Hertz Reports Strong Q3 Results

Hertz Global Holdings Inc. reported third quarter 2010 worldwide revenues of $2.2 billion, an increase of 7.1 percent year-over-year (a 8.9 percent increase excluding the effects of foreign currency).

Worldwide car rental revenues for the quarter increased 8.3 percent (a 10.5 percent increase excluding the effects of foreign currency) to $1.9 billion. Revenues from worldwide equipment rental for the third quarter were $281.2 million, up 0.2 percent (a 0.1 percent increase excluding the effects of foreign currency) over the prior year period.

Third quarter 2010 adjusted pre-tax income was $253.6 million, an increase of $58.3 million, or 29.9 percent, from $195.3 million in the year-ago period. Pre-tax income on a GAAP basis, was $158.3 million, more than double that of the year-ago period's $75.8 million. Corporate EBITDA for the third quarter 2010 was $437.2 million, an increase of 12.7 percent from the same period in 2009.

Third quarter 2010 adjusted net income was $162.7 million, an increase of 30.7 percent from $124.5 million in the year-ago period, resulting in adjusted diluted earnings per share for the quarter of $0.40, compared with $0.31 per share for the third quarter 2009. Third quarter 2010 net income, on a GAAP basis, was $156.6 million, or earnings of $0.36 per share on a diluted basis, compared with $64.5 million, or earnings of $0.15 per share on a diluted basis, for the third quarter 2009.

"In the third quarter, we increased adjusted pre-tax income year-over-year for the fifth consecutive quarter and doubled GAAP pre-tax income compared with the third quarter of 2009. These third quarter, year-over-year improvements are attributable to 11.4 percent revenue growth in U.S. car rental, our largest business, strong performance by our European car rental unit and efficiency improvements, including lower fleet costs. Also, HERC generated revenue growth in the third quarter for the first time in two years, and recorded a 33.7 percent year-over-year improvement in adjusted pre-tax income as well as a corporate EBITDA margin of 40 percent," said Mark P. Frissora, Hertz's chairman and chief executive officer.

"Despite continued investments in our global car rental network, especially in the Advantage and U.S. off-airport businesses, we anticipate generating strong adjusted pre-tax income results for the fourth quarter which is why, on Oct. 20, 2010, we increased full year 2010 adjusted diluted EPS guidance to a range of $0.47 - $0.48," he added.

Hertz took $15.2 million in restructuring and related charges in the third quarter, primarily attributable to costs associated with the closure of equipment rental locations and process reengineering. Hertz expects the restructuring and related charges to continue to diminish throughout the remainder of 2010.

Hertz ended the third quarter with total debt of $12.05 billion and net corporate debt of $3.78 billion, compared with total debt of $11.69 billion and net corporate debt of $3.64 billion as of June 30, 2010. Total debt increased primarily due to the private offering of $700.0 million of 7.5 percent senior notes that closed on Sept. 30, 2010, partly offset by a decrease in fleet debt related to seasonality. Net cash provided by operating activities was $904.7 million in the third quarter 2010, compared to $608.8 million last year.

Worldwide Car Rental

Worldwide car rental revenues were $1.9 billion for the third quarter of 2010, an increase of 8.3 percent (a 10.5 percent increase excluding the effects of foreign currency) from the prior year period.

Transaction days for the quarter increased 8.2 percent [8.9 percent U.S.; 7.0 percent international] from the prior year period.

U.S. off-airport total revenues for the third quarter increased 15.8 percent and transaction days increased 10.4% year-over-year.

Rental rate revenue per transaction day for the quarter increased 1.1 percent [1.7 percent U.S.; 0.3 percent international] from the prior year period.

Worldwide car rental adjusted pre-tax income for the third quarter of 2010 was $309.3 million, an increase of 19.7 percent from $258.3 million in the prior year period. The result was driven by increased volume and strong cost management performance. As a result, worldwide car rental achieved an adjusted pre-tax margin, based on revenues, of 16.2 percent for the quarter, versus 14.7 percent in the prior year period.

The worldwide average number of company-operated cars for the third quarter of 2010 was 487,100, an increase of 8.8 percent over the prior year period.

Worldwide Equipment Rental

Worldwide equipment rental revenues were $281.2 million for the third quarter of 2010, a 0.2 percent increase (a 0.1 percent increase excluding the effects of foreign currency) from the prior year period.

Adjusted pre-tax income for worldwide equipment rental for the third quarter of 2010 was $33.7 million, an increase of 33.7 percent from $25.2 million in the year-ago period, primarily attributable to the effects of increased volume and cost management initiatives. Worldwide equipment rental achieved an adjusted pre-tax margin, based on revenues, of 12 percent, a 300 basis point improvement over the prior year period, and a corporate EBITDA margin, based on revenues, of 40 percent for the quarter.

The average acquisition cost of rental equipment operated during the third quarter of 2010 decreased by 5 percent year-over-year and net revenue earning equipment as of Sept. 30, 2010 was $1,681.4 million, an 11.2 percent decrease from the amount as of Sept. 30, 2009.

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