Table of Contents


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

FORM 10-Q
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31,June 30, 2017
OR
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

HERTZ GLOBAL HOLDINGS, INC.
THE HERTZ CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 001-37665 61-1770902
DELAWARE 001-07541 13-1938568
(State or other jurisdiction of
incorporation or organization)
 (Commission File Number) (I.R.S Employer Identification No.)
     
  
8501 Williams Road
Estero, Florida 33928
(239) 301-7000
  
  
8501 Williams Road
Estero, Florida 33928
(239) 301-7000
  
  
(Address, including Zip Code, and
telephone number, including area code,
of registrant's principal executive offices)
  
     
  Not Applicable  
  Not Applicable  
  
(Former name, former address and
former fiscal year, if changed since last report.)
  

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Hertz Global Holdings, Inc.    Yes x No o
The Hertz Corporation    Yes x No o

Indicate by check mark whether the registrant 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 registrant was required to submit and post such files). 
Hertz Global Holdings, Inc.    Yes x No o
The Hertz Corporation    Yes x No o

Indicate by check mark whether the registrant 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", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Hertz Global Holdings, Inc.Large accelerated filer oAccelerated filer o
Non-accelerated filer

(Do not check if a smaller reporting company)
x
 Smaller reporting company oEmerging growth companyo  
 If an emerging growth company, indicate by checkmark if the registrant has not elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.o  
The Hertz CorporationLarge accelerated filer oAccelerated filer o
Non-accelerated filer

(Do not check if a smaller reporting company)
x
 Smaller reporting company oEmerging growth companyo  
 If an emerging growth company, indicate by checkmark if the registrant has not elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.o  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Hertz Global Holdings, Inc.    Yes o No x
The Hertz Corporation    Yes o No x

Indicate the number of shares outstanding as of the latest practicable date.
  Class Shares Outstanding atMay 1,July 31, 2017
Hertz Global Holdings, Inc. Common Stock, par value $0.01 per share 83,711,80883,716,852
The Hertz Corporation Common Stock, par value $0.01 per share 
100 (100% owned by
Rental Car Intermediate Holdings, LLC)
      


Table of Contents
HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES


TABLE OF CONTENTS

   
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Table of Contents
HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES


PART I—FINANCIAL INFORMATION
ITEM 1.   CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Index

  Page
Hertz Global Holdings, Inc. and Subsidiaries 
The Hertz Corporation and Subsidiaries 
Notes to the Condensed Consolidated Financial Statements 


1


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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited
(In millions, except par value)
March 31,
2017
 December 31, 2016June 30,
2017
 December 31, 2016
ASSETS      
Cash and cash equivalents$785
 $816
$1,141
 $816
Restricted cash and cash equivalents:      
Vehicle223
 235
183
 235
Non-vehicle43
 43
879
 43
Total restricted cash and cash equivalents266
 278
1,062
 278
Receivables:      
Vehicle323
 546
282
 546
Non-vehicle, net of allowance of $39 and $42, respectively711
 737
Non-vehicle, net of allowance of $37 and $42, respectively928
 737
Total receivables, net1,034
 1,283
1,210
 1,283
Prepaid expenses and other assets497
 578
565
 578
Revenue earning vehicles:      
Vehicles14,579
 13,655
16,149
 13,655
Less accumulated depreciation(2,886) (2,837)(2,963) (2,837)
Total revenue earning vehicles, net11,693
 10,818
13,186
 10,818
Property and equipment:      
Land, buildings and leasehold improvements1,173
 1,165
1,188
 1,165
Service equipment and other761
 724
771
 724
Less accumulated depreciation(1,086) (1,031)(1,120) (1,031)
Total property and equipment, net848
 858
839
 858
Other intangible assets, net3,325
 3,332
3,239
 3,332
Goodwill1,081
 1,081
1,082
 1,081
Assets held for sale127
 111
109
 111
Total assets$19,656
 $19,155
$22,433
 $19,155
LIABILITIES AND EQUITY      
Accounts payable:      
Vehicle$544
 $258
$677
 $258
Non-vehicle597
 563
704
 563
Total accounts payable1,141
 821
1,381
 821
Accrued liabilities966
 980
963
 980
Accrued taxes, net173
 165
166
 165
Debt:      
Vehicle10,113
 9,646
11,176
 9,646
Non-vehicle3,895
 3,895
5,633
 3,895
Total debt14,008
 13,541
16,809
 13,541
Public liability and property damage405
 407
423
 407
Deferred income taxes, net2,028
 2,149
1,922
 2,149
Liabilities held for sale17
 17
13
 17
Total liabilities18,738
 18,080
21,677
 18,080
Commitments and contingencies
 

 
Equity:      
Preferred Stock, $0.01 par value, no shares issued and outstanding
 

 
Common Stock, $0.01 par value, 86 and 85 shares issued and 84 and 83 shares outstanding1
 1
1
 1
Additional paid-in capital2,231
 2,227
2,234
 2,227
Accumulated deficit(1,056) (882)(1,214) (882)
Accumulated other comprehensive income (loss)(158) (171)(165) (171)
1,018
 1,175
856
 1,175
Treasury Stock, at cost, 2 shares and 2 shares(100) (100)(100) (100)
Total equity918
 1,075
756
 1,075
Total liabilities and equity$19,656
 $19,155
$22,433
 $19,155

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

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(In millions, except per share data)
Three Months Ended
March 31,
Three Months Ended
June 30,
 Six Months Ended
June 30,
2017 20162017 2016 2017 2016
Revenues:          
Worldwide vehicle rental$1,764
 $1,839
$2,062
 $2,124
 $3,827
 $3,963
All other operations152
 144
162
 146
 313
 290
Total revenues1,916
 1,983
2,224
 2,270
 4,140
 4,253
Expenses:          
Direct vehicle and operating1,132
 1,158
1,255
 1,267
 2,387
 2,425
Depreciation of revenue earning vehicles and lease charges, net701
 616
743
 629
 1,444
 1,245
Selling, general and administrative220
 225
223
 234
 442
 459
Interest expense, net:          
Vehicle71
 69
82
 72
 153
 140
Non-vehicle59
 81
76
 102
 136
 185
Total interest expense, net130
 150
158
 174
 289
 325
Intangible asset impairments86
 
 86
 
Other (income) expense, net27
 (90)4
 1
 31
 (89)
Total expenses2,210
 2,059
2,469
 2,305
 4,679
 4,365
Income (loss) from continuing operations before income taxes(294) (76)(245) (35) (539) (112)
Income tax (provision) benefit71
 24
87
 7
 158
 32
Net income (loss) from continuing operations(223) (52)(158) (28) (381) (80)
Net income (loss) from discontinued operations
 1

 (15) 
 (13)
Net income (loss)$(223) $(51)$(158) $(43) $(381) $(93)
          
Weighted average shares outstanding:          
Basic83
 85
83
 85
 83
 85
Diluted83
 85
83
 85
 83
 85
          
Earnings (loss) per share - basic and diluted:          
Basic earnings (loss) per share from continuing operations$(2.69) $(0.61)$(1.90) $(0.33) $(4.59) $(0.94)
Basic earnings (loss) per share from discontinued operations
 0.01

 (0.18) 
 (0.15)
Basic earnings (loss) per share$(2.69) $(0.60)$(1.90) $(0.51) $(4.59) $(1.09)
          
Diluted earnings (loss) per share from continuing operations$(2.69) $(0.61)$(1.90) $(0.33) $(4.59) $(0.94)
Diluted earnings (loss) per share from discontinued operations
 0.01

 (0.18) 
 (0.15)
Diluted earnings (loss) per share$(2.69) $(0.60)$(1.90) $(0.51) $(4.59) $(1.09)

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

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Unaudited
(In millions)
Three Months Ended
March 31,
Three Months Ended
June 30,
 Six Months Ended
June 30,
2017 20162017 2016 2017 2016
Net income (loss)$(223) $(51)$(158) $(43) $(381) $(93)
Other comprehensive income (loss):          
Foreign currency translation adjustments16
 36
(4) (18) 12
 18
Unrealized holding gains (losses) on securities
 17

 (8) 
 9
Reclassification of realized gain on securities to other (income) expense(3) 

 
 (3) 
Net gain (loss) on defined benefit pension plans(1)

(3)
(34)
(4)
(34)
Reclassification from other comprehensive income (loss) to selling, general and administrative expense for amortization of actuarial (gains) losses on defined benefit pension plans1
 2
1
 2
 2
 4
Total other comprehensive income (loss) before income taxes13
 55
(6) (58) 7
 (3)
Income tax (provision) benefit related to net gains and losses on defined benefit pension plans
 14
 
 14
Income tax (provision) benefit related to reclassified amounts of net periodic costs on defined benefit pension plans
 (1)(1) (1) (1) (2)
Total other comprehensive income (loss)13
 54
(7) (45) 6
 9
Total comprehensive income (loss)$(210) $3
$(165) $(88) $(375) $(84)

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

4


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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(In millions)


Three Months Ended
March 31,
Six Months Ended
June 30,
2017 20162017 2016
Cash flows from operating activities:      
Net income (loss)$(223) $(51)$(381) $(93)
Less: Net income (loss) from discontinued operations
 1

 (13)
Net income (loss) from continuing operations(223) (52)(381) (80)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:      
Depreciation of revenue earning vehicles, net684
 601
1,410
 1,212
Depreciation and amortization, non-vehicle58
 67
120
 128
Amortization and write-off of deferred financing costs10
 13
20
 22
Amortization and write-off of debt discount (premium)
 1
1
 3
Loss on extinguishment of debt8
 20
Stock-based compensation charges7
 5
12
 12
Provision for receivables allowance8
 14
17
 24
Deferred income tax, net(71) (15)(175) (49)
Impairment charges and asset write-downs30
 
116
 3
(Gain) loss on sale of shares in equity investment(3) (75)(3) (75)
Other(3) (4)7
 (4)
Changes in assets and liabilities      
Non-vehicle receivables23
 (55)(180) (214)
Prepaid expenses and other assets(35) (24)(71) (48)
Non-vehicle accounts payable42
 9
134
 43
Accrued liabilities(30) (23)(53) (15)
Accrued taxes, net8
 (7)(1) 14
Public liability and property damage(7) 6
1
 18
Net cash provided by (used in) operating activities498
 461
982
 1,014
Cash flows from investing activities:      
Net change in restricted cash and cash equivalents, vehicle14
 (8)55
 18
Net change in restricted cash and cash equivalents, non-vehicle
 1

 (2)
Revenue earning vehicles expenditures(2,862) (3,385)(6,709) (6,887)
Proceeds from disposal of revenue earning vehicles1,960
 2,762
3,835
 4,787
Capital asset expenditures, non-vehicle(54) (46)(103) (72)
Proceeds from disposal of property and other equipment7
 19
11
 39
Sales of (investment in) shares in equity investment9
 233
Sales of shares in equity investment, net of amounts invested9
 188
Other(2) 
Net cash provided by (used in) investing activities(926) (424)(2,904) (1,929)

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

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Unaudited
(In millions)

Three Months Ended
March 31,
Six Months Ended
June 30,
2017 20162017 2016
Cash flows from financing activities:      
Net change in restricted cash and cash equivalents, non-vehicle(834) 
Proceeds from issuance of vehicle debt2,098
 2,449
5,028
 6,079
Repayments of vehicle debt(1,692) (2,240)(3,665) (5,078)
Proceeds from issuance of non-vehicle debt100
 365
2,100
 1,477
Repayments of non-vehicle debt(102) (371)(354) (2,843)
Payment of financing costs(12) (10)(34) (51)
Early redemption premium payment(5) 
Transfers from discontinued entities
 122

 2,122
Other(1) 8
(1) 12
Net cash provided by (used in) financing activities391
 323
2,235
 1,718
Effect of foreign currency exchange rate changes on cash and cash equivalents from continuing operations6
 12
12
 8
Net increase (decrease) in cash and cash equivalents during the period from continuing operations(31) 372
325
 811
Cash and cash equivalents at beginning of period816
 474
816
 474
Cash and cash equivalents at end of period$785
 $846
$1,141
 $1,285

 

 
Cash flows from discontinued operations:      
Cash flows provided by (used in) operating activities$
 $116
$
 $205
Cash flows provided by (used in) investing activities
 7

 (78)
Cash flows provided by (used in) financing activities
 (124)
 (96)
Net increase (decrease) in cash and cash equivalents during the period from discontinued operations$
 $(1)$
 $31
      
Supplemental disclosures of cash information for continuing operations:      
Cash paid during the period for:      
Interest, net of amounts capitalized:      
Vehicle$67
 $61
$130
 $115
Non-vehicle30
 38
128
 167
Income taxes, net of refunds2
 14
29
 25
Supplemental disclosures of non-cash information for continuing operations:      
Purchases of revenue earning vehicles included in accounts payable and accrued liabilities$437
 $555
$546
 $560
Sales of revenue earning vehicles included in receivables215
 444
151
 392
Purchases of property and other equipment included in accounts payable17
 18
22
 19
Sales of property and other equipment included in receivables2
 11
5
 17
Revenue earning vehicles and property and equipment acquired through capital lease13
 

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

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THE HERTZ CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited
(In millions, except par value and share data)
March 31,
2017
 December 31,
2016
June 30,
2017
 December 31,
2016
ASSETS      
Cash and cash equivalents$785
 $816
$1,141
 $816
Restricted cash and cash equivalents:      
Vehicle223
 235
183
 235
Non-vehicle43
 43
879
 43
Total restricted cash and cash equivalents266
 278
1,062
 278
Receivables:      
Vehicle323
 546
282
 546
Non-vehicle, net of allowance of $39 and $42, respectively711
 737
Non-vehicle, net of allowance of $37 and $42, respectively928
 737
Total receivables, net1,034
 1,283
1,210
 1,283
Prepaid expenses and other assets497
 578
565
 578
Revenue earning vehicles:      
Vehicles14,579
 13,655
16,149
 13,655
Less accumulated depreciation(2,886) (2,837)(2,963) (2,837)
Total revenue earning vehicles, net11,693
 10,818
13,186
 10,818
Property and equipment:      
Land, buildings and leasehold improvements1,173
 1,165
1,188
 1,165
Service equipment and other761
 724
771
 724
Less accumulated depreciation(1,086) (1,031)(1,120) (1,031)
Total property and equipment, net848
 858
839
 858
Other intangible assets, net3,325
 3,332
3,239
 3,332
Goodwill1,081
 1,081
1,082
 1,081
Assets held for sale127
 111
109
 111
Total assets$19,656
 $19,155
$22,433
 $19,155
LIABILITIES AND EQUITY      
Accounts payable:      
Vehicle$544
 $258
$677
 $258
Non-vehicle597
 563
704
 563
Total accounts payable1,141
 821
1,381
 821
Accrued liabilities966
 980
963
 980
Accrued taxes, net174
 165
166
 165
Debt:      
Vehicle10,113
 9,646
11,176
 9,646
Non-vehicle3,895
 3,895
5,633
 3,895
Total debt14,008
 13,541
16,809
 13,541
Public liability and property damage405
 407
423
 407
Deferred income taxes, net2,028
 2,149
1,923
 2,149
Liabilities held for sale17
 17
13
 17
Total liabilities18,739
 18,080
21,678
 18,080
Commitments and contingencies
 

 
Equity:      
Common Stock, $0.01 par value, 3,000 shares authorized, 100 shares issued and outstanding
 

 
Additional paid-in capital3,154
 3,150
3,158
 3,150
Due from affiliate(39) (37)(40) (37)
Accumulated deficit(2,040) (1,867)(2,198) (1,867)
Accumulated other comprehensive income (loss)(158) (171)(165) (171)
Total equity917
 1,075
755
 1,075
Total liabilities and equity$19,656
 $19,155
$22,433
 $19,155

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

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THE HERTZ CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(In millions)
Three Months Ended
March 31,
Three Months Ended
June 30,
 Six Months Ended
June 30,
2017 20162017 2016 2017 2016
Revenues:          
Worldwide vehicle rental$1,764
 $1,839
$2,062
 $2,124
 $3,827
 $3,963
All other operations152
 144
162
 146
 313
 290
Total revenues1,916
 1,983
2,224
 2,270
 4,140
 4,253
Expenses:          
Direct vehicle and operating1,132
 1,158
1,255
 1,267
 2,387
 2,425
Depreciation of revenue earning vehicles and lease charges, net701
 616
743
 629
 1,444
 1,245
Selling, general and administrative220
 225
223
 234
 442
 459
Interest expense, net:          
Vehicle71
 69
82
 72
 153
 140
Non-vehicle58
 81
75
 102
 134
 185
Total interest expense, net129
 150
157
 174
 287
 325
Intangible asset impairments86
 
 86
 
Other (income) expense, net27
 (90)4
 1
 31
 (89)
Total expenses2,209
 2,059
2,468
 2,305
 4,677
 4,365
Income (loss) from continuing operations before income taxes(293) (76)(244) (35) (537) (112)
Income tax (provision) benefit71
 24
86
 7
 157
 32
Net income (loss) from continuing operations(222) (52)(158) (28) (380) (80)
Net income (loss) from discontinued operations
 3

 (15) 
 (11)
Net income (loss)$(222) $(49)$(158) $(43) $(380) $(91)


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

8


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THE HERTZ CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Unaudited
(In millions)
Three Months Ended
March 31,
Three Months Ended
June 30,
 Six Months Ended
June 30,
2017 20162017 2016 2017 2016
Net income (loss)$(222) $(49)$(158) $(43) $(380) $(91)
Other comprehensive income (loss):          
Foreign currency translation adjustments16
 36
(4) (18) 12
 18
Unrealized holding gains (losses) on securities
 17

 (8) 
 9
Reclassification of realized gain on securities to other (income) expense(3) 

 
 (3) 
Net gain (loss) on defined benefit pension plans(1) 
(3) (34) (4) (34)
Reclassification from other comprehensive income (loss) to selling, general and administrative expense for amortization of actuarial (gains) losses on defined benefit pension plans1
 2
1
 2
 2
 4
Total other comprehensive income (loss) before income taxes13
 55
(6) (58) 7
 (3)
Income tax (provision) benefit related to net gains and losses on defined benefit pension plans
 14
 
 14
Income tax (provision) benefit related to reclassified amounts of net periodic costs on defined benefit pension plans
 (1)(1) (1) (1) (2)
Total other comprehensive income (loss)13
 54
(7) (45) 6
 9
Total comprehensive income (loss)$(209) $5
$(165) $(88) $(374) $(82)

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

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Table of Contents
THE HERTZ CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(In millions)

Three Months Ended
March 31,
Six Months Ended
June 30,
2017 20162017 2016
Cash flows from operating activities:      
Net income (loss)$(222) $(49)$(380) $(91)
Less: Net income (loss) from discontinued operations
 3

 (11)
Net income (loss) from continuing operations(222) (52)(380) (80)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:      
Depreciation of revenue earning vehicles, net684
 601
1,410
 1,212
Depreciation and amortization, non-vehicle58
 67
120
 128
Amortization and write-off of deferred financing costs10
 13
20
 22
Amortization and write-off of debt discount (premium)
 1
1
 3
Loss on extinguishment of debt8
 20
Stock-based compensation charges7
 5
12
 12
Provision for receivables allowance8
 14
17
 24
Deferred income taxes, net(71) (15)(174) (49)
Impairment charges and asset write-downs30
 
116
 3
(Gain) loss on sale of shares in equity investment(3) (75)(3) (75)
Other(3) (4)7
 (4)
Changes in assets and liabilities      
Non-vehicle receivables23
 (55)(180) (214)
Prepaid expenses and other assets(35) (24)(71) (48)
Non-vehicle accounts payable42
 9
134
 43
Accrued liabilities(30) (23)(53) (15)
Accrued taxes, net8
 (7)(1) 14
Public liability and property damage(7) 6
1
 18
Net cash provided by (used in) operating activities499
 461
984
 1,014
Cash flows from investing activities:      
Net change in restricted cash and cash equivalents, vehicle14
 (8)55
 18
Net change in restricted cash and cash equivalents, non-vehicle
 1

 (2)
Revenue earning vehicles expenditures(2,862) (3,385)(6,709) (6,887)
Proceeds from disposal of revenue earning vehicles1,960
 2,762
3,835
 4,787
Capital asset expenditures, non-vehicle(54) (46)(103) (72)
Proceeds from disposal of property and other equipment7
 19
11
 39
Sales of (investment in) shares in equity investment9
 233
Sales of shares in equity investment, net of amounts invested9
 188
Other(2) 
Net cash provided by (used in) investing activities(926) (424)(2,904) (1,929)

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

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THE HERTZ CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(In millions)

Three Months Ended
March 31,
Six Months Ended
June 30,
2017 20162017 2016
Cash flows from financing activities:      
Net change in restricted cash and cash equivalents, non-vehicle(834) 
Proceeds from issuance of vehicle debt2,098
 2,449
5,028
 6,079
Repayments of vehicle debt(1,692) (2,240)(3,665) (5,078)
Proceeds from issuance of non-vehicle debt100
 365
2,100
 1,477
Repayments of non-vehicle debt(102) (371)(354) (2,843)
Payment of financing costs(12) (10)(34) (51)
Early redemption premium payment(5) 
Transfers from discontinued entities
 130

 2,122
Advances to Hertz Global/Old Hertz Holdings(2) 
(3) 
Other
 12
Net cash provided by (used in) financing activities390
 323
2,233
 1,718
Effect of foreign currency exchange rate changes on cash and cash equivalents from continuing operations6
 12
12
 8
Net increase (decrease) in cash and cash equivalents during the period from continuing operations(31) 372
325
 811
Cash and cash equivalents at beginning of period816
 474
816
 474
Cash and cash equivalents at end of period$785
 $846
$1,141
 $1,285
      
Cash flows from discontinued operations:      
Cash flows provided by (used in) operating activities$
 $119
$
 $207
Cash flows provided by (used in) investing activities
 7

 (77)
Cash flows provided by (used in) financing activities
 (121)
 (94)
Net increase (decrease) in cash and cash equivalents during the period from discontinued operations$
 $5
$
 $36
      
Supplemental disclosures of cash flow information for continuing operations:      
Cash paid during the period for:      
Interest, net of amounts capitalized:      
Vehicle$67
 $61
$130
 $115
Non-vehicle30
 38
128
 167
Income taxes, net of refunds2
 14
29
 25
Supplemental disclosures of non-cash information for continuing operations:      
Purchases of revenue earning vehicles included in accounts payable and accrued liabilities$437
 $555
$546
 $560
Sales of revenue earning vehicles included in receivables215
 444
151
 392
Purchases of property and other equipment included in accounts payable17
 18
22
 19
Sales of property and other equipment included in receivables2
 11
5
 17
Revenue earning vehicles and property and equipment acquired through capital lease13
 
Non-cash dividend paid to affiliate
 334

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

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited


Note 1—Background

Hertz Global Holdings, Inc. ("Hertz Global" when including its subsidiaries and "Hertz Holdings" excluding its subsidiaries) was incorporated in Delaware in 2015 to serve as the top-level holding company for Rental Car Intermediate Holdings, LLC which wholly owns The Hertz Corporation ("Hertz" and interchangeably with Hertz Global, the "Company"), Hertz Global's primary operating company. Hertz was incorporated in Delaware in 1967 and is a successor to corporations that have been engaged in the vehicle rental and leasing business since 1918. Hertz operates its vehicle rental business globally primarily through the Hertz, Dollar and Thrifty brands from company-owned, licensee and franchisee locations in the U.S., Africa, Asia, Australia, Canada, The Caribbean, Europe, Latin America, the Middle East and New Zealand. Through its Donlen subsidiary, Hertz provides vehicle leasing and fleet management services.

On June 30, 2016, former Hertz Global Holdings, Inc. (for periods on or prior to June 30, 2016, “Old Hertz Holdings” and for periods after June 30, 2016, “Herc Holdings”) completed a spin-off (the “Spin-Off”) of its global vehicle rental business through a dividend to stockholders of record of Old Hertz Holdings as of the close of business on June 22, 2016, the record date for the distribution, of all of the issued and outstanding common stock of Hertz Rental Car Holding Company, Inc. (“New Hertz”), which was re-named Hertz Global Holdings, Inc. in connection with the Spin-Off, on a one-to-five basis. New Hertz, or Hertz Global, is the “accounting successor” to Old Hertz Holdings. As such, the historical financial information of Hertz reflects the equipment rental business as a discontinued operation and the historical financial information of Hertz Global reflects the equipment rental business and certain parent legal entities as discontinued operations. See Note 3, "Discontinued Operations," for additional information. Unless noted otherwise, information disclosed in these notes to the consolidated financial statements pertain to the continuing operations of Hertz and Hertz Global.

Note 2—Basis of Presentation and Recently Issued Accounting Pronouncements

Basis of Presentation

The Company prepares its unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments of a normal recurring nature that are necessary for a fair presentation of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year.

The preparation of financial statements in conformity with U.S. 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, 2016 condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. The information included in this Form 10-Q should be read in conjunction with information included in the Company's Form 10‑K for the year ended December 31, 2016 (the "2016 Form 10-K"), as filed with the Securities and Exchange Commission ("SEC") on March 6, 2017.

As disclosed below in "Recently Issued Accounting Pronouncements," the Company adopted the guidance "ImprovementsCertain prior period amounts have been reclassified to Employee Share-Based Payment Accounting" on January 1, 2017.conform with current period presentation.

Principles of Consolidation

The unaudited condensed consolidated financial statements of Hertz Global include the accounts of Hertz Global and its wholly owned and majority owned U.S. and international subsidiaries. The unaudited condensed consolidated financial statements of Hertz include the accounts of Hertz and its wholly owned and majority owned U.S. and international subsidiaries. In the event that the Company is a primary beneficiary of a variable interest entity, the assets, liabilities, and results of operations of the variable interest entity are included in the Company's consolidated financial statements. The Company accounts for its investment in joint ventures using the equity method when it has significant

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THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited

statements. The Company accounts for its investment in joint ventures using the equity method when it has significant influence but not control and is not the primary beneficiary. All significant intercompany transactions have been eliminated in consolidation.

Out Of Period Adjustments

The Company has identified a misstatement in its prior period financial statements, related to the income tax provision, that it has corrected in the second quarter of 2017. The cumulative impact of the adjustment was an increase in net loss of approximately $10 million. There was no impact to pre-tax loss from continuing operations. The misstatement relates to an error in the tax provision for U.S. income of a foreign equity investment transaction for fiscal year 2016. The Company considered both quantitative and qualitative factors in assessing the materiality of the item and determined that the misstatement was not material to any prior period and not material to the three and six months ended June 30, 2017.

Correction of Errors

The Company identified classification errors within the investing section of the condensed consolidated statement of cash flows for the threesix months ended March 31, 2016 that wereJune 30, 2016. One of the errors related to the Company's Donlen operations and was previously disclosed in the Company's 2016 Form 10-K. 10‑K. The second error related to the Company's operations in Brazil and was identified during the preparation of the condensed consolidated statement of cash flows for the six months ended June 30, 2017.

The Company considered both quantitative and qualitative factors in assessing the materiality of the classification errors individually, and in the aggregate, and determined that the classification errors were not material and revised the accompanying condensed consolidated statement of cash flows for the threesix months ended March 31,June 30, 2016 to correct for the classification errors.accordingly. Correction of the errors which did not impact total operating, investing or financing cash flows, decreased both revenue earning vehicles expenditures and proceeds from disposals of revenue earning vehicles by $205$381 million for the threesix months ended March 31, 2016. This revisionJune 30, 2016 and did not impact total operating, investing or financing cash flows. These revisions had no impact on the Company's condensed consolidated balance sheet at December 31, 2016 or its condensed consolidated statement of operations for the three and six months ended March 31,June 30, 2016.

Recently Issued Accounting Pronouncements

Adopted

Improvements to Employee Share-Based Payment Accounting

In March 2016, the FASB issued guidance that simplifies several areas of employee share-based payment accounting, including income taxes, forfeitures, minimum statutory withholding requirements, and classifications within the statement of cash flows. Most significantly, the new guidance eliminates the need to track tax “windfalls” in a separate pool within additional paid-in capital; instead, excess tax benefits and tax deficiencies will be recorded within income tax expense. The Company adopted this guidance in accordance with the effective date on January 1, 2017. The method of adoption with respect to the condensed consolidated balance sheet was a modified retrospective basis. Upon adoption, the Company recorded a deferred tax asset with an offsetting entry to the opening accumulated deficit to recognize net operating loss carryforwards, net of a valuation allowance, attributable to excess tax benefits on stock compensation that had not been previously recognized. Additionally, the Company has elected to continue to estimate forfeitures expected to occur.


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THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited

The impact to the condensed consolidated opening balance sheet as of January 1, 2017 of adopting this guidance was as follows (in millions):

Hertz Global
 Deferred income taxes, net Total liabilities Accumulated deficit Total equity Total liabilities and equity
As of December 31, 2016$2,149
 $18,080
 $(882) $1,075
 $19,155
Record deferred tax asset(49) (49) 49
 49
 
As of January 1, 2017$2,100
 $18,031
 $(833) $1,124
 $19,155

Hertz
 Deferred income taxes, net Total liabilities Accumulated deficit Total equity Total liabilities and equity
As of December 31, 2016$2,149
 $18,080
 $(1,867) $1,075
 $19,155
Record deferred tax asset(49) (49) 49
 49
 
As of January 1, 2017$2,100
 $18,031
 $(1,818) $1,124
 $19,155

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THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited


The method of adoption with respect to the condensed consolidated statement of operations and the condensed consolidated statements of cash flows pertaining to excess tax benefits or deficiencies is on a prospective basis. The method of adoption with respect to the condensed consolidated statements of cash flows pertaining to employee taxes paid is on a retrospective basis and adoption of the guidance did not impact the Company's cash flows.

Classification of Certain Cash Receipts and Cash Payments

In August 2016, the FASB issued guidance that addresses the treatment of certain transactions in statements of cash flow,flows, with the objective of reducing the existing diversity in practice in how certain cash receipts and cash payments are presented and classified. These items include debt prepayment or debt extinguishment costs, proceeds from the settlement of life insurance claims, proceeds from the settlement of corporate-owned life insurance policies, and distributions received from equity method investees. The Company adopted this guidance early, as permitted, on a retrospective basis, on January 1, 2017. Adoption of this guidance did not impact the Company’s financial position, results of operations or cash flows.

Accounting for Goodwill Impairment

In January 2017, the FASB issued guidance that eliminates the second step of the two-step goodwill impairment test, which requires the determination of the implied fair value of goodwill to measure an impairment. Rather, a goodwill impairment charge will be calculated as the amount by which a reporting unit's carrying amount exceeds its fair value. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The Company adopted this guidance early, as permitted, on a prospective basis, on January 1, 2017. Adoption of this guidance did not impact the Company’s financial position, results of operations or cash flows.

Scope of Modification Accounting for Share-Based Payment Awards

In May 2017, the FASB issued guidance that amends the scope of modification accounting for share-based payment arrangements. The guidance describes the types of changes to the terms or conditions of share-based payment awards where modification accounting is required to be applied. Modification accounting is not required if the fair value, vesting conditions and classification of the awards are the same immediately before and after the modification. The Company adopted this guidance early, as permitted, on a prospective basis, on April 1, 2017. Adoption of this guidance did not impact the Company’s financial position, results of operations or cash flows.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited


Not Yet Adopted

Revenue from Contracts with Customers

In May 2014, the FASB issued guidance that will replace most existing revenue recognition guidance in U.S. GAAP. The new guidance applies to all contracts with customers except for leases, insurance contracts, financial instruments, certain nonmonetary exchanges and certain guarantees. The core principle of the guidance is that an entity should recognize revenue from customers for the transfer of goods or services equal to the amount that it expects to be entitled to receive for those goods or services. The new principles-based revenue recognition model requires an entity to perform five steps: 1) identify the contract(s) with a customer, 2) identify the performance obligations in the contract, 3) determine the transaction price, 4) allocate the transaction price to the performance obligations in the contract, and 5) recognize revenue when (or as) the entity satisfies a performance obligation. Under the new guidance, performance obligations in a contract will be separately identified, which may impact the timing of recognition of the revenue allocated to each obligation. The measurement of revenue recognized may also be impacted by identification of new performance obligations and other provisions, such as collectability and variable consideration. The guidance will impact the Company’s accounting for certain contracts and its Hertz Gold Plus Rewards liability. Upon adoption, each transaction which generates Hertz Gold Plus Rewards points will result in the deferral of revenue; the associated revenue will be recognized at the time when the customer redeems the reward points. Currently the Company records an expense associated with the incremental cost of providing the rental when the reward points are earned. Also, additional disclosures are required about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. The FASB has issued several amendments and updates to the new revenue standard (collectively, “Topic 606”), including guidance may be adopted on eitherrelated to when an entity should recognize revenue gross as a fullprincipal or modified retrospective basis.net as an agent and how an entity should identify performance obligations. As originally issued, the guidanceamended, Topic 606 is effective for annual reportingand interim periods beginning after December 15, 2016, including interim2017, with early adoption permitted, and allows for full retrospective adoption applied to all periods within those reporting periods. In July 2015,presented or a modified retrospective adoption with the FASB deferredcumulative effect of initially applying the effectivenew guidance as an adjustment to the opening balance of retained earnings recognized at the date of initial application. The Company intends to adopt Topic 606 when effective on January 1, 2018 using a modified retrospective approach applied to all contracts. Prior periods will not be retrospectively adjusted. The Company has reached conclusions on several key accounting assessments related to its revenue recognition, however, it is still finalizing its assessment and quantifying the guidance until annualimpacts that adoption of Topic 606 will have on the accounting for its loyalty programs, such as Hertz Gold Plus Rewards, as further described below. The Company is still in the process of determining the level of disaggregated revenue information that it will include in its disclosures and interimcontinues to evaluate its internal controls over financial reporting periods beginning after December 15, 2017.to ensure that controls are in place to prevent or detect material misstatements to the consolidated financial statements upon adoption of Topic 606.

In March 2016,Vehicle Rental Operations

The Company has concluded that revenue earned by operations for the FASB issued clarifyingrental of vehicles and from other forms of rental related activities wherein an identified asset is transferred to the customer and the customer has the ability to control that asset is outside of the scope of Topic 606 and will be evaluated under the new lease guidance on assessing whether an entitydescribed in more detail in the “Leases” disclosure below.

Recognition of revenue from other forms of rental related activities that represent a service will not be materially impacted by adoption of Topic 606.

The Company is still in the process of evaluating the breakdown of its vehicle rental revenues into lease and non-lease components.

Recognition of revenue earned through the licensing of the Hertz, Dollar and Thrifty brands under franchise agreements (“franchise fees”) is expected to remain consistent with current revenue recognition guidance except for initial and renewal franchise fees. Currently, initial franchise fees are recorded as deferred income when received and are recognized as revenue when all material upfront services and conditions related to the franchise fee have been substantially performed and renewal franchise fees are recognized as revenue when the license agreements are effective and collectability is reasonably assured. Upon adoption, revenue from initial and renewal franchise fees that relate to a principal or an agentfuture contract term, for franchises in a revenueeffect as of January 1, 2018, will be deferred and recognized over the remaining contract term. However, this amount will not be material.

The Company believes that the most significant impact relates to its accounting for reward points earned by customers under its loyalty programs. Upon adoption of Topic 606, each transaction which impacts whethergenerates reward points will result in the deferral of revenue equivalent to the retail value of the redemption of the loyalty reward points. The associated revenue will be recognized at the time the customer redeems the loyalty reward points. Under the current guidance, there is no revenue deferral and the Company records an entity reports revenue on a gross or net basis. In April 2016,expense associated with the FASBincremental cost of providing

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited

issued guidance that reduces the complexity of identifying performance obligations and clarifiesfuture rental at the implementation guidance on licensing for intellectual property. In May 2016,time when the FASB issued guidance that clarifies the collectability criterion, the presentation of sales taxes, and noncash consideration, and provides additional implementation practical expedients.reward points are earned. The Company is in the process of determiningquantifying the methodimpact of adoption of Topic 606.

Fleet Leasing and assessingManagement Operations

The Company has concluded that revenue earned by operations for the overall impactleasing of adoptingvehicles and from other forms of rental related activities wherein an identified asset is transferred to the customer and the customer has the ability to control that asset is outside of the scope of Topic 606 and will be evaluated under the new lease guidance described in more detail in the “Leases” disclosure below. Administration fees and service revenue attributable to the Company's Donlen operations will not be materially impacted by adoption of Topic 606.

Leases

In February 2016, the FASB issued guidance that replaces the existing lease guidance in U.S. GAAP. The new guidance establishes a right-of-use (“ROU”) model that requires a lessee to record on the balance sheet a ROU asset and corresponding lease liability based on the present value of future lease payments for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. This guidance also expands the requirements for lessees to record leases embedded in other arrangements. Additionally, enhanced quantitative and qualitative disclosures surrounding leases are required which provide financial statement users the ability to assess the amount, timing and uncertainty of cash flows arising from leases. This guidance is effective for annual periods beginning after December 15, 2018 and interim periods within those annual periods with early adoption permitted. A modified retrospective transition approach is required for both lessees and lessors for existing leases at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The Company is still in the process of evaluating whether to avail itself of allowable practicable expedients during transition.

Lessee

Adoption of this guidance will result in a material increase in the Company's lease-related assets and liabilities on its financial position,balance sheet, primarily for leases of rental locations and other assets. Additionally, adoption of this guidance will impact the statement of cash flows with respect to the presentation of the Company's operating activities, but is not expected to impact its presentation of investing or financing activities. Adoption of this guidance is not expected to have a material impact on the Company’s results of operations. The Company has reached conclusions on key accounting assessments related to its leases and is performing an analysis of its lease portfolio to ensure proper application of the new guidance including implementation of internal controls over financial reporting.

Lessor

The Company has concluded that revenue earned by operations for the rental and cash flows.leasing of vehicles and from other forms of rental related activities wherein an identified asset is transferred to the customer and the customer has the ability to control that asset is within the scope of this guidance and that additional disclosures regarding lease revenue are required upon adoption. There is no impact to the nature, timing or recognition of rental lease revenue upon adoption of this guidance.

Recognition and Measurement of Financial Assets and Financial Liabilities

In January 2016, the FASB issued guidance that makes several changes to the manner in which financial assets and liabilities are accounted for, including, among other things, a requirement to measure most equity investments at fair value with changes in fair value recognized in net income (with the exception of investments that are consolidated or accounted for using the equity method or a fair value practicability exception), and amends certain disclosure requirements related to fair value measurements and financial assets and liabilities. This guidance is effective for annual periods beginning after December 15, 2017 and interim periods within those annual periods using a modified retrospective transition method for most of the requirements. Based on current operations, adoption of this guidance is not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

Leases
16


In February 2016, the FASB issued guidance that replaces the existing lease guidance. The new guidance establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and lease liability on the balance sheet for all leases with terms longer than 12 months. The guidance will impact the Company's accounting for leases
Table of the Company's rental locations, as the Company owns approximately 3% of the locations from which it operates its vehicle rental business, in addition to leases of other assets. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. This guidance also expands the requirements for lessees to record leases embedded in other arrangements and the required quantitative and qualitative disclosures surrounding leases. For lessors, the guidance modifies classification criteria and accounting for sales-type and direct financing leases and requires a lessor to derecognize the carrying value of the leased asset that is considered to have been transferred to a lessee and record a lease receivable and residual asset. This guidance is effective for annual periods beginning after December 15, 2018 and interim periods within those annual periods using a modified retrospective transition approach. A modified retrospective transition approach is required for both lessees and lessors for existing leases at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. Although the Company is still in the process of assessing the overall impact of adopting this guidance on its financial position, results of operations and cash flows, it expects that adoption of this guidance will result in a material increase in lease-related assets and liabilities on its condensed consolidated balance sheet.Contents
HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited


Measurement of Credit Losses on Financial Instruments

In June 2016, the FASB issued guidance that sets forth a current expected credit loss (“CECL”) impairment model for financial assets, which replaces the current incurred loss model. This model requires a financial asset (or group of financial assets), including trade receivables, measured at amortized cost to be presented at the net amount expected to be collected with an allowance for credit losses deducted from the amortized cost basis. The allowance for credit losses should reflect management’s current estimate of credit losses that are expected to occur over the remaining life of a financial asset. This guidance is effective for annual periods beginning after December 15, 2019 and interim periods within those annual periods using a modified retrospective transition method. AdoptionBased on current operations, adoption of this guidance is not expected to have a material impact on the Company's financial position, results of operations or cash flows.

Tax Consequences of Intra-Entity Transfers of Assets Other Than Inventory

In October 2016, the FASB issued guidance that requires the tax consequences of intra-entity asset transfers, other than intra-entity asset transfers of inventory, to be recognized when the transfers occur although the profits on the sales of the assets are eliminated in consolidation. Current guidance requires the tax effects of the transfer be recognized later when the assets are sold to a third party or otherwise disposed of. Under the new guidance, the seller's tax

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited

expense on the profit and the buyer's deferred tax benefit on the increased tax basis are recognized within the consolidated group when the transfers occur. The guidance is effective for annual periods beginning after December 15, 2017 and interim periods within those annual periods using a modified retrospective transition method. AdoptionBased on current operations, adoption of this guidance is not expected to have a material impact on the Company's financial position, results of operations, and cash flows.

Restricted Cash

In November 2016, the FASB issued guidance that clarifies existing guidance on the classification and presentation of restricted cash in the statement of cash flows. The guidance requires entities to include restricted cash and restricted cash equivalents in its cash and cash equivalents balances in the statement of cash flows. Under current guidance, the Company presents these transfers within the cash flows from investing sectionand financing sections in its consolidated statements of cash flows. The guidance is effective for annual periods beginning after December 15, 2017 and interim periods within those annual periods using a retrospective transition method. The Company estimates that adoptionAdoption of this guidance would result inwill impact the inclusionreconciliation of restricted cash of $266 million and $341 million for the three months ended March 31, 2017 and 2016, respectively, when reconciling the beginning-of-period and end-of-period total amounts shown on the accompanying condensed consolidated statementsCompany's statement of cash flows. For the six months ended June 30, 2017, the amount of cash and cash equivalents as presented on the statement of cash flows will increase by $1.1 billion. Additionally, transfers between restricted and unrestricted cash will no longer be a component of the Company's investing or financing activities.

Clarifying the Definition of a Business

In January 2017, the FASB issued guidance that clarifies the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The guidance requires an evaluation of whether substantially all of the fair value of assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets. If so, the transaction does not qualify as a business. The guidance also requires an acquired business to include at least one substantive process and narrows the definition of outputs. The guidance is effective for annual periods beginning after December 15, 2017 and interim periods within those annual periods using a prospective transition method. AdoptionBased on current operations, adoption of this guidance is not expected to have a material impact on the Company's financial position, results of operations or cash flows.

Clarifying the Scope of Nonfinancial Asset Derecognition and Accounting for Partial Sales of Nonfinancial Assets

In February 2017, the FASB issued guidance that clarifies the scope of the established guidance on nonfinancial asset derecognition as well as the accounting for partial sales of nonfinancial assets. The guidance is effective for annual reporting periods beginning after December 15, 2017 and interim periods within those annual periods. The new guidance

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited

may be adopted on either a full or modified retrospective basis. The Company is in the processBased on current operations, adoption of determining the method of adoption and assessing the potential impacts of adopting this guidance on itsis not expected to impact the Company's financial position, results of operations andor cash flows.

Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost

In March 2017, the FASB issued guidance that requires entities to (1) disaggregate the current-service-cost component from the other components of net benefit cost (the “other components”) and present itthe current-service-cost component with other current compensation costs for related employees in the income statement and (2) present the other components elsewhere in the income statement and outside of income from operations if such a subtotal is presented. The guidance also requires entities to disclose the income statement lines that contain the other components if they are not presented on described separate lines. In addition, only the service-cost component of net benefit cost is eligible for capitalization, which is a change from current practice, under which entities capitalize the aggregate net benefit cost when applicable. The guidance is effective for annual reporting periods beginning after December 15, 2017 and interim periods within those annual periods. The guidance affecting the presentation of the components of net periodic benefit cost in the income statement requires use of the retrospective method of adoption and the guidance limiting the capitalization of net periodic benefit cost to the service cost component requires use of the prospective method of adoption. The Company is in the processAdoption of assessing the overall impact of adopting this guidance on itswill result in a reclassification of certain amounts from direct vehicle and operating expense and selling, general and administrative expense to other (income) expense, net which does not impact the Company's financial position, results of operations andor cash flows. The Company does not expect the reclassified amounts to be material.


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THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited

Note 3—Discontinued Operations

As further described in Note 1, "Background," on June 30, 2016, the separation of Old Hertz Holdings' global vehicle rental and equipment rental businesses was completed.

Results of Discontinued Operations - Hertz Global

The following table summarizes the results of the equipment rental business and certain parent legal entities which are presented as discontinued operations in 2016:
Three Months Ended
March 31,
Three Months Ended
June 30,
 Six Months Ended
June 30,
(In millions)20162016 2016
Total revenues$328
$349
 $677
Direct operating expenses183
182
 366
Depreciation of revenue earning equipment and lease charges, net90
91
 181
Selling, general and administrative42
81
 123
Interest expense, net(1)
7
11
 17
Other (income) expense, net(1)
 (1)
Income (loss) from discontinued operations before income taxes7
(16) (9)
(Provision) benefit for taxes on discontinued operations(6)1
 (4)
Net income (loss) from discontinued operations$1
$(15) $(13)

(1) In addition to interest expense directly associated with Herc Holdings, the Company allocated interest expense related to certain debt repaid in connection with the Spin-Off to discontinued operations. For the three months ended March 31,June 30, 2016, the amount allocated was $2$3 million. For the six months ended June 30, 2016, the amount allocated was $5 million.


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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited

Results of Discontinued Operations - Hertz

The following table summarizes the results of the equipment rental business which is presented as discontinued operations in 2016:
Three Months Ended
March 31,
Three Months Ended
June 30,
 Six Months Ended
June 30,
(In millions)20162016 2016
Total revenues$328
$349
 $677
Direct operating expenses183
182
 366
Depreciation of revenue earning equipment and lease charges, net90
91
 181
Selling, general and administrative42
82
 124
Interest expense, net(1)
4
10
 13
Other (income) expense, net(1)
 (1)
Income (loss) from discontinued operations before income taxes10
(16) (6)
(Provision) benefit for taxes on discontinued operations(7)1
 (5)
Net income (loss) from discontinued operations$3
$(15) $(11)

(1) In addition to interest expense directly associated with Herc Holdings, the Company allocated interest expense related to certain debt repaid in connection with the Spin-Off to discontinued operations. For the three months ended March 31,June 30, 2016, the amount allocated was $2$3 million. For the six months ended June 30, 2016, the amount allocated was $5 million.


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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited

Note 4—Acquisitions and Divestitures

Divestitures

CAR Inc. Investment

In March 2016, the Company sold 204 million shares of common stock of CAR Inc., a publicly traded company on the Hong Kong Stock Exchange and extended its commercial agreement with CAR Inc. to 2023, in exchange for $240 million, of which $233 million was allocated to the sale of shares based on the fair value of those shares. The sale of shares resulted in a pre-tax gain of $75 million which has been recognized and recorded in the Company's corporate operations and is included in other (income) expense, net in the accompanying condensed consolidated statements of operations. Additionally, $7 million of the proceeds were allocated to the extension of the commercial agreement which have been deferred and are being recognized over the remaining term of the commercial agreement. The sale of the shares reduced the Company's ownership interest in CAR Inc. to 1.7% and eliminated the Company's ability to exercise significant influence over CAR Inc. As a result, the Company classifies the investment as an available for sale security which is presented within prepaid expenses and other assets in the accompanying condensed consolidated balance sheet as of December 31, 2016.

In February 2017, the Company sold its remaining shares of common stock of CAR Inc. and no longer has an ownership interest in the entity.

Brazil Operations

During the fourth quarter of 2016, the Company, along with certain of its wholly owned subsidiaries, entered into a definitive stock purchase agreement ("Purchase Agreement") to sell Car Rental Systems do Brasil LocacaoLocação de Veiculos Ltd., a wholly owned subsidiary of the Company located in Brazil ("Brazil Operations"), to Localiza Fleet S.A. (“Localiza”), a corporation headquartered in Brazil. As part of the overall agreement, the Company intends to enter into certain ancillary agreements with Localiza, including co-branding in Brazil and use of the Localiza brand in other select markets, customer referrals and the exchange of technology and information, at the closing date of the Purchase Agreement and upon receiving clearance from the regulatory authority in Brazil.Agreement. The proceeds from the sale are expected to be approximately $117$108 million, which is subject to change in accordance with the terms of the Purchase Agreement. Approximately $13$12 million of the proceeds will be placed into escrow to secure certain indemnification obligations as defined in the Purchase Agreement. The transaction is subject to In July 2017, the Company received

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited

regulatory approval and customary closing conditions. Thefor the sale which is expected to close induring the secondthird quarter of 2017. The Brazil Operations are included in the Company's International Rental Car segment.

The Brazil operations are classified as held for sale in the accompanying condensed consolidated balance sheets.


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THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited

The carrying amounts of the major classes of assets and liabilities of the Brazil Operations are as follows:
(In millions)March 31, 2017 December 31, 2016June 30, 2017 December 31, 2016
ASSETS      
Cash and cash equivalents$8
 $1
$4
 $1
Receivables, net12
 11
12
 11
Prepaid expenses and other assets3
 5
3
 5
Revenue earning vehicles, net95
 86
81
 86
Property and equipment, net1
 1
1
 1
Intangibles1
 1
2
 1
Deferred income taxes, net7
 6
6
 6
Assets held for sale$127
 $111
$109
 $111
LIABILITIES      
Accounts payable$11
 $11
$6
 $11
Accrued liabilities6
 6
7
 6
Liabilities held for sale$17
 $17
$13
 $17

Note 5—Revenue Earning Vehicles

The components of revenue earning vehicles, net are as follows:
(In millions)March 31, 2017 December 31, 2016June 30, 2017 December 31, 2016
Revenue earning vehicles$13,944
 $13,287
$15,739
 $13,287
Less: Accumulated depreciation(2,665) (2,678)(2,843) (2,678)
11,279
 10,609
12,896
 10,609
Revenue earning vehicles held for sale, net414
 209
290
 209
Revenue earning vehicles, net$11,693
 $10,818
$13,186
 $10,818

The above amounts exclude revenue earning vehicles of the Company's Brazil Operations which are deemed held for sale as further described in Note 4, "Acquisitions and Divestitures".

Depreciation of revenue earning vehicles and lease charges, net includes the following:
Three Months Ended
March 31,
Three Months Ended
June 30,
 Six Months Ended
June 30,
(In millions)2017 20162017 2016 2017 2016
Depreciation of revenue earning vehicles$605
 $558
$660
 $576
 $1,265
 $1,135
(Gain) loss on disposal of revenue earning vehicles(a)
79
 43
66
 35
 145
 77
Rents paid for vehicles leased17
 15
17
 18
 34
 33
Depreciation of revenue earning vehicles and lease charges, net$701
 $616
$743
 $629
 $1,444
 $1,245


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THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited

(a)    (Gain) loss on disposal of revenue earning vehicles by segment is as follows:
Three Months Ended
March 31,
Three Months Ended
June 30,
 Six Months Ended
June 30,
(In millions)2017 20162017 2016 2017 2016
U.S. Rental Car(i)
$78
 $43
$67
 $38
 $145
 $81
International Rental Car1
 
(1) (3) 
 (4)
Total$79
 $43
$66
 $35
 $145
 $77

(i) Includes costs associated with the Company's U.S. vehicle sales operations of $30$34 million and $25$27 million for the three months ended March 31,June 30, 2017 and 2016, respectively, and $63 million and $53 million, for the six months ended June 30, 2017 and 2016, respectively.

Depreciation rates are reviewed on a quarterly basis based on management's ongoing assessment of present and estimated future market conditions, their effect on residual values at the time of disposal and the estimated holding periods for the vehicles. The impact of depreciation rate changes is as follows:
Increase (decrease)Three Months Ended
March 31,
Three Months Ended
June 30,
 Six Months Ended
June 30,
(In millions)2017 20162017 2016 2017 2016
U.S. Rental Car(a)$26
 $27
$36
 $19
 $62
 $45
International Rental Car
 1
1
 1
 1
 2
Total$26
 $28
$37
 $20
 $63
 $47

(a)The depreciation rate changes in the U.S. Rental Car operations for the three and six months ended June 30, 2017 include a net increase in depreciation expense of $24 million based on the review completed during the second quarter of 2017. The depreciation rate changes in the U.S. Rental Car operations for the three and six months ended June 30, 2016 include a net increase in depreciation expense of $12 million based on the review completed during the second quarter of 2016.

Note 6—Goodwill and Intangible Assets

As a result of declines in revenue and profitability of the Company and a decline in the share price of Hertz Global's common stock, the Company tested the recoverability of its goodwill and indefinite-lived intangible assets as of June 30, 2017 as further described below.

Goodwill

The Company performed a goodwill impairment analysis using the income approach, a measurement using level 3 inputs under the GAAP fair value hierarchy. In performing the impairment analysis, the Company leveraged long-term strategic plans, which are based on strategic initiatives for future profitability growth. The weighted average cost of capital used in the discounted cash flow model was calculated based upon the fair value of the Company's debt and stock price with a debt to equity ratio comparable to the vehicle rental car industry. The results of the Company's analysis indicated that the estimated fair value of each reporting unit was substantially in excess of its carrying value, therefore, the Company determined that no goodwill impairment existed as of June 30, 2017.

Intangible Assets

The Company performed an impairment analysis of its indefinite-lived intangible assets using the relief from royalty method, a measurement using level 3 inputs under the GAAP fair value hierarchy. As a result of the analysis, the Company concluded that there was an impairment of the Dollar Thrifty tradename in its U.S. Rental Car segment and recorded a charge of $86 million. The impairment was largely due to a decrease in long-term revenue projections coupled with an increase in the weighted average cost of capital. The carrying value of the Dollar Thrifty tradename at June 30, 2017 is approximately $934 million, representing its estimated fair value. A change of 1 percentage point to the weighted average cost of capital assumption used in the impairment analysis could impact the impairment charge by approximately $80 million.


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THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited

Note 7—Debt

The Company's debt, including its available credit facilities, consists of the following (in millions):
Facility Weighted Average Interest Rate at March 31, 2017 Fixed or
Floating
Interest
Rate
 Maturity March 31,
2017
 December 31,
2016
 Weighted Average Interest Rate at June 30, 2017 Fixed or
Floating
Interest
Rate
 Maturity June 30,
2017
 December 31,
2016
Non-Vehicle Debt        
Senior Term Loan 3.54% Floating 6/2023 $695
 $697
 3.98% Floating 6/2023 $693
 $697
Senior RCF N/A Floating 6/2021 
 
 4.41% Floating 6/2021 750
 
Senior Notes(1)
 6.07% Fixed 4/2018–10/2024 3,200
 3,200
 6.22% Fixed 4/2019–10/2024 2,950
 3,200
Senior Second Priority Secured Notes 7.63% Fixed 6/2022 1,250
 
Promissory Notes 7.00% Fixed 1/2028 27
 27
 7.00% Fixed 1/2028 27
 27
Other Non-Vehicle Debt 2.01% Fixed Various 10
 10
 1.98% Fixed Various 9
 10
Unamortized Debt Issuance Costs and Net (Discount) Premium (37) (39) (46) (39)
Total Non-Vehicle Debt 3,895
 3,895
 5,633
 3,895
Vehicle Debt        
HVF U.S. Vehicle Medium Term NotesHVF U.S. Vehicle Medium Term Notes    HVF U.S. Vehicle Medium Term Notes    
HVF Series 2010-1(2)
 4.96% Fixed 2/2018 115
 115
 4.96% Fixed 2/2018 115
 115
HVF Series 2011-1(2)
 N/A N/A N/A 
 115
 N/A N/A N/A 
 115
HVF Series 2013-1(2)
 1.91% Fixed 8/2018 625
 625
 1.91% Fixed 8/2018 625
 625
 740
 855
 740
 855
HVF II U.S. ABS Program        
HVF II U.S. Vehicle Variable Funding NotesHVF II U.S. Vehicle Variable Funding Notes    HVF II U.S. Vehicle Variable Funding Notes    
HVF II Series 2013-A(2)
 2.25% Floating 1/2019 2,609
 1,844
 2.39% Floating 1/2019 3,223
 1,844
HVF II Series 2013-B(2)
 2.18% Floating 1/2019 438
 626
 2.34% Floating 1/2019 268
 626
HVF II Series 2017-A(2)
 N/A Floating 10/2018 
 
 3,047
 2,470
 3,491
 2,470
HVF II U.S. Vehicle Medium Term NotesHVF II U.S. Vehicle Medium Term Notes    
HVF II Series 2015-1(2)
 2.93% Fixed 3/2020 780
 780
HVF II Series 2015-2(2)
 2.30% Fixed 9/2018 250
 250
HVF II Series 2015-3(2)
 2.96% Fixed 9/2020 350
 350
HVF II Series 2016-1(2)
 2.72% Fixed 3/2019 439
 439
HVF II Series 2016-2(2)
 3.25% Fixed 3/2021 561
 561
HVF II Series 2016-3(2)
 2.56% Fixed 7/2019 400
 400
HVF II Series 2016-4(2)
 2.91% Fixed 7/2021 400
 400
 3,180
 3,180
Donlen ABS Program    
HFLF Variable Funding Notes    
HFLF Series 2013-2(2)
 2.11% Floating 9/2018 150
 410
 150
 410

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited

Facility Weighted Average Interest Rate at March 31, 2017 Fixed or
Floating
Interest
Rate
 Maturity March 31,
2017
 December 31,
2016
 Weighted Average Interest Rate at June 30, 2017 Fixed or
Floating
Interest
Rate
 Maturity June 30,
2017
 December 31,
2016
HVF II U.S. Vehicle Medium Term Notes    
HVF II Series 2015-1(2)
 2.93% Fixed 3/2020 780
 780
HVF II Series 2015-2(2)
 2.30% Fixed 9/2018 250
 250
HVF II Series 2015-3(2)
 2.96% Fixed 9/2020 350
 350
HVF II Series 2016-1(2)
 2.72% Fixed 3/2019 439
 439
HVF II Series 2016-2(2)
 3.25% Fixed 3/2021 561
 561
HVF II Series 2016-3(2)
 2.56% Fixed 7/2019 400
 400
HVF II Series 2016-4(2)
 2.91% Fixed 7/2021 400
 400
 3,180
 3,180
Donlen ABS Program    
HFLF Variable Funding Notes    
HFLF Series 2013-2(2)
 2.01% Floating 9/2018 457
 410
 457
 410
HFLF Medium Term Notes        
HFLF Series 2013-3(5)
 2.02% Floating 4/2017-6/2017 59
 96
 N/A N/A N/A 
 96
HFLF Series 2014-1(5)
 1.63% Floating 4/2017-12/2017 119
 148
 2.06% Floating 7/2017-12/2017 82
 148
HFLF Series 2015-1(5)
 1.56% Floating 4/2017-11/2019 227
 248
 1.84% Floating 7/2017-8/2019 198
 248
HFLF Series 2016-1(5)
 2.08% Floating 6/2017-4/2019 385
 385
 2.35% Both 7/2017-2/2019 387
 385
HFLF Series 2017-1(5)
 2.18% Both 6/2018-5/2020 500
 
 790
 877
 1,167
 877
Other Vehicle Debt        
U.S. Vehicle RCF(3)
 3.29% Floating 6/2021 193

193
 3.55% Floating 6/2021 168

193
European Revolving Credit Facility 2.75% Floating 1/2019 124
 147
 2.75% Floating 1/2019 284
 147
European Vehicle Notes(4)
 4.29% Fixed 1/2019–10/2021 700
 677
 4.29% Fixed 1/2019–10/2021 740
 677
European Securitization(2)
 1.55% Floating 10/2018 303
 312
 1.55% Floating 10/2018 454
 312
Canadian Securitization(2)
 2.19%
Floating
1/2019
180

162
 2.19%
Floating
1/2019
268

162
Australian Securitization(2)
 3.17% Floating 7/2018 128
 117
 3.12% Floating 7/2018 122
 117
New Zealand RCF 4.30% Floating 9/2018 42
 41
 4.30% Floating 9/2018 35
 41
Capitalized Leases 2.79% Floating 4/2017–9/2020 264
 244
 2.74% Floating 7/2017–4/2021 412
 244
 1,934
 1,893
 2,483
 1,893
Unamortized Debt Issuance Costs and Net (Discount) Premium (35) (39) (35) (39)
Total Vehicle Debt 10,113
 9,646
 11,176
 9,646
Total Debt $14,008
 $13,541
 $16,809
 $13,541
N/A - Not Applicable


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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited

(1)References to the "Senior Notes" include the series of Hertz's unsecured senior notes set forth on the table below. Outstanding principal amounts for each such series of the Senior Notes is also specified below:
(In millions)Outstanding PrincipalOutstanding Principal
Senior NotesMarch 31, 2017 December 31, 2016June 30, 2017 December 31, 2016
4.25% Senior Notes due April 2018$250
 $250
$
 $250
6.75% Senior Notes due April 2019450
 450
450
 450
5.875% Senior Notes due October 2020700
 700
700
 700
7.375% Senior Notes due January 2021500
 500
500
 500
6.25% Senior Notes due October 2022500
 500
500
 500
5.50% Senior Notes due October 2024800
 800
800
 800
$3,200
 $3,200
$2,950
 $3,200

(2)Maturity reference is to the earlier "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.
(3)Approximately $67 million of the aggregate maximum borrowing capacity under the U.S. Vehicle RCF is scheduled to expire in January 2018.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited

(4)References to the "European Vehicle Notes" include the series of Hertz Holdings Netherlands B.V.'s, an indirect wholly-owned subsidiary of Hertz organized under the laws of The Netherlands (“HHN BV”), unsecured senior notes (converted from Euros to U.S. dollars at a rate of 1.081.14 to 1 and 1.04 to 1 as of March 31,June 30, 2017 and December 31, 2016, respectively) set forth on the table below. Outstanding principal amounts for each such series of the European Vehicle Notes is also specified below:
(In millions)Outstanding PrincipalOutstanding Principal
European Vehicles NotesMarch 31, 2017 December 31, 2016June 30, 2017 December 31, 2016
4.375% Senior Notes due January 2019$458
 $443
4.125% Senior Notes due October 2021242
 234
4.375% Senior Notes due January 2019 (€425 million aggregate principal amount)$484
 $443
4.125% Senior Notes due October 2021 (€225 million aggregate principal amount)256
 234
$700
 $677
$740
 $677
(5)In the case of the Hertz VehicleFleet Lease Funding LP ("HFLF") Medium Term Notes, such notes are repayable from cash flows derived from third-party leases comprising the underlying HFLF collateral pool. The initial maturity date referenced for each series of HFLF Medium Term Notes represents the end of the revolving period for such series, at which time the related notes begin to amortize monthly by an amount equal to the lease collections payable to that series. To the extent the revolving period already has ended, the initial maturity date reflected is AprilJuly 2017. The second maturity date referenced for each series of HFLF Medium Term Notes represents the date by which Hertz and the investors in the related series expect such series of notes to be repaid in full, which is based upon various assumptions made at the time of pricing of such notes, including the contractual amortization of the underlying leases as well as the assumed rate of prepayments of such leases.  Such maturity reference is to the “expected final maturity date” as opposed to the subsequent “legal final maturity date”. The legal final maturity date is the date on which the relevant indebtedness is legally due and payable. Although the underlying lease cash flows that support the repayment of the HFLF Medium Term Notes may vary, the cash flows generally are expected to approximate a straight line amortization of the related notes from the initial maturity date through the expected final maturity date.

The Company is highly leveraged and a substantial portion of its liquidity needs arise from debt service on its indebtedness and from the funding of its costs of operations, acquisitions and capital expenditures. The Company’s practice is to maintain sufficient liquidity through cash from operations, credit facilities and other financing arrangements, to mitigate any adverse impact on its operations resulting from adverse financial market conditions. Approximately $744 million$1.4 billion of vehicle debt will mature between AprilJuly 1, 2017 and March 31,June 30, 2018. The Company has reviewed the vehicle debt that will mature within this timeframe and determined that it is probable that the Company will be able, and has the intent, to refinance these maturities. If the Company were not able to refinance these maturities, it has available liquidity sufficient to repay them at the maturity date. As of March 31,June 30, 2017, the Company was in compliance with its financial maintenance covenant under the senior secured revolving credit facility ("Senior RCF"), see "Covenant Compliance" below.

In June 2017, the Company redeemed all $250 million of its outstanding 4.25% Senior Notes due April 2018 and terminated $150 million of commitments under the Senior RCF, as further described below, and recorded $8 million of charges for early redemption premiums and the write off of deferred financing costs.

Non-Vehicle Debt

Senior Facilities

In June 2017, Hertz terminated $150 million of commitments under the Senior RCF, such that after giving effect to such termination the Senior RCF consists of a $1.55 billion senior secured revolving credit facility.

In February 2017, certain terms of the credit agreement governing the $700 million senior secured term facility (the "Senior Term Loan") and the Senior RCF (together, the "Senior Facilities") were amended with the consent of the required lenders under the Senior RCF and such credit agreement. The amendment, among other things, (i) amends

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited

the terms of the financial maintenance covenant for the Senior RCF to test, when applicable, Hertz’s consolidated first lien net leverage ratio in lieu of Hertz’s consolidated total net corporate leverage ratio, (ii) provides that Hertz shall not make dividends and certain restricted payments until a leverage ratio test is satisfied, (iii) adds a new covenant restricting the incurrence of certain corporate indebtedness, (iv) caps the amount of unrestricted cash that may be netted for purposes of calculating the consolidated first lien net leverage ratio at $500 million unless a specified consolidated total gross corporate leverage ratio is met for a specified period and (v) amends certain financial definitions relating to the foregoing.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited


Senior Notes

In June 2017, Hertz redeemed all $250 million of its outstanding 4.25% Senior Notes due April 2018 (the "April 2018 Notes").

Senior Second Priority Secured Notes

In June 2017, Hertz issued $1.25 billion in aggregate principal amount of 7.625% Senior Second Priority Secured Notes due 2022 (the "Senior Second Priority Secured Notes"), the proceeds of which are restricted under the terms of the credit agreement governing the Senior Facilities, primarily related to the repayment of indebtedness. In June 2017, the Company utilized approximately $266 million of the proceeds to pay the outstanding principal and early redemption premium in connection with the redemption of the April 2018 Notes and fees and expenses in connection with the issuance of the Senior Second Priority Secured Notes. In June 2017, the Company also exercised its right to reduce the amount of available commitments under its Senior RCF by $150 million. As of June 30, 2017, approximately $834 million in proceeds remained from the issuance of the Senior Second Priority Secured Notes and is included in restricted cash and cash equivalents, non-vehicle in the accompanying condensed consolidated balance sheet.

In July 2017, the Company rescinded a conditional notice of full redemption previously delivered in May 2017 to the holders of its 6.75% Senior Notes due April 2019. The Company is continuing to evaluate its use of the proceeds from the issuance of the Senior Second Priority Secured Notes to either repay certain of its indebtedness, which may include, among other options, repayments of outstanding borrowings under the Senior Term Loan and/or repurchases of certain of Hertz’s Senior Notes, or make additional commitment reductions under the Senior RCF.

Vehicle Debt

HVF II U.S. Vehicle Variable Funding Notes

In FebruaryMay 2017, Hertz Vehicle Financing II LP, a bankruptcy remote, indirect, wholly-owned, special purpose subsidiary of Hertz ("HVF II") entered into various amendment agreements pursuant to which certain termsissued the Series 2017-A Variable Funding Rental Car Asset Backed Notes (the “HVF II Series 2017-A Notes”) with an aggregate maximum principal amount of $500 million and a maturity date of October 2018.

In February 2017, HVF II extended the maturities of the HVF II Series 2013-A Notes and the HVF II Series 2013-B (the "HVF II Series 2013 Notes") Notes were amended. The amendments, among other things, extendedfrom October 2017 to January 2019. In April 2017, HVF II increased the maturitiescommitments of $3.2 billionthe HVF II Series 2013 Notes by $250 million, such that after giving effect to such increase the aggregate maximum principal amount of the HVF II Series 2013-A Notes was approximately $3.1 billion and the aggregate maximum principal amount of the HVF II Series 2013-B Notes was approximately $581 million. In June 2017, HVF II transitioned approximately $300 million of commitments available under the HVF II Series 2013-A2013-B Notes andto the HVF II Series 2013-B2013-A Notes.

HFLF Medium Term Notes from October

In May 2017, an affiliate of HFLF sold approximately $15 million of the HFLF Series 2016-1 Class E Notesto January 2019.third parties which it had previously purchased in the initial offering in April 2016 and previously was eliminated in consolidation.

In April 2017, HFLF, a bankruptcy remote, indirect, wholly-owned, special purpose subsidiary of Donlen, issued the Series 2017-1 Asset-Backed Notes, Class A, Class B, Class C, Class D, and Class E (collectively, the “HFLF Series 2017-1 Notes”) in an aggregate principal amount of $500 million. The HFLF Series 2017-1 Notes are fixed rate, except for the Class A-1 Notes which are floating rate and carry an interest rate based upon a spread to one-month LIBOR. The proceeds of this issuance, together with available cash, were used to reduce amounts outstanding under the HFLF Series 2013-2 Notes.


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THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited

Vehicle Debt-Other

European Revolving Credit Facility

In February 2017, HHN BV amended its credit agreement (the "European Revolving Credit Facility") to extend the maturity of €235 million of the aggregate maximum borrowings available from October 2017 to January 2019.

Canadian Securitizations

In February 2017, TCL Funding Limited Partnership, a bankruptcy remote, indirect, wholly-owned, special purpose subsidiary of Hertz ("Funding LP") amended its securitization platform in Canada (the "Canadian Securitization") to extend the maturity of CAD$350 million aggregate maximum borrowings available from January 2018 to January 2019.

Capitalized Leases-U.K. Leveraged Financing

In February 2017, the capitalized lease financings outstanding in the United Kingdom ("U.K. Leveraged Financing") were amended to extend the maturity of £250 million aggregate maximum borrowings available from October 2017 to January 2019.

See also Note 17, "Subsequent Events," regarding financing transactions occurring subsequent In May 2017, the U.K. Leveraged Financing was amended to March 31,provide for aggregate maximum leasing capacity (subject to asset availability) of up to £287.5 million during the peak season, for a seasonal commitment period into September 2017.  Following the expiration of the seasonal commitment period, aggregate maximum borrowings available under the U.K Leveraged Financing will revert to up to £250 million.

Borrowing Capacity and Availability

Borrowing capacity and availability comes from the Company's "revolving credit facilities," which are a combination of variable funding asset-backed securitization facilities, cash-flow-based revolving credit facilities and asset-based revolving credit facilities. Creditors under each such asset-backed securitization facility and asset-based revolving credit facility have a claim on a specific pool of assets as collateral. The Company's ability to borrow under each such asset-backed securitization facility and asset-based revolving credit facility is a function of, among other things, the value of the assets in the relevant collateral pool. With respect to each such asset-backed securitization facility and asset-based revolving credit facility, the Company refers to the amount of debt it can borrow given a certain pool of assets as the borrowing base.

The Company refers to "Remaining Capacity" as the maximum principal amount of debt permitted to be outstanding under the respective facility (i.e., with respect to a variable funding asset-backed securitization facility or asset-based revolving credit facility, the amount of debt the Company could borrow assuming it possessed sufficient assets as collateral) less the principal amount of debt then-outstanding under such facility. With respect to a variable funding

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THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited

asset-backed securitization facility or asset-based revolving credit facility, the Company refers to "Availability Under Borrowing Base Limitation" as the lower of Remaining Capacity or the borrowing base less the principal amount of debt then-outstanding under such facility (i.e., the amount of debt that can be borrowed given the collateral possessed at such time). With respect to the Senior RCF, "Availability Under Borrowing Base Limitation" is the same as "Remaining Capacity" since borrowings under the Senior RCF are not subject to a borrowing base.


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THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited

The following facilities were available to the Company as of March 31,June 30, 2017, and are presented net of any outstanding letters of credit:
(In millions)
Remaining
Capacity
 
Availability Under
Borrowing Base
Limitation
Remaining
Capacity
 
Availability Under
Borrowing Base
Limitation
Non-Vehicle Debt      
Senior RCF$939
 $939
$9
 $9
Total Non-Vehicle Debt939
 939
9
 9
Vehicle Debt      
U.S. Vehicle RCF7
 14
32
 10
HVF II U.S. Vehicle Variable Funding Notes369
 33
674
 20
HFLF Variable Funding Notes43
 10
350
 
European Revolving Credit Facility145
 

 
European Securitization192
 
69
 
Canadian Securitization83
 

 
Australian Securitization64
 
70
 
Capitalized Leases81
 

 
New Zealand RCF
 
9
 
Total Vehicle Debt984
 57
1,204
 30
Total$1,923
 $996
$1,213
 $39

Letters of Credit

As of March 31,June 30, 2017, there were outstanding standby letters of credit totaling $773$804 million. Such letters of credit have been issued primarily to support the Company's insurance programs, vehicle rental concessions and leaseholds as well as to provide credit enhancement for its asset-backed securitization facilities. Of this amount $761$791 million was issued under the Senior RCF, which has a $1.0 billion letter of credit sublimit, resulting in $239 million of availability under such sublimit.RCF. As of March 31,June 30, 2017, none of the letters of credit have been drawn upon.

Special Purpose Entities

Substantially all of the revenue earning vehicles and certain related assets are owned by special purpose entities, or are encumbered in favor of the lenders under the various credit facilities, other secured financings and asset-backed securities programs. None of such assets (including the assets owned by Hertz Vehicle Financing II LP, Hertz Vehicle Financing LLC, Rental Car Finance LLC, DNRS II LLC, HFLF, Donlen Trust and various international subsidiaries that facilitate the Company's international securitizations) are available to satisfy the claims of general creditors.

These special purpose entities are consolidated variable interest entities, of which the Company is the primary beneficiary, whose sole purpose is to provide commitments to lend in various currencies subject to borrowing bases comprised of revenue earning vehicles and related assets of certain of Hertz International, Ltd.'s subsidiaries. As of March 31,June 30, 2017 and December 31, 2016, its International Vehicle Financing No. 1 B.V., International Vehicle Financing No. 2 B.V. and HA Funding Pty, Ltd. variable interest entities had total assets of $432$655 million and $454 million, respectively, primarily comprised of loans receivable and revenue earning vehicles, and total liabilities of $431$654 million and $454 million, respectively, primarily comprised of debt.


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Unaudited

Covenant Compliance

In February 2017, Hertz amended the terms of the financial maintenance covenant for the Senior RCF to test, when applicable, Hertz’s consolidated first lien net leverage ratio. The amended financial covenant provides that Hertz’s consolidated first lien net leverage ratio, as defined in the Senior RCF Credit Agreement, as of the last day of any fiscal quarter (the "Covenant Leverage Ratio"), may not exceed the ratios indicated below:

Fiscal Quarter(s) Ending Maximum Ratio Maximum Ratio
March 31, 2017 3.25to1.00
June 30, 2017 3.25to1.00 3.25to1.00
September 30, 2017 3.25to1.00 3.25to1.00
December 31, 2017 and each March 31, June 30, September 30 and December 31 ending thereafter 3.00to1.00 3.00to1.00

Note 7—8—Employee Retirement Benefits

The following tabletables sets forth the net periodic pension expense:
Pension BenefitsPension Benefits
U.S. Non-U.S.U.S. Non-U.S.
Three Months Ended March 31,Three Months Ended June 30,
(In millions)2017 2016 2017 20162017 2016 2017 2016
Components of Net Periodic Benefit Cost:              
Service cost$
 $1
 $
 $
$
 $
 $1
 $1
Interest cost5
 5
 2
 2
6
 7
 1
 2
Expected return on plan assets(6) (7) (2) (3)(7) (7) (3) (3)
Net amortizations1
 2
 
 
1
 1
 1
 
Settlement loss1
 1
 
 
Net periodic pension expense (benefit)$1
 $2
 $
 $(1)$
 $1
 $
 $

 Pension Benefits
 U.S. Non-U.S.
 Six Months Ended June 30,
(In millions)2017 2016 2017 2016
Components of Net Periodic Benefit Cost:       
Service cost$
 $1
 $1
 $1
Interest cost11
 11
 3
 4
Expected return on plan assets(13) (14) (5) (6)
Net amortizations2
 4
 1
 
Settlement loss1
 1
 
 
Net periodic pension expense (benefit)$1
 $3
 $
 $(1)

Note 8—9—Stock-Based Compensation

The non-cash stock-based compensation expense associated with the Hertz Holdings stock-based compensation plans is pushed down from Hertz Global and recorded on the books at the Hertz level.

Effective January 1, 2017, the Company's board of directors adopted the 2017 Executive Incentive Compensation Plan ("2017 EICP"). The provisions of the plan provide for the pay out of any bonus earned in either cash or performance stock units ("PSUs") for certain groups of employees. The decision regarding the form of payout will be made after the bonus has been earned and as such, the grant date of the PSUs is not established until vested. The potential PSU awards will be based on a monetary amount equivalent to a percentage of employees’ salaries that will be based on

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited

the achievement of specific performance metrics in 2017. The specific monetary amount will be calculated at the time of grant. The PSUs are intended to be granted in place of cash bonus awards and, therefore, qualify as equity awards. Compensation cost for these awards is recognized over the requisite service period based on the fair value of the award at the end of each reporting period. The Company calculates the anticipated number of awards to be granted based on the bonus dollars expected to be earned divided by the stock price as of the reporting date. The anticipated awards are used to estimate the compensation expense as of the reporting date. Compensation charges will accumulate as a liability until the grant date, at which time the liability will be reclassified to equity. During the three and six months ended March 31,June 30, 2017, the Company recognized approximately $2 million and $3 million, respectively, of stock-based compensation expense associated

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THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited

with the 2017 EICP. The Company expects approximately 350,000540,000 shares will be granted in connection with this program based on the Company’s stock price as of March 31,June 30, 2017.

Under the Hertz Global Holdings, Inc. 2016 Omnibus Incentive Plan, (the "2016 Omnibus Plan"), during the threesix months ended March 31,June 30, 2017, Hertz Global granted 557,882 non-qualified stock options to certain executives and employees at a weighted average grant date fair value of $9.44 as determined using the Black Scholes option pricing model; 458,709545,283 restricted stock units ("RSUs") at a weighted average grant date fair value of $22.18$20.26; 412,618423,052 PSUs at a weighted average grant date fair value of $22.19$22.08 and 664,643 performance stock awards ("PSAs") at a weighted average grant date fair value of $22.19, with vesting terms of three to five years. None of the PSUs associated with the 2017 EICP plan are included in the grant amounts above. During the three and six months ended March 31,June 30, 2017, the Company recognized approximately $5$3 million and $9 million, respectively, of stock-based compensation expense associated with the 2016 Omnibus Plan.

A summary of the total compensation expense and associated income tax benefits recognized under all plans, including the cost of stock options, RSUs, PSUs and PSAs is as follows:
Three Months Ended
March 31,
Three Months Ended
June 30,
 Six Months Ended
June 30,
(In millions)2017 20162017 2016 2017 2016
Compensation expense$7
 $5
$5
 $6
 $12
 $12
Income tax benefit(3) (2)(2) (2) (5) (5)
Total$4
 $3
$3
 $4
 $7
 $7

As of March 31,June 30, 2017, there was $30$26 million of total unrecognized compensation cost related to non-vested stock options, RSUs, PSUs and PSAs granted by Hertz Global under all plans. The total unrecognized compensation cost is expected to be recognized over the remaining 2.01.7 years, on a weighted average basis, of the requisite service period that began on the grant dates.

Note 9—10—Restructuring

The Company continuously evaluates its workforce, product offerings and operations to determine when headcount reductions, business process re-engineering, asset impairments or outsourcing arrangements are necessary. There were no significant restructuring programs initiated during the three and six months ended March 31,June 30, 2017.

Restructuring charges for the periods shown are as follows:
 Three Months Ended
March 31,
(In millions)2017 2016
By Type:   
Termination benefits$1
 $6
Facility closure and lease obligation costs
 1
Total$1
 $7

 Three Months Ended
March 31,
(In millions)2017 2016
By Caption:   
Direct vehicle and operating$
 $1
Selling, general and administrative1
 6
Total$1
 $7
 Three Months Ended
June 30,
 Six Months Ended
June 30,
(In millions)2017 2016 2017 2016
By Type:       
Termination benefits$2
 $10
 $3
 $16
Impairments and asset write-downs
 3
 
 3
Facility closure and lease obligation costs
 5
 
 5
Total$2
 $18
 $3
 $24


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THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited

 Three Months Ended
March 31,
(In millions)2017 2016
By Segment:   
U.S. Rental Car$
 $6
International Rental Car1
 1
Total$1
 $7
 Three Months Ended
June 30,
 Six Months Ended
June 30,
(In millions)2017 2016 2017 2016
By Caption:       
Direct vehicle and operating$
 $8
 $
 $9
Selling, general and administrative2
 10
 3
 15
Total$2
 $18
 $3
 $24

 Three Months Ended
June 30,
 Six Months Ended
June 30,
(In millions)2017 2016 2017 2016
By Segment:       
U.S. Rental Car$1
 $15
 $1
 $21
International Rental Car
 3
 1
 3
Corporate1
 
 1
 
Total$2
 $18
 $3
 $24

The following table sets forth the activity during the threesix months ended March 31,June 30, 2017 affecting the restructuring accrual, which is included in accrued liabilities in the accompanying condensed consolidated balance sheets. The Company expects to pay the remaining restructuring obligations relating to termination benefits overwithin the next twenty‑four months.two years. Other is primarily comprised of future lease obligations which will be paid over the remaining term of the applicable leases.
(In millions)Termination
Benefits
 Other TotalTermination
Benefits
 Other Total
Balance as of December 31, 2016$13
 $14
 $27
$13
 $14
 $27
Charges incurred1
 
 1
3
 
 3
Cash payments(2) (1) (3)(4) (2) (6)
Balance as of March 31, 2017$12
 $13
 $25
Balance as of June 30, 2017$12
 $12
 $24

Note 10—11—Income Tax (Provision) Benefit

Hertz Global

The effective tax rate for the three months ended June 30, 2017 and 2016 was 36% and 20%, respectively. The effective tax rate for the six months ended June 30, 2017 and 2016 was 29% and 29%, respectively.

The Company recorded a tax benefit of $87 million for the three months ended June 30, 2017, compared to $7 million for the three months ended June 30, 2016. The change was the result of composition of earnings and lower worldwide pre-tax income, offset by discrete items in the quarter, attributable to the out of period adjustment as disclosed in Note 2, "Basis of Presentation and Recently Issued Accounting Pronouncements" and due in part to tax charges from stock compensation.

The Company recorded a tax benefit of $158 million for the six months ended June 30, 2017, compared to $32 million for the six months ended June 30, 2016. The change was the result of composition of earnings and lower worldwide pre-tax income, offset by discrete items in the first half of 2017, attributable to the out of period adjustment as disclosed in Note 2, "Basis of Presentation and Recently Issued Accounting Pronouncements" and due in part to tax charges from stock compensation.

Hertz

The effective tax rate for the three months ended March 31,June 30, 2017 and 2016 was 24%35% and 32%20%, respectively. The effective tax rate for the full fiscal yearsix months ended June 30, 2017 is expected to be approximately 27%.and 2016 was 29% and 29%, respectively.


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THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited

The Company recorded a tax benefit of $71$86 million for the three months ended March 31,June 30, 2017, compared to $24$7 million for the three months ended March 31,June 30, 2016. The change was the result of composition of earnings by jurisdiction and lower worldwide pre-tax income, offset by discrete items in the quarter.quarter, attributable to the out of period adjustment as disclosed in Note 2, "Basis of Presentation and Recently Issued Accounting Pronouncements" and due in part to tax charges from stock compensation.

The Company recorded a tax benefit of $157 million for the six months ended June 30, 2017, compared to $32 million for the six months ended June 30, 2016. The change was the result of composition of earnings and lower worldwide pre-tax income, offset by discrete items in the first half of 2017, attributable to the out of period adjustment as disclosed in Note 2, "Basis of Presentation and Recently Issued Accounting Pronouncements" and due in part to tax charges from stock compensation.

Note 11—12—Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The fair value of accounts receivable, accounts payable and accrued expenses, to the extent the underlying liability will be settled in cash, approximates the carrying values because of the short-term nature of these instruments.

Cash Equivalents and Investments

The Company’s cash equivalents primarily consist of money market accounts. The Company determines the fair value of cash equivalents using a market approach based on quoted prices in active markets.

Investments in equity and other securities that are measured at fair value on a recurring basis consist of available for sale securities. The valuation of these securities is based on Level 1 inputs whereby all significant inputs are observable or can be derived from or corroborated by observable market data.


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THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited

The following table summarizes the ending balances of the Company's cash equivalents and investments.investments:
 March 31, 2017 December 31, 2016 June 30, 2017 December 31, 2016
(In millions) Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Money market funds $158
 $323
 $
 $481
 $213
 $393
 $
 $606
 $72
 $476
 $
 $548
 $213
 $393
 $
 $606
Equity and other securities 
 
 
 
 9
 
 
 9
 
 
 
 
 9
 
 
 9
Total $158
 $323
 $
 $481
 $222
 $393
 $
 $615
 $72
 $476
 $
 $548
 $222
 $393
 $
 $615

Debt Obligations

The fair value of debt is estimated based on quoted market rates as well as borrowing rates currently available to the Company for loans with similar terms and average maturities (Level 2 inputs).
As of March 31, 2017 As of December 31, 2016As of June 30, 2017 As of December 31, 2016
(In millions)Nominal Unpaid Principal Balance Aggregate Fair Value Nominal Unpaid Principal Balance Aggregate Fair ValueNominal Unpaid Principal Balance Aggregate Fair Value Nominal Unpaid Principal Balance Aggregate Fair Value
Non-vehicle Debt$3,932
 $3,775
 $3,934
 $3,791
$5,679
 $5,401
 $3,934
 $3,791
Vehicle Debt10,148
 10,129
 9,685
 9,670
11,211
 11,190
 9,685
 9,670
Total$14,080
 $13,904
 $13,619
 $13,461
$16,890
 $16,591
 $13,619
 $13,461


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THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis
(In millions)Carrying Value as of March 31, 2017 Level 1 Level 2 Level 3 Total Fair Value (Income)/Loss Adjustments Recorded for the Three Months Ended March 31, 2017Carrying Value as of June 30, 2017 Level 1 Level 2 Level 3 Total Fair Value (Income)/Loss Adjustments Recorded for the Six Months Ended June 30, 2017
Long-lived assets held for sale$127
 $
 $127
 $
 $(4)$109
 $
 $109
 $
 $
Liabilities held for sale$17
 $

$17
 $
 $
$13
 $

$13
 $
 $
Equity method investments$4
 $
 $
 $4
 $30
$4
 $
 $
 $4
 $30
Intangible assets$934
 $
 $
 $934
 $86

Assets and Liabilities Held for Sale

Assets and liabilities held for sale are associated with the Company's Brazil Operations as further described in Note 4, "Acquisitions and Divestitures."

Investments in Related Parties

Investments in related parties are accounted for under the equity method and are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. The Company recognizes an impairment charge whenever there is a decline in value that is determined to be other than temporary.

In April 2016, the Company paid approximately $45 million for an equity method investment. In March 2017, the Company determined it had an other than temporary loss in value of its investment and recorded an impairment charge of $30 million which is included in other (income) expense in the accompanying condensed consolidated statement of operations for the threesix months ended March 31,June 30, 2017.


28Intangible Assets

In June 2017, the Company recorded impairment charges for the Dollar Thrifty tradename as further described in Note 6, "Goodwill and Intangible Assets".


HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited

Note 12—13—Contingencies and Off-Balance Sheet Commitments

Legal Proceedings

Public Liability and Property Damage

The Company is currently a defendant in numerous actions and has received numerous claims on which actions have not yet been commenced for public liability and property damage arising from the operation of motor vehicles rented from the Company. The obligation for public liability and property damage on self-insured U.S. and international vehicles, as stated on the accompanying condensed consolidated balance sheets, 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 rental volume and actuarial evaluations of historical accident claim experience and trends, as well as future projections of ultimate losses, expenses, premiums and administrative costs. At March 31,June 30, 2017 and December 31, 2016, the Company's liability recorded for public liability and property damage matters was $405$423 million and $407 million, respectively. The Company believes that its analysis is based on the most relevant information available, combined with reasonable assumptions, and that the Company may prudently rely on this information to determine the estimated liability. 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 the Company's estimates change or if actual results differ from these assumptions, the amount of the recorded liability is adjusted to reflect these results.

Other Matters

From time to time the Company is a party to various legal proceedings. The Company has summarized below the most significant legal proceedings to which the Company was and/or is a party to during the threesix months ended March 31,June 30, 2017 or the period after March 31,June 30, 2017, but before the filing of this Report on Form 10‑Q.

Concession Fee Recoveries - In October 2006, Janet Sobel, Daniel Dugan, PhD. and Lydia Lee, individually and on behalf of all others similarly situated v. The Hertz Corporation and Enterprise Rent-A-Car Company (“Enterprise”) was filed in the U.S. District Court for the District of Nevada (Enterprise became a defendant in a separate action which they have now settled.) The Sobel case is a consumer class action on behalf of all persons who rented vehicles from Hertz at airports in Nevada and were separately charged airport concession

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited

recovery fees by Hertz as part of their rental charges during the class period. In October 2014, the court entered final judgment against the Company and directed Hertz to pay the class approximately $42 million in restitution and $11 million in prejudgment interest, and to pay attorney's fees of $3 million with an additional $3 million to be paid to class counsel from the restitution fund. In November 2014, Hertz timely filed an appeal of that final judgment with the U.S. Court of Appeals for the Ninth Circuit and the plaintiffs cross appealed the court's judgment seeking to challenge the lower court's ruling that Hertz did not deceive or mislead the class members. Following briefing and oral argument, on January 5, 2017, the Ninth Circuit issued an opinion reversing the District Court’s holdings on liability and remedy and vacating the judgment. The Ninth Circuit also rejected plaintiffs’ cross-appeal, finding that Hertz’s actions were not deceptive or misleading. On January 19, 2017, plaintiffs asked the entire Ninth Circuit, sitting en banc, to rehear the appeal. That petition was rejected on February 15, 2017. Plaintiffs have an opportunityelected not to file a petition seeking a non-mandatory further review by the United States Supreme Court, to review the Ninth Circuit's decision in favor of the Company. The Company continues to believe the outcome ofso this case will not be material to its financial condition, results of operations or cash flows.matter is now concluded.

In re Hertz Global Holdings, Inc. Securities Litigation - In November 2013, a purported shareholder class action, Pedro Ramirez, Jr. v. Hertz Global Holdings, Inc., et al., was commenced in the U.S. District Court for the District of New Jersey naming Old Hertz Holdings and certain of its officers as defendants and alleging violations of the federal securities laws. The complaint alleged that Old Hertz Holdings made material misrepresentations and/or omissions of material fact in its public disclosures during the period from February 25, 2013 through November 4, 2013, in violation of Section 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder. The complaint sought an unspecified amount of monetary damages on behalf of the purported class and an award of costs and expenses, including counsel fees and expert fees.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited

In June 2014, Old Hertz Holdings responded to the amended complaint by filing a motion to dismiss. After a hearing in October 2014, the court granted Old Hertz Holdings’ motion to dismiss the complaint. The dismissal was without prejudice and plaintiff was granted leave to file a second amended complaint within 30 days of the order. In November 2014, plaintiff filed a second amended complaint which shortened the putative class period such that it was not alleged to have commenced until May 18, 2013 and made allegations that were not substantively very different than the allegations in the prior complaint. In early 2015, this case was assigned to a new federal judge in the District of New Jersey, and Old Hertz Holdings responded to the second amended complaint by filing another motion to dismiss. On July 22, 2015, the court granted Old Hertz Holdings’ motion to dismiss without prejudice and ordered that plaintiff could file a third amended complaint on or before August 22, 2015. On August 21, 2015, plaintiff filed a third amended complaint. The third amended complaint included additional allegations, named additional current and former officers as defendants and expanded the putative class period such that it was alleged to span from February 14, 2013 to July 16, 2015. On November 4, 2015, Old Hertz Holdings filed its motion to dismiss. Thereafter, a motion was made by plaintiff to add a new plaintiff, because of challenges to the standing of the first plaintiff. The court granted plaintiffs leave to file a fourth amended complaint to add the new plaintiff, and the new complaint was filed on March 1, 2016. Old Hertz Holdings and the individual defendants moved to dismiss the fourth amended complaint in its entirety with prejudice on March 24, 2016, and plaintiff filed its opposition to same on May 6, 2016. On June 13, 2016, Old Hertz Holdings and the individual defendants filed their reply briefs in support of their motions to dismiss. The matter is now fully briefed. On April 28, 2017, the court issued an order wherein Old Hertz Holdings' and the individual defendants' motions to dismiss were granted and the plaintiffs’ fourth amended complaint to add a new plaintiff was dismissed with prejudice (the “Order”). Plaintiffs have an opportunity to appeal toOn May 30, 2017, the U.S.plaintiffs filed a Notice of Appeal with the U. S. Court of Appeals for the Third Circuit within 30 days ofCircuit. However, the Order.court has not yet released to the parties the expected briefing schedule for this appeal.

Ryanair - In July 2015, Ryanair Ltd. ("Ryanair") filed a complaint against Hertz Europe Limited, a subsidiary of the Company, in the High Court of Justice, Queen’s Bench Division, Commercial Court, Royal Courts of Justice of the United Kingdom alleging breach of contract in connection with Hertz Europe Limited’s termination of its vehicle hire agreement with Ryanair following a contractual dispute with respect to Ryanair’s agreement to begin using third party ticket distributors. The complaint seeks damages, interest and costs, together with attorney fees. The Company believes that it has valid and meritorious defenses and, to that end, it intendshas filed a Defense and Counterclaim. In addition, there have been detailed and intensive exchanges of documents by both parties and taking and exchanging of Witness Statements. The Court has decided to vigorously defend against these allegations, but litigation is subjectpostpone the next

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Unaudited

hearing date to many uncertainties andMarch/April 2018.  In the outcome of this matter is not predictable with assurance.meantime, the parties participated in a mediation in late July 2017.  The Company has established a reserve for thisthe matter which is not material. However, it is possible that this matter could be decided unfavorably to the Company, accordingly, it is possible that an adverse outcome could exceed the amount accrued in an amount that could be material to the Company's consolidated financial condition, results of operations or cash flows in any particular reporting period.

The Company intends to assert that it has meritorious defenses in the foregoing matters and the Company intends to defend itself vigorously.

Governmental Investigations - In June 2014, the Company was advised by the staff of the New York Regional Office of the Securities and Exchange Commission (“SEC”) that it is investigating the events disclosed in certain of the Company’s filings with the SEC. In addition, in December 2014 a state securities regulator requested information and starting in June 2016 the Company has had communications with the United States Attorney’s Office for the District of New Jersey regarding the same or similar events. The investigations and communications generally involve the restatements included in the Old Hertz Holdings Form 10-K for the year ended December 31, 2014, as filed with the SEC on July 16, 2015 (the “Old Hertz Holdings 2014 10-K”) and related accounting for prior periods. The Company has and intends to continue to cooperate with all requests related to the foregoing. Due to the stage at which the proceedings are, Hertz is currently unable to predict the likely outcome of the proceedings or estimate the range of reasonably possible losses, which may be material. Among other matters, the restatements included in the Old Hertz Holdings 2014 Form 10-K addressed a variety of accounting matters involving the Company’s Brazil vehicle rental operations.

Additionally, the Company has identified certain activities in Brazil that raise issues under the Foreign Corrupt Practices Act and may raise issues under other federal and local laws, which the Company has self-reported

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited

to appropriate government entities and the processes with these government entities continue. The Company is continuing to investigate these issues. The Company has established a reserve relating to the activities in Brazil which is not material. However, it is possible that an adverse outcome with respect to the activities in Brazil and the other issues discussed herein could exceed the amount accrued in an amount that could be material to the Company's consolidated financial condition, results of operations or cash flows in any particular reporting period.

French Antitrust - In February 2015, the French Competition Authority issued a Statement of Objections claiming that several vehicle rental companies, including the Company and certain of its subsidiaries, violated French competition law by receiving historic market information from twelve French airports relating to the vehicle rental companies operating at those airports and by engaging in a concerted practice relating to train station surcharges. In February 2017, the French Competition Authority issued a decision dismissing all such claims against the Company and its subsidiaries.

French Road Tax - The French Tax Authority has challenged the historic practice of several vehicle rental companies, including Hertz France, of registering vehicles in jurisdictions where it is established and where the road tax payable with respect to those vehicles is lower than the road tax payable in the jurisdictions where the vehicles will primarily be used. In respect of a period in 2005, the Company has unsuccessfully appealed the French Tax assessment to the highest Administrative court in France. In respect of a period from 2003 to 2005, following an adverse judgment, the Company appealed the French Tax Authority’s assessment to the Civil Court of Appeal. On March 2, 2017, the Company received an adverse judgment in the road tax appeal from the Civil Court of Appeal in the 2003 to 2005 years. In the third quarter of 2015, following an adverse decision against another industry participant involved in a similar action, the Company recorded charges with respect to this matter of approximately $23 million. In January 2016, the Company made a payment of approximately $9 million.

The Company has established reserves for matters where the Company believes that losses are probable and can be reasonably estimated. Other than the aggregate reserve established for claims for public liability and property damage, none of those reserves are material. For matters, including certain of those described above, where the Company has 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, could be decided unfavorably to the Company or

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any of its 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 the accompanying consolidated financial condition, results of operations or cash flows in any particular reporting period.

Indemnification Obligations

In the ordinary course of business, the Company executed 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. Specifically, the Company has 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 the Company may be held responsible could be substantial. In addition, Hertz entered into customary indemnification agreements with Hertz Holdings and certain of the Company's stockholders and their affiliates pursuant to which Hertz Holdings and Hertz will indemnify those entities 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 such entities and certain other claims and liabilities, including liabilities arising out of financing arrangements or securities offerings. The Company has entered into customary indemnification agreements with each of its directors and certain of its officers. Performance under these indemnification obligations would generally be triggered by a breach of terms of the contract or by a third party

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited

claim. In connection with the Spin-Off, the Company executed an agreement with Herc Holdings that contains mutual indemnification clauses and a customary indemnification provision with respect to liability arising out of or resulting from assumed legal matters. The Company regularly evaluates the probability of having to incur costs associated with these indemnification obligations and have accrued for expected losses that are probable and estimable.

Note 13—14—Related Party Transactions

Agreements with the Icahn Group

In the normal course of business, the Company purchases goods and services from entities controlled by Carl C. Icahn and his affiliates, including The Pep Boys - Manny, Moe & Jack. During the three and six months ended March 31,June 30, 2017, the Company purchased approximately $2 million and $4 million, respectively, worth of goods and services from these related parties.

Transactions between Hertz Holdings and Hertz

On June 30, 2016, Hertz signed a master loan agreement with Hertz Global for a facility size of $425 million with an expiration in June 2017 (the "Master"Old Master Loan"). The interest rate is based on the U.S. Dollar LIBOR rate plus a margin.

In June 2017, upon expiration of the Old Master Loan, Hertz signed a new master loan agreement with Hertz Global for a facility size of $425 million with an expiration in June 2018 (the "Master Loan" and together with the Old Master Loan, the "Loan") where amounts outstanding under the Old Master Loan were transferred to the Master Loan. The interest rate is based on the U.S. Dollar LIBOR rate plus a margin. As of March 31,June 30, 2017 and December 31, 2016, there was $104$105 million and $102 million, respectively outstanding under the Master Loan respectively, representing advances under the Master Loan and any accrued but unpaid interest.

As of March 31,both periods ended June 30, 2017 and December 31, 2016, Hertz has a due to affiliate in the amount of $65 million and $65 million, respectively, which represents its tax related liability to Hertz Holdings.

The above amounts are included in equity in the accompanying condensed consolidated balance sheets of Hertz.


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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited

Note 14—15—Earnings (Loss) Per Share - Hertz Global

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.

As described in Note 1, "Background", on June 30, 2016, the distribution date, Old Hertz Holdings stockholders of record as of the close of business on June 22, 2016 received one share of Hertz Holdings common stock for every five shares of Old Hertz Holdings common stock held as of the record date. Basic and diluted net income (loss) per share for the three months ended March 31, 2016 is calculated using the weighted average number of basic, dilutive and anti-dilutive common shares outstanding during the period, as adjusted for the one-to-five distribution ratio.

As described in Note 8,9, "Stock-Based Compensation", the Company adopted the 2017 EICP on January 1, 2017. PSU awards issued under the 2017 EICP will be included in the denominator of diluted earnings (loss) per share when the required minimum threshold to receive the awards is met. There are no PSU awards issued under the 2017 EICP included in the computation of diluted earnings (loss) per share during the three and six months ended March 31, 2017 and 2016.


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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited
June 30, 2017.

The following table sets forth the computation of basic and diluted earnings (loss) per share:
Three Months Ended
March 31,
Three Months Ended
June 30,
 Six Months Ended
June 30,
(In millions, except per share data)2017 20162017 2016 2017 2016
Basic and diluted earnings (loss) per share:          
Numerator:          
Net income (loss) from continuing operations$(223) $(52)$(158) $(28) $(381) $(80)
Net income (loss) from discontinued operations
 1

 (15) 
 (13)
Net income (loss), basic$(223) $(51)$(158) $(43) $(381) $(93)
Denominator:          
Basic weighted average common shares83
 85
83
 85
 83
 85
Dilutive stock options, RSUs, PSUs and PSAs
 

 
 
 
Weighted average shares used to calculate diluted earnings per share83
 85
83
 85
 83
 85
Antidilutive stock options, RSUs, PSUs and PSAs2
 2
3
 1
 3
 2
Earnings (loss) per share:          
Basic earnings (loss) per share from continuing operations$(2.69) $(0.61)$(1.90) $(0.33) $(4.59) $(0.94)
Basic earnings (loss) per share from discontinued operations
 0.01

 (0.18) 
 (0.15)
Basic earnings (loss) per share$(2.69) $(0.60)$(1.90) $(0.51) $(4.59) $(1.09)
          
Diluted earnings (loss) per share from continuing operations$(2.69) $(0.61)$(1.90) $(0.33) $(4.59) $(0.94)
Diluted earnings (loss) per share from discontinued operations
 0.01

 (0.18) 
 (0.15)
Diluted earnings (loss) per share$(2.69) $(0.60)$(1.90) $(0.51) $(4.59) $(1.09)

Note 15—16—Segment Information

The Company has identified three reportable segments, which are organized based on the products and services provided by its operating segments and the geographic areas in which its operating segments conduct business, as follows:

U.S. Rental Car ("U.S. RAC") - rental of vehicles (cars, crossovers and light trucks), as well as sales of ancillary products and services, in the United States and consists of the Company's United States operating segment;

International Rental Car ("International RAC") - rental and leasing of vehicles (cars, vans, crossovers and light trucks), as well as sales of ancillary products and services, internationally and consists of the Company's Europe and Other International operating segments, which are aggregated into a reportable segment based

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primarily upon similar economic characteristics, products and services, customers, delivery methods and general regulatory environments;

All Other Operations - primarily consists of the Company's Donlen business, which provides vehicle leasing and fleet management services, together with other business activities which represent less than 2% of revenues and expenses of the segment.

In addition to the above reportable segments, the Company has corporate operations ("Corporate") which includes general corporate assets and expenses and certain interest expense (including net interest on non-vehicle debt).

The following tables provide significant statement of operations and balance sheet information by segment for each of Hertz Global and Hertz, as well as adjusted pretax incomesincome (loss), the segment measure of profitability.
 Three Months Ended
June 30,
 Six Months Ended
June 30,
(In millions)2017 2016 2017 2016
Revenues       
U.S. Rental Car$1,519
 $1,584
 $2,872
 $2,990
International Rental Car543
 540
 955
 973
All Other Operations162
 146
 313
 290
Total Hertz Global and Hertz$2,224
 $2,270
 $4,140
 $4,253
Depreciation of revenue earning vehicles and lease charges, net       
U.S. Rental Car$524
 $417
 $1,023
 $836
International Rental Car100
 98
 185
 184
All Other Operations119
 114
 236
 225
Total Hertz Global and Hertz$743
 $629
 $1,444
 $1,245
Adjusted pre-tax income (loss)(a)
       
U.S. Rental Car$(37) $143
 $(152) $138
International Rental Car56
 34
 52
 36
All Other Operations19
 17
 39
 35
Corporate(120) (139) (234) (262)
Total Hertz Global(82) 55
 (295) (53)
Corporate - Hertz1
 
 2
 
Total Hertz$(81) $55
 $(293) $(53)

(In millions)June 30, 2017 December 31, 2016
Total Assets   
U.S. Rental Car$13,639
 $12,876
International Rental Car4,852
 3,578
All other operations1,646
 1,612
Corporate2,296
 1,089
Total Hertz Global and Hertz$22,433
 $19,155


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Unaudited

 Three Months Ended March 31,
(In millions)2017 2016
Revenues   
U.S. Rental Car$1,353
 $1,406
International Rental Car411
 433
All Other Operations152
 144
Total Hertz Global and Hertz$1,916
 $1,983
Adjusted pre-tax income (loss) (a)
   
U.S. Rental Car$(116) $(4)
International Rental Car(4) 3
All Other Operations21
 18
Corporate(114) (123)
Total Hertz Global(213) (106)
Corporate - Hertz1
 
Total Hertz$(212) $(106)
Depreciation of revenue earning vehicles and lease charges, net   
U.S. Rental Car$499
 $419
International Rental Car85
 86
All Other Operations117
 111
Total Hertz Global and Hertz$701
 $616

(In millions)March 31, 2017 December 31, 2016
Total Assets   
U.S. Rental Car$13,220
 $12,876
International Rental Car3,706
 3,578
All other operations1,615
 1,612
Corporate1,115
 1,089
Total Hertz Global and Hertz$19,656
 $19,155

(a)Adjusted pre-tax income (loss), the Company's segment profitability measure, is calculated as income (loss) from continuing operations before income taxes plus non-cash acquisition accounting charges, debt-related charges relating to the amortization and write-off of debt financing costs and debt discounts, intangible and tangible asset impairments and write downs and certain one-time charges and non-operational items.

Reconciliation of adjusted pre-tax income (loss) by segment to consolidated amounts are summarized below.

Hertz Global
 Three Months Ended
June 30,
 Six Months Ended
June 30,
(In millions)2017 2016 2017 2016
Adjusted pre-tax income (loss):       
U.S. Rental Car$(37) $143
 $(152) $138
International Rental Car56
 34
 52
 36
All Other Operations19
 17
 39
 35
Total reportable segments38
 194
 (61) 209
Corporate(1)
(120) (139) (234) (262)
Adjusted pre-tax income (loss)(82) 55
 (295) (53)
Adjustments:       
Acquisition accounting(2)
(16) (18) (31) (34)
Debt-related charges(3)
(10) (12) (21) (25)
Loss on extinguishment of debt(4)
(8) (20) (8) (20)
Restructuring and restructuring related charges(5)
(5) (18) (13) (29)
Sale of CAR Inc. common stock(6)

 
 3
 75
Impairment charges and asset write-downs(7)
(86) (3) (116) (3)
Finance and information technology transformation costs(8)
(20) (19) (39) (26)
Other(9)
(18) 
 (19) 3
Income (loss) before income taxes$(245) $(35) $(539) $(112)


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Hertz Global
 Three Months Ended March 31,
(In millions)2017 2016
Adjusted pre-tax income (loss):   
U.S. Rental Car$(116) $(4)
International Rental Car(4) 3
All Other Operations21
 18
Total reportable segments(99) 17
Corporate(1)
(114) (123)
Adjusted pre-tax income (loss)(213) (106)
Adjustments:   
Acquisition accounting(2)
(16) (16)
Debt-related charges(3)
(10) (14)
Restructuring and restructuring related charges(4)
(8) (12)
Sale of CAR Inc. common stock(5)
3
 75
Impairment charges and asset write-downs(6)
(30) 
Finance and information technology transformation costs(7)
(19) (8)
Other(8)
(1) 5
Income (loss) before income taxes$(294) $(76)

Hertz
Three Months Ended March 31,Three Months Ended
June 30,
 Six Months Ended
June 30,
(In millions)2017 20162017 2016 2017 2016
Adjusted pre-tax income (loss):          
U.S. Rental Car$(116) $(4)$(37) $143
 $(152) $138
International Rental Car(4) 3
56
 34
 52
 36
All Other Operations21
 18
19
 17
 39
 35
Total reportable segments(99) 17
38
 194
 (61) 209
Corporate(1)
(113) (123)(119) (139) (232) (262)
Adjusted pre-tax income (loss)(212) (106)(81) 55
 (293) (53)
Adjustments:          
Acquisition accounting(2)
(16) (16)(16) (18) (31) (34)
Debt-related charges(3)
(10) (14)(10) (12) (21) (25)
Restructuring and restructuring related charges(4)
(8) (12)
Sale of CAR Inc. common stock(5)
3
 75
Impairment charges and asset write-downs(6)
(30) 
Finance and information technology transformation costs(7)
(19) (8)
Other(8)
(1) 5
Loss on extinguishment of debt(4)
(8) (20) (8) (20)
Restructuring and restructuring related charges(5)
(5) (18) (13) (29)
Sale of CAR Inc. common stock(6)

 
 3
 75
Impairment charges and asset write-downs(7)
(86) (3) (116) (3)
Finance and information technology transformation costs(8)
(20) (19) (39) (26)
Other(9)
(18) 
 (19) 3
Income (loss) before income taxes$(293) $(76)$(244) $(35) $(537) $(112)

(1)Represents general corporate expenses, non-vehicle interest expense, as well as other business activities.
(2)Represents incremental expense associated with amortization of other intangible assets and depreciation of property and equipment relating to acquisition accounting.
(3)Represents debt-related charges relating to the amortization of deferred financing costs and debt discounts and premiums.

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(4)In 2017, represents $6 million of early redemption premium and write off of deferred financing costs associated with the redemption of the outstanding 4.25% Senior Notes due April 2018 and a $2 million write-off of deferred financing costs associated with the termination of commitments under the Senior RCF. In 2016, represents the write-off of deferred financing costs in the second quarter as a result of paying off the Senior Term Facility and various vehicle debt refinancings.
(5)Represents expenses incurred under restructuring actions as defined in U.S. GAAP, excluding impairments and asset write-downs, when applicable. For further information on restructuring costs, see Note 9,10, "Restructuring." Also represents certain other charges such as incremental costs incurred directly supporting business transformation initiatives. Such costs include transition costs incurred in connection with 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. Also includes consulting costs and legal fees related to the previously disclosed accounting review and investigation.
(5)(6)Represents the pre-tax gain on the sale of CAR Inc. common stock.
(6)(7)In 2017, primarily represents a $30second quarter $86 million impairment of the Dollar Thrifty tradename and a first quarter impairment of $30 million related to an equity method investment.
(7)(8)Represents external costs associated with the Company’s finance and information technology transformation programs, both of which are multi-year initiatives that commenced in 2016 to upgrade and modernize the Company’s systems and processes.
(8)(9)IncludesRepresents miscellaneous, non-recurring and other non-cash items and, initems. In 2017, includes an adjustmentfirst and second quarter adjustments, as applicable, to the carrying value of the Company's Brazil operations in connection with its classification as held for sale. Insale and second quarter charges of $6 million for labor-related matters and $5 million relating to PLPD as a result of a terrorist event. For the six months ended June 30, 2016, also includes a $9 million settlement gain from an eminent domain case related to one of the Company's U.S. airport locations.

Note 16—17—Guarantor and Non-Guarantor Condensed Consolidating Financial Information - Hertz

The following condensed consolidating financial information presents the Condensed Consolidating Balance Sheets as of March 31,June 30, 2017 and December 31, 2016, the Condensed Consolidating Statements of Operations and Comprehensive Income (Loss) for the three and six monthsended March 31,June 30, 2017 and 2016 and the Statements of Cash Flows for the threesix months ended March 31,June 30, 2017 and 2016 of (a) The Hertz Corporation, ("Parent”); (b) the Parent's

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Unaudited

subsidiaries that guarantee the Senior Notes issued by the Parent ("Guarantor Subsidiaries"); (c) the Parent's subsidiaries that do not guarantee the Senior Notes issued by the Parent ("Non-Guarantor Subsidiaries"); (d) elimination entries necessary to consolidate the Parent with the Guarantor Subsidiaries and Non-Guarantor Subsidiaries ("Eliminations"); and of (e) Hertz on a consolidated basis.

Investments in subsidiaries are accounted for using the equity method for purposes of the consolidating presentation. The principal elimination entries relate to investments in subsidiaries and intercompany balances and transactions. The Guarantor Subsidiaries are 100% owned by the Parent and all guarantees are full and unconditional and joint and several. Additionally, substantially all of the assets of the Guarantor Subsidiaries are pledged under the Senior Facilities and Senior Second Priority Secured Notes, and consequently will not be available to satisfy the claims of Hertz's general creditors. In lieu of providing separate unaudited financial statements for the Guarantor Subsidiaries, Hertz has included the accompanying condensed consolidating financial statements based on Rule 3-10 of the SEC's Regulation S-X. Management of Hertz does not believe that separate financial statements of the Guarantor Subsidiaries are material to Hertz's investors; therefore, separate financial statements and other disclosures concerning the Guarantor Subsidiaries are not presented.

As described in Note 1, "Background", Old Hertz Holdings completed the Spin-Off on June 30, 2016. In connection with the Spin-Off, certain amounts that were historically recorded on the balance sheet of the Parent were distributed with the discontinued entities. These amounts primarily related to defined benefit pension plans, workers’ compensation liabilities, and income taxes. These amounts have been reclassified in the condensed consolidating statements of operations and comprehensive income (loss) and the statements of cash flows for the three months ended March 31, 2016 to reflect the balances transferred in the Guarantor Subsidiaries' and Non-Guarantor Subsidiaries' financial statements based on which discontinued entity received the distribution in the Spin-Off.

During the preparation of the condensed consolidating financial information of The Hertz Corporation and Subsidiaries as of and for the three months ended March 31, 2017, it was determined that prepaid expenses and other assets, deferred income taxes, net, due from affiliates and due to affiliates, and the related eliminations at December 31, 2016 as filed in the Company’s 2016 Form 10-K were improperly calculated, resulting in a $915 million overstatement of prepaid expenses and other assets and due to affiliates of the Parent and an overstatement of due from affiliates and deferred income taxes, net of the Guarantor Subsidiaries. The errors, which the Company has determined are not material to this disclosure, had no impact on the net assets of the Parent or the Guarantor Subsidiaries and are eliminated upon consolidation, and therefore have no impact on the Company’s consolidated financial condition, results of operations or cash flows. The Company has revised the Condensed Consolidating Balance Sheets for the Parent, Guarantor Subsidiaries and Eliminations as of December 31, 2016 to correct for these errors.

During the preparation of the condensed consolidating financial information of The Hertz Corporation and Subsidiaries as of and for the three and nine months ended September 30, 2016, it was determined that cash flows from operating activities and investing activities for the Parent and Non-Guarantor Subsidiaries were misstated as filed in the Company's second quarter 2016 Form 10-Q, resulting in a $411 million overstatement of net cash used in operating activities and a $411 million overstatement of net cash provided by investing activities of the Parent, and a $411 million overstatement of net cash provided by operating activities and a $411 million overstatement of net cash used in investing activities of the Non-Guarantor Subsidiaries. These errors had no impact to the Guarantor Subsidiaries and no impact to financing activities. These errors, which the Company determined are not material, have no impact on the Company's consolidated financial condition, results of operations, or cash flows. The Company has revised the Condensed Consolidating Statements of Cash Flows for Parent and Guarantor Subsidiaries for the six months ended June 30, 2016 to correct for these errors.


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THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited

THE HERTZ CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET
March 31,June 30, 2017
(In millions)

Parent
(The Hertz
Corporation)
 
Guarantor
Subsidiaries
 
Non-
Guarantor
Subsidiaries
 Eliminations 
The Hertz
Corporation &
Subsidiaries
Parent
(The Hertz
Corporation)
 
Guarantor
Subsidiaries
 
Non-
Guarantor
Subsidiaries
 Eliminations 
The Hertz
Corporation &
Subsidiaries
ASSETS                  
Cash and cash equivalents$421
 $10
 $354
 $
 $785
$841
 $11
 $289
 $
 $1,141
Restricted cash and cash equivalents93
 8
 165
 
 266
888
 7
 167
 
 1,062
Receivables, net of allowance264
 171
 599
 
 1,034
271
 160
 779
 
 1,210
Due from affiliates3,225
 3,927
 9,117
 (16,269) 
3,400
 4,176
 9,158
 (16,734) 
Prepaid expenses and other assets4,985
 78
 222
 (4,788) 497
5,410
 77
 236
 (5,158) 565
Revenue earning vehicles, net321
 6
 11,366
 
 11,693
317
 3
 12,866
 
 13,186
Property and equipment, net642
 67
 139
 
 848
631
 65
 143
 
 839
Investment in subsidiaries, net6,247
 719
 
 (6,966) 
6,201
 694
 
 (6,895) 
Other intangible assets, net96
 3,211
 18
 
 3,325
112
 3,111
 16
 
 3,239
Goodwill102
 943
 36
 
 1,081
102
 943
 37
 
 1,082
Assets held for sale
 
 127
 
 127

 
 109
 
 109
Total assets$16,396
 $9,140
 $22,143
 $(28,023) $19,656
$18,173
 $9,247
 $23,800
 $(28,787) $22,433
LIABILITIES AND EQUITY                  
Due to affiliates$10,259
 $1,960
 $4,050
 $(16,269) $
$10,461
 $1,990
 $4,283
 $(16,734) $
Accounts payable336
 89
 716
 
 1,141
380
 97
 904
 
 1,381
Accrued liabilities548
 96
 322
 
 966
529
 90
 344
 
 963
Accrued taxes, net88
 21
 2,981
 (2,916) 174
86
 23
 3,225
 (3,168) 166
Debt4,087
 
 9,921
 
 14,008
5,800
 
 11,009
 
 16,809
Public liability and property damage161
 41
 203
 
 405
162
 42
 219
 
 423
Deferred income taxes, net
 2,079
 1,821
 (1,872) 2,028

 2,077
 1,836
 (1,990) 1,923
Liabilities held for sale
 
 17
 
 17

 
 13
 
 13
Total liabilities15,479
 4,286
 20,031
 (21,057) 18,739
17,418
 4,319
 21,833
 (21,892) 21,678
Equity:                  
Stockholder's equity917
 4,854
 2,112
 (6,966) 917
755
 4,928
 1,967
 (6,895) 755
Total liabilities and equity$16,396
 $9,140
 $22,143
 $(28,023) $19,656
$18,173
 $9,247
 $23,800
 $(28,787) $22,433


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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited

THE HERTZ CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 2016
(In millions)
 
Parent
(The Hertz
Corporation)
 
Guarantor
Subsidiaries
 
Non-
Guarantor
Subsidiaries
 Eliminations 
The Hertz
Corporation &
Subsidiaries
ASSETS         
Cash and cash equivalents$458
 $12
 $346
 $
 $816
Restricted cash and cash equivalents53
 5
 220
 
 278
Receivables, net of allowance752
 167
 364
 
 1,283
Due from affiliates3,668
 3,823
 9,750
 (17,241) 
Prepaid expenses and other assets4,821
 83
 199
 (4,525) 578
Revenue earning vehicles, net361
 7
 10,450
 
 10,818
Property and equipment, net656
 70
 132
 
 858
Investment in subsidiaries, net6,114
 598
 
 (6,712) 
Other intangible assets, net89
 3,223
 20
 
 3,332
Goodwill102
 943
 36
 
 1,081
Assets held for sale
 
 111
 
 111
Total assets$17,074
 $8,931
 $21,628
 $(28,478) $19,155
LIABILITIES AND EQUITY         
Due to affiliates$10,833
 $1,900
 $4,508
 $(17,241) $
Accounts payable279
 90
 452
 
 821
Accrued liabilities557
 103
 320
 
 980
Accrued taxes, net78
 18
 2,881
 (2,812) 165
Debt4,086
 
 9,455
 
 13,541
Public liability and property damage166
 43
 198
 
 407
Deferred income taxes, net
 2,065
 1,797
 (1,713) 2,149
Liabilities held for sale
 
 17
 
 17
Total liabilities15,999
 4,219
 19,628
 (21,766) 18,080
Equity:         
Stockholder's equity1,075
 4,712
 2,000
 (6,712) 1,075
Total liabilities and equity$17,074
 $8,931
 $21,628
 $(28,478) $19,155



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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited

THE HERTZ CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
For the Three Months Ended March 31,June 30, 2017
(In millions)

Parent
(The Hertz
Corporation)
 
Guarantor
Subsidiaries
 
Non-
Guarantor
Subsidiaries
 Eliminations 
The Hertz
Corporation &
Subsidiaries
Parent
(The Hertz
Corporation)
 
Guarantor
Subsidiaries
 
Non-
Guarantor
Subsidiaries
 Eliminations 
The Hertz
Corporation &
Subsidiaries
Total revenues$991
 $307
 $1,377
 $(759) $1,916
$1,170
 $354
 $1,871
 $(1,171) $2,224
Expenses:                  
Direct vehicle and operating688
 169
 275
 
 1,132
741
 181
 333
 
 1,255
Depreciation of revenue earning vehicles and lease charges, net737
 102
 621
 (759) 701
1,024
 113
 714
 (1,108) 743
Selling, general and administrative150
 11
 59
 
 220
156
 8
 59
 
 223
Interest expense, net82
 (22) 69
 
 129
101
 (25) 81
 
 157
Intangible asset impairments
 86
 
 
 86
Other (income) expense, net33
 
 (6) 
 27

 
 4
 
 4
Total expenses1,690
 260
 1,018
 (759) 2,209
2,022
 363
 1,191
 (1,108) 2,468
Income (loss) from continuing operations before income taxes and equity in earnings (losses) of subsidiaries(699) 47
 359
 
 (293)(852) (9) 680
 (63) (244)
Income tax (provision) benefit214
 (15) (128) 
 71
358
 1
 (273) 
 86
Equity in earnings (losses) of subsidiaries, net of tax263
 32
 
 (295) 
336
 30
 
 (366) 
Net income (loss) from continuing operations(222) 64
 231
 (295) (222)(158) 22
 407
 (429) (158)
Net income (loss) from discontinued operations
 
 
 
 

 
 
 
 
Net income (loss)(222) 64
 231
 (295) (222)(158) 22
 407
 (429) (158)
Other comprehensive income (loss), net of tax13
 
 12
 (12) 13
(7) 3
 (8) 5
 (7)
Comprehensive income (loss)$(209) $64
 $243
 $(307) $(209)$(165) $25
 $399
 $(424) $(165)


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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited

THE HERTZ CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
For the Three Months Ended March 31,June 30, 2016
(In millions)

Parent
(The Hertz
Corporation)
 
Guarantor
Subsidiaries
 
Non-
Guarantor
Subsidiaries
 Eliminations 
The Hertz
Corporation &
Subsidiaries
Parent
(The Hertz
Corporation)
 
Guarantor
Subsidiaries
 
Non-
Guarantor
Subsidiaries
 Eliminations 
The Hertz
Corporation &
Subsidiaries
Total revenues$1,066
 $339
 $1,297
 $(719) $1,983
$1,192
 $385
 $1,636
 $(943) $2,270
Expenses:                  
Direct vehicle and operating685
 189
 285
 (1) 1,158
732
 192
 343
 
 1,267
Depreciation of revenue earning vehicles and lease charges, net621
 135
 578
 (718) 616
759
 214
 599
 (943) 629
Selling, general and administrative146
 14
 65
 
 225
158
 11
 65
 
 234
Interest expense, net97
 (11) 64
 
 150
119
 (21) 76
 
 174
Other (income) expense, net
 (9) (81) 
 (90)1
 (1) 1
 
 1
Total expenses1,549
 318
 911
 (719) 2,059
1,769
 395
 1,084
 (943) 2,305
Income (loss) from continuing operations before income taxes and equity in earnings (losses) of subsidiaries(483) 21
 386
 
 (76)(577) (10) 552
 
 (35)
Income tax (provision) benefit190
 (7) (159) 
 24
227
 3
 (223) 
 7
Equity in earnings (losses) of subsidiaries, net of tax244
 56
 
 (300) 
307
 144
 
 (451) 
Net income (loss) from continuing operations(49) 70
 227
 (300) (52)(43) 137
 329
 (451) (28)
Net income (loss) from discontinued operations
 7
 (4) 
 3

 (4) (11) 
 (15)
Net income (loss)(49) 77
 223
 (300) (49)(43) 133
 318
 (451) (43)
Other comprehensive income (loss), net of tax54
 (4) 53
 (49) 54
(45) (5) (23) 28
 (45)
Comprehensive income (loss)$5
 $73
 $276
 $(349) $5
$(88) $128
 $295
 $(423) $(88)


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Table of Contents
HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited

THE HERTZ CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
For the Six Months Ended June 30, 2017
(In millions)

 
Parent
(The Hertz
Corporation)
 
Guarantor
Subsidiaries
 
Non-
Guarantor
Subsidiaries
 Eliminations 
The Hertz
Corporation &
Subsidiaries
Total revenues$2,220
 $661
 $3,248
 $(1,989) $4,140
Expenses:         
Direct vehicle and operating1,429
 350
 608
 
 2,387
Depreciation of revenue earning vehicles and lease charges, net1,761
 215
 1,335
 (1,867) 1,444
Selling, general and administrative306
 19
 117
 
 442
Interest expense, net183
 (47) 151
 
 287
Intangible asset impairments
 86
 
 
 86
Other (income) expense, net33
 
 (2) 
 31
Total expenses3,712
 623
 2,209
 (1,867) 4,677
Income (loss) from continuing operations before income taxes and equity in earnings (losses) of subsidiaries(1,492) 38
 1,039
 (122) (537)
Income tax (provision) benefit572
 (14) (401) 
 157
Equity in earnings (losses) of subsidiaries, net of tax540
 62
 
 (602) 
Net income (loss) from continuing operations(380) 86
 638
 (724) (380)
Net income (loss) from discontinued operations
 
 
 
 
Net income (loss)(380) 86
 638
 (724) (380)
Other comprehensive income (loss), net of tax6
 3
 4
 (7) 6
Comprehensive income (loss)$(374) $89
 $642
 $(731) $(374)



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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited

THE HERTZ CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
For the Six Months Ended June 30, 2016
(In millions)

 
Parent
(The Hertz
Corporation)
 
Guarantor
Subsidiaries
 
Non-
Guarantor
Subsidiaries
 Eliminations 
The Hertz
Corporation &
Subsidiaries
Total revenues$2,258
 $725
 $2,932
 $(1,662) $4,253
Expenses:         
Direct vehicle and operating1,417
 381
 627
 
 2,425
Depreciation of revenue earning vehicles and lease charges, net1,380
 349
 1,177
 (1,661) 1,245
Selling, general and administrative304
 24
 132
 (1) 459
Interest expense, net207
 (22) 140
 
 325
Other (income) expense, net1
 (10) (80) 
 (89)
Total expenses3,309
 722
 1,996
 (1,662) 4,365
Income (loss) from continuing operations before income taxes and equity in earnings (losses) of subsidiaries(1,051) 3
 936
 
 (112)
Income tax (provision) benefit415
 (2) (381) 
 32
Equity in earnings (losses) of subsidiaries, net of tax545
 201
 
 (746) 
Net income (loss) from continuing operations(91) 202
 555
 (746) (80)
Net income (loss) from discontinued operations
 (1) (10) 
 (11)
Net income (loss)(91) 201
 545
 (746) (91)
Other comprehensive income (loss), net of tax9
 (5) 29
 (24) 9
Comprehensive income (loss)$(82) $196
 $574
 $(770) $(82)



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Table of Contents
HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited

THE HERTZ CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the ThreeSix Months Ended March 31,June 30, 2017
(In millions)
Parent
(The Hertz
Corporation)
 
Guarantor
Subsidiaries
 
Non-
Guarantor
Subsidiaries
 Eliminations 
The Hertz
Corporation &
Subsidiaries
Parent
(The Hertz
Corporation)
 
Guarantor
Subsidiaries
 
Non-
Guarantor
Subsidiaries
 Eliminations 
The Hertz
Corporation &
Subsidiaries
Net cash provided by (used in) operating activities from continuing operations$(714) $5
 $1,488
 $(280) $499
$(377) $15
 $2,168
 $(822) $984
Cash flows from investing activities:                  
Net change in restricted cash and cash equivalents, vehicle(41) (2) 57
 
 14
(1) (1) 57
 
 55
Net change in restricted cash and cash equivalents, non-vehicle
 (1) 1
 
 
Revenue earning vehicle expenditures(89) (1) (2,772) 
 (2,862)(171) (5) (6,533) 
 (6,709)
Proceeds from disposal of revenue earning vehicles49
 
 1,911
 
 1,960
91
 
 3,744
 
 3,835
Capital asset expenditures, non-vehicle(42) (3) (9) 
 (54)(75) (5) (23) 
 (103)
Proceeds from disposal of property and other equipment5
 
 2
 
 7
6
 
 5
 
 11
Sales of (investment in) shares in equity investment
 
 9
 
 9
Loan to Parent/Guarantor from Non-Guarantor
 
 (316) 316
 
Sales of shares in equity investment
 
 9
 
 9
Other
 
 (2) 
 (2)
Capital contributions to subsidiaries(662) 
 
 662
 
(1,419) 
 
 1,419
 
Return of capital from subsidiaries1,150
 
 
 (1,150) 
1,898
 
 
 (1,898) 
Loan to Parent/Guarantor from Non-Guarantor
 
 431
 (431) 
Net cash provided by (used in) investing activities from continuing operations370
 (7) (1,117) (172) (926)329
 (11) (2,312) (910) (2,904)
Cash flows from financing activities:                  
Net change in restricted cash and cash equivalents, non-vehicle(834) (1) 1
 
 (834)
Proceeds from issuance of vehicle debt276
 
 1,822
 
 2,098
631
 
 4,397
 
 5,028
Repayments of vehicle debt(276) 
 (1,416) 
 (1,692)(657) 
 (3,008) 
 (3,665)
Proceeds from issuance of non-vehicle debt100
 
 
 
 100
2,100
 
 
 
 2,100
Repayments of non-vehicle debt(102) 
 
 
 (102)(354) 
 
 
 (354)
Payment of financing costs(16) (4) (14) 
 (34)
Early redemption premium payment(5) 
 
 
 (5)
Advances to Hertz Global(3) 
 
 
 (3)
Capital contributions received from parent
 
 662
 (662) 

 
 1,419
 (1,419) 
Payment of dividends and return of capital

 
 (2,720) 2,720
 
Loan to Parent/Guarantor from Non-Guarantor316
 
 
 (316) 
(431) 
 
 431
 
Payment of dividends and return of capital


 
 (1,430) 1,430
 
Payment of financing costs(5) 
 (7) 
 (12)
Advances to Hertz Global/Old Hertz Holdings(2) 
 
 
 (2)
Net cash provided by (used in) financing activities from continuing operations307
 
 (369) 452
 390
431
 (5) 75
 1,732
 2,233
Effect of foreign currency exchange rate changes on cash and cash equivalents from continuing operations
 
 6
 
 6

 
 12
 
 12
Net increase (decrease) in cash and cash equivalents during the period from continuing operations(37) (2) 8
 
 (31)383
 (1) (57) 
 325
Cash and cash equivalents at beginning of period458
 12
 346
 
 816
458
 12
 346
 
 816
Cash and cash equivalents at end of period$421
 $10
 $354
 $
 $785
$841
 $11
 $289
 $
 $1,141

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Table of Contents
HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited

THE HERTZ CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the ThreeSix Months Ended March 31,June 30, 2016
(In millions)
Parent
(The Hertz
Corporation)
 
Guarantor
Subsidiaries
 
Non-
Guarantor
Subsidiaries
 Eliminations 
The Hertz
Corporation &
Subsidiaries
Parent
(The Hertz
Corporation)
 
Guarantor
Subsidiaries
 
Non-
Guarantor
Subsidiaries
 Eliminations 
The Hertz
Corporation &
Subsidiaries
Net cash provided by (used in) operating activities from continuing operations$(889) $(30) $1,565
 $(185) $461
$(1,492) $37
 $2,908
 $(439) $1,014
Cash flows from investing activities:                  
Net change in restricted cash and cash equivalents, vehicle(9) (2) 3
 
 (8)(10) (2) 30
 
 18
Net change in restricted cash and cash equivalents, non-vehicle
 
 1
 
 1

 
 (2) 
 (2)
Revenue earning vehicle expenditures(132) (7) (3,246) 
 (3,385)(176) (34) (6,677) 
 (6,887)
Proceeds from disposal of revenue earning vehicles108
 10
 2,644
 
 2,762
131
 
 4,656
 
 4,787
Capital assets expenditures, non-vehicle(29) (7) (10) 
 (46)(41) (8) (23) 
 (72)
Proceeds from disposal of property and other equipment6
 4
 9
 
 19
12
 3
 24
 
 39
Sales of shares in equity investment, net of amounts invested(45) 
 233
 
 188
Capital contributions to subsidiaries(372) 
 
 372
 
(514) 
 
 514
 
Return of capital from subsidiaries847
 25
 
 (872) 
1,623
 
 
 (1,623) 
Loan to Parent/Guarantor from Non-Guarantor
 
 (340) 340
 

 
 (405) 405
 
Sale of (investment in) shares in equity investment
 
 233
 
 233
Net cash provided by (used in) investing activities from continuing operations419
 23
 (706) (160) (424)980
 (41) (2,164) (704) (1,929)
Cash flows from financing activities:                  
Proceeds from issuance of vehicle debt
 
 2,449
 
 2,449
186
 
 5,893
 
 6,079
Repayments of vehicle debt(33) 
 (2,207) 
 (2,240)(183) 
 (4,895) 
 (5,078)
Proceeds from issuance of non-vehicle debt365
 
 
 
 365
1,477
 
 
 
 1,477
Repayments of non-vehicle debt(371) 
 
 
 (371)(2,843) 
 
 
 (2,843)
Payment of financing costs(31) (3) (17) 
 (51)
Transfers from discontinued entities2,122
 
 
 
 2,122
Other11
 1
 
 
 12
Capital contributions received from parent
 
 372
 (372) 

 
 514
 (514) 
Payment of dividends and return of capital
 
 (2,062) 2,062
 
Loan to Parent/Guarantor from Non-Guarantor340
 
 
 (340) 
405
 
 
 (405) 
Payment of dividends and return of capital
 
 (1,057) 1,057
 
Payment of financing costs
 
 (10) 
 (10)
Transfer (to) from discontinued entities123
 
 7
 
 130
Net cash provided by (used in) financing activities from continuing operations424
 
 (446) 345
 323
1,144
 (2) (567) 1,143
 1,718
Effect of foreign currency exchange rate changes on cash and cash equivalents from continuing operations
 
 12
 
 12

 
 8
 
 8
Net increase (decrease) in cash and cash equivalents during the period from continuing operations(46) (7) 425
 
 372
632
 (6) 185
 
 811
Cash and cash equivalents at beginning of period179
 17
 278
 
 474
179
 17
 278
 
 474
Cash and cash equivalents at end of period$133
 $10
 $703
 $
 $846
$811
 $11
 $463
 $
 $1,285
                  
Cash flows from discontinued operations:                  
Cash flows provided by (used in) operating activities$
 $112
 $7
 $
 $119
$
 $59
 $148
 $
 $207
Cash flows provided by (used in) investing activities
 4
 3
 
 7

 (75) (2) 
 (77)
Cash flows provided by (used in) financing activities
 (114) (7) 
 (121)
 44
 (138) 
 (94)
Net increase (decrease) in cash and cash equivalents during the period from discontinued operations$
 $2
 $3
 $
 $5
$
 $28
 $8
 $
 $36

42


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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited

Note 17—Subsequent Events

Amendments to vehicle debt agreements

HVF II U.S. Vehicle Variable Funding Notes

In April 2017, the Company increased the commitments under the HVF II U.S. Vehicle Variable Funding Notes by $250 million, such that after giving effect to such increase the aggregate maximum principal amount of the HVF II Series 2013-A Class A Notes was approximately $3.0 billion, the aggregate maximum principal amount of the HVF II Series 2013-A Class B Notes was approximately $90 million and the aggregate maximum principal amount of the HVF II Series 2013-B Class A Notes was approximately $581 million.

In May 2017, HVF II issued the Series 2017-A Variable Funding Rental Car Asset Backed Notes (the “HVF II Series 2017-A Notes”) with an aggregate maximum principal amount of $500 million and a maturity date of October 2018.

HFLF Medium Term Notes

In April 2017, HFLF issued the Series 2017-1 Asset-Backed Notes, Class A, Class B, Class C, Class D, and Class E (collectively, the “HFLF Series 2017-1 Notes”) in an aggregate principal amount of $500 million. The HFLF Series 2017-1 Notes are fixed rate, except for the Class A-1 Notes which are floating rate and carry an interest rate based upon a spread to one-month LIBOR.


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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES

ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Hertz Global Holdings, Inc. (together with its consolidated subsidiaries, "Hertz Global" or the "Company") is a holding company and its principal, wholly-owned subsidiary is The Hertz Corporation Inc. (together with its consolidated subsidiaries, "Hertz"). As Hertz Global consolidates Hertz for financial statement purposes, disclosures that relate to activities of Hertz also apply to Hertz Global, unless otherwise noted. Hertz comprises approximately the entire balance of Hertz Global's assets, liabilities and operating cash flows. In addition, Hertz's operating revenues and operating expenses comprise nearly 100% of Hertz Global's revenues and operating expenses. As such, Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") that follows for Hertz also applies to Hertz Global in all material respects and differences between the operations and results of Hertz and Hertz Global are separately disclosed and explained. We sometimes use the words "we", "our," "us," and the "Company" in this MD&A for disclosures that relate to all of Hertz and Hertz Global.

Management’s discussion and analysis ("MD&A") should be read in conjunction with the MD&A presented in our 2016 Form 10‑K and the unaudited condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of this Report on Form 10-Q for the quarterly period ended March 31,June 30, 2017 (this "Report"), which include additional information about our accounting policies, practices and the transactions underlying our financial results. The preparation of our unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts in our unaudited condensed consolidated financial statements and the accompanying notes including vehicle depreciation and various claims and contingencies related to lawsuits, taxes, environmental and other matters arising during the normal course of business. We apply our best judgment, our knowledge of existing facts and circumstances and our knowledge of actions that we may undertake in the future in determining the estimates that will affect our unaudited condensed consolidated financial statements. We evaluate our estimates on an ongoing basis using our historical experience, as well as other factors we believe to be appropriate under the circumstances, such as current economic conditions, and adjust or revise our estimates as circumstances change. As future events and their effects cannot be determined with precision, actual results may differ from these estimates.

In this MD&A we refer to certain key metrics and Non-GAAP measures, including the following:
Adjusted Pre-Tax Income - important to management because it allows management to assess the operational performance of our business, exclusive of certain items and allows management to assess the performance of the entire business on the same basis as the segment measure of profitability. Management believes that it is important to investors for the same reasons it is important to management and because it allows them to assess our operational performance on the same basis that management uses internally.
Total Revenue Per Transaction Day ("Total RPD", also referred to as "pricing") - important to management and investors as it represents a measurement of the changes in underlying pricing in the vehicle rental business and encompasses the elements in vehicle rental pricing that management has the ability to control.
Total Revenue Per Unit Per Month ("Total RPU") - important to management and investors as it provides a measure of revenue productivity relative to the total number of vehicles in our fleet whether owned or leased ("average vehicles" or "fleet capacity").
Transaction Days - important to management and investors as it represents the number of revenue generating days ("volume"). It is used as a component to measure Total RPD and vehicle utilization. Transaction days represent the total number of 24-hour periods, with any partial period counted as one transaction day, that vehicles were on rent (the period between when a rental contract is opened and closed) in a given period. Thus, it is possible for a vehicle to attain more than one transaction day in a 24-hour period.
Vehicle Utilization - important to management and investors because it is the measurement of the proportion of our vehicles that are being used to generate revenues relative to fleet capacity. Higher vehicle utilization means more vehicles are being utilized to generate revenue.
Net Depreciation Per Unit Per Month - important to management and investors as depreciation of revenue earning vehicles and lease charges, is one of our largest expenses for the vehicle rental business and is driven by the number of vehicles, expected residual values at the time of disposal and expected hold period of the vehicles. Net depreciation per unit per month is reflective of how we are managing the costs of our vehicles and facilitates a comparison with other participants in the vehicle rental industry.

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES

ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Key metrics and Non-GAAP measures should not be considered in isolation and should not be considered superior to, or a substitute for, financial measures calculated in accordance with U.S. GAAP. The above key metrics and Non-GAAP measures are defined, and the Non-GAAP measures are reconciled to their most comparable U.S. GAAP measure, in the "Footnotes to the Results of Operations and Selected Operating Data by Segment Tables" section of this MD&A.

OUR COMPANY

Hertz Global Holdings, Inc. was incorporated in Delaware in 2015 to serve as the top-level holding company for Rental Car Intermediate Holdings, LLC which wholly owns Hertz, Hertz Global's primary operating company. Hertz was incorporated in Delaware in 1967 and is a successor to corporations that have been engaged in the vehicle rental and leasing business since 1918.

We operate our vehicle rental business globally through the Hertz, Dollar and Thrifty brands from approximately 9,700 corporate and franchisee locations in North America, Europe, Latin America, Africa, Asia, Australia, The Caribbean, the Middle East and New Zealand. We are one of the largest worldwide airport general use vehicle rental companies and our Hertz brand name is one of the most recognized in the world, signifying leadership in quality rental services and products. We have an extensive network of rental locations in the United States ("U.S.") and in all major European markets. We believe that we maintain one of the leading airport vehicle rental brand market shares, by overall reported revenues, in the U.S. and at major airports in Europe where data regarding vehicle rental concessionaire activity is available. We are a leading provider of comprehensive, integrated vehicle leasing and fleet management solutions through our Donlen subsidiary.

OVERVIEW OF OUR BUSINESS AND OPERATING ENVIRONMENT

We are engaged principally in the business of renting and leasing vehicles primarily through our Hertz, Dollar and Thrifty brands. In addition to vehicle rental, we provide comprehensive, integrated vehicle leasing and fleet management solutions through our Donlen subsidiary. We have a diversified revenue base and a highly variable cost structure and are able to adjust fleet capacity, the most significant determinant of our costs, over time to meet expectations of market demand. Our profitability is primarily a function of the volume, mix and pricing of rental transactions and the utilization of vehicles, the related ownership cost of vehicles and other operating costs. Significant changes in the purchase price or residual values of vehicles 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 vehicles, and consequently we require substantial liquidity to finance such expenditures. See "Liquidity and Capital Resources" below.

Our strategy includes optimization of our vehicle rental operations, disciplined performance management and evaluation of all locations and the pursuit of same-store sales growth.

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

Vehicle rental revenues - revenues from all company-operated vehicle rental operations, including charges to customers for the reimbursement of costs incurred relating to airport concession fees and vehicle license fees, the fueling of vehicles and revenues associated with ancillary products associated with vehicle rentals, including the sale of loss or collision damage waivers, liability insurance coverage, parking and other products and fees, ancillary products associated with the retail vehicle sales channel and certain royalty fees from our franchisees (such fees, including initial franchise fees, are less than 2% of total revenues each period);

All other operations revenues - revenues from vehicle leasing and fleet management services and other business activities.


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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES

ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Our expenses primarily consist of:

Direct vehicle and operating expenses (primarily wages and related benefits; commissions and concession fees paid to airport authorities, travel agents and others; facility, self-insurance and reservation costs; and other costs relating to the operation and rental of revenue earning vehicles, such as damage, maintenance and fuel costs);

Depreciation expense and lease charges, net relating to revenue earning vehicles (including net gains or losses on the disposal of such vehicles);

Selling, general and administrative expenses; and

Interest expense, net.

Our Business Segments

We have identified three reportable segments, which are organized based on the products and services provided by our operating segments and the geographic areas in which our operating segments conduct business, as follows:
U.S. Rental Car ("U.S. RAC") - Rental of vehicles, as well as sales of ancillary products and services, in the U.S.;
International Rental Car ("International RAC") - Rental and leasing of vehicles, as well as sales of ancillary products and services, internationally; and
All Other Operations - Comprised of our Donlen business, which provides vehicle leasing and fleet management services, and other business activities.
In addition to the above reportable segments, we have Corporate operations. We assess performance and allocate resources based upon the financial information for our operating segments.

Fleet

We periodically review the efficiencies of an optimal mix between program and non-program vehicles in our fleet. Program vehicles generally provide us with flexibility to increase or reduce the size of our fleet based on economic demand. When we increase the percentage of program vehicles, the average age of our fleet decreases since the average holding period for program vehicles is shorter than for non-program vehicles. We dispose of our non-program vehicles via auction, dealer-direct and our retail locations. Non-program vehicles disposed of through our retail outlets allow us the opportunity for ancillary revenue, such as warranty and financing and title fees. We adjust the ratio of program and non-program vehicles in our fleet as needed based on contract negotiations and the economic environment pertaining to our industry.

Seasonality

Our vehicle rental operations are a seasonal business, with decreased levels of business in the winter months and heightened activity during the spring and summer peak ("our peak season") for the majority of countries where we generate our revenues. To accommodate increased demand, we increase our available fleet and staff during the second and third quarters of the year. As business demand declines, vehicles 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 utilization initiatives and the use of our information technology systems, to help manage our variable costs. Generally, between 70% and 75% of our annual operating costs represent variable costs, while the remaining costs are fixed or semi-fixed. We also maintain a flexible workforce, with a significant number of part-time and seasonal workers. Certain operating expenses, including real estate taxes, rent, insurance, utilities, maintenance and other facility-related expenses, the costs of operating our information technology systems and minimum staffing costs, remain fixed and cannot be adjusted for seasonal demand.

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES

ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)


2017 Operating Overview

The following provides an overview of our business and financial performance and key factors influencing our results:

Total revenues for U.S. RAC for the firstsecond quarter of 2017 decreased by 4% compared to 2016 driven by a 3%2% decline in Total RPD and a 1%3% decrease in transaction days. Total revenues for U.S. RAC for the first half of 2017 decreased by 4% as compared to the first half of 2016 driven by a 2% decline in Total RPD and a 2% decrease in transaction days;

Depreciation of revenue earning vehicles and lease charges, net for U.S. RAC increased 19%26% to $499$524 million from $419$417 million for the second quarter of 2017 versus 2016 and increased 22% to $1.0 billion from $836 million for the first quarterhalf of 2017 versus 2016. Net depreciation per unit per month in U.S. RAC increased 15%27% to $348$353 from $303$278 for the firstsecond quarter of 2017 versus 2016 and increased 21% to $351 from $290 for the first half of 2017 versus 2016. The increases in per vehicle depreciation rates are the result of shortened hold periods on certain non-program vehicles as we rebalanced the fleet, our onboarding of a richer mix of premium model year 2017 vehicles, and declining residual values on non-program vehicles;values;

Total revenues for International RAC decreased 5%increased 1% for the firstsecond quarter of 2017 versus 2016. Excluding the impact of foreign currency exchange rates, total revenues for International RAC decreased $16increased $21 million, or 4% for the firstsecond quarter 2017 versus 2016, driven by a 4% decrease6%increase in Total RPDtransaction days, partially offset by a 1% decrease in Total RPD. Total revenues for International RAC decreased 2% for the first half of 2017 versus 2016. Excluding the impact of foreign currency exchange rates, total revenues for International RAC increased $6 million, or 1% for the first half of 2017 versus 2016, driven by a 4% increase in transaction days;days, partially offset by a 3% decrease in Total RPD;

Depreciation of revenue earning vehicles and lease charges, net for International RAC decreased 1%increased 2% to $85$100 million from $86$98 million for the firstsecond quarter of 2017 versus 2016 and excluding a $2increased 1% to $185 million impactfrom $184 million for the first half of foreign currency exchange rates, increased $1 million due to an increase in average vehicles.2017 versus 2016. Net depreciation per unit per month for International RAC increased 2% to $172 from $168 for the second quarter of 2017 versus 2016 and was comparable year over year;for the first half of 2017 versus 2016;

International RAC's public liability and property damage (“PLPD”) expense decreased $17 million in the second quarter of 2017 versus 2016 and decreased $14 million during the first half of 2017 versus 2016. The decreases are primarily related to $20 million in unanticipated charges recorded in the second quarter of 2016 resulting from adverse experience and case development of historical claims, primarily in the United Kingdom, and a $5 million favorable impact in the second quarter of 2017 as a result of actions taken by management to improve claims handling in Europe and changes in business practices, including the closure of certain locations with unfavorable PLPD experience, partially offset by a $5 million accrual for PLPD related to a terrorist event in the second quarter of 2017;

Recorded $86 million of impairment charges in the second quarter 2017 resulting from the impairment of the Dollar Thrifty tradename versus $3 million of net impairments and asset write-downs in the second quarter 2016. Recorded $116 million of impairment charges during the first halfof 2017 resulting from the $86 million impairment of the Dollar Thrifty tradename and a $30 million impairment of an equity method investment during the first halfof 2017 compared to $3 million of net impairments and asset write-downs during the first half of 2016;

Recorded $19$20 million and $39 million during the second quarter and first half of 2017, respectively, in expenses associated with our finance and information technology transformation programs, both of which are multi-year initiatives to upgrade and modernize the Company's systems and processes, during the first quarter 2017 compared to $8$19 million and $26 million during the second quarter and first quarterhalf of 2016;2016, respectively;


Recorded a $30 million impairment52


Table of an equity method investment during the first quarter 2017 with no impairment charges during the first quarter of 2016; andContents
HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES

ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)


During the first quarterhalf of 2017, we sold approximately 9 million shares of common stock of CAR Inc., a publicly traded company on the Hong Kong Stock Exchange, for net proceeds of approximately $9 million, recognizing a pre-tax gain of $3 million. During the first quarterhalf of 2016, we sold 204 million shares of common stock of CAR Inc. for net proceeds of approximately $233 million, recognizing a pre-tax gain of $75 million. There were no sales of common stock of CAR Inc. in the second quarter of 2017 or 2016;

We issued $1.25 billion in aggregate principal amount of 7.625% Senior Second Priority Secured Notes due 2022, utilizing a portion of the proceeds to decrease near term debt maturities by approximately $250 million following redemption of the April 2018 Notes and to terminate commitments under the Senior RCF by $150 million; and

Recorded $8 million of charges for early redemption premiums and write off of deferred financing costs in the second quarter and first half of 2017 as a result of redeeming the April 2018 Notes and terminating commitments under the Senior RCF, compared to $20 million in the second quarter and first half of 2016 as a result of paying off the Senior Term Facility and various vehicle debt refinancings.

For more information on the above highlights, see the discussion of our results on a consolidated basis and by segment that follows herein.


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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES

ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

CONSOLIDATED RESULTS OF OPERATIONS - HERTZ
Three Months Ended March 31, Percent Increase/(Decrease)Three Months Ended June 30, Percent Increase/(Decrease) Six Months Ended
June 30,
 Percent Increase/(Decrease)
($ in millions)2017 2016 2017 2016 2017 2016 
Total revenues$1,916
 $1,983
 (3)%$2,224
 $2,270
 (2)% $4,140
 $4,253
 (3)%
Direct vehicle and operating expenses1,132
 1,158
 (2)1,255
 1,267
 (1) 2,387
 2,425
 (2)
Depreciation of revenue earning vehicles and lease charges, net701
 616
 14
743
 629
 18
 1,444
 1,245
 16
Selling, general and administrative expenses220
 225
 (2)223
 234
 (5) 442
 459
 (4)
Interest expense, net:                
Vehicle71
 69
 3
82
 72
 14
 153
 140
 9
Non-vehicle58
 81
 (28)75
 102
 (26) 134
 185
 (28)
Interest expense, net129
 150
 (14)157
 174
 (10) 287
 325
 (12)
Intangible asset impairments86
 
 
 86
 
 
Other (income) expense, net27
 (90) NM
4
 1
 300
 31
 (89) NM
Income (loss) from continuing operations, before income taxes(293) (76) 286
(244) (35) 597
 (537) (112) 379
Income tax (provision) benefit71
 24
 196
86
 7
 NM
 157
 32
 391
Net income (loss) from continuing operations(222) (52) 327
(158) (28) 464
 (380) (80) 375
Net income (loss) from discontinued operations
 3
 NM

 (15) NM
 
 (11) NM
Net income (loss)$(222) $(49) 353
$(158) $(43) 267
 $(380) $(91) 318
Adjusted pre-tax income (loss)(a)
$(212) $(106) 100
$(81) $55
 NM
 $(293) $(53) 453
Footnotes to the table above are shown in the "Footnotes to the Results of Operations and Selected Operating Data by Segment Tables" section of this MD&A.
NM - Not meaningful

Three Months Ended March 31,June 30, 2017 Compared with Three Months Ended March 31,June 30, 2016

Total revenues decreased $67$46 million, or 3%2%, due primarily to decreases in our U.S. RAC and International RAC revenues of $53$65 million, and $22 million, respectively, partially offset by an $8a $16 million increase in our All Other Operations segment revenues and a $3 million increase in our International RAC revenues. Total RPD in our U.S. RAC segment declined 3% driven predominantly by lower rental rates2% due to a decline in ancillary revenues and a change in customer mix from higher yielding corporate contracted and retail rentals to lower yielding domestic tour and opaque rentals. Additionally, there was a decline in revenues for certain ancillary products.mix. Volume for U.S. RAC decreased 1%. Volume3% comprised of a decrease of 2% for our airport business decreased 2% and was flat4% for our off airport business versuswhich reflects the challenging year over year comparison in replacement rentals due to a large number of customer vehicle recalls in the second quarter of 2016. Revenues in our All Other Operations business increased primarily due to an increase in Donlen's leasing and services volume. Excluding a $6an $18 million impact of foreign currency exchange rates, International RAC revenues decreased $16increased $21 million, or 4%, driven by a 4% decrease6% increase in Total RPDtransaction days partially offset by a 1% increasedecrease in transaction daysTotal RPD for the segment. Rate and volume in both the U.S. and International RAC segments were negatively impacted by the Easter holiday falling in the second quarter of 2017 versus the first quarter of 2016.

The decrease in direct vehicle and operating expenses ("DOE") of $26$12 million, or 2%1%, was primarily due to a decrease in our International RAC andsegment of $19 million, partially offset by an increase in our All Other Operations segment of $8 million while the U.S. RAC segments of $12 million and $9 million, respectively, in the first quarter of 2017 compared to the first quarter of 2016.segment remained flat. Excluding the $6$11 million impact of foreign currency exchange rates, direct vehicle and operating expensesDOE for International RAC decreased $6$8 million, or 2%, due to a $5$17 milliondecrease in commissions, technology and facility charges and a $4 million decrease in vehicle damagePLPD expense, partially offset by a $4 million increase in public liability and property damage ("PLPD") expense. The decrease in direct vehicle and operating expenses for our U.S. RAC segment is comprised of a $7 million decrease in vehicle related expenses and a $4 million decrease in personnel related expenses, partially offset by an increase of $10 million in other direct vehicle operating expensestransaction variable costs due to higher rental volume in the second quarter of $2 million.2017 versus 2016. The increase in our All Other Operations segment is due to charges related to new leases entered into during the second quarter of 2017.

Depreciation of revenue earning vehicles and lease charges, net increased $85$114 million, or 14%18%, primarily due to an $80a $107 million increase in our U.S. RAC segment resulting from higher per vehicle depreciation rates, slightly offset by a smaller fleet.

Selling, general and administrative expenses (“SG&A”) decreased $11 million, or 5%, in the second quarter of 2017 compared to the second quarter of 2016, primarily due to declining residual values on non-program vehicles.

a decrease of approximately $32 million in restructuring

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES

ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Selling, general and administrative expenses (“SG&A”) decreased $5 million, or 2%, in the first quarter of 2017 compared to the first quarter of 2016, primarily due to a decrease of approximately $24 million inrelated, incentive compensation advertising, restructuring related and other expenses, partially offset by an $11a $21 million increase in advertising expense, charges for labor-related matters and information technology transformation program costs and $8 million in litigation settlements related to various cases("IT") expenses recorded during the quarter. The above changes primarily related to our U.S. RAC segment and Corporate.

Vehicle interest expense, net increased $10 million, or 14%, in the second quarter of 2017 compared to the second quarter of 2016 primarily due to higher market interest rates, higher rates associated with increasing the mix of medium term funding and interest related to the European Vehicle Notes that were issued in the third quarter of 2016, partially offset by a loss on extinguishment of debt for terminated vehicle debt in the second quarter of 2016 with no comparable loss in the second quarter of 2017.

Non-vehicle interest expense, net decreased $27 million, or 26%, in the second quarter of 2017 compared to the second quarter of 2016, primarily due to the termination of the $2.1 billion of Senior Credit Facilities in June 2016, the 2016 refinancings of certain Senior Notes with the lower rate Senior Term Loan and 5.50% Senior Notes due 2024 and lower losses on the extinguishment of debt in the second quarter of 2017 versus 2016.

We had intangible asset impairments of $86 million related to the Dollar Thrifty tradename for the second quarter of 2017.

We had other expense of $4 million for the second quarter of 2017, primarily comprised of a $4 million fair value adjustment of our Brazil operations in connection with its classification as held for sale. In the second quarter of 2016, we had other expense of $1 million.

The effective tax rate in the second quarter of 2017 was 35% compared to 20% in the second quarter of 2016. The Company recorded a tax benefit of $86 million in the second quarter of 2017 and $7 million in the second quarter of 2016. The $79 million increase in the income tax benefit is the result of the composition of earnings and lower worldwide pre-tax income, offset by discrete items in the quarter, attributable to an out of period adjustment and due in part to tax charges from stock compensation.

The results for discontinued operations are associated with the activities of the Old Hertz Holdings equipment rental business which was spun-off on June 30, 2016.

Adjusted pre-tax loss was $81 million in the second quarter of 2017 compared to adjusted pre-tax income of $55 million in the second quarter of 2016. See footnote (a) in the "Footnotes to the Results of Operations and Selected Operating Data by Segment Tables" for a summary and description of reconciling adjustments on a consolidated basis.

Six Months Ended June 30, 2017 Compared with Six Months Ended June 30, 2016

Total revenues decreased $113 million, or 3%, due primarily to decreases in our U.S. RAC and International RAC revenues of $118 million and $18 million, respectively, partially offset by a $23 million increase in our All Other Operations segment revenues. Total RPD in our U.S. RAC segment decreased 2% due to a decline in ancillary revenues and customer mix, primarily driven by a change from higher yielding corporate contracted and retail rentals to lower yielding domestic tour, opaque and ride-hailing vehicle rentals. Volume for U.S. RAC decreased 2% driven by declines of 2% in each of our airport and off airport businesses. The decline in our off airport volume reflects the challenging year over year comparison in replacement rentals due to a large number of customer vehicle recalls in the first half of 2016. Excluding a $24 million impact of foreign currency exchange rates, International RAC revenues increased $6 million, or 1%, driven by a 4% increase in transaction days partially offset by a 3% decrease in Total RPD for the segment. Total revenues in our All Other Operations segment increased primarily due to an increase in Donlen's leasing and services volume.

The decrease in DOE of $38 million, or 2%, was primarily due to a decrease in our International RAC segment and our corporate operations of $31 million and $9 million, respectively, while the U.S. RAC segment remained flat in the first half of 2017 compared to the first half of 2016. Excluding the $17 million impact of foreign currency exchange rates, DOE for International RAC decreased $14 million, or 2%, due to a $14 milliondecrease in PLPD expense and a $5 million decrease in vehicle damage expense, partially offset by an increase of $9 million in transaction variable

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THE HERTZ CORPORATION AND SUBSIDIARIES

ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

costs due to higher rental volume. The decrease in DOE for our corporate operations is due mainly to charges related to the Spin-Off in the first half of 2016 with no comparable charges in the first half of 2017.

Depreciation of revenue earning vehicles and lease charges, net increased $199 million, or 16%, primarily due to a $187 million increase in our U.S. RAC segment resulting from higher per vehicle depreciation rates combined with a slightly larger fleet.

SG&A decreased $17 million, or 4%, in the first half of 2017 compared to the first half of 2016, primarily due to a decrease of approximately $50 million in restructuring related, incentive compensation and other expenses, partially offset by a $21 million increase in advertising expense, charges for labor-related matters and litigation settlements related to various cases and a $13 million increase in information technology transformation program costs recorded during the first half of 2017. The above changes primarily related to our U.S. RAC segment. As discussed above, we incurred higher information technology transformation program costs in the first quarterhalf of 2017 versus the first quarterhalf 2016, and we expect to see continued increases in SG&A expenses for information technology investments for the remainder of 2017 and in 2018.

Vehicle interest expense, net increased $2$13 million, or 3%9%, in the first quarterhalf of 2017 compared to the first quarterhalf of 2016 primarily due to higher market interest rates and higher rates associated with increasing the mix of medium term funding and interest related to the European Vehicle Notes that were issued in the third quarter of 2016, partially offset by a reduction in amortizationloss on extinguishment of deferred financing costsdebt for terminated vehicle debt.debt in the first half of 2016 with no comparable loss recorded in the first half of 2017.

Non-vehicle interest expense, net decreased $23$51 million, or 28%, in the first quarterhalf of 2017 compared to the first quarterhalf of 2016, primarily due to the termination of the $2.1 billion of Senior Credit Facilities in June 2016, and the 2016 refinancings of certain Senior Notes with the lower rate Senior Term Loan and 5.50% Senior Notes due 2024.2024 and lower losses on the extinguishment of debt in the first half of 2017 versus 2016.

We had intangible asset impairments of $86 million related to the Dollar Thrifty tradename for the first half of 2017.

We had other expense of $27 million as compared to other income of $90$31 million for the first quarterhalf of 2017, compared to the first quarter of 2016. Other expense for the first quarter of 2017 was primarily comprised of a $30 million impairment of an equity method investment. Other income of $89 million for the first quarterhalf of 2016 was primarily comprised of a $75 million gain on the sale of common stock of CAR Inc. and a $9 million settlement gain from an eminent domain case at one of our airport locations.

The effective tax rate in the first quarterhalf of 2017 was 24%29% compared to 32%29% in the first quarterhalf of 2016. The effective tax rate for the full fiscal year 2017 is expected to be approximately 27%. The Company recorded a tax benefit of $71$157 million in the first quarterhalf of 2017 and $24$32 million in the first quarterhalf of 2016. The $47$125 million increase in the income tax benefit is due tothe result of composition of earnings by jurisdiction and lower worldwide pre-tax income, offset by discrete items in the quarter.first half of 2017, attributable to an out of period adjustment and due in part to tax charges from stock compensation.

The results for discontinued operations are associated with the activities of the Old Hertz Holdings equipment rental business which was spun-off on June 30, 2016.

Adjusted pre-tax loss was $212$293 million in the first quarterhalf of 2017 compared to $106$53 million in the first quarterhalf of 2016. See footnote (a) in the "Footnotes to the Results of Operations and Selected Operating Data by Segment Tables" for a summary and description of reconciling adjustments on a consolidated basis.

CONSOLIDATED RESULTS OF OPERATIONS - HERTZ GLOBAL

The above discussion for Hertz also applies to Hertz Global.

Hertz Global has net losses from discontinued operations of $2 million for the first quarterhalf of 2016 that are incremental to the amounts shown for Hertz. These amounts represent the net losses of the parent legal entities of Old Hertz Holdings

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THE HERTZ CORPORATION AND SUBSIDIARIES

ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

which are deemed discontinued operations of Hertz Global but not Hertz. There are no incremental net losses for Hertz Global in the second quarter 2016.

In the second quarter and first quarterhalf of 2017, Hertz Global has interest expense, net for Hertz Global isof $1 million greater thanand $2 million, respectively that is incremental to the amounts shown for Hertz. This amount representsThese amounts represent interest associated with amounts outstanding under the master loan agreement between the companies. Hertz includes this amount as interest income in its statement of operations but this amount is eliminated in consolidation for purposes of Hertz Global.

RESULTS OF OPERATIONS AND SELECTED OPERATING DATA BY SEGMENT

U.S. Rental Car
 Three Months Ended
June 30,
 Percent Increase/(Decrease)  Six Months Ended
June 30,
 Percent Increase/(Decrease) 
($ in millions, except as noted)2017 2016   2017 2016  
Total revenues$1,519
 $1,584
 (4)%  $2,872
 $2,990
 (4)% 
Direct vehicle and operating expenses$919
 $916
 
  $1,780
 $1,786
 
 
Depreciation of revenue earning vehicles and lease charges, net$524
 $417
 26
  $1,023
 $836
 22
 
Income (loss) before income taxes$(146) $104
 NM
  $(278) $82
 NM
 
Adjusted pre-tax income (loss)(a)
$(37) $143
 NM
  $(152) $138
 NM
 
Transaction days (in thousands)(b)
36,233
 37,190
 (3)  68,545
 69,932
 (2) 
Average vehicles(c)
495,000
 500,000
 (1)  486,500
 480,100
 1
 
Vehicle utilization(c)
80% 82% (130)bps 78% 80% (220)bps
Total RPD (in whole dollars)(d)
$41.26
 $42.11
 (2)  $41.23
 $42.23
 (2) 
Total RPU (in whole dollars)(e)
$1,007
 $1,044
 (4)  $968
 $1,025
 (6) 
Net depreciation per unit per month (in whole dollars)(f)
$353
 $278
 27
  $351
 $290
 21
 
Percentage of program vehicles at period end11% 12% (100)bps 11% 12% (100)bps
Footnotes to the table above are shown in the "Footnotes to the Results of Operations and Selected Operating Data by Segment Tables" section of this MD&A.
NM - Not meaningful

Three Months Ended June 30, 2017 Compared with Three Months Ended June 30, 2016

Total U.S. RAC revenues were $1.5 billion in the second quarter of 2017, a decrease of $65 million, or 4%, from the second quarter of 2016. Total RPD decreased 2% due to a decline in ancillary revenues and customer mix, primarily driven by a change from higher yielding corporate contracted and retail rentals to lower yielding domestic tour and ride-hailing vehicle rentals. Transaction days decreased 3% comprised of a decrease of 2% for our airport business and 4% for our off airport business which reflects the challenging year over year comparison in replacement rentals due to a large number of customer vehicle recalls in the second quarter of 2016. Off airport revenues comprised 28% of total revenues for the segment in the second quarter of 2017 and 2016.

DOE for U.S. RAC was comparable year over year primarily due to the following:

Vehicle related expenses were comparable with the second quarter of 2016.

Personnel related expenses increased $12 million compared to the second quarter of 2016, primarily due to an increase of $9 million in field wages due in part to new customer-oriented initiatives and an increase of $8 million in benefits expense, mainly resulting from an increase in the workers compensation reserve, partially offset by a $5 million decrease in variable incentive compensation.


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THE HERTZ CORPORATION AND SUBSIDIARIES

ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Transaction variable expenses decreased $18 million primarily due to decreases in optional insurance liability expense of $21 million due to favorable adjustments based on historical experience and a decrease in transaction days discussed above, partially offset by higher fuel expense of $4 million due to higher market fuel prices compared to the second quarter of 2016.

Other direct vehicle and operating expenses increased $9 million year over year primarily due to increased facility costs of $6 million, mainly related to accelerated depreciation at certain of our airport locations as a result of the Ultimate Choice program, and a $4 million increase in IT charges.

Depreciation rates are reviewed on a 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. Depreciation rates being used to compute the provision for depreciation of revenue earning vehicles are adjusted on certain vehicles in our vehicle rental operations to reflect changes in the estimated residual values to be realized when revenue earning vehicles are sold. Based on the reviews completed during the second quarter of 2017 and 2016, depreciation rate changes in our U.S. RAC operations resulted in a net increase in depreciation expense of $24 million and $12 million, respectively. The rate changes reflect shortened hold periods on certain non-program vehicles as we rebalanced the fleet, our onboarding of a richer mix of premium model year 2017 vehicles, and declining residual values.

Depreciation of revenue earning vehicles and lease charges, net for U.S. RAC increased by $107 million, or 26%, in the second quarter of 2017 compared to the second quarter of 2016. Net depreciation per unit per month increased to $353 in the second quarter of 2017 compared to $278 in the second quarter of 2016. The increase year over year is primarily the result of higher per vehicle depreciation rates, slightly offset by a smaller fleet.

There was a loss before income taxes for U.S. RAC of $146 million in the second quarter of 2017 compared to income before income taxes of $104 million in the second quarter of 2016. The $250 million decrease year over year is primarily due to the impact of increased depreciation expense on our revenue earning vehicles, the $86 million impairment of the Dollar Thrifty tradename and lower revenues. The above were partially offset by a decrease of $10 million in interest expense, net. SG&A for the segment decreased $2 million year over year, primarily resulting from $16 million of decreases in restructuring related, information technology transformation program costs, incentive compensation and other expenses, partially offset by a $14 million increase due to charges for labor-related matters and advertising expense recorded during the second quarter of 2017.

Adjusted pre-tax loss for U.S. RAC was $37 million in the second quarter of 2017 compared to adjusted pre-tax income of $143 million in the second quarter of 2016. See footnote (a) in the "Footnotes to the Results of Operations and Selected Operating Data by Segment Tables" for a summary and description of reconciling adjustments on a consolidated basis.

Six Months Ended June 30, 2017 Compared with Six Months Ended June 30, 2016

Total U.S. RAC revenues were $2.9 billion in the first half of 2017, a decrease of $118 million, or 4%, from the first half of 2016. Total RPD decreased 2% due to a decline in ancillary revenues and customer mix, primarily driven by a change from higher yielding corporate contracted and retail rentals to lower yielding domestic tour, opaque and ride-hailing vehicle rentals. Transaction days decreased 2% driven by declines of 2% in each of our airport and off airport businesses. The decline in our off airport volume reflects the challenging year over year comparison in replacement rentals due to a large number of customer vehicle recalls in the first half of 2016. Off airport revenues comprised 28% of total revenues for the segment in the first half of 2017 as compared to 27% for the first half of 2016.

DOE for U.S. RAC was comparable year over year primarily due to the following:

Vehicle related expenses decreased $5 million year over year primarily due to:

Decreased collision and short term maintenance expense of $10 million resulting from improved customer collections on damage claims resulting from process improvements and a decrease in the

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THE HERTZ CORPORATION AND SUBSIDIARIES

ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

costs to prepare program vehicles for turn-back due to a reduction in the number of program vehicles returned to the manufacturer year over year.

Increased maintenance expense of $4 million for the reconditioning of certain vehicles.

Personnel related expenses increased $8 million compared to the first half of 2016, primarily due to a $11 million increase in field wages due in part to new customer-oriented initiatives and a $9 million increase in benefits expense, primarily resulting from an increase in the workers compensation reserve, partially offset by a $12 million decrease in variable incentive compensation.

Transaction variable expenses decreased $18 million primarily due to decreases in optional insurance liability expense of $21 million due to favorable adjustments based on historical experience and a decrease in transaction days discussed above, and decreased concessions and credit card expense of $4 million, partially offset by higher fuel expense of $8 million due to higher market fuel prices compared to the first half of 2016.

Other direct vehicle and operating expenses increased $9 million year over year primarily due to $5 million of charges related to our navigational service offerings.

Depreciation rates are reviewed on a 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. Depreciation rates being used to compute the provision for depreciation of revenue earning vehicles are adjusted on certain vehicles in our vehicle rental operations to reflect changes in the estimated residual values to be realized when revenue earning vehicles are sold. Based on the reviews completed during the first half of 2017 and 2016, depreciation rate changes in our U.S. RAC operations resulted in a net increase in depreciation expense of $62 million and $45 million, respectively. The rate changes reflect shortened hold periods on certain non-program vehicles as we rebalanced the fleet, our onboarding of a richer mix of premium model year 2017 vehicles, and declining residual values.

Depreciation of revenue earning vehicles and lease charges, net for U.S. RAC increased by $187 million, or 22%, in the first half of 2017 compared to the first half of 2016. Net depreciation per unit per month increased to $351 in the first half of 2017 compared to $290 in the first half of 2016. The increase year over year is primarily the result of higher per vehicle depreciation rates combined with a slightly larger fleet.

There was a loss before income taxes for U.S. RAC of $278 million in the first half of 2017 compared to income before income taxes of $82 million in the first half of 2016. The $360 million decrease year over year is due primarily to the impact of increased depreciation expense on our revenue earning vehicles, lower revenues and the $86 million impairment of the Dollar Thrifty tradename. The above were partially offset by a decrease of $25 million in interest expense, net and a $11 million decrease in SG&A for the segment, primarily resulting from $21 million of decreases in restructuring related, incentive compensation and other expenses and a $9 million decrease in information technology transformation program costs, partially offset by a $19 million increase due to charges for labor-related matters and advertising expense recorded during the first half of 2017. Additionally, in the first half of 2016 we had other income of $11 million primarily related to an eminent domain case at one of our airport locations with no comparable charges in 2017.

Adjusted pre-tax loss for U.S. RAC was $152 million in the first half of 2017 compared to adjusted pre-tax income of $138 million in the first half of 2016. See footnote (a) in the "Footnotes to the Results of Operations and Selected Operating Data by Segment Tables" for a summary and description of reconciling adjustments on a consolidated basis.


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THE HERTZ CORPORATION AND SUBSIDIARIES

ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

RESULTS OF OPERATIONS AND SELECTED OPERATING DATA BY SEGMENT

U.S.International Rental Car
Three Months Ended
March 31,
 Percent Increase/(Decrease) Three Months Ended
June 30,
 Percent Increase/(Decrease) Six Months Ended
June 30,
 Percent Increase/(Decrease) 
($ in millions, except as noted)2017 2016 2017 2016 2017 2016 
Total revenues$1,353
 $1,406
 (4)% $543
 $540
 1 % $955
 $973
 (2)% 
Direct vehicle and operating expenses$861
 $870
 (1) $322
 $341
 (6) $589
 $620
 (5) 
Depreciation of revenue earning vehicles and lease charges, net$499
 $419
 19
 $100
 $98
 2
 $185
 $184
 1
 
Income (loss) before income taxes$(132) $(22) 500
 $43
 $29
 48
 $37
 $27
 37
 
Adjusted pre-tax income (loss)(a)
$(116) $(4) NM
 $56
 $34
 65
 $52
 $36
 44
 
Transaction days (in thousands)(b)
32,312
 32,742
 (1) 13,235
 12,511
 6
 23,419
 22,613
 4
 
Average vehicles(c)
478,000
 460,200
 4
 186,100
 178,600
 4
 168,300
 163,300
 3
 
Vehicle utilization(c)
75% 78% (310)bps78% 77% 120
bps 77% 76% 80
bps
Total RPD (in whole dollars)(d)
$41.19
 $42.36
 (3) $39.29
 $39.88
 (1) $39.28
 $40.38
 (3) 
Total RPU (in whole dollars)(e)
$928
 $1,005
 (8) $931
 $931
 
 $911
 $932
 (2) 
Net depreciation per unit per month (in whole dollars)(f)
$348
 $303
 15
 $172
 $168
 2
 $177
 $176
 1
 
Program vehicles as a percentage of average vehicles at period end8% 15% (700)bps
Percentage of program vehicles at period end46% 45% 100
bps 46% 45% 100
bps
Footnotes to the table above are shown in the "Footnotes to the Results of Operations and Selected Operating Data by Segment Tables" section of this MD&A.
NM - Not meaningful

Three Months Ended March 31,June 30, 2017 Compared with Three Months Ended March 31,June 30, 2016

Total U.S.revenues for International RAC revenues were $1.4 billionincreased $3 million, or 1%, in the first quarter of 2017, a decrease of $53 million, or 4%, from the first quarter of 2016. Total RPD decreased 3% driven predominantly by lower rental rates and a change in customer mix from higher yielding corporate contracted and retail rentals to lower yielding domestic tour and opaque rentals. Additionally, there was a decrease in ancillary revenue from insurance and related products and vehicle upgrades. Transaction days decreased 1% due in part to there being one less day in the firstsecond quarter of 2017 compared to the firstsecond quarter of 2016. Rate and volume were also negatively impactedExcluding an $18 million impact of foreign currency exchange rates, revenues increased $21 million or 4%, driven by a 6% increase in transaction days primarily due to the impact in Europe of the Easter holiday falling in the second quarter of 2017 versus the first quarter of 2016. Volume for U.S. RAC decreased 2% for our airport business and was flat for our off airport business versus the first quarter of 2016. Off airport revenues comprised 28% of total revenues for the segment in the first quarter of 2017 as compared to 26% for the first quarter of 2016.

Direct vehicle and operating expenses for U.S. RAC decreased $9 million, or 1%, primarily due to the following:

Vehicle related expenses decreased $7 million year over year primarily due to:

Decreased collision and short term maintenance expense of $7 million resulting from improved customer mix and improved customer collections on damage claims resulting from process improvements and a decrease in the costs to prepare program vehicles for turn-back due to a reduction in the number of program vehicles returned to the manufacturer year over year.

Personnel related expenses decreased $4 million compared to the first quarter of 2016 primarily due toand growth in our value brands, partially offset by a 1% decrease in variable incentive compensation.Total RPD.

OtherDOE for International RAC decreased $19 million in the second quarter of 2017 compared to the second quarter of 2016. Excluding the $11 million impact of foreign currency exchange rates, direct vehicle and operating expenses increased $2decreased $8 million, year overor 2%, versus the prior year primarily due to increased fuela $17 milliondecrease in PLPD expense, partially offset by an increase of $10 million in transaction variable costs, of $4 millionsuch as field compensation, concessions and facilities due to higher market fuel pricing.rental volume in the second quarter of 2017. The decrease in PLPD expense primarily represents a $20 million charge in the second quarter of 2016 resulting from adverse experience and case development, primarily in the United Kingdom, combined with a $5 million reduction in PLPD expense in the second quarter 2017 as a result of actions taken by management to improve claims handling in Europe and changes in business practices, including the closure of certain locations with unfavorable PLPD experience, partially offset by a $5 million accrual for PLPD related to a terrorist event in the second quarter of 2017.

Depreciation of revenue earning vehicles and lease charges, net for International RAC increased $2 million, or 2%, in the second quarter of 2017 compared to the second quarter of 2016. Excluding the $4 million impact of foreign currency exchange rates, are reviewed ondepreciation of revenue earning vehicles and lease charges, net increased $6 million or 6% primarily due to a quarterly basis based on management's routine review4% increase in average vehicles in the second quarter of present and estimated future market conditions and their effect on residual values at2017 compared to the timesecond quarter of disposal. Depreciation rates being used2016. Net depreciation per unit per month increased to $172 in the second quarter of 2017 compared to $168 in the second quarter of 2016.


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ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

compute the provisionThere was income before income taxes for depreciationInternational RAC of revenue earning vehicles are adjusted on certain vehicles in our vehicle rental operations to reflect changes$43 million in the estimated residual values to be realized when revenue earning vehicles are sold. Based on the reviews completed during the first quarter of 2017 and 2016, depreciation rate changes in our U.S. RAC operations resulted in a net increase in depreciation expense of $26 million and $27 million, respectively. The rate changes reflect declining residual values on non-program vehicles.

Depreciation of revenue earning vehicles and lease charges, net for U.S. RAC increased by $80 million, or 19%, in the firstsecond quarter of 2017 compared to $29 million in the firstsecond quarter of 2016. Net depreciation per unit per month increased to $348 in the first quarter of 2017 compared to $303 in the first quarter of 2016. The $14 million increase year over year is primarily due to decreased DOE and higher revenues as discussed above, partially offset by an increase of $4 million in interest expense, net primarily related to the resultEuropean Vehicle Notes which were issued in the third quarter of declining residual values on non-program vehicles.2016, and an increase of $4 million in other income (expense), net comprised of a $4 million fair value adjustment of our Brazil assets and liabilities held for sale.

Loss beforeAdjusted pre-tax income taxes for U.S.International RAC increased $110was $56 million in the firstsecond quarter of 2017 compared to the first quarter of 2016 due primarily to the impact of lower revenues and increased depreciation expense on our revenue earning vehicles. Additionally, in the first quarter of 2016 we had other income of $9 million related to an eminent domain case at one of our airport locations. The above were partially offset by a decrease of $14 million in interest expense, net and a $9 million decrease in SG&A for the segment, resulting from $17 million of decreases in incentive compensation, advertising expenses, restructuring related expenses, information technology transformation program costs and other general expenses, partially offset by $8 million in litigation settlements related to various cases recorded during the quarter.

Adjusted pre-tax loss for U.S. RAC was $116$34 million in the first quarter of 2017 compared to $4 million in the firstsecond quarter of 2016. See footnote (a) in the "Footnotes to the Results of Operations and Selected Operating Data by Segment Tables" for a summary and description of reconciling adjustments on a consolidated basis.

Six Months Ended June 30, 2017 Compared with Six Months Ended June 30, 2016

Total revenues for International Rental Car
 Three Months Ended March 31, Percent Increase/(Decrease) 
($ in millions, except as noted)2017 2016  
Total revenues$411
 $433
 (5)% 
Direct vehicle and operating expenses$267
 $279
 (4) 
Depreciation of revenue earning vehicles and lease charges, net$85
 $86
 (1) 
Income (loss) before income taxes$(5) $(1) 400
 
Adjusted pre-tax income (loss)(a)
$(4) $3
 NM
 
Transaction days (in thousands)(b)
10,184
 10,104
 1
 
Average vehicles(c)
150,400
 148,100
 2
 
Vehicle utilization(c)
75% 75% 30
bps
Total RPD (in whole dollars)(d)
$39.38
 $40.97
 (4) 
Total RPU (in whole dollars)(e)
$889
 $932
 (5) 
Net depreciation per unit per month (in whole dollars)(f)
$184
 $185
 (1) 
Program vehicles as a percentage of average vehicles at period end33% 37% (400)bps
FootnotesRAC decreased $18 million, or 2%, in the first half of 2017 compared to the tablefirst half of 2016. Excluding a $24 million impact of foreign currency exchange rates, revenues increased $6 million or 1%, driven by a 4% increase in transaction days for the segment, due to volume growth in our value brands, partially offset by a 3% decrease in Total RPD.

DOE for International RAC decreased $31 million in the first half of 2017 compared to the first half of 2016. Excluding the $17 million impact of foreign currency exchange rates, direct vehicle and operating expenses decreased $14 million, or 2%, versus the prior year due to a $14 milliondecrease in PLPD expense and a decrease of $5 million in vehicle damage expense, partially offset by an increase of $9 million in transaction variable costs, such as field compensation and concessions due to higher rental volume in the first half of 2017 versus 2016. The decrease in PLPD expense primarily represents a $20 million charge in the second quarter of 2016 resulting from adverse experience and case development, primarily in the United Kingdom, partially offset by a $5 million accrual for PLPD related to a terrorist event in the first half of 2017.

Depreciation of revenue earning vehicles and lease charges, net for International RAC increased $1 million, or 1%, in the first half of 2017 compared to the first half of 2016. Excluding the $6 million impact of foreign currency exchange rates, depreciation of revenue earning vehicles and lease charges, net increased $7 million or 4% primarily due to a 3% increase in average vehicles in the first half of 2017 compared to the first half of 2016. Net depreciation per unit per month was comparable year over year.

There was income before income taxes for International RAC of $37 million in the first half of 2017 compared to $27 million in the first half of 2016. The $10 million increase year over year is primarily due to decreased direct vehicle and operating expenses discussed above are shownand a decrease of $4 million in SG&A driven by the impact of exchange rates, incentive compensation and other general expenses, partially offset by lower revenues and a $5 million increase in interest expense, net primarily related to the European Vehicle Notes which were issued in the third quarter of 2016.

Adjusted pre-tax income for International RAC was $52 million in the first half of 2017 compared to $36 million in the first half of 2016. See footnote (a) in the "Footnotes to the Results of Operations and Selected Operating Data by Segment Tables" sectionfor a summary and description of this MD&A.
NM - Not meaningfulreconciling adjustments on a consolidated basis.

Three Months Ended March 31, 2017 Compared with Three Months Ended March 31, 2016

Total revenues for International RAC decreased $22 million, or 5%, in the first quarter of 2017 compared to the first quarter of 2016. Excluding a $6 million impact of foreign currency exchange rates, revenues decreased $16 million or 4%, driven by a 4% decrease in Total RPD, partially offset by a 1% increase in transaction days for the segment despite there being one less day in the first quarter of 2017 compared to the first quarter of 2016. The decline in Total RPD is

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THE HERTZ CORPORATION AND SUBSIDIARIES

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primarily due to the impact in Europe of the Easter holiday falling in the second quarter of 2017 versus the first quarter of 2016 and the termination of certain contracts in the third quarter of 2016.

Direct vehicle and operating expenses for International RAC decreased $12 million in the first quarter of 2017 compared to the first quarter of 2016. Excluding the $6 million impact of foreign currency exchange rates, direct vehicle and operating expenses decreased $6 million, or 2%, versus the prior year due to a decrease of $4 million in vehicle damage expense and a $5 million decrease in commissions, technology and facility charges in the first quarter of 2017. The decreases were partially offset by an increase in PLPD expense of $4 million primarily due to adverse case development in France and Germany in the first quarter of 2017.

Depreciation of revenue earning vehicles and lease charges, net for International RAC decreased $1 million, or 1%, in the first quarter of 2017 compared to the first quarter of 2016. Excluding the $2 million impact of foreign currency exchange rates, depreciation of revenue earning vehicles and lease charges, net increased $1 million or 1% primarily due to an increase in average vehicles in the first quarter of 2017 compared to the first quarter of 2016. Net depreciation per unit per month was comparable year over year.

There was a loss before income taxes for International RAC of $5 million in the first quarter of 2017 compared to $1 million in the first quarter of 2016. The $4 million decrease year-over-year is primarily due to the factors discussed above.

Adjusted pre-tax loss for International RAC was $4 million in the first quarter of 2017 compared to adjusted pre-tax income of $3 million in the first quarter of 2016. See footnote (a) in the "Footnotes to the Results of Operations and Selected Operating Data by Segment Tables" for a summary and description of reconciling adjustments on a consolidated basis.

All Other Operations
Three Months Ended March 31, Percent Increase/(Decrease)Three Months Ended
June 30,
 Percent Increase/(Decrease) Six Months Ended
June 30,
 Percent Increase/(Decrease)
($ in millions)2017 2016 2017 2016 2017 2016 
Total revenues$152
 $144
 6%$162
 $146
 11% $313
 $290
 8%
Direct vehicle and operating expenses$5
 $5
 
$14
 $6
 133
 $19
 $11
 73
Depreciation of revenue earning vehicles and lease charges, net$117
 $111
 5
$119
 $114
 4
 $236
 $225
 5
Income (loss) before income taxes$18
 $15
 20
$16
 $14
 14
 $34
 $30
 13
Adjusted pre-tax income (loss)(a)
$21
 $18
 17
$19
 $17
 12
 $39
 $35
 11
Average vehicles - Donlen207,500
 162,300
 28
206,200
 166,900
 24
 206,900
 166,900
 24
Footnotes to the table above are shown in the "Footnotes to the Results of Operations and Selected Operating Data by Segment Tables" section of this MD&A.

Total revenues for All Other Operations increased $8 million, or 6%,has favorable results in the second quarter of 2017 as compared to the second quarter of 2016 and favorable results in the first quarterhalf of 2017 as compared to the first quarterhalf of 2016,2016. Revenues were higher primarily driven bydue to an increase in Donlen's leasing and services volume due to new business origination and existing customer growth. Higher revenuesgrowth, and were partially offset by increases in DOE due to charges related to new leases entered into during the second quarter of 2017 and increases in vehicle depreciation due to the growth of leased fleet, resulting in a 20% increase in income before income taxes. fleet.

Footnotes to the Results of Operations and Selected Operating Data by Segment Tables

(a)Adjusted pre-tax income (loss) is calculated as income (loss) from continuing operations before income taxes plus non-cash acquisition accounting charges, debt-related charges relating to the amortization and write-off of debt financing costs and debt discounts, goodwill, intangible and tangible asset impairments and write-downs and certain one-time charges and non-operational items. Adjusted pre-tax income (loss) is important because it allows management to assess operational performance of our business, exclusive of the items mentioned above. It also allows management to assess the performance of the entire business on the same basis as the segment measure of profitability. Management believes that it is important to investors for the same reasons it is important to management and because it allows them to assess our operational performance on the same basis that management uses internally. When evaluating our operating performance, investors should not consider adjusted pre-tax income (loss) in isolation of, or as a substitute for, measures of our financial performance, such as net income (loss) from continuing operations or income (loss) from continuing operations before income taxes. The contribution of our reportable segments to adjusted pre-tax income (loss) and reconciliation to the most comparable consolidated GAAP measure are presented below:

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THE HERTZ CORPORATION AND SUBSIDIARIES

ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

contribution of our reportable segments to adjusted pre-tax income (loss) and reconciliation to the most comparable consolidated GAAP measure are presented below:
Hertz
Three Months Ended
March 31,
Three Months Ended
June 30,
 Six Months Ended
June 30,
(In millions)2017 20162017 2016 2017 2016
Adjusted pre-tax income (loss):          
U.S. Rental Car$(116) $(4)$(37) $143
 $(152) $138
International Rental Car(4) 3
56
 34
 52
 36
All Other Operations21
 18
19
 17
 39
 35
Total reportable segments(99) 17
38
 194
 (61) 209
Corporate(1)
(113) (123)(119) (139) (232) (262)
Adjusted pre-tax income (loss)(212) (106)(81) 55
 (293) (53)
Adjustments:          
Acquisition accounting(2)
(16) (16)(16) (18) (31) (34)
Debt-related charges(3)
(10) (14)(10) (12) (21) (25)
Restructuring and restructuring related charges(4)
(8) (12)
Sale of CAR Inc. common stock(5)
3
 75
Impairment charges and asset write-downs(6)
(30) 
Finance and information technology transformation costs(7)
(19) (8)
Other(8)
(1) 5
Loss on extinguishment of debt(4)
(8) (20) (8) (20)
Restructuring and restructuring related charges(5)
(5) (18) (13) (29)
Sale of CAR Inc. common stock(6)

 
 3
 75
Impairment charges and asset write-downs(7)
(86) (3) (116) (3)
Finance and information technology transformation costs(8)
(20) (19) (39) (26)
Other(9)
(18) 
 (19) 3
Income (loss) before income taxes$(293) $(76)$(244) $(35) $(537) $(112)

Hertz Global
Three Months Ended
March 31,
Three Months Ended
June 30,
 Six Months Ended
June 30,
(In millions)2017 20162017 2016 2017 2016
Adjusted pre-tax income (loss):          
U.S. Rental Car$(116) $(4)$(37) $143
 $(152) $138
International Rental Car(4) 3
56
 34
 52
 36
All Other Operations21
 18
19
 17
 39
 35
Total reportable segments(99) 17
38
 194
 (61) 209
Corporate(1)
(114) (123)(120) (139) (234) (262)
Adjusted pre-tax income (loss)(213) (106)(82) 55
 (295) (53)
Adjustments:          
Acquisition accounting(2)
(16) (16)(16) (18) (31) (34)
Debt-related charges(3)
(10) (14)(10) (12) (21) (25)
Restructuring and restructuring related charges(4)
(8) (12)
Sale of CAR Inc. common stock(5)
3
 75
Impairment charges and asset write-downs(6)
(30) 
Finance and information technology transformation costs(7)
(19) (8)
Other(8)
(1) 5
Loss on extinguishment of debt(4)
(8) (20) (8) (20)
Restructuring and restructuring related charges(5)
(5) (18) (13) (29)
Sale of CAR Inc. common stock(6)

 
 3
 75
Impairment charges and asset write-downs(7)
(86) (3) (116) (3)
Finance and information technology transformation costs(8)
(20) (19) (39) (26)
Other(9)
(18) 
 (19) 3
Income (loss) before income taxes$(294) $(76)$(245) $(35) $(539) $(112)

(1)Represents general corporate expenses, non-vehicle interest expense, as well as other business activities.
(2)Represents incremental expense associated with amortization of other intangible assets and depreciation of property and equipment relating to acquisition accounting.
(3)Represents debt-related charges relating to the amortization of deferred financing costs and debt discounts and premiums.
(4)Represents expenses incurredIn 2017, represents $6 million of early redemption premium and write off of deferred financing costs associated with the redemption of the outstanding 4.25% Senior Notes due April 2018 and a $2 million in deferred financing costs associated with the termination of commitments under restructuring actionsthe Senior RCF. In 2016, represents the write-off of deferred financing costs in the second quarter as defined in U.S. GAAP, excluding impairmentsa result of paying off the Senior Term Facility and asset write-downs, when applicable. For further information on restructuring costs, see Part I, Item 1, Note 9, "Restructuring," to the Notes to our condensed consolidated financial statements included in this Report. Also represents certain other charges such as incremental costs incurred directly supporting business transformation initiatives. Such costs include transition costs incurred in connection withvarious vehicle debt refinancings.

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THE HERTZ CORPORATION AND SUBSIDIARIES

ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

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. Also includes consulting costs and legal fees related to the previously disclosed accounting review and investigation.
(5)Represents expenses incurred under restructuring actions as defined in U.S. GAAP, excluding impairments and asset write-downs, when applicable. For further information on restructuring costs, see Part I, Item 1, Note 10, "Restructuring," to the Notes to our condensed consolidated financial statements included in this Report. Also represents certain other charges such as incremental costs incurred directly supporting business transformation initiatives. Such costs include transition costs incurred in connection with 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. Also includes consulting costs and legal fees related to the previously disclosed accounting review and investigation.
(6)Represents the pre-tax gain on the sale of CAR Inc. common stock.
(6)(7)In 2017, primarily represents a $30second quarter $86 million impairment of the Dollar Thrifty tradename and a first quarter impairment of $30 million related to an equity method investment.
(7)(8)Represents external costs associated with the Company’sour finance and information technology transformation programs, both of which are multi-year initiatives that commenced in 2016 to upgrade and modernize the Company’sour systems and processes.
(8)(9)IncludesRepresents miscellaneous, non-recurring and other non-cash items and, initems. In 2017, includes an adjustmentfirst and second quarter adjustments, as applicable, to the carrying value of the Company's Brazil operations in connection with its classification as held for sale. Insale and second quarter charges of $6 million for labor-related matters and $5 million relating to PLPD as a result of a terrorist event. For the six months ended June 30, 2016, also includes a $9 million settlement gain from an eminent domain case related to one of the Company'sour airport locations.

(b)Transaction days represent the total number of 24-hour periods, with any partial period counted as one transaction day, that vehicles were on rent (the period between when a rental contract is opened and closed) in a given period. Thus, it is possible for a vehicle to attain more than one transaction day in a 24-hour period. 

(c)Average vehicles is determined using a simple average of the number of vehicles at the beginning and end of a given period. Among other things, average vehicles is used to calculate our vehicle utilization which represents the portion of our vehicles that are being utilized to generate revenue. Vehicle utilization is calculated by dividing total transaction days by available car days. The calculation of vehicle utilization is shown in the table below.
U.S. Rental Car International Rental CarU.S. Rental Car International Rental Car
Three Months Ended March 31,Three Months Ended June 30,
2017 2016 2017 20162017 2016 2017 2016
Transaction days (in thousands)32,312
 32,742
 10,184
 10,104
36,233
 37,190
 13,235
 12,511
Average vehicles478,000
 460,200
 150,400
 148,100
495,000
 500,000
 186,100
 178,600
Number of days in period90
 91
 90
 91
91
 91
 91
 91
Available car days (in thousands)43,020
 41,878
 13,536
 13,477
45,045
 45,500
 16,935
 16,253
Vehicle utilization75% 78% 75% 75%80% 82% 78% 77%

 U.S. Rental Car International Rental Car
 Six Months Ended June 30,
 2017 2016 2017 2016
Transaction days (in thousands)68,545
 69,932
 23,419
 22,613
Average vehicles486,500
 480,100
 168,300
 163,300
Number of days in period181
 182
 181
 182
Available car days (in thousands)88,057
 87,378
 30,462
 29,721
Vehicle utilization78% 80% 77% 76%


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THE HERTZ CORPORATION AND SUBSIDIARIES

ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

(d)Total RPD is a key metric that is calculated as total revenue less ancillary retail vehicle sales revenue, divided by the total number of transaction days, with all periods adjusted to eliminate the effect of fluctuations in foreign currency exchange rates. Our management believes eliminating the effect of fluctuations in foreign currency exchange rates is useful in analyzing underlying trends. This statistic is important to our management and investors as it represents a measurement of the changes in underlying pricing in the vehicle rental business and encompasses the elements in vehicle rental pricing that management has the ability to control. The following tables reconcile our rental car segment revenues to our total rental revenue and total revenue per transaction day (based on December 31, 2016 foreign currency exchange rates) for the periods shown:
U.S. Rental Car International Rental CarU.S. Rental Car International Rental Car
Three Months Ended March 31,Three Months Ended June 30,
($ in millions, except as noted)2017 2016 2017 20162017 2016 2017 2016
Revenues$1,353
 $1,406
 $411
 $433
$1,519
 $1,584
 $543
 $540
Ancillary retail vehicle sales revenue(22) (19) 
 
(24) (18) 
 
Foreign currency adjustment
 
 (10) (19)
 
 (23) (41)
Total rental revenue$1,331
 $1,387
 $401
 $414
$1,495
 $1,566
 $520
 $499
Transaction days (in thousands)32,312
 32,742
 10,184
 10,104
36,233
 37,190
 13,235
 12,511
Total RPD (in whole dollars)$41.19
 $42.36
 $39.38
 $40.97
$41.26
 $42.11
 $39.29
 $39.88

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THE HERTZ CORPORATION AND SUBSIDIARIES

ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
 U.S. Rental Car International Rental Car
 Six Months Ended June 30,
($ in millions, except as noted)2017 2016 2017 2016
Revenues$2,872
 $2,990
 $955
 $973
Ancillary retail vehicle sales revenue(46) (37) 
 
Foreign currency adjustment
 
 (35) (60)
Total rental revenue$2,826
 $2,953
 $920
 $913
Transaction days (in thousands)68,545
 69,932
 23,419
 22,613
Total RPD (in whole dollars)$41.23
 $42.23
 $39.28
 $40.38

(e)Total RPU is a key metric that is calculated as total revenues less ancillary retail vehicle sales revenue divided by the average vehicles in each period and then dividedivided by the number of months in the period reported, with all periods adjusted to eliminate the effect of fluctuations in foreign currency exchange rates. Our management believes eliminating the effect of fluctuations in foreign currency exchange rates is appropriate so as not to affect the comparability of underlying trends. This metric is important to our management as it represents a measurement of revenue productivity relative to fleet capacity. The following tables reconcile our rental car segments' total rental revenues to our total revenue per unit per month (based on December 31, 2016 foreign currency exchange rates) for the periods shown:
U.S. Rental CarInternational Rental CarU.S. Rental CarInternational Rental Car
Three Months Ended March 31,Three Months Ended June 30,
($ in millions, except as noted)2017 2016 2017 20162017 2016 2017 2016
Total rental revenue$1,331
 $1,387
 $401
 $414
$1,495
 $1,566
 $520
 $499
Average vehicles478,000
 460,200
 150,400
 148,100
495,000
 500,000
 186,100
 178,600
Total revenue per unit (in whole dollars)$2,785
 $3,014
 $2,666
 $2,795
$3,020
 $3,132
 $2,794
 $2,794
Number of months in period3
 3
 3
 3
3
 3
 3
 3
Total RPU (in whole dollars)$928
 $1,005
 $889
 $932
$1,007
 $1,044
 $931
 $931


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THE HERTZ CORPORATION AND SUBSIDIARIES

ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

 U.S. Rental CarInternational Rental Car
 Six Months Ended June 30,
($ in millions, except as noted)2017 2016 2017 2016
Total rental revenue$2,826
 $2,953
 $920
 $913
Average vehicles486,500
 480,100
 168,300
 163,300
Total revenue per unit (in whole dollars)$5,809
 $6,151
 $5,466
 $5,591
Number of months in period6
 6
 6
 6
Total RPU (in whole dollars)$968
 $1,025
 $911
 $932


(f)Net depreciation per unit per month is a key metric that is calculated by dividing depreciation of revenue earning vehicles and lease charges, net by the average vehicles in each period and then dividing by the number of months in the period reported, with all periods adjusted to eliminate the effect of fluctuations in foreign currency exchange rates. Our management believes eliminating the effect of fluctuations in foreign currency exchange rates is useful in analyzing underlying trends. Net depreciation per unit per month represents the amount of average depreciation expense and lease charges, net per vehicle per month. The following tables reconcile our rental car segment depreciation of revenue earning vehicles and lease charges, net to our net depreciation per unit per month (based on December 31, 2016 foreign currency exchange rates) for the periods shown:
U.S. Rental Car International Rental CarU.S. Rental Car International Rental Car
Three Months Ended March 31,Three Months Ended June 30,
($ in millions, except as noted)2017 2016 2017 20162017 2016 2017 2016
Depreciation of revenue earning vehicles and lease charges, net$499
 $419
 $85
 $86
$524
 $417
 $100
 $98
Foreign currency adjustment
 
 (2) (4)
 
 (4) (8)
Adjusted depreciation of revenue earning vehicles and lease charges, net$499
 $419
 $83
 $82
$524
 $417
 $96
 $90
Average vehicles478,000
 460,200
 150,400
 148,100
495,000
 500,000
 186,100
 178,600
Adjusted depreciation of revenue earning vehicles and lease charges, net divided by average vehicles (in whole dollars)$1,044
 $910
 $552
 $554
$1,059
 $834
 $516
 $504
Number of months in period3 3 3 33 3 3 3
Net depreciation per unit per month (in whole dollars)$348
 $303
 $184
 $185
$353
 $278
 $172
 $168

 U.S. Rental Car International Rental Car
 Six Months Ended June 30,
($ in millions, except as noted)2017 2016 2017 2016
Depreciation of revenue earning vehicles and lease charges, net$1,023
 $836
 $185
 $184
Foreign currency adjustment
 
 (6) (12)
Adjusted depreciation of revenue earning vehicles and lease charges, net$1,023
 $836
 $179
 $172
Average vehicles486,500
 480,100
 168,300
 163,300
Adjusted depreciation of revenue earning vehicles and lease charges, net divided by average vehicles (in whole dollars)$2,103
 $1,741
 $1,064
 $1,053
Number of months in period6 6 6 6
Net depreciation per unit per month (in whole dollars)$351
 $290
 $177
 $176

LIQUIDITY AND CAPITAL RESOURCES

Our U.S. and international operations are funded by cash provided by operating activities and by extensive financing arrangements maintained by us in the U.S. and internationally.

As of March 31,June 30, 2017, we had $785 million$1.1 billion of cash and cash equivalents and $266 million$1.1 billion of restricted cash. Of these amounts as of March 31,June 30, 2017, $119 million of cash and cash equivalents and $80$49 million of restricted cash was held

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THE HERTZ CORPORATION AND SUBSIDIARIES

ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

by our subsidiaries outside of the U.S., Canada and Puerto Rico. Repatriation of some of these funds under current regulatory and tax law for use in domestic operations would expose us to additional taxes. Except for cash and cash equivalents in Brazil, due to the pending sale of our operations in that foreign jurisdiction, we consider cash held by our subsidiaries outside of the U.S., Canada and Puerto Rico to be permanently reinvested.

We believe that cash and cash equivalents generated by our U.S. operations, cash received on the disposal of vehicles, together with amounts available under various liquidity facilities and refinancing options available to us in the U.S. capital markets, will be sufficient to fund operating requirements for the next twelve months.

Cash Flows - Hertz

As of June 30, 2017, Hertz had cash and cash equivalents of $1.1 billion, an increase of $325 million from $816 million as of December 31, 2016. The following table summarizes the net change in cash and cash equivalents for the periods shown:
 Six Months Ended
June 30,
  
(In millions)2017 2016 $ Change
Cash provided by (used in):     
Operating activities$984
 $1,014
 $(30)
Investing activities(2,904) (1,929) (975)
Financing activities2,233
 1,718
 515
Effect of exchange rate changes12
 8
 4
Net change in cash and cash equivalents$325
 $811
 $(486)

During the six months ended June 30, 2017, there was a reduction of cash inflows of $62 million from net income excluding non-cash items, partially offset by a $32 million reduction in cash outflows from working capital accounts period over period. The change from working capital accounts is due primarily to a $91 million increase in cash related to non-vehicle accounts payable from customer prepayments for peak season vehicle rentals and an increase in payables related to our IT transformation programs. The above is partially offset by a $61 million decrease in cash related to accrued liabilities and prepaid expenses and other assets resulting from insurance and restructuring payments, other accrued liabilities and prepayments for advertising and IT services.

Our primary investing activities relate to the acquisition and disposals of revenue earning vehicles. Cash from the sale of revenue earning vehicles was down $952 million due to fewer program vehicles returned to the manufacturer year over year and overall lower sales prices, and was partially offset by a $178 million decrease in cash outflows for the purchase of revenue earning vehicles as the Company focused on managing its fleet size. Cash from equity method investments was down $179 million due to $9 million of proceeds received from the sale of CAR Inc. common stock during the six months ended June 30, 2017 compared to $233 million received in the prior year period, offset by a $45 million cash outflow in the prior period for the purchase of an equity method investment.

During the six months ended June 30, 2017, there was a $3.5 billion increase in net borrowings, partially offset by the $2.1 billion transfer from discontinued operations resulting from the Spin-Off which occurred during the six months ended June 30, 2016. Under the terms of the credit agreement governing the Senior Facilities, the use of proceeds from the issuance of the Senior Second Priority Secured Notes in June 2017 is limited to refinancing existing indebtedness and funding related expenses. As such, the remaining proceeds as of June 30, 2017 of approximately $834 million are classified as restricted cash and comprise the net change in restricted cash and cash equivalents, non-vehicle during the six months ended June 30, 2017.


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THE HERTZ CORPORATION AND SUBSIDIARIES

ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Cash Flows - Hertz Global

As of March 31,June 30, 2017, Hertz Global had cash and cash equivalents of $785 million, a decrease$1.1 billion, an increase of $31$325 million from $816 million as of December 31, 2016. The following table summarizes the net change in cash and cash equivalents for the periods shown:
 Three Months Ended
March 31,
  
(In millions)2017 2016 $ Change
Cash provided by (used in):     
Operating activities$499
 $461
 $38
Investing activities(926) (424) (502)
Financing activities390
 323
 67
Effect of exchange rate changes6
 12
 (6)
Net change in cash and cash equivalents$(31) $372
 $(403)

During the three months ended March 31, 2017, we generated $38 million more cash from operating activities compared with the same period in 2016 primarily due to a $95 million increase in the change in working capital period over period mainly due to a $78 million change in non-vehicle receivables at March 31, 2017 compared to March 31, 2016. The increase was partially offset by a $57 million reduction in net income excluding non-cash items.

Our primary use of cash in investing activities is for the acquisition of revenue earning vehicles. During the three months ended March 31, 2017, we used $502 million more cash for investing activities compared with the same period in 2016 primarily due to an increase in net revenue earning vehicle expenditures of $279 million due to $802 million lower proceeds from disposals of revenue earning vehicles, partially offset by $523 million lower expenditures for revenue earning vehicles. Also, there was a $224 million decrease in proceeds from the sale of CAR Inc. common stock.

During the three months ended March 31, 2017, cash provided by financing activities increased by $67 million compared with the same period in 2016 primarily due to a $201 million increase in net borrowings. There was cash received from our discontinued entities of $130 million during the three months ended March 31, 2016 compared with no amounts received during the three months ended March 31, 2017 which partially offsets the increase above.

Cash Flows - Hertz Global

As of March 31, 2017, Hertz Global had cash and cash equivalents of $785 million, a decrease of $31 million from $816 million as of December 31, 2016. The following table summarizes the net change in cash and cash equivalents for the periods shown:
Three Months Ended
March 31,
  Six Months Ended
June 30,
  
(In millions)2017 2016 $ Change2017 2016 $ Change
Cash provided by (used in):          
Operating activities$498
 $461
 $37
$982
 $1,014
 $(32)
Investing activities(926) (424) (502)(2,904) (1,929) (975)
Financing activities391
 323
 68
2,235
 1,718
 517
Effect of exchange rate changes6
 12
 (6)12
 8
 4
Net change in cash and cash equivalents$(31) $372
 $(403)$325
 $811
 $(486)

Fluctuations in operating, investing and financing cash flows from period to period are due to the same factors as those disclosed for Hertz above, with the exception of any cash inflows or outflows related to the master loan agreement between Hertz and Hertz Global and cash outflows by Hertz Global for the purchase of treasury shares, of which there were none during the threesix months ended March 31,June 30, 2017 or 2016.


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THE HERTZ CORPORATION AND SUBSIDIARIES

ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Financing

Our primary liquidity needs include servicing of vehicle and non-vehicle debt, the payment of operating expenses and capital projects and purchases of revenue earning vehicles to be used in our operations. Our primary sources of funding are operating cash flows, cash received on the disposal of revenue earning vehicles, borrowings under our revolving credit facilities and access to the credit markets. Substantially all of our revenue earning vehicles and certain related assets are owned by special purpose entities, or are encumbered in favor of our lenders under our various credit facilities, other secured financings and asset-backed securities programs. None of such assets are available to satisfy the claims of our general creditors.

We are highly leveraged, and a substantial portion of our liquidity needs arise from debt service on our indebtedness and from the funding of our costs of operations, capital expenditures and acquisitions. The Company’s practice is to maintain sufficient total liquidity through cash from operations, credit facilities and other financing arrangements, to mitigate any adverse effect on its operations resulting from adverse financial market conditions.

FinancingIn June 2017, Hertz terminated $150 million of commitments under the Senior RCF, such that after giving effect to such termination the Senior RCF consists of a $1.55 billion senior secured revolving credit facility. Other financing transactions that occurred during the threesix months ended March 31,June 30, 2017 did not significantly change our overall liquidity. See Part I, Item 1, Note 6,7, "Debt," to the Notes to our condensed consolidated financial statements included in this Report ("Note 6"7") for information.

Cash paid for interest during the three months ended March 31, 2017 was $67 million for interest on vehicle debt and $30 million for interest on non-vehicle debt. Corporate liquidity (defined as unrestricted cash plus availability under the primary non-vehicle liquidity line of $785 million$1.1 billion and $939$9 million, respectively, at March 31,June 30, 2017 and $816 million and $1.13$1.1 billion, respectively, at December 31, 2016) declined slightly to $1.7$1.2 billion at March 31,June 30, 2017 from $1.9 billion at December 31, 2016. The decline is primarily due to funding our operations and the acquisition of non-vehicle capital assets.

Cash paid for interest during the six months ended June 30, 2017 was $130 million for interest on vehicle debt and $128 million for interest on non-vehicle debt.

Approximately $790 million$1.6 billion of vehicle debt and $257$7 million of non-vehicle debt will mature during the twelve months following the issuance of this Report and the Company will need to refinance a portion of the debt. The Company has reviewed the maturing debt obligations and determined that it is probable that the Company will be able, and has the intent, to repay or refinance such obligations before the expiration of such facilities.


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ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

We believe that cash generated from operations, cash received on the disposal of vehicles, together with amounts available under various liquidity facilities and refinancing options available to us, will be adequate to permit us to meet our debt maturities over the next twelve months.

Covenants

The indentures for the Senior Notes and Senior Second Priority Secured Notes contain covenants that, among other things, limit or restrict the ability of the Hertz credit group to incur additional indebtedness, incur guarantee obligations, prepay certain indebtedness, make certain restricted payments (including paying dividends, redeeming stock or making other distributions to parent entities of Hertz and other persons outside of the Hertz credit group), make investments, create liens, transfer or sell assets, merge or consolidate, and enter into certain transactions with Hertz's affiliates that are not members of the Hertz credit group.

Certain of the Company's other debt instruments and credit facilities (including the Senior Facilities) contain a number of covenants that, among other things, limit or restrict the ability of the borrowers and the guarantors to dispose of assets, incur additional indebtedness, incur guarantee obligations, prepay certain indebtedness, make certain restricted payments (including paying dividends, share repurchases or making other distributions), create liens, make investments, make acquisitions, engage in mergers, fundamentally change the nature of their business, make capital expenditures, or engage in certain transactions with certain affiliates.


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THE HERTZ CORPORATION AND SUBSIDIARIES

ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

The Senior RCF contains a financial maintenance covenant that is only applicable to the Senior RCF. Such covenant provides that Hertz’s consolidated first lien net leverage ratio, as defined in the Senior RCF Credit Agreement, as of the last day of any fiscal quarter (the "Covenant Leverage Ratio"), may not exceed the ratios indicated below:
Fiscal Quarter(s) Ending Maximum Ratio Maximum Ratio
March 31, 2017 3.25to1.00
June 30, 2017 3.25to1.00 3.25to1.00
September 30, 2017 3.25to1.00 3.25to1.00
December 31, 2017 and each March 31, June 30, September 30 and December 31 ending thereafter 3.00to1.00 3.00to1.00

At March 31,June 30, 2017, Hertz was in compliance with the Covenant Leverage Ratio with a ratio of 2.412.56 to 1.00, as calculated in accordance with the Senior RCF Credit Agreement. Consolidated EBITDA, as defined in the Senior RCF Credit Agreement, is a component of the calculation of the Covenant Leverage Ratio and is a non-GAAP financial measure that is not a measure of operating results, but instead is a measure used to determine compliance with the Covenant Leverage Ratio under the Senior RCF Credit Agreement. Consolidated EBITDA is generally defined in the Senior RCF Credit Agreement as consolidated net income plus the sum of income taxes, non-vehicle interest expense, non-vehicle depreciation and amortization expense, and non-cash charges or losses, as further adjusted for certain other items permitted in calculating covenant compliance under the Senior RCF, including add backs for non-recurring, unusual or extraordinary charges, business optimization expenses or other restructuring charges or reserves.

Based on available liquidity from our expected operating results, the Senior RCF and other financing arrangements, Hertz expects to continue to be in compliance with the Covenant Leverage Ratio for at least the next twelve months.

Rental Fleet Securitization Rating Methodology

In July 2016, Moody’s Investors Service (“Moody’s”) published a request for comment regarding proposed changes to its methodology for rating rental fleet securitizations, and in December 2016, Moody's published updated methodology for rating rental fleet securitizations.  In connection therewith, Moody's placed several senior tranches of our outstanding series of HVF II U.S. Vehicle Medium Term Notes and/or HVF U.S. Vehicle Medium Term Notes on review for downgrade as a result of Moody’s application of its new methodology to such outstanding series of notes. In February 2017, the Company took actions to maintain the ratings at their current levels and as a result of such actions Moody’s removed these tranches from review for downgrade and confirmed the ratings of such tranches at their current levels. The actions taken include the Company making changes to the underlying documentation governing such series of notes

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as well as providing incremental enhancement with respect to one such series. The aforementioned rating actions relate solely to certain of our securitization debt and not our corporate ratings or ratings on any of our non-vehicle debt.

Capital Expenditures

Revenue Earning Vehicle Expenditures

The table below sets forth our revenue earning vehicle expenditures and related disposal proceeds for the periods shown:
Cash inflow (cash outflow)Revenue Earning Vehicles
(In millions)
Capital
Expenditures
 
Disposal
Proceeds
 
Net Capital
Expenditures
2017     
First Quarter$(2,862) $1,960
 $(902)
2016     
First Quarter$(3,385) $2,762
 $(623)


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ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Cash inflow (cash outflow)Revenue Earning Vehicles
(In millions)
Capital
Expenditures
 
Disposal
Proceeds
 
Net Capital
Expenditures
2017     
First Quarter$(2,862) $1,960
 $(902)
Second Quarter(3,847) 1,875
 (1,972)
Total$(6,709) $3,835
 $(2,874)
2016     
First Quarter$(3,378) $2,755
 $(623)
Second Quarter(3,509) 2,032
 (1,477)
Total$(6,887) $4,787
 $(2,100)

The table below sets forth net capital expenditures for revenue earning vehicles by segment for the periods shown:
Cash inflow (cash outflow)Three Months Ended
March 31,
    Six Months Ended
June 30,
    
($ in millions)2017 2016 $ Change % Change2017 2016 $ Change % Change
U.S. Rental Car$(806) $(583) $(223) 38 %$(1,862) $(1,309) $(553) 42 %
International Rental Car7
 75
 (68) (91)(787) (543) (244) 45
All Other Operations(103) (115) 12
 (10)(225) (248) 23
 (9)
Total$(902) $(623) $(279) 45
$(2,874) $(2,100) $(774) 37

As further described in Note 2, "Basis of Presentation and Recently Issued Accounting Pronouncements," to the Notes to our condensed consolidated financial statements included in this Report, we revised our condensed consolidated statements of cash flows to decrease revenue earning vehicles expenditures and decrease proceeds from disposals of revenue earning vehicles by $205$22 million, of which $7 million is attributable to the first quarter of 2016, in the International segment and $359 million in the All Other Operations segment for the threesix months ended March 31,June 30, 2016. This revisionThese revisions had no impact on net capital expenditures for revenue earning vehicles for the segment.segments.


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Capital Assets, non-fleetnon-vehicle

The table below sets forth our capital asset expenditures, non-fleet,non-vehicle, and related disposal proceeds for the periods shown:
Cash inflow (cash outflow)Capital Assets, Non-VehicleCapital Assets, Non-Vehicle
(In millions)
Capital
Expenditures
 
Disposal
Proceeds
 
Net Capital
Expenditures
Capital
Expenditures
 
Disposal
Proceeds
 
Net Capital
Expenditures
2017          
First Quarter$(54) $7
 $(47)$(54) $7
 $(47)
Second Quarter(49) 4
 (45)
Total$(103) $11
 $(92)
2016          
First Quarter$(46) $19
 $(27)$(46) $19
 $(27)
Second Quarter(26) 20
 (6)
Total$(72) $39
 $(33)

The table below sets forth capital asset expenditures, non-fleet, net of disposal proceeds, by segment for the periods shown:
Cash inflow (cash outflow)Three Months Ended
March 31,
    Six Months Ended
June 30,
    
($ in millions)2017 2016 $ Change % Change2017 2016 $ Change % Change
U.S. Rental Car$(25) $(11) $(14) 127%$(45) $(17) $(28) 165%
International Rental Car(4) (4) 
 
(9) (7) (2) 29
All Other Operations(2) (1) (1) 100
(3) (2) (1) 50
Corporate(16) (11) (5) 45
(35) (7) (28) 400
Total$(47) $(27) $(20) 74
$(92) $(33) $(59) 179

CONTRACTUAL OBLIGATIONS

MaterialAs of June 30, 2017, there have been no material changes outside of the ordinary course of business to our aggregate indebtedness are described in Part I, Item 1, Note 6, "Debt," to the Notes to our condensed consolidated financial statements included in this Report, however, these changes did not significantly revise our future estimated interest payments from those which areknown contractual obligations as set forth in the Contractual Obligations table included in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our 2016 Form 10‑K.

As of March 31, 2017, there have been no other material changes outside of the ordinary course of business Changes to our other known contractual obligations.aggregate indebtedness, including related interest and terms for new issuances, are described in Part I, Item 1, Note 7, "Debt," to the Notes to our condensed consolidated financial statements included in this Report.

OFF-BALANCE SHEET COMMITMENTS AND ARRANGEMENTS

Indemnification Obligations

There have been no significant changes to our indemnification obligations as compared to those disclosed in Note 17, "Contingencies and Off-Balance Sheet Commitments" of the Notes to our consolidated financial statements included in our 2016 Form 10‑K under the caption Item 8, "Financial Statements and Supplementary Data."

The Company regularly evaluates the probability of having to incur costs associated with indemnification obligations and will accrue for expected losses when they are probable and estimable.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our discussion and analysis of financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of the condensed consolidated financial statements requires management

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United States of America. The preparation of the condensed consolidated financial statements requires management to make estimates and judgments that affect the reported amounts in our condensed consolidated financial statements and accompanying notes. If different assumptions or conditions were to prevail, the results could be materially different from our reported results.

We discuss our critical accounting policies and estimates in Part II, Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2016 Form 10-K. On January 1, 2017, we prospectively adopted guidance that eliminates the second step of the two-step goodwill impairment test, which requires the determination of the implied fair value of goodwill to measure an impairment. Rather, a goodwill impairment charge will be calculated as the amount by which a reporting unit's carrying amount exceeds its fair value. Under the guidance, we still have the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary.

On January 1, 2017 we also adopted guidance that simplifies several areas of employee share-based payment accounting, including income taxes, forfeitures, minimum statutory withholding requirements, and classifications within the statement of cash flows. Most significantly, the new guidance eliminates the need to track tax “windfalls” in a separate pool within additional paid-in capital; instead, excess tax benefits and tax deficiencies will be recorded within income tax expense. For details regarding the method of adoption, refer to Part I, Item 1, Note 2 "Basis of Presentation and Recently Issued Accounting Pronouncements," to the Notes to our condensed consolidated financial statements included in this Report.

Effective January 1, 2017, the Company’s board of directors adopted the 2017 EICP which provides for PSUs where the service inception date precedes the grant date. The fair value is based on the anticipated number of shares awarded and the quoted price of the Company’s shares at each reporting date up to the grant date. Compensation charges accumulate as a liability until the grant date, at which time the liability will be reclassified to equity. Additionally, under the 2016 Omnibus Plan, we issued PSAs with graded vesting where the compensation expense is recognized ratably over the requisite service period for each separately vesting tranche of the award. For details regarding the 2017 EICP and PSAs described above, refer to Part I, Item 1, Note 89 "Stock-Based Compensation," to the Notes to our condensed consolidated financial statements included in this Report.

There have been no other material changes to our critical accounting policies and estimates as disclosed in Part II, Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2016 Form 10-K.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

For a discussion of recent accounting pronouncements, see Note 2, "Basis of Presentation and Recently Issued Accounting Pronouncements," to the Notes to our condensed consolidated financial statements included in this Report on Form 10-Q under the caption Item 1, "Condensed Consolidated Financial Statements (Unaudited)" ("Note 2")."

As disclosed in Note 2, the Company will adopt Topic 606 on January 1, 2018. The Company believes that the most significant impact relates to its accounting for reward points earned by customers under its loyalty programs. Upon adoption of Topic 606, each transaction which generates loyalty reward points will result in the deferral of revenue equivalent to the retail value of the redemption of the loyalty reward points. The associated revenue will be recognized at the time when the customer redeems the loyalty reward points. Under the current guidance, there is no revenue deferral and the Company records an expense associated with the incremental cost of providing the future rental at the time when the loyalty reward points are earned. The Company is in the process of quantifying the impact of deferring revenue associated with reward points upon adoption of Topic 606.

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 ("SEC") on Forms 10‑K and 10‑Q and file or furnish on Form 8‑K, and in related comments by our management, include "forward-looking statements." Forward-looking statements

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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," "potential," "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 Forms 10‑K, 10‑Q and 8‑K.

Important factors that could affect our actual results and cause them to differ materially from those expressed in forward-looking statements include, among others, those that may be disclosed from time to time in subsequent reports filed

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ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

with the SEC, those described under "Item 1A—Risk Factors" included in our 2016 Form 10-K and the following, which were derived in part from the risks set forth in "Item 1A—Risk Factors" of our 2016 Form 10-K:

any claims, investigations or proceedings arising as a result of the restatement in 2015 of our previously issued financial results;
our ability to remediate the material weaknesses in our internal controls over financial reporting;
levels of travel demand, particularly with respect to airline passenger traffic in the United States and in global markets;
the effect of our separation of our vehicle and equipment rental businesses, any failure by Herc Holdings Inc. to comply with the agreements entered into in connection with the separation and our ability to obtain the expected benefits of the separation;
significant changes in the competitive environment, including as a result of industry consolidation, and the effect of competition in our markets on rental volume and pricing, including on our pricing policies or use of incentives;
increased vehicle costs due to declines in the value of our non-program vehicles;
occurrences that disrupt rental activity during our peak periods;
our ability to purchase adequate supplies of competitively priced vehicles and risks relating to increases in the cost of the vehicles we purchase;
our ability to accurately estimate future levels of rental activity and adjust the number and mix of vehicles used in our rental operations accordingly;
our ability to maintain sufficient liquidity and the availability to us of additional or continued sources of financing for our revenue earning vehicles and to refinance our existing indebtedness;
our ability to adequately respond to changes in technology and customer demands;
our access to third-party distribution channels and related prices, commission structures and transaction volumes;
an increase in our vehicle costs or disruption to our rental activity, particularly during our peak periods, due to safety recalls by the manufacturers of our vehicles;
a major disruption in our communication or centralized information networks;
financial instability of the manufacturers of our vehicles;
any impact on us from the actions of our franchisees, dealers and independent contractors;
our ability to sustain operations during adverse economic cycles and unfavorable external events (including war, terrorist acts, natural disasters and epidemic disease);
shortages of fuel and increases or volatility in fuel costs;

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our ability to successfully integrate acquisitions and complete dispositions;
our ability to maintain favorable brand recognition;
costs and risks associated with litigation and investigations;
risks related to our indebtedness, including our substantial amount of debt, our ability to incur substantially more debt, the fact that substantially all of our consolidated assets secure certain of our outstanding indebtedness and increases in interest rates or in our borrowing margins;
our ability to meet the financial and other covenants contained in our Senior Facilities, our outstanding unsecured Senior Notes, our Senior Second Priority Secured Notes and certain asset-backed and asset-based arrangements;

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changes in accounting principles, or their application or interpretation, and our ability to make accurate estimates and the assumptions underlying the estimates, which could have an effect on operating results;
risks associated with operating in many different countries, including the risk of a violation or alleged violation of applicable anticorruption or antibribery laws and our ability to repatriate cash from non-U.S. affiliates without adverse tax consequences;
our ability to successfully outsource a significant portion of our information technology services or other activities;
our ability to successfully implement our finance and information technology transformation programs;
changes in the existing, or the adoption of new laws, regulations, policies or other activities of governments, agencies and similar organizations where such actions may affect our operations, the cost thereof or applicable tax rates;
changes to our senior management team and the dependence of our business operations on our senior management team;
the effect of tangible and intangible asset impairment charges;
our exposure to uninsured claims in excess of historical levels;
fluctuations in interest rates and commodity prices;
our exposure to fluctuations in foreign currency exchange rates; and
other risks described from time to time in periodic and current reports that we file with the SEC.
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.

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

WeHertz Global and Hertz are exposed to a variety of market risks, including the effects of changes in interest rates (including credit spreads), foreign currency exchange rates and fluctuations in fuel prices. WeHertz Global and Hertz manage ourtheir exposure to these market risks through ourtheir regular operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments. Derivative financial instruments are viewed as risk management tools and have not been used for speculative or trading purposes. In addition, derivative financial instruments are entered into with a diversified group of major financial institutions in order to manage ourHertz Global and Hertz's exposure to counterparty nonperformance on such instruments.


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Hertz Global

In the second quarter of 2017, Hertz Global identified a new 5 percent shareholder of its common stock that resulted in a change in control as that term is defined in Section 382 of the Internal Revenue Code. Due to the net unrealized built-in gains from its like-kind exchange programs, Hertz Global does not anticipate that this will have an impact on its taxes or that it will lose any of its net operating losses. Other than as described above, there have been no material changes to the information reported under Part II, Item 7A, "Quantitative and Qualitative Disclosures About Market Risk," included in Hertz Global's 2016 Form 10‑K.

Hertz

There is no material change in the information reported under Part II, Item 7A, "Quantitative and Qualitative Disclosures About Market Risk," included in ourHertz's 2016 Form 10‑K.


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ITEM 4.   CONTROLS AND PROCEDURES

HERTZ GLOBAL HOLDINGS, INC.

Evaluation of Disclosure Controls and Procedures

Our senior management has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined under Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of March 31, 2017, due to the identification of material weaknesses in our internal control over financial reporting, as further described in Item 9A of our 2016 Form 10-K, our disclosure controls and procedures were not effective to provide reasonable assurance that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act of 1934 is recorded, processed, summarized and reported within the

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time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

Our remediation efforts were ongoing during the three months ended March 31, 2017. In October 2016, we transitioned Hertz Claim Management (“HCM”) U.S. third party claims processing to a third service party provider. The Company will continue managing claims opened prior to October 1, 2016 and is projected to complete the transition by the fourth quarter of 2017.

To remediate our existing material weaknesses, we require additional time to complete the implementation of our remediation plans and demonstrate the effectiveness of our remediation efforts. The material weaknesses cannot be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

Other than those items noted above, there were no other material changes in our internal control over financial reporting that occurred during the three months ended March 31, 2017 that materially affected, or that are reasonably likely to materially affect our internal control over financial reporting.

THE HERTZ CORPORATION

Evaluation of Disclosure Controls and Procedures

Our senior management has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined under Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of March 31,June 30, 2017, due to the identification of material weaknesses in our internal control over financial reporting, as further described in Item 9A of our 2016 Form 10-K, our disclosure controls and procedures were not effective to provide reasonable assurance that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, with the participation of its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

Our remediation efforts were ongoingDuring the three months ended June 30, 2017, we have taken, and continue to take, the actions described below to remediate our existing material weaknesses, which have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

Control Activities

Non-Fleet Procurement

To address the material weaknesses over the non-fleet procurement process untimely creation of purchase orders and improper receipting of goods management performed the following during the three months ended March 31, 2017. In October 2016, we transitioned Hertz ClaimJune 30, 2017: (1) established comprehensive and clear policies and procedures to govern requisitioning of goods and expenditure approval requirements, (ii) delivered supplemental trainings to all requisitioners with the objective of developing a thorough understanding of the Company’s requisitioner policies and review protocols and (iii) implemented monitoring controls of purchase orders created after invoice date and invoices on hold activity to ensure compliance with policies and procedures.

To address the material weakness over improper recording and submission of purchase card “Pcard” transactions by field operations, management performed the following during the three months ended June 30, 2017: (1) updated existing technology and expense reporting tools to assist in the review and approval of Pcard transactions, (2) delivered trainings on the new process for submitting Pcard transactions with receipts for approval and desktop procedures and (3) enhanced our Pcard approval review controls.

To address the material weakness over lack of approval of material vendor payments, management performed the following during the three months ended June 30, 2017: (1) updated existing technology to assist in the review and approval of material vendor payments, (2) established comprehensive and clear policies and procedures to govern expenditure approval requirements, training and (iii) enhanced our material vendor payment approval manual review controls.

Risk Assessment

Information Technology Systems

To address the material weakness associated with controls over IT, management performed the following during the three months ended June 30, 2017: (1) enhanced and implemented controls to monitor developers’ access to production and adequately capture, document and approve data changes and other IT related activities, (2) enhanced design and operation of control activities and procedures associated with user and administrator access to the affected IT system, including both preventative and detective control activities, (3) educated and re-trained control owners regarding risks,

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controls and maintaining adequate evidence of review, (4) clarified and communicated appropriate roles and responsibilities for controls and systems for both IT and business users and (5) dedicated additional resources to administer IT general controls monitoring and promote compliance with policies, procedures and processes.

System-Generated Reports and Spreadsheets Related to Revenue Earning Vehicles Estimates

To address the material weakness associated with completeness and accuracy of system-generated reports and spreadsheets used in the accounting for estimates related to revenue earning vehicles, during the three months ended June 30, 2017, management identified the key assumptions and inputs of certain significant estimates, the data sources and designed procedures to validate the completeness and accuracy of the data extraction and transfer of data used in these estimates. Management (“HCM”) U.S. third party claims processing to a third service party provider. The Company will continue managing claims opened prior to October 1, 2016is in process of completing the design and is projected to completeimplementation of the transition by the fourth quarter of 2017.controls.

To remediate our existing material weaknesses, we require additional time to complete the implementation of our remediation plans and demonstrate the effectiveness of our remediation efforts. The material weaknesses cannot be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

Other than those items noted above, there were no otherAs we continue to evaluate and work to improve our internal controls over financial reporting, our senior management may determine to take additional measures to address control deficiencies or determine to modify the remediation efforts described in this section. Until the remediation efforts discussed in this section, including any additional remediation efforts that our senior management identifies as necessary, are completed, the material changesweaknesses described in Item 9A of our 2016 Form 10-K will continue to exist.

HERTZ

Evaluation of Disclosure Controls and Procedures

Our senior management has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined under Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of June 30, 2017, due to the identification of material weaknesses in our internal control over financial reporting, as further described in Item 9A of our 2016 Form 10-K, our disclosure controls and procedures were not effective to provide reasonable assurance that occurred duringthe information required to be disclosed by us in the reports that we file or submit under the Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, with the participation of its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

During the three months ended March 31,June 30, 2017, thatwe have taken, and continue to take, the actions described below to remediate our existing material weaknesses, which have materially affected, or that are reasonably likely to materially affect, ourthe Company's internal control over financial reporting.

Control Activities

Non-Fleet Procurement

To address the material weaknesses over the non-fleet procurement process untimely creation of purchase orders and improper receipting of goods management performed the following during the three months ended June 30, 2017: (1) established comprehensive and clear policies and procedures to govern requisitioning of goods and expenditure approval requirements, (ii) delivered supplemental trainings to all requisitioners with the objective of developing a thorough understanding of the Company’s requisitioner policies and review protocols and (iii) implemented monitoring

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ITEM 4.   CONTROLS AND PROCEDURES (CONTINUED)


controls of purchase orders created after invoice date and invoices on hold activity to ensure compliance with policies and procedures.

To address the material weakness over improper recording and submission of purchase card “Pcard” transactions by field operations, management performed the following during the three months ended June 30, 2017: (1) updated existing technology and expense reporting tools to assist in the review and approval of Pcard transactions, (2) delivered trainings on the new process for submitting Pcard transactions with receipts for approval and desktop procedures and (3) enhanced our Pcard approval review controls.

To address the material weakness over lack of approval of material vendor payments, management performed the following during the three months ended June 30, 2017: (1) updated existing technology to assist in the review and approval of material vendor payments, (2) established comprehensive and clear policies and procedures to govern expenditure approval requirements, training and (iii) enhanced our material vendor payment approval manual review controls.

Risk Assessment

Information Technology Systems

To address the material weakness associated with controls over IT, management performed the following during the three months ended June 30, 2017: (1) enhanced and implemented controls to monitor developers’ access to production and adequately capture, document and approve data changes and other IT related activities, (2) enhanced design and operation of control activities and procedures associated with user and administrator access to the affected IT system, including both preventative and detective control activities, (3) educated and re-trained control owners regarding risks, controls and maintaining adequate evidence of review, (4) clarified and communicated appropriate roles and responsibilities for controls and systems for both IT and business users and (5) dedicated additional resources to administer IT general controls monitoring and promote compliance with policies, procedures and processes.

System-Generated Reports and Spreadsheets Related to Revenue Earning Vehicles Estimates

To address the material weakness associated with completeness and accuracy of system-generated reports and spreadsheets used in the accounting for estimates related to revenue earning vehicles, during the three months ended June 30, 2017, management identified the key assumptions and inputs of certain significant estimates, the data sources and designed procedures to validate the completeness and accuracy of the data extraction and transfer of data used in these estimates. Management is in process of completing the design and implementation of the controls.

To remediate our existing material weaknesses, we require additional time to complete the implementation of our remediation plans and demonstrate the effectiveness of our remediation efforts. The material weaknesses cannot be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

As we continue to evaluate and work to improve our internal controls over financial reporting, our senior management may determine to take additional measures to address control deficiencies or determine to modify the remediation efforts described in this section. Until the remediation efforts discussed in this section, including any additional remediation efforts that our senior management identifies as necessary, are completed, the material weaknesses described in Item 9A of our 2016 Form 10-K will continue to exist.


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PART II—OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS
For a description of certain pending legal proceedings see Part I, Item 1, Note 12,13, "Contingencies and Off-Balance Sheet Commitments," to the Notes to our condensed consolidated financial statements included in this Report.
ITEM 1A.   RISK FACTORS
There are no material amendments or additions to the information reported under Part I, Item 1A “Risk Factors” contained in our 2016 Form 10-K.
ITEM 2.   UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3.   DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4.   MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5.   OTHER INFORMATION
None.
ITEM 6.   EXHIBITS
(a)Exhibits:
The attached list of exhibits in the "Exhibit Index" immediately following the signature page to this Report is filed as part of this Form 10-Q and is incorporated herein by reference in response to this item.

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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date:MayAugust 8, 2017
HERTZ GLOBAL HOLDINGS, INC.
THE HERTZ CORPORATION
(Registrants)
  By:/s/ THOMAS C. KENNEDY
   
Thomas C. Kennedy
Senior Executive Vice President and Chief Financial Officer

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EXHIBIT INDEX
Exhibit
Number
 Description
4.16.1
Hertz Holdings
Hertz
4.16.2
Hertz Holdings
Hertz
4.16.3
Hertz Holdings
Hertz
31.1Hertz Holdings
31.2Hertz Holdings
31.3Hertz
31.4Hertz
32.1Hertz Holdings
32.2Hertz Holdings
32.3Hertz
32.4Hertz
101.INS
Hertz Holdings
Hertz
XBRL Instance Document*
101.SCH
Hertz Holdings
Hertz
XBRL Taxonomy Extension Schema Document*
101.CAL
Hertz Holdings
Hertz
XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEF
Hertz Holdings
Hertz
XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB
Hertz Holdings
Hertz
XBRL Taxonomy Extension Label Linkbase Document*
101.PRE
Hertz Holdings
Hertz
XBRL Taxonomy Extension Presentation Linkbase Document*


*Furnished herewith

Note: Certain instruments with respect to various additional obligations, which could be considered as long-term debt, have not been filed as exhibits to this Report because the total amount of securities authorized under any such instrument does not exceed 10% of our total assets on a consolidated basis. We agree to furnish to the SEC upon request a copy of any such instrument defining the rights of the holders of such long-term debt.

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