Table of Contents

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



FORM 10-Q

ý   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2012

OR

o

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-33139

HERTZ GLOBAL HOLDINGS, INC.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)
  20-3530539
(I.R.S. Employer
Identification Number)

225 Brae Boulevard
Park Ridge, New Jersey 07656-0713
(201) 307-2000
(Address, including Zip Code, and telephone number,
including area code, of registrant's principal executive offices)

Not Applicable
(Former name, former address and former fiscal year,
if changed since last report.)

Indicate by check mark whether the 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. Yes ý 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). Yes ý 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" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ý   Accelerated filer o   Non-accelerated filer o
(Do not check if a smaller
reporting company)
  Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

There were 420,318,854 shares of the registrant's common stock, par value $0.01 per share, issued and outstanding as of August 1, 2012.

   


HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

INDEX

 
   
  Page

PART I. FINANCIAL INFORMATION

   


ITEM 1.


 


Condensed Consolidated Financial Statements (Unaudited)


 


1



 


Report of Independent Registered Public Accounting Firm


 


1



 


Condensed Consolidated Balance Sheets as of June 30, 2012 and December 31, 2011


 


2



 


Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2012 and 2011


 


3



 


Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2012 and 2011


 


4



 


Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2012 and 2011


 


5-6



 


Notes to Condensed Consolidated Financial Statements


 


7-31


ITEM 2.


 


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


 


32-65


ITEM 3.


 


Quantitative and Qualitative Disclosures About Market Risk


 


66


ITEM 4.


 


Controls and Procedures


 


66


PART II. OTHER INFORMATION


 

 


ITEM 1.


 


Legal Proceedings


 


67


ITEM 1A.


 


Risk Factors


 


67


ITEM 6.


 


Exhibits


 


67


SIGNATURE


 


68


EXHIBIT INDEX


 


69


Table of Contents

PART I—FINANCIAL INFORMATION

ITEM l.    Condensed Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and
Shareholders of Hertz Global Holdings, Inc.:

We have reviewed the accompanying condensed consolidated balance sheet of Hertz Global Holdings, Inc. and its subsidiaries as of June 30, 2012, and the related consolidated statements of operations and comprehensive income (loss) for the three-month and six-month periods ended June 30, 2012 and June 30, 2011 and the consolidated statements of cash flows for the six-month periods ended June 30, 2012 and June 30, 2011. These interim financial statements are the responsibility of the Company's management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of December 31, 2011, and the related consolidated statements of operations, of changes in equity and of cash flows for the year then ended (not presented herein), and in our report dated February 27, 2012, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2011, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived.

/s/ PricewaterhouseCoopers LLP
Florham Park, New Jersey
August 2, 2012

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands of Dollars)

Unaudited

 
  June 30,
2012
  December 31,
2011
 

ASSETS

             

Cash and cash equivalents

  $ 586,201   $ 931,779  

Restricted cash and cash equivalents

    175,449     308,039  

Receivables, less allowance for doubtful accounts of $21,899 and $20,282

    1,448,271     1,616,382  

Inventories, at lower of cost or market

    101,712     83,978  

Prepaid expenses and other assets

    419,209     421,758  

Revenue earning equipment, at cost:

             

Cars

    12,027,004     9,678,765  

Less accumulated depreciation

    (1,619,009 )   (1,360,012 )

Other equipment

    3,046,549     2,830,176  

Less accumulated depreciation

    (1,016,585 )   (1,043,520 )
           

Total revenue earning equipment

    12,437,959     10,105,409  
           

Property and equipment, at cost:

             

Land, buildings and leasehold improvements

    1,172,743     1,146,112  

Service equipment and other

    1,112,298     1,050,915  
           

    2,285,041     2,197,027  

Less accumulated depreciation

    (1,020,772 )   (945,173 )
           

Total property and equipment

    1,264,269     1,251,854  
           

Other intangible assets, net

    2,544,011     2,562,234  

Goodwill

    452,408     392,094  
           

Total assets

  $ 19,429,489   $ 17,673,527  
           

LIABILITIES AND EQUITY

             

Accounts payable

  $ 1,487,086   $ 897,489  

Accrued liabilities

    1,064,410     1,128,458  

Accrued taxes

    165,576     125,803  

Debt

    12,467,873     11,317,090  

Public liability and property damage

    270,640     281,534  

Deferred taxes on income

    1,707,966     1,688,478  
           

Total liabilities

    17,163,551     15,438,852  
           

Commitments and contingencies

             

Equity:

             

Hertz Global Holdings, Inc. and Subsidiaries stockholders' equity

             

Preferred Stock, $0.01 par value, 200,000,000 shares authorized, no shares issued and outstanding

         

Common Stock, $0.01 par value, 2,000,000,000 shares authorized, 420,302,667 and 417,022,853 shares issued and outstanding

    4,203     4,170  

Additional paid-in capital

    3,210,281     3,205,964  

Accumulated deficit

    (910,508 )   (947,064 )

Accumulated other comprehensive loss

    (38,057 )   (28,414 )
           

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

    2,265,919     2,234,656  

Noncontrolling interest

    19     19  
           

Total equity

    2,265,938     2,234,675  
           

Total liabilities and equity

  $ 19,429,489   $ 17,673,527  
           

   

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

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands of Dollars, except share and per share data)

Unaudited

 
  Three Months Ended
June 30,
  Six Months Ended
June 30,
 
 
  2012   2011   2012   2011  

Revenues:

                         

Car rental

  $ 1,849,327   $ 1,731,200   $ 3,472,558   $ 3,210,138  

Equipment rental

    334,199     301,641     635,525     569,727  

Other

    41,622     39,452     77,990     72,431  
                   

Total revenues

    2,225,148     2,072,293     4,186,073     3,852,296  
                   

Expenses:

                         

Direct operating

    1,188,933     1,187,306     2,304,080     2,260,971  

Depreciation of revenue earning equipment and lease charges

    519,750     419,669     1,033,867     855,758  

Selling, general and administrative

    206,569     195,591     414,321     377,812  

Interest expense

    152,184     165,826     314,451     362,715  

Interest income

    (468 )   (1,546 )   (1,560 )   (3,401 )

Other (income) expense, net

    (554 )   10,801     (1,011 )   62,677  
                   

Total expenses

    2,066,414     1,977,647     4,064,148     3,916,532  
                   

Income (loss) before income taxes

    158,734     94,646     121,925     (64,236 )

Provision for taxes on income

    (65,847 )   (34,561 )   (85,370 )   (4,621 )
                   

Net income (loss)

    92,887     60,085     36,555     (68,857 )

Less: Net income attributable to noncontrolling interest

        (5,087 )       (8,760 )
                   

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

  $ 92,887   $ 54,998   $ 36,555   $ (77,617 )
                   

Weighted average shares outstanding (in thousands):

                         

Basic

    420,036     415,947     419,056     415,011  

Diluted

    447,448     451,818     447,881     415,011  

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

                         

Basic

  $ 0.22   $ 0.13   $ 0.09   $ (0.19 )

Diluted

  $ 0.21   $ 0.12   $ 0.08   $ (0.19 )

   

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

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In Thousands of Dollars)

Unaudited

 
  Three Months Ended
June 30, 2012
  Three Months Ended
June 30, 2011
 

Net income

        $ 92,887         $ 60,085  
                       

Other comprehensive income (loss), net of tax:

                         

Translation adjustment changes, (net of tax of 2012: $1,756 and 2011: $324)

  $ (46,090 )       $ 16,259        

Unrealized holding gains on securities, (net of tax of 2012: $9 and 2011: $765)

    11           1,202        

Other, (net of tax of 2012: $0 and 2011: $0)

    196           (18 )      

Unrealized loss on Euro-denominated debt, (net of tax of 2012: $0 and 2011: $(2,150))

              (3,357 )      

Defined benefit pension plans

                         

Net gains arising during the period, (net of tax of 2012: $1,251 and 2011: $888)

    2,196           15,699        
                       

Defined benefit pension plans

    2,196           15,699        
                   

Other comprehensive income (loss)

          (43,687 )         29,785  
                       

Comprehensive income

          49,200           89,870  

Less: Comprehensive income attributable to noncontrolling interest

                    (5,087 )
                       

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

        $ 49,200         $ 84,783  
                       

 

 
  Six Months Ended
June 30, 2012
  Six Months Ended
June 30, 2011
 

Net income (loss)

        $ 36,555         $ (68,857 )
                       

Other comprehensive income (loss), net of tax:

                         

Translation adjustment changes, (net of tax of 2012: $382 and 2011: ($1,650))

  $ (16,520 )       $ 58,730        

Unrealized holding gains on securities, (net of tax of 2012: $1,968 and 2011: $765)

    3,097           1,235        

Other, (net of tax of 2012: $0 and 2011: $0)

    108           (60 )      

Unrealized loss on Euro-denominated debt, (net of tax of 2012: $0 and 2011: $(9,548))

              (14,915 )      

Defined benefit pension plans

                         

Net gains arising during the period, (net of tax of 2012: $2,338 and 2011: $1,675)

    3,672           17,082        
                       

Defined benefit pension plans

    3,672           17,082        
                   

Other comprehensive income (loss)

          (9,643 )         62,072  
                       

Comprehensive income (loss)

          26,912           (6,785 )

Less: Comprehensive income attributable to noncontrolling interest

                    (8,760 )
                       

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

        $ 26,912         $ (15,545 )
                       

   

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

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of Dollars)

Unaudited

 
  Six Months Ended
June 30,
 
 
  2012   2011  

Cash flows from operating activities:

             

Net income (loss)

  $ 36,555   $ (68,857 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

             

Depreciation of revenue earning equipment

    989,300     809,433  

Depreciation of property and equipment

    83,756     77,140  

Amortization of other intangible assets

    39,029     33,679  

Amortization and write-off of deferred financing costs

    30,560     64,251  

Amortization and write-off of debt discount

    14,888     22,677  

Stock-based compensation charges

    14,977     16,630  

Gain on derivatives

    (856 )   (2,203 )

Loss on revaluation of foreign denominated debt

    2,498      

Provision for losses on doubtful accounts

    13,582     14,313  

Asset writedowns

    3,181     23,311  

Deferred taxes on income

    31,329     (29,184 )

Gain on sale of property and equipment

    (716 )   (4,748 )

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

             

Receivables

    (226,556 )   (187,818 )

Inventories, prepaid expenses and other assets

    (33,056 )   (57,878 )

Accounts payable

    142,051     138,214  

Accrued liabilities

    7,926     (179,327 )

Accrued taxes

    16,806     21,667  

Public liability and property damage

    (6,842 )   (4,393 )
           

Net cash provided by operating activities

    1,158,412     686,907  
           

Cash flows from investing activities:

             

Net change in restricted cash and cash equivalents

    130,137     (60,233 )

Revenue earning equipment expenditures

    (5,698,892 )   (5,466,856 )

Proceeds from disposal of revenue earning equipment

    3,608,323     3,488,890  

Property and equipment expenditures

    (137,168 )   (125,370 )

Proceeds from disposal of property and equipment

    56,421     28,388  

Acquisitions, net of cash acquired

    (161,844 )   (10,976 )

Purchase of short-term investments, net

        (32,891 )

Other investing activities

    (625 )   1,303  
           

Net cash used in investing activities

  $ (2,203,648 ) $ (2,177,745 )
           

   

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

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(In Thousands of Dollars)

Unaudited

 
  Six Months Ended
June 30,
 
 
  2012   2011  

Cash flows from financing activities:

             

Proceeds from issuance of long-term debt

  $ 270,529   $ 3,028,591  

Payment of long-term debt

    (643,083 )   (3,631,480 )

Short-term borrowings:

             

Proceeds

    246,664     285,803  

Payments

    (656,231 )   (489,217 )

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

    1,543,770     728,855  

Distributions to noncontrolling interest

        (10,500 )

Purchase of noncontrolling interest

    (38,000 )    

Proceeds from employee stock purchase plan

    1,988     1,716  

Proceeds from exercise of stock options

    5,742     11,581  

Proceeds from disgorgement of stockholder short-swing profits

    17     72  

Net settlement on vesting of restricted stock

    (19,976 )   (11,381 )

Payment of financing costs

    (6,949 )   (81,392 )
           

Net cash provided by (used in) financing activities

    704,471     (167,352 )
           

Effect of foreign exchange rate changes on cash and cash equivalents

    (4,813 )   31,602  
           

Net decrease in cash and cash equivalents during the period

    (345,578 )   (1,626,588 )

Cash and cash equivalents at beginning of period

    931,779     2,374,170  
           

Cash and cash equivalents at end of period

  $ 586,201   $ 747,582  
           

Supplemental disclosures of cash flow information:

             

Cash paid during the period for:

             

Interest (net of amounts capitalized)

  $ 281,864   $ 343,383  

Income taxes

    37,655     25,338  

Supplemental disclosures of non-cash flow information:

             

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

  $ 598,620   $ 628,695  

Sales of revenue earning equipment included in receivables

    178,409     263,954  

Purchases of property and equipment included in accounts payable          

    42,060     59,633  

Sales of property and equipment included in receivables

    9,163     14,356  

   

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

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Unaudited

Note 1—Background

Hertz Global Holdings, Inc., or "Hertz Holdings," is our top-level holding company. The Hertz Corporation, or "Hertz," is our primary operating company and a direct wholly-owned subsidiary of Hertz Investors, Inc., which is wholly-owned by Hertz Holdings. "We," "us" and "our" mean Hertz Holdings and its consolidated subsidiaries, including Hertz.

We are a successor to corporations that have been engaged in the car and truck rental and leasing business since 1918 and the equipment rental business since 1965. Hertz was incorporated in Delaware in 1967. Ford Motor Company acquired an ownership interest in Hertz in 1987. Prior to this, Hertz was a subsidiary of United Continental Holdings, Inc. (formerly Allegis Corporation), which acquired Hertz's outstanding capital stock from RCA Corporation in 1985. Hertz Holdings was incorporated in Delaware in 2005 and had no operations prior to the Acquisition (as defined below).

On December 21, 2005, investment funds associated with or designated by:

acquired all of Hertz's common stock from Ford Holdings LLC. In January 2009, Bank of America Corporation, or "Bank of America," acquired Merrill Lynch & Co., Inc., the former parent company of MLGPE. Accordingly, Bank of America is now an indirect beneficial owner of our common stock held by the investment funds associated with MLGPE. We refer to CD&R, Carlyle and MLGPE collectively as the "Sponsors." We refer to the acquisition of all of Hertz's common stock by the Sponsors as the "Acquisition."

After giving effect to our initial public offering in November 2006 and subsequent offerings, the Sponsors' holdings represent approximately 38% of the outstanding shares of common stock of Hertz Holdings as of June 30, 2012.

On September 1, 2011, Hertz completed the acquisition of Donlen Corporation, or "Donlen," a leading provider of fleet leasing and management services.

On December 31, 2011, Hertz purchased the noncontrolling interest of Navigation Solutions, L.L.C., thereby increasing its ownership interest from 65% to 100%.

Note 2—Basis of Presentation and Recently Issued Accounting Pronouncements

Basis of Presentation

The significant accounting policies summarized in Note 2 to our audited consolidated financial statements contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011, filed with the United States Securities and Exchange Commission, or "SEC," on February 27, 2012, or the "Form 10-K," have been followed in preparing the accompanying condensed consolidated financial statements.

The December 31, 2011 condensed consolidated balance sheet data was derived from our audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America, or "GAAP."

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

The preparation of financial statements in conformity with 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.

In our opinion, all adjustments necessary for a fair presentation of the results of operations for the interim periods have been made. Results for interim periods are not necessarily indicative of results for a full year.

Certain prior period amounts have been reclassified to conform with current period presentation.

Recently Issued Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board, or "FASB," issued Accounting Standards Update No. 2011-05, "Presentation of Comprehensive Income," requiring companies to present items of net income and other comprehensive income either in one continuous statement, referred to as the statement of comprehensive income, or in two separate, but consecutive statements of net income and other comprehensive income. The amendments in this update do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. These provisions became effective for us beginning with the quarterly report for the period ended March 31, 2012. In December 2011, the FASB issued Accounting Standards Update No. 2011-12, "Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05," which defers the timing of implementing only those changes in Update 2011-05 that relate to the presentation of reclassification adjustments.

Note 3—Cash and Cash Equivalents and Restricted Cash and Cash Equivalents

We consider all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.

In our Consolidated Statements of Cash Flows, we net cash flows from revolving borrowings in the line item "Proceeds (payments) under the revolving lines of credit, net." The contractual maturities of such borrowings may exceed 90 days in certain cases.

Restricted cash and cash equivalents includes cash and cash equivalents that are not readily available for our normal disbursements. Restricted cash and cash equivalents are restricted for the purchase of revenue earning vehicles and other specified uses under our Fleet Debt facilities, for our Like-Kind Exchange Program, or "LKE Program," and to satisfy certain of our self-insurance regulatory reserve requirements. As of June 30, 2012 and December 31, 2011, the portion of total restricted cash and cash equivalents that was associated with our Fleet Debt facilities was $104.0 million and $213.6 million, respectively. The decrease in restricted cash and cash equivalents associated with our fleet debt of $109.6 million from December 31, 2011 to June 30, 2012 was primarily related to the timing of purchases and sales of revenue earning vehicles.

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

Note 4—Goodwill and Other Intangible Assets

The following summarizes the changes in our goodwill, by segment (in millions of dollars):

 
  Car Rental   Equipment
Rental
  Total  

Balance as of January 1, 2012

                   

Goodwill

  $ 419.3   $ 693.8   $ 1,113.1  

Accumulated impairment losses

    (46.1 )   (674.9 )   (721.0 )
               

    373.2     18.9     392.1  
               

Goodwill acquired during the period

   
   
76.8
   
76.8
 

Adjustments to previously recorded purchase price allocation

    (15.1 )       (15.1 )

Other changes during the period(1)

    (0.9 )   (0.5 )   (1.4 )
               

    (16.0 )   76.3     60.3  

Balance as of June 30, 2012

                   

Goodwill

    403.3     770.1     1,173.4  

Accumulated impairment losses

    (46.1 )   (674.9 )   (721.0 )
               

  $ 357.2   $ 95.2   $ 452.4  
               

 

 
  Car Rental   Equipment
Rental
  Total  

Balance as of January 1, 2011

                   

Goodwill

  $ 367.9   $ 681.7   $ 1,049.6  

Accumulated impairment losses

    (46.1 )   (674.9 )   (721.0 )
               

    321.8     6.8     328.6  
               

Goodwill acquired during the year

   
53.1
   
12.3
   
65.4
 

Adjustments to previously recorded purchase price allocation

    (0.9 )   (0.1 )   (1.0 )

Other changes during the year(1)

    (0.8 )   (0.1 )   (0.9 )
               

    51.4     12.1     63.5  

Balance as of December 31, 2011

                   

Goodwill

    419.3     693.8     1,113.1  

Accumulated impairment losses

    (46.1 )   (674.9 )   (721.0 )
               

  $ 373.2   $ 18.9   $ 392.1  
               

(1)
Primarily consists of changes resulting from the translation of foreign currencies at different exchange rates from the beginning of the period to the end of the period.

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

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

 
  June 30, 2012  
 
  Gross
Carrying
Amount
  Accumulated
Amortization
  Net
Carrying
Value
 

Amortizable intangible assets:

                   

Customer-related

  $ 689.7   $ (399.4 ) $ 290.3  

Other(1)

    78.4     (32.9 )   45.5  
               

Total

    768.1     (432.3 )   335.8  
               

Indefinite-lived intangible assets:

                   

Trade name

    2,190.0         2,190.0  

Other(2)

    18.2         18.2  
               

Total

    2,208.2         2,208.2  
               

Total other intangible assets, net

  $ 2,976.3   $ (432.3 ) $ 2,544.0  
               

 

 
  December 31, 2011  
 
  Gross
Carrying
Amount
  Accumulated
Amortization
  Net
Carrying
Value
 

Amortizable intangible assets:

                   

Customer-related

  $ 672.6   $ (365.5 ) $ 307.1  

Other(1)

    74.7     (27.8 )   46.9  
               

Total

    747.3     (393.3 )   354.0  
               

Indefinite-lived intangible assets:

                   

Trade name

    2,190.0         2,190.0  

Other(2)

    18.2         18.2  
               

Total

    2,208.2         2,208.2  
               

Total other intangible assets, net

  $ 2,955.5   $ (393.3 ) $ 2,562.2  
               

(1)
Other amortizable intangible assets primarily consist of our Advantage trade name and concession rights, Donlen trade name, reacquired franchise rights, non-compete agreements and technology-related intangibles.

(2)
Other indefinite-lived intangible assets primarily consist of reacquired franchise rights.

Amortization of other intangible assets for the three months ended June 30, 2012 and 2011, was approximately $19.8 million and $16.9 million, respectively, and for the six months ended June 30, 2012 and 2011, was approximately $39.0 million and $33.7 million, respectively. Based on our amortizable intangible assets as of June 30, 2012, we expect amortization expense to be approximately $37.9 million for the remainder of 2012, $75.3 million in 2013, $71.4 million in 2014, $69.1 million in 2015, $20.6 million in 2016 and $8.6 million in 2017.

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

On September 1, 2011, Hertz acquired 100% of the equity interest in Donlen, a leading provider of fleet leasing and management services. The amount of revenue and earnings of the combined entity had the acquisition date been January 1, 2010, are as follows (in millions):

 
  Revenue   Earnings
(Loss)
 

2011 supplemental pro forma for the second quarter of 2011 (combined entity)

  $ 2,171.0   $ 58.2  

2011 supplemental pro forma for the first half of 2011 (combined entity)

    4,045.0     (72.1 )

2011 supplemental pro forma revenue for the three months ended June 30, 2011 excludes $1.2 million related to deferred revenue which was eliminated as part of acquisition accounting. 2011 supplemental pro forma earnings for the three months ended June 30, 2011 excludes $0.7 million related to deferred income which was eliminated as part of acquisition accounting. 2011 supplemental pro forma revenue for the six months ended June 30, 2011 excludes $2.6 million related to deferred revenue which was eliminated as part of acquisition accounting. 2011 supplemental pro forma earnings for the six months ended June 30, 2011 excludes $1.6 million related to deferred income which was eliminated as part of acquisition accounting.

This transaction has been accounted for using the acquisition method of accounting in accordance with GAAP and operating results of Donlen from the date of acquisition are included in our consolidated statements of operations. The allocation of the purchase price to the tangible and intangible net assets acquired is substantially complete, except with regards to deferred taxes on income, which could change based upon the completion of Donlen's pre-acquisition tax return.

Other Acquisitions

Additionally, during the six months ended June 30, 2012, we added nine domestic equipment rental locations through external acquisitions. These acquisitions are not material to the consolidated amounts presented within our statement of operations for the three-month and six-month periods ended June 30, 2012.

Note 5—Taxes on Income

The effective tax rate for the three and six months ended June 30, 2012 was 41.5% and 70.0%, respectively. The provision for taxes on income of $65.8 million in the three months ended June 30, 2012 increased from $34.5 million in the three months ended June 30, 2011, primarily due to higher income before income taxes, changes in geographic earnings mix and changes in losses in certain non-U.S. jurisdictions for which tax benefits cannot be realized. The provision for taxes on income of $85.3 million in the six months ended June 30, 2012 increased from $4.6 million in the six months ended June 30, 2011, primarily due to higher income before income taxes, changes in geographic earnings mix and changes in losses in certain non-U.S. jurisdictions for which tax benefits cannot be realized.

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

Note 6—Depreciation of Revenue Earning Equipment and Lease Charges

Depreciation of revenue earning equipment and lease charges includes the following (in millions of dollars):

 
  Three Months Ended
June 30,
 
 
  2012   2011  

Depreciation of revenue earning equipment

  $ 539.5   $ 453.3  

Adjustment of depreciation upon disposal of revenue earning equipment

    (41.2 )   (56.3 )

Rents paid for vehicles leased

    21.5     22.7  
           

Total

  $ 519.8   $ 419.7  
           

 

 
  Six Months Ended
June 30,
 
 
  2012   2011  

Depreciation of revenue earning equipment

  $ 1,069.9   $ 871.8  

Adjustment of depreciation upon disposal of revenue earning equipment

    (80.6 )   (62.4 )

Rents paid for vehicles leased

    44.6     46.3  
           

Total

  $ 1,033.9   $ 855.7  
           

The adjustment of depreciation upon disposal of revenue earning equipment for the three months ended June 30, 2012 and 2011, included net gains of $38.3 million and $53.6 million, respectively, on the disposal of vehicles used in our car rental operations and net gains of $2.9 million and $2.7 million, respectively, on the disposal of industrial and construction equipment used in our equipment rental operations. The adjustment of depreciation upon disposal of revenue earning equipment for the six months ended June 30, 2012 and 2011, included net gains of $73.2 million and $59.7 million, respectively, on the disposal of vehicles used in our car rental operations and net gains of $7.4 million and $2.7 million, respectively, on the disposal of industrial and construction equipment used in our equipment rental operations.

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. During the six months ended June 30, 2012, depreciation rates being used to compute the provision for depreciation of revenue earning equipment were adjusted on certain vehicles in our car rental operations to reflect changes in the estimated residual values to be realized when revenue earning equipment is sold. These depreciation rate changes resulted in net decreases of $37.1 million and $37.3 million in depreciation expense for the three and six months ended June 30, 2012, respectively. During the three-month and six-month periods ended June 30, 2012, there was no impact from depreciation rate changes in our equipment rental operations.

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

Note 7—Debt

Our debt consists of the following (in millions of dollars):

Facility
  Average
Interest
Rate at
June 30,
2012(1)
  Fixed or
Floating
Interest
Rate
  Maturity   June 30,
2012
  December 31,
2011
 

Corporate Debt

                           

Senior Term Facility

    3.75 % Floating   3/2018   $ 1,382.5   $ 1,389.5  

Senior ABL Facility

    2.50 % Floating   3/2016     410.0      

Senior Notes(2)

    7.09 % Fixed   10/2018–1/2021     2,450.0     2,638.6  

Promissory Notes

    6.96 % Fixed   6/2012–1/2028     48.7     224.7  

Convertible Senior Notes

    5.25 % Fixed   6/2014     474.7     474.7  

Other Corporate Debt

    5.39 % Floating   Various     52.0     49.6  

Unamortized Net Discount (Corporate)(3)

                  (50.0 )   (72.3 )
                         

Total Corporate Debt

                  4,767.9     4,704.8  
                         

Fleet Debt

                           

U.S. ABS Program

                           

U.S. Fleet Variable Funding Notes:

                           

Series 2009-1(4)

    1.24 % Floating   3/2013     2,025.0     1,000.0  

Series 2010-2(4)

    1.38 % Floating   3/2013     200.0     170.0  

Series 2011-2(4)

    N/A   Floating   4/2012         175.0  
                         

                  2,225.0     1,345.0  
                         

U.S. Fleet Medium Term Notes

                           

Series 2009-2(4)

    4.95 % Fixed   3/2013–3/2015     1,384.3     1,384.3  

Series 2010-1(4)

    3.77 % Fixed   2/2014–2/2018     749.8     749.8  

Series 2011-1(4)

    2.86 % Fixed   3/2015–3/2017     598.0     598.0  
                         

                  2,732.1     2,732.1  
                         

Donlen ABS Program

                           

Donlen GN II Variable Funding Notes

    1.17 % Floating   8/2012     879.1     811.2  
                         

Other Fleet Debt

                           

U.S. Fleet Financing Facility

    3.00 % Floating   9/2015     136.0     136.0  

European Revolving Credit Facility

    3.13 % Floating   6/2015     261.8     200.6  

European Fleet Notes

    8.50 % Fixed   7/2015     498.7     517.7  

European Securitization(4)

    2.78 % Floating   7/2013     316.5     256.2  

Canadian Securitization

    2.13 % Floating   6/2013     131.7     68.3  

Australian Securitization(4)

    5.31 % Floating   12/2012     154.2     169.3  

Brazilian Fleet Financing Facility

    14.22 % Floating   2/2013     14.8     23.1  

Capitalized Leases

    4.40 % Floating   Various     358.4     363.7  

Unamortized Discount (Fleet)

                  (8.3 )   (10.9 )
                         

                  1,863.8     1,724.0  
                         

Total Fleet Debt

                  7,700.0     6,612.3  
                         

Total Debt

                $ 12,467.9   $ 11,317.1  
                         

Note:
For further information on the definitions and terms of our debt, see Note 4 of the Notes to our audited annual consolidated financial statements included in our Form 10-K under the caption "Item 8—Financial Statements and Supplementary Data."

(1)
As applicable, reference is to the June 30, 2012 weighted average interest rate (weighted by principal balance).

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

(2)
References to our "Senior Notes" include the series of Hertz's unsecured senior notes set forth in the table below. As of June 30, 2012, the outstanding principal amount for each such series of the Senior Notes is also specified below.

 
  Outstanding Principal (in millions)    
Senior Notes
  June 30, 2012   December 31, 2011    
8.875% Senior Notes due January 2014   $   $ 162.3    
7.875% Senior Notes due January 2014         276.3   (€213.5)
7.50% Senior Notes due October 2018     700.0     700.0    
7.375% Senior Notes due January 2021     500.0     500.0    
6.75% Senior Notes due April 2019     1,250.0     1,000.0    
             
    $ 2,450.0   $ 2,638.6    
             
(3)
As of June 30, 2012 and December 31, 2011, $53.4 million and $65.5 million, respectively, of the unamortized corporate discount relates to the 5.25% Convertible Senior Notes.

(4)
Maturity reference is to the "expected final maturity date" as opposed to the subsequent "legal maturity date." The expected final maturity date is the date by which Hertz and investors in the relevant indebtedness expect the relevant indebtedness to be repaid. The legal final maturity date is the date on which the relevant indebtedness is legally due and payable.

Maturities

The aggregate amounts of maturities of debt for each of the twelve-month periods ending June 30 (in millions of dollars) are as follows:

2013   $ 5,993.7   (including $5,390.0 of other short-term borrowings*)
2014   $ 280.0    
2015   $ 1,211.3    
2016   $ 888.4    
2017   $ 244.7    
After 2017   $ 3,908.1    

*
Our short-term borrowings as of June 30, 2012 include, among other items, the amounts outstanding under the European Securitization, Australian Securitization, Senior ABL Facility, U.S. Fleet Financing Facility, U.S. Fleet Variable Funding Notes, Brazilian Fleet Financing Facility, Canadian Securitization, Capitalized Leases, European Revolving Credit Facility and the Donlen GN II Variable Funding Notes. These amounts are reflected as short-term borrowings, regardless of the facility maturity date, as these facilities are revolving in nature and/or the outstanding borrowings have maturities of three months or less. Short-term borrowings also include the Convertible Senior Notes which became convertible on January 1, 2012 and remain as such through September 30, 2012. As of June 30, 2012, short-term borrowings had a weighted average interest rate of 2.3%.

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

Letters of Credit

As of June 30, 2012, there were outstanding standby letters of credit totaling $608.8 million. Of this amount, $563.1 million was issued under the Senior Credit Facilities ($291.0 million of which was issued for the benefit of the U.S. ABS Program and $64.6 million was related to other debt obligations) and the remainder is primarily to support self-insurance programs (including insurance policies with respect to

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

which we have agreed to indemnify the policy issuers for any losses) as well as airport concession obligations in the United States, Canada and Europe. As of June 30, 2012, none of these letters of credit have been drawn upon.

2012 Events

On January 1, 2012, our Convertible Senior Notes became convertible. This conversion right was triggered because our closing common stock price per share exceeded $10.77 for at least 20 trading days during the 30 consecutive trading day period ending on December 31, 2011. Since this same trigger was met in the second quarter of 2012, the Convertible Senior Notes continue to be convertible through September 30, 2012, and may be convertible thereafter, if one or more of the conversion conditions specified in the indenture is satisfied during future measurement periods. Our policy has been and continues to be to settle conversions of Convertible Senior Notes using a combination of cash and our common stock, which calls for settling the fixed dollar amount per $1,000 in principal amount in cash and settling in shares the excess conversion, if any.

In February 2012, Hertz called the remainder of its outstanding 8.875% Senior Notes due 2014 and 7.875% Senior Notes due January 2014 for redemption. Hertz redeemed these notes in full during March 2012.

In March 2012, Hertz issued an additional $250 million in aggregate principal amount of the 6.75% Senior Notes due 2019. The proceeds of this March 2012 offering were used to redeem all of the outstanding 8.875% Senior Notes due 2014 and together with cash on hand, all of the outstanding 7.875% Senior Notes due 2014 which resulted in the write-off of unamortized debt costs of $3.2 million.

In March 2012, Hertz amended the Canadian Securitization to extend the maturity date from March 2012 to May 2012. In the second quarter 2012, the maturity date was extended to June 2013.

In April 2012, Hertz paid off the remaining debt outstanding under the U.S. ABS Program Series 2011-2 U.S. Fleet Variable Funding Notes and terminated the facility.

In May 2012, the borrowing capacity of the Series 2009-1 under our U.S. Fleet Variable Funding Notes was increased by $250 million.

In June 2012, Hertz amended the European Revolving Credit Facility to extend the maturity date from June 2013 to June 2015.

In June 2012, Hertz amended the Brazilian Fleet Financing Facility to extend the maturity date from June 2012 to February 2013.

In June 2012, Hertz amended the European Seasonal Revolving Credit Facility under the European Revolving Credit Facility to create a commitment period running from June 2012 to November 2012 that provides for aggregate maximum borrowings of €85.7 million (the equivalent of $106.9 million as of June 30, 2012), subject to borrowing base availability.

During the first half of 2012, Donlen's GN II Variable Funding Notes remained outstanding and lender commitments thereunder were increased to permit aggregate maximum borrowings of $900.0 million (subject to borrowing base availability).

See Note 17—Subsequent Events.

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

Registration Rights

Pursuant to the terms of exchange and registration rights agreements entered into in connection with the issuance of $250 million in aggregate principal amount of the 6.75% Senior Notes due 2019 in March 2012, Hertz has agreed to file a registration statement under the Securities Act of 1933, as amended, to permit either the exchange of such notes for registered notes or, in the alternative, the registered resale of such notes. Hertz's failure to meet its obligations under the exchange and registration rights agreement, including by failing to have the registration statement become effective by March 2013 or failing to complete the exchange offer by April 2013, will result in Hertz incurring special interest on such notes at a per annum rate of 0.25% for the first 90 days of any period where a default has occurred and is continuing, which rate will be increased by an additional 0.25% during each subsequent 90 day period, up to a maximum of 0.50%. We do not believe the special interest obligation is probable, and as such, we have not recorded any amounts with respect to this registration payment arrangement.

Guarantees and Security

There have been no material changes to the guarantees and security provisions of the debt instruments and credit facilities under which our indebtedness as of June 30, 2012 has been issued from the terms disclosed in our Form 10-K.

Financial Covenant Compliance

Under the terms of our Senior Term Facility and Senior ABL Facility, we are not subject to ongoing financial maintenance covenants; however, under the Senior ABL Facility, failure to maintain certain levels of liquidity will subject the Hertz credit group to a contractually specified fixed charge coverage ratio of not less than 1:1 for the four quarters most recently ended. As of June 30, 2012, we were not subject to such contractually specified fixed charge coverage ratio.

Borrowing Capacity and Availability

As of June 30, 2012, the following facilities were available for the use of Hertz and its subsidiaries (in millions of dollars):

 
  Remaining
Capacity
  Availability Under
Borrowing Base
Limitation
 

Corporate Debt

             

Senior ABL Facility

  $ 1,027.6   $ 782.4  
           

Total Corporate Debt

    1,027.6     782.4  
           

Fleet Debt

             

U.S. Fleet Variable Funding Notes

    163.1     36.8  

Donlen GN II Variable Funding Notes

    26.1     2.1  

U.S. Fleet Financing Facility

    54.0     16.2  

European Revolving Credit Facility

    119.3     66.7  

European Securitization

    157.3     16.8  

Canadian Securitization

    63.4     20.6  

Australian Securitization

    97.8      

Capitalized Leases

    132.2     25.6  
           

Total Fleet Debt

    813.2     184.8  
           

Total

  $ 1,840.8   $ 967.2  
           

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

Our borrowing capacity and availability primarily comes from our "revolving credit facilities," which are a combination of asset-backed securitization facilities and asset-based revolving credit facilities. Creditors under each of our revolving credit facilities have a claim on a specific pool of assets as collateral. Our ability to borrow under each revolving credit facility is a function of, among other things, the value of the assets in the relevant collateral pool. We refer to the amount of debt we can borrow given a certain pool of assets as the "borrowing base."

We refer to "Remaining Capacity" as the maximum principal amount of debt permitted to be outstanding under the respective facility (i.e., the amount of debt we could borrow assuming we possessed sufficient assets as collateral) less the principal amount of debt then-outstanding under such facility.

We refer to "Availability Under Borrowing Base Limitation" 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 we could borrow given the collateral we possess at such time).

As of June 30, 2012, the Senior Term Facility had approximately $0.3 million available under the letter of credit facility and the Senior ABL Facility had $1,081.6 million available under the letter of credit facility sublimit, subject to borrowing base restrictions.

Substantially all of our revenue earning equipment and certain related assets are owned by special purpose entities, or are encumbered in favor of our lenders under our various credit facilities.

Some of these special purpose entities are consolidated variable interest entities, of which Hertz is the primary beneficiary, whose sole purpose is to provide commitments to lend in various currencies subject to borrowing bases comprised of rental vehicles and related assets of certain of Hertz International, Ltd.'s subsidiaries. As of June 30, 2012 and December 31, 2011, our International Fleet Financing No. 1 B.V., International Fleet Financing No. 2 B.V. and HA Funding Pty, Ltd. variable interest entities had total assets primarily comprised of loans receivable and revenue earning equipment of $528.1 million and $456.3 million, respectively, and total liabilities primarily comprised of debt of $527.6 million and $455.8 million, respectively.

Note 8—Employee Retirement Benefits

The following table sets forth the net periodic pension and postretirement (including health care, life insurance and auto) expense (in millions of dollars):

 
  Pension Benefits    
   
 
 
  Postretirement
Benefits (U.S.)
 
 
  U.S.   Non-U.S.  
 
  Three Months Ended June 30,  
 
  2012   2011   2012   2011   2012   2011  

Components of Net Periodic Benefit Cost:

                                     

Service cost

  $ 7.0   $ 6.9   $ 0.3   $ 1.8   $ 0.1   $  

Interest cost

    7.4     7.5     2.3     2.8     0.2     0.3  

Expected return on plan assets

    (8.0 )   (8.1 )   (3.0 )   (3.1 )        

Net amortizations

    3.2     2.3     (0.1 )   (0.3 )       0.1  

Settlement loss

        0.4                  

Curtailment gain

                (13.1 )        
                           

Net pension/postretirement expense

  $ 9.6   $ 9.0   $ (0.5 ) $ (11.9 ) $ 0.3   $ 0.4  
                           

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

 

 
  Pension Benefits    
   
 
 
  Postretirement
Benefits (U.S.)
 
 
  U.S.   Non-U.S.  
 
  Six Months Ended June 30,  
 
  2012   2011   2012   2011   2012   2011  

Components of Net Periodic Benefit Cost:

                                     

Service cost

  $ 13.3   $ 13.1   $ 0.6   $ 3.5   $ 0.2   $ 0.1  

Interest cost

    13.9     14.0     4.6     5.6     0.4     0.5  

Expected return on plan assets

    (15.3 )   (15.2 )   (6.0 )   (6.2 )        

Net amortizations

    6.0     4.3     (0.1 )   (0.6 )       0.1  

Settlement loss

        0.7                  

Curtailment gain

                (13.1 )        
                           

Net pension/postretirement expense

  $ 17.9   $ 16.9   $ (0.9 ) $ (10.8 ) $ 0.6   $ 0.7  
                           

Our policy for funded plans is to contribute annually, at a minimum, amounts required by applicable laws, regulations and union agreements. From time to time we make contributions beyond those legally required. For the three and six months ended June 30, 2012, we contributed $11.8 million and $32.2 million, respectively, to our worldwide pension plans, including discretionary contributions of $0.0 million and $3.2 million, respectively, to our United Kingdom, or "U.K.," defined benefit pension plan and benefit payments made through unfunded plans. For the three and six months ended June 30, 2011, we contributed $12.3 million and $57.1 million, respectively, to our worldwide pension plans, including discretionary contributions of $0.8 million and $13.2 million, respectively, to our U.K. defined benefit pension plan and benefit payments made through unfunded plans. The level of future contributions will vary, and is dependent on a number of factors including investment returns, interest rate fluctuations, plan demographics, funding regulations and the results of the final actuarial valuation.

On June 30, 2011, we approved an agreement with the trustees of our U.K. defined benefit pension plan to cease all future benefit accruals to existing members and to close the plan to new members. Effective July 1, 2011, we introduced a defined contribution plan with company matching contributions to replace the U.K. defined benefit pension plan. The company matching contributions are generally 100% of the employee contributions, up to 8% of pay, except that former members of the defined benefit pension plan receive an enhanced match for five years. In the year ended December 31, 2011, we recognized a gain of $13.1 million for the U.K. plan that represented unamortized prior service cost from a 2010 amendment that eliminated discretionary pension increases related to pre-1997 service primarily for inactive employees.

We also sponsor postretirement health care and life insurance benefits for a limited number of employees with hire dates prior to January 1, 1990. The postretirement health care plan is contributory with participants' contributions adjusted annually. An unfunded liability is recorded. We also have a key officer postretirement car benefit plan that provides the use of a vehicle from our fleet and insurance for the participants' benefit for retired Senior Vice Presidents and above who have a minimum of 20 years of service and who retire at age 58 or above. The assigned car benefit is available for 15 years post-retirement or until the participant reaches the age of 80, whichever occurs last.

We participate in various "multiemployer" pension plans. In the event that we withdraw from participation in one of these plans, then applicable law could require us to make an additional lump-sum contribution to the plan, and we would have to reflect that as an expense in our consolidated statement of operations and as a liability on our condensed consolidated balance sheet. Our withdrawal liability for any multiemployer plan would depend on the extent of the plan's funding of vested benefits. At least one

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

multiemployer plan in which we participate is reported to have, and other of our multiemployer plans could have, significant underfunded liabilities. Such underfunding may increase in the event other employers become insolvent or withdraw from the applicable plan or upon the inability or failure of withdrawing employers to pay their withdrawal liability. In addition, such underfunding may increase as a result of lower than expected returns on pension fund assets or other funding deficiencies. The occurrence of any of these events could have a material adverse effect on our consolidated financial position, results of operations or cash flows.

Note 9—Stock-Based Compensation

In March 2012, we granted 527,360 Restricted Stock Units, or "RSUs," to certain executives and employees at fair values ranging from $13.65 to $14.47, 747,423 Performance Stock Units, or "PSUs," at a fair value of $13.65, and 1,083,962 PSUs (referred to as Price Vesting Units, or "PVUs") at fair values ranging from $10.13 to $11.26 under the Hertz Global Holdings, Inc. 2008 Omnibus Incentive Plan, or the "Omnibus Plan." The PSUs have a performance condition under which the number of units that will ultimately be awarded will vary from 0% to 150% of the original grant, based on 2012 and 2013 Corporate EBITDA results. "EBITDA" means consolidated net income before net interest expense, consolidated income taxes and consolidated depreciation (which includes revenue earning equipment lease charges) and amortization and "Corporate EBITDA," represents EBITDA as adjusted for car rental fleet interest, car rental fleet depreciation and certain other items, as provided in the applicable award agreements. Of the PVUs granted, one half will fully vest after three years if the stock price appreciates 15% over the grant date price, and one half will fully vest after four years if the stock price appreciates 25% over the grant date price. Partial attainment of the stock appreciation targets will result in partial vesting. The achievement of the market condition for the PVUs is determined based on the average closing stock price for the 20 trading day period ending March 6, 2015 and 2016, respectively. In May 2012, Hertz Holdings granted 146,301 RSUs at a fair value of $15.48.

A summary of the total compensation expense and associated income tax benefits recognized under our Hertz Global Holdings, Inc. Stock Incentive Plan and Hertz Global Holdings, Inc. Director Stock Incentive Plan, or the "Prior Plans," and the Omnibus Plan, including the cost of stock options, RSUs, and PSUs, is as follows (in millions of dollars):

 
  Three Months Ended
June 30,
  Six Months Ended
June 30,
 
 
  2012   2011   2012   2011  

Compensation expense

  $ 7.5   $ 7.6   $ 15.0   $ 16.6  

Income tax benefit

    (2.9 )   (3.0 )   (5.8 )   (6.4 )
                   

Total

  $ 4.6   $ 4.6   $ 9.2   $ 10.2  
                   

As of June 30, 2012, there was approximately $51.2 million of total unrecognized compensation cost related to non-vested stock options, RSUs and PSUs granted by Hertz Holdings under the Prior Plans and the Omnibus Plan. The total unrecognized compensation cost is expected to be recognized over the remaining 1.6 years, on a weighted average basis, of the requisite service period that began on the grant dates.

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Unaudited

Note 10—Segment Information

Our operating segments are aggregated into reportable business segments based primarily upon similar economic characteristics, products, services, customers, and delivery methods. We have identified two reportable segments: rental and leasing of cars, crossovers and light trucks, or "car rental," and rental of industrial, construction, material handling and other equipment, or "equipment rental." Other reconciling items include general corporate assets and expenses, certain interest expense (including net interest on corporate debt), as well as other business activities. Donlen is included in the car rental reportable segment.

Adjusted pre-tax income is calculated as income (loss) before income taxes plus non-cash purchase accounting charges, non-cash debt charges relating to the amortization and write-off of debt financing costs and debt discounts and certain one-time charges and non-operational items. Adjusted pre-tax income is important to management 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. The contribution of our reportable segments to revenues and adjusted pre-tax income (loss) and the reconciliation to consolidated amounts are summarized below (in millions of dollars).

 
  Three Months Ended June 30,  
 
  Revenues   Adjusted Pre-Tax Income
(Loss)
 
 
  2012   2011   2012   2011  

Car rental

  $ 1,889.6   $ 1,768.8   $ 277.4   $ 242.2  

Equipment rental

    335.0     301.7     42.5     33.4  
                   

Total reportable segments

    2,224.6     2,070.5     319.9     275.6  

Other

    0.5     1.8              
                       

Total

  $ 2,225.1   $ 2,072.3              
                       

Adjustments:

                         

Other reconciling items(1)

                (86.0 )   (91.2 )

Purchase accounting(2)

                (29.0 )   (22.5 )

Non-cash debt charges(3)

                (20.6 )   (27.1 )

Restructuring charges

                (16.1 )   (33.7 )

Restructuring related charges(4)

                (5.0 )   (2.8 )

Acquisition related costs

                (4.5 )   (6.1 )

Pension adjustment(5)

                    13.1  

Premiums paid on debt(6)

                    (10.7 )
                       

Income before income taxes

              $ 158.7   $ 94.6  
                       

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

 

 
  Six Months Ended June 30,  
 
  Revenues   Adjusted Pre-Tax Income
(Loss)
 
 
  2012   2011   2012   2011  

Car rental

  $ 3,547.9   $ 3,279.1   $ 369.0   $ 303.5  

Equipment rental

    637.1     569.9     68.4     43.6  
                   

Total reportable segments

    4,185.0     3,849.0     437.4     347.1  

Other

    1.1     3.3              
                       

Total

  $ 4,186.1   $ 3,852.3              
                       

Adjustments:

                         

Other reconciling items(1)

                (174.2 )   (178.7 )

Purchase accounting(2)

                (53.0 )   (43.1 )

Non-cash debt charges(3)

                (45.8 )   (87.0 )

Restructuring charges

                (25.5 )   (38.4 )

Restructuring related charges(4)

                (5.6 )   (3.3 )

Acquisition related costs

                (11.4 )   (9.0 )

Management transition costs

                    (2.5 )

Pension adjustment(5)

                    13.1  

Premiums paid on debt(6)

                    (62.4 )
                       

Income (loss) before income taxes

              $ 121.9   $ (64.2 )
                       

(1)
Represents general corporate expenses, certain interest expense (including net interest on corporate debt), as well as other business activities.

(2)
Represents the purchase accounting effects of the Acquisition on our results of operations relating to increased depreciation and amortization of tangible and intangible assets and accretion of revalued workers' compensation and public liability and property damage liabilities. Also represents the purchase accounting effects of subsequent acquisitions on our results of operations relating to increased depreciation and amortization of tangible and intangible assets.

(3)
Represents non-cash debt charges relating to the amortization and write-off of deferred debt financing costs and debt discounts.

(4)
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.

(5)
Represents a gain for the U.K. pension plan relating to unamortized prior service cost from a 2010 amendment that eliminated discretionary pension increases related to pre-1997 service primarily pertaining to inactive employees.

(6)
Represents premiums paid to redeem our 10.5% Senior Subordinated Notes and a portion of our 8.875% Senior Notes.

Total assets increased $1,756.0 million from December 31, 2011 to June 30, 2012. The increase was primarily related to increases in our car rental and equipment rental segments' revenue earning equipment, partly offset by decreases in our cash and cash equivalents, primarily relating to the redemption of our 8.875% Senior Notes and our 7.875% Senior Notes, restricted cash and cash equivalents and fleet receivables, due to the timing of sales of revenue earning equipment.

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Unaudited

Note 11—Total Equity

 
   
  Common Stock    
   
  Accumulated
Other
Comprehensive
Loss
   
   
 
 
  Preferred Stock   Additional
Paid-In Capital
  Accumulated
Deficit
  Non-
Controlling
Interest
  Total
Equity
 
(In Millions)
  Shares   Amount  

December 31, 2011

  $     417.0   $ 4.2   $ 3,206.0   $ (947.1 ) $ (28.4 ) $   $ 2,234.7  

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

                            36.6                 36.6  

Other comprehensive loss

                                  (9.7 )         (9.7 )

Employee stock purchase plan

          0.2           2.3                       2.3  

Net settlement on vesting of restricted stock

          2.1           (20.0 )                     (20.0 )

Stock-based employee compensation charges, net of tax

                      15.0                       15.0  

Exercise of stock options, net of tax

          1.0           5.7                       5.7  

Common shares issued to Directors

                      1.3                       1.3  
                                   

June 30, 2012

  $     420.3   $ 4.2   $ 3,210.3   $ (910.5 ) $ (38.1 ) $   $ 2,265.9  
                                   

 

 
   
  Common Stock    
   
  Accumulated
Other
Comprehensive
Income (Loss)
   
   
 
 
  Preferred
Stock
  Additional
Paid-In
Capital
  Accumulated
Deficit
  Non-
Controlling
Interest
  Total
Equity
 
(In Millions)
  Shares   Amount  

December 31, 2010

  $     413.5   $ 4.1   $ 3,183.2   $ (1,123.2 ) $ 37.8   $ 16.5   $ 2,118.4  

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

                            (77.6 )               (77.6 )

Other comprehensive income

                                  62.1           62.1  

Net income relating to noncontrolling interest

                                        8.7     8.7  

Dividend payment to noncontrolling interest

                                        (10.5 )   (10.5 )

Employee stock purchase plan

          0.1           2.0                       2.0  

Net settlement on vesting of restricted stock

          1.2           (11.4 )                     (11.4 )

Stock-based employee compensation charges, net of tax

                      16.6                       16.6  

Exercise of stock options, net of tax

          1.6     0.1     11.6                       11.7  

Common shares issued to Directors

                      1.4                       1.4  
                                   

June 30, 2011

  $     416.4   $ 4.2   $ 3,203.4   $ (1,200.8 ) $ 99.9   $ 14.7   $ 2,121.4  
                                   

Accumulated other comprehensive loss as of June 30, 2012 and December 31, 2011 includes accumulated translation gains of $74.8 million and $91.3 million, respectively, pension benefits of $(96.0) million and $(99.6) million, respectively, unrealized losses on our Euro-denominated debt of $(19.4) million and $(19.4) million, respectively, unrealized holding gains of $3.4 million and $0.3 million, respectively, and other of $(0.9) million and $(1.0) million, respectively.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

Note 12—Restructuring

As part of our ongoing effort to implement our strategy of reducing operating costs, we have evaluated our workforce and operations and made adjustments, including headcount reductions and business process reengineering resulting in optimized work flow at rental locations and maintenance facilities as well as streamlined our back-office operations and evaluated potential outsourcing opportunities. When we made adjustments to our workforce and operations, we incurred incremental expenses that delay the benefit of a more efficient workforce and operating structure, but we believe that increased operating efficiency and reduced costs associated with the operation of our business are important to our long-term competitiveness.

During 2007 through 2011, we announced several initiatives to improve our competitiveness and industry leadership through targeted job reductions. These initiatives included, but were not limited to, job reductions at our corporate headquarters and back-office operations in the U.S. and Europe. As part of our re-engineering optimization we outsourced selected functions globally. In addition, we streamlined operations and reduced costs by initiating the closure of targeted car rental locations and equipment rental branches throughout the world. The largest of these closures occurred in 2008 which resulted in closures of approximately 250 off-airport locations and 22 branches in our U.S. equipment rental business. These initiatives impacted approximately 8,960 employees.

During the first and second quarter of 2012, we continued to streamline operations and reduce costs with the closure of several car rental and equipment rental locations globally as well as a reduction in our workforce by approximately 65 employees and 280 employees, respectively.

From January 1, 2007 through June 30, 2012, we incurred $556.0 million ($273.3 million for our car rental segment, $228.2 million for our equipment rental segment and $54.5 million of other) of restructuring charges.

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

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

 
  Three Months Ended
June 30,
  Six Months Ended
June 30,
 
 
  2012   2011   2012   2011  

By Type:

                         

Termination benefits

  $ 13.5   $ 3.4   $ 16.2   $ 4.4  

Pension and post retirement expense

        0.3         0.3  

Consultant costs

    0.4     0.2     0.6     0.3  

Asset writedowns

        22.6     2.7     23.3  

Facility closure and lease obligation costs

    2.2     6.9     6.0     10.0  

Other

        0.3         0.1  
                   

Total

  $ 16.1   $ 33.7   $ 25.5   $ 38.4  
                   

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

 

 
  Three Months Ended
June 30,
  Six Months Ended
June 30,
 
 
  2012   2011   2012   2011  

By Caption:

                         

Direct operating

  $ 7.0   $ 30.4   $ 14.6   $ 34.5  

Selling, general and administrative

    9.1     3.3     10.9     3.9  
                   

Total

  $ 16.1   $ 33.7   $ 25.5   $ 38.4  
                   

 

 
  Three Months Ended
June 30,
  Six Months Ended
June 30,
 
 
  2012   2011   2012   2011  

By Segment:

                         

Car rental

  $ 11.8   $ 3.5   $ 17.0   $ 4.5  

Equipment rental

    2.5     29.8     6.7     33.6  

Other reconciling items

    1.8     0.4     1.8     0.3  
                   

Total

  $ 16.1   $ 33.7   $ 25.5   $ 38.4  
                   

During the three and six months ended June 30, 2012, the after-tax effect of the restructuring charges decreased the income per share by $0.02 and $0.04, respectively. During the three and six months ended June 30, 2011, the after-tax effect of the restructuring charges decreased the income per share by $0.05 and increased the loss per share by $0.06, respectively.

The following table sets forth the activity affecting the restructuring accrual during the six months ended June 30, 2012 (in millions of dollars). We expect to pay the remaining restructuring obligations relating to termination benefits over the next twelve months. The remainder of the restructuring accrual relates to future lease obligations which will be paid over the remaining term of the applicable leases.

 
  Termination
Benefits
  Pension
and Post
Retirement
Expense
  Consultant
Costs
  Other   Total  

Balance as of January 1, 2012

  $ 9.1   $ 0.2   $ 0.6   $ 11.7   $ 21.6  

Charges incurred

    16.2         0.6     8.7     25.5  

Cash payments

    (8.4 )       (0.7 )   (1.8 )   (10.9 )

Other(1)

    0.2         (0.1 )   (8.8 )   (8.7 )
                       

Balance as of June 30, 2012

  $ 17.1   $ 0.2   $ 0.4   $ 9.8   $ 27.5  
                       

(1)
Consists of decreases of $6.2 million for facility closures and $2.7 million for asset writedowns, partly offset by an increase of $0.2 million due to foreign currency translation.

Note 13—Financial Instruments

Cash and Cash Equivalents and Restricted Cash and Cash Equivalents

Fair value approximates the amount indicated on the balance sheet at June 30, 2012 and December 31, 2011 because of the short-term maturity of these instruments. Money market accounts, whose fair value at June 30, 2012, is measured using Level 1 inputs, totaling $273.2 million and $118.6 million are

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

included in "Cash and cash equivalents" and "Restricted cash and cash equivalents," respectively. Money market accounts, whose fair value at December 31, 2011, is measured using Level 1 inputs, totaling $566.0 million and $142.9 million are included in "Cash and cash equivalents" and "Restricted cash and cash equivalents," respectively.

Marketable Securities

Marketable securities held by us consist of equity securities classified as available-for-sale, which are carried at fair value and are included within "Prepaid expenses and other assets." Unrealized gains and losses, net of related income taxes, are included in "Accumulated other comprehensive loss." As of June 30, 2012 and December 31, 2011, the fair value of marketable securities was $38.3 million and $33.2 million, respectively. For the three and six months ended June, 30, 2012, unrealized gains of $0.1 million and $5.1 million, respectively, were recorded in "Accumulated other comprehensive loss." For the three and six months ended June, 30, 2011, unrealized gains of $2.0 million and $2.0 million, respectively, were recorded in "Accumulated other comprehensive loss." Fair values for marketable securities are based on Level 1 inputs consisting of quoted market prices.

Debt

For borrowings with an initial maturity of 93 days or less, fair value approximates carrying value because of the short-term nature of these instruments. For all other debt, fair value is estimated based on quoted market rates as well as borrowing rates currently available to us for loans with similar terms and average maturities (Level 2 inputs). The aggregate fair value of all debt at June 30, 2012 was $13,151.6 million, compared to its aggregate unpaid principal balance of $12,526.2 million. The aggregate fair value of all debt at December 31, 2011 was $11,832.5 million, compared to its aggregate unpaid principal balance of $11,400.3 million.

Derivative Instruments and Hedging Activities

The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis (in millions of dollars):

 
  Fair Value of Derivative Instruments(1)  
 
  Asset Derivatives(2)   Liability Derivatives(2)  
 
  June 30,
2012
  December 31,
2011
  June 30,
2012
  December 31,
2011
 

Derivatives not designated as hedging instruments under ASC 815:

                         

Gasoline swaps

  $   $   $ 2.7   $ 0.4  

Interest rate caps

        0.5         0.4  

Foreign exchange forward contracts

    6.4     4.4     1.0     1.9  

Interest rate swaps

            0.1     0.2  

Foreign exchange options

    0.1     0.1          
                   

Total derivatives not designated as hedging instruments under ASC 815

  $ 6.5   $ 5.0   $ 3.8   $ 2.9  
                   

(1)
All fair value measurements were primarily based upon significant observable (Level 2) inputs.

(2)
All asset derivatives are recorded in "Prepaid expenses and other assets" and all liability derivatives are recorded in "Accrued liabilities" on our condensed consolidated balance sheets.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

 
  Location of Gain or (Loss)
Recognized on Derivatives
  Amount of Gain or
(Loss) Recognized in
Income on Derivatives
 
 
   
  Three Months Ended
June 30,
 
 
   
  2012   2011  

Derivatives Not Designated as Hedging Instruments under ASC 815:

                 

Gasoline swaps

  Direct operating   $ (3.3 ) $ (0.2 )

Interest rate caps

  Selling, general and administrative     (0.1 )    

Foreign exchange forward contracts

  Selling, general and administrative     (7.7 )   (7.3 )

Foreign exchange options

  Selling, general and administrative     0.1      
               

Total

      $ (11.0 ) $ (7.5 )
               

 

 
  Location of Gain or (Loss)
Recognized on Derivatives
  Amount of Gain or
(Loss) Recognized in
Income on Derivatives
 
 
   
  Six Months Ended
June 30,
 
 
   
  2012   2011  

Derivatives Not Designated as Hedging Instruments under ASC 815:

                 

Gasoline swaps

  Direct operating   $ (1.5 ) $ 2.9  

Interest rate caps

  Selling, general and administrative     (0.1 )    

Foreign exchange forward contracts

  Selling, general and administrative     (5.6 )   (7.9 )

Foreign exchange options

  Selling, general and administrative     0.1      
               

Total

      $ (7.1 ) $ (5.0 )
               

In conjunction with the refinanced Series 2009-1 and the Series 2010-2, HVF purchased an interest rate cap for $6.7 million, with a maximum notional amount equal to the refinanced Series 2009-1 and the Series 2010-2 with a combined maximum principal amount of $2.1 billion, a strike rate of 5% and expected maturity date of March 25, 2013. Additionally, Hertz sold a 5% interest rate cap for $6.2 million, with a matching notional amount and term to the HVF interest rate cap. In March 2012, an additional $250 million of the Series 2009-1 notes was issued, for which HVF and Hertz amended their interest rate cap agreements to increase the maximum notional amounts by $250 million. Also, in December 2010, the Australian Securitization was completed and our Australian operating subsidiary purchased an interest rate cap for $0.5 million, with a maximum notional amount equal to the Australian Securitization maximum principal amount of A$250 million, a strike rate of 7% and expected maturity date of December 2012. Additionally, Hertz sold a 7% interest rate cap for $0.4 million with a matching notional amount and term to the Australian operating subsidiary's interest rate cap. The fair values of all interest rate caps were calculated using a discounted cash flow method and applying observable market data (i.e. the 1-month LIBOR yield curve and credit default swap spreads). Gains and losses resulting from changes in the fair value of these interest rate caps are included in our results of operations in the periods incurred.

In connection with our acquisition of Donlen, we acquired interest rate swaps with a total notional amount of $23.2 million at June 30, 2012, associated with floating rate debt. These interest rate swaps

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

are used to effectively convert an amount of floating rate debt into fixed rate debt. The fair values of these interest rate swaps were calculated using a discounted cash flow method and applying observable market data (i.e. the 1-month LIBOR yield curve). Gains and losses resulting from changes in the fair value of these interest rate swaps are included in our results of operations in the periods incurred (in Selling, general and administrative).

We purchase unleaded gasoline and diesel fuel at prevailing market rates and maintain a program to manage our exposure to changes in fuel prices through the use of derivative commodity instruments. We currently have in place swaps to cover a portion of our fuel price exposure through May 2013. We presently hedge a portion of our overall unleaded gasoline and diesel fuel purchases with commodity swaps and have contracts in place that settle on a monthly basis. As of June 30, 2012, our outstanding commodity instruments for unleaded gasoline and diesel fuel totaled approximately 5.1 million gallons and 0.3 million gallons, respectively. The fair value of these commodity instruments was calculated using a discounted cash flow method and applying observable market data (including NYMEX RBOB Gasoline and U.S. Department of Energy surveys). Gains and losses resulting from changes in the fair value of these commodity instruments are included in our results of operations in the periods incurred.

We manage our foreign currency risk primarily by incurring, to the extent practicable, operating and financing expenses in the local currency in the countries in which we operate, including making fleet and equipment purchases and borrowing locally. Also, we have purchased foreign exchange options to manage exposure to fluctuations in foreign exchange rates for selected marketing programs. The effect of exchange rate changes on these financial instruments would not materially affect our consolidated financial position, results of operations or cash flows. Our risks with respect to foreign exchange options are limited to the premium paid for the right to exercise the option and the future performance of the option's counterparty. Premiums paid for options outstanding as of June 30, 2012, were approximately $0.2 million. We limit counterparties to the transactions to financial institutions that have strong credit ratings. As of June 30, 2012 and December 31, 2011, the total notional amount of these foreign exchange options was $7.5 million and $9.1 million, respectively. As of June 30, 2012, these foreign exchange options mature through April 2013. The fair value of the foreign exchange options was calculated using a discounted cash flow method and applying observable market data (i.e. foreign currency exchange rates). Gains and losses resulting from changes in the fair value of these options are included in our results of operations in the periods incurred.

We also manage exposure to fluctuations in currency risk on intercompany loans we make to certain of our subsidiaries by entering into foreign currency forward contracts at the time of the loans which are intended to offset the impact of foreign currency movements on the underlying intercompany loan obligations. As of June 30, 2012, the total notional amount of these forward contracts was $780.8 million, maturing within two months. The fair value of these foreign currency forward contracts was calculated based on foreign currency forward exchange rates.

Note 14—Related Party Transactions

Relationship with Hertz Investors, Inc. and the Sponsors

Other than as disclosed below, in the six months ended June 30, 2012, there were no material changes to our relationship with Hertz Investors, Inc. or the Sponsors.

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

Financing Arrangements with Related Parties

Affiliates of MLGPE (which is one of the Sponsors), including Bank of America and certain of its affiliates, have provided various investment and commercial banking and financial advisory services to us for which they have received customary fees and commissions. In addition, these parties have acted as agents, lenders, purchasers and/or underwriters to us under our respective financing arrangements, for which they have received customary fees, commissions, expenses and/or other compensation. More specifically, these parties have acted in the following capacities, or similar capacities, with respect to our financing arrangements: lenders and/or agents under the Senior Credit Facilities, the U.S. Fleet Financing Facility and certain of the U.S. Fleet Variable Funding Notes; purchasers and/or underwriters under the Senior Notes and certain of the U.S. Fleet Medium Term Notes; and structuring advisors and/or agents under the U.S. ABS Program.

As of June 30, 2012 and December 31, 2011, approximately $174 million and $174 million, respectively, of our outstanding debt was with related parties.

For information on our total indebtedness, see Note 7—Debt.

Note 15—Contingencies and Off-Balance Sheet Commitments

Off-Balance Sheet Commitments

As of June 30, 2012 and December 31, 2011, the following guarantees (including indemnification commitments) were issued and outstanding.

Indemnification Obligations

In the ordinary course of business, we execute contracts involving indemnification obligations customary in the relevant industry and indemnifications specific to a transaction such as the sale of a business. These indemnification obligations might include claims relating to the following: environmental matters; intellectual property rights; governmental regulations and employment-related matters; customer, supplier and other commercial contractual relationships; and financial matters. Performance under these indemnification obligations would generally be triggered by a breach of terms of the contract or by a third party claim. We regularly evaluate the probability of having to incur costs associated with these indemnification obligations and have accrued for expected losses that are probable and estimable. The types of indemnification obligations for which payments are possible include the following:

Sponsors; Directors

Hertz has entered into customary indemnification agreements with Hertz Holdings, the Sponsors and our stockholders affiliated with the Sponsors, pursuant to which Hertz Holdings and Hertz will indemnify the Sponsors, our stockholders affiliated with the Sponsors and their respective affiliates, directors, officers, partners, members, employees, agents, representatives and controlling persons, against certain liabilities arising out of performance of a consulting agreement with Hertz Holdings and each of the Sponsors and certain other claims and liabilities, including liabilities arising out of financing arrangements or securities offerings. We also entered into indemnification agreements with each of our directors. We do not believe that these indemnifications are reasonably likely to have a material impact on us.

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

Environmental

We have indemnified various parties for the costs associated with remediating numerous hazardous substance storage, recycling or disposal sites in many states and, in some instances, for natural resource damages. The amount of any such expenses or related natural resource damages for which we may be held responsible could be substantial. The probable expenses that we expect to incur for such matters have been accrued, and those expenses are reflected in our condensed consolidated financial statements. As of June 30, 2012 and December 31, 2011, the aggregate amounts accrued for environmental liabilities including liability for environmental indemnities, reflected in our condensed consolidated balance sheets in "Accrued liabilities" were $1.4 million and $1.5 million, respectively. The accrual generally represents the estimated cost to study potential environmental issues at sites deemed to require investigation or clean-up activities, and the estimated cost to implement remediation actions, including on-going maintenance, as required. Cost estimates are developed by site. Initial cost estimates are based on historical experience at similar sites and are refined over time on the basis of in-depth studies of the sites. For many sites, the remediation costs and other damages for which we ultimately may be responsible cannot be reasonably estimated because of uncertainties with respect to factors such as our connection to the site, the materials there, the involvement of other potentially responsible parties, the application of laws and other standards or regulations, site conditions, and the nature and scope of investigations, studies, and remediation to be undertaken (including the technologies to be required and the extent, duration, and success of remediation).

Legal Proceedings

From time to time we are a party to various legal proceedings. We are currently a defendant in numerous actions and have received numerous claims on which actions have not yet been commenced for public liability and property damage arising from the operation of motor vehicles and equipment rented from us and our licensees. The obligation for public liability and property damage on self-insured U.S. and international vehicles and equipment, as stated on our balance sheet, represents an estimate for both reported accident claims not yet paid and claims incurred but not yet reported. The related liabilities are recorded on a non-discounted basis. Reserve requirements are based on actuarial evaluations of historical accident claim experience and trends, as well as future projections of ultimate losses, expenses, premiums and costs. At June 30, 2012 and December 31, 2011 our liability recorded for public liability and property damage matters was $270.6 million and $281.5 million, respectively. We believe that our analysis is based on the most relevant information available, combined with reasonable assumptions, and that we may prudently rely on this information to determine the estimated liability. We note the liability is subject to significant uncertainties. The adequacy of the liability reserve is regularly monitored based on evolving accident claim history and insurance related state legislation changes. If our estimates change or if actual results differ from these assumptions, the amount of the recorded liability is adjusted to reflect these results.

For a detailed description of certain of our legal proceedings please see Note 11 of the Notes to our audited annual consolidated financial statements included in our Form 10-K under the caption "Item 8—Financial Statements and Supplementary Data."

The following recent developments pertaining to legal proceedings described in our Form 10-K are furnished on a supplemental basis:

In June 2012, in Davis Landscape, Ltd. et al. v. Hertz Equipment Rental Corporation, the judge denied our motion for partial summary judgment on the Loss Damage Waiver claim and, in July 2012, the judge

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

granted our motion for partial summary judgment on the Environmental Recovery Fee claim. The court also entered an order referring the case to mediation by private consent of the parties.

In May 2012, all briefing was completed in Janet Sobel and Daniel Dugan, PhD., individually and on behalf of all others similarly situated v. The Hertz Corporation on the two outstanding issues—unjust enrichment and damages. The briefing included expert reports as submitted by both sides.

In May 2012, in Michael Shames et al. v. The Hertz Corporation et al., the district court issued an order preliminarily approving the settlement of this action; certifying a settlement class; certifying a class representative and lead counsel; and providing for class notice. The court also scheduled a final approval hearing for October 29, 2012. We have accrued our best estimate of the ultimate cost which is not material to our financial condition.

In June 2012, a mediation was held in Fun Services of Kansas City, Inc., individually and as the representative of a class of similarly-situated persons v. Hertz Equipment Rental Corporation. As a result of the mediation, the parties have reached an agreement in principle to settle this class action. A draft settlement agreement that addresses compensation to class members, class counsel fees and the claims process, and which would be subject to court approval, is being finalized by the parties' counsel. We have accrued our best estimate of the ultimate cost which is not material to our financial condition.

Aside from the above mentioned, none of the other legal proceedings described in our Form 10-K have experienced any material changes.

As previously disclosed, on June 15, 2011 we received a subpoena from the staff of the Securities and Exchange Commission, or "SEC," seeking production of documents related to our proposed business combination with Dollar Thrifty Automotive Group, Inc. We are cooperating fully with the SEC's investigation. We do not expect this investigation to have any effect on a proposed business combination with Dollar Thrifty.

In addition to the above mentioned and those described in our Form 10-K or in our other filings with Securities and Exchange Commission, various other legal actions, claims and governmental inquiries and proceedings are pending or may be instituted or asserted in the future against us and our subsidiaries. Other than with respect to the aggregate claims for public liability and property damage pending against us, management, based on the advice of legal counsel, does not believe that any of the matters resolved, or pending against us, are material to us and our subsidiaries taken as a whole.

We have established reserves for matters where we believe that the losses are probable and reasonably estimated. Other than with respect to the aggregate reserve established for claims for public liability and property damage, none of those reserves are material. For matters where we have not established a reserve, the ultimate outcome or resolution cannot be predicted at this time, or the amount of ultimate loss, if any, cannot be reasonably estimated. Litigation is subject to many uncertainties and the outcome of the individual litigated matters is not predictable with assurance. It is possible that certain of the actions, claims, inquiries or proceedings, including those discussed in our Form 10-K or in our other filings with Securities and Exchange Commission, could be decided unfavorably to us or any of our subsidiaries involved. Accordingly, it is possible that an adverse outcome from such a proceeding could exceed the amount accrued in an amount that could be material to our consolidated financial condition, results of operations or cash flows in any particular reporting period.

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

Note 16—Earnings (Loss) Per Share

Basic earnings (loss) per share has been computed based upon the weighted average number of common shares outstanding. Diluted earnings (loss) per share has been computed based upon the weighted average number of common shares outstanding plus the effect of all potentially dilutive common stock equivalents, except when the effect would be anti-dilutive.

The following table sets forth the computation of basic and diluted loss per share (in millions of dollars, except per share amounts):

 
  Three Months Ended
June 30,
  Six Months Ended
June 30,
 
 
  2012   2011   2012   2011  

Basic and diluted earnings (loss) per share:

                         

Numerator:

                         

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

  $ 92.9   $ 55.0   $ 36.6   $ (77.6 )
                   

Denominator:

                         

Weighted average shares used in basic computation

    420.0     415.9     419.1     415.0  

Add: Stock options, RSUs and PSUs

    4.4     8.3     5.5      

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

    23.0     27.6     23.3      
                   

Weighted average shares used in diluted computation

    447.4     451.8     447.9     415.0  
                   

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

  $ 0.22   $ 0.13   $ 0.09   $ (0.19 )

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

  $ 0.21   $ 0.12   $ 0.08   $ (0.19 )

Diluted earnings (loss) per share computations for the three and six months ended June 30, 2012 excluded the weighted-average impact of the assumed exercise of approximately 4.6 million shares, of stock options, RSUs and PSUs, because such impact would be antidilutive. Diluted earnings (loss) per share computations for the three and six months ended June 30, 2011 excluded the weighted-average impact of the assumed exercise of approximately 5.0 million and 21.2 million shares, respectively, of stock options, RSUs and PSUs, because such impact would be antidilutive. Additionally, for the six months ended June 30, 2011, there was no impact to the diluted earnings (loss) per share computations associated with the outstanding Convertible Senior Notes, because such impact would be anti-dilutive.

Note 17—Subsequent Events

In July 2012, Hertz amended the Donlen GN II Variable Funding Notes to permit aggregate maximum borrowings of $1.0 billion (subject to borrowing base availability) and to extend the maturity date from August 2012 to December 2012.

In July 2012, Hertz amended the European Securitization to extend the maturity date from July 2013 to July 2014.

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

The following discussion and analysis provides information that we believe to be relevant to an understanding of our consolidated financial condition and results of operations. Unless the context otherwise requires, in this Report on Form 10-Q, (i) "Hertz Holdings" means Hertz Global Holdings, Inc., our top-level holding company, (ii) "Hertz" means The Hertz Corporation, our primary operating company and a direct wholly-owned subsidiary of Hertz Investors, Inc., which is wholly-owned by Hertz Holdings, (iii) "we," "us" and "our" mean Hertz Holdings and its consolidated subsidiaries, including Hertz, (iv) "HERC" means Hertz Equipment Rental Corporation, Hertz's wholly-owned equipment rental subsidiary, together with our various other wholly-owned international subsidiaries that conduct our industrial, construction and material handling equipment rental business, (v) "cars" means cars, crossovers and light trucks (including sport utility vehicles and, outside North America, light commercial vehicles), (vi) "program cars" means cars purchased by car rental companies under repurchase or guaranteed depreciation programs with car manufacturers, (vii) "non-program cars" means cars not purchased under repurchase or guaranteed depreciation programs for which the car rental company is exposed to residual risk and (viii) "equipment" means industrial, construction and material handling equipment.

You should read the following discussion and analysis together with the section below entitled "Cautionary Note Regarding Forward-Looking Statements," with the financial statements and the related notes thereto contained elsewhere in this Form 10-Q, or this "Report."

Cautionary Note Regarding Forward-Looking Statements

Certain statements contained or incorporated by reference in this Report and in reports we subsequently file with the United States Securities and Exchange Commission, or the "SEC," on 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 include information concerning our liquidity and our possible or assumed future results of operations, including descriptions of our business strategies. These statements often include words such as "believe," "expect," "project," "anticipate," "intend," "plan," "estimate," "seek," "will," "may," "would," "should," "could," "forecasts" or similar expressions. These statements are based on certain assumptions that we have made in light of our experience in the industry as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate in these circumstances. We believe these judgments are reasonable, but you should understand that these statements are not guarantees of performance or results, and our actual results could differ materially from those expressed in the forward-looking statements due to a variety of important factors, both positive and negative, that may be revised or supplemented in subsequent reports on SEC Forms 10-K, 10-Q and 8-K.

Some important factors that could affect our actual results include, among others, those that may be disclosed from time to time in subsequent reports filed with the SEC, those described under "Item 1A—Risk Factors" included in Hertz Global Holding, Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 2011, filed with the SEC, on February 27, 2012, or our "Form 10-K" and the following:

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


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


You should not place undue reliance on forward-looking statements. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing cautionary statements. All such statements speak only as of the date made, and we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Corporate History

Hertz Holdings was incorporated in Delaware in 2005 to serve as the top-level holding company for the consolidated Hertz business. Hertz was incorporated in Delaware in 1967. Hertz is a successor to corporations that have been engaged in the car and truck rental and leasing business since 1918 and the equipment rental business since 1965. Ford Motor Company acquired an ownership interest in Hertz in 1987. Prior to this, Hertz was a subsidiary of United Continental Holdings, Inc. (formerly Allegis Corporation), which acquired Hertz's outstanding capital stock from RCA Corporation in 1985.

On December 21, 2005, investment funds associated with or designated by:

acquired all of Hertz's common stock from Ford Holdings LLC. In January 2009, Bank of America Corporation, or "Bank of America," acquired Merrill Lynch & Co., Inc., the former parent company of MLGPE. Accordingly, Bank of America is now an indirect beneficial owner of our common stock held by the investment funds associated with MLGPE. We refer to CD&R, Carlyle and MLGPE collectively as the "Sponsors." We refer to the acquisition of all of Hertz's common stock by the Sponsors as the "Acquisition."

After giving effect to our initial public offering in November 2006 and subsequent offerings, the Sponsors' holdings represent approximately 38% of the outstanding shares of common stock of Hertz Holdings as of June 30, 2012.

Overview of Our Business

We are engaged principally in the business of renting and leasing of cars and equipment.

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

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

Our expenses primarily consist of:

Our profitability is primarily a function of the volume, mix and pricing of rental transactions and the utilization of cars and equipment. Significant changes in the purchase price or residual values of cars and equipment or interest rates can have a significant effect on our profitability depending on our ability to adjust pricing for these changes. We continue to balance our mix of non-program and program vehicles based on market conditions. Our business requires significant expenditures for cars and equipment, and consequently we require substantial liquidity to finance such expenditures. See "Liquidity and Capital Resources" below.

Car Rental

In the U.S., as of June 30, 2012, the percentage of non-program cars was 83% as compared to 68% as of June 30, 2011. Internationally, as of June 30, 2012, the percentage of non-program cars was 65%, compared to 58% as of June 30, 2011. In the U.S., as of December 31, 2011, the percentage of non-program cars was 79% as compared to 72% as of December 31, 2010. Internationally, as of December 31, 2011, the percentage of non-program cars was 75%, compared to 70% as of December 31, 2010.

In recent periods we have decreased the percentage of program cars in our car rental fleet. Non-program cars typically have lower acquisition costs and lower depreciation rates than comparable program cars. As a result of decreasing our reliance on program cars, we reduce our risk related to the creditworthiness of the vehicle manufacturers. With fewer program cars in our fleet, we have an increased risk that the market value of a car at the time of its disposition will be less than its estimated residual value. Program cars generally provide us with flexibility to reduce the size of our fleet by returning cars sooner than originally expected without risk of loss in the event of an economic downturn or to respond to changes in rental demand. This flexibility is reduced as the percentage of non-program cars in our car rental fleet increases. Furthermore, it is expected that the average age of our fleet will increase since the average holding period for non-program vehicles is longer than program vehicles. However, the longer holding period does not necessarily equate to higher costs due to the stringent turnback requirements imposed by vehicle manufacturers for program cars.

In the six months ended June 30, 2012, our monthly per vehicle depreciation costs decreased as compared to the prior year period due to improved residual values in the U.S., a continued move towards a greater proportion of non-program vehicles, mix optimization and improved procurement and remarketing efforts.

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. During the six months ended June 30, 2012, depreciation rates being used to compute the provision for

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

depreciation of revenue earning equipment were adjusted on certain vehicles in our car rental operations to reflect changes in the estimated residual values to be realized when revenue earning equipment is sold. These depreciation rate changes resulted in net decreases of $37.1 million and $37.3 million in depreciation expense for the three and six months ended June 30, 2012, respectively.

For the three months ended June 30, 2012 and 2011, our worldwide car rental operations sold approximately 41,200 and 42,800 non-program cars, respectively, a 3.8% year over year decrease. The year over year decrease was primarily due to the impact of the events in Japan last year. For the six months ended June 30, 2012 and 2011, our worldwide car rental operations sold approximately 83,600 and 74,900 non-program cars, respectively, an 11.6% year over year increase. The year over year increase was primarily due to an overall increase in the number of cars in the fleet, an increase in the percentage of non-program cars, and a robust used car market. We believe the residual values have remained fairly strong primarily due to continued short supply of vehicle inventory and aided by strong new vehicle sales.

For the six months ended June 30, 2012, we experienced a 9.9% increase in transaction days versus the prior period in the United States while rental rate revenue per transaction day, or "RPD," declined by 3.7%. During the six months ended June 30, 2012, in our European operations, we experienced a 2.5% decline in transaction days and a 3.2% decline in RPD when compared to the six months ended June 30, 2011.

Our U.S. off-airport operations represented $608.9 million and $551.2 million of our total car rental revenues in the six months ended June 30, 2012 and 2011, respectively. As of June 30, 2012, we have approximately 2,350 off-airport locations. Our strategy includes selected openings of new off-airport locations, the disciplined evaluation of existing locations and the pursuit of same-store sales growth. Our strategy also includes increasing penetration in the off-airport market and growing the online leisure market, particularly in the longer length weekly sector, which is characterized by lower vehicle costs and lower transaction costs at a lower RPD. Increasing our penetration in these sectors is consistent with our long-term strategy to generate profitable growth. When we open a new off-airport location, we incur a number of costs, including those relating to site selection, lease negotiation, recruitment of employees, selection and development of managers, initial sales activities and integration of our systems with those of the companies who will reimburse the location's replacement renters for their rentals. A new off-airport location, once opened, takes time to generate its full potential revenues and, as a result, revenues at new locations do not initially cover their start-up costs and often do not, for some time, cover the costs of their ongoing operations.

On September 1, 2011, Hertz acquired 100% of the equity interest in Donlen, a leading provider of fleet leasing and management services for corporate fleets. For the three and six months ended June 30, 2012, Donlen had an average of approximately 146,100 and 143,800 vehicles, respectively, under lease and management. Donlen provides Hertz an immediate leadership position in long-term car, truck and equipment leasing and fleet management. Donlen's fleet management programs provide outsourced solutions to reduce fleet operating costs and improve driver productivity. These programs include administration of preventive maintenance, advisory services, and fuel and accident management along with other complementary services. Additionally, Donlen brings to Hertz a specialized consulting and technology expertise that will enable us to model, measure and manage fleet performance more effectively and efficiently.

As of June 30, 2012, our worldwide car rental operations had a total of approximately 8,760 corporate and licensee locations in approximately 150 countries in North America, Europe, Latin America, Asia, Australia, Africa, the Middle East and New Zealand.

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

While Hertz Holdings withdrew its exchange offer for Dollar Thrifty's common stock in October 2011, we continue to believe that a merger with Dollar Thrifty is in the best interests of both companies. We remain engaged with the Federal Trade Commission to secure antitrust clearance to potentially acquire Dollar Thrifty, which would require (among other things) the divestiture of our Advantage business, which would be sold at a loss. We can offer no assurance that any transaction with Dollar Thrifty will be commenced or consummated.

Equipment Rental

HERC experienced higher rental volumes and pricing for six months ended June 30, 2012 compared to the prior year period as the industry continued its recovery in North America. We continued to see growth in our specialty services such as Pump & Power, Industrial Plant Services and Hertz Entertainment Services. Additionally, there continues to be opportunities for the remainder of 2012 as the uncertain economic outlook makes rental solutions attractive to customers.

On January 19, 2012, HERC acquired Cinelease Holdings, LLC, or "Cinelease," a U.S. market leader in lighting and grip rentals to the television industry.

As of June 30, 2012, HERC had a total of approximately 330 branches in the U.S., Canada, France, Spain, China and Saudi Arabia.

Seasonality

Our car rental and equipment rental operations are seasonal businesses, with decreased levels of business in the winter months and heightened activity during the spring and summer. We have the ability to dynamically manage fleet capacity, the most significant portion of our cost structure, to meet market demand. For instance, to accommodate increased demand, we increase our available fleet and staff during the second and third quarters of the year. As business demand declines, fleet and staff are decreased accordingly. A number of our other major operating costs, including airport concession fees, commissions and vehicle liability expenses, are directly related to revenues or transaction volumes. In addition, our management expects to utilize enhanced process improvements, including efficiency initiatives and the use of our information technology systems, to help manage our variable costs. Approximately two-thirds of our typical annual operating costs represent variable costs, while the remaining one-third is fixed or semi-fixed. We also maintain a flexible workforce, with a significant number of part time and seasonal workers. However, certain operating expenses, including rent, insurance, and administrative overhead, remain fixed and cannot be adjusted for seasonal demand. Revenues related to our fleet leasing and management services are generally not seasonal.

Restructuring

During the first and second quarter of 2012, we continued to streamline operations and reduce costs with the closure of several car rental and equipment rental locations globally as well as a reduction in our workforce by approximately 65 employees and 280 employees, respectively.

For the three and six months ended June 30, 2012, our consolidated statement of operations includes restructuring charges of $16.1 million and $25.5 million, respectively. For the three and six months ended June 30, 2011, our consolidated statement of operations includes restructuring charges of $33.7 million and $38.4 million, respectively.

Additional efficiency and cost saving initiatives are being developed, however, we presently do not have firm plans or estimates of any related expenses. See Note 12 to the Notes to our condensed consolidated financial statements included in this Report.

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

RESULTS OF OPERATIONS

Three Months Ended June 30, 2012 Compared with Three Months Ended June 30, 2011

Summary

The following table sets forth the percentage of total revenues represented by the various line items in our consolidated statements of operations for the three months ended June 30, 2012 and 2011 (in millions of dollars):

 
   
   
  Percentage of Revenues  
 
  Three Months Ended
June 30,
  Three Months Ended
June 30,
 
 
  2012   2011   2012   2011  

Revenues:

                         

Car rental

  $ 1,849.3   $ 1,731.2     83.1 %   83.5 %

Equipment rental

    334.2     301.6     15.0     14.6  

Other

    41.6     39.5     1.9     1.9  
                   

Total revenues

    2,225.1     2,072.3     100.0     100.0  
                   

Expenses:

                         

Direct operating

    1,188.9     1,187.3     53.4     57.3  

Depreciation of revenue earning equipment and lease charges

    519.8     419.7     23.4     20.3  

Selling, general and administrative

    206.6     195.6     9.3     9.4  

Interest expense

    152.2     165.8     6.8     8.0  

Interest income

    (0.5 )   (1.5 )       (0.1 )

Other (income) expense, net

    (0.6 )   10.8         0.5  
                   

Total expenses

    2,066.4     1,977.7     92.9     95.4  
                   

Income before income taxes

    158.7     94.6     7.1     4.6  

Provision for taxes on income

    (65.8 )   (34.5 )   (2.9 )   (1.7 )
                   

Net income

    92.9     60.1     4.2     2.9  

Less: Net income attributable to noncontrolling interest

        (5.1 )       (0.2 )
                   

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

  $ 92.9   $ 55.0     4.2 %   2.7 %
                   

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

The following table sets forth certain of our selected car rental, equipment rental and other operating data for the three months ended or as of June 30, 2012 and 2011:

 
  Three Months Ended
or as of June 30,
 
 
  2012   2011  

Selected Car Rental Operating Data:

             

Worldwide number of transactions (in thousands)

    7,517     7,146  

Domestic (Hertz)

    5,620     5,255  

International (Hertz)

    1,897     1,891  

Worldwide transaction days (in thousands)(a)

    37,256     34,826  

Domestic (Hertz)

    26,312     23,889  

International (Hertz)

    10,944     10,937  

Worldwide rental rate revenue per transaction day(b)

  $ 39.50   $ 40.87  

Domestic (Hertz)

  $ 38.10   $ 39.32  

International (Hertz)

  $ 42.85   $ 44.25  

Worldwide average number of cars during the period

    656,200     487,300  

Domestic (Hertz company-operated)

    353,100     328,200  

International (Hertz company-operated)

    157,000     159,100  

Donlen (under lease and maintenance)

    146,100     N/A  

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

  $ 277.4   $ 242.2  

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

  $ 10,408.0   $ 9,522.7  

Selected Worldwide Equipment Rental Operating Data:

             

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

  $ 303.0   $ 266.1  

Same store revenue growth, including growth initiatives(e)

    7.3 %   10.4 %

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

  $ 3,003.6   $ 2,778.8  

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

  $ 42.5   $ 33.4  

Revenue earning equipment, net (in millions of dollars)

  $ 2,030.0   $ 1,702.7  

(a)
Transaction days represent the total number of days that vehicles were on rent in a given period.

(b)
Car rental rate revenue consists of all revenue, net of discounts, associated with the rental of cars including charges for optional insurance products, but excluding revenue derived from fueling and concession and other expense pass-throughs, NeverLost units in the U.S. and certain ancillary revenue. Rental rate revenue per transaction day is calculated as total rental rate revenue, divided by the total number of transaction days, with all periods adjusted to eliminate the effect of fluctuations in foreign currency. Our management believes eliminating the effect of fluctuations in foreign currency is appropriate so as not to affect the comparability of underlying trends. This statistic is important to our management and investors as it represents the best measurement of the changes in underlying pricing in the car rental business and encompasses the elements in car rental pricing that management has the ability to control. The optional insurance products are packaged within certain negotiated corporate, government and membership programs and within certain retail rates being charged. Based upon these existing programs and rate packages, management believes that these optional insurance products should be consistently included in the daily pricing of car rental transactions. On the other hand, non-rental rate revenue items such as refueling and concession pass-through expense items are driven by factors beyond the control of management (i.e. the price of fuel and the concession fees charged by airports). Additionally, NeverLost units are an optional revenue product which management does not consider to be part of their daily pricing of car rental transactions. The following table reconciles our

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

 
  Three Months Ended
June 30,
 
 
  2012   2011  

Car rental segment revenues

  $ 1,889.6   $ 1,768.8  

Non-rental rate revenue

    (419.4 )   (290.3 )

Foreign currency adjustment

    1.3     (55.3 )
           

Rental rate revenue

  $ 1,471.5   $ 1,423.2  
           

Transaction days (in thousands)

    37,256     34,826  

Rental rate revenue per transaction day (in whole dollars)

  $ 39.50   $ 40.87  
(c)
Adjusted pre-tax income is calculated as income (loss) before income taxes plus non-cash purchase accounting charges, non-cash debt charges relating to the amortization and write-off of debt financing costs and debt discounts and certain one-time charges and non-operational items. Adjusted pre-tax income is important to management 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. The contribution of our reportable segments to adjusted pre-tax income and reconciliation to consolidated amounts are presented below (in millions of dollars):

 
  Three Months Ended
June 30,
 
 
  2012   2011  

Adjusted pre-tax income:

             

Car rental

  $ 277.4   $ 242.2  

Equipment rental

    42.5     33.4  
           

Total reportable segments

    319.9     275.6  

Adjustments:

             

Other reconciling items(1)

    (86.0 )   (91.2 )

Purchase accounting(2)

    (29.0 )   (22.5 )

Non-cash debt charges(3)

    (20.6 )   (27.1 )

Restructuring charges

    (16.1 )   (33.7 )

Restructuring related charges(4)

    (5.0 )   (2.8 )

Acquisition related costs

    (4.5 )   (6.1 )

Pension adjustment(5)

        13.1  

Premiums paid on debt(6)

        (10.7 )
           

Income before income taxes

  $ 158.7   $ 94.6  
           

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

(d)
Equipment rental and rental related revenue consists of all revenue, net of discounts, associated with the rental of equipment including charges for delivery, loss damage waivers and fueling, but excluding revenue arising from the sale of equipment, parts and supplies and certain other ancillary revenue. Rental and rental related revenue is adjusted in all periods to eliminate the effect of fluctuations in foreign currency. Our management believes eliminating the effect of fluctuations in foreign currency is appropriate so as not to affect the comparability of underlying trends. This statistic is important to our management and investors as it is utilized in the measurement of rental revenue generated per dollar invested in fleet on an annualized basis and is comparable with the reporting of other industry participants. The following table reconciles our equipment rental segment revenues to our equipment rental and rental related revenue (based on December 31, 2011 foreign exchange rates) for the three months ended June 30, 2012 and 2011 (in millions of dollars):

 
  Three Months Ended
June 30,
 
 
  2012   2011  

Equipment rental segment revenues

  $ 335.0   $ 301.7  

Equipment sales and other revenue

    (31.3 )   (29.4 )

Foreign currency adjustment

    (0.7 )   (6.2 )
           

Rental and rental related revenue

  $ 303.0   $ 266.1  
           
(e)
Same store revenue growth is calculated as the year over year change in revenue for locations that are open at the end of the period reported and have been operating under our direction for more than twelve months. The same store revenue amounts are adjusted in all periods to eliminate the effect of fluctuations in foreign currency. Our management believes eliminating the effect of fluctuations in foreign currency is appropriate so as not to affect the comparability of underlying trends.

REVENUES

 
  Three Months Ended
June 30,
   
   
 
(in millions of dollars)
  2012   2011   $ Change   % Change  

Revenues by Segment

                         

Car rental

  $ 1,889.6   $ 1,768.8   $ 120.8     6.8 %

Equipment rental

    335.0     301.7     33.3     11.0 %

Other reconciling items

    0.5     1.8     (1.3 )   (68.3 )%
                     

Total revenues

  $ 2,225.1   $ 2,072.3   $ 152.8     7.4 %
                     

Car Rental Segment

Revenues from our car rental segment increased 6.8%, primarily as a result of increases in car rental transaction days worldwide of 7.0%, refueling fees of $5.3 million and airport concession recovery fees of $4.6 million. The three months ended June 30, 2012 also includes $115.4 million of revenues related to Donlen, which was acquired on September 1, 2011. These increases were partly offset by the effects of foreign currency translation of approximately $54.7 million and a decrease in worldwide RPD.

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

RPD for worldwide car rental for the three months ended June 30, 2012 decreased 3.4% from 2011, due to decreases in U.S. and International RPD of 3.1% and 3.2%, respectively, and a mix shift to the U.S. due to uncertain economic conditions in Europe. U.S. off-airport RPD declined by 4.0% and U.S. airport RPD decreased 2.2%. U.S. airport RPD was negatively impacted by a mix shift to longer life, lower RPD rentals (including mix shift towards off-airport and the Advantage brand). International RPD decreased primarily due to a decrease in Europe's airport RPD which was due to the competitive pricing environment and uncertain economic conditions.

Equipment Rental Segment

Revenues from our equipment rental segment increased 11.0%, primarily due to increases of 12.6% and 3.6% in equipment rental volumes and pricing, respectively, partially offset by the effects of foreign currency translation of approximately $6.3 million. The increase in volume was primarily due to strong industrial and improving construction performance. Our acquisition of Cinelease in January 2012 also contributed to the revenue increase.

Other

Revenues from all other sources decreased $1.3 million, primarily due to a decrease in revenues from our third-party claim management services.

EXPENSES

 
  Three Months Ended
June 30,
   
   
 
(in millions of dollars)
  2012   2011   $ Change   % Change  

Expenses:

                         

Fleet related expenses

  $ 287.3   $ 287.0   $ 0.3     0.1 %

Personnel related expenses

    384.0     373.5     10.5     2.8 %

Other direct operating expenses

    517.6     526.8     (9.2 )   (1.7 )%
                     

Direct operating

    1,188.9     1,187.3     1.6     0.1 %

Depreciation of revenue earning equipment and lease charges

    519.8     419.7     100.1     23.8 %

Selling, general and administrative

    206.6     195.6     11.0     5.6 %

Interest expense

    152.2     165.8     (13.6 )   (8.2 )%

Interest income

    (0.5 )   (1.5 )   1.0     (69.7 )%

Other (income) expense, net

    (0.6 )   10.8     (11.4 )   (105.1 )%
                     

Total expenses

  $ 2,066.4   $ 1,977.7   $ 88.7     4.5 %
                     

Total expenses increased 4.5%, but total expenses as a percentage of revenues decreased from 95.4% for the three months ended June 30, 2011 to 92.9% for the three months ended June 30, 2012.

Direct Operating Expenses

Car Rental Segment

Direct operating expenses for our car rental segment of $995.8 million for the three months ended June 30, 2012 increased 1.8% from $977.9 million for the three months ended June 30, 2011 as a result

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

of increases in other direct operating expenses and personnel related expenses, partly offset by a decrease in fleet related expenses.

Equipment Rental Segment

Direct operating expenses for our equipment rental segment of $195.4 million for the three months ended June 30, 2012 decreased 6.4% from $208.7 million for the three months ended June 30, 2011 as a result of decreases in other direct operating expenses partly offset by increases in fleet related expenses and personnel related expenses.

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

Depreciation of Revenue Earning Equipment and Lease Charges

Car Rental Segment

Depreciation of revenue earning equipment and lease charges for our car rental segment of $454.1 million for the three months ended June 30, 2012 increased 27.9% from $355.1 million for the three months ended June 30, 2011. The increase was primarily due to the acquisition of Donlen and its related depreciation expense of $94.5 million, as well as an increase in our average fleet size of 4.7% (exclusive of vehicles acquired through the Donlen acquisition), partly offset by lower net depreciation per vehicle, a higher mix of non-program cars and the effects of foreign currency translation of approximately $12.8 million.

Equipment Rental Segment

Depreciation of revenue earning equipment and lease charges in our equipment rental segment of $65.7 million for the three months ended June 30, 2012 increased 1.8% from $64.6 million for the three months ended June 30, 2011. The increase was primarily due to an 8.1% increase in the average acquisition cost of rental equipment operated during the period, partly offset by higher residual values on the disposal of used equipment, and the effects of foreign currency translation of approximately $1.2 million.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased by $11.0 million or 5.6% from the prior year period, due to increases in administrative expenses and sales promotion expenses, partially offset by a decrease in advertising expenses.

Interest Expense

Car Rental Segment

Interest expense for our car rental segment of $77.2 million for the three months ended June 30, 2012 decreased 2.2% from $79.0 million for the three months ended June 30, 2011. The decrease was primarily due to the effects of foreign currency translation, lower fleet levels and interest rates in Europe, and lower interest rates in Brazil, partly offset by an increase in the weighted average debt outstanding as result of an increased fleet size in the U.S., and by Donlen's additional interest expense.

Equipment Rental Segment

Interest expense for our equipment rental segment of $11.5 million for the three months ended June 30, 2012 decreased 6.4% from $12.2 million for the three months ended June 30, 2011. The decrease was

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

primarily due to lower interest rates in Europe, partially offset by an increase in weighted average debt outstanding as a result of an increased fleet size.

Other

Other interest expense relating to interest on corporate debt of $63.5 million for the three months ended June 30, 2012 decreased 14.9% from $74.6 million for the three months ended June 30, 2011. The decrease was primarily due to the prior year's write-off of unamortized debt costs in connection with the redemption of a portion of our 8.875% Senior Notes, as well as a decrease in the average debt outstanding and interest rates in 2012, mainly due to the redemption of the remainder of our 8.875% Senior Notes and 7.875% Senior Notes in the first quarter of 2012.

Interest Income

Interest income decreased $1.0 million from the prior year period.

Other (Income) Expense, Net

Other (income) expense, net for the three months ended June 30, 2012 and 2011, reflected income of $0.6 million and expense of $10.8 million, respectively. The expense in 2011 was primarily due to $10.7 million in premiums paid in connection with the redemption of a portion of our 8.875% Senior Notes.

ADJUSTED PRE-TAX INCOME (LOSS)

Car Rental Segment

Adjusted pre-tax income for our car rental segment of $277.4 million increased 14.5% from $242.2 million for the three months ended June 30, 2011. The increase was primarily due to stronger volumes, lower net depreciation per vehicle and disciplined cost management, partly offset by decreased pricing. Adjustments to our car rental segment income before income taxes for the three months ended June 30, 2012 totaled $42.6 million (which consists of purchase accounting of $17.2 million, restructuring and restructuring related charges of $14.9 million, and non-cash debt charges of $10.6 million, partly offset by a gain on derivatives of $0.1 million). Adjustments to our car rental segment income before income taxes for the three months ended June 30, 2011 totaled $10.1 million (which consists of non-cash debt charges of $10.6 million, purchase accounting of $8.5 million and restructuring and restructuring related charges of $4.0 million, and derivative losses of $0.1 million, partly offset by pension adjustments of $13.1 million). See footnote (c) to the table under "Results of Operations" for a summary and description of these adjustments.

Equipment Rental Segment

Adjusted pre-tax income for our equipment rental segment of $42.5 million increased 27.2% from $33.4 million for the three months ended June 30, 2011. The increase was primarily due to stronger volumes and pricing, strong cost management performance and higher residual values on the disposal of used equipment. Adjustments to our equipment rental segment income before income taxes for the three months ended June 30, 2012 totaled $14.4 million (which consists of purchase accounting of $10.8 million, restructuring charges of $2.5 million, and non-cash debt charges of $1.1 million). Adjustments to our equipment rental income before income taxes for the three months ended June 30, 2011 totaled $46.7 million (which consists of restructuring and restructuring related charges of $32.1 million, purchase accounting of $13.1 million, and non-cash debt charges of $1.5 million). See

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

footnote (c) to the table under "Results of Operations" for a summary and description of these adjustments.

PROVISION FOR TAXES ON INCOME, NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST AND NET INCOME ATTRIBUTABLE TO HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES' COMMON STOCKHOLDERS

 
  Three Months Ended
June 30,
   
   
 
(in millions of dollars)
  2012   2011   $ Change   % Change  

Income before income taxes

  $ 158.7   $ 94.6   $ 64.1     67.7 %

Provision for taxes on income

    (65.8 )   (34.5 )   (31.3 )   90.5 %
                     

Net income

    92.9     60.1     32.8     54.6 %

Less: Net income attributable to noncontrolling interest

        (5.1 )   5.1     (100.0 )%
                     

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

  $ 92.9   $ 55.0   $ 37.9     68.9 %
                     

Provision for Taxes on Income

The effective tax rate for the three months ended June 30, 2012 was 41.5% as compared to 36.5% in the three months ended June 30, 2011. The provision for taxes on income increased $31.3 million, primarily due to higher income before income taxes, changes in geographic earnings mix and changes in losses in certain non-U.S. jurisdictions for which tax benefits cannot be realized.

Net Income Attributable to Noncontrolling Interest

Net income attributable to noncontrolling interest decreased $5.1 million due to Hertz's purchase of the noncontrolling interest of Navigation Solutions, L.L.C. on December 31, 2011, thereby increasing its ownership interest from 65% to 100%.

Net Income Attributable to Hertz Global Holdings, Inc. and Subsidiaries' Common Stockholders

The net income attributable to Hertz Global Holdings, Inc. and Subsidiaries' common stockholders increased 68.9% primarily due to higher rental volumes in our worldwide car and equipment rental operations, disciplined cost management, lower net depreciation per vehicle in our car rental operations, increased pricing in our equipment rental operations and improved residual values on the disposal of certain used equipment, partly offset by lower pricing in our worldwide car rental operations. The impact of changes in exchange rates on net income was mitigated by the fact that not only revenues but also most expenses outside of the United States were incurred in local currencies.

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

Six Months Ended June 30, 2012 Compared with Six Months Ended June 30, 2011

Summary

The following table sets forth the percentage of total revenues represented by the various line items in our consolidated statements of operations for the six months ended June 30, 2012 and 2011 (in millions of dollars):

 
   
   
  Percentage of Revenues  
 
  Six Months Ended
June 30,
  Six Months Ended
June 30,
 
 
  2012   2011   2012   2011  

Revenues:

                         

Car rental

  $ 3,472.6   $ 3,210.1     83.0 %   83.3 %

Equipment rental

    635.5     569.7     15.2     14.8  

Other

    78.0     72.5     1.8     1.9  
                   

Total revenues

    4,186.1     3,852.3     100.0     100.0  
                   

Expenses:

                         

Direct operating

    2,304.1     2,261.0     55.0     58.7  

Depreciation of revenue earning equipment and lease charges

    1,033.9     855.7     24.7     22.2  

Selling, general and administrative

    414.3     377.8     9.9     9.8  

Interest expense

    314.5     362.7     7.5     9.4  

Interest income

    (1.6 )   (3.4 )        

Other (income) expense, net

    (1.0 )   62.7         1.6  
                   

Total expenses

    4,064.2     3,916.5     97.1     101.7  
                   

Income (loss) before income taxes

    121.9     (64.2 )   2.9     (1.7 )

Provision for taxes on income

    (85.3 )   (4.6 )   (2.0 )   (0.1 )
                   

Net income (loss)

    36.6     (68.8 )   0.9     (1.8 )

Less: Net income attributable to noncontrolling interest

        (8.8 )       (0.2 )
                   

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

  $ 36.6   $ (77.6 )   0.9 %   (2.0 )%
                   

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

The following table sets forth certain of our selected car rental, equipment rental and other operating data for the six months ended or as of June 30, 2012 and 2011:

 
  Six Months Ended
or as of June 30,
 
 
  2012   2011  

Selected Car Rental Operating Data:

             

Worldwide number of transactions (in thousands)

    13,905     13,174  

Domestic (Hertz)

    10,457     9,733  

International (Hertz)

    3,448     3,441  

Worldwide transaction days (in thousands)(a)

    68,925     64,476  

Domestic (Hertz)

    49,137     44,710  

International (Hertz)

    19,788     19,766  

Worldwide rental rate revenue per transaction day(a)(b)

  $ 39.89   $ 41.38  

Domestic (Hertz)

  $ 38.77   $ 40.26  

International (Hertz)

  $ 42.69   $ 43.92  

Worldwide average number of cars during the period

    625,500     457,300  

Domestic (Hertz company-operated)

    336,800     311,900  

International (Hertz company-operated)

    144,900     145,400  

Donlen (under lease and maintenance)

    143,800     N/A  

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

  $ 369.0   $ 303.5  

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

  $ 10,408.0   $ 9,522.7  

Selected Worldwide Equipment Rental Operating Data:

             

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

  $ 577.3   $ 507.5  

Same store revenue growth, including growth initiatives(a)

    8.1 %   9.9 %

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

  $ 2,951.6   $ 2,769.2  

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

  $ 68.4   $ 43.6  

Revenue earning equipment, net (in millions of dollars)

  $ 2,030.0   $ 1,702.7  

(a)
For further details relating to car rental transaction days, car rental rate revenue per transaction day, adjusted pre-tax income, equipment rental and rental related revenue and equipment rental same store revenue growth including growth initiatives, see "Three Months Ended June 30, 2012 Compared with Three Months Ended June 30, 2011—Summary."

(b)
The following table reconciles our car rental segment revenues to our rental rate revenue and rental rate revenue per transaction day (based on December 31, 2011 foreign exchange rates) for the six months ended June 30, 2012 and 2011 (in millions of dollars, except as noted):

 
  Six Months Ended
June 30,
 
 
  2012   2011  

Car rental segment revenues

  $ 3,547.9   $ 3,279.1  

Non-rental rate revenue

    (788.7 )   (535.9 )

Foreign currency adjustment

    (9.6 )   (75.0 )
           

Rental rate revenue

  $ 2,749.6   $ 2,668.2  
           

Transaction days (in thousands)

    68,925     64,476  

Rental rate revenue per transaction day (in whole dollars)

  $ 39.89   $ 41.38  

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

(c)
The contribution of our reportable segments to adjusted pre-tax income and reconciliation to consolidated amounts are presented below (in millions of dollars):

 
  Six Months Ended
June 30,
 
 
  2012   2011  

Adjusted pre-tax income:

             

Car rental

  $ 369.0   $ 303.5  

Equipment rental

    68.4     43.6  
           

Total reportable segments

    437.4     347.1  

Adjustments:

             

Other reconciling items(1)

    (174.2 )   (178.7 )

Purchase accounting(2)

    (53.0 )   (43.1 )

Non-cash debt charges(3)

    (45.8 )   (87.0 )

Restructuring charges

    (25.5 )   (38.4 )

Restructuring related charges(4)

    (5.6 )   (3.3 )

Acquisition related costs

    (11.4 )   (9.0 )

Management transition costs

        (2.5 )

Pension adjustment(5)

        13.1  

Premiums paid on debt(6)

        (62.4 )
           

Income before income taxes

  $ 121.9   $ (64.2 )
           

(d)
The following table reconciles our equipment renta