HERTZ GLOBAL ESTERO, Fla., Aug. 8, 2017 /PRNewswire/ -- Hertz Global Holdings, Inc. (NYSE: HTZ) ("Hertz Global" or the "Company") today reported a second quarter 2017 net loss from continuing operations of $158 million, or $1.90 per diluted share, including $54 million of impairment charges, compared with a net loss from continuing operations of $28 million, or $0.33 per diluted share, during the second quarter 2016. On an adjusted basis, the Company reported a net loss for the second quarter 2017 of $52 million, or $0.63 per diluted share, compared with net income of $35 million, or $0.41 per diluted share, for the same period last year.
Total revenues for the second quarter 2017 were $2.2 billion, a 2% decline versus the second quarter 2016. Loss from continuing operations before income taxes for second quarter 2017 was $245 million, including $86 million of impairment charges, versus $35 million in the same period last year. Adjusted Corporate EBITDA for the second quarter 2017 was $35 million, compared to $184 million in the same period last year.
"We have made significant progress in the first half of the year, executing on our operating turnaround plan. Of course, the hard work always comes before the pay off as reflected in our second quarter results, where increased spending to fix areas of weakness and invest in areas of opportunity were exacerbated by a challenging vehicle residual environment in the U.S.," said Kathryn V. Marinello, president and chief executive officer of Hertz. "On the upside, we have now completed our U.S. fleet transformation, redesigned 37 Hertz airport locations for Ultimate Choice, updated our financial and revenue management systems, and introduced new management tools and resources to drive service excellence. Admittedly, we still have a lot of work to do, but these early wins are evidence that we have the right plan in place to ultimately achieve best-in-class outcomes."
U.S. RENTAL CAR ("U.S. RAC")
SUMMARY
U.S. Three Months Ended Percent
RAC(1) Inc/
(Dec)
June 30,
($
in
millions,
except
where
noted) 2017 2016
---------- ---- ----
Total
Revenues $1,519 $1,584 (4)%
Depreciation
of
revenue
earning
vehicles
and
lease
charges,
net $524 $417 26%
Income
(loss)
from
continuing
operations
before
income
taxes $(146) $104 NM
Adjusted
pre-
tax
income
(loss) $(37) $143 NM
Adjusted
pre-
tax
margin (2)% 9% NM bps
Adjusted
Corporate
EBITDA $(22) $168 NM
Adjusted
Corporate
EBITDA
margin (1)% 11% NM bps
Average
vehicles 495,000 500,000 (1)%
Transaction
days
(in
thousands) 36,233 37,190 (3)%
Total
RPD
(in
whole
dollars) $41.26 $42.11 (2)%
Total
RPU
(in
whole
dollars) $1,007 $1,044 (4)%
Net
depreciation
per
unit
per
month
(in
whole
dollars) $353 $278 27%
------------- ---- ---- ---
NM - Not Meaningful
Total U.S. RAC revenues were $1.5 billion in the second quarter 2017, a decrease of 4%, versus the same period last year. Transaction days decreased by 3% year-over-year as compared to a strong second quarter 2016, which was driven by replacement rentals from unusually high customer vehicle recall activity. Pricing, as measured by Total RPD, decreased by 2% in the quarter, driven by a change in customer mix year-over-year and weaker ancillary revenues.
Second quarter U.S. RAC net vehicle depreciation per month increased 27% versus the same period last year to $353 per unit primarily driven by declining residual values, accelerated vehicle disposition timing and fleet quality and mix investments. Despite the decrease in industry residual values, the Company stayed on course with its fleet optimization plan, selling 35% more vehicles year-over-year and onboarding a richer mix of model year 2017 vehicles. As planned, the Company reduced its total average fleet by 1% in the second quarter compared with a year earlier, as the number of core rental vehicles declined by 3%, partially offset by an increase in the vehicles dedicated to the ride hailing fleet. While utilization declined by 130 basis points in the quarter, the Company has made early progress toward driving customer satisfaction and improving profitability longer term. Its goal of reducing its mix of compact cars to 16% of the total U.S. fleet from 21% a year ago was met at quarter end, better reflecting customer preference. Also, the Company continued to roll out its Ultimate Choice program, where customers are able to choose their preferred vehicle, on site, with no wait.
Second quarter 2017 Adjusted Corporate EBITDA for U.S. RAC was a negative $22 million, a $190 million decline versus the same period last year. In addition to revenue pressure and increased fleet costs, the reduction was impacted by investments related to service-level improvements, systems enhancements and brand development initiatives.
INTERNATIONAL RENTAL CAR ("INTERNATIONAL
RAC") SUMMARY
International
RAC(1) Three Months Ended Percent
June 30, Inc/(Dec)
---------
($
in
millions,
except
where
noted) 2017 2016
--------- ---- ----
Total
Revenues $543 $540 1%
Depreciation
of
revenue
earning
vehicles
and
lease
charges,
net $100 $98 2%
Income
(loss)
from
continuing
operations
before
income
taxes $43 $29 48%
Adjusted
pre-
tax
income
(loss) $56 $34 65%
Adjusted
pre-
tax
margin 10% 6% 400 bps
Adjusted
Corporate
EBITDA $63 $42 50%
Adjusted
Corporate
EBITDA
margin 12% 8% 380 bps
Average
vehicles 186,100 178,600 4%
Transaction
days
(in
thousands) 13,235 12,511 6%
Total
RPD
(in
whole
dollars) $39.29 $39.88 (1)%
Total
RPU
(in
whole
dollars) $931 $931 - %
Net
depreciation
per
unit
per
month
(in
whole
dollars) $172 $168 2%
------------ ---- ---- ---
The Company's International RAC segment revenues were $543 million in the second quarter 2017, an increase of 1% from the second quarter 2016. Excluding an $18 million unfavorable impact of foreign currency exchange rates, revenues increased 4% driven by a 6% increase in transaction days, partially offset by a 1% decrease in Total RPD.
Second quarter 2017 Adjusted Corporate EBITDA for International RAC was $63 million, a 50% increase from the same period last year. The year-over-year increase reflects a $20 million charge taken in the second quarter of 2016 related to adverse public liability and property damage claims experience and case development that did not reoccur this year as a result of actions taken by management to improve claims handling and changes in business practices.
ALL OTHER OPERATIONS
All
Other
Operations(1) Three Months Ended Percent
June 30, Inc/(Dec)
--- ---------
($
in
millions) 2017 2016
---------- ---- ----
Total
Revenues $162 $146 11%
Adjusted
pre-
tax
income
(loss) $19 $17 12%
Adjusted
pre-
tax
margin 12% 12% 10 bps
Adjusted
Corporate
EBITDA $17 $16 6%
Adjusted
Corporate
EBITDA
margin 10% 11% (50) bps
Average
vehicles
-
Donlen 206,200 166,900 24%
-------- ------- ------- ---
All Other Operations, which is primarily comprised of the Company's Donlen leasing operations, reported an 11% increase in total revenues for the second quarter 2017. Adjusted Corporate EBITDA for the All Other Operations segment was $17 million for the second quarter 2017, which is an increase of 6% versus second quarter last year.
OUTLOOK
In the U.S. rental car segment, the Company is encouraged by preliminary third quarter 2017 total revenue per day trends. In July, total revenue per day is expected to have increased by approximately 3% compared with July 2016. July transaction days are estimated to have declined by about 4% as the Company targets higher-quality revenue. With only approximately 55% of reservations booked, August is less clear, but early indications suggest trends similar to July. September is expected to be seasonally weaker, but the Company will continue to focus on fleet capacity discipline and revenue quality.
In the International rental car segment, the terrorist event in early June does not seem to have impacted reservation trends for Europe in the third quarter 2017 peak summer season.
(1) Adjusted pre-tax income (loss), adjusted pre-tax margin, Adjusted Corporate EBITDA, Adjusted Corporate EBITDA margin, adjusted net income (loss) and adjusted diluted earnings per share are non-GAAP measures. Average vehicles, transaction days, Total RPD, Total RPU and net depreciation per unit per month are key metrics. See the accompanying Supplemental Schedules and Definitions for the reconciliations and definitions for each of these non-GAAP measures and key metrics and the reason the Company's management believes that this information is useful to investors.
RESULTS OF THE HERTZ CORPORATION
The GAAP and Non-GAAP profitability metrics for Hertz Global's operating subsidiary, The Hertz Corporation ("Hertz"), are materially the same as those for Hertz Global.
EARNINGS WEBCAST INFORMATION
Hertz Global's second quarter 2017 live webcast discussion will be held on August 8, 2017, at 5:00 p.m. Eastern. The earnings release and related supplemental schedules containing the reconciliations of non-GAAP measures will be available on our website, IR.Hertz.com.
SELECTED FINANCIAL AND OPERATING DATA, SUPPLEMENTAL SCHEDULES AND DEFINITIONS
Following are tables that present selected financial and operating 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 press release.
ABOUT HERTZ
The Hertz Corporation, a subsidiary of Hertz Global Holdings, Inc., operates the Hertz, Dollar and Thrifty vehicle rental brands in approximately 9,700 corporate and franchisee locations 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 airport general use vehicle rental companies, and the Hertz brand is one of the most recognized in the world. Product and service initiatives such as Hertz Gold Plus Rewards, Ultimate Choice, Carfirmations, Mobile Wi-Fi and unique vehicles offered through the Adrenaline, Dream, Green and Prestige 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 CONCERNING FORWARD LOOKING STATEMENTS
Certain statements contained 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: any claims, investigations or proceedings arising as a result of the restatement in 2015 of the Company's previously issued financial results; the Company's ability to remediate the material weaknesses in its internal controls over financial reporting; levels of travel demand, particularly with respect to airline passenger traffic in the United States and in global markets; the effect of the Company's separation of its vehicle and equipment rental businesses, any failure by Herc Holdings Inc. to comply with the agreements entered into in connection with the separation and the Company's ability to obtain the expected benefits of the separation; significant changes in the competitive environment, including as a result of industry consolidation, 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; increased vehicle costs due to declines in the value of the Company's non-program vehicles; occurrences that disrupt rental activity during the Company's peak periods; 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 ability to accurately estimate future levels of rental activity and adjust the number and mix of vehicles used in its rental operations accordingly; the Company's ability to maintain sufficient liquidity and the availability to it of additional or continued sources of financing for its revenue earning vehicles and to refinance its existing indebtedness; the Company's ability to adequately respond to changes in technology and customer demands; the Company's ability to maintain access to third-party distribution channels and related prices, commission structures and transaction volumes; an increase in the Company's vehicle costs or disruption to its rental activity, particularly during its peak periods, due to safety recalls by the manufacturers of its vehicles; a major disruption in the Company's communication or centralized information networks; financial instability of the manufacturers of the Company's vehicles; any impact on the Company from the actions of its franchisees, dealers and independent contractors; the Company's ability to sustain operations during adverse economic cycles and unfavorable external events (including war, terrorist acts, natural disasters and epidemic disease); shortages of fuel and increases or volatility in fuel costs; the Company's ability to successfully integrate acquisitions and complete dispositions; the Company's ability to maintain favorable brand recognition; costs and risks associated with litigation and investigations; 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 its 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 Facilities, its outstanding unsecured Senior Notes, its Senior Second Priority Secured Notes and certain asset-backed and asset-based arrangements; 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; risks associated with operating in many different countries, including the risk of a violation or alleged violation of applicable anticorruption or antibribery laws and the Company's ability to repatriate cash from non-U.S. affiliates without adverse tax consequences; the Company's ability to successfully outsource a significant portion of its information technology services or other activities; the Company's ability to successfully implement its finance and information technology transformation programs; 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; changes to the Company's senior management team and the dependence of its business operations on its senior management team; the effect of tangible and intangible asset impairment charges; the Company's exposure to uninsured claims in excess of historical levels; fluctuations in interest rates and commodity prices; the Company's exposure to fluctuations in foreign currency exchange rates and other risks 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 As a Six Months Ended As a
June 30, Percentage of June 30, Percentage of
Total
Revenues Total
Revenues
--------
(In millions, except per share data) 2017 2016 2017 2016 2017 2016 2017 2016
----------------------------------- ---- ---- ---- ---- ---- ---- ---- ----
Total revenues $2,224 $2,270 100% 100% $4,140 $4,253 100% 100%
------ ------ ------ ------
Expenses:
Direct vehicle and operating 1,255 1,267 56% 56% 2,387 2,425 58% 57%
Depreciation of revenue earning vehicles and lease
charges, net 743 629 33% 28% 1,444 1,245 35% 29%
Selling, general and administrative 223 234 10% 10% 442 459 11% 11%
Interest expense, net:
Vehicle 82 72 4% 3% 153 140 4% 3%
Non-vehicle 76 102 3% 4% 136 185 3% 4%
--- --- ---
Total interest expense, net 158 174 7% 8% 289 325 7% 8%
--- --- --- ---
Intangible asset impairments 86 - 4% - % 86 - 2% - %
Other (income) expense, net 4 1 - % - % 31 (89) 1% (2)%
Total expenses 2,469 2,305 111% 102% 4,679 4,365 113% 103%
----- ----- ----- -----
Income (loss) from continuing operations before income
taxes (245) (35) (11)% (2)% (539) (112) (13)% (3)%
Income tax (provision) benefit from continuing operations 87 7 4% - % 158 32 4% 1%
Net income (loss) from continuing operations (158) (28) (7)% (1)% (381) (80) (9)% (2)%
Net income (loss) from discontinued operations - (15) - % (1)% - (13) - % - %
Net Income (loss) $(158) $(43) (7) (2)% $(381) $(93) (9)% (2)%
%
Weighted average number of shares outstanding:
Basic 83 85 83 85
Diluted 83 85 83 85
Earnings (loss) per share - basic and diluted:
Basic earnings (loss) per share from continuing
operations $(1.90) $(0.33) $(4.59) $(0.94)
Basic earnings (loss) per share from discontinued
operations - (0.18) - (0.15)
----- -----
Basic earnings (loss) per share $(1.90) $(0.51) $(4.59) $(1.09)
====== ====== ====== ======
Diluted earnings (loss) per share from continuing
operations $(1.90) $(0.33) $(4.59) $(0.94)
Diluted earnings (loss) per share from discontinued
operations - (0.18) - (0.15)
--- ----- --- -----
Diluted earnings (loss) per share $(1.90) $(0.51) $(4.59) $(1.09)
====== ====== ====== ======
Adjusted pre-tax income (loss) (a) $(82) $55 $(295) $(53)
Adjusted net income (loss)(a) $(52) $35 $(186) $(33)
Adjusted earnings (loss) per share(a) $(0.63) $0.41 $(2.24) $(0.39)
Adjusted Corporate EBITDA (a) $35 $184 $(75) $212
(a) Represents a non-GAAP
measure, see the accompanying
reconciliations included in
Supplemental Schedule II.
SELECTED UNAUDITED CONSOLIDATED BALANCE
SHEET DATA
---------------------------------------
(In millions) June 30, December
2017 31, 2016
------------ --------- ---------
Cash and cash equivalents $1,141 $816
Total restricted cash 1,062 278
Revenue earning vehicles, net:
U.S. Rental Car 8,804 7,716
International Rental Car 3,044 1,755
All Other Operations 1,338 1,347
----- -----
Total revenue earning vehicles,
net 13,186 10,818
Total assets 22,433 19,155
Total debt 16,809 13,541
Net vehicle debt (a) 11,026 9,447
Net non-vehicle debt (a) 3,702 3,116
Total equity 756 1,075
(a) Represents a non-GAAP measure, see the accompanying reconciliations included in Supplemental Schedule V.
SELECTED UNAUDITED CONSOLIDATED CASH
FLOW DATA
------------------------------------
Six Months Ended June 30,
(In millions) 2017 2016
------------ ---- ----
Cash from continuing
operations provided by
(used in):
Operating activities $982 $1,014
Investing activities (2,904) (1,929)
Financing activities 2,235 1,718
Effect of exchange rate
changes 12 8
Net change in cash and cash
equivalents $325 $811
==== ====
Fleet growth (a) $(46) $130
Adjusted free cash flow (a) (566) (101)
(a) Represents a non-GAAP measure,
see the accompanying
reconciliations included in
Supplemental Schedules III and IV.
SELECTED UNAUDITED OPERATING
DATA BY SEGMENT
----------------------------
Three Months Ended Percent Six Months Ended Percent
June 30, Inc/(Dec) June 30, Inc/(Dec)
--------- -------- ---------
2017 2016 2017
2016
----
U.S. RAC
Transaction days (in thousands) 36,233 37,190 (3)% 68,545 69,932 (2)%
Total RPD(a) $41.26 $42.11 (2)% $41.23 $42.23 (2)%
Total RPU(a) $1,007 $1,044 (4)% $968 $1,025 (6)%
Average vehicles 495,000 500,000 (1)% 486,500 480,100 1%
Vehicle utilization(a) 80% 82% (130) bps 78% 80% (220) bps
Net depreciation per unit per month(a) $353 $278 27% $351 $290 21%
Percentage of program vehicles at period end 11% 12% (100) bps 11% 12% bps
(100)
Adjusted pre-tax income (loss)(in millions)(b) $(37) $143 NM $(152) $138 NM
International RAC
Transaction days (in thousands) 13,235 12,511 6% 23,419 22,613 4%
Total RPD(a)(c) $39.29 $39.88 (1)% $39.28 $40.38 (3)%
Total RPU(a)(c) $931 $931 -% $911 $932 (2)%
Average vehicles 186,100 178,600 4% 168,300 163,300 3%
Vehicle utilization(a) 78% 77% 120 bps 77% 76% 80 bps
Net depreciation per unit per month(a)(c) $172 $168 2% $177 $176 1%
Percentage of program vehicles at period end 46% 45% 100 bps 46% 45% 100 bps
Adjusted pre-tax income (loss)(in millions)(b) $56 $34 65% $52 $36 44%
All Other Operations
Average vehicles - Donlen 206,200 166,900 24% 206,900 166,900 24%
Adjusted pre-tax income (loss) (in millions)(b) $19 $17 12% $39 $35 11%
NM - Not Meaningful
(a) Represents a key metric, see
the accompanying reconciliations
included in Supplemental Schedule
VI.
(b) Represents a non-GAAP measure,
see the accompanying
reconciliations included in
Supplemental Schedule II.
(c) Based on December 31, 2016
foreign exchange rates.
Supplemental Schedule I
HERTZ GLOBAL HOLDINGS, INC.
CONDENSED STATEMENT OF OPERATIONS BY SEGMENT
Unaudited
Three Months Ended June 30, 2017 Three Months Ended June 30, 2016
(In millions) U.S. Rental Car Int'l Rental All Other Corporate Hertz Global U.S. Rental Car Int'l Rental All Other
Car Operations Car Operations Corporate Hertz Global
------------ --------------- ------------- ---------- --------- ------------ --------------- ------------- ---------- --------- ------------
Total revenues: $1,519 $543 $162 $ - $2,224 $1,584 $540 $146 $ - $2,270
------ ---- ---- --- --- ------ ------ ---- ---- --- --- ------
Expenses:
Direct vehicle and operating 919 322 14 - 1,255 916 341 6 4 1,267
Depreciation of revenue earning vehicles and
lease charges, net 524 100 119 - 743 417 98 114 - 629
Selling, general and administrative 101 55 8 59 223 103 57 8 66 234
Interest expense, net:
Vehicle 57 18 7 - 82 53 14 5 - 72
Non-vehicle (22) 1 (2) 99 76 (8) 1 (1) 110 102
--- --- --- --- --- --- --- --- --- ---
Total interest expense, net 35 19 5 99 158 45 15 4 110 174
--- --- --- --- --- --- --- --- --- ---
Intangible asset impairments 86 - - - 86 - - - - -
Other (income) expense, net - 4 - - 4 (1) - - 2 1
Total expenses 1,665 500 146 158 2,469 1,480 511 132 182 2,305
Income (loss) from continuing operations
before income taxes $(146) $43 $16 $(158) (245) $104 $29 $14 $(182) (35)
===== === === ===== ==== === === =====
Income tax (provision) benefit from continuing operations 87 7
Net income (loss) from continuing operations (158) (28)
Net income (loss) from discontinued operations - (15)
--- ---
Net income (loss) $(158) $(43)
===== ====
Supplemental Schedule I (continued)
HERTZ GLOBAL HOLDINGS, INC.
CONDENSED STATEMENT OF OPERATIONS BY SEGMENT
Unaudited
Six Months Ended June 30, 2017 Six Months Ended June 30, 2016
(In millions) U.S. Rental Car Int'l Rental All Other Corporate Hertz Global U.S. Rental Car Int'l Rental All Other
Car Operations Car Operations Corporate Hertz Global
------------ --------------- ------------- ---------- --------- ------------ --------------- ------------- ---------- --------- ------------
Total revenues: $2,872 $955 $313 $ - $4,140 $2,990 $973 $290 $ - $4,253
------ ---- ---- --- --- ------ ------ ---- ---- --- --- ------
Expenses:
Direct vehicle and operating 1,780 589 19 (1) 2,387 1,786 620 11 8 2,425
Depreciation of revenue earning vehicles and
lease charges, net 1,023 185 236 - 1,444 836 184 225 - 1,245
Selling, general and administrative 197 108 15 122 442 208 112 17 122 459
Interest expense, net:
Vehicle 105 34 14 - 153 104 27 9 - 140
Non-vehicle (41) 1 (5) 181 136 (15) 3 (2) 199 185
--- --- --- --- --- --- --- --- --- ---
Total interest expense, net 64 35 9 181 289 89 30 7 199 325
--- --- --- --- --- --- --- --- --- ---
Intangible asset impairments 86 - - - 86 - - - - -
Other (income) expense, net - 1 - 30 31 (11) - - (78) (89)
Total expenses 3,150 918 279 332 4,679 2,908 946 260 251 4,365
Income (loss) from continuing operations
before income taxes $(278) $37 $34 $(332) (539) $82 $27 $30 $(251) (112)
===== === === ===== === === === =====
Income tax (provision) benefit from continuing operations 158 32
Net income (loss) from continuing operations (381) (80)
Net income (loss) from discontinued operations - (13)
--- ---
Net income (loss) $(381) $(93)
===== ====
Supplemental Schedule II
HERTZ GLOBAL HOLDINGS, INC.
RECONCILIATION OF INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
TO GROSS EBITDA, CORPORATE EBITDA, ADJUSTED CORPORATE EBITDA, ADJUSTED PRE-TAX INCOME (LOSS),
ADJUSTED NET INCOME (LOSS) AND ADJUSTED DILUTED EARNINGS (LOSS) PER SHARE
Unaudited
Three Months Ended June 30, 2017 Three Months Ended June 30, 2016
(In millions) U.S. Rental Int'l Rental All Other Corporate Hertz Global U.S. Rental Int'l Rental All Other
Car Car Operations Car Car Operations Corporate Hertz Global
------------ ------------ ------------ ---------- --------- ------------ ----------- ------------ ---------- --------- ------------
Income (loss) from continuing operations before income taxes $(146) $43 $16 $(158) $(245) $104 $29 $14 $(182) $(35)
Depreciation and amortization 573 108 121 4 806 462 106 116 7 691
Interest, net of interest income 35 19 5 99 158 45 15 4 110 174
--- --- --- --- --- ---
Gross EBITDA $462 $170 $142 $(55) $719 $611 $150 $134 $(65) $830
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Revenue earning vehicle depreciation and lease charges, net (524) (100) (119) - (743) (417) (98) (114) - (629)
Vehicle debt interest (57) (18) (7) - (82) (53) (14) (5) - (72)
Vehicle debt-related charges (a) 4 2 1 - 7 1 1 1 - 3
Loss on extinguishment of vehicle related debt(b) - - - - - 6 - - - 6
--- --- --- --- --- --- --- --- --- ---
Corporate EBITDA $(115) $54 $17 $(55) $(99) $148 $39 $16 $(65) $138
----- --- --- ---- ---- ---- --- --- ---- ----
Non-cash stock-based employee compensation charges - - - 5 5 - - - 6 6
Restructuring and restructuring related charges (c)(d) - - - 5 5 13 3 - 2 18
Impairment charges and asset write-downs(e) 86 - - - 86 3 - - - 3
Finance and information technology transformation costs(f) - - - 20 20 5 - - 14 19
Other items(g) 7 9 - 2 18 (1) - - 1 -
--- --- --- --- --- --- --- --- --- ---
Adjusted Corporate EBITDA $(22) $63 $17 $(23) $35 $168 $42 $16 $(42) $184
---- --- --- ---- --- ---- --- --- ---- ----
Non-vehicle depreciation and amortization (49) (8) (2) (4) (63) (45) (8) (2) (7) (62)
Non-vehicle debt interest, net of interest income 22 (1) 2 (99) (76) 8 (1) 1 (110) (102)
Non-vehicle debt-related charges (a) - - - 3 3 - - - 9 9
Loss on extinguishment of non-vehicle related debt(b) - - - 8 8 - - - 14 14
Non-cash stock-based employee compensation charges - - - (5) (5) - - - (6) (6)
Acquisition accounting (h) 12 2 2 - 16 12 1 2 3 18
--- --- --- --- --- --- --- --- --- ---
Adjusted pre-tax income (loss)(i) $(37) $56 $19 $(120) $(82) $143 $34 $17 $(139) $55
==== === === ===== ==== === === =====
Income tax (provision) benefit on adjusted pre-tax income (loss)(j) 30 (20)
---
Adjusted net income (loss) $(52) $35
==== ===
Weighted average number of diluted shares outstanding 83 85
Adjusted diluted earnings (loss) per share $(0.63) $0.41
Supplemental Schedule II (continued)
HERTZ GLOBAL HOLDINGS, INC.
RECONCILIATION OF INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
TO GROSS EBITDA, CORPORATE EBITDA, ADJUSTED CORPORATE EBITDA, ADJUSTED PRE-TAX INCOME (LOSS)
AND ADJUSTED NET INCOME (LOSS)
Unaudited
Six Months Ended June 30, 2017 Six Months Ended June 30, 2016
(In millions) U.S. Rental Int'l Rental All Other Corporate Hertz Global U.S. Rental Car Int'l Rental All Other
Car Car Operations Car Operations Corporate Hertz Global
------------ ------------ ------------ ---------- --------- ------------ --------------- ------------ ---------- --------- ------------
Income (loss) from continuing operations before income taxes $(278) $37 $34 $(332) $(539) $82 $27 $30 $(251) $(112)
Depreciation and amortization 1,115 201 242 6 1,564 931 201 230 12 1,374
Interest, net of interest income 64 35 9 181 289 89 30 7 199 325
--- --- --- --- --- ---
Gross EBITDA $901 $273 $285 $(145) $1,314 $1,102 $258 $267 $(40) $1,587
---- ---- ---- ----- ------ ------ ---- ---- ---- ------
Revenue earning vehicle depreciation and lease charges, net (1,023) (185) (236) - (1,444) (836) (184) (225) - (1,245)
Vehicle debt interest (105) (34) (14) - (153) (104) (27) (9) - (140)
Vehicle debt-related charges (a) 8 4 2 - 14 8 3 2 - 13
Loss on extinguishment of vehicle related debt(b) - - - - - 6 - - - 6
--- --- --- --- --- --- --- --- --- ---
Corporate EBITDA $(219) $58 $37 $(145) $(269) $176 $50 $35 $(40) $221
----- --- --- ----- ----- ---- --- --- ---- ----
Non-cash stock-based employee compensation charges - - - 12 12 - - - 11 11
Restructuring and restructuring related charges(c)(d) - 1 - 10 11 14 3 - 12 29
Sale of CAR Inc. common stock(k) - - - (3) (3) - - - (75) (75)
Impairment charges and asset write-downs(e) 86 - - 30 116 3 - - - 3
Finance and information technology transformation costs(f) - - - 39 39 9 - - 17 26
Other items(g) 7 7 - 5 19 (9) - - 6 (3)
--- --- --- --- --- --- --- --- --- ---
Adjusted Corporate EBITDA $(126) $66 $37 $(52) $(75) $193 $53 $35 $(69) $212
----- --- --- ---- ---- ---- --- --- ---- ----
Non-vehicle depreciation and amortization (92) (16) (6) (6) (120) (95) (17) (5) (12) (129)
Non-vehicle debt interest, net of interest income 41 (1) 5 (181) (136) 15 (3) 2 (199) (185)
Non-vehicle debt-related charges(a) - - - 7 7 - - - 12 12
Loss on extinguishment of non-vehicle related debt(b) - - - 8 8 - - - 14 14
Non-cash stock-based employee compensation charges - - - (12) (12) - - - (11) (11)
Acquisition accounting (h) 25 3 3 - 31 25 3 3 3 34
Other(d) - - - 2 2 - - - - -
--- --- --- --- --- --- --- --- --- ---
Adjusted pre-tax income (loss)(i) $(152) $52 $39 $(234) $(295) $138 $36 $35 $(262) $(53)
===== === === ===== ==== === === =====
Income tax (provision) benefit on adjusted pre-tax income (loss)(j) 109 20
---
Adjusted net income (loss) $(186) $(33)
===== ====
Weighted average number of diluted shares outstanding 83 85
Adjusted diluted earnings (loss) per share $(2.24) $(0.39)
(a) Represents debt-related charges
relating to the amortization of
deferred financing costs and debt
discounts and premiums.
(b) In 2017, represents $6 million
of early redemption premium and
write off of deferred financing
costs associated with the redemption
of the outstanding 4.25% Senior
Notes due April 2018 and a $2
million write-off of deferred
financing costs associated with the
termination of commitments under the
Senior RCF. In 2016, represents the
write-off of deferred financing
costs in the second quarter as a
result of paying off the Senior Term
Facility and various vehicle debt
refinancings.
(c) Represents expenses incurred
under restructuring actions as
defined in U.S. GAAP, excluding
impairments and asset write-downs,
when applicable. Also represents
certain other charges such as
incremental costs incurred directly
supporting business transformation
initiatives. Such costs include
transition costs incurred in
connection with business process
outsourcing arrangements and
incremental costs incurred to
facilitate business process re-
engineering initiatives that involve
significant organization redesign
and extensive operational process
changes. Also includes consulting
costs and legal fees related to the
previously disclosed accounting
review and investigation.
(d) For the six months ended June
30, 2017, excludes $2 million of
stock-based compensation
expenditures included in
restructuring and restructuring
related charges.
(e) In 2017, primarily represents a
second quarter impairment of $86
million of the Dollar Thrifty
tradename and a first quarter
impairment of $30 million related to
an equity method investment.
(f) Represents external costs
associated with the Company's
finance and information technology
transformation programs, both of
which are multi-year initiatives
that commenced in 2016 to upgrade
and modernize the Company's systems
and processes.
(g) Represents miscellaneous, non-
recurring and other non-cash items.
In 2017, includes first and second
quarter adjustments, as applicable,
to the carrying value of the
Company's Brazil operations in
connection with its classification
as held for sale and second quarter
charges of $6 million for labor-
related matters and $5 million
relating to PLPD as a result of a
terrorist event. For the six months
ended June 30, 2016, includes a $9
million settlement gain from an
eminent domain case related to one
of the Company's airport locations.
(h) Represents incremental expense
associated with amortization of
other intangible assets and
depreciation of property and
equipment relating to acquisition
accounting.
(i) Adjustments by caption to arrive
at adjusted pre-tax income (loss)
are as follows:
Increase (decrease) to expenses Three Months Ended June 30, Six Months Ended June 30,
(In millions) 2017 2016 2017 2016
------------ ---- ---- ---- ----
Direct vehicle and operating expenses $(21) $(25) $(37) $(38)
Selling, general and administrative expenses (33) (32) (62) (59)
Vehicle interest expense, net (7) (9) (14) (19)
Non-vehicle interest expense, net (11) (23) (15) (26)
Other income (expense), net (91) (1) (116) 83
--- --- ---- ---
Total adjustments $(163) $(90) $(244) $(59)
===== ==== ===== ====
(j) Derived utilizing a combined
statutory rate of 37% applied to the
adjusted income (loss) before income
taxes.
(k) Represents the pre-tax gain on
the sale of CAR Inc. common stock.
Supplemental Schedule III
HERTZ GLOBAL HOLDINGS, INC.
RECONCILIATION OF GAAP TO NON-GAAP MEASURE - FLEET GROWTH
Unaudited
Six Months Ended June 30, 2017 Six Months Ended June 30, 2016
(In millions) U.S. Rental Car Int'l Rental All Other Hertz Global U.S. Rental Car Int'l Rental Car All Other
Car Operations Operations Hertz Global
------------ --------------- ------------ ---------- ------------ --------------- ---------------- ---------- ------------
Revenue earning vehicles expenditures $(4,520) $(1,856) $(333) $(6,709) $(4,854) $(1,669) $(364) $(6,887)
Proceeds from disposal of revenue earning vehicles 2,658 1,069 108 3,835 3,545 1,126 116 4,787
Net revenue earning vehicles capital expenditures (1,862) (787) (225) (2,874) (1,309) (543) (248) (2,100)
Depreciation of revenue earning vehicles, net 1,023 151 236 1,410 837 150 225 1,212
Financing activity related to vehicles:
Borrowings 3,214 1,060 754 5,028 4,221 1,267 591 6,079
Payments (2,333) (607) (725) (3,665) (3,614) (886) (578) (5,078)
Restricted cash changes 33 56 (34) 55 18 1 (2) 17
--- --- --- --- --- --- --- ---
Net financing activity related to vehicles 914 509 (5) 1,418 625 382 11 1,018
Fleet growth $75 $(127) $6 $(46) $153 $(11) $(12) $130
=== ===== === ==== ==== ==== ==== ====
Supplemental Schedule IV
HERTZ GLOBAL HOLDINGS, INC.
RECONCILIATION OF GAAP TO NON-GAAP MEASURE - ADJUSTED FREE CASH FLOW
Unaudited
Reconciliation of
Cash Flows From
Operating Activities
to Adjusted Free
Cash Flow Six Months Ended June 30,
---------------------
(In millions) 2017 2016
------------ ---- ----
Net cash provided by
operating activities $982 $1,014
Net change in
restricted cash and
cash equivalents,
vehicle 55 17
Revenue earning
vehicles
expenditures (6,709) (6,887)
Proceeds from
disposal of revenue
earning vehicles 3,835 4,787
Capital asset
expenditures, non-
vehicle (103) (72)
Proceeds from
disposal of property
and other equipment 11 39
Proceeds from
issuance of vehicle
debt 5,028 6,079
Repayments of vehicle
debt (3,665) (5,078)
------ ------
Adjusted free cash
flow $(566) $(101)
===== =====
Supplemental Schedule V
HERTZ GLOBAL HOLDINGS, INC.
RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES - NET DEBT
Unaudited
As of June 30, 2017 As of December 31, 2016
(In millions) Vehicle Non-Vehicle Total Vehicle Non-Vehicle Total
------------ ------- ----------- ----- ------- ----------- -----
Debt as reported
in the balance
sheet $11,176 $5,633 $16,809 $9,646 $3,895 $13,541
Add:
Debt issue costs
deducted from
debt
obligations(a) 33 44 77 36 37 73
Less:
Cash and cash
equivalents - 1,141 1,141 - 816 816
Restricted cash 183 834 1,017 235 - 235
Net debt $11,026 $3,702 $14,728 $9,447 $3,116 $12,563
======= ====== ======= ====== ====== =======
(a) Certain debt issue costs
are required to be reported
as a deduction from the
carrying amount of the
related debt obligation under
GAAP. Management believes
that eliminating the effects
that these costs have on debt
will more accurately reflect
the Company's net debt
position.
Supplemental Schedule VI
HERTZ GLOBAL HOLDINGS, INC.
RECONCILIATIONS OF KEY METRICS
REVENUE, UTILIZATION AND DEPRECIATION
Unaudited
U.S. Rental Car
Three Months Ended Percent Inc/ Six Months Ended Percent Inc/
(Dec) (Dec)
June 30, June 30,
($ in millions, except as noted) 2017 2016 2017 2016
------------------------------- ---- ---- ---- ----
Total RPD
Revenues $1,519 $1,584 $2,872 $2,990
Ancillary retail vehicle sales revenue (24) (18) (46) (37)
Total rental revenue $1,495 $1,566 $2,826 $2,953
Transaction days (in thousands) 36,233 37,190 68,545 69,932
------ ------ ------ ------
Total RPD (in whole dollars) $41.26 $42.11 (2)% $41.23 $42.23 (2)%
====== ====== ====== ======
Total Revenue Per Unit Per Month
Total rental revenue $1,495 $1,566 $2,826 $2,953
Average vehicles 495,000 500,000 486,500 480,100
Total revenue per unit (in whole dollars) $3,020 $3,132 $5,809 $6,151
Number of months in period 3 3 6 6
--- --- --- ---
Total RPU (in whole dollars) $1,007 $1,044 (4)% $968 $1,025 (6)%
====== ====== ==== ======
Vehicle Utilization
Transaction days (in thousands) 36,233 37,190 68,545 69,932
Average vehicles 495,000 500,000 486,500 480,100
Number of days in period 91 91 181 182
--- --- --- ---
Available car days (in thousands) 45,045 45,500 88,057 87,378
Vehicle utilization(a) 80% 82% (130) bps 78% 80% (220) bps
Net Depreciation Per Unit Per Month
Depreciation of revenue earning vehicles and lease charges,
net $524 $417 $1,023 $836
Average vehicles 495,000 500,000 486,500 480,100
------- ------- ------- -------
Depreciation of revenue earning vehicles and lease charges,
net divided by average vehicles (in whole dollars) $1,059 $834 $2,103 $1,741
Number of months in period 3 3 6 6
Net depreciation per unit per month (in whole dollars) $353 $278 27% $351 $290 21%
==== ==== ==== ====
(a) Calculated as transaction
days divided by available
car days.
Supplemental Schedule VI (continued)
HERTZ GLOBAL HOLDINGS, INC.
RECONCILIATIONS OF KEY METRICS
REVENUE, UTILIZATION AND DEPRECIATION
Unaudited
International Rental Car
Three Months Ended Percent Six Months Ended Percent
Inc/(Dec) Inc/
(Dec)
June 30, June 30,
($ in millions, except as noted) 2017 2016 2017 2016
---- ---- ---- ----
Total RPD
Revenues $543 $540 $955 $973
Foreign currency adjustment(a) (23) (41) (35) (60)
Total rental revenue $520 $499 $920 $913
Transaction days (in thousands) 13,235 12,511 23,419 22,613
------ ------ ------ ------
Total RPD (in whole dollars) $39.29 $39.88 (1)% $39.28 $40.38 (3)%
====== ====== ====== ======
Total Revenue Per Unit Per Month
Total rental revenue $520 $499 $920 $913
Average vehicles 186,100 178,600 168,300 163,300
Total revenue per unit (in whole dollars) $2,794 $2,794 $5,466 $5,591
Number of months in period 3 3 6 6
--- --- --- ---
Total RPU (in whole dollars) $931 $931 - % $911 $932 (2)%
==== ==== ==== ====
Vehicle Utilization
Transaction days (in thousands) 13,235 12,511 23,419 22,613
Average vehicles 186,100 178,600 168,300 163,300
Number of days in period 91 91 181 182
--- --- --- ---
Available car days (in thousands) 16,935 16,253 30,462 29,721
Vehicle utilization(b) 78% 77% 120 bps 77% 76% 80 bps
Net Depreciation Per Unit Per Month
Depreciation of revenue earning vehicles and lease
charges, net $100 $98 $185 $184
Foreign currency adjustment (a) (4) (8) (6) (12)
--- --- --- ---
Adjusted depreciation of revenue earning vehicles and
lease charges, net $96 $90 $179 $172
--- --- ---- ----
Average vehicles 186,100 178,600 168,300 163,300
------- ------- ------- -------
Adjusted depreciation of revenue earning vehicles and
lease charges, net divided by average vehicles (in
whole dollars) $516 $504 $1,064 $1,053
Number of months in period 3 3 6 6
Net depreciation per unit per month (in whole dollars) $172 $168 2% $177 $176 1%
==== ==== ==== ====
(a) Based on December 31, 2016
foreign exchange rates.
(b) Calculated as transaction days
divided by available car days.
Supplemental Schedule VI (continued)
HERTZ GLOBAL HOLDINGS, INC.
RECONCILIATIONS OF KEY METRICS
REVENUE, UTILIZATION AND DEPRECIATION
Unaudited
Worldwide Rental Car
Three Months Ended Percent Six Months Ended Percent Inc/
Inc/(Dec) (Dec)
June 30, June 30,
($ in millions, except as noted) 2017 2016 2017 2016
---- ---- ---- ----
Total RPD
Revenues $2,062 $2,124 $3,827 $3,963
Ancillary retail vehicle sales revenue (24) (18) (46) (37)
Foreign currency adjustment(a) (23) (41) (35) (60)
Total rental revenue $2,015 $2,065 $3,746 $3,866
Transaction days (in thousands) 49,468 49,701 91,964 92,545
------ ------ ------ ------
Total RPD (in whole dollars) $40.73 $41.55 (2)% $40.73 $41.77 (2)%
====== ====== ====== ======
Total Revenue Per Unit Per Month
Total rental revenue $2,015 $2,065 $3,746 $3,866
Average vehicles 681,100 678,600 654,800 643,400
Total revenue per unit (in whole dollars) $2,958 $3,043 $5,721 $6,009
Number of months in period 3 3 6 6
Total RPU (in whole dollars) $986 $1,014 (3)% $954 $1,002 (5)%
==== ====== ==== ======
Vehicle Utilization
Transaction days (in thousands) 49,468 49,701 91,964 92,545
Average vehicles 681,100 678,600 654,800 643,400
Number of days in period 91 91 181 182
--- --- --- ---
Available car days (in thousands) 61,980 61,753 118,519 117,099
Vehicle utilization(b) 80% 80% (70) bps 78% 79% (140) bps
Net Depreciation Per Unit Per Month
Depreciation of revenue earning vehicles and lease charges, net $624 $515 $1,208 $1,020
Foreign currency adjustment (a) (4) (8) (6) (12)
--- --- --- ---
Adjusted depreciation of revenue earning vehicles and lease
charges, net $620 $507 $1,202 $1,008
---- ---- ------ ------
Average vehicles 681,100 678,600 654,800 643,400
------- ------- ------- -------
Adjusted depreciation of revenue earning vehicles and lease
charges, net divided by average vehicles (in whole dollars) $910 $747 $1,836 $1,567
Number of months in period 3 3 6 6
Net depreciation per unit per month (in whole dollars) $303 $249 22% $306 $261 17%
==== ==== ==== ====
Note: Worldwide Rental Car represents
U.S. Rental Car and International
Rental Car segment information on a
combined basis and excludes our All
Other Operations segment, which is
primarily comprised of our Donlen
leasing operations, and Corporate.
(a) Based on December 31, 2016
foreign exchange rates.
(b) Calculated as transaction days
divided by available car days.
NON-GAAP MEASURES AND KEY METRICS - DEFINITIONS AND USE
Hertz Global is the top-level holding company and The Hertz Corporation is Hertz Global's primary operating company. The term "GAAP" refers to accounting principles generally accepted in the United States of America.
Definitions of non-GAAP measures are set forth below. Also set forth below is a summary of the reasons why management of the Company believes that the presentation of the non-GAAP financial measures included in the Earnings Release provide useful information regarding the Company's financial condition and results of operations and additional purposes, if any, for which management of the Company utilizes the non-GAAP measures.
Adjusted Pre-Tax Income (Loss) and Adjusted Pre-tax Margin
Adjusted pre-tax income (loss) is calculated as income (loss) from continuing operations before income taxes plus non-cash acquisition accounting charges, debt-related charges relating to the amortization and write-off of debt financing costs and debt discounts, goodwill, intangible and tangible asset impairments and write-downs and certain one-time charges and non-operational items. Adjusted pre-tax income (loss) is important because it allows management to assess operational performance of the Company's business, exclusive of the items mentioned above. It also allows management to assess the performance of the entire business on the same basis as the segment measure of profitability. Management believes it is important to investors for the same reasons it is important to management and because it allows them to assess the operational performance of the Company on the same basis that management uses internally. When evaluating the Company's operating performance, investors should not consider adjusted pre-tax income (loss) in isolation of, or as a substitute for, measures of the Company's financial performance, such as net income (loss) from continuing operations or income (loss) from continuing operations before income taxes. Adjusted pre-tax margin is adjusted pre-tax income (loss) divided by total revenues.
Adjusted Net Income (Loss)
Adjusted net income (loss) is calculated as adjusted pre-tax income (loss) less a provision for income taxes derived utilizing a combined statutory rate of 37%. The combined statutory rate is management's estimate of the Company's long-term tax rate. Adjusted net income (loss) is important to management and investors because it represents the Company's operational performance exclusive of the effects of purchase accounting, debt-related charges, one-time charges and items that are not operational in nature or comparable to those of the Company's competitors.
Adjusted Earnings (Loss) Per Diluted Share ("Adjusted EPS")
Adjusted earnings (loss) per diluted share is calculated as adjusted net income divided by the weighted average number of diluted shares outstanding for the period. Adjusted earnings (loss) per diluted share is important to management and investors because it represents a measure of the Company's operational performance exclusive of the effects of purchase accounting adjustments, debt-related charges, one-time charges and items that are not operational in nature or comparable to those of the Company's competitors.
Adjusted Free Cash Flow
Adjusted free cash flow is calculated as net cash provided by operating activities from continuing operations, including the change in restricted cash and cash equivalents related to vehicles, net revenue earning vehicle and capital asset expenditures and the net impact of vehicle financing activities. Adjusted free cash flow is important to management and investors as it provides useful information about the amount of cash available for acquisitions and the reduction of non-vehicle debt. When evaluating the Company's liquidity, investors should not consider Adjusted free cash flow in isolation of, or as a substitute for, a measure of the Company's liquidity as determined in accordance with GAAP, such as net cash provided by operating activities.
Available Car Days
Available Car Days is calculated as average vehicles multiplied by the number of days in a period.
Average Vehicles
Average Vehicles, also known as "fleet capacity", is determined using a simple average of the number of vehicles in our fleet whether owned or leased by the Company at the beginning and end of a given period. Among other things, average vehicles is used to calculate Vehicle Utilization which represents the portion of the Company's vehicles that are being utilized to generate revenue.
Earnings Before Interest, Taxes, Depreciation and Amortization ("Gross EBITDA"), Corporate EBITDA, Adjusted Corporate EBITDA and Adjusted Corporate EBITDA Margin
Gross EBITDA is defined as net income (loss) from continuing operations before net interest expense, income taxes and depreciation (which includes lease charges on revenue earning vehicles) and amortization. Corporate EBITDA, as presented herein, represents Gross EBITDA as adjusted for vehicle debt interest, vehicle depreciation and vehicle debt-related charges. Adjusted Corporate EBITDA, as presented herein, represents Corporate EBITDA as adjusted for certain other items, as described in more detail in the accompanying schedules.
Management uses Gross EBITDA, Corporate EBITDA and Adjusted Corporate EBITDA as operating performance metrics for internal monitoring and planning purposes, including the preparation of the Company's annual operating budget and monthly operating reviews, as well as to facilitate analysis of investment decisions, profitability and performance trends. Further, Gross EBITDA enables management and investors to isolate the effects on profitability of operating metrics such as revenue, direct vehicle and operating expenses and selling, general and administrative expenses, which enables management and investors to evaluate the Company's business segments that are financed differently and have different depreciation characteristics and compare the Company's performance against companies with different capital structures and depreciation policies. We also present Adjusted Corporate EBITDA as a supplemental measure because such information is utilized in the determination of certain executive compensation.
Gross EBITDA, Corporate EBITDA, Adjusted Corporate EBITDA and Adjusted Corporate EBITDA Margin are not recognized measurements under U.S. GAAP. When evaluating the Company's operating performance, investors should not consider Gross EBITDA, Corporate EBITDA and Adjusted Corporate EBITDA in isolation of, or as a substitute for, measures of the Company's financial performance as determined in accordance with GAAP, such as net income (loss) from continuing operations or income (loss) from continuing operations before income taxes.
Adjusted Corporate EBITDA Margin is calculated as the ratio of Adjusted Corporate EBITDA to total revenues and is used by the Compensation Committee to determine certain executive compensation, primarily in the form of PSUs.
Fleet Growth
U.S. and International Rental Car segments fleet growth is defined as revenue earning vehicles expenditures, net of proceeds from disposals, plus vehicle depreciation and net vehicle financing which includes borrowings, repayments and the change in restricted cash associated with vehicles.
Net Non-Vehicle Debt
Net non-vehicle debt is calculated as non-vehicle debt as reported on the Company's balance sheet, excluding the impact of unamortized debt issue costs associated with non-vehicle debt, less cash and equivalents and restricted cash associated with the issuance of the Senior Second Priority Secured Notes. Non-vehicle debt consists of the Company's Senior Term Loan, Senior RCF, Senior Notes, Senior Second Priority Secured Notes, Promissory Notes and certain other non-vehicle indebtedness of its domestic and foreign subsidiaries.
Net non-vehicle debt is important to management and investors as it helps measure the Company's leverage. Net non-vehicle debt also assists in the evaluation of the Company's ability to service its non-vehicle debt without reference to the expense associated with the vehicle debt, which is collateralized by assets not available to lenders under the non-vehicle debt facilities.
Net Vehicle Debt
Net vehicle debt is calculated as vehicle debt as reported on the Company's balance sheet, excluding the impact of unamortized debt issue costs associated with vehicle debt, less cash and equivalents and restricted cash associated with vehicles. This measure is important to management, investors and ratings agencies as it helps measure the Company's leverage with respect to its vehicle debt.
Net Depreciation Per Unit Per Month
Net depreciation per unit per month is calculated by dividing depreciation of revenue earning vehicles and lease charges, net by the average vehicles in each period and then dividing by the number of months in the period reported with all periods adjusted to eliminate the effect of fluctuations in foreign currency exchange rates. Management believes eliminating the effect of fluctuations in foreign currency exchange rates is appropriate so as not to affect the comparability of underlying trends. Net depreciation per unit per month represents the amount of average depreciation expense and lease charges, net per vehicle per month.
Restricted Cash Associated with Vehicle Debt (used in the calculation of Net Vehicle Debt)
Restricted cash associated with vehicle debt is restricted for the purchase of revenue earning vehicles and other specified uses under the Company's vehicle debt facilities and its vehicle rental like-kind exchange program.
Total Net Debt
Total net debt is calculated as total debt less total cash and cash equivalents and restricted cash associated with vehicle debt. This measure is important to management, investors and ratings agencies as it helps measure the Company's gross leverage.
Total RPD (also referred to as "pricing")
Total RPD is calculated as total revenue less ancillary revenue associated with retail vehicle sales, divided by the total number of transaction days, with all periods adjusted to eliminate the effect of fluctuations in foreign currency exchange rates. The Company's management believes eliminating the effect of fluctuations in foreign currency exchange rates is appropriate so as not to affect the comparability of underlying trends. This metric is important to the Company's management and investors as it represents a measurement of the changes in underlying pricing in the vehicle rental business and encompasses the elements in vehicle rental pricing that management has the ability to control.
Total Revenue Per Unit Per Month ("Total RPU")
Total revenue per unit per month is calculated as total revenues less ancillary revenue associated with retail vehicle sales divided by the average vehicles in each period and then dividing by the number of months in the period reported with all periods adjusted to eliminate the effect of fluctuations in foreign currency exchange rates. Management believes eliminating the effect of fluctuations in foreign currency exchange rates is appropriate so as not to affect the comparability of underlying trends. This metric is important to the Company's management and investors as it provides a measure of revenue productivity relative to fleet capacity.
Transaction Days
Transaction days, also known as volume, represent the total number of 24-hour periods, with any partial period counted as one transaction day, that vehicles were on rent (the period between when a rental contract is opened and closed) in a given period. Thus, it is possible for a vehicle to attain more than one transaction day in a 24-hour period.
Vehicle Utilization
Vehicle utilization is calculated by dividing total transaction days by the available car days.
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SOURCE The Hertz Corporation
