Business Context and Reporting Period
This Form 8-K, filed on July 18, 2019, by Hertz Global Holdings, Inc. (HGH) and its subsidiary The Hertz Corporation (Hertz), discloses a proposed private offering of $500.0 million in Senior Notes due 2026. The filing also provides preliminary, unaudited financial results for the quarter ended June 30, 2019, in connection with the offering memorandum.
Key Financial Metrics
- Revenue: Estimated revenue for the quarter ended June 30, 2019, is expected to be consistent with prior guidance of approximately $2.5 billion.
- Profitability: Estimated Adjusted Corporate EBITDA for the quarter is expected to be moderately above the high end of the previously disclosed range of $165 million to $185 million.
- Leverage: The estimated net corporate leverage ratio as of June 30, 2019, is approximately 5.5x. This calculation is pro forma for the new Notes offering, a prior rights offering, and the expected full redemption of 5.875% Senior Notes due 2020 and 7.375% Senior Notes due 2021.
- Cash Flow and Liquidity: Specific cash flow figures are not provided in this filing. The company notes its ability to maintain sufficient liquidity is a key risk factor.
Material Changes and Debt Structure
The primary material change disclosed is the proposed issuance of $500.0 million in new Senior Notes due 2026. Concurrently, the company plans to redeem in full its outstanding 5.875% Senior Notes due 2020 and 7.375% Senior Notes due 2021. The filing does not provide specific comparative financial data for the prior quarter or year-over-year changes, as the focus is on preliminary current-quarter estimates and the debt restructuring.
Guidance, Outlook, and Risks
Management Commentary: Management states that the preliminary financial information is unaudited and subject to adjustment for quarter-end closing procedures. The company explicitly states it undertakes no obligation to update this information.
Risks and Contingencies: The filing includes an extensive list of risk factors, including:
- Volatility in travel demand and airline passenger traffic.
- Competitive pressures affecting rental volume and pricing.
- Vehicle costs, including declines in non-program vehicle values and safety recalls.
- Substantial indebtedness and the ability to refinance existing debt.
- Operational disruptions, cybersecurity threats, and adverse economic cycles.
Unusual Items: The filing notes that a GAAP to non-GAAP reconciliation for Adjusted Corporate EBITDA is not provided due to the preliminary nature of the data and the volatility of certain adjustments, which the company believes would imply a misleading degree of precision.
Investor Verification Checklist
- Verify the final audited revenue and Adjusted Corporate EBITDA for the quarter ended June 30, 2019, against the preliminary estimates of $2.5 billion and >$185 million, respectively.
- Confirm the successful closing of the $500.0 million Senior Notes offering and the subsequent redemption of the 2020 and 2021 notes.
- Review the final net corporate leverage ratio to ensure it aligns with the pro forma estimate of 5.5x.
- Monitor the company's liquidity position and access to financing for revenue-earning vehicles as highlighted in the risk factors.