Hertz Global Holdings, Inc · NASDAQ:HTZ
Hertz Global — Bank of America Consumer Conference 2008
43 slides from Hertz Global's conference presentation, Mar 17, 2008
Slide 1: Bank of America Consumer Conference March 12, 2008
Bank of America Consumer Conference March 12, 2008
Slide 2: Forward-Looking Statements
Forward-Looking Statements Certain statements contained in this presentation are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements give our current expectations or forecasts of future events and our future performance and do not
Slide 3: Disclosure on Financials in Presentation
Disclosure on Financials in Presentation Amounts shown in this presentation, unless otherwise indicated, are for Hertz Global Holdings, Inc., (HGH), the ultimate parent company of The Hertz Corporation (THC). GAAP and non-GAAP profitability metrics for THC, the wholly owned operating subsidiary, are
Slide 4: Non-GAAP Measures and Terms
Non-GAAP Measures and Terms The following non-GAAP measures and terms will be used in the presentation: • LTM • EBITDA • Corporate EBITDA • Adjusted Pre-Tax Income • Adjusted Net Income • Adjusted Diluted Earnings Per Share • Net Corporate Debt • Net Fleet Debt • Corporate Restricted Cash • Restrict
Slide 5: Key Investment Considerations
Key Investment Considerations Premier global brand Leading franchises in large, growing industries Superior business model and strategy with successful track record Multiple drivers of earnings growth Robust diversified revenue growth Significant productivity opportunities Strong cash flow to drive
Slide 6: Leading Franchises
Leading Franchises Rent-A-Car (RAC) Hertz Equipment Rental (HERC) YTD 12/31/07 Revenue $6.9 billion +8.5%* Corp. EBITDA $742 million + 13.9%* Adj. Pre -Tax $609.1 million +29.0%* YTD 12/31/07 Revenue $1.8 billion +5.0%* Corp. EBITDA $834 million +9.8%* Adj. Pre -Tax $374 million +8.2%* #1 airport ma
Slide 7: Superior Business Model
Superior Business Model Diversified Business ... Revenue Mix ($ in Billions) Worldwild HERC $1.8 20% U.S. Off-Airport $1.0 11% International RAC $2.3 27% U.S. Airport RAC $3.6 42% 2007 Revenue = $8.7bn ... with Consistent Growth and Profitability Revenue ($ in Millions) RAC HERC CAGR = 10.0% $5,934
Slide 8: Executing On Our Strategy
Executing On Our Strategy Drivers Focus on Growth Drive Cost Efficiencies Utilize Cash Flow to Delever Performance Metrics 12 Months Ended 9/30/06 PF 12/31/07 Revenue $7,911 $8,686 6-8% % Growth +8.2% +7.8% Corp. EBITDA $1,285 $1,542 % of Revenue 16.2% 17.7% 19-21% Adjusted Pre-tax Income $409 $661
Slide 9: Hertz Consolidated Scorecard Full Year 2007
Hertz Consolidated Scorecard Full Year 2007 ($ in Millions) Revenues December YTD YoY Improvement 2006 YTD 2007 YTD $8,058.4 $8,685.6 7.8% Adjusted Pre-Tax Income $486.7 $660.7 35.8% % of Revenues 6.0% 7.6% 1.6 PPT Adjusted Net Income $299.7 $409.8 36.7% % of Revenues 3.7% 4.7% 1.0 PPT Adjusted Dilu
Slide 10: Key Long-Term Revenue Growth Opportunities – Worldwide RAC
Key Long-Term Revenue Growth Opportunities – Worldwide RAC Delivering over $1.4 Billion in Incremental Revenue Off-Airport Expansion On track to achieve above market U.S. growth with 202 new off-airport locations opened in 2007; network at 1,580 locations Recognized supplier to over 150 of the large
Slide 11: Key Long-Term Revenue Growth Opportunities - Worldwide HERC
Key Long-Term Revenue Growth Opportunities - Worldwide HERC Delivering over $600 million in Incremental Revenue Delivering over $600 Million in Incremental Revenue Continued development of customer and product segmentation - Industrial, aerial, General Rental, power generation, pumps and trench shor
Slide 12: Hertz "Under Construction"
Hertz "Under Construction" Business Process Re-engineering Key processes: Fleet Management, Vehicle Preparation and Cleaning, Vehicle Sales Processes, Logistics, Transportation, CMS and Maintenance Standardizing processes and work using global best practices Organization Restructuring and Outsourcin
Slide 13: Hertz Reinvestment Strategy
Hertz Reinvestment Strategy Incremental Investments to Become a "Better and Better" Hertz Our Brand Advertising - "Love the Road" NeverLost Expansion and Enhancement Green Collection Promotion Simply Wheelz Pilot in Orlando and Spain Incremental Spending FY 2007 $25 Million Our Operations $20 Millio
Slide 14: Strong Capital Structure and Liquidity Position
Strong Capital Structure and Liquidity Position Leverage Liquidity ($ in Millions) As of December 31, 2007 Net Fleet Debt $6,584 Net Corporate Debt 3,486 YTD Corporate EBITDA $1,542 Total Net Debt/EBITDA $3,985 Total Net Debt $10,569 YTD EBITDA $3.0 x Net Corp. Debt/Corp. EBITDA 2.6 x As of December
Slide 15: Hertz Worldwide RAC
Heréz’ Worldwide™ RAC Pp
Slide 16: Large Market with Attractive Growth
Large Market with Attractive Growth 2007 Total Global Market = $33+B Source: Estimate based on Auto Rental News, Mintel and Euromonitor International Current Industry Trends Soft Q4 pricing based on industry over capacity - Hertz Q4 RPD down 2.3% Moderating 2008 fleet costs with adequate supply Indu
Slide 17: Long-Term Market Leader
Long-Term Market Leader U.S. Airport Market Share 2007 Market Size = ~ $10.8B 30% 28.7% Hertz 27.9% 25% 26.0% Vanguard(a) 19.5% 20% 22.3% Avis 19.9% 15% 11.8% Budget 10.4% 10% 8.8% Dollar/Thrifty 11.6% 5% Others 2.4% 0% 1.4% Enterprise 8.3% 2000 2001 2002 2003 2004 2005 2006 Sept’07 YTD* Source: Air
Slide 18: Highly Differentiated, Leading Brand Strategy
Highly Differentiated, Leading Brand Strategy Affiliated customer strategy - Over 80% of revenues from affiliated business • 70+ travel partnerships Strong corporate account relationships Leading loyalty program Increasing popular car collections (Green, Fun, Prestige, Motorbikes) Product differenti
Slide 19: Flexible Fleet Dynamics
Flexible Fleet Dynamics Global Fleet Supplier Diversity Lower concentration of top suppliers than many major competitors Note: Represents purchases for YTD 12/31/07 U.S. RAC Model Year Economics 2007 2008 Impact Estimate Model Year Cost Inflation ~15% ~4-6% Process, Mix & Structural Changes ~(12%) ~
Slide 20: U.S. Volume/Pricing Trends in Line with Growth Strategy
U.S. Volume/Pricing Trends in Line with Growth Strategy Transaction Days Continued growth of transaction days - 3.8% in 2007 vs. 2006 U.S. Off-Airport transaction days grew at a strong pace outperforming airport - 10.6% in 2007 vs. 2006 U.S. online transactions days grew 13% in 2007 vs. 2006 Pricing
Slide 21: Worldwide HERC
Worldwide HERC 20
Slide 22: Large Market with Attractive Growth
Large Market with Attractive Growth Large, fragmented industry with long-term growth characteristics – Contracting construction growth mitigated by strength in industrial and fragmented sectors Cyclical growth: 4 to 5 years into what historically has been a 9 to 10 year expansion cycle Increased pro
Slide 23: Diversified End Markets with Profitable Growth Opportunities
Diversified End Markets with Profitable Growth Opportunities Hertz YTD 12/31/07 Revenue Diversification North American Revenue Sources Residential Construction 20% Industrial 30% Engineering Svcs/Gov't/ Other 3% 47% Non-Residential Construction 12/31/07 HERC Geographic Diversity 15% South-western 12
Slide 24: HERC: World Class Operator in Equipment Rental Industry
HERC: World Class Operator in Equipment Rental Industry Broad geographic footprint Industry-leading salesforce automation and strong national account base End-user and product diversification mitigates reliance on construction activity - Aerial, pumps, power generation, General Rental, and on site p
Slide 25: Wrap Up Questions & Answers
Wrap Up Questions & Answers 24
Slide 26: Key Investment Considerations
Key Investment Considerations Premier global brand Leading franchises in large, growing industries Superior business model and strategy with successful track record Multiple drivers of earnings growth Robust diversified revenue growth Significant productivity opportunities Strong cash flow to drive
Slide 27: Financial Overview Appendices
Financial Overview Appendices 26
Slide 28: Financial Profile
Financial Profile · Significant growth opportunities Long-Term Growth Target - Revenue +6-8% - Corporate EBITDA + 10-12% - Adjusted pre-tax income +18-20% · Strong balance sheet and liquidity profile - Flexible capital structure - Ample liquidity to support growth · Attractive free cash flow (levere
Slide 29: Strong Financial Performance
Strong Financial Performance Historical RAC HERC Revenue ($ in Millions) CARG = 10.0% $5,934 $6,676 $7,469 $8,058 $8,686 $1,038 $1,162 $1,415 $1,673 $1,756 $4,888 $5,508 $6,047 $6,378 $6,921 2003 2004 2005 2006 2007 Corporate EBITDA ($ in Millions) CAGR = 20.2% $739 $992 $1,141 $1,379 $1,542 $356 $4
Slide 30: Generating Cash Flow
Generating Cash Flow • Significant cash flow available to pay down Corporate Debt • Improvements due primarily to incremental Corporate EBITDA and improved working capital 12 Months Ended 12/31/2006 12/31/07 Change ($ in Millions) Corporate EBITDA $1,378.7 $1,541.5 $162.8 Corporate Net Cash Interest
Slide 31: Key Definitions
Key Definitions LTM Results for the twelve months ended LTM 9/30/06 based on the 4th quarter 2005 results for The Hertz Corporation and nine months ended September 30, 2006 results for Hertz Holdings. EBITDA* Earnings before interest expense, taxes, depreciation and amortization, Corporate EBITDA* E
Slide 32: Key Definitions
Key Definitions Net Fleet Debt* Fleet debt (U.S. ABS Fleet Debt, the Fleet Financing Facility, the International Fleet Debt Facilities, capital lease financings relating to revenue earning equipment that are outside the International Fleet Debt Facilities, the Belgian Fleet Financing Facility, the B
Slide 33: Key Profitability Metrics
Key Profitability Metrics Adjusted Pre-Tax Income (by Segment) Excludes: Non-cash effects of purchase accounting Amortization of deferred financing fees/debt discount Other one-time or non-operational items (e.g., restructuring charges and vacation accrual adjustment) Corporate EBITDA (by Segment) C
Slide 34: Build-Up of Key Profitability Metrics
Build-Up of Key Profitability Metrics YTD 12/31/07 Corporate EBITDA ($ in Millions) EBITDA $ 3,485.6 (-) RAC fleet depreciation (1,695.4) (-) RAC fleet Interest (427.8) (+) Non-cash expenses & charges 102.2 (+) Extraordinary, unusual or non- recurring gains and losses 76.9 Corporate EBITDA $ 1,541.5
Slide 35: Hertz Debt Structure at 12/31/07
Hertz Debt Structure at 12/31/07 "RAC FleetCo" “Corporate” Fleet Depreciation + Fleet Interest Use of Vehicles ($ in millions) Assets: RAC Fleet Value $ 7,610 Fleet Receivables 702 Cash(1) 573 Total $ 8,885 Fleet Debt: U.S. ABS & Fleet Financing $ 4,774 International Fleet Debt 1,912 Other Internati
Slide 36: Non-GAAP Reconciliations
Non-GAAP Reconciliations EBITDA Less RAC Interest Expense and RAC Fleet Depreciation Expense ($ in Millions) Car Rental 2003 2004 Income before income taxes and minority interest $ 278.7 $ 437.7 Depreciation and amortization 1,369.7 1,365.3 Interest, net of interest income 271.8 305.0 EBITDA 1,920.2
Slide 37: Non-GAAP Reconciliations
Non-GAAP Reconciliations ($ in Millions) Corporate EBITDA 3 Months Ended LTM 9 Months Ended Sept. 30, Dec. 31, Sept. 30, 2006 PF 2006 Combined Car Rental 2005 PF Income before income taxes and minority interest $ 318.4 $ 283.1 $ 35.3 Depreciation and amortization Interest, net 1,641.9 1,246.4 396.5
Slide 38: Non-GAAP Reconciliations
Non-GAAP Reconciliations ($ in Millions) Corporate EBITDA Year Ended December 31, Combined 2005 PF 2006 2007 Car Rental Income before income taxes and minority interest $ 291.6 $373.5 $468.6 Depreciation and amortization Interest, net of 1,551.9 1,659.9 1,856.6 interest income 421.0 424.1 436.8 EBIT
Slide 39: Non-GAAP Reconciliations
Non-GAAP Reconciliations ($ in Millions) Adjusted Pre-Tax Income (Loss) LTM 9 MonthsEnded 3MonthsEnded Sept. 30, Sept. 30, Dec. 31, Combined Car Rental 2006 PF 2006 2005 PF Income before income taxes and minority interest $ 318.4 $ 283.1 35.3 Adjustments: Purchase accounting 22.7 17.1 5.6 Non-cash d
Slide 40: Non-GAAP Reconciliations
Non-GAAP Reconciliations ($ in Millions) Adjusted Pre-Tax Income Year Ended December 31, Car Rental 2006 2007 Income before income taxes and minority interest $ 373.5 $ 468.6 Adjustments: 23.8 35.3 Purchase accounting Non-cash debt charges 75.0 66.5 Restructuring charges - 64.5 Vacation accrual adju
Slide 41: Non-GAAP Reconciliations
Non-GAAP Reconciliations ($ in Millions) Net Corporate Debt and Net Fleet Debt As of As of As of September 30, December 31, December 31, 2006 2006 2007 Corporate Debt Debt, less: $ 12,959.3 $ 12,276.2 $11,960.1 U.S. Fleet Debt and Pre-Acquisition Notes 4,969.1 4,845.2 4,603.5 International Fleet Deb
Slide 42: Importance of Non-GAAP Measures
Importance of Non-GAAP Measures EBITDA and Corporate EBITDA provide investors with supplemental measures of operating performance and liquidity. , Corporate EBITDA provides supplemental information utilized in the calculation of the financial covenants under Hertz's senior credit facilities. , Manag
Slide 43: Importance of Non-GAAP Measures
Importance of Non-GAAP Measures Adjusted Pre-Tax Income is the Company's measure of segment profitability and is important to management and investors because it represents a preferred measure of our operational performance exclusive of the effects purchase accounting, non-cash debt charges, one-tim
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