Hertz 2007 Annual Report Download

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Let Hertz Put You in the Driver’s Seat.
2007 Annual Report
n

Table of contents

  • Page 1
    Let Hertz Put You in the Driver's Seat. 2007 Annual Report

  • Page 2
    .... 1955 First car rental company with 1,000 locations. 1965 Hertz Equipment Rental Corporation [HERC] is formed. 1978 First Nationwide Emergency Road Service. 1979 HERC enters the industrial equipment rental and leasing markets. 1980 n First Express Service, #1 Club members bypass the airport counter...

  • Page 3
    ... Pro Forma 2006 2007 *Indicates a Non-GAAP measurement presented and reconciled within the section of the Annual Report to Stockholders entitled "Definitions and Non-GAAP Reconciliations," which follows our Annual Report on Form 10-K included in this Annual Report. Hertz Global Holdings, Inc. 1

  • Page 4
    ... than worldwide implementation of a Net Promoter Score (NPS) system in 2007. NPS is an online tool to measure customer satisfaction, rental-by-rental, in real time. We receive over 30,000 customer responses every month, and we use NPS feedback to drive service improvements across the rental network...

  • Page 5
    vehicles, with another 2,500 on the way in 2008. We launched Simply Wheelz in Orlando and Spain - our low cost, high-tech rental brand to serve value-oriented, leisure customers. We are now the market leader in Germany in van and truck rentals, a rapidly growing business across our European network....

  • Page 6
    Customer Satisfaction Our customers can expect a rental experience focused on three critical areas: speed, service and selection. 4 Hertz Global Holdings, Inc.

  • Page 7
    ... customer to book specific make and model to guarantee availability of the rental vehicle they want. The Prestige Collection includes Ameri- n Hertz Fun Collection Sporty cars and SUVs to create a memorable rental experience. n Hertz Motorcycle Collection BMW Motorcycles rented from 10 locations...

  • Page 8
    n Hertz Customer Satisfaction Unique rental experience for every rental customer. n Hertz Prestige Collection Car rental as a luxury experience. 6 Hertz Global Holdings, Inc.

  • Page 9
    ...growth in our Small Business accounts - corporations generatJoseph R. Nothwang Executive Vice President & President, Vehicle Rental & Leasing, The Americas & Pacific ing less than $10,000 of rental revenue annually. Our longstanding association relationships include AAA and ARC in Europe, and well...

  • Page 10
    ... very popular Ford Fusion featured in the Hertz Green Collection. n Hertz Green Collection 65,000 higher mileage per gallon, lower emission vehicles reservable by make and model. n Hertz Nick On the Goâ„¢ Program Children's entertainment enhancing the rental experience for kids and their parents...

  • Page 11
    ...providing car rental experiences focused on speed, service and selection. Hertz puts the customer - business, leisure and replacement renters - in the driver's seat with vehicle choices, service options and a worldwide rental network unmatched in the industry. Michel Taride Executive Vice President...

  • Page 12
    10 Hertz Global Holdings, Inc.

  • Page 13
    ... available at 21 locations in North America, HERC offers a broad range of mobile power generators to serve customers ranging from small contractors to the largest industrial businesses. Power generation business almost doubled during 2007, and is one key way HERC is increasing share of rental spend...

  • Page 14
    Employee Satisfaction Improved training, communication, performance management, development and compensation plans are the focus of company-wide efforts to be the global employer of choice. 12 Hertz Global Holdings, Inc.

  • Page 15
    ... the vehicle washing and vacuuming process or streamlining busing operations, our car rental locations are being transformed into models of employee-driven efficiency. At our equipment rental locations, employees have significantly reduced return and delivery turnaround time, enabling us to better...

  • Page 16
    ..., or 17.4%, since December 31, 2005 Dynamic Cash Flow Model...Improving Cash Flow Performance Throughout the Fleet Management Cycle Procure 14 Hertz Global Holdings, Inc. n Improve Supplier Terms n Global Supply Chain n Reduce Working Capital Rent n Fleet Mix n Utilization n Ancillary Revenues

  • Page 17
    ... Annual Report to Stockholders entitled "Definitions and Non-GAAP Reconciliations," which follows our Annual Report on Form 10-K included in this Annual Report. Collect n Improve Customer Terms n Vehicle Damage Collection Sell n Speed to Auction n Multiple Sales Channels Hertz Global Holdings...

  • Page 18
    ..., Dubilier & Rice, Inc. Executive Vice President, Financial Reporting and Enterprise Risk Management, and Chief Accounting Officer, Marriott International, Inc. Robert F. End Managing Director, Merrill Lynch Global Private Equity David H. Wasserman Financial Principal, Clayton, Dubilier & Rice...

  • Page 19
    ...and telephone number, including area code, of registrant's principal executive offices) Securities registered pursuant to Section 12(b) of the Act: Title of each class Common Stock, Par Value $.01 per share Name of each exchange on which registered New York Stock Exchange HERTZ GLOBAL HOLDINGS, INC...

  • Page 20
    ...' EQUITY ...CONSOLIDATED STATEMENTS OF CASH FLOWS ...NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ...CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE ...CONTROLS AND PROCEDURES ...OTHER INFORMATION ...DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE EXECUTIVE...

  • Page 21
    ..., construction and material handling equipment rental business, (v) ''cars'' means cars and light trucks (including sport utility vehicles and, outside North America, light commercial vehicles), (vi) ''program cars'' means cars purchased by car rental companies under repurchase or guaranteed...

  • Page 22
    ... cost savings and opportunities to increase productivity and profitability; • income and margins; • liquidity and availability to us of additional or continued sources of financing for our revenue earning equipment and financial instability of insurance companies providing financial guarantees...

  • Page 23
    ... and Industry Data Information in this Annual Report about the car and equipment rental industries, including our general expectations concerning the industries and our market position and market share, are based in part on industry data and forecasts obtained from industry publications and surveys...

  • Page 24
    ...we have company-operated locations and data regarding car rental concessionaire activity is available. We believe that we also maintain the second largest market share, by revenues, in the off-airport car rental market in the United States. In our equipment rental business segment, we rent equipment...

  • Page 25
    ... the United States) or one or more special purpose entities, as the case may be, and, rental equipment and related assets of certain of our subsidiaries organized outside North America or one or more special purpose entities, as the case may be, which facilities (together with certain capital lease...

  • Page 26
    ... annual growth rate since 1990, including 5.5% growth in 2007. We believe car rental revenues in Western Europe account for over $12.5 billion in annual revenues, with the airport portion of the industry comprising approximately 40% of the total. Within Europe, the largest markets are Germany...

  • Page 27
    ...certain interest expense (including net interest on corporate debt), as well as other business activities, such as third-party claim management services. Car Rental: Our ''company-operated'' rental locations are those through which we, or an agent of ours, rent cars that we own or lease. We maintain...

  • Page 28
    ... by geographic area, all for the year ended December 31, 2007 and revenue earning equipment at net book value, as of December 31, 2007 (the majority of our international operations are in Europe). See Note 9 to the Notes to our consolidated financial statements included in this Annual Report under...

  • Page 29
    ...), loss or collision damage waiver, theft protection, liability and personal accident/effects insurance coverage, Hertz NeverLost navigation systems and satellite radio services. We have company-operated rental locations both in the United States and internationally. The international car rental...

  • Page 30
    ... in the program. In addition to our airport locations, we operate off-airport locations offering car rental services to a variety of customers. Our off-airport rental customers include people wishing to rent cars closer to home for business or leisure purposes, as well as those needing to travel to...

  • Page 31
    ...leisure and business traveler customers and by increasing penetration of the insurance replacement market, of which we currently have a low market share. In the United States during the year ended December 31, 2007, approximately one-third of our rental revenues at off-airport locations were related...

  • Page 32
    ...we rent cars to the general public. We have negotiated arrangements relating to car rental with many large businesses, governments and other organizations, including most Fortune 500 companies. Customers who rent from us for ''leisure'' purposes include not only individual travelers booking vacation...

  • Page 33
    ..., travel companies and other groups whose members, participants and customers rent cars for either business or leisure purposes. A specialized sales force calls on companies with replacement rental needs, including insurance and leasing companies and car dealers. We also advertise our car rental...

  • Page 34
    ... cars for rental from us and our licensees worldwide through local, national or toll-free telephone calls to our reservations centers, directly through our rental locations or, in the case of replacement rentals, through proprietary automated systems serving the insurance industry. Additionally...

  • Page 35
    ... programs. Accordingly, we bear increased risk relating to the residual market value and the related depreciation on our car rental fleet and must use different rotational techniques to accommodate our seasonal peak demand for cars. Over the five years ended December 31, 2007, approximately...

  • Page 36
    ... share in the cost of our reservations system, sales force and certain other services. In return, licensees are provided the use of the Hertz brand name, management and administrative assistance and training, reservations through our reservations channels, the Hertz #1 Club and #1 Club Gold programs...

  • Page 37
    ... locations. Competition among car rental industry participants is intense and frequently takes the form of price competition. For the year ended December 31, 2007, based on publicly available information, we believe some U.S. car rental brands experienced transaction day growth and rental rate...

  • Page 38
    ... and service reputation of the Hertz brand and our extensive worldwide ownership of car rental operations provide us with a competitive advantage. Equipment Rental Operations We, through HERC, operate an equipment rental business in the United States, Canada, France and Spain. On the basis of total...

  • Page 39
    ... a company, governmental body or other organization-seeking to rent HERC's equipment. Moreover, unlike in our car rental business, where our cars are normally picked up and dropped off by customers at our rental locations, HERC delivers much of its rental equipment to its customers' job sites...

  • Page 40
    ... of its used equipment through a variety of channels, including private sales to customers and other third parties, sales to wholesalers, brokered sales and auctions. Ancillary to its rental business, HERC is also a dealer of certain brands of new equipment in the United States and Canada, and sells...

  • Page 41
    ... Car rental and equipment rental are seasonal businesses, with decreased levels of business in the winter months and heightened activity during spring and summer. To accommodate increased demand, we increase our available fleet and staff during the second and third quarters of the year. As business...

  • Page 42
    ... members of the public and employees from other causes (general liability/ workers' compensation); and • risk of property damage and/or business interruption and/or increased cost of working as a consequence of property damage. In addition, we offer optional liability insurance and other products...

  • Page 43
    ... the rented vehicle or equipment (for car rentals in certain places, though, only to the extent such liability exceeds the amount stipulated in the applicable financial responsibility law). In addition, many of HERC's domestic rental contracts require the renter to maintain liability insurance under...

  • Page 44
    ... vehicle liability on us. In both our domestic car rental operations and our company-operated international car rental operations in many countries, we offer optional products providing insurance coverage, or ''PAI/PEC'' coverage, to the renter and the renter's immediate family members traveling...

  • Page 45
    ... damage costs and the costs of stolen or unaccounted-for vehicles and equipment, along with other damage to our property, are charged to expense as incurred. Other Risks To manage other risks associated with our businesses, or to comply with applicable law, we purchase other types of insurance...

  • Page 46
    ...to honor reservations, the terms on which we deal with vehicle loss or damage (including the protections we provide to renters purchasing loss or damage waivers) and the terms and method of sale of the optional insurance coverage that we offer. Some states (including California, New York, Nevada and...

  • Page 47
    ... car rental companies either may not pass through to customers, by means of separate charges, expenses such as vehicle licensing and concession fees or may do so only in certain limited circumstances. Recent or potential changes in law or regulation that affect us relate to insurance intermediaries...

  • Page 48
    ... our respective businesses. These transactions include HERC's providing equipment rental services to Ford, our providing insurance and insurance claim management services to Ford and our providing car rental services to Ford. In addition, Ford subsidiaries are our car rental licensees in Scandinavia...

  • Page 49
    ...of operations, as we may lose rental volume. The Internet has increased pricing transparency among car rental companies by enabling cost-conscious customers, including business travelers, to more easily obtain the lowest rates available from car rental companies for any given trip. This transparency...

  • Page 50
    ... of limited supplies of competitively priced cars. We believe we are one of the largest private sector purchasers of new cars in the world for our rental fleet, and during the year ended December 31, 2007, our approximate average holding period for a rental car was 11 months in the United States and...

  • Page 51
    .... In addition, certain car manufacturers, including Ford, have adopted strategies to de-emphasize sales to the car rental industry which they view as less profitable due to historical sales incentive and other discount programs that tended to lower the average cost of cars for fleet purchasers such...

  • Page 52
    ... due primarily to changes in the overall terms offered by automobile manufacturers under repurchase programs. Accordingly, we are now bearing increased risk relating to the residual market value and the related depreciation on our car rental fleet and must use different rotational techniques to...

  • Page 53
    ... of these risks could have a material adverse impact on our results of operations, financial condition and cash flows. In addition, investors or securities analysts who cover the common stock of Hertz Holdings may not agree with us that these changes are beneficial, and our stock price may decline...

  • Page 54
    ... Fleet Debt, which are secured by rental vehicles and related assets of certain of our subsidiaries (all of which are organized outside the United States) or by rental equipment and related assets of certain of our subsidiaries organized outside North America, as well as (subject to certain limited...

  • Page 55
    ... by the affected insurer. In that event we would also be required to apply a proportional amount, or substantially all in the case of insolvency of both insurers, of all rental payments by Hertz to its special purpose leasing subsidiary and all car disposal proceeds under the applicable facility, or...

  • Page 56
    ... of our car rental business relies. In addition, significant increases in fuel prices or reduction in fuel supplies could negatively impact our equipment rental business by increasing the cost of buying new equipment, since fuel is used in the manufacturing process and in delivering equipment to us...

  • Page 57
    ... and centralized information systems. We rely heavily on information systems to accept reservations, process rental and sales transactions, manage our fleets of cars and equipment, account for our activities and otherwise conduct our business. We have centralized our information systems in two...

  • Page 58
    ... in changes in our capital structure, including the incurrence of additional indebtedness. We may not be successful in addressing these risks or any other problems encountered in connection with any acquisitions. We face risks related to changes in our ownership. A substantial number of our airport...

  • Page 59
    ... results of operations and financial condition. We face risks related to liabilities and insurance. Our businesses expose us to claims for personal injury, death and property damage resulting from the use of the cars and equipment rented or sold by us and for workers' compensation claims and other...

  • Page 60
    ... on The New York Stock Exchange, or ''NYSE.'' Environmental laws and regulations and the costs of complying with them, or any liability or obligation imposed under them, could adversely affect our financial position, results of operations or cash flows. We are regulated by federal, state, local and...

  • Page 61
    ...Australia, we have discontinued sales of insurance products there. See ''Item 1-Business-Risk Management'' for further discussion regarding how changes in the regulation of insurance intermediaries may affect us internationally. Laws in many countries and jurisdictions limit the types of information...

  • Page 62
    ... Notes to our audited annual consolidated financial statements included in this Annual Report under caption ''Item 8-Financial Statements and Supplemental Data.'' Risks Relating to Our Substantial Indebtedness We have substantial debt and may incur substantial additional debt, which could adversely...

  • Page 63
    .... If new debt is added to our current debt levels, the related risks that we now face would increase. In addition, the instruments governing our indebtedness do not prevent us or our subsidiaries from incurring obligations that do not constitute indebtedness. On June 30, 2006, Hertz Holdings entered...

  • Page 64
    ... not be available to our general creditors in a bankruptcy unless and until they are transferred to a non-bankruptcy remote entity. As of December 31, 2007, substantially all of our consolidated assets, including our car and equipment rental fleets, have been pledged for the benefit of the lenders...

  • Page 65
    ... conditions and to financial, market and competitive factors, many of which are beyond our control. Our ability to comply with these covenants in future periods will also depend substantially on the pricing of our products and services, our success at implementing cost reduction initiatives and our...

  • Page 66
    ...our business, financial condition and results of operations. An increase in interest rates would increase the cost of servicing our debt and could reduce our profitability. A significant portion of our outstanding debt, including borrowings under the Senior Credit Facilities, the International Fleet...

  • Page 67
    ... Operations-Market Risks-Interest Rate Risk.'' Risks Relating to Our Common Stock We may have a contingent liability arising out of electronic communications sent to institutional accounts by a previously named underwriter that did not participate as an underwriter in the initial public offering of...

  • Page 68
    ... the price of our common stock and impede our ability to raise capital through the issuance of equity securities. There were 321,862,083 shares of our common stock outstanding as of December 31, 2007. Of these shares, the 88,235,000 shares of common stock sold in the initial public offering and...

  • Page 69
    ... difficult a change in control of Hertz Holdings that our stockholders might consider in their best interests. These provisions include: • establishment of a classified board of directors, with staggered terms; • granting to the board of directors sole power to set the number of directors and to...

  • Page 70
    ... PROPERTIES We operate car rental locations at or near airports and in central business districts and suburban areas of major cities in North America (the United States, including Puerto Rico and the U.S. Virgin Islands, and Canada), Europe (France, Germany, Italy, the United Kingdom, Spain, the...

  • Page 71
    ...the complaint. After the parties engaged in some limited discovery, we filed a motion for summary judgment in August 2007. 3. New Mexico On December 13, 2005, Janelle Johnson, individually and on behalf of all other similarly situated persons v. The Hertz Corporation was filed in the Second Judicial...

  • Page 72
    ...United States District Court for the District of New Jersey. Davis Landscape, Ltd., purports to be a nationwide class action on behalf of all persons and business entities who rented equipment from Hertz Equipment Rental Corporation, or ''HERC,'' and who paid a Loss Damage Waiver, or ''LDW,'' charge...

  • Page 73
    ... Vanguard Car Rental USA, Inc., Enterprise Rent-A-Car Company, Fox Rent A Car, Inc., Coast Leasing Corp., The California Travel and Tourism Commission, and Caroline Beteta was commenced in the United States District Court for the Southern District of California. Shames purports to be a class action...

  • Page 74
    ... to defend and settle public liability and property damage actions and claims or to pay judgments resulting from them. On February 19, 2007, The Hertz Corporation and TSD Rental LLC v. Enterprise Rent-A-Car Company and The Crawford Group, Inc. was filed in the United States District Court for the...

  • Page 75
    ...President and Chief Financial Officer and Treasurer Executive Vice President and President, Vehicle Rental and Leasing, The Americas and Pacific Executive Vice President and President, HERC Executive Vice President and President, Hertz Europe Limited Executive Vice President, Supply Chain Management...

  • Page 76
    ... Commercial Vehicle Systems and Specialty Markets, and Vice President, Global Program Management. Mr. Eckroth has served as the Senior Vice President and Chief Information Officer of Hertz Holdings and Hertz since June 2007. Prior to joining Hertz Holdings and Hertz, Mr. Eckroth served as Executive...

  • Page 77
    ... as General Manager and Chief Information Officer for two General Electric business units, GE Medical Systems and GE Industrial Systems, from November 1996 through August 2000. Mr. Stuart has served as the Senior Vice President, Global Sales, of Hertz Holdings and Hertz since December 2007. Prior to...

  • Page 78
    ..., 2007, the investment funds associated with the Sponsors completed a secondary public offering of 51,750,000 shares of their Hertz Holdings common stock at a price of $22.25 per share, or approximately $1.15 billion. This offering was effected pursuant to a Registration Statement on Form S-1 (File...

  • Page 79
    ... return on Hertz Global Holdings, Inc. common stock with the Russell 1000 Index and the Hemscott Industry Group 761 - Rental & Leasing Services. The Russell 1000 Index is included because it is comprised of the 1,000 largest publicly traded issuers and has a median total market capitalization...

  • Page 80
    ..., 2007: Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) Weighted-average exercise price of...

  • Page 81
    ... of December 31, 2007 and 2006 presented below were derived from our consolidated financial statements and the related notes thereto included in this Annual Report under the caption ''Item 8-Financial Statements and Supplementary Data.'' You should read the following information in conjunction with...

  • Page 82
    ...-Liquidity and Capital Resources.'' Includes equity contributions totaling $2,295 million to Hertz Holdings from investment funds associated with or designated by the Sponsors on or prior to December 21, 2005, net proceeds from the sale of stock to employees and the initial public offering of...

  • Page 83
    ... all company-operated car 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 the sale of loss or collision damage waivers, liability insurance coverage and other products...

  • Page 84
    ... our available fleet and staff during the second and third quarters of the year. As business demand declines, fleet and staff are decreased accordingly. A number of our other major operating costs, including airport concession fees, commissions and vehicle liability expenses, are directly related to...

  • Page 85
    ... financial statements included in this Annual Report under the caption ''Item 8-Financial Statements and Supplementary Data.'' For the year ended December 31, 2007, based on publicly available information, we believe some U.S. car rental brands experienced transaction day growth and rental rate...

  • Page 86
    ... Annual Report under the caption ''Item 8-Financial Statements and Supplementary Data.'' Public Liability and Property Damage The obligation for public liability and property damage on self-insured U.S. and international vehicles and equipment represents an estimate for both reported accident claims...

  • Page 87
    ...based on financial information available through October 1, 2007. We believe this change in accounting principle is preferable because the new date more closely aligns with our annual budgeting process and allows for a better estimation of the future cash flows used in the discounted cash flow model...

  • Page 88
    ... Data.'' Stock-Based Compensation In December 2004, the Financial Accounting Standards Board, or the ''FASB,'' revised its SFAS, No. 123, with SFAS No. 123R, ''Share-Based Payment.'' The revised statement requires a public entity to measure the cost of employee services received in exchange for an...

  • Page 89
    ...based on our U.S. pension plan withdrawal rate assumptions. The non-cash stock-based compensation expense associated with the Hertz Global Holdings, Inc. Stock Incentive Plan, or the ''Stock Incentive Plan,'' is pushed down from Hertz Holdings and recorded on the books at the Hertz level. Results of...

  • Page 90
    ...Car rental ...Equipment rental . . Other ...Total revenues ...Expenses: Direct operating ...Depreciation of revenue earning equipment ...Selling, general and administrative ...Interest, net of interest income . . Total expenses . . Income (loss...247 6,739,839 ... 386,820 200,651 541,688 (33,218) ...

  • Page 91
    ... statements of operations: Successor Combined Successor Predecessor For the periods from December 21, 2005 January 1, 2005 to December 31, to December 20, 2005 2005 Years Ended December 31, 2007 2006 2005 Revenues: Car rental ...Equipment rental ...Other ...Total revenues ...Expenses: Direct...

  • Page 92
    ... Transaction days represents the total number of days that vehicles were on rent in a given period. Car rental rate revenue consists of all revenue, net of discounts, associated with the rental of cars including charges for optional insurance products, but excluding revenue derived from fueling and...

  • Page 93
    ... December 31, 2007 Car Equipment Corporate Rental Rental and Other Income (loss) before income taxes and minority Adjustments: Purchase accounting(1) ...Non-cash debt charges(2) ...Unrealized gain on derivative(3) ...Restructuring charges ...Management transition costs ...Vacation accrual adjustment...

  • Page 94
    ...results of operations relating to increased depreciation and amortization of tangible and intangible assets and accretion of revalued workers' compensation and public liability and property damage liabilities. Non-cash debt charges represent the amortization of deferred debt financing costs and debt...

  • Page 95
    ... across companies with different capital structures and depreciation policies. This enables management and investors to compare our performance on a consolidated basis and on a segment basis to that of our peers. In addition, our management uses consolidated EBITDA as a proxy for cash flow available...

  • Page 96
    ...in this filing is not, comparable to similarly titled measures reported by other companies. The calculation of Corporate EBITDA in the table below reflects historical financial data except for car rental fleet interest and non-cash amortization of debt costs included in car rental fleet interest for...

  • Page 97
    ... (loss) (i) to Corporate EBITDA on an actual basis for the Successor years ended December 31, 2007 and 2006 and the Successor period ended December 31, 2005 and (ii) to Corporate EBITDA on a pro forma basis, as it relates to car rental fleet interest and non-cash amortization of debt costs, for...

  • Page 98
    ... ended December 31, 2007 2006 2005 Corporate non-cash stock-based employee compensation charges ...$ 26.8 $ 27.2 Non-cash amortization of debt costs included in car rental fleet interest ...64.4 71.6 Non-cash charges for workers' compensation . . 2.6 1.0 Corporate non-cash charges for pension ...12...

  • Page 99
    ... an increase in airport concession recovery fees of $67.1 million. RPD for worldwide car rental was unchanged from 2006, as a slight improvement of 0.9% in international RPD was offset by a slight decline of 0.4% in U.S. RPD. U.S. airport RPD increased 0.7%, reflecting our increased pricing, partly...

  • Page 100
    ... business, which has a lower cost profile. Our strategy includes increasing penetration in the off-airport market and growing the online leisure market, particularly in the longer length weekly sector, which is characterized by lower vehicle costs and lower transaction costs at lower RPD. Increasing...

  • Page 101
    ..., increases in stock-based employee compensation expense of $16.3 million, pension costs of $3.6 million and management incentive compensation of $2.9 million, partly offset by foreign currency transaction losses of $19.2 million associated with our Euro-denominated debt in 2006, stock purchase...

  • Page 102
    Net Income Net income increased 128.2% primarily due to higher rental volume in our worldwide car and equipment rental operations, partly offset by higher fleet costs, as well as the net effect of other contributing factors noted above. The impact of changes in exchange rates on net income was ...

  • Page 103
    ... the number of employees. Fleet related expenses increased $69.2 million, or 7.1%. The majority of the increase primarily related to the increase in worldwide rental volume and included increases in gasoline costs of $28.9 million, which also reflects the higher price of gasoline, vehicle damage and...

  • Page 104
    ...we had $661.0 million of restricted cash to be used for the purchase of revenue earning vehicles and other specified uses under our Fleet Debt facilities, our like-kind exchange programs and to satisfy certain of our self-insurance regulatory reserve requirements. Our domestic and foreign operations...

  • Page 105
    ... and international car rental fleets. For further information concerning our asset-backed financing programs, see ''-Fleet Financing'' below. For a discussion of risks related to our reliance on asset-backed financing to purchase cars, see ''Item 1A-Risk Factors-Risks Related to Our Business-Our...

  • Page 106
    ... Western Shut-Down (1995) Ltd. and Hertz Canada Equipment Rental Partnership are the Canadian borrowers under the Senior ABL Facility. At December 31, 2007, net of a discount of $19.1 million, Hertz and Matthews Equipment Limited collectively had $191.8 million in borrowings outstanding under...

  • Page 107
    ... ability of Hertz to pay cash dividends and make loans to Hertz Holdings remains subject to Hertz's meeting specified financial tests, as described above, as well as requirements imposed by applicable Delaware law. The amendment to the Senior Term Facility also permits Hertz to use proceeds of the...

  • Page 108
    ...deferred purchase price of vehicles and all other obligations arising under vehicle supply agreements entered into by Fleetco (Espana), S.L., an entity created to own the Spanish rental car fleet in connection with the pending securitization of the rental car fleets in a number of European countries...

  • Page 109
    ... class of notes has an expected final payment date approximately three, four or five years from the Closing Date. The variable funding notes will be funded through the bank multi seller commercial paper market. The assets of HVF, including the U.S. car rental fleet owned by HVF and certain related...

  • Page 110
    ... 31, 2007, the fair value of our HVF Swaps was a liability of $50.2 million, which is reflected in our consolidated balance sheet in ''Other accrued liabilities.'' The U.S. Fleet Debt issued on the closing date of the Acquisition has the benefit of financial guaranty insurance policies under which...

  • Page 111
    ... the car rental business in certain European jurisdictions may, at their option, continue to engage in capital lease financings relating to revenue earning equipment outside the International Fleet Debt facilities. As of December 31, 2007, there were $30.8 million of capital lease financings...

  • Page 112
    ...and other financial institutions from time to time party thereto as lenders, Gelco Corporation d.b.a. GE Fleet Services, or the ''Fleet Financing Agent,'' as administrative agent, as collateral agent for collateral owned by Hertz and as collateral agent for collateral owned by PR Cars. Affiliates of...

  • Page 113
    ... outstanding under this facility. Canadian Fleet Financing Facility. On May 30, 2007, our indirect subsidiary, Hertz Canada Limited, and certain of its subsidiaries, entered into a Note Purchase Agreement with CARE Trust, a third-party special purpose commercial paper conduit administered by Bank of...

  • Page 114
    ... Financing. On December 21, 2007, our subsidiary in the United Kingdom, or the ''U.K.,'' Hertz (U.K.) Limited, entered into an agreement for a sale and lease back facility with a financial institution in the U.K., under which we may sell and leaseback fleet up to the value of £135.0 million (or...

  • Page 115
    ... of FIN 48 liability and interest and penalty payments in individual years beyond twelve months due to uncertainties in the timing of the effective settlement of tax positions. See Note 7 to the Notes to our consolidated financial statements included in this Annual Report under the caption ''Item...

  • Page 116
    ... The increase in our car rental revenue earning equipment expenditures is primarily due to higher rental volumes during the year ended December 31, 2007 as compared to the year ended December 31, 2006, which required us to maintain higher fleet levels. The decrease in our equipment rental operations...

  • Page 117
    ... to which Hertz Holdings and Hertz will indemnify the Sponsors, Hertz Holdings' stockholders affiliated with the Sponsors and their respective affiliates, directors, officers, partners, members, employees, agents, representatives and controlling persons, against certain liabilities arising out...

  • Page 118
    ... information on these exposures, see Note 13 to the Notes to our consolidated financial statements included in this Annual Report under the caption ''Item 8-Financial Statements and Supplementary Data.'' Interest Rate Risk From time to time, we may enter into interest rate swap agreements to manage...

  • Page 119
    ... case of insolvency of both insurers, of all rental payments by Hertz to its special purpose leasing subsidiary and all car disposal proceeds under the applicable facility, or under substantially all U.S. Fleet Debt facilities in the case of insolvency of both insurers, to pay down the amounts owed...

  • Page 120
    ... foreign exchange options to manage exposure to fluctuations in foreign exchange rates for selected marketing programs. The effect of exchange rate changes on these financial instruments would not materially affect our consolidated financial position, results of operations or cash flows. Our risks...

  • Page 121
    ... Stock Incentive Plan provides for the sale of shares of stock of Hertz Holdings to our executive officers, other key employees and directors as well as the grant of stock options to purchase shares of Hertz Holdings to those individuals. During the second quarter of 2006, we made an equity offering...

  • Page 122
    ... Stock Incentive Plan. On June 12, 2006, Mr. Koch purchased 50,000 shares of the common stock of Hertz Holdings at a purchase price of $10.00 per share and received options to purchase an additional 100,000 shares at a purchase price of $10.00 per share ($5.68 after adjustment for the special cash...

  • Page 123
    ... stock options granted by Hertz Holdings under the Stock Incentive Plan, including costs related to modifying the exercise prices of certain option grants in order to preserve the intrinsic value of the options, consistent with applicable tax law, to reflect special cash dividends of $4.32 per share...

  • Page 124
    ... measurement objective for all assets acquired and liabilities assumed; requires that acquisition related costs be expensed; and requires the acquirer to disclose to investors and other users all of the information they need to evaluate and understand the nature and financial effect of the business...

  • Page 125
    ..., on the financial statement schedules, and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and...

  • Page 126
    ... Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audit. We conducted our audit of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). These...

  • Page 127
    ...Preferred Stock, $0.01 par value, 200,000,000 shares authorized, no shares issued ...Additional paid-in capital ...Retained earnings ...Accumulated other comprehensive income ...Total stockholders' equity ...Total liabilities and stockholders' equity ... The accompanying notes are an integral part...

  • Page 128
    ... GLOBAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands of Dollars, except share data) Successor Predecessor For the periods from December 21, January 1, 2005 to 2005 to December 31, December 20, 2005 2005 Years ended December 31, 2007 2006 Revenues: Car rental...

  • Page 129
    ...public offering ...Cash dividends ($4.32 and $1.12 per common share) ...Stock-based employee compensation ...Sale of stock under employee equity offering ...Adjustment to initially apply FASB Statement No. 158, net of tax of $4,873 (revised) ...December 31, 2006 ...Net income ...Change in fair value...

  • Page 130
    ... costs ...Debt modification costs ...Amortization of debt discount ...Stock-based employee compensation ...Loss on revaluation of foreign denominated debt . . Unrealized (gain) loss on derivatives ...Loss (gain) on ineffectiveness of interest rate swaps Provision for losses on doubtful accounts...

  • Page 131
    ... from the sale of stock ...Distributions to minority interest ...Exercise of stock options ...Proceeds from disgorgement of stockholder short-swing profits ...Payment of financing costs ... ... Net cash (used in) provided by financing activities ...Effect of foreign exchange rate changes on cash and...

  • Page 132
    ...35.50 per share, or approximately $735 million. As a result of that acquisition, Hertz's Class A Common Stock ceased to be traded on the New York Stock Exchange. However, because certain of Hertz's debt securities were sold through public offerings, Hertz continued to file periodic reports under the...

  • Page 133
    ... the United States) or one or more special purpose entities, as the case may be, and, rental equipment and related assets of certain of our subsidiaries organized outside North America or one or more special purpose entities, as the case may be, which facilities (together with certain capital lease...

  • Page 134
    ...or the ''Hertz Holdings Loan Facility,'' and to pay related transaction fees and expenses. The proceeds were also used to pay special cash dividends of $1.12 per share on November 21, 2006 to stockholders of record of Hertz Holdings immediately prior to the initial public offering. In June 2007, the...

  • Page 135
    ...earning equipment, depreciation expense is adjusted for the difference between the net proceeds received and the remaining net book value. Environmental Liabilities The use of automobiles and other vehicles is subject to various governmental controls designed to limit environmental damage, including...

  • Page 136
    ... Our employee pension costs and obligations are dependent on our assumptions used by actuaries in calculating such amounts. These assumptions include discount rates, salary growth, long-term return on plan assets, retirement rates, mortality rates and other factors. Actual results that differ from...

  • Page 137
    ... the United States or are expected to be remitted free of taxes. Sales tax amounts collected from customers have been recorded on a net basis. Prior to the Acquisition, Hertz and its domestic subsidiaries filed a consolidated federal income tax return with Ford. Pursuant to a tax sharing agreement...

  • Page 138
    ... an asset exceeds its fair value. Stock-Based Compensation In December 2004, the FASB, revised SFAS No. 123, with SFAS No. 123R, ''Share-Based Payment,'' or ''SFAS No. 123R.'' The revised statement requires a public entity to measure the cost of employee services received in exchange for an award of...

  • Page 139
    ... financial information available through October 1, 2007. We believe this change in accounting principle is preferable because the new date more closely aligns with our annual budgeting process and allows for a better estimation of the future cash flows used in the discounted cash flow model we use...

  • Page 140
    HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following summarizes the changes in our goodwill, by segment (in thousands of dollars): Car Rental Equipment Rental Total Balance as of December 31, 2006 ...Changes(1) ...Balance as of December ...

  • Page 141
    HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 3-Debt Our debt consists of the following (in thousands of dollars): December 31, 2007 2006 Corporate Debt Senior Term Facility, average interest rate: 2007, 6.9%; 2006, 7.4% (effective average ...

  • Page 142
    ... of December 31, 2007 include, among other items, the amounts outstanding under our Senior ABL Facility, International Fleet Debt facility, fleet financing facilities relating to our car rental fleet in Hawaii, Kansas, Puerto Rico and St. Thomas, the U.S. Virgin Islands, Brazil, Canada, Belgium and...

  • Page 143
    ... Western Shut-Down (1995) Ltd. and Hertz Canada Equipment Rental Partnership are the Canadian borrowers under the Senior ABL Facility. At December 31, 2007, net of a discount of $19.1 million, Hertz and Matthews Equipment Limited collectively had $191.8 million in borrowings outstanding under...

  • Page 144
    ... financial statements of Hertz are available and (iii) in additional amounts at any time, up to a specified amount of certain equity contributions made by Hertz Holdings to Hertz. Restrictive covenants in the Senior ABL Facility (as amended) permit cash dividends to be paid to Hertz Holdings...

  • Page 145
    HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) requirements for specific interest rate levels; (ii) eliminating certain mandatory prepayment requirements; (iii) increasing the amounts of certain other types of indebtedness that Hertz and its ...

  • Page 146
    ... any fiscal year 6% of the aggregate gross proceeds received by Hertz through a contribution to equity capital from such offering to enable the public parent company to pay dividends to its stockholders. On January 12, 2007, Hertz completed exchange offers for its outstanding Senior Notes and Senior...

  • Page 147
    HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Fleet Financing U.S. Fleet Debt. In connection with the Acquisition, Hertz Vehicle Financing LLC, or ''HVF,'' a bankruptcy-remote special purpose entity wholly-owned by Hertz, entered into an amended...

  • Page 148
    ... Subject to legal, tax, cost and other structuring considerations and to certain exceptions, the International Fleet Debt facilities are secured by a material part of the assets of each borrower, certain related entities and each guarantor, including pledges of the capital stock of each borrower and...

  • Page 149
    ... the car rental business in certain European jurisdictions may, at their option, continue to engage in capital lease financings relating to revenue earning equipment outside the International Fleet Debt facilities. As of December 31, 2007, there were $30.8 million of capital lease financings...

  • Page 150
    ... certain assets related to Hertz's rental car fleet in Hawaii and Kansas, including, without limitation, manufacturer repurchase program agreements. PR Cars' obligations under the Fleet Financing Facility and the other loan documents are secured by security interests in PR Cars' rental car fleet in...

  • Page 151
    ... outstanding under this facility. Canadian Fleet Financing Facility. On May 30, 2007, our indirect subsidiary, Hertz Canada Limited, and certain of its subsidiaries, entered into a Note Purchase Agreement with CARE Trust, a third-party special purpose commercial paper conduit administered by Bank of...

  • Page 152
    ... GLOBAL HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) U.K. Leveraged Financing. On December 21, 2007, our subsidiary in the United Kingdom, or the ''U.K.,'' Hertz (U.K.) Limited, entered into an agreement for a sale and lease back facility with a financial...

  • Page 153
    ... vehicle for retired Senior Vice Presidents and above who have a minimum of 20 years of service and who retired at age 58 or above. We use a December 31 measurement date for all our plans. The following tables set forth the funded status and the net periodic pension cost of the Hertz Retirement Plan...

  • Page 154
    ... sheet and statement of operations (in millions of dollars): U.S. 2007 Pension Benefits Non-U.S. 2006 2007 2006 Postretirement Benefits (U.S.) 2007 2006 Change in Benefit Obligation Benefit obligation at January 1 . Service cost ...Interest cost ...Employee contributions ...Plan amendments ...Plan...

  • Page 155
    HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Pension Benefits U.S. Non-U.S. 2007 2006 2007 2006 Postretirement Benefits (U.S.) 2007 2006 Amounts recognized in balance sheet: Liabilities ...$(121.5) $ (98.8) $ (37.1) $ (64.4) $(13.2) $(16.6) Net...

  • Page 156
    HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The expected return on plan assets for each funded plan is based on expected future investment returns considering the target investment mix of plan assets. Pension Benefits Non-U.S Successor ...

  • Page 157
    ... 20, 2007 2006 2005 2005 Components of Net Periodic Benefit Cost: Service cost ...Interest cost ...Amortization: Losses and other ...Special termination benefit cost ...Net postretirement expense ...Weighted-average discount rate for expense ...Initial health care cost trend rate ...Ultimate...

  • Page 158
    ...the Hertz Global Holdings, Inc. Stock Incentive Plan, or the ''Stock Incentive Plan.'' The Stock Incentive Plan provides for the sale of Hertz Holdings common stock to our executive officers, other key employees and directors as well as the grant of stock options to purchase shares of Hertz Holdings...

  • Page 159
    ... FINANCIAL STATEMENTS (Continued) or the Compensation Committee of Hertz Holdings may determine the specific number of shares to be offered or options to be granted to an individual employee or director. A maximum of 25 million shares are reserved for issuance under the Stock Incentive Plan...

  • Page 160
    ... NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) information about past volatility. Therefore, we have used the calculated value method, substituting the historical volatility of an appropriate industry sector index for the expected volatility of Hertz Holdings' common stock price as an...

  • Page 161
    ... stock options granted by Hertz Holdings under the Stock Incentive Plan, including costs related to modifying the exercise prices of certain option grants in order to preserve the intrinsic value of the options, consistent with applicable tax law, to reflect special cash dividends of $4.32 per share...

  • Page 162
    ... 2006, respectively. For the years ended December 31, 2007 and 2006, our worldwide car rental operations sold approximately 163,400 and 101,000 non-program cars, respectively, a 61.8% increase. Note 7-Taxes on Income The components of income (loss) before income taxes and minority interest for the...

  • Page 163
    HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The principal items of the U.S. and foreign net deferred tax liability at December 31, 2007 and 2006 are as follows (in thousands of dollars): 2007 2006 Deferred Tax Assets: Employee benefit plans ...

  • Page 164
    ... recorded in 2007 were not material to our current or previously issued consolidated financial statements. The American Jobs Creation Act, or ''the Act,'' was enacted in October 2004. The Act contained a provision allowing a one-time favorable tax benefit in 2005 related to the repatriation...

  • Page 165
    ... as Australia, the Netherlands, Brazil, Canada, France, Germany, Italy, Spain, Ireland, the United Kingdom and the United States. The open tax years for these jurisdictions span from 1997 to 2007. A tax indemnification agreement entered into with Ford on the Closing Date indemnifies Hertz from...

  • Page 166
    ... concession agreements and real estate leases require us to pay or reimburse operating expenses, such as common area charges and real estate taxes, to pay concession fees above guaranteed minimums or additional rent based on a percentage of revenues or sales (as defined in those agreements) arising...

  • Page 167
    ..., products, services, customers, and delivery methods. We have identified two reportable segments: rental of cars and light trucks, or ''car rental''; and rental of industrial, construction and material handling equipment, or ''equipment rental.'' ''Corporate and other'' includes general...

  • Page 168
    ... FINANCIAL STATEMENTS (Continued) Successor December 21, 2005 to December 31, 2005 $ 131.8 22.5 0.2 $ 154.5 $ (15.5) (9.4) (8.1) $ 37.4 6.4 - $ 43.8 $ 4.1 1.2 0.2 5.5 1.1 1.0 - 2.1 Predecessor For the periods from Years ended December 31, 2007 Revenues Car rental ...Equipment rental ...Corporate...

  • Page 169
    HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) We operate in the United States and in foreign countries. Foreign operations are substantially in Europe. The operations within major geographic areas are summarized below (in millions of dollars): ...

  • Page 170
    ... ...Management transition costs ...Stock purchase compensation charge ...Unrealized transaction loss (gain) on Euro-denominated debt(4) . . Unrealized gain on derivative(5) . . Gain on sale of swap derivative . . Sponsor termination fee ...Interest on Hertz Holdings debt . . Secondary offering costs...

  • Page 171
    ... alternate theories to challenge the application of our Fuel and Service Charge, or ''FSC,'' on rentals of cars that are returned with less fuel than when rented. The actions in Texas and Oklahoma remain pending, but the actions in New Mexico and Nevada were dismissed in 2007. 1. Texas On March 15...

  • Page 172
    ... persons v. The Hertz Corporation was filed in the United States District Court for the District of Nevada. Guerra purported to be a class action on behalf of all individuals and business entities who rented vehicle at Las Vegas McCarran International Airport and were charged a FSC. The complaint...

  • Page 173
    ...United States District Court for the District of New Jersey. Davis Landscape, Ltd., purports to be a nationwide class action on behalf of all persons and business entities who rented equipment from Hertz Equipment Rental Corporation, or ''HERC,'' and who paid a Loss Damage Waiver, or ''LDW,'' charge...

  • Page 174
    ...in California on January 1, 2007. The complaint alleges that California's Passenger Car Rental Industry Tourism Assessment Program, as included in the California Tourism Marketing Act, violates the United States Constitution's Commerce Clause and First Amendment, both directly and in violation of 42...

  • Page 175
    ... to defend and settle public liability and property damage actions and claims or to pay judgments resulting from them. On February 19, 2007, The Hertz Corporation and TSD Rental LLC v. Enterprise Rent-A-Car Company and The Crawford Group, Inc. was filed in the United States District Court for the...

  • Page 176
    ..., directors, officers, partners, members, employees, agents, representatives and controlling persons, against certain liabilities arising out of performance of a consulting agreement with Hertz Holdings and each of the Sponsors and certain other claims and liabilities, including liabilities arising...

  • Page 177
    ..., respectively, of tax benefit related to the restructuring charge. The second quarter of 2007, third quarter of 2007 and fourth quarter of 2007 include decreases of $19.6 million, $9.2 million and $7.7 million, respectively, in our employee vacation accrual relating to a change in our U.S. vacation...

  • Page 178
    ... affecting approximately 480 positions in our U.S. car and equipment rental operations, as well as financial and reservations-related jobs in our U.S. service center in Oklahoma City, Oklahoma. During 2007, we began to implement cost reducing initiatives in our European operations, and we expect...

  • Page 179
    HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2007, our consolidated statement of operations includes restructuring charges relating to the initiatives discussed above of $96.4 million, which is composed of $65.2 ...

  • Page 180
    ... to trade receivables are limited due to the large number of customers comprising our customer base, and their dispersion across different businesses and geographic areas. As of December 31, 2007, we had no significant concentration of credit risk. Cash and Equivalents and Restricted Cash Fair value...

  • Page 181
    ... case of insolvency of both insurers, of all rental payments by Hertz to its special purpose leasing subsidiary and all car disposal proceeds under the applicable facility, or under substantially all U.S. Fleet Debt facilities in the case of insolvency of both insurers, to pay down the amounts owed...

  • Page 182
    ..., including making fleet and equipment purchases and borrowing for working capital needs. Also, we have purchased foreign exchange options to manage exposure to fluctuations in foreign exchange rates for selected marketing programs. The effect of exchange rate changes on these financial instruments...

  • Page 183
    HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 14-Related Party Transactions Relationship with Ford Prior to the Acquisition, we were an indirect, wholly-owned subsidiary of Ford. We and certain of our subsidiaries had entered ...

  • Page 184
    ..., and sold cars to Ford and its subsidiaries under various repurchase programs for approximately (in billions of dollars) $2.2, $3.1, $0.1 and $3.5, respectively. Stock option plan Certain employees of ours participate in the stock option plan of Ford under Ford's 1998 Long-Term Incentive Plan. As...

  • Page 185
    ...our respective businesses. These transactions include providing car and equipment rental services to Ford and providing insurance and insurance claim management services to Ford. In addition, Ford subsidiaries are our car rental licensees in Scandinavia and Finland. Relationship with Hertz Investors...

  • Page 186
    ...-law of our director David H. Wasserman, is a principal. Under the arrangement, which has now been fully performed, Tenzing Consulting LLC provided supply chain management and corporate purchasing management consulting. In exchange for these services, Tenzing Consulting LLC received fees of $25,000...

  • Page 187
    ... TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Sponsors and their respective affiliates, directors, officers, partners, members, employees, agents, representatives and controlling persons, against certain liabilities arising out of the performance of a consulting agreement with Hertz Holdings and...

  • Page 188
    ...initial post-Acquisition capital structure. See Note 1-Summary of Significant Accounting Policies-Background and Change in Ownership-Initial and Secondary Public Offering and Note 5-Hertz Holdings Stock Incentive Plan for a discussion of subsequent capital structure changes. Basic earnings per share...

  • Page 189
    ... cash awards, including non-qualified stock options, incentive stock options, stock appreciation rights, performance awards (shares and units), restricted stock, restricted stock units and deferred stock units. The purpose of the plan is to foster and promote the long-term financial success of Hertz...

  • Page 190
    ... value of one share of Hertz Holdings common stock on the grant date. Stock options and stock appreciation rights will vest based on a minimum period of service or the occurrence of events (such as a change in control, as defined in the Omnibus plan) specified by the compensation committee. No stock...

  • Page 191
    SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT HERTZ GLOBAL HOLDINGS, INC. PARENT COMPANY BALANCE SHEETS (In Thousands of Dollars) December 31, 2007 2006 ASSETS Cash and equivalents ...Receivables ...Accounts receivable from Hertz affiliate Prepaid expenses and other assets ...Deferred ...

  • Page 192
    SCHEDULE I (Continued) HERTZ GLOBAL HOLDINGS, INC. PARENT COMPANY STATEMENTS OF OPERATIONS (In Thousands of Dollars) Years ended December 31, 2007 2006 For the period from December 21, 2005 to December 31, 2005 Revenues ...Expenses: Selling, general and administrative ...Interest, net of interest ...

  • Page 193
    ...229,500,000 ... Total Comprehensive Income (revised) . Sale of common stock in initial public offering ...Cash dividends ($4.32 and $1.12 per common share) ...Stock-based employee compensation Sale of stock under employee equity offering ...Adjustment to initially apply FASB Statement No. 158, net...

  • Page 194
    ...Dividends from subsidiary ...Net cash used in investing activities ...Cash flows from financing activities: Proceeds from issuance of long-term debt ...Repayment of long-term debt ...Payment of financing costs ...Exercise of stock options ...Accounts receivable from Hertz affiliate ...Proceeds from...

  • Page 195
    ... of $1.0 billion, or the ''Hertz Holdings Loan Facility,'' for the purpose of paying a special cash dividend to the holders of record of its common stock immediately prior to the initial public offering and paying fees and expenses related to the facility. The Hertz Holdings Loan Facility was repaid...

  • Page 196
    ... AND QUALIFYING ACCOUNTS HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES (In Thousands of Dollars) Balance at Beginning of Period Additions Charged to Translation Expense Adjustments Deductions Balance at End of Period Allowance for doubtful accounts: Successor Year ended December 31, 2007 . . Year...

  • Page 197
    ... limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions...

  • Page 198
    ... is included in Part I of this Annual Report under the caption ''Executive Officers of the Registrant.'' Information relating to compliance with Section 16(a) of the Exchange Act is set forth under the caption ''Section 16(a) Beneficial Ownership Reporting Compliance'' of our 2008 Proxy Statement...

  • Page 199
    ... Statements of Stockholders' Equity ...Consolidated Statements of Cash Flows ...Notes to Consolidated Financial Statements ...Financial Statement Schedules: Our financial statement schedules filed herewith are set forth in Part II, Item 8 of this Annual Report as follows: Hertz Global Holdings...

  • Page 200
    ... Report on Form 10-Q of Hertz Global Holdings, Inc., as filed on November 14, 2007.) Exchange and Registration Rights Agreement, dated as of December 21, 2005, by and between CCMG Acquisition Corporation, Deutsche Bank Securities Inc. and the other financial institutions named therein, relating...

  • Page 201
    ... Trustee, the financial institutions named therein, and The Hertz Corporation Australian Purchaser Charge (Project H)-Unlimited, dated as of December 21, 2005, by and between Hertz Australia Pty Limited and HA Funding Pty Limited** Australian Purchaser Charge (Project H)-South Australia, dated as...

  • Page 202
    ..., between HA Funding Pty Limited and BNP Paribas** Reserved Reserved Share Pledge Agreement, dated as of December 21, 2005, by and between Hertz Holdings Netherlands B.V., as Pledgor, and BNP Paribas, as Pledgee** Reserved Reserved Reserved Reserved Reserved Pledge of a Business as a Going Concern...

  • Page 203
    ..., 2005, between Hertz Autovermietung GmbH as assignor and BNP Paribas S.A. as Security Agent and lender** Share Pledge Agreement, dated as of December 21, 2005, among Equipole S.A. (France), The Royal Bank of Scotland plc, Calyon, BNP Paribas (Canada), Indosuez Finance (U.K.) Limited and BNP Paribas...

  • Page 204
    ... Pledgor, and BNP Paribas S.A., as Pledgee and Security Agent** Pledge Agreement over Hertz Italiana S.p.A. shares, dated as of December 21, 2005, between Hertz Holding South Europe S.r.l as Pledgor and BNP Paribas S.A. as Pledgee and Security Agent** Deed of Non-Possessory Pledge of Movables, dated...

  • Page 205
    ... 2005, between Hertz Holdings South Europe S.r.l and BNP Paribas S.A. as Security Agent relating to the pledge of the entire share capital of Hertz AG** Reserved Reserved Deed of Charge over Shares in Hertz Holdings III UK Limited, dated as of December 21, 2005, between Hertz International, Ltd. and...

  • Page 206
    ... Joint Bookrunning Managers (Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K of The Hertz Corporation, as filed on July 7, 2006.) Second Amendment, dated as of February 9, 2007, among The Hertz Corporation, Deutsche Bank AG, New York Branch, and the other parties signatory...

  • Page 207
    ... Global Holdings, Inc., as filed on November 14, 2007.) Credit Agreement, dated as of December 21, 2005, by and between Hertz Equipment Rental Corporation, The Hertz Corporation, the Canadian Borrowers parties thereto, the several lenders from time to time parties thereto, Deutsche Bank AG, New York...

  • Page 208
    ... filed on July 7, 2006.) Second Amendment, dated as of February 15, 2007, among Hertz Equipment Rental Corporation, The Hertz Corporation, Matthews Equipment Limited, Western Shut-Down (1995) Limited, Deutsche Bank AG, New York Branch, Deutsche Bank AG, Canada Branch, and the other parties signatory...

  • Page 209
    ... Holdings, Inc., as filed on November 14, 2007.) Fourth Amendment, dated as of September 30, 2007, among Hertz Equipment Rental Corporation, The Hertz Corporation, Matthews Equipment Limited, Western Shut-Down (1995) Limited, Hertz Canada Equipment Rental Corporation, Deutsche Bank AG, New York...

  • Page 210
    ..., dated as of August 1, 2006, between Hertz Vehicle Financing LLC and The Bank Of New York Trust Company, N.A. (Incorporated by reference to Exhibit 4.1.10 to the Quarterly Report on Form 10-Q of Hertz Global Holdings, Inc., as filed on November 14, 2007.) Second Amended and Restated Series 2004...

  • Page 211
    ... Hertz Vehicle Financing LLC and The Bank Of New York Trust Company, N.A. (Incorporated by reference to Exhibit 4.1.6 to the Quarterly Report on Form 10-Q of Hertz Global Holdings, Inc., as filed on November 14, 2007.) Second Amended and Restated Master Motor Vehicle Operating Lease and Servicing...

  • Page 212
    ... Rental Car Asset Backed Notes, Class A), dated as of March 3, 2006, by and between Hertz Vehicle Financing LLC, The Hertz Corporation, as Administrator, certain Conduit Investors, each as a Conduit Investor, certain Financial Institutions, each as a Committed Note Purchaser, certain Funding Agents...

  • Page 213
    ..., among The Hertz Corporation, Puerto Ricancars, Inc., the several banks and other financial institutions from time to time parties as lenders thereto and Gelco Corporation d.b.a. GE Fleet Services, as administrative agent and collateral agents for the lenders thereunder*** Form of Stock Certificate...

  • Page 214
    ... Retirement and Savings Plan (Incorporated by reference to Exhibit 10.7 to Amendment No. 1 to the Registration Statement on Form S-1 of The Hertz Corporation (File No. 333-125764) as filed on August 30, 2005)* The Hertz Corporation Executive Long Term Incentive Compensation Plan (Incorporated by...

  • Page 215
    ... Motor Company, The Hertz Corporation and Hertz General Interest LLC (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of The Hertz Corporation as filed on July 11, 2005. Such Exhibit omits certain information that has been filed separately with the Securities and Exchange...

  • Page 216
    ... Chief Executive Officer and Chief Financial Officer 10.32 10.33 10.34 10.35 10.36 12 21.1 23.1 31.1-31.2 32.1-32.2 * ** Indicates management compensation plan. Incorporated by reference to the exhibit of the same number to the Current Report on Form 8-K of The Hertz Corporation, as filed on...

  • Page 217
    ..., 2008. HERTZ GLOBAL HOLDINGS, INC. (Registrant) By: /s/ ELYSE DOUGLAS Name: Elyse Douglas Title: Executive Vice President and Chief Financial Officer and Treasurer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on...

  • Page 218
    Signature Title /s/ ROBERT F. END Robert F. End /s/ BARRY H. BERACHA Barry H. Beracha /s/ CARL T. BERQUIST Carl T. Berquist /s/ MICHAEL J. DURHAM Michael J. Durham /s/ HENRY C. WOLF Henry C. Wolf Director Director Director Director Director 198

  • Page 219
    ... OF CHIEF EXECUTIVE OFFICER PURSUANT TO RULE 13a-14(a)/15d-14(a) I, Mark P . Frissora, certify that: 1. I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2007 of Hertz Global Holdings, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of...

  • Page 220
    ... OF CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13a-14(a)/15d-14(a) I, Elyse Douglas, certify that: 1. I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2007 of Hertz Global Holdings, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of...

  • Page 221
    EXHIBIT 32.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 In connection with the Annual Report of Hertz Global Holdings, Inc. (the ''Company'') on Form 10-K for the period ending December 31, 2007 as filed with the Securities and Exchange Commission on the date hereof ...

  • Page 222
    EXHIBIT 32.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 In connection with the Annual Report of Hertz Global Holdings, Inc. (the ''Company'') on Form 10-K for the period ending December 31, 2007 as filed with the Securities and Exchange Commission on the date hereof ...

  • Page 223
    ... cause such differences, please see the section of our Annual Report on Form 10-K for the year ended December 31, 2007, which is included in this annual report to our stockholders, under the heading ''Item 1A.-Risk Factors'' and the cautionary note regarding forward-looking statements appearing in...

  • Page 224
    ...-IPO number of shares outstanding. Unlevered Pre-Tax Cash Flow Unlevered pre-tax cash flow is calculated as Corporate EBITDA less equipment rental fleet depreciation including gain (loss) on sale, non-fleet capital expenditures, net of non-fleet disposals, plus changes in working capital (accounts...

  • Page 225
    ... specified uses under our Fleet Debt programs, our like-kind exchange programs and to satisfy certain of our self insurance regulatory reserve requirements. Corporate restricted cash is calculated as total restricted cash less restricted cash associated with fleet debt. Net Fleet Debt Net fleet debt...

  • Page 226
    ... of property and equipment relating to purchase accounting, among other adjustments which are detailed in the Adjusted Pre-Tax Income (Loss) and Adjusted Net Income (Loss) reconciliation. (d) Represents non-cash debt charges relating to the amortization of deferred debt financing costs and debt...

  • Page 227
    ... of property and equipment relating to purchase accounting. (d) Represents the increase in interest expense giving effect to our new capital structure as if the debt associated with the acquisition on December 21, 2005 had occurred on January 1, 2005. (e) Represents a benefit for income taxes...

  • Page 228
    ... number of shares outstanding ...Adjusted diluted earnings per share ... Year Ended December 31, 2005 (Combined)-Pro Forma Car Equipment Corporate Rental Rental and Other Total Income (loss) before income taxes and minority interest ...Adjustments: Purchase accounting(a) ...Non-cash debt charges...

  • Page 229
    ... capital . Changes in other assets and liabilities ...Unlevered pre-tax cash flow (c) Corporate net cash interest . Corporate cash taxes ...Levered after-tax cash flow before fleet growth (c) ...Equipment rental fleet growth capital expenditures ...Car rental net fleet equity requirement ...Levered...

  • Page 230
    ... liabilities ...Unlevered pre-tax cash flow (c) . . Corporate net cash interest ...Corporate cash taxes ...Levered after-tax cash flow before fleet growth (c) ...Equipment rental fleet growth capital expenditures ...Car rental net fleet equity requirement ...Levered after-tax cash flow after fleet...

  • Page 231
    ...)-Pro Forma Car Equipment Corporate Rental Rental and Other Total Non-cash amortization of debt costs included in car rental fleet interest . . $ 83.2 Non-cash stock-based employee compensation charges ...- Non-cash charges for workers' compensation ...11.7 Total non-cash expenses and charges . $ 94...

  • Page 232
    ...2007 2006 2005 Net cash provided by operating activities ...Stock-based employee compensation ...Amortization of debt and debt modification costs ...Unrealized gain (loss) on derivatives ...Unrealized transaction (gain) loss on Euro-denominated debt . Gain on sale of property and equipment ...(Loss...

  • Page 233
    ... information about the company should contact: Lauren S. Babus Vice President, Investor Relations Hertz Global Holdings, Inc. 225 Brae Boulevard Park Ridge, NJ 07656 (201) 307-2100 [email protected] Certifications Hertz Global Holdings has included as exhibits to its Annual Report...

  • Page 234
    www.hertz.com Hertz Global Holdings, Inc. 225 Brae Boulevard Park Ridge, NJ 07656 (201) 307-2000