ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Hertz Global Holdings, Inc. is a holding company and its principal, wholly owned subsidiary is The Hertz Corporation. Hertz Global consolidates Hertz for financial statement purposes, and Hertz comprises approximately the entire balance of Hertz Global’s assets, liabilities and operating cash flows. In addition, Hertz’s operating revenues and operating expenses comprise nearly 100% of Hertz Global’s revenues and operating expenses. As such, Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") that follows herein is for Hertz and also applies to Hertz Global in all material respects, unless otherwise noted. Differences between the operations and results of Hertz and Hertz Global are separately disclosed and explained.
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
We sometimes use the words “we,” “our,” “us” and the “Company” in this MD&A for disclosures that relate to all of Hertz and Hertz Global.
The statements in this MD&A regarding industry outlook, our expectations regarding the performance of our business and the other non-historical statements are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in Item 1A, "Risk Factors.” The following MD&A provides information that we believe to be relevant to an understanding of our consolidated financial condition and results of operations. Our actual results may differ materially from those contained in or implied by any forward-looking statements. You should read the following MD&A together with the sections entitled “Cautionary Note Regarding Forward-Looking Statements and Summary of Risk Factors,” Item 1A, "Risk Factors” and our consolidated financial statements and related notes included in Part II, Item 8 of this 2025 Annual Report.
In this MD&A, we refer to the following non-GAAP measure and key metrics:
• Adjusted Corporate EBITDA – important non-GAAP measure to management because it allows management to assess the operational performance of our business, exclusive of certain items, and allows management to assess the performance of the entire business on the same basis as the segment measure of profitability. Management believes that it is important to investors for the same reasons it is important to management and because it allows investors to assess our operational performance on the same basis that management uses internally. Adjusted EBITDA, the segment measure of profitability and accordingly a GAAP measure, is calculated exclusive of certain items which are largely consistent with those used in the calculation of Adjusted Corporate EBITDA.
• 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. 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. Depreciation Per Unit Per Month is reflective of how we are managing the costs of our vehicles and facilitates a comparison with other participants in the vehicle rental industry.
• Total Revenue Per Transaction Day ("Total RPD," also referred to as "pricing") – important key metric to management and investors as it represents a measurement of the changes in underlying pricing in the vehicle rental business and encompasses the elements in vehicle rental pricing that management has the ability to control.
• 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"). 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. 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.
Our non-GAAP measure and key metrics should not be considered in isolation and should not be considered superior to, or a substitute for, financial measures calculated in accordance with U.S. GAAP. The above non-GAAP measure and key metrics are defined, and the non-GAAP measure is reconciled to its most comparable U.S. GAAP measure, in the "Footnotes to the Results of Operations and Selected Operating Data by Segment Tables" section of this MD&A.
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
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. Our profitability is primarily a function of the volume, mix and pricing of rental transactions and the utilization of vehicles based on its availability to rent, the related ownership cost of vehicles and other operating costs. Significant changes in the purchase price or residual values of vehicles or interest rates can have a significant effect on our profitability depending on 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. Our business requires significant expenditures for vehicles, and, as such, we require substantial liquidity to finance such expenditures.
Through our "Back-to-Basics" roadmap, we are committed to executing a comprehensive strategy to transform our business, anchored by three financial pillars: disciplined fleet management, revenue optimization and rigorous cost control. Building on our brand strength, global network and fleet management expertise, we remain committed to operational excellence and keeping customers central to everything we do. We have strengthened our fleet by refining our capabilities by sourcing vehicles strategically, deploying them efficiently and monetizing them effectively. Our approach balances disciplined execution today with systematic innovation for tomorrow, leveraging industry experience to adapt to evolving market dynamics and position us for sustainable growth in the future of mobility.
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. Also included are collections from customers for vehicle damages, ancillary revenues associated with, but not limited to, retail vehicle sales and certain royalty fees from our franchisees (such fees are approximately 2% of total revenues each period).
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 collision and damage, maintenance, fuel and electric charging costs;
• depreciation expense and lease charges, net relating to revenue earning vehicles, including gains and losses and related costs associated with the disposal of vehicles, including vehicle sales;
• 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.
To accommodate increased demand, we seek to increase our available fleet and staff. As demand declines, we seek to reduce our fleet and staff accordingly. As a result, we strive to maintain a flexible workforce, with a significant number of part-time and seasonal workers. 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.
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Our 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.
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. Also included in revenue earning vehicles are vehicles placed on our retail lots for sale or actively in the process of being sold through other disposition channels.
Program vehicles are purchased under repurchase or guaranteed depreciation programs with vehicle manufacturers wherein the manufacturers agree to repurchase vehicles at a specified price or guarantee the depreciation rate on the vehicles during established repurchase periods, subject to, among other things, certain vehicle condition, mileage and holding period requirements. Guaranteed depreciation programs guarantee the residual value of the program vehicle upon sale, subject to, among other things, certain vehicle condition, mileage and holding period requirements. Program vehicles generally provide us with flexibility to increase or reduce the size of our fleet based on market demand. 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.
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, 2025, 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). The planned holding period of our revenue earning vehicles as of December 31, 2025, typically averaged 27 months; however, certain vehicles in our fleet may have fallen above or below our average planned holding period. 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 and market conditions. The vehicle is depreciated using a rate based on these estimates. Depreciation rates are reviewed on a quarterly basis based on management's ongoing assessment of present and estimated future market conditions, their effect on residual values at the expected time of disposal and any changes to the estimated holding period of the vehicle. 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.
We dispose of our non-program vehicles through a variety of channels, including dealer direct wholesale channels, retail and auction. Non-program vehicles disposed of through our retail locations allow us the opportunity for ancillary vehicle sales revenue, such as warranty, financing and title fees, with vehicle sale proceeds offsetting our depreciation of revenue earning vehicles and lease charges. 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.
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
2025 Operating Overview
The following charts provide the period-over-period change for several key factors influencing our results for each of the years ended December 31, 2025 and 2024:
(1) Includes impact of foreign currency exchange at average rates.
(2) Results shown are in constant currency as of December 31, 2024.
(3) The percentages shown in this chart reflect Vehicle Utilization versus period-over-period change.
For more information on the above, see the discussion of our results on a consolidated basis and by segment that follows herein. In this MD&A, certain amounts in the following tables are denoted in millions. Amounts, such as percentages, are calculated from the underlying numbers in thousands, and as a result, may not agree to the amount when calculated from the tables in millions. Discussions regarding our results of operations, liquidity and capital resources for the year ended December 31, 2025 compared to the year ended December 31, 2024 are included within this MD&A. Discussions of our results of operations, liquidity and capital resources for the year ended December 31, 2024 compared to the year ended December 31, 2023 can be found under Part II, Item 7 of
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
our 2024 Form 10-K, which is available on the SEC's website (www.sec.gov) or indirectly through our website (www.hertz.com).
CONSOLIDATED RESULTS OF OPERATIONS - HERTZ
Years Ended December 31,
Percent
Increase/(Decrease)
($ In millions)
Total revenues
Depreciation of revenue earning vehicles and lease charges, net
Direct vehicle and operating expenses
Non-vehicle depreciation and amortization
Selling, general and administrative expenses
Interest expense, net:
Vehicle
Non-vehicle
Interest expense, net
Other (income) expense, net
(Gain) from the sale of non-vehicle capital assets
Legal settlement
Bankruptcy-related litigation reserve
Long-Lived Assets impairment
Income (loss) before income taxes
Income tax (provision) benefit
Net income (loss)
Adjusted Corporate EBITDA (a)
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.
NM - Not meaningful
Year Ended December 31, 2025 Compared with Year Ended December 31, 2024
Total revenues decreased $544 million in 2025 compared to 2024, resulting primarily from a decrease of $639 million in our Americas RAC segment, partially offset by an increase of $94 million in our International RAC segment. The decrease in total revenues resulted primarily from lower pricing and lower volume.
Depreciation of revenue earning vehicles and lease charges, net decreased $1.7 billion in 2025 compared to 2024, which is primarily attributable to our Americas RAC segment. Depreciation of revenue earning vehicles and lease charges, net decreased due primarily to (i) impacts from our fleet refresh reducing the capital cost of newly acquired vehicles and strengthening of residual values at the expected time of disposal resulting from market improvements, (ii) per unit gains on vehicle dispositions recognized in 2025 compared to per unit losses recognized in the same period in 2024 resulting in part from the disposition of vehicles through a more optimized channel mix, (iii) lower Average Vehicles and (iv) write-downs on the carrying values of the EVs classified as held for sale in the first half of 2024.
DOE decreased $200 million in 2025 compared to 2024 with a decrease of $265 million in our Americas RAC segment, partially offset by an increase of $60 million in our International RAC segment. The decrease in DOE was due primarily to lower volume.
Non-vehicle depreciation and amortization decreased $23 million in 2025 compared to 2024, resulting from decreases of $13 million and $10 million associated with our Americas RAC segment and corporate operations,
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
respectively. The decrease in non-vehicle depreciation and amortization is due primarily to certain asset retirements in 2024 and first quarter of 2025 resulting in an increase in assets that were fully depreciated in 2025.
SG&A increased $138 million in 2025 compared to 2024 driven primarily by an increase of $132 million associated with our corporate operations. The increase in SG&A associated with our corporate operations was due primarily to a non-cash stock-based compensation gain related to forfeitures of former CEO awards in March 2024, higher personnel costs and increased professional fees.
Vehicle interest expense, net increased $18 million in 2025 compared to 2024 due primarily to higher average rates, partially offset by decreased debt levels and lower market rates.
Non-vehicle interest expense, net increased $100 million in 2025 compared to 2024 due primarily to higher debt levels and higher average interest rates.
In 2025, we recognized a gain of $144 million on the sales of certain non-vehicle capital assets, primarily during the second and third quarters of 2025, in our Americas RAC segment, as disclosed in Note 3, "Divestitures," in Part II, Item 8 of this 2025 Annual Report.
In 2025, we recognized a gain of $154 million related to the receipt of a legal settlement distribution in connection with our participation in a class action settlement, as disclosed in Note 15, "Contingencies and Off-Balance Sheet Commitments," in Part II, Item 8 of this 2025 Annual Report.
In 2025, we recognized additional expense of $24 million in our corporate operations related to an existing bankruptcy-related litigation reserve for interest that continues to accrue during each subsequent reporting period until resolved. Refer also to Note 15, "Contingencies and Off-Balance Sheet Commitments," in Part II, Item 8 of this 2025 Annual Report.
In 2024, we recognized an impairment charge of $1.0 billion associated with the Long-Lived Assets in our Americas RAC and International RAC segments, as disclosed in Note 4, "Long-Lived Assets Impairment," in Part II, Item 8 of this 2025 Annual Report.
For the year ended December 31, 2025, we recorded a tax benefit of $83 million, which resulted in an effective tax rate of 11%. For the year ended December 31, 2024, we recorded a tax benefit of $375 million, which resulted in an effective tax rate of 11%. The change in tax in 2025 compared to 2024 was driven primarily by lower pretax losses in 2025, non-taxable year-over-year fluctuations in fair value adjustments of the Exchangeable Note and lower tax credits in 2025, partially offset by lower valuation allowances in 2025.
CONSOLIDATED RESULTS OF OPERATIONS - HERTZ GLOBAL
The above discussion for Hertz also applies to Hertz Global.
Hertz Global had a loss of $44 million and income of $275 million from the change in fair value of Public Warrants that was incremental to Hertz for the years ended December 31, 2025 and 2024, respectively.
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
RESULTS OF OPERATIONS AND SELECTED OPERATING DATA BY SEGMENT
Americas RAC
As of December 31, 2025, our Americas RAC operations had a total of approximately 4,600 company-operated and franchisee locations, comprised of 2,000 airport and 2,600 off airport locations.
Results of operations and our discussion and analysis for our Americas RAC segment were as follows:
Years Ended December 31,
Percent Increase/(Decrease)
($ In millions, except as noted)
Total revenues
Depreciation of revenue earning vehicles and lease charges, net
Direct vehicle and operating expenses
Direct vehicle and operating expenses as a percentage of total revenues
Non-vehicle depreciation and amortization
Selling, general and administrative expenses
Selling, general and administrative expenses as a percentage of total revenues
Vehicle interest expense
(Gain) from the sale of non-vehicle capital assets
Legal settlement
Long-Lived Assets impairment
Adjusted EBITDA
Transaction Days (in thousands) (b)
Average Vehicles (in whole units) (c)
Average Rentable Vehicles (in whole units) (c)
Vehicle Utilization (c)
Total RPD (in dollars) (d)
Total RPU Per Month (in whole dollars) (e)
Depreciation Per Unit Per Month (in whole dollars) (f)
Percentage of program vehicles as of period end
Footnotes to the table above are shown in the "Footnotes to the Results of Operations and Selected Operating Data by Segment Tables" section of this MD&A.
NM - Not meaningful
Year Ended December 31, 2025 Compared with Year Ended December 31, 2024
Total Americas RAC revenues decreased $639 million in 2025 compared to 2024 due primarily to lower pricing and lower volume. Total RPD and Transaction Days declined across most customer channels in 2025 compared to 2024. Airport revenues comprised 68% and 69% of total revenues for the segment in 2025 and 2024, respectively.
Depreciation of revenue earning vehicles and lease charges, net for Americas RAC decreased $1.6 billion in 2025 compared to 2024 due primarily to (i) impacts from our fleet refresh reducing the capital cost of newly acquired vehicles and strengthening of residual values at the expected time of disposal resulting from market improvements, (ii) per unit gains on vehicle dispositions recognized in 2025 compared to per unit losses recognized in the same period in 2024 resulting in part from the disposition of vehicles through a more optimized channel mix, (iii) lower Average Vehicles and (iv) write-downs on the carrying values of the EVs classified as held for sale in 2024.
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
DOE for Americas RAC decreased $265 million in 2025 compared to 2024 due primarily to lower volume, reduced self-insurance liabilities as a result of adverse experience and case development and decreased collision and damage charges, partially offset by increased facility rent expense resulting in part from sale leaseback transactions in 2025.
Non-vehicle depreciation and amortization decreased $13 million in 2025 compared to the same period in 2024 due primarily to certain asset retirements in 2024 resulting in an increase in assets that were fully depreciated in 2025.
SG&A for Americas RAC increased $22 million in 2025 compared to 2024 due primarily to increased professional fees, higher personnel costs and increased advertising spend, partially offset by lower restructuring related charges.
Vehicle interest expense for Americas RAC increased $31 million in 2025 compared to 2024 due primarily to higher average rates due in part to the issuance of the HVF III 2025 Notes, partially offset by lower market rates and lower debt levels.
Americas RAC recognized a gain of $144 million on the sale of certain non-vehicle capital assets, primarily during the second and third quarters of 2025, as disclosed in Note 3, "Divestitures," in Part II, Item 8 of this 2025 Annual Report.
Americas RAC recognized a gain of $154 million in 2025 related to the receipt of a legal settlement distribution in connection with our participation in a class action settlement, as disclosed in Note 15, "Contingencies and Off-Balance Sheet Commitments," in Part II, Item 8 of this 2025 Annual Report.
Americas RAC recognized an impairment charge of $865 million in 2024 associated with certain long-lived assets, of which $740 million and $125 million related to its revenue earning vehicles and ROU assets, respectively. See Note 4, "Long-Lived Assets Impairment," in Part II, Item 8 of this 2025 Annual Report for further details.
International RAC
As of December 31, 2025, our International RAC operations had approximately 6,300 company-operated and franchisee locations, comprised of 1,500 airport and 4,800 off airport locations in over 110 countries and jurisdictions, including Africa, Asia, Australia, Europe, the Middle East and New Zealand.
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Results of operations and our discussion and analysis for our International RAC segment were as follows:
Years Ended December 31,
Percent Increase/(Decrease)
($ In millions, except as noted)
Total revenues
Depreciation of revenue earning vehicles and lease charges, net
Direct vehicle and operating expenses
Direct vehicle and operating expenses as a percentage of total revenues
Non-vehicle depreciation and amortization
Selling, general and administrative expenses
Selling, general and administrative expenses as a percentage of total revenues
Vehicle interest expense
Long-Lived Assets impairment
Adjusted EBITDA
Transaction Days (in thousands) (b)
Average Vehicles (in whole units) (c)
Average Rentable Vehicles (in whole units) (c)
Vehicle Utilization (c)
Total RPD (in dollars) (d)
Total RPU Per Month (in whole dollars) (e)
Depreciation Per Unit Per Month (in whole dollars) (f)
Percentage of program vehicles as of period end
Footnotes to the table above are shown in the "Footnotes to the Results of Operations and Selected Operating Data by Segment Tables" section of this MD&A.
NM - Not meaningful
Year Ended December 31, 2025 Compared with Year Ended December 31, 2024
Total revenues for International RAC increased $94 million in 2025 compared to 2024, due primarily to higher volume resulting from increases primarily in our leisure channel in 2025 compared to 2024. Total revenues for International RAC were also impacted by a favorable $47 million foreign currency impact in 2025.
Depreciation of revenue earning vehicles and lease charges, net for International RAC decreased $60 million in 2025 compared to 2024 due primarily to (i) per unit gains recognized on vehicle dispositions in 2025 compared to per unit losses recognized in the same period in 2024 and (ii) changes in fleet mix.
DOE for International RAC increased $60 million in 2025 compared to 2024 due primarily to higher facility rent costs, increased maintenance costs and increased volume.
SG&A for International RAC decreased $16 million in 2025 compared to 2024 due primarily to decreased restructuring related charges, partially offset by expenses incurred related to an unfavorable litigation ruling in the third quarter of 2025.
Vehicle interest expense for International RAC decreased $13 million in 2025 compared to 2024 due primarily to lower debt levels and lower market rates.
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
International RAC recognized an impairment charge of $183 million in 2024 associated with its revenue earning vehicles. See Note 4, "Long-Lived Assets Impairment," in Part II, Item 8 of this 2025 Annual Report for further details.
Footnotes to the Results of Operations and Selected Operating Data by Segment Tables
(a) Adjusted Corporate EBITDA is calculated as net income (loss), adjusted for income taxes; non-vehicle depreciation and amortization; non-vehicle debt interest, net; vehicle debt-related charges; restructuring and restructuring related charges; unrealized (gains) losses from financial instruments; change in fair value of Public Warrants and certain other miscellaneous items. When evaluating our operating performance, investors should not consider Adjusted Corporate EBITDA in isolation of, or as a substitute for, measures of our financial performance determined in accordance with U.S. GAAP. The reconciliations to the most comparable consolidated U.S. GAAP measure are presented below.
HERTZ
Years Ended December 31,
(In millions)
Net income (loss)
Adjustments:
Income tax provision (benefit)
Non-vehicle depreciation and amortization
Non-vehicle debt interest, net (1)
Vehicle debt-related charges (2)
Restructuring and restructuring related charges (3)
Unrealized (gains) losses on financial instruments (4)
Gain on sale of non-vehicle capital assets (5)
Legal settlement (6)
Bankruptcy-related litigation reserve (7)
Long-Lived Assets impairment (8)
Non-cash stock-based compensation forfeitures (9)
Other items (10)
Adjusted Corporate EBITDA
HERTZ GLOBAL
Years Ended December 31,
(In millions)
Net income (loss)
Adjustments:
Income tax provision (benefit)
Non-vehicle depreciation and amortization
Non-vehicle debt interest, net (1)
Vehicle debt-related charges (2)
Restructuring and restructuring related charges (3)
Unrealized (gains) losses on financial instruments (4)
Gain on sale of non-vehicle capital assets (5)
Legal settlement (6)
Bankruptcy-related litigation reserve (7)
Long-Lived Assets impairment (8)
Non-cash stock-based compensation forfeitures (9)
Change in fair value of Public Warrants (11)
Other items (10)
Adjusted Corporate EBITDA
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(1) In 2025, excludes gains (losses) related to the fair value of the Exchange Features 2029 and the Exchange Feature 2030, which are included in footnote 4 below.
(2) Represents vehicle debt-related charges relating to the amortization of deferred financing costs and debt discounts and premiums.
(3) Represents charges incurred under restructuring actions as defined in U.S. GAAP. Also includes restructuring related charges such as incremental costs incurred related to personnel reductions, litigation and closure of underperforming locations.
(4) Represents unrealized (gains) losses on derivative financial instruments. In 2025, also includes gains (losses) related to the fair value of the Exchange Features 2029 and the Exchange Feature 2030. See Note 12, "Financial Instruments," in Part II, Item 8 of this 2025 Annual Report.
(5) Represents the gains on sales of certain non-vehicle capital assets sold in 2025 and 2023. See Note 3, "Divestitures," in Part II, Item 8 of this 2025 Annual Report.
(6) Represents the gain related to the receipt of a legal settlement distribution in September 2025 in connection with the Company’s participation in a class action settlement. See Note 15, "Contingencies and Off-Balance Sheet Commitments," in Part II, Item 8 of this 2025 Annual Report.
(7) Represents an increase to an existing bankruptcy-related litigation reserve initially recorded in September 2024, including interest that continues to accrue during each subsequent reporting period. See Note 15, "Contingencies and Off-Balance Sheet Commitments," in Part II, Item 8 of this 2025 Annual Report.
(8) Represents Long-Lived Assets impairment charges recognized in the third quarter of 2024. See Note 4, "Long-Lived Assets Impairment," in Part II, Item 8 of this 2025 Annual Report.
(9) Represents former CEO awards forfeited in March 2024. See Note 9, "Stock-Based Compensation," in Part II, Item 8 of this 2025 Annual Report.
(10) Represents miscellaneous items. For 2025, primarily includes a pension plan settlement reserve adjustment, a one-time settlement agreement to restructure an IT contract, certain IT-related charges, cloud computing costs, an unfavorable litigation ruling and certain concession-related adjustments. For 2024, primarily includes certain IT-related charges, cloud computing costs and certain storm-related vehicle damages, partially offset by a loss recovery settlement and certain litigation settlements.
(11) Represents the change in fair value during the reporting period for Hertz Global's outstanding Public Warrants, as disclosed in Note 13, "Fair Value Measurements," in Part II, Item 8 of this 2025 Annual Report.
(b) Transaction Days represents the total number of 24-hour periods, with any partial period counted as one Transaction Day, that vehicles were on rent (the period between when a rental contract is opened and closed) in a given period. Thus, it is possible for a vehicle to attain more than one Transaction Day in a 24-hour period.
(c) Vehicle Utilization is calculated by dividing total Transaction Days by Available Car Days. Available Car Days represents Average Rentable Vehicles multiplied by the number of days in a given period. Average Rentable Vehicles excludes vehicles for sale on our retail lots or actively in the process of being sold through other disposition channels and is determined using a simple average of such vehicles at the beginning and end of a given period.
Americas RAC
International RAC
Years Ended December 31,
Transaction Days (in thousands)
Average Rentable Vehicles (in whole units)
Number of days in period (in whole units)
Available Car Days (in thousands)
Vehicle Utilization
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(d) Total RPD is calculated as revenues, with all periods adjusted to eliminate the effect of fluctuations in foreign currency exchange rates ("Total Revenues - adjusted for foreign currency"), divided by the total number of Transaction Days. Our management believes eliminating the effect of fluctuations in foreign currency exchange rates is useful in analyzing underlying trends. The calculation of Total RPD is shown below:
Americas RAC
International RAC
Years Ended December 31,
($ in millions, except as noted)
Revenues
Foreign currency adjustment (1)
Total Revenues-adjusted for foreign currency
Transaction Days (in thousands)
Total RPD (in dollars)
(1) Based on December 31, 2024 foreign currency exchange rates for all periods presented.
(e) Total RPU Per Month is calculated as Total Revenues - adjusted for foreign currency divided by the Average Rentable Vehicles in each period and then divided by the number of months in the period reported.
Americas RAC
International RAC
Years Ended December 31,
($ in millions, except as noted)
Total Revenues-adjusted for foreign currency
Average Rentable Vehicles (in whole units)
Total revenue per unit (in whole dollars)
Number of months in period (in whole units)
Total RPU Per Month (in whole dollars)
(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. Our management believes eliminating the effect of fluctuations in foreign currency exchange rates is useful in analyzing underlying trends. The calculation of Depreciation Per Unit Per Month is shown below:
Americas RAC
International RAC
Years Ended December 31,
($ in millions, except as noted)
Depreciation of revenue earning vehicles and lease charges, net (1)
Foreign currency adjustment (2)
Adjusted depreciation of revenue earning vehicles and lease charges
Average Vehicles (in whole units)
Adjusted depreciation of revenue earning vehicles and lease charges divided by Average Vehicles (in whole dollars)
Number of months in period (in whole units)
Depreciation Per Unit Per Month (in whole dollars)
(1) Reflects four months of depreciation at post-impairment rates for the year ended December 31, 2024. See Note 4, "Long-Lived Assets Impairment," in Part II, Item 8 of this 2025 Annual Report.
(2) Based on December 31, 2024 foreign currency exchange rates for all periods presented.
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
LIQUIDITY AND CAPITAL RESOURCES
Our U.S. and international operations are funded by cash provided by operating activities and by extensive financing arrangements in the U.S. and internationally.
Cash and Cash Equivalents
As of December 31, 2025, we had $565 million of cash and cash equivalents and $602 million of restricted cash and cash equivalents. As of December 31, 2025, $231 million of cash and cash equivalents and $89 million of restricted cash and cash equivalents were held by our subsidiaries outside of the U.S. 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.
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 for the next twelve months and for the foreseeable future thereafter.
Cash Flows - Hertz
As of December 31, 2025 and 2024, Hertz had cash and cash equivalents of $565 million and $591 million, respectively, and restricted cash and cash equivalents of $602 million and $541 million, respectively. 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,
(In millions)
$ Change
Cash provided by (used in):
Operating activities
Investing activities
Financing activities
Effect of exchange rate changes
Net change in cash and cash equivalents and restricted cash and cash equivalents
Year Ended December 31, 2025 Compared with Year Ended December 31, 2024
During 2025, cash flows from operating activities decreased $598 million period over period due primarily to a $190 million change in net income, as adjusted for non-cash and non-operating items and a $408 million change in working capital accounts. Cash flows from working capital accounts decreased due primarily to an increase to an existing bankruptcy-related litigation reserve recorded in the third quarter of 2024 and an increase in self-insurance liabilities as a result of adverse experience and case development in 2024, partially offset by a reduction in value added tax ("VAT") receivables due primarily to VAT refunds received in 2025.
Our primary investing activities relate to the acquisition and disposal of revenue earning vehicles. During 2025, there was a $934 million decrease in the cash used in investing activities period over period due primarily to a $749 million decrease in revenue earning vehicle expenditures, net. The decrease in cash used by revenue earning vehicle expenditures, net, resulted primarily from per unit gains on vehicle dispositions recognized in 2025 compared to per unit losses recognized in 2024, higher fleet prepayments in 2024 due in part to our fleet rotation initiatives and changes to fleet working capital due to timing, partially offset by increased vehicle acquisitions. Cash used in investing activities also decreased period over period due to $177 million of increased proceeds primarily
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
from the disposition of certain non-vehicle capital assets in 2025 compared to 2024, as disclosed in Note 3, "Divestitures," in Part II, Item 8 of this 2025 Annual Report.
Net financing cash inflows were $370 million in the 2025 compared to $655 million in 2024. The $285 million decrease in cash inflows is due primarily to a $1.3 billion decrease in net proceeds from non-vehicle debt resulting from fewer issuances of non-vehicle debt in 2025 compared to 2024. Cash flows from financing activities were also impacted by an increase of $1.1 billion in net proceeds from vehicle debt largely resulting from more issuances of HVF III medium term notes in 2025 compared to 2024.
Cash Flows - Hertz Global
As of December 31, 2025 and 2024, Hertz Global had cash and cash equivalents of $565 million and $592 million, respectively, and restricted cash and cash equivalents of $602 million and $541 million, respectively. 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,
(In millions)
$ Change
Cash provided by (used in):
Operating activities
Investing activities
Financing activities
Effect of exchange rate changes
Net change in cash and cash equivalents and restricted cash and cash equivalents
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. See Note 17, "Equity and Earnings (Loss) Per Common Share – Hertz Global," and Note 18, "Public Warrants – Hertz Global," in Part II, Item 8 of this 2025 Annual Report.
Public Warrants
As of December 31, 2025, approximately 82,700,000 Public Warrants remain outstanding with an exercise price of $13.61. As of December 31, 2025, there has been approximately 6,300,000 Public Warrants exercised since their original issuance in June 2021. The outstanding warrants are exercisable through June 30, 2051. As of December 31, 2025, the exercise price is $13.61.
At-the-Market ("ATM") Equity Offering Program
In May 2025, Hertz Global filed a Form S-3 Registration Statement as well as a prospectus supplement covering the offering, issuance and sale of up to a maximum aggregate offering price of $250 million shares of Hertz Global common stock par value $0.01 per share that may be issued and sold from time to time under an equity distribution agreement with various banking institutions, acting as the Company's agents, through an ATM offering program (the "ATM Program"). As of December 31, 2025, no shares of Hertz Global common stock had been sold under the ATM Program.
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Debt Financing
See Note 7, "Debt," in Part II, Item 8 of this 2025 Annual Report for information on our outstanding debt obligations and our borrowing capacity and availability under our revolving credit facilities as of December 31, 2025.
Cash paid for interest on non-vehicle debt during 2025 compared to 2024 was $463 million and $287 million, respectively. The $176 million increase in cash paid for non-vehicle debt interest is due primarily to higher debt levels in 2025 resulting from the issuance of the First Lien Senior Notes in 2024. Cash paid for interest on vehicle debt during 2025 compared to 2024 was $541 million and $511 million, respectively. The $30 million increase in cash paid for vehicle debt interest is due primarily to higher debt levels resulting from the issuances of HVF III medium term notes in 2025 and the second half of 2024, partially offset by lower debt levels and interest rates associated with the European ABS.
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. We expect to maintain heightened levels of indebtedness into 2026. For a discussion of the risks associated with our high leverage, see Item 1A, "Risk Factors" in this 2025 Annual Report.
Our available corporate liquidity, which excludes unused commitments under our vehicle debt, was as follows:
(In millions)
As of December 31, 2025
As of December 31, 2024
Cash and cash equivalents
Availability under the First Lien RCF
Corporate liquidity (1)
(1) In January 2026, we made a payment for the stipulated amount of $346 million in connection with the case captioned Wells Fargo Bank, National Association v. The Hertz Corporation, et. al., as further disclosed in Note 15, "Contingencies and Off-Balance Sheet Commitments," in Part II, Item 8 of this 2025 Annual Report. The payment was funded through borrowings under the First Lien RCF.
Non-vehicle Debt
Approximately $284 million of our outstanding non-vehicle debt is scheduled to mature during the twelve months following the issuance of this 2025 Annual Report. We have reviewed our debt facilities for non-vehicle debt and determined that it is probable that we will be able, and have the intent, to refinance these facilities at such times as we determine appropriate prior to maturity.
Significant financing activities during the year ended December 31, 2025 for our non-vehicle debt are below.
First Lien Credit Agreement / First Lien RCF
On April 1, 2025, an amendment to the First Lien Credit Agreement, which was entered into in April 2024 ("Amendment No. 8"), expired. Amendment No. 8 contained a minimum liquidity covenant of $400 million for each month ending in the second and third quarters of 2024 and $500 million for each month ending in the fourth quarter of 2024 and the first quarter of 2025. Amendment No. 8 also temporarily amended Hertz's compliance with a financial covenant consisting of a ratio of first lien debt to Consolidated EBITDA ("the First Lien Ratio"), as defined within the First Lien Credit Agreement and may be materially different than Adjusted Corporate EBITDA presented in Part II, Item 7 of this 2025 Annual Report, to require a ratio of less than or equal to 5.0x in the second and third quarters of 2024 and 4.75x in the fourth quarter of 2024 and first quarter of 2025. Upon expiration of Amendment No. 8, the First Lien Ratio reverted to a requirement of less than or equal to 3.0x in the first and last quarters of the calendar year and 3.5x in the second and third quarters of the calendar year.
In May 2025, the First Lien Credit Agreement was amended ("Amendment No. 10"), which provided for the extension of the maturity date of $1.7 billion of commitments under our existing $2.0 billion First Lien RCF from
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
June 2026 to March 2028, subject to a springing maturity date (as defined in the First Lien Credit Agreement) and makes certain other amendments to the First Lien Credit Agreement. We will have access to up to $2.0 billion under the First Lien RCF until June 2026, and thereafter the aggregate amount of commitments under the First Lien RCF will be $1.7 billion until March 2028, after giving effect to the terms of Amendment No. 10.
Amendment No. 10 also contains a minimum liquidity covenant, consistent with that of Amendment No. 8, which requires $400 million for each month ending in the second and third quarters of the calendar year and $500 million for each month ending in the first and fourth quarter of the calendar year. Amendment No. 10 also adds certain limitations on Restricted Payments and Permitted Investments (each as defined in the First Lien Credit Agreement). Under the terms of Amendment No. 10, the minimum liquidity covenant and certain restrictions will sunset upon the end of the Relief Period (as defined in the First Lien Credit Agreement).
Exchangeable Notes Due 2029
In June 2024, Hertz issued $250 million in aggregate principal amount of the Exchangeable Notes Due 2029. The Exchangeable Notes Due 2029 bear PIK interest payable semi-annually in arrears on January 15 and July 15 (the "Semi-annual PIK Event"), which began in January 2025, whereby PIK interest increases the principal amount of the Exchangeable Notes Due 2029 upon each Semi-annual PIK Event. In connection with Semi-annual PIK Events in the first and third quarter of 2025, we increased the principal amount of the Exchangeable Notes Due 2029 by $11 million and $10 million, respectively.
Upon issuance, the Company bifurcated the Exchange Feature 2029, as defined in Note 13, "Fair Value Measurements," in Part II, Item 8 of this 2025 Annual Report, from the Exchangeable Notes Due 2029 for accounting purposes utilizing applicable guidance. As a result, the Company recognized a debt discount of $68 million within non-vehicle debt, representing the initial fair value of the Exchange Feature 2029. Additionally, for each Semi-annual PIK Event, we bifurcate an associated embedded derivative (the "Exchange Feature 2029 PIK") from the Exchangeable Notes Due 2029 for accounting purposes utilizing applicable guidance. As a result, we recognized a debt discount of $11 million within non-vehicle debt representing the initial fair value. See Note 13, "Fair Value Measurements," in Part II, Item 8 of this 2025 Annual Report for further details.
The net carrying amount of the Exchangeable Notes consists of the following:
(In millions)
December 31, 2025
December 31, 2024
Principal
Non-cash PIK interest
Unamortized debt discounts and issuance costs (1)
Unamortized discounts associated with the Exchange Features 2029 (2)
Fair value of the Exchange Features 2029 (3)
Net carrying amount
(1) Debt issuance costs are amortized to non-vehicle interest expense over the term of the Exchangeable Notes Due 2029 using the effective interest method.
(2) Reflects the unamortized discount associated with the Exchange Features 2029, as defined in Note 13, "Fair Value Measurements," in Part II, Item 8 of this 2025 Annual Report, net of accretive interest which is amortized to non-vehicle interest expense over the term of the Exchangeable Notes Due 2029 using the effective interest method.
(3) Refer also to Note 13, "Fair Value Measurements," in Part II, Item 8 of this 2025 Annual Report.
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Interest expense recognized for the Exchangeable Notes Due 2029 consists of the following:
Year Ended December 31,
(In millions)
Non-cash PIK interest
Amortization of debt discount and debt issuance costs
Accretive interest
(Gain) loss on fair value of the Exchange Features 2029 (1)
Total
(1) Refer also to Note 13, "Fair Value Measurements," in Part II, Item 8 of this 2025 Annual Report.
Exchangeable Notes Due 2030
In September 2025, Hertz issued $425 million in aggregate principal amount of the Exchangeable Notes Due 2030, which are guaranteed by Hertz Holdings, Rental Car Intermediate Holdings, LLC and each of Hertz's existing and future, direct and indirect, U.S. subsidiaries that are guarantors under the First Lien Credit Agreement. The Exchangeable Notes Due 2030 bear interest at a rate of 5.500% per year, payable semi-annually in arrears on April 1 and October 1 of each year, beginning on April 1, 2026. The Exchangeable Notes Due 2030 mature on October 1, 2030 (the "Maturity Date 2030"), unless earlier repurchased, redeemed or exchanged (the "Exchange Feature 2030"), in accordance with their terms prior to the Maturity Date 2030.
Prior to July 1, 2030, the Exchangeable Notes Due 2030 will be exchangeable only upon satisfaction of certain conditions and during certain periods. Thereafter, the Exchangeable Notes Due 2030 will be exchangeable at any time until the close of business on the second scheduled trading day immediately preceding the Maturity Date 2030. The Exchangeable Notes Due 2030 will be exchangeable by holders into shares of Hertz Global common stock, cash or a combination of common stock and cash, at Hertz's election, at an initial exchange rate of 108.2808 shares per $1,000 principal amount of Exchangeable Notes Due 2030, corresponding to an initial exchange price of $9.24 per share of Hertz Global common stock, subject to adjustment upon the occurrence of certain events.
Hertz may not redeem the Exchangeable Notes Due 2030 prior to October 6, 2028. On or after October 6, 2028 and on or prior to the 26th scheduled trading day immediately preceding the Maturity Date 2030, if the last reported sale price per share of Hertz Global common stock has been at least 130% of the exchange price for the Exchangeable Notes Due 2030 for certain specified periods and certain other conditions are satisfied, Hertz may redeem all or a portion (subject to certain limitations) of the Exchangeable Notes Due 2030. The redemption will be at a cash redemption price equal to the principal amount of the Exchangeable Notes Due 2030 to be redeemed plus accrued and unpaid interest on such Exchangeable Notes Due 2030 to, but not including, the redemption date.
Upon issuance, we bifurcated the Exchange Feature 2030 from the Exchangeable Notes Due 2030 for accounting purposes utilizing applicable guidance. As a result, we recognized a debt discount within non-vehicle debt representing the initial fair value of the Exchange Feature 2030. As of December 31, 2025, the fair value of the Exchange Feature 2030 was $54 million. See Note 13, "Fair Value Measurements," in Part II, Item 8 of this 2025 Annual Report for further details.
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
The net carrying amount of the Exchangeable Notes Due 2030 consists of the following:
(In millions)
December 31, 2025
December 31, 2024
Principal
Unamortized debt issuance costs (1)
Unamortized discounts associated with the Exchange Feature 2030 (2)
Fair value of the Exchange Feature 2030 (3)
Net carrying amount
(1) Debt issuance costs are amortized to non-vehicle interest expense over the term of the Exchangeable Notes Due 2030 using the effective interest method.
(2) Reflects the unamortized discount associated with the Exchange Feature 2030, net of accretive interest which is amortized to non-vehicle interest expense over the term of the Exchangeable Notes Due 2030 using the effective interest method.
(3) As further disclosed in Note 13, "Fair Value Measurements," in Part II, Item 8 of this 2025 Annual Report.
Interest expense recognized for the Exchangeable Notes Due 2030 consists of the following:
Year ended December 31,
(In millions)
Contractual interest expense
Amortization of debt issuance costs
Accretive interest
(Gain) loss on fair value of Exchange Feature 2030 (1)
Total
(1) As further disclosed in Note 13, "Fair Value Measurements," in Part II, Item 8 of this 2025 Annual Report.
Letters of Credit
As of December 31, 2025, there were outstanding standby letters of credit totaling $995 million comprised primarily of $681 million issued under the First Lien RCF and $245 million issued under the Term C Loan. As of December 31, 2025, no capacity remained to issue additional 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. As of December 31, 2025, none of the issued letters of credit have been drawn upon.
Hertz also has access to various unsecured letter of credit facilities ("Standby LCs"), in which, at Hertz's option and under the terms of the facilities, Hertz may request letters of credit be issued for itself and on behalf of certain of its subsidiaries up to the committed amounts of the facilities. In February 2026, Hertz increased the committed amounts under its Standby LCs by approximately $200 million.
Vehicle Debt
Significant financing activities during the year ended December 31, 2025 for our vehicle debt were as follows:
Americas RAC
Approximately $3.1 billion of the outstanding vehicle debt in our Americas RAC segment is scheduled to mature during the twelve months following the issuance of this 2025 Annual Report. We have reviewed our debt facilities and determined that it is probable that we will be able, and have the intent, to refinance these facilities at such times as we determine appropriate prior to maturity.
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
HVF III U.S. Vehicle Variable Funding Notes
In May 2025, HVF III amended the HVF III Series 2021-A Notes, which provided for the extension of the maturity date of $2.9 billion of aggregate commitments of Class A Notes from April 2026 to May 2027. In August 2025, $780 million in non-extending commitments were voluntarily terminated.
In June 2025, HVF III amended the HVF III Series 2021-A Notes to issue new Class B Notes in which aggregate commitments were increased from $188 million to $300 million and the maturity date was extended to June 2027. The Class B Notes are subordinate to the Class A Notes.
In August 2025, HVF III amended the HVF III Series 2021-A Notes to permit borrowings and repayments of principal under the Class B Notes and to allow for future issuance of a Class C tranche of notes.
HVF III U.S. Vehicle Medium Term Notes
HVF III Series 2025-1 Notes and Series 2025-2 Notes: In March 2025, HVF III issued the Series 2025-1 (Class A, Class B, Class C and Class D) and Series 2025-2 Notes (Class A, Class B, Class C and Class D) each in aggregate principal amount of $500 million with maturity dates of September 2028 and September 2030, respectively.
In June 2025, HVF III issued the Series 2025-3 (Class A, Class B, Class C and Class D) and Series 2025-4 Notes (Class A, Class B, Class C and Class D) in aggregate principal amounts of $375 million and $310 million with maturity dates of December 2028 and December 2030, respectively.
In December 2025, HVF III issued the Series 2025-5 (Class A, Class B, Class C and Class D) and Series 2025-6 Notes (Class A, Class B, Class C and Class D) in aggregate principal amounts of $450 million and $550 million with maturity dates of May 2029 and May 2031, respectively.
There is subordination within each of the preceding series based on class.
Hertz Canadian Securitization
In May 2025, the Hertz Canadian Securitization was amended to extend the maturity date to April 2027.
International RAC
Approximately $67 million of the outstanding vehicle debt in our International RAC segment is scheduled to mature during the twelve months following the issuance of this 2025 Annual Report. We have reviewed our debt facilities and determined that it is probable that we will be able, and have the intent, to refinance these facilities at such times as we determine appropriate prior to maturity.
European ABS
In May 2025, the European ABS was amended to provide for the extension of the maturity date of total aggregate maximum borrowings of €1.2 billion, inclusive of the addition of Class B Notes, to April 2027. In August 2025, €129 million in non-extending commitments were voluntarily terminated.
In July 2025, the European ABS was amended for the issuance of Class C Notes in an aggregate principal amount of €100 million. The Class C Notes can be drawn and repaid on a revolving basis and have a maturity date of April 2027. After giving effect to the issuance of the Class C Notes, total aggregate maximum borrowings available under the European ABS are €1.3 billion until April 2027. The Class C Notes are subordinate to the Class A Notes and Class B Notes.
Australian Securitization
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
In June 2025, the Australian Securitization was amended to extend the maturity date to June 2027.
New Zealand RCF
In August 2025, the New Zealand RCF was amended to extend the maturity date to August 2027.
U.K. ABS
In December 2024, HFF entered into the U.K. ABS. Upon issuance, the U.K. ABS was not funded. During the first quarter of 2025, the U.K. ABS aggregate maximum borrowings were increased to £215 million.
In December 2025, the U.K. ABS was amended to extend the maturity date to March 2028.
Covenants
The First Lien Credit Agreement requires us to comply with the following financial covenant: the First Lien Ratio, which requires a ratio of less than or equal to 3.0x in the first and last quarters of the calendar year and 3.5x in the second and third quarters of the calendar year. Amendment No. 8 temporarily increased the First Lien Ratio and contained a minimum liquidity covenant, which expired, as expected, on the first day of the second quarter of 2025, as discussed above. Additionally, Amendment No. 10 requires a minimum liquidity covenant, consistent with Amendment No. 8, and will sunset upon the end of the Relief Period, as discussed above. As of December 31, 2025, we were in compliance with the First Lien Ratio. As of December 31, 2025, we were in compliance with the minimum liquidity covenant, as discussed above.
Additionally, the First Lien Credit Agreement, the First Lien Senior Notes, the Exchangeable Notes Due 2029, the Exchangeable Notes Due 2030, the Senior Notes Due 2026 and the Senior Notes Due 2029 (collectively, the "Corporate Indebtedness") contain customary affirmative covenants including, among other things, the delivery of quarterly and annual financial statements and/or compliance certificates, and covenants related to conduct of business, maintenance of property and insurance, compliance with environmental laws and, where applicable, the granting of security interests for the benefit of the secured parties under the applicable agreements on after-acquired real property, fixtures and future subsidiaries.
The terms of our Corporate Indebtedness contain covenants limiting the ability of Hertz and its restricted subsidiaries to: incur or guarantee additional indebtedness; incur or guarantee secured indebtedness; pay dividends or distributions on, or redeem or repurchase, Hertz Global capital stock; make certain investments or other restricted payments; sell certain assets; transfer intellectual property to unrestricted subsidiaries; merge, consolidate or sell all or substantially all of its assets; and create restrictions on the ability of Hertz’s restricted subsidiaries to pay dividends or other amounts to Hertz. As per the terms of the Corporate Indebtedness, these covenants are subject to a number of important and significant limitations, qualifications and exceptions.
As of December 31, 2025, we were in compliance with all covenants under the terms of agreements governing the respective Corporate Indebtedness.
Vehicle Financing Risks
Our program vehicles are subject to repurchase by vehicle manufacturers under contractual repurchase or guaranteed depreciation programs. Under these programs, vehicle manufacturers agree to repurchase vehicles at a specified price or guarantee the depreciation rate on the vehicles during a specified time period, typically subject to certain vehicle condition and mileage requirements. We use values derived from this specified price or guaranteed depreciation rate to calculate financing capacity under certain asset-backed financing arrangements.
In the event of a bankruptcy of a vehicle manufacturer, our liquidity could be impacted by several factors including reductions in fleet residual values and the risk that we would be unable to collect outstanding receivables due to us from such bankrupt manufacturer. In addition, the program vehicles manufactured by any such company would
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
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.
Substantially all of our revenue earning vehicles and certain related assets are owned by special purpose entities or are encumbered in favor of the lenders under the various credit facilities, other secured financings and asset-backed securities programs. None of the value of such assets (including the assets owned by Hertz Vehicle Financing III LLC, TCL Funding LP and each of the domestic and international subsidiaries that pledge vehicle and vehicle related assets as part of our securitization programs) will be available to satisfy the claims of non-vehicle secured or unsecured creditors unless the vehicle related secured creditors under the securitization programs are paid in full.
We rely significantly on asset-backed financing arrangements to purchase vehicles for our U.S. and international vehicle rental fleets. For further information concerning our asset-backed financing programs and our indebtedness, see Note 7, "Debt," in Part II, Item 8 of this 2025 Annual Report. For a discussion of the risks associated with our reliance on asset-backed financing and the significant amount of indebtedness, see Item 1A, "Risk Factors" in this 2025 Annual Report.
Capital Expenditures
Revenue Earning Vehicles Expenditures and Disposals
The table below sets forth our revenue earning vehicles expenditures and related disposal proceeds for the annual periods shown.
Cash inflow (cash outflow)
Revenue Earning Vehicles
(In millions)
Capital
Expenditures
Disposal
Proceeds
Net Capital Proceeds (Expenditures)
The table below sets forth expenditures for revenue earning vehicles, net of disposal proceeds, by segment.
Cash inflow (cash outflow)
Years Ended December 31,
($ in millions)
$ Change
% Change
Americas RAC
International RAC
Total
Year Ended December 31, 2025 Compared with Year Ended December 31, 2024
Proceeds from the disposal of revenue earning vehicles increased $408 million, or 5%, in 2025 compared to the same period in 2024, primarily in our Americas RAC segment resulting in part from per unit gains on vehicle dispositions recognized in 2025 compared to per unit losses recognized in 2024. Revenue earning vehicle expenditures decreased $341 million, or 3%, in 2025 compared to 2024, primarily in our Americas RAC segment, resulting from higher fleet prepayments in 2024 due in part to fleet rotation initiatives and changes to fleet working capital due to timing, partially offset by increased vehicle acquisitions.
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Non-Vehicle Capital Asset Expenditures and Disposals
The table below sets forth our non-vehicle capital asset expenditures, and related disposal proceeds from non-vehicle capital assets disposed of or to be disposed of for the annual periods shown.
Cash inflow (cash outflow)
Non-Vehicle Capital Assets
(In millions)
Capital
Expenditures
Disposal
Proceeds
Net Capital
Expenditures
The table below sets forth non-vehicle capital asset expenditures, net of disposal proceeds, by segment.
Cash inflow (cash outflow)
Years Ended December 31,
($ in millions)
$ Change
% Change
Americas RAC
International RAC
Corporate
Total
NM - Not meaningful
Year Ended December 31, 2025 Compared with Year Ended December 31, 2024
The change in non-vehicle capital asset expenditures, net in 2025 compared to 2024 is primarily due to a $177 million increase in proceeds resulting largely from the disposition of certain non-vehicle capital assets in our Americas RAC segment, as disclosed in Note 3, "Divestitures," in Part II, Item 8 of this 2025 Annual Report.
CONTRACTUAL AND OTHER OBLIGATIONS
The following table details our material cash requirements for our contractual and other obligations as of December 31, 2025:
Payments Due by Period
(In millions)
Total
After 2030
Vehicles:
Debt obligation
Interest on debt (1)
Non-Vehicle:
Debt obligation
Interest on debt (1)
Minimum fixed obligations for operating leases
Commitments to purchase vehicles (2)
Purchase obligations and other (3)
Total
(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, 2025. See Note 7, "Debt," in Part II, Item 8 of this 2025 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 purchases are subject to vehicle manufacturers satisfying their performance commitments under such agreements.
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(3) Represents agreements to purchase goods or services that are legally binding on us and that specify all significant terms, including fixed or minimum quantities; fixed, minimum or variable price provisions; and the approximate timing of the transaction, as well as liabilities for uncertain tax positions and other liabilities, and excludes any obligations to employees. Only the minimum non-cancelable portion of purchase agreements and related cancellation penalties are included as obligations. In the case of contracts that state minimum quantities of goods or services, amounts reflect only the stipulated minimums; all other contracts reflect estimated amounts. Purchase obligations include $31 million representing our tax liability for uncertain tax positions and related net accrued interest and penalties.
The table excludes pension benefit obligations as disclosed in Note 8, "Employee Retirement Benefits," in Part II, Item 8 of this 2025 Annual Report.
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. These indemnification obligations might include claims relating to the following: environmental matters; intellectual property rights; governmental regulations and employment-related matters; customer, supplier and other commercial contractual relationships and financial matters. Performance under these indemnification obligations would generally be triggered by a breach of terms of the contract or by a third-party claim. We regularly evaluate the probability of having to incur costs associated with these indemnification obligations and have accrued for expected losses that are probable and estimable.
Environmental
We have indemnified various parties for the costs associated with remediating numerous hazardous substance storage, recycling or disposal sites in many states and, in some instances, for natural resource damages. The amount of any such expenses or related natural resource damages for which we may be held responsible could be substantial. The probable expenses that we expect to incur for such matters have been accrued, and those expenses are reflected in our consolidated financial statements within accrued liabilities. Amounts accrued represent the estimated cost to study potential environmental issues at sites deemed to require investigation or clean-up activities, and the estimated cost to implement remediation actions, including on-going maintenance, as required. Initial cost estimates are based on historical experience at similar sites and are refined over time on the basis of in-depth studies of the sites. For many sites, the remediation costs and other damages for which we ultimately may be responsible cannot be reasonably estimated because of uncertainties with respect to factors such as our connection to the site, the materials there, the involvement of other potentially responsible parties, the application of laws and other standards or regulations, site conditions, and the nature and scope of investigations, studies, and remediation to be undertaken (including the technologies to be required and the extent, duration, and of remediation).
EMPLOYEE RETIREMENT BENEFITS
Pension
We sponsor defined benefit pension plans worldwide. Pension obligations give rise to expenses that are dependent on assumptions discussed in Note 8, "Employee Retirement Benefits," in Part II, Item 8 of this 2025 Annual Report.
Our 2025 worldwide net periodic pension expense included in the accompanying consolidated statement of operations for the year ended December 31, 2025 was $6 million compared to $9 million in 2024 resulting in part from curtailment gains associated with our international plans.
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 8, "Employee Retirement Benefits," in Part II, Item 8 of this 2025 Annual Report, increased in December 31, 2025 compared with December 31, 2024 due primarily to increased returns on plan assets. We contributed $9 million to the Hertz Retirement Plan during 2025,
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
and we do not anticipate contributing to the Hertz Retirement Plan during 2026. For the international plans, we anticipate contributing approximately $4 million during 2026. The level of 2026 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.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of the consolidated financial statements requires management to make estimates and judgments that affect the reported amounts in our consolidated financial statements and accompanying notes.
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. 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 2025 Annual Report.
Revenue Earning Vehicles
Our principal assets are revenue earning vehicles, which represented approximately 56% of our total assets as of December 31, 2025. Revenue earning vehicles consist of vehicles utilized in our vehicle rental operations. For the year ended December 31, 2025, 26% 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.
For program vehicles, the manufacturers agree to repurchase vehicles at a specified price or guarantee the depreciation rate on the vehicles during established repurchase periods, subject to, among other things, certain vehicle condition, mileage and holding period requirements. Vehicle repurchase programs guarantee on an aggregate basis the residual value of the program vehicle upon sale according to certain parameters which include the holding period, mileage and condition of the vehicles. Since the contractual arrangement reduces or eliminates estimation uncertainty, we do not consider the depreciation of program vehicles to be part of our critical accounting policies or estimates.
For all other vehicles, depreciation is recorded over the estimated holding period based on projected residual values at the time of disposal. Generally, when revenue earning vehicles are acquired outside of a vehicle repurchase program (i.e., non-program vehicles), we estimate the period that we will hold the asset, primarily based on historical measures of the amount of rental activity (e.g., automobile mileage) and the targeted age of vehicles at the time of disposal. We also estimate the residual value of the applicable revenue earning vehicles at the expected time of disposal, which is affected by many factors including make, model and options, age, physical condition, mileage, sale location and time of the year. Market conditions for used vehicle sales can also be affected by external factors such as the economy, natural disasters, fuel prices, new and used vehicle supply levels, and incentives offered by manufacturers of new vehicles. Depreciation rates are reviewed on a quarterly basis based on management's ongoing assessment of present and projected 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. Upon disposal of revenue earning vehicles, any difference between the net proceeds received and the net book value results in a gain or loss and is recorded as an adjustment to depreciation of revenue earning vehicles and lease charges in the accompanying statements of operations.
Changes in projected residual values or holding periods could cause a material change in our estimates of non-program depreciation expense.
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Self-insured Liabilities
Self-insured liabilities on our consolidated balance sheets primarily include public liability, property damage and liability insurance supplement. These represent an estimate for both reported accident claims not yet paid, and claims incurred but not yet reported and are recorded on an undiscounted basis. Reserve requirements are based on actuarially determined estimates using historical claims experience. The adequacy of the liability is monitored quarterly based on evolving accident claim history. If our estimates change or if actual results differ from these assumptions, the amount of the recorded liability is adjusted to reflect these results.
Recoverability of Goodwill and Indefinite-lived Intangible Assets
On an annual basis as of October 1, and at interim periods when circumstances require as a result of a triggering event, as defined by Accounting Standards Codification ("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. An impairment is deemed to exist if the carrying value of goodwill or indefinite-lived intangible assets exceed their fair value as determined using Level 3 inputs, as described in Part II, Item 8 of this 2025 Annual Report, under the U.S. GAAP fair value hierarchy. The reviews of fair value involve judgment and estimates, including projected revenues, projected cash flows, long-term growth rates, royalty rates and discount rates, which we deem reasonable for this purpose.
For goodwill, we determine the fair value using an income approach based on the discounted cash flows of each reporting unit. A reporting unit is an operating segment or a business one level below that operating segment (the component level) if discrete financial information is prepared and regularly reviewed by segment management. Components are aggregated into a single reporting unit when they have similar economic characteristics. We have two reporting units (operating segments): Americas Rental Car and International Rental Car. Key assumptions used in the discounted cash flow valuation model include discount rates, growth rates, cash flow projections, tax rates and terminal value rates. Discount rates are determined based on the reporting unit's weighted average cost of capital (“WACC”). 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. The discount rate utilized for each reporting unit is indicative of the return an investor would expect to receive for investing in such a business. Our cash flow projections represent management's most recent planning assumptions, which are based on a combination of industry outlooks, views on general economic conditions, our expected pricing plans and expected future savings. Terminal value rates are determined using a common methodology of capturing the present value of perpetual cash flow estimates beyond the last projected period assuming a constant WACC and long-term growth rates.
Our indefinite-lived intangible assets primarily consist of the Hertz and Dollar Thrifty tradenames. For tradenames, we determine the fair value using a relief-from-royalty income approach, which utilizes our revenue projections for each asset along with assumptions for royalty rates, tax rates and the WACC.
A significant decline in either projected revenues, projected cash flows or an increase in discount rates, such as the WACC, used to determine fair value could result in an impairment charge. 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. We will continue to closely monitor actual results versus our expectations as well as any significant changes in market events or conditions and the resulting impact to our assumptions about future projected cash flows, projected revenues and the weighted average cost of capital. If our expectations of the operating results, both in magnitude or timing, do not materialize, or if our weighted average cost of capital increases, we may be required to record goodwill and indefinite-lived intangible asset impairment charges, which could be material.
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
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 U.S. 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. In evaluating our ability to recover our deferred tax assets in the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations. The assumptions about future taxable income require the use of significant judgment and are consistent with the plans and estimates we are using to manage the underlying businesses.
The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in a multitude of jurisdictions across our global operations. ASC 740 states that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits.
We record unrecognized tax benefits as liabilities in accordance with ASC 740 and adjust these liabilities in the period in which the uncertain tax position is effectively settled, the statute of limitations expires for the relevant taxing authority to examine the tax position or when new information becomes available. Because of the complexity of some of these uncertainties, the ultimate resolution may result in a payment or a loss of a tax attribute or deduction that is materially different from our current estimate of the unrecognized tax benefits. These differences will be reflected as increases or decreases to income tax expense in the period in which the change in judgment occurs.
On July 4, 2025, the OBBBA was enacted, reinstating full bonus depreciation, allowing interest deductions based on EBITDA, expensing R&D costs and modifying certain international provisions of the Code. As a result, we expect federal cash taxes to decrease in the near term, assuming fleet investments are maintained or increased from current levels. These provisions are also expected to increase deferred tax assets, such as net operating losses, and may necessitate additional valuation allowances depending on future taxable income and loss trends.
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 2025 Annual Report.
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
