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~~September 30, 2018
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

HERTZ GLOBAL HOLDINGS, INC.

THE HERTZ CORPORATION

(Exact name of registrant as specified in its charter)



DELAWARE	001-37665	61-1770902
DELAWARE	001-07541	13-1938568
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(~~I.R.S~~I.R.S. Employer Identification No.)

	8501 Williams Road Estero, Florida 33928 (239) 301-7000
	8501 Williams Road Estero, Florida 33928 (239) 301-7000
	(Address, including Zip Code, and telephone number, including area code, of registrant's principal executive offices)

	Not Applicable
	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.

Hertz Global Holdings, Inc. Yes x No o

The Hertz Corporation 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).

Hertz Global Holdings, Inc. Yes x No o

The Hertz Corporation Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Hertz Global Holdings, Inc.	Large accelerated filer	o	Accelerated filer	x	Non-accelerated filer ~~(Do not check if a smaller reporting company)~~	o
	Smaller reporting company	o	Emerging growth company	o
	If an emerging growth company, indicate by check mark if the registrant has not elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.			o
The Hertz Corporation	Large accelerated filer	o	Accelerated filer	o	Non-accelerated filer ~~(Do not check if a smaller reporting company)~~	x
	Smaller reporting company	o	Emerging growth company	o
	If an emerging growth company, indicate by check mark if the registrant has not elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.			o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Hertz Global Holdings, Inc. Yes o No x

The Hertz Corporation Yes o No x

Indicate the number of shares outstanding as of the latest practicable date.



	Class	Shares Outstanding at	~~July 30,~~October 29, 2018
Hertz Global Holdings, Inc.	Common Stock, par value $0.01 per share	~~84,179,208~~83,932,275
The Hertz Corporation	Common Stock, par value $0.01 per share	100 (100% owned by Rental Car Intermediate Holdings, LLC)

Table of Contents

HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

THE HERTZ CORPORATION AND SUBSIDIARIES

TABLE OF CONTENTS

Table of Contents

HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

THE HERTZ CORPORATION AND SUBSIDIARIES

PART I—I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Index



		Page
Hertz Global Holdings, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets as of ~~June~~September 30, 2018 and December 31, 2017		2
Condensed Consolidated Statements of Operations for the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2018 and 2017		3
Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2018 and 2017		4
Condensed Consolidated Statements of Cash Flows for the ~~Six~~Nine Months Ended ~~June~~September 30, 2018 and 2017		5
The Hertz Corporation and Subsidiaries
Condensed Consolidated Balance Sheets as of ~~June~~September 30, 2018 and December 31, 2017		7
Condensed Consolidated Statements of Operations for the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2018 and 2017		8
Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2018 and 2017		9
Condensed Consolidated Statements of Cash Flows for the ~~Six~~Nine Months Ended ~~June~~September 30, 2018 and 2017		10
Notes to the Condensed Consolidated Financial Statements
Note 1	Background	12
Note 2	Basis of Presentation and Recently Issued Accounting Pronouncements	12
Note 3	Acquisitions and Divestitures	19
Note 4	Revenue Earning Vehicles	1920
Note 5	Intangible Asset Impairment	21
Note 6	Debt	21
Note 7	Revenue	27
Note 8	Income Tax (Provision) Benefit	30
Note 9	Earnings (Loss) Per Share - Hertz Global	31
Note 10	Fair Value Measurements	31
Note 11	Contingencies and Off-Balance Sheet Commitments	32
Note 12	Related Party Transactions	35
Note 13	Segment Information	36
Note 14	Guarantor and Non-Guarantor Condensed Consolidating Financial Information - Hertz	39

Table of Contents

HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

Unaudited

(In millions, except par value)


	June 30, 2018			December 31, 2017			September 30, 2018			December 31, 2017
ASSETS
Cash and cash equivalents	$	685		$	1,072		$	761		$	1,072
Restricted cash and cash equivalents:
Vehicle	209			386			236			386
Non-vehicle	27			46			29			46
Total restricted cash and cash equivalents	236			432			265			432
Total cash, cash equivalents, restricted cash and restricted cash equivalents	921			1,504			1,026			1,504
Receivables:
Vehicle	354			531			796			531
Non-vehicle, net of allowance of $29 and $33, respectively	1,072			834			1,009			834
Total receivables, net	1,426			1,365			1,805			1,365
Prepaid expenses and other assets	922			687			991			687
Revenue earning vehicles:
Vehicles	17,706			14,574			16,972			14,574
Less accumulated depreciation	(3,289		)	(3,238		)	(3,395		)	(3,238		)
Total revenue earning vehicles, net	14,417			11,336			13,577			11,336
Property and equipment:
Land, buildings and leasehold improvements	1,204			1,233			1,214			1,233
Service equipment and other	790			763			786			763
Less accumulated depreciation	(1,192		)	(1,156		)	(1,219		)	(1,156		)
Total property and equipment, net	802			840			781			840
Other intangible assets, net	3,200			3,242			3,197			3,242
Goodwill	1,083			1,084			1,083			1,084
Total assets^(a)	$	22,771		$	20,058		$	22,460		$	20,058
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable:
Vehicle	$	697		$	294		$	239		$	294
Non-vehicle	794			652			765			652
Total accounts payable	1,491			946			1,004			946
Accrued liabilities	1,158			920			1,306			920
Accrued taxes, net	162			160			181			160
Debt:
Vehicle	12,933			10,431			12,737			10,431
Non-vehicle	4,431			4,434			4,421			4,434
Total debt	17,364			14,865			17,158			14,865
Public liability and property damage	421			427			439			427
Deferred income taxes, net	1,106			1,220			1,145			1,220
Total liabilities^(a)	21,702			18,538			21,233			18,538
Commitments and contingencies
Stockholders' equity:
Preferred Stock, $0.01 par value, no shares issued and outstanding	—			—			—			—
Common Stock, $0.01 par value, 86 and 86 shares issued and 84 and 84 shares outstanding	1			1			1			1
Additional paid-in capital	2,253			2,243			2,256			2,243
Accumulated deficit	(960		)	(506		)	(819		)	(506		)
Accumulated other comprehensive income (loss)	(135		)	(118		)	(135		)	(118		)
Treasury Stock, at cost, 2 shares and 2 shares	(100		)	(100		)	(100		)	(100		)
Total stockholders' equity attributable to Hertz Global	1,059			1,520			1,203			1,520
Non-controlling interest	10			—
Noncontrolling interest							24			—
Total stockholders' equity	1,069			1,520			1,227			1,520
Total liabilities and stockholders' equity	$	22,771		$	20,058		$	22,460		$	20,058

(a)

Hertz Global Holdings, Inc.'s consolidated total assets as of ~~June~~September 30, 2018 and December 31, 2017 include total assets of variable interest entities (“VIEs”) of ~~$706~~$800 million and $524 million, respectively, which can only be used to settle obligations of the VIEs. Hertz Global Holdings, Inc.'s consolidated total liabilities as of ~~June~~September 30, 2018 and December 31, 2017 include total liabilities of VIEs of ~~$696~~$776 million and $524 million, respectively, for which the creditors of the VIEs have no recourse to Hertz Global Holdings, Inc. See "Special Purpose Entities" in Note 6, "Debt," and "Other Relationships" in Note 12, "Related Party Transactions," for further information.

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

Table of Contents

HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Unaudited

(In millions, except per share data)


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017			2018			2017			2018			2017
Revenues:
Worldwide vehicle rental	$	2,217		$	2,062		$	4,111		$	3,827		$	2,584		$	2,413		$	6,694		$	6,240
All other operations	172			162			341			313			174			159			515			473
Total revenues	2,389			2,224			4,452			4,140			2,758			2,572			7,209			6,713
Expenses:
Direct vehicle and operating	1,349			1,255			2,585			2,387			1,459			1,348			4,043			3,735
Depreciation of revenue earning vehicles and lease charges, net	687			743			1,348			1,444			672			700			2,020			2,144
Selling, general and administrative	265			223			498			442			265			217			765			661
Interest expense, net:
Vehicle	127			82			221			153			115			90			336			242
Non-vehicle	73			76			146			136			73			86			218			223
Total interest expense, net	200			158			367			289			188			176			554			465
Intangible asset impairments	—			86			—			86			—			—			—			86
Other (income) expense, net	(26		)	4			(29		)	31			(7		)	(12		)	(36		)	19
Total expenses	2,475			2,469			4,769			4,679			2,577			2,429			7,346			7,110
Income (loss) before income taxes	(86		)	(245		)	(317		)	(539		)	181			143			(137		)	(397		)
Income tax (provision) benefit	23			87			52			158			(41		)	(50		)	12			108
Net income (loss)	$	(63	)	$	(158	)	$	(265	)	$	(381	)	140			93			(125		)	(289		)
Net (income) loss attributable to noncontrolling interests													1			—			1			—
Net income (loss) attributable to Hertz Global													$	141		$	93		$	(124	)	$	(289	)
Weighted average shares outstanding:
Basic	84			83			83			83			84			83			83			83
Diluted	84			83			83			83			84			83			83			83
Earnings (loss) per share - basic and diluted:
Earnings (loss) per share:
Basic earnings (loss) per share	$	(0.75	)	$	(1.90	)	$	(3.19	)	$	(4.59	)	$	1.68		$	1.12		$	(1.49	)	$	(3.48	)
Diluted earnings (loss) per share	$	(0.75	)	$	(1.90	)	$	(3.19	)	$	(4.59	)	$	1.68		$	1.12		$	(1.49	)	$	(3.48	)

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

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Unaudited

(In millions)


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017			2018			2017			2018			2017
Net income (loss)	$	(63	)	$	(158	)	$	(265	)	$	(381	)	$	140		$	93		$	(125	)	$	(289	)
Other comprehensive income (loss):
Foreign currency translation adjustments	(19		)	(4		)	(19		)	12			1			9			(18		)	21
Reclassification of realized gain on securities to other (income) expense	—			—			—			(3		)	—			—			—			(3		)
Reclassification of foreign currency items to other (income) expense, net													(1		)	8			(1		)	8
Net gain (loss) on defined benefit pension plans	5			(3		)	2			(4		)	(1		)	(3		)	1			(7		)
Reclassification from other comprehensive income (loss) to selling, general and administrative expense for amortization of actuarial (gains) losses on defined benefit pension plans	—			1			—			2			—			1			—			3
Reclassification from other comprehensive income (loss) to other income/expense for amortization of actuarial (gains) losses on defined benefit pension plans													2			—			2			—
Total other comprehensive income (loss) before income taxes	(14		)	(6		)	(17		)	7			1			15			(16		)	22
Income tax (provision) benefit related to net gains and losses on defined benefit pension plans	—			—			—			—
Income tax (provision) benefit related to reclassified amounts of net periodic costs on defined benefit pension plans	—			(1		)	—			(1		)	(1		)	—			(1		)	(1		)
Total other comprehensive income (loss)	(14		)	(7		)	(17		)	6			—			15			(17		)	21
Total comprehensive income (loss)	$	(77	)	$	(165	)	$	(282	)	$	(375	)	140			108			(142		)	(268		)
Comprehensive (income) loss attributable to noncontrolling interests													1			—			1			—
Comprehensive income (loss) attributable to Hertz Global													$	141		$	108		$	(141	)	$	(268	)

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

Table of Contents

HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited

(In millions)


	Six Months Ended June 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Cash flows from operating activities:
Net income (loss)	$	(265	)	$	(381	)	$	(125	)	$	(289	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation of revenue earning vehicles, net	1,306			1,410			1,952			2,089
Depreciation and amortization, non-vehicle	113			120			166			182
Amortization of deferred financing costs and debt discount (premium)	26			21			36			33
Loss on extinguishment of debt	22			8			22			8
Stock-based compensation charges	7			12			10			16
Provision for receivables allowance	19			17			29			28
Deferred income taxes, net	(74		)	(175		)	(39		)	(138		)
Impairment charges and asset write-downs	—			116			—			116
Gain on marketable securities	(17		)	(3		)
(Gain) loss on marketable securities							(21		)	(3		)
Gain on sale of Brazil Operations							—			(6		)
Other	3			7			1			(12		)
Changes in assets and liabilities:
Non-vehicle receivables	(275		)	(180		)	(217		)	(184		)
Prepaid expenses and other assets	(84		)	(71		)	(58		)	(25		)
Non-vehicle accounts payable	154			115			119			140
Accrued liabilities	5			(53		)	106			(5		)
Accrued taxes, net	2			(1		)	21			9
Public liability and property damage	—			1			15			18
Net cash provided by (used in) operating activities	942			963			2,017			1,977
Cash flows from investing activities:
Revenue earning vehicles expenditures	(7,610		)	(6,709		)	(10,076		)	(8,683		)
Proceeds from disposal of revenue earning vehicles	3,654			3,835			5,378			5,285
Capital asset expenditures, non-vehicle	(80		)	(84		)	(119		)	(124		)
Proceeds from disposal of property and other equipment	8			11
Proceeds from property and other equipment disposed of or to be disposed of							47			18
Proceeds from sale of Brazil Operations, net of retained cash							—			94
Purchases of marketable securities	(61		)	—			(60		)	—
Sales of marketable securities	36			9			36			9
Other	(2		)	(2		)	(5		)	(4		)
Net cash provided by (used in) investing activities	(4,055		)	(2,940		)	(4,799		)	(3,405		)

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

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

Unaudited

(In millions)


	Six Months Ended June 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Cash flows from financing activities:
Proceeds from issuance of vehicle debt	9,414			5,028			11,871			6,907
Repayments of vehicle debt	(6,829		)	(3,665		)	(9,525		)	(5,887		)
Proceeds from issuance of non-vehicle debt	187			2,100			387			2,100
Repayments of non-vehicle debt	(194		)	(354		)	(398		)	(986		)
Payment of financing costs	(27		)	(34		)	(30		)	(43		)
Early redemption premium payment	(19		)	(5		)	(19		)	(5		)
Contributions from noncontrolling interest owners							25			—
Other	8			(1		)	(3		)	(1		)
Net cash provided by (used in) financing activities	2,540			3,069			2,308			2,085
Effect of foreign currency exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents	(10		)	17			(4		)	26
Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents during the period	(583		)	1,109			(478		)	683
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period	1,504			1,094			1,504			1,094
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period	$	921		$	2,203		$	1,026		$	1,777

Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest, net of amounts capitalized:
Vehicle	$	175		$	130		$	268		$	212
Non-vehicle	142			128			171			164
Income taxes, net of refunds	10			29			15			40
Supplemental disclosures of non-cash information:
Purchases of revenue earning vehicles included in accounts payable and accrued liabilities, net of incentives	$	548		$	546		$	101		$	69
Sales of revenue earning vehicles included in receivables	204			151			658			443
Purchases of non-vehicle capital assets included in accounts payable	42			41			43			49
Sales of non-vehicle capital assets included in receivables	4			5			3			1
Receivable on sale of Brazil Operations							—			13
Revenue earning vehicles and non-vehicle capital assets acquired through capital lease	16			13			17			24

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

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THE HERTZ CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

Unaudited

(In millions, except par value and share data)


	June 30, 2018			December 31, 2017			September 30, 2018			December 31, 2017
ASSETS
Cash and cash equivalents	$	685		$	1,072		$	761		$	1,072
Restricted cash and cash equivalents:
Vehicle	209			386			236			386
Non-vehicle	27			46			29			46
Total restricted cash and cash equivalents	236			432			265			432
Total cash, cash equivalents, restricted cash and restricted cash equivalents	921			1,504			1,026			1,504
Receivables:
Vehicle	354			531			796			531
Non-vehicle, net of allowance of $29 and $33, respectively	1,072			834			1,009			834
Total receivables, net	1,426			1,365			1,805			1,365
Prepaid expenses and other assets	922			687			991			687
Revenue earning vehicles:
Vehicles	17,706			14,574			16,972			14,574
Less accumulated depreciation	(3,289		)	(3,238		)	(3,395		)	(3,238		)
Total revenue earning vehicles, net	14,417			11,336			13,577			11,336
Property and equipment:
Land, buildings and leasehold improvements	1,204			1,233			1,214			1,233
Service equipment and other	790			763			786			763
Less accumulated depreciation	(1,192		)	(1,156		)	(1,219		)	(1,156		)
Total property and equipment, net	802			840			781			840
Other intangible assets, net	3,200			3,242			3,197			3,242
Goodwill	1,083			1,084			1,083			1,084
Total assets^(a)	$	22,771		$	20,058		$	22,460		$	20,058
LIABILITIES AND STOCKHOLDER'S EQUITY
Accounts payable:
Vehicle	$	697		$	294		$	239		$	294
Non-vehicle	794			652			765			652
Total accounts payable	1,491			946			1,004			946
Accrued liabilities	1,158			920			1,306			920
Accrued taxes, net	162			160			181			160
Debt:
Vehicle	12,933			10,431			12,737			10,431
Non-vehicle	4,431			4,434			4,421			4,434
Total debt	17,364			14,865			17,158			14,865
Public liability and property damage	421			427			439			427
Deferred income taxes, net	1,107			1,220			1,146			1,220
Total liabilities^(a)	21,703			18,538			21,234			18,538
Commitments and contingencies
Stockholder's equity:
Common Stock, $0.01 par value, 100 shares issued and outstanding	—			—			—			—
Additional paid-in capital	3,179			3,166			3,183			3,166
Due from affiliate	(48		)	(42		)	(50		)	(42		)
Accumulated deficit	(1,938		)	(1,486		)	(1,796		)	(1,486		)
Accumulated other comprehensive income (loss)	(135		)	(118		)	(135		)	(118		)
Total stockholder's equity attributable to Hertz	1,058			1,520			1,202			1,520
Non-controlling interest	10			—
Noncontrolling interest							24			—
Total stockholder's equity	1,068			1,520			1,226			1,520
Total liabilities and stockholder's equity	$	22,771		$	20,058		$	22,460		$	20,058

(a)

The Hertz Corporation's consolidated total assets as of ~~June~~September 30, 2018 and December 31, 2017 include total assets of variable interest entities (“VIEs”) of ~~$706~~$800 million and $524 million, respectively, which can only be used to settle obligations of the VIEs. The Hertz Corporation's consolidated total liabilities as of ~~June~~September 30, 2018 and December 31, 2017 include total liabilities of VIEs of ~~$696~~$776 million and $524 million, respectively, for which the creditors of the VIEs have no recourse to the Hertz Corporation. See "Special Purpose Entities" in Note 6, "Debt," and "Other Relationships" in Note 12, "Related Party Transactions," for further information.

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

Table of Contents

THE HERTZ CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Unaudited

(In millions)


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017			2018			2017			2018			2017
Revenues:
Worldwide vehicle rental	$	2,217		$	2,062		$	4,111		$	3,827		$	2,584		$	2,413		$	6,694		$	6,240
All other operations	172			162			341			313			174			159			515			473
Total revenues	2,389			2,224			4,452			4,140			2,758			2,572			7,209			6,713
Expenses:
Direct vehicle and operating	1,349			1,255			2,585			2,387			1,459			1,348			4,043			3,735
Depreciation of revenue earning vehicles and lease charges, net	687			743			1,348			1,444			672			700			2,020			2,144
Selling, general and administrative	265			223			498			442			265			217			765			661
Interest expense, net:
Vehicle	127			82			221			153			115			90			336			242
Non-vehicle	71			75			143			134			71			85			213			219
Total interest expense, net	198			157			364			287			186			175			549			461
Intangible asset impairments	—			86			—			86			—			—			—			86
Other (income) expense, net	(26		)	4			(29		)	31			(7		)	(12		)	(36		)	19
Total expenses	2,473			2,468			4,766			4,677			2,575			2,428			7,341			7,106
Income (loss) before income taxes	(84		)	(244		)	(314		)	(537		)	183			144			(132		)	(393		)
Income tax (provision) benefit	23			86			51			157			(42		)	(50		)	10			107
Net income (loss)	$	(61	)	$	(158	)	$	(263	)	$	(380	)	141			94			(122		)	(286		)
Net (income) loss attributable to noncontrolling interests													1			—			1			—
Net income (loss) attributable to Hertz													$	142		$	94		$	(121	)	$	(286	)

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

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THE HERTZ CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Unaudited

(In millions)


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017			2018			2017			2018			2017
Net income (loss)	$	(61	)	$	(158	)	$	(263	)	$	(380	)	$	141		$	94		$	(122	)	$	(286	)
Other comprehensive income (loss):
Foreign currency translation adjustments	(19		)	(4		)	(19		)	12			1			9			(18		)	21
Reclassification of realized gain on securities to other (income) expense	—			—			—			(3		)	—			—			—			(3		)
Reclassification of foreign currency items to other (income) expense, net													(1		)	8			(1		)	8
Net gain (loss) on defined benefit pension plans	5			(3		)	2			(4		)	(1		)	(3		)	1			(7		)
Reclassification from other comprehensive income (loss) to selling, general and administrative expense for amortization of actuarial (gains) losses on defined benefit pension plans	—			1			—			2			—			1			—			3
Reclassification from other comprehensive income (loss) to other income/expense for amortization of actuarial (gains) losses on defined benefit pension plans													2			—			2			—
Total other comprehensive income (loss) before income taxes	(14		)	(6		)	(17		)	7			1			15			(16		)	22
Income tax (provision) benefit related to net gains and losses on defined benefit pension plans	—			—			—			—
Income tax (provision) benefit related to reclassified amounts of net periodic costs on defined benefit pension plans	—			(1		)	—			(1		)	(1		)	—			(1		)	(1		)
Total other comprehensive income (loss)	(14		)	(7		)	(17		)	6			—			15			(17		)	21
Total comprehensive income (loss)	$	(75	)	$	(165	)	$	(280	)	$	(374	)	141			109			(139		)	(265		)
Comprehensive (income) loss attributable to noncontrolling interests													1			—			1			—
Comprehensive income (loss) attributable to Hertz													$	142		$	109		$	(138	)	$	(265	)

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

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THE HERTZ CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited

(In millions)


	Six Months Ended June 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Cash flows from operating activities:
Net income (loss)	$	(263	)	$	(380	)	$	(122	)	$	(286	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation of revenue earning vehicles, net	1,306			1,410			1,952			2,089
Depreciation and amortization, non-vehicle	113			120			166			182
Amortization of deferred financing costs and debt discount (premium)	26			21			36			33
Loss on extinguishment of debt	22			8			22			8
Stock-based compensation charges	7			12			10			16
Provision for receivables allowance	19			17			29			28
Deferred income taxes, net	(73		)	(174		)	(38		)	(137		)
Impairment charges and asset write-downs	—			116			—			116
Gain on marketable securities	(17		)	(3		)
(Gain) loss on marketable securities							(21		)	(3		)
Gain on sale of Brazil Operations							—			(6		)
Other	3			7			1			(12		)
Changes in assets and liabilities:
Non-vehicle receivables	(275		)	(180		)	(217		)	(184		)
Prepaid expenses and other assets	(84		)	(71		)	(58		)	(25		)
Non-vehicle accounts payable	154			115			119			140
Accrued liabilities	5			(53		)	106			(5		)
Accrued taxes, net	2			(1		)	21			9
Public liability and property damage	—			1			15			18
Net cash provided by (used in) operating activities	945			965			2,021			1,981
Cash flows from investing activities:
Revenue earning vehicles expenditures	(7,610		)	(6,709		)	(10,076		)	(8,683		)
Proceeds from disposal of revenue earning vehicles	3,654			3,835			5,378			5,285
Capital asset expenditures, non-vehicle	(80		)	(84		)	(119		)	(124		)
Proceeds from disposal of property and other equipment	8			11
Proceeds from property and other equipment disposed of or to be disposed of							47			18
Proceeds from sale of Brazil Operations, net of retained cash							—			94
Purchases of marketable securities	(61		)	—			(60		)	—
Sales of marketable securities	36			9			36			9
Other	(2		)	(2		)	(5		)	(4		)
Net cash provided by (used in) investing activities	(4,055		)	(2,940		)	(4,799		)	(3,405		)

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

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THE HERTZ CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited

(In millions)


	Six Months Ended June 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Cash flows from financing activities:
Proceeds from issuance of vehicle debt	9,414			5,028			11,871			6,907
Repayments of vehicle debt	(6,829		)	(3,665		)	(9,525		)	(5,887		)
Proceeds from issuance of non-vehicle debt	187			2,100			387			2,100
Repayments of non-vehicle debt	(194		)	(354		)	(398		)	(986		)
Payment of financing costs	(27		)	(34		)	(30		)	(43		)
Early redemption premium payment	(19		)	(5		)	(19		)	(5		)
Advances to Hertz Holdings	(6		)	(3		)	(7		)	(4		)
Contributions from noncontrolling interest owners							25			—
Other	11			—			—			(1		)
Net cash provided by (used in) financing activities	2,537			3,067			2,304			2,081
Effect of foreign currency exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents	(10		)	17			(4		)	26
Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents during the period	(583		)	1,109			(478		)	683
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period	1,504			1,094			1,504			1,094
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period	$	921		$	2,203		$	1,026		$	1,777

Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest, net of amounts capitalized:
Vehicle	$	175		$	130		$	268		$	212
Non-vehicle	142			128			171			164
Income taxes, net of refunds	10			29			15			40
Supplemental disclosures of non-cash information:
Purchases of revenue earning vehicles included in accounts payable and accrued liabilities, net of incentives	$	548		$	546		$	101		$	69
Sales of revenue earning vehicles included in receivables	204			151			658			443
Purchases of non-vehicle capital assets included in accounts payable	42			41			43			49
Sales of non-vehicle capital assets included in receivables	4			5			3			1
Receivable on sale of Brazil Operations							—			13
Revenue earning vehicles and non-vehicle capital assets acquired through capital lease	16			13			17			24

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

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Unaudited

Note 1—Background

Hertz Global Holdings, Inc. ("Hertz Global" when including its subsidiaries and variable interest entities and "Hertz Holdings" excluding its subsidiaries and variable interest entities) was incorporated in Delaware in 2015 to serve as the top-level holding company for Rental Car Intermediate Holdings, LLC, which wholly owns The Hertz Corporation ("Hertz" and interchangeably with Hertz Global, the "Company"), Hertz Global's primary operating company. Hertz was incorporated in Delaware in 1967 and is a successor to corporations that have been engaged in the vehicle rental and leasing business since 1918. Hertz operates its vehicle rental business globally primarily through the Hertz, Dollar and Thrifty brands from company-owned, licensee and franchisee locations in the United States ("U.S."), Africa, Asia, Australia, Canada, the Caribbean, Europe, Latin America, the Middle East and New Zealand. Through its Donlen subsidiary, Hertz provides vehicle leasing and fleet management services.

Note 2—Basis of Presentation and Recently Issued Accounting Pronouncements

Basis of Presentation

This Quarterly Report on Form 10-Q combines the quarterly reports on Form 10-Q for the quarterly period ended September 30, 2018 of Hertz Global and Hertz. Hertz Global consolidates Hertz for financial statement purposes, therefore, disclosures that relate to activities of Hertz also apply to Hertz Global. In the sections that combine disclosure of Hertz Global and Hertz, this report refers to actions as being actions of the Company, or Hertz Global, which is appropriate because the business is one enterprise and Hertz Global operates the business through Hertz. When appropriate, Hertz Global and Hertz are named specifically for their individual disclosures and any significant differences between the operations and results of Hertz Global and Hertz are separately disclosed and explained.

The Company's unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments of a normal recurring nature that are necessary for a fair presentation of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year.

The preparation of financial statements in conformity with U.S. 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.

The December 31, 2017 unaudited condensed consolidated balance sheet data is derived from audited financial statements but does not include all disclosures required by U.S. GAAP. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with information included in the Company's Form 10‑K for the year ended December 31, 2017 (the "2017 Form 10‑K"), as filed with the Securities and Exchange Commission ("SEC") on February 27, 2018. Certain prior period amounts have been reclassified to conform with current period presentation.

As disclosed below in "Recently Issued Accounting Pronouncements," the Company adopted the financial statement disclosure guidance "Restricted Cash" on January 1, 2018.

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Unaudited

Principles of Consolidation

The unaudited condensed consolidated financial statements of Hertz Global include the accounts of Hertz Global and its wholly owned and majority owned U.S. and international subsidiaries. The unaudited condensed consolidated financial statements of Hertz include the accounts of Hertz and its wholly owned and majority owned U.S. and international subsidiaries. The Company is the primary beneficiary of certain variable interest entities, therefore, the assets, liabilities, results of operations and cash flows of the variable interest entities are included in the Company's unaudited condensed consolidated financial statements. The Company accounts for its investment in joint ventures using the equity method when it has significant influence but not control and is not the primary beneficiary. All significant intercompany transactions have been eliminated in consolidation.

Out of Period Adjustments

The Company identified a misstatement in its 2016 financial statements, related to the income tax provision, that it corrected in the second quarter of 2017. The cumulative impact of the adjustment was an increase in net loss of approximately $10 million. There was no impact to loss before income taxes. The misstatement related to an error in the tax provision for U.S. income of a foreign equity investment transaction for fiscal year 2016. The Company considered

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~~HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES~~

~~THE HERTZ CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)~~

~~Unaudited~~

both quantitative and qualitative factors in assessing the materiality of the item and determined that the misstatement was not material to any prior period and not material to the ~~three and six~~nine months ended ~~June 30, 2017.~~

~~Correction of Errors~~

The Company identified classification errors within the operating and investing sections of its unaudited condensed consolidated statement of cash flows for the six months ended June 30, 2017 that were previously disclosed in the Company's Form 10-Q for the quarterly period ended March 31, 2018. The error related to $19 million of intangible software assets for which no payment was made as of June 30, 2017.

The Company considered both quantitative and qualitative factors in assessing the materiality of the classification errors individually, and in the aggregate, and determined that the classification errors are not material and revised the accompanying unaudited condensed consolidated statement of cash flows for the six months ended June 30, 2017, accordingly. Correction of the error decreased cash provided by operating activities for changes in non-vehicle accounts payable by $19 million, decreased cash used in investing activities by $19 million, and decreased capital asset expenditures, non-vehicle by $19 million. Also, there was a $19 million increase in the non-cash supplemental disclosure for purchases of non-vehicle capital assets included in accounts payable. These revisions had no impact to cash flows from financing activities. Additionally, these revisions had no impact on the Company's unaudited condensed consolidated balance sheet as of December 31, 2017 or its unaudited condensed consolidated statement of operations for the three and six months ended JuneSeptember 30, 2017.

Recently Issued Accounting Pronouncements

Adopted

Revenue from Contracts with Customers

In May 2014, the Financial Accounting Standards Board (the "FASB") issued guidance that replaced most existing revenue recognition guidance in U.S. GAAP. The FASB also issued several amendments and updates to the new revenue standard (collectively, “Topic 606”). Topic 606 applies to all contracts with customers except for leases, insurance contracts, financial instruments, certain nonmonetary exchanges and certain guarantees. The core principle of Topic 606 is that an entity should recognize revenue from customers for the transfer of goods or services equal to the amount that it expects to be entitled to receive for those goods or services, as well as when an entity should recognize revenue gross as a principal or net as an agent and how an entity should identify performance obligations. Topic 606 requires disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. The Company adopted Topic 606 on the effective date, January 1, 2018, using a modified retrospective approach applied to all contracts. Prior periods have not been retrospectively adjusted.

The impact to the Company’s financial position, results of operations and cash flows is primarily for revenue associated with the redemption of points earned by customers under the Company’s loyalty programs (“loyalty points”). For transactions that generate loyalty points to the customer, a portion of revenue is deferred until the loyalty points are redeemed by the customer. The amount of revenue deferred is equivalent to the retail value of each loyalty point less an estimated amount representing loyalty points that are not expected to be redeemed.

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Unaudited

The cumulative effect of applying the new guidance to all contracts with customers that were not completed as of January 1, 2018 has been recorded as an adjustment to accumulated deficit, net of tax, as of the adoption date as follows:

Hertz Global



(In millions)	Deferred income taxes, net			Accrued liabilities		Total liabilities		Accumulated deficit			Total equity			Total liabilities and equity
As of December 31, 2017	$	1,220		$	920	$	18,538	$	(506	)	$	1,520		$	20,058
Effect of Adopting ASC 606	(51		)	240		189		(189		)	(189		)	—
As of January 1, 2018	$	1,169		$	1,160	$	18,727	$	(695	)	$	1,331		$	20,058

Hertz



(In millions)	Deferred income taxes, net			Accrued liabilities		Total liabilities		Accumulated deficit			Total equity			Total liabilities and equity
As of December 31, 2017	$	1,220		$	920	$	18,538	$	(1,486	)	$	1,520		$	20,058
Effect of Adopting ASC 606	(51		)	240		189		(189		)	(189		)	—
As of January 1, 2018	$	1,169		$	1,160	$	18,727	$	(1,675	)	$	1,331		$	20,058

As disclosed above, the Company adopted Topic 606 on a modified retrospective basis, therefore, historical financial information has not been restated for comparative purposes and continues to be reported under the accounting standards in effect for those periods (“legacy guidance”). The following table presents the amounts for line items in the Company’s unaudited condensed consolidated balance sheet, statement of operations and cash flows impacted by the adoption of Topic 606 as compared to the amounts that would have been recognized in accordance with legacy guidance. The impact to the Company's unaudited condensed consolidated statement of comprehensive income (loss) is comprised solely of the impact to net income (loss) as shown in the table below:

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Unaudited

Hertz Global


(In millions, except per share data)	As Reported			Effect of Adoption Increase (Decrease)			Balances Without Adoption			As Reported			Effect of Adoption Increase (Decrease)			Balances Without Adoption
Unaudited Condensed Consolidated Balance Sheet as of June 30, 2018:
Unaudited Condensed Consolidated Balance Sheet as of September 30, 2018:										Unaudited Condensed Consolidated Balance Sheet as of September 30, 2018:
Accrued liabilities	$	1,158		$	239		$	919		$	1,306		$	245		$	1,061
Deferred income taxes, net	1,106			(53		)	1,159			1,145			(53		)	1,198
Total liabilities	21,702			186			21,516			21,233			192			21,041
Accumulated deficit	(960		)	(186		)	(774		)	(819		)	(192		)	(627		)
Total stockholders' equity	1,069			(186		)	1,255			1,227			(192		)	1,419
Unaudited Condensed Consolidated Statement of Operations for the Three Months Ended June 30, 2018:
Unaudited Condensed Consolidated Statement of Operations for the Three Months Ended September 30, 2018:										Unaudited Condensed Consolidated Statement of Operations for the Three Months Ended September 30, 2018:
Worldwide vehicle rental revenues	$	2,217		$	(2	)	$	2,219		$	2,584		$	(7	)	$	2,591
Selling, general and administrative expense	265			(1		)	266			265			(1		)	266
Income (loss) before income taxes	(86		)	(1		)	(85		)	181			(6		)	187
Income tax (provision) benefit	23			2			21			(41		)	—			(41		)
Net income (loss)	(63		)	1			(64		)	140			(6		)	146
Net (income) loss attributable to noncontrolling interests										1			—			1
Net income (loss) attributable to Hertz Global										141			(6		)	147
Basic earnings (loss) per share	(0.75		)	0.01			(0.76		)	1.68			(0.07		)	1.75
Diluted earnings (loss) per share	(0.75		)	0.01			(0.76		)	1.68			(0.07		)	1.75
Unaudited Condensed Consolidated Statement of Operations for the Six Months Ended June 30, 2018:
Unaudited Condensed Consolidated Statement of Operations for the Nine Months Ended September 30, 2018:										Unaudited Condensed Consolidated Statement of Operations for the Nine Months Ended September 30, 2018:
Worldwide vehicle rental revenues	$	4,111		$	1		$	4,110		$	6,694		$	(6	)	$	6,700
Selling, general and administrative expense	498			—			498			765			(1		)	766
Income (loss) before income taxes	(317		)	1			(318		)	(137		)	(5		)	(132		)
Income tax (provision) benefit	52			2			50			12			2			10
Net income (loss)	(265		)	3			(268		)	(125		)	(3		)	(122		)
Net (income) loss attributable to noncontrolling interests										1			—			1
Net income (loss) attributable to Hertz Global										(124		)	(3		)	(121		)
Basic earnings (loss) per share	(3.19		)	0.04			(3.23		)	(1.49		)	(0.04		)	(1.45		)
Diluted earnings (loss) per share	(3.19		)	0.04			(3.23		)	(1.49		)	(0.04		)	(1.45		)
Unaudited Condensed Consolidated Statement of Cash Flow for the Six Months Ended June 30, 2018:
Unaudited Condensed Consolidated Statement of Cash Flow for the Nine Months Ended September 30, 2018:										Unaudited Condensed Consolidated Statement of Cash Flow for the Nine Months Ended September 30, 2018:
Cash flows from operating activities:
Net income (loss)	$	(265	)	$	3		$	(268	)	$	(125	)	$	(3	)	$	(122	)
Deferred income taxes, net	(74		)	(2		)	(72		)	(39		)	(2		)	(37		)
Accrued liabilities	5			(1		)	6			106			5			101

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Unaudited

Hertz


(In millions, except per share data)	As Reported			Effect of Adoption Increase (Decrease)			Balances Without Adoption			As Reported			Effect of Adoption Increase (Decrease)			Balances Without Adoption
Unaudited Condensed Consolidated Balance Sheet as of June 30, 2018:
Unaudited Condensed Consolidated Balance Sheet as of September 30, 2018:										Unaudited Condensed Consolidated Balance Sheet as of September 30, 2018:
Accrued liabilities	$	1,158		$	239		$	919		$	1,306		$	245		$	1,061
Deferred income taxes, net	1,107			(53		)	1,160			1,146			(53		)	1,199
Total liabilities	21,703			186			21,517			21,234			192			21,042
Accumulated deficit	(1,938		)	(186		)	(1,752		)	(1,796		)	(192		)	(1,604		)
Total stockholders' equity	1,068			(186		)	1,254			1,226			(192		)	1,418
Unaudited Condensed Consolidated Statement of Operations for the Three Months Ended June 30, 2018:
Unaudited Condensed Consolidated Statement of Operations for the Three Months Ended September 30, 2018:										Unaudited Condensed Consolidated Statement of Operations for the Three Months Ended September 30, 2018:
Worldwide vehicle rental revenues	$	2,217		$	(2	)	$	2,219		$	2,584		$	(7	)	$	2,591
Selling, general and administrative expense	265			(1		)	266			265			(1		)	266
Income (loss) before income taxes	(84		)	(1		)	(83		)	183			(6		)	189
Income tax (provision) benefit	23			2			21			(42		)	—			(42		)
Net income (loss)	(61		)	1			(62		)	141			(6		)	147
Unaudited Condensed Consolidated Statement of Operations for the Six Months Ended June 30, 2018:
Net (income) loss attributable to noncontrolling interests										1			—			1
Net income (loss) attributable to Hertz										142			(6		)	148
Unaudited Condensed Consolidated Statement of Operations for the Nine Months Ended September 30, 2018:										Unaudited Condensed Consolidated Statement of Operations for the Nine Months Ended September 30, 2018:
Worldwide vehicle rental revenues	$	4,111		$	1		$	4,110		$	6,694		$	(6	)	$	6,700
Selling, general and administrative expense	498			—			498			765			(1		)	766
Income (loss) before income taxes	(314		)	1			(315		)	(132		)	(5		)	(127		)
Income tax (provision) benefit	51			2			49			10			2			8
Net income (loss)	(263		)	3			(266		)	(122		)	(3		)	(119		)
Unaudited Condensed Consolidated Statement of Cash Flow for the Six Months Ended June 30, 2018:
Net (income) loss attributable to noncontrolling interests										1			—			1
Net income (loss) attributable to Hertz										(121		)	(3		)	(118		)
Unaudited Condensed Consolidated Statement of Cash Flow for the Nine Months Ended September 30, 2018:										Unaudited Condensed Consolidated Statement of Cash Flow for the Nine Months Ended September 30, 2018:
Cash flows from operating activities:
Net income (loss)	$	(263	)	$	3		$	(266	)	$	(122	)	$	(3	)	$	(119	)
Deferred income taxes, net	(73		)	(2		)	(71		)	(38		)	(2		)	(36		)
Accrued liabilities	5			(1		)	6			106			5			101

See Note 7, "Revenue," for information regarding the Company’s accounting policies for revenue recognition, including the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers, as well as other required disclosures under Topic 606.

Restricted Cash

In November 2016, the FASB issued guidance that clarifies existing guidance on the classification and presentation of restricted cash in the statement of cash flows. The guidance requires entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. Additionally, entities will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. The Company adopted this guidance retrospectively in accordance with the effective date on January 1, 2018.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Unaudited

Adoption of this guidance had no impact on the Company's financial position or results of operations. The impact to the unaudited condensed consolidated statement of cash flows of adopting this guidance is as follows:

Hertz Global


	Six Months Ended June 30, 2017									Nine Months Ended September 30, 2017
(In millions)	As Previously Reported			Adjustments			As Adjusted			As Previously Reported			Adjustments			As Adjusted
Net change in restricted cash and cash equivalents, vehicle	$	55		$	(55	)	$	—		$	89		$	(89	)	$	—
Net cash provided by (used in) investing activities^(a)	(2,885		)	(55		)	(2,940		)	(3,316		)	(89		)	(3,405		)
Net change in restricted cash and cash equivalents, non-vehicle	(834		)	834			—			(833		)	833			—
Net cash provided by (used in) financing activities	2,235			834			3,069			1,252			833			2,085
Effect of foreign currency exchange rate changes on cash, cash equivalents, restricted cash and restricted cash(1)	12			5			17			19			7			26
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period(1)	816			278			1,094			816			278			1,094
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period(1)	1,141			1,062			2,203			748			1,029			1,777

Hertz


	Six Months Ended June 30, 2017									Nine Months Ended September 30, 2017
(In millions)	As Previously Reported			Adjustments			As Adjusted			As Previously Reported			Adjustments			As Adjusted
Net change in restricted cash and cash equivalents, vehicle	$	55		$	(55	)	$	—		$	89		$	(89	)	$	—
Net cash provided by (used in) investing activities^(a)	(2,885		)	(55		)	(2,940		)	(3,316		)	(89		)	(3,405		)
Net change in restricted cash and cash equivalents, non-vehicle	(834		)	834			—			(833		)	833			—
Net cash provided by (used in) financing activities	2,233			834			3,067			1,248			833			2,081
Effect of foreign currency exchange rate changes on cash, cash equivalents, restricted cash and restricted cash(1)	12			5			17			19			7			26
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period(1)	816			278			1,094			816			278			1,094
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period(1)	1,141			1,062			2,203			748			1,029			1,777


~~(a)~~(1)	~~Amount~~The amounts as previously reported ~~includes the $19 million revision to correct for an error as disclosed above in "Correction~~were comprised of ~~Errors."~~cash and cash equivalents and did not include restricted cash and restricted cash equivalents.

Not Yet Adopted

Leases

In February 2016, the FASB issued guidance that replaces the existing lease guidance in U.S. GAAP. The new guidance ("Topic 842") establishes a right-of-use (“ROU”) model that requires a lessee to record on the balance sheet a ROU asset and corresponding lease liability based on the present value of future lease payments for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. Topic 842 also expands the requirements for lessees to record leases embedded in other arrangements. Additionally, enhanced quantitative and qualitative disclosures surrounding leases are required which provide financial statement users the ability to assess the amount, timing and uncertainty of cash flows arising from leases. Topic 842 is effective for annual periods beginning after December 15, 2018 and interim periods within those annual periods with early adoption permitted. The Company intends to adopt this guidance, in accordance with the effective date, on January 1, 2019. A modified retrospective transition approach is required for ~~both lessees and lessors for existing leases at, or entered into after, the beginning of the earliest comparative period~~

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Unaudited

both lessees and lessors for existing leases at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The Company intends to avail itself of the allowable practical expedients for existing or expired contracts of lessees and lessors wherein the Company would not be required to reassess whether such contracts contain leases, the lease classification or the initial direct costs. Additionally, with respect to its real estate and fleet leases, the Company intends to avail itself of the practical expedient for lessees which allows it to elect an accounting policy by class of underlying asset to combine lease and non-lease components. The Company does not intend to utilize the practical expedient which allows the use of hindsight by lessees and lessors in determining the lease term and in assessing impairment of its ROU assets. The Company is in the process of evaluating whether to avail itself of other allowable practicable expedients during transition.

In July 2018, the FASB issued guidance related to Topic 842 that provides an additional transition method that would allow the Company to only apply the new lease standard in the year of adoption. Additionally, the guidance provides a practical expedient for lessors that would allow the Company to elect as an accounting policy, by class of underlying asset, to combine non-lease components with the related lease components, if certain conditions are met. This could allow the Company to account for all revenue earned from the operations of rental vehicles and from other forms of rental related activities under the new lease guidance. The Company plans to adopt the new transition method which allows the application of the standard at the adoption date, January 1, 2019, and will recognize a cumulative-effect adjustment to the opening balances of retained earnings in the period of adoption. The Company ~~is in the process~~intends to avail itself of ~~evaluating the new guidance related to~~ the practical ~~expedient.~~expedient for lessors which allows it to elect an accounting policy by class of underlying asset to combine lease and non-lease components, with respect to its real estate and fleet leases.

Lessee

Adoption of Topic 842 will result in a material increase in the Company's lease-related assets and liabilities on its balance sheet, primarily for leases of rental locations and other assets. Additionally, adoption of this guidance will impact the statement of cash flows with respect to the presentation of the Company's operating activities, but is not expected to impact its presentation of investing or financing activities. Adoption of Topic 842 is not expected to have a material impact on the Company’s results of operations. The Company has reached conclusions on key accounting assessments related to its leases which includes an accounting policy election to not recognize ROU assets or lease liabilities for short-term leases (i.e. those with a term of 12 months or less). The Company is performing an analysis of its lease portfolio to ensure proper application of the new guidance including implementation of internal controls over financial reporting.

Lessor

The Company has concluded that revenue earned from the rental and leasing of vehicles and from other forms of rental related activities wherein an identified asset is transferred to the customer and the customer has the ability to control that asset is within the scope of this guidance and that additional disclosures regarding lease revenue are required upon adoption. The Company is in the process of evaluating the breakdown of its vehicle rental revenues into lease and non-lease ~~components.~~components to determine if the recognition timing and pattern of transfer of the non-lease components meet the practical expedient requirements. There is no impact to the nature, timing or recognition of rental lease revenue upon adoption of this guidance.

Reporting Comprehensive Income

In February 2018, the FASB issued guidance that allows a reclassification from accumulated other comprehensive income to retained earnings for the stranded tax effects resulting from the U.S. Tax Cuts and Jobs Act ("TCJA"). The guidance is effective for annual periods beginning after December 15, 2018, and interim periods within those annual periods. The guidance should be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate in the TCJA is recognized. ~~Early adoption is permitted, including adoption~~The Company will adopt this guidance on January 1, 2019, in ~~any interim period.~~accordance with the effective date. Adoption of this guidance will result in a reclassification of certain amounts from accumulated other comprehensive income to retained earnings as of the date adopted.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Unaudited

Changes to Disclosure Requirements for Defined Benefit Plans

In August 2018, the FASB issued guidance that modifies disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans to remove disclosures no longer considered cost beneficial, add disclosures identified as relevant and clarify certain disclosure requirements. The guidance is effective for annual periods beginning after December 15, 2020 using a retrospective transition method. Early adoption is permitted. The Company is in the process of determining the timing of adoption and assessing the overall impact of adopting this guidance on its disclosures.

Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement

In August 2018, the FASB issued guidance on a customer's accounting for implementation fees paid in a cloud computing service contract arrangement that addresses which implementation costs to capitalize as an asset and which costs to expense. Capitalized implementation fees are to be expensed over the term of the cloud computing arrangement, and the expense is required to be recognized in the same line item in the income statement as the associated hosting service expenses. The entity is also required to present the capitalized implementation fees on the balance sheet in the same line item as the prepayment for hosting service fees associated with the cloud computing arrangement.

The guidance is effective for annual periods beginning after December 15, 2019, and interim periods within those annual periods using a retrospective or prospective transition method. Early adoption is permitted, including adoption in any interim period. The Company is in the process of determining the method and timing of adoption and assessing the overall impact of adopting this guidance on its financial position, results of operations and cash flows.

Note 3—Acquisitions and Divestitures

Divestitures

Equity Investment

The Company had an investment that was accounted for under the equity method. In March 2017, the Company determined it had an other than temporary loss in value of its investment and recorded an impairment charge of $30 million, which is included in other (income) expense, net in the accompanying unaudited condensed consolidated statement of operations for the ~~six~~nine months ended ~~June~~September 30, 2017. In September 2017, the investee was dissolved and the Company no longer has an ownership interest in the entity.

Brazil Operations

~~Note 4—Revenue Earning Vehicles~~

In August 2017, the Company completed the sale of Car Rental Systems do Brasil Locação de Veiculos Ltd., a wholly owned subsidiary of the Company located in Brazil ("Brazil Operations"), to Localiza Fleet S.A., a corporation headquartered in Brazil, and received proceeds of $115 million, of which $13 million was placed in escrow to secure certain indemnification obligations. Prior to the sale, the Brazil Operations were reported in the Company's International Rental Car Segment. As a result of the sale, the Company recorded a $6 million gain, net of the impact of foreign currency adjustments, which is included in other (income) expense, net in the accompanying unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2017. As part of the sale, both companies entered into referral and brand cooperation agreements to govern their ongoing relationship which have an initial term of twenty years with an option to extend for another twenty years. The ~~components~~alliance also involves the exchange of ~~revenue earning vehicles, net are as follows:~~

(In millions) June 30, 2018 December 31, 2017
Revenue earning vehicles $ 17,256
$ 14,209
Less: Accumulated depreciation (3,162 ) (3,123 )
14,094
11,086
Revenue earning vehicles held for sale, net 323
250
Revenue earning vehicles, net $ 14,417
$ 11,336

~~Depreciation~~knowledge in areas of ~~revenue earning vehicles~~technology, customer service and ~~lease charges, net includes the following:~~operational excellence.

Three Months Ended
June 30, Six Months Ended
June 30,
(In millions) 2018 2017 2018 2017
Depreciation of revenue earning vehicles $ 634
$ 660
$ 1,228
$ 1,265
(Gain) loss on disposal of revenue earning vehicles^(a)
31
66
78
145
Rents paid for vehicles leased 22
17
42
34
Depreciation of revenue earning vehicles and lease charges, net $ 687
$ 743
$ 1,348
$ 1,444

~~(a) (Gain) loss on disposal of revenue earning vehicles by segment is as follows:~~

Three Months Ended
June 30, Six Months Ended
June 30,
(In millions) 2018 2017 2018 2017
U.S. Rental Car⁽ⁱ⁾
$ 34
$ 67
$ 79
$ 145
International Rental Car (3 ) (1 ) (1 ) —
Total $ 31
$ 66
$ 78
$ 145


~~(i)~~	Includes costs associated with the Company's U.S. vehicle sales operations of $34 million for each of the three months ended June 30, 2018 and 2017 and $70 million and $63 million for the six months ended June 30, 2018 and 2017, respectively.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Unaudited

Note 4—Revenue Earning Vehicles

The components of revenue earning vehicles, net are as follows:



(In millions)	September 30, 2018			December 31, 2017
Revenue earning vehicles	$	16,376		$	14,209
Less accumulated depreciation	(3,231		)	(3,123		)
	13,145			11,086
Revenue earning vehicles held for sale, net	432			250
Revenue earning vehicles, net	$	13,577		$	11,336

Depreciation of revenue earning vehicles and lease charges, net includes the following:



	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2018		2017		2018		2017
Depreciation of revenue earning vehicles	$	619	$	636	$	1,847	$	1,902
(Gain) loss on disposal of revenue earning vehicles, net^(a)	27		43		105		187
Lease charges	26		21		68		55
Depreciation of revenue earning vehicles and lease charges, net	$	672	$	700	$	2,020	$	2,144

(a) (Gain) loss on disposal of revenue earning vehicles, net by segment is as follows:



	Three Months Ended September 30,					Nine Months Ended September 30,
(In millions)	2018			2017		2018			2017
U.S. Rental Car⁽ⁱ⁾	$	29		$	43	$	107		$	187
International Rental Car	(2		)	—		(2		)	—
Total	$	27		$	43	$	105		$	187


(i)	Includes costs associated with the Company's U.S. vehicle sales operations of $39 million and $36 million for the three months ended September 30, 2018 and 2017, respectively, and $109 million and $99 million for the nine months ended September 30, 2018 and 2017, respectively.

Depreciation rates are reviewed on a quarterly basis based on management's ongoing assessment of present and estimated future market conditions, their effect on residual values at the time of disposal and the estimated holding periods for the vehicles. The impact of depreciation rate changes is as follows:


Increase (decrease)	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended September 30,					Nine Months Ended September 30,
(In millions)	2018		2017		2018		2017		2018			2017		2018			2017
U.S. Rental Car^(a)	$	3	$	36	$	12	$	62	$	(32	)	$	6	$	(20	)	$	68
International Rental Car	1		1		3		1		(1		)	4		2			5
Total	$	4	$	37	$	15	$	63	$	(33	)	$	10	$	(18	)	$	73

(a)

The depreciation rate changes in the U.S. Rental Car operations for the three and ~~six~~nine months ended ~~June~~September 30, 2018 include a net ~~increase~~decrease in depreciation expense of $2$30 million based on the review completed during the ~~second~~third quarter of 2018. The depreciation rate changes in the U.S. Rental Car operations for the three and ~~six~~nine months ended ~~June~~September 30, 2017 include a net ~~increase~~decrease in depreciation expense of ~~$24~~$15 million based on the review completed during the ~~second~~third quarter of 2017.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Unaudited

Note 5—Intangible Asset Impairment

As a result of declines in revenue and profitability of the Company and a decline in the share price of Hertz Global's common stock, the Company performed an impairment analysis of its indefinite-lived intangible assets as of June 30, 2017 using the relief from royalty method, a measurement using level 3 inputs under the U.S. GAAP fair value hierarchy. As a result of the analysis, the Company concluded that there was an impairment of the Dollar Thrifty tradename in its U.S. Rental Car segment and recorded a charge of $86 million. The impairment was largely due to a decrease in long-term revenue projections coupled with an increase in the weighted average cost of capital. The carrying value of the Dollar Thrifty tradename ~~at June 30, 2017 was~~subsequent to recording the impairment charge is approximately $934 million, representing its estimated fair value.

Note 6—Debt

The Company's debt, including its available credit facilities, consists of the following ($ in millions):


Facility		Weighted Average Interest Rate as of June 30, 2018	Fixed or Floating Interest Rate	Maturity	June 30, 2018			December 31, 2017				Weighted Average Interest Rate as of September 30, 2018	Fixed or Floating Interest Rate	Maturity	September 30, 2018			December 31, 2017
Non-Vehicle Debt
Senior Term Loan		4.85%	Floating	6/2023	$	681		$	688			5.00%	Floating	6/2023	$	677		$	688
Senior RCF		N/A	Floating	6/2021	—			—				N/A	Floating	6/2021	—			—
Senior Notes⁽¹⁾		6.13%	Fixed	10/2020-10/2024	2,500			2,500				6.13%	Fixed	10/2020-10/2024	2,500			2,500
Senior Second Priority Secured Notes		7.63%	Fixed	6/2022	1,250			1,250				7.63%	Fixed	6/2022	1,250			1,250
Promissory Notes		7.00%	Fixed	1/2028	27			27				7.00%	Fixed	1/2028	27			27
Other Non-Vehicle Debt		1.91%	Fixed	Various	11			11				3.08%	Fixed	Various	2			11
Unamortized Debt Issuance Costs and Net (Discount) Premium					(38		)	(42		)					(35		)	(42		)
Total Non-Vehicle Debt					4,431			4,434							4,421			4,434
Vehicle Debt
HVF U.S. Vehicle Medium Term Notes	HVF U.S. Vehicle Medium Term Notes										HVF U.S. Vehicle Medium Term Notes
HVF Series 2010-1		N/A	N/A	N/A	—			39				N/A	N/A	N/A	—			39
HVF Series 2013-1⁽²⁾		1.91%	Fixed	8/2018	208			625				N/A	N/A	N/A	—			625
					208			664							—			664
HVF II U.S. ABS Program
HVF II U.S. Vehicle Variable Funding Notes	HVF II U.S. Vehicle Variable Funding Notes										HVF II U.S. Vehicle Variable Funding Notes
HVF II Series 2013-A⁽²⁾		3.58%	Floating	3/2020	3,030			1,970				3.68%	Floating	3/2020	3,170			1,970
HVF II Series 2013-B⁽²⁾		3.52%	Floating	3/2020	28			123				3.66%	Floating	3/2020	15			123
					3,058			2,093							3,185			2,093

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Unaudited


Facility		Weighted Average Interest Rate as of June 30, 2018	Fixed or Floating Interest Rate	Maturity	June 30, 2018			December 31, 2017				Weighted Average Interest Rate as of September 30, 2018	Fixed or Floating Interest Rate	Maturity	September 30, 2018			December 31, 2017
HVF II U.S. Vehicle Medium Term Notes	HVF II U.S. Vehicle Medium Term Notes										HVF II U.S. Vehicle Medium Term Notes
HVF II Series 2015-1⁽²⁾		2.93%	Fixed	3/2020	780			780				2.93%	Fixed	3/2020	780			780
HVF II Series 2015-2⁽²⁾		2.45%	Fixed	9/2018	265			265				N/A	N/A	N/A	—			265
HVF II Series 2015-3⁽²⁾		3.10%	Fixed	9/2020	371			371				3.10%	Fixed	9/2020	371			371
HVF II Series 2016-1⁽²⁾		2.89%	Fixed	3/2019	466			466				2.89%	Fixed	3/2019	466			466
HVF II Series 2016-2⁽²⁾		3.41%	Fixed	3/2021	595			595				3.41%	Fixed	3/2021	595			595
HVF II Series 2016-3⁽²⁾		2.72%	Fixed	7/2019	424			424				2.72%	Fixed	7/2019	424			424
HVF II Series 2016-4⁽²⁾		3.09%	Fixed	7/2021	424			424				3.09%	Fixed	7/2021	424			424
HVF II Series 2017-1⁽²⁾		3.38%	Fixed	10/2020	450			450				3.38%	Fixed	10/2020	450			450
HVF II Series 2017-2⁽²⁾		3.57%	Fixed	10/2022	350			350				3.57%	Fixed	10/2022	350			350
HVF II Series 2018-1⁽²⁾		3.41%	Fixed	2/2023	1,000			—				3.41%	Fixed	2/2023	1,000			—
HVF II Series 2018-2⁽²⁾		3.80%	Fixed	6/2021	200			—				3.80%	Fixed	6/2021	200			—
HVF II Series 2018-3⁽²⁾		4.15%	Fixed	7/2023	200			—				4.15%	Fixed	7/2023	200			—
					5,525			4,125							5,260			4,125
Donlen ABS Program
HFLF Variable Funding Notes
HFLF Series 2013-2⁽²⁾		2.56%	Floating	3/2020	66			380				2.72%	Floating	3/2020	170			380
					66			380							170			380
HFLF Medium Term Notes
HFLF Series 2015-1⁽⁴⁾⁽³⁾		2.97%	Floating	7/2018-3/2019	85			145				3.22%	Floating	10/2018-3/2019	58			145
HFLF Series 2016-1⁽⁴⁾⁽³⁾		3.15%	Both	7/2018-1/2020	239			318				3.28%	Both	10/2018-2/2020	204			318
HFLF Series 2017-1⁽⁴⁾⁽³⁾		2.61%	Both	7/2018-8/2020	480			500				2.66%	Both	10/2018-2/2021	437			500
HFLF Series 2018-1⁽⁴⁾⁽³⁾		2.55%	Both	7/2019-6/2021	550			—				2.58%	Both	7/2019-6/2021	550			—
					1,354			963							1,249			963
Vehicle Debt - Other
U.S. Vehicle RCF		4.56%	Floating	6/2021	133			186				4.52%	Floating	6/2021	133			186
European Revolving Credit Facility		2.95%	Floating	3/2020	410			184				2.95%	Floating	10/2018-3/2020	514			184
European Vehicle Notes⁽³⁾⁽⁴⁾		5.07%	Fixed	10/2021-3/2023	838			773				5.07%	Fixed	10/2021-3/2023	851			773
European Securitization⁽²⁾		1.70%	Floating	10/2018-3/2020	490			367				1.70%	Floating	10/2018-3/2020	515			367
Canadian Securitization⁽²⁾		3.13%	Floating	10/2018-3/2020	308			237				3.27%	Floating	10/2018-3/2020	315			237
Australian Securitization⁽²⁾		3.51%	Floating	3/2020	132			155				3.56%	Floating	3/2020	142			155
New Zealand RCF		4.71%	Floating	3/2020	36			42				4.61%	Floating	3/2020	40			42
U.K. Financing Facility		2.86%	Floating	7/2018-4/2021	377			251				3.08%	Floating	10/2018-8/2021	363			251
Other Vehicle Debt		3.98%	Floating	7/2018-10/2022	51			51				4.01%	Floating	10/2018-10/2022	47			51
					2,775			2,246							2,920			2,246
Unamortized Debt Issuance Costs and Net (Discount) Premium					(53		)	(40		)					(47		)	(40		)
Total Vehicle Debt					12,933			10,431							12,737			10,431
Total Debt					$	17,364		$	14,865						$	17,158		$	14,865

N/A - Not applicable

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Unaudited


(1)	References to the "Senior Notes" include the series of Hertz's unsecured senior notes set forth on the table below. Outstanding principal amounts for each such series of the Senior Notes is also specified below:


(In millions)	Outstanding Principal				Outstanding Principal
Senior Notes	June 30, 2018		December 31, 2017		September 30, 2018		December 31, 2017
5.875% Senior Notes due October 2020	$	700	$	700	$	700	$	700
7.375% Senior Notes due January 2021	500		500		500		500
6.250% Senior Notes due October 2022	500		500		500		500
5.500% Senior Notes due October 2024	800		800		800		800
	$	2,500	$	2,500	$	2,500	$	2,500

(2)

Maturity reference is to the earlier "expected final maturity date" as opposed to the subsequent "legal final maturity date." The expected final maturity date is the date by which Hertz and investors in the relevant indebtedness expect the outstanding principal of the relevant indebtedness to be repaid in full. The legal final maturity date is the date on which the outstanding principal of the relevant indebtedness is legally due and payable in full.

(3)

References to the "European Vehicle Notes" include the series of Hertz Holdings Netherlands B.V.'s, an indirect wholly-owned subsidiary of Hertz organized under the laws of The Netherlands (“HHN BV”), unsecured senior notes (converted from Euros to U.S. dollars at a rate of 1.16 to 1 and 1.19 to 1 as of June 30, 2018 and December 31, 2017, respectively) set forth on the table below. Outstanding principal amounts for each such series of the European Vehicle Notes is also specified below:

(In millions) Outstanding Principal
European Vehicles Notes June 30, 2018 December 31, 2017
4.375% Senior Notes due January 2019 $ —
$ 505
4.125% Senior Notes due October 2021 260
268
5.500% Senior Notes due March 2023 578
—
$ 838
$ 773

~~(4)~~

In the case of the Hertz Fleet Lease Funding LP ("HFLF") Medium Term Notes, such notes are repayable from cash flows derived from third-party leases comprising the underlying HFLF collateral pool. The initial maturity date referenced for each series of HFLF Medium Term Notes represents the end of the revolving period for such series, at which time the related notes begin to amortize monthly by an amount equal to the lease collections payable to that series. To the extent the revolving period already has ended, the initial maturity date reflected is ~~July~~October 2018. The second maturity date referenced for each series of HFLF Medium Term Notes represents the date by which Hertz and the investors in the related series expect such series of notes to be repaid in full, which is based upon various assumptions made at the time of pricing of such notes, including the contractual amortization of the underlying leases as well as the assumed rate of prepayments of such leases. Such maturity reference is to the “expected final maturity date” as opposed to the subsequent “legal final maturity date.” The legal final maturity date is the date on which the relevant indebtedness is legally due and payable. Although the underlying lease cash flows that support the repayment of the HFLF Medium Term Notes may vary, the cash flows generally are expected to approximate a straight-line amortization of the related notes from the initial maturity date through the expected final maturity date.

(4)

References to the "European Vehicle Notes" include the series of Hertz Holdings Netherlands B.V.'s, an indirect wholly owned subsidiary of Hertz organized under the laws of The Netherlands (“HHN BV”), unsecured senior notes (converted from Euros to U.S. dollars at a rate of 1.17 to 1 and 1.19 to 1 as of September 30, 2018 and December 31, 2017, respectively) set forth on the table below. Outstanding principal amounts for each such series of the European Vehicle Notes is also specified below:



(In millions)	Outstanding Principal
European Vehicle Notes	September 30, 2018		December 31, 2017
4.375% Senior Notes due January 2019	$	—	$	505
4.125% Senior Notes due October 2021	264		268
5.500% Senior Notes due March 2023	587		—
	$	851	$	773

The Company is highly leveraged and a substantial portion of its liquidity needs arise from debt service on its indebtedness and from the funding of its costs of operations ~~acquisitions~~ and capital expenditures. The Company’s practice is to maintain sufficient liquidity through cash from operations, credit facilities and other financing arrangements, to mitigate any adverse impact on its operations resulting from adverse financial market conditions. As of ~~June~~September 30, 2018, approximately ~~$2.2~~$2.3 billion of vehicle debt and ~~$25~~$16 million of non-vehicle debt is due to mature between ~~July~~October 1, 2018 and ~~June~~September 30, 2019.

The Company has reviewed its debt facilities and determined that it is probable that the Company will be able, and has the intent, to refinance these facilities at such times as the Company determines appropriate prior to their respective maturities.

Non-Vehicle Debt

Senior Facilities

In June 2018, the Company terminated letters of credit issued under the Senior RCF with a stated amount of approximately $302 million and reissued such letters of credit under the Letter of Credit Facility, as defined below. As a result, the commitments under the Senior RCF were permanently reduced on a dollar-for-dollar basis, such that after giving effect to such reduction the Senior RCF consists of a $865 million senior secured revolving credit facility.

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Vehicle Debt

HVF II U.S. Vehicle Variable Funding Notes

HVF II Series 2013 Notes: In April 2018, HVF II increased the maximum commitments under the HVF II Series 2013-A Notes and HVF II Series 2013-B Notes (the "HVF II Series 2013 Notes") by $250 million, such that after giving effect to such increase, the aggregate maximum principal amount of the HVF II Series 2013 Notes is approximately $3.7 billion.

HVF II Series 2017-A Notes: In March 2018, HVF II terminated all $500 million of commitments under the HVF II Series 2017-A Notes.

HVF II U.S. Vehicle Medium Term Notes

HVF II Series 2018-2 Notes and HVF II Series 2018-3 Notes: In June 2018, HVF II issued the Series 2018-2 Rental Car Asset Backed Notes, Class A, Class B, Class C and Class D ("the HVF II Series 2018-2 Notes") and the Series 2018-3 Rental Car Asset Backed Notes, Class A, Class B, Class C and Class D ("the HVF II Series 2018-3 Notes") in an aggregate principal amount of approximately $426 million. Hertz purchased the Class D Notes of each such series and as a result, approximately $26 million of the aggregate principal amount is eliminated in consolidation. There is subordination within the HVF II Series 2018-2 Notes and the HVF II Series 2018-3 Notes based on class.

HVF II Series 2018-1 Notes: In January 2018, HVF II issued the Series 2018-1 Rental Car Asset Backed Notes, Class A, Class B, Class C and Class D ("the HVF II Series 2018-1 Notes") in an aggregate principal amount of approximately $1.1 billion. Hertz purchased the Class D Notes of such series and as a result, approximately $58 million of the aggregate principal amount is eliminated in consolidation. There is subordination within the HVF II Series 2018-1 Notes based on class.

HFLF Medium Term Notes

HFLF Series 2018-1 Notes: In May 2018, HFLF issued the Series 2018-1 Asset-Backed Notes, Class A, Class B, Class C, Class D, and Class E (collectively, the “HFLF Series 2018-1 Notes”) in an aggregate principal amount of $550 million. The HFLF Series 2018-1 Notes are fixed rate, except for the Class A-1 Notes which are floating rate and carry an interest rate based upon a spread to one-month LIBOR. A portion of the net proceeds of this issuance were used to reduce amounts outstanding under the HFLF Series 2013-2 Notes.

Vehicle Debt - Other

European Vehicle Notes

In March 2018, HHN BV issued 5.50% Senior Notes due March 2023 in an aggregate original principal amount of €500 million (the "2023 Notes"). A portion of the net proceeds from this issuance were used in April 2018 to fully redeem all €425 million of 4.375% Senior Notes due January 2019, and the Company recorded $20 million of charges for the early redemption premium and write-off of deferred financing costs.

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European Revolving Credit Facility

In March 2018, HHN BV amended its credit agreement ("European Revolving Credit Facility") to provide for aggregate maximum borrowing capacity (subject to borrowing base availability) of up to €438 million during the peak rental season, for a seasonal commitment period through October 2018. Following the expiration of the seasonal commitment period, aggregate maximum borrowings available under the European Revolving Credit Facility will revert to €235 million (subject to borrowing base availability). In October 2018, the European Revolving Credit Facility was terminated, as further described below.

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European ABS

In October 2018, International Fleet Financing No.2 B.V (“IFF No. 2”), a special purpose entity which is intended to be bankruptcy remote, issued variable funding rental car asset backed notes that permit borrowings by IFF No. 2 on a revolving basis in an aggregate amount up to €1.0 billion with a term of two years ("European ABS"). The European ABS is the primary vehicle financing facility for the Company's vehicle rental operations in France, the Netherlands, Germany and Spain. The lenders under the European ABS have been granted a security interest in the owned rental vehicles used in the Company's vehicle rental operations in these countries and certain contractual rights related to such vehicles.

In connection with the above transaction, the Company terminated the European Revolving Credit Facility and the European Securitization.

Canadian Securitization

In May 2018, TCL Funding Limited Partnership, a bankruptcy remote, indirect, ~~wholly-owned,~~wholly owned, special purpose subsidiary of Hertz, amended its supplemental indenture for its Series 2015-A Variable Funding Rental Car Asset Backed Notes (the "Funding LP Series 2015-A Notes") to provide for aggregate maximum borrowing capacity (subject to borrowing base availability) of up to CAD$410 million during the peak rental season, for a seasonal commitment period through October 2018. Following the expiration of the seasonal commitment period, aggregate maximum borrowings available under the Funding LP Series 2015-A Notes will revert to CAD$350 million (subject to borrowing base availability).

U.K. Financing Facility

In May 2018, Hertz U.K. Limited amended its credit agreement ("U.K. Financing Facility") to provide for aggregate maximum borrowing capacity (subject to asset availability) of up to £287.5 million during the peak rental season, and in July 2018, the U.K. Financing Facility was further amended to provide for aggregate maximum borrowing capacity (subject to asset availability) of up to £300 million during the peak rental season, for a seasonal commitment period through September 2018. Following the expiration of the seasonal commitment period, aggregate maximum borrowings available under the U.K. Financing Facility ~~will revert~~reverted to £250 million (subject to asset availability).

Borrowing Capacity and Availability

Borrowing capacity and availability comes from the Company's "revolving credit facilities," which are a combination of variable funding asset-backed securitization facilities, cash-flow-based revolving credit facilities, asset-based revolving credit facilities and a standalone $400 million letter of credit facility (the "Letter of Credit Facility"). Creditors under each such asset-backed securitization facility and asset-based revolving credit facility have a claim on a specific pool of assets as collateral. The Company's ability to borrow under each such asset-backed securitization facility and asset-based revolving credit facility is a function of, among other things, the value of the assets in the relevant collateral pool. With respect to each such asset-backed securitization facility and asset-based revolving credit facility, the Company refers to the amount of debt it can borrow given a certain pool of assets as the borrowing base.

The Company refers to "Remaining Capacity" as the maximum principal amount of debt permitted to be outstanding under the respective facility (i.e., with respect to a variable funding asset-backed securitization facility or asset-based revolving credit facility, the amount of debt the Company could borrow assuming it possessed sufficient assets as collateral) less the principal amount of debt then-outstanding under such facility. With respect to a variable funding asset-backed securitization facility or asset-based revolving credit facility, the Company refers 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 that can be borrowed given the collateral possessed at such time). With respect to the Senior RCF and the Letter of Credit Facility, "Availability Under Borrowing Base Limitation" is the same as "Remaining Capacity" since borrowings under the Senior RCF and the Letter of Credit Facility are not subject to a borrowing base.

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The following facilities were available to the Company as of ~~June~~September 30, 2018, and are presented net of any outstanding letters of credit:


(In millions)	Remaining Capacity		Availability Under Borrowing Base Limitation		Remaining Capacity		Availability Under Borrowing Base Limitation
Non-Vehicle Debt
Senior RCF	$	502	$	502	$	505	$	505
Letter of Credit Facility	—		—		1		1
Total Non-Vehicle Debt	502		502		506		506
Vehicle Debt
U.S. Vehicle RCF	—		—		—		—
HVF II U.S. Vehicle Variable Funding Notes	607		—		480		—
HFLF Variable Funding Notes	434		6		330		1
European Revolving Credit Facility	96		—		—		—
European Securitization	41		—		25		5
Canadian Securitization	—		—		—		—
Australian Securitization	51		—		40		—
U.K. Financing Facility	—		—		32		—
New Zealand RCF	5		—		—		—
Total Vehicle Debt	1,234		6		907		6
Total	$	1,736	$	508	$	1,413	$	512

Letters of Credit

As of ~~June~~September 30, 2018, there were outstanding standby letters of credit totaling ~~$676~~$672 million. As disclosed above, the Company terminated letters of credit issued under the Senior RCF and reissued such letters of credit under the Letter of Credit Facility. Issued letters of credit primarily support the Company's insurance programs, vehicle rental concessions and leaseholds as well as to provide credit enhancement for its asset-backed securitization facilities. Of this amount, ~~$363~~$360 million was issued under the Senior RCF and ~~$302~~$301 million was issued under the Letter of Credit Facility. As of ~~June~~September 30, 2018, none of the issued letters of credit have been drawn upon.

Special Purpose Entities

Substantially all of the Company's revenue earning vehicles and certain related assets are owned by special purpose entities, or are encumbered in favor of the lenders under the various credit facilities, other secured financings and asset-backed securities programs. None of such assets (including the assets owned by Hertz Vehicle Financing II LP, Hertz Vehicle Financing LLC, Rental Car Finance LLC, DNRS II LLC, HFLF, Donlen Trust and various international subsidiaries that facilitate the Company's international securitizations) are available to satisfy the claims of general creditors.

The Company has a 25% ownership interest in ~~International Fleet Financing~~"IFF No. ~~2 B.V. ("IFF No.~~ 2"), ~~a special purpose entity~~ whose sole purpose is to provide commitments to lend in various currencies subject to borrowing bases comprised of revenue earning vehicles and related assets of certain of Hertz International, Ltd.'s subsidiaries. IFF No. 2 is a variable interest entity and the Company is the primary beneficiary, therefore, the assets, liabilities, and results of operations of IFF No. 2 are included in the Company's unaudited condensed consolidated financial statements. As of ~~June~~September 30, 2018 and December 31, 2017, IFF No. 2 had total assets of ~~$696~~$776 million and $524 million, respectively, primarily comprised of loan receivables, and total liabilities of ~~$696~~$776 million and $524 million, respectively, primarily comprised of debt and loan payables.

Covenant Compliance

The financial covenant provides that Hertz’s consolidated first lien net leverage ratio, as defined in the credit agreements governing the Senior RCF and the Letter of Credit Facility, as of the last day of any fiscal quarter following and including

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fiscal quarter ending December 31, 2017 (the "Covenant Leverage Ratio"), may not exceed a ratio of 3.00 to 1.00. As of ~~June~~September 30, 2018, Hertz was in compliance with the Covenant Leverage Ratio.

Note 7—Revenue

The Company recognizes two types of ~~revenue;~~revenue: (i) revenue from contracts with ~~customers,~~customers; and (ii) lease revenue, which is generated through the fleet leasing operations of its Donlen subsidiary.

As disclosed in the Revenue from Contracts with Customers section of Note 2, “Basis of Presentation and Recently Issued Accounting Pronouncements” ("Note 2"), the Company adopted Topic 606 in accordance with the effective date on January 1, 2018. Note 2 includes disclosures regarding the Company’s method of adoption and the impact on the Company’s financial position, results of operations and cash flows. In the Leases section of Note 2, the Company discloses that it has concluded that revenue earned from vehicle rentals, and from other forms of rental related activities wherein an identified asset is transferred to the customer and the customer has the ability to control that asset, will be accounted for under Topic 842 upon its adoption. Until the Company adopts Topic 842, vehicle rental and rental related revenues are recognized in accordance with Topic 606.

The Company recognizes revenue net of any taxes or non-concession fees collected from customers on behalf of governmental authorities.

Revenue from Contracts with Customers

The Company operates at airport rental locations in the U.S. and internationally ("airport") and at off airport locations also in the U.S. and internationally ("off airport"). For the Company's airport company-operated rental locations, the Company has obtained concessions or similar leasing agreements or arrangements, granting it the right to conduct a vehicle rental business at the respective airport. The terms of an airport concession typically require the Company to pay the airport's operator concession fees based upon a specified percentage of the revenues it generates at the airport, subject to a minimum annual guarantee. The terms of the Company's concessions typically do not forbid it from seeking, and in a few instances ~~actually~~ require it to seek, reimbursement from customers for concession fees it pays; however, in certain jurisdictions the law limits or forbids the Company from doing so. Where the Company is required or permitted to seek such reimbursement, it is its general practice to do so. The Company's airport rental customers are typically airline travelers; whereas the Company's off airport rental customers include people who prefer to rent vehicles closer to their home or place of work for business or leisure purposes, as well as those needing to travel to or from airports. The Company's off airport customers also include people who have been referred by, or whose rental costs are being wholly or partially reimbursed by, insurance companies following accidents in which their vehicles were damaged, those expecting to lease vehicles that are not yet available from their leasing companies and replacement renters. In addition, the Company's off airport customers include drivers for transportation network companies ("TNC").

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The following table presents revenues from contracts with customers by reportable segment and disaggregated by product/service and type of location and customer:


	Three Months Ending June 30, 2018								Three Months Ending September 30, 2018
(In millions)	U.S. Rental Car		International Rental Car		All Other Operations		Consolidated		U.S. Rental Car		International Rental Car		All Other Operations		Consolidated
Vehicle rental and rental related:
Airport	$	1,142	$	332	$	—	$	1,474	$	1,279	$	446	$	—	$	1,725
Off airport	453		219		—		672		535		242		—		777
Total vehicle rental and rental related	1,595		551		—		2,146		1,814		688		—		2,502

Other:
Licensee revenue	8		38		—		46		10		44		—		54
Ancillary retail vehicle sales	25		—		—		25		27		—		—		27
Fleet management	—		—		10		10		—		—		10		10
Total other	33		38		10		81		37		44		10		91
Total revenue from contracts with customers	$	1,628	$	589	$	10	$	2,227	$	1,851	$	732	$	10	$	2,593


	Six Months Ending June 30, 2018								Nine Months Ending September 30, 2018
(In millions)	U.S. Rental Car		International Rental Car		All Other Operations		Consolidated		U.S. Rental Car		International Rental Car		All Other Operations		Consolidated
Vehicle rental and rental related:
Airport	$	2,124	$	583	$	—	$	2,707	$	3,403	$	1,029	$	—	$	4,432
Off airport	865		404		—		1,269		1,400		646		—		2,046
Total vehicle rental and rental related	2,989		987		—		3,976		4,803		1,675		—		6,478

Other:
Licensee revenue	14		70		—		84		24		114		—		138
Ancillary retail vehicle sales	51		—		—		51		78		—		—		78
Fleet management	—		—		22		22		—		—		32		32
Total other	65		70		22		157		102		114		32		248
Total revenue from contracts with customers	$	3,054	$	1,057	$	22	$	4,133	$	4,905	$	1,789	$	32	$	6,726

Vehicle Rental and Rental Related Revenues

The Company recognizes revenue from its vehicle rental operations when persuasive evidence of a contract exists, the performance obligations have been satisfied, the transaction price is fixed or determinable and collection is reasonably assured. Performance obligations associated with vehicle rental transactions are satisfied over the rental period, except for the portion associated with loyalty points, as further described below. Rental periods are short term in nature. Therefore, the Company has elected to apply the practical expedient which eliminates the requirement to disclose information about remaining performance obligations. Performance obligations associated with rental related activities, such as charges to the customer for the fueling of vehicles and value-added services such as loss damage waivers, insurance products, navigation units, supplemental equipment and other consumables, are also satisfied over the rental period. Revenue from charges that are passed through to the customer, such as gasoline, vehicle licensing and airport concession fees, is recorded on a gross basis with a corresponding charge to direct vehicle and operating

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expense. Sales commissions paid to third parties are generally expensed when incurred due to the short-term nature of the related transaction on which the commission was earned and are recorded within selling, general and administrative expense. Payments are due from customers at the completion of the rental, except for customers with negotiated payment terms, generally net 30 days or less, which are invoiced and remain as accounts receivable until collected.

Loyalty Programs - The Company offers loyalty programs, primarily Hertz Gold Plus Rewards, wherein customers are eligible to earn loyalty points that are redeemable for free rental days or can be converted to loyalty points for redemption of products and services under loyalty programs of other companies. Each transaction that generates loyalty points results in the deferral of revenue equivalent to the retail value of the redemption of the loyalty points. The associated revenue is recognized when the customer redeems the loyalty points at some point in the future. The retail value of loyalty points is estimated based on the expected retail value of the future vehicle rental to be provided less an estimated amount representing loyalty points that are not expected to be redeemed (“breakage”). Breakage is estimated on a quarterly basis and includes significant assumptions such as historical breakage trends and internal Company forecasts. During the three and ~~six~~nine months ended ~~June~~September 30, 2018, based on the net impact of loyalty points earned and redeemed by customers, the Company ~~recognized $1~~recorded a net revenue deferral of $9 million and $4$5 million, ~~of revenue,~~ respectively. As of ~~June~~September 30, 2018, the value of unredeemed loyalty points is ~~$261~~$271 million, which is recorded as a contract liability in accrued liabilities in the accompanying unaudited condensed consolidated balance sheet.

Customer Rebates - The Company has business customers that rent vehicles based on terms that have been negotiated through contracts with their employers, or other entities with which they are associated (“commercial contracts”), which can differ substantially from the terms on which the Company rents vehicles to the general public. Some of the commercial contracts contain provisions which allow for rebates to the entity based on achieving a specific rental volume threshold. Rebates are treated as variable consideration and are recognized as a reduction of revenue at the time of the rental based on the rebate expected to be earned by the entity.

Licensee Revenue

The Company has franchise agreements which allow an independent entity to rent their vehicles under the Company’s brands, primarily Hertz, Dollar or Thrifty, for a fee (“franchise fee”). Franchise fees are earned over time for the duration of the franchise agreement and are typically based on the larger of a minimum payment or an amount representing a percentage of net sales of the franchised business. Franchise fees are recognized as earned and when collectability is reasonably assured. Franchise fees that relate to a future contract term, such as initial fees or renewal fees, are deferred and recognized over the term of the franchise agreement. The Company has elected to apply one of the practical expedients under Topic 606, and as such the value of unsatisfied performance obligations for sales-based royalty fees from franchisees is not disclosed.

Ancillary Retail Vehicle Sales Revenue

Ancillary retail vehicle sales represent revenues generated from the sale of warranty contracts, financing and title fees, and other ancillary services associated with vehicles disposed of at the Company’s retail outlets. These revenues are recorded at the point in time when the Company sells the product or provides the service to the customer. These revenues exclude the sale price of the vehicle which is a component of the gain or loss on the disposition and is included in depreciation of revenue earning vehicles and lease charges, net.

Fleet Management Revenue

The Company's Donlen subsidiary generates revenue from various fleet management services, such as fuel purchasing and management, preventive maintenance, repair consultation, toll management and accident management. Fleet management revenue is recognized net of any fees collected from customers on behalf of ~~third party~~third-party service providers, as services are rendered.

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Contract Balances

The Company recognizes receivables and liabilities resulting from its contracts with customers. Contract receivables primarily consist of receivables from customers for vehicle rentals. Contract liabilities primarily consist of obligations to customers for prepaid vehicle rentals and related to the Company’s points-based loyalty programs.

The contract liability balance as of ~~June~~September 30, 2018 is ~~$412~~$351 million and is included in accrued liabilities in the accompanying unaudited condensed consolidated balance sheet. The contract liability as of January 1, 2018, after giving effect to the adoption of Topic 606, was $345 million and revenue recognized during the ~~six~~nine months ended ~~June~~September 30, 2018 for such contract liabilities is ~~$96~~$129 million. The contract liability as of ~~March 31,~~June 30, 2018 was ~~$388~~$412 million and revenue recognized during the three months ended ~~June~~September 30, 2018 for such contract liabilities is ~~$87~~$164 million.

Note 8—Income Tax (Provision) Benefit

The Company recognized the income tax effects of the tax reform legislation commonly referred to as the Tax Cuts and Jobs Act ("TCJA") in its audited consolidated financial statements included in the Company’s 2017 Form 10‑K in accordance with Staff Accounting Bulletin No. 118, which provides SEC staff guidance for the application of Topic 740, Income Taxes, in the reporting period in which the TCJA was signed into law. The guidance also provides for a measurement period of up to one year from the enactment date for the Company to complete the accounting for the U.S. tax law changes. As such, the Company’s 2017 financial ~~results reflected~~position reflects the provisional estimate of the income tax effects of the ~~TCJA. No subsequent adjustments have been made to the amounts recorded as of December 31, 2017,~~TCJA, which ~~continue to represent a provisional estimate of the impact of TCJA. The estimate of the impact of TCJA is~~was based on certain assumptions and the Company's ~~current~~ interpretation of the law at that time.

During the third quarter of 2018, the Company further analyzed tax liabilities associated with the deemed repatriation of cumulative earnings from foreign subsidiaries. As a result of the analysis, the Company has recorded a non-cash tax expense of approximately $15 million, consisting of a $25 million one-time transition tax liability, offset by $10 million of remeasured net operating losses. The amounts recorded are estimates and ~~may~~are subject to change as the ~~Company receives additional clarification and implementation guidance and as the interpretation of the TCJA evolves over time.~~

~~The~~ Company continues to analyze the impact of TCJA ~~provisions effective January 1, 2018.~~ provisions.

The income tax provision for the three and ~~six~~nine months ended ~~June~~September 30, 2018 also incorporates the TCJA's changes to deductions for executive compensation and meals and entertainment. Other provisions include global intangible low-tax income ("GILTI"), base erosion anti-avoidance tax ("BEAT"), ~~and~~ foreign-derived intangible income ("FDII"). and an interest expense deduction limitation. As of ~~June~~September 30, 2018, the Company estimates no short-to-medium term tax liability resulting from GILTI, BEAT, FDII, or ~~FDII.~~the interest limitation. These ~~are~~ estimates ~~and~~ are based on the Company's current interpretation of the TCJA. These assumptions and interpretations may change as ~~additional clarification and implementation guidance are issued~~ as the interpretation of the TCJA evolves ~~over time. As such,~~and as additional clarification and implementation guidance are issued.

Changes in the ~~Company is still analyzing certain aspects of the Act and refining its estimate, which~~estimates described above could potentially affect the measurement of deferred tax assets and liabilities or potentially give rise to new deferred tax amounts.

Hertz Global

The effective tax rate for the three months ended ~~June~~September 30, 2018 and 2017 is ~~27%~~(23)% and ~~36%~~(35)%, respectively. The effective tax rate for the ~~six~~nine months ended ~~June~~September 30, 2018 and 2017 is ~~16%~~9% and ~~29%~~27%, respectively.

The Company recorded a tax ~~benefit~~provision of ~~$23~~$41 million for the three months ended ~~June~~September 30, 2018, compared to ~~$87~~$50 million for the three months ended ~~June~~September 30, 2017. The ~~lower~~ effective income tax rate and related tax ~~benefit~~expense are lower for the three months ended September 30, 2018 primarily due to the reduced corporate tax rate as a result of the TCJA, ~~reduced corporate losses,~~tax credits, and the composition of earnings by jurisdictions, partially offset by a net provisional amount of $15 million for the ~~release of the valuation allowance on U.S. federal capital losses.~~one-time transition tax related to TCJA.

The Company recorded a tax benefit of ~~$52~~$12 million for the ~~six~~nine months ended ~~June~~September 30, 2018, compared to ~~$158~~$108 million for the ~~six~~nine months ended ~~June~~September 30, 2017. The ~~lower~~ effective income tax rate and related tax benefit are primarily due to the reduced corporate tax rate as a result of the TCJA, reduced corporate losses, and the composition of earnings by jurisdictions, partially offset by the release of the valuation allowance on U.S. federal capital losses.

~~Hertz~~

The effective tax rate for the three months ended June 30, 2018 and 2017 is 27% and 35%, respectively. The effective tax rate for the six months ended June 30, 2018 and 2017 is 16% and 29%, respectively.lower

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~~The Company recorded a tax benefit of $23 million~~ for the ~~three~~nine months ended ~~June~~September 30, 2018 ~~compared to $86 million for the three months ended June 30, 2017. The lower effective income tax rate and related tax benefit are~~ primarily due to the reduced corporate tax rate as a result of the TCJA, reduced corporate losses, and the composition of earnings by jurisdictions, partially offset by a net provisional amount of $15 million for the ~~release~~one-time transition tax related to TCJA.

Hertz

The effective tax rate for the three months ended September 30, 2018 and 2017 is (23)% and (35)%, respectively. The effective tax rate for the nine months ended September 30, 2018 and 2017 is 8% and 27%, respectively.

The Company recorded a tax provision of $42 million for the three months ended September 30, 2018, compared to $50 million for the three months ended September 30, 2017. The effective income tax rate and related tax expense are lower for the three months ended September 30, 2018 primarily due to the reduced corporate tax rate as a result of the ~~valuation allowance on U.S. federal capital losses.~~TCJA, tax credits, and the composition of earnings by jurisdictions, partially offset by a net provisional amount of $15 million for the one-time transition tax related to TCJA.

The Company recorded a tax benefit of ~~$51~~$10 million for the ~~six~~nine months ended ~~June~~September 30, 2018, compared to ~~$157~~$107 million for the ~~six~~nine months ended ~~June~~September 30, 2017. The ~~lower~~ effective income tax rate and related tax benefit are lower for the nine months ended September 30, 2018 primarily due to the reduced corporate tax rate as a result of the TCJA, reduced corporate losses, and the composition of earnings by jurisdictions, partially offset by a net provisional amount of $15 million for the ~~release of the valuation allowance on U.S. federal capital losses.~~one-time transition tax related to TCJA.

Note 9—Earnings (Loss) Per Share - Hertz Global

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 earnings (loss) per share:


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,				Nine Months Ended September 30,
(In millions, except per share data)	2018			2017			2018			2017			2018		2017		2018			2017
Basic and diluted earnings (loss) per share:
Numerator:
Net income (loss), basic and diluted	$	(63	)	$	(158	)	$	(265	)	$	(381	)
Net income (loss) attributable to Hertz Global													$	141	$	93	$	(124	)	$	(289	)
Denominator:
Basic weighted average common shares	84			83			83			83
Basic weighted average shares outstanding													84		83		83			83
Dilutive stock options, RSUs, PSUs and PSAs	—			—			—			—			—		—		—			—
Weighted average shares used to calculate diluted earnings per share	84			83			83			83
Diluted weighted average shares outstanding													84		83		83			83
Antidilutive stock options, RSUs, PSUs and PSAs	3			3			3			3			1		3		1			3
Earnings (loss) per share:
Basic earnings (loss) per share	$	(0.75	)	$	(1.90	)	$	(3.19	)	$	(4.59	)	$	1.68	$	1.12	$	(1.49	)	$	(3.48	)
Diluted earnings (loss) per share	$	(0.75	)	$	(1.90	)	$	(3.19	)	$	(4.59	)	$	1.68	$	1.12	$	(1.49	)	$	(3.48	)

Note 10—Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The fair value of cash, restricted cash, accounts receivable, accounts payable and accrued expenses, to the extent the underlying liability will be settled in cash, approximates the carrying values because of the short-term nature of these instruments.

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Cash Equivalents, Restricted Cash Equivalents and Investments

The Company’s cash equivalents and restricted cash equivalents primarily consist of investments in money market funds and time deposits. The Company determines the fair value of cash equivalents using a market approach based on quoted prices in active markets (Level 1 inputs).

Investments in equity securities that are measured at fair value on a recurring basis consist of marketable securities.

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The following table summarizes the ending balances of the Company's cash equivalents, restricted cash equivalents and investments:


	June 30, 2018								December 31, 2017								September 30, 2018								December 31, 2017
(In millions)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Money market funds and time deposits	$	485	$	—	$	—	$	485	$	634	$	—	$	—	$	634	$	356	$	—	$	—	$	356	$	634	$	—	$	—	$	634
Equity securities	41		—		—		41		—		—		—		—		45		—		—		45		—		—		—		—

Debt Obligations

The fair value of debt is estimated based on quoted market rates as well as borrowing rates currently available to the Company for loans with similar terms and average maturities (Level 2 inputs).


	As of June 30, 2018				As of December 31, 2017				As of September 30, 2018				As of December 31, 2017
(In millions)	Nominal Unpaid Principal Balance		Aggregate Fair Value		Nominal Unpaid Principal Balance		Aggregate Fair Value		Nominal Unpaid Principal Balance		Aggregate Fair Value		Nominal Unpaid Principal Balance		Aggregate Fair Value
Non-vehicle Debt	$	4,469	$	4,154	$	4,476	$	4,438	$	4,456	$	4,254	$	4,476	$	4,438
Vehicle Debt	12,986		12,911		10,471		10,456		12,784		12,715		10,471		10,456
Total	$	17,455	$	17,065	$	14,947	$	14,894	$	17,240	$	16,969	$	14,947	$	14,894

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

In March 2017, as further described in Note 3, "Acquisitions and Divestitures," the Company determined it had an other than temporary loss in value of its equity method investment. In June 2017, as further described in Note 5, "Intangible Asset Impairment," the Company recorded impairment charges for the Dollar Thrifty tradename.

The Company measured the assets and liabilities of its Brazil Operations at fair value as of March 31, 2017 and June 30, 2017, while held for sale, and recorded a pre-tax gain of $4 million and a loss of $4 million, respectively. The Brazil Operations were sold in August 2017 and the Company recorded a pre-tax gain of $6 million as further described in Note 3, "Acquisitions and Divestitures."

Note 11—Contingencies and Off-Balance Sheet Commitments

Legal Proceedings

Public Liability and Property Damage

The Company is currently a defendant in numerous actions and has received numerous claims on which actions have not yet been commenced for public liability and property damage arising from the operation of motor vehicles rented from the Company. The obligation for public liability and property damage on self-insured U.S. and international vehicles, as stated on the accompanying unaudited condensed consolidated balance sheets, 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 rental volume and actuarial evaluations of historical accident claim experience and trends, as well as future projections of ultimate losses, expenses, premiums and

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administrative costs. As of ~~June~~September 30, 2018 and December 31, 2017, the Company's liability recorded for public liability and property damage matters is ~~$421~~$439 million and $427 million, respectively. The Company believes that its analysis is based on the most relevant information available, combined with reasonable assumptions, and that the Company may prudently rely on this information to determine the estimated liability. 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 the Company's estimates change or if actual results differ from these assumptions, the amount of the recorded liability is adjusted to reflect these results.

Other Matters

From time to time the Company is a party to various legal proceedings, typically involving operational issues common to the vehicle rental business, including claims by employees and former employees, and governmental investigations. The Company has summarized below the most significant legal proceedings to which the Company was and/or is a

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party to during the ~~six~~nine months ended ~~June~~September 30, 2018 or the period after ~~June~~September 30, 2018, but before the filing of this Report on Form 10‑Q.

In re Hertz Global Holdings, Inc. Securities Litigation - In November 2013, a purported shareholder class action, Pedro Ramirez, Jr. v. Hertz Global Holdings, Inc., et al., was commenced in the U.S. District Court for the District of New Jersey naming Old Hertz Holdings (as defined in the Company's 2017 Form 10‑K) and certain of its officers as defendants and alleging violations of the federal securities laws. The complaint alleged that Old Hertz Holdings made material misrepresentations and/or omissions of material fact in its public disclosures during the period from February 25, 2013 through November 4, 2013, in violation of Section 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder. The complaint sought an unspecified amount of monetary damages on behalf of the purported class and an award of costs and expenses, including counsel fees and expert fees. In June 2014, Old Hertz Holdings responded to the amended complaint by filing a motion to dismiss. After a hearing in October 2014, the court granted Old Hertz Holdings’ motion to dismiss the complaint. The dismissal was without prejudice and plaintiff was granted leave to file a second amended complaint within 30 days of the order. In November 2014, plaintiff filed a second amended complaint which shortened the putative class period such that it was not alleged to have commenced until May 18, 2013 and made allegations that were not substantively very different than the allegations in the prior complaint. In early 2015, this case was assigned to a new federal judge in the District of New Jersey, and Old Hertz Holdings responded to the second amended complaint by filing another motion to dismiss. On July 22, 2015, the court granted Old Hertz Holdings’ motion to dismiss without prejudice and ordered that plaintiff could file a third amended complaint on or before August 22, 2015. On August 21, 2015, plaintiff filed a third amended complaint. The third amended complaint included additional allegations, named additional current and former officers as defendants and expanded the putative class period such that it was alleged to span from February 14, 2013 to July 16, 2015. Plaintiffs filed a fourth amended complaint to add a new plaintiff on March 1, 2016. Old Hertz Holdings and the individual defendants moved to dismiss the fourth amended complaint in its entirety with prejudice on March 24, 2016, and plaintiff filed its opposition to same. The court granted Old Hertz Holdings' motion to dismiss with prejudice on April 27, 2017. The plaintiffs appealed to the United States Court of Appeals for the Third Circuit and filed their Initial Brief in November ~~2017 and~~2017. Old Hertz Holdings - joined by two of the individual defendants along with a separate brief by one of the individual defendants - filed Opposition Briefs in January 2018. The plaintiffs’ Reply Brief was thereafter filed in February of 2018. Oral arguments were ~~requested and were~~ held on June 12, 2018.

~~The Company intends to assert that it has meritorious defenses in~~ On September 20, 2018, the ~~foregoing matters and~~Third Circuit affirmed the ~~Company intends to vigorously defend itself.~~dismissal of the fourth amended complaint with prejudice.

Governmental Investigations - In June 2014, the Company was advised by the staff of the New York Regional Office of the Securities and Exchange Commission (“SEC”) that it is investigating the events disclosed in certain of the Company’s filings with the SEC. In addition, starting in June 2016 the Company has had communications with the U.S. Attorney’s Office for the District of New Jersey regarding the same or similar events. The investigations and communications generally involve the restatements included in the Old Hertz Holdings Form 10-K for the year ended December 31, 2014, as filed with the SEC on July 16, 2015 and related accounting for prior periods. The Company has and intends to continue to cooperate with all requests related to the foregoing. The Company is engaged in discussions with the enforcement staff of the New York office of

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the SEC ("Staff") to resolve certain matters under investigation. Any proposed settlement that might result from discussions with the Staff would be subject to additional reviews and approvals, including acceptance and authorization by the SEC. The Company cannot predict the ultimate timing or the final terms of a possible settlement, including any settlement amount. The Company has established an estimated range of probable loss, but given the uncertainties associated with the matters under discussion, the Company is unable to determine a best estimate within the range of loss. Therefore, during the three months ended June 30, 2018, the Company accrued a loss contingency ~~equal to the minimum amount~~ of ~~the range~~$13.6 million which is its best estimate of probable loss based on current circumstances. It is possible that ~~an adverse outcome with respect to~~ the ~~restatement investigations and the other issues discussed herein~~final settlement could result in losses that exceed the accrual ~~or the estimated range~~ and could be material to the Company's consolidated financial condition, results of operations or cash ~~flows in any particular reporting period.~~

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flows.

Additionally, the Company previously identified certain activities in Brazil that raised issues under the Foreign Corrupt Practices Act (the "FCPA") and other federal and local laws, which the Company self-reported to appropriate government entities. The matters associated with the FCPA and other federal matters have been resolved without further action by the applicable U.S. government entities. The Company is continuing its cooperation with respect to matters under local Brazilian laws. The Company ~~had previously~~has accrued a loss contingency with respect to the ongoing Brazil-related matters that ~~was~~is not material. ~~Because of the resolution of these matters here in the U.S., during the three months ended June 30, 2018, the Company decreased the loss contingency accrual.~~ However, it is possible that an adverse outcome with respect to the ongoing matters in Brazil could result in losses that could be material to the Company's consolidated financial condition, results of operations or cash flows in any particular reporting period.

French Road Tax - The French Tax Authority has challenged the historic practice of several vehicle rental companies, including Hertz France, of registering vehicles in jurisdictions where it is established and where the road tax payable with respect to those vehicles is lower than the road tax payable in the jurisdictions where the vehicles will primarily be used. In respect of a period in 2005, the Company has unsuccessfully appealed the French Tax assessment to the highest Administrative court in France. In respect of a period from 2003 to 2005, following an adverse judgment, the Company appealed the French Tax Authority’s assessment to the Civil Court of Appeal. In March 2017, the Company received an adverse judgment in the 2003 -2005 road tax appeal from the Civil Court of Appeal. The Company appealed this decision to the Supreme Civil Court in May 2017. In December 2017, the French Tax Authority issued an assessment for registration tax for the year 2014 and the Company submitted a rebuttal to the French Tax Authority in February 2018. The Company began reserving for this matter in 2015 and assesses the reserve on a quarterly basis as part of the financial statements close process.

In addition to the matters described above, the Company maintains an internal compliance program through which it from time to time identifies other potential violations of laws and regulations applicable to the Company. When the Company identifies such matters, the Company conducts an internal investigation and otherwise cooperates with governmental authorities, as appropriate.

The Company has established reserves for matters where the Company believes that losses are probable and can be reasonably estimated. Other than the aggregate reserve established for claims for public liability and property damage, none of those reserves are material. For matters, including certain of those described above, where the Company has 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. These matters are 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 above, could be decided unfavorably to the Company or any of its 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 the accompanying consolidated financial condition, results of operations or cash flows in any particular reporting period.

Indemnification Obligations

In the ordinary course of business, the Company has executed 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. Specifically, the Company has indemnified various parties for the costs associated

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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 the Company may be held responsible could be substantial. In addition, Hertz entered into customary indemnification agreements with Hertz Holdings and certain of the Company's stockholders and their affiliates pursuant to which Hertz Holdings and Hertz will indemnify those entities 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 such entities and certain other claims and

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liabilities, including liabilities arising out of financing arrangements or securities offerings. The Company has entered into customary indemnification agreements with each of its directors and certain of its officers. Performance under these indemnification obligations would generally be triggered by a breach of terms of the contract or by a third-party claim. In connection with the Spin-Off, the Company executed an agreement with Herc Holdings that contains mutual indemnification clauses and a customary indemnification provision with respect to liability arising out of or resulting from assumed legal matters. The Company regularly evaluates the probability of having to incur costs associated with these indemnification obligations and ~~have~~has accrued for expected losses that are probable and estimable.

Note 12—Related Party Transactions

Agreements with the Icahn Group

In the normal course of business, the Company purchases goods and services and leases property from entities controlled by Carl C. Icahn and his affiliates, including The Pep Boys - Manny, Moe & ~~Jack.~~Jack (collectively, the "Icahn Group"). During the three months ended ~~June~~September 30, 2018 and 2017, the Company purchased approximately ~~$11~~$10 million and $2$3 million, respectively, worth of goods and services from these related parties. During the ~~six~~nine months ended ~~June~~September 30, 2018 and 2017, the Company purchased approximately ~~$17~~$27 million and $4$8 million, respectively, worth of goods and services from these related parties.

In May 2018, the Company sold approximately $36 million of marketable securities to the Icahn Group at the then current market price of such securities.

Transactions between Hertz Holdings and Hertz

In June 2017, Hertz entered into a master loan agreement with Hertz Holdings for a facility size of $425 million with an expiration in June 2018 (the "2017 Master Loan"). The interest rate is based on the U.S. Dollar LIBOR rate plus a margin.

In June 2018, upon expiration of the 2017 Master Loan, Hertz entered into a new master loan agreement with Hertz Holdings for a facility size of $425 million with an expiration in June 2019 (the "2018 Master Loan") where amounts outstanding under the 2017 Master Loan were transferred to the 2018 Master Loan. The interest rate is based on the U.S. Dollar LIBOR rate plus a margin. As of ~~June~~September 30, 2018 and December 31, 2017, there was ~~$113~~$115 million and $107 million, respectively, outstanding under the 2018 Master Loan representing advances and any accrued but unpaid interest.

As of ~~June~~September 30, 2018 and December 31, 2017, Hertz has a due to affiliate in the amount of $65 million, which represents its tax-related liability to Hertz Holdings.

The above amounts are included in equity in the accompanying unaudited condensed consolidated balance sheets of Hertz.

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Other Relationships

In January 2018, Hertz entered into a Master Motor Vehicle Lease and Management Agreement (the “767 Lease Agreement”) pursuant to which Hertz granted 767 Auto Leasing LLC (“767”), an entity affiliated with the Icahn Group, the option to acquire certain vehicles from Hertz at rates aligned with the rates at which Hertz sells vehicles to third parties. Hertz will lease the vehicles, purchased by 767 under the 767 Lease Agreement or from third parties, under a mutually developed fleet plan and Hertz will manage, service, repair, sell and maintain those leased vehicles on behalf of 767. Hertz will rent the leased vehicles to drivers of TNC, including Lyft, Inc. drivers, from rental counters within locations leased or owned by affiliates of 767, including locations operated under a master lease agreement with The Pep Boys - Manny, Joe & Jack. The 767 Lease Agreement has an initial term of 18 months and is subject to automatic six-month renewals thereafter, unless terminated by either party (with or without cause) prior to the start of any such six-month renewal. 767’s payment obligations under the 767 Lease Agreement are guaranteed by American Entertainment Properties Corp. ("American"), an entity affiliated with Mr. ~~Icahn ("American").~~Icahn. American contributed $5$15 million and $25 million to 767 ~~in February~~during the three and nine months ended September 30, 2018, ~~and $5 million in May 2018. 767 commenced business in late-March 2018, and is still in the early stages of its operations.~~respectively. During the three and ~~six~~nine months ended ~~June~~September 30, 2018, the Company sold ~~586~~approximately 1,000 and ~~592~~1,600 vehicles, respectively, to 767 for approximately $7$11 million ~~with substantially all of the sales occurring in the three months ended June 30, 2018.~~and $18 million, respectively.

The Company is entitled to 25% of the profit from the rental of the leased vehicles, as specified in the 767 Lease Agreement, which is variable and based primarily on the rental revenue, less certain costs, such as depreciation, licensing and maintenance expenses. The Company has determined that it is the primary beneficiary of 767 due to its power to direct the activities of 767 that most significantly impact 767's economic performance and the Company's obligation to absorb 25% of 767's gains/losses. Accordingly, 767 is consolidated by the Company as a VIE.

Note 13—Segment Information

The Company has identified three reportable segments, which are organized based on the products and services provided by its operating segments and the geographic areas in which its operating segments conduct business, as follows:

U.S. Rental Car ("U.S. RAC") - rental of vehicles (cars, crossovers and light trucks), as well as sales of value-added services, in the U.S. and consists of the Company's U.S. operating segment;

International Rental Car ("International RAC") - rental and leasing of vehicles (cars, vans, crossovers and light trucks), as well as sales of value-added services, internationally and consists of the Company's Europe and Other International operating segments, which are aggregated into a reportable segment based primarily upon similar economic characteristics, products and services, customers, delivery methods and general regulatory environments;

All Other Operations - primarily consists of the Company's Donlen business, which provides vehicle leasing and fleet management services, together with other business activities which represent less than 2% of revenues and expenses of the segment.

In addition to the above reportable segments, the Company has corporate operations ("Corporate") which includes general corporate assets and expenses and certain interest expense (including net interest on non-vehicle debt).

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The following tables provide significant statement of operations and balance sheet information by segment for each of Hertz Global and Hertz, as well as adjusted pre-tax income (loss), the segment measure of profitability.


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
(In millions)	2018			2017			2018			2017			2018			2017			2018			2017
Revenues
U.S. Rental Car	$	1,628		$	1,519		$	3,054		$	2,872		$	1,852		$	1,685		$	4,905		$	4,557
International Rental Car	589			543			1,057			955			732			728			1,789			1,683
All Other Operations	172			162			341			313			174			159			515			473
Total Hertz Global and Hertz	$	2,389		$	2,224		$	4,452		$	4,140		$	2,758		$	2,572		$	7,209		$	6,713
Depreciation of revenue earning vehicles and lease charges, net
U.S. Rental Car	$	447		$	524		$	881		$	1,023		$	414		$	455		$	1,295		$	1,478
International Rental Car	112			100			214			185			128			126			342			311
All Other Operations	128			119			253			236			130			119			383			355
Total Hertz Global and Hertz	$	687		$	743		$	1,348		$	1,444		$	672		$	700		$	2,020		$	2,144
Adjusted pre-tax income (loss)^(a)
Adjusted Pre-tax Income (Loss)^(a)
U.S. Rental Car	$	24		$	(37	)	$	(24	)	$	(152	)	$	222		$	158		$	200		$	5
International Rental Car	74			56			69			52			133			147			201			200
All Other Operations	24			19			47			39			22			20			68			59
Corporate	(143		)	(120		)	(289		)	(234		)	(137		)	(137		)	(425		)	(371		)
Total Hertz Global	(21		)	(82		)	(197		)	(295		)	240			188			44			(107		)
Corporate - Hertz	2			1			3			2			2			1			5			4
Total Hertz	$	(19	)	$	(81	)	$	(194	)	$	(293	)	$	242		$	189		$	49		$	(103	)


(In millions)	June 30, 2018		December 31, 2017		September 30, 2018		December 31, 2017
Total Assets
U.S. Rental Car	$	14,847	$	12,785	$	14,495	$	12,785
International Rental Car	4,973		3,971		5,081		3,971
All Other Operations	1,759		1,700		1,763		1,700
Corporate	1,192		1,602		1,121		1,602
Total Hertz Global and Hertz	$	22,771	$	20,058	$	22,460	$	20,058

(a)

Adjusted ~~pre-tax income (loss)~~Pre-tax Income (Loss), the Company's segment profitability measure, is calculated as income (loss) before income taxes plus non-cash acquisition accounting charges, debt-related charges relating to the amortization and write-off of debt financing costs and debt discounts and premiums, goodwill, intangible and tangible asset impairments and write downs, information technology and finance transformation costs, income or loss attributable to noncontrolling interests, and certain other miscellaneous or non-recurring items.

Reconciliations of ~~adjusted pre-tax income (loss)~~Adjusted Pre-tax Income (Loss) by segment to consolidated amounts are summarized below.

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Hertz Global


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
(In millions)	2018			2017			2018			2017			2018			2017			2018			2017
Adjusted pre-tax income (loss):
Adjusted Pre-tax Income (Loss):
U.S. Rental Car	$	24		$	(37	)	$	(24	)	$	(152	)	$	222		$	158		$	200		$	5
International Rental Car	74			56			69			52			133			147			201			200
All Other Operations	24			19			47			39			22			20			68			59
Total reportable segments	122			38			92			(61		)	377			325			469			264
Corporate⁽¹⁾	(143		)	(120		)	(289		)	(234		)	(137		)	(137		)	(425		)	(371		)
Adjusted pre-tax income (loss)	(21		)	(82		)	(197		)	(295		)
Adjusted Pre-tax Income (Loss)													240			188			44			(107		)
Adjustments:
Acquisition accounting⁽²⁾	(15		)	(16		)	(30		)	(31		)	(15		)	(15		)	(46		)	(47		)
Debt-related charges⁽³⁾	(13		)	(10		)	(26		)	(21		)	(11		)	(12		)	(36		)	(33		)
Loss on extinguishment of debt⁽⁴⁾	(20		)	(8		)	(22		)	(8		)	—			—			(22		)	(8		)
Restructuring and restructuring related charges⁽⁵⁾	(10		)	(5		)	(13		)	(13		)	(12		)	(2		)	(26		)	(14		)
Impairment charges and asset write-downs⁽⁶⁾	—			(86		)	—			(116		)	—			—			—			(116		)
Information technology and finance transformation costs⁽⁷⁾	(29		)	(20		)	(51		)	(39		)	(24		)	(15		)	(75		)	(55		)
Other⁽⁸⁾	22			(18		)	22			(16		)	3			(1		)	24			(17		)
Income (loss) before income taxes	$	(86	)	$	(245	)	$	(317	)	$	(539	)	$	181		$	143		$	(137	)	$	(397	)

Hertz


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
(In millions)	2018			2017			2018			2017			2018			2017			2018			2017
Adjusted pre-tax income (loss):
Adjusted Pre-tax Income (Loss):
U.S. Rental Car	$	24		$	(37	)	$	(24	)	$	(152	)	$	222		$	158		$	200		$	5
International Rental Car	74			56			69			52			133			147			201			200
All Other Operations	24			19			47			39			22			20			68			59
Total reportable segments	122			38			92			(61		)	377			325			469			264
Corporate⁽¹⁾	(141		)	(119		)	(286		)	(232		)	(135		)	(136		)	(420		)	(367		)
Adjusted pre-tax income (loss)	(19		)	(81		)	(194		)	(293		)
Adjusted Pre-tax Income (Loss)													242			189			49			(103		)
Adjustments:
Acquisition accounting⁽²⁾	(15		)	(16		)	(30		)	(31		)	(15		)	(15		)	(46		)	(47		)
Debt-related charges⁽³⁾	(13		)	(10		)	(26		)	(21		)	(11		)	(12		)	(36		)	(33		)
Loss on extinguishment of debt⁽⁴⁾	(20		)	(8		)	(22		)	(8		)	—			—			(22		)	(8		)
Restructuring and restructuring related charges⁽⁵⁾	(10		)	(5		)	(13		)	(13		)	(12		)	(2		)	(26		)	(14		)
Impairment charges and asset write-downs⁽⁶⁾	—			(86		)	—			(116		)	—			—			—			(116		)
Information technology and finance transformation costs⁽⁷⁾	(29		)	(20		)	(51		)	(39		)	(24		)	(15		)	(75		)	(55		)
Other⁽⁸⁾	22			(18		)	22			(16		)	3			(1		)	24			(17		)
Income (loss) before income taxes	$	(84	)	$	(244	)	$	(314	)	$	(537	)	$	183		$	144		$	(132	)	$	(393	)


(1)	Represents general corporate expenses, non-vehicle interest expense, as well as other business activities.

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Unaudited


(2)	Represents incremental expense associated with amortization of other intangible assets and depreciation of property and equipment relating to acquisition accounting.


(3)	Primarily represents debt-related charges relating to the amortization of deferred financing costs and debt discounts and premiums.

(4)

In 2018, primarily represents $20 million of early redemption premium and write-off of deferred financing costs associated with the full redemption of the 4.375% European Vehicle Senior Notes due January 2019 in April 2018. In 2017, represents $6 million of early redemption premium and write-off of deferred financing costs associated with the redemption of certain notes and a $2 million write-off of deferred financing costs associated with the termination of commitments under the Senior ~~RCF.~~RCF incurred during the second quarter.

(5)

Represents charges incurred under restructuring actions as defined in U.S. GAAP, excluding impairments and asset write-downs, which are shown separately in the table. Also includes restructuring related charges such as incremental costs incurred directly supporting business transformation initiatives. Such costs include transition costs incurred in connection with 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. Also includes consulting costs, legal fees, the loss contingency, which totals $13.6 million for the nine months of 2018, and other expenses related to the previously disclosed accounting review and investigation.


(6)	In 2017, represents a second quarter $86 million impairment of the Dollar Thrifty tradename and a first quarter impairment of $30 million related to an equity method investment.


(7)	Represents costs associated with the Company’s information technology and finance transformation programs, both of which are multi-year initiatives to upgrade and modernize the Company’s systems and processes.

(8)

Represents miscellaneous or non-recurring items. In 2018, includes net loss attributable to noncontrolling interests, a ~~$17~~$4 million and $21 million pre-tax gain on marketable securities during the third quarter and nine months, respectively, and a $6 million legal settlement received in the second quarter related to an oil spill in the Gulf of Mexico in 2010. In 2017, includes ~~first and second quarter adjustments, as applicable, to~~net expenses of $13 million resulting from hurricanes, partially offset by a $6 million pre-tax gain on the ~~carrying value~~sale of the Company's ~~previous~~ Brazil ~~operations and~~Operations in the third quarter. Also, includes second quarter charges of $6 million for labor-related matters and $5 million relating to PLPD as a result of a terrorist event.

Note 14—Guarantor and Non-Guarantor Condensed Consolidating Financial Information - Hertz

The following condensed consolidating financial information presents the Condensed Consolidating Balance Sheets as of ~~June~~September 30, 2018 and December 31, 2017, the Condensed Consolidating Statements of Operations and Comprehensive Income (Loss) for the three and ~~six~~nine months ended ~~June~~September 30, 2018 and 2017 and the Statements of Cash Flows for the ~~six~~nine months ended ~~June~~September 30, 2018 and 2017 of (a) The Hertz Corporation, ("Parent”); (b) the Parent's subsidiaries that guarantee the Senior Notes issued by the Parent ("Guarantor Subsidiaries"); (c) the Parent's subsidiaries that do not guarantee the Senior Notes issued by the Parent ("Non-Guarantor Subsidiaries"); (d) elimination entries necessary to consolidate the Parent with the Guarantor Subsidiaries and Non-Guarantor Subsidiaries ("Eliminations"); and of (e) Hertz on a consolidated basis.

Investments in subsidiaries are accounted for using the equity method for purposes of the consolidating presentation. The principal elimination entries relate to investments in subsidiaries and intercompany balances and transactions. The Guarantor Subsidiaries are 100% owned by the Parent and all guarantees are full and unconditional and joint and several. Additionally, substantially all of the assets of the Guarantor Subsidiaries are pledged under the Senior Facilities and Senior Second Priority Secured Notes, and consequently will not be available to satisfy the claims of Hertz's general creditors. In lieu of providing separate unaudited financial statements for the Guarantor Subsidiaries, Hertz has included the accompanying condensed consolidating financial statements based on Rule 3-10 of the SEC's Regulation S-X. Management of Hertz does not believe that separate financial statements of the Guarantor Subsidiaries are material to Hertz's investors; therefore, separate financial statements and other disclosures concerning the Guarantor Subsidiaries are not presented.

During the preparation of the condensed consolidating financial information of The Hertz Corporation and Subsidiaries as of and for the year ended December 31, 2017, it was determined that there were classification errors within the investing section of the statements of cash flows that resulted in overstatement of capital contributions to subsidiaries and return of capital from subsidiaries for the Parent and classification errors within the financing section of the statements of cash flows that resulted in overstatement of capital contributions received from parent and payment of dividends and returns of capital for the Non-Guarantor Subsidiaries. The overstatement was ~~$159~~$164 million for the ~~six~~nine months ended ~~June~~September 30, 2017. The errors, which the Company has determined are not material to this disclosure, had no impact to cash from investing activities for the Parent or cash from financing activities of the Non-Guarantor Subsidiaries, and had no impact to any cash flows of the Guarantor Subsidiaries. These errors are eliminated in

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Unaudited

consolidation and therefore have no impact on the Company’s unaudited condensed consolidated financial condition, results of operations or cash flows. The Company has revised the Condensed Consolidating Statements of Cash Flows for the Parent, Non-Guarantor Subsidiaries and Eliminations for the ~~six~~nine months ended ~~June~~September 30, 2017 to correct for these errors.

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THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Unaudited

THE HERTZ CORPORATION

CONDENSED CONSOLIDATING BALANCE SHEET

~~June~~September 30, 2018

(In millions)


	Parent (The Hertz Corporation)		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			The Hertz Corporation & Subsidiaries		Parent (The Hertz Corporation)		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			The Hertz Corporation & Subsidiaries
ASSETS
Cash and cash equivalents	$	393	$	6	$	286	$	—		$	685	$	271	$	7	$	483	$	—		$	761
Restricted cash and cash equivalents	71		9		156		—			236		90		8		167		—			265
Total cash, cash equivalents, restricted cash and restricted cash equivalents	464		15		442		—			921		361		15		650		—			1,026
Receivables, net of allowance	468		163		795		—			1,426		441		166		1,198		—			1,805
Due from affiliates	3,565		5,070		8,852		(17,487		)	—		3,486		5,200		8,575		(17,261		)	—
Prepaid expenses and other assets	4,367		40		301		(3,786		)	922		4,719		36		292		(4,056		)	991
Revenue earning vehicles, net	402		2		14,013		—			14,417		453		1		13,123		—			13,577
Property and equipment, net	606		63		133		—			802		590		62		129		—			781
Investment in subsidiaries, net	7,767		1,298		—		(9,065		)	—		7,695		1,334		—		(9,029		)	—
Other intangible assets, net	128		3,065		7		—			3,200		139		3,052		6		—			3,197
Goodwill	102		943		38		—			1,083		102		943		38		—			1,083
Total assets	$	17,869	$	10,659	$	24,581	$	(30,338	)	$	22,771	$	17,986	$	10,809	$	24,011	$	(30,346	)	$	22,460
LIABILITIES AND STOCKHOLDER'S EQUITY
Due to affiliates	$	10,843	$	2,328	$	4,316	$	(17,487	)	$	—	$	10,728	$	2,270	$	4,263	$	(17,261	)	$	—
Accounts payable	466		115		910		—			1,491		430		112		462		—			1,004
Accrued liabilities	685		69		404		—			1,158		797		67		442		—			1,306
Accrued taxes, net	76		18		2,466		(2,398		)	162		90		19		2,711		(2,639		)	181
Debt	4,563		—		12,801		—			17,364		4,554		—		12,604		—			17,158
Public liability and property damage	178		41		202		—			421		185		40		214		—			439
Deferred income taxes, net	—		1,485		1,010		(1,388		)	1,107		—		1,525		1,038		(1,417		)	1,146
Total liabilities	16,811		4,056		22,109		(21,273		)	21,703		16,784		4,033		21,734		(21,317		)	21,234
Stockholder's equity:
Total stockholder's equity attributable to Hertz	1,058		6,603		2,462		(9,065		)	1,058		1,202		6,776		2,253		(9,029		)	1,202
Non-controlling interest	—		—		10		—			10
Noncontrolling interest												—		—		24		—			24
Total stockholder's equity	1,058		6,603		2,472		(9,065		)	1,068		1,202		6,776		2,277		(9,029		)	1,226
Total liabilities and stockholder's equity	$	17,869	$	10,659	$	24,581	$	(30,338	)	$	22,771	$	17,986	$	10,809	$	24,011	$	(30,346	)	$	22,460

4041

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THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Unaudited

THE HERTZ CORPORATION

CONDENSED CONSOLIDATING BALANCE SHEET

December 31, 2017

(In millions)



	Parent (The Hertz Corporation)		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			The Hertz Corporation & Subsidiaries
ASSETS
Cash and cash equivalents	$	686	$	9	$	377	$	—		$	1,072
Restricted cash and cash equivalents	225		7		200		—			432
Total cash, cash equivalents, restricted cash and restricted cash equivalents	911		16		577		—			1,504
Receivables, net of allowance	366		167		832		—			1,365
Due from affiliates	3,373		4,567		8,794		(16,734		)	—
Prepaid expenses and other assets	3,747		37		302		(3,399		)	687
Revenue earning vehicles, net	352		2		10,982		—			11,336
Property and equipment, net	639		61		140		—			840
Investment in subsidiaries, net	7,966		1,265		—		(9,231		)	—
Other intangible assets, net	141		3,091		10		—			3,242
Goodwill	102		944		38		—			1,084
Total assets	$	17,597	$	10,150	$	21,675	$	(29,364	)	$	20,058
LIABILITIES AND STOCKHOLDER'S EQUITY
Due to affiliates	$	10,368	$	2,156	$	4,210	$	(16,734	)	$	—
Accounts payable	375		92		479		—			946
Accrued liabilities	473		73		374		—			920
Accrued taxes, net	77		21		2,235		(2,173		)	160
Debt	4,619		—		10,246		—			14,865
Public liability and property damage	165		37		225		—			427
Deferred income taxes, net	—		1,451		995		(1,226		)	1,220
Total liabilities	16,077		3,830		18,764		(20,133		)	18,538
Stockholder's equity:
Total stockholder's equity	1,520		6,320		2,911		(9,231		)	1,520
Total liabilities and stockholder's equity	$	17,597	$	10,150	$	21,675	$	(29,364	)	$	20,058

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THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Unaudited

THE HERTZ CORPORATION

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

For the Three Months Ended ~~June~~September 30, 2018

(In millions)

Parent
(The Hertz
Corporation)

Guarantor
Subsidiaries

Non-
Guarantor
Subsidiaries
Eliminations
The Hertz
Corporation &
Subsidiaries
Total revenues $ 1,193
$ 368
$ 2,129
$ (1,301 ) $ 2,389
Expenses:
Direct vehicle and operating 839
182
328
—
1,349
Depreciation of revenue earning vehicles and lease charges, net 1,220
98
670
(1,301 ) 687
Selling, general and administrative 179
16
70
—
265
Interest (income) expense, net 100
(37 ) 135
—
198
Other (income) expense, net (25 ) —
(1 ) —
(26 )
Total expenses 2,313
259
1,202
(1,301 ) 2,473
Income (loss) before income taxes and equity in earnings (losses) of subsidiaries (1,120 ) 109
927
—
(84 )
Income tax (provision) benefit 235
(21 ) (191 ) —
23
Equity in earnings (losses) of subsidiaries, net of tax 824
34
—
(858 ) —
Net income (loss) (61 ) 122
736
(858 ) (61 )
Other comprehensive income (loss), net of tax (14 ) (3 ) (14 ) 17
(14 )
Comprehensive income (loss) $ (75 ) $ 119
$ 722
$ (841 ) $ (75 )

~~Table of Contents~~

~~HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES~~

~~THE HERTZ CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)~~

~~Unaudited~~

~~THE HERTZ CORPORATION~~

~~CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)~~

~~For the Three Months Ended June 30, 2017~~

~~(In millions)~~


	Parent (The Hertz Corporation)			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			The Hertz Corporation & Subsidiaries			Parent (The Hertz Corporation)			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			The Hertz Corporation & Subsidiaries
Total revenues	$	1,170		$	354		$	1,871		$	(1,171	)	$	2,224		$	1,349		$	418		$	2,272		$	(1,281	)	$	2,758
Expenses:
Direct vehicle and operating	741			181			333			—			1,255			865			190			404			—			1,459
Depreciation of revenue earning vehicles and lease charges, net	1,024			113			714			(1,108		)	743			1,200			91			662			(1,281		)	672
Selling, general and administrative	156			8			59			—			223			176			24			65			—			265
Interest (income) expense, net	101			(25		)	81			—			157			108			(42		)	120			—			186
Intangible asset impairments	—			86			—			—			86
Other (income) expense, net	—			—			4			—			4			(6		)	—			(1		)	—			(7		)
Total expenses	2,022			363			1,191			(1,108		)	2,468			2,343			263			1,250			(1,281		)	2,575
Income (loss) before income taxes and equity in earnings (losses) of subsidiaries	(852		)	(9		)	680			(63		)	(244		)	(994		)	155			1,022			—			183
Income tax (provision) benefit	358			1			(273		)	—			86			270			(41		)	(271		)	—			(42		)
Equity in earnings (losses) of subsidiaries, net of tax	336			30			—			(366		)	—			866			32			—			(898		)	—
Net income (loss)	(158		)	22			407			(429		)	(158		)	142			146			751			(898		)	141
Other comprehensive income (loss), net of tax	(7		)	3			(8		)	5			(7		)
Comprehensive income (loss)	$	(165	)	$	25		$	399		$	(424	)	$	(165	)
Net (income) loss attributable to noncontrolling interests																—			—			1			—			1
Net income (loss) attributable to Hertz																142			146			752			(898		)	142
Total other comprehensive income (loss), net of tax																—			2			(1		)	(1		)	—
Comprehensive income (loss) attributable to Hertz																$	142		$	148		$	751		$	(899	)	$	142

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Unaudited

THE HERTZ CORPORATION

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

For the ~~Six~~Three Months Ended ~~June~~September 30, ~~2018~~2017

(In millions)



	Parent (The Hertz Corporation)			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			The Hertz Corporation & Subsidiaries			Parent (The Hertz Corporation)			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			The Hertz Corporation & Subsidiaries
Total revenues	$	2,249		$	687		$	3,618		$	(2,102	)	$	4,452		$	1,296		$	394		$	1,861		$	(979	)	$	2,572
Expenses:
Direct vehicle and operating	1,590			354			641			—			2,585			772			188			388			—			1,348
Depreciation of revenue earning vehicles and lease charges, net	1,985			182			1,283			(2,102		)	1,348			826			98			669			(893		)	700
Selling, general and administrative	340			28			130			—			498			151			9			57			—			217
Interest (income) expense, net	204			(70		)	230			—			364			108			(26		)	93			—			175
Intangible asset impairments	—			—			—			—			—			—			—			—			—			—
Other (income) expense, net	(27		)	—			(2		)	—			(29		)	(4		)	—			(8		)	—			(12		)
Total expenses	4,092			494			2,282			(2,102		)	4,766			1,853			269			1,199			(893		)	2,428
Income (loss) before income taxes and equity in earnings (losses) of subsidiaries	(1,843		)	193			1,336			—			(314		)	(557		)	125			662			(86		)	144
Income tax (provision) benefit	356			(35		)	(270		)	—			51			188			(43		)	(195		)	—			(50		)
Equity in earnings (losses) of subsidiaries, net of tax	1,224			58			—			(1,282		)	—			463			37			—			(500		)	—
Net income (loss)	(263		)	216			1,066			(1,282		)	(263		)	94			119			467			(586		)	94
Other comprehensive income (loss), net of tax	(17		)	(5		)	(17		)	22			(17		)
Comprehensive income (loss)	$	(280	)	$	211		$	1,049		$	(1,260	)	$	(280	)
Total other comprehensive income (loss), net of tax																15			4			14			(18		)	15
Total comprehensive income (loss)																$	109		$	123		$	481		$	(604	)	$	109

Table of Contents

HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Unaudited

THE HERTZ CORPORATION

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

For the ~~Six~~Nine Months Ended ~~June~~September 30, 2018

(In millions)




	Parent (The Hertz Corporation)			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			The Hertz Corporation & Subsidiaries
Total revenues	$	3,598		$	1,105		$	5,890		$	(3,384	)	$	7,209
Expenses:
Direct vehicle and operating	2,455			544			1,044			—			4,043
Depreciation of revenue earning vehicles and lease charges, net	3,185			273			1,946			(3,384		)	2,020
Selling, general and administrative	516			53			196			—			765
Interest (income) expense, net	311			(112		)	350			—			549
Other (income) expense, net	(33		)	—			(3		)	—			(36		)
Total expenses	6,434			758			3,533			(3,384		)	7,341
Income (loss) before income taxes and equity in earnings (losses) of subsidiaries	(2,836		)	347			2,357			—			(132		)
Income tax (provision) benefit	627			(76		)	(541		)	—			10
Equity in earnings (losses) of subsidiaries, net of tax	2,088			90			—			(2,178		)	—
Net income (loss)	(121		)	361			1,816			(2,178		)	(122		)
Net (income) loss attributable to noncontrolling interests	—			—			1			—			1
Net income (loss) attributable to Hertz	(121		)	361			1,817			(2,178		)	(121		)
Total other comprehensive income (loss), net of tax	(17		)	(3		)	(18		)	21			(17		)
Comprehensive income (loss) attributable to Hertz	$	(138	)	$	358		$	1,799		$	(2,157	)	$	(138	)

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Unaudited

THE HERTZ CORPORATION

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

For the Nine Months Ended September 30, 2017

(In millions)



	Parent (The Hertz Corporation)			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			The Hertz Corporation & Subsidiaries			Parent (The Hertz Corporation)			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			The Hertz Corporation & Subsidiaries
Total revenues	$	2,220		$	661		$	3,248		$	(1,989	)	$	4,140		$	3,516		$	1,055		$	5,109		$	(2,967	)	$	6,713
Expenses:
Direct vehicle and operating	1,429			350			608			—			2,387			2,201			538			996			—			3,735
Depreciation of revenue earning vehicles and lease charges, net	1,761			215			1,335			(1,867		)	1,444			2,587			313			2,004			(2,760		)	2,144
Selling, general and administrative	306			19			117			—			442			457			28			176			—			661
Interest (income) expense, net	183			(47		)	151			—			287			290			(73		)	244			—			461
Intangible asset impairments	—			86			—			—			86			—			86			—			—			86
Other (income) expense, net	33			—			(2		)	—			31			30			—			(11		)	—			19
Total expenses	3,712			623			2,209			(1,867		)	4,677			5,565			892			3,409			(2,760		)	7,106
Income (loss) before income taxes and equity in earnings (losses) of subsidiaries	(1,492		)	38			1,039			(122		)	(537		)	(2,049		)	163			1,700			(207		)	(393		)
Income tax (provision) benefit	572			(14		)	(401		)	—			157			760			(57		)	(596		)	—			107
Equity in earnings (losses) of subsidiaries, net of tax	540			62			—			(602		)	—			1,003			100			—			(1,103		)	—
Net income (loss)	(380		)	86			638			(724		)	(380		)	(286		)	206			1,104			(1,310		)	(286		)
Other comprehensive income (loss), net of tax	6			3			4			(7		)	6
Comprehensive income (loss)	$	(374	)	$	89		$	642		$	(731	)	$	(374	)
Total other comprehensive income (loss), net of tax																21			6			19			(25		)	21
Total comprehensive income (loss)																$	(265	)	$	212		$	1,123		$	(1,335	)	$	(265	)

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THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Unaudited

THE HERTZ CORPORATION

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the ~~Six~~Nine Months Ended ~~June~~September 30, 2018

(In millions)


	Parent (The Hertz Corporation)			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			The Hertz Corporation & Subsidiaries			Parent (The Hertz Corporation)			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			The Hertz Corporation & Subsidiaries
Net cash provided by (used in) operating activities	$	(34	)	$	5		$	2,093		$	(1,119	)	$	945		$	187		$	7		$	3,732		$	(1,905	)	$	2,021
Cash flows from investing activities:
Revenue earning vehicles expenditures	(213		)	—			(7,397		)	—			(7,610		)	(328		)	—			(9,748		)	—			(10,076		)
Proceeds from disposal of revenue earning vehicles	96			—			3,558			—			3,654			183			—			5,195			—			5,378
Capital asset expenditures, non-vehicle	(54		)	(6		)	(20		)	—			(80		)	(85		)	(8		)	(26		)	—			(119		)
Proceeds from disposal of property and other equipment	3			—			5			—			8
Proceeds from property and other equipment disposed of or to be disposed of																41			—			6			—			47
Purchases of marketable securities	(60		)	—			(1		)	—			(61		)	(60		)	—			—			—			(60		)
Sales of marketable securities	36			—			—			—			36			36			—			—			—			36
Other	—			—			(2		)	—			(2		)	(2		)	—			(3		)	—			(5		)
Capital contributions to subsidiaries	(1,978		)	—			—			1,978			—			(2,817		)	—			—			2,817			—
Return of capital from subsidiaries	1,900			—			—			(1,900		)	—			2,445			—			—			(2,445		)	—
Loan to Parent/Guarantor from Non-Guarantor	—			—			76			(76		)	—
Proceeds from/repayments of intercompany loan																—			—			78			(78		)	—
Net cash provided by (used in) investing activities	(270		)	(6		)	(3,781		)	2			(4,055		)	(587		)	(8		)	(4,498		)	294			(4,799		)
Cash flows from financing activities:
Proceeds from issuance of vehicle debt	1,172			—			8,242			—			9,414			1,809			—			10,062			—			11,871
Repayments of vehicle debt	(1,226		)	—			(5,603		)	—			(6,829		)	(1,862		)	—			(7,663		)	—			(9,525		)
Proceeds from issuance of non-vehicle debt	187			—			—			—			187			387			—			—			—			387
Repayments of non-vehicle debt	(194		)	—			—			—			(194		)	(398		)	—			—			—			(398		)
Payment of financing costs	(1		)	—			(26		)	—			(27		)	(1		)	—			(29		)	—			(30		)
Early redemption premium payment	—			—			(19		)	—			(19		)	—			—			(19		)	—			(19		)
Advances to Hertz Holdings	(6		)	—			—			—			(6		)	(7		)	—			—			—			(7		)
Other	1			—			10			—			11
Contributions from noncontrolling interest owners																—			—			25			—			25
Capital contributions received from parent	—			—			1,978			(1,978		)	—			—			—			2,817			(2,817		)	—
Payment of dividends and return of capital	—			—			(3,019		)	3,019			—			—			—			(4,350		)	4,350			—
Loan to Parent/Guarantor from Non-Guarantor	(76		)	—			—			76			—
Proceeds from/repayments of intercompany loan																(78		)	—			—			78			—
Net cash provided by (used in) financing activities	(143		)	—			1,563			1,117			2,537			(150		)	—			843			1,611			2,304
Effect of foreign currency exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents	—			—			(10		)	—			(10		)	—			—			(4		)	—			(4		)
Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents during the period	(447		)	(1		)	(135		)	—			(583		)	(550		)	(1		)	73			—			(478		)
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period	911			16			577			—			1,504			911			16			577			—			1,504
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period	$	464		$	15		$	442		$	—		$	921		$	361		$	15		$	650		$	—		$	1,026

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Unaudited

THE HERTZ CORPORATION

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the ~~Six~~Nine Months Ended ~~June~~September 30, 2017

(In millions)


	Parent (The Hertz Corporation)			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			The Hertz Corporation & Subsidiaries			Parent (The Hertz Corporation)			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			The Hertz Corporation & Subsidiaries
Net cash provided by (used in) operating activities	$	(396	)	$	15		$	2,168		$	(822	)	$	965		$	(80	)	$	17		$	3,255		$	(1,211	)	$	1,981
Cash flows from investing activities:
Revenue earning vehicles expenditures	(171		)	(5		)	(6,533		)	—			(6,709		)	(195		)	(5		)	(8,483		)	—			(8,683		)
Proceeds from disposal of revenue earning vehicles	91			—			3,744			—			3,835			123			—			5,162			—			5,285
Capital asset expenditures, non-vehicle	(56		)	(5		)	(23		)	—			(84		)	(82		)	(8		)	(34		)	—			(124		)
Proceeds from disposal of property and other equipment	6			—			5			—			11			7			—			11			—			18
Proceeds from sale of Brazil Operations, net of retained cash																—			—			94			—			94
Sales of marketable securities	—			—			9			—			9			—			—			9			—			9
Other	—			—			(2		)	—			(2		)	—			—			(4		)	—			(4		)
Capital contributions to subsidiaries	(1,260		)	—			—			1,260			—			(2,060		)	—			—			2,060			—
Return of capital from subsidiaries	1,739			—			—			(1,739		)	—			2,099			—			—			(2,099		)	—
Loan to Parent/Guarantor from Non-Guarantor	—			—			431			(431		)	—
Proceeds from/repayments of intercompany loan																—			—			80			(80		)	—
Net cash provided by (used in) investing activities	349			(10		)	(2,369		)	(910		)	(2,940		)	(108		)	(13		)	(3,165		)	(119		)	(3,405		)
Cash flows from financing activities:
Proceeds from issuance of vehicle debt	631			—			4,397			—			5,028			1,133			—			5,774			—			6,907
Repayments of vehicle debt	(657		)	—			(3,008		)	—			(3,665		)	(1,129		)	—			(4,758		)	—			(5,887		)
Proceeds from issuance of non-vehicle debt	2,100			—			—			—			2,100			2,100			—			—			—			2,100
Repayments of non-vehicle debt	(354		)	—			—			—			(354		)	(986		)	—			—			—			(986		)
Payment of financing costs	(16		)	(4		)	(14		)	—			(34		)	(18		)	(4		)	(21		)	—			(43		)
Early redemption premium payment																(5		)	—			—			—			(5		)
Advances to Hertz Holdings	(3		)	—			—			—			(3		)	(4		)	—			—			—			(4		)
Early redemption premium payment	(5		)	—			—			—			(5		)
Other																(1		)	—			—			—			(1		)
Capital contributions received from parent	—			—			1,260			(1,260		)	—			—			—			2,060			(2,060		)	—
Payment of dividends and return of capital	—			—			(2,561		)	2,561			—			—			—			(3,310		)	3,310			—
Loan to Parent/Guarantor from Non-Guarantor	(431		)	—			—			431			—
Proceeds from/repayments of intercompany loan																(80		)	—			—			80			—
Net cash provided by (used in) financing activities	1,265			(4		)	74			1,732			3,067			1,010			(4		)	(255		)	1,330			2,081
Effect of foreign currency exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents	—			—			17			—			17			—			—			26			—			26
Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents during the period	1,218			1			(110		)	—			1,109			822			—			(139		)	—			683
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period	511			17			566			—			1,094			510			18			566			—			1,094
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period	$	1,729		$	18		$	456		$	—		$	2,203		$	1,332		$	18		$	427		$	—		$	1,777

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

THE HERTZ CORPORATION AND SUBSIDIARIES


ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Hertz Global Holdings, Inc. (together with its consolidated subsidiaries and variable interest entities, "Hertz Global") is a holding company and its principal, ~~wholly-owned~~wholly owned subsidiary is The Hertz Corporation (together with its consolidated subsidiaries and variable interest entities, "Hertz"). As Hertz Global consolidates Hertz for financial statement purposes, disclosures that relate to activities of Hertz also apply to Hertz Global, unless otherwise noted. Hertz comprises approximately the entire balance of Hertz Global's assets, liabilities and operating cash flows. In addition, Hertz's operating revenues and operating expenses comprise nearly 100% of Hertz Global's revenues and operating expenses. As such, Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") that follows for Hertz also applies to Hertz Global in all material respects, and differences between the operations and results of Hertz and Hertz Global are separately disclosed and explained. We sometimes use the words "we," "our," "us," and the "Company" in this MD&A for disclosures that relate to all of Hertz and Hertz Global.

~~Management’s discussion and analysis ("~~This MD~~&A")~~&A should be read in conjunction with the MD&A presented in our 2017 Form 10‑K and the unaudited condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of this Report on Form 10-Q for the quarterly period ended ~~June~~September 30, 2018 (this "Report"), which include additional information about our accounting policies, practices and the transactions underlying our financial results. The preparation of our unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts in our unaudited condensed consolidated financial statements and the accompanying notes including vehicle depreciation and various claims and contingencies related to lawsuits, taxes and other matters arising during the normal course of business. We apply our best judgment, our knowledge of existing facts and circumstances and our knowledge of actions that we may undertake in the future in determining the estimates that will affect our unaudited condensed consolidated financial statements. We evaluate our estimates on an ongoing basis using our historical experience, as well as other factors we believe to be appropriate under the circumstances, such as current economic conditions, and adjust or revise our estimates as circumstances change. As future events and their effects cannot be determined with precision, actual results may differ from these estimates.

In this MD&A we refer to certain key metrics and ~~Non-GAAP~~non-GAAP measures, including the following:

Adjusted Pre-Tax Income (Loss) - important to management because it allows management to assess the operational performance of our business, exclusive of certain items, and 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.

Net Depreciation Per Unit Per Month - important to management and investors as depreciation of revenue earning vehicles and lease charges is one of our largest expenses for the vehicle rental business and is driven by the number of vehicles, expected residual values at the time of disposal and expected hold period of the vehicles. Net ~~depreciation per unit per month~~Depreciation Per Unit Per Month is reflective of how we are managing the costs of our vehicles and facilitates a comparison with other participants in the vehicle rental industry.

Total Revenue Per Transaction Day ("Total RPD," also referred to as "pricing") - important to management and investors as it represents a measurement of the changes in underlying pricing in the vehicle rental business and encompasses the elements in vehicle rental pricing that management has the ability to control.

Total Revenue Per Unit Per Month ("Total RPU") - important to management and investors as it provides a measure of revenue productivity relative to the total number of vehicles in our fleet whether owned or leased ("~~average vehicles"~~Average Vehicles" or "fleet capacity").

Transaction Days - important to management and investors as it represents the number of revenue generating days ("volume"). It is used as a component to measure Total RPD and ~~vehicle utilization.~~Vehicle Utilization. Transaction ~~days~~Days represent the total number of 24-hour periods, with any partial period counted as one transaction day, that vehicles were on rent (the period between when a rental contract is opened and closed) in a given period. Thus, it is possible for a vehicle to attain more than one transaction day in a 24-hour period.

Vehicle Utilization - important to management and investors because it is the measurement of the proportion of our vehicles that are being used to generate revenues relative to fleet capacity. Higher vehicle utilization means more vehicles are being utilized to generate revenue.

Table of Contents

HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

THE HERTZ CORPORATION AND SUBSIDIARIES


ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Key metrics and ~~Non-GAAP~~non-GAAP measures should not be considered in isolation and should not be considered superior to, or a substitute for, financial measures calculated in accordance with U.S. GAAP. The above key metrics and ~~Non-GAAP~~non-GAAP measures are defined, and the ~~Non-GAAP~~non-GAAP measures are reconciled to their most comparable U.S. GAAP measure, in the "Footnotes to the Results of Operations and Selected Operating Data by Segment Tables" section of this MD&A.

OUR COMPANY

Hertz Global was incorporated in Delaware in 2015 to serve as the top-level holding company for Rental Car Intermediate Holdings, LLC, which wholly owns Hertz, Hertz Global's primary operating company. Hertz was incorporated in Delaware in 1967 and is a successor to corporations that have been engaged in the vehicle rental and leasing business since 1918.

We operate our vehicle rental business globally through the Hertz, Dollar and Thrifty brands from approximately 10,200 corporate and franchisee locations in North America, Europe, Latin America, Africa, Asia, Australia, the Caribbean, the Middle East and New Zealand. We are one of the largest worldwide airport general use vehicle rental companies and our Hertz brand name is one of the most recognized ~~in the world,~~globally, signifying leadership in quality rental services and products. We have an extensive network of rental locations in the U.S. and in all major European markets. We believe that we maintain one of the leading airport vehicle rental brand market shares, by overall reported revenues, in the U.S. and at major airports in Europe where data regarding vehicle rental concessionaire activity is available. We are a leading provider of comprehensive, integrated vehicle leasing and fleet management solutions through our Donlen subsidiary.

OVERVIEW OF OUR BUSINESS AND OPERATING ENVIRONMENT

We are engaged principally in the business of renting and leasing vehicles primarily through our Hertz, Dollar and Thrifty brands. In addition to vehicle rental, we provide comprehensive, integrated vehicle leasing and fleet management solutions through our Donlen subsidiary. We have a diversified revenue base and a highly variable cost structure and are able to adjust fleet capacity, the most significant determinant of our costs, over time to meet expectations of market demand. Our profitability is primarily a function of the volume, mix and pricing of rental transactions and the utilization of vehicles, the related ownership cost of vehicles and other operating costs. Significant changes in the purchase price or residual values of vehicles 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.~~conditions, including residual values. Our business requires significant expenditures for vehicles, and consequently we require substantial liquidity to finance such expenditures. See "Liquidity and Capital Resources" below.

Our strategy includes optimization of our vehicle rental operations, disciplined performance management and evaluation of all locations and the pursuit of same-store sales growth.

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

Vehicle rental revenues - revenues from all company-operated vehicle rental operations, including charges to customers for the reimbursement of costs incurred relating to airport concession fees and vehicle license fees, the fueling of vehicles and revenues associated with value-added services associated with vehicle rentals, including the sale of loss or collision damage waivers, liability insurance coverage, parking and other products and fees, ancillary revenues associated with the retail vehicle sales channel and certain royalty fees from our franchisees (such fees are less than 2% of total revenues each period); and

All other operations revenues - revenues from vehicle leasing and fleet management services by our Donlen business and other business activities.

Our expenses primarily consist of:

Direct vehicle and operating expense ("DOE") - primarily wages and related benefits, commissions and concession fees paid to airport authorities, travel agents and others, facility, self-insurance and reservation

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

THE HERTZ CORPORATION AND SUBSIDIARIES


ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

~~Our expenses primarily consist of:~~

Direct vehicle and operating expense ("DOE") (primarily wages and related benefits; commissions and concession fees paid to airport authorities, travel agents and others; facility, self-insurance and reservation costs;costs and other costs relating to the operation and rental of revenue earning vehicles, such as damage, maintenance and fuel ~~costs);~~costs;

Depreciation expense and lease charges, net relating to revenue earning vehicles (including net gains or losses on the disposal of such vehicles);

Selling, general and administrative expense ("SG&A"), which includes costs for information technology and finance transformation programs; and

Interest expense, net.

Our Business Segments

We have identified three reportable segments, which are organized based on the products and services provided by our operating segments and the geographic areas in which our operating segments conduct business, as follows:

U.S. Rental Car ("U.S. RAC") - Rental of vehicles, as well as sales of value-added services, in the U.S.;

International Rental Car ("International RAC") - Rental and leasing of vehicles, as well as sales of value-added services, internationally; and

All Other Operations - Comprised primarily of our Donlen business, which provides vehicle leasing and fleet management services, and other business activities.

In addition to the above reportable segments, we have Corporate operations. We assess performance and allocate resources based upon the financial information for our operating segments.

Fleet

We periodically review and adjust the mix between program and non-program vehicles in our fleet in an effort to optimize the mix of vehicles. Program vehicles generally provide us with flexibility to increase or reduce the size of our fleet based on economic demand. When we increase the percentage of program vehicles, the average age of our fleet decreases since the average holding period for program vehicles is shorter than for non-program vehicles. We dispose of our non-program vehicles via auction, dealer-direct and our retail locations. Non-program vehicles disposed of through our retail outlets allow us the opportunity for value-added revenue, such as warranty, ~~and~~ financing and title fees. We adjust the ratio of program and non-program vehicles in our fleet as needed based on contract negotiations and the economic environment pertaining to our industry.

Seasonality

Our vehicle rental operations are a seasonal business, with decreased levels of business in the winter months and heightened activity during the spring and summer peak ("our peak season") for the majority of countries where we generate our revenues. To accommodate increased demand, we increase our available fleet and staff during the second and third quarters of the year. As business demand declines, vehicles 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 utilization initiatives and the use of our information technology systems, to help manage our variable costs. Generally, between 70% and 75% of our annual operating costs represent variable costs, while the remaining costs are fixed or semi-fixed. We also maintain a flexible workforce, with a significant number of part-time and seasonal workers. Certain operating expenses, including real estate taxes, rent, insurance, utilities, maintenance and other facility-related expenses, the costs of operating our information technology systems and minimum staffing costs, remain fixed and cannot be adjusted for seasonal demand.

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

THE HERTZ CORPORATION AND SUBSIDIARIES


ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Adoption of the new Revenue Standard

Effective January 1, 2018, we adopted the new revenue standard, Topic 606, which resulted in a net increase to beginning accumulated deficit in the amount of $189 million related to the cumulative effect of our loyalty program. The adoption of Topic 606 did not have a significant impact to our results of operations for the ~~second~~third quarter and ~~first half of~~nine months ended September 30, 2018. See the Revenue from Contracts with Customers section in Note 2, ""Basis of Presentation and Recently Issued Accounting Pronouncements" for further information.

2018 Operating Overview

The following provides an overview of our business and financial performance and key factors influencing our results:

U.S. RAC


◦	Q23Q 2018 versus Q23Q 2017:


▪	Total revenues increased ~~$109~~$167 million, or 10%


▪	Total RPD and Total RPU increased 3%


▪	Transaction Days increased 7%


▪	Depreciation of revenue earning vehicles and lease charges, net decreased 9% to $414 million


▪	Net Depreciation Per Unit Per Month decreased 15% to $261


▪	Vehicle Utilization was 81%, an increase of 30 bps


▪	DOE as a percentage of total revenues was flat at 58%


▪	SG&A as a percentage of total revenues increased 130 bps (7% versus 6%)


◦	Nine months of 2018 versus nine months of 2017:


▪	Total revenues increased $348 million, or 8%


▪	Total RPD increased 1%, and Total RPU increased 3%


▪	Transaction ~~days~~Days increased 7%~~, Total RPD was flat~~


▪	Depreciation of revenue earning vehicles and lease charges, net decreased 12% to $1.3 billion


▪	Net Depreciation Per Unit Per Month decreased 16% to $282


▪	Vehicle Utilization increased 190 bps (81% versus 79%)


▪	DOE as a percentage of total revenues increased ~~220~~110 bps ~~(63%~~(61% versus ~~61%)~~


▪	~~SG&A as a percentage of total revenues was flat at 7%~~


▪	~~Depreciation of revenue earning vehicles and lease charges, net decreased 15% to $447 million~~


▪	~~Net depreciation per unit per month decreased 19% to $285~~


▪	~~Vehicle utilization increased 100 bps (81% versus 80%)~~


▪	~~Total RPU increased 1%~~


◦	~~First Half 2018 versus First Half 2017:~~


▪	~~Total revenues increased $182 million, or 6%~~


▪	~~Transaction days increased 6%, Total RPD was flat~~


▪	~~DOE as a percentage of total revenues increased 180 bps (64% versus 62%)~~


▪	~~SG&A as a percentage of total revenues was flat at 7%~~


▪	~~Depreciation of revenue earning vehicles and lease charges, net decreased 14% to $881 million~~


▪	~~Net depreciation per unit per month decreased 17% to $293~~


▪	~~Vehicle utilization increased 260 bps (80% versus 78%)~~


▪	~~Total RPU increased~~ 3%

•~~International RAC~~


◦	~~Q2 2018 versus Q2 2017:~~


▪	~~Total revenues increased $46 million, or 8%, and increased $11 million, or 2%, excluding the impact of foreign currency exchange rates ("fx")~~


▪	~~Transaction days were flat, Total RPD increased 2%~~


▪	~~DOE as a percentage of total revenues decreased 460 bps (55% versus 59%~~60%)


▪	SG&A as a percentage of total revenues increased 6070 bps ~~(11%~~(7% versus ~~10%~~6%)

•International RAC


◦	3Q 2018 versus 3Q 2017:


▪	Total revenues increased $4 million, or 1%, and increased $18 million, or 3%, excluding the impact of foreign currency exchange at average rates ("fx")


▪	Total RPD increased 3%, and Total RPU increased 1%


▪	Transaction Days were flat


▪	Depreciation of revenue earning vehicles and lease charges, net increased ~~12%~~2% to ~~$112~~$128 million, and increased $5 million, or 5%4%, excluding fx


▪	Net ~~depreciation per unit per month~~Depreciation Per Unit Per Month increased 4%3% to ~~$199~~


▪	~~Vehicle utilization was flat at~~ ~~78%~~$205


▪	~~Total RPU increased~~ 1%


◦	~~First Half 2018~~Vehicle Utilization decreased 120 bps (80% versus ~~First Half 2017:~~


▪	~~Total revenues increased $102 million, or 11%, and increased $22 million, or 2%, excluding fx.~~


▪	~~Transaction days decreased 1%, Total RPD increased 4%~~82%)


▪	DOE as a percentage of total revenues ~~decreased 280~~increased 140 bps ~~(59%~~(52% versus ~~62%~~51%)


▪	SG&A as a percentage of total revenues was flat at ~~11%~~9%


◦	Nine months of 2018 versus nine months of 2017:


▪	Total revenues increased $106 million, or 6%, and increased $40 million, or 2%, excluding fx


▪	Total RPD increased 3%, and Total RPU increased 2%


▪	Transaction Days decreased 1%


▪	Depreciation of revenue earning vehicles and lease charges, net increased ~~16%~~10% to ~~$214~~$342 million, and increased ~~$11~~$15 million, or 5%, excluding fx


▪	Net ~~depreciation per unit per month~~Depreciation Per Unit Per Month increased 6% to ~~$209~~$208


▪	Vehicle Utilization decreased 80 bps (78% versus 79%)

5152

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

THE HERTZ CORPORATION AND SUBSIDIARIES


ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)


▪	~~Vehicle utilization~~DOE as a percentage of total revenues decreased 6090 bps (~~76%~~(56% versus ~~77%~~57%)


▪	~~Total RPU increased 3%~~ SG&A as a percentage of total revenues was flat at 10%

Recorded ~~$29~~$24 million and ~~$51~~$75 million in expenses during the ~~second~~third quarter and ~~first half~~the nine months of 2018, respectively, associated with our information technology and finance transformation programs, compared to ~~$20~~$15 million and ~~$39~~$55 million during the ~~second~~third quarter and ~~first half~~nine months of 2017, respectively.

~~Recorded $20 million of charges for the early redemption premium and write-off of deferred financing costs in the second quarter and first half of 2018 as a result of redeeming the~~ ~~4.375% European Vehicle~~ ~~Senior Notes due January 2019, compared to $8 million in the second quarter and first half of 2017 as a result of redeeming the 4.25% Senior Notes due April 2018 and terminating commitments under the Senior RCF.~~

For more information on the above, see the discussion of our results on a consolidated basis and by segment that follows herein.

~~Table of Contents~~

~~HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES~~

~~THE HERTZ CORPORATION AND SUBSIDIARIES~~


~~ITEM 2.~~	~~MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)~~

CONSOLIDATED RESULTS OF OPERATIONS - HERTZ


	Three Months Ended June 30,						Percent Increase/(Decrease)			Six Months Ended June 30,								Percent Increase/(Decrease)		Three Months Ended September 30,								Percent Increase/(Decrease)		Nine Months Ended September 30,						Percent Increase/(Decrease)
($ in millions)	2018			2017					2018				2017				2018				2017					2018				2017						Percent Increase/(Decrease)
Total revenues	$	2,389		$	2,224		Percent Increase/(Decrease)	7	%		$	4,452			$	4,140		Percent Increase/(Decrease)			8	%	$	2,758			$	Percent Increase/(Decrease)	2,572		7	%	$	7,209		$	6,713	7	%
Direct vehicle and operating expenses	1,349			1,255			7			2,585				2,387				8		1,459				1,348				8		4,043			3,735			8
Depreciation of revenue earning vehicles and lease charges, net	687			743			(8	)		1,348				1,444				(7	)	672				700				(4	)	2,020			2,144			(6	)
Selling, general and administrative expenses	265			223			19			498				442				13		265				217				22		765			661			16
Interest expense, net:
Vehicle	127			82			55			221				153				44		115				90				28		336			242			39
Non-vehicle	71			75			(5	)		143				134				7		71				85				(16	)	213			219			(3	)
Interest expense, net	198			157			26			364				287				27		186				175				6		549			461			19
Intangible asset impairments	—			86			(100	)		—				86				(100	)	—				—				—		—			86			(100	)
Other (income) expense, net	(26		)	4			NM			(29		)		31				NM		(7		)		(12		)		(42	)	(36		)	19			NM
Income (loss) before income taxes	(84		)	(244		)	(66	)		(314		)		(537		)		(42	)	183				144				27		(132		)	(393		)	(66	)
Income tax (provision) benefit	23			86			(73	)		51				157				(68	)	(42		)		(50		)		(16	)	10			107			(91	)
Net income (loss)	$	(61	)	$	(158	)	(61	)		$	(263	)		$	(380	)		(31	)	$	141			$	94			50		$	(122	)	$	(286	)	(57	)
Adjusted pre-tax income (loss)^(a)	$	(19	)	$	(81	)	(77	)		$	(194	)		$	(293	)		(34	)
Net (income) loss attributable to noncontrolling interests																				$	1			$	—			—		$	1		$	—		—
Net income (loss) attributable to Hertz																				$	142			$	94			51		$	(121	)	$	(286	)	(58	)
Adjusted Pre-tax Income (Loss)^(a)																				$	242			$	189			28		$	49		$	(103	)	NM

Footnotes to the table above are shown in the "Footnotes to the Results of Operations and Selected Operating Data by Segment Tables" section of this MD&A.

NM - Not meaningful

Three Months Ended ~~June~~September 30, 2018 Compared with Three Months Ended ~~June~~September 30, 2017

Total revenues increased ~~$165~~$186 million, or 7%, due primarily to an increase of ~~$109 million, $46~~$167 million and ~~$10~~$15 million in our U.S. RAC ~~segment, International RAC segment,~~ and All Other Operations ~~segment,~~segments, respectively. U.S. RAC revenues increased due to 7% higher volume, comprised of a ~~13%~~17% increase for our off airport business and a 4%2% increase for our airport business, while Total RPD ~~was flat~~increased 3% for the segment. ~~Excluding a $35 million impact of foreign currency exchange rates, International RAC revenues increased $11 million, or 2%, driven by a 2% increase in Total RPD.~~ Total revenues in our All Other Operations segment increased ~~$10~~$15 million primarily due to an increase in Donlen's leasing volume. Revenues for the International RAC segment increased slightly and, excluding a $14 million fx impact, increased $18 million, or 3%, driven by a 3% increase in Total RPD.

DOE increased ~~$94~~$111 million year over year primarily due to an increase of ~~$102~~$98 million in our U.S. RAC segment ~~partially offset by a decrease of $6~~and $12 million in our ~~All Other Operations~~International RAC segment. The increase in our U.S. RAC segment iswas primarily due to increased core rental volumes, transportation network companies ("TNC") rentals and investments in additional personnel ~~and site improvement activities~~ related to our transformation ~~initiatives and TNC rentals.~~initiatives. Excluding an $8 million fx impact, DOE for ~~our~~ International RAC ~~segment is flat year over year and decreased $21~~increased $20 million ~~excluding the impact of foreign currency exchange rates.~~

~~Depreciation of revenue earning vehicles and lease charges, net decreased $56 million, or 8%,~~ primarily due to a $77 million decrease in our U.S. RAC segment resulting from decreased losses on disposal of revenue earning vehicles due to stabilization in residual values and a 16 percentage point increase in dispositions through dealer direct and retail sales channels. The decrease was partially offset by a $12 million increase in our International RAC segment. Excluding the $7 million impact of foreign currency exchange rates, depreciation of revenue earning vehicles and lease charges, net for our International RAC segment increased ~~$5 million resulting from higher per vehicle depreciation rates and an increase in average vehicles.~~

SG&A increased $42 million, or 19%, in the second quarter of 2018 compared to 2017, due to an increase of $54 million in marketing, incentive compensation, information technology and finance transformation program costspersonnel and other ~~expenses, offset by a $12 million decrease in restructuring related and other~~vehicle expenses. ~~The above changes are primarily related to our U.S. RAC and corporate operations.~~

Table of Contents

HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

THE HERTZ CORPORATION AND SUBSIDIARIES


ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

~~Vehicle interest expense,~~Depreciation of revenue earning vehicles and lease charges, net ~~increased $45~~decreased $28 million, or ~~55%~~4%, primarily due to a $41 million decrease in our U.S. RAC segment resulting from favorable acquisition prices and residual values, and opportunistic sales of certain models. The decrease was partially offset by an $11 million increase in our All Other Operations segment.

SG&A increased $48 million, or 22%, in the ~~second~~third quarter of 2018 compared to 2017, primarily due to an increase of $63 million in ~~debt levels~~marketing, information technology and ~~losses on extinguishment~~finance transformation program costs, litigation charges, including the loss contingency related to the previously disclosed accounting review and investigation, incentive compensation and other expenses, offset by a $15 million decrease due to labor related matters and other expenses. The above changes are primarily related to our U.S. RAC segment and corporate operations.

Vehicle interest expense, net increased $25 million, or 28%, in the third quarter of ~~debt,~~2018 compared to 2017 primarily due to higher market interest rates, increased margins on bank funded facilities and an increase in debt levels due to higher average ~~fleet, and higher rates associated with increasing the mix of medium term funding.~~fleet.

Non-vehicle interest expense, net decreased $4$14 million, or 5%16%, in the ~~second~~third quarter of 2018 compared to 2017, primarily due to decreased outstanding non-vehicle debt balances, ~~and losses on extinguishment of debt,~~ partially offset by the impact of higher interest rates primarily associated with ~~the Senior Second Priority Secured Notes which were issued in the second quarter of 2017 and~~a higher ~~rates on our floating rate non-vehicle debt.~~

~~We had intangible asset impairments of $86 million in the second quarter of 2017 related to the Dollar Thrifty tradename with no comparable charges in the second quarter of 2018.~~LIBOR.

We had other income of ~~$26~~$7 million for the ~~second~~third quarter of 2018 compared to ~~other expense of $4~~$12 million in the ~~second~~third quarter of 2017. Other income in 2018 was primarily comprised of a ~~$17 million~~pre-tax gain on marketable ~~securities~~securities. Other income in 2017 was primarily comprised of a pre-tax gain on the sale of our Brazil Operations recorded in the International RAC segment and a ~~$6 million legal settlement received related to~~pre-tax gain resulting from a return of capital from an ~~oil spill in the Gulf of Mexico in 2010 which relate to our corporate operations and U.S. RAC segment, respectively.~~equity method investment.

The effective tax rate in the ~~second~~third quarter of 2018 was ~~27%~~(23%) compared to ~~35%~~(35%) in the ~~second~~third quarter of 2017. We recorded a tax ~~benefit~~provision of ~~$23~~$42 million in the ~~second~~third quarter of 2018 compared to ~~$86~~$50 million in the ~~second~~third quarter of 2017. The ~~lower~~ effective income tax rate and related tax ~~benefit~~provision were lower primarily due to the reduced corporate tax rate as a result of the TCJA, ~~reduced corporate losses,~~tax credits, and the composition of earnings by jurisdictions, partially offset by a net provisional amount of $15 million for the ~~release~~one-time transition tax related to TCJA. The provisional amount for the one-time transition tax related to TCJA may change in the fourth quarter of ~~the valuation allowance on U.S. federal capital losses.~~2018 once we finalize our calculation.

Adjusted ~~pre-tax loss~~Pre-tax Income was ~~$19~~$242 million in the ~~second~~third quarter of 2018 compared to ~~$81~~$189 million in the ~~second~~third quarter of 2017. See footnote (a) in the "Footnotes to the Results of Operations and Selected Operating Data by Segment Tables" for a summary and description of reconciling adjustments on a consolidated basis.

~~Six~~Nine Months Ended ~~June~~September 30, 2018 Compared with ~~Six~~Nine Months Ended ~~June~~September 30, 2017

Total revenues increased ~~$312~~$496 million, or 8%7%, due primarily to an increase of ~~$182~~$348 million, ~~$102~~$106 million and ~~$28~~$42 million in our U.S. RAC, ~~segment,~~ International RAC, ~~segment,~~ and All Other Operations ~~segment,~~segments, respectively. U.S. RAC revenues increased due to a 6%7% increase in volume, comprised of a ~~14%~~15% increase for our off airport business and a 3%2% increase for our airport business, ~~while~~and increased Total RPD ~~was flat for the segment.~~of 1%. Excluding ~~an $80~~a $66 million fx impact, ~~of foreign currency exchange rates,~~ International RAC revenues increased ~~$22~~$40 million, or 2%, driven by a 4%3% increase in Total RPD, partially offset by a 1% decrease in transaction days. Total revenues in our All Other Operations segment increased ~~$28 million~~primarily due to an increase in Donlen's leasing volume.

DOE increased ~~$198~~$308 million year over year primarily due to increases of ~~$167~~$266 million and ~~$33~~$44 million in our U.S. RAC ~~segment~~ and International RAC ~~segment,~~segments, respectively. The increase in our U.S. RAC segment iswas primarily due to increased core rental volumes (those excluding TNC rentals), investments in additional personnel ~~and site improvement activities~~ related to our transformation initiatives and TNC rentals. Excluding the ~~$51~~$43 million fx impact, ~~of foreign currency exchange rates,~~ DOE for International RAC ~~decreased $18 million.~~

Depreciation of revenue earning vehicles and lease charges, net decreased $96 million, or 7%, primarily due to a $142 million decrease in our U.S. RAC segment resulting from decreases in losses on disposal of revenue earning vehicles due to stabilization in residual values and a 14 percentage point increase in dispositions through dealer direct and retail sales channels. The decrease was partially offset by an increase of $29 million and $17 million in our International RAC segment and All Other Operations, respectively. Excluding the $18 million impact of foreign currency exchange rates, depreciation of revenue earning vehicles and lease charges, net for our International RAC segment increased $11 million resulting from higher per vehicle depreciation rates. The decrease in All Other Operations is due to an increase in Donlen's leasing volume.nearly flat.

Table of Contents

HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

THE HERTZ CORPORATION AND SUBSIDIARIES


ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Depreciation of revenue earning vehicles and lease charges, net decreased $124 million, or 6%, primarily due to a $183 million decrease in our U.S. RAC segment resulting from decreases in losses on disposal of revenue earning vehicles due to stabilization in residual values and a 14 percentage point increase in dispositions through dealer direct and retail sales channels. The decrease was partially offset by an increase of $31 million and $28 million in our International RAC and All Other Operations segments, respectively. Excluding a $16 million fx impact, depreciation of revenue earning vehicles and lease charges, net for our International RAC segment increased $15 million resulting from higher per vehicle depreciation rates. The increase in All Other Operations was due to an increase in Donlen's leasing volume.

SG&A increased ~~$56~~$104 million, or ~~13%~~16%, in the ~~first half~~nine months of 2018 compared to 2017, due to an increase of ~~$78~~$143 million in marketing, ~~incentive compensation,~~ information technology and finance transformation program costs, incentive compensation, litigation charges, including the loss contingency related to the previously disclosed accounting review and investigation, which totals $13.6 million, and other expenses, partially offset by a ~~$22~~$39 million decrease ~~in net restructuring~~due to labor related matters and ~~litigation~~other expenses. The above changes are primarily related to ~~our~~the U.S. RAC and International RAC segments, and our corporate operations. Excluding the ~~$11~~$10 million fx impact, ~~of foreign currency exchange rates,~~ SG&A for International RAC increased $2$6 million.

Vehicle interest expense, net increased ~~$68~~$94 million, or ~~44%~~39%, in the ~~first half~~nine months of 2018 compared to 2017 primarily due to ~~an increase in debt levels and losses on extinguishment of debt,~~ higher market interest rates, an increase in margins on bank funded facilities, an increase in debt levels due to higher average fleet and ~~higher rates associated with increasing the mix~~an increase in loss on extinguishment of ~~medium term funding.~~debt.

Non-vehicle interest expense, net ~~increased $9~~decreased $6 million, or 7%3%, in the ~~first half~~nine months of 2018 compared to 2017, primarily due to ~~increased~~decreased outstanding non-vehicle debt balances during the period ~~increased~~and a decrease in loss on extinguishment of debt, partially offset by the impact of higher interest rates ~~associated with~~largely attributable to a higher LIBOR and the issuance of our Senior Second Priority Secured Notes ~~which were issued~~ in ~~the second quarter of 2017 and higher rates on our floating rate non-vehicle debt, partially offset by a decrease in losses on extinguishment of debt.~~June 2017.

We had intangible asset impairments of $86 million related to the Dollar Thrifty tradename in the ~~first half~~nine months of 2017 with no comparable charges in the ~~first half~~nine months of 2018.

We had other income of ~~$29~~$36 million in the ~~first half~~nine months of 2018 compared to other expense of ~~$31~~$19 million in the ~~first half~~nine months of 2017. Other income in 2018 was primarily comprised of a ~~$17~~$21 million pre-tax gain on marketable securities and a $6 million legal settlement received in the second quarter related to an oil spill in the Gulf of Mexico in 2010, which relate to our corporate operations and U.S. RAC segment, respectively. Other expense in 2017 was primarily comprised of a $30 million impairment of an equity method ~~investment.~~investment which was partially offset by a pre-tax gain resulting from a return of capital from an equity method investment, and a pre-tax gain on the sale of our Brazil Operations.

The effective tax rate in the ~~first half~~nine months of 2018 was ~~16%~~8% compared to ~~29%~~27% in the ~~first half~~nine months of 2017. We recorded a tax benefit of ~~$51~~$10 million in the ~~first half~~nine months of 2018 compared to ~~$157~~$107 million in the ~~first half~~nine months of 2017. The ~~lower~~ effective income tax rate and related tax benefit were lower primarily due to the reduced corporate tax rate as a result of the TCJA, reduced corporate losses, and the composition of earnings by jurisdictions, partially offset by a net provisional amount of $15 million for the ~~release~~one-time transition tax liability related to TCJA. The provisional amount for the one-time transition tax related to TCJA may change in the fourth quarter of ~~the valuation allowance on U.S. federal capital losses.~~2018 once we finalize our calculation.

Adjusted ~~pre-tax loss~~Pre-tax Income was ~~$194~~$49 million in the ~~first half~~nine months of 2018 compared to ~~$293~~Adjusted Pre-tax Loss of $103 million in the ~~first half~~nine months of 2017. See footnote (a) in the "Footnotes to the Results of Operations and Selected Operating Data by Segment Tables" for a summary and description of reconciling adjustments on a consolidated basis.

CONSOLIDATED RESULTS OF OPERATIONS - HERTZ GLOBAL

The above discussion for Hertz also applies to Hertz Global.

Hertz Global had $2 million and $3$5 million of interest expense, net for the ~~second~~third quarter and ~~first half~~nine months of 2018, respectively, and $1 million and $2$4 million of interest expense, net for the ~~second~~third quarter and ~~first half~~nine months of 2017,

Table of Contents

HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

THE HERTZ CORPORATION AND SUBSIDIARIES


ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

respectively, that was incremental to the amounts shown for Hertz. This amount represents interest associated with amounts outstanding under a master loan agreement between the companies. Hertz includes this amount as interest income in its statement of operations, but this amount is eliminated in consolidation for purposes of presenting Hertz Global. Hertz ~~Global also~~ had $1 million of income tax provision for the third quarter of 2018 that was incremental to the amounts shown for Hertz Global. Hertz Global had $2 million of income tax benefit for the ~~first half~~nine months of 2018 and $1 million of income tax benefit for ~~both~~ the ~~second quarter and first half~~nine months of 2017 that was incremental to the amounts shown for Hertz.

5556

Table of Contents

HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

THE HERTZ CORPORATION AND SUBSIDIARIES


ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

RESULTS OF OPERATIONS AND SELECTED OPERATING DATA BY SEGMENT

U.S. Rental Car


	Three Months Ended June 30,						Percent Increase/(Decrease)				Six Months Ended June 30,								Percent Increase/(Decrease)			Three Months Ended September 30,						Percent Increase/(Decrease)				Nine Months Ended September 30,						Percent Increase/(Decrease)
($ in millions, except as noted)	2018			2017					2018				2017					2018				2017					2018				2017							Percent Increase/(Decrease)
Total revenues	$	1,628		$	1,519		Percent Increase/(Decrease)		7	%			$	3,054			$	2,872	Percent Increase/(Decrease)				6	%	$	1,852		Percent Increase/(Decrease)	$	1,685			10	%		$	4,905		$	4,557	8	%
Direct vehicle and operating expenses	$	1,021		$	919		11				$	1,947			$	1,780			9			$	1,068		$	970		10				$	3,016		$	2,750		10
Depreciation of revenue earning vehicles and lease charges, net	$	447		$	524		(15	)			$	881			$	1,023			(14	)		$	414		$	455		(9	)			$	1,295		$	1,478		(12	)
Selling, general and administrative expenses																						$	128		$	94		36				$	345		$	290		19
Income (loss) before income taxes	$	10		$	(146	)	NM				$	(58	)		$	(278	)		(79	)		$	203		$	131		55				$	145		$	(147	)	NM
Adjusted pre-tax income(loss)^(a)	$	24		$	(37	)	NM				$	(24	)		$	(152	)		(84	)
Transaction days (in thousands)^(b)	38,747			36,233			7				72,949				68,545				6
Average vehicles^(c)	523,000			495,000			6				500,800				486,500				3
Vehicle utilization^(c)	81		%	80		%	100		bps		80		%		78		%		260		bps
Adjusted Pre-tax Income(Loss)^(a)																						$	222		$	158		41				$	200		$	5		NM
Transaction Days (in thousands)^(b)																						39,478			36,879			7				112,427			105,424			7
Average Vehicles (in whole units)^(c)																						527,900			495,000			7				509,800			489,300			4
Vehicle Utilization^(c)																						81		%	81		%	30		bps		81		%	79		%	190		bps
Total RPD (in whole dollars)^(d)	$	41.37		$	41.26		—				$	41.17			$	41.23			—			$	46.23		$	45.04		3				$	42.93		$	42.56		1
Total RPU per month (in whole dollars)^(e)	$	1,022		$	1,007		1				$	999			$	968			3
Net depreciation per unit per month (in whole dollars)^(f)	$	285		$	353		(19	)			$	293			$	351			(17	)
Total RPU Per Month (in whole dollars)^(e)																						$	1,152		$	1,119		3				$	1,052		$	1,019		3
Net Depreciation Per Unit Per Month (in whole dollars)^(f)																						$	261		$	306		(15	)			$	282		$	336		(16	)
Percentage of program vehicles at period end	13		%	11		%	220		bps		13		%		11		%		220		bps	12		%	9		%	290		bps		12		%	9		%	290		bps

Footnotes to the table above are shown in the "Footnotes to the Results of Operations and Selected Operating Data by Segment Tables" section of this MD&A.

NM - Not meaningful

Three Months Ended ~~June~~September 30, 2018 Compared with Three Months Ended ~~June~~September 30, 2017

Total U.S. RAC revenues were ~~$1.6~~$1.9 billion in the ~~second~~third quarter of 2018, an increase of ~~$109~~$167 million, or 7%10%, from the ~~second~~third quarter of 2017. Transaction ~~days~~Days increased 7%, while Total RPD ~~was flat.~~increased 3%. Increased volume was driven by a ~~13%~~17% increase in our off airport business and a 4%2% increase in our airport business. Off airport volume increased primarily due to growth in ~~our transportation network companies ("TNC"), retail and~~TNC, insurance replacement and retail rentals. Airport volume increased due to growth in ~~our~~ corporate ~~domestic tour and inbound~~contracted rentals. Off airport revenues comprised ~~29%~~31% of total revenues for the segment in the ~~second~~third quarter of 2018 as compared to 28% in the ~~second~~third quarter of 2017.

~~DOE for U.S. RAC~~ Total RPD increased ~~$102 million, or 11%, of which $36 million was driven by higher core rental volume, $16 million was driven by incremental investments in additional personnel and site improvement activities related~~due to ~~our transformation initiatives and $16 million was driven by~~ growth in ~~TNC rentals. Also contributing to the increase are the following:~~

~~Increased facilities and other DOE expenses of $11 million.~~

~~Increased insurance-related liability expense of $9 million due to a higher number of claims and unfavorable case development in the second quarter of 2018 versus 2017.~~

~~Increased other vehicle expense of $6 million driven by increased licensing fees in certain states.~~

~~Table of Contents~~

~~HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES~~

~~THE HERTZ CORPORATION AND SUBSIDIARIES~~


~~ITEM 2.~~	~~MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)~~

~~Increased personnel related expenses of $6 million primarily due to the implementation of additional employee incentive programs.~~

~~Increased transportation expense of $5 million driven by increased usage, higher rates from third-party transportation providers and additional trucking for pre-owned vehicle purchases.~~

DOE as a percentage of total revenues for U.S. RAC was 63% for the second quarter of 2018 compared to 61% for the second quarter of 2017, an increase of 220 bps, and SG&A as a percentage of total revenues for U.S. RAC was 7% for the second quarter of 2018 and 2017.nearly all customer segments.

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. Depreciation rates being used to compute the provision for depreciation of revenue earning vehicles are adjusted on certain vehicles in our vehicle rental operations to reflect changes in the estimated residual values to be realized when revenue earning vehicles are sold based on the expected hold period for the vehicles. The change in estimate, based on the review completed for U.S. RAC during the ~~second~~third quarter of 2018, resulted in ~~additional~~a reduction to depreciation expense of $2$30 million. The ~~second~~third quarter of 2018 rate change reflects ~~declining~~favorable acquisition prices and residual values, ~~on large sport utility vehicles.~~and opportunistic sales of certain models. The change in estimate, based on the review completed for U.S. RAC during the ~~second~~third quarter of 2017, resulted in ~~additional~~a decrease in depreciation expense of ~~$24~~$15 million which reflected ~~shortened hold periods on certain non-program vehicles as we rebalanced~~ the ~~fleet, our onboarding~~stabilization of ~~a richer mix of premium model year 2017 vehicles, and declining residual values.~~

Depreciation of revenue earning vehicles and lease charges, net for U.S. RAC decreased by $77 million, or 15%, in the second quarter of 2018 compared to 2017. The decrease year over year is primarily the result of improved residual values and a ~~16 percentage point increase in dispositions through dealer direct and retail sales channels. Net depreciation per unit per~~two month ~~decreased to $285 in the second quarter of 2018 compared to $353 in the second quarter of 2017.~~

Income before income taxes for U.S. RAC was $10 million in the second quarter of 2018 compared to a loss before income taxes of $146 million in the second quarter of 2017. The $156 million year over year favorable variance is primarily due to the impact of increased revenues, decreased depreciation expense on our revenue earning vehicles and the impairment of the Dollar Thrifty tradename in the second quarter of 2017. The favorable variance was partially offset by the increase in DOE, a $17 million increase in SG&A due to increased marketing expenses and a $16 million increase in vehicle related interest expense due to higher debt levels, higher market interest rates, and higher rates associated with increasing the mix of medium term funding.

Adjusted pre-tax income for U.S. RAC was $24 million in the second quarter of 2018 compared to adjusted pre-tax loss of $37 million in the second quarter of 2017. See footnote (a) in the "Footnotes to the Results of Operations and Selected Operating Data by Segment Tables" for a summary and description of reconciling adjustments on a consolidated basis.

~~Six Months Ended June 30, 2018 Compared with Six Months Ended June 30, 2017~~

Total U.S. RAC revenues were $3.1 billion in the first half of 2018, an increase of $182 million, or 6%, from the first half of 2017. Transaction days increased 6%, while Total RPD was flat. Increased volume was driven by a 14% increase in our off airport business and a 3% increase in our airport business. Off airport volume increased due to growth in our TNC, insurance replacement and retail rentals. Airport volume increased due to growth in our corporate and leisure rentals. Off airport revenues comprised 30% of total revenues for the segment in the first half of 2018 as compared to 28% in the first half of 2017.

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

THE HERTZ CORPORATION AND SUBSIDIARIES


ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

increase in the assumed hold period for model year 2017 vehicles to accommodate increased volume in our off airport rentals.

Depreciation of revenue earning vehicles and lease charges, net for U.S. RAC decreased by $41 million, or 9%, in the third quarter of 2018 compared to 2017. The decrease year over year was primarily the result of improved residual values and opportunistic sales of certain models. Net Depreciation Per Unit Per Month decreased to $261 in the third quarter of 2018 compared to $306 in the third quarter of 2017.

DOE for U.S. RAC increased ~~$167~~$98 million, or 9%10%, of which $47 million was driven by higher core rental volume, ~~$37~~$17 million was driven by growth in TNC rentals and $12 million was driven by incremental investments in additional personnel ~~and site improvement activities~~ related to our transformation ~~initiatives and $29 million was driven by growth in TNC rentals.~~initiatives. Also contributing to the increase are the following:

Increased ~~personnel related expenses of $15 million primarily due to the implementation of additional employee incentive programs.~~

~~Increased~~ transportation expense of ~~$13~~$9 million driven by ~~increased usage,~~ higher rates from third-party transportation providers and additional trucking for pre-owned vehicle purchases.

Increased ~~facility expenses~~damage expense of ~~$12~~$7 million ~~driven by weather-related charges and corrective maintenance.~~related to weather events.

Increased ~~maintenance~~fuel expense of $8$7 million ~~driven by~~due to higher ~~average vehicles and a richer mix of premium vehicles.~~market fuel prices compared to 2017.

DOE as a percentage of total revenues for U.S. RAC was ~~64%~~58% for the ~~first half~~third quarters of both 2018 ~~compared to 62% for the first half of 2017, an increase of 180 bps,~~ and 2017. SG&A as a percentage of total revenues for U.S. RAC was 7% for the ~~first half~~third quarter of 2018 compared to 6% for the third quarter of 2017, an increase of 130 bps, primarily due to an increase of $24 million in incremental marketing investments.

Income before income taxes for U.S. RAC was $203 million in the third quarter of 2018 compared to $131 million in the third quarter of 2017. The $72 million year over year favorable variance was primarily due to the impact of increased revenues and decreased depreciation expense on our revenue earning vehicles. The favorable variance was partially offset by the increase in DOE and SG&A and an $18 million increase in vehicle related interest expense due to higher market interest rates, increased margins on bank funded facilities and an increase in debt levels due to higher average fleet.

Adjusted Pre-tax Income for U.S. RAC was $222 million in the third quarter of 2018 compared to $158 million in the third quarter of 2017. See footnote (a) in the "Footnotes to the Results of Operations and Selected Operating Data by Segment Tables" for a summary and description of reconciling adjustments on a consolidated basis.

Nine Months Ended September 30, 2018 Compared with Nine Months Ended September 30, 2017

Total U.S. RAC revenues were $4.9 billion in the nine months of 2018, an increase of $348 million, or 8%, from the nine months of 2017. Transaction Days increased 7%, while Total RPD increased 1%. Increased volume was driven by a 15% increase in our off airport business and a 2% increase in our airport business. Off airport volume increased due to growth in TNC and insurance replacement rentals. Airport volume increased due to growth in corporate contracted rentals. Off airport revenues comprised 30% of total revenues for the segment in the nine months of 2018 as compared to 28% in the nine months of 2017. Total RPD increased primarily due to growth in TNC and retail customer segments.

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. Depreciation rates being used to compute the provision for depreciation of revenue earning vehicles are adjusted on certain vehicles in our vehicle rental operations to reflect changes in the estimated residual values to be realized when revenue earning vehicles are sold based on the expected hold period for the vehicles. The changes in estimate, based on reviews completed for U.S. RAC during the ~~first half~~nine months of 2018, resulted in ~~additional~~a reduction to depreciation expense of ~~$12~~$20 million. The ~~first half~~nine months of 2018 rate change reflects ~~declining~~favorable residual values, particularly on mid and full-size sedans, and opportunistic sales of certain vehicles, partially offset by the impact of unfavorable residual values on regular and large sport utility vehicles. The changes in estimate, based on reviews completed for U.S. RAC during the ~~first half~~nine months of 2017, resulted in additional depreciation expense of ~~$62~~$68 million which reflected shortened hold periods on certain non-program vehicles

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

THE HERTZ CORPORATION AND SUBSIDIARIES


ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

as we rebalanced the fleet, our onboarding of a richer mix of premium model year 2017 vehicles, and declining residual ~~values.~~values primarily experienced in the first half of the year.

Depreciation of revenue earning vehicles and lease charges, net for U.S. RAC decreased by ~~$142~~$183 million, or ~~14%~~12%, in the ~~first half~~nine months of 2018 compared to 2017. The decrease year over year iswas primarily the result of improved residual values and a 14 percentage point increase in dispositions through dealer direct and retail sales channels. Net ~~depreciation per unit per month~~Depreciation Per Unit Per Month decreased to ~~$293~~$282 in the ~~first half~~nine months of 2018 compared to ~~$351~~$336 in the ~~first half~~nine months of 2017.

~~Loss~~DOE for U.S. RAC increased $266 million, or 10%, of which $93 million was driven by core rental volume, $56 million was driven by incremental investments in additional personnel related to our transformation initiatives and $46 million was driven by growth in TNC rentals. Also contributing to the increase are the following:

Increased transportation expense of $26 million driven by increased usage, higher rates from third-party transportation providers and additional trucking for pre-owned vehicle purchases and fleet optimization.

Increased facility expenses of $15 million primarily driven by increased rent and facility services.

Increased other vehicle expense of $11 million primarily driven by increased licensing fees in certain states.

Increased fuel expense of $10 million due to higher market fuel prices compared to 2017.

DOE as a percentage of total revenues for U.S. RAC was 61% for the nine months of 2018 compared to 60% for the nine months of 2017, an increase of 110 bps. SG&A as a percentage of total revenues for U.S. RAC was 7% for the nine months of 2018 compared to 6% for the nine months of 2017, an increase of 70 bps, primarily due to an increase of $48 million in incremental marketing investments.

Income before income taxes for U.S. RAC was ~~$58~~$145 million in the ~~first half~~nine months of 2018 compared to ~~$278~~loss before income taxes of $147 million in the ~~first half quarter~~nine months of 2017. The ~~$220~~$292 million year over year ~~favorable variance is~~improvement was primarily due to the impact of increased revenues, decreased depreciation expense on our revenue earning vehicles and the impairment of the Dollar Thrifty tradename in the second half of 2017. The ~~favorable variance~~improvement was partially offset by an increase in DOE and ~~a $23~~SG&A and an $11 million increase in ~~SG&A due to increased marketing expenses and a $32 million increase in~~interest expense, net primarily driven by vehicle related interest expense due to higher ~~debt levels, higher~~ market interest rates, an increase in margins on bank funded facilities, and an increase in debt levels due to higher ~~rates associated with increasing the mix of medium term funding.~~average fleet.

Adjusted ~~pre-tax loss~~Pre-tax Income for U.S. RAC was ~~$24~~$200 million in the ~~first half~~nine months of 2018 compared to ~~$152~~$5 million in the ~~first half~~nine months of 2017. See footnote (a) in the "Footnotes to the Results of Operations and Selected Operating Data by Segment Tables" for a summary and description of reconciling adjustments on a consolidated basis.

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ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

International Rental Car


	Three Months Ended June 30,						Percent Increase/(Decrease)				Six Months Ended June 30,								Percent Increase/(Decrease)			Three Months Ended September 30,						Percent Increase/(Decrease)				Nine Months Ended September 30,						Percent Increase/(Decrease)
($ in millions, except as noted)	2018			2017					2018				2017					2018				2017					2018				2017							Percent Increase/(Decrease)
Total revenues	$	589		$	543		Percent Increase/(Decrease)		8	%			$	1,057			$	955	Percent Increase/(Decrease)				11	%	$	732		Percent Increase/(Decrease)	$	728			1	%		$	1,789		$	1,683	6	%
Direct vehicle and operating expenses	$	322		$	322		—				$	622			$	589			6			$	384		$	372		3				$	1,006		$	962		5
Depreciation of revenue earning vehicles and lease charges, net	$	112		$	100		12				$	214			$	185			16			$	128		$	126		2				$	342		$	311		10
Selling, general and administrative expenses																						$	65		$	63		3				$	186		$	170		9
Income (loss) before income taxes	$	50		$	43		16				$	38			$	37			3			$	131		$	152		(14	)			$	169		$	189		(11	)
Adjusted pre-tax income (loss)^(a)	$	74		$	56		32				$	69			$	52			33
Transaction days (in thousands)^(b)	13,225			13,235			—				23,199				23,419				(1	)
Average vehicles^(c)	187,300			186,100			1				168,000				168,300				—
Vehicle utilization^(c)	78		%	78		%	(60	)	bps		76		%		77		%		(60	)	bps
Adjusted Pre-tax Income (loss)^(a)																						$	133		$	147		(10	)			$	201		$	200		1
Transaction Days (in thousands)^(b)																						15,876			15,947			—				39,075			39,366			(1	)
Average Vehicles (in whole units)^(c)																						214,900			212,600			1				183,600			183,100			—
Vehicle Utilization^(c)																						80		%	82		%	(120	)	bps		78		%	79		%	(80	)	bps
Total RPD (in whole dollars)^(d)	$	44.61		$	43.67		2				$	45.09			$	43.55			4			$	47.37		$	46.03		3				$	46.01		$	44.56		3
Total RPU per month (in whole dollars)^(e)	$	1,050		$	1,035		1				$	1,038			$	1,010			3
Net depreciation per unit per month (in whole dollars)^(f)	$	199		$	192		4				$	209			$	197			6
Total RPU Per Month (in whole dollars)^(e)																						$	1,166		$	1,151		1				$	1,088		$	1,064		2
Net Depreciation Per Unit Per Month (in whole dollars)^(f)																						$	205		$	199		3				$	208		$	197		6
Percentage of program vehicles at period end	51		%	46		%	480		bps		51		%		46		%		480		bps	45		%	45		%	20		bps		45		%	45		%	20		bps

Footnotes to the table above are shown in the "Footnotes to the Results of Operations and Selected Operating Data by Segment Tables" section of this MD&A.

Three Months Ended ~~June~~September 30, 2018 Compared with Three Months Ended ~~June~~September 30, 2017

Total revenues for International RAC increased ~~$46~~$4 million, or 8%1%, in the ~~second~~third quarter of 2018 compared to 2017. Excluding a ~~$35~~$14 million fx impact, ~~of foreign currency exchange rates,~~ revenues increased ~~$11~~$18 million, or 2%3%, driven by a 2%3% increase in Total RPD. Excluding the impact of the sale of our Brazil operations in 2017, total revenues for International RAC increased ~~$58~~$12 million, or ~~11%~~2%, Total RPD ~~was flat,~~increased 1% due to improved pricing in leisure markets, and ~~transactions~~transaction days increased ~~4%.~~

~~DOE for International RAC was flat compared~~2% due primarily to ~~the prior year. Excluding a $21 million impact of foreign currency exchange rates, DOE decreased $21 million, or 6% compared to the prior year driven by a decrease of $20 million~~growth in ~~PLPD expense, due to favorable case development~~corporate contracted and ~~fewer large claims, and a charge recorded in 2017 resulting from a terrorist event.~~

DOE as a percentage of total revenues for International RAC was 55% for the second quarter of 2018 compared to 59% for the second quarter of 2017, a decrease of 460 bps, and SG&A as a percentage of total revenues for International RAC was 11% for the second quarter of 2018 compared to 10% for the second quarter of 2017, an increase of 60 bps.van rentals.

Depreciation of revenue earning vehicles and lease charges, net for International RAC increased ~~$12~~$2 million, or ~~12%~~2%, in the ~~second~~third quarter of 2018 compared to 2017. Excluding a $7$3 million fx impact, ~~of foreign currency exchange rates,~~ depreciation of revenue earning vehicles and lease charges, net increased $5 million or 5%4% primarily due to ~~an increase in average vehicles of 1% and~~ higher per vehicle depreciation rates which ~~was~~were primarily driven by declining residual values on diesel vehicles in ~~Europe and the divestiture of our Brazil operations.~~Europe. Net ~~depreciation per unit per month~~Depreciation Per Unit Per Month for International RAC increased 4%3% to ~~$199~~$205 from ~~$192~~$199 for the ~~second~~third quarter of 2018 versus 2017.

~~Income before income taxes~~DOE for International RAC increased $12 million compared to the prior year. Excluding an $8 million fx impact, DOE increased $20 million, or 5% compared to the prior year driven by an increase of $9 million in personnel related expenses for the summer peak season and $9 million in other vehicle expenses, including maintenance and damage charges, due to fleet mix.

DOE as a percentage of total revenues for International RAC was ~~$50 million in~~52% for the ~~second~~third quarter of 2018 compared to ~~$43 million in~~51% for the ~~second~~third quarter of ~~2017. The increase year over year is primarily due to~~2017, an increase ~~in revenues. The~~of 140 bps, and SG&A as a percentage of total revenues for International RAC was 9% for the third quarter of 2018 and 2017.

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ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

~~increase~~

Income before income taxes for International RAC was ~~partially offset by a $25~~$131 million ~~increase~~ in ~~interest expense, net~~the third quarter of 2018 compared to $152 million in the third quarter of 2017. The $21 million year over year unfavorable variance was primarily due to the ~~$20 million loss on extinguishment of debt associated with the redemption of the 4.375% European Vehicle Senior Notes due January 2019 and an~~ increase in DOE and depreciation expense on our revenue earning vehicles. Additionally, there was a $6 million pre-tax gain recorded on the sale of our Brazil operations in 2017 with no comparable gain in 2018.

Adjusted ~~pre-tax income~~Pre-tax Income for International RAC was ~~$74~~$133 million in the ~~second~~third quarter of 2018 compared to ~~$56~~$147 million in the ~~second~~third quarter of 2017. See footnote (a) in the "Footnotes to the Results of Operations and Selected Operating Data by Segment Tables" for a summary and description of reconciling adjustments on a consolidated basis.

~~Six~~Nine Months Ended ~~June~~September 30, 2018 Compared with ~~Six~~Nine Months Ended ~~June~~September 30, 2017

Total revenues for International RAC increased ~~$102~~$106 million, or ~~11%~~6%, in the ~~first half~~nine months of 2018 compared to 2017. Excluding ~~an $80~~a $66 million fx impact, ~~of foreign currency exchange rates,~~ revenues increased ~~$22~~$40 million, or 2%, driven by an increase in pricing, partially offset by lower volume. Total RPD for International RAC increased 4%3% due to improved pricing in our leisure markets and the sale of our lower RPD operations in Brazil in the third quarter of 2017. Transaction days decreased 1% mostly due to the sale of our Brazil operations. Excluding the impact of the sale of our Brazil operations, total revenues for International RAC increased ~~$127~~$139 million, or ~~14%~~8%, Total RPD increased 1%, and ~~transactions~~transaction days increased 4%3%.

Depreciation of revenue earning vehicles and lease charges, net for International RAC increased $31 million, or 10%, in the nine months of 2018 compared to 2017. Excluding a $16 million fx impact, depreciation of revenue earning vehicles and lease charges, net increased $15 million or 5% primarily due to higher per vehicle depreciation rates, which was primarily driven by declining residual values on diesel vehicles in Europe. Net Depreciation Per Unit Per Month for International RAC increased 6% to $208 from $197 for the nine months of 2018 versus 2017.

DOE for International RAC increased ~~$33~~$44 million in the ~~first half~~nine months of 2018 compared to 2017. Excluding a ~~$51~~$43 million fx impact, ~~of foreign currency exchange rates,~~ DOE ~~decreased $18 million, or 3%,~~was flat driven by a ~~$22~~$19 million decrease in ~~PLPD~~public liability and property damage expense due to favorable case development and fewer large claims, and a charge recorded in 2017 resulting from a terrorist event. The decrease was partially offset by an increase of $8$12 million in ~~maintenance and damage charges.~~field compensation.

DOE as a percentage of total revenues for International RAC was ~~59%~~56% for the ~~first half~~nine months of 2018 compared to ~~62%~~57% for the ~~first half~~nine months of 2017, a decrease of ~~280~~90 bps, and SG&A as a percentage of total revenues for International RAC was ~~11%~~10% for the ~~first half~~nine months of both 2018 and ~~2017.~~

Depreciation of revenue earning vehicles and lease charges, net for International RAC increased $29 million, or 16%, in the first half of 2018 compared to 2017. Excluding an $18 million impact of foreign currency exchange rates, depreciation of revenue earning vehicles and lease charges, net increased $11 million or 5% primarily due to higher per vehicle depreciation rates, which was driven by declining residual values on diesel vehicles in Europe. Net depreciation per unit per month for International RAC increased 6% to $209 from $197 for the first half of 2018 versus 2017.

Income before income taxes for International RAC was ~~$38~~$169 million in the ~~first half~~nine months of 2018 compared to ~~$37~~$189 million in the ~~first half~~nine months of 2017. The ~~increase~~$20 million unfavorable variance year over year iswas primarily due to an increase in ~~revenues, partially offset by increased~~ DOE and depreciation expense on our revenue earning vehicles. Additionally, there was an increase of ~~$28~~$30 million in interest expense, net primarily due to ~~the~~a $20 million loss on extinguishment of debt associated with the redemption of the 4.375% European Vehicle Senior Notes due January 2019 and higher interest rates on our outstanding debt ~~balances and~~balances. Also, there was a ~~$13~~$16 million increase in SG&A ~~mainly~~primarily due to the impact of foreign currency exchange rates. The above were partially offset by increased revenues.

Adjusted ~~pre-tax income~~Pre-tax Income for International RAC was ~~$69~~$201 million in the ~~first half~~nine months of 2018 compared to ~~$52~~$200 million in the ~~first half~~nine months of 2017. See footnote (a) in the "Footnotes to the Results of Operations and Selected Operating Data by Segment Tables" for a summary and description of reconciling adjustments on a consolidated basis.

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THE HERTZ CORPORATION AND SUBSIDIARIES


ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

All Other Operations

The All Other Operations segment is primarily comprised of our Donlen business, as such, our discussion is limited to Donlen.


	Three Months Ended June 30,				Percent Increase/(Decrease)			Six Months Ended June 30,								Percent Increase/(Decrease)		Three Months Ended September 30,								Percent Increase/(Decrease)		Nine Months Ended September 30,					Percent Increase/(Decrease)
($ in millions)	2018		2017				2018				2017				2018				2017					2018				2017					Percent Increase/(Decrease)
Total revenues	$	172	$	162	Percent Increase/(Decrease)	6	%		$	341			$	313		Percent Increase/(Decrease)			9	%	$	174			$	Percent Increase/(Decrease)	159		9	%	$	515	$	473	9	%
Direct vehicle and operating expenses	$	8	$	14	(43	)		$	17			$	19			(11	)	$	8			$	9			(11	)	$	25		$	28	(11	)
Depreciation of revenue earning vehicles and lease charges, net	$	128	$	119	8			$	253			$	236			7		$	130			$	119			9		$	383		$	355	8
Selling, general and administrative expenses																		$	10			$	8			25		$	28		$	25	12
Income (loss) before income taxes	$	21	$	16	31			$	40			$	34			18		$	19			$	17			12		$	59		$	51	16
Adjusted pre-tax income (loss)^(a)	$	24	$	19	26			$	47			$	39			21
Average vehicles - Donlen	187,600		206,200		(9	)		189,600				206,900				(8	)
Adjusted Pre-tax Income (Loss)^(a)																		$	22			$	20			10		$	68		$	59	15
Average Vehicles (in whole units) - Donlen																		185,300				205,600				(10	)	188,200			206,500		(9	)

Footnotes to the table above are shown in the "Footnotes to the Results of Operations and Selected Operating Data by Segment Tables" section of this MD&A.

Donlen had favorable results in the ~~second~~third quarter and ~~first half~~nine months of 2018 as compared to the ~~second~~third quarter and ~~first half~~nine months of 2017. Donlen units under lease increased 4% in the ~~second~~third quarter of 2018 versus 2017 and increased 3% in the ~~first half~~nine months of 2018 versus 2017. Growth in units under lease, as well as a richer mix of vehicles, resulted in increased revenues and depreciation expense. Additionally, there were increased charges related to new leases entered into beginning in 2017 with fewer comparable leases entered into in 2018, resulting in a decrease in DOE. The decrease in overall average vehicles in the ~~second~~third quarter and ~~first half~~nine months of 2018 as compared to the ~~second~~third quarter and ~~first half~~nine months of 2017 iswas due to a reduction in non-lease units in our maintenance management programs which drive a lower revenue per unit when compared to lease units under these programs.

Footnotes to the Results of Operations and Selected Operating Data by Segment Tables

(a)

Adjusted ~~pre-tax income (loss)~~Pre-tax Income (Loss) is calculated as income (loss) before income taxes plus non-cash acquisition accounting charges, debt-related charges relating to the amortization and write-off of debt financing costs and debt discounts and premiums, goodwill, intangible and tangible asset impairments and write downs, information technology and finance transformation costs, net income or loss attributable to noncontrolling interests, and certain other miscellaneous or non-recurring items. Adjusted ~~pre-tax income (loss)~~Pre-tax Income (Loss) is important 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. When evaluating our operating performance, investors should not consider ~~adjusted pre-tax income (loss)~~Adjusted Pre-tax Income (Loss) in isolation of, or as a substitute for, measures of our financial performance, such as net income (loss) or income (loss) before income taxes. The contribution of our reportable segments to ~~adjusted pre-tax income (loss)~~Adjusted Pre-tax Income (Loss) and reconciliation to the most comparable consolidated U.S. GAAP measure are presented below:

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ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Hertz


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
(In millions)	2018			2017			2018			2017			2018			2017			2018			2017
Adjusted pre-tax income (loss):
Adjusted Pre-tax Income (Loss):
U.S. Rental Car	$	24		$	(37	)	$	(24	)	$	(152	)	$	222		$	158		$	200		$	5
International Rental Car	74			56			69			52			133			147			201			200
All Other Operations	24			19			47			39			22			20			68			59
Total reportable segments	122			38			92			(61		)	377			325			469			264
Corporate⁽¹⁾	(141		)	(119		)	(286		)	(232		)	(135		)	(136		)	(420		)	(367		)
Adjusted pre-tax income (loss)	(19		)	(81		)	(194		)	(293		)
Adjusted Pre-tax Income (Loss)													242			189			49			(103		)
Adjustments:
Acquisition accounting⁽²⁾	(15		)	(16		)	(30		)	(31		)	(15		)	(15		)	(46		)	(47		)
Debt-related charges⁽³⁾	(13		)	(10		)	(26		)	(21		)	(11		)	(12		)	(36		)	(33		)
Loss on extinguishment of debt⁽⁴⁾	(20		)	(8		)	(22		)	(8		)	—			—			(22		)	(8		)
Restructuring and restructuring related charges⁽⁵⁾	(10		)	(5		)	(13		)	(13		)	(12		)	(2		)	(26		)	(14		)
Impairment charges and asset write-downs⁽⁶⁾	—			(86		)	—			(116		)	—			—			—			(116		)
Information technology and finance transformation costs⁽⁷⁾	(29		)	(20		)	(51		)	(39		)	(24		)	(15		)	(75		)	(55		)
Other⁽⁸⁾	22			(18		)	22			(16		)	3			(1		)	24			(17		)
Income (loss) before income taxes	$	(84	)	$	(244	)	$	(314	)	$	(537	)	$	183		$	144		$	(132	)	$	(393	)

Hertz Global


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
(In millions)	2018			2017			2018			2017			2018			2017			2018			2017
Adjusted pre-tax income (loss):
Adjusted Pre-tax Income (Loss):
U.S. Rental Car	$	24		$	(37	)	$	(24	)	$	(152	)	$	222		$	158		$	200		$	5
International Rental Car	74			56			69			52			133			147			201			200
All Other Operations	24			19			47			39			22			20			68			59
Total reportable segments	122			38			92			(61		)	377			325			469			264
Corporate⁽¹⁾	(143		)	(120		)	(289		)	(234		)	(137		)	(137		)	(425		)	(371		)
Adjusted pre-tax income (loss)	(21		)	(82		)	(197		)	(295		)
Adjusted Pre-tax Income (Loss)													240			188			44			(107		)
Adjustments:
Acquisition accounting⁽²⁾	(15		)	(16		)	(30		)	(31		)	(15		)	(15		)	(46		)	(47		)
Debt-related charges⁽³⁾	(13		)	(10		)	(26		)	(21		)	(11		)	(12		)	(36		)	(33		)
Loss on extinguishment of debt⁽⁴⁾	(20		)	(8		)	(22		)	(8		)	—			—			(22		)	(8		)
Restructuring and restructuring related charges⁽⁵⁾	(10		)	(5		)	(13		)	(13		)	(12		)	(2		)	(26		)	(14		)
Impairment charges and asset write-downs⁽⁶⁾	—			(86		)	—			(116		)	—			—			—			(116		)
Information technology and finance transformation costs⁽⁷⁾	(29		)	(20		)	(51		)	(39		)	(24		)	(15		)	(75		)	(55		)
Other⁽⁸⁾	22			(18		)	22			(16		)	3			(1		)	24			(17		)
Income (loss) before income taxes	$	(86	)	$	(245	)	$	(317	)	$	(539	)	$	181		$	143		$	(137	)	$	(397	)


(1)	Represents general corporate expenses, non-vehicle interest expense, as well as other business activities.


(2)	Represents incremental expense associated with amortization of other intangible assets and depreciation of property and equipment relating to acquisition accounting.


(3)	Primarily represents debt-related charges relating to the amortization of deferred financing costs and debt discounts and premiums.

(4)

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

THE HERTZ CORPORATION AND SUBSIDIARIES


ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

(5)


(6)	In 2017, represents a second quarter $86 million impairment of the Dollar Thrifty tradename and a first quarter impairment of $30 million related to an equity method investment.


(7)	Represents costs associated with our information technology and finance transformation programs, both of which are multi-year initiatives to upgrade and modernize our systems and processes.

(8)

Represents miscellaneous or non-recurring items. In 2018, includes net loss attributable to noncontrolling interests, a ~~$17~~$4 million and $21 million pre-tax gain on marketable securities during the third quarter and nine months, respectively, and a $6 million legal settlement received in the second quarter related to an oil spill in the Gulf of Mexico in 2010. In 2017, includes ~~first and second quarter adjustments, as applicable, to~~net expenses of $13 million resulting from hurricanes, partially offset by a $6 million pre-tax gain on the ~~carrying value~~sale of our Brazil Operations in the ~~our previous Brazil operations and~~third quarter. Also, includes second quarter charges of $6 million for labor-related matters and $5 million relating to PLPD as a result of a terrorist event.


(b)	Transaction ~~days~~Days represent the total number of 24-hour periods, with any partial period counted as one ~~transaction day,~~Transaction Day, that vehicles were on rent (the period between when a rental contract is opened and closed) in a given period. Thus, it is possible for a vehicle to attain more than one ~~transaction day~~Transaction Day in a 24-hour period.

(c)

Average ~~vehicles~~Vehicles are determined using a simple average of the number of vehicles at the beginning and end of a given period. Among other things, ~~average vehicles~~Average Vehicles is used to calculate our ~~vehicle utilization~~Vehicle Utilization which represents the portion of our vehicles that are being utilized to generate revenue. Vehicle ~~utilization~~Utilization is calculated by dividing total ~~transaction days~~Transaction Days by ~~available car days.~~Available Car Days. The calculation of ~~vehicle utilization~~Vehicle Utilization is shown in the table below.

U.S. Rental Car International Rental Car
Three Months Ended June 30,
2018 2017 2018 2017
Transaction days (in thousands) 38,747
36,233
13,225
13,235
Average vehicles 523,000
495,000
187,300
186,100
Number of days in period 91
91
91
91
Available car days (in thousands) 47,593
45,045
17,044
16,935
Vehicle utilization 81 % 80 % 78 % 78 %



	U.S. Rental Car				International Rental Car
	Three Months Ended September 30,
	2018		2017		2018		2017
Transaction Days (in thousands)	39,478		36,879		15,876		15,947
Average Vehicles (in whole units)	527,900		495,000		214,900		212,600
Number of days in period	92		92		92		92
Available Car Days (in thousands)	48,567		45,540		19,771		19,559
Vehicle Utilization	81	%	81	%	80	%	82	%

U.S. Rental Car International Rental Car
Six Months Ended June 30,
2018 2017 2018 2017
Transaction days (in thousands) 72,949
68,545
23,199
23,419
Average vehicles 500,800
486,500
168,000
168,300
Number of days in period 181
181
181
181
Available car days (in thousands) 90,645
88,057
30,408
30,462
Vehicle utilization 80 % 78 % 76 % 77 %

~~(d)~~

Total RPD is calculated as total revenue less ancillary retail vehicle sales revenue, with all periods adjusted to eliminate the effect of fluctuations in foreign currency exchange rates ("total rental revenue"), divided by the total number of transaction days. Our management believes eliminating the effect of fluctuations in foreign currency exchange rates is useful in analyzing underlying trends. The calculation of Total RPD is shown below:

U.S. Rental Car International Rental Car
Three Months Ended June 30,
($ in millions, except as noted) 2018 2017 2018 2017
Revenues $ 1,628
$ 1,519
$ 589
$ 543
Ancillary retail vehicle sales revenue (25 ) (24 ) —
—
Foreign currency adjustment⁽¹⁾
—
—
1
35
Total rental revenue $ 1,603
$ 1,495
$ 590
$ 578
Transaction days (in thousands) 38,747
36,233
13,225
13,235
Total RPD (in whole dollars) $ 41.37
$ 41.26
$ 44.61
$ 43.67

~~Table of Contents~~

~~HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES~~

~~THE HERTZ CORPORATION AND SUBSIDIARIES~~


~~ITEM 2.~~	~~MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)~~

U.S. Rental Car International Rental Car
Six Months Ended June 30,
($ in millions, except as noted) 2018 2017 2018 2017
Revenues $ 3,054
$ 2,872
$ 1,057
$ 955
Ancillary retail vehicle sales revenue (51 ) (46 ) —
—
Foreign currency adjustment⁽¹⁾
—
—
(11 ) 65
Total rental revenue $ 3,003
$ 2,826
$ 1,046
$ 1,020
Transaction days (in thousands) 72,949
68,545
23,199
23,419
Total RPD (in whole dollars) $ 41.17
$ 41.23
$ 45.09
$ 43.55


~~(1)~~	~~Based on December 31, 2017 foreign currency exchange rates for the periods presented.~~


~~(e)~~	Total RPU is calculated as total rental revenue divided by the average vehicles in each period and then divided by the number of months in the period reported. The calculation of Total RPU is shown below:

U.S. Rental Car International Rental Car
Three Months Ended June 30,
($ in millions, except as noted) 2018 2017 2018 2017
Total rental revenue $ 1,603
$ 1,495
$ 590
$ 578
Average vehicles 523,000
495,000
187,300
186,100
Total revenue per unit (in whole dollars) $ 3,065
$ 3,020
$ 3,150
$ 3,106
Number of months in period 3
3
3
3
Total RPU per month (in whole dollars) $ 1,022
$ 1,007
$ 1,050
$ 1,035

U.S. Rental Car International Rental Car
Six Months Ended June 30,
($ in millions, except as noted) 2018 2017 2018 2017
Total rental revenue $ 3,003
$ 2,826
$ 1,046
$ 1,020
Average vehicles 500,800
486,500
168,000
168,300
Total revenue per unit (in whole dollars) $ 5,996
$ 5,809
$ 6,226
$ 6,061
Number of months in period 6
6
6
6
Total RPU (in whole dollars) $ 999
$ 968
$ 1,038
$ 1,010

~~(f)~~

Net depreciation per unit per month represents the amount of average depreciation expense and lease charges, net per vehicle per month and is calculated as depreciation of revenue earning vehicles and lease charges, net, with all periods adjusted to eliminate the effect of fluctuations in foreign currency exchange rates, divided by the average vehicles in each period and then dividing by the number of months in the period reported. Our management believes eliminating the effect of fluctuations in foreign currency exchange rates is useful in analyzing underlying trends. The calculation of net depreciation per unit per month is shown below:

U.S. Rental Car International Rental Car
Three Months Ended June 30,
($ in millions, except as noted) 2018 2017 2018 2017
Depreciation of revenue earning vehicles and lease charges, net $ 447
$ 524
$ 112
$ 100
Foreign currency adjustment⁽¹⁾
—
—
—
7
Adjusted depreciation of revenue earning vehicles and lease charges, net $ 447
$ 524
$ 112
$ 107
Average vehicles 523,000
495,000
187,300
186,100
Adjusted depreciation of revenue earning vehicles and lease charges, net divided by average vehicles (in whole dollars) $ 855
$ 1,059
$ 598
$ 575
Number of months in period 3
3
3
3
Net depreciation per unit per month (in whole dollars) $ 285
$ 353
$ 199
$ 192



	U.S. Rental Car				International Rental Car
	Nine Months Ended September 30,
	2018		2017		2018		2017
Transaction Days (in thousands)	112,427		105,424		39,075		39,366
Average Vehicles (in whole units)	509,800		489,300		183,600		183,100
Number of days in period	273		273		273		273
Available Car Days (in thousands)	139,175		133,579		50,123		49,986
Vehicle Utilization	81	%	79	%	78	%	79	%

Table of Contents

HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

THE HERTZ CORPORATION AND SUBSIDIARIES


ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

(d)

Total RPD is calculated as total revenue less ancillary retail vehicle sales revenue, with all periods adjusted to eliminate the effect of fluctuations in foreign currency exchange rates ("Total Rental Revenue"), divided by the total number of Transaction Days. Our management believes eliminating the effect of fluctuations in foreign currency exchange rates is useful in analyzing underlying trends. The calculation of Total RPD is shown below:



	U.S. Rental Car						International Rental Car
	Three Months Ended September 30,
($ in millions, except as noted)	2018			2017			2018		2017
Revenues	$	1,852		$	1,685		$	732	$	728
Ancillary retail vehicle sales revenue	(27		)	(24		)	—		—
Foreign currency adjustment⁽¹⁾	—			—			20		6
Total Rental Revenue	$	1,825		$	1,661		$	752	$	734
Transaction Days (in thousands)	39,478			36,879			15,876		15,947
Total RPD (in whole dollars)	$	46.23		$	45.04		$	47.37	$	46.03

U.S. Rental Car International Rental Car
Six Months Ended June 30,
($ in millions, except as noted) 2018 2017 2018 2017
Depreciation of revenue earning vehicles and lease charges, net $ 881
$ 1,023
$ 214
$ 185
Foreign currency adjustment⁽¹⁾
—
—
(3 ) 14
Adjusted depreciation of revenue earning vehicles and lease charges, net $ 881
$ 1,023
$ 211
$ 199
Average vehicles 500,800
486,500
168,000
168,300
Adjusted depreciation of revenue earning vehicles and lease charges, net divided by average vehicles (in whole dollars) $ 1,759
$ 2,103
$ 1,256
$ 1,182
Number of months in period 6
6
6
6
Net depreciation per unit per month (in whole dollars) $ 293
$ 351
$ 209
$ 197



	U.S. Rental Car						International Rental Car
	Nine Months Ended September 30,
($ in millions, except as noted)	2018			2017			2018		2017
Revenues	$	4,905		$	4,557		$	1,789	$	1,683
Ancillary retail vehicle sales revenue	(78		)	(70		)	—		—
Foreign currency adjustment⁽¹⁾	—			—			9		71
Total Rental Revenue	$	4,827		$	4,487		$	1,798	$	1,754
Transaction Days (in thousands)	112,427			105,424			39,075		39,366
Total RPD (in whole dollars)	$	42.93		$	42.56		$	46.01	$	44.56


(1)	Based on December 31, 2017 foreign currency exchange rates for the periods presented.


(e)	Total RPU is calculated as Total Rental Revenue divided by the Average Vehicles in each period and then divided by the number of months in the period reported. The calculation of Total RPU is shown below:



	U.S. Rental Car				International Rental Car
	Three Months Ended September 30,
($ in millions, except as noted)	2018		2017		2018		2017
Total Rental Revenue	$	1,825	$	1,661	$	752	$	734
Average Vehicles (in whole units)	527,900		495,000		214,900		212,600
Total revenue per unit (in whole dollars)	$	3,457	$	3,356	$	3,499	$	3,452
Number of months in period	3		3		3		3
Total RPU Per Month (in whole dollars)	$	1,152	$	1,119	$	1,166	$	1,151



	U.S. Rental Car				International Rental Car
	Nine Months Ended September 30,
($ in millions, except as noted)	2018		2017		2018		2017
Total Rental Revenue	$	4,827	$	4,487	$	1,798	$	1,754
Average Vehicles (in whole units)	509,800		489,300		183,600		183,100
Total revenue per unit (in whole dollars)	$	9,468	$	9,170	$	9,793	$	9,579
Number of months in period	9		9		9		9
Total RPU Per Month (in whole dollars)	$	1,052	$	1,019	$	1,088	$	1,064

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

THE HERTZ CORPORATION AND SUBSIDIARIES


ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

(f)

Net Depreciation Per Unit Per Month represents the amount of average depreciation expense and lease charges, net per vehicle per month and is calculated as depreciation of revenue earning vehicles and lease charges, net, with all periods adjusted to eliminate the effect of fluctuations in foreign currency exchange rates, divided by the Average Vehicles in each period and then dividing by the number of months in the period reported. Our management believes eliminating the effect of fluctuations in foreign currency exchange rates is useful in analyzing underlying trends. The calculation of Net Depreciation Per Unit Per Month is shown below:



	U.S. Rental Car				International Rental Car
	Three Months Ended September 30,
($ in millions, except as noted)	2018		2017		2018		2017
Depreciation of revenue earning vehicles and lease charges, net	$	414	$	455	$	128	$	126
Foreign currency adjustment⁽¹⁾	—		—		4		1
Adjusted depreciation of revenue earning vehicles and lease charges, net	$	414	$	455	$	132	$	127
Average Vehicles (in whole units)	527,900		495,000		214,900		212,600
Adjusted depreciation of revenue earning vehicles and lease charges, net divided by Average Vehicles (in whole dollars)	$	784	$	919	$	614	$	597
Number of months in period	3		3		3		3
Net Depreciation Per Unit Per Month (in whole dollars)	$	261	$	306	$	205	$	199



	U.S. Rental Car				International Rental Car
	Nine Months Ended September 30,
($ in millions, except as noted)	2018		2017		2018		2017
Depreciation of revenue earning vehicles and lease charges, net	$	1,295	$	1,478	$	342	$	311
Foreign currency adjustment⁽¹⁾	—		—		1		14
Adjusted depreciation of revenue earning vehicles and lease charges, net	$	1,295	$	1,478	$	343	$	325
Average Vehicles (in whole units)	509,800		489,300		183,600		183,100
Adjusted depreciation of revenue earning vehicles and lease charges, net divided by Average Vehicles (in whole dollars)	$	2,540	$	3,021	$	1,868	$	1,775
Number of months in period	9		9		9		9
Net Depreciation Per Unit Per Month (in whole dollars)	$	282	$	336	$	208	$	197


(1)	Based on December 31, 2017 foreign currency exchange rates for the periods presented.

LIQUIDITY AND CAPITAL RESOURCES

Our U.S. and international operations are funded by cash provided by operating activities and by extensive financing arrangements maintained by us in the U.S. and internationally.

As of ~~June~~September 30, 2018, we had ~~$685~~$761 million of cash and cash equivalents and ~~$236~~$265 million of restricted cash. Of these amounts, ~~$159~~$372 million of cash and cash equivalents and ~~$48~~$47 million of restricted cash was held by our subsidiaries outside of the U.S. If not in the form of loan repayments, repatriation of some of these funds under current regulatory and tax law for use in domestic operations would expose us to additional taxes.

We believe that cash and cash equivalents generated by our operations and cash received on the disposal of vehicles, together with amounts available under various liquidity facilities and refinancing options available to us in the capital markets, will be sufficient to fund operating requirements for the next twelve months.

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THE HERTZ CORPORATION AND SUBSIDIARIES


ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Cash Flows - Hertz

As of ~~June~~September 30, 2018, Hertz had cash, cash equivalents, restricted cash and restricted cash equivalents of ~~$921 million~~$1.0 billion as compared to $1.5 billion as of December 31, 2017. The following table summarizes the net change in cash, cash equivalents and restricted cash for the periods shown:


	Six Months Ended June 30,									Nine Months Ended September 30,
(In millions)	2018			2017			$ Change			2018			2017			$ Change
Cash provided by (used in):
Operating activities	$	945		$	965		$	(20	)	$	2,021		$	1,981		$	40
Investing activities	(4,055		)	(2,940		)	(1,115		)	(4,799		)	(3,405		)	(1,394		)
Financing activities	2,537			3,067			(530		)	2,304			2,081			223
Effect of exchange rate changes	(10		)	17			(27		)	(4		)	26			(30		)
Net change in cash, cash equivalents, restricted cash and restricted cash equivalents	$	(583	)	$	1,109		$	(1,692	)	$	(478	)	$	683		$	(1,161	)

During the ~~first half~~nine months of 2018, there was a $9$33 million ~~increase~~decrease in cash outflows from working capital accounts period over period and ~~a reduction~~an increase of cash inflows of ~~$11~~$7 million from net income (loss), excluding non-cash and non-operating items. The change from working capital accounts was due ~~primarily~~ to a ~~$109~~$123 million increase in cash primarily driven by additional accruals for operational expenses, partially offset by a $90 million decrease in cash ~~due in part to an increase in~~primarily from additional customer receivables related to increased revenue year over year, an increase in prepaid expenses and other assets primarily related to vehicle purchases and an increase in value-added tax receivables in our International RAC segment. The above was partially offset by a $100 million increase in cash due in part to an increase in non-vehicle accounts payable and accrued liabilities related to commissions payable, insurance payables and prepaid ~~rentals.~~expense items, all of which were the result of increased rental volume during the period.

Our primary investing activities relate to the acquisition and ~~disposals~~disposal of revenue earning vehicles. ~~There was a $1.1~~We expended an additional $1.4 billion ~~increase in the use of cash for investing activities year over year primarily due to a$901 million increase in cash outflows for the purchase of~~on revenue earning vehicles in 2018, primarily in the U.S. RAC ~~due~~operations, to ~~a higher volume of vehicles acquired earlier in 2018 versus 2017 with a richer mix of premium vehicles~~increase the average fleet size and ~~a decrease in proceeds from~~enrich the ~~sale of revenue earnings vehicles of $181 million due to fewer vehicle dispositions year over year.~~fleet mix.

~~There were net~~Net financing cash inflows ~~of $2.5~~were $2.3 billion for ~~financing activities for~~ the ~~first half~~nine months of 2018 compared to ~~$3.1~~$2.1 billion for the ~~first half~~nine months of ~~2017,~~2017. The variance was primarily ~~due~~driven by an increase of $1.3 billion in net cash inflows in 2018 for vehicle debt related to ~~the issuance of $1.4 billion HVF II Series 2018-1 Notes, HVF II Series 2018-2 Notes~~our richer fleet mix and ~~HVF II Series 2018-3 Notes and €500 million HHN BV 5.50% Senior Notes due March 2023. Additionally, during the first half of~~larger fleet size. Comparatively, in June 2017, we issued non-vehicle debt of $1.25 billion and repaid $250 million of 4.25% Senior Notes, with the remaining proceeds being included in ~~aggregate principal amount of 7.625% Senior Second Priority Secured Notes due 2022 and~~restricted cash. Additionally, we had ~~a $750~~$120 million ~~draw~~outstanding on the Senior ~~RCF.~~RCF at September 30, 2017.

Cash Flows - Hertz Global

As of ~~June~~September 30, 2018, Hertz Global had cash, cash equivalents, restricted cash and restricted cash equivalents of ~~$921 million~~$1.0 billion as compared to $1.5 billion as of December 31, 2017. The following table summarizes the net change in cash, cash equivalents and restricted cash for the periods shown:


	Six Months Ended June 30,									Nine Months Ended September 30,
(In millions)	2018			2017			$ Change			2018			2017			$ Change
Cash provided by (used in):
Operating activities	$	942		$	963		$	(21	)	$	2,017		$	1,977		$	40
Investing activities	(4,055		)	(2,940		)	(1,115		)	(4,799		)	(3,405		)	(1,394		)
Financing activities	2,540			3,069			(529		)	2,308			2,085			223
Effect of exchange rate changes	(10		)	17			(27		)	(4		)	26			(30		)
Net change in cash, cash equivalents, restricted cash and restricted cash equivalents	$	(583	)	$	1,109		$	(1,692	)	$	(478	)	$	683		$	(1,161	)

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

THE HERTZ CORPORATION AND SUBSIDIARIES


ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Fluctuations in operating, investing and financing cash flows from period to period are due to the same factors as those disclosed for Hertz above, with the exception of any cash inflows or outflows related to the master loan agreement between Hertz and Hertz Global and cash outflows by Hertz Global for the purchase of treasury shares. There were no purchases of treasury shares by Hertz Global during the ~~first half~~nine months of 2018 or 2017.

Financing

Our primary liquidity needs include servicing of vehicle and non-vehicle debt, the payment of operating expenses and capital projects and purchases of revenue earning vehicles to be used in our operations. Our primary sources of funding are operating cash flows, cash received on the disposal of revenue earning vehicles, borrowings under our revolving credit facilities and access to the credit markets. Substantially all of our revenue earning vehicles and certain related assets are owned by special purpose entities, or are encumbered in favor of our lenders under our various credit facilities, other secured financings and asset-backed securities programs. None of such assets are available to satisfy the claims of our general creditors.

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 and acquisitions.~~expenditures. Our practice is to maintain sufficient total liquidity through cash from operations, credit facilities and other financing arrangements, to mitigate any adverse effect on our operations resulting from adverse financial market conditions.

Refer to Part I, Item 1, Note 6, "Debt," to the Notes to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for information on our outstanding debt obligations and our borrowing capacity and availability under our revolving credit facilities as of ~~June~~September 30, 2018. Cash paid for interest during the ~~first half~~nine months of 2018 was ~~$175~~$268 million for interest on vehicle debt and ~~$142~~$171 million for interest on non-vehicle debt. Cash paid for interest during the ~~first half~~nine months of 2017 was ~~$130~~$212 million for interest on vehicle debt and ~~$128~~$164 million for interest on non-vehicle debt.

Details of our corporate liquidity were as follows:


(In millions)	June 30, 2018		December 31, 2017		September 30, 2018		December 31, 2017
Cash and cash equivalents	$	685	$	1,072	$	761	$	1,072
Availability under the Senior RCF	502		552		505		552
Corporate liquidity	$	1,187	$	1,624	$	1,266	$	1,624

Approximately ~~$2.5~~$1.8 billion of vehicle debt and ~~$25~~$16 million of non-vehicle debt will mature during the twelve months following the issuance of this Report (the "next twelve months") and we will need to refinance a portion of the debt. We have reviewed the maturing debt obligations and determined that it is probable that we will be able, and have the intent, to repay or refinance these facilities at such times as we deem appropriate prior to their maturities. We believe that cash generated from operations, cash received on the disposal of vehicles, together with amounts available under various liquidity facilities and refinancing options available to us, will be adequate to permit us to meet our debt maturities over the next twelve months.

Covenants

The indentures for the Senior Notes and the Senior Second Priority Secured Notes contain covenants that, among other things, limit or restrict the ability of the Hertz credit group to incur additional indebtedness, incur guarantee obligations, prepay certain indebtedness, make certain restricted payments (including paying dividends, redeeming stock or making other distributions to parent entities of Hertz and other persons outside of the Hertz credit group), make investments, create liens, transfer or sell assets, merge or consolidate, and enter into certain transactions with Hertz's affiliates that are not members of the Hertz credit group.

Certain of our other debt instruments and credit facilities (including the Senior Facilities and the Letter of Credit Facility) contain a number of covenants that, among other things, limit or restrict the ability of the borrowers and the guarantors to dispose of assets, incur additional indebtedness, incur guarantee obligations, prepay certain indebtedness, make certain restricted payments (including paying dividends, share repurchases or making other distributions), create liens,

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ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

to dispose of assets, incur additional indebtedness, incur guarantee obligations, prepay certain indebtedness, make certain restricted payments (including paying dividends, share repurchases or making other distributions), create liens, make investments, make acquisitions, engage in mergers, fundamentally change the nature of their business, make capital expenditures, or engage in certain transactions with certain affiliates.

The Senior RCF and the Letter of Credit Facility contain a financial maintenance covenant applicable to such facilities. Such covenant provides that Hertz’s consolidated first lien net leverage ratio, as defined in the credit agreements governing such facilities (together, the "Senior Credit Agreement"), as of the last day of any fiscal quarter (the "Covenant Leverage Ratio"), may not exceed a ratio of 3.00 to 1.00.

As of ~~June~~September 30, 2018, Hertz was in compliance with the Covenant Leverage Ratio with a ratio of ~~1.60~~1.50 to 1.00, as calculated in accordance with the Senior Credit Agreement. Consolidated EBITDA, as defined in the Senior Credit Agreement, is a component of the calculation of the Covenant Leverage Ratio and is a non-GAAP financial measure that is not a measure of operating results, but instead is a measure used to determine compliance with the Covenant Leverage Ratio under the Senior Credit Agreement. Consolidated EBITDA is generally defined in the Senior Credit Agreement as consolidated net income plus the sum of income taxes, non-vehicle interest expense, non-vehicle depreciation and amortization expense, and non-cash charges or losses, as further adjusted for certain other items permitted in calculating covenant compliance under the Senior RCF and the Letter of Credit Facility, including add-backs for non-recurring, unusual or extraordinary charges, business optimization expenses or other restructuring charges or reserves.

Based on available liquidity from our expected operating results, the Senior RCF and other financing arrangements, Hertz expects to continue to be in compliance with the Covenant Leverage Ratio for at least the next twelve months.

Capital Expenditures

Revenue Earning Vehicles Expenditures

The table below sets forth our revenue earning vehicles expenditures and related disposal proceeds for the periods shown:


Cash inflow (cash outflow)	Revenue Earning Vehicles								Revenue Earning Vehicles
(In millions)	Capital Expenditures			Disposal Proceeds		Net Capital Expenditures			Capital Expenditures			Disposal Proceeds		Net Capital Expenditures
2018
First Quarter	$	(3,565	)	$	1,782	$	(1,783	)	$	(3,565	)	$	1,782	$	(1,783	)
Second Quarter	(4,045		)	1,872		(2,173		)	(4,045		)	1,872		(2,173		)
Third Quarter									(2,466		)	1,724		(742		)
Total	$	(7,610	)	$	3,654	$	(3,956	)	$	(10,076	)	$	5,378	$	(4,698	)
2017
First Quarter	$	(2,837	)	$	1,935	$	(902	)	$	(2,837	)	$	1,935	$	(902	)
Second Quarter	(3,872		)	1,900		(1,972		)	(3,872		)	1,900		(1,972		)
Third Quarter									(1,974		)	1,450		(524		)
Total	$	(6,709	)	$	3,835	$	(2,874	)	$	(8,683	)	$	5,285	$	(3,398	)

As previously disclosed, we identified a classification error in our first quarter 2017 statement of cash flows that we corrected in the second quarter of 2017 related to our former operations in Brazil. Correction of the error resulted in a $25 million decrease to revenue earning vehicles expenditures and proceeds from ~~disposals~~disposal of ~~revenues~~revenue earning vehicles for the first quarter of 2017 and a $25 million increase of revenue earning vehicles expenditures and proceeds from ~~disposals~~disposal of ~~revenues~~revenue earning vehicles for the second quarter of 2017 in the table above. These revisions had no impact on the third quarter of 2017. Additionally, there was no impact on 2017 net capital expenditures for revenue earning vehicles ~~for either 2017 quarter~~ and ~~had~~ no impact on the 2017 totals.

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ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

The table below sets forth net capital expenditures for revenue earning vehicles by segment for the periods shown:


Cash inflow (cash outflow)	Six Months Ended June 30,											Nine Months Ended September 30,
($ in millions)	2018			2017			$ Change			% Change		2018			2017			$ Change			% Change
U.S. Rental Car	$	(2,968	)	$	(1,862	)	$	(1,106	)	59	%	$	(3,076	)	$	(1,748	)	$	(1,328	)	76	%
International Rental Car	(705		)	(787		)	82			(10	)	(1,201		)	(1,294		)	93			(7	)
All Other Operations	(283		)	(225		)	(58		)	26		(421		)	(356		)	(65		)	18
Total	$	(3,956	)	$	(2,874	)	$	(1,082	)	38		$	(4,698	)	$	(3,398	)	$	(1,300	)	38

Capital Assets, Non-Vehicle

The table below sets forth our capital asset expenditures, non-vehicle, and related disposal proceeds from property and other equipment disposed of or to be disposed of for the periods shown:


Cash inflow (cash outflow)	Capital Assets, Non-Vehicle								Capital Assets, Non-Vehicle
(In millions)	Capital Expenditures			Disposal Proceeds		Net Capital Expenditures			Capital Expenditures			Disposal Proceeds		Net Capital Expenditures
2018
First Quarter	$	(44	)	$	4	$	(40	)	$	(44	)	$	4	$	(40	)
Second Quarter	(36		)	4		(32		)	(36		)	4		(32		)
Third Quarter									(39		)	39		—
Total	$	(80	)	$	8	$	(72	)	$	(119	)	$	47	$	(72	)
2017
First Quarter	$	(41	)	$	7	$	(34	)	$	(41	)	$	7	$	(34	)
Second Quarter	(43		)	4		(39		)	(43		)	4		(39		)
Third Quarter									(40		)	7		(33		)
Total	$	(84	)	$	11	$	(73	)	$	(124	)	$	18	$	(106	)

The table below sets forth capital asset expenditures, non-vehicle, net of disposal proceeds, by segment for the periods shown:


Cash inflow (cash outflow)	Six Months Ended June 30,											Nine Months Ended September 30,
($ in millions)	2018			2017			$ Change			% Change		2018			2017			$ Change			% Change
U.S. Rental Car	$	(38	)	$	(41	)	$	3		(7	)%	$	(14	)	$	(56	)	$	42		(75	)%
International Rental Car	(7		)	(9		)	2			(22	)	(11		)	(15		)	4			(27	)
All Other Operations	(2		)	(3		)	1			(33	)	(3		)	(4		)	1			(25	)
Corporate	(25		)	(20		)	(5		)	25		(44		)	(31		)	(13		)	42
Total	$	(72	)	$	(73	)	$	1		(1	)	$	(72	)	$	(106	)	$	34		(32	)

As ~~further described in Note 2, "Basis of Presentation and Recently Issued Accounting Pronouncements," to the Notes to our condensed consolidated financial statements included in this Report,~~previously disclosed, we revised our ~~condensed consolidated statements of cash flows for the six months ended June 30, 2017 to decrease~~ capital asset expenditures, non-vehicle ~~by $19 million,~~for a correction of error related to intangible software assets for which no payment was made as of June 30, 2017. The correction resulted in a decrease in capital asset expenditures, non-vehicle of $13 million and $6 million ~~is attributable to~~for the first and second quarter of 2017, respectively. ~~For~~The cumulative error of $25 million was corrected in the ~~six months ended June 30,~~third quarter of 2017. Accordingly, we revised our capital asset expenditures, non-vehicle for the third quarter of 2017 $4by a decrease of $19 million ~~is attributable to our U.S. RAC segment and $15 million is attributable to our corporate operations.~~in the table above. These revisions had no impact on the 2017 totals.

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ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

CONTRACTUAL OBLIGATIONS

As of ~~June~~September 30, 2018, there have been no material changes outside of the ordinary course of business to our known contractual obligations as set forth in the table included in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our 2017 Form 10‑K. Changes to our aggregate indebtedness, including related interest and terms for new issuances, are described in Part I, Item 1, Note 6, "Debt," to the Notes to our unaudited 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)~~

OFF-BALANCE SHEET COMMITMENTS AND ARRANGEMENTS

Indemnification Obligations

There have been no significant changes to our indemnification obligations as compared to those disclosed in Note 16, "Contingencies and Off-Balance Sheet Commitments" of the Notes to our consolidated financial statements included in our 2017 Form 10‑K under the caption Item 8, "Financial Statements and Supplementary Data."

We regularly evaluate the probability of having to incur costs associated with indemnification obligations and will accrue for expected losses when they are probable and estimable.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

For a discussion of recent accounting pronouncements, see Note 2, "Basis of Presentation and Recently Issued Accounting Pronouncements," to the Notes to our unaudited condensed consolidated financial statements included in this Report ("Note 2").

As disclosed in Note 2, we adopted Topic 606 in accordance with the effective date on January 1, 2018. The Revenue from Contracts with Customers section of Note 2 includes disclosures regarding our method of adoption and the impact on our financial position, results of operations and cash flows. See Note 7, "Revenue," for information regarding our accounting policies for revenue recognition, including the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers, as well as other required disclosures under Topic 606.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained or incorporated by reference in this Report on Form 10-Q and in reports we subsequently file with the United States Securities and Exchange Commission ("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," "potential," "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 Forms 10‑K, 10‑Q and 8‑K.

Important factors that could affect our actual results and cause them to differ materially from those expressed in forward-looking statements 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 our 2017 Form 10‑K and the following, which were derived in part from the risks set forth in "Item 1A—Risk Factors" of our 2017 Form 10‑K:

any claims, investigations or proceedings arising as a result of the restatement in 2015 of our previously issued financial results;

our ability to remediate the material weaknesses in our internal controls over financial reporting;

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ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

levels of travel demand, particularly with respect to airline passenger traffic in the United States and in global markets;

the effect of our separation of our vehicle and equipment rental businesses, any failure by Herc Holdings Inc. to comply with the agreements entered into in connection with the separation and our ability to obtain the expected benefits of the separation;

significant changes in the competitive environment and the effect of competition in our markets on rental volume and pricing, including on our pricing policies or use of incentives;

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~~ITEM 2.~~	~~MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)~~

occurrences that disrupt rental activity during our peak periods;

increased vehicle costs due to declines in the value of our non-program vehicles;

our ability to purchase adequate supplies of competitively priced vehicles and risks relating to increases in the cost of the vehicles we purchase;

our ability to accurately estimate future levels of rental activity and adjust the number and mix of vehicles used in our rental operations accordingly;

our ability to maintain sufficient liquidity and the availability to us of additional or continued sources of financing for our revenue earning vehicles and to refinance our existing indebtedness;

our ability to adequately respond to changes in technology and customer demands;

our access to third-party distribution channels and related prices, commission structures and transaction volumes;

an increase in our vehicle costs or disruption to our rental activity, particularly during our peak periods, due to safety recalls by the manufacturers of our vehicles;

a major disruption in our communication or centralized information networks;

financial instability of the manufacturers of our vehicles;

any impact on us from the actions of our franchisees, dealers and independent contractors;

our ability to sustain operations during adverse economic cycles and unfavorable external events (including war, terrorist acts, natural disasters and epidemic disease);

shortages of fuel and increases or volatility in fuel costs;

our ability to successfully integrate acquisitions and complete dispositions;

our ability to maintain favorable brand recognition and a coordinated and comprehensive branding and portfolio strategy;

costs and risks associated with litigation and investigations;

risks related to our indebtedness, including our substantial amount of debt, our ability to incur substantially more debt, the fact that substantially all of our consolidated assets secure certain of our outstanding indebtedness and increases in interest rates or in our borrowing margins;

our ability to meet the financial and other covenants contained in our Senior Facilities and the Letter of Credit Facility, our outstanding unsecured Senior Notes, our outstanding Senior Second Priority Secured Notes and certain asset-backed and asset-based arrangements;

changes in accounting principles, or their application or interpretation, and our ability to make accurate estimates and the assumptions underlying the estimates, which could have an effect on operating results;

risks associated with operating in many different countries, including the risk of a violation or alleged violation of applicable anticorruption or antibribery laws and our ability to repatriate cash from non-U.S. affiliates without adverse tax consequences;

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ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

our ability to prevent the misuse or theft of information we possess, including as a result of cyber security breaches and other security threats;

our ability to successfully implement our information technology and finance transformation programs;

changes in the existing, or the adoption of new laws, regulations, policies or other activities of governments, agencies and similar organizations, such as the Tax Cuts and Jobs Act, where such actions may affect our operations, the cost thereof or applicable tax rates;

changes to our senior management team and the dependence of our business operations on our senior management team;

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~~ITEM 2.~~	~~MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)~~

the effect of tangible and intangible asset impairment charges;

our exposure to uninsured claims in excess of historical levels;

fluctuations in interest rates and commodity prices;

our exposure to fluctuations in foreign currency exchange rates; and

other risks and uncertainties described from time to time in periodic and current reports that we file with the SEC.

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.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to a variety of market risks, including the effects of changes in interest rates (including credit spreads), foreign currency exchange rates and fluctuations in fuel prices. We manage our exposure to these market risks through our regular operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments. Derivative financial instruments are viewed as risk management tools and have not been used for speculative or trading purposes. In addition, derivative financial instruments are entered into with a diversified group of major financial institutions in order to manage our exposure to counterparty nonperformance on such instruments.

There have been no material changes to the information reported under Part II, Item 7A, "Quantitative and Qualitative Disclosures About Market Risk," included in our 2017 Form 10‑K.

ITEM 4. CONTROLS AND PROCEDURES

HERTZ GLOBAL

Evaluation of Disclosure Controls and Procedures

Our senior management has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined under Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of ~~June~~September 30, 2018, due to the identification of material weaknesses in our internal control over financial reporting, as further described in Item 9A of our 2017 Form 10-K, our disclosure controls and procedures were not effective to provide reasonable assurance that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

During the three months ended ~~June~~September 30, 2018, we have taken, and continue to take, the actions described below to remediate our existing material weaknesses which have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

~~Risk Assessment~~

To address the risk assessment material weakness, during the three months ended June 30, 2018, management completed the design and implementation of several internal controls over financial reporting to respond to the risks of material misstatement over financial reporting.

~~IT Systems~~

To address the material weakness associated with controls over IT, management performed the following during the three months ended June 30, 2018: (i) implemented enhanced controls to monitor developers’ access to production, (ii) implemented enhanced control activities related to access and monitoring of critical jobs, (iii) continued training for control owners regarding risks, controls and maintaining adequate evidence of review and (iv) hired additional resources to monitor compliance with policies, procedures and controls.

Income Taxes

To address the material weakness associated with controls over the analysis and assessment of income tax effects related to non-recurring transactions, the provision for income taxes and state deferred tax asset valuation allowances, during the three months ended ~~June~~September 30, 2018 management implemented quarterly control activities and enhanced and designed specific ~~quarterly~~year-end control activities to assess the accounting for significant complex transactions and other tax related judgments.

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~~ITEM 4. CONTROLS AND PROCEDURES (CONTINUED)~~

To remediate our existing material weaknesses, we require additional time to complete the implementation of our remediation plans and demonstrate the effectiveness of our remediation efforts. The material weaknesses cannot be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

HERTZ

Our senior management has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined under Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of ~~June 30,~~September30, 2018, due to the identification of material weaknesses in our internal control over financial reporting, as further described in Item 9A of our 2017 Form 10-K, our disclosure controls and procedures were not effective to provide reasonable assurance that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act of 1934 is recorded, processed, summarized and reported within the

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ITEM 4. CONTROLS AND PROCEDURES (CONTINUED)

time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

~~Risk Assessment~~

~~IT Systems~~

Income Taxes

Our remediation efforts were ongoing during the three months ended ~~June~~September 30, 2018. To remediate our existing material weaknesses, we require additional time to complete the implementation of our remediation plans and demonstrate the effectiveness of our remediation efforts. The material weaknesses cannot be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

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PART ~~II—~~II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

For a description of certain pending legal proceedings see Part I, Item 1, Note 11, "Contingencies and Off-Balance Sheet Commitments," to the Notes to our unaudited condensed consolidated financial statements included in this Report.

ITEM 1A. RISK FACTORS

There are no material amendments or additions to the information reported under Part I, Item 1A “Risk Factors” contained in our 2017 Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS


(a)	Exhibits:

The attached list of exhibits in the "Exhibit Index" immediately following the signature page to this Report on is filed as part of this Form 10-Q and is incorporated herein by reference in response to this item.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



Date:	~~August 6,~~November 8, 2018	HERTZ GLOBAL HOLDINGS, INC. THE HERTZ CORPORATION (Registrants)
		By:	/s/ ~~THOMAS C. KENNEDY~~JAMERE JACKSON
			~~Thomas C. Kennedy~~Jamere Jackson ~~Senior~~ Executive Vice President and Chief Financial Officer

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EXHIBIT INDEX



Exhibit Number		Description
~~10.2.10~~4.17.1	Hertz Holdings Hertz	~~Form of Employee Stock Option~~Issuer Facility Agreement, ~~under the 2016 Omnibus Incentive Plan~~dated September 25, 2018, by and among International Fleet Financing No. 2 B.V., Hertz Europe Limited, Credit Agricole Corporate and Investment Bank, certain committed note purchasers, conduit investors and funding agents named therein, and BNP Paribas Trust Corporation UK Limited.*
4.17.2	Hertz Holdings Hertz	Master Definitions and Constructions Agreement, dated September 25, 2018, by and among International Fleet Financing No. 2 B.V., Hertz Automobielen Nederland B.V., Stuurgroep Fleet (Netherlands) B.V., Hertz France S.A.S., RAC Finance S.A.S., Hertz De Espana SL, Hertz Autovermietung GMBH, Hertz Fleet Limited, Eurotitrisation S.A., BNP Paribas Securities Services, BNP Paribas S.A., Credit Agricole Corporate and Investment Bank, Hertz Europe Limited, BNP Paribas Securities Services, Luxembourg Branch, The Hertz Corporation, TMF SFS Management BV, KPMG LLP, BNP Paribas Trust Corporation UK Limited, BNP Paribas S.A., Dublin Branch, BNP Paribas S.A., Netherlands Branch, Sanne Trustee Services Limited, Hertz Holdings Netherlands B.V., and certain committed note purchasers, conduit investors and funding agents named therein.* #
4.17.3	Hertz Holdings Hertz	THC Guaranty and Indemnity, dated September 25, 2018, by and among The Hertz Corporation, Stuurgroep Fleet (Netherlands) B.V., RAC Finance S.A.S., Hertz Fleet Limited, Stuurgroep Fleet (Netherlands) B.V. Spanish Branch, and BNP Paribas Trust Corporation UK Limited.*
4.17.4	Hertz Holdings Hertz	French Master Lease and Servicing Agreement, dated September 25, 2018, by and among RAC Finance S.A.S., Hertz France S.A.S., those Permitted Lessees from time to time becoming Lessees thereunder, and BNP Paribas Trust Corporation UK Limited.*
4.17.5	Hertz Holdings Hertz	Dutch Master Lease and Servicing Agreement, dated September 25, 2018, by and among Stuurgroep Fleet (Netherlands) B.V., Hertz Automobielen Nederland B.V., those Permitted Lessees from time to time becoming Lessees thereunder, and BNP Paribas Trust Corporation UK Limited.*
4.17.6	Hertz Holdings Hertz	German Master Lease and Servicing Agreement, dated September 25, 2018, by and among Hertz Fleet Limited, Hertz Autovermietung GMBH, those Permitted Lessees from time to time becoming Lessees thereunder, and BNP Paribas Trust Corporation UK Limited.*
4.17.7	Hertz Holdings Hertz	Spanish Master Lease and Agreement, dated September 25, 2018, by and among Stuurgroep Fleet (Netherlands) B.V., Stuurgroep Fleet (Netherlands) B.V., Sucursal en Espana, Hertz de Espana, S.L.U., those Permitted Lessees from time to time becoming Lessees thereunder, and BNP Paribas Trust Corporation UK Limited.*
10.35	Hertz Holdings Hertz	Offer Letter, signed on August 15, 2018 between Jamere Jackson and The Hertz Corporation (Incorporated by reference to Exhibit ~~10.3~~10.1 to the Current Report on Form ~~8-K/A~~8-K of Hertz Global Holdings, Inc. (File No. 001-37665) and The Hertz Corporation (File No. 001-07541), as filed on ~~March 7, 2017).~~August 20, 2018.
~~10.2.11~~10.36	Hertz Holdings Hertz	~~Form~~Separation Agreement, dated as of ~~Restricted Stock Agreement under the 2016 Omnibus Incentive Plan~~August 29, 2018 by and among Thomas C. Kennedy, Hertz Global Holdings, Inc. and The Hertz Corporation (Incorporated by reference to Exhibit ~~10.4~~10.1 to the Current Report on Form ~~8-K/A~~8-K of Hertz Global Holdings, Inc. (File No. 001-37665) and The Hertz Corporation (File No. 001-07541), as filed on ~~March 7, 2017).~~August 31, 2018.
~~10.2.12~~	~~Hertz Holdings~~ ~~Hertz~~	Form of Performance Stock Agreement (EBITDA Award) under the 2016 Omnibus Incentive Plan (Incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K/A of Hertz Global Holdings, Inc. (File No. 001-37665) and The Hertz Corporation (File No. 001-07541), as filed on March 7, 2017).
~~10.2.13~~	~~Hertz Holdings~~ ~~Hertz~~	Form of Performance Stock Agreement (Donlen EBITDA Award) under the 2016 Omnibus Incentive Plan (Incorporated by reference to Exhibit 10.6 to the Current Report on Form 8-K/A of Hertz Global Holdings, Inc. (File No. 001-37665) and The Hertz Corporation (File No. 001-07541), as filed on March 7, 2017).
~~10.2.14~~	~~Hertz Holdings~~ ~~Hertz~~	~~Form of Performance Stock Unit Agreement under the 2016 Omnibus Incentive Plan (EBITDA)~~
~~10.2.15~~	~~Hertz Holdings~~ ~~Hertz~~	~~Form of Director Restricted Stock Unit Agreement under the 2016 Omnibus Incentive Plan~~
~~10.2.16~~	~~Hertz Holdings~~ ~~Hertz~~	~~Form of Restricted Stock Unit Agreement under the 2016 Omnibus Incentive Plan (Pro Rata)~~
~~10.2.17~~	~~Hertz Holdings~~ ~~Hertz~~	~~Form of Restricted Stock Unit Agreement under the 2016 Omnibus Incentive Plan (Revenue)~~
~~10.2.18~~	~~Hertz Holdings~~ ~~Hertz~~	~~Form of Employee Stock Option Agreement under the 2016 Omnibus Incentive Plan~~
31.1	Hertz Holdings	Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).*
31.2	Hertz Holdings	Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).*
31.3	Hertz	Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).*
31.4	Hertz	Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).*
32.1	Hertz Holdings	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350.*
32.2	Hertz Holdings	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350.*
32.3	Hertz	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350.*

Table of Contents

HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

THE HERTZ CORPORATION AND SUBSIDIARIES



Exhibit Number		Description
32.4	Hertz	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350.*
101.INS	Hertz Holdings Hertz	XBRL Instance Document*
101.SCH	Hertz Holdings Hertz	XBRL Taxonomy Extension Schema Document*
101.CAL	~~Hertz Holdings~~ ~~Hertz~~	XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEF	Hertz Holdings Hertz	XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB	Hertz Holdings Hertz	XBRL Taxonomy Extension Label Linkbase Document*
101.PRE	Hertz Holdings Hertz	XBRL Taxonomy Extension Presentation Linkbase Document*

~~Table of Contents~~

~~HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES~~

~~THE HERTZ CORPORATION AND SUBSIDIARIES~~

*Furnished herewith

# Confidential treatment has been requested for certain portions of this Exhibit pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, which portions have been omitted and filed separately with the Securities and Exchange Commission

Note: Certain instruments with respect to various additional obligations, which could be considered as long-term debt, have not been filed as exhibits to this Report because the total amount of securities authorized under any such instrument does not exceed 10% of our total assets on a consolidated basis. We agree to furnish to the SEC upon request a copy of any such instrument defining the rights of the holders of such long-term debt.

7879




		Page
PART I. FINANCIAL INFORMATION
ITEM 1.	Condensed Consolidated Financial Statements (Unaudited)	1
ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	4849
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	7374
ITEM 4.	Controls and Procedures	7374
PART II. OTHER INFORMATION
ITEM 1.	Legal Proceedings	7576
ITEM 1A.	Risk Factors	7576
ITEM 2.	Unregistered Sales of Securities and Use of Proceeds	7576
ITEM 3.	Defaults Upon Senior Securities	7576
ITEM 4.	Mine Safety Disclosures	7576
ITEM 5.	Other Information	7576
ITEM 6.	Exhibits	7576
SIGNATURE		7677
EXHIBIT INDEX		7778



(In millions)	Outstanding Principal
European Vehicles Notes	June 30, 2018		December 31, 2017
4.375% Senior Notes due January 2019	$	—	$	505
4.125% Senior Notes due October 2021	260		268
5.500% Senior Notes due March 2023	578		—
	$	838	$	773



	U.S. Rental Car				International Rental Car
	Six Months Ended June 30,
	2018		2017		2018		2017
Transaction days (in thousands)	72,949		68,545		23,199		23,419
Average vehicles	500,800		486,500		168,000		168,300
Number of days in period	181		181		181		181
Available car days (in thousands)	90,645		88,057		30,408		30,462
Vehicle utilization	80	%	78	%	76	%	77	%