S-1 1 a2171675zs-1.htm FORM S-1
QuickLinks -- Click here to rapidly navigate through this document

As filed with the Securities and Exchange Commission on July 14, 2006

Registration No. 333-              



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


FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933


HERTZ GLOBAL HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
(See table of additional registrants on following page.)

Delaware
(State or other jurisdiction of
incorporation or organization)
  7514
(Primary Standard Industrial
Classification Code Number)
  20-3530539
(I.R.S. Employer
Identification Number)

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


Harold E. Rolfe, Esq.
Senior Vice President, General Counsel and Secretary
Hertz Global Holdings, Inc.
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:
Steven J. Slutzky, Esq.
Debevoise & Plimpton LLP
919 Third Avenue
New York, New York 10022
(212) 909-6000
  Rod Miller, Esq.
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
(212) 310-8000

        Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this Registration Statement.


        If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.    o

        If this Form is filed to register additional securities of an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

        If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

        If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o


CALCULATION OF REGISTRATION FEE


Title of each class of
securities to be registered

  Proposed maximum aggregate
offering price(1)

  Amount of
Registration Fee


Common Stock, $.01 par value   $1,000,000,000   $107,000

(1)
Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(o) promulgated under the Securities Act of 1933, as amended. Includes shares of Common Stock subject to the underwriters' option.


        The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.




The information in this prospectus is not complete and may be changed. We may not issue these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject to Completion. Dated July 14, 2006.

                Shares

LOGO

Hertz Global Holdings, Inc.

Common Stock


        This is an initial public offering of shares of common stock of Hertz Global Holdings, Inc., which we refer to in this prospectus as "Hertz Holdings."

        Hertz Holdings is offering            of the shares to be sold in this offering. The selling stockholders identified in this prospectus, which include affiliates of Merrill Lynch & Co., an underwriter in this offering, are offering an additional            shares. Hertz Holdings will not receive any of the proceeds from the sale of the shares being sold by the selling stockholders.

        Prior to this offering, there has been no public market for the common stock. It is currently estimated that the initial public offering price per share will be between $             and $            . Hertz Holdings intends to apply to list the common stock on the New York Stock Exchange under the symbol HTZ.

        See "Risk Factors" on page 18 to read about factors you should consider before buying shares of the common stock.


        Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

 
  Per Share
  Total
Initial public offering price   $   $
Underwriting discount   $   $
Proceeds, before expenses, to Hertz Holdings   $   $
Proceeds, before expenses, to the selling stockholders   $   $

        To the extent that the underwriters sell more than            shares of common stock, the underwriters have the option to purchase up to an additional            shares from Hertz Holdings and an additional            shares from the selling stockholders at the initial public offering price less the underwriting discount.


        The underwriters expect to deliver the shares against payment in New York, New York on                        , 2006.

Joint Global Coordinators and Bookrunners

Goldman, Sachs & Co.   Lehman Brothers   Merrill Lynch & Co.

Joint Bookrunners
Deutsche Bank Securities   JPMorgan

Prospectus dated                        , 2006.


TABLE OF CONTENTS

 
  Page
Summary   1
Risk Factors   18
Cautionary Note Regarding Forward-Looking Statements   35
Market and Industry Data   36
Recent Transactions   37
Use of Proceeds   39
Dividend Policy   40
Capitalization   41
Dilution   42
Unaudited Pro Forma Condensed Consolidated Financial Statements   44
Selected Historical Consolidated Financial Data   53
Management's Discussion and Analysis of Financial Condition and Results of Operations   55
Business   82
Management   109
Security Ownership of Certain Beneficial Owners, Management and Selling Stockholders   128
Certain Relationships and Related Party Transactions   131
Description of Certain Indebtedness   133
Description of Capital Stock   150
Shares Eligible for Future Sale   154
Certain U.S. Federal Tax Considerations   156
Underwriting   159
Legal Matters   164
Experts   164
Where You Can Find Additional Information   164
Index to Financial Statements   F-1

        We have not authorized anyone to give you any information or to make any representations about the transactions we discuss in this prospectus other than those contained in the prospectus. If you are given any information or representation about these matters that is not discussed in this prospectus, you must not rely on that information. This prospectus is not an offer to sell anywhere or to anyone where or to whom we are not permitted to offer to sell securities under applicable law.

        In making an investment decision, investors must rely on their own examination of the issuer and the terms of the offering, including the merits and risks involved. These securities have not been recommended by any federal or state securities commission or regulatory authority. Furthermore, the foregoing authorities have not confirmed the accuracy or determined the adequacy of this document. Any representation to the contrary is a criminal offense.


        We have filed with the U.S. Securities and Exchange Commission, or the "SEC," a registration statement on Form S-1 under the Securities Act with respect to the common stock offered by this prospectus. This prospectus, filed as part of the registration statement, does not contain all the information set forth in the registration statement and its exhibits and schedules, portions of which have been omitted as permitted by the rules and regulations of the SEC. For further information about us and our common stock, we refer you to the registration statement and to its exhibits and schedules. With respect to statements in this prospectus about the contents of any contract, agreement or other document, in each instance, we refer you to the copy of such contract, agreement or document filed as

ii



an exhibit to the registration statement, and each such statement is qualified in all respects by reference to the document to which it refers.

        The public may read and copy any reports or other information that we and our subsidiaries file with the SEC. Such filings are available to the public over the Internet at the SEC's website at http://www.sec.gov. The SEC's website is included in this prospectus as an inactive textual reference only. You may also read and copy any document that we file with the SEC at its public reference room at 100 F Street, N.E., Washington D.C. 20549. You may obtain information on the operation of the public reference room by calling the SEC at 1-800-SEC-0330.


        Unless the context otherwise requires, in this prospectus, (i) "Hertz Holdings" means Hertz Global Holdings, Inc., our top-level holding company, (ii) "Hertz" means The Hertz Corporation, our primary operating company and a direct wholly owned subsidiary of Hertz Investors, Inc., which is wholly owned by Hertz Holdings, (iii) "we," "us" and "our" mean (a) prior to December 21, 2005, Hertz and its consolidated subsidiaries and (b) on and after December 21, 2005, Hertz Holdings and its consolidated subsidiaries, including Hertz, (iv) "HERC" means Hertz Equipment Rental Corporation, Hertz's wholly owned equipment rental subsidiary, together with our various other wholly owned international subsidiaries that conduct our industrial, construction and material handling equipment rental business, (v) "cars" means cars and light trucks (including sport utility vehicles and, outside North America, light commercial vehicles), (vi) "equipment" means industrial, construction and material handling equipment, (vii) "EBITDA" means consolidated net income before net interest expense, consolidated income taxes and consolidated depreciation and amortization and (viii) "Corporate EBITDA" means "EBITDA" as that term is defined under Hertz's senior credit facilities, which is generally consolidated net income before net interest expense (other than interest expense relating to certain car rental fleet financing), consolidated income taxes, consolidated depreciation (other than depreciation related to the car rental fleet) and amortization and before certain other items, in each case as more fully described in the agreements governing Hertz's senior credit facilities.

        On December 21, 2005, or the "Closing Date," an indirect, wholly owned subsidiary of Hertz Holdings acquired all of Hertz's common stock from Ford Holdings LLC, or "Ford Holdings," pursuant to a Stock Purchase Agreement, dated as of September 12, 2005, among Ford Motor Company, or "Ford," Ford Holdings and Hertz Holdings (previously known as CCMG Holdings, Inc.). As a result of this transaction, investment funds associated with or designated by Clayton, Dubilier & Rice, Inc., The Carlyle Group and Merrill Lynch Global Private Equity, or, collectively, the "Sponsors," currently own over 99% of the common stock of Hertz Holdings. We refer to the acquisition of all of Hertz's common stock as the "Acquisition." We refer to the Acquisition, together with related transactions entered into to finance the cash consideration for the Acquisition, to refinance certain of our existing indebtedness and to pay related transaction fees and expenses, as the "Transactions." The "Successor period ended December 31, 2005" refers to the 11-day period from December 21, 2005 to December 31, 2005 and the "Predecessor period ended December 20, 2005" refers to the period from January 1, 2005 to December 20, 2005. The term "Successor" refers to us following the Acquisition and the term "Predecessor" refers to us prior to the Closing Date.

        The "Restatement" refers to the restatement by Hertz of its previously issued consolidated statements of operations, stockholder's equity and cash flows for the Predecessor period ended December 20, 2005. See Note 1A to the Notes to our audited annual consolidated financial statements included elsewhere in this prospectus for more information regarding the Restatement.

        Certain financial information in this prospectus for the Predecessor period ended December 20, 2005 (as restated) and Successor period ended December 31, 2005 has been presented on a combined basis. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations" for a discussion of the presentation of our results for the year ended December 31, 2005 on a combined basis.

iii



SUMMARY

        This summary highlights information appearing elsewhere in this prospectus. This summary is not complete and does not contain all of the information that you should consider before making an investment decision. You should carefully read the entire prospectus, including the section entitled "Risk Factors," beginning on page 18 and our financial statements and notes to those financial statements included elsewhere in this prospectus before making any investment decision.


Our Company

        We own what we believe is the largest worldwide general use car rental brand and the third largest equipment rental business in the United States, both based on revenues. Our Hertz brand name is one of the most recognized in the world, signifying leadership in quality rental services and products. In our car rental business segment, we and our independent licensees and associates accept reservations for car rentals at approximately 7,600 locations in approximately 145 countries. We are the only car rental company that has an extensive network of company-operated rental locations both in the United States and in all major European markets. We maintain the leading airport car rental market share, by overall reported revenues, in the United States and at the 69 major airports in Europe where we have company-operated locations and which have provided data regarding car rental concessionaire activity. We believe that we also maintain the second largest market share, by revenues, in the off-airport car rental market in the United States. In our equipment rental business segment, we rent equipment through over 340 branches in the United States, Canada, France and Spain, as well as through our international licensees. We and our predecessors have been in the car rental business since 1918 and in the equipment rental business since 1965.

        We have a diversified revenue base and a highly variable cost structure and are able to dynamically manage fleet capacity, the most significant determinant of our costs. This has helped us to earn a pre-tax profit in each year since our incorporation in 1967. Our revenues have grown at a compound annual growth rate of 7.6% over the last 20 years, with year-over-year growth in 18 of those 20 years. For the year ended December 31, 2005, we generated consolidated revenues of $7,469.2 million and operating income of $1,041.7 million. For a discussion of the presentation of our results for the year ended December 31, 2005 on a combined basis, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations."


Our Segments

        The table below sets forth key financial and other facts as of December 31, 2005 or for the year then ended, unless otherwise indicated. For more details regarding the key financial and other facts appearing below, see "Business," and for more information concerning our segment financial data, see Note 11 to the Notes to our audited annual consolidated financial statements included elsewhere in this prospectus.

1


 
  Car Rental
  Equipment Rental
Revenues       $6,046.8 million       $1,415.3 million

Operating Income

 

 

 

$735.1 million

 

 

 

$328.9 million

Key Facts

 

















 

 

#1 worldwide general use car rental
brand
#1 brand overall at U.S. airports with a
market share of approximately 29%
#1 overall U.S. airport market position in
each of the business and leisure markets
#1 overall airport market position at 69
major European airports
Approximately 28 million annual
transactions
Balanced rental revenue base of 53%
leisure and 47% business
Over 80% of revenues generated from
affiliated customer channels, including
over 60 travel industry partnerships
Average of 438,800 company-operated
cars in the fleet in 2005, with an average
net book value of $8.3 billion

 




















 

 

Third largest equipment rental company
in the U.S. and Canadian markets
combined
Industry participant for over 40 years with
a majority of its operations developed
from organic growth
Year-over-year same store sales growth
worldwide of 21.6% from 2004 to 2005
and 27.2% for the first quarter of 2006
27 month average fleet age in the United
States, the youngest of any major U.S.
industry participant
Broad diversity of fleet and customers
Nationwide presence in the United States,
Canada, France and Spain, with over 40%
of rental revenues derived from national
accounts
Total of 208,000 pieces of equipment, with
an average fleet acquisition cost during
2005 of $2.6 billion


Our Markets

        We operate in the global car rental industry and in the equipment rental industry, primarily in the United States. Both industries are large with favorable growth trends and opportunities.

        We believe that the global car rental industry exceeds $30 billion in annual revenues. According to Auto Rental News, car rental revenues in the United States totaled approximately $19 billion in 2005 and have grown at a 4.9% compound annual growth rate since 1990, including 7.3% growth in 2005. We estimate that rentals by airline travelers at or near airports, or "airport rentals," account for approximately one-half of the total market in the United States. This portion of the market is significantly influenced by developments in the travel industry and particularly in airline passenger traffic, or "enplanements." The Federal Aviation Administration, or "FAA," projects that U.S. domestic enplanements will grow at a compound annual rate of 3.2% from 2006 to 2017, consistent with long-term historical trends. Car rentals in Western Europe account for over $11 billion in annual revenues, with the airport portion of the industry comprising approximately one-third of the total. According to air travel trade association data, annual international enplanements are projected to grow at a compound annual rate of 5.6% from 2005 to 2009. The off-airport portion of the industry has rental volume primarily driven by local business use, leisure travel and the replacement of cars being repaired.

        We estimate the size of the U.S. equipment rental industry, which is highly fragmented with few national competitors and many regional and local operators, to be approximately $31 billion in annual revenues. We believe, based on industry sources, that the industry grew at a 9.7% compound annual growth rate between 1991 and 2005. The equipment rental industry serves a broad range of customers from small local contractors to large industrial national accounts and encompasses a wide range of rental equipment from small tools to heavy earthmoving equipment. The industry is undergoing a strong recovery following the industrial recession and downturn in non-residential construction spending between 2001 and 2003. According to a leading construction industry research resource, U.S. non-residential construction spending is projected to grow at an annual rate of 9% and 7% in 2006 and 2007, respectively. We also believe, based on industry publications, that rental equipment accounted for

2



approximately 30% to 40% of all equipment sold into the U.S. construction industry in 2005, up from approximately 5% to 10% in 1991. In addition, we believe that the trend toward rental instead of ownership of equipment in the U.S. construction industry will continue and that as much as 50% of the equipment used in the industry could be rental equipment within the next ten years.


Our Strengths

    Premier Global Brand and Service Offerings

        We believe that our premier brand and service offerings have allowed us to create and maintain a loyal customer base and command premium pricing across our businesses.

        Car Rental.    The Hertz brand is one of the most recognized brands in the world. It has been the only travel company brand to be listed in Business Week's "100 Most Valuable Global Brands," and has been included in this list every year since the study's inception in 2001. Our customer surveys indicate that, in the United States, Hertz is the car rental brand most associated with the highest quality service, which is consistent with numerous published best-in-class car rental awards that we have won over many years. We have sought to support our reputation for quality and customer service in car rental through a variety of innovative service offerings, such as our global expedited rental program, Hertz #1 Club Gold, which accounted for approximately 40% of our car rental transactions worldwide for the twelve months ended March 31, 2006.

        Equipment Rental.    HERC, which is operated under the Hertz Equipment Rental brand, has long been a leader in equipment rental in the United States. HERC was the first equipment rental company to develop an extensive national account program, which continues to be the source of substantial revenues. HERC's leadership position has recently been enhanced through a substantial investment in sales force automation and the operation of a high quality and diverse fleet. From January 1, 2004 through March 31, 2006, we invested $1.1 billion, net of dispositions, in HERC's U.S. fleet, thereby reducing its average age to 27 months, which we believe is younger than those of HERC's largest competitors.

    Clear and Sustained Market Leadership Position in Car Rental

        We believe that Hertz is the leading worldwide general use car rental system, based on revenues. In the United States, we maintain the overall leading market share of airport car rentals among both business and leisure customers. Based on reported industry revenues for 2005, we had an overall market share of approximately 29% at the 180 largest U.S. airports where we operate, over nine percentage points of share higher than that of the closest competing brand. We have maintained this leadership position for more than 30 years. We also believe that we had the largest market share, by reported revenues on a collective basis in 2005, at the 69 major airports in Europe where we have company-operated locations and which provided data regarding car rental concessionaire activity.

    Global, Diversified Business Mix

        We believe that our mix of businesses, customer types, end-markets, distribution channels and geographies provides us with a diverse revenue stream that positions us to capitalize on growth opportunities throughout our markets and makes us less vulnerable to economic cycles and events that might negatively affect either of our industries or any specific geography. Within our car rental business, we maintain a relatively balanced mix of leisure and business rentals (representing 53% and 47%, respectively, of our car rental revenues for the year ended December 31, 2005), and utilize a broad range of distribution channels and partnerships. Within our equipment rental business, we serve a wide variety of industries and have a broad mix of end customers from local contractors to large national industrial accounts.

3


    Affiliated Customer Strategy Drives Premium Pricing and Customer Loyalty

        Over 80% of our car rental revenues are derived from affiliated customer channels, such as corporate accounts and travel industry partnerships. We believe that we are one of only two car rental brands that have the service offerings and market presence to consistently serve these affiliated customer channels on a global basis. Our corporate accounts, which account for 40% of our car rental revenues, represent a predictable source of revenues and a customer base that values our premium customer service. We have a leading position with this type of customer and provide our car rental services to most Fortune 500 companies. Our distribution partnerships include over 60 airlines, railroads and hotel chains worldwide, as well as leading traditional and online travel agencies and affiliations with non-travel organizations and associations.

    Best-in-Class Fleet and Fleet Management

        Car Rental.    Our worldwide car rental fleet includes cars from 32 manufacturers, and we believe our U.S. fleet mix is significantly more diversified than those of most of our major competitors. In the twelve months ended March 31, 2006, four manufacturers each supplied more than 5% of our U.S. fleet, while six manufacturers each supplied more than 5% of our international fleet. We have longstanding relationships with leading American, European, Japanese and Korean automakers, enabling us to provide a wide variety of car models and brands to our customers. The diversity of our car fleet enables us to design innovative rental offerings, such as the Prestige and Fun Collections, that help us maintain a competitive advantage over our competitors. In addition, we have substantial experience in the complex process of managing the mix of cars subject to manufacturer repurchase and similar programs, or "program cars," and other cars, or "risk cars," in our fleet. We maintain an extensive infrastructure that supports the efficient disposition of risk cars and enables us to be opportunistic when evaluating the relative merits of purchasing program and risk cars.

        Equipment Rental.    We believe that our U.S. equipment rental fleet is the youngest of any major participant in the industry, offering a value proposition to our customers in terms of productivity, safety and operator use enhancements while simultaneously reducing HERC's maintenance costs and fleet downtime. Our diverse U.S. equipment rental fleet enables us to meet the rental equipment needs of many customers; moreover, we are further diversifying our fleet through the addition of general rental and specialty equipment at many locations. Our over 40 years of experience in the procurement and disposition of equipment allows us to adjust our fleet size efficiently in light of market trends.

    Proprietary Strategic Information Systems

        We utilize information technology comprehensively in the areas of reservations, fleet and rate management, customer relations and sales and marketing, as well as aspects of billing, finance, accounting and other reporting systems. Since January 1, 2001, we have invested more than $300 million in our proprietary information systems and computer equipment to permit us to conduct our business more efficiently and enhance our ability to offer innovative services. Our information systems, which we believe are unique in the car and equipment rental industries, permit us to provide superior end-to-end service to customers, maintain effective pricing structures in a rapidly changing environment, utilize our fleets efficiently and maintain a high level of control over our geographically dispersed operations.

    Experienced and Proven Management Team

        We have an experienced management team committed to maintaining operational excellence. Our management team has extensive knowledge of the car and equipment rental industries. While Craig R. Koch, our current Chief Executive Officer, is expected to relinquish the title of Chief Executive Officer and become Chairman of our Board of Directors effective July 19, 2006, we have employed our nine next most senior executive officers for an average of 26 years. Our regional and country managers also have a great deal of experience, having been employed by us for an average of 20 years and having

4


been in their current positions for an average of seven years. Mark P. Frissora, previously the Chairman and Chief Executive Officer of Tenneco Inc., will replace Mr. Koch as our Chief Executive Officer effective July 19, 2006. Mr. Frissora served in various management positions at Tenneco Inc. over the past 10 years, including as Chief Executive Officer since 1999 and Chairman since 2000. Prior to joining Tenneco Inc., Mr. Frissora served as a Vice President of Aeroquip Vickers Corporation for five years and, in the 15 years prior to joining Aeroquip Vickers, he served for 10 years with General Electric and five years with Philips Lighting Company in management roles focusing on product development and marketing. We believe our stock incentive plan closely aligns the interests of our management team and our stockholders.


Our Strategy

        Further Enhance Our Premier Car Rental Brand, Differentiated Service Offering and Affiliated Customer Base

        The Hertz brand is recognized for superior customer service and a differentiated, premium product. We intend to maintain our position as a premier company through an intense focus on service, quality and product innovation. We believe that consistent investments in our core business activities, particularly in the areas of brand, facilities, technology, training and customer loyalty initiatives, will improve customer satisfaction and further enhance our premium brand position and product offerings. Continuing to strengthen these attributes will allow us to build our affiliated customer base and increase our share of profitable business.

    Pursue Profitable Growth within Our Car Rental Business

        We believe that we have significant opportunities for growth within our global car rental business that will allow us to sustain growth rates in this business consistent with historical levels.

        U.S. Airport Market.    We intend to maintain or expand our market share in the U.S. airport rental business and to continue to build upon our brand positioning and service differentiation, allowing us to capitalize on opportunities in the business and leisure travel markets and further strengthen the advantages arising from our leading market share position.

        U.S. Off-Airport Market Opportunities.    We intend to leverage our significant recent investment in our U.S. off-airport network and to expand the network to enable us to further penetrate the large and growing insurance replacement rental market, as well as to increase our share of other off-airport business and leisure rentals. In the two years ended December 31, 2005, we increased the number of our off-airport rental locations in the United States by approximately 33% to approximately 1,400 locations. Through this investment, we believe we have achieved critical scale in the off-airport market and continue to grow our revenue rapidly through increasing penetration in the insurance rental replacement market through new and existing insurance company customers as well as with our traditional business and leisure customers as evidenced by our off-airport revenue growth of approximately 46% over the two years ended December 31, 2005. We believe our off-airport platform has significant future growth potential.

        European Markets.    We believe that the European market presents airport rental growth opportunities resulting from the growth of European air travel due in large part to the presence of high volume, low cost air carriers and increasing use of the Internet throughout the continent. We intend to continue to build on our affiliated relationships with travel providers and other associations in Europe to increase our penetration of the European market. We also intend to increase our participation in the off-airport portion of the car rental market in Europe, especially in leisure, replacement and light trucks.

5



    Increase Share of the Fragmented U.S. Equipment Rental Market

        We believe that our emphasis on customer service, large national account base, prominent brand name and diverse and comparatively young rental fleet will position HERC to continue to gain market share in the fragmented U.S. equipment rental market. We intend to continue to increase HERC's presence through moderate expansion in the number of our locations and the continued penetration of the specialty equipment and general rental markets.

    Further Improve Profitability, Cash Flow and Return on Capital

        We believe that there are opportunities to further increase the productivity of our operations, thereby improving our profit margins and capital efficiency. The profit margins that we have achieved in our car rental business during the twelve months ended March 31, 2006 are below our peak levels of profitability achieved in 2000. We believe that we can improve our profitability by leveraging the investments we have made in building our off-airport business, in upgrading our airport facilities and through the use of our enhanced information systems to optimize our pricing, yield management and fleet utilization generally. In addition, we believe, based on our current business plans and capital structure, that as a result of the like-kind exchange programs implemented in connection with our car rental and equipment rental fleets, we will not be required to pay material U.S. federal income taxes for several years.


Recent Developments

New Chief Executive Officer

        On July 11, 2006, we announced that Mark P. Frissora, previously the Chairman and Chief Executive Officer of Tenneco Inc., will replace Mr. Koch as our Chief Executive Officer effective July 19, 2006. Mr. Frissora will also become a member of our Board of Directors as of July 19, 2006. As of that date, Craig R. Koch, our current Chief Executive Officer, will become Chairman of our Board of Directors and George W. Tamke will become Lead Director and Chairman of the Executive Committee of the Board of Directors. Mr. Frissora is expected to assume Mr. Koch's role as Chairman of the Board of Directors in late 2006 or early 2007. For a more detailed description of the terms of Mr. Frissora's employment, see "Management—Employment Agreements."

Hertz Holdings Loan Facility and Hertz Holdings Dividend

        On June 30, 2006, Hertz Holdings entered into a loan facility with Deutsche Bank AG, New York Branch, Lehman Commercial Paper Inc., Merrill Lynch Capital Corporation, Goldman Sachs Credit Partners L.P., JPMorgan Chase Bank, N.A. and Morgan Stanley Senior Funding, Inc. or affiliates thereof, providing for a loan of $1.0 billion, which we refer to in this prospectus as the "Hertz Holdings Loan Facility," for the purpose of paying a dividend to the holders of our common stock and paying fees and expenses related to the facility. Under the terms of the financing, Hertz Holdings will be required to pay interest in cash, but only to the extent that funds are available by way of dividend from Hertz to do so in accordance with applicable law and the instruments governing Hertz's existing indebtedness. The amount of interest that would otherwise be payable in cash but for restrictions imposed by applicable law or the instruments governing Hertz's existing indebtedness will not be due on the applicable interest payment date, but will accrue until such time as sufficient funds are available to pay the accrued and unpaid interest in cash without violating these restrictions. Hertz Holdings primarily used the proceeds of the Hertz Holdings Loan Facility, together with cash on hand, to pay special cash dividends of $4.32 per share, or approximately $999.2 million in the aggregate, to its common stockholders on June 30, 2006, which we refer to in this prospectus as the "Hertz Holdings Dividend." It is anticipated that the Hertz Holdings Loan Facility will be repaid with the proceeds to us from this offering. Because affiliates of certain of the underwriters are lenders under the Hertz Holdings Loan Facility, affiliates of such underwriters will receive a substantial portion of the proceeds of this offering. For a more detailed description of the Hertz Holdings Loan Facility, see "Description of Certain Indebtedness—Hertz Holdings Loan Facility."

6



Principal and Selling Stockholders

        Investment funds associated with or designated by the Sponsors currently own over 99% of our outstanding common stock. Of the eight members of our Board of Directors, seven are currently principals of the Sponsors.

    Clayton, Dubilier & Rice

        Clayton, Dubilier & Rice Fund VII, L.P. and related funds are private investment funds managed by Clayton, Dubilier & Rice, Inc., or "CD&R." CD&R is a leading private equity investment firm that employs an integrated operational and financial approach to build and grow portfolio businesses. Approximately half of the firm's principals are seasoned corporate executives from major industrial enterprises and the remainder come from mergers and acquisitions, financing or investment backgrounds. Since its founding in 1978, CD&R has managed the investment of over $6 billion in 38 businesses—mostly subsidiaries or divisions of large multibusiness corporations—representing a broad range of industries with an aggregate transaction value in excess of $30 billion and revenues of more than $40 billion. CD&R and its affiliates have offices in New York and London. Investment funds associated with or designated by CD&R currently own approximately one-third of our outstanding common stock.

    The Carlyle Group

        Carlyle Partners IV, L.P. and related funds are private investment funds managed by TC Group, L.L.C. The Carlyle Group, or "Carlyle," is a global private equity firm with $39 billion under management. Carlyle invests in buyouts, venture & growth capital, real estate and leveraged finance in Asia, Europe and North America, focusing on aerospace & defense, automotive & transportation, consumer & retail, energy & power, healthcare, industrial, technology & business services and telecommunications & media. Since 1987, Carlyle has invested over $18 billion of equity in 463 transactions for a total purchase price of more than $73 billion. Carlyle employs more than 650 people in 14 countries. In the aggregate, Carlyle portfolio companies have more than $46 billion in revenues and employ more than 184,000 people around the world. Investment funds associated with or designated by Carlyle currently own approximately one-third of our outstanding common stock.

    Merrill Lynch Global Private Equity

        ML Global Private Equity Fund, L.P. and related funds are private investment funds managed by certain private equity arm affiliates of Merrill Lynch & Co., Inc., or "MLGPE." MLGPE invests in companies with high growth/profitability prospects or strong cash flow characteristics and capable and experienced management teams. MLGPE's dedicated team of private equity professionals invests globally, across industries including general manufacturing, consumer products, as well as business and consumer services. MLGPE takes a partnership approach to investing with both management teams and other financial or strategic investors. Investment funds associated with or designated by MLGPE currently own approximately one-third of our outstanding common stock.

*        *        *        *

        Hertz Holdings and Hertz are incorporated under the laws of the state of Delaware. Our corporate headquarters are located at 225 Brae Boulevard, Park Ridge, New Jersey 07656. Our telephone number is (201) 307-2000.

7



The Offering

Common stock offered               shares of common stock, par value $0.01 per share, of Hertz Holdings, or "our common stock."

Shares of common stock offered by Hertz Holdings

 

      

Shares of common stock offered by selling stockholders

 

      

Shares of common stock outstanding after the offering

 

      

Use of proceeds

 

Our net proceeds from this offering, after deducting underwriting discounts and estimated offering expenses, will be approximately $      . We intend to use the net proceeds of this offering to repay borrowings outstanding under the Hertz Holdings Loan Facility, with the remainder of the proceeds, if any, to be used for general corporate purposes (which may include the repayment of borrowings under our senior credit facilities). We will not receive any proceeds from the sale of shares by the selling stockholders, which include affiliates of Merrill Lynch & Co., an underwriter in this offering. Because affiliates of certain of the underwriters are lenders under the Hertz Holdings Loan Facility, affiliates of such underwriters will receive a substantial portion of the proceeds of this offering. See "Use of Proceeds."

Dividend policy

 

We do not expect to pay dividends on our common stock for the foreseeable future.

Proposed New York Stock Exchange symbol

 

HTZ

        Unless we specifically state otherwise, all information in this prospectus:

      assumes no exercise of the underwriters' option to purchase additional shares; and

      excludes 14,001,354 shares of common stock issuable upon the exercise of outstanding stock options at a weighted average exercise price of $10.86 per share. We expect the exercise prices of our outstanding stock options to be adjusted downward by an amount equal to the Hertz Holdings Dividend paid on June 30, 2006 ($4.32 per share), thereby preserving the intrinsic value of the options, consistent with applicable tax law.

        If the underwriters exercise the underwriters' option in full,            shares of our common stock will be outstanding after this offering.


Risk Factors

        You should consider carefully all of the information set forth in this prospectus and, in particular, the information under the heading "Risk Factors" beginning on page 18 for risks involved in investing in our common stock.

8



SUMMARY HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA

        The following tables present summary historical and unaudited pro forma consolidated financial information and other data for our business. The summary consolidated statement of operations data presented below for the combined year ended December 31, 2005 has been restated. For a discussion of the Restatement, see note (a) below and Note 1A to the Notes to our audited annual consolidated financial statements included elsewhere in this prospectus. The summary consolidated statement of operations data for each of the years ended December 31, 2003, 2004 and 2005 (as restated) and the summary consolidated balance sheet data as of December 31, 2005 presented below were derived from our audited annual consolidated financial statements and the related notes thereto included elsewhere in this prospectus. The unaudited summary condensed consolidated statement of operations data for the Predecessor three-month period ended March 31, 2005 and for the Successor three-month period ended March 31, 2006 and the unaudited summary condensed consolidated balance sheet data as of March 31, 2006 are derived from the unaudited interim condensed consolidated financial statements and related notes thereto included elsewhere in this prospectus.

        The pro forma as adjusted financial data below for the year ended December 31, 2005 and for the three months ended March 31, 2005 reflects adjustments to our historical financial data to give effect to (i) the Transactions and the use of the net proceeds therefrom, (ii) the borrowings under the Hertz Holdings Loan Facility and the payment of the Hertz Holdings Dividend and (iii) the sale of the common stock offered by this prospectus and the use of the net sale proceeds to repay borrowings under the Hertz Holdings Loan Facility with the remainder of our proceeds, if any, to be used for general corporate purposes (which may include the repayment of borrowings under our senior credit facilities) as if such transactions had occurred on January 1, 2005 for income statement purposes. The pro forma as adjusted financial data below as of and for the three months ended March 31, 2006 reflects adjustments to our historical financial data to give effect to the borrowings under the Hertz Holdings Loan Facility, the payment of the Hertz Holdings Dividend, the sale of common stock offered by this prospectus and the use of the net sale proceeds to repay borrowings under the Hertz Holdings Loan Facility with the remainder of our proceeds, if any, to be used for general corporate purposes (which may include the repayment of borrowings under our senior credit facilities) as if such transactions had occurred on January 1, 2005 for income statement purposes and March 31, 2006 for balance sheet purposes.

        You should read the following summary historical and unaudited pro forma financial data in conjunction with the historical financial statements and the related notes thereto and other financial information appearing elsewhere in this prospectus, including "Capitalization," "Unaudited Pro Forma Condensed Consolidated Financial Statements," "Selected Historical Consolidated Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations."

9


 
  Historical
  Pro Forma as Adjusted
 
  Predecessor
  Combined
  Predecessor
  Successor
   
   
   
 
  Years Ended December 31,
  Three Months Ended March 31,
  Year Ended December 31,
  Three Months Ended March 31,
 
  2003
  2004
  2005(a)
Restated

  2005
  2006
  2005
  2005
  2006
 
  (Dollars in millions except per share data)

Statement of Operations Data                                          
Revenues                                          
  Car rental   $ 4,819.3   $ 5,430.8   $ 5,949.9   $ 1,333.4   $ 1,399.6            
  Equipment rental     1,037.8     1,162.0     1,414.9     285.4     363.1            
  Other(b)     76.6     83.2     104.4     21.8     23.9            
   
 
 
 
 
 
 
 
    Total revenues     5,933.7     6,676.0     7,469.2     1,640.6     1,786.6            
   
 
 
 
 
 
 
 
Expenses                                          
  Direct operating     3,316.1     3,734.4     4,189.3     974.2     1,070.1            
  Depreciation of revenue earning equipment(c)     1,523.4     1,463.3     1,599.7     373.6     407.3            
  Selling, general and administrative     501.7     591.3     638.5     158.1     162.2            
  Interest, net of interest income(d)     355.0     384.4     500.0     99.2     210.3            
   
 
 
 
 
 
 
 
    Total expenses     5,696.2     6,173.4     6,927.5     1,605.1     1,849.9            
   
 
 
 
 
 
 
 
Income (loss) before income taxes and minority interest     237.5     502.6     541.7     35.5     (63.3 )          
(Provision) benefit for taxes on income(e)     (78.9 )   (133.9 )   (179.1 )   (12.3 )   17.3            
Minority interest         (3.2 )   (12.6 )   (2.3 )   (3.2 )          
   
 
 
 
 
 
 
 
Net income (loss)   $ 158.6   $ 365.5   $ 350.0   $ 20.9   $ (49.2 )          
   
 
 
 
 
 
 
 

Weighted average shares outstanding (in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
  Basic     229.5     229.5     229.5     229.5     229.5            
  Diluted     229.5     229.5     229.5     229.5     229.5            
Earnings (loss) per share(f)                                          
  Basic   $ 0.69   $ 1.59   $ 1.53   $ 0.09   $ (0.21 )          
  Diluted   $ 0.69   $ 1.59   $ 1.53   $ 0.09   $ (0.21 )          
Other Financial Data                                          
  Cash flows from operating activities   $ 1,899.3   $ 2,251.4   $ 1,452.8   $ 910.6   $ 1,205.0            
  EBITDA(g)     2,268.6     2,525.3     2,819.5     552.7     616.1            
  Pro forma Corporate EBITDA(g)                 1,140.9     155.0     204.7            

10


 
  Historical
   
 
  Pro Forma
As Adjusted

 
  Successor
 
  As of
December 31, 2005

  As of
March 31, 2006

  As of
March 31, 2006

 
  (Dollars in millions)

Balance Sheet Data                  
Cash and equivalents   $ 843.9   $ 679.4   $  
Total assets(h)     18,580.9     18,936.6      
Total debt     12,515.0     12,459.7      
Net corporate debt(i)     5,014.8     5,044.2      
Stockholders' equity(j)     2,266.2     2,266.3      
 
  Historical
 
 
  Predecessor
  Combined
  Predecessor
  Successor
 
 
  Years Ended, or as of
December 31,

  Three Months Ended, or as of
March 31,

 
 
  2003
  2004
  2005
  2005
  2006
 
Selected Car Rental Operating Data                                
Worldwide transaction days(k) (in thousands)     102,281     115,246     122,102     27,398     28,013  
  Domestic     72,243     81,262     86,116     19,984     20,410  
  International     30,038     33,984     35,986     7,414     7,603  
Worldwide rental rate revenue per transaction day(l)   $ 43.14   $ 41.92   $ 42.03   $ 41.89   $ 43.17  
  Domestic   $ 43.08   $ 41.85   $ 42.43   $ 42.44   $ 43.97  
  International   $ 43.28   $ 42.10   $ 41.10   $ 40.40   $ 41.02  
Worldwide average number of company-operated cars during period     374,600     414,700     438,800     408,800     407,600  
  Domestic     260,600     285,500     301,400     291,000     289,200  
  International     114,000     129,200     137,400     117,800     118,400  
Worldwide revenue earning equipment, net (in millions of dollars)   $ 6,462.0   $ 7,597.2   $ 7,399.5   $ 8,355.5   $ 8,177.4  

Selected Worldwide Equipment Rental Operating Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Rental and rental related revenue(m) (in millions of dollars)   $ 937.9   $ 1,032.5   $ 1,254.3   $ 250.1   $ 317.8  
Same store revenue growth(n)     3.3 %   13.3 %   21.6 %   19.6 %   27.2 %
Average acquisition cost of rental equipment operated during period (in millions of dollars)   $ 2,281.8   $ 2,305.7   $ 2,588.0   $ 2,368.9   $ 2,757.9  
Revenue earning equipment, net (in millions of dollars)   $ 1,331.3   $ 1,525.7   $ 2,075.5   $ 1,596.5   $ 2,193.8  

(a)
Hertz has restated its previously issued consolidated statement of operations for the Predecessor period ended December 20, 2005. An explanation of the Restatement appears in Note 1A to the Notes to our audited annual consolidated financial statements included elsewhere in this prospectus. The Restatement resulted in the previously reported provision for taxes on income to increase by $27.5 million and net income to decrease by $27.5 million, due to the recording of additional non-cash tax expense relating to dividends repatriated prior to the Acquisition.


To see the breakdown for the Predecessor period ended December 20, 2005 and the Successor period ended December 31, 2005, see "Selected Historical Consolidated Financial Data," and for a discussion of the presentation of our results for the year ended December 31, 2005 on a combined basis, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations."

(b)
Includes fees and certain cost reimbursements from our licensees and revenues from our third-party claim management services.

(c)
For the Predecessor period ended December 20, 2005, the Successor period ended December 31, 2005 and the Successor three months ended March 31, 2006, depreciation of revenue earning equipment was reduced by $33.8 million, $1.2 million and $8.7 million, respectively, resulting from the net effects of changing depreciation rates to reflect changes in the estimated residual value of revenue earning equipment upon disposal. For the years ended December 31, 2003, 2004, the Predecessor period ended December 20, 2005, the Successor period ended December 31, 2005 and the Predecessor and Successor three months ended March 31, 2005 and 2006, respectively, depreciation of revenue earning equipment includes a net loss of $0.8 million and net gains of $57.2 million, $68.3 million, $2.1 million, $17.8 million and $17.0 million, respectively, from the disposal of revenue earning equipment.

(d)
For the years ended December 31, 2003, 2004, the Predecessor period ended December 20, 2005, the Successor period ended December 31, 2005 and the Predecessor and Successor three months ended March 31, 2005 and 2006, respectively, interest income was $17.9 million, $23.7 million, $36.1 million, $1.1 million, $7.7 million and $7.7 million, respectively.

(e)
For the year ended December 31, 2004, includes benefits of $46.6 million relating to net adjustments to federal and foreign tax accruals. For the Predecessor period ended December 20, 2005, includes the reversal of a valuation allowance on foreign

11


    tax credit carryforwards of $35.0 million (established in 2004) and favorable foreign tax adjustments of $5.3 million, partly offset by a $31.3 million provision relating to the repatriation of foreign earnings.

(f)
Amounts for the historical periods are computed based upon 229,500,000 shares of common stock outstanding immediately after the Acquisition applied to our historical net income (loss) amounts. Amounts for the pro forma as adjusted periods are computed based upon            shares of common stock outstanding as a result of this offering applied to our pro forma net income (loss) amounts. 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.

(g)
We present EBITDA and Corporate EBITDA in this prospectus to provide investors with supplemental measures of our operating performance and liquidity and, in the case of Corporate EBITDA, information utilized in the calculation of the financial covenants under Hertz's senior credit facilities. EBITDA, as used in this prospectus, is defined as consolidated net income before net interest expense, consolidated income taxes and consolidated depreciation and amortization. Corporate EBITDA differs from the term "EBITDA" as it is commonly used. Corporate EBITDA, as used in this prospectus, means "EBITDA" as that term is defined under Hertz's senior credit facilities, which is generally consolidated net income before net interest expense (other than interest expense relating to certain car rental fleet financing), consolidated income taxes, consolidated depreciation (other than depreciation related to the car rental fleet) and amortization and before certain other items, in each case as more fully defined in the agreements governing Hertz's senior credit facilities. The other items excluded in this calculation include, but are not limited to: non-cash expenses and charges; extraordinary, unusual or non-recurring gains or losses; gains or losses associated with the sale or writedown of assets not in the ordinary course of business; certain management fees paid to the Sponsors; and earnings to the extent of cash dividends or distributions paid from non-controlled affiliates. Further, the covenants in our senior credit facilities are calculated using Corporate EBITDA for the most recent four fiscal quarters as a whole. As a result, the measure can be disproportionately affected by a particularly strong or weak quarter. Further, it may not be comparable to the measure for any subsequent four-quarter period or for any complete fiscal year.


We believe EBITDA and Corporate EBITDA are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industries. Management uses EBITDA and Corporate EBITDA to evaluate comparisons between us and our competitors and for internal monitoring and planning purposes, including the preparation of our annual operating budget and monthly operating reviews, as well as to facilitate analysis of investment decisions. In addition, we believe that investors, analysts and rating agencies consider EBITDA and Corporate EBITDA useful in measuring our ability to meet our debt service obligations and make capital expenditures. Several of our material debt covenants are based on Corporate EBITDA and non-compliance with those covenants could result in the requirement to immediately repay all amounts outstanding under those agreements, which could have a material adverse effect on our results of operations, financial position and cash flows.


EBITDA and Corporate EBITDA are not recognized measurements under accounting principles generally accepted in the United States of America, or "GAAP." When evaluating our operating performance or liquidity, investors should not consider EBITDA and Corporate EBITDA in isolation of, or as a substitute for, measures of our financial performance and liquidity as determined in accordance with GAAP, such as net income, operating income or net cash provided by operating activities. EBITDA and Corporate EBITDA may have material limitations as performance measures because they exclude items that are necessary elements of our costs and operations. Because other companies may calculate EBITDA and Corporate EBITDA differently than we do, EBITDA may not be, and Corporate EBITDA as presented in this prospectus is not, comparable to similarly titled measures reported by other companies.


The calculations of Pro forma Corporate EBITDA in the table above reflect historical financial data except for car rental fleet interest, which has been calculated on a pro forma basis to give effect to our new capital structure as if the fleet financings associated with the Transactions had occurred on January 1, 2005. This calculation may not be representative of the calculation of Corporate EBITDA under Hertz's senior credit facilities for any period prior to December 31, 2006 because consolidated interest expense (as defined in the agreements governing Hertz's senior credit facilities), a component of Corporate EBITDA, is calculated on a transitional basis until such date. As of March 31, 2006, Corporate EBITDA under this transitional formula would have been higher than the amount shown in the table above. Accordingly, we believe that the presentation of this amount would be misleading to investors and have instead provided what we believe to be a more meaningful calculation of Corporate EBITDA.


Borrowings under Hertz's senior credit facilities are a key source of our liquidity. Hertz's ability to borrow under these senior credit facilities depends upon, among other things, the maintenance of a sufficient borrowing base and compliance with the financial ratio covenants based on Corporate EBITDA set forth in the credit agreements for Hertz's senior credit facilities. Failure to comply with these financial ratio covenants would result in a default under the credit agreements for Hertz's senior credit facilities and, absent a waiver or an amendment from the lenders, permit the acceleration of all outstanding borrowings under the senior credit facilities. Although we were not required to be in compliance with the above financial covenants as of March 31, 2006, we performed the calculations associated with them and determined that we would have been in compliance, if compliance had been necessary, both under the transition rule as set forth in the credit agreements governing the senior credit facilities and as described in this footnote (g). For further information on the terms of Hertz's senior credit facilities, see "Description of Certain Indebtedness—Senior Credit Facilities." We have a significant amount of debt. For a discussion of the risks associated with our significant leverage, see "Risk Factors—Risks Relating to Our Substantial Indebtedness."

12



The following table reconciles historical net income (loss) to EBITDA for the years ended December 31, 2003 and 2004 and historical net income (loss) to EBITDA and (i) on a pro forma basis to Corporate EBITDA for the Predecessor period ended December 20, 2005 (as restated), the Successor period ended December 31, 2005, the combined year ended December 31, 2005 (as restated) and the Predecessor three month period ended March 31, 2005 and (ii) on an actual basis to Corporate EBITDA for the Successor three month period ended March 31, 2006:

 
  Predecessor
  Predecessor
  Successor
  Combined
  Predecessor
  Successor
 
 
   
   
  For the Periods From
   
   
   
 
 
  Years Ended December 31,
  January 1 to
December 20,

  December 21 to
December 31,

  Year Ended
December 31,

  Three Months Ended March 31,
 
 
  2003
  2004
  2005
Restated

  2005
  2005
Restated

  2005
  2006
 
 
   
   
   
  (Dollars in millions)

   
   
   
 
Net income (loss)   $ 158.6   $ 365.5   $ 371.3   $ (21.3 ) $ 350.0   $ 20.9   $ (49.2 )
  Depreciation and amortization     1,676.1     1,641.5     1,739.0     51.4     1,790.4     420.3     472.3  
  Interest, net of interest income     355.0     384.4     474.2     25.8     500.0     99.2     210.3  
  Provision (benefit) for taxes on income     78.9     133.9     191.3     (12.2 )   179.1     12.3     (17.3 )
   
 
 
 
 
 
 
 
EBITDA     2,268.6     2,525.3     2,775.8     43.7     2,819.5     552.7     616.1  
Adjustments:                                            
  Deduct pro forma car rental fleet
interest(1)
                (313.0 )   (9.2 )   (322.2 )   (76.4 )   (98.0 )
  Deduct car rental fleet depreciation(2)                 (1,344.1 )   (37.4 )   (1,381.5 )   (322.3 )   (345.6 )
  Non-cash expenses and charges(3)                 23.0     (0.7 )   22.3     4.6     31.4  
  Extraordinary, unusual or non-recurring gains or losses(4)                 2.8         2.8     (3.6 )    
  Sponsors' fees                                 0.8  
               
 
 
 
 
 
Pro forma Corporate EBITDA               $ 1,144.5   $ (3.6 ) $ 1,140.9   $ 155.0   $ 204.7  
               
 
 
 
 
 

13


            The following table reconciles historical net cash provided by (used in) operating activities to EBITDA for the years ended December 31, 2003 and 2004, the Predecessor period ended December 20, 2005 (as restated), the Successor period ended December 31, 2005, the combined year ended December 31, 2005 (as restated) and the Predecessor and Successor three month periods ended March 31, 2005 and 2006, respectively:

 
  Predecessor
  Predecessor
  Successor
  Combined
  Predecessor
  Successor
 
 
   
   
  For the Periods From
   
   
   
 
 
  Years Ended December 31,
  January 1 to
December 20,

  December 21 to
December 31,

  Year Ended
December 31,

  Three Months Ended March 31,
 
 
  2003
  2004
  2005
Restated

  2005
  2005
Restated

  2005
  2006
 
 
   
   
   
  (Dollars in millions)

   
   
   
 
Net cash provided by (used in) operating activities   $ 1,899.3   $ 2,251.4   $ 1,727.5   $ (274.7 ) $ 1,478.9   $ 910.6   $ 1,205.0  
  Stock-based employee compensation     (6.0 )   (5.6 )   (10.5 )       (10.5 )   (1.7 )    
  Provision for public liability and property damage     (178.3 )   (153.1 )   (158.1 )   (1.9 )   (160.0 )   (35.8 )   (45.9 )
  Minority interest         (3.2 )   (12.3 )   (0.3 )   (12.6 )   (2.3 )   (3.3 )
  Deferred income taxes     (260.8 )   (129.6 )   411.5     12.2     423.7     (13.8 )   (0.6 )
  Payments of public liability and property damage claims and expenses     155.2     178.7     155.9     7.9     163.8     43.2     44.0  
  Provision (benefit) for taxes on income     78.9     133.9     191.3     (12.2 )   179.1     12.3     (17.3 )
  Interest expense, net of interest income     355.0     384.4     474.2     25.8     500.0     99.2     210.3  
  Net changes in assets and liabilities     225.3     (131.6 )   (3.7 )   286.9     257.1     (459.0 )   (776.1 )
   
 
 
 
 
 
 
 
EBITDA   $ 2,268.6   $ 2,525.3   $ 2,775.8   $ 43.7   $ 2,819.5   $ 552.7   $ 616.1  
   
 
 
 
 
 
 
 

            The following tables reconcile, on a segment basis, historical income (loss) before income taxes and minority interest to EBITDA and (i) on a pro forma basis to Corporate EBITDA for the Predecessor period ended December 20, 2005, the Successor period ended December 31, 2005, the combined year ended December 31, 2005 and the Predecessor three month period ended March 31, 2005 and (ii) on an actual basis to Corporate EBITDA for the Successor three month period ended March 31, 2006:

 
  Predecessor
 
 
  For the Period From
January 1, 2005 to December 20, 2005

 
 
  Car Rental
  Equipment
Rental

  Corporate
and Other

  Total
 
 
  (Dollars in millions)

 
Income (loss) before income taxes and minority interest   $ 390.8   $ 250.5   $ (66.4 ) $ 574.9  
  Depreciation and amortization     1,485.9     248.2     4.9     1,739.0  
  Interest, net of interest income     349.2     86.4     38.6     474.2  
  Minority interest             (12.3 )   (12.3 )
   
 
 
 
 
EBITDA     2,225.9     585.1     (35.2 )   2,775.8  

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 
  Pro forma car rental fleet interest(1)     (313.0 )           (313.0 )
  Car rental fleet depreciation(2)     (1,344.1 )           (1,344.1 )
  Non-cash expenses and charges(3)     11.7     1.0     10.3     23.0  
  Extraordinary, unusual or non-recurring gains or losses(4)     0.5     1.2     1.1     2.8  
   
 
 
 
 
Pro forma Corporate EBITDA(5)   $ 581.0   $ 587.3   $ (23.8 ) $ 1,144.5  
   
 
 
 
 

14


 
  Successor
 
 
  For the Period From
December 21 to December 31, 2005

 
 
  Car Rental
  Equipment
Rental

  Corporate
and Other

  Total
 
 
  (Dollars in millions)

 
Income (loss) before income taxes and minority interest   $ (16.2 ) $ (11.4 ) $ (5.6 ) $ (33.2 )
  Depreciation and amortization     42.6     8.6     0.2     51.4  
  Interest, net of interest income     15.8     3.4     6.6     25.8  
  Minority interest             (0.3 )   (0.3 )
   
 
 
 
 
EBITDA     42.2     0.6     0.9     43.7  

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 
  Car rental fleet interest(1)     (9.2 )           (9.2 )
  Car rental fleet depreciation(2)     (37.4 )           (37.4 )
  Non-cash expenses and charges(3)     2.1         (2.8 )   (0.7 )
   
 
 
 
 
Pro forma Corporate EBITDA(5)   $ (2.3 ) $ 0.6   $ (1.9 ) $ (3.6 )
   
 
 
 
 
 
  Combined
 
 
  For the Year Ended December 31, 2005
 
 
  Car Rental
  Equipment
Rental

  Corporate
and Other

  Total
 
 
  (Dollars in millions)

 
Income (loss) before income taxes and minority interest   $ 374.6   $ 239.1   $ (72.0 ) $ 541.7  
  Depreciation and amortization     1,528.5     256.8     5.1     1,790.4  
  Interest, net of interest income     365.0     89.8     45.2     500.0  
  Minority interest             (12.6 )   (12.6 )
   
 
 
 
 
EBITDA     2,268.1     585.7     (34.3 )   2,819.5  

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 
  Pro forma car rental fleet interest(1)     (322.2 )           (322.2 )
  Car rental fleet depreciation(2)     (1,381.5 )           (1,381.5 )
  Non-cash expenses and charges(3)     13.8     1.0     7.5     22.3  
  Extraordinary, unusual or non-recurring gains or losses(4)     0.5     1.2     1.1     2.8  
   
 
 
 
 
Pro forma Corporate EBITDA(5)   $ 578.7   $ 587.9   $ (25.7 ) $ 1,140.9  
   
 
 
 
 

15


 
  Predecessor
 
 
  Three Months Ended March 31, 2005
 
 
  Car Rental
  Equipment
Rental

  Corporate
and Other

  Total
 
 
  (Dollars in millions)

 
Income (loss) before income taxes and minority interest   $ 24.6   $ 15.4   $ (4.5 ) $ 35.5  
  Depreciation and amortization     359.0     60.1     1.2     420.3  
  Interest, net of interest income     77.1     20.2     1.9     99.2  
  Minority interest             (2.3 )   (2.3 )
   
 
 
 
 
EBITDA     460.7     95.7     (3.7 )   552.7  

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 
  Pro forma car rental fleet interest(1)     (76.4 )           (76.4 )
  Car rental fleet depreciation(2)     (322.3 )           (322.3 )
  Non-cash expenses and charges(3)     2.8     0.2     1.6     4.6  
  Extraordinary, unusual or non-recurring gains or losses(4)     (3.6 )           (3.6 )
   
 
 
 
 
Pro forma Corporate EBITDA(5)   $ 61.2   $ 95.9   $ (2.1 ) $ 155.0  
   
 
 
 
 
 
  Successor
 
 
  Three Months Ended March 31, 2006
 
 
  Car Rental
  Equipment
Rental

  Corporate
and Other

  Total
 
 
  (Dollars in millions)

 
Income (loss) before income taxes and minority interest   $ (11.1 ) $ 34.5   $ (86.7 ) $ (63.3 )
  Depreciation and amortization     391.5     79.4     1.4     472.3  
  Interest, net of interest income     104.0     31.4     74.9     210.3  
  Minority interest             (3.2 )   (3.2 )
   
 
 
 
 
EBITDA     484.4     145.3     (13.6 )   616.1  

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 
  Car rental fleet interest(1)     (98.0 )           (98.0 )
  Car rental fleet depreciation(2)     (345.6 )           (345.6 )
  Non-cash expenses and charges(3)     23.7     1.2     6.5     31.4  
  Sponsors' fees             0.8     0.8  
   
 
 
 
 
Corporate EBITDA   $ 64.5   $ 146.5   $ (6.3 ) $ 204.7  
   
 
 
 
 
    (1)
    As defined in the credit agreements governing our senior credit facilities, Corporate EBITDA includes a reduction for certain car rental fleet related interest. For the Predecessor periods presented, car rental fleet interest has been calculated on a pro forma basis to give effect to the U.S. and international fleet debt financings entered into as part of the Transactions as if they had occurred on January 1, 2005. For the Successor period presented, car rental fleet interest is based on actual results.

    (2)
    As defined in the credit agreements governing our senior credit facilities, Corporate EBITDA includes a reduction for car rental fleet depreciation. For pro forma purposes, car rental fleet depreciation does not vary from the historical amounts.

    (3)
    As defined in the credit agreements governing our senior credit facilities, Corporate EBITDA excludes the impact of certain non-cash expenses and charges. The adjustments reflect the following: non-cash stock-based employee compensation charges, unrealized losses (gains) on currency translation of Euro denominated senior notes, non-cash amortization of debt financing costs included in car rental fleet interest and non-cash charges for workers' compensation.

    (4)
    As defined in the credit agreements governing our senior credit facilities, Corporate EBITDA excludes the impact of extraordinary, unusual or non-recurring gains or losses or charges or credits. The adjustments reflect the following: (i) costs incurred in connection with the relocation of the European and U.K. Headquarters to Uxbridge, England, (ii) concession and lease settlements, (iii) insurance settlements, (iv) a charge related to Hurricane Katrina, (v) a value added tax settlement, (vi) a pension settlement loss recorded in connection with the Supplemental Employee Retirement Plan and (vii) legal settlements.

    (5)
    Car rental fleet interest has been presented on a pro forma basis to give effect to the U.S. and international fleet debt financings entered into as part of the Transactions as if they had occurred on January 1, 2005 for all periods presented, except for the Successor three month period ended March 31, 2006, which is based on actual results.

(h)
Substantially all of our revenue earning equipment, as well as certain related assets, are owned by special purpose entities, or are subject to liens in favor of our lenders. Substantially all our other assets in the United States are also subject to liens in favor of our lenders, and substantially all our other assets outside the United States are (with certain limited exceptions) subject to liens in favor of our lenders. None of such assets are available to satisfy the claims of our general creditors.

16


(i)
Net corporate debt is not a defined term under GAAP. Net corporate debt is calculated as total debt excluding fleet debt less cash and equivalents and short-term investments, if any. Fleet debt consists of our obligations under our U.S. and international fleet debt facilities entered into as part of the Transactions, as well as certain asset-backed securities existing at the time of the Acquisition. This statistic is important to management and to ratings agencies as it helps measure our leverage.

 
  Successor
 
 
  December 31,
2005

  March 31,
2006

 
 
  (Dollars in millions)

 
Total debt   $ 12,515.0   $ 12,459.7  
  Less fleet debt     (6,656.3 )   (6,736.1 )
   
 
 
      5,858.7     5,723.6  
Less cash and equivalents     (843.9 )   (679.4 )
   
 
 
  Net corporate debt   $ 5,014.8   $ 5,044.2  
   
 
 
(j)
Includes equity contributions totaling $2,295 million to Hertz Holdings from investment funds associated with or designated by the Sponsors on or prior to December 21, 2005.

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

(l)
Car rental rate revenue consists of all revenue, net of discounts, associated with the rental of cars including charges for optional insurance products, but excluding revenue derived from fueling and concession and other expense pass-throughs, NeverLost units and certain ancillary revenue. Rental rate revenue per transaction day is calculated as total rental rate revenue, divided by the total number of transaction days, with all periods adjusted to eliminate the effect of fluctuations in foreign currency. This statistic is important to management as it represents the best measurement of the changes in underlying pricing in the car rental business and encompasses the elements in car rental pricing that management has the ability to control.

 
  Historical
 
 
  Predecessor
  Combined
  Predecessor
  Successor
 
 
  Year Ended December 31,

  Three Months Ended
March 31,

 
 
  2003
  2004
  2005
  2005
  2006
 
 
  (Dollars in millions)

 
Car rental revenue per statement of operations   $ 4,819.3   $ 5,430.8   $ 5,949.9   $ 1,333.4   $ 1,399.6  
Non-rental rate revenue     (491.9 )   (561.4 )   (758.2 )   (158.8 )   (185.6 )
Foreign currency adjustment     85.1     (37.8 )   (59.2 )   (26.9 )   (4.7 )
   
 
 
 
 
 
Rental rate revenue   $ 4,412.5   $ 4,831.6   $ 5,132.5   $ 1,147.7   $ 1,209.3  
   
 
 
 
 
 
Transaction days (in millions)     102.28     115.25     122.10     27.40     28.01  
Rental rate revenue per transaction day   $ 43.14   $ 41.92   $ 42.03   $ 41.89   $ 43.17  
(m)
Equipment rental and rental related revenue consists of all revenue, net of discounts, associated with the rental of equipment including charges for delivery, loss damage waivers and fueling, but excluding revenue arising from the sale of equipment, parts and supplies and certain other ancillary revenue. Rental and rental related revenue is adjusted in all periods to eliminate the effect of fluctuations in foreign currency.

 
  Historical
 
 
  Predecessor
  Combined
  Predecessor
  Successor
 
 
  Year Ended December 31,

  Three Months Ended
March 31,

 
 
  2003
  2004
  2005
  2005
  2006
 
 
  (Dollars in millions)

 
Equipment rental revenue per statement of operations   $ 1,037.8   $ 1,162.0   $ 1,414.9   $ 285.4   $ 363.1  
Equipment sales and other revenue     (122.4 )   (134.2 )   (158.8 )   (33.3 )   (44.1 )
Foreign currency adjustment     22.5     4.7     (1.8 )   (2.0 )   (1.2 )
   
 
 
 
 
 
Rental and rental related revenue   $ 937.9   $ 1,032.5   $ 1,254.3   $ 250.1   $ 317.8  
   
 
 
 
 
 
(n)
Same store revenue growth represents the change in the current period total same store revenue over the prior period total same store revenue as a percentage of the prior period. The same store revenue amounts are adjusted in all periods to eliminate the effect of fluctuations in foreign currency.

17



RISK FACTORS

        Our business is subject to a number of important risks and uncertainties, some of which are described below. The risks described below, however, are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also impair our business operations. Any of these risks may have a material adverse effect on our business, financial condition, results of operations and cash flows. In such a case, you may lose all or part of your investment in our common stock.

Risks Related to Our Business

An economic downturn could result in a decline in business and leisure travel and non-residential capital investment, which could harm our business.

        Our results of operations are affected by many economic factors, including the level of economic activity in the markets in which we operate. A decline in economic activity either in the United States or in international markets may have a material adverse effect on our business. In the car rental business, a decline in economic activity typically results in a decline in both business and leisure travel and, accordingly, a decline in the volume of car rental transactions. In the equipment rental business, a decline in economic activity typically results in a decline in activity in non-residential construction and other businesses in which our equipment rental customers operate and, therefore, results in a decline in the volume of equipment rental transactions. In the case of a decline in car or equipment rental activity, we may reduce rental rates to meet competitive pressures, which could have a material adverse effect on our results of operations. A decline in economic activity also may have a material adverse effect on residual values realized on the disposition of our revenue earning cars and/or equipment.

We face intense competition that may lead to downward pricing, or an inability to increase prices, which could have a material adverse impact on our results of operations.

        The markets in which we operate are highly competitive. See "Business—Worldwide Car Rental—Competition" and "Business—Equipment Rental—Competition." We believe that price is one of the primary competitive factors in the car and equipment rental markets. Our competitors, some of whom may have access to substantial capital, may seek to compete aggressively on the basis of pricing. To the extent that we match competitors' downward pricing, it could have a material adverse impact on our results of operations. To the extent that we do not match or remain within a reasonable competitive distance from our competitors' pricing, it could also have a material adverse impact on our results of operations, as we may lose rental volume. The Internet has increased pricing transparency among car rental companies by enabling cost-conscious customers, including business travelers, to more easily obtain the lowest rates available from car rental companies for any given trip. This transparency may increase the prevalence and intensity of price competition in the future.

Our car rental business is dependent on the air travel industry, and disruptions in air travel patterns could harm our business.

        We estimate that approximately 72% of our worldwide car rental revenues during the twelve months ended March 31, 2006 were generated at our airport rental locations. Significant capacity reductions or airfare increases (e.g., due to an increase in fuel costs) could result in reduced air travel and have a material adverse effect on our results of operations. In addition, any event that disrupts or reduces business or leisure air travel could have a material adverse effect on our results of operations. In particular, certain U.S. airlines have experienced economic distress in recent years, resulting in the bankruptcy proceedings of Delta Air Lines, Inc., Northwest Airlines Corporation, United Air Lines, Inc. and US Airways Group, Inc. Any further deterioration in the economic condition of U.S. and international airlines could exacerbate reductions in air travel. Other events that impact air travel

18



could include work stoppages, military conflicts, terrorist incidents, natural disasters, epidemic diseases, or the response of governments to any of these events. For example, shortly before the September 11, 2001 terrorist attacks, we estimated that we would earn a pre-tax profit of approximately $250 million in 2001; by contrast, our actual pre-tax profit for 2001 was only approximately $3 million, and we continued to feel the adverse effects of the attacks well into the following year. On a smaller scale, the 2003 outbreak of Severe Acute Respiratory Syndrome, or "SARS," in the Toronto, Canada area and parts of Asia, significantly reduced our 2003 results of operations in Canada.

Our business is highly seasonal, and a disruption in rental activity during our peak season could materially adversely affect our results of operations.

        Certain significant components of our expenses, including real estate taxes, rent, utilities, maintenance and other facility-related expenses, the costs of operating our information systems and minimum staffing costs, are fixed in the short-run. Seasonal changes in our revenues do not alter those fixed expenses, typically resulting in higher profitability in periods when our revenues are higher and lower profitability in periods when our revenues are lower. The second and third quarters of the year have historically been our strongest quarters due to their increased levels of leisure travel and construction activity. In 2005, the second and third quarters accounted for approximately 25% and 28% of total revenues and 29% and 49% of income before income taxes and minority interest, respectively. Any occurrence that disrupts rental activity during the second or third quarters could have a disproportionately material adverse effect on our liquidity and/or results of operations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources."

We may not be successful in our business strategy to expand into the off-airport rental market, including marketing to replacement renters and insurance companies that reimburse or pay for such rentals.

        We have been increasing our presence in the off-airport car rental market in the United States. We currently intend to pursue profitable growth opportunities in the off-airport market. We may do this through a combination of selected new location openings, a disciplined evaluation of existing locations and the pursuit of same-store sales growth. In order to increase revenues at our existing and any new off-airport locations, we will need to successfully market to insurance companies and other companies that provide rental referrals to those needing cars while their vehicles are being repaired or are temporarily unavailable for other reasons, as well as to the renters themselves. This could involve a significant number of additional off-airport locations or strategic changes with respect to our existing locations. We incur minimal non-fleet costs in opening our new off-airport locations, but new off-airport locations, once opened, take time to generate their full potential revenues. As a result, revenues at new locations do not initially cover their start-up costs and often do not, for some time, cover the costs of their ongoing operation. See "Business—Worldwide Car Rental—Operations." The results of this strategy and the success of our implementation of this strategy will not be known for a number of years. If we are unable to grow profitably in our off-airport network, properly react to changes in market conditions or successfully market to replacement renters and the insurance companies covering the cost of their rentals, our financial condition, results of operations and cash flows could be materially adversely affected.

We face risks of increased costs of cars and equipment and of decreased profitability, including as a result of limited supplies of competitively priced cars or equipment.

        We believe we are one of the largest private sector purchasers of new cars in the world for our rental fleet, and during the twelve months ended March 31, 2006, our approximate average holding period for a rental car was eleven months in the United States and eight months in our international car rental operations. In recent years, the average cost of new cars has increased. We expect increases

19



in car costs during the next twelve months. In the United States, increases of approximately 17% in monthly per-car depreciation costs for 2006 model year program cars began to adversely affect our results of operations in the fourth quarter of 2005, as those cars began to enter our fleet. We may not be able to offset these car cost increases to a degree sufficient to maintain our profitability.

        Historically, we have purchased more of the cars we rent from Ford Motor Company, or "Ford," than from any other automobile manufacturer. Over the five years ended December 31, 2005, approximately 50% of the cars acquired by us for our U.S. car rental fleet, and approximately 30% of the cars acquired by us for our international fleet, were manufactured by Ford and its subsidiaries. During the twelve months ended March 31, 2006, approximately 41% of the cars acquired by us domestically were manufactured by Ford and its subsidiaries and approximately 36% of the cars acquired by us for our international fleet were manufactured by Ford and its subsidiaries, which represented the largest percentage of any automobile manufacturer during that period. Under our Master Supply and Advertising Agreement with Ford, Ford has agreed to develop fleet offerings in the United States that are generally competitive with terms and conditions of similar offerings by other automobile manufacturers. The Master Supply and Advertising Agreement expires in 2010. See "Business—Relationship with Ford—Supply and Advertising Arrangements." We cannot assure you that we will be able to extend the Master Supply and Advertising Agreement beyond its current term or enter into similar agreements at reasonable terms. In the future, we expect to buy a smaller proportion of our car rental fleet from Ford than we have in the past. If Ford does not offer us competitive terms and conditions, and we are not able to purchase sufficient quantities of cars from other automobile manufacturers on competitive terms and conditions, then we may be forced to purchase cars at higher prices, or on terms less competitive, than for cars purchased by our competitors. Historically, we have also purchased a significant percentage of our car rental fleet from General Motors Corporation, or "General Motors." Over the five years ended December 31, 2005, approximately 19% of the cars acquired by us for our U.S. car rental fleet, and approximately 16% of the cars acquired by us for our international fleet, were manufactured by General Motors. During the twelve months ended March 31, 2006, approximately 21% of the cars acquired by our U.S. car rental fleet, and approximately 13% of the cars acquired by us for our international fleet, were manufactured by General Motors.

        To date we have not entered into any long-term car supply arrangements with manufacturers other than Ford. In addition, certain car manufacturers, including Ford, have adopted strategies to de-emphasize sales to the car rental industry which they view as less profitable due to historical sales incentive and other discount programs that tended to lower the average cost of cars for fleet purchasers such as us. Reduced or limited supplies of equipment together with increased prices are risks that we also face in our equipment rental business. We cannot offer assurance that we will be able to pass on increased costs of cars or equipment to our rental customers. Failure to pass on significant cost increases to our customers would have a material adverse impact on our results of operations and financial condition.

We face risks related to decreased acquisition or disposition of cars through repurchase and guaranteed depreciation programs.

        For the twelve months ended March 31, 2006, approximately 72% of the cars purchased in our combined U.S. and international car rental fleet were subject to repurchase by car manufacturers under contractual repurchase or guaranteed depreciation programs. Under these programs, car manufacturers agree to repurchase cars at a specified price or guarantee the depreciation rate on the cars during a specified time period, typically subject to certain car condition and mileage requirements. These repurchase and guaranteed depreciation programs limit the risk to us that the market value of a car at the time of its disposition will be less than its estimated residual value at such time. We refer to this risk as "residual risk." For these reasons, cars purchased by car rental companies under repurchase and guaranteed depreciation programs are sometimes referred to by industry participants as "program"

20



cars. Conversely, those cars not purchased under repurchase or guaranteed depreciation programs for which the car rental company is exposed to residual risk are sometimes referred to as "risk" cars.

        Repurchase and guaranteed depreciation programs enable us to determine our depreciation expense in advance. Depreciation is a significant cost factor in our operations. We expect the percentage of our car rental fleet subject to repurchase or guaranteed depreciation programs to decrease substantially due primarily to anticipated changes in the terms to be offered by automobile manufacturers under repurchase programs and because we expect car manufacturers to offer fewer program cars to us as part of their announced efforts to de-emphasize sales to car rental companies. Accordingly, we expect to bear increased risk relating to the residual market value of our car rental fleet and related depreciation.

        In addition, repurchase and guaranteed depreciation programs generally provide us with flexibility to reduce the size of our fleet by returning cars sooner than originally expected without risk of loss in the event of an economic downturn or to respond to changes in demand. This flexibility will be reduced to the extent the percentage of program cars in our car rental fleet decreases. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Overview" and "Business—Worldwide Car Rental—Fleet."

        Car manufacturers could modify or eliminate their repurchase or guaranteed depreciation programs or change their return policies (which include condition, mileage and holding period requirements for returned cars) from one program year to another to make it disadvantageous to acquire certain cars. Any such modification or elimination would expose us to the risks described in the preceding paragraphs. In addition, because we obtain a substantial portion of our financing in reliance on repurchase and guaranteed depreciation programs, the modification or elimination of those programs, or the associated return policies, by manufacturers or significant adverse changes in the financial condition of manufacturers would make needed vehicle-related debt financing significantly more difficult to obtain on reasonable terms. See "—Our reliance on asset-backed financing to purchase cars subjects us to a number of risks, many of which are beyond our control."

We could be harmed by a decline in the results of operations or financial condition of the manufacturers of our cars, particularly if they are unable to repurchase program cars from us.

        In the past 18 months, Ford and General Motors, which are the principal suppliers of cars to us on both a program and risk basis, have experienced deterioration in their operating results and significant declines in their credit ratings. A severe or persistent decline in the results of operations or financial condition of a manufacturer of cars that we own could reduce the cars' residual values, particularly to the extent that the manufacturer unexpectedly announced the eventual elimination of its models or nameplates or ceased manufacturing them altogether. Such a reduction could cause us to sustain a loss on the ultimate sale of those cars or require us to depreciate those cars on a more rapid basis while we own them. In addition, if a decline in results or conditions were so severe as to cause a manufacturer to default on an obligation to repurchase or guarantee the depreciation of program cars we own, or to cause a manufacturer to commence bankruptcy reorganization proceedings, we would have to find an alternate method of disposition of those cars, which could significantly increase our expenses and decrease our proceeds on disposal. Any such default or reorganization might also leave us with a substantial unpaid claim against the manufacturer with respect to program cars that were sold and returned to the car manufacturer but not paid for, or that were sold for less than their agreed repurchase price or guaranteed value. For the twelve months ended March 31, 2006, outstanding month-end receivables for cars sold to manufacturers were as much as $975 million, with the highest amount for a single manufacturer being $350 million owed by Ford. A decline in the economic and business prospects of car manufacturers, including any economic distress impacting the suppliers of car components to manufacturers, could also cause manufacturers to raise the prices we pay for cars or reduce their supply to us. In addition, events negatively affecting the car manufacturers could affect

21



how much we may borrow under our asset-backed financing. See "—Our reliance on asset-backed financing to purchase cars subjects us to a number of risks, many of which are beyond our control."

Our reliance on asset-backed financing to purchase cars subjects us to a number of risks, many of which are beyond our control.

        We rely significantly on asset-backed financing to purchase cars for our domestic and international car rental fleets. In connection with the Acquisition, a bankruptcy-remote special purpose entity wholly owned by us issued approximately $4,300 million of new debt (plus an additional $1,500 million in the form of variable funding notes issued but not funded at the closing of the Acquisition) backed by our U.S. car rental fleet under our U.S. asset-backed securities program, or our "ABS Program." In addition, we issued $600 million of medium term notes backed by our U.S. car rental fleet prior to the Acquisition, or the "pre-Acquisition ABS Notes," all of which remain outstanding. As part of the Acquisition, various of our non-U.S. subsidiaries and certain special purpose entities issued approximately $1,781 million of debt under loan facilities secured by rental vehicles and related assets of certain of our subsidiaries (all of which are organized outside the United States) or by rental equipment and related assets of certain of our subsidiaries organized outside North America, as well as (subject to certain limited exceptions) substantially all our other assets outside North America. The asset-backed debt issued in connection with the Transactions has expected final payment dates ranging from 2008 to 2010 and the pre-Acquisition ABS Notes have expected final payment dates ranging from 2007 to 2009. Based upon these repayment dates, this debt will need to be refinanced within five years from the date of the closing of the Transactions. Consequently, if our access to asset-backed financing were reduced or were to become significantly more expensive for any reason, we cannot assure you that we would be able to refinance or replace our existing asset-backed financing or continue to finance new car acquisitions through asset-backed financing on favorable terms, or at all. Our asset-backed financing capacity could be decreased, or financing costs and interest rates could be increased, as a result of risks and contingencies, many of which are beyond our control, including, without limitation:

    rating agencies that provide credit ratings for our asset-backed indebtedness, third-party credit enhancers that insure our asset-backed indebtedness or other third parties requiring changes in the terms and structure of our asset-backed financing, including increased credit enhancement (i) in connection with the incurrence of additional or refinancing of existing asset-backed debt, (ii) upon the occurrence of external events, such as changes in general economic and market conditions or further deterioration in the credit ratings of our principal car manufacturers, including Ford and General Motors, or (iii) or otherwise;

    the terms and availability of third-party credit enhancement at the time of the incurrence of additional or refinancing of existing asset-backed debt;

    the insolvency or deterioration of the financial condition of one or more of the third-party credit enhancers that insure our asset-backed indebtedness;

    the occurrence of certain events that, under the agreements governing our asset-backed financing, could result, among other things, in (i) an amortization event pursuant to which payments of principal and interest on the affected series of asset-backed notes may be accelerated, or (ii) a liquidation event of default pursuant to which the trustee or holders of asset-backed notes would be permitted to require the sale of fleet vehicles or equipment that collateralize the asset-backed financing; or

    changes in law that negatively impact our asset-backed financing structure.

        Any disruption in our ability to refinance or replace our existing asset-backed financing or to continue to finance new car acquisitions through asset-backed financing, or any negative development in the terms of the asset-backed financing available to us, could cause our cost of financing to increase

22



significantly and have a material adverse effect on our financial condition and results of operations. The assets that collateralize our asset-backed financing will not be available to satisfy the claims of our general creditors. The terms of our senior credit facilities permit us to finance or refinance new car acquisitions through other means, including secured financing that is not limited to the assets of special purpose entity subsidiaries. We may seek in the future to finance or refinance new car acquisitions, including cars excluded from the ABS Program such as our fleet in Hawaii, Kansas and Puerto Rico, through such other means. No assurances can be given, however, as to whether such financing will be available, or as to whether the terms of such financing will be comparable to the debt issued under the ABS Program.

Fluctuations in fuel costs or reduced supplies could harm our business.

        We could be adversely affected by limitations on fuel supplies, the imposition of mandatory allocations or rationing of fuel or significant increases in fuel prices. A severe or protracted disruption of fuel supplies or significant increases in fuel prices could have a material adverse effect on our financial condition and results of operations, either by directly interfering with our normal activities or by disrupting the air travel on which a significant portion of our car rental business relies. See "—Our car rental business is dependent on the air travel industry, and disruptions in air travel patterns could harm our business."

Manufacturer safety recalls could create risks to our business.

        Our cars may be subject to safety recalls by their manufacturers. Under certain circumstances, the recalls may cause us to attempt to retrieve cars from renters or to decline to re-rent returned cars until we can arrange for the steps described in the recalls to be taken. If a large number of cars are the subject of simultaneous recalls, or if needed replacement parts are not in adequate supply, we may not be able to re-rent recalled cars for a significant period of time. We could also face liability claims if recalls affect cars that we have already sold. Depending on the severity of the recall, it could materially adversely affect our revenues, create customer service problems, reduce the residual value of the cars involved and harm our general reputation.

We face risks arising from our heavy reliance on communications networks and centralized information systems.

        We rely heavily on information systems to accept reservations, process rental and sales transactions, manage our fleets of cars and equipment, account for our activities and otherwise conduct our business. We have centralized our information systems in two redundant facilities in Oklahoma City, Oklahoma, and we rely on communications service providers to link our systems with the business locations these systems serve. A simultaneous loss of both facilities, or a major disruption of communications between the systems and the locations they serve, could cause a loss of reservations, interfere with our ability to manage our fleet, slow rental and sales processes and otherwise materially adversely affect our ability to manage our business effectively. Our systems back-up plans, business continuity plans and insurance programs are designed to mitigate such a risk, not to eliminate it. In addition, because our systems contain information about millions of individuals and businesses, our failure to maintain the security of the data we hold, whether the result of our own error or the malfeasance or errors of others, could harm our reputation or give rise to legal liabilities leading to lower revenues, increased costs and other material adverse effects on our results of operations.

23


The concentration of our reservations, accounting and information technology functions at a limited number of facilities in Oklahoma, Alabama and Ireland creates risks for us.

        We have concentrated our reservations functions for the United States in two facilities, one in Oklahoma City, Oklahoma, and one in Saraland (Mobile County), Alabama, and we have concentrated our accounting functions for the United States in two facilities in Oklahoma City. Similarly, we have concentrated reservations and accounting functions for our European operations in a single facility near Dublin, Ireland. In addition, our major information systems are centralized in two of our facilities in Oklahoma City. A disruption of normal business at any of our principal facilities in Oklahoma City, Saraland or Dublin, whether as the result of localized conditions (such as a fire or explosion) or as the result of events or circumstances of broader geographic impact (such as an earthquake, storm, flood, epidemic, strike, act of war, civil unrest or terrorist act), could materially adversely affect our business by disrupting normal reservations, customer service, accounting and systems activities. Our systems designs, business continuity plans and insurance programs are designed to mitigate those risks, not to eliminate them, and this is particularly true with respect to events of broad geographic impact.

Claims that the software products and information systems that we rely on are infringing on the intellectual property rights of others could increase our expenses or inhibit us from offering certain services, which could adversely affect our results of operations.

        A number of entities, including some of our competitors, have sought, or may in the future obtain, patents and other intellectual property rights that cover or affect software products and other components of information systems that we rely on to operate our business. For example, Enterprise Rent-A-Car Company, or "Enterprise," has asserted that certain systems we use to conduct insurance replacement rentals would infringe on patent rights it would obtain if it were granted certain patents for which it has applied.

        Litigation may be necessary to determine the validity and scope of third-party rights or to defend against claims of infringement. If a court determines that one or more of the software products or other components of information systems we use infringe on intellectual property owned by others or we agree to settle such a dispute, we may be liable for money damages. In addition, we may be required to cease using those products and components unless we obtain licenses from the owners of the intellectual property, redesign those products and components in such a way as to avoid infringement or cease altogether the use of those products and components. Each of these alternatives could increase our expenses materially or impact the marketability of our services. Any litigation, regardless of the outcome, could result in substantial costs and diversion of resources and could have a material adverse effect on our business. In addition, a third-party intellectual property owner might not allow us to use its intellectual property at any price, or on terms acceptable to us, which could materially affect our competitive position and our results of operations. For example, if Enterprise were to obtain the patent rights referred to above and after that pursue and prevail on claims of infringement similar to those it has previously asserted, it could have a material adverse effect on our ability to grow our insurance replacement business and, in turn, our off-airport business.

If we acquire any businesses in the future, they could prove difficult to integrate, disrupt our business, or have an adverse effect on our results of operations.

        We intend to pursue growth primarily through internal growth, but from time to time we may consider opportunistic acquisitions which may be significant. Any future acquisition would involve numerous risks including, without limitation:

    potential disruption of our ongoing business and distraction of management;

    difficulty integrating the acquired business; and

24


    exposure to unknown liabilities, including litigation against the companies we may acquire.

        If we make acquisitions in the future, acquisition-related accounting charges may affect our balance sheet and results of operations. In addition, the financing of any significant acquisition may result in changes in our capital structure, including the incurrence of additional indebtedness. We may not be successful in addressing these risks or any other problems encountered in connection with any acquisitions.

We face risks related to changes in our ownership.

        A substantial number of our airport concession agreements, as well as certain of our other agreements with third parties, require the consent of the airports' operators or other parties in connection with any change in ownership of us. Changes in ownership of us could also require the approval of other governmental authorities (including insurance regulators, regulators of our retail used car sales activities and antitrust regulators), and we cannot offer assurance that those approvals would be obtained on terms acceptable to us. If our owners were to proceed to change their ownership of us without obtaining necessary approvals, or if significant conditions on our operations were imposed in connection with obtaining such approvals, our ability to conduct our business could be impaired, resulting in a material adverse effect on our results of operations and financial condition.

We face risks related to liabilities and insurance.

        Our businesses expose us to claims for personal injury, death and property damage resulting from the use of the cars and equipment rented or sold by us and for workers' compensation claims and other employment-related claims by our employees. Currently, we generally self-insure up to $10 million per occurrence in the United States and Europe for vehicle and general liability exposures and maintain insurance with unaffiliated carriers in excess of such levels up to $100 million per occurrence, or in the case of equipment rental in Europe and international operations outside of Europe, in such lower amounts as we deem adequate given the risks. We cannot assure you that we will not be exposed to uninsured liability at levels in excess of our historical levels resulting from multiple payouts or otherwise, that liabilities in respect of existing or future claims will not exceed the level of our insurance, that we will have sufficient capital available to pay any uninsured claims or that insurance with unaffiliated carriers will continue to be available to us on economically reasonable terms or at all. See "Business—Risk Management" and "Business—Legal Proceedings."

We could face significant withdrawal liability if we withdraw from participation in one or more multiemployer pension plans in which we participate.

        We participate in various "multiemployer" pension plans administered by labor unions representing some of our employees. We make periodic contributions to these plans to allow them to meet their pension benefit obligations to their participants. In the event that we withdrew from participation in one or more of these plans, then applicable law could require us to make an additional lump-sum contribution to those plans, and we would have to reflect that on our balance sheet and statement of operations. Our withdrawal liability for any multiemployer plan would depend on the extent of the plan's funding of vested benefits. We currently do not expect to incur any withdrawal liability in the near future. However, in the ordinary course of our renegotiation of collective bargaining agreements with labor unions that maintain these plans, we could decide to discontinue participation in a plan, and in that event, we could face a withdrawal liability. Some multiemployer plans, including ones in which we participate, are reported to have significantly underfunded liabilities. Such underfunding could increase the size of our potential withdrawal liability.

25



We have received an informal request from the SEC to provide information about car rental services that we provide to our independent registered public accounting firm in the ordinary course of business.

        In July 2005, the Division of Enforcement of the SEC informed us that it was conducting an informal inquiry and asked Hertz to voluntarily provide documents and information related to car rental services that we provide to our independent registered public accounting firm PricewaterhouseCoopers LLP, or "PwC." The SEC noted in its letter that the inquiry should not be construed as an indication by the SEC or its staff that any violations of law have occurred, or as a reflection upon any person, entity or security. We cooperated with the SEC by providing it with certain requested information in July and September 2005. Since then, we have received no further requests from the SEC with respect to this informal inquiry, but neither have we been advised that it has been closed.

        After learning of this informal inquiry, our audit committee and representatives of PwC discussed PwC's independence with respect to us. PwC reconfirmed that it has been and remains independent with respect to us. In making this determination, PwC considered, among other things, its belief that PwC's arrangements with us represent arm's-length transactions that were negotiated in the normal course of business, and, therefore, that the commercial relationship does not impair PwC's independence with respect to us. If the SEC were to take a different view and it were ultimately determined that PwC was not independent with respect to us for certain periods, our filings with the SEC which contain our consolidated financial statements for such periods would be non-compliant with applicable securities laws. A determination that PwC was not independent with respect to us could, among other things, cause us to be in violation of, or in default under, the instruments governing our indebtedness and airport concession agreements, limit our access to capital markets and result in regulatory sanctions. Also, in the event of such a determination, we may be required to have independent audits conducted on our previously audited financial statements by another independent registered public accounting firm for the affected periods. The time involved to conduct such independent audits may make it more difficult to obtain capital on favorable terms, or at all, pending the completion of such audits. Any of the foregoing could have a material adverse effect on our results of operations, liquidity and financial condition, the trading prices of our securities and the eligibility for listing of our common stock on The New York Stock Exchange.

Environmental laws and regulations and the costs of complying with them, or any liability or obligation imposed under them, could adversely affect our financial position, results of operations or cash flows.

        We are regulated by federal, state, local and foreign environmental laws and regulations in connection with our operations, including, among other things, with respect to the ownership and operation of tanks for the storage of petroleum products, such as gasoline, diesel fuel and motor and waste oils. We have established a compliance program for our tanks that is intended to ensure that the tanks are properly registered with the state or other jurisdiction in which the tanks are located and have been either replaced or upgraded to meet applicable leak detection and spill, overfill and corrosion protection requirements. However, we cannot assure you that these tank systems will at all times remain free from undetected leaks or that the use of these tanks will not result in significant spills.

        We have made, and will continue to make, expenditures to comply with environmental laws and regulations, including, among others, expenditures for the cleanup of contamination at or emanating from, currently and formerly owned and leased properties, as well as contamination at other locations at which our wastes have reportedly been identified. We cannot assure you that compliance with existing or future environmental legislation and regulations will not require material expenditures by us or otherwise have a material adverse effect on our consolidated financial position, results of operations or cash flows. See "Business—Governmental Regulation and Environmental Matters" and "Business—Legal Proceedings."

26



Changes in the U.S. and foreign legal and regulatory environment that impact our operations, including laws and regulations relating to the insurance products we sell, customer privacy, data security, insurance rates and expenses we pass through to customers by means of separate charges, could disrupt our business, increase our expenses or otherwise could have a material adverse effect on our results of operations.

        We are subject to a wide variety of laws and regulations in the United States and the other countries and jurisdictions in which we operate, and changes in the level of government regulation of our business have the potential to materially alter our business practices or our profitability. Depending on the jurisdiction, those changes may come about through new legislation, the issuance of new laws and regulations or changes in the interpretation of existing laws and regulations by a court, regulatory body or governmental official. Sometimes those changes may have not just prospective but also retroactive effect, which is particularly true when a change is made through reinterpretation of laws or regulations that have been in effect for some time. Moreover, changes in regulation that may seem neutral on their face may have either more or less impact on us than on our competitors, depending on the circumstances.

        The optional liability insurance policies and products providing insurance coverage in our domestic car rental operations are conducted pursuant to limited licenses or exemptions under state laws governing the licensing of insurance producers. In our international car rental operations, our offering of optional products providing insurance coverage historically has not been regulated. Any changes in the law in the United States or internationally that change our operating requirements with respect to insurance could increase our costs of compliance or make it uneconomical to offer such products, which would lead to a reduction in revenues. For instance, in the countries of the European Union and Australia, the regulatory environment for insurance intermediaries is rapidly evolving, and we cannot assure you either that we will be able to continue offering such coverage without substantial changes in our offering process or in the terms of the coverage or that such changes, if required, would not render uneconomic our continued offering of the coverage. Due to a change in law in Australia, we have discontinued sales of certain insurance products there. See "Business—Risk Management" for further discussion regarding how changes in the regulation of insurance intermediaries may affect us internationally.

        Laws in many countries and jurisdictions limit the types of information we may collect about individuals with whom we deal or propose to deal, as well as how we collect, retain and use the information that we are permitted to collect. In addition, the centralized nature of our information systems requires the routine flow of information about customers and potential customers across national borders, particularly into the United States. If this flow of information were to become illegal, or subject to onerous restrictions, our ability to serve our customers could be seriously impaired for an extended period of time. Other changes in the regulation of customer privacy and data security could likewise have a material adverse effect on our business. Privacy and data security are rapidly evolving areas of regulation, and additional regulation in those areas, some of it potentially difficult for us to accommodate, is frequently proposed and occasionally adopted. Thus, changes in the worldwide legal and regulatory environment in the areas of customer privacy, data security and cross-border data flows could have a material adverse effect on our business, primarily through the impairment of our marketing and transaction processing activities.

        Further, the substantive regulation of the rates we charge car renters, either through direct price regulation or a requirement that we disregard a customer's source market (location or place of residence) for rate purposes, could reduce our revenues or increase our expenses. We set rates based on a variety of factors including the sources of rental reservations geographically and the means through which the reservations were made, all of which are in response to various market factors and costs. The European Commission has recently considered a directive that could eventually require us to disregard the country of residence of European Union residents for rate purposes, and bills have been introduced into the New York State legislature that similarly would prevent us from charging higher

27



rates to renters residing in certain boroughs of New York City. The adoption of any such measures could have a material adverse impact on our revenues and results of operations.

        The Attorneys General of Massachusetts, Virginia and Montana have in the past year taken positions that car rental companies may not pass through to customers, by means of separate charges, various expenses, such as vehicle licensing costs and airport concession fees, that the companies incur in their business, or that our ability to pass through such expenses is limited. In Massachusetts and Virginia, as well as in most other places where we operate, we pass through various expenses, including the recovery of vehicle licensing costs and airport concession fees, to our car rental customers as separate charges; we have no corporate operations in Montana. We believe our expense pass-through charges, where imposed, are lawful, and expense pass-throughs have, when challenged, been upheld in courts of other states. The position of the Attorney General of Virginia was reversed by subsequent legislation, while the concerns of the Attorney General of Montana, which related primarily to the passing through of vehicle licensing costs, were resolved by assurances of voluntary compliance by our licensees (which permitted passing through of such costs subject to certain limitations of small operational significance). Nonetheless, we cannot offer assurance that the Attorney General of Massachusetts or other states will not take enforcement action against us with respect to our car rental expense pass-throughs. If such action were taken and the Attorneys General were to prevail, it could have a material adverse impact on our revenues and results of operations. In the United States, our revenues from car rental expense pass-throughs for the year ended December 31, 2005, were approximately $287.4 million.

Risks Relating to Our Substantial Indebtedness

We have substantial debt and may incur substantial additional debt, which could adversely affect our financial condition, our ability to obtain financing in the future and our ability to react to changes in our business.

        We have a significant amount of debt. On a pro forma basis assuming that this offering and the use of proceeds to us thereof as described in "Use of Proceeds" occurred on March 31, 2006, we would have had approximately $            million of debt outstanding and a total debt to equity ratio of            to            . Our substantial debt could have important consequences to you. For example, it could:

    make it more difficult for us to satisfy our obligations to the holders of our outstanding debt securities and to the lenders under our senior credit facilities and the U.S. and international fleet debt financings entered into as part of the Transactions, resulting in possible defaults on and acceleration of such indebtedness;

    require us to dedicate a substantial portion of our cash flows from operations to make payments on our debt, which would reduce the availability of our cash flows from operations to fund working capital, capital expenditures or other general corporate purposes;

    increase our vulnerability to general adverse economic and industry conditions, including interest rate fluctuations, because a portion of our borrowings, including under the agreements governing our U.S. and international fleet debt financings entered into as part of the Transactions and our senior credit facilities, is at variable rates of interest;

    place us at a competitive disadvantage to our competitors with proportionately less debt or comparable debt at more favorable interest rates;

    limit our ability to refinance our existing indebtedness or borrow additional funds in the future;

    limit our flexibility in planning for, or reacting to, changing conditions in our business and industry; and

28


    limit our ability to react to competitive pressures, or make it difficult for us to carry out capital spending that is necessary or important to our growth strategy and our efforts to improve operating margins.

        Any of the foregoing impacts of our substantial indebtedness could have a material adverse effect on our business, financial condition and results of operations.

Despite our current indebtedness levels, we and our subsidiaries may be able to incur substantially more debt. This could further exacerbate the risks associated with our substantial indebtedness.

        We and our subsidiaries may be able to incur substantial additional indebtedness in the future. The terms of the instruments governing our indebtedness do not prohibit us or fully prohibit us or our subsidiaries from doing so. As of March 31, 2006, our senior credit facilities provided us commitments for additional borrowings (subject to borrowing base limitations) of approximately $1,395.5 million, and permitted additional borrowings beyond those commitments under certain circumstances. As of March 31, 2006, our U.S. and international fleet debt facilities provided us commitments for additional aggregate borrowings of approximately $1,135.0 million and the U.S. dollar equivalent of $1,455.6 million respectively, subject to borrowing base limitations. If new debt is added to our current debt levels, the related risks that we now face would increase. In addition, the instruments governing our indebtedness do not prevent us or our subsidiaries from incurring obligations that do not constitute indebtedness. On June 30, 2006, Hertz Holdings entered into the Hertz Holdings Loan Facility in order to finance the payment of the Hertz Holdings Dividend. We cannot assure you that Hertz Holdings will not enter into similar transactions in the future.

We may not be able to generate sufficient cash to service all of our debt, and may be forced to take other actions to satisfy our obligations under such indebtedness, which may not be successful.

        Our ability to make scheduled payments on our indebtedness, or to refinance our obligations under our debt agreements, will depend on the financial and operating performance of us and our subsidiaries, which, in turn, will be subject to prevailing economic and competitive conditions and to the financial and business risk factors, many of which may be beyond our control, as described under "—Risks Related to Our Business" above.

        We cannot assure you that we will maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness.

        If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell assets, seek to obtain additional equity capital or restructure our indebtedness. In the future, our cash flows and capital resources may not be sufficient for payments of interest on and principal of our debt, and such alternative measures may not be successful and may not permit us to meet scheduled debt service obligations. We also cannot assure you that we will be able to refinance any of our indebtedness or obtain additional financing, particularly because of our high levels of debt and the debt incurrence restrictions imposed by the agreements governing our debt, as well as prevailing market conditions. In the absence of such operating results and resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations. The instruments governing our indebtedness restrict our ability to dispose of assets and restrict the use of proceeds from any such dispositions. We cannot assure you we will be able to consummate those sales, or, if we do, what the timing of the sales will be or whether the proceeds that we realize will be adequate to meet debt service obligations when due.

29



Restrictive covenants in certain of the agreements and instruments governing our indebtedness may adversely affect our financial flexibility.

        Our senior credit facilities and the indentures governing our senior notes and senior subordinated notes contain covenants that, among other things, restrict our and our subsidiaries' ability to:

    dispose of assets;

    incur additional indebtedness;

    incur guarantee obligations;

    prepay other indebtedness or amend other debt instruments;

    pay dividends;

    create liens on assets;

    enter into sale and leaseback transactions;

    make investments, loans or advances;

    make acquisitions;

    engage in mergers or consolidations;

    change the business conducted by us; and

    engage in certain transactions with affiliates.

        In addition, our senior credit facilities contain covenants that require us to maintain specified financial ratios and satisfy other financial condition tests, including ratios and tests which utilize Corporate EBITDA. Our ability to comply with the covenants and restrictions contained in our senior credit facilities and the indentures for our senior notes and senior subordinated notes may be affected by economic, financial and industry conditions beyond our control. The breach of any of these covenants or restrictions could result in a default under either our senior credit facilities or the indentures that would permit the applicable lenders or holders of the senior notes and senior subordinated notes, as the case may be, to declare all amounts outstanding thereunder to be due and payable, together with accrued and unpaid interest. In any such case, we may be unable to make borrowings under the senior credit facilities and may not be able to repay the amounts due under the senior credit facilities and the senior notes and senior subordinated notes. This could have serious consequences to our financial condition and results of operations and could cause us to become bankrupt or insolvent.

        We are also subject to operational limitations under the terms of our ABS Program. For example, there are contractual limitations with respect to the cars that secure our ABS Program. These limitations are based on the identity or credit ratings of the cars' manufacturers, the existence of satisfactory repurchase or guaranteed depreciation arrangements for the cars or the physical characteristics of the cars. As a result, we may be required to limit the percentage of cars from any one manufacturer or increase the credit enhancement related to the program and may not be able to take advantage of certain cost savings that might otherwise be available through manufacturers. If these limitations prevented us from purchasing, or retaining in our fleet, cars on terms that we would otherwise find advantageous, our results of operations could be adversely affected.

        Further, the facilities relating to our international fleet financing contain a number of covenants, including a covenant that restricts the ability of Hertz International, Ltd., a subsidiary of ours that is the direct or indirect holding company of substantially all of our non-U.S. operating subsidiaries, to make dividends and other restricted payments (which may include payments of intercompany indebtedness), in an amount greater than €100 million plus a specified excess cash flow amount,

30



calculated by reference to excess cash flow in earlier periods. Subject to certain exceptions, until the later of one year from the Closing Date and such time as 50% of the commitments under the facilities on the Closing Date have been replaced by permanent take-out international asset-based facilities, the specified excess cash flow amount will be zero. Thereafter, this specified excess cash flow amount will be between 50% and 100% of excess cash flow based on the percentage of facilities relating to our international fleet debt at the closing of the Acquisition that have been replaced by permanent take-out international asset-based facilities. These restrictions will limit the availability of funds from Hertz International, Ltd. and its subsidiaries to help us make payments on our indebtedness. Certain of these permanent take-out international asset-based facilities are expected to be novel and complicated structures. We cannot assure you that we will be able to complete such permanent take-out financings on terms acceptable to us or on a timely basis, if at all; if we are unable to do so, our liquidity and interest costs may be adversely affected.

The instruments governing our debt contain cross default or cross acceleration provisions that may cause all of the debt issued under such instruments to become immediately due and payable as a result of a default under an unrelated debt instrument.

        The indentures governing our senior notes and senior subordinated notes and the agreements governing our senior credit facilities contain numerous covenants and require us to meet certain financial ratios and tests which utilize Corporate EBITDA. Our failure to comply with the obligations contained in these agreements or other instruments governing our indebtedness could result in an event of default under the applicable instrument, which could result in the related debt and the debt issued under other instruments becoming immediately due and payable. In such event, we would need to raise funds from alternative sources, which funds may not be available to us on favorable terms, on a timely basis or at all. Alternatively, such a default could require us to sell our assets and otherwise curtail our operations in order to pay our creditors. Such alternative measures could have a material adverse effect on our business, financial condition and results of operations.

Risks Relating to Our Common Stock and This Offering

Hertz Holdings is a holding company with no operations of its own that depends on its subsidiaries for cash.

        The operations of Hertz Holdings are conducted almost entirely through its subsidiaries and its ability to generate cash to meet its debt service obligations or to pay dividends is highly dependent on the earnings and the receipt of funds from its subsidiaries via dividends or intercompany loans. However, none of the subsidiaries of Hertz Holdings are obligated to make funds available to Hertz Holdings for the payment of dividends. In addition, payments of dividends and interest among the companies in our group may be subject to withholding taxes. Further, the terms of the indentures governing our senior notes and senior subordinated notes and the agreements governing our senior credit facilities and our fleet debt facilities significantly restrict the ability of the subsidiaries of Hertz Holdings to pay dividends or otherwise transfer assets to Hertz Holdings. Furthermore, the subsidiaries of Hertz Holdings are permitted under the terms of our senior credit facilities and other indebtedness to incur additional indebtedness that may severely restrict or prohibit the making of distributions, the payment of dividends or the making of loans by such subsidiaries to Hertz Holdings. See "Risk Factors—Risks Relating to Our Substantial Indebtedness—Restrictive covenants in certain of the agreements governing our indebtedness may adversely affect our financial flexibility." In addition, Delaware law may impose requirements that may restrict our ability to pay dividends to holders of our common stock.

31



There currently exists no market for our common stock. We cannot assure you that an active trading market will develop for our common stock. If our stock price fluctuates after this offering, you could lose all or a significant part of your investment.

        Prior to this offering, there was no public market for shares of our common stock. An active market may not develop following the completion of this offering or, if developed, may not be maintained. We negotiated the initial public offering price with the underwriters. The initial public offering price may not be indicative of the price at which our common stock will trade following completion of this offering. The market price of our common stock may also be influenced by many factors, some of which are beyond our control, including:

    the failure of securities analysts to cover our common stock after this offering, changes in financial estimates by analysts or a downgrade of our stock or our sector by analysts;

    announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments;

    variations in quarterly operating results;

    loss of a large customer or supplier;

    general economic conditions;

    war, terrorist acts and epidemic disease;

    future sales of our common stock; and

    investor perceptions of us and the car and equipment rental industries.

        As a result of these factors, investors in our common stock may not be able to resell their shares at or above the initial offering price. In addition, the stock market in general has experienced extreme price and volume fluctuations that may be unrelated or disproportionate to the operating performance of companies like us. These broad market and industry factors may materially reduce the market price of our common stock, regardless of our operating performance.

A few significant stockholders control the direction of our business. If the ownership of our common stock continues to be highly concentrated, it will prevent you and other stockholders from influencing significant corporate decisions.

        Following the completion of this offering, Clayton, Dubilier & Rice Fund VII, L.P. and related funds, Carlyle Partners IV, L.P. and related funds and ML Global Private Equity Fund, L.P. and related funds will beneficially own approximately    %,    % and    %, respectively, of the outstanding shares of our common stock. These funds and Hertz Holdings are parties to a Stockholders Agreement, pursuant to which the funds have agreed to vote in favor of nominees to our board of directors nominated by the other funds. As a result, the Sponsors will continue to exercise control over matters requiring stockholder approval and our policy and affairs, for example, by being able to direct the use of proceeds received from this and future security offerings. See "Certain Relationships and Related Party Transactions." In addition, we are a "controlled company" within the meaning of the New York Stock Exchange rules and, as a result, currently intend to rely on exemptions from certain corporate governance requirements.

        The concentrated holdings of the funds associated with the Sponsors, certain provisions of the Stockholders Agreement among the funds and us and the presence of these funds' nominees on our board of directors may result in a delay or the deterrence of possible changes in control of our company, which may reduce the market price of our common stock. The interests of our existing stockholders may conflict with the interests of our other stockholders. Our board of directors intends to adopt corporate governance guidelines that will, among other things, address potential conflicts

32



between a director's interests and our interests. In addition, we have adopted a code of business conduct that, among other things, requires our employees to avoid actions or relationships that might conflict or appear to conflict with their job responsibilities or the interests of Hertz Holdings, and to disclose their outside activities, financial interests or relationships that may present a possible conflict of interest or the appearance of a conflict to management or corporate counsel. These corporate governance guidelines and code of business ethics will not, by themselves, prohibit transactions with our principal stockholders.

Because affiliates of certain underwriters are lenders under the Hertz Holdings Loan Facility and selling stockholders, they may have interests that conflict with yours as an investor in our common stock.

        On June 30, 2006, we entered into the Hertz Holdings Loan Facility under which certain underwriters or their affiliates provided a $1.0 billion loan to us, which loan must be repaid or converted into longer term debt securities on June 30, 2007. Under the terms of the credit agreement, we are required to use the proceeds of this offering to repay the loan. For a description of the material terms of the Hertz Holdings Loan Facility, we refer you to the disclosure under the heading "Description of Certain Indebtedness—Hertz Holdings Loan Facility." In addition, affiliates of Merrill Lynch & Co. are selling stockholders in this offering. As a result of this loan, together with the participation of affiliates of Merrill Lynch & Co. as selling stockholders, these underwriters have interests that may conflict with yours as an investor in our common stock with respect to this offering because they have interests in the successful completion of this offering beyond the underwriting discount and commissions they will receive in the offering, including their interest in the repayment of the Hertz Holdings Loan Facility and, in the case of the selling stockholders affiliated with Merrill Lynch & Co., the return on their equity investment in us.

        Because these underwriters may receive more than 10% of the entire net proceeds in this offering, the underwriters may be deemed to have a "conflict of interest" under Rule 2710(h) of the Conduct Rules of the National Association of Securities Dealers, Inc. or "NASD." In addition, because affiliates of Merrill Lynch & Co. own more than 10% of our outstanding common stock, Merrill Lynch & Co. is deemed to be an affiliate of Hertz Holdings under Rule 2720(b)(1) of the NASD Conduct Rules and, therefore, the underwriters may also be deemed to have a conflict of interest under Rule 2720 of the NASD Conduct Rules. Accordingly, this offering will be made in compliance with the applicable NASD Conduct Rules, which require that the initial public offering price can be no higher than that recommended by a "qualified independent underwriter," as defined by the NASD.                      has served in that capacity. We cannot assure you that the use of a qualified independent underwriter will be sufficient to eliminate any actual or potential conflicts of interest. For more information regarding the role of the qualified independent underwriter in this offering and other relationships we and our affiliates have with the underwriters, we refer you to the disclosure under the heading "Underwriting."

Our share price may decline due to the large number of shares eligible for future sale.

        Sales of substantial amounts of our common stock, or the possibility of such sales, may adversely affect the price of our common stock and impede our ability to raise capital through the issuance of equity securities.

        Upon consummation of this offering, there will be            shares of common stock outstanding. Of these shares, the shares of common stock sold in the offering will be freely transferable without restriction or further registration under the Securities Act of 1933, as amended, or the "Securities Act." The remaining                    shares of common stock outstanding will be restricted securities within the meaning of Rule 144 under the Securities Act, but will be eligible for resale subject to applicable volume, manner of sale, holding period and other limitations of Rule 144. We, each of the funds associated with the Sponsors, our executive officers and directors and the selling stockholders have agreed to a "lock-up," meaning that, subject to certain exceptions, neither we nor they will sell any

33



shares without the prior consent of the representatives of the underwriters for      days after the date of this prospectus. Following the expiration of this      day lock-up period,                    of these shares of our common stock will be eligible for future sale, subject to the applicable volume, manner of sale, holding period and other limitations of Rule 144. See "Shares Eligible for Future Sale" for a discussion of the shares of common stock that may be sold into the public market in the future. In addition, our existing stockholders have the right under certain circumstances to require that we register their shares for resale. See "Certain Relationships and Related Party Transactions—Registration Rights Agreement" for a description of the shares of common stock that may be sold into the public market in the future.

Purchasers of our common stock will experience immediate and substantial dilution resulting in their shares being worth less on a net tangible book value basis than the amount they invested.

        The initial public offering price is expected to be significantly higher than the net tangible book value per share of our common stock. Purchasers of the common stock in this offering will experience an immediate dilution in net tangible book value of $    per share of common stock purchased. In the past, we issued options to acquire shares of common stock at prices that may be significantly below the initial public offering price. To the extent that these outstanding options are exercised, there may be further dilution to investors. Accordingly, in the event we are liquidated, investors may not receive the full amount of their investment. See "Dilution."

Our certificate of incorporation, by-laws and Delaware law may discourage takeovers and business combinations that our stockholders might consider in their best interests.

        A number of provisions we intend to include, effective as of the offering, in our certificate of incorporation and by-laws, as well as anti-takeover provisions of Delaware law, may have the effect of delaying, deterring, preventing or rendering more difficult a change in control of Hertz Holdings that our stockholders might consider in their best interests. These provisions include:

    establishment of a classified board of directors, with staggered terms;

    granting to the board of directors sole power to set the number of directors and to fill any vacancy on the board of directors, whether such vacancy occurs as a result of an increase in the number of directors or otherwise;

    limitations on the ability of stockholders to remove directors;

    the ability of our board of directors to designate and issue one or more series of preferred stock without stockholder approval, the terms of which may be determined at the sole discretion of the board of directors;

    prohibition on stockholders from calling special meetings of stockholders;

    establishment of advance notice requirements for stockholder proposals and nominations for election to the board of directors at stockholder meetings; and

    prohibiting our stockholders from acting by written consent if investment funds affiliated with or designated by the Sponsors cease to collectively hold a majority of our outstanding common stock.

        These provisions may prevent our stockholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in a takeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stock if they are viewed as discouraging takeover attempts in the future.

        Our certificate of incorporation and by-laws may also make it difficult for stockholders to replace or remove our management. These provisions may facilitate management entrenchment that may delay, deter, render more difficult or prevent a change in our control, which may not be in the best interests of our stockholders.

        See "Description of Capital Stock" for additional information on the anti-takeover measures applicable to us.

34



CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

        Certain statements contained in this prospectus under "Business," "Business—Legal Proceedings," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Management—Directors and Executive Officers" and "Management—Executive Compensation" include "forward-looking statements." You should not place undue reliance on these statements. Forward-looking statements include information concerning our liquidity and our possible or assumed future results of operations, including descriptions of our business strategies. These statements often include words such as "believe," "expect," "anticipate," "intend," "plan," "estimate," "seek," "will," "may" or similar expressions. These statements are based on certain assumptions that we have made in light of our experience in the industry as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate in these circumstances. As you read and consider this prospectus, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties and assumptions. Many factors could affect our actual financial results and could cause actual results to differ materially from those expressed in the forward-looking statements. Some important factors include:

    our operations;

    economic performance;

    financial condition;

    management forecasts;

    efficiencies,

    cost savings and opportunities to increase productivity and profitability;

    income and margins;

    liquidity;

    anticipated growth;

    economies of scale;

    the economy;

    future economic performance;

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

    future acquisitions and dispositions;

    litigation;

    potential and contingent liabilities;

    management's plans;

    taxes; and

    refinancing of existing debt.

        In light of these risks, uncertainties and assumptions, the forward-looking statements contained in this prospectus might not prove to be accurate and you should not place undue reliance upon them. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing cautionary statements. All such statements speak only as of the date made, and we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

35



MARKET AND INDUSTRY DATA

        Information in this prospectus about the car and equipment rental industries, including our general expectations concerning the industries and our market position and market share, are based in part on industry data and forecasts obtained from industry publications and surveys and internal company surveys. Third-party industry publications and forecasts generally state that the information contained therein has been obtained from sources generally believed to be reliable. While we are not aware of any misstatements regarding any industry data presented in this prospectus, our estimates, in particular as they relate to our general expectations concerning the car and equipment rental industries, involve risks and uncertainties and are subject to change based on various factors, including those discussed under the caption "Risk Factors."

36



RECENT TRANSACTIONS

Hertz Holdings Dividend and Related Financing

        In June 2006, Hertz Holdings entered into the Hertz Holdings Loan Facility. Hertz Holdings primarily used the proceeds from the borrowings under the Hertz Holdings Loan Facility plus cash on hand to pay the Hertz Holdings Dividend and related fees and expenses. It is anticipated that all borrowings and other amounts owing under the Hertz Holdings Loan Facility will be repaid with the proceeds to us from this offering.

The Transactions

        On the Closing Date, we entered into a series of financing and refinancing transactions in connection with the Acquisition. To finance the cash consideration for the Acquisition, to refinance certain of Hertz's existing indebtedness and to pay related transaction fees and expenses, the following funds were used:

    equity contributions totaling $2,295 million from the investment funds associated with or designated by the Sponsors;

    net proceeds from a private placement by CCMG Acquisition Corporation, a wholly owned subsidiary of Hertz Holdings, of $1,800 million aggregate principal amount of 8.875% Senior Notes due 2014, or the "Senior Dollar Notes," $600 million aggregate principal amount of 10.5% Senior Subordinated Notes due 2016, or the "Senior Subordinated Notes," and €225 million aggregate principal amount of 7.875% Senior Notes due 2014, or the "Senior Euro Notes." In connection with the Transactions, CCMG Acquisition Corporation merged with and into Hertz, with Hertz as the surviving corporation of the merger. We refer to the Senior Dollar Notes and the Senior Euro Notes together in this prospectus as the "Senior Notes;"

    aggregate borrowings of approximately $1,707 million by Hertz under a new senior term facility, or the "Senior Term Facility," which consists of (a) a maximum borrowing capacity of $2,000 million, including a $293 million delayed draw term loan that was made available until August 2007 to refinance certain existing debt and (b) a synthetic letter of credit facility in an aggregate principal amount of $250 million. On May 15, 2006, Hertz borrowed approximately $84.9 million under the delayed draw term loan of the Senior Term Facility, or the "Delayed Draw Term Loan," and used the proceeds thereof to repay its 6.5% Senior Notes due 2006. Hertz expects to borrow the remaining portion of the Delayed Draw Term Loan on July 10, 2006, and to apply the proceeds thereof to repay borrowings outstanding under the asset-based revolving loan facility described below;

    aggregate borrowings of approximately $400 million by Hertz and one of its Canadian subsidiaries under a new senior asset-based revolving loan facility, or the "Senior ABL Facility," with a maximum borrowing capacity of $1,600 million. We refer to the Senior Term Facility and the Senior ABL Facility together in this prospectus as the "Senior Credit Facilities;"

    aggregate proceeds of offerings totaling approximately $4,300 million by a special purpose entity wholly owned by Hertz of asset-backed securities backed by our U.S. car rental fleet, or the "U.S. Fleet Debt," all of which were issued under our ABS Program, under which an additional $600 million of pre-Acquisition ABS Notes having maturities from 2007 to 2009 remain outstanding following the closing of the Transactions, and in connection with which approximately $1,500 million of variable funding notes in two series were also issued, but not funded, on the Closing Date;

37


    aggregate borrowings of the U.S. dollar equivalent of approximately $1,781 million by certain of Hertz's foreign subsidiaries under asset-based revolving loan facilities with aggregate commitments equivalent to approximately $2,930 million (calculated in each case as of December 31, 2005), subject to borrowing bases comprised of rental vehicles, and related assets of certain of Hertz's foreign subsidiaries (all of which are organized outside of the United States) or one or more special purpose entities, as the case may be, and rental equipment and related assets of certain of Hertz's subsidiaries organized outside North America or one or more special purpose entities, as the case may be, which facilities are referred to collectively in this prospectus as the "International Fleet Debt Facilities;" and

    Hertz's cash on hand.

        In connection with the Transactions, Hertz refinanced existing indebtedness in an aggregate principal amount of $8,346 million, plus all related accrued interest and unamortized debt discounts.

38



USE OF PROCEEDS

        We estimate that our net proceeds from the sale of            shares of our common stock being offered by us pursuant to this prospectus at an assumed initial public offering price of $            per share, the midpoint of the range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and estimated offering expenses, will be approximately $                  million. A $1.00 increase (decrease) in the assumed initial public offering price of $            per share would increase (decrease) the net proceeds to us from this offering by $                  million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated expenses payable by us. We will not receive any proceeds from the sale of the            shares of our common stock being offered by the selling stockholders, which include affiliates of Merrill Lynch & Co., an underwriter in this offering, pursuant to this prospectus or the additional shares that would be sold by the selling stockholders if the underwriters exercised the underwriters' option.

        We intend to use the net proceeds to us from the sale of common stock to repay borrowings outstanding under the Hertz Holdings Loan Facility and to pay related transaction fees and expenses, with the remainder, if any, being used for general corporate purposes (which may include repayment of borrowings under our senior credit facilities). Hertz Holdings used the proceeds of the Hertz Holdings Loan Facility plus cash on hand to pay special cash dividends of $4.32 per share, or approximately $999.2 million in the aggregate, to its common stockholders on June 30, 2006 and related fees and expenses. Borrowings outstanding under the Hertz Holdings Loan Facility, which currently has a stated maturity of June 30, 2007, bear interest, at our option, at a fluctuating rate of interest measured by reference to either (1) an adjusted London inter-bank offered rate, or "LIBOR," plus a borrowing margin or (2) an alternate base rate plus a borrowing margin. See "Description of Certain Indebtedness—Hertz Holdings Loan Facility." As of June 30, 2006, borrowings under the Hertz Holdings Loan Facility bore interest at 10.5%. Because affiliates of certain of the underwriters are lenders under the Hertz Holdings Loan Facility, affiliates of such underwriters will receive a substantial portion of the proceeds of this offering. See "Underwriting."

39



DIVIDEND POLICY

        We do not expect to pay dividends on our common stock for the foreseeable future. Instead, we anticipate that all of our earnings in the foreseeable future will be used for the operation and growth of our business. Our ability to pay dividends to holders of our common stock is limited as a practical matter by Hertz's Senior Credit Facilities, Hertz's Fleet Debt Facilities and the indentures governing Hertz's Senior Notes and Senior Subordinated Notes, which directly or indirectly restrict Hertz's ability to pay dividends or make loans to Hertz Holdings. Any future determination to pay dividends on our common stock is subject to the discretion of our board of directors and will depend upon various factors, including our results of operations, financial condition, liquidity requirements, restrictions that may be imposed by applicable law and our contracts, and other factors deemed relevant by our board of directors.

        On June 30, 2006, we paid special dividends of $4.32 per share to the holders of our common stock, totaling approximately $999.2 million. Investors purchasing common stock in this offering will not receive any payment in connection with this special dividend. We do not currently intend to declare or pay any similar special dividends in the future.

40



CAPITALIZATION

        The following table sets forth as of March 31, 2006, on a consolidated basis:

    Our actual capitalization;

    Our pro forma capitalization that gives effect to the Hertz Holdings Loan Facility and the Hertz Holdings Dividend; and

    Our pro forma as adjusted capitalization that gives further effect to our sale of      shares of common stock in this offering at an assumed initial public offering price of $      per share, the midpoint of the range set forth on the cover page of this prospectus, and the application of the net proceeds therefrom to repay borrowings outstanding under the Hertz Holdings Loan Facility and to pay related transaction fees and expenses as described in "Use of Proceeds."

        You should read the following table in conjunction with the information in this prospectus under the captions "Unaudited Pro Forma Condensed Consolidated Financial Statements," "Selected Historical Consolidated Financial Data," "Description of Certain Indebtedness" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," and with the audited annual consolidated and unaudited interim condensed consolidated financial statements and related notes included elsewhere in this prospectus. For a description of the debt facilities and instruments referred to below, see "Recent Transactions—The Transactions" and "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources."

 
  As of March 31, 2006
 
  Actual
  Pro Forma
  Pro Forma
As Adjusted

 
  (Dollars in millions)

Cash and equivalents   $ 679.4   $ 679.4    
   
 
 
Total debt:                
  Fleet debt(1)   $ 6,736.1   $ 6,736.1    
  Corporate debt(2)     5,723.6     5,723.6    
  Hertz Holdings Loan Facility(3)         995.0    
   
 
 
    Total debt (including current portion)     12,459.7     13,454.7    
   
 
 
Stockholders' equity                
  Common stock, par value $0.01 per share, 2,000,000,000 shares authorized; 229,500,000 shares outstanding actual and pro forma;          shares outstanding pro forma as adjusted     2.3     2.3    
  Additional capital paid-in     2,292.7     1,301.3    
  Retained earnings (deficit)     (70.6 )   (70.6 )  
  Accumulated other comprehensive income (loss)     41.9     41.9    
   
 
 
Total stockholders' equity     2,266.3     1,274.9    
   
 
 
    Total capitalization(4)   $ 14,726.0   $ 14,729.6    
   
 
 

(1)
Fleet debt consists of our U.S. Fleet Debt, obligations incurred under our International Fleet Debt Facilities and the pre-Acquisition ABS Notes. For a description of these facilities see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Financing—Fleet Financing."

(2)
Corporate debt consists of senior notes and Euro medium term notes issued prior to the Acquisition; borrowings under our Senior Term Facility; borrowings under our Senior ABL Facility; our Senior Notes; our Senior Subordinated Notes; and certain other indebtedness of our domestic and foreign subsidiaries. For a description of these facilities, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Financing—Senior Credit Facilities" and "—Senior Notes and Senior Subordinated Notes."

(3)
Represents aggregate borrowings of $1.0 billion under the Hertz Holdings Loan Facility net of fees of $5.0 million paid to the lenders thereunder on June 30, 2006.

(4)
A $1.00 increase (decrease) in the assumed initial public offering price of $                  per share would increase (decrease) each of cash and cash equivalents, additional capital paid-in, total stockholders' equity and total capitalization by $                  million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated expenses payable by us.

41



DILUTION

        If you invest in our common stock, your interest will be diluted to the extent of the difference between the initial public offering price of the shares of our common stock and the net tangible book value per share after this offering.

        Net tangible book value (deficit) per share represents the amount of total tangible assets less total liabilities, divided by the number of shares of common stock then outstanding. Our net tangible book value (deficit) as of March 31, 2006 was $(1,992.7) million, or $(8.68) per share, based on the 229.5 million shares of common stock outstanding as of such date. We subsequently issued an aggregate of 1,807,354 shares to our senior management in May 2006 at a price per share of $10.00 pursuant to the management equity offering and an offering in June 2006 to Craig R. Koch, our current chief executive officer. After giving effect to our sale of                        shares in this offering at an assumed initial public offering price of $             per share, the midpoint of the range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and estimated offering expenses, our net tangible book value as of March 31, 2006 would have been $                         million, or $            per share. This represents an immediate increase in the net tangible book value of $            per share to existing stockholders and an immediate and substantial dilution of $            per share to new investors purchasing shares in this offering. If the initial offering price is higher or lower, the dilution to new investors purchasing our common stock will be greater or less, respectively. The following table illustrates this dilution:

 
   
  Per Share
Assumed initial public offering price       $          
  Net tangible book value (deficit) as of March 31, 2006   (8.68 )    
  Increase attributable to this offering          
   
     
Pro forma as adjusted net tangible book value after this offering          
       
Dilution in net tangible book value to new investors       $          
       

        A $1.00 increase (decrease) in the assumed initial public offering price of $            per share would increase (decrease) our pro forma net tangible book deficit by $                  million, the pro forma as adjusted net tangible book deficit per share would increase (decrease) after this offering by $      per share and increase the dilution in net tangible book deficit per share to new investors in this offering by $            , assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated expenses payable by us.

        The following table summarizes as of March 31, 2006 the total number of shares of common stock purchased from us, the total consideration paid to us, and the weighted average price per share paid by existing stockholders and by new investors purchasing shares from us in this offering at our assumed initial public offering price of $                  per share, the midpoint of the range set forth on the cover page of this prospectus, and before deducting underwriting discounts and estimated offering expenses payable by us.

 
   
   
  Total
Consideration

   
 
  Shares Acquired
   
 
  Weighted
Average Price
Per Share

 
  Number
  Percent
  Amount
  Percent
Existing stockholders         % $       % $  
New investors                        
   
 
 
 
 
  Total       100.0 % $     100.0 % $  
   
 
 
 
 

        A $1.00 increase (decrease) in the assumed initial public offering price of $                  per share would increase (decrease) total consideration paid by new investors and the total average price per

42



share by $                  million and $                  respectively, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and without deducting underwriting discounts and commissions and estimated expenses payable by us.

        The foregoing discussion and tables assume no exercise of outstanding stock options. As of June 30, 2006, there were options outstanding to purchase a total of 14,001,354 shares of our common stock at a weighted average exercise price of $10.86 per share. We expect the exercise prices of our outstanding stock options to be adjusted downward by an amount equal to the Hertz Holdings Dividend paid on June 30, 2006 ($4.32 per share), thereby preserving the intrinsic value of the options, consistent with applicable tax law.

        To the extent that any of these stock options are exercised, there may be further dilution to new investors. See "Capitalization," "Management," Note 17 to the Notes to our audited annual consolidated financial statements and Note 11 to the Notes to our unaudited interim condensed consolidated financial statements included elsewhere in this prospectus.

        In addition, we may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of such securities could result in further dilution to our stockholders.

43



UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

        The following unaudited pro forma condensed consolidated statements of operations and the unaudited pro forma condensed consolidated balance sheet have been derived from our historical audited annual consolidated financial statements and the related notes thereto and our historical unaudited interim condensed consolidated financial statements and the related notes thereto included elsewhere in this prospectus. The pro forma as adjusted financial data below for the year ended December 31, 2005 (as restated) and the three months ended March 31, 2005 reflect adjustments to our historical financial data to give effect to (i) the Transactions and the use of the net proceeds therefrom, (ii) the borrowings under the Hertz Holdings Loan Facility and the payment of the Hertz Holdings Dividend, or the "Hertz Holdings Transactions," and (iii) the sale of the common stock offered by this prospectus and the use of the net sale proceeds to repay borrowings under the Hertz Holdings Loan Facility with the remainder of the proceeds, if any, to be used for general corporate purposes (which may include the repayment of borrowings under our senior credit facilities), or the "Offering and Use of Proceeds" as if they had occurred on January 1, 2005 for income statement purposes. The historical consolidated statements of operations data presented below for the Predecessor period ended December 20, 2005 and the combined year ended December 31, 2005 have been restated. For a discussion of the Restatement, see Note 1A to the Notes to our audited annual consolidated financial statements included elsewhere in this prospectus. The pro forma as adjusted financial data below as of and for the three months ended March 31, 2006 reflects adjustments to our historical financial data to give effect to the Hertz Holdings Transactions and the Offering and Use of Proceeds as if such transactions had occurred on January 1, 2005 for income statement purposes and March 31, 2006 for balance sheet purposes.

        The unaudited pro forma condensed consolidated financial statements include adjustments directly attributable to the Transactions, the Hertz Holdings Transactions and the Offering and Use of Proceeds that are expected to have a continuing impact on us. The pro forma adjustments are described in the accompanying notes to the unaudited pro forma condensed consolidated financial statements. The pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable. The unaudited pro forma condensed consolidated financial statements do not purport to represent our results of operations or financial position had the Transactions, the Hertz Holdings Transactions and the Offering and Use of Proceeds actually occurred as of such dates or of the results that we would have achieved after the Transactions, the Hertz Holdings Transactions and the Offering and Use of Proceeds.

        The Acquisition has been accounted for using the purchase method of accounting for business combinations. Under this method, assets and liabilities are recorded at their fair values on the closing date of the Acquisition. The total purchase price plus acquisition costs in excess of the fair value of the assets acquired and liabilities assumed results in goodwill. The fair value adjustments included in the unaudited pro forma condensed consolidated financial statements summarize management's evaluation of the fair value of the net assets acquired based upon available information. This evaluation assigned value to certain identifiable tangible and intangible assets, including our trade name and customer relationships.

        The unaudited pro forma condensed consolidated financial statements should be read in conjunction with the information included in this prospectus under the captions "Use of Proceeds," "Capitalization," "Selected Historical Consolidated Financial Data," and "Management's Discussion and Analysis of Financial Condition and Results of Operations," and with the historical consolidated and condensed consolidated financial statements and the related notes thereto.

44



Hertz Global Holdings, Inc.

Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 2005
(Dollars in millions except per share data)

 
  Historical
  Pro Forma
 
  Predecessor
  Successor
  Combined
   
   
   
   
   
 
  For the
Periods from

   
   
   
   
   
   
 
  January 1,
2005 to
December 20,
2005
Restated

  December 21,
2005 to
December 31,
2005

  Year Ended
December 31,
2005
Restated

  Adjustments
for the
Transactions(1)

  Pro Forma
Subtotal

  Adjustments
for the
Hertz Holdings
Transactions(5)

  Adjustments
for the
Offering and
Use of Proceeds

  Pro Forma
As Adjusted

Revenues:                                                
  Car rental   $ 5,820.5   $ 129.4   $ 5,949.9   $   $ 5,949.9   $   $     $  
  Equipment rental     1,392.4     22.5     1,414.9         1,414.9                
  Other     101.8     2.6     104.4         104.4                
   
 
 
 
 
 
 
 
    Total revenues     7,314.7     154.5     7,469.2         7,469.2                
   
 
 
 
 
 
 
 
Expenses:                                                
  Direct operating     4,086.3     103.0     4,189.3     74.0 (2)   4,263.3                
  Depreciation of revenue earning equipment     1,555.9     43.8     1,599.7     12.8 (2)   1,612.5                
  Selling, general and administrative     623.4     15.1     638.5     (12.7 )(2)   625.8                
  Interest, net of interest income     474.2     25.8     500.0     382.5 (3)   882.5     94.8            
   
 
 
 
 
 
 
 
    Total expenses     6,739.8     187.7     6,927.5     456.6     7,384.1     94.8            
   
 
 
 
 
 
 
 
Income (loss) before income taxes and minority interest     574.9     (33.2 )   541.7     (456.6 )   85.1     (94.8 )          
(Provision) benefit for taxes on income     (191.3 )   12.2     (179.1 )   124.9 (4)   (54.2 )   33.2            
Minority interest     (12.3 )   (0.3 )   (12.6 )       (12.6 )              
   
 
 
 
 
 
 
 
Net income (loss)   $ 371.3   $ (21.3 ) $ 350.0   $ (331.7 ) $ 18.3   $ (61.6 )          
   
 
 
 
 
 
 
 
Weighted average shares outstanding (in millions)                                                
  Basic     229.5     229.5     229.5                              
  Diluted     229.5     229.5     229.5                              
Earnings (loss) per share:                                                
  Basic   $ 1.62   $ (0.09 ) $ 1.53                              
  Diluted   $ 1.62   $ (0.09 ) $ 1.53                              

See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.

45



Hertz Global Holdings, Inc.

Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Three Months Ended March 31, 2005
(Dollars in millions except per share data)

 
  Historical
  Pro Forma
 
  Predecessor
  Adjustments
for the
Transactions(1)

  Pro Forma
Subtotal

  Adjustments
for the Hertz
Holdings
Transactions(5)

  Adjustments
for the Offering
and Use of
Proceeds

  Pro Forma
As Adjusted

Revenues:                                    
  Car rental   $ 1,333.4   $   $ 1,333.4   $     $     $  
  Equipment rental     285.4         285.4                  
  Other     21.8         21.8                  
   
 
 
 
 
 
    Total revenues     1,640.6         1,640.6                  
   
 
 
 
 
 
Expenses:                                    
  Direct operating     974.2     18.9 (2)   993.1                
  Depreciation of revenue earning equipment     373.6     3.2 (2)   376.8                
  Selling, general and administrative     158.1     4.7 (2)   162.8                
  Interest, net of interest income     99.2     118.2 (3)   217.4     21.8            
   
 
 
 
 
 
    Total expenses     1,605.1     145.0     1,750.1     21.8            
   
 
 
 
 
 
Income (loss) before income taxes and minority interest     35.5     (145.0 )   (109.5 )   (21.8 )          
(Provision) benefit for taxes on income     (12.3 )   50.7 (4)   38.4     7.6 (4)          
Minority interest     (2.3 )       (2.3 )              
   
 
 
 
 
 
Net income (loss)   $ 20.9   $ (94.3 ) $ (73.4 ) $ (14.2 )          
   
 
 
 
 
 

Weighted average shares outstanding (in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
  Basic     229.5                              
  Diluted     229.5                              
Earnings (loss) per share:                                    
  Basic   $ 0.09                              
  Diluted   $ 0.09                              

See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.

46



Hertz Global Holdings, Inc.

Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Three Months Ended March 31, 2006
(Dollars in millions except per share data)

 
  Historical
  Pro Forma
 
   
  Adjustments
for the Hertz
Holdings
Transactions(5)

  Adjustments
for the Offering
and Use of
Proceeds

  Pro Forma as
Adjusted

Revenues:                        
  Car rental   $ 1,399.6   $   $   $  
  Equipment rental     363.1              
  Other     23.9              
   
 
 
 
    Total revenues     1,786.6              
   
 
 
 
Expenses:                        
  Direct operating     1,070.1                
  Depreciation of revenue earning equipment     407.3                
  Selling, general and administrative     162.2                
  Interest, net of interest income     210.3     25.6            
   
 
 
 
    Total expenses     1,849.9     25.6            
   
 
 
 
Income (loss) before income taxes and minority interest     (63.3 )   (25.6 )          
(Provision) benefit for taxes on income     17.3     9.0            
Minority interest     (3.2 )              
   
 
 
 
Net income (loss)   $ (49.2 ) $ (16.6 )          
   
 
 
 
Weighted average shares outstanding (in millions)                        
  Basic     229.5                  
  Diluted     229.5                  
Earnings (loss) per share:                        
  Basic   $ (0.21 )                
  Diluted   $ (0.21 )                

See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.

47



Hertz Global Holdings, Inc.

Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of March 31, 2006
(Dollars in millions)

 
  Historical
  Pro Forma
 
   
  Adjustments
for the Hertz
Holdings
Transactions(5)

  Adjustments for
the Offering and
Use of
Proceeds(6)

  Pro Forma as
Adjusted

Assets                    
Cash and equivalents   $ 679.4   $        
Restricted cash     248.3            
Receivables, less allowance for doubtful accounts     1,429.4            
Inventories, at lower of cost or market     111.8            
Prepaid expenses and other assets     448.4     3.6        
Revenue earning equipment, net     10,371.2            
Property and equipment, net     1,389.1            
Goodwill and other intangible assets     4,259.0            
   
 
 
 
  Total assets   $ 18,936.6   $ 3.6        
   
 
 
 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

 

 
Accounts payable   $ 1,015.5   $        
Accrued liabilities     861.3            
Accrued taxes     107.0            
Debt     12,459.7     995.0        
Public liability and property damage     346.9            
Deferred taxes on income     1,867.7            
   
 
 
 
  Total liabilities     16,658.1     995.0        
   
 
 
 
Minority interest     12.2            
Stockholders' equity:                    
  Common stock     2.3            
  Preferred stock                
  Additional capital paid-in     2,292.7     (991.4 )      
  Retained earnings (deficit)     (70.6 )          
  Accumulated other comprehensive income     41.9            
   
 
 
 
  Total stockholders' equity     2,266.3     (991.4 )      
   
 
 
 
  Total liabilities and stockholders' equity   $ 18,936.6   $ 3.6        
   
 
 
 

See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.

48



Hertz Global Holdings, Inc.

Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
(Dollars in millions)

                 (1)   On December 21, 2005, an indirect wholly owned subsidiary of Hertz Holdings acquired all of Hertz's common stock from Ford Holdings pursuant to a Stock Purchase Agreement dated as of September 12, 2005, among Ford, Ford Holdings and Hertz Holdings. As a result of this transaction, investment funds associated with or designated by the Sponsors currently own over 99% of our common stock.

        We have accounted for the Acquisition as a purchase in accordance with Statement of Financial Accounting Standards, or "SFAS," No. 141, "Business Combinations," with goodwill and other intangible assets recorded in conformity with SFAS No. 142, "Goodwill and Other Intangible Assets," requiring an allocation of the purchase price to the tangible and intangible net assets acquired based on their relative fair values as of the date of acquisition. Accordingly, we have allocated the excess of the purchase price over the net assets acquired to certain identifiable intangible assets, including our customer relationships and trade name, and goodwill. We believe that the Hertz trade name has an indefinite life and therefore will be assessed on an annual basis for impairment. In accordance with SFAS No. 142, goodwill is not amortized but is reviewed at least annually for impairment. Goodwill recorded in relation to the Acquisition will not be deductible for tax purposes since this is a stock purchase transaction.

        As noted above, a portion of the excess purchase price has been allocated to certain identifiable intangible assets, which has created a difference in the book and tax values of the assets. This difference has impacted the deferred tax liability accounts reflected in the unaudited pro forma condensed consolidated balance sheet.

        The allocation of the purchase price was based on management's judgment after evaluating several factors, including actuarial estimates for pension liabilities, fair values of our indebtedness and other liabilities, and valuation assessments of our tangible and intangible assets prepared by a valuation specialist.

        The following table summarizes the allocation of the Acquisition purchase price (in millions of dollars):

Purchase price allocation:              
Purchase price         $ 14,495 (a)
Estimated transaction fees and expenses           439 (b)
         
 
Total cash estimated purchase price           14,934  
Less:              
  Debt refinanced   $ 8,346 (c)      
  Assumption of remaining existing debt     1,770 (d)      
  Fair value adjustments to tangible net assets     1,471        
  Other intangible assets acquired     3,237        
  Deferred taxes     (1,241 )      
  Deferred financing fees and debt discount     312     13,895  
   
 
 
Excess purchase price attributed to goodwill         $ 1,039  
         
 

        At the time of the Acquisition, no election was made under Section 338(h)(10) of the Internal Revenue Code. Such an election, which requires the consent of Ford, can be made on or prior to September 15, 2006 and may increase the purchase price. The effect of such an election for tax purposes, if made, would be to treat the Acquisition as the purchase of assets rather than stock, increasing the tax basis of certain assets held by the Hertz group. As a result, the deferred taxes related to the acquired intangible assets (other than goodwill, for which no deferred taxes are provided) would be eliminated and goodwill would be reduced to the extent of the elimination of the deferred tax liability. At this time, it is unclear whether any such election will be made.


(a)
Represents the use of proceeds from the Transactions to (i) purchase equity, and (ii) refinance pre-Acquisition and assume existing debt outstanding, as follows (in millions of dollars):

Purchase equity   $ 4,379
Refinance pre-Acquisition debt     8,346
Existing debt remaining outstanding     1,770
   
    $ 14,495
   
(b)
Represents fees and expenses incurred in connection with the Transactions, including placement and other financing fees, bond tender costs, advisory fees and other transaction costs and professional fees and expenses. Of these fees and expenses,

49


    $223.2 million are capitalized on our balance sheet as deferred financing fees and $89.3 million are costs paid directly to lenders and classified as discounts on the respective loans.

(c)
Represents refinancing of pre-Acquisition debt, including related accrued interest and unamortized debt discount.

(d)
Represents pre-Acquisition debt that remains outstanding subsequent to the Transactions, including $600.0 million of pre-Acquisition ABS Notes, $817.4 million of pre-Acquisition Euro medium term notes and pre-existing senior notes not tendered and $69.0 million of pre-Acquisition capital lease obligations. The remaining balance represents commercial paper and other short term debt that was repaid with the proceeds of the Transactions upon maturity.

(2)
Represents the adjustments to income for the following:
 
  Year Ended
December 31,

  Three Months
Ended
March 31,

 
 
  2005
  2005
 
 
  (Dollars in millions)

 
Direct Operating Expenses              

Historical amortization expense of intangibles

 

$

(2.8

)

$

(0.3

)
Pro forma amortization expense of intangibles     61.2     15.3  
   
 
 
Increased amortization expense     58.4     15.0  
   
 
 
Increased property and equipment depreciation     10.1     2.6  
Increased public liability and property damage accretion expense     4.1     1.0  
Increased workers' compensation accretion expense     1.4     0.3  
   
 
 
Pro forma increase in direct operating expenses   $ 74.0   $ 18.9  
   
 
 

Depreciation of Revenue Earning Equipment

 

 

 

 

 

 

 

Historical depreciation of revenue earning equipment

 

$

(1,599.7

)

$

(373.6

)
Pro forma depreciation of revenue earning equipment     1,612.5     376.8  
   
 
 
Pro forma increase in depreciation of revenue earning equipment     12.8     3.2  
   
 
 

Selling General and Administrative Expenses

 

 

 

 

 

 

 

Historical trading gain/(loss) on interest rate swaps

 

$

2.7

 

$


 
Pro forma trading (gain)/loss on interest rate swaps     21.6     19.6  
   
 
 
Increased trading (gain)/loss on interest rate swaps(a)     24.3     19.6  
   
 
 
Historical unrealized foreign exchange gain/(loss) on Euro denominated debt     2.8      
Pro forma unrealized foreign exchange (gain)/loss on Euro denominated debt     (40.7 )   (15.1 )
   
 
 
Increased unrealized foreign exchange (gain)/loss on Euro denominated debt(b)     (37.9 )   (15.1 )
   
 
 
Increased property and equipment depreciation     0.9     0.2  
   
 
 
Pro forma (decrease)/increase in selling, general and administrative expenses   $ (12.7 ) $ 4.7  
   
 
 
(a)
Effective September 30, 2003 and June 3, 2004, we entered into interest rate swap agreements, or the "swaps," relating to certain pre-Acquisition senior notes with an aggregate notional value of $1.1 billion. Under these agreements we paid interest at a variable rate in exchange for fixed rate receipts, effectively transforming these notes to floating rate obligations. These swaps were accounted for as fair value hedges under SFAS No. 133, "Accounting for Derivative Instruments And Hedging Activities." The swap transactions qualified for the short-cut method of recognition under SFAS No. 133; therefore, no portion of the swaps were treated as ineffective. As such, the carrying amounts of the interest rate swaps were adjusted on the balance sheet to their fair value for changes in market interest rates, with an offsetting adjustment to the fixed rate debt.


As a result of the Acquisition, a significant portion of the underlying fixed rate debt has been tendered leaving an aggregate principal amount of $123.8 million outstanding at December 31, 2005, causing the interest rate swaps to be ineffective as of December 21, 2005. Consequently, any changes in the fair value of the derivatives are recognized in the statement of operations. Between December 21, 2005 (the date that hedge accounting was discontinued) and December 31, 2005, the fair value adjustment related to these swaps was a gain of $2.7 million, which was recorded in earnings. For the purposes of the unaudited pro forma condensed consolidated statements of operations, we have reflected the historical impact of these mark-to-market adjustments.

(b)
In connection with the Transactions, we issued € 225,000,000 of Senior Euro Notes. GAAP requires changes in the exchange rates between the functional currency and the currency in which a transaction is denominated to be

50


    recorded as a foreign currency transaction gain or loss in the statement of operations. For purposes of the pro forma condensed consolidated statements of operations, the Senior Euro Notes were assumed to be outstanding as of January 1, 2005 and were adjusted at the exchange rates in effect at the end of every period.

        (3)  Represents the increase in net interest expense, reflecting the refinancing of pre-Acquisition debt, the notes and the other debt incurred in connection with the Transactions.

 
  Year Ended
December 31,
2005

  Three Months
Ended
March 31,
2005

 
 
  (Dollars in millions)

 
Pro forma interest expense, net(a):              
  Pre-Acquisition ABS Notes(b)   $ 19.5   $ 4.9  
  Pre-Acquisition capital lease obligations(c)     3.0     0.4  
  U.S. Fleet Debt(d)     235.4     56.0  
  International Fleet Debt(e)     84.0     19.1  
   
 
 
    Sub-total fleet debt     341.9     80.4  
  Pre-Acquisition senior notes and Euro medium term notes not tendered(f)     55.1     13.8  
  Senior Term Facility(g)     129.5     32.3  
  Senior ABL Facility(h)     33.1     8.3  
  Synthetic Letter of Credit     5.6     1.4  
  Senior and Senior Subordinated Notes(i)     244.7     61.5  
   
 
 
      809.9     197.7  
  Amortization of deferred financing fees and debt discount     109.8     27.4  
  Historical interest income(j)     (37.2 )   (7.7 )
   
 
 
  Pro forma interest expense, net of interest income     882.5     217.4  
  Historical interest expense, net of interest income     (500.0 )   (99.2 )
   
 
 
  Increased interest expense, net of interest income   $ 382.5   $ 118.2  
   
 
 

The significant terms and interest rate assumptions applied in determining the pro forma interest expense are summarized as follows:

(a)
Variable rate credit facilities are calculated using the U.S. Dollar LIBOR rate, the EURIBOR rate and the LIBOR rates in specific countries as of June 30, 2006. Assuming a hypothetical increase of one eighth of a percentage point in interest rates on our variable rate debt portfolio on a pro forma basis as of December 31, 2005, our net interest expense would increase by an estimated $5.3 million over a twelve-month period without taking into account any potential required hedging under the instruments governing our debt.

(b)
Of the $600.0 million of pre-Acquisition ABS Notes, $500.0 million has fixed interest rates ranging from 2.38% to 3.23% and maturities ranging from 2007 to 2009 and the remaining $100.0 million has a variable interest rate based on LIBOR plus nine basis points and matures in 2007.

(c)
Represents the interest expense on capital lease obligations in the United Kingdom and Netherlands as historically reported.

(d)
Includes a mixture of fixed and variable rate U.S. medium term asset-backed debt and U.S. variable funding asset-backed debt. The annual interest rate for the fixed and variable rate U.S. medium term asset-backed debt is equal to (i) the applicable fixed rate benchmark or (ii) LIBOR, in each case, plus a margin. We have entered into floating to fixed interest rate swaps which have been reflected in pro forma interest expense. Giving effect to these swaps, the blended annual interest rates for the fixed and variable rate U.S. medium term asset-backed debt are 5.37% and 5.01%, respectively. The blended annual interest rate on the U.S. variable funding asset-backed debt is 5.94%. Both the U.S. medium term asset-backed debt and the U.S. variable funding asset-backed debt have associated fees paid to monoline insurers for credit enhancement and insurance, which have been included as a component of pro forma interest expense. The average monoline fee for each of the U.S. medium term asset-backed debt and U.S. variable funding asset-backed debt is 29 basis points.


The U.S. variable funding asset-backed debt, which includes an unfunded amount of $1,500 million, has a blended commitment fee of 16 basis points on the undrawn balance.

(e)
Based on a variable asset-based interim credit facility with interest rates equal to the anticipated EURIBOR or local currency LIBOR plus a weighted average margin of 104 basis points. This four tranche facility, which allows for borrowings in various currencies of up to a maximum amount equivalent to approximately $3,136 million (using currency exchange rates in effect on June 30, 2006), also requires the payment of a weighted average commitment fee of 39 basis points on the undrawn balance.

51


(f)
Hertz received tenders from holders of approximately $3,701 million of existing senior notes and approximately €192 million of existing Euro medium term notes pursuant to the Tender Offers. The table above reflects interest expense on the amount that remained untendered at the expiration of the Tender Offers.

(g)
Based on a $1,707 million 7-year Senior Term Facility funded at closing with an interest rate of LIBOR plus a margin of 225 basis points. This facility includes the $293 million Delayed Draw Term Loan that was made available until August 2007 to refinance existing senior notes and a $250 million synthetic letter of credit facility. On May 15, 2006, Hertz borrowed approximately $84.9 million under the Delayed Draw Term Loan and used the proceeds thereof to repay its 6.5% Senior Notes due 2006. Hertz expects to borrow the remaining portion of the Delayed Draw Term Loan on July 10, 2006, and to apply the proceeds thereof to repay borrowings outstanding under the Senior ABL Facility. As of December 31, 2005, on a pro forma basis, no amount would have been drawn against the letter of credit facility by the beneficiaries thereof and the delayed draw facility would have been undrawn.

(h)
Based on $400 million drawn on a 5-year Senior ABL Facility with an interest rate of LIBOR plus a margin of 200 basis points. The Senior ABL Facility has a maximum borrowing capacity of $1,600 million and a commitment fee of 50 basis points on the undrawn balance.

(i)
Based on $2,668.9 million aggregate principal amount of notes, including (i) $1,800 million aggregate principal amount of 8.875% Senior Notes due 2014, (ii) $600 million aggregate principal amount of 10.5% Senior Subordinated Notes due 2016 and (iii) €225 million aggregate principal amount of 7.875% Senior Notes due 2014.

(j)
Represents interest income as historically reported.

        (4)  Represents the tax effect of the pro forma adjusted income (loss) before taxes and minority interest at an estimated statutory tax rate of 35% for the period presented. We expect our tax payments in future years, however, to vary from this amount. In January 2006, we implemented a like-kind exchange program for our U.S. car rental business. The program is expected to result in a material deferral of federal and state income taxes. A similar plan for HERC has been in place for several years. We cannot, however, offer assurance that the expected tax deferral will be achieved or that the relevant law concerning the programs will remain in its current form.

        During the year ended December 31, 2004, we recorded a tax valuation allowance of $35.0 million in respect of uncertainties regarding the future use of certain foreign tax credits. Subsequently, during the Predecessor period ended December 20, 2005, we reversed this allowance. In connection with the Acquisition, the deferred tax asset related to the foreign tax credits were settled with Ford and have been excluded from the pro forma balance sheet. Accordingly, the impact of the valuation allowance has also been excluded in the period presented.

        As of December 31, 2005, we have U.S. Federal Net Operating Losses, or "NOLs," of $126 million available to offset future taxable income and are therefore a "loss company" within the meaning of Section 382 of the Internal Revenue Code of 1986, as amended, or "Section 382." Additionally, we expect these NOLs to increase over the next few years, predominantly due to timing benefits of the like-kind exchange program (as discussed above). Under Section 382, NOLs could be limited if Hertz Holdings undergoes an ownership change within the meaning of Section 382(g). We do not believe that the proposed offering will constitute an ownership change within the meaning of Section 382(g). We will continue to monitor cumulative ownership changes, as required by regulation, and the effect, if any, on the value of the NOLs. Future sales of our shares could result in an ownership change for purposes of Section 382 and, consequently, a limitation on the use of our NOLs.

        (5)   On June 30, 2006, Hertz Holdings entered into a loan facility with Deutsche Bank AG, New York Branch, Lehman Commercial Paper Inc., Merrill Lynch Capital Corporation, Goldman Sachs Credit Partners L.P., JPMorgan Chase Bank, N.A. and Morgan Stanley Senior Funding, Inc., or affiliates thereof, providing for a loan of $1.0 billion with a maturity date of June 30, 2007. The borrowing margins applicable to the loans under the Hertz Holdings Loan Facility will increase by 1.5% per annum following the six-month anniversary of the closing date, and by 1.0% per annum during any period in which interest is deferred pursuant to the terms of the facility. Interest on the loan was calculated using the three-month LIBOR rate on June 30, 2006 plus 3.25% for the first six months of 2005 and the same LIBOR rate plus 4.75% for both the last six months of 2005 and the first three months of 2006 based on the assumption that no interest will be deferred. Additionally, a $5 million fee was charged on the loan by the lenders and we incurred an estimated additional $3.6 million in other fees and expenses related to the facility. Hertz Holdings will amortize these costs over the life of the loan. However, since the amortization is only expected to be recorded for a short duration and will be eliminated upon repayment of the loan if the offering is completed, these charges were excluded from presentation in our pro forma statements of operations.

        The proceeds from this loan were used to pay special cash dividends of $4.32 per share, or approximately $999.2 million in the aggregate, to our common stockholders and to pay other fees and expenses related to the facility. For pro forma balance sheet purposes, the dividend was assumed to have been paid on March 31, 2006 to the then stockholders of record (totaling $991.4 million) with the remaining cash proceeds used to pay the other fees and expenses related to the facility.

        (6)   A $1.00 increase (decrease) in the assumed initial public offering price of $                  per share would increase (decrease) the net proceeds to us from this offering by $                  million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated expenses payable by us.

52



SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

        The following table presents selected consolidated financial information and other data for our business. The summary consolidated statement of operations data presented below for the Predecessor period ended December 20, 2005 has been restated. For a discussion of the Restatement, see note (a) below and Note 1A to the Notes to our audited annual consolidated financial statements included elsewhere in this prospectus. The selected consolidated statement of operations data for the years ended December 31, 2003 and December 31, 2004, the Predecessor period ended December 20, 2005 (as restated), the Successor period ended December 31, 2005 and the selected consolidated balance sheet data as of December 31, 2004 and 2005 presented below were derived from our audited annual consolidated financial statements and the related notes thereto included elsewhere in this prospectus, and the unaudited selected condensed consolidated statement of operations data for the Predecessor three-month period ended March 31, 2005 and the Successor three-month period ended March 31, 2006 and the unaudited condensed consolidated balance sheet data as of March 31, 2006 were derived from our unaudited interim condensed consolidated financial statements and the related notes thereto included elsewhere in this prospectus. The selected consolidated statement of operations data for the years ended December 31, 2001 and December 31, 2002 and the selected consolidated balance sheet data as of December 31, 2001, 2002 and 2003 presented below were derived from our audited annual consolidated financial statements and related notes thereto, which are not included in this prospectus.

        You should read the following information in conjunction with the section of this prospectus entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our audited annual consolidated financial statements and related notes thereto and our unaudited interim condensed consolidated financial statements and related notes thereto included elsewhere in this prospectus.

 
  Predecessor
  Predecessor
  Successor
  Predecessor
  Successor
 
 
  Years ended December 31,
  For the Periods From
  Three Months Ended,
March 31,

 
 
  2001
  2002
  2003
  2004
  January 1,
2005 to
December 20,
2005
Restated(a)

  December 21,
2005 to
December 31,
2005

  2005
  2006
 
 
  (Dollars in millions except per share data)

 
Statement of Operations Data                                                  
Revenues:                                                  
  Car rental   $ 4,366.6   $ 4,537.6   $ 4,819.3   $ 5,430.8   $ 5,820.5   $ 129.4   $ 1,333.4   $ 1,399.6  
  Equipment rental     1,128.7     1,018.7     1,037.8     1,162.0     1,392.4     22.5     285.4     363.1  
  Other(b)     101.6     82.1     76.6     83.2     101.8     2.6     21.8     23.9  
   
 
 
 
 
 
 
 
 
    Total revenues     5,596.9     5,638.4     5,933.7     6,676.0     7,314.7     154.5     1,640.6     1,786.6  
   
 
 
 
 
 
 
 
 
Expenses:                                                  
  Direct operating     3,248.0     3,093.0     3,316.1     3,734.4     4,086.3     103.0     974.2     1,070.1  
  Depreciation of revenue earning equipment(c)     1,462.3     1,499.5     1,523.4     1,463.3     1,555.9     43.8     373.6     407.3  
  Selling, general and administrative     479.2     463.1     501.7     591.3     623.4     15.1     158.1     162.2  
  Interest, net of interest income(d)     404.7     366.4     355.0     384.4     474.2     25.8     99.2     210.3  
   
 
 
 
 
 
 
 
 
    Total expenses     5,594.2     5,422.0     5,696.2     6,173.4     6,739.8     187.7     1,605.1     1,849.9  
   
 
 
 
 
 
 
 
 
  Income (loss) before income taxes and minority interest     2.7     216.4     237.5     502.6     574.9     (33.2 )   35.5     (63.3 )
  (Provision) benefit for taxes on income(e)     20.6     (72.4 )   (78.9 )   (133.9 )   (191.3 )   12.2     (12.3 )   17.3  
  Minority interest                 (3.2 )   (12.3 )   (0.3 )   (2.3 )   (3.2 )
   
 
 
 
 
 
 
 
 
  Income (loss) before cumulative effect of change in accounting principle     23.3     144.0     158.6     365.5     371.3     (21.3 )   20.9     (49.2 )
  Cumulative effect of change in accounting principle(f)         (294.0 )                        
   
 
 
 
 
 
 
 
 
  Net income (loss)   $ 23.3   $ (150.0 ) $ 158.6   $ 365.5   $ 371.3   $ (21.3 ) $ 20.9   $ (49.2 )
   
 
 
 
 
 
 
 
 
Weighted average shares outstanding:                                                  
  Basic     229.5     229.5     229.5     229.5     229.5     229.5     229.5     229.5  
  Diluted     229.5     229.5     229.5     229.5     229.5     229.5     229.5     229.5  
Earnings (loss) per share(g):                                                  
  Basic   $ 0.10   $ (0.65 ) $ 0.69   $ 1.59   $ 1.62   $ (0.09 ) $ 0.09   $ (0.21 )
  Diluted   $ 0.10   $ (0.65 ) $ 0.69   $ 1.59   $ 1.62   $ (0.09 ) $ 0.09   $ (0.21 )
Other Financial Data                                                  
  Net non-fleet capital expenditures   $ 230.9   $ 189.2   $ 172.1   $ 227.1   $ 261.9   $ 7.3   $ 72.3   $ 44.9  

53


 
  Predecessor
  Successor
 
  Years ended, or as of December 31,
  Year
Ended, or
as of
December 31,

  Three
Months
Ended,
or as of
March 31,

 
  2001
  2002
  2003
  2004
  2005
  2006
 
  (Dollars in millions)  

Balance Sheet Data                                    
Cash and equivalents and short-term investments   $ 214.0   $ 601.3   $ 1,110.1   $ 1,235.0   $ 843.9   $ 679.4
Total assets(h)     10,158.4     11,128.9     12,579.0     14,096.4     18,580.9     18,936.6
Total debt     6,314.0     7,043.2     7,627.9     8,428.0     12,515.0     12,459.7
Stockholders' equity(i)     1,984.4     1,921.9     2,225.4     2,670.2     2,266.2     2,266.3

(a)
Hertz has restated its previously issued consolidated statement of operations for the Predecessor period ended December 20, 2005. An explanation of the Restatement appears in Note 1A to the Notes to our audited annual consolidated financial statements included elsewhere in this prospectus. The Restatement resulted in the previously reported provision for taxes on income to increase by $27.5 million and net income to decrease by $27.5 million, due to the recording of additional non-cash tax expense relating to dividends repatriated prior to the Acquisition.

(b)
Includes fees and certain cost reimbursements from our licensees and revenues from our car leasing operations, telecommunications services through 2001 and third-party claim management services.

(c)
For the Predecessor period ended December 20, 2005, the Successor period ended December 31, 2005 and the Successor three months ended March 31, 2006, depreciation of revenue earning equipment was reduced by $33.8 million, $1.2 million and $8.7 million, respectively, resulting from the net effects of changing depreciation rates to reflect changes in the estimated residual value of revenue earning equipment. For the years ended December 31, 2001, 2002, 2003 and 2004, the Predecessor period ended December 20, 2005, the Successor period ended December 31, 2005 and the Successor three months ended March 31, 2006, depreciation of revenue earning equipment includes a net loss of $1.6 million, a net gain of $10.8 million, a net loss of $0.8 million and net gains of $57.2 million, $68.3 million, $2.1 million and $17.0 million, respectively, from the disposal of revenue earning equipment.

(d)
For the years ended December 31, 2001, 2002, 2003 and 2004, the Predecessor period ended December 20, 2005, the Successor period ended December 31, 2005 and the Successor three months ended March 31, 2006, interest income was $9.0 million, $10.3 million, $17.9 million, $23.7 million, $36.1 million, $1.1 million and $7.7 million, respectively.

(e)
For the year ended December 31, 2001, includes benefits of $30.2 million from certain foreign tax credits, for the year ended December 31, 2004, includes benefits of $46.6 million relating to net adjustments to federal and foreign tax accruals and, for the Predecessor period ended December 20, 2005, includes the reversal of a valuation allowance on foreign tax credit carryforwards of $35.0 million (established in 2004) and favorable foreign tax adjustments of $5.3 million, partly offset by a $31.3 million provision relating to the repatriation of foreign earnings.

(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)
Amounts are computed based upon 229,500,000 shares of common stock outstanding immediately after the Acquisition applied to our historical net income (loss) amounts. 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.

(h)
Substantially all of our revenue earning equipment, as well as certain related assets, are owned by special purpose entities, or are subject to liens in favor of our lenders. Substantially all our other assets in the United States are also subject to liens in favor of our lenders, and substantially all our other assets outside the United States are (with certain limited exceptions) subject to liens in favor of our lenders. None of such assets are available to satisfy the claims of our general creditors.

(i)
Includes equity contributions totaling $2,295 million to Hertz Holdings from investment funds associated with or designated by the Sponsors on or prior to December 21, 2005.

54



MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        The following discussion and analysis of our results of operations and financial condition primarily covers periods prior to the consummation of the Transactions. Accordingly, the discussion and analysis of historical periods prior to the quarter ended March 31, 2006 does not reflect the significant impact that the Transactions will have on us, including significantly increased leverage and liquidity requirements. The statements in the discussion and analysis regarding industry outlook, our expectations regarding the performance of our business and the other non-historical statements in the discussion and analysis are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in "Risk Factors." Our actual results may differ materially from those contained in or implied by any forward-looking statements. You should read the following discussion together with the sections entitled "Risk Factors," "Cautionary Note Regarding Forward-Looking Statements," "Selected Historical Consolidated Financial Data" and our audited annual consolidated financial statements and related notes thereto and unaudited interim consolidated financial statements and related notes thereto included elsewhere in this prospectus.

Overview

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

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

    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 third-party claim management services).

        Our equipment rental business also derives revenues from the sale of new equipment and consumables.

        Our expenses primarily consist of:

    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 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, net of interest income.

        The car and equipment rental industries are significantly influenced by general economic conditions. The car rental industry is also significantly influenced by developments in the travel industry, and, particularly, in airline passenger traffic. Our profitability is primarily a function of the volume and pricing of rental transactions and the utilization of cars and equipment. Significant changes in the purchase price of cars and equipment or interest rates can also have a significant effect on our profitability depending on our ability to adjust pricing for these changes. We expect increases in car

55


costs during the next twelve months. In the United States, increases of approximately 17% in monthly per-car depreciation costs for 2006 model year program cars began to adversely affect our results of operations in the fourth quarter of 2005, as those cars began to enter our fleet. Our business requires significant expenditures for cars and equipment, and consequently we require substantial liquidity to finance such expenditures.

        Our car rental and equipment rental operations are seasonal businesses, with decreased levels of business in the winter months and heightened activity during the spring and summer. We have the ability to dynamically manage fleet capacity, the most significant portion of our cost structure, to meet market demand. For instance, to accommodate increased demand, we increase our available fleet and staff during the second and third quarters of the year. As business demand declines, fleet and staff are decreased accordingly. A number of our other major operating costs, including airport fees, commissions and vehicle liability expenses, are directly related to revenues or transaction volumes. We also maintain a flexible workforce, with a significant number of part time and seasonal workers. However, certain operating expenses, including minimum concession fees, rent, insurance, and administrative overhead, remain fixed and cannot be adjusted for seasonal demand.

        In the United States, industry revenues from airport rentals have only in 2005 returned to levels seen before the 2001 recession and the September 11, 2001 terrorist attacks. During the year ended December 31, 2005, we believe car rental pricing among the major U.S. car rental brands declined slightly, as measured by rental rates charged. During the latter part of the fourth quarter of 2005 and the first quarter of 2006, based on publicly available information, some U.S. car rental providers experienced transaction day growth and pricing increases compared to the comparable prior periods. We experienced higher car rental volumes and pricing in the U.S. for the year ended December 31, 2005 and the first quarter of 2006. It is not certain whether these increases will continue during the remainder of 2006. Also, we believe most European car rental companies' pricing moved downward in 2005. During the three months ended March 31, 2006, we experienced moderate transaction day growth in our European operations and our car rental pricing was above the level of pricing during the three months ended March 31, 2005.

        In the two years ended December 31, 2005, we increased the number of our off-airport rental locations in the United States by approximately 33% to approximately 1,400 locations. Revenues from our U.S. off-airport operations grew during the same period, representing $576.9 million, $697.4 million and $843.7 million of our total car rental revenues in the years ended December 31, 2003, 2004 and 2005, respectively. Our expanding U.S. off-airport operations represented $195.2 million and $174.9 million of our total car rental revenues in the quarters ended March 31, 2006 and 2005, respectively. In 2006 and subsequent years our strategy may include selected openings of new off-airport locations, the disciplined evaluation of existing locations and the pursuit of same-store sales growth. When we open a new off-airport location, we incur a number of costs, including those relating to site selection, lease negotiation, recruitment of employees, selection and development of managers, initial sales activities and integration of our systems with those of the companies who will reimburse the location's replacement renters for their rentals. A new off-airport location, once opened, takes time to generate its full potential revenues, and as a result revenues at new locations do not initially cover their start-up costs and often do not, for some time, cover the costs of their ongoing operation.

        From 2001 to 2003, the equipment rental industry experienced downward pricing, measured by the rental rates charged by rental companies. For the years ended December 31, 2004 and 2005 and the first quarter of 2006, we believe industry pricing, measured in the same way, improved in the United States and Canada but only started to improve towards the end of 2005 in France and Spain. HERC also experienced higher equipment rental volumes worldwide for the year ended December 31, 2005 and the first quarter of 2006. HERC slightly contracted its network of equipment rental locations during the 2001 to 2003 downturn in construction activities. HERC added five new locations in the United States in 2004 and six new locations in 2005. During the first quarter of 2006, HERC added one new U.S. location, and expects to add 15 additional new locations in the United States and two in

56



Canada, during the remainder of the year. In its U.S. expansion, we expect HERC will incur non-fleet start-up costs of approximately $600,000 per location and additional fleet acquisition costs over an initial twelve-month period of approximately $5.4 million per location.

        Property damage and business interruption from the 2005 hurricanes in Florida and other Gulf Coast states did not have a material effect on our results of operations for the year ended December 31, 2005.

        The following discussion and analysis provides information that management believes to be relevant to an understanding of our consolidated financial condition and results of operations. This discussion should be read in conjunction with the financial statements and the related notes thereto contained in our audited annual consolidated financial statements and unaudited interim condensed consolidated financial statements included elsewhere in this prospectus.

Restatement of Predecessor Financial Statements

        Hertz has restated its previously issued consolidated statements of operations, stockholder's equity and cash flows for the Predecessor period ended December 20, 2005. The Restatement revises, in accordance with Accounting Principles Board Opinion No. 20, "Accounting Changes," Hertz's tax provision on repatriated foreign earnings.

        Prior to the Acquisition, Hertz and its domestic subsidiaries filed consolidated Federal income tax returns with Ford. During December 2005, in connection with Ford pre-sale activities and to obtain the benefit of favorable one-time tax treatment of distributions offered by the American Jobs Creation Act of 2004, dividends of $547.8 million were recognized, of which $216.9 million were cash dividends and $330.9 million were deemed dividends for tax purposes. The deemed dividends relate to undistributed foreign earnings which are no longer considered to be permanently reinvested. The provision for taxes on income for the Predecessor period ended December 20, 2005, as originally reported, included $54.1 million of tax expense associated with that repatriation, of which $50.3 million was offset by foreign tax credits, resulting in net tax expense of $3.8 million. All Federal income taxes associated with the repatriation are to be reported and paid by Ford as part of their consolidated income tax return. In June 2006, it was determined that there was an error in estimating the amount of Hertz's tax expense for the December 2005 repatriation, which is payable by Ford and that it should be increased by $27.5 million to $31.3 million. This change resulted from a detailed study recently completed by Ford for the purpose of preparing their 2005 tax return.

        As Ford is responsible for the payment of this tax, we have determined that this error has no impact subsequent to the Acquisition. Because the liability for this tax rests with Ford, there is no effect on our liquidity in either the Predecessor period ended December 20, 2005 or the Successor period ended December 31, 2005. A summary of the effects of the Restatement on the previously issued consolidated statement of operations for the Predecessor period ended December 20, 2005 is as follows (in thousands of dollars):

 
  Predecessor
 
 
  January 1, 2005
to December 20, 2005

 
 
  As Reported
  As Restated
 
Provision for taxes on income   $ (163,832 ) $ (191,332 )
Net income     398,823     371,323  
Earnings per share              
  Basic   $ 1.74   $ 1.62  
  Diluted   $ 1.74   $ 1.62  

        The effect of the Restatement on the previously issued consolidated statement of cash flows for the Predecessor period ended December 20, 2005, is to decrease net income by $27.5 million and to increase the change in accrued taxes by $27.5 million.

57



Critical Accounting Policies and Estimates

        Our discussion and analysis of financial condition and results of operations are based upon our unaudited interim condensed consolidated and audited annual consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts in our financial statements and accompanying notes.

        We believe the following critical accounting policies affect the more significant judgments and estimates used in the preparation of our financial statements and changes in these judgments and estimates may impact our future results of operations and financial condition. For additional discussion of our accounting policies, see Note 1 to the Notes to our audited annual consolidated financial statements included elsewhere in this prospectus.

Revenue Earning Equipment

        Our principal assets are revenue earning equipment, which represented 51% of total assets as of December 31, 2005. Revenue earning equipment consists of vehicles utilized in our car rental operations and equipment utilized in our equipment rental operations. For the year ended December 31, 2005, 77% of the vehicles purchased for our U.S. and international car rental fleet were subject to repurchase by automobile manufacturers under contractual repurchase and guaranteed depreciation programs, subject to certain manufacturers' car condition and mileage requirements, at a specific price during a specified time period. These programs limit our residual risk with respect to vehicles purchased under the programs. For all other vehicles, as well as equipment acquired by our equipment rental business, we use historical experience and monitor market conditions to set depreciation rates. When revenue earning equipment is acquired, we estimate the period that we will hold the asset. Depreciation is recorded on a straight-line basis over the estimated holding period, with the objective of minimizing gain or loss on the disposition of the revenue earning equipment. Upon disposal of the revenue earning equipment, depreciation expense is adjusted for the difference between the net proceeds received and the remaining book value. As market conditions change, we adjust our depreciation rates prospectively, over the remaining holding period, to reflect these changes in market conditions. See Note 8 to the Notes to our audited annual consolidated financial statements and Note 6 to the Notes to our unaudited interim condensed consolidated financial statements included elsewhere in this prospectus.

Public Liability and Property Damage

        The obligation for public liability and property damage, or "PL/PD," on self-insured U.S. and international vehicles and equipment represents an estimate for both reported accident claims not yet paid, and claims incurred but not yet reported. The related liabilities are recorded on a non-discounted basis. Reserve requirements are based on actuarial evaluations of historical accident claim experience and trends, as well as future projections of ultimate losses, expenses, premiums and administrative costs. The adequacy of the liability is regularly monitored based on evolving accident claim history. If our estimates change or if actual results differ from these assumptions, the amount of the recorded liability is adjusted to reflect these results.

Pensions

        Our employee pension costs and obligations are dependent on our assumptions used by actuaries in calculating such amounts. These assumptions include discount rates, salary growth, long-term return on plan assets, retirement rates, mortality rates and other factors. Actual results that differ from our assumptions are accumulated and amortized over future periods and, therefore, generally affect our recognized expense and recorded obligation in such future periods. While we believe that the assumptions used are appropriate, significant differences in actual experience or significant changes in assumptions would affect our pension costs and obligations.

58



        See Note 6 to the Notes to our audited annual consolidated financial statements and Note 8 to the Notes to our unaudited interim condensed consolidated financial statements included elsewhere in this prospectus.

Goodwill and Other Intangible Assets

        We review goodwill for impairment whenever events or changes in circumstances indicate that the carrying amount of the goodwill may not be recoverable, and also review goodwill annually in accordance with SFAS No. 142, "Goodwill and Other Intangible Assets." Our annual review is conducted in the second quarter of each year. Under SFAS No. 142, goodwill impairment is deemed to exist if the carrying value of goodwill exceeds its fair value. In addition, SFAS No. 142 requires that goodwill be tested at least annually using a two-step process. The first step is to identify any potential impairment by comparing the carrying value of the reporting unit to its fair value. If a potential impairment is identified, the second step is to compare the implied fair value of goodwill with its carrying amount to measure the impairment loss. We estimate the fair value of our reporting units using a discounted cash flow methodology. A significant decline in the projected cash flows used to determine fair value could result in a goodwill impairment charge.

        The Acquisition was recorded by allocating the cost of the assets acquired, including intangible assets and liabilities assumed, based on their estimated fair values at the Acquisition date. Consequently, as a result of the Acquisition, we have recognized significant intangible assets. In accordance with SFAS No. 142, we reevaluate the estimated useful lives of our intangible assets annually or as circumstances change. Those intangible assets considered to have indefinite useful lives are evaluated for impairment on an annual basis, by comparing the fair value of the intangible asset to its carrying value. In addition, whenever events or changes in circumstances indicate that the carrying value of intangible assets might not be recoverable, we will perform an impairment review. We estimate the fair value of our intangible assets using a discounted cash flow methodology. Intangible assets with finite useful lives are amortized over their respective estimated useful lives and reviewed for impairment in accordance with SFAS No. 144, "Accounting for Impairment or Disposal of Long-Lived Assets."

        Our estimates are based upon historical trends, management's knowledge and experience and overall economic factors. While we believe our estimates are reasonable, different assumptions regarding items such as future cash flows and volatility in the markets we serve could affect our evaluations and result in an impairment charge to the carrying amount of our goodwill and our intangible assets.

        See Note 2 to the Notes to our audited annual consolidated financial statements and Note 4 to the Notes to our unaudited interim condensed consolidated financial statements included elsewhere in this prospectus.

Income Taxes

        We recognize deferred tax assets and liabilities resulting from differences between the financial statement carrying amounts and the tax bases of assets and liabilities. We regularly review our deferred tax assets to assess their potential realization and establish a valuation allowance if we believe the asset will not be realized. In performing these reviews, we make estimates about future profits and tax planning strategies that would affect future taxable income and the realization of these deferred tax assets. A change in these assumptions or strategies could cause an increase or decrease in the valuation allowance that would ultimately increase or decrease our effective tax rate, which could impact our results of operations. Our tax returns are subject to audit, and local tax authorities could challenge our tax positions. Our practice is to review tax filing positions and to record probable tax assessments, including interest and penalties if applicable. Changes to these reserves could increase or decrease our income tax expense, effective tax rate and results of operations.

59



        See Note 9 to the Notes to our audited annual consolidated financial statements and Note 5 to the Notes to our unaudited interim condensed consolidated financial statements included elsewhere in this prospectus.

Results of Operations

        In the following discussion, comparisons are made between the years ended December 31, 2005 (combined, as restated) and December 31, 2004, notwithstanding the presentation in our consolidated statements of operations for the year ended December 31, 2005, the Successor period ended December 31, 2005 and the Predecessor period ended December 20, 2005 (as restated). A split presentation of an annual period is required under GAAP when a change in accounting basis occurs. Accounting for an acquisition requires that the historical carrying values of assets acquired and liabilities assumed be adjusted to fair value. A resulting higher cost basis associated with the allocation of the purchase price impacts post-acquisition period results, which impacts period-to-period comparisons. We believe a discussion of the separate periods presented for the year ended December 31, 2005 in our consolidated statements of operations may impede understanding of our operating performance. The impact of the Acquisition on the 11-day Successor period does not materially affect the comparison of the annual periods and, accordingly, we have prepared the discussion of our results of operations by comparing the year ended December 31, 2005 (combined, as restated) with the year ended December 31, 2004 without regard to the differentiation between Predecessor and Successor results of operations for the Predecessor period ended December 20, 2005 (as restated) and the Successor period ended December 31, 2005.

 
  Predecessor
  Predecessor
  Successor
  Combined
  Predecessor
  Successor
 
 
  Years Ended
December 31,

  For the Periods from
  Year Ended
December 31,

  Three Months Ended
 
 
  2003
  2004
  January 1, 2005
to December 20,
2005
Restated

  December 21, 2005
to December 31,
2005

  2005
Restated

  March 31,
2005

  March 31,
2006

 
 
   
   
   
  (Dollars in thousands)

   
   
   
 
Revenues:                                            
  Car rental   $ 4,819,255   $ 5,430,805   $ 5,820,473   $ 129,448   $ 5,949,921   $ 1,333,380   $ 1,399,622  
  Equipment rental     1,037,754     1,161,955     1,392,461     22,430     1,414,891     285,414     363,048  
  Other     76,661     83,192     101,811     2,591     104,402     21,779     23,924  
   
 
 
 
 
 
 
 
  Total revenues     5,933,670     6,675,952     7,314,745     154,469     7,469,214     1,640,573     1,786,594  
   
 
 
 
 
 
 
 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
  Direct operating     3,316,101     3,734,361     4,086,344     102,958     4,189,302     974,229     1,070,150  
  Depreciation of revenue earning equipment     1,523,391     1,463,258     1,555,862     43,827     1,599,689     373,594     407,254  
  Selling, general and administrative     501,643     591,317     623,386     15,167     638,553     158,059     162,177  
  Interest, net of interest income     355,043     384,464     474,247     25,735     499,982     99,212     210,313  
   
 
 
 
 
 
 
 
  Total expenses     5,696,178     6,173,400     6,739,839     187,687     6,927,526     1,605,094     1,849,894  
   
 
 
 
 
 
 
 
Income (loss) before income taxes and minority interest     237,492     502,552     574,906     (33,218 )   541,688     35,479     (63,300 )
(Provision) benefit for taxes on income     (78,877 )   (133,870 )   (191,332 )   12,243     (179,089 )   (12,302 )   17,323  
Minority interest         (3,211 )   (12,251 )   (371 )   (12,622 )   (2,302 )   (3,259 )
   
 
 
 
 
 
 
 
Net income (loss)   $ 158,615   $ 365,471   $ 371,323   $ (21,346 ) $ 349,977   $ 20,875   $ (49,236 )
   
 
 
 
 
 
 
 

60


        The following table sets forth, for each of the periods indicated, the percentage of total revenues represented by certain items in our consolidated statements of operations:

 
  Predecessor
  Predecessor
  Successor
  Combined
  Predecessor
  Successor
 
 
  Years Ended
December 31,

  For the Periods from
  Year Ended
December 31,

  Three Months Ended
 
 
  2003
  2004
  January 1, 2005
to December 20,
2005
Restated

  December 21, 2005
to December 31,
2005

  2005
Restated

  March 31,
2005

  March 31,
2006

 
Revenues:                              
  Car rental   81.2 % 81.3 % 79.6 % 83.8 % 79.7 % 81.3 % 78.4 %
  Equipment rental   17.5   17.4   19.0   14.5   18.9   17.4   20.3  
  Other   1.3   1.3   1.4   1.7   1.4   1.3   1.3  
   
 
 
 
 
 
 
 
  Total revenues   100.0   100.0   100.0   100.0   100.0   100.0   100.0  
   
 
 
 
 
 
 
 
Expenses:                              
  Direct operating   55.9   55.9   55.9   66.6   56.1   59.4   59.9  
  Depreciation of revenue earning equipment   25.7   21.9   21.3   28.4   21.4   22.8   22.8  
  Selling, general and administrative   8.4   8.9   8.5   9.8   8.5   9.6   9.0  
  Interest, net of interest income   6.0   5.8   6.4   16.7   6.7   6.0   11.8  
   
 
 
 
 
 
 
 
  Total expenses   96.0   92.5   92.1   121.5   92.7   97.8   103.5  
   
 
 
 
 
 
 
 
Income (loss) before income taxes and minority interest   4.0   7.5   7.9   (21.5 ) 7.3   2.2   (3.5 )
(Provision) benefit for taxes on income   (1.3 ) (2.0 ) (2.6 ) 7.9   (2.4 ) (0.8 ) 0.9  
Minority interest       (0.2 ) (0.2 ) (0.2 ) (0.1 ) (0.2 )
   
 
 
 
 
 
 
 
Net income (loss)   2.7 % 5.5 % 5.1 % (13.8 )% 4.7 % 1.3 % (2.8 )%
   
 
 
 
 
 
 
 

Three Months Ended March 31, 2006 Compared with Three Months Ended March 31, 2005

Revenues

        Total revenues in the quarter ended March 31, 2006 of $1,786.6 million increased by 8.9% from $1,640.6 million in the quarter ended March 31, 2005.

        Revenues from our car rental operations of $1,399.6 million in the quarter ended March 31, 2006 increased by $66.2 million, or 5.0%, from $1,333.4 million in the quarter ended March 31, 2005. The increase was primarily the result of a 2.2% increase in car rental volume worldwide, a 3.1% increase in pricing worldwide (including a 3.6% increase in the U.S.), an increase in license and tax reimbursement fees, refueling fees and airport concession fees and the effects of foreign currency translation of approximately $27.1 million.

        Revenues from our equipment rental operations of $363.0 million in the quarter ended March 31, 2006 increased by $77.6 million, or 27.2%, from $285.4 million in the quarter ended March 31, 2005. The increase was due to higher rental volume and improved pricing primarily in the United States and Canada.

        Revenues from all other sources of $23.9 million in the quarter ended March 31, 2006 increased by $2.1 million, or 9.8%, from $21.8 million in the quarter ended March 31, 2005, primarily due to the increase in car rental licensee revenue.

61



Expenses

        Total expenses of $1,849.9 million in the quarter ended March 31, 2006 increased by 15.3% from $1,605.1 million in the quarter ended March 31, 2005, and total expenses as a percentage of revenues increased to 103.5% in the quarter ended March 31, 2006 compared with 97.8% in the quarter ended March 31, 2005.

        Direct operating expenses of $1,070.2 million in the quarter ended March 31, 2006 increased by 9.8% from $974.2 million in the quarter ended March 31, 2005. The increase was primarily the result of increases in the amortization of other intangible assets, commission fees, wages and benefits, self insurance expenses, gasoline costs, cost of equipment sold, facility expenses, concession fees in our car rental operations and the effects of foreign currency translation.

        Depreciation of revenue earning equipment for our car rental operations of $345.6 million in the quarter ended March 31, 2006 increased by 7.3% from $322.1 million in the quarter ended March 31, 2005. The increase was primarily due to the higher cost of vehicles in the United States and the effects of foreign currency translation. This increase was partly offset by a $3.6 million net reduction in depreciation for our domestic car rental operations resulting from a decrease in depreciation rates effective January 1, 2006 to reflect changes in the estimated residual values of vehicles and higher net proceeds received in excess of book value on the disposal of used vehicles. Depreciation of revenue earning equipment for our equipment rental operations of $61.7 million in the quarter ended March 31, 2006 increased by 19.8% from $51.5 million in the quarter ended March 31, 2005 due to an increase in the quantity of equipment operated and lower net proceeds received in excess of book value on the disposal of used equipment in the United States. This increase was partly offset by a $5.1 million net reduction in depreciation for our United States and Canada equipment rental operations resulting from a decrease in depreciation rates effective January 1, 2006 to reflect changes in the estimated residual values of equipment.

        Selling, general and administrative expenses of $162.2 million in the quarter ended March 31, 2006 increased by 2.6% from $158.1 million in the quarter ended March 31, 2005. The increase was primarily due to increases in administrative and sales promotion expenses and the effects of foreign currency translation.

        Interest expense, net of interest income, of $210.3 million in the quarter ended March 31, 2006 increased by 112.0% from $99.2 million in the quarter ended March 31, 2005, primarily due to increases in the weighted average interest rate and the weighted average debt outstanding (both related to the Transactions) and the effects of foreign currency translation.

        The benefit for taxes on income of $17.3 million in the quarter ended March 31, 2006 increased $29.6 million from a tax provision of $12.3 million in the quarter ended March 31, 2005, primarily due to the pre-tax losses in 2006 compared to the pre-tax profits in 2005. The effective tax rate in the quarter ended March 31, 2006 was 27.4% as compared to 34.7% in the quarter ended March 31, 2005. See Note 5 to the Notes to our unaudited interim condensed consolidated financial statements included elsewhere in this prospectus.

        Minority interest of $3.3 million in the quarter ended March 31, 2006 increased $1.0 million from $2.3 million in the quarter ended March 31, 2005. The increase was primarily due to an increase in our majority-owned subsidiary Navigation Solutions, L.L.C.'s, or "Navigation Solutions," net income in the quarter ended March 31, 2006 as compared to the quarter ended March 31, 2005.

Net Income (Loss)

        We had a net loss of $49.2 million in the quarter ended March 31, 2006, representing a decrease of $70.1 million from net income of $20.9 million in the quarter ended March 31, 2005. The decrease in net income was primarily due to the 112.0% increase in interest expense over the first quarter of 2005, as well as the net effect of other contributing factors noted above.

62



Effects of the Transactions

        Increased interest expense resulting from our higher debt levels and increased depreciation and amortization expense resulting from the revaluation of our assets and the recognition of certain identified intangible assets, all in connection with the Acquisition, are expected to have a significant adverse impact on full year 2006 income (loss) before income taxes and minority interest.

        The following table summarizes the purchase accounting effects of the Acquisition on our results of operations for the three months ended March 31, 2006 (in millions of dollars):

Depreciation and amortization of tangible and intangible assets:      
  Other intangible assets   $ 15.3
  Revenue earning equipment     1.9
  Property and equipment     3.5
Accretion of revalued liabilities:      
  Discount on debt     2.1
  Workers' compensation and public liability and property damage     1.3
   
    $ 24.1
   

Year Ended December 31, 2005 Combined (as Restated) Compared with Year Ended December 31, 2004

Revenues

        Total revenues of $7,469.2 million for the year ended December 31, 2005 increased by 11.9% from $6,676.0 million for the year ended December 31, 2004.

        Revenues from our car rental operations of $5,949.9 million for the year ended December 31, 2005 increased by $519.1 million, or 9.6%, from $5,430.8 million for the year ended December 31, 2004. The increase was primarily the result of a 4.1% increase in car rental volume worldwide, a 0.2% increase in pricing worldwide, an increase in airport concession recovery and refueling fees and the effects of foreign currency translation of approximately $23.1 million.

        Revenues from our equipment rental operations of $1,414.9 million for the year ended December 31, 2005 increased by $252.9 million, or 21.8%, from $1,162.0 million for the year ended December 31, 2004. The increase was primarily due to higher rental volume and improved pricing in the United States and Canada and the effects of foreign currency translation of approximately $12.3 million.

        Revenues from all other sources of $104.4 million for the year ended December 31, 2005 increased by $21.2 million, or 25.5%, from $83.2 million for the year ended December 31, 2004, primarily due to the increase in car rental licensee revenue and the effects of foreign currency translation.

Expenses

        Total expenses of $6,927.5 million for the year ended December 31, 2005 increased by 12.2% from $6,173.4 million for the year ended December 31, 2004, principally due to the increase in revenues. Total expenses as a percentage of revenues increased to 92.7% for the year ended December 31, 2005 compared with 92.5% for the year ended December 31, 2004.

        Direct operating expenses of $4,189.3 million for the year ended December 31, 2005 increased by 12.2% from $3,734.4 million for the year ended December 31, 2004. The increase was primarily the result of increases in wages and benefits, commission fees, facility expenses, gasoline costs, concession fees in our car rental operations and the effects of foreign currency translation, and further reflects the fact that during the year ended December 31, 2004, we received $7.0 million for claims made by us on our insurance policies for business interruption losses resulting from the terrorist attacks of September 11, 2001 and a final gain of $7.5 million from the condemnation of a car rental and support facility in Florida.

63



        Depreciation of revenue earning equipment for our car rental operations of $1,381.5 million for the year ended December 31, 2005 increased by 12.4% from $1,228.6 million for the year ended December 31, 2004. The increase was primarily due to the increase in the average number of vehicles worldwide, higher cost of vehicles in the U.S., lower net proceeds received in excess of book value on the disposal of vehicles and the effects of foreign currency translation. This increase was partly offset by a $21.8 million net reduction in depreciation for our domestic car rental operations resulting from a decrease in depreciation rates to reflect changes in the estimated residual values of vehicles. Depreciation of revenue earning equipment for our equipment rental operations of $218.2 million for the year ended December 31, 2005 decreased by 7.0% from $234.7 million for the year ended December 31, 2004 due to higher net proceeds received in excess of book value on the disposal of used equipment in the United States, and a $13.2 million net reduction in depreciation resulting from the effects of changes in depreciation rates of equipment in the U.S. and Canada, partly offset by an increase in the quantity of equipment operated.

        Selling, general and administrative expenses of $638.5 million for the year ended December 31, 2005 increased by 8.0% from $591.3 million for the year ended December 31, 2004. The increase was primarily due to increases in administrative and sales promotion expenses and the effects of foreign currency translation. The increases in administrative and sales promotion expenses were primarily due to increases in salaries, commissions and benefits relating to the improvement in earnings for the year ended December 31, 2005.

        Interest expense, net of interest income, of $500.0 million for the year ended December 31, 2005 increased by 30.0% from $384.4 million for the year ended December 31, 2004, primarily due to increases in the weighted average debt outstanding, the weighted average interest rate and $35.6 million of interest expense on the $1,185.0 million Intercompany Note payable to Ford Holdings LLC relating to the dividend declared and paid on June 10, 2005. The increase was partly offset by an increase in interest income.

        The provision for taxes on income of $179.1 million for the year ended December 31, 2005 (restated) increased by 33.8% from $133.9 million for the year ended December 31, 2004, primarily due to an increase in income before income taxes and minority interest and a $31.3 million provision relating to the repatriation of foreign earnings for the year ended December 31, 2005, and net favorable tax adjustments in 2004 totaling $46.6 million, principally relating to the evaluation of certain federal and foreign tax accruals and foreign tax credits. The increase was partly offset by the reversal of a valuation allowance on foreign tax credit carryforwards of $35.0 million and favorable foreign tax adjustments of $5.3 million. The effective tax rate for the year ended December 31, 2005 (restated) was 33.1% as compared to 26.6% for the year ended December 31, 2004. See Notes 1, 1A and 9 to the Notes to our audited annual consolidated financial statements included elsewhere in this prospectus.

        Minority interest of $12.6 million for the year ended December 31, 2005 increased $9.4 million from $3.2 million for the year ended December 31, 2004. The increase was due to only two quarters of earnings being included in 2004 as we increased our ownership interest in Navigation Solutions beginning in July 2004. See Note 5 to the Notes to our audited annual consolidated financial statements included elsewhere in this prospectus.

Net Income

        We had net income of $350.0 million for the year ended December 31, 2005 (restated), representing a decrease of $15.5 million, or 4.2%, from $365.5 million for the year ended December 31, 2004. The decrease in net income was primarily due to the one-time $31.3 million tax provision relating to the repatriation of foreign earnings, as well as the net effect of other contributing factors noted above. The impact of changes in exchange rates on net income was mitigated by the fact that not only foreign revenues but also most foreign expenses were incurred in local currencies.

64



Effects of Acquisition

        The loss for the Successor period ended December 31, 2005 relates to lower rental demand due to the seasonality of the business and costs associated with the Transactions. Increased interest expense resulting from our higher debt levels and increased depreciation and amortization expense resulting from the revaluation of our assets and the recognition of certain identified intangible assets, all in connection with the Acquisition, are expected to have a significant adverse impact on full year 2006 income before income taxes and minority interest.

Year Ended December 31, 2004 Compared with Year Ended December 31, 2003

Revenues

        Total revenues of $6,676.0 million for the year ended December 31, 2004 increased by 12.5% from $5,933.7 million for the year ended December 31, 2003.

        Revenues from our car rental operations of $5,430.8 million for the year ended December 31, 2004 increased by $611.5 million, or 12.7%, from $4,819.3 million for the year ended December 31, 2003. This increase was primarily the result of higher car rental volumes worldwide and the effects of foreign currency translation of approximately $143.6 million, partly offset by a 2.6% decrease in pricing worldwide.

        Revenues from our equipment rental operations of $1,162.0 million for the year ended December 31, 2004 increased by 12.0% from $1,037.8 million for the year ended December 31, 2003. This $124.2 million increase was principally due to improved pricing in the United States, higher equipment rental volumes worldwide and the effects of foreign currency translation of approximately $22.1 million.

        Revenues from all other sources of $83.2 million for the year ended December 31, 2004 increased by 8.5% from $76.6 million for the year ended December 31, 2003, due to an increase in licensee revenues.

Expenses

        Total expenses of $6,173.4 million for the year ended December 31, 2004 increased by 8.4% from $5,696.2 million for the year ended December 31, 2003, principally due to the increase in revenues. Total expenses as a percentage of revenues decreased to 92.5% for the year ended December 31, 2004 compared to 96.0% for the year ended December 31, 2003.

        Direct operating expenses of $3,734.4 million for the year ended December 31, 2004 increased by 12.6% from $3,316.1 million for the year ended December 31, 2003. The increase was primarily the result of the effects of foreign currency translation, increases in wages and benefits, commissions, concession fees, facility expense, vehicle damage expense and gasoline costs in our car rental operations. The increase was partly offset by favorable credit and collection and PL/PD claims experience. Current period expenses were further reduced by $7.0 million received for the year ended December 31, 2004 for claims made by us on our insurance policies for business interruption losses resulting from the terrorist attacks of September 11, 2001 and a final gain of $7.5 million for the year ended December 31, 2004 from the condemnation of a car rental and support facility in Florida. An initial gain of $8.0 million related to the condemnation was recorded for the year ended December 31, 2003.

65


        Depreciation of revenue earning equipment for our car rental operations of $1,228.6 million for the year ended December 31, 2004 decreased by 2.4% from $1,258.3 million for the year ended December 31, 2003. The decrease was primarily due to the decrease in the United States average cost per vehicle and higher net proceeds received in excess of book value on the disposal of used vehicles worldwide, partly offset by the effects of foreign currency translation, an increase in the average number of vehicles operated worldwide and a one-time refund of $7.8 million for the year ended December 31, 2003. The refund resulted from a special transitional credit for car rental companies instituted by the Australian Taxation Office for Goods and Services Tax. Taxes paid were previously included in the capitalized cost of the vehicles in our Australian car rental fleet. Depreciation of revenue earning equipment for our equipment rental operations of $234.7 million for the year ended December 31, 2004 decreased by 11.5% from $265.1 million for the year ended December 31, 2003, primarily due to higher net proceeds received in excess of book value on the disposal of used equipment in the United States.

        Selling, general and administrative expenses of $591.3 million for the year ended December 31, 2004 increased by 17.9% from $501.7 million for the year ended December 31, 2003. The increase was principally due to the effects of foreign currency translation and increases in administrative and advertising expenses. The increase in administrative expenses was attributable to increases in salaries and in incentive compensation expense relating to the improvement in earnings for the year ended December 31, 2004. The increase in advertising was due to expanded media advertising, primarily in television.

        Interest expense, net of interest income, of $384.4 million for the year ended December 31, 2004 increased 8.3% from $355.0 million for the year ended December 31, 2003, primarily due to an increase in the weighted average debt outstanding and foreign currency translation, partly offset by a decrease in the weighted average interest rate and higher interest income.

        The provision for taxes on income of $133.9 million for the year ended December 31, 2004 increased 69.7% from $78.9 million for the year ended December 31, 2003. The increase in the provision for taxes on income was primarily the result of an increase in income before income taxes for the year ended December 31, 2004, partly offset by net favorable tax adjustments totaling $46.6 million, principally relating to the evaluation of certain federal and foreign tax accruals and foreign tax credits. The effect of the net tax adjustments caused a decrease in the effective tax rate from 35.9% to 26.6% as compared to 33.2% for the year ended December 31, 2003. See Notes 1 and 9 to the Notes to our audited annual consolidated financial statements included elsewhere in this prospectus.

        On July 1, 2004, we increased our joint venture ownership interest in Navigation Solutions from 40% to 65%. Minority interest of $3.2 million for the year ended December 31, 2004 represents the minority interest's share (35%) of Navigation Solutions' net income for the period July 1, 2004 through December 31, 2004. See Note 5 to the Notes to our audited annual consolidated financial statements included elsewhere in this prospectus.

Net Income

        We had net income of $365.5 million for the year ended December 31, 2004, representing an increase of $206.9 million from $158.6 million for the year ended December 31, 2003. The increase reflects higher rental volume in our worldwide car and equipment rental businesses, lower fleet costs, higher net proceeds received in excess of book value on the disposal of used vehicles and equipment and net favorable tax adjustments, partly offset by lower pricing in our worldwide car rental business, as well as the net effect of other contributing factors noted above. The impact of changes in exchange rates on net income was mitigated by the fact that not only foreign revenues but also most foreign expenses were incurred in local currencies.

66



Liquidity and Capital Resources

        As of March 31, 2006, we had cash and equivalents of $679.4 million, a decrease of $164.5 million from December 31, 2005. As of March 31, 2006, we had $248.3 million of restricted cash to be used for the purchase of revenue earning vehicles, the repayment of outstanding indebtedness primarily under our ABS Program and to satisfy certain of our self-insurance reserve requirements.

        Our domestic and foreign operations are funded by cash provided by operating activities and by extensive financing arrangements maintained by us in the United States, Europe, Australia, New Zealand, Canada and Brazil. Net cash provided by operating activities during the quarter ended March 31, 2006 was $1,205.0 million, an increase of $294.4 million from the quarter ended March 31, 2005. This increase was primarily due to timing differences in the receipts and payments of receivables.

        Our primary use of cash in investing activities is for the acquisition of revenue earning equipment, which consists of cars and equipment. Net cash used in investing activities during the quarter ended March 31, 2006 was $1,274.7 million, an increase of $203.7 million from the quarter ended March 31, 2005. The increase is primarily due to proceeds from the sale of short-term investments in 2005 and an increase in revenue earning equipment expenditures, partly offset by an increase in the proceeds from the disposal of revenue earning equipment. For the quarter ended March 31, 2006, our expenditures for revenue earning equipment were $3,862.1 million, partially offset by proceeds from the disposal of such equipment of $2,591.3 million. These assets are purchased by us in accordance with the terms of programs negotiated with the car and equipment manufacturers.

        For the quarter ended March 31, 2006, our capital expenditures for property and non-revenue earning equipment were $64.7 million. For the quarter ended March 31, 2006, we experienced a slightly decreased level of net expenditures for revenue earning equipment and property and non-revenue earning equipment compared to the quarter ended March 31, 2005. This decrease was primarily due to a decrease in property and non-revenue earning equipment expenditures and an increase in property and non-revenue earning equipment disposals for the quarter ended March 31, 2006. For the full year 2006, we expect a level of net expenditures for revenue earning equipment and property and non-revenue earning equipment similar to that of 2005. See "—Capital Expenditures" below.

        Our car rental and equipment rental operations are seasonal businesses with decreased levels of business in the winter months and heightened activity during the spring and summer. This is particularly true of our airport car rental operations and equipment rental operations. To accommodate increased demand, we maintain a larger fleet by holding vehicles and equipment and purchasing additional fleet which increases our financing requirements in the second and third quarters of the year. These seasonal financing needs are funded by increasing the utilization of our bank credit facilities and, in past years, our commercial paper program. As business demand moderates during the winter, we reduce our fleet accordingly and dispose of vehicles and equipment. The disposal proceeds are used to reduce debt.

        We are highly leveraged and a substantial portion of our liquidity needs arise from debt service on indebtedness incurred in connection with the Transactions and from the funding of our costs of operations, working capital and capital expenditures.

        As of March 31, 2006, we had outstanding approximately $12,459.7 million of total indebtedness. Cash paid for interest during the quarter ended March 31, 2006, was $119.1 million, net of amounts capitalized.

        We rely significantly on asset-backed financing to purchase cars for our domestic and international car rental fleets. For further information concerning our asset-backed financing programs, see "Description of Certain Indebtedness—ABS Program—U.S. Fleet Debt" and "Description of Certain Indebtedness—ABS Program—International Fleet Debt" below. For a discussion of risks related to our reliance on asset-backed financing to purchase cars, see "Risk Factors—Risks Related to Our Business—Our reliance on asset-backed financing to purchase cars subjects us to a number of risks, many of which are beyond our control."

67



        Also, substantially all of our revenue earning equipment and certain related assets are owned by special purpose entities, or are subject to liens in favor of our lenders. Substantially all our other assets in the United States are also subject to liens in favor of our lenders, and substantially all our other assets outside the United States are (with certain limited exceptions) subject to liens in favor of our lenders. None of such assets will be available to satisfy the claims of our general creditors.

        We believe that cash generated from operations, together with amounts available under the Senior Credit Facilities, asset-backed financing and other available financing arrangements will be adequate to permit us to meet our debt service obligations, ongoing costs of operations, working capital needs and capital expenditure requirements for the foreseeable future. Our future financial and operating performance, ability to service or refinance our debt and ability to comply with covenants and restrictions contained in our debt agreements will be subject to future economic conditions and to financial, business and other factors, many of which are beyond our control. See "Risk Factors" and "Cautionary Note Regarding Forward-Looking Statements."

Financing

Hertz Holdings Financing

        On June 30, 2006, we incurred indebtedness of $1,000 million pursuant to the Hertz Holdings Loan Facility, which we expect to repay with a portion of the net proceeds to us of this offering. For further information regarding the Hertz Holdings Loan Facility, see "Description of Certain Indebtedness—Hertz Holdings Loan Facility."

        On the Closing Date, Hertz entered into a series of financing and refinancing transactions. For a description of the Transactions, see "Recent Transactions—The Transactions."

Senior Credit Facilities

Senior Term Facility.    In connection with the Acquisition, Hertz entered into a credit agreement with respect to its Senior Term Facility with Deutsche Bank AG, New York Branch as administrative agent and collateral agent, Lehman Commercial Paper Inc. as syndication agent, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated as documentation agent, and the other financial institutions party thereto from time to time. The facility consists of a $2,000.0 million secured term loan facility providing for loans denominated in U.S. Dollars, including a delayed draw facility of $293.0 million that may be drawn until August 2007 to refinance certain existing debt. In addition, there is a pre-funded synthetic letter of credit facility in an aggregate principal amount of $250.0 million. On the Closing Date, Hertz utilized $1,707.0 million of the Senior Term Facility. As of March 31, 2006, Hertz had $1,659.5 million in borrowings outstanding under this facility, which is net of a discount of $43.2 million. The term loan facility and the synthetic letter of credit facility will mature on December 21, 2012.

Senior ABL Facility.    Hertz, Hertz Equipment Rental Corporation and certain other subsidiaries of Hertz also entered into a credit agreement with respect to the Senior ABL Facility with Deutsche Bank AG, New York Branch as administrative agent and collateral agent, Deutsche Bank AG, Canada Branch as Canadian Agent and Canadian collateral agent, Lehman Commercial Paper Inc. as syndication agent, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated as documentation agent and the financial institutions party thereto from time to time. This facility provides (subject to availability under a borrowing base) for aggregate maximum borrowings of $1,600.0 million under a revolving loan facility providing for loans denominated in U.S. Dollars, Canadian Dollars, Euros and Pounds Sterling. Up to $200.0 million of the revolving loan facility is available for the issuance of letters of credit. Hertz and Hertz Equipment Rental Corporation are the U.S. borrowers under the Senior ABL Facility and Matthews Equipment Limited and its subsidiary Western Shut-Down (1995) Ltd. are the Canadian borrowers under the Senior ABL Facility. At March 31, 2006, net of a discount of $26.3 million, Hertz and Matthews Equipment Limited had

68



$267.4 million and the Canadian dollar equivalent of $188.5 million, respectively, in borrowings outstanding under this facility. The Senior ABL Facility will mature on December 21, 2010.

        The Senior Credit Facilities contain a number of covenants that, among other things, limit or restrict the ability of the borrowers and the guarantors to dispose of assets, incur additional indebtedness, incur guarantee obligations, prepay other indebtedness, make dividends and other restricted payments, create liens, make investments, make acquisitions, engage in mergers, change the nature of their business, make capital expenditures, or engage in certain transactions with affiliates. Under the Senior Term Facility, the borrowers are subject to financial covenants, including a requirement to maintain a specified debt to Corporate EBITDA leverage ratio and a specified Corporate EBITDA to interest expense coverage ratio for specified periods (the requirements for both of these ratios vary throughout the term of the loan.) Also, under the Senior ABL Facility, if the borrowers fail to maintain a specified minimum level of borrowing capacity, they will then be subject to financial covenants under such facility, including a specified debt to Corporate EBITDA leverage ratio (the ratio varies throughout the term of the loan) and a specified Corporate EBITDA to fixed charges coverage ratio of one to one. Failure to comply with the financial covenants under the Senior Credit Facilities would result in a default under the credit agreements governing our Senior Credit Facilities and, absent a waiver or an amendment from our lenders, permit the acceleration of all outstanding borrowings under the Senior Credit Facilities. Although we were not required to be in compliance with the above financial covenants as of March 31, 2006, we performed the calculations associated with them and determined that we would have been in compliance, if compliance had been necessary, both under the transition rule as set forth in the credit agreements governing the Senior Credit Facilities and as described in footnote (g) to "Summary—Summary Historical and Unaudited Pro Forma Financial Data." For a description of this calculation and the transition rule, see "Summary—Summary Historical and Unaudited Pro Forma Financial Data." The Senior Credit Facilities are subject to certain mandatory prepayment requirements and provide for customary events of default.

        On June 30, 2006, Hertz entered into amendments to each of its Senior Term Facility and Senior ABL Facility. The amendments provide, among other things, for additional capacity under the covenants in these credit facilities to enter into certain sale and leaseback transactions, to pay dividends and, in the case of the amendment to the Senior Term Facility, to make investments. The amendment to the Senior Term Facility also permits Hertz to use proceeds of the $293 million Delayed Draw Term Loan to repay borrowings outstanding under the Senior ABL Facility, in addition to repaying certain other outstanding indebtedness of Hertz. On May 15, 2006, Hertz borrowed approximately $84.9 million under the Delayed Draw Term Loan and used the proceeds thereof to repay its 6.5% Senior Notes due 2006. Hertz expects to borrow the remaining portion of the Delayed Draw Term Loan on July 10, 2006, and to apply the proceeds thereof to repay borrowings outstanding under the Senior ABL Facility. For further information regarding the Senior Credit Facilities, see "Description of Certain Indebtedness—Senior Credit Facilities."

Senior Notes and Senior Subordinated Notes

        In connection with the Acquisition, CCMG Acquisition Corporation issued the Senior Notes and the Senior Subordinated Notes under separate indentures between CCMG Acquisition Corporation and Wells Fargo Bank, National Association, as trustee. Hertz and the guarantors entered into supplemental indentures, dated as of the Closing Date, pursuant to which Hertz assumed the obligations of CCMG Acquisition Corporation under the Senior Notes, the Senior Subordinated Notes and the respective indentures, and the guarantors issued the related guarantees. CCMG Acquisition Corporation subsequently merged with and into Hertz, with Hertz as the surviving entity.

        As of March 31, 2006, $2,072.6 million and $600.0 million in borrowings were outstanding under the Senior Notes and Senior Subordinated Notes, respectively. The Senior Notes will mature on January 1, 2014, and the Senior Subordinated Notes will mature on January 1, 2016. The Senior Dollar Notes bear interest at a rate per annum of 8.875%, the Senior Euro Notes bear interest at a rate per annum of 7.875% and the Senior Subordinated Notes bear interest at a rate per annum of 10.5%.

69



Hertz's obligations under the indentures are guaranteed by each of its direct and indirect domestic subsidiaries that is a guarantor under the Senior Credit Facilities.

        Both the indenture for the Senior Notes and the indenture for the Senior Subordinated Notes contain covenants that, among other things, limit the ability of Hertz and its restricted subsidiaries, described in the respective indentures, to incur more debt, pay dividends, redeem stock or make other distributions, make investments, create liens, transfer or sell assets, merge or consolidate and enter into certain transactions with affiliates. The indenture for the Senior Subordinated Notes also contains subordination provisions and a limitation on the types of senior subordinated debt that may be incurred. The indentures also contain certain mandatory and optional prepayment or redemption provisions and provide for customary events of default. For further information regarding the Senior Notes and Senior Subordinated Notes, see "Description of Certain Indebtedness—Senior Notes and Senior Subordinated Notes." We also have outstanding as of March 31, 2006 approximately $807.3 million of pre-Acquisition senior notes and Euro-denominated medium-term notes, net of a $5.2 million discount. See "Description of Certain Indebtedness—Pre-Acquisition Senior Notes and Euro Medium Term Notes."

Fleet Financing

U.S. Fleet Debt.    In connection with the Acquisition, Hertz Vehicle Financing LLC, or "HVF," a bankruptcy-remote special purpose entity wholly owned by Hertz, entered into an amended and restated base indenture, or the "ABS Indenture," dated as of the Closing Date, with BNY Midwest Trust Company as trustee, and a number of related supplements to the ABS Indenture, each dated as of the closing date of the Acquisition, with BNY Midwest Trust Company as trustee and securities intermediary, or, collectively, the "ABS Supplement." On the Closing Date, HVF, as issuer, issued approximately $4,300.0 million of new medium term asset-backed notes consisting of 11 classes of notes in two series under the ABS Supplement. HVF also issued approximately $1,500.0 million of variable funding notes in two series, none of which were funded at closing. As of March 31, 2006, $4,300.0 million and $365.0 million in aggregate borrowings were outstanding in the form of these medium term notes and variable funding notes, respectively.

        HVF is subject to numerous restrictive covenants under the ABS Indenture and the other agreements governing the U.S. Fleet Debt, including restrictive covenants with respect to liens, indebtedness, benefit plans, mergers, disposition of assets, acquisition of assets, dividends, officers' compensation, investments, agreements, the types of business it may conduct and other customary covenants for a bankruptcy-remote special purpose entity. The U.S. Fleet Debt is subject to events of default and amortization events that are customary in nature for U.S. rental car asset-backed securitizations of this type. The occurrence of an amortization event or event of default could result in the acceleration of principal of the notes and a liquidation of the U.S. car rental fleet.

International Fleet Debt.    In connection with the Acquisition, Hertz International, Ltd., or "HIL," a Delaware corporation organized as a foreign subsidiary holding company and a direct subsidiary of Hertz, and certain of its subsidiaries (all of which are organized outside the United States), together with certain bankruptcy-remote special purpose entities (whether organized as HIL's subsidiaries or as non-affiliated "orphan" companies), or "SPEs," entered into revolving bridge loan facilities providing commitments to lend, in various currencies, up to an aggregate amount equivalent to approximately $2,956.2 million (calculated as of March 31, 2006), subject to borrowing bases comprised of rental vehicles and related assets of certain of HIL's subsidiaries (all of which are organized outside the United States) or one or more SPEs, as the case may be, and rental equipment and related assets of certain of HIL's subsidiaries organized outside North America or one or more SPEs, as the case may be. As of March 31, 2006, the U.S. dollar equivalent of $1,488.7 million in borrowings was outstanding under these facilities, net of a $12.0 million discount. These facilities are referred to collectively as the "International Fleet Debt Facilities."

70



        The International Fleet Debt Facilities contain a number of covenants (including, without limitation, covenants customary for transactions similar to the International Fleet Debt Facilities) that, among other things, limit or restrict the ability of HIL, the borrowers and the other subsidiaries of HIL to dispose of assets, incur additional indebtedness, incur guarantee obligations, create liens, make investments, make acquisitions, engage in mergers, make negative pledges, change the nature of their business or engage in certain transactions with affiliates. In addition, HIL is restricted from making dividends and other restricted payments (which may include payments of intercompany indebtedness) in an amount greater than €100 million plus a specified excess cash flow amount calculated by reference to excess cash flow in earlier periods. Subject to certain exceptions, until the later of one year from the Closing Date and such time as 50% of the commitments under the International Fleet Debt Facilities as of the closing of the Acquisition have been replaced by permanent take-out international asset-based facilities, the specified excess cash flow amount will be zero. Thereafter, this specified excess cash flow amount will be between 50% and 100% of cumulative excess cash flow based on the percentage of the International Fleet Debt Facilities that have been replaced by permanent take-out international asset-based facilities. As a result of the contractual restrictions on HIL's ability to pay dividends to us as of March 31, 2006, the restricted net assets of our consolidated subsidiaries exceeded 25% of our total consolidated net assets. For further information regarding the U.S. Fleet Debt Facilities and International Fleet Debt Facilities, see "Description of Certain Indebtedness—ABS Program."

        As of March 31, 2006, substantially all of our assets are pledged under one or more of the facilities noted above.

        In addition, as of March 31, 2006, we had outstanding approximately $582.6 million of pre-Acquisition ABS Notes, net of a $17.4 million discount. See "Description of Certain Indebtedness—ABS Program—Pre-Acquisition ABS Notes."

Credit Facilities

        As of March 31, 2006, the following credit facilities were available for the use of Hertz and its subsidiaries:

    The Senior Term Facility had $293.0 million available to refinance certain existing debt under the delayed draw facility and $39.5 million available under the letter of credit facility.

    The Senior ABL Facility had the U.S. dollar equivalent of approximately $1,102.5 million of remaining capacity, all of which was available under the borrowing base limitation.

    The International Fleet Debt Facilities had the U.S. dollar equivalent of approximately $1,455.6 million unused and $161.2 million available under the borrowing base limitation.

    The U.S. Fleet Debt had approximately $1,135.0 million of remaining capacity and $69.3 million available under the borrowing base limitation.

        For further information regarding these credit facilities, see "Description of Certain Indebtedness."

71



Contractual Obligations

        The following table details the contractual cash obligations for debt and related interest payable, operating leases and concession agreements and other purchase obligations as of December 31, 2005, without giving effect to this offering and the use of the proceeds to us thereof:

 
   
  Payments Due by Period
 
  Total
  Less than
1 Year

  1–3 Years
  3–5 Years
  More than
5 Years

 
  (In millions of dollars)

Debt(1)   $ 12,657.9   $ 2,774.9   $ 1,064.7   $ 4,099.6   $ 4,718.7
Interest on debt(2)     4,232.4     673.6     1,275.1     1,081.7     1,202.0
Operating leases and concession agreements(3)     1,552.8     328.3     467.0     244.3     513.2
Purchase obligations(4)     6,984.4     6,845.9     137.9     0.6    
   
 
 
 
 
Total   $ 25,427.5   $ 10,622.7   $ 2,944.7   $ 5,426.2   $ 6,433.9
   
 
 
 
 

(1)
Amounts represent debt obligations included in "Debt" in our consolidated balance sheet and include $2,555.3 million of commercial paper, and other short-term borrowings, excluding estimated payments under interest rate swap agreements. See Note 3 to the Notes to our audited annual consolidated financial statements included elsewhere in this prospectus.

(2)
Amounts represent the estimated interest payments based on the principal amounts, minimum non-cancelable maturity dates and applicable interest rates on the debt at December 31, 2005. The minimum non-cancelable obligations under the International Fleet Debt and Senior ABL Facility matured between January and March 2006. While there was no requirement to do so, these obligations were subsequently renewed.

(3)
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 annual consolidated financial statements included elsewhere in this prospectus.

(4)
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, 2005, $6,687.3 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.

Other Factors

Goodwill and Other Intangible Assets Following the Acquisition

        We have recognized a significant amount of goodwill and other intangible assets in connection with the Acquisition. We perform an impairment analysis with respect to our goodwill and indefinite-lived intangible assets at least annually, or more frequently if changes in circumstances indicate that the carrying amount of the goodwill or other intangible assets may not be recoverable. If we identify an impairment in goodwill or other intangible assets we may be required to take a charge that could negatively impact our future earnings.

Foreign Currency

        Historically, provisions have not been made for U.S. income taxes on undistributed earnings of foreign subsidiaries that have been or are intended to be indefinitely reinvested outside the United States or are expected to be remitted free of taxes. Our decision to withdraw earnings or investments from foreign countries is, in some cases, influenced by exchange controls and the utilization of foreign tax credits, and may also be affected by fluctuations in exchange rates for foreign currencies and by the revaluation of such currencies in relation to the U.S. Dollar by the governments involved. Foreign operations have been financed to a substantial extent through loans from local lending sources in the currency of the countries in which such operations are conducted. Car rental operations in foreign countries are, from time to time, subject to governmental regulations imposing varying degrees of currency restrictions. Currency restrictions and other regulations historically have not had a material impact on our operations as a whole.

72


Capital Expenditures

        The table below shows revenue earning equipment and property and equipment capital expenditures and related disposal proceeds received by quarter for 2005, 2004 and 2003 and the first quarter of 2006.

 
  Revenue Earning Equipment
  Property and Equipment
 
  Capital
Expenditures

  Disposal
Proceeds

  Net Capital
Expenditures
(Proceeds)

  Capital
Expenditures

  Disposal
Proceeds

  Net Capital
Expenditures

 
  (Dollars in millions)

2006                                    
Successor                                    
First Quarter   $ 3,862.1   $ (2,591.3 ) $ 1,270.8   $ 64.7   $ (19.8 ) $ 44.9
   
 
 
 
 
 

2005

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Predecessor                                    
First Quarter   $ 3,600.2   $ (2,307.4 ) $ 1,292.8   $ 81.3   $ (9.0 ) $ 72.3
Second Quarter     4,040.4     (2,304.3 )   1,736.1     105.5     (21.3 )   84.2
Third Quarter     2,377.5     (2,579.5 )   (202.0 )   92.9     (19.0 )   73.9
Fourth Quarter (Oct. 1–Dec. 20, 2005)     2,168.1     (2,915.1 )   (747.0 )   54.8     (23.3 )   31.5
Successor                                    
Fourth Quarter (Dec. 21–Dec. 31, 2005)     234.8     (199.7 )   35.1     8.5     (1.2 )   7.3
   
 
 
 
 
 
Total Year   $ 12,421.0   $ (10,306.0 ) $ 2,115.0   $ 343.0   $ (73.8 ) $ 269.2
   
 
 
 
 
 

2004

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Predecessor                                    
First Quarter   $ 2,916.1   $ (1,860.7 ) $ 1,055.4   $ 61.2   $ (11.7 ) $ 49.5
Second Quarter     3,804.1     (1,921.2 )   1,882.9     82.8     (20.9 )   61.9
Third Quarter     2,179.0     (2,321.8 )   (142.8 )   74.6     (19.4 )   55.2
Fourth Quarter     2,410.9     (2,637.2 )   (226.3 )   67.8     (7.3 )   60.5
   
 
 
 
 
 
Total Year   $ 11,310.1   $ (8,740.9 ) $ 2,569.2   $ 286.4   $ (59.3 ) $ 227.1
   
 
 
 
 
 

2003

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Predecessor                                    
First Quarter   $ 2,951.4   $ (2,557.3 ) $ 394.1   $ 51.3   $ (9.0 ) $ 42.3
Second Quarter     2,338.3     (1,153.7 )   1,184.6     56.6     (23.6 )   33.0
Third Quarter     1,611.5     (1,656.2 )   (44.7 )   54.4     (13.1 )   41.3
Fourth Quarter     2,535.4     (2,507.2 )   28.2     64.4     (8.9 )   55.5
   
 
 
 
 
 
Total Year   $ 9,436.6   $ (7,874.4 ) $ 1,562.2   $ 226.7   $ (54.6 ) $ 172.1
   
 
 
 
 
 

        Revenue earning equipment expenditures in our car rental operations were $11,493.9 million, $10,665.3 million and $9,100.5 million for the years ended December 31, 2005, 2004 and 2003, respectively. Revenue earning equipment expenditures in our equipment rental operations were $927.1 million, $644.7 million and $336.1 million for the years ended December 31, 2005, 2004 and 2003, respectively.

        Revenue earning equipment expenditures in our car rental operations were $3,651.9 million and $3,408.4 million for the quarters ended March 31, 2006 and 2005, respectively. Revenue earning equipment expenditures in our equipment rental operations were $210.2 million and $191.8 million for the quarters ended March 31, 2006 and 2005, respectively.

        Revenue earning equipment expenditures in our car rental and equipment rental operations for the year ended December 31, 2005 increased by 7.8% and 43.8%, respectively, compared to the year ended December 31, 2004. The increase in equipment rental revenue earning equipment expenditures is primarily the result of higher rental volume.

        Revenue earning equipment expenditures in our car rental and equipment rental operations for the quarter ended March 31, 2006 increased by 7.1% and 9.6%, respectively, compared to the quarter

73



ended March 31, 2005. The increase in car rental and equipment rental revenue earning equipment expenditures is primarily the result of higher rental volume.

        Property and equipment expenditures in our car rental operations were $271.1 million, $220.4 million and $191.6 million for the years ended December 31, 2005, 2004 and 2003, respectively. Property and equipment expenditures in our equipment rental operations were $69.0 million, $63.1 million and $32.2 million for the years ended December 31, 2005, 2004 and 2003, respectively. Property and equipment expenditures in our "corporate and other" activities were $2.9 million, $3.0 million and $2.9 million for the years ended December 31, 2005, 2004 and 2003, respectively.

        Property and equipment expenditures in our car rental operations were $53.8 million and $68.8 million for the quarters ended March 31, 2006 and 2005, respectively. Property and equipment expenditures in our equipment rental operations were $10.6 million and $12.2 million for the quarters ended March 31, 2006 and 2005, respectively. Property and equipment expenditures in our "corporate and other" activities were $0.3 million for the quarters ended March 31, 2006 and 2005.

        Property and equipment expenditures in our car rental, equipment rental and "corporate and other" operations for the year ended December 31, 2005 increased by 23.0%, 9.4% and decreased by 3.3%, respectively, compared to the year ended December 31, 2004.

        Property and equipment expenditures in our car rental and equipment rental operations for the quarter ended March 31, 2006 decreased by 21.8% and 13.1%, respectively, and remained the same in "corporate and other" compared to the quarter ended March 31, 2005.

        For the year ended December 31, 2005, we experienced a level of net expenditures for revenue earning equipment and property and equipment slightly lower than our net expenditures in 2004. The net capital expenditures decrease was due to increased disposals partly offset by increases in the prices of 2006 model year vehicles acquired beginning in the fourth quarter of 2005, together with capital expenditures relating to the expansion of our off-airport locations.

        For the quarter ended March 31, 2006, we experienced a level of net expenditures for revenue earning equipment and property and equipment slightly lower than our net expenditures in the quarter ended March 31, 2005. The net capital expenditures decrease was due to increased disposals partly offset by an increase in the prices of 2006 model year vehicles acquired beginning in the fourth quarter of 2005, together with capital expenditures relating to the expansion of our off-airport locations.

Off-Balance Sheet Commitments

        As of March 31, 2006, December 31, 2005 and 2004, the following guarantees (including indemnification commitments) were issued and outstanding:

Indemnifications

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

Sponsors

        On the Closing Date, Hertz entered into indemnification agreements with Hertz Holdings, the Sponsors and Hertz Holdings' stockholders affiliated with the Sponsors, pursuant to which Hertz Holdings and Hertz will indemnify the Sponsors, Hertz Holdings' stockholders affiliated with the

74



Sponsors and their respective affiliates, directors, officers, partners, members, employees, agents, representatives and controlling persons, against certain liabilities arising out of performance of a consulting agreement with Hertz Holdings and each of the Sponsors and certain other claims and liabilities, including liabilities arising out of financing arrangements or securities offerings.

Environmental

        We have indemnified various parties for the costs associated with remediating numerous hazardous substance storage, recycling or disposal sites in many states and, in some instances, for natural resource damages. The amount of any such expenses or related natural resource damages for which we may be held responsible could be substantial. The probable losses that we expect to incur for such matters have been accrued, and those losses are reflected in our consolidated financial statements. As of March 31, 2006, December 31, 2005 and December 31, 2004, the aggregate amounts accrued for environmental liabilities, including liability for environmental indemnities, reflected in our consolidated balance sheet in "Other accrued liabilities" were $3.9 million, $3.9 million and $5.4 million, respectively. The accrual generally represents the estimated cost to study potential environmental issues at sites deemed to require investigation or clean-up activities, and the estimated cost to implement remediation actions, including on-going maintenance, as required. Cost estimates are developed by site. Initial cost estimates are based on historical experience at similar sites and are refined over time on the basis of in-depth studies of the sites. For many sites, the remediation costs and other damages for which we ultimately may be responsible cannot be reasonably estimated because of uncertainties with respect to factors such as our connection to the site, the materials there, the involvement of other potentially responsible parties, the application of laws and other standards or regulations, site conditions, and the nature and scope of investigations, studies, and remediation to be undertaken (including the technologies to be required and the extent, duration, and success of remediation).

Tax

        We provide various tax-related indemnifications as part of the transactions giving rise to the indemnification obligations. The indemnified party typically is protected from certain events that result in a tax treatment different from that originally anticipated. In some cases, a payment under a tax indemnification may be offset in whole or in part by refunds from the applicable governmental taxing authority. We are party to a number of tax indemnifications, and many of these indemnities do not limit potential payment; therefore, we are unable to estimate a maximum amount of potential future payments that could result from claims made under these indemnities.

Risk Management

        For a discussion of additional risks arising from our operations, including vehicle liability, general liability and property damage insurable risks, see "Business—Risk Management."

Market Risks

        We are exposed to a variety of market risks, including the effects of changes in interest rates and foreign currency exchange rates. We manage our exposure to these market risks through our regular operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments. Derivative financial instruments are viewed as risk management tools and historically have not been used for speculative or trading purposes. In addition, derivative financial instruments are entered into with a diversified group of major financial institutions in order to manage our exposure to counterparty nonperformance on such instruments. For more information on these exposures, see Note 14 to the Notes to our audited annual consolidated financial statements included elsewhere in this prospectus.

75


Interest Rate Risk

        From time to time, we enter into interest rate swap agreements to manage interest rate risk. Effective September 30, 2003, we entered into interest rate swap agreements relating to the issuance of our 4.7% notes due October 2, 2006. Effective June 3, 2004, we entered into interest rate swap agreements relating to the issuance of our 6.35% notes due June 15, 2010. Under these agreements, we pay interest at a variable rate in exchange for fixed rate receipts, effectively transforming these notes to floating rate obligations. As a result of the Acquisition, a significant portion of the underlying fixed rate debt was tendered, causing the interest rate swaps to be ineffective as of December 21, 2005. Consequently, any changes in the fair value of the derivatives are recognized in the statement of operations. Between December 21, 2005 (the date that hedge accounting was discontinued) and December 31, 2005, the fair value adjustment related to these swaps was a gain of $2.7 million, which was recorded in our consolidated statement of operations in "Selling, general and administrative" expenses. During January 2006, we assigned these interest rate swaps to a third party in return for cash. As a result of the assignment of these interest rate swaps, we recorded a gain of $6.6 million which is reflected in our unaudited interim condensed consolidated statement of operations in "Selling, general and administrative expenses."

        In connection with the Acquisition and the issuance of the $3,550.0 million of floating rate U.S. Fleet Debt, HVF and Hertz entered into certain interest rate swap agreements, or the "HVF Swaps," effective December 21, 2005. These agreements mature at various terms, in connection with the scheduled maturity of the associated debt obligations, through November 25, 2011. Under these agreements, we pay monthly interest at a fixed rate of 4.5% per annum in exchange for monthly amounts at one-month LIBOR, effectively transforming the floating rate U.S. Fleet Debt to fixed rate obligations.

        In connection with the remaining €7.6 million untendered balance of our Euro Medium Term Notes, we entered into an interest rate swap agreement on December 21, 2005, effective January 16, 2006, and maturing on July 16, 2007. The purpose of this interest rate swap is to lock in the interest cash outflows on the variable rate Euro Medium Term Notes.

        See Notes 3 and 14 to the Notes to our audited annual consolidated financial statements included elsewhere in this prospectus.

        We have a significant amount of debt (including under our U.S. and International Fleet Debt and Senior ABL Facility) with variable rates of interest based generally on LIBOR, EURIBOR or their equivalents for local currencies plus an applicable margin. Increases in interest rates could therefore significantly increase the associated interest payments that we are required to make on this debt.

        We have assessed our exposure to changes in interest rates by analyzing the sensitivity to our earnings assuming various changes in market interest rates. Assuming a hypothetical increase of one percentage point in interest rates on our debt portfolio as of March 31, 2006, our net interest expense would increase by an estimated $18.4 million over a twelve-month period.

        Consistent with the terms of the agreements governing the respective debt obligations, we may hedge a portion of the floating rate interest exposure under the Senior Credit Facilities and the U.S. and International Fleet Debt to provide protection in respect of such exposure.

        In connection with the forecasted issuance of the permanent take-out international asset-based facilities, HIL purchased two swaptions in May 2006 for €3.3 million to protect itself from interest rate increases. These swaptions give HIL the right, but not the obligation, to enter into interest rate swaps based on a total notional amount of €600 million at an interest rate of 4.155%. The swaptions mature on March 15, 2007.

76



Foreign Currency Risk

        We manage our foreign currency risk primarily by incurring, to the extent practicable, operating and financing expenses in the local currency in the countries in which we operate, including making fleet and equipment purchases and borrowing for working capital needs. Also, we have purchased foreign exchange options to manage exposure to fluctuations in foreign exchange rates for selected marketing programs. The effect of exchange rate changes on these financial instruments would not materially affect our consolidated financial position, results of operations or cash flows. Our risks with respect to currency option contracts are limited to the premium paid for the right to exercise the option and the future performance of the option's counterparty. Premiums paid for options outstanding as of March 31, 2006, were approximately $0.2 million, and we limit counterparties to financial institutions that have strong credit ratings.

        We also manage exposure to fluctuations in currency risk on intercompany loans we make to certain of our subsidiaries by entering into foreign currency forward contracts at the time of the loans. The forward rate is reflected in the intercompany loan rate to the subsidiaries, and as a result, the forward contracts have no material impact on our earnings.

        In connection with the Transactions, we issued €225,000,000 of Senior Euro Notes, which are currently not hedged. The foreign exchange transaction gains or losses resulting from the monthly translation of these Euro-denominated Notes into the U.S. Dollar, could have a material impact on our consolidated financial position, results of operations or cash flows.

Like-Kind Exchange Program

        In January 2006, we implemented a like-kind exchange program for our U.S. car rental business. Pursuant to the program, we dispose of vehicles and acquire replacement vehicles in a form intended to allow such dispositions and replacements to qualify as tax-deferred "like-kind exchanges" pursuant to section 1031 of the Internal Revenue Code. The program is expected to result in a material deferral of federal and state income taxes. A similar plan for HERC has been in place for several years. We cannot, however, offer assurance that the expected tax deferral will be achieved or that the relevant law concerning the programs will remain in its current form.

Inflation

        The increased acquisition cost of vehicles is the primary inflationary factor affecting us. Many of our other operating expenses are also expected to increase with inflation, including health care costs. Management does not expect that the effect of inflation on our overall operating costs will be greater for us than for our competitors.

Employee Retirement Benefits

Pension

        We sponsor defined benefit pension plans worldwide. Pension obligations give rise to significant expenses that are dependent on assumptions discussed in Note 6 of the Notes to our audited annual consolidated financial statements included elsewhere in this prospectus. Our 2005 worldwide pre-tax pension expense was approximately $37.5 million, which is an increase of $6.8 million from 2004 primarily attributable to the decrease in the discount rate in the United States from 6.25% to 5.75% and in the United Kingdom from 5.50% to 5.25%, a pension settlement loss of $1.1 million relating to our Supplemental Executive Retirement Plan, as well as the effects of foreign currency translation. Based on present assumptions, 2006 worldwide pre-tax pension expense is expected to be approximately $34.8 million, which is a decrease of $2.7 million from 2005. Effective with the Acquisition, the assignment of the purchase price to individual assets acquired and liabilities assumed included a liability

77



for the projected benefit obligation in excess of plan assets, which eliminated any previously existing unrecognized net gain or loss, or unrecognized prior service cost. As a result, our expense for 2006 does not include any costs related to amortizing unrecognized losses or unrecognized prior service costs. Our pension expense for 2005 included $6.0 million of amortization costs, as well as a settlement loss of $1.1 million. This reduction in pension expense from 2005 to 2006 is partially offset by an increase due to a decrease in the discount rate in the United States from 5.75% to 5.50% and in the United Kingdom from 5.25% to 4.70%.

        The funded status (i.e., the amount by which the present value of projected benefit obligations exceeded the market value of pension plan assets) of our U.S. qualified plan, in which most domestic employees participate, declined as of December 31, 2005, compared with December 31, 2004. The primary factor that contributed to the change in the funded status was a decrease in the discount rate, partially offset by a discretionary contribution of $28.0 million.

        We review our pension assumptions regularly and from time to time make contributions beyond those legally required. For example, discretionary contributions of $28.0 million, $48.0 million and $54.0 million were made to our U.S. qualified plan for the years ended December 31, 2005, 2004 and 2003, respectively. After giving effect to these contributions, based on current interest rates and on our return assumptions and assuming no additional contributions, we do not expect to be required to pay any variable-rate premiums to the Pension Benefit Guaranty Corporation before 2010. In the United Kingdom, we made a discretionary contribution of $15.6 million in the quarter ended March 31, 2006.

        We participate in various "multiemployer" pension plans administrated by labor unions representing some of our employees. We make periodic contributions to these plans to allow them to meet their pension benefit obligations to their participants. In the event that we withdrew from participation in one of these plans, then applicable law could require us to make an additional lump-sum contribution to the plan, and we would have to reflect that in expense and as a liability on our balance sheet. Our withdrawal liability for any multiemployer plan would depend on the extent of the plan's funding of vested benefits. We currently do not expect to incur any material withdrawal liability in the near future. However, in the ordinary course of our renegotiation of collective bargaining agreements with labor unions that maintain these plans, we could decide to discontinue participation in a plan, and in that event we could face a withdrawal liability. Some multiemployer plans, including one in which we participate, are reported to have significant underfunded liabilities. Such underfunding could increase the size of our potential withdrawal liability.

Other Postretirement Benefits

        We provide limited postretirement health care and life insurance for employees of our domestic operations with hire dates prior to January 1, 1990. There are no plan assets associated with this plan. We provide for these postretirement costs through monthly accruals. The net periodic postretirement benefit cost for the year ended December 31, 2005 was $1.6 million and the accumulated benefit obligation as of December 31, 2005 was $18.2 million compared to postretirement benefit cost of $1.6 million and an accumulated benefit obligation of $17.3 million as of December 31, 2004. The increase in the accumulated benefit obligation was primarily attributable to the decrease in the discount rate from 5.75% as of December 31, 2004 to 5.50% as of December 31, 2005.

Hertz Holdings Stock Incentive Plan

        On February 15, 2006, our Board of Directors and that of Hertz jointly approved the Hertz Global Holdings, Inc. Stock Incentive Plan, or the "Stock Incentive Plan." The Stock Incentive Plan provides for the sale of shares of stock of Hertz Holdings to our named executive officers, other key employees and directors as well as the grant of stock options to purchase shares of Hertz Holdings to those individuals. See "Management—Hertz Holdings Stock Incentive Plan."

78



Recent Accounting Pronouncements

        In December 2004, the Financial Accounting Standards Board, or "FASB," issued FASB Staff Position No. 109-2, "Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004," or "FSP 109-2." FSP 109-2 provides accounting guidance for non-U.S. earnings that are repatriated under the American Jobs Creation Act of 2004. SFAS No. 109, "Accounting for Income Taxes," requires a company to reflect in the period of enactment the effect of a new tax law. During December 2005, in connection with Ford pre-sale activities and to obtain the benefit of favorable one-time tax treatment of distributions offered by the American Jobs Creation Act of 2004, dividends of $547.8 million were recognized, of which $216.9 million were cash dividends and $330.9 million were deemed dividends for tax purposes. The deemed dividends relate to undistributed foreign earnings which are no longer considered to be permanently reinvested. These dividends generated $168.2 million of tax expense, of which $136.9 million was offset by foreign tax credits, resulting in a net tax expense of $31.3 million.

        In December 2004, the FASB revised its SFAS No. 123, with SFAS No. 123R, "Accounting for Stock-Based Compensation." The revision establishes standards for the accounting of transactions in which an entity exchanges its equity instruments for goods or services, particularly transactions in which an entity obtains employee services in share-based payment transactions. The revised statement requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost is to be recognized over the period during which the employee is required to provide service in exchange for the award. Changes in fair value during the requisite service period are to be recognized as compensation cost over that period. The provisions of the revised statement are effective for financial statements issued for the first annual reporting period beginning after June 15, 2005. In March 2005, the SEC issued Staff Accounting Bulletin No. 107, or "SAB No. 107," regarding the SEC Staff's interpretation of the revised statement. SAB No. 107 provides the Staff's views regarding interactions between the revised statement and certain SEC rules and regulations and provides interpretations of the valuation of share-based payments for public companies. We have accounted for our employee stock-based compensation awards in accordance with SFAS No. 123. Adoption of the revised statement did not have, nor is it expected to have, a significant effect on our financial position, results of operations or cash flows. Effective with the Acquisition, all unvested options granted to our employees under Ford's 1998 Long-Term Incentive Plan became vested and exercisable. During the three months ended March 31, 2006, we have not granted any new awards to our employees. In May and June 2005, we completed an offering of equity securities to our senior management. See "Management—Hertz Holdings Stock Incentive Plan."

        In March 2005, the FASB issued Interpretation No. 47, "Accounting for Conditional Asset Retirement Obligations," or "FIN 47." FIN 47 clarifies that liabilities associated with asset retirement obligations whose timing or settlement method are conditional upon future events should be recognized at fair value as soon as fair value is reasonably estimable. FIN 47 also provides guidance on the information required to reasonably estimate the fair value of the liability. FIN 47 was effective no later than December 31, 2005, and did not have a material impact on our financial position, results of operations or cash flows.

        In May 2005, FASB issued SFAS No. 154, "Accounting Changes and Error Corrections—a replacement of APB Opinion No. 20 and FASB Statement No. 3." Previously, APB No. 20, "Accounting Changes" and SFAS No. 3, "Reporting Accounting Changes in Interim Financial Statements" required the inclusion of the cumulative effect of changes in accounting principle in net income of the period of the change. SFAS No. 154 requires companies to recognize changes in accounting principle, including changes required by a new accounting pronouncement when the pronouncement does not include specific transition provisions, retrospectively to prior periods' financial statements. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal

79



years beginning after December 15, 2005. We do not currently anticipate making any accounting changes which would be governed by this statement.

Controls and Procedures

Restatement of Predecessor Financial Statements and Impact on Internal Control over Financial Reporting

        As discussed in Note 1A to the Notes to our annual audited consolidated financial statements included elsewhere in this prospectus, Hertz has restated its previously issued consolidated financial statements for the Predecessor period ended December 20, 2005, or the "Restatement." The Restatement revises Hertz's tax provision on repatriated foreign earnings. These dividends, which were initiated by Ford, Hertz's previous parent, and occurred prior to the Acquisition, resulted in an estimated provision for taxes of $54.1 million, net of foreign tax credits of $50.3 million, or $3.8 million. Upon Ford's completion of a detailed study in June 2006, for the purpose of preparing their 2005 tax return, it was determined that the amount of tax expense should be increased by $27.5 million to $31.3 million.

        The dividends were originally completed as part of the Ford pre-sale activities and also to obtain the one-time favorable tax treatment of dividends offered by the American Jobs Creation Act of 2004. Otherwise, it is not our policy to repatriate undistributed earnings of our foreign subsidiaries, but rather to invest them within their operations. All Federal income taxes associated with this one-time repatriation are to be paid by Ford and, as such, have no impact on the Successor period ended December 31, 2005 or in 2006 and beyond.

        Our management, who has responsibility for establishing and maintaining internal control over financial reporting, concluded that the Restatement is not an indication of a material weakness existing as of December 31, 2005 because management has assessed our controls as of that date and determined they were adequate to prevent or detect a material misstatement to our financial statements after the Acquisition. Accordingly, the Restatement did not have an impact on our management's conclusion that our internal control over financial reporting and disclosure controls and procedures as of December 31, 2005 were effective. Also, our management has concluded that no revisions to our controls over income tax accounting and reporting were required as a result of this matter.

Management's Report on Internal Control Over Financial Reporting

        Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

        Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

        Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2005. The assessment was based on criteria established in the framework Internal Control—Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment after considering the impact of the Restatement, management concluded that our internal control over financial reporting

80



was effective as of December 31, 2005. Management's assessment of the effectiveness of our internal control over financial reporting as of December 31, 2005 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report included elsewhere in this prospectus.

Changes in Internal Control Over Financial Reporting

        An evaluation of our internal controls over financial reporting was performed under the supervision of, and with the participation of, management, including our Chief Executive Officer and Chief Financial Officer, to determine whether any changes have occurred during the three months ended March 31, 2006 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that no changes in our internal control over financial reporting have occurred during the quarter ended March 31, 2006 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

81



BUSINESS

Our Company

        We own what we believe is the largest worldwide general use car rental brand and the third largest equipment rental business in the United States, both based on revenues. Our Hertz brand name is one of the most recognized in the world, signifying leadership in quality rental services and products. In our car rental business segment, we and our independent licensees and associates accept reservations for car rentals at approximately 7,600 locations in approximately 145 countries. We are the only car rental company that has an extensive network of company-operated rental locations both in the United States and in all major European markets. We maintain the leading airport car rental market share, by overall reported revenues, in the United States and at the 69 major airports in Europe where we have company-operated locations and which have provided data regarding car rental concessionaire activity. We believe that we also maintain the second largest market share, by revenues, in the off-airport car rental market in the United States. In our equipment rental business segment, we rent equipment through over 340 branches in the United States, Canada, France and Spain, as well as through our international licensees. We and our predecessors have been in the car rental business since 1918 and in the equipment rental business since 1965. We have a diversified revenue base and a highly variable cost structure and are able to dynamically manage fleet capacity, the most significant determinant of our costs. This has helped us to earn a pre-tax profit in each year since our incorporation in 1967. Our revenues have grown at a compound annual growth rate of 7.6% over the last 20 years, with year-over-year growth in 18 of those 20 years.

Corporate History

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

        On December 21, 2005, investment funds associated with or designated by the Sponsors, through an indirect, wholly owned subsidiary of Hertz Holdings, acquired all of Hertz's common stock from Ford Holdings in the Acquisition. In connection with the Acquisition, Hertz entered into a series of financing and refinancing transactions. For a description of the Transactions, see "Recent Transactions—The Transactions."

Our Strengths

    Premier Global Brand and Service Offerings

        We believe that our premier brand and service offerings have allowed us to create and maintain a loyal customer base and command premium pricing across our businesses.

        Car Rental.    The Hertz brand is one of the most recognized brands in the world. It has been the only travel company brand to be listed in Business Week's "100 Most Valuable Global Brands," and has been included in this list every year since the study's inception in 2001. Our customer surveys indicate that, in the United States, Hertz is the car rental brand most associated with the highest quality service, which is consistent with numerous published best-in-class car rental awards that we have won over many years. We have sought to support our reputation for quality and customer service in car rental through a variety of innovative service offerings, such as our global expedited rental program, Hertz #1 Club Gold, which accounted for approximately 40% of our car rental transactions worldwide for the twelve months ended March 31, 2006.

        Equipment Rental.    HERC, which is operated under the Hertz Equipment Rental brand, has long been a leader in equipment rental in the United States. HERC was the first equipment rental company to develop an extensive national account program, which continues to be the source of substantial

82


revenues. HERC's leadership position has recently been enhanced through a substantial investment in sales force automation and the operation of a high quality and diverse fleet. From January 1, 2004 through March 31, 2006, we invested $1.1 billion, net of dispositions, in HERC's U.S. fleet, thereby reducing its average age to 27 months, which we believe is younger than those of HERC's largest competitors.

    Clear and Sustained Market Leadership Position in Car Rental

        We believe that Hertz is the leading worldwide general use car rental system, based on revenues. In the United States, we maintain the overall leading market share of airport car rentals among both business and leisure customers. Based on reported industry revenues for 2005, we had an overall market share of approximately 29% at the 180 largest U.S. airports where we operate, over nine percentage points of share higher than that of the closest competing brand. We have maintained this leadership position for more than 30 years. We also believe that we had the largest market share, by reported revenues on a collective basis in 2005, at the 69 major airports in Europe where we have company-operated locations and which provided data regarding car rental concessionaire activity.

    Global, Diversified Business Mix

        We believe that our mix of businesses, customer types, end-markets, distribution channels and geographies provides us with a diverse revenue stream that positions us to capitalize on growth opportunities throughout our markets and makes us less vulnerable to economic cycles and events that might negatively affect either of our industries or any specific geography. Within our car rental business, we maintain a relatively balanced mix of leisure and business rentals (representing 53% and 47%, respectively, of our car rental revenues for the year ended December 31, 2005), and utilize a broad range of distribution channels and partnerships. Within our equipment rental business, we serve a wide variety of industries and have a broad mix of end customers from local contractors to large national industrial accounts. During the year ended December 31, 2005, no single customer or location generated more than 1.3% or 2.0%, respectively, of our total revenues.

    Affiliated Customer Strategy Drives Premium Pricing and Customer Loyalty

        Over 80% of our car rental revenues are derived from affiliated customer channels, such as corporate accounts and travel industry partnerships. We believe that we are one of only two car rental brands that have the service offerings and market presence to consistently serve these affiliated customer channels on a global basis. Our corporate accounts, which account for 40% of our car rental revenues, represent a predictable source of revenues and a customer base that values our premium customer service. We have a leading position with this type of customer and provide our car rental services to most Fortune 500 companies. Our distribution partnerships include over 60 airlines, railroads and hotel chains worldwide, as well as leading traditional and online travel agencies and affiliations with non-travel organizations and associations.

    Best-in-Class Fleet and Fleet Management

        Car Rental.    Our worldwide car rental fleet includes cars from 32 manufacturers, and we believe our U.S. fleet mix is significantly more diversified than those of most of our major competitors. In the twelve months ended March 31, 2006, four manufacturers each supplied more than 5% of our U.S. fleet, while six manufacturers each supplied more than 5% of our international fleet. We have longstanding relationships with leading American, European, Japanese and Korean automakers, enabling us to provide a wide variety of car models and brands to our customers. The diversity of our car fleet enables us to design innovative rental offerings, such as the Prestige and Fun Collections, that help us maintain a competitive advantage over our competitors. In addition, we have substantial experience in the complex process of managing the mix of program cars and risk cars in our fleet. We maintain an extensive infrastructure that supports the efficient disposition of risk cars and enables us to be opportunistic when evaluating the relative merits of purchasing program and risk cars.

83


        Equipment Rental.    We believe that our U.S. equipment rental fleet is the youngest of any major participant in the industry, offering a value proposition to our customers in terms of productivity, safety and operator use enhancements while simultaneously reducing HERC's maintenance costs and fleet downtime. Our diverse U.S. equipment rental fleet enables us to meet the rental equipment needs of many customers; moreover, we are further diversifying our fleet through the addition of general rental and specialty equipment at many locations. Our over 40 years of experience in the procurement and disposition of equipment allows us to adjust our fleet size efficiently in light of market trends.

    Proprietary Strategic Information Systems

        We utilize information technology comprehensively in the areas of reservations, fleet and rate management, customer relations and sales and marketing, as well as aspects of billing, finance, accounting and other reporting systems. Since January 1, 2001, we have invested more than $300 million in our proprietary information systems and computer equipment to permit us to conduct our business more efficiently and enhance our ability to offer innovative services. Our information systems, which we believe are unique in the car and equipment rental industries, permit us to provide superior end-to-end service to customers, maintain effective pricing structures in a rapidly changing environment, utilize our fleets efficiently and maintain a high level of control over our geographically dispersed operations.

    Experienced and Proven Management Team

        We have an experienced management team committed to maintaining operational excellence. Our management team has extensive knowledge of the car and equipment rental industries. While Craig R. Koch, our current Chief Executive Officer, is expected to relinquish the title of Chief Executive Officer and become Chairman of our Board of Directors effective July 19, 2006, we have employed our nine next most senior executive officers for an average of 26 years. Our regional and country managers also have a great deal of experience, having been employed by us for an average of 20 years and having been in their current positions for an average of seven years. Mark P. Frissora, previously the Chairman and Chief Executive Officer of Tenneco Inc., will replace Mr. Koch as our Chief Executive Officer effective July 19, 2006. Mr. Frissora served in various management positions at Tenneco Inc. over the past 10 years, including as Chief Executive Officer since 1999 and Chairman since 2000. Prior to joining Tenneco Inc., Mr. Frissora served as a Vice President of Aeroquip Vickers Corporation for five years and, in the 15 years prior to joining Aeroquip Vickers, he served for 10 years with General Electric and five years with Philips Lighting Company in management roles focusing on product development and marketing. We believe our stock incentive plan closely aligns the interests of our management team and our stockholders.

Our Strategy

        Further Enhance Our Premier Car Rental Brand, Differentiated Service Offering and Affiliated Customer Base

        The Hertz brand is recognized for superior customer service and a differentiated, premium product. We intend to maintain our position as a premier company through an intense focus on service, quality and product innovation. We believe that consistent investments in our core business activities, particularly in the areas of brand, facilities, technology, training and customer loyalty initiatives, will improve customer satisfaction and further enhance our premium brand position and product offerings. Continuing to strengthen these attributes will allow us to build our affiliated customer base and increase our share of profitable business.

    Pursue Profitable Growth within Our Car Rental Business

        We believe that we have significant opportunities for growth within our global car rental business that will allow us to sustain growth rates in this business consistent with historical levels.

84


        U.S. Airport Market.    We intend to maintain or expand our market share in the U.S. airport rental business and to continue to build upon our brand positioning and service differentiation, allowing us to capitalize on opportunities in the business and leisure travel markets and further strengthen the advantages arising from our leading market share position.

        U.S. Off-Airport Market Opportunities.    We intend to leverage our significant recent investment in our U.S. off-airport network and to expand the network to enable us to further penetrate the large and growing insurance replacement rental market, as well as to increase our share of other off-airport business and leisure rentals. In the two years ended December 31, 2005, we increased the number of our off-airport rental locations in the United States by approximately 33% to approximately 1,400 locations. Through this investment, we believe we have achieved critical scale in the off-airport market and continue to grow our revenue rapidly through increasing penetration in the insurance rental replacement market through new and existing insurance company customers as well with our traditional business and leisure customers as evidenced by our off-airport revenue growth of approximately 46% over the two years ended December 31, 2005. We believe our off-airport platform has significant future growth potential.

        European Markets.    We believe that the European market presents airport rental growth opportunities resulting from the growth of European air travel due in large part to the presence of high volume, low cost air carriers and increasing use of the Internet throughout the continent. We intend to continue to build on our affiliated relationships with travel providers and other associations in Europe to increase our penetration of the European market. We also intend to increase our participation in the off-airport portion of the car rental market in Europe, especially in leisure, replacement and light trucks.

    Increase Share of the Fragmented U.S. Equipment Rental Market

        We believe that our emphasis on customer service, large national account base, prominent brand name and diverse and comparatively young rental fleet will position HERC to continue to gain market share in the fragmented U.S. equipment rental market. We intend to continue to increase HERC's presence through moderate expansion in the number of our locations and the continued penetration of the specialty equipment and general rental markets.

    Further Improve Profitability, Cash Flow and Return on Capital

        We believe that there are opportunities to further increase the productivity of our operations, thereby improving our profit margins and capital efficiency. The profit margins that we have achieved in our car rental business during the twelve months ended March 31, 2006 are below our peak levels of profitability achieved in 2000. We believe that we can improve our profitability by leveraging the investments we have made in building our off-airport business, in upgrading our airport facilities and through the use of our enhanced information systems to optimize our pricing, yield management and fleet utilization generally. In addition, we believe, based on our current business plan and capital structure, that as a result of the like-kind exchange programs implemented in connection with our car rental and equipment rental fleets, we will not be required to pay material U.S. federal income taxes for several years.

Our Markets

        We operate in the global car rental industry and in the equipment rental industry, primarily in the United States.

    Worldwide Car Rental

        We believe that the global car rental industry exceeds $30 billion in annual revenues. According to Auto Rental News, car rental revenues in the United States totaled approximately $19 billion in 2005 and have grown at a 4.9% compound annual growth rate since 1990, including 7.3% growth in 2005. Car rental revenues in Western Europe account for over $11 billion in annual revenues, with the

85


airport portion of the industry comprising approximately one-third of the total. Within Europe, the largest markets are Germany, France and the United Kingdom. Based on market data, we estimate that total rental revenues for the car rental industry in Europe in 2004, the most recent year for which this information is available, were approximately $9.4 billion in the nine countries—France, Germany, Italy, the United Kingdom, Spain, the Netherlands, Switzerland, Belgium and Luxembourg—where we have company-operated rental locations and approximately $2 billion in eight other countries—Greece, Ireland, Portugal, Sweden, Norway, Denmark, Austria and Finland—where our brand is present through our licensees.

        We estimate that airport rentals account for approximately one-half of the total market in the United States. This portion of the market is significantly influenced by developments in the travel industry and particularly in airline passenger traffic, or enplanements. According to the FAA, enplanements in the United States only completed their recovery and surpassed their pre-2001 levels in 2005. Consequently, only in 2005 did airport car rental revenues in the United States return to the levels seen before the 2001 recession and the September 11, 2001 terrorist attacks. The FAA projects that domestic enplanements will grow at a compound annual rate of 3.2% from 2006 to 2017, consistent with long-term historical trends. According to air travel trade association data, annual international enplanements are projected to grow at a compound annual rate of 5.6% from 2005 to 2009.

        The off-airport part of the industry has rental volume primarily driven by local business use, leisure travel and the replacement of cars being repaired. Because Europe has generally demonstrated a lower historical reliance on air travel, the European off-airport car rental market is significantly more developed than it is in the United States. However, we believe that in recent years, industry revenues from off-airport car rentals in the United States have grown faster than revenues from airport rentals.

    Equipment Rental

        We estimate the size of the U.S. equipment rental industry, which is highly fragmented with few national competitors and many regional and local operators, to be approximately $31 billion in annual revenues, but the part of the rental industry dealing with equipment of the type HERC rents is somewhat smaller than that. We believe, based on industry sources, that the industry grew at a 9.7% compound annual growth rate between 1991 and 2005. Other market data indicates that the equipment rental industries in France and Spain generate roughly $4 billion and $2 billion in annual revenues, respectively, although the portions of those markets in which HERC competes are smaller.

        The equipment rental industry serves a broad range of customers from small local contractors to large industrial national accounts and encompasses a wide range of rental equipment from small tools to heavy earthmoving equipment. The industry is undergoing a strong recovery following the industrial recession and downturn in non-residential construction spending between 2001 and 2003. According to a leading construction industry research resource, U.S. non-residential construction spending is projected to grow at an annual rate of 9% and 7% in 2006 and 2007, respectively. We also believe, based on industry publications, that rental equipment accounted for approximately 30% to 40% of all equipment sold into the U.S. construction industry in 2005, up from approximately 5% to 10% in 1991. In addition, we believe that the trend toward rental instead of ownership of equipment in the U.S. construction industry will continue and that as much as 50% of the equipment used in the industry could be rental equipment within the next ten years.

Our Business Segments

        Our business consists of two significant segments, car rental and equipment rental. In addition, "corporate and other" includes general corporate expenses, as well as other business activities, such as third-party claim management services.

        Car Rental:    Our "company-operated" rental locations are those through which we, or an agent of ours, rent cars that we own or lease. We maintain a substantial network of company-operated car rental

86



locations both in the United States and internationally, and what we believe to be the largest number of company-operated airport car rental locations in the world, enabling us to provide consistent quality and service worldwide. For the year ended December 31, 2005, we derived approximately 72% of our worldwide car rental revenues from airport locations. Our licensees and associates also operate rental locations in over 140 countries and jurisdictions, including most of the countries in which we have company-operated rental locations.

        Equipment Rental:    HERC operates what we believe to be the third largest equipment rental business in the United States and Canada combined and the fourth largest general equipment rental business in each of France and Spain, in each case based upon revenues. HERC rents a broad range of earthmoving equipment, material handling equipment, aerial and electrical equipment, air compressors, generators, pumps, small tools, compaction equipment and construction-related trucks. HERC also derives revenues from the sale of new equipment and consumables.

        Set forth below are charts showing revenues and operating income (loss), by segment, and revenues by geographic area, all for the year ended December 31, 2005 on a combined basis, and revenue earning equipment at net book value, as of March 31, 2006 (the majority of our international operations are in Europe). See Note 11 to the Notes to our audited annual consolidated financial statements included elsewhere in this prospectus.

Revenues by Segment for
Year Ended December 31, 2005(1)(3)
  Operating Income by Segment for
Year Ended December 31, 2005(2)(3)

$7.5 billion

 

$1.1 billion

LOGO

 

LOGO
Revenues by Geographic Area for
Year Ended December 31, 2005(3)
  Revenue Earning Equipment, Net Book
Value as of March 31, 2006

$7.5 billion

 

$10.4 billion

LOGO

 

LOGO

(1)
Car rental segment revenue includes fees and certain cost reimbursements from licensees. See Note 11 to the Notes to our audited annual consolidated financial statements included elsewhere in this prospectus.

(2)
Operating income represents pre-tax income before interest expense and minority interest. The above chart excludes an operating loss of $22.3 million attributable to our Corporate and Other activities.

(3)
For the Predecessor period ended December 20, 2005, we generated revenues of $5,150.5 million and $2,164.2 million in the United States and internationally, respectively, and operating income of $1,049.1 million. For the Successor period ended December 31, 2005, we generated revenues of $123.7 million and $30.8 million in the United States and internationally, respectively, and an operating loss of $7.4 million.

87


        For further information on our business segments, including financial information for the first quarter of 2006 and the Successor period ended December 31, 2005, and the Predecessor period ended December 20, 2005 (as restated), and the years ended December 31, 2004 and 2003, see Note 9 to the Notes to our unaudited interim condensed consolidated financial statements and Note 11 to the Notes to our audited annual consolidated financial statements included elsewhere in this prospectus.

Worldwide Car Rental

Operations

        We rent a wide variety of makes and models of cars, nearly all of which are the current or previous year's models. We generally accept reservations only for a class of vehicles, although we accept reservations for specific makes and models of vehicles in our Prestige Collection luxury rental program and our Fun Collection experiential rental program and a limited number of models in high-volume, leisure-oriented destinations. We rent cars on a daily, weekend, weekly, monthly or multi-month basis, with rental charges computed on a limited or unlimited mileage rate, or on a time rate plus a mileage charge. Our rates vary at different locations depending on local market conditions and other competitive and cost factors. While cars are usually returned to the locations from which they are rented, we also allow one-way rentals from and to certain locations. In addition to car rentals and licensee fees, we generate revenues from reimbursements by customers of airport concession fees and vehicle licensing costs, fueling charges, and charges for ancillary customer products and services such as supplemental equipment (child seats and ski racks), loss or collision damage waiver, theft protection, liability and personal accident/effects insurance coverage, Hertz NeverLost navigation systems and satellite radio services. Several U.S. State Attorneys General have recently taken positions that car rental companies either may not pass through to customers, by means of separate charges, expenses such as vehicle licensing and concession fees or may do so only in certain limited circumstances. See "Risk Factors—Risks Related to Our Business—Changes in the U.S. and foreign legal and regulatory environment that impact our operations, including laws and regulations relating to the insurance products we sell, customer privacy, data security, insurance rates and expenses we pass through to customers by means of separate charges, could disrupt our business, increase our expenses or otherwise could have a material adverse effect on our results of operations."

        We have company-operated rental locations both in the United States and internationally. The international car rental operations that generated the highest volumes of business from our company-operated locations for the year ended December 31, 2005 were, in descending order of revenues, those conducted in France, Germany, Italy, the United Kingdom, Australia, Spain and Canada. We also have company-operated rental locations in the Netherlands, Switzerland, Belgium, Luxembourg, New Zealand, Puerto Rico, Brazil and the U.S. Virgin Islands.

        As of March 31, 2006, we had over 1,700 staffed rental locations in the United States, of which approximately one-third were airport locations and two-thirds were off-airport locations, and we regularly rented cars from over 900 other locations that were not staffed. As of March 31, 2006, we had approximately 1,100 staffed rental locations internationally, of which approximately one-fifth were airport locations and four-fifths were off-airport locations, and we regularly rent cars from over 80 other locations that were not staffed. We believe that our extensive U.S. and international network of company-operated locations contributes to the consistency of our service, cost control, fleet utilization, yield management, competitive pricing and ability to offer one-way rentals.

        In order to operate airport rental locations, we have obtained concessions or similar leasing, licensing or permitting agreements or arrangements, or "concessions," granting us the right to conduct a car rental business at all major, and many other, airports with regularly scheduled passenger service in each country where we have company-operated rental locations, except for airports where our licensees operate rental locations and Orlando International Airport in Orlando, Florida. Our

88



concessions were obtained from the airports' operators, which are typically governmental bodies or authorities, following either negotiation or bidding for the right to operate a car rental business there. The terms of an airport concession typically require us to pay the airport's operator concession fees based upon a specified percentage of the revenues we generate at the airport, subject to a minimum annual guarantee. Under most concessions, we must also pay fixed rent for terminal counters or other leased properties and facilities. Most concessions are for a fixed length of time, while others create operating rights and payment obligations that are terminable at any time.

        The terms of our concessions typically do not forbid, and in a few instances actually require, us to seek reimbursement from customers of concession fees we pay; however, in certain jurisdictions the law limits or forbids our doing so. Where we are required or permitted to seek such reimbursement, it is our general practice to do so. The number of car rental concessions available at airports varies considerably, but, except at small, regional airports, it is rarely less than four. At Orlando International Airport, where we do not have a car rental concession, we operate an airport rental location at a facility located near the airport's premises and pick up and drop off our customers at the airport under a permit from the airport's operator. Certain of our concession agreements require the consent of the airport's operator in connection with changes in ownership of us. We will seek those consents that are required in connection with this offering, except where not obtaining them will not, in our view, have a material adverse effect on our consolidated financial position or results of operations. See "Risk Factors—Risks Related to Our Business—We face risks related to changes in our ownership."

        The Hertz brand is one of the most recognized brands in the world. It has been listed in Business Week's "100 Most Valuable Global Brands" in 2005 and every year since the study's inception in 2001. The Hertz brand has been the only travel company brand to appear in the study. Moreover, our customer surveys indicate that in the United States, Hertz is the car rental brand most associated with the highest quality service. This is consistent with numerous published best-in class car rental awards that we have won, both in the United States and internationally, over many years. We have sought to support our reputation for quality and customer service in car rental through a variety of innovative service offerings, such as our customer loyalty program (Hertz #1 Club), our global expedited rental program (Hertz #1 Club Gold), our one-way rental program (Rent-it-Here/Leave-it-There), our national-scale luxury rental program (Prestige Collection), our national-scale experiential rental program (Hertz Fun Collection) and our in-car navigational services (Hertz NeverLost). We intend to maintain our position as a premier company through an intense focus on service, quality and product innovation.

        In the United States, we had approximately a 29% market share, by revenues, both in 2004 and in 2005 at the 180 largest airports where we operated, nine percentage points of share higher than that of the closest competing brand. Out of approximately 150 major European airports at which we have company-operated rental locations, 69 provided us data regarding car rental concessionaire activity for the year ended December 31, 2005. Based upon this data, we believe that we were the largest airport car rental company, measured by aggregate airport rental revenues during that period, at those 69 airports taken together. In the United States, we intend to maintain or expand our market share in the airport rental business. For a further description of our competitors, market share and competitive position see "—Competition" below.

        At our major airport rental locations, as well as at some smaller airport and off-airport locations, customers participating in our Hertz #1 Club Gold program are able to rent vehicles in an expedited manner. In the United States, participants in Hertz #1 Club Gold often bypass the rental counter entirely and proceed directly to their vehicles upon arrival at our facility. For the twelve months ended March 31, 2006, rentals by Hertz #1 Club Gold members accounted for approximately 40% of our worldwide rental transactions. We believe the Hertz #1 Club Gold program provides a significant competitive advantage to us, particularly among frequent travelers, and we have, through travel industry relationships, targeted such travelers for participation in the program.

89



        In addition to our airport locations, we operate off-airport locations offering car rental services to a variety of customers. Our off-airport rental customers include people wishing to rent cars closer to home for business or leisure purposes, as well as those needing to travel to or from airports. Our off-airport customers also include people who have been referred by, or whose rental costs are being wholly or partially reimbursed by, insurance companies following accidents in which their cars were damaged, those expecting to lease cars that are not yet available from their leasing companies and those needing cars while theirs are being repaired or are temporarily unavailable for other reasons; we call these customers "replacement renters." At many of our off-airport locations we will provide pick-up and delivery services in connection with rentals.

        When compared to our airport rental locations, an off-airport rental location typically services more types of customers, uses smaller rental facilities with fewer employees, conducts pick-up and delivery services and deals with replacement renters using specialized systems and processes. In addition, on average, off-airport locations generate fewer transactions per period than airport locations. At the same time, though, our airport and off-airport rental locations employ common car fleets, are supervised by common country, regional and local area management, use many common systems and rely on common maintenance and administrative centers. Moreover, airport and off-airport locations, outside the area of replacement rentals, are supported by a common commercial sales force, benefit from many common marketing activities and have many of the same customers. As a consequence, we regard both types of locations as aspects of a single, unitary, car rental business.

        We believe that the off-airport portion of the car rental market offers opportunities for us on several levels. First, presence in the off-airport market can provide customers a more convenient and geographically extensive network of rental locations, thereby creating revenue opportunities from replacement renters, non-airline travel renters and airline travelers with local rental needs. Second, it can give us a more balanced revenue mix by reducing our reliance on airport travel and therefore limiting our risk exposure to external events that may disrupt airline travel trends. Third, it can produce higher fleet utilization as a result of the longer average rental periods associated with off-airport business, compared to those of airport rentals. Fourth, replacement rental volume is far less seasonal than that of other business and leisure rentals, which permits efficiencies in both fleet and labor planning. Finally, cross-selling opportunities exist for us to promote off-airport rentals among frequent airport Hertz #1 Club renters and, conversely, to promote airport rentals to off-airport renters. In view of those benefits, along with our belief that our market share for off-airport rentals is generally smaller than our market share for airport rentals, we intend to seek profitable growth in the off-airport rental market, both in the United States and internationally.

        In the two years ended December 31, 2005, we increased the number of our off-airport rental locations in the United States by approximately 33% to approximately 1,400 locations. In 2006 and subsequent years, our strategy may include selected openings of new off-airport locations, the disciplined evaluation of existing locations and pursuit of same-store sales growth. We anticipate that same-store sales growth would be driven by our traditional leisure and business traveler customers and by increasing penetration of the insurance replacement market, of which we currently have a low market share. In the United States during the year ended December 31, 2005, approximately one-third of our rental revenues at off-airport locations were related to replacement rentals. We believe that if we successfully pursue our strategy of profitable off-airport growth, the proportion of replacement rental revenues will increase. As we move forward, our determination of whether to expand our U.S. off-airport network will be based upon a combination of factors, including the concentration of target insurance company policy holders, car dealerships, auto body shops and other clusters of retail, commercial activity and potential profitability. We also intend to increase the number of our staffed off-airport rental locations internationally on the basis of similar criteria.

        In addition to renting cars, in Germany we also rent trucks of eight tons and over, including truck tractors. This truck rental fleet consists of approximately 3,000 vehicles, which have been either

90



acquired under repurchase programs similar to those under which we purchase program cars or are under operating leases. We believe we are a market leader in truck rental in Germany. Also, we are engaged in a car leasing business in Brazil. Our truck rental activities in Germany and our car leasing activities in Brazil are treated as part of our international car rental business in our consolidated financial statements.

        Our worldwide car rental operations generated $1,421.6 million in revenues and a loss of $11.1 million before income taxes and minority interest in the first quarter of 2006, $6,046.8 million in revenues and $374.6 million in income before income taxes and minority interest during the year ended December 31, 2005, which consisted of $131.8 million in revenues and $16.2 million in losses before income taxes and minority interest for the Successor period ended December 31, 2005 and $5,915.0 million in revenues and $390.8 million in income before income taxes and minority interest for the Predecessor period ended December 20, 2005.

        We may also, from time to time, pursue profitable growth within our car rental business by pursuing opportunistic acquisitions that would expand our global car rental business.

Customers and Business Mix

        We categorize our rental business based on two primary criteria—the purpose for which customers rent from us (business or leisure) and the type of location from which they rent (airport or off-airport). The table below sets forth, for the year ended December 31, 2005, the percentages of rental revenues and rental transactions in our U.S. and international operations derived from business and leisure rentals and from airport and off-airport rentals.

 
  Year Ended December 31, 2005
 
 
  U.S.
  International
 
 
  Revenues
  Transactions
  Revenues
  Transactions
 
Type of Car Rental                  
By Customer:                  
  Business   46 % 50 % 48 % 53 %
  Leisure   54   50   52   47  
   
 
 
 
 
    100 % 100 % 100 % 100 %
   
 
 
 
 
By Location:                  
  Airport   80 % 80 % 55 % 57 %
  Off-airport   20   20   45   43  
   
 
 
 
 
    100 % 100 % 100 % 100 %
   
 
 
 
 

        Customers who rent from us for "business" purposes include those who require cars in connection with commercial activities, the activities of governments and other organizations or for temporary vehicle replacement purposes. Most business customers rent cars from us on terms that we have negotiated with their employers or other entities with which they are associated, and those terms can differ substantially from the terms on which we rent cars to the general public. We have negotiated arrangements relating to car rental with many large businesses, governments and other organizations, including most Fortune 500 companies.

        Customers who rent from us for "leisure" purposes include not only individual travelers booking vacation travel rentals with us but also people renting to meet other personal needs. Leisure rentals, taken as a whole, are longer in duration and generate more revenue per transaction than do business rentals, although some types of business rentals, such as rentals to replace temporarily unavailable cars, have a long average duration. Business rentals and leisure rentals have different characteristics and place different types of demands on our operations. We believe that maintaining an appropriate

91



balance between business and leisure rentals is important to the profitability of our business and the consistency of our operations.

        Our business and leisure customers rent from both our airport and off-airport locations. Demand for airport rentals is correlated with airline travel patterns, and transaction volumes generally follow enplanement trends on a global basis. Customers often make reservations for airport rentals when they book their flight plans, which makes our strong relationships with travel agents, associations and other partners (e.g., airlines) a key competitive advantage in generating consistent and recurring revenue streams.

        Off-airport rentals typically involve people wishing to rent cars closer to home for business or leisure purposes, as well as those needing to travel to or from airports. This category also includes people who have been referred by, or whose rental costs are being wholly or partially reimbursed by, insurance companies because their cars have been damaged. In order to attract these renters, we must establish agreements with the referring insurers establishing the relevant rental terms, including the arrangements made for billing and payment. While we estimate our share of the insurance replacement rental market was approximately 7% of the estimated rental revenue volume for the twelve months ended March 31, 2006, we have identified approximately 170 insurance companies, ranging from local or regional carriers to large, national companies, as our target insurance replacement market. Although Enterprise currently has the largest share of the insurance replacement market, we believe that many of these companies are receptive to our replacement rental offerings and prefer to have at least two national rental car suppliers. Enterprise has asserted that certain systems we use to conduct insurance replacement rentals would infringe on patent rights it would obtain if it were granted certain patents for which it has applied. See "Risk Factors—Risks Related to Our Business—Claims that the software products and information systems that we rely on are infringing on the intellectual property rights of others could increase our expenses or inhibit us from offering certain services, which could adversely affect our results of operations."

        We conduct active sales and marketing programs to attract and retain customers. Our commercial and travel industry sales force calls on companies and other organizations whose employees and associates need to rent cars for business purposes, as well as on membership associations, tour operators, travel companies and other groups whose members, participants and customers rent cars for either business or leisure purposes. A specialized sales force calls on companies with replacement rental needs, including insurance and leasing companies and car dealers. We also advertise our car rental offerings through a variety of traditional media, such as television and newspapers, direct mail and the Internet. In addition to advertising, we also conduct a variety of other forms of marketing and promotion, including travel industry business partnerships and press and public relations activities.

        In almost all cases, when we rent a car, we rent it directly to an individual who is identified in a written rental agreement that we prepare. Except when we are accommodating someone with a disability, the individual to whom we rent a car is required to have a valid driver's license and meet other rental criteria (including minimum age and creditworthiness requirements) that vary on the basis of location and type of rental. Our rental agreements permit only the individual renting the car, people signing additional authorized operator forms and certain defined categories of other individuals (such as fellow employees, parking attendants and in some cases spouses or domestic partners) to operate the car.

        With rare exceptions, individuals renting cars from us are personally obligated to pay all amounts due under their rental agreements. They typically pay us with a charge, credit or debit card issued by a third party, although certain customers use a Hertz charge account that we have established for them, usually as part of an agreement between us and their employer. For the year ended December 31, 2005, all amounts charged to Hertz charge accounts established in the United States, and approximately 99% of amounts charged to Hertz charge accounts established by our international subsidiaries, are

92



billed directly to a company or other organization or are guaranteed by a company. The remainder of the amounts charged to Hertz charge accounts established by our international subsidiaries are billed to individual account holders whose obligations are not guaranteed by the holder's employer or any other organization associated with the account holder. We also issue rental vouchers and certificates that may be used to pay rental charges for mostly prepaid and tour-related rentals. In addition, where the law requires us to do so, we rent cars on a cash basis.

        In the United States for the year ended December 31, 2005, 86% of our car rental revenues came from customers who paid us with third-party charge, credit or debit cards, while 8% came from customers using Hertz charge accounts, 4% from customers using rental vouchers or another method of payment and 2% from cash transactions. In our international operations for the year ended December 31, 2005, 48% of our car rental revenues came from customers who paid us with third-party charge, credit or debit cards, while 31% came from customers using Hertz charge accounts, 19% from customers using rental vouchers or another method of payment and 2% from cash transactions. For the year ended December 31, 2005, we had a bad debt expense ratio of 0.1% of car rental revenues for our U.S. operations and 0.3% of car rental revenues for our international operations.

Reservations

        When customers reserve cars for rental from us and our licensees, they may seek to do so through travel agents or third-party travel websites. In many of those cases, the travel agent or website will utilize a third-party operated computerized reservation system, also known as a global distribution system, or "GDS," to contact us and make the reservation. There are currently four principal GDSs, and we have contracts with all of them providing that we will process reservation requests made through the GDSs. Historically, GDSs were owned and operated by airlines and were subject to extensive regulation along with their airline owners. In recent years, however, airlines have greatly reduced their ownership interests in GDSs and the level of regulation to which GDSs are subject has substantially decreased. One of the four principal GDSs is now owned by Cendant Corporation, or "Cendant," which currently owns a diversified portfolio of businesses, including car rental companies that compete with us. Cendant has announced its intention to sell the business that operates its GDS and separate its car rental business from all of its non-car rental businesses as part of a restructuring to take place during 2006.

        In major countries, including the United States and all other countries with company-operated locations, customers may also reserve cars for rental from us and our licensees worldwide through local, national or toll-free telephone calls to our reservations centers, directly through our rental locations or, in the case of replacement rentals, through proprietary automated systems serving the insurance industry. Additionally, we accept reservations for rentals from us and our licensees worldwide through our websites. Our websites, which also allow customers to enroll in loyalty programs, obtain copies of bills for past transactions and obtain information about our rental offerings, have grown significantly in importance as a reservations channel in recent years. Third-party travel websites have also grown in importance to us as a reservations channel.

        For the twelve months ended March 31, 2006, approximately 35% of the worldwide reservations we accepted came through travel agents using GDSs, while 33% came through phone calls to our reservations centers, 21% through our websites, 7% through third-party websites and 4% through local booking sources.

Fleet

        We believe we are one of the largest private sector purchasers of new cars in the world. During the twelve months ended March 31, 2006, we operated a peak rental fleet in the United States of approximately 322,000 cars and a combined peak rental fleet in our international operations of

93



approximately 163,000 cars, in each case exclusive of our licensees' fleet. During the twelve months ended March 31, 2006, our approximate average holding period for a rental car was eleven months in the United States and eight months in our international operations.

        We have historically acquired, subject to availability, over 70% of our cars pursuant to various fleet repurchase or guaranteed depreciation programs established by automobile manufacturers. Under these programs, the manufacturers agree to repurchase cars at a specified price or guarantee the depreciation rate on the cars during established repurchase or auction periods, subject to, among other things, certain car condition, mileage and holding period requirements. Repurchase prices under repurchase programs are based on either a predetermined percentage of original car cost and the month in which the car is returned or the original capitalized cost less a set daily depreciation amount. Guaranteed depreciation programs guarantee on an aggregate basis the residual value of the cars covered by the programs upon sale according to certain parameters which include the holding period, mileage and condition of the cars. These repurchase and guaranteed depreciation programs limit our residual risk with respect to cars purchased under the programs and allow us to determine depreciation expense in advance. For the twelve months ended March 31, 2006, program cars as a percentage of all cars purchased by our U.S. operations were 73% and as a percentage of all cars purchased by our international operations were approximately 70%, or 72% when calculated on an aggregate worldwide basis.

        Over the five years ended December 31, 2005, approximately 50% of the cars acquired by us for our U.S. car rental fleet, and approximately 30% of the cars acquired by us for our international fleet, were manufactured by Ford and its subsidiaries. During the twelve months ended March 31, 2006, approximately 41% of the cars acquired by us domestically were manufactured by Ford and its subsidiaries and approximately 36% of the cars acquired by us for our international fleet were manufactured by Ford and its subsidiaries, which represented the largest percentage of any automobile manufacturer during that period. The percentage of the fleet which we purchase from Ford may decline as a result of recent changes to the vehicle supply arrangements between Ford and us. See "—Relationship with Ford" and Note 15 to the Notes to our audited annual consolidated financial statements included elsewhere in this prospectus. Historically, we have also purchased a significant percentage of our car rental fleet from General Motors. Over the five years ended December 31, 2005, approximately 19% of the cars acquired by us for our U.S. car rental fleet, and approximately 16% of the cars acquired by us for our international fleet, were manufactured by General Motors. During the twelve months ended March 31, 2006, approximately 21% of the cars acquired by our U.S. car rental fleet, and approximately 13% of the cars acquired by us for our international fleet, were manufactured by General Motors.

        Purchases of cars are financed through funds provided from operations and by active and ongoing global borrowing programs. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources."

        We maintain automobile maintenance centers at certain airports and in certain urban and off-airport areas, providing maintenance facilities for our car rental fleet. Many of these facilities, which include sophisticated car diagnostic and repair equipment, are accepted by automobile manufacturers as eligible to perform and receive reimbursement for warranty work. Collision damage and major repairs are generally performed by independent contractors.

        We dispose of risk cars, as well as program cars that have for any reason become ineligible for manufacturer repurchase or guaranteed depreciation programs, through a variety of disposition channels, including auctions, brokered sales, sales to wholesalers and, to a lesser extent and primarily in the United States, sales at retail through a network of seven company-operated car sales locations dedicated exclusively to the sale of used cars from our rental fleet. During the twelve months ended March 31, 2006, of the cars that were not repurchased by manufacturers, we sold approximately 74% at

94



auction or on a wholesale basis, while 18% were sold at retail and 8% through other channels. We closed 23 retail car sales locations in the United States in the first half of 2006. We do not expect these closures to have a significant impact on our results of operations.

Licensees

        We believe that our extensive worldwide ownership of car rental operations contributes to the consistency of our high-quality service, cost control, fleet utilization, yield management, competitive pricing and our ability to offer one-way rentals. However, in certain predominantly smaller U.S. and international markets, we have found it more efficient to utilize independent licensees, which rent cars that they own. Our licensees operate locations in over 140 countries, including most of the countries where we have company-operated locations. As of March 31, 2006, we owned 96% of all the cars in the combined company-owned and licensee-owned fleets in the United States.

        We believe that our licensee arrangements are important to our business because they enable us to offer expanded national and international service and a broader one-way rental program. Licenses are issued principally by our wholly owned subsidiaries, Hertz System, Inc., or "System," and HIL under franchise arrangements to independent licensees and affiliates who are engaged in the car rental business in the United States and in many foreign countries.

        Licensees generally pay fees based on a percentage of their revenues or the number of cars they operate. The operations of all licensees, including the purchase and ownership of vehicles, are financed independently by the licensees, and we do not have any investment interest in the licensees or their fleets. System licensees share in the cost of our U.S. advertising program, reservations system, sales force and certain other services. Our European and other international licensees also share in the cost of our reservations system, sales force and certain other services. In return, licensees are provided the use of the Hertz brand name, management and administrative assistance and training, reservations through our reservations channels, the Hertz #1 Club and #1 Club Gold programs, our one-way rental program and other services. In addition to car rental, certain licensees outside the United States engage in car leasing, chauffeur-driven rentals and renting camper vans under the Hertz name.

        System licensees ordinarily are limited as to transferability without our consent and are terminable by us only for cause or after a fixed term. Licensees in the United States may generally terminate for any reason on 90 days' notice. In Europe and certain other international jurisdictions, licensees typically do not have early termination rights. Initial license fees or the price for the sale to a licensee of a company-owned location may be payable over a term of several years. We continue to issue new licenses and, from time to time, purchase licensee businesses.

Competition

        In the United States, our principal car rental industry competitors are Cendant, which currently operates the Avis and Budget brands, Vanguard Car Rental USA Group, or "Vanguard," which operates the National Car Rental and Alamo brands, Dollar Thrifty Automotive Group, Inc., or "DTG," which operates the Dollar and Thrifty brands, and Enterprise, which operates the Enterprise brand.

        The following table lists our estimated market share, and the estimated market shares of our principal competitors and their licensees, at the 180 largest U.S. airports at which we have company-operated locations, determined on the basis of revenues reported to the airports' operators on which

95



concession or off-airport permit fees are determined for the indicated periods. Complete market share data is not available for any date later than for the year ended December 31, 2005.

 
  Years Ended December 31,
 
 
  2001
  2002
  2003
  2004
  2005
 
Brand Name                      
Hertz   29.5 % 29.2 % 29.0 % 29.6 % 29.2 %

Avis

 

21.6

 

22.3

 

21.2

 

20.2

 

20.2

 
Budget   11.8   10.8   10.4   10.2   10.5  
   
 
 
 
 
 
  Cendant Brands(1)   33.4   33.1   31.6   30.4   30.7  

National/Alamo (Vanguard Brands)(2)

 

25.4

 

21.8

 

20.8

 

19.8

 

19.4

 

Dollar

 

7.1

 

7.2

 

7.4

 

7.7

 

7.1

 
Thrifty   1.8   3.2   4.4   4.5   4.3  
   
 
 
 
 
 
  DTG Brands   8.9   10.4   11.8   12.2   11.4  

Enterprise

 

2.0

 

3.9

 

5.0

 

6.0

 

7.0

 
Other   0.8   1.6   1.8   2.0   2.3  
   
 
 
 
 
 
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. Cendant, which currently operates a diversified portfolio of businesses, has announced its intention to separate its car rental business from all of its non-car rental businesses as part of a restructuring to take place during 2006.

(2)
National and Alamo have been owned by Vanguard since October 2003.

        The U.S. off-airport rental market has historically been dominated by Enterprise. We now have a significant presence in the off-airport market, and Cendant's brands also are present. Many smaller companies also operate in the airport and off-airport rental markets.

        In Europe, in addition to us, the principal pan-European participants in the car rental industry are Avis Europe plc (which is not an affiliate of Cendant but is operating under a license from Cendant), which operates the Avis and Budget brands, and Europcar, which was recently acquired from Volkswagen AG by Eurazeo. In certain European countries, there are also other companies and brands with substantial market shares, including Sixt AG (operating the Sixt brand), Vanguard (operating both the National Car Rental and Alamo brands) in the United Kingdom and Germany, and through franchises in Spain, Italy and France, and Enterprise (operating the Enterprise brand) in the United Kingdom, Ireland and Germany. In every European country, there are also national, regional or other, smaller companies operating in the airport and off-airport rentals markets. Apart from Enterprise-branded operations, all of which Enterprise owns, the other major car rental brands are present in European car rental markets through a combination of company-operated and franchisee- or licensee-operated locations.

        Competition among car rental industry participants is intense and frequently takes the form of price competition. For the year ended December 31, 2005, we believe most U.S. and European car rental companies experienced downward pressure on pricing, as measured by the rental rates they charged. During the latter part of the fourth quarter of 2005 and first quarter of 2006, based on publicly available information, some U.S. car rental providers experienced transaction day growth and pricing increases compared to comparable prior periods. We experienced higher car rental volumes and pricing in the U.S. for the year ended December 31, 2005 and the first quarter of 2006. It is not certain whether these increases will continue during the remainder of 2006. Also, we believe most European car rental companies' pricing moved downward in 2005. During the quarter ended March 31, 2006, we experienced moderate transaction day growth in our European operations and our car rental pricing was above the level of our pricing during the three months ended March 31, 2005.

96



        Our competitors, some of which may have access to substantial capital, may seek to compete aggressively on the basis of pricing. To the extent that we match downward competitor pricing, it could have an adverse impact on our results of operations. To the extent that we are not willing to match or remain within a reasonable competitive margin of our competitors' pricing, it could also have an adverse impact on our results of operations, as we may lose market share. As a result of increased use of the Internet as a travel distribution channel, pricing transparency has increased. See "Risk Factors—Risks Related to Our Business—We face intense competition that may lead to downward pricing, or an inability to increase prices, which could have a material adverse impact on our results of operations." We believe, however, that the prominence and service reputation of the Hertz brand and our extensive worldwide ownership of car rental operations provides us with a competitive advantage.

Equipment Rental

Operations

        We, through HERC, operate an equipment rental business in the United States, Canada, France and Spain. We believe HERC is the third largest equipment rental company in the United States and Canada combined and the fourth largest general equipment rental company in France and Spain, in each case based on revenues. HERC has operated in the United States since 1965.

        HERC's principal business is the rental of equipment. HERC offers a broad range of equipment for rental; major categories include earthmoving equipment, material handling equipment, aerial and electrical equipment, air compressors, pumps, generators, small tools, compaction equipment and construction-related trucks.

        HERC's comprehensive line of equipment enables it to supply equipment to a wide variety of customers from local contractors to large industrial plants. The fact that many larger companies, particularly those with industrial plant operations, now require single source vendors, not only for equipment rental, but also for management of their total equipment needs fits well with HERC's core competencies. Arrangements with such companies may include maintenance of the tools and equipment they own, supplies and rental tools for their labor force and custom management reports. HERC supports this through its dedicated in-plant operations, tool trailers and plant management systems.

        As of March 31, 2006, HERC operated 345 equipment rental branches, of which 235 were in 40 states within the United States, 31 were in Canada, 71 were in France and 8 were in Spain. HERC generated same-store, year-over-year revenue growth for each of the last ten quarters. HERC's rental locations generally are situated in industrial or commercial zones. A growing number of locations have highway or major thoroughfare visibility. The typical location is approximately three acres in size, though smaller in Europe, and includes a customer service center, an equipment service area and storage facilities for equipment. The branches are built or conform to the specifications of the HERC prototype branch, which stresses efficiency, safety and environmental compliance. Most branches have stand-alone maintenance and fueling facilities and showrooms.

        HERC slightly contracted its network of equipment rental locations during the 2001 to 2003 downturn in construction activities. HERC added five new locations in the United States during 2004 and six during 2005. During the first quarter of 2006, HERC added one U.S. location, and we expect HERC to add 15 additional locations in the United States and two in Canada during the remainder of 2006. In connection with its U.S. expansion, we expect HERC will incur non-fleet start-up costs of approximately $600,000 per location and additional fleet acquisition costs over an initial twelve-month period of approximately $5.4 million per location.

        Starting in 2004, HERC began to broaden its equipment line in the United States to include more equipment with an acquisition cost of under $10,000 per unit, ranging from air compressors and generators to small tools and accessories, in order to supply customers who are local contractors with a

97



greater proportion of their overall equipment rental needs. As of March 31, 2006, these activities, referred to as "general rental activities," were conducted at approximately 32% of HERC's U.S. rental locations. Before it begins to conduct general rental activities at a location, HERC typically renovates the location to make it more appealing to walk-in customers and adds staff and equipment in anticipation of subsequent demand.

        HERC's operations generated $363.1 million in revenues and $34.5 million in income before income taxes and minority interest during the quarter ended March 31, 2006, $1,415.3 million in revenues and $239.1 million in income before income taxes and minority interest during the year ended December 31, 2005, which consisted of $22.5 million in revenues and $11.4 million in losses before income taxes and minority interest for the Successor period ended December 31, 2005 and $1,392.4 million in revenues and $250.5 million in income before income taxes and minority interest for the Predecessor period ended December 20, 2005.

Customers

        HERC's customers consist predominantly of commercial accounts and represent a wide variety of industries, such as construction, petrochemical, automobile manufacturing, railroad, power generation and shipbuilding. Serving a number of different industries enables HERC to reduce its dependence on a single or limited number of customers in the same business and somewhat reduces the seasonality of HERC's revenues and its dependence on construction cycles. HERC primarily targets customers in medium to large metropolitan markets. For the year ended December 31, 2005, no customer of HERC accounted for more than 1.2% of its rental revenues. Of HERC's rental revenues for the year ended December 31, 2005, roughly half were derived from customers operating in the construction industry, while the remaining revenues were derived from rentals to industrial, governmental and other types of customers.

        Unlike in our car rental business, where we enter into rental agreements with the people who will operate the cars being rented, HERC ordinarily enters into a rental agreement with the legal entity—typically a company, governmental body or other organization—seeking to rent HERC's equipment. Moreover, unlike in our car rental business, where our cars are normally picked up and dropped off by customers at our rental locations, HERC delivers much of its rental equipment to its customers' job sites and retrieves the equipment from the job sites when the rentals conclude. Finally, unlike in our car rental business, HERC extends credit terms to many of its customers to pay for rentals. Thus, for the year ended December 31, 2005, 94% of HERC's revenues came from customers who were invoiced by HERC for rental charges, while 5% came from customers paying with third-party charge, credit or debit cards and 1% came from customers who paid with cash or used another method of payment. For the year ended December 31, 2005, HERC had a bad debt expense ratio of 0.4% of its revenues.

Fleet

        HERC acquires its equipment from a variety of manufacturers. The equipment is typically new at the time of acquisition and is not subject to any repurchase program. The per-unit acquisition cost of units of rental equipment in HERC's fleet vary from over $200,000 to under $100. As of March 31, 2006, the average per-unit acquisition cost (excluding small equipment purchased for less than $5,000 per unit) for HERC's fleet in the United States was $35,000. As of March 31, 2006, the average age of HERC's rental fleet in the United States was 27 months. We believe that this fleet is younger than that of any of HERC's principal competitors in the United States. Having a younger fleet reduces maintenance expenses, which generally escalate as equipment ages. As of March 31, 2006, the average age of HERC's international rental fleet was 32 months in Canada and 39 months in France and Spain, which we believe is roughly comparable to the average ages of the fleets of HERC's principal competitors in those countries.

98



        HERC disposes of its used equipment through a variety of channels, including private sales to customers and other third parties, sales to wholesalers, brokered sales and auctions. Ancillary to its rental business, HERC is also a dealer of certain brands of new equipment in the United States and Canada, and sells consumables such as gloves and hardhats at many of its rental locations.

Licensees

        HERC licenses the Hertz name to equipment rental businesses in seven countries in Europe and the Middle East. The terms of those licenses are broadly similar to those we grant to our international car rental licensees.

Competition

        HERC's competitors in the equipment rental industry range from other large national companies to small regional and local businesses. In each of the four countries where HERC operates, the equipment rental industry is highly fragmented, with large numbers of companies operating on a regional or local scale. The number of industry participants operating on a national scale is, however, much smaller. HERC is one of the principal national-scale industry participants in each of the four countries where it operates. HERC's operations in the United States represented approximately 76% of our worldwide equipment rental revenues during the quarter ended March 31, 2006 and the year ended December 31, 2005. In the United States and Canada, the other principal national-scale industry participants are United Rentals, Inc. and RSC Equipment Rental, a division of the Atlas Copco Group. A number of individual Caterpillar dealers also participate in the equipment rental market in the United States and Canada. In France, the other principal national-scale industry participants are Loxam, Kiloutou and Laho, while in Spain, the other principal national-scale industry participants are GAM, Euroloc and Vilatel.

        Competition in the equipment rental industry is intense, and it often takes the form of price competition. HERC's competitors, some of which may have access to substantial capital, may seek to compete aggressively on the basis of pricing. To the extent that HERC matches downward competitor pricing, it could have an adverse impact on our results of operations. To the extent that HERC is not willing to match competitor pricing, it could also have an adverse impact on our results of operations due to lower rental volume. From 2001 to 2003, the equipment rental industry experienced downward pricing, measured by the rental rates charged by rental companies. For the years ended December 31, 2004 and 2005 and the first quarter of 2006, we believe industry pricing, measured in the same way, improved in the United States and Canada, but only started to improve towards the end of 2005 in France and Spain. HERC also experienced higher equipment rental volumes worldwide for the year ended December 31, 2005 and the first quarter of 2006. We believe that HERC's competitive success has been primarily the product of its 40 years of experience in the equipment rental industry, its systems and procedures for monitoring, controlling and developing its branch network, its capacity to maintain a comprehensive rental fleet, the quality of its sales force and its established national accounts program.

Other Operations

        Our wholly owned subsidiary, Hertz Claim Management Corporation, or "HCM," provides claim administration services to us and, to a lesser extent, to third parties. These services include investigating, evaluating, negotiating and disposing of a wide variety of claims, including third-party, first-party, bodily injury, property damage, general liability and product liability, but not the underwriting of risks. HCM conducts business at nine regional offices in the United States. Separate subsidiaries of ours conduct similar operations in eight countries in Europe.

99



Seasonality

        Car rental and equipment rental are seasonal businesses, with decreased levels of business in the winter months and heightened activity during the spring and summer. To accommodate increased demand, we increase our available fleet and staff during the second and third quarters of the year. As business demand declines, fleet and staff are decreased accordingly. However, certain operating expenses, including minimum concession fees, rent, insurance and administrative overhead, remain fixed and cannot be adjusted for seasonal demand. See "Risk Factors—Risks Related to Our Business—Our business is highly seasonal, and a disruption in rental activity during our peak season could materially adversely affect our results of operations." The following tables set forth this seasonal effect by providing quarterly revenues and operating income for each of the quarters since the beginning of 2005:

GRAPHIC   GRAPHIC

Employees

        As of March 31, 2006, we employed approximately 32,200 persons, consisting of 22,800 persons in our U.S. operations and 9,400 persons in our international operations. Employee benefits in effect include group life insurance, hospitalization and surgical insurance, pension plans and a defined contribution plan. International employees are covered by a wide variety of union contracts and governmental regulations affecting, among other things, compensation, job retention rights and pensions. Labor contracts covering the terms of employment of approximately 7,350 employees in the United States are presently in effect under 136 active contracts with local unions, affiliated primarily with the International Brotherhood of Teamsters and the International Association of Machinists. Labor contracts covering approximately 1,430 of these employees will expire during 2006. We have had no material work stoppage as a result of labor problems during the last 10 years, and we believe our labor relations to be good. Nonetheless, we may be unable to negotiate new labor contracts on terms advantageous to us, or without labor interruptions.

        In addition to the employees referred to above, we employ a substantial number of temporary workers, and engage outside services, as is customary in the industry, principally for the non-revenue movement of rental cars and equipment between rental locations and the movement of rental equipment to and from customers' job sites.

Risk Management

        Three types of generally insurable risks arise in our operations:

    legal liability arising from the operation of our cars and on-road equipment (vehicle liability);

100


    legal liability to members of the public and employees from other causes (general liability/workers' compensation); and

    risk of property damage and/or business interruption and/or increased cost of working as a consequence of property damage.

        In addition, we offer optional liability insurance and other products providing insurance coverage, which create additional risk exposures for us. Our risk of property damage is also increased when we waive the provisions in our rental contracts that hold a renter responsible for damage or loss under an optional loss or damage waiver that we offer. We bear these and other risks, except to the extent the risks are transferred through insurance or contracts.

        In many cases we self-insure our risks or reinsure risks through a wholly owned insurance subsidiary. We mitigate our exposure to large liability losses by maintaining excess insurance coverage, subject to deductibles and caps, through unaffiliated carriers with respect to our domestic operations and our car rental operations in Europe. For our international operations outside Europe and for HERC's operations in Europe, we maintain some liability insurance coverage with unaffiliated carriers. We also maintain property insurance with unaffiliated insurance carriers domestically and in Europe, subject to deductibles.

Third-Party Liability

        In our domestic operations, we are required by applicable financial responsibility laws to maintain insurance against legal liability for bodily injury (including death) or property damage to third parties arising from the operation of our cars and on-road equipment, sometimes called "vehicle liability," in stipulated amounts. In most places, we satisfy those requirements by qualifying as a self-insurer, a process that typically involves governmental filings and demonstration of financial responsibility, which sometimes requires the posting of a bond or other security. In the remaining places, we obtain an insurance policy from an unaffiliated insurance carrier and indemnify the carrier for any amounts paid under the policy. As a result of such arrangements, we bear economic responsibility for domestic vehicle liability, except to the extent we successfully transfer such liability to others through insurance or contractual arrangements.

        For our car rental operations in Europe, we have established two wholly owned insurance subsidiaries, Probus Insurance Company Europe Limited, or "Probus," a direct writer of insurance domiciled in Ireland, and Hertz International RE Limited, or "HIRE," a reinsurer organized in Ireland. In most European countries with company-operated locations, we purchase from Probus the vehicle liability insurance required by law, and Probus reinsures the risks under such insurance with HIRE. In the remaining countries in Europe with company-operated locations, we obtain the coverage from unaffiliated insurance carriers, which reinsure their risks with HIRE. Thus, as with our domestic operations, we bear economic responsibility for vehicle liability in our European car rental operations, except to the extent that we transfer such liability to others through insurance or contractual arrangements. For our international operations outside Europe and for HERC's operations in Europe, we maintain some form of vehicle liability insurance coverage. The nature of such coverage, and our economic responsibility for covered losses, varies considerably. In all cases, though, we believe the amounts and nature of the coverage we obtain is adequate in light of the respective potential hazards.

        Both domestically and in our international operations, from time to time in the course of our business we become legally responsible to members of the public for bodily injury (including death) or property damage arising from causes other than the operation of our cars and on-road equipment, sometimes known as "general liability." As with vehicle liability, we bear economic responsibility for general liability losses, except to the extent we transfer such losses to others through insurance or contractual arrangements.

101


        To mitigate our exposure to large vehicle and general liability losses domestically and in our car rental operations in Europe, we maintain excess insurance coverage with unaffiliated insurance carriers against such losses to the extent they exceed $10 million per occurrence (for occurrences in Europe before December 15, 2003, to the extent such losses exceeded $5 million per occurrence). The coverage provided under such excess insurance policies is limited to $100 million for the current policy year, which began on December 21, 2005 and ends on December 21, 2006 (for occurrences between December 15, 2005 and December 20, 2005, $235 million; December 15, 2004 and December 14, 2005, $185 million; December 15, 2003 and December 14, 2004, $150 million; and December 15, 2002 and December 14, 2003, $675 million). For our international operations outside Europe and for HERC's operations in Europe, we also maintain liability insurance coverage with unaffiliated carriers in such amounts as we deem adequate in light of the respective potential hazards, where such insurance is obtainable on commercially reasonable terms.

        Our domestic rental contracts, both for car rental and for equipment rental, typically provide that the renter will indemnify us for liability arising from the operation of the rented vehicle or equipment (for car rentals in certain places, though, only to the extent such liability exceeds the amount stipulated in the applicable financial responsibility law). In addition, many of HERC's domestic rental contracts require the renter to maintain liability insurance under which HERC is entitled to coverage. While such provisions are sometimes effective to transfer liability to renters, their value to us, particularly in cases of large losses, may be limited. The rental contracts used in our international operations sometimes contain provisions relating to insurance or indemnity, but they are typically more limited than those employed in our domestic operations.

        In our domestic car rental operations, we offer an optional liability insurance product, Liability Insurance Supplement, or "LIS," that provides vehicle liability insurance coverage substantially higher than state minimum levels to the renter and other authorized operators of a rented vehicle. LIS coverage is provided under excess liability insurance policies issued by an unaffiliated insurance carrier, the risks under which are reinsured with a subsidiary of ours. As a consequence of those reinsurance arrangements, rental customers' purchases of LIS do not reduce our economic exposure to vehicle liability. Instead, our exposure to vehicle liability is potentially increased when LIS is purchased, because insured renters and other operators may have vehicle liability imposed on them in circumstances and in amounts where the applicable rental agreement or applicable law would not, absent the arrangements just described, impose vehicle liability on us.

        In both our domestic car rental operations and our company-operated international car rental operations in many countries, we offer an optional product or products providing insurance coverage, or "PAI/PEC" coverage, to the renter and the renter's immediate family members traveling with the renter for accidental death or accidental medical expenses arising during the rental period or for damage or loss of their property during the rental period. PAI/PEC coverage is provided under insurance policies issued by unaffiliated carriers or, in some parts of Europe, by Probus, and the risks under such policies either are reinsured with HIRE or another subsidiary of ours or are the subject of indemnification arrangements between us and the carriers. Rental customers' purchases of PAI/PEC coverage create additional risk exposures for us, since we would not typically be liable for the risks insured by PAI/PEC coverage if that coverage had not been purchased.

        Our offering of LIS and PAI/PEC coverage in our domestic car rental operations is conducted pursuant to limited licenses or exemptions under state laws governing the licensing of insurance producers. In our international car rental operations, our offering of PAI/PEC coverage historically has not been regulated; however, in the countries of the European Union and Australia, the regulatory environment for insurance intermediaries is rapidly evolving, and we cannot assure you either that we will be able to continue offering PAI/PEC coverage without substantial changes in its offering process or in the terms of the coverage or that such changes, if required, would not render uneconomic our continued offering of the coverage. Due to a change in law in Australia, we have discontinued the sales of certain insurance products there.

102



        Provisions on our books for self-insured vehicle liability losses are made by charges to expense based upon evaluations of estimated ultimate liabilities on reported and unreported claims. As of March 31, 2006, this liability was estimated at $346.9 million for our combined domestic and international operations.

Damage to Our Property

        We bear the risk of damage to our property, unless such risk is transferred through insurance or contractual arrangements.

        To mitigate our risk of large, single-site property damage losses domestically and in Europe, we maintain property insurance with unaffiliated insurance carriers, generally with a per-occurrence deductible of $3.0 million ($10 million effective April 30, 2006 in the United States) and $2.5 million in respect of vehicle damage, and $50,000 in respect of all other losses, in Europe. For our international operations outside Europe, we also maintain property insurance coverage with unaffiliated carriers in such amounts as we deem adequate in light of the respective hazards, where such insurance is available on commercially reasonable terms.

        Our rental contracts typically provide that the renter is responsible for damage to or loss (including loss through theft) of rented vehicles or equipment. We generally offer an optional rental product, known in various countries as "loss damage waiver," "collision damage waiver," "theft protection" or "accident excess reduction," under which we waive or limit our right to make a claim for such damage or loss. This product is not regulated as insurance, but it is subject to specific laws in roughly half of the U.S. jurisdictions where we operate.

        Collision damage costs and the costs of stolen or unaccounted-for vehicles and equipment, along with other damage to our property, are charged to expense as incurred.

Other Risks

        To manage other risks associated with our businesses, or to comply with applicable law, we purchase other types of insurance carried by business organizations, such as worker's compensation and employer's liability (for which we, through contracts with insurers domestically, bear the risk of the first $5 million of loss from any occurrence), commercial crime and fidelity, performance bonds and directors' and officers' liability insurance, from unaffiliated insurance companies in amounts deemed by us to be adequate in light of the respective hazards, where such coverage is obtainable on commercially reasonable terms.

Governmental Regulation and Environmental Matters

        Throughout the world, we are subject to numerous types of governmental controls, including those relating to prices and advertising, privacy and data protection, currency controls, labor matters, charge card operations, insurance, environmental protection, used car sales and licensing.

Environmental

        The environmental requirements applicable to our operations generally pertain to (i) the operation and maintenance of cars, trucks and other vehicles, such as heavy equipment, buses and vans; (ii) the ownership and operation of tanks for the storage of petroleum products, including gasoline, diesel fuel and oil; and (iii) the generation, storage, transportation and disposal of waste materials, including oil, vehicle wash sludge and waste water. We have made, and will continue to make, expenditures to comply with applicable environmental laws and regulations.

        The use of cars and other vehicles is subject to various governmental requirements designed to limit environmental damage, including those caused by emissions and noise. Generally, these requirements are met by the manufacturer, except in the case of occasional equipment failure requiring

103



repair by us. Measures are taken at certain locations in states that require the installation of Stage II Vapor Recovery equipment to reduce the loss of vapor during the fueling process.

        We utilize tanks worldwide, approximately 490 of which are underground and 1,750 of which are aboveground, to store petroleum products, and we believe our tanks are maintained in material compliance with environmental regulations, including federal and state financial responsibility requirements for corrective action and third-party claims due to releases. Our compliance program for our tanks is intended to ensure that (i) the tanks are properly registered with the state or other jurisdiction in which the tanks are located and (ii) the tanks have been either replaced or upgraded to meet applicable leak detection and spill, overfill and corrosion protection requirements.

        We are also incurring and providing for expenses for the investigation and cleanup of contamination from the discharge of petroleum substances at, or emanating from, currently and formerly owned and leased properties, as well as contamination at other locations at which our wastes have reportedly been identified. The amount of any such expenses or related natural resource damages for which we may be held responsible could be substantial. The probable losses that we expect to incur for such matters have been accrued, and those losses are reflected in our consolidated financial statements. As of March 31, 2006 and December 31, 2005, the aggregate amounts accrued for environmental liabilities reflected in our consolidated balance sheet in "Other accrued liabilities" were $3.9 million and $3.9 million, respectively. The accrual generally represents the estimated cost to study potential environmental issues at sites deemed to require investigation or clean-up activities, and the estimated cost to implement remediation actions, including ongoing maintenance, as required. Cost estimates are developed by site. Initial cost estimates are based on historical experience at similar sites and are refined over time on the basis of in-depth studies of the site. For many sites, the remediation costs and other damages for which we ultimately may be responsible cannot be reasonably estimated because of uncertainties with respect to factors such as our connection to the site, the nature of the contamination, the involvement of other potentially responsible parties, the application of laws and other standards or regulations, site conditions, and the nature and scope of investigations, studies, and remediation to be undertaken (including the technologies to be required and the extent, duration, and success of remediation).

        With respect to cleanup expenditures for the discharge of petroleum substances at, or emanating from, currently and formerly owned or leased properties, we have received reimbursement, in whole or in part, from certain U.S. states that maintain underground storage tank petroleum cleanup reimbursement funds. Such funds have been established to assist tank owners in the payment of cleanup costs associated with releases from registered tanks. With respect to off-site U.S. locations at which our wastes have reportedly been identified, we have been and continue to be required to contribute to cleanup costs due to strict joint and several cleanup liability imposed by the federal Comprehensive Environmental Response, Compensation, and Liability Act of 1980 and comparable state superfund statutes.

        Environmental legislation and regulations and related administrative policies have changed rapidly in recent years, both in the United States and in other countries. There is a risk that governmental environmental requirements, or enforcement thereof, may become more stringent in the future and that we may be subject to legal proceedings brought by government agencies or private parties with respect to environmental matters. In addition, with respect to cleanup of contamination, additional locations at which wastes generated by us or substances used by us may have been released or disposed, and of which we are currently unaware, may in the future become the subject of cleanup for which we may be liable, in whole or part. Further, at airport-leased properties, we may be subject to environmental requirements imposed by airports that are more restrictive than those obligations imposed by environmental regulatory agencies. Accordingly, while we believe that we are in substantial compliance with applicable requirements of environmental laws, we cannot offer assurance that our future environmental liabilities will not be material to our consolidated financial position, results of operations or cash flows.

104



Dealings with Renters

        In the United States, car and equipment rental transactions are generally subject to Article 2A of the Uniform Commercial Code, which governs "leases" of tangible personal property. Car rental is also specifically regulated in more than half of the states of the United States. The subjects of state regulation include the methods by which we advertise, quote and charge prices, the consequences of failing to honor reservations, the terms on which we deal with vehicle loss or damage (including the protections we provide to renters purchasing loss or damage waivers) and the terms and method of sale of the optional insurance coverage that we offer. Some states (including California, New York, Nevada and Illinois) regulate the price at which we may sell loss or damage waivers, and many state insurance regulators have authority over the prices and terms of the optional insurance coverage we offer. See "—Risk Management" above for further discussion regarding the loss or damage waivers and optional insurance coverages that we offer renters. Internationally, regulatory regimes vary greatly by jurisdiction, but they do not generally prevent us from dealing with customers in a manner similar to that employed in the United States.

        Both in the United States and internationally, we are subject to increasing regulation relating to customer privacy and data protection. In general, we are limited in the uses to which we may put data that we collect about renters, including the circumstances in which we may communicate with them. In addition, we are generally obligated to take reasonable steps to protect customer data while it is in our possession. Our failure to do so could subject us to substantial legal liability or seriously damage our reputation.

Changes in Regulation

        Changes in government regulation of our business have the potential to alter our business practices, or our profitability, materially. Depending on the jurisdiction, those changes may come about through new legislation, the issuance of new regulations or changes in the interpretation of existing laws and regulations by a court, regulatory body or governmental official. Sometimes those changes may have not just prospective but also retroactive effect; this is particularly true when a change is made through reinterpretation of laws or regulations that have been in effect for some time. Moreover, changes in regulation that may seem neutral on their face may have either more or less impact on us than on our competitors, depending on the circumstances. Recent or potential changes in law or regulation that affect us relate to insurance intermediaries, customer privacy and data security and rate regulation, each as described under "Risk Factors—Risks Related to Our Business—Changes in the U.S. and foreign legal and regulatory environment that impact our operations, including laws and regulations relating to the insurance products we sell, customer privacy, data security, insurance rates and expenses we pass through to customers by means of separate charges, could disrupt our business, increase our expenses or otherwise could have a material adverse effect on our results of operations."

        In addition, our operations, as well as those of our competitors, also could be affected by any limitation in the fuel supply or by any imposition of mandatory allocation or rationing regulations. We are not aware of any current proposal to impose such a regime in the United States or internationally. Such a regime could, however, be quickly imposed if there were a serious disruption in supply for any reason, including an act of war, terrorist incident or other problem affecting petroleum supply, refining, distribution or pricing.

Relationship with Ford

        Prior to the Acquisition, Ford, through its wholly owned subsidiary Ford Holdings, was Hertz's only stockholder. As a result of the Acquisition, Hertz Holdings indirectly owns all of Hertz's outstanding common stock. Currently, investment funds associated with or designated by the Sponsors own over 99% of Hertz Holdings' outstanding common stock, with the remainder held by members of management. Following the completion of this offering, the funds associated with or designated by the Sponsors will hold approximately      % of our outstanding common stock.

105



        Set forth below are descriptions of certain agreements, relationships and transactions between Hertz and Ford that survived the completion of the Acquisition.

Supply and Advertising Arrangements

        On July 5, 2005, Hertz, one of its wholly owned subsidiaries and Ford signed a Master Supply and Advertising Agreement, effective July 5, 2005 and expiring August 31, 2010, that covers the 2005 through 2010 vehicle model years. This agreement replaced and superseded the joint advertising and vehicle supply agreements that would have expired on August 31, 2007.

        The terms of the Master Supply and Advertising Agreement only apply to our fleet requirements and advertising in the United States and to Ford, Lincoln or Mercury brand vehicles, or "Ford Vehicles." Under the Master Supply and Advertising Agreement, Ford has agreed to supply to us and we have agreed to purchase from Ford, during each of the 2005 through 2010 vehicle model years, a specific number of Ford Vehicles. Ford has also agreed in the Master Supply and Advertising Agreement to pay us a contribution toward the cost of our advertising of Ford Vehicles equal to one-half of our total expenditure on such advertising, up to a specified maximum amount. To be eligible for advertising cost contribution under the Master Supply and Advertising Agreement, the advertising must meet certain conditions, including the condition that we feature Ford Vehicles in a manner and with a prominence that is reasonably satisfactory to Ford. It further provides that the amounts Ford will be obligated to pay to us for our advertising costs will be increased or reduced according to the number of Ford Vehicles acquired by us in any model year, provided Ford will not be required to pay any amount for our advertising costs for any year if the number of Ford Vehicles acquired by us in the corresponding model year is less than a specified minimum except to the extent that our failure to acquire the specified minimum number of Ford Vehicles is attributable to the availability of Ford Vehicles or Ford vehicle production is disrupted for reasons beyond the control of Ford. To the extent we acquire less than a specified minimum number of Ford Vehicles in any model year, we have agreed to pay Ford a specified amount per vehicle below the minimum.

        The advertising contributions paid by Ford for the 2005 vehicle model year were less than the advertising contributions we received from Ford for the 2004 model year. We expect that contributions in future years may also be below levels for the 2005 model year based upon anticipated reductions in the number of Ford vehicles to be acquired. We do not expect that the reductions in Ford's advertising contributions will have a material adverse effect on our results of operations.

        Under the terms of the Master Supply and Advertising Agreement, we are able to enter into vehicle advertising and supply agreements with other automobile manufacturers in the United States and in other countries, and we intend to explore those opportunities. However, we cannot offer assurance that we will be able to obtain advertising contributions from other automobile manufacturers that will mitigate reductions in Ford's advertising contributions.

        Ford subsidiaries and affiliates also supply other brands of cars, including Jaguar, Volvo, Mazda and Land Rover cars, to us in the United States under arrangements separate from the Master Supply and Advertising Agreement. In addition, Ford and its subsidiaries and affiliates are significant suppliers of cars to our international operations.

Other Relationships and Transactions

        We and Ford also engage in other transactions in the ordinary course of our respective businesses. These transactions include HERC's providing equipment rental services to Ford, our providing insurance and insurance claim management services to Ford and our providing car rental services to Ford. In addition, Ford subsidiaries are our car rental licensees in Scandinavia and Finland.

106



Properties

        We operate car rental locations at or near airports and in central business districts and suburban areas of major cities in North America (the United States, including Puerto Rico and the U.S. Virgin Islands, and Canada), Europe (France, Germany, Italy, the United Kingdom, Spain, the Netherlands, Switzerland, Belgium and Luxembourg), the Pacific (Australia and New Zealand) and Brazil, as well as retail used car sales locations in the United States and France. We operate equipment rental locations in North America (the United States and Canada) and Europe (France and Spain). We also operate headquarters, sales offices and service facilities in the foregoing countries in support of our car rental and equipment rental operations, as well as small car rental sales offices and service facilities in a select number of other countries in Europe and Asia.

        Of such locations, fewer than 10% are owned by us. The remaining locations are leased or operated under concessions from governmental authorities and private entities. Those leases and concession agreements typically require the payment of minimum rents or minimum concession fees and often also require us to pay or reimburse operating expenses; to pay additional rent, or concession fees above guaranteed minimums, based on a percentage of revenues or sales arising at the relevant premises; or to do both. See Note 10 to the Notes to our audited annual consolidated financial statements included elsewhere in this prospectus.

        We own four major facilities in the vicinity of Oklahoma City, Oklahoma at which reservations for our car rental operations are processed, global information systems are serviced and major domestic and international accounting functions are performed. We also have a long-term lease for a reservation and financial center near Dublin, Ireland, at which we have centralized our European car rental reservation and customer relations and accounting functions, and we lease a reservation center in Saraland (Mobile County), Alabama to supplement the capacity of our Oklahoma City car rental reservation center. We maintain our executive offices in an owned facility in Park Ridge, New Jersey, and lease a European headquarters office in Uxbridge, England.

Legal Proceedings

        On March 15, 2004, Jose M. Gomez, individually and on behalf of all other similarly situated persons, v. The Hertz Corporation was commenced in the 214th Judicial District Court of Nueces County, Texas. Gomez purports to be a class action filed alternatively on behalf of all persons who were charged a Fuel and Service Charge, or "FSC," by us or all Texas residents who were charged a FSC by us. The petition alleged that the FSC is an unlawful penalty and that, therefore, it is void and unenforceable. The plaintiff seeks compensatory damages, with the return of all FSC paid or the difference between the FSC and our actual costs, disgorgement of unearned profits, attorneys' fees and costs. In response to various motions by us, the plaintiff filed two amended petitions which scaled back the putative class from a nationwide class to a class of all Texas residents who were charged a FSC by us or by our Corpus Christi licensee. A new cause of action was also added for conversion for which the plaintiff is seeking punitive damages. After some limited discovery, we filed a motion for summary judgment in December 2004. That motion was denied in January 2005. The parties then engaged in more extensive discovery. In April 2006, the plaintiff further amended his petition by adding a cause of action for fraudulent misrepresentation and, at the plaintiff's request, a hearing on the plaintiff's motion for class certification has been scheduled for August 2006. In May 2006, the plaintiff filed a fourth amended petition which deleted the cause of action for conversion and the plaintiff also filed a first amended motion for class certification in anticipation of the August 2006 hearing on class certification.

        On November 18, 2004, Keith Kochner, individually and on behalf of all similarly situated persons, v. The Hertz Corporation was commenced in the District Court in and for Tulsa County, State of Oklahoma. As with the Gomez case, Kochner purports to be a class action, this time on behalf of Oklahoma residents who rented from us and incurred our FSC. The petition alleged that the imposition of the FSC is a breach of contract and amounts to an unconscionable penalty or liquidated damages in violation of Article 2A of the Oklahoma Uniform Commercial Code. The plaintiff seeks

107



compensatory damages, with the return of all FSC paid or the difference between the FSC and our actual costs, disgorgement of unearned profits, attorneys' fees and costs. In March 2005, the trial court granted our motion to dismiss the action but also granted the plaintiff the right to replead. In April 2005, the plaintiff filed an amended class action petition, newly alleging that our FSC violates the Oklahoma Consumer Protection Act and that we have been unjustly enriched, and again alleging that our FSC is unconscionable under Article 2A of the Oklahoma Uniform Commercial Code. In May 2005, we filed a motion to dismiss the amended class action petition. In October 2005, the court granted our motion to dismiss, but allowed the plaintiff to file a second amended complaint by the end of October, which the plaintiff did. A third amended complaint was filed in November 2005 and we then answered the complaint. Discovery has now commenced.

        On December 13, 2005, Janelle Johnson, individually and on behalf of all other similarly situated persons v. The Hertz Corporation was filed in the Second Judicial District Court of the County of Bernalillo, New Mexico. As with the Gomez and Kochner cases, Johnson purports to be a class action, this time on behalf of all New Mexico residents who rented from us and who were charged a FSC. The complaint alleges that the FSC is unconscionable as a matter of law under pertinent sections of the New Mexico Uniform Commercial Code and that, under New Mexico common law, the collection of FSC does not constitute valid liquidated damages, but rather is a void penalty. The plaintiff seeks compensatory damages, with the return of all FSC paid or the difference between the FSC and its actual cost. In the alternative, the plaintiff requests that the court exercise its equitable jurisdiction and order us to cease and desist from our unlawful conduct and to modify our lease provisions to conform with applicable provisions of New Mexico statutory and common law. The complaint also asks for attorneys' fees and costs. We have removed the action to the U.S. District Court for the District of New Mexico and, in lieu of an answer, filed a motion to dismiss.

        We believe that we have meritorious defenses in the foregoing matters and will defend ourselves vigorously.

        In February 2005, the Hazardous Materials Division of the San Diego Department of Environmental Health, or the "Department," indicated in writing that it was preparing to bring an administrative action against us due to an alleged noncompliance related to secondary containment testing for certain underground storage tanks located at one of our facilities. The Department verbally proposed a monetary penalty of approximately $113,000. We have commenced settlement discussions concerning the alleged violations.

        In addition, we are currently a defendant in numerous actions and have received numerous claims on which actions have not yet been commenced for PL/PD arising from the operation of motor vehicles and equipment rented from us and our licensees. In the aggregate, we can be expected to expend material sums to defend and settle PL/PD actions and claims or to pay judgments resulting from them. See "—Risk Management."

        In addition to the foregoing, various legal actions, claims and governmental inquiries and proceedings are pending or may be instituted or asserted in the future against us and our subsidiaries. Litigation is subject to many uncertainties, and the outcome of the individual litigated matters is not predictable with assurance. It is possible that certain of the actions, claims, inquiries or proceedings, including those discussed above, could be decided unfavorably to us or any of our subsidiaries involved. Although the amount of liability with respect to these matters cannot be ascertained, potential liability in excess of related accruals is not expected to materially affect our consolidated financial position, results of operations or cash flows.

108



MANAGEMENT

Directors and Executive Officers

        Set forth below are the names, ages and number of years employed by us as of June 30, 2006 and positions of our executive officers and directors.

Name

  Age
  Number of
Years
Employed
by Us

  Position
George W. Tamke   59     Chairman of the Board of Directors (Lead Director as of July 19, 2006)
Craig R. Koch   59   35   Chief Executive Officer and Director (Chairman of the Board of Directors as of July 19, 2006)
Mark P. Frissora   50     Chief Executive Officer and Director (as of July 19, 2006)
Paul J. Siracusa   61   37   Executive Vice President and Chief Financial Officer
Joseph R. Nothwang   59   30   Executive Vice President and President, Vehicle Rental and Leasing, The Americas and Pacific
Brian J. Kennedy   64   22   Executive Vice President, Marketing & Sales
Gerald A. Plescia   50   26   Executive Vice President and President, HERC
Michel Taride   49   20   Executive Vice President and President, Hertz Europe Limited
Harold E. Rolfe   48   7   Senior Vice President, General Counsel & Secretary
Irwin Pollack   50   27   Senior Vice President, Employee Relations
Charles L. Shafer   62   40   Senior Vice President, Quality Assurance & Administration
Claude B. Burgess III   51   26   Senior Vice President, Technology & e-Business
Richard J. Foti   60   27   Controller
Robert H. Rillings   65   45   Treasurer
Nathan K. Sleeper   32     Director
David H. Wasserman   39     Director
William E. Conway, Jr.   56     Director
Gregory S. Ledford   49     Director
George A. Bitar   41     Director
Robert F. End   50     Director

        Mr. Tamke has served as the Chairman of the Board of Directors of Hertz Holdings since shortly after the Acquisition in December 2005. Mr. Tamke has also served as the Chairman of the Board of Hertz since that date. As of July 19, 2006, Mr. Tamke will relinquish the title of Chairman of the Board of Directors of Hertz Holdings and Hertz and will become Lead Director of Hertz Holdings and Hertz. Mr. Tamke is an operating principal with CD&R. Prior to joining CD&R in 2000, he was an executive at Emerson Electric Co., a manufacturer of electrical and electronic equipment, serving as President and Chief Operating Officer from 1997 to 1999 and as Vice Chairman and Co-Chief Executive Officer

109



from 1999 to February 2000. He has served as a director of Target Corporation since June 1999 and as Chairman of Culligan Ltd. since October 2004 and was previously Chairman and Chief Executive Officer of Kinko's, Inc.

        Mr. Koch has served as the Chief Executive Officer and a director of Hertz Holdings since December 21, 2005. He has served as Chief Executive Officer of Hertz since January 2000. From January 1, 2004 until December 21, 2005, he was Chairman of the Board of Hertz as well. As of July 19, 2006, Mr. Koch will relinquish the title of Chief Executive Officer and will become Chairman of the Board of Directors of Hertz Holdings and Hertz. Prior to his election as Chief Executive Officer, Mr. Koch served in various other operating positions with Hertz. From August 1993 until December 1999, he served as President and Chief Operating Officer. From February 1988 until August 1993, he served as Executive Vice President and President of North America Car Rental Operations. From May 1987 to February 1988, he served as President and Chief Operating Officer. From October 1983 until May 1987, he served as Executive Vice President and General Manager of Hertz's Car Rental Division. From March 1980 until October 1983, he served as Vice President and General Manager. Mr. Koch has been a director on Hertz's Board of Directors since June 1994 and previously served as a director from May 1987 to July 1993 and from October 1983 to September 1985. On October 27, 2005, Mr. Koch announced his current intention to retire from Hertz effective January 1, 2007.

        Mr. Frissora will serve as the Chief Executive Officer and a director of Hertz and Hertz Holdings effective July 19, 2006. Prior to joining Hertz and Hertz Holdings, Mr. Frissora served as Chief Executive Officer of Tenneco Inc. from November 1999 to July 2006 and as President of the automotive operations of Tenneco Inc. from April 1999 to July 2006. He also served as the Chairman of Tenneco Inc. from March 2000 to July 2006. From 1996 to April 1999, he held various positions within Tenneco Inc.'s automotive operations, including Senior Vice President and General Manager of the worldwide original equipment business. Previously Mr. Frissora served as a Vice President of Aeroquip Vickers Corporation from 1991 to 1996. In the 15 years prior to joining Aeroquip Vickers, he served for 10 years with General Electric and five years with Philips Lighting Company in management roles focusing on product development and marketing. He is a director of NCR Corporation, where he serves on its Compensation Committee, and FMC Corporation, where he serves on its Audit Committee.

        Mr. Siracusa has served as the Executive Vice President and Chief Financial Officer of Hertz Holdings since the Acquisition in December 2005. He has served as the Executive Vice President and Chief Financial Officer of Hertz since August 1997. From January 1996 to August 1997, he served as Vice President, Finance and Chief Financial Officer, Hertz International, Ltd., based in England. He served as Staff Vice President and Controller Worldwide Rent A Car for Hertz from August 1994 until December 1995 and has served in various other financial positions with us since 1969. Mr. Siracusa served as a director on Hertz's Board of Directors from January 2004 until December 2005.

        Mr. Nothwang has served as the Executive Vice President and President of Vehicle Rental and Leasing, The Americas and Pacific, for Hertz since January 2000 and as the Executive Vice President and President of Vehicle Rental and Leasing, The Americas and Pacific of Hertz Holdings since June 2006. From September 1995 until December 1999 he was Executive Vice President and General Manager, U.S. Car Rental Operations for Hertz. From August 1993 until August 1995 he was Vice President and General Manager U.S. Car Rental Operations for Hertz. Prior to that he was Division Vice President, Region Operations for Hertz since 1985. He served in various other operating positions with Hertz between 1976 and 1985.

        Mr. Kennedy has served as Hertz's Executive Vice President, Marketing & Sales since February 1988 and as the Executive Vice President, Sales & Marketing, of Hertz Holdings since June 2006. From May 1987 through January 1988, he served as Executive Vice President and General Manager of Hertz's Car Rental Division, prior to which, from October 1983, he served as Senior Vice President, Marketing for Hertz.

110



        Mr. Plescia has served as the Executive Vice President and President, HERC since July 1997 and as the Executive Vice President and President, HERC, of Hertz Holdings since June 2006. From September 1991 until June 1997, he served as Division Vice President, Field Operations, HERC and has served in various other operations and financial positions with us since 1979.

        Mr. Taride has served as the Executive Vice President and President, Hertz Europe Limited since January 2004 and as the Executive Vice President and President, Hertz Europe Limited, of Hertz Holdings since June 2006. From January 2003 until December 2003, he served as Vice President and President, Hertz Europe Limited. From April 2000 until December 2002, he served as Vice President and General Manager, Rent A Car, Hertz Europe Limited. From July 1998 to March 2000, he was General Manager, Rent A Car France and HERC Europe. Previously, he served in various other operating positions in Europe from 1980 to 1983 and from 1985 to 1998.

        Mr. Rolfe has served as the Senior Vice President, General Counsel and Secretary of Hertz Holdings since June 2006. He served as the General Counsel and Secretary of Hertz Holdings from December 2005 until June 2006 and as the Senior Vice President, General Counsel and Secretary of Hertz since May 1999. He served as the Senior Vice President and General Counsel of Hertz from October 1998 to May 1999. Previously he served as Vice President and General Counsel, Corporate Property Investors, New York, New York from June 1991 until September 1998.

        Mr. Pollack has served as the Senior Vice President, Employee Relations of Hertz since January 2005 and as the Senior Vice President, Employee Relations of Hertz Holdings since June 2006. From July 1999 until December 2004, Mr. Pollack served as Division Vice President, Employee Relations, Vehicle Rental and Leasing, The Americas and Pacific for Hertz. He served in various other Employee Relations positions with Hertz from 1978 to 1999.

        Mr. Shafer has served as the Senior Vice President, Quality Assurance & Administration for Hertz since January 2003 and as the Senior Vice President, Quality Assurance & Administration of Hertz Holdings since June 2006. From February 1998 until December 2002, he had served as Vice President and President, Hertz Europe Limited. From January 19