CAGR

5.2%
4.6%
0.0%

Total Revenue

FY05E
6,000.9
1,374.4
70.9
7,446.2

FY06
6,312.9
1,437.6
70.9
7,821.5

Projected
FY07
FY08
6,641.2
6,986.6
1,503.8
1,572.9
70.9
70.9
8,215.9
8,630.4

RAC
HERC
Corporate
Gross EBITDA

2,201.1
557.7
(6.8)
2,752.0

8.5%
7.2%
0.0%

2,388.2
597.9
(6.8)
2,979.2

2,591.2
640.9
(6.8)
3,225.3

2,811.4
687.0
(6.8)
3,491.7

RAC
HERC
Corporate
Corporate EBITDA

452.4
557.7
(6.8)
1,003.3

11.5%
7.2%
0.0%

504.4
597.9
(6.8)
1,095.5

562.4
640.9
(6.8)
1,196.5

627.1
687.0
(6.8)
1,307.4

RAC
HERC
Corporate

RAC
HERC
Corporate
Fleet Value

8,176.0
1,856.5
10,032.5

5.1%
3.6%

8,593.0
1,923.3
10,516.3

9,031.2
1,992.6
11,023.8

9,491.8
2,064.3
11,556.1

Projected
FY09
7,349.9
1,645.3
70.9
9,066.0

FY10
7,732.1
1,721.0
70.9
9,523.9

3,050.4
736.5
(6.8)
3,780.1

3,309.7
789.5
(6.8)
4,092.4

699.2
736.5
(6.8)
1,428.9

779.6
789.5
(6.8)
1,562.4

9,975.9
2,138.6
12,114.5

10,484.7
2,215.6
12,700.3

Revenue
Direct Op.Ex.+ SG&A
Gross EBITDA
Fleet Depreciation
Fleet Interest
Adjusted EBITDA
Non-Fleet Depreciation
Adjusted EBITA
Corporate EBITDA

FY05E
7,446
4,694
2,752
1,588
360
804
187
617

FY06
7,821
4,842
2,979
1,710
388
881
192
689

Projected
FY07
FY08
8,216
8,630
4,991
5,139
3,225
3,492
1,842
1,984
418
450
966
1,058
197
202
769
857

1,003

1,095

1,197

1,307

FY09
9,066
5,286
3,780
2,137
484
1,159
207
953
1,429

FY10 CAGR
9,524
5,431
4,092
2,301
7.7%
522
7.7%
1,270
212
2.5%
1,058
1,562

Adjusted EBITDA
Net Fleet Equity Req.
Net OpCo EBITDA
HERC Net Fleet Growth Cap. Ex.
Non-Fleet Cap. Ex.
Change in NWC
Change in other Bal. Sheet accounts
Pre-Tax Unlevered CF
OpCo Interest Expense
Taxes
After-Tax Levered FCF

FY06
881
(104)
777
(67)
(233)
18
35
530
458
(55)
18

FY07
966
(110)
856
(69)
(222)
19
39
623
458
(37)
128

OpCo Debt
OpCo Debt/Corporate EBITDA
Corporate EBITDA/OpCo Interest

5,044
4.6
2.4

4,916
4.1
2.6

Projected
FY08
1,058
(115)
943
(72)
(211)
21
42
724
425
(6)
293
4,622
3.5
3.1

FY09
1,159
(121)
1,038
(74)
(199)
23
46
834
399
24
411
4,212
2.9
3.6

FY10
1,270
(127)
1,143
(77)
(188)
25
51
954
364
60
530
3,682
2.4
4.3

Basis
25.0%

57.0
2.0%
4.0%
8.64%
35.0%

Source
On-Airport Op. Exp.
Off-Airport Op. Exp.
Europe
Total
Taxes
After-Tax Total
US Non-Fleet Cap. Ex.
HERC ROIC Improvement
Grand Total Gains
Perpetuity Value (use a 3% TV growth rate):

Expected
163
100
167
430
151
280
90
32
402
5,736
3,346

Amt. Used
75
58
33
166
58
108
56
32
196
2,799
1,633

Notes
Exhibits 2A and 2B
p. 6
Exhibits 3A and 3B
35%
p. 7
p. 7

10%
15%

Hertz LBO
Ford
Manufacturing
FMCC
Hertz
Other

Debt
Equity

OpCo
LBO
Debt
Equity

HERC
Op. Eq.
Other

Bankruptcy Remote

Hertz IPO
RAC
HERC
Op. Eq.
Other

FleetCo
Debt

Equity

Cash
RAC
Other

ABS
Debt
Equity

Hertz Supplement
Revenue
- Direct Op.Ex./SG&A (excl. depreciation)
= Gross EBITDA
- Fleet Depreciation
- Fleet Interest
= Adjusted EBITDA
- Net Fleet Equity Requirement
= Net OpCo EBITDA
- HERC Net Fleet Growth Cap. Ex.
- Non-Fleet Cap. Ex.
- Change in Working Capital
- Change in Other Assets/Liabilities
= Pre-Tax Unlevered FCF
- OpCo Cash Interest
- Cash Taxes
= After-Tax Levered FCF

CFM ECF Framework

Revenue
- COGS (incl. depreciation)
- SG&A
= EBIT
- Cash Interest
= EBT
- Cash Taxes
= Net Income
+ Depreciation
- Cap. Ex.
+/- Change in Other Assets/Liab.
+/- Change in Working Capital
= Cash Flow Available

Assumptions
2010 Corporate EBITDA
Exit Multiple
a

1,562
6.0
1.5

Rf

4.6%

Rm - Rf

5.0%

After-Tax Levered FCF

Amortization of Principal
ECF
Ending Equity MV
OpCo Debt
Debt + Equity
Debt/Capital
Equity/Capital
levered
Re

FY06
18
18
2,768
5,044
7,812
0.65
0.35
4.2
25.8%

Terminal Values
Assets
Debt
9,374
3,682

Valuation
FY07
FY08
128
293
128
293
3,403
4,103
4,916
4,622
8,319
8,725
0.59
0.53
0.41
0.47
3.7
3.2
23.0%
20.6%

FY09
411
411
4,867
4,212
9,078
0.46
0.54
2.8
18.6%

minal Values
Equity
5,692

FY10
530
530
5,692
3,682
9,374
0.39
0.61
2.5
17.0%

Mult.
2005
2006

IRR to Investors
6.0
7.0
8.0
(2,295) (2,295) (2,295)
-

2007

2008
2009
2010

5,692

7,255

8,817

IRR

20%

26%

31%