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UNDER
THE SECURITIES ACT OF 1933
Delaware | 7514 | 13-1938568 | ||
(State of Incorporation) | (Primary Standard Industrial | (I.R.S. Employer Identification No.) | ||
Classification Code Number) |
Park Ridge, New Jersey 07656-0713
(201) 307-2000
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Harold E. Rolfe, Esq.
Senior Vice President, General
Counsel and Secretary
The Hertz Corporation
225 Brae Boulevard
Park Ridge, New Jersey 07656-0713
(201) 307-2000
(Name, address, including zip code, and telephone number, including area code, of agent for service)
With copies to:
Alan D. Schnitzer, Esq. | Lisa L. Jacobs, Esq. | |
Simpson Thacher & Bartlett LLP | Shearman & Sterling LLP | |
425 Lexington Avenue | 599 Lexington Avenue | |
New York, New York 10017-3954 | New York, New York 10022-6069 | |
(212) 455-2000 | (212) 848-4000 |
Proposed Maximum Aggregate | Amount of | |||||||
Title of Each Class of Securities to be Registered | Offering Price(1)(2) | Registration Fee | ||||||
Class A common stock, par value $0.01 per share(3) | ||||||||
Equity Units(4) | $100,000,000 | $11,770(7) | ||||||
Purchase contracts(5) | ||||||||
Senior notes due 2015(6) | ||||||||
Total | $100,000,000 | $11,770(7) | ||||||
(1) | Estimated solely for the purpose of calculating the registration fee under Rule 457(o) of the Securities Act of 1933, as amended (the “Securities Act”). | ||
(2) | Exclusive of accrued interest, if any. | ||
(3) | In addition to the offering of Class A common stock, also includes the shares of Class A common stock that may be issued to holders of the Equity Units upon settlement or termination of the Equity Units. The actual number of shares of Class A common stock will not be determined until the date of settlement or termination of the related purchase contracts. | ||
(4) | Each Equity Unit will consist of a purchase contract, described under note (5) below, and a 1/40, or 2.5%, undivided beneficial ownership interest in a $1,000 principal amount senior note, described under note (6) below. | ||
(5) | The purchase contracts are offered as a component of the Equity Units for no additional consideration. | ||
(6) | The senior notes are offered as a component of the Equity Units for no additional consideration. | ||
(7) | Previously paid. | ||
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• | the front and back cover pages; | ||
• | pages for the “Prospectus summary” section describing the offering of Equity Units; | ||
• | pages containing risk factors applicable only to the offering of Equity Units; | ||
• | pages containing a description of the Equity Units; | ||
• | pages containing descriptions of the senior notes and purchase contracts that constitute the Equity Units; | ||
• | pages describing U.S. federal income tax consequences of holding the Equity Units; | ||
• | pages describing ERISA considerations associated with holding the Equity Units; and | ||
• | pages comprising the section entitled “Underwriting” relating to the offering of the Equity Units. | ||
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The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where an offer or sale is not permitted.
Per Share | Total | |||||||
Initial public offering price | $ | $ | ||||||
Underwriting discounts and commissions | $ | $ | ||||||
Proceeds to us, before expenses | $ | $ |
JPMorgan | Citigroup | Goldman, Sachs & Co. |
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Class A common stock offered by us | shares | |||
Common stock to be outstanding immediately after this offering: | ||||
Class A common stock | shares | |||
Class B common stock | shares | |||
Total common stock outstanding | shares | |||
Common stock to be held by Ford immediately after this offering: | ||||
Class A common stock | shares | |||
Class B common stock | shares | |||
Total number of shares of common stock | shares | |||
Percentage of the combined voting power of all of our outstanding common stock to be held by Ford immediately after this offering | % | |||
Over-allotment option | shares of Class A common stock to be offered by us if the underwriters exercise the over-allotment option in full | |
Use of proceeds | The proceeds to us from the offering, after the deduction of underwriting discounts, commissions and expenses payable by us, are estimated to be $($ if the underwriters’ over-allotment option is exercised in full). Substantially all of the proceeds from this offering and from the offering of Equity Units are expected to be used to repay the subordinated promissory notes that we issued to Ford on each of June 10, 2005 and , 2005 in the amounts of $1,185.0 million and $ , respectively, which we refer to collectively as the “Intercompany Notes” and pay an additional dividend to Ford. See “Use of proceeds.” | |
Equity Units Offering | Concurrently with this offering, we are also offering, by means of a separate prospectus, $ of our “Equity Units” which are units comprised of senior notes issued by us and a forward contract obligating holders to purchase a number of shares of our Class A common stock. While this offering is not contingent on the offering of Equity Units, the | |
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offering of Equity Units is contingent upon the completion of this offering. | ||
Voting rights | The holders of our Class A common stock and Class B common stock will be entitled to share equally on a per share basis in all dividends and other distributions declared by our Board of Directors. However, the holders of our Class A common stock are entitled to one vote per share and the holders of our Class B common stock are entitled to five votes per share. Under certain circumstances, shares of our Class B common stock can be converted into an equivalent number of shares of our Class A common stock. See “Relationship with Ford” and “Description of capital stock—Common stock—Voting rights.” | |
Dividend policy | Our Board of Directors currently intends to declare quarterly dividends on our common stock. It is expected that the first quarterly dividend payment will be $ per share (an indicated rate of $ per share annually), with the initial dividend to be declared and paid in 2005. The declaration and payment of dividends are subject to the discretion of our Board of Directors. Any determination as to the payment of dividends will depend upon, among other things, general business conditions, our financial results, contractual, legal and regulatory restrictions regarding the payment of dividends by us and our subsidiaries, our credit ratings and such other factors as the Board of Directors may consider to be relevant. | |
We did not pay any dividends during the part of the year 2005 ended June 9, 2005 or the years ended December 31, 2004, 2003 or 2002. On June 10, 2005 and , 2005, we paid dividends of $1,185.0 million and $ , respectively, on our common stock to Ford in the form of the Intercompany Notes. We intend to pay additional dividends to Ford out of the proceeds of shares sold pursuant to the over-allotment option for this offering and out of the proceeds of Equity Units sold pursuant to the over-allotment option for the Equity Units offering. To the extent that the over-allotment option for this offering is not subscribed for in full, we intend to pay a dividend to Ford in the form of Class A common stock. | ||
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Certain debt and other instruments to which we are a party restrict our ability to pay dividends. See “Dividend policy.” | ||
Controlling stockholder | Currently, Ford indirectly owns all of our common stock. For information regarding the relationship between us and Ford, see “Relationship with Ford.” | |
Risk factors | For a discussion of certain considerations relevant to an investment in our Class A common stock, see “Risk factors.” | |
Proposed New York Stock Exchange symbol for our Class A common stock | HTZ |
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Six Months | ||||||||||||||||||||||||||||
Ended, or as of June 30, | Year Ended, or as of December 31, | |||||||||||||||||||||||||||
2004 (a) | 2003 (a) | 2002 (a) | 2001 (a) | 2000 (a) | ||||||||||||||||||||||||
2005 | Restated | 2004 | Restated | Restated | Restated | Restated | ||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||
Statement of Operations | ||||||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||||||
Car rental | $ | 2,824.5 | $ | 2,551.9 | $ | 5,430.8 | $ | 4,819.3 | $ | 4,537.6 | $ | 4,366.6 | $ | 4,553.9 | ||||||||||||||
Equipment rental | 630.1 | 522.3 | 1,162.0 | 1,037.8 | 1,018.7 | 1,128.7 | 1,106.3 | |||||||||||||||||||||
Other (b) | 48.3 | 38.2 | 83.2 | 76.6 | 82.1 | 101.6 | 137.5 | |||||||||||||||||||||
Total revenues | 3,502.9 | 3,112.4 | 6,676.0 | 5,933.7 | 5,638.4 | 5,596.9 | 5,797.7 | |||||||||||||||||||||
Expenses | ||||||||||||||||||||||||||||
Direct operating | 2,025.5 | 1,781.8 | 3,734.4 | 3,316.1 | 3,093.0 | 3,248.0 | 3,019.2 | |||||||||||||||||||||
Depreciation of revenue earning equipment (c) | 756.4 | 713.8 | 1,463.3 | 1,523.4 | 1,499.5 | 1,462.3 | 1,323.5 | |||||||||||||||||||||
Selling, general and administrative | 318.9 | 292.4 | 591.3 | 501.7 | 463.1 | 479.2 | 459.3 | |||||||||||||||||||||
Interest, net of interest income (d) | 212.0 | 182.7 | 384.4 | 355.0 | 366.4 | 404.7 | 414.8 | |||||||||||||||||||||
Total expenses | 3,312.9 | 2,970.7 | 6,173.4 | 5,696.2 | 5,422.0 | 5,594.2 | 5,216.8 | |||||||||||||||||||||
Income before income taxes and minority interest | 190.0 | 141.7 | 502.6 | 237.5 | 216.4 | 2.7 | 580.9 | |||||||||||||||||||||
(Provision) benefit for taxes on income (e) | (64.9 | ) | (49.5 | ) | (133.9 | ) | (78.9 | ) | (72.4 | ) | 20.6 | (222.5 | ) | |||||||||||||||
Minority interest | (5.0 | ) | — | (3.2 | ) | — | — | — | — | |||||||||||||||||||
Income before cumulative effect of change in accounting principle | 120.1 | 92.2 | 365.5 | 158.6 | 144.0 | 23.3 | 358.4 | |||||||||||||||||||||
Cumulative effect of change in accounting principle (f) | — | — | — | — | (294.0 | ) | — | — | ||||||||||||||||||||
Net income (loss) | $ | 120.1 | $ | 92.2 | $ | 365.5 | $ | 158.6 | $ | (150.0 | ) | $ | 23.3 | $ | 358.4 | |||||||||||||
Balance Sheet Data | ||||||||||||||||||||||||||||
Revenue earning equipment, net | ||||||||||||||||||||||||||||
Cars | $ | 9,271.5 | $ | 8,476.6 | $ | 7,597.2 | $ | 6,462.0 | $ | 5,998.3 | $ | 5,220.4 | $ | 5,186.2 | ||||||||||||||
Other equipment | 1,893.8 | 1,465.7 | 1,525.7 | 1,331.3 | 1,427.6 | 1,631.3 | 1,736.3 | |||||||||||||||||||||
Total assets | 15,752.0 | 14,691.5 | 14,096.4 | 12,579.0 | 11,128.9 | 10,158.4 | 10,620.0 | |||||||||||||||||||||
Total debt | 10,760.1 | 9,200.5 | 8,428.0 | 7,627.9 | 7,043.2 | 6,314.0 | 6,676.0 | |||||||||||||||||||||
Stockholder’s equity (g) | 1,499.1 | 2,285.4 | 2,670.2 | 2,225.4 | 1,921.9 | 1,984.4 | 1,984.1 | |||||||||||||||||||||
Selected Operating Data | ||||||||||||||||||||||||||||
Car Rental Operations: | ||||||||||||||||||||||||||||
Average number of owned cars operated during period | 426,100 | 393,500 | 413,000 | 373,500 | 369,500 | 373,800 | 359,300 | |||||||||||||||||||||
Transaction days (in thousands) | 58,431 | 54,352 | 115,246 | 102,281 | 99,240 | 104,015 | 103,279 | |||||||||||||||||||||
Equipment Rental Operations: | Average acquisition cost of rental equipment operated during period | $ | 2,460.6 | $ | 2,212.1 | $ | 2,305.7 | $ | 2,281.8 | $ | 2,327.6 | $ | 2,381.4 | $ | 2,157.4 |
(a) | We have restated our previously issued consolidated statements of operations for the quarters ended March 31, 2004 and June 30, 2004 and the years ended December 31, 2003, 2002, 2001 and 2000. We will be restating our previously issued consolidated statement of operations for the quarter ended September 30, 2004. An explanation of the Restatement appears in note 1A to the notes to our audited consolidated financial statements and our unaudited condensed consolidated financial statements included in this prospectus. The Restatement resulted in previously reported revenues and expenses being increased by equal amounts with no change in our previously reported income before income taxes and minority interest and net income (loss). | |
(b) | Includes fees and expense reimbursements from licensees and revenues from car leasing operations, telecommunications services through 2001 and claim management services. Certain foreign car leasing operations were transferred to an affiliated company on August 31, 2000. |
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(c) | For the six months ended June 30, 2005 and 2004 and the years ended December 31, 2004, 2003, 2002, 2001, and 2000, depreciation of revenue earning equipment includes net gains of $41.2 million, $25.4 million, $57.2 million, a net loss of $0.8 million, a net gain of $10.8 million, a net loss of $1.6 million and a net gain of $54.5 million, respectively, from the disposal of revenue earning equipment. | |
(d) | For the six months ended June 30, 2005 and 2004 and the years ended December 31, 2004, 2003, 2002, 2001 and 2000, interest income was $16.9 million, $9.0 million, $23.7 million, $17.9 million, $10.3 million, $9.0 million and $13.5 million, respectively. | |
(e) | Includes benefits of $46.6 million for the year ended December 31, 2004 relating to net adjustments to federal and foreign tax accruals and includes benefits of $30.2 million for the year ended December 31, 2001 from certain foreign tax credits. | |
(f) | Cumulative effect of change in accounting principle represents a non-cash charge for the year ended December 31, 2002, related to impairment of goodwill in our equipment rental business, recognized in accordance with the adoption of Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets.” | |
(g) | Includes the declaration and payment on June 10, 2005 of a dividend totaling $1.2 billion on our outstanding common stock to Ford in the form of an Intercompany Note. | |
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• | on an actual basis; | ||
• | on an as adjusted pre-offering basis, after giving effect to our issuance of the second Intercompany Note on , 2005 as a dividend to Ford and the issuance of the Cumulative Preferred Stock to Ford as described below; and | ||
• | on an as adjusted post-offering basis, after giving effect to the items just described, plus this offering, the offering of Equity Units, the repayment of the Intercompany Notes with the proceeds of those offerings and the redemption of the Cumulative Preferred Stock from Ford described below. | ||
As of June 30, 2005 | ||||||||||||
As adjusted | As adjusted | |||||||||||
Actual | pre-offerings | post-offerings | ||||||||||
(Unaudited) | ||||||||||||
(Dollars in thousands) | ||||||||||||
Cash, cash equivalents and short-term investments (1) | $ | 1,000,349 | $ | $ | ||||||||
Debt: | ||||||||||||
Notes payable, including commercial paper | $ | 1,483,075 | $ | $ | ||||||||
Interim Credit Facility (2) | 1,459,521 | |||||||||||
Intercompany Notes (3) | 1,185,000 | |||||||||||
Promissory senior notes (including current portion) | 5,198,142 | |||||||||||
Senior Notes due 2015(4) | — | |||||||||||
Foreign subsidiaries debt: | ||||||||||||
Short-term borrowings: | ||||||||||||
Banks | 869,186 | |||||||||||
Commercial Paper | 317,500 | |||||||||||
Other borrowings | 247,654 | |||||||||||
Total debt | 10,760,078 | |||||||||||
Stockholders’ equity: | ||||||||||||
Actual and as adjusted pre-offering: common stock, par value $0.01 per share; 3,000 shares authorized, 100 shares issued; as adjusted post-offering: Class A common stock and Class B common stock, each par value $0.01 per share; shares authorized, shares of Class A common stock and shares of Class B common stock issued (5) | — | |||||||||||
Cumulative Preferred Stock (6) | — | |||||||||||
Additional capital paid-in (6) | 983,132 | |||||||||||
Retained earnings (3) | 414,292 | |||||||||||
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As of June 30, 2005 | ||||||||||||
As adjusted | As adjusted | |||||||||||
Actual | pre-offerings | post-offerings | ||||||||||
(Unaudited) | ||||||||||||
(Dollars in thousands) | ||||||||||||
Accumulated other comprehensive income | 101,714 | |||||||||||
Total stockholders’ equity (7) | 1,499,138 | |||||||||||
Total capitalization | $ | 12,259,216 | $ | $ | ||||||||
(1) | As of June 30, 2005, our cash and equivalents totaled $703.9 million and our short-term investments totaled $296.4 million. | |
(2) | On May 26, 2005, we entered into the Interim Credit Facility with an aggregate availability of up to $3.0 billion with the joint book-running managers of this offering and/or their affiliates. The Interim Credit Facility will mature on November 23, 2005. See “Management’s discussion and analysis of financial condition and results of operations—Liquidity and capital resources—Credit facilities.” Amounts include borrowings by our Canadian subsidiary that have been fully and unconditionally guaranteed by The Hertz Corporation. | |
(3) | On June 10, 2005 and , 2005, we paid dividends of $1,185.0 million and $ , respectively, on our common stock to Ford in the form of the Intercompany Notes. We intend to repay the Intercompany Notes with the proceeds of this offering. | |
(4) | The senior notes are being issued as a component of the Equity Units being offered. | |
(5) | In connection with this offering, we will undertake a change to our capital structure so that all of the shares of common stock outstanding prior to this offering will be changed into and reclassified to shares of Class A common stock and shares of Class B common stock, all to be held by Ford, to be outstanding after this offering. Amounts do not include the Class A common stock issuable upon settlement of the purchase contracts included in the Equity Units being offered concurrently with this offering. | |
(6) | On , 2005, we issued to Ford shares of our Cumulative Preferred Stock, $0.01 par value per share, for $ . Our Cumulative Preferred Stock has a liquidation preference amount of $1,000,000 per share, accrues dividends at a rate of % per annum on the liquidation preference amount and is redeemable at our option in whole at any time or in part from time to time at a price equal to the liquidation preference amount plus accrued and unpaid dividends. Simultaneous with this offering, we will be redeeming these shares of Cumulative Preferred Stock from Ford for $ plus accrued and unpaid dividends, with cash on hand. | |
(7) | Reflects an adjustment of $ representing the present value of the contract adjustment payments payable in connection with the purchase contracts included in the Equity Units being offered. | |
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Six Months | |||||||||||||||||||||||||||||
Ended, or as of June 30, | Year Ended, or as of December 31, | ||||||||||||||||||||||||||||
2004 (a) | 2003 (a) | 2002 (a) | 2001 (a) | 2000 (a) | |||||||||||||||||||||||||
2005 | Restated | 2004 | Restated | Restated | Restated | Restated | |||||||||||||||||||||||
(Dollars in millions, unless otherwise noted) | |||||||||||||||||||||||||||||
Statement of Operations | |||||||||||||||||||||||||||||
Revenues | |||||||||||||||||||||||||||||
Car rental | $ | 2,824.5 | $ | 2,551.9 | $ | 5,430.8 | $ | 4,819.3 | $ | 4,537.6 | $ | 4,366.6 | $ | 4,553.9 | |||||||||||||||
Equipment rental | 630.1 | 522.3 | 1,162.0 | 1,037.8 | 1,018.7 | 1,128.7 | 1,106.3 | ||||||||||||||||||||||
Other (b) | 48.3 | 38.2 | 83.2 | 76.6 | 82.1 | 101.6 | 137.5 | ||||||||||||||||||||||
Total revenues | 3,502.9 | 3,112.4 | 6,676.0 | 5,933.7 | 5,638.4 | 5,596.9 | 5,797.7 | ||||||||||||||||||||||
Expenses | |||||||||||||||||||||||||||||
Direct operating | 2,025.5 | 1,781.8 | 3,734.4 | 3,316.1 | 3,093.0 | 3,248.0 | 3,019.2 | ||||||||||||||||||||||
Depreciation of revenue earning equipment (c) | 756.4 | 713.8 | 1,463.3 | 1,523.4 | 1,499.5 | 1,462.3 | 1,323.5 | ||||||||||||||||||||||
Selling, general and administrative | 318.9 | 292.4 | 591.3 | 501.7 | 463.1 | 479.2 | 459.3 | ||||||||||||||||||||||
Interest, net of interest income (d) | 212.0 | 182.7 | 384.4 | 355.0 | 366.4 | 404.7 | 414.8 | ||||||||||||||||||||||
Total expenses | 3,312.9 | 2,970.7 | 6,173.4 | 5,696.2 | 5,422.0 | 5,594.2 | 5,216.8 | ||||||||||||||||||||||
Income before income taxes and minority interest | 190.0 | 141.7 | 502.6 | 237.5 | 216.4 | 2.7 | 580.9 | ||||||||||||||||||||||
(Provision) benefit for taxes on income (e) | (64.9 | ) | (49.5 | ) | (133.9 | ) | (78.9 | ) | (72.4 | ) | 20.6 | (222.5 | ) | ||||||||||||||||
Minority interest | (5.0 | ) | — | (3.2 | ) | — | — | — | — | ||||||||||||||||||||
Income before cumulative effect of change in accounting principle | 120.1 | 92.2 | 365.5 | 158.6 | 144.0 | 23.3 | 358.4 | ||||||||||||||||||||||
Cumulative effect of change in accounting principle (f) | — | — | — | — | (294.0 | ) | — | — | |||||||||||||||||||||
Net income (loss) | $ | 120.1 | $ | 92.2 | $ | 365.5 | $ | 158.6 | $ | (150.0 | ) | $ | 23.3 | $ | 358.4 | ||||||||||||||
Pro forma net income (loss) per share (in dollars) (g) | $ | $ | |||||||||||||||||||||||||||
Balance Sheet Data | |||||||||||||||||||||||||||||
Revenue earning equipment, net | |||||||||||||||||||||||||||||
Cars | $ | 9,271.5 | $ | 8,476.6 | $ | 7,597.2 | $ | 6,462.0 | $ | 5,998.3 | $ | 5,220.4 | $ | 5,186.2 | |||||||||||||||
Other equipment | 1,893.8 | 1,465.7 | 1,525.7 | 1,331.3 | 1,427.6 | 1,631.3 | 1,736.3 | ||||||||||||||||||||||
Total assets | 15,752.0 | 14,691.5 | 14,096.4 | 12,579.0 | 11,128.9 | 10,158.4 | 10,620.0 | ||||||||||||||||||||||
Total debt | 10,760.1 | 9,200.5 | 8,428.0 | 7,627.9 | 7,043.2 | 6,314.0 | 6,676.0 | ||||||||||||||||||||||
Stockholder’s equity (h) | 1,499.1 | 2,285.4 | 2,670.2 | 2,225.4 | 1,921.9 | 1,984.4 | 1,984.1 | ||||||||||||||||||||||
Selected Operating Data | |||||||||||||||||||||||||||||
Car Rental Operations: | |||||||||||||||||||||||||||||
Average number of owned cars operated during period | 426,100 | 393,500 | 413,000 | 373,500 | 369,500 | 373,800 | 359,300 | ||||||||||||||||||||||
Transaction days (in thousands) | 58,431 | 54,352 | 115,246 | 102,281 | 99,240 | 104,015 | 103,279 | ||||||||||||||||||||||
Equipment Rental Operations: | |||||||||||||||||||||||||||||
Average acquisition cost of rental equipment operated during period | $ | 2,460.6 | $ | 2,212.1 | $ | 2,305.7 | $ | 2,281.8 | $ | 2,327.6 | $ | 2,381.4 | $ | 2,157.4 | |||||||||||||||
(a) | We have restated our previously issued consolidated statements of operations for the quarters ended March 31, 2004 and June 30, 2004 and the years ended December 31, 2003, 2002, 2001 and 2000. We will be restating our previously issued consolidated statement of operations for the quarter ended September 30, 2004. An explanation of the Restatement appears in note 1A to the notes to our audited consolidated financial statements and our unaudited condensed consolidated financial statements included in this prospectus. The Restatement resulted in previously reported revenues and expenses being increased by equal amounts with no change in our previously reported income before income taxes and minority interest and net income (loss). | |
(b) | Includes fees and expense reimbursements from licensees and revenues from car leasing operations, telecommunications services through 2001 and claim management services. Certain foreign car leasing operations were transferred to an affiliated company on August 31, 2000. | |
(c) | For the six months ended June 30, 2005 and 2004 and the years ended December 31, 2004, 2003, 2002, 2001 and 2000, depreciation of revenue earning equipment includes net gains of $41.2 million, $25.4 million, $57.2 million, a net loss of $0.8 million, a net gain of $10.8 million, a net loss of $1.6 million and a net gain of $54.5 million, respectively, from the disposal of revenue earning equipment. | |
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(d) | For the six months ended June 30, 2005 and 2004 and the years ended December 31, 2004, 2003, 2002, 2001 and 2000, interest income was $16.9 million, $9.0 million, $23.7 million, $17.9 million, $10.3 million, $9.0 million and $13.5 million, respectively. | |
(e) | Includes benefits of $46.6 million for the year ended December 31, 2004 relating to net adjustments to Federal and foreign tax accruals and includes benefits of $30.2 million for the year ended December 31, 2001 from certain foreign tax credits. | |
(f) | Cumulative effect of change in accounting principle represents a non-cash charge for the year ended December 31, 2002, related to impairment of goodwill in our equipment rental business, recognized in accordance with the adoption of Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets.” | |
(g) | Pro forma amounts are computed based on shares of Class A common stock and shares of Class B common stock outstanding after this offering applied to our historical net income (loss). Due to the changes in our capital structure, historical share and per share data will not be comparable to, or meaningful in the context of, future periods. See “Capitalization.” | |
(h) | Includes the declaration and payment on June 10, 2005 of a dividend totaling $1.2 billion on our outstanding common stock to Ford in the form of an Intercompany Note. | |
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financial condition and results of operations
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Six Months Ended | ||||||||||||||||||||||||
June 30, 2004 | Year Ended December 31, 2003 | Year Ended December 31, 2002 | ||||||||||||||||||||||
As Previously | As Previously | As | As Previously | As | ||||||||||||||||||||
Reported | As Restated | Reported | Restated | Reported | Restated | |||||||||||||||||||
Revenues: | ||||||||||||||||||||||||
Car rental | $ | 2,240,400 | $ | 2,551,919 | $ | 4,239,244 | $ | 4,819,255 | $ | 4,005,620 | $ | 4,537,607 | ||||||||||||
Equipment rental | 453,423 | 522,257 | 904,582 | 1,037,754 | 892,646 | 1,018,759 | ||||||||||||||||||
Other | 31,861 | 38,190 | 64,103 | 76,661 | 69,873 | 82,076 | ||||||||||||||||||
Total revenues | 2,725,684 | 3,112,366 | 5,207,929 | 5,933,670 | 4,968,139 | 5,638,442 | ||||||||||||||||||
Expenses: | ||||||||||||||||||||||||
Direct operating | 1,398,343 | 1,781,829 | 2,596,727 | 3,316,101 | 2,428,820 | 3,093,024 | ||||||||||||||||||
Depreciation of revenue earning equipment | 713,742 | 713,742 | 1,523,391 | 1,523,391 | 1,499,568 | 1,499,568 | ||||||||||||||||||
Selling, general and administrative | 289,173 | 292,369 | 495,276 | 501,643 | 456,986 | 463,085 | ||||||||||||||||||
Interest, net of interest income | 182,706 | 182,706 | 355,043 | 355,043 | 366,371 | 366,371 | ||||||||||||||||||
Total expenses | 2,583,964 | 2,970,646 | 4,970,437 | 5,696,178 | 4,751,745 | 5,422,048 | ||||||||||||||||||
Income before income taxes | 141,720 | 141,720 | 237,492 | 237,492 | 216,394 | 216,394 | ||||||||||||||||||
Provision for taxes on income | (49,537 | ) | (49,537 | ) | (78,877 | ) | (78,877 | ) | (72,346 | ) | (72,346 | ) | ||||||||||||
Income before cumulative effect of change in accounting principle | 92,183 | 92,183 | 158,615 | 158,615 | 144,048 | 144,048 | ||||||||||||||||||
Cumulative effect of change in accounting principle | — | — | — | — | (294,000 | ) | (294,000 | ) | ||||||||||||||||
Net income (loss) | $ | 92,183 | $ | 92,183 | $ | 158,615 | $ | 158,615 | $ | (149,952 | ) | $ | (149,952 | ) | ||||||||||
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• | Car rental revenues (revenues from all company-operated car 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 the sale of loss or collision damage waivers, liability insurance coverage and other products); | ||
• | Equipment rental revenues (revenues from all company-operated equipment rental operations, including amounts charged to customers for the fueling and delivery of equipment and sale of loss damage waivers); and | ||
• | Other revenues (fees and certain cost reimbursements from our licensees and revenues from our claim management services). |
• | Direct operating expenses (primarily wages and related benefits; commissions and concession fees paid to airport authorities, travel agents and others; facility, self-insurance and reservations costs; the cost of new equipment and consumables purchased for resale; and other costs relating to the operation and rental of the revenue earning equipment, such as damage, maintenance and fuel costs); | ||
• | Depreciation expense relating to revenue earning equipment (including net gains or losses on the disposal of such equipment). Revenue earning equipment includes cars and equipment; | ||
• | Selling, general and administrative expenses (including advertising); and | ||
• | Interest expense relating primarily to the funding of the acquisition of revenue earning equipment. |
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Percentage of Revenues | ||||||||||||||||||||
Six Months Ended | Year Ended | |||||||||||||||||||
June 30, | December 31, | |||||||||||||||||||
2004 | 2003 | 2002 | ||||||||||||||||||
2005 | Restated | 2004 | Restated | Restated | ||||||||||||||||
Revenues: | ||||||||||||||||||||
Car rental | 80.6 | % | 82.0 | % | 81.3 | % | 81.2 | % | 80.5 | % | ||||||||||
Equipment rental | 18.0 | 16.8 | 17.4 | 17.5 | 18.1 | |||||||||||||||
Other | 1.4 | 1.2 | 1.3 | 1.3 | 1.4 | |||||||||||||||
100.0 | 100.0 | 100.0 | 100.0 | 100.0 | ||||||||||||||||
Expenses: | ||||||||||||||||||||
Direct operating | 57.8 | 57.2 | 55.9 | 55.9 | 54.9 | |||||||||||||||
Depreciation of revenue earning equipment | 21.6 | 22.9 | 21.9 | 25.7 | 26.6 | |||||||||||||||
Selling, general and administrative | 9.1 | 9.4 | 8.9 | 8.4 | 8.2 | |||||||||||||||
Interest, net of interest income | 6.1 | 5.9 | 5.8 | 6.0 | 6.5 | |||||||||||||||
94.6 | 95.4 | 92.5 | 96.0 | 96.2 | ||||||||||||||||
Income before income taxes and minority interest | 5.4 | 4.6 | 7.5 | 4.0 | 3.8 | |||||||||||||||
Provision for taxes on income | (1.9 | ) | (1.6 | ) | (2.0 | ) | (1.3 | ) | (1.3 | ) | ||||||||||
Minority interest | (0.1 | ) | — | — | — | — | ||||||||||||||
Net income | 3.4 | % | 3.0 | % | 5.5 | % | 2.7 | % | 2.5 | % | ||||||||||
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• | The multi-year facilities were renegotiated effective July 1, 2005 and as of June 30, 2005 totaled $952.5 million in commitments with expirations as follows: $35.0 million on June 30, 2006, $108.0 million on June 30, 2007, $102.0 million on June 30, 2008, $81.0 million on June 30, 2009 and $626.5 million on June 30, 2010. The multi-year facilities that expire in 2010 have an evergreen feature, which provides for the automatic extension of the expiration date one year forward unless the bank provides timely notice. | ||
• | During 2005, the 364-day global committed credit facilities, which totaled $94.0 million as of June 16, 2005, were renegotiated and currently expire on June 15, 2006. Under the terms of the 364-day facilities, we are permitted to convert any amount outstanding prior to expiration into a two-year loan. |
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• | The other committed facilities totaled $178.9 million as of June 30, 2005 and expire at various times during 2005 and 2006. |
• | Effective September 18, 2002, as part of the ABS program, we transferred a portion of the 364-day global committed credit facilities to the ABS program. As part of the agreement to transfer these commitments, we have waived the right to transfer them back to the 364-day global committed credit facilities without the consent of the participating banks. As of June 30, 2005, $814.0 million was committed under this facility which expires in June 2006. | ||
• | In addition to the transfer of the 364-day commitments, we raised committed credit support through an ABS letter of credit from banks that participate in our multi-year global committed credit facilities, which totaled $215.0 million as of June 30, 2005 and expires in June 2007. In exchange for this credit support, we agreed to reduce the banks’ multi-year facility commitment by one half of the amount of their ABS letter of credit participation. |
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Payments Due by Period | ||||||||||||||||||||
Less than 1 | More than | |||||||||||||||||||
Contractual Obligations | Total | Year | 1-3 Years | 3-5 Years | 5 Years | |||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Debt(1) | $ | 8,435.8 | $ | 3,054.3 | $ | 1,795.7 | $ | 1,185.6 | $ | 2,400.2 | ||||||||||
Operating leases and concession agreements(2) | 1,270.2 | 259.7 | 389.0 | 198.2 | 423.3 | |||||||||||||||
Purchase obligations(3) | ||||||||||||||||||||
Ford and subsidiaries | 2,757.2 | 2,757.2 | — | — | — | |||||||||||||||
All others | 3,704.1 | 3,668.3 | 35.8 | — | — | |||||||||||||||
Total purchase obligations | 6,461.3 | 6,425.5 | 35.8 | — | — | |||||||||||||||
Total | $ | 16,167.3 | $ | 9,739.5 | $ | 2,220.5 | $ | 1,383.8 | $ | 2,823.5 | ||||||||||
(1) | Amounts represent debt obligations included in “Debt” in our consolidated balance sheet and include $2,444.1 million of commercial paper and other short-term borrowings, excluding obligations for interest and estimated payments under interest rate swap agreements. See note 3 to the notes to our audited consolidated financial statements included in this prospectus. |
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(2) | Includes obligations under various concession agreements, which provide for payment of rents and a percentage of revenue with a guaranteed minimum, and lease agreements for real estate, revenue earning equipment and office and computer equipment. Such obligations are reflected to the extent of their minimum non-cancelable terms. See note 10 to the notes to our audited consolidated financial statements included in this prospectus. | |
(3) | Purchase obligations represent agreements to purchase goods or services that are legally binding on us and that specify all significant terms, including fixed or minimum quantities; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Only the minimum non-cancelable portion of purchase agreements and related cancellation penalties are included as obligations. In the case of contracts, which state minimum quantities of goods or services, amounts reflect only the stipulated minimums; all other contracts reflect estimated amounts. Of the total purchase obligations as of December 31, 2004, $6,288.9 million represent fleet purchases where contracts have been signed or are pending with committed orders under the terms of such arrangements. We do not regard our employment relationships with our employees as “agreements to purchase services” for these purposes. |
Debt Ratings | ||||||
Long-Term | Short-Term | Outlook/Trend | ||||
Moody’s | Baa3 | Prime-3 | Developing outlook | |||
S&P | BBB- | A3 | CreditWatch – developing | |||
Fitch | BBB- | F2 | Rating watch – evolving | |||
DBRS | BBB | R-2 (middle)(1) | Under review – developing |
(1) | Relates to commercial paper of Hertz Canada Limited, one of our wholly owned subsidiaries. |
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Revenue Earning Equipment | Property and Equipment | |||||||||||||||||||
Capital | Disposal | Capital | Disposal | Net Capital | ||||||||||||||||
Expenditures | Proceeds | Expenditures | Proceeds | Expenditures | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
2005 | ||||||||||||||||||||
First Quarter | $ | 3,600.2 | $ | (2,307.4 | ) | $ | 81.3 | $ | (9.0 | ) | $ | 1,365.1 | ||||||||
Second Quarter | 4,040.4 | (2,304.3 | ) | 105.5 | (21.3 | ) | 1,820.3 | |||||||||||||
Total | $ | 7,640.6 | $ | (4,611.7 | ) | $ | 186.8 | $ | (30.3 | ) | $ | 3,185.4 | ||||||||
2004 | ||||||||||||||||||||
First Quarter | $ | 2,916.1 | $ | (1,860.7 | ) | $ | 61.2 | $ | (11.7 | ) | $ | 1,104.9 | ||||||||
Second Quarter | 3,804.1 | (1,921.2 | ) | 82.8 | (20.9 | ) | 1,944.8 | |||||||||||||
Third Quarter | 2,179.0 | (2,321.8 | ) | 74.6 | (19.4 | ) | (87.6 | ) | ||||||||||||
Fourth Quarter | 2,410.9 | (2,637.2 | ) | 67.8 | (7.3 | ) | (165.8 | ) | ||||||||||||
Total Year | $ | 11,310.1 | $ | (8,740.9 | ) | $ | 286.4 | $ | (59.3 | ) | $ | 2,796.3 | ||||||||
2003 | ||||||||||||||||||||
First Quarter | $ | 2,951.4 | $ | (2,557.3 | ) | $ | 51.3 | $ | (9.0 | ) | $ | 436.4 | ||||||||
Second Quarter | 2,338.3 | (1,153.7 | ) | 56.6 | (23.6 | ) | 1,217.6 | |||||||||||||
Third Quarter | 1,611.5 | (1,656.2 | ) | 54.4 | (13.1 | ) | (3.4 | ) | ||||||||||||
Fourth Quarter | 2,535.4 | (2,507.2 | ) | 64.4 | (8.9 | ) | 83.7 | |||||||||||||
Total Year | $ | 9,436.6 | $ | (7,874.4 | ) | $ | 226.7 | $ | (54.6 | ) | $ | 1,734.3 | ||||||||
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(1) | Operating income (loss) represents pre-tax income (loss) before interest expense and minority interest. The above chart excludes an operating loss of $15.5 million attributable to our Corporate and Other activities. |
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U.S. | International | ||||||||||||||||
Type of Rental | Revenues | Transactions | Revenues | Transactions | |||||||||||||
By Customer: | |||||||||||||||||
Business | 47 | % | 50 | % | 46 | % | 51 | % | |||||||||
Leisure | 53 | 50 | 54 | 49 | |||||||||||||
100 | % | 100 | % | 100 | % | 100 | % | ||||||||||
By Location: | |||||||||||||||||
Airport | 81 | % | 82 | % | 56 | % | 57 | % | |||||||||
Off-airport | 19 | 18 | 44 | 43 | |||||||||||||
100 | % | 100 | % | 100 | % | 100 | % | ||||||||||
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Brand Name | 2004 | 2003 | 2002 | 2001 | 2000 | |||||||||||||||
Hertz | 29.6 | % | 29.0 | % | 29.2 | % | 29.5 | % | 28.7 | % | ||||||||||
Avis | 20.2 | 21.2 | 22.3 | 21.6 | 22.3 | |||||||||||||||
Budget | 10.2 | 10.4 | 10.8 | 11.8 | 11.8 | |||||||||||||||
Cendant Brands(1) | 30.4 | 31.6 | 33.1 | 33.4 | 34.1 | |||||||||||||||
National/Alamo (Vanguard Brands)(2) | 19.8 | 20.8 | 21.8 | 25.4 | 26.0 | |||||||||||||||
Dollar | 7.7 | 7.4 | 7.2 | 7.1 | 6.9 | |||||||||||||||
Thrifty | 4.5 | 4.4 | 3.2 | 1.8 | 1.9 | |||||||||||||||
DTG Brands | 12.2 | 11.8 | 10.4 | 8.9 | 8.8 | |||||||||||||||
Enterprise | 6.0 | 5.0 | 3.9 | 2.0 | 1.4 | |||||||||||||||
Other | 2.0 | 1.8 | 1.6 | 0.8 | 1.0 | |||||||||||||||
Total | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||
(1) | Cendant acquired all of the outstanding shares of Avis Group Holdings, Inc. on March 1, 2001 and acquired substantially all of the domestic assets of the vehicle rental business of Budget Group, Inc. on November 22, 2002. | |
(2) | National and Alamo have been owned by Vanguard since October 2003. |
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Risk management |
• | legal liability arising from the operation of our vehicles (vehicle liability); | ||
• | legal liability to members of the public from causes other than the operation of our vehicles (general liability); and | ||
• | risk of property damage. |
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Number of | ||||||||||
years | ||||||||||
employed | ||||||||||
Name | Age | by us | Position | |||||||
Craig R. Koch | 58 | 34 | Chairman of the Board and Chief Executive Officer and Director | |||||||
Paul J. Siracusa | 60 | 36 | Executive Vice President and Chief Financial Officer and Director | |||||||
Joseph R. Nothwang | 58 | 29 | Executive Vice President and President, Vehicle Rental and Leasing, The Americas and Pacific | |||||||
Brian J. Kennedy | 63 | 21 | Executive Vice President, Sales & Marketing | |||||||
Gerald A. Plescia | 49 | 25 | Executive Vice President and President, HERC | |||||||
Michel Taride | 49 | 19 | Executive Vice President and President, Hertz Europe Limited | |||||||
Harold E. Rolfe | 47 | 6 | Senior Vice President, General Counsel & Secretary | |||||||
Irwin Pollack | 49 | 26 | Senior Vice President, Employee Relations | |||||||
Charles L. Shafer | 61 | 39 | Senior Vice President, Quality Assurance & Administration | |||||||
Claude B. Burgess III | 50 | 25 | Senior Vice President, Technology & e-Business | |||||||
Richard J. Foti | 59 | 26 | Controller | |||||||
Robert H. Rillings | 64 | 43 | Treasurer | |||||||
Donat R. Leclair | 53 | - | Director | |||||||
Greg C. Smith | 53 | - | Director | |||||||
Michael E. Bannister | 55 | - | Director |
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• | to monitor our financial reporting process and internal control system; | ||
• | to appoint and, if necessary, replace our independent registered public accountants from time to time, determine their compensation and other terms of engagement and oversee their work; | ||
• | to oversee the performance of our internal audit function; | ||
• | to establish procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls, or auditing matters and the confidential anonymous submission by employees of concerns regarding questionable accounting or auditing matters; and | ||
• | to oversee our compliance with legal, ethical and regulatory matters. |
• | provide oversight on the development and implementation of the compensation policies, strategies, plans and programs for our key employees and outside directors and disclosure relating to these matters; and |
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• | to review and approve the compensation of our chief executive officer and our other executive officers. | ||
Long-Term Compensation | ||||||||||||||||||||||||||||||
Annual Compensation (1) | Awards | Payouts | ||||||||||||||||||||||||||||
Restricted | Securities | |||||||||||||||||||||||||||||
Other Annual | Stock | Underlying | LTIP | All Other | ||||||||||||||||||||||||||
Name and Principal | Salary | Bonus | Compensation | Award(s) | Options | Payouts | Compensation | |||||||||||||||||||||||
Position | Year | ($) (2) | ($) (3) | ($) (4)(5) | ($) (6) | # (7) | ($) (8) | ($) (9) | ||||||||||||||||||||||
Craig R. Koch | 2004 | 910,000 | 2,202,200 | 104,754 | — | 161,000 | 1,600,000 | 6,500 | ||||||||||||||||||||||
Chairman of the Board and CEO | 2003 | 893,846 | 946,400 | 109,911 | — | 161,000 | 578,400 | 6,000 | ||||||||||||||||||||||
2002 | 850,000 | 1,602,250 | 97,085 | — | 161,000 | 900,000 | 5,500 | |||||||||||||||||||||||
Joseph R. Nothwang | 2004 | 515,000 | 845,115 | — | — | 103,000 | 800,000 | 6,500 | ||||||||||||||||||||||
Executive Vice President | 2003 | 502,308 | 392,430 | 6,000 | — | 103,000 | 289,200 | 6,000 | ||||||||||||||||||||||
2002 | 485,000 | 760,601 | 9,211 | — | 103,000 | 500,000 | 5,500 | |||||||||||||||||||||||
Paul J. Siracusa | 2004 | 454,231 | 804,650 | 2,100 | — | 64,000 | 600,000 | 6,500 | ||||||||||||||||||||||
Executive Vice President and | 2003 | 444,519 | 323,960 | 1,800 | — | 64,000 | 192,800 | 6,000 | ||||||||||||||||||||||
Chief Financial Officer | 2002 | 420,000 | 554,190 | 3,150 | — | 64,000 | 360,000 | 5,500 | ||||||||||||||||||||||
Michel Taride | 2004 | 475,254 | 757,460 | 163,930 | — | 52,000 | 240,000 | — | ||||||||||||||||||||||
Executive Vice President | 2003 | 410,000 | 367,032 | 225,001 | — | 52,000 | 57,840 | — | ||||||||||||||||||||||
2002 | 314,190 | 226,914 | 102,051 | — | 12,000 | 60,000 | — | |||||||||||||||||||||||
Gerald Plescia | 2004 | 373,077 | 613,613 | — | — | 45,000 | 400,000 | 6,500 | ||||||||||||||||||||||
Executive Vice President | 2003 | 365,000 | 148,044 | 4,287 | — | 45,000 | 115,680 | 6,000 | ||||||||||||||||||||||
2002 | 341,923 | 268,330 | 2,391 | — | 45,000 | 240,000 | 5,500 |
(1) | Mr. Taride’s annual compensation is paid in pounds sterling which have been converted at an average exchange rate for each year (2002 — £1.00 = $1.5033; 2003 — £1.00 = $1.6400; 2004 — £1.00 = $1.8279). | |
(2) | Amounts included consist of salary payments for the respective year and amounts deferred pursuant to section 401(k) of the Internal Revenue Code of 1986, as amended, or the Code. | |
(3) | Includes bonuses earned for the respective year and paid in the subsequent year. |
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(4) | For 2002, 2003 and 2004, amounts paid to Mr. Koch include personal use of our aircraft in the amounts of $73,365, $94,438 and $92,473, respectively, and tax gross-up payments related to personal use of our aircraft in the amounts of $8,189, $15,473 and $9,531, respectively. For information regarding our security policy and executive use of our aircraft, See “Security policy and valuing the use of our aircraft.” | |
(5) | Country club memberships were reimbursed to Mr. Koch ($13,031 in 2002) and Mr. Nothwang ($5,650 in 2002 and $6,000 in 2003). Amounts reimbursed for financial advice under a financial assistance program for 2002, 2003 and 2004 were as follows: Mr. Koch — $2,500, $0, $2,750; Mr. Nothwang — $3,561, $0, $0; Mr. Siracusa — $3,150, $1,800, $2,100; and Mr. Plescia - - $2,391, $4,287, $0. Amounts paid to Mr. Taride include $33,824 in housing allowances, $39,159 for housing benefits, $25,189 for tax gross-up payments related to housing benefits and $3,879 in fuel allowances for 2002; $118,080 for tax equalization, $62,059 for housing benefits, $40,631 for tax gross-up payments related to housing benefits and $4,231 in fuel allowances for 2003; $43,870 for tax equalization, $68,418 for housing benefits, $46,926 for tax gross-up payments related to housing benefits and $4,716 in fuel allowances for 2004. | |
(6) | We did not grant or issue any restricted stock during the years covered by this table. | |
(7) | See “ — Stock options.” | |
(8) | Includes long term incentive bonuses earned for the respective year and paid in the subsequent year. | |
(9) | Represents the amounts contributed by us to the Income Savings Plan for the respective year. Mr. Taride does not participate in this plan. |
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Individual Grants | ||||||||||||||||||||
Number of | % of Total | |||||||||||||||||||
Securities | Options | |||||||||||||||||||
Underlying | Granted to | Exercise or | Grant Date | |||||||||||||||||
Options | Employees in | Base Price | Expiration | Present | ||||||||||||||||
Name | Granted (#) | Fiscal Year (3) | ($/Sh) | Date(4) | Value(2)(4) | |||||||||||||||
Craig R. Koch | 161,000 | 10.8 | % | 13.26 | 3/11/14 | $ | 743,820 | |||||||||||||
Joseph R. Nothwang | 103,000 | 6.9 | % | 13.26 | 3/11/14 | 475,860 | ||||||||||||||
Paul J. Siracusa | 64,000 | 4.3 | % | 13.26 | 3/11/14 | 295,680 | ||||||||||||||
Michel Taride | 52,000 | 3.5 | % | 13.26 | 3/11/14 | 240,240 | ||||||||||||||
Gerald Plescia | 45,000 | 3.0 | % | 13.26 | 3/11/14 | 207,900 |
(1) | The exercise price of the stock options is the average of the high and low selling prices of Ford’s common stock on the New York Stock Exchange on the grant date. In general, 33% of a stock option grant can be exercised one year after the grant date, 66% after two years, and 100% after three years. Any unexercised options expire after ten years. | |
If a grantee retires, becomes disabled, or dies, his or her options continue to be exercisable up to the normal expiration date. In most other instances of employment termination, all options generally end upon termination of employment or are exercisable for a specified period. | ||
Options are subject to certain conditions, including not engaging in competitive activity. Options generally cannot be transferred except through inheritance. | ||
(2) | These values were determined using the Black-Scholes methodology and the assumptions described in note 7 to the notes to our audited consolidated financial statements included in this prospectus. The ultimate value of the options, if any, will depend on the future value of the Ford common stock and the grantee’s investment decisions, neither of which can be accurately predicted. | |
(3) | Represents percentage of options granted (1,490,500) to all of Hertz participating employees for the year ended December 31, 2004. | |
(4) | Under the 1998 Plan, once we cease to be a subsidiary of Ford, these options will expire on the fifth anniversary of our ceasing to be a subsidiary. The expiration date and grant date present value shown above have been determined without regard to this. |
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and Fiscal Year-End Option Values
Number of Securities | ||||||||||||||||
Underlying Unexercised | Value of Unexercised In- | |||||||||||||||
Options at FY-End | the-Money Options at | |||||||||||||||
Shares | (#) | FY-End($)(1) | ||||||||||||||
Acquired on | Value Realized | Exercisable/ | Exercisable/ | |||||||||||||
Name | Exercise(#) | ($) | Unexercisable | Unexercisable | ||||||||||||
Craig R. Koch | — | — | 640,866/323,610 | 376,692/986,978 | ||||||||||||
Joseph R. Nothwang | — | — | 443,507/207,030 | 240,989/631,421 | ||||||||||||
Paul J. Siracusa | — | — | 282,063/128,640 | 149,741/392,339 | ||||||||||||
Michel Taride | — | — | 67,375/90,920 | 121,664/318,776 | ||||||||||||
Gerald Plescia | — | — | 188,989/90,450 | 105,287/275,864 |
(1) | These year-end values represent the difference between the fair market value of Ford common stock subject to options (based on the Ford common stock’s closing price of $14.64 on the New York Stock Exchange on December 31, 2004) and the exercise prices of the options. “In-the-money” means that the fair market value of the stock is greater than the option’s exercise price on the valuation date. |
Performance | ||||||||||||||||||||
Number of | or Other | |||||||||||||||||||
Shares, Units | Period Until | Estimated Future Payouts under | ||||||||||||||||||
or Other | Maturation | Non-Stock Price-Based Plans | ||||||||||||||||||
Name | Rights(#) | or Payout (1) | Threshold | Target | Maximum | |||||||||||||||
Craig R. Koch | — | — | $ | 0 | $ | 800,000 | $ | 1,600,000 | ||||||||||||
Joseph R. Nothwang | — | — | 0 | 400,000 | 800,000 | |||||||||||||||
Paul J. Siracusa | — | — | 0 | 300,000 | 600,000 | |||||||||||||||
Michel Taride | — | — | 0 | 120,000 | 240,000 | |||||||||||||||
Gerald Plescia | — | — | 0 | 200,000 | 400,000 |
(1) | Target and maximum award grants in place for performance year 2004 are included in the above table for the named executive officers. Payouts for performance year 2004 are included in the Summary compensation table. |
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• | a lump sum cash payment reflecting accrued but unpaid compensation equal to the sum of (i) the executive’s annual base salary earned but not paid through the date of termination, the amount of such salary attributable to vacation earned but not taken and unreimbursed expenses incurred by the executive through the date of termination, and (ii) (x) one-twelfth of the average of the annual bonuses payable to the executive, including any amounts deferred at the election of the executive, with respect to the three calendar years preceding the change in control, or (y) in the event the executive has not been eligible to earn an annual bonus from us in his position as a senior executive officer for three full calendar years preceding the change in control, one-twelfth of 100% of the target annual bonus the executive is eligible to earn in respect of the fiscal year in which the change in control occurs, or if no target annual bonus has yet been established for such fiscal year, 100% of the target annual bonus for the prior fiscal year (z) in each case multiplied by the number of full and partial months from the beginning of the calendar year during which the termination occurs; | ||
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• | a lump sum cash payment equal to a multiple, as set forth below for each executive, of the sum of (i) the executive’s annual base salary in effect immediately prior to the date of termination and (ii) (x) the average of the annual bonuses payable to the executive, including any amounts deferred at the election of the executive, with respect to the three calendar years preceding the change in control or (y) in the event the executive has not been eligible to earn an annual bonus from us in his position as a senior executive officer for three full calendar years preceding the change in control, 100% of the target annual bonus the executive is eligible to earn in respect of the fiscal year in which the change in control occurs, or if no target annual bonus has yet been established for such fiscal year, 100% of the target annual bonus for the prior fiscal year; | ||
• | receipt of future payouts in accordance with any Long Term Incentive Plan in which the executive participated immediately prior to the date of termination, based on the performance results at the end of each performance period in respect of which there was a Long Term Incentive Plan grant in place for the executive as of the date of termination, as if the executive had retired in a company-approved retirement; | ||
• | (i) maintenance, without any change in terms that is adverse to the executive, of any retirement plan of, or provided by us in which the executive, immediately prior to the date of termination, participated or would, upon normal retirement (as such term is defined in the applicable retirement plan), be entitled to participate, and (ii) credit of an additional number of years, as set forth below, to the executive’s years of age and “Years of Service” for all purposes under our SERP II (which is described below under “ – Retirement Plans”); | ||
• | continuation of (i) all health benefits with respect to the executive (and, to the extent applicable, the executive’s dependents) for an additional period of years, as set forth below, following the date of termination (with health benefits thereafter being available, but at the executive’s expense, until the earlier of (x) the date the executive becomes reemployed and is (along with the executive’s applicable dependents) covered, without qualification for preexisting conditions, under another employer’s health plan and (y) the date on which the executive and the executive’s spouse become eligible for coverage under any other comprehensive health benefit plan including Medicare), and (ii) all life insurance benefits, until the expiration of a set number of years, as set forth below, from the date of termination, provided, that any coverage for life insurance benefits shall cease on the date the executive becomes reemployed and receives at least an equal amount of life insurance coverage under another employer’s benefit plan; | ||
• | participation in our postretirement assigned car benefit plan following termination without change to the terms and conditions of our postretirement assigned car benefit plan that is adverse to the executive; and | ||
• | within the twelve months following the termination date, outplacement assistance up to maximum of $25,000 paid directly to an outplacement service provider. |
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• | a percentage of final average compensation (using the highest five consecutive of the last ten years of covered compensation); | ||
• | years of credited service up to July 1, 1987; and | ||
• | the accrued value of a cash account after July 1, 1987 which gets credited each year at a predetermined percentage of compensation. |
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Final | Years of Credited Service | |||||||||||||||||||||||
Average | ||||||||||||||||||||||||
Compensation | 20 | 25 | 30 | 35 | 40 | |||||||||||||||||||
$ | 200,000 | $ | 62,800 | $ | 78,500 | $ | 94,200 | $ | 110,000 | $ | 125,700 | |||||||||||||
400,000 | 126,800 | 158,500 | 190,200 | 222,000 | 253,700 | |||||||||||||||||||
600,000 | 190,800 | 238,500 | 286,200 | 334,000 | 381,700 | |||||||||||||||||||
800,000 | 254,800 | 318,500 | 382,200 | 446,000 | 509,700 | |||||||||||||||||||
1,000,000 | 318,800 | 398,500 | 478,200 | 558,000 | 637,700 | |||||||||||||||||||
1,200,000 | 382,800 | 478,500 | 574,200 | 670,000 | 765,700 | |||||||||||||||||||
1,400,000 | 446,800 | 558,500 | 670,200 | 782,000 | 893,700 | |||||||||||||||||||
1,600,000 | 510,800 | 638,500 | 766,200 | 894,000 | 1,021,700 | |||||||||||||||||||
1,800,000 | 574,800 | 718,500 | 862,200 | 1,006,000 | 1,149,700 | |||||||||||||||||||
2,000,000 | 638,800 | 798,500 | 958,200 | 1,118,000 | 1,277,700 |
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Our Income Savings Plan, or the “Hertz Savings Plan,” was established on August 30, 1985. Prior to that date, qualified employees participated in the RCA Income Savings Plan. The assets and liabilities maintained under that plan were transferred as of September 1, 1985 to the Hertz Savings Plan. | ||
The Hertz Savings Plan is a defined contribution plan and is available to certain full-time and part-time employees who have been credited with at least 1,000 hours of service during any calendar year. Employees covered by a collective bargaining agreement are not eligible unless their collective bargaining agreement makes the Hertz Savings Plan applicable to them. | ||
Effective June 3, 2002, eligible employees may generally elect to contribute 1% to 30% of their annual eligible pretax compensation. Contributions are subject to certain limitations by Internal Revenue regulations. We contribute 50% of the first 6% of the employee’s contribution for a maximum matched contribution of 3% of the employee’s eligible compensation. | ||
Our employees are immediately fully vested in their contributions and related earnings. Effective January 1, 2002, our contributions made to employees after that date become fully vested after the employee completes three or more years of service. Prior to January 1, 2002, employees became fully vested in the amount contributed by us and related earnings after completing five years of service. | ||
Each plan member determines to which fund, or funds, their contributions will be applied. The funds include a variety of equity and fixed income funds. |
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• | The multi-year facilities were renegotiated effective July 1, 2005 and as of June 30, 2005 totaled $952.5 million in commitments with expirations as follows: $35.0 million on June 30, 2006, $108.0 million on June 30, 2007, $102.0 million on June 30, 2008, $81.0 million on June 30, 2009 and $626.5 million on June 30, 2010. The multi-year facilities that expire in 2010 have an evergreen feature, which provides for the automatic extension of the expiration date one year forward unless the bank provides timely notice. | ||
• | During 2005, the 364-day global committed credit facilities, which totaled $94.0 million as of June 16, 2005, were renegotiated and currently expire on June 15, 2006. Under the terms of the 364-day facilities, we are permitted to convert any amount outstanding prior to expiration into a two-year loan. | ||
• | The other committed facilities totaled $178.9 million as of June 30, 2005 and expire at various times during 2005 and 2006. |
• | Effective September 18, 2002, as part of the ABS program, we transferred a portion of the 364-day global committed credit facilities to the ABS program. As part of the agreement to transfer these commitments, we have waived the right to transfer them back to the 364-day global committed credit facilities without the consent of the participating banks. As of June 30, 2005, $814.0 million was committed under this facility which expires in June 2006. | ||
• | In addition to the transfer of the 364-day commitments, we raised committed credit support through an ABS letter of credit from banks that participate in our multi-year global committed credit facilities, which totaled $215.0 million as of June 30, 2005 and expires in June 2007. In exchange for this credit support, we agreed to reduce the banks’ multi-year facility commitment by one half of the amount of their ABS letter of credit participation. |
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(i) | any security interest in favor of us or a Restricted Subsidiary; | ||
(ii) | certain pre-existing security interests; |
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(iii) | security interests existing on property at the time it is acquired by us or a Restricted Subsidiary, provided, such security interest is limited to all or part of the property so acquired; | ||
(iv) | (a) any security interest existing on the property of or on the outstanding shares or indebtedness of a corporation at the time such corporation shall become a Restricted Subsidiary or (b) subject to the provisions referred to above under “—Limitations on mergers,” any security interest on property of a corporation existing at the time such corporation is merged into or consolidated with us or a Restricted Subsidiary or at the time of a sale, lease or other disposition of the properties of a corporation as an entirety or substantially as an entirety to us or a Restricted Subsidiary (provided, in each such case, that such security interest does not extend to any property owned prior to such transaction by us or any Restricted Subsidiary which was a Restricted Subsidiary prior to such transaction); | ||
(v) | mechanics’, materialmen’s, carriers’ or other like liens arising in the ordinary course of business; | ||
(vi) | certain tax liens or assessments, and certain judgment liens; | ||
(vii) | certain security interests in favor of the United States of America or any state or any agency of the United States of America; | ||
(viii) | security interests on certain business equipment; | ||
(ix) | in the case of property (other than rental equipment) acquired after certain dates by us or a Restricted Subsidiary, any security interest which secures an amount not in excess of the lesser of the purchase price or fair value of such property at the time of acquisition, provided that such security interest is limited to the property so acquired; | ||
(x) | security interests on properties financed through tax-exempt municipal obligations, provided that the security interest is limited to the property so financed; and | ||
(xi) | any refunding, renewal, extension or placement (or successive refundings, renewals, extensions or replacements), in whole or in part, of any security interest referred to in the preceding clauses (i) through (x), provided that the principal amount of indebtedness secured in such refunding, renewal, extension or replacement does not exceed that secured at the time by such security interest and that such refunding, renewal, extension or replacement is limited to all or part of the same property subject to the security interest being refunded, renewed, extended or replaced. |
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Holders of Class A common stock and Class B common stock will be entitled to share equally on a per share basis in all dividends if, as and when dividends are declared from time to time by our Board of Directors out of funds legally available for that purpose, after payment of dividends required to be paid on outstanding preferred stock, as described below, if any. Dividends consisting of shares of Class A common stock and Class B common stock may be paid only as follows: (i) shares of Class A common stock may be paid only to holders of shares of Class A common stock, and shares of Class B common stock may be paid only to holders of Class B common stock; and (ii) shares shall be paid proportionally with respect to each outstanding share of Class A and Class B common stock. |
Our dividend policy following this offering is described under “Dividend policy.” |
We may not subdivide or combine shares of either class of common stock without at the same time proportionally subdividing or combining shares of the other class. |
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(i) | a corporate opportunity offered to any person who is an officer of the company, and who is also a director but not an officer of Ford, shall belong to us; | ||
(ii) | a corporate opportunity offered to any person who is a director but not an officer of the company, and who is also a director or officer of Ford, shall belong to us if such opportunity is expressly offered to such person in writing solely in his or her capacity as a director of the company, and otherwise shall belong to Ford; and | ||
(iii) | a corporate opportunity offered to any person who is an officer of both the company and Ford shall belong to us if such opportunity is expressly offered to such person in writing solely in his or her capacity as an officer of the company, and otherwise shall belong to Ford. |
(i) | A director of the company who is Chairman of the Board of Directors of the company or of a committee thereof shall not be deemed to be an officer of the company by reason of holding such position (without regard to whether such position is deemed an officer of the company under the by-laws of the company), unless such person is a full-time employee of the company; and | ||
(ii) | (A) The term “company” shall mean us and all corporations, partnerships, joint ventures, associations and other entities in which we beneficially own (directly or indirectly) 50% or more of the outstanding voting stock, voting power, partnership interests or similar voting interests, and (B) the term “Ford” shall mean Ford and all corporations, partnerships, joint ventures, associations and other entities (other than us, defined in accordance with clause (A) of this section (ii)) in which Ford beneficially owns (directly or indirectly) 50% or more of the outstanding voting stock, voting power, partnership interests or similar voting interests. |
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• | prior to such time, the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder; | ||
• | upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced (excluding certain shares); or | ||
• | on or subsequent to such time, the business combination is approved by the board of directors of the corporation and by the affirmative vote of at least 66 2/3% of the outstanding voting stock which is not owned by the interested stockholder. Except as specified in Section 203 of the Delaware Law, an “interested stockholder” is defined to include (x) any person that is the owner of 15% or more of the outstanding voting stock of the corporation, or is an affiliate or associate of the corporation and was the owner of 15% or more of the outstanding voting stock of the corporation, at any time within three years immediately prior to the relevant date and (y) the affiliates and associates of any such person. |
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• | a contract to purchase shares of our Class A common stock, which we refer to as the stock purchase contracts; and | ||
• | a 1/40, or 2.5%, undivided beneficial ownership interest in $1,000 principal amount of our % senior notes, which initially mature on November 16, 2015, subject to adjustment, which we refer to as the notes. | ||
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• | if the applicable market value of our Class A common stock is equal to or greater than $ , which we refer to as the threshold appreciation price, the settlement rate will be shares of our Class A common stock, which is the number of shares of our Class A common stock equal to $25 divided by the threshold appreciation price; | ||
• | if the applicable market value of our Class A common stock is less than the threshold appreciation price but greater than $ , which we refer to as the reference price, the settlement rate will be a number of shares of our Class A common stock equal to $25 divided by the applicable market value; and | ||
• | if the applicable market value of our Class A common stock is less than or equal to the reference price, the settlement rate will be shares of our Class A common stock, which is the number of shares of our Class A common stock equal to $25 divided by the reference price. | ||
• | a holder of Corporate Units or Treasury Units has settled the related purchase contracts prior to the purchase contract settlement date through the early delivery of cash to the purchase contract agent; | ||
• | a holder of Corporate Units that include applicable ownership interests in notes has settled the related purchase contracts with separate cash on the fifth business day immediately preceding a purchase contract settlement date; or | ||
• | a termination event has occurred, | ||
• | in the case of Corporate Units where the treasury portfolio has replaced the notes underlying the Corporate Units because of a tax event redemption, proceeds equal to the stated amount of $25 per Corporate Unit when paid at maturity of the appropriate applicable ownership interests of the treasury portfolio will automatically be applied to satisfy in full the holder’s obligation to purchase common stock under the related purchase contracts; | ||
• | in the case of Corporate Units where there has been a successful remarketing of the notes on the remarketing date, the portion of the proceeds from the remarketing equal to the principal amount of the notes remarketed will automatically be applied to satisfy in full the holder’s obligation to purchase shares of our Class A common stock under the related purchase contracts; | ||
• | in the case of Corporate Units where there has been a failed final remarketing of the notes, holders of all Corporate Units will be deemed to have automatically exercised their right to put their notes to us on the purchase contract settlement date at a put price equal to $1,000 per senior note ($25 per applicable ownership interest) plus accrued and unpaid interest in satisfaction of such holder’s obligations to us under the related purchase contracts, thereby satisfying such obligations in full, unless, prior to 11:00 a.m., New York City time, on the second business day immediately preceding the purchase contract settlement date, such holder provides a written notice of an intention to settle the related purchase contract with separate cash and on or prior to the business day immediately preceding the purchase contract settlement date delivers to the collateral agent the purchase price in cash; and | ||
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• | in the case of Treasury Units, the principal amount of the related treasury securities, when paid at maturity, will automatically be applied to satisfy in full the holder’s obligation to purchase common stock under the related purchase contracts. | ||
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• | the interest rate on the notes will not be reset; | ||
• | the remarketing agents will thereafter attempt to establish a new reset rate meeting the requirements described above and remarket the notes on subsequent remarketing dates, which will be the third business day immediately preceding February 16, 2009, May 16, 2009, August 16, 2009 and November 16, 2009; | ||
• | the proceeds received upon maturity of the treasury securities pledged as collateral for any Treasury Units will be used to settle the applicable purchase contracts, and any remaining cash proceeds will be remitted to the holders of the Treasury Units, and any cash pledged by holders of Corporate Units choosing not to participate in the remarketing will also be used to settle the applicable purchase contracts and the purchase contract settlement date will not be further deferred with respect to these purchase contracts, regardless of whether the remarketing attempt at that time is successful; and | ||
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• | the purchase contract settlement date for all remaining purchase contract will be deferred until the next remarketing settlement date. | ||
• | The interest rate on the notes will not be reset and the notes will continue to bear cash distributions at the initial rate of % per year, payable quarterly in arrears. | ||
• | Holders of all notes will have the right to put their notes to us at a put price equal to $1,000 per senior note ($25 per applicable ownership interest) plus accrued and unpaid interest. | ||
• | Holders of Corporate Units will be deemed to have automatically exercised this put right with respect to the notes underlying such Corporate Units unless, prior to 11:00 a.m., New York City time, on the second business day immediately preceding the purchase contract settlement date, such holder provides a written notice of an intention to settle the related purchase contract with separate cash and on or prior to the business day immediately preceding the purchase contract settlement date delivers to the collateral agent the purchase price in cash. Unless a Corporate Unit holder has settled the related purchase contracts with separate cash on or prior to the purchase contract settlement date, such holder will be deemed to have elected to apply a portion of the proceeds of the put price equal to the principal amount of the notes underlying such Corporate Units against such holder’s obligations to us under the related purchase contracts, thereby satisfying such obligations in full, and we will deliver to such holder our Class A common stock pursuant to the related purchase contracts. | ||
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estate tax consequences to non-U.S. holders
• | an individual citizen or resident of the United States; | ||
• | a corporation (or any other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia; | ||
• | an estate the income of which is subject to U.S. federal income taxation regardless of its source; or | ||
• | a trust if it (1) is subject to the primary supervision of a court within the United States and one or more U.S. persons have the authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person. |
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• | the gain is effectively connected with a trade or business of the non-U.S. holder in the United States (and, if required by an applicable income tax treaty, is attributable to a U.S. permanent establishment of the non-U.S. holder); | ||
• | the non-U.S. holder is an individual who is present in the United States for 183 days or more in the taxable year of that disposition, and certain other conditions are met; or | ||
• | we are or have been a “United States real property holding corporation” for U.S. federal income tax purposes. |
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Number | ||||
Name | Shares | |||
J.P. Morgan Securities Inc. | ||||
Citigroup Global Markets Inc. | ||||
Goldman, Sachs & Co. | ||||
ABN AMRO Rothschild LLC | ||||
Barclays Bank Capital | ||||
Bear, Stearns & Co. Inc. | ||||
BNP Paribas Securities (USA) Inc. | ||||
Calyon Securities (USA) Inc. | ||||
Comerica Securities, Inc. | ||||
Credit Suisse First Boston LLC | ||||
Daiwa Securities America Inc. | ||||
Deutsche Bank Securities | ||||
Dresdner Kleinwort Wasserstein | ||||
Harris Nesbitt Corp. | ||||
HSBC Securities (USA) Inc. | ||||
ING Financial Markets LLC | ||||
Lehman Brothers Inc. | ||||
Mellon Financial Markets, LLC | ||||
Merrill Lynch, Pierce, Fenner & Smith Incorporated | ||||
Mizuho International plc | ||||
Morgan Stanley & Co. Incorporated | ||||
Mitsubishi Securities International plc | ||||
RBC Capital Markets Corporation | ||||
BNY Capital Markets, Inc. | ||||
Scotia Capital (USA) Inc. | ||||
UBS Investment Bank | ||||
Wachovia Capital Markets, LLC | ||||
WestLB AG | ||||
Total | ||||
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Without | With full | |||||||
over-allotment | over-allotment | |||||||
exercise | exercise | |||||||
Per Share | $ | $ | ||||||
Total | $ | $ |
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• | during the last 17 days of the 180-day restricted period, we issue an earnings release or material news or a material event relating to us occurs; or | ||
• | prior to the expiration of the 180-day restricted period, we announce that we will release earnings results during the 16-day period beginning on the last day of the 180-day period, |
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(a) | to legal entities which are authorised or regulated to operate in the financial markets or, if not so authorised or regulated, whose corporate purpose is solely to invest in securities; | ||
(b) | to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts; or | ||
(c) | in any other circumstances which do not require the publication by us of a prospectus pursuant to Article 3 of the Prospectus Directive. |
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• | the information set forth in this prospectus and otherwise available to the representatives; | ||
• | the history of and prospects for the industries in which we compete; | ||
• | an assessment of our management; | ||
• | our prospects for future earnings; | ||
• | the general condition of the securities markets at the time of this offering; | ||
• | the recent market prices of, and demand for, publicly traded common stock of generally comparable companies; and | ||
• | other factors deemed relevant by the underwriters and us. |
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Interim unaudited condensed consolidated financial statements | ||||
F-2 | ||||
F-3 | ||||
F-4 | ||||
F-5 | ||||
F-6 – 16 | ||||
Annual audited consolidated financial statements | ||||
F-17 | ||||
F-18 | ||||
F-19 | ||||
F-20 | ||||
F-21 – 22 | ||||
F-23 – 53 | ||||
F-54 |
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Stockholder of The Hertz Corporation:
Florham Park, New Jersey
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June 30, | December 31, | |||||||
2005 | 2004 | |||||||
ASSETS | ||||||||
Cash and equivalents (Notes 3 and 7 | $ | 703,947 | $ | 680,866 | ||||
Short-term investments (Notes 3 and 11) | 296,402 | 556,997 | ||||||
Receivables, less allowance for doubtful accounts of $25,763 and $30,447 (Note 7) | 1,130,391 | 1,282,290 | ||||||
Due from affiliates (Note 11) | 377,263 | 445,235 | ||||||
Inventories, at lower of cost or market | 94,040 | 83,287 | ||||||
Prepaid expenses and other assets (Note 7) | 161,530 | 144,168 | ||||||
Revenue earning equipment, at cost (Notes 6, 7 and 11): | ||||||||
Cars | 10,073,730 | 8,380,688 | ||||||
Less accumulated depreciation | (802,210 | ) | (783,499 | ) | ||||
Other equipment | 2,677,373 | 2,378,673 | ||||||
Less accumulated depreciation | (783,551 | ) | (852,947 | ) | ||||
Total revenue earning equipment | 11,165,342 | 9,122,915 | ||||||
Property and equipment, at cost: | ||||||||
Land, buildings and leasehold improvements | 1,313,920 | 1,296,196 | ||||||
Service equipment | 1,297,185 | 1,232,739 | ||||||
2,611,105 | 2,528,935 | |||||||
Less accumulated depreciation | (1,332,978 | ) | (1,292,764 | ) | ||||
Total property and equipment | 1,278,127 | 1,236,171 | ||||||
Goodwill and other intangible assets (Note 4) | 544,927 | 544,445 | ||||||
Total assets | $ | 15,751,969 | $ | 14,096,374 | ||||
LIABILITIES AND STOCKHOLDER’S EQUITY | ||||||||
Accounts payable (Note 11) | $ | 1,301,329 | $ | 786,037 | ||||
Accrued liabilities (Note 7) | 771,550 | 835,680 | ||||||
Accrued taxes | 149,178 | 130,062 | ||||||
Debt (Notes 7 and 11) | 10,760,078 | 8,428,031 | ||||||
Public liability and property damage | 355,318 | 391,696 | ||||||
Deferred taxes on income | 907,400 | 849,700 | ||||||
Total liabilities | 14,244,853 | 11,421,206 | ||||||
Minority interest (Note 1) | 7,978 | 4,921 | ||||||
Stockholder’s equity (Notes 7 and 11): | ||||||||
Common Stock, $0.01 par value, 3,000 shares authorized, 100 shares issued | — | — | ||||||
Additional capital paid-in | 983,132 | 983,132 | ||||||
Retained earnings | 414,292 | 1,479,217 | ||||||
Accumulated other comprehensive income (Note 10) | 101,714 | 207,898 | ||||||
Total stockholder’s equity | 1,499,138 | 2,670,247 | ||||||
Total liabilities and stockholder’s equity | $ | 15,751,969 | $ | 14,096,374 | ||||
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Six Months | ||||||||
Ended June 30, | ||||||||
2005 | 2004 | |||||||
Restated | ||||||||
Revenues: | ||||||||
Car rental | $ | 2,824,539 | $ | 2,551,919 | ||||
Industrial and construction equipment rental | 630,094 | 522,257 | ||||||
Other | 48,269 | 38,190 | ||||||
Total revenues (Note 1A) | 3,502,902 | 3,112,366 | ||||||
Expenses: | ||||||||
Direct operating | 2,025,483 | 1,781,829 | ||||||
Depreciation of revenue earning equipment (Note 6) | 756,437 | 713,742 | ||||||
Selling, general and administrative | 318,905 | 292,369 | ||||||
Interest, net of interest income of $16,863 and $9,010 (Note 7) | 212,044 | 182,706 | ||||||
Total expenses (Note 1A) | 3,312,869 | 2,970,646 | ||||||
Income before income taxes and minority interest | 190,033 | 141,720 | ||||||
Provision for taxes on income (Note 5) | (64,937 | ) | (49,537 | ) | ||||
Minority interest (Note 1) | (5,021 | ) | — | |||||
Net income | $ | 120,075 | $ | 92,183 | ||||
F-4
Table of Contents
Six Months | ||||||||
Ended June 30, | ||||||||
2005 | 2004 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 120,075 | $ | 92,183 | ||||
Adjustments to reconcile net income to net cash provided by operating activities | 1,545,470 | 1,570,327 | ||||||
Net cash provided by operating activities (Note 1) | 1,665,545 | 1,662,510 | ||||||
Cash flows from investing activities: | ||||||||
Proceeds from sales (purchases) of short-term investments, net | 260,595 | (2,324 | ) | |||||
Revenue earning equipment expenditures | (7,640,642 | ) | (6,720,161 | ) | ||||
Proceeds from disposal of revenue earning equipment | 4,611,722 | 3,781,921 | ||||||
Property and equipment expenditures | (186,803 | ) | (144,048 | ) | ||||
Proceeds from disposal of property and equipment | 30,287 | 32,566 | ||||||
Available-for-sale securities: | ||||||||
Purchases | — | (5,566 | ) | |||||
Sales | 85 | 5,516 | ||||||
Changes in investment in joint venture | — | 2,000 | ||||||
Net cash used in investing activities (Note 1) | (2,924,756 | ) | (3,050,096 | ) | ||||
Cash flows from financing activities: | ||||||||
Issuance of an intercompany note (Notes 7 and 11) | 1,185,000 | — | ||||||
Proceeds from issuance of long-term debt | 9,286 | 1,207,967 | ||||||
Repayment of long-term debt | (505,676 | ) | (6,283 | ) | ||||
Short-term borrowings: | ||||||||
Proceeds | 1,866,998 | 658,355 | ||||||
Repayments | (427,877 | ) | (403,503 | ) | ||||
Ninety day term or less, net (Note 11) | 387,683 | 198,769 | ||||||
Dividends paid (Notes 7 and 11) | (1,185,000 | ) | — | |||||
Net cash provided by financing activities | 1,330,414 | 1,655,305 | ||||||
Effect of foreign exchange rate changes on cash | (48,122 | ) | (17,402 | ) | ||||
Net increase in cash and equivalents during the period | 23,081 | 250,317 | ||||||
Cash and equivalents at beginning of year | 680,866 | 609,986 | ||||||
Cash and equivalents at end of period | $ | 703,947 | $ | 860,303 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Cash paid (received) during the period for: | ||||||||
Interest (net of amounts capitalized) | $ | 208,419 | $ | 176,653 | ||||
Income taxes | 7,464 | (6,006 | ) | |||||
F-5
Table of Contents
Six Months Ended | ||||||||
June 30, 2004 | ||||||||
As Previously | As | |||||||
Reported | Reclassified | |||||||
Net cash flows (used in) provided by operating activities | $ | (1,275,730 | ) | $ | 1,662,510 | |||
Net cash used in investing activities | $ | (111,856 | ) | $ | (3,050,096 | ) | ||
Net increase in cash and equivalents during the period | $ | 250,317 | $ | 250,317 | ||||
F-6
Table of Contents
Six Months Ended | ||||||||
June 30, 2004 | ||||||||
As Previously | As | |||||||
Reported | Restated | |||||||
Revenues: | ||||||||
Car rental | $ | 2,240,400 | $ | 2,551,919 | ||||
Industrial and construction equipment rental | 453,423 | 522,257 | ||||||
Other | 31,861 | 38,190 | ||||||
Total revenues | 2,725,684 | 3,112,366 | ||||||
�� | ||||||||
Expenses: | ||||||||
Direct operating | 1,398,343 | 1,781,829 | ||||||
Depreciation of revenue earning equipment | 713,742 | 713,742 | ||||||
Selling, general and administrative | 289,173 | 292,369 | ||||||
Interest, net of interest income of $9,010 | 182,706 | 182,706 | ||||||
Total expenses | 2,583,964 | 2,970,646 | ||||||
Income before income taxes | 141,720 | 141,720 | ||||||
Provision for taxes on income | (49,537 | ) | (49,537 | ) | ||||
Net income | $ | 92,183 | $ | 92,183 | ||||
F-7
Table of Contents
December 31, | June 30, | |||||||||||
2004 | Change(1) | 2005 | ||||||||||
Goodwill | ||||||||||||
Car rental | $ | 365,607 | $ | (1,580 | ) | $ | 364,027 | |||||
Industrial and construction equipment rental | 177,268 | (7,175 | ) | 170,093 | ||||||||
Total Goodwill | 542,875 | (8,755 | ) | 534,120 | ||||||||
Other intangible assets | 1,570 | 9,237 | 10,807 | |||||||||
Total | $ | 544,445 | $ | 482 | $ | 544,927 | ||||||
(1) | The change in goodwill resulted primarily from the translation of foreign currencies at different exchange rates on December 31, 2004 and June 30, 2005. The change in other intangible assets resulted from the acquisitions of domestic car rental licensees and the amortization of certain other intangible assets. The largest acquisition of a domestic car rental licensee in 2005 resulted in $9.0 million of other intangibles which are not subject to amortization. | |
F-8
Table of Contents
Six Months Ended | ||||||||
June 30, | ||||||||
2005 | 2004 | |||||||
Depreciation of revenue earning equipment | $ | 788,773 | $ | 732,197 | ||||
Adjustment of depreciation upon disposal of the equipment | (41,240 | ) | (25,424 | ) | ||||
Rents paid for vehicles leased | 8,904 | 6,969 | ||||||
Total | $ | 756,437 | $ | 713,742 | ||||
June 30, | December 31, | |||||||
2005 | 2004 | |||||||
Notes payable, including commercial paper, average interest rate: 2005, 4.1%; 2004, 2.4% | $ | 2,480,198 | $ | 993,856 | ||||
Promissory notes, average interest rate: 2005, 6.2%; 2004, 6.1% (effective average interest rate: 2005, 6.2%; 2004, 6.1%); net of unamortized discount: 2005, $9,858; 2004, $10,964; due 2005 to 2028 | 5,198,142 | 5,700,443 | ||||||
Intercompany Note Payable to Ford Holdings LLC, average interest rate: 5.4%; due 2010 | 1,185,000 | — | ||||||
Foreign subsidiaries’ debt, including commercial paper: in millions (2005, $317.5; 2004, $787.7); and other borrowings; average interest rate: 2005, 3.6%; 2004, 3.0% | 1,896,738 | 1,733,732 | ||||||
Total | $ | 10,760,078 | $ | 8,428,031 | ||||
F-9
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F-10
Table of Contents
F-11
Table of Contents
Six Months Ended June 30, | ||||||||||||||||||||||||
Health Care & Life | ||||||||||||||||||||||||
Pension Benefits | Insurance (U.S.) | |||||||||||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||||||||||
U.S. | Non-U.S. | U.S. | Non-U.S. | |||||||||||||||||||||
Components of Net Periodic Benefit Cost: | ||||||||||||||||||||||||
Service cost | $ | 12.2 | $ | 3.5 | $ | 9.5 | $ | 2.8 | $ | 0.2 | $ | 0.2 | ||||||||||||
Interest cost | 9.8 | 3.3 | 8.2 | 2.9 | 0.5 | 0.4 | ||||||||||||||||||
Expected return on plan assets | (10.7 | ) | (2.7 | ) | (8.2 | ) | (2.4 | ) | — | — | ||||||||||||||
Amortization: | ||||||||||||||||||||||||
Amendments | 0.2 | — | 0.2 | — | — | — | ||||||||||||||||||
Losses and other | 1.9 | 1.0 | 0.4 | 0.7 | 0.1 | 0.1 | ||||||||||||||||||
Settlement loss | 1.1 | — | — | — | — | — | ||||||||||||||||||
Net pension/post retirement expense | $ | 14.5 | $ | 5.1 | $ | 10.1 | $ | 4.0 | $ | 0.8 | $ | 0.7 | ||||||||||||
F-12
Table of Contents
Six Months Ended June 30, | ||||||||||||||||
Income (Loss) Before | ||||||||||||||||
Income Taxes and | ||||||||||||||||
Revenues | Minority Interest | |||||||||||||||
2004 | ||||||||||||||||
2005 | Restated | 2005 | 2004 | |||||||||||||
Car rental | $ | 2,869,013 | $ | 2,586,998 | $ | 133,351 | (a) | $ | 147,322 | (b) | ||||||
Industrial and construction equipment rental | 630,198 | 522,255 | 71,872 | 6,004 | ||||||||||||
Corporate and other | 3,691 | 3,113 | (15,190 | ) | (11,606 | ) | ||||||||||
Total | $ | 3,502,902 | $ | 3,112,366 | $ | 190,033 | $ | 141,720 | ||||||||
(a) | Includes $10.1 million decrease in depreciation expense related to a change in revenue earning vehicle depreciation rates in our domestic car rental operations. | |
(b) | Includes $7.0 million received from business interruption claims we made relating to the terrorist attacks of September 11, 2001. |
Six Months | ||||||||
Ended June 30, | ||||||||
2005 | 2004 | |||||||
Net income | $ | 120,075 | $ | 92,183 | ||||
Other comprehensive income (loss), net of tax: | ||||||||
Foreign currency translation adjustments | (106,198 | ) | (31,885 | ) | ||||
Unrealized gain (loss) on available-for-sale securities | 14 | (318 | ) | |||||
Total other comprehensive loss | (106,184 | ) | (32,203 | ) | ||||
Comprehensive income | $ | 13,891 | $ | 59,980 | ||||
F-13
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F-14
Table of Contents
F-15
Table of Contents
F-16
Table of Contents
and Stockholder of The Hertz Corporation:
March 21, 2005
F-17
Table of Contents
December 31, | ||||||||
2004 | 2003 | |||||||
Dollars in thousands | ||||||||
ASSETS | ||||||||
Cash and equivalents (Note 14) | $ | 680,866 | $ | 609,986 | ||||
Short-term investments (Notes 14 and 15) | 556,997 | 500,108 | ||||||
Receivables, less allowance for doubtful accounts of $30,447 and $35,758 (Note 3) | 1,282,290 | 1,238,853 | ||||||
Due from affiliates (Note 15) | 445,235 | 520,842 | ||||||
Inventories, at lower of cost or market | 83,287 | 73,354 | ||||||
Prepaid expenses and other assets (Notes 3, 4 and 5) | 144,168 | 135,922 | ||||||
Revenue earning equipment, at cost (Notes 3, 8 and 15): | ||||||||
Cars | 8,380,688 | 7,168,688 | ||||||
Less accumulated depreciation | (783,499 | ) | (706,719 | ) | ||||
Other equipment | 2,378,673 | 2,214,901 | ||||||
Less accumulated depreciation | (852,947 | ) | (883,623 | ) | ||||
Total revenue earning equipment | 9,122,915 | 7,793,247 | ||||||
Property and equipment, at cost: | ||||||||
Land, buildings and leasehold improvements | 1,296,196 | 1,221,423 | ||||||
Service equipment | 1,232,739 | 1,114,875 | ||||||
2,528,935 | 2,336,298 | |||||||
Less accumulated depreciation | (1,292,764 | ) | (1,166,529 | ) | ||||
Total property and equipment | 1,236,171 | 1,169,769 | ||||||
Goodwill and other intangible assets (Note 2) | 544,445 | 536,929 | ||||||
Total assets | $ | 14,096,374 | $ | 12,579,010 | ||||
LIABILITIES AND STOCKHOLDER’S EQUITY | ||||||||
Accounts payable (Note 15) | $ | 786,037 | $ | 757,869 | ||||
Accrued salaries and other compensation | 348,594 | 287,676 | ||||||
Other accrued liabilities (Notes 3 and 12) | 487,086 | 448,690 | ||||||
Accrued taxes | 130,062 | 111,432 | ||||||
Debt (Notes 3, 14 and 15) | 8,428,031 | 7,627,930 | ||||||
Public liability and property damage | 391,696 | 398,822 | ||||||
Deferred taxes on income (Note 9) | 849,700 | 721,200 | ||||||
Commitments and contingencies (Notes 10, 12 and 14) | ||||||||
Total liabilities | 11,421,206 | 10,353,619 | ||||||
Minority interest (Note 5) | 4,921 | — | ||||||
Stockholder’s equity (Notes 1, 3 and 15): | ||||||||
Common stock, $0.01 par value, 3,000 shares authorized, 100 shares issued | — | — | ||||||
Additional capital paid-in | 983,132 | 983,132 | ||||||
Retained earnings | 1,479,217 | 1,113,746 | ||||||
Accumulated other comprehensive income (Note 4) | 207,898 | 128,513 | ||||||
Total stockholder’s equity | 2,670,247 | 2,225,391 | ||||||
Total liabilities and stockholder’s equity | $ | 14,096,374 | $ | 12,579,010 | ||||
F-18
Table of Contents
Years ended December 31, | ||||||||||||
2003 | 2002 | |||||||||||
2004 | Restated | Restated | ||||||||||
Dollars in thousands | ||||||||||||
Revenues: | ||||||||||||
Car rental | $ | 5,430,805 | $ | 4,819,255 | $ | 4,537,607 | ||||||
Industrial and construction equipment rental | 1,161,955 | 1,037,754 | 1,018,759 | |||||||||
Other (Note 5) | 83,192 | 76,661 | 82,076 | |||||||||
Total revenues (Note 1A) | 6,675,952 | 5,933,670 | 5,638,442 | |||||||||
Expenses: | ||||||||||||
Direct operating | 3,734,361 | 3,316,101 | 3,093,024 | |||||||||
Depreciation of revenue earning equipment (Note 8) | 1,463,258 | 1,523,391 | 1,499,568 | |||||||||
Selling, general and administrative | 591,317 | 501,643 | 463,085 | |||||||||
Interest, net of interest income of $23,707, $17,881 and $10,339 (Note 3) | 384,464 | 355,043 | 366,371 | |||||||||
Total expenses (Note 1A) | 6,173,400 | 5,696,178 | 5,422,048 | |||||||||
Income before income taxes and minority interest | 502,552 | 237,492 | 216,394 | |||||||||
Provision for taxes on income (Note 9) | (133,870 | ) | (78,877 | ) | (72,346 | ) | ||||||
Minority interest (Note 5) | (3,211 | ) | — | — | ||||||||
Income before cumulative effect of change in accounting principle | 365,471 | 158,615 | 144,048 | |||||||||
Cumulative effect of change in accounting principle (Note 2) | — | — | (294,000 | ) | ||||||||
Net income (loss) | $ | 365,471 | $ | 158,615 | $ | (149,952 | ) | |||||
F-19
Table of Contents
Accumulated | ||||||||||||||||||||
Additional | Other | Total | ||||||||||||||||||
Common | Capital | Retained | Comprehensive | Stockholder’s | ||||||||||||||||
Stock | Paid-In | Earnings | Income (Loss) | Equity | ||||||||||||||||
Balance at: | ||||||||||||||||||||
DECEMBER 31, 2001 | $ | — | $ | 983,132 | $ | 1,105,083 | $ | (103,835 | ) | $ | 1,984,380 | |||||||||
Comprehensive Income | ||||||||||||||||||||
Net loss | (149,952 | ) | (149,952 | ) | ||||||||||||||||
Translation adjustment changes | 93,537 | 93,537 | ||||||||||||||||||
Unrealized holding gains on securities, net of tax of $53 | 475 | 475 | ||||||||||||||||||
Minimum pension liability adjustment, net of tax of $3,040 | (6,553 | ) | (6,553 | ) | ||||||||||||||||
Total Comprehensive Loss | (62,493 | ) | ||||||||||||||||||
DECEMBER 31, 2002 | — | 983,132 | 955,131 | (16,376 | ) | 1,921,887 | ||||||||||||||
Comprehensive Income | ||||||||||||||||||||
Net income | 158,615 | 158,615 | ||||||||||||||||||
Translation adjustment changes | 149,037 | 149,037 | ||||||||||||||||||
Unrealized holding losses on securities, net of tax of $61 | (551 | ) | (551 | ) | ||||||||||||||||
Minimum pension liability adjustment, net of tax of $1,748 | (3,597 | ) | (3,597 | ) | ||||||||||||||||
Total Comprehensive Income | 303,504 | |||||||||||||||||||
DECEMBER 31, 2003 | — | 983,132 | 1,113,746 | 128,513 | 2,225,391 | |||||||||||||||
Comprehensive Income | ||||||||||||||||||||
Net income | 365,471 | 365,471 | ||||||||||||||||||
Translation adjustment changes | 83,420 | 83,420 | ||||||||||||||||||
Unrealized holding losses on securities, net of tax of $8 | (82 | ) | (82 | ) | ||||||||||||||||
Minimum pension liability adjustment, net of tax of $1,076 | (3,953 | ) | (3,953 | ) | ||||||||||||||||
Total Comprehensive Income | 444,856 | |||||||||||||||||||
DECEMBER 31, 2004 | $ | — | $ | 983,132 | $ | 1,479,217 | $ | 207,898 | $ | 2,670,247 | ||||||||||
F-20
Table of Contents
Years ended December 31, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
Dollars in thousands | ||||||||||||
Cash flows from operating activities: | ||||||||||||
Net income (loss) | $ | 365,471 | $ | 158,615 | $ | (149,952 | ) | |||||
Non-cash expenses: | ||||||||||||
Cumulative effect of change in accounting principle | — | — | 294,000 | |||||||||
Depreciation of revenue earning equipment | 1,463,258 | 1,523,391 | 1,499,568 | |||||||||
Depreciation of property and equipment | 177,597 | 151,706 | 155,424 | |||||||||
Amortization of intangibles | 607 | 1,024 | 1,346 | |||||||||
Stock-based employee compensation | 5,584 | 6,039 | — | |||||||||
Provision for public liability and property damage | 153,139 | 178,292 | 145,010 | |||||||||
Provision for losses for doubtful accounts | 14,133 | 23,053 | 15,570 | |||||||||
Minority interest | 3,211 | — | — | |||||||||
Deferred income taxes | 129,576 | 260,848 | 106,340 | |||||||||
Changes in assets and liabilities: | ||||||||||||
Receivables | 57,303 | (95,527 | ) | (3,179 | ) | |||||||
Due from affiliates | 75,607 | (269,543 | ) | (107,997 | ) | |||||||
Inventories and prepaid expenses and other assets | (20,275 | ) | (3,981 | ) | (27,990 | ) | ||||||
Accounts payable | (58,318 | ) | 182,264 | 1,099 | ||||||||
Accrued liabilities | 50,831 | (111,439 | ) | 88,481 | ||||||||
Accrued taxes | 12,315 | 49,825 | (19,713 | ) | ||||||||
Payments of public liability and property damage claims and expenses | (178,654 | ) | (155,241 | ) | (120,486 | ) | ||||||
Net cash flows provided by operating activities (Note 1) | $ | 2,251,385 | $ | 1,899,326 | $ | 1,877,521 | ||||||
F-21
Table of Contents
Years ended December 31, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
Dollars in thousands | ||||||||||||
Cash flows from investing activities: | ||||||||||||
Purchase of short-term investments, net | $ | (56,889 | ) | $ | (500,108 | ) | $ | — | ||||
Revenue earning equipment expenditures | (11,310,032 | ) | (9,436,581 | ) | (9,946,271 | ) | ||||||
Proceeds from disposal of revenue earning equipment | 8,740,920 | 7,874,414 | 8,065,848 | |||||||||
Property and equipment expenditures | (286,428 | ) | (226,747 | ) | (221,227 | ) | ||||||
Proceeds from disposal of property and equipment | 59,253 | 54,638 | 32,035 | |||||||||
Available-for-sale securities: | ||||||||||||
Purchases | (11,261 | ) | (12,114 | ) | (4,587 | ) | ||||||
Sales | 19,448 | 10,246 | 4,082 | |||||||||
Changes in investment in joint venture | 2,000 | 5,640 | 6,560 | |||||||||
Net cash used in investing activities (Note 1) | (2,842,989 | ) | (2,230,612 | ) | (2,063,560 | ) | ||||||
Cash flows from financing activities: | ||||||||||||
Proceeds from issuance of long-term debt | 1,985,981 | 510,853 | 809,426 | |||||||||
Repayment of long-term debt | (913,635 | ) | (712,057 | ) | (559,858 | ) | ||||||
Short-term borrowings: | ||||||||||||
Proceeds | 1,382,587 | 1,094,152 | 730,731 | |||||||||
Repayments | (973,659 | ) | (721,333 | ) | (557,755 | ) | ||||||
Ninety-day term or less, net | (846,780 | ) | 130,294 | 127,767 | ||||||||
Net cash provided by financing activities | 634,494 | 301,909 | 550,311 | |||||||||
Effect of foreign exchange rate changes on cash | 27,990 | 38,100 | 22,994 | |||||||||
Net increase in cash and equivalents during the year | 70,880 | 8,723 | 387,266 | |||||||||
Cash and equivalents at beginning of year | 609,986 | 601,263 | 213,997 | |||||||||
Cash and equivalents at end of year | $ | 680,866 | $ | 609,986 | $ | 601,263 | ||||||
Supplemental disclosures of cash flow information: | ||||||||||||
Cash paid (received) during the year for: | ||||||||||||
Interest (net of amounts capitalized) | $ | 377,279 | $ | 357,585 | $ | 389,893 | ||||||
Income taxes | (4,149 | ) | 31,481 | (3,854 | ) |
F-22
Table of Contents
F-23
Table of Contents
Revenue Earning Equipment (REE): | ||
Cars | 3 to 6 years | |
Other equipment | 3 to 10 years | |
Buildings | 20 to 50 years | |
Capitalized internal use software | 1 to 10 years | |
Service cars and service equipment | 3 to 25 years | |
Intangible assets | 5 to 15 years | |
Leasehold improvements | The shorter of their economic lives or | |
the lease term. |
F-24
Table of Contents
F-25
Table of Contents
Years ended December 31, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
Net income (loss), as reported | $ | 365,471 | $ | 158,615 | $ | (149,952 | ) | |||||
Add: Stock-based employee compensation expense included in reported net income, net of related tax effects | 3,630 | 3,925 | — | |||||||||
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects | (3,630 | ) | (3,925 | ) | (7,228 | ) | ||||||
Pro forma net income (loss) | $ | 365,471 | $ | 158,615 | $ | (157,180 | ) | |||||
F-26
Table of Contents
Year Ended | Year Ended | |||||||||||||||
December 31, 2003 | December 31, 2002 | |||||||||||||||
As Previously | As Previously | |||||||||||||||
Reported | As Reclassified | Reported | As Reclassified | |||||||||||||
Net cash flows provided by (used in) operating activities | $ | 337,159 | $ | 1,899,326 | $ | (2,902 | ) | $ | 1,877,521 | |||||||
Net cash used in investing activities | $ | (668,445 | ) | $ | (2,230,612 | ) | $ | (183,137 | ) | $ | (2,063,560 | ) | ||||
Net increase in cash and equivalents during the year | $ | 8,723 | $ | 8,723 | $ | 387,266 | $ | 387,266 |
F-27
Table of Contents
F-28
Table of Contents
Year ended December 31, 2003 | Year ended December 31, 2002 | |||||||||||||||
As Previously | As Previously | |||||||||||||||
Reported | As Restated | Reported | As Restated | |||||||||||||
Revenues: | ||||||||||||||||
Car rental | $ | 4,239,244 | $ | 4,819,255 | $ | 4,005,620 | $ | 4,537,607 | ||||||||
Industrial and construction equipment rental | 904,582 | 1,037,754 | 892,646 | 1,018,759 | ||||||||||||
Other | 64,103 | 76,661 | 69,873 | 82,076 | ||||||||||||
Total revenues | 5,207,929 | 5,933,670 | 4,968,139 | 5,638,442 | ||||||||||||
Expenses: | ||||||||||||||||
Direct operating | 2,596,727 | 3,316,101 | 2,428,820 | 3,093,024 | ||||||||||||
Depreciation of revenue earning equipment | 1,523,391 | 1,523,391 | 1,499,568 | 1,499,568 | ||||||||||||
Selling, general and administrative | 495,276 | 501,643 | 456,986 | 463,085 | ||||||||||||
Interest, net of interest income of $17,881 and $10,339 | 355,043 | 355,043 | 366,371 | 366,371 | ||||||||||||
Total expenses | 4,970,437 | 5,696,178 | 4,751,745 | 5,422,048 | ||||||||||||
Income before income taxes | 237,492 | 237,492 | 216,394 | 216,394 | ||||||||||||
Provision for taxes on income | (78,877 | ) | (78,877 | ) | (72,346 | ) | (72,346 | ) | ||||||||
Income before cumulative effect of change in accounting principle | 158,615 | 158,615 | 144,048 | 144,048 | ||||||||||||
Cumulative effect of change in accounting principle | — | — | (294,000 | ) | (294,000 | ) | ||||||||||
Net income (loss) | $ | 158,615 | $ | 158,615 | $ | (149,952 | ) | $ | (149,952 | ) | ||||||
F-29
Table of Contents
Goodwill | ||||||||||||||||||||
Industrial and | Other | |||||||||||||||||||
construction | intangible | |||||||||||||||||||
Car rental | equipment rental | Total goodwill | assets | Total | ||||||||||||||||
Balance December 31, 2002 | $ | 360,919 | $ | 156,054 | $ | 516,973 | $ | 2,048 | $ | 519,021 | ||||||||||
Other changes (1) | 3,241 | 14,912 | 18,153 | (245 | ) | 17,908 | ||||||||||||||
Balance December 31, 2003 | 364,160 | 170,966 | 535,126 | 1,803 | 536,929 | |||||||||||||||
Other changes (1) | 1,447 | 6,302 | 7,749 | (233 | ) | 7,516 | ||||||||||||||
Balance December 31, 2004 | $ | 365,607 | $ | 177,268 | $ | 542,875 | $ | 1,570 | $ | 544,445 | ||||||||||
(1) | Consists of changes primarily resulting from the translation of foreign currencies at different exchange rates from the beginning of the year to the end of the year and amortization of certain intangible assets. |
December 31, | ||||||||
2004 | 2003 | |||||||
Notes payable, including commercial paper, average interest rate: 2004, 2.4%; 2003, 1.3% | $ | 993,856 | $ | 1,187,142 | ||||
Promissory notes, average interest rate: 2004, 6.1%; 2003, 6.2% (effective average interest rate: 2004, 6.1%; 2003, 6.2%); net of unamortized discount: 2004, $10,964; 2003, $11,676; due 2005 to 2028 | 5,700,443 | 4,895,180 | ||||||
Foreign subsidiaries’ debt in foreign currencies: | ||||||||
Short-term borrowings: | ||||||||
Banks, average interest rate: 2004, 3.5%; 2003, 3.6% | 667,678 | 502,573 | ||||||
Commercial paper, average interest rate: 2004, 2.5%; 2003, 2.7% | 787,660 | 1,034,912 | ||||||
Other borrowings, average interest rate: 2004, 3.3%; 2003, 12.7% | 278,394 | 8,123 | ||||||
Total | $ | 8,428,031 | $ | 7,627,930 | ||||
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F-31
Table of Contents
F-32
Table of Contents
F-33
Table of Contents
Gross | Gross | |||||||||||||||
Unrealized | Unrealized | Estimated | ||||||||||||||
Cost | Gains | Losses | Fair Value | |||||||||||||
December 31, 2004 | ||||||||||||||||
Government debt obligations | $ | 2,795 | $ | 19 | $ | (28 | ) | $ | 2,786 | |||||||
Total | $ | 2,795 | $ | 19 | $ | (28 | ) | $ | 2,786 | |||||||
December 31, 2003 | ||||||||||||||||
Government debt obligations | $ | 2,619 | $ | 15 | $ | (44 | ) | $ | 2,590 | |||||||
Corporate debt obligations | 8,068 | 137 | (27 | ) | 8,178 | |||||||||||
Total | $ | 10,687 | $ | 152 | $ | (71 | ) | $ | 10,768 | |||||||
Estimated | ||||||||
Cost | Fair Value | |||||||
Due in one year or less | $ | 276 | $ | 270 | ||||
Due after one year through five years | 2,341 | 2,338 | ||||||
Due after five years through ten years | 178 | 178 | ||||||
Total | $ | 2,795 | $ | 2,786 | ||||
F-34
Table of Contents
F-35
Table of Contents
Pension Benefits | Health Care & | |||||||||||||||||||||||
U.S. Plans | Non-U.S. Plans | Life Insurance (U.S.) | ||||||||||||||||||||||
2004 | 2003 | 2004 | 2003 | 2004 | 2003 | |||||||||||||||||||
Change in Benefit Obligation | ||||||||||||||||||||||||
Benefit obligation at January 1 | $ | 276.2 | $ | 235.9 | $ | 97.6 | $ | 69.4 | $ | 14.1 | $ | 10.3 | ||||||||||||
Service cost | 21.1 | 17.3 | 5.3 | 3.3 | 0.4 | 0.4 | ||||||||||||||||||
Interest cost | 17.7 | 15.5 | 5.4 | 4.1 | 0.9 | 0.8 | ||||||||||||||||||
Employee contributions | — | — | 1.2 | 1.2 | 0.1 | 0.1 | ||||||||||||||||||
Benefits paid | (6.6 | ) | (6.9 | ) | (2.2 | ) | (2.2 | ) | (0.4 | ) | (0.8 | ) | ||||||||||||
Foreign exchange translation | — | — | 9.0 | 10.0 | — | — | ||||||||||||||||||
Actuarial loss | 30.8 | 14.4 | 15.9 | 11.8 | 2.2 | 3.3 | ||||||||||||||||||
Benefit obligation at December 31 | $ | 339.2 | $ | 276.2 | $ | 132.2 | $ | 97.6 | $ | 17.3 | $ | 14.1 | ||||||||||||
Change in Plan Assets | ||||||||||||||||||||||||
Fair value of plan assets at January 1 | $ | 200.5 | $ | 123.9 | $ | 63.8 | $ | 38.6 | $ | — | $ | — | ||||||||||||
Actual return on plan assets | 27.8 | 26.9 | 7.1 | 7.3 | — | — | ||||||||||||||||||
Company contributions | 49.4 | 56.6 | 8.2 | 14.4 | 0.3 | 0.7 | ||||||||||||||||||
Employee contributions | — | — | 1.2 | 1.2 | 0.1 | 0.1 | ||||||||||||||||||
Benefits paid | (6.6 | ) | (6.9 | ) | (2.2 | ) | (2.2 | ) | (0.4 | ) | (0.8 | ) | ||||||||||||
Foreign exchange translation | — | — | 5.8 | 4.4 | — | — | ||||||||||||||||||
Other | (0.6 | ) | — | — | 0.1 | — | — | |||||||||||||||||
Fair value of plan assets at December 31 | $ | 270.5 | $ | 200.5 | $ | 83.9 | $ | 63.8 | $ | — | $ | — | ||||||||||||
Funded Status of the Plan | ||||||||||||||||||||||||
Plan assets less than benefit obligation | $ | (68.7 | ) | $ | (75.7 | ) | $ | (48.3 | ) | $ | (33.8 | ) | $ | (17.3 | ) | $ | (14.1 | ) | ||||||
Unamortized: | ||||||||||||||||||||||||
Transition obligation | — | — | 0.2 | 0.2 | — | — | ||||||||||||||||||
Prior service cost | 4.1 | 4.6 | 0.1 | 0.1 | — | — | ||||||||||||||||||
Net losses and other | 41.7 | 22.0 | 39.5 | 25.4 | 4.5 | 2.6 | ||||||||||||||||||
Net amount recognized | $ | (22.9 | ) | $ | (49.1 | ) | $ | (8.5 | ) | $ | (8.1 | ) | $ | (12.8 | ) | $ | (11.5 | ) | ||||||
Amounts Recognized in the Balance Sheet Assets/(Liabilities) | ||||||||||||||||||||||||
Intangible assets (including prepaid assets) | $ | 10.6 | $ | 3.6 | $ | 0.8 | $ | — | $ | — | $ | — | ||||||||||||
Accrued liabilities | (40.1 | ) | (57.4 | ) | (24.2 | ) | (19.9 | ) | (12.8 | ) | (11.5 | ) | ||||||||||||
Deferred Income Tax | 2.3 | 1.6 | 4.1 | 3.7 | — | — | ||||||||||||||||||
Accumulated other comprehensive loss, net of tax | 4.3 | 3.1 | 10.8 | 8.1 | — | — | ||||||||||||||||||
Net amount recognized | $ | (22.9 | ) | $ | (49.1 | ) | $ | (8.5 | ) | $ | (8.1 | ) | $ | (12.8 | ) | $ | (11.5 | ) | ||||||
Pension Plans in Which Accumulated Benefit Obligation Exceeds Plan Assets at December 31 | ||||||||||||||||||||||||
Projected benefit obligation | $ | 53.3 | $ | 39.0 | $ | 127.4 | $ | 93.7 | ||||||||||||||||
Accumulated benefit obligation | 40.1 | 33.2 | 103.9 | 80.0 | ||||||||||||||||||||
Fair value of plan assets | — | — | 80.3 | 60.2 | ||||||||||||||||||||
Accumulated Benefit Obligation at December 31 | $ | 277.6 | $ | 229.1 | $ | 107.2 | $ | 83.0 | ||||||||||||||||
Weighted-average assumptions as of December 31 | ||||||||||||||||||||||||
Discount rate | 5.75 | % | 6.25 | % | 5.14 | % | 5.52 | % | 5.75 | % | 6.25 | % | ||||||||||||
Expected return on assets | 8.75 | % | 8.75 | % | 6.90 | % | 6.93 | % | N/A | N/A | ||||||||||||||
Average rate of increase in compensation | 4.4 | % | 4.4 | % | 3.3 | % | 3.4 | % | N/A | N/A | ||||||||||||||
Initial health care cost trend rate | — | — | — | — | 11.0 | % | 10.0 | % | ||||||||||||||||
Ultimate health care cost trend rate | — | — | — | — | 5.0 | % | 5.0 | % | ||||||||||||||||
Number of years to ultimate trend rate | — | — | — | — | 9 | 10 |
F-36
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Years ended December 31, | ||||||||||||||||||||||||||||||||||||
Pension Benefits | Health Care & Life | |||||||||||||||||||||||||||||||||||
2004 | 2003 | 2002 | Insurance (U.S.) | |||||||||||||||||||||||||||||||||
U.S. | Non-U.S. | U.S. | Non-U.S. | U.S. | Non-U.S. | 2004 | 2003 | 2002 | ||||||||||||||||||||||||||||
Components of Net Periodic Benefit Cost: | ||||||||||||||||||||||||||||||||||||
Service cost | $ | 21.1 | $ | 5.4 | $ | 17.3 | $ | 3.3 | $ | 16.3 | $ | 2.9 | $ | 0.4 | $ | 0.4 | $ | 0.2 | ||||||||||||||||||
Interest cost | 17.7 | 5.4 | 15.5 | 4.1 | 14.1 | 3.7 | 1.0 | 0.8 | 0.7 | |||||||||||||||||||||||||||
Expected return on plan assets | (17.9 | ) | (4.5 | ) | (15.9 | ) | (2.8 | ) | (13.3 | ) | (3.1 | ) | — | — | — | |||||||||||||||||||||
Amortization: | ||||||||||||||||||||||||||||||||||||
Transition | — | — | — | 0.7 | — | 0.1 | — | — | — | |||||||||||||||||||||||||||
Amendments | 0.5 | — | 0.5 | — | 0.4 | — | — | — | ||||||||||||||||||||||||||||
Losses(gains) and other | 1.8 | 1.2 | 2.1 | 1.2 | (0.6 | ) | 0.3 | 0.2 | 0.1 | — | ||||||||||||||||||||||||||
Net pension/ postretirement expense | $ | 23.2 | $ | 7.5 | $ | 19.5 | $ | 6.5 | $ | 16.9 | $ | 3.9 | $ | 1.6 | $ | 1.3 | $ | 0.9 | ||||||||||||||||||
Weighted-average discount rate for expense | 6.25 | % | 5.52 | % | 6.75 | % | 5.73 | % | 7.25 | % | 5.75 | % | 6.25 | % | 6.75 | % | 7.25 | % | ||||||||||||||||||
Weighted-average assumed long-term rate of return on assets | 8.75 | % | 6.93 | % | 8.75 | % | 6.94 | % | 9.50 | % | 7.42 | % | ||||||||||||||||||||||||
Initial health care cost trend rate | — | — | — | — | — | — | 10.0 | % | 10.0 | % | 8.5 | % | ||||||||||||||||||||||||
Ultimate health care cost trend rate | — | — | — | — | — | — | 5.0 | % | 5.0 | % | 5.0 | % | ||||||||||||||||||||||||
Number of years to ultimate trend rate | — | — | — | — | — | — | 10 | 11 | 5 |
One Percentage | One Percentage | |||||||
Point Increase | Point Decrease | |||||||
Effect on total of service and interest cost components | $ | 107,000 | $ | 93,000 | ||||
Effect on postretirement benefit obligation | 1,148,000 | 1,007,000 |
F-37
Table of Contents
Plan assets | ||||||||||||||||
U.S. | Non U.S. | |||||||||||||||
2004 | 2003 | 2004 | 2003 | |||||||||||||
Asset Category | ||||||||||||||||
Equity securities | 72.4 | % | 64.1 | % | 84.6 | % | 85.0 | % | ||||||||
Fixed income securities | 27.6 | 35.8 | 15.4 | 15.0 | ||||||||||||
Other | — | 0.1 | — | — | ||||||||||||
Total | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
F-38
Table of Contents
Healthcare & Life | ||||||||
Pension Benefits | Insurance (U.S.) | |||||||
2005 | $ | 12.5 | $ | 0.6 | ||||
2006 | 14.6 | 0.7 | ||||||
2007 | 17.0 | 0.9 | ||||||
2008 | 18.4 | 1.0 | ||||||
2009 | 22.7 | 1.1 | ||||||
2010-2014 | 153.2 | 7.0 |
2004 | 2003 | 2002 | ||||||||||||||||||||||
Weighted | Weighted | Weighted | ||||||||||||||||||||||
Average | Average | average | ||||||||||||||||||||||
Number of | Exercise | Number of | Exercise | Number of | Exercise | |||||||||||||||||||
Shares | Price | Shares | Price | Shares | Price | |||||||||||||||||||
Outstanding at January 1 | 7,227,817 | $ | 25.10 | 5,994,339 | $ | 29.43 | 4,647,127 | $ | 33.46 | |||||||||||||||
Granted | 1,490,500 | $ | 13.26 | 1,473,625 | $ | 7.55 | 1,499,900 | $ | 16.91 | |||||||||||||||
Expired or canceled | (239,673 | ) | $ | 23.59 | (240,147 | ) | $ | 25.38 | (152,688 | ) | $ | 24.84 | ||||||||||||
Exercised | (41,811 | ) | $ | 7.55 | — | — | — | — | ||||||||||||||||
Outstanding at December 31 | 8,436,833 | $ | 23.14 | 7,227,817 | $ | 25.10 | 5,994,339 | $ | 29.43 | |||||||||||||||
Options exercisable at Dec. 31 | 5,608,824 | $ | 28.74 | 4,305,981 | $ | 30.57 | 3,015,727 | $ | 35.35 | |||||||||||||||
Weighted-average fair value of options granted during year | $ | 4.62 | $ | 1.90 | $ | 6.01 |
Options Outstanding | Options Exercisable | |||||||||||||||||||
Weighted | ||||||||||||||||||||
Average | Number of | |||||||||||||||||||
Number of | Remaining | Weighted Average | Shares | Weighted Average | ||||||||||||||||
Range of Exercise Prices | Shares | Contractual Life | Exercise Price | Exercisable | Exercise Price | |||||||||||||||
$41.40 — $42.52 | 651,556 | 3.3 | $ | 41.42 | 651,556 | $ | 41.42 | |||||||||||||
$35.66 | 1,059,793 | 5.1 | $ | 35.66 | 1,059,793 | $ | 35.66 | |||||||||||||
$35.19 | 946,887 | 4.1 | $ | 35.19 | 946,887 | $ | 35.19 | |||||||||||||
$27.42 — $30.19 | 1,598,975 | 6.1 | $ | 27.79 | 1,598,975 | $ | 27.79 | |||||||||||||
$16.91 | 1,371,350 | 7.2 | $ | 16.91 | 905,091 | $ | 16.91 | |||||||||||||
$13.07 — $13.26 | 1,455,175 | 9.2 | $ | 13.26 | — | — | ||||||||||||||
$7.55 | 1,353,097 | 8.2 | $ | 7.55 | 446,522 | $ | 7.55 |
F-39
Table of Contents
Years ended December 31, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
Depreciation of revenue earning equipment | $ | 1,506,988 | $ | 1,504,482 | $ | 1,492,292 | ||||||
Adjustment of depreciation upon disposal of the equipment | (57,212 | ) | 808 | (10,801 | ) | |||||||
Rents paid for vehicles leased | 13,482 | 18,101 | 18,077 | |||||||||
Total | $ | 1,463,258 | $ | 1,523,391 | $ | 1,499,568 | ||||||
Years ended December 31, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
Current: | ||||||||||||
Federal | $ | (22,950 | ) | $ | (214,487 | ) | $ | (37,368 | ) | |||
Foreign | 16,679 | 22,341 | 6,085 | |||||||||
State and local | 10,565 | 10,175 | (2,711 | ) | ||||||||
Total current | 4,294 | (181,971 | ) | (33,994 | ) | |||||||
Deferred: | ||||||||||||
Federal | 132,877 | 270,248 | 91,940 | |||||||||
Foreign | (11,801 | ) | (6,400 | ) | 3,300 | |||||||
State and local | 8,500 | (3,000 | ) | 11,100 | ||||||||
Total deferred | 129,576 | 260,848 | 106,340 | |||||||||
Total provision | $ | 133,870 | $ | 78,877 | $ | 72,346 | ||||||
F-40
Table of Contents
Years ended December 31, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
Difference between tax and book depreciation | $ | 489,202 | $ | 145,208 | $ | 464,653 | ||||||
Accrued and prepaid expense deducted for tax purposes when paid or incurred | (41,640 | ) | (32,267 | ) | (3,078 | ) | ||||||
Tax operating loss (carryforwards) utilized | (341,090 | ) | 288,783 | (365,982 | ) | |||||||
Foreign tax credit (carryforwards) utilized | (8,556 | ) | (105,980 | ) | 8,595 | |||||||
Federal and state alternative minimum tax credit (carryforwards) utilized | (3,288 | ) | (34,896 | ) | 2,152 | |||||||
Increase in valuation allowance | 34,948 | — | — | |||||||||
Total deferred provision | $ | 129,576 | $ | 260,848 | $ | 106,340 | ||||||
�� |
2004 | 2003 | |||||||
Difference between tax and book depreciation | $ | 1,680,024 | $ | 1,190,822 | ||||
Accrued and prepaid expense deducted for tax purposes when paid or incurred | (262,970 | ) | (220,254 | ) | ||||
Tax operating loss carryforwards | (423,585 | ) | (82,495 | ) | ||||
Foreign tax credit carryforwards, net of valuation allowance | (105,585 | ) | (131,977 | ) | ||||
Federal and state alternative minimum tax credit carryforwards | (38,184 | ) | (34,896 | ) | ||||
Total | $ | 849,700 | $ | 721,200 | ||||
Years ended December 31, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
Computed tax at statutory rate | $ | 175,893 | $ | 83,122 | $ | 75,738 | ||||||
State and local income taxes, net of Federal income tax benefit | 12,392 | 4,664 | 5,453 | |||||||||
Income taxes on foreign earnings at effective rates different from the U.S. statutory rate, including the anticipated realization of certain foreign tax benefits and the effect of subsidiaries’ gains and losses and exchange adjustments with no tax effect | (7,529 | ) | (9,949 | ) | (5,989 | ) | ||||||
Increase in valuation allowance | 34,948 | — | — | |||||||||
Adjustments made to Federal and foreign tax accruals in connection with tax audit evaluations | (69,834 | ) | — | — | ||||||||
Favorable foreign tax adjustments relating to tax return filings | (11,684 | ) | — | — | ||||||||
All other items, net | (316 | ) | 1,040 | (2,856 | ) | |||||||
Total provision | $ | 133,870 | $ | 78,877 | $ | 72,346 | ||||||
F-41
Table of Contents
Years ended December 31, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
Rents | $ | 100,243 | $ | 90,421 | $ | 80,857 | ||||||
Concession fees: | ||||||||||||
Minimum fixed obligations | 227,535 | 230,443 | 215,385 | |||||||||
Additional amounts, based on revenues | 182,069 | 132,860 | 139,918 | |||||||||
Total | $ | 509,847 | $ | 453,724 | $ | 436,160 | ||||||
Rents | Concessions | |||||||
Years ended December 31, | ||||||||
2005 | $ | 77,994 | $ | 166,108 | ||||
2006 | 66,028 | 140,355 | ||||||
2007 | 53,083 | 117,098 | ||||||
2008 | 42,541 | 74,372 | ||||||
2009 | 30,524 | 50,564 | ||||||
Years after 2009 | 101,843 | 321,485 |
Years ended December 31, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
Revenue earning equipment | $ | 13,482 | $ | 18,101 | $ | 18,077 | ||||||
Office and computer equipment | 15,338 | 13,075 | 11,732 | |||||||||
Total | $ | 28,820 | $ | 31,176 | $ | 29,809 | ||||||
F-42
Table of Contents
Years ended December 31, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
Revenues (Restated) | ||||||||||||
Car rental | $ | 5,508 | $ | 4,889 | $ | 4,610 | ||||||
Industrial and construction equipment rental | 1,162 | 1,038 | 1,019 | |||||||||
Corporate and other | 6 | 7 | 9 | |||||||||
Total | $ | 6,676 | $ | 5,934 | $ | 5,638 | ||||||
Income (loss) before income taxes and minority interest | ||||||||||||
Car rental | $ | 438 | $ | 279 | $ | 264 | ||||||
Industrial and construction equipment rental | 88 | (22 | ) | (38 | ) | |||||||
Corporate and other | (23 | ) | (20 | ) | (10 | ) | ||||||
Total | $ | 503 | $ | 237 | $ | 216 | ||||||
Depreciation of revenue earning equipment | ||||||||||||
Car rental | $ | 1,228 | $ | 1,258 | $ | 1,229 | ||||||
Industrial and construction equipment rental | 235 | 265 | 271 | |||||||||
Corporate and other | — | — | — | |||||||||
Total | $ | 1,463 | $ | 1,523 | $ | 1,500 | ||||||
Depreciation of property and equipment | ||||||||||||
Car rental | $ | 136 | $ | 111 | $ | 116 | ||||||
Industrial and construction equipment rental | 37 | 36 | 35 | |||||||||
Corporate and other | 5 | 5 | 4 | |||||||||
Total | $ | 178 | $ | 152 | $ | 155 | ||||||
Amortization of intangibles | ||||||||||||
Car rental | $ | 1 | $ | — | $ | — | ||||||
Industrial and construction equipment rental | — | 1 | 1 | |||||||||
Corporate and other | — | — | — | |||||||||
Total | $ | 1 | $ | 1 | $ | 1 | ||||||
Operating income (loss): pre-tax income (loss) before interest expense and minority interest | ||||||||||||
Car rental | $ | 742 | $ | 551 | $ | 530 | ||||||
Industrial and construction equipment rental | 160 | $ | 54 | 52 | ||||||||
Corporate and other | (15 | ) | (12 | ) | 1 | |||||||
Total | $ | 887 | $ | 593 | $ | 583 | ||||||
F-43
Table of Contents
Years ended December 31, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
Total assets at end of year | ||||||||||||
Car rental | $ | 10,351 | $ | 9,310 | $ | 8,354 | ||||||
Industrial and construction equipment rental | 2,157 | 1,891 | 1,965 | |||||||||
Corporate and other | 1,588 | 1,378 | 810 | |||||||||
Total | $ | 14,096 | $ | 12,579 | $ | 11,129 | ||||||
Revenue earning equipment, net, at end of year | ||||||||||||
Car rental | $ | 7,597 | $ | 6,462 | $ | 5,998 | ||||||
Industrial and construction equipment rental | 1,526 | 1,331 | 1,428 | |||||||||
Corporate and other | — | — | — | |||||||||
Total | $ | 9,123 | $ | 7,793 | $ | 7,426 | ||||||
Revenue earning equipment and property and equipment | ||||||||||||
Car rental | ||||||||||||
Expenditures | $ | 10,885 | $ | 9,292 | $ | 9,891 | ||||||
Proceeds from disposals | (8,554 | ) | (7,701 | ) | (7,901 | ) | ||||||
Net expenditures | $ | 2,331 | $ | 1,591 | $ | 1,990 | ||||||
Industrial and construction equipment rental | ||||||||||||
Expenditures | $ | 708 | $ | 368 | $ | 272 | ||||||
Proceeds from disposals | (246 | ) | (228 | ) | (197 | ) | ||||||
Net expenditures | $ | 462 | $ | 140 | $ | 75 | ||||||
Corporate and other | ||||||||||||
Expenditures | $ | 3 | $ | 3 | $ | 4 | ||||||
Proceeds from disposals | — | — | — | |||||||||
Net expenditures | $ | 3 | $ | 3 | $ | 4 | ||||||
Years ended December 31, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
Revenues (Restated) | ||||||||||||
United States | $ | 4,678 | $ | 4,256 | $ | 4,221 | ||||||
Foreign | 1,998 | 1,678 | 1,417 | |||||||||
Total | $ | 6,676 | $ | 5,934 | $ | 5,638 | ||||||
Income before income taxes and minority interest | ||||||||||||
United States | $ | 323 | $ | 132 | $ | 131 | ||||||
Foreign | 180 | 105 | 85 | |||||||||
Total | $ | 503 | $ | 237 | $ | 216 | ||||||
Depreciation of revenue earning equipment | ||||||||||||
United States | $ | 1,107 | $ | 1,241 | $ | 1,252 | ||||||
Foreign | 356 | 282 | 248 | |||||||||
Total | $ | 1,463 | $ | 1,523 | $ | 1,500 | ||||||
Depreciation of property and equipment | ||||||||||||
United States | $ | 137 | $ | 114 | $ | 124 | ||||||
Foreign | 41 | 38 | 31 | |||||||||
Total | $ | 178 | $ | 152 | $ | 155 | ||||||
Amortization of intangibles | ||||||||||||
United States | $ | — | $ | 1 | $ | 1 | ||||||
Foreign | 1 | — | — | |||||||||
Total | $ | 1 | $ | 1 | $ | 1 | ||||||
Operating income: pre-tax income before interest expense and minority interest | ||||||||||||
United States | $ | 661 | $ | 449 | $ | 461 | ||||||
Foreign | 226 | 144 | 122 | |||||||||
Total | $ | 887 | $ | 593 | $ | 583 | ||||||
Total assets at end of year | ||||||||||||
United States | $ | 10,099 | $ | 9,014 | $ | 8,423 | ||||||
Foreign | 3,997 | 3,565 | 2,706 | |||||||||
Total | $ | 14,096 | $ | 12,579 | $ | 11,129 | ||||||
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Years ended December 31, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
Revenue earning equipment, net, at end of year | ||||||||||||
United States | $ | 6,705 | $ | 5,873 | $ | 5,908 | ||||||
Foreign | 2,418 | 1,920 | 1,518 | |||||||||
Total | $ | 9,123 | $ | 7,793 | $ | 7,426 | ||||||
Revenue earning equipment and property and equipment | ||||||||||||
United States | ||||||||||||
Expenditures | $ | 7,928 | $ | 6,801 | $ | 7,714 | ||||||
Proceeds from disposals | (5,818 | ) | (5,453 | ) | (5,995 | ) | ||||||
Net expenditures | $ | 2,110 | $ | 1,348 | $ | 1,719 | ||||||
Foreign | ||||||||||||
Expenditures | $ | 3,668 | $ | 2,862 | $ | 2,453 | ||||||
Proceeds from disposals | (2,982 | ) | (2,476 | ) | (2,103 | ) | ||||||
Net expenditures | $ | 686 | $ | 386 | $ | 350 | ||||||
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First Quarter 2004 | Second Quarter 2004(1) | Third Quarter 2004(5) | ||||||||||||||||||||||||||||||
As | As | As | Fourth | Year ended | ||||||||||||||||||||||||||||
Previously | Previously | Previously | Quarter | Dec. 31, | ||||||||||||||||||||||||||||
Reported | As Restated | Reported | As Restated | Reported | As Restated | 2004(2)(5) | 2004 | |||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||||||
Car rental | $ | 1,053,242 | $ | 1,198,213 | $ | 1,187,158 | $ | 1,353,706 | $ | 1,363,814 | $ | 1,538,357 | $ | 1,340,529 | $ | 5,430,805 | ||||||||||||||||
Industrial and construction, equipment rental | 209,956 | 240,268 | 243,467 | 281,989 | 277,047 | 316,331 | 323,367 | 1,161,955 | ||||||||||||||||||||||||
Other | 14,750 | 17,763 | 17,111 | 20,427 | 20,239 | 24,509 | 20,493 | 83,192 | ||||||||||||||||||||||||
Total revenues | 1,277,948 | 1,456,244 | 1,447,736 | 1,656,122 | 1,661,100 | 1,879,197 | 1,684,389 | 6,675,952 | ||||||||||||||||||||||||
Expenses: | ||||||||||||||||||||||||||||||||
Direct operating | 688,436 | 865,145 | 709,907 | 916,684 | 778,384 | 994,164 | 958,368 | 3,734,361 | ||||||||||||||||||||||||
Depreciation of revenue earning equipment | 359,958 | 359,958 | 353,784 | 353,784 | 370,738 | 370,738 | 378,778 | 1,463,258 | ||||||||||||||||||||||||
Selling, general and administrative | 146,587 | 148,174 | 142,586 | 144,195 | 158,742 | 161,059 | 137,889 | 591,317 | ||||||||||||||||||||||||
Interest, net of interest income | 87,963 | 87,963 | 94,743 | 94,743 | 102,372 | 102,372 | 99,386 | 384,464 | ||||||||||||||||||||||||
Total expenses | 1,282,944 | 1,461,240 | 1,301,020 | 1,509,406 | 1,410,236 | 1,628,333 | 1,574,421 | 6,173,400 | ||||||||||||||||||||||||
Income (loss) before income taxes and minority interest | (4,996 | ) | (4,996 | ) | 146,716 | 146,716 | 250,864 | 250,864 | 109,968 | 502,552 | ||||||||||||||||||||||
(Provision) benefit for taxes on income | 1,713 | 1,713 | (51,250 | ) | (51,250 | ) | (64,968 | ) | (64,968 | ) | (19,365 | ) | (133,870 | ) | ||||||||||||||||||
Minority interest | — | — | — | — | (1,456 | ) | (1,456 | ) | (1,755 | ) | (3,211 | ) | ||||||||||||||||||||
Net income (loss) | $ | (3,283 | ) | $ | (3,283 | ) | $ | 95,466 | $ | 95,466 | $ | 184,440 | $ | 184,440 | $ | 88,848 | $ | 365,471 | ||||||||||||||
Year Ended | ||||||||||||||||||||||||||||||||||||||||
First Quarter 2003(3) | Second Quarter 2003(3)(4) | Third Quarter 2003 | Fourth Quarter 2003 | Dec. 31, 2003 | ||||||||||||||||||||||||||||||||||||
As | As | As | As | As | ||||||||||||||||||||||||||||||||||||
Previously | As | Previously | As | Previously | As | Previously | As | Previously | As | |||||||||||||||||||||||||||||||
Reported | Restated | Reported | Restated | Reported | Restated | Reported | Restated | Reported | Restated | |||||||||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||||||||||||||
Car rental | $ | 938,850 | $ | 1,068,230 | $ | 1,033,668 | $ | 1,178,900 | $ | 1,225,400 | $ | 1,384,089 | $ | 1,041,326 | $ | 1,188,036 | $ | 4,239,244 | $ | 4,819,255 | ||||||||||||||||||||
Industrial and construction equipment rental | 194,087 | 220,261 | 220,710 | 256,000 | 245,966 | 280,517 | 243,819 | 280,976 | 904,582 | 1,037,754 | ||||||||||||||||||||||||||||||
Other | 14,723 | 17,579 | 15,431 | 18,815 | 18,178 | 21,997 | 15,771 | 18,270 | 64,103 | 76,661 | ||||||||||||||||||||||||||||||
Total revenues | 1,147,660 | 1,306,070 | 1,269,809 | 1,453,715 | 1,489,544 | 1,686,603 | 1,300,916 | 1,487,282 | 5,207,929 | 5,933,670 | ||||||||||||||||||||||||||||||
Expenses: | ||||||||||||||||||||||||||||||||||||||||
Direct operating | 621,369 | 778,215 | 625,522 | 807,682 | 690,701 | 885,871 | 659,135 | 844,333 | 2,596,727 | 3,316,101 | ||||||||||||||||||||||||||||||
Depreciation of revenue earning equipment | 363,026 | 363,026 | 373,037 | 373,037 | 396,808 | 396,808 | 390,520 | 390,520 | 1,523,391 | 1,523,391 | ||||||||||||||||||||||||||||||
Selling, general and administrative | 131,213 | 132,777 | 122,204 | 123,950 | 125,486 | 127,375 | 116,373 | 117,541 | 495,276 | 501,643 | ||||||||||||||||||||||||||||||
Interest, net of interest income | 88,888 | 88,888 | 89,422 | 89,422 | 88,966 | 88,966 | 87,767 | 87,767 | 355,043 | 355,043 | ||||||||||||||||||||||||||||||
Total expenses | 1,204,496 | 1,362,906 | 1,210,185 | 1,394,091 | 1,301,961 | 1,499,020 | 1,253,795 | 1,440,161 | 4,970,437 | 5,696,178 | ||||||||||||||||||||||||||||||
Income (loss) before income taxes | (56,836 | ) | (56,836 | ) | 59,624 | 59,624 | 187,583 | 187,583 | 47,121 | 47,121 | 237,492 | 237,492 | ||||||||||||||||||||||||||||
(Provision) benefit for taxes on income | 19,144 | 19,144 | (20,034 | ) | (20,034 | ) | (60,888 | ) | (60,888 | ) | (17,099 | ) | (17,099 | ) | (78,877 | ) | (78,877 | ) | ||||||||||||||||||||||
Net income (loss) | $ | (37,692 | ) | $ | (37,692 | ) | $ | 39,590 | $ | 39,590 | $ | 126,695 | $ | 126,695 | $ | 30,022 | $ | 30,022 | $ | 158,615 | $ | 158,615 | ||||||||||||||||||
(1) | Includes $7.0 million received in the second quarter of 2004 regarding claims made by the Company on its insurance policies for business interruption losses resulting from the terrorist attacks of September 11, 2001. | |
(2) | Includes a final gain of $7.5 million in the fourth quarter of 2004 from the condemnation of a car rental and support facility in Florida. | |
(3) | Includes a credit totaling $7.8 million in the first and second quarter of 2003 from a one-time refund of Goods and Service Tax related to the Company’s Australian car rental operations. | |
(4) | Includes an initial gain of $8.0 million in the second quarter of 2003 from the condemnation of a car rental and support facility in Florida. | |
(5) | Includes favorable foreign tax adjustments of $23.3 million in the third quarter of 2004 and net favorable domestic and foreign tax adjustments of $23.3 million in the fourth quarter of 2004. |
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Additions | ||||||||||||||||||||
Balance at | ||||||||||||||||||||
Beginning of | Charged to | Translation | Balance at | |||||||||||||||||
Year | Expense | Adjustments | Deductions | End of Year | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
2004: | ||||||||||||||||||||
Allowance for doubtful accounts | $ | 35,758 | $ | 14,133 | $ | 1,123 | $ | 20,567 | (a) | $ | 30,447 | |||||||||
2003: | ||||||||||||||||||||
Allowance for doubtful accounts | $ | 29,047 | $ | 23,053 | $ | 3,646 | $ | 19,988 | (a) | $ | 35,758 | |||||||||
2002: | ||||||||||||||||||||
Allowance for doubtful accounts | $ | 38,886 | $ | 15,570 | $ | 2,900 | $ | 28,309 | (a) | $ | 29,047 | |||||||||
(a) | Amounts written off, net of recoveries. |
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JPMorgan | Citigroup | Goldman, Sachs & Co. |
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The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement field with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where an offer or sale is not permitted.
• | The purchase contract will obligate you to purchase from us on the purchase contract settlement date for a price of $25 in cash, the following number of shares of our Class A common stock, subject to anti-dilution adjustments: |
• | if the average closing price of our Class A common stock over the 20-trading day period ending on the third trading day prior to November 16, 2008 equals or exceeds $ , shares of our Class A common stock; | ||
• | if the average closing price of our Class A common stock over the same period is less than $ but greater than $ , a number of shares of our Class A common stock having a value, based on the average closing price, equal to $25; and | ||
• | if the average closing price of our Class A common stock over the same period is less than or equal to $ , shares of our Class A common stock. |
• | The purchase contract settlement date is expected to be November 16, 2008 (or, if this date is not a business day, the following business day), but could be deferred for up to four quarterly periods until November 16, 2009 (or, if this date is not a business day, the following business day). | ||
• | We will also pay you quarterly contract adjustment payments at a rate of % per year of the stated amount of $25 per Equity Unit, or $ per year, subject to our right to defer contract adjustment payments, as described in this prospectus. | ||
• | The senior notes will initially bear interest at a rate of % per year, payable, initially, quarterly. The senior notes will be remarketed as described in this prospectus. Following a successful remarketing, the interest rate on the senior notes may be reset, the interest payment dates may be changed and the maturity may be adjusted as described in this prospectus. | ||
• | If a tax event redemption described in this prospectus occurs prior to the purchase contract settlement date, the senior notes comprising a part of the Corporate Units will be replaced by the treasury portfolio described in this prospectus. | ||
• | You can create Treasury Units from Corporate Units by substituting treasury securities for the senior notes and you can recreate Corporate Units by substituting senior notes or the applicable ownership interests in the treasury portfolio for the treasury securities comprising a part of the Treasury Units. | ||
• | Your ownership interest in a senior note or, if substituted for the ownership interest in a senior note, the treasury securities or the applicable ownership interest in the treasury portfolio, as the case may be, will be pledged to us to secure your obligation under the related purchase contract. | ||
• | The Corporate Units will initially be sold by the underwriters in minimum increments of 40 units. |
Per Unit | Total | |||||||
Initial public offering price | $ | $ | ||||||
Underwriting discounts and commissions | $ | $ | ||||||
Proceeds to us, before expenses | $ | $ | ||||||
JPMorgan | Citigroup | Goldman, Sachs & Co. |
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• | if the applicable market value of our Class A common stock is equal to or greater than $ , which we refer to as the threshold appreciation price, the settlement rate will be shares of our Class A common stock, which is the number of shares of our Class A common stock equal to $25 divided by the threshold appreciation price; | ||
• | if the applicable market value of our Class A common stock is less than the threshold appreciation price but greater than $ , which we refer to as the reference price, the settlement rate will be a number of shares of our Class A common stock equal to $25 divided by the applicable market value; and | ||
• | if the applicable market value of our Class A common stock is less than or equal to the reference price, the settlement rate will be shares of our Class A common stock, which is the number of shares of our Class A common stock equal to $25 divided by the reference price. |
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• | the purchase contract settlement date will be deferred until the next scheduled remarketing date, for up to four quarterly periods until November 16, 2009 (or, if this date is not a business day, the following business day); | ||
• | the interest rate on the senior notes will not be reset; | ||
• | the senior notes will continue to bear interest at the rate of % per year, payable quarterly in arrears; | ||
• | the proceeds received upon maturity of the treasury securities pledged as collateral for any Treasury Units will be used to settle the applicable purchase contracts, and any remaining cash proceeds will be remitted to the holders of the Treasury Units, and any cash pledged by holders of Corporate Units choosing not to participate in the remarketing |
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will also be used to settle the applicable purchase contracts and the purchase contract settlement date will not be further deferred with respect to these purchase contracts, regardless of whether the remarketing attempt at that time is successful; | |||
• | the remarketing agents will attempt to remarket the senior notes on subsequent remarketing dates and establish a reset rate meeting the requirements described above; the subsequent remarketing dates will be the third business day immediately preceding February 16, 2009, May 16, 2009, August 16, 2009 and November 16, 2009. |
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• | through early settlement as described under “Can I settle the purchase contract early?” above; | ||
• | through cash settlement prior to any remarketing date in the case of holders of Corporate Units, unless the treasury portfolio has replaced the senior notes underlying the Corporate Units, by notifying the purchase contract agent on or prior to the second business day prior to such remarketing date and delivering the cash payment required under the related purchase contracts on or prior to the business day before the purchase contract settlement date; | ||
• | through the automatic application of the proceeds of the treasury securities in the case of the Treasury Units or proceeds from the treasury portfolio equal to the principal amount of the senior notes in the case of Corporate Units if the treasury portfolio has replaced the senior notes as a component of the Corporate Units; | ||
• | through exercise of the put right as described under “What happens if the senior notes are not successfully remarketed prior to the final remarketing date?” if no successful remarketing has occurred and none of the above events has taken place; or | ||
• | without any further action, upon the termination of the purchase contracts as a result of our bankruptcy, insolvency or reorganization. |
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• | U.S. treasury securities that mature on or prior to November 15, 2008 in an aggregate amount equal to the principal amount of the senior notes underlying the Corporate Units, and | ||
• | for each scheduled interest payment date on the senior notes that occurs after the tax event redemption date and on or prior to November 16, 2008, U.S. treasuries maturing on or prior to that interest payment date in an amount equal to the interest payment due on the senior notes underlying the Corporate Units assuming no tax event redemption and accruing from and including the immediately preceding interest payment date. |
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Value of Delivered Shares | Number of Shares Delivered | |
Upon Settlement of a Purchase Contract | Upon Settlement of a Purchase Contract | |
Notes: |
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1/40 Ownership Interest in | |||||||||||
Purchase Contract | Senior Note(1)(2) | ||||||||||
(Owed to Holder) | (Owed to Holder) | ||||||||||
Class A common stock | Interest | ||||||||||
+ | % per year paid quarterly | ||||||||||
Contract Adjustment Payment | |||||||||||
% per year | (at reset rate following a successful | ||||||||||
paid quarterly | remarketing and paid monthly, quarterly or | ||||||||||
semi-annually thereafter) | |||||||||||
(Owed to Hertz) | (Owed to Holder) | ||||||||||
$25 at Settlement | $25 at Maturity | ||||||||||
(November 16, 2008) | (November 16, 2015, | ||||||||||
unless adjusted) | |||||||||||
Notes: |
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• | The holder of a Corporate Unit owns the 1/40 undivided beneficial ownership interest in the senior note but will pledge it to us to secure the holder’s obligation under the related purchase contract. | |
• | If the treasury portfolio has replaced the senior notes as a result of a tax event redemption prior to the earlier of a successful remarketing or a purchase contract settlement date, the applicable ownership interest in the treasury portfolio will also replace the applicable ownership interest in senior notes as a component of the Corporate Unit. |
1/40 Ownership Interest in | ||
Purchase Contract | Treasury Security | |
(Owed to Holder) | ||
Class A common stock | ||
+ | ||
Contract Adjustment Payment | ||
% per year | ||
paid quarterly | ||
(Owed to Hertz) | (Owed to Holder) | |
$25 at Settlement | $25 at Maturity | |
(November 16, 2008) | (November 16, 2008) | |
• | The holder owns the 1/40 ownership interest in the treasury security that forms a part of the Treasury Unit but will pledge it to us through the collateral agent to secure the holder’s obligations under the related purchase contract. Unless the purchase contract is terminated as a result of our bankruptcy, insolvency or reorganization or the holder recreates a Corporate Unit, the treasury security will be used to satisfy the holder’s obligation under the related purchase contract. | |
• | Treasury Units can only be created with integral multiples of 40 Corporate Units. | |
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Senior Note | ||||
(Owed to Holder) | ||||
Interest | ||||
% per year paid quarterly (at reset rate following a successful remarketing and paid monthly, quarterly or semi-annually thereafter) | ||||
(Owed to Holder) | ||||
$1,000 at Maturity | ||||
(November 16, 2015, unless adjusted) | ||||
• | Because the senior notes and the treasury securities are issued in minimum denominations of $1,000, holders of Corporate Units may only create Treasury Units in integral multiples of 40 Corporate Units. | |
• | To create 40 Treasury Units, a holder separates 40 Corporate Units into their two components – 40 purchase contracts and a senior note—and then combines the purchase contracts with a treasury security that matures on the day immediately preceding the purchase contract settlement date. | |
• | The senior note, which is no longer a component of Corporate Units and has a principal amount of $1,000, is released to the holder and is tradable as a separate security. | |
• | A holder owns the treasury security that forms a part of the Treasury Units but will pledge it to us through the collateral agent to secure its obligation under the related purchase contract. | |
• | The treasury security together with the 40 purchase contracts constitute 40 Treasury Units. |
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1/40 Ownership | 1/40 Ownership | 1/40 Ownership | |||||||||||||||||||||
Interest in | Interest in | Interest in | |||||||||||||||||||||
Purchase Contract | Senior Note(1)(2) | Purchase Contract | Treasury Security | Senior Note(1)(2) | |||||||||||||||||||
(Owed to Holder) | (Owed to Holder) | (Owed to Holder) | (Owed to Holder) | ||||||||||||||||||||
Class A common | Interest | Class A common stock | Interest | ||||||||||||||||||||
stock | % per year paid | + | % per year paid | ||||||||||||||||||||
+ | quarterly | Contract Adjustment | quarterly | ||||||||||||||||||||
Contract Adjustment | Payment | ||||||||||||||||||||||
Payment % per year paid quarterly | + | (at reset rate following a successful remarketing and paid monthly, quarterly or semi-annually thereafter) | ® | % per year paid quarterly | + | + | (at reset rate following a successful remarketing and paid monthly, quarterly or semi-annually thereafter) | ||||||||||||||||
(Owed to Hertz) | (Owed to Holder) | (Owed to Hertz) | (Owed to Holder) | (Owed to Holder) | |||||||||||||||||||
$25 at Settlement | $25 at Maturity | $25 at Settlement | $25 at Maturity | $25 at Maturity | |||||||||||||||||||
(November 16, 2008) | (November 16, 2015, | (November 16, 2008) | (November 15, 2008) | (November 16, 2015, | |||||||||||||||||||
unless adjusted) | unless adjusted) | ||||||||||||||||||||||
Corporate Unit | Treasury Unit |
• | Following a tax event redemption, the applicable ownership interests in the treasury portfolio, rather than the senior note, will be released to the holder upon the transformation of a Corporate Unit into a Treasury Unit and will be tradable separately. | ||
• | The holder can also transform 40 Treasury Units and a $1,000 principal senior note (or, following a tax event redemption, the applicable ownership interest in the treasury portfolio) into 40 Corporate Units. Following that transformation, the treasury security, which will no longer be a component of the Treasury Unit, will be released to the holder and will be tradable as a separate security. | ||
• | If, following a tax event redemption, the applicable ownership interest in the treasury portfolio has replaced the senior notes underlying the Corporate Units, you will no longer be permitted to create any Treasury Units from Corporate Units or recreate any Corporate Units from Treasury Units. |
Notes: |
each interest payment payable in respect of, a $1,000 principal amount senior note.
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• | disqualification of the indenture trustee for “conflicting interests,” as defined under the Trust Indenture Act; | ||
• | provisions preventing a trustee that is also a creditor of the issuer from improving its own credit position at the expense of the security holders immediately prior to or after a default under such indenture; and |
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• | the requirement that the indenture trustee deliver reports at least annually with respect to certain matters concerning the indenture trustee and the securities. |
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Six Months | ||||||||||||
Ended June | ||||||||||||
30, | Year Ended December 31, | |||||||||||
2005 | 2004 | 2003 | 2002 | 2001 | 2000 | |||||||
Ratio of Earnings to Fixed Charges (1) | 1.6 | 1.9 | 1.5 | 1.4 | 1.0 | 2.1 |
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(a) | a purchase contract, under which: |
(1) | you will agree to purchase from us, and we will agree to sell to you on the purchase contract settlement date (scheduled to occur on November 16, 2008, subject to deferral for up to four quarterly periods until November 16, 2009 if remarketing attempts are not successful; provided that if any such date is not a business day, settlement will occur on the following business day), or upon early settlement, for $25 in cash, a number of newly issued shares of our Class A common stock equal to the settlement rate described below under “Description of the purchase contracts—Purchase of Class A common stock” or “Description of the purchase contracts—Early settlement,” as the case may be, subject to anti-dilution adjustments, and | ||
(2) | we will pay you quarterly contract adjustment payments at the rate of % per year on the stated amount of $25, or $ per year, subject to our right to defer any contract adjustment payments, and |
(b) | either: |
(1) | a 1/40, or 2.5%, undivided, beneficial ownership interest in a $1,000 principal amount senior note issued by us, or | ||
(2) | following the occurrence of a tax event redemption, the applicable ownership interest in a portfolio of U.S. treasury securities, which we refer to as the treasury portfolio. |
• | a 1/40, or 2.5%, undivided, beneficial ownership interest in $1,000 face amount of U.S. treasury securities included in the treasury portfolio that matures on the business day immediately prior to the purchase contract settlement date; and |
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• | for each scheduled interest payment date on the senior notes that occurs after the tax event redemption date and on or prior to the purchase contract settlement date, an undivided beneficial ownership interest in a $1,000 U.S. treasury security that matures on or prior to that interest payment date in an amount equal to the interest payment that would be due on a 1/40, or 2.5%, beneficial ownership interest in the principal amount of the senior notes that would have been components of the Corporate Units assuming no tax event redemption and accruing from and including the immediately preceding interest payment date. |
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Applicable Settlement Date | CUSIP No. | |
November 15, 2008 | 912820DK0 | |
February 15, 2009 | 912820JW8 | |
May 15, 2009 | 912820DV6 | |
August 15, 2009 | 912820EA1 | |
November 15, 2009 | 912800AA7 |
(a) | a purchase contract under which |
(1) | you will agree to purchase from us, and we will agree to sell to you, not later than the purchase contract settlement date, for $25 in cash, a number of newly issued shares of our Class A common stock equal to the settlement rate, subject to anti-dilution adjustments, and | ||
(2) | we will pay you quarterly contract adjustment payments at the rate of % per year on the stated amount of $25, or $ per year, subject to our right to defer any contract adjustment payments, and |
(b) | a 1/40, or 2.5%, undivided beneficial interest in a treasury security with a principal amount of $1,000. |
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• | deposit with the collateral agent a treasury security that has a principal amount payable on the business day prior to the applicable settlement date of $1,000 which must be purchased on the open market at your expense (unless otherwise owned by you), and | ||
• | transfer 40 Corporate Units to the purchase contract agent accompanied by a notice stating that you have deposited a treasury security with the collateral agent and requesting the release to you of the senior notes relating to the 40 Corporate Units. |
• | cancel the 40 Corporate Units, | ||
• | transfer the related $1,000 principal amount of senior note to you, and | ||
• | deliver 40 Treasury Units to you. |
• | deposit with the collateral agent a $1,000 principal amount senior note, which must be purchased in the open market at your expense unless otherwise owned by you, and | ||
• | transfer 40 Treasury Unit certificates to the purchase contract agent accompanied by a notice stating that you have deposited a $1,000 principal amount senior note with the collateral agent and requesting the release to you of the treasury security relating to the Treasury Units. |
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• | cancel the 40 Treasury Units, | ||
• | transfer the related treasury security to you, and | ||
• | deliver 40 Corporate Units to you. |
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• | If the applicable market value of our Class A common stock is equal to or greater than the threshold appreciation price of $ , the settlement rate will be shares of our Class A common stock (the “minimum settlement rate”), which is the number of shares equal to $25 divided by the threshold appreciation price. |
• | If the applicable market value of our Class A common stock is less than the threshold appreciation price but greater than the reference price of $ , the settlement rate will be a number of shares of our Class A common stock equal to $25 divided by the applicable market value. |
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• | If the applicable market value of our Class A common stock is less than or equal to the reference price, the settlement rate will be shares of our Class A common stock (the “maximum settlement rate”), which is the number of shares equal to $25 divided by the reference price. |
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• | is not suspended from trading on any national or regional securities exchange or association or over-the-counter market at the close of business and | ||
• | has traded at least once on the national or regional securities exchange or association or over-the-counter market that is the primary market for the trading of the Class A common stock. |
• | you have settled the related purchase contracts prior to the purchase contract settlement date through the early delivery of cash to the purchase contract agent in the manner described under “—Early settlement” or “—Early settlement upon cash merger,” | ||
• | you have that settled the related purchase contracts with separate cash on the third business day immediately preceding a remarketing date pursuant to prior notice given in the manner described under “—Notice to settle with cash,” or | ||
• | an event described under “—Termination” has occurred, then, the settlement of the stock purchase contracts will occur as follows: | ||
• | in the case of Corporate Units where the treasury portfolio has replaced the senior notes underlying the Corporate Units because of a tax event redemption, proceeds equal to the stated amount of $25 per Corporate Unit when paid at maturity of the appropriate applicable ownership interests of the treasury portfolio automatically will be applied to satisfy in full your obligation to purchase common stock under the related purchase contracts; | ||
• | in the case of Corporate Units where there has been a successful remarketing of the senior notes on the remarketing date, the portion of the proceeds from the remarketing equal to the principal amount of the senior notes remarketed automatically will be applied to satisfy in full your obligation to purchase shares of our Class A common stock under the related purchase contracts; | ||
• | in the case of Corporate Units where there has been a failed final remarketing of the senior notes, you will be deemed to have automatically exercised your right to put your senior notes to us on the purchase contract settlement date at a put price equal to $1,000 per senior note ($25 per applicable ownership interest) plus accrued and unpaid interest in satisfaction of such holder’s obligations to us under the related purchase contracts, thereby satisfying such obligations in full, unless, prior to 11:00 a.m., New York City time, on the second business day immediately preceding the purchase contract settlement date, you provide a written notice of an intention to settle the related purchase contract with separate cash and on or prior to the business day immediately preceding the purchase contract settlement date deliver to the collateral agent the purchase price in cash; and |
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• | in the case of Treasury Units, the principal amount of the related treasury securities, when paid at maturity, automatically will be applied to satisfy in full your obligation to purchase common stock under the related purchase contracts. |
• | irrevocably agreed to be bound by the terms and provisions of the related purchase contracts and the purchase contract and pledge agreement and to have agreed to perform your obligations thereunder for so long as you remain a holder of the Corporate Units or Treasury Units; and | ||
• | duly appointed the purchase contract agent as your attorney-in-fact to enter into and perform the related purchase contracts and purchase contract and pledge agreement on your behalf and in your name. |
• | yourself as the owner of the related senior notes underlying the Corporate Units, applicable ownership interests in the treasury portfolio or the treasury securities, as the case may be, and | ||
• | the senior notes as indebtedness of the Company for all United States federal income tax purposes. |
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• | any of our proposed changes to the terms of the senior notes that will become effective upon a successful remarketing, including, if applicable, any change to the stated maturity of the senior notes, the date on and after which we will have the right to redeem the senior notes at our option, and any change to the interest payment dates; | ||
• | the procedures you must follow if you hold your senior notes as a component of Corporate Units to elect not to participate in the remarketing and the date by which such election must be made; | ||
• | the procedures you must follow if you hold senior notes separately to elect to participate in the remarketing as described below under “Description of senior notes—Optional remarketing,” and | ||
• | only in the case of a remarketing for settlement on November 16, 2009 (or, if this date is not a business day, the following business day), the procedures you must follow in the event of a failed final remarketing if you hold the senior notes separately to exercise your put right with respect to your senior notes. |
• | the interest rate on the senior notes will not be reset; | ||
• | the remarketing agents will thereafter attempt to establish a new reset rate meeting the requirements described above and remarket the senior notes on subsequent remarketing dates, which will be the third business day immediately preceding February 16, 2009, May 16, 2009, August 16, 2009 and November 16, 2009; | ||
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• | the proceeds received upon maturity of the treasury securities pledged as collateral for any Treasury Units will be used to settle the applicable purchase contracts, and any remaining cash proceeds will be remitted to the holders of the Treasury Units, and any cash pledged by holders of Corporate Units choosing not to participate in the remarketing will also be used to settle the applicable purchase contracts and the purchase contract settlement date will not be further deferred with respect to these purchase contracts, regardless of whether the remarketing attempt at that time is successful; and | ||
• | the purchase contract settlement date for all remaining purchase contract will be deferred until the next remarketing settlement date. |
• | The interest rate on the senior notes will not be reset and the senior notes will continue to bear cash interest at the initial rate of % per year, payable quarterly in arrears. | ||
• | If you hold senior notes, you will have the right to put your senior notes to us at a put price equal to $1,000 per senior note ($25 per applicable ownership interest) plus accrued and unpaid interest. | ||
• | If you hold Corporate Units, you will be deemed to have automatically exercised this put right with respect to the senior notes underlying such Corporate Units unless, prior to 11:00 a.m., New York City time, on the second business day immediately preceding the purchase contract settlement date, you provide a written notice of your intention to settle the related purchase contract with separate cash and on or prior to the business day immediately preceding the purchase contract settlement date deliver to the collateral agent the purchase price in cash. Unless you have settled the related purchase contracts with separate cash on or prior to the purchase contract settlement date, you will be deemed to have elected to apply a portion of the proceeds of the put price equal to the principal amount of the senior notes underlying such Corporate Units against your obligations to us under the related purchase contracts, thereby satisfying such obligations in full, and we will deliver to you our Class A common stock pursuant to the related purchase contracts. |
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• | the stated amount times the number of purchase contracts being settled, plus | ||
• | if the delivery is made with respect to any purchase contract during the period from the close of business on any record date next preceding any payment date to the opening of business on such payment date, an amount equal to the contract adjustment payments payable on the payment date with respect to the purchase contract, minus | ||
• | the amount of any deferred contract adjustment payments payable by us to you on the payment date with respect to the purchase contract. |
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• | except as described below in “—Early settlement upon cash merger” you will receive the minimum settlement rate of newly issued shares of Class A common stock per Corporate Unit or Treasury Unit, subject to adjustment under the circumstances described under “—Anti-dilution adjustments,” accompanied by an appropriate prospectus if required by law, | ||
• | the senior notes, the applicable ownership interest in the treasury portfolio or the treasury securities, as the case may be, related to the Corporate Units or Treasury Units will be transferred to you free and clear of our security interest, | ||
• | your right to receive future contract adjustment payments and any accrued and unpaid contract adjustment payments for the period since the most recent quarterly payment date will terminate, and | ||
• | no adjustment will be made to or for you on account of any accrued and unpaid contract adjustment payments referred to in the previous bullet. |
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(a) | If we issue shares of Class A common stock as a dividend or distribution on the outstanding shares of Class A common stock, then each fixed settlement rate will be adjusted based on the following formula: |
OS(1) | ||||
SR(1) = SR(0) x ________ | ||||
OS(0) | ||||
where, | ||||
SR(0) = | the fixed settlement rate in effect immediately prior to such event | |||
SR(1) = | the fixed settlement rate in effect immediately after such event | |||
OS(0) = | the number of shares of our Class A common stock outstanding at the close of business on the date fixed for such determination | |||
OS(1) = | the number of shares of our common stock outstanding at the close of business on the date fixed for such determination plus the total number of shares constituting such dividend or other distribution |
(b) | If we issue to all holders of outstanding shares of Class A common stock of rights, warrants or options (other than pursuant to any dividend reinvestment or share purchase plans) entitling them, for a period of up to 45 days, to subscribe for or purchase shares of Class A common stock at less than the current market price thereof, then each fixed settlement rate will be adjusted based on the following formula: |
OS(0) + X | ||||
SR(1) = SR(0) x __________ | ||||
OS(0) + Y | ||||
where, | ||||
SR(0) = | the fixed settlement rate in effect immediately prior to such event | |||
SR(1) = | the fixed settlement rate in effect immediately after such event |
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OS(0) = | the number of shares of our Class A common stock outstanding at the close of business on the date fixed for such determination | |||
X = | the total number of shares of our Class A common stock so offered for subscription or purchase | |||
Y = | the number of shares of our Class A common stock which the aggregate of the offering price of the total number of shares of our Class A common stock so offered for subscription or purchase would purchase at the current market price |
(c) | Subdivisions and splits of shares of Class A common stock, in which event each fixed settlement rate will be proportionately increased, and, conversely, if outstanding shares of our Class A common stock are combined into a smaller number of shares of our Class A common stock, each fixed settlement rate in effect at the opening of business on the day following the day upon which such combination becomes effective will be proportionately decreased. | ||
(d) | If we distribute evidences of our indebtedness, shares of capital stock, securities, cash or property (excluding any dividend or distribution covered by clause (a) or (b) above and any dividend or distribution paid exclusively in cash covered by clause (e) below) to all holders of outstanding shares of Class A common stock, then each fixed settlement rate will be adjusted based on the following formula: |
SP(0) | ||||
SR(1) = SR(0) x _______________ | ||||
SP(0) — FMV | ||||
where, | ||||
SR(0) = | the fixed settlement rate in effect immediately prior to such distribution | |||
SR(1) = | the fixed settlement rate in effect immediately after such distribution | |||
SP(0) = | the current market price of our Class A common stock | |||
FMV = | the fair market value, as determined by our board of directors, of the portion of the distribution applicable to one share of Class A common stock |
FMV + MP(0) | ||||
SR(1) = SR(0) x _______________ | ||||
MP(0) | ||||
where, | ||||
SR(0) = | the fixed settlement rate in effect immediately prior to such distribution |
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SR(1) = | the fixed settlement rate in effect immediately after such distribution | |||
FMV = | the average of the last reported sale prices of the capital stock or similar equity interest distributed to holders of our Class A common stock applicable to one share of our Class A common stock for the ten trading days commencing on and including the fifth trading day after the “ex-date” for such distribution | |||
MP(0) = | the average of the last reported sale prices of our Class A common stock for the ten trading days commencing on and including the fifth trading day after the “ex-date” for such distribution |
(e) | If we make a distribution consisting exclusively of cash to all holders of our Class A common stock, excluding (1) any cash dividend on our Class A common stock to the extent that the aggregate cash dividend per share of Class A common stock in any quarter does not exceed (i) $ in any fiscal quarter in the case of a quarterly dividend or (ii) $ in the prior twelve months in the case of an annual dividend (each such number, the “dividend threshold amount”) (the dividend threshold amount is subject to adjustment on an inversely proportional basis whenever fixed settlement rates are adjusted, provided that no adjustment will be made to the dividend threshold amount for any adjustment made to each fixed settlement rate pursuant to this clause (e)), and (2) any dividend or distribution in connection with our liquidation, dissolution or termination, then each fixed settlement rate will be adjusted based on the following formula: |
SP(0) | ||||
SR(1) = SR(0) x __________ | ||||
SP(0) – C | ||||
where, | ||||
SR(0) = | the fixed settlement rate in effect immediately prior to the record date for such distribution | |||
SR(1) = | the fixed settlement rate in effect immediately after the ex dividend date for such distribution | |||
SP(0) = | the current market price of our Class A common stock | |||
C = | the amount per share of such dividend or distribution in excess of the dividend threshold |
(f) | If we or any of our subsidiaries successfully completes a tender or exchange offer for our Class A common stock to the extent that the cash and the value of any other consideration included in the payment per share of Class A common stock exceeds % of the average of the closing price of our Class A common stock for each of the five consecutive trading days next succeeding the last date on which tenders or exchanges may be made under such tender or exchange offer, then each fixed settlement rate will be adjusted based on the following formula: |
AC + (SP(1) x OS(1)) | ||||
SR(1) = SR(0) x ___________________ | ||||
SP(1) x OS(0) |
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where, | ||||
SR(0) = | the fixed settlement rate in effect on the date such tender offer or exchange offer expires | |||
SR(1) = | the fixed settlement rate in effect on the day next succeeding the date such tender offer or exchange offer expires | |||
AC = | the fair market value, as determined by our board of directors, of the aggregate consideration payable for all shares of our Class A common stock that we purchase in such tender or exchange offer | |||
OS(0) = | the number of shares of our Class A common stock outstanding, including any such purchased shares | |||
OS(1) = | the number of shares of our Class A common stock outstanding less any such purchased shares | |||
SP(1) = | the closing price of our common stock on the trading day next succeeding the expiration of the tender or exchange offer |
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• | to substitute treasury securities for the related senior notes as provided for under “Description of the Equity Units—Creating Treasury Units,” | ||
• | to substitute senior notes for the related treasury securities, as provided for under “Description of the Equity Units—Recreating Corporate Units,” or | ||
• | upon the termination, cash settlement or early settlement of the related purchase contracts. |
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• | will not be entitled to have such global security certificates or the Corporate Units or Treasury Units represented by these certificates registered in their names, | ||
• | will not receive or be entitled to receive physical delivery of Corporate Unit or Treasury Unit certificates in exchange for beneficial interests in global security certificates, and | ||
• | will not be considered to be owners or holders of the global security certificates or any Corporate Units or Treasury Units represented by these certificates for any purpose under the Corporate Units or Treasury Units or the purchase contract and pledge agreement. | ||
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the purchase contract and pledge agreement
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• | to evidence the succession of another person to our obligations; | ||
• | to evidence and provide for the acceptance of appointment of a successor purchase contract agent or a successor collateral agent or securities intermediary; | ||
• | to add to the covenants for the benefit of holders or to surrender any of our rights or powers under those agreements; | ||
• | to make provision with respect to the rights of holders pursuant to adjustments in the settlement rate due to consolidations, mergers or other reorganization events; | ||
• | to cure any ambiguity, to correct or supplement any provisions that may be inconsistent, provided that any such amendment made solely to conform the provisions of the purchase contract and pledge agreement to this prospectus will be deemed not to adversely affect the interests of holders; and | ||
• | to make any other provisions with respect to such matters or questions, provided that such action shall not materially adversely affect the interest of the holders. | ||
• | change any payment date; | ||
• | impair the right of the holder of any pledged securities to receive distributions on the pledged securities or otherwise adversely affect the holder’s rights in or to the pledged securities; | ||
• | change the place or currency of payment or reduce any contract adjustment payments; | ||
• | impair the right to institute suit for the enforcement of the purchase contract or payment of any contract adjustment payments; | ||
• | reduce the number of shares of Class A common stock purchasable under the purchase contract, increase the price to purchase shares of Class A common stock upon settlement of the purchase contract, change the purchase contract settlement date or the right to early settlement or otherwise adversely affect the holder’s rights under the purchase contract; or | ||
• | reduce the above-stated percentage of outstanding purchase contracts the consent of the holders of which is required for the modification or amendment of the provisions of the purchase contracts or the purchase contract and pledge agreement. | ||
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• | the senior notes (equally and ratably with any of our other indebtedness then entitled to such Security Interest) shall be secured by a prior lien on such property, or | ||
• | such Security Interest would otherwise be permitted under the indentures. (Section 803) | ||
(a) | any Security Interest in favor of us or a Restricted Subsidiary; | ||
(b) | Security Interests existing on March 16, 2001; | ||
(c) | Security Interests existing on property at the time it is acquired by us or a Restricted Subsidiary, provided such Security Interest is limited to all or part of the property so acquired; | ||
(d) | (i) any Security Interest existing on the property of or on the outstanding shares or indebtedness of a corporation at the time such corporation shall become a Restricted Subsidiary, or (ii) subject to the provisions referred to above under “Limitations on mergers,” any Security Interest on property of a corporation existing at the time such corporation is merged into or consolidated with us or a Restricted Subsidiary or at the time of a sale, lease or other disposition of the properties of a corporation as an entirety or |
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substantially as an entirety to us or a Restricted Subsidiary, provided, in each such case, that such Security Interest does not extend to any property owned prior to such transaction by us or any Restricted Subsidiary which was a Restricted Subsidiary prior to such transaction; | |||
(e) | mechanics’, materialmen’s, carriers’ or other like liens, arising in the ordinary course of business; | ||
(f) | certain tax liens or assessments, and certain judgment liens; | ||
(g) | certain Security Interests in favor of the United States of America or any state or any agency of the United States of America; | ||
(h) | Security Interests on Business Equipment; | ||
(i) | in the case of property (other than Rental Equipment) acquired after March 16, 2001 by us or any Restricted Subsidiary, any Security Interest which secures an amount not in excess of the purchase price or fair value of such property at the time of acquisition, whichever, in our opinion, shall be less, provided that such Security Interest is limited to the property so acquired; | ||
(j) | Security Interests on properties financed through tax-exempt municipal obligations, provided that such Security Interest is limited to the property so financed; or | ||
(k) | any refunding, renewal, extension or placement (or successive refunding, renewals, extensions, or replacements), in whole or in part, of any Security Interest referred to in the foregoing clauses (a) through (j), provided that the principal amount of indebtedness secured in such refunding, renewal, extension or replacement does not exceed that secured at the time by such Security Interest and that such renewal, refunding, extension or replacement of such Security Interest is limited to all or part of the same property subject to the Security Interest being refunded, renewed, extended or replaced. | ||
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• | our capital and surplus accounts and the capital and surplus accounts of our Restricted Subsidiaries, as shown in our most recent consolidated balance sheet and our Restricted Subsidiaries, prepared in accordance with generally accepted accounting principles, plus | ||
• | the aggregate outstanding principal amount of our Subordinated Debt (as defined in the indenture) and the aggregate principal amount of Subordinated Debt of Restricted Subsidiaries, as reflected on the same consolidated balance sheet. | ||
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• | failure for 30 days to pay interest on the senior notes when due; | ||
• | failure to pay principal of the senior notes when due at maturity thereof or otherwise, which failure shall continue unremedied for five business days; | ||
• | the acceleration of any of our other indebtedness in excess of $25 million, including another series of senior debt securities issued under the indenture, if such acceleration is not rescinded or annulled within ten days after written notice of the acceleration to us; | ||
• | failure to perform any other covenant in the senior notes within 90 days after written notice of the failure to us specifying the failure and requiring its remedy; | ||
• | certain events of bankruptcy, insolvency or reorganization; and | ||
• | failure to pay the put price of any senior notes following the exercise of the put right by any holder of senior notes on the date payment is due, unless the senior notes underlie Corporate Units, in which case our obligation to pay the put price will be netted against such holder’s obligation to pay the purchase price under the related purchase contracts. (Section 501) | ||
• | in the payment of the principal of or interest, if any, on any of the senior notes, or | ||
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• | in respect of a covenant or provision of the indenture which, under the terms of the indenture, cannot be modified or amended without the consent of the holders of all of the senior notes affected thereby. | ||
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(a) | will be deemed to have paid and discharged the entire indebtedness represented by the outstanding senior notes, and to have satisfied all our other obligations under senior notes (except for obligations relating to the rights of holders to receive payments from the trust fund as described in the indenture, certain obligations to register the transfer and exchange of senior notes, replace stolen, lost or mutilated senior notes, maintain paying agencies, hold moneys for payment in trust and our obligations with respect to Global Securities and defeasance and covenant defeasance generally); or | ||
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(b) | shall be released from our obligations described above under “— Limitations on mergers ,” “— Limitations on secured debt” and “— Limitations on sale and leaseback transactions” with respect to the outstanding senior notes, if we irrevocably deposit or cause to be deposited with the trustee money or U.S. Government Obligations or a combination of money or U.S. Government Obligations sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification of its opinion delivered to the Trustee, to pay and discharge the principal of (and premium, if any) and interest, if any, on the outstanding senior notes. | ||
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estate tax considerations
• | a dealer in securities or currencies; | ||
• | a financial institution; | ||
• | a regulated investment company; | ||
• | a real estate investment trust; | ||
• | a tax-exempt organization; | ||
• | an insurance company; | ||
• | a person holding the senior notes, Corporate Units, Treasury Units, or shares of Class A common stock as part of a hedging, integrated, conversion or constructive sale transaction or a straddle; | ||
• | a trader in securities that has elected the mark-to-market method of accounting for your securities; | ||
• | a person liable for alternative minimum tax; | ||
• | a person who is an investor in a pass-through entity; or | ||
• | a person whose “functional currency” is not the U.S. dollar. |
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• | an individual citizen or resident of the United States.; | ||
• | a corporation (or any other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia; | ||
• | an estate the income of which is subject to U.S. federal income taxation regardless of its source; or | ||
• | a trust if it (i) is subject to the primary supervision of a court within the United States and one or more U.S. persons have the authority to control all substantial decisions of the trust or (ii) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person. |
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• | interest paid on the senior note or treasury security is not effectively connected with your conduct of a trade or business in the United States; | ||
• | you do not (actually or constructively) own 10% or more of the total combined voting power of all classes of our voting stock within the meaning of Section 871(h)(3) of the Code and the Treasury regulations; | ||
• | you are not a controlled foreign corporation that is related to us (actually or constructively) through stock ownership; | ||
• | you are not a bank whose receipt of interest on the senior notes or treasury securities is described in section 881(c)(3)(A) of the Code; and |
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• | (a) you provide your name and address on an IRS Form W-8BEN (or other applicable form), and certify, under penalties of perjury, that you are not a U.S. person, or (b) if you hold your Corporate Units, Treasury Units, senior notes or treasury securities through certain foreign intermediaries, you satisfy the certification requirements of applicable U.S. Treasury regulations. | ||
• | IRS Form W-8BEN (or other applicable form) claiming an exemption from, or reduction in the rate of, withholding under an applicable income tax treaty; or | ||
• | IRS Form W-8ECI (or other applicable form) stating that interest paid on the senior notes or treasury securities is not subject to withholding tax because it is effectively connected with your conduct of a trade or business in the United States. | ||
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• | that gain or income is effectively connected with the conduct of a trade or business by you in the United States; or | ||
• | you are an individual who is present in the United States for 183 days or more in the taxable year of that disposition, and certain other conditions are met; or | ||
• | in the case of Corporate Units, Treasury Units or our Class A common stock, we are or have been a “U.S. real property holding corporation” for U.S. federal income tax purposes (subject to the discussion below). | ||
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Number | ||||
Name | Shares | |||
J.P. Morgan Securities Inc. | ||||
Citigroup Global Markets Inc. | ||||
Goldman, Sachs & Co. | ||||
ABN AMRO Rothschild LLC | ||||
Barclays Bank Capital | ||||
Bear, Stearns & Co. Inc. | ||||
BNP Paribas Securities (USA) Inc. | ||||
Calyon Securities (USA) Inc. | ||||
Comerica Securities, Inc. | ||||
Credit Suisse First Boston LLC | ||||
Daiwa Securities America Inc. | ||||
Deutsche Bank Securities | ||||
Dresdner Kleinwort Wasserstein | ||||
Harris Nesbitt Corp. | ||||
HSBC Securities (USA) Inc. | ||||
ING Financial Markets LLC | ||||
Lehman Brothers Inc. | ||||
Mellon Financial Markets, LLC | ||||
Merrill Lynch, Pierce, Fenner & Smith Incorporated | ||||
Mizuho International plc | ||||
Morgan Stanley & Co. Incorporated | ||||
Mitsubishi Securities International plc | ||||
RBC Capital Markets Corporation | ||||
BNY Capital Markets, Inc. | ||||
Scotia Capital (USA) Inc. | ||||
UBS Investment Bank | ||||
Wachovia Capital Markets, LLC | ||||
WestLB AG | ||||
Total | ||||
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Without | With full | |||||||
over-allotment | over-allotment | |||||||
exercise | exercise | |||||||
Per Corporate Unit | $ | $ | ||||||
Total | $ | $ |
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• | during the last 17 days of the 180-day restricted period, we issue an earnings release or material news or a material event relating to us occurs; or | ||
• | prior to the expiration of the 180-day restricted period, we announce that we will release earnings results during the 16-day period beginning on the last day of the 180-day period, |
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(a) | to legal entities which are authorised or regulated to operate in the financial markets or, if not so authorised or regulated, whose corporate purpose is solely to invest in securities; | ||
(b) | to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than€43,000,000 and (3) an annual net turnover of more than€50,000,000, as shown in its last annual or consolidated accounts; or | ||
(c) | in any other circumstances which do not require the publication by us of a prospectus pursuant to Article 3 of the Prospectus Directive. | ||
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• | the information set forth in this prospectus and otherwise available to the representatives; | ||
• | the history of and prospects for the industries in which we compete; | ||
• | an assessment of our management; | ||
• | our prospects for future earnings; | ||
• | the general condition of the securities markets at the time of this offering; | ||
• | the recent market prices of, and demand for, publicly traded corporate units of generally comparable companies; and | ||
• | other factors deemed relevant by the underwriters and us. | ||
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JPMorgan | Citigroup | Goldman, Sachs & Co. |
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Securities and Exchange Commission Registration Fee | $ | 11,770 | ||
NASD Fee | 10,500 | |||
New York Stock Exchange Listing Fees | 150,000 | |||
Blue Sky Fees and Expenses | 25,000 | |||
Printing Expenses | 1,000,000 | |||
Legal Fees and Expenses | 1,200,000 | |||
Accounting Fees | 275,000 | |||
Transfer Agent Fees and Expenses | 15,000 | |||
Agent and Trustee Fees and Expenses | 30,000 | |||
Miscellaneous Expenses | 250,000 | |||
Total | $ | 2,967,270 | ||
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THE HERTZ CORPORATION | ||||
By: | /s/ Paul J. Siracusa | |||
Name: | Paul J. Siracusa | |||
Title: | Executive Vice President and Chief Financial Officer | |||
Signature | Title | |
* Craig R. Koch | Chairman of the Board and Chief Executive Officer and Director (Principal Executive Officer) | |
/s/ Paul J. Siracusa Paul J. Siracusa | Executive Vice President and Chief Financial Officer and Director (Principal Financial Officer) | |
* Greg C. Smith | Director | |
* Donat R. Leclair | Director | |
* Michael E. Bannister | Director | |
* Richard J. Foti | Staff Vice President and Controller (Principal Accounting Officer) |
*By: | /s/ Paul J. Siracusa | |||
Paul J. Siracusa | ||||
Attorney-in-Fact |
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Exhibit No. | Description of Exhibit | |
1.1(1) | Form of Underwriting Agreement relating to The Hertz Corporation’s Class A common stock | |
1.2(1) | Form of Underwriting Agreement relating to The Hertz Corporation’s Equity Units | |
2.1(1) | Merger Agreement between The Hertz Corporation, The Hertz Holdings Corporation, Hertz Merger Subsidiary, Inc. and Ford Motor Company | |
3.1(1) | Form of Restated Certificate of Incorporation of The Hertz Corporation | |
3.2(1) | Form of Restated By-Laws of The Hertz Corporation to be effective post offering | |
4.1 | At June 30, 2005, The Hertz Corporation had various obligations which could be considered as long-term debt, none of which exceeded 10% of the total assets of The Hertz Corporation on a consolidated basis. The Hertz Corporation agrees to furnish to the Securities and Exchange Commission upon request a copy of any such instrument defining the rights of the holders of such long-term debt | |
4.2(2) | Indenture, dated as of March 16, 2001, between The Hertz Corporation and The Bank of New York as trustee | |
4.3(1) | Form of Supplemental Indenture No. 1 between The Hertz Corporation and The Bank of New York, as trustee | |
4.4(1) | Form of Senior Note (included in Exhibit 4.3) | |
4.5(1) | Form of Purchase Contract Agreement between The Hertz Corporation and The Bank of New York, as purchase contract agent | |
4.6(1) | Form of Corporate Unit certificate (included in Exhibit 4.5) | |
4.7(1) | Form of Treasury Unit certificate (included in Exhibit 4.5) | |
4.8(1) | Form of Pledge Agreement among The Hertz Corporation, , as collateral agent, custodial agent and securities intermediary, and The Bank of New York, as purchase contract agent | |
4.9(1) | Form of Remarketing Agreement among The Hertz Corporation, The Bank of New York, as purchase contract agent, and J.P. Morgan Securities Inc, Citigroup Global Markets Inc. and Goldman, Sachs & Co., as remarketing agents | |
5.1(1) | Opinion of Simpson Thacher & Bartlett LLP |
Table of Contents
Exhibit No. | Description of Exhibit | |
10.1** | Master Supply and Advertising Agreement among Ford Motor Company, The Hertz Corporation and Hertz General Interest LLC, dated July 5, 2005 | |
10.2(1) | Corporate Agreement between The Hertz Corporation and Ford Motor Company | |
10.3(1) | Tax Sharing Agreement between The Hertz Corporation and Ford Motor Company | |
10.4(3) | Employment Agreement between The Hertz Corporation and Craig R. Koch | |
10.5 | Form of Change in Control Agreement (and certain terms related thereto) among The Hertz Corporation, Ford Motor Company and each of Messrs. Koch, Nothwang, Siracusa, Taride and Plescia | |
10.6 | Non-Compete Agreement between Hertz Europe Limited and Michel Taride, dated April 10, 2000 | |
10.7 | The Hertz Corporation Compensation Supplemental Retirement and Savings Plan | |
10.8 | The Hertz Corporation Executive Long Term Incentive Compensation Plan | |
10.9 | The Hertz Corporation Supplemental Executive Retirement Plan | |
10.10 | The Hertz Corporation Benefit Equalization Plan | |
10.11 | The Hertz Corporation Key Officer Postretirement Assigned Car Benefit Plan | |
10.12 | The Hertz Corporation Retirement Plan | |
10.13 | The Hertz Corporation (UK) 1972 Pension Plan | |
10.14 | The Hertz Corporation (UK) Supplementary Unapproved Pension Scheme | |
10.15 | RCA Executive Deferred Compensation Plan and Employee Participation Agreement, dated May 29, 1985, between Craig R. Koch and The Hertz Corporation | |
10.16(4) | Credit Agreement among The Hertz Corporation, Hertz Canada Limited, JPMorgan Chase Bank, N.A., JPMorgan Chase Bank, N.A., Toronto Branch, Goldman Sachs Credit Partners L.P., Citigroup Global Markets Inc., J.P. Morgan Securities Inc. and the lenders thereto | |
12.1(5) | Statement of ratio of earnings to fixed charges | |
15.1 | Letter from PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm, relating to Financial Information | |
21.1 | List of Subsidiaries | |
Table of Contents
Exhibit No. | Description of Exhibit | |
23.1(1) | Consent of Simpson Thacher & Bartlett LLP (included as part of its opinion filed as Exhibit 5.1 hereto) | |
23.2 | Consent of PricewaterhouseCoopers LLP | |
24.1* | Powers of Attorney | |
25.1 | Statement of eligibility of The Bank of New York, as trustee under the indenture, under the Trust Indenture Act of 1939, as amended, on Form T-1 | |
* | Previously filed. | |
** | Incorporated by reference to Exhibit 10.1 to The Hertz Corporation’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 11, 2005. Such Exhibit omits certain information that has been filed separately with the Securities and Exchange Commission and submitted pursuant to an application for confidential treatment. | |
(1) | To be filed by amendment. | |
(2) | Incorporated by reference to The Hertz Corporation’s Registration Statement on Form S-3 (File No. 333-57138). | |
(3) | Incorporated by reference to The Hertz Corporation’s Registration Statement on Form S-1 (File No. 333-22517). | |
(4) | Incorporated by reference to Exhibit 10.2 to The Hertz Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005. | |
(5) | Incorporated by reference to Exhibit 12 to The Hertz Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004 and Exhibit 12 to The Hertz Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005. | |