FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-7541
THE HERTZ CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-1938568
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
225 Brae Boulevard, Park Ridge, New Jersey 07656-0713
(Address of principal executive offices)
(Zip Code)
(201) 307-2000
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report.)
The registrant meets the conditions set forth in General
Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing
this Form with the reduced disclosure format permitted by General
Instruction H(2) of Form 10-Q.
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. Yes X No
Indicate the number of shares outstanding of each of the
registrant's classes of common stock as of September 30, 1994:
Common Stock, $1 par value - Class A, 200 shares; Class B, 51
shares; and Class C, 490 shares.
Page 1 of 21 pages
The Exhibit Index is on page 18
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PART I - FINANCIAL INFORMATION
ITEM l. FINANCIAL STATEMENTS.
INTRODUCTORY STATEMENT
The summary of accounting policies set forth in Note 1 to the
consolidated financial statements contained in the Form 10-K for
the fiscal year ended December 31, 1993, filed by the registrant
with the Securities and Exchange Commission on March 8, 1994, has
been followed in preparing the accompanying condensed
consolidated financial statements, except, effective January 1,
1994, the registrant adopted the provisions of Financial
Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities", and effective July 1, 1994, the
registrant increased certain lives being used to compute the
provision for depreciation of revenue earning equipment (see
Notes 1 and 3 to the Notes to Condensed Consolidated Financial
Statements).
The condensed consolidated financial statements for interim
periods included herein have not been audited by independent
public accountants. In the registrant's opinion, all adjustments
(which include only normal recurring adjustments) necessary for a
fair presentation of the results of operations for the interim
periods have been made. Results for interim periods are not
necessarily indicative of results for a full year.
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<PAGE>
THE HERTZ CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(In Thousands of Dollars)
A S S E T S
Unaudited
Sept. 30, Dec. 31,
1994 1993
CASH AND EQUIVALENTS $ 112,229 $ 88,557
RECEIVABLES, less allowance for
doubtful accounts: 1994, $9,397;
1993, $6,862 532,155 434,423
DUE FROM AFFILIATES 203,523 328,512
INVENTORIES, at lower of cost or market 34,278 33,643
PREPAID EXPENSES AND OTHER ASSETS (Note 1) 96,601 121,776
REVENUE EARNING VEHICLES AND OTHER
EQUIPMENT, at cost, less accumulated
depreciation: 1994, $549,974; 1993,
$418,692 4,540,370 2,702,552
PROPERTY AND EQUIPMENT, at cost,
less accumulated depreciation:
1994, $413,218; 1993, $358,781 434,052 384,598
FRANCHISES, CONCESSIONS, CONTRACT COSTS
AND LEASEHOLDS, net of amortization 6,888 7,192
COST IN EXCESS OF NET ASSETS OF PURCHASED
BUSINESSES, net of amortization (Note 6) 575,930 587,245
$6,536,026 $4,688,498
LIABILITIES AND SHAREHOLDERS' EQUITY
ACCOUNTS PAYABLE $ 430,120 $ 328,957
ACCRUED LIABILITIES 487,929 422,743
ACCRUED TAXES 102,759 70,849
DEBT (Note 4) 4,401,002 2,940,495
PUBLIC LIABILITY AND PROPERTY DAMAGE 306,802 264,158
DEFERRED TAXES ON INCOME 73,800 44,600
SHAREHOLDERS' EQUITY (Note 5):
Preferred stock -
Series A, 10% cumulative 236,000 340,000
Series B, various rates cumulative 249,900 99,900
Common stock 1 1
Additional capital paid-in 59,056 100,099
Reinvested earnings 192,222 105,445
Translation adjustment (3,338) (28,749)
Unrealized holding losses for
available-for-sale securities (Note 1) (227) -
Total shareholders' equity 733,614 616,696
$6,536,026 $4,688,498
The accompanying notes are an integral part of this statement.
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THE HERTZ CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(In Thousands of Dollars)
Unaudited
Three Months
Ended September 30,
1994 1993
REVENUES $958,189 $817,252
EXPENSES:
Direct operating 477,994 441,553
Depreciation of revenue earning
equipment (Note 3) 191,570 140,243
Selling, general and administrative 104,574 85,605
Interest, net of interest income
of $1,440 and $818 75,667 71,598
849,805 738,999
INCOME BEFORE INCOME TAXES 108,384 78,253
PROVISION FOR TAXES ON INCOME
(Note 2) 46,902 39,219
NET INCOME $ 61,482 $ 39,034
The accompanying notes are an integral part of this statement.
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<PAGE>
THE HERTZ CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(In Thousands of Dollars)
Unaudited
Nine Months
Ended September 30,
1994 1993
REVENUES $2,478,904 $2,192,997
EXPENSES:
Direct operating 1,324,337 1,266,242
Depreciation of revenue earning
equipment (Note 3) 513,193 396,079
Selling, general and administrative 283,891 254,421
Interest, net of interest income
of $5,427 and $10,404 (Notes 4 and 5) 204,618 185,347
2,326,039 2,102,089
INCOME BEFORE INCOME TAXES 152,865 90,908
PROVISION FOR TAXES ON INCOME
(Notes 2 and 5) 66,088 45,634
NET INCOME $ 86,777 $ 45,274
The accompanying notes are an integral part of this statement.
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<PAGE>
THE HERTZ CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands of Dollars)
Unaudited
Nine Months
Ended September 30,
1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 86,777 $ 45,274
Non-cash expenses:
Depreciation of revenue earning
equipment 513,193 396,079
Depreciation of property and
equipment 50,358 47,789
Amortization of intangibles 14,514 14,534
Provision for public liability
and property damage 143,193 114,563
Provision for losses for doubtful
accounts 5,051 4,761
Deferred income taxes 29,200 (4,400)
Revenue earning equipment
expenditures (5,184,006) (3,929,119)
Proceeds from sales of revenue
earning equipment 2,968,952 2,301,685
Changes in assets and liabilities,
net of effects from purchases
of various operations -
Receivables (69,903) 103,903
Due from affiliates 124,989 (152,062)
Inventories and prepaid expenses
and other assets 37,949 33,039
Accounts payable 82,365 (44,265)
Accrued liabilities 44,703 38,521
Accrued taxes 27,329 36,154
Payments of public liability and
property damage claims and expenses (100,266) (77,911)
Net cash flows used for
operating activities (1,225,602) (1,071,455)
The accompanying notes are an integral part of this statement.
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<PAGE>
THE HERTZ CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands of Dollars)
Unaudited
Nine Months
Ended September 30,
1994 1993
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment expenditures $ (117,531) $ (73,332)
Proceeds from sales of property and
equipment 27,775 31,211
Purchases of available-for-sale
securities (5,998) -
Proceeds from sale of available-for-
sale securities 3,242 -
Purchases of various operations, net
of cash acquired (see supplemental
disclosures below) (2,044) (3,548)
Net cash flows used for investing
activities (94,556) (45,669)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term
debt 454,116 589,749
Repayment of long-term debt (173,484) (700,296)
Short-term borrowings:
Proceeds 626,151 663,310
Repayments (319,988) (370,034)
Other, net 898,968 771,565
Payment for the redemption of
common and preferred stock and
related expenses (145,043) -
Net cash flows provided from
financing activities 1,340,720 954,294
EFFECT OF FOREIGN EXCHANGE RATE
CHANGES ON CASH 3,110 (2,610)
NET INCREASE (DECREASE) IN CASH
AND EQUIVALENTS DURING THE PERIOD 23,672 (165,440)
CASH AND EQUIVALENTS AT BEGINNING OF
YEAR 88,557 268,019
CASH AND EQUIVALENTS AT END OF PERIOD $ 112,229 $ 102,579
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid (received) during the
period for -
Interest (net of amount capitalized) $ 194,644 $ 189,298
Income taxes 18,995 (2,066)
In connection with acquisitions made during the nine months
ended September 30, 1994 and 1993, liabilities assumed were $27
million and $2.1 million, respectively.
The accompanying notes are an integral part of this statement.
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<PAGE>
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Accounting Change
Effective January 1, 1994, the registrant adopted the
provisions of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities", which
requires a more detailed disclosure of debt and equity securities
held for investment, the methods to be used in determining fair
value, and when to record unrealized holding gains and losses in
earnings or in a separate component of shareholders' equity.
As of September 30, 1994, Prepaid Expenses and Other Assets
include available-for-sale securities at fair value of $5.4
million (cost $5.7 million). The fair value is calculated using
information provided by outside quotation services. These
securities include various governmental and corporate debt
obligations, with maturity dates ranging from 1995 through 2014.
For the nine months ended September 30, 1994, proceeds of
$3,242,000 from the sale of available-for-sale securities were
received, and a gross realized loss of $8,827 was included in
earnings. Actual cost was used in computing the realized loss on
the sale. For the nine months ended September 30, 1994,
unrealized holding losses and unrealized holding gains, net of
taxes, included in Shareholders' Equity were $245,456 and
$18,176, respectively.
Note 2 - Taxes on Income
The income tax provision is based upon the expected effective
tax rate applicable to the full year. The effective tax rate is
higher than the U.S. statutory rate of 35% due to higher tax
rates relating to foreign operations and adjustment for state
taxes net of federal benefit. The income tax provision for the
three and nine months ended September 30, 1993 includes a $1.1
million charge relating to the increase in net deferred tax
liabilities as of January 1, 1993 due to changes in the U.S. tax
law enacted in August 1993, and a $2.0 million credit resulting
from adjustments made to tax accruals in connection with tax
audit evaluations and the effects of prior years' tax sharing
arrangements between the registrant and its former parent
companies, RCA Corporation and UAL Corporation.
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<PAGE>
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 3 - Depreciation of Revenue Earning Equipment
Depreciation of revenue earning equipment includes the
following (in thousands of dollars):
Unaudited
1994 1993
Three months Ended September 30
Depreciation of revenue earning equipment $169,032 $131,073
Less adjustment of depreciation upon
disposal of the equipment (3,084) (6,732)
Rents paid for vehicles leased 25,622 15,902
Total $191,570 $140,243
Nine months Ended September 30
Depreciation of revenue earning equipment $459,755 $352,288
Less adjustment of depreciation upon
disposal of the equipment (22,559) (25,144)
Rents paid for vehicles leased 75,997 68,935
Total $513,193 $396,079
Effective July 1, 1994, certain lives being used to compute the
provision for depreciation of revenue earning equipment were
increased to reflect changes in the estimated residual values to
be realized when the equipment is sold. As a result of this
change, depreciation of revenue earning equipment for the three
and nine months ended September 30, 1994 was decreased by $6.1
million.
The adjustment of depreciation upon disposal of revenue earning
equipment for the three months ended September 30, 1994 and 1993
included net losses of $.2 million and net gains of $4.0 million,
respectively, on the sale of equipment in the construction
equipment rental operations in the United States; net gains of
$3.3 million and $1.5 million, respectively, in the car rental
and car leasing operations primarily relating to foreign
operations; and in 1993, credits of $1.2 million resulting from
valuing pre-acquisition assets on a net of tax basis.
The adjustment of depreciation upon disposal of revenue earning
equipment for the nine months ended September 30, 1994 and 1993
included net gains of $12.5 million and $13.4 million,
respectively, on the sale of equipment in the construction
equipment rental operations in the United States; net gains of
$10.1 million and $7.6 million, respectively, in the car rental
and car leasing operations primarily relating to foreign
operations; and in 1993, credits of $4.1 million resulting from
valuing pre-acquisition assets on a net of tax basis.
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THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 4 - Debt
Debt at September 30, 1994 and December 31, 1993 consists of
the following (in thousands of dollars):
Unaudited
Sept. 30, Dec. 31,
1994 1993
Notes payable, including commercial paper,
average interest rate: 1994, 4.8%;
1993, 3.4% $ 919,832 $ 237,197
Promissory notes, average interest rate:
1994, 7.6%; 1993, 8.3%; (effective
average interest rate: 1994, 7.7%; 1993,
8.6%); net of unamortized discount: 1994,
$3,524; 1993, $2,549; due 1994 to 2005 1,469,136 1,025,111
Swiss Franc bonds, fixed U.S. dollar
obligation 11.1% (effective interest
rate 9.7%); including unamortized
premium: 1994, $182; 1993, $330; due 1995 46,314 46,462
Property and equipment lease obligations,
average interest rate: 1994, 8.8%; 1993,
9.0%; due 1994 to 1998 7,454 9,907
Medium term notes, average interest rate
9.3% (effective average interest rate: 1994,
9.6%; 1993, 9.4%); net of unamortized
discount: 1994, $62; 1993, $139; due
1995 to 1997 188,363 226,411
Senior and other subordinated promissory
notes, average interest rate: 1994, 9.5%;
1993, 7.4% (effective average interest
rate: 1994, 9.6%; 1993, 7.5%); net of
unamortized discount: 1994, $505; 1993,
$621; due 1994 to 1998 (Note 5) 250,847 400,731
Junior subordinated promissory notes,
average interest rate 6.9%; net of
unamortized discount: 1994, $340; 1993,
$372; due 2000 to 2003 399,660 399,628
Subsidiaries' short-term debt in millions
(1994, $931.1; 1993, $463.1) and other
borrowings; average interest rate in
domestic and foreign currencies: 1994,
6.2%; 1993, 7.1%; including unamortized
discount: 1994, $52; 1993, $65 1,119,396 595,048
Total $4,401,002 $2,940,495
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<PAGE>
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 4 - Debt (continued)
The aggregate amounts of maturities of debt for the twelve
month periods following September 30, 1994 are as follows (in
millions): 1995, $2,265.9 (including $1,995.9 of commercial paper
and short-term borrowings); 1996, $277.3; 1997, $227.3; 1998,
$330.2; 1999, $99.6; after 1999, $1,200.7.
Interest expense for the nine months ended September 30, 1994
and 1993 was reduced by $1.6 million and $8.2 million,
respectively, of interest income relating to refunds of prior
years' state, local and federal income taxes.
At September 30, 1994, approximately $104 million of the
registrant's consolidated shareholders' equity was free of
dividend limitations pursuant to its existing debt agreements.
On June 8, 1994, the registrant and Ford entered into a
revolving loan agreement under which the registrant may borrow
from Ford from time to time in amounts of up to $250 million
outstanding at any one time. Obligations of the registrant under
the agreement would rank pari passu with the registrant's Senior
Debt Securities. This agreement by its terms expires on June 30,
1999, on which date any amounts then outstanding thereunder are
required to be repaid. In addition, at September 30, 1994, the
registrant had $163.9 million of outstanding loans from Ford.
The registrant and its subsidiaries have entered into
arrangements to manage exposure to fluctuations in interest
rates. These arrangements consist of interest-rate swap
agreements and forward rate agreements. The differential paid or
received on these agreements is recognized as an adjustment to
interest expense. The effect of these agreements is to make the
registrant less susceptible to changes in interest rates by
effectively converting certain variable rate debt to fixed rate
debt. Because of the relationship of current market rates to
historical fixed rates, the effect at September 30, 1994 of the
swap agreements is to give the registrant an overall effective
weighted-average rate on debt of 7.0%, with 37% of debt
effectively subject to variable interest rates, compared to a
weighted-average interest rate on debt of 6.9%, with 45% of debt
subject to variable interest rates when not considering the swap
agreements. These agreements expressed in notional amounts
aggregated $353 million at September 30, 1994. Notional amounts
are not reflective of the registrant's obligations under these
agreements because the registrant is only obligated to pay the
net amount of interest rate differential between the fixed and
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<PAGE>
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 4 - Debt (continued)
variable rates specified in the contracts. At September 30,
1994, the fair value of all outstanding contracts (notional
principal of $362 million, which includes $32 million of notional
principal scheduled to start after September 30, 1994), which is
representative of the registrant's obligations under these
contracts, assuming the contracts were terminated at that date,
was approximately a net receivable of $.6 million.
Note 5 - Change in Ownership and Supplemental Disclosure of
Noncash Investing and Financing Activities
In March 1994, Ford Motor Company ("Ford") acquired the
registrant's Common Stock owned by Commerzbank Aktiengesell-
schaft. On April 29, 1994, the registrant redeemed its preferred
and common stock owned by AB Volvo for $145 million, borrowing
the funds from Ford to pay for the redemption, and Ford purchased
all of the common stock of the registrant owned by Park Ridge
Limited Partnership. This resulted in the registrant becoming a
wholly owned subsidiary of Ford. In addition, the $150 million
subordinated promissory note of the registrant held by Ford Motor
Credit Company, was exchanged for $150 million of Series B
Preferred Stock of the registrant. In connection with these
transactions, notes payable were increased by $145 million,
Series A Preferred Stock was reduced by $104 million, and
Additional Capital Paid-in was reduced by $41 million; interest
expense was increased by $8.6 million and provision for taxes was
decreased by $3.0 million; and subordinated promissory notes were
reduced by $150 million and Series B Preferred Stock was
increased by $150 million.
During the nine months ended September 30, 1994, the registrant
purchased Ford vehicles at a cost of approximately $2.9 billion,
and sold Ford vehicles to Ford or its affiliates under various
repurchase programs for approximately $1.5 billion.
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<PAGE>
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 5 - Change in Ownership and Supplemental Disclosure of
Noncash Investing and Financing Activities (continued)
In 1992, the registrant entered into a lease agreement with a
third party lessor, Hertz Funding Corp. ("HFC"), providing for
the lease of vehicles purchased by HFC under a repurchase program
offered by Ford. As with similar lease transactions with vehicle
manufacturers in the past, the registrant acts as lessee and
servicer relating to the acquisition and return of leased
vehicles owned by HFC. Although the officers of HFC are
employees of the registrant, HFC is wholly owned by PAZ ABS Corp.
("PAZ"), an entity unaffiliated with the registrant or any of its
subsidiaries, and the Board of Directors of HFC is controlled by
directors unaffiliated with the registrant or any of its
subsidiaries. Under the lease, which is accounted for as an
operating lease, the registrant makes payments equal to the
monthly depreciation and all expenses (including interest) of HFC
and is responsible for the remaining net cost on any vehicles
that become ineligible under the repurchase program. At
September 30, 1994, the net cost of the vehicles leased under
this agreement was approximately $342 million. The registrant
intends to acquire, on or about November 1, 1994, all of the
issued and outstanding shares of HFC from PAZ for the purpose of
winding-down the activities of HFC.
Note 6 - Acquisition
On July 31, 1994, Axus, S.A., a car leasing company of the
registrant which operates in various countries in Europe,
acquired an additional interest in Locaplan S.A., a car leasing
operation in France, increasing its ownership from 50% to 100%.
The cost relating to this acquisition approximated $2.3 million,
which exceeded the net assets acquired by approximately $2.2
million. Commencing in August 1994, the accounts of this
operation have been included in the consolidated financial
statements of the registrant, which did not have a material
effect on the registrant's consolidated financial position or
results of operations.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Third Quarter 1994 vs. Third Quarter 1993
Revenues in the third quarter of 1994 of $958 million
increased by $141 million as compared to the third quarter of
1993. This increase was primarily attributable to increases in
the car rental operations resulting from a greater number of
transactions due to increased travel and an increase in market
share and changes in foreign exchange rates, higher revenues in
car leasing due to an acquisition made in July 1994 in Europe and
changes in foreign exchange rates, and improvements in
construction equipment rental and sales in the United States due
to increased volume resulting from improvements in the economy in
the United States. These increases were partly offset by lower
revenues in claim administration and telecommunication services
due to decreases in volume.
Total expenses increased $111 million to $850 million in the
third quarter of 1994 as compared to $739 million in the third
quarter of 1993. Direct operating expense increased principally
due to the higher volume of business and changes in foreign
exchange rates, but is lower in 1994 as a percent of revenues due
to more efficient fixed cost coverage. Depreciation of revenue
earning equipment increased primarily due to an increase in
vehicles and equipment operated, higher prices for automobiles,
and credits recorded in 1993 resulting from valuing certain pre-
acquisition assets on a net of tax basis; these increases were
partly offset by a reduction in depreciation of $6.1 million due
to changes made effective July 1, 1994 to the increase in certain
lives being used to compute the provision for depreciation of
revenue earning equipment to reflect changes in the estimated
residual values to be realized when the equipment is sold.
Selling, general and administrative expense increased primarily
due to higher advertising and administrative costs and changes in
foreign exchange rates. The increase in interest expense was
primarily due to higher debt levels in 1994, partially offset by
lower interest rates in 1994 in the foreign operations.
The tax provision of $46.9 million in the third quarter of
1994 was higher than the tax provision of $39.2 million in the
third quarter of 1993, primarily due to higher income before
income taxes in 1994 and changes in effective tax rates. See
Note 2 to the Notes to Condensed Consolidated Financial
Statements.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued).
Nine Months Ended September 30, 1994 vs. September 30, 1993
Revenues in the nine months of 1994 of $2,479 million
increased by $286 million as compared to the nine months of 1993.
This increase was primarily attributable to increases in the car
rental operations resulting from a greater number of transactions
due to increased travel and an increase in market share, and
improvements in construction equipment rental and sales in the
United States due to increased volume resulting from improvements
in the economy in the United States. These increases were partly
offset by lower revenues in claim administration and
telecommunication services due to decreases in volume.
Total expenses increased $224 million to $2,326 million in the
nine months of 1994 as compared to $2,102 million in the nine
months of 1993. Direct operating expense increased principally
due to the higher volume of business, but is lower in 1994 as a
percent of revenues due to more efficient fixed cost coverage.
Depreciation of revenue earning equipment increased primarily due
to an increase in vehicles and equipment operated, higher prices
for automobiles, and credits recorded in 1993 resulting from
valuing certain pre-acquisition assets on a net of tax basis;
these increases were partly offset by a reduction in depreciation
of $6.1 million due to changes made effective July 1, 1994 to the
increase in certain lives being used to compute the provision for
depreciation of revenue earning equipment to reflect changes in
the estimated residual values to be realized when the equipment
is sold, and higher net proceeds received on disposal of revenue
earning equipment in excess of book value primarily related to a
decrease in the number of "risk" vehicles in the car rental
operations and gains on the sale of equipment in the construction
equipment rental operations in the United States principally due
to improvements in the economy in the United States. Selling,
general and administrative expense increased primarily due to
higher advertising costs. The increase in interest expense was
primarily due to higher debt levels and lower interest income in
1994 and $8.6 million included in 1994 relating to interest
receivable from Park Ridge Limited Partnership which will not be
collected, partly offset by lower interest rates in 1994 in the
foreign operations.
The tax provision of $66.1 million in the nine months of 1994
was higher than the tax provision of $45.6 million in the nine
months of 1993, primarily due to higher income before income
taxes in 1994 and changes in effective tax rates. See Note 2 to
the Notes to Condensed Consolidated Financial Statements.
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
(4) Instruments defining the rights of security
holders, including indentures. During the quarter
ended September 30, 1994, the registrant and its
subsidiaries ("Hertz") incurred various
obligations which could be considered as long-term
debt, none of which exceeded 10% of the total
assets of Hertz on a consolidated basis. Hertz
agrees to furnish to the Commission upon request a
copy of any instrument defining the rights of the
holders of such long-term debt.
(12) Computation of Ratio of Earnings to Fixed Charges for the
nine months ended September 30, 1994, and 1993.
(27) Financial Data Schedule for the nine months ended
September 30, 1994.
(b) Reports on Form 8-K:
The registrant filed Form 8-K/A #1 dated July 14, 1994
reporting under Items 4, 5 and 7 thereof (i) instruments
defining the rights of security holders, including
indentures, in connection with the Registration Statement
on Form S-3 (File No. 33-39145) filed by the registrant
with the Securities and Exchange Commission covering
Senior and Senior Subordinated Debt Securities issuable
under Indentures dated as of April 1, 1986, as
supplemented, and June 1, 1989, and (ii) reporting a
change in the registrant's certifying accountant.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
THE HERTZ CORPORATION
(Registrant)
Date: October 28, 1994 By: /s/ William Sider
William Sider
Executive Vice President and
Chief Financial Officer
(principal financial officer
and duly authorized officer)
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<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
filed with
FORM 10-Q
for the quarter ended
September 30, 1994
under
THE SECURITIES EXCHANGE ACT OF 1934
THE HERTZ CORPORATION
Commission file number 1-7541
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<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
12 Computation of Ratio of Earnings to
Fixed Charges for the nine months ended
September 30, 1994 and 1993.
27 Financial Data Schedule for the nine
months ended September 30, 1994.
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<PAGE>
EXHIBIT 12
THE HERTZ CORPORATION AND SUBSIDIARIES
CONSOLIDATED COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In Thousands of Dollars Except Ratios)
Unaudited
Nine Months
Ended September 30,
1994 1993
Income before income taxes $152,865 $ 90,908
Interest expense 210,045 195,751
Portion of rent estimated to represent
the interest factor 67,512 60,772
Earnings before income taxes and fixed
charges $430,422 $347,431
Interest expense (including capitalized
interest) $210,398 $195,888
Portion of rent estimated to represent
the interest factor 67,512 60,772
Fixed charges $277,910 $256,660
Ratio of earnings to fixed charges 1.5 1.4
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<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<EXCHANGE-RATE> 1
<CASH> 20,874
<SECURITIES> 91,355
<RECEIVABLES> 541,552
<ALLOWANCES> (9,397)
<INVENTORY> 34,278
<CURRENT-ASSETS> 0
<PP&E> 5,937,614
<DEPRECIATION> (963,192)
<TOTAL-ASSETS> 6,536,026
<CURRENT-LIABILITIES> 0
<BONDS> 4,401,002
<COMMON> 1
0
485,900
<OTHER-SE> 247,713
<TOTAL-LIABILITY-AND-EQUITY> 6,536,026
<SALES> 0
<TOTAL-REVENUES> 2,478,904
<CGS> 0
<TOTAL-COSTS> 2,116,370
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 5,051
<INTEREST-EXPENSE> 204,618
<INCOME-PRETAX> 152,865
<INCOME-TAX> 66,088
<INCOME-CONTINUING> 86,777
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 86,777
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
