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What changed in HERTZ GLOBAL HOLDINGS, INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of HERTZ GLOBAL HOLDINGS, INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+606 added−338 removedSource: 10-K (2024-02-12) vs 10-K (2023-02-07)

Top changes in HERTZ GLOBAL HOLDINGS, INC's 2023 10-K

606 paragraphs added · 338 removed · 261 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

72 edited+168 added−6 removed54 unchanged
Biggest changeThere are a number of risks associated with expanding our EV fleet, including but not limited to the following: • Our ability to secure adequate vehicle supply within the time frame we, and our customers, expect; • The timeline for the build out of the charging infrastructure that is needed to fully support an increase in EVs generally for the public, our ability to facilitate access to that infrastructure for our customers, and our ability to develop our own charging infrastructure; • Demand for EVs which may be impacted by customer sentiment regarding EVs overall, including with respect to the reliability and safety of EVs and access to charging infrastructure; • Costs associated with maintaining or repairing EVs and related infrastructure; • The ability to attract, retain and train talent that is capable of managing an EV fleet; • Risks related to the battery cells on which EVs depend, including the safety of such products and the associated need to maintain and significantly grow access to battery cells and raw materials; • Risks related to the data connectivity and the technology upon which the success of these initiatives will rely, such as risks of unauthorized access to modify or use such technology; and • Possible competition from other vehicle rental providers or mobility industry participants that may implement similar strategies and the possibility that our EV initiatives are not as well-received by our consumer base as anticipated. 23 Table of Contents HERTZ GLOBAL HOLDINGS, INC.
Biggest changeThere are a number of risks associated with our EV strategy, including but not limited to the following: • Volatility in the pricing of new EVs by manufacturers, which can impact the residual values of EVs in our fleet; • The timeline for the build out of the charging infrastructure that is needed to fully support an increase in EVs generally for the public, our ability to facilitate access to that infrastructure for our customers, and our ability to develop our own charging infrastructure; • Demand for EVs, which may be impacted by customer sentiment regarding EVs overall, including with respect to the reliability and safety of EVs and access to charging infrastructure; • The frequency of damage and collision to EVs, which may be impacted by lack of familiarity by drivers; • Our ability to successfully deploy EVs to ride share drivers; • Costs associated with maintaining or repairing EVs and related infrastructure, which may remain elevated until the market for labor and parts for EV and EV infrastructure repair and maintenance matures; • Our ability to secure adequate EV supply within the time frame we, and our customers, expect; • Our ability to attract, retain and train talent that is capable of managing an EV fleet; • Risks related to the battery cells on which EVs depend, including the safety of such products and the associated need to maintain and significantly grow access to battery cells and raw materials; • Risks related to the data connectivity and the technology upon which the success of these initiatives will rely, such as risks of unauthorized access to modify or use such technology; and • Possible competition from other vehicle rental providers or mobility industry participants that may implement similar strategies and the possibility that our EV initiatives are not as successful with our consumer base as anticipated.
As a result of the foregoing factors, various automotive manufacturers have been forced to delay or stall new vehicle production in recent years, which caused limitations in supply and delays in us receiving new vehicles. These conditions may continue, or other global and regional supply chain disruptions may in the future cause similar issues.
As a result of the foregoing and other factors, various automotive manufacturers have been forced to delay or stall new vehicle production in recent years, which caused limitations in supply and delays in us receiving new vehicles. These conditions may continue, or other global and regional supply chain disruptions may in the future cause similar issues.
We derive significant revenues from key leisure destinations, including Florida, California, Texas, Hawaii and New York in the U.S. and major cities in Europe.
We derive significant revenues from key leisure destinations, including California, Florida, Hawaii, New York and Texas in the U.S. and major cities in Europe.
If one or more manufacturers were to adversely modify or eliminate repurchase or guaranteed depreciation programs in the future, our access to and the terms of asset-backed and asset-based debt financing could be adversely affected, which could in turn have a material adverse effect on our results of operations, financial condition, liquidity and cash flows.
If one or more manufacturers were to adversely modify or eliminate repurchase or guaranteed depreciation programs in the future, our access to and the terms of our asset-backed and asset-based debt financing could be adversely affected, which could in turn have a material adverse effect on our results of operations, financial condition, liquidity and cash flows.
Cyber attacks vary in their form and can include the deployment of harmful malware or ransomware, denial-of-services attacks, and other attacks, all of which are intended to affect business continuity and threaten the availability, confidentiality and integrity of our information.
Cyber attacks vary in their form and can include the deployment of harmful malware or ransomware, denial-of-services attacks, and other attacks, which are intended to affect business continuity and threaten the availability, confidentiality and integrity of our information.
However, because of the rapidly changing nature and sophistication of security threats, which can be difficult to detect, there can be no assurance that our controls, policies and procedures have or will detect or prevent all of these threats, and we cannot predict the full impact of any past or future incident.
However, because of the rapidly changing nature and sophistication of security threats, which can be difficult to detect, there can be no guarantee that our controls, policies and procedures have or will detect or prevent all of these threats, and we cannot predict the full impact of any past or future incident.
Our vehicle purchase strategies have in the past been and may in the future be affected by commercial, economic, market and other conditions, including a reduction of supply from auto manufacturers and any rebates or other incentives offered by them for our purchases.
Our vehicle purchase strategies have historically been and may in the future be affected by commercial, economic, market and other conditions, including a reduction of supply from auto manufacturers and any rebates or other incentives offered by them for our purchases.
If a large number of vehicles are the subject of a recall at one time, or if needed replacement parts are not in adequate supply, we may not be able to service all of our available demand for a significant period of time.
If a large number of vehicles are the subject of a recall at one time, or if needed replacement parts or skilled labor are not in adequate supply, we may not be able to service all of our available demand for a significant period of time.
AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 1A. RISK FACTORS Our business is subject to a number of significant risks and uncertainties, and should be carefully considered along with all of the information in this 2022 Annual Report.
AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 1A. RISK FACTORS Our business is subject to a number of significant risks and uncertainties, and should be carefully considered along with all of the information in this 2023 Annual Report.
Examples include technology solutions designed to: address increasing customer expectations improving vehicle maintenance and utilization and enable traditional and non-traditional competitors to introduce transportation offerings, consumption models and vehicle platforms, including EVs and autonomous vehicles and other potentially disruptive technologies.
Examples include technology solutions designed to: address increasing customer expectations, improve vehicle maintenance and utilization and enable traditional and non-traditional competitors to introduce transportation offerings, consumption models and vehicle platforms, including EVs and autonomous vehicles and other potentially disruptive technologies.
RISK FACTORS (Continued) Moreover, although we are sourcing EVs from a growing number of manufacturers, in the near term we remain exposed to a number of risks related to the potential concentration of EV makes and models in our fleet, including the risk that a malfunction, recall or lack of availability of replacement parts for a particular EV make and model could have an outsized impact on our ability to offer EVs, or that demand from our customers for the particular EVs we acquire may be lower than we anticipate.
Moreover, although we are sourcing EVs from a growing number of manufacturers, in the near term, we remain exposed to a number of risks related to the potential concentration of EV makes and models in our fleet, including the risk that a malfunction, recall or lack of availability of replacement parts or skilled labor for a particular EV make and model could have an outsized impact on our ability to offer EVs, or that demand from our customers for the particular EVs we acquire may be lower than we anticipate.
BUSINESS (Continued) Other Risks To manage other risks associated with our businesses, or to comply with applicable law, we purchase other types of insurance carried by business organizations, such as workers' compensation and employer's liability, commercial crime and fidelity, performance bonds, directors' and officers' liability insurance, terrorism insurance and cyber security insurance, all from unaffiliated insurance companies in amounts we deem to be adequate in light of the respective hazards, where such coverage is obtainable on commercially reasonable terms.
Other Risks To manage other risks associated with our businesses, or to comply with applicable law, we purchase other types of insurance carried by business organizations, such as workers' compensation and employer's liability, commercial crime and fidelity, performance bonds, directors' and officers' liability insurance, terrorism insurance and cybersecurity insurance, all from unaffiliated insurance companies in amounts we deem to be adequate in light of the respective hazards, where such coverage is obtainable on commercially reasonable terms.
RISKS RELATED TO INFORMATION TECHNOLOGY, CYBER SECURITY AND PRIVACY Cyber security threats continue to increase in frequency and sophistication, and a successful cyber security attack could interrupt or disrupt our information technology systems, or those of our third-party service providers, which could, among other things, disrupt our business, force us to incur costs or cause reputational harm.
RISKS RELATED TO INFORMATION TECHNOLOGY, CYBERSECURITY AND PRIVACY Cybersecurity threats continue to increase in frequency and sophistication, and a successful cybersecurity attack could interrupt or disrupt our information technology systems, or those of our third-party service providers, which could, among other things, disrupt our business, force us to incur costs or cause reputational harm.
Reductions in levels of air travel, whether caused by general economic conditions including inflation, higher airfare costs or other events such as work stoppages, military conflicts, terrorist incidents, civil unrest, cyber security incidents, natural disasters, epidemic or pandemic diseases, recessions or other economic or labor market downturns, or the response of governments to any of these events, could have a material adverse effect on the demand for vehicle rentals overall and for our rental vehicles in particular.
Reductions in levels of air travel, whether caused by general economic conditions including inflation, higher airfare costs or other events such as work stoppages, military conflicts, terrorist incidents, civil unrest, cybersecurity incidents, natural disasters, epidemic or pandemic diseases, government shutdowns, recessions or other economic or labor market downturns, or the response of governments to any of these events, could have a material adverse effect on the demand for vehicle rentals overall and for our rental vehicles in particular.
Shortages in materials and increased costs for transportation, energy, and raw material, particularly with respect to raw materials extracted from, or components produced in, Russia and/or Ukraine, which are important to the vehicle manufacturing industry including the production of electric vehicle batteries, can impact vehicle production volumes, delivery schedules and costs.
Shortages in materials and increased costs for transportation, energy, and raw materials, particularly with respect to raw materials extracted from, or components produced in, Russia and/or Ukraine, which are important to the vehicle manufacturing industry, including the production of EV batteries, can impact vehicle production volumes, delivery schedules and costs.
If our fleet management systems are unable to accurately estimate future levels of rental activity and determine the appropriate mix of vehicles to purchase and maintain in our rental operations, the results may be obsolescence and excessive aging of fleet, the inability to sell fleet at adequate prices, sub-optimal fleet size and utilization, increased fleet costs, lower customer satisfaction, lost or missing fleet assets, reduced margins and cash flows and other unfavorable consequences which may materially adversely affect our results of operations, financial condition, liquidity and cash flows.
RISK FACTORS (Continued) systems are unable to accurately estimate future levels of rental activity and determine the appropriate mix of vehicles to purchase and maintain in our rental operations, the results may be obsolescence and excessive aging of fleet, the inability to sell fleet at adequate prices, sub-optimal fleet size and utilization, increased fleet costs, lower customer satisfaction, lost or missing fleet assets, reduced margins and cash flows and other unfavorable consequences, which may materially adversely affect our results of operations, financial condition, liquidity and cash flows.
Additionally, pricing in the vehicle rental industry is impacted by the supply of vehicles available for rent. Any significant fluctuations in the supply of rental vehicles available in the market due to unexpected changes in demand, supply chain disruptions, or actions taken by our competitors could require us to make changes to our pricing.
Additionally, pricing in the vehicle rental industry is impacted by the supply of vehicles available for rent. Any significant fluctuations in the supply of rental vehicles available in the market due to unexpected changes in demand, supply chain disruptions, residual value declines or actions taken by our competitors could require us to make changes to our pricing.
AVAILABLE INFORMATION You may access, free of charge, Hertz Global and Hertz's reports filed with or furnished to the SEC (including the Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and any amendments to those forms) directly through the SEC (www.sec.gov) or indirectly through our website (www.hertz.com).
BUSINESS (Continued) AVAILABLE INFORMATION You may access, free of charge, Hertz Global and Hertz's reports filed with or furnished to the SEC (including the Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and any amendments to those reports) directly through the SEC's website (www.sec.gov) or indirectly through our website (www.hertz.com).
We monitor our obligations under and compliance with global laws requiring information security safeguards and notification in the event of a security breach. We respond to potential security issues by utilizing procedures that provide for controls on detecting and addressing cyber security threats and communicating information to senior personnel and security representatives that we retain.
We monitor our obligations under and compliance with global laws requiring information security safeguards and notification in the event of a security breach. We respond to security threats by utilizing procedures that provide for controls on detecting and addressing cybersecurity threats and communicating information to senior personnel and security representatives that we retain.
Reports filed with or furnished to the SEC will be available as soon as reasonably practicable after they are filed with or furnished to the SEC. The information found on our website is not part of this or any other report filed with or furnished to the SEC. 20 Table of Contents HERTZ GLOBAL HOLDINGS, INC.
Reports filed with or furnished to the SEC will be available as soon as reasonably practicable after they are filed with or furnished to the SEC. The information found on our website is not part of this 2023 Annual Report or any other report filed with or furnished to the SEC. 19 Table of Contents HERTZ GLOBAL HOLDINGS, INC.
In addition, the global supply chain can be impacted by logistics provider capacity issues, inflation, increased freight costs, depleted inventory levels, labor shortages and demand peaks.
In addition, the global supply chain can be impacted by logistics provider capacity issues, inflationary pressures, increased freight costs, depleted inventory levels, labor shortages and demand peaks.
Cyber attacks can also include phishing attempts or other methods to cause confidential information, payments or other data to be transmitted to an unintended recipient. Cyber threats can have an external or internal origin. Cyber threat actors also attempt to exploit vulnerabilities through software that is commonly used by companies in cloud-based services, programs and bundled software.
Cyber attacks can also include fraud, phishing or other social engineering attempts or other methods to cause confidential information, payments or other data to be transmitted to an unintended recipient. Cyber threat actors also attempt to exploit vulnerabilities through software that is commonly used by companies in cloud-based services, programs and bundled software.
We believe that the following information identifies the material risks and uncertainties affecting Hertz Global and Hertz; however, these are not the only risks and uncertainties that we encounter in our operations.
We believe that the following information identifies the material risks and uncertainties most likely to affect Hertz Global and Hertz; however, these are not the only risks and uncertainties that we encounter in our operations.
Additionally, program vehicles provide flexibility because we may be able to sell certain program vehicles shortly after having acquired them at a higher value than what we could for a similar non-program vehicle at that time, which is useful in managing demand for vehicles. These benefits diminish when there are fewer program vehicles in our fleet.
Additionally, program vehicles provide flexibility because we may be able to sell certain program vehicles shortly after having acquired them at a higher value than what we could for a similar non-program vehicle at that time, which is useful in managing demand for vehicles.
The potential impact of a recall may be particularly severe if it impacts a model that comprises a significant proportion of our fleet, or parts that are common across numerous model types, such as recalls of airbags in recent years.
The potential impact of a recall may be particularly severe if it impacts a model that comprises a significant proportion of our fleet, or parts that are common across numerous model types.
Disruption in that supply chain may adversely affect our ability to service demand, or do so efficiently. Our supply chain, particularly with respect to access to new vehicles, is complex and reliant on raw goods and finished materials that are obtained from or manufactured by many different market participants, both within and outside the U.S.
Disruption in that supply chain may adversely affect our ability to service demand, or do so efficiently. Our supply chain, particularly with respect to access to new vehicles, is complex and reliant on raw goods and finished materials that are obtained from or manufactured by many different market participants, both within and 21 Table of Contents HERTZ GLOBAL HOLDINGS, INC.
If our customers develop loyalty to internet travel intermediaries rather than our brands, our financial results may suffer. Certain internet travel intermediaries, such as online travel agencies and third-party internet sites, use generic indicators of the type of vehicle (such as “standard” or “compact”) at the expense of brand identification.
If our customers develop loyalty to internet travel intermediaries rather than our brands, our business and revenues could be adversely affected. Certain internet travel intermediaries, such as online travel agencies and third-party internet sites, use generic indicators of the type of vehicle (such as “standard” or “compact”) at the expense of brand identification.
In addition, the Canadian Competition Bureau has interpreted Canadian consumer law to prohibit “drip pricing” such that base rate advertising is not allowed and the first price that consumers view on the websites of rental vehicle companies must reflect the bundled price for the proposed rental. Recent or potential changes in 19 Table of Contents HERTZ GLOBAL HOLDINGS, INC.
In addition, the Canadian Competition Bureau has interpreted Canadian consumer law to prohibit “drip pricing” such that base rate advertising is not allowed and the first price that consumers view on the websites of rental vehicle companies must reflect the bundled price for the proposed rental.
In addition, the success of our strategic initiatives related to EVs depends, in part, on the economics ultimately associated with EVs, including depreciation rates and residual values of EVs and the cost of financing EVs, which will impact the attractiveness of our EVs to our customers. These economics are evolving due to the developing nature of the EV market.
In addition, the success of our strategic initiatives related to EVs depends, in part, on the economics ultimately associated with EVs, including depreciation rates and residual values of EVs and the cost of financing EVs, which will impact the attractiveness of our EVs to us and our customers.
Manufacturer safety recalls could create risks to our business. The Raechel and Jacqueline Houck Safe Rental Car Act of 2015 prohibits us from renting or selling vehicles with open federal safety recalls and requires us to repair or address these recalls.
Manufacturer safety recalls could require costly and time-consuming repairs to our fleet. The Raechel and Jacqueline Houck Safe Rental Car Act of 2015 prohibits us from renting or selling vehicles with open federal safety recalls and requires us to repair or address these recalls.
The vehicle rental industry is particularly affected by changes in the demand for business and leisure travel, especially with respect to levels of airline passenger traffic.
RISK FACTORS (Continued) RISKS RELATED TO OUR BUSINESS Our vehicle rental business is particularly sensitive to reductions in the levels of business and leisure travel. The vehicle rental industry is particularly affected by changes in the demand for business and leisure travel, especially with respect to levels of airline passenger traffic.
AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 1A.
AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 1.
Any decrease in residual values of our non-program vehicles could result in a substantial loss on the sale of such vehicles or accelerated depreciation while we own the vehicles, which can materially adversely affect our results of operations, financial condition, liquidity and cash flows.
Decreases in residual values of our non-program vehicles, or the failure of residual values to follow historical patterns, could result in a substantial loss on the sale of such vehicles, or accelerated depreciation while we own the vehicles. Each of these outcomes can materially adversely affect our results of operations, financial condition, liquidity and cash flows.
We may be unable to purchase adequate supplies of competitively priced vehicles or the cost of the vehicles we purchase may increase significantly without a compensating increase in vehicle rental rates or residual values.
AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 1A. RISK FACTORS (Continued) We may be unable to purchase adequate supplies of competitively priced vehicles or the cost of the vehicles we purchase may increase significantly without a compensating increase in vehicle rental rates or residual values.
See “Insurance and Risk Management—Damage to Our Property” above for further discussion regarding the loss or damage waivers and optional insurance coverages that we offer renters. In addition, various consumer protection laws and regulations may generally apply to our business operations.
See “Insurance and Risk Management—Damage to Our Property” above for further discussion regarding the loss or damage waivers and optional insurance coverages that we offer renters. In 17 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 1. BUSINESS (Continued) addition, various consumer protection laws and regulations may generally apply to our business operations.
Uncertainty in overall consumer sentiment in the current economic environment, coupled with military conflicts such as between Russia and Ukraine, may adversely affect leisure travel to certain key markets, and thus have a negative impact on our business. We face intense competition that may lead to downward pricing or an inability to increase prices.
Uncertainty in overall consumer sentiment in the current economic environment, coupled with military conflicts, such as between Russia and Ukraine, may adversely affect leisure travel to certain key markets, and thus have a negative impact on our business.
However, it is difficult to predict with certainty the potential impact of future compliance efforts and environmental remedial actions and thus future costs associated with such matters may exceed the amount of the estimated accrued amount.
However, it is difficult to predict with certainty the potential impact of future compliance efforts and environmental remedial actions and thus future costs associated with such matters may exceed the amount of the estimated accrued amount. 18 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 1.
The significant majority of vehicles in our fleet are non-program vehicles. We sell our non-program vehicles through a variety of channels, including auction, dealer direct wholesale, direct sales to third parties and retail.
The significant majority of vehicles in our fleet are non-program vehicles. We sell our non-program vehicles through a variety of channels, including auction, dealer direct wholesale, direct sales to third parties and retail in an effort to maximize sale prices and have access to an array of sales channels to dispose of vehicles in a timely manner.
Consequently, there is no guarantee that we will be able to purchase a sufficient number of new vehicles at competitive prices and on competitive terms and conditions to fulfill demand or to do so efficiently. The ability to attract and retain front-line employees and senior management is critical to the success of our business.
Consequently, there is no guarantee that we will be able to purchase a sufficient number of new vehicles at competitive prices and on competitive terms and conditions to fulfill demand or to do so efficiently.
These types of disruptions could jeopardize our ability to fulfill existing contractual commitments or satisfy demand for our vehicles and could also 25 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 1A. RISK FACTORS (Continued) result in the loss of business to competitors whose fleets are not similarly impacted.
These types of disruptions could jeopardize our ability to fulfill existing contractual commitments or satisfy demand for our vehicles and could also result in the loss of business to competitors whose fleets are not similarly impacted.
If the volume of sales made through internet travel intermediaries increases significantly and consumers develop stronger loyalties to these intermediaries than to our brands, or if our market share suffers due to lower levels of customer loyalty, our business and revenues could be adversely affected. Our commercial off airport leases and airport concession agreements expose us to risks.
If the volume of sales made through internet travel intermediaries increases significantly and consumers develop stronger loyalties to these intermediaries than to our brands, or if our market share suffers due to lower levels of customer loyalty, our business and our results of operations, financial condition, liquidity and cash flows could be adversely affected.
Changes in Regulation Changes in government regulation of our businesses have the potential to materially alter our business practices or our profitability. Depending on the jurisdiction, those changes may come about through new legislation, the issuance of new laws and regulations or changes in the interpretation of existing laws, regulations and treaties by a court, regulatory body or governmental official.
Depending on the jurisdiction, those changes may come about through new legislation, the passage of new laws and regulations or changes in the interpretation of existing laws, regulations and treaties by a court, regulatory body or governmental official.
RISK FACTORS (Continued) for used vehicles is subject to many economic factors, such as demand, consumer interests, inventory levels, pricing of new car models, interest rates, fuel costs, tariffs and other general economic conditions.
However, there are many factors that can affect the market for used vehicles. Vehicle purchases are typically discretionary for consumers and the market for used vehicles is subject to many economic factors, such as demand, consumer interests, inventory levels, pricing of new car models, interest rates, fuel costs, tariffs and other general economic conditions.
These leases and concession agreements typically include minimum payment obligations that are required even if our volume significantly declines which could increase our costs as a percentage of revenues. In addition, if the costs of these leases and/or concession agreements increase and we are unable to increase our pricing structure to offset the increased costs, our financial results could suffer.
These leases and concession agreements typically include minimum payment obligations that are required even if our volume significantly declines, which could increase our costs as a percentage of revenues.
If we purchase too many vehicles, our Vehicle Utilization could be adversely affected and we may not be able to dispose of excess vehicles in a timely and cost-effective manner.
If we purchase too many vehicles, our Vehicle Utilization could be adversely affected and we may not be able to dispose of excess vehicles in a timely and cost-effective manner. If our fleet management 23 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 1A.
With program vehicles, vehicle manufacturers agree to repurchase the vehicles at a specified price or guarantee the depreciation rate on the vehicles during a specified time period. Using program vehicles in our fleet can often alleviate our residual value risk because of the terms of our agreements with the vehicle manufacturer for repurchases and guaranteed depreciation on those vehicles.
Using program vehicles in our fleet can often alleviate our residual value risk because of the terms of our agreements with the vehicle manufacturer for repurchases and guaranteed depreciation on those vehicles.
The success of our business depends on the efforts and abilities of our ability to hire and retain enough front-line employees and our senior management and other key personnel with the necessary skills to meet demand.
RISK FACTORS (Continued) RISK RELATED TO OUR EMPLOYEES The ability to attract and retain front-line employees and senior management is critical to the success of our business. The success of our business depends on our ability to hire and retain front-line employees, senior management and other key personnel in sufficient numbers and with the necessary skills to meet demand.
Any failure by us to effectively address, enforce and maintain our information technology infrastructure and cyber security requirements may result in substantial harm to our business, including major disruptions to business operations, loss of intellectual property, release of confidential information, malicious corruption of data, regulatory intervention and sanctions or fines, investigation and remediation costs and possible prolonged negative publicity.
A cyber attack of our information or systems, or any failure by us or our third-party service providers to effectively address, enforce and maintain our information technology infrastructure and cybersecurity requirements may result in substantial harm to our business and financial condition, including major disruptions to business operations, loss of intellectual property, release of confidential information, malicious corruption of data or systems, costs related to remediation or the payment of ransom, and litigation including individual claims or consumer class actions, administrative, and civil or criminal investigations or actions, regulatory intervention and sanctions or fines, investigation and remediation costs and possible prolonged negative publicity.
Any circumstance, occurrence or situation that disrupts rental activity during our peak periods, or our inability to effectively meet heightened demand in those periods, could have a significant and disproportionate impact on our revenue.
Any circumstance, occurrence or situation that disrupts rental activity during our peak periods, or our inability to effectively meet heightened demand in those periods, could have a materially adverse effect on our results of operations, financial condition, liquidity and cash flows.
Outcomes associated with these economic factors could materially impact the success of such initiatives. If we do not adequately address potential risks related to EVs, our future revenue potential may be impacted and our ability to pursue our EV initiatives could be compromised. We may fail to adequately respond to changes in technology that are impacting the mobility industry.
If we do not adequately address potential risks related to EVs, our results of operations, financial condition, liquidity and cash flows may be adversely impacted and our ability to pursue our EV initiatives could be compromised. We may fail to adequately respond to changes in technology that are impacting the mobility industry.
Factors affecting brand recognition are often outside our control, and our efforts to maintain or enhance favorable brand recognition, such as marketing and advertising campaigns, may not have their desired effects.
Our business is heavily dependent upon the favorable brand recognition that our “Hertz”, “Dollar” and “Thrifty” brand names have in the markets in which they participate. Factors affecting brand recognition are often outside our control, and our efforts to maintain or enhance favorable brand recognition, such as marketing and advertising campaigns, may not have their desired effects.
We encounter continuous risk of exposure to cyber attacks and other security threats to our information networks and systems and the information stored on those networks and systems. Cyber attacks are increasing in their frequency, sophistication and intensity, have become increasingly difficult to detect, and may be exacerbated at any time by escalation of geopolitical tensions.
Cyber attacks are increasing in their frequency, sophistication and intensity, have become increasingly difficult to detect, and may be exacerbated at any time by escalation of geopolitical tensions.
Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business, results of operations, financial condition, liquidity and cash flows. In such a case, you may lose all or part of your investment in Hertz Global's common stock or The Hertz Corporation's debt securities.
Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business, results of operations, financial condition, liquidity and cash flows in future periods.
Depending on the severity of any recall, it could materially adversely affect, among other things, our revenues, create customer service problems, present liability claims, reduce the residual value of the recalled vehicles and harm our general reputation. We rely on third-party distribution channels for a significant amount of our revenues.
Depending on the severity of any recall, it could materially adversely affect, among other things, our revenues, create customer service problems, present liability claims, reduce the residual value of the recalled vehicles and harm our general reputation. 22 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 1A.
We have invested in the protection of data and information technology, and actively work to enhance our business continuity and disaster recovery capabilities to ensure resilience; however, there can be no assurance that our efforts will be successful.
At this time, we do not have any indication that any cybersecurity incidents have had a material effect on our business, operations or financial condition. We have invested in the protection of data and information technology, and actively work to enhance our business continuity and disaster recovery capabilities; however, there can be no assurance that our efforts will be successful.
AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 1. BUSINESS (Continued) law or regulation that affect us relate to insurance intermediaries, customer privacy, like-kind exchange programs, data security and rate regulation and our retail vehicle sales operations.
Recent or potential changes in laws or regulations that may affect us relate to insurance intermediaries, customer privacy, like-kind exchange programs, data security and rate regulation and our retail vehicle sales operations.
These contracts are renegotiated periodically, and we anticipate renegotiating labor contracts with approximately 32% of these 26 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 1A. RISK FACTORS (Continued) employees in 2023. Failure to negotiate a new labor agreement when required could result in a work stoppage.
These contracts are renegotiated periodically, and we anticipate renegotiating labor contracts with approximately 45% of these employees in 2024. Failure to negotiate a new labor agreement when required could result in a work stoppage.
AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 1A. RISK FACTORS (Continued) competitors, we may experience sub-optimal pricing, sub-optimal asset utilization, poor customer satisfaction, lost revenue and other unfavorable consequences which may materially adversely affect our revenues and results of operations, financial condition, liquidity and cash flows.
To the extent we do not react appropriately to our competition or optimize our revenue and pricing strategies to react to the actions of these competitors, we may experience sub-optimal pricing, sub-optimal asset utilization, poor customer satisfaction, lost revenue and other unfavorable consequences which may materially adversely affect our revenues and results of operations, financial condition, liquidity and cash flows. 25 Table of Contents HERTZ GLOBAL HOLDINGS, INC.
Any decline in perceived favorable recognition of our brands or damage to our reputation could materially adversely affect our results of operations, financial condition, liquidity and cash flows. We may face issues with our union-represented employees.
Any decline in perceived favorable recognition of our brands or damage to our reputation could materially adversely affect our results of operations, financial condition, liquidity and cash flows. 26 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 1A.
In addition, if we are unable to purchase new vehicles at competitive prices to refresh our fleet, increased maintenance costs in relation to our existing fleet may put further pressure on our results of operations and financial condition.
In addition, if we are unable to purchase new vehicles at competitive prices to refresh our fleet, increased maintenance costs in relation to our existing fleet may adversely affect our results of operations, financial condition, liquidity and cash flows. We may not be able to effectively dispose of non-program vehicles, at the times or through the channels, that we desire.
In addition to lingering impacts from the COVID-19 pandemic, the global automotive supply chain has been negatively impacted by the military conflict between Russia and Ukraine. Governments in the U.S., United Kingdom, and European Union have each imposed export controls on certain products and financial and economic sanctions on certain industry sectors and parties in Russia.
Governments in the U.S., United Kingdom, and European Union have each imposed export controls on certain products and financial and economic sanctions on certain industry sectors and parties in Russia.
We also compete with non-traditional companies for vehicle rental market share, including auto manufacturers, ride-hailing and car sharing companies and other competitors in the mobility industry. To the extent we do not react appropriately to our competition or optimize our revenue and pricing strategies to react to the actions of these 22 Table of Contents HERTZ GLOBAL HOLDINGS, INC.
We also compete with non-traditional companies for vehicle rental market share, including auto manufacturers, ride-hailing and car sharing companies and other competitors in the mobility industry.
We maintain a substantial network of vehicle rental locations at off airport and airport locations in the U.S. and internationally.
Our commercial off airport leases and airport concession agreements expose us to numerous risks that could cause our financial results to suffer. We maintain a substantial network of vehicle rental locations at off airport and airport locations in the U.S. and internationally.
The mix of program and non-program vehicles in our fleet, as well as declining values of our non-program vehicles, can subject us to an increased residual value risk. We use program and non-program vehicles in our fleet.
Any of the following risks and uncertainties could materially and adversely affect our business, financial condition, operating results or cash flow in future periods. RISKS RELATED TO OUR FLEET The mix of program and non-program vehicles in our fleet, as well as declining values of our non-program vehicles, can subject us to an increased residual value risk.
We have also taken steps to address cyber security threats at third parties that handle, possess, process and store our information to mitigate the potential risk to us, including both service providers and licensee and franchisee. Such measures include contractually requiring the third parties to maintain certain data security controls.
We have also taken steps to assess cybersecurity at third parties, including service providers, licensees and franchisees, that handle, possess, process and store our material information. We require these third parties to maintain certain security controls.
Our ability to, among other things, accept reservations, process rental and sales transactions, manage our pricing, manage our revenue earning vehicles, manage our financing arrangements, account for our activities and otherwise 27 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES
Our ability to, among other things, accept reservations, process rental and sales transactions, manage our pricing, manage our revenue earning vehicles, manage our financing arrangements, account for our activities and otherwise conduct our business depends on the performance and availability of our networks and systems, as well as those of third-party cloud-based providers and other service providers.
Overall, the failure of our talent management strategies could result in inadequate staffing levels, declines in customer satisfaction, an inability to execute our business plan, eroding employee morale and productivity, an 21 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 1A.
Overall, the failure of our talent management strategies could result in inadequate staffing levels, declines in customer satisfaction, an inability to execute our business plan, eroding employee morale and productivity, an increase in operating expenses or an inability to achieve internal control, regulatory or other compliance-related requirements. We may face issues with our union-represented employees.
Like many other companies, we detect attempts by third parties to gain access to our systems and networks on a frequent basis, and the frequency of such attempts could increase in the future. At this time, we do not believe that any such attempts have had a material effect on our business, operations or financial condition.
Like many other companies, we detect attempts by threat 27 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 1A. RISK FACTORS (Continued) actors to gain access to our systems and networks on a frequent basis, and the frequency of such attempts could increase in the future.
You should carefully consider each of the following risks and uncertainties. Any of the following risks and uncertainties could materially and adversely affect our business, financial condition, operating results or cash flow. RISKS RELATED TO OUR BUSINESS AND INDUSTRY Our business, results of operations and financial condition are dependent on the efficient operation of a complex global supply chain.
Our inability to rotate aged vehicles for newer vehicles may have an adverse effect on our results of operations, financial condition, liquidity and cash flows. Our business, results of operations and financial condition are dependent on the efficient operation of a complex global supply chain.
As a result of the factors that can affect the market for used vehicles described below, our retail sales channels may not provide stable or desirable vehicle prices in the future compared to the wholesale disposition channels.
Any combination of these factors can make it more difficult for us to successfully dispose of vehicles and optimize our fleet mix. Similarly, combinations of these factors may make our retail sales channels less capable of providing stable or desirable vehicle prices compared to the wholesale disposition channels.
Vehicle purchases are typically discretionary for consumers and the retail market 24 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 1A.
These economics are evolving due to the developing nature of the EV market. Outcomes associated with these economic factors could materially impact the success of such initiatives. 24 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 1A.
However, the labor market has undergone significant change in the wake of the COVID-19 pandemic. Competition for qualified employees is intense. Changing employee expectations about remote work and workplace flexibility complicate our employee recruiting, retention and talent management strategies. In addition, recent inflationary trends overall have driven market pressure for increased wages.
Competition for qualified employees is intense, particularly with respect to technology roles that are critical to our strategic and IT initiatives. Changing employee expectations about remote work and workplace flexibility complicate our employee recruiting, retention and talent management strategies.
Removed
RISK FACTORS (Continued) increase in operating expenses or an inability to achieve internal control, regulatory or other compliance-related requirements. Our vehicle rental business is particularly sensitive to reductions in the levels of business and leisure travel.
Added
ITEM 1. BUSINESS (Continued) Airport As of December 31, 2023, we had approximately 1,900 airport rental locations in our Americas RAC segment and approximately 1,500 airport rental locations in our International RAC segment.
Removed
We are implementing a strategy that focuses on increasing our use of EVs in our fleet, which may not be as successful as we anticipate. We are embarking on a strategy that includes significantly expanding our EV rental fleet.
Added
We believe that our extensive global network of locations contributes to our success by providing consistency of our service, cost control, Vehicle Utilization, competitive pricing and our ability to offer one-way rentals.
Removed
We have a partnership with Uber to make Tesla EVs available for their drivers to rent on the Uber network in North America and Europe. The success of this initiative will be dependent in part on the factors described above.
Added
For our airport company-operated rental locations, we are dependent on, and have obtained, concessions or similar leasing agreements or arrangements, that grant us the right to conduct a vehicle rental business at the respective airport.
Removed
For non-program vehicles, there is an increased risk that the net amount realized upon the disposition of the vehicle will be less than its estimated residual value at such time. The residual values of non-program vehicles are affected by the market for used vehicles.
Added
Our concessions were obtained from the airports' operators, which are typically governmental bodies or authorities, following either negotiation or bidding for the right to operate a vehicle rental business.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe TCJA, which was temporarily modified by the Coronavirus Aid, Relief, and Economic Security Act, imposed significant limitations on the deductibility of business interest expense under Section 163(j). These limitations could result in additional material cash tax payments that could adversely affect our results of operations and liquidity.
Biggest changeWe may not be able to deduct certain business interest expenses, which could have a material adverse effect on our results of operations and liquidity. The TCJA, which was temporarily modified by the Coronavirus Aid, Relief, and Economic Security Act, imposed significant limitations on the deductibility of business interest expense under Section 163(j).
Department of Commerce's Office of Anti-Boycott Compliance. The failure of our program to operate as designed can result in a failure to comply with applicable laws, which could result in significant penalties or otherwise harm the Company’s reputation and business.
Department of Commerce's Office of Anti-Boycott Compliance. The failure of our compliance program to operate as designed can result in a failure to comply with applicable laws, which could result in significant penalties or otherwise harm the Company’s reputation and business.
Provisions in the Hertz Holdings Certificate of Incorporation and Bylaws may have the effect of delaying or preventing a change of control or changes in our management, including, generally, provisions that: • do not provide cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • provide for a classified board of directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of the Board; • allow for removal of directors only for cause; • allow only the Board to fill a vacancy created by the expansion of the Board or the resignation, death, retirement, disqualification or removal of a director; • require advance notice for stockholder proposals to be brought before a meeting of stockholders, including proposed nominations of persons for election to the board of directors; • only allow stockholder action to be taken at an annual or special meeting; • limit the ability of stockholders to call a special meeting; and • authorize blank check preferred stock.
Provisions in the Hertz Holdings Certificate of Incorporation and Bylaws may have the effect of delaying or preventing a change of control or changes in our management, including, generally, provisions that: • do not provide cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • provide for a classified Board with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of the Board; • allow for removal of directors only for cause; • allow only the Board to fill a vacancy created by the expansion of the Board or the resignation, death, retirement, disqualification or removal of a director; • require advance notice for stockholder proposals to be brought before a meeting of stockholders, including proposed nominations of persons for election to the Board; • only allow stockholder action to be taken at an annual or special meeting; • limit the ability of stockholders to call a special meeting; and • authorize blank check preferred stock.
Additionally, any failure to manage information privacy in compliance with applicable laws, whether as a result of our own error or the error or malfeasance of others, could result in regulatory fines and sanctions, litigation, prolonged negative publicity, data breaches, declining customer confidence, loss of key customers, employee liability, and other unfavorable consequences.
Additionally, any failure to manage information privacy in compliance with applicable laws, whether as a result of our own error or the error or malfeasance of others, could result in significant regulatory fines and sanctions, litigation, prolonged negative publicity, data breaches, declining customer confidence, loss of key customers, employee liability, and other unfavorable consequences.
RISKS RELATED TO OUR OWNERSHIP OF COMMON STOCK We cannot guarantee that our stock repurchase program will be fully consummated or that it will enhance long-term stockholder value. Stock repurchases could also increase the volatility of our stock and could diminish our liquidity. Our Board has authorized a stock repurchase program that does not have an expiration date.
RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK We cannot guarantee that our share repurchase program will be fully consummated or that it will enhance long-term stockholder value. Share repurchases could also increase the volatility of our stock and could diminish our liquidity. Our Board has authorized a share repurchase program that does not have an expiration date.
We are permitted under the Tax Cuts and Jobs Act (the “TCJA”) to expense, in the year of acquisition, 100% of the acquisition costs in the year of acquisition for vehicles purchased during the years 2017 through 2022. The TCJA reduces the expensing percentage ratably by 20% each year 2023 through 2027.
We are permitted under the Tax Cuts and Jobs Act (the “TCJA”) to expense, in the year of acquisition, 100% of the acquisition costs for vehicles purchased during the years 2017 through 2022. The TCJA reduces the expensing percentage ratably by 20% each year between 2023 and 2027.
Failure by us to have proper financing and debt management processes may result in cash shortfalls and liquidity problems, the need to seek emergency financing at high interest rates, violations of debt covenants, and an inability to execute strategic initiatives.
Failure by us to have proper financing and debt management processes in place may result in cash shortfalls and liquidity problems, the need to seek emergency financing at high interest rates, violations of debt covenants, and an inability to execute strategic initiatives.
Should rules establishing limitations on greenhouse gas emissions or rules imposing fees on entities deemed to be responsible for greenhouse gas emissions become effective, demand for our services could be affected, our vehicle, and/or other, costs could increase, and our business could be adversely affected.
Should rules establishing limitations on greenhouse gas emissions or rules imposing fees on entities deemed to be responsible for greenhouse gas emissions become effective, demand for our services could be affected, our vehicle and compliance, and/or other, costs could increase, and our business could be adversely affected.
Certain proposed or enacted laws and regulations with respect to the banking and finance industries, including the Dodd-Frank Wall Street Reform and Consumer Protection Act (including risk retention requirements) and amendments to the SEC's rules relating to asset-backed securities, could restrict our access to certain financing arrangements and increase our financing costs, which could have a material adverse effect on our results of operations, financial condition, liquidity and cash flows. 31 Table of Contents HERTZ GLOBAL HOLDINGS, INC.
Certain proposed or enacted laws and regulations with respect to the banking and finance industries, including the Dodd-Frank Wall Street Reform and Consumer Protection Act (including risk retention requirements) and amendments to the SEC's rules relating to asset-backed securities, could restrict our access to certain financing arrangements and increase our financing costs, which could have a material adverse effect on our results of operations, financial condition, liquidity and cash flows. 32 Table of Contents HERTZ GLOBAL HOLDINGS, INC.
If we cannot maintain and execute adequate internal control over financial reporting or implement required new or improved controls that provide reasonable assurance of the reliability of the financial reporting and preparation of our financial statements for external use, we could suffer harm to our reputation, incur incremental compliance costs, fail to meet our public reporting requirements on a timely basis, be unable to properly report on our business and our results of operations, or be required to restate our financial statements, and our results of operations, our stock price and our ability to obtain new business could be materially adversely affected.
If we cannot maintain and execute adequate internal control over financial reporting or implement required new or improved controls that provide reasonable assurance of the reliability of the financial reporting and preparation of our financial statements for external use, we could suffer harm to our reputation, incur incremental compliance costs, fail to meet our public reporting requirements on a timely basis, be unable to properly report on our business and our results of operations, or be required to restate our financial statements, and our results of operations, our share price and our ability to obtain new business could be materially adversely affected.
We have a business continuity management plan designed to (i) identify key assets, operations and underlying threats, (ii) define and assess relevant threats (e.g., natural disasters, pandemics, terrorism, etc.) on business operations, (iii) develop and maintain disaster recovery strategies and business resumption plans to minimize the impact of both known and unknown threats and (iv) test the adequacy of our action plans.
We have a business continuity management plan designed to: (i) identify key assets, operations and underlying threats; (ii) define and assess relevant threats (e.g., natural disasters, pandemics, civil unrest, terrorism, etc.) on business operations; (iii) develop and maintain disaster recovery strategies and business resumption plans to minimize the impact of both known and unknown threats; and (iv) test the adequacy of our action plans.
In particular, t he European Union’s General Data Protection Regulation (the “GDPR”) imposes compliance obligations for the collection, use, retention, security, processing, transfer and deletion of personally identifiable information of individuals. In addition, countries such as the United Kingdom have implemented the GDPR through their own legislation, for example, the UK Data Protection Act of 2018.
In particular, the European Union’s General Data Protection Regulation (the “GDPR”) imposes compliance obligations for the collection, use, retention, security, processing, transfer and deletion of personally identifiable information of individuals. In addition, countries such as the United Kingdom have implemented the GDPR through their own legislation, for example, the UK Data Protection Act of 2018.
These provisions may make it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management.
These provisions may make it more difficult for stockholders to replace members of our Board, which is responsible for appointing the members of our management.
We are subject to a wide variety of U.S. laws and regulations and changes in the level of government regulation of our business have the potential to materially alter our business practices and materially adversely affect our results of operations, financial condition, liquidity and cash flows.
We are subject to a wide variety of U.S. and international laws and regulations and changes in the level of government regulation of our business that have the potential to materially alter our business practices and materially adversely affect our results of operations, financial condition, liquidity and cash flows.
In the ordinary course of our business, we evaluate, upgrade and consolidate our systems, including by making changes to legacy systems, replacing legacy systems with successor systems with new functionality, outsourcing certain systems, and acquiring new systems with new functionality. We deploy significant capital expenditures in connection with these activities.
In the ordinary course of our business, we evaluate, upgrade and consolidate our information technology systems, including by making changes to legacy systems, replacing legacy systems with successor systems with new functionality, outsourcing certain systems, and acquiring new systems with new functionality. We deploy significant capital expenditures in connection with these activities.
Changes in the U.S. legal and regulatory environment that affect our operations could disrupt our business, increase our expenses or otherwise have a material adverse effect on our results of operations, financial condition, liquidity and cash flows.
Changes in the legal and regulatory environment that affect our operations could disrupt our business, increase our expenses or otherwise have a material adverse effect on our results of operations, financial condition, liquidity and cash flows.
RISK FACTORS (Continued) Anti-takeover provisions in our charter documents and under Delaware law, as well as ownership of a significant percentage of our common stock by the Plan Sponsors, could make an acquisition of us more difficult, limit attempts by our stockholders to replace or remove our current management and may negatively affect the market price of our common stock.
Anti-takeover provisions in our charter documents and under Delaware law, as well as ownership of a significant percentage of our common stock by the Plan Sponsors, could make an acquisition of us more difficult, limit attempts by our stockholders to replace or remove our current management and may negatively affect the market price of our common stock.
A portion of our indebtedness bears interest at variable rates, which exposes us to risks inherent in interest rate fluctuations and higher interest expenses in the event of increases in interest rates. See Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in this 2022 Annual Report for additional information related to interest rate risk.
A portion of our indebtedness bears interest at variable rates, which exposes us to risks inherent in interest rate fluctuations and higher interest expenses in the event of continued increases in interest rates. See Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in this 2023 Annual Report for additional information related to interest rate risk.
Our asset-backed and asset-based financing capacity could be decreased, our financing costs and interest rates could be increased, or our future access to the financial markets could be limited, as a result of risks and contingencies, many of which are beyond our control, including: (i) the acceptance by credit markets of the structures and structural risks associated with our asset-backed and asset-based financing arrangements; (ii) the credit ratings provided by credit rating agencies for our asset-backed indebtedness; (iii) third parties requiring changes in the terms and structure of our asset-backed or asset-based financing arrangements, including increased credit enhancement or required cash collateral and/or other liquid reserves; (iv) the insolvency or deterioration of the financial condition of one or more of our principal vehicle manufacturers; or (v) changes in laws or regulations that negatively affect any of our asset-backed or asset-based financing arrangements.
Our asset-backed and asset-based financing capacity could be decreased, our financing costs and interest rates could be increased, or our future access to the financial markets could be limited, as a result of risks and contingencies, many of which are beyond our control, including: (i) the acceptance by and/or demand from credit markets of the structures and structural risks associated with our asset-backed and asset-based financing arrangements; (ii) the credit ratings provided by credit rating agencies for our asset-backed indebtedness; (iii) third parties requiring changes in the terms and structure of our asset-backed or asset-based financing arrangements, including increased credit enhancement or required cash collateral and/or other liquid reserves; (iv) the insolvency or deterioration of the financial condition of one or more of our principal vehicle manufacturers; (v) changes in laws or regulations that negatively affect any of our asset-backed or asset-based financing arrangements; or (vi) the overall credit condition of The Hertz Corporation.
Our operations in many different countries increases the risk of a violation, or alleged violation, of the United States Foreign Corrupt Practices Act, the United Kingdom Bribery Act, other applicable anti-corruption laws and regulations, the economic sanctions programs administered by the U.S. Treasury Department’s Office of Foreign Assets Control and the anti-boycott regulations administered by the U.S.
Operating in many different countries increases the risk of a violation, or alleged violation, of the United States Foreign Corrupt Practices Act, the United Kingdom Bribery Act, other applicable anti-corruption laws and regulations, the economic sanctions programs administered by the U.S. Treasury Department’s Office of Foreign Assets Control and the anti-boycott regulations administered by the U.S.
For further discussion regarding how changes in the regulation of insurance intermediaries may affect us, see Item 1, ‘‘Business—Insurance and Risk Management’’ in this 2022 Annual Report.
For further discussion regarding how changes in the regulation of insurance intermediaries may affect us, see Item 1, ‘‘Business—Insurance and Risk Management’’ in this 2023 Annual Report.
Further, a material and extended reduction in vehicle purchases by our U.S. vehicle rental business, for any reason, would similarly limit the amount of tax expense available to offset the tax cost associated with the disposition of vehicles.
RISK FACTORS (Continued) Further, a material and extended reduction in vehicle purchases by our U.S. vehicle rental business, for any reason, would similarly limit the amount of tax expense available to offset the tax cost associated with the disposition of vehicles.
If Hertz Holdings does not receive cash from its subsidiaries, then Hertz Holdings' financial condition could be materially adversely affected. Failure to meet ESG expectations or standards or achieve our ESG goals could adversely affect our business, results of operations or financial condition.
If Hertz Holdings does not receive cash from its subsidiaries, then Hertz Holdings' financial condition could be materially adversely affected. Failure to meet ESG expectations or standards or achieve our corporate responsibility goals could adversely affect our business, results of operations and financial condition.
If we fail to maintain comprehensive technology enablement and effective processes, we may be unable to support business growth expectations, and such failure could result in excessive overhead costs, high rates of transaction failures and rework, detrimental impact to customers, excessive write-offs, service quality issues, declining employee morale, loss of key talent and other unfavorable consequences.
If we fail to maintain effective technology enablement and processes, we may be unable to support business growth expectations, and such failure could result in excessive overhead costs, high rates of transaction failures and rework, detrimental impact to customers, cybersecurity threats or incidents, excessive write-offs, service quality issues, declining employee morale, loss of key talent and other unfavorable consequences.
These risks include those described or referred to in this “Risk Factors” section and in the other documents incorporated herein by reference as well as, among other things: • our operating and financial performance and prospects; • sales of a substantial number of shares of our common stock in the public market, or the perception in the market that the holders of a large number of shares of common stock intend to sell; • our ability to repay our debt; • our access to financial and capital markets to refinance our debt or replace the existing credit facilities; • investor perceptions of us and the industry and markets in which we operate; • our dividend policy; • future sales of equity or equity-related securities; • announcements by third parties of significant claims or proceedings against us; • issuances of new or updated research reports by security or industry analysts, or those analysts not publishing or ceasing to publish reports about us, our industry or out market; • changes in, or results that vary from, earnings estimates or buy/sell recommendations by analysts; and • general financial, domestic, economic and other market conditions.
These risks include those described or referred to in this “Risk Factors” section and in the other documents incorporated herein by reference as well as, among other things: • our operating and financial performance and prospects; • our successful execution of our business strategy, including with respect to successful deployment of our EV strategy; • sales of a substantial number of shares of our common stock in the public market, or the perception in the market that the holders of a large number of shares of common stock intend to sell; • our ability to repay our debt; • our access to financial and capital markets to refinance our debt or replace the existing credit facilities; • investor perceptions of us and the industry and markets in which we operate; • our dividend policy; • future sales of equity or equity-related securities; • announcements and actions filed by third parties of significant claims or proceedings against us; • issuances of new or updated research reports by security or industry analysts, or those analysts not publishing or ceasing to publish reports about us, our industry or our market; • changes in, or results that vary from, earnings estimates or buy/sell recommendations by analysts; and • general financial, domestic, economic and other market conditions.
Our failure or perceived failure to achieve ESG goals, maintain practices aligned with stakeholder expectations for “best practices,” or comply with new ESG expectations could harm our reputation, adversely impact our ability to attract and retain customers and talent, and expose us to increased scrutiny from a range of stakeholders.
Our failure or perceived failure to achieve our goals, maintain practices that align with stakeholder expectations for “best practices,” or comply with new ESG expectations and regulatory requirements could harm our reputation, adversely impact our ability to attract and retain customers and talent, and expose us to increased scrutiny from a range of stakeholders.
GENERAL RISK FACTORS We may pursue strategic transactions, including acquisitions and divestitures, which could be difficult to implement, disrupt our business or change our business profile significantly.
We may pursue strategic transactions, including acquisitions and divestitures, which could be difficult to implement, disrupt our business or change our business profile significantly.
The misuse or theft of information we possess, including as a result of cyber security breaches, could harm our brand, reputation or competitive position and give rise to liabilities which may materially adversely affect our results of operations, financial condition, liquidity and cash flows.
The misuse or theft of information we possess, including as a result of cybersecurity attacks, could harm our brand, reputation or competitive position and give rise to liabilities which may materially adversely affect our results of operations, financial condition, liquidity and cash flows.
In the normal course of business, we regularly collect, process and store non-public information about millions of individuals and businesses, including both credit and debit card information and other sensitive and confidential personal information. In addition, our customers regularly transmit sensitive and confidential information to us via the internet and through other electronic means.
In the normal course of business, we regularly collect, process and store information about millions of individuals and businesses, including both payment card information and other sensitive and confidential personal information. In addition, our customers regularly transmit personal information and other sensitive and confidential information to us via the internet and through other electronic means.
Further, stock repurchases could affect the market price of our common stock or increase its volatility and decrease our cash balances and/or our liquidity.
Furthermore, share repurchases could affect the market price of our common stock or increase its volatility and decrease our cash balances and/or our liquidity.
Operating in many different countries exposes us to varying risks, which include: (i) multiple, and sometimes conflicting, foreign regulatory requirements and laws that are subject to change and are often much different than the domestic laws in the U.S., including laws relating to taxes, automobile-related liability, insurance rates, insurance products, consumer privacy, data security, employment matters, cost and fee recovery, and the protection of our trademarks and other intellectual property; (ii) the effect of foreign currency translation risk, as well as limitations on our ability to repatriate income; (iii) varying tax regimes, including consequences from changes in applicable tax laws and our ability to repatriate cash from non-U.S. affiliates without adverse tax consequences; (iv) local ownership or investment requirements, as well as difficulties in obtaining financing in foreign countries for local operations; and (v) political and economic instability, natural calamities, war, and terrorism.
We generate a portion of our revenue outside the U.S., and operating in many different countries exposes us to varying risks, which include: (i) multiple, and sometimes conflicting, foreign regulatory requirements and laws that are subject to change and are often much different than the domestic laws in the U.S., including laws relating to taxes, automobile-related liability, insurance rates, insurance products, consumer privacy, data security, employment matters, cost and fee recovery, and the protection of our trademarks and other intellectual property; (ii) the effect of foreign currency translation risk, as well as limitations on our ability to repatriate income; (iii) varying tax regimes, including consequences from changes in applicable tax laws and our ability to repatriate cash from non-U.S. affiliates without adverse tax consequences; (iv) local ownership or investment requirements, as well as difficulties in obtaining financing in foreign countries for local operations; (v) changes in the proportion of revenue between countries with varying tax rates or imposition of global minimum tax rates; and (vi) political and economic instability, natural calamities, civil unrest, war, terrorism and other hostilities.
As a result, reductions in the estimated market value of vehicles used as collateral could adversely affect our profitability, require us to use cash intended for other purposes as collateral, and potentially lead to decreased borrowing base availability.
As a result, reductions in the estimated market value of vehicles used as collateral could adversely affect our liquidity, cash flow, and, ultimately, the profitability of our company, or otherwise require us to use cash intended for other purposes as collateral, and potentially lead to decreased borrowing base availability.
For example, in accordance with Section 482 of the Code and the Organization for Economic Cooperation and Development guidelines, we have established transfer pricing policies to govern our intercompany operations. Implementing transfer pricing policies can be extremely complex.
For example, in accordance with Section 482 of the Code and the OECD guidelines, we have established transfer pricing policies to govern our intercompany operations. Implementing transfer pricing policies can be extremely complex.
Furthermore, in the event our debt instruments were to be recharacterized as equity for tax purposes, the Company would not be entitled to deduct the payments as interest and could be assessed withholding taxes on payments to certain lenders, which could adversely affect our results of operations and liquidity.
Furthermore, in the event our debt instruments were to be recharacterized as equity for tax purposes, the Company would not be entitled to deduct the payments as interest and could be assessed withholding taxes on payments to certain lenders, which could have a material adverse effect on our results of operations and liquidity.
Our reputation also may be harmed by the perceptions that our stakeholders have about our action or inaction on ESG-related issues. Damage to our reputation may reduce demand for our products and services and thus have an adverse effect on our future financial results.
Our reputation also may be harmed by the perceptions that our stakeholders have about our action or inaction on ESG-related issues. Damage to our reputation may reduce demand for our products and services and thus have an adverse effect on our future financial results. 34 Table of Contents HERTZ GLOBAL HOLDINGS, INC.
The significant ownership interests held by our Plan Sponsors, which we believe as of December 31, 2022, exceeded 50% of our outstanding common stock, means that the Plan Sponsors have the ability to control matters requiring stockholder approval, such as director elections, amendments to the Hertz Holdings Certificate of Incorporation and significant corporate transactions.
The significant ownership interests held by our Plan Sponsors, which we believe as of December 31, 2023, exceeded 50% of our outstanding common stock (without taking into account the dilutive impact of outstanding Public Warrants) means that the Plan Sponsors have the ability to control matters requiring stockholder approval, such as director elections, amendments to the Hertz Holdings Certificate of Incorporation and significant corporate transactions.
Privacy laws in the U.S. include the California Consumer Privacy Act (the “CCPA”), as amended, which expands the definition of personal information and grants, among other things, individual rights to access and delete personal information, and the right to opt out of the sale of personal information.
Privacy laws in the U.S. include the California Consumer Privacy Act (the “CCPA”), as amended, as well as other similar state privacy laws, which expand the definition of personal information and may grant, among other things, individual rights to access and delete personal information, and the right to opt out of the sale of personal information.
Substantially all of our consolidated assets are subject to security interests or are otherwise encumbered for the benefit of the lenders under our senior credit facilities, and our revenue earning vehicles and certain related vehicle assets are subject to security interests or are otherwise encumbered for the benefit of our asset-backed and asset-based financing arrangements.
Substantially all of our consolidated assets are subject to security interests or are otherwise encumbered for the benefit of our creditors. The bulk of our consolidated assets consists of our revenue earning vehicles and certain related vehicle assets and are subject to security interests or are otherwise encumbered for the benefit of our asset-backed and asset-based financing arrangements.
RISK FACTORS (Continued) choice of forum provision contained in our Certificate of Incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition.
Alternatively, if a court were to find the choice of forum provision contained in our Certificate of Incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition.
Because substantially all of our assets are encumbered under financing arrangements, our ability to incur additional secured indebtedness or to sell or dispose of assets to raise capital may be impaired, which could have a material adverse effect on our financial flexibility and force us to attempt to incur additional unsecured indebtedness, which may not be available to us. 34 Table of Contents HERTZ GLOBAL HOLDINGS, INC.
Because substantially all of our assets are encumbered under financing arrangements, our ability to incur additional secured indebtedness or to sell or dispose of assets to raise capital may be impaired or contractually limited under our existing financings, which could have a material adverse effect on our financial flexibility and force us to attempt to incur additional unsecured indebtedness, which may not be available to us or may not be available to us at favorable rates and terms.
RISKS RELATED TO LEGAL, REGULATORY AND TAX MATTERS Our foreign operations expose us to risks that may materially adversely affect our results of operations, financial condition, liquidity and cash flows. We generate a portion of our revenue outside the U.S.
RISKS RELATED TO LEGAL, REGULATORY AND TAX MATTERS Our foreign operations expose us to risks that may materially adversely affect our results of operations, financial condition, liquidity and cash flows.
In addition, stock markets experience significant price and volume fluctuations from time to time that are not related to the operating performance of particular companies. These market fluctuations may have material adverse effect on the market price of our common stock. 35 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 1A.
In addition, stock markets experience significant price and volume fluctuations from time to time that are not related to the operating performance of particular companies. These market fluctuations may have material adverse effect on the share price of our common stock.
In the event that we cannot post additional collateral, the principal under our asset-backed and certain asset-based financing arrangements may be required to be repaid sooner than anticipated with vehicle disposition proceeds and lease payments we make to our special purpose financing subsidiaries.
In the event that we cannot post additional collateral, the principal under our asset-backed and certain asset-based financing arrangements may be required to be repaid sooner than anticipated with vehicle disposition proceeds and lease payments we make to our special-purpose financing subsidiaries. If that event were to occur (or any other 35 Table of Contents HERTZ GLOBAL HOLDINGS, INC.
While we work to continuously evaluate our security throughout our business and make appropriate changes to our operating processes, improve our defenses and implement security measures designed to safeguard our systems and data, our efforts may not meet the ever evolving level of sophistication of the attacks or our measures may not be sufficient to maintain the confidentiality, 28 Table of Contents HERTZ GLOBAL HOLDINGS, INC.
Although we evaluate our security throughout our business and make appropriate changes to our operating processes, improve our defenses and implement security measures designed to safeguard our systems and data, our efforts may not meet the ever evolving level of sophistication of the attacks or our measures may not be sufficient to maintain the confidentiality, security, or availability of the data we collect, store, and use to operate our business.
These developments and other rapidly changing laws, regulations, policies and related interpretations, as well as increased enforcement actions by various governmental and regulatory agencies, may alter the environment in which we do business and may increase the ongoing costs of compliance, which could adversely impact our results of operations and cash flows.
These developments and other rapidly changing laws, regulations, policies and related interpretations, as well as increased enforcement actions by various governmental and regulatory agencies, may alter the environment in which we do business.
As a result of substantially all of our assets being encumbered for the benefit of certain creditors, our various secured creditors have liquidation priorities ahead of other stakeholders of our business.
Substantially all of our remaining consolidated assets are encumbered by and pledged to our senior creditors as collateral for certain of our senior debt obligations. As a result of substantially all of our assets being encumbered for the benefit of certain creditors, our various secured creditors have liquidation priorities ahead of other stakeholders of our business.
There has been an increased focus from stakeholders on the environmental, social and governance performance of companies, including in the areas of greenhouse gas emission levels; diversity, equity, and inclusion initiatives; sourcing and supply chain activities; human rights records; and overall corporate governance profile.
There has been an increased focus from stakeholders and activists on the environmental, social and governance performance of companies, including environmental stewardship (e.g., climate, sustainability and water use); diversity, equity, and inclusion initiatives; sourcing and supply chain activities; human capital and rights records; and overall corporate governance profile.
These risks are elevated when legacy systems and infrastructure updates are delayed or otherwise not made on a timely basis, which can result in a heightened security risk.
Although we have made progress to reduce the number of aged systems, such risks are elevated when legacy systems and infrastructure updates are delayed or otherwise not made on a timely basis, which can result in a heightened security risk.
If we choose to purchase vehicles using such financing arrangements, or if our existing financing arrangements are deemed not to qualify under the Code, our ability to claim accelerated expensing would be limited.
If we choose to purchase vehicles using such financing arrangements, or if our existing financing arrangements are deemed not to qualify under the Code, our ability to claim accelerated expensing would be limited. 30 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 1A.
A material disposition could require the amendment or refinancing of our outstanding indebtedness or a portion thereof. Our results of operations and stock price could be adversely affected if we are unable to maintain effective internal controls. The accuracy of our financial reporting is dependent on the effectiveness of our internal controls.
Our results of operations and share price could be adversely affected if we are unable to maintain effective internal controls. The accuracy of our financial reporting is dependent on the effectiveness of our internal controls.
Unauthorized parties may also attempt to gain access to our facilities or systems, or those of third parties with whom we do business, through fraud, misrepresentation, or other forms of deception. We and our service providers may not anticipate or prevent all types of attempts to obtain unauthorized access, and techniques used to obtain unauthorized access to systems change frequently.
Unauthorized parties may also attempt to gain access to our facilities or systems, or those of third parties with whom we do business, through fraud, misrepresentation, or other forms of deception or attack.
The operations of Hertz Holdings are conducted nearly entirely through its subsidiaries and its ability to generate cash to meet its debt service obligations or to pay dividends on its common stock is dependent on the earnings and 32 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 1A.
The operations of Hertz Holdings are conducted nearly entirely through its subsidiaries and its ability to generate cash to meet its debt service obligations or to pay dividends on its common stock is dependent on the earnings and the receipt of funds from its subsidiaries via return of paid-in capital, dividends or intercompany loans.
RISK FACTORS (Continued) the receipt of funds from its subsidiaries via return of paid-in capital, dividends or intercompany loans. However, none of the subsidiaries of Hertz Holdings are obligated to make funds available to Hertz Holdings for the payment of dividends or the service of its debt.
However, none of the subsidiaries of Hertz Holdings are obligated to make funds available to Hertz Holdings for the payment of dividends or the service of its debt.
Given our commitment to being a responsible corporate citizen, we actively manage ESG issues through various initiatives which we may refine or expand further in the future.
Given our commitment to being a responsible corporate citizen, we actively monitor and manage ESG trends through various initiatives, which we may refine or expand further in the future, and we could be criticized for the scope or nature of our corporate responsibility goals, or for any revisions to our goals.
Strict data privacy laws regulating the collection, transmission, storage and use of employee data and consumers’ personally-identifying information are continuously evolving in the European Union, U.S. and other jurisdictions in which we operate.
Strict data privacy laws regulating the collection, transmission, storage and use of employee data and consumers’ personal information are continuously evolving in the European Union, 29 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 1A. RISK FACTORS (Continued) U.S. and other jurisdictions in which we operate.
Numerous factors, including many over which we have no control, may have a significant impact on the market price of our common stock.
RISK FACTORS (Continued) The share price of our common stock may be volatile. Numerous factors, including many that are outside of our control, may have a significant impact on the market price of our common stock.
This has resulted in expanding and increasingly complex expectations related to reporting, diligence, and disclosure on ESG topics.
This has resulted in expanding and increasingly complex expectations related to reporting, diligence, and disclosure on ESG topics, as well as pressure to modify product offerings and business practices to drive change on these issues.
In addition, we have elected not to be governed by Section 203 of the General Corporation Law of the State of Delaware (the "DGCL"), which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with a stockholder owning 15% or more of our outstanding voting stock, unless the stockholder has held the stock for a period of at least three years.
RISK FACTORS (Continued) corporation from engaging in any of a broad range of business combinations with a stockholder owning 15% or more of our outstanding voting stock, unless the stockholder has held the stock for a period of at least three years.
RISKS RELATED TO OUR INDEBTEDNESS Our indebtedness exposes us to various risks, which could impair our financial condition. As of December 31, 2022, we had total indebtedness of approximately $13.9 billion, including $10.9 billion of vehicle related debt and $3.0 billion of non-vehicle debt.
AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 1A. RISK FACTORS (Continued) RISKS RELATED TO OUR INDEBTEDNESS Our indebtedness exposes us to various risks, which could impair our financial condition. As of December 31, 2023, we had total indebtedness of approximately $15.7 billion, including $12.2 billion of vehicle related debt and $3.4 billion of non-vehicle related debt.
If that event were to occur (or any other liquidation events), the holders of our asset-backed and certain asset-based debt may have the ability to exercise their right to direct the trustee or other secured party to foreclose on and sell vehicles to generate proceeds sufficient to repay such debt.
AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 1A. RISK FACTORS (Continued) liquidation events), the holders of our asset-backed and certain asset-based debt may have the ability to exercise their right to, directly or indirectly, foreclose on and sell vehicles to generate proceeds sufficient to repay such debt.
There can be no assurance that all of our employees, contractors and agents will comply with the Company’s policies that mandate compliance with these laws.
There can be no guarantee that all of our employees, contractors and agents will comply with the 33 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 1A. RISK FACTORS (Continued) Company’s policies that mandate compliance with these laws.
If a leak or a spill occurs, it is possible that the costs to investigate and remediate resulting impacts, as well as any associated fines, could be significant. Historically, we have indemnified property owners for the costs associated with remediating certain hazardous substance storage, recycling or disposal sites and, in some instances, for natural resource damages.
Historically, we have indemnified property owners for the costs associated with remediating certain hazardous substance storage, recycling or disposal sites and, in some instances, for natural resource damages.
Compliance with existing or future environmental laws and regulations may require material expenditures by us or otherwise have a material adverse effect on our consolidated financial condition, results of operations, liquidity or cash flows. See Item 1, ‘‘Business—Government Regulation and Environmental Matters’’ in this 2022 Annual Report. The U.S.
Compliance with existing or future environmental laws and regulations may require material expenditures by us or otherwise have a material adverse effect on our consolidated financial condition, results of operations, liquidity or 31 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 1A. RISK FACTORS (Continued) cash flows.
Similarly, if the used vehicle marketplace were to become impaired resulting in sales of vehicles below net book value, we may have difficulty meeting the minimum required collateral levels requiring us to add additional collateral in the form of cash or additional vehicles.
Similarly, if the demand for used vehicles were to decline, resulting in sales of vehicles below the net book value required by our asset-backed and certain asset-based financings, we may have difficulty meeting the minimum required collateral levels resulting in a contractual obligation to add additional collateral in the form of cash or additional vehicles to the under collateralized asset-backed and/or certain asset-based financing.
We are required to provide a report from management to our shareholders on our internal control over financial reporting that includes an assessment of the effectiveness of these controls. Internal control over financial reporting has inherent limitations, including human error, the possibility that controls could be circumvented or become inadequate because of changed conditions, and fraud.
We are required to provide a report from management to our shareholders on our internal control over financial reporting that includes an assessment of the effectiveness of these controls. Internal control over financial reporting has inherent 38 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 1A.
The Inflation Reduction Act of 2022 imposes a non-deductible 1% excise tax on the fair market value of stock repurchases commencing in 2023 that exceed $1 million in a taxable year, which will make our share repurchase program more expensive. The market price of our common stock may be volatile.
Beginning in 2023, the Inflation Reduction Act of 2022 imposed a non-deductible 1% excise tax on the fair market value of share repurchases that exceed $1 million in a taxable year, which will increase the cost of our share repurchase program. 36 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 1A.
RISK FACTORS (Continued) The disposition of revenue earning vehicles may result in taxable income which might not be fully offset by the taxable expense associated with newly purchased revenue earning vehicles.
The effects of these risks may, individually or in the aggregate, materially adversely affect our results of operations, financial condition, liquidity and cash flows. The disposition of revenue earning vehicles may result in taxable income, which might not be fully offset by the taxable expense associated with newly purchased revenue earning vehicles.
If we are unable to refinance or replace our existing asset-backed and asset-based financing or continue to finance new vehicle acquisitions through asset-backed or asset-based financing on favorable terms, on a timely basis, or at all, then our costs of 33 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 1A.
If we are unable to refinance or replace our existing asset-backed and asset-based financing or continue to finance new vehicle acquisitions through asset-backed or asset-based financing on favorable terms, on a timely basis, or at all, then our costs of financing could increase significantly and have a material adverse effect on our liquidity, interest costs, financial condition, cash flows and results of operations, including, more broadly, the financial performance of the company.
Congress and other legislative and regulatory authorities in the U.S. and internationally have considered, and will likely continue to consider, numerous measures related to climate change and greenhouse gas emissions.
Congress and other legislative and regulatory authorities in the U.S. and internationally have considered, and will likely continue to consider, and passed numerous measures related to climate change and greenhouse gas emissions, such as the European Commission's Corporate Sustainability Reporting Directive ("CSRD"), the SEC's proposed climate disclosure requirements, the Climate Corporate Data and Accountability Act (“CCDAA”) and the Climate-Related Financial Risk Act (together with the CCDAA, the “California Climate Laws”).
Because of these inherent limitations, internal control over financial reporting might not prevent or detect all misstatements or fraud.
RISK FACTORS (Continued) limitations, including human error, the possibility that controls could be circumvented or become inadequate because of changed conditions, and fraud. Because of these inherent limitations, internal control over financial reporting might not prevent or detect all misstatements or fraud.
See Item 1, “Business - Insurance and Risk Management” and Note 15, "Contingencies and Off-Balance Sheet Commitments," to the Notes to our consolidated financial statements included in this 2022 Annual Report under the caption Item 8, ‘‘Financial Statements and Supplementary Data.” Environmental laws and regulations and the costs of complying with them, or any liability or obligation imposed under them, could materially adversely affect our results of operations, financial condition, liquidity and cash flows.
Environmental laws and regulations and the costs of complying with them, or any liability or obligation imposed under them, could materially adversely affect our results of operations, financial condition, liquidity and cash flows.
We have a compliance program that promotes a culture of ethical behavior and adherence to applicable laws and regulations.
Our global business requires a compliance program to promote organizational adherence to applicable laws and regulations, and if the compliance program does not operate as designed, it can increase numerous risks to the Company. We have a compliance program that promotes a culture of ethical behavior and adherence to applicable laws and regulations.
RISK FACTORS (Continued) financing could increase significantly and have a material adverse effect on our liquidity, interest costs, financial condition, cash flows and results of operations.
These limitations could result in additional material cash tax payments that could have a material adverse effect on our results of operations and liquidity.
We cannot guarantee that the tanks will remain free from 30 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 1A. RISK FACTORS (Continued) leaks or that the use of these tanks will not result in significant spills or leakage.
We cannot guarantee that the tanks will remain free from leaks or that the use of these tanks will not result in significant spills or leakage. If a leak or a spill occurs, it is possible that the costs to investigate and remediate resulting impacts, as well as any associated fines, could be significant.
For details of our annual impairment testing, see Note 5, "Goodwill and Intangible Assets, Net," to the Notes to our consolidated financial statements included in this 2022 Annual Report under the caption Item 8, "Financial Statements and Supplementary Data." Our global business requires a compliance program to promote organizational adherence to applicable laws and regulations.
For details of our annual impairment testing, see Note 5, "Goodwill and Intangible Assets, Net," in Part II, Item 8 of this 2023 Annual Report. Changes in management’s estimates and assumptions could have a material impact to our results of operations, financial condition, liquidity and cash flows.
Alternatively, if a court were to find the 36 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 1A.
In addition, we have elected not to be governed by Section 203 of the General Corporation Law of the State of Delaware (the "DGCL"), which generally prohibits a Delaware 37 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 1A.
The effects of these risks may, individually or in the aggregate, materially adversely affect our results of operations, financial condition, liquidity and cash flows. 29 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 1A.
GENERAL RISK FACTORS A business continuity plan is necessary for our global business, and the failure of such plan may materially adversely affect our results of operations, financial condition, liquidity and cash flows.
These events could, individually or in the aggregate, lead to lower revenues, increased costs or other effects on our results of operations, financial condition, liquidity and cash flows, which may be material. If we fail to maintain, upgrade and consolidate our information technology systems, our business could be adversely affected.
ITEM 1A. RISK FACTORS (Continued) If we fail to maintain, upgrade and consolidate our information technology systems, our business could be adversely affected.
Removed
ITEM 1A. RISK FACTORS (Continued) conduct our business is dependent on the performance and availability of our networks and systems, as well as those of third-party cloud providers. We have experienced, and from time to time in the future may experience, a failure or interruption that results in the unavailability of certain information systems.
Added
We and our service providers may not anticipate or prevent all types of attempts to obtain unauthorized access, and techniques used to obtain unauthorized access to systems change frequently.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe also operate vehicle rental operations internationally, where Australia, France, Germany, Italy and Spain include approximately 30% of our International RAC segment rental locations. We own approximately 5% of the locations from which we operate our vehicle rental businesses and in some cases own real property that we lease to franchisees or other third parties.
Biggest changeWe also operate vehicle rental operations internationally, where Australia, France, Germany, Italy and Spain account for approximately 30% of our International RAC segment rental locations. We own approximately 5% of the locations from which we operate our vehicle rental businesses and in some cases own real property that we lease to franchisees or other third parties.
ITEM 2. PROPERTIES We operate vehicle rental locations at or near airports and in central business districts and suburban areas of major cities in the U.S. The states of California, Florida, Hawaii, New York and Texas include approximately 30% of our Americas RAC segment rental locations.
ITEM 2. PROPERTIES We operate vehicle rental locations at or near airports and in central business districts and suburban areas of major cities in the U.S. The states of California, Florida, Hawaii, New York and Texas account for approximately 30% of our Americas RAC segment rental locations.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

13 edited+6 added−18 removed2 unchanged
Biggest changeStone previously served as President and Chief Executive Officer and as a director of the Company between May 2020 and October 2021. From March 2018 to May 2020, Mr. Stone served as Executive Vice President and Chief Retail Operations Officer North America of the Company. From November 2015 to December 2017, Mr.
Biggest changeKeppy has served as Executive Vice President and Chief Operating Officer of the Company since November 2023. He previously served as President, North America Residential & Light Commercial HVAC, for Carrier Global Corporation ("Carrier"), a leader in sustainable healthy buildings, HVAC, commercial and transport refrigeration solutions, since March 2020. Prior to that, Mr.
Brooks has served as Senior Vice President, Chief Accounting Officer of the Company since October 2020. She previously served as Senior Vice President, Internal Audit from June 2020 to October 2020. Prior to joining the Company, Ms. Brooks was the Vice President, Internal Audit at Aptiv PLC (“Aptiv”), a global technology company, beginning May 2015. Before joining Aptiv, Ms.
She previously served as Senior Vice President, Chief Accounting Officer of the Company from October 2020 to July 2023 and as Senior Vice President, Internal Audit from June 2020 to October 2020. Prior to joining the Company, Ms. Brooks was the Vice President, Internal Audit at Aptiv PLC (“Aptiv”), a global technology company, beginning May 2015. Before joining Aptiv, Ms.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 38 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES INFORMATION ABOUT OUR EXECUTIVE OFFICERS The table below sets forth, as of January 26, 2023, the names, ages, number of years employed by the Company and positions of our executive officers.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 41 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES INFORMATION ABOUT OUR EXECUTIVE OFFICERS The table below sets forth, as of February 7, 2024, the names, ages, number of years employed by the Company and positions of our executive officers.
Batcheler has more than 15 years of experience as a general counsel and senior leader of publicly-traded companies, and more than 20 years of experience practicing law. Prior to joining the Company, Ms.
Batcheler has more than 15 years of experience as a general counsel and senior leader of publicly-traded companies, and more than 20 years of experience practicing law. Prior to joining the Company, Ms. Batcheler served as Executive Vice President, General Counsel and Corporate Secretary at Conagra Brands, Inc.
Batcheler served as Executive Vice President, General Counsel and Corporate Secretary at Conagra Brands, Inc., one of North America's leading branded food companies, from September 2009 to April 2022. Prior to that, she served in other senior management roles at Conagra since June 2006. Prior to joining Conagra, Ms.
("Conagra"), one of North America's leading branded food companies, from September 2009 to April 2022. Prior to that, she served in other senior management roles at Conagra since June 2006. Prior to joining Conagra, Ms.
Leef served as Senior Vice President, Chief Human Resources Officer at Atria Senior Living, from October 2019 to July 2020. Prior to that, Mr. Leef served as Executive Director, HR Client Support for GE and GE Appliances, a Haier Company, from 2013 to September 2019 and held various other HR roles for GE Appliances since 2003. Ms.
Leef served as Executive Director, HR Client Support for GE and GE Appliances, a Haier Company that manufacturers appliances, from 2013 to September 2019 and held various other HR roles for GE Appliances since 2003. Ms. Galloway has served as Senior Vice President and Chief Accounting Officer of the Company since July 2023.
Leef has served as Executive Vice President and Chief Human Resources Officer of the Company since February 2021 and previously served as Senior Vice President and Chief Human Resources Officer beginning 39 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES INFORMATION ABOUT OUR EXECUTIVE OFFICERS (Continued) September 2020. Prior to joining the Company, Mr.
Leef has served as Executive Vice President and Chief Human Resources Officer of the Company since February 2021 and previously served as Senior Vice President and Chief Human Resources Officer beginning September 2020. Prior to joining the Company, Mr.
Leef 49 2 Executive Vice President and Chief Human Resources Officer Alexandra D. Brooks 52 2 Senior Vice President and Chief Accounting Officer Mr. Scherr has served as Chief Executive Officer and a member of the Company's Board of Directors since February 2022. Mr. Scherr was appointed Chairperson of the Board of Directors in January 2023.
Leef 50 3 Executive Vice President and Chief Human Resources Officer Kelly Galloway 39 9 Senior Vice President and Chief Accounting Officer Mr. Scherr has served as Chief Executive Officer and a member of the Company's Board since February 2022. Mr. Scherr was appointed Chairperson of the Board in January 2023. Prior to joining the Company, Mr.
Prior to joining the Company, Mr. Scherr spent nearly three decades at Goldman Sachs, leading a range of strategic and operational functions. He most recently served as Chief Financial Officer of Goldman Sachs from 2018 through 2021, and CEO of Goldman Sachs Bank USA and Head of the Consumer & Commercial Bank Division from 2016 to 2018.
Scherr spent nearly three decades at Goldman Sachs, leading a range of strategic and operational functions. He most recently served as Chief Financial Officer of Goldman Sachs Group, Inc.
Name Age Number of Years Employed Position Stephen M. Scherr 58 — Chief Executive Officer Paul E. Stone 52 4 President and Chief Operating Officer Kenny K. Cheung 40 4 Executive Vice President and Chief Financial Officer Colleen R. Batcheler 49 — Executive Vice President, General Counsel and Secretary Eric J.
Name Age Number of Years Employed Position Stephen M. Scherr 59 1 Chief Executive Officer Alexandra D. Brooks 53 3 Executive Vice President and Chief Financial Officer Colleen R. Batcheler 50 1 Executive Vice President, General Counsel and Secretary Justin R. Keppy 51 — Executive Vice President and Chief Operating Officer Eric J.
She began her career with Pricewaterhouse Coopers, a professional services firm, and is a Certified Public Accountant. 40 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES PART II ITEM 5.
Galloway held roles at Kforce and PricewaterhouseCoopers, both professional services firms, and is a Certified Public Accountant. 43 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES PART II
Cheung worked for General Electric Company, a multinational conglomerate, in various roles across Supply Chain, Operations and Financial Planning & Analysis. Ms. Batcheler has served as Executive Vice President, General Counsel and Secretary of the Company since May 2022. Ms.
She began her career with PricewaterhouseCoopers, a professional services firm, and is a Certified Public Accountant. Ms. Batcheler has served as Executive Vice President, General Counsel and Secretary of the Company since May 2022. Ms.
Batcheler served as Vice President and Corporate Secretary at Albertson's, Inc., Associate Counsel with The Cleveland Clinic Foundation and as an Associate with the law firm of Jones Day. She earned her J.D. from Case Western Reserve School of Law, and a Bachelor of Arts degree in political science from the State University of New York College at Fredonia. Mr.
Batcheler served as Vice President and Corporate Secretary at Albertson's, Inc., Associate Counsel with The Cleveland Clinic Foundation and as an Associate with the law firm of Jones Day. Ms. Batcheler also has been a member of the board of directors of Hyster-Yale Materials Handling, Inc., and its Nominating and Corporate Governance Committee since May 2023. Mr.
Removed
Prior to joining Goldman Sachs, Mr. Scherr practiced law. Mr. Scherr holds a J.D. from Harvard Law School and an A.B. from the Woodrow Wilson School of Public and International Affairs at Princeton University. Mr. Stone has served as President and Chief Operating Officer of the Company since October 2021. Mr.
Added
("Goldman Sachs"), a global investment banking, securities and investment management firm, from 2018 through 2021, and CEO of Goldman Sachs Bank USA and Head of the Consumer & Commercial Bank Division from 2016 to 2018. Prior to joining Goldman Sachs, Mr. Scherr practiced law. Ms. Brooks has served as Executive Vice President and Chief Financial Officer since July 2023.
Removed
Stone served as the Chief Retail Officer at Cabela's Inc., an outdoor outfitter retail company. Prior to joining Cabela's Inc., Mr. Stone spent 28 years growing his career with Sam's Club, a retail warehouse subsidiary of Walmart Inc., a multinational retail corporation.
Added
Keppy was Carrier’s Vice President & General Manager, Truck Trailer Americas, within its Refrigeration segment, since November 2019. Prior to joining Carrier, Mr.
Removed
His most-recent position with Sam's Club was as Senior Vice President - West Division from 2007 to 2015, where he led operations upwards of 200 locations with more than 30,000 employees. Mr. Cheung has served as Executive Vice President and Chief Financial Officer of the Company since September 2020.
Added
Keppy served as Vice President, North America JIT for Lear Corporation, a leader in automotive technology, from June 2019 to November 2019, and as Vice President at Collins Aerospace, a leader in technologically advanced and intelligent solutions for the global aerospace and defense industry, created through a merger of UTC Aerospace and Rockwell Collins’ aerospace business, from December 2018 to June 2019.
Removed
He previously served as Executive Vice President, Chief Operational Finance and Restructuring Officer beginning in August 2020. Prior to that role, he was Senior Vice President of Global Financial Planning and Analysis and Chief Financial Officer of North America beginning in December 2018. From 2007 to 2018, Mr.
Added
Before the merger, Mr. Keppy served in a variety of 42 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES INFORMATION ABOUT OUR EXECUTIVE OFFICERS (Continued) leadership roles within UTC Aerospace Systems since August 2012, including serving as President, Sensors & Integrated Systems from July 2014 to December 2018. Mr.
Removed
Cheung held a variety of financial leadership roles with Nielsen Holdings, PLC, an information, data and measurement firm, most recently as Global Chief Audit Executive, and prior to that as a regional Chief Operating Officer after holding the position of regional Chief Financial Officer. Prior to Nielsen, Mr.
Added
Leef served as Senior Vice President, Chief Human Resources Officer at Atria Senior Living, a provider of independent, assisted living and memory care options, from October 2019 to July 2020. Prior to that, Mr.
Removed
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES HERTZ GLOBAL As of January 26, 2023, there were 875 holders of record of Hertz Holdings common stock.
Added
She previously served as Senior Vice President and Controller from August 2020 to July 2023, as Vice President and Controller from August 2019 to August 2020, as Assistant Corporate Controller from August 2018 to August 2019, and in other accounting-related roles from September 2014 to August 2018. Prior to joining the Company, Ms.
Removed
Hertz Holdings paid no cash dividends on its common stock in 2022 or 2021, and it does not expect to pay dividends on its common stock for the foreseeable future.
Removed
Since Hertz Holdings does not conduct business itself, any dividends on, and repurchases of, its common stock must be funded using dividends from Hertz, amounts borrowed under a master loan agreement with Hertz or independent borrowings.
Removed
The credit agreements governing Hertz's First Lien Credit Facilities restrict Hertz's ability to make dividends and certain payments, including payments to Hertz Holdings to fund dividends on Hertz Holdings' common stock or for share repurchases.
Removed
Nasdaq Listing On November 8, 2021, reorganized Hertz Global successfully completed the registration of its new common stock and Public Warrants with the SEC for a public offering by certain selling stockholders pursuant to a Registration Statement on Form S-1.
Removed
On November 9, 2021, reorganized Hertz Global's common stock and Public Warrants began trading on The Nasdaq Global Select Market ("Nasdaq") under the trading symbols "HTZ" and "HTZWW," respectively. In conjunction with the Nasdaq listing, certain selling stockholders of Hertz Global offered and sold 44,520,000 shares of Hertz Global's common stock to the public.
Removed
Of these shares, Hertz Global repurchased from the underwriters 10,344,828 shares for an aggregate purchase price of approximately $300 million. This amount is included in treasury stock in the accompanying Hertz Global consolidated balance sheets as of December 31, 2022 and 2021 under the caption Item 8, "Financial Statements and Supplementary Data” included in this 2022 Annual Report.
Removed
Repurchases of Equity Securities Share Repurchase Programs for Common Stock In November 2021, Hertz Global's Board of Directors approved a share repurchase program that authorized the repurchase of up to $2.0 billion worth of shares of Hertz Global's outstanding common stock (the "2021 Share Repurchase Program").
Removed
During the second quarter of 2022, the Company completed the 2021 Share Repurchase Program by repurchasing 80,677,021 shares of Hertz Global's common stock during the first and second quarters of 2022 at an average share price of $19.74 for an aggregate purchase price of $1.6 billion.
Removed
Under the completed 2021 Share Repurchase Program, a total of 97,783,047 shares of Hertz Global common stock were repurchased for an aggregate purchase price of $2.0 billion.
Removed
In June 2022, Hertz Global's Board of Directors approved a new share repurchase program (the "2022 Share Repurchase Program") that authorized additional repurchases of up to an incremental $2.0 billion worth of shares of Hertz Global's outstanding common stock.
Removed
Between inception and December 31, 2022, a total of 47,303,009 shares of Hertz Global's common stock were repurchased under the 2022 Share Repurchase Program at an average share price of $17.64 for an aggregate purchase price of $835 million .
Removed
Between January 1, 2023 and January 26, 2023, a total of 1,079,647 shares of Hertz Global's common stock were repurchased under the 2022 Share Repurchase Program at an average share price of $16.51 resulting in an aggregate purchase price of $18 million. 41 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

8 edited+124 added−2 removed1 unchanged
Biggest changeThe 2022 Share Repurchase Program 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 future repurchases.
Biggest changeIn June 2022, Hertz Global's independent Audit Committee recommended, and its Board approved, a new share repurchase program (the "2022 Share Repurchase Program") that authorized additional repurchases of up to an incremental $2.0 billion worth of shares of Hertz Global's outstanding common stock.The 2022 Share Repurchase Program, announced on June 15, 2022, has no initial time limit, does not obligate Hertz Global to acquire any particular amount of common stock and can be discontinued at any time.
The Russell 1000 Index is included because it is comprised of the 1,000 largest publicly traded issues.
The Russell 1000 Index is included because it is comprised of the 1,000 largest publicly traded issuers.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG HERTZ GLOBAL HOLDINGS, INC., RUSSELL 1000 INDEX AND MORNINGSTAR RENTAL & LEASING SERVICES INDUSTRY GROUP ASSUMES DIVIDEND REINVESTMENT HERTZ There is no established public trading market for the common stock of Hertz. Rental Car Intermediate Holdings, LLC, which is wholly-owned by Hertz Holdings, owns all of the outstanding common stock of Hertz.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG HERTZ GLOBAL HOLDINGS, INC., RUSSELL 1000 INDEX AND MORNINGSTAR RENTAL & LEASING SERVICES INDUSTRY GROUP ASSUMES DIVIDEND REINVESTMENT HERTZ There is no established public trading market for the common stock of Hertz.
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES (Continued) Any repurchases are made at the discretion of management and may be executed 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.
Any future repurchases will be made at the discretion of Hertz Global's 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.
(a) Total number of shares purchased (b) Average price paid per share (c) Total number of shares purchased as part of the publicly announced plan or program (d) Maximum number (or approximate dollar value) of shares that may yet be purchased under the publicly announced plan or program (In thousands, except share data) Common Stock October 1 – October 31, 2022 9,353,998 $ 17.26 9,353,998 $ 1,318,688 November 1 – November 30, 2022 2,464,041 $ 17.69 2,464,041 $ 1,275,088 December 1 – December 31, 2022 7,044,124 $ 15.57 7,044,124 $ 1,165,376 Total 18,862,163 $ 16.69 18,862,163 $ 1,165,376 Performance Graph The graph that follows compares the cumulative total stockholder return on Hertz Holdings common stock with the Russell 1000 Index and the Morningstar Rental & Leasing Services Industry Group.
(a) Total number of shares purchased (b) Average price paid per share (c) Total number of shares purchased as part of the publicly announced plan or program (d) Maximum number (or approximate dollar value) of shares that may yet be purchased under the publicly announced plan or program (In thousands, except share data) Common Stock October 1 – October 31, 2023 1,649,589 $ 10.50 1,649,589 $ 897,958 November 1 – November 30, 2023 2,367,562 $ 8.64 2,367,562 $ 877,500 December 1 – December 31, 2023 339,369 $ 9.00 339,369 $ 874,445 Total 4,356,520 $ 9.37 4,356,520 $ 874,445 Performance Graph The graph that follows compares the cumulative total stockholder return on Hertz Holdings common stock with the Russell 1000 Index and the Morningstar Rental & Leasing Services Industry Group.
The following table provides a breakdown of our equity security repurchases during the fourth quarter of fiscal year 2022.
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES (Continued) The following table provides a breakdown of our equity security repurchases during the fourth quarter of fiscal year 2023.
The credit agreements governing Hertz's First Lien Credit Facilities restrict Hertz's ability to make dividends and certain payments, including payments to Hertz Holdings for dividends on Hertz Holdings' common stock or for share repurchases.
The credit agreements governing Hertz's First Lien Credit Facilities and the indenture governing Hertz's Senior Notes Due 2026 and Senior Notes Due 2029 provide conditions that limit when Hertz can make dividends and certain other restricted payments, including restrictions for distributions to Hertz Holdings used to pay dividends on Hertz Holdings' common stock.
Following receipt of consent obtained from the lenders of Hertz's First Lien Credit Facilities to permit the retirement of preferred stock, Hertz paid dividends to Hertz Holdings of $2.5 billion in 2022 and 2021 to help fund common stock and preferred stock repurchases as further disclosed in Note 17, "Equity – Hertz Global" to the Notes to its consolidated financial statements in this 2022 Annual Report under the caption Item 8, "Financial Statements and Supplementary Data." Hertz did not pay dividends in 2020 to Hertz Holdings.
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES (Continued) Hertz paid dividends to Hertz Holdings of $321 million and $2.5 billion in 2023 and 2022, respectively, to help fund common stock repurchases, as further disclosed in Note 16, "Equity and Earnings (Loss) Per Common Share – Hertz Global" in Part II, Item 8 of this 2023 Annual Report.
Removed
The results are based on an assumed $100 invested on November 9, 2021 (the first day of trading on Nasdaq following Hertz 42 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 5.
Added
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES HERTZ GLOBAL Hertz Holdings' common stock and Public Warrants trade on The Nasdaq Global Select Market ("Nasdaq") under the symbols "HTZ" and "HTZWW," respectively. As of February 7, 2024, there were 863 holders of record of Hertz Holdings' common stock.
Removed
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES (Continued) Global's emergence from bankruptcy and its Nasdaq listing), at the market close, through December 31, 2022. Share price performance presented below is not necessarily indicative of future results.
Added
Hertz Holdings paid no cash dividends on its common stock in 2023 or 2022, and it does not expect to pay dividends on its common stock for the foreseeable future. Since Hertz Holdings does not conduct business itself, any dividends on, and repurchases of, its common stock must be funded using dividends or amounts borrowed from Hertz or independent borrowings.
Added
Repurchases of Equity Securities Share Repurchase Programs for Common Stock In November 2021, Hertz Global's independent Audit Committee recommended, and its Board approved, a share repurchase program that authorized the repurchase of up to $2.0 billion worth of shares of Hertz Global's outstanding common stock (the "2021 Share Repurchase Program"), which was announced on November 29, 2021.
Added
In 2022, the Company completed the 2021 Share Repurchase Program by repurchasing 80,677,021 shares of Hertz Global's common stock during the first half of 2022 at an average share price of $19.74 for an aggregate purchase price of $1.6 billion.
Added
Under the completed 2021 Share Repurchase Program, a total of 97,783,047 shares of Hertz Global common stock were repurchased for an aggregate purchase price of $2.0 billion.
Added
As of December 31, 2023, approximately $874 million remains available under the 2022 Share Repurchase Program. Between inception and December 31, 2023, a total of 66,684,169 shares of Hertz Global's common stock were repurchased in open-market transactions under the 2022 Share Repurchase Program at an average share price of $16.88 for an aggregate purchase price of $1.1 billion.
Added
There were no share repurchases after December 31, 2023 through the date of the filing of this 2023 Annual Report.
Added
There can be no assurance as to the timing or number of any share repurchases. 44 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 5.
Added
The results are based on an assumed $100 invested on November 9, 2021 (the first day of trading pursuant to a registration statement on Form S-1), at the market close, through December 31, 2023. Share price performance presented below is not necessarily indicative of future results.
Added
Rental Car Intermediate Holdings, LLC, which is wholly-owned by Hertz Holdings, owns all of the outstanding common stock of Hertz. 45 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 5.
Added
The credit agreements governing Hertz's First Lien Credit Facilities provide conditions that limit when Hertz can make dividends and certain other restricted payments, including restrictions for distributions to Hertz Holdings used to pay dividends on Hertz Holdings' common stock. ITEM 6. [RESERVED] Not applicable. ITEM 7.
Added
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.
Added
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.
Added
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.
Added
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.
Added
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.
Added
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 Part II, Item 8 of this 2023 Annual Report.
Added
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.
Added
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.
Added
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. • Vehicle Utilization – important key metric to management and investors as it is the measurement of the proportion of our vehicles that are being used to generate revenues relative to rentable fleet capacity.
Added
Higher Vehicle Utilization means more vehicles are being utilized to generate revenues. • 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.
Added
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. 46 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 7.
Added
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) • 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. • 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 number of vehicles in our rental fleet whether owned or leased ("Average Rentable Vehicles").
Added
Average Rentable Vehicles excludes vehicles for sale on our retail lots or actively in the process of being sold through other disposition channels . • 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.
Added
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.
Added
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.
Added
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 Our Business We are engaged principally in the business of renting vehicles primarily through our Hertz, Dollar and Thrifty brands.
Added
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.
Added
Significant changes in the purchase price or residual values of vehicles or interest rates can have a significant effect on our profitability depending on our ability to adjust pricing for these changes. We continue to balance our mix of EVs, non-program vehicles and program vehicles based on market conditions, including residual values.
Added
Our business requires significant expenditures for vehicles, and as such, we require substantial liquidity to finance such expenditures. Our strategy is focused on excellence in execution of our rental operations, presenting distinct product offerings through each of our brands, building on our leadership in ride share and selling vehicles from the fleet directly to consumers.
Added
Our revenues are primarily derived from rental and related charges and consist of worldwide vehicle rental revenues from all company-operated vehicle rental operations and charges to customers for the reimbursement of costs incurred relating to airport concession fees and vehicle license fees, the fueling and electric charging 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.
Added
Also included are collections from customers for vehicle damages, ancillary revenues associated with retail vehicle sales and certain royalty fees from our franchisees (such fees are approximately 2% of total revenues each period).
Added
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; 47 Table of Contents HERTZ GLOBAL HOLDINGS, INC.
Added
AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 7.
Added
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) • Depreciation expense and lease charges, net 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 business transformation programs; and • Interest expense, net.
Added
To accommodate increased demand, we seek to increase our available fleet and staff. As demand declines, we seek to reduce fleet and staff accordingly. As a result, we strive to maintain a flexible workforce, with a significant number of part-time and seasonal workers.
Added
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. 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.
Added
Our Reportable Segments We have identified two reportable segments, which are consistent with our operating segments and 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 of vehicles, as well as sales of value-added services, in locations other than the U.S., Canada, Latin America and the Caribbean.
Added
In the second quarter of 2021, as a result of the Donlen Sale, as further disclosed in Note 3, "Divestitures," in Part II, Item 8 of this 2023 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.
Added
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 sixty-six months.
Added
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.
Added
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.
Added
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.
Added
Historically, when we have increased the percentage of program vehicles, the average age of our fleet has decreased, since the average holding period for program vehicles has historically been shorter than that for non-program vehicles.
Added
When a revenue earning vehicle is acquired outside of a vehicle repurchase program, which is the case for the majority of our fleet at December 31, 2023, 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).
Added
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., 48 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 7.
Added
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) auction, retail, dealer direct), historical sales experience for similar vehicles, third-party expectations of resale value and market conditions. The vehicle is depreciated using a rate based on these estimates.
Added
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 any changes to the estimated holding period of the vehicle.
Added
Differences between actual residual values (i.e., the ultimate sales price) and those estimated in our financial statements 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.
Added
We dispose of our non-program vehicles via auction, dealer direct wholesale channels, direct sales to third parties and retail channels. Non-program vehicles disposed of through our retail locations allow us the opportunity for ancillary revenue, such as warranty, financing and title fees.
Added
We periodically review and adjust the mix between program and non-program vehicles in our fleet based on contract negotiations and the economic environment pertaining to our industry in an effort to optimize the mix of vehicles. The use of program vehicles reduces the volatility associated with residual value estimation.
Added
Chapter 11 and Emergence On May 22, 2020, as a result of the impact from the COVID-19 global pandemic, the Debtors filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code in the Bankruptcy Court.
Added
On June 10, 2021, the Plan of Reorganization was confirmed by the Bankruptcy Court and on June 30, 2021, the Plan of Reorganization became effective and the Debtors emerged from Chapter 11. 2023 Operating Overview In December 2023, we identified a group of EVs (the "EV Disposal Group") that we desired to sell in response to management's determination that the supply of EVs exceeded customer demand, elevated EV damage and collision costs and a decline in EV residual values.
Added
As a result, the EV Disposal Group, included in our Americas RAC segment, has been classified as held for sale as of December 31, 2023.
Added
The carrying values of the vehicles included in the EV Disposal Group were written down to fair value less costs to sell and resulted in a write-down of $245 million for the year ended December 31, 2023. See Note 4, "Revenue Earning Vehicles" in Part II, Item 8 of this 2023 Annual Report for further details.
Added
The following charts provide the period-over-period change for several key factors influencing our results for each of the years ended December 31, 2023 , 2022 and 2021. 49 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 7.
Added
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) (1) Includes impact of foreign currency exchange at average rates ("fx"). (2) Results shown are in constant currency as of December 31, 2022. (3) The percentages shown in this chart reflect Vehicle Utilization versus period-over-period change.
Added
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.
Added
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. Discussions regarding our results of operations, liquidity and capital resources for the year ended December 31, 2023 compared to the year ended December 31, 2022 are included within this MD&A.
Added
Discussions of our results of operations, liquidity and capital resources for the year ended December 31, 2022 compared to the year ended December 31, 2021 can be found under Part II, Item 7 of our 2022 Form 10-K, which is available on the SEC's website (www.sec.gov) or indirectly through our website (www.hertz.com). 50 Table of Contents HERTZ GLOBAL HOLDINGS, INC.
Added
AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 7.
Added
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) CONSOLIDATED RESULTS OF OPERATIONS - HERTZ Years Ended December 31, Percent Increase/(Decrease) ($ In millions) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Total revenues $ 9,371 $ 8,685 $ 7,336 8% 18% Direct vehicle and operating expenses 5,455 4,808 3,920 13 23 Depreciation of revenue earning vehicles and lease charges, net 2,039 701 497 NM 41 Non-vehicle depreciation and amortization 149 142 196 4 (27) Selling, general and administrative expenses 962 959 688 — 39 Interest expense, net: Vehicle 555 159 284 NM (44) Non-vehicle 238 169 185 41 (9) Interest expense, net 793 328 469 NM (30) Other (income) expense, net 12 2 (21) NM NM Reorganization items, net — — 513 — (100) Gain on sale of non vehicle assets (162) — — — — (Gain) from the sale of a business — — (400) — (100) Income (loss) before income taxes 123 1,745 1,474 (93) 18 Income tax (provision) benefit 329 (390) (318) NM 23 Net income (loss) 452 1,355 1,156 (67) 17 Net (income) loss attributable to noncontrolling interests — — 1 — (100) Net income (loss) attributable to Hertz $ 452 $ 1,355 $ 1,157 (67) 17 Adjusted Corporate EBITDA (a) $ 561 $ 2,305 $ 2,130 (76) 8 The footnote in the table above is shown in the "Footnotes to the Results of Operations and Selected Operating Data by Segment Tables" section of this MD&A.
Added
NM - Not meaningful Year Ended December 31, 2023 Compared with Year Ended December 31, 2022 Total revenues increased $686 million in 2023 compared to 2022 driven primarily by higher volume. Americas RAC increased $443 million and International RAC increased $244 million, including a favorable $22 million fx impact in 2023.
Added
DOE increased $646 million in 2023 compared to 2022, with increases of $502 million and $152 million in our Americas RAC and International RAC segments, respectively. DOE in our Americas RAC segment increased due primarily to higher volume-driven costs as well as higher collision and damage costs, particularly within the EV fleet, partially offset by cost saving initiatives in 2023.
Added
DOE in our International RAC segment, which included a favorable $11 million fx impact in 2023, increased primarily due to increased volume. The completion of the sale of the EV Disposal Group is expected to have a positive impact on DOE in our Americas RAC segment in 2024, particularly later in the year as sales are completed.
Added
Depreciation of revenue earning vehicles and lease charges, net increased $1.3 billion in 2023 compared to 2022, of which $1.2 billion is attributed to our Americas RAC segment.
Added
The increase in our Americas RAC segment was due to several factors, primarily (i) reduced per unit gains on vehicle dispositions, (ii) an increase in Average Vehicles and (iii) a lower volume of vehicle dispositions. The increase in Americas RAC was partially offset by longer vehicle holding periods.
Added
Additionally, depreciation of revenue earning vehicles and lease charges, net increased 51 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 7.
Added
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) compared to 2022 due to the $245 million write-down of the carrying values of the EV Disposal Group resulting from its classification as held for sale in December 2023.
Added
Depreciation of revenue earning vehicles and lease charges, net in our International RAC segment increased $116 million in 2023 compared to 2022 due primarily to higher vehicle acquisition costs, an increase in Average Vehicles and reduced per unit gains on vehicle dispositions, partially offset by a higher volume of vehicle dispositions in 2023.

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Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

78 edited+29 added−38 removed31 unchanged
Biggest changeNon-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: Cash inflow (cash outflow) Non-Vehicle Capital Assets (In millions) Capital Expenditures Disposal Proceeds Net Capital Expenditures 2022 $ (150) $ 12 $ (138) 2021 (71) 16 (55) 2020 (98) 60 (38) The table below sets forth non-vehicle capital asset expenditures, net of disposal proceeds, by segment: Cash inflow (cash outflow) Years Ended December 31, 2022 vs. 2021 2021 vs. 2020 ($ in millions) 2022 2021 2020 $ Change % Change $ Change % Change Americas RAC $ (114) $ (35) $ 3 $ (79) NM $ (38) NM International RAC (10) (8) (4) (2) 25 (4) 100 All other operations — (1) (4) 1 (100) 3 (75) Corporate (14) (11) (33) (3) 27 22 (67) Total $ (138) $ (55) $ (38) $ (83) NM $ (17) 45 NM - Not meaningful 66 Table of Contents HERTZ GLOBAL HOLDINGS, INC.
Biggest changeMANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) The table below sets forth non-vehicle capital asset expenditures, net of disposal proceeds, by segment: Cash inflow (cash outflow) Years Ended December 31, 2023 vs. 2022 2022 vs. 2021 ($ in millions) 2023 2022 2021 $ Change % Change $ Change % Change Americas RAC $ 52 $ (114) $ (35) $ 166 NM $ (79) NM International RAC (19) (10) (8) (9) 90 (2) 25 All other operations — — (1) — — 1 (100) Corporate (40) (14) (11) (26) NM (3) 27 Total $ (7) $ (138) $ (55) $ 131 (95) $ (83) NM NM - Not meaningful Year Ended December 31, 2023 Compared with Year Ended December 31, 2022 In 2023, proceeds for non-vehicle capital assets increased by $169 million compared to 2022, driven by our Americas RAC segment, resulting primarily from the sale of certain non-vehicle capital assets as disclosed in Note 3, "Divestitures," in Part II, Item 8 of this 2023 Annual Report.
Our management believes eliminating the effect of fluctuations in foreign currency exchange rates is useful in analyzing underlying trends.
Our management believes eliminating the effect of fluctuations in foreign currency exchange rates is useful in analyzing underlying trends.
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.
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 ("ASC") 350 – Intangibles, Goodwill and Other ("ASC 350"), we test the recoverability of our goodwill and indefinite-lived intangible assets by performing an impairment analysis.
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.
Any future 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.
Further deterioration in the global economic conditions in the travel industry and the supply chain constraints 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.
Deterioration in the global economic conditions in the travel industry and the supply chain constraints 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.
In addition to the financial covenant, the First Lien Credit Agreement contains customary affirmative covenants including, among other things, the delivery of quarterly and annual financial statements and compliance certificates, and covenants related to 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.
In addition to the financial covenant, the First Lien Credit Agreement contains customary affirmative covenants including, among other things, the delivery of quarterly and annual financial statements and compliance certificates, and covenants related to conduct of business, maintenance of property and insurance, compliance with environmental laws and the granting of security interests for the benefit of the secured parties under that agreement on after-acquired real property, fixtures and future subsidiaries.
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 WACC used in the discounted cash flow model methodology is calculated based upon the fair value of our debt and share price with a debt-to-equity ratio comparable to the vehicle rental car industry as well specific risk factors for each reporting unit.
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 maintained by us in the U.S. and internationally.
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 in the U.S. and internationally.
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, 2022, we were in compliance with all covenants in the First Lien Credit Agreement.
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, 2023, we were in compliance with all covenants in the First Lien Credit Agreement.
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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) 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.
Between inception and December 31, 2022, a total of 47,303,009 shares of Hertz Global's common stock were repurchased under the 2022 Share Repurchase Program at an average share price of $17.64 for an aggregate purchase price of $835 million .
Between inception and December 31, 2022, a total of 47,303,009 shares of Hertz Global's common stock were repurchased in open-market transactions under the 2022 Share Repurchase Program at an average share price of $17.64 for an aggregate purchase price of $835 million.
Revenue earning vehicles consist of vehicles utilized in our vehicle rental operations. For the year ended December 31, 2022, 9% 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.
Revenue earning vehicles consist of vehicles utilized in our vehicle rental operations. For the year ended December 31, 2023, 12% 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.
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, which may result in periodic adjustments to the depreciation rates applied prospectively.
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, which may result in periodic adjustments to the depreciation rates recognized in the period of change and future periods.
We did not contribute to the Hertz Retirement Plan during 2022, and we do not anticipate contributing to the Hertz Retirement Plan during 2023. For the international plans, we anticipate contributing approximately $3 million during 2023.
We did not contribute to the Hertz Retirement Plan during 2023, and we do not anticipate contributing to the Hertz Retirement Plan during 2024. For the international plans, we anticipate contributing approximately $4 million during 2024.
During the second quarter of 2022, we completed the 2021 Share Repurchase Program by repurchasing 80,677,021 shares of Hertz Global's common stock during the first and second quarters of 2022 at an average share price of $19.74 for an aggregate purchase price of $1.6 billion.
In 2022, the Company completed the 2021 Share Repurchase Program by repurchasing 80,677,021 shares of Hertz Global's common stock during the first half of 2022 at an average share price of $19.74 for an aggregate purchase price of $1.6 billion.
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 monitored quarterly based on evolving accident claim history and insurance related state legislation changes.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) 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 monitored quarterly based on evolving accident claim history and insurance related state legislation changes.
In June 2022, Hertz Global's Board of Directors approved a new share repurchase program (the "2022 Share Repurchase Program") that authorized additional repurchases of up to an incremental $2.0 billion worth of shares of Hertz Global's outstanding common stock.
In June 2022, Hertz Global's independent Audit Committee recommended, and its Board approved, the 2022 Share Repurchase Program that authorized additional repurchases of up to an incremental $2.0 billion worth of shares of Hertz Global's outstanding common stock.
Common shares repurchased are included in treasury stock in the accompanying Hertz Global consolidated balance sheets as of December 31, 2022 and 2021 under the caption Item 8, "Financial Statements and Supplementary Data” included in this 2022 Annual Report.
Common shares repurchased are included in treasury stock in the accompanying Hertz Global consolidated balance sheets as of December 31, 2023 and 2022 in Part II, Item 8 of this 2023 Annual Report.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Covenants The First Lien Credit Agreement requires us to comply with the following financial covenant: 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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Covenants The First Lien Credit Agreement requires us to comply with the following financial covenant: a ratio of First Lien debt to Consolidated EBITDA, as defined in our First Lien Credit Agreement which may be materially different than Adjusted Corporate EBITDA presented in this 2023 Annual Report, (the "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.
Changes in estimated residual values or holding periods could cause a material change in our estimates of non-program depreciation expense. 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 69 Table of Contents HERTZ GLOBAL HOLDINGS, INC.
Changes in estimated residual values or holding periods could cause a material change in our estimates of non-program depreciation expense. Self-insured Liabilities Self-insured liabilities on our consolidated balance sheets primarily include public liability, property damage and liability insurance supplement.
Cash Flows - Hertz Global As of December 31, 2022 and 2021, Hertz Global had cash and cash equivalents of $943 million and $2.3 billion, respectively, and restricted cash and cash equivalents of $475 million and $393 million, respectively.
Cash Flows - Hertz Global As of December 31, 2023 and 2022, Hertz Global had cash and cash equivalents of $764 million and $943 million, respectively, and restricted cash and cash equivalents of $442 million and $475 million, respectively.
Cash and Cash Equivalents As of December 31, 2022, we had $943 million of cash and cash equivalents and $475 million of restricted cash and cash equivalents. As of December 31, 2022, $512 million of cash and cash equivalents and $90 million of restricted cash and cash equivalents were held by our subsidiaries outside of the U.S.
Cash and Cash Equivalents As of December 31, 2023, we had $764 million of cash and cash equivalents and $442 million of restricted cash and cash equivalents. As of December 31, 2023, $328 million of cash and cash equivalents and $129 million of restricted cash and cash equivalents were held by our subsidiaries outside of the U.S.
Cash Flows - Hertz As of December 31, 2022 and 2021, Hertz had cash and cash equivalents of $943 million and $2.3 billion, respectively, and restricted cash and cash equivalents of $475 million and $393 million, respectively.
Cash Flows - Hertz As of December 31, 2023 and 2022, Hertz had cash and cash equivalents of $764 million and $943 million, respectively, and restricted cash and cash equivalents of $442 million and $475 million, respectively.
Such letters of credit have been issued primarily to support our insurance programs and to provide credit enhancement for our asset-backed securitization facilities, as well as to support our vehicle rental concessions and leaseholds. As of December 31, 2022, none of the issued letters of credit have been drawn upon.
As of December 31, 2023, there is no remaining capacity to issue letters of credit under the Term C Loan. Such letters of credit have been issued primarily to provide credit enhancement for our asset-backed securitization facilities and to support our insurance programs, as well as to support our vehicle rental concessions and leaseholds.
In addition, the program vehicles manufactured by any such company would 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.
In addition, the program vehicles manufactured by any such company would 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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) States and numerous foreign jurisdictions. Significant judgments and estimates are required in the determination of the consolidated income tax expense. We record net deferred tax assets to the extent we believe these assets will more likely than not be realized.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) We record net deferred tax assets to the extent we believe these assets will more likely than not be realized.
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 2022 Annual Report under the caption Item 8, "Financial Statements and Supplementary Data," decreased in December 31, 2022 compared with December 31, 2021 primarily due to decreased returns on plan assets.
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," in Part II, Item 8 of this 2023 Annual Report, increased in December 31, 2023 compared with December 31, 2022 due primarily to an increase in the value of plan assets.
The following table summarizes the net change in cash and cash equivalents and restricted cash and cash equivalents for the periods shown: Years Ended December 31, 2022 vs. 2021 2021 vs. 2020 (In millions) 2022 2021 2020 $ Change $ Change Cash provided by (used in): Operating activities $ 2,538 $ 1,806 $ 956 $ 732 $ 850 Investing activities (4,233) (3,544) 4,591 (689) (8,135) Financing activities 488 2,872 (5,403) (2,384) 8,275 Effect of exchange rate changes (25) (34) 46 9 (80) Net change in cash and cash equivalents and restricted cash and cash equivalents $ (1,232) $ 1,100 $ 190 $ (2,332) $ 910 Year ended December 31, 2022 compared with year ended December 31, 2021 In 2022, cash flows from operating activities increased by $732 million year over year due primarily to the $518 million change in net income, as adjusted for non-cash and non-operating items, and the associated decrease of $214 million in working capital requirements.
The following table summarizes the net change in cash and cash equivalents and restricted cash and cash equivalents for the periods shown: Years Ended December 31, 2023 vs. 2022 2022 vs. 2021 (In millions) 2023 2022 2021 $ Change $ Change Cash provided by (used in): Operating activities $ 2,471 $ 2,538 $ 1,806 $ (67) $ 732 Investing activities (4,024) (4,233) (3,544) 209 (689) Financing activities 1,316 488 2,872 828 (2,384) Effect of exchange rate changes 25 (25) (34) 50 9 Net change in cash and cash equivalents and restricted cash and cash equivalents $ (212) $ (1,232) $ 1,100 $ 1,020 $ (2,332) Year Ended December 31, 2023 Compared with Year Ended December 31, 2022 In 2023, cash flows from operating activities decreased by $67 million year over year due primarily to a $169 million change in working capital accounts, partially offset by a $102 million change in net income, as adjusted for non-cash and non-operating items.
The calculation of Depreciation Per Unit Per Month is shown below: Americas RAC International RAC Years Ended December 31, ($ in millions, except as noted) 2022 2021 2020 2022 2021 2020 Depreciation of revenue earning vehicles and lease charges, net $ 553 $ 343 $ 1,352 $ 148 $ 154 $ 243 Foreign currency adjustment (1) 1 — 1 11 (5) 5 Adjusted depreciation of revenue earning vehicles and lease charges $ 554 $ 343 $ 1,353 $ 159 $ 149 $ 248 Average Vehicles (in whole units) 411,047 355,647 437,547 94,999 77,643 102,793 Adjusted depreciation of revenue earning vehicles and lease charges divided by Average Vehicles (in whole dollars) $ 1,348 $ 964 $ 3,093 $ 1,673 $ 1,915 $ 2,410 Number of months in period (in whole units) 12 12 12 12 12 12 Depreciation Per Unit Per Month (in whole dollars) $ 112 $ 81 $ 258 $ 139 $ 160 $ 201 (1) Based on December 31, 2021 foreign currency exchange rates for all periods presented. 59 Table of Contents HERTZ GLOBAL HOLDINGS, INC.
The calculation of Depreciation Per Unit Per Month is shown below: Americas RAC International RAC Years Ended December 31, ($ in millions, except as noted) 2023 2022 2021 2023 2022 2021 Depreciation of revenue earning vehicles and lease charges, net $ 1,775 $ 553 $ 343 $ 264 $ 148 $ 154 Foreign currency adjustment (1) 1 1 1 (5) — (15) Adjusted depreciation of revenue earning vehicles and lease charges $ 1,776 $ 554 $ 344 $ 259 $ 148 $ 139 Average Vehicles (in whole units) 446,219 411,047 355,647 106,240 94,999 77,643 Adjusted depreciation of revenue earning vehicles and lease charges divided by Average Vehicles (in whole dollars) $ 3,981 $ 1,347 $ 967 $ 2,434 $ 1,556 $ 1,784 Number of months in period (in whole units) 12 12 12 12 12 12 Depreciation Per Unit Per Month (in whole dollars) $ 332 $ 112 $ 81 $ 203 $ 130 $ 149 (1) Based on December 31, 2022 foreign currency exchange rates for all periods presented. 58 Table of Contents HERTZ GLOBAL HOLDINGS, INC.
The following table summarizes the net change in cash and cash equivalents and restricted cash and cash equivalents for Hertz Global for the periods shown: Years Ended December 31, 2022 vs. 2021 2021 vs. 2020 (In millions) 2022 2021 2020 $ Change $ Change Cash provided by (used in): Operating activities $ 2,538 $ 1,806 $ 953 $ 732 $ 853 Investing activities (4,233) (3,544) 4,591 (689) (8,135) Financing activities 487 2,845 (5,372) (2,358) 8,217 Effect of exchange rate changes (25) (34) 46 9 (80) Net change in cash and cash equivalents and restricted cash and cash equivalents $ (1,233) $ 1,073 $ 218 $ (2,306) $ 855 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 17, "Equity – Hertz Global," to the Notes to our consolidated financial statements under the caption Item 8, "Financial Statements and Supplementary Data” included in this 2022 Annual Report, the issuance or exercise of Public Warrants as disclosed in Note 19, "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 2022 Annual Report.
The following table summarizes the net change in cash and cash equivalents and restricted cash and cash equivalents for Hertz Global for the periods shown: Years Ended December 31, 2023 vs. 2022 2022 vs. 2021 (In millions) 2023 2022 2021 $ Change $ Change Cash provided by (used in): Operating activities $ 2,474 $ 2,538 $ 1,806 $ (64) $ 732 Investing activities (4,024) (4,233) (3,544) 209 (689) Financing activities 1,313 487 2,845 826 (2,358) Effect of exchange rate changes 25 (25) (34) 50 9 Net change in cash and cash equivalents and restricted cash and cash equivalents $ (212) $ (1,233) $ 1,073 $ 1,021 $ (2,306) 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 the issuance or repurchase of our common stock and the exercise of Public Warrants.
Income Taxes Our income tax expense, deferred tax assets and liabilities, and liabilities for unrecognized tax benefits reflect management’s best estimate of current and future taxes to be paid. We are subject to income taxes in the United 70 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 7.
Income Taxes Our income tax expense, deferred tax assets and liabilities, and liabilities for unrecognized tax benefits reflect management’s best estimate of current and future taxes to be paid. We are subject to income taxes in the United States and numerous foreign jurisdictions.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) The table below sets forth expenditures for revenue earning vehicles, net of disposal proceeds, by segment: Cash inflow (cash outflow) Years Ended December 31, 2022 vs. 2021 2021 vs. 2020 ($ in millions) 2022 2021 2020 $ Change % Change $ Change % Change Americas RAC $ (3,470) $ (3,763) $ 3,903 $ 293 (8) $ (7,666) NM International RAC (628) (489) 929 (139) 28 (1,418) NM All other operations — (84) (276) 84 (100) 192 (70) Total $ (4,098) $ (4,336) $ 4,556 $ 238 (5) $ (8,892) NM NM - Not meaningful Year ended December 31, 2022 compared with year ended December 31, 2021 In 2022, revenue earning vehicle expenditures increased approximately $3.4 billion, or 48%, compared to 2021, primarily in our Americas RAC segment, due primarily to increased vehicle acquisitions resulting from increased travel demand.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) 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: Cash inflow (cash outflow) Revenue Earning Vehicles (In millions) Capital Expenditures Disposal Proceeds Net Capital Proceeds (Expenditures) 2023 $ (9,514) $ 5,498 $ (4,016) 2022 (10,596) 6,498 (4,098) 2021 (7,154) 2,818 (4,336) The table below sets forth expenditures for revenue earning vehicles, net of disposal proceeds, by segment: Cash inflow (cash outflow) Years Ended December 31, 2023 vs. 2022 2022 vs. 2021 ($ in millions) 2023 2022 2021 $ Change % Change $ Change % Change Americas RAC $ (3,412) $ (3,470) $ (3,763) $ 58 (2) $ 293 (8) International RAC (604) (628) (489) 24 (4) (139) 28 All other operations — — (84) — — 84 (100) Total $ (4,016) $ (4,098) $ (4,336) $ 82 (2) $ 238 (5) NM - Not meaningful Year Ended December 31, 2023 Compared with Year Ended December 31, 2022 In 2023, revenue earning vehicle expenditures decreased approximately $1.1 billion, or 10%, compared to 2022, primarily in our Americas RAC segment, resulting from decreased vehicle acquisitions in 2023 as we held vehicles longer.
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 2022 Annual Report under the caption Item 8, "Financial Statements and Supplementary Data." Revenue Earning Vehicles Our principal assets are revenue earning vehicles, which represented approximately 56% of our total assets as of December 31, 2022.
For additional discussion of our critical accounting policies, as well as our significant accounting policies, see Note 2, "Significant Accounting Policies," in Part II, Item 8 of this 2023 Annual Report. Revenue Earning Vehicles Our principal assets are revenue earning vehicles, which represented approximately 60% of our total assets as of December 31, 2023.
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 2022 Annual Report under the caption Item 8, "Financial Statements and Supplementary Data." 71 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES
Recent Accounting Pronouncements For a discussion of recent accounting pronouncements, see Note 2, "Significant Accounting Policies," — "Recently Issued Accounting Pronouncements," in Part II, Item 8 of this 2023 Annual Report. 70 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES
Non-vehicle Debt Significant financing activities during the year ended December 31, 2022 for our non-vehicle debt were as follows: During 2022, the aggregate committed amount under the First Lien RCF was increased from $1.3 billion to $1.9 billion and the sublimit for letters of credit was increased from $1.1 billion to $1.8 billion.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Significant financing activities during the year ended December 31, 2023 for our non-vehicle debt were as follows: In March 2023, the aggregate committed amount under the First Lien RCF was increased from $1.9 billion to $2.0 billion.
The calculation of Total RPU Per Month is shown below: Americas RAC International RAC Years Ended December 31, ($ in millions, except as noted) 2022 2021 2020 2022 2021 2020 Total Revenues-adjusted for foreign currency $ 7,284 $ 6,212 $ 3,759 $ 1,512 $ 951 $ 885 Average Rentable Vehicles (in whole units) 385,234 345,306 406,239 93,564 76,190 98,261 Total revenue per unit (in whole dollars) $ 18,909 $ 17,991 $ 9,254 $ 16,158 $ 12,485 $ 9,003 Number of months in period (in whole units) 12 12 12 12 12 12 Total RPU Per Month (in whole dollars) $ 1,576 $ 1,499 $ 771 $ 1,346 $ 1,040 $ 750 (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, net, with all periods adjusted to eliminate the effect of fluctuations in foreign currency exchange rates, divided by the Average Vehicles in each period, which is determined using a simple average of the number of vehicles at the beginning and end of a period, and then dividing by the number of months in the period reported.
Americas RAC International RAC Years Ended December 31, ($ in millions, except as noted) 2023 2022 2021 2023 2022 2021 Total Revenues-adjusted for foreign currency $ 7,719 $ 7,268 $ 6,204 $ 1,628 $ 1,409 $ 886 Average Rentable Vehicles (in whole units) 422,485 385,234 345,306 104,173 93,564 76,190 Total revenue per unit (in whole dollars) $ 18,271 $ 18,867 $ 17,968 $ 15,627 $ 15,062 $ 11,628 Number of months in period (in whole units) 12 12 12 12 12 12 Total RPU Per Month (in whole dollars) $ 1,523 $ 1,572 $ 1,497 $ 1,302 $ 1,255 $ 969 (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, net, with all periods adjusted to eliminate the effect of fluctuations in foreign currency exchange rates, divided by the Average Vehicles in each period, which is determined using a simple average of the number of vehicles at the beginning and end of a period, and then dividing by the number of months in the period reported.
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.
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.
Approximately $119 million of the outstanding vehicle debt in our International RAC segment is scheduled to mature during the twelve months following the issuance of this 2022 Annual Report. 64 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 7.
International RAC Approximately $90 million of the outstanding vehicle debt in our International RAC segment is scheduled to mature during the twelve months following the issuance of this 2023 Annual Report.
Debt Financing Refer to Note 6, "Debt," to the Notes to our consolidated financial statements included in this 2022 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, 2022.
Debt Financing Refer to Note 6, "Debt," in Part II, Item 8 of this 2023 Annual Report for information on our outstanding debt obligations and our borrowing capacity and availability under our revolving credit facilities as of December 31, 2023. Cash paid for interest on vehicle debt during 2023 and 2022 was $469 million and $204 million, respectively.
The level of 2023 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.
The level of 2024 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. 67 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 7.
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. 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.
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.
See Note 6, "Debt," to the Notes to our consolidated financial statements included in this 2022 Annual Report under the caption Item 8, "Financial Statements and Supplementary Data" for further details. (2) Represents fleet purchases where contracts have been signed or are pending with committed orders under the terms of such agreements.
See Note 6, "Debt," in Part II, Item 8 of this 2023 Annual Report for further details. (2) Represents fleet purchases where contracts have been signed or are pending with committed orders under the terms of such agreements. We expect purchases under these agreements will be financed primarily through the issuance of vehicle debt.
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 67 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 7.
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.
Our 2022 worldwide net periodic pension expense included in the accompanying consolidated statement of operations for the year ended December 31, 2022 is $7 million, which was comparable to 2021.
Our 2023 worldwide net periodic pension expense included in the accompanying consolidated statement of operations for the year ended December 31, 2023 was $11 million compared to $7 million in 2022 resulting primarily from increased interest costs, partially offset by reduced settlements.
AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) estimate for both reported accident claims not yet paid, and claims incurred but not yet reported and are recorded on an undiscounted basis.
These represent an estimate for both reported accident claims not yet paid, and claims incurred but not yet reported and are recorded on an undiscounted basis. Reserve requirements are based 68 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 7.
The financial covenant was effective beginning in the third quarter of 2021. As of December 31, 2022, we were in compliance with the First Lien Ratio.
As of December 31, 2023, we were in compliance with the First Lien Ratio.
We expect purchases under these agreements will be financed primarily through the issuance of vehicle debt. These purchases are subject to vehicle manufacturers satisfying their performance commitments under such agreements.
These purchases are subject to vehicle manufacturers satisfying their performance commitments under such agreements.
The calculation of Total RPD is shown below: Americas RAC International RAC Years Ended December 31, ($ in millions, except as noted) 2022 2021 2020 2022 2021 2020 Revenues $ 7,280 $ 6,215 $ 3,756 $ 1,405 $ 985 $ 872 Foreign currency adjustment (1) 4 (3) 3 107 (34) 13 Total Revenues-adjusted for foreign currency $ 7,284 $ 6,212 $ 3,759 $ 1,512 $ 951 $ 885 Transaction Days (in thousands) 111,759 100,085 85,016 25,101 20,488 22,283 Total RPD (in dollars) $ 65.18 $ 62.07 $ 44.22 $ 60.23 $ 46.43 $ 39.70 (1) Based on December 31, 2021 foreign currency exchange rates for all periods presented.
The calculation of Total RPD is shown below: Americas RAC International RAC Years Ended December 31, ($ in millions, except as noted) 2023 2022 2021 2023 2022 2021 Revenues $ 7,722 $ 7,280 $ 6,215 $ 1,649 $ 1,405 $ 985 Foreign currency adjustment (1) (3) (12) (11) (21) 4 (99) Total Revenues-adjusted for foreign currency $ 7,719 $ 7,268 $ 6,204 $ 1,628 $ 1,409 $ 886 Transaction Days (in thousands) 125,215 111,759 100,085 28,974 25,101 20,488 Total RPD (in dollars) $ 61.65 $ 65.03 $ 61.99 $ 56.19 $ 56.14 $ 43.24 (1) Based on December 31, 2022 foreign currency exchange rates for all periods presented.
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.
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.
Letters of Credit As of December 31, 2022, there were outstanding standby letters of credit totaling $691 million comprised primarily of $431 million were issued under the First Lien RCF and $245 million issued under the Term C Loan. As of December 31, 2022, there is no remaining capacity to issue letters of credit under the Term C Loan.
In November 2023, Hertz entered into an incremental term loan ("Incremental Term B Loan") in an aggregate principal amount of $500 million. Letters of Credit As of December 31, 2023, there were outstanding standby letters of credit totaling $995 million comprised primarily of $734 million issued under the First Lien RCF and $245 million issued under the Term C Loan.
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 required.
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 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.
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.
The 2022 Share Repurchase Program, announced on June 15, 2022, has no initial time limit, does not obligate Hertz Global to acquire any particular amount of common stock and can be discontinued at any time. As of December 31, 2023, approximately $874 million remains available under the 2022 Share Repurchase Program.
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: Cash inflow (cash outflow) Revenue Earning Vehicles (In millions) Capital Expenditures Disposal Proceeds Net Capital Proceeds (Expenditures) 2022 $ (10,596) $ 6,498 $ (4,098) 2021 (7,154) 2,818 (4,336) 2020 (5,542) 10,098 4,556 65 Table of Contents HERTZ GLOBAL HOLDINGS, INC.
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: Cash inflow (cash outflow) Non-Vehicle Capital Assets (In millions) Capital Expenditures Disposal Proceeds Net Capital Expenditures 2023 $ (188) $ 181 $ (7) 2022 (150) 12 (138) 2021 (71) 16 (55) 65 Table of Contents HERTZ GLOBAL HOLDINGS, INC.
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 2022 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 2022 Annual Report.
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 2023 Annual Report. 64 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 7.
Cash paid for interest on non-vehicle debt during 2022 and 2021 was $168 million and $198 million, respectively. The $30 million decrease in non-vehicle debt interest is primarily due to the payoff and termination of non-vehicle debt in accordance with the Plan of Reorganization in 2021.
The $265 million increase in cash paid for vehicle debt interest is due primarily to higher interest rates and higher debt levels resulting primarily from the issuances of the HVF III Series 2023 Notes. Cash paid for interest on non-vehicle debt during 2023 and 2022 was $252 million and $168 million, respectively.
Vehicle repurchase programs guarantee on an aggregate basis the residual value of the program vehicle upon sale according to certain parameters which include the holding period, mileage and condition of the vehicles. For all other vehicles, depreciation is recorded over the forecasted holding period based on estimated residual values at the time of disposal.
For all other vehicles, depreciation is recorded over the estimated holding period based on projected residual values at the time of disposal.
The Hertz Canadian Securitization was amended in June 2022 to extend the maturity of the aggregate maximum borrowings of CAD$350 million to June 2024. In December 2022, the Hertz Canadian Securitization was amended to provide for aggregate maximum borrowings of CAD$390 million, for a temporary commitment period through April 2023.
Repurchase Facilities As of December 31, 2023, there were no repurchase transactions outstanding under the Repurchase Facilities. Hertz Canadian Securitization The Hertz Canadian Securitization was amended in June 2023 to provide for aggregate maximum borrowings of CAD$475 million and to extend the maturity date to June 2025.
During the year ended December 31, 2022, 245,959 Public Warrants were exercised, of which 60,661 were cashless exercises and 185,298 were exercised for $13.80 per share. The outstanding warrants are exercisable through June 30, 2051. As of December 31, 2022, the exercise price remains $13.80.
There can be no assurance as to the timing or number of shares of any repurchases. Public Warrants During the years ended December 31, 2023 and 2022, 48,965 and 245,959 Public Warrants were exercised, of which 31,034 and 60,661 were cashless exercises and 17,931 and 185,298 were exercised for $13.80 per share, respectively.
In July and August 2022, all of the Series 2022-1 Class D Notes were sold to third parties. • HVF III Series 2022-2 Notes were issued in January 2022 in an aggregate principal amount of $750 million.
At the time of issuance, Hertz, an affiliate of HVF III, purchased the Class D Notes in an aggregate principal amount of $40 million, which were subsequently sold to third parties in September 2023 as discussed below. • HVF III Series 2023-2 Notes, issued in March 2023, in an aggregate principal amount of $300 million. • HVF III Series 2023-3 Notes and Series 2023-4 Notes, issued in August 2023, in aggregate principal amounts of $500 million, respectively.
Americas RAC In 2022, the following HVF III Series 2022 Fixed Rate Rental Car Asset Backed Notes (the "Series 2022 Notes") were issued as follows: • HVF III Series 2022-1 Notes were issued in January 2022 in an aggregate principal amount of $750 million.
ABS Program The following HVF III Series 2023 Fixed Rate Rental Car Asset Backed Notes (collectively, the "HVF III Series 2023 Notes") were issued during the year ended December 31, 2023: • HVF III Series 2023-1 Notes, issued in March 2023, in an aggregate principal amount of $500 million in four classes (Class A, Class B, Class C and Class D).
CONTRACTUAL OBLIGATIONS The following table details our contractual cash obligations as of December 31, 2022: Payments Due by Period (In millions) Total 2023 2024 to 2025 2026 to 2027 After 2027 Vehicles: Debt obligation $ 10,948 $ 657 $ 7,305 $ 2,986 $ — Interest on debt (1) 837 406 361 70 — Non-Vehicle: Debt obligation 3,035 20 28 526 2,461 Interest on debt (1) 1,051 216 381 312 142 Minimum fixed obligations for operating leases 2,943 471 693 466 1,313 Commitments to purchase vehicles (2) 6,625 5,412 318 418 477 Purchase obligations and other (3) 269 143 91 33 2 Total $ 25,708 $ 7,325 $ 9,177 $ 4,811 $ 4,395 (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, 2022.
CONTRACTUAL AND OTHER OBLIGATIONS The following table details our material cash requirements for our contractual and other obligations as of December 31, 2023: Payments Due by Period (In millions) Total 2024 2025 to 2026 2027 to 2028 After 2028 Vehicles: Debt obligation $ 12,314 $ 2,322 $ 7,888 $ 1,854 $ 250 Interest on debt (1) 1,132 509 511 109 3 Non-Vehicle: Debt obligation 3,515 20 536 1,959 1,000 Interest on debt (1) 1,080 269 463 302 46 Minimum fixed obligations for operating leases 3,475 554 827 559 1,535 Commitments to purchase vehicles (2) 6,672 6,672 — — — Purchase obligations and other (3) 243 92 85 23 43 Total $ 28,431 $ 10,438 $ 10,310 $ 4,806 $ 2,877 (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, 2023.
Following the expiration of the temporary commitment period, aggregate maximum borrowings will revert to CAD$350 million. Approximately $532 million of the outstanding vehicle debt in our Americas RAC segment is scheduled to mature during the twelve months following the issuance of this 2022 Annual Report.
Vehicle Debt Significant financing activities during the year ended December 31, 2023 for our vehicle debt were as follows: Americas RAC Approximately $2.3 billion of the outstanding vehicle debt in our Americas RAC segment is scheduled to mature during the twelve months following the issuance of this 2023 Annual Report.
There is subordination within each of the Series 2022 Notes based on class. Proceeds from the issuance of the Series 2022 Notes were used to repay amounts outstanding on the Series 2021-A Notes and for the purchase or refinancing of vehicles.
At the time of each respective issuance, proceeds from the issuance of the HVF III Series 2023 Notes were used primarily to repay amounts outstanding on the Series 2021-A Notes, with any remaining funds used for the purchase or refinancing of certain eligible vehicles. 62 Table of Contents HERTZ GLOBAL HOLDINGS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) 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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) share price of $15.01 for an aggregate purchase price of $291 million.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) • HVF III Series 2022-4 Notes were issued in March 2022 in an aggregate principal amount of $667 million. Hertz purchased the Class D Notes, and as a result $87 million of the aggregate principal amount eliminated in consolidation.
AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) During initial issuance of the HVF III Series 2022-2, Series 2022-5 and Series 2023-1 Class D Notes (the "Class D Notes"), Hertz, an affiliate of HVF III, purchased the Class D Notes.
Revenue earning vehicle disposal proceeds increased approximately $3.7 billion in 2022 compared to 2021, primarily in our Americas RAC segment, resulting from increased vehicle dispositions.
Revenue earning vehicle disposal proceeds decreased approximately $1.0 billion, or 15%, in 2023 compared to 2022, primarily in our Americas RAC segment, driven by reduced per unit gains recognized on lower volume of vehicle dispositions.
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 2022 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.
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," in Part II, Item 8 of this 2023 Annual Report.
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: (In millions) As of December 31, 2022 As of December 31, 2021 Cash and cash equivalents $ 943 $ 2,257 Availability under the First Lien RCF 1,514 925 Corporate liquidity $ 2,457 $ 3,182 We believe that cash and 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.
We believe that cash and cash equivalents generated by our operations and cash received on the disposal of vehicles, including disposal of the EV Disposal Group, 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 for the next twelve months and for the foreseeable future thereafter.
Financing Facility in April 2022 to extend the maturity of the aggregate maximum borrowings of £100 million to October 2023. • Hertz U.K. Limited amended the U.K.
Financing Facility The U.K. Financing Facility was amended in June 2023 to provide for aggregate maximum borrowings of £135 million and to extend the maturity date to November 2024. 63 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 7.
Our primary investing activities relate to the acquisition and disposal of revenue earning vehicles.
Additionally, cash flows from working capital accounts decreased due to lower value added tax payables arising from intercompany fleet transfers in 2022. Our primary investing activities relate to the acquisition and disposal of revenue earning vehicles.
Between January 1, 2023 and January 26, 2023, a total of 1,079,647 shares of Hertz Global's common stock were repurchased under the 2022 Share Repurchase Program at an average share price of $16.51 resulting in an aggregate purchase price of $18 million.
Since inception of the 2022 Share Repurchase program a total of 66,684,169 shares of Hertz Global's common stock have been repurchased in open-market transactions at an average share price of $16.88 for an aggregate purchase price of $1.1 billion. There were no share repurchases after December 31, 2023 through the date of the filing of this 2023 Annual Report.
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.
The increase in net financing cash inflows in 2023 was partially offset by a decrease of $1.8 billion in net proceeds from vehicle debt as a result of less issuances in 2023 compared to 2022.
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 2022 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.
AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) OFF-BALANCE SHEET COMMITMENTS AND ARRANGEMENTS 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.
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 share repurchases.
The $828 million increase in cash inflows was due primarily to a $2.2 billion reduction in dividends paid by Hertz to Hertz Holdings due to reduced share repurchases in 2023, and an increase of $492 million in net proceeds from non-vehicle debt resulting primarily from the issuance of a new term loan in 2023.
Share Repurchase Programs 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 (the "2021 Share Repurchase Program").
Share Repurchase Programs for Common Stock In November 2021, Hertz Global's independent Audit Committee recommended, and its Board approved, the 2021 Share Repurchase Program, which was announced on November 29, 2021.
If different assumptions or conditions were to prevail, the results could be materially different from our reported results.
The following accounting policies involve a higher degree of judgment and complexity in their application, unless otherwise noted below, 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.
Between the inception of the share repurchase program and December 31, 2021, a total of 61 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 7.
During the year ended December 31, 2023, a total of 19,381,160 shares of Hertz Global's common stock were repurchased in open-market transactions at an average 60 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 7.
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 2022 Annual Report. 62 Table of Contents HERTZ GLOBAL HOLDINGS, INC.
The $84 million increase in non-vehicle debt interest is primarily due to higher interest rates and outstanding borrowings on the First Lien RCF during 2023. 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.
Removed
As discussed above, effective in the first quarter of 2022, we revised our calculation of Total RPU to use Average Rentable Vehicles as the denominator. Accordingly, prior periods have been restated to conform with the revised definition.
Added
We continue to assert non-permanent reinvestment of foreign earnings that give rise to excess cash, provided such cash can be remitted in a tax efficient manner.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

10 edited+0 added−0 removed5 unchanged
Biggest changeManagement does not expect that the effect of inflation on our overall operating costs will be greater for us than for our competitors. 73 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES
Biggest changeMany of our other operating expenses are also expected to fluctuate in connection with inflation, such as health care costs, vehicle fueling prices and electric charging costs. Management does not expect that the effect of inflation on our overall operating costs will be greater for us than for our competitors. 72 Table of Contents HERTZ GLOBAL HOLDINGS, INC.
Floating rate debt carries interest based generally on LIBOR, Secured Overnight Financing Rate ("SOFR"), Euro inter-bank offer rate ("EURIBOR") or their equivalents for local currencies or bank conduit commercial paper rates plus an applicable margin. Increase in interest rates could therefore significantly increase the associated interest payments that we are required to make on this debt.
Floating rate debt carries interest based generally on Secured Overnight Financing Rate ("SOFR"), Euro inter-bank offer rate ("EURIBOR") or their equivalents for local currencies or bank conduit commercial paper rates plus an applicable margin. Increase in interest rates could therefore significantly increase the associated interest payments that we are required to make on this debt.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK RISK MANAGEMENT For a discussion of additional risks arising from our operations, including vehicle liability, general liability and property damage insurable risks, see “Item 1—Business—Risk Management” included in this 2022 Annual Report.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK RISK MANAGEMENT For a discussion of additional risks arising from our operations, including vehicle liability, general liability and property damage insurable risks, see “Item 1—Business—Risk Management” included in this 2023 Annual Report.
Assuming a hypothetical increase of one percentage point in interest rates on our debt portfolio, cash equivalents and investments as of December 31, 2022, our pre-tax operating results would decrease by an estimated $50 million over a twelve-month period.
Assuming a hypothetical increase of one percentage point in interest rates on our debt portfolio, cash equivalents and investments as of December 31, 2023, our pre-tax operating results would decrease by an estimated $52 million over a twelve-month period.
Assuming a hypothetical change of one percentage point to the foreign currency exchange rates on our intercompany loan balance as of December 31, 2022, our pre-tax operating results would increase (decrease) by approximately $3 million.
Assuming a hypothetical change of one percentage point to the foreign currency exchange rates on our intercompany loan balance as of December 31, 2023, our pre-tax operating results would increase (decrease) by approximately $6 million.
AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (Continued) Fuel Risks We purchase unleaded gasoline and diesel fuel at prevailing market rates. We are subject to price exposure related to the fluctuations in the price of fuel. We anticipate that fuel risk will remain a market risk for the foreseeable future.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (Continued) Fuel Risks We purchase unleaded gasoline and diesel fuel at prevailing market rates. We are subject to price exposure related to the fluctuations in the price of fuel. We anticipate that fuel risk will remain a market risk for the foreseeable future.
We have determined that a 10% hypothetical change in the price of fuel will not have a material impact on our operating results. Inflation The increased cost of vehicles and staffing costs are the primary inflationary factors affecting us. Many of our other operating expenses are also expected to increase with inflation, including health care costs and gasoline.
We have determined that a 10% hypothetical change in the price of fuel will not have a material impact on our operating results. Inflationary Risks The increased cost of vehicles, higher staffing costs and increased interest expenses are the primary inflationary factors affecting us.
From time to time, we enter into interest rate swap and/or interest rate cap agreements to manage interest rate risk and our mix of fixed and floating rate debt. See Note 12, "Financial Instruments," to the Notes to our consolidated financial statements under the caption Item 8, "Financial Statements and Supplementary Data” included in this 2022 Annual Report.
From time to time, we enter into interest rate swap and/or interest rate cap agreements to manage interest rate risk and our mix of fixed and floating rate debt. See Note 11, "Financial Instruments," in Part II, Item 8 of this 2023 Annual Report.
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 2022 Annual Report. We have assessed our exposure to changes in interest rates by analyzing the sensitivity to our operating results assuming various changes in market interest rates.
See Note 6, "Debt," in Part II, Item 8 of this 2023 Annual Report. We have assessed our exposure to changes in interest rates by analyzing the sensitivity to our operating results assuming various changes in market interest rates.
We may also purchase foreign currency exchange rate derivative financial instruments to manage exposure to fluctuations in foreign currency exchanges rates. See Note 12, "Financial Instruments," to the Notes to our consolidated financial statements under the caption Item 8, "Financial Statements and Supplemental Data," included in this 2022 Annual Report. 72 Table of Contents HERTZ GLOBAL HOLDINGS, INC.
We may also purchase foreign currency exchange rate derivative financial instruments to manage exposure to fluctuations in foreign currency exchanges rates. See Note 11, "Financial Instruments," in Part II, Item 8 of this 2023 Annual Report. 71 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 7A.

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