# HERTZ GLOBAL HOLDINGS, INC (HTZ) FY 2021 MD&A

Verbatim Item 7 Management's Discussion and Analysis from HERTZ GLOBAL HOLDINGS, INC's 10-K for fiscal year 2021.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1657853/000165785322000012/htz-20211231.htm
Accession: 0001657853-22-000012
Filing date: 2022-02-23
Report date: 2021-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/HTZ/
All MD&A years: /company/HTZ/mda/
Next year: /company/HTZ/mda/fy2022/ (FY 2022)

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Hertz Global Holdings, Inc. is a holding company and its principal, wholly-owned subsidiary is The Hertz Corporation. Hertz Global consolidates Hertz for financial statement purposes, and Hertz comprises approximately the entire balance of Hertz Global’s assets, liabilities and operating cash flows. In addition, Hertz’s operating revenues and operating expenses comprise nearly 100% of Hertz Global’s revenues and operating expenses. As such, Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") that follows herein is for Hertz and also applies to Hertz Global in all material respects, unless otherwise noted. Differences between the operations and results of Hertz and Hertz Global are separately disclosed and explained. We sometimes use the words “we,” “our,” “us,” and the “Company” in this MD&A for disclosures that relate to all of Hertz and Hertz Global.

The statements in this MD&A regarding industry outlook, our expectations regarding the performance of our business and the other non-historical statements are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in Item 1A, "Risk Factors.” The following MD&A provides information that we believe to be relevant to an understanding of our consolidated financial condition and results of operations. Our actual results may differ materially from those contained in or implied by any forward-looking statements. You should read the following MD&A together with the sections entitled “Cautionary Note Regarding Forward-Looking Statements and Summary of Risk Factors,” Item 1A, "Risk Factors,” and our consolidated financial statements and related notes included in this 2021 Annual Report under the caption Item 8, "Financial Statements and Supplementary Data.”

In this MD&A we refer to the following non-GAAP measure and key metrics:

•Adjusted Corporate EBITDA - important non-GAAP measure to management because it allows management to assess the operational performance of our business, exclusive of certain items, and allows management to assess the performance of the entire business on the same basis as the segment measure of profitability. Management believes that it is important to investors for the same reasons it is important to management and because it allows investors to assess our operational performance on the same basis that management uses internally. Adjusted EBITDA, the segment measure of profitability and accordingly a GAAP measure, is calculated exclusive of certain items which are largely consistent with those used in the calculation of Adjusted Corporate EBITDA.

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THE HERTZ CORPORATION AND SUBSIDIARIES

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

•Depreciation Per Unit Per Month - important key metric to management and investors as depreciation of revenue earning vehicles and lease charges is one of our largest expenses for the vehicle rental business and is driven by the number of vehicles, expected residual values at the expected time of disposal and expected hold period of the vehicles. Depreciation Per Unit Per Month is reflective of how we are managing the costs of our vehicles and facilitates a comparison with other participants in the vehicle rental industry.

•Total Revenue Per Transaction Day ("Total RPD," also referred to as "pricing") - important key metric to management and investors as it represents a measurement of the changes in underlying pricing in the vehicle rental business and encompasses the elements in vehicle rental pricing that management has the ability to control. Effective in the third quarter of 2021, we revised our calculation of Total RPD to include ancillary retail vehicle sales revenues to better align with current industry practice, and accordingly, prior periods have been restated to conform with the revised definition.

•Total Revenue Per Unit Per Month ("Total RPU") - important key metric to management and investors as it provides a measure of revenue productivity relative to the total number of vehicles in our fleet whether owned or leased ("Average Vehicles" or "fleet capacity"). Effective in the third quarter of 2021, we revised our calculation of Total RPU to include ancillary retail vehicle sales revenues to better align with current industry practice, and accordingly, prior periods have been restated to conform with the revised definition.

•Transaction Days - important key metric to management and investors as it represents the number of revenue generating days ("volume"). It is used as a component to measure Total RPD and Vehicle Utilization. Transaction Days represent the total number of 24-hour periods, with any partial period counted as one Transaction Day, that vehicles were on rent (the period between when a rental contract is opened and closed) in a given period. Thus, it is possible for a vehicle to attain more than one Transaction Day in a 24-hour period.

•Vehicle Utilization - important key metric to management and investors because it is the measurement of the proportion of our vehicles that are being used to generate revenues relative to fleet capacity. Higher Vehicle Utilization means more vehicles are being utilized to generate revenues.

Our non-GAAP measure and key metrics should not be considered in isolation and should not be considered superior to, or a substitute for, financial measures calculated in accordance with U.S. GAAP. The above non-GAAP measure and key metrics are defined, and the non-GAAP measure is reconciled to its most comparable U.S. GAAP measure, in the "Footnotes to the Results of Operations and Selected Operating Data by Segment Tables" section of this MD&A.

OVERVIEW OF OUR BUSINESS AND OPERATING ENVIRONMENT

Impact of COVID-19 on our Business

In March 2020, the World Health Organization declared COVID-19 a pandemic, affecting multiple global regions. The impact of this pandemic has been extensive in many aspects of society, which has resulted in significant disruptions to the global economy, as well as businesses around the world. In an effort to halt the spread of COVID-19, many governments around the world placed significant restrictions on travel, individuals voluntarily reduced their air and other travel in attempts to avoid the outbreak and many businesses announced closures and imposed travel restrictions. In 2021, individuals across the globe have increasingly gained access to COVID-19 vaccinations, particularly in the U.S. During 2021, many of the government-imposed restrictions have been lifted or eased, and travel, particularly domestic leisure travel, has experienced a strong rebound. There remains continued uncertainty about the duration of the negative impact from COVID-19 and its variants, including the length and scope of travel restrictions and business closures that may be imposed by governments of impacted countries or voluntarily undertaken by individuals and private businesses.

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Chapter 11 and Emergence

On May 22, 2020, the Debtors filed Petitions under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court. The Chapter 11 Cases were jointly administered for procedural purposes only under the caption In re The Hertz Corporation, et al., Case No. 20-11218 (MFW). While in Chapter 11, in general we were allowed to operate our ongoing business, but could not engage in transactions outside the ordinary course of our business without the prior approval of the Bankruptcy Court. On May 14, 2021, the Debtors filed the Plan of Reorganization, and the solicitation version of the Supplement to the Disclosure Statement which was approved by the Bankruptcy Court on May 14, 2021. On June 10, 2021, the Plan of Reorganization was confirmed by the Bankruptcy Court. On June 30, 2021, the Effective Date, the Plan of Reorganization became effective in accordance with its terms and the Debtors emerged from Chapter 11. Additional information about the Chapter 11 Cases, including access to documents filed with the Bankruptcy Court, is available online at https://restructuring.primeclerk.com/hertz, a website administered by Prime Clerk. The information on this website is not incorporated by reference and does not constitute part of this 2021 Annual Report.

On the Effective Date, as a result of the Plan of Reorganization, we received cash proceeds of $7.5 billion comprised of:

•$2.8 billion from the purchase of Hertz Global common stock by the Plan Sponsors and certain other investment funds and entities;

•$1.6 billion from the purchase of Hertz Global common stock pursuant to the 2021 Rights Offering;

•$1.5 billion (less a 2% upfront discount and stock issuance fees) from the purchase of preferred stock of reorganized Hertz Global by Apollo; and

•$1.5 billion in proceeds from our secured exit term loan facilities (the "Term Loans").

Such cash proceeds were used, in part, to provide payments to our stakeholders pursuant to the terms of the Plan of Reorganization as follows:

•the holders of administrative, priority and secured claims received payment in cash in full;

•the holders of the approximately $1.0 billion of obligations owed with respect to the DIP Credit Agreement received payment in cash in full;

•the holders of the Senior Term Loan, Senior RCF and Letter of Credit Facility received payment in cash in full with respect to all non-contingent liquidated claims;

•the holders of claims with respect to the Senior Second Priority Secured Notes received payment in cash in full;

•the holders of the €725 million European Vehicle Notes received payment in cash in full;

•the holders of the €257 million Second HIL Credit Agreement received payment in cash in full;

•the holders of claims with respect to the Senior Notes and the holders of claims with respect to the Alternative Letter of Credit Facility received payment in cash with respect to (i) all remaining principal, (ii) accrued and unpaid interest as of the Petition Date at the contract rate, and (iii) accrued and unpaid interest from the Petition Date to the Effective Date at the federal judgment rate (at such rate in effect as of the Petition Date), subject to the rights of creditors (if any) to bring a claim for the payment of additional interest and/or premiums; and

•the holders of general unsecured claims will receive payment in cash in full plus interest at the federal judgment rate from the Petition Date to the date of payment (at such rate in effect as of the Petition Date), subject to the rights of creditors to bring a claim for payment of additional interest.

All of the Hertz Global equity interests existing as of the Effective Date were cancelled on such date in accordance with the Plan of Reorganization with existing equity holders receiving (i) cash in the amount of $1.53 per share of existing interests, (ii) their pro rata share of 3% of the common shares of reorganized Hertz Global, subject to dilution, and (iii) either Public Warrants, for in the aggregate of up to 18% of reorganized Hertz Global common

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

stock issued and outstanding on the Effective Date, subject to dilution and certain conditions, or subscription rights to participate in the 2021 Rights Offering as discussed below.

In accordance with the Plan of Reorganization, Hertz Global commenced a 2021 Rights Offering, under which eligible holders of Hertz Global's common stock and certain eligible holders of the Senior Notes and lenders under the Alternative Letter of Credit Facility could purchase up to $1.6 billion of shares of the reorganized Hertz Global common stock at a purchase price of $10.00 per share. Pursuant to the EPCA, the Backstop Parties agreed to purchase all unsubscribed shares in the 2021 Rights Offering. The final expiration date for the 2021 Rights Offering occurred on June 15, 2021, with eligible holders subscribing to purchase 127,362,114 shares (approximately $1.3 billion), with the Backstop Parties to purchase the remaining 36,137,887 shares (approximately $361 million). Hertz Global closed the 2021 Rights Offering upon emergence from the Chapter 11 Cases on June 30, 2021. Pursuant to the terms of the EPCA, the Backstop Parties received a backstop fee equal in amount of $164 million (payable in shares of reorganized Hertz Global common stock valued at $10.00 per share).

As a result of these transactions, on the Effective Date, Hertz Global issued 471,102,462 shares of common stock as follows:

•14,133,024 shares to existing stockholders;

•277,119,438 shares to Plan Sponsors pursuant to the EPCA;

•127,362,114 shares to eligible participants pursuant to the Rights Offering; and

•52,487,886 shares to the Backstop Parties pursuant to the EPCA.

On the Effective Date, in accordance with the Plan of Reorganization, reorganized Hertz Global issued 1,500,000 shares of preferred stock (the "Series A Preferred Stock") to Apollo and received gross proceeds of $1.5 billion, less a 2% upfront discount and stock issuance fees. As discussed below, during the fourth quarter of 2021, all shares of the Series A Preferred Stock were repurchased and retired by Hertz Global at $1,250 per share.

On the Effective Date, in accordance with the Plan of Reorganization and the Public Warrant Agreement, reorganized Hertz Global issued 89,049,029 Public Warrants. The Public Warrants are exercisable from the date of issuance until June 30, 2051 at which time all unexercised Public Warrants will expire and the rights of the holders of such expired Public Warrants will terminate. The Public Warrants have an initial exercise price of $13.80 and are subject to adjustment from time to time upon the occurrence of any payments of cash dividends, certain dilutive events and recurring fair value adjustments.

On the Effective Date, reorganized Hertz entered into the First Lien Credit Agreement that provides for an aggregate amount of $2.8 billion comprised of the First Lien RCF in an aggregate committed amount of $1.3 billion plus Term Loans in an aggregate principal amount of $1.5 billion. Additionally, reorganized Hertz entered into a new HVF III ABS facility in an aggregate of $6.8 billion comprised of variable funding notes with a principal amount up to $2.8 billion and medium term notes in an aggregate principal amount of $4.0 billion. On the Effective Date, substantially all non-vehicle debt and all existing ABS facilities under the HVF II U.S. ABS Program were repaid in full and terminated in accordance with the Plan of Reorganization. See Note 6, "Debt," to the Notes to our consolidated financial statements under the caption Item 8, "Financial Statements and Supplementary Data” included in this 2021 Annual Report for additional information.

NYSE Delisting and Nasdaq Listing

As a result of the filing of the Chapter 11 Cases, the NYSE suspended trading of Hertz Global common stock after the market close on October 29, 2020. On October 30, 2020, Hertz Global common stock began trading exclusively on the OTC market under the symbol "HTZGQ," and was delisted from the NYSE on November 10, 2020. Upon deregistration of Hertz Global common stock under Section 12(b) of the Exchange Act, Hertz Global common stock remained registered under Section 12(g) of the Exchange Act. As discussed above, on the Effective Date, all of the Hertz Global common stock then existing was cancelled and Hertz Global issued 471,102,462 shares of its new common stock pursuant to the Plan of Reorganization.

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THE HERTZ CORPORATION AND SUBSIDIARIES

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

On November 8, 2021, reorganized Hertz Global successfully completed its Nasdaq listing, in which shares of its new common stock were registered with the SEC for a public offering by certain selling stockholders. On November 9, 2021, reorganized Hertz Global's common stock and Public Warrants began trading on Nasdaq under the trading symbols "HTZ" and "HTZWW," respectively.

In conjunction with the Nasdaq listing certain selling stockholders offered and sold 44,520,000 shares of Hertz Global's common stock to the public. Of these shares, Hertz Global repurchased from the underwriters 10,344,828 shares for an aggregate purchase price of $300 million. This amount is included in treasury stock in the accompanying Hertz Global consolidated balance sheet as of December 31, 2021 under the caption Item 8, "Financial Statements and Supplementary Data” included in this 2021 Annual Report.

Share Repurchase Program for Common Stock

In November 2021, Hertz Global's Board of Directors approved a share repurchase program that authorizes the repurchase of up to $2.0 billion worth of shares of Hertz Global's outstanding common stock. Any repurchases will be made at the discretion of management through a variety of methods, such as open-market transactions (including pre-set trading plans pursuant to Rule 10b5-1 of the Exchange Act), privately negotiated transactions, accelerated share repurchases, and other transactions in accordance with applicable securities laws. The share repurchase authorization has no initial time limit, does not obligate us to acquire any particular amount of common stock and can be discontinued at any time. There can be no assurance as to the timing or number of shares of any repurchases.

Between the inception of the share repurchase program and December 31, 2021, a total of 17,106,026 shares of Hertz Global's common stock were repurchased at an average share price of $23.83, resulting in an aggregate purchase price of $408 million. Between January 1, 2022 and February 17, 2022, a total of 20,589,620 shares of Hertz Global's common stock were repurchased at an average share price of $20.95 resulting in an aggregate purchase price of $431 million.

Tender Offer for Repurchase of Series A Preferred Stock

In November 2021, Hertz Global commenced a tender offer (the "Tender Offer") to repurchase all 1,500,000 outstanding shares of its Series A Preferred Stock at a per-share price of $1,250. In December 2021, the Tender Offer expired and all 1,500,000 shares of the Series A Preferred Stock were repurchased at $1,250 per share for aggregate payments by Hertz Global of $1.9 billion, including approximately $7 million in certain fees. Hertz Global funded the share repurchases in the Tender Offer with available cash, including proceeds from Hertz's offering of the Senior Notes Due 2026 and Senior Notes Due 2029 which were contributed to Hertz Global through a dividend distribution from Hertz. The repurchased shares of Series A Preferred Stock were simultaneously retired. In connection with the Tender Offer, any unpaid dividends that the Preferred Stockholders were entitled to pursuant to the original Preferred Stock terms were forfeited upon acceptance of the Tender Offer.

For additional information about our restructured debt and equity, see Note 6, "Debt," and Note 16, "Equity and Mezzanine Equity – Hertz Global," to the Notes to our consolidated financial statements under the caption Item 8, "Financial Statements and Supplementary Data” included in this 2021 Annual Report.

Our Business

We are engaged principally in the business of renting vehicles primarily through our Hertz, Dollar and Thrifty brands. In addition to vehicle rental, we provided integrated vehicle leasing and fleet management solutions through our Donlen subsidiary, where in the fourth quarter of 2020, we entered into a stock and asset purchase agreement to sell substantially all of the assets and certain liabilities as discussed below. The sale was completed on March 30, 2021. Our profitability is primarily a function of the volume, mix and pricing of rental transactions and the utilization of vehicles, the related ownership cost of vehicles and other operating costs. Significant changes in the purchase price or residual values of vehicles or interest rates can have a significant effect on our profitability depending on

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

our ability to adjust pricing for these changes. We continue to balance our mix of non-program and program vehicles based on market conditions, including residual values. Our business requires significant expenditures for vehicles, and as such, we require substantial liquidity to finance such expenditures.

Our strategy includes optimization of our vehicle rental operations, disciplined performance management and evaluation of all locations. In October 2021, we announced several new initiatives as part of a plan to offer the largest EV rental fleet, to lead in providing access to EVs for ride sharing and to digitize our vehicle disposition process. These efforts are aimed at positioning us to be a leader in the future mobility ecosystem.

Our revenues are primarily derived from rental and related charges and consist of worldwide vehicle rental revenues from all company-operated vehicle rental operations, including charges to customers for the reimbursement of costs incurred relating to airport concession fees and vehicle license fees, the fueling of vehicles and revenues associated with value-added services, including the sale of loss or collision damage waivers, theft protection, liability and personal accident/effects insurance coverage, premium emergency roadside service and other products and fees. Also included are ancillary revenues associated with retail vehicle sales and certain royalty fees from our franchisees (such fees are less than 2% of total revenues each period).

We also had revenues from vehicle leasing and fleet management services by our Donlen business, which was sold on March 30, 2021.

Our expenses primarily consist of:

•Direct vehicle and operating expense ("DOE"), primarily wages and related benefits; commissions and concession fees paid to airport authorities, travel agents and others; facility, self-insurance and reservation costs; and other costs relating to the operation and rental of revenue earning vehicles, such as damage, maintenance and fuel costs;

•Depreciation expense and lease charges relating to revenue earning vehicles, including gains and losses and related costs associated with the disposal of vehicles;

•Depreciation and amortization expense relating to non-vehicle assets;

•Selling, general and administrative expense ("SG&A"), which includes advertising costs and administrative personnel costs, along with costs for information technology and finance transformation programs;

•Interest expense, net; and

•Reorganization items, net, which includes charges associated with the Chapter 11 Cases, primarily professional fees which concluded on the Effective Date as a result of the implementation of the Plan of Reorganization.

To accommodate increased demand, we increase our available fleet and staff. As demand declines, fleet and staff are decreased accordingly. A number of our other major operating costs, including airport concession fees, commissions and vehicle liability expenses, are directly related to revenues or transaction volumes. We also maintain a flexible workforce, with a significant number of part-time and seasonal workers. Certain operating expenses, including real estate taxes, rent, insurance, utilities, maintenance and other facility-related expenses, and minimum staffing costs, remain fixed and cannot be adjusted for demand.

Our Reportable Segments

In the second quarter of 2021, in connection with the Chapter 11 Emergence, and changes in how our CODM regularly reviews operating results and allocates resources, we revised our reportable segments to include Canada, Latin America and the Caribbean in our Americas RAC reportable segment, which were previously included in our International RAC reportable segment. Accordingly, prior periods have been restated to conform with the revised presentation. We have identified two reportable segments, which are consistent with our operating segments and

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

organized based on the products and services provided and the geographic areas in which business is conducted, as follows:

•Americas RAC - Rental of vehicles, as well as sales of value-added services, in the U.S. Canada, Latin America and the Caribbean; and

•International RAC - Rental and leasing of vehicles, as well as sales of value-added services, internationally and consists primarily of our Europe and other international locations.

Also, in the second quarter of 2021, as a result of the Donlen Sale, as further disclosed in Note 3, "Divestitures," to the Notes to our consolidated financial statements under the caption Item 8, "Financial Statements and Supplementary Data” included in this 2021 Annual Report, the All Other Operations reportable segment which was primarily comprised of the Donlen business was no longer deemed to be a reportable segment.

In addition to the above reportable segments, we have corporate operations. We assess performance and allocate resources based upon the financial information for our operating segments.

Revenue Earning Vehicles

Revenue earning vehicles used in our rental and leasing operations are recorded at cost, net of related discounts and incentives from manufacturers. Holding periods typically range from six to thirty-six months. Also included in revenue earning vehicles are vehicles placed on our retail lots for sale or actively in the process of being sold through other disposition channels.

Program vehicles are purchased under repurchase or guaranteed depreciation programs with vehicle manufacturers wherein the manufacturers agree to repurchase vehicles at a specified price or guarantee the depreciation rate on the vehicles during established repurchase periods, subject to, among other things, certain vehicle condition, mileage and holding period requirements. Guaranteed depreciation programs guarantee the residual value of the program vehicle upon sale, subject to, among other things, certain vehicle condition, mileage and holding period requirements. Program vehicles generally provide us with flexibility to increase or reduce the size of our fleet based on market demand. When we increase the percentage of program vehicles, the average age of our fleet decreases since the average holding period for program vehicles is shorter than that for non-program vehicles.

When a revenue earning vehicle is acquired outside of a vehicle repurchase program, we estimate the period that we will hold the asset, primarily based on historical measures of the amount of rental activity (e.g., automobile mileage). We also estimate the residual value of the applicable revenue earning vehicles at the expected time of disposal, considering factors such as make, model and options, age, physical condition, mileage, sale location, time of the year, channel disposition (e.g., auction, retail, dealer direct) and market conditions. The vehicle is depreciated using a rate based on these estimates. Depreciation rates are reviewed on a quarterly basis based on management's ongoing assessment of present and estimated future market conditions, their effect on residual values at the expected time of disposal and the estimated holding period of the vehicle. Differences between actual residual values and those estimated result in an adjustment to depreciation upon disposition of the vehicle. Our depreciation of revenue earning vehicles and lease charges also includes costs associated with the disposal of vehicles and rents paid for vehicles leased.

We dispose of our non-program vehicles via auction, dealer direct and retail locations. In October 2021, we announced a nationwide agreement with Carvana with respect to our vehicle disposition process and our plan to position us at the center of the modern mobility ecosystem. The Carvana arrangement allows us to digitize and modernize our retail sales process, reduce our reliance on wholesale channels and allow us to renew our vehicle supply more rapidly. Non-program vehicles disposed of through our retail locations allow us the opportunity for value-added revenue, such as warranty, financing and title fees. We periodically review and adjust the mix between program and non-program vehicles in our fleet based on contract negotiations and the economic environment

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THE HERTZ CORPORATION AND SUBSIDIARIES

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

pertaining to our industry in an effort to optimize the mix of vehicles. Additionally, the use of program vehicles reduces the volatility associated with residual value estimation.

2021 Operating Overview

Effective during the third quarter of 2021, we changed our definition of Total RPD and Total RPU to include ancillary retail sales revenues to better align with current industry practice, and accordingly, prior periods have been restated to conform with the revised definition. Effective during the second quarter of 2021, we began reporting non-vehicle depreciation expense on a separate line item in the consolidated statement of operations, and accordingly prior periods have been restated to reflect this change.

The following charts provide several key factors influencing our results for the years ended December 31, 2021, 2020 and 2019.

(1)     Includes impact of foreign currency exchange at average rates ("fx").

(2)    Results shown are in constant currency as of December 31, 2020.

(3)    The percentages shown in this chart reflect Vehicle Utilization versus period-over-period change.

For more information on the above, see the discussion of our results on a consolidated basis and by segment that follows herein. In this MD&A, certain amounts in the following tables are denoted in millions. Amounts such as percentages are calculated from the underlying numbers in thousands, and as a result, may not agree to the amount when calculated from the tables in millions.

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THE HERTZ CORPORATION AND SUBSIDIARIES

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

CONSOLIDATED RESULTS OF OPERATIONS - HERTZ

[[GREPCENT_TABLE]]
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[[/GREPCENT_TABLE]]

Footnotes to the table above are shown at the end of the Results of Operations and Selected Operating Data by Segment section of this MD&A.

NM - Not meaningful

Year Ended December 31, 2021 Compared with Year Ended December 31, 2020

Total revenues increased $2.1 billion in 2021 compared to 2020 due primarily to an increase of $2.5 billion and $113 million in our Americas RAC and International RAC segments, respectively, partially offset by a decrease of $494 million in all other operations. Americas RAC revenues increased due primarily to increased pricing resulting from growth in travel demand and industry constraints on vehicles due to the Chip Shortage affecting new vehicle production. Excluding a $42 million impact of fx, revenues for our International RAC segment increased $71 million also due primarily to increased pricing resulting primarily from industry constraints on vehicles due to the Chip Shortage affecting new vehicle production, partially offset by lower volume. The decrease in all other operations was the result of the Donlen Sale in the first quarter of 2021.

DOE increased $497 million in 2021 compared to 2020 due primarily to an increase of $540 million in our Americas RAC segment, partially offset by a decrease of $42 million in our International RAC segment. The increase in DOE for our Americas RAC segment was due primarily to higher volume, partially offset by lower fleet costs due to reduced fleet size and lower fixed costs resulting from cost-reduction initiatives. Excluding the $30 million impact of fx, DOE for International RAC decreased $72 million due primarily to lower volume and lower fixed costs resulting from cost-reduction initiatives.

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THE HERTZ CORPORATION AND SUBSIDIARIES

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Depreciation of revenue earning vehicles and lease charges decreased $1.5 billion in 2021 compared to 2020 due primarily to decreases of $1.0 billion, $435 million, and $89 million in our Americas RAC segment, all other operations, and International RAC segment, respectively. The decrease in our Americas RAC was due primarily to increasing residual values and longer vehicle holding periods resulting in an increase in vehicles that were fully depreciated and an increase in gains recognized on the disposition of vehicles. The decrease in all other operations was due to the sale of our Donlen business in the first quarter of 2021. Excluding a $6 million impact of fx, depreciation of revenue earning vehicles and lease charges for our International RAC segment decreased $95 million due primarily to right sizing of the fleet, the Chip Shortage affecting new vehicle production and strength in residual values.

Non-vehicle depreciation and amortization decreased $29 million in 2021 compared to 2020 due primarily to lower depreciation expense resulting in part from the Lease Rejection Orders in our Americas RAC segment in 2020 and fully depreciated intangible assets related to concession rights.

SG&A increased $43 million in 2021 compared to 2020 due primarily to an increase of $81 million in our corporate operations due primarily to increased personnel costs, partially offset by decreases of $28 million and $9 million in our International RAC segment and all other operations, respectively. Excluding a $6 million fx impact, SG&A in our International RAC segment decreased $34 million due primarily to lower professional fees and lower personnel costs, partially offset by higher marketing spend.

Vehicle interest expense, net decreased $171 million in 2021 compared to 2020 due primarily to lower average balances and lower average rates primarily in our Americas RAC segment.

Non-vehicle interest expense, net increased $34 million in 2021 compared to 2020 due primarily to higher amortization of capitalized deferred financing costs, higher letter of credit fees and higher average interest rates due primarily to the issuance of new unsecured senior notes in the fourth quarter of 2021, the issuance of the Term Loans in the second quarter of 2021 and the DIP Credit Agreement which was entered into in the third quarter of 2020, partially offset by interest on certain non-vehicle debt being suspended as a result of filing the Chapter 11 Cases.

We incurred charges of $213 million for impairment of intangible and other assets in 2020 due primarily to $124 million impairment of technology-related intangible assets and $69 million impairment of capitalized cloud computing implementation costs in our corporate operations due to uncertainty surrounding our financial ability to complete certain information technology projects as a result of COVID-19 and the filing of the Chapter 11 Cases. Additionally, we incurred a charge of $20 million for impairment of the Hertz tradename in our historical International RAC segment as a result of our annual testing of the recoverability of our indefinite-lived intangible assets.

We incurred a charge of $133 million in 2020 in our corporate operations resulting from the full write-off of the 2019 Master Loan with Hertz Holdings due to the filing of the Chapter 11 Cases.

We had other income of $21 million in 2021 compared to other income of $9 million in 2020. Other income in 2021 was comprised in part to gains relating to derivative instruments in our corporate operations, the gain on the sales of certain franchises in our Americas RAC segment and income from an equity investment in our corporate operations. Other income of $9 million in 2020 was primarily comprised of a $20 million gain due to additional cash received from the sale of non-vehicle capital assets, primarily offset by $11 million in pension-related settlement charges.

We incurred $513 million of net reorganization charges in 2021, primarily in our corporate operations, which was comprised primarily of professional fees associated with the Chapter 11 Cases, the loss on extinguishment of certain debt resulting from the implementation of the Plan of Reorganization, a prior plan sponsor breakup fee and other miscellaneous charges related to the implementation of the Plan of Reorganization. We incurred $175 million of net reorganization charges in 2020 in our corporate operations for professional fees and other costs associated with the Chapter 11 Cases.

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THE HERTZ CORPORATION AND SUBSIDIARIES

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Gain from the Donlen Sale of $400 million in 2021 resulting from the completion of the Donlen Sale in the first quarter of 2021 which was recorded in our corporate operations.

The effective tax rate in 2021 was 22% compared to 15% in 2020. We recorded a tax provision of $318 million in 2021 compared to a tax benefit of $328 million in 2020. The increase in the tax provision in 2021 compared to 2020 was driven by improvements in our financial performance in 2021, change in the mix of earnings and losses in jurisdictions in which no tax benefit can be recognized, non-deductible bankruptcy expenses, and reduced by the tax benefits of the European reorganization.

Year Ended December 31, 2020 Compared with Year Ended December 31, 2019

Total revenues decreased $4.5 billion in 2020 compared to 2019 due to reduced demand related to the impact from COVID-19 where there were decreases of $3.5 billion and $1.0 billion in our Americas RAC and International RAC segments, respectively. Americas RAC revenues decreased due primarily to lower volume. Excluding a $6 million impact of fx, revenues for our International RAC segment decreased $1.0 billion also due primarily to lower volume and pricing.

DOE decreased $1.9 billion in 2020 compared to 2019 due primarily to decreases of $1.4 billion and $482 million in our Americas RAC and International RAC segments, respectively. The decrease in our Americas RAC segment was due primarily to lower volume driven by the impact from COVID-19 on total revenues described above, lower personnel costs and other cost elimination initiatives. Excluding the $4 million impact of fx, DOE for International RAC decreased $486 million due primarily to lower volume driven by the impact from COVID-19 on total revenues described above and lower personnel costs due to employee furloughs and associated government support across Europe related to COVID-19.

Depreciation of revenue earning vehicles and lease charges decreased $533 million in 2020 compared to 2019 due primarily to decreases of $354 million and $144 million in our Americas RAC and International RAC segments, respectively. The decreases in our Americas RAC and International RAC segments were due primarily to a reduction in fleet size in response to pandemic-related declines in consumer demand.

Non-vehicle depreciation and amortization increased $22 million in 2020 compared to 2019 due primarily to in-service placement of internally developed software assets in our Americas RAC segment.

SG&A decreased $305 million in 2020 compared to 2019 due primarily to lower marketing costs in our Americas RAC and International RAC segments, lower personnel costs in our Americas RAC segment and lower information technology and finance transformation costs in our corporate operations.

Vehicle interest expense, net decreased $38 million in 2020 compared to 2019 due primarily to lower vehicle debt levels primarily in our Americas RAC segment.

Non-vehicle interest expense, net decreased $154 million in 2020 compared to 2019 due primarily to lower debt levels, lower market interest rates and the suspension of interest on certain non-vehicle debt as a result of filing the Chapter 11 Cases.

We incurred charges of $213 million for impairment of intangible and other assets in 2020 due primarily to $124 million impairment of technology-related intangible assets and $69 million impairment of capitalized cloud computing implementation costs in our corporate operations due to uncertainty surrounding our financial ability to complete certain information technology projects as a result of COVID-19 and the filing of the Chapter 11 Cases. Additionally, we incurred a charge of $20 million for impairment of the Hertz tradename in our historical International RAC segment as a result of our annual testing of the recoverability of our indefinite-lived intangible assets.

We incurred a charge of $133 million in 2020 in our corporate operations resulting from the full write-off of the 2019 Master Loan with Hertz Holdings due to the filing of the Chapter 11 Cases.

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THE HERTZ CORPORATION AND SUBSIDIARIES

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Other income of $9 million in 2020 was primarily comprised of a $20 million gain due to additional cash received from the sale of non-vehicle capital assets, primarily offset by $11 million in pension-related settlement charges. Other income of $59 million in 2019 was primarily comprised of a $30 million gain on marketable securities and a $39 million gain on non-vehicle capital assets.

We incurred $175 million of net reorganization charges in 2020 in our corporate operations for professional fees and other costs associated with the Chapter 11 Cases.

The effective tax rate in 2020 was 15% compared to 326% in 2019. We recorded a tax benefit of $328 million in 2020 compared to a tax provision of $65 million in 2019. The effective income tax rate and related tax benefit in 2020 compared to 2019 were driven by increased losses on our operations due to the effects of COVID-19, primarily offset by the impact of valuation allowances on net deferred tax assets for certain foreign and domestic jurisdictions.

CONSOLIDATED RESULTS OF OPERATIONS - HERTZ GLOBAL

The above discussion for Hertz also applies to Hertz Global.

Hertz Global had $627 million of expense from the change in fair value of Public Warrants that was incremental to Hertz for the year ended December 31, 2021. Hertz Global also had $164 million of reorganization items, net for the year ended December 31, 2021 that was incremental to the amounts shown for Hertz, which represent certain effects from the implementation of the Plan of Reorganization.

Hertz Global had $2 million and $7 million of interest expense, net, during 2020 and 2019, respectively, that was incremental to the amounts shown for Hertz. These amounts represent interest associated with amounts outstanding under a master loan agreement between the companies. Hertz includes this amount as interest income in its statements of operations, but this amount is eliminated in consolidation for purposes of Hertz Global.

In 2020, Hertz Global had $1 million of income tax benefit that was incremental to the amounts shown for Hertz due primarily to the $133 million master loan write-off included in Hertz's consolidated statements of operations. In 2019, Hertz had $2 million of tax provision that was incremental to the amounts shown for Hertz Global.

RESULTS OF OPERATIONS AND SELECTED OPERATING DATA BY SEGMENT

Americas RAC

As of December 31, 2021, our Americas RAC operations had a total of approximately 5,400 corporate and franchisee locations, comprised of 1,900 airport and 3,500 off airport locations.

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THE HERTZ CORPORATION AND SUBSIDIARIES

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results of operations and our discussion and analysis for our Americas RAC segment were as follows:

[[GREPCENT_TABLE]]
[["","Years Ended December 31,","","Percent Increase/(Decrease)"],["($ In millions, except as noted)","2021","","2020","","2019","","2021 vs. 2020","","2020 vs. 2019"],["Total revenues","$","6,215","","","$","3,756","","","$","7,208","","","65%","","(48)%"],["Depreciation of revenue earning vehicles and lease charges","$","343","","","$","1,352","","","$","1,706","","","(75)","","(21)"],["Direct vehicle and operating expenses","$","3,302","","","$","2,763","","","$","4,163","","","20","","(34)"],["Direct vehicle and operating expenses as a percentage of total revenues","53","%","","74","%","","58","%"],["Non-vehicle depreciation and amortization","$","166","","","$","182","","","$","159","","","(9)","","15"],["Selling, general and administrative expenses","$","282","","","$","283","","","$","499","","","\u2014","","(43)"],["Selling, general and administrative expenses as a percentage of total revenues","5","%","","8","%","","7","%"],["Vehicle interest expense","$","213","","","$","329","","","$","353","","","(35)","","(7)"],["Reorganization items, net","$","80","","","$","8","","","$","\u2014","","","NM","","NM"],["Adjusted EBITDA","$","2,173","","","$","(810)","","","$","512","","","NM","","NM"],["Transaction Days (in thousands)(b)","100,085","","85,016","","161,278","","18","","(47)"],["Average Vehicles (in whole units)(c)","355,647","","437,547","","555,220","","(19)","","(21)"],["Vehicle Utilization(c)","77","%","","53","%","","80","%"],["Total RPD (in whole dollars)(d)","$","62.07","","","$","44.22","","","$","44.75","","","40","","(1)"],["Total RPU Per Month (in whole dollars)(e)","$","1,456","","","$","716","","","$","1,083","","","NM","","(34)"],["Depreciation Per Unit Per Month (in whole dollars)(f)","$","80","","","$","258","","","$","256","","","(69)","","1"],["Percentage of program vehicles as of period end","0.4","%","","3","%","","11","%"]]
[[/GREPCENT_TABLE]]

Footnotes to the table above are shown at the end of the Results of Operations and Selected Operating Data by Segment section of this MD&A.

NM - Not meaningful

Year Ended December 31, 2021 Compared with Year Ended December 31, 2020

Total revenues for Americas RAC increased $2.5 billion in 2021 compared to 2020 due primarily to higher pricing and volume. The 40% increase in Total RPD was driven primarily by higher pricing across the industry due to growth in travel demand and industry-wide constraints on vehicles due to the Chip Shortage affecting new vehicle production. The 18% increase in Transaction Days was driven primarily by volume increases in leisure and most business categories as government-imposed travel restrictions began to lift in 2021 due to increased access to COVID-19 vaccines. Volume increased in our airport locations by 44%. Airport revenues comprised 70% of total revenues for the segment in 2021 compared to 56% in 2020.

Depreciation of revenue earning vehicles and lease charges for Americas RAC decreased $1.0 billion in 2021 compared to 2020. Average Vehicles decreased 19% and Depreciation Per Unit Per Month decreased to $80 compared to $258 in 2020, due primarily to increasing residual values and longer vehicle holding periods resulting in an increase in vehicles that were fully depreciated and an increase in gains recognized on the disposition of vehicles.

DOE for Americas RAC increased $540 million in 2021 compared to 2020. Excluding a $5 million fx impact, DOE increased $534 million due primarily to higher volume driven by the increased travel demand discussed above and increased vehicle maintenance costs due primarily to longer vehicle holding periods resulting from new vehicle

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THE HERTZ CORPORATION AND SUBSIDIARIES

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

production constraints due to the Chip Shortage, partially offset by lower fleet-related costs due to a reduced fleet size and lower facility costs resulting from cost-reduction initiatives.

Non-vehicle depreciation and amortization for Americas RAC decreased $16 million in 2021 compared to 2020 resulting in part from the Lease Rejection Orders in 2020 and fully depreciated intangible assets related to concession rights.

SG&A for Americas RAC was comparable to 2020 in which 2021 incurred lower personnel costs due to cost-reduction initiatives, partially offset by higher marketing spend during our peak season in 2021.

Vehicle interest expense for Americas RAC decreased $116 million in 2021 compared to 2020 due primarily to lower average balances and lower average rates resulting from the issuance of the HVF III ABS Notes and the full repayment and termination of the HVF II ABS Notes in accordance with the Plan of Reorganization.

Reorganization items, net for Americas RAC increased $73 million in 2021 compared to 2020 due primarily to the loss on extinguishment of certain vehicle debt resulting from the implementation of the Plan of Reorganization and certain contract-related charges in the first half of 2021.

Year Ended December 31, 2020 Compared with Year Ended December 31, 2019

Total Americas RAC revenues decreased $3.5 billion in 2020 compared to 2019 due primarily to lower volume. The 47% decrease in Transaction Days was driven by the impact from COVID-19 with declines in leisure and most business categories, excluding delivery services in our off airport locations where volume and pricing increased compared to 2019. Volume decreased in both our airport and off airport locations by 59% and 29%, respectively. Total RPD decreased by 2%. Off airport revenues comprised 44% of total revenues in 2020 as compared to 32% for 2019 due primarily to customer demand changes associated with COVID-19.

Depreciation of revenue earning vehicles and lease charges for Americas RAC decreased $354 million in 2020 compared to 2019. Average Vehicles decreased 21% due in part to a reduction in fleet size in response to pandemic-related declines in consumer demand. Depreciation Per Unit Per Month was comparable to 2019.

DOE for Americas RAC decreased $1.4 billion in 2020 compared to 2019 due primarily to lower volume driven by the impact from COVID-19 on total revenues described above, lower personnel costs due to an employee restructuring program that commenced in 2020 in response to COVID-19 and other cost elimination initiatives.

Non-vehicle depreciation and amortization for Americas RAC increased $24 million in 2020 compared to 2019 due primarily to in-service placement of internally developed software assets.

SG&A for Americas RAC decreased $216 million in 2020 compared to 2019 due primarily to lower marketing and personnel costs in response to COVID-19 and other cost elimination initiatives.

Vehicle interest expense for Americas RAC decreased $24 million in 2020 compared to 2019 due primarily to lower debt levels as a result of vehicle dispositions resulting from the Interim Lease Order.

International RAC

As of December 31, 2021, our International RAC operations had approximately 6,000 corporate and franchisee locations, comprised of 1,400 airport and 4,600 off airport locations in approximately 110 countries and regions including the countries of Australia, New Zealand, and in the regions of Africa, Asia, Europe and the Middle East.

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THE HERTZ CORPORATION AND SUBSIDIARIES

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results of operations and our discussion and analysis for our International RAC segment were as follows:

[[GREPCENT_TABLE]]
[["","Years Ended December 31,","","Percent Increase/(Decrease)"],["($ In millions, except as noted)","2021","","2020","","2019","","2021 vs. 2020","","2020 vs. 2019"],["Total revenues","$","985","","","$","872","","","$","1,899","","","13%","","(54)%"],["Depreciation of revenue earning vehicles and lease charges","$","154","","","$","243","","","$","388","","","(37)","","(37)"],["Direct vehicle and operating expenses","$","606","","","$","647","","","$","1,128","","","(6)","","(43)"],["Direct vehicle and operating expenses as a percentage of total revenues","61","%","","74","%","","59","%"],["Non-vehicle depreciation and amortization","$","16","","","$","19","","","$","20","","","(17)","","(7)"],["Selling, general and administrative expenses","$","136","","","$","164","","","$","202","","","(17)","","(19)"],["Selling, general and administrative expenses as a percentage of total revenues","14","%","","19","%","","11","%"],["Vehicle interest expense","$","59","","","$","80","","","$","89","","","(26)","","(10)"],["Reorganization items, net","$","12","","","$","\u2014","","","$","\u2014","","","NM","","NM"],["Adjusted EBITDA","$","90","","","$","(229)","","","$","115","","","NM","","NM"],["Transaction Days (in thousands)(b)","20,488","","22,283","","44,720","","(8)","","(50)"],["Average Vehicles (in whole units)(c)","77,643","","102,793","","160,382","","(24)","","(36)"],["Vehicle Utilization(c)","72","%","","59","%","","76","%"],["Total RPD (in whole dollars)(d)","$","49.30","","","$","42.12","","","$","46.18","","","17","","(9)"],["Total RPU Per Month (in whole dollars)(e)","$","1,084","","","$","761","","","$","1,073","","","42","","(29)"],["Net Depreciation Per Unit Per Month (in whole dollars)(f)","$","171","","","$","214","","","$","219","","","(20)","","(2)"],["Percentage of program vehicles as of period end","32","%","","31","%","","43","%"]]
[[/GREPCENT_TABLE]]

Footnotes to the table above are shown at the end of the Results of Operations and Selected Operating Data by Segment section of this MD&A.

NM - Not meaningful

Year Ended December 31, 2021 Compared with Year Ended December 31, 2020

Total revenues for International RAC increased $113 million in 2021 compared to 2020 due to higher pricing, partially offset by lower volume. Excluding a $42 million fx impact, revenues increased $71 million due to higher pricing and higher leisure mix in Europe. Total RPD increased 17% driven primarily by higher pricing across the industry due to industry-wide constraints on vehicle supply due to the Chip Shortage affecting new vehicle production and higher leisure mix in Europe beginning in the second half of 2021. Transaction Days decreased 8% driven primarily by lower volume in most leisure and business categories due to continued government-imposed travel restrictions.

Depreciation of revenue earning vehicles and lease charges for International RAC decreased $89 million in 2021 compared to 2020. Excluding a $6 million fx impact, depreciation decreased $95 million. Average Vehicles for International RAC decreased 24% due to fleet reductions in 2020 in response to lower demand during the pandemic and vehicle supply shortages limiting fleet expansion as demand began to return in 2021. Depreciation Per Unit Per Month for International RAC decreased to $171 from $214 for 2021 versus 2020 due to strength in residual values resulting in lower gross depreciation, offset by higher vehicle sales gains.

DOE for International RAC decreased $42 million in 2021 compared to 2020. Excluding a $30 million fx impact, DOE decreased $72 million due primarily to lower volume driven by the impact of travel restrictions resulting from

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THE HERTZ CORPORATION AND SUBSIDIARIES

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

COVID-19 and lower facility costs resulting from cost-reduction initiatives, partially offset by increases related to restructuring initiatives.

Non-vehicle depreciation and amortization for International RAC decreased $3 million in 2021 compared to 2020 due primarily to in-service placement of internally developed software assets.

SG&A for International RAC decreased $28 million in 2021 compared to 2020. Excluding a $6 million fx impact, SG&A decreased $34 million due primarily to lower professional fees resulting from debt restructuring initiatives during 2020 and lower personnel costs, partially offset by higher marketing spend.

Vehicle interest expense for International RAC decreased $21 million in 2021 compared to 2020 due primarily to lower debt levels, partially offset by higher average rates.

Reorganization items, net for International RAC increased $12 million in 2021 compared to 2020 due primarily to advisory fees related to debt refinancings and the loss on extinguishment of the European Vehicle Notes resulting from the implementation of the Plan of Reorganization during the first half of 2021.

Year Ended December 31, 2020 Compared with Year Ended December 31, 2019

Total revenues for International RAC decreased $1.0 billion in 2020 compared to 2019 due to lower volume and pricing. Transaction Days decreased 50% and Total RPD decreased 9%. Excluding a $6 million fx impact, revenues decreased $1.0 billion due to lower volume and pricing, primarily in Europe, across all leisure and business categories driven by the impact of COVID-19.

Depreciation of revenue earning vehicles and lease charges for International RAC decreased $144 million in 2020 compared to 2019, where the fx impact was immaterial. Average Vehicles for International RAC decreased 36% due to downsizing the fleet as a result of COVID-19. Depreciation Per Unit Per Month for International RAC decreased to $197 from $202 for 2020 versus 2019.

DOE for International RAC decreased $482 million in 2020 compared to 2019. Excluding a $4 million fx impact, DOE decreased $486 million due primarily to lower volume driven by the impact from COVID-19 on total revenues described above and lower personnel costs due to employee furloughs and associated government support across Europe related to COVID-19.

SG&A for International RAC decreased $38 million in 2020 compared to 2019. Excluding a $9 million fx impact, SG&A decreased $47 million due primarily to lower marketing and facility costs.

Vehicle interest expense for International RAC decreased $9 million in 2020 compared to 2019 due primarily to downsizing the fleet as a result of COVID-19 market conditions.

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THE HERTZ CORPORATION AND SUBSIDIARIES

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Footnotes to the Results of Operations and Selected Operating Data by Segment Tables

(a)Adjusted Corporate EBITDA is calculated as net income (loss) attributable to Hertz or Hertz Global, adjusted for income taxes; non-vehicle depreciation and amortization; non-vehicle debt interest, net; vehicle debt-related charges; restructuring and restructuring related charges; information technology and finance transformation costs; reorganization items, net; pre-reorganization items and non-debtor financing charges; gain from the sale of a business and certain other miscellaneous items. When evaluating our operating performance, investors should not consider Adjusted Corporate EBITDA in isolation of, or as a substitute for, measures of our financial performance determined in accordance with U.S. GAAP. The reconciliations to the most comparable consolidated U.S. GAAP measure are presented below:

HERTZ

[[GREPCENT_TABLE]]
[["","Years Ended December 31,"],["(In millions)","2021","","2020","","2019"],["Net income (loss) attributable to Hertz","$","1,157","","","$","(1,846)","","","$","(53)"],["Adjustments:"],["Income tax provision (benefit)","318","","","(328)","","","65"],["Non-vehicle depreciation and amortization","196","","","225","","","203"],["Non-vehicle debt interest, net(1)","185","","","151","","","304"],["Vehicle debt-related charges(2)","72","","","55","","","38"],["Restructuring and restructuring related charges(3)","76","","","64","","","14"],["Intangible and other asset impairment(4)","\u2014","","","213","","","\u2014"],["Write-off of intercompany loan(5)","\u2014","","","133","","","\u2014"],["Information technology and finance transformation costs(6)","12","","","42","","","114"],["Reorganization items, net(7)","513","","","175","","","\u2014"],["Pre-reorganization and non-debtor financing charges(8)","42","","","109","","","\u2014"],["Gain from the sale of Donlen(9)","(400)","","","\u2014","","","\u2014"],["Other items(10)","(41)","","","12","","","(36)"],["Adjusted Corporate EBITDA","$","2,130","","","$","(995)","","","$","649"]]
[[/GREPCENT_TABLE]]

HERTZ GLOBAL

[[GREPCENT_TABLE]]
[["","Years Ended December 31,"],["(In millions)","2021","","2020","","2019"],["Net income (loss) attributable to Hertz Global","$","366","","","$","(1,714)","","","$","(58)"],["Adjustments:"],["Income tax provision (benefit)","318","","","(329)","","","63"],["Non-vehicle depreciation and amortization","196","","","225","","","203"],["Non-vehicle debt interest, net(1)","185","","","153","","","311"],["Vehicle debt-related charges(2)","72","","","55","","","38"],["Restructuring and restructuring related charges(3)","76","","","64","","","14"],["Intangible and other asset impairment(4)","\u2014","","","213","","","\u2014"],["Information technology and finance transformation costs(6)","12","","","42","","","114"],["Reorganization items, net(7)","677","","","175","","","\u2014"],["Pre-reorganization and non-debtor financing charges(8)","42","","","109","","","\u2014"],["Gain from the sale of Donlen(9)","(400)","","","\u2014","","","\u2014"],["Change in fair value of Public Warrants(11)","627","","","\u2014","","","\u2014"],["Other items(10)","(41)","","","12","","","(36)"],["Adjusted Corporate EBITDA","$","2,130","","","$","(995)","","","$","649"]]
[[/GREPCENT_TABLE]]

(1)In 2021, includes $8 million of loss on extinguishment of debt associated with the payoff and termination of the HIL Credit Agreement recorded in the second quarter. See Note 6, "Debt," in Part II, Item 8 of this 2021 Annual Report for further information.

(2)Represents vehicle debt-related charges relating to the amortization of deferred financing costs and debt discounts and premiums.

(3)Represents charges incurred under restructuring actions as defined in U.S. GAAP, excluding impairments and asset write-downs. See Note 10, "Restructuring," in Part II, Item 8 of this 2021 Annual Report for further information. Also included restructuring related charges such as incremental costs incurred directly supporting business transformation initiatives.

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

(4)Represents the impairment of technology-related intangible assets and capitalized cloud computing cost. In 2020, also represented impairment of other assets and the Hertz tradename. See Note 5, "Goodwill and Intangible Assets, Net," in Part II, Item 8 of this 2021 Annual Report.

(5)Represented the write-off of the 2019 Master Loan between Hertz and Hertz Holdings, as disclosed in Note 15, "Related Party Transactions," in Part II, Item 8 of this 2021 Annual Report.

(6)Represents costs associated with our information technology and finance transformation programs, both of which are multi-year initiatives to upgrade and modernize our systems and processes.

(7)Represents charges associated with the filing of and the emergence from the Chapter 11 Cases, as described in Note 21, "Reorganization Items, Net," in Part II, Item 8 of this 2021 Annual Report.

(8)Represents charges incurred prior to the filing of the Chapter 11 Cases, which were comprised of preparation charges for the reorganization, such as professional fees. Also included certain non-debtor financing and professional fee charges. See Note 1, "Background," in Part II, Item 8 of this 2021 Annual Report.

(9)Represents the net gain from the sale of our Donlen business on March 30, 2021 recorded in Corporate as disclosed in Note 3, "Divestitures," in Part II, Item 8 of this 2021 Annual Report.

(10)Represents miscellaneous items, including non-cash stock-based compensation charges, and amounts attributable to non-controlling interests. For 2021, also includes $100 million associated with the suspension of depreciation during the first quarter for the Donlen business while classified as held for sale, partially offset by $17 million for certain professional fees, $14 million of charges related to the settlement of bankruptcy claims, charges for a multiemployer pension plan withdrawal liability and letter of credit fees. For 2020, also included charges of $18 million for losses associated with certain vehicle damages which were recorded in the second quarter, partially offset by a $20 million gain on the sale of non-vehicle capital assets, which was recorded in the first quarter.

(11)Represents the change in fair value during the reporting period for the Company's outstanding Public Warrants, as disclosed in Note 12, "Fair Value Measurements," in Part II, Item 8 of this 2021 Annual Report.

(b)    Transaction Days represent the total number of 24-hour periods, with any partial period counted as one Transaction Day, that vehicles were on rent (the period between when a rental contract is opened and closed) in a given period. Thus, it is possible for a vehicle to attain more than one Transaction Day in a 24-hour period.

(c)    Average Vehicles are determined using a simple average of the number of vehicles at the beginning and end of a given period. Among other things, Average Vehicles is used to calculate our Vehicle Utilization which represents the portion of our vehicles that are being utilized to generate revenue. Vehicle Utilization is calculated by dividing total Transaction Days by Available Car Days. The calculation of Vehicle Utilization is shown in the table below:

[[GREPCENT_TABLE]]
[["","Americas RAC","","International RAC"],["","Years Ended December 31,"],["","2021","","2020","","2019","","2021","","2020","","2019"],["Transaction Days (in thousands)","100,085","","","85,016","","","161,278","","","20,488","","","22,283","","","44,720"],["Average Vehicles (in whole units)","355,647","","","437,547","","","555,220","","","77,643","","","102,793","","","160,382"],["Number of days in period (in whole units)","365","","","366","","","365","","","365","","","366","","","365"],["Available Car Days (in thousands)","129,944","","","160,142","","","202,655","","","28,366","","","37,622","","","58,539"],["Vehicle Utilization","77","%","","53","%","","80","%","","72","%","","59","%","","76","%"]]
[[/GREPCENT_TABLE]]

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

THE HERTZ CORPORATION AND SUBSIDIARIES

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

(d)    Total RPD is calculated as revenues with all periods adjusted to eliminate the effect of fluctuations in foreign currency exchange rates ("Total Revenues - adjusted for foreign currency"), divided by the total number of Transaction Days. As discussed above, effective in the third quarter of 2021, we revised our calculation of Total RPD to include ancillary retail vehicle sales revenues, and accordingly, prior periods have been restated to conform with the revised definition. Our management believes eliminating the effect of fluctuations in foreign currency exchange rates is useful in analyzing underlying trends. The calculation of Total RPD is shown below:

[[GREPCENT_TABLE]]
[["","Americas RAC","","International RAC"],["","Years Ended December 31,"],["($ in millions, except as noted)","2021","","2020","","2019","","2021","","2020","","2019"],["Revenues","$","6,215","","","$","3,756","","","$","7,208","","","$","985","","","$","872","","","$","1,899"],["Foreign currency adjustment(1)","(3)","","","3","","","8","","","25","","","66","","","166"],["Total Revenues-adjusted for foreign currency","$","6,212","","","$","3,759","","","$","7,216","","","$","1,010","","","$","938","","","$","2,065"],["Transaction Days (in thousands)","100,085","","","85,016","","","161,278","","","20,488","","","22,283","","","44,720"],["Total RPD (in dollars)","$","62.07","","","$","44.22","","","$","44.75","","","$","49.30","","","$","42.12","","","$","46.18"]]
[[/GREPCENT_TABLE]]

(1)Based on December 31, 2020 foreign currency exchange rates for all periods presented.

(e)    Total RPU Per Month is calculated as Total Revenues - adjusted for foreign currency divided by the Average Vehicles in each period and then divided by the number of months in the period reported. As discussed above, effective in the third quarter of 2021, we revised our calculation of Total RPU to include ancillary retail vehicle sales revenues, and accordingly, prior periods have been restated to conform with the revised definition. The calculation of Total RPU Per Month is shown below:

[[GREPCENT_TABLE]]
[["","Americas RAC","","International RAC"],["","Years Ended December 31,"],["($ in millions, except as noted)","2021","","2020","","2019","","2021","","2020","","2019"],["Total Revenues-adjusted for foreign currency","$","6,212","","","$","3,759","","","$","7,216","","","$","1,010","","","$","938","","","$","2,065"],["Average Vehicles (in whole units)","355,647","","","437,547","","","555,220","","","77,643","","","102,793","","","160,382"],["Total revenue per unit (in whole dollars)","$","17,467","","","$","8,591","","","$","12,997","","","$","13,009","","","$","9,130","","","$","12,877"],["Number of months in period (in whole units)","12","","","12","","","12","","","12","","","12","","","12"],["Total RPU Per Month (in whole dollars)","$","1,456","","","$","716","","","$","1,083","","","$","1,084","","","$","761","","","$","1,073"]]
[[/GREPCENT_TABLE]]

(f)    Depreciation Per Unit Per Month represents the amount of average depreciation expense and lease charges, per vehicle per month and is calculated as depreciation of revenue earning vehicles and lease charges, with all periods adjusted to eliminate the effect of fluctuations in foreign currency exchange rates, divided by the Average Vehicles in each period and then dividing by the number of months in the period reported. Our management believes eliminating the effect of fluctuations in foreign currency exchange rates is useful in analyzing underlying trends. The calculation of Depreciation Per Unit Per Month is shown below:

[[GREPCENT_TABLE]]
[["","Americas RAC","","International RAC"],["","Years Ended December 31,"],["($ in millions, except as noted)","2021","","2020","","2019","","2021","","2020","","2019"],["Depreciation of revenue earning vehicles and lease charges","$","343","","","$","1,352","","","$","1,706","","","$","154","","","$","243","","","$","388"],["Foreign currency adjustment(1)","\u2014","","","1","","","1","","","5","","","21","","","34"],["Adjusted depreciation of revenue earning vehicles and lease charges","$","343","","","$","1,353","","","$","1,707","","","$","159","","","$","264","","","$","422"],["Average Vehicles (in whole units)","355,647","","","437,547","","","555,220","","","77,643","","","102,793","","","160,382"],["Adjusted depreciation of revenue earning vehicles and lease charges divided by Average Vehicles (in whole dollars)","$","964","","","$","3,093","","","$","3,075","","","$","2,051","","","$","2,567","","","$","2,631"],["Number of months in period (in whole units)","12","","12","","12","","12","","12","","12"],["Depreciation Per Unit Per Month (in whole dollars)","$","80","","","$","258","","","$","256","","","$","171","","","$","214","","","$","219"]]
[[/GREPCENT_TABLE]]

(1)Based on December 31, 2020 foreign currency exchange rates for all periods presented.

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

THE HERTZ CORPORATION AND SUBSIDIARIES

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

LIQUIDITY AND CAPITAL RESOURCES

Our U.S. and international operations are funded by cash provided by operating activities and by extensive financing arrangements, both debt and equity, maintained by us in the U.S. and internationally.

Cash and Cash Equivalents

As of December 31, 2021, we had $2.3 billion of unrestricted cash and unrestricted cash equivalents and $393 million of restricted cash and restricted cash equivalents. As of December 31, 2021, $489 million of unrestricted cash and unrestricted cash equivalents and $78 million of restricted cash and restricted cash equivalents were held by our subsidiaries outside of the U.S. Beginning in the quarterly period ending March 31, 2020, we no longer assert permanent reinvestment with respect to our non-U.S. earnings, and if not in the form of loan repayments or subject to favorable tax treaties, repatriation of some of these funds under current regulatory and tax law for use in domestic operations could expose us to additional cash taxes.

Voluntary Petitions for Bankruptcy and Emergence

On May 22, 2020, the Debtors filed Petitions under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court. The Chapter 11 Cases were jointly administered for procedural purposes only under the caption In re The Hertz Corporation, et al., Case No. 20-11218 (MFW). Additional information about the Chapter 11 Cases, including access to documents filed with the Bankruptcy Court, is available online at https://restructuring.primeclerk.com/hertz, a website administered by Prime Clerk, a third-party bankruptcy claims and noticing agent. The information on this website is not incorporated by reference and does not constitute part of this 2021 Annual Report.

As disclosed in Note 1, "Background," in Part II, Item 8 of this 2021 Annual Report, on May 14, 2021, the Debtors filed the Plan of Reorganization, and the solicitation version of the Supplement to the Disclosure Statement which was approved by the Bankruptcy Court on May 14, 2021. On June 10, 2021, the Plan of Reorganization was confirmed by the Bankruptcy Court. On June 30, 2021, the Effective Date, the Plan of Reorganization became effective in accordance with its terms and the Debtors emerged from Chapter 11.

On the Effective Date, as a result of the Plan of Reorganization, we received cash proceeds of $7.5 billion comprised of:

•$2.8 billion from the purchase of reorganized Hertz Global common stock by the Plan Sponsors and certain other investment funds and entities;

•$1.6 billion from the purchase of reorganized Hertz Global common stock pursuant to the 2021 Rights Offering;

•$1.5 billion (less a 2% upfront discount and stock issuance fees) from the purchase of Series A Preferred Stock of reorganized Hertz Global by Apollo; and

•$1.5 billion in proceeds from our Term Loans.

Such cash proceeds were used, in part, to provide payments to our stakeholders pursuant to the terms of the Plan of Reorganization as follows:

•the holders of administrative, priority and secured claims received payment in cash in full;

•the holders of the approximately $1.0 billion of obligations owed with respect to the DIP Credit Agreement received payment in cash in full;

•the holders of the Senior Term Loan, Senior RCF and Letter of Credit Facility received payment in cash in full with respect to all non-contingent liquidated claims;

•the holders of claims with respect to the Senior Second Priority Secured Notes received payment in cash in full;

•the holders of the €725 million European Vehicle Notes received payment in cash in full;

•the holders of the €257 million Second HIL Credit Agreement received payment in cash in full;

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

THE HERTZ CORPORATION AND SUBSIDIARIES

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

•the holders of claims with respect to the Senior Notes and the holders of claims with respect to the Alternative Letter of Credit Facility received payment in cash with respect to (i) all remaining principal, (ii) accrued and unpaid interest as of the Petition Date at the contract rate, and (iii) accrued and unpaid interest from the Petition Date to the Effective Date at the federal judgment rate (at such rate in effect as of the Petition Date), subject to the rights of creditors (if any) to bring a claim for the payment of additional interest and/or premiums; and

•the holders of general unsecured claims will receive payment in cash in full plus interest at the federal judgment rate (at such rate in effect as of the Petition Date), subject to the rights of creditors to bring a claim for payment of additional interest.

On the Effective Date, reorganized Hertz entered into the First Lien Credit Agreement that provides for an aggregate amount of $2.8 billion comprised of the First Lien RCF in an aggregate committed amount of $1.3 billion plus Term Loans in an aggregate principal amount of $1.5 billion. Additionally, reorganized Hertz entered into a new HVF III ABS facility in an aggregate of $6.8 billion comprised of variable funding notes with a principal amount up to $2.8 billion and medium term notes in an aggregate principal amount of $4.0 billion.

On the Effective Date, substantially all then-existing non-vehicle debt and all then-existing ABS facilities under the HVF II U.S. ABS Program were repaid in full and terminated in accordance with the Plan of Reorganization. See Note 6, "Debt," to the Notes to our consolidated financial statements under the caption Item 8, "Financial Statements and Supplementary Data” included in this 2021 Annual Report for additional information.

Public Warrants

On the Effective Date, in accordance with the Plan of Reorganization, we issued 89,049,029 Public Warrants. Between the Effective Date and December 31, 2021, 6,040,280 Public Warrants were exercised, of which 428,102 were cashless exercises and 5,612,178 were exercised for $13.80 per share, resulting in cash proceeds to us of $77 million. The outstanding warrants are exercisable through June 30, 2051. As of December 31, 2021, the exercise price remains $13.80.

See the subsequent sections under "Equity Financing" and "Debt Financing" for additional discussions about liquidity events that occurred on the Effective Date and thereafter.

Cash Flows - Hertz

As of December 31, 2021 and 2020, Hertz had unrestricted cash and unrestricted cash equivalents of $2.3 billion and $1.1 billion, respectively, and restricted cash and restricted cash equivalents of $393 million and $383 million, respectively. The following table summarizes the net change in cash, cash equivalents, restricted cash and restricted cash equivalents for the periods shown:

[[GREPCENT_TABLE]]
[["","Years Ended December 31,","","2021 vs. 2020","","2020 vs. 2019"],["(In millions)","2021","","2020","","2019","","$ Change","","$ Change"],["Cash provided by (used in):"],["Operating activities","$","1,806","","","$","956","","","$","2,907","","","$","850","","","$","(1,951)"],["Investing activities","(3,544)","","","4,591","","","(4,425)","","","(8,135)","","","9,016"],["Financing activities","2,872","","","(5,403)","","","1,467","","","8,275","","","(6,870)"],["Effect of exchange rate changes","(34)","","","46","","","1","","","(80)","","","45"],["Net change in cash, cash equivalents, restricted cash and restricted cash equivalents","$","1,100","","","$","190","","","$","(50)","","","$","910","","","$","240"]]
[[/GREPCENT_TABLE]]

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

THE HERTZ CORPORATION AND SUBSIDIARIES

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Year ended December 31, 2021 compared with year ended December 31, 2020

In 2021, cash flows from operating activities increased by $850 million year over year due primarily to the $1.5 billion change in net income, as adjusted for non-cash and non-operating items, partially offset by the associated reduction of $607 million in working capital requirements. Cash flows from working capital accounts decreased due primarily to $485 million cash paid for reorganization items in 2021 compared to $102 million paid in 2020, and the payment of claims in the second half of 2021 that had been previously deferred and subject to compromise while in Chapter 11.

Our primary investing activities relate to the acquisition and disposal of revenue earning vehicles. During 2021, there was an $8.1 billion decrease in the cash provided by investing activities compared to 2020 due primarily to a $7.3 billion decrease in disposal proceeds in 2021 where disposals in 2020 increased due to the Interim Lease Order and the impact of COVID-19 on travel demand and a $1.6 billion increase in purchased vehicles due to increasing travel demand, primarily in our Americas RAC segment. The net decrease in cash provided was partially offset by $871 million net proceeds from the Donlen Sale.

Net financing cash inflows were $2.9 billion in 2021 compared to cash outflows of $5.4 billion in 2020. In 2021, cash inflows of $5.6 billion were due to contributions from Hertz Holdings from net proceeds received from the issuance of reorganized Hertz Global equity which were partially offset by $2.5 billion of cash dividends paid to Hertz Global to fund the Tender Offer and share repurchases. In 2020, cash outflows of $10.8 billion were due to the repayment of vehicle debt which were partially offset by reduced borrowings of $4.5 billion primarily resulting from the Chapter 11 Cases.

Year ended December 31, 2020 compared with year ended December 31, 2019

In 2020, cash flows from operating activities decreased by $2.0 billion year over year due primarily to the $1.8 billion change in net loss driven by the impact of COVID-19 discussed above, partially offset by the associated reduction of $331 million in working capital requirements.

Our primary investing activities relate to the acquisition and disposal of revenue earning vehicles. However, Hertz disposed of approximately 198,000 lease vehicles between June 1, 2020 and December 31, 2020, pursuant to or otherwise in satisfaction of our vehicle disposition obligations under an order from the Bankruptcy Court (the "Interim Lease Order"). There was a $9.0 billion decrease in the use of cash for investing activities year over year. Cash outflows for revenue earning vehicles decreased $8.2 billion as we reduced our commitments to purchase vehicles, primarily in our Americas RAC segment, due to the impact from COVID-19 and a $612 million increase of cash proceeds from disposals of revenue earning vehicles as we accelerated the disposition of vehicles due to the Interim Lease Order.

Net financing cash outflows were $5.4 billion in 2020 compared to cash inflows of $1.5 billion in 2019 primarily due to a $8.5 billion reduction in vehicle debt borrowings as we reduced our commitments to purchase vehicles, partially offset by a $1.7 billion reduction in non-vehicle repayments, net of new borrowings, primarily resulting from the Chapter 11 Cases.

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

THE HERTZ CORPORATION AND SUBSIDIARIES

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Cash Flows - Hertz Global

As of December 31, 2021 and 2020, Hertz Global had unrestricted cash and unrestricted cash equivalents of $2.3 billion and $1.1 billion, respectively, and restricted cash and restricted cash equivalents of $393 million and $411 million, respectively. The following table summarizes the net change in cash, cash equivalents, restricted cash and restricted cash equivalents for Hertz Global for the periods shown:

[[GREPCENT_TABLE]]
[["","Years Ended December 31,","","2021 vs. 2020","","2020 vs. 2019"],["(In millions)","2021","","2020","","2019","","$ Change","","$ Change"],["Cash provided by (used in):"],["Operating activities","$","1,806","","","$","953","","","$","2,900","","","$","853","","","$","(1,947)"],["Investing activities","(3,544)","","","4,591","","","(4,425)","","","(8,135)","","","9,016"],["Financing activities","2,845","","","(5,372)","","","1,474","","","8,217","","","(6,846)"],["Effect of exchange rate changes","(34)","","","46","","","1","","","(80)","","","45"],["Net change in cash, cash equivalents, restricted cash and restricted cash equivalents","$","1,073","","","$","218","","","$","(50)","","","$","855","","","$","268"]]
[[/GREPCENT_TABLE]]

Fluctuations in operating, investing and financing cash flows from period to period were due to the same factors as those disclosed for Hertz above, with the exception of any cash inflows or outflows related to proceeds or disbursements from the issuance or repurchase of stock as disclosed in Note 16, "Equity and Mezzanine Equity – Hertz Global," to the Notes to our consolidated financial statements under the caption Item 8, "Financial Statements and Supplementary Data” included in this 2021 Annual Report, the issuance or exercise of Public Warrants as disclosed in Note 18, "Public Warrants - Hertz Global," to the Notes to our consolidated financial statements under the caption Item 8, "Financial Statements and Supplementary Data” included in this 2021 Annual Report and the master loan agreement between Hertz and Hertz Global.

Equity Financing

NYSE Delisting and Nasdaq Listing

As a result of the filing of the Chapter 11 Cases, the NYSE suspended trading of Hertz Global common stock after the market close on October 29, 2020. On October 30, 2020, Hertz Global common stock began trading exclusively on the over-the-counter under the symbol HTZGQ, and was delisted from the NYSE on November 10, 2020. Upon deregistration of Hertz Global common stock under Section 12(b) of the Exchange Act, Hertz Global common stock remained registered under Section 12(g) of the Exchange Act. As discussed above, on the Effective Date, all of the Hertz Global common stock then existing was cancelled and Hertz Global issued 471,102,462 shares of its new common stock pursuant to the Plan of Reorganization.

On November 8, 2021, reorganized Hertz Global successfully completed its Nasdaq listing, in which shares of its new common stock were registered with the SEC for a public offering by certain selling stockholders. On November 9, 2021, reorganized Hertz Global's common stock and Public Warrants began trading on Nasdaq under the trading symbols "HTZ" and "HTZWW," respectively.

In conjunction with the Nasdaq listing, certain selling stockholders offered and sold 44,520,000 shares of Hertz Global's common stock to the public. Of these shares, Hertz Global repurchased from the underwriters 10,344,828 shares for an aggregate purchase price of $300 million which is included in treasury stock in the accompanying Hertz Global consolidated balance sheet as of December 31, 2021 under the caption Item 8, "Financial Statements and Supplementary Data” included in this 2021 Annual Report.

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

THE HERTZ CORPORATION AND SUBSIDIARIES

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Share Repurchase Program for Common Stock

In November 2021, Hertz Global's Board of Directors approved a share repurchase program that authorizes the repurchase of up to $2.0 billion worth of shares of Hertz Global's outstanding common stock. Any repurchases will be made at the discretion of management through a variety of methods, such as open-market transactions (including pre-set trading plans pursuant to Rule 10b5-1 of the Exchange Act), privately negotiated transactions, accelerated share repurchases, and other transactions in accordance with applicable securities laws. The share repurchase authorization has no initial time limit, does not obligate us to acquire any particular amount of common stock and can be discontinued at any time. There can be no assurance as to the timing or number of shares of any repurchases.

Between the inception of the share repurchase program and December 31, 2021, a total of 17,106,026 shares of Hertz Global's common stock were repurchased at an average share price of $23.83, resulting in an aggregate purchase price of $408 million which is included in treasury stock in the accompanying Hertz Global consolidated balance sheet as of December 31, 2021 under the caption Item 8, "Financial Statements and Supplementary Data” included in this 2021 Annual Report.

Between January 1, 2022 and February 17, 2022, a total of 20,589,620 shares of Hertz Global's common stock were repurchased at an average share price of $20.95 resulting in an aggregate purchase price of $431 million.

Tender Offer for Repurchase of Series A Preferred Stock

In November 2021, Hertz Global commenced the Tender Offer to repurchase all 1,500,000 outstanding shares of its Series A Preferred Stock at a per-share price of $1,250. In December 2021, the Tender Offer expired and all 1,500,000 shares of the Series A Preferred Stock were repurchased at $1,250 per share for aggregate payments by Hertz Global of $1.9 billion, including approximately $7 million in certain fees. Hertz Global funded the share repurchases in the Tender Offer with available cash, including proceeds from Hertz's offering of the Senior Notes Due 2026 and Senior Notes Due 2029 which were contributed to Hertz Global through a dividend distribution from Hertz. The repurchased shares of Series A Preferred Stock were simultaneously retired. In connection with the Tender Offer, any unpaid dividends that the Preferred Stockholders were entitled to pursuant to the original Preferred Stock terms were forfeited upon acceptance of the Tender Offer.

Refer to Note 16, "Equity and Mezzanine Equity – Hertz Global," and Note 18, "Public Warrants - Hertz Global," to the Notes to our consolidated financial statements included in this 2021 Annual Report under the caption Item 8, "Financial Statements and Supplementary Data" for information on our equity financing arrangements.

Debt Financing

Refer to Note 6, "Debt," to the Notes to our consolidated financial statements included in this 2021 Annual Report under the caption Item 8, "Financial Statements and Supplementary Data" for information on our outstanding debt obligations and our borrowing capacity and availability under our revolving credit facilities as of December 31, 2021.

Cash paid for interest during 2021 was $198 million for interest on non-vehicle debt and $257 million for interest on vehicle debt. Cash paid for interest during 2020 was $109 million for interest on non-vehicle debt and $335 million for interest on vehicle debt. The $89 million increase in non-vehicle debt interest is primarily due to suspending interest payments on certain debt due to the filing of the Chapter 11 Cases.

A substantial portion of our liquidity requirements arise from servicing our indebtedness, funding our operations, including purchases of revenue earning vehicles, and funding non-vehicle capital expenditures. For a discussion of the risks associated with our high leverage, see Item 1A, "Risk Factors" in this 2021 Annual Report.

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

THE HERTZ CORPORATION AND SUBSIDIARIES

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Our available corporate liquidity, which excludes unused commitments under our vehicle debt, was as follows:

[[GREPCENT_TABLE]]
[["(In millions)","As of December 31, 2021","","As of December 31, 2020"],["Cash and cash equivalents","$","2,257","","","$","1,096"],["Availability under the First Lien RCF","925","","","\u2014"],["Corporate liquidity","$","3,182","","","$","1,096"]]
[[/GREPCENT_TABLE]]

We believe that unrestricted cash and unrestricted cash equivalents generated by our operations and cash received on the disposal of vehicles, together with amounts available under various liquidity facilities and refinancing options available to us in the capital markets, will be sufficient to fund our operating activities and obligations contained in the subsequent table under the heading Contractual Obligations in this Item 7.

Significant financing activities during the year ended December 31, 2021 for our non-vehicle and vehicle debt were as follows:

Non-vehicle Debt

In accordance with the Plan of Reorganization, substantially all then-existing non-vehicle debt was repaid in full and cancelled on the Effective Date. On and after the Effective Date, we entered into new credit agreements, as discussed below. As of December 31, 2021, none of our non-vehicle debt is set to mature prior to 2026.

First Lien Credit Agreement

Pursuant to the Plan of Reorganization, on the Effective Date Hertz entered into the First Lien Credit Agreement that provides for the following:

•a term loan "B" facility (the "Term B Loan") for term loans in an aggregate principal amount of $1.3 billion;

•a term loan "C" facility (the "Term C Loan") for term loans that are available to cash collateralize letters of credit in an aggregate principal amount of $245 million; and

•the First Lien RCF for revolving loans and letters of credit up to an aggregate principal amount of $1.3 billion.

Proceeds received under the First Lien Credit Agreement were used to (i) repay certain of our existing indebtedness; (ii) pay fees, expenses and costs associated with the consummation of the Plan of Reorganization; (iii) fund distributions required in connection with the Plan of Reorganization; (iv) provide funds for working capital and general corporate purposes; and (v) backstop letters of credit issued under the Term C Loan or replace existing letters of credit.

2021 Senior Notes

In November 2021, Hertz issued $1.5 billion of unsecured senior notes consisting of $500 million aggregate principal amount of 4.625% senior notes due December 2026 (the "Senior Notes Due 2026") and $1.0 billion aggregate principal amount of 5.000% senior notes due December 2029 (the "Senior Notes Due 2029"). The Senior Notes Due 2026 and the Senior Notes Due 2029 are our senior unsecured obligations and are guaranteed by each of Hertz’s direct and indirect U.S. subsidiaries that are guarantors under the First Lien Credit Agreement. Proceeds from the issuance of the Senior Notes Due 2026 and the Senior Notes Due 2029 were contributed to Hertz Global through a dividend distribution from Hertz to repurchase and retire all outstanding shares of Hertz Global's Series A Preferred Stock. See Note 6, "Debt," and Note 16, "Equity and Mezzanine Equity – Hertz Global," to the Notes to our consolidated financial statements included in this 2021 Annual Report under the caption Item 8, "Financial Statements and Supplementary Data."

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

THE HERTZ CORPORATION AND SUBSIDIARIES

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Letters of Credit

On the Effective Date, in accordance with the Plan of Reorganization, drawn letters of credit under the Senior RCF, the Letter of Credit Facility and the Alternative Letter of Credit Facility were paid in full and terminated. To the extent any of the related issued letters of credit remained outstanding as of the Effective Date, certain of these letters of credit were deemed to be issued under the First Lien RCF. For the remainder, we provide cash collateral to backstop these obligations.

As of December 31, 2021, there were outstanding standby letters of credit totaling $591 million comprised primarily of $245 million issued under the Term C Loan and $330 million were issued under the First Lien RCF. As of December 31, 2021, there is no remaining capacity to issue letters of credit under the Term C Loan. Such letters of credit have been issued primarily to support our insurance programs, vehicle rental concessions and leaseholds as well as to provide credit enhancement for our asset-backed securitization facilities. As of December 31, 2021, none of the issued letters of credit have been drawn upon.

Vehicle Debt

We organize our discussion of significant vehicle debt financing facilities below by reportable segment.

Americas RAC

On the Effective Date, in accordance with the Plan of Reorganization, the then-existing HVF II notes and HVIF notes were paid in full and terminated. Repayment proceeds originated from the new HVF III ABS Facility, as discussed below.

HVF III ABS Facility

On the Effective Date, Hertz Vehicle Financing III LLC ("HVF III"), a wholly-owned, special-purpose and bankruptcy remote subsidiary of Hertz, established a securitization platform, the HVF III ABS facility program, to facilitate the financing activities relating to vehicles used in our U.S. daily vehicle rental operations. This facility provided an aggregate principal amount of $6.8 billion comprised of variable funding notes with a principal amount up to $2.8 billion and medium term notes in an aggregate principal amount of $4.0 billion, as follows:

•HVF III Series 2021-A Notes with a maximum principal amount of up to $2.8 billion and a maturity date of June 2023;

•HVF III Series 2021-1 Notes with an aggregate principal amount of $2.0 billion; and

•HVF III Series 2021-2 Notes with an aggregate principal amount of $2.0 billion.

On the Effective Date, proceeds received upon issuance from the HVF III Series 2021 Notes were used to fund the purchases of certain vehicles and for the repayment in full of (i) approximately $3.5 billion in aggregate outstanding principal of notes issued by HVF II and (ii) approximately $2.2 billion in aggregate outstanding principal of notes issued by HVIF. The manufacturer rebates associated with HVF and HVIF were transferred to HVF III as part of the purchase agreements with HVF and HVIF. Any remaining funds are expected to be used for the future purchase or refinancing of vehicles.

In December 2021, Hertz issued the Series 2021-A Class B Notes with a maximum principal amount of up to $188 million.

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In January 2022, the Series 2022-1 Fixed Rate Rental Car Asset Backed Notes (the "Series 2022-1 Notes") and the Series 2022-2 Fixed Rate Rental Car Asset Backed Notes (the "Series 2022-2 Notes") were issued in an aggregate principal amount of $1.5 billion, of which $195 million were retained, as follows:

•HVF III Series 2022-1 Notes were issued in an aggregate principal amount of $750 million. An affiliate of HVF III purchased the Class D Notes, and as a result approximately $98 million of the aggregate principal amount is eliminated in consolidation.

•HVF III Series 2022-2 Notes were issued in an aggregate principal amount of $750 million. An affiliate of HVF III purchased the Class D Notes, and as a result approximately $98 million of the aggregate principal amount is eliminated in consolidation.

Proceeds from the issuance of the Series 2022-1 Notes and the Series 2022-2 Notes will be used to repay amounts outstanding on the Series 2021-A Notes. Any remaining funds are expected to be used for the future purchase or refinancing of vehicles.

Approximately $190 million of the outstanding vehicle debt in our Americas RAC segment is scheduled to mature during the twelve months following the issuance of this 2021 Annual Report.

International RAC

In December 2021, the European ABS was amended to increase the aggregate maximum borrowings to €750 million and to extend the maturity to October 2023.

In January 2022, the Australian Securitization was amended to increase the aggregate maximum borrowings to AUD$250 million and to extend the maturity to April 2024.

Covenants

The First Lien Credit Agreement requires us to comply with the following financial covenant subsequent to the expiration of the Relief Period which expired effective as of September 30, 2021: a First Lien Ratio of less than or equal to 3.00 to 1.00 in the first and last quarters of the calendar year and 3.50 to 1.00 in the second and third quarters of the calendar year. The financial covenant disclosed above was effective beginning in the third quarter of 2021. As of December 31, 2021, we were in compliance with the First Lien Ratio.

In addition to financial covenants, the First Lien Credit Agreement contains customary affirmative covenants including, among other things, the delivery of quarterly and annual financial statements and compliance certificates, conduct of business, maintenance of property and insurance, compliance with environmental laws and the granting of security interest for the benefit of the secured parties under that agreement on after-acquired real property, fixtures and future subsidiaries. The First Lien Credit Agreement also contains customary negative covenants, including, among other things, the incurrence of liens, indebtedness, asset dispositions and restricted payments. As of December 31, 2021, we were in compliance with all covenants in the First Lien Credit Agreement.

Vehicle Financing Risks

Our program vehicles are subject to repurchase by vehicle manufacturers under contractual repurchase or guaranteed depreciation programs. Under these programs, vehicle manufacturers agree to repurchase vehicles at a specified price or guarantee the depreciation rate on the vehicles during a specified time period, typically subject to certain vehicle condition and mileage requirements. We use values derived from this specified price or guaranteed depreciation rate to calculate financing capacity under certain asset-backed and asset-based financing arrangements.

In the event of a bankruptcy of a vehicle manufacturer, our liquidity could be impacted by several factors including reductions in fleet residual values and the risk that we would be unable to collect outstanding receivables due to us from such bankrupt manufacturer. In addition, the program vehicles manufactured by any such company would

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

need to be removed from our financing facilities or re-designated as non-program vehicles, which would require us to furnish additional credit enhancement associated with these program vehicles.

We rely significantly on asset-backed and asset-based financing arrangements to purchase vehicles for our U.S. and international vehicle rental fleets. For further information concerning our asset-backed financing programs and our indebtedness, see Note 6, "Debt," to the Notes to our consolidated financial statements included in this 2021 Annual Report under the caption Item 8, "Financial Statements and Supplementary Data." For a discussion of the risks associated with our reliance on asset-backed and asset-based financing and the significant amount of indebtedness, see Item 1A, "Risk Factors" in this 2021 Annual Report.

Capital Expenditures

Revenue Earning Vehicles Expenditures and Disposals

The table below sets forth our revenue earning vehicles expenditures and related disposal proceeds for the annual periods shown:

[[GREPCENT_TABLE]]
[["Cash inflow (cash outflow)","Revenue Earning Vehicles"],["(In millions)","Capital Expenditures","","Disposal Proceeds","","Net Capital Proceeds (Expenditures)"],["2021","$","(7,154)","","","$","2,818","","","$","(4,336)"],["2020","(5,542)","","","10,098","","","4,556"],["2019","(13,714)","","","9,486","","","(4,228)"]]
[[/GREPCENT_TABLE]]

The table below sets forth expenditures for revenue earning vehicles, net of proceeds from disposal, by segment:

[[GREPCENT_TABLE]]
[["Cash inflow (cash outflow)","Years Ended December 31,","","2021 vs. 2020","","2020 vs. 2019"],["($ in millions)","2021","","2020","","2019","","$ Change","","% Change","","$ Change","","% Change"],["Americas RAC segment","$","(3,763)","","","$","3,903","","","$","(3,075)","","","$","(7,666)","","","NM","","$","6,978","","","NM"],["International RAC segment","(489)","","","929","","","(466)","","","(1,418)","","","NM","","1,395","","","NM"],["All other operations","(84)","","","(276)","","","(687)","","","192","","","(70)","","","411","","","(60)"],["Total","$","(4,336)","","","$","4,556","","","$","(4,228)","","","$","(8,892)","","","NM","","$","8,784","","","NM"]]
[[/GREPCENT_TABLE]]

NM - Not meaningful

Year ended December 31, 2021 compared with year ended December 31, 2020

In 2021, revenue earning vehicle cash flows decreased by $8.9 billion, primarily in our Americas RAC segment, as a result of reduced disposal proceeds in 2021 where disposals in 2020 increased due to the Interim Lease Order and the impact of COVID-19 on travel demand, partially offset by a slight increase in vehicle purchases due to increasing demand resulting from government-imposed travel restrictions that began to lift in 2021 due to increased access to COVID-19 vaccines.

Year ended December 31, 2020 compared with year ended December 31, 2019

In 2020, revenue earning vehicle cash flows increased by $8.8 billion, primarily in our Americas RAC segment, as we reduced our commitments to purchase vehicles due to the impact from COVID-19, partially offset by an increase of cash proceeds from disposals of revenue earning vehicles as we accelerated the disposition of vehicles due to the Interim Lease Order and the impact of COVID-19 on travel demand.

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Non-Vehicle Capital Asset Expenditures and Disposals

The table below sets forth our non-vehicle capital asset expenditures, and related disposal proceeds from non-vehicle capital assets disposed of or to be disposed of for the annual periods shown:

[[GREPCENT_TABLE]]
[["Cash inflow (cash outflow)","Non-Vehicle Capital Assets"],["(In millions)","Capital Expenditures","","Disposal Proceeds","","Net Capital Expenditures"],["2021","$","(71)","","","$","16","","","$","(55)"],["2020","(98)","","","60","","","(38)"],["2019","(224)","","","27","","","(197)"]]
[[/GREPCENT_TABLE]]

The table below sets forth non-vehicle capital asset expenditures, net of disposal proceeds, by segment:

[[GREPCENT_TABLE]]
[["Cash inflow (cash outflow)","Years Ended December 31,","","2021 vs. 2020","","2020 vs. 2019"],["($ in millions)","2021","","2020","","2019","","$ Change","","% Change","","$ Change","","% Change"],["Americas RAC segment","$","(35)","","","$","3","","","$","(72)","","","$","(38)","","","NM","","$","75","","","NM"],["International RAC segment","(8)","","","(4)","","","(12)","","","(4)","","","100","","","8","","","(67)"],["All other operations","(1)","","","(4)","","","(4)","","","3","","","(75)","","","\u2014","","","\u2014"],["Corporate","(11)","","","(33)","","","(109)","","","22","","","(67)","","","76","","","(70)"],["Total","$","(55)","","","$","(38)","","","$","(197)","","","$","(17)","","","45","","","$","159","","","(81)"]]
[[/GREPCENT_TABLE]]

NM - Not meaningful

Year ended December 31, 2021 compared with year ended December 31, 2020

In 2021, net expenditures for non-vehicle capital assets increased by $17 million, driven primarily by our Americas RAC segment, resulting from the restart of location refurbishment projects put on hold during the Chapter 11 Cases, partially offset by a reduction in information technology and finance transformation program costs in our corporate operations.

Year ended December 31, 2020 compared with year ended December 31, 2019

In 2020, net expenditures for non-vehicle capital assets decreased by $76 million in our corporate operations primarily due to a reduction in information technology and finance transformation program costs.

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

CONTRACTUAL OBLIGATIONS

The following table details our contractual cash obligations as of December 31, 2021:

[[GREPCENT_TABLE]]
[["","","","Payments Due by Period"],["(In millions)","Total","","2022","","2023 to 2024","","2025 to 2026","","After 2026"],["Vehicles:"],["Debt obligation","$","7,954","","","$","311","","","$","5,643","","","$","2,000","","","$","\u2014"],["Interest on debt(1)","459","","","165","","","209","","","85","","","\u2014"],["Non-Vehicle:"],["Debt obligation","3,055","","","20","","","35","","","526","","","2,474"],["Interest on debt(1)","1,007","","","157","","","296","","","296","","","258"],["Minimum fixed obligations for operating leases","2,536","","","390","","","616","","","377","","","1,153"],["Purchase obligations and other(2)","170","","","91","","","53","","","\u2014","","","26"],["Total","$","15,181","","","$","1,134","","","$","6,852","","","$","3,284","","","$","3,911"]]
[[/GREPCENT_TABLE]]

(1)    Amounts represent the estimated commitment fees and interest payments based on the principal amounts, minimum non-cancelable maturity dates and interest rates on the debt as of December 31, 2021. See Note 6, "Debt," to the Notes to our consolidated financial statements included in this 2021 Annual Report under the caption Item 8, "Financial Statements and Supplementary Data" for further details.

(2)    Represents agreements to purchase goods or services that are legally binding on us and that specify all significant terms, including fixed or minimum quantities; fixed, minimum or variable price provisions; and the approximate timing of the transaction, as well as liabilities for uncertain tax positions and other liabilities, and excludes any obligations to employees. Only the minimum non-cancelable portion of purchase agreements and related cancellation penalties are included as obligations. In the case of contracts that state minimum quantities of goods or services, amounts reflect only the stipulated minimums; all other contracts reflect estimated amounts. Purchase obligations include $26 million representing our tax liability for uncertain tax positions and related net accrued interest and penalties.

We have agreements with vehicle manufacturers to purchase vehicles over the next 12 months. We expect purchases under these agreements to be approximately $5.7 billion, which will be financed primarily through the issuance of vehicle debt. These purchases are subject to vehicle manufacturers satisfying their performance commitments under such agreements. Additionally, the table excludes pension and other postretirement benefit obligations as disclosed in Note 7, "Employee Retirement Benefits," to the Notes to our consolidated financial statements included in this 2021 Annual Report under the caption Item 8, "Financial Statements and Supplementary Data."

Indemnification Obligations

In the ordinary course of business, we execute contracts involving indemnification obligations customary in the relevant industry and indemnifications specific to a transaction such as the sale of a business. These indemnification obligations might include claims relating to the following: environmental matters; intellectual property rights; governmental regulations and employment-related matters; customer, supplier and other commercial contractual relationships and financial matters. Performance under these indemnification obligations would generally be triggered by a breach of terms of the contract or by a third-party claim. We regularly evaluate the probability of having to incur costs associated with these indemnification obligations and have accrued for expected losses that are probable and estimable.

Environmental

We have indemnified various parties for the costs associated with remediating numerous hazardous substance storage, recycling or disposal sites in many states and, in some instances, for natural resource damages. The amount of any such expenses or related natural resource damages for which we may be held responsible could be substantial. The probable expenses that we expect to incur for such matters have been accrued, and those expenses are reflected in our consolidated financial statements within accrued liabilities. Amounts accrued represent the estimated cost to study potential environmental issues at sites deemed to require investigation or clean-up activities, and the estimated cost to implement remediation actions, including on-going maintenance, as

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required. Initial cost estimates are based on historical experience at similar sites and are refined over time on the basis of in-depth studies of the sites. For many sites, the remediation costs and other damages for which we ultimately may be responsible cannot be reasonably estimated because of uncertainties with respect to factors such as our connection to the site, the materials there, the involvement of other potentially responsible parties, the application of laws and other standards or regulations, site conditions, and the nature and scope of investigations, studies, and remediation to be undertaken (including the technologies to be required and the extent, duration, and success of remediation).

EMPLOYEE RETIREMENT BENEFITS

Pension

We sponsor defined benefit pension plans worldwide. Pension obligations give rise to expenses that are dependent on assumptions discussed in Note 7, "Employee Retirement Benefits," to the Notes to our consolidated financial statements included in this 2021 Annual Report under the caption Item 8, "Financial Statements and Supplementary Data." Previously we sponsored the Hertz Corporation Benefit Equalization Plan and the Hertz Corporation Supplemental Executive Retirement Plans which were rejected by the Bankruptcy Court and terminated in connection with the Plan of Reorganization.

Our 2021 worldwide net periodic pension expense included in the accompanying consolidated statement of operations for the year ended December 31, 2021 is $7 million, which was comparable to 2020.

The funded status (i.e., the dollar amount by which the projected benefit obligations exceeded the market value of pension plan assets) of the Hertz Retirement Plan, as defined in Note 7, "Employee Retirement Benefits," to the Notes to our consolidated financial statements included in this 2021 Annual Report under the caption Item 8, "Financial Statements and Supplementary Data," improved in December 31, 2021 compared with December 31, 2020 primarily due to actuarial gains resulting from increased discount rates. We did not contribute to the Hertz Retirement Plan during 2021, and we do not anticipate contributing to the Hertz Retirement Plan during 2022. For the international plans, we anticipate contributing $2 million during 2022. The level of 2022 and future contributions will vary, and is dependent on a number of factors including investment returns, interest rate fluctuations, plan demographics, funding regulations and the results of the final actuarial valuation.

We participate in several "multiemployer" pension plans. We have accrued $20 million for benefit payments under our multiemployer pension plans which represents the net present value of the projected liabilities from withdrawal claims as of December 31, 2021. In the event that we withdraw from participation in one of these plans, then applicable law could require us to make an additional lump-sum contribution to the plan, payable in installments over a minimum of twenty years, which would be reflected as a liability on a discounted basis on our consolidated balance sheet. Our withdrawal liability for any multiemployer plan would depend on the extent of the plan's funding of vested benefits. Our multiemployer plans could have significant underfunded liabilities. Such underfunding may increase in the event other employers become insolvent or withdraw from the applicable plan or upon the inability or failure of withdrawing employers to pay their withdrawal liability. In addition, such underfunding may increase as a result of lower than expected returns on pension fund assets or other funding deficiencies. The occurrence of any of these events could have a material adverse effect on our consolidated financial position, results of operations or cash flows. For a discussion of the risks associated with our pension plans, see Item 1A, "Risk Factors” in this 2021 Annual Report.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of the consolidated financial statements requires management to make estimates and judgments that affect the reported amounts in our consolidated financial statements and accompanying notes.

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The following accounting policies involve a higher degree of judgment and complexity in their application, and therefore, represent the critical accounting policies used in the preparation of our consolidated financial statements. If different assumptions or conditions were to prevail, the results could be materially different from our reported results. For additional discussion of our critical accounting policies, as well as our significant accounting policies, see Note 2, "Significant Accounting Policies," to the Notes to our consolidated financial statements included in this 2021 Annual Report under the caption Item 8, "Financial Statements and Supplementary Data."

The continued uncertainty of the impact from COVID-19 could have a material impact to certain critical accounting estimates, and as a result, may have an adverse impact on our future operating results.

Revenue Earning Vehicles

Our principal assets are revenue earning vehicles, which represented approximately 47% of our total assets as of December 31, 2021. Revenue earning vehicles consist of vehicles utilized in our vehicle rental operations. For the year ended December 31, 2021, 11% of the vehicles purchased for our combined U.S. and International vehicle rental fleets were vehicles purchased under repurchase or guaranteed depreciation programs with vehicle manufacturers, or program vehicles.

Under our vehicle repurchase programs, the manufacturers agree to repurchase vehicles at a specified price or guarantee the depreciation rate on the vehicles during established repurchase periods, subject to, among other things, certain vehicle condition, mileage and holding period requirements. Vehicle repurchase programs guarantee on an aggregate basis the residual value of the vehicles covered by the programs upon sale according to certain parameters which include the holding period, mileage and condition of the vehicles. We record a provision for excess mileage and vehicle condition, as necessary, during the holding period. These repurchase and guaranteed depreciation programs limit our residual risk with respect to vehicles purchased under the programs and allow us to reduce the variability of depreciation expense for such vehicles, however, typically the acquisition cost is higher. Incentives received from the manufacturers for purchases of vehicles reduce the cost.

For all other vehicles, we use historical experience, industry residual value guidebooks and the monitoring of market conditions to set depreciation rates. Generally, when revenue earning vehicles are acquired outside of a vehicle repurchase program, (i.e., non-program vehicles) we estimate the period that we will hold the asset, primarily based on historical measures of the amount of rental activity (e.g., automobile mileage) and the targeted age of vehicles at the time of disposal. We also estimate the residual value of the applicable revenue earning vehicles at the expected time of disposal. The residual values for rental vehicles are affected by many factors, including make, model and options, age, physical condition, mileage, sale location, time of the year and channel of disposition (e.g., auction, dealer direct, retail). Depreciation is recorded over the estimated holding period. Depreciation rates are reviewed on a quarterly basis based on management's ongoing assessment of present and estimated future market conditions, their effect on residual values at the expected time of disposal and the estimated holding periods. Market conditions for used vehicle sales can also be affected by external factors such as the economy, natural disasters, fuel prices, new and used vehicle supply levels, and incentives offered by manufacturers of new vehicles. These key factors are considered when estimating future residual values. Depreciation rates are adjusted prospectively through the remaining expected holding period based on the estimated residual value. As a result of this ongoing assessment, we make periodic adjustments to depreciation rates of revenue earning vehicles in response to changing market conditions. Upon disposal of revenue earning vehicles, depreciation of revenue earning vehicles and lease charges in the accompanying statements of operations is adjusted for any difference between the net proceeds received and the remaining net book value and a corresponding gain or loss is recorded.

COVID-19 may continue to have a significant impact on the used-vehicle market, which may impact our current fleet and sales plans resulting in changes to the holding period of our vehicles as well as our ability to acquire and dispose of vehicles in the period originally anticipated. Changes in estimated residual values or holding periods could cause a material change in our estimates of non-program depreciation expense.

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Self-insured Liabilities

Self-insured liabilities on our consolidated balance sheets include public liability, property damage, general liability, liability insurance supplement, personal accident insurance, and workers compensation. These represent an estimate for both reported accident claims not yet paid, and claims incurred but not yet reported and are recorded on an undiscounted basis. Reserve requirements are based on rental volume and actuarial evaluations of historical accident claim experience and trends, as well as future projections of ultimate losses, expenses and administrative costs. The adequacy of the liability is regularly monitored based on evolving accident claim history and insurance related state legislation changes. If our estimates change or if actual results differ from these assumptions, the amount of the recorded liability is adjusted to reflect these results.

Recoverability of Goodwill and Indefinite-lived Intangible Assets

On an annual basis as of October 1, and at interim periods when circumstances require as a result of a triggering event as defined by Accounting Standards Codification 350 – Intangibles, Goodwill and Other ("ASC 350"), we test the recoverability of our goodwill and indefinite-lived intangible assets by performing an impairment analysis. An impairment is deemed to exist if the carrying value of goodwill or indefinite-lived intangible assets exceed their fair value as determined using level 3 inputs under the GAAP fair value hierarchy. The reviews of fair value involve judgment and estimates, including projected revenues, long-term growth rates, royalty rates and discount rates. We believe our valuation techniques and assumptions are reasonable for this purpose.

For goodwill, we determine the fair value using an income approach based on the discounted cash flows of each reporting unit. A reporting unit is an operating segment or a business one level below that operating segment (the component level) if discrete financial information is prepared and regularly reviewed by segment management. Components are aggregated into a single reporting unit when they have similar economic characteristics. We have two reporting units (operating segments): Americas Rental Car and International Rental Car. Key assumptions used in the discounted cash flow valuation model include discount rates, growth rates, cash flow projections, tax rates and terminal value rates. Discount rates are set by using the Weighted-Average Cost of Capital (“WACC”) methodology. The WACC used in the discounted cash flow model methodology is calculated based upon the fair value of our debt and stock price with a debt-to-equity ratio comparable to the vehicle rental car industry as well specific risk factors for each reporting unit. The discount rate utilized for each reporting unit is indicative of the return an investor would expect to receive for investing in such a business. Our cash flow projections represent management's most recent planning assumptions, which are based on a combination of industry outlooks, views on general economic conditions, our expected pricing plans and expected future savings. Terminal value rates are determined using a common methodology of capturing the present value of perpetual cash flow estimates beyond the last projected period assuming a constant WACC and long-term growth rates.

Our indefinite-lived intangible assets primarily consist of the Hertz and Dollar Thrifty tradenames. For tradenames, we determine the fair value using a relief-from-royalty income approach, which utilizes our revenue projections for each asset along with assumptions for royalty rates, tax rates and the WACC.

A significant decline in either projected revenues, projected cash flows or increased discount rates (the WACC) used to determine fair value could result in an impairment charge. Further deterioration in the global economic conditions in the travel industry and the Chip Shortage affecting new vehicle production, our cash flows and our ability to obtain future financing to maintain our fleet or the weighted average cost of capital assumptions may result in an impairment charge to earnings in future periods. We will continue to closely monitor actual results versus our expectations as well as any significant changes in market events or conditions, including the impact of COVID-19 on our business and the global travel industry, and the resulting impact to our assumptions about future estimated cash flows, and the weighted average cost of capital. If our expectations of the operating results, both in magnitude or timing, do not materialize, or if our weighted average cost of capital increases, we may be required to record goodwill and indefinite-lived intangible asset impairment charges, which could be material.

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Income Taxes

Our income tax expense or benefit, deferred tax assets and liabilities and liabilities for unrecognized tax benefits reflect management's best assessment of estimated current and future taxes to be paid. Deferred tax asset valuation allowances and our liabilities for unrecognized tax benefits require significant management judgment regarding applicable statutes and their related interpretation, the status of various income tax audits and our particular facts and circumstances.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Valuation allowances are estimated and recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. In evaluating our ability to recover our deferred tax assets within the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and results of operations. In projecting future taxable income, we consider historical results and incorporate assumptions about the amount of future state, federal and foreign pretax operating income adjusted for items that do not have tax consequences. Our assumptions regarding future taxable income are consistent with the plans and estimates we use to manage our underlying businesses. Subsequent changes to these estimates, enacted tax rates and changes to the global mix of operating results will result in changes to the tax rates used to calculate deferred taxes and any related valuation allowances. We record deferred tax assets for NOL carry forwards in various tax jurisdictions when applicable. Upon utilization of those carry forwards, the taxing authorities may examine the positions that led to the generation of those NOLs and determine that some of those losses are disallowed, which could result in additional income tax payable to us.

We evaluate our exposures associated with our various tax filing positions and recognize a tax benefit only if it is more likely than not that the tax position will be sustained upon examination by the relevant taxing authorities, including resolutions of any related appeals or litigation processes, based on the technical merits of our position. For uncertain tax positions that do not meet this threshold, we record a related liability. We adjust our unrecognized tax benefit liability and income tax expense in the period in which the uncertain tax position is effectively settled, the statute of limitations expires for the relevant taxing authority to examine the tax position or when new information becomes available. There is a reasonable possibility that our unrecognized tax benefit liability as of December 31, 2021 will be adjusted within twelve months due to the expiration of a statute of limitations and/or resolution of examinations with taxing authorities.

Our income tax returns are periodically audited by domestic and foreign tax authorities. These audits include review of our tax filing positions, including the timing and amount of deductions taken and the allocation of income between tax jurisdictions.

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements, see Note 2, "Significant Accounting Policies," — "Recently Issued Accounting Pronouncements," to the Notes to our consolidated financial statements included in this 2021 Annual Report under the caption Item 8, "Financial Statements and Supplementary Data."

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