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1
F O R M 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For The Fiscal Year Ended December 31, 1993 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission File Number 1-7541
T H E H E R T Z C O R P O R A T I O N
(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)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
6-5/8% Junior Subordinated Notes due July 15, 2000 New York Stock Exchange
7% Junior Subordinated Notes due July 15, 2003 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
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______.
State the aggregate market value of the voting stock held by non-affiliates of
the registrant: None (all of the voting stock of the registrant is owned by
Ford Motor Company, AB Volvo, Park Ridge Limited Partnership and Commerzbank
Aktiengesellschaft).
Indicate the number of shares outstanding of each of the registrant's classes
of common stock as of December 31, 1993: Common Stock, $1 par value - Class A,
200 shares; Class B, 311 shares; and Class C, 490 shares.
Documents Incorporated By Reference
List hereunder the following documents if incorporated by reference and the
Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is
incorporated: (1) Any annual report to security holders; (2) Any proxy or
information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933: None.
Page 1 of 133 pages
The Exhibit Index is on page 70
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PART I
ITEM 1. BUSINESS.
General
The Hertz Corporation and its subsidiaries ("Hertz"), affiliates,
independent licensees and associates are engaged principally in the business of
renting automobiles and renting and leasing trucks, without drivers, in or
through approximately 5,200 locations throughout the United States and in over
140 foreign countries. Collectively, they operate what the registrant believes
is the largest rent a car business in the world and one of the largest one-way
truck rental businesses in the United States. In addition, through its
wholly-owned subsidiary, Hertz Equipment Rental Corporation, Hertz operates
what it believes to be the largest rental, lease and sale of construction and
materials handling equipment business in the United States. Other activities
of Hertz include the sale of its used vehicles, the leasing of automobiles,
primarily in Europe, Australia and New Zealand, operating car dealerships in
Belgium and providing claim management and telecommunications services in the
United States.
The registrant, which was incorporated in Delaware in 1967, is a successor
to corporations which were engaged in the automobile and truck leasing and
rental business since 1924. UAL Corporation ("UAL") (formerly Allegis
Corporation) purchased all of the registrant's outstanding capital stock from
RCA Corporation ("RCA") on August 30, 1985. Park Ridge Corporation ("Park
Ridge") purchased all of the registrant's outstanding capital stock from UAL on
December 30, 1987. On July 19, 1993, Park Ridge (which had no material assets
other than the registrant) was merged with and into the registrant, with the
prior stockholders of Park Ridge becoming the stockholders of the registrant.
See Notes 1 and 7 of the Notes to Consolidated Financial Statements included in
this Report.
For information with respect to the relative contributions to revenue of
the various classes of services of Hertz' business, reference should be made to
the Selected Financial Data included in this Report. For information with
respect to business segments of Hertz, reference should be made to Note 10 of
the Notes to Consolidated Financial Statements included in this Report.
Rent A Car
Hertz provides rent a car service throughout the United States, including
virtually all major U.S. cities, and in major foreign countries. Rent a car
service is also provided through independent licensees and associates (see
Business - Licensees and Associates). A wide variety of makes and models of
automobiles are used for daily rental purposes, nearly all of which are current
year or the previous year's models. Car rentals are made on a daily, weekly or
monthly basis, the rental charge being computed on a limited or unlimited
mileage rate, or on a time rate plus a mileage charge. Rates vary at different
locations depending on local market, competitive and cost factors, and most
rentals are made utilizing rate plans under which the customer is responsible
for gasoline used during the rental. Other services provided to customers
include public liability and property damage protection. In the United States,
Hertz owns operations in approximately 725 locations and its domestic licensee
locations number approximately 450 and, currently, together they hold a
combined fleet of approximately 172,000 vehicles. Outside the United States,
and primarily in Europe, the Hertz system is serviced through approximately
1,600 company owned or authorized locations and 2,425 licensee locations with
approximately 125,000 vehicles. In addition to vehicle rentals and licensee
fees, revenues are generated from providing customers with ancillary products
such as loss or collision damage waiver, theft protection, liability
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ITEM 1. BUSINESS (continued).
insurance supplement, personal accident insurance and personal effects
coverage. Rent a car operations are subject to seasonal factors with the
greatest activity occurring in the second and third calendar quarters (see Note
13 of the Notes to Consolidated Financial Statements included in this Report).
Hertz and certain licensees, under the Hertz "Rent it Here-Leave it There"
program, offer customers in most parts of the world the convenience of leaving
a rented car at a Hertz or licensee location in a city other than the one in
which it was rented. Depending upon rental location and distance driven, a
drop off charge or a special intercity rate may be imposed if the vehicle is
not returned to the same location from which it is rented.
A centralized reservations service is also offered within the continental
United States by use of a toll free telephone number. In addition, through
"The Hertz #1 Club", Hertz maintains a computerized data retrieval system on
participating customers' preferences as to type of car and other information
typically needed prior to the rental of a car, so that, when #1 Club members
make a reservation using their membership number, the renting location is able
to have a rental agreement prepared prior to the time of their arrival. A
similar service is available to Hertz' customers in certain foreign countries
under the name "Hertz No. 1 Club". In addition, a Hertz charge card is offered
for use by Hertz customers in connection with car rental services.
At most major airport locations within the United States, Canada, Europe
and Australia, Hertz offers "Hertz #1 Club Gold," which is an expedited rental
service designed for the frequent traveler. Enrollment is by application,
which provides for the payment of an annual membership fee. The terms
governing all rentals using this service are contained in the member's
enrollment agreement. Hertz #1 Club Gold encompasses two services, canopied
and counter service. When using #1 Club Gold canopy service, which is
available at a number of major airport locations within the United States and
the United Kingdom, the counter rental transaction is eliminated and members
are taken by the Hertz courtesy bus to a separate canopied rental area, where
an electronic sign board directs them to their assigned car, which is ready to
go. Usually, there is nothing to sign. After presenting their driver's
license and rental record at the gate, they are on their way. Hertz #1 Club
Gold counter service is available at many airport locations where #1 Club Gold
canopied service is unavailable, in which case, members with #1 Club Gold
reservations proceed to a special counter for members, where they receive their
rental record and are directed to their pre-assigned car so they can be on
their way as quickly as possible.
Hertz also participates in packaged tour plans in conjunction with
airlines, tour operators and hotels under which a certain period of rent a car
usage is included with air fare, and often hotel accommodations, at a combined
quoted price.
Automobile maintenance centers are operated at airports and in certain
urban and suburban areas, providing maintenance facilities for the rental
fleet. Many of these facilities, which include automatic car washes and
vehicle diagnostic and repair equipment, are accepted by automobile
manufacturers as eligible to perform warranty work. Collision damage and major
repairs are generally performed by independent contractors.
-3-
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ITEM 1. BUSINESS (continued).
Hertz believes that a majority of its customers are from cities other than
those in which the automobiles are rented. Rent a car facilities are operated
at virtually all major airports and at downtown locations in major cities in
the United States. Hertz estimates that airport revenues accounted for
approximately 90% of its rent a car revenues in the United States in 1993.
Arrangements are also in effect at hotels, motels and railroad terminals to
facilitate car rentals at such locations.
The foreign rent a car operations of Hertz that generated the highest
volumes of business during 1993 are those conducted in France, Germany, the
United Kingdom, Italy, Canada, Spain, Australia and Switzerland. These
operations are conducted by wholly-owned subsidiaries of Hertz. In general,
Hertz' foreign rent a car operations are conducted along lines similar to those
of rent a car operations of Hertz in the United States. Hertz believes there
are no unusual risks associated with its foreign operations.
Hertz' ability to withdraw earnings or investments from foreign countries
is, in some cases, subject to exchange controls and the utilization of foreign
tax credits. It may also be affected by fluctuations in exchange rates for
foreign currencies and by revaluation of such currencies in relation to the
U.S. dollar by the governments involved. Foreign operations have been financed
to a substantial extent through loans from local lending sources in the
currency of the countries in which such operations are conducted. Rent a car
operations in currency of the foreign countries are, from time to time, subject
to governmental regulations imposing varying degrees of restrictions. Hertz
does not believe currency restrictions or other regulations have had any
material impact on its operations as a whole.
Equipment Rental and Sales
Hertz also rents, leases and sells a wide range of construction and
materials handling equipment to construction, industrial and governmental users
through its subsidiaries, Hertz Equipment Rental Corporation ("HERC") in the
United States, a subsidiary of Hertz Equipment Rental International, Ltd. in
Spain, and a subsidiary in France owned 51% by Hertz International, Ltd. and
49% by Equipment Rental Services Netherlands B.V., which operates under a
license from HERC.
Rentals are made on a daily, weekly or monthly basis. Rates vary at
different locations depending on local market and competitive factors.
HERC believes it operates the largest rental, lease and sale of
construction and materials handling equipment business in the United States and
has become so through providing superior equipment, operations and services.
In the United States, HERC operates 81 locations throughout the Northeast,
Southeast, Southwest, Midwest and Gulf and West Coasts. The Spain subsidiary
operates from one location and the France subsidiary operates from three
locations.
HERC operations are subject to seasonal factors with the greatest activity
occurring in the second and third calendar quarters and its operations have
been profitable.
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ITEM 1. BUSINESS (continued).
Truck Leasing and Rental
In 1988, the registrant sold its 50% interest in Hertz Penske Truck
Leasing, Inc., which has been succeeded by Penske Truck Leasing Co., L.P.,
("Penske"), and entered into a license agreement under which Penske has the
right, as a Hertz System licensee, to conduct a one-way truck rental business
(including trailers) for a 10 year period. The license agreement covers the
entire United States, with certain exclusions for those cities and towns that
were licensed to other Hertz System licensees, but under certain conditions,
Penske may also operate in the localities of other Hertz System licensees.
Penske currently maintains a one-way truck rental fleet of approximately
6,900 vehicles and is headquartered in Reading, Pennsylvania.
Car Leasing and Car Dealerships
Hertz has car leasing operations in Europe, Australia and New Zealand, and
car dealership operations in Belgium. Leases are generally closed-end where
the disposition of vehicles on lease termination is for Hertz' account. Hertz
owns all of its car leasing operations in the United Kingdom, Australia and New
Zealand, and 98% of Axus, S.A., a leasing company which operates in Belgium,
Luxembourg, Holland, France, Italy and Spain, and also operates car dealerships
in Belgium. Axus, S.A. uses the Hertz name pursuant to a license from Hertz.
Claim Management
Through its subsidiary Hertz Claim Management Corporation ("HCM"), Hertz
provides a claim administration service to numerous customers, which includes
investigating, evaluating, negotiating and disposing of a wide variety of
claims, including third-party, first-party, bodily injury, property damage,
general liability, product liability and workers compensation claims, but does
not include underwriting of risks. In 1992, HCM became the claims
administrator for workers compensation claims of the registrant, which are
underwritten by an outside insurance carrier, and also became the administrator
for the registrant's medical, dental and other employee health related benefit
plans. HCM provides these services from 41 locations throughout the United
States and its operations have been profitable.
Telecommunication
In 1991, Hertz began providing telecommunication services through its
subsidiary Hertz Technologies, Inc. ("HTI"). HTI markets custom designed voice
and data telecommunication packages of rates and services and makes available
to customers throughout the United States the opportunity to take advantage of
Hertz' negotiated rates with its underlying carriers providing, among other
things, discounted long-distance services. HTI provides these services from
Oklahoma City and its operations have been profitable.
-5-
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ITEM 1. BUSINESS (continued).
Insurance
For its domestic operations, the registrant is a qualified self-insurer
against liability resulting from accidents under certificates of self-insurance
for financial responsibility in all states wherein its motor vehicles are
registered. The registrant also self-insures general public liability and
property damage for all domestic operations. Effective July 1, 1987, all
claims are retained and borne by the registrant up to a limit of $5,000,000 for
each accident. Self-insurance retention borne by the registrant for each
accident prior to July 1, 1987 was as follows: $10,000,000 from September 1,
1986 to June 30, 1987; $1,000,000 and 50% of claims for amounts exceeding
$1,000,000 up to $6,000,000 from February 17, 1985 to August 31, 1986; and
$1,000,000 prior to February 17, 1985.
For its foreign operations, Hertz generally does not act as a self-insurer.
Instead, Hertz purchases insurance to comply with local legal requirements from
unaffiliated carriers. Effective January 1, 1993, motor vehicle liability
insurance for claims arising on or after January 1, 1993, purchased locally
from unaffiliated carriers by Hertz owned operations in Europe, has been
reinsured by Hertz International RE Limited ("HIRE"), a newly formed reinsurer
in Dublin, Ireland. HIRE effectively responds to the first $1,500,000 of motor
vehicle liability for each accident, with excess liability insurance coverage
maintained by Hertz with unaffiliated carriers.
Provisions for public liability and property damage on self-insured
domestic claims and reinsured foreign claims are made by charges to expense
based upon evaluations of estimated ultimate liabilities on reported and
unreported claims. At December 31, 1993, this liability was estimated at $264
million for combined domestic and foreign operations.
Hertz also maintains insurance coverage with unaffiliated carriers for
such amounts in excess of those retained and borne by Hertz, as it determines
to be necessary.
Ordinarily, collision damage costs and the costs of stolen or unaccounted
for vehicles are carried on a self-insured basis, with such costs being charged
to expense as incurred.
HERC generally requires its customers to provide their own liability
insurance on rented equipment with HERC held harmless under various agreements.
Other types of insurance usually carried by business organizations, such
as workers compensation, property (including boiler and machinery and business
interruption), commercial crime and fidelity and performance bonds, are
purchased from various insurance companies in amounts deemed adequate by Hertz
for the respective hazards.
-6-
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ITEM 1. BUSINESS (continued).
Vehicle Acquisition and Disposition
Hertz believes it is the largest single private purchaser of new vehicles
in the United States, buying and leasing approximately 269,000 vehicles in
1993. The acquisition and disposition of vehicles are, thus, important
activities for Hertz and have a significant impact on profitability. Hertz
obtains, subject to availability, a majority of its cars pursuant to various
fleet programs established by original equipment manufacturers ("OEMs"). Such
vehicles are deemed "nonrisk" because Hertz is able to return these vehicles to
the OEMs at pre-established prices and time frames. In 1993, in Hertz'
domestic and foreign operations, approximately 91% of the vehicles in the fleet
were "nonrisk". Hertz disposes of "at risk" vehicles, whereby Hertz bears the
economic risk of their eventual disposal, through wholesalers and miscellaneous
other channels such as auctions. In recent years, the dynamics of the new and
used car markets have had a negative impact on Hertz' sales efforts and Hertz
has responded by purchasing fewer risk vehicles and by refining the vehicle mix
of its fleet. Upon the sale of a vehicle, the difference between the net
proceeds from sale and the remaining book value is recorded as an adjustment to
depreciation in the period when sold (see Note 7 of the Notes to Consolidated
Financial Statements included in this Report.)
The average holding periods of vehicles and other revenue earning
equipment are as follows: car rental vehicles 6 to 9 months, car leasing
vehicles 36 months, and other equipment 18 to 48 months. At December 31, 1993,
the average ages of owned vehicles and other revenue earning equipment are as
follows: car rental vehicles 5 months, car leasing vehicles 18 months, and
other equipment 28 months. At December 31, 1993, approximately 23% of owned
vehicles and all other revenue earning equipment were "at risk."
Domestically, approximately 74% of the vehicles purchased or leased in
1993 were manufactured by Ford Motor Company ("Ford"), 2% were manufactured by
General Motors Corporation and the remainder were manufactured by Japanese and
European manufacturers. In its foreign operations, Hertz utilizes vehicles
manufactured abroad by subsidiaries of Ford and by other manufacturers. The
percentage of vehicles procured from Ford is expected to continue at
approximately this level in the future, pursuant to a long-term supply contract
between the registrant and Ford. Hertz conducts purchase negotiations for all
of the Hertz owned rental locations. Negotiations include determination of the
initial purchase price of the vehicle and establishment of the payment terms
with individual dealers. New vehicle guarantees of repurchase and/or
depreciation, approval for using Hertz locations for warranty repairs, as well
as the establishment of cooperative advertising and promotion programs are
negotiated with the manufacturers.
The purchases of vehicles are financed through funds provided from
operations and by an active and ongoing global borrowing program. Domestic
short-term requirements are funded primarily in the commercial paper market,
while medium and long-term funds are obtained from the U.S. bond market or the
Euro-markets.
-7-
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ITEM 1. BUSINESS (continued).
Licensees and Associates
The Hertz Corporation's wholly-owned subsidiaries, Hertz System, Inc.
("System") and Hertz International, Ltd. ("International"), respectively,
issue licenses under franchise arrangements to independent licensees who are
engaged in the vehicle renting and leasing business in the United States and
many foreign countries. These licensees generally pay fees based on the number
of vehicles they operate and/or on revenues. Licensees also share in the cost
of the Hertz advertising program, reservations system, and certain other
services. In return, licensees are provided with the use of the "Hertz" name,
management and administrative assistance, training, the availability of Hertz
charge cards, #1 Club, reservations service, the "Rent it Here-Leave it There"
program and other services. System, which owns the Hertz service and
trademarks and certain proprietary knowhow used by licensees, establishes the
uniform standards and procedures under which all such licensees operate. The
Hertz name has significant value. It is well known domestically and in all
major international markets.
System licenses ordinarily are limited as to transferability without
Hertz' consent and are terminable by Hertz only for cause or after a fixed
term. Licensees may generally terminate for any reason on 90 days notice to
System. In some instances, the licenses may require purchase by System of
license rights. The establishment and operations of all licensees are financed
independently by the licensee with Hertz having no investment interest in the
licensee (except for three foreign licensees) or in the licensee's fleet.
Licenses outside the United States are granted by International, with the
consent of System. Initial license fees or the price for the sale to a
licensee of a corporate location may be payable over a term of several years.
New licenses continue to be issued and in some cases licensee businesses are
purchased by Hertz.
In a small number of foreign countries, Hertz is associated with certain
car rental firms in joint representation, marketing and reservations
arrangements under which each party pays commissions to the other on completed
rentals originated through reservations made by the other party. (These firms
are referred to as "associates" in this Report.)
Licensees and associates are of importance since they enable Hertz to offer
expanded national and international service and a broader "Rent it Here-Leave
it There" program. License fees and other payments made by licensees and
associates do not contribute materially to Hertz' income.
-8-
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ITEM 1. BUSINESS (continued).
Advertising
Hertz conducts an active national and international advertising program,
the cost of which, as noted above, is supported in part by contributions of the
independent licensees. Hertz is also a party to a cooperative advertising
agreement with Ford pursuant to which Ford participates in some of the cost of
certain of Hertz' advertising programs in the United States and abroad which
feature the Ford name or products. The advertising campaign also involves
cooperative advertising arrangements with airlines, hotels and others in the
travel industry.
During the five year period ended December 31, 1993, total advertising and
related expenditures of Hertz' advertising programs were approximately as
follows:
Paid By 1993 1992 1991 1990 1989
- ------- -------- -------- -------- -------- --------
(In thousands of dollars)
The Hertz Corporation
and Subsidiaries $101,281 $104,757 $105,871 $106,409 $ 95,458
Ford 40,259 35,692 31,912 30,483 28,867
Licensees 8,154 7,285 7,664 7,715 10,563
------- ------- ------- ------- -------
Total $149,694 $147,734 $145,447 $144,607 $134,888
======= ======= ======= ======= =======
In addition, the licensees spend additional amounts for local advertising
and sales promotions which feature the Hertz name.
Employees
On December 31, 1993, Hertz employed approximately 17,950 persons in its
domestic and foreign operations. Labor contracts covering the terms of
employment of approximately 4,800 employees in the United States are presently
in effect with 96 local unions, affiliated primarily with the International
Brotherhood of Teamsters and the International Association of Machinists
(AFL-CIO). Labor contracts which cover approximately 2,300 of these employees
will expire during 1994. Employee benefits in effect include group life
insurance, hospitalization and surgical insurance, pension plans, and an income
savings plan. Overseas employees are covered by a wide variety of union
contracts and governmental regulations affecting, among other things,
compensation, job retention rights and pensions. Hertz has had no material
work stoppage as a result of labor problems during the last 10 years. Hertz
believes its labor relations to be good.
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ITEM 1. BUSINESS (continued).
Competition
Hertz believes that, collectively with its affiliates, independent
licensees and associates, its rent a car business is the largest in the world;
that its licensed one-way truck rental business is one of the largest in the
United States; and believes that its construction and materials handling
equipment rental, lease and sales business is the largest in the United States.
Hertz has substantial competitors with large resources in its rent a car and
truck rental activities who compete with Hertz in all principal aspects of
these activities, including price and service. Hertz is also faced with
substantial competition from a growing number of smaller operators. At
substantially all of its airport locations, it is faced with competition from
one or more competitors on and off the airport. Competition in all of Hertz'
areas of business is now, and is expected to continue to be, active and
intense.
Governmental Regulation
Throughout the world, Hertz is subject to numerous types of governmental
controls, including those relating to price regulation and advertising,
currency controls, labor matters, charge card operations, environmental
protection, used vehicle sales and franchising.
The use of automobiles and other vehicles is subject to various
governmental controls designed to limit environmental damage, including that
caused by emissions and noise. Generally, these controls are met by the
manufacturer, except in the case of occasional equipment failure requiring
repair by Hertz. To comply with environmental regulations, measures are being
taken at certain locations to reduce the loss of vapor during the fueling
process and to maintain and replace underground fuel storage tanks. Hertz is
also incurring and providing for expenses for the cleanup of fuel discharges
and other alleged violations of environmental laws arising from the disposition
of waste products. Hertz does not believe that it will be required to make any
material capital expenditures for environmental control facilities or to make
any other material expenditures to meet the requirements of governmental
authorities in this area.
Hertz' operations, as well as those of its competitors, could be affected
by any limitation in the fuel supply or by any imposition of mandatory
allocation or rationing regulations. In the event of a severe disruption of
fuel supplies, the operations of all vehicle renting and leasing companies
could be adversely affected.
-10-
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ITEM 2. PROPERTIES.
Hertz' operations are carried on at approximately 1,800 locations at rental
and sales offices and service facilities located at airports and in downtown
and suburban areas. Most of such premises are leased, except for 93 which are
owned in fee. Substantially all airport locations are leased from governmental
authorities charged with the operation of such airports under arrangements
generally providing for payment of rents and a percentage of revenues with a
guaranteed annual minimum (see Note 9 of the Notes to Consolidated Financial
Statements included in this Report).
Hertz has facilities in the vicinity of Oklahoma City, operated under
capital leases, at which reservations for its worldwide car rental operations
are processed and major domestic accounting functions are performed. Hertz
maintains its executive offices in a leased facility in Park Ridge, New Jersey
in which Hertz has a 50% equity interest.
ITEM 3. LEGAL PROCEEDINGS.
Various legal actions, governmental investigations and proceedings, and
claims are pending or may be instituted or asserted in the future against the
registrant and its subsidiaries. Litigation is subject to many uncertainties,
and the outcome of the individual litigated matters is not predictable with
assurance. It is reasonably possible that certain of the actions,
investigations or proceedings could be decided unfavorably to the registrant or
the subsidiary involved. Although the amount of liability at December 31, 1993
with respect to these matters cannot be ascertained, such liability could
approximate up to $1.7 million (net of income tax benefits), and the registrant
believes that any resulting liability should not materially affect the
consolidated financial position, results of operations or cash flows of the
registrant.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not required.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
There is no market for the registrant's common stock. All of the voting
stock of the registrant is owned by Ford Motor Company, AB Volvo, Park Ridge
Limited Partnership and Commerzbank Aktiengesellschaft.
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ITEM 6. SELECTED FINANCIAL DATA.
On July 19, 1993, Park Ridge was merged with and into the registrant. The
merger has been recorded as a "pooling of interests". Under this method of
accounting, when the entities before and after a merger are under common
control with the same management, the operations are combined at historical
cost. Consequently, the selected consolidated financial information of the
registrant set forth in the following table prior to 1993 has been restated for
all periods prior to the effective date of the merger, and is identical to and
has been extracted from the audited consolidated financial statements of Park
Ridge for such periods. The selected financial data for 1993 has been
extracted from the audited consolidated financial information of the registrant
for the year ended December 31, 1993. The information in the tables and the
notes thereto should be read in conjunction with the "Management's Discussion
and Analysis" and the registrant's consolidated financial statements and the
notes thereto, which are included elsewhere in this Report.
Years Ended December 31,
---------------------------------------------------------
1993 1992 1991 1990 1989
------ ------ ------ ------ ------
(In Millions)
REVENUES:
Car rental $2,156 $2,095 $1,972 $2,074 $1,862
Construction equipment rental and sales 216 209 213 233 191
Car leasing 209 241 222 200 128
Car dealerships, claim administration,
etc. 274 271 219 160 72
------ ------ ------ ------ ------
2,855 2,816 2,626 2,667 2,253
------ ------ ------ ------ ------
EXPENSES:
Direct operating 1,647 1,627 1,486 1,470 1,239
Depreciation of revenue earning
equipment 524(a) 497(b) 493 526 463
Selling, general and administrative 336 353 339 348 290
Interest, net of interest income of
$11, $4, $10, $25 and $20 246 307 304 300 253
------ ------ ------ ------ ------
2,753 2,784 2,622 2,644 2,245
------ ------ ------ ------ ------
INCOME BEFORE INCOME TAXES 102 32 4(b) 23 8
PROVISION (BENEFIT) FOR TAXES ON
INCOME 49(a) 22(b) (1)(b) (11)(c) (1)
------ ------ ------ ------ ------
INCOME BEFORE CUMULATIVE EFFECT
OF CHANGES IN ACCOUNTING PRINCIPLES 53 10 5 34 9
CUMULATIVE EFFECT ON PRIOR YEARS OF
CHANGES IN METHOD OF ACCOUNTING FOR -
Postretirement Benefits (d) - (4) - - -
Vehicle Warranties (e) - - (4) - -
Income Taxes (f) - - - - (2)
------ ------ ------ ------ ------
NET INCOME $ 53 $ 6 $ 1 $ 34 $ 7
====== ====== ====== ====== ======
Ratio of Earnings to Fixed Charges (g) 1.3 1.1 1.0 1.1 1.0
Balance Sheet Data at End of Period:
Total Assets $4,688 $4,222 $4,294 $4,334 $4,152
Total Debt 2,940 2,550 2,702 2,798 2,716
Shareholders' Equity 617 580 599 600 542
Ratio of Total Debt to
Shareholders' Equity 4.8 4.4 4.5 4.7 5.0
- ----------
(a) thru (g) see pages 13 and 14.
-12-
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ITEM 6. SELECTED FINANCIAL DATA (continued).
(a) Depreciation of revenue earning equipment for the year 1993 includes
net credits of $28.1 million as compared to net credits of $16.9
million in 1992, primarily attributable to higher proceeds received in
1993 on disposal of the equipment. The tax provision for the year 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 tax laws
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 its former parent companies, UAL and RCA.
Effective January 1, 1993, the registrant adopted the provisions of
Statement of Financial Accounting Standards No. 109, Accounting for
Income Taxes ("FAS No. 109"), which requires the recognition of
deferred tax assets, net of applicable reserves, related to net
operating loss carryforwards and certain temporary differences. The
changes made in FAS No. 109, as they relate to the registrant, did not
have a material effect on the registrant's consolidated financial
position, results of operations or cash flows.
(b) Depreciation of revenue earning equipment for the year 1992 includes
net credits of $16.9 million as compared to net charges of $5.4 million
in 1991, primarily attributable to higher proceeds received in 1992 on
disposal of the equipment and the elimination of losses incurred in
1991 due to the increase in 1992 of "nonrisk" vehicles acquired which
are returned to the vehicle manufacturers at pre-established prices.
The tax provision includes credits of $9.8 million, $16.7 million, and
$38.8 million for the years 1992, 1991 and 1990, respectively,
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,
UAL and RCA, and the reversal of tax accruals no longer required and
benefits realized relating to certain foreign operations. The tax
provision for the year 1991 also includes benefits of $5.5 million
related to the close down and sale of certain unprofitable foreign
operations.
The decrease in income before income taxes for the year ended December
31, 1991, as compared to the prior year, was due to provisions made in
1991 of approximately $20 million primarily incurred to close down
certain unprofitable foreign operations and depreciation adjustments
made to residual values of certain vehicles, $15 million of lower
interest income in 1991 primarily relating to refunds of prior years'
income taxes, and the adverse effects of the decrease in travel due to
the war in the Persian Gulf and a slowdown in the economy. The
decrease was partly offset by net credits of $8.9 million relating to
the sale and disposition of certain properties.
(c) The tax provision for the year 1990 was favorable as compared to the
tax provision for the prior year due to credit adjustments of $38.8
million recorded in 1990, 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, UAL and RCA.
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ITEM 6. SELECTED FINANCIAL DATA (continued).
(d) Effective January 1, 1992, the registrant adopted the provisions of
Statement of Financial Accounting Standards No. 106, Employers'
Accounting for Postretirement Benefits Other than Pensions ("FAS No.
106"), which requires that postretirement health care and other
non-pension benefits be accrued during the years the employee renders
the necessary service. Prior to 1992, the registrant accrued for such
benefits on a pay-as-you-go basis. As of January 1, 1992, the
registrant recorded a cumulative decrease in net income of $4.3 million
(net of $2.7 million tax benefit) as a result of implementing FAS No.
106.
(e) Effective January 1, 1991, the registrant adopted the provisions of
FASB Technical Bulletin No. 90-1, Accounting for Separately Priced
Extended Warranty and Product Maintenance Contracts ("FAS No. 90-1"),
which requires that proceeds received from warranty contracts should be
deferred and recognized in income on a straight line basis over the
contract period, and costs of services performed under the contract
should be charged to expense as incurred. Prior to 1991, when vehicles
were sold under an extended warranty contract, the proceeds received by
the registrant under such contract, net of estimated costs to be
incurred in fulfilling obligations under those contracts, were recorded
in income when the sale occurred. As of January 1, 1991, the
registrant recorded a cumulative decrease in net income of $3.5 million
(net of $2.2 million tax benefit) as a result of implementing FAS No.
90-1.
(f) Effective January 1, 1989, the registrant adopted the provisions of
Statement of Financial Accounting Standards No. 96, Accounting for
Income Taxes ("FAS No. 96"), which requires the use of the liability
method in accounting for income taxes. Deferred tax assets and
liabilities are recorded based on the differences between the financial
statement and tax bases of assets and liabilities and the tax rates in
effect when these differences are expected to reverse. In addition,
deferred tax amounts are recorded with respect to assets and
liabilities acquired in business combinations prior to adoption, when
prior years' financial statements are not restated to reflect adoption
of FAS No. 96. The cumulative decrease in net income as a result of
implementing FAS No. 96 was $2 million.
(g) Earnings have been calculated by adding interest expense and the
portion of rentals estimated to represent the interest factor to income
before income taxes. Fixed charges include interest charges (including
capitalized interest) and the portion of rentals estimated to represent
the interest factor.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION.
1993 vs. 1992
Revenues in 1993 of $2,855 million increased by $39 million as compared to
1992. This improvement was primarily attributable to gains in the car rental
operations resulting from a greater number of transactions and domestic rate
increases, and higher revenues in telecommunication services and construction
equipment rental and sales due to increased volume. These increases were
principally offset by decreases in car leasing and car rental revenues
resulting from changes in foreign exchange rates.
Total expenses decreased $31 million to $2,753 million in 1993 as compared
to $2,784 million in 1992. Direct operating expense increased principally due
to higher costs in the car rental operations and in telecommunication services;
these increases were partly offset by decreases resulting from changes in
foreign exchange rates. Depreciation of revenue earning equipment increased
primarily due to an increase in vehicles and equipment operated and the
discontinuance by the domestic automobile manufacturers of fleet purchase cash
incentives; partly offset by higher net proceeds received on disposal of
revenue earning equipment in excess of book value, principally relating to the
foreign and the construction equipment rental operations. In 1993,
approximately 91% of the vehicles in the fleet were "nonrisk", which at the
time of disposition will not result in any gain or loss. Selling, general and
administrative expense decreased primarily due to lower administrative and
advertising costs and changes in foreign exchange rates. The decrease in
interest expense was primarily due to lower interest rates and higher interest
income in 1993.
The tax provision of $49 million in 1993 was $27 million higher than the
tax provision in 1992, primarily due to higher income before income taxes in
1993 and changes in effective tax rates. The 1993 tax provision 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 tax laws enacted in August 1993. The
1993 and 1992 tax provisions include credits of $2.0 million and $9.8 million,
respectively, 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, UAL and
RCA. See Item 6 - Selected Financial Data and the notes thereto, and Notes 1
and 8 of the Notes to Consolidated Financial Statements included in this
Report.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION (continued).
1992 vs. 1991
Revenues in 1992 of $2.8 billion increased by $.2 billion as compared to
1991. This improvement was primarily attributed to higher revenues in the car
rental operations resulting from an increase in travel and changes in exchange
rates; increased revenues in claim administration and telecommunication
services due to increased volume in the businesses partly due to acquisitions;
and, in Europe, higher revenues in car leasing and car dealership operations
due to the higher volume of business, changes in the mix of vehicles being
leased, and changes in exchange rates. These increases were partly offset by
lower revenues in the foreign operations of construction equipment rental and
sales.
Total expenses increased $.2 billion to $2.8 billion in 1992 as compared to
$2.6 billion in 1991. Direct operating expense increased principally due to
higher volume in the car rental operations, increased costs in the claim
administration and telecommunications service operations, higher costs in the
domestic car rental operations for public liability and property damage claims,
and net credits of $8.9 million included in 1991 relating to the sale and
disposition of certain properties. Depreciation of revenue earning equipment
increased primarily due to an increase in 1992 in the size of the car rental
fleet and higher prices for the automobiles, substantially offset by higher net
proceeds received on disposal of revenue earning equipment in excess of book
value, and the additional depreciation recorded in 1991 to adjust residual
values of certain vehicles partly related to the close down of certain
unprofitable foreign operations. The adjustments included in depreciation of
revenue earning equipment upon disposal of the equipment were $16.9 million
credit in 1992 and $5.4 million charge in 1991; the improvement in 1992 was
primarily attributable to the elimination of losses incurred in 1991 due to the
increase in "nonrisk" vehicles in 1992, and higher proceeds received in 1992 on
the sale of other equipment. In 1992, approximately 93% of the vehicles in the
fleet were "nonrisk", which at the time of disposition will not result in any
gain or loss. Selling, general and administrative expense increased primarily
due to higher administrative expenses partly due to changes in exchange rates.
The increase in interest expense was due to higher debt levels partly offset by
lower interest rates in 1992.
The tax provision of $22 million in 1992 was higher than the tax benefit of
$1 million in 1991, primarily due to higher income before income taxes in 1992
and larger tax credits included in 1991. Tax credits of $9.8 million were
included in 1992 and $22 million were included in 1991 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, UAL and RCA, and in 1991 the reversal of tax
accruals no longer required and benefits realized relating to certain foreign
operations. See Item 6 - Selected Financial Data and the notes thereto, and
Notes 1 and 8 of the Notes to Consolidated Financial Statements included in
this Report.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION (continued).
Liquidity and Capital Resources
Hertz' principal assets are highly liquid, consisting mainly of passenger
automobiles and fairly standard classes of construction equipment. Disposal
channels for these assets, including availability of vehicle manufacturers'
guaranteed buyback programs, are large, well defined, and capable of absorbing
Hertz' short fleet rotation requirements. Customer accounts receivable also
turn rapidly and generate significant liquidity with approximately 30 days of
sales outstanding. Cash requirements are highly seasonal, peaking when fleet
acquisitions are the heaviest. In the annual business cycle, a typical low
point for cash needs occurs during the fourth quarter. Hertz funds its
domestic short-term borrowing requirements in the commercial paper market and
through credit facilities with various banks. Hertz also has access to all
global capital markets for its long-term debt requirements. Funding
requirements of Hertz' foreign operations are generally provided through local
currency short-term and revolving loans with local banks.
During 1993 net cash flows used for operating activities of $558 million
were primarily used for the net expenditures of revenue earning equipment.
These expenditures were funded by net borrowings of $442 million, which
included proceeds from the issuance of long-term debt of $846 million.
The registrant has on file with the Securities and Exchange Commission,
under Rule 415, a Registration Statement on Form S-3 which, as of December 31,
1993, allows the registrant to offer from time to time up to $300 million
aggregate principal amount of its unsecured senior and senior subordinated debt
securities on terms to be determined at the time the securities are offered for
sale. In connection with this filing, the registrant issued in April 1993,
$100 million, 6-1/2% Senior Notes, which mature April 1, 2000; issued in
October 1993, $100 million, 6-3/8% Senior Notes, which mature October 15, 2005;
and subsequently issued in February 1994, $150 million, 6% Senior Notes, which
mature February 1, 2001. The funds were used for general corporate purposes
and to reduce short-term borrowings.
In July 1993, the registrant filed with the Securities and Exchange
Commission, under Rules 415 and 430A, an additional Registration Statement on
Form S-3, which allowed the registrant to offer from time to time up to $500
million aggregate principal amount of its unsecured debt securities, which may
be senior, senior subordinated or junior subordinated in priority of payment,
on terms to be determined at the time the securities are offered for sale. In
connection with this filing, the registrant issued on July 19, 1993, $150
million, 6-5/8% Junior Subordinated Notes, which mature July 15, 2000; and $250
million, 7% Junior Subordinated Notes, which mature July 15, 2003. The
proceeds from these borrowings were used to repay $334.3 million promissory
notes of Park Ridge and to reduce short-term borrowings.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION (continued).
Liquidity and Capital Resources (continued)
As of December 31, 1993, under a lease agreement with a third party lessor,
the registrant may, at its option, lease from the third party lessor up to $500
million net cost of vehicles at any one time. At December 31, 1993, the net
cost of the vehicles leased under this agreement was approximately $407 million
(see Note 7 of the Notes to Consolidated Financial Statements included in this
Report).
At December 31, 1993, Hertz had approximately $1.6 billion of consolidated
unused lines of credit subject to customary terms and conditions, which
includes unused amounts under domestic bank facilities totalling $500 million
to support commercial paper and other short-term borrowings.
At December 31, 1993, approximately $52 million of the registrant's
consolidated shareholders' equity was free of dividend limitations pursuant to
its existing debt agreements.
In May 1993, the Financial Accounting Standards Board issued Statement 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 for fiscal years
beginning after December 15, 1993. Implementation of the standard is not
expected to have a material effect on Hertz' consolidated financial position,
results of operations or cash flows.
Financial reporting in the United States has traditionally been expressed
by virtually all companies in terms of historical or actual costs only.
Financial data comparing historical dollars expended or received in different
years do not reflect the impact of inflation for Hertz, except, as of December
30, 1987, in accordance with the purchase method of accounting, assets and
liabilities of Hertz were recorded at their estimated fair value. As a result
of this change, the value of Hertz' net assets included the effects of
inflation as of December 30, 1987. Since a significant portion of the assets
of Hertz, namely "revenue earning equipment" is held for a short period of
time, the effects of inflation on Hertz' financial data after December 30, 1987
are not significant.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Consolidated Balance Sheet of the registrant at December 31, 1993 and
1992, and the related Consolidated Statement of Income and Reinvested Earnings
and Consolidated Statement of Cash Flows for the years ended December 31, 1993,
1992 and 1991, and other financial statement schedules are set forth under Item
14 hereof.
Selected quarterly data for each quarter of the years 1993 and 1992 is set
forth in Note 13 of the Notes to Consolidated Financial Statements included in
this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information regarding the directors and executive officers of the
registrant, and their ages as of February 7, 1994, are as follows:
Name Age Position and Office
------------------------------- --- --------------------------
Frank A. Olson 61 Chairman of the Board, Chief Executive
Officer and Director
Craig R. Koch 47 President and Chief Operating Officer
Daniel I. Kaplan 51 Executive Vice President
Brian J. Kennedy 52 Executive Vice President, Sales and
Marketing
William Sider 60 Executive Vice President and Chief
Financial Officer and Director
Robert J. Bailey 59 Senior Vice President
John E. Blake 60 Senior Vice President, Properties and
Facilities
Donald F. Steele 55 Senior Vice President, Employee Relations
Paul M. Tschirhart 53 Senior Vice President and General Counsel
Antoine E. Cau 46 Vice President
Joseph R. Nothwang 47 Vice President and General Manager, U.S.
Rent A Car Division
Thomas J. Santorelli 52 Vice President, Insurance
Leo A. Massad, Jr. 62 Controller
Robert H. Rillings 53 Treasurer
Sally W. Staebler 48 Secretary
Albert R. Dowden 52 Director
Malcolm S. Macdonald 53 Director
Terrence F. Marrs 48 Director
David N. McCammon 59 Director
Mats Ola Palm 52 Director
Peter J. Pestillo 55 Director
Jurgen Reimnitz 63 Director
All directors are elected annually to serve until the next annual meeting of
shareholders and until their successors have been elected and qualified. The
election of directors is governed by a Stockholders Agreement dated as of July
7, 1993 among Ford, Park Ridge Limited Partnership, Ford Motor Credit Company,
AB Volvo, Commerzbank Aktiengesellschaft, the registrant and Park Ridge.
Directors are not paid any compensation for their services as directors but
are reimbursed for expenses incurred in connection with attending directors'
meetings.
Officers are elected at the organization meeting of the Board of Directors
held each year for a term of one year and they are elected to serve until the
next annual meeting.
Mr. Olson has been Chairman of the Board of Directors since June 1980, and a
director of the registrant since November 1974. In August 1987, he became
President and a director of Park Ridge Corporation (the registrant's parent
prior to July 19, 1993), Park Ridge, New Jersey. From June 9, 1987 to December
12, 1987 he was Chairman of the Board, President and Chief Executive Officer of
UAL Corporation, Elk Grove, Illinois (the registrant's former parent). He is
also a director of Becton, Dickinson and Co., Franklin Lakes, New Jersey;
Cooper Industries, Inc., Houston, Texas; UAL Corporation, Chicago, Illinois;
Commonwealth Edison Co., Chicago, Illinois; and Foundation Health Corporation,
Rancho Cordova, California.
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ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (continued).
Mr. Koch was elected President and Chief Operating Officer of the
registrant on September 1, 1993. From February 1988 through August 1993 he
served as Executive Vice President and President of North America Rent A Car
operations of the registrant. He served as President and Chief Operating
Officer of the registrant from May 1987 to February 1988. In October 1983 he
became Executive Vice President and General Manager of the registrant's Rent A
Car Division after having served as Vice President and General Manager since
March 1980. He previously served as a director of the registrant from May 1987
to July 1993 and from October 1983 to September 1985.
Mr. Kaplan was elected Executive Vice President of the registrant in May
1987. Previously, he was Vice President, Materials and Support Services from
July 1982 to September 1982 and continued as a Vice President until May 1987.
In September 1982, he was elected a director and President of Hertz Equipment
Rental Corporation, a subsidiary of the registrant.
Mr. Kennedy was elected Executive Vice President, Sales and Marketing of
the registrant in February 1988. From May 1987 through January 1988, he served
as Executive Vice President and General Manager of the Rent A Car Division of
the registrant, prior to which, from October 1983, he served as Senior Vice
President, Marketing.
Mr. Sider was elected Executive Vice President and Chief Financial Officer
of the registrant in February 1988. During the period January 1988 until July
1993, he served Park Ridge as a director and Executive Vice President - Finance
at various times. From June 25, 1987 to December 31, 1987, he served as Chief
Financial Officer of UAL Corporation, Elk Grove, Illinois. From October 1983
to February 1988, he served as Senior Vice President, Finance of the
registrant. In April 1981, he was elected Vice President, Finance, and in 1980
served as Vice President and Controller of the registrant. He has been a
director of the registrant since October 1983.
Mr. Bailey was elected Senior Vice President of the registrant in May 1990.
Previously, he served in various functions with the registrant since 1956,
except for the years 1966 and 1981.
Mr. Blake was elected Senior Vice President, Properties and Facilities of
the registrant in February 1988. In December 1984, he was elected Vice
President, Properties and Facilities. Previously, he served in various
functions with the registrant since 1970.
Mr. Steele was elected Senior Vice President, Employee Relations of the
registrant in July 1984. Previously, he served in various functions with the
registrant since 1972.
Mr. Tschirhart was elected Senior Vice President and General Counsel of the
registrant in October 1986 and was elected Secretary in February 1988.
Previously, he served as Senior Counsel for United Airlines, Inc., Elk Grove,
Illinois, since 1982.
Mr. Cau was elected Vice President of the registrant and President of Hertz
International, Ltd., a subsidiary of the registrant, in April 1990.
Previously, he served in various functions with Hertz International, Ltd.
foreign operations since 1973.
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ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (continued).
Mr. Nothwang was elected Vice President and General Manager U.S. Rent A Car
on September 1, 1993. Previously he served as Division Vice President, Region
Operations since 1985. He has served in various operating positions since
1976.
Mr. Santorelli was elected Vice President, Insurance of the registrant in
March 1986 and in September 1986, he was elected President of Hertz Claim
Management Corporation, a subsidiary of the registrant. Previously, he served
in various positions with the registrant since 1977.
Mr. Massad was elected Controller of the registrant in July 1986.
Previously, he served in various positions with the registrant since 1965.
Mr. Rillings was elected Treasurer of the registrant in November 1986.
Previously, he served in various positions with the registrant since 1961.
Ms. Staebler was elected Secretary of the registrant in July 1993. She
served as Vice President and Secretary of Park Ridge from November 1992 until
July 1993. Ms. Staebler is Assistant General Counsel - Corporate Transactions
for Ford. From 1986 until May, 1993, she was Associate Counsel - Corporate
Transactions for Ford.
Mr. Dowden was elected a director of the registrant and became a member of
the Compensation Committee in July 1993. Mr. Dowden served Park Ridge as a
director from April 1991 until July 1993 and as Executive Vice President from
January 1993 until July 1993. He is President, Chief Executive Officer and
director of Volvo North America Corporation and Senior Vice President of its
parent company, AB Volvo. From 1986 to 1991 he was Executive Vice President
(Deputy Chief Executive Officer) and director of Volvo North America
Corporation.
Mr. Macdonald was elected an Assistant Treasurer and a director of the
registrant and became a member of the Audit Committee in July 1993. During the
period December 1987 until July 1993, he served Park Ridge as a director,
Executive Vice President, Vice President, and Treasurer at various times. He
became an Assistant Treasurer of Ford on September 10, 1981. He is also a
director of Ford Holdings, Inc.
Mr. Marrs was elected a director of the registrant in July 1993. He served
as a director of Park Ridge from December 1990 until July 1993 and Executive
Vice President from January 1993 until July 1993. From 1988 until 1990 he was
Manager of Finance - North American Financial Services Group of Ford.
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ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (continued).
Mr. McCammon was elected a director of the registrant and became Chairman
of the Audit Committee and a member of the Compensation Committee in July 1993.
He served as a director and Executive Vice President of Park Ridge from August
1987 until July 1993. He was elected Vice President - Finance and Treasurer of
Ford on October 13, 1987. Mr. McCammon is also a director of Ford Holdings,
Inc. and Ford Motor Credit Company.
Mr. Palm was elected a director of the registrant in July 1993. He was a
director and Executive Vice President of Park Ridge from January 1993 until
July 1993. He is President and Chief Executive Officer of Volvo Cars of North
America, Inc. Prior to assuming his current responsibilities, Mr. Palm was
Executive Vice President of Volvo Car Corporation, Gothenburg, Sweden. From
1985-1989 he was President of Volvo do Brasil Motores e Velculos S.A., in
Curitiba, Brazil.
Mr. Pestillo was elected a director of the registrant and Chairman of the
Compensation Committee in July 1993. He served Park Ridge as Executive Vice
President, director and Chairman of the Compensation Committee from August 1989
until July 1993. He is Executive Vice President, Corporate Relations of Ford.
He was Vice President, Corporate Relations and Diversified Businesses of Ford
from April 1990 to January 1993. From January 1986 to April 1990 he was Vice
President, Employee and External Affairs for Ford. He is also a director of
Rouge Steel Company.
Mr. Reimnitz was elected a director of the registrant in July 1993. He
served as a director of Park Ridge from June 1989 until July 1993. He has been
a member of the Board of Managing Directors of Commerzbank Aktiengesellschaft
since 1973. He is also a director of Commerzbank Capital Markets Corporation.
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ITEM 11. EXECUTIVE COMPENSATION.
The following table sets forth the compensation earned and/or paid to the
registrant's five most highly compensated executive officers for services
rendered in all capacities to the registrant for the fiscal years ended
December 31, 1993, 1992 and 1991. Compensation of the executive officers are
reviewed and approved by the registrant's Compensation Committee and are
determined in part by the operating performance and the contributions made to
the consolidated results of the registrant. The members of the Compensation
Committee are Peter J. Pestillo (Chairman), Albert R. Dowden and David N.
McCammon, all of whom are directors of the registrant, are not employees of the
registrant, and are not eligible to participate in the registrant's
compensation plans.
SUMMARY COMPENSATION TABLE (5)
Annual Compensation
---------------------------
Other Long Term
Annual Compen- All Other
Name and Salary Bonus Compen- sation Compen-
Principal Position Year (1) (2) sation (3) Payouts (2) sation (4)
- ------------------------- ---- ------ ------ -------- ----------- ---------
(In Thousands of Dollars)
Frank A. Olson 1993 $620 $546 $ - $339 $4
Chairman of the Board and 1992 595 735 - - 4
Chief Executive Officer 1991 550 488 - - 4
Craig R. Koch 1993 348 293 - 169 4
President and Chief 1992 325 342 - - 4
Operating Officer 1991 279 372 - - 4
William Sider 1993 292 183 - 102 4
Executive Vice President 1992 280 245 - - 4
and Chief Financial Officer 1991 255 157 - - 4
Antoine E. Cau 1993 226 132 66 136 -
Vice President 1992 263 169 86 - -
1991 210 184 91 - -
Daniel I. Kaplan 1993 240 189 - 61 4
Executive Vice President 1992 230 36 - - 4
1991 205 42 - - 3
(1) Amounts included consist of salary payments for the respective year and
amounts deferred pursuant to section 401(k) of the Internal Revenue Code.
(2) Includes executive and long term incentive bonuses earned and paid for
the respective year. The long term incentive first year (1991) award
was determined in 1992 and was paid in 1992, and such amounts were
included in the amounts reported for 1991 under "Bonus"; 1992 awards
paid in 1993 were included in 1993 under "Long Term Compensation
Payouts"; 1993 awards to be paid in 1994 have not yet been determined.
(3) Includes the following for the years 1993, 1992 and 1991 (in thousands):
$36, $51 and $52 housing allowance; $6, $7 and $11 automobile use; and
$24, $28 and $28 tax equalization payments, respectively.
(4) Represents the amounts contributed by the registrant to the Income
Savings Plan for the respective year.
(5) The registrant has not granted or issued any stock options or stock
appreciation rights.
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ITEM 11. EXECUTIVE COMPENSATION (continued).
Incentive Compensation Plans
The registrant has an Executive Incentive Compensation Plan for key
employees and officers of the registrant and its subsidiaries. The grant of
awards and the size thereof depends upon the degree to which each operation's
financial targets (pretax income and return on total capital, each as defined)
approved by senior officers of the registrant and members of the registrant's
Compensation Committee, are reached or exceeded. Performance is measured
annually, and the awards are paid in full in the following year, or may be
deferred pursuant to a prior election by a participant, to a period selected by
the participant.
In 1991, the registrant established a Long Term Incentive Plan for officers
and other key employees of the registrant and its subsidiaries. The grant of
awards and the size thereof will be determined by the achievement of certain
qualitative and quantitative performance targets. A new four year performance
cycle begins on each January 1. Performance is measured in four year periods
and awards will be made in cash at the end of each performance period. The
performance factors used include net income of the registrant relative to the
net income average for the Dow 30 Industrials, market share and customer
satisfaction. To phase in this plan, transitional grants were made as of
January 1, 1991, covering one-year, two-year and three-year performance
periods. Awards made in 1993 to the registrant's five most highly compensated
executive officers are set forth in the table below.
LONG TERM INCENTIVE PLANS - AWARDS IN 1993
Performance
or Other Estimated Future Payouts under Non-Stock
Period Until Price-Based Plans
Maturation or ----------------------------------------
Name Payout Threshold Target Maximum
- -------------- ------------- --------- -------- ---------
(In Thousands of Dollars)
Frank A. Olson (1) $-0- $375 $750
Craig R. Koch (1) -0- 188 375
William Sider (1) -0- 113 225
Antoine E. Cau (1) -0- 180 360
Daniel I. Kaplan (1) -0- 68 135
(1) Awards for 1993 will be determined by 1993 performance versus performance
for the three years ended December 31, 1992, and will be paid in 1994.
The registrant also maintains Field Incentive Compensation Plans for
certain employees of the registrant and its subsidiaries. Awards are made and
paid annually based on the achievement of revenue and pretax income objectives.
Each award is determined and approved by the registrant's Compensation
Committee.
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ITEM 11. EXECUTIVE COMPENSATION (continued).
Income Savings Plan
The Income Savings Plan of The Hertz Corporation ("Hertz") was established
effective August 30, 1985. Prior thereto, Hertz salaried employees
participated in the RCA Income Savings Plan ("RCA Plan"). The assets and
liabilities maintained under the RCA Plan attributable to participating Hertz
salaried employees were transferred as of September 1, 1985 to Hertz' Income
Savings Plan (the "Plan"). Under the Plan, Hertz continued substantially the
same provisions as provided under the RCA Plan, except for the following: (1)
the RCA Stock Fund as an investment option was discontinued and was reinvested
in other investment funds as elected by the participants, and (2) the
eligibility requirement for salaried employees hired on or after September 30,
1985 was changed to two years of service in lieu of the one year of service
previously required. Effective January 1, 1989, the eligibility requirement
was reduced to one year of service.
The Plan is a defined contribution plan available to certain full-time and
part-time salaried employees of Hertz, who have been credited with at least
1,000 hours of service during any twelve consecutive months commencing on the
day he/she is credited with his/her first hour of service. Employees covered
by a collective bargaining agreement are not eligible to participate in the
Plan.
As explained below, Hertz contributes a fixed percentage of eligible
employees' base salary. Employees may also elect to have Hertz contribute on
their behalf, subject to a percentage limitation, any whole percentage of their
base salary to the Plan, in lieu of being paid such salary in cash under a
qualified cash or deferred arrangement described in Section 401(k) of the
Internal Revenue Code. Prior to July 1, 1987, employees could also make their
own contributions of their base salary, subject to a percentage limitation.
Effective July 1, 1987, the Plan was amended whereby Hertz contributes a
percentage of eligible employees' salary only if the employee elects to
contribute a portion of his/her base salary. Hertz' contribution was 66% of
the first 6% of the employee's contribution for a maximum Hertz match of 4% of
the employee's base salary. Employee after tax contributions were eliminated.
Effective January 1, 1988, the Plan was further amended to change Hertz'
contribution from 66% to 50% of the first 6% of the employee's contribution for
a maximum Hertz match of 3% of the employee's base salary. Effective July 1,
1991, Hertz' contribution was suspended and was resumed on January 1, 1992.
Employees hired prior to January 1, 1987 become fully vested when
contributions are made. Employees hired on or after January 1, 1987 become
fully vested in the amount contributed by Hertz after the employee completes
five years of service. Each Plan member determines the fund distribution to
which contributions will be applied. The funds include the General Common
Stock Fund, a commingled index fund investing in common stock (shares in medium
to large-size companies chosen for the purpose of approximating the rate of
growth for the S&P 500 Composite Stock Index); the Fixed Income Fund invested
in a managed commingled fund with high quality fixed rate securities, as well
as with insurance companies that guarantee interest rates at agreed upon
levels; a Balanced Fund consisting of a mix of stocks or bonds ranging from 30%
to 70% (stocks are in medium to large-size companies chosen for the purpose of
approximating the rate of growth for the S&P 500 Composite Stock Index, and
bonds are in U.S. Treasury and Agency issues, as well as, high quality
Corporate issues). Plan funds may be invested in interim investments prior to
investments in the General Common Stock Fund, Fixed Income Fund and the
Balanced Fund. Distributions are based on the unit value of the employee's
account as of the valuation date next occurring after retirement, termination
of service, or withdrawal from the Plan. Withdrawals are subject to conditions
stated in the Plan.
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ITEM 11. EXECUTIVE COMPENSATION (continued).
Pension Plan
Effective August 30, 1985, The Hertz Corporation established the Retirement
Plan for the Employees of The Hertz Corporation ("Hertz Plan"). Prior thereto,
Hertz participated in the Retirement Plan for the Employees of RCA Corporation
and Subsidiary Companies ("RCA Plan"). The assets and liabilities associated
with benefits accrued by participating employees of Hertz as of August 30, 1985
were retained under the RCA Plan. Benefits accrued by Hertz' employees through
August 30, 1985 will be paid under the RCA Plan. The Hertz Plan amended the
RCA Plan in the form of a restated plan which continued the RCA Plan for Hertz
employees without interruption.
The Hertz Plan is qualified under the Internal Revenue Code and is a
defined benefit plan for which contributions were made by the employees up to
June 30, 1987 and by the employer. Effective July 1, 1987, the Hertz Plan was
revised to an "Account Balance Pension Plan" under which Hertz pays the entire
cost and employees are no longer required to contribute. Employees are
eligible for participation in the Plan on the first day of the month coinciding
with or following the date on which they complete one year of continuous
service, as defined by the Employee Retirement Income Security Act of 1974
("ERISA"). Employees covered by a collective bargaining agreement are not
eligible unless their union contract makes the Hertz Plan applicable to them.
Effective July 1, 1987, employees are credited annually with 3% of their
pensionable earnings. This benefit is credited with guaranteed interest rates
compounded annually based on rates issued by the Pension Benefit Guaranty
Corporation in effect for the preceding December. In addition, all employees
age 50 or over with 10 or more years of service as of July 1, 1987, will have
an additional amount of their pensionable earnings credited to their account as
follows: 1% for ages 50 through age 54, 2% for ages 55 through 59 and 3% for
ages 60 and over.
Officers of the registrant and its subsidiaries participate in the Hertz
Plan. The amount of the normal retirement benefit under these plans is
determined as a percentage of final average compensation (highest five of last
ten years of covered compensation), based upon years of participation up to
July 1, 1987. Effective July 1, 1987, the normal retirement benefit will be
the value of their cash balance account accrued after July 1, 1987. The
benefits are not offset by Social Security. Compensation covered by the Hertz
Plan means all salary and wages, including overtime and premium pay, sales
commissions and amounts paid under executive and field compensation plans. Set
forth on the next page is a table indicating annual pension benefits payable
under the plan formula prior to July 1, 1987, applicable to the Hertz Plan for
participants in specified remuneration and years of service classifications,
based on retirement at age 65 and selection of a straight life annuity (other
annuity options are available, which would reduce the amounts shown on the
following page). The amounts shown on the following page do not reflect
limitations imposed by ERISA on retirement benefits which may be paid under
plans qualified under the Internal Revenue Code. The registrant has instituted
non-qualified pension plans for its officers to pay those benefits under the
qualified plans which would otherwise be subject to the ERISA limitations.
These plans have been filed with the Internal Revenue Service.
-27-
28
ITEM 11. EXECUTIVE COMPENSATION (continued).
PENSION PLAN TABLE
Final Five Years of Participation in Plan
Years Average -------------------------------------------------------------------------------------------
Earnings 15 20 25 30 35 40
- ------------- -------- -------- -------- -------- -------- --------
$175,000 $ 41,026 $ 54,701 $ 68,376 $ 82,051 $ 95,726 $109,402
225,000 52,996 70,661 88,326 105,991 123,656 141,322
275,000 64,966 86,621 108,276 129,931 151,586 173,242
325,000 76,936 102,581 128,226 153,871 179,516 205,162
375,000 88,906 118,541 148,176 177,811 207,446 237,082
425,000 100,876 134,501 168,126 201,751 235,376 269,002
475,000 112,846 150,461 188,076 225,691 263,306 300,922
525,000 124,816 166,421 208,026 249,631 291,236 332,842
575,000 136,786 182,380 227,976 273,571 319,167 364,763
625,000 148,756 198,341 247,927 297,511 347,096 396,682
675,000 160,726 214,301 267,876 321,452 375,026 428,602
725,000 172,696 230,261 287,826 345,391 402,956 460,522
Credited service with the registrant and its subsidiaries for persons named
in the cash compensation table is as follows: Mr. Olson - 27 years; Mr. Koch
- - 21 years; Mr. Sider - 27 years; and Mr. Kaplan - 15 years. Mr. Cau does not
participate in the Hertz Plan or the RCA Plan.
Employment Agreements
Messrs. Olson, Koch, Sider, and Kennedy serve the registrant under
employment agreements which currently expire on April 30, 1999, April 30, 1999,
June 30, 1997, and June 30, 1997, respectively. Mr. Cau serves a subsidiary of
the registrant under an employment agreement dated January 1, 1990, as amended,
that is terminable by either party under certain circumstances stated therein.
Mr. Daniel I. Kaplan serves a subsidiary of the registrant under an employment
agreement which currently expires on December 14, 1994. The employment
agreements do not provide for any compensatory plan or arrangement or
termination of employment or change in control, except for the compensation of
Antoine E. Cau (portions of his contract which were filed as an Exhibit to the
registrant's report on Form 10-K for the year 1990, were granted confidential
treatment under Rule 24b-2). Employment agreements of Messrs. Olson and Koch
are automatically extended one (1) additional year unless not later than
December 31st of the preceding year, the registrant or the executive shall have
given notice not to extend the agreement.
-28-
29
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Park Ridge purchased all of the registrant's outstanding capital stock from
UAL on December 30, 1987. On July 19, 1993, Park Ridge (which had no material
assets other than the registrant) was merged with and into the registrant, with
the prior stockholders of Park Ridge becoming the stockholders of the
registrant. As of December 31, 1993, 76% of the Preferred Stock and 49% of the
Common Stock of the registrant was owned by Ford (with a Ford subsidiary), 20%
of the Common Stock was owned by Park Ridge Limited Partnership
("Partnership"), whose general partner is Frank A. Olson, Chief Executive
Officer of the registrant, 24% of the Preferred Stock and 26% of the Common
Stock was owned by AB Volvo ("Volvo") and 5% of the Common Stock was owned by
Commerzbank Aktiengesellschaft ("Commerzbank"). Election of directors, public
and private sales of equity securities and other matters related to the
registrant are governed by a Stockholders Agreement dated as of July 7, 1993
among Ford, the Partnership, Ford Motor Credit Company, Volvo, Commerzbank, the
registrant and Park Ridge.
The following table sets forth certain information with regard to the
beneficial ownership of the outstanding capital stock of the registrant, by
each director of the registrant individually and by all directors and officers
of the registrant as a group. Unless otherwise noted, the persons named in the
table have sole voting and investment power with respect to all shares shown as
beneficially owned by them:
Shares Percent of
Beneficially All Common
Beneficial Owner Owned Stock
- ---------------- ------------ ----------
Class A Common Stock:
- ---------------------
Frank A. Olson 200 (1) 20%
All directors and officers as a group 200 20%
(1) Represents 100% of Class A Common Stock. All such shares are owned by
the Partnership of which Mr. Olson is the sole general partner with
sole voting power with respect to such shares. Messrs. Olson and
Sider, who are directors of the registrant, are limited partners of the
Partnership.
In connection with the acquisition of the registrant on December 30, 1987
by Park Ridge, the Partnership contributed $20 million to Park Ridge, which
included $1.5 million in cash and a $18.5 million, 10% Secured Promissory Note
(the "Partnership Note"). As of December 31, 1993, the registrant had a
receivable of $27.1 million due from the Partnership relating to the
Partnership Note. The Partnership Note is secured by a pledge of the Common
Stock of the registrant owned by the Partnership and is payable out of the
proceeds of a dividend, distribution or other disposition of the Partnership's
Common Stock in accordance with the Partnership Note.
-29-
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(continued).
In May 1990, Ford (with a Ford subsidiary) loaned $150 million in the form
of subordinated debt (the "FMCC Note") to Park Ridge, which was assumed by the
registrant upon the merger and is subordinated in right of payment to all
"Superior Indebtedness" (as defined for purposes of the FMCC Note). The FMCC
Note bears interest at a floating rate and matures on May 17, 2000. In
addition, upon the first to occur of certain events, the registrant will be
required to accrue additional interest ("Contingent Interest") on the FMCC Note
as a payable due on maturity of the FMCC Note and ranking pari passu with the
FMCC Note. In the event of a sale by the registrant of the stock or assets of
either (a) Hertz Equipment Rental Corporation and its subsidiaries and certain
affiliates ("HERC", as defined for purposes of the FMCC Note) or 20% or more of
the net assets of HERC or (b) certain subsidiaries and certain licenses of
Hertz International, Ltd. ("Hertz Europe", as defined for purposes of the FMCC
Note) or 20% or more of the stockholder's equity of Hertz Europe, the
registrant will be obligated to pay Contingent Interest equal to 50% of the
amount by which the selling price thereof exceeds a base price thereof
determined as of December 31, 1989 and adjusted thereafter to reflect changes
in the net assets of HERC or changes in the stockholder's equity of Hertz
Europe, respectively (computed on a pro rata basis if less than 100% is sold).
In the case of the first such sale (whether relating to HERC or Hertz Europe),
however, if the excess of the selling price over the adjusted base price of the
entity being sold is less than the excess of the value of the entity not being
sold (determined pursuant to an appraisal procedure) over its adjusted base
price, then such sale shall not constitute an "event" for purposes of the
preceding sentence. In the event of (x) the closing of an initial public
offering of common stock issued by the registrant in accordance with the
Stockholders Agreement among the registrant and its stockholders or (y) the
FMCC Note becoming due and payable by reason of maturity, notice of prepayment
or otherwise, the registrant will be obligated to pay Contingent Interest equal
to 50% of the greater of (i) the amount by which the value of HERC (determined
pursuant to an appraisal procedure) exceeds the adjusted base price thereof and
(ii) the amount by which the value of Hertz Europe (determined pursuant to an
appraisal procedure) exceeds the adjusted base price thereof, except that if
HERC or Hertz Europe or a portion thereof was sold prior to the event referred
to in (x) or (y) and such sale did not result in the determination of
Contingent Interest, then Contingent Interest shall be determined with respect
to the entity so sold.
In 1994, Ford expects to acquire additional shares of Common Stock of the
registrant, including Commerzbank's 5% of the registrant's Common Stock
bringing Ford's ownership of the registrant's voting stock to 54%.
-30-
31
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Hertz is party to a cooperative advertising agreement with Ford (see Item 1
- - Business - Advertising included in this Report). In addition, for each of
the five years ended December 31, 1993, Hertz' domestic revenue earning
vehicles included approximately 70% Ford products and 2% Volvo products. In
its foreign operations, Hertz utilizes vehicles manufactured abroad by
subsidiaries of Ford (which for the five years ended December 31, 1993,
represented in the aggregate approximately 40% of Hertz' fleet) and by other
manufacturers. Ford products are purchased from dealers who are independent
from Ford. The percentages of Ford and Volvo products purchased by Hertz are
expected to continue at approximately this level in the future, pursuant to
long-term supply contracts between the registrant and Ford and the registrant
and Volvo. Hertz purchases the vehicles from Ford dealers and Volvo at
competitive prices.
In 1992, the registrant entered into a lease agreement with a third party
lessor providing for the lease of vehicles purchased by the third party lessor
under a repurchase program offered by Ford. Under the lease, which is
accounted for as an operating lease, the registrant makes payment equal to the
monthly depreciation and all expenses (including interest) of the third party
lessor and is responsible for the remaining net cost on any vehicles that
become ineligible under the repurchase program. At December 31, 1993, the net
cost of the vehicles leased under this agreement was approximately $407
million. See Note 7 of the Notes to Consolidated Financial Statements included
in this Report.
-31-
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements: Page
-----
(i) The Hertz Corporation and Subsidiaries -
Report of Independent Public Accountants 37
Consolidated Balance Sheet at December 31, 1993
and 1992 38-39
Consolidated Statement of Income and Reinvested
Earnings for the years ended December 31, 1993,
1992 and 1991 40
Consolidated Statement of Cash Flows
for the years ended December 31, 1993, 1992
and 1991 41-42
Notes to Consolidated Financial Statements 43-62
2. Financial Statement Schedules:
(i) The Hertz Corporation and Subsidiaries -
Schedule II - Amounts receivable from related
parties for the years ended December 31, 1993,
1992 and 1991 63
Schedule V - Revenue earning equipment, property
and equipment for the years ended December 31,
1993, 1992 and 1991 64-65
Schedule VI - Accumulated depreciation of revenue
earning equipment, property and equipment
for the years ended December 31, 1993, 1992
and 1991 66-67
Schedule VIII - Valuation and qualifying accounts
for the years ended December 31, 1993, 1992
and 1991 68
3. Exhibits:
(3) Articles of Incorporation and By-Laws.
(i) Restated Certificate of Incorporation of The Hertz
Corporation -- incorporated herein by reference to
Exhibit (3)(i) to the registrant's report on Form 8-K
dated July 20, 1993 (File No. 1-7541).
(ii) By-Laws of The Hertz Corporation adopted by its Board of
Directors on July 19, 1993 -- incorporated by reference
to Exhibit (3)(ii) to the registrant's report on Form
8-K dated July 20, 1993 (File No. 1-7541).
-32-
33
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(continued).
3. Exhibits (continued):
(4) Instruments defining the rights of security holders, including
indentures.
(iii) At December 31, 1993, Hertz had 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 such instrument
defining the rights of the holders of such long-term debt.
(10) Material Contracts.
(i) (a) Agreement dated December 30, 1985 between The Hertz
Corporation and Allegis Corporation incorporated
herein by reference to Exhibit (10)(i)(a) to the
registrant's report on Form 10-K for the year ended
December 31, 1985 (File No. 1-7541).
(b) Use Agreement dated December 30, 1985 between The
Hertz Corporation and Allegis Corporation
incorporated herein by reference to Exhibit
(10)(i)(b) to the registrant's report on Form 10-K
for the year ended December 31, 1985 (File
No. 1-7541).
(ii)(A) Stockholders Agreement dated as of July 7, 1993,
among Ford Motor Company, Park Ridge Limited
Partnership, Ford Motor Credit Company, AB Volvo,
Commerzbank Aktiengesellschaft, The Hertz
Corporation, Park Ridge Corporation, and the persons
that become parties thereto pursuant to the terms
thereof. (Portions of this Exhibit have been
omitted pursuant to a request for confidential
treatment of such omitted information under Rule
24b-2.)
(ii)(B)(a) Agreement dated January 1, 1988 between The Hertz
Corporation and Ford Motor Company (portions of this
Exhibit have been omitted and granted confidential
treatment under Rule 24b-2) incorporated herein by
reference to Exhibit (10)(ii)(B)(a) to the
registrant's report on Form 10-K for the year ended
December 31, 1987 (File No. 1-7541).
(b) Agreement dated January 1, 1988 between Hertz
System, Inc. and Ford Motor Company (portions of
this Exhibit have been omitted and granted
confidential treatment under Rule 24b-2)
incorporated by reference to Exhibit (10)(ii)(B)(b)
to the registrant's report on Form 10-K for the year
ended December 31, 1987 (File No. 1-7541).
(c) Agreement dated September 25, 1992 between Hertz
System, Inc. and Ford Motor Company. (Portions of
this Exhibit have been omitted and granted
confidential treatment under Rule 24b-2)
incorporated by reference to Exhibit (10)(ii)(B)(c)
to the registrant's report on Form 10-Q for the
quarterly period ended September 30, 1992 (File No.
1-7541).
-33-
34
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(continued).
3. Exhibits (continued):
(10) Material Contracts (continued):
(iii)(A) (a) Employment contract with Frank A. Olson dated April
16, 1987, as amended December 30, 1987, incorporated
by reference to Exhibit (10)(iii)(A)(a) to the
registrant's report on Form 10-K for the year ended
December 31, 1987 (File No. 1-7541).
(b) Employment contract with Craig R. Koch dated April
16, 1987, as amended December 30, 1987, incorporated
by reference to Exhibit (10)(iii)(A)(b) to the
registrant's report on Form 10-K for the year ended
December 31, 1987 (File No. 1-7541).
(c) Employment contract with William Sider dated July
1, 1992, incorporated by reference to Exhibit
(10)(iii)(A)(c) to the registrant's report on Form
10-K for the year ended December 31, 1992 (File
No. 1-7541).
(d) Employment contract with Brian J. Kennedy dated
July 1, 1992, incorporated by reference to Exhibit
(10)(iii)(A)(d) to the registrant's report on Form
10-K for the year ended December 31, 1992 (File
No. 1-7541).
(e) Employment contract with Daniel I. Kaplan dated
December 14, 1989, incorporated by reference to
Exhibit (10)(iii)(A)(f) to the registrant's report
on Form 10-K for the year ended December 31, 1989
(File No. 1-7541).
(f) Employment contract with Antoine E. Cau dated
January 1, 1990, as amended April 4, 1990,
December 13, 1990 and December 18, 1990 (portions of
this Exhibit have been omitted and granted
confidential treatment under Rule 24b-2) incorporated
by reference to Exhibit (10)(iii)(A)(f) to the
registrant's report on Form 10-K for the year ended
December 31, 1990 (File No. 1-7541).
(g) Executive Incentive Compensation Plan, incorporated
by reference to Exhibit (10)(iii)(A)(g) to the
registrant's report on Form 10-K for the year ended
December 31, 1989 (File No. 1-7541).
(h) Long Term Incentive Plan, incorporated by reference
to Exhibit (10)(iii)(A)(h) to the registrant's
report on Form 10-K for the year ended December 31,
1991 (File No. 1-7541).
-34-
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ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(continued).
3. Exhibits (continued):
(12) Computation of Consolidated Ratio of Earnings to Fixed Charges
for each of the five years in the period ended December 31, 1993.
(21) Subsidiaries of the registrant. Listing of subsidiaries of the
registrant at December 31, 1993.
(23) Consents of experts and counsel. Consent to the incorporation
by reference of report of independent public accountants in
previously filed registration statements under the Securities
Act of 1933.
(b) Reports on Form 8-K:
The registrant filed a Form 8-K dated October 15, 1993 reporting under
Items 5 and 7 thereof (a) certain audited consolidated financial statements of
Park Ridge, which prior to July 19, 1993 was the parent corporation of the
registrant and which on July 19, 1993 was merged with and into the registrant,
(b) the report of Arthur Andersen & Co., independent public accountants, on
such financial statements, and (c) the consent of Arthur Andersen & Co. to the
inclusion of such report in Registration Statements on Form S-3 (File Nos.
33-39145 and 33-62902) filed by the registrant with the Securities and Exchange
Commission covering the issuance of Debt Securities by the registrant.
Schedules and exhibits not included above have been omitted because
the information required has been included in the financial statements or notes
thereto or are not applicable or not required.
-35-
36
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
By: /s/ William Sider
----------------------------------
William Sider
Executive Vice President and
Chief Financial Officer
March 8, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the indicated capacities, on March 8, 1994:
/s/ Frank A. Olson /s/ Craig R. Koch
- --------------------------------- ---------------------------------------
Frank A. Olson Craig R. Koch
Chairman of the Board, Chief President and Chief Operating Officer
Executive Officer and Director
(Principal Executive Officer)
/s/ William Sider /s/ Leo A. Massad, Jr.
- --------------------------------- ---------------------------------------
William Sider Leo A. Massad, Jr.
Executive Vice President and Staff Vice President and Controller
Chief Financial Officer (Principal Accounting Officer)
and Director
(Principal Financial Officer)
/s/ Terrence F. Marrs /s/ David N. McCammon
- --------------------------------- ---------------------------------------
Terrence F. Marrs David N. McCammon
Director Director
/s/ Peter J. Pestillo
- ---------------------------------
Peter J. Pestillo
Director
-36-
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Hertz Corporation:
We have audited the accompanying consolidated balance sheet of The Hertz
Corporation (a Delaware corporation) and subsidiaries as of December 31, 1993
and 1992, and the related consolidated statements of income and reinvested
earnings and cash flows for each of the three years in the period ended
December 31, 1993. These consolidated financial statements and the schedules
referred to below are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of The Hertz Corporation and
subsidiaries as of December 31, 1993 and 1992, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1993, in conformity with generally accepted accounting principles.
As explained in Note 1 to the consolidated financial statements, effective
January 1, 1992 and January 1, 1991, the Company changed its methods of
accounting for postretirement benefits other than pensions and for warranty
contracts in order to comply with the Statement of Financial Accounting
Standards No. 106 and the Financial Accounting Standards Board Technical
Bulletin No. 90-1, respectively.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The financial statement schedules
listed in Item 14(a)2(i) are presented for purposes of complying with the
Securities and Exchange Commission's rules and are not part of the basic
financial statements. These schedules have been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly state in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN & CO.
New York, New York
February 7, 1994
-37-
38
THE HERTZ CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS OF DOLLARS)
ASSETS
December 31,
-----------------------------
1993 1992
---------- ----------
CASH AND EQUIVALENTS (Note 14) $ 88,557 $ 268,019
RECEIVABLES, less allowance for doubtful accounts
of $6,862 (1992 - $8,496) (Schedule VIII) 434,423 608,238
DUE FROM AFFILIATES (Note 7) 328,512 27,948
INVENTORIES, at lower of cost or market 33,643 40,037
PREPAID EXPENSES AND OTHER ASSETS (Note 1) 121,776 140,789
REVENUE EARNING EQUIPMENT, at cost (Note 7)
(Schedules V & VI):
Vehicles 2,685,220 2,115,813
Less accumulated depreciation (268,174) (244,632)
Other equipment 436,024 410,429
Less accumulated depreciation (150,518) (159,082)
---------- ----------
Total revenue earning equipment 2,702,552 2,122,528
---------- ----------
PROPERTY AND EQUIPMENT, at cost (Schedules V & VI):
Land, buildings and leasehold improvements 367,118 349,633
Service equipment 376,261 365,017
---------- ----------
743,379 714,650
Less accumulated depreciation (358,781) (314,378)
---------- ----------
Total property and equipment 384,598 400,272
---------- ----------
FRANCHISES, CONCESSIONS, CONTRACT COSTS AND
LEASEHOLDS, net of amortization 7,192 7,817
COST IN EXCESS OF NET ASSETS OF PURCHASED
BUSINESSES, net of amortization (Note 5) 587,245 606,324
---------- ----------
$4,688,498 $4,221,972
========== ==========
The accompanying notes are an integral part of this statement.
-38-
39
THE HERTZ CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS OF DOLLARS)
LIABILITIES AND SHAREHOLDERS' EQUITY
December 31,
-----------------------------
1993 1992
----------- -----------
ACCOUNTS PAYABLE $ 328,957 $ 380,287
ACCRUED SALARIES AND OTHER COMPENSATION 81,325 69,458
OTHER ACCRUED LIABILITIES 341,418 309,382
ACCRUED TAXES 70,849 69,422
DEBT (Notes 2 and 14) 2,940,495 2,549,901
PUBLIC LIABILITY AND PROPERTY DAMAGE (Schedule VIII) 264,158 226,789
DEFERRED TAXES ON INCOME (Note 8) 44,600 37,200
COMMITMENTS AND CONTINGENCIES (Notes 9, 11 and 14)
SHAREHOLDERS' EQUITY (Note 2):
Preferred stock --
Series A, 10% cumulative 340,000 340,000
Series B, various rates cumulative 99,900 99,900
Common stock, par value $1 per share, shares
issued -- 200 Class A, 311 Class B and 490
Class C (Note 1) 1 1
Additional capital paid-in (Note 4) 100,099 100,099
Reinvested earnings 105,445 52,017
Translation adjustment (Note 3) (28,749) (12,484)
---------- ----------
Total shareholders' equity 616,696 579,533
---------- ----------
$4,688,498 $4,221,972
========== ==========
The accompanying notes are an integral part of this statement.
-39-
40
THE HERTZ CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME AND REINVESTED EARNINGS
(IN THOUSANDS OF DOLLARS)
Years Ended December 31,
------------------------------------------------------
1993 1992 1991
---------- ---------- ----------
REVENUES:
Car rental $2,155,612 $2,095,018 $1,971,867
Construction equipment rental
and sales 215,760 208,768 212,554
Car leasing 209,308 241,004 222,189
Car dealerships, claim
administration, etc. 274,187 271,432 219,615
---------- ---------- ----------
2,854,867 2,816,222 2,626,225
---------- ---------- ----------
EXPENSES:
Direct operating 1,647,104 1,627,521 1,485,585
Depreciation of revenue earning
equipment (Note 7) 523,876 496,824 493,487
Selling, general and administrative 336,037 353,254 338,633
Interest, net of interest income of
$11,318, $3,627 and $9,956 (Note 2) 245,400 306,854 304,308
---------- ---------- ----------
2,752,417 2,784,453 2,622,013
---------- ---------- ----------
INCOME BEFORE INCOME TAXES 102,450 31,769 4,212
PROVISION (BENEFIT) FOR TAXES ON INCOME
(Note 8) 49,022 21,730 (530)
---------- ---------- ----------
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGES IN ACCOUNTING PRINCIPLES 53,428 10,039 4,742
CUMULATIVE EFFECT ON PRIOR YEARS OF
CHANGES IN METHOD OF ACCOUNTING FOR
(Note 1) -
Postretirement Benefits - (4,319) -
Vehicle Warranties - - (3,472)
---------- ---------- ----------
NET INCOME 53,428 5,720 1,270
REINVESTED EARNINGS AT BEGINNING OF YEAR 52,017 46,297 45,027
---------- ---------- ----------
REINVESTED EARNINGS AT END OF YEAR
(Note 2) $ 105,445 $ 52,017 $ 46,297
========== ========== ==========
The accompanying notes are an integral part of this statement.
-40-
41
THE HERTZ CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
Years Ended December 31,
---------------------------------------------------
1993 1992 1991
------------ ----------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 53,428 $ 5,720 $ 1,270
Non-cash expenses:
Depreciation of revenue earning
equipment 523,876 496,824 493,487
Depreciation of property and equipment 63,887 72,093 73,694
Amortization of intangibles 19,365 19,727 21,281
Provision for public liability and
property damage 147,387 126,324 106,569
Provision for losses for doubtful
accounts 6,714 7,959 8,225
Deferred income taxes 7,400 (5,800) 9,900
Revenue earning equipment expenditures (4,845,084) (4,283,018) (4,015,653)
Proceeds from sales of revenue earning
equipment 3,685,946 3,773,059 3,784,010
Changes in assets and liabilities,
net of effects from purchases of
various operations-
Receivables 138,782 (148,168) (71,937)
Due from affiliates (300,564) 126,070 (108,974)
Inventories and prepaid expenses
and other assets 20,864 (11,073) (7,587)
Accounts payable (33,708) 81,524 14,621
Accrued liabilities 57,383 35,172 30,945
Accrued taxes 6,424 10,183 2,827
Payments of public liability and
property damage claims and expenses (109,706) (94,498) (105,906)
---------- ---------- ----------
Net cash flows provided from
(used for) operating activities $ (557,606) $ 212,098 $ 236,772
---------- ---------- ----------
The accompanying notes are an integral part of this statement.
-41-
42
THE HERTZ CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands of Dollars)
Years Ended December 31,
--------------------------------------------------
1993 1992 1991
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment expenditures $ (92,173) $ (83,009) $(100,435)
Proceeds from sales of property and
equipment 36,116 32,219 34,625
Purchases of various operations,
net of cash acquired (see supplemental
disclosures below) (3,578) (2,805) (6,593)
--------- --------- ---------
Net cash flows used for investing
activities (59,635) (53,595) (72,403)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 845,758 261,654 434,845
Repayment of long-term debt (868,810) (342,108) (451,249)
Short-term borrowings:
Proceeds 698,261 486,970 436,288
Repayments (504,703) (473,989) (457,033)
Other, net 271,071 (4,786) (59,570)
--------- --------- ---------
Net cash flows provided from (used for)
financing activities 441,577 (72,259) (96,719)
--------- --------- ---------
EFFECT OF FOREIGN EXCHANGE RATE
CHANGES ON CASH (3,798) (8,113) (81)
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS
DURING THE YEAR (179,462) 78,131 67,569
CASH AND EQUIVALENTS AT BEGINNING OF YEAR 268,019 189,888 122,319
--------- --------- ---------
CASH AND EQUIVALENTS AT END OF YEAR $ 88,557 $ 268,019 $ 189,888
========= ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for -
Interest (net of amount capitalized) $ 240,316 $ 301,295 $ 311,643
Income taxes 11,221 23,509 27,821
In connection with acquisitions made during the years 1993 and 1991,
liabilities assumed were $2.1 million and $.8 million, respectively.
The accompanying notes are an integral part of this statement.
-42-
43
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies
Merger and Capitalization -- the registrant, which was incorporated in
Delaware in 1967, is a successor to corporations which were engaged in the
automobile and truck leasing and rental business since 1924. UAL Corporation
("UAL") (formerly Allegis Corporation) purchased all of the registrant's
outstanding capital stock from RCA Corporation ("RCA") on August 30, 1985.
Park Ridge Corporation ("Park Ridge") purchased all of the registrant's
outstanding capital stock from UAL on December 30, 1987. On July 19, 1993,
Park Ridge (which had no material assets other than the registrant) was merged
with and into the registrant, with the prior stockholders of Park Ridge
becoming the stockholders of the registrant. The merger has been recorded as a
"pooling of interests". Under this method of accounting, when the entities
before and after a merger are under common control with the same management,
the operations are combined at historical cost. Consequently, the consolidated
financial statements of the registrant included herein have been restated for
all periods prior to the effective date of the merger, and are identical to the
audited consolidated financial statements of Park Ridge for such periods. On
the date of the merger, the registrant refinanced $334.3 million promissory
notes of Park Ridge through the public issuance of $400 million aggregate
principal amount of junior subordinated debt securities of the registrant; and
a $150 million loan to Park Ridge from Ford Motor Credit Company ("FMCC") in
the form of subordinated debt was assumed by the registrant (the "FMCC Note").
The FMCC Note, which has a scheduled maturity date of May 17, 2000, is
subordinated in right of payment to all "Superior Indebtedness" (as defined for
purposes of the FMCC Note) of the registrant including the junior subordinated
debt securities referred to above.
As of December 31, 1993, 76% of the Preferred Stock and 49% of the
Common Stock of the registrant was owned by Ford Motor Company ("Ford"), with a
Ford subsidiary, 20% of the Common Stock was owned by Park Ridge Limited
Partnership ("Partnership"), whose general partner is Frank A. Olson, Chief
Executive Officer of the registrant, 24% of the Preferred Stock and 26% of the
Common Stock was owned by AB Volvo ("Volvo") and 5% of the Common Stock was
owned by Commerzbank Aktiengesellschaft ("Commerzbank").
The capital stock of the registrant authorized and issued as of December 31,
1993 and 1992 and the additional capital paid-in are as follows:
Number of Shares
Par Value -------------------------
Per Share Authorized Issued Amount
--------- ---------- ---------- ------------
Preferred Stock:
Series A $100 4,500,000 3,400,000 $340,000,000
Series B 100 999,000 999,000 99,900,000
Common Stock:
Class A 1 200 200 200
Class B 1 800 311 311
Class C 1 490 490 490
------------
Total preferred and common stock 439,901,001
Additional capital paid-in 100,098,999
------------
Total capitalization $540,000,000
============
-43-
44
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies (continued)
The holders of the Series A Preferred Stock ("Series A Stock") and the
Series B Preferred Stock ("Series B Stock") are entitled, when, as and if
declared by the Board of Directors of the registrant, to cumulative annual
dividends, but payable only out of funds legally available therefore,
compounded annually (if in arrears). The annual dividend rate through December
31, 1998 is 10% for the Series A Stock and at various rates which average 4.5%
for the Series B Stock. Commencing January 1, 1999 the annual dividend rate
for the Series A Stock and Series B Stock are subject to adjustment and are
reset on an annual basis. The Series A Stock and the Series B Stock are
redeemable by their terms at the option of the registrant at any time, and do
not have any voting rights, except that the holders of the Series A Stock shall
have the right to elect two directors in the event of default, and the holders
of the Series B Stock will be granted voting rights in the event of significant
and continuing net operating losses.
The holders of the Class A Common Stock and Class B Common Stock have one
vote per share and no special preferences. The holders of the Class C Common
Stock have one vote per share and have the right to designate three directors,
until such time as fewer than 40 shares thereof (adjusted for stock splits and
the like) shall be outstanding, provided, however, that the Class C Common
Stock shall in any event have 40% of the general voting power and the right to
elect not less than 40% of the members of such Board of Directors, until such
time as fewer than 40 shares thereof (as so adjusted) shall be outstanding.
The Class C Common Stock is convertible into Class B Common Stock on a share
for share basis at any time at the holder's option.
In connection with the acquisition of the registrant on December 30, 1987
by Park Ridge, the Partnership contributed $20 million to Park Ridge, which
included $1.5 million in cash and a $18.5 million, 10% Secured Promissory Note
(the "Partnership Note"). As of December 31, 1993, the registrant had a
receivable of $27.1 million due from the Partnership relating to the
Partnership Note. The Partnership Note is secured by a pledge of the Common
Stock of the registrant owned by the Partnership and is payable out of the
proceeds of a dividend, distribution or other disposition of the Partnership's
Common Stock in accordance with the Partnership Note. As of December 31, 1993,
the registrant's receivable due from the Partnership relating to the
Partnership Note, included the $18.5 million Partnership Note and interest of
$8.6 million which is included in Prepaid Expenses and Other Assets in the
consolidated balance sheet.
Principles of Consolidation -- the consolidated financial statements
include the accounts of The Hertz Corporation and its domestic and foreign
subsidiaries. All significant intercompany transactions are eliminated.
-44-
45
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 1 - Summary of Significant Accounting Policies (continued)
Consolidated Statement of Cash Flows -- for purposes of this statement,
the registrant considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
Depreciable Assets -- the provisions for depreciation and amortization are
computed on a straight-line basis over the estimated useful lives of the
respective assets, as follows:
Revenue Earning Equipment:
Vehicles 4 to 6 years
Other equipment 3 to 7 years
Buildings 20 to 50 years
Leasehold improvements Term of lease
Service vehicles and service equipment 3 to 10 years
Franchises, concessions, contract costs and leaseholds 3 to 40 years
Cost in excess of net assets of purchased businesses 20 to 40 years
Hertz follows the practice of charging maintenance and repairs, including the
cost of minor replacements, to maintenance expense accounts. Costs of major
replacements of units of property are charged to property and equipment
accounts and depreciated on the basis indicated above. Gains and losses on
dispositions of property and equipment are included in income as realized.
Upon disposal of revenue earning equipment, depreciation expense is adjusted
for the difference between the net proceeds from sale and the remaining book
value.
Public Liability and Property Damage -- provisions for public liability and
property damage on self-insured domestic claims and reinsured foreign claims
are made by charges to expense based upon evaluations of estimated ultimate
liabilities on reported and unreported claims. For its domestic operations,
the registrant is a qualified self-insurer against liability resulting from
accidents under certificates of self-insurance for financial responsibility in
all states wherein its motor vehicles are registered. The registrant also
self-insures general public liability and property damage for all domestic
operations. Effective July 1, 1987, all claims are retained and borne by the
registrant up to a limit of $5,000,000 for each accident. Self-insurance
retention borne by the registrant for each accident prior to July 1, 1987 was
as follows: $10,000,000 from September 1, 1986 to June 30, 1987; $1,000,000
and 50% of claims for amounts exceeding $1,000,000 up to $6,000,000 from
February 17, 1985 to August 31, 1986; and $1,000,000 prior to February 17,
1985. For its foreign operations, Hertz generally does not act as a
self-insurer. Instead, Hertz purchases insurance to comply with local legal
requirements from unaffiliated carriers. Effective January 1, 1993, motor
vehicle liability insurance for claims arising on or after January 1, 1993,
purchased locally from unaffiliated carriers by Hertz owned operations in
Europe, has been reinsured by Hertz International RE Limited ("HIRE"), a newly
formed reinsurer in Dublin, Ireland. HIRE effectively responds to the first
$1,500,000 of motor vehicle liability for each accident, with excess liability
insurance coverage maintained by Hertz with unaffiliated carriers.
-45-
46
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 1 - Summary of Significant Accounting Policies (continued)
Accounting Changes and Federal and Foreign Taxes -- the registrant sponsors
unfunded plans to provide selected postretirement health care and life
insurance benefits for domestic employees who were hired prior to 1990.
Employees who were hired on and after January 1, 1990 are not eligible to
participate. Effective January 1, 1992, the registrant adopted the provisions
of Statement of Financial Accounting Standards No. 106, Employers' Accounting
for Postretirement Benefits Other than Pensions ("FAS No. 106"), which requires
that postretirement health care and other non-pension benefits be accrued
during the years the employee renders the necessary service. Prior to 1992,
the registrant accrued for such benefits on a pay-as-you-go basis. As of
January 1, 1992, the registrant recorded a cumulative decrease in net income of
$4.3 million (net of $2.7 million tax benefit) as a result of implementing FAS
No. 106.
The registrant adopted the provisions of FASB Technical Bulletin No. 90-1,
Accounting for Separately Priced Extended Warranty and Product Maintenance
Contracts ("FAS No. 90-1") effective January 1, 1991. FAS No. 90-1, which was
issued in December 1990 by the Financial Accounting Standards Board, requires
that proceeds received from warranty contracts should be deferred and
recognized in income on a straight line basis over the contract period, and
costs of services performed under the contract should be charged to expense as
incurred. Prior to 1991, when vehicles were sold under an extended warranty
contract, the proceeds received by the registrant under such contract, net of
estimated costs to be incurred in fulfilling obligations under those contracts,
were recorded in income when the sale occurred. As of January 1, 1991, the
registrant recorded a cumulative decrease in net income of $3.5 million (net of
$2.2 million tax benefit) as a result of implementing FAS No. 90-1.
Effective January 1, 1993, the registrant adopted the provisions of
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes ("FAS No. 109"), which requires the recognition of deferred tax assets,
net of applicable reserves, related to net operating loss carryforwards and
certain temporary differences. The changes made in FAS No. 109, as they relate
to the registrant, did not have a material effect on the registrant's
consolidated financial position, results of operations or cash flows.
The registrant and its domestic subsidiaries filed consolidated Federal
income tax returns after December 31, 1987, and from September 1, 1985 to
December 31, 1987 were included in the consolidated Federal income tax return
of UAL, and prior thereto in the consolidated Federal income tax return of RCA.
Pursuant to arrangements with UAL and RCA, the registrant provides for current
and deferred taxes as if it filed a separate consolidated tax return with its
domestic subsidiaries, except that if any items are subject to limitations in
the registrant's consolidated return calculations, such as foreign tax credits,
investment tax credits, capital losses and net operating losses, such
limitations are determined on the basis of the entire UAL or RCA consolidated
group, as appropriate. To the extent that items which would be subject to
limitation at the registrant's consolidated return level are not limited in the
UAL and RCA consolidated return, the registrant and its domestic subsidiaries
receive credit for such items. The registrant and its subsidiaries account for
investment tax credits under the flow-through method. U.S. income taxes have
not been provided on $212 million in undistributed earnings of subsidiaries
that have been or are intended to be permanently reinvested outside the United
States or are expected to be remitted free of taxes.
-46-
47
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 1 - Summary of Significant Accounting Policies (continued)
Pension and Income Saving Plans -- substantially all domestic employees,
after completion of specified periods of service, are eligible to participate
in the Retirement Plan for the Employees of The Hertz Corporation ("Hertz
Retirement Plan") and in the Income Savings Plan of The Hertz Corporation
("Hertz Income Savings Plan") as of August 30, 1985, and prior thereto in the
Retirement Plan and in the Income Savings Plan of RCA. Payments are made to
pension plans of others pursuant to various collective bargaining agreements.
Under the Hertz Retirement Plan, through June 30, 1987 employees contributed a
part of the cost of current-service benefits while Hertz contributed the
remainder and all other costs under the projected unit credit cost method.
Effective July 1, 1987, the Hertz Retirement Plan was revised to an "Account
Balance Pension Plan" under which Hertz pays the entire cost and employees are
no longer required to contribute. The normal retirement benefits are based on
years of credited service and the five highest amounts of annual compensation
during the employee's last ten years of credited service up to July 1, 1987.
Effective July 1, 1987, the normal retirement benefit will be the value of
their cash balance account accrued after July 1, 1987. Hertz' funding policy
is to contribute at least the minimum amount required by the Employee
Retirement Income Security Act of 1974. Under the Hertz Income Savings Plan,
as explained below, Hertz contributes a fixed percentage of eligible employees'
base salary. Employees may also elect to have Hertz contribute on their
behalf, subject to a percentage limitation, any whole percentage of their base
salary to the Plan, in lieu of being paid such salary in cash under a qualified
cash or deferred arrangement described in Section 401(k) of the Internal
Revenue Code. Prior to July 1, 1987, employees could also make their own
contributions of their base salary, subject to a percentage limitation.
Effective July 1, 1987, the Hertz Income Savings Plan was amended whereby Hertz
contributes a percentage of eligible employees' salary only if the employee
elects to contribute a portion of his/her base salary. Hertz' contribution was
66% of the first 6% of the employee's contribution for a maximum Hertz match
of 4% of the employee's base salary. Employee after tax contributions were
eliminated. Effective January 1, 1988, the Plan was further amended to change
Hertz' contribution from 66% to 50% of the first 6% of the employee's
contribution for a maximum Hertz match of 3% of the employee's base salary.
Effective July 1, 1991, Hertz' contribution was suspended and was resumed on
January 1, 1992.
Most of the registrant's foreign subsidiaries have defined benefit
retirement plans or are required to participate in government plans. These
plans are all funded, except in Germany, where an unfunded liability is
recorded. In certain countries, when the subsidiaries make the required
funding payments, they have no further obligations under such plans.
In May 1993, the Financial Accounting Standards Board issued Statement 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 for fiscal years
beginning after December 15, 1993. Implementation of the standard is not
expected to have a material effect on Hertz' consolidated financial position,
results of operations or cash flows.
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48
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 2 - Debt
Debt of the registrant and its subsidiaries (in thousands of dollars)
consists of the following:
December 31,
-----------------------------
1993 1992
----------- ----------
Notes payable, including commercial paper,
average interest rate 3.4% $ 237,197 $ -
Promissory notes, average interest rate:
1993, 8.3%; 1992, 7.5%; (effective
average interest rate: 1993, 8.6%; 1992,
7.9%); net of unamortized discount: 1993,
$2,549; 1992, $3,517; due 1994 to 2005 1,025,111 1,341,994
Swiss Franc bonds, fixed U.S. dollar obligation,
11.1%, (effective interest rate 9.7%);
including unamortized premium: 1993, $330;
1992, $528; due 1995 46,462 46,660
Property and equipment lease obligations, average
interest rate: 1993, 9.0%; 1992, 9.2%;
due 1994 to 1998 9,907 12,712
Medium-term notes, average interest rate 9.3%
(effective average interest rate: 1993, 9.4%;
1992, 9.3%); net of amortized discount: 1993,
$139; 1992, $281; due 1994 to 1997 226,411 260,269
Senior subordinated promissory notes, average
interest rate, 9.5% (effective average interest
rate 9.6%); net of unamortized discount: 1993,
$621; 1992, $778; due 1994 to 1998 250,731 251,432
Junior subordinated promissory notes, average
interest rate 6.9%; net of unamortized discount
of $372; due 2000 to 2003 399,628 -
Subordinated promissory note, average interest
rate: 1993, 4.0%; 1992, 4.2%; due 2000 (Note 1) 150,000 150,000
Subsidiaries' debt:
Short-term borrowings -
Banks, average interest rate: 1993, 6.6%;
1992, 10.1%, in foreign currencies 441,671 251,136
Others, average interest rate: 1993, 5.4%;
1992, 15.4%, in foreign currencies 21,388 4,469
Other borrowings, average interest rate: 1993,
8.9%; 1992, 10.1%; in domestic and foreign
currencies; net of unamortized discount: 1993,
$65; 1992, $152 131,989 231,229
--------- ---------
Total $2,940,495 $2,549,901
========= =========
-48-
49
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 2 - Debt (continued)
The aggregate amounts of maturities of debt, in millions, are as follows:
1994, $905.0 (including $700.3 of demand and other short-term borrowings);
1995, $262.7; 1996, $224.4; 1997, $176.1; 1998, $319.8; after 1998, $1,052.5.
During the year ended December 31, 1993, short-term borrowings, in
millions, were as follows: maximum amounts outstanding $769.7 commercial
paper, $940.1 banks and $48.0 other; monthly average amounts outstanding $287.5
commercial paper (weighted average interest rate 3.3%), $722.4 banks (weighted
average interest rate 6.9%) and $25.2 other (weighted average interest rate
7.8%).
During the year ended December 31, 1992, short-term borrowings, in
millions, were as follows: maximum amounts outstanding $671.9 commercial paper,
$855.9 banks and $68.2 other; monthly average amounts outstanding $242.8
commercial paper (weighted average interest rate 4.1%), $594.0 banks (weighted
average interest rate 9.5%) and $41.1 other (weighted average interest rate
10.9%).
During the year ended December 31, 1991, short-term borrowings, in
millions, were as follows: maximum amounts outstanding $201.3 commercial paper,
$588.5 banks and $73.6 other; monthly average amounts outstanding $67.4
commercial paper (weighted average interest rate 6.9%), $497.3 banks (weighted
average interest rate 12.1%) and $38.6 other (weighted average interest rate
10.0%).
The net amortized discount charged to interest expense for the years ended
December 31, 1993, 1992 and 1991 relating to debt and other liabilities was
$1.4 million, $2.1 million and $1.9 million, respectively. In addition,
interest expense for the year 1993 was reduced by $8.2 million of interest
income, relating to refunds of prior years' Federal income taxes.
As of October 7, 1993, the registrant entered into a Credit Agreement
("Agreement") with Bank of America National Trust and Savings Association (as
agent and a lender) and twenty-five other banks which is utilized to support
commercial paper and other short-term borrowings and provide committed funding
in the aggregate amount of $500 million to October 6, 1997. Under the
Agreement, the facility can be utilized by the registrant and its domestic
subsidiaries to borrow U.S. dollars or other currencies under various interest
rate alternatives. A facility fee of .20% per annum is payable on the
available credit regardless of utilization.
Hertz had consolidated unused lines of credit subject to customary terms
and conditions, which includes unused amounts under the bank facility indicated
above, of approximately $1.6 billion at December 31, 1993.
The terms of the registrant's loan agreements limit the payment of cash
dividends. At December 31, 1993, approximately $52 million of consolidated
shareholders' equity was free of such limitations.
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50
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 3 - Foreign Currency
Foreign currency exchange gains and losses included in net income were net
gains of $1.4 million, $2.2 million and $1.7 million for the years ended
December 31, 1993, 1992 and 1991, respectively. The cumulative translation
credit adjustment at December 31, 1990 was $15.1 million. The net translation
charge adjustments were $16.3 million, $25.6 million and $1.9 million for the
years ended December 31, 1993, 1992 and 1991, respectively.
Note 4 - Additional Capital Paid-In
There were no changes to additional capital paid-in during 1993, 1992 and
1991.
Note 5 - Acquisitions
In 1992 and 1991, the registrant acquired additional interests in Axus,
S.A. (a leasing company which operates in Belgium, Luxembourg, Holland, France,
Italy and Spain), increasing its ownership from 79% to 98%. In November and
July 1991, the registrant acquired vocational rehabilitation service companies,
which operate in California. The costs relating to these acquisitions
approximated $8.6 million, which exceeded the net assets acquired by
approximately $2.4 million. These acquisitions do not have a material effect
on the registrant's consolidated financial position or results of operations.
In connection with the acquisition of the registrant by Park Ridge in
December 1987 and UAL in August 1985, the excess of the purchase price over the
consolidated equity of the registrant at the time of these purchases was $658.3
million. These costs are being amortized by the registrant over 40 years. The
unamortized amount of such costs at December 31, 1993 was $550.7 million.
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51
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 6 - Pension and Income Savings Plans and Postretirement Benefit Plans
The following tables set forth the funded status and the net periodic
pension cost of the Hertz Retirement Plan covering its domestic ("U.S.")
employees and the retirement plans for foreign operations ("Non-U.S.") and
amounts included in the consolidated balance sheet and statement of income (in
millions of dollars):
December 31, 1993 December 31, 1992
----------------- -----------------
U.S. Non-U.S. U.S. Non-U.S.
------ -------- ------ --------
Actuarial present value of accumulated
benefit obligation -
Vested $ 44.2 $ 18.2 $ 34.2 $ 15.1
Nonvested 8.1 2.7 7.6 2.5
----- ----- ----- -----
Total $ 52.3 $ 20.9 $ 41.8 $ 17.6
===== ===== ===== =====
Actuarial present value of projected
benefit obligation $113.6 $ 26.9 $ 65.7 $ 19.8
Plan assets at fair value 65.3 19.5 57.3 14.8
----- ----- ----- -----
Projected benefit obligation in excess
of plan assets (48.3) (7.4) (8.4) (5.0)
Unrecognized net loss (gain) 29.0 3.0 (4.9) .6
Prior service cost not yet recognized in
net periodic pension cost .5 - .6 -
Remaining unrecognized net obligation 2.2 - 2.7 -
----- ----- ----- -----
Pension liability included in the
balance sheet $(16.6) $ (4.4) $(10.0) $ (4.4)
===== ===== ===== =====
1993 1992 1991
----------------- ----------------- -----------------
U.S. Non-U.S. U.S. Non-U.S. U.S. Non-U.S.
------- ------- ------- ------- ------- -------
Service cost - benefits
earned during the period $ 7.3 $ 1.8 $ 6.1 $ 1.4 $ 6.3 $ 1.4
Interest cost on projected
benefit obligation 6.7 1.4 4.8 1.0 4.2 .8
Actual return on plan assets (5.7) (1.1) (4.2) (.6) (3.9) (.7)
Net amortization and deferral 1.6 .1 .7 .1 .5 .2
----- ----- ----- ----- ----- -----
Net periodic pension cost
included in the income statement $ 9.9 $ 2.2 $ 7.4 $ 1.9 $ 7.1 $ 1.7
===== ===== ===== ===== ===== =====
Significant assumptions used for the U.S. plan were as follows: weighted
average discount rate of 7% at December 31, 1993 and 7-3/4% during 1993 (8.5%
for 1992 and 1991), 6.4% rate of increase in future compensation levels; and
expected long-term rate of return on assets of 9% in 1993 (8.5% in 1992 and
1991). Assumptions used for the Non-U.S. plans vary by country and are made in
accordance with local conditions, but do not vary materially from those used in
the U.S. plan.
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52
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 6 - Pension and Income Savings Plans and Postretirement Benefit Plans
(continued)
The provisions charged to income for the years ended December 31, 1993,
1992 and 1991 for all other pension plans were approximately (in millions)
$5.6, $5.3 and $5.0, respectively.
The provisions charged to income for the years ended December 31, 1993,
1992 and 1991 for the Hertz Income Savings Plan were approximately (in
millions) $2.6, $2.5 and $1.3, respectively.
Beginning in 1992, the estimated cost for postretirement health care and
life insurance benefits has been accrued on an actuarially determined basis, in
accordance with the requirements of FAS No. 106. The following sets forth the
plans' status, reconciled with the amounts included in the consolidated balance
sheet and statement of income (in millions):
Actuarial present value of accumulated benefit December 31,
obligation - ---------------
1993 1992
---- ----
Retirees $ 2.0 $ 1.8
Active employees eligible to retire 1.6 2.6
Other active employees 3.4 3.5
---- ----
Total accumulated obligation and accrued
liability included in the balance sheet $ 7.0 $ 7.9
==== ====
1993 1992
---- ----
Benefits attributed to employees' service $ .3 $ .4
Interest on accumulated benefit obligation .4 .6
---- ----
Net periodic postretirement benefit cost $ .7 $ 1.0
==== ====
The significant assumptions used for the postretirement benefit plans were
as follows: 7.0% weighted average discount rate (8.5% in 1992), 6.4% rate of
increase in future compensation levels, 10.0% weighted average health care cost
trend rate through 1998 (12% in 1992), and 8.6% weighted average trend rate in
ten years (9.6% in 1992). Changing the assumed health care cost trend rates by
one percentage point in each year would change the accumulated postretirement
benefit obligation as of December 31, 1993 by approximately $360,000, and the
aggregate service and interest cost components of net periodic postretirement
benefit cost for 1993 by approximately $50,000.
The cost for the retiree postretirement benefit payments included in
expense for the year ended December 31, 1991 was not material.
-52-
53
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 7 - Revenue Earning Equipment
Revenue earning equipment is used in the rental of vehicles and
construction equipment and the leasing of vehicles under closed-end leases
where the disposition of the vehicles upon termination of the lease is for the
account of Hertz. Revenue is recorded when it becomes receivable and expenses
are recorded as incurred. Hertz' domestic revenue earning vehicles include
approximately 74% Ford products, which are acquired from dealers who are
independent from Ford. The percentage of Ford products acquired by Hertz is
expected to continue at approximately this level in the future, pursuant to a
long-term supply contract between the registrant and Ford. Hertz purchases the
vehicles from Ford dealers at competitive prices.
Under operating leases, aggregate minimum future rentals for vehicles and
equipment leased at December 31, 1993 are receivable approximately as follows
(in millions): $156 in 1994, $91 in 1995, $37 in 1996, and $7 in 1997.
Vehicles and other equipment under lease at December 31, 1993 which are owned
by Hertz amounted to $357 million, net of accumulated depreciation of $144
million (see Note 9 for minimum obligations for vehicles leased under operating
leases by Hertz).
Depreciation of revenue earning equipment includes the following (in
thousands of dollars):
Years Ended December 31,
----------------------------------
1993 1992 1991
-------- -------- --------
Depreciation of revenue earning equipment
(1991 includes additional depreciation to
adjust residual values of certain vehicles
partly relating to the close down of
certain unprofitable foreign operations) $461,708 $434,128 $428,212
Adjustment of depreciation upon disposal
of the equipment, which includes credits
resulting from valuing certain pre-
acquisition assets on a net of tax basis (28,144) (16,882) 5,379
Rents paid for vehicles leased 90,312 79,578 59,896
------- ------- -------
Total $523,876 $496,824 $493,487
======= ======= =======
The improvements in the "adjustment of depreciation upon disposal of the
equipment", from a charge of $5.4 million in 1991 to gains of $16.9 million in
1992, and $28.1 million in 1993, were primarily attributable to higher proceeds
received in 1992 and 1993 on disposal of the equipment and the elimination of
losses incurred in 1991 due to the increase in 1992 and 1993 of "nonrisk"
vehicles acquired which are returned to the vehicle manufacturers at
pre-established prices.
As of December 31, 1993 and 1992, Ford owed Hertz $329 million and $28
million, respectively, in connection with various vehicle repurchase and
warranty programs which were made and are being paid in the ordinary course of
business.
-53-
54
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 7 - Revenue Earning Equipment (continued)
As of December 31, 1993, the registrant operated vehicles used in its
domestic rent a car operations under a lease agreement between the registrant
and a third party lessor. The leased vehicles are purchased by the third party
lessor under a repurchase program with Ford. Under the lease, the registrant
makes payments equal to the monthly depreciation and all expenses (including
interest) of the third party lessor, and is responsible for the remaining net
cost on any vehicles that become ineligible under the repurchase program. The
leased vehicles are subject to a minimum holding period of four months up to
maximum of thirteen months. The average holding period for vehicles leased by
the registrant is eight months. There are no minimum lease payments required
in future years. The registrant may, at its option, lease from the third party
lessor up to $500 million net cost of vehicles at any one time. At December
31, 1993, the net cost of the vehicles leased under this agreement was
approximately $407 million.
Note 8 - Taxes on Income
The provision (benefit) for taxes on income consists of the following (in
thousands of dollars):
Years Ended December 31,
----------------------------------------
1993 1992 1991
------- ------- --------
Current:
Federal $15,717 $ 2,816 $(20,103)
Foreign 23,186 12,682 3,339
State and local 2,719 12,032 6,334
------ ------ -------
Total current 41,622 27,530 (10,430)
------ ------ -------
Deferred:
Federal 8,094 (6,900) (1,600)
Foreign (5,594) 6,700 12,300
State and local 4,900 (5,600) (800)
------ ------ -------
Total deferred 7,400 (5,800) 9,900
------ ------ -------
Total provision (benefit) $49,022 $21,730 $ (530)
====== ====== =======
The principal items in the deferred tax provision (benefit) are as follows
(in thousands of dollars):
Differences between tax and book
depreciation $33,259 $ 3,183 $ 6,689
Accrued and prepaid expense
deducted for tax purposes when
paid or incurred (20,171) (18,537) 25,303
Tax operating loss utilized
(carryforwards) (2,585) 8,479 (4,583)
Federal alternative minimum tax
credits utilized (carryforwards) (8,123) (1,407) 1,540
Investment tax credits utilized
(carryforwards) 5,020 2,482 (19,049)
------ ------ -------
Total deferred provision (benefit) $ 7,400 $(5,800) $ 9,900
====== ====== =======
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55
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 8 - Taxes on Income (continued)
The principal items in the deferred tax liability at December 31, 1993 and 1992
are as follows (in thousands of dollars):
1993 1992
-------- --------
Differences between tax and book
depreciation $201,168 $167,909
Accrued and prepaid expense
deducted for tax purposes when
paid or incurred (108,253) (88,082)
Tax operating loss carryforwards (4,280) (1,695)
Federal alternative minimum tax
credit carryforwards (32,488) (24,365)
Investment tax credit carryforwards (11,547) (16,567)
------- -------
Total $ 44,600 $ 37,200
======= =======
The tax operating loss carryforwards at December 31, 1993 of $4.3 million
relate to certain foreign operations which have no expiration dates. It is
anticipated that such operations will become profitable in the future and the
carryforwards will be fully utilized.
As of December 31, 1993, the alternative minimum tax credit carryforwards of
$32.5 million (which has no expiration date) and investment tax credit
carryforwards of $11.5 million (which expires at the end of 1999) will be
utilized when timing differences turnaround and from future taxable income.
-55-
56
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 8 - Taxes on Income (continued)
The principal items accounting for the difference in taxes on income
computed at the U.S. statutory rate of 35% for 1993 and 34% for 1992 and 1991
and as recorded are as follows (in thousands of dollars):
Years Ended December 31,
-------------------------------------
1993 1992 1991
--------- -------- --------
Computed tax at statutory rate $35,858 $10,801 $ 1,432
State and local income taxes, net
of Federal income tax benefit 4,953 4,303 3,088
Tax effect that resulted from the equal
off-setting provision or benefit required
in connection with sales of certain pre-
acquisition assets or the payment of certain
pre-acquisition liabilities 5,737 5,596 6,386
Adjustments made to tax accruals in connection
with tax audit evaluations, the effects of
prior years' tax sharing arrangements between
the registrant and its former parent
companies, UAL and RCA, and the reversal of
tax accruals no longer required and benefits
realized relating to certain foreign
operations (1,983) (9,800) (16,661)
Provision relating to the increase in net deferred
tax liabilities as of January 1, 1993 due to
changes in tax laws enacted in August 1993 1,137 - -
Tax benefits related to the close down and sale
of certain unprofitable foreign operations - - (5,501)
Income taxes on foreign earnings at
effective rates different from the U.S.
statutory rate, including the realization
of certain foreign tax benefits and the
effect of subsidiaries' gains and losses
and exchange adjustments with no tax effect 1,883 9,246 9,923
All other items, net, none of which
exceeded 5% of computed tax 1,437 1,584 803
------ ------ ------
Total provision (benefit) $49,022 $21,730 $ (530)
====== ====== ======
-56-
57
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 9 - Lease and Concession Agreements
Hertz has various concession agreements which provide for payment of rents
and a percentage of revenue with a guaranteed minimum and real estate leases
under which the following amounts were expensed (in thousands of dollars):
Years Ended December 31,
-------------------------------------
1993 1992 1991
-------- -------- --------
Rents $ 49,168 $ 50,988 $ 45,941
Concession fees:
Minimum fixed obligations 105,499 96,528 89,984
Additional amounts, based on revenues 89,792 88,802 80,444
------- ------- -------
Total $244,459 $236,318 $216,369
======= ======= =======
As of December 31, 1993, minimum obligations under existing agreements
referred to above are approximately as follows (in thousands of dollars):
Rents Concessions
-------- -------------
Years ended December 31,
1994 $ 37,854 $91,428
1995 31,028 68,678
1996 25,118 51,705
1997 21,574 34,618
1998 19,198 17,292
Years after 1998 142,172 40,973
In addition to the above, Hertz has various leases on vehicles and office
and computer equipment under which the following amounts were expensed (in
thousands of dollars):
Years Ended December 31,
----------------------------------------------
1993 1992 1991
-------- -------- --------
Vehicles $ 90,312 $ 79,578 $59,896
Office and computer equipment 25,229 24,481 26,457
------- ------ ------
Total $115,541 $104,059 $86,353
======= ======= ======
As of December 31, 1993, minimum obligations under existing agreements
referred to above that have a maturity of more than one year are as follows (in
thousands): vehicles, which are substantially offset by sublease rental income
under operating leases (see Note 7), 1994, $586; and office and computer
equipment 1994, $20,259; 1995, $12,864; 1996, $2,125; 1997, $257; after 1997,
$41.
-57-
58
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 10 - Segment Information
Hertz' business consists of two significant segments: Rental and leasing of
automobiles and certain other activities ("car rental"); and rental, leasing,
and sales of construction and materials handling equipment ("construction
equipment rental and sales"). The contributions of these segments to revenues
are indicated in the Consolidated Statement of Income. The contribution of
these segments to other financial data (in millions of dollars) are as follows:
Years Ended December 31,
-----------------------------------------
1993 1992 1991
------ ------ ------
Operating Income (pretax income before
interest):
Car rental $ 307 $ 314 $ 284
Construction equipment rental and sales 41 25 24
----- ----- -----
Total $ 348 $ 339 $ 308
===== ===== =====
Capital Expenditures (includes revenue
earning equipment):
Car rental $4,783 $4,274 $4,069
Construction equipment rental and sales 154 92 47
----- ----- -----
Total $4,937 $4,366 $4,116
===== ===== =====
Depreciation and Amortization:
Car rental $ 557 $ 529 $ 521
Construction equipment rental and sales 50 60 67
----- ----- -----
Total $ 607 $ 589 $ 588
===== ===== =====
Identifiable Assets at December 31:
Car rental $4,321 $3,887 $3,931
Construction equipment rental and sales 367 335 363
----- ----- -----
Total $4,688 $4,222 $4,294
===== ===== =====
-58-
59
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 10 - Segment Information (continued)
Hertz operates in the United States and in foreign countries. The
operations within major geographic areas are summarized as follows (in millions
of dollars):
Years Ended December 31,
----------------------------------------
1993 1992 1991
------ ------ ------
Revenues
United States $1,932 $1,773 $1,636
Foreign operations (substantially Europe) 923 1,043 990
----- ----- -----
Total $2,855 $2,816 $2,626
===== ===== =====
Income Before Income Taxes
United States $ 48 $ (7) $ (23)
Foreign operations (substantially Europe) 54 39 27
----- ----- -----
Total $ 102 $ 32 $ 4
===== ===== =====
Total Assets at End of Year
United States $3,447 $2,952 $2,905
Foreign operations (substantially Europe) 1,241 1,270 1,389
----- ----- -----
Total $4,688 $4,222 $4,294
===== ===== =====
Note 11 - Litigation
Various legal actions, governmental investigations and proceedings, and
claims are pending or may be instituted or asserted in the future against the
registrant and its subsidiaries. Litigation is subject to many uncertainties,
and the outcome of individual litigated matters is not predictable with
assurance. It is reasonably possible that certain of the actions,
investigations or proceedings could be decided unfavorably to the registrant or
the subsidiary involved. Although the amount of liability at December 31, 1993
with respect to these matters cannot be ascertained, such liability could
approximate up to $1.7 million (net of income tax benefits), and the registrant
believes that any resulting liability should not materially affect the
consolidated financial position, results of operations or cash flows of the
registrant.
-59-
60
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 12 - Supplementary Income Statement Information (in thousands of dollars)
Years Ended December 31,
---------------------------------------------
1993 1992 1991
------- ------- -------
General Taxes:
Vehicle licenses $ 61,079 $ 62,470 $ 56,186
Property and other 27,580 25,198 24,815
------- ------- -------
$ 88,659 $ 87,668 $ 81,001
======= ======= =======
Maintenance and repairs (prior
year balances have been restated
to conform with classifications
used in 1993) $197,723 $182,163 $178,835
======= ======= =======
Advertising and related expenses:
Total expenditures $149,694 $147,734 $145,447
Less amounts paid by:
Ford Motor Company (40,259) (35,692) (31,912)
Licensees (8,154) (7,285) (7,664)
------- ------- -------
Charged to income $101,281 $104,757 $105,871
======= ======= =======
Hertz is a party to a cooperative advertising agreement with Ford pursuant
to which Ford participates in some of the cost of certain of Hertz' advertising
programs in the United States and abroad which feature the Ford name or
products. This program will continue in the future.
-60-
61
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 13 - Quarterly Financial Information (Unaudited)
A summary of the quarterly operating results during 1993 and 1992 (before
the cumulative effect on prior years of the change in 1992 in the method of
accounting for postretirement benefits other than pensions) was as follows:
Gross Profit Income (Loss) Income (Loss)
(Pretax Income Before Income Before Change
Revenues Before Interest) Taxes In Accounting
---------- ---------------- ------------- -------------
1993
First quarter $ 636,241 $ 37,116 $(14,271) $ (6,873)
Second quarter 739,504 89,288 26,926 13,113
Third quarter 817,252 149,851 78,253 39,034
Fourth quarter 661,870 71,595 11,542 8,154
--------- ------- ------- ------
Total Year $2,854,867 $347,850 $102,450 $ 53,428
========= ======= ======= =======
1992
First quarter $ 602,751 $ 17,029 $(54,303) $(54,303)
Second quarter 708,930 78,934 (518) (1,769)
Third quarter 840,739 156,940 71,925 56,100
Fourth quarter 663,802 85,720 14,665 10,011
--------- ------- ------- ------
Total Year $2,816,222 $338,623 $ 31,769 $ 10,039
========= ======= ======= =======
The tax provision in the third quarter of 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 tax laws 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, UAL and RCA.
The tax provision in the fourth quarter of 1992 includes credits of $9.8
million 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, UAL and RCA, and the
reversal of tax accruals no longer required and benefits realized relating to
certain foreign operations.
-61-
62
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 14 - Financial Instruments and Commitments
Cash and equivalents -- fair value approximates cost indicated on the
balance sheet at December 31, 1993, because of the short-term maturity of
these instruments.
Debt -- fair value is estimated based on quoted market rates as well as
borrowing rates currently available to the registrant for loans with similar
terms and average maturities. Carrying value was used as fair value for
borrowings with an initial maturity of 90 days or less. The fair value of all
debt at December 31, 1993 approximated $3.1 billion compared to carrying value
of $2.9 billion.
Interest rate swaps -- the registrant has outstanding interest rate swaps
of various maturities with multiple financial institutions. At December 31,
1993, the aggregate notional principal amounts in various currencies were $842
million. Notional amounts do not represent cash flows and are not subject to
credit risks. Credit and market risk exposures are limited to the net interest
differentials. The fair value is calculated using information provided by
outside quotation services and is the estimated amount that would be received
or paid to terminate the swaps at December 31, 1993, taking into account
current interest rates and the current credit worthiness of the swap
counterparties. The fair value was estimated to be a net payable of $14
million at December 31, 1993, however, the registrant uses these interest rate
swaps to fix interest rates on variable rate debt and does not anticipate any
early terminations of these swaps. Therefore, this amount will not have to be
paid in connection with such early termination.
Note 15 - Subsequent Event
In 1994, Ford expects to acquire additional shares of Common Stock of the
registrant, including Commerzbank's 5% of the registrant's Common Stock
bringing Ford's ownership of the registrant's voting stock to 54%.
-62-
63
SCHEDULE II
THE HERTZ CORPORATION AND SUBSIDIARIES
AMOUNTS RECEIVABLE FROM RELATED PARTIES
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
(In Thousands of Dollars)
Balance at Balance
Beginning at End of
Name of Debtor of Year Additions Deductions Year
- ------------------ ---------- --------- ---------- ---------
Park Ridge Limited
Partnership -
1993 $27,086 $ - $ - $ 27,086
1992 $27,086 $ - $ - $ 27,086
1991 $24,624 $ 2,462 $ - $ 27,086
In connection with the acquisition of the registrant on December 30, 1987
by Park Ridge, the Partnership contributed $20 million to Park Ridge, which
included $1.5 million in cash and a $18.5 million, 10% Secured Promissory Note
(the "Partnership Note"). As of December 31, 1993, the registrant had a
receivable of $27.1 million due from the Partnership relating to the
Partnership Note. The Partnership Note is secured by a pledge of the Common
Stock of the registrant owned by the Partnership and is payable out of the
proceeds of a dividend, distribution or other disposition of the Partnership's
Common Stock in accordance with the Partnership Note. As of December 31, 1993,
the registrant's receivable due from the Partnership relating to the
Partnership Note, included the $18.5 million Partnership Note and interest of
$8.6 million.
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64
SCHEDULE V
Page 1 of 2
THE HERTZ CORPORATION AND SUBSIDIARIES
REVENUE EARNING EQUIPMENT, PROPERTY AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
(In Thousands of Dollars)
Balance at Additions Deductions Balance
--------- -------------------------
Beginning Translation Retirements at End
of Year Purchases Adjustments & Transfers of Year
---------- --------- ----------- ----------- ----------
1993
Revenue Earning Equipment:
Vehicles $2,115,813 $4,704,583 $ 64,453 $ 4,070,723 $ 2,685,220
Other equipment 410,429 140,501 1,923 112,983 436,024
--------- --------- --------- ---------- ----------
$2,526,242 $4,845,084 $ 66,376 $ 4,183,706 $ 3,121,244
========= ========= ========= ========== ==========
Property and Equipment (a):
Land $ 75,021 $ 2,936 $ 1,013 $ 469 $ 76,475
Buildings 95,998 6,732 2,683 381 99,666
Leasehold Improvements 178,614 17,044 3,140 1,541 190,977
Service Equipment 365,017 65,461 5,794 48,423 376,261
--------- --------- --------- ---------- ----------
$ 714,650 $ 92,173 $ 12,630 $ 50,814 $ 743,379
========= ========= ========= ========== ==========
1992
Revenue Earning Equipment:
Vehicles $2,206,977 $4,200,214 $ 125,482 $ 4,165,896 $ 2,115,813
Other equipment 418,780 82,804 3,902 87,253 410,429
--------- --------- --------- ---------- ----------
$2,625,757 $4,283,018 $ 129,384 $ 4,253,149 $ 2,526,242
========= ========= ========= ========== ==========
Property and Equipment (a):
Land $ 76,396 $ 1,373 $ 1,284 $ 1,464 $ 75,021
Buildings 95,082 6,006 3,384 1,706 95,998
Leasehold improvements 176,531 14,551 7,125 5,343 178,614
Service Equipment 352,376 61,079 12,091 36,347 365,017
--------- --------- --------- ---------- ----------
$ 700,385 $ 83,009 $ 23,884 $ 44,860 $ 714,650
========= ========= ========= ========== ==========
(a) Retirements and transfers include charge adjustments relating to assets
sold or retired of (in millions) $1.2 and $1.8 for the years ended
December 31, 1993 and 1992, respectively, applicable to the reversal of
credits resulting from valuing certain pre-acquisition assets on a net
of tax basis.
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65
SCHEDULE V
Page 2 of 2
THE HERTZ CORPORATION AND SUBSIDIARIES
REVENUE EARNING EQUIPMENT, PROPERTY AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
(In Thousands of Dollars)
Additions Deductions
Balance at ----------- ------------------------------ Balance
Beginning Translation Retirements at End
of Year Purchases Adjustments & Transfers of Year
---------- ----------- ----------- ----------- --------
1991
Revenue Earning Equipment:
Vehicles $2,441,145 $3,975,999 $ 292 $4,209,875 $2,206,977
Other equipment 454,527 39,654 339 75,062 418,780
--------- --------- ------- --------- ---------
$2,895,672 $4,015,653 $ 631 $4,284,937 $2,625,757
========= ========= ======= ========= =========
Property and Equipment (a):
Land $ 78,652 $ 2,010 $ 397 $ 3,869 $ 76,396
Buildings 94,215 5,372 1,558 2,947 95,082
Leasehold improvements 160,679 20,822 3,006 1,964 176,531
Service equipment 313,157 72,398 241 32,938 352,376
--------- --------- ------- --------- ---------
$ 646,703 $ 100,602 $ 5,202 $ 41,718 $ 700,385
========= ========= ======= ========= =========
(a) Retirements and transfers include charge adjustments relating to
assets sold or retired of $2.6 million for the year ended December
31, 1991, applicable to the reversal of credits resulting from
valuing certain pre-acquisition assets on a net of tax basis.
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66
SCHEDULE VI
Page 1 of 2
THE HERTZ CORPORATION AND SUBSIDIARIES
ACCUMULATED DEPRECIATION OF
REVENUE EARNING EQUIPMENT, PROPERTY AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
(In Thousands of Dollars)
Additions Deductions
Balance at --------- ------------------------- Balance
Beginning Charged to Translation Retirements at End
of Year Income Adjustments & Transfers Of Year
--------- -------- ----------- ----------- -------
1993
Revenue Earning Equipment(a):
Vehicles $ 244,632 $ 482,294 $ 10,225 $ 448,527 $268,174
Other equipment 159,082 41,582 913 49,233 150,518
-------- -------- ------- -------- -------
$ 403,714 $ 523,876 $ 11,138 $ 497,760 $418,692
======== ======== ======= ======== =======
Property and Equipment(b):
Buildings $ 15,844 $ 3,835 $ 122 $ 173 $ 19,384
Leasehold improvements 74,906 18,388 1,127 463 91,704
Service equipment 223,628 41,664 3,265 14,334 247,693
-------- -------- ------- -------- -------
$ 314,378 $ 63,887 $ 4,514 $ 14,970 $358,781
======== ======== ======= ======== =======
1992
Revenue Earning Equipment(a):
Vehicles $ 277,036 $ 446,605 $ 40,036 $ 438,973 $244,632
Other equipment 151,390 50,219 1,410 41,117 159,082
-------- -------- ------- -------- -------
$ 428,426 $ 496,824 $ 41,446 $ 480,090 $403,714
======== ======== ======= ======== =======
Property and Equipment(b):
Buildings $ 13,034 $ 3,684 $ 758 $ 116 $ 15,844
Leasehold improvements 58,523 21,234 3,781 1,070 74,906
Service equipment 195,260 47,175 7,352 11,455 223,628
-------- -------- ------- -------- -------
$ 266,817 $ 72,093 $ 11,891 $ 12,641 $314,378
======== ======== ======= ======== =======
(a) Depreciation expense has been decreased by $28.1 million and $16.9 million
for the years ended December 31, 1993 and 1992, respectively, for the
difference between the remaining book values and the net proceeds from sale
of revenue earning equipment, which includes credits resulting from valuing
certain pre-acquisition assets on a net of tax basis. Rents paid for
vehicles leased included in depreciation expense in the amount of (in
millions) $90.3 and $79.6 for the years ended December 31, 1993 and 1992,
respectively, have also been included above in retirements and transfers.
(b) Depreciation expense relating to assets sold or retired has been reduced by
(in millions) $1.2 and $1.8 for the years ended December 31, 1993 and 1992,
respectively, applicable to credits resulting from valuing certain
pre-acquisition assets on a net of tax basis and a contra charge has been
included above in retirements and transfers.
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SCHEDULE VI
Page 2 of 2
THE HERTZ CORPORATION AND SUBSIDIARIES
ACCUMULATED DEPRECIATION OF
REVENUE EARNING EQUIPMENT, PROPERTY AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
(In Thousands of Dollars)
Additions Deductions
Balance at --------- ------------------------- Balance
Beginning Charged to Translation Retirements at End
of Year Income Adjustments & Transfers Of Year
--------- -------- ----------- ----------- -------
1991
Revenue Earning Equipment(a):
Vehicles $ 314,970 $ 436,710 $ 3,624 $ 471,020 $277,036
Other equipment 124,535 56,777 15 29,907 151,390
-------- -------- ------- -------- -------
$ 439,505 $ 493,487 $ 3,639 $ 500,927 $428,426
======== ======== ======= ======== =======
Property and Equipment(b):
Buildings $ 10,954 $ 4,347 $ 303 $ 1,964 $ 13,034
Leasehold improvements 41,168 18,997 744 898 58,523
Service equipment 149,356 50,350 215 4,231 195,260
-------- -------- ------- -------- -------
$ 201,478 $ 73,694 $ 1,262 $ 7,093 $266,817
======== ======== ======= ======== =======
(a) Depreciation expense has been increased for the difference between the
remaining book values and the net proceeds from sale of revenue earning
equipment, which includes credits resulting from valuing certain
pre-acquisition assets on a net of tax basis, by $5.4 million for the year
ended December 31, 1991. Rents paid for vehicles leased included in
depreciation expense in the amount of $59.9 million for the year ended
December 31, 1991 have also been included above in retirements and
transfers.
(b) Depreciation expense relating to assets sold or retired has been reduced by
$2.6 million for the year ended December 31, 1991, applicable to credits
resulting from valuing certain pre-acquisition assets on a net of tax basis
and a contra charge has been included above in retirements and transfers.
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68
SCHEDULE VIII
THE HERTZ CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(In Thousands of Dollars)
Additions
---------
Charged Deductions
Balance at --------------------------- Balance
Beginning to Translation at End
of Year Income Adjustments Other of Year
---------- --------- ----------- ------- -------
1993
Allowance for doubtful
accounts $ 8,496 $ 6,714 $ 524 $ 7,824(a) $ 6,862
======== ======== ======= ====== =======
Public liability and
property damage $ 226,789 $ 147,387 $ 1,076 $108,942(b) $264,158
======== ======== ======= ======= =======
1992
Allowance for doubtful
accounts $ 10,104 $ 7,959 $ 983 $ 8,584(a) $ 8,496
======== ======== ======= ====== =======
Public liability and
property damage $ 195,932 $ 126,324 $ 591 $ 94,876(b) $226,789
======== ======== ======= ====== =======
1991
Allowance for doubtful
accounts $ 8,837 $ 8,225 $ 87 $ 6,871(a) $ 10,104
======== ======== ======= ====== =======
Public liability and
property damage $ 195,239 $ 106,569 $ (14) $105,890(b) $195,932
======== ======== ======= ======= =======
(a) Amounts written off, net of recoveries.
(b) Payments of claims and expenses.
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69
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
EXHIBITS
filed with
FORM 10-K
for the fiscal year ended
December 31, 1993
under
THE SECURITIES EXCHANGE ACT OF 1934
-----------------------
THE HERTZ CORPORATION
Commission file number 1-7541
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70
INDEX TO EXHIBITS
Exhibit
No. Description
- ---------- -----------
10(ii)A Stockholders Agreement dated as of July 7, 1993, among Ford Motor Company, Park Ridge Limited Partnership,
Ford Motor Credit Company, AB Volvo, Commerzbank Aktiengesellschaft, The Hertz Corporation, Park Ridge
Corporation, and the persons that become parties thereto pursuant to the terms thereof. (Portions of this
Exhibit have been omitted pursuant to a request for confidential treatment of such omitted information under
Rule 24b-2.)
12 Computation of Consolidated Ratio of Earnings to Fixed Charges for each of the five years in the period ended
December 31, 1993.
21 Listing of subsidiaries of the registrant at December 31, 1993.
23 Consent to the incorporation by reference of report of independent public accountants in previously filed
registration statements under the Securities Act of 1933.
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