Hertz Global Holdings, Inc 10-Q for FY2020 Q1

Hertz Global Holdings, Inc (HTZ)

10-Q 2020-05-11 For: 2020-03-31

Added on April 11, 2026

About this 10-Q

Hertz Global Holdings, Inc filed this 10-Q on May 11, 2020, covering the quarter ended March 31, 2020 (FY2020 Q1).

Headline figures

Quarter ended March 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $1.92B; down 8.7% from $2.11B a year earlier
Net loss: $356M; compared with a net loss of $147M a year earlier
Diluted EPS: -$2.50; compared with -$1.54 a year earlier

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☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended		March 31, 2020
OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



Delaware	001-37665			61-1770902
Delaware	001-07541			13-1938568
(State or other jurisdiction of incorporation or organization)	(Commission File Number)			(I.R.S. Employer Identification No.)

	8501 Williams Road
	Estero,	Florida	33928
	239	301-7000
	(Address, including Zip Code, and telephone number, including area code, of registrant's principal executive offices)

	Not Applicable
	(Former name, former address and former fiscal year, if changed since last report.)



Securities registered pursuant to Section 12(b) of the Act:
	Title of each class		Trading Symbol(s)	Name of each exchange on which Registered
Hertz Global Holdings, Inc.	Common Stock	par value $0.01 per share	HTZ	New York Stock Exchange
The Hertz Corporation	None		None	None



Hertz Global Holdings, Inc.	Large accelerated filer	☒	Accelerated filer	☐	Non-accelerated filer	☐
	Smaller reporting company	☐	Emerging growth company	☐
	If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.			☐
The Hertz Corporation	Large accelerated filer	☐	Accelerated filer	☐	Non-accelerated filer	☒
	Smaller reporting company	☐	Emerging growth company	☐
	If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.			☐



	Class		Shares Outstanding as of	May 4, 2020
Hertz Global Holdings, Inc.	Common Stock,	par value $0.01 per share	142,285,475
The Hertz Corporation⁽¹⁾	Common Stock,	par value $0.01 per share	100
			⁽¹⁾(100% owned by Rental Car Intermediate Holdings, LLC)




		Page
PART I. FINANCIAL INFORMATION
ITEM 1.	Condensed Consolidated Financial Statements (Unaudited)	1
ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	32
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	53
ITEM 4.	Controls and Procedures	53
PART II. OTHER INFORMATION
ITEM 1.	Legal Proceedings	54
ITEM 1A.	Risk Factors	54
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	56
ITEM 3.	Defaults Upon Senior Securities	56
ITEM 5.	Other Information	56
ITEM 6.	Exhibits	57
SIGNATURE		58
EXHIBIT INDEX		59



		Page
Hertz Global Holdings, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019		2
Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2020 and 2019		3
Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2020 and 2019		4
Condensed Consolidated Statements of Changes in Stockholders' Equity for the Three Months Ended March 31, 2020 and 2019		5
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2020 and 2019		6
The Hertz Corporation and Subsidiaries
Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019		8
Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2020 and 2019		9
Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2020 and 2019		10
Condensed Consolidated Statements of Changes in Stockholder's Equity for the Three Months Ended March 31, 2020 and 2019		11
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2020 and 2019		12
Notes to the Condensed Consolidated Financial Statements
Note 1	Background	14
Note 2	Basis of Presentation and Recently Issued Accounting Pronouncements	15
Note 3	Divestitures	17
Note 4	Debt	17
Note 5	Leases	22
Note 6	Income Tax (Provision) Benefit	23
Note 7	Earnings (Loss) Per Share - Hertz Global	23
Note 8	Fair Value Measurements	24
Note 9	Contingencies and Off-Balance Sheet Commitments	25
Note 10	Related Party Transactions	27
Note 11	Segment Information	28



	March 31, 2020			December 31, 2019
ASSETS
Cash and cash equivalents	$	1,017		$	865
Restricted cash and cash equivalents:
Vehicle	368			466
Non-vehicle	24			29
Total restricted cash and cash equivalents	392			495
Total cash, cash equivalents, restricted cash and restricted cash equivalents	1,409			1,360
Receivables:
Vehicle	1,286			791
Non-vehicle, net of allowance of $31 and $35, respectively	809			1,049
Total receivables, net	2,095			1,840
Prepaid expenses and other assets	1,121			689
Revenue earning vehicles:
Vehicles	17,646			17,085
Less: accumulated depreciation	(3,337		)	(3,296		)
Total revenue earning vehicles, net	14,309			13,789
Property and equipment, net	765			757
Operating lease right-of-use assets	1,832			1,871
Intangible assets, net	3,231			3,238
Goodwill	1,080			1,083
Total assets^(a)	$	25,842		$	24,627
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable:
Vehicle	$	443		$	289
Non-vehicle	555			654
Total accounts payable	998			943
Accrued liabilities	982			1,032
Accrued taxes, net	133			150
Debt:
Vehicle	14,438			13,368
Non-vehicle	4,316			3,721
Total debt	18,754			17,089
Operating lease liabilities	1,844			1,848
Self-insured liabilities	532			553
Deferred income taxes, net	1,108			1,124
Total liabilities^(a)	24,351			22,739
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value, no shares issued and outstanding	—			—
Common stock, $0.01 par value, 144,308,001 and 144,153,444 shares issued, respectively and 142,279,069 and 142,124,512 shares outstanding, respectively	1			1
Additional paid-in capital	3,022			3,024
Accumulated deficit	(1,323		)	(967		)
Accumulated other comprehensive income (loss)	(228		)	(189		)
Treasury stock, at cost, 2,028,932 and 2,028,932 shares, respectively	(100		)	(100		)
Stockholders' equity attributable to Hertz Global	1,372			1,769
Noncontrolling interests	119			119
Total stockholders' equity	1,491			1,888
Total liabilities and stockholders' equity	$	25,842		$	24,627



	Three Months Ended March 31,
	2020			2019
Revenues:
Worldwide vehicle rental	$	1,749		$	1,953
All other operations	174			154
Total revenues	1,923			2,107
Expenses:
Direct vehicle and operating	1,241			1,266
Depreciation of revenue earning vehicles and lease charges	677			592
Selling, general and administrative	208			234
Interest expense, net:
Vehicle	118			112
Non-vehicle	57			71
Total interest expense, net	175			183
Other (income) expense, net	(17		)	(19		)
Total expenses	2,284			2,256
Income (loss) before income taxes	(361		)	(149		)
Income tax (provision) benefit	4			1
Net income (loss)	(357		)	(148		)
Net (income) loss attributable to noncontrolling interests	1			1
Net income (loss) attributable to Hertz Global	$	(356	)	$	(147	)
Weighted-average shares outstanding:
Basic	142			96
Diluted	142			96
Earnings (loss) per share:
Basic earnings (loss) per share	$	(2.50	)	$	(1.54	)
Diluted earnings (loss) per share	$	(2.50	)	$	(1.54	)



	Preferred Stock Shares	Common Stock Shares	Common Stock Amount		Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Treasury Stock Shares	Treasury Stock Amount			Stockholders' Equity Attributable to Hertz Global			Non- controlling Interests			Total Stockholders' Equity
Balance as of:	Preferred Stock Shares	Common Stock Shares	Common Stock Amount		Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Treasury Stock Shares	Treasury Stock Amount			Stockholders' Equity Attributable to Hertz Global			Non- controlling Interests			Total Stockholders' Equity
December 31, 2018	—	84	$	1	$	2,261		$	(909	)	$	(192	)	2	$	(100	)	$	1,061		$	59		$	1,120
Net income (loss)	—	—	—		—			(147		)	—			—	—			(147		)	(1		)	(148		)
Other comprehensive income (loss)	—	—	—		—			—			7			—	—			7			—			7
Net settlement on vesting of restricted stock	—	—	—		(2		)	—			—			—	—			(2		)	—			(2		)
Stock-based compensation charges	—	—	—		3			—			—			—	—			3			—			3
Contributions from noncontrolling interests	—	—	—		—			—			—			—	—			—			25			25
March 31, 2019	—	84	$	1	$	2,262		$	(1,056	)	$	(185	)	2	$	(100	)	$	922		$	83		$	1,005



Facility	Weighted-Average Interest Rate as of March 31, 2020	Fixed or Floating Interest Rate	Maturity	March 31, 2020			December 31, 2019
Non-Vehicle Debt
Senior Term Loan	3.74%	Floating	6/2023	$	656		$	660
Senior RCF	3.99%	Floating	6/2021	595			—
Senior Notes⁽¹⁾	6.11%	Fixed	10/2022-1/2028	2,700			2,700
Senior Second Priority Secured Notes	7.63%	Fixed	6/2022	350			350
Promissory Notes	7.00%	Fixed	1/2028	27			27
Other Non-Vehicle Debt	5.71%	Fixed	Various	21			18
Unamortized Debt Issuance Costs and Net (Discount) Premium				(33		)	(34		)
Total Non-Vehicle Debt				4,316			3,721
Vehicle Debt
HVF II U.S. ABS Program
HVF II U.S. Vehicle Variable Funding Notes
HVF II Series 2013-A⁽²⁾	2.71%	Floating	3/2022	4,704			2,644
				4,704			2,644
HVF II U.S. Vehicle Medium Term Notes
HVF II Series 2015-1⁽²⁾	N/A	Fixed	3/2020	—			780
HVF II Series 2015-3⁽²⁾	3.10%	Fixed	9/2020	371			371
HVF II Series 2016-2⁽²⁾	3.41%	Fixed	3/2021	595			595
HVF II Series 2016-4⁽²⁾	3.09%	Fixed	7/2021	424			424
HVF II Series 2017-1⁽²⁾	3.38%	Fixed	10/2020	450			450
HVF II Series 2017-2⁽²⁾	3.74%	Fixed	10/2022	370			350
HVF II Series 2018-1⁽²⁾	3.54%	Fixed	2/2023	1,058			1,000
HVF II Series 2018-2⁽²⁾	3.94%	Fixed	6/2021	213			200
HVF II Series 2018-3⁽²⁾	4.29%	Fixed	7/2023	213			200
HVF II Series 2019-1⁽²⁾	4.00%	Fixed	3/2022	745			700
HVF II Series 2019-2⁽²⁾	3.67%	Fixed	5/2024	799			750
HVF II Series 2019-3⁽²⁾	2.91%	Fixed	12/2024	800			800
				6,038			6,620
Donlen U.S. ABS Program
HFLF Variable Funding Notes
HFLF Series 2013-2⁽²⁾	2.56%	Floating	3/2022	450			286
				450			286
HFLF Medium Term Notes
HFLF Series 2016-1⁽³⁾	N/A	Both	1/2020-2/2020	—			34
HFLF Series 2017-1⁽³⁾	2.54%	Both	4/2020-2/2021	174			229
HFLF Series 2018-1⁽³⁾	2.78%	Both	4/2020-4/2022	401			462
HFLF Series 2019-1⁽³⁾	2.41%	Both	4/2020-1/2023	613			650
				1,188			1,375


(1)	References to the "Senior Notes" include the series of Hertz's unsecured senior notes set forth in the table below. Outstanding principal amounts for each such series of the Senior Notes is also specified below:



(In millions)	Outstanding Principal
Senior Notes	March 31, 2020		December 31, 2019
6.250% Senior Notes due October 2022	500		500
5.500% Senior Notes due October 2024	800		800
7.125% Senior Notes due August 2026	500		500
6.000% Senior Notes due January 2028	900		900
	$	2,700	$	2,700



(In millions)	Outstanding Principal
European Vehicle Notes	March 31, 2020		December 31, 2019
4.125% Senior Notes due October 2021	$	251	$	251
5.500% Senior Notes due March 2023	557		559
	$	808	$	810



(In millions)	Aggregate Principal Amount
HVF II Series 2017-2 Class D Notes	$	20
HVF II Series 2018-1 Class D Notes	58
HVF II Series 2018-2 Class D Notes	13
HVF II Series 2018-3 Class D Notes	13
HVF II Series 2019-1 Class D Notes	45
HVF II Series 2019-2 Class D Notes	49
Total	$	198


(1)	Reflects the impact of the Rights Offering subscription period.



(In millions)	Remaining Capacity		Availability Under Borrowing Base Limitation
Non-Vehicle Debt
Senior RCF	$	25	$	25
Letter of Credit Facility	5		5
Alternative Letter of Credit Facility	—		—
Total Non-Vehicle Debt	30		30
Vehicle Debt
U.S. Vehicle RCF	—		—
HVF II U.S. Vehicle Variable Funding Notes	151		—
HFLF Variable Funding Notes	50		9
European ABS	695		138
Hertz Canadian Securitization	37		—
Donlen Canadian Securitization	9		—
Australian Securitization	19		—
U.K. Financing Facility	110		—
New Zealand RCF	—		—
Total Vehicle Debt	1,071		147
Total	$	1,101	$	177



	Three Months Ended March 31,
(In millions, except per share data)	2020			2019
Numerator:
Net income (loss) attributable to Hertz Global	$	(356	)	$	(147	)
Denominator:
Basic weighted-average shares outstanding (excluding the impact of the Rights Offering)	142			84
Rights Offering adjustment⁽¹⁾	—			12
Basic weighted-average shares outstanding	142			96
Dilutive stock options, RSUs and PSUs	—			—
Diluted weighted-average shares outstanding	142			96
Antidilutive stock options, RSUs, PSUs and PSAs	2			2
Earnings (loss) per share:
Basic earnings (loss) per share	$	(2.50	)	$	(1.54	)
Diluted earnings (loss) per share	$	(2.50	)	$	(1.54	)



	As of March 31, 2020				As of December 31, 2019
(In millions)	Nominal Unpaid Principal Balance		Aggregate Fair Value⁽¹⁾		Nominal Unpaid Principal Balance		Aggregate Fair Value
Non-Vehicle Debt	$	4,349	$	2,872	$	3,755	$	3,840
Vehicle Debt	14,521		13,783		13,415		13,529
Total	$	18,870	$	16,655	$	17,170	$	17,369


(1)	The decrease in the aggregate fair value of the Company's debt is due to the impact from COVID-19, as disclosed in Note 1, "Background."


•	U.S. Rental Car ("U.S. RAC") - rental of vehicles (cars, crossovers, vans and light trucks), as well as sales of value-added services, in the U.S. and consists of the Company's U.S. operating segment;


•	All Other Operations - primarily consists of the Company's Donlen business, which provides vehicle leasing and fleet management services, together with other business activities which represent less than 1% of revenues and expenses of the segment.


(1)	The consolidated total assets of Hertz Global and Hertz as of March 31, 2020 and December 31, 2019 include total assets of VIEs of $1.1 billion and $1.3 billion, respectively, which can only be used to settle obligations of the VIEs. See "Special Purpose Entities" in Note 4, "Debt," and "767 Auto Leasing LLC" in Note 10, "Related Party Transactions," for further information.


(1)	Represents other reconciling items primarily consisting of general corporate expenses, non-vehicle interest expense, as well as other business activities.


(2)	Represents vehicle debt-related charges relating to the amortization of deferred financing costs and debt discounts and premiums.


(3)	Represents charges incurred under restructuring actions as defined in U.S. GAAP, excluding impairments and asset write-downs. Also includes restructuring related charges such as incremental costs incurred directly supporting business transformation initiatives.


(4)	Represents costs associated with the Company’s information technology and finance transformation programs, both of which are multi-year initiatives to upgrade and modernize the Company’s systems and processes.


•	Total Revenue Per Transaction Day ("Total RPD," also referred to as "pricing") - important key metric to 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") - important key metric to management and investors as it provides a measure of revenue productivity relative to the total number of vehicles in our fleet whether owned or leased ("Average Vehicles" or "fleet capacity").


•	Vehicle Utilization - important key metric to management and investors because it is the measurement of the proportion of our vehicles that are being used to generate revenues relative to fleet capacity. Higher Vehicle Utilization means more vehicles are being utilized to generate revenues.


◦	Reservation bookings are significantly behind where they have historically been for the spring and summer months, our peak season, and we anticipate a material adverse impact on our results of operations on a portion or all of our peak season. This is a result of the decrease in business and leisure travel because of COVID-19, and the duration of this pandemic is unclear.


◦	The pandemic has had a substantial reduction to airline travel and a large portion of our business is generated at airport locations. Consequently, we anticipate a material adverse impact on our results of operations until such travel returns to historical levels.


◦	We expect a material reduction in our commitments to purchase vehicles with approximately a $4.0 billion reduction from original commitments in our U.S. RAC segment during the remainder of 2020.


◦	We leveraged our ability to accelerate the timing for the return of program vehicles in order to reduce fleet; and in March 2020, we returned approximately 24,000 program vehicles in our U.S. RAC segment compared to 6,000 program vehicles in March of 2019.


◦	The downturn in our rental car business has resulted in excess fleet, which we must park in certain overflow parking areas.


•	All other operations revenues - revenues from vehicle leasing and fleet management services by our Donlen business and other business activities.