Hertz Global Holdings Inc HTZ
Q4 2012 Earnings Call Transcript
Transcript Call Date 02/25/2013

Operator: Hello and welcome to the Hertz Global Holdings' Fourth Quarter and 2012 Earnings Conference Call.

The Company has asked me to remind you that certain statements made on this call contained forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of performance, and by their nature are subject to inherent uncertainties. Actual results may differ materially. Any forward-looking information relayed on this call speaks only as of this date, and that Company undertakes no obligation to update that information to reflect changed circumstances.

Additional information concerning these statements is contained in the Company's press release regarding its fourth quarter results issued this morning and in the Risk Factors and Forward-Looking Statements section of the Company's 2011 Forms 10-K and 2012 Quarterly Reports. Copies of these filings are available from the SEC, the Hertz website or the Company's Investor Relations department.

I would like to remind you that today's call is being recorded by the Company and is available for replay starting at 12.30 pm Eastern Time and running through March 11, 2013.

I'd now like to turn the conference over to your host, Leslie Hunziker. Please go ahead.

Leslie Hunziker - IR: Good morning. You should all have our press release and associated financial information. We've also provided slides to accompany our conference call that can be accessed on our website at www.hertz.com on the Investor Relations page.

Today we'll use certain non-GAAP financial measures all of which are reconciled with GAAP numbers in our press release and at the back of the slide presentation, those of which are posted on our website. We believe that our profitability and performance is better demonstrated using these non-GAAP metrics. Our call today focuses on Hertz Global Holdings Incorporated, the publicly-traded company. Results for the Hertz Corporation differed only slightly as explained in our press release.

With regard to our IR calendar, we'll be presenting at the JPMorgan Leverage Finance Conference in Miami tomorrow, the JPMorgan Gaming and Lodging Conference in Las Vegas on March 8 and the CSFB Global Services Conference in Phoenix on March 11, and then on April 2, we'll be hosting our 2013 Investor Day and Financial Modeling Workshop in New York City. The agenda and registration information will be sent out later this week.

This morning, in addition to Mark Frissora, Hertz's Chairman and CEO; and Elyse Douglas, our Chief Financial Officer, on the call, we have Scott Sider, Executive Vice President and President of Vehicle Rental and Leasing, The Americas; Michel Taride, Executive Vice President and President of Hertz International; and Lois Boyd, Executive Vice President and President of Hertz Equipment Rental Corporation. They'll be on hand for the Q&A session.

Now, I'll turn the call over to Mark.

Mark P. Frissora - Chairman and CEO: Good morning, everyone and thanks for joining us. 2012 was a remarkable year for Hertz on many fronts. Through organic initiatives and acquisitions, all of the strategic pieces of our portfolio are now in place.

Let me start on Slide 5, from our strategic perspective, we have four sizable growth businesses that recorded another year of double-digit revenue improvement exceeding their respective markets growth rates. Leisure value rental car on Slide 6 is the fastest-growing segment of the U.S. airport market. It's a segment where we've wanted to operate on a national level for some time.

In 2012, after an unusually drawn out regulatory process we finally were able to acquire Dollar Thrifty which closed on November 19. As we worked through the early stages of the integration, we found a well-run company, with strong human resources and opportunities for additional synergies, particularly in the areas of fleet and IT which I'll talk about in a minute.

These brands have a lot of potential for Hertz and therefore, we expect to continue to generate double-digit growth in the Value segment, as we did with our recently divested Advantage brand. Despite little to no investment in 2012 Advantage U.S. revenues were up more than 25% and it's adjusted pre-tax income nearly doubled the scale and brand cache of Dollar Thrifty, along with its higher price point and national scope upgraded our position in the airport value segment, while presenting new opportunities off-airport and overseas.

Moving to the next slide, another recent acquisition is already generating double-digit growth, we fully integrated Donlen Leasing business in 2012 cross-training our respective sales forces, launching five new products and services and securing run rate revenue of about $45 million from new accounts. As a result of Donlen's total revenue increased 16% to $471 million last year, exceeding the commercial leasing markets 4% estimated growth rate.

Off-airport rental car on Slide 8 is another significant opportunity for us. It's an $11 billion market growing anywhere from 5% to 10% annually depending on the segment. We had 348 net new off-airport rental car locations last year for a total 2,523 supporting the brand and broad demographic coverage of our national insurance customers and expanding our accessibility to neighborhood renters. Insurance replacement in the U.S. revenues grew 14.3% in 2012.

Moving to Slide 9; our equipment rental revenue outpaced the industrial recovery and also benefited from our tuck-in acquisition strategy. Last year, we benefited from the acquisition of three rental companies that extended our reach into new geographic and end-user markets like oil and gas, entertainment services and pump and power.

U.S. equipment rental revenue finished the year, up roughly 20% on double-digit volume improvements and sequential year-over-year quarterly price increases. In addition to revenue initiatives, strategic cost initiatives are driving performance. If you turn to Slide 10, you will see that 154 of our global rental car and equipment rental locations had gone through our Lean Six Sigma efficiency programs as of December 31, 2012. This represents about 42% of total revenue. We're building a culture of continuous improvement throughout the organization.

In addition to the process efficiencies, we're lowering our fleet costs as you can see on Slide 11. In the U.S., we sold 17% more used cars in 2012, as a result of the higher risk vehicle mix, a shift to lower cost vehicles and the expansion of our used car sales force. Of those sales 53% were through higher return dealer and consumer direct channels versus 44% in 2011. These actions supported an 11.8% decline in U.S. monthly depreciation per vehicle for 2012. In total, we generated $483 million of cost savings in 2012 through process improvements and consolidated revenue per employee increased 1.8% over 2011.

Moving to Slide 12, our sources of high margin growth are hitting on all cylinders, and as a result, we're driving earnings like never before. In fact in 2012, we had our best year ever across all profit measures. For the consolidated company, adjusted pre-tax incomes was up 32.5% on an 8.7% revenue gain driving 180 basis point expansion in adjusted pre-tax margin.

Corporate EBITDA increased approximately 18% driving a 140 basis point improvement in margin, and adjusted earnings per share was up $1.33, up 37% over 2011. Benchmarks were also set in U.S. rental car last year, this is on Slide 13. Full year record revenue of $4.9 billion was up 9.6% over '11 driven by strong off-airport revenue, the double-digit increase in Advantage revenue and a month and a half of incremental Dollar Thrifty.

Total transaction days reached an all-time high in 2012 increasing 12.6%. The volume was partially offset by 3.1% decline in rental revenue per day for all U.S. rental car, but the trends are improving. For example on Slide 15, in December our Hertz brand rental revenue per day for both commercial and leisure airport rentals was up 1.6%. The positive pricing continued with 6% growth in January.

You can see on this slide the Dollar Thrifty also saw a positive year-over-year pricing in recent months. The mix of revenue favorably supported a 2.2% increase in rental length last year. This in part helped drive fleet efficiency up 40 basis points year-over-year to 80.3% the highest annual rate since becoming a publicly traded company.

You can see that on Slide 16 in the U.S. rental car monthly depreciation it reached a record low of $225 per vehicle. In 2012 as a result of more diversified fleet our ability to share fleet between brands and selling more used cars in the higher return channels. The higher revenue and lower operating costs led to a record $876 million of adjusted pre-tax income and an all-time high 17.9% margin for U.S. rental car.

In Europe it was a tough year all around, tougher than we expected, however on Slide 17 you can see that European rental car represents only about 16% of total company revenue and just about 5% of total company adjusted pre-tax income, so it's impact isn't as significant today and while there was no good news in the majority of the European economies there were several positive developments at Hertz that helped us in 2012 and should set the stage for growth in 2013.

We open 14 Advantage locations bringing the total to the 37 sites for value brand. Advantage revenue in Europe increased 86% year-over-year excluding foreign exchange. Going forward our plan will be to rebrand the existing Advantage locations. Also, following the U.S. lead we launched dealer direct and retail sales platform online in six countries.

We are already starting to see a benefit from these higher contribution channels and most significant was the franchising of our operation in Switzerland to the Emil Frey Group at the end of September last year. In order to get an apples-to-apples comparison of the operating metrics we've taken out the Switzerland results for the 2011 fourth quarter.

With that in mind adjusted European rental car revenue for 2012 fell 4.3% excluding the impact of foreign exchange with transaction days down 2.7% and pricing down 2.9%.

Excluding Advantage in the currency impact, pricing was down 1.1%. Despite low residual values across much of the continent, we believe our fleets are fully aligned with demand. Industry fleets however are still relatively loose causing continued pricing pressure, and yet we expect that easier year-over-year comps, incremental revenue from Dollar Thrifty, lower-priced new fleet, and continued process improvements will position us for earnings growth in 2013 for Europe.

On the next Slide our North American equipment rental business which represents 92% of worldwide equipment rental revenue delivered strong results in 2012. It was especially encouraging to have closed out the year with a 25% increase in rental revenue in the fourth quarter, but the full year was equally impressive in North America. Equipment rental revenue increased 19% over the prior year. Pricing was up 4% over 2011. Volume increased 13.5%. Fleet age was down 11% to about 42 months and time (yield) improved by 370 basis points, even with 11% more fleet in 2012.

Finally, dollar utilization was up 260 basis points. It was quiet year considering that non-residential construction hasn't yet recovered from the recession. On the domestic front, U.S. revenues grew 20.4% year-over-year, pricing was up 5.1% in '12 tampered in part by National Accounts. U.S. non-contract pricing was up 7.3% with National Accounts pricing up 3.2% for the year. On a worldwide basis, equipment rental corporate EBITDA increased 20%, with margin up to 90 basis points over 2011.

Now let's talk about cash flow because it's become a key focus for the Company, now to our portfolio of products and services is complete and major acquisitions are behind us.

On Slide 19, in 2012 we delivered corporate cash flow before acquisitions of $226 million, about $300 million greater than 2011, higher earnings before depreciation and proceed from franchising Switzerland more than offset fleet growth expenditures. We spent $2.4 billion on acquisitions and acquisition-related cost last year included Dollar Thrifty which is the largest acquisition in the Company's history. We also invested new fleet for both equipment and car rental last year. But we are more prudent with demand outpacing fleet expansion in both businesses.

In 2013, we'll reduce our gross investment in equipment rental feet by about 20% compared with 2012. The pace of recovery in equipment rental is steady and we expect another double digit volume increase this year. In rental car, our new fleet cost in both the U.S. and Europe are expected to be down slightly versus last year. Organic growth and lower fleet investments will create significantly higher corporate cash flow trends going forward.

With that, let me turn it over to Elyse, so she can give you some details around the fourth quarter and other capital management initiatives.

Elyse Douglas - EVP and CFO: Thanks Mark. Good morning everyone. Let me begin on Slide 21 by reviewing our fourth quarter financial results. On a consolidated basis, we achieved a record fourth quarter revenue of $2.3 billion, an improvement of 15.1% over the prior year. This record stands even if we exclude the 45 days of revenue earned from the November acquisition of Dollar Thrifty.

On a GAAP basis, we recorded a pre-tax loss of $40.3 million in the fourth quarter which includes $144 million of acquisition cost related to the Dollar Thrifty acquisition and sale of Advantage. These costs represent $0.24 per share on a GAAP basis. If you back out those costs instead of $0.09 loss it would be $0.15 of earnings. Adjusting for these cost and other non-cash and one-time items, we delivered record adjusted pre-tax income of $213.5 million, an increase of 29.3% over the similar 2011 quarter.

In addition to the benefit from revenue growth, we improved depreciation expense as a percent of revenue by 230 basis points as monthly depreciation per unit for worldwide rack was 14.5% lower than the fourth quarter of 2011. Direct operating expense increased slightly as a percent of revenue reflecting the addition of Dollar Thrifty. We also had a difficult comp in the 2012 fourth quarter due to a large property sale gain in the prior year.

Adjusted net income was up 35.5% resulting in adjusted earnings per share of $0.33 a share, an increase of $0.09 or 37.5% over the 2011 fourth quarter. The 2012 three-month earnings were calculated using 421 million shares. In instances, where we have a GAAP net loss we are required to use a basic share count. The opposite is true when we record GAAP net income. So for example, the full year share count is fully diluted for all four quarters, even though the first and fourth quarters reflected a GAAP loss.

Now let's move to Slide 22 where I'll briefly review the fourth quarter results for the business units. Worldwide rental car revenues increased $1.9 billion, up 14% in the quarter, which included Donlen revenues of $124 million. In the U.S. rental cars total revenue in the fourth quarter increased 24.5%, reflecting only one and a half months of Dollar Thrifty revenue and favorable volume offset by decreased pricing. Rental revenue per day was down 1.7% year-over-year and sequentially better than the third quarter of 2012. The good news is that December delivered strong revenue per day as Mark mentioned. Volume increased 25.4% reflecting double-digit increases in both airport and off-airport businesses.

Rental length expanded for each of our businesses in U.S. rental car culminating in a total increase of 4.1%. Longer length rentals drive utilization up and operating costs lower. Revenue for Hertz On Demand our hourly car rental business grew 30% globally with transactions increasing 33% over the prior year. Membership also grew in the fourth quarter increasing 40% over 2011.

These revenue and efficiency drivers led to an adjusted pre-tax income increase of 39.2% over the prior year fourth quarter and a margin improvement of 180 basis points. An important contributor to the strong earnings results was a 20% decline in the monthly depreciation per vehicle achieved through all the strategic initiatives that Mark outlined. The fourth quarter marks the 14th consecutive quarter of year-over-year reduced depreciation per unit expense in the U.S.

Moving to Slide 25; Europe's rental car revenue for the fourth quarter declined 9.8% or 6.6% excluding the impact of foreign exchange. Franchising our Swiss operations accounted for about three points of the year-over-year decline. But on a positive note, in the challenging European economic environment, revenue for our leisure value brand grew about 66% in the fourth quarter excluding FX. Pricing and volume were down for the fourth quarter over the prior year, but through fleet strategies we improved efficiency 60 basis points and reduced monthly depreciation per vehicle by 1%.

Now let's discuss the equipment rental results on Slide 26 through 29. Our North American business performed well in the fourth quarter delivering strong revenue growth of 25% over the prior year with pricing and volume increases of 4.1% and 15.9% respectively.

Our worldwide equipment rental revenue grew more than 21% in the fourth quarter. The increase reflects 3.8% higher pricing and 14.6% volume expansion. The solid performance in North America drove a 25.7% improvement in worldwide equipment rentals corporate EBITDA and 160 basis point margin improvements. Adjusted pre-tax income in the fourth quarter was up roughly 33% while the margin increased to 190 basis points. Margin improvements reflect revenue growth, improved dollar utilization of 350 basis points and reduced maintenance associated with the younger fleet.

Our full year gross spend was about $773 million of which roughly $120 million was spent in the fourth quarter. On a net basis, the capital expenditure was approximately $588 million. For fully year 2013, we expect gross fleet investments to be between $600 million and $700 million.

At year-end our fleet age averaged 43 months compared to 48 months at the end of 2011. Younger fleet drives demand at improved pricing levels and reduced maintenance cost. Corporate EBITDA flow through was about 54% for the quarter. For 2013, we're expecting flow through in the range of 55% to 60%.

Moving to Slide 30, the fourth quarter consolidated cash interest was relatively flat versus the fourth quarter of '11 despite incurring $12 million of post-acquisition interest on $1.9 billion of Dollar Thrifty acquisition financing. On a full-year basis cash interest was $20 million below 2011 despite higher fleet levels and the additional acquisition financing. This reflects the continued reduction in rates as we refinanced our debt.

At year-end 2012 our weighted average interest rate was about 4%, down 65 basis points from year-end 2011. Other expense of $35.5 million for the full year primarily was the result of a loss in the sale of the Advantage and expenses associated with the Dollar Thrifty divestitures.

Moving to Slide 31, due to the higher concentration of U.S. profits as a result of the Dollar Thrifty acquisition, our normalized tax rate will increase to 35% from 34% in 2013. Cash flow from operations in the fourth quarter was $799 million, up by $133 million when adjusted for the Dollar Thrifty acquisition. Corporate cash flow was negative $1.6 billion in the quarter, reflecting the completion of the acquisition on November 19.

The total cash outlay for Dollar Thrifty was $2.175 billion as outlined on Slide 32. Excluding acquisitions corporate cash flow for the quarter was positive $526 million. To fund the transaction we raised $1.95 billion through permanent financing and the remainder was funded with cash from Dollar Thrifty in our liquidity. We expect the acquisition to be credit neutral in one year.

We continue to maintain a healthy liquidity cushion as shown on Slide 33.

At December 31, we had almost $1.7 billion of corporate liquidity available. Our net corporate debt to corporate EBITDA ratio was 3.6 times at year-end. However, if we include a full year of EBITDA for Dollar Thrifty, the pro forma ratio would be approximately 3.1 times. If we also include the full run rate of synergies the debt ratio drops to 2.7 times.

The fourth quarter and first quarter debt related activity is summarized on Slide 34. You can see, we are continuing to reduce our borrowing costs and improved financing terms. We have a strong balance sheet with no meaningful near-term maturities and will continue to pursue opportunities that improve our debt profile as you can see on Slide 35.

With that I'll turn it back to Mark.

Mark P. Frissora - Chairman and CEO: Thanks, Elyse. As you can see, we made substantial progress on the actions we outlined last year to further penetrate equipment rental end-markets, generate revenue synergies with Donlen, expand our insurance replacement network, and add a national value brand in rental car. We've never been a better position strategically in the rental car business.

We've long enjoyed the number one premium preferred brand and now we've added two established value brands which we can grow across Europe and through our travel partnerships and use to accelerate our off-airport business, and in the off-airport business, we'll also be incorporating and rolling out new technologies that enhance our car sharing model this year.

Company-wide, we'll drive growth and further improve profitability by continuing to make smart investments. While very disciplined approach to capital spending in 2013, we expect to invest in new disruptive technologies for rental car that are in line with our asset-light strategy and will ultimately reduce costs and drive revenue through greater customer satisfaction.

Additional investment will be made to grow our equipment rental fleet, sales force and location network as the cycle continues to advance. Of course in 2013, we'll also be spending on the integration of Dollar Thrifty which we now think can deliver and estimated $300 million in cost synergies and another $300 million of revenue synergies. The additional $100 million of cost synergies will take longer realized than two years, because a good portion of them relate to technology opportunities that have a longer implementation period. Timing of revenue synergies are tougher to forecast, because we're only just beginning to test the waters.

Now let me walk you through the rest of the guidance and talk about some of our other assumptions. I am starting on Slide 38. With two months behind us, we estimate consolidated revenues will increase 20% to 21% year-over-year to between $10.85 billion and $10.95 billion. This includes a shift of about $20 million of corporate revenues to franchisees. Our franchise strategy has been modified as many of the lower performing corporate locations that have been targeted for franchisees are now in line with or exceeding the division's pre-tax margin. Therefore franchising becomes more about filling wide space, expanding our brand and leveraging asset-like growth in about selling corporate locations.

The revenue forecast also assumes total revenue per day for worldwide rental car to be essentially flat this year. We expect continued pricing pressure on contracted rates year-over-year, however, we made a strategic decision to minimize our participation with less profitable commercial accounts. In January, commercial revenue per day was actually positive compared with the prior year and while contract rates continued to improve from 2012 levels, we still expect pricing of this segment to be slightly down overall this year.

Volume for worldwide rental cars is estimated to be up 21% to 23%. For worldwide equipment rental, we're modeling a price improvement of 2% to 3% on 10% to 12% higher volume. In terms of adjusted pre-tax income, we expect growth of between 40% and 48% and corporate EBITDA improvement of 35% to 38% versus last year. You can see on Slides 39 and 40, that among other things these profit estimates assume investments to modernize facilities increase the video kiosk globally, and additional spending on in-car technologies. (8,100) million of cost synergies from the Dollar Thrifty acquisition are also included and we've further improved our 2013 estimate for rental car monthly depreciation per unit.

In the U.S. monthly depreciation per unit is expected to be down 4% to 5% this year. The improvement will be significantly weighted towards the first quarter, which has the easiest comp. The second and third quarters will be more difficult as comps, as we make adjustments to depreciation in each of those quarters last year. The 2013 depreciation per unit assumes 46% more used cars sold versus 2012, 110 basis point increase in cars sold through retail and dealer direct channels and lower new car prices in the U.S.

In Europe we expect monthly depreciation per unit to decline about 2% on an easier comp and lower new fleet prices. We expect worldwide rental car depreciation savings to continue into 2014. Corporate free cash flow on Slide 41 is expected to come in between $500 million and $600 million in 2013. This is higher than previously projected but the key areas of investment are the same.

Spending for both rental car and equipment fleet is estimated to be lower this year than in 2012, and as I mentioned, we'll be stepping up our non-fleet investments this year to upgrade and modernize rental facilities, add new equipment rental locations and continue to advance our technology initiatives are greater fleet and operating efficiencies and capitalize on customer relationship management.

Finally, on Slide 42 we show a table that highlights the performance of key metrics over a five-year period. This provides you with a quick snapshot of the growth and value we've delivered since the downturn. It's quite a turnaround. We've solidly beaten every prerecession measurement and are poised to further accelerate returns.

From my perspective, this Company with synergies from Dollar Thrifty and all the other key growth initiatives has three years of solid double-digit earnings growth ahead of us. We'll look forward to detailing our long-term plan with you at the upcoming Investor Day in April.

With that, let's open it up to Q&A, operator.

Transcript Call Date 02/25/2013

Operator: Brian Johnson, Barclays.

Brian Johnson - Barclays: I just want to drill down on a pricing a housekeeping question and then kind of a market temperature question. On the housekeeping, when you say worldwide pricing flat year-over-year, is that through as reported Hertz Corporation or racked or is that to as if you owned DTG and had divested Advantage?

Mark P. Frissora - Chairman and CEO: It's just everything. I mean everything, Brian. So, it relates to all the above and it's saying that in the Europe and it's as reported I guess, that would be the best way to define it. Anyone else in the room want to…?

Elyse Douglas - EVP and CFO: It's just RPD year-over-year.

Operator: Michael Millman, Millman Research.

Michael Millman - Millman Research: Regarding prices; well, you said January was up 6% for Hertz, and for the year, you are kind of talking about flat, so could you talk about whether you think that January basically easy comp and not continuing or you're being super conservative or is it something else that we should be aware of?

Mark P. Frissora - Chairman and CEO: Well, I guess, you know in terms of our assumptions, we built that into our assumptions and then you can judge what you want. I mean, obviously January is was a high watermark, but what you need to understand about January is that we finished the year with longer fleet rentals in the strong holiday season, so the actual revenue per day actually kind of flowed in January as well, so it kinds of inflates January a little bit more than what January probably actually was and that's true of all rental car companies. So, while January looked really great, we would expect some of that was artificially inflated. February, we believe is strong as well, Where this things goes, no one knows and so you know we're always try to be conservative on pricing because what we don't want to do is miss lead investors. So, the assumptions are what they are and its' based on what we see going forward and hopefully environment is more positive than what we see. So, at this point, it's a positive environment and we're hopeful as I have said in the past, usually when fleet cost go up, pricing goes up with it. Usually when residuals go down, pricing goes up, so we're hopeful the overall environment continues to be positive.

Operator: Christopher Agnew, MKM Partners.

Christopher Agnew - MKM Partners: Good to see you emphasizing the free cash flow story and I just wanted to dig into you '13 guidance. Can you talk about raising non-fleet investments, can you quantify how much above what would maybe be a normalized pace are those non-fleet investments in '13? Then very quickly, any update on your go investment-grade?

Mark P. Frissora - Chairman and CEO: I think we're spending probably a couple hundred million dollars more year-over-year than we normally would spend. So in terms of investment grade I guess I don't know. We feel like we still have the two to three-year trajectory where we will be investment grade statistic wise maybe faster than that depending on the free cash flow. We think the company I mean if you were to get rid of some of the investments that we're going to be making this year and next year, absent that we're probably an $800 billion a year free cash flow company. We expect to get at that level in the near-term -- future near-term be in the next two to three years. So, feel pretty excited about cash flow generation of the company and while we make these strategic investments a lot of them are asset-light and actually get us more profit and revenue than the existing business model does. So, they're investments but they will pay back in the higher ROI way than some of our traditional capital investments do.

Operator: Richard Kwas, Wells Fargo.

Richard Kwas - Wells Fargo: I'll sneak two in. Mark, first of all what's the U.S. GDP assumption for the year? The second question is on '14 CapEx I know you're not going to give guidance for '14 for just how do you think about Hertz gross CapEx that's going to be down in '13 year-over-year if there is a non-res pickup later this year, and do you feel like you have to spend a significant amount of more money – significant more money to get the fleet right sized for resumption of growth in the non-res sector.

Mark P. Frissora - Chairman and CEO: Okay, so the U.S. GDP growth assumption was about 1.5% or for this year. In terms of the Hertz fleet growth. I'm trying to get the exact number here for you, but…

Elyse Douglas - EVP and CFO: For '14?

Mark P. Frissora - Chairman and CEO: Yeah.

Elyse Douglas - EVP and CFO: I don't have the number for '14, but what we're going to do is work both on really watching the market and also on utilization – our utilization metrics to really improve performance around fleet.

Mark P. Frissora - Chairman and CEO: In terms of fleet growth, we're really trying to drive more productivity on the assets rather than grow, we're actually just – as you will kind of build – fulfill the dreams, hope we throw fleet at it and hope they come. So, it really depends on the non-res construction growth. If non-res comes back hard, obviously we're going to fund that growth. But at this point, again pretty modestly fleet growth this year, in fact actually less than last year and we'll see what '14 holds depending on the non-res opportunity.

Operator: Afua Ahwoi, Goldman Sachs.

Afua Ahwoi - Goldman Sachs: Just switching targets a little bit. On the Dollar Thrifty, $300 million revenue synergy, I understand, you're still early in the process, but could you maybe help us identify some of the buckets you've have found to get to you that $300 million number?

Mark P. Frissora - Chairman and CEO: Well, yeah, I mean, some of the big buckets would be, obviously, the travel partnerships that we have. They all want Dollar Thrifty, so we have a high share of airline partners, a high share hotel partners, a high share of AAA, all those partners will get Dollar Thrifty in one way or another and so those partnerships represent 30% of our revenues today at Hertz. Now, we don't expect them necessarily to represent 30% of Dollar Thrifty's but again that will be an area of synergies. Second area of synergies will be the number of locations that we have today. Some of them will get Dollar Thrifty as brands. So, today we have 3,000 locations in the U.S. and Europe probably 1,000 to 1,200 and we're not going to put them in every location, but a lot of our off-airport locations will have it and then there is the brand that we had which was advantage and that brand in Europe is certainly being replaced by another brand. Its' going to be Dollar Thrifty in some cases, so we expand in Europe significantly this year with the Dollar Thrifty brand. I guess the only other thing in terms of the revenue synergies that we're adding that I think is kind of noteworthy is the fact that we'll be giving some technology to Dollar Thrifty which the fleet policies we have with them and the way we work Hertz and the technology solution two companies is going to drive revenue growth. We're already seeing Dollar Thrifty grow significant off of their base rate the last couple of years. Their growth today is probably triple what the growth was in the fourth quarter and very strong growth rates. And our fleet sharing is helping that. The fact that we're over fleeted on the weak ends and that they are – that's their peak, that's really driving revenue growth and that's going to accelerate we think this year as we come up with our interim IT solutions. So, that's going to be a big area of just plain organic growth for Dollar Thrifty with the fleet sharing that we're doing between the two companies and they have counter cyclical kind of fleet demand levels.

Operator: Fred Lowrance, Jr., Avondale Partners.

Fred Lowrance, Jr. - Avondale Partners: Two part question here. Just Mark you already mentioned your fleet costs are going to be down in 2013, but then you've also done a good job in recent quarters and here on this call, you're noting that generally when fleet costs are up, pricing is up and vice versa. So, with the backdrop of fleet costs being down this year, one, how much of that year-over-year decline is just a mix shift on Dollar Thrifty if you could quantify that? Then secondly, when you've got at least one of your peers greatly incented to push pricing higher this year because of a huge fleet cost headwind, how are you thinking about where you are on a market share basis at this point and how that might have impact your strategy on pricing?

Mark P. Frissora - Chairman and CEO: I guess on fleet costs one of the things that I think the – just to make sure we get our point of view on fleet cost for the industry this year, we decided to try to look at the Manheim Index, MMR which was down in December and in January, down, when I say down it was down sequentially from 124 in December in '12 down to 123.4 in January 2013 it's also down year-over-year. Hertz's residual however on a year-over-year basis are up 300 basis points in January that's our residuals on the cars we sell, okay. So, we went from 71.2% to 74.4% unadjusted. So, I guess the only point I'm making on this is that while the Manheim Index and while people are kind of forecasting this headwind, we're not experiencing it. It's due to the shift in channels where we're selling the cars and how we're selling them and that's improving our fleet costs I mean it's just lowering the depreciation per vehicle. Yes, you're right, Dollar Thrifty, their fleet costs, their average rate of depreciation rate per vehicle is lower than ours that's helpful to us as well. But the other piece is our cap costs, which is what we buy our cars at in the U.S. are lower year-over-year and they are lower by over 1%. So, we bought our cars for this year. We bought them right and brought it from a wide variety of OEMs. So, our overall fleet costs are down there. That's why we were bold enough to say that 2014 is another year that we'll see fleet costs being flat to down again. This is like a one-time thing for us. Our channel shifting is helping a lot. So, we feel pretty good that we're in good shape on fleet costs for the foreseeable future and that we're bucking maybe some industry information that you see from Manheim. Second part of your question dealt about pricing. We certainly are willing to give up customers that on a commercial level are not profitable or barely profitable and we are trying to really focus on profitable customer segments and profitable customers. So, that's where we're trying to grow our shares. So, there is a lot of energy around that in our organization. So we're actually willing to give up share and retention in some cases. We're not really looking to in terms of pricing just be there where the market has taken price wherever we can and chase profitable segments going forward. So, we're chasing profitable segments last year, but we've probably raised the bar a little bit and the hurdle rate a little bit from where we were in the past.

Operator: Adam Jonas, Morgan Stanley.

Adam Jonas - Morgan Stanley: I wanted to go back to fleet costs again, you had previously guided to depreciation flat to down, 1% or 2% as recently as the Detroit Show and now expecting down 4% to 5%, just wondering specifically what drove that change over the course of the last month and I believe in your prepared comments, you said that your within the assumptions of fleet cost that new prices meaning you acquisition cost for fleet should be down, but could you be a little bit more specific on what your assumption is of the underlying used market and ex-DTG – ex the DTG mix impact, would you still be able to target lower fleet cost year-on-year?

Mark P. Frissora - Chairman and CEO: Absolutely. Yes, we would be able to target lower fleet cost year-on-year ex-DTG, no question about it and so in terms of specificity there is about 15 moving pieces. I'll try to give you that in just the last minute or so before your question, so hopefully that provided enough color for you to understand it. I gave you 300 basis points improvement in our year-over-year residuals which is not being experienced my guess is from competition or other people. So, our strategy is what's driving it and the depreciation – lower cost depreciation of Dollar Thrifty vehicles drove it as well, but probably equal parts and I don't want to give you an exact number because I guess there are a lot of moving pieces. But I feel really good that regardless of whatever happens in the next 12 months, next 18 months are going to be very good for us. So, hopefully that gives us much information we have right now that we're disclosing on.

Operator: (Jordan Hymowitz, Philadelphia Financials).

Jordan Hymowitz - Philadelphia Financials: Thanks most of my questions were answered. One quick question is, is there a limit on debt-to-EBITDA, do you guys have?

Elyse Douglas - EVP and CFO: No limitation.

Operator: Thank you, and with that, that's all the time we have questions for today.

Mark P. Frissora - Chairman and CEO: Alright. Listen, thank you all for listening in and appreciate the support that we've had from investors. Our plan is again to announce an Investor Day here this week and fill you in a little bit more and a lot more detail actually when we have our Investor Day in April. Thanks everyone.

Operator: Thank you. Once again, today's conference call is available for replay beginning at 12.30 PM Eastern Time and running through March 11 at Midnight. You may access the replay system by dialing 800-475-6701 or internationally 320-365-3844 and enter the access code of 280527. Again the numbers are 800-475-6701 or 320-365-3844 with the common access code of 280527. That does conclude our conference for today. We thank you for your participation. You may now disconnect.