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 June 30, 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 ý 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 412,066,036416,494,442 shares of the Registrant'sregistrant's common stock, par value $0.01 per share, issued and outstanding as of August 2, 2010.2011.


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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
INDEX

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 June 30, 20102011 and December 31, 20092010

 

2

 

Consolidated Statements of Operations for the Three and Six Months Ended June 30, 20102011 and 20092010

 

3

 

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 20102011 and 20092010

 

4-5

 

Notes to Condensed Consolidated Financial Statements

 

6-346-33

   

ITEM 2.

 

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

 

35-6734-67

   

ITEM 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

6768

   

ITEM 4.

 

Controls and Procedures

 

6768

PART II. OTHER INFORMATION

  
   

ITEM 1.

 

Legal Proceedings

 

6869

   

ITEM 1A.

 

Risk Factors

 

68-8669-70

   

ITEM 6.

 

Exhibits

 

8770

SIGNATURE

 

8871

EXHIBIT INDEX

 

8972


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 June 30, 2010,2011, and the related consolidated statements of operations for the three-month and six-month periods ended June 30, 20102011 and June 30, 20092010 and the consolidated statements of cash flows for the six-month periods ended June 30, 20102011 and June 30, 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
August 6, 20105, 2011


Table of Contents


HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATED BALANCE SHEETS



(In Thousands of Dollars)



Unaudited



 June 30,
2010
 December 31,
2009
 
 June 30,
2011
 December 31,
2010
 

ASSETS

ASSETS

 

ASSETS

 

Cash and cash equivalents

Cash and cash equivalents

 $896,848 $985,642 

Cash and cash equivalents

 $747,582 $2,374,170 

Restricted cash and cash equivalents

Restricted cash and cash equivalents

 743,435 365,159 

Restricted cash and cash equivalents

 274,289 207,576 

Receivables, less allowance for doubtful accounts of $17,374 and $21,268

 1,400,306 1,325,332 

Receivables, less allowance for doubtful accounts of $19,099 and $19,708

Receivables, less allowance for doubtful accounts of $19,099 and $19,708

 1,447,170 1,356,553 

Inventories, at lower of cost or market

Inventories, at lower of cost or market

 88,805 93,415 

Inventories, at lower of cost or market

 99,999 87,429 

Prepaid expenses and other assets

Prepaid expenses and other assets

 304,296 300,125 

Prepaid expenses and other assets

 464,947 352,782 

Revenue earning equipment, at cost:

Revenue earning equipment, at cost:

 

Revenue earning equipment, at cost:

 

Cars

 9,853,330 8,205,579 

Cars

 10,787,553 8,435,077 
 

Less accumulated depreciation

 (1,091,215) (1,186,299) 

Less accumulated depreciation

 (1,264,859) (1,199,355)

Other equipment

 2,558,808 2,582,029 

Other equipment

 2,790,005 2,756,101 
 

Less accumulated depreciation

 (909,713) (749,724) 

Less accumulated depreciation

 (1,087,346) (1,052,414)
           
 

Total revenue earning equipment

 10,411,210 8,851,585  

Total revenue earning equipment

 11,225,353 8,939,409 
           

Property and equipment, at cost:

Property and equipment, at cost:

 

Property and equipment, at cost:

 

Land, buildings and leasehold improvements

 1,038,726 1,023,891 

Land, buildings and leasehold improvements

 1,119,172 1,071,987 

Service equipment and other

 853,647 838,906 

Service equipment and other

 1,001,807 900,271 
           

 1,892,373 1,862,797 

 2,120,979 1,972,258 
 

Less accumulated depreciation

 (735,705) (674,668) 

Less accumulated depreciation

 (902,437) (808,689)
           
 

Total property and equipment

 1,156,668 1,188,129  

Total property and equipment

 1,218,542 1,163,569 
           

Other intangible assets, net

Other intangible assets, net

 2,563,709 2,597,682 

Other intangible assets, net

 2,522,540 2,550,559 

Goodwill

Goodwill

 290,550 295,350 

Goodwill

 307,212 300,174 
           
 

Total assets

 $17,855,827 $16,002,419  

Total assets

 $18,307,634 $17,332,221 
           

LIABILITIES AND EQUITY

LIABILITIES AND EQUITY

 

LIABILITIES AND EQUITY

 

Accounts payable

Accounts payable

 $1,467,148 $658,671 

Accounts payable

 $1,560,856 $944,973 

Accrued liabilities

Accrued liabilities

 915,817 1,024,822��

Accrued liabilities

 1,043,938 1,070,082 

Accrued taxes

Accrued taxes

 158,114 108,356 

Accrued taxes

 134,397 108,940 

Debt

Debt

 11,693,823 10,364,367 

Debt

 11,693,593 11,306,429 

Public liability and property damage

Public liability and property damage

 261,142 277,828 

Public liability and property damage

 286,018 278,685 

Deferred taxes on income

Deferred taxes on income

 1,446,099 1,470,934 

Deferred taxes on income

 1,457,194 1,491,789 
           
 

Total liabilities

 15,942,143 13,904,978  

Total liabilities

 16,175,996 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, 411,949,818 and 410,245,225 shares issued and outstanding

 4,120 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, 416,415,936 and 413,462,889 shares issued and outstanding

 4,164 4,135 

Additional paid-in capital

 3,160,278 3,141,695 

Additional paid-in capital

 3,203,452 3,183,225 

Accumulated deficit

 (1,237,844) (1,062,318)

Accumulated deficit

 (1,187,977) (1,110,362)

Accumulated other comprehensive loss

 (30,783) (3,331)

Accumulated other comprehensive income

 97,262 37,823 
           
 

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

 1,895,771 2,080,148  

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

 2,116,901 2,114,821 

Noncontrolling interest

Noncontrolling interest

 17,913 17,293 

Noncontrolling interest

 14,737 16,502 
           
 

Total equity

 1,913,684 2,097,441  

Total equity

 2,131,638 2,131,323 
           
 

Total liabilities and equity

 $17,855,827 $16,002,419  

Total liabilities and equity

 $18,307,634 $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
June 30,
 Six Months Ended
June 30,
 
 Three Months Ended
June 30,
 Six Months Ended
June 30,
 


 2010 2009 2010 2009 
 2011 2010 2011 2010 

Revenues:

Revenues:

 

Revenues:

 

Car rental

 $1,582,983 $1,450,902 $2,979,554 $2,711,804 

Car rental

 $1,731,200 $1,582,983 $3,210,138 $2,979,554 

Equipment rental

 265,706 276,808 502,677 556,140 

Equipment rental

 301,641 265,706 569,727 502,677 

Other

 30,897 26,774 58,243 51,426 

Other

 39,452 30,897 72,431 58,243 
                   
 

Total revenues

 1,879,586 1,754,484 3,540,474 3,319,370  

Total revenues

 2,072,293 1,879,586 3,852,296 3,540,474 
                   

Expenses:

Expenses:

 

Expenses:

 

Direct operating

 1,075,037 988,573 2,088,036 1,943,893 

Direct operating

 1,187,306 1,075,037 2,260,971 2,088,036 

Depreciation of revenue earning equipment

 456,720 479,350 915,893 969,178 

Depreciation of revenue earning equipment and lease charges

 419,669 456,720 855,758 915,893 

Selling, general and administrative

 171,985 141,510 339,728 308,234 

Selling, general and administrative

 195,591 171,985 377,812 339,728 

Interest expense

 188,873 163,835 369,971 328,944 

Interest expense

 165,826 188,873 362,715 369,971 

Interest and other income, net

 (6,791) (49,511) (9,069) (51,532)

Interest income

 (1,546) (6,791) (3,401) (9,069)
         

Other (income) expense, net

 10,801  62,677  
 

Total expenses

 1,885,824 1,723,757 3,704,559 3,498,717           
          

Total expenses

 1,977,647 1,885,824 3,916,532 3,704,559 
         

Income (loss) before income taxes

Income (loss) before income taxes

 (6,238) 30,727 (164,085) (179,347)

Income (loss) before income taxes

 94,646 (6,238) (64,236) (164,085)

(Provision) benefit for taxes on income

 (14,210) (22,989) (3,190) 26,665 

Provision for taxes on income

Provision for taxes on income

 (34,561) (14,210) (4,621) (3,190)
                   

Net income (loss)

Net income (loss)

 (20,448) 7,738 (167,275) (152,682)

Net income (loss)

 60,085 (20,448) (68,857) (167,275)

Less: Net income attributable to noncontrolling interest

Less: Net income attributable to noncontrolling interest

 (4,673) (3,876) (8,251) (6,965)

Less: Net income attributable to noncontrolling interest

 (5,087) (4,673) (8,760) (8,251)
                   

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

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

 $(25,121)$3,862 $(175,526)$(159,647)

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

 $54,998 $(25,121)$(77,617)$(175,526)
                   

Weighted average shares outstanding (in thousands)

Weighted average shares outstanding (in thousands)

 

Weighted average shares outstanding (in thousands)

 

Basic

 411,834 343,698 411,290 333,591 

Basic

 415,947 411,834 415,011 411,290 

Diluted

 411,834 349,153 411,290 333,591 

Diluted

 451,818 411,834 415,011 411,290 

Earnings (loss) per share attributable to Hertz Global Holdings, Inc. and Subsidiaries' common stockholders:

Earnings (loss) per share attributable to Hertz Global Holdings, Inc. and Subsidiaries' common stockholders:

 

Earnings (loss) per share attributable to Hertz Global Holdings, Inc. and Subsidiaries' common stockholders:

 

Basic

 $(0.06)$0.01 $(0.43)$(0.48)

Basic

 $0.13 $(0.06)$(0.19)$(0.43)

Diluted

 $(0.06)$0.01 $(0.43)$(0.48)

Diluted

 $0.12 $(0.06)$(0.19)$(0.43)

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



 Six Months Ended
June 30,
 
 Six Months Ended
June 30,
 


 2010 2009 
 2011 2010 

Cash flows from operating activities:

Cash flows from operating activities:

 

Cash flows from operating activities:

 

Net loss

 $(167,275)$(152,682)

Net loss

 $(68,857)$(167,275)

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

 915,893 969,178  

Depreciation of revenue earning equipment

 809,433 881,540 
 

Depreciation of property and equipment

 78,571 80,543  

Depreciation of property and equipment

 77,140 78,571 
 

Amortization of other intangible assets

 32,700 33,138  

Amortization of other intangible assets

 33,679 32,700 
 

Amortization and write-off of deferred financing costs

 38,508 27,922  

Amortization and write-off of deferred financing costs

 64,251 38,508 
 

Amortization of debt discount

 21,104 14,923  

Amortization and write-off of debt discount

 22,677 21,104 
 

Stock-based compensation charges

 19,308 16,502  

Stock-based compensation charges

 16,630 19,308 
 

(Gain) loss on derivatives

 4,922 (18,318) 

(Gain) loss on derivatives

 (2,203) 5,047 
 

Amortization of cash flow hedges

 38,868 29,857  

Amortization of cash flow hedges

  38,868 
 

Provision for losses on doubtful accounts

 10,295 16,635  

Provision for losses on doubtful accounts

 14,313 10,295 
 

Asset writedowns

 14,215 13,105  

Asset writedowns

 23,311 14,215 
 

Deferred taxes on income

 (3,818) 19,724  

Deferred taxes on income

 (29,184) (3,818)
 

Gain on sale of property and equipment

 (2,176) (1,314) 

Gain on sale of property and equipment

 (4,748) (2,176)

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

 

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

 
 

Receivables

 (105,472) (15,878) 

Receivables

 (187,818) (105,472)
 

Inventories, prepaid expenses and other assets

 (28,075) 18,257  

Inventories, prepaid expenses and other assets

 (57,878) (25,509)
 

Accounts payable

 254,809 (65,003) 

Accounts payable

 138,214 254,809 
 

Accrued liabilities

 (66,832) (208,362) 

Accrued liabilities

 (179,327) (69,523)
 

Accrued taxes

 (5,220) (57,838) 

Accrued taxes

 21,667 (5,220)
 

Public liability and property damage

 252 (22,029) 

Public liability and property damage

 (4,393) 252 
           
 

Net cash provided by operating activities

 1,050,577 698,360  

Net cash provided by operating activities

 686,907 1,016,224 
           

Cash flows from investing activities:

Cash flows from investing activities:

 

Cash flows from investing activities:

 

Net change in restricted cash and cash equivalents

 (389,242) 543,774 

Net change in restricted cash and cash equivalents

 (60,233) (389,242)

Revenue earning equipment expenditures

 (5,429,930) (3,540,501)

Revenue earning equipment expenditures

 (5,466,856) (5,317,298)

Proceeds from disposal of revenue earning equipment

 3,409,157 3,197,561 

Proceeds from disposal of revenue earning equipment

 3,488,890 3,443,510 

Property and equipment expenditures

 (92,018) (48,344)

Property and equipment expenditures

 (125,370) (92,018)

Proceeds from disposal of property and equipment

 15,194 5,106 

Proceeds from disposal of property and equipment

 28,388 15,194 

Acquisitions, net of cash acquired

 (157) (71,280)

Acquisitions, net of cash acquired

 (10,976) (157)

(Purchase) sale of short-term investments, net

 3,171 (4,169)

(Purchase) sale of short-term investments, net

 (32,891) 3,171 

Other investing activities

 817 835 

Other investing activities

 1,303 817 
           
 

Net cash provided by (used in) investing activities

 $(2,483,008)$82,982  

Net cash used in investing activities

 $(2,177,745)$(2,336,023)
           

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



 Six Months Ended
June 30,
 
 Six Months Ended
June 30,
 


 2010 2009 
 2011 2010 

Cash flows from financing activities:

Cash flows from financing activities:

 

Cash flows from financing activities:

 

Proceeds from issuance of long-term debt

 $681,370 $4,219 

Proceeds from issuance of long-term debt

 $3,028,591 $681,370 

Proceeds from convertible debt offering

  459,655 

Payment of long-term debt

 (3,631,480) (756,964)

Repayment of long-term debt

 (756,964) (682,389)

Short-term borrowings:

 

Short-term borrowings:

  

Proceeds

 285,803 274,730 
 

Proceeds

 274,730 221,921  

Payments

 (489,217) (281,009)
 

Repayments

 (168,377) (181,442) 

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

 728,855 1,423,403 
 

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

 1,423,403 (971,469)

Distributions to noncontrolling interest

 (10,500) (7,630)

Distributions to noncontrolling interest

 (7,630) (8,050)

Proceeds from employee stock purchase plan

 1,716 1,222 

Proceeds from sale of common stock

  328,739 

Proceeds from exercise of stock options

 11,581 2,250 

Proceeds from exercise of stock options

 2,250 2,702 

Proceeds from disgorgement of stockholder short-swing profits

 72 111 

Proceeds from employee stock purchase plan

 1,222 1,363 

Net settlement on vesting of restricted stock

 (11,381) (5,670)

Proceeds from disgorgement of stockholder short-swing profits

 111 14 

Payment of financing costs

 (81,392) (24,972)

Net settlement on vesting of restricted stock

 (5,670)        

Payment of financing costs

 (24,972) (6,772) 

Net cash provided by (used in) financing activities

 (167,352) 1,306,841 
           
 

Net cash provided by (used in) financing activities

 1,419,473 (831,509)
     

Effect of foreign exchange rate changes on cash and cash equivalents

Effect of foreign exchange rate changes on cash and cash equivalents

 (75,836) 26,790 

Effect of foreign exchange rate changes on cash and cash equivalents

 31,602 (75,836)
           

Net decrease in cash and cash equivalents during the period

 (88,794) (23,377)

Net change in cash and cash equivalents during the period

Net change in cash and cash equivalents during the period

 (1,626,588) (88,794)

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

 $896,848 $570,889 

Cash and cash equivalents at end of period

 $747,582 $896,848 
           

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)

 $264,563 $298,711 

Interest (net of amounts capitalized)

 $343,383 $264,563 
 

Income taxes

 30,694 13,998 

Income taxes

 25,338 30,694 

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

 $828,881 $616,745 

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

 $628,695 $828,881 
 

Sales of revenue earning equipment included in receivables

 530,856 145,640 

Sales of revenue earning equipment included in receivables

 263,954 530,856 
 

Purchases of property and equipment included in accounts payable

 29,125 14,309 

Purchases of property and equipment included in accounts payable

 59,633 29,125 
 

Sales of property and equipment included in receivables

 5,259 680 

Sales of property and equipment included in receivables

 14,356 5,259 

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


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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.

LiquidityNote 2—Basis of Presentation

Our primary liquidity needs include servicing of corporate and fleet related debt, the payment of operating expenses and purchases of rental vehicles and equipmentThe significant accounting policies summarized in Note 2 to be usedour audited consolidated financial statements contained in our operations. Our primary sourcesAnnual Report on Form 10-K for the fiscal year ended December 31, 2010, filed with the United States Securities and Exchange Commission, or "SEC," on February 25, 2011, or the "Form 10-K," have been followed in preparing the accompanying condensed consolidated financial statements.

The December 31, 2010 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 funding are operating revenue, cash received onAmerica, or "GAAP."

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the disposal of vehiclesamounts reported in the financial statements and equipment, borrowings under our asset-backed borrowing arrangements and our revolving credit facilities.

As of June 30, 2010, we had $11,693.8 million of total indebtedness outstanding. Accordingly, we are highly leveraged and a substantial portion of our liquidity needs arisefootnotes. Actual results could differ materially from debt service on our indebtedness and from the funding of our costs of operations and capital expenditures.

Our liquidity as of June 30, 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 and the first half of 2010, 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 twelve months. See Note 8—Debt.

In June 2010, Hertz Vehicle Financing LLC, or "HVF," our wholly-owned subsidiary, issued $184.3 million in aggregate principal amount of 3 year and 5 year Subordinated Series 2009-2 Rental Car Asset Backedthose estimates.


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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited


Notes, Class B, or the "Series 2009-2 Class B Notes." The 3 year notes carry a 4.94% coupon (5.00% yield) and the 5 year notes carry a 5.93% coupon (6.01% yield) with expected final maturities in 2013 and 2015, respectively. The net proceeds of the offering were or will be used to purchase vehicles under our asset-backed securities, or "ABS," program, used to pay other ABS indebtedness or, to the extent permitted, used for general purposes.

Also, in June 2010, we issued EUR 400 million (the equivalent of $491.1 million as of June 30, 2010) aggregate principal amount of 8.5% Senior Secured Notes due 2015, or the "Euro Notes," and entered into a EUR 220 million (the equivalent of $270.1 million as of June 30, 2010) revolving credit facility that matures in 2013, or the "European Credit Facility." The net proceeds of the Euro Notes and European Credit Facility were used to refinance our International Fleet Debt and Belgian Fleet Financing Facility, both of which were due to mature in December 2010, and the excess was or will be used for general purposes.

As of June 30, 2010, we have approximately $520.5 million of remaining international fleet debt outstanding that matures in December 2010. We are currently in discussions regarding our remaining refinancing options, and based on these discussions and our ability to access the capital markets, we expect to refinance the remaining debt maturing in December 2010 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 replacement 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 have a negative impact on our operational and financial flexibility, and may require us to make significant operational changes to our business (including, without limitation, reducing the size of our rental fleet, reducing the percentage of our car rental fleet subject to repurchase or guaranteed depreciation programs or reducing or delaying capital expenditures).

In July 2010, we entered into a EUR 400 million (the equivalent of $491.1 million as of June 30, 2010) asset-backed securitization facility that matures in 2013, or the "European Securitization," the proceeds of which were used to refinance the portion of our existing International ABS Fleet Financing Facility relating to France and the Netherlands, which was due to mature in December 2010. This facility refinanced $288.8 million of the $520.5 million of remaining international fleet debt outstanding as of June 30, 2010 that matures in December 2010.

In addition, in July 2010, we issued approximately $750 million in aggregate principal amount of 3 year, 5 year and 7 year Series 2010-1 Rental Car Asset Backed Notes, or the "Series 2010-1 Notes." The net proceeds of the offering were or will be used, to the extent permitted, to purchase vehicles under the ABS program of HVF, to pay other ABS indebtedness or distributed to Hertz and used for general purposes.

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. As of June 30, 2010, we were in compliance with all of these financial covenants.

MBIA Insurance Corporation, or "MBIA," and Ambac Assurance Corporation, or "Ambac," provide credit enhancements in the form of financial guarantees for our 2005 Notes, with each providing guarantees for approximately half of the $2,184.9 million in principal amount of the 2005 Notes that was outstanding as of June 30, 2010, all of which matures during 2010.


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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

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, Series 2009-2 Notes, Series 2009-2 Class B Notes or the Series 2010-1 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 these recent financings to pay down the amounts owed under the affected series of 2005 Notes.

On April 25, 2010, we entered into a definitive merger agreement, or the "Merger Agreement," under which we agreed to 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 and 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 $200 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 at the closing 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 the amount of the special cash dividend paid by Dollar Thrifty. At the closing, we will issue an aggregate of approximately 18 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 also intend to 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; however, it is likely that we will incur additional financing prior to the acquisition to replenish our liquidity levels. We are currently exploring alternatives with respect to debt offerings and other financings.

On July 28, 2010, Avis Budget Group, Inc., or "Avis," submitted a competing offer to acquire Dollar Thrifty, or the "Avis Offer." Pursuant to the terms of our Merger Agreement, the Dollar Thrifty board of directors analyzed the Avis Offer to determine whether its terms were superior to the terms of our Merger Agreement. On August 3, 2010, Dollar Thrifty issued a press release publishing a letter from its chief executive officer and president to Avis's chairman and chief executive officer indicating that Dollar Thrifty's board of directors could not conclude that the terms of the Avis Offer were superior to the terms of our Merger Agreement, but that Dollar Thrifty was ready to review and consider any modifications or additional information Avis may wish to make or provide to address the concerns identified in the letter.

Note 2—Basis of Presentation

The significant accounting policies summarized in Note 1 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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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited


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

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, or "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.

The December 31, 2009 condensed consolidated balance sheet data was derived from our audited financial statements, but does not include all disclosures required by GAAP.

In our opinion, all 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.

Note 3—Recent Accounting PronouncementsFor the six months ended June 30, 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.

For the six months ended June 30, 2010, we have also revised net cash used in investing activities and net cash provided by financing activities within our consolidated statement of cash flows to classify certain payments to a third party finance company for purchases of revenue earning equipment as cash outflows from financing activities as opposed to investing activities.

In June 2009,2011, the Financial Accounting Standards Board issued guidance, which contains amendments to Accounting Standards Codification 810, "Consolidation,Update No. 2011-05, "Presentation of Comprehensive Income," relatingrequiring companies to how a company determinespresent items of net income and other comprehensive income either in one continuous statement, referred to as the statement of comprehensive income, or in two separate, but consecutive statements of net income and other comprehensive income. The amendments in this update do not change the items that must be reported in other comprehensive income or when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) shoulditem of other comprehensive income must be consolidated. The determination of whether a company is requiredreclassified 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.net income. These provisions becamewill become effective for us on January 1, 2010, but did not have a material impact onbeginning with our financial position or results of operations.quarterly report for the period ended March 31, 2012.

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 June 30, 20102011 and December 31, 2009,2010, the portion of total restricted cash and cash equivalents that was associated with our Fleet Debt facilities was $671.2$183.2 million and $295.0$115.6 million, respectively. The increase in restricted cash and cash equivalents associated with our Fleet Debtfleet debt of $376.2$67.6 million from December 31, 20092010 to June 30, 2010,2011 was primarily related to the timing of purchases and sales of revenue earning vehicles prior to the end of the quarter.vehicles.


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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

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 
        
 

Goodwill acquired during the period

    0.8  0.8 
 

Other changes during the period(1)

  (5.3) (0.3) (5.6)
        

Balance as of June 30, 2010

          
 

Goodwill

  330.5  655.0  985.5 
 

Accumulated impairment losses

  (43.0) (651.9) (694.9)
        

 $287.5 $3.1 $290.6 
        
 
 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

  
1.8
  
0.2
  
2.0
 
 

Adjustments to previously recorded purchase price allocation

  (0.9) 1.4  0.5 
 

Other changes during the period(1)

  4.3  0.2  4.5 
        

  5.2  1.8  7.0 

Balance as of June 30, 2011

          
 

Goodwill

  341.6  660.5  1,002.1 
 

Accumulated impairment losses

  (43.0) (651.9) (694.9)
        

 $298.6 $8.6 $307.2 
        

 

 
 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.

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

 
 June 30, 2010 
 
 Gross
Carrying
Amount
 Accumulated
Amortization
 Net
Carrying
Value
 

Amortizable intangible assets:

          
 

Customer-related

 $600.3 $(275.6)$324.7 
 

Other

  49.0  (15.6) 33.4 
        
  

Total

  649.3  (291.2) 358.1 
        

Indefinite-lived intangible assets:

          
 

Trade name

  2,190.0    2,190.0 
 

Other

  15.6    15.6 
        
  

Total

  2,205.6    2,205.6 
        
   

Total other intangible assets, net

 $2,854.9 $(291.2)$2,563.7 
        

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

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

 
 June 30, 2011 
 
 Gross
Carrying
Amount
 Accumulated
Amortization
 Net
Carrying
Value
 

Amortizable intangible assets:

          
 

Customer-related

 $606.6 $(334.0)$272.6 
 

Other(1)

  64.6  (22.9) 41.7 
        
  

Total

  671.2  (356.9) 314.3 
        

Indefinite-lived intangible assets:

          
 

Trade name

  2,190.0    2,190.0 
 

Other(2)

  18.2    18.2 
        
  

Total

  2,208.2    2,208.2 
        
   

Total other intangible assets, net

 $2,879.4 $(356.9)$2,522.5 
        

 



 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 June 30, 20102011 and 2009,2010, was approximately $16.3$16.9 million and $17.6$16.3 million, respectively, and for the six months ended June 30, 20102011 and 2009,2010, was approximately $32.7$33.7 million and $33.2$32.7 million, respectively. Based on our amortizable intangible assets as of June 30, 2010,2011, we expect amortization expense to be approximately $32.0$32.8 million for the remainder of 20102011, $65.3 million in 2012, $64.0 million in 2013, $61.0 million in 2014, $59.8 million in 2015 and range from $58.2$13.4 million to $63.6 million for each of the next five fiscal years.in 2016.

During the six months ended June 30, 2010,2011, we added oneeight international car rental location by acquiring a former franchisee in our domestic car rental operationslocations and one domestic equipment rental location related to anthrough external acquisition done within our equipment rental operations. Each of theseacquisitions. These transactions hashave been accounted for using the acquisition method of accounting in accordance with GAAP and operating results of the acquired locations from the datesdate of acquisition are included in our consolidated statements of operations.

Note 6—Taxes on Income

The effective tax rate for the three and six months ended June 30, 2010 was (227.8)% and (1.9)%, respectively. The provision for taxes on income of $14.2 million in the three months ended June 30, 2010 decreased from $22.9 million in the three months ended June 30, 2009, primarily due to decreases in income before income taxes and discrete charges and a decrease in the losses in certain non-U.S. jurisdictions for which a tax benefit cannot be recognized. The provision for taxes on income was $3.2 million in the six months ended June 30, 2010 compared to a benefit of $26.7 million in the six months ended June 30, 2009. The change is primarily due to a lower loss before income taxes and an increase in discrete charges in the six months ended June 30, 2010, compared to the six months ended June 30, 2009, partially offset by a decrease in losses in certain non-U.S. jurisdictions for which a tax benefit cannot be recognized.statement


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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited


of operations. The allocation of the purchase price to the tangible and intangible net assets acquired is preliminary and subject to finalization. These acquisitions are not material to the consolidated amounts presented within our statement of operations for the three-month and six-month periods ended June 30, 2011.

Note 7—5—Taxes on Income

The effective tax rate for the three and six months ended June 30, 2011 was 36.5% and (7.2)%, respectively. The provision for taxes on income of $34.5 million in the three months ended June 30, 2011 increased from $14.2 million in the three months ended June 30, 2010, primarily due to higher income before income taxes, changes in geographic earnings mix and changes in losses in certain non-U.S. jurisdictions for which tax benefits cannot be realized. The provision for taxes on income of $4.6 million in the six months ended June 30, 2011 increased from $3.2 million in the six months ended June 30, 2010, primarily due to lower loss before income taxes, 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
June 30,
 
 Three Months Ended
June 30,
 


 2010 2009 
 2011 2010 

Depreciation of revenue earning equipment

Depreciation of revenue earning equipment

 $429.8 $441.1 

Depreciation of revenue earning equipment

 $453.3 $426.1 

Adjustment of depreciation upon disposal

 12.7 18.5 

Adjustment of depreciation upon disposal of revenue earning equipment

Adjustment of depreciation upon disposal of revenue earning equipment

 (56.3) 12.7 

Rents paid for vehicles leased

Rents paid for vehicles leased

 14.2 19.8 

Rents paid for vehicles leased

 22.7 17.9 
           

Total

 $456.7 $479.4 

Total

 $419.7 $456.7 
           

 



 Six Months Ended
June 30,
 
 Six Months Ended
June 30,
 


 2010 2009 
 2011 2010 

Depreciation of revenue earning equipment

Depreciation of revenue earning equipment

 $861.4 $870.3 

Depreciation of revenue earning equipment

 $871.8 $854.0 

Adjustment of depreciation upon disposal

 27.5 63.7 

Adjustment of depreciation upon disposal of revenue earning equipment

Adjustment of depreciation upon disposal of revenue earning equipment

 (62.4) 27.5 

Rents paid for vehicles leased

Rents paid for vehicles leased

 27.0 35.2 

Rents paid for vehicles leased

 46.3 34.4 
           

Total

 $915.9 $969.2 

Total

 $855.7 $915.9 
           

The adjustment of depreciation upon disposal of revenue earning equipment for the three months ended June 30, 2011 and 2010, included a net gain of $53.6 million and 2009, includeda net lossesloss of $9.4 million and $11.6 million, respectively, on the disposal of vehicles used in our car rental operations and a net lossesgain of $2.7 million and a net loss of $3.3 million and $6.9 million, respectively, on the disposal of industrial and construction equipment used in our equipment rental operations. The adjustment of depreciation upon disposal of revenue earning equipment for the six months ended June 30, 2011 and 2010, included a net gain of $59.7 million and 2009, includeda net lossesloss of $20.6 million and $26.7 million, respectively, on the disposal of vehicles used in our car rental operations and a net lossesgain of $2.7 million and a net loss of $6.9 million and $37.0 million, respectively, on the disposal of industrial and construction equipment used in our equipment rental operations.


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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

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 six months ended June 30, 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 net increasesdecreases of $3.4$8.0 million and $10.9$8.6 million in depreciation expense for the three and six months ended June 30, 2010,2011, respectively. During the three and six months ended June 30, 2010,2011, depreciation rate changes in certain of our equipment rental operations resulted in net increasesdecreases of $0.7$1.3 million and $2.7$2.3 million in depreciation expense.

For the three months ended June 30, 20102011 and 2009,2010, our worldwide car rental operations sold approximately 41,40042,800 and 39,00042,000 non-program cars, respectively, a 6.2%1.9% year over year increase primarily due to a higher average fleet size.increase. For the six months ended June 30, 20102011 and 2009,2010, our worldwide car rental operations sold approximately 83,00074,900 and 67,50084,000 non-program cars, respectively, a 23.0%10.8% 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):

 
 June 30,
2010
 December 31,
2009
 

Corporate Debt

       

Senior Term Facility, average interest rate: 2010, 2.1%; 2009, 2.0% (effective average interest rate: 2010, 2.1%; 2009, 2.0%); net of unamortized discount: 2010, $11.6; 2009, $13.9

 $1,340.2 $1,344.7 

Senior ABL Facility; net of unamortized discount: 2010, $7.4; 2009, $9.6

  (7.4) (9.6)

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

  2,009.4  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, 7.5%; 2009, 7.3% (effective average interest rate: 2010, 7.5%; 2009, 7.4%); net of unamortized discount: 2010, $3.1; 2009, $3.3

  342.6  391.4 

Convertible Senior Notes, average interest rate: 2010, 5.25%; 2009, 5.25%; (effective average interest rate: 2010, 6.6%; 2009, 6.8%); net of unamortized discount: 2010, $97.8; 2009, $107.3

  376.9  367.4 

Notes payable, average interest rate: 2010, 6.0%; 2009, 8.0%

  8.9  9.6 

Foreign subsidiaries' debt denominated in foreign currencies:

       
 

Short-term bank borrowings, average interest rate: 2010, 7.7%; 2009, 10.8%

  12.0  7.3 
 

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

  4.4  5.4 
      
   

Total Corporate Debt

  4,605.5  4,689.4 
      

Fleet Debt

       

U.S. Fleet Debt, average interest rate: 2010, 4.1%; 2009, 4.7% (effective average interest rate: 2010, 4.1%; 2009, 4.7%); net of unamortized discount: 2010, $14.4; 2009, $16.7

  5,217.4  4,058.3 

International Fleet Debt(1), average interest rate: 2009, 2.1% (effective average interest rate: 2009, 2.2%); net of unamortized discount: 2009, $8.7

    705.3 

International ABS Fleet Financing Facility, average interest rate: 2010, 3.6%; 2009, 3.6%; (effective average interest rate: 2010, 3.6%; 2009, 3.6%); net of unamortized discount: 2010, $2.4; 2009, $5.7

  446.1  383.2 

Fleet Financing Facility, average interest rate: 2010, 1.6%; 2009, 1.5% (effective average interest rate: 2010, 1.6%; 2009, 1.5%); net of unamortized discount: 2010, $0.5; 2009, $0.8

  162.5  147.2 

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

  74.5  69.3 

Canadian Fleet Financing Facility, average interest rate: 2010, 0.6%; 2009, 0.5%

  115.2  55.6 

Belgian Fleet Financing Facility(1), average interest rate: 2009, 1.8%

    33.7 

Capitalized Leases, average interest rate: 2010, 4.0%; 2009, 4.8%

  314.7  222.4 

Euro Notes(1), average interest rate: 2010, 8.5% (effective average interest rate: 2010, 8.5%); net of unamortized discount: 2010, $2.6

  488.5   

European Credit Facility(1), average interest rate: 2010, 4.2%

  269.4   
      
   

Total Fleet Debt

  7,088.3  5,675.0 
      
  

Total Debt

 $11,693.8 $10,364.4 
      
Facility
 Average
Interest
Rate at
June 30,
2011(1)
 Fixed or
Floating
Interest
Rate
 Maturity June 30,
2011
 December 31,
2010
 

Corporate Debt

              
 

Senior Term Facility(2)

  3.75%Floating 3/2018 $1,396.5 $1,345.0 
 

Senior ABL Facility(2)

  2.26%Floating 3/2016  125.0   
 

Senior Notes(3)

  7.32%Fixed 1/2014–1/2021  2,669.1  3,229.6 
 

Senior Subordinated Notes

  10.50%Fixed 1/2016    518.5 
 

Promissory Notes

  7.48%Fixed 6/2012–1/2028  224.8  345.6 
 

Convertible Senior Notes

  5.25%Fixed 6/2014  474.7  474.8 
 

Other Corporate Debt

  4.45%Floating Various  34.3  22.0 
 

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

         (77.6) (104.8)
             

Total Corporate Debt

         4,846.8  5,830.7 
             

Fleet Debt

              

U.S. ABS Program

              
 

U.S. Fleet Variable Funding Notes:

              
  

Series 2009-1(5)

  1.13%Floating 3/2013  1,713.0  1,488.0 
  

Series 2010-2(5)

  1.22%Floating 3/2013  127.0  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 
  

Series 2011-1 Notes(5)

  2.86%Fixed 3/2015–3/2017  598.0   

Other Fleet Debt

              
 

U.S. Fleet Financing Facility

  1.44%Floating 12/2011  165.0  163.0 
 

European Revolving Credit Facility

  5.05%Floating 6/2013  315.3  168.6 
 

European Seasonal Revolving Credit Facility

  3.81%Floating 11/2011  100.6   
 

European Fleet Notes

  8.50%Fixed 7/2015  574.8  529.0 
 

European Securitization(5)

  4.51%Floating 7/2012  332.4  236.9 
 

Canadian Securitization(5)

  1.16%Floating 11/2011  127.9  80.4 
 

Australian Securitization(5)

  6.44%Floating 12/2012  142.3  183.2 
 

Brazilian Fleet Financing Facility

  13.34%Floating 12/2011  19.4  77.8 
 

Capitalized Leases

  4.64%Floating Various  511.9  398.1 
 

Unamortized Discount (Fleet)

         (14.9) (18.4)
             

Total Fleet Debt

         6,846.8  5,475.7 
             

Total Debt

        $11,693.6 $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 Form 10-K under the caption "Item 8—Financial Statements and Supplementary Data" and Note 1—Background and Liquidity of this Form 10-Q, or this "Report.Data."

(1)
The International Fleet Debt and Belgian Fleet Financing FacilityAs applicable, reference is to the June 30, 2011 weighted average interest rate (weighted by principal balance).

(2)
December 31, 2010 balance refers to the former facilities which were refinanced in the three months ended June 30, 2010 with the proceeds of the Euro Notes and the European Credit Facility.on March 11, 2011, see "2011 Events," below.

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(3)
References to our "Senior Notes" include the series of Hertz's unsecured senior notes set forth in the table below. As of June 30, 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$162.3 million
7.875% Senior Notes due January 2014$306.8 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 June 30, 2011 and December 31, 2010, $76.9 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 June 30 (in millions of dollars) are as follows: 2011, $5,373.4 (including $3,060.9

2012 $4,364.1 (including $4,167.7 of other short-term borrowings)
2013 $597.8  
2014 $743.1  
2015 $1,210.7  
2016 $963.9  
After 2016 $3,906.5  

We are highly leveraged and a substantial portion of other short-term borrowings); 2012, $180.2; 2013, $1,929.4; 2014, $2,484.5; 2015, $828.7; after 2015, $1,037.4.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 and cash received on the disposal of vehicles and equipment, 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 of $3,060.9 million as of June 30, 20102011 include, among other items, the amounts outstanding under our International ABSthe European Securitization, Australian Securitization, U.S. Fleet Financing Facility, Fleet Financing Facility,U.S. Variable Funding Notes, Brazilian Fleet Financing Facility, Canadian Fleet Financing Facility,Securitization, Capitalized Leases and European Revolving Credit Facility. These amounts are consideredreflected as short-term in nature since they haveborrowings, regardless of the facility maturity dates of three months or less; howeverdate, 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 do not expire at the timeremain as such through September 30, 2011. As of theJune 30, 2011, short-term debt maturity except for our International ABS Fleet Financing Facility and Brazilian Fleet Financing Facility which mature in December 2010.borrowings had a weighted average interest rate of 3.0%.

Letters of Credit

As of June 30, 2010,2011, there were outstanding standby letters of credit totaling $685.7$580.3 million. Of this amount, $423.5$532.8 million has beenwas issued under the Senior Credit Facilities ($288.6 million of which was issued for the benefit of the ABS Program ($200.0 million of which was issued by Ford and $223.5 million of which was issued under the Senior Credit Facilities)Program) and the remainder is primarily to support self-insurance programs (including insurance policies with respect to which we have indemnifiedagreed to indemnify the policy issuers for


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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 June 30, 2010,2011, none of these letters of credit have been drawn upon. In November 2010,

2011 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 "Ford" letter of credit by its terms will expire30 consecutive trading day period ending on December 31, 2010. Since this same trigger was met in conjunction with the maturityperiods ending March 31, 2011 and June 30, 2011, the Convertible Senior Notes continue to be convertible through September 30, 2011, and may be convertible thereafter, if one or more of the 2005 Notes.

Second Quarter Eventsconversion 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 JuneJanuary 2011, Hertz redeemed in full its outstanding ($518.5 million principal amount) 10.50% 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 HVF issuedissuance of $700 million aggregate principal amount of 7.50% Senior Notes, the Series 2009-2 Class B Notes which mature in 2013 and 2015. The net proceeds of the offering were or will be used to purchase vehicles under our ABS program, used to pay other ABS indebtedness or, to the extent permitted, used for general purposes. The Series 2009-2 Class B Notes are included in U.S. Fleet Debt.

In June 2010, we issued the Euro Notes and entered into the European Credit Facility. The net proceeds of the Euro Notes and European Credit Facility were used to refinance our International Fleet Debt and Belgian Fleet Financing Facility, both of which were due to mature in December 2010 and the excess was or will be used for general purposes. The Euroissuance of $500 million aggregate principal amount of 7.375% Senior Notes and the European Credit Facility will beFebruary 2011 issuance of $500 million aggregate principal amount of 6.75% Senior Notes (see below) for these redemptions. Premiums paid during the primary fleet financing forsix months ended June 30, 2011 of $51.7 million are recorded in "Other (income) expense, net" on our rental car operations in Germany, Italy, Spain, Belgium, Luxembourg and Switzerland and mature in 2013.consolidated statement of operations.

In February 2011, Hertz issued $500 million aggregate principal amount of 6.75% Senior Notes due 2019. The Euro6.75% Senior Notes and the European Credit Facility are guaranteed on a senior unsecured basis by Hertz and certain U.S.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 Hertz's outstanding 8.875% Senior Notes due 2014 which resulted in premiums paid during the three months ended June 30, 2011, of $10.7 million recorded in "Other (income) expense, net" on our consolidated statement of operations and the write-off of unamortized debt costs of $5.8 million.

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 unamortized 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


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Senior Term Facility, the determination as to whether the 2005 Senior Term Facility and the new Senior Term Facility 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 facility in an 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 six months ended June 30, 2011, we recorded financing costs of $6.6 million in "Interest expense" on our consolidated statement of operations associated with the new 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 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.

In June 2011, Hertz Vehicle Financing LLC, or "HVF," a special purpose bankruptcy remote limited liability company of which Hertz is the sole member, closed on $598 million in aggregate principal amount of 3.5 year and 5.5 year weighted average life Series 2011-1 Rental Car Asset Backed Notes, Class A and Class B.

In June 2011, Hertz Holdings Netherlands B.V., an indirect wholly-owned subsidiary of Hertz organized under the laws of The Netherlands, entered into an accordion facility, or the "European Seasonal Revolving Credit Facility," under the European Revolving Credit Facility that provides for aggregate maximum borrowings of €100 million (the equivalent of $143.7 million as of June 30, 2011), subject to borrowing base availability.

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


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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 and on a senior secured basis by certain non-U.S. subsidiaries of Hertz.

See Note 18—Subsequent Events.May 25, 2011, Hertz filed an amended registration statement. 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 June 30, 20102011 has been issued from the terms as disclosed in our Annual Report, exceptForm 10-K.

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 June 30, 2011, no triggering event had occurred requiring testing of the springing financial maintenance covenant.

Borrowing Capacity and Availability

As of June 30, 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

 $1,340.8 $828.9 
      
 

Total Corporate Debt

  1,340.8  828.9 
      

Fleet Debt

       

U.S. Fleet Variable Funding Notes

  298.1  29.6 

European Seasonal Revolving Credit Facility

  43.1  43.1 

European Securitization

  174.3  34.6 

Canadian Securitization

  101.4  20.3 

Australian Securitization

  121.2  2.6 

Brazilian Fleet Financing Facility

  0.9   

Capitalized Leases

  15.0   
      
 

Total Fleet Debt

  754.0  130.2 
      

Total

 $2,094.8 $959.1 
      

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 described above.collateral. Our ability to borrow under each revolving credit facility is a function of, among other things, the value of the


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Covenants

Certainassets in the relevant collateral pool. We refer to the amount of our debt instruments and credit facilities containwe can borrow given a number of covenants that, among other things, limit or restrict the ability of the borrowers and the guarantors to disposecertain pool of assets incur additional indebtedness, incur guarantee obligations, prepay other indebtedness, make dividendsas 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 other restricted payments, create liens, make investments, make acquisitions, engage in mergers, change"borrowing base availability" as the naturelower of their business, make capital expenditures,Remaining Capacity or engage in certain transactions with affiliates. Somethe borrowing base less the principal amount of these agreements also requiredebt then-outstanding under such facility (i.e., the maintenanceamount of certain financial covenants. As of June 30, 2010,debt we were in compliance with all of these financial covenants.could borrow given the collateral we possess at such time).

As of June 30, 2010, we had an aggregate principal amount outstanding of $1,351.8 million pursuant to our Senior Term Facility and no amounts outstanding in our Senior ABL Facility. As of June 30, 2010, Hertz was required under the Senior Term Facility to have a consolidated leverage ratio of not more than 5.25:1 and a consolidated interest expense coverage ratio of not less than 2.00:1. In addition, under our Senior ABL Facility, if there was less than $200.0 million of available borrowing capacity under that facility as of June 30, 2010, Hertz was required to have a consolidated leverage ratio of not more than 5.25:1 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 June 30, 2010, we had a consolidated leverage ratio of 3.54:1 and a consolidated interest expense coverage ratio of 3.40:1. Since we had maintained sufficient borrowing capacity under our Senior ABL Facility as of June 30, 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 June 30, 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

  1,591.7  815.9 
      
 

Total Corporate Debt

  1,591.7  815.9 
      

Fleet Debt

       

U.S. Fleet Debt

  478.1  80.4 

International ABS Fleet Financing Facility

  456.2  25.6 

Fleet Financing Facility

  2.0  2.0 

Brazilian Fleet Financing Facility

     

Canadian Fleet Financing Facility

  102.0  3.9 

Capitalized Leases

  62.5  17.3 

Euro Notes

     

European Credit Facility

     
      
 

Total Fleet Debt

  1,100.8  129.2 
      

Total

 $2,692.5 $945.1 
      

As of June 30, 2010,2011, the Senior Term Facility had approximately $1.3$0.5 million available under the letter of credit facility and the Senior ABL Facility had $6.7$1,111.7 million available under the letter of credit facility sublimit.

Our liquidity as of June 30, 2010 was $2,813.5 million, which consisted of $896.8 million of cash and cash equivalents, $815.9 million of unused commitments under our Senior ABL Facility and $1,100.8 million of unused commitments under our fleet financing facilities. Taking into consideration thesublimit, subject to borrowing base limitations in our Senior ABL Facility and in our Fleet Debt, the amount that we had available for immediate use as of June 30, 2010 under our Senior ABL Facility was $815.9 million and we had $129.2 million of over-enhancement that was available under our Fleet Debt. Accordingly, as of June 30, 2010, we had $1,841.9 million ($896.8 million in cash and cash equivalents, $815.9 million available under our Senior ABL Facility and $129.2 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.restrictions.

Also, substantiallySubstantially all of our revenue earning equipment and certain related assets are owned by special purpose entities, or are subject to liensencumbered 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.


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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

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 June 30, 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 $374.3$651.4 million and $367.6$652.1 million, respectively, and total liabilities primarily comprised of debt of $485.8$650.8 million and $710.3$651.6 million, respectively. For further information on the terms of our 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 June 30, 2010 and December 31, 2009, accrued interest was $117.5 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 June 30, 
 
 2010 2009 2010 2009 2010 2009 

Components of Net Periodic Benefit Cost:

                   
 

Service cost

 $6.7 $5.4 $1.2 $1.4 $ $0.1 
 

Interest cost

  6.8  7.0  2.5  2.4  0.2  0.2 
 

Expected return on plan assets

  (6.7) (5.8) (2.4) (1.9)    
 

Net amortizations

  1.6  0.1    (0.1) (0.1) (0.1)
 

Settlement loss

  0.1           
              
 

Net pension/postretirement expense

 $8.5 $6.7 $1.3 $1.8 $0.1 $0.2 
              
 
 Pension Benefits  
  
 
 
 Postretirement
Benefits (U.S.)
 
 
 U.S. Non-U.S. 
 
 Three Months Ended June 30, 
 
 2011 2010 2011 2010 2011 2010 

Components of Net Periodic Benefit Cost:

                   
 

Service cost

 $6.9 $6.7 $1.8 $1.2 $ $ 
 

Interest cost

  7.5  6.8  2.8  2.5  0.3  0.2 
 

Expected return on plan assets

  (8.1) (6.7) (3.1) (2.4)    
 

Net amortization

  2.3  1.6  (0.3)   0.1  (0.1)
 

Settlement loss

  0.4  0.1         
 

Curtailment gain

      (13.1)      
              
 

Net pension/postretirement expense

 $9.0 $8.5 $(11.9)$1.3 $0.4 $0.1 
              

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

 
 Pension Benefits  
  
 
 
 Postretirement
Benefits (U.S.)
 
 
 U.S. Non-U.S. 
 
 Six Months Ended June 30, 
 
 2010 2009 2010 2009 2010 2009 

Components of Net Periodic Benefit Cost:

                   
 

Service cost

 $13.4 $10.8 $2.5 $2.7 $0.1 $0.1 
 

Interest cost

  13.6  14.0  5.1  4.6  0.4  0.4 
 

Expected return on plan assets

  (13.4) (11.7) (4.9) (3.6)    
 

Net amortizations

  3.3  0.2  (0.1) (0.2) (0.2) (0.2)
 

Settlement loss

  0.4  0.7         
              
 

Net pension/postretirement expense

 $17.3 $14.0 $2.6 $3.5 $0.3 $0.3 
              
 
 Pension Benefits  
  
 
 
 Postretirement
Benefits (U.S.)
 
 
 U.S. Non-U.S. 
 
 Six Months Ended June 30 
 
 2011 2010 2011 2010 2011 2010 

Components of Net Periodic Benefit Cost:

                   
 

Service cost

 $13.1 $13.4 $3.5 $2.5 $0.1 $0.1 
 

Interest cost

  14.0  13.6  5.6  5.1  0.5  0.4 
 

Expected return on plan assets

  (15.2) (13.4) (6.2) (4.9)    
 

Net amortization

  4.3  3.3  (0.6) (0.1) 0.1  (0.2)
 

Settlement loss

  0.7  0.4         
 

Curtailment gain

      (13.1)      
              
 

Net pension/postretirement expense

 $16.9 $17.3 $(10.8)$2.6 $0.7 $0.3 
              

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


Table required. For the three and six months ended June 30, 2011, we contributed $12.3 million and $57.1 million, respectively, to our worldwide pension plans, including discretionary contributions of Contents


HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited


required.$0.8 million and $13.2 million, respectively, to our United Kingdom, or "U.K.," defined benefit pension plan and benefit payments made through unfunded plans. For the three and six months ended June 30, 2010, we contributed $10.6 million and $46.6 million, respectively, to our worldwide pension plans, including discretionary contributions of $1.4 million and $3.2 million, respectively, to our U.K. defined benefit pension plan and benefit payments made through unfunded plans. For the three and six months ended June 30, 2009, we contributed to and made benefit payments of $8.5 million and $17.2 million, respectively, to our funded worldwide plans. Of the contributions to worldwide plans, we contributed $6.5 million to the U.S. defined benefit plans during the three months ended June 30, 2009. For the three and six months ended June 30, 2009, we made discretionary contributions of $1.4 million and $2.5 million, respectively, to our U.K. defined benefit pension plan. Based upon the significant decline in asset values in 2008, which were in line with the overall market declines, it is likely we have and will continue to make cash contributions in 20102011 and possibly in future years.

We expect to contribute up to $54.0 million to our U.S.sponsor a defined benefit pension plan in the full yearU.K. On June 30, 2011, we approved an agreement with the trustees of 2010.that plan to cease all future benefit accruals to existing members and to close the plan to new members. 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. On scheme closure 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 have recognized a gain of $13.1 million for the U.K. plan that represents unamortized prior service cost from a 2010 amendment that eliminated discretionary pension increases related to pre-1997 service primarily related to inactive employees.

We participate 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.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.


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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

Note 10—9—Stock-Based Compensation

In March 2010,2011, we granted 527,574371,505 Restricted Stock Units, or "RSUs," to certain executives and employees at fair values ranging from $9.70$14.60 to $9.99 and 800,613$15.02, 499,515 Performance Stock Units, or "PSUs," at a fair value of $9.70$14.60, and 193,798 PSUs at a fair value of $10.19 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 May 2010,2011, we granted 182,606130,275 RSUs to certain employees at a fair values ranging from $11.87 to $12.38 under the Omnibus Plan.value of $16.39.

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, and in May 2010, we granted options to acquire 29,229 shares of our common stock to certain employees at exercise prices ranging from $11.87 to $12.38,$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


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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited


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 June 30, 
  
 2010 2009 
 

Compensation Expense

 $10.3 $9.1 
 

Income Tax Benefit

  (4.0) (3.5)
       
  

Total

 $6.3 $5.6 
       


  
 Six Months Ended June 30, 
  
 2010 2009 
 

Compensation Expense

 $19.3 $16.5 
 

Income Tax Benefit

  (7.5) (6.4)
       
  

Total

 $11.8 $10.1 
       
 
 Three Months Ended
June 30,
 Six Months Ended
June 30,
 
 
 2011 2010 2011 2010 

Compensation Expense

 $7.6 $10.3 $16.6 $19.3 

Income Tax Benefit

  (3.0) (4.0) (6.4) (7.5)
          
 

Total

 $4.6 $6.3 $10.2 $11.8 
          

As of June 30, 2010,2011, there was approximately $58.8$49.4 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 1.41.7 years, on a weighted average basis, of the requisite service period that began on the grant dates.


For the three and six months ended June 30, 2010, we recognized compensation cost

Table of approximately $0.1 million ($0.1 million, net of tax) and $0.3 million ($0.2 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, or "ESPP." For the three and six months ended June 30, 2009, we recognized compensation cost of approximately $0.1 million ($0.1 million, net of tax) and $0.2 million ($0.1 million, net of tax), respectively, for the amount of the discount on the stock purchased by our employees under the ESPP.Contents


HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

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 includesinclude 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


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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited


reconciliation to consolidated amounts for the three and six months ended June 30, 2010 and 2009 are summarized below (in millions of dollars).



 Three Months Ended June 30, 
 Three Months Ended June 30, 


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


 2010 2009 2010 2009 
 2011 2010 2011 2010 

Car rental

Car rental

 $1,611.4 $1,474.7 $174.9 $143.5 

Car rental

 $1,768.8 $1,611.4 $242.2 $174.9 

Equipment rental

Equipment rental

 265.8 277.0 14.4 24.7 

Equipment rental

 301.7 265.8 33.4 14.4 
                   
 

Total reportable segments

 1,877.2 1,751.7 189.3 168.2  

Total reportable segments

 2,070.5 1,877.2 275.6 189.3 

Other

Other

 2.4 2.8     

Other

 1.8 2.4     
               
 

Total

 $1,879.6 $1,754.5      

Total

 $2,072.3 $1,879.6     
               

Adjustments:

Adjustments:

 

Adjustments:

 

Other reconciling items(1)

     (93.5) (87.1)

Other reconciling items(1)

     (91.2) (93.5)

Purchase accounting(2)

     (22.5) (21.8)

Purchase accounting(2)

     (22.5) (22.5)

Non-cash debt charges(3)

     (49.6) (47.7)

Non-cash debt charges(3)

     (27.1) (49.6)

Restructuring charges

     (20.3) (22.0)

Restructuring charges

     (33.7) (20.3)

Restructuring related charges(4)

     (2.0) (11.3)

Restructuring related charges(4)

     (2.8) (2.0)

Gain on debt buyback(5)

      48.5 

Derivative losses(5)

      (0.6)

Derivative gains (losses)(6)

     (0.6) 3.9 

Acquisition related costs

     (6.1) (7.0)

Acquisition related costs(7)

     (7.0)  

Pension adjustment(6)

     13.1  
     

Premiums paid on debt(7)

     (10.7)  
 

Income (loss) before income taxes

     $(6.2)$30.7       
      

Income (loss) before income taxes

     $94.6 $(6.2)
     

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

 



 Six Months Ended June 30, 
 Six Months Ended June 30, 


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


 2010 2009 2010 2009 
 2011 2010 2011 2010 

Car rental

Car rental

 $3,033.1 $2,757.6 $202.0 $110.0 

Car rental

 $3,279.1 $3,033.1 $303.5 $202.0 

Equipment rental

Equipment rental

 502.8 556.5 9.4 25.4 

Equipment rental

 569.9 502.8 43.6 9.4 
                   
 

Total reportable segments

 3,535.9 3,314.1 211.4 135.4  

Total reportable segments

 3,849.0 3,535.9 347.1 211.4 

Other

Other

 4.6 5.3     

Other

 3.3 4.6     
               
 

Total

 $3,540.5 $3,319.4      

Total

 $3,852.3 $3,540.5     
               

Adjustments:

Adjustments:

 

Adjustments:

 

Other reconciling items(1)

     (184.9) (170.9)

Other reconciling items(1)

     (178.7) (184.9)

Purchase accounting(2)

     (44.6) (47.8)

Purchase accounting(2)

     (43.1) (44.6)

Non-cash debt charges(3)

     (98.4) (72.7)

Non-cash debt charges(3)

     (87.0) (98.4)

Restructuring charges

     (31.0) (51.5)

Restructuring charges

     (38.4) (31.0)

Restructuring related charges(4)

     (7.3) (20.2)

Restructuring related charges(4)

     (3.3) (7.3)

Management transition costs

      (0.7)

Derivative losses(5)

      (2.3)

Gain on debt buyback(5)

      48.5 

Acquisition related costs

     (9.0) (7.0)

Derivative gains (losses)(6)

     (2.3) 4.9 

Management transition costs

     (2.5)  

Acquisition related costs(7)

     (7.0)  

Pension adjustment(6)

     13.1  

Third-party bankruptcy accrual(8)

      (4.3)

Premiums paid on debt(7)

     (62.4)  
           
 

Loss before income taxes

     $(164.1)$(179.3) 

Loss before income taxes

     $(64.2)$(164.1)
           

(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.

(3)
Represents non-cash debt charges relating to the amortization and write-off of deferred debt financing costs and debt discounts. For the three and six months ended June 30, 2010, also includes $18.0 million and $38.9 million, respectively, associated with the amortization of amounts pertaining to the de-designation of the HVF interest rate swaps as effective hedging instruments and $4.4 million and $4.4 million, respectively, associated with the write-off of unamortized debt costs in connection with the refinancing of our International Fleet Debt and Belgian FleetHertz Vehicle Financing Facility. For the three and six months ended June 30, 2009, also includes $22.3 million and $29.8 million, respectively, associated with the amortization of amounts pertaining to the de-designation of the HVFLLC, 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.

(5)
Represents a gain (net of transaction costs) recorded in connection with the buyback of portions of our Senior Notes and Senior Subordinated Notes.

(6)
In 2010, represents the mark-to-market adjustment on our interest rate cap. In 2009, represents

(6)
Represents a gain for the mark-to-market adjustments on our gasoline swap.U.K. pension plan relating to unamortized prior service cost from a 2010 amendment that eliminated discretionary pension increases related to pre-1997 service primarily pertaining to inactive employees.

(7)
Represents costs incurred in connection with the potential acquisitionpremiums paid to redeem our 10.5% Senior Subordinated Notes and a portion of Dollar Thrifty Automotive Group, Inc.

our 8.875% Senior Notes.
(8)
Represents an allowance for uncollectible program car receivables

Total assets increased $975.4 million from December 31, 2010 to June 30, 2011. The increase was primarily related to an increase in our car rental segment's revenue earning equipment, partly offset by a bankrupt European dealer affiliated withdecrease in other cash and cash equivalents primarily relating to the redemption of our 10.5% Senior Subordinated Notes and a U.S. car manufacturer.portion of our 8.875% Senior Notes.


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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

The increase in total assets from December 31, 2009 to June 30, 2010 in our condensed consolidated balance sheet was primarily due to an increase in revenue earning vehicles and restricted cash in our car rental segment.

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

              (175.5)       (175.5)
 

Change in fair value of derivatives qualifying as cash flow hedges, net of tax of $18.6

                 29.0     29.0 
 

Translation adjustment changes

                 (83.2)    (83.2)
 

Unrealized gain on Euro-denominated debt, net of tax of $17.7

                 27.6     27.6 
 

Defined benefit pension plans, net

                 (0.9)    (0.9)
                         
 

Total Comprehensive Loss

                       (203.0)
                         
 

Dividend payment to noncontrolling interest

                    (7.5) (7.5)
 

Net income relating to noncontrolling interest

                    8.2  8.2 
 

Employee stock purchase plan

  0.2        1.2           1.2 
 

Net settlement on vesting of restricted stock

           (5.7)          (5.7)
 

Restricted stock

  1.5                    
 

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

           19.3           19.3 
 

Exercise of stock options

           2.3           2.3 
 

Common shares issued to Directors

           1.3           1.3 
 

Phantom shares issued to Directors

           0.1           0.1 
 

Proceeds from disgorgement of stockholder short-swing profits, net of tax of $0

           0.1           0.1 
                  

June 30, 2010

  411.9 $4.1 $ $3,160.3 $(1,237.8)$(30.8)$17.9 $1,913.7 
                  
 
  
 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

              (77.6)       (77.6)
 

Translation adjustment changes, net of tax

                 58.7     58.7 
 

Unrealized holding gains on securities, net of tax

                 1.2     1.2 
 

Unrealized gain on Euro-denominated debt, net of tax

                 (14.9)    (14.9)
 

Defined benefit pension plans, net of tax

                 14.4     14.4 
                         
 

Total Comprehensive Loss

                       (18.2)
                         
 

Net income relating to noncontrolling interest

                    8.7  8.7 
 

Dividend payment to noncontrolling interest

                    (10.5) (10.5)
 

Employee stock purchase plan

     0.1     2.0           2.0 
 

Net settlement on vesting of restricted stock

     1.2     (11.4)          (11.4)
 

Stock-based employee compensation charges, net of tax

           16.6           16.6 
 

Exercise of stock options, net of tax

     1.6  0.1  11.6           11.7 
 

Common shares issued to Directors

           1.4           1.4 
                  

June 30, 2011

 $  416.4 $4.2 $3,203.4 $(1,188.0)$97.3 $14.7 $2,131.6 
                  

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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

              (159.6)       (159.6)
 

Change in fair value of derivatives qualifying as cash flow hedges, net of tax of $8.5

                 12.9     12.9 
 

Translation adjustment changes

                 35.0     35.0 
 

Unrealized gain on Euro-denominated debt, net of tax of $0.6

                 (1.0)    (1.0)
 

Defined benefit pension plans, net

                 (1.0)    (1.0)
                         
 

Total Comprehensive Loss

                       (113.7)
                         
 

Dividend payment to noncontrolling interest

                    (8.1) (8.1)
 

Net income relating to noncontrolling interest

                    7.0  7.0 
 

Proceeds from debt offering, net of tax of $44.5

           69.8           69.8 
 

Proceeds from sale of common stock

  53.0  0.5     328.2           328.7 
 

Employee stock purchase plan

  0.4        1.4           1.4 
 

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

           16.5           16.5 
 

Exercise of stock options

  0.6        2.7           2.7 
 

Common shares issued to Directors

           0.4           0.4 
 

Phantom shares issued to Directors

           0.1           0.1 
                  

June 30, 2009

  377.0 $3.7 $ $2,922.9 $(1,095.9)$(54.2)$16.6 $1,793.1 
                  
 
  
  
  
  
  
 Accumulated
Other
Comprehensive
Income
(Loss)
  
  
 
 
  
 Common Stock  
  
  
  
 
 
 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

              (175.5)       (175.5)
 

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

                 29.0     29.0 
 

Translation adjustment changes, net of tax

                 (83.2)    (83.2)
 

Unrealized gain on Euro-denominated debt, net of tax

                 27.6     27.6 
 

Defined benefit pension plans, net of tax

                 (0.9)    (0.9)
                         
 

Total Comprehensive Loss

                       (203.0)
                         
 

Dividend payment to noncontrolling interest

                    (7.5) (7.5)
 

Net income relating to noncontrolling interest

                    8.2  8.2 
 

Employee stock purchase plan

     0.2     1.2           1.2 
 

Net settlement on vesting of restricted stock

     1.5     (5.7)          (5.7)
 

Stock-based employee compensation charges, net of tax

           19.3           19.3 
 

Exercise of stock options, net of tax

           2.3           2.3 
 

Common shares issued to Directors

           1.3           1.3 
 

Phantom shares issued to Directors

           0.1           0.1 
 

Proceeds from disgorgement of stockholder short-swing profits, net of tax

           0.1           0.1 
                  

June 30, 2010

 $  411.9 $4.1 $3,160.3 $(1,237.8)$(30.8)$17.9 $1,913.7 
                  

Accumulated other comprehensive lossincome as of June 30, 20102011 and December 31, 20092010 includes accumulated translation gains of $48.9$173.6 million and $132.1$114.9 million, respectively, pension benefits of $(55.8) million and $(70.2) million, respectively, unrealized losses on cash flow hedgesour Euro-denominated debt of $(20.7)$(21.7) million and $(49.8) million, respectively, changes due to the pension mark-to-market adjustment of $(67.4) million and $(66.5)$(6.8) million, respectively, and unrealized holding gains (losses) on our Euro-denominated debt of $8.4$1.3 million and $(19.2)$0.1 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


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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited


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.

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 11the U.S. and Europe. As part of our re-engineering optimization we outsourced selected functions globally. In addition, we streamlined operations and reduced costs by initiating the Notes to our audited annual consolidated financial statements includedclosure 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 halfquarter of 2010,2011, 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.

During the second quarter of 2011, we continued to streamline operations and reduce costs with the closure of twelve equipment rental locations in the U.S., consolidation of our European headquarters and the reduction in our global workforce by approximately 50 employees.

From January 1, 2007 through June 30, 2011, we incurred $512.7 million ($244.2 million for our car rental segment, $214.7 million for our equipment rental business incurred charges for losses on available for sale equipmentsegment and the disposal of surplus equipment and recognition of future facility lease obligations related to branch closures in North America. We have suspended depreciation of all available for sale equipment, which would have the impact of decreasing quarterly depreciation by approximately $1.5 million. Additionally, first and second quarter restructuring charges included employee termination liabilities covering approximately 200 employees and 120 employees, respectively.

For the three months ended June 30, 2010, our consolidated statement of operations includes restructuring charges relating to the initiatives discussed above of $20.3 million which is composed of $13.7 million in revenue earning equipment and fixed asset impairment charges, $3.0 million in facility closure and lease obligation costs, $1.4$53.8 million of termination benefits, $1.2 million in relocation and temporary labor costs and $1.0 millionother) of other restructuring charges. The after-tax effect of the restructuring charges increased diluted loss per share by $0.03 for the three months ended June 30, 2010.

For the six months ended June 30, 2010, our consolidated statement of operations includes restructuring charges relating to the initiatives discussed above of $31.0 million which is composed of $14.5 million in revenue earning equipment and fixed asset impairment charges, $6.6 million in facility closure and lease obligation costs, $4.8 million of termination benefits, $2.5 million in relocation and temporary labor costs, $0.7 million in consulting costs and $1.9 million of other restructuring charges. The after-tax effect of the restructuring charges increased diluted loss per share by $0.05 for the six months ended June 30, 2010.

For the three months ended June 30, 2009, our consolidated statement of operations includes restructuring charges relating to the initiatives discussed above of $22.0 million which is composed of $8.3 million of involuntary termination benefits, $6.5 million in facility closures and lease obligation costs, $5.3 million in asset impairment charges, $0.7 million in consulting costs and $1.2 million of other restructuring charges. The after-tax effect of the restructuring charges reduced diluted earnings per share by $0.05 for the three months ended June 30, 2009.

For the six months ended June 30, 2009, our consolidated statement of operations included restructuring charges relating to the initiatives discussed above of $51.5 million which was composed of $18.6 million of involuntary termination benefits, $16.3 million in facility closures and lease obligation costs, $6.4 million in consulting costs, $6.0 million in asset impairment charges, $1.7 million in contract termination costs and $2.5 million of other restructuring charges. The after-tax effect of the restructuring charges increased diluted loss per share by $0.12 for the six months ended June 30, 2009.

Additional efficiency and cost saving initiatives are being developed during 2010.2011. However, we presently do not have firm plans or estimates of any related expenses.

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

 
 Three Months Ended
June 30,
 Six Months Ended
June 30,
 
 
 2011 2010 2011 2010 

By Type:

             
 

Involuntary termination benefits

 $3.4 $1.4 $4.4 $4.8 
 

Pension and post retirement expense

  0.3  0.3  0.3  0.6 
 

Consultant costs

  0.2    0.3  0.7 
 

Asset writedowns

  22.6  13.7  23.3  14.5 
 

Facility closure and lease obligation costs

  6.9  3.0  10.0  6.6 
 

Relocation costs and temporary labor costs

    1.2    2.5 
 

Other

  0.3  0.7  0.1  1.3 
          
  

Total

 $33.7 $20.3 $38.4 $31.0 
          

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

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

 
 Three Months Ended June 30, 
 
 2010 2009 

By Caption:

       
 

Direct operating

 $18.3 $18.5 
 

Selling, general and administrative

  2.0  3.5 
      
  

Total

 $20.3 $22.0 
      
 
 Three Months Ended
June 30,
 Six Months Ended
June 30,
 
 
 2011 2010 2011 2010 

By Caption:

             
 

Direct operating

 $30.4 $18.3 $34.5 $25.3 
 

Selling, general and administrative

  3.3  2.0  3.9  5.7 
          
  

Total

 $33.7 $20.3 $38.4 $31.0 
          

 

 
 Six Months Ended June 30, 
 
 2010 2009 

By Caption:

       
 

Direct operating

 $25.3 $35.3 
 

Selling, general and administrative

  5.7  16.2 
      
  

Total

 $31.0 $51.5 
      
 
 Three Months Ended
June 30,
 Six Months Ended
June 30,
 
 
 2011 2010 2011 2010 

By Segment:

             
 

Car rental

 $3.5 $4.2 $4.5 $9.5 
 

Equipment rental

  29.8  16.0  33.6  20.9 
 

Other reconciling items

  0.4  0.1  0.3  0.6 
          
  

Total

 $33.7 $20.3 $38.4 $31.0 
          


During the three and six months ended June 30, 2011, the after-tax effect of the restructuring charges decreased the income per share by $0.05 and increased the loss per share by $0.06, respectively. During the three and six months ended June 30, 2010, the after-tax effect of the restructuring charges increased the loss per share by $0.03 and $0.05, respectively.

 
 Three Months Ended June 30, 
 
 2010 2009 

By Segment:

       
 

Car rental

 $4.2 $9.8 
 

Equipment rental

  16.0  12.8 
 

Other reconciling items

  0.1  (0.6)
      
  

Total

 $20.3 $22.0 
      


 
 Six Months Ended June 30, 
 
 2010 2009 

By Segment:

       
 

Car rental

 $9.5 $24.9 
 

Equipment rental

  20.9  19.8 
 

Other reconciling items

  0.6  6.8 
      
  

Total

 $31.0 $51.5 
      

The following table sets forth the activity affecting the restructuring accrual during the six months ended June 30, 20102011 (in millions of dollars). We expect to pay substantially all of the remaining restructuring obligations byrelating to involuntary termination benefits over the endnext twelve months. The remainder of the fourth quarter 2010.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

  4.8  0.6  0.7  24.9  31.0 
 

Cash payments

  (13.1)   (1.1) (7.8) (22.0)
 

Other(1)

  (2.1) (0.4) 0.1  (18.0) (20.4)
            

Balance as of June 30, 2010

 $9.2 $0.2 $0.1 $8.8 $18.3 
            
 
 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

  4.4  0.3  0.3  33.4  38.4 
 

Cash payments

  (7.8)   (0.1) (0.8) (8.7)
 

Other(1)

  0.1  (0.2)   (26.0) (26.1)
            

Balance as of June 30, 2011

 $3.0 $0.3 $0.3 $17.5 $21.1 
            

(1)
Primarily consistsConsists of decreases of $14.5$23.3 million for the impairment of revenue earning equipment and other assets,asset writedowns, $2.8 million for facility closures, $2.4$0.3 million loss inFAS 88 pension adjustment and $0.2 million for involuntary benefits, partly offset by an increase of $0.5 million due to foreign currency translation and a $0.3 million for executive pension liability settlements.translation.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

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 June 30, 20102011 and December 31, 20092010 because of the short-term maturity of these instruments. Money market accounts, whose fair value at June 30, 2010,2011, is measured using Level 1 inputs, totaling $339.2$309.8 million and $653.3$103.4 million are


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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited


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.

Marketable Securities

Marketable securities held by us consist of equity securities classified as available-for-sale, which are carried at fair value and are included within "Prepaid expenses and other assets." Unrealized gains and losses, net of related income taxes, are included in "Accumulated other comprehensive income." As of June 30, 2011 and December 31, 2010, the fair value of marketable securities was $34.9 million and $0.0 million, respectively. For the three and six months ended June, 30, 2011, unrealized gains of $2.0 million and $2.0 million, respectively, were recorded in "Accumulated other comprehensive income." Fair values for marketable securities are based on Level 1 inputs are observable inputs such asconsisting of quoted prices in active markets.market prices.

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 June 30, 20102011 was $12,133.3$12,496.1 million, compared to its aggregate carrying valueunpaid principal balance of $11,833.6$11,786.1 million. The aggregate fair value of all debt at December 31, 2009 approximated $10,795.72010 was $12,063.5 million, compared to its aggregate carrying valueunpaid principal balance of $10,530.4$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 June 30, 2010 and December 31, 2009 (in millions of dollars):

 
 Fair Value of Derivative Instruments(1) 
 
 Asset Derivatives(2) Liability Derivatives(2) 
 
 June 30,
2010
 December 31,
2009
 June 30,
2010
 December 31,
2009
 

Derivatives designated as hedging instruments under ASC 815:

             
 

HVF interest rate swaps

 $ $ $4.0 $12.8 
          

Derivatives not designated as hedging instruments under ASC 815:

             
 

Gasoline swaps

    2.2  1.3   
 

Interest rate caps

  1.3  8.2  1.0  5.6 
 

Foreign exchange forward contracts

  4.0  7.6  2.9  5.7 
 

Foreign exchange options

  0.1       
          
  

Total derivatives not designated as hedging instruments under ASC 815

  5.4  18.0  5.2  11.3 
          

Total derivatives

 $5.4 $18.0 $9.2 $24.1 
          
 
 Fair Value of Derivative Instruments(1) 
 
 Asset Derivatives(2) Liability Derivatives(2) 
 
 June 30,
2011
 December 31,
2010
 June 30,
2011
 December 31,
2010
 

Derivatives not designated as hedging instruments under ASC 815:

             
 

Gasoline swaps

 $1.3 $3.1 $ $ 
 

Interest rate caps

  2.4  7.2  2.4  7.2 
 

Foreign exchange forward contracts

  1.8  2.6  13.7  11.1 
 

Foreign exchange options

  0.2  0.1     
          
  

Total derivatives not designated as hedging instruments under ASC 815

 $5.7 $13.0 $16.1 $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.

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Unaudited

(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 June 30, 
 
 2010 2009 2010 2009 2010 2009 

Derivatives in ASC 815 Cash Flow Hedging Relationship:

                   
 

HVF interest rate swaps

 $(5.6)$(0.6)$(18.0)(1)$(22.3)(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 June 30, 
 
 2011 2010 2011 2010 

Derivatives in ASC 815 Cash Flow Hedging Relationship:

             
 

HVF interest rate swaps

 $ $(5.6)$ $(23.6)(1)

 

 
 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)
 
 
 Six Months Ended June 30, 
 
 2010 2009 2010 2009 2010 2009 

Derivatives in ASC 815 Cash Flow Hedging Relationship:

                   
 

HVF interest rate swaps

 $(8.8)$(12.0)$(38.9)(1)$(29.8)(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)
 
 
 Six Months Ended June 30, 
 
 2011 2010 2011 2010 

Derivatives in ASC 815 Cash Flow Hedging Relationship:

             
 

HVF interest rate swaps

 $ $(8.8)$ $(50.5)(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. No amount of gain or loss was recognized in income (ineffective portion) during the three and six months ended June 30, 2011 and 2010.

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


 
  
 Amount of Gain or
(Loss) Recognized in
Income on Derivative
 
 
  
 Three Months Ended
June 30,
 
 
 Location of Gain or (Loss)
Recognized on Derivative
 
 
 2010 2009 

Derivatives Not Designated as Hedging Instruments under ASC 815:

         
 

Gasoline swaps

 Direct operating $(2.5)$3.9 
 

Interest rate caps

 Selling, general and administrative  (0.6)  
 

Foreign exchange forward contracts

 Selling, general and administrative  (10.1) 18.2 
 

Foreign exchange options

 Selling, general and administrative    0.2 
        
  

Total

   $(13.2)$22.3 
        
 
  
 Amount of Gain or
(Loss) Recognized in
Income on Derivative
 
 
 Location of Gain or (Loss)
Recognized on Derivative
 Three Months Ended
June 30,
 
 
  
 2011 2010 

Derivatives Not Designated as Hedging Instruments under ASC 815:

         
 

Gasoline swaps

 Direct operating $(0.2)$(2.5)
 

Interest rate caps

 Selling, general and administrative    (0.6)
 

Foreign exchange forward contracts

 Selling, general and administrative  (7.3) (10.1)
 

Foreign exchange options

 Selling, general and administrative     
        
  

Total

   $(7.5)$(13.2)
        

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

 

 
  
 Amount of Gain or
(Loss) Recognized in
Income on Derivative
 
 
  
 Six Months Ended
June 30,
 
 
 Location of Gain or (Loss)
Recognized on Derivative
 
 
 2010 2009 

Derivatives Not Designated as Hedging Instruments under ASC 815:

         
 

Gasoline swaps

 Direct operating $(1.7)$4.9 
 

Interest rate caps

 Selling, general and administrative  (2.3)  
 

Foreign exchange forward contracts

 Selling, general and administrative  (1.4) 12.4 
 

Foreign exchange options

 Selling, general and administrative  (0.1) 0.1 
        
  

Total

   $(5.5)$17.4 
        
 
  
 Amount of Gain or
(Loss) Recognized in
Income on Derivative
 
 
 Location of Gain or (Loss)
Recognized on Derivative
 Six Months Ended
June 30,
 
 
  
 2011 2010 

Derivatives Not Designated as Hedging Instruments under ASC 815:

         
 

Gasoline swaps

 Direct operating $2.9 $(1.7)
 

Interest rate caps

 Selling, general and administrative    (2.3)
 

Foreign exchange forward contracts

 Selling, general and administrative  (7.9) (1.4)
 

Foreign exchange options

 Selling, general and administrative    (0.1)
        
  

Total

   $(5.0)$(5.5)
        

In connectionconjunction with the Acquisitionrefinanced Series 2009-1 Notes and the issuance 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 remaining in "Accumulated other comprehensive loss" associated with this cash flow hedging relationship was frozen and is being amortized into "Interest expense" over the respective terms of the associated debt in accordance with GAAP. We expect to amortize approximately $29.9 million from "Accumulated other comprehensive loss" into "Interest expense" over the next five 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 Swaps 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 June 30, 2010 and December 31, 2009, the balance reflected in "Accumulated other comprehensive loss," was a loss of $20.7 million (net of tax of $13.1 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 sale of the 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.January 2012. 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 June 30, 2010,2011, our outstanding commodity instruments for unleaded gasoline and diesel fuel totaled approximately 9.46.6 million gallons and 1.61.8 million gallons, respectively. 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 U.S. Department of Energy surveys, etc.). 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 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 June 30, 2010,


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2011, were approximately $0.2 million. We limit counterparties to the transactions to financial institutions that have strong credit ratings. As of June 30, 20102011 and December 31, 2009,2010, the total notional amount of these foreign exchange options was $4.6$7.1 million and $0.3$3.5 million, respectively, maturingrespectively. As of June 30, 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 June 30, 2011 and December 31, 2010, the total notional amount of these forward contracts was $649.0$808.8 million maturingand $721.8 million, respectively. As of June 30, 2011 these foreign currency forward contracts mature within twofour 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 June 30, 20102011 and December 31, 2009, gains2010, losses of $8.4$21.7 million (net of tax of $0.1$14.7 million) and losses of $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 six months ended June 30, 2010,2011, there were no material changes to our relationship with Hertz Investors, Inc. or the Sponsors.

Director Compensation Policy

ForOn March 31, 2011, the three and six months ended June 30, 2010, we recognized $0.5Sponsors sold 50 million and $0.9of 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. For the three and six months ended June 30, 2009, we recognized $0.4 million and $0.8 million, respectively, 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., or "ML," one of the underwriters in the initial public offering of our common stockcommercial banking 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 purchasers with respectfinancial advisory services to the offerings of the Senior Notes, the Senior Subordinated Notes and the Series 2008-1 Notes; acted as structuring advisors and agents under our 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.

Banc of America Securities LLC, an affiliate of MLGPE, acted as one of the joint lead book runners in the issuance of the Series 2009-2 Notes and Series 2009-2 Class B Notes,us for which they have received customary fees and expenses.

Ascommissions. In addition, these parties have acted as agents, lenders, purchasers and/or 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 following capacities, or similar capacities, with respect to our financing arrangements: lenders and/or agents under the Senior Credit Facilities, the U.S. Fleet Financing Facility and certain of June 30, 2010the U.S. Fleet Variable Funding Notes; purchasers and/or underwriters under the Senior Notes and December 31, 2009, approximately $253 millioncertain of the U.S. Fleet Medium Term Notes; and $246 million, respectively, of our outstanding debt was with related parties.

See Note 8—Debt.structuring advisors and/or agents under the ABS Program.


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As of June 30, 2011 and December 31, 2010, approximately $197 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 June 30, 20102011 and December 31, 2009,2010, the following guarantees (including indemnification commitments) were issued and outstanding:outstanding.

Indemnification Obligations

In the ordinary course of business, we execute contracts involving indemnification obligations customary in the relevant industry and indemnifications specific to a transaction such as the sale of a business. These indemnification 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 indemnification 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 indemnification obligations and have accrued for expected losses that are probable and estimable. The types of indemnification 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 June 30, 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 $1.6$1.7 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 factors such as our connection to the site, the materials there, the involvement of other potentially


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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).

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 June 30, 20102011 and December 31, 20092010 our liability recorded for public liability and property damage matters was $261.1$286.0 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 developmentsdevelopment pertaining to a legal proceedingsproceeding described in our Annual Report areForm 10-K is furnished on a supplemental basis:

In June 2010,May 2011, the judge in the related cases ofJanet Sobel Daniel Dugan, PhD. and Lydia Lee, individually and on behalf of all others similarly situatedet al. v. The Hertz Corporation andLydia Lee et al. v. Enterprise Rent-A-Car Company et al., denied the Lydia Lee case was refiled separately against Enterprise. Thereafter, Hertz and Enterprise jointly engaged in a mediation withplaintiffs' motion for final approval of the plaintiffs. That mediation has now resulted in a proposed settlement and denied the plaintiffs' motion for an immaterial amountattorneys' fees, expenses and incentive awards as moot. The court concluded that will needthe absence of evidence as to the actual value to the class of the coupons offered in settlement and the value of the claims to be incorporated intosurrendered precluded a Settlement Agreement. Once executed byfinding that the parties, the Settlement Agreement will be presented to the court for its approval.settlement is fair, reasonable and adequate.

In June 2010, inMichael Shames and Gary Gramkow v. The Hertz Corporation, Dollar Thrifty Automotive Group, Inc., Avis Budget Group, Inc., Vanguard Car Rental USA, Inc., Enterprise Rent-A-Car Company, Fox Rent A Car, Inc. Coast Leasing Corp., The California Travel and Tourism Commission, and Caroline Beteta, a three judge panelNone of the United States Court of Appeals for the Ninth Circuit affirmed the dismissal of the plaintiffs' antitrust claim against the California Travel and Tourism Commission as a state agency immune from an antitrust complaint because the California legislature foresaw the alleged price-fixing conspiracy that was the subject of the plaintiffs' complaint. The plaintiffs subsequently filed a petition with the United States Court of Appeals for the Ninth Circuit seeking to have all of the judges on the Ninth Circuit review the decision of the three judge panel.


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

In addition to the above mentioned and those described in our Form 10-K or in our other filings with Securities and Exchange Commission, 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 or in our other filings with Securities and Exchange Commission, could be decided unfavorably to us or any of our subsidiaries involved. Accordingly, it is possible that an adverse outcome 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—16—Earnings (Loss) Per Share

Basic earnings (loss) per share has been computed based upon the weighted average number of common shares outstanding. Diluted earnings (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 earnings (loss) per share (in millions of dollars, except per share amounts):



 Three Months Ended
June 30,
 
 Three Months Ended
June 30,
 Six Months Ended
June 30,
 


 2010 2009 
 2011 2010 2011 2010 

Basic and diluted earnings (loss) per share:

Basic and diluted earnings (loss) per share:

 

Basic and diluted earnings (loss) per share:

 

Numerator:

Numerator:

 

Numerator:

 

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

 $(25.1)$3.9 

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

 $55.0 $(25.1)$(77.6)$(175.5)
               

Denominator:

Denominator:

 

Denominator:

 

Weighted average shares used in basic computation

 411.8 343.7 

Weighted average shares used in basic computation

 415.9 411.8 415.0 411.3 

Add: Stock options, RSUs and PSUs

  5.5 

Add: Stock options, RSUs and PSUs

 8.3    
     

Add: Potential issuance of common stock upon conversion of Convertible Senior Notes

 27.6    

Weighted average shares used in diluted computation

 411.8 349.2           
     

Weighted average shares used in diluted computation

 451.8 411.8 415.0 411.3 
         

Earnings (loss) per share attributable to Hertz Global Holdings, Inc. and Subsidiaries' common stockholders, basic

Earnings (loss) per share attributable to Hertz Global Holdings, Inc. and Subsidiaries' common stockholders, basic

 $(0.06)$0.01 

Earnings (loss) per share attributable to Hertz Global Holdings, Inc. and Subsidiaries' common stockholders, basic

 $0.13 $(0.06)$(0.19)$(0.43)

Earnings (loss) per share attributable to Hertz Global Holdings, Inc. and Subsidiaries' common stockholders, diluted

Earnings (loss) per share attributable to Hertz Global Holdings, Inc. and Subsidiaries' common stockholders, diluted

 $(0.06)$0.01 

Earnings (loss) per share attributable to Hertz Global Holdings, Inc. and Subsidiaries' common stockholders, diluted

 $0.12 $(0.06)$(0.19)$(0.43)

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 Six Months Ended
June 30,
 
 
 2010 2009 

Basic and diluted loss per share:

       

Numerator:

       
 

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

 $(175.5)$(159.6)
      

Denominator:

       
 

Weighted average shares used in basic and diluted computation

  411.3  333.6 
      

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

 $(0.43)$(0.48)

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

 $(0.43)$(0.48)

Diluted earnings (loss) per share computations for the three and six months ended June 30, 2011 excluded the weighted-average impact of the assumed exercise of approximately 5.0 million and 21.2 million shares, respectively, of stock options, RSUs and PSUs, respectively, because such impact would be antidilutive. Additionally, for the six months ended June 30, 2011, there was no impact to the diluted earnings (loss) per share computations associated with the Convertible Senior Notes, because such impact would be antidilutive. Diluted earnings (loss) per share computations for the three and six months ended June 30, 2010 excluded the weighted-average impact of the assumed exercise of approximately 23.7 million stock options, RSUs and PSUs respectively, because such impact would be antidilutive. Additionally, for the three and six months ended June 30, 2010, there was no impact to the diluted earnings (loss) per share computations associated with the Convertible Senior Notes, because such impact would be antidilutive. Diluted earnings (loss) per share computations for the three and six months ended June 30, 2009 excluded the weighted-average impact of the assumed exercise of approximately 10.8 million and 23.0 million shares, respectively, of stock options, RSUs and PSUs, because such impact would be anti-dilutive. Additionally, for the three and six months ended June 30, 2009, there was no impact to the diluted earnings (loss) per share computations associated with the Convertible Senior Notes as the average market price of our shares did not exceed the conversion price.

Note 18—17—Subsequent Events

InOn July 2010, we issued EUR 40012, 2011, Hertz entered into a definitive merger agreement under which it will acquire a fleet leasing and management services company, Donlen Corporation, or "Donlen," for an aggregate purchase price of $250 million, (the equivalentsubject to adjustment either upward or downward based on the net assets of $491.1 million as of June 30, 2010) asset-backed securitization facility (European Securitization) which matures in 2013, the proceeds of which were used to refinance the portion of our existing International ABS Fleet Financing Facility relating to France and the Netherlands, which was due to mature in December 2010.

Donlen at closing. In addition, in July 2010, we issuedHertz will assume or refinance approximately $750$680 million in aggregate principal amount of 3 year, 5 yearDonlen's outstanding fleet debt. The transaction is subject to customary closing conditions and 7 year Series 2010-1 Rental Car Asset Backed Notes (Series 2010-1 Notes). The net proceedsregulatory approvals and has been approved by the board of the offering were or will be used, to the extent permitted, to purchase vehicles under the ABS programdirectors and stockholders of HVF, to pay other ABS indebtedness or distributed to Hertz and used for general purposes.Donlen.


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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, 2010 and March 1, 2010, respectively,25, 2011, or collectively known as our "Annual Report,"Form 10-K," and in Part II, "Item 1A- 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)

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.


Table of Contents

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

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

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


Table of Contents

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

Our expenses primarily consist of:

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.

On July 12, 2011, Hertz entered into a definitive merger agreement under which it will acquire a fleet leasing and management services company, Donlen Corporation, or "Donlen," for an aggregate purchase price of $250 million, subject to adjustment either upward or downward based on the net assets of Donlen at closing. In addition, Hertz will assume or refinance approximately $680 million of Donlen's outstanding fleet debt. The transaction is subject to customary closing conditions and regulatory approvals and has been approved by the board of directors and stockholders of Donlen.

Car Rental

In the U.S., as of June 30, 2010,2011, the percentage of non-program cars was 61%68% as compared to 76%61% as of June 30, 2009.2010. Internationally, as of June 30, 2010,2011, the percentage of non-program cars was 57%,58% as compared to 58%48% as of June 30, 2009.2010. In the U.S., as of December 31, 2009,2010, the percentage of non-program cars was 67%72% as compared to 74%67% as of December 31, 2008.2009. Internationally, as of


Table of Contents

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


December 31, 2009,2010, the percentage of non-program cars was 71%70%, compared to 68%71% as of December 31, 2008.2009.

In recent periods we have decreased the percentage of program cars in our car rental fleet. 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 the percentage of non-program cars in our car rental fleet 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.

In the six months ended June 30, 2011, our vehicle depreciation costs decreased as compared to the prior year 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. We believe the increase in residual values is partially due to the recent events in Japan and we are unsure if they will remain this high as these events work their way through the vehicle and equipment supply chain.

For the six months ended June 30, 2010,2011, we experienced a 9.2%6.5% increase in transaction days versus the prior period in the United States, while rental rate revenue per transaction day, or "RPD," declined by 0.5%3.0%. During the six months ended June 30, 2010,2011, in our European operations, we experienced a 2.0%6.9% improvement in transaction days and a 1.9% improvement in our car rentalwhile RPD declined by 2.5% compared to the six months ended June 30, 2009.2010.

Our U.S. off-airport operations represented $495.9$550.3 million and $445.1$496.0 million of our total car rental revenues in the six months ended June 30, 20102011 and 2009,2010, respectively. As of June 30, 2010,2011, we have approximately 1,8602,030 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, 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. carEquipment Rental

HERC experienced higher rental fleet was affected byvolumes and pricing worldwide for the largest of these recalls. We rapidly made repairssix months ended June 30, 2011 compared to the recalled vehiclesprior year period as the industry begins to recover and returned themfleet levels begin to our car rental fleet. There was a short-term impact on our business to coveralign with demand in the costs associated with repairingindustry. Specifically, we saw increases in HERC specialty services as well as government work.


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


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" included in this Report.

In the six months ended June 30, 2010, our per car vehicle depreciation costs decreased approximately 14% and 9% 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.

HERC experienced lower rental volumes and pricing worldwide for the six months ended June 30, 2010 compared to the prior year period.

HERC locations:

 
 Total U.S. Canada France Spain Italy China 

December 31, 2009

  322  214  35  66  4    3 
 

Net increase (decrease)

  (2) (1)   (1)      
 

Additions relating to acquisitions

  1          1   
                

June 30, 2010

  321  213  35  65  4  1  3 
                
 
 Total U.S. Canada France Spain Italy China Saudi Arabia 

December 31, 2010

  322  210  38  65  4  1  4   
 

Net increase (decrease)

  (8) (9)           1 
 

Additions relating to acquisitions

  1  1             
                  

June 30, 2011

  315  202  38  65  4  1  4  1 
                  

Seasonality

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. 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.

Restructuring

During the first halfquarter 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 available for salelocations globally as well as a reduction in our workforce by approximately 100 employees.

During the second quarter of 2011, we continued to streamline operations and reduce costs with the closure of twelve equipment rental locations in the U.S., consolidation of our European headquarters and the disposalreduction in our global workforce by approximately 50 employees.

For the three and six months ended June 30, 2011, our consolidated statement of surplus equipment and recognition of future facility lease obligations related to branch closures in North America. Additionally, first and second quarteroperations includes restructuring charges included employee termination liabilities covering approximately 200 employeesof $33.7 million and 120 employees,$38.4 million, respectively.

For the three and six months ended June 30, 2010, our consolidated statement of operations includes restructuring charges relating to the initiatives discussed above of $20.3 million and $31.0 million, respectively. For the three and six months ended June 30, 2009, our consolidated statement of operations includes restructuring charges relating to the initiatives discussed above of $22.0 million and $51.5 million, respectively.

Additional efficiency and cost saving initiatives are being developed during 2010.2011. However, we presently do not have firm plans or estimates of any related expenses. See Note 13 of12 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 June 30, 20102011 Compared with Three Months Ended June 30, 20092010

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 June 30, 20102011 and 20092010 (in millions of dollars):



  
  
 Percentage of Revenues 
  
  
 Percentage of Revenues 


 Three Months Ended
June 30,
 Three Months Ended
June 30,
 
 Three Months Ended
June 30,
 Three Months Ended
June 30,
 


 2010 2009 2010 2009 
 2011 2010 2011 2010 

Revenues:

Revenues:

 

Revenues:

 

Car rental

 $1,583.0 $1,450.9 84.2% 82.7%

Car rental

 $1,731.2 $1,583.0 83.5% 84.2%

Equipment rental

 265.7 276.8 14.1 15.8 

Equipment rental

 301.6 265.7 14.6 14.1 

Other

 30.9 26.8 1.7 1.5 

Other

 39.5 30.9 1.9 1.7 
                   
 

Total revenues

 1,879.6 1,754.5 100.0 100.0  

Total revenues

 2,072.3 1,879.6 100.0 100.0 
                   

Expenses:

Expenses:

 

Expenses:

 

Direct operating

 1,075.0 988.6 57.2 56.3 

Direct operating

 1,187.3 1,075.0 57.3 57.2 

Depreciation of revenue earning equipment

 456.7 479.4 24.3 27.3 

Depreciation of revenue earning equipment and lease charges

 419.7 456.7 20.3 24.3 

Selling, general and administrative

 172.0 141.5 9.2 8.1 

Selling, general and administrative

 195.6 172.0 9.4 9.2 

Interest expense

 188.9 163.9 10.0 9.3 

Interest expense

 165.8 188.9 8.0 10.0 

Interest and other income, net

 (6.8) (49.6) (0.4) (2.8)

Interest income

 (1.5) (6.8) (0.1) (0.4)
         

Other (income) expense, net

 10.8  0.5  
 

Total expenses

 1,885.8 1,723.8 100.3 98.2           
          

Total expenses

 1,977.7 1,885.8 95.4 100.3 
         

Income (loss) before income taxes

Income (loss) before income taxes

 (6.2) 30.7 (0.3) 1.8 

Income (loss) before income taxes

 94.6 (6.2) 4.6 (0.3)

Provision for taxes on income

Provision for taxes on income

 (14.2) (22.9) (0.8) (1.4)

Provision for taxes on income

 (34.5) (14.2) (1.7) (0.8)
                   

Net income (loss)

Net income (loss)

 (20.4) 7.8 (1.1) 0.4 

Net income (loss)

 60.1 (20.4) 2.9 (1.1)

Less: Net income attributable to noncontrolling interest

Less: Net income attributable to noncontrolling interest

 (4.7) (3.9) (0.2) (0.2)

Less: Net income attributable to noncontrolling interest

 (5.1) (4.7) (0.2) (0.2)
                   

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

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

 $(25.1)$3.9 (1.3)% 0.2%

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

 $55.0 $(25.1) 2.7% (1.3)%
                   

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 June 30, 20102011 and 2009:2010:



 Three Months Ended
or as of June 30,
 
 Three Months Ended
or as of June 30,
 


 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)

 6,821 6,375 

Worldwide number of transactions (in thousands)

 7,146 6,821 
 

Domestic

 5,021 4,629  

Domestic

 5,255 5,021 
 

International

 1,800 1,746  

International

 1,891 1,800 

Worldwide transaction days (in thousands)(a)

 32,194 29,574 

Worldwide transaction days (in thousands)(a)

 34,826 32,194 
 

Domestic

 22,061 20,047  

Domestic

 23,889 22,061 
 

International

 10,133 9,527  

International

 10,937 10,133 

Worldwide rental rate revenue per transaction day(b)

 $43.42 $43.44 

Worldwide rental rate revenue per transaction day(b)

 $41.16 $42.83 
 

Domestic

 $41.07 $41.56  

Domestic

 $39.32 $41.07 
 

International

 $48.52 $47.41  

International

 $45.17 $46.66 

Worldwide average number of company-operated cars during the period

 448,100 408,000 

Worldwide average number of company-operated cars during the period

 487,600 448,400 
 

Domestic

 300,000 270,700  

Domestic

 328,200 300,000 
 

International

 148,100 137,300  

International

 159,400 148,400 

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

 $174.9 $143.5 

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

 $242.2 $174.9 

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

 $8,762.1 $7,363.3 

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

 $9,522.7 $8,762.1 

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)

 $239.4 $253.5 

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

 $267.8 $239.6 

Same store revenue decline, including growth initiatives(e)

 (5.1)% (30.1)%

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

 10.4% (5.0)%

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

 $2,703.7 $2,841.7 

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

 $2,778.8 $2,704.4 

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

 $14.4 $24.7 

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

 $33.4 $14.4 

Revenue earning equipment, net (in millions of dollars)

 $1,649.1 $1,945.4 

Revenue earning equipment, net (in millions of dollars)

 $1,702.7 $1,649.1 

(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
June 30,
 
  
 2010 2009 
 

Car rental segment revenues

 $1,611.4 $1,474.7 
 

Non-rental rate revenue

  (263.2) (225.5)
 

Foreign currency adjustment

  49.6  35.6 
       
 

Rental rate revenue

 $1,397.8 $1,284.8 
       
 

Transaction days (in thousands)

  32,194  29,574 
 

Rental rate revenue per transaction day (in whole dollars)

 $43.42 $43.44 
 
 Three Months Ended
June 30,
 
 
 2011 2010 

Car rental segment revenues

 $1,768.8 $1,611.4 

Non-rental rate revenue

  (292.4) (261.4)

Foreign currency adjustment

  (43.1) 29.0 
      

Rental rate revenue

 $1,433.3 $1,379.0 
      

Transaction days (in thousands)

  34,826  32,194 

Rental rate revenue per transaction day (in whole dollars)

 $41.16 $42.83 
(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 June 30, 2010 and 2009reconciliation to consolidated amounts are presented below (in millions of dollars):

  
 Three Months Ended
June 30, 2010
 
  
 Car
Rental
 Equipment
Rental
 
 

Income (loss) before income taxes

 $121.4 $(15.8)
 

Adjustments:

       
  

Purchase accounting(1)

  9.7  12.0 
  

Non-cash debt charges(2)

  37.7  2.2 
  

Restructuring charges

  4.2  16.0 
  

Restructuring related charges(3)

  1.9   
       
 

Adjusted pre-tax income

 $174.9 $14.4 
       


 
 Three Months Ended
June 30,
 
 
 2011 2010 

Adjusted pre-tax income:

       
 

Car rental

 $242.2 $174.9 
 

Equipment rental

  33.4  14.4 
      
   

Total reportable segments

  275.6  189.3 

Adjustments:

       
  

Other reconciling items(1)

  (91.2) (93.5)
  

Purchase accounting(2)

  (22.5) (22.5)
  

Non-cash debt charges(3)

  (27.1) (49.6)
  

Restructuring charges

  (33.7) (20.3)
  

Restructuring related charges(4)

  (2.8) (2.0)
  

Derivative losses(5)

    (0.6)
  

Acquisition related costs

  (6.1) (7.0)
  

Pension adjustment(6)

  13.1   
  

Premiums paid on debt(7)

  (10.7)  
      
   

Income (loss) before income taxes

 $94.6 $(6.2)
      
  
 Three Months Ended
June 30, 2009
 
  
 Car
Rental
 Equipment
Rental
 
 

Income (loss) before income taxes

 $80.3 $(1.7)
 

Adjustments:

       
  

Purchase accounting(1)

  9.9  11.2 
  

Non-cash debt charges(2)

  34.9  2.3 
  

Restructuring charges

  9.8  12.8 
  

Restructuring related charges(3)

  8.6  0.1 
       
 

Adjusted pre-tax income

 $143.5 $24.7 
       


Table of Contents

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


Table of Contents

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

(d)
Equipment rental and rental related revenue consists of all revenue, net of discounts, associated with the rental of equipment including charges for delivery, loss damage waivers and fueling, but excluding revenue arising from the sale of equipment, parts and supplies and certain other ancillary revenue. Rental and rental related revenue is 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. This statistic is important to our management as it is utilized in the measurement of rental revenue generated per dollar invested in fleet on an annualized basis and is comparable with the reporting of other industry participants. The following table reconciles our equipment rental segment revenues to our equipment rental and rental related revenue (based on December 31, 20092010 foreign exchange rates) for the three months ended June 30, 20102011 and 20092010 (in millions of dollars):

  
 Three Months Ended
June 30,
 
  
 2010 2009 
 

Equipment rental segment revenues

 $265.8 $277.0 
 

Equipment sales and other revenue

  (28.7) (29.9)
 

Foreign currency adjustment

  2.3  6.4 
       
 

Rental and rental related revenue

 $239.4 $253.5 
       
 
 Three Months Ended
June 30,
 
 
 2011 2010 

Equipment rental segment revenues

 $301.7 $265.8 

Equipment sales and other revenue

  (29.4) (28.7)

Foreign currency adjustment

  (4.5) 2.5 
      

Rental and rental related revenue

 $267.8 $239.6 
      
(e)
Same store revenue growth or decline representsis 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.

REVENUES



 Three Months Ended
June 30,
  
  
 
 Three Months Ended
June 30,
  
  
 
(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

 $1,611.4 $1,474.7 $136.7 9.3%

Car rental

 $1,768.8 $1,611.4 $157.4 9.8%

Equipment rental

 265.8 277.0 (11.2) (4.0)%

Equipment rental

 301.7 265.8 35.9 13.5%

Other reconciling items

 2.4 2.8 (0.4) (14.3)%

Other reconciling items

 1.8 2.4 (0.6) (25.0)%
                   
 

Total revenues

 $1,879.6 $1,754.5 $125.1 7.1% 

Total revenues

 $2,072.3 $1,879.6 $192.7 10.3%
                   

Car Rental Segment

Revenues from our car rental segment increased 9.3%9.8%, primarily as a result of an 8.9% increaseincreases in car rental transaction days worldwide and increases inof 8.2%, refueling fees of $12.6$15.2 million and airport concession recovery fees of $9.2$9.8 million partly offset byas well as the effects of foreign currency translation of approximately $10.9 million.$74.1 million, partly offset by a decrease in worldwide RPD.

RPD for worldwide car rental for the three months ended June 30, 2011 decreased 3.9% from 2010, due to decreases in U.S. and International RPD of 4.3% and 3.2%, respectively. U.S. off-airport RPD declined by 1.8% and U.S. airport RPD decreased 5.1%. U.S. airport RPD decreased due to the lower RPD that our Advantage brand generates, as well as the competitive pricing environment. International RPD decreased primarily due to a decrease in Europe's airport RPD.


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 June 30, 2010 decreased 0.1% from 2009, due to a decrease in U.S. RPD of 1.2%, mostly offset by an increase in International RPD of 2.3%. U.S. off-airport RPD improved by 2.8% and U.S. airport RPD decreased 2.6%. U.S. airport RPD decreased mainly due to the lower RPD that our Advantage brand generates.

Equipment Rental Segment

Revenues from our equipment rental segment decreased 4.0%increased 13.5%, primarily due to a 4.8% decreaseincreases of 11.3% and 2.2% in equipment rental volumevolumes and a 6.1% decline in pricing, partly offset byrespectively, as well as the effects of foreign currency translation of approximately $5.2$8.1 million. The increase in volume was primarily due to strong industrial performance.

Other

Revenues from all other sources decreased 14.3%, primarily due to a decrease in revenues from our third-party claim management services.$0.6 million.

EXPENSES



 Three Months Ended
June 30,
  
  
 
 Three Months Ended
June 30,
  
  
 
(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

 $248.8 $205.7 $43.1 20.9%

Fleet related expenses

 $287.0 $248.8 $38.2 15.4%

Personnel related expenses

 354.7 310.1 44.6 14.4%

Personnel related expenses

 373.5 354.7 18.8 5.3%

Other direct operating expenses

 471.5 472.8 (1.3) (0.3)%

Other direct operating expenses

 526.8 471.5 55.3 11.7%
                   
 

Direct operating

 1,075.0 988.6 86.4 8.7% 

Direct operating

 1,187.3 1,075.0 112.3 10.4%
 

Depreciation of revenue earning equipment

 456.7 479.4 (22.7) (4.7)% 

Depreciation of revenue earning equipment and lease charges

 419.7 456.7 (37.0) (8.1)%
 

Selling, general and administrative

 172.0 141.5 30.5 21.5% 

Selling, general and administrative

 195.6 172.0 23.6 13.7%
 

Interest expense

 188.9 163.9 25.0 15.3% 

Interest expense

 165.8 188.9 (23.1) (12.2)%
 

Interest and other income, net

 (6.8) (49.6) 42.8 (86.3)% 

Interest income

 (1.5) (6.8) 5.3 (77.2)%
          

Other (income) expense, net

 10.8  10.8 100.0%
 

Total expenses

 $1,885.8 $1,723.8 $162.0 9.4%          
          

Total expenses

 $1,977.7 $1,885.8 $91.9 4.9%
         

Total expenses increased 9.4% and4.9%, but total expenses as a percentage of revenues increaseddecreased from 98.2% for the three months ended June 30, 2009 to 100.3% for the three months ended June 30, 2010.2010 to 95.4% for the three months ended June 30, 2011.

Direct Operating Expenses

Car Rental Segment

Direct operating expenses for our car rental segment of $977.9 million for the three months ended June 30, 2011 increased 8.7%9.7% from $891.5 million for the three months ended June 30, 2010 as a result of increases in personnelother direct operating expenses, fleet related expenses and fleetpersonnel related expenses, partly offset by a decrease in otherexpenses.