Hertz Reports Record Year and Fourth Quarter Results

Hertz Global Holdings Inc. reported Feb. 25 worldwide revenues for the year 2012 were $9 billion, an increase of 8.7% over the prior year (a 10.5% increase excluding the effects of foreign currency). Worldwide car rental revenues for the year increased 7.8% (a 9.7% increase excluding the effects of foreign currency) to $7.6 billion.

Full-year 2012 adjusted net income was $595 million, an increase of 38.5% from 2011. Full-year 2012 net income, on a GAAP basis, was $243.1 million, compared with $176.2 million for 2011.

For U.S. car rental, according to the earnings conference call, full-year record revenue was reported at a 9.6% increase over 2011 to $4.9 billion. The company reports that this was driven by strong off-airport revenue and a double-digit increase in Advantage revenue and one-and-a-half months of Dollar Thrifty.

Hertz On Demand, the company’s hourly car rental business, saw a 33% increase in transactions and a 40% membership growth compared to 2011.

Fourth Quarter Results

Hertz reported fourth quarter 2012 worldwide revenues of $2.3 billion, an increase of 15.1% year over year (a 15.5% increase excluding the effects of foreign currency), including the results from the company’s recent acquisition of Dollar Thrifty. 

Worldwide car rental revenues for the fourth quarter increased 14% year over year (a 14.6% increase excluding the effects of foreign currency) to about $1.9 billion, including results of Dollar Thrifty. U.S. car rental revenues increased 24.5% for the quarter, including 43 days of revenues from Dollar Thrifty. However, Europe’s car rental revenue declined 9.8% in the fourth quarter, according to the conference call.

“I'm pleased that Hertz once again delivered record fourth quarter and full-year financial performance due to sustained operational excellence, improving pricing during the fourth quarter and the positive impact of strategic investments, including the acquisition of Dollar Thrifty Automotive Group,” said Mark P. Frissora, the company's chairman and CEO.

He added, “Finally, 2012 marked our third consecutive year of significant double-digit percentage improvements in adjusted pre-tax income, EBITDA, and adjusted earnings per share, as well as margin expansion.”

Worldwide car rental adjusted pre-tax income for the fourth quarter of 2012 was $222 million, an increase of $50.6 million from $171.4 million in the prior-year period. The result was driven by increased volume, strong residual values and strong cost management performance, partially offset by negative RPD. As a result, worldwide car rental achieved an adjusted pre-tax margin of 11.5% for the quarter, versus 10.1% in the prior-year period.

Transaction days for the quarter increased 17.3% over the fourth quarter of 2011 [25.4% U.S.; (0.9)% International].

U.S. off-airport total revenues for the fourth quarter increased 12.2% year over year, and transaction days increased 12.4% from the prior year period. Worldwide rental rate revenue per transaction day (RPD) for the quarter decreased 2.8% [(1.7)% U.S.; (4.3)% International] from the prior-year period. Hertz noted that U.S. pricing improved during the latter portion of the fourth quarter, culminating in December airport RPD increasing 1.6% for Hertz and 4.6% for Dollar Thrifty (consistent with historical Dollar Thrifty calculation methodology). 

Growth in off-airport rentals, and specifically growth in replacement rentals, which have longer rental lengths, has a negative impact on RPD. However, it is important to note that off-airport's highly contributory profit is growing significantly, Hertz said.

The worldwide average number of company-operated cars, largely as a result of the Dollar Thrifty acquisition, for the fourth quarter of 2012 was 705,800, an increase of 17.8% over the prior-year period, and 9.8% excluding the Dollar Thrifty fleet.

Outlook

Hertz forecasts full-year 2013 revenues in the range of around $10.85 billion to $10.95 billion. The range is based on the projection of modest economic growth, a strong U.S. Dollar and incremental franchising of certain rental operations. 

Additionally, Hertz forecasts lower monthly depreciation per vehicle in the U.S. of no less than 4-5% in 2013, with only modest deterioration in residual values due to the company's increasingly diversified re-marketing channels.   

Dollar Thrifty synergies are expected to exceed previous forecasts, now estimated at $300 million of cost synergies from 2013 through 2015, and $300 million of revenue synergies over the same period.

Frissora, commenting on the company's outlook, said, “We continue to make significant progress reducing fleet expenses, our largest operating cost, and we are encouraged that Dollar Thrifty synergies are likely to exceed our earlier forecasts. Additionally, we are off to a fast start this year with January 2013 car rental RPD at U.S. airports up 6% for Hertz and 2.6% for Dollar Thrifty (consistent with historical Dollar Thrifty calculation methodology).

"We are also generating double-digit revenue growth from four of our $500 million-plus businesses: U.S. airport leisure, U.S. off-airport, HERC and Donlen, and we expect these businesses to maintain their pace of strong growth throughout 2013.”

The Hertz conference call will be available for replay until March 11, 2013 by calling (800) 475-6701 in the U.S. or (320) 365-3844 for international callers with the passcode: 280527. The original press release and related tables containing the reconciliations of non-GAAP measures will be available on its website, www.hertz.com/investorrelations.


To see reports from other public car rental companies operating in the U.S., click here.

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