Hertz Global Holdings Reports 2015 Fourth Quarter And Full-Year Financial Results

ESTERO, Fla., Feb. 29, 2016 /PRNewswire/ -- Hertz Global Holdings, Inc. (NYSE: HTZ) ("HGH" or the "Company") today reported fourth quarter 2015 GAAP net income of $70 million, or $0.16 per diluted share, compared to a net loss of $234 million, or $0.51 per diluted share, during the fourth quarter of 2014. The Company also reported adjusted net income for the fourth quarter 2015 of $22 million, or $0.05 per diluted share, compared with an adjusted net loss of $101 million, or $0.22 per diluted share, for the same period last year. Total revenues for the fourth quarter 2015 were $2.41 billion, a 6% decline versus the fourth quarter of 2014. Adjusted corporate EBITDA for the 2015 fourth quarter was $266 million, compared to $76 million in the fourth quarter of 2014.

Foreign currency exchange rates had an unfavorable impact on Hertz Global Holdings' fourth quarter 2015 results as compared to the prior year period. The unfavorable impact of foreign currency exchange rates to total revenue in the quarter was approximately $75 million and the unfavorable impact to net income for the period was approximately $6 million, or $0.01 per diluted share.

For the full-year 2015, Hertz Global Holdings reported GAAP net income of $273 million, or $0.60 per diluted share, versus a loss of $82 million, or $0.18 per diluted share, for the full year 2014. Adjusted net income for 2015 was $360 million, or $0.79 per diluted share, compared with an adjusted net loss of $254 million, or $0.56 per diluted share, for 2014. Total revenues for 2015 of $10.5 billion represent a 5% year over year decline. Full year 2015 adjusted corporate EBITDA of $1,493 million represents a 12% improvement versus full year 2014.

Hertz Global Holdings ended 2015 with approximately $2.2 billion of corporate liquidity, which is its highest level since 2011.  As a result, the company reduced its year-end leverage ratio, which is defined as net corporate debt to adjusted corporate EBITDA, to 3.7 times at Dec. 31, 2015 versus 4.4 times at Sept. 30, 2015.

"By fundamentally improving our fleet management and reducing costs throughout the business, we delivered on our expected outcome for the fourth quarter and the full year, despite a highly competitive pricing environment," said John Tague, president and chief executive officer. "We are encouraged by rising customer satisfaction across our major brands, which reached record levels in the third and fourth quarters of 2015, as well as the pace of improvement in our cost structure. 

"Looking ahead, we continue to see soft pricing in the U.S. rental car market in the first quarter 2016 as well as continued weakness in upstream oil and gas markets affecting equipment rental, both of which are reflected in our outlook for 2016," Tague added.  "In this environment, we will continue to focus internally on improving cost and quality as part of our commitment to our three-to-five year margin improvement plan."

In the fourth quarter, effective fleet management and a focus and investment in customer service programs resulted in improvements in worldwide customer satisfaction for Hertz, Dollar and Thrifty.  Customer satisfaction levels reached record levels for these brands in the fourth quarter. For Hertz Global Holdings overall, customer satisfaction in the fourth quarter rose 4 points and 5 points in the U.S. and International segments, respectively.

Effective fleet management also drove a 3 percentage point year-over-year increase in Worldwide Car Rental fleet efficiency to 78%. In the U.S., Car Rental fleet efficiency rose to 79%, an increase of 4 percentage points versus the fourth quarter of 2014, driven by reduced out-of-service levels and better utilization or matching of demand to cars available to rent.  In the International segment, Car Rental fleet efficiency was 73%, a decrease of 1 percentage point from the fourth quarter of 2014.

Worldwide Revenue per Available Car Day (RACD) increased by 1%, as the improvement in fleet efficiency mitigated a 3% decrease in Total Revenue per Transaction Day (RPD) versus the fourth quarter of 2014.  In the U.S., RACD was unchanged as higher fleet efficiency offset a 5% decrease in RPD. The International region RACD increased 2%, as a 3% increase in Total RPD was slightly offset by a reduction in fleet efficiency.

Effective fleet management resulted in improved fleet condition, which contributed to the Company's lower out-of-service levels and lower maintenance costs during the fourth quarter versus the prior year.  This was accomplished while keeping 2015 fleet cost slightly below 2014 levels.

As part of its ongoing cost reduction program, Hertz Global Holdings achieved savings of approximately $75 million in the fourth quarter. For the full-year, the Company realized cost savings of approximately $230 million, exceeding its 2015 goal. In 2016, the Company expects to achieve an additional $350 million in cost savings.

Hertz Equipment Rental Corporation (HERC) continued to diversify its business, achieving a 42% increase in revenue from new accounts in North America on a constant currency basis in the fourth quarter. Hertz Global Holdings continues to expect that the planned separation of HERC as a public company is on track for mid-2016.

Fourth-quarter 2015 U.S. Car Rental revenues totaled $1,413 million, a decrease of 5% from the fourth quarter of 2014. For the quarter, the Company reported flat transaction days and a 5% decline in Total RPD.  The decline in pricing was the result of competitive pricing in airport rentals and negative off airport mix shift. Growth in leisure rental transaction days was offset by softness in corporate volumes and off airport location closures. Adjusted corporate EBITDA for the fourth quarter was $72 million, a $166 million improvement versus the same period last year, primarily driven by effective fleet management, improved productivity and strong cost controls.

Fourth-quarter 2015 International Car Rental revenues totaled $469 million, a decrease of 9% from the fourth quarter of 2014. Excluding the unfavorable foreign currency impact of $65 million, fourth-quarter revenues increased 3% driven by improved revenue mix. Fourth-quarter adjusted corporate EBITDA of $23 million was a $22 million improvement versus the same period last year primarily driven by a 3% increase in RPD, excluding currency effects on a constant rate basis, and strong fleet management.

Fourth-quarter 2015 Worldwide Equipment Rental revenues totaled $386 million, a decrease of 7% from the fourth quarter of 2014. Excluding the unfavorable foreign currency impact of $10 million, revenue decreased 5% driven by continued pressure in upstream oil and gas related markets and the Oct. 30, 2015, sale of Hertz Equipment Rental operations in France and Spain. Adjusted corporate EBITDA for the Worldwide Equipment Rental segment for the fourth quarter of 2015 was $166 million, a $12 million decrease versus the fourth quarter of 2014.

All Other Operations, which include Donlen Leasing and Hertz Claims Management, reported a 1% increase in revenues for the fourth quarter of 2015. Adjusted corporate EBITDA for the All Other Operations segment was $18 million, a 13% increase over the prior-year period.

SHARE REPURCHASE ACTIVITY

During the fourth quarter, the Company repurchased approximately 22 million shares totaling $343 million, including commissions. The share repurchases were funded primarily by cash flow from operations, proceeds from the sale of a portion of its holdings in CAR Inc. (China Auto Rental) and proceeds from the sale of HERC's businesses in France and Spain. For the full year, under the Company's previously announced $1 billion authorized share repurchase program, Hertz Global Holdings repurchased approximately 37 million shares at a total cost of approximately $605 million, including commissions.

HERTZ GLOBAL HOLDINGS GUIDANCE

For the full-year 2016, the Company forecasts the following:

For the full-year 2016, the Company has revised its previously issued preliminary 2016 adjusted corporate EBITDA guidance for both Consolidated Hertz Global Holdings and the Worldwide Equipment Rental segment. For Hertz Global Holdings, the guidance has been revised from a range of $1.7 billion to $1.8 billion to a range of $1.6 billion to $1.7 billion, reflecting lower U.S. RAC Total Revenue growth in the second half of the fourth quarter 2015 and the resulting impact to the first quarter of 2016, as well as continued pressure in the upstream oil and gas business in the Worldwide Equipment Rental segment. As a result, Worldwide Equipment Rental segment preliminary 2016 adjusted corporate EBITDA guidance has been revised from a range of $625 million to $675 million to a range of $600 million to $650 million.  In addition, the Company lowered its U.S. RAC revenue guidance from a range of 2.5% to 3.5% to a range of 1.5% to 2.5%.  Guidance for U.S. RAC capacity growth has been revised from a range of (0.5%) to 0.5% to a range of (3.0%) to (2.0%).  Non-fleet capex spending guidance has also been revised from a range of $250 million to $275 million to a range of $200 million to $225 million.  The guidance for U.S. RAC net depreciation per unit per month is unchanged.

RESULTS OF THE HERTZ CORPORATION

The GAAP and Non-GAAP profitability metrics for Hertz Global Holdings' operating subsidiary, The Hertz Corporation, are materially the same as those for Hertz Global Holdings.

(1) Adjusted pre-tax income, Adjusted pre-tax margin, Adjusted Corporate EBITDA, Adjusted Corporate EBITDA margin, adjusted net income, adjusted net income margin, adjusted diluted earnings per share, total revenue per transaction day, revenue per available car day and net depreciation per unit per month are non-GAAP measures. See the accompanying Supplemental Schedules and Definitions for the reconciliations and definitions for each of these non-GAAP measures and the reason the Company's management believes that these measures provide useful information to investors.

(2) Because of the forward-looking nature of the Company's Adjusted Corporate EBITDA forecast, specific quantifications of the amounts that would be required to reconcile a pre-tax income forecast are not available. The Company believes that there is a degree of volatility with respect to certain of the Company's GAAP measures, primarily related to fair value accounting for its financial assets (which includes the Company's derivative financial instruments), its income tax reporting and certain adjustments made to arrive at the relevant non-GAAP measures, which preclude the Company from providing accurate forecast of GAAP to non-GAAP reconciliations. Based on the above, the Company believes that providing estimates of the amounts that would be required to reconcile the range of the non-GAAP Adjusted Corporate EBITDA would imply a degree of precision that would be confusing or misleading to investors for the reasons identified above.

EARNINGS WEBCAST INFORMATION

Hertz Global Holdings' fourth-quarter 2015 earnings webcast will be held on March 1, 2016, at 8:00 a.m. U.S. Eastern. The press release and related supplemental schedules containing the reconciliations of non-GAAP measures will be available on our website, IR.Hertz.com.

ANNUAL MEETING OF STOCKHOLDERS

The Company's Board of Directors has set the date of the annual meeting of stockholders for May 18, 2016, which will be held in Estero, Florida.  Holders of record at the close of business on March 25, 2016, will be entitled to vote at the meeting.  The time and exact location of the annual meeting will be announced in the Company's proxy materials, which it expects to file with the U.S. Securities and Exchange Commission in late March 2016.

SELECTED FINANCIAL AND OPERATING DATA, SUPPLEMENTAL SCHEDULES AND DEFINITIONS

Following are tables that present selected financial and operating data of Hertz Global Holdings. 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 GLOBAL HOLDINGS

Hertz Global Holdings operates the Hertz, Dollar, Thrifty and Firefly car rental brands in approximately 9,980 corporate and licensee locations throughout approximately 150 countries in North America, Europe, Latin America, Asia, Australia, Africa, the Middle East and New Zealand. Hertz Global Holdings is the largest worldwide airport general use car rental company with approximately 1,635 airport locations in the U.S. and more than 1,320 airport locations internationally. Product and service initiatives such as Hertz Gold Plus Rewards, NeverLost®, Carfirmations, Mobile Wi-Fi and unique vehicles offered through the Adrenaline, Dream, Green and Prestige Collections set Hertz Global Holdings apart from the competition. Additionally, Hertz Global Holdings owns the vehicle leasing and fleet management leader Donlen Corporation, operates the Hertz 24/7 hourly car rental business in international markets and sells vehicles through its Rent2Buy program. The Company also owns Hertz Equipment Rental Corporation ("HERC"), one of the largest equipment rental businesses with approximately 280 locations worldwide offering a diverse line of equipment and tools for rent and sale. HERC primarily serves the construction, industrial, oil, gas, entertainment and government sectors. For more information about Hertz Global Holdings, 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. Among other items, such factors could include: any claims, investigations or proceedings arising as a result of the restatement of our previously issued financial results; our ability to remediate the material weaknesses in our 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 our proposed separation of our equipment rental business and ability to obtain the expected benefits of any related transaction; significant changes in the competitive environment, including as a result of industry consolidation, and the effect of competition in our markets on rental volume and pricing, including on our pricing policies or use of incentives; occurrences that disrupt rental activity during our peak periods; our ability to achieve and maintain cost savings and efficiencies and realize opportunities to increase productivity and profitability; an increase in our fleet costs as a result of an increase in the cost of new vehicles and/or a decrease in the price at which we dispose of used vehicles either in the used vehicle market or under repurchase or guaranteed depreciation programs; our ability to accurately estimate future levels of rental activity and adjust the size and mix of our fleet accordingly; our ability to maintain sufficient liquidity and the availability to us of additional or continued sources of financing for our revenue earning equipment and to refinance our existing indebtedness; our ability to realize the operational efficiencies of the acquisition of Dollar Thrifty; our ability to maintain access to third-party distribution channels, including current or favorable prices, commission structures and transaction volumes; an increase in our fleet costs or disruption to our rental activity, particularly during our peak periods, due to safety recalls by the manufacturers of our vehicles and equipment; a major disruption in our communication or centralized information networks; financial instability of the manufacturers of our vehicles and equipment, which could impact their ability to perform under agreements with us and/or their willingness or ability to make cars available to us or the car rental industry on commercially reasonable terms; any impact on us from the actions of our franchisees, dealers and independent contractors; our ability to maintain profitability 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; our ability to successfully integrate acquisitions and complete dispositions; our ability to maintain favorable brand recognition; costs and risks associated with litigation and investigations; risks related to our indebtedness, including our substantial amount of debt, our ability to incur substantially more debt and increases in interest rates or in our borrowing margins; our ability to meet the financial and other covenants contained in our Senior Credit Facilities, our outstanding unsecured Senior Notes and certain asset-backed and asset-based arrangements; changes in accounting principles, or their application or interpretation, and our ability to make accurate estimates and the assumptions underlying the estimates, which could have an effect on earnings; 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 our operations, the cost thereof or applicable tax rates; changes to our senior management team; the effect of tangible and intangible asset impairment charges; our exposure to uninsured claims in excess of historical levels; fluctuations in interest rates and commodity prices; and our exposure to fluctuations in foreign exchange rates.

Additional information concerning these and other factors can be found in our filings with the Securities and Exchange Commission, including our most recent Annual Report 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.