Hertz Global Holdings, Inc · NASDAQ:HTZ
Hertz Global — Q1 2008 Earnings Presentation
36 slides from Hertz Global's earnings presentation, Apr 24, 2008
Slide 1: Hertz Global Holdings 1st Quarter 2008 Conference Call
Hertz Global Holdings, Inc. 1st Quarter 2008 Conference Call April 24, 2008
Slide 2: Safe Harbor Statement
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 uncertaintie
Slide 3: Today's Agenda
Today’s Agenda • Strategic Overview – Mark Frissora, Chairman and CEO • Operating and Financial Review – Elyse Douglas, Executive VP and CFO • 2008 Outlook – Mark Frissora, Chairman and CEO • Question & Answer Session 3
Slide 4: Non-GAAP Measures
Non-GAAP Measures The following Non-GAAP measures will be used in the presentation: • Corporate EBITDA • Adjusted Pre-Tax Income • Adjusted Net Income • Adjusted Diluted Earnings Per Share • Net Corporate Debt • Levered After-Tax Cash Flow After Fleet Growth Definitions and reconciliations of these
Slide 5: Q1 2008 Financial Highlights
Q1 2008 Financial Highlights • Hertz had a solid quarter – Overcame challenging macro-economic environment Better / $ in millions, except per share calculations Q1 2008 Q1 2007 <Worse> Actual Actual vs. Q1 2007 Revenue $2,039.2 $1,921.5 6.1% GAAP Pre-Tax Loss ($55.8) ($90.6) 38.4% Net Loss ($57.7) (
Slide 6: Hertz Is Well Diversified
Hertz Is Well Diversified • Global brand – International revenues grew 24% inclusive of currency effect – Represents 33% of consolidated revenues – Network expansion • WW R-A-C – Strong U.S. off airport market growth – Online penetration increased to 28% – Enhanced travel partnerships • WW HERC – St
Slide 7: Hertz "Under Construction"
Hertz “Under Construction” • Continued focus on cost and efficiency initiatives – “COE” model (Center of Expertise) • Global cross-functional units to improve processes • Real Estate, Human Resources, Information Technology, Marketing, Finance – Outsourcing contracts • Information Technology (IBM) •
Slide 8: Fleet Management Sensitivity
Fleet Management Sensitivity • Consolidated fleet holding costs = ~30% of revenues – Fleet efficiency improvement of 1 percentage point • R-A-C: $30 million per year • HERC: $7 million per year – Fleet depreciation & interest reduction of 1% • $25 million per year • Consolidated fleet purchases of $
Slide 9: Fleet Portfolio Management
Fleet Portfolio Management • Driving to a more diverse car rental fleet – Largest single supplier at 44% four years ago, now at 26% – Over 30 different manufacturers • Objective: Lower R-A-C/HERC fleet holding cost – Strategic acquisition and disposal practices • Dealer direct purchase/sale benefits
Slide 10: Customer Focus Initiatives
Customer Focus Initiatives • Hertz Improvement Process (HIP) – Over 13,000 employees trained – Training additional 1,500 employees in 2008 – 60% of consolidated revenues covered by year end • Net Promoter Score (NPS) – Customer satisfaction improving • North America R-A-C: +9 points (year-over-year)
Slide 11: Car Rental Commentary
Car Rental Commentary • Domestic – RPD <2.9%> due to price pressure and mix shift • Online leisure and off-airport in U.S. – Average rental length: +5.6% – Transaction days: +2.0% • International – RPD <2.8>% due to mix shift – Average rental length: +6.4% • Europe (+7.9%): Growth in vans, monthly r
Slide 12: HERC Commentary
HERC Commentary • Q1 revenue growth of 5.4% – U.S. construction market softness – Continued strength in industrial and oil-related activity – Quilovat and All Reach Equipment acquisitions • Fleet age of 30.8 months – relatively young • Fleet capital expenditure YTD $ in millions Q1 2008 Maintenance
Slide 13: Q1 2008 Consolidated Highlights
Q1 2008 Consolidated Highlights • Solid performance in challenging quarter Better / $ in millions, except per share calculations Q1 2008 Q1 2007 <Worse> Actual Actual vs. Q1 2007 Revenue $2,039.2 $1,921.5 6.1% GAAP Pre-Tax Loss ($55.8) ($90.6) 38.4% Net Loss ($57.7) ($62.6) 7.8% Loss per Share ($0.1
Slide 14: Fleet Efficiency & Residual Update
Fleet Efficiency & Residual Update • Fleet efficiency* year-over-year – WW R-A-C: +0.9 pps • Fleet initiatives – WW HERC: <2.6> pps • Fleet rebalancing • U.S. residual values under pressure year-over-year – Manheim Index average for Q108: <4.7%> – Hertz average for Q108: <89 bps> • Younger, more div
Slide 15: Debt and Liquidity Highlights
Debt and Liquidity Highlights • Ample room under existing covenants – Consolidated leverage ratio 3.0:1 (maximum 5.25:1) – Consolidated interest coverage 4.0:1 (minimum 2.0x) • Total liquidity of $5.6 billion – $3.5 billion fleet financing – $1.4 billion corporate credit facilities – $729 million ca
Slide 16: Update on Taxes
Update on Taxes • Q1 GAAP effective income tax rate is low due to the interaction between interim period tax accounting treatment (FIN 18) and the seasonality of our business Q1 2008 FY 2008 Actual Projected Effective tax rate 5.3% 34.0% Cash taxes (mlns) $8.9 $65 • Hertz not expecting to pay materi
Slide 17: Cash Flow Update
Cash Flow Update • LTM Levered after-tax cash flows after fleet growth were $197 million Q108 vs. $462 million Q107 – Higher earnings: $112 million – Improved working capital: $170 million – Lower HERC fleet investment: $26 million – Higher R-A-C net equity need: $496 million • Cash flows reduced ne
Slide 18: 2008 Full Year Guidance Affirmed
2008 Full Year Guidance Affirmed • First half of 2008 more challenging than second half Expected range Increase vs. 2007 Total Revenue* $8,900 - $9,000 2.5% - 3.6% Corporate EBITDA $1,575 - $1,615 2.2% - 4.8% Adjusted Pre-Tax Income $725 - $750 9.7% - 13.5% Adjusted Net Income** $450 - $470 9.8% - 1
Slide 19: Table 1 Condensed Consolidated Statements of Operations
Table 1 HERTZ GLOBAL HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except per share amounts) Unaudited Three Months Ended As a Percent March 31, of Total Revenues 2008 2007 2008 2007 Total revenues $ 2,039.2 $ 1,921.5 100.0 % 100.0 % Expenses: Direct operating 1,171.5
Slide 20: Table 2 Statements of Operations, As Reported and Adjusted
Table 2 HERTZ GLOBAL HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In millions) Unaudited Three Months Ended March 31, 2008 As As Reported Adjustments Adjusted Total revenues $ 2,039.2 $ - $ 2,039.2 Expenses: Direct operating 1,171.5 (32.4) (a) 1,139.1 Depreciation of revenue earni
Slide 21: Table 3 Segment and Other Information
Table 3 HERTZ GLOBAL HOLDINGS, INC. SEGMENT AND OTHER INFORMATION (In millions, except per share amounts) Unaudited Three Months Ended March 31, 2008 2007 Revenues: Car Rental $ 1,626.2 $ 1,529.7 Equipment Rental 411.0 389.9 Other Reconciling Items 2.0 1.9 $ 2,039.2 $ 1,921.5 Depreciation of propert
Slide 22: Table 4 Selected Operating and Financial Data
Table 4 HERTZ GLOBAL HOLDINGS, INC. SELECTED OPERATING AND FINANCIAL DATA Unaudited Three Percent Months change Ended, or as from of March 31, prior year 2008 period Selected Car Rental Operating Data Worldwide number of transactions (in thousands) 6,565 (1.5) % Domestic 4,900 (3.4) % International
Slide 23: Table 5 Reconciliation of GAAP to Non-GAAP Earnings Measures
Table 5 HERTZ GLOBAL HOLDINGS, INC. RECONCILIATION OF GAAP TO NON-GAAP EARNINGS MEASURES (In millions, except per share amounts) Unaudited ADJUSTED PRE-TAX INCOME (LOSS) AND ADJUSTED NET INCOME (LOSS) Three Months Ended March 31, 2008 Other Car Equipment Reconciling Rental Rental Items Total Total r
Slide 24: Table 5 (page 2)
Table 5 (page 2) Three Months Ended March 31, 2007 Other Car Equipment Reconciling Rental Rental Items Total Total revenues: $ 1,529.7 $ 389.9 $ 1.9 $ 1,921.5 Expenses: Direct operating and selling, general and administrative 1,045.2 237.0 32.5 1,314.7 Depreciation of revenue earning equipment 395.9
Slide 25: Table 6 Reconciliation of GAAP to Non-GAAP Earnings Measures
Table 6 HERTZ GLOBAL HOLDINGS, INC. RECONCILIATION OF GAAP TO NON-GAAP EARNINGS MEASURES (In millions) Unaudited EBITDA, CORPORATE EBITDA, UNLEVERED PRE-TAX CASH FLOW, LEVERED AFTER-TAX CASH FLOW BEFORE FLEET GROWTH AND AFTER FLEET GROWTH Three Months Ended March 31, 2008 Other Car Equipment Reconci
Slide 26: Table 6 (page 2)
Table 6 (page 2) (a) As defined in the credit agreements for the senior credit facilities, Corporate EBITDA excludes the impact of certain non-cash expenses and charges. The adjustments reflect the following: NON-CASH EXPENSES AND CHARGES Three Months Ended March 31, 2008 Other Car Equipment Reconci
Slide 27: Table 7 Reconciliation of Non-GAAP Earnings Measures
Table 7 HERTZ GLOBAL HOLDINGS, INC. RECONCILIATION OF NON-GAAP EARNINGS MEASURES (In millions) Unaudited RECONCILIATION FROM ADJUSTED PRE-TAX INCOME (LOSS) TO CORPORATE EBITDA Three Months Ended March 31, 2008 Other Car Equipment Reconciling Rental Rental Items Total Adjusted pre-tax income (loss) (
Slide 28: Table 8 Reconciliation of GAAP to Non-GAAP Earnings Measures
Table 8 HERTZ GLOBAL HOLDINGS, INC. RECONCILIATION OF GAAP TO NON-GAAP EARNINGS MEASURES (In millions, except as noted) Unaudited Three Months Ended RECONCILIATION FROM OPERATING March 31, CASH FLOWS TO EBITDA: 2008 2007 Net cash provided by operating activities $ 1,128.2 $ 1,123.4 Amortization of d
Slide 29: Table 8 (page 2) Net Corporate Debt & Net Fleet Debt
Table 8 (page 2) NET CORPORATE DEBT & December 31, March 31, NET FLEET DEBT 2006 2006 Corporate Debt Debt, less: $ 12,276.2 $ 12,459.7 U.S. Fleet Debt and Pre-Acquisition Notes 4,845.2 5,247.5 International Fleet Debt 1,987.8 1,579.6 Fleet Financing Facility 165.9 - Fleet Debt $ 6,998.9 $ 6,827.1 Co
Slide 30: Table 9 Reconciliation of GAAP to Non-GAAP Earnings Measures
Table 9 HERTZ GLOBAL HOLDINGS, INC. RECONCILIATION OF GAAP TO NON-GAAP EARNINGS MEASURES (In millions) Unaudited EBITDA, CORPORATE EBITDA, UNLEVERED PRE-TAX CASH FLOW, LEVERED AFTER-TAX CASH FLOW BEFORE FLEET GROWTH AND AFTER FLEET GROWTH Last Twelve Three Three Months Ended Months Ended Months Ende
Slide 31: Table 9 (page 2)
Table 9 (page 2) Last Twelve Three Three Months Ended Months Ended Months Ended Year Ended March 31, March 31, March 31, December 31, 2007 2007 2006 2006 Income (loss) before income taxes and minority interest $ 173.3 $ (90.6) $ (63.3) $ 200.6 Depreciation and amortization 2,072.7 528.9 472.3 2,016.
Slide 32: Non-GAAP Measures: Definitions and Use/Importance
Non-GAAP Measures: Definitions and Use/Importance On December 21, 2005 ("Closing Date") an indirect, wholly owned subsidiary of Hertz Global Holdings, Inc. ("Hertz Holdings") acquired all of The Hertz Corporation's ("Hertz") common stock from Ford Holdings LLC ("Ford Holdings") pursuant to a Stock P
Slide 33: Corporate EBITDA definition
Corporate EBITDA also serves as an important measure of our performance. Corporate EBITDA for our car rental segment enables us to assess our operating performance inclusive of fleet management performance, depreciation assumptions and the cost of financing our fleet. In addition, Corporate EBITDA f
Slide 34: Adjusted Net Income and Adjusted Diluted EPS
3. Adjusted Net Income Adjusted net income is calculated as adjusted pre-tax income less a provision for income taxes derived utilizing a normalized income tax rate and minority interest. The normalized income tax rate is management’s estimate of our long-term tax rate. Adjusted net income is import
Slide 35: Unlevered and Levered After-Tax Cash Flow
9. Unlevered Pre-Tax Cash Flow Unlevered pre-tax cash flow is calculated as Corporate EBITDA less equipment rental fleet depreciation including gain (loss) on sale, non-fleet capital expenditures, net of non-fleet disposals, plus changes in working capital (accounts receivable, inventories, prepaid
Slide 36: Corporate Restricted Cash and Fleet Debt Restricted Cash
16. Corporate Restricted Cash (used in the calculation of Net Corporate Debt) Total restricted cash includes cash and equivalents that are not readily available for our normal disbursements. Total restricted cash and equivalents are restricted for the purchase of revenue earning vehicles and other s
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