Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 20102011

OR

o

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-33139

HERTZ GLOBAL HOLDINGS, INC.
(Exact name of Registrantregistrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)
 20-3530539
(I.R.S. Employer
Identification Number)

225 Brae Boulevard
Park Ridge, New Jersey 07656-0713
(201) 307-2000
(Address, including Zip Code, and telephone number,
including area code, of Registrant'sregistrant's principal executive offices)

Not Applicable
(Former name, former address and former fiscal year,
if changed since last report.)

Indicate by check mark whether the Registrantregistrant (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 ý    No o

Indicate by check mark whether the Registrantregistrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrantregistrant was required to submit and post such files). Yes oý    No o

Indicate by check mark whether the Registrantregistrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ý Accelerated filer o Non-accelerated filer o
(Do not check if a smaller
reporting company)
 Smaller reporting company o

Indicate by check mark whether the Registrantregistrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No ý

There were 411,722,103415,808,391 shares of the Registrant'sregistrant's common stock, par value $0.01 per share, issued and outstanding as of April 30, 2010.May 2, 2011.


HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
INDEX

 
  
 Page

PART I. FINANCIAL INFORMATION

  
   

ITEM 1.

 

Condensed Consolidated Financial Statements (Unaudited)

  

 

Report of Independent Registered Public Accounting Firm

 

1

 

Condensed Consolidated Balance Sheets as of March 31, 20102011 and December 31, 20092010

 

2

 

Consolidated Statements of Operations for the Three Months Ended March 31, 20102011 and 20092010

 

3

 

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 20102011 and 20092010

 

4-5

 

Notes to Condensed Consolidated Financial Statements

 

6-296-28

   

ITEM 2.

 

Management's Discussion and Analysis of Financial Condition and Results of Operations

 

30-5329-53

   

ITEM 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

53

   

ITEM 4.

 

Controls and Procedures

 

5354

PART II. OTHER INFORMATION

  
   

ITEM 1.

 

Legal Proceedings

 

5455

   

ITEM 1A.

 

Risk Factors

 

54-5555-56

   

ITEM 6.

 

Exhibits

 

5556

SIGNATURE

 

5657

EXHIBIT INDEX

 

5758-59


Table of Contents


PART I—FINANCIAL INFORMATION

ITEM l.    Condensed Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and
Shareholders of Hertz Global Holdings, Inc.:

We have reviewed the accompanying condensed consolidated balance sheet of Hertz Global Holdings, Inc. and its subsidiaries as of March 31, 2010,2011, and the related consolidated statements of operations for the three-month periods ended March 31, 20102011 and March 31, 20092010 and the consolidated statements of cash flows for the three monththree-month periods ended March 31, 20102011 and March 31, 2009.2010. These interim financial statements are the responsibility of the Company's management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of December 31, 2009,2010, and the related consolidated statements of operations, of changes in equity and of cash flows for the year then ended (not presented herein), and in our report dated February 26, 2010,25, 2011, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2009,2010, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived.

/s/ PricewaterhouseCoopers LLP
Florham Park, New Jersey
May 5, 20106, 2011


Table of Contents



HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands of Dollars)

Unaudited



 March 31,
2010
 December 31,
2009
 
 March 31,
2011
 December 31,
2010
 

ASSETS

ASSETS

 

ASSETS

 

Cash and cash equivalents

Cash and cash equivalents

 $800,749 $985,642 

Cash and cash equivalents

 $1,365,759 $2,374,170 

Restricted cash and cash equivalents

Restricted cash and cash equivalents

 221,338 365,159 

Restricted cash and cash equivalents

 190,886 207,576 

Receivables, less allowance for doubtful accounts of $20,361 and $21,268

 1,446,373 1,325,332 

Receivables, less allowance for doubtful accounts of $21,323 and $19,708

Receivables, less allowance for doubtful accounts of $21,323 and $19,708

 1,311,755 1,356,553 

Inventories, at lower of cost or market

Inventories, at lower of cost or market

 92,933 93,415 

Inventories, at lower of cost or market

 97,472 87,429 

Prepaid expenses and other assets

Prepaid expenses and other assets

 283,516 300,125 

Prepaid expenses and other assets

 428,879 352,782 

Revenue earning equipment, at cost:

Revenue earning equipment, at cost:

 

Revenue earning equipment, at cost:

 

Cars

 8,764,868 8,205,579 

Cars

 8,970,894 8,435,077 
 

Less accumulated depreciation

 (1,115,837) (1,186,299) 

Less accumulated depreciation

 (1,256,743) (1,199,355)

Other equipment

 2,567,353 2,582,029 

Other equipment

 2,766,600 2,756,101 
 

Less accumulated depreciation

 (823,925) (749,724) 

Less accumulated depreciation

 (1,079,491) (1,052,414)
           
 

Total revenue earning equipment

 9,392,459 8,851,585  

Total revenue earning equipment

 9,401,260 8,939,409 
           

Property and equipment, at cost:

Property and equipment, at cost:

 

Property and equipment, at cost:

 

Land, buildings and leasehold improvements

 1,031,177 1,023,891 

Land, buildings and leasehold improvements

 1,101,047 1,071,987 

Service equipment and other

 850,159 838,906 

Service equipment and other

 945,999 900,271 
           

 1,881,336 1,862,797 

 2,047,046 1,972,258 
 

Less accumulated depreciation

 (711,347) (674,668) 

Less accumulated depreciation

 (860,537) (808,689)
           
 

Total property and equipment

 1,169,989 1,188,129  

Total property and equipment

 1,186,509 1,163,569 
           

Other intangible assets, net

Other intangible assets, net

 2,580,697 2,597,682 

Other intangible assets, net

 2,535,570 2,550,559 

Goodwill

Goodwill

 290,311 295,350 

Goodwill

 309,495 300,174 
           
 

Total assets

 $16,278,365 $16,002,419  

Total assets

 $16,827,585 $17,332,221 
           

LIABILITIES AND EQUITY

LIABILITIES AND EQUITY

 

LIABILITIES AND EQUITY

 

Accounts payable

Accounts payable

 $1,223,859 $658,671 

Accounts payable

 $1,204,927 $944,973 

Accrued liabilities

Accrued liabilities

 885,952 1,024,822 

Accrued liabilities

 983,420 1,070,082 

Accrued taxes

Accrued taxes

 143,727 108,356 

Accrued taxes

 121,602 108,940 

Debt

Debt

 10,387,856 10,364,367 

Debt

 10,750,019 11,306,429 

Public liability and property damage

Public liability and property damage

 267,017 277,828 

Public liability and property damage

 282,127 278,685 

Deferred taxes on income

Deferred taxes on income

 1,429,919 1,470,934 

Deferred taxes on income

 1,450,797 1,491,789 
           
 

Total liabilities

 14,338,330 13,904,978  

Total liabilities

 14,792,892 15,200,898 
           

Commitments and contingencies (Note 16)

 

Commitments and contingencies

Commitments and contingencies

 

Equity:

Equity:

 

Equity:

 

Hertz Global Holdings Inc. and Subsidiaries stockholders' equity

Hertz Global Holdings Inc. and Subsidiaries stockholders' equity

 

Hertz Global Holdings Inc. and Subsidiaries stockholders' equity

 

Common Stock, $0.01 par value, 2,000,000,000 shares authorized, 411,366,789 and 410,245,225 shares issued and outstanding

 4,114 4,102 

Preferred Stock, $0.01 par value, 200,000,000 shares authorized, no shares issued and outstanding

   

Preferred Stock, $0.01 par value, 200,000,000 shares authorized, no shares issued and outstanding

   

Common Stock, $0.01 par value, 2,000,000,000 shares authorized, 414,938,766 and 413,462,889 shares issued and outstanding

 4,149 4,135 

Additional paid-in capital

 3,146,981 3,141,695 

Additional paid-in capital

 3,184,496 3,183,225 

Accumulated deficit

 (1,212,723) (1,062,318)

Accumulated deficit

 (1,242,975) (1,110,362)

Accumulated other comprehensive loss

 (16,233) (3,331)

Accumulated other comprehensive income

 68,873 37,823 
           
 

Total Hertz Global Holdings, Inc. and Subsidiaries stockholders' equity

 1,922,139 2,080,148  

Total Hertz Global Holdings, Inc. and Subsidiaries stockholders' equity

 2,014,543 2,114,821 

Noncontrolling interest

Noncontrolling interest

 17,896 17,293 

Noncontrolling interest

 20,150 16,502 
           
 

Total equity

 1,940,035 2,097,441  

Total equity

 2,034,693 2,131,323 
           
 

Total liabilities and equity

 $16,278,365 $16,002,419  

Total liabilities and equity

 $16,827,585 $17,332,221 
           

The accompanying notes are an integral part of these financial statements.


Table of Contents


HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands of Dollars, except share and per share data)

Unaudited

 
 Three Months Ended
March 31,
 
 
 2011 2010 

Revenues:

       
 

Car rental

 $1,478,938 $1,396,571 
 

Equipment rental

  268,086  236,971 
 

Other

  32,979  27,346 
      
  

Total revenues

  1,780,003  1,660,888 
      

Expenses:

       
 

Direct operating

  1,073,665  1,012,999 
 

Depreciation of revenue earning equipment and lease charges

  436,089  459,173 
 

Selling, general and administrative

  182,221  167,743 
 

Interest expense

  196,889  181,098 
 

Interest income

  (1,855) (2,278)
 

Other (income) expense, net

  51,876   
      
  

Total expenses

  1,938,885  1,818,735 
      

Loss before income taxes

  (158,882) (157,847)

Benefit for taxes on income

  29,940  11,020 
      

Net loss

  (128,942) (146,827)

Less: Net income attributable to noncontrolling interest

  (3,673) (3,578)
      

Net loss attributable to Hertz Global Holdings, Inc. and Subsidiaries' common stockholders

 $(132,615)$(150,405)
      

Weighted average shares outstanding (in thousands)

       
 

Basic

  414,065  410,740 
 

Diluted

  414,065  410,740 

Loss per share attributable to Hertz Global Holdings, Inc. and Subsidiaries' common stockholders:

       
 

Basic

 $(0.32)$(0.37)
 

Diluted

 $(0.32)$(0.37)

The accompanying notes are an integral part of these financial statements.


Table of Contents


HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

CASH FLOWS

(In Thousands of Dollars, except share and per share data)

Dollars)

Unaudited

 
 Three Months Ended
March 31,
 
 
 2010 2009 

Revenues:

       
 

Car rental

 $1,396,571 $1,260,902 
 

Equipment rental

  236,971  279,332 
 

Other

  27,346  24,652 
      
  

Total revenues

  1,660,888  1,564,886 
      

Expenses:

       
 

Direct operating

  1,012,999  955,320 
 

Depreciation of revenue earning equipment

  459,173  489,828 
 

Selling, general and administrative

  167,743  166,724 
 

Interest expense

  181,098  165,109 
 

Interest and other income, net

  (2,278) (2,021)
      
  

Total expenses

  1,818,735  1,774,960 
      

Loss before income taxes

  (157,847) (210,074)

Benefit for taxes on income

  11,020  49,654 
      

Net loss

  (146,827) (160,420)

Less: Net income attributable to noncontrolling interest

  (3,578) (3,089)
      

Net loss attributable to Hertz Global Holdings, Inc. and Subsidiaries' common stockholders

 $(150,405)$(163,509)
      

Weighted average shares outstanding (in thousands)

       
 

Basic

  410,740  323,371 
 

Diluted

  410,740  323,371 

Loss per share attributable to Hertz Global Holdings, Inc. and Subsidiaries' common stockholders:

       
 

Basic

 $(0.37)$(0.51)
 

Diluted

 $(0.37)$(0.51)

The accompanying notes are an integral part of these financial statements.


Table of Contents


HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of Dollars)

Unaudited



 Three Months Ended
March 31,
 


 2010 2009 
 Three Months Ended
March 31,
 


  
 (Note 2)
 
 2011 2010 

Cash flows from operating activities:

Cash flows from operating activities:

 

Cash flows from operating activities:

 

Net loss

 $(146,827)$(160,420)

Net loss

 $(128,942)$(146,827)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

Adjustments to reconcile net loss to net cash provided by operating activities:

 
 

Depreciation of revenue earning equipment

 459,173 489,828  

Depreciation of revenue earning equipment

 412,508 442,671 
 

Depreciation of property and equipment

 39,630 38,086  

Depreciation of property and equipment

 37,695 39,630 
 

Amortization of other intangible assets

 16,372 15,514  

Amortization of other intangible assets

 16,784 16,372 
 

Amortization and write-off of deferred financing costs

 15,573 11,693  

Amortization and write-off of deferred financing costs

 44,598 15,573 
 

Amortization of debt discount

 12,356 5,823  

Amortization and write-off of debt discount

 15,297 12,356 
 

Stock-based compensation charges

 8,997 7,364  

Stock-based compensation charges

 9,078 8,997 
 

Loss on derivative

 1,649   

(Gain) loss on derivatives

 (6,917) 9,838 
 

Amortization of cash flow hedges

 20,899 7,487  

Amortization of cash flow hedges

  20,899 
 

Provision for losses on doubtful accounts

 5,087 8,317  

Provision for losses on doubtful accounts

 6,362 5,087 
 

Asset writedowns

 676 3,130  

Asset writedowns

 742 676 
 

Deferred taxes on income

 32,233 7,256  

Deferred taxes on income

 (26,465) 32,233 
 

Gain on sale of property and equipment

 (409) (1,291) 

Gain on sale of property and equipment

 (2,317) (409)

Changes in assets and liabilities, net of effects of acquisition:

 

Changes in assets and liabilities, net of effects of acquisition:

 
 

Receivables

 (28,545) 96,058  

Receivables

 (26,035) (28,545)
 

Inventories, prepaid expenses and other assets

 (5,338) 8,460  

Inventories, prepaid expenses and other assets

 (48,280) (8,975)
 

Accounts payable

 48,868 (47,564) 

Accounts payable

 28,813 48,868 
 

Accrued liabilities

 (118,560) (226,547) 

Accrued liabilities

 (165,747) (123,112)
 

Accrued taxes

 (56,487) (62,258) 

Accrued taxes

 3,934 (56,487)
 

Public liability and property damage

 (4,175) (16,456) 

Public liability and property damage

 (5,468) (4,175)
           
 

Net cash provided by operating activities

 301,172 184,480  

Net cash provided by operating activities

 165,640 284,670 
           

Cash flows from investing activities:

Cash flows from investing activities:

 

Cash flows from investing activities:

 

Net change in restricted cash and cash equivalents

 139,905 401,225 

Net change in restricted cash and cash equivalents

 20,611 139,905 

Revenue earning equipment expenditures

 (2,214,469) (1,399,612)

Revenue earning equipment expenditures

 (1,963,814) (2,214,469)

Proceeds from disposal of revenue earning equipment

 1,589,945 2,026,075 

Proceeds from disposal of revenue earning equipment

 1,690,159 1,606,447 

Property and equipment expenditures

 (51,292) (26,723)

Property and equipment expenditures

 (56,770) (51,292)

Proceeds from disposal of property and equipment

 6,683 5,266 

Proceeds from disposal of property and equipment

 14,451 6,683 

Acquisitions, net of cash acquired

  (10,153)

Acquisitions, net of cash acquired

 (9,774)  

Sales of short-term investments

 3,360  

Sale of short-term investments, net

  3,360 

Other investing activities

 341 844 

Other investing activities

 1,192 341 
           
 

Net cash provided by (used in) investing activities

 $(525,527)$996,922  

Net cash used in investing activities

 $(303,945)$(509,025)
           

The accompanying notes are an integral part of these financial statements.


Table of Contents


HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(In Thousands of Dollars)

Unaudited



 Three Months Ended
March 31,
 


 2010 2009 
 Three Months Ended
March 31,
 


  
 (Note 2)
 
 2011 2010 

Cash flows from financing activities:

Cash flows from financing activities:

 

Cash flows from financing activities:

 

Proceeds from issuance of long-term debt

 $8,472 $1,286 

Proceeds from issuance of long-term debt

 $2,429,456 $8,472 

Repayment of long-term debt

 (262,593) (470,523)

Payment of long-term debt

 (3,138,875) (262,593)

Short-term borrowings:

 

Short-term borrowings:

 
 

Proceeds

 66,581 69,339  

Proceeds

 67,155 66,581 
 

Repayments

 (79,279) (108,062) 

Payments

 (225,302) (79,279)
 

Proceeds (repayments) under the revolving lines of credit, net

 347,175 (690,025) 

Proceeds (payments) under the revolving lines of credit, net

 47,928 347,175 

Distributions to noncontrolling interest

 (2,975) (2,800)

Distributions to noncontrolling interest

  (2,975)

Proceeds from employee stock purchase plan

 610 725 

Proceeds from employee stock purchase plan

 871 610 

Proceeds from exercise of stock options

 690 926 

Proceeds from exercise of stock options

 1,728 690 

Proceeds from disgorgement of stockholder short-swing profits

 41 9 

Proceeds from disgorgement of stockholder short-swing profits

 40 41 

Net settlement on vesting of restricted stock

 (5,262)  

Net settlement on vesting of restricted stock

 (10,703) (5,262)

Payment of financing costs

 (1,311) (1,504)

Payment of financing costs

 (64,091) (1,311)
           
 

Net cash provided by (used in) financing activities

 72,149 (1,200,629) 

Net cash provided by (used in) financing activities

 (891,793) 72,149 
           

Effect of foreign exchange rate changes on cash and cash equivalents

Effect of foreign exchange rate changes on cash and cash equivalents

 (32,687) (17,968)

Effect of foreign exchange rate changes on cash and cash equivalents

 21,687 (32,687)
           

Net decrease in cash and cash equivalents during the period

 (184,893) (37,195)

Net change in cash and cash equivalents during the period

Net change in cash and cash equivalents during the period

 (1,008,411) (184,893)

Cash and cash equivalents at beginning of period

Cash and cash equivalents at beginning of period

 985,642 594,266 

Cash and cash equivalents at beginning of period

 2,374,170 985,642 
           

Cash and cash equivalents at end of period

Cash and cash equivalents at end of period

 $800,749 $557,071 

Cash and cash equivalents at end of period

 $1,365,759 $800,749 
           

Supplemental disclosures of cash flow information:

Supplemental disclosures of cash flow information:

 

Supplemental disclosures of cash flow information:

 

Cash paid during the period for:

 

Cash paid during the period for:

Cash paid during the period for:

 
 

Interest (net of amounts capitalized)

 $173,247 $204,101 

Interest (net of amounts capitalized)

 $205,812 $173,247 
 

Income taxes

 24,564 7,823 

Income taxes

 11,555 24,564 

Supplemental disclosures of non-cash flow information:

Supplemental disclosures of non-cash flow information:

 

Supplemental disclosures of non-cash flow information:

 
 

Purchases of revenue earning equipment included in accounts payable

 $709,052 $409,606 

Purchases of revenue earning equipment included in accounts payable and accrued liabilities

 $487,921 $709,052 
 

Sales of revenue earning equipment included in receivables

 632,336 331,501 

Sales of revenue earning equipment included in receivables

 387,620 632,336 
 

Purchases of property and equipment included in accounts payable

 26,164 14,467 

Purchases of property and equipment included in accounts payable

 38,782 26,164 
 

Sales of property and equipment included in receivables

 6,271 5,627 

Sales of property and equipment included in receivables

 6,760 6,271 

The accompanying notes are an integral part of these financial statements.


Table of Contents


HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Unaudited

Note 1—Background and Liquidity

Background

Hertz Global Holdings, Inc., or "Hertz Holdings," is our top-level holding company. The Hertz Corporation, or "Hertz," is our primary operating company and a direct wholly-owned subsidiary of Hertz Investors, Inc., which is wholly-owned by Hertz Holdings. "We," "us" and "our" mean Hertz Holdings and its consolidated subsidiaries, including Hertz.

We are a successor to corporations that have been engaged in the car and truck rental and leasing business since 1918 and the equipment rental business since 1965. Hertz was incorporated in Delaware in 1967. Ford Motor Company, or "Ford," acquired an ownership interest in Hertz in 1987. Prior to this, Hertz was a subsidiary of UAL CorporationUnited Continental Holdings, Inc. (formerly Allegis Corporation), which acquired Hertz's outstanding capital stock from RCA Corporation in 1985. Hertz Holdings was incorporated in Delaware in 2005 and had no operations prior to the Acquisition (as defined below).

On December 21, 2005, investment funds associated with or designated by:

or collectively the "Sponsors," acquired all of Hertz's common stock from Ford Holdings LLC. We refer to the acquisition of all of Hertz's common stock by the Sponsors as the "Acquisition." Following

In March 2011, the Sponsors sold 50,000,000 shares of their Hertz Holdings common stock to Goldman, Sachs & Co. as the sole underwriter in the registered public offering of those shares.

As a result of our initial public offering in November 2006 and subsequent offerings in June 2007, May 2009, and June 2009 and March 2011, the Sponsors currently ownreduced their holdings to approximately 51%39% of the outstanding shares of common stock of Hertz Holdings.

In January 2009, Bank of America Corporation, or "Bank of America," acquired Merrill Lynch & Co., Inc., the parent company of MLGPE.BAMLCP. Accordingly, Bank of America is now an indirect beneficial owner of our common stock held by MLGPEBAMLCP and certain of its affiliates.

Liquidity

Our primary liquidity needs include servicing of corporate and fleet related debt, the payment of operating expenses and purchases of rental vehicles and equipment to be used in our operations. Our primary sources of funding are operating revenue, cash received on the disposal of vehicles and equipment, borrowings under our asset-backed borrowing arrangements and our revolving credit facility.

As of March 31, 2010, we had $10,387.9 million of total indebtedness outstanding. Accordingly, we are highly leveraged and a substantial portion of our liquidity needs arise from debt service on indebtedness incurred in connection with the Acquisition and from the funding of our costs of operations and capital expenditures.

Our liquidity as of March 31, 2010 consists of cash and cash equivalents, unused commitments under our Senior ABL Facility and unused commitments under our Fleet Financing Facilities. For a description of these amounts, see Note 8—Debt.

Based on all that we accomplished in 2009, our current availability under our various credit facilities and our business plan, we believe we have sufficient liquidity to meet our U.S. debt maturities over the next


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twelve months. However, we have approximately $1.0 billion of international fleet debt outstanding as of March 31, 2010, that matures in December 2010. We are currently in discussions regarding our refinancing options, and based on these discussions and our ability to access the capital markets we expect to refinance these facilities on or prior to maturity. However, the availability of financing is subject to a variety of factors not in our control including economic and market conditions and investor demand, so there is no guarantee that such facilities can be refinanced or that the terms of such financings will be acceptable. In the event financing is not available or is not available on terms we deem acceptable, we would expect to utilize our corporate liquidity to repay these obligations which could reduce our ability to fund operations and replace our fleet. See Note 18—Subsequent Events.

The agreements governing our corporate indebtedness require us to comply with two key covenants based on a consolidated leverage ratio and a consolidated interest expense coverage ratio. Our failure to comply with the obligations contained in any agreements governing our indebtedness could result in an event of default under the applicable instrument, which could result in the related debt becoming immediately due and payable and could further result in a cross default or cross acceleration of our debt issued under other instruments. However, as a result of the above-mentioned actions and planned future actions, we believe that we will remain in compliance with our corporate debt covenants and that cash generated from operations, together with amounts available under various liquidity facilities will be adequate to permit us to meet our debt service obligations, ongoing costs of operations, working capital needs and capital expenditure requirements for the next twelve months. Our future financial and operating performance, ability to service or refinance our debt and ability to comply with covenants and restrictions contained in our corporate debt agreements will be subject to future economic conditions and to financial, business and other factors, many of which are beyond our control.

MBIA Insurance Corporation, or "MBIA," and Ambac Assurance Corporation, or "Ambac," provide credit enhancements in the form of financial guaranties for our 2005 Notes, with each providing guaranties for approximately half of the $2,622.0 million in principal amount of the 2005 Notes that was outstanding as of March 31, 2010, all of which matures during 2010.

An event of bankruptcy with respect to MBIA or Ambac between now and the maturities of the 2005 Notes in 2010 would result in an amortization event under the portion of the 2005 Notes guaranteed by the affected insurer. In addition, if an amortization event continues for 30 days or longer, the noteholders of the affected series of notes would have the right to require liquidation of a portion of the fleet sufficient to repay such notes, provided that the exercise of the right was exercised by a majority of the affected noteholders. Ambac has publicly stated that it has insufficient capital to finance its debt service and operating expense requirements beyond the second quarter of 2011 and may need to seek bankruptcy protection.

Since MBIA and Ambac are facing financial instability, have been downgraded one or more times and are on review for further credit downgrade or under developing outlook by one or more credit agencies, we did not have the Series 2009-1 Notes or the Series 2009-2 Notes guaranteed. Accordingly, if a bankruptcy of MBIA or Ambac were to occur prior to the 2005 Notes maturing, we expect that we would use our corporate liquidity and the borrowings under or proceeds from the Series 2009-1 Notes and the Series 2009-2 Notes to pay down the amounts owed under the affected series of 2005 Notes.

Note 2—Basis of Presentation

The significant accounting policies summarized in Note 12 to our audited consolidated financial statements contained in our Annual Report on Form 10-K and Form 10-K/A for the fiscal year ended


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December 31, 2009,2010, filed with the United States Securities and Exchange Commission, or "SEC," on February 26, 2010 and March 1, 2010, respectively,25, 2011, or collectively known as our "Annual Report,the "Form 10-K," have been followed in preparing the accompanying condensed consolidated financial statements.

The December 31, 20092010 condensed consolidated balance sheet data was derived from our audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America, or "GAAP."

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and footnotes. Actual results could differ materially from those estimates.


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Unaudited

In our opinion, all adjustments (which include only normal recurring adjustments) necessary for a fair statement of the results of operations for the interim periods have been made. Results for interim periods are not necessarily indicative of results for a full year.

Certain prior period amounts have been reclassified to conform with current reporting.

ForThere have been no new accounting pronouncements issued or changes to existing guidance during the three months ended March 31, 2009, we have revised our consolidated statements of cash flows to exclude the impact of non-cash purchases and sales of revenue earning equipment and property and equipment which were included in "accounts payable" or "receivables" at the end of the period. See Note 17 in our Form 10-Q for the quarterly period ended June 30, 2009 filed with the SEC on August 7, 2009.

Note 3—Recent Accounting Pronouncements

In June 2009, the Financial Accounting Standards Board issued guidance, which contains amendments to Accounting Standards Codification 810, "Consolidation," relating to how a company determines when an entity2011 that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. The determination of whether a company is required to consolidate an entity is based on, among other things, an entity's purpose and design and a company's ability to direct the activities of the entity that most significantly impact the entity's economic performance. These provisions became effective for us on January 1, 2010, but did notwould have a material impact on our financial position or results of operations.

For the three months ended March 31, 2010, we have revised net cash provided by operating activities and net cash used in investing activities within our consolidated statement of cash flows due to a gross-up of cash lease payments relating to our revenue earning equipment in the non-cash add back previously included in depreciation of revenue earning equipment and proceeds from disposal of revenue earning equipment.

Note 4—3—Cash and Cash Equivalents and Restricted Cash and Cash Equivalents

We consider all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.

In our Consolidated Statements of Cash Flows, we net cash flows from revolving borrowings in the line item "Proceeds (repayments)(payments) under the revolving lines of credit, net." The contractual maturities of such borrowings may exceed 90 days in certain cases.

Restricted cash and cash equivalents includes cash and cash equivalents that are not readily available for our normal disbursements. Restricted cash and cash equivalents are restricted for the purchase of revenue earning vehicles and other specified uses under our Fleet Debt facilities, for our Like-Kind Exchange Program, or "LKE Program," and to satisfy certain of our self-insurance regulatory reserve requirements. As of March 31, 20102011 and December 31, 2009,2010, the portion of total restricted cash and cash equivalents that was associated with our Fleet Debt facilities was $129.6$110.2 million and $295.0$115.6 million, respectively. The decrease in restricted cash and cash equivalents associated with our Fleet Debtfleet debt of $165.4$5.4 million from December 31, 20092010 to March 31, 2010,2011 was primarily related to payments to reduce fleet debt and the timing of purchases and sales of revenue earning vehicles.


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Note 5—4—Goodwill and Other Intangible Assets

The following summarizes the changes in our goodwill, by segment for the periods presented (in millions of dollars):

 
 Car Rental Equipment
Rental
 Total 

Balance as of January 1, 2010

          
 

Goodwill

 $335.8 $654.5 $990.3 
 

Accumulated impairment losses

  (43.0) (651.9) (694.9)
        

  292.8  2.6  295.4 
        
 

Other changes during the year(1)

  
(4.9

)
 
(0.2

)
 
(5.1

)
        

Balance as of March 31, 2010

          
 

Goodwill

  330.9  654.3  985.2 
 

Accumulated impairment losses

  (43.0) (651.9) (694.9)
        

 $287.9 $2.4 $290.3 
        
 
 Car Rental Equipment
Rental
 Total 

Balance as of January 1, 2011

          
 

Goodwill

 $336.4 $658.7 $995.1 
 

Accumulated impairment losses

  (43.0) (651.9) (694.9)
        

  293.4  6.8  300.2 
        
 

Goodwill acquired during the period

  
5.0
  
  
5.0
 
 

Adjustments to previously recorded purchase price allocation

  (0.9) 1.4  0.5 
 

Other changes during the period(1)

  3.6  0.2  3.8 
        

  7.7  1.6  9.3 

Balance as of March 31, 2011

          
 

Goodwill

  344.1  660.3  1,004.4 
 

Accumulated impairment losses

  (43.0) (651.9) (694.9)
        

 $301.1 $8.4 $309.5 
        

 

 
 Car Rental Equipment
Rental
 Total 

Balance as of January 1, 2009

          
 

Goodwill

 $307.1 $651.9 $959.0 
 

Accumulated impairment losses

  (43.0) (651.9) (694.9)
        

  264.1    264.1 
        
 

Goodwill acquired during the year

  
24.0
  
2.4
  
26.4
 
 

Other changes during the year(1)

  4.7  0.2  4.9 
        

Balance as of December 31, 2009

          
 

Goodwill

  335.8  654.5  990.3 
 

Accumulated impairment losses

  (43.0) (651.9) (694.9)
        

 $292.8 $2.6 $295.4 
        
 
 Car Rental Equipment
Rental
 Total 

Balance as of January 1, 2010

          
 

Goodwill

 $335.8 $654.5 $990.3 
 

Accumulated impairment losses

  (43.0) (651.9) (694.9)
        

  292.8  2.6  295.4 
        
 

Goodwill acquired during the year

  
2.7
  
4.3
  
7.0
 
 

Other changes during the year(1)

  (2.1) (0.1) (2.2)
        

  0.6  4.2  4.8 

Balance as of December 31, 2010

          
 

Goodwill

  336.4  658.7  995.1 
 

Accumulated impairment losses

  (43.0) (651.9) (694.9)
        

 $293.4 $6.8 $300.2 
        

(1)
Primarily consists of changes resulting from the translation of foreign currencies at different exchange rates from the beginning of the period to the end of the period.

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Unaudited

Other intangible assets, net, consisted of the following major classes (in millions of dollars):



 March 31, 2010 
 March 31, 2011 


 Gross
Carrying
Amount
 Accumulated
Amortization
 Net
Carrying
Value
 
 Gross
Carrying
Amount
 Accumulated
Amortization
 Net
Carrying
Value
 

Amortizable intangible assets:

Amortizable intangible assets:

 

Amortizable intangible assets:

 

Customer-related

 $600.3 $(260.9)$339.4 

Customer-related

 $606.6 $(319.3)$287.3 

Other

 49.7 (14.0) 35.7 

Other(1)

 60.8 (20.7) 40.1 
               
 

Total

 650.0 (274.9) 375.1  

Total

 667.4 (340.0) 327.4 
               

Indefinite-lived intangible assets:

Indefinite-lived intangible assets:

 

Indefinite-lived intangible assets:

 

Trade name

 2,190.0  2,190.0 

Trade name

 2,190.0  2,190.0 

Other

 15.6  15.6 

Other(2)

 18.2  18.2 
               
 

Total

 2,205.6  2,205.6  

Total

 2,208.2  2,208.2 
               
 

Total other intangible assets, net

 $2,855.6 $(274.9)$2,580.7  

Total other intangible assets, net

 $2,875.6 $(340.0)$2,535.6 
               

 



 December 31, 2009 
 December 31, 2010 


 Gross
Carrying
Amount
 Accumulated
Amortization
 Net
Carrying
Value
 
 Gross
Carrying
Amount
 Accumulated
Amortization
 Net
Carrying
Value
 

Amortizable intangible assets:

Amortizable intangible assets:

 

Amortizable intangible assets:

 

Customer-related

 $600.6 $(246.5)$354.1 

Customer-related

 $606.5 $(304.6)$301.9 

Other

 50.0 (12.0) 38.0 

Other(1)

 59.1 (18.6) 40.5 
               
 

Total

 650.6 (258.5) 392.1  

Total

 665.6 (323.2) 342.4 
               

Indefinite-lived intangible assets:

Indefinite-lived intangible assets:

 

Indefinite-lived intangible assets:

 

Trade name

 2,190.0  2,190.0 

Trade name

 2,190.0  2,190.0 

Other

 15.6  15.6 

Other(2)

 18.2  18.2 
               
 

Total

 2,205.6  2,205.6  

Total

 2,208.2  2,208.2 
               
 

Total other intangible assets, net

 $2,856.2 $(258.5)$2,597.7  

Total other intangible assets, net

 $2,873.8 $(323.2)$2,550.6 
               

(1)
Other amortizable intangible assets primarily consist of our Advantage trade name and concession rights, reacquired franchise rights, non-compete agreements and technology-related intangibles.

(2)
Other indefinite-lived intangible assets primarily consist of reacquired franchise rights.

Amortization of other intangible assets for the three months ended March 31, 20102011 and 2009,2010, was approximately $16.4$16.8 million and $15.5$16.4 million, respectively. Based on our amortizable intangible assets as of March 31, 2010,2011, we expect amortization expense to be approximately $48.3$49.4 million for the remainder of 2010 and range from $58.22011, $64.9 million toin 2012, $63.6 million for each of the next five fiscal years.in 2013, $60.7 million in 2014, $59.5 million in 2015 and $13.2 million in 2016.

Note 6—Taxes on Income

The effective tax rate forDuring the three months ended March 31, 20102011, we added eight international car rental locations from an external acquisition. This transaction has been accounted for using the acquisition method of accounting in accordance with GAAP and 2009 was 7.0% and 23.6%, respectively. The benefit for taxes on incomeoperating results of $11.0 million in the three months ended March 31, 2010 decreased from $49.6 million in the three months ended March 31, 2009, primarily due to losses in certain non-U.S. jurisdictions for which a tax benefit cannot be recognized and an increase in discrete items which includes a $4.3 million tax chargeacquired locations from the newly enacted tax lawdate of acquisition are included in France which became effective January 1, 2010.our consolidated statement of operations. The allocation of the purchase price to the tangible and intangible net assets acquired is preliminary and subject to finalization. This


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Unaudited


acquisition is not material to the consolidated amounts presented within our statement of operations for the three months ended March 31, 2011.

Note 7—5—Taxes on Income

The effective tax rate for the three months ended March 31, 2011 and 2010 was 18.8% and 7.0%, respectively. The benefit for taxes on income of $30.0 million in the three months ended March 31, 2011 increased from $11.0 million in the three months ended March 31, 2010, primarily due to changes in geographic earnings mix and changes in losses in certain non-U.S. jurisdictions for which tax benefits cannot be realized.

Note 6—Depreciation of Revenue Earning Equipment and Lease Charges

Depreciation of revenue earning equipment and lease charges includes the following (in millions of dollars):



 Three Months Ended
March 31,
 
 Three Months Ended
March 31,
 


 2010 2009 
 2011 2010 

Depreciation of revenue earning equipment

Depreciation of revenue earning equipment

 $431.6 $429.3 

Depreciation of revenue earning equipment

 $418.7 $427.9 

Adjustment of depreciation upon disposal

 14.8 45.1 

Adjustment of depreciation upon disposal of revenue earning equipment

Adjustment of depreciation upon disposal of revenue earning equipment

 (6.2) 14.8 

Rents paid for vehicles leased

Rents paid for vehicles leased

 12.8 15.4 

Rents paid for vehicles leased

 23.6 16.5 
           

Total

 $459.2 $489.8 

Total

 $436.1 $459.2 
           

The adjustment of depreciation upon disposal of revenue earning equipment for the three months ended March 31, 2011 and 2010, included a net gain of $6.1 million and 2009, includeda net lossesloss of $11.2 million and $15.0 million, respectively, on the disposal of vehicles used in our car rental operations and a net lossesgain of $0.1 million and a net loss of $3.6 million and $30.1 million, respectively, on the disposal of industrial and construction equipment used in our equipment rental operations.

Depreciation rates are reviewed on an ongoinga quarterly basis based on management's routine review of present and estimated future market conditions and their effect on residual values at the time of disposal. During the three months ended March 31, 2010,2011, depreciation rates being used to compute the provision for depreciation of revenue earning equipment were adjusted on certain vehicles in our car rental operations to reflect changes in the estimated residual values to be realized when revenue earning equipment is sold. These depreciation rate changes resulted in a net increasesdecrease of $7.5$0.6 million in depreciation expense for the three months ended March 31, 2010.2011. During the three months ended March 31, 2010,2011, depreciation rate changes in certain of our equipment rental operations resulted in a net increasesdecrease of $2.0$1.0 million in depreciation expense.

For the three months ended March 31, 20102011 and 2009,2010, our worldwide car rental operations sold approximately 38,90030,600 and 28,40042,300 non-program cars, respectively, a 37.0%27.7% year over year increasedecrease primarily due to a higher average fleet size.an increase in car rental demand.


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Unaudited

Note 8—7—Debt

Our debt consists of the following (in millions of dollars):

 
 March 31,
2010
 December 31,
2009
 

Corporate Debt

       

Senior Term Facility, average interest rate: 2010, 2.0%; 2009, 2.0% (effective average interest rate: 2010, 2.0%; 2009, 2.0%); net of unamortized discount: 2010, $12.7; 2009, $13.9

 $1,342.4 $1,344.7 

Senior ABL Facility; net of unamortized discount: 2010, $8.5; 2009, $9.6

  (8.5) (9.6)

Senior Notes, average interest rate: 2010, 8.7%; 2009, 8.7%

  2,035.1  2,054.7 

Senior Subordinated Notes, average interest rate: 2010, 10.5%; 2009, 10.5%

  518.5  518.5 

Promissory Notes, average interest rate: 2010, 7.3%; 2009, 7.3% (effective average interest rate: 2010, 7.4%; 2009, 7.4%); net of unamortized discount: 2010, $3.7; 2009, $3.3

  392.0  391.4 

Convertible Senior Notes, average interest rate: 2010, 5.25%; 2009, 5.25%; (effective average interest rate: 2010, 6.7%; 2009, 6.8%); net of unamortized discount: 2010, $102.7; 2009, $107.3

  372.1  367.4 

Notes payable, average interest rate: 2010, 6.2%; 2009, 8.0%

  9.4  9.6 

Foreign subsidiaries' debt denominated in foreign currencies:

       
 

Short-term bank borrowings, average interest rate: 2010, 9.0%; 2009, 10.8%

  8.3  7.3 
 

Other borrowings, average interest rate: 2010, 2.5%; 2009, 2.5%

  5.4  5.4 
      
   

Total Corporate Debt

  4,674.7  4,689.4 
      

Fleet Debt

       

U.S. Fleet Debt, average interest rate: 2010, 4.5%; 2009, 4.7% (effective average interest rate: 2010, 4.5%; 2009, 4.7%); net of unamortized discount: 2010, $15.5; 2009, $16.7

  4,284.5  4,058.3 

International Fleet Debt, average interest rate: 2010, 2.3%; 2009, 2.1% (effective average interest rate: 2010, 2.4%; 2009, 2.2%); net of unamortized discount: 2010, $6.1; 2009, $8.7

  555.4  705.3 

International ABS Fleet Financing Facility, average interest rate: 2010, 3.7%; 2009, 3.6%; (effective average interest rate: 2010, 3.7%; 2009, 3.6%); net of unamortized discount: 2010, $4.1; 2009, $5.7

  313.3  383.2 

Fleet Financing Facility, average interest rate: 2010, 1.5%; 2009, 1.5% (effective average interest rate: 2010, 1.5%; 2009, 1.5%); net of unamortized discount: 2010, $0.7; 2009, $0.8

  162.4  147.2 

Brazilian Fleet Financing Facility, average interest rate: 2010, 9.9%; 2009, 13.3%

  70.0  69.3 

Canadian Fleet Financing Facility, average interest rate: 2010, 0.4%; 2009, 0.5%

  96.3  55.6 

Belgian Fleet Financing Facility, average interest rate: 2010, 1.8%; 2009, 1.8%

  32.9  33.7 

Capitalized Leases, average interest rate: 2010, 4.3%; 2009, 4.8%

  198.4  222.4 
      
   

Total Fleet Debt

  5,713.2  5,675.0 
      
  

Total Debt

 $10,387.9 $10,364.4 
      
Facility
 Average
Interest
Rate at
March 31,
2011(1)
 Fixed or
Floating
Interest
Rate
 Maturity March 31,
2011
 December 31,
2010
 

Corporate Debt

              
 

Senior Term Facility(2)

  3.75%Floating 3/2018 $1,400.0 $1,345.0 
 

Senior ABL Facility(2)

  N/A Floating 3/2016     
 

Senior Notes(3)

  7.56%Fixed 1/2014–1/2021  3,143.6  3,229.6 
 

Senior Subordinated Notes

  10.50%Fixed 1/2016    518.5 
 

Promissory Notes

  7.48%Fixed 6/2012–1/2028  224.7  345.6 
 

Convertible Senior Notes

  5.25%Fixed 6/2014  474.8  474.8 
 

Other Corporate Debt

  4.26%Floating Various  42.2  22.0 
 

Unamortized Net (Discount) Premium (Corporate)(4)

         (83.1) (104.8)
             

Total Corporate Debt

         5,202.2  5,830.7 
             

Fleet Debt

              

U.S. ABS Program

              
 

U.S. Fleet Variable Funding Notes:

              
  

Series 2009-1(5)

  1.27%Floating 3/2013  1,538.0  1,488.0 
  

Series 2010-2(5)

  1.30%Floating 3/2013  145.0  35.0 
 

U.S. Fleet Medium Term Notes

              
  

Series 2009-2 Notes(5)

  4.95%Fixed 3/2013–3/2015  1,384.3  1,384.3 
  

Series 2010-1 Notes(5)

  3.77%Fixed 2/2014–2/2018  749.8  749.8 

Other Fleet Debt

              
 

U.S. Fleet Financing Facility

  1.50%Floating 12/2011  163.0  163.0 
 

European Revolving Credit Facility

  4.58%Floating 6/2013  155.3  168.6 
 

European Fleet Notes

  8.50%Fixed 7/2015  564.5  529.0 
 

European Securitization(5)

  4.18%Floating 7/2012  202.8  236.9 
 

Canadian Securitization(5)

  1.19%Floating 11/2011  82.6  80.4 
 

Australian Securitization(5)

  6.29%Floating 12/2012  170.8  183.2 
 

Brazilian Fleet Financing Facility

  13.52%Floating 7/2011  18.6  77.8 
 

Capitalized Leases

  4.92%Floating 4/2011–2/2013  389.8  398.1 
 

Unamortized Discount (Fleet)

         (16.7) (18.4)
             

Total Fleet Debt

         5,547.8  5,475.7 
             

Total Debt

        $10,750.0 $11,306.4 
             

Note:
For further information on the definitions and terms of our debt, see Note 34 of the Notes to our audited annual consolidated financial statements included in our Annual ReportForm 10-K under the caption "Item 8—Financial Statements and Supplementary Data."

(1)
As applicable, reference is to the March 31, 2011 weighted average interest rate (weighted by principal balance).

(2)
December 31, 2010 balance refers to the former facilities which were refinanced on March 11, 2011, see "First Quarter Events," below.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

(3)
References to our "Senior Notes" include the series of Hertz's unsecured senior notes set forth in the table below. As of March 31, 2011, the outstanding principal amount for each such series of the Senior Notes is also specified below.

Senior Notes
Outstanding Principal
8.875% Senior Notes due January 2014$642.3 million
7.875% Senior Notes due January 2014$301.3 million (€213.5 million)
7.50% Senior Notes due October 2018$700 million
7.375% Senior Notes due January 2021$500 million
6.75% Senior Notes due April 2019$1,000 million
(4)
As of March 31, 2011 and December 31, 2010, $82.3 million and $87.7 million, respectively, of the unamortized corporate discount relates to the 5.25% Convertible Senior Notes.

(5)
Maturity reference is to the "expected final maturity date" as opposed to the subsequent "legal maturity date." The expected final maturity date is the date by which Hertz and investors in the relevant indebtedness expect the relevant indebtedness to be repaid. The legal final maturity date is the date on which the relevant indebtedness is legally due and payable.

Maturities

The aggregate amounts of maturities of debt for each of the twelve-month periods ending March 31 (in millions of dollars) are as follows: 2011, $4,727.5 (including $1,927.4

2012 $3,859.3 (including $3,356.1 of other short-term borrowings)
2013 $773.9
2014 $743.9
2015 $842.7
2016 $953.4
After 2016 $3,676.6

We are highly leveraged and a substantial portion of other short-term borrowings); 2012, $4.3; 2013, $2,032.2; 2014, $2,035.6; 2015, $1,196.0; after 2015, $546.3.our liquidity needs arise from debt service on our indebtedness and from the funding of our costs of operations and capital expenditures. We believe that cash generated from operations, together with amounts available under various liquidity facilities will be adequate to permit us to meet our debt maturities over the next twelve months.

Our short-term borrowings as of March 31, 20102011 include, among other items, the amounts outstanding under our International Fleet Debt facility, International ABSthe European Securitization, Australian Securitization, U.S. Fleet Financing Facility, Brazilian Fleet Financing Facility, Canadian Securitization, Capitalized Leases and European Revolving Credit Facility. These amounts are reflected as short-term borrowings, regardless of the facility maturity date, as these facilities are revolving in nature and/or the outstanding borrowings have maturities of three months or less. Short-term borrowings also include the Convertible Senior Notes which became convertible on January 1, 2011 and remain as such through June 30, 2011. As of March 31, 2011, short-term borrowings had a weighted average interest rate of 3.0%.

In March 2011, Hertz issued an additional $500 million aggregate principal of the 6.75% Senior Notes due 2019 in a private offering, the proceeds of which were used in April 2011 to redeem $480 million principal amount of its outstanding 8.875% Senior Notes due 2014. The redeemed portion of the 8.875% Senior Notes has been included in the 2012 maturities in the table above.

Letters of Credit

As of March 31, 2011, there were outstanding standby letters of credit totaling $516.9 million. Of this amount, $467.6 million was issued under the Senior Credit Facilities ($226.6 million of which was issued for the benefit of the ABS Program) and the remainder is primarily to support self-insurance programs


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Facility, Brazilian Fleet Financing Facility, Canadian Fleet Financing Facility, Belgian Fleet Financing Facility and Capitalized Leases. These amounts are considered short-term in nature since they have maturity dates of three months or less; however these facilities are revolving in nature and do not expire at the time of the short-term debt maturity. In addition, we include certain scheduled payments of principal under our ABS Program as short-term borrowings.

As of March 31, 2010, there were outstanding standby letters of credit totaling $598.2 million. Of this amount, $310.0 million has been issued for the benefit of the ABS Program ($200.0 million of which was issued by Ford Motor Company, or "Ford," and $110.0 million of which was used under the Senior Credit Facilities) and the remainder is primarily to support self-insurance programs (including(including insurance policies with respect to which we have indemnifiedagreed to indemnify the policy issuers for any losses) in the United States, Canada and Europe and to supportas well as airport concession obligations in the United States, Canada and Canada.Europe. As of March 31, 2010,2011, none of these letters of credit have been drawn upon.

First Quarter Events

On January 1, 2011, our Convertible Senior Notes became convertible. This conversion right was triggered because our closing common stock price per share exceeded $10.77 for at least 20 trading days during the 30 consecutive trading day period ending on December 31, 2010. Since this same trigger was met in the first quarter of 2011, the Convertible Senior Notes continue to be convertible through June 30, 2011, and may be convertible thereafter, if one or more of the conversion conditions specified in the indenture is satisfied during future measurement periods. Our policy has been and continues to be to settle conversions of Convertible Senior Notes using a combination of cash and our common stock, which calls for settling the fixed dollar amount per $1,000 in principal amount in cash and settling in shares the excess conversion, if any.

In NovemberJanuary 2011, Hertz redeemed in full its outstanding ($518.5 million principal amount) 10.5% Senior Subordinated Notes due 2016 which resulted in premiums paid of $27.2 million and the write-off of unamortized debt costs of $8.6 million. In January and February 2011, Hertz redeemed $1,105 million principal amount of its outstanding 8.875% Senior Notes due 2014 which resulted in premiums paid of $24.5 million and the write-off of unamortized debt costs of $14.4 million. Hertz used the proceeds from the September 2010 issuance of $700 million aggregate principal amount of 7.50% Senior Notes, the "Ford"December 2010 issuance of $500 million aggregate principal amount of 7.375% Senior Notes and the February 2011 issuance of $500 million aggregate principal amount of 6.75% Senior Notes (see below) for these redemptions. Total premiums paid during the three months ended March 31, 2011, of $51.7 million are recorded in "Other (income) expense, net" on our consolidated statement of operations.

In February 2011, Hertz issued $500 million aggregate principal amount of 6.75% Senior Notes due 2019. The 6.75% Senior Notes are guaranteed on a senior unsecured basis by the domestic subsidiaries of Hertz that guarantee its Senior Credit Facilities.

In February 2011, Hertz used existing corporate liquidity to pay off the maturing amount of the Brazilian Fleet Financing Facility.

In March 2011, Hertz issued an additional $500 million aggregate principal of the 6.75% Senior Notes due 2019 in a private offering. The proceeds of which were used in April 2011 to redeem $480 million principal amount of its outstanding 8.875% Senior Notes due 2014. See Note 17—Subsequent Events.

In March 2011, Hertz refinanced its 2005 Senior Term Facility and 2005 Senior ABL Facility. A description of the new Senior Term Facility and Senior ABL Facility is set forth below. During the three months ended March 31, 2011, we recorded an expense of $9.3 million in "Interest expense" on our consolidated statement of operations associated with the write-off of debt costs in connection with the refinancing of our 2005 Senior Term Facility and 2005 Senior ABL Facility. Additionally, a portion of the unamortized debt costs associated with the 2005 Senior Term Facility and 2005 Senior ABL Facility are continuing to be amortized over the terms of the new Senior Term Facility and Senior ABL Facility. The determination of whether these costs were expensed or further deferred was dependent upon whether the terms of the old and new instruments were considered to be substantially different. In regards to the Senior Term Facility, the determination as to whether the 2005 Senior Term Facility and the new Senior Term Facility


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were considered to be substantially different was made on a lender by lender basis using the "net method" which compares the cash flows related to the lowest common principal balance between the old and new instruments.

In March 2011, Hertz entered into a credit agreement that provides a $1,400.0 million secured term loan facility (as amended, the "Senior Term Facility"). In addition, the Senior Term Facility includes a pre-funded synthetic letter of credit will expirefacility in conjunctionan aggregate principal amount of $200.0 million. Subject to the satisfaction of certain conditions and limitations, the Senior Term Facility allows for the addition of incremental term and/or revolving loans. Hertz used approximately $1,345.0 million of borrowings under the Senior Term Facility to refinance indebtedness under the 2005 Senior Term Facility. We reflected this transaction on a gross basis in our Consolidated Statement of Cash Flows in "Proceeds from issuance of long-term debt" and "Payment of long-term debt." During the three months ended March 31, 2011, we recorded financing costs of $6.6 million in "Interest expense" on our consolidated statement of operations associated with the maturitynew Senior Term Facility.

In March 2011, Hertz, Hertz Equipment Rental Corporation and certain other of our subsidiaries entered into a credit agreement that provides for aggregate maximum borrowings of $1,800.0 million (subject to borrowing base availability) on a revolving basis under an asset-based revolving credit facility (as amended, the "Senior ABL Facility"). Up to $1,500.0 million of the 2005 Series Notes.Senior ABL Facility is available for the issuance of letters of credit subject to certain conditions including issuing lender participation. Subject to the satisfaction of certain conditions and limitations, the Senior ABL Facility allows for the addition of incremental revolving and/or term loan commitments. In addition, the Senior ABL Facility permits Hertz to increase the amount of commitments under the Senior ABL with the consent of each lender providing an additional commitment, subject to satisfaction of certain conditions.

In March 2011, Hertz amended the Canadian Securitization to extend the maturity date from May 2011 to November 2011.

Registration Rights

Pursuant to the terms of exchange and registration rights agreements entered into in connection with the separate issuances of the 7.5% Senior Notes due 2018, the 7.375% Senior Notes due 2021 and the 6.75% Senior Notes due 2019, Hertz has agreed to file a registration statement under the Securities Act of 1933, as amended, to permit either the exchange of such notes for registered notes or, in the alternative, the registered resale of such notes. Hertz's failure to meet its obligations under the exchange and registration rights agreements, including by failing to have the respective registration statement become effective by a specified date or failing to complete the respective exchange offer by a specified date, will result in Hertz incurring special interest on such notes at a per annum rate of 0.25% for the first 90 days of any period where a default has occurred and is continuing, which rate will be increased by an additional 0.25% during each subsequent 90 day period, up to a maximum of 0.50%. On March 23, 2011, Hertz filed a registration statement for such notes. We do not believe the special interest obligation is probable, and as such, we have not recorded any amounts with respect to this registration payment arrangement.

Guarantees and Security

There have been no material changes to the guarantees and security provisions of the debt instruments and credit facilities under which our indebtedness as of March 31, 20102011 has been issued from the terms as disclosed in our Annual Report.

Covenants

Certain of our debt instruments and credit facilities contain a number of covenants that, among other things, limit or restrict the ability of the borrowers and the guarantors to dispose of assets, incur additional indebtedness, incur guarantee obligations, prepay other indebtedness, make dividends and other restricted payments, create liens, make investments, make acquisitions, engage in mergers, change the nature of their business, make capital expenditures, or engage in certain transactions with affiliates. Some of these agreements also require the maintenance of certain financial covenants. As of March 31, 2010, we were in compliance with all of these financial covenants.

As of March 31, 2010, we had an aggregate principal amount outstanding of $1,355.1 million pursuant to our Senior Term Facility and no amounts outstanding in our Senior ABL Facility. As of March 31, 2010, Hertz was required under the Senior Term Facility to have a consolidated leverage ratio of not more than 4.75:1 and a consolidated interest expense coverage ratio of not less than 2.25:1. In addition, under our Senior ABL Facility, if there was less than $200.0 million of available borrowing capacity under that facility as of March 31, 2010, Hertz was required to have a consolidated leverage ratio of not more than 4.75:1 and a consolidated fixed charge coverage ratio of not less than 1:1 for the quarter then ended. Under the Senior Term Facility, as of March 31, 2010, we had a consolidated leverage ratio of 3.71:1 and a consolidated interest expense coverage ratio of 3.29:1. Since we had maintained sufficient borrowing capacity under our Senior ABL Facility as of March 31, 2010, and expect to maintain such capacity in the future, the consolidated fixed charge coverage ratio was not deemed relevant for presentation. For further information on the terms of our senior credit facilities, see Note 3 of the Notes to our audited annual consolidated financial statements included in our Annual Report under the caption "Item 8—Financial Statements and Supplementary Data."

Derivatives

We utilize certain derivative instruments to enhance our ability to manage risks relating to cash flow and interest rate exposure. See Note 14—Financial Instruments.


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Credit Facilities

As of March 31, 2010, the following credit facilities were available for the use of Hertz and its subsidiaries (in millions of dollars):

 
 Remaining
Capacity
 Availability
Under
Borrowing
Base
Limitation
 

Corporate Debt

       

Senior Term Facility

 $ $ 

Senior ABL Facility

  1,636.1  866.1 
      
 

Total Corporate Debt

  1,636.1  866.1 
      

Fleet Debt

       

U.S. Fleet Debt

  1,663.1  28.0 

International Fleet Debt

  899.6  101.6 

International ABS Fleet Financing Facility

  674.1  88.8 

Fleet Financing Facility

     

Brazilian Fleet Financing Facility

  6.3   

Canadian Fleet Financing Facility

  124.0  38.8 

Belgian Fleet Financing Facility

     

Capitalized Leases

  107.0   
      
 

Total Fleet Debt

  3,474.1  257.2 
      
 

Total

 $5,110.2 $1,123.3 
      

As of March 31, 2010, the Senior Term Facility had approximately $4.1 million available under the letter of credit facility and the Senior ABL Facility had $96.1 million available under the letter of credit facility sublimit.

Our liquidity as of March 31, 2010 was $5,140.9 million, which consisted of $800.7 million of cash and cash equivalents, $866.1 million of unused commitments under our Senior ABL Facility and $3,474.1 million of unused commitments under our Fleet Financing Facilities. Taking into consideration the borrowing base limitations in our Senior ABL Facility and in our Fleet Debt, the amount that we had available for immediate use as of March 31, 2010 under our Senior ABL Facility was $866.1 million and we had $257.2 million of over-enhancement that was available under our Fleet Debt. Accordingly, as of March 31, 2010 we had $1,924.0 million ($800.7 million in cash and cash equivalents, $866.1 million available under our Senior ABL Facility and $257.2 million available under our various Fleet Debt facilities) in liquidity that was available for our immediate use. Future availability of borrowings under these facilities will depend on borrowing base requirements and other factors, many of which are outside our control.

Also, substantially all of our revenue earning equipment and certain related assets are owned by special purpose entities, or are subject to liens in favor of our lenders under our various credit facilities. Substantially all our other assets in the United States are also subject to liens in favor of our lenders under our various credit facilities. None of these assets would be available to satisfy the claims of our general creditors, if we failed to perform our obligations to such creditors.Form 10-K.


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Financial Covenant Compliance

Under the new terms of our amended Senior Term Facility and Senior ABL Facility, we are not subject to ongoing financial maintenance covenants; however, under the Senior ABL Facility we are subject to a springing financial maintenance covenant upon the occurrence of certain triggering events. As of March 31, 2011, no triggering event had occurred requiring testing of the springing financial maintenance covenant.

Borrowing Capacity and Availability

As of March 31, 2011, the following facilities were available for the use of Hertz and its subsidiaries (in millions of dollars):

 
 Remaining
Capacity
 Availability Under
Borrowing Base
Limitation
 

Corporate Debt

       

Senior ABL Facility

 $1,800.0 $896.4 
      
 

Total Corporate Debt

  1,800.0  896.4 
      

Fleet Debt

       

U.S. Fleet Variable Funding Notes

  455.1  90.5 

U.S. Fleet Financing Facility

  2.0  2.0 

European Revolving Credit Facility

  154.4  154.4 

European Securitization

  314.6  71.6 

Canadian Securitization

  148.3  4.8 

Australian Securitization

  86.4  7.6 

Brazilian Fleet Financing Facility

  0.9  0.9 

Capitalized Leases

  108.1  28.9 
      
 

Total Fleet Debt

  1,269.8  360.7 
      

Total

 $3,069.8 $1,257.1 
      

Our borrowing capacity and availability primarily comes from our "revolving credit facilities," which are a combination of asset-backed securitization facilities and asset-based revolving credit facilities. Creditors under each of our revolving credit facilities have a claim on a specific pool of assets as collateral. Our ability to borrow under each revolving credit facility is a function of, among other things, the value of the assets in the relevant collateral pool. We refer to the amount of debt we can borrow given a certain pool of assets as the "borrowing base."

We refer to "Remaining Capacity" as the maximum principal amount of debt permitted to be outstanding under the respective facility (i.e., the amount of debt we could borrow assuming we possessed sufficient assets as collateral) less the principal amount of debt then-outstanding under such facility.

We refer to "Availability Under Borrowing Base Limitation" and "borrowing base availability" as the lower of Remaining Capacity or the borrowing base less the principal amount of debt then-outstanding under such facility (i.e., the amount of debt we could borrow given the collateral we possess at such time).

As of March 31, 2011, the Senior Term Facility had approximately $3.2 million available under the letter of credit facility and the Senior ABL Facility had $1,095.2 million available under the letter of credit facility sublimit, subject to borrowing base restrictions.


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Substantially all of our revenue earning equipment and certain related assets are owned by special purpose entities, or are encumbered in favor of our lenders under our various credit facilities.

Some of these special purpose entities are consolidated variable interest entities, of which Hertz is the primary beneficiary, whose sole purpose is to provide commitments to lend in various currencies subject to borrowing bases comprised of rental vehicles and related assets of certain of Hertz International, Ltd.'s subsidiaries. As of March 31, 20102011 and December 31, 2009,2010, our International Fleet Financing No. 1 B.V., International Fleet Financing No. 2 B.V. and HA Funding and Hertz Fleet LimitedPty, Ltd. variable interest entities had total assets primarily comprised of loans receivable and revenue earning equipment of $396.6$503.0 million and $367.6$652.1 million, respectively, and total liabilities primarily comprised of debt of $691.7$502.5 million and $710.3$651.6 million, respectively. For further information on the terms of our International Fleet Debt, see Note 3 of the Notes to our audited annual consolidated financial statements included in our Annual Report under the caption "Item 8—Financial Statements and Supplementary Data."

Accrued Interest

As of March 31, 2010 and December 31, 2009, accrued interest was $78.8 million and $120.9 million, respectively, which is reflected in our condensed consolidated balance sheet in "Accrued liabilities."

Note 9—8—Employee Retirement Benefits

The following table sets forth the net periodic pension and postretirement (including health care, life insurance and auto) expense (in millions of dollars):

 
 Pension Benefits  
  
 
 
 Postretirement
Benefits (U.S.)
 
 
 U.S. Non-U.S. 
 
 Three Months Ended March 31, 
 
 2010 2009 2010 2009 2010 2009 

Components of Net Periodic Benefit Cost:

                   
 

Service cost

 $6.7 $5.4 $1.3 $1.3 $0.1 $ 
 

Interest cost

  6.8  7.0  2.6  2.2  0.2  0.2 
 

Expected return on plan assets

  (6.7) (5.9) (2.5) (1.7)    
 

Net amortizations

  1.7  0.1  (0.1) (0.1) (0.1) (0.1)
 

Settlement loss

  0.3  0.7         
              
 

Net pension/postretirement expense

 $8.8 $7.3 $1.3 $1.7 $0.2 $0.1 
              
 
 Pension Benefits  
  
 
 
 Postretirement
Benefits (U.S.)
 
 
 U.S. Non-U.S. 
 
 Three Months Ended March 31, 
 
 2011 2010 2011 2010 2011 2010 

Components of Net Periodic Benefit Cost:

                   
 

Service cost

 $6.2 $6.7 $1.7 $1.3 $0.1 $0.1 
 

Interest cost

  6.5  6.8  2.8  2.6  0.2  0.2 
 

Expected return on plan assets

  (7.1) (6.7) (3.1) (2.5)    
 

Net amortization

  2.0  1.7  (0.3) (0.1)   (0.1)
 

Settlement loss

  0.3  0.3         
              
 

Net pension/postretirement expense

 $7.9 $8.8 $1.1 $1.3 $0.3 $0.2 
              

Our policy for funded plans is to contribute annually, at a minimum, amounts required by applicable laws, regulations and union agreements. From time to time we make contributions beyond those legally required. For the three months ended March 31, 20102011 and 2009,2010, we contributed $36.0$44.8 million and $8.6$36.0 million, respectively, to our worldwide pension plans, including discretionary contributions of $1.8$12.3 million and $1.2$1.8 million, respectively, to our U.K.United Kingdom, or "U.K.," defined benefit pension plan and benefit payments made through unfunded plans. Based upon the significant decline in asset values in 2008, which were in line with the overall market declines, it is likely we will continue to make cash contributions in 20102011 and possibly in future years.

We expect to contribute up to $65 million to our U.S.sponsor a defined benefit pension plan in the full yearU.K. In January 2011, we tentatively agreed with the trustees of 2010.that plan to cease all future benefit accruals and to close the plan to members, contingent on the outcome of the consultation process with employees that ends in May. We will introduce a defined contribution plan with company matching contributions to replace the defined benefit pension plan. The level of 2010 and futurecompany matching contributions will vary, and is dependent on a number of factors including actual and projected investment returns, interest rate fluctuations, plan demographics, funding regulations and the resultsgenerally be 100% of the final actuarial valuation.employee contributions, up to 8% of pay, except that current members of the defined benefit plan will receive an enhanced match for five years.

Our obligation for the U.K. pension plan was $163.4 million, with a fair value of assets of about $145.6 million, as of December 31, 2010. We participaterecognized expense of $1.3 million in various "multiemployer" pension plans administered by labor unions representing some of our employees. We make periodic contributions to these plans to allow them to meet their pension benefit obligations to their participants. In the event that we withdraw from participation in one of these plans, then applicable law could require us to make an additional lump-sum contribution to the2010.


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If the proposal to close the scheme occurs during 2011, then this will result in somewhat lower contributions this year into the defined benefit plan, which will be offset by matching contributions to the new defined contribution plan.

We participate in various "multiemployer" pension plans. In the event that we withdraw from participation in one of these plans, then applicable law could require us to make an additional lump-sum contribution to the plan, and we would have to reflect that as an expense in our consolidated statement of operations and as a liability on our condensed consolidated balance sheet. Our withdrawal liability for any multiemployer plan would depend on the extent of the plan's funding of vested benefits. In the ordinary course of our renegotiation of collective bargaining agreements with labor unions that maintain these plans, we could decide to discontinue participation in aAt least one multiemployer plan and in that event, we could face a withdrawal liability. Some multiemployer plans, including one in which we participate areis reported to have, and other of our multiemployer plans could have, significant underfunded liabilities. Such underfunding couldmay increase in the sizeevent other employers become insolvent or withdraw from the applicable plan or upon the inability or failure of our potentialwithdrawing employers to pay their withdrawal liability. In addition, such underfunding may increase as a result of lower than expected returns on pension fund assets or other funding deficiencies.

Note 10—9—Stock-Based Compensation

In March 2010,2011, we granted 527,574371,505 Restricted Stock Units, or "RSUs," to keycertain executives and employees at fair values ranging from $9.70$14.60 to $9.99$15.02 and 800,613693,313 Performance Stock Units, or "PSUs," at a fair value of $9.70$14.60 under the Hertz Global Holdings, Inc. 2008 Omnibus Incentive Plan, or the "Omnibus Plan." For the PSUs, 499,515 have a performance condition under which the number of units that will ultimately be awarded will vary from 0% to 150% of the original grant, based on the sum of 2011 and 2012 Corporate EBITDA results. The remaining 193,798 PSUs granted contain a market condition whereby the 20 day average trailing stock price must equal or exceed a certain price target at any time during the five year performance period.

In March 2010,2011, we granted options to acquire 3,208,1552,108,944 shares of our common stock to certain executives and employees at exercise prices ranging from $9.70$14.60 to $9.99$15.02 under the Omnibus Plan.

A summary of the total compensation expense and associated income tax benefits recognized under our Hertz Global Holdings, Inc. Stock Incentive Plan and Hertz Global Holdings, Inc. Director Stock Incentive Plan, or the "Prior Plans," and the Omnibus Plan, including the cost of stock options, RSUs, and PSUs, is as follows (in millions of dollars):

  
 Three Months Ended March 31, 
  
 2010 2009 
 

Compensation Expense

 $9.0 $7.4 
 

Income Tax Benefit

  (3.5) (2.9)
       
  

Total

 $5.5 $4.5 
       
 
 Three Months Ended March 31, 
 
 2011 2010 

Compensation Expense

 $9.1 $9.0 

Income Tax Benefit

  (3.5) (3.5)
      
 

Total

 $5.6 $5.5 
      

As of March 31, 2010,2011, there was approximately $67.0$48.0 million of total unrecognized compensation cost related to non-vested stock options, RSUs and PSUs granted by Hertz Holdings under the Prior Plans and the Omnibus Plan, including costs related to modifying the exercise prices of certain option grants in order to preserve the intrinsic value of the options, consistent with applicable tax law, to reflect special cash dividends of $4.32 per share paid on June 30, 2006 and $1.12 per share paid on November 21, 2006. These remaining costs areThe total unrecognized compensation cost is expected to be recognized over the remaining 1.51.7 years, on a weighted average basis, of the requisite service period that began on the grant dates.


For the three months ended March 31, 2010 and 2009, we recognized compensation cost

Table of approximately $0.1 million ($0.1 million, net of tax) and $0.1 million ($0.1 million, net of tax), respectively, for the amount of the discount on the stock purchased by our employees under the Hertz Global Holdings, Inc. Employee Stock Purchase Plan.Contents


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Note 11—10—Segment Information

Our operating segments are aggregated into reportable business segments based primarily upon similar economic characteristics, products, services, customers, and delivery methods. We have identified two reportable segments: rental of cars, crossovers and light trucks, or "car rental," and rental of industrial, construction and material handling equipment, or "equipment rental." Other reconciling items includes


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general corporate assets and expenses, certain interest expense (including net interest on corporate debt), as well as other business activities, such as our third party claim management services.

Adjusted pre-tax income (loss) is the measure utilized by management in making decisions about allocating resources to segments and measuring their performance. We believe this measure best reflects the financial results from ongoing operations. Adjusted pre-tax income (loss) is calculated as income (loss) before income taxes plus other reconciling items, non-cash purchase accounting charges, non-cash debt charges and certain one-time charges and non-operational items. The contribution of our reportable segments to revenues and adjusted pre-tax income (loss) and the reconciliation to consolidated amounts for the three months ended March 31, 2010 and 2009 are summarized below (in millions of dollars).



 Three Months Ended March 31, 
 Three Months Ended March 31, 


 Revenues Adjusted Pre-Tax Income (Loss) 
 Revenues Adjusted Pre-Tax Income
(Loss)
 


 2010 2009 2010 2009 
 2011 2010 2011 2010 

Car rental

Car rental

 $1,421.7 $1,282.9 $27.1 $(33.5)

Car rental

 $1,510.3 $1,421.7 $61.3 $27.1 

Equipment rental

Equipment rental

 237.0 279.5 (5.0) 0.7 

Equipment rental

 268.2 237.0 10.2 (5.0)
                   
 

Total reportable segments

 1,658.7 1,562.4 22.1 (32.8) 

Total reportable segments

 1,778.5 1,658.7 71.5 22.1 

Other

Other

 2.2 2.5     

Other

 1.5 2.2     
               
 

Total

 $1,660.9 $1,564.9      

Total

 $1,780.0 $1,660.9     
               

Adjustments:

Adjustments:

 

Adjustments:

 

Other reconciling items(1)

     (91.3) (83.8)

Other reconciling items(1)

     (87.5) (91.3)

Purchase accounting(2)

     (22.1) (26.0)

Purchase accounting(2)

     (20.6) (22.1)

Non-cash debt charges(3)

     (48.8) (25.0)

Non-cash debt charges(3)

     (59.9) (48.8)

Restructuring charges

     (10.7) (29.5)

Restructuring charges

     (4.9) (10.7)

Restructuring related charges(4)

     (5.3) (8.9)

Restructuring related charges(4)

     (0.5) (5.3)

Management transition costs

      (0.7)

Derivative losses(5)

      (1.7)

Derivative gains (losses)(5)

     (1.7) 1.0 

Acquisition related costs

     (2.8)  

Third-party bankruptcy accrual(6)

      (4.3)

Management transition costs

     (2.5)  
     

Premiums paid on debt(6)

     (51.7)  
 

Loss before income taxes

     $(157.8)$(210.0)      
      

Loss before income taxes

     $(158.9)$(157.8)
     

(1)
Represents general corporate expenses, certain interest expense (including net interest on corporate debt), as well as other business activities such as our third-party claim management services.

(2)
Represents the purchase accounting effects of the Acquisition on our results of operations relating to increased depreciation and amortization of tangible and intangible assets and accretion of revalued workers' compensation and public liability and property damage liabilities. Also represents the purchase accounting effects of subsequent acquisitions on our results of operations relating to increased amortization of intangible assets.

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

(3)
Represents non-cash debt charges relating to the amortization and write-off of deferred debt financing costs and debt discounts. For the three months ended March 31, 2010, and 2009, also includes $20.9 million and $7.5 million, respectively, associated with the amortization of amounts pertaining to the de-designation of the Hertz Vehicle Financing LLC, or "HVF," interest rate swaps as effective hedging instruments.

(4)
Represents incremental one-time costs incurred directly supporting our business transformation initiatives. Such costs include transition costs incurred in connection with our business process outsourcing arrangements and incremental costs incurred to facilitate business process re-engineering initiatives that involve significant organization redesign and extensive operational process changes.


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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

(5)
In 2010, representsRepresents the mark-to-market adjustment on our interest rate cap. In 2009, represents the mark-to-market adjustments on our gasoline swap.

(6)
Represents an allowance for uncollectible program car receivablespremiums paid to redeem our 10.5% Senior Subordinated Notes and a portion of our 8.875% Senior Notes.

Total assets decreased $504.6 million from December 31, 2010 to March 31, 2011. The decrease was primarily related to a bankrupt European dealer affiliated withdecrease in other cash and cash equivalents relating to the redemption of our 10.5% Senior Subordinated Notes and a U.S.portion of our 8.875% Senior Notes, partly offset by an increase in our car manufacturer.

rental segment's revenue earning equipment.

Note 12—11—Total Equity

(in Millions)
 Number
of Shares
 Common
Stock
 Preferred
Stock
 Additional
Paid-In
Capital
 Accumulated
Deficit
 Accumulated
Other
Comprehensive
Income (Loss)
 Non-
controlling
Interest
 Total
Equity
 

December 31, 2009

  410.2 $4.1 $ $3,141.7 $(1,062.3)$(3.3)$17.2 $2,097.4 
 

Net loss attributable to Hertz Global Holdings, Inc. and Subsidiaries' common stockholders

              (150.4)       (150.4)
 

Change in fair value of derivatives qualifying as cash flow hedges, net of tax of $9.5

                 14.6     14.6 
 

Translation adjustment changes

                 (39.0)    (39.0)
 

Unrealized gain on Euro-denominated debt, net of tax of $7.6

                 11.9     11.9 
 

Defined benefit pension plans, net

                 (0.4)    (0.4)
                         
 

Total Comprehensive Loss

                       (163.3)
                         
 

Dividend payment to noncontrolling interest

                    (3.0) (3.0)
 

Net income relating to noncontrolling interest

                    3.6  3.6 
 

Employee stock purchase plan

  0.1        0.7           0.7 
 

Net settlement on vesting of restricted stock

           (5.3)          (5.3)
 

Restricted stock

  1.0                    
 

Stock-based employee compensation charges, net of tax of $0

  0.1        9.0           9.0 
 

Exercise of stock options

           0.7           0.7 
 

Common shares issued to Directors

          0.1           0.1 
 

Phantom shares issued to Directors

           0.1           0.1 
                  

March 31, 2010

  411.4 $4.1 $ $3,147.0 $(1,212.7)$(16.2)$17.8 $1,940.0 
                  
 
  
 Common Stock  
  
 Accumulated
Other
Comprehensive
Income (Loss)
  
  
 
 
 Preferred
Stock
 Additional
Paid-In
Capital
 Accumulated
Deficit
 Non-
controlling
Interest
 Total
Equity
 
(in Millions)
 Shares Amount 

December 31, 2010

 $  413.5 $4.1 $3,183.2 $(1,110.4)$37.9 $16.5 $2,131.3 
 

Net loss attributable to Hertz Global Holdings, Inc. and Subsidiaries' common stockholders

              (132.6)       (132.6)
 

Translation adjustment changes, net of tax of $0

                 42.5     42.5 
 

Unrealized gain on Euro-denominated debt, net of tax of $7.4

                 (11.6)    (11.6)
 

Defined benefit pension plans, net of tax of $0

                 0.1     0.1 
                         
 

Total Comprehensive Loss

                       (101.6)
                         
 

Net income relating to noncontrolling interest

                    3.7  3.7 
 

Employee stock purchase plan

     0.1     1.0           1.0 
 

Net settlement on vesting of restricted stock

     1.0     (10.7)          (10.7)
 

Stock-based employee compensation charges, net of tax of $0

           9.1           9.1 
 

Exercise of stock options, net of tax of $0

     0.3     1.8           1.8 
 

Common shares issued to Directors

           0.1           0.1 
                  

March 31, 2011

 $  414.9 $4.1 $3,184.5 $(1,243.0)$68.9 $20.2 $2,034.7 
                  

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

 

(in Millions)
 Number
of Shares
 Common
Stock
 Preferred
Stock
 Additional
Paid-In
Capital
 Accumulated
Deficit
 Accumulated
Other
Comprehensive
Income (Loss)
 Non-
controlling
Interest
 Total
Equity
 

December 31, 2008

  323.0 $3.2 $ $2,503.8 $(936.3)$(100.1)$17.7 $1,488.3 
 

Net loss attributable to Hertz Global Holdings, Inc. and Subsidiaries' common stockholders

              (163.5)       (163.5)
 

Change in fair value of derivatives qualifying as cash flow hedges, net of tax of $0.1

                 (0.2)    (0.2)
 

Translation adjustment changes

                 (34.8)    (34.8)
 

Unrealized gain on Euro-denominated debt, net of tax of $5.6

                 8.7     8.7 
                         
 

Total Comprehensive Loss

                       (189.8)
                         
 

Dividend payment to noncontrolling interest

                    (2.8) (2.8)
 

Net income relating to noncontrolling interest

                    3.1  3.1 
 

Employee stock purchase plan

  0.2        0.9           0.9 
 

Stock-based employee compensation charges, net of tax of $0

  0.2        7.4           7.4 
 

Exercise of stock options

           0.9           0.9 
 

Phantom shares issued to Directors

           0.1           0.1 
                  

March 31, 2009

  323.4 $3.2 $ $2,513.1 $(1,099.8)$(126.4)$18.0 $1,308.1 
                  
 
  
 Common Stock  
  
 Accumulated
Other
Comprehensive
Income (Loss)
  
  
 
 
 Preferred
Stock
 Additional
Paid-In
Capital
 Accumulated
Deficit
 Non-
controlling
Interest
 Total
Equity
 
(in Millions)
 Shares Amount 

December 31, 2009

 $  410.2 $4.1 $3,141.7 $(1,062.3)$(3.3)$17.2 $2,097.4 
 

Net loss attributable to Hertz Global Holdings, Inc. and Subsidiaries' common stockholders

              (150.4)       (150.4)
 

Change in fair value of derivatives qualifying as cash flow hedges, net of tax of $9.5

                 14.6     14.6 
 

Translation adjustment changes, net of tax of $0

                 (39.0)    (39.0)
 

Unrealized gain on Euro-denominated debt, net of tax of $7.6

                 11.9     11.9 
 

Defined benefit pension plans, net of tax of $0

                 (0.4)    (0.4)
                         
 

Total Comprehensive Loss

                       (163.3)
                         
 

Dividend payment to noncontrolling interest

                    (3.0) (3.0)
 

Net income relating to noncontrolling interest

                    3.6  3.6 
 

Employee stock purchase plan

     0.1     0.7           0.7 
 

Net settlement on vesting of restricted stock

     1.0     (5.3)          (5.3)
 

Stock-based employee compensation charges, net of tax of $0

     0.1     9.0           9.0 
 

Exercise of stock options, net of tax of $0

           0.7           0.7 
 

Common shares issued to Directors

          0.1           0.1 
 

Phantom shares issued to Directors

           0.1           0.1 
                  

March 31, 2010

 $  411.4 $4.1 $3,147.0 $(1,212.7)$(16.2)$17.8 $1,940.0 
                  

Accumulated other comprehensive lossincome (loss) as of March 31, 20102011 and December 31, 20092010 includes accumulated translation gains of $93.1$157.3 million and $132.1$114.9 million, respectively, unrealized losses on cash flow hedgespension benefits of $(35.1)$(70.1) million and $(49.8) million, respectively, changes due to the pension mark-to-market adjustment of $(66.9) million and $(66.5)$(70.2) million, respectively, and unrealized losses on our Euro-denominated debt of $(7.3)$(18.4) million and $(19.2)$(6.8) million, respectively.

Note 13—12—Restructuring

As part of our ongoing effort to implement our strategy of reducing operating costs, we have evaluated our workforce and operations and made adjustments, including headcount reductions and business process re-engineeringreengineering resulting in optimized work flow at rental locations and maintenance facilities as well as streamlined our back-office operations and evaluated potential outsourcing opportunities. When we made adjustments to our workforce and operations, we incurred incremental expenses that delay the benefit of a more efficient workforce and operating structure, but we believe that increased operating efficiency and reduced costs associated with the operation of our business are important to our long-term competitiveness.


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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

For further information on actions takenDuring 2007 through 2010, we announced several initiatives to improve our competitiveness and industry leadership through targeted job reductions. These initiatives included, but were not limited to, job reductions at our corporate headquarters and back-office operations in 2009, see Note 11 to the Notes toU.S. and Europe. As part of our audited annual consolidated financial statements includedre-engineering optimization we outsourced selected functions globally. In addition, we streamlined operations and reduced costs by initiating the closure of targeted car rental locations and equipment rental branches throughout the world. The largest of these closures occurred in 2008 which resulted in closures of approximately 250 off-airport locations and 22 branches in our Annual Report under caption "Item 8—Financial Statements and Supplementary Data."U.S. equipment rental business. These initiatives impacted approximately 8,500 employees.

During the first quarter of 20102011, we continued to streamline operations and reduce costs with the closure of several car rental and equipment rental locations globally as well as a reduction in our workforce by approximately 100 employees.

From January 1, 2007 through March 31, 2011, we incurred $479.0 million ($240.7 million for our car rental segment, $184.9 million for our equipment rental business incurred charges for losses on the disposal of surplus equipmentsegment and recognition of future facility lease obligations related to branch closures in North America. Additionally, first quarter restructuring charges included employee termination liabilities covering approximately 200 employees.

For the three months ended March 31, 2010, our consolidated statement of operations includes restructuring charges relating to the initiatives discussed above of $10.7 million which is composed of $3.6 million in facility closure and lease obligation costs, $3.4$53.4 million of termination benefits, $1.3 million in relocation and temporary labor costs, $0.7 million in revenue earning equipment and fixed asset impairment charges, $0.5 million in consulting costs, and $1.2 millionother) of other restructuring charges. The after-tax effect of the restructuring charges increased diluted loss per share by $0.02 for the three months ended March 31, 2010.

For the three months ended March 31, 2009, our consolidated statement of operations includes restructuring charges of $29.5 million which is composed of $10.3 million of involuntary termination benefits, $9.8 million in facility closure and lease obligation costs, $5.7 million in consulting costs, $1.7 million in contract termination costs and $2.0 million of other restructuring charges. The after-tax effect of the restructuring charges increased diluted loss per share by $0.07 for the three months ended March 31, 2009.

Additional efficiency and cost saving initiatives are being developed during 2010. However,2011. In April 2011, we presently do not have firm plansclosed eleven equipment rental locations and expect to close an additional one or estimatestwo locations in the remainder of any related expenses.the second quarter of 2011. We estimate that these equipment rental location closures will result in $20 to $30 million of restructuring charges in the second quarter of 2011.

Restructuring charges in our consolidated statement of operations can be summarized as follows (in millions of dollars):

 
 Three Months Ended March 31, 
 
 2010 2009 

By Caption:

       
 

Direct operating

 $7.0 $16.8 
 

Selling, general and administrative

  3.7  12.7 
      
  

Total

 $10.7 $29.5 
      
 
 Three Months ended March 31, 
 
 2011 2010 

By Type:

       
 

Involuntary termination benefits

 $1.0 $3.4 
 

Pension and post retirement expense

    0.3 
 

Consultant costs

  0.1  0.5 
 

Asset writedowns

  0.7  0.7 
 

Facility closure and lease obligation costs

  3.1  3.6 
 

Relocation costs

    1.3 
 

Other

    0.9 
      
  

Total

 $4.9 $10.7 
      

 

 
 Three Months Ended March 31, 
 
 2010 2009 

By Segment:

       
 

Car rental

 $5.3 $15.1 
 

Equipment rental

  4.9  7.0 
 

Other reconciling items

  0.5  7.4 
      
  

Total

 $10.7 $29.5 
      
 
 Three Months ended March 31, 
 
 2011 2010 

By Caption:

       
 

Direct operating

 $4.3 $7.0 
 

Selling, general and administrative

  0.6  3.7 
      
  

Total

 $4.9 $10.7 
      

Table of Contents


HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

Our condensed consolidated balance sheet as of

 
 Three Months ended March 31, 
 
 2011 2010 

By Segment:

       
 

Car rental

 $1.0 $5.3 
 

Equipment rental

  3.9  4.9 
 

Other reconciling items

    0.5 
      
  

Total

 $4.9 $10.7 
      

During the three months ended March 31, 2011 and 2010, included accruals relating tothe after-tax effect of the restructuring program of $22.0 million. We expect to pay substantially all ofcharges increased the remaining restructuring obligationsloss per share by the end of the second quarter 2010. $0.01 and $0.02, respectively.

The following table sets forth the activity affecting the restructuring accrual during the three months ended March 31, 20102011 (in millions of dollars):. We expect to pay the remaining restructuring obligations relating to involuntary termination benefits over the next twelve months. The remainder of the restructuring accrual relates to future lease obligations which will be paid over the remaining term of the applicable leases.

 
 Involuntary
Termination
Benefits
 Pension
and Post
Retirement
Expense
 Consultant
Costs
 Other Total 

Balance as of January 1, 2010

 $19.6 $ $0.4 $9.7 $29.7 
 

Charges incurred

  3.4  0.3  0.5  6.5  10.7 
 

Cash payments

  (9.3)   (0.7) (4.0) (14.0)
 

Other(1)

  (1.7) (0.3)   (2.4) (4.4)
            

Balance as of March 31, 2010

 $12.0 $ $0.2 $9.8 $22.0 
            
 
 Involuntary
Termination
Benefits
 Pension
and Post
Retirement
Expense
 Consultant
Costs
 Other Total 

Balance as of January 1, 2011

 $6.3 $0.2 $0.1 $10.9 $17.5 
 

Charges incurred

  1.0    0.1  3.8  4.9 
 

Cash payments

  (3.4)   (0.1) (0.4) (3.9)
 

Other(1)

  0.2  0.1    (2.5) (2.2)
            

Balance as of March 31, 2011

 $4.1 $0.3 $0.1 $11.8 $16.3 
            

(1)
Primarily consistsConsists of a decreasedecreases of $2.4($0.7) million for asset writedowns and ($1.9) million for facility closures, $0.7partly offset by an increase of $0.4 million for the impairment of revenue earning equipment and other assets, $0.3 million for executive pension liability settlements and a $1.2 million loss indue to foreign currency translation, partially offset by a ($0.3) million settlement gain related to executive pension plan distributions.translation.

Note 14—13—Financial Instruments

Cash and Cash Equivalents and Restricted Cash and Cash Equivalents

Fair value approximates the amount indicated on the balance sheet at March 31, 20102011 and December 31, 20092010 because of the short-term maturity of these instruments. Money market accounts, whose fair value at March 31, 2010,2011, is measured using Level 1 inputs, totaling $249.7$239.4 million and $125.6$53.3 million are included in "Cash and cash equivalents" and "Restricted cash and cash equivalents," respectively. Money market accounts, whose fair value at December 31, 2009,2010, is measured using Level 1 inputs, totaling $106.8$1,747.9 million and $294.4$24.1 million are included in "Cash and cash equivalents" and "Restricted cash and cash equivalents," respectively. Level 1 inputs are observable inputs such as quoted prices in active markets.

Debt

For borrowings with an initial maturity of 93 days or less, fair value approximates carrying value because of the short-term nature of these instruments. For all other debt, fair value is estimated based on quoted market rates as well as borrowing rates currently available to us for loans with similar terms and average maturities.maturities (Level 2 inputs). The aggregate fair value of all debt at March 31, 2010 approximated $10,891.22011 was $11,552.9 million, compared to its aggregate carrying valueunpaid principal balance of $10,541.9$10,849.8 million. The aggregate fair value of all debt at December 31, 2009 approximated $10,795.7 million, compared to its aggregate carrying value of $10,530.4 million.


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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited


debt at December 31, 2010 was $12,063.5 million, compared to its aggregate unpaid principal balance of $11,429.6 million.

Derivative Instruments and Hedging Activities

The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2010 and December 31, 2009 (in millions of dollars):

 
 Fair Value of Derivative Instruments(1) 
 
 Asset Derivatives(2) Liability Derivatives(2) 
 
 March 31,
2010
 December 31,
2009
 March 31,
2010
 December 31,
2009
 

Derivatives designated as hedging instruments under ASC 815:

             
 

HVF interest rate swaps

 $ $ $9.6 $12.8 
          

Derivatives not designated as hedging instruments under ASC 815:

             
 

Gasoline swaps

  2.3  2.2     
 

Interest rate caps

  3.7  8.2  2.9  5.6 
 

Foreign exchange forward contracts

  11.3  7.6  1.1  5.7 
 

Foreign exchange options

  0.2       
          
  

Total derivatives not designated as hedging instruments under ASC 815

  17.5  18.0  4.0  11.3 
          

Total derivatives

 $17.5 $18.0 $13.6 $24.1 
          
 
 Fair Value of Derivative Instruments(1) 
 
 Asset Derivatives(2) Liability Derivatives(2) 
 
 March 31, 2011 December 31, 2010 March 31, 2011 December 31, 2010 

Derivatives not designated as hedging instruments under ASC 815:

             
 

Gasoline swaps

 $4.7 $3.1 $ $ 
 

Interest rate caps

  5.8  7.2  5.8  7.2 
 

Foreign exchange forward contracts

  1.5  2.6  4.7  11.1 
 

Foreign exchange options

  0.2  0.1     
          
  

Total derivatives not designated as hedging instruments under ASC 815

 $12.2 $13.0 $10.5 $18.3 
          

(1)
All fair value measurements were primarily based upon significant observable (Level 2) inputs.

(2)
All asset derivatives are recorded in "Prepaid expenses and other assets" and all liability derivatives are recorded in "Accrued liabilities" on our condensed consolidated balance sheets.


 
 Amount of Gain or
(Loss) Recognized in
Other Comprehensive
Income on Derivative
(Effective Portion)
 Amount of Gain or
(Loss) Reclassified
from Accumulated
Other Comprehensive
Income into Income
(Effective Portion)
 Amount of Gain or
(Loss) Recognized in
Income on Derivative
(Ineffective Portion)
 
 
 Three Months Ended March 31, 
 
 2010 2009 2010 2009 2010 2009 

Derivatives in ASC 815 Cash Flow Hedging Relationship:

                   
 

HVF interest rate swaps

 $(9.6)$(11.5)$(20.9)(1)$(7.5)(1)$ $ 
 
 Amount of Gain or
(Loss) Recognized in
Other Comprehensive
Income (Loss)
on Derivative
(Effective Portion)
 Amount of Gain or
(Loss) Reclassified
from Accumulated
Other Comprehensive
Income (Loss)
into Income
(Effective Portion)
 
 
 Three Months Ended March 31, 
 
 2011 2010 2011 2010 

Derivatives in ASC 815 Cash Flow Hedging Relationship:

             
 

HVF interest rate swaps

 $ $(9.6)$ $(26.9)(1)

Note:
As of December 31, 2010, the HVF interest rate swaps and associated debt matured. The location of both the effective portion reclassified from "Accumulated other comprehensive loss"income" into income and the ineffective portion recognized in income is in "Interest expense" on our consolidated statement of operations.

(1)
Represents the amortization of amounts in "Accumulated other comprehensive loss" associated with the de-designation of the previous cash flow hedging relationship as described below.

Table of Contents


HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

 
  
 Amount of Gain or
(Loss) Recognized in
Income on Derivative
 
 
  
 Three Months Ended
March 31,
 
 
 Location of Gain or (Loss)
Recognized on Derivative
 
 
 2010 2009 

Derivatives Not Designated as Hedging Instruments under ASC 815:

         
 

Gasoline swaps

 Direct operating $0.8 $1.0 
 

Interest rate caps

 Selling, general and administrative  (1.7)  
 

Foreign exchange forward contracts

 Selling, general and administrative  8.7  (5.8)
 

Foreign exchange options

 Selling, general and administrative  (0.1) (0.1)
        
  

Total

   $7.7 $(4.9)
        
(1)
Includes the issuanceamortization of $3,550.0 million of floating rate U.S. Fleet Debt, our subsidiary HVF entered into certain interest rate swap agreements, or the "HVF Swaps," effective December 21, 2005, which qualify as cash flow hedging instruments in accordance with GAAP. These agreements mature at various terms, in connection with the scheduled maturity of the associated debt obligations, through November 2010. Under these agreements, until February 2009, HVF was paying monthly interest at a fixed rate of 4.5% per annum in exchange for monthly interest at one-month LIBOR, effectively transforming the floating rate U.S. Fleet Debt to fixed rate obligations. In March 2009, HVF made a cash payment to have the fixed rate on these swaps reset to the then current market rates of 0.872% and 1.25% for the swaps that matured in February 2010 and that will mature in November 2010, respectively. $80.4 million of this payment was made to an affiliate of MLGPE which is a counterparty to the HVF Swaps. Concurrently with this payment, the hedging relationship was de-designated and the amount remainingamounts in "Accumulated other comprehensive loss"income" associated with thisthe de-designation of a previous cash flow hedging relationship was frozen and is being amortized into "Interest expense" overrelationship.


 
  
 Amount of Gain or
(Loss) Recognized in
Income on Derivative
 
 
  
 Three Months Ended
March 31,
 
 
 Location of Gain or (Loss)
Recognized on Derivative
 
 
 2011 2010 

Derivatives Not Designated as Hedging Instruments under ASC 815:

         
 

Gasoline swaps

 Direct operating $3.1 $0.8 
 

Interest rate caps

 Selling, general and administrative    (1.7)
 

Foreign exchange forward contracts

 Selling, general and administrative  (0.6) 8.7 
 

Foreign exchange options

 Selling, general and administrative    (0.1)
        
  

Total

   $2.5 $7.7 
        

In conjunction with the respective terms of the associated debt in accordance with GAAP. We expect to amortize approximately $47.9 million from "Accumulated other comprehensive loss" into "Interest expense" over the next eight months. Additionally, a new hedging relationship was designated between the HVF Swaps, which also qualifies for cash flow hedge accounting in accordance with GAAP. Both at the inception of the hedge and on an ongoing basis, we measure ineffectiveness by comparing the fair value of the HVF Swapsrefinanced Series 2009-1 Notes and the fair value of hypothetical swaps, with similar terms, using the Hypothetical Method in accordance with GAAP. The hypothetical swaps represent a perfect hedge of the variability in interest payments associated with the U.S. Fleet Debt. Subsequent to the resetting of the swaps at current market rates, we anticipate that there will be no ineffectiveness in the hedging relationship because the critical terms of the HVF Swaps match the terms of the hypothetical swaps.

As of March 31, 2010 and December 31, 2009, the balance reflected in "Accumulated other comprehensive loss," was a loss of $35.1 million (net of tax of $22.3 million) and a loss of $49.7 million (net of tax of $31.8 million), respectively. The fair values of the HVF Swaps were calculated using the income approach and applying observable market data (i.e. the 1-month LIBOR yield curve and credit default swap spreads).

In connection with the entrance into the HVF Swaps, Hertz entered into seven differential interest rate swap agreements, or the "differential swaps." These differential swaps were required to be put in place to protect the counterparties to the HVF Swaps in the event of an "amortization event" under the asset-backed notes agreements. An "event of bankruptcy" (as defined in the ABS Base Indenture) with


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respect to MBIA or Ambac would constitute an "amortization event" under the portion of the U.S. Fleet Debt facilities guaranteed by the affected insurer. In the event of an "amortization event," the amount by which the principal balance on the floating rate portion of the U.S. Fleet Debt is reduced, exclusive of the originally scheduled amortization, becomes the notional amount of the differential swaps and is transferred to Hertz. There was no payment associated with these differential swaps and their notional amounts are and will continue to be zero unless (1) there is an amortization event, which causes the amortization of the loan balance, or (2) the debt is prepaid.

On September 18, 2009, HVF completed the closing of thenew Series 2009-1 Notes. In order to satisfy rating agency requirements related to its bankruptcy-remote status,2010-2 Notes, HVF purchased an interest rate cap for $11.7$6.7 million, with a maximum notional amount equal to the refinanced Series 2009-1 Notes and the new Series 2010-2 Notes with a combined maximum principal amount of $2.1 billion, with a strike rate of 5% and a term until Januaryexpected maturity date of March 25, 2013. Additionally, Hertz sold a 5% interest rate cap for $6.5$6.2 million, with a notional amount equal to 33.3% of the notional amount of the HVF cap through January 2012, and then subsequently with a matching notional amount and term to the HVF interest rate cap. Also in December 2010, the Australian Securitization was completed and our Australian operating subsidiary purchased an interest rate cap through itsfor $0.5 million, with a maximum notional amount equal to the Australian Securitization maximum principal amount of A$250 million, a strike rate of 7% and expected maturity date of January 25, 2013.December 2012. Additionally, Hertz sold a 7% interest rate cap, for $0.4 million with a matching notional amount and term to the Australian operating subsidiary's interest rate cap. The fair valuevalues of theseall interest rate caps waswere calculated using a discounted cash flow method and applying observable market data (i.e. the 1-month LIBOR yield curve and credit default swap spreads). Gains and losses resulting from changes in the fair value of these interest rate caps are included in our results of operations in the periods incurred.

We purchase unleaded gasoline and diesel fuel at prevailing market rates. In January 2009, we beganrates and maintain a program to manage our exposure to changes in fuel prices through the use of derivative commodity instruments. We currently have in place swaps to cover a portion of our fuel price exposure through December 2010.June 2011. We presently hedge a portion of our overall unleaded gasoline and diesel fuel purchases with commodity swaps and have contracts in place that settle on a monthly basis. As of March 31, 2010,2011, our outstanding commodity instruments for unleaded gasoline and diesel fuel totaled approximately 7.95.5 million gallons and 1.8 million gallons, respectively.gallons. The fair value of these commodity instruments was calculated using a discounted cash flow method and applying observable market data (i.e., NYMEX RBOB Gasoline and Department of Energy surveys, etc.)Gasoline). Gains and losses resulting from changes in the fair value of these commodity instruments are included in our results of operations in the periods incurred.

We manage our foreign currency risk primarily by incurring, to the extent practicable, operating and financing expenses in the local currency in the countries in which we operate, including making fleet and equipment purchases and borrowing for working capital needs. Also, we have purchased foreign exchange options to manage exposure to fluctuations in foreign exchange rates for selected marketing


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programs. The effect of exchange rate changes on these financial instruments would not materially affect our consolidated financial position, results of operations or cash flows. Our risks with respect to foreign exchange options are limited to the premium paid for the right to exercise the option and the future performance of the option's counterparty. Premiums paid for options outstanding as of March 31, 2010,2011, were approximately $0.3 million and we$0.2 million. We limit counterparties to the transactions to financial institutions that have strong credit ratings. As of March 31, 20102011 and December 31, 2009,2010, the total notional amount of these foreign exchange options was $5.6$5.8 million and $0.3$3.5 million, respectively, maturingrespectively. As of March 31, 2011, these foreign exchange options mature through January 2011.2012. The fair value of the foreign exchange options was calculated using a discounted cash flow method and applying observable market data (i.e. foreign currency exchange rates). Gains and losses resulting from changes in the fair value of these options are included in our results of operations in the periods incurred.


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We also manage exposure to fluctuations in currency risk on intercompany loans we make to certain of our subsidiaries by entering into foreign currency forward contracts at the time of the loans which are intended to offset the impact of foreign currency movements on the underlying intercompany loan obligations. As of March 31, 2010,2011, the total notional amount of these forward contracts was $849.0$763.8 million, maturing within threefour months. The fair value of these foreign currency forward contracts was calculated based on foreign currency forward exchange rates.

On October 1, 2006, we designated our 7.875% Senior Euro Notes due 2014 as an effective net investment hedge of our Euro-denominated net investment in our international operations. As a result of this net investment hedge designation, as of March 31, 20102011 and December 31, 2009,2010, losses of $7.3$18.4 million (net of tax of $10.2$12.5 million) and $19.2$6.8 million (net of tax of $17.8$5.1 million), respectively, attributable to the translation of our 7.875% Senior Euro Notes due 2014 into the U.S. dollar are recorded in our condensed consolidated balance sheet in "Accumulated other comprehensive loss.income."

Note 15—14—Related Party Transactions

Relationship with Hertz Investors, Inc. and the Sponsors

Other than as disclosed below, in the three months ended March 31, 2010,2011, there were no material changes to our relationship with Hertz Investors, Inc. or the Sponsors.

Director Compensation Policy

For the three months endedOn March 31, 2010 and 2009, we recognized $0.42011, the Sponsors sold 50 million and $0.4of our common shares to Goldman, Sachs & Co. as the sole underwriter in the registered public offering of those shares. Following this offering, the Sponsors continue to own an aggregate of approximately 160 million respectively,shares, or approximately 39% of expense relating to the Director Compensation Policy in our consolidated statement of operations in "Selling, general and administrative" expenses.outstanding common stock.

Financing Arrangements with Related Parties

Affiliates of ML Global Private Equity, L.P.BAMLCP (which is one of the Sponsors), including Merrill Lynch & Co., Inc., Bank of America, N.A. and its related fundscertain of their affiliates (which are stockholders of Hertz Holdings), have provided various investment and of Merrill Lynch & Co., Inc., commercial banking and financial advisory services to us for which they have received customary fees and commissions. In addition, these parties have acted as agents, lenders, purchasers and/or "ML," one of the underwriters to us under our respective financing arrangements, for which they have received customary fees, commissions, expenses and/or other compensation. More specifically, these parties have acted in the initial public offering of our common stock and the June 2007 secondary offering by the Sponsors, were lenders under the Hertz Holdings Loan Facility (which was repaid with the proceeds of our initial public offering); are lenders under the original and amended Senior Term Facility, the original and amended Senior ABL Facility and the Fleet Financing Facility; acted as initial purchasersfollowing capacities, or similar capacities, with respect to our financing arrangements: lenders and/or agents under the offeringsSenior Credit Facilities, the U.S. Fleet Financing Facility and certain of the U.S. Fleet Variable Funding Notes; purchasers and/or underwriters under the Senior Notes, the Senior Subordinated Notes and certain of the Series 2008-1U.S. Fleet Medium Term Notes; acted asand structuring advisors andand/or agents under ourthe ABS Program; and acted as dealer managers and solicitation agents for Hertz's tender offers for its existing debt securities in connection with the Acquisition.

As of March 31, 2010 and December 31, 2009, approximately $253 million and $246 million, respectively, of our outstanding debt was with related parties.

See Note 8—Debt.Program.


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As of March 31, 2011 and December 31, 2010, approximately $191 million and $255 million, respectively, of our outstanding debt was with related parties.

See Note 7—Debt.

Note 16—Commitments15—Contingencies and ContingenciesOff-Balance Sheet Commitments

Off-Balance Sheet Commitments

As of March 31, 20102011 and December 31, 2009,2010, the following guarantees (including indemnification commitments) were issued and outstanding:outstanding.

IndemnificationsIndemnification Obligations

In the ordinary course of business, we execute contracts involving indemnifications standardindemnification obligations customary in the relevant industry and indemnifications specific to a transaction such as the sale of a business. These indemnificationsindemnification obligations might include claims relating to the following: environmental matters; intellectual property rights; governmental regulations and employment-related matters; customer, supplier and other commercial contractual relationships; and financial matters. Performance under these indemnitiesindemnification obligations would generally be triggered by a breach of terms of the contract or by a third party claim. We regularly evaluate the probability of having to incur costs associated with these indemnificationsindemnification obligations and have accrued for expected losses that are probable and estimable. The types of indemnificationsindemnification obligations for which payments are possible include the following:

Sponsors; Directors

Hertz has entered into customary indemnification agreements with Hertz Holdings, the Sponsors and our stockholders affiliated with the Sponsors, pursuant to which Hertz Holdings and Hertz will indemnify the Sponsors, our stockholders affiliated with the Sponsors and their respective affiliates, directors, officers, partners, members, employees, agents, representatives and controlling persons, against certain liabilities arising out of performance of a consulting agreement with Hertz Holdings and each of the Sponsors and certain other claims and liabilities, including liabilities arising out of financing arrangements or securities offerings. We also entered into indemnification agreements with each of our directors. We do not believe that these indemnifications are reasonably likely to have a material impact on us.

Environmental

We have indemnified various parties for the costs associated with remediating numerous hazardous substance storage, recycling or disposal sites in many states and, in some instances, for natural resource damages. The amount of any such expenses or related natural resource damages for which we may be held responsible could be substantial. The probable expenses that we expect to incur for such matters have been accrued, and those expenses are reflected in our condensed consolidated financial statements. As of March 31, 20102011 and December 31, 2009,2010, the aggregate amounts accrued for environmental liabilities including liability for environmental indemnities, reflected in our condensed consolidated balance sheetsheets in "Accrued liabilities" were $1.8$1.5 million and $2.0$1.6 million, respectively. The accrual generally represents the estimated cost to study potential environmental issues at sites deemed to require investigation or clean-up activities, and the estimated cost to implement remediation actions,


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including on-going maintenance, as required. Cost estimates are developed by site. Initial cost estimates are based on historical experience at similar sites and are refined over time on the basis of in-depth studies of the sites. For many sites, the remediation costs and other damages for which we ultimately may be responsible cannot be reasonably estimated because of uncertainties with respect to


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factors such as our connection to the site, the materials there, the involvement of other potentially responsible parties, the application of laws and other standards or regulations, site conditions, and the nature and scope of investigations, studies, and remediation to be undertaken (including the technologies to be required and the extent, duration, and success of remediation).remediation.

Legal Proceedings

From time to time we are a party to various legal proceedings. We are currently a defendant in numerous actions and have received numerous claims on which actions have not yet been commenced for public liability and property damage arising from the operation of motor vehicles and equipment rented from us and our licensees. The obligation for public liability and property damage on self-insured U.S. and international vehicles and equipment, as stated on our balance sheet, represents an estimate for both reported accident claims not yet paid and claims incurred but not yet reported. The related liabilities are recorded on a non-discounted basis. Reserve requirements are based on actuarial evaluations of historical accident claim experience and trends, as well as future projections of ultimate losses, expenses, premiums and administrative costs. At March 31, 20102011 and December 31, 20092010 our liability recorded for public liability and property damage matters was $267.0$282.1 million and $277.8$278.7 million, respectively. The decrease in the reserve balance primarily reflects lower claim costs, the timing of payment activity during the quarter and the effects of foreign currency translation. We believe that our analysis was based on the most relevant information available, combined with reasonable assumptions, and that we may prudently rely on this information to determine the estimated liability. We note the liability is subject to significant uncertainties. The adequacy of the liability reserve is regularly monitored based on evolving accident claim history and insurance related state legislation changes. If our estimates change or if actual results differ from these assumptions, the amount of the recorded liability is adjusted to reflect these results.

For a detailed description of certain of our legal proceedings please see Note 1011 of the Notes to our audited annual consolidated financial statements included in our Annual ReportForm 10-K under the caption "Item 8—Financial Statements and Supplementary Data."

The following recent developments pertaining to legal proceedings described in our Annual Report are furnished on a supplemental basis:

In March 2010, inJanet Sobel, Daniel Dugan, PhD. and Lydia Lee, individually and on behalf of all others similarly situated v. The Hertz Corporation and Enterprise Rent-A-Car Company, the court ruled on the cross motions for summary judgment holding that Hertz violated the since amended Nevada "bundled pricing" statute by separately disclosing and charging airport concession fee recoveries. However, the court also found that Hertz's full disclosure of the estimated total price of the airport rentals was not deceptive within the meaning of Nevada's Deceptive Trade Practices Act. Some additional discovery will now be taken and additional motions are expected to be filed by both sides in the coming months.

Aside from the above mentioned, thereThere were no material changes in the legal proceedings described in our Annual ReportForm 10-K and we are not otherwise required to disclose any pending legal proceedings in response to Item 103 of Regulation S-K.

In addition to those described in our Form 10-K, various other legal actions, claims and governmental inquiries and proceedings are pending or may be instituted or asserted in the future against us and our subsidiaries. Other than with respect to the aggregate claims for public liability and property damage


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pending against us, management does not believe that any of the matters resolved, or pending against us, are material to us and our subsidiaries taken as a whole.

We have established reserves for matters where we believe that the losses are probable and reasonably estimated. Other than with respect to the reserve established for claims for public liability and property damage, none of those reserves are material. For matters where we have not established a reserve, the ultimate outcome or resolution cannot be predicted at this time, or the amount of ultimate loss, if any, cannot be reasonably estimated. Litigation is subject to many uncertainties and the outcome of the individual litigated matters is not predictable with assurance. It is possible that certain of the actions, claims, inquiries or proceedings, including those discussed above,in our Form 10-K, could be decided unfavorably to us or any of our subsidiaries involved. Accordingly, it is possible that an adverse outcome


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from such a proceeding could exceed the amount accrued in an amount that could be material to our consolidated financial condition, results of operations or cash flows in any particular reporting period.

Note 17—Loss16—Earnings (Loss) Per Share

Basic lossearnings (loss) per share has been computed based upon the weighted average number of common shares outstanding. Diluted lossearnings (loss) per share has been computed based upon the weighted average number of common shares outstanding plus the effect of all potentially dilutive common stock equivalents, except when the effect would be anti-dilutive.

The following table sets forth the computation of basic and diluted loss per share (in millions of dollars, except per share amounts):



 Three Months Ended
March 31,
 
 Three Months Ended
March 31,
 


 2010 2009 
 2011 2010 

Basic and diluted loss per share:

Basic and diluted loss per share:

 

Basic and diluted loss per share:

 

Numerator:

Numerator:

 

Numerator:

 

Net loss attributable to Hertz Global Holdings, Inc. and Subsidiaries' common stockholders

 $(150.4)$(163.5)

Net loss attributable to Hertz Global Holdings, Inc. and Subsidiaries' common stockholders

 $(132.6)$(150.4)
           

Denominator:

Denominator:

 

Denominator:

 

Weighted average shares used in basic and diluted computation

 410.7 323.4 

Weighted average shares used in basic and diluted computation

 414.1 410.7 
           

Loss per share attributable to Hertz Global Holdings, Inc. and Subsidiaries' common stockholders, basic

Loss per share attributable to Hertz Global Holdings, Inc. and Subsidiaries' common stockholders, basic

 $(0.37)$(0.51)

Loss per share attributable to Hertz Global Holdings, Inc. and Subsidiaries' common stockholders, basic

 $(0.32)$(0.37)

Loss per share attributable to Hertz Global Holdings, Inc. and Subsidiaries' common stockholders, diluted

Loss per share attributable to Hertz Global Holdings, Inc. and Subsidiaries' common stockholders, diluted

 $(0.37)$(0.51)

Loss per share attributable to Hertz Global Holdings, Inc. and Subsidiaries' common stockholders, diluted

 $(0.32)$(0.37)

Diluted earnings (loss)loss per share computations for the three months ended March 31, 20102011 and 20092010 excluded the weighted-average impact of the assumed exercise of approximately 21.821.6 million and 23.221.8 million stock options, RSUs and PSUs, respectively, because such impact would be antidilutive. Additionally, for the three months ended March 31, 2011 and 2010, there was no impact to the earnings (loss)diluted loss per share computations associated with the outstanding Convertible Senior Notes, because such impact would be anti-dilutive.


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Note 18—17—Subsequent Events

OnIn April 25, 2010, we entered into a definitive merger agreement under which we will acquire Dollar Thrifty Automotive Group, or "Dollar Thrifty," for a purchase price of $41.00 per share, or a total of $1.27 billion, in a mix of cash and2011, Hertz Holdings common stock, based on our closing stock price on the trading day before the agreement was signed. Under the terms of the agreement, Dollar Thrifty has agreed to pay a special cash dividend of $200redeemed $480 million (expected to be approximately $6.88 per share) to its stockholders immediately prior to closing, and each outstanding share of Dollar Thrifty common stock will be converted into the right to receive from us 0.6366 of a share of our common stock and a cash payment from us equal to $32.80 less theprincipal amount of the special cash dividendits outstanding 8.875% Senior Notes due 2014 which resulted in premiums paid by Dollar Thrifty. At the closing, we will issue an aggregate of approximately 18$10.7 million shares of our common stock (excluding shares issuable upon the exercise of stock options that are being converted to Hertz Holdings stock options) and pay an aggregate of approximately $750 million in cash (which does not include the $200 million special cash dividend to be paid by Dollar Thrifty.) We intend to fund the cash portion of the purchase price with existing liquidity from the combined company. We will also assume or refinance Dollar Thrifty's existing fleet debt outstanding at closing. The transaction is subject to customary closing conditions, regulatory approvals, approval by Dollar Thrifty stockholders and payment of the special dividend. The transaction is not conditioned on receipt of financing by us.

In connection with this transaction, on April 28, 2010, a plaintiff filed a purported class action lawsuit on behalf of himself and other similarly situated shareholders of Dollar Thrifty, entitledHenzel v. Dollar Thrifty Automotive Group, Inc. et al., Case No. CJ-2010-02761, in the District Court of the State of Oklahoma, Tulsa County. The lawsuit was filed against us, Dollar Thrifty, and the memberswrite-off of the boardunamortized debt costs of directors of Dollar Thrifty. The complaint alleges, among other things, that the proposed transaction is the result of an unfair process$5.8 million.

In April 2011, Lois I. Boyd was named Executive Vice President and that the individual defendants breached their fiduciary duties by failing to maximize shareholder value. In addition, the lawsuit asserts that we and Dollar Thrifty aided and abetted the individual defendants' alleged breaches of fiduciary duties. The complaint seeks to, among other things, enjoin the consummation of the merger, or, to the extent already implemented, rescind the proposed transaction. We believe that this action is wholly without merit and intend to defend vigorously against it. However, because this case is in the early stages, we cannot predict the outcome at this time, and we cannot be assured that the action will not delay the consummation of the merger or result in substantial costs.

On May 3, 2010, Avis Budget Group, Inc., or "Avis," sent a letter to the Board of Directors of Dollar Thrifty requesting access to management and due diligence information for the stated purpose of formulating a competing offer. The Avis letter also requested the elimination of certain provisions of our merger agreement with Dollar Thrifty. That merger agreement contains provisions that set forth each party's rights and obligations with respect to potentially competing offers, but at this time we cannot predict the outcome of, or real motivation behind, the Avis letter. It is of course possible that the Avis letter might result in a delay in, and/or jeopardize the completion of, our acquisition of Dollar Thrifty pursuant to the already announced terms.President, Hertz Equipment Rental Corporation.


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ITEM 2.    Management's Discussion and Analysis of Financial Condition and Results of
                 Operations

The following discussion and analysis provides information that we believe to be relevant to an understanding of our consolidated financial condition and results of operations. Unless the context otherwise requires, in this Report on Form 10-Q, (i) "Hertz Holdings" means Hertz Global Holdings, Inc., our top-level holding company, (ii) "Hertz" means The Hertz Corporation, our primary operating company and a direct wholly-owned subsidiary of Hertz Investors, Inc., which is wholly-owned by Hertz Holdings, (iii) "we," "us" and "our" mean (a) prior to December 21, 2005, Hertz and its consolidated subsidiaries and (b) on and after December 21, 2005, Hertz Holdings and its consolidated subsidiaries, including Hertz, (iv) "HERC" means Hertz Equipment Rental Corporation, Hertz's wholly-owned equipment rental subsidiary, together with our various other wholly-owned international subsidiaries that conduct our industrial, construction and material handling equipment rental business, (v) "cars" means cars, crossovers and light trucks (including sport utility vehicles and, outside North America, light commercial vehicles), (vi) "program cars" means cars purchased by car rental companies under repurchase or guaranteed depreciation programs with car manufacturers, (vii) "non-program cars" mean cars not purchased under repurchase or guaranteed depreciation programs for which the car rental company is exposed to residual risk and (viii) "equipment" means industrial, construction and material handling equipment.

You should read the following discussion and analysis together with the section below entitled "Cautionary Note Regarding Forward-Looking Statements," with the financial statements and the related notes thereto contained elsewhere in this Form 10-Q, or this "Report."

Cautionary Note Regarding Forward-Looking Statements

Certain statements contained or incorporated by reference in this Report and in reports we subsequently file with the United States Securities and Exchange Commission, or the "SEC," on Forms10-K,Forms 10-K, 10-Q and file or furnish on Form 8-K, and in related comments by our management, include "forward-looking statements." Forward-looking statements include information concerning our liquidity and our possible or assumed future results of operations, including descriptions of our business strategies. These statements often include words such as "believe," "expect," "project," "anticipate," "intend," "plan," "estimate," "seek," "will," "may," "would," "should," "could," "forecasts" or similar expressions. These statements are based on certain assumptions that we have made in light of our experience in the industry as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate in these circumstances. We believe these judgments are reasonable, but you should understand that these statements are not guarantees of performance or results, and our actual results could differ materially from those expressed in the forward-looking statements due to a variety of important factors, both positive and negative, that may be revised or supplemented in subsequent reports on SEC Forms 10-K, 10-Q and 8-K.

Some important factors that could affect our actual results include, among others, those that may be disclosed from time to time in subsequent reports filed with the SEC, those described under "Item 1A—Risk Factors" included in Hertz Holdings' Annual Report on Form 10-K and Form 10-K/A for the fiscal year ended December 31, 2009,2010, filed with the SEC, on February 26, 201025, 2011, or our "Form 10-K," and March 1, 2010, respectively, or collectively known as our "Annual Report",in Part II, "Item 1ARisk Factors" included in this Form 10-Q and the following, which were derived in part from the risks set forth in the Annual Report:Form 10-K:


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ITEM 2.    Management's Discussion and Analysis of Financial Condition and Results of
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ITEM 2.    Management's Discussion and Analysis of Financial Condition and Results of
                 Operations (Continued)


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                 Operations (Continued)


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ITEM 2.    Management's Discussion and Analysis of Financial Condition and Results of
                 Operations (Continued)

You should not place undue reliance on forward-looking statements. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing cautionary statements. All such statements speak only as of the date made, and we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Corporate History

We areHertz Holdings was incorporated in Delaware in 2005 to serve as the top-level holding company for the consolidated Hertz business. Hertz was incorporated in Delaware in 1967. Hertz is a successor to corporations that have been engaged in the car and truck rental and leasing business since 1918 and the equipment rental business since 1965. Ford Motor Company, "Ford," acquired an ownership interest in Hertz in 1987. Prior to this, Hertz was a subsidiary of United Continental Holdings, was incorporatedInc. (formerly Allegis Corporation), which acquired Hertz's outstanding capital stock from RCA Corporation in Delaware in 2005 and had no operations prior to the Acquisition (as defined below).1985.

On December 21, 2005, investment funds associated with or designated by:

or collectively the "Sponsors," acquired all of Hertz's common stock from Ford Holdings LLC. We refer to the acquisition of all of Hertz's common stock by the Sponsors as the "Acquisition." Following

In March 2011, the Sponsors sold 50,000,000 shares of their Hertz Holdings common stock to Goldman, Sachs & Co. as the sole underwriter in the registered public offering of those shares.

As a result of our initial public offering in November 2006 and subsequent offerings in June 2007, May 2009, and June 2009 and March 2011, the Sponsors currently ownreduced their holdings to approximately 51%39% of the outstanding shares of common stock of Hertz Holdings.

In January 2009, Bank of America Corporation, or "Bank of America," acquired Merrill Lynch & Co., Inc., the parent company of MLGPE.BAMLCP. Accordingly, Bank of America is now an indirect beneficial owner of our common stock held by MLGPEBAMLCP and certain of its affiliates.

Overview of Our Business

We are engaged principally in the business of renting cars and renting equipment.

Our revenues primarily are derived from rental and related charges and consist of:


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ITEM 2.    Management's Discussion and Analysis of Financial Condition and Results of
                 Operations (Continued)

Our equipment rental business also derives revenues from the sale of new equipment and consumables.

Our expenses primarily consist of:


Table of Contents

ITEM 2.    Management's Discussion and Analysis of Financial Condition and Results of
                 Operations (Continued)

Our profitability is primarily a function of the volume, mix and pricing of rental transactions and the utilization of cars and equipment. Significant changes in the purchase price or residual values of cars and equipment or interest rates can have a significant effect on our profitability depending on our ability to adjust pricing for these changes. We continue to balance our mix of non-program and program vehicles based on market conditions. Our business requires significant expenditures for cars and equipment, and consequently we require substantial liquidity to finance such expenditures. See "Liquidity and Capital Resources" below.

In the U.S., as of March 31, 2011, the percentage of non-program cars was 77% as compared to 66% as of March 31, 2010. Internationally, as of March 31, 2011 and 2010, the percentage of non-program cars remained the same at 65%. In the U.S., as of December 31, 2010, the percentage of non-program cars was 66%72% as compared to 75%67% as of MarchDecember 31, 2009. Internationally, as of MarchDecember 31, 2010, the percentage of non-program cars was 65%70%, compared to 70%71% as of MarchDecember 31, 2009.

In the U.S., for the year ended December 31, 2009,recent periods we have decreased the percentage of non-programprogram cars was 51%in our car rental fleet and we expect this percentage to continue to decrease in the future. Non-program cars typically have lower acquisition costs and lower depreciation rates than comparable program cars. As a result of decreasing our reliance on program cars, we reduce our risk related to the creditworthiness of the vehicle manufacturers. With fewer program cars in our fleet, we have an increased risk that the market value of a car at the time of its disposition will be less than its estimated residual value. Program cars generally provide us with flexibility to reduce the size of our fleet by returning cars sooner than originally expected without risk of loss in the event of an economic downturn or to respond to changes in rental demand. This flexibility will be reduced as compared to 45% for the year ended December 31, 2008. For the year ended December 31, 2009, the percentage of non-program cars in our internationalcar rental fleet was 39%,increases. Furthermore, it is expected that the average age of our fleet will increase since the average holding period for non-program vehicles is longer than program vehicles. However, the longer holding period does not necessarily equate to higher costs due to the stringent turnback requirements imposed by vehicle manufacturers for program cars.


Table of Contents

ITEM 2.    Management's Discussion and Analysis of Financial Condition and Results of
                 Operations (Continued)

In the three months ended March 31, 2011, our vehicle depreciation costs decreased as compared to 41% for the prior year ended December 31, 2008.period due to improved residual values, a continued move towards a greater proportion of non-program vehicles, mix optimization and improved procurement and remarketing efforts.

For the three months ended March 31, 2010,2011, we experienced an 8.3%a 4.4% increase in transaction days versus the prior period in the United States, while rental rate revenue per transaction day, or "RPD," improveddeclined by 0.3%1.5%. During the three months ended March 31, 2010,2011, in our European operations, we experienced a 1.4% decline5.8% improvement in transaction days and a 0.8% declineincrease in our car rental RPD compared to the three months ended March 31, 2009.2010.

Our U.S. off-airport operations represented $231.6$262.1 million and $212.5$231.7 million of our total car rental revenues in the three months ended March 31, 20102011 and 2009,2010, respectively. As of March 31, 2010,2011, we have approximately 1,8001,960 off-airport locations. Our strategy includes selected openings of new off-airport locations, the disciplined evaluation of existing locations and the pursuit of same-store sales growth. Our strategy also includes increasing penetration in the off-airport market and growing the online leisure market with our Advantage brand, particularly in the longer length weekly sector, which is characterized by lower vehicle costs and lower transaction costs at a lower RPD. Increasing our penetration in these sectors is consistent with our long-term strategy to generate profitable growth. When we open a new off-airport location, we incur a number of costs, including those relating to site selection, lease negotiation, recruitment of employees, selection and development of managers, initial sales activities and integration of our systems with those of the companies who will reimburse the location's replacement renters for their rentals. A new off-airport location, once opened, takes time to generate its full potential revenues and, as a result, revenues at new locations do not initially cover their start-up costs and often do not, for some time, cover the costs of their ongoing operations.

In early 2010, Toyota announced recalls of several of its models. As such, we temporarily took a portion of our Toyota fleet out of service. Approximately 13% of our total U.S. car rental fleet was affected by the largest of these recalls. We rapidly made repairs to the recalled vehicles and returned them to our car rental fleet. There was a short-term impact on our business to cover the costs associated with repairing these vehicles; however, we believe that this recall will not have a long-term material impact on our business. Also, we unfortunately turned away some, but not a significant number of rentals as a result of this recall. See "Item 1A—Risk Factors" in our Annual Report.


Table of Contents

ITEM 2.    Management's Discussion and Analysis of Financial Condition and Results of
                 Operations (Continued)

In the year ended December 31, 2009, our per car vehicle depreciation costs decreased approximately 4% and increased approximately 7% in the United States and Europe, respectively, as compared to the prior year period. In the three months ended March 31, 2010, our per car vehicle depreciation costs decreased 14% and 10% in the United States and Europe, respectively, as compared to the prior year period. We expect our per car vehicle depreciation costs in the United States and in Europe for 2010 to be lower than 2009. Our business requires significant expenditures for cars and equipment, and consequently we require substantial liquidity to finance such expenditures. See "Liquidity and Capital Resources" section below.

HERC experienced lowerhigher rental volumes, andwhile pricing remained relatively flat worldwide for the three months ended March 31, 20102011 compared to the prior year period.period as commercial construction markets continued to be suppressed and credit markets for capital expansion remained tight. Pricing remains challenging and irrational at times although as fleet levels begin to align with demand, we expect to see upward movement in the industry. Volume improvements were primarily due to the industrial recovery, HERC specialty services as well as government work, coordinating with efforts to balance our customer portfolio.

HERC locations:

 
 Total U.S. Canada France Spain China 

December 31, 2009

  322  214  35  66  4  3 
 

Net increase (decrease)

  (1) (1)        
 

Additions relating to acquisitions

             
              

March 31, 2010

  321  213  35  66  4  3 
              
 
 Total U.S. Canada France Spain Italy China 

December 31, 2010

  322  210  38  65  4  1  4 
 

Net increase

  1  1           
                

March 31, 2011

  323  211  38  65  4  1  4 
                

Our car rental and equipment rental operations are seasonal businesses, with decreased levels of business in the winter months and heightened activity during the spring and summer. We have the ability to dynamically manage fleet capacity, the most significant portion of our cost structure, to meet market demand. For instance, to accommodate increased demand, we increase our available fleet and staff during the second and third quarters of the year. As business demand declines, fleet and staff are decreased accordingly. A number of our other major operating costs, including airport concession fees, commissions and vehicle liability expenses, are directly related to revenues or transaction volumes. In addition, our management expects to utilize enhanced process improvements, including efficiency initiatives and the use of our information technology systems, to help manage our variable costs.


Table of Contents

ITEM 2.    Management's Discussion and Analysis of Financial Condition and Results of
                 Operations (Continued)


Approximately two-thirds of our typical annual operating costs represent variable costs, while the remaining one-third is fixed or semi-fixed. We also maintain a flexible workforce, with a significant number of part time and seasonal workers. However, certain operating expenses, including minimum concession fees, rent, insurance, and administrative overhead, remain fixed and cannot be adjusted for seasonal demand.

During the first quarter of 2010 our2011, we continued to streamline operations and reduce costs with the closure of several car rental and equipment rental business incurred charges for losses on the disposal of surplus equipment and recognition of future facility lease obligations related to branch closureslocations globally as well as a reduction in North America. Additionally, first quarter restructuring charges included employee termination liabilities coveringour workforce by approximately 200100 employees.

For the three months ended March 31, 20102011 and 2009,2010, our consolidated statement of operations includes restructuring charges relating to the initiatives discussed above of $10.7$4.9 million and $29.5$10.7 million, respectively.

Additional efficiency and cost saving initiatives are being developed during 2010. However,2011. In April 2011, we presently do not have firm plansclosed eleven equipment rental locations and expect to close an additional one or estimatestwo locations in the remainder of any related expenses.the second quarter of 2011. We estimate that these equipment rental location closures will result in $20 to $30 million of restructuring charges in the second quarter of 2011. See Note 1312 to the Notes to our condensed consolidated financial statements included in this Report.


Table of Contents

ITEM 2.    Management's Discussion and Analysis of Financial Condition and Results of
                 Operations (Continued)

RESULTS OF OPERATIONS

Three Months Ended March 31, 2011 Compared with Three Months Ended March 31, 2010

Summary

The following table sets forth the percentage of total revenues represented by the various line items set forth in our consolidated statements of operations for the three months ended March 31, 20102011 and 20092010 (in millions of dollars):



  
  
 Percentage of Revenues 
  
  
 Percentage of Revenues 


 Three Months Ended
March 31,
 Three Months Ended
March 31,
 
 Three Months Ended
March 31,
 Three Months Ended
March 31,
 


 2010 2009 2010 2009 
 2011 2010 2011 2010 

Revenues:

Revenues:

 

Revenues:

 

Car rental

 $1,396.6 $1,260.9 84.1% 80.6%

Car rental

 $1,478.9 $1,396.6 83.1% 84.1%

Equipment rental

 237.0 279.3 14.3 17.8 

Equipment rental

 268.1 237.0 15.1 14.3 

Other

 27.3 24.7 1.6 1.6 

Other

 33.0 27.3 1.8 1.6 
                   
 

Total revenues

 1,660.9 1,564.9 100.0 100.0  

Total revenues

 1,780.0 1,660.9 100.0 100.0 
                   

Expenses:

Expenses:

 

Expenses:

 

Direct operating

 1,013.0 955.3 61.0 61.1 

Direct operating

 1,073.7 1,013.0 60.3 61.0 

Depreciation of revenue earning equipment

 459.2 489.8 27.6 31.3 

Depreciation of revenue earning equipment and lease charges

 436.1 459.2 24.5 27.6 

Selling, general and administrative

 167.7 166.7 10.1 10.6 

Selling, general and administrative

 182.2 167.7 10.2 10.1 

Interest expense

 181.1 165.1 10.9 10.5 

Interest expense

 196.9 181.1 11.1 10.9 

Interest and other income, net

 (2.3) (2.0) (0.1) (0.1)

Interest income

 (1.9) (2.3) (0.1) (0.1)
         

Other (income) expense, net

 51.9  2.9  
 

Total expenses

 1,818.7 1,774.9 109.5 113.4           
          

Total expenses

 1,938.9 1,818.7 108.9 109.5 
         

Loss before income taxes

Loss before income taxes

 (157.8) (210.0) (9.5) (13.4)

Loss before income taxes

 (158.9) (157.8) (8.9) (9.5)

Benefit for taxes on income

Benefit for taxes on income

 11.0 49.6 0.6 3.2 

Benefit for taxes on income

 30.0 11.0 1.7 0.6 
                   

Net loss

Net loss

 (146.8) (160.4) (8.9) (10.2)

Net loss

 (128.9) (146.8) (7.2) (8.9)

Less: Net income attributable to noncontrolling interest

Less: Net income attributable to noncontrolling interest

 (3.6) (3.1) (0.2) (0.2)

Less: Net income attributable to noncontrolling interest

 (3.7) (3.6) (0.2) (0.2)
                   

Net loss attributable to Hertz Global Holdings, Inc. and Subsidiaries' common stockholders

Net loss attributable to Hertz Global Holdings, Inc. and Subsidiaries' common stockholders

 $(150.4)$(163.5) (9.1)% (10.4)%

Net loss attributable to Hertz Global Holdings, Inc. and Subsidiaries' common stockholders

 $(132.6)$(150.4) (7.4)% (9.1)%
                   

Table of Contents

ITEM 2.    Management's Discussion and Analysis of Financial Condition and Results of
                 Operations (Continued)

The following table sets forth certain of our selected car rental, equipment rental and other operating data for the three months ended or as of March 31, 20102011 and 2009:2010:



 Three Months Ended
or as of March 31,
 
 Three Months Ended
or as of March 31,
 


 2010 2009 
 2011 2010 

Selected Car Rental Operating Data:

Selected Car Rental Operating Data:

 

Selected Car Rental Operating Data:

 

Worldwide number of transactions (in thousands)

 5,860 5,548 

Worldwide number of transactions (in thousands)

 6,028 5,857 
 

Domestic

 4,398 4,042  

Domestic

 4,479 4,397 
 

International

 1,462 1,506  

International

 1,549 1,460 

Worldwide transaction days (in thousands)(a)

 28,110 26,683 

Worldwide transaction days (in thousands)(a)

 29,648 28,116 
 

Domestic

 19,939 18,411  

Domestic

 20,821 19,939 
 

International

 8,171 8,272  

International

 8,827 8,177 

Worldwide rental rate revenue per transaction day(b)

 $43.05 $42.89 

Worldwide rental rate revenue per transaction day(b)

 $42.26 $42.69 
 

Domestic

 $41.96 $41.82  

Domestic

 $41.34 $41.96 
 

International

 $45.72 $45.28  

International

 $44.41 $44.49 

Worldwide average number of company-operated cars during the period

 417,700 383,500 

Worldwide average number of company-operated cars during the period

 427,400 417,700 
 

Domestic

 293,700 260,000  

Domestic

 295,700 293,700 
 

International

 124,000 123,500  

International

 131,700 124,000 

Adjusted pre-tax income (loss) (in millions of dollars)(c)

 $27.1 $(33.5)

Adjusted pre-tax income (in millions of dollars)(c)

 $61.3 $27.1 

Worldwide revenue earning equipment, net (in millions of dollars)

 $7,649.0 $6,274.4 

Worldwide revenue earning equipment, net (in millions of dollars)

 $7,714.2 $7,649.0 

Selected Worldwide Equipment Rental Operating Data:

Selected Worldwide Equipment Rental Operating Data:

 

Selected Worldwide Equipment Rental Operating Data:

 

Rental and rental related revenue (in millions of dollars)(d)

 $215.7 $264.6 

Rental and rental related revenue (in millions of dollars)(d)

 $243.1 $215.6 

Same store revenue decline, including growth initiatives(e)

 (17.8)% (23.6)%

Same store revenue growth (decline), including growth initiatives(e)

 10.6% (17.8)%

Average acquisition cost of rental equipment operated during the period (in millions of dollars)

 $2,780.0 $2,963.4 

Average acquisition cost of rental equipment operated during the period (in millions of dollars)

 $2,756.8 $2,780.0 

Adjusted pre-tax income (loss) (in millions of dollars)(c)

 $(5.0)$0.7 

Adjusted pre-tax income (loss) (in millions of dollars)(c)

 $10.2 $(5.0)

Revenue earning equipment, net (in millions of dollars)

 $1,743.4 $2,009.1 

Revenue earning equipment, net (in millions of dollars)

 $1,687.1 $1,743.4 

(a)
Transaction days represents the total number of days that vehicles were on rent in a given period.

(b)
Car rental rate revenue consists of all revenue, net of discounts, associated with the rental of cars including charges for optional insurance products, but excluding revenue derived from fueling and concession and other expense pass-throughs, NeverLost units in the U.S. and certain ancillary revenue. Rental rate revenue per transaction day is calculated as total rental rate revenue, divided by the total number of transaction days, with all periods adjusted to eliminate the effect of fluctuations in foreign currency. Our management believes eliminating the effect of fluctuations in foreign currency is appropriate so as not to affect the comparability of underlying trends. This statistic is important to our management as it represents the best measurement of the changes in underlying pricing in the car rental business and encompasses the elements in car rental pricing that management has the ability to control. The optional insurance products are packaged within certain negotiated corporate, government and membership programs and within certain retail rates being charged. Based upon these existing programs and rate packages, management believes that these optional insurance products should be consistently included in the daily pricing of car rental transactions. On the other hand, non-rental rate revenue items such as refueling and concession pass-through expense items are driven by factors beyond the control of management (i.e. the price of fuel and the concession fees charged by airports). Additionally, NeverLost units are an optional revenue product which management does not consider to be part of their daily pricing of car rental transactions. The following table reconciles our car rental

Table of Contents

ITEM 2.    Management's Discussion and Analysis of Financial Condition and Results of
                 Operations (Continued)

  
 Three Months Ended
March 31,
 
  
 2010 2009 
 

Car rental segment revenues

 $1,421.7 $1,282.9 
 

Non-rental rate revenue

  (223.2) (197.1)
 

Foreign currency adjustment

  11.7  58.6 
       
 

Rental rate revenue

 $1,210.2 $1,144.4 
       
 

Transaction days (in thousands)

  28,110  26,683 
 

Rental rate revenue per transaction day (in whole dollars)

 $43.05 $42.89 
  
 Three Months Ended
March 31,
 
  
 2011 2010 
 

Car rental segment revenues

 $1,510.3 $1,421.7 
 

Non-rental rate revenue

  (248.0) (222.9)
 

Foreign currency adjustment

  (9.5) 1.5 
       
 

Rental rate revenue

 $1,252.8 $1,200.3 
       
 

Transaction days (in thousands)

  29,648  28,116 
 

Rental rate revenue per transaction day (in whole dollars)

 $42.26 $42.69 
(c)
Adjusted pre-tax income (loss) is calculated as income (loss) before income taxes plus non-cash purchase accounting charges, non-cash debt charges and certain one-time charges and non-operational items. Adjusted pre-tax income is the measure utilized by management in making decisions about allocating resources to segments and measuring their performance. Management believes this measure best reflects the financial results from ongoing operations. The following table reconciles income (loss) before income taxes by segmentcontribution of our reportable segments to adjusted pre-tax income (loss) by segment for the three months ended March 31, 2010 and 2009reconciliation to consolidated amounts are presented below (in millions of dollars):

  
 Three Months Ended
March 31, 2010
 
  
 Car
Rental
 Equipment
Rental
 
 

Loss before income taxes

 $(30.1)$(23.4)
 

Adjustments:

       
  

Purchase accounting(1)

  9.8  11.5 
  

Non-cash debt charges(2)

  37.0  1.9 
  

Restructuring charges

  5.3  4.9 
  

Restructuring related charges(3)

  5.1  0.1 
       
 

Adjusted pre-tax income (loss)

 $27.1 $(5.0)
       
  
 Three Months Ended
March 31,
 
  
 2011 2010 
 

Adjusted pre-tax income (loss):

       
  

Car rental

 $61.3 $27.1 
  

Equipment rental

  10.2  (5.0)
       
   

Total reportable segments

  71.5  22.1 
 

Adjustments:

       
  

Other reconciling items(1)

  (87.5) (91.3)
  

Purchase accounting(2)

  (20.6) (22.1)
  

Non-cash debt charges(3)

  (59.9) (48.8)
  

Restructuring charges

  (4.9) (10.7)
  

Restructuring related charges(4)

  (0.5) (5.3)
  

Derivative losses(5)

    (1.7)
  

Acquisition related costs

  (2.8)  
  

Management transition costs

  (2.5)  
  

Premiums paid on debt(6)

  (51.7)  
       
    

Loss before income taxes

 $(158.9)$(157.8)
       


  
 Three Months Ended
March 31, 2009
 
  
 Car
Rental
 Equipment
Rental
 
 

Loss before income taxes

 $(90.2)$(24.8)
 

Adjustments:

       
  

Purchase accounting(1)

  9.4  16.1 
  

Non-cash debt charges(2)

  19.3  2.3 
  

Restructuring charges

  15.1  7.0 
  

Restructuring related charges(3)

  8.6  0.1 
  

Third-party bankruptcy reserve(4)

  4.3   
       
 

Adjusted pre-tax income (loss)

 $(33.5)$0.7 
       


Table of Contents

ITEM 2.    Management's Discussion and Analysis of Financial Condition and Results of
                 Operations (Continued)

  
 Three Months Ended March 31, 
  
 2010 2009 
 

Equipment rental segment revenues

 $237.0 $279.5 
 

Equipment sales and other revenue

  (22.1) (26.4)
 

Foreign currency adjustment

  0.8  11.5 
       
 

Rental and rental related revenue

 $215.7 $264.6 
       
  
 Three Months Ended
March 31,
 
  
 2011 2010 
 

Equipment rental segment revenues

 $268.2 $237.0 
 

Equipment sales and other revenue

  (23.4) (22.1)
 

Foreign currency adjustment

  (1.7) 0.7 
       
 

Rental and rental related revenue

 $243.1 $215.6 
       
(e)
Same store revenue growth representsor decline is calculated as the year over year change in revenue for locations that are open at the current period total same store revenue over the prior period total same store revenue as a percentageend of the prior period.period reported and have been operating under our direction for more than twelve months. The same store revenue amounts are adjusted in all periods to eliminate the effect of fluctuations in foreign currency. Our management believes eliminating the effect of fluctuations in foreign currency is appropriate so as not to affect the comparability of underlying trends.

Three Months Ended March 31, 2010 Compared with Three Months Ended March 31, 2009

REVENUES



 Three Months Ended
March 31,
  
  
 
 Three Months Ended
March 31,
  
  
 
(in millions of dollars)
(in millions of dollars)
 2010 2009 $ Change % Change (in millions of dollars)
 2011 2010 $ Change % Change 

Revenues by Segment

Revenues by Segment

 

Revenues by Segment

 

Car rental

 $1,421.7 $1,282.9 $138.8 10.8%

Car rental

 $1,510.3 $1,421.7 $88.6 6.2%

Equipment rental

 237.0 279.5 (42.5) (15.2)%

Equipment rental

 268.2 237.0 31.2 13.2%

Other reconciling items

 2.2 2.5 (0.3) (12.0)%

Other reconciling items

 1.5 2.2 (0.7) (31.8)%
                   
 

Total revenues

 $1,660.9 $1,564.9 $96.0 6.1% 

Total revenues

 $1,780.0 $1,660.9 $119.1 7.2%
                   

Car Rental Segment

Revenues from our car rental segment increased 10.8%6.2%, primarily as a result of a 5.3% increaseincreases in car rental transaction days worldwide higher RPD and increases inof 5.4%, refueling fees of $11.3$8.3 million and airport concession recovery fees of $9.4 million. These increases include revenue relating to Advantage which was acquired in April 2009 and$8.2 million as well as the effects of foreign currency translation of approximately $46.4 million.$14.4 million, partly offset by a decrease in worldwide RPD.

RPD for worldwide car rental for the three months ended March 31, 2011 decreased 1.0% from 2010, due to decreases in U.S. and International RPD of 1.5% and 0.2%, respectively. The decrease in International was lessened by an increase in Europe RPD of 0.8%. U.S. off-airport RPD improved by 0.6% and U.S. airport RPD decreased 1.3%. U.S. airport RPD decreased due to the lower RPD that our Advantage brand generates, as well as the competitive pricing environment.


Table of Contents

ITEM 2.    Management's Discussion and Analysis of Financial Condition and Results of
                 Operations (Continued)

RPD for worldwide car rental for the three months ended March 31, 2010 increased 0.3% from 2009, due to increases in U.S. and International RPD of 0.3% and 1.0%, respectively. U.S. off-airport RPD improved by 1.9% and U.S. airport RPD decreased 0.5%. U.S. airport RPD decreased due to the lower RPD that our Advantage brand generates.

Equipment Rental Segment

Revenues from our equipment rental segment decreased 15.2%increased 13.2%, primarily due to a 14.4% decrease14.3% increase in equipment rental volume an 8.0% decline in pricing and a decrease in equipment sales of $4.1 million, partly offset by the effects of foreign currency translation of approximately $11.0$2.9 million. The increase in volume was primarily due to strong industrial performance.

Other

Revenues from all other sources decreased 12.0%31.8%, primarily due to a decrease in revenues from our third-party claim management services, partly offset by revenues from our car sharing technology subsidiary.services.

EXPENSES



 Three Months Ended
March 31,
  
  
 
 Three Months Ended
March 31,
  
  
 
(in millions of dollars)
(in millions of dollars)
 2010 2009 $ Change % Change (in millions of dollars)
 2011 2010 $ Change % Change 

Expenses:

Expenses:

 

Expenses:

 

Fleet related expenses

 $229.0 $195.8 $33.2 16.9%

Fleet related expenses

 $249.9 $229.0 $20.9 9.1%

Personnel related expenses

 346.4 324.0 22.4 6.9%

Personnel related expenses

 366.0 346.4 19.6 5.6%

Other direct operating expenses

 437.6 435.5 2.1 0.5%

Other direct operating expenses

 457.8 437.6 20.2 4.6%
                   
 

Direct operating

 1,013.0 955.3 57.7 6.0% 

Direct operating

 1,073.7 1,013.0 60.7 6.0%
 

Depreciation of revenue earning equipment

 459.2 489.8 (30.6) (6.3)% 

Depreciation of revenue earning equipment and lease charges

 436.1 459.2 (23.1) (5.0)%
 

Selling, general and administrative

 167.7 166.7 1.0 0.6% 

Selling, general and administrative

 182.2 167.7 14.5 8.6%
 

Interest expense

 181.1 165.1 16.0 9.7% 

Interest expense

 196.9 181.1 15.8 8.7%
 

Interest and other income, net

 (2.3) (2.0) (0.3) 12.7% 

Interest income

 (1.9) (2.3) 0.4 (18.6)%
          

Other (income) expense, net

 51.9  51.9 NM 
 

Total expenses

 $1,818.7 $1,774.9 $43.8 2.5%          
          

Total expenses

 $1,938.9 $1,818.7 $120.2 6.6%
         

Total expenses increased 2.5%6.6%, butand total expenses as a percentage of revenues decreased from 113.4% for the three months ended March 31, 2009 to 109.5% for the three months ended March 31, 2010.2010 to 108.9% for the three months ended March 31, 2011.

Direct Operating Expenses

Car Rental Segment

Direct operating expenses for our car rental segment of $903.8 million for the three months ended March 31, 2011 increased 6.0%5.2% from $859.4 million for the three months ended March 31, 2010 as a result of increases in personnel related expenses, fleet related expenses and other direct operating expenses.


Table of Contents

ITEM 2.    Management's Discussion and Analysis of Financial Condition and Results of
                 Operations (Continued)

Equipment Rental Segment

Direct operating expenses for our equipment rental segment of $170.8 million for the three months ended March 31, 2011 increased 8.7% from $157.1 million for the three months ended March 31, 2010 as a result of increases in fleet related expenses, personnel relatedother direct operating expenses and other direct operatingpersonnel related expenses.


Table of Contents

ITEM 2.    Management's Discussion and Analysis of Financial Condition and Results of
                 Operations (Continued)

Depreciation of Revenue Earning Equipment and Lease Charges

Car Rental Segment

Depreciation of revenue earning equipment and lease charges for our car rental segment of $368.9 million for the three months ended March 31, 2011 decreased 5.0% from $388.3 million for the three months ended March 31, 2010 decreased 0.7% from $391.1 million for the three months ended March 31, 2009.2010. The decrease was primarily relateddue to higheran improvement in certain vehicle residual values on the disposaland a higher mix of used vehicles,non-program cars, partly offset by the effects of foreign currency translation of approximately $14.0 million and a $7.5 million net increase in depreciation in certain of our car rental operations resulting from changes in depreciation rates to reflect the estimated residual value of vehicles.$3.5 million.

Equipment Rental Segment

Depreciation of revenue earning equipment and lease charges in our equipment rental segment of $67.2 million for the three months ended March 31, 2011 decreased 5.2% from $70.9 million for the three months ended March 31, 2010 decreased 28.2% from $98.7 million for the three months ended March 31, 2009.2010. The decrease was primarily due to a 6.2% reduction0.8% decrease in the average acquisition cost of rental equipment operated during the period and higher residual values on the disposal of used equipment, partly offset by the effects of foreign currency translation of approximately $2.1 million.equipment.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased 0.6%8.6%, due to an increaseincreases in advertisingadministrative expenses and sales promotion expenses, partly offset by a decrease in advertising.