Table of Contents


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________________________________________________________________
FORM 10-Q
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2019
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

HERTZ GLOBAL HOLDINGS, INC.
THE HERTZ CORPORATION
(Exact name of registrant as specified in its charter)
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.)
 
 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Hertz Global Holdings, Inc.    Yes  x  No  o
The Hertz Corporation    Yes  x  No  o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Hertz Global Holdings, Inc.    Yes  x  No  o
The Hertz Corporation    Yes  x  No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Hertz Global Holdings, Inc.
Large accelerated filer 
x
Accelerated filer 
o
Non-accelerated filer
o

 
Smaller reporting company 
o
Emerging growth company
o
 
 
 
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.
o
 
 
The Hertz Corporation
Large accelerated filer 
o
Accelerated filer 
o
Non-accelerated filer
x
 
Smaller reporting company 
o
Emerging growth company
o
 
 
 
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.
o
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Hertz Global Holdings, Inc.    Yes  o  No  x
The Hertz Corporation    Yes  o  No  x
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

Indicate the number of shares outstanding as of the latest practicable date.
 
 
Class
 
Shares Outstanding at
April 29, 2019
Hertz Global Holdings, Inc.
 
Common Stock, par value $0.01 per share
 
84,119,340
The Hertz Corporation
 
Common Stock, par value $0.01 per share
 
100 (100% owned by
Rental Car Intermediate Holdings, LLC)
 
 
 
 
 
 

Table of Contents
HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES

TABLE OF CONTENTS

 
 
 
 
 
Page
 
 

Table of Contents
HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES

PART I. FINANCIAL INFORMATION
ITEM 1.    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Index

 
 
Page
Hertz Global Holdings, Inc. and Subsidiaries
 
The Hertz Corporation and Subsidiaries
 
Notes to the Condensed Consolidated Financial Statements
 


1

Table of Contents



HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited
(In millions, except par value)
 
March 31,
2019
 
December 31,
2018
ASSETS
 
 
 
Cash and cash equivalents
$
554

 
$
1,127

Restricted cash and cash equivalents:
 
 
 
Vehicle
425

 
257

Non-vehicle
27

 
26

Total restricted cash and cash equivalents
452

 
283

Total cash, cash equivalents, restricted cash and restricted cash equivalents
1,006

 
1,410

Receivables:
 
 
 
Vehicle
583

 
625

Non-vehicle, net of allowance of $27 and $27, respectively
980

 
962

Total receivables, net
1,563

 
1,587

Prepaid expenses and other assets
1,107

 
902

Revenue earning vehicles:
 
 
 
Vehicles
16,979

 
15,703

Less: accumulated depreciation
(3,211
)
 
(3,284
)
Total revenue earning vehicles, net
13,768

 
12,419

Property and equipment, net
771

 
778

Operating lease right-of-use assets
1,514

 
—

Intangible assets, net
3,218

 
3,203

Goodwill
1,083

 
1,083

Total assets (a)
$
24,030

 
$
21,382

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Accounts payable:
 
 
 
Vehicle
$
649

 
$
284

Non-vehicle
630

 
704

Total accounts payable
1,279

 
988

Accrued liabilities
1,330

 
1,304

Accrued taxes, net
146

 
136

Debt:
 
 
 
Vehicle
12,827

 
11,902

Non-vehicle
4,430

 
4,422

Total debt
17,257

 
16,324

Operating lease liabilities
1,513

 
—

Public liability and property damage
411

 
418

Deferred income taxes, net
1,089

 
1,092

Total liabilities (a)
23,025

 
20,262

Commitments and contingencies


 


Stockholders' equity:
 
 
 
Preferred stock, $0.01 par value, no shares issued and outstanding
—

 
—

Common stock, $0.01 par value, 86 and 86 shares issued, respectively and 84 and 84 shares outstanding, respectively
1

 
1

Additional paid-in capital
2,262

 
2,261

Accumulated deficit
(1,056
)
 
(909
)
Accumulated other comprehensive income (loss)
(185
)
 
(192
)
Treasury stock, at cost, 2 shares and 2 shares, respectively
(100
)
 
(100
)
Stockholders' equity attributable to Hertz Global
922

 
1,061

Noncontrolling interests
83

 
59

Total stockholders' equity
1,005

 
1,120

Total liabilities and stockholders' equity
$
24,030

 
$
21,382

(a)
Hertz Global Holdings, Inc.'s consolidated total assets as of March 31, 2019 and December 31, 2018 include total assets of variable interest entities (“VIEs”) of $1.1 billion and $1.0 billion , respectively, which can only be used to settle obligations of the VIEs. Hertz Global Holdings, Inc.'s consolidated total liabilities as of March 31, 2019 and December 31, 2018 include total liabilities of VIEs of $1.0 billion and $947 million , respectively, for which the creditors of the VIEs have no recourse to Hertz Global Holdings, Inc. See "Special Purpose Entities" in Note 3 , " Debt ," and "Other Relationships" in Note 9 , " Related Party Transactions ," for further information.

The accompanying notes are an integral part of these financial statements.

2

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(In millions, except per share data)
 
Three Months Ended
March 31,
 
2019
 
2018
Revenues:
 
 
 
Worldwide vehicle rental
$
1,953

 
$
1,894

All other operations
154

 
169

Total revenues
2,107

 
2,063

Expenses:
 
 
 
Direct vehicle and operating
1,266

 
1,236

Depreciation of revenue earning vehicles and lease charges
592

 
661

Selling, general and administrative
234

 
234

Interest expense, net:
 
 
 
Vehicle
112

 
94

Non-vehicle
71

 
72

Total interest expense, net
183

 
166

Other (income) expense, net
(19
)
 
(3
)
Total expenses
2,256

 
2,294

Income (loss) before income taxes
(149
)
 
(231
)
Income tax (provision) benefit
1

 
29

Net income (loss)
(148
)
 
(202
)
Net (income) loss attributable to noncontrolling interests
1

 
—

Net income (loss) attributable to Hertz Global
$
(147
)
 
$
(202
)
Weighted average shares outstanding:
 
 
 
Basic
84

 
83

Diluted
84

 
83

Earnings (loss) per share:
 
 
 
Basic earnings (loss) per share
$
(1.75
)
 
$
(2.43
)
Diluted earnings (loss) per share
$
(1.75
)
 
$
(2.43
)



The accompanying notes are an integral part of these financial statements.

3

Table of Contents


HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Unaudited
(In millions)
 
Three Months Ended
March 31,
 
2019
 
2018
Net income (loss)
$
(148
)
 
$
(202
)
Other comprehensive income (loss):
 
 
 
Foreign currency translation adjustments
8

 
—

Net gain (loss) on defined benefit pension plans
(1
)

(3
)
Reclassification from other comprehensive income (loss) to other (income) expense for amortization of actuarial (gains) losses on defined benefit pension plans
1

 
—

Total other comprehensive income (loss) before income taxes
8

 
(3
)
Income tax (provision) benefit related to reclassified amounts of net periodic costs on defined benefit pension plans
(1
)
 
—

Total other comprehensive income (loss)
7

 
(3
)
Total comprehensive income (loss)
(141
)
 
(205
)
Comprehensive (income) loss attributable to noncontrolling interests
1

 
—

Comprehensive income (loss) attributable to Hertz Global
$
(140
)
 
$
(205
)

The accompanying notes are an integral part of these financial statements.

4

Table of Contents


HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Unaudited
(In millions)
 
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:
 
 
 
 
 
December 31, 2017
—

 
84

 
$
1

 
$
2,243

 
$
(506
)
 
$
(118
)
 
2

 
$
(100
)
 
$
1,520

 
$
—

 
$
1,520

Change in accounting principle
—

 
—

 
—

 
—

 
(189
)
 
—

 
—

 
—

 
(189
)
 
—

 
(189
)
January 1, 2018 (as adjusted)
—

 
84

 
1

 
2,243

 
(695
)
 
(118
)
 
2

 
(100
)
 
1,331

 
—

 
1,331

Net income (loss)
—

 
—

 
—

 
—

 
(202
)
 
—

 
—

 
—

 
(202
)
 
—

 
(202
)
Other comprehensive income (loss)
—

 
—

 
—

 
—

 
—

 
(3
)
 
—

 
—

 
(3
)
 
—

 
(3
)
Net settlement on vesting of restricted stock
—

 
—

 
—

 
(3
)
 
—

 
—

 
—

 
—

 
(3
)
 
—

 
(3
)
Stock-based compensation charges
—

 
—

 
—

 
10

 
—

 
—

 
—

 
—

 
10

 
—

 
10

Contributions from noncontrolling interests
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
5

 
5

March 31, 2018
—

 
84

 
$
1

 
$
2,250

 
$
(897
)
 
$
(121
)
 
2

 
$
(100
)
 
$
1,133

 
$
5

 
$
1,138

 
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:
 
 
 
 
 
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




The accompanying notes are an integral part of these financial statements.

5

Table of Contents
HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(In millions)


 
Three Months Ended
March 31,
 
2019
 
2018
Cash flows from operating activities:
 
 
 
Net income (loss)
$
(148
)
 
$
(202
)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
 
 
 
Depreciation and reserves for revenue earning vehicles
644

 
641

Depreciation and amortization, non-vehicle
48

 
58

Amortization of deferred financing costs and debt discount (premium)
14

 
13

Stock-based compensation charges
3

 
3

Provision for receivables allowance
10

 
9

Deferred income taxes, net
(4
)
 
(36
)
(Gain) loss on marketable securities
(11
)
 
—

Other
(13
)
 
4

Changes in assets and liabilities:
 
 
 
Non-vehicle receivables
(33
)
 
(107
)
Prepaid expenses and other assets
(55
)
 
(64
)
Operating lease right-of-use assets
90

 
—

Non-vehicle accounts payable
32

 
73

Accrued liabilities
28

 
4

Accrued taxes, net
10

 
2

Operating lease liabilities
(94
)
 
—

Public liability and property damage
(7
)
 
3

Net cash provided by (used in) operating activities
514

 
401

Cash flows from investing activities:
 
 
 
Revenue earning vehicles expenditures
(3,973
)
 
(3,565
)
Proceeds from disposal of revenue earning vehicles
2,153

 
1,782

Capital asset expenditures, non-vehicle
(54
)
 
(44
)
Proceeds from property and other equipment disposed of or to be disposed of
19

 
4

Other
—

 
(27
)
Net cash provided by (used in) investing activities
(1,855
)
 
(1,850
)

The accompanying notes are an integral part of these financial statements.

6

Table of Contents
HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(In millions)


 
Three Months Ended
March 31,
 
2019
 
2018
Cash flows from financing activities:
 
 
 
Proceeds from issuance of vehicle debt
3,667

 
5,181

Repayments of vehicle debt
(2,736
)
 
(3,283
)
Proceeds from issuance of non-vehicle debt
341

 
127

Repayments of non-vehicle debt
(344
)
 
(131
)
Payment of financing costs
(12
)
 
(19
)
Contributions from noncontrolling interests
25

 
5

Other
(2
)
 
(3
)
Net cash provided by (used in) financing activities
939

 
1,877

Effect of foreign currency exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents
(2
)
 
8

Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents during the period
(404
)
 
436

Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period
1,410

 
1,504

Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period
$
1,006

 
$
1,940

 


 


Supplemental disclosures of cash flow information:
 
 
 
Cash paid during the period for:
 
 
 
Interest, net of amounts capitalized:
 
 
 
Vehicle
$
87

 
$
82

Non-vehicle
29

 
28

Income taxes, net of refunds
6

 
6

Operating lease liabilities
140

 
—

Supplemental disclosures of non-cash information:
 
 
 
Purchases of revenue earning vehicles included in accounts payable and accrued liabilities, net of incentives
$
431

 
$
613

Sales of revenue earning vehicles included in receivables
365

 
268

Sales of revenue earning vehicles included in other receivables
78

 
—

Purchases of non-vehicle capital assets included in accounts payable
45

 
42

Operating lease right-of-use assets obtained in exchange for lease liabilities
20

 
—




The accompanying notes are an integral part of these financial statements.

7

Table of Contents



THE HERTZ CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited
(In millions, except par value and share data)
 
March 31,
2019
 
December 31,
2018
ASSETS
 
 
 
Cash and cash equivalents
$
554

 
$
1,127

Restricted cash and cash equivalents:
 
 
 
Vehicle
425

 
257

Non-vehicle
27

 
26

Total restricted cash and cash equivalents
452

 
283

Total cash, cash equivalents, restricted cash and restricted cash equivalents
1,006

 
1,410

Receivables:
 
 
 
Vehicle
583

 
625

Non-vehicle, net of allowance of $27 and $27, respectively
980

 
962

Total receivables, net
1,563

 
1,587

Prepaid expenses and other assets
1,107

 
902

Revenue earning vehicles:
 
 
 
Vehicles
16,979

 
15,703

Less: accumulated depreciation
(3,211
)
 
(3,284
)
Total revenue earning vehicles, net
13,768

 
12,419

Property and equipment, net
771

 
778

Operating lease right-of-use assets
1,514

 
—

Intangible assets, net
3,218

 
3,203

Goodwill
1,083

 
1,083

Total assets (a)
$
24,030

 
$
21,382

LIABILITIES AND STOCKHOLDER'S EQUITY
 
 
 
Accounts payable:
 
 
 
Vehicle
$
649

 
$
284

Non-vehicle
630

 
704

Total accounts payable
1,279

 
988

Accrued liabilities
1,330

 
1,304

Accrued taxes, net
146

 
136

Debt:
 
 
 
Vehicle
12,827

 
11,902

Non-vehicle
4,430

 
4,422

Total debt
17,257

 
16,324

Operating lease liabilities
1,513

 
—

Public liability and property damage
411

 
418

Deferred income taxes, net
1,091

 
1,094

Total liabilities (a)
23,027

 
20,264

Commitments and contingencies


 


Stockholder's equity:
 
 
 
Common stock, $0.01 par value, 100 and 100 shares issued and outstanding, respectively
—

 
—

Additional paid-in capital
3,190

 
3,187

Due from affiliate
(56
)
 
(52
)
Accumulated deficit
(2,029
)
 
(1,884
)
Accumulated other comprehensive income (loss)
(185
)
 
(192
)
Stockholder's equity attributable to Hertz
920

 
1,059

Noncontrolling interests
83

 
59

Total stockholder's equity
1,003

 
1,118

Total liabilities and stockholder's equity
$
24,030

 
$
21,382

(a)
The Hertz Corporation's consolidated total assets as of March 31, 2019 and December 31, 2018 include total assets of variable interest entities (“VIEs”) of $1.1 billion and $1.0 billion , respectively, which can only be used to settle obligations of the VIEs. The Hertz Corporation's consolidated total liabilities as of March 31, 2019 and December 31, 2018 include total liabilities of VIEs of $1.0 billion and $947 million , respectively, for which the creditors of the VIEs have no recourse to The Hertz Corporation. See "Special Purpose Entities" in Note 3 , " Debt ," and "Other Relationships" in Note 9 , " Related Party Transactions ," for further information.

The accompanying notes are an integral part of these financial statements.

8

Table of Contents


THE HERTZ CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(In millions)
 
Three Months Ended
March 31,
 
2019
 
2018
Revenues:
 
 
 
Worldwide vehicle rental
$
1,953

 
$
1,894

All other operations
154

 
169

Total revenues
2,107

 
2,063

Expenses:
 

 
 

Direct vehicle and operating
1,266

 
1,236

Depreciation of revenue earning vehicles and lease charges
592

 
661

Selling, general and administrative
234

 
234

Interest expense, net:
 
 
 
Vehicle
112

 
94

Non-vehicle
69

 
71

Total interest expense, net
181

 
165

Other (income) expense, net
(19
)
 
(3
)
Total expenses
2,254

 
2,293

Income (loss) before income taxes
(147
)
 
(230
)
Income tax (provision) benefit
1

 
29

Net income (loss)
(146
)
 
(201
)
Net (income) loss attributable to noncontrolling interests
1

 
—

Net income (loss) attributable to Hertz
$
(145
)
 
$
(201
)


The accompanying notes are an integral part of these financial statements.

9

Table of Contents


THE HERTZ CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Unaudited
(In millions)
 
Three Months Ended
March 31,
 
2019
 
2018
Net income (loss)
$
(146
)
 
$
(201
)
Other comprehensive income (loss):
 
 
 
Foreign currency translation adjustments
8

 
—

Net gain (loss) on defined benefit pension plans
(1
)
 
(3
)
Reclassification from other comprehensive income (loss) to other (income) expense for amortization of actuarial (gains) losses on defined benefit pension plans
1

 
—

Total other comprehensive income (loss) before income taxes
8

 
(3
)
Income tax (provision) benefit related to reclassified amounts of net periodic costs on defined benefit pension plans
(1
)
 
—

Total other comprehensive income (loss)
7

 
(3
)
Total comprehensive income (loss)
(139
)
 
(204
)
Comprehensive (income) loss attributable to noncontrolling interests
1

 
—

Comprehensive income (loss) attributable to Hertz
$
(138
)
 
$
(204
)

The accompanying notes are an integral part of these financial statements.

10

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THE HERTZ CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
Unaudited
(In millions, except share data)
 
Common Stock Shares
 
Common Stock Amount
 
Additional
Paid-In Capital
 
Due From Affiliate
 
Accumulated
Deficit
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Stockholder's Equity Attributable to Hertz
 
Noncontrolling Interests
 
Total Stockholder's Equity
Balance at:
 
 
 
 
 
 
 
December 31, 2017
100

 
$
—

 
$
3,166

 
$
(42
)
 
$
(1,486
)
 
$
(118
)
 
$
1,520

 
$
—

 
$
1,520

Change in accounting principle
—

 
—

 
—

 
—

 
(189
)
 
—

 
(189
)
 
—

 
(189
)
January 1, 2018 (as adjusted)
100

 
—

 
3,166

 
(42
)
 
(1,675
)
 
(118
)
 
1,331

 
—

 
1,331

Net income (loss)
—

 
—

 
—

 
—

 
(201
)
 
—

 
(201
)
 
—

 
(201
)
Due from Hertz Holdings
—

 
—

 
—

 
(4
)
 
—

 
—

 
(4
)
 
—

 
(4
)
Other comprehensive income (loss)
—

 
—

 
—

 
—

 
—

 
(3
)
 
(3
)
 
—

 
(3
)
Stock-based compensation charges
—

 
—

 
10

 
—

 
—

 
—

 
10

 
—

 
10

Contributions from noncontrolling interests
—

 
—

 
—

 
—

 
—

 
—

 
—

 
5

 
5

March 31, 2018
100

 
$
—

 
$
3,176

 
$
(46
)
 
$
(1,876
)
 
$
(121
)
 
$
1,133

 
$
5

 
$
1,138

 
Common Stock Shares
 
Common Stock Amount
 
Additional
Paid-In Capital
 
Due From Affiliate
 
Accumulated
Deficit
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Stockholder's Equity Attributable to Hertz
 
Noncontrolling Interests
 
Total Stockholder's Equity
Balance at:
 
 
 
 
 
 
 
December 31, 2018
100

 
$
—

 
$
3,187

 
$
(52
)
 
$
(1,884
)
 
$
(192
)
 
$
1,059

 
$
59

 
$
1,118

Net income (loss)
—

 
—

 
—

 
—

 
(145
)
 
—

 
(145
)
 
(1
)
 
(146
)
Due from Hertz Holdings
—

 
—

 
—

 
(4
)
 
—

 
—

 
(4
)
 
—

 
(4
)
Other comprehensive income (loss)
—

 
—

 
—

 
—

 
—

 
7

 
7

 
—

 
7

Stock-based compensation charges
—

 
—

 
3

 
—

 
—

 
—

 
3

 
—

 
3

Contributions from noncontrolling interests
—

 
—

 
—

 
—

 
—

 
—

 
—

 
25

 
25

March 31, 2019
100

 
$
—

 
$
3,190

 
$
(56
)
 
$
(2,029
)
 
$
(185
)
 
$
920

 
$
83

 
$
1,003




The accompanying notes are an integral part of these financial statements.

11

Table of Contents
THE HERTZ CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(In millions)

 
Three Months Ended
March 31,
 
2019
 
2018
Cash flows from operating activities:
 
 
 
Net income (loss)
$
(146
)
 
$
(201
)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
 
 
 
Depreciation and reserves for revenue earning vehicles
644

 
641

Depreciation and amortization, non-vehicle
48

 
58

Amortization of deferred financing costs and debt discount (premium)
14

 
13

Stock-based compensation charges
3

 
3

Provision for receivables allowance
10

 
9

Deferred income taxes, net
(4
)
 
(36
)
(Gain) loss on marketable securities
(11
)
 
—

Other
(13
)
 
4

Changes in assets and liabilities:
 

 
 

Non-vehicle receivables
(33
)
 
(107
)
Prepaid expenses and other assets
(55
)
 
(64
)
Operating lease right-of-use assets
90

 
—

Non-vehicle accounts payable
32

 
73

Accrued liabilities
28

 
4

Accrued taxes, net
10

 
2

Operating lease liabilities
(94
)
 
—

Public liability and property damage
(7
)
 
3

Net cash provided by (used in) operating activities
516

 
402

Cash flows from investing activities:
 

 
 

Revenue earning vehicles expenditures
(3,973
)
 
(3,565
)
Proceeds from disposal of revenue earning vehicles
2,153

 
1,782

Capital asset expenditures, non-vehicle
(54
)
 
(44
)
Proceeds from property and other equipment disposed of or to be disposed of
19

 
4

Other
—

 
(27
)
Net cash provided by (used in) investing activities
(1,855
)
 
(1,850
)

The accompanying notes are an integral part of these financial statements.

12

Table of Contents
THE HERTZ CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(In millions)

 
Three Months Ended
March 31,
 
2019
 
2018
Cash flows from financing activities:
 
 
 
Proceeds from issuance of vehicle debt
3,667

 
5,181

Repayments of vehicle debt
(2,736
)
 
(3,283
)
Proceeds from issuance of non-vehicle debt
341

 
127

Repayments of non-vehicle debt
(344
)
 
(131
)
Payment of financing costs
(12
)
 
(19
)
Advances to Hertz Holdings
(4
)
 
(4
)
Contributions from noncontrolling interests
25

 
5

Net cash provided by (used in) financing activities
937

 
1,876

Effect of foreign currency exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents
(2
)
 
8

Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents during the period
(404
)
 
436

Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period
1,410

 
1,504

Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period
$
1,006

 
$
1,940

 
 
 
 
Supplemental disclosures of cash flow information:
 
 
 
Cash paid during the period for:
 
 
 
Interest, net of amounts capitalized:
 
 
 
Vehicle
$
87

 
$
82

Non-vehicle
29

 
28

Income taxes, net of refunds
6

 
6

Operating lease liabilities
140

 
—

Supplemental disclosures of non-cash information:
 

 
 

Purchases of revenue earning vehicles included in accounts payable and accrued liabilities, net of incentives
$
431

 
$
613

Sales of revenue earning vehicles included in receivables
365

 
268

Sales of revenue earning vehicles included in other receivables
78

 
—

Purchases of non-vehicle capital assets included in accounts payable
45

 
42

Operating lease right-of-use assets obtained in exchange for lease liabilities
20

 
—




 


The accompanying notes are an integral part of these financial statements.

13

Table of Contents
HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited


Note 1 — Background

Hertz Global Holdings, Inc. ("Hertz Global" when including its subsidiaries and VIEs and "Hertz Holdings" excluding its subsidiaries and VIEs) was incorporated in Delaware in 2015 to serve as the top-level holding company for Rental Car Intermediate Holdings, LLC, which wholly owns The Hertz Corporation ("Hertz" and interchangeably with Hertz Global, the "Company"), Hertz Global's primary operating company. Hertz was incorporated in Delaware in 1967 and is a successor to corporations that have been engaged in the vehicle rental and leasing business since 1918. Hertz operates its vehicle rental business globally primarily through the Hertz, Dollar and Thrifty brands from company-owned, licensee and franchisee locations in the United States ("U.S."), Africa, Asia, Australia, Canada, the Caribbean, Europe, Latin America, the Middle East and New Zealand. Through its Donlen subsidiary, Hertz provides vehicle leasing and fleet management services.

Note 2 — Basis of Presentation and Recently Issued Accounting Pronouncements

Basis of Presentation

This Quarterly Report on Form 10-Q combines the quarterly reports on Form 10-Q for the quarterly period ended March 31, 2019 of Hertz Global and Hertz. Hertz Global consolidates Hertz for financial statement purposes, therefore, disclosures that relate to activities of Hertz also apply to Hertz Global. In the sections that combine disclosure of Hertz Global and Hertz, this report refers to actions as being actions of the Company, or Hertz Global, which is appropriate because the business is one enterprise and Hertz Global operates the business through Hertz. When appropriate, Hertz Global and Hertz are named specifically for their individual disclosures and any significant differences between the operations and results of Hertz Global and Hertz are separately disclosed and explained.

The Company's unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”). In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments of a normal recurring nature that are necessary for a fair presentation of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and footnotes. Actual results could differ materially from those estimates.

The December 31, 2018 unaudited condensed consolidated balance sheet data is derived from audited financial statements but does not include all disclosures required by U.S. GAAP. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with information included in the Company's Form 10‑K for the year ended December 31, 2018 (the "2018 Form 10‑K"), as filed with the Securities and Exchange Commission ("SEC") on February 25, 2019.

Principles of Consolidation

The unaudited condensed consolidated financial statements of Hertz Global include the accounts of Hertz Global and its wholly owned and majority owned U.S. and international subsidiaries, and its VIEs, as applicable. The unaudited condensed consolidated financial statements of Hertz include the accounts of Hertz, its wholly owned and majority owned U.S. and international subsidiaries, and its VIEs, as applicable. The Company consolidates a VIE when it is deemed the primary beneficiary. The Company accounts for its investment in joint ventures using the equity method when it has significant influence but not control and is not the primary beneficiary. All significant intercompany transactions have been eliminated in consolidation.


14

Table of Contents
HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited

Recently Issued Accounting Pronouncements

Adopted

Leases

In February 2016, the Financial Accounting Standards Board (the "FASB") issued guidance that replaced the existing lease guidance in U.S. GAAP and in 2018 and 2019 issued amendments and updates to the new lease standard (collectively "Topic 842"). Topic 842 established a right-of-use (“ROU”) model that requires a lessee to record on the balance sheet a ROU asset and corresponding lease liability based on the present value of future lease payments. Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. Topic 842 also expanded the requirements for lessees to record leases embedded in other arrangements. Additionally, enhanced quantitative and qualitative disclosures surrounding leases are required which provide financial statement users the ability to assess the amount, timing and uncertainty of cash flows arising from leases.

The Company adopted this guidance effective January 1, 2019 using a simplified transition approach for both lessees and lessors. Prior periods have not been retrospectively adjusted and are in conformance with the then existing guidance under U.S. GAAP ("Topic 840"). The Company utilized the package of practical expedients for existing or expired contracts and did not reassess whether such contracts contain leases, the lease classification or the initial direct costs. Additionally, the Company utilized the historical lease term and did not utilize the practical expedient allowing the use of hindsight in determining the lease term and in assessing impairment of its ROU assets. To determine the present value of its lease payments as of January 1, 2019, the Company utilized the interest rate implicit in the lease agreement. If the implicit interest rate was not provided in the lease agreement, the Company utilized the Company's collateralized incremental borrowing rate as of January 1, 2019. Also, with respect to the Company's real estate leases, vehicle leases and fleet leases, the Company availed itself of the practical expedient for lessees and lessors and elected an accounting policy by class of underlying asset to combine lease and non-lease components.

As of January 1, 2019, the Company accounts for revenue earned from vehicle rentals and rental related activities wherein an identified asset is transferred to the customer and the customer has the ability to control that asset under Topic 842. Prior to the adoption of Topic 842, the Company accounted for such revenue under Revenue from Contracts with Customers ("Topic 606").

The cumulative effect of applying the new guidance to all leases as of January 1, 2019 that were not completed and with lease terms in excess of twelve months has been recorded as of the adoption date as follows:

Hertz Global
(In millions)
Operating Lease Right-of-Use Assets
 
Prepaid and Other Assets
 
Total Assets
 
Operating Lease Liabilities
 
Accrued Liabilities
 
Total Liabilities
 
Total Liabilities and Stockholders' Equity
As of December 31, 2018
$
—

 
$
902

 
$
21,382

 
$
—

 
$
1,304

 
$
20,262

 
$
21,382

Effect of Adopting Topic 842
1,585

 
(45
)
 
1,540

 
1,588

 
(48
)
 
1,540

 
1,540

As of January 1, 2019
$
1,585

 
$
857

 
$
22,922

 
$
1,588

 
$
1,256

 
$
21,802

 
$
22,922


15

Table of Contents
HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited


Hertz
(In millions)
Operating Lease Right-of-Use Assets
 
Prepaid and Other Assets
 
Total Assets
 
Operating Lease Liabilities
 
Accrued Liabilities
 
Total Liabilities
 
Total Liabilities and Stockholder's Equity
As of December 31, 2018
$
—

 
$
902

 
$
21,382

 
$
—

 
$
1,304

 
$
20,264

 
$
21,382

Effect of Adopting Topic 842
1,585

 
(45
)
 
1,540

 
1,588

 
(48
)
 
1,540

 
1,540

As of January 1, 2019
$
1,585

 
$
857

 
$
22,922

 
$
1,588

 
$
1,256

 
$
21,804

 
$
22,922


Adoption of Topic 842 did not impact the Company's results of operations or cash flows. See Note 4 , " Leases ," for information regarding the Company’s accounting policies for leases, as well as other required disclosures under Topic 842.

Not Yet Adopted

Changes to Disclosure Requirements for Defined Benefit Plans

In August 2018, the FASB issued guidance that modifies disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans to remove disclosures no longer considered cost beneficial, add disclosures identified as relevant and clarify certain disclosure requirements. The guidance is effective for annual periods beginning after December 15, 2020 using a retrospective transition method. Early adoption is permitted. The Company is in the process of determining the timing of adoption and assessing the overall impact of adopting this guidance on its disclosures.

Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement

In August 2018, the FASB issued guidance on a customer's accounting for implementation fees paid in a cloud computing service contract arrangement that addresses which implementation costs to capitalize as an asset and which costs to expense. Capitalized implementation fees are to be expensed over the term of the cloud computing arrangement, and the expense is required to be recognized in the same line item in the income statement as the associated hosting service expenses. The entity is also required to present the capitalized implementation fees on the balance sheet in the same line item as the prepayment for hosting service fees associated with the cloud computing arrangement.

The guidance is effective for annual periods beginning after December 15, 2019, and interim periods within those annual periods using a retrospective or prospective transition method. Early adoption is permitted, including adoption in any interim period. The Company intends to adopt this guidance when effective, on January 1, 2020, using a prospective transition method and is in the process of assessing the overall impact of adopting this guidance on its financial position, results of operations and cash flows.
  
Note 3 — Debt

The Company's debt, including its available credit facilities, consists of the following ($ in millions):
Facility
 
Weighted Average Interest Rate
as of
March 31, 2019
 
Fixed or
Floating
Interest
Rate
 
Maturity
 
March 31,
2019
 
December 31,
2018
Non-Vehicle Debt
 
 
 
 
 
 
 
 
 
 
Senior Term Loan
 
5.25%
 
Floating
 
6/2023
 
$
670

 
$
674

Senior RCF
 
N/A
 
Floating
 
6/2021
 
—

 
—


16

Table of Contents
HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited

Facility
 
Weighted Average Interest Rate
as of
March 31, 2019
 
Fixed or
Floating
Interest
Rate
 
Maturity
 
March 31,
2019
 
December 31,
2018
Senior Notes (1)
 
6.13%
 
Fixed
 
10/2020-10/2024
 
2,500

 
2,500

Senior Second Priority Secured Notes
 
7.63%
 
Fixed
 
6/2022
 
1,250

 
1,250

Promissory Notes
 
7.00%
 
Fixed
 
1/2028
 
27

 
27

Other Non-Vehicle Debt
 
6.14%
 
Fixed
 
Various
 
13

 
4

Unamortized Debt Issuance Costs and Net (Discount) Premium
 
 
 
 
 
 
 
(30
)
 
(33
)
Total Non-Vehicle Debt
 
 
 
 
 
 
 
4,430

 
4,422

Vehicle Debt
 
 
 
 
 
 
 
 
 
 
HVF II U.S. ABS Program
 
 
 
 
 
 
 
 
 
 
HVF II U.S. Vehicle Variable Funding Notes
 
 
 
 
 
 
 
 
HVF II Series 2013-A (2)
 
3.67%
 
Floating
 
3/2021
 
3,570

 
2,940

HVF II Series 2019-A (2)
 
N/A
 
Floating
 
10/2019
 
—

 
—

 
 
 
 
 
 
 
 
3,570

 
2,940

HVF II U.S. Vehicle Medium Term Notes
 
 
 
 
 
 
 
 
HVF II Series 2015-1 (2)
 
2.93%
 
Fixed
 
3/2020
 
780

 
780

HVF II Series 2015-3 (2)
 
3.10%
 
Fixed
 
9/2020
 
371

 
371

HVF II Series 2016-1 (2)
 
N/A
 
N/A
 
N/A
 
—

 
466

HVF II Series 2016-2 (2)
 
3.41%
 
Fixed
 
3/2021
 
595

 
595

HVF II Series 2016-3 (2)
 
2.72%
 
Fixed
 
7/2019
 
424

 
424

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)
 
3.57%
 
Fixed
 
10/2022
 
350

 
350

HVF II Series 2018-1 (2)
 
3.41%
 
Fixed
 
2/2023
 
1,000

 
1,000

HVF II Series 2018-2 (2)
 
3.80%
 
Fixed
 
6/2021
 
200

 
200

HVF II Series 2018-3 (2)
 
4.15%
 
Fixed
 
7/2023
 
200

 
200

HVF II Series 2019-1 (2)
 
3.85%
 
Fixed
 
3/2022
 
700

 
—

 
 
 
 
 
 
 
 
5,494

 
5,260

Donlen ABS Program
 
 
 
 
 
 
 
 
 
 
HFLF Variable Funding Notes
 
 
 
 
 
 
 
 
 
 
HFLF Series 2013-2 (2)
 
3.86%
 
Floating
 
3/2021
 
482

 
320

 
 
 
 
 
 
 
 
482

 
320

HFLF Medium Term Notes
 
 
 
 
 
 
 
 
 
 
HFLF Series 2015-1 (3)
 
N/A
 
N/A
 
N/A
 
—

 
33

HFLF Series 2016-1 (3)
 
3.81%
 
Both
 
4/2019-2/2020
 
136

 
171

HFLF Series 2017-1 (3)
 
2.86%
 
Both
 
4/2019-4/2021
 
352

 
397

HFLF Series 2018-1 (3)
 
3.28%
 
Both
 
7/2019-6/2021
 
550

 
550

 
 
 
 
 
 
 
 
1,038

 
1,151


17

Table of Contents
HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited

Facility
 
Weighted Average Interest Rate
as of
March 31, 2019
 
Fixed or
Floating
Interest
Rate
 
Maturity
 
March 31,
2019
 
December 31,
2018
Vehicle Debt - Other
 
 
 
 
 
 
 
 
 
 
U.S. Vehicle RCF
 
4.98%
 
Floating
 
6/2021
 
146

 
146

European Vehicle Notes (4)
 
5.07%
 
Fixed