Hertz 2007 Annual Report Download - page 170

HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(a) The following table reconciles income (loss) before income taxes and minority interest to adjusted pre-tax income (loss) for
the years ended December 31, 2007 and 2006, the Successor period ended December 31, 2005 and Predecessor period
ended December 20, 2005 (in millions of dollars):
Successor Predecessor
For the periods from
December 21, January 1,
2005 to 2005 to
Years ended December 31, December 31, December 20,
2007 2006 2005 2005(1)
Income (loss) before income taxes
and minority interest ......... $386.8 $200.6 $(33.2) $574.9
Adjustments:
Purchase accounting(2) ....... 95.2 90.4 2.7 —
Non-cash debt charges(3) ...... 105.9 99.5 0.3 8.8
Restructuring charges ........ 96.4 — — —
Management transition costs .... 15.0 9.8 — —
Stock purchase compensation
charge ................ — 13.3 — —
Unrealized transaction loss (gain)
on Euro-denominated debt(4) . . — 19.2 (2.8) —
Unrealized gain on derivative(5) . . (4.1) — — —
Gain on sale of swap derivative . . — (1.0) — —
Sponsor termination fee ....... — 15.0 — —
Interest on Hertz Holdings debt . . — 39.9 — —
Secondary offering costs ...... 2.0 — — —
European headquarters relocation
costs ................. — — — 4.0
Vacation accrual adjustment(6) . . . (36.5) — — —
Adjusted pre-tax income (loss)(7) . . . $660.7 $486.7 $(33.0) $587.7
(1) Amounts are based on actual results during the period and therefore do not give effect to our new capital structure
as if the debt associated with the Acquisition and related purchase accounting adjustments had occurred on
January 1, 2005.
(2) Includes the purchase accounting effects of the Acquisition and any subsequent acquisition on our results of
operations relating to increased depreciation and amortization of tangible and intangible assets and accretion of
revalued workers’ compensation and public liability and property damage liabilities.
(3) Non-cash debt charges represent the amortization of deferred debt financing costs and debt discounts. During the
year ended December 31, 2007, also includes $20.4 million associated with the ineffectiveness of our HVF swaps
and the write-off of $16.2 million of unamortized debt costs associated with a debt modification. During the year
ended December 31, 2006, also includes $1.0 million associated with the reversal of the ineffectiveness of our HVF
swaps. During the Successor period ended December 31, 2005, also includes $1.0 million associated with the
ineffectiveness of our HVF swaps.
(4) Represents unrealized losses and gains on currency translation of our Euro-denominated debt. On October 1,
2006, we designated this Euro-denominated debt as an effective net investment hedge of our Euro-denominated
net investment in our foreign operations and as such we will no longer incur unrealized exchange transaction gains
or losses in our consolidated statement of operations.
(5) During the year ended December 31, 2007, includes an unrealized gain on interest rate swaptions.
(6) Represents a decrease in the employee vacation accrual during the year ended December 31, 2007, relating to a
change in our U.S. vacation policy, which now provides for vacation entitlement to be earned ratably throughout the
year versus the previous policy which provided for full vesting on January 1 of each year.
(7) See Item 7. MD&A—Results of Operation for reconciliation of adjusted pre-tax income (loss) by segment.
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