Restatement

12 Months Ended

Dec. 31, 2014

Accounting Changes and Error Corrections [Abstract]

Restatement

Restatement

Revisions Reported in the 2013 Form 10-K

During the fourth quarter of 2013, the Company identified certain out of period misstatements totaling $46 million, of which $35 million ($21 million, net of tax) related to its previously issued consolidated financial statements for the years ended December 31, 2012 and prior. While these misstatements did not, individually or in the aggregate, result in a material misstatement of the Company's previously issued consolidated financial statements, correcting these misstatements in the fourth quarter of 2013 would have been material to that quarter. Accordingly, management revised its previously reported consolidated financial statements in the Form 10-K for the year ended December 31, 2013 filed with the SEC on March 31, 2014 ("2013 Form 10-K"). These recorded pre-tax adjustments relate to vendor incentives (reduced pre-tax income by $2 million in 2012) which had been accounted for as a reduction of marketing expenses instead of reducing the cost of revenue earning equipment, charges related to certain assets and allowances for doubtful accounts in Brazil (reduced pre-tax income by $4 million in 2012), as well as other immaterial misstatements (reduced pre-tax income by $3 million in 2012).

The column in the tables below labeled "As Previously Reported" reflects the revised numbers that include the effects of these out of period misstatements. Certain prior period amounts have been reclassified to conform with current period presentation.

Restatement

As discussed in the Explanatory Note to this Annual Report on Form 10-K, this Note 2 to the consolidated financial statements discloses the nature of the restatement matters and adjustments and shows the impact of the restatement matters on revenues, expenses, income, assets, liabilities, equity, and cash flows from operating activities, investing activities, and financing activities, and the cumulative effects of these adjustments on the consolidated statement of operations, balance sheet, and cash flows for 2012 and 2013. In addition, this Note shows the effects of the adjustment to opening retained earnings as of January 1, 2012, which adjustment reflects the impact of the restatement on periods prior to 2012. The cumulative impact of the out of period misstatements for all previously reported periods through December 31, 2013, including amounts associated with the revision previously reported in the 2013 Form 10-K, was approximately a $349 million reduction in pre-tax income and $231 million reduction in net income. The cumulative annual impact on 2012 and 2013 was a reduction in pre-tax income and net income of $90 million and $62 million for 2012 and $72 million and $51 million for 2013. Excluding the revision included in the 2013 Form 10-K of $26 million on a pre-tax basis and $17 million on an after-tax basis, approximately $160 million on a pre-tax basis and $100 million on an after-tax basis is included as a reduction to opening retained earnings as of January 1, 2012. For information on the impact of the restatement on the year 2011, reference is made to Item 6 - Selected Financial Data of this Annual Report on Form 10-K.

Restatement Background

During the preparation of the Company's Form 10-Q for the first quarter of 2014, misstatements were identified in the previous financial statements relating to the capitalization and timing of depreciation for certain non-fleet assets, allowances for doubtful accounts in Brazil, as well as other items. These misstatements, in combination with misstatements previously identified in the revision included in the Company's 2013 Form 10-K related to vehicle vendor allowances for marketing and misstatements related to the Brazil operations, resulted in the Audit Committee, in consultation with the Company's management, concluding on June 3, 2014 that the Company's financial statements for 2011 should no longer be relied upon, and would require restatement.

In light of the above, in June 2014, the Audit Committee directed that two complementary processes be undertaken. First, the Audit Committee directed management to conduct a thorough review of the Company's financial records for fiscal years 2011, 2012 and 2013 to determine whether further adjustments were necessary. This review, which was conducted with the assistance of outside consultants, identified additional misstatements, including misstatements related to:

• capitalization and timing of depreciation for non-fleet capital and information technology expenditures;

• accruals for uninvoiced non-fleet vendor obligations;

• accrual for salvage vehicles;

• the amortization period associated with vehicle registration and license fees;

• reserve estimates associated with allowances for uncollectible amounts receivable for renter obligations related to damaged vehicles;

• reserve estimates associated with allowances for doubtful accounts, including credit memos;

• reserve estimates associated with probable credit card charge backs;

• accruals for customer rewards programs;

• accrued unbilled revenue;

• reserve estimates associated with allowances for doubtful accounts for the Brazil operations;

• accruals for travel vouchers associated with the Brazil operations;

• Brazil operations litigation reserves;

• other assets and intercompany accounts for the Brazil operations;

• accruals for restoration obligations at the end of facility leases; and

• disclosure of gross equipment and accumulated depreciation balances associated with the capitalization of refurbishment costs.

On November 10, 2014, the Audit Committee, in consultation with management, concluded that additional proposed adjustments arising out of the review were material to the Company's 2012 and 2013 financial statements and that, as a result, the 2012 and 2013 financial statements also would require restatement.

The second process, which the Company commenced in June 2014, involved an internal investigation of certain matters related to the accounting during prior periods. The investigation was undertaken by outside counsel, along with independent counsel for the Audit Committee. Counsel received assistance from outside consultants and new senior accounting and compliance personnel. The internal investigation is complete, although the Company's outside counsel and the independent counsel to the Audit Committee continue to provide forensic and investigative support in connection with certain proceedings discussed in Item 3, "Legal Proceedings," in this Annual Report on Form 10-K and in Note 14, "Contingencies and Off-Balance Sheet Commitments" to the consolidated financial statements involving the Company's restatements and related accounting for prior periods.

As part of the Company’s review of its financial records, the Company identified control deficiencies related to the control environment, risk assessment, information and communication, and monitoring. For further information regarding these control deficiencies, please see Item 9A - Controls and Procedures in this Annual Report on Form 10-K. The Company’s incorrect accounting was the result of these control deficiencies and the complex mix of structural and environmental factors. The Company’s investigation found that one of these factors was that an inconsistent and sometimes inappropriate tone at the top that was present under the then existing senior management that did not in certain instances result in adherence to GAAP and Company accounting policies and procedures. In particular, the Company’s former Chief Executive Officer’s management style and temperament created a pressurized operating environment at the Company, where challenging targets were set and achieving those targets was a key performance expectation. There was in certain instances an inappropriate emphasis on meeting internal budgets, business plans, and current estimates. The Company’s former Chief Executive Officer further encouraged employees to focus on potential business risks and opportunities, and on potential financial or operating performance gaps, as well as ways of ameliorating potential risks or gaps, including through accounting reviews. This resulted in an environment which in some instances may have led to inappropriate accounting decisions and the failure to disclose information critical to an effective review of transactions and accounting entries, such as certain changes in accounting methodologies, to the appropriate finance and accounting personnel or the Company’s Board, Audit Committee, or independent registered public accounting firm. The tone set and pressures imposed by the former Chief Executive Officer were inappropriate in certain instances and may have been a factor influencing one or more employees to record an accounting entry now determined to be improper. Other factors affecting the overall historic accounting environment and influencing employees included the distraction caused by the multiple, conflicting business initiatives; challenges related to managing complex, inefficient legacy systems; the lack of a sufficient complement of personnel with an appropriate level of knowledge, experience, and training with GAAP; unclear reporting structures, reporting lines, and decisional authority in the organization; and other matters. Taken together, these factors fostered a control environment that in some instances enabled inappropriate accounting to occur.

Description of Restatement Matters and Restatement Adjustments

Based on the internal investigation, the Company's review of its financial records, and other work completed by its management, the Audit Committee has concluded that there were material misstatements in the 2011, 2012, and 2013 consolidated financial statements.

The restatement of previously issued financial statements reduced pre-tax earnings for the years ended December 31, 2013 and December 31, 2012 by approximately $72 million and $81 million, respectively. Below are tables summarizing the impact of the restatement matters and the effect of the change in accounting principle, as discussed further in Note 7 - "Employee Retirement Benefits," on the previously issued consolidated financial statements for the years ended December 31, 2013 and December 31, 2012. The change in accounting principle increased pre-tax income by $12 million in 2013 and $5 million in 2012.

The individual restatement matters that underlie the restatement adjustments are described below and are reflected and quantified, as applicable, in the footnotes to the below tables. The restatement adjustments also affect periods prior to 2012.

Reserve and Estimates Recognition Restatement Adjustments

(a) Allowance for Doubtful Accounts and Credit Memos (U.S. Car Rental) - The historical methodology employed for doubtful customer accounts and credit memo allowances for the U.S. Car Rental business inappropriately used inaccurate write-off rates for receivables, aggregated receivables with significantly different credit risks for purposes of analysis and used assumptions in setting the reserve for credit memos that were not supported. Inappropriate tone at the top, among other factors, may have contributed to this restatement matter. The resulting reduction to pre-tax earnings was $1 million in 2013 and $3 million in 2012, respectively. The cumulative pre-tax misstatement was a decrease of $7 million.

(b) Allowance for Doubtful Accounts and Credit Memos (International Car Rental) - The historical methodology employed for doubtful customer accounts and credit memo allowances for the international car rental business inappropriately used inaccurate write-off rates for receivables, aggregated receivables with significantly different credit risks for purposes of analysis and did not include a reserve for credit memos. Inappropriate tone at the top, among other factors, may have contributed to this restatement matter. The resulting reduction to pre-tax earnings was $3 million in 2013 and $1 million in 2012, respectively. The cumulative pre-tax misstatement was a decrease of $12 million.

(c) Allowance for Doubtful Accounts and Credit Memos (Worldwide Equipment Rental) - The historical methodology employed for doubtful customer accounts and credit memo allowances for the worldwide equipment rental business inappropriately used rates that differed from historical norms, used unsupported assumptions, and contained formulaic errors. In addition, changes to the methodology in 2012 reduced the reserve requirement and slowed the rate of recording account write-offs. Inappropriate tone at the top, among other factors, may have contributed to this restatement matter. There was no impact to pre-tax earnings in 2013 and a reduction to pre-tax earnings of $6 million in 2012. The cumulative pre-tax misstatement was a decrease of $8 million.

(d) Subrogation (Damage) Receivables and the Related Allowance for Doubtful Accounts (U.S. Car Rental) - This restatement matter relates to estimated recoveries from third parties responsible for damages to vehicles. The historical methodologies used to estimate the unbilled balances and the allowance accounts inappropriately used assumptions that lacked support, including using write-offs rather than collection history as a key assumption and changed methodologies without any supported basis, as well as contained formulaic errors. In addition, there were instances in which the amount recorded for the allowance was significantly less than the amount calculated based on the methodology in place at the time. The Company has revised the methodology used to calculate subrogation claims to utilize the ratio of claims collected compared to damage expense incurred. Inappropriate tone at the top, among other factors, may have contributed to this restatement matter. The result was a reduction to pre-tax earnings of $3 million in 2013 and $26 million in 2012. The cumulative pre-tax misstatement was a decrease of $48 million.

(e) Subrogation (Damage) Receivables and the Related Allowance for Doubtful Accounts (International Car Rental) - This restatement matter relates to estimated recoveries from third parties responsible for damages to vehicles. The historical methodologies used to estimate the allowance accounts inappropriately used assumptions that lacked support, including using write-offs rather than collection history as a key assumption, as well as contained formulaic errors. In addition, there were instances in which the amount recorded for the allowance was significantly less than the amount calculated based on the methodology in place at the time. The result was an increase to pre-tax earnings of $3 million in 2013 and a reduction to pre-tax earnings of $3 million in 2012. The cumulative pre-tax misstatement was a decrease of $8 million.

(f) Accrued Salvaged Vehicles (U.S. Car Rental) - This restatement matter relates to the reserve for estimated vehicle damages incurred in the U.S. car rental business but not reported as of period ends. The methodology used to estimate the reserve was changed without appropriate supporting documentation and the most significant, required element of the reserve was eliminated. As part of the restatement process, the Company has reinstated the previous methodology. Inappropriate tone at the top, among other factors, may have contributed to this restatement matter. There was no impact to pre-tax earnings in 2013 and a reduction to pre-tax earnings of $5 million in 2012. The cumulative pre-tax misstatement was a decrease of $5 million.

(g) Credit Card Chargebacks (U.S. and International Car Rental) - This restatement matter relates to reserves established to accrue for future credit card chargebacks pertaining to completed revenue transactions with customers and for chargebacks received from credit card providers.  The reserves were understated in 2011, 2012 and 2013 for a variety of reasons.  These reasons included (1) the Company inappropriately changed the methodology for computing reserves established to accrue for future chargebacks in 2013 and (2) the Company erroneously excluded chargebacks received from credit card providers from the balances used to calculate the allowance for doubtful accounts.  Inappropriate tone at the top, among other factors, may have contributed to this restatement matter. The resulting reduction to pre-tax earnings was $3 million for 2013 and $1 million for 2012. The cumulative pre-tax misstatement was a decrease of $4 million.

Accounting for Fleet Restatement Adjustments

(h) Rental Equipment Refurbishment (Worldwide Equipment Rental) - This restatement matter relates to refurbishment designed to extend the useful life of rental equipment used in the worldwide equipment rental business. At the time of refurbishment, the Company improperly reduced the cost basis of rental equipment that was subject to useful life extension. The reduction was effected by reversing accumulated depreciation on refurbished equipment as an offset to original cost. These adjustments to the balance sheet had no impact on pre-tax earnings in 2013 and 2012 but reduced cost and accumulated depreciation of Revenue Earning Equipment cumulatively by $31 million in 2013 and $16 million in 2012. Inappropriate tone at the top, among other factors, may have contributed to this restatement matter.

Fixed Assets Restatement Adjustments

(i) Fixed Assets and Construction in Progress and Capitalized Software (U.S. Car Rental, Worldwide Equipment Rental and Corporate) - This restatement matter relates to accounting for non-fleet fixed assets (e.g., leasehold improvements and property improvements) and capitalized software expenditures. The adjustments associated with non-fleet fixed assets  and capitalized software primarily relate to the Company’s identification of (1) expenditures that were capitalized rather than expensed, (2) the failure to write off abandoned projects included in construction in progress on a timely basis, (3) the failure to write off assets no longer in service, and (4) depreciation adjustments associated with assets that should have been placed in service at a date that preceded the placed-in-service date, including assets that had not yet been transferred from construction in progress to in service. Inappropriate tone at the top, among other factors, may have contributed to this restatement matter.  The resulting reduction to pre-tax earnings was $19 million for 2013 and $8 million for 2012. The cumulative pre-tax misstatement was a decrease of $56 million.

Brazil Restatement Adjustment

(j) Brazil Adjustments (International Car Rental) - This restatement matter relates to the Brazilian operations of the International Car Rental business. Allowances for uncollectible balances were calculated using inappropriate methodologies, and certain assets, reserves for legal expenses and litigation, and intercompany account balances were not properly supported and consequently were written off. Inappropriate tone at the top, among other factors, may have contributed to this restatement matter. The resulting increase to pre-tax earnings was $1 million in 2013 and there was no impact in 2012. The adjustments related to Brazil impacting periods prior to 2012 have been reflected in the opening adjustment to retained earnings. The cumulative pre-tax misstatement (including the correction recorded in the Form 10-K in 2013 of $14 million) was a decrease in pre-tax income of $54 million.

Reclassifications

(k) Cash reclassifications (All Segments) - The Company reclassified negative cash balances representing outstanding checks to accounts payable at period end despite, in some cases, the existence of bank agreements with legal right of offset against cash balances with the same banks. The resulting correction had no impact to pre-tax earnings for 2013 and 2012 but reduced cash balances and accounts payable by $19 million for 2013 and $9 million for 2012.

(l) Internal Use Software reclassification (All Segments) - The Company reclassified all internal use software asset balances, including accumulated depreciation on these assets, to intangible assets. Previously, these assets were reported in property and equipment. The resulting correction had no impact to pre-tax earnings for 2013 and 2012, but reduced gross property and equipment and accumulated depreciation balances and increased intangible asset and accumulated amortization balances by $197 million for 2013 and $151 million for 2012, on a net basis.

Other Restatement Adjustments

(m) Accrued Unbilled Accounts Receivable (U.S. Car Rental) - The Company over accrued revenue on open rental agreements related to the U.S. Car Rental business at period end because its calculation methodology was based on too limited a sample of open rental agreements. Also, vehicles that had been returned before period end, but that had not been processed as returned until after the look back period used in the calculation methodology, were treated as rented to customers at period end. Further, the rates utilized for certain types of transactions in the computation for the unbilled receivables were erroneous. The resulting reduction to pre-tax earnings was $1 million in 2013 and $6 million in 2012, respectively. The cumulative pre-tax misstatement was a decrease of $13 million.

(n) Vehicle License Fees (U.S. Car Rental) - This restatement matter relates to vehicle registration cost amortization in the U.S. Car Rental business. The Company inappropriately changed its amortization period for vehicle registration cost to the life of the vehicle instead of the life of the registration or license. Inappropriate tone at the top, among other factors, may have contributed to this restatement matter. The resulting reduction to pre-tax earnings was $13 million in 2013 and cumulatively.

(o) Hertz #1 Gold Points Liability (U.S. Car Rental) - The Company has made adjustments to the reserves established for the liability associated with the redemption of points earned by customers enrolled in the Hertz Gold Plus Rewards Program.  The Company determined that these reserves were understated in 2011, 2012, and 2013 for a variety of reasons.  These reasons included: (1) a miscalculation of the rate at which customers would redeem points, (2) the use of incorrect income statement accounts in calculating the incremental costs associated with customers’ use of points, (3) the failure to reconcile the account from 2011 through 2013 and (4) a systems issue that prevented certain customer points from expiring as they should have when the Company modified its Gold Points expiration policy in 2011.  The resulting reduction to pre-tax earnings was $1 million for 2013 and $3 million for 2012. The cumulative pre-tax misstatement was a decrease of $9 million.

(p) Accounts payable (All Segments) - The accruals for expenses paid utilizing credit cards did not include amounts which have been incurred and are in the process of being billed to the Company.  In addition, the manual process and lack of automated interface controls with legacy systems and the failure to complete sufficient personnel training on the accounts payable Oracle ERP system module, among other factors, resulted in erroneous accruals including purchase orders, marketing and consulting spending.  The resulting reduction to pre-tax earnings was $19 million for 2013 and $2 million for 2012. The cumulative pre-tax misstatement was a decrease of $33 million.

(q) Asset Retirement Obligation (All Segments) - This restatement matter relates to asset restoration costs associated with contractual obligations included in lease agreements. The Company failed to account for global contractual restoration costs on certain of its leased facilities, including its European headquarters at Uxbridge, United Kingdom. Inappropriate tone at the top, among other factors, may have contributed to this restatement matter. The resulting reduction to pre-tax earnings was $3 million in 2013 and $2 million in 2012, respectively. The cumulative pre-tax misstatement was a decrease of $5 million.

(r) Other Restatement Adjustments(All Segments) - There are certain other restatement matters not otherwise described in items (a) through (q) of this Note the adjustments of which are individually insignificant but, in aggregate with all the restatement matters, are significant to the financial statements. The cumulative pre-tax misstatement was a decrease of $53 million.

(s) Taxes on income (loss) - The tax effect of the out of period misstatements and the change in accounting principle through December 31, 2013 was approximately $100 million. The tax effect of the misstatements resulted in a reduction to income tax expense of $21 million and $24 million for 2013 and 2012, respectively. In connection with the restatement, the Company recorded an entry, that impacted the Company’s tax disclosures, of $141 million in 2012 and $131 million in 2013 to reclassify deferred tax assets and liabilities associated with depreciation of intangible assets and net operating loss carryforwards. 

(t) Change in Accounting Principle - In 2014, the Company changed its method of calculating the market-related value of pension assets for purposes of determining the expected return on plan assets and accounting for asset gains and losses. The change in accounting principle was applied retroactively to December 2005, a portion of which is a correction of an error as follows:

	Year Ended December 31,
(In millions)	2005 to 2011			2012		2013
Correction of an error	$	3		$	—	$	—
Change in accounting principle	(6		)	5		12
Total increase (decrease) in pre-tax income	$	(3	)	$	5	$	12

See Note 7, "Employee Retirement Benefits" for more details.

(u) Tax Reclassification - Separately from the tax impact of the Company’s restatement, the Company also corrected a balance sheet reclassification of certain of its tax liabilities from accrued taxes to deferred taxes on income, net. These adjustments to the balance sheet had no impact on pre-tax earnings in 2013 and 2012, but reduced accrued taxes, net and increased deferred taxes on income, net cumulatively by $63 million in 2013 and $49 million in 2012.

CONSOLIDATED BALANCE SHEET
(In millions, except par value and share data)
	December 31, 2013
	As Previously Reported			Restatement Adjustment			Ref	As Restated
ASSETS
Cash and cash equivalents	$	423		$	(12	)	k	$	411
Restricted cash and cash equivalents	860			1			k	861
Receivables, net of allowance of $62	1,513			(116		)	a, b, c, d, e, g, j, m, r	1,397
Due from Hertz Global Holdings, Inc.	93			—				93
Inventories, net	92			(5		)	p, r	87
Prepaid expenses and other assets	717			(2		)	n, r	715
Revenue earning equipment:
Cars	14,457			(1		)	j, p	14,456
Less accumulated depreciation - cars	(2,680		)	(1		)	j, r	(2,681		)
Other equipment	3,512			23			h, p	3,535
Less accumulated depreciation - other equipment	(1,096		)	(23		)	h	(1,119		)
Revenue earning equipment, net	14,193			(2		)		14,191
Property and equipment:
Land, buildings and leasehold improvements	1,362			(91		)	i, l, r, q	1,271
Service equipment and other	1,257			(279		)	i, l	978
Less accumulated depreciation	(1,105		)	141			i, l, r	(964		)
Property and equipment, net	1,514			(229		)		1,285
Other intangible assets, net	3,928			196			l, r	4,124
Goodwill	1,348			4			q	1,352
Total assets	$	24,681		$	(165	)		$	24,516
LIABILITIES AND EQUITY
Accounts payable	$	968		$	53		k, p	$	1,021
Accrued liabilities	1,105			67			f, g, j, m, o, q, t	1,172
Accrued taxes, net	203			(58		)	r, s, u	145
Debt	16,228			—				16,228
Public liability and property damage	348			3			r	351
Deferred taxes on income, net	2,945			(26		)	s, u	2,919
Total liabilities	21,797			39				21,836
Commitments and contingencies
Equity:
The Hertz Corporation and Subsidiaries stockholder's equity
Common Stock, $0.01 par value, 3,000 shares authorized, 100 shares issued and outstanding	—			—				—
Additional paid-in capital	3,552			—				3,552
Accumulated deficit	(675		)	(203		)	a-t	(878		)
Accumulated other comprehensive income	7			(1		)	q, t	6
Total equity	2,884			(204		)		2,680
Total liabilities and equity	$	24,681		$	(165	)		$	24,516

CONSOLIDATED BALANCE SHEET
(In millions, except par value and share data)
	December 31, 2012
	As Previously Reported			Restatement Adjustment			Ref	As Restated
ASSETS
Cash and cash equivalents	$	546		$	(5	)	k	$	541
Restricted cash and cash equivalents	552			(6		)	k	546
Receivables, net of allowance of $53	1,880			(93		)	a, b, c, d, e, g, j, r	1,787
Due from Hertz Global Holdings, Inc.	13			—				13
Inventories, net	106			(4		)	r	102
Prepaid expenses and other assets	479			—			r	479
Revenue earning equipment:
Cars	12,549			(7		)	f, r	12,542
Less accumulated depreciation - cars	(1,850		)	(5		)	f	(1,855		)
Other equipment	3,240			17			h, r	3,257
Less accumulated depreciation - other equipment	(1,042		)	(10		)	h	(1,052		)
Revenue earning equipment, net	12,897			(5		)		12,892
Property and equipment:
Land, buildings and leasehold improvements	1,289			(65		)	i, r, q	1,224
Service equipment and other	1,261			(202		)	i, l, r	1,059
Less accumulated depreciation	(1,114		)	90			i, l, r	(1,024		)
Property and equipment, net	1,436			(177		)		1,259
Other intangible assets, net	4,030			150			l, r	4,180
Goodwill	1,329			4			q	1,333
Total assets	$	23,268		$	(136	)		$	23,132
LIABILITIES AND EQUITY
Accounts payable	$	1,003		$	33		k, p, r	$	1,036
Accrued liabilities	1,162			50			j, o, q, r	1,212
Accrued taxes, net	193			(46		)	r, u	147
Debt	15,015			—				15,015
Public liability and property damage	332			1			r	333
Deferred taxes on income, net	2,667			(19		)	s, u	2,648
Total liabilities	20,372			19				20,391
Commitments and contingencies
Equity:
The Hertz Corporation and Subsidiaries stockholder's equity
Common Stock, $0.01 par value, 3,000 shares authorized, 100 shares issued outstanding	—			—				—
Additional paid-in capital	3,510			—				3,510
Accumulated deficit	(587		)	(159		)	a-t	(746		)
Accumulated other comprehensive loss	(27		)	4			q, t	(23		)
Total equity	2,896			(155		)		2,741
Total liabilities and equity	$	23,268		$	(136	)		$	23,132

CONSOLIDATED STATEMENT OF OPERATIONS
(In millions)
	For the Year Ended December 31, 2013
	As Previously Reported			Restatement Adjustment			Ref	As Restated
Revenues:
Worldwide car rental	$	8,707		$	2		a, b, g, m, r	$	8,709
Worldwide equipment rental	1,538			1			c, r	1,539
All other operations	527			—				527
Total revenues	10,772			3				10,775
Expenses:
Direct operating	5,752			25			d, e, f, j, m, n, p, q, r, t	5,777
Depreciation of revenue earning equipment and lease charges, net	2,526			7			r	2,533
Selling, general and administrative	1,022			31			a, b, c, d, e, i, j, o, p, q, r	1,053
Interest expense, net	666			3			r	669
Other expense, net	67			(3		)	r	64
Total expenses	10,033			63				10,096
Income (loss) before income taxes	739			(60		)		679
(Provision) benefit for taxes on income	(345		)	16			s	(329		)
Net income (loss)	$	394		$	(44	)		$	350

CONSOLIDATED STATEMENT OF OPERATIONS
(In millions)
	For the Year Ended December 31, 2012
	As Previously Reported			Restatement Adjustment			Ref	As Restated
Revenues:
Worldwide car rental	$	7,162		$	(9	)	a, b, g, m, r	$	7,153
Worldwide equipment rental	1,385			(3		)	c, r	1,382
All other operations	478			—				478
Total revenues	9,025			(12		)		9,013
Expenses:
Direct operating	4,806			55			d, e, f, j, m, n, o, p, q, r, t	4,861
Depreciation of revenue earning equipment and lease charges, net	2,129			(1		)	r	2,128
Selling, general and administrative	968			10			a, b, c, d, e, i, j, o, p, q, r	978
Interest expense, net	594			2			r	596
Other expense, net	35			(2		)	r	33
Total expenses	8,532			64				8,596
Income (loss) before income taxes	493			(76		)		417
(Provision) benefit for taxes on income	(221		)	21			s	(200		)
Net income (loss)	$	272		$	(55	)		$	217

CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
	For the Year Ended December 31, 2013
	As Previously Reported			Restatement Adjustment			Ref	As Restated
Cash flows from operating activities:
Net income (loss)	$	394		$	(44	)	a, b, c, d, e, f, g, i, j, m ,n, o, p, q, r, s	$	350
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation of revenue earning equipment, net	2,445			7			f, r, j	2,452
Depreciation and amortization, non-fleet assets	327			12			i, r	339
Amortization and write-off of deferred financing costs	54			—				54
Amortization and write-off of debt discount	(5		)	(1		)		(6		)
Stock-based compensation charges	35			—				35
Loss on disposal of business	4			—				4
Loss on extinguishment of debt	7			—				7
Provision for receivables allowance	71			—			a, b, c, d, e, g, j, r	71
Deferred taxes on income	269			(14		)	r, s	255
Impairment charges and asset write-downs	40			—				40
Other	(2		)	(4		)	r	(6		)
Changes in assets and liabilities, net of effects of acquisition:
Receivables	(60		)	7			a, b, c, d, e, g, j, r	(53		)
Inventories, prepaid expenses and other assets	(34		)	(1		)	n, r	(35		)
Accounts payable	23			31			k, p, r	54
Accrued liabilities	23			5			o, q, r	28
Accrued taxes	24			3			s, j	27
Public liability and property damage	(4		)	3			r	(1		)
Net cash provided by (used in) operating activities	3,611			4				3,615
Cash flows from investing activities:
Net change in restricted cash and cash equivalents	(308		)	(7		)	k	(315		)
Revenue earning equipment expenditures	(10,298		)	9			h	(10,289		)
Proceeds from disposal of revenue earning equipment	7,264			(8		)	h, f, r	7,256
Capital asset expenditures, non-fleet	(315		)	(12		)	i, r, p	(327		)
Proceeds from disposal of property and equipment	73			8			i	81
Acquisitions, net of cash acquired	(41		)	—				(41		)
Equity method investment	(213		)	—				(213		)
Repayments of loans with Hertz Global Holdings, Inc.	(129		)	—				(129		)
Proceeds from loans with Hertz Global Holdings, Inc.	49			—				49
Other investing activities	(1		)	(1		)	r	(2		)
Net cash provided by (used in) investing activities	(3,919		)	(11		)		(3,930		)

CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)
(In millions)
	For the Year Ended December 31, 2013
	As Previously Reported			Restatement Adjustment			Ref	As Restated
Cash flows from financing activities:
Proceeds from issuance of long-term debt	2,275			—				2,275
Repayments of long-term debt	(1,045		)	—				(1,045		)
Short-term borrowings:
Proceeds	596			—				596
Payments	(1,018		)	—				(1,018		)
Proceeds under the revolving lines of credit	9,012			—				9,012
Payments under the revolving lines of credit	(9,104		)	—				(9,104		)
Purchase of noncontrolling interest	—			—				—
Payment of financing costs	(54		)	—				(54		)
Dividend paid to Hertz Global Holdings, Inc.	(482		)	—				(482		)
Other	5			—				5
Net cash provided by financing activities	185			—				185
Effect of foreign exchange rate changes on cash and cash equivalents	—			—				—
Net change in cash and cash equivalents during the period	(123		)	(7		)		(130		)
Cash and cash equivalents at beginning of period	546			(5		)	k	541
Cash and cash equivalents at end of period	$	423		$	(12	)	k	$	411

CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
	For the Year Ended December 31, 2012
	As Previously Reported			Restatement Adjustment			Ref	As Restated
Cash flows from operating activities:
Net income (loss)	$	272		$	(55	)	a, b, c, d, e, f, g, i, m, o, q, r, s	$	217
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation of revenue earning equipment, net	2,049			(1		)	f, j, r	2,048
Depreciation and amortization, non-fleet assets	257			4			i, r	261
Amortization and write-off of deferred financing costs	52			—				52
Amortization and write-off of debt discount	4			—				4
Stock-based compensation charges	30			—				30
Loss on disposal of business	46			—				46
Provision for receivables allowance	52			6			a, b, c, d, e, g, j, r	58
Deferred taxes on income	133			(23		)	r, s	110
Other	(10		)	1			r	(9		)
Changes in assets and liabilities, net of effects of acquisition:
Receivables	(163		)	38			a, b, c, d, e, g, j, r	(125		)
Inventories, prepaid expenses and other assets	(22		)	4			n, r	(18		)
Accounts payable	34			18			k, r	52
Accrued liabilities	(30		)	10			o, r	(20		)
Accrued taxes	40			1			r, s	41
Public liability and property damage	(4		)	—				(4		)
Net cash provided by (used in) operating activities	2,740			3				2,743
Cash flows from investing activities:
Net change in restricted cash and cash equivalents	(241		)	4			k	(237		)
Revenue earning equipment expenditures	(9,613		)	2			r	(9,611		)
Proceeds from disposal of revenue earning equipment	7,125			(2		)	h, r	7,123
Capital asset expenditures, non-fleet	(297		)	(1		)	i, r	(298		)
Proceeds from disposal of property and equipment	122			3			i	125
Acquisitions, net of cash acquired	(1,905		)	—				(1,905		)
Proceeds from disposal of business	85			(1		)		84
Repayments of loans with Hertz Global Holdings, Inc.	(25		)	—				(25		)
Proceeds from loans with Hertz Global Holdings, Inc.	12			—				12
Other investing activities	(3		)	1				(2		)
Net cash provided by (used in) investing activities	(4,740		)	6				(4,734		)

CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)
(In millions)
	For the Year Ended December 31, 2012
	As Previously Reported			Restatement Adjustment			Ref	As Restated
Cash flows from financing activities:
Proceeds from issuance of long-term debt	2,237			—				2,237
Repayments of long-term debt	(952		)	—				(952		)
Short-term borrowings:
Proceeds	438			—				438
Payments	(1,280		)	—				(1,280		)
Proceeds under the revolving lines of credit	6,464			—				6,464
Payments under the revolving lines of credit	(5,190		)	—				(5,190		)
Purchase of noncontrolling interest	(38		)	—				(38		)
Payment of financing costs	(49		)	—				(49		)
Dividend paid to Hertz Global Holdings, Inc.	(25		)	—				(25		)
Other	4			(1		)		3
Net cash provided by financing activities	1,609			(1		)		1,608
Effect of foreign exchange rate changes on cash and cash equivalents	6			—				6
Net change in cash and cash equivalents during the period	(385		)	8				(377		)
Cash and cash equivalents at beginning of period	931			(13		)	k	918
Cash and cash equivalents at end of period	$	546		$	(5	)	k	$	541