Hertz Reports Strong Third Quarter Operating Results
Worldwide revenues for the quarter of $2.2 billion, an increase of 7.1% year-over-year.
-- Worldwide revenues for the quarter of $2.2 billion, an increase of 7.1%
year-over-year.
-- Worldwide car rental revenues for the quarter up 8.3% year-over-year,
with U.S. car rental revenues up 11.4%.
-- Worldwide car rental adjusted pre-tax income(1) for the third quarter
increased 19.7% over the prior year period, representing a 150 basis
point margin improvement.
-- Adjusted diluted earnings per share(1) for the quarter of $0.40 versus
$0.31 in the prior year; GAAP diluted earnings per share for the
quarter of $0.36 versus $0.15 in the prior year.
Hertz Global Holdings, Inc. (NYSE: HTZ) reported third quarter 2010 worldwide revenues of $2.2 billion, an increase of 7.1% year-over-year (a 8.9% increase excluding the effects of foreign currency). Worldwide car rental revenues for the quarter increased 8.3% (a 10.5% increase excluding the effects of foreign currency) to $1.9 billion. Revenues from worldwide equipment rental for the third quarter were $281.2 million, up 0.2% (a 0.1% increase excluding the effects of foreign currency) over the prior year period.
Third quarter 2010 adjusted pre-tax income(1) was $253.6 million, versus $195.3 million in the same period in 2009, an increase of $58.3 million, or 29.9%, and income before income taxes ("pre-tax income"), on a GAAP basis, was $158.3 million, more than doubling that of the third quarter of 2009 of $75.8 million. Corporate EBITDA(1) for the third quarter of 2010 was $437.2 million, an increase of 12.7% from the same period in 2009.
Third quarter 2010 adjusted net income(1) was $162.7 million, an increase of 30.7% from $124.5 million in the same period of 2009, resulting in adjusted diluted earnings per share for the quarter of $0.40, compared with $0.31 per share for the third quarter of 2009. Third quarter 2010 net income, on a GAAP basis, was $156.6 million or earnings of $0.36 per share on a diluted basis, compared with $64.5 million, or earnings of $0.15 per share on a diluted basis, for the third quarter of 2009.
Mark P. Frissora, the Company's Chairman and Chief Executive Officer, said, "In the third quarter, we increased adjusted pre-tax income year-over-year for the fifth consecutive quarter and doubled GAAP pre-tax income compared with the third quarter of 2009. These third quarter, year-over-year improvements are attributable to 11.4% revenue growth in U.S. car rental, our largest business, strong performance by our European car rental unit and efficiency improvements, including lower fleet costs. Also, HERC generated revenue growth in the third quarter for the first time in two years, and recorded a 33.7% year-over-year improvement in adjusted pre-tax income as well as a Corporate EBITDA margin of 40%. Despite continued investments in our global car rental network, especially in the Advantage and U.S. off-airport businesses, we anticipate generating strong adjusted pre-tax income results for the fourth quarter which is why, on October 20, 2010, we increased full year 2010 adjusted diluted EPS guidance to a range of $0.47 - $0.48. (2)"
INCOME MEASUREMENTS, THIRD QUARTER 2010 & 2009
Q3 2010 Q3 2009
-------------------------- --------------------------
Diluted Diluted
Earnings Earnings
(in millions, except Pre-tax Net Per Pre-tax Net Per
per share amounts) Income Income Share Income Income Share
-------- ------- -------- -------- ------- --------
Earnings Measures, as
reported (EPS
based on 430.4M and
425.2M diluted
shares,
respectively) $ 158.3 $ 156.6 $ 0.36 $ 75.8 $ 64.5 $ 0.15
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Adjustments:
Purchase accounting 23.8 21.7
Non-cash debt
charges 46.4 48.5
Restructuring and
related charges 15.2 47.1
Derivative loss 0.2 1.9
Acquisition related
costs 9.7 -
Management
transition costs - 0.3
-------- --------
Adjusted pre-tax
income 253.6 253.6 195.3 195.3
Assumed provision for
income taxes at 34% (86.2) (66.4)
Noncontrolling
interest (4.7) (4.4)
-------- ------- -------- -------
Earnings Measures, as
adjusted (EPS based
on 410.0M and 407.7M
diluted shares,
respectively) $ 253.6 $ 162.7 $ 0.40 $ 195.3 $ 124.5 $ 0.31
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The Company took $15.2 million in restructuring and related charges in the third quarter of 2010, primarily attributable to costs associated with the closure of equipment rental locations and process reengineering. The Company expects the restructuring and related charges to continue to diminish throughout the remainder of 2010.
The Company ended the third quarter of 2010 with total debt of $12.05 billion and net corporate debt(1) of $3.78 billion, compared with total debt of $11.69 billion and net corporate debt of $3.64 billion as of June 30, 2010. Total debt increased primarily due to the private offering of $700.0 million of 7.5% senior notes that closed on September 30, 2010, partly offset by a decrease in fleet debt related to seasonality. Net cash provided by operating activities was $904.7 million in the third quarter of 2010, compared to $608.8 million last year.
WORLDWIDE CAR RENTAL
Worldwide car rental revenues were $1.9 billion for the third quarter of 2010, an increase of 8.3% (a 10.5% increase excluding the effects of foreign currency) from the prior year period. Transaction days for the quarter increased 8.2% [8.9% U.S.; 7.0% International] from the prior year period. U.S. off-airport total revenues for the third quarter increased 15.8% and transaction days increased 10.4% year-over-year. Rental rate revenue per transaction day(1) ("RPD") for the quarter increased 1.1% [1.7% U.S.; 0.3% International] from the prior year period.
Worldwide car rental adjusted pre-tax income for the third quarter of 2010 was $309.3 million, an increase of 19.7% from $258.3 million in the prior year period. The result was driven by increased volume and strong cost management performance. As a result, worldwide car rental achieved an adjusted pre-tax margin, based on revenues, of 16.2% for the quarter, versus 14.7% in the prior year period.
The worldwide average number of Company-operated cars for the third quarter of 2010 was 487,100, an increase of 8.8% over the prior year period.
WORLDWIDE EQUIPMENT RENTAL
Worldwide equipment rental revenues were $281.2 million for the third quarter of 2010, a 0.2% increase (a 0.1% increase excluding the effects of foreign currency) from the prior year period.
Adjusted pre-tax income for worldwide equipment rental for the third quarter of 2010 was $33.7 million, an increase of 33.7% from $25.2 million in the prior year period, primarily attributable to the effects of increased volume and cost management initiatives. Worldwide equipment rental achieved an adjusted pre-tax margin, based on revenues, of 12.0%, a 300 basis point improvement over the prior year period, and a Corporate EBITDA margin, based on revenues, of 40.0% for the quarter.
The average acquisition cost of rental equipment operated during the third quarter of 2010 decreased by 5.0% year-over-year and net revenue earning equipment as of September 30, 2010 was $1,681.4 million, a 11.2% decrease from the amount as of September 30, 2009.
OUTLOOK
On October 20, 2010, the Company announced it had reaffirmed its full year 2010 revenue and Corporate EBITDA guidance, provided on April 26, 2010, in the range of $7.5 billion to $7.7 billion and $1.080 billion to $1.095 billion,(2) respectively. The Company also announced it increased its full year 2010 worldwide forecast for adjusted pre-tax income, adjusted diluted earnings per share and efficiency savings as follows:
Revised Guidance Prior Guidance
--------------------- ---------------------
Adjusted Pre-Tax Income(2) $ 315 - $ 325 million $ 290 - $ 305 million
Adjusted Diluted Earnings Per
Share(2) $ 0.47 - $ 0.48 $ 0.43 - $ 0.45
Efficiency Savings $ 410 million $ 380 million
RESULTS OF THE HERTZ CORPORATION
The Company's operating subsidiary, The Hertz Corporation ("Hertz"), posted the same revenues for the third quarter as the Company. Hertz's third quarter 2010 pre-tax income was $170.1 million versus the Company's pre-tax income of $158.3 million, primarily attributable to additional interest expense recognized by the Company on its 5.25% Convertible Senior Notes issued in May and June 2009.
(1) Adjusted pre-tax income (loss), Corporate EBITDA, adjusted net income (loss), adjusted diluted earnings (loss) per share, net corporate debt and rental rate revenue per transaction day are non-GAAP measures. See the accompanying Tables and Exhibit for the reconciliations and definitions for each of these non-GAAP measures and the reason the Company's management believes that these measures provide useful information to investors regarding the Company's financial condition and results of operations.
(2) Management believes that Corporate EBITDA, adjusted pre-tax income and adjusted diluted earnings per share are useful in measuring the comparable results of the Company period-over-period. The GAAP measures most directly comparable to Corporate EBITDA, adjusted pre-tax income and adjusted diluted earnings per share are cash flows from operating activities, pre-tax income and diluted earnings per share. Because of the forward-looking nature of the Company's forecasted Corporate EBITDA, adjusted pre-tax income and adjusted diluted earnings per share, specific quantifications of the amounts that would be required to reconcile forecasted cash flows from operating activities, pre-tax income and diluted earnings per share are not available. The Company believes that there is a degree of volatility with respect to certain of the Company's GAAP measures, primarily related to fair value accounting for its financial assets (which includes the Company's derivative financial instruments), its income tax reporting and certain adjustments made to arrive at the relevant non-GAAP measures, which preclude the Company from providing accurate forecasted GAAP to non-GAAP reconciliations. Based on the above, the Company believes that providing estimates of the amounts that would be required to reconcile the range of the non-GAAP Corporate EBITDA, adjusted pre-tax income and adjusted diluted earnings per share to forecasted cash flows from operating activities, pre-tax income and diluted earnings per share would imply a degree of precision that would be confusing or misleading to investors for the reasons indentified above.
Full year forecasted 2010 adjusted diluted earnings per share is based on a normalized tax rate of 34% and 410.0 million shares.
