Cop
#his spreadsheet supports S#UD$%# analysis of the case &'idding For ert* +everaged 'uyout& (UV!,F,-./0)
right (c) 2008 by the University of Virginia Darden School Foundation Charlottesville V!" !ll rights reserved"
Hertz Historical Consolidated Income Statement ($ millions) 2002
2003
2004
2005E (1)
RAC Revenue irect %& ' S*+ *ross '-I+ /leet e&reciation /leet Interest +d0usted '-I+
$4,542.7 2,#7#. ",8##.4 ",2"#.7 27!. 78.8
$4,852.2 2,4. ",!8. ",25#.4 27#.2 75.7
$5,4!." ,. 2,!#.2 ",2". "!.2 554."
$#,!5".7 ,845.2 2,2!#.5 ",#2.2 8!." 4#4.2
HERC Revenue irect %& ' S*+ *ross '-I+ /leet e&reciation /leet Interest +d0usted '-I+
",!5.7 722.2 7.5 282.8 5.4 14.7
",!8".5 7"7. #.# 2#7.! 78. "7.7
","85. 74.# 4#. 2".4 74. "!.#
",58.! 8!5." 552. 228.! #.# 228.
otal +d0usted '-I+ on1/leet e&reciation %&eratin3 Com&an Interest '&ense
74." "57.# !.!
.4 "5#.! !.!
#84.7 "82.7 !.!
#2.5 "84.7 !.!
Pretax Income -oo aes 6inorit Interest
2"#.5 77. !.!
27.4 85.5 !.!
5!2.! "8!.7 .2
5!7.8 "82. .7
$138.6
$151.9
$321.3
$324.9
Net Income (")
Relects &re1-% estimated net income or 2!!5.
Hertz Historical Consolidated -alance S9eet ($ millions) 2002 Aet Cas9 and ':uivalents /leet Cas9 'n9ancement +ccounts Receiva;le 6anuacturer Receiva;les Inventories
2003
2004
2005E (1)
#!". !.! 7." 47.8 7".8 8.8 42. 2,!72."
",""!." !.! ",!8.2 5"". 7.4 !. 45.# ,".5
",27. !.! ",225." #!!." 8. "!!." 44." ,2!.#
","!2. !.! ",!!4.2 #2.7 2.7 ""." #.5 2,7."
/leet, et <<' et 'istin3 *ood=ill Intan3i;les e= *ood=ill Intan3i;les otal +ssets
7,425.8 ",""".8 5".! !.! "","28.7
7,7. ","#.8 5#. !.! "2,#.5
,"22. ",2#.2 544.4 !.! "4,"4."
,7#7. ",54.# 54.# !.! "4,#5.#
!"a#""t"e % &toc'oer* E+,"t+ccounts
5!#.2 78.4 52.8 ",48.4 7,!4.2
757. 7#.4 """.4 ",#!5.7 7,#27.
78#.! 85.7 "!." ",75".8 8,428.!
758.! 8".7 "2. ",7!7.! ,"8!.
5.5 4#2." !.! !.!
8.8 72".2 !.! !.!
".7 84.7 !.! 4.
74. ##.! !.! "2.7
,2!7.2
"!,5.#
"",42#."
"","!.
",2".8 "","2.!
2,285.8 "2,#.4
2,7#7. "4,"4.!
2,725. "4,##.2
otal ia;ilities otal ':uit otal ia;ilities ':uit (")
Relects &re1-% estimated ;alance s9eet or 2!!5. Small dierences in 9istorical total assets and total lia;ilitie
s and e:uit in 2!!212!!4 are due to roundin3.
2!!#
2!!7
2!!8
2!!
2!"!
,"ne &e/ment RAC Revenue irect %& ' S*+ *ross '-I+ /leet e&reciation /leet Interest +d0usted '-I+
#,!5".7 ,845.2 2,2!#.5 ",#2.2 ## 478.
#,55.8 4,!2.8 2,5!.! ",544.7 4!8." 55!.2
#,. 4,2".! 2,7#2. ",#52. 44.5 ##!.!
7,4"2. 4,455." 2,57.8 ",752.! 47.! 72#.8
7,78.# 4,#!5.# ,"78.! ",8.# 5!5.# 82.7
8,". 4,828.2 ,!5.7 ",22.4 52. 85.4
HERC Revenue irect %& ' S*+ *ross '-I+ /leet e&reciation /leet Interest(2) +d0usted '-I+
",58.! 8!5." 552. 228.! !.! 24.
",4.8 8#." #!.7 24.5 !.! 8"."
",#". ".! #4. 2#.5 !.! 424.8
",7"!." #8.8 74". 285.7 !.! 455.#
",787." .5 787.# 28.5 !.! 48."
",84!.7 ",!". 8!.4 !7.5 !.! 5!".
8!.2 "45. 8.8 #"8.5
". "54.4 4".8 75."
",!84.8 "5.! 4.! 882.8
","82. "#".! 45.! 7#.
",2".8 "#.! 4#.! ",""2.8
",55. "#5.! 47.! ","4.
%& Co Interest '&ense> erm oan acilit (R+C), 8.!? Senior +- acilit, 7? 'uro notes, 7.88? Senior unsecured notes, 8.875? 'istin3 senior notes, 7.!!? Senior su;ordinated notes, "!.5? otal %& Co interest e&ense
4#!.8
"44.! 28.! "5.8 "77.5 5#.! #.! 484.
"48.5 28.! "5.8 "77.5 5#.! #.! 488.8
"5!." 28.! "5.8 "77.5 5#.! #.! 4!.4
"42.2 28.! "5.8 "77.5 5#.! #.! 482.5
"25.4 28.! "5.8 "77.5 5#.! #.! 4#5.7
"57.7 5#.8 "!!.
25!.8 !. "#!.5
4.! "4".8 252.2
48#.! "74. "".!
#!. 22#. 4!.4
#77.# 24. 4.7
",!".2
","8!.
",54.
",4#8.!
",#2!.
",##2.8
Hert Cororat"on (HertCo) otal +d0usted '-I+ R+C on1/leet e&reciation H'RC on1/leet e&reciation %&eratin3 Com&an (total) '-I
Cor&orate '-I+() ( )
Relects 2!!5
e&ense).
2!!#
2!!7
2!!8
2!!
!! "7 ",!!4 #! "" 7 2,4 ,7#7 7,7!" 2,!## ",55 ,"5 "7,5!
"#" 42 ",!88 ### "!! "2 4! 2,52! "!,#! 8,7 2,227 ",445 ,"5 "8,84"
"72 ## ","## 7" "!8 "" 42 2,# "",75! ,44 2,4!5 ",4# ,"5 ",827
"82 88 ",2# 75# ""4 " 45 2,8#" "2,455 ,!5 2,55! ",4#! ,"5 2!,#"
"" 4!7 ",27 74 "2! "4# 47 ,!!2 ",!#5 "!,4!! 2,##5 ",474 ,"5 2",45#
" 42# ",52 82 "25 "52 4 ,"2 ",#" "!,8#8 2,745 ",5"# ,"5 22,"77
758 82! "2 ",7!7
82" 888 "4! ",85!
88! 52 "5! ",8
",!! "5 2,"!2
7 ",!5 "#7 2,2!5
",!2! ","! "74 2,28
",8!! ",85# ",87# ",778 ",5#8 4,!! 4,!2 5,258 5,585 5,87 ",8!! 2,!# 2,272 2,4 2,575 #!! #!! #!! #!! #!! ! ! ! ! ! 4!! 4!! 4!! 4!! 4!! 2!! 2!! 2!! 2!! 2!! 2,!!! 2,!!! 2,!!! 2,!!! 2,!!! 8!! 8!! 8!! 8!! 8!! #!! #!! #!! #!! #!! "2,5!! ",454 "4,!!# "4,5 "4,#"# 74 74 74 74 74 ## #8 7 78 82" " " " " " "5,2! "#,8! "7,""5 "7,##7 "8,!2 2,!! 2,4#" 2,7" ,!24 ,427 otal ia;ilities ':uit "7,5! "8,84" ",827 2!,#" 2",45# (") Small dierences in t9e totals and t 9e sum o individual line items are due to roundin3. (2) Relects 2!!5 ;alance s9eet in '9i;it ad0usted or -% ca&ital structure. () +-S de;t ;alances increase over time due to increases in R+C leet rom 3ro=t9 and risi n3 ve9icle costs.
"," #,"4# 2,7! #!! ! 4!! 2!! 2,!!! 8!! #!! "4,775 74 85# " "8,"# ,8#" 22,"77
Aet Cas9 and ':uivalents /leet Cas9 'n9ancement +ccounts Receiva;le 6anuacturer Receiva;les Inventories erm oan acilit (R+C), 8.!? @.S. +-S notes, 4.5? () International +-S notes, 4.?() 'istin3 +-S de;t, 4.!? /leet (+-S) inancin3 acilt Senior +- /acilit, 7.!? Senior 'uro notes, 7.88? Senior unsecured notes, 8.875? 'istin3 senior su;ordinated notes, 7.!? Senior su;ordinated notes, "!.5? otal on31erm e;t
2!"!
200.1F Cost of debt ."/3 Cost of e7uity -"-3 Debt $7uity :d :e $7uity 'eta WACC
-2.00 200 86"6/3 -.".63 2"2 5.85%
Unlevered 'eta of Coparables 0"/ 'eta 2"2 4is5 free rate 6"2/3 49,4fr 6"803 Spread for ''' coapny in 200 23
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2!!7
2!!8
2!!
2!"!
et Income +dd> increase in deerred taes +dd> H'RC leet de&reciation +dd> total non1leet de&reciation ess> H'RC leet C+< 'A
"#!.5 5.2 24.5 "#.2 4"!.7
252.2 4.5 2#.5 2!2.! 447.7
"".! 44. 285.7 2!#.! 4!.!
4!.4 8.4 28.5 2!.! 4".
4.7 4.7 !7.5 2"2.! 87.4
ess> total non1leet C+< 'A
287.!
2".8
2!2.#
22.2
254.2
1""5.8 "4.2 15#.5 !.
4#. 7.5 12!.! "2.8
4.! 72. 8.# ".8
8. #4.4 2"!." !8.8
7.! #!.8 248. 28.!
25.5
22.8
4"2.4
5"8.
54#. "44#.5
25.5 " 2
22.8 2 2#"
4"2.4 48
5"8. 4 4"
"5!!.8 5 ""24
ess> increase in BC ess> net leet e:uit re:uirement Cas9 /lo= availa;le to &a do=n de;t (2) +dd> o&eratin3 com&an interest ater ta /ree Cas9 /lo= to Ca&ital (unlevered) #erinal Value #otal cash flo= ears Discounted Cash flo= Firm Value
12556
Gear Discount @ Hro=th 4ates :!CC ."8.3 +ong ter Hro=th 4 2"003
20-0 20-20-2 20- 20-6 !verage Jhttp*<<==="statista Jhttp*<<==="usinfla
HD1 gro=th 4ate ;nflation 4ate 2".3 -"/03 2"23 2"223
-".03 3 -"03 -".03
2"E3
0"803
2"2-3
-"03
"co
Com&ara;le Com&an +nalsis ($ millions) 6 /inancials (1)
Com&an
Stoc
':uit Ealue
'nter&rise Ealue ('E) (2)
Revenue
'-I+
'-I+ 6ar3in
2!!5'
Car Renta
+merco Cendant ollar19rit
$58.!" $2!.54 $2.!
$",2#
$",2
$2,!47
$28
"4.#!?
"."
$22,""7 $84#
$2#,4"7 $##"
$2!,454 $",48"
$,"" $"!7
"5.2!? 7.2!?
"4.# "5
$"8.4 $2.!4 $"8.!2
$",44! $#75 $"!,42
$4,2"2 $",5#7 $"",82
$,!" $","44 $#,27!
$785 $24# $",45
2#."!? 2".5!? 2.8!?
"!.8 "#. "#.8
E+,"ment Renta
@nited Rentals +s9tead *rou& +tlas Co&co
(")
Cendant 9eld +vis and ot9er travel related ;usinesses. RSC ':ui&ment Rentals =as a division o +tlas Co&co.
(2)
'nter&rise Ealue or car and truc rental re&resents t9e value o t9e o&eratin3 com&an, suc9 t9at t9e associated multi&les r o&eratin3 com&an. Similarl, '-I+ or car rental re&resents ad0usted '-I+. ollar 9ritFs enter&rise value is less t de;t is leet1;ased (t9ere is no o&eratin3 com&an de;t) and ;ecause ollar 9rit 9as $"85 million in ecess cas9.
rea,r- an Cororate Rate A,/,t 2005 1mont9 1;ill 51ear reasur -ond "!1ear reasur -ond Cor&orate --- -onds
.44? 4."2? 4.2#? 5.8?
,"ne &e/ment RAC
Revenue irect %& ' S*+ *ross '-I+ /leet e&reciation /leet Interest +d0usted '-I+
2!!5 #,!5".7 ,845.2 2,2!#.5 ",#2.2 ## 478.
HERC
Revenue irect %& ' S*+ *ross '-I+ /leet e&reciation /leet Interest(2) +d0usted '-I+
$';D#! 9ultiple of 4!C $';D#! 9ultiple of 4$C
",58.! 8!5." 552. 228.! !.! 24.
9ultiple $';D#! $nterprise Value "060 68" /"0 /".68 26"E 2-2"6
arnin3s
EalueD6
2!!#'
Revenue
'-I+ 6ulti&le
"5.7
!.4
"2. ".7
".2 !.45
#.47 8.47! #."78 7.!4!
8.7 "".8 "5.2
".4 ".7 ".8
5.## #.7! 7.!8 /".68
e&resent t9e multi&les or t9e an e:uit value ;ecause all o its
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