The car rental business was affected by general economic conditions and more particularly by conditions in the travel industry, especially airline traffic. There was a high correlation between airline traffic (number of enplanements) and industry-wide rental revenues. Following the September 11 terrorist attacks on the United States, there was a sharp downturn in enplanements, but they finally seemed to be rebounding in 2004. The U.S. Department of Transportation predicted enplanements would grow at an annual rate of 3.7% from 2004 to 2010. Partially due to 9/11, off-airport rentals, which consisted primarily of insurance replacement (rentals provided by insurance companies while the policyowner's automobile was out of service), local business travel, and leisure travel, had recently grown at a faster pace than had airport rentals. The Equipment Rental Market As of August 2005, the size of the North American equipment rental market in revenues was believed to be $25 billion, while that of France and Spain were approximately $4 billion and $2 billion, respectively. But because HERC only offered certain types of equipment, Hertz's applicable market was somewhat smaller. The equipment rental market was more variable than the car rental market and depended mostly on industrial productivity, particularly commercial and residential construction. Over the past 15 years, the best estimates of growth suggested the market had grown at an annual rate of approximately 9.7%. During this time, there was a trend toward companies in need of equipment renting rather than owning it, which was expected to continue. The market had experienced rapid growth in the 1990s but had slowed considerably between 2000 and 2003 with the decline in the economy. The equipment rental market had recently started to rebound from the 2000-03 levels, a rebound which was expected to continue. Unlike the car rental market, the U.S. equipment rental industry was highly fragmented with few national competitors. Other major national scale operators like Hertz included United Rentals, Inc., and RSC Equipment Rentals, a division of the Atlas Copco Group. The equipment rental business was highly competitive, and rental prices had started declining in 2001 and did not improve in North America until 2004. Prices in France and Spain had yet to stop declining. Instead of a concentrated source of revenues (U.S. airports), customers of the equipment rental industry were widely scattered throughout the country. This complicated the distribution of equipment and reduced the opportunity to achieve scale in operations, encouraging local players to compete with large businesses. Nonetheless, Hertz was a top player in the industry, ranking third based on 2005 revenues. Hertz's diverse customer base also helped to alleviate some of the risks of cyclicality and seasonality present in the industry. Tough Times at Ford Ford's acquisition of Hertz in January 2001 reflected the strategy of its then CEO and president, Jacques A. Nasser. Nasser had been promoted from president of Ford's worldwide automotive operations to become CEO in December 1998. At the same time, Bill Ford Jr., a great-grandson of Henry Ford, assumed the role of company chairman. Nasser's strategy was to turn Ford into something, anything, other than a traditional car company. He attempted to shrink Ford's mainstream automotive divisions and remake it into a leading consumer company in automotive products and services. Known for his abrasive style, Nasser frenetically pursued his strategy, etting around the world and working 20-hour days. He acquired Volvo, Land Rover Tough Times at Ford a Ford's acquisition of Hertz in January 2001 reflected the strategy of its then CEO and president, Jacques A. Nasser. Nasser had been promoted from president of Ford's worldwide automotive operations to become CEO in December 1998. At the same time, Bill Ford Jr., a great-grandson of Henry Ford, assumed the role of company chairman. Nasser's strategy was to turn Ford into something, anything, other than a traditional car company. He attempted to shrink Ford's mainstream automotive divisions and remake it into a leading consumer company in automotive products and services. Known for his abrasive style, Nasser frenetically pursued his strategy, jetting around the world and working 20-hour days. He acquired Volvo, Land Rover, Hertz, and spent billions pursuing noncore operations. During Nasser's three-year tenure, Ford's once- impressive $15 billion cash reserve dwindled to less than $1 billion by 2001.6 In November 2001, Bill Ford Jr. assumed the CEO role at Ford replacing Nasser. After the turbulent years of Nasser, Bill Ford's ascension to CEO was greeted enthusiastically. But Ford inherited a company that had lost $5.5 billion the previous year and whose future held great uncertainty. While Ford had a strong line of trucks, its passenger car line was lagging. By mid-2002, Ford was losing $190 per vehicle because of its bloated cost structure and intense pricing pressure from competitors. Although Ford proposed several restructuring plans that would reduce costs and reenergize its passenger car line, his plans were not enough to stem the company's decline. By the time he announced the company's intentions to explore strategic options for Hertz in April 2005, Ford's stock price had fallen to less than $10 per share. The company continued to lose money, especially in its North American operations. Rumored to be facing a potential downgrade in its bond rating, Hertz looked to be a viable candidate for Ford to raise some much-needed cash to shore up its bond rating and attempt to return its car operations to profitability. Hertz as an LBO candidate Although Ford owned 100% of Hertz, Hertz had operated largely without oversight by or obligation to Ford. Members of the Bidding Group had individually evaluated Hertz and believed it to be an attractive leveraged buyout candidate. Operating Synergies Hertz's two business segments presented large opportunities for operational improvement. The key drivers of the rental car business included the number of transactions, the length of each rental, revenue per rental day, and fleet utilization. Transaction volume, which was a good indicator of market demand, typically followed growth in the general economy and enplanements. Rental length was largely dependent on customer and end- product mix. Leisure and insurance renters generally rented cars for longer periods than business travelers. Another major driver of revenues was price, or revenue per rental day. Utilization of the fleet also played an important role in determining profitability and return on assets. Improvement in any of these drivers had the potential to yield substantial increases in revenue. With travel finally beginning to rebound after the events of 9/11, the near-term market trends appeared favorable, and management had projected transaction volume to grow 6.9% in 2005. With respect to price, the Hertz brand was exceptionally strong and recognized worldwide. Hertz had shown an ability to sustain a premium pricing Improvement in any of these drivers had the potential to yield substantial increases in revenue. With travel finally beginning to rebound after the events of 9/11, the near-term market trends appeared favorable, and management had projected transaction volume to grow 6.9% in 2005. With respect to price, the Hertz brand was exceptionally strong and recognized worldwide. Hertz had shown an ability to sustain a premium pricing strategy, which was in part due to its loyal customer base. Although Hertz was the price leader in the market, it could not impose higher rates if competitors chose not to follow. Hertz was one of the largest private sector purchasers of new cars in the world. In 2004, the company operated a peak fleet of 300,000 cars in the United States and approximately 169,000 in its international operations. Fleet usage was highly seasonal-it peaked in the second and third quarters of the year and declined in the first and fourth quarters as leisure travel waned. Significant cost savings could arise from right sizing the fleet (purchasing and disposing of cars) to match seasonal demand. Historically, Hertz had purchased the majority of its cars from Ford, but in recent years, it had moved to decrease its reliance on Ford vehicles. In part, this was in response to U.S. auto manufacturers' decision to reduce fleet sales to bolster their own profitability. This had two effects on Hertz and its competitors. First, it increased vehicles costs and second, it increased the proportion of "at risk" vehicles potentially subject to declining residual values. An increase in vehicle costs in 2006 was expected to increase Hertz's acquisition costs and hence fleet capital spending by proportionately more than the previous year. The Bidding Group compared Hertz with peer firms and with its own historical results to identify the following operational savings." 1. Current adjusted EBITDA margins were approximately 400 basis points (bps) below 2000 levels and were 100 to 200 bps below those of Avis. 2. From 2002 to 2005E nonflect-related operating expenses had increased by 38% and had outpaced revenue growth by 6%. 3. Hertz's off-airport growth strategy had resulted in significant losses. The Bidding Group would look to rationalize this strategy 4. U.S. RAC's nonfleet capital expenditures (CAPEX) as a percentage of sales were considerably higher than Avis's long-term CAPEX levels. 5. Europe RAC's SG&A as a percentage of sales and on a per-day basis were three times higher than those in the United States. 6. HERC's return on assets lagged that of competitors, reflecting an inefficient use of capital. In 2005, HERC's rental revenue on fleet assets was projected to be 70.5%. By comparison, the returns for RSC and United Rentals were expected to be 85% and 116%, respectively. All told, the Bidding Group believed that an amount between $400 million and $600 million in annual EBITDA savings (relative to 2005 levels) was attainable by 2009. These estimates of operational improvements were confirmed by external industry advisors who had been hired as part of due diligence. The Bidding Group had also carefully evaluated Hertz's management team. The current management team had considerable industry experience but, partially as a result of Ford's hands-off management style, they operated in an insular manner and had not been pressured to excel. The existing compensation structure was based on market share, and new incentive plans were planned that would target cash flow and capital usage metrics. If removal of the current CEO, Craig Koch, proved necessary, an experienced manager, George Tamke, had been identified to step in. Tamke, who was currently a partner at CD&:R. was formerly vice ora Ruvut Exhibit 6 Bidding for Hertz: Leveraged Buyout Debt and Purchase-Price Multiples for Leveraged Buyouts Greater than $50 Million (1) 9.00 800 700 6.00 500 H Multiples of EBITDA 100 4.00 3.00 2.00 10 illil 1.00 0.00 1997 1998 1999 2000 2001 2002 2003 2004 2005 Senior Debt/EBITDA 3.77 3.47 3.32 315 2.60 2:38 2.73 3.24 426 Sab Debt/EBITDA 1.60 2.12 161 0.90 142 163 165 1.25 Others 0.12 0.15 0.11 0.07 0.16 0.20 0.13 0.12 Equity/EBITDA 2.40 2.43 2.63 2.15 2.29 2.55 2.59 2.34 2.57 Equity/EBITDA Others Sub Debt/EBITDA Senior Debt/EBITDA 0.09 Perego que deve el Sene Sab Dole Oder, and Equipment plan Data source: Standard & Poor's, a division of the McGraw-Hill Companies, Inc. Exhibit 7 Bidding for Hertz: Leveraged Buyout Valuation Schematic for Hertz Transaction RAC Operating Company RAC Fleet Pro Forra Adjusted EBITDA (1) Fleet Book Value * Adjusted EBITDA Multiple - Required Fleet Equity (2) - Operating Company Value Net Book Value of Fleet Total RAC Segment Value Operating Company Valur Fire Vale RAC Transaction Value HERC Segment Value Cross EBITDA EBITDA Multiple HERC Transaction Value Given the large deal size, the ABS debt was not the only source of financing needed to finance the buyout. Exhibit 5 shows the proposed financing for the transaction. Although $1,400 million of existing debt would roll over, for the most part, Carlyle and the consortium members planned to raise new debt to finance the deal. In total, the nonequity funding for the transaction was approximately $12.5 billion.' 13 In the summer of 2005, the debt and LBO market had recovered from the lows following the 2001 slowdown. Senior debt, which had fallen to 2.38X EBITDA in 2002, had since recovered to 3.24x EBITDA in 2004. Further relaxation of lending standards had occurred over the course of 2005 and senior debt multiples were expected to close above 4x EBITDA by year end 2005. Deal valuation had followed suit- purchase- price multiples, which had fallen to around 6x EBITDA in 2001, had expanded to more than 8x EBITDA in 2005. Exhibit 6 shows the recent history of debt and purchase price multiples. Valuation of Hertz a The Bidding Group planned to set up both RAC and HERC as separate legal entities within a holding company named "Hertz Corporation" or "HertzCo"-in part due to the decision to use ABS financing, and because later it might facilitate separate disposals of the properties. HertzCo consisted of the two business segments: RAC and HERC. RAC was made up of RAC Operating Company (OpCo), which held claim to the cash flows and nonfleet assets of the car rental company, and RAC Fleet, the subsidiary which housed the rental car fleet. HERC held claim to the cash flows and assets of the equipment rental business. This structure was key to valuing HertzCo the value of RAC and HERC could be determined separately and then added together to determine the total enterprise value of HertzCo. The value of equity in turn could be determined by subtracting the total operating company and fledt debt from enterprise value. See Exhibit 7 for a detailed representation. RAC could be valued by applying an appropriate multiple to RAC OpCo's operating flows and then adding the net book value of the fleet. Due to its relatively short life, the fleet had a fairly transparent market value, which was well approximated by its book value. Because of the ABS debt, the operating company's flows had to be adjusted to reflect the depreciation and interest payments made to RAC Fleet. In essence, the service obligations on the fleet had to be met before the providers of LBO financing were paid. RAC Adjusted EBITDA was therefore RAC Gross EBITDA less flect depreciation and fleet interest. HERC could be valued by applying an appropriate multiple to HERC Gross EBITDA (Revenues less Direct Operating and SG&A Expenses). HERC did not utilize ABS debt because the market value of equipment rentals was less transparent (due to longer lives and diverse usages). Exhibits 8 and 9 contain a base-case pro forma income statement and balance sheet with projections for 2006-10. Given projected enplanements, car-rental growth was estimated to slow to 4.5% by 2009 and stabilize at that level. Though the equipment rental market had started to rebound from a cyclical slowdown, equipment rental growth at Hertz had been much more variable, and it was eventually expected to decline over time and to stabilize at 3% by 2010. The base-case estimates build in the low end of $400 million in operational savings over time and incorporate the segment revenue growth rates noted above. RAC fleet expenditures (and ABS debt) were expected to increase as a percentage of sales due to higher vehicle costs, leading to corresponding increases in RAC depreciation. For Hertz: Leveraged Buyout proy 200610. Although it was not possible to directly estimate a beta for Hertz, comparable company equity betas were around 1.5, which, when de-levered, yielded unlevered betas of approximately 0.60. But there was a wide range to these estimates. Interest rates as of August 2005 and market multiples are shown in Exhibit 11. The Decision Any bid put forth by the Bidding Group for Hertz would have to satisfy three critical tests. First, it would have to provide adequate returns to the sponsors' limited partners. Second, it would have to be higher than Ford could receive from an IPO. Third, the bid would have to best that of the rival bidding group. Time was drawing to a close, and Carlyle and its partners needed to finalize their bid. Ledford knew that his investment committee would not only be keenly interested in the possible returns they could expect from Hertz, but also in his views on the risks of the deal and bidding strategy. Although much work had been done, much more lay ahead. It was not turning out to be the vacation he planned. Exhibit 1 Bidding for Hertz: Leveraged Buyout Hertz Ownership History A. TUT HT Source: Hertz Corporation Exhibit 2 Bidding for Hertz: Leveraged Buyout Hertz Historical Consolidated Income Statement ($ millions) 2002 2003 2004 2005E RAC Revenue Direct Op EX SCRA Cross PBITDA $45127 2676.3 18664 $1.8522 2943.9 1.908 3 $5.4901 3,3939 2.0962 $6,0517 3.8152 2206.5 Exhibit 2 Bidding for Hertz: Leveraged Buyout Hertz Historical Consolidated Income Statement ($ millions) 2002 2003 2004 2005E RAC Revenue Direct Op Ex & SG&A Gross EBITDA Fleet Depreciation Fleet Interest Adjusted EBITDA $4,5427 2,676.3 1,8664 1.216.7 270.9 3788 $4,852.2 2943.9 1,908.3 1.2564 276.2 375.7 $5,490.1 3,393.9 20962 1,2319 310.2 554.1 $6,051.7 3,845.2 2.206.5 13622 380.1 4642 HERC Revenue Direct Op Ex & SGRA Cross EBITDA Fleet Depreciation Fleet Interest Adjusted EBITDA 1.0957 7222 373.5 2828 954 -4.7 10815 7179 3636 267.0 78.9 177 1.185.9 749.6 4363 2314 743 1306 1358.0 805.1 5529 2280 96.6 2283 Total Adjusted EBITDA Non-Fleet Depreciation Operating Company Interest Expense 3741 1576 00 3934 1560 0.0 6847 1827 00 6925 184.7 0.0 Pretax Income Book Taxes Minorky Interest 216.5 779 00 2374 855 00 5020 180.7 3.2 5078 1829 9.7 Net Income $138.6 $151.9 $321.3 $324.9 ReflectiveLBO det income for 2005 Data source: Consortium intemal documentation Bidding for Hertz: Leveraged Buyout Hertz Historical Consolidated Balance Sheet ($ millions) 2002 2003 2004 2005E Assets Cash and Equivalents Fleet Cash Enhancement Accounts Receivable Manufacturer Receivables Inventories Prepaid Esponses Other Assets Total Current Assets Fleet, Net PP&E Net Existing Goodwill & Intangibles New Goodwill & Intangibles Total Assets 6013 0.0 799.1 473.8 71.8 83.8 423 2.072.1 1.110.1 00 1.308.2 511.9 734 90.3 456 3,139,5 1.237.9 0.0 1.225.1 600.1 83.3 100.1 441 3.290.6 1.102.9 0.0 1,0042 629.7 92.7 113.1 36.5 2.979.1 74258 1,1118 519,0 00 11.128.7 7.7933 1.109.8 536.9 00 12.6395 9.1229 1.2362 5444 00 14,194.1 9.7673 1.3546 5346 0.0 14,635.6 Liabilities & Stockholders' Equity Accounts Payable Accrued Liabilities Accrued Taws Total Current Liabilities Total Long Term Debt 5062 789.4 528 1,348.4 7,0432 7579 736.4 1114 1.6057 7.6279 7860 8357 1301 1.7518 84280 7580 819.7 1293 1.7070 9.1803 Public Liability Property Damage Deferred Tags Commitments & Contingencies Minority Interest Total Liabilities 3535 4621 00 00 9.2072 3988 721.2 00 00 10,3536 3917 849.7 00 49 114261 3743 6360 00 127 11 9103 Total Equay Total Liabilities & Equity 1.0218 11,129.0 2.285.8 126394 27679 14.1940 27250 14.636.2 Raba pe 230 std balace for 2003. flere dalle od toulon and 2003-04 esto con Bidding for Hertz: Leveraged Buyout Hertz Historical Consolidated Balance Sheet ($ millions) 2002 2003 2004 2005E(1 Assets Cash and Equivalents Fleet Cash Enhancement Accounts Receivable Manufacturer Receivables Inventories Prepaid Expenses Other Assets Total Current Assets 601.3 00 799.1 473.8 71.8 83.8 423 2.072.1 1.110.1 00 1,308.2 5119 73.4 903 456 3.139.5 1.237.9 0.0 1.225.1 600.1 83.3 100.1 4441 3,290.6 1.102.9 00 1.004.2 629.7 927 113.1 36.5 2.9791 Fleet. Net PP&E Net Existing Goodwal & Intangibles New Goodwill & Intangibles Total Assets 7.425.8 1.111.8 519.0 00 11,128.7 7.793.3 1.169.8 536.9 00 12,639,5 9,1229 1.236.2 5444 00 14.194.1 9.767.3 1.354.6 534.6 00 14.635.6 Liabilities & Stockholders' Equity Accounts Payable Accrued Liabilities Accrued Taxes Total Current Liabilities Total Long-Term Debt Pop 5062 789.4 128 1.348.4 7.043.2 7579 736 4 14 1,605.7 7,627.9 786.0 835.7 1201 1.751.8 8.428,0 758.0 819.7 1293 1.7070 9.180.3 Public Libility & Property Damage Deferred Taxes Commitments & Contingencies Minority Interest Total Liabilities 353.5 462.1 00 0.0 9,2072 3988 721.2 0.0 00 10.353.6 391.7 849.7 00 49 11.426.1 374.3 636.0 00 12.7 11.910,3 Total Equky Total abilities & Equity 1.921.8 11.129.0 2.285.8 12.6394 2.7679 14.1940 27259 14.6362 Reteen go-180 med balore sheet for 2005. Small differences in stooral tool to od tolland qty in 2003-04 e due to dig ta source: Consortium internal documentation Exhibit 4 Bidding for Hertz: Leveraged Buyout U.S. Rental Car Market Revenues (1996-2005) (5 billions) $25 $20 $19.4 $18.9 $18.2 $17.2 $17.6 $17.6 $164 5165 SI56 $14,6 $15 $10 SS 8 SO 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Data source: Auto Rental News, 2006. Exhibit 5 Bidding for Hertz: Leveraged Buyout Proposed Financing for the Hertz Buyout A 14.300 US ABS 51.300 ABS 10 ABS 1670 TRAC ADS 11.100 TL 5. SARL 30S 2000 SL 5.00 SOS 2.500 T Debe Ohman 3200 Toote een 3014 The Data G. Exhibit 7 Bidding for Hertz: Leveraged Buyout Valuation Schematic for Hertz Transaction RAC Operating Company Pro Forma Adjusted EBITDA (1) *Adjusted EBITDA Multiple = Operating Company Value RAC Fleet Fleet Book Value - Required Fleet Equity (2) = Net Book Value of Fleet Total RAC Segment Value Operating Company Value + Fleet Value - RAC Transaction Value HERC Segment Value Gross EBITDA * EBITDA Multiple HERC Transaction Value HertzCo Total Enterprise Value RAC Segment Value + HERC Segment Value - Total Transaction Value Pro Forma Adulted EBITDA- GEBITDA - Deporte de la The 10 to 20% testety, dependent as thermal the leapple. The store to age 13 of the book of the Source: Consortium internal documentation, adapted by author. Exhibit 8 Bidding for Hertz: Leveraged Buyout Projected Income Statement ($ millions) 2005 P 2006 2007 2008 2009 2010 5,5355 Business Segu RAC Rev Drect Op Ex SGLA Cross FRIDA Fleet Deprecation Het Interese Add EHITDA 6,0517 38152 2.2005 1,3122 38 1783 603 1.210 21923 1.6929 4195 74129 41551 2967.8 1.7520 2.510.5 1,517 RI 557.7 7736 LE 3.1780 1 90663 827 &1330 18282 3,3057 19224 7258 AR HIER Pr 1.3580 1.18 1.6833 17101 1.7671 1817 Exhibit 8 Bidding for Hertz: Leveraged Buyout Projected Income Statement (5 millions) 2005 PF 2006 2007 2008 2009 2010 Business Segments: RAC Revenue Direct Op Ex& SGA Gross EBITDA Fleet Depreciation Fleet Interest Adjusted EBITDA 6.0517 3.8452 2,206.5 1.3622 386 478.3 6.535.8 40252 2,510.5 1,544.7 4081 6,9833 42210 27623 1.6529 4195 6600 74129 4.551 2.9578 1.7520 4720 726.8 7,783.6 48456 3.178.0 1.839.6 9056 832.7 8133.9 48282 3.305.7 1.9224 5299 8924 557.7 HRC Revenue Direct Op Ex& SGA Gross EBITDA Fleet Depreciation Fleet Interest Adested EBITDA 1,3580 8051 5529 2280 1.710.1 88 7413 1.4938 8631 630.7 2195 00 3811 1,6133 9190 3043 2005 00 1248 2857 1.787.1 4095 787.6 2985 00 489.1 1.8407 10313 809.4 3075 20 5019 09 00 4556 3249 Het Corporation Co) Total Adjusted EBITDA RAC Non-Fleet Depreciation HERC Non-Fleet Depreciation Operating Company fota) EBIT 8032 1459 38.8 6185 938.8 1514 418 7426 1,0848 150.0 13.0 8828 L1823 161.0 45.0 970.3 1,321.8 1630 460 1.1128 1,355,3 1650 17.0 1.1433 1418 280 Op Co Interest Expene: Term Loan facilky RAC). 8.0% Senior ABL Bailay 7 Euro notes. 788% Senior unsecured notes, 8.879% Existing senior notes. 7.00% Senbor subordinated notes, 10.5% Total Op Co Interest expense 15.8 1440 28.0 158 177.5 560 630 1843 1481 28.0 15.8 1775 56.0 030 4584 149.7 280 15.8 177.5 56.0 63.0 490.0 177.5 560 630 4821 125.0 280 158 1775 58.0 630 0852 4308 Pretax Income Book Taxes (386) Net Income 1577 568 1009 2583 93.0 1653 301.4 1420 2524 186.4 175.1 3113 6307 2270 4036 6781 2441 1340 Comporte ERITDA 10312 1.188.41 13543 1.468.0 13 1628 Rates 2005PT Wishbi 2 ted for LBO capital te dansested is total latest spee Tosato con un caded for supliers Fret interest eceeds the intents de mobles on the debe de to additional ABS debts facto mesto pre mobile search Sa FRAC Add EBITDA 2 HERC GHI EBITDA Source: Author estimates from consortium documents and Hertz Global Holdings, Inc. form S-1 A, 11/13/2006 Exhibit 9 Bidding for Hertz: Leveraged Buyout Projected Balance Sheet (1) ($ millions) 2005 PF 161 LP 2006 2007 2008 2009 2010 Asses Cash and Equivalents 300 172 182 191 199 Fleet Cash Enhancement 317 3412 366 388 407 126 Accounts Receivable 1001 1.08 1.166 1.236 1.237 1352 Manufacturer Receivables 630 666 713 756 794 820 Inventories 53 100 108 114 120 125 Prepaid Expenses 113 122 131 135 146 152 Other Assets 27 40 42 45 47 49 Total Current Assets 2003 2.520 2.699 2861 3.002 3.132 Fleet 9.767 10.500 11.750 12.455 13.065 13,613 RAC Fleet 7.701 8.733 9.344 9.505 10.400 10.868 HERC Fleet 2006 2.227 2.405 2.550 2.665 2.745 PPRE Net 1.355 14LS 1463 1.460 1.474 1.516 Goodwill & Intangibles fysis 3915 2015 3915 3915 3015 Total Assets 17530 18841 1927 20,601 21.456 22.177 Liabilities & Stockholders' Equity Accounts Payable 758 KI 933 979 1.020 Accred Liabiles 820 88 952 1.000 1.030 1,10 Accrued Taxes 192 192 167 174 Total Current Labs 1.707 1.8.50 183 2.102 2205 2208 Long-term Deber Lena Lai | lay A0, 4 % 1200 IR 1871 1.773 1 S2 1314 US ABS Botes, 4.300 4.50 3258 5.585 5.873 6.146 International ABS notes.499.00 100 2.000 2.272 2433 2,575 2.700 Eesti ABS debt. 40% 600 600 600 600 600 Thee (ABS) Pancing facily D 0 0 0 O 0 Senior ABL. Facy. 400 400 100 000 100 400 Seniorro notes. 7 200 200 200 200 200 200 Senkt unsecured notes, 8875% 2.000 2.000 2.000 2000 2.000 2000 Esisting senior subordinated notes 7.0% 800 800 800 BOO 800 Senior subordinated motea, 10.5%. M 400 ECO CO Total Long-Term Debt 12.500 13:40 10.00 14.390 10610 1760 Publicy & Property Damage 374 374 374 374 374 374 Defend TRES 636 089 730 73 821 836 Monty Interest 13 13 Total Labs 15.20 16.375 1762 18624 18.30 Total Buty 2.165 ZE 23 Total Labs Buy 17530 IHMI 19.27 21.456 22.177 recette dernidade de tondu 2005 e Eshibir el foc LB palm ABS dibeber de RAC from the com 17.110 20 Exhibit 10 Bidding for Hertz: Leveraged Buyout Projected Cash Flows to Operating Company(1) ($ millions) 2006 2007 2008 2009 2010 Net Income 165.3 252.4 311.3 403.6 434.0 Add: Increase in deferred taxes 53.2 49.5 44.3 38.4 34.7 Add: HERC fleet depreciation 249.5 269.5 285.7 298.5 307.5 Add: total non-fleet deprecation 196.2 202.0 206.0 209.0 212.0 Less: HERC fleet CAP EX 410.7 447.7 430.0 4133 387.4 Less total non-fleet CAP EX 287.0 219.8 202.6 223.2 254.2 Less: Increase in NWC - 115.8 463 43.0 383 37.0 Less net fleet equity requirement 1342 79.5 72.9 64.4 60.8 Cash Flow avalkable to pay down debe -51.7 - 19.8 988 210.4 248.6 Add operating company interest after tax 309.9 3126 313,6 308.5 2977 Free Cash Flow to Capital (unlevered) 258.3 2928 412.4 5189 yilad areas on Dupational espiral poder sisted i BAC Det er et sted back/whered for project because a RAC The world with pay off the loan Source: Author estimates from consortium documents and Her Global Holdings, Inc. form S-1 A, 11/13/2006. Exhibit 11 5463 Bidding for Hertz: Leveraged Buyout Comparable Company Analysis (5 millions) LTM TINTA RITA View M WWTM WENTO Se NISU Vi Car Rental AR Cat 101 SID 1207 117 se on 119 IS SHIP 191 HE SET RE 11 12 1. 117 ht AG 100 16 14 11 SI 1021 Se SHE ENO SR www.pe . BERDAD DT SEDA Source: Consortium internal documentation on LBO, The car rental business was affected by general economic conditions and more particularly by conditions in the travel industry, especially airline traffic. There was a high correlation between airline traffic (number of enplanements) and industry-wide rental revenues. Following the September 11 terrorist attacks on the United States, there was a sharp downturn in enplanements, but they finally seemed to be rebounding in 2004. The U.S. Department of Transportation predicted enplanements would grow at an annual rate of 3.7% from 2004 to 2010. Partially due to 9/11, off-airport rentals, which consisted primarily of insurance replacement (rentals provided by insurance companies while the policyowner's automobile was out of service), local business travel, and leisure travel, had recently grown at a faster pace than had airport rentals. The Equipment Rental Market As of August 2005, the size of the North American equipment rental market in revenues was believed to be $25 billion, while that of France and Spain were approximately $4 billion and $2 billion, respectively. But because HERC only offered certain types of equipment, Hertz's applicable market was somewhat smaller. The equipment rental market was more variable than the car rental market and depended mostly on industrial productivity, particularly commercial and residential construction. Over the past 15 years, the best estimates of growth suggested the market had grown at an annual rate of approximately 9.7%. During this time, there was a trend toward companies in need of equipment renting rather than owning it, which was expected to continue. The market had experienced rapid growth in the 1990s but had slowed considerably between 2000 and 2003 with the decline in the economy. The equipment rental market had recently started to rebound from the 2000-03 levels, a rebound which was expected to continue. Unlike the car rental market, the U.S. equipment rental industry was highly fragmented with few national competitors. Other major national scale operators like Hertz included United Rentals, Inc., and RSC Equipment Rentals, a division of the Atlas Copco Group. The equipment rental business was highly competitive, and rental prices had started declining in 2001 and did not improve in North America until 2004. Prices in France and Spain had yet to stop declining. Instead of a concentrated source of revenues (U.S. airports), customers of the equipment rental industry were widely scattered throughout the country. This complicated the distribution of equipment and reduced the opportunity to achieve scale in operations, encouraging local players to compete with large businesses. Nonetheless, Hertz was a top player in the industry, ranking third based on 2005 revenues. Hertz's diverse customer base also helped to alleviate some of the risks of cyclicality and seasonality present in the industry. Tough Times at Ford Ford's acquisition of Hertz in January 2001 reflected the strategy of its then CEO and president, Jacques A. Nasser. Nasser had been promoted from president of Ford's worldwide automotive operations to become CEO in December 1998. At the same time, Bill Ford Jr., a great-grandson of Henry Ford, assumed the role of company chairman. Nasser's strategy was to turn Ford into something, anything, other than a traditional car company. He attempted to shrink Ford's mainstream automotive divisions and remake it into a leading consumer company in automotive products and services. Known for his abrasive style, Nasser frenetically pursued his strategy, etting around the world and working 20-hour days. He acquired Volvo, Land Rover Tough Times at Ford a Ford's acquisition of Hertz in January 2001 reflected the strategy of its then CEO and president, Jacques A. Nasser. Nasser had been promoted from president of Ford's worldwide automotive operations to become CEO in December 1998. At the same time, Bill Ford Jr., a great-grandson of Henry Ford, assumed the role of company chairman. Nasser's strategy was to turn Ford into something, anything, other than a traditional car company. He attempted to shrink Ford's mainstream automotive divisions and remake it into a leading consumer company in automotive products and services. Known for his abrasive style, Nasser frenetically pursued his strategy, jetting around the world and working 20-hour days. He acquired Volvo, Land Rover, Hertz, and spent billions pursuing noncore operations. During Nasser's three-year tenure, Ford's once- impressive $15 billion cash reserve dwindled to less than $1 billion by 2001.6 In November 2001, Bill Ford Jr. assumed the CEO role at Ford replacing Nasser. After the turbulent years of Nasser, Bill Ford's ascension to CEO was greeted enthusiastically. But Ford inherited a company that had lost $5.5 billion the previous year and whose future held great uncertainty. While Ford had a strong line of trucks, its passenger car line was lagging. By mid-2002, Ford was losing $190 per vehicle because of its bloated cost structure and intense pricing pressure from competitors. Although Ford proposed several restructuring plans that would reduce costs and reenergize its passenger car line, his plans were not enough to stem the company's decline. By the time he announced the company's intentions to explore strategic options for Hertz in April 2005, Ford's stock price had fallen to less than $10 per share. The company continued to lose money, especially in its North American operations. Rumored to be facing a potential downgrade in its bond rating, Hertz looked to be a viable candidate for Ford to raise some much-needed cash to shore up its bond rating and attempt to return its car operations to profitability. Hertz as an LBO candidate Although Ford owned 100% of Hertz, Hertz had operated largely without oversight by or obligation to Ford. Members of the Bidding Group had individually evaluated Hertz and believed it to be an attractive leveraged buyout candidate. Operating Synergies Hertz's two business segments presented large opportunities for operational improvement. The key drivers of the rental car business included the number of transactions, the length of each rental, revenue per rental day, and fleet utilization. Transaction volume, which was a good indicator of market demand, typically followed growth in the general economy and enplanements. Rental length was largely dependent on customer and end- product mix. Leisure and insurance renters generally rented cars for longer periods than business travelers. Another major driver of revenues was price, or revenue per rental day. Utilization of the fleet also played an important role in determining profitability and return on assets. Improvement in any of these drivers had the potential to yield substantial increases in revenue. With travel finally beginning to rebound after the events of 9/11, the near-term market trends appeared favorable, and management had projected transaction volume to grow 6.9% in 2005. With respect to price, the Hertz brand was exceptionally strong and recognized worldwide. Hertz had shown an ability to sustain a premium pricing Improvement in any of these drivers had the potential to yield substantial increases in revenue. With travel finally beginning to rebound after the events of 9/11, the near-term market trends appeared favorable, and management had projected transaction volume to grow 6.9% in 2005. With respect to price, the Hertz brand was exceptionally strong and recognized worldwide. Hertz had shown an ability to sustain a premium pricing strategy, which was in part due to its loyal customer base. Although Hertz was the price leader in the market, it could not impose higher rates if competitors chose not to follow. Hertz was one of the largest private sector purchasers of new cars in the world. In 2004, the company operated a peak fleet of 300,000 cars in the United States and approximately 169,000 in its international operations. Fleet usage was highly seasonal-it peaked in the second and third quarters of the year and declined in the first and fourth quarters as leisure travel waned. Significant cost savings could arise from right sizing the fleet (purchasing and disposing of cars) to match seasonal demand. Historically, Hertz had purchased the majority of its cars from Ford, but in recent years, it had moved to decrease its reliance on Ford vehicles. In part, this was in response to U.S. auto manufacturers' decision to reduce fleet sales to bolster their own profitability. This had two effects on Hertz and its competitors. First, it increased vehicles costs and second, it increased the proportion of "at risk" vehicles potentially subject to declining residual values. An increase in vehicle costs in 2006 was expected to increase Hertz's acquisition costs and hence fleet capital spending by proportionately more than the previous year. The Bidding Group compared Hertz with peer firms and with its own historical results to identify the following operational savings." 1. Current adjusted EBITDA margins were approximately 400 basis points (bps) below 2000 levels and were 100 to 200 bps below those of Avis. 2. From 2002 to 2005E nonflect-related operating expenses had increased by 38% and had outpaced revenue growth by 6%. 3. Hertz's off-airport growth strategy had resulted in significant losses. The Bidding Group would look to rationalize this strategy 4. U.S. RAC's nonfleet capital expenditures (CAPEX) as a percentage of sales were considerably higher than Avis's long-term CAPEX levels. 5. Europe RAC's SG&A as a percentage of sales and on a per-day basis were three times higher than those in the United States. 6. HERC's return on assets lagged that of competitors, reflecting an inefficient use of capital. In 2005, HERC's rental revenue on fleet assets was projected to be 70.5%. By comparison, the returns for RSC and United Rentals were expected to be 85% and 116%, respectively. All told, the Bidding Group believed that an amount between $400 million and $600 million in annual EBITDA savings (relative to 2005 levels) was attainable by 2009. These estimates of operational improvements were confirmed by external industry advisors who had been hired as part of due diligence. The Bidding Group had also carefully evaluated Hertz's management team. The current management team had considerable industry experience but, partially as a result of Ford's hands-off management style, they operated in an insular manner and had not been pressured to excel. The existing compensation structure was based on market share, and new incentive plans were planned that would target cash flow and capital usage metrics. If removal of the current CEO, Craig Koch, proved necessary, an experienced manager, George Tamke, had been identified to step in. Tamke, who was currently a partner at CD&:R. was formerly vice ora Ruvut Exhibit 6 Bidding for Hertz: Leveraged Buyout Debt and Purchase-Price Multiples for Leveraged Buyouts Greater than $50 Million (1) 9.00 800 700 6.00 500 H Multiples of EBITDA 100 4.00 3.00 2.00 10 illil 1.00 0.00 1997 1998 1999 2000 2001 2002 2003 2004 2005 Senior Debt/EBITDA 3.77 3.47 3.32 315 2.60 2:38 2.73 3.24 426 Sab Debt/EBITDA 1.60 2.12 161 0.90 142 163 165 1.25 Others 0.12 0.15 0.11 0.07 0.16 0.20 0.13 0.12 Equity/EBITDA 2.40 2.43 2.63 2.15 2.29 2.55 2.59 2.34 2.57 Equity/EBITDA Others Sub Debt/EBITDA Senior Debt/EBITDA 0.09 Perego que deve el Sene Sab Dole Oder, and Equipment plan Data source: Standard & Poor's, a division of the McGraw-Hill Companies, Inc. Exhibit 7 Bidding for Hertz: Leveraged Buyout Valuation Schematic for Hertz Transaction RAC Operating Company RAC Fleet Pro Forra Adjusted EBITDA (1) Fleet Book Value * Adjusted EBITDA Multiple - Required Fleet Equity (2) - Operating Company Value Net Book Value of Fleet Total RAC Segment Value Operating Company Valur Fire Vale RAC Transaction Value HERC Segment Value Cross EBITDA EBITDA Multiple HERC Transaction Value Given the large deal size, the ABS debt was not the only source of financing needed to finance the buyout. Exhibit 5 shows the proposed financing for the transaction. Although $1,400 million of existing debt would roll over, for the most part, Carlyle and the consortium members planned to raise new debt to finance the deal. In total, the nonequity funding for the transaction was approximately $12.5 billion.' 13 In the summer of 2005, the debt and LBO market had recovered from the lows following the 2001 slowdown. Senior debt, which had fallen to 2.38X EBITDA in 2002, had since recovered to 3.24x EBITDA in 2004. Further relaxation of lending standards had occurred over the course of 2005 and senior debt multiples were expected to close above 4x EBITDA by year end 2005. Deal valuation had followed suit- purchase- price multiples, which had fallen to around 6x EBITDA in 2001, had expanded to more than 8x EBITDA in 2005. Exhibit 6 shows the recent history of debt and purchase price multiples. Valuation of Hertz a The Bidding Group planned to set up both RAC and HERC as separate legal entities within a holding company named "Hertz Corporation" or "HertzCo"-in part due to the decision to use ABS financing, and because later it might facilitate separate disposals of the properties. HertzCo consisted of the two business segments: RAC and HERC. RAC was made up of RAC Operating Company (OpCo), which held claim to the cash flows and nonfleet assets of the car rental company, and RAC Fleet, the subsidiary which housed the rental car fleet. HERC held claim to the cash flows and assets of the equipment rental business. This structure was key to valuing HertzCo the value of RAC and HERC could be determined separately and then added together to determine the total enterprise value of HertzCo. The value of equity in turn could be determined by subtracting the total operating company and fledt debt from enterprise value. See Exhibit 7 for a detailed representation. RAC could be valued by applying an appropriate multiple to RAC OpCo's operating flows and then adding the net book value of the fleet. Due to its relatively short life, the fleet had a fairly transparent market value, which was well approximated by its book value. Because of the ABS debt, the operating company's flows had to be adjusted to reflect the depreciation and interest payments made to RAC Fleet. In essence, the service obligations on the fleet had to be met before the providers of LBO financing were paid. RAC Adjusted EBITDA was therefore RAC Gross EBITDA less flect depreciation and fleet interest. HERC could be valued by applying an appropriate multiple to HERC Gross EBITDA (Revenues less Direct Operating and SG&A Expenses). HERC did not utilize ABS debt because the market value of equipment rentals was less transparent (due to longer lives and diverse usages). Exhibits 8 and 9 contain a base-case pro forma income statement and balance sheet with projections for 2006-10. Given projected enplanements, car-rental growth was estimated to slow to 4.5% by 2009 and stabilize at that level. Though the equipment rental market had started to rebound from a cyclical slowdown, equipment rental growth at Hertz had been much more variable, and it was eventually expected to decline over time and to stabilize at 3% by 2010. The base-case estimates build in the low end of $400 million in operational savings over time and incorporate the segment revenue growth rates noted above. RAC fleet expenditures (and ABS debt) were expected to increase as a percentage of sales due to higher vehicle costs, leading to corresponding increases in RAC depreciation. For Hertz: Leveraged Buyout proy 200610. Although it was not possible to directly estimate a beta for Hertz, comparable company equity betas were around 1.5, which, when de-levered, yielded unlevered betas of approximately 0.60. But there was a wide range to these estimates. Interest rates as of August 2005 and market multiples are shown in Exhibit 11. The Decision Any bid put forth by the Bidding Group for Hertz would have to satisfy three critical tests. First, it would have to provide adequate returns to the sponsors' limited partners. Second, it would have to be higher than Ford could receive from an IPO. Third, the bid would have to best that of the rival bidding group. Time was drawing to a close, and Carlyle and its partners needed to finalize their bid. Ledford knew that his investment committee would not only be keenly interested in the possible returns they could expect from Hertz, but also in his views on the risks of the deal and bidding strategy. Although much work had been done, much more lay ahead. It was not turning out to be the vacation he planned. Exhibit 1 Bidding for Hertz: Leveraged Buyout Hertz Ownership History A. TUT HT Source: Hertz Corporation Exhibit 2 Bidding for Hertz: Leveraged Buyout Hertz Historical Consolidated Income Statement ($ millions) 2002 2003 2004 2005E RAC Revenue Direct Op EX SCRA Cross PBITDA $45127 2676.3 18664 $1.8522 2943.9 1.908 3 $5.4901 3,3939 2.0962 $6,0517 3.8152 2206.5 Exhibit 2 Bidding for Hertz: Leveraged Buyout Hertz Historical Consolidated Income Statement ($ millions) 2002 2003 2004 2005E RAC Revenue Direct Op Ex & SG&A Gross EBITDA Fleet Depreciation Fleet Interest Adjusted EBITDA $4,5427 2,676.3 1,8664 1.216.7 270.9 3788 $4,852.2 2943.9 1,908.3 1.2564 276.2 375.7 $5,490.1 3,393.9 20962 1,2319 310.2 554.1 $6,051.7 3,845.2 2.206.5 13622 380.1 4642 HERC Revenue Direct Op Ex & SGRA Cross EBITDA Fleet Depreciation Fleet Interest Adjusted EBITDA 1.0957 7222 373.5 2828 954 -4.7 10815 7179 3636 267.0 78.9 177 1.185.9 749.6 4363 2314 743 1306 1358.0 805.1 5529 2280 96.6 2283 Total Adjusted EBITDA Non-Fleet Depreciation Operating Company Interest Expense 3741 1576 00 3934 1560 0.0 6847 1827 00 6925 184.7 0.0 Pretax Income Book Taxes Minorky Interest 216.5 779 00 2374 855 00 5020 180.7 3.2 5078 1829 9.7 Net Income $138.6 $151.9 $321.3 $324.9 ReflectiveLBO det income for 2005 Data source: Consortium intemal documentation Bidding for Hertz: Leveraged Buyout Hertz Historical Consolidated Balance Sheet ($ millions) 2002 2003 2004 2005E Assets Cash and Equivalents Fleet Cash Enhancement Accounts Receivable Manufacturer Receivables Inventories Prepaid Esponses Other Assets Total Current Assets Fleet, Net PP&E Net Existing Goodwill & Intangibles New Goodwill & Intangibles Total Assets 6013 0.0 799.1 473.8 71.8 83.8 423 2.072.1 1.110.1 00 1.308.2 511.9 734 90.3 456 3,139,5 1.237.9 0.0 1.225.1 600.1 83.3 100.1 441 3.290.6 1.102.9 0.0 1,0042 629.7 92.7 113.1 36.5 2.979.1 74258 1,1118 519,0 00 11.128.7 7.7933 1.109.8 536.9 00 12.6395 9.1229 1.2362 5444 00 14,194.1 9.7673 1.3546 5346 0.0 14,635.6 Liabilities & Stockholders' Equity Accounts Payable Accrued Liabilities Accrued Taws Total Current Liabilities Total Long Term Debt 5062 789.4 528 1,348.4 7,0432 7579 736.4 1114 1.6057 7.6279 7860 8357 1301 1.7518 84280 7580 819.7 1293 1.7070 9.1803 Public Liability Property Damage Deferred Tags Commitments & Contingencies Minority Interest Total Liabilities 3535 4621 00 00 9.2072 3988 721.2 00 00 10,3536 3917 849.7 00 49 114261 3743 6360 00 127 11 9103 Total Equay Total Liabilities & Equity 1.0218 11,129.0 2.285.8 126394 27679 14.1940 27250 14.636.2 Raba pe 230 std balace for 2003. flere dalle od toulon and 2003-04 esto con Bidding for Hertz: Leveraged Buyout Hertz Historical Consolidated Balance Sheet ($ millions) 2002 2003 2004 2005E(1 Assets Cash and Equivalents Fleet Cash Enhancement Accounts Receivable Manufacturer Receivables Inventories Prepaid Expenses Other Assets Total Current Assets 601.3 00 799.1 473.8 71.8 83.8 423 2.072.1 1.110.1 00 1,308.2 5119 73.4 903 456 3.139.5 1.237.9 0.0 1.225.1 600.1 83.3 100.1 4441 3,290.6 1.102.9 00 1.004.2 629.7 927 113.1 36.5 2.9791 Fleet. Net PP&E Net Existing Goodwal & Intangibles New Goodwill & Intangibles Total Assets 7.425.8 1.111.8 519.0 00 11,128.7 7.793.3 1.169.8 536.9 00 12,639,5 9,1229 1.236.2 5444 00 14.194.1 9.767.3 1.354.6 534.6 00 14.635.6 Liabilities & Stockholders' Equity Accounts Payable Accrued Liabilities Accrued Taxes Total Current Liabilities Total Long-Term Debt Pop 5062 789.4 128 1.348.4 7.043.2 7579 736 4 14 1,605.7 7,627.9 786.0 835.7 1201 1.751.8 8.428,0 758.0 819.7 1293 1.7070 9.180.3 Public Libility & Property Damage Deferred Taxes Commitments & Contingencies Minority Interest Total Liabilities 353.5 462.1 00 0.0 9,2072 3988 721.2 0.0 00 10.353.6 391.7 849.7 00 49 11.426.1 374.3 636.0 00 12.7 11.910,3 Total Equky Total abilities & Equity 1.921.8 11.129.0 2.285.8 12.6394 2.7679 14.1940 27259 14.6362 Reteen go-180 med balore sheet for 2005. Small differences in stooral tool to od tolland qty in 2003-04 e due to dig ta source: Consortium internal documentation Exhibit 4 Bidding for Hertz: Leveraged Buyout U.S. Rental Car Market Revenues (1996-2005) (5 billions) $25 $20 $19.4 $18.9 $18.2 $17.2 $17.6 $17.6 $164 5165 SI56 $14,6 $15 $10 SS 8 SO 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Data source: Auto Rental News, 2006. Exhibit 5 Bidding for Hertz: Leveraged Buyout Proposed Financing for the Hertz Buyout A 14.300 US ABS 51.300 ABS 10 ABS 1670 TRAC ADS 11.100 TL 5. SARL 30S 2000 SL 5.00 SOS 2.500 T Debe Ohman 3200 Toote een 3014 The Data G. Exhibit 7 Bidding for Hertz: Leveraged Buyout Valuation Schematic for Hertz Transaction RAC Operating Company Pro Forma Adjusted EBITDA (1) *Adjusted EBITDA Multiple = Operating Company Value RAC Fleet Fleet Book Value - Required Fleet Equity (2) = Net Book Value of Fleet Total RAC Segment Value Operating Company Value + Fleet Value - RAC Transaction Value HERC Segment Value Gross EBITDA * EBITDA Multiple HERC Transaction Value HertzCo Total Enterprise Value RAC Segment Value + HERC Segment Value - Total Transaction Value Pro Forma Adulted EBITDA- GEBITDA - Deporte de la The 10 to 20% testety, dependent as thermal the leapple. The store to age 13 of the book of the Source: Consortium internal documentation, adapted by author. Exhibit 8 Bidding for Hertz: Leveraged Buyout Projected Income Statement ($ millions) 2005 P 2006 2007 2008 2009 2010 5,5355 Business Segu RAC Rev Drect Op Ex SGLA Cross FRIDA Fleet Deprecation Het Interese Add EHITDA 6,0517 38152 2.2005 1,3122 38 1783 603 1.210 21923 1.6929 4195 74129 41551 2967.8 1.7520 2.510.5 1,517 RI 557.7 7736 LE 3.1780 1 90663 827 &1330 18282 3,3057 19224 7258 AR HIER Pr 1.3580 1.18 1.6833 17101 1.7671 1817 Exhibit 8 Bidding for Hertz: Leveraged Buyout Projected Income Statement (5 millions) 2005 PF 2006 2007 2008 2009 2010 Business Segments: RAC Revenue Direct Op Ex& SGA Gross EBITDA Fleet Depreciation Fleet Interest Adjusted EBITDA 6.0517 3.8452 2,206.5 1.3622 386 478.3 6.535.8 40252 2,510.5 1,544.7 4081 6,9833 42210 27623 1.6529 4195 6600 74129 4.551 2.9578 1.7520 4720 726.8 7,783.6 48456 3.178.0 1.839.6 9056 832.7 8133.9 48282 3.305.7 1.9224 5299 8924 557.7 HRC Revenue Direct Op Ex& SGA Gross EBITDA Fleet Depreciation Fleet Interest Adested EBITDA 1,3580 8051 5529 2280 1.710.1 88 7413 1.4938 8631 630.7 2195 00 3811 1,6133 9190 3043 2005 00 1248 2857 1.787.1 4095 787.6 2985 00 489.1 1.8407 10313 809.4 3075 20 5019 09 00 4556 3249 Het Corporation Co) Total Adjusted EBITDA RAC Non-Fleet Depreciation HERC Non-Fleet Depreciation Operating Company fota) EBIT 8032 1459 38.8 6185 938.8 1514 418 7426 1,0848 150.0 13.0 8828 L1823 161.0 45.0 970.3 1,321.8 1630 460 1.1128 1,355,3 1650 17.0 1.1433 1418 280 Op Co Interest Expene: Term Loan facilky RAC). 8.0% Senior ABL Bailay 7 Euro notes. 788% Senior unsecured notes, 8.879% Existing senior notes. 7.00% Senbor subordinated notes, 10.5% Total Op Co Interest expense 15.8 1440 28.0 158 177.5 560 630 1843 1481 28.0 15.8 1775 56.0 030 4584 149.7 280 15.8 177.5 56.0 63.0 490.0 177.5 560 630 4821 125.0 280 158 1775 58.0 630 0852 4308 Pretax Income Book Taxes (386) Net Income 1577 568 1009 2583 93.0 1653 301.4 1420 2524 186.4 175.1 3113 6307 2270 4036 6781 2441 1340 Comporte ERITDA 10312 1.188.41 13543 1.468.0 13 1628 Rates 2005PT Wishbi 2 ted for LBO capital te dansested is total latest spee Tosato con un caded for supliers Fret interest eceeds the intents de mobles on the debe de to additional ABS debts facto mesto pre mobile search Sa FRAC Add EBITDA 2 HERC GHI EBITDA Source: Author estimates from consortium documents and Hertz Global Holdings, Inc. form S-1 A, 11/13/2006 Exhibit 9 Bidding for Hertz: Leveraged Buyout Projected Balance Sheet (1) ($ millions) 2005 PF 161 LP 2006 2007 2008 2009 2010 Asses Cash and Equivalents 300 172 182 191 199 Fleet Cash Enhancement 317 3412 366 388 407 126 Accounts Receivable 1001 1.08 1.166 1.236 1.237 1352 Manufacturer Receivables 630 666 713 756 794 820 Inventories 53 100 108 114 120 125 Prepaid Expenses 113 122 131 135 146 152 Other Assets 27 40 42 45 47 49 Total Current Assets 2003 2.520 2.699 2861 3.002 3.132 Fleet 9.767 10.500 11.750 12.455 13.065 13,613 RAC Fleet 7.701 8.733 9.344 9.505 10.400 10.868 HERC Fleet 2006 2.227 2.405 2.550 2.665 2.745 PPRE Net 1.355 14LS 1463 1.460 1.474 1.516 Goodwill & Intangibles fysis 3915 2015 3915 3915 3015 Total Assets 17530 18841 1927 20,601 21.456 22.177 Liabilities & Stockholders' Equity Accounts Payable 758 KI 933 979 1.020 Accred Liabiles 820 88 952 1.000 1.030 1,10 Accrued Taxes 192 192 167 174 Total Current Labs 1.707 1.8.50 183 2.102 2205 2208 Long-term Deber Lena Lai | lay A0, 4 % 1200 IR 1871 1.773 1 S2 1314 US ABS Botes, 4.300 4.50 3258 5.585 5.873 6.146 International ABS notes.499.00 100 2.000 2.272 2433 2,575 2.700 Eesti ABS debt. 40% 600 600 600 600 600 Thee (ABS) Pancing facily D 0 0 0 O 0 Senior ABL. Facy. 400 400 100 000 100 400 Seniorro notes. 7 200 200 200 200 200 200 Senkt unsecured notes, 8875% 2.000 2.000 2.000 2000 2.000 2000 Esisting senior subordinated notes 7.0% 800 800 800 BOO 800 Senior subordinated motea, 10.5%. M 400 ECO CO Total Long-Term Debt 12.500 13:40 10.00 14.390 10610 1760 Publicy & Property Damage 374 374 374 374 374 374 Defend TRES 636 089 730 73 821 836 Monty Interest 13 13 Total Labs 15.20 16.375 1762 18624 18.30 Total Buty 2.165 ZE 23 Total Labs Buy 17530 IHMI 19.27 21.456 22.177 recette dernidade de tondu 2005 e Eshibir el foc LB palm ABS dibeber de RAC from the com 17.110 20 Exhibit 10 Bidding for Hertz: Leveraged Buyout Projected Cash Flows to Operating Company(1) ($ millions) 2006 2007 2008 2009 2010 Net Income 165.3 252.4 311.3 403.6 434.0 Add: Increase in deferred taxes 53.2 49.5 44.3 38.4 34.7 Add: HERC fleet depreciation 249.5 269.5 285.7 298.5 307.5 Add: total non-fleet deprecation 196.2 202.0 206.0 209.0 212.0 Less: HERC fleet CAP EX 410.7 447.7 430.0 4133 387.4 Less total non-fleet CAP EX 287.0 219.8 202.6 223.2 254.2 Less: Increase in NWC - 115.8 463 43.0 383 37.0 Less net fleet equity requirement 1342 79.5 72.9 64.4 60.8 Cash Flow avalkable to pay down debe -51.7 - 19.8 988 210.4 248.6 Add operating company interest after tax 309.9 3126 313,6 308.5 2977 Free Cash Flow to Capital (unlevered) 258.3 2928 412.4 5189 yilad areas on Dupational espiral poder sisted i BAC Det er et sted back/whered for project because a RAC The world with pay off the loan Source: Author estimates from consortium documents and Her Global Holdings, Inc. form S-1 A, 11/13/2006. Exhibit 11 5463 Bidding for Hertz: Leveraged Buyout Comparable Company Analysis (5 millions) LTM TINTA RITA View M WWTM WENTO Se NISU Vi Car Rental AR Cat 101 SID 1207 117 se on 119 IS SHIP 191 HE SET RE 11 12 1. 117 ht AG 100 16 14 11 SI 1021 Se SHE ENO SR www.pe . BERDAD DT SEDA Source: Consortium internal documentation on LBO