UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 28, 2018 (February 28, 2018)
HERTZ GLOBAL HOLDINGS, INC.
THE HERTZ CORPORATION
(Exact name of registrant as specified in its charter)
(Exact name of registrant as specified in its charter)
DELAWARE | 001-37665 | 61-1770902 | ||
DELAWARE | 001-07541 | 13-1938568 | ||
(State of incorporation) | (Commission File Number) | (I.R.S Employer Identification No.) | ||
8501 Williams Road | ||||
Estero, Florida 33928 | ||||
8501 Williams Road | ||||
Estero, Florida 33928 | ||||
(Address of principal executive offices, including zip code) | ||||
(239) 301-7000 | ||||
(239) 301-7000 | ||||
(Registrant’s telephone number, including area code) | ||||
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company o
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. o
ITEM 7.01 REGULATION FD DISCLOSURE
On February 28, 2018, Hertz Global Holdings, Inc. and The Hertz Corporation (collectively, “Hertz” or the “Company”) updated the set of slides that accompanied the Company’s earnings webcast held on February 28, 2018 to include new slides #20 and #21 in response to a request for additional information from an analyst on the webcast. The updated version of these slides will be available to the public through the Company’s website and is attached hereto as Exhibit 99.1.
This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”), except as shall be expressly set forth by specific reference in such a filing.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this report, 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,” “expect,” “project,” “potential,” “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 Forms 10-K, 10-Q and 8-K filed or furnished to the Securities and Exchange Commission ("SEC"). Among other items, such factors could include: any claims, investigations or proceedings arising as a result of the restatement in 2015 of the Company's previously issued financial results; the Company's ability to remediate the material weaknesses in its 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 the Company's separation of its vehicle and equipment rental businesses, any failure by Herc Holdings Inc. to comply with the agreements entered into in connection with the separation and the Company's ability to obtain the expected benefits of the separation; significant changes in the competitive environment and the effect of competition in the Company's markets on rental volume and pricing, including on the Company's pricing policies or use of incentives; occurrences that disrupt rental activity during our peak periods; increased vehicle costs due to declines in the value of the Company's non-program vehicles; the Company's ability to purchase adequate supplies of competitively priced vehicles and risks relating to increases in the cost of the vehicles it purchases; the Company's ability to accurately estimate future levels of rental activity and adjust the number and mix of vehicles used in its rental operations accordingly; the Company's ability to maintain sufficient liquidity and the availability to it of additional or continued sources of financing for its revenue earning vehicles and to refinance its existing indebtedness; the Company's ability to adequately respond to changes in technology and customer demands; the Company's access to third-party distribution channels and related prices, commission structures and transaction volumes; an increase in the Company's vehicle costs or disruption to its rental activity, particularly during its peak periods, due to safety recalls by the manufacturers of its vehicles; a major disruption in the Company's communication or centralized information networks; financial instability of the manufacturers of the Company's vehicles; any impact on the Company from the actions of its franchisees, dealers and independent contractors; the Company's ability to sustain operations 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; the Company's ability to successfully integrate acquisitions and complete dispositions; the Company's ability to maintain favorable brand recognition and a coordinated and comprehensive branding and portfolio strategy; costs and risks associated with litigation and investigations; risks related to the Company's indebtedness, including its substantial amount of debt, its ability to incur substantially more debt, the fact that substantially all of its consolidated assets secure certain of its outstanding indebtedness and increases in interest rates or in its borrowing margins; the Company's ability to meet the financial and other covenants contained in its Senior Facilities and the Letter of Credit Facility, its outstanding unsecured Senior Notes, its outstanding Senior Second Priority Secured Notes and certain asset-backed and asset-based arrangements; changes in accounting principles, or their application or interpretation, and the Company's ability to make accurate estimates and the assumptions underlying the estimates, which could have an effect on operating results; risks associated with operating in many different countries, including the risk of a violation or alleged violation of applicable anticorruption or antibribery laws and the Company's ability to repatriate cash from non-U.S. affiliates without
adverse tax consequences; the Company's ability to prevent the misuse or theft of information it possesses, including as a result of cyber security breaches and other security threats; the Company's ability to successfully implement its information technology and finance transformation programs;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 the Company's operations, the cost thereof or applicable tax rates; changes to the Company's senior management team and the dependence of its business operations on its senior management team; the effect of tangible and intangible asset impairment charges; the Company's exposure to uninsured claims in excess of historical levels; fluctuations in interest rates and commodity prices; the Company's exposure to fluctuations in foreign currency exchange rates and other risks and uncertainties described from time to time in periodic and current reports that the Company files with the SEC.
Additional information concerning these and other factors can be found in the Company's filings with the SEC, including its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-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.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(d) Exhibits.
Exhibit 99.1 shall not be deemed filed for purposes of Section 18 of the Exchange Act, nor shall it be deemed incorporated by reference in any filing under the Securities Act, except as shall be expressly set forth by specific reference in a filing.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
HERTZ GLOBAL HOLDINGS, INC. THE HERTZ CORPORATION | ||
(Registrant) | ||
By: | /s/ Thomas C. Kennedy | |
Name: | Thomas C. Kennedy | |
Title: | Senior Executive Vice President and Chief Financial Officer | |
Date: February 28, 2018
1
4Q 2017 Earnings Call
February 28, 2018
8:00 am ET
2
Safe Harbor Statement
Certain statements made within this presentation contain forward-looking statements, within the
meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are
not guarantees of performance and by their nature are subject to inherent uncertainties. Actual
results may differ materially. Any forward-looking information relayed in this presentation speaks
only as of February 28, 2018 and Hertz Global Holdings, Inc. (the “Company”) undertakes no
obligation to update that information to reflect changed circumstances.
Additional information concerning these statements is contained in the Company’s press release
regarding its Fourth Quarter 2017 results issued on February 27, 2018, and the Risk Factors and
Forward-Looking Statements sections of the Company’s 2017 Form 10-K filed on February 27,
2018. Copies of these filings are available from the SEC, the Hertz website, or the Company’s
Investor Relations Department.
4Q
3
Key Metrics and Non-GAAP Measures
THE FOLLOWING KEY METRICS AND NON-GAAP MEASURES WILL BE USED IN THE PRESENTATION:
Adjusted corporate EBITDA
Adjusted corporate EBITDA margin
Adjusted pre-tax income (loss)
Adjusted net income (loss)
Adjusted diluted earnings (loss) per share
(Adjusted diluted EPS)
Total RPD
Total RPU
Net depreciation per unit per month
Vehicle utilization
Transaction days
Definitions and reconciliations of key metrics and non-GAAP measures are provided in the Company’s fourth quarter 2017
press release issued on February 27, 2018 and as an exhibit to the Company’s Form 8-K filed on February 28, 2018.
4Q
4
Agenda
BUSINESS
OVERVIEW
Kathryn Marinello
President & Chief Executive Officer
Hertz Global Holdings, Inc.
FINANCIAL RESULTS
OVERVIEW
Tom Kennedy
Chief Financial Officer
Hertz Global Holdings, Inc.
4Q
5
NA Turnaround Progress Evident in 2017
2H:17 YoY U.S. RPD, utilization, RPU, monthly depreciation per unit improve vs. 2H:16
Fleet
• Optimized car-class mix
• Successful model year 2018 negotiations
• Managing growth in ride-hailing demand
• Increased remarketing capability
Momentum is Broad Based Across the Organization
Operations
• Ultimate Choice available at 50+ locations
• Site Optimization Initiative creating best
rental experience for customers
• Improved customer satisfaction scores
Technology
• Transforming reservation, digital and
enhanced customer management platforms
for roll out in 2018
Sales / Marketing
• Upcoming digital enhancements and a new,
mobile-first strategy, will offer more options
to engage with Hertz, Dollar and Thrifty
6
Quarterly Overview
TOM KENNEDY
CHIEF FINANCIAL OFFICER
Hertz Global Holdings, Inc.
7
GAAP
4Q:17
Results
4Q:16
Results
YoY %
Inc/(Dec)
FY:17
Results
FY:16
Results
YoY %
Inc/(Dec)
Total revenues $2,091M $2,009M 4% $8,803M $8,803M 0%
Income (loss) from continuing operations
before income taxes
$(179)M $(466)M 62% $(575)M $(470)M (22%)
Net income (loss) from continuing operations $616M $(438)M NM $327M $(474)M NM
Diluted earnings (loss) per share from
continuing operations
$7.42 $(5.28) NM $3.94 $(5.65) NM
Weighted average shares outstanding: diluted 83M 83M 83M 84M
Non-GAAP*
Adjusted corporate EBITDA $21M $12M 75% $267M $553M (52)%
Adjusted corporate EBITDA margin 1% 1% 40 bps 3% 6% (330 bps)
Adjusted pre-tax income (loss) $(102)M $(93)M (10%) $(210)M $65M NM
Adjusted net income (loss) $(64)M $(59)M (8%) $(132)M $41M NM
Adjusted diluted EPS $(0.77) $(0.71) (8%) $(1.59) $0.49 NM
4Q/FY:17 Consolidated Results 4Q
* Definitions and reconciliations of these key metrics and non-GAAP measures are provided in the Company’s fourth
quarter 2017 press release issued on February 27, 2018 and as an exhibit to the Company’s Form 8-K filed on
February 28, 2018.
NM = not meaningful
Net benefit of $679M in 4Q:17 from the re-measured valuation of net deferred tax liabilities
8
2H:17 Results Improved Significantly from 1H:17 4Q
1H:17
Results
YoY %
Inc/(Dec)
2H:17
Results
YoY %
Inc/(Dec)
Total Revenues $4,140M (3%) $4,663M 2%
Adjusted Corporate EBITDA ($75)M (135%) $342M 0%
US RAC Total RPD $41.23 (2%) $42.83 1%
US RAC Total RPU $968 (6%) $1,062 1%
US RAC Vehicle Utilization 78% (220 bps) 81% 50 bps
US RAC Monthly Depreciation Per Unit $351 21% $304 (3%)
Actions taken for operational turn around beginning to show momentum
9
4Q:17 U.S. RAC Revenue Performance
Revenue Days Total RPD
Vehicle Utilization (bps) Capacity Total RPU
0% (2%)
(4%)
1%
(4%)
(1%)
2%
(1%)
(130)(100) (2%)
3%
1%
(3%)
U.S. RAC (YoY quarterly results1)
1Revenue is defined as total revenue excluding ancillary retail vehicle sales revenue; Capacity is average fleet.
4Q:17 Performance Drivers
(3%)
(310)
4%
(8%)
(5%) (3%)
(2%)
(1%)
(4%)
(130)
4Q
2%
(1%)
3%
(1%)
250
1%
• RPD decreased 1% YoY, but increased 3%
excluding Value-Added Service Revenues,
reflecting strong leisure demand
- Modifying and introducing new value-
added services and digital capabilities to
re-energize ancillary sales
• Transaction days increased 3% YoY as a result
of growth in ride-hailing customers and our off
airport business
• Total RPU increased 2% YoY, a key
performance measure
10
4Q:17 U.S. RAC Fleet
Continued focus on optimizing our
fleet profile
4Q
• Vehicle utilization was 81% vs 78% in 4Q:16
• New analytic tools and optimized fleet capacity
aligned fleet with customer demand
- Core rental fleet decreased 4% YoY
- Ride-hailing fleet grew to 22,000 vehicles
as of year end
11
4Q:17 U.S. RAC Monthly Depreciation Per Unit
$321
$306 $302
$269
$303
$278
$304
$321
Q4'16 Q1'17 Q2'17 Q3'17 Q4'17
Current Year Prior Year
+15% +27%
+19%
4Q
$348
YEAR OVER YEAR TREND CONTINUES TO IMPROVE
$353 +1% (6%)
• Continued transition to a richer, more preferred vehicle mix
• Lower model year 2017 and model year 2018 purchase prices (like-for-like vs. model year 2016)
• Stabilizing residual values – FY:17 core residuals decreased 2.5% YoY
• Incremental demand for replacement vehicles post-hurricanes
• Increased sales through higher return re-marketing channels
12
FY:17 US RAC Monthly Vehicle Depreciation Per Unit 4Q
7
12
26
8
11
Wholesale /
Rebalancing
FY:16 Richer Fleet Mix Core Residual Fleet
Acquisition Cost
Other FY:17
$301
$327
13
4Q:17 U.S. RAC Fleet Sales Initiative
29%
34%
37%
4Q:16
Non-Program Vehicle
Disposition Channel Mix
4Q
27%
35%
38%
Auction Retail Dealer Direct
4Q:17
Focused on Driving More Sales
Through Alternative Channels
• Absolute sales through highest-return retail channel
grew 6% in 4Q:17
• FY:17 largest number of units re-marketed in
company history
• 80 Hertz retail stores across the country
• 10th largest used car operation nationally
14
4Q:17 International RAC 4Q
• Revenue increased 10%, or 4% YoY excluding foreign exchange
• Revenue ex-Brazil increased 13%, or 7% YoY excluding foreign
exchange
− Transaction days increased 1%, or 6% excluding Brazil
operations1
− Total RPD growth driven by improved pricing environment in
Australia and New Zealand for summer and holiday peak season
and the sale of lower RPD Brazil operations
• Vehicle utilization a result of continued improvement in fleet
management
• Monthly depreciation per unit increased 9% YoY driven by declining
residual values on diesel vehicles in Europe and divestiture of
Brazil operations
1Sale finalized August 2017
2Excluding Brazil operations
1%1%
Total RPUUtilization
10 bps
Total RPD
Key Operating Metrics2
4Q:17 YoY
15
LIQUIDITY / BALANCE SHEET
OVERVIEW
TOM KENNEDY
CHIEF FINANCIAL OFFICER
Hertz Global Holdings, Inc.
16
YE:17 HGH Consolidated Debt
57%
43%
Vehicle Debt
65%
35%
Total Debt
85%
15%
Fixed Rate Debt Floating Rate Debt
Non-Vehicle Debt
Notes: YE fixed rate debt ratio at highest level because total vehicle debt is at seasonally lowest level
100 bps change in YE:17 net floating rate debt = $44M change in annual interest expense
Excluding Donlen floating rate debt, which is effectively hedged, increases the total fixed rate debt to 70%
17
YE:17 Liquidity Overview
Corporate Liquidity at December 31, 2017
$ in millions
• Corporate liquidity increased by $232M in 4Q:17
• Redeemed $450 million of senior notes due 2019 in
December 2017
• Issued $1.0 billion of 5 year term ABS in January
2018
• Higher unrestricted cash balance reflects, in part,
the equivalent of $383M of proceeds from the
Senior Second Priority Notes offering associated
with a corresponding reduction in Senior RCF
commitments
Senior RCF Facility Size 1,167$
Outstanding Letters of Credit 615
Borrowings O/S -
Available under Senior RCF 552$
Unrestricted Cash 1,072
Corporate Liquidity 1,624$
18
Corporate Debt Maturity Profile is Well Laddered
December 31, 2017 Hertz Global Non-Vehicle Debt Maturity Profile1
1 Excludes $27M of promissory notes due 2028 and $11M of capital leases.
$700
$500 $500
$800
$1,250
$14 $14
$14
$14
$14
$618
$1,167
2018 2019 2020 2021 2022 2023 2024
Senior Notes Senior Second Priority Secured Notes Term Loan Senior RCF
In $M USD
19
First Lien Financial Maintenance Covenant
Consolidated First Lien Leverage Ratio as of December 31, 2017 was 1.9x
1 TTM adjusted corporate EBITDA defined as $267M reported LTM adjusted corporate EBIDTA + $123M adjustments as per credit
agreement
2 Actual unrestricted cash on the balance sheet as of 12/31/17 was $1,072M. The credit facility limits netting of unrestricted cash to $500M
3 First lien leverage ratio must not exceed 3.0x in accordance with the terms of the Credit Agreement
Senior RCF Facility Size $1,167M
Outstanding Letters of Credit - 615
Term Loan Outstanding + 688
Unrestricted Cash2 - 500
First Lien Secured Net Debt $740M
TTM Adjusted Corporate EBITDA1 / $390M
First Lien Leverage Ratio3 1.9x
3Q:17 4Q:17+
3.25x 3.0x
Our Consolidated First Lien Leverage Ratio is tested each quarter and must not exceed
the thresholds outlined below:
20
Tax Reform Impact
• Net benefit of $679M in 4Q:17 from the re-measured valuation of net deferred tax liabilities
• Effective tax rate anticipated to be between 23% and 26%, beginning in 2018
• Not expected to be material cash tax payer in at least the next three to five years
– Elimination of Like-Kind Exchange program expected to be fully offset by 100% bonus
depreciation through 2022
• Existing NOL balance of $4B
21
FY:18 Investments Impacting Adjusted Corporate EBITDA
2018
Estimate
2017
Actual
YoY $
Inc/(Dec)
Total Investments $300 $260 $40
Major Categories
Fleet $100 $130 $(30)
IT/Operations 120 70 50
Sales/Marketing/Other 80 60 20
Total $300 $260 $40
in $M USD
22
Q&A