factset equity winner_2015

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Hertz Global Holdings, Inc. (NYSE: HTZ) Long: $21.75 Intrinsic Value: $34.50 (+59%) Time Horizon: 1 Yr March 23, 2015 – Analyst: David R. Hanson

CONFIDENTIAL Property of HWP. Not for Redistribution without express written consent. 1 This presentation does not constitute an offer to purchase securities of Hanson Wells Partners Fund, LP. The information contained herein is confidential and is provided to you solely for informational purposes only. This information is not to be shared, distributed, or otherwise used, for any other purpose or by any other person without the written permission of Hanson Wells Partners Fund, LP. See Disclosures page. David R. Hanson / [email protected]

Metrics (3/23/2015 - Intraday) Stock Price / Volume Chart

Price: $21.75 (52 L/H $18.50-31.61)

Market Cap: $10.0bn / EV $16.0bn

Valuation: $34.50 (+59%)

Sum-of-the-Parts

Current 31.37 - 35.92

L-T 26.32 - 32.72

Midpoint 29.52 - 33.64

EPS P/E Adjusted Now Target

‘14e $1.75 12.4x 20.0x

‘15e $2.04 10.7x 16.5x

EBITDA EV / EBITDA (mm) Adjusted Now Target

‘14e $2,240 7.2x 9.8x

‘15e $2,491 6.4x 8.8x

Upcoming Events: - Financial Statements Re-Filed TBD - Debt Covenant Waiver Expires ~6/30

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Recommendation Conclusion: Leading rental car company (substantially higher margins & fleet efficiency vs. peer CAR)

trading at 59% discount to IV ($34.50); Multiple near-term, reasonably-attainable catalysts to reach IV

Long Price: $21.75 Target: $34.50 (+59%) Position Size: ~5-7% position until HERC spin-off (~Q4’15)

Executive Summary & Situation Overview (Update to HWP’s October 2013 Underwriting Memo.)

Consistent w/ HWP 2013 thesis, HTZ announced Q1’14 that it would separate HERC via tax-free spinoff o Management recognized that pure-play equipment rental & rental car valuation multiples had

returned to and above pre-Crisis levels, but that HTZ was still trading at a discounted multiple o Post-spin, HTZ estimated to receive net cash proceeds of $2.5bn, to be used to Pay down Hertz

debt and Support a new $1 billion share repurchase program (may increase up to 20% of o/s); o Spinoff will give 1) HTZ better transparency, optimized capital structure, the ability to return

capital to shareholders 2) HERC ability to grow, and becomes best pure-play comp to URI

HTZ has been hit by a plethora of woes (accounting, ERP roll-out, management, Ebola)

Core operating results for rental car (RAC) & equipment rental (HERC) progressing nicely o From ‘12-‘14, HTZ revenue, EBITDA, FCF grew nicely o RAC business has grown to ~$10bn in revenue, driven by 48% growth in US RAC o HERC revenue is approaching pre-Crisis levels, but with a more-balanced business mix o While HERC revenues & margins have not year reached pre-Crisis peaks, cost-cutting and

efficiency measures have pushed RAC to all-time high levels

HWP thesis on improving industry pricing proved correct as reflected by peer Avis (CAR) o Since 9/2013, CAR (lower-margin peer) returns +113% vs HTZ -12%

Vast majority of actual & potential material negative business updates already announced and/or reflected in current share price - with no credit for future improvement

New, strong management team is in place and is working quickly to ‘right the ship’ o CEO, CFO, CRO, CIO, Lead Independent Director, 3 additional Independent Directors are all

new within last ~1 year, with substantial rental-car industry expertise

Icahn/Jana own 19% / top 15 non-passive 50%; Pressuring HTZ mgmt. to address subpar share returns; Jana (2/5/15) said HTZ EPS could double and shares could triple over the next few years

Bull-case: several years out, HTZ could earn $3.50+/share with very reasonable margin and growth assumptions; Using a 20x P/E multiple, this would equate to $70/share (+222%)

mailto:[email protected]

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Business Description (Update to HWP’s October 2013 Underwriting Memo.)

Hertz is the largest airport & general use car rental brand in the world; 95-year old company o 10,270 locations worldwide and 700,000 vehicles o NAm (79% of locations) Europe, Africa, Middle East (17%), LatAm (2%), Asia (2%), ANZ o #1 on-airport market share (39% / Ent 33% / CAR 26%) o #2 OAP (12% / Ent 69% / CAR 10% / Other 9%)

Rental car (RAC): o On-airport (946 locations / 2/3rds US; ~67% of RAC revenue) o Off-airport (3,400 locations / 75% US; ~27% of RAC revenue) o Hertz – peak business is mid-week servicing business renters o Dollar & Thrifty – acquired 11/2012; peak business is weekends & renting to business travelers; o Car Sharing (24/7) – Zipcar (Avis) competitor; rents cars by the hour and/or the day in NAm o Services: Equip (child seat, nav, XM), Insurance (damage waiver, theft, liability & accident)

Equipment Rental (HERC) - $1.6bn revenue; 70% US (232 locations), 21% Canada (35), 7% EU (67)

Fleet leasing and management (Donlen Corp.) – manages commercial fleets and tracks data such as fuel management, vehicle maintenance, and accident management

Hertz is a market leader in RAC with a leading equipment rental business bolted-on

Hertz Global Holdings, Inc.(NYSE: HTZ)

2014 Revenue: $11.0 Billion

Equipment Rental (~14%)

2014 Revenue: $1.6 Billion

Leasing /

Other (~5%)

$0.6 Billion

U.S.

$7.2 Billion

Rental Car (~81%)

2014 Revenue: $8.9 BillionOn- and Off-Airport

Int’l

$2.7 Billion

Construc.

~$0.6Bn

Industrial

~$0.4Bn

Other

~$0.5Bn

~16% Corp. EBITDA margin

World’s largest general-use airport car rental

brand; #1 airport car rental brand in U.S. and

at 119 major airports in Europe

Approximately 8,750 locations in ~150

countries Offering rentals for hourly, weekly,

monthly, yearly (leases) for leisure, business,

insurance replacement, etc.

~42-44% Corp. EBITDA margin

One of the largest operators in North America

Low cost structure

Diversified revenue mix

Approximately 330 locations worldwide

Largest national account base

Source: Hertz, Company Filings, HWP Analysis


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Background Note: HWP has been involved with Hertz since ~Q3 of 2013. Below and throughout, there are references to our original underwriting document, as well as to Hertz financials and circumstances at that time.

Catalysts For Intrinsic Value To Be Realized / Update on Prior Catalysts (Realized / ~In-Progress)

Firmer industry pricing / Industry consolidation improves pricing dynamics. o HTZ, CAR, Enterprise have 94% market share overall, prices rising every quarter o Gaining share by increasing value, not decreasing px; technology gets HTZ there

~ Firmer industry pricing / Industry consolidation has improved pricing dynamics (but more to go)

o Following HTZ/Dollar Thrifty deal, market share for top 3 increased to 94%, industry pricing rising annually at 1-2% thereafter

o HTZ announced incremental price increases Jan 1, 2015 o CAR reported pricing +1% y/y 2012-2013 and +2% y/y 2013-2014 (fair proxy for HTZ ’14)

Strong organic revenue growth opportunities o OAP and Leisure/Value segment – higher RPD/length vs. commercial

Hertz has only 12% market share in profitable off-airport (OAP), a three-player market Since ‘06, HTZ increased OAP locations 60%; expects 9.6% increase ‘13. Significant

opportunity to capture more share and insurance replacement market Didn’t have budget brand during recession (where all volume growth was); DT will

capitalize on value segment, fastest growing on-airport RAC market +25% ‘12 DT brands to continue double-digit growth in 2013-2014

o China Auto Rental 20% stake Q1 2013 (Warburg Pincus) o Hertz On Demand (hourly rentals) will expand to 3,500 locations by Q3 2013: Mgmt. expect little

to no cannibalization from the continued expansion of this business o Services growth: all of Hertz's ~500k US vehicles will have On Demand tech by YE2014 o Revenue synergies from DT (2012), Donlen (2011), 11 HERC tuck-ins since 2010

~ Strong organic revenue growth but more work to be done

o Despite recent turmoil, RAC business grew to ~$10bn in revenue, driven by 48% growth in US RAC HERC revenue is approaching pre-Crisis levels, but with a more-balanced business mix

Higher margins via: o 1) Technology (e.g., Self-serve Kiosks)

Kiosks allows 24/7 rentals, which increases fleet utilization in a cost-effective manner Allows for rapid expansion of higher profit off-airport network: asset-light model will

increase returns on capital ExpressRent 400: moving into body shops, auto dealerships, hotels, parking garages;

partnership with Lowes: kiosk / vans w 24/7 Significantly reduces labor costs: live agents maintain a high-quality, personal

experience for customers in a cost-effective manner o 2) Optimizing remarketing channels yields $500-$1100/vehicle in incremental margin; online

sales via Rent2buy.com / dealer direct / 100 retail lots by YE’13 o 3) Focused on taking out costs; $2.6bn taken out since 2006, $2.9bn target YE’13 o $300mm in cost synergies from DT over 3 years (2012-2015)

~ Higher margins were realized, but more work to be done

o HTZ US RAC margins rose from 14% in 2011 to 16% in 2013 (Targeting 20%+) o HERC margins rose from 40% to 43% o Remarketing via Dealer Direct (+$400 vs auction) and Retail/Rent2Buy (+$1000) channels

increased from 44% in 2011 to 54% in 2013, with a target of 70% by YE2014 o Cumulative cost savings increased from $226mm to $235mm and employee efficiency

increased from $2.2mm to $2.9mm o HTZ announced in Jan 2015 it was cutting expenses by an additional $100mm annually o Targeted cost synergies from DT ($300mm 2012-2015) have likely not been realized due to

poor integration


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Summary of Catalysts For Intrinsic Value To Be Realized / Update on Prior Catalysts (continued)

Investments complete, now cashflow (in progress) o Investments in technology, RAC, and HERC have stabilized post 2012 ($3..8bn last 4yrs); now

corporate EBITDA and FCF will increase o EVA and Corporate EBITDA are primary bonus metrics; Corporate EBITDA = (EBITDA) – (car

rental fleet interest) – (car rental fleet depreciation) + (non-cash expenses) + other non-recurring expenses.

o ~ HTZ FCF grew 190% 2012-2013, but likely did not hit 34% 2013-2014 growth target

Delevering and returning capital to shareholders (in progress) o Net corporate debt / EBITDA looks high 3.6x; With full year DTG 3.3x; With synergies 2.8x o Targeting delever to IG target 1.6x (net debt / EBITDA); Strong FCF generation would allow

Hertz to pay down corporate debt and achieve target by 2014 o Mgmt repeatedly asserted Hertz will return cash to shareholders once target leverage ratio met o Clarity on return of capital to shareholders would be a huge catalyst; Future payout of FCF as

share repurchase or dividends all incremental upside o Spin-off or sale of HERC (non-core) would delever corporate balance sheet and free up capital,

as much of the corporate debt supports HERC; Only recently became able to separate HERC

~ Net corporate debt / EBITDA still looks high given fall in EBITDA (net debt stayed fairly flat)

o Spin-off of HERC will delever corporate balance sheet and give HTZ substantial capital to return to shareholders

Post-Spinoff, HERC & HTZ will each trade up towards peer multiples (URI/ CAR)

Sponsor ownership overhang removed (Q2’13) o In December 2005, CDR, Carlyle, and ML acquired Hertz from Ford for $14.5bn ($4.4bn cash,

$10.5bn assumed debt and fees) o November 2006 IPO at ~$16/share o May 2013, Sponsors sold remaining shares ($23-26 range)

o While realized, difficult to estimate impact this positive / removal of overhang had on shares

New: Filing of restated financial statements and update of 2014 results / 2015+ Guidance o The vast majority of actual and potential material negative business updates have already been

announced and/or are reflected in the current share price – with no credit given for future results

/ solid results from core operating business

o Financials will likely be restated before YE2015, with expectations for ~6/30/15; Waiver

on debt covenants gives management a financial incentive to re-file by this date

o A new, strong management team is in place and is working quickly to ‘right the ship’ (CEO,

CFO, CRO, CIO, Lead Independent Director, 3 additional Independent Directors are all new

within the last ~1 year, with substantial rental-car industry expertise)

o Two significant share re-ratings are on the horizon:

Given HTZ size (1.5x Avis), non-activist investors will re-enter shares post re-

statement (driving a re-rating towards CAR multiples)

Post-Spinoff, HERC & HTZ RAC will each trade up towards peer multiples (URI / CAR)

New: Activists (Icahn, Jana, Fir Tree own 19% / top 15 non-passive 50%) will maintain pressure on management team to address subpar share returns; HERC is a key lever to unlock value

o Even post-appointment of new HTZ CEO, Icahn and Jana have increased stakes and citing ongoing focus on fixing HTZ

New (lower-quality catalyst): Lower gas prices spur additional leisure trip spend / RAC demand


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Hertz Equipment Rental (HERC) Spinoff

HWP October 2013 thesis “Spin-off or sale of HERC (non-core) would delever corporate balance sheet and free up capital, as much of the corporate debt supports HERC; Only recently became able to separate HERC”

March 2014: HTZ announced that it would separate HERC into a standalone public co. via tax-free spin o Hertz estimated the HERC spinoff would close by early 2015

Target HERC net leverage ratio of 3.5x-4.0x at separation Target HTZ net corporate leverage ratio of 2.5x-3.5x

o Post-spin, Hertz estimated to receive net cash proceeds of $2.5 billion, to be used to: Pay down Hertz debt Support a new $1 billion share repurchase program (may increase up to 20% of

o/s); Replaces $300 million program announced in 2013 / $87.5 million utilized o Received Private Letter Ruling from IRS giving comfort to tax-free nature of spin

The spinoff will allow: o HTZ to be the leading pure-play rental car co. in a consolidated industry

Better transparency, and an optimized capital structure (currently skewed by HERC) Primarily focus on cash generation and growth Fixed leverage target range / FCF profile may provide for ongoing return of capital to

shareholders o HERC to grow and reduce costs through cycle

Will be the only other US public peer to URI

Hertz management recognized that pure-play equipment rental and rental car companies had both returned to and above pre-Crisis levels, but that HTZ was still trading at a discounted multiple

Source: Hertz


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Summary of Noteworthy Hertz Developments since HWP Involvement In Sept 2013, HTZ revised its fleet cost guidance (cost to dispose of each rental car) upward

In December of 2013, Tom Kennedy was appointed CFO o Well-regarded CFO (Harvard MBA) o Served as Hilton’s CFO during the balance sheet restructuring and deleveraging initiatives o Was CFO for Vanguard Car Rental (National and Alamo brands) and was part of the senior

leadership team which engineered the transformation and ultimate sale of Vanguard’s European business to Eurazeo and the sale of the North American business to Enterprise Rent-a-Car

o Ideal background to be the CFO of HTZ – but inherited a jumbled array of systems from the HTZ/Dollar Thrifty transaction and has been playing catch-up ever since

o Leading a recently-appointed accounting team (CAO Robin Kramer hired in mid May, VP of SOX/Compliance, Randy Walford, hired in late April, plus additional new hires to strengthen technical and managerial expertise in these departments)

In December of 2013, HTZ also adopted a 1-year “poison pill” (shareholder rights plan) in response to Icahn/Activist share accumulation

In March of 2014, HTZ delayed filing its 10-K citing delays due to its newly-implemented ERP system o HTZ also identified adjustments relating to prior periods which would require restatements that

were immaterial to Hertz’s “reported results of operations, financial condition, or liquidity”

On March 18, 2014, HTZ announced its plan to spin-off its equipment rental business, HERC, to dividend cash from HERC to HTZ, and to buyback ~$1bn of HTZ shares outstanding

Delay of Q1’14 10-Q o On May 13, 2014, Hertz delayed filing Q1’14 10-Q, citing difficulty in evaluating capitalization of

depreciation for certain non-fleet expenditures o HTZ also identified “immaterial” errors relating to the financial statements for 2011 o On May 19, HTZ again delayed Q1 results, but reaffirmed its full year 2014 guidance

In June of 2014, Brian MacDonald was named CEO of HERC

On June 6, In a reversal to prior comments, HTZ announced that it had found a material weakness in internal controls, and would need to restate 2011, 2012, and 2013 financials

o HTZ also previewed that Q1 would be below consensus “reflecting costs associated with the accounting review, other unusual items, and certain anticipated operating results”

During/after Q3’14, airlines and car rental firms hit by slower world growth estimates + Ebola concerns

In mid-August, Hertz withdrew its full-year financial estimates, saying it would be “well below the low end of its 2014 guidance”, citing costs and challenges relating to the GM recalls, higher expenses in the US rental car segment, the rollout of an enterprise resource planning (ERP) system, and soft demand in the equipment rental segment

o This represented the ‘straw that broke the camel’s back’ o Activist investors Carl Icahn, Jana Partners, Fir Tree Partners all reported large stakes, and

cited management missteps with regard to accounting errors and operational issues o Under pressure from Icahn, Chairman & CEO Mark Frissora resigned In September o Icahn added 3 Directors to Board, 2 of which will be part of 5-person CEO search committee o Hertz also reported that Scott Sider retired as group president of RAC Americas / Linda Fayne

Levinson would become independent lead director; Seen as tough outside director (among first

female partners ever at McKinsey & Co.) who will push management to resolve problems


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Summary of Noteworthy Developments (continued)

In mid-November, HTZ provided a business update: o “Hertz remains committed to the separation of its equipment rental business and is continuing to

advance those plans, although the timing of the actual separation will be delayed and will not

occur until after the Company has completed its accounting review and filed the necessary

updated financial statements with the SEC”

In late-November, HTZ appointed John Tague as CEO (selected unanimously, indicating support from Icahn), former President and COO of United Airlines, CEO of Cardinal Logistics

o Icahn: "I have been involved in a number of CEO searches during the last decade and have

been quite impressed by the knowledge and imagination of a number of these candidates,

many of whom have turned into very successful CEOs," Icahn said. "I am happy to say that

after listening to John's ideas concerning Hertz and evaluating what he has accomplished at

United, I believe he ranks at or near the top of the group."

As of December 2014, Icahn, Jana and Fir Tree collectively represented 21% of HTZ shares, and overall the top-15 non-passive investors represented 43%

In January of 2015, HTZ continued to make key hires o Hired Jeffrey Foland as Senior EVP & Chief Revenue Officer; previously at United Airlines o Hired Tyler Best as EVP & Chief Info. Officer; Previously held senior IT roles at Vanguard Car

Rental (Alamo & National) and at Budget Rent-a-Car. Served in senior executive IT roles at YP & Ally Financial. Worked for Vanguard, GMAC and YP while each owned by Cerberus

HTZ announced that it was raising pricing across-the-board as of Jan 1, 2015 and cutting expenses by an additional $100mm annually

o “Driven by fleet depreciation increases, primarily related to residual value declines” o +1% change in RAC pricing = +$67mm pretax income ~5%; CAR saw 2% price change in ‘14 o $100mm expense cut equals ~1% of total expenses / $0.22 per share

February 25, 2015 – HTZ released preliminary 2014 business update o Cumulative financial statement errors to date not material: ~4% of 2013 pre-tax income o Re-committed to HERC separation and doubled cost savings goal to $200mm o Revenue of $11bn (+2.3% despite all business / execution / mgmt. issues); EBITDA at low end

of $1.3-$1.45bn range

HWP believes: o The vast majority of actual and potential material negative business updates have

already been announced and/or are reflected in the current share price

o Financials will be restated before YE2015, with expectations for ~6/30/15; Waiver on debt

covenants gives management a financial incentive to re-file by this date

o Hertz’s core operating business (US rental car) and the US rental car industry are

progressing in-line with our prior expectations

o A new, strong management team is in place and is working quickly to ‘right the ship’

(CEO, CFO, CRO, CIO, Lead Independent Director, 3 additional Independent Directors are

all new within last ~1 year, with substantial rental-car industry expertise)

o HERC spinoff and subsequent HTZ share buyback will continue as announced

o Activist investors will maintain pressure on management team to address subpar share

returns, with HERC being a key lever to unlock value

o Two significant share re-ratings are on the horizon:

Given HTZ size (1.5x Avis), non-activist investors will re-enter shares post re-

statement (driving a re-rating towards CAR multiples)

Post-Spinoff, HERC & HTZ will each trade up towards peer multiples (URI/ CAR)


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Summary of Noteworthy Hertz Developments Since HWP Involvement

While HTZ has been hit by a plethora of woes (accounting, ERP roll-out, management, Ebola), they have also benefitted from improving core operating results and substantial activist investor involvement; Avis (CAR) is a good proxy for how HTZ should have performed

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09/26/13 Revises FY'13 Guidance 09/30/13 HWP Initial Investment11/04/13 Q3'13 Results11/14/13 Philippe Laffont Elected Director12/02/13 Tom Kennedy Appointed CFO12/30/13 Adopts 1-Year Poison Pill in response to Icahn/Activist accumulation

03/03/14 Delays Q4'13 Results03/18/14 Q4 Results & HERC Separation05/13/14 Delays Q1'14 & Bus. Update05/19/14 Delays Q1'1406/02/14 B.MacDonald new HERC CEO06/06/14 Announces Broader Acctg. Issue

08/20/14 Icahn increases stake to 8.5%09/08/14 M. Frissora Resigns as CEO09/11/14 Agreement w Icahn09-10/14 Ebola Scare in US10/20/14 JANA increases stake to 7%

11/14/14 Bus. Update / Guid. Low'd11/17/14 JANA increases stake to 8.3%11/20/14 J. Tague new HTZ CEO11/26/14 Icahn increases stake to 10.8%12/18/14 Icahn increases stake to 11.3%02/25/15 Business update

Source: Hertz, Avis, Company Filings, Bloomberg, HWP Analysis


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Activist Investor Involvement

Hertz has significant activist investor presence: Icahn and Jana collectively own 18.9%; Overall, the top 15 non-passive investors represent 49.9%

Shares Amount Δ From Prior

# Holder (mm) $mm % of OS #mm % Date

1 Carl Icahn 51.9 $1,177.1 11.3% 13.1 34% 12/31/2014

2 Jana Partners 34.8 789.4 7.6% 23.8 217% 12/31/2014

3 Vanguard 24.6 558.6 5.4% -1.3 -5% 12/31/2014

4 Glenview Capital 18.5 420.2 4.0% -1.0 -5% 12/31/2014

5 Fir Tree 15.2 343.5 3.3% -2.9 -16% 12/31/2014

6 SRS Investment 15.0 340.1 3.3% -5.0 -25% 12/31/2014

7 Tiger 14.3 323.3 3.1% -1.6 -10% 12/31/2014

8 York Capital 13.5 305.6 2.9% - - 12/31/2014

9 JGD Management 13.5 305.6 2.9% 1.9 16% 12/31/2014

10 Wellington 13.3 301.3 2.9% 7.2 120% 12/31/2014

11 Iridian Asset 12.6 284.8 2.7% 3.3 36% 12/31/2014

12 BlackRock 11.8 267.4 2.6% -0.2 -1% 12/31/2014

13 GSAM 10.6 239.2 2.3% 1.6 18% 12/31/2014

14 Highfields 9.2 208.2 2.0% -4.8 -34% 12/31/2014

15 Fidelity 8.9 201.1 1.9% 1.3 17% 12/31/2014

16 DEShaw 8.8 199.7 1.9% -0.3 -3% 12/31/2014

17 State Street 8.5 193.1 1.9% 0.4 5% 12/31/2014

18 Sab Capital 7.5 170.3 1.6% 0.0 0% 12/31/2014

19 TIAA-CREF 7.1 159.9 1.5% 0.4 6% 12/31/2014

20 Neuberger 6.3 143.3 1.4% -1.6 -20% 12/31/2014

21 Ivory Investment 4.8 108.8 1.0% 4.8 New 12/31/2014

22 Owl Creek 4.6 104.4 1.0% - - 12/31/2014

23 Eminence Capital 4.5 101.6 1.0% - - 12/31/2014

Top 5 Active 135.4 $3,070.1 29.6%

Top 15 ex-Passive 228.6 5182.4 49.9%

Active Ex-Icahn 176.7 4,005.4 38.6% Icahn (8/20/2014) – “[We believe HTZ shares] were undervalued [and] intend to have discussions with [HTZ] management and board of directors relating to shareholder value, accounting issues, operational failures, underperformance relative to its peers and the Reporting Persons' lack of confidence in management. The Reporting Persons may also seek shareholder board representation if appropriate.” Fir Tree (8/20/2014) – “The CEO has had some serious missteps, and it’s time for a change.” “We believe Hertz has an

incredible brand and an opportunity to show leadership in the car-rental industry. We look to work constructively with

management and the board to address these issues.” Jana Partners (Q3 2014 Letter) – “Hertz is a leader in a consolidated industry that we believe has substantial

unrealized pricing power. We have been following HTZ and the transformation of the car rental industry over the last three years. Against a backdrop of healthy industry fundamentals, HTZ has been plagued recently by fleet mismanagement problems and an accounting restatement. The dreadful share price performance of HTZ relative to its peers has fostered a shareholder rebellion that led to the ouster of CEO Mark Frissora and important changes to the HTZ board. What HTZ needs now is new leadership – a CEO who can reposition and right size the fleet, take the lead on improving pricing, resolve the

accounting problems, reinvigorate the troops, and complete the spin-off of Hertz Equipment Rental (HERC).” “With the right CEO at the helm – be it Scott [Thompson, former CEO of Dollar Thrifty] or an equally qualified leader – and the appropriate strategy and capital allocation plans in place, we believe HTZ is capable of generating nearly $3.00/share of free cash flow. This combined with an estimated value for HERC of roughly $6.00 per share, suggests that HTZ is trading at a very deep discount to intrinsic value.” Jana Partners (10/20/2014) – “Jana continues to believe that Hertz’s shares are undervalued and that it may hold

discussions with management.” Jana Partners (2/5/2015) – “Hertz could double earnings per share over the next couple of years and the stock

could triple” - EnTrust Investment Summit Source: Company Filings, Morningstar, HWP Analysis


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Potential Risks & Mitigants

Continued fall in residual value of cars o Potential mitigant(s):

Hertz has shifted remarketing channels away from auctions towards higher profit channels (online, direct to dealer), decreasing the required sales price to break-even

HTZ has already increased its depreciation per vehicle from $275-280/unit (Q4’13) to $280-$300/unit (2014) equal to +2% to +9%

As part of its fleet upgrade announced in Nov. 2014, HTZ is shifting towards new cars, acquiring 35,000 model year 2015 vehicles in the U.S.

Additionally, Hertz accelerated used car sales during Q4’14, increasing risk vehicle dispositions by 45% vs plan, targeting its highest mileage vehicles

For 2015, HTZ is decreasing U.S. non-program cars from 79% to 70%, decreasing the portion of its operating fleet that is impacted by residual values

HTZ raised prices (effective Jan. 1, 2015) to offset declining residual values Per management, falling residuals = decrease in new car costs (0.81 r

2) and increase in

revenue per day (0.72 r2)

Delay in re-filing of financial statements o Potential mitigant(s):

Given the new management team, activist board pressure, and financial incentive to re-file by 6/30/2015, HWP believes financials will be filed as soon as possible

Delay or cancellation of spin-off of HERC o Potential mitigant(s):

In mid-November 2014, HTZ management re-committed to the HERC spinoff - “the timing of the actual separation will be delayed and will not occur until after the Company has completed its accounting review and filed the necessary updated financial statements with the SEC”

New management team and activist board pressure is keenly focused on effecting HERC spinoff and returning capital to shareholders

Exit of investor with large stake in HTZ, given concentration of current shareholder base o Potential mitigant(s):

Given HTZ size (1.5x Avis), non-activist investors will re-enter shares post re-statement (driving a re-rating towards CAR multiples)

Larger drawdown in US economy o Potential mitigant(s):

Flexibility to dispose of fleet (similar to 2008-2009 downturn) given lower number of program cars

Highly variable cost structure, with part-time workers (33% of direct op. expenses) Long-term growth in enplanements worldwide offsets temporary economic conditions

and cycles Even during the worst of the crisis, 2009 RAC revenues only fell 13% and overall 17% Sustained economic woes may shift customers to rent vs. purchase, or hourly rentals

Europe risk o Potential mitigant(s):

Europe only represents 22% of HTZ ’13a revenues Hertz is expanding its franchise arrangements in Europe (risk is on partners’ capital) Hertz is expanding its discount/value brands in Europe, including Firefly (ex Advantage

Europe) which would appeal to budget-strapped Europeans


https://sumzero.com



Valuation

Currently, Sum-of-the-Parts is most meaningful o ’14 metrics less relevant given large adjustments, announced spinoff of HERC, and special

situation interest in HTZ (activist involvement, etc.) o However, current SOTP includes some equip. peers trading at cyclical high valuation multiples

P/E ’15e of 16.5x o Adjusting 2014 results to back-out non-core / extraordinary items o $1.75 EPS $0.10 below midpoint of management’s 3/14 guidance o Growing ’14 revenue @ 5.5% (vs 6-10% pre-DTG growth rate) plus a 2% pricing increase

(~$135mm pretax income) supported by CAR 2014 and HTZ 2015 px increase announcement o CAR trading at 16.7x and equipment rental peers at ~16x

EV/EBITDA ‘15e of 9.0x (vs. CAR trading at 9.3x and equipment peers trading at 6.3x)

HWP estimates intrinsic value ~$34.50/share, based on conservative estimates (+59% current) o Assigning HTZ a discount vs CAR due to poor recent execution / non-pure play nature of HTZ o In reality, HTZ deserves a premium to CAR based on substantially higher EBITDA margin o Bull-case: several years out, HTZ could earn $3.50+/share with very reasonable margin and

growth assumptions; Using a 20x P/E multiple, this would equate to $70/share (+222%) o Jana Partners (2/5/2015) – “Hertz could double earnings per share over the next couple of years

and the stock could triple” – Barry Rosenstein at EnTrust Investment Summit Valuation Multiples Implied Valuation Range

Metric Low High Multiple Low High Midpoint

SOTP Current $31.37 - $35.92 $33.64

SOTP Long-Term $26.32 - $32.72 $29.52

P/E ('14) $1.75 19.0x - 21.0x 20.0x $33.24 - $36.73 $34.98

P/E ('15) $2.04 16.0x - 17.0x 16.5x $32.59 - $34.63 $33.61

Memo: Y/Y ∆ 16%

EV/EBITDA ('14) $2,240mm 9.5x - 10.5x 10.0x $33.18 - $38.08 $35.63

EV/EBITDA ('15) $2,491mm 8.5x - 9.5x 9.0x $32.95 - $38.39 $35.67

Memo: Y/Y ∆ 11%

Median $32.77 - $36.32 $34.55

Average $31.61 - $36.08 $33.84

HWP Estimate Implied Valuation Multiples Target $34.50

Implied P/E '14 19.7x '15 16.9x Current $21.75

Implied EV/EBITDA '14 9.8x '15 8.8x Upside +59%

$31.37

$26.32

$33.24

$32.59

$33.18

$32.95

$35.92

$32.72

$36.73

$34.63

$38.08

$38.39

SOTP Current

SOTP Long-Term

P/E ('14)

P/E ('15)

EV/EBITDA ('14)

EV/EBITDA ('15)


https://sumzero.com



Valuation (continued) HTZ Adj. 2014 Results / HWP 2015e Est. ($ mm) 2013a 2014a 2015e Memo

Rev 10,772 11,018 11,624

Rev Growth 2.3% 5.5% Pre DTG growth 6-10% p.a.

PTI 1,153 1,234 1,302

PTI % 10.7% 11.2% 11.2% Assumes PTI +50bps (sub mgmt est); Upside from margin inc. /cost cuts

Price Inc. 135 Assumes 2% price increase in 2015 (CAR +2% in 2014)

Adj PTI 1,153 1,234 1,437

NI 748 801 932

EPS 1.67 1.75 2.04 Assumes no change in share count Sum-of-the-Parts Valuation

Using conservative assumptions, adjusted ‘14 EBITDA & EPS in-line with 3/14 Mgmt Guidance

3/14 '14e

Corp. Midpoint

($ Millions) RAC + HERC - Other = Total Guidance

Revenue 9,444 + 1,574 = 11,018 11,550

Corp. EBITDA 1,558 + 699 = 2,257 2,240

16.5% 44.4% 20.5% 19.4%

PTI 1,386 + 300 435 = 1,250 1,320

14.7% 19.0% 11.3% 11.4%

NI 937 + 194 330 = 801 855

9.9% 12.3% 7.3% 7.4%

EPS 2.05 + 0.42 0.72 = 1.75 1.85

FCF 600

Current SOTP yields a $34.58 valuation, with several peers (CAR, URI) trading near cyclical-high valuation multiples; using HTZ and URI L-T multiples results in a $30 Price Target post spinoff

Current (Adjusted 2014) Post Spin Long-Term (Adjusted 2014)

P/E EV/E Memo P/E EV/E Memo

RAC 647.1 1,558.3 647.1 1,558.3

20.2x 10.3x CAR 20.0x 8.5x HTZ L-T

Equity 13,078.3 16,031.3 12,942.7 13,245.2

EV 9,943.3 7,157.2

Per Share $28.57 $21.72 $28.27 $15.63

HERC 193.9 698.9 193.9 698.9

17.3x 6.3x URI, AHT, AGK, HEES 10.5x 7.0x URI 10-Year

3,364.1 4,417.0 2,036.3 4,892.0

Per Share $7.35 $9.65 $4.45 $10.69

Total 16,442.4 14,360.3 14,979.0 12,049.2

Per Share $35.92 $31.37 $32.72 $26.32

Midpoint $33.64 $29.52

Upside 55% 36%


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Comparables ($ millions) Market EPS

23-Mar Cap EV CAGR P/E EV / EBITDA EBITDA Margin

Company Ticker Price ($mm) ($mm) '11-'14 '13E '14E '15E '16E '13E '14E '15E '16E '11A '12A '13E '14E

Auto Rental

Hertz Global Holdings HTZ 21.75 9,957.37 16,045.37 20.4% 13.3x 29.4x 17.1x 13.4x 7.8x 11.1x 8.7x 7.8x 17% 18% 19% 12%

Avis Budget Group CAR 58.81 6,254.44 9,012.24 12.6% 26.7x 20.2x 16.7x 14.4x 11.7x 10.3x 9.3x 8.7x 10% 11% 10% 10%

Average (ex HTZ) 8,105.91 12,528.81 12.6% 26.7x 20.2x 16.7x 14.4x 11.7x 10.3x 9.3x 8.7x 14% 15% 14%

Median (ex HTZ) 8,105.91 12,528.81 12.6% 26.7x 20.2x 16.7x 14.4x 11.7x 10.3x 9.3x 8.7x 14% 15% 14%

HTZ vs CAR 59% 78% 63% (50%) 45% 3% (7%) (33%) 8% (7%) (11%) +6% +7% +9%

Equipment Rental

Hertz Global Holdings HTZ 21.75 9,957.37 16,045.37 20.4% 13.3x 29.4x 17.1x 13.4x 7.8x 11.1x 8.7x 7.8x 17% 18% 19% 12%

United Rentals URI 88.24 8,516.92 16,443.30 61.5% 18.0x 12.9x 11.0x 9.4x 7.2x 6.1x 5.5x 34% 43% 41% 39%

Ashtead Group plc AHT LN £11.16 £5,617.27 £6,867.27 124.1% 35.3x 24.5x 18.1x 14.4x 13.2x 10.3x 8.8x 34% 38% 41%

Aggreko AGK LN £15.78 £4,041.57 £4,503.57 (2.2%) 16.3x 19.2x 18.4x 16.9x 6.9x 6.5x 38% 40% 41%

H&E Equipment HEES 24.10 849.77 1,695.93 19.1x 15.4x 14.6x 12.2x 6.7x 5.5x 4.8x

Average (ex HTZ) 8,216.49 12,357.81 51.0% 22.2x 18.0x 15.5x 13.2x 8.5x 7.1x 6.3x 25% 33% 34% 33%

Median (ex HTZ) 8,443.33 13,138.80 41.0% 18.5x 17.3x 16.4x 13.3x 7.1x 6.3x 5.5x 25% 36% 39% 40%

HTZ vs Median 1.2x 1.2x 50% (28%) 69% 5% 1% 11% 76% 59% (33%) (50%) (52%) (70%)

HTZ vs URI (26%) 128% 55% 43% 8% 82% 59%

Source: Company Filings, Credit Suisse, Deutsche Bank, HWP Analysis


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HTZ Financials Trend

From ‘12-‘13, HTZ revenue & EBITDA grew nicely; Revised 11/2014 guidance shows revenue close to plan, but EBITDA lagging badly

7,1027,563

8,2999,025

10,77211,550

11,018

974 1,094 1,371 1,6262,044 2,240

1,375

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2009 2010 2011 2012 2013 2014e 3/14 2014e

Re

ve

nu

e &

Co

rp E

BIT

DA

($

mm

)

19%

7%2%

26%

10%

-33%

Similarly, HTZ Pre-Tax Income, EPS, Free Cash Flow all grew nicely ’12-’13, and were originally estimated to continue for 2014

193340

662

892

1,153

1,320

-347

463

63 155

449

600

0.280.51

0.94

1.31

1.63

1.85

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

2.00

-600

-400

-200

0

200

400

600

800

1,000

1,200

1,400

1,600

2009 2010 2011 2012 2013 2014e 3/14 2014e 11/14

Ad

jus

ted

EP

S ($

)

PT

I / F

CF

($

mm

)

Pre-Tax Income

Free Cash Flow

EPS

29%

24%

190%

14%

13%

34%



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Operating Performance Trends

Despite recent turmoil, the Rental Car (RAC) business has grown to ~$10bn in revenue, driven by 48% growth in US RAC

HERC revenue is approaching pre-Crisis levels, but with a more-balanced business mix

4,4

69 6,6

28

6,2746,801 6,730

5,8736,355

6,9417,640

9,2349,748

0

2,000

4,000

6,000

8,000

10,000

12,000

2006 2008 2010 2012 9M'14 ann.

HT

Z R

AC

Rev

en

ue (

$m

m)

US RAC Int'l RAC Donlen / Other

48%

52%38%

18%

26%

30%

36%

1,6721,755

1,657

1,110 1,071

1,210

1,385

1,538 1,548

0

400

800

1,200

1,600

2,000

2006 2008 2010 2012 9M'14 ann.

HE

RC

Rev

en

ue (

$m

m)

Construction Industrial Fragmented

While HERC revenues, EBITDA margins, and PTI margins have not year reached pre-Crisis peaks, cost-cutting and efficiency measures have pushed RAC to all-time high levels

46%47%

44%41%

38%40%

42%43%

11% 11%

6%

10%12%

14%16% 16%

20% 19%

6%8%

0%

10%

20%

30%

40%

50%

2006 2007 2008 2009 2010 2011 2012 2013

Co

rp E

BIT

DA

Marg

in

Equipment

RAC Total

US RAC

Int'l RAC

21% 21%

16%

7% 7%

13%

16%

19%

9% 9%

4%

8%

10%12%

14%15%

18%17%

4%

6%

0%

5%

10%

15%

20%

25%

2006 2007 2008 2009 2010 2011 2012 2013

Pre

-Tax I

nco

me M

arg

in

Equipment

RAC

US

Int'l



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Operating Performance Trends

Prior to the Accounting / ERP issues, HTZ operating performance had shown consistent improvement

Source: Hertz


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Liquidity and Leverage Trends Hertz’ Q3’14 liquidity of $1.5bn is flat (-2%) from YE’13, and up (+13%) Y/Y despite numerous operational issues during FY’14

Leverage has increased because EBITDA has temporarily declined (-33%) while net debt has stayed flat (-3%)

1,0411,146

357

750

1,157

876

1,029

611

525

613

423

666

2,070

1,757

882

1,363

1,5801,542

0

500

1,000

1,500

2,000

2,500

Q4'11 Q4'12 Q2'13 Q3'13 Q4'13 Q3'14

HT

Z L

iqu

idit

y (

$m

m)

Cash

ABL Capacity

3,6

76

5,9

35

7,0

54

6,2

74

6,0

81

6,0

83

1,3

90

1,6

36

1,9

29

2,0

62

2,0

44

1,3

75

2.6x

3.6x 3.7x

3.0x 3.0x

4.4x

0.0x

0.5x

1.0x

1.5x

2.0x

2.5x

3.0x

3.5x

4.0x

4.5x

5.0x

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Q4'11 Q4'12 Q2'13 Q3'13 Q4'13 Q3'14

Lev

era

ge

(Ne

t Co

rp D

eb

t / Co

rp E

BIT

DA

)

Net

Co

rp.

Deb

t /

Co

rp E

BIT

DA

($

mm

)

-33%

-3%



https://sumzero.com



Peer Comparison: Hertz vs. Avis

Standalone HTZ RAC should trade at a substantial premium to CAR, given substantially better fleet efficiency and EBITDA margins ($ millions) HTZ (Total) HTZ (RAC only) CAR HTZ/CAR Memo

Sales

'13 10,772 8,707 7,937 10%

'14e 11,296 9,181 8,533 8%

EBITDA (adj.)

'13 2,088 1,436 769 87%

'14e 2,372 1,636 870 88%

EBITDA Margins (adj.)

'13 19% 16% 10% 70% HTZ has substantially better EBITDA Margins

'14e 21% 18% 10% 75%

Leverage 4.3x 3.5x 23% HTZ has higher leverage due to HERC

FCF (adj.)

'13 441 460 -4% '13 was slated to be the last large CapEx year

Fleet Efficiency 78% 71% 9% HTZ has consistently better fleet efficiency

RAC Locations

NAm 5,874 60% 3,150 36% CAR may be getting more credit for

Int'l 3,876 40% 5,650 64% potential international growth.

Total 9,750 8,800 11%

Car Rental Fleet Size

NAm 467,225 74% 342,430 70% While HTZ has a ~30% larger fleet than CAR,

Int'l 160,800 26% 145,262 30% it has been significantly over-fleeted post-DTG.

Total 628,025 487,692 29%

Source: Hertz, Avis, Company Filings, HWP Analysis


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HTZ RAC Standalone Visibility Will Add Value

Post-Separation, HTZ RAC’s best-in-class financial performance should capture greater valuation

Source: Hertz


https://sumzero.com



Rental Car Industry Pricing Trends

Consistent with HWP’s initial thesis: following the Hertz / Dollar Thrifty transaction, the market share for Enterprise, Hertz, and Avis increased to 94%, and industry pricing has been rising annually at 1-2% thereafter

73%

86% 87% 87% 86% 87%

94% 95% 95%

+2%

+1%

36.00

37.00

38.00

39.00

40.00

41.00

42.00

43.00

44.00

45.00

0%

20%

40%

60%

80%

100%

2006 2007 2008 2009 2010 2011 2012 2013 2014

HT

Z/C

AR

Rev

Per D

ay (P

ricin

g)

Mark

et

Sh

are

of

To

p 3

Pla

yers

Market Share of Top 3 Players CAR NA Pricing HTZ NA Pricing

HTZ / Dollar Thrifty

Source: Hertz, Avis, Company Filings, HWP Analysis


https://sumzero.com



Fleet Management and Productivity Improvements

Hertz has struggled with fleet depreciation and residual value issues during 2014; As of mid-April, Hertz was still estimating that it would be able to send 30% of its 2014 fleet dispositions

through alternative resale channels like Rent2Buy, which yields ~$1,000 more per vehicle than the Auction channel

Employee efficiency (+4%) and cumulative cost savings (+36%) have continued to improve from the levels observed pre-HWP involvement; Management is expanding Lean Six Sigma to off-airport rental car locations and targeting ~$200mm+ in annual

gross cost savings to offset inflation

32%

38%39%

40%

12%

15% 15%

30%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

2011 2012 2013 2014e

% o

f H

TZ

Fle

et

in A

lte

rna

tiv

e R

es

ale

Ch

an

ne

ls

Dealer Direct (+$400 vs Auction)

Retail & Rent2Buy (+$1000)

0

187

500

1,260

1,698

2,156

2,639

2,939

175

193

203

211

222

226229

235

150

160

170

180

190

200

210

220

230

240

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2006 2007 2008 2009 2010 2011 2012 2013

Em

plo

ye

e E

fficie

nc

y ($

00

0)

Cu

mu

lati

ve

Co

st

Sa

vin

gs

($

mm

)

Cumul. Cost Savings ($mm)

Employee Efficiency ($000)

4%

36%

Source: Hertz


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Financial Sensitivity

Pre-Tax Sensitivity to Incremental 1% Changes

Source: Hertz


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Appendix (From HWP’s October 2013 Underwriting Memo.) Market Segmentation: Following the acquisition of DTG, HTZ finally has a large presence in the Mid-

Tier and Value segments, which have been the fastest growing part of the U.S. airport market

Ten years of consolidation have led to a landscape where 3 competitors control 94% of the market

33% 33% 34% 35% 33% 34%

47% 48% 49% 49%

11% 11% 10% 11% 13% 13%

19% 20% 19% 19% 18% 18% 20% 20% 19% 20%

9% 10% 7% 8% 8% 8% 7% 8% 7% 7%

13% 13% 14% 14% 14% 15%20% 19% 20% 19%

6% 6% 7% 7% 7% 7%9% 8% 7% 7% 6% 5% 6% 6% 6% 6%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Ma

rket

Sh

are

(R

ev

en

ue

)

Others

Budget

Avis

Dollar Thrifty

Hertz (inc. DT)

National / Alamo

Enterprise

While HTZ leads the on-airport market…

…Enterprise dominates the OAP market…

…Which makes ENT a clear #1 overall and HTZ #2

HTZ, 39%

ENT, 33%

CAR, 26%

Other, 2%

HTZ, 12%

ENT, 69%

CAR, 10%

Other, 9%

HTZ, 26%

ENT, 50%

CAR, 19%

Other, 5%

On-Airport $12.5bn OAP market ~$11bn Total market $23.5bn

Source: Hertz, Company Filings, HWP Analysis.


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Buyout Transaction

2005 December: Clayton, Dubilier & Rice, The Carlyle Group, and Merrill Lynch acquired all of Hertz's common stock from Ford for aggregate consideration of $15bn

o $4,379 million in cash; $10,116 million of debt refinanced or assumed o $447 million transaction fees and expenses

2006: Sponsors began to exit o IPO in 11/2006 at ~$16/share at 88.235mm shares o Secondary offering 6/2007 51.75mm

2009 May/June: Crisis requires fresh capital o 5-6/2009 52.9mm share follow-on at 6.50 ($343.9mm) o Private offering w CD&R and Carlyle for $200mm at $6.23/sh

2011 – 2013: Sponsors complete exit o Secondary offerings March 2011, December 2012, March 2013 and May 2013 o Hertz repurchased 40% of March 2013 offering to offset future dilution from convertible note

33% IRR and 2.6x Cash-on-cash return

As of May 2013, the overhang from Sponsor ownership of Hertz has finally been removed

100%

55%51%

38%

26%

13%

0%0%

20%

40%

60%

80%

100%

Q3'06 Q2'07 Q4'10 Q4'11 Q4'12 Q1'13 Q2'13

M&A Activity

America’s Car Rental (5 since 2010) o Eileo (2008) o Donlen (2011) o Navigation Solutions (2011) o Dollar Thrifty (2012) / Divested Advantage in connection with DT acquisition o Penske Automotive Memphis Franchise (2012)

International Car Rental (3 + minority) o Flexicar (2010) o Ace Rental Cars (2011) o Emil Frey Group Franchise (2012) o China Auto Rental (10% - 2013)

Worldwide Equipment Rental (10) o Forces, Western Machinery, 24/7 Studio Equipment, 1st Call Studio Equipment (2010) o Offshore equipment business of Delta Rigging & Tools, We Got It Rentals, DW Pumps (2011) o Cinelease, Arpielle, Pioneer Rentals (2012)



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Dollar Thrifty (November 2012)

$87.50 / share in cash ($2.6bn or 7.8x EV / corporate EBITDA; 40% premium to HTZ/CAR) o DT had a ~5% market share pre-acquisition o Outside of HTZ, CAR, and Enterprise, no other competitor has more than a 1% market share o HTZ began looking at DTG in April 2007 o Made formal offer of $1.2bn in 2010 that shareholders rejected o Made another offer in 2011 that was withdrawn due to market conditions o HTZ agreed to divest Advantage to meet antitrust clearance o Instant scale in mid-tier value segment: known brand, airport infrastructure U.S. airport leisure

business as % of HTZ WW RAC revenue to significantly increase o Faster and more certain strategy than growing Advantage organically

Revenue and cost synergies from DT acquisition.

“Each of our brands generally maintains separate airport counters, reservations and reservation systems, marketing and all other customer contact activities, however a single management team manages all three brands. As we integrate the Dollar and Thrifty brands into our operations, we expect to eliminate many of the duplicative functions previously performed separately by Dollar Thrifty and identify synergies through combined fleet management, insurance, information technology functions, back office processing and procurement.(7)”

Cost synergies originally $170mm now $300mm

Revenue synergies originally $0 now $300mm

Recognized over 3 years

China Auto Rental (April 2013)

On April 15, 2013, Hertz agreed to made a strategic investment in China Auto Rental o Largest car rental company in China o Hertz invested cash and agreed to contribute its China RAC entities to China Auto Rental o Hertz received common stock (10%) and a convertible note in return and will receive an

additional convertible note upon completion of the contribution

Initial closing of the transaction occurred on May 1, 2013

Hertz owns 10% of China Auto Rental’s ordinary shares and has a seat on China Auto Rental’s Board

Upon conversion of the convertible notes, Hertz would have 18.64% on a fully diluted basis Source: Hertz, Company Filings.


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Hertz Global Equipment Rental (HERC)

Targeting more efficiency through centralized operations / hub and spoke model o Hubs (regional) manage maintenance, fleet & fleet logistics, customer service center o Rolling out tablets in the field for technical data, communication, on spot procurement – 2yr roll

out, expect $2mm in savings for $0.35mm investment o Plugging Donlen into HERC (optimal routing, automated transport compliance, e paperwork

process) - 2 Year Roll Out, expect $5mm in savings for $1.5mm investment

POS expansion with kiosk / mobile app (see truck and equipment rental options at kiosk)

Equipment point global telematics o Gives customers 24/7 mobile access to their fleet and utilization and to HERC fleet available o 3yr roll out, expect 20-30% pretax margin from revenue & cost savings

HERC revenue still $370mm below ‘06

Diversified and updated fleet o Strategically increased mix of consistent industrial revenue o Expanded into non-cyclical niche markets (entertainment svcs.)

HERC is NAm-focused, but has expanded into Asia, Central America, and South America

Source: Hertz, Company Filings.


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HERC has diversified away from Construction and has deepened its Industrial & Fragmented verticals

2006 2012

Const.50%

Indu.15%

Frag.35%

Const.35%

Indu.25%

Frag.40%

Similarly, HERC has balanced its fleet mix; Higher dollar utilization with Specialty equipment

2006 2012

Earth moving

30%

Aerial22%

Mat. Handl.19%

Trucks13%

Other9%

Spec.7%

Earth moving

22%

Aerial24%Mat.

Handl.16%

Trucks14%

Other9%

Spec.15%

HERC Key Metrics (Q2 2013)



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Donlen

Founded 1965; HQ Northbrook, IL; Acquired Sept. 2011, fully integrated YE 2012

Q2’13 revenue: $134mm; $530mm ‘13e

500 corporate customers and over 166,000 vehicles; 98% customer retention

Offers fleet financing, asset integration, fleet management

Spans cars (light duty), trucks (medium and heavy duty), and equipment

Hertz value lease (shorter term alternative to a full lease)

Number of Leased and Managed vehicles

growing significantly post-Hertz acquisition Revenues have accelerated and are on track to be

over 50% higher in 2013e than 2010

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

2006 2007 2008 2009 2010 2011 2012 2013e

Veh

icle

s

Lease Mgmt

CAGR Lease 4.6% Mgmt 4.3%

CAGR Lease 11.0% Mgmt 14.5%

329 361 362

340 351

408

471

530

0

100

200

300

400

500

600

2006 2007 2008 2009 2010 2011 2012 2013e

Do

nle

n R

ev

en

ue

($

mm

) CAGR 1.6%

CAGR 14%



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Structural Shift in Rental Car Pricing Environment

Historically, GM, Chrysler, Ford overproduced cars and used RAC market to unload excess production o This resulted in consistent over-fleeting and under-utilization in the car rental market o In order to increase utilization, car rental companies were incentivized to lower prices, ultimately

resulting in a highly competitive pricing environment marked by low returns

As a result of major restructurings, auto manufacturers are more rational with their production o This has significantly mitigated over-fleeting in the car rental market and increased utilization

Car rental utilization rates across the industry are at their all-time high High utilization dis-incentivizes car rental companies from competing on price Renewed focus on returns and profitability

Consolidation Improves Industry Competitive Dynamics

Source: Columbia Business School Presentation April 2013 (Hunt, Lieu, Raymoulik)


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Strategy

1) Transforming Hertz

Transforming Hertz: All pieces in place for a transformation



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2) Optimize strategies, maximize profit & cash flow

$55mm in video revenue so far

$3.4mm net labor savings 2012

93% cust satisfaction

Ancillary sales higher

Higher return investments: technology & innovation



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3) Grow U.S. Off Airport Rental Car

Including insurance replacement o 1/3 of OAP revenue ($2,237mm / $746mm) o market share has grown from 8% in 2007 to 13% in 2012

US OAP locations have lower labor costs, direct op. expenses, SG&A, and higher utilization; This lower cost structure coupled with longer-rentals drives higher off-airport margins



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4) Cash flow improvement

“Commitment to Accelerating Cash Flow Generation: Hertz generated approximately $2.7 billion in net cash flow from operations in 2012, a $485 million year-over-year improvement. Having completed the Dollar Thrifty acquisition last year, and 11 HERC acquisitions over a 3-year period, as well as investing heavily in our rental fleets as the U.S. economy recovered, we believe we will now rapidly accelerate corporate cash flow generation in 2013 and beyond.”

DTG and lower overall fleet investment requirements will drive future corporate cash flow: o HERC fleet growth: 2013E investment declining YoY vs. increasing over past 3 years o RAC fleet growth: 2013E stabilizing / declining due to initiatives: risk fleet, remarketing

channels, and higher utilization o DTG: positive cash flow + synergies more than offset incremental interest expense o Non-fleet capital: increasing as we invest in technology and new / updated facilities – slight

offset to cash flow o Expect 2013 Free Cash Flow of $500M to $600M



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5) Shift U.S. Remarketing Strategy

A 10% shift, wholesale to retail, reduces depreciation expense $12M

Reduces cost of sales, improves sale price, keeps cars on rent longer

Hertz has shifted away from the Auction remarketing channel; Shift into more profitable resale channels increases margins and mitigates potential drop in used car prices

88

%

75

%

65

%

33

%

23

%

7%

8%

9%

13

%

23

%

11

%

19

%

47

%

47

%

5%

6%

7%

7%

7%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2009 2010 2011 2012 2013e

Other

Dealer Direct

Retail/Rent2Buy

Auction



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6) Reduce costs and improve employee efficiency

Source: Hertz.


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Appendix: Debt and Liquidity While HTZ’s total debt figure, $17.8bn (Q2 2013) seems high, please note:

o Only $7.6bn ($7.1bn net) is at HTZ Corporate level o Remainder ($10.2bn) is Fleet level and is bankruptcy remote, not guaranteed by HTZ

HTZ has only $1.5bn of debt maturities before 2018

523.4

1,005.8

3,064.8 2,950.0

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2014 2015 2016 2017 2018 2018+

Co

rpo

rate

Deb

t M

atu

riti

es (

$m

m)

Including unrestricted cash of $483mm, Hertz has $840mm of corporate liquidity

Available Avg. Int.

Remaining Under Rate at Fixed or

Corporate Debt Capacity Borrow B 6/30/2013 Floating? Maturity 12/31/2011 12/31/2012 6/30/2013

Senior Term Facility 3.26% Floating 3/2018 1,389.5 2,125.5 2,114.8

Senior ABL Facility 357.3 357.3 2.89% Floating 3/2016 0.0 195.0 1,005.8

Senior Notes 2,638.6

4.25% Senior Notes due April 2018 4.25% Fixed 4/2018 0.0 250.0

7.50% Senior Notes due October 2018 7.50% Fixed 10/2018 700.0 700.0

6.75% Senior Notes due April 2019 6.75% Fixed 4/2019 1,250.0 1,250.0


7.375% Senior Notes due January 2021 7.38% Fixed 1/2021 500.0 500.0


Senior Notes 6.58% Fixed 4/2018-10/2022 2,638.6 3,650.0 3,900.0

Promissory Notes 6.96% Fixed 6/2012-1/2028 224.7 48.7 48.7

Convertible Senior Notes 5.25% Fixed 6/2014 474.7 474.7 474.7

Other Corporate Debt 3.51% Floating Various 49.6 88.7 58.5

Unamortized Net Discount (Corporate) (72.3) (37.3) (23.7)

Total Corporate Debt 357.3 357.3 5.58% 4,704.8 6,545.3 7,578.8



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Appendix: Debt Available Avg. Int.


















Fleet Debt

HVF U.S. ABS Program

HVF US Fleet VFN

HVF Series 2009-1 148.8 1.04% Floating 3/2014 1,000.0 2,350.0 2,590.0

HVF Series 2010-2 N/A Floating 3/2013 170.0 0.0 0.0


1.04% 1,345.0 2,350.0 2,590.0

HVF U.S. Fleet MTNs

HVF Series 2009-2 5.37% Fixed 3/2013-3/2015 1,384.3 1,095.9 807.5

HVF Series 2010-1 3.77% Fixed 2/2014-2/2018 749.8 749.8 749.8

HVF Series 2011-1 2.86% Fixed 3/2015-3/2017 598.0 598.0 598.0

HVF Series 2013-1 1.68% Fixed 8/2016-8/2018 0.0 0.0 950.0

3.37% 2,732.1 2,443.7 3,105.3

RCFC U.S. ABS Program

RCFC US Fleet VFN

RCFC Series 2010-3 60.0 0.0 1.03% Floating 12/2013 0.0 519.0 540.0

RCFC US Fleet MTNs

RCFC Series 2011-1 2.81% Fixed 2/2015 0.0 500.0 500.0


2.25% 0.0 1,419.0 1,440.0

Donlen ABS Program

Donlen GN II VFN 60.0 1.00% Floating 12/2013 811.2 899.3 943.8

Other Fleet Debt

US Fleet Financing Facility 19.0 2.95% Floating 9/2015 136.0 166.0 171.0

European Revolving Credit Facility 58.5 2.67% Floating 6/2015 200.6 185.3 357.9

European Fleet Notes 8.50% Fixed 7/2015 517.7 529.4 520.5

European Securitization 157.4 2.50% Floating 7/2014 256.2 242.2 363.0

Hertz Canadian Securitization 85.0 2.14% Floating 6/2013 68.3 100.5 124.2

Dollar Thrifty Canadian Securitization 66.9 2.13% Floating 8/2014 0.0 55.3 76.4

Australian Securitization 112.3 4.17% Floating 12/2014 169.3 148.9 119.7

Brazilian Fleet Financing Facility 13.89% Floating 2/2013 23.1 14.0 13.0

Capitalized Leases 4.08% Floating Various 363.7 337.6 429.6

Unamortized Premium (Fleet) (10.9) 12.1 8.8

4.44% 1,724.0 1,791.3 2,184.1

Total Fleet Debt 767.9 0.0 2.64% 6,612.3 8,903.3 10,263.2

Total 1,125.2 357.3 3.89% 11,317.1 15,448.6 17,842.0

Corporate EBITDA 1,389.5 1,635.6 2,155.0

Cash 931.8 533.3 483.1

Net Corporate Debt 3,773.0 6,012.0 7,095.7

Corporate Debt / EBITDA 2.7x 3.7x 3.3x

Available Avg. Int.


















Fleet Debt

HVF U.S. ABS Program

HVF US Fleet VFN

HVF Series 2009-1 148.8 1.04% Floating 3/2014 1,000.0 2,350.0 2,590.0



1.04% 1,345.0 2,350.0 2,590.0

HVF U.S. Fleet MTNs

HVF Series 2009-2 5.37% Fixed 3/2013-3/2015 1,384.3 1,095.9 807.5

HVF Series 2010-1 3.77% Fixed 2/2014-2/2018 749.8 749.8 749.8

HVF Series 2011-1 2.86% Fixed 3/2015-3/2017 598.0 598.0 598.0

HVF Series 2013-1 1.68% Fixed 8/2016-8/2018 0.0 0.0 950.0

3.37% 2,732.1 2,443.7 3,105.3

RCFC U.S. ABS Program

RCFC US Fleet VFN

RCFC Series 2010-3 60.0 0.0 1.03% Floating 12/2013 0.0 519.0 540.0

RCFC US Fleet MTNs



2.25% 0.0 1,419.0 1,440.0

Donlen ABS Program

Donlen GN II VFN 60.0 1.00% Floating 12/2013 811.2 899.3 943.8

Other Fleet Debt

US Fleet Financing Facility 19.0 2.95% Floating 9/2015 136.0 166.0 171.0

European Revolving Credit Facility 58.5 2.67% Floating 6/2015 200.6 185.3 357.9

European Fleet Notes 8.50% Fixed 7/2015 517.7 529.4 520.5

European Securitization 157.4 2.50% Floating 7/2014 256.2 242.2 363.0

Hertz Canadian Securitization 85.0 2.14% Floating 6/2013 68.3 100.5 124.2

Dollar Thrifty Canadian Securitization 66.9 2.13% Floating 8/2014 0.0 55.3 76.4

Australian Securitization 112.3 4.17% Floating 12/2014 169.3 148.9 119.7

Brazilian Fleet Financing Facility 13.89% Floating 2/2013 23.1 14.0 13.0

Capitalized Leases 4.08% Floating Various 363.7 337.6 429.6

Unamortized Premium (Fleet) (10.9) 12.1 8.8

4.44% 1,724.0 1,791.3 2,184.1

Total Fleet Debt 767.9 0.0 2.64% 6,612.3 8,903.3 10,263.2

Total 1,125.2 357.3 3.89% 11,317.1 15,448.6 17,842.0

Corporate EBITDA 1,389.5 1,635.6 2,155.0

Cash 931.8 533.3 483.1

Net Corporate Debt 3,773.0 6,012.0 7,095.7

Corporate Debt / EBITDA 2.7x 3.7x 3.3x



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Appendix: Historical Valuation Hertz has historically traded at a 12-14x trailing P/E

12.0x

13.9x

13.0x

14.2x

0.0x

10.0x

20.0x

30.0x

40.0x

50.0x

60.0x

No

v-0

6

Fe

b-0

7

Ma

y-0

7

Au

g-0

7

No

v-0

7

Fe

b-0

8

Ma

y-0

8

Au

g-0

8

No

v-0

8

Fe

b-0

9

Ma

y-0

9

Au

g-0

9

No

v-0

9

Fe

b-1

0

Ma

y-1

0

Au

g-1

0

No

v-1

0

Feb

-11

Ma

y-1

1

Au

g-1

1

No

v-1

1

Fe

b-1

2

Ma

y-1

2

Au

g-1

2

No

v-1

2

Feb

-13

Ma

y-1

3

Au

g-1

3

No

v-1

3

TT

M P

/E

HTZ pre-LBO pre-IPO P/E was volatile, in the 8-20x range, but averaging 16x

Source: JPMorgan, Bloomberg, HWP Analysis.


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Appendix: Historical Valuation

HTZ has historically traded between 7.4-9.3x trailing EV/EBITDA

8.9x

9.3x

8.1x

7.4x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

No

v-0

6

Feb

-07

Ma

y-0

7

Aug-0

7

No

v-0

7

Feb

-08

Ma

y-0

8

Aug-0

8

No

v-0

8

Feb

-09

Ma

y-0

9

Aug-0

9

No

v-0

9

Feb

-10

Ma

y-1

0

Aug-1

0

No

v-1

0

Fe

b-1

1

Ma

y-1

1

Aug-1

1

No

v-1

1

Feb

-12

Ma

y-1

2

Aug-1

2

No

v-1

2

Fe

b-1

3

Ma

y-1

3

Aug-1

3

No

v-1

3

TT

M E

V/E

BIT

DA

HTZ pre-LBO pre-IPO EV/EBITDA was in the 4.5-5.25x range

Source: JPMorgan, Bloomberg, HWP Analysis.


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Post-Crisis, HTZ traded at ~20x forward P/E, a premium to CAR and DTG at ~17x

Historically, forward P/E for CAR & DTG was in the 10-20x range

CAR has traded at 7-28x forward P/E

(L-T average 13x, 2 turn discount to HTZ) Pre-acquisition, DTG traded at 6-25x forward P/E

(L-T average 12x, 3 turn discount to HTZ)

Source: JPMorgan


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Pre-crisis, CAR EV/EBITDA was trading in the 10-12x range; mid-crisis, ~9-10x; post-crisis, 11-12x

Pre-crisis, DTG, the weakest of the 3 RACs, was trading in the 15x EV/EBITDA range; mid-crisis, ~0-1x; post-crisis 3-4x

Source: JPMorgan


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Appendix: Impact of Interest Rates

Hertz Revenue & Profits Increase as interest rates increase: Change in 3-Month LIBOR vs Change in HTZ Revenue

Source: Hertz


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Disclaimer / Disclosure This document is not a solicitation to invest in any investment product, nor is it intended to provide investment advice. It is intended for information purposes only and should be used by sophisticated investors who are knowledgeable of the risks involved. Past performance is not a guarantee of future results. Please refer to the relevant confidential offering document for full details on investment products and strategies. The information contained herein reflects the opinions and projections of Hanson Wells Capital Management LLC, and its affiliates (collectively “HWP”) as of the date of publication, which are subject to change without notice at any time subsequent to the date of issue. HWP does not represent that any opinion or projection will be realized. All information provided is for informational purposes only and should not be deemed as investment advice or a recommendation to purchase or sell any specific security. While the information presented herein is believed to be reliable, no representation or warranty is made concerning the accuracy of any data presented. This communication is confidential and may not be reproduced without prior written permission from HWP. Performance returns reflect the time weighted return, net of expenses and full fees, for a hypothetical partner. Returns are shown net of the incentive allocations. Performance returns are estimated pending the year-end audit. Past performance is not indicative of future results. Actual returns may differ from the returns presented. Each partner will receive individual returns from HWP’s administrator. Reference to an index does not imply that the Partnership will achieve returns or other results similar to the index. The total returns for the index do not reflect the deduction of any fees or expenses which would reduce returns. Weightings, exposure, attribution and performance contribution information reflect estimates and are the result of classifications and assumptions made in the sole judgment of HWP. Positions reflected in this letter do not represent all the positions held, purchased, or sold, and in the aggregate, the information may represent a small percentage of activity. The information presented is intended to provide insight into the noteworthy events, in the sole opinion of HWP, affecting the Partnership. THIS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY INTERESTS IN ANY FUND MANAGED BY HWP OR ANY OF ITS AFFILIATES. SUCH AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY INTERESTS MAY ONLY BE MADE PURSUANT TO CONFIDENTIAL OFFERING DOCUMENT BETWEEN A FUND AND AN INVESTOR. An investment in Hanson Wells Partners Fund, LP (the “Fund”) is subject to a high degree of investment risk, including the possible loss of the entire amount of an investment in the Fund. An investor should carefully read and review the confidential offering document, including the description of risk factors, before making an investment in the Fund. Statements herein that reflect projections or expectations of future financial or economic performance of the Fund are forward-looking statements. Such “forward-looking” statements are based on various assumptions, which assumptions may not prove to be correct. Accordingly, there can be no assurance that such assumptions and statements will accurately predict future events or the Fund’s actual performance. No representation or warranty can be given that the estimates, opinions or assumptions made herein will prove to be accurate. Any projections and forward-looking statements included herein should be considered speculative and are qualified in their entirety by the information and risks disclosed in the confidential offering document. Actual results for any period may or may not approximate such forward-looking statements. Prospective investors are advised to consult with their own independent tax and business advisors concerning the validity and reasonableness of the factual, accounting and tax assumptions. No representations or warranties whatsoever are made by the Fund, the Partners, or any other person or entity as to the future profitability of the Fund or the results of making an investment in the Fund. Past performance is not a guarantee of future results. This presentation and its contents are confidential and proprietary information of the Fund and any reproduction of this information, in whole or in part, without the prior written consent of the Fund is prohibited. Additional information is available from the Fund upon request. The Fund, the Partners, and their respective affiliates are not acting as your adviser or agent. “Partners” generally refers to Limited Partners of Hanson Wells Partners Fund, L.P. Sources: JPMorgan, Credit Suisse, Columbia Business School Presentation April 2013 (Hunt, Lieu, Raymoulik), Company Filings, HWP Analysis.


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Documents

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peer avis car o

vs htz

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herc ability

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