Back to GetFilings.com
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, 1994 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 of incorporation) (I.R.S. Employer Identification No.)
225 Brae Boulevard, Park Ridge, New Jersey 07656-0713
- - ------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 201-307-2000
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
The registrant meets the conditions set forth in General Instruction J(1)(a)
and (b) of Form 10-K and is therefore filing this Form with the reduced
disclosure format permitted by General Instruction J(2) of Form 10-K.
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).
Indicate the number of shares outstanding of each of the registrant's classes
of common stock as of December 31, 1994: Common Stock, $1 par value - Class A,
200 shares; Class B, 51 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 74 pages
The Exhibit Index is on page 50
-1-
2
PART I
ITEM 1. BUSINESS.
General
The Hertz Corporation and its subsidiaries ("Hertz"), affiliates and
independent licensees are engaged principally in the business of renting
automobiles and renting and leasing trucks, without drivers, in the United
States and in over 150 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 in Australia and New Zealand and in Europe through its independent
licensees; and providing claim management and telecommunication 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.
In March 1994, Ford Motor Company ("Ford") acquired the registrant's common
stock owned by Commerzbank Aktiengesellschaft. On April 29, 1994, Ford
purchased all of the common stock of the registrant owned by Park Ridge Limited
Partnership. The registrant then redeemed the preferred and common stock of
the registrant owned by AB Volvo, borrowing the funds to pay for the
redemption. In addition, a subordinated promissory note of the registrant held
by Ford Motor Credit Company was exchanged for an equivalent amount of
preferred stock of the registrant. See Notes 1, 5, 7 and 14 of the Notes to
Consolidated Financial Statements 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 (see Business -
Licensees). 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. Services provided to customers include public
liability and property damage protection. 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
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
12 of the Notes to Consolidated Financial Statements included in this Report).
-2-
3
ITEM 1. BUSINESS (continued).
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. 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 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.
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 1994. 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 1994 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
-3-
4
ITEM 1. BUSINESS (continued).
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
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.
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.
Truck Leasing and Rental and Car Leasing
In 1988, the registrant entered into a license agreement with Hertz Penske
Truck Leasing, Inc., which has been succeeded by Penske Truck Leasing Co.,
L.P., ("Penske"), 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.
Effective January 1, 1995, the registrant sold its European car leasing
and car dealership operations to Hertz Leasing International, Inc. ("HLI"), at
an amount equal to its book value of approximately $61 million. HLI is wholly
owned by Ford. In addition, Ford is to receive the worldwide rights (subject
to certain existing license rights) to use and sublicense others to use the
"Hertz" name in the conduct of motor vehicle leasing businesses. The
registrant believes that this transaction will not have a material effect on
its financial position or future operations.
-4-
5
ITEM 1. BUSINESS (continued).
Other Operations
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 throughout the United States and its
operations have been profitable.
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.
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. 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, a reinsurer in Dublin, Ireland. Hertz also maintains insurance
coverage with unaffiliated carriers, or with unaffiliated carriers through
Ford, for such amounts in excess of those retained and borne by Hertz, as it
determines to be necessary.
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, 1994, this liability was estimated at $304
million for combined domestic and foreign operations.
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, or through unaffiliated carriers
with Ford, in amounts deemed adequate by Hertz for the respective hazards.
-5-
6
ITEM 1. BUSINESS (continued).
Vehicle Acquisition and Disposition
Hertz believes it is the largest single private purchaser of new vehicles
in the United States. 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 1994,
in Hertz' domestic and foreign operations, approximately 88% 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 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.
Licensees
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 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.
-6-
7
ITEM 1. BUSINESS (continued).
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.
Licensees 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 do not
contribute materially to Hertz' income.
Employees
On December 31, 1994, Hertz employed approximately 19,200 persons in its
domestic and foreign operations. Labor contracts covering the terms of
employment of approximately 4,500 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 1,400 of these employees
will expire during 1995. 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 work
stoppage as a result of labor problems during the last 10 years, which has
materially affected its operations. Hertz believes its labor relations to be
good.
Competition
Hertz believes that its rent a car business, collectively with its
affiliates and independent licensees, 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.
-7-
8
ITEM 1. BUSINESS (continued).
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.
ITEM 2. PROPERTIES.
Hertz' operations are carried on at rental and sales offices and service
facilities located at airports and in downtown and suburban areas. Most of
such premises are leased. 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 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 facility in Park Ridge, New Jersey.
-8-
9
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, 1994
with respect to these matters cannot be ascertained, such liability could
approximate up to $3.0 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.
On January 9, 1995, Newark International Airport, in Newark, N.J.,
suffered an electrical outage that caused significant operational problems for
one day due to a construction accident that occurred on the registrant's
property. A subcontractor of the registrant was involved in this accident.
The registrant believes that it has adequate defenses, indemnities and
insurance coverage against anticipated litigation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Omitted.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
There is no market for the registrant's common stock. The registrant is a
wholly-owned subsidiary of Ford.
ITEM 6. SELECTED FINANCIAL DATA.
Omitted.
-9-
10
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION.
1994 vs. 1993
Revenues in 1994 of $3,294 million increased by $440 million as compared
to 1993. This increase was primarily attributable to increases in the car
rental operations resulting from a greater number of transactions due to
increased travel, an increase in market share, and changes in foreign exchange
rates; improvements in construction equipment rental and sales in the United
States due to increased volume resulting from improvements in the economy and
increased volume from industrial related markets; and higher revenues in car
leasing due to an acquisition made in July 1994 in Europe and changes in
foreign exchange rates. These increases were partly offset by lower revenues
in claim administration and telecommunication services due to decreases in
volume.
Total expenses increased $379 million to $3,131 million in 1994 as
compared to $2,752 million in 1993. Direct operating expense increased
principally due to the higher volume of business and changes in foreign
exchange rates, but was lower in 1994 as a percent of revenues due to more
efficient fixed cost coverage. Depreciation of revenue earning equipment
increased in 1994 primarily due to an increase in vehicles and equipment
operated, higher prices for automobiles, and credits recorded in 1993 resulting
from valuing certain pre-acquisition assets on a net of tax basis; these
increases were partly offset by a reduction in depreciation of $9.6 million due
to changes made effective July 1, 1994 increasing certain lives being used to
compute the provision for depreciation to reflect changes in the estimated
residual values to be realized when the equipment is sold. Selling, general
and administrative expense increased primarily due to higher advertising costs
and changes in foreign exchange rates. The increase in interest expense was
primarily due to higher debt levels and lower interest income in 1994 and an
$8.6 million write-off of interest receivable from Park Ridge Limited
Partnership, partly offset by lower interest rates in 1994 in the foreign
operations.
The tax provision of $72 million in 1994 was higher than the tax provision
of $49 million in 1993, primarily due to the increase in income before income
taxes in 1994 and changes in effective tax rates. See Notes 1 and 8 of the
Notes to Consolidated Financial Statements included in this Report.
-10-
11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION (continued).
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 $32 million to $2,752 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 Notes 1 and 8 of the Notes to Consolidated Financial Statements
included in this Report.
-11-
12
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Consolidated Balance Sheet of the registrant at December 31, 1994 and
1993, and the related Consolidated Statement of Income and Reinvested Earnings
and Consolidated Statement of Cash Flows for the years ended December 31, 1994,
1993 and 1992, and other financial statement schedules are set forth under Item
14 hereof.
Selected quarterly data for each quarter of the years 1994 and 1993 is set
forth in Note 12 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.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Omitted.
ITEM 11. EXECUTIVE COMPENSATION.
Omitted.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Omitted.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Omitted.
-12-
13
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 -
Reports of Independent Public Accountants 18-19
Consolidated Balance Sheet at December 31, 1994
and 1993 20-21
Consolidated Statement of Income and Reinvested
Earnings for the years ended December 31, 1994,
1993 and 1992 22
Consolidated Statement of Cash Flows for the
years ended December 31, 1994, 1993
and 1992 23-24
Notes to Consolidated Financial Statements 25-47
2. Financial Statement Schedules:
(i) The Hertz Corporation and Subsidiaries -
Schedule II - Valuation and qualifying accounts
for the years ended December 31, 1994, 1993
and 1992 48
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) Certificate of Amendment of Restated
Certificate of Incorporation of The Hertz
Corporation filed with the Secretary of State
of Delaware on April 28, 1994.
(iii) 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).
-13-
14
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, 1994, 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 and granted confidential
treatment of such omitted information under Rule 24b-2)
incorporated herein by reference to Exhibit (10)(ii)(A)
to the registrant's report on Form 10-K for the year
ended December 31, 1993 (File No. 1-7541).
(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).
-14-
15
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(continued).
3. Exhibits (continued):
(10) Material Contracts (continued):
(ii)(B) (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).
(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 agreement with Daniel I. Kaplan
dated February 17, 1995.
(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.
(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).
-15-
16
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,
1994.
(21) Subsidiaries of the registrant. Listing of subsidiaries of
the registrant at December 31, 1994.
(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.
(27) Consolidated Financial Data Schedule for the year ended
December 31, 1994.
(b) Reports on Form 8-K:
The registrant did not file any reports on Form 8-K during the quarter
ended December 31, 1994.
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.
-16-
17
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 13, 1995
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 13, 1995.
/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/ Malcolm S. Macdonald /s/ David N. McCammon
- - ----------------------------------- --------------------------------------
Malcolm S. Macdonald David N. McCammon
Assistant Treasurer and Director Director
/s/ Peter J. Pestillo
- - ----------------------------------
Peter J. Pestillo
Director
-17-
18
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 wholly-owned subsidiary of Ford Motor
Company) and subsidiaries as of December 31, 1994 and the related consolidated
statements of income and reinvested earnings and cash flows and the financial
statement schedule listed in Item 14(a)2(i) for the year ended December 31,
1994. These consolidated financial statements and financial statement schedule
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements and schedule
based on our audit.
We conducted our audit 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 audit provides 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, 1994, and the results of their operations and
their cash flows for the year ended December 31, 1994, in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedule referred to above, when considered in relation to
the basic financial statements taken as a whole, presents fairly in all
material respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
Parsippany, New Jersey
January 27, 1995
-18-
19
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 the related consolidated statements of income and reinvested earnings and
cash flows for each of the two years in the period ended December 31, 1993.
These consolidated financial statements and the schedule referred to below are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements and schedule
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 the results of their operations and
their cash flows for each of the two 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, the Company changed its method of accounting for
postretirement benefits other than pensions in order to comply with the
Statement of Financial Accounting Standards No. 106.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The financial statement schedule listed
in Item 14(a)2(i) for the years ended December 31, 1993 and 1992, are presented
for purposes of complying with the Securities and Exchange Commission's rules
and are not part of the basic financial statements. This schedule has 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 LLP
New York, New York
February 7, 1994
-19-
20
THE HERTZ CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS OF DOLLARS)
ASSETS
December 31,
--------------------------
1994 1993
---------- ----------
CASH AND EQUIVALENTS (Note 13) $ 99,749 $ 88,557
RECEIVABLES, less allowance for doubtful accounts
of $10,026 (1993 - $6,862) (Schedule II) 641,595 434,423
DUE FROM AFFILIATES (Notes 1 and 7) 371,599 328,512
INVENTORIES, at lower of cost or market 35,092 33,643
PREPAID EXPENSES AND OTHER ASSETS (Note 4) 94,880 121,776
REVENUE EARNING EQUIPMENT, at cost (Notes 5 and 7):
Vehicles 4,257,835 2,685,220
Less accumulated depreciation (403,476) (268,174)
Other equipment 553,345 436,024
Less accumulated depreciation (147,340) (150,518)
--------- ---------
Total revenue earning equipment 4,260,364 2,702,552
--------- ---------
PROPERTY AND EQUIPMENT, at cost:
Land, buildings and leasehold improvements 416,477 367,118
Service equipment 451,059 376,261
--------- ---------
867,536 743,379
Less accumulated depreciation (427,859) (358,781)
--------- ---------
Total property and equipment 439,677 384,598
--------- ---------
FRANCHISES, CONCESSIONS, CONTRACT COSTS AND
LEASEHOLDS, net of amortization 6,708 7,192
COST IN EXCESS OF NET ASSETS OF PURCHASED
BUSINESSES, net of amortization (Note 5) 571,182 587,245
--------- ---------
$6,520,846 $4,688,498
========= =========
The accompanying notes are an integral part of this statement.
-20-
21
THE HERTZ CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS OF DOLLARS)
LIABILITIES AND SHAREHOLDERS' EQUITY
December 31,
--------------------------
1994 1993
---------- ------------
ACCOUNTS PAYABLE (Note 7) $ 417,619 $ 328,957
ACCRUED SALARIES AND OTHER COMPENSATION 136,255 104,746
OTHER ACCRUED LIABILITIES 381,624 317,997
ACCRUED TAXES 81,862 70,849
DEBT (Notes 2 and 13) 4,413,915 2,940,495
PUBLIC LIABILITY AND PROPERTY DAMAGE (Schedule II) 304,328 264,158
DEFERRED TAXES ON INCOME (Note 8) 49,300 44,600
COMMITMENTS AND CONTINGENCIES (Notes 9, 11 and 13)
SHAREHOLDERS' EQUITY (Note 2):
Preferred stock --
Series A, 10% cumulative 236,000 340,000
Series B, various rates cumulative 249,900 99,900
Common stock, par value $1 per share, shares
issued -- 200 Class A, 51 Class B (311 in
1993), and 490 Class C (Note 1) 1 1
Additional capital paid-in (Note 1) 59,008 100,099
Reinvested earnings 196,527 105,445
Translation adjustment (Note 3) (5,271) (28,749)
Unrealized holding losses for available-for-
sale securities (Note 4) (222) -
--------- ---------
Total shareholders' equity 735,943 616,696
--------- ---------
$6,520,846 $4,688,498
========= =========
The accompanying notes are an integral part of this statement.
-21-
22
THE HERTZ CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME AND REINVESTED EARNINGS
(IN THOUSANDS OF DOLLARS)
Years Ended December 31,
-------------------------------------------
1994 1993 1992
---------- ---------- ----------
REVENUES:
Car rental $2,553,142 $2,155,612 $2,095,018
Construction equipment rental
and sales 263,154 215,760 208,768
Car leasing (Note 14) 231,372 209,308 241,004
Car dealerships, claim
administration, etc. 246,733 274,187 271,432
--------- --------- ---------
3,294,401 2,854,867 2,816,222
--------- --------- ---------
EXPENSES:
Direct operating 1,766,228 1,647,104 1,627,521
Depreciation of revenue earning
equipment (Note 7) 702,644 523,876 496,824
Selling, general and administrative 385,470 336,037 353,254
Interest, net of interest income of
$7,210, $11,318 and $3,627 (Note 2) 277,228 245,400 306,854
--------- --------- ---------
3,131,570 2,752,417 2,784,453
--------- --------- ---------
INCOME BEFORE INCOME TAXES 162,831 102,450 31,769
PROVISION FOR TAXES ON INCOME (Note 8) 71,749 49,022 21,730
--------- --------- ---------
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE 91,082 53,428 10,039
CUMULATIVE EFFECT ON PRIOR YEARS OF
CHANGE IN METHOD OF ACCOUNTING FOR
POSTRETIREMENT BENEFITS (Note 1) - - (4,319)
--------- --------- --------
NET INCOME 91,082 53,428 5,720
REINVESTED EARNINGS AT BEGINNING OF YEAR 105,445 52,017 46,297
--------- --------- ---------
REINVESTED EARNINGS AT END OF YEAR
(Note 2) $ 196,527 $ 105,445 $ 52,017
========= ========= =========
The accompanying notes are an integral part of this statement.
-22-
23
THE HERTZ CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
Years Ended December 31,
--------------------------------------------
1994 1993 1992
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 91,082 $ 53,428 $ 5,720
Non-cash expenses:
Depreciation of revenue earning
equipment 702,644 523,876 496,824
Depreciation of property and equipment 68,646 63,887 72,093
Amortization of intangibles 19,401 19,365 19,727
Provision for public liability and
property damage 159,049 147,387 126,324
Provision for losses for doubtful
accounts 6,813 6,714 7,959
Write-off of interest on Park Ridge
Limited Partnership promissory note 8,586 - -
Deferred income taxes 4,700 7,400 (5,800)
Revenue earning equipment expenditures (6,873,281) (4,845,084) (4,283,018)
Proceeds from sales of revenue earning
equipment 4,747,409 3,685,946 3,773,059
Changes in assets and liabilities,
net of effects from purchases of
various operations-
Receivables (181,439) 138,782 (148,168)
Due from affiliates (43,087) (300,564) 126,070
Inventories and prepaid expenses
and other assets 30,463 20,864 (11,073)
Accounts payable 70,001 (33,708) 81,524
Accrued liabilities 74,633 57,383 35,172
Accrued taxes 6,656 6,424 10,183
Payments of public liability and
property damage claims and expenses (118,380) (109,706) (94,498)
---------- ---------- ----------
Net cash flows (used for) provided
from operating activities $(1,226,104) $ (557,606) $ 212,098
---------- ---------- ----------
The accompanying notes are an integral part of this statement.
-23-
24
THE HERTZ CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands of Dollars)
Years Ended December 31,
----------------------------------------
1994 1993 1992
---------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment expenditures $ (150,569) $ (92,173) $ (83,009)
Proceeds from sales of property and
equipment 35,839 36,116 32,219
Purchases of available-for-sale securities (8,145) - -
Proceeds from sale of available-for-sale
securities 5,221 - -
Purchases of various operations,
net of cash acquired (see supplemental
disclosures below) (2,044) (3,578) (2,805)
--------- -------- -------
Net cash flows used for investing
activities (119,698) (59,635) (53,595)
--------- -------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 719,289 845,758 261,654
Repayment of long-term debt (207,195) (868,810) (342,108)
Short-term borrowings:
Proceeds 736,430 698,261 486,970
Repayments (614,439) (504,703) (473,989)
Ninety days or less, net 864,816 271,071 (4,786)
Payment for the redemption of common and
preferred stock and related expenses (145,091) - -
--------- -------- --------
Net cash flows provided from (used for)
financing activities 1,353,810 441,577 (72,259)
--------- -------- --------
EFFECT OF FOREIGN EXCHANGE RATE
CHANGES ON CASH 3,184 (3,798) (8,113)
--------- -------- --------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS
DURING THE YEAR 11,192 (179,462) 78,131
CASH AND EQUIVALENTS AT BEGINNING OF YEAR 88,557 268,019 189,888
--------- -------- --------
CASH AND EQUIVALENTS AT END OF YEAR $ 99,749 $ 88,557 $ 268,019
========= ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for -
Interest (net of amounts capitalized) $ 257,652 $ 240,316 $ 301,295
Income taxes 36,341 11,221 23,509
In connection with acquisitions made during the years 1994 and 1993,
liabilities assumed were $27 million and $2.1 million, respectively.
The accompanying notes are an integral part of this statement.
-24-
25
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies
Merger, Change in Ownership 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 had a scheduled maturity date of May
17, 2000, was 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.
In March 1994, Ford Motor Company ("Ford") acquired the registrant's
common stock owned by Commerzbank Aktiengesellschaft. On April 29, 1994, the
registrant redeemed its preferred and common stock owned by AB Volvo for $145
million, borrowing the funds from Ford to pay for the redemption, and Ford
purchased all of the common stock of the registrant owned by Park Ridge Limited
Partnership ("Partnership"). This resulted in the registrant becoming a
wholly-owned subsidiary of Ford. In addition, the $150 million subordinated
promissory note of the registrant held by FMCC, was exchanged for $150 million
of Series B Preferred Stock of the registrant, and a promissory note in the
amount of $18.5 million, owed by the Partnership to the registrant was assumed
by Ford ("Ford Note"). In connection with these transactions, notes payable
were increased by $145 million, Series A Preferred Stock was reduced by $104
million, and additional capital paid-in was reduced by $41 million; interest
expense was increased by $8.6 million and provision for taxes was decreased by
$3.0 million; and subordinated promissory notes were reduced by $150 million
and Series B Preferred Stock was increased by $150 million. The Ford Note is
payable on demand, with interest payable quarterly on the outstanding principal
balance at a fluctuating rate per annum equal to LIBOR (London Interbank
Offered Rate). At December 31, 1994, the registrant's receivable relating to
the Ford Note was $18.7 million and is included in Due From Affiliates in the
consolidated balance sheet.
-25-
26
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies (continued)
As of December 31, 1994, 100% of the Common Stock of the registrant was
owned by Ford and 100% of the outstanding Preferred Stock was owned by FMCC.
The capital stock of the registrant authorized and issued as of December
31, 1994 and 1993 and the additional capital paid-in for the year ended
December 31, 1994 are set forth below. There were no changes to the capital
stock and additional capital paid-in during 1993 and 1992.
Number of Shares
Par Value -------------------------
Per Share Authorized Issued Amount
--------- ---------- ---------- -------------
Series A Preferred Stock:
Balance December 31, 1993 $100 4,500,000 3,400,000 $ 340,000,000
Redemption - (1,040,000) (104,000,000)
--------- ---------- ------------
Balance December 31, 1994 $100 4,500,000 2,360,000 $ 236,000,000
=== ========= ========== ============
Series B Preferred Stock
Balance December 31, 1993 $100 1,000,000 999,000 $ 99,900,000
Issued in exchange for
subordinated promissory note 100 1,500,000 1,500,000 150,000,000
--------- ---------- ------------
Balance December 31, 1994 $100 2,500,000 2,499,000 $ 249,900,000
=== ========= ========== ============
Class A Common Stock
Balance December 31, 1993 and 1994 $ 1 200 200 $ 200
=== === ==== ====
Class B Common Stock
Balance December 31, 1993 $ 1 800 311 $ 311
Redemption - (260) (260)
--- ---- ----
Balance December 31, 1994 $ 1 800 51 $ 51
=== === ==== ====
Class C Common Stock
Balance December 31, 1993 and 1994 $ 1 800 490 $ 490
=== === ==== ====
Additional Capital Paid-In
Balance December 31, 1993 $ 100,098,999
Redemption of common and preferred stock
in excess of par value and related expenses (41,091,049)
------------
Balance December 31, 1994 $ 59,007,950
============
-26-
27
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.
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.
Certain balances for 1993 have been restated to conform with the
classifications used in 1994.
Consolidated Statement of Cash Flows -- for purposes of this statement, the
registrant considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents. See page 25
for Noncash Investing and Financing Activities.
-27-
28
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 1 - Summary of Significant Accounting Policies (continued)
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 11 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.
Environmental Conservation -- 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. Liabilities for these
expenditures are recorded when it is probable that obligations have been
incurred and the amounts can be reasonably estimated.
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
-28-
29
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 1 - Summary of Significant Accounting Policies (continued)
Hertz owned operations in Europe, has been reinsured by Hertz International RE
Limited ("HIRE"), a reinsurer in Dublin, Ireland. HIRE effectively responds to
the first $1,500,000 of motor vehicle liability for each accident. Excess
liability insurance coverage is maintained by Hertz with unaffiliated carriers,
or through unaffiliated carriers with Ford.
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.
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.
Effective April 30, 1994, the registrant and its domestic subsidiaries will
file consolidated Federal income tax returns with Ford. The registrant and its
domestic subsidiaries filed consolidated Federal income tax returns after
December 31, 1987; prior to that, from September 1, 1985 to December 31, 1987
they 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 Ford, 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 Ford, 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 Ford, 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.
As of December 31, 1994, U.S. income taxes have not been provided on $265
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.
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. The amounts contributed by Ford for the years ended December 31,
1994, 1993 and 1992 were (in millions) $42.0, $40.3 and $35.7, respectively.
This program will continue in the future.
-29-
30
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.
The American Institute of Certified Public Accountants issued in December
1993 Statement of Position No. 93-7, which requires, effective for financial
statements for years beginning after June 15, 1994, that advertising costs be
expensed in the periods in which those costs are incurred, or the first time
the advertising takes place. Implementation of this statement is not expected
to have a material effect on Hertz' consolidated financial position, results of
operations or cash flows.
-30-
31
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,
--------------------------
1994 1993
---------- ----------
Notes payable, including commercial paper,
average interest rate: 1994, 6.0%;
1993, 3.4% $1,018,443 $ 237,197
Promissory notes, average interest rate:
1994, 7.8%; 1993, 8.3%; (effective
average interest rate: 1994, 7.9%; 1993,
8.6%); net of unamortized discount: 1994,
$3,254; 1993, $2,549; due 1995 to 2005 1,574,406 1,025,111
Swiss Franc bonds, fixed U.S. dollar obligation,
11.1%, (effective interest rate 9.7%);
including unamortized premium: 1994, $132;
1993, $330; due 1995 46,264 46,462
Property and equipment lease obligations, average
interest rate: 1994, 8.7%; 1993, 9.0%;
due 1995 to 1998 6,847 9,907
Medium-term notes, average interest rate 9.3%
(effective average interest rate: 1994, 9.6%;
1993, 9.4%); net of amortized discount: 1994,
$36; 1993, $139; due 1995 to 1997 188,389 226,411
Senior and other subordinated promissory notes,
average interest rate: 1994, 9.5%; 1993, 7.4%;
(effective average interest rate: 1994, 9.6%;
1993, 7.5%); net of unamortized discount:
1994, $461; 1993, $621; due 1996 to 1998 249,539 400,731
Junior subordinated promissory notes, average
interest rate 6.9%; net of unamortized discount:
1994, $329; 1993, $372; due 2000 to 2003 399,671 399,628
Subsidiaries' debt:
Short-term borrowings -
Banks, average interest rate: 1994, 6.5%;
1993, 6.6%, in foreign currencies 693,020 441,671
Others, average interest rate: 1994, 4.3%;
1993, 5.4%, in foreign currencies 64,078 21,388
Other borrowings, average interest rate: 1994,
8.1%; 1993, 8.9%; in domestic and foreign
currencies; net of unamortized discount:
1994, $47; 1993, $65 173,258 131,989
--------- ---------
Total $4,413,915 $2,940,495
========= =========
-31-
32
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:
1995, $2,072.8 (including $1,775.5 of demand and other short-term borrowings);
1996, $234.2; 1997, $233.4; 1998, $322.5; 1999, $352.8; after 1999, $1,198.2.
During the year ended December 31, 1994, short-term borrowings, in
millions, were as follows: maximum amounts outstanding $1,021.3 commercial
paper, $1,247.6 banks and $194.1 other; monthly average amounts outstanding
$659.9 commercial paper (weighted average interest rate 4.9%), $975.5 banks
(weighted average interest rate 5.8%) and $95.5 other (weighted average
interest rate 5.3%).
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%).
The net amortized discount charged to interest expense for the years ended
December 31, 1994, 1993 and 1992 relating to debt and other liabilities was
$1.3 million, $1.8 million and $2.4 million, respectively. In addition,
interest expense for the years 1994 and 1993 was reduced by $1.6 million and
$8.2 million, respectively, of interest income, relating to refunds of prior
years' state, local and federal income taxes.
In 1994, the registrant entered into the following two committed bank
facilities with a group of twenty-nine commercial banks, which will be utilized
to support commercial paper and other short-term borrowings in the aggregate
amount of $1.75 billion: (i) five year credit agreement for $1 billion is
committed until June 30, 1999. The termination date is automatically extended
for an additional one-year period each June 30, unless the bank gives notice to
the contrary. A commitment fee of .1875% per annum is payable on the unused
available credit; and (ii) 364-day credit agreement for $751 million is
committed until June 30, 1995. A commitment fee of .08% per annum is payable
on the unused available credit.
The registrant also entered into a revolving loan agreement with Ford on
June 8, 1994 under which the registrant may borrow from Ford from time to time
up to $250 million outstanding at any one time. Obligations of the registrant
under this agreement would rank pari passu with the registrant's senior debt
securities. This agreement by its terms expires on June 30, 1999, on which
date any amounts then outstanding thereunder are required to be repaid. A
commitment fee of .1875% per annum is payable on the unused available credit.
In addition, at December 31, 1994, the registrant and a subsidiary had $268.9
million of outstanding loans from Ford.
-32-
33
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 2 - Debt (continued)
Hertz had consolidated unused lines of credit subject to customary terms
and conditions, which includes unused amounts under the three facilities
indicated above, of approximately $2.2 billion at December 31, 1994.
The terms of the registrant's loan agreements limit the payment of cash
dividends. At December 31, 1994, approximately $104 million of consolidated
shareholders' equity was free of such limitations.
Note 3 - Foreign Currency
Foreign currency exchange gains and losses included in net income were net
gains of $1.2 million, $1.4 million and $2.2 million for the years ended
December 31, 1994, 1993 and 1992, respectively. The cumulative translation
credit adjustment at December 31, 1991 was $13.1 million. The net translation
credit adjustment was $23.5 million for the year ended December 31, 1994. The
net translation charge adjustments were $16.3 million and $25.6 million for the
years ended December 31, 1993 and 1992, respectively.
Note 4 - Available-for-Sale Securities
Effective January 1, 1994, the registrant adopted the provisions of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities", which requires a more detailed disclosure of debt
and equity securities held for investment, the methods to be used in
determining fair value, and when to record unrealized holding gains and losses
in earnings or in a separate component of shareholders' equity.
As of December 31, 1994, Prepaid Expenses and Other Assets in the
consolidated balance sheet include available-for-sale securities at fair value
of $5.5 million (cost $5.8 million). The fair value is calculated using
information provided by outside quotation services. These securities include
various governmental and corporate debt obligations, with the following
maturity dates (in millions): fair value $.2 (cost $.2) in 1995; fair value
$4.7 (cost $4.9) 1996 through 1999; fair value $.6 (cost $.7) 2002 through
2004. For the year ended December 31, 1994, proceeds of $5.2 million from the
sale of available-for-sale securities were received, and a gross realized loss
of $95,251 was included in earnings. Actual cost was used in computing the
realized loss on the sale. For the year ended December 31, 1994, unrealized
holding losses and unrealized holding gains, net of taxes, included in
Shareholders' Equity were $239,619 and $18,035, respectively.
-33-
34
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 5 - Acquisitions
In 1992, the registrant entered into a lease agreement with a third party
lessor, Hertz Funding Corp. ("HFC"), providing for the lease of vehicles
purchased by HFC under a repurchase program offered by Ford. Under the lease,
which was accounted for as an operating lease, the registrant made payments
equal to the monthly depreciation and all expenses (including interest) of the
third party lessor and was responsible for the remaining net cost on any
vehicles that became ineligible under the repurchase program. At October 31,
1994, the net cost of the vehicles leased under this agreement was
approximately $300 million. On November 1, 1994, the registrant acquired all
of the issued and outstanding shares of HFC from PAZ ABS Corp. (an entity
unaffiliated with the registrant or any of its subsidiaries) for the purpose of
winding-down the activities of HFC. Commencing in November 1994, the accounts
of HFC have been included in the consolidated financial statements of the
registrant, which did not have a material effect on the registrant's
consolidated financial position or results of operations.
On July 31, 1994, Axus, S.A., a car leasing company of the registrant which
operates in various countries in Europe, acquired an additional interest in
Locaplan S.A., a car leasing operation in France, increasing its ownership from
50% to 100%. The cost relating to this acquisition approximated $2.3 million,
which exceeded the net assets acquired by approximately $2.2 million.
Commencing in August 1994, the accounts of this operation have been included in
the consolidated financial statements of the registrant, which did not have a
material effect on the registrant's consolidated financial position or results
of operations.
In 1992, the registrant acquired additional interests in Axus, S.A.,
increasing its ownership to 98%. The cost relating to this acquisition
approximated $2.2 million, which exceeded the net assets acquired by
approximately $.4 million. This acquisition did 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, 1994 was $534.2 million.
-34-
35
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, 1994 December 31, 1993
------------------ --------------------
U.S. Non-U.S. U.S. Non-U.S.
------ -------- ------ --------
Actuarial present value of accumulated
benefit obligation -
Vested $(47.0) $(19.8) $ (44.2) $(18.2)
Nonvested (9.3) (3.1) (8.1) (2.7)
----- ------ ------- -----
Total $(56.3) $(22.9) $ (52.3) $(20.9)
===== ===== ====== =====
Actuarial present value of projected
benefit obligation $(92.7) $(31.8) $(113.6) $(26.9)
Plan assets at fair value 68.8 22.8 65.3 19.5
----- ----- ----- -----
Projected benefit obligation in excess
of plan assets (23.9) (9.0) (48.3) (7.4)
Unrecognized net loss 2.6 3.5 29.0 3.0
Prior service cost not yet recognized in
net periodic pension cost .3 - .5 -
Remaining unrecognized net obligation 1.9 - 2.2 -
----- ----- ------ -----
Pension liability included in the
balance sheet $(19.1) $ (5.5) $ (16.6) $ (4.4)
===== ===== ====== =====
Years ended December 31,
---------------------------------------------------------------------
1994 1993 1992
------------------- -------------------- -------------------
U.S. Non-U.S. U.S. Non-U.S. U.S. Non-U.S.
------ -------- ------ -------- ------ --------
Service cost - benefits
earned during the period $ 6.4 $ 2.3 $ 6.3 $ 1.8 $ 5.6 $ 1.4
Interest cost on projected
benefit obligation 7.2 1.5 6.7 1.4 4.8 1.0
Return on assets:
Actual loss (gain) .7 (1.5) (7.5) (1.1) (4.6) (.6)
Deferred (loss) gain (6.1) - 2.8 - .9 -
Net amortization and deferral 1.8 .1 1.6 .1 .7 .1
---- ---- ---- ---- ---- ----
Net periodic pension cost
included in the income statement $10.0 $ 2.4 $ 9.9 $ 2.2 $ 7.4 $ 1.9
==== ==== ==== ==== ==== ====
Significant assumptions used for the U.S. plan were as follows: weighted
average discount rate of 8.25% at December 31, 1994 and 7% during 1994 (7-3/4%
during 1993 and 8.5% during 1992); 5.5% rate of increase in future compensation
levels (6.4% for 1993 and 1992); and expected long-term rate of return on
assets of 9% in 1994 and 1993 (8.5% in 1992). 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. Plan
assets consist principally of investments in stocks, government bonds and other
fixed income securities.
-35-
36
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, 1994,
1993 and 1992 for all other pension plans were approximately (in millions)
$6.0, $5.6 and $5.3, respectively.
The provisions charged to income for the years ended December 31, 1994,
1993 and 1992 for the Hertz Income Savings Plan were approximately (in
millions) $3.0, $2.6 and $2.5, 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):
December 31,
---------------
1994 1993
---- ----
Actuarial present value of accumulated benefit
obligation -
Retirees $1.8 $2.0
Active employees eligible to retire 1.4 1.6
Other active employees 2.0 3.4
--- ---
Total accumulated obligation and accrued
liability included in the balance sheet $5.2 $7.0
=== ===
Years Ended December 31,
------------------------
1994 1993 1992
---- ---- ----
Benefits attributed to employees' service $ .2 $ .3 $ .4
Interest on accumulated benefit obligation .1 .4 .6
--- --- ---
Net periodic postretirement benefit cost $ .3 $ .7 $1.0
=== === ===
The significant assumptions used for the postretirement benefit plans were
as follows: 7.5% weighted average discount rate (7.0% in 1993 and 8.5% in
1992), 5.5% rate of increase in future compensation levels (6.4% in 1993 and
1992), 9% weighted average health care cost trend rate through 1999 (10% in
1993 and 12% in 1992), and 8% weighted average trend rate in ten years (8.6% in
1993 and 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, 1994 by approximately $285,200, and the
aggregate service and interest cost components of net periodic postretirement
benefit cost for 1994 by approximately $50,500.
-36-
37
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 65% 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, 1994 are receivable approximately as follows
(in millions): $196 in 1995, $123 in 1996, $52 in 1997, and $10 in 1998.
Vehicles and other equipment under lease at December 31, 1994 which are owned
by Hertz amounted to $464 million, net of accumulated depreciation of $182
million (see Note 9 for minimum obligations for vehicles leased under operating
leases by Hertz, and Note 14 for car leasing operations sold by Hertz to Ford
in 1995).
The average holding periods of vehicles and other revenue earning equipment
are as follows: car rental vehicles 6 to 8 months, car leasing vehicles 36
months, and other equipment 18 to 48 months. At December 31, 1994, 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
23 months. At December 31, 1994, approximately 26% of owned vehicles and all
other revenue earning equipment were "at risk."
Depreciation of revenue earning equipment includes the following (in
thousands of dollars):
Years Ended December 31,
----------------------------------
1994 1993 1992
--------- -------- --------
Depreciation of revenue earning equipment $651,413 $461,708 $434,128
Adjustment of depreciation upon disposal
of the equipment, which includes credits
resulting from valuing certain pre-
acquisition assets on a net of tax basis (22,983) (28,144) (16,882)
Rents paid for vehicles leased 74,214 90,312 79,578
------- ------- -------
Total $702,644 $523,876 $496,824
======= ======= =======
Effective July 1, 1994, certain lives being used to compute the provision
for depreciation of revenue earning equipment were increased to reflect changes
in the estimated residual values to be realized when the equipment is sold. As
a result of this change, depreciation of revenue earning equipment for year
1994 was decreased by $9.6 million.
-37-
38
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 7 - Revenue Earning Equipment (continued)
The adjustment of depreciation upon disposal of revenue earning equipment
for the years ended December 31, 1994, 1993, and 1992 included (in millions)
net gains of $13.2, $16.1 and $11.5, respectively, on the sale of equipment in
the construction equipment rental operations in the United States; net gains of
$9.8, $7.9, and $1.7, respectively, in the car rental and car leasing
operations primarily relating to foreign operations; and in 1993 and 1992,
credits of $4.1 and $3.7, respectively, resulting from valuing pre-acquisition
assets on a net of tax basis.
The improvement in the "adjustment of depreciation upon disposal of the
equipment" of $28 million in 1993 as compared to 1992, was primarily
attributable to higher net proceeds received in 1993 on disposal of the
equipment principally related to a decrease in the number of "risk" vehicles in
the car rental operations and gains on the sale of equipment in the
construction equipment rental operations in the United States due to
improvements in the economy in the United States.
As of December 31, 1994 and 1993, Ford owed Hertz $352.9 million and $328.5
million, respectively, in connection with various vehicle repurchase and
warranty programs. As of December 31, 1994, Hertz owed Ford $41.4 million
(included under Accounts Payable in the consolidated balance sheet) in
connection with vehicles purchased. These transactions were made and are being
paid in the ordinary course of business.
During the year ended December 31, 1994, the registrant purchased Ford
vehicles at a cost of approximately $3.7 billion, and sold Ford vehicles to
Ford or its affiliates under various repurchase programs for approximately $2.4
billion.
-38-
39
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 8 - Taxes on Income
The provision for taxes on income consists of the following (in thousands
of dollars):
Years Ended December 31,
------------------------------------
1994 1993 1992
-------- -------- --------
Current:
Federal $38,797 $15,717 $ 2,816
Foreign 20,016 23,186 12,682
State and local 8,236 2,719 12,032
------ ------ ------
Total current 67,049 41,622 27,530
------ ------ ------
Deferred:
Federal 2,027 8,094 (6,900)
Foreign (127) (5,594) 6,700
State and local 2,800 4,900 (5,600)
------ ------ -------
Total deferred 4,700 7,400 (5,800)
------ ------ -------
Total provision $71,749 $49,022 $21,730
====== ====== ======
The principal items in the deferred tax provision (benefit) are as follows
(in thousands of dollars):
Differences between tax and book
depreciation $ 9,234 $33,259 $ 3,183
Accrued and prepaid expense
deducted for tax purposes when
paid or incurred (14,517) (20,171) (18,537)
Tax operating loss utilized
(carryforwards) (2,636) (2,585) 8,479
Federal alternative minimum tax
credit utilized (carryforwards)
1,072 (8,123) (1,407)
Investment tax credit utilized 11,547 5,020 2,482
------ ------ -------
Total deferred provision (benefit) $ 4,700 $ 7,400 $(5,800)
====== ====== ======
-39-
40
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, 1994 and 1993
are as follows (in thousands of dollars):
1994 1993
--------- --------
Differences between tax and book
depreciation $ 210,402 $201,168
Accrued and prepaid expense
deducted for tax purposes when
paid or incurred (122,770) (108,253)
Tax operating loss carryforwards (6,916) (4,280)
Federal alternative minimum tax
credit carryforwards (31,416) (32,488)
Investment tax credit carryforwards - (11,547)
-------- -------
Total $ 49,300 $ 44,600
======== =======
The tax operating loss carryforwards at December 31, 1994 of $6.9 million
relate to certain foreign operations and have the following expiration dates
(in millions): $1.9 in 1996, $.1 in 1998, and $4.9 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, 1994, the alternative minimum tax credit carryforwards
of $31.4 million (which has no expiration date) will be utilized upon reversal
of timing differences and against future taxable income.
-40-
41
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 1994 and 1993, and 34% for 1992
and as recorded are as follows (in thousands of dollars):
Years Ended December 31,
---------------------------------------
1994 1993 1992
-------- -------- --------
Computed tax at statutory rate $56,991 $35,858 $10,801
State and local income taxes, net
of Federal income tax benefit 7,173 4,953 4,303
Tax effect on the amortization of the
cost in excess of the registrant's net
assets acquired by Park Ridge and UAL 5,760 5,737 5,596
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 (1,511) (1,983) (9,800)
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 -
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 1,987 1,883 9,246
All other items, net, none of which
exceeded 5% of computed tax 1,349 1,437 1,584
------ ------ ------
Total provision $71,749 $49,022 $21,730
====== ====== ======
-41-
42
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,
------------------------------------
1994 1993 1992
-------- -------- --------
Rents $ 50,066 $ 49,168 $ 50,988
Concession fees:
Minimum fixed obligations 114,920 105,499 96,528
Additional amounts, based on revenues 107,685 89,792 88,802
------- ------- -------
Total $272,671 $244,459 $236,318
======= ======= =======
As of December 31, 1994 minimum obligations under existing agreements
referred to above are approximately as follows (in thousands of dollars):
Rents Concessions
----- -----------
Years ended December 31,
1995 $ 38,729 $85,829
1996 31,384 66,076
1997 26,840 44,584
1998 23,848 27,514
1999 20,390 15,353
Years after 1999 139,537 38,257
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,
------------------------------------
1994 1993 1992
-------- -------- --------
Vehicles $ 74,214 $ 90,312 $ 79,578
Office and computer equipment 23,679 25,229 24,481
------- ------- ------
Total $ 97,893 $115,541 $104,059
======= ======= =======
As of December 31, 1994, 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), 1995, $86; 1996, $87; 1997, $54; 1998,
$13; and office and computer equipment 1995, $14,030; 1996, $3,778; 1997,
$1,081; 1998, $75; 1999, $19.
-42-
43
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,
------------------------------
1994 1993 1992
------ ------ ------
Operating Income (pretax income before
interest):
Car rental $ 353 $ 307 $ 314
Construction equipment rental and sales 87 41 25
----- ----- -----
Total $ 440 $ 348 $ 339
===== ===== =====
Capital Expenditures (includes revenue
earning equipment):
Car rental $6,789 $4,783 $4,274
Construction equipment rental and sales 235 154 92
----- ----- -----
Total $7,024 $4,937 $4,366
===== ===== =====
Depreciation and Amortization:
Car rental $ 743 $ 557 $ 529
Construction equipment rental and sales 48 50 60
----- ----- -----
Total $ 791 $ 607 $ 589
===== ===== =====
Identifiable Assets at December 31:
Car rental $6,023 $4,321 $3,887
Construction equipment rental and sales 498 367 335
----- ----- -----
Total $6,521 $4,688 $4,222
===== ===== =====
-43-
44
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,
-----------------------------
1994 1993 1992
------ ------ ------
Revenues
United States $2,258 $1,932 $1,773
Foreign operations (substantially Europe) 1,036 923 1,043
----- ----- -----
Total $3,294 $2,855 $2,816
===== ===== =====
Income Before Income Taxes
United States $ 94 $ 48 $ (7)
Foreign operations (substantially Europe) 69 54 39
----- ----- -----
Total $ 163 $ 102 $ 32
===== ===== =====
Total Assets at End of Year
United States $4,762 $3,447 $2,952
Foreign operations (substantially Europe) 1,759 1,241 1,270
----- ----- -----
Total $6,521 $4,688 $4,222
===== ===== =====
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, 1994
with respect to these matters cannot be ascertained, such liability could
approximate up to $3.0 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.
On January 9, 1995, Newark International Airport, in Newark, N.J., suffered
an electrical outage that caused significant operational problems for one day
due to a construction accident that occurred on the registrant's property. A
subcontractor of the registrant was involved in this accident. The registrant
believes that it has adequate defenses, indemnities and insurance coverage
against anticipated litigation.
-44-
45
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 12 - Quarterly Financial Information (Unaudited)
A summary of the quarterly operating results during 1994 and 1993 were as
follows:
Gross Profit Income (Loss)
(Pretax Income Before Income Net Income
Revenues Before Interest) Taxes (Loss)
---------- ---------------- ------------- ------------
1994
First quarter $ 694,803 $ 54,636 $ (1,886) $ (1,066)
Second quarter 825,912 118,796 46,367 26,361
Third quarter 958,189 184,051 108,384 61,482
Fourth quarter 815,497 82,576 9,966 4,305
------- ------- ------- -------
Total Year $3,294,401 $ 440,059 $ 162,831 $ 91,082
========= ======== ======= =======
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
========= ======== ======== =======
Effective July 1, 1994, certain lives being used to compute the provision for
depreciation of revenue earning equipment were increased to reflect changes in
the estimated residual values to be realized when the equipment is sold. As a
result of this change, pretax income before interest includes credit
adjustments of $6.1 million and $3.5 million in the third and fourth quarters,
respectively, as a result of decreasing depreciation of revenue earning
equipment.
The tax provision in the fourth quarter of 1994 includes a $1.5 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 company, RCA.
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.
-45-
46
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 13 - Financial Instruments and Commitments
Financial instruments which potentially subject the registrant to
concentrations of credit risk consist principally of cash equivalents and trade
receivables. The registrant places its cash equivalents with financial
institutions and limits the amount of credit exposure to any one financial
institution. Concentrations of credit risk with respect to trade receivables
are limited due to the large number of customers comprising the registrant's
customer base, and their dispersion across different businesses and geographic
areas. As of December 31, 1994, the registrant had no significant
concentration of credit risk.
Cash and equivalents -- fair value approximates cost indicated on the
balance sheet at December 31, 1994, 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, 1994 approximated $4.3 billion compared to carrying value
of $4.4 billion.
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. These liabilities are
anticipated to be paid in the future which range between one and five years.
The present (fair) value of these liabilities at December 31, 1994 approximates
$270 million compared to carrying value of $304 million.
The registrant and its subsidiaries have entered into arrangements to
manage exposure to fluctuations in interest rates. These arrangements consist
of interest-rate swap agreements ("swaps"), forward rate agreements ("FRAs"),
and interest rate cap agreements ("caps"). The differential paid or received
on these agreements is recognized as an adjustment to interest expense. These
agreements are not entered into for trading purposes. The effect of these
agreements is to make the registrant less susceptible to changes in interest
rates by effectively converting certain variable rate debt to fixed rate debt.
Because of the relationship of current market rates to historical fixed rates,
the effect at December 31, 1994 of the swap agreements is to give the
registrant an overall effective weighted-average rate on debt of 7.4%, with 33%
of debt effectively subject to variable interest rates, compared to a
weighted-average interest rate on debt of 7.3%, with 41% of debt subject to
variable interest rates when not considering the swap agreements. At December
31, 1994, these agreements expressed in notional amounts aggregated (in
millions) $324.7 swaps
-46-
47
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 13 - Financial Instruments and Commitments (continued)
and $31.3 caps. Notional amounts are not reflective of the registrant's
obligations under these agreements because the registrant is only obligated to
pay the net amount of interest rate differential between the fixed and variable
rates specified in the contracts. The registrant's exposure to any credit loss
in the event of non-performance by the counterparties is further mitigated by
the fact that all of these financial instruments are with significant financial
institutions that are rated "A" or better by the major credit rating agencies.
At December 31, 1994, the fair value of all outstanding contracts, which is
representative of the registrant's obligations under these contracts, assuming
the contracts were terminated at that date, was approximately a net receivable,
in millions, of $2.0 swaps, $.1 FRAs and $.1 caps. This relates to notional
principal, in millions, of $325 swaps maturing $111, $181, $32 and $1 in 1995,
1996, 1997 and 1998, respectively; $31 caps maturing in 1997; and of notional
principal scheduled to start after December 31, 1994, in millions, of $10 swaps
maturing $1, $1, and $8 in 1996, 1997 and 1999, respectively; and $20 FRAs
maturing in 1995.
Note 14 - Subsequent Event
Effective January 1, 1995, the registrant sold its European car leasing and
car dealership operations to Hertz Leasing International, Inc. ("HLI"), at an
amount equal to its book value of approximately $61 million. HLI is wholly
owned by Ford. In addition, Ford is to receive the worldwide rights (subject
to certain existing license rights) to use and sublicense others to use the
"Hertz" name in the conduct of motor vehicle leasing businesses. The
unaudited total assets as of December 31, 1994 and unaudited total revenues and
net income for the year ended December 31, 1994 of the registrant's European
car leasing and car dealership operations were (in millions) $482, $295 and $6,
respectively. The registrant believes that this transaction will not have a
material effect on its financial position or future operations.
-47-
48
SCHEDULE II
THE HERTZ CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(In Thousands of Dollars)
Additions
--------- Deductions
Balance at Charged ---------------------- Balance
Beginning to Translation at End
of Year Income Adjustments Other of Year
---------- --------- ----------- -------- --------
1994
Allowance for doubtful
accounts $ 6,862 $ 6,813 $ (521) $ 4,170(a) $ 10,026
======= ======= ===== ======= =======
Public liability and
property damage $264,158 $159,049 $ 403 $118,476(b) $304,328
======= ======= ===== ======= =======
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
======= ======= ===== ======= =======
(a) Amounts written off, net of recoveries.
(b) Payments of claims and expenses.
-48-
49
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
EXHIBITS
FILED WITH
FORM 10-K
FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1994
UNDER
THE SECURITIES EXCHANGE ACT OF 1934
_______________________
THE HERTZ CORPORATION
COMMISSION FILE NUMBER 1-7541
-49-
50
INDEX TO EXHIBITS
Exhibit
No. Description
- - ---------- ---------------------------------------------------------
3(ii) Certificate of Amendment of Restated Certificate of
Incorporation of The Hertz Corporation filed with the
Secretary of State of Delaware on April 28, 1994.
10(iii)(A)(e) Employment agreement with Daniel I. Kaplan dated
February 17, 1995.
10(iii)(A)(g) Executive Incentive Compensation Plan.
12 Computation of Consolidated Ratio of Earnings to Fixed
Charges for each of the five years in the period ended
December 31, 1994.
21 Listing of subsidiaries of the registrant at
December 31, 1994.
23 Consent to the incorporation by reference of report of
independent public accountants in previously filed
registration statements under the Securities Act of
1933.
27 Consolidated Financial Data Schedule for the year ended
December 31, 1994.
-50-