Guarantor and Non-Guarantor Condensed Consolidating Financial Statements

6 Months Ended

Jun. 30, 2011

Guarantor and Non-Guarantor Condensed Consolidating Financial Statements

Guarantor and Non-Guarantor Condensed Consolidating Financial Statements

Note 16—Guarantor and Non-Guarantor Condensed Consolidating Financial Statements

The following condensed consolidating financial information presents the Condensed Consolidating Balance Sheets as of June 30, 2011 and December 31, 2010 and the Condensed Consolidating Statements of Operations for the three and six month periods ended June 30, 2011 and 2010, and Statements of Cash Flows for the six months ended June 30, 2011 and 2010, of (a) The Hertz Corporation, ("the Company" or "the Parent"); (b) the Parent's subsidiaries that guarantee the Parent's indebtedness, or the Guarantor Subsidiaries; (c) the Parent's subsidiaries that do not guarantee the Parent's indebtedness, or the Non-Guarantor Subsidiaries; (d) elimination entries necessary to consolidate the Parent with the Guarantor Subsidiaries and Non-Guarantor Subsidiaries; and of (e) the Company on a consolidated basis.

Investments in subsidiaries are accounted for using the equity method for purposes of the consolidating presentation. The principal elimination entries relate to investments in subsidiaries and intercompany balances and transactions. Separate financial statements and other disclosures with respect to the Guarantor Subsidiaries have not been provided as management believes the following information is sufficient, as the Guarantor Subsidiaries are 100% owned by the Parent and all guarantees are full and unconditional and joint and several. Additionally, substantially all of the assets of the Guarantor Subsidiaries are pledged under the Senior Credit Facilities, and consequently will not be available to satisfy the claims of our general creditors.

We have revised our Condensed Consolidated Statement of Cash Flows for the six months ended June 30, 2010 to reflect a reclassification of revenue earning equipment proceeds between the operating and investing sections of the Parent and Non-Guarantor Subsidiaries. We previously reported "Net cash provided by operating activities" of $361.5 million for the Parent and $880.7 million for the Non-Guarantor Subsidiaries for the six months ended June 30, 2010. We previously reported "Net cash used in investing activities" of $45.5 million for the Parent and $2,406.0 million for the Non-Guarantor Subsidiaries for the six months ended June 30, 2010. We have also revised our Condensed Consolidated Statement of Cash Flows for the six months ended June 30, 2010 to reflect a reclassification of certain payments to a third party finance company for purchases of revenue earning equipment between the investing and financing sections of the Non-Guarantor Subsidiaries. We previously reported "Net cash provided by financing activities" of $1,286.1 million for the Non-Guarantor Subsidiaries for the six months ended June 30, 2010. There was no impact to The Hertz Corporation's Consolidated Statement of Cash Flows. Management has concluded that this footnote revision is not material to our previously issued financial statements.

CONDENSED CONSOLIDATING BALANCE SHEET
June 30, 2011
(In Thousands of Dollars)

		Parent (The Hertz Corporation)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			The Hertz Corporation & Subsidiaries
ASSETS
Cash and cash equivalents		$	305,177	$	4,419	$	437,984	$	—		$	747,580
Restricted cash and cash equivalents			17,911		14,455		241,923		—			274,289
Receivables, less allowance for doubtful accounts			243,085		171,616		1,032,469		—			1,447,170
Due from Hertz affiliate			806,262		55,169		651,897		(1,513,328	)		—
Inventories, at lower cost or market			29,016		31,722		39,261		—			99,999
Prepaid expenses and other assets			2,013,678		7,432		161,837		(1,724,754	)		458,193
Revenue earning equipment, net			176,601		1,267,555		9,781,197		—			11,225,353
Property and equipment, net			784,680		170,856		263,006		—			1,218,542
Investment in subsidiaries, net			4,256,989		27,416		—		(4,284,405	)		—
Other intangible assets, net			104,755		2,326,882		90,903		—			2,522,540
Goodwill			71,835		12,502		222,875		—			307,212
	Total assets	$	8,809,989	$	4,090,024	$	12,923,352	$	(7,522,487	)	$	18,300,878
LIABILITIES AND EQUITY
Due to Hertz affiliate		$	706,761	$	220,708	$	587,437	$	(1,513,328	)	$	1,578
Accounts payable			111,800		141,467		1,307,589		—			1,560,856
Accrued liabilities			691,318		38,170		312,441		—			1,041,929
Accrued taxes			61,925		173,137		152,890		(226,098	)		161,854
Debt			4,627,667		104		6,667,983		—			11,295,754
Public liability and property damage			105,699		16,434		163,885		—			286,018
Deferred taxes on income			—		1,277,985		1,654,004		(1,498,656	)		1,433,333
	Total liabilities		6,305,170		1,868,005		10,846,229		(3,238,082	)		15,781,322
Equity:
The Hertz Corporation and Subsidiaries stockholder's equity			2,504,819		2,222,019		2,062,386		(4,284,405	)		2,504,819
Noncontrolling interest			—		—		14,737		—			14,737
	Total equity		2,504,819		2,222,019		2,077,123		(4,284,405	)		2,519,556
	Total liabilities and equity	$	8,809,989	$	4,090,024	$	12,923,352	$	(7,522,487	)	$	18,300,878

CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 2010
(In Thousands of Dollars)

		Parent (The Hertz Corporation)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			The Hertz Corporation & Subsidiaries
ASSETS
Cash and cash equivalents		$	1,754,378	$	5,180	$	614,448	$	—		$	2,374,006
Restricted cash and cash equivalents			16,092		25,468		166,016		—			207,576
Receivables, less allowance for doubtful accounts			265,195		166,483		924,875		—			1,356,553
Due from Hertz affiliate			501,735		47,166		313,466		(862,367	)		—
Inventories, at lower cost or market			21,164		31,734		34,531		—			87,429
Prepaid expenses and other assets			1,756,704		6,814		169,539		(1,588,131	)		344,926
Revenue earning equipment, net			166,316		1,265,641		7,507,452		—			8,939,409
Property and equipment, net			735,770		178,691		249,108		—			1,163,569
Investment in subsidiaries, net			4,044,084		47,109		—		(4,091,193	)		—
Other intangible assets, net			114,840		2,334,500		101,219		—			2,550,559
Goodwill			71,835		9,971		218,368		—			300,174
	Total assets	$	9,448,113	$	4,118,757	$	10,299,022	$	(6,541,691	)	$	17,324,201
LIABILITIES AND EQUITY
Due to Hertz affiliate		$	360,069	$	191,832	$	311,862	$	(862,367	)	$	1,396
Accounts payable			144,261		177,170		623,542		—			944,973
Accrued liabilities			681,125		30,961		355,916		—			1,068,002
Accrued taxes			51,916		174,553		22,331		(112,403	)		136,397
Debt			5,601,707		112		5,317,526		—			10,919,345
Public liability and property damage			110,346		16,939		151,400		—			278,685
Deferred taxes on income			—		1,284,768		1,651,172		(1,475,728	)		1,460,212
	Total liabilities		6,949,424		1,876,335		8,433,749		(2,450,498	)		14,809,010
Equity:
The Hertz Corporation and Subsidiaries stockholder's equity			2,498,689		2,242,422		1,848,771		(4,091,193	)		2,498,689
Noncontrolling interest			—		—		16,502		—			16,502
	Total equity		2,498,689		2,242,422		1,865,273		(4,091,193	)		2,515,191
	Total liabilities and equity	$	9,448,113	$	4,118,757	$	10,299,022	$	(6,541,691	)	$	17,324,201

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Three Months Ended June 30, 2011
(In Thousands of Dollars)

		Parent (The Hertz Corporation)			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			The Hertz Corporation & Subsidiaries
Total revenues		$	1,022,145		$	237,359		$	1,417,951		$	(605,162	)	$	2,072,293
Expenses:
	Direct operating		576,641			172,021			438,644			—			1,187,306
	Depreciation of revenue earning equipment		511,166			54,776			458,889			(605,162	)		419,669
	Selling, general and administrative		91,582			23,169			80,747			—			195,498
	Interest expense		70,558			8,358			74,673			—			153,589
	Interest income		(51	)		(7	)		(1,488	)		—			(1,546	)
	Other (income) expense, net		10,655			—			146			—			10,801
	Total expenses		1,260,551			258,317			1,051,611			(605,162	)		1,965,317
Income (loss) before income taxes, noncontrolling interest and equity in earnings (losses) of subsidiaries			(238,406	)		(20,958	)		366,340			—			106,976
(Provision) benefit for taxes on income			75,968			6,619			(122,380	)		—			(39,793	)
Net income (loss)			(162,438	)		(14,339	)		243,960			—			67,183
Noncontrolling interest			—			—			(5,087	)		—			(5,087	)
Equity in earnings (losses) of subsidiaries (net of tax)			224,534			(2,347	)		—			(222,187	)		—
Net income (loss) attributable to The Hertz Corporation and Subsidiaries' common stockholder		$	62,096		$	(16,686	)	$	238,873		$	(222,187	)	$	62,096

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 2011
(In Thousands of Dollars)

		Parent (The Hertz Corporation)			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			The Hertz Corporation & Subsidiaries
Total revenues		$	1,952,498		$	456,227		$	2,625,578		$	(1,182,007	)	$	3,852,296
Expenses:
	Direct operating		1,132,819			312,876			815,276			—			2,260,971
	Depreciation of revenue earning equipment		976,851			113,352			947,562			(1,182,007	)		855,758
	Selling, general and administrative		179,763			42,939			154,986			—			377,688
	Interest expense		175,042			15,514			147,794			—			338,350
	Interest income		(410	)		(8	)		(2,984	)		—			(3,402	)
	Other (income) expense, net		62,396			(9	)		290						62,677
	Total expenses		2,526,461			484,664			2,062,924			(1,182,007	)		3,892,042
Income (loss) before income taxes, noncontrolling interest and equity in earnings (losses) of subsidiaries			(573,963	)		(28,437	)		562,654			—			(39,746	)
(Provision) benefit for taxes on income			182,692			9,018			(204,075	)		—			(12,365	)
Net income (loss)			(391,271	)		(19,419	)		358,579			—			(52,111	)
Less: Net income attributable to noncontrolling interest			—			—			(8,760	)		—			(8,760	)
Equity in earnings (losses) of subsidiaries (net of tax)			330,400			(3,304	)		—			(327,096	)		—
Net income (loss) attributable to The Hertz Corporation and Subsidiaries' common stockholder		$	(60,871	)	$	(22,723	)	$	349,819		$	(327,096	)	$	(60,871	)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Three Months Ended June 30, 2010
(In Thousands of Dollars)

		Parent (The Hertz Corporation)			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			The Hertz Corporation & Subsidiaries
Total revenues		$	993,816		$	199,583		$	1,303,526		$	(617,339	)	$	1,879,586
Expenses:
	Direct operating		556,393			140,424			378,220			—			1,075,037
	Depreciation of revenue earning equipment		487,276			56,832			529,951			(617,339	)		456,720
	Selling, general and administrative		92,118			17,777			62,108			—			172,003
	Interest expense		72,257			7,118			97,846			—			177,221
	Interest and other income, net		(43	)		(2	)		(6,746	)		—			(6,791	)
	Total expenses		1,208,001			222,149			1,061,379			(617,339	)		1,874,190
Income (loss) before income taxes, noncontrolling interest and equity in earnings (losses) of subsidiaries			(214,185	)		(22,566	)		242,147			—			5,396
Provision (benefit) for taxes on income (loss)			23,230			2,818			(34,293	)		—			(8,245	)
Net income (loss)			(190,955	)		(19,748	)		207,854			—			(2,849	)
Less: Net income attributable to noncontrolling interest			—			—			(4,673	)		—			(4,673	)
Equity in earnings (losses) of subsidiaries (net of tax)			183,433			(1,426	)		—			(182,007	)		—
Net income (loss) attributable to The Hertz Corporation and Subsidiaries' common stockholder		$	(7,522	)	$	(21,174	)	$	203,181		$	(182,007	)	$	(7,522	)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 2010
(In Thousands of Dollars)

		Parent (The Hertz Corporation)			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			The Hertz Corporation & Subsidiaries
Total revenues		$	1,906,734		$	381,370		$	2,430,730		$	(1,178,360	)	$	3,540,474
Expenses:
	Direct operating		1,094,714			260,701			732,621			—			2,088,036
	Depreciation of revenue earning equipment		968,993			116,088			1,009,172			(1,178,360	)		915,893
	Selling, general and administrative		170,274			34,712			134,734			—			339,720
	Interest expense		142,418			14,363			190,029			—			346,810
	Interest and other income, net		(92	)		(3	)		(8,974	)		—			(9,069	)
	Total expenses		2,376,307			425,861			2,057,582			(1,178,360	)		3,681,390
Income (loss) before income taxes, noncontrolling interest and equity in earnings (losses) of subsidiaries			(469,573	)		(44,491	)		373,148			—			(140,916	)
Provision (benefit) for taxes on income (loss)			81,133			7,964			(83,129	)		—			5,968
Net income (loss)			(388,440	)		(36,527	)		290,019			—			(134,948	)
Less: Net income attributable to noncontrolling interest			—			—			(8,251	)		—			(8,251	)
Equity in earnings (losses) of subsidiaries (net of tax)			245,241			(1,791	)		—			(243,450	)		—
Net income (loss) attributable to The Hertz Corporation and Subsidiaries' common stockholder		$	(143,199	)	$	(38,318	)	$	281,768		$	(243,450	)	$	(143,199	)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Six Months Ended June 30, 2011
(In Thousands of Dollars)

			Parent (The Hertz Corporation)			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			The Hertz Corporation & Subsidiaries
Net cash provided by (used in) operating activities			$	388,425		$	132,542		$	452,580		$	(273,946	)	$	699,601
Cash flows from investing activities:
	Net change in restricted cash and cash equivalents			(1,819	)		11,014			(69,428	)		—			(60,233	)
	Revenue earning equipment expenditures			(103,214	)		(189,323	)		(5,174,319	)		—			(5,466,856	)
	Proceeds from disposal of revenue earning equipment			66,993			56,343			3,365,554			—			3,488,890
	Property and equipment expenditures			(82,334	)		(11,537	)		(31,499	)		—			(125,370	)
	Proceeds from disposal of property and equipment			11,793			2,803			13,792			—			28,388
	Capital contributions to subsidiaries			(1,801,000	)		—			—			1,801,000			—
	Return of capital from subsidiaries			1,251,054			—			—			(1,251,054	)		—
	Acquisitions, net of acquired			—			(500	)		(10,476	)		—			(10,976	)
	Purchase of short-term investments, net			(32,891	)		—			—			—			(32,891	)
	Other investing activities			—			—			1,303			—			1,303
	Net cash provided by (used in) investing activities			(691,418	)		(131,200	)		(1,905,073	)		549,946			(2,177,745	)
Cash flows from financing activities:
	Proceeds from issuance of long-term debt			2,426,505			—			602,086			—			3,028,591
	Payment of long-term debt			(3,585,159	)		(8	)		(46,305	)		—			(3,631,472	)
	Short-term borrowings:
		Proceeds		—			—			285,803			—			285,803
		Payments		(8,596	)		—			(480,621	)		—			(489,217	)
		Proceeds (payments) under the revolving lines of credit, net		110,872			(2,095	)		620,078			—			728,855
	Distributions to noncontrolling interest			—			—			(10,500	)		—			(10,500	)
	Capital contributions received from parent			—			—			1,801,000			(1,801,000	)		—
	Payment of dividends and return of capital			(12,450	)		—			(1,525,000	)		1,525,000			(12,450	)
	Proceeds from employee stock purchase plan			1,716			—			—			—			1,716
	Loan from Hertz Global Holdings, Inc.			182			—			—			—			182
	Payment of financing costs			(79,278	)		—			(2,114	)		—			(81,392	)
	Net cash provided by (used in) financing activities			(1,146,208	)		(2,103	)		1,244,427			(276,000	)		(179,884	)
Effect of foreign exchange rate changes on cash and cash equivalents				—			—			31,602			—			31,602
Net decrease in cash and cash equivalents during the period				(1,449,201	)		(761	)		(176,464	)		—			(1,626,426	)
Cash and cash equivalents at beginning of period				1,754,378			5,180			614,448			—			2,374,006
Cash and cash equivalents at end of period			$	305,177		$	4,419		$	437,984		$	—		$	747,580

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Six Months Ended June 30, 2010
(In Thousands of Dollars)

			Parent (The Hertz Corporation)			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			The Hertz Corporation & Subsidiaries
Net cash provided by (used in) operating activities			$	361,230		$	14,695		$	846,626		$	(191,420	)	$	1,031,131
Cash flows from investing activities:
	Net change in restricted cash and cash equivalents			1,801			(3,492	)		(387,551	)		—			(389,242	)
	Revenue earning equipment expenditures			(72,362	)		(36,776	)		(5,208,160	)		—			(5,317,298	)
	Proceeds from disposal of revenue earning equipment			43,550			33,015			3,366,945			—			3,443,510
	Property and equipment expenditures			(44,545	)		(9,867	)		(37,606	)		—			(92,018	)
	Proceeds from disposal of property and equipment			117			8,538			6,539			—			15,194
	Capital contributions to subsidiaries			(301,521	)		—			—			301,521			—
	Return of capital from subsidiaries			324,490			—			—			(324,490	)		—
	Acquisitions, net of cash acquired			—			—			(157	)		—			(157	)
	Purchase of short-term investments, net			3,183			94			(106	)		—			3,171
	Other investing activities			—			—			817			—			817
	Net cash provided by (used in) investing activities			(45,287	)		(8,488	)		(2,259,279	)		(22,969	)		(2,336,023	)
Cash flows from financing activities:
	Proceeds from issuance of long-term debt			8,018			—			673,352			—			681,370
	Payment of long-term debt			(65,550	)		(39	)		(691,375	)		—			(756,964	)
	Short-term borrowings:
		Proceeds		9,621			—			265,109			—			274,730
		Repayments		—			—			(281,009	)		—			(281,009	)
		Proceeds (payments) under the revolving lines of credit, net		(23,755	)		(4,298	)		1,451,456			—			1,423,403
	Distributions to noncontrolling interest			—			—			(7,630	)		—			(7,630	)
	Capital contributions received from parent			—			—			301,521			(301,521	)		—
	Payment of dividends and return of capital			(12,500	)		—			(515,910	)		515,910			(12,500	)
	Proceeds from employee stock purchase plan			1,222			—			—			—			1,222
	Loan from Hertz Global Holdings, Inc.			(5,607	)		—			—			—			(5,607	)
	Payment of financing costs			(2,944	)		—			(22,028	)		—			(24,972	)
	Net cash provided by (used in) financing activities			(91,495	)		(4,337	)		1,173,486			214,389			1,292,043
Effect of foreign exchange rate changes on cash and cash equivalents				—			—			(75,836	)		—			(75,836	)
Net change in cash and cash equivalents during the period				224,448			1,870			(315,003	)		—			(88,685	)
Cash and cash equivalents at beginning of period				108,522			6,069			870,876			—			985,467
Cash and cash equivalents at end of period			$	332,970		$	7,939		$	555,873		$	—		$	896,782