Hertz 2010 Annual Report Download - page 81

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Year Ended December 31, 2008
Equipment
Car Rental Rental
Loss before income taxes ............................... $(385.3) $(629.3)
Adjustments:
Purchase accounting(1) ................................ 40.2 58.8
Non-cash debt charges(2) .............................. 71.1 10.3
Restructuring charges ................................ 98.4 103.2
Restructuring related charges(3) .......................... 19.5 3.1
Derivative losses(4) .................................. 2.2 —
Impairment charges(6) ................................ 443.0 725.9
Adjusted pre-tax income ................................ $289.1 $ 272.0
(1) Represents the purchase accounting effects of the Acquisition on our results of operations relating to increased
depreciation and amortization of tangible and intangible assets and accretion of revalued workers’ compensation and
public liability and property damage liabilities. Also represents the purchase accounting effects of subsequent
acquisitions on our results of operations relating to increased amortization of intangible assets.
(2) Represents non-cash debt charges relating to the amortization and write-off of deferred debt financing costs and debt
discounts. For the years ended December 31, 2010 and 2009, also includes $68.9 million and $74.6 million,
respectively, associated with the amortization of amounts pertaining to the de-designation of the Hertz Vehicle
Financing LLC, or ‘‘HVF,’’ interest rate swaps as effective hedging instruments. During the year ended December 31,
2008, also includes $11.8 million associated with the ineffectiveness of our HVF interest rate swaps and $30.0 million
related to the write-off of deferred financing costs associated with those countries outside the United States as to which
take-out asset-based facilities have not been entered into.
(3) Represents incremental costs incurred directly supporting our business transformation initiatives. Such costs include
transition costs incurred in connection with our business process outsourcing arrangements and incremental costs
incurred to facilitate business process re-engineering initiatives that involve significant organization redesign and
extensive operational process changes.
(4) In 2010, represents the mark-to-market adjustment on our interest rate cap. In 2008, represents unrealized and realized
gains and losses on our interest rate swaptions.
(5) Represents an allowance for uncollectible program car receivables related to a bankrupt European dealer affiliated with
a U.S. car manufacturer.
(6) Represents non-cash impairment charges related to our goodwill, other intangible assets and property and equipment.
(d) Equipment rental and rental related revenue consists of all revenue, net of discounts, associated with the rental of equipment
including charges for delivery, loss damage waivers and fueling, but excluding revenue arising from the sale of equipment,
parts and supplies and certain other ancillary revenue. Rental and rental related revenue is adjusted in all periods to eliminate
the effect of fluctuations in foreign currency. Our management believes eliminating the effect of fluctuations in foreign
currency is appropriate so as not to affect the comparability of underlying trends. This statistic is important to our
management as it is utilized in the measurement of rental revenue generated per dollar invested in fleet on an annualized
basis and is comparable with the reporting of other industry participants. The following table reconciles our equipment rental
revenue to our equipment rental and rental related revenue (based on December 31, 2009 foreign exchange rates) for the
years ended December 31, 2010, 2009 and 2008 (in millions of dollars):
Years ended December 31,
2010 2009 2008
Equipment rental segment revenues ........................... $1,070.1 $1,110.9 $1,658.1
Equipment sales and other revenue ............................ (100.1) (109.8) (177.8)
Foreign currency adjustment ................................ 6.1 20.7 (5.2)
Rental and rental related revenue ............................. $ 976.1 $1,021.8 $1,475.1
57