SEC Filing | Hertz Global Holdings, Inc.

View:

Download DOC

Download PDF

Download XLS

Download XBRL

Document

Table of Contents

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		June 30, 2019
OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

HERTZ GLOBAL HOLDINGS, INC.

THE HERTZ CORPORATION

(Exact name of registrant as specified in its charter)



Delaware	001-37665			61-1770902
Delaware	001-07541			13-1938568
(State or other jurisdiction of incorporation or organization)	(Commission File Number)			(I.R.S. Employer Identification No.)

	8501 Williams Road
	Estero,	Florida	33928
	239	301-7000
	(Address, including Zip Code, and telephone number, including area code, of registrant's principal executive offices)


	Not Applicable
	(Former name, former address and former fiscal year, if changed since last report.)



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.	Common Stock	par value $0.01 per share	HTZ	New York Stock Exchange
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 Corporation Yes ☒ No ☐

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.	Large accelerated filer	☒	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	☐	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.			☐

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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.



	Class		Shares Outstanding at	July 30, 2019
Hertz Global Holdings, Inc.	Common Stock,	par value $0.01 per share	142,067,813
The Hertz Corporation	Common Stock,	par value $0.01 per share	100
			(100% owned by Rental Car Intermediate Holdings, LLC)

Table of Contents

HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

THE HERTZ CORPORATION AND SUBSIDIARIES

TABLE OF CONTENTS




		Page
PART I. FINANCIAL INFORMATION
ITEM 1.	Condensed Consolidated Financial Statements (Unaudited)	1
ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	41
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	63
ITEM 4.	Controls and Procedures	63
PART II. OTHER INFORMATION
ITEM 1.	Legal Proceedings	64
ITEM 1A.	Risk Factors	64
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	64
ITEM 3.	Defaults Upon Senior Securities	64
ITEM 5.	Other Information	64
ITEM 6.	Exhibits	64
SIGNATURE		65
EXHIBIT INDEX		66

Table of Contents

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
Condensed Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018		2
Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2019 and 2018		3
Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2019 and 2018		4
Condensed Consolidated Statements of Changes in Stockholders' Equity for the Three and Six Months Ended June 30, 2019 and 2018		5
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2019 and 2018		6
The Hertz Corporation and Subsidiaries
Condensed Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018		8
Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2019 and 2018		9
Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2019 and 2018		10
Condensed Consolidated Statements of Changes in Stockholder's Equity for the Three and Six Months Ended June 30, 2019 and 2018		11
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2019 and 2018		12
Notes to the Condensed Consolidated Financial Statements
Note 1	Background	14
Note 2	Basis of Presentation and Recently Issued Accounting Pronouncements	14
Note 3	Debt	16
Note 4	Leases	22
Note 5	Income Tax (Provision) Benefit	24
Note 6	Earnings (Loss) Per Share - Hertz Global	25
Note 7	Fair Value Measurements	26
Note 8	Contingencies and Off-Balance Sheet Commitments	26
Note 9	Related Party Transactions	28
Note 10	Segment Information	29
Note 11	Guarantor and Non-Guarantor Condensed Consolidating Financial Information - Hertz	32
Note 12	Subsequent Events	40

Table of Contents

HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

Unaudited

(In millions, except par value)



	June 30, 2019			December 31, 2018
ASSETS
Cash and cash equivalents	$	415		$	1,127
Restricted cash and cash equivalents:
Vehicle	207			257
Non-vehicle	32			26
Total restricted cash and cash equivalents	239			283
Total cash, cash equivalents, restricted cash and restricted cash equivalents	654			1,410
Receivables:
Vehicle	434			625
Non-vehicle, net of allowance of $29 and $27, respectively	1,264			962
Total receivables, net	1,698			1,587
Prepaid expenses and other assets	926			902
Revenue earning vehicles:
Vehicles	19,687			15,703
Less: accumulated depreciation	(3,242		)	(3,284		)
Total revenue earning vehicles, net	16,445			12,419
Property and equipment, net	772			778
Operating lease right-of-use assets	1,547			—
Intangible assets, net	3,229			3,203
Goodwill	1,083			1,083
Total assets^(a)	$	26,354		$	21,382
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable:
Vehicle	$	705		$	284
Non-vehicle	664			704
Total accounts payable	1,369			988
Accrued liabilities	1,358			1,304
Accrued taxes, net	164			136
Debt:
Vehicle	14,919			11,902
Non-vehicle	4,428			4,422
Total debt	19,347			16,324
Operating lease liabilities	1,538			—
Public liability and property damage	426			418
Deferred income taxes, net	1,082			1,092
Total liabilities^(a)	25,284			20,262
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value, no shares issued and outstanding	—			—
Common stock, $0.01 par value, 86 and 86 shares issued, respectively and 84 and 84 shares outstanding, respectively	1			1
Additional paid-in capital	2,267			2,261
Accumulated deficit	(1,017		)	(909		)
Accumulated other comprehensive income (loss)	(187		)	(192		)
Treasury stock, at cost, 2 shares and 2 shares, respectively	(100		)	(100		)
Stockholders' equity attributable to Hertz Global	964			1,061
Noncontrolling interests	106			59
Total stockholders' equity	1,070			1,120
Total liabilities and stockholders' equity	$	26,354		$	21,382

(a)

Hertz Global Holdings, Inc.'s consolidated total assets as of June 30, 2019 and December 31, 2018 include total assets of variable interest entities (“VIEs”) of $1.5 billion and $1.0 billion, respectively, which can only be used to settle obligations of the VIEs. Hertz Global Holdings, Inc.'s consolidated total liabilities as of June 30, 2019 and December 31, 2018 include total liabilities of VIEs of $1.4 billion and $947 million, respectively, for which the creditors of the VIEs have no recourse to Hertz Global Holdings, Inc. See "Special Purpose Entities" in Note 3, "Debt," and "767 Auto Leasing LLC" in Note 9, "Related Party Transactions," for further information.

The accompanying notes are an integral part of these financial statements.

Table of Contents

HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Unaudited

(In millions, except per share data)



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Revenues:
Worldwide vehicle rental	$	2,344		$	2,217		$	4,297		$	4,111
All other operations	167			172			321			341
Total revenues	2,511			2,389			4,618			4,452
Expenses:
Direct vehicle and operating	1,388			1,349			2,655			2,585
Depreciation of revenue earning vehicles and lease charges	634			687			1,226			1,348
Selling, general and administrative	258			265			490			498
Interest expense, net:
Vehicle	127			127			238			221
Non-vehicle	72			73			144			146
Total interest expense, net	199			200			382			367
Other (income) expense, net	(12		)	(26		)	(31		)	(29		)
Total expenses	2,467			2,475			4,722			4,769
Income (loss) before income taxes	44			(86		)	(104		)	(317		)
Income tax (provision) benefit	(4		)	23			(3		)	52
Net income (loss)	40			(63		)	(107		)	(265		)
Net (income) loss attributable to noncontrolling interests	(2		)	—			(1		)	—
Net income (loss) attributable to Hertz Global	$	38		$	(63	)	$	(108	)	$	(265	)
Weighted average shares outstanding:
Basic	96			96			96			95
Diluted	97			96			96			95
Earnings (loss) per share:
Basic earnings (loss) per share	$	0.40		$	(0.66	)	$	(1.13	)	$	(2.78	)
Diluted earnings (loss) per share	$	0.40		$	(0.66	)	$	(1.13	)	$	(2.78	)

The accompanying notes are an integral part of these financial statements.

Table of Contents

HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Unaudited

(In millions)



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Net income (loss)	$	40		$	(63	)	$	(107	)	$	(265	)
Other comprehensive income (loss):
Foreign currency translation adjustments	(5		)	(19		)	3			(19		)
Net gain (loss) on defined benefit pension plans	1			5			—			2
Reclassification from other comprehensive income (loss) to other (income) expense for amortization of actuarial (gains) losses on defined benefit pension plans	2			—			3			—
Total other comprehensive income (loss) before income taxes	(2		)	(14		)	6			(17		)
Income tax (provision) benefit related to reclassified amounts of net periodic costs on defined benefit pension plans	—			—			(1		)	—
Total other comprehensive income (loss)	(2		)	(14		)	5			(17		)
Total comprehensive income (loss)	38			(77		)	(102		)	(282		)
Comprehensive (income) loss attributable to noncontrolling interests	(2		)	—			(1		)	—
Comprehensive income (loss) attributable to Hertz Global	$	36		$	(77	)	$	(103	)	$	(282	)

The accompanying notes are an integral part of these financial statements.

Table of Contents

HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

Unaudited

(In millions)



	Preferred Stock Shares	Common Stock Shares	Common Stock Amount		Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Treasury Stock Shares	Treasury Stock Amount			Stockholders' Equity Attributable to Hertz Global			Non- controlling Interests		Total Stockholders' Equity
Balance as of:	Preferred Stock Shares	Common Stock Shares	Common Stock Amount		Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Treasury Stock Shares	Treasury Stock Amount			Stockholders' Equity Attributable to Hertz Global			Non- controlling Interests		Total Stockholders' Equity
December 31, 2017	—	84	$	1	$	2,243		$	(506	)	$	(118	)	2	$	(100	)	$	1,520		$	—	$	1,520
Change in accounting principle	—	—	—		—			(189		)	—			—	—			(189		)	—		(189		)
January 1, 2018 (as adjusted)	—	84	1		2,243			(695		)	(118		)	2	(100		)	1,331			—		1,331
Net income (loss)	—	—	—		—			(202		)	—			—	—			(202		)	—		(202		)
Other comprehensive income (loss)	—	—	—		—			—			(3		)	—	—			(3		)	—		(3		)
Net settlement on vesting of restricted stock	—	—	—		(3		)	—			—			—	—			(3		)	—		(3		)
Stock-based compensation charges	—	—	—		10			—			—			—	—			10			—		10
Contributions from noncontrolling interests	—	—	—		—			—			—			—	—			—			5		5
March 31, 2018	—	84	1		2,250			(897		)	(121		)	2	(100		)	1,133			5		1,138
Net income (loss)	—	—	—		—			(63		)	—			—	—			(63		)	—		(63		)
Other comprehensive income (loss)	—	—	—		—			—			(14		)	—	—			(14		)	—		(14		)
Stock-based compensation charges	—	—	—		3			—			—			—	—			3			—		3
Contributions from noncontrolling interests	—	—	—		—			—			—			—	—			—			5		5
June 30, 2018	—	84	$	1	$	2,253		$	(960	)	$	(135	)	2	$	(100	)	$	1,059		$	10	$	1,069



	Preferred Stock Shares	Common Stock Shares	Common Stock Amount		Additional Paid-In Capital			Accumulated Deficit^(a)			Accumulated Other Comprehensive Income (Loss)			Treasury Stock Shares	Treasury Stock Amount			Stockholders' Equity Attributable to Hertz Global			Non- controlling Interests			Total Stockholders' Equity
Balance as of:	Preferred Stock Shares	Common Stock Shares	Common Stock Amount		Additional Paid-In Capital			Accumulated Deficit^(a)			Accumulated Other Comprehensive Income (Loss)			Treasury Stock Shares	Treasury Stock Amount			Stockholders' Equity Attributable to Hertz Global			Non- controlling Interests			Total Stockholders' Equity
December 31, 2018	—	84	$	1	$	2,261		$	(909	)	$	(192	)	2	$	(100	)	$	1,061		$	59		$	1,120
Net income (loss)	—	—	—		—			(147		)	—			—	—			(147		)	(1		)	(148		)
Other comprehensive income (loss)	—	—	—		—			—			7			—	—			7			—			7
Net settlement on vesting of restricted stock	—	—	—		(2		)	—			—			—	—			(2		)	—			(2		)
Stock-based compensation charges	—	—	—		3			—			—			—	—			3			—			3
Contributions from noncontrolling interests	—	—	—		—			—			—			—	—			—			25			25
March 31, 2019	—	84	1		2,262			(1,056		)	(185		)	2	(100		)	922			83			1,005
Net income (loss)	—	—	—		—			39			—			—	—			39			2			41
Other comprehensive income (loss)	—	—	—		—			—			(2		)	—	—			(2		)	—			(2		)
Stock-based compensation charges	—	—	—		5			—			—			—	—			5			—			5
Contributions from noncontrolling interests	—	—	—		—			—			—			—	—			—			21			21
June 30, 2019	—	84	$	1	$	2,267		$	(1,017	)	$	(187	)	2	$	(100	)	$	964		$	106		$	1,070


(a)	Net income (loss) is computed independently each quarter. As a result, the quarter amounts presented herein may be rounded to agree to accumulated deficit in the unaudited condensed consolidated balance sheet.

The accompanying notes are an integral part of these financial statements.

Table of Contents

HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited

(In millions)



	Six Months Ended June 30,
	2019			2018
Cash flows from operating activities:
Net income (loss)	$	(107	)	$	(265	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and reserves for revenue earning vehicles	1,329			1,306
Depreciation and amortization, non-vehicle	99			113
Amortization of deferred financing costs and debt discount (premium)	26			26
Loss on extinguishment of debt	—			22
Stock-based compensation charges	8			7
Provision for receivables allowance	23			19
Deferred income taxes, net	(13		)	(74		)
(Gain) loss on marketable securities	(20		)	(17		)
Other	(22		)	3
Changes in assets and liabilities:
Non-vehicle receivables	(316		)	(275		)
Prepaid expenses and other assets	(90		)	(84		)
Operating lease right-of-use assets	200			—
Non-vehicle accounts payable	65			154
Accrued liabilities	56			5
Accrued taxes, net	29			2
Operating lease liabilities	(211		)	—
Public liability and property damage	(2		)	—
Net cash provided by (used in) operating activities	1,054			942
Cash flows from investing activities:
Revenue earning vehicles expenditures	(8,947		)	(7,610		)
Proceeds from disposal of revenue earning vehicles	4,212			3,654
Capital asset expenditures, non-vehicle	(118		)	(80		)
Proceeds from property and other equipment disposed of or to be disposed of	21			8
Purchases of marketable securities	—			(61		)
Sales of marketable securities	—			36
Other	—			(2		)
Net cash provided by (used in) investing activities	(4,832		)	(4,055		)

The accompanying notes are an integral part of these financial statements.

Table of Contents

HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited

(In millions)



	Six Months Ended June 30,
	2019		2018
Cash flows from financing activities:
Proceeds from issuance of vehicle debt	8,267		9,414
Repayments of vehicle debt	(5,254	)	(6,829	)
Proceeds from issuance of non-vehicle debt	815