries and its VIEs, as applicable. The unaudited condensed consolidated financial statements of Hertz include the accounts of Hertz, its wholly owned and majority owned U.S. and international subsidiaries and its VIEs, as applicable. The Company consolidates a VIE when it is
14
HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited
deemed the primary beneficiary of the VIE. All significant intercompany transactions have been eliminated in consolidation.
Recently Issued Accounting Pronouncements
Not yet adopted
Improvements to Reportable Segment Disclosures
In November 2023, the Financial Accounting Standards Board ("FASB") issued guidance that modifies segment reporting disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The guidance is effective for annual periods beginning after December 15, 2023 and interim periods beginning after December 15, 2024 using a retrospective transition method. Early adoption is permitted. The Company is in the process of determining the timing of adoption and assessing the overall impact of adopting this guidance on its disclosures.
Improvements to Income Tax Disclosures
In December 2023, the FASB issued guidance to enhance income tax disclosures related to, among other items, rate reconciliation and income taxes paid. The guidance is effective for annual periods beginning after December 15, 2024 using a prospective transition method. Early adoption and retrospective application are permitted. The Company is in the process of determining the timing of adoption and assessing the overall impact of adopting this guidance on its disclosures.
Note 3—Divestitures
Sales of Non-vehicle Capital Assets
In 2019, the Company substantially completed the sale of certain non-vehicle capital assets constituting real property, in an eminent domain proceeding, in its Americas RAC segment. In February 2023, the Company received additional cash from the sale upon final resolution of the eminent domain proceeding and recognized an additional $29 million pre-tax gain on the sale, which is included in (gain) on sale of non-vehicle capital assets in the accompanying unaudited condensed consolidated statement of operations for the three months ended March 31, 2023.
In March 2023, the Company sold and leased back its Los Angeles, California airport location in its Americas RAC segment. The transaction qualified for sale-leaseback accounting. The Company recognized a pre-tax gain of $133 million based on the difference in the sale amount of $143 million less $9 million net book value of assets sold and $1 million in selling costs, which is included in (gain) on sale of non-vehicle capital assets in the accompanying unaudited condensed consolidated statement of operations for the three months ended March 31, 2023. The leaseback is classified as an operating lease with a term of 36 months.
15
HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited
Note 4—Revenue Earning Vehicles
The components of revenue earning vehicles, net are as follows:
| (In millions) | March 31, 2024 | December 31, 2023 | |||||||||
| Revenue earning vehicles | $ | $ | |||||||||
| Less accumulated depreciation | ( | ( | |||||||||
Revenue earning vehicles held for sale, net(1) | |||||||||||
| Revenue earning vehicles, net | $ | $ | |||||||||
(1) Represents the carrying amount of vehicles classified as held for sale as of the respective balance sheet date, including the First EV Disposal Group and the Second EV Disposal Group, each as defined and disclosed below.
Depreciation of revenue earning vehicles and lease charges, net includes the following:
| Three Months Ended March 31, | |||||||||||
| (In millions) | 2024 | 2023 | |||||||||
| Depreciation of revenue earning vehicles | $ | $ | |||||||||
(Gain) loss on disposal of revenue earning vehicles(1) | ( | ||||||||||
| Rents paid for vehicles leased | |||||||||||
| Depreciation of revenue earning vehicles and lease charges, net | $ | $ | |||||||||
(1) Includes the write-down to fair value for vehicles classified as held for sale, including the First EV Disposal Group and Second EV Disposal Group as disclosed below, for the three months ended March 31, 2024.
In December 2023, the Company identified a group of electric vehicles ("EVs") that it desired to sell (the "First EV Disposal Group") in response to management's determination that the supply of EVs exceeded customer demand, elevated EV damage and collision costs and a decline in EV residual values. As a result, the First EV Disposal Group, included in the Company's Americas RAC segment, was classified as held for sale with an aggregate carrying value of $542 million and is included in revenue earning vehicles, net in the accompanying unaudited condensed consolidated balance sheet as of December 31, 2023. As of March 31, 2024, approximately 50 % of the First EV Disposal Group has been sold and the carrying values of the remaining vehicles written down to fair value less costs to sell. This resulted in charges of $41 million for losses incurred on the vehicles sold and $40 million for the write-down on the remaining vehicles, which are included in depreciation of revenue earning vehicles and lease charges, net in the accompanying unaudited condensed consolidated statement of operations for the three months ended March 31, 2024. The remaining, unsold portion of the First EV Disposal Group has an aggregate carrying value of $210 million and is included in revenue earning vehicles, net in the accompanying unaudited consolidated balance sheet as of March 31, 2024.
In March 2024, the Company identified an additional group of EVs that it desired to sell (the "Second EV Disposal Group") in response to management's determination that the supply of EVs exceeded customer demand, elevated EV damage and collision costs and a decline in EV residual values. As a result, the Second EV Disposal Group, consisting of approximately 9,000 EVs in the Company's Americas RAC segment and approximately 1,000 EVs in the Company's International RAC segment, was classified as held for sale with carrying values of $227 million and $30 million in the Company's Americas RAC and International RAC segments, respectively, which are included in revenue earning vehicles, net in the accompanying unaudited condensed consolidated balance sheet as of March 31, 2024. The carrying values of the vehicles in the Second EV Disposal Group were written down to fair value less costs to sell and resulted in write-downs of $107 million and $7 million in the Company's Americas RAC and International RAC segments, respectively, which are included in depreciation of revenue earning vehicles and lease charges, net in the accompanying unaudited condensed consolidated statement of operations for the three months ended March 31, 2024.
16
HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited
Note 5—Debt
The Company's debt, including its available credit facilities, consists of the following ($ in millions) as of March 31, 2024 and December 31, 2023:
| Facility | Weighted-Average Interest Rate as of March 31, 2024 | Fixed or Floating Interest Rate | Maturity | March 31, 2024 | December 31, 2023 | |||||||||||||||||||||||||||
| Non-Vehicle Debt | ||||||||||||||||||||||||||||||||
| First Lien RCF | Floating | 6/2026 | $ | $ | ||||||||||||||||||||||||||||
| Term B Loan | Floating | 6/2028 | ||||||||||||||||||||||||||||||
| Incremental Term B Loan | Floating | 6/2028 | ||||||||||||||||||||||||||||||
| Term C Loan | Floating | 6/2028 | ||||||||||||||||||||||||||||||
| Senior Notes Due 2026 | Fixed | 12/2026 | ||||||||||||||||||||||||||||||
| Senior Notes Due 2029 | Fixed | 12/2029 | ||||||||||||||||||||||||||||||
Other Non-Vehicle Debt(1) | Fixed | Various | ||||||||||||||||||||||||||||||
| Unamortized Debt Issuance Costs and Net (Discount) Premium | ( | ( | ||||||||||||||||||||||||||||||
| Total Non-Vehicle Debt | ||||||||||||||||||||||||||||||||
| Vehicle Debt | ||||||||||||||||||||||||||||||||
| HVF III U.S. ABS Program | ||||||||||||||||||||||||||||||||
| HVF III U.S. Vehicle Variable Funding Notes | ||||||||||||||||||||||||||||||||
HVF III Series 2021-A Class A(2) | Floating | 6/2025 | ||||||||||||||||||||||||||||||
HVF III Series 2021-A Class B(2) | Fixed | 8/2025 | ||||||||||||||||||||||||||||||
| HVF III U.S. Vehicle Medium Term Notes | ||||||||||||||||||||||||||||||||
HVF III Series 2021-1(2) | Fixed | 12/2024 | ||||||||||||||||||||||||||||||
HVF III Series 2021-2(2) | Fixed | 12/2026 | ||||||||||||||||||||||||||||||
HVF III Series 2022-1(2) | Fixed | 6/2025 | ||||||||||||||||||||||||||||||
HVF III Series 2022-2(2) | Fixed | 6/2027 | ||||||||||||||||||||||||||||||
HVF III Series 2022-3(2) | N/A | Fixed | 3/2024 | |||||||||||||||||||||||||||||
HVF III Series 2022-4(2) | Fixed | 9/2025 | ||||||||||||||||||||||||||||||
HVF III Series 2022-5(2) | Fixed | 9/2027 | ||||||||||||||||||||||||||||||
HVF III Series 2023-1(2) | Fixed | 6/2026 | ||||||||||||||||||||||||||||||
HVF III Series 2023-2(2) | Fixed | 9/2028 | ||||||||||||||||||||||||||||||
HVF III Series 2023-3(2) | Fixed | 2/2027 | ||||||||||||||||||||||||||||||
HVF III Series 2023-4(2) | Fixed | 3/2029 | ||||||||||||||||||||||||||||||
| Vehicle Debt - Other | ||||||||||||||||||||||||||||||||
European ABS(2) | Floating | 3/2026 | ||||||||||||||||||||||||||||||
Hertz Canadian Securitization(2) | Floating | 6/2025 | ||||||||||||||||||||||||||||||
Australian Securitization(2) | Floating | 6/2025 | ||||||||||||||||||||||||||||||
| New Zealand RCF | Floating | 6/2025 | ||||||||||||||||||||||||||||||
| U.K. Financing Facility | Floating | 4/2024-3/2028 | ||||||||||||||||||||||||||||||
17
HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited
| Facility | Weighted-Average Interest Rate as of March 31, 2024 | Fixed or Floating Interest Rate | Maturity | March 31, 2024 | December 31, 2023 | |||||||||||||||||||||||||||
| Non-Vehicle Debt | ||||||||||||||||||||||||||||||||
Other Vehicle Debt(3) | Floating | 4/2024-2/2028 | ||||||||||||||||||||||||||||||
| Unamortized Debt Issuance Costs and Net (Discount) Premium | ( | ( | ||||||||||||||||||||||||||||||
| Total Vehicle Debt | ||||||||||||||||||||||||||||||||
| Total Debt | $ | $ | ||||||||||||||||||||||||||||||
(1) Other non-vehicle debt is primarily comprised of $1
(2) Maturity reference is to the earlier "expected final maturity date" as opposed to the subsequent "legal final maturity date." The expected final maturity date is the date by which Hertz and investors in the relevant indebtedness originally expect the outstanding principal of the relevant indebtedness to be repaid in full. The legal final maturity date is the date on which the outstanding principal of the relevant indebtedness is legally due and payable in full.
(3) Other vehicle debt is primarily comprised of $92 million and $104 million in finance lease obligations as of March 31, 2024 and December 31, 2023, respectively.
Non-Vehicle Debt
In April 2024, the credit agreement governing the First Lien RCF (the "First Lien Credit Agreement"), which requires Hertz to comply with a financial covenant consisting of a ratio of first lien debt to Consolidated EBITDA ("the First Lien Ratio"), as defined within the First Lien Credit Agreement and may be materially different than Adjusted Corporate EBITDA presented in Part I, Item 2 of this Quarterly Report, was amended ("Amendment No. 8") to require a ratio of less than or equal to 5.0 x in the second and third quarters of 2024 and 4.75 x in the fourth quarter of 2024 and the first quarter of 2025. Amendment No. 8 also contains a minimum liquidity covenant of $400 500
Vehicle Debt
In April 2024, Hertz Vehicle Financing III LLC ("HVF III"), a wholly-owned, special-purpose and bankruptcy-remote subsidiary of Hertz, amended the HVF III Series 2021-A Notes to extend the maturity of the Class A Notes to April 2026.
Vehicle Debt-Other
In April 2024, International Fleet Financing No. 2 BV ("IFF No. 2"), an indirect, special purpose subsidiary of Hertz, amended the European ABS to increase the aggregate maximum borrowings from €1.2 billion to €1.3 billion. Additionally, the European ABS was amended to provide for aggregate maximum borrowings of €1.5 billion for a seasonal commitment period beginning in April 2024 through November 2024. Following expiration of the seasonal commitment period, the aggregate maximum borrowings will revert to €1.3 billion.
In April 2024, TCL Funding Limited Partnership, a bankruptcy remote, indirect, wholly-owned, special purpose subsidiary of Hertz, amended the Hertz Canadian Securitization to increase the aggregate maximum borrowings from CAD$475 million to CAD$625 million until November 2024, reverting to CAD$475 million thereafter until the extended maturity date of April 2026.
18
HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited
Borrowing Capacity and Availability
Borrowing capacity and availability comes from the Company's revolving credit facilities, which are a combination of variable funding asset-backed securitization facilities, cash-flow based revolving credit facilities, asset-based revolving credit facilities and the First Lien RCF. Creditors under each such asset-backed securitization facility and asset-based revolving credit facility have a claim on a specific pool of assets as collateral. With respect to each such asset-backed securitization facility and asset-based revolving credit facility, the Company refers to the amount of debt it can borrow given a certain pool of assets as the borrowing base.
The Company refers to "Remaining Capacity" as the maximum principal amount of debt permitted to be outstanding under the respective facility (i.e., with respect to a variable funding asset-backed securitization facility or asset-based revolving credit facility, the amount of debt the Company could borrow assuming it possessed sufficient assets as collateral) less the principal amount of debt then-outstanding under such facility and, in the case of the First Lien RCF, less any issued standby letters of credit. With respect to a variable funding asset-backed securitization facility or asset-based revolving credit facility, the Company refers to "Availability Under Borrowing Base Limitation" as the lower of Remaining Capacity or the borrowing base less the principal amount of debt then-outstanding under such facility (i.e., the amount of debt that can be borrowed given the collateral possessed at such time).
The following facilities were available to the Company as of March 31, 2024 and are presented net of any outstanding letters of credit:
| (In millions) | Remaining Capacity | Availability Under Borrowing Base Limitation | |||||||||
| Non-Vehicle Debt | |||||||||||
| First Lien RCF | $ | $ | |||||||||
| Total Non-Vehicle Debt | |||||||||||
| Vehicle Debt | |||||||||||
| HVF III Series 2021-A | |||||||||||
| European ABS | |||||||||||
| Hertz Canadian Securitization | |||||||||||
| Australian Securitization | |||||||||||
| New Zealand RCF | |||||||||||
| U.K. Financing Facility | |||||||||||
| Other Vehicle Debt | |||||||||||
| Total Vehicle Debt | |||||||||||
| Total | $ | $ | |||||||||
Letters of Credit
As of March 31, 2024, there were outstanding standby letters of credit totaling $944 million comprised primarily of $684 million issued under the First Lien RCF and $245 million issued under the Term C Loan. As of March 31, 2024, no capacity remained to issue additional letters of credit under the Term C Loan. Such letters of credit have been issued primarily to provide credit enhancement for the Company's asset-backed securitization facilities and to support the Company's insurance programs, as well as to support the Company's vehicle rental concessions and leaseholds. As of March 31, 2024, none of the issued letters of credit have been drawn upon.
Pledges Related to Vehicle Financing
Substantially all of the Company's revenue earning vehicles and certain related assets are owned by special purpose entities or are encumbered in favor of the lenders under the various credit facilities, other secured
19
HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited
financings or asset-backed securities programs. None of the value of such assets (including the assets owned by Hertz Vehicle Financing III LLC and various other domestic and international subsidiaries that facilitate the Company's international securitizations) will be available to satisfy the claims of unsecured creditors unless the secured creditors are paid in full.
The Company has a 25 % ownership interest in IFF No. 2, whose sole purpose is to provide commitments to lend under the European ABS in various currencies subject to borrowing bases comprised of revenue earning vehicles and related assets of certain of Hertz International, Ltd.'s subsidiaries. IFF No. 2 is a VIE and the Company is the primary beneficiary; therefore, the assets, liabilities and results of operations of IFF No. 2 are included in the accompanying unaudited condensed consolidated financial statements. As of March 31, 2024 and December 31, 2023, IFF No. 2 had total assets of $1.4 billion and $1.7 billion, respectively, comprised primarily of intercompany receivables, and total liabilities of $1.4 billion and $1.7 billion, respectively, comprised primarily of debt.
Covenant Compliance
The First Lien Credit Agreement requires Hertz to comply with the following financial covenant: the First Lien Ratio, which requires a ratio of less than or equal to 3.0 3.5
In addition to the financial covenant, the First Lien Credit Agreement contains customary affirmative covenants including, among other things, the delivery of quarterly and annual financial statements and compliance certificates, and covenants related to conduct of business, maintenance of property and insurance, compliance with environmental laws and the granting of security interests for the benefit of the secured parties under that agreement on after-acquired real property, fixtures and future subsidiaries. The First Lien Credit Agreement also contains customary negative covenants, including, among other things, restrictions on the incurrence of liens, indebtedness, asset dispositions and restricted payments.
As of March 31, 2024, the Company was in compliance with all covenants in the First Lien Credit Agreement.
Note 6—Leases
The Company enters into certain agreements as a lessor under which it rents vehicles and leases fleets to customers. The following table summarizes the amount of operating lease income and other income included in total revenues in the accompanying unaudited condensed consolidated statements of operations:
| Three Months Ended March 31, | |||||||||||
| (In millions) | 2024 | 2023 | |||||||||
| Operating lease income from vehicle rentals | $ | $ | |||||||||
| Variable operating lease income | |||||||||||
| Revenue accounted for under Topic 842 | |||||||||||
| Revenue accounted for under Topic 606 | |||||||||||
| Total revenues | $ | $ | |||||||||
20
HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited
Note 7—Income Tax (Provision) Benefit
Hertz Global
For the three months ended March 31, 2024, Hertz Global recorded a tax benefit of $395 million, which resulted in an effective tax rate of 68 %. For the three months ended March 31, 2023, Hertz Global recorded a tax benefit of $134 million, which resulted in an effective tax rate of (214 )%.
The change in taxes for the three months ended March 31, 2024 compared to the same period in 2023 was primarily driven by lower pretax income, lower estimated EV credits in 2024, the recognition of uncertain tax benefits related to our tax restructuring of European operations in 2023 and the non-taxable change in the fair value of warrants.
Hertz
For the three months ended March 31, 2024, Hertz recorded a tax benefit of $395 million, which resulted in an effective tax rate of 59 %. For the three months ended March 31, 2023, Hertz recorded a tax benefit of $134 million, which resulted in an effective tax rate of (74 )%.
The change in taxes for the three months ended March 31, 2024 compared to the same period in 2023 was primarily driven by lower pretax income, lower estimated EV credits in 2024 and the recognition of uncertain tax benefits related to our tax restructuring of European operations in 2023.
Note 8—Public Warrants, Equity and Earnings (Loss) Per Common Share – Hertz Global
Public Warrants
During the three months ended March 31, 2024, 4,426 Public Warrants were exercised, of which 976 were cashless exercises and 3,450 were exercised for $13.80 per share. As of March 31, 2024, a cumulative 6,339,630 Public Warrants have been exercised since their original issuance in June 2021. The Public Warrants are recorded at fair value in the accompanying unaudited condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023. See Note 11, "Fair Value Measurements."
Share Repurchase Programs for Common Stock
In June 2022, Hertz Global's independent Audit Committee recommended, and its Board of Directors approved, a new share repurchase program (the "2022 Share Repurchase Program") that authorized additional repurchases of up to an incremental $2.0 billion worth of shares of Hertz Global's outstanding common stock. The 2022 Share Repurchase Program, announced on June 15, 2022, has no initial time limit, does not obligate Hertz Global to acquire any particular amount of common stock and can be discontinued at any time. However, during the effective period of Amendment No. 8, as disclosed in Note 5, "Debt," the repurchase of shares is not permitted commencing April 16, 2024 through April 1, 2025. Since the inception of the 2022 Share Repurchase Program, a total of 66,684,169 shares of Hertz Global's common stock have been repurchased for an aggregate purchase price of $1.1 billion, excluding applicable excise tax. There were no share repurchases during the three months ended March 31, 2024.
Common shares repurchased are included in treasury stock in the accompanying Hertz Global unaudited condensed consolidated balance sheet as of March 31, 2024 and December 31, 2023.
Subsequent to the expiration of Amendment No. 8, any future share repurchases will be made at the discretion of Hertz Global's management through a variety of methods, such as open-market transactions (including pre-set trading plans pursuant to Rule 10b5-1 of the Exchange Act), privately negotiated transactions, accelerated share repurchases, and other transactions in accordance with applicable securities laws. There can be no assurance as to the timing or number of shares of any repurchases.
21
HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATE