Copyright (c) 2008 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved.

This spreadsheet supports STUDENT analysis of the case, "Bidding For Hertz: Leveraged Buyout" (UVA-F-1560)

Copyright (c) 2008 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved.
 Hertz Historical Consolidated Income Statement ($ millions)

2002 2003 2004 2005E (1)

RAC
Revenue $4,542.7 $4,852.2 $5,490.1 $6,051.7
Direct Op Ex & SG&A 2,676.3 2,943.9 3,393.9 3,845.2
Gross EBITDA 1,866.4 1,908.3 2,096.2 2,206.5
Fleet Depreciation 1,216.7 1,256.4 1,231.9 1,362.2
Fleet Interest 270.9 276.2 310.2 380.1
Adjusted EBITDA 378.8 375.7 554.1 464.2

HERC
Revenue 1,095.7 1,081.5 1,185.9 1,358.0
Direct Op Ex & SG&A 722.2 717.9 749.6 805.1
Gross EBITDA 373.5 363.6 436.3 552.9
Fleet Depreciation 282.8 267.0 231.4 228.0
Fleet Interest 95.4 78.9 74.3 96.6
Adjusted EBITDA -4.7 17.7 130.6 228.3

Total Adjusted EBITDA 374.1 393.4 684.7 692.5

Non-Fleet Depreciation 157.6 156.0 182.7 184.7
Operating Company Interest Expense 0.0 0.0 0.0 0.0

Pretax Income 216.5 237.4 502.0 507.8

Book Taxes 77.9 85.5 180.7 182.9
Minority Interest 0.0 0.0 3.2 9.7

Net Income $138.6 $151.9 $321.3 $324.9

(1)
Reflects pre-LBO estimated net income for 2005.
 Hertz Historical Consolidated Balance Sheet ($ millions)

2002 2003 2004 2005E (1)

Assets
Cash and Equivalents 601.3 1,110.1 1,237.9 1,102.9
Fleet Cash Enhancement 0.0 0.0 0.0 0.0
Accounts Receivable 799.1 1,308.2 1,225.1 1,004.2
Manufacturer Receivables 473.8 511.9 600.1 629.7
Inventories 71.8 73.4 83.3 92.7
Prepaid Expenses 83.8 90.3 100.1 113.1
Other Assets 42.3 45.6 44.1 36.5
Total Current Assets 2,072.1 3,139.5 3,290.6 2,979.1

Fleet, Net 7,425.8 7,793.3 9,122.9 9,767.3

PP&E Net 1,111.8 1,169.8 1,236.2 1,354.6
Existing Goodwill & Intangibles 519.0 536.9 544.4 534.6
New Goodwill & Intangibles 0.0 0.0 0.0 0.0
Total Assets 11,128.7 12,639.5 14,194.1 14,635.6

Liabilities & Stockholders’ Equity

Accounts Payable 506.2 757.9 786.0 758.0
Accrued Liabilities 789.4 736.4 835.7 819.7
Accrued Taxes 52.8 111.4 130.1 129.3
Total Current Liabilities 1,348.4 1,605.7 1,751.8 1,707.0
Total Long-Term Debt 7,043.2 7,627.9 8,428.0 9,180.3

Public Liability & Property Damage 353.5 398.8 391.7 374.3

Deferred Taxes 462.1 721.2 849.7 636.0
Commitments & Contingencies 0.0 0.0 0.0 0.0
Minority Interest 0.0 0.0 4.9 12.7
Total Liabilities 9,207.2 10,353.6 11,426.1 11,910.3

Total Equity 1,921.8 2,285.8 2,767.9 2,725.9

Total Liabilities & Equity 11,129.0 12,639.4 14,194.0 14,636.2

(1)      
Reflects pre-LBO estimated balance sheet for 2005. Small differences in historical total assets and total liabilities and equity in 2002-200
total liabilities and equity in 2002-2004 are due to rounding.
 Projected Income Statement ($ millions)

2005 PF(1) 2006 2007 2008 2009 2010

Business Segments:
RAC
Revenue 6,051.7 6,535.8 6,993.3 7,412.9 7,783.6 8,133.9
Direct Op Ex & SG&A 3,845.2 4,032.8 4,231.0 4,455.1 4,605.6 4,828.2
Gross EBITDA 2,206.5 2,503.0 2,762.3 2,957.8 3,178.0 3,305.7
Fleet Depreciation 1,362.2 1,544.7 1,652.9 1,752.0 1,839.6 1,922.4
Fleet Interest 366 408.1 449.5 479.0 505.6 529.9
Adjusted EBITDA 478.3 550.2 660.0 726.8 832.7 853.4

HERC
Revenue 1,358.0 1,493.8 1,613.3 1,710.1 1,787.1 1,840.7
Direct Op Ex & SG&A 805.1 863.1 919.0 968.8 999.5 1,031.3
Gross EBITDA 552.9 630.7 694.3 741.3 787.6 809.4
Fleet Depreciation 228.0 249.5 269.5 285.7 298.5 307.5
Fleet Interest(2) 0.0 0.0 0.0 0.0 0.0 0.0
Adjusted EBITDA 324.9 381.1 424.8 455.6 489.1 501.9

Hertz Corporation (HertzCo)

Total Adjusted EBITDA 803.2 931.3 1,084.8 1,182.3 1,321.8 1,355.3
RAC Non-Fleet Depreciation 145.9 154.4 159.0 161.0 163.0 165.0
HERC Non-Fleet Depreciation 38.8 41.8 43.0 45.0 46.0 47.0
Operating Company (total) EBIT 618.5 735.1 882.8 976.3 1,112.8 1,143.3

Op Co Interest Expense:
Term Loan facility (RAC), 8.0% 144.0 148.5 150.1 142.2 125.4
Senior ABL facility, 7% 28.0 28.0 28.0 28.0 28.0
Euro notes, 7.88% 15.8 15.8 15.8 15.8 15.8
Senior unsecured notes, 8.875% 177.5 177.5 177.5 177.5 177.5
Existing senior notes, 7.00% 56.0 56.0 56.0 56.0 56.0
Senior subordinated notes, 10.5% 63.0 63.0 63.0 63.0 63.0
Total Op Co interest expense 460.8 484.3 488.8 490.4 482.5 465.7

Pretax Income 157.7 250.8 394.0 486.0 630.3 677.6

Book Taxes (36%) 56.8 90.3 141.8 174.9 226.9 243.9
Net Income 100.9 160.5 252.2 311.0 403.4 433.7

Corporate EBITDA(3) 1,031.2 1,180.9 1,354.3 1,468.0 1,620.3 1,662.8

(1)
Reflects 2005PF income statement in Exhibit 2 adjusted for LBO capital structure (and associated increase in total interest expense).
Transaction costs are excluded for simplicity.
(2)
Fleet interest exceeds the interest rate times the average year-end balances on the fleet debt due to additional
ABS debt incurred intra-year to meet seasonal peaks in automobile rentals.
Sum of RAC adjusted EBITDA and HERC gross EBITDA
(3)
 Projected Income Statement ($ millions)

2005 PF(1) 2006 2007 2008 2009 2010

Business Segments:
RAC
Revenue 6,051.7 6,535.8 6,993.3 7,412.9 7,783.6 8,133.9
Direct Op Ex & SG&A 63.54% 61.70% 60.50% 60.10% 59.17% 59.36%
Gross EBITDA 36.46% 38.30% 39.50% 39.90% 40.83% 40.64%
Fleet Depreciation 17.69% 17.69% 17.69% 17.69% 17.69% 17.69%
Fleet Interest 6.05% 6.24% 6.43% 6.46% 6.50% 6.51%
Adjusted EBITDA 7.90% 8.42% 9.44% 9.80% 10.70% 10.49%

HERC
Revenue 1,358.0 1,493.8 1,613.3 1,710.1 1,787.1 1,840.7
Direct Op Ex & SG&A 59.29% 57.78% 56.96% 56.65% 55.93% 56.03%
Gross EBITDA 40.71% 42.22% 43.04% 43.35% 44.07% 43.97%
Fleet Depreciation 11.04% 11.20% 11.20% 11.20% 11.20% 11.20%
Fleet Interest(2) 0.0 0.0 0.0 0.0 0.0 0.0
Adjusted EBITDA 23.92% 25.52% 26.33% 26.64% 27.37% 27.27%

Hertz Corporation (HertzCo)

Total Adjusted EBITDA 10.84% 11.60% 12.60% 12.96% 13.81% 13.59%
RAC Non-Fleet Depreciation
HERC Non-Fleet Depreciation
Operating Company (total) EBIT 8.35% 9.15% 10.26% 10.70% 11.63% 11.46%

Op Co Interest Expense:
Term Loan facility (RAC), 8.0% 0.0 0.0 0.0 0.0 0.0
Senior ABL facility, 7% 0.0 0.0 0.0 0.0 0.0
Euro notes, 7.88% 0.0 0.0 0.0 0.0 0.0
Senior unsecured notes, 8.875% 0 0 0 0 0
Existing senior notes, 7.00% 0.0 0.0 0.0 0.0 0.0
Senior subordinated notes, 10.5% 0.0 0.0 0.0 0.0 0.0
Total Op Co interest expense 6.22% 6.03% 5.68% 5.38% 5.04% 4.67%

Pretax Income 2.13% 3.12% 4.58% 5.33% 6.59% 6.79%

Book Taxes (36%) 0.0 0.0 0.0 0.0 0.0 0.0
Net Income 1.36% 2.00% 2.93% 3.41% 4.21% 4.35%

tal interest expense).

 Projected Balance Sheet ($ millions)(1)

2005 PF (2) 2006 2007 2008 2009 2010

Assets
Cash and Equivalents 300 161 172 182 191 199
Fleet Cash Enhancement 317 342 366 388 407 426
Accounts Receivable 1,004 1,088 1,166 1,236 1,297 1,352
Manufacturer Receivables 630 666 713 756 794 829
Inventories 93 100 108 114 120 125
Prepaid Expenses 113 123 131 139 146 152
Other Assets 37 40 42 45 47 49
Total Current Assets 2,493 2,520 2,699 2,861 3,002 3,132
Fleet 9,767 10,960 11,750 12,455 13,065 13,613
RAC Fleet 7,701 8,733 9,344 9,905 10,400 10,868
HERC Fleet 2,066 2,227 2,405 2,550 2,665 2,745
PP&E, Net 1,355 1,445 1,463 1,460 1,474 1,516
Goodwill & Intangibles 3,915 3,915 3,915 3,915 3,915 3,915
Total Assets 17,530 18,841 19,827 20,691 21,456 22,177
Liabilities & Stockholders’ Equity
Accounts Payable 758 821 880 933 979 1,020
Accrued Liabilities 820 888 952 1,009 1,059 1,103
Accrued Taxes 129 140 150 159 167 174
Total Current Liabilities 1,707 1,850 1,983 2,102 2,205 2,298
Long-term Debt:
Term Loan facility (RAC), 8.0% 1,800 1,856 1,876 1,778 1,568 1,319
U.S. ABS notes, 4.5% (3)
4,300 4,902 5,258 5,585 5,873 6,146
International ABS notes, 4.9% (3)
1,800 2,096 2,272 2,433 2,575 2,709
Existing ABS debt, 4.0% 600 600 600 600 600 600
Fleet (ABS) financing facilty 0 0 0 0 0 0
Senior ABL Facility, 7.0% 400 400 400 400 400 400
Senior Euro notes, 7.88% 200 200 200 200 200 200
Senior unsecured notes, 8.875% 2,000 2,000 2,000 2,000 2,000 2,000
Existing senior subordinated notes, 7.0% 800 800 800 800 800 800
Senior subordinated notes, 10.5% 600 600 600 600 600 600
Total Long-Term Debt 12,500 13,454 14,006 14,395 14,616 14,775
Public Liability & Property Damage 374 374 374 374 374 374
Deferred Taxes 636 689 739 783 821 856
Minority Interest 13 13 13 13 13 13
Total Liabilities 15,230 16,380 17,115 17,667 18,029 18,316
Total Equity 2,300 2,461 2,713 3,024 3,427 3,861
Total Liabilities & Equity 17,530 18,841 19,827 20,691 21,456 22,177
(1)
Small differences in the totals and the sum of individual line items are due to rounding.
  Reflects 2005 balance sheet in Exhibit 3 adjusted for LBO capital structure.
(2)

(3)
ABS debt balances increase over time due to increases in RAC fleet from growth and rising vehicle costs.
 Projected Cash Flows to Operating Company ($ millions)

2006 2007 2008 2009 2010

Net Income 160.5 252.2 311.0 403.4 433.7
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 depreciation 196.2 202.0 206.0 209.0 212.0
Less: HERC fleet CAP EX 410.7 447.7 430.0 413.3 387.4
Less: total non-fleet CAP EX 287.0 219.8 202.6 223.2 254.2
Less: increase in NWC -115.8 46.3 43.0 38.3 37.0
Less: net fleet equity requirement 134.2 79.5 72.9 64.4 60.8
Cash Flow available to pay down debt(2) -56.5 -20.0 98.6 210.1 248.3
Add: operating company interest after tax 309.9 312.8 313.8 308.8 298.0
Free Cash Flow to Capital (unlevered) 253.5 292.8 412.4 518.9 546.3
12390.7
Total cash flow 253.5 292.8 412.4 518.9 12937.0
Years 1 2 3 4 5
Discounted Cash flow 240.24195 263.38593 350.97049 415.6456 9678.5497
Value of the Firm 10948.79
Less : Debt 8,428
Value of Equity 2,521 2295

Dividend $ 1 Billion
IPO Proceeding $ 1.26 Billion
Dilution of Stack 27.5% Dilution
Value of the Equity 4.58 Billion
 Assumptions for the Long run
WACC 5.98%
Long term Growth 1.50%

Terminal Value
 Comparable Company Analysis ($ millions)

LTM Financials Price Earnings

Company (1)
Stock Price Equity Enterprise Value Revenue EBITDA EBITDA 2005E
(8/15/05) Value (EV) (2) Margin

Car Rental
Amerco $58.01 $1,236 $1,929 $2,047 $298 14.60% 19.1
Cendant $20.54 $22,117 $26,417 $20,454 $3,119 15.20% 14.6
Dollar-Thrifty $32.30 $846 $661 $1,481 $107 7.20% 15

Equipment Rental
United Rentals $18.49 $1,440 $4,212 $3,013 $785 26.10% 10.8
Ashtead Group $2.04 $675 $1,567 $1,144 $246 21.50% 16.9
Atlas Copco $18.02 $10,942 $11,823 $6,270 $1,495 23.80% 16.8

(1)
Cendant held Avis and other travel related businesses. RSC Equipment Rentals was a division of Atlas Copco.

Enterprise Value for car and truck rental represents the value of the operating company, such that the associated multiples represent the mu
(2)

operating company. Similarly, EBITDA for car rental represents adjusted EBITDA. Dollar Thrifty’s enterprise value is less than equity valu
debt is fleet-based (there is no operating company debt) and because Dollar Thrifty has $185 million in excess cash.

Treasury and Corporate Rates - August 2005

3-month T-bill 3.44%
5-year Treasury Bond 4.12%
10-year Treasury Bond 4.26%
Corporate BBB Bonds 5.98%

Business Segments:
RAC 2005
Revenue 6,051.7
Direct Op Ex & SG&A 3,845.2
Gross EBITDA 2,206.5
Fleet Depreciation 1,362.2
Fleet Interest 366
Adjusted EBITDA 478.3

HERC
Revenue 1,358.0
Direct Op Ex & SG&A 805.1
Gross EBITDA 552.9
Fleet Depreciation 228.0
Fleet Interest(2) 0.0
Adjusted EBITDA 324.9

Multiple EBIDTA Enterprise Value

EBIDTA Multiple of RAC 7.040 478.3 3367.30
EBIDTA Multiple of HREC 6.548 324.9 2127.43
Book Value of Fleet 9,767
Fleet Equity 1269.749
Enterprise Value 13992
Debt 12,500
Cash 616.60
Equity value 2108.88
 Enterprise
Price Earnings Value/LTM
2006E Revenue EBITDA
Multiple

15.7 0.94 6.473

12.3 1.29 8.470
13.7 0.45 6.178
7.040 3367.3

8.7 1.4 5.366

11.8 1.37 6.370
15.2 1.89 7.908
6.548

d multiples represent the multiples for the

alue is less than equity value because all of its
h.
 2006 2007 2008 2009 2010
Cost of debt 2.43% 2.38% 2.30% 2.25% 2.18%
Cost of equity 22.17% 22.17% 22.17% 22.17% 22.17%

Debt 12,500 13,454 14,006 14,395 14,616

Equity 2,300 2,461 2,713 3,024 3,427
Wd 84.46% 84.54% 83.77% 82.64% 81.01%
We 15.54% 15.46% 16.23% 17.36% 18.99%

WACC 5.50% 5.44% 5.53% 5.71% 5.98%

Beta 1.62
Risk free rate 3.44%
RM-Rfr 11.56%