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Hertz Global Holdings Reports Second Quarter 2020 Financial Results

Cision
Cision

ESTERO, Fla. , Aug. 10, 2020 /PRNewswire/ -- Hertz Global Holdings, Inc. (NYSE: HTZ) ("Hertz Global" or the "Company") today reported results for its second quarter 2020 with revenue of $832 million , a net loss attributable to the Company of $847 million and Adjusted Corporate EBITDA of negative $587 million . Liquidity at the end of the second quarter was $1.4 billion .

"In the second quarter, like so many companies whose revenues have sharply declined due to the pandemic's significant impact on global travel, we had to make difficult but necessary decisions to strengthen and position the company for growth for many years to come," said Paul Stone , President and Chief Executive Officer of Hertz Global. "The toughest decisions have been those that impact the livelihood of our dedicated workforce and our voluntarily reorganizing under Chapter 11 in North America . We are moving through our reorganization process and remain focused on emerging an even stronger global rental car leader better positioned to serve our customers around the world."

In the second quarter, global revenue declined 67%. While air travel around the world experienced a significant slowdown, and the U.S. car sales market was extremely limited until May, the Company worked to align labor with rental demand, cancel new-fleet orders, return program vehicles, cut all non-essential spending and capital expenses, and consolidate off-airport rental locations for efficiency. As a result, the Company reduced global direct operating and SG&A expenses by 47% year-over-year in the second quarter.

Global revenue in April, May and June, while down versus prior year, showed sequential monthly improvement as states and countries began to re-open. During the quarter, Hertz Global capitalized on positive trends in its new driver and delivery service offering and saw an increase in cargo trucks and van rentals off airport. Insurance replacement rentals also experienced a restart as more cars returned to the highways. Leisure air travel began to pick up heading into the domestic July 4th holiday in the U.S. However, a rise in COVID-19 infections in the south and west since then caused the positive leisure trend to slow again.

The U.S. used-car market experienced a strong rebound in May and June. At the end of the second quarter, the number of vehicles in the global fleet was 29% lower year over year. The Company is capitalizing on the robust demand and record-high resale pricing by significantly ramping up its used-car sales efforts in North America .

"We continue to make disciplined adjustments to our cost structure based on revenue fluctuations and expect to generate about $2.5 billion in annualized savings," said Stone. "Our priority is fleet management. The continued strong used-car market allows us to continue to sell cars aggressively as we right-size the fleet to align with market realities. Across the business, our team is laser-focused on capturing revenue, driving efficiency and advancing critical technology. In the U.S., we continue to capitalize on rental opportunities off airport, while ensuring customer service levels remain best-in-class. Internationally, our fleet is trending toward demand levels. And our Donlen leasing business remains stable. Finally, continuing to keep our teams and our customers safe in this unpredictable environment is of utmost importance to everyone at Hertz."

In addition to following social distancing best practices and daily employee health assessments at Hertz, Dollar and Thrifty locations, the Company raised the bar on its high standards for safety and cleanliness. Every vehicle is being sealed and certified 'Hertz Gold Standard Clean' after undergoing a 15-point cleaning and sanitization process that follows global health agency guidelines and uses EPA-approved products. The Company also has directed that masks be worn by all employees in its field and corporate locations across the U.S. Similarly, masks are now required for U.S. customers to help protect not only the renters, but also the tens of thousands of Hertz employees working to serve our customers every day. The Company's Ultimate Choice vehicle pick-up option and digital app for adding ancillary products and services allows renters to bypass the counter for a contactless experience.

U.S. RENTAL CAR ("U.S. RAC") SUMMARY
__________________________________________________________________

U.S. RAC

Three Months Ended

June 30,


Percent
Inc/(Dec)

($ in millions, except where noted)

2020


2019


Total revenues

$

533



$

1,784



(70)

%







Adjusted EBITDA

$

(470)



$

156



NM


Adjusted EBITDA Margin

(88)

%


9

%









Average Vehicles (in whole units)

502,763



554,794



(9)

%

Vehicle Utilization

28

%


82

%



Transaction Days (in thousands)

12,964



41,173



(69)

%

Total RPD (in whole dollars)

$

38.17



$

42.54



(10)

%

Total RPU Per Month (in whole dollars)

$

328



$

1,052



(69)

%

Depreciation Per Unit Per Month (in whole dollars)

$

271



$

247



10

%

NM - Not meaningful

Total U.S. RAC revenues were down 70% year-over-year. Airport rental car volume declined 82%, roughly in line with airline travel weakness resulting from COVID-19 restrictions. Off airport volume declined 47% as the impact on demand for insurance replacement rentals was less severe than travel-related rentals and demand for delivery vans increased. The mix shift in volume from airport rentals to lower-priced, longer-length off-airport rentals contributed to a 10% decrease in Total RPD. Off airport revenues comprised 60% of total revenues for the segment versus 32% for the second quarter 2019.

Depreciation Per Unit Per Month was impacted by residual values on certain vehicle models.

During the quarter, the Company reduced the size of the U.S. operating fleet and took measures to align staffing levels and operating costs with the decline in demand. The aggressive cost reduction actions and lower volume drove a $547 million decrease in direct operating and selling, general and administration expenses.

The Company remains focused on sustainable cost-savings and right-sizing its U.S. RAC fleet.

INTERNATIONAL RENTAL CAR ("INTERNATIONAL RAC") SUMMARY
_______________________________________________________________________________________________________

International RAC

Three Months Ended

June 30,


Percent
Inc/(Dec)

($ in millions, except where noted)

2020


2019


Total revenues

$

135



$

560



(76)

%







Adjusted EBITDA

$

(127)



$

56



NM


Adjusted EBITDA Margin

(94)

%


10

%









Average Vehicles (in whole units)

129,615



186,881



(31)

%

Vehicle Utilization

36

%


77

%



Transaction Days (in thousands)

4,256



13,125



(68)

%

Total RPD (in whole dollars)

$

32.56



$

42.68



(24)

%

Total RPU Per Month (in whole dollars)

$

356



$

999



(64)

%

Depreciation Per Unit Per Month (in whole dollars)

$

215



$

189



14

%

NM - Not meaningful

Total International RAC revenues were down 76% year-over-year on a constant currency basis. Airport rental car volume declined 84%, roughly in line with airline travel weakness resulting from COVID-19 restrictions. Off airport volume declined 47% as the impact of the pandemic was less substantial for local rentals. The mix shift in volume from airport rentals to lower-priced, longer-length off-airport rentals contributed to a 24% decrease in Total RPD. Off airport revenues comprised 71% of total revenues for the segment versus 40% for the second quarter 2019.

Depreciation Per Unit Per Month increased primarily due to the impact of lower residual values on risk vehicles and shortened hold periods on certain program vehicles.

During the quarter, the Company significantly reduced the size of the International operating fleet and eliminated non-essential spend. International RAC direct operating and selling, general and administration expenses were down $210 million year-over-year in the quarter.

The Company remains focused on sustainable cost-savings and right-sizing its International fleet.

ALL OTHER OPERATIONS SUMMARY
___________________________________________________________

All Other Operations

Three Months Ended

June 30,


Percent
Inc/(Dec)

($ in millions, except where noted)

2020


2019


Total revenues

$

164



$

167



(1)

%







Adjusted EBITDA

$

23



$

24



(3)

%

Adjusted EBITDA Margin

14

%


14

%









Average Vehicles (in whole units) - Donlen

196,018



207,704



(6)

%

All Other Operations primarily is comprised of the Company's Donlen leasing and fleet management operations. Revenue and Adjusted EBITDA for the quarter remained relatively stable.

FINANCIAL REORGANIZATION
_______________________________________________________

As previously announced, on May 22, 2020 , Hertz Global and its operating subsidiary, The Hertz Corporation ("Hertz") (and together with Hertz Global, the "Companies") and certain of their direct and indirect subsidiaries in the United States and Canada filed voluntary petitions for relief under chapter 11 of the U.S. Bankruptcy Code (the "Reorganization").

The Reorganization provides the time to put in place a new, stronger financial foundation to move successfully through the COVID-19 pandemic and to better position the Companies for the future. Throughout the Reorganization process, all of Hertz's businesses globally, including its Hertz, Dollar, Thrifty, Firefly, Hertz Car Sales, and Donlen subsidiaries, are open and serving customers.  All reservations, promotional offers, vouchers, and customer and loyalty programs, including rewards points, are expected to continue as usual.

Information related to the Reorganization is included in the Hertz Global and Hertz Form 10-Qs for the quarterly period ended June 30, 2020 filed with the Securities and Exchange Commission ("SEC") and on the Hertz website, IR.Hertz.com. Additional information, including access to documents filed with the Bankruptcy Court, is also available online at https://restructuring.primeclerk.com/hertz , a website administered by Prime Clerk, LLC, a third-party bankruptcy claims and noticing agent.

RESULTS OF THE HERTZ CORPORATION
________________________________________________________________

The Company's operating subsidiary, The Hertz Corporation ("Hertz"), posted the same revenues as the Company for the second quarter of 2020.  Hertz's second quarter 2020 pre-tax loss was $1.2 billion versus the Company's pre-tax loss of $1.0 billion . The difference between Hertz's and the Company's GAAP results is primarily due to Hertz's write off in the second quarter of 2020 of $133 million due from the Company. The non-GAAP profitability metrics for Hertz are materially the same as those for Hertz Global.

SELECTED FINANCIAL DATA, SUPPLEMENTAL SCHEDULES, NON-GAAP MEASURES AND DEFINITIONS
________________________________________________________________________________________________________________________________________________

Following is selected financial data of Hertz Global. Also included are Supplemental Schedules, which are provided to present segment results, and reconciliations of non-GAAP measures to their most comparable GAAP measure. Following the Supplemental Schedules, the Company provides definitions for terminology used throughout this earnings release and provides the usefulness of non-GAAP measures to investors and additional purposes for which management uses such measures.

ABOUT HERTZ
___________________________  

The Hertz Corporation, a subsidiary of Hertz Global Holdings, Inc., operates the Hertz, Dollar and Thrifty vehicle rental brands throughout North America , Europe , the Caribbean , Latin America , Africa , the Middle East , Asia , Australia and New Zealand . The Hertz Corporation is one of the largest worldwide vehicle rental companies, and the Hertz brand is one of the most recognized globally. Product and service initiatives such as Hertz Gold Plus Rewards, Ultimate Choice, Carfirmations, Mobile Wi-Fi and unique vehicles offered through its specialty collections set Hertz apart from the competition. Additionally, The Hertz Corporation owns the vehicle leasing and fleet management leader Donlen Corporation, operates the Firefly vehicle rental brand and Hertz 24/7 car sharing business in international markets and sells vehicles through Hertz Car Sales. For more information about The Hertz Corporation, visit: www.hertz.com .

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
_________________________________________________________________________________________________________

Certain statements contained or incorporated by reference in this release, 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: the Company's ability to navigate the Chapter 11 process, including obtaining Bankruptcy Court approval for certain requirements, complying with and operating under the requirements and constraints of the Bankruptcy Code, negotiating and consummating a Chapter 11 plan, developing, funding and executing the Company's business plan and continuing as a going concern; the Company's ability to maintain a listing of its common stock on the New York Stock Exchange; the value of the Company's common stock due to the Chapter 11 process; levels of travel demand, particularly with respect to business and leisure travel in the United States and in global markets; the length and severity of the COVID-19 pandemic and the impact on the Company's vehicle rental business as a result of travel restrictions and business closures or disruptions; the impact of the COVID-19 pandemic and actions taken in response to the pandemic on global and regional economies and economic factors; general economic uncertainty and the pace of economic recovery, including in key global markets, when the COVID-19 pandemic subsides; the Company's ability to successfully restructure the Company's substantial indebtedness or raise additional capital; the Company's post-bankruptcy capital structure; the Company's ability to maintain an effective employee retention and talent management strategy and resulting changes in personnel and employee relations the recoverability of the Company's goodwill and indefinite-lived intangible assets when performing impairment analysis; the Company's ability to dispose of vehicles in the used-vehicle market, use the proceeds of such sales to acquire new vehicles and to reduce exposure to residual risk; actions creditors may take with respect to the vehicles used in the rental car operations; 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 the Company's peak periods; the Company's ability to accurately estimate future levels of rental activity and adjust the number and mix of vehicles used in the Company's rental operations accordingly; increased vehicle costs due to declining value of the Company's non-program vehicles; the Company's ability to maintain sufficient liquidity and the availability to it of additional or continued sources of financing for the Company's revenue earning vehicles and to refinance its existing indebtedness; 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 the Company's 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 credit facilities and letter of credit facilities, its outstanding unsecured senior notes, its outstanding senior second priority secured notes and certain asset-backed and asset-based arrangements; the Company's ability to access financial markets, including the financing of its vehicle fleet through the issuance of asset-backed securities; fluctuations in interest rates, foreign currency exchange rates and commodity prices; the Company's ability to sustain operations during adverse economic cycles and unfavorable external events (including war, terrorist acts, natural disasters and epidemic disease); 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 adequately respond to changes in technology, customer demands and market competition; 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 recognition of previously deferred tax gains on the disposition of revenue earning vehicles; financial instability of the manufacturers of the Company's vehicles, which could impact their ability to fulfill obligations under repurchase or guaranteed depreciation programs; an increase in the Company's vehicle costs or disruption to the Company's rental activity, particularly during peak periods, due to safety recalls by the manufacturers of the Company's vehicles; the Company's ability to execute a business continuity plan; the Company's access to third-party distribution channels and related prices, commission structures and transaction volumes; the Company's ability to retain customer loyalty and market share; risks associated with operating in many different countries, including the risk of a violation or alleged violation of applicable anticorruption or antibribery laws, the Company's ability to repatriate cash from non-U.S. affiliates without adverse tax consequences, the Company's exposure to fluctuations in foreign currency exchange rates and the Company's ability to effectively manage its international operations after the United Kingdom's withdrawal from the European Union; a major disruption in the Company's communication or centralized information networks; a failure to maintain, upgrade and consolidate the Company's information technology systems; costs and risks associated with litigation and investigations or any failure or inability to comply with laws and regulations or any changes in the legal and regulatory environment, including laws and regulations relating to environmental matters and consumer privacy and data security; the Company's ability to maintain its network of leases and vehicle rental concessions at airports in the U.S. and internationally; the Company's ability to maintain favorable brand recognition and a coordinated branding and portfolio strategy;; 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; risks relating to the Company's deferred tax assets, including the risk of an "ownership change" under the Internal Revenue Code of 1986, as amended; the Company's exposure to uninsured claims in excess of historical levels; risks relating to the Company's participation in multiemployer pension plans; shortages of fuel and increases or volatility in fuel costs; 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 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.

______________________

FINANCIAL INFORMATION AND OPERATING DATA
_____________________________________________________________________________                          

SELECTED UNAUDITED CONSOLIDATED INCOME STATEMENT DATA


Three Months Ended

June 30,


As a Percentage of
Total Revenues


Six Months Ended

June 30,


As a Percentage of
Total Revenues

(In millions, except per share data)

2020


2019


2020


2019


2020


2019


2020


2019

Total revenues

$

832



$

2,511



100

%


100

%


$

2,755



$

4,618



100

%


100

%

Expenses:
















Direct vehicle and operating

704



1,388



85

%


55

%


1,945



2,655



71

%


57

%

Depreciation of revenue earning vehicles and lease charges

610



634



73

%


25

%


1,286



1,226



47

%


27

%

Selling, general and administrative

168



258



20

%


10

%


377



490



14

%


11

%

Interest expense, net:
















Vehicle

132



127



16

%


5

%


250



238



9

%


5

%

Non-vehicle

44



72



5

%


3

%


101



144



4

%


3

%

Total interest expense, net

176



199



21

%


8

%


351



382



13

%


8

%

Technology-related intangible and other asset impairments

193





23

%


%


193





7

%


%

Other (income) expense, net

2



(12)



%


%


(15)



(31)



(1)

%


(1)

%

Reorganization items, net

23





3

%


%


23





1

%


%

 Total expenses

1,876



2,467



225

%


98

%


4,160



4,722



151

%


102

%

Income (loss) before income taxes

(1,044)



44



(125)

%


2

%


(1,405)



(104)



(51)

%


(2)

%

Income tax (provision) benefit

192



(4)



23

%


%


196



(3)



7

%


%

Net income (loss)

(852)



40



(102)

%


2

%


(1,209)



(107)



(44)

%


(2)

%

Net (income) loss attributable to noncontrolling interests

5



(2)



1

%


%


6



(1)



%


%

Net income (loss) attributable to Hertz Global

$

(847)



$

38



(102)

%


2

%


$

(1,203)



$

(108)



(44)

%


(2)

%

Weighted-average number of shares outstanding:
















Basic

144



96







143



96






Diluted

144



97







143



96






Earnings (loss) per share:
















Basic

$

(5.86)



$

0.40







$

(8.39)



$

(1.13)






Diluted

$

(5.86)



$

0.40







$

(8.39)



$

(1.13)






















Adjusted Net Income (Loss) (a)

$

(508)



$

71







$

(760)



$

(12)






Adjusted Diluted Earnings (Loss) Per Share (a)

$

(3.51)



$

0.74







$

(5.30)



$

(0.12)






Adjusted Corporate EBITDA (a)

$