HGH Q2 2013 FORM 10-Q
Table of Contents


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________________________________________________________________
FORM 10-Q
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2013
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 x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer 
x
Accelerated filer 
o
Non-accelerated filer 
o
Smaller reporting company 
o
 
 
 
 
(Do not check if a smaller
reporting company)
 
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of July 31, 2013, 401,512,817 shares of the registrant's common stock, par value $0.01 per share, were outstanding.
 


Table of Contents


HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
INDEX

 
 
 
 
 
Page
 
 
 
 
 
 
 
 
 




Table of Contents


PART I—FINANCIAL INFORMATION
ITEM l.    Condensed Consolidated Financial Statements (Unaudited)
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, 2013, and the related consolidated statements of operations and of comprehensive income for the three-month and six-month periods ended June 30, 2013 and 2012, the consolidated statement of changes in equity for the six-month period ended June 30, 2013 and the consolidated statements of cash flows for the six-month periods ended June 30, 2013 and 2012. 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, 2012, and the related consolidated statements of operations, of comprehensive income (loss), of changes in equity and of cash flows for the year then ended (not presented herein), and in our report dated March 4, 2013, 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, 2012, 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, 2013

1

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In Millions of Dollars, except share and per share data)
 
June 30,
2013
 
December 31,
2012
ASSETS
 
 
 
Cash and cash equivalents
$
483.1

 
$
533.3

Restricted cash and cash equivalents
393.2

 
571.6

Receivables, less allowance for doubtful accounts of $26.2 and $25.1
1,656.0

 
1,886.6

Inventories, at lower of cost or market
128.3

 
105.7

Prepaid expenses and other assets
765.3

 
470.1

Revenue earning equipment, at cost:
 
 
 
Cars
15,489.8

 
12,591.1

Less accumulated depreciation
(2,169.1
)
 
(1,881.0
)
Other equipment
3,425.2

 
3,240.1

Less accumulated depreciation
(1,039.9
)
 
(1,041.9
)
Total revenue earning equipment
15,706.0

 
12,908.3

Property and equipment, at cost:
 
 
 
Land, buildings and leasehold improvements
1,333.7

 
1,288.8

Service equipment and other
1,257.8

 
1,261.1

 
2,591.5

 
2,549.9

Less accumulated depreciation
(1,125.9
)
 
(1,113.5
)
Total property and equipment
1,465.6

 
1,436.4

Other intangible assets, net
3,968.5

 
4,032.1

Goodwill
1,366.3

 
1,341.9

Total assets
$
25,932.3

 
$
23,286.0

LIABILITIES AND EQUITY
 
 
 
Accounts payable
$
1,484.5

 
$
999.1

Accrued liabilities
1,184.4

 
1,180.5

Accrued taxes
134.9

 
118.6

Debt
17,842.0

 
15,448.6

Public liability and property damage
327.5

 
332.2

Deferred taxes on income
2,794.8

 
2,699.7

Total liabilities
23,768.1

 
20,778.7

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, 424,617,879 and 421,485,862 shares issued and 401,417,879 and 421,485,862 outstanding
4.2

 
4.2

Additional paid-in capital
3,265.1

 
3,234.0

Accumulated deficit
(564.6
)
 
(704.0
)
Accumulated other comprehensive loss
(73.3
)
 
(26.9
)
 
2,631.4

 
2,507.3

Treasury Stock, at cost, 23,200,000 shares and 0 shares
(467.2
)
 

Total Hertz Global Holdings, Inc. and Subsidiaries stockholders' equity
2,164.2

 
2,507.3

Total liabilities and equity
$
25,932.3

 
$
23,286.0

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

2

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Millions of Dollars, except share and per share data)
Unaudited
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2013
 
2012
 
2013
 
2012
Revenues:
 
 
 
 
 
 
 
Car rental
$
2,329.5

 
$
1,889.6

 
$
4,414.3

 
$
3,547.9

Equipment rental
384.3

 
335.0

 
735.4

 
637.1

Other
0.8

 
0.5

 
1.5

 
1.1

Total revenues
2,714.6

 
2,225.1

 
5,151.2

 
4,186.1

Expenses:
 
 
 
 
 
 
 
Direct operating
1,405.9

 
1,188.9

 
2,757.1

 
2,303.1

Depreciation of revenue earning equipment and lease charges
641.1

 
519.8

 
1,228.1

 
1,034.9

Selling, general and administrative
275.0

 
206.6

 
526.7

 
414.3

Interest expense
183.8

 
152.2

 
360.6

 
314.5

Interest income
(2.0
)
 
(0.5
)
 
(3.8
)
 
(1.6
)
Other income, net
(1.1
)
 
(0.6
)
 
(1.7
)
 
(1.0
)
Total expenses
2,502.7

 
2,066.4

 
4,867.0

 
4,064.2

Income before income taxes
211.9

 
158.7

 
284.2

 
121.9

Provision for taxes on income
(90.5
)
 
(65.8
)
 
(144.8
)
 
(85.3
)
Net income attributable to Hertz Global Holdings, Inc. and Subsidiaries' common stockholders
$
121.4

 
$
92.9

 
$
139.4

 
$
36.6

Weighted average shares outstanding (in millions):
 
 
 
 
 
 
 
Basic
400.8

 
420.0

 
408.3

 
419.1

Diluted
465.1

 
447.4

 
463.0

 
447.9

Earnings per share attributable to Hertz Global Holdings, Inc. and Subsidiaries' common stockholders (See Note 17—Earnings Per Share):
 
 
 
 
 
 
 
Basic
$
0.30

 
$
0.22

 
$
0.34

 
$
0.09

Diluted
$
0.27

 
$
0.21

 
$
0.31

 
$
0.08

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

3

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Millions of Dollars)
Unaudited
 
Three Months Ended
June 30, 2013
 
Three Months Ended
June 30, 2012
Net income
 

 
$
121.4

 
 

 
$
92.9

Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
Translation adjustment changes
(26.7
)
 
 

 
(46.1
)
 
 

Unrealized holding gains on securities, (net of tax of 2013: $0 and 2012: $0)
2.1

 
 

 

 
 

Other, (net of tax of 2013: $0 and 2012: $0)
0.1

 
 

 
0.2

 
 

Defined benefit pension plans:
 
 
 
 
 
 
 
Net gains (losses) arising during the period, (net of tax of 2013: $1.5 and 2012: $1.2)
2.3

 
 

 
3.9

 
 

Defined benefit pension plans
2.3

 
 

 
3.9

 
 

Other comprehensive loss
 

 
(22.2
)
 
 

 
(42.0
)
Comprehensive income attributable to Hertz Global Holdings, Inc. and Subsidiaries' common stockholders
 

 
$
99.2

 
 

 
$
50.9


 
Six Months Ended
June 30, 2013
 
Six Months Ended
June 30, 2012
Net income
 
 
$
139.4

 
 
 
$
36.6

Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
Translation adjustment changes
(54.0
)
 
 
 
(16.5
)
 
 
Unrealized holding gains on securities, (net of tax of 2013: $0 and 2012: $2.0)
2.1

 
 
 
3.1

 
 
Other, (net of tax of 2013: $0 and 2012: $0)
0.1

 
 
 
0.1

 
 
Defined benefit pension plans:
 
 
 
 
 
 
 
Net gains (losses) arising during the period, (net of tax of 2013: $3.2 and 2012: $2.3)
5.4

 
 
 
3.7

 
 
Defined benefit pension plans
5.4

 
 
 
3.7

 
 
Other comprehensive loss
 
 
(46.4
)
 
 
 
(9.6
)
Comprehensive income attributable to Hertz Global Holdings, Inc. and Subsidiaries' common stockholders
 
 
$
93.0

 
 
 
$
27.0


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

4

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(In Millions of Dollars)
Unaudited
 
Preferred Stock
 
Common Stock
 
Additional
Paid-In Capital
 
Accumulated
Deficit
 
Accumulated
Other
Comprehensive
Loss
 
Treasury Stock
 
Total
Equity
Shares
 
Amount
December 31, 2012
$

 
421.5

 
$
4.2

 
$
3,234.0

 
$
(704.0
)
 
$
(26.9
)
 
$

 
$
2,507.3

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

 
 

 
 

 
 

 
139.4

 
 

 
 
 
139.4

Other comprehensive loss
 

 
 

 
 

 
 

 
 

 
(46.4
)
 
 
 
(46.4
)
Employee stock purchase plan
 

 
0.2

 

 
2.8

 
 

 
 

 
 
 
2.8

Net settlement on vesting of restricted stock units
 

 
0.9

 

 
(11.7
)
 
 

 
 

 
 
 
(11.7
)
Share repurchase(a)
 
 
 
 
 
 
 
 
 
 
 
 
(467.2
)
 
(467.2
)
Stock-based employee compensation charges, net of tax
 

 
 

 
 

 
19.7

 
 

 
 

 
 
 
19.7

Exercise of stock options, net of tax
 

 
2.0

 

 
18.6

 
 

 
 

 
 
 
18.6

Common shares issued to Directors
 

 

 

 
1.7

 
 

 
 

 
 
 
1.7

June 30, 2013
$

 
424.6

 
$
4.2

 
$
3,265.1

 
$
(564.6
)
 
$
(73.3
)
 
$
(467.2
)
 
$
2,164.2

_________________________________________________
(a) In March 2013, Hertz Holdings repurchased 23.2 million shares at a price of $20.14 per share.

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 Millions of Dollars)
Unaudited
 
Six Months Ended
June 30,
 
2013
 
2012
Cash flows from operating activities:
 
 
 
Net income
$
139.4

 
$
36.6

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation of revenue earning equipment
1,194.8

 
990.3

Depreciation of property and equipment
101.8

 
85.5

Amortization of other intangible assets
60.7

 
39.0

Amortization and write-off of deferred financing costs
26.3

 
30.6

Amortization and write-off of debt discount
10.5

 
14.9

Stock-based compensation charges
19.7

 
15.0

Gain on derivatives
(3.6
)
 
(0.9
)
Loss on disposal of business
1.5

 
0.4

Loss on revaluation of foreign denominated debt

 
2.5

Provision for losses on doubtful accounts
21.4

 
13.6

Deferred taxes on income
93.5

 
31.3

Gain on sale of property and equipment
(1.5
)
 
(0.7
)
Changes in assets and liabilities, net of effects of acquisition:
 
 
 
Receivables
(227.4
)
 
(226.6
)
Inventories, prepaid expenses and other assets
(58.6
)
 
(21.0
)
Accounts payable
85.3

 
142.1

Accrued liabilities
(6.1
)
 
7.9

Accrued taxes
15.7

 
16.8

Public liability and property damage
(14.8
)
 
(6.8
)
Net cash provided by operating activities
1,458.6

 
1,170.5

Cash flows from investing activities:
 
 
 
Net change in restricted cash and cash equivalents
175.4

 
130.1

Revenue earning equipment expenditures
(6,825.5
)
 
(5,711.0
)
Proceeds from disposal of revenue earning equipment
3,742.8

 
3,608.3

Property and equipment expenditures
(168.1
)
 
(137.2
)
Proceeds from disposal of property and equipment
42.5

 
56.4

Acquisitions, net of cash acquired
(229.2
)
 
(161.8
)
Other investing activities
(2.0
)
 
(0.6
)
Net cash used in investing activities
$
(3,264.1
)
 
$
(2,215.8
)
   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 Millions of Dollars)
Unaudited
 
Six Months Ended
June 30,
 
2013
 
2012
Cash flows from financing activities:
 
 
 
Proceeds from issuance of long-term debt
$
1,204.4

 
$
270.5

Payment of long-term debt
(320.7
)
 
(643.1
)
Short-term borrowings:
 
 
 
Proceeds
332.0

 
246.7

Payments
(435.9
)
 
(656.2
)
Proceeds under the revolving lines of credit
3,680.1

 
3,535.5

Payments under the revolving lines of credit
(2,217.9
)
 
(1,991.7
)
Purchase of noncontrolling interest

 
(38.0
)
Proceeds from employee stock purchase plan
2.4

 
2.0

Proceeds from exercise of stock options
18.6

 
5.7

Purchase of treasury shares
(467.2
)
 

Net settlement on vesting of restricted stock units
(11.7
)
 
(20.0
)
Payment of financing costs
(20.6
)
 
(6.9
)
Net cash provided by financing activities
1,763.5

 
704.5

Effect of foreign exchange rate changes on cash and cash equivalents
(8.2
)
 
(4.8
)
Net decrease in cash and cash equivalents during the period
(50.2
)
 
(345.6
)
Cash and cash equivalents at beginning of period
533.3

 
931.8

Cash and cash equivalents at end of period
$
483.1

 
$
586.2

Supplemental disclosures of cash flow information:
 
 
 
Cash paid during the period for:
 
 
 
Interest (net of amounts capitalized)
$
316.4

 
$
281.9

Income taxes
43.0

 
37.7

Supplemental disclosures of non-cash flow information:
 
 
 
Purchases of revenue earning equipment included in accounts payable and accrued liabilities
$
561.6

 
$
598.6

Sales of revenue earning equipment included in receivables
118.8

 
178.4

Purchases of property and equipment included in accounts payable   
58.6

 
42.1

Sales of property and equipment included in receivables
18.5

 
9.2

Consideration for acquisitions and divestitures
18.0

 

   
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 a holding company that operates its business through its subsidiaries, including The Hertz Corporation, or “Hertz,” which 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 and Dollar Thrifty Automotive Group, Inc., or "Dollar Thrifty."
We operate our car rental business through the Hertz, Dollar and Thrifty brands from corporate, licensee and franchisee locations in North America, Europe, Latin America, Asia, Australia, Africa, the Middle East and New Zealand and our equipment rental business our equipment rental business segment, we rent equipment through in the United States, Canada, France, Spain, China and Saudi Arabia, as well as through our international licensees. We and our predecessors have been in the car rental business since 1918 and in the equipment rental business since 1965. We also own Donlen Corporation, or "Donlen," based in Northbrook, Illinois, which is a leader in providing fleet leasing and management services.
On November 19, 2012, Hertz completed the acquisition of Dollar Thrifty, a car rental business. On December 12, 2012, Hertz completed the sale of Simply Wheelz LLC, a wholly owned subsidiary of Hertz that operated our Advantage Rent A Car business. See Note 5—Business Combinations and Divestitures.
In May 2013, we announced plans to relocate our worldwide headquarters to Estero, Florida from Park Ridge, New Jersey over a two-year period.
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, 2012, filed with the United States Securities and Exchange Commission, or "SEC," on March 4, 2013, or the "Form 10-K," have been followed in preparing the accompanying condensed consolidated financial statements.
The December 31, 2012 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."
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.
The Company has revised its consolidated statement of cash flows to correctly present borrowings and repayments related to its revolving lines of credits on a gross basis. These amounts had previously been presented on a net basis within the financing section. This revision had no impact on the Company's total operating, investing or financing cash flows.
Recently Issued Accounting Pronouncements
In July 2012, the Financial Accounting Standards Board, or "FASB," issued Accounting Standards Update, or "ASU," No. 2012-02, "Intangibles—Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment," or "ASU 2012-02" which states that an entity has the option first to assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that an indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, an entity concludes that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the entity is not required to take further action.

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

However, if an entity concludes otherwise, then it is required to determine the fair value of the indefinite-lived intangible asset and perform the quantitative impairment test by comparing the fair value with the carrying amount. This provision is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. This accounting guidance is not expected to have a material impact on our consolidated financial statements or financial statement disclosures.
In March 2013, the FASB issued ASU No. 2013-05, “Foreign Currency Matters (Topic 830): Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity,” or “ASU 2013-05”, which permits an entity to release cumulative translation adjustments into net income when a reporting entity (parent) ceases to have a controlling financial interest in a subsidiary or group of assets that is a business within a foreign entity. Accordingly, the cumulative translation adjustment should be released into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided, or, if a controlling financial interest is no longer held. The revised standard is effective for reporting periods beginning after December 15, 2013. The amendments should be applied prospectively to derecognition events occurring after the effective date. Prior periods should not be adjusted. Early adoption is permitted. This accounting guidance is not expected to have a material impact on our consolidated financial statements or financial statement disclosures.
In July 2013, the FASB issued ASU No. 2013-11, "Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists," an amendment to FASB Accounting Standards Codification, or "ASC" Topic 740, Income Taxes, or "FASB ASC Topic 740." This update clarifies that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward if such settlement is required or expected in the event the uncertain tax position is disallowed. In situations where a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction or the tax law of the jurisdiction does not require, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. This ASU is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013. Early adoption and retrospective application are permitted. This accounting guidance is not expected to have a material impact on our consolidated financial statements or financial statement disclosures.
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.
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, 2013 and December 31, 2012, the portion of total restricted cash and cash equivalents that was associated with our Fleet Debt facilities and LKE Program was $351.6 million and $494.0 million, respectively. The decrease in restricted cash and cash equivalents associated with our fleet of $142.4 million from December 31, 2012 to June 30, 2013 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, 2013
 
 
 
 
 
Goodwill
$
1,287.5

 
$
775.4

 
$
2,062.9

Accumulated impairment losses
(46.1
)
 
(674.9
)
 
(721.0
)
 
1,241.4

 
100.5

 
1,341.9

 
 
 
 
 
 
Goodwill acquired during the period
9.4

 

 
9.4

Adjustments to previously recorded purchase price allocation(a)
15.0

 
1.7

 
16.7

Other changes during the period(b)
(1.6
)
 
(0.1
)
 
(1.7
)
 
22.8

 
1.6

 
24.4

 
 
 
 
 
 
Balance as of June 30, 2013
 
 
 
 
 
Goodwill
1,310.3

 
777.0

 
2,087.3

Accumulated impairment losses
(46.1
)
 
(674.9
)
 
(721.0
)
 
$
1,264.2

 
$
102.1

 
$
1,366.3


 
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 year
884.9

 
82.0

 
966.9

Adjustments to previously recorded purchase price allocation(c)
(15.3
)
 

 
(15.3
)
Other changes during the year(d)
(1.4
)
 
(0.4
)
 
(1.8
)
 
868.2

 
81.6

 
949.8

 
 
 
 
 
 
Balance as of December 31, 2012
 
 
 
 
 
Goodwill
1,287.5

 
775.4

 
2,062.9

Accumulated impairment losses
(46.1
)
 
(674.9
)
 
(721.0
)
 
$
1,241.4

 
$
100.5

 
$
1,341.9

_______________________________________________________________________________
(a)
Consists of adjustments related to purchase accounting and deferred tax during 2013.
(b)
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.
(c)
Consists of deferred tax adjustments recorded during 2012.
(d)
Primarily consists of changes resulting from disposals and the translation of foreign currencies at different exchange rates from the beginning of the year to the end of the year.


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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, 2013
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Value
Amortizable intangible assets:
 
 
 
 
 
Customer-related
$
694.6

 
$
(468.5
)
 
$
226.1

Other(1)
454.0

 
(59.8
)
 
394.2

Total
1,148.6

 
(528.3
)
 
620.3

Indefinite-lived intangible assets:
 
 
 
 
 
Trade name
3,330.0

 

 
3,330.0

Other(2)
18.2

 

 
18.2

Total
3,348.2

 

 
3,348.2

Total other intangible assets, net
$
4,496.8

 
$
(528.3
)
 
$
3,968.5

 
 
December 31, 2012
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Value
Amortizable intangible assets:
 
 
 
 
 
Customer-related
$
694.7

 
$
(434.0
)
 
$
260.7

Other(1)
459.6

 
(33.8
)
 
425.8

Total
1,154.3

 
(467.8
)
 
686.5

Indefinite-lived intangible assets:
 
 
 
 
 
Trade name
3,330.0

 

 
3,330.0

Other(2)
15.6

 

 
15.6

Total
3,345.6

 

 
3,345.6

Total other intangible assets, net
$
4,499.9

 
$
(467.8
)
 
$
4,032.1

_______________________________________________________________________________
(1)
Other amortizable intangible assets primarily include Dollar Thrifty concession agreements, 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, 2013 and 2012 was approximately $30.2 million and $19.8 million, respectively. Amortization of other intangible assets for the six months ended June 30, 2013 and 2012 was approximately $60.7 million and $39.0 million, respectively. Based on our amortizable intangible assets as of June 30, 2013, we expect amortization expense to be approximately $60.0 million for the remainder of 2013, $116.4 million in 2014, $113.9 million in 2015, $64.9 million in 2016 and $51.8 million in 2017.
Note 5—Business Combinations and Divestitures
Dollar Thrifty Acquisition
On November 19, 2012, Hertz Holdings completed the Dollar Thrifty acquisition pursuant to the terms of the Merger Agreement with Dollar Thrifty and a wholly owned Hertz subsidiary, or "Merger Sub." In accordance with the terms of the Merger Agreement, Merger Sub completed a tender offer in which it purchased a majority of the shares of Dollar Thrifty common stock then outstanding at a price equal to $87.50 per share in cash. Merger Sub subsequently acquired the remaining shares of Dollar Thrifty common stock by means of a short-form merger in which such shares were converted into the right to receive the same $87.50 per share in cash paid in the tender offer. The total purchase price was approximately $2,592.0 million, comprised of $2,551.0 million of cash, including our use of approximately $404.0

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

million of cash and cash equivalents available from Dollar Thrifty, and the fair value of our previously held equity interest in Dollar Thrifty of $41.0 million. As a condition of the Merger Agreement, and pursuant to a divestiture agreement reached with the Federal Trade Commission, or "FTC," Hertz divested its Simply Wheelz subsidiary, which owned and operated the Advantage brand, and secured for the buyer of Advantage certain Dollar Thrifty on-airport car rental concessions. Dollar Thrifty is now a wholly-owned subsidiary of Hertz.
The purchase price of Dollar Thrifty was funded with (i) cash proceeds of $1,950.0 million received by Hertz from its issuance of $1,950.0 million in aggregate principal amount of Senior Notes and Term Loans, (ii) approximately $404.0 million of acquired cash and cash equivalents from Dollar Thrifty, and (iii) the balance funded by Hertz's existing cash.
The purchase price was allocated to the estimated fair values of the assets acquired and liabilities assumed on the closing date of November 19, 2012. For the preliminary purchase price allocation refer to 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."
Adjustments to the preliminary purchase price allocation have been made to reflect revised estimates of the fair value of the assets acquired and liabilities assumed at November 19, 2012 and is based on the best information available to management at the time of the preparation of this report and is preliminary pending the completion of the final valuation analysis of the Dollar Thrifty assets and liabilities, including the valuation of income taxes. The revisions primarily related to valuation of certain contracts and accrued liabilities, and the resulting changes to goodwill. Providing for these adjustments in previous periods would not have a material impact on the reported operating results for the three month periods ended December 31, 2012 and March 31, 2013.
Unaudited pro forma financial information
The following table presents unaudited pro forma financial information as if the acquisition of Dollar Thrifty had occurred on January 1, 2012 for the period presented below (in millions of dollars).
 
Revenue
 
Earnings
2012 supplemental pro forma for the second quarter of 2012 (combined entity)
$
2,555.1

 
$
115.5

2012 supplemental pro forma for the first half of 2012 (combined entity)
$
4,812.5

 
$
74.4

                
The unaudited pro forma consolidated results do not purport to project the future results of operations of the combined entity nor do they reflect the expected realization of any cost savings associated with the acquisition. The unaudited pro forma consolidated results reflect the historical financial information of Hertz Holdings and Dollar Thrifty, adjusted for increases in amortization expense related to intangible assets acquired, additional interest expense associated with the financing relating to the acquisition, elimination of the results of operations of the Advantage business and locations to be divested where Dollar Thrifty operated at least one of its brands prior to the consummation of the Dollar Thrifty acquisition, and including an estimated amount of leasing revenue to be earned by Hertz from leasing vehicles to the buyer of Advantage.
Other Acquisitions
On April 15, 2013, Hertz entered into definitive agreements with China Auto Rental Holdings, Inc., or ‘‘China Auto Rental,’’ and related parties pursuant to which Hertz made a strategic investment in China Auto Rental. China Auto Rental is the largest car rental company in China. Pursuant to the transaction, Hertz invested cash in, and agreed to contribute its China Rent-a-Car entities to, China Auto Rental. For this investment, Hertz received common stock and a convertible note in return and will receive an additional convertible note upon completion of the contribution. Upon the initial closing of the transaction, which occurred on May 1, 2013, Hertz owns 10% of China Auto Rental’s ordinary shares and has a seat on China Auto Rental’s Board. We have de-consolidated Hertz China Rent-a-Car entities and classified the convertible notes as available for sale securities. Upon conversion of the convertible notes, Hertz would have 18.64% on a fully diluted basis. This transaction will be accounted for under the equity method of accounting in accordance with GAAP.
During the six months ended June 30, 2013, we re-acquired five domestic car rental locations from our former licensees and added five international locations through an external acquisition. 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, 2013.

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

Divestitures
Potential Divestiture of Selected Dollar Thrifty Airport Locations
In order to obtain regulatory approval and clearance for the Dollar Thrifty acquisition, Hertz agreed to dispose of Advantage, to secure for the buyer of Advantage certain on-airport car rental concessions and related assets at certain locations where Dollar Thrifty operated at least one of its brands. As of June 30, 2013, Hertz completed the transfer of most of these Dollar Thrifty locations, and had a remaining loss reserve including estimated support payments, of $15.7 million.
Advantage Divestiture
On December 12, 2012, Hertz completed the sale of Simply Wheelz LLC, or the “Advantage divestiture,” a wholly owned subsidiary of Hertz that operated our Advantage Rent A Car business, or “Advantage.” As part of the sale agreement, Hertz agreed to sublease vehicles to the buyer of Advantage for use in continuing the operations of Advantage, for a period no longer than two years from the closing date. As such, Hertz will have significant continuing involvement in the operations of the disposed Advantage business. Therefore, the operating results associated with the Advantage business will continue to be classified as part of our continuing operations in the consolidated statements of operations for all periods presented.
Note 6—Taxes on Income
The effective tax rate for the three months ended June 30, 2013 and 2012 was 42.7% and 41.5%, respectively. The effective tax rate for the six months ended June 30, 2013 and 2012 was 50.9% and 70.0%, respectively. The effective tax rate for the full fiscal year 2013 is expected to be approximately 41%. The provision for taxes on income of $90.5 million for the three months ended June 30, 2013 increased from $65.8 million for the three months ended June 30, 2012, 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 are not realized, and non-deductible acquisition costs related to the China transaction. The provision for taxes on income of $144.8 million for the six months ended June 30, 2013 increased from $85.3 million for the six months ended June 30, 2012, 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 are not realized, and non-deductible acquisition costs related to the China transaction.
Note 7—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,
 
2013
 
2012
Depreciation of revenue earning equipment
$
611.8

 
$
539.5

Adjustment of depreciation upon disposal of revenue earning equipment
11.3

 
(41.2
)
Rents paid for vehicles leased
18.0

 
21.5

Total
$
641.1

 
$
519.8

 
Six Months Ended
June 30,
 
2013
 
2012
Depreciation of revenue earning equipment
$
1,184.8

 
$
1,070.9

Adjustment of depreciation upon disposal of revenue earning equipment
10.0

 
(80.6
)
Rents paid for vehicles leased
33.3

 
44.6

Total
$
1,228.1

 
$
1,034.9

The adjustment of depreciation upon disposal of revenue earning equipment for the three months ended June 30, 2013 and 2012, included net losses of $17.5 million and net gains of $38.3 million, respectively, on the disposal of vehicles used in our car rental operations and gains of $6.2 million and $2.9 million, respectively, on the disposal of

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

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, 2013 and 2012, included net losses of $20.8 million and net gains of $73.2 million, respectively, on the disposal of vehicles used in our car rental operations and net gains of $10.8 million and $7.4 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, 2013, 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 $14.8 million and $15.5 million in depreciation expense for the three-month and six-month periods ended June 30, 2013, respectively. Prospective changes include the impact of car sales channel diversification and acceleration of our retail sales expansion. During the three-month and six-month periods ended June 30, 2013, the depreciation rate changes in certain of our equipment rental operations resulted in a net decrease of $0.1 million and $0.0 million, respectively, in depreciation expense.
Note 8—Debt
Our debt consists of the following (in millions of dollars):
Facility
Average Interest Rate at June 30, 2013(1)
 
Fixed or
Floating
Interest
Rate
 
Maturity
 
June 30,
2013
 
December 31,
2012
Corporate Debt
 
 
 
 
 
 
 
 
 
Senior Term Facility
3.26%
 
Floating
 
3/2018
 
$
2,114.8

 
$
2,125.5

Senior ABL Facility
2.89%
 
Floating
 
3/2016
 
1,005.8

 
195.0

Senior Notes(2)
6.58%
 
Fixed
 
4/2018–10/2022
 
3,900.0

 
3,650.0

Promissory Notes
6.96%
 
Fixed
 
6/2012–1/2028
 
48.7

 
48.7

Convertible Senior Notes
5.25%
 
Fixed
 
6/2014
 
474.7

 
474.7

Other Corporate Debt
3.51%
 
Floating
 
Various
 
58.5

 
88.7

Unamortized Net Discount (Corporate)(3)
 
 
 
 
 
 
(23.7
)
 
(37.3
)
Total Corporate Debt
 
 
 
 
 
 
7,578.8

 
6,545.3

Fleet Debt
 
 
 
 
 
 
 
 
 
HVF U.S. ABS Program
 
 
 
 
 
 
 
 
 
HVF U.S. Fleet Variable Funding Notes
 
 
 
 
 
 
 
 
 
HVF Series 2009-1(4)
1.04%
 
Floating
 
3/2014
 
2,590.0

 
2,350.0

 
 
 
 
 
 
 
2,590.0

 
2,350.0

HVF U.S. Fleet Medium Term Notes
 
 
 
 
 
 
 
 
 
HVF Series 2009-2(4)
5.37%
 
Fixed
 
3/2013–3/2015
 
807.5

 
1,095.9

HVF Series 2010-1(4)
3.77%
 
Fixed
 
2/2014–2/2018
 
749.8

 
749.8

HVF Series 2011-1(4)
2.86%
 
Fixed
 
3/2015–3/2017
 
598.0

 
598.0

HVF Series 2013-1(4)
1.68%
 
Fixed
 
8/2016–8/2018
 
950.0

 

 
 
 
 
 
 
 
3,105.3

 
2,443.7

RCFC U.S. ABS Program
 
 
 
 
 
 
 
 
 
RCFC U.S. Fleet Variable Funding Notes
 
 
 
 
 
 
 
 
 
RCFC Series 2010-3 Notes(4)(5)
1.03%
 
Floating
 
12/2013
 
540.0

 
519.0

RCFC U.S. Fleet Medium Term Notes
 
 
 
 
 
 
 
 
 

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

Facility
Average Interest Rate at June 30, 2013(1)
 
Fixed or
Floating
Interest
Rate
 
Maturity
 
June 30,
2013
 
December 31,
2012
RCFC Series 2011-1 Notes(4)(5)
2.81%
 
Fixed
 
2/2015
 
500.0

 
500.0

RCFC Series 2011-2 Notes(4)(5)
3.21%
 
Fixed
 
5/2015
 
400.0

 
400.0

 
 
 
 
 
 
 
1,440.0

 
1,419.0

Donlen ABS Program
 
 
 
 
 
 
 
 
 
Donlen GN II Variable Funding Notes(4)
1.00%
 
Floating
 
12/2013
 
943.8

 
899.3

Other Fleet Debt
 
 
 
 
 
 
 
 
 
U.S. Fleet Financing Facility
2.95%
 
Floating
 
9/2015
 
171.0

 
166.0

European Revolving Credit Facility
2.67%
 
Floating
 
6/2015
 
357.9

 
185.3

European Fleet Notes
8.50%
 
Fixed
 
7/2015
 
520.5

 
529.4

European Securitization(4)
2.50%
 
Floating
 
7/2014
 
363.0

 
242.2

Hertz-Sponsored Canadian Securitization(4)
2.14%
 
Floating
 
3/2014
 
124.2

 
100.5

Dollar Thrifty-Sponsored Canadian Securitization(4)(5)
2.13%
 
Floating
 
8/2014
 
76.4

 
55.3

Australian Securitization(4)
4.17%
 
Floating
 
12/2014
 
119.7

 
148.9

Brazilian Fleet Financing Facility
13.89%
 
Floating
 
10/2013
 
13.0

 
14.0

Capitalized Leases
4.08%
 
Floating
 
Various
 
429.6

 
337.6

Unamortized Discount (Fleet)
 
 
 
 
 
 
8.8

 
12.1

 
 
 
 
 
 
 
2,184.1

 
1,791.3

Total Fleet Debt
 
 
 
 
 
 
10,263.2

 
8,903.3

Total Debt
 
 
 
 
 
 
$
17,842.0

 
$
15,448.6

_______________________________________________________________________________
Note:
For further information on the definitions and terms of our debt, see Note 5 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, 2013 weighted average interest rate (weighted by principal balance).
(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, 2013 and December 31, 2012, the outstanding principal amount for each such series of the Senior Notes is as specified below.
 
Outstanding Principal (in millions)
Senior Notes
June 30, 2013
 
December 31, 2012
4.25% Senior Notes due April 2018
$
250.0

 
$

7.50% Senior Notes due October 2018
700.0

 
700.0

6.75% Senior Notes due April 2019
1,250.0

 
1,250.0

5.875% Senior Notes due October 2020
700.0

 
700.0

7.375% Senior Notes due January 2021
500.0

 
500.0

6.25% Senior Notes due October 2022
500.0

 
500.0

 
$
3,900.0

 
$
3,650.0

(3)
As of June 30, 2013 and December 31, 2012, $27.0 million and $40.6 million, respectively, of the unamortized corporate discount relates to the 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.
(5)
RCFC U.S. ABS Program and the Dollar Thrifty-Sponsored Canadian Securitization represent fleet debt acquired in connection with the Dollar Thrifty acquisition on November 19, 2012.

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

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:
2014
$
7,503.0

 
(including $7,215.8 of other short-term borrowings*)
2015
$
2,124.4

 
 
2016
$
1,140.0

 
 
2017
$
366.5

 
 
2018
$
2,819.1

 
 
After 2018
$
3,903.9

 
 
_______________________________________________________________________________
*
Our short-term borrowings as of June 30, 2013 include, among other items, the amounts outstanding under the Senior ABL Facility, HVF U.S. Fleet Variable Funding Notes, RCFC U.S. Fleet Variable Funding Notes, Donlen GN II Variable Funding Notes, U.S. Fleet Financing Facility, European Revolving Credit Facility, European Securitization, Hertz-Sponsored Canadian Securitization, Dollar Thrifty-Sponsored Canadian Securitization, Australian Securitization, Brazilian Fleet Financing Facility and Capitalized Leases. 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, 2013 and remain as such through September 30, 2013. As of June 30, 2013, short-term borrowings had a weighted average interest rate of 2.1%.
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, 2013, there were outstanding standby letters of credit totaling $664.4 million. Of this amount, $638.0 million was issued under the Senior Credit Facilities. As of June 30, 2013, none of these letters of credit have been drawn upon.
2013 Events
On January 1, 2013, our Convertible Senior Notes became convertible again. 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, 2012. The Convertible Senior Notes continued to be convertible until June 30, 2013, and on July 1, 2013, our Convertible Senior Notes became convertible again. 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 June 30, 2013. The Convertible Senior Notes continue to be convertible through September 30, 2013, and may be convertible thereafter, if one or more of the conversion conditions specified in the indenture is satisfied during future measurement periods. In connection with our repurchase of the shares of our common stock in March 2013, we changed our settlement policy to provide that we will settle conversions of our Convertible Senior Notes using 100% shares of our common stock. Previously, we had a policy of settling the conversion of our Convertible Senior Notes using a combination settlement, which called for settling the fixed dollar amount per $1,000 in principal amount in cash and settling in shares the excess conversion value, if any.
In January 2013, Hertz Vehicle Financing LLC, or "HVF," an insolvency remote, direct, wholly-owned, special purpose subsidiary of Hertz, completed the issuance of $950.0 million in aggregate principal amount of three year and five year Series 2013-1 Rental Car Asset Backed Notes, Class A and Class B. The $282.75 million of three year Class A notes carry a 1.12% coupon, the $42.25 million of three year Class B notes carry a 1.86% coupon, the $543.75 million of five year Class A notes carry a 1.83% coupon, and the $81.25 million of five year Class B notes carry a 2.48% coupon. The three year notes and five year notes have expected final payment dates in August 2016 and August 2018, respectively. The Class B notes are subordinated to the Class A notes.
The net proceeds from the sale of HVF's Series 2013-1 Rental Car Asset Backed Notes was, to the extent permitted by the applicable agreements, (i) used to pay the purchase price of vehicles acquired by HVF pursuant to HVF's U.S. ABS Program (as defined herein), (ii) used to pay the principal amount of other HVF U.S. ABS Program indebtedness

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

that is then permitted or required to be paid or (iii) released to HVF to be distributed to Hertz or otherwise used by HVF for general purposes.
In February 2013, Hertz caused its Brazilian operating subsidiary to amend the Brazilian Fleet Financing Facility to extend the maturity date from February 2013 to October 2013.
In March 2013, Hertz issued $250 million in aggregate principal amount of 4.25% Senior Notes due 2018. The proceeds of this March 2013 offering were used by Hertz to replenish a portion of its liquidity, after having dividended $467.2 million in available liquidity to us, which we used to repurchase 23,200,000 shares of our common stock in March 2013.
In April 2013, Hertz entered into an Amendment No. 2, or "Amendment No. 2," to the Senior Term Facility, primarily to reduce the interest rate applicable to a portion of the outstanding term loans under the Senior Term Facility. Prior to Amendment No. 2, approximately $1,372.0 million of tranche B term loans, or “Tranche B Term Loans”, under the Senior Term Facility bore interest at a floating rate measured by reference to, at Hertz's option, either (i) an adjusted London inter-bank offered rate not less than 1.00 percent plus a borrowing margin of 2.75 percent per annum or (ii) an alternate base rate plus a borrowing margin of 1.75 percent per annum. Pursuant to Amendment No. 2, certain of the existing lenders under the Senior Term Facility converted their existing Tranche B Term Loans into a new tranche of tranche B-2 term loans, or the “Tranche B-2 Term Loans”, in an aggregate principal amount, along with new loans advanced by certain new lenders, of approximately $1,372.0 million. The proceeds of Tranche B-2 Term Loans advanced by the new lenders were used to prepay in full all of the Tranche B Term Loans that were not converted into Tranche B-2 Term Loans.
The Tranche B-2 Term Loans bear interest at a floating rate measured by reference to, at Hertz's option, either (i) an adjusted London inter-bank offered rate not less than 0.75 percent plus a borrowing margin of 2.25 percent per annum or (ii) an alternate base rate plus a borrowing margin of 1.25 percent per annum. The terms and conditions of the new Tranche B-2 Term Loans with respect to maturity, collateral, and covenants are otherwise unchanged compared to the Tranche B Term Loans.
In May 2013, the U.K. Leveraged Financing was amended to provide for additional amounts available under the U.K. Leveraged Financing of £25 million (the equivalent of $38.3 million as of June 30, 2013) for a commitment period running from May 30, 2013 to October 30, 2013.
In May 2013, HVF amended the HVF Series 2009-1 Notes to permit aggregate maximum borrowings of $2,738.8 million (subject to borrowing base availability).
In June 2013, Hertz Holdings Netherlands B.V., an indirect wholly-owned subsidiary of Hertz organized under the laws of Netherlands, or "HHN BV," amended the European Revolving Credit Facility to provide for aggregate maximum borrowings of an additional €100 million (the equivalent of $130.1 million as of June 30, 2013), subject to borrowing base availability, for a commitment period running from June 12, 2013 to December 16, 2013.
In the second quarter of 2013, HC Limited Partnership amended the Hertz-Sponsored Canadian Securitization to extend the maturity from June 2013 to March 2014.
For subsequent events relating to our indebtedness, see Note 18—Subsequent Events.
Registration Rights
Pursuant to the terms of the exchange and registration rights agreement entered into in connection with the issuance of $250 million in aggregate principal amount of the 4.25% Senior Notes due 2018 in March 2013, Hertz 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 2014 or failing to complete the exchange offer by April 2014, 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 any such failure 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%. A registration statement on Form S-4 was filed with the SEC on June 26, 2013 covering the exchange of such notes. 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.

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

Guarantees and Security
In February 2013 and March 2013, we added Dollar Thrifty and certain of its subsidiaries as guarantors under certain of our debt instruments and credit facilities including the Senior Term Facility and the Senior Notes. 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, 2013 has been issued from the terms as 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, 2013, we were not subject to such contractually specified fixed charge coverage ratio.
Borrowing Capacity and Availability
As of June 30, 2013, 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
$
357.3

 
$
357.3

Total Corporate Debt
357.3

 
357.3

Fleet Debt
 
 
 
HVF U.S. Fleet Variable Funding Notes
148.8

 

RCFC U.S. Fleet Variable Funding Notes
60.0

 

Donlen GN II Variable Funding Notes
60.0

 

U.S. Fleet Financing Facility
19.0

 

European Revolving Credit Facility
58.5

 

European Securitization
157.4

 

Hertz-Sponsored Canadian Securitization
85.0

 

Dollar Thrifty-Sponsored Canadian Securitization
66.9

 

Australian Securitization
112.3

 

Total Fleet Debt
767.9

 

Total
$
1,125.2

 
$
357.3

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, 2013, the Senior Term Facility had approximately $0.1 million available under the letter of credit facility and the Senior ABL Facility had $1,006.5 million available under the letter of credit facility sublimit, subject to borrowing base restrictions.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Unaudited

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, 2013 and December 31, 2012, our International Fleet Financing No. 1 B.V., International Fleet Financing No. 2 B.V. and HA Funding Pty, Ltd. variable interest entities collectively had total assets primarily comprised of loans receivable and revenue earning equipment of $579.3 million and $440.8 million, respectively, and collectively had total liabilities primarily comprised of debt of $578.8 million and $440.3 million, respectively.
Note 9—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,
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
Components of Net Periodic
 
 
 
 
 
 
 
 
 
 
 
Benefit Cost:
 
 
 
 
 
 
 
 
 
 
 
Service cost
$
7.1

 
$
7.0

 
$
0.7

 
$
0.3

 
$

 
$
0.1

Interest cost
6.9

 
7.4

 
2.3

 
2.3

 
0.1

 
0.2

Expected return on plan assets
(7.5
)
 
(8.0
)
 
(3.2
)
 
(3.0
)
 

 

Net amortizations
4.0

 
3.2

 
0.1

 
(0.1
)
 
0.1

 

Net pension /
 
 
 
 
 
 
 
 
 
 
 
postretirement expense
$
10.5

 
$
9.6

 
$
(0.1
)
 
$
(0.5
)
 
$
0.2

 
$
0.3

 
Pension Benefits
 
Postretirement
Benefits (U.S.)
 
U.S.
 
Non-U.S.
 
 
Six Months Ended June 30,
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
Components of Net Periodic
 
 
 
 
 
 
 
 
 
 
 
Benefit Cost:
 
 
 
 
 
 
 
 
 
 
 
Service cost
$
14.4

 
$
13.3

 
$
1.3

 
$
0.6

 
$
0.1

 
$
0.2

Interest cost
13.6

 
13.9

 
4.6

 
4.6

 
0.3

 
0.4

Expected return on plan assets
(15.0
)
 
(15.3
)
 
(6.3
)
 
(6.0
)
 

 

Net amortizations
8.3

 
6.0

 
0.2

 
(0.1
)
 
0.1

 

Net pension /
 
 
 
 
 
 
 
 
 
 
 
postretirement expense
$
21.3

 
$
17.9

 
$
(0.2
)
 
$
(0.9
)
 
$
0.5

 
$
0.6

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, 2013, we contributed $6.9 million and $10.6 million, respectively, to our worldwide pension plans. 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. We expect to contribute between $10 million and $20 million to our U.S. plan during the remainder of 2013. 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.
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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Unaudited

provides the use of a vehicle from our fleet and insurance for the participants' benefit for retired Executive 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 postretirement 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 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.
During 2012, Hertz completely withdrew employees from an existing multi-employer pension plan with the Central States Pension Fund, or the "Pension Fund," and entered into a new agreement with the Pension Fund. In connection with the complete withdrawal from the Pension Fund, Hertz was subject to a withdrawal liability of approximately $23.2 million, which was paid in December 2012.
Note 10—Stock-Based Compensation
In February 2013, we granted 5,247 Restricted Stock Units, or "RSUs," and 1,707,458 Performance Stock Units, or "PSUs," to certain executives and employees at a grant date fair value of $19.95, under the Hertz Global Holdings, Inc. 2008 Omnibus Incentive Plan, or the "Omnibus Plan." Of the total PSUs awarded 1,136,724 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 2013 and combined 2013-2014 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. These PSU awards vest evenly over a three year vesting period. Of the total PSUs awarded, 490,632 PSUs have a performance condition under which the number of units that will ultimately be awarded will be 0% to 100% of the original grant. Satisfaction of the performance condition under this grant is contingent upon final 2013 Corporate EBITDA Margin exceeding a minimum level. "Corporate EBITDA Margin" means Corporate EBITDA as a percentage of Consolidated Revenue. These PSU awards vest evenly over a three year vesting period. Of the total PSUs awarded, 83,567 PSUs have a performance condition under which the number of units that will ultimately be awarded will be 0% to 100% of the original grant. Satisfaction of the performance condition under this grant is contingent upon final 2013 Corporate EBITDA Margin exceeding a minimum level. These PSU awards vest evenly over a two year vesting period. The 5,247 RSUs awarded have a two year cliff vesting period.
In May 2013, we granted 166,576 RSUs at a fair value of $23.80. Of the total RSUs awarded, 162,584 vest 33 1/3% annually over three years, and 3,992 RSUs vest after two years.
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,
 
2013
 
2012
 
2013
 
2012
Compensation expense
$
11.7

 
$
7.5

 
$
19.7

 
$
15.0

Income tax benefit
(4.5
)
 
(2.9
)
 
(7.6
)
 
(5.8
)
Total
$
7.2

 
$
4.6

 
$
12.1

 
$
9.2

As of June 30, 2013, there was approximately $55.4 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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Unaudited

total unrecognized compensation cost is expected to be recognized over the remaining 1.7 years, on a weighted average basis, of the requisite service period that began on the grant dates.
Note 11—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 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 and the reconciliation to consolidated amounts are summarized below (in millions of dollars).
 
Three Months Ended June 30,
 
Revenues
 
Adjusted Pre-Tax Income
 
2013
 
2012
 
2013
 
2012
Car rental
$
2,329.5

 
$
1,889.6

 
$
363.0

 
$
277.4

Equipment rental
384.3

 
335.0

 
74.1

 
42.5

Total reportable segments
2,713.8

 
2,224.6

 
437.1

 
319.9

Other
0.8

 
0.5

 
 

 
 

Total
$
2,714.6

 
$
2,225.1

 
 

 
 

Adjustments:
 
 
 
 
 
 
 
Other reconciling items(1)
 

 
 

 
(122.6
)
 
(86.0
)
Purchase accounting(2)
 

 
 

 
(33.1
)
 
(29.0
)
Non-cash debt charges(3)
 

 
 

 
(19.5
)
 
(20.6
)
Restructuring charges
 

 
 

 
(17.6
)
 
(16.1
)
Restructuring related charges(4)
 

 
 

 
(8.6
)
 
(5.0
)
Integration expenses(5)
 

 
 

 
(9.2
)
 

Derivative gains (losses)(6)
 
 
 
 
(0.1
)
 

Acquisition related costs
 

 
 

 
(9.1
)
 
(4.5
)
Other(7)
 
 
 
 
(5.4
)
 

Income before income taxes
 

 
 

 
$
211.9

 
$
158.7



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

 
Six Months Ended June 30,
 
Revenues
 
Adjusted Pre-Tax Income
 
2013
 
2012
 
2013
 
2012
Car rental
$
4,414.3

 
$
3,547.9

 
$
571.4

 
$
369.0

Equipment rental
735.4

 
637.1

 
119.9

 
68.4

Total reportable segments
5,149.7

 
4,185.0

 
691.3

 
437.4

Other
1.5

 
1.1

 
 

 
 

Total
$
5,151.2

 
$
4,186.1

 
 

 
 

Adjustments:
 
 
 
 
 
 
 
Other reconciling items(1)
 

 
 

 
(232.3
)
 
(174.2
)
Purchase accounting(2)
 

 
 

 
(66.8
)
 
(53.0
)
Non-cash debt charges(3)
 

 
 

 
(36.8
)
 
(45.8
)
Restructuring charges
 

 
 

 
(21.3
)
 
(22.8
)
Restructuring related charges(4)
 

 
 

 
(12.8
)
 
(8.3
)
Integration expenses(5)
 

 
 

 
(20.0
)
 

Acquisition related costs
 

 
 

 
(11.7
)
 
(11.4
)
Other(7)
 
 
 
 
(5.4
)
 

Income before income taxes
 

 
 

 
$
284.2

 
$
121.9

_______________________________________________________________________________
(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 2005 sale of all of Hertz's stock 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 certain 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)
Primarily represents Dollar Thrifty related expenses and adjustments.
(6)
Represents the mark-to-market adjustment on our interest rate caps.
(7)
Primarily represents expenses related to litigation accruals.
Total assets increased $2,646.3 million from December 31, 2012 to June 30, 2013. The increase was primarily related to an increase in our car rental and equipment rental segments' revenue earning equipment, driven by increased volumes, partly offset by a decrease in fleet receivables within our car rental segment, primarily related to the timing of purchases and sales of revenue earning equipment.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Unaudited

Note 12—Accumulated Other Comprehensive Loss
Changes in the accumulated other comprehensive loss balance by component (net of tax) were as follows (in millions of dollars):
 
Pension and Other Post-Employment Benefits
 
Foreign Currency Items
 
Unrealized Losses on Terminated Net Investment Hedges
 
Unrealized Gains on Available for Sale Securities
 
Other
 
Accumulated Other Comprehensive Loss
Balance at January 1, 2013
$
(109.8
)
 
$
102.7

 
$
(19.4
)
 
$

 
$
(0.4
)
 
$
(26.9
)
Other comprehensive income (loss) before reclassification
0.3

 
(55.5
)
 

 
2.1

 
0.1

 
(53.0
)
 
 
 
 
 
 
 
 
 
 
 
 
Amounts reclassified from accumulated other comprehensive income
5.1

 
1.5

 

 

 

 
6.6

 
 
 
 
 
 
 
 
 
 
 
 
Net current period other comprehensive income (loss)
5.4

 
(54.0
)
 

 
2.1

 
0.1

 
(46.4
)
Balance at June 30, 2013
$
(104.4
)
 
$
48.7

 
$
(19.4
)
 
$
2.1

 
$
(0.3
)
 
$
(73.3
)
 
Pension and Other Post-Employment Benefits
 
Foreign Currency Items
 
Unrealized Losses on Terminated Net Investment Hedges
 
Unrealized Gains on Available for Sale Securities
 
Other
 
Accumulated Other Comprehensive Loss
Balance at January 1, 2012
$
(99.6
)
 
$
91.3

 
$
(19.4
)
 
$
0.3

 
$
(1.0
)
 
$
(28.4
)
Other comprehensive income (loss) before reclassification

 
(16.5
)
 

 
3.1

 
0.1

 
(13.3
)
 
 
 
 
 
 
 
 
 
 
 
 
Amounts reclassified from accumulated other comprehensive income
3.7

 

 

 

 

 
3.7

 
 
 
 
 
 
 
 
 
 
 
 
Net current period Other comprehensive income (loss)
3.7

 
(16.5
)
 

 
3.1

 
0.1

 
(9.6
)
Balance at June 30, 2012
$
(95.9
)
 
$
74.8

 
$
(19.4
)
 
$
3.4

 
$
(0.9
)
 
$
(38.0
)
Amounts reclassified from accumulated other comprehensive loss to earnings during the three-month and six-month periods ended June 30, 2013 and 2012 were as follows (in millions of dollars):
<
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
Statement of Operations Captions
 
 
2013
 
2012
 
2013
 
2012
 
Pension and other postretirement benefit plans
 
 
 
 
 
 
 
 
 
 
Amortization of actuarial losses(1)
 
$
4.0