HERTZ GLOBAL HOLDINGS, INC 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index Page Hertz Global Holdings, Inc. and Subsidiaries Reports of Independent Registered Public Accounting Firm (PCAOB ID: 42 ) 84 Consolidated Balance Sheets as of December 31, 2021 and December 31, 2020 92 Consolidated Statements of Operations for Years Ended December 31, 2021, 2020 and 2019 93 Consolidated Statements of Comprehensive Income (Loss) for Years Ended December 31, 2021, 2020 and 2019 94 Consolidated Statements of Changes in Mezzanine Equity and Stockholders' Equity for Years Ended December 31, 202 1 , 20 20 and 201 9 95 Consolidated Statements of Cash Flows for Years Ended December 31, 2021, 2020 and 2019 97 The Hertz Corporation and Subsidiaries Reports of Independent Registered Public Accounting Firm (PCAOB ID: 42 ) 88 Consolidated Balance Sheets as of December 31, 2021 and December 31, 2020 99 Consolidated Statements of Operations for Years Ended December 31, 2021, 2020 and 2019 100 Consolidated Statements of Comprehensive Income (Loss) for Years Ended December 31, 2021, 2020 and 2019 101 Consolidated Statements of Changes in Stock holder's Equity (Deficit) for Years Ended December 31, 2021, 2020 and 2019 102 Consolidated Statements of Cash Flows for Years Ended December 31, 2021, 2020 and 2019 103 Notes to the Consolidated Financial Statements Note 1 Background 105 Note 2 Significant Accounting Policies 107 Note 3 Divestitures 115 Note 4 Revenue Earning Vehicles 117 Note 5 Goodwill and Intangible Assets, Net 117 Note 6 Debt 120 Note 7 Employee Retirement Benefits 130 Note 8 Stock-Based Compensation 138 Note 9 Leases 143 Note 10 Restructuring 145 Note 11 Income Tax (Provision) Benefit 147 Note 12 Fair Value Measurements 151 Note 13 Accumulated Other Comprehensive Income (Loss) 153 Note 14 Contingencies and Off-Balance Sheet Commitments 153 Note 15 Related Party Transactions 156 Note 16 Equity and Mezzanine Equity – Hertz Global 157 Note 1 7 Earnings (Loss) Per Share – Hertz Global 161 Note 1 8 Public Warrants - Hertz Global 161 Note 1 9 Segment Information 162 Note 20 Liabilities Subject to Compromise 168 Note 21 Reorganization Items, Net 168 Schedule I Condensed Financial Information of Registrant Hertz Global Holdings, Inc. 170 Schedule II Valuation and Qualifying Accounts 175 83 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Hertz Global Holdings, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Hertz Global Holdings, Inc. and subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), changes in mezzanine equity and stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedules listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 23, 2022 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Calculation of Non-Program Depreciation on Revenue Earning Vehicles in the Americas Rental Car (“RAC”) Segment Description of the Matter For the year ended December 31, 2021, total depreciation of revenue earning vehicles and lease charges in the Americas RAC segment was $343 million, including gains and losses on disposals. As discussed in Note 2 to the consolidated financial statements, depreciation rates are reviewed on a quarterly basis based on management’s ongoing assessment of present and estimated future market conditions, the effect of these conditions on residual values at the expected time of disposal and the estimated holding period for the revenue earning vehicles. The Company’s fleet is comprised of vehicles that are subject to and are not subject to vehicle repurchase programs (“program vehicles” and “non-program vehicles,” respectively). For program vehicles, the manufacturers guarantee a specified price or depreciation rate upon disposal, versus non-program vehicles where the Company estimates the residual value of the vehicle at the expected time of disposal. 84 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES Auditing the Company’s calculation of depreciation for non-program vehicles related to the Americas RAC segment was complex due to the significant estimation uncertainty and management judgment to determine the estimated residual values at the expected time of disposal. The significant estimation uncertainty was primarily due to management’s assumptions of future consumer demand for vehicles within their current fleet, the disposal channel of those vehicles and other external market conditions. Additionally, auditing the calculation of depreciation was challenging due to the volume of data inputs utilized in management’s calculation, including historical sales data from multiple sources at varying levels of disaggregation along with additional data specific to the Company’s current fleet. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over the Company’s measurement of depreciation expense for non-program vehicles related to the Americas RAC segment. For example, we tested controls over management’s quarterly review of the depreciation rates, which included their procedures to validate the completeness and accuracy of the data used in the calculation and their assessment of significant assumptions, specifically the estimated residual values of non-program vehicles related to the Americas RAC segment. To test the depreciation calculation for non-program vehicles, our audit procedures included, among others, testing the completeness and accuracy of the underlying data by comparing historical sales data and vehicle information used in the calculation (e.g., make, model, trim) to external sources and the Company’s records. We tested the base depreciation rate calculations performed within the IT application and evaluated the reasonableness of other significant assumptions such as resale market conditions, including consumer demand for specific vehicles, and disposition channels to assess the reasonableness of the residual value estimates made by management. Additionally, we performed analytical procedures to evaluate historical gains and losses recognized upon disposal in order to retrospectively review the reasonableness of management’s estimates. Valuation of Self-insured Liabilities Description of the Matter As disclosed in Notes 2 and 14 to the consolidated financial statements, the Company is self-insured for public liability, property damage, general liability, liability insurance supplement and worker's compensation. The Company records liabilities for these matters based on actuarial analyses of historical claim activity and estimates of both reported accident claims not yet paid and claims incurred but not yet reported. The estimated self-insured liabilities as of December 31, 2021 were $463 million. The actuarial analyses that determine the claims incurred but not yet reported portion of the liability balances considers a variety of factors, including the frequency and severity of losses, changes in claim reporting and resolution patterns, insurance industry practices, the regulatory environment and legal precedent. The adequacy of the liabilities is regularly monitored based on evolving accident claim history and insurance related state legislation changes. If the Company’s estimates change or if actual results differ from these assumptions, the amount of the recorded liabilities are adjusted to reflect these results. Auditing self-insured liabilities is complex and required the involvement of our actuarial specialists due to the significant valuation uncertainty associated with the estimate, management’s application of complex judgments and the use of actuarial methods. In addition, the self-insured liabilities estimates are sensitive to management’s assumptions, including claim frequency, actuarial evaluations of historical claim experience and future projections of ultimate losses used in the computation of self-insured liabilities. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over the Company’s self-insured liabilities process. For example, we tested controls over management’s review of the assumptions outlined above that are used in the self-insured liabilities calculation and the completeness and accuracy of the data underlying the self-insured liabilities. 85 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES To test the valuation of the self-insured liabilities, we performed audit procedures that included involving our internal actuarial specialists to assist us in developing an independent estimate of liability and evaluating the methods used by management and the reasonableness of assumptions used in their models (e.g., actuarial evaluations of historical claim experience and future projections of ultimate losses). We compared the Company's reserve to the estimate of liability developed by our actuarial specialists based on the underlying claims data and independently selected assumptions. Valuation of Indefinite-Lived Intangible Tradename Assets in the International Rental Car (“RAC”) Segment Description of the Matter As disclosed in Note 5 to the consolidated financial statements, the Company’s indefinite-lived intangible tradename assets totaled $2.794 billion, with $600 million relating to indefinite-lived intangible tradename assets in the International RAC segment, as of December 31, 2021. As disclosed in Note 2 to the consolidated financial statements, indefinite-lived intangible assets are tested for impairment on an annual basis, as of October 1, and at interim periods when circumstances require as a result of a triggering event. Auditing the Company’s indefinite-lived intangible tradename assets in the International RAC segment was complex and highly judgmental due to the significant estimation required to determine its fair value as a result of the Company’s future projections, operating performance and the current industry and economic environment in which the Company operates. The Company’s estimate of fair value for the indefinite-lived intangible tradename assets in the International RAC segment required significant judgment to estimate the impact of changes in revenues and profitability, industry trends on future operating results and the future cash flows expected to be generated. In addition, the fair value estimate of these indefinite-lived intangible tradename assets in the International RAC segment was sensitive to significant assumptions such as projected revenues, royalty rates, terminal period revenue growth rates and the weighted average cost of capital. These significant assumptions are affected by expected future market or economic conditions, including the continuing impact of COVID-19 and the Chip Shortage as defined in the Company’s Form 10-K. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over the Company’s indefinite-lived intangible tradename assets impairment review processes. For example, we tested controls over management’s review of the assumptions, including assumptions related to projected financial information, as outlined above that are used in the indefinite-lived intangible tradename assets impairment test. To test the estimated fair value of the International RAC segment’s indefinite-lived intangible tradename assets, we performed audit procedures that included, among others, assessing methodologies and testing the significant assumptions and the completeness and accuracy of the underlying data used by the Company in its analyses. We compared the significant assumptions used by management to current industry and economic trends, expected changes to the Company’s business model, the Company’s historical results and other relevant factors. We assessed the historical accuracy of management’s estimates, including projected financial information, and performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the International RAC segment indefinite-lived intangible tradename assets that would result from hypothetical changes in the assumptions. We also involved valuation specialists to assist in our evaluation of the Company’s model, valuation methodologies, and certain significant assumptions, such as the royalty rates, the terminal period revenue growth rates and the weighted average cost of capital. /s/ Ernst & Young LLP We have served as the Company's auditor since 2019. Tampa, Florida February 23, 2022 86 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Hertz Global Holdings, Inc. Opinion on Internal Control Over Financial Reporting We have audited Hertz Global Holdings, Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Hertz Global Holdings, Inc. and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), changes in mezzanine equity and stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedules listed in the Index at Item 15(a) and our report dated February 23, 2022 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Tampa, Florida February 23, 2022 87 Table of Contents THE HERTZ CORPORATION AND SUBSIDIARIES REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholder and the Board of Directors of The Hertz Corporation Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of The Hertz Corporation and subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), changes in stockholder’s equity (deficit) and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 23, 2022 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Calculation of Non-Program Depreciation on Revenue Earning Vehicles in the Americas Rental Car (“RAC”) Segment Description of the Matter For the year ended December 31, 2021, total depreciation of revenue earning vehicles and lease charges in the Americas RAC segment was $343 million, including gains and losses on disposals. As discussed in Note 2 to the consolidated financial statements, depreciation rates are reviewed on a quarterly basis based on management’s ongoing assessment of present and estimated future market conditions, the effect of these conditions on residual values at the expected time of disposal and the estimated holding period for the revenue earning vehicles. The Company’s fleet is comprised of vehicles that are subject to and are not subject to vehicle repurchase programs (“program vehicles” and “non-program vehicles,” respectively). For program vehicles, the manufacturers guarantee a specified price or depreciation rate upon disposal, versus non-program vehicles where the Company estimates the residual value of the vehicle at the expected time of disposal. 88 Table of Contents THE HERTZ CORPORATION AND SUBSIDIARIES Auditing the Company’s calculation of depreciation for non-program vehicles related to the Americas RAC segment was complex due to the significant estimation uncertainty and management judgment to determine the estimated residual values at the expected time of disposal. The significant estimation uncertainty was primarily due to management’s assumptions of future consumer demand for vehicles within their current fleet, the disposal channel of those vehicles and other external market conditions. Additionally, auditing the calculation of depreciation was challenging due to the volume of data inputs utilized in management’s calculation, including historical sales data from multiple sources at varying levels of disaggregation along with additional data specific to the Company’s current fleet. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over the Company’s measurement of depreciation expense for non-program vehicles related to the Americas RAC segment. For example, we tested controls over management’s quarterly review of the depreciation rates, which included their procedures to validate the completeness and accuracy of the data used in the calculation and their assessment of significant assumptions, specifically the estimated residual values of non-program vehicles related to the Americas RAC segment. To test the depreciation calculation for non-program vehicles, our audit procedures included, among others, testing the completeness and accuracy of the underlying data by comparing historical sales data and vehicle information used in the calculation (e.g., make, model, trim) to external sources and the Company’s records. We tested the base depreciation rate calculations performed within the IT application and evaluated the reasonableness of other significant assumptions such as resale market conditions, including consumer demand for specific vehicles, and disposition channels to assess the reasonableness of the residual value estimates made by management. Additionally, we performed analytical procedures to evaluate historical gains and losses recognized upon disposal in order to retrospectively review the reasonableness of management’s estimates. Valuation of Self-insured Liabilities Description of the Matter As disclosed in Notes 2 and 14 to the consolidated financial statements, the Company is self-insured for public liability, property damage, general liability, liability insurance supplement and worker's compensation. The Company records liabilities for these matters based on actuarial analyses of historical claim activity and estimates of both reported accident claims not yet paid and claims incurred but not yet reported. The estimated self-insured liabilities as of December 31, 2021 were $463 million. The actuarial analyses that determine the claims incurred but not yet reported portion of the liability balances considers a variety of factors, including the frequency and severity of losses, changes in claim reporting and resolution patterns, insurance industry practices, the regulatory environment and legal precedent. The adequacy of the liabilities is regularly monitored based on evolving accident claim history and insurance related state legislation changes. If the Company’s estimates change or if actual results differ from these assumptions, the amount of the recorded liabilities are adjusted to reflect these results. Auditing self-insured liabilities is complex and required the involvement of our actuarial specialists due to the significant valuation uncertainty associated with the estimate, management’s application of complex judgments and the use of actuarial methods. In addition, the self-insured liabilities estimates are sensitive to management’s assumptions, including claim frequency, actuarial evaluations of historical claim experience and future projections of ultimate losses used in the computation of self-insured liabilities. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over the Company’s self-insured liabilities process. For example, we tested controls over management’s review of the assumptions outlined above that are used in the self-insured liabilities calculation and the completeness and accuracy of the data underlying the self-insured liabilities. 89 Table of Contents THE HERTZ CORPORATION AND SUBSIDIARIES To test the valuation of the self-insured liabilities, we performed audit procedures that included involving our internal actuarial specialists to assist us in developing an independent estimate of liability and evaluating the methods used by management and the reasonableness of assumptions used in their models (e.g., actuarial evaluations of historical claim experience and future projections of ultimate losses). We compared the Company's reserve to the estimate of liability developed by our actuarial specialists based on the underlying claims data and independently selected assumptions. Valuation of Indefinite-Lived Intangible Tradename Assets in the International Rental Car (“RAC”) Segment Description of the Matter As disclosed in Note 5 to the consolidated financial statements, the Company’s indefinite-lived intangible tradename assets totaled $2.794 billion, with $600 million relating to indefinite-lived intangible tradename assets in the International RAC segment, as of December 31, 2021. As disclosed in Note 2 to the consolidated financial statements, indefinite-lived intangible assets are tested for impairment on an annual basis, as of October 1, and at interim periods when circumstances require as a result of a triggering event. Auditing the Company’s indefinite-lived intangible tradename assets in the International RAC segment was complex and highly judgmental due to the significant estimation required to determine its fair value as a result of the Company’s future projections, operating performance and the current industry and economic environment in which the Company operates. The Company’s estimate of fair value for the indefinite-lived intangible tradename assets in the International RAC segment required significant judgment to estimate the impact of changes in revenues and profitability, industry trends on future operating results and the future cash flows expected to be generated. In addition, the fair value estimate of these indefinite-lived intangible tradename assets in the International RAC segment was sensitive to significant assumptions such as projected revenues, royalty rates, terminal period revenue growth rates and the weighted average cost of capital. These significant assumptions are affected by expected future market or economic conditions, including the continuing impact of COVID-19 and the Chip Shortage as defined in the Company’s Form 10-K. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over the Company’s indefinite-lived intangible tradename assets impairment review processes. For example, we tested controls over management’s review of the assumptions, including assumptions related to projected financial information, as outlined above that are used in the indefinite-lived intangible tradename assets impairment test. To test the estimated fair value of the International RAC segment’s indefinite-lived intangible tradename assets, we performed audit procedures that included, among others, assessing methodologies and testing the significant assumptions and the completeness and accuracy of the underlying data used by the Company in its analyses. We compared the significant assumptions used by management to current industry and economic trends, expected changes to the Company’s business model, the Company’s historical results and other relevant factors. We assessed the historical accuracy of management’s estimates, including projected financial information, and performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the International RAC segment indefinite-lived intangible tradename assets that would result from hypothetical changes in the assumptions. We also involved valuation specialists to assist in our evaluation of the Company’s model, valuation methodologies, and certain significant assumptions, such as the royalty rates, the terminal period revenue growth rates and the weighted average cost of capital. /s/ Ernst & Young LLP We have served as the Company's auditor since 2019. Tampa, Florida February 23, 2022 90 Table of Contents THE HERTZ CORPORATION AND SUBSIDIARIES REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholder and the Board of Directors of The Hertz Corporation Opinion on Internal Control Over Financial Reporting We have audited The Hertz Corporation and subsidiaries’ internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, The Hertz Corporation and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), changes in stockholder’s equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedule listed in the Index at Item 15(a) and our report dated February 23, 2022 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Tampa, Florida February 23, 2022 91 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In millions, except par value and share data) December 31, 2021 December 31, 2020 ASSETS Cash and cash equivalents $ 2,258 $ 1,096 Restricted cash and cash equivalents: Vehicle 77 50 Non-vehicle 316 361 Total restricted cash and cash equivalents 393 411 Total cash, cash equivalents, restricted cash and restricted cash equivalents 2,651 1,507 Receivables: Vehicle 62 164 Non-vehicle, net of allowance of $ 48 and $ 46 , respectively 696 613 Total receivables, net 758 777 Prepaid expenses and other assets 1,017 373 Revenue earning vehicles: Vehicles 10,836 7,540 Less: accumulated depreciation ( 1,610 ) ( 1,478 ) Total revenue earning vehicles, net 9,226 6,062 Property and equipment, net 608 666 Operating lease right-of-use assets 1,566 1,675 Intangible assets, net 2,912 2,992 Goodwill 1,045 1,045 Assets held for sale — 1,811 Total assets (1) $ 19,783 $ 16,908 LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable: Vehicle $ 56 $ 29 Non-vehicle 516 389 Total accounts payable 572 418 Accrued liabilities 863 759 Accrued taxes, net 157 121 Debt: Vehicle 7,921 6,024 Non-vehicle 2,986 243 Total debt 10,907 6,267 Public Warrants 1,324 — Operating lease liabilities 1,510 1,636 Self-insured liabilities 463 488 Deferred income taxes, net 1,010 730 Total liabilities not subject to compromise 16,806 10,419 Liabilities subject to compromise — 4,965 Liabilities held for sale — 1,431 Total liabilities (1) 16,806 16,815 Commitments and contingencies Stockholders' equity: Preferred stock, $ 0.01 par value, no shares issued and outstanding — — Common stock, $ 0.01 par value, 477,233,278 and 158,235,410 shares issued, respectively, and 449,782,424 and 156,206,478 shares outstanding, respectively 5 2 Treasury stock, at cost, 27,450,854 and 2,028,932 common shares, respectively ( 708 ) ( 100 ) Additional paid-in capital 6,209 3,047 Retained earnings (Accumulated deficit) ( 2,315 ) ( 2,681 ) Accumulated other comprehensive income (loss) ( 214 ) ( 212 ) Stockholders' equity attributable to Hertz Global 2,977 56 Noncontrolling interests — 37 Total stockholders' equity 2,977 93 Total liabilities and stockholders' equity $ 19,783 $ 16,908 (1) Hertz Global Holdings, Inc.'s consolidated total assets as of December 31, 2021 and December 31, 2020 included total assets of variable interest entities ("VIEs") of $ 734 million and $ 511 million, respectively, which can only be used to settle obligations of the VIEs. Hertz Global Holdings, Inc.'s consolidated total liabilities as of December 31, 2021 and December 31, 2020 included total liabilities of VIEs of $ 733 million and $ 475 million, respectively, for which the creditors of the VIEs have no recourse to Hertz Global Holdings, Inc. See "Pledges Related to Vehicle Financing" in Note 6, "Debt," and "Termination of 767 Auto Leasing Agreement" in Note 3, "Divestitures," for further information. The accompanying notes are an integral part of these financial statements. 92 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except per share data) Years Ended December 31, 2021 2020 2019 Revenues $ 7,336 $ 5,258 $ 9,779 Expenses: Direct vehicle and operating 3,920 3,423 5,305 Depreciation of revenue earning vehicles and lease charges 497 2,030 2,563 Non-vehicle depreciation and amortization 196 225 203 Selling, general and administrative 688 645 949 Interest expense, net: Vehicle 284 455 494 Non-vehicle (excludes contractual interest of $ 129 million for the year ended December 31, 2020) 185 153 311 Total interest expense, net 469 608 805 Technology-related intangible and other asset impairments — 213 — Other (income) expense, net ( 21 ) ( 9 ) ( 59 ) Reorganization items, net 677 175 — (Gain) from the sale of a business ( 400 ) — — Change in fair value of Public Warrants 627 — — Total expenses 6,653 7,310 9,766 Income (loss) before income taxes 683 ( 2,052 ) 13 Income tax (provision) benefit ( 318 ) 329 ( 63 ) Net income (loss) 365 ( 1,723 ) ( 50 ) Net (income) loss attributable to noncontrolling interests 1 9 ( 8 ) Net income (loss) attributable to Hertz Global 366 ( 1,714 ) ( 58 ) Series A Preferred Stock deemed dividends ( 450 ) — — Net income (loss) available to Hertz Global common stockholders $ ( 84 ) $ ( 1,714 ) $ ( 58 ) Weighted-average common shares outstanding: Basic 315 150 117 Diluted 315 150 117 Earnings (loss) per common share: Basic $ ( 0.27 ) $ ( 11.44 ) $ ( 0.49 ) Diluted $ ( 0.27 ) $ ( 11.44 ) $ ( 0.49 ) The accompanying notes are an integral part of these financial statements. 93 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (In millions) Years Ended December 31, 2021 2020 2019 Net income (loss) $ 365 $ ( 1,723 ) $ ( 50 ) Other comprehensive income (loss): Foreign currency translation adjustments ( 36 ) ( 19 ) 6 Net gain (loss) on pension and postretirement benefit plans 25 ( 11 ) ( 11 ) Reclassification from other comprehensive income (loss) to other (income) expense for amortization of actuarial net losses 15 13 11 Total other comprehensive income (loss) before income taxes 4 ( 17 ) 6 Income tax (provision) benefit related to pension and postretirement benefit plans ( 3 ) ( 4 ) ( 1 ) Income tax (provision) benefit related to reclassified amounts of net periodic costs on pension and postretirement benefit plans ( 3 ) ( 2 ) ( 2 ) Total other comprehensive income (loss) ( 2 ) ( 23 ) 3 Total comprehensive income (loss) 363 ( 1,746 ) ( 47 ) Comprehensive (income) loss attributable to noncontrolling interests 1 9 ( 8 ) Comprehensive income (loss) attributable to Hertz Global $ 364 $ ( 1,737 ) $ ( 55 ) The accompanying notes are an integral part of these financial statements. 94 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY (In millions) Mezzanine Equity Preferred Stock Shares Preferred Stock Amount Common Stock Shares Common Stock Amount Additional Paid-In Capital Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Income (Loss) Treasury Stock Shares Treasury Stock Amount Stockholders' Equity Attributable to Hertz Global Non- controlling Interests Total Stockholders' Equity Balance as of: December 31, 2018 — $ — 84 $ 1 $ 2,261 $ ( 909 ) $ ( 192 ) 2 $ ( 100 ) $ 1,061 $ 59 $ 1,120 Net income (loss) — — — — — ( 58 ) — — — ( 58 ) 8 ( 50 ) Other comprehensive income (loss) — — — — — — 3 — — 3 — 3 Net settlement on vesting of restricted stock — — — — ( 3 ) — — — — ( 3 ) — ( 3 ) Stock-based compensation charges — — — — 18 — — — — 18 — 18 2019 Rights Offering, net — — 58 — 748 — — — — 748 — 748 Contributions from noncontrolling interests — — — — — — — — — — 52 52 December 31, 2019 — — 142 1 3,024 ( 967 ) ( 189 ) 2 ( 100 ) 1,769 119 1,888 Net income (loss) — — — — — ( 1,714 ) — — — ( 1,714 ) ( 9 ) ( 1,723 ) Other comprehensive income (loss) — — — — — — ( 23 ) — — ( 23 ) — ( 23 ) Net settlement on vesting of restricted stock — — — — ( 3 ) — — — — ( 3 ) — ( 3 ) Stock-based compensation charges — — — — ( 2 ) — — — — ( 2 ) — ( 2 ) ATM Program, net — — 14 1 28 — — — — 29 — 29 Distributions to noncontrolling interests, net — — — — — — — — — — ( 73 ) ( 73 ) December 31, 2020 — — 156 2 3,047 ( 2,681 ) ( 212 ) 2 ( 100 ) 56 37 93 Net income (loss) — — — — — 366 — — — 366 ( 1 ) 365 Other comprehensive income (loss) — — — — — — ( 2 ) — — ( 2 ) — ( 2 ) Stock-based compensation charges — — — — 10 — — — — 10 — 10 Cancellation of stock-based awards — — — — ( 10 ) — — — — ( 10 ) — ( 10 ) Cancellation of common and treasury shares in exchange for new common shares — — ( 142 ) ( 2 ) ( 98 ) — — ( 2 ) 100 — — — Distributions to common stockholders — — — — ( 239 ) — — — — ( 239 ) — ( 239 ) Contributions from Plan Sponsors — — 277 3 2,778 — — — — 2,781 — 2,781 2021 Rights Offering, net — — 181 2 1,800 — — — — 1,802 — 1,802 Public Warrant issuance — — — — ( 800 ) — — — — ( 800 ) — ( 800 ) Preferred stock issuance, net 2 1,433 — — — — — — — 1,433 — 1,433 Repurchase of preferred stock, net ( 2 ) ( 1,433 ) — — ( 450 ) — — — — ( 1,883 ) — ( 1,883 ) Public Warrant exercises (1) — — 5 — 180 — — — — 180 — 180 Nasdaq listing and share repurchases (2) — — ( 27 ) — ( 9 ) — — 27 ( 708 ) ( 717 ) — ( 717 ) Distributions to noncontrolling interests (3) — — — — — — — — — — ( 36 ) ( 36 ) December 31, 2021 — $ — 450 $ 5 $ 6,209 $ ( 2,315 ) $ ( 214 ) 27 $ ( 708 ) $ 2,977 $ — $ 2,977 The accompanying notes are an integral part of these financial statements. 95 Table of Contents (1) The amounts presented herein may be rounded to agree to amounts in the audited consolidated balance sheet. Also see Note 18, "Public Warrants - Hertz Global." (2) See Registration Status of Stock Issued on the Effective Date and Nasdaq Listing and Share Repurchase Program for Common Stock in Note 16, "Equity and Mezzanine Equity – Hertz Global." (3) Effective October 31, 2021, the 767 lease agreement was terminated. See Note 3, "Divestitures." The accompanying notes are an integral part of these financial statements. 96 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) Years Ended December 31, 2021 2020 2019 Cash flows from operating activities: Net income (loss) $ 365 $ ( 1,723 ) $ ( 50 ) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and reserves for revenue earning vehicles 600 2,259 2,791 Depreciation and amortization, non-vehicle 196 225 203 Amortization of deferred financing costs and debt discount (premium) 122 59 52 Loss on extinguishment of debt 8 5 43 Stock-based compensation charges 10 ( 2 ) 18 Provision for receivables allowance 125 94 53 Deferred income taxes, net 270 ( 353 ) 27 Technology-related intangible and other asset impairments — 213 — Reorganization items, net 314 8 — (Gain) loss from the sale of a business ( 400 ) — — (Gain) loss on marketable securities — — ( 30 ) (Gain) loss on sale of non-vehicle capital assets ( 8 ) ( 24 ) ( 39 ) Change in fair value of Public Warrants 627 — — Other ( 5 ) 5 ( 9 ) Changes in assets and liabilities: Non-vehicle receivables ( 210 ) 195 ( 88 ) Prepaid expenses and other assets ( 20 ) 92 ( 8 ) Operating lease right-of-use assets 274 366 402 Non-vehicle accounts payable ( 70 ) 98 65 Accrued liabilities ( 108 ) ( 61 ) ( 98 ) Accrued taxes, net 24 ( 52 ) 14 Operating lease liabilities ( 291 ) ( 375 ) ( 428 ) Self-insured liabilities ( 17 ) ( 76 ) ( 18 ) Net cash provided by (used in) operating activities 1,806 953 2,900 Cash flows from investing activities: Revenue earning vehicles expenditures ( 7,154 ) ( 5,542 ) ( 13,714 ) Proceeds from disposal of revenue earning vehicles 2,818 10,098 9,486 Non-vehicle capital asset expenditures ( 71 ) ( 98 ) ( 224 ) Proceeds from non-vehicle capital assets disposed of or to be disposed of 16 60 27 Sales of marketable securities — 74 — Collateral payments ( 303 ) — — Collateral returned in exchange for letters of credit 280 — — Proceeds from the sale of a business, net of cash sold 871 — — Other ( 1 ) ( 1 ) — Net cash provided by (used in) investing activities ( 3,544 ) 4,591 ( 4,425 ) Cash flows from financing activities: Proceeds from issuance of vehicle debt 14,323 4,546 13,013 Repayments of vehicle debt ( 12,607 ) ( 10,751 ) ( 11,530 ) Proceeds from issuance of non-vehicle debt 4,644 1,812 3,016 97 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (In millions) Years Ended December 31, 2021 2020 2019 Repayments of non-vehicle debt ( 6,352 ) ( 855 ) ( 3,732 ) Payment of financing costs ( 185 ) ( 75 ) ( 53 ) Proceeds from Plan Sponsors 2,781 — — Early redemption premium payment ( 85 ) — ( 34 ) Proceeds from issuance of common stock, net — 28 — Proceeds from exercises of Public Warrants 77 — — Proceeds from the issuance of preferred stock, net 1,433 — — Distributions to common stockholders ( 239 ) — — Contributions from (distributions to) noncontrolling interests ( 38 ) ( 75 ) 49 Proceeds from rights offerings, net 1,639 — 748 Share repurchases ( 654 ) — — Repurchase of preferred stock ( 1,883 ) — — Payments for Nasdaq listing costs ( 9 ) — — Other — ( 2 ) ( 3 ) Net cash provided by (used in) financing activities 2,845 ( 5,372 ) 1,474 Effect of foreign currency exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents ( 34 ) 46 1 Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents during the period 1,073 218 ( 50 ) Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period (1) 1,578 1,360 1,410 Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period (1) $ 2,651 $ 1,578 $ 1,360 Supplemental disclosures of cash flow information: Cash paid during the period for: Interest, net of amounts capitalized: Vehicle $ 257 $ 335 $ 431 Non-vehicle 198 109 272 Income taxes, net of refunds 40 ( 11 ) 21 Operating lease liabilities 472 546 575 Supplemental disclosures of non-cash information: Purchases of revenue earning vehicles included in accounts payable, net of incentives $ 27 $ 9 $ 165 Sales of revenue earning vehicles included in vehicle receivables 33 144 667 Fleet payables included in liabilities subject to compromise — 2 — Purchases of non-vehicle capital assets included in accounts payable 24 7 40 Revenue earning vehicles and non-vehicle capital assets acquired through capital leases 79 32 23 Purchases of non-vehicle capital assets included in liabilities subject to compromise — 18 — Operating lease right-of-use assets obtained in exchange for lease liabilities 177 152 680 Public Warrant issuance 800 — — Public Warrant exercises 103 — — Backstop equity issuance 164 — — Accrual for purchases of treasury shares 54 — — (1) Amounts include cash and cash equivalents and restricted cash and cash equivalents which were held for sale as of December 31, 2020, prior to the completion of the Donlen Sale in the first quarter of 2021, as described in Note 3 , " Divestitures." The accompanying notes are an integral part of these financial statements. 98 Table of Contents THE HERTZ CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In millions, except par value and share data) December 31, 2021 December 31, 2020 ASSETS Cash and cash equivalents $ 2,257 $ 1,096 Restricted cash and cash equivalents: Vehicle 77 50 Non-vehicle 316 333 Total restricted cash and cash equivalents 393 383 Total cash, cash equivalents, restricted cash and restricted cash equivalents 2,650 1,479 Receivables: Vehicle 62 164 Non-vehicle, net of allowance of $ 48 and $ 46 , respectively 695 613 Total receivables, net 757 777 Due from Hertz Holdings — 1 Prepaid expenses and other assets 1,016 372 Revenue earning vehicles: Vehicles 10,836 7,540 Less: accumulated depreciation ( 1,610 ) ( 1,478 ) Total revenue earning vehicles, net 9,226 6,062 Property and equipment, net 608 666 Operating lease right-of-use assets 1,566 1,675 Intangible assets, net 2,912 2,992 Goodwill 1,045 1,045 Assets held for sale — 1,811 Total assets (1) $ 19,780 $ 16,880 LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT) Accounts payable: Vehicle $ 56 $ 29 Non-vehicle 516 389 Total accounts payable 572 418 Accrued liabilities 809 759 Accrued taxes, net 157 121 Debt: Vehicle 7,921 6,024 Non-vehicle 2,986 243 Total debt 10,907 6,267 Operating lease liabilities 1,510 1,636 Self-insured liabilities 463 488 Deferred income taxes, net 1,012 735 Total liabilities not subject to compromise 15,430 10,424 Liabilities subject to compromise — 5,030 Liabilities held for sale — 1,431 Total liabilities (1) 15,430 16,885 Commitments and contingencies Stockholder's equity (deficit): Common stock, $ 0.01 par value, 3,000 shares authorized and 100 shares issued and outstanding — — Additional paid-in capital 7,190 3,953 Retained earnings (Accumulated deficit) ( 2,626 ) ( 3,783 ) Accumulated other comprehensive income (loss) ( 214 ) ( 212 ) Stockholder's equity (deficit) attributable to Hertz 4,350 ( 42 ) Noncontrolling interests — 37 Total stockholder's equity (deficit) 4,350 ( 5 ) Total liabilities and stockholder's equity (deficit) $ 19,780 $ 16,880 (1) The Hertz Corporation's consolidated total assets as of December 31, 2021 and December 31, 2020 included total assets of VIEs of $ 734 million and $ 511 million, respectively, which can only be used to settle obligations of the VIEs. The Hertz Corporation's consolidated total liabilities as of December 31, 2021 and December 31, 2020 included total liabilities of VIEs of $ 733 million and $ 475 million, respectively, for which the creditors of the VIEs have no recourse to The Hertz Corporation. See "Pledges Related to Vehicle Financing" in Note 6, "Debt," and "Termination of 767 Auto Leasing Agreement" in Note 3, "Divestitures," for further information. The accompanying notes are an integral part of these financial statements. 99 Table of Contents THE HERTZ CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In millions) Years Ended December 31, 2021 2020 2019 Revenues $ 7,336 $ 5,258 $ 9,779 Expenses: Direct vehicle and operating 3,920 3,423 5,305 Depreciation of revenue earning vehicles and lease charges 497 2,030 2,563 Non-vehicle depreciation and amortization 196 225 203 Selling, general and administrative 688 645 949 Interest expense, net: Vehicle 284 455 494 Non-vehicle (excludes contractual interest of $ 129 million for the year ended December 31, 2020) 185 151 304 Total interest expense, net 469 606 798 Technology-related intangible and other asset impairments — 213 — Write-off of intercompany loan — 133 — Other (income) expense, net ( 21 ) ( 9 ) ( 59 ) Reorganization items, net 513 175 — (Gain) from the sale of a business ( 400 ) — — Total expenses 5,862 7,441 9,759 Income (loss) before income taxes 1,474 ( 2,183 ) 20 Income tax (provision) benefit ( 318 ) 328 ( 65 ) Net income (loss) 1,156 ( 1,855 ) ( 45 ) Net (income) loss attributable to noncontrolling interests 1 9 ( 8 ) Net income (loss) attributable to Hertz $ 1,157 $ ( 1,846 ) $ ( 53 ) The accompanying notes are an integral part of these financial statements. 100 Table of Contents THE HERTZ CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (In millions) Years Ended December 31, 2021 2020 2019 Net income (loss) $ 1,156 $ ( 1,855 ) $ ( 45 ) Other comprehensive income (loss): Foreign currency translation adjustments ( 36 ) ( 19 ) 6 Net gain (loss) on pension and postretirement benefit plans 25 ( 11 ) ( 11 ) Reclassification from other comprehensive income (loss) to other (income) expense for amortization of actuarial net losses 15 13 11 Total other comprehensive income (loss) before income taxes 4 ( 17 ) 6 Income tax (provision) benefit related to pension and postretirement benefit plans ( 3 ) ( 4 ) ( 1 ) Income tax (provision) benefit related to reclassified amounts of net periodic costs on pension and postretirement benefit plans ( 3 ) ( 2 ) ( 2 ) Total other comprehensive income (loss) ( 2 ) ( 23 ) 3 Total comprehensive income (loss) 1,154 ( 1,878 ) ( 42 ) Comprehensive (income) loss attributable to noncontrolling interests 1 9 ( 8 ) Comprehensive income (loss) attributable to Hertz $ 1,155 $ ( 1,869 ) $ ( 50 ) The accompanying notes are an integral part of these financial statements. 101 Table of Contents THE HERTZ CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY (DEFICIT) (In millions) Common Stock Shares Common Stock Amount Additional Paid-In Capital Due From Affiliate Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Stockholder's Equity (Deficit) Attributable to Hertz Noncontrolling Interests Total Stockholder's Equity (Deficit) Balance as of: December 31, 2018 100 — 3,187 ( 52 ) ( 1,884 ) ( 192 ) 1,059 59 1,118 Net income (loss) — — — — ( 53 ) — ( 53 ) 8 ( 45 ) Other comprehensive income (loss) — — — — — 3 3 — 3 Due from Hertz Holdings — — — ( 12 ) — — ( 12 ) — ( 12 ) Stock-based compensation charges — — 18 — — — 18 — 18 Contributions from Hertz Holdings — — 750 — — — 750 — 750 Contributions from noncontrolling interests — — — — — — — 52 52 December 31, 2019 100 — 3,955 ( 64 ) ( 1,937 ) ( 189 ) 1,765 119 1,884 Net income (loss) — — — — ( 1,846 ) — ( 1,846 ) ( 9 ) ( 1,855 ) Other comprehensive income (loss) — — — — — ( 23 ) ( 23 ) — ( 23 ) Due from Hertz Holdings — — — ( 4 ) — — ( 4 ) — ( 4 ) Liabilities subject to compromise (1) — — — ( 65 ) — — ( 65 ) — ( 65 ) Write-off of intercompany loan (1) — — — 133 — — 133 — 133 Stock-based compensation charges — — ( 2 ) — — — ( 2 ) — ( 2 ) Distributions to noncontrolling interests, net — — — — — — — ( 73 ) ( 73 ) December 31, 2020 100 — 3,953 — ( 3,783 ) ( 212 ) ( 42 ) 37 ( 5 ) Net income (loss) — — — — 1,157 — 1,157 ( 1 ) 1,156 Other comprehensive income (loss) — — — — — ( 2 ) ( 2 ) — ( 2 ) Non-cash distribution (1) — — 65 — — — 65 — 65 Stock-based compensation charges — — 10 — — — 10 — 10 Cancellation of stock-based awards — — ( 10 ) — — — ( 10 ) — ( 10 ) Contributions from Hertz Holdings — — 5,642 — — — 5,642 — 5,642 Dividends to Hertz Holdings — — ( 2,470 ) — — — ( 2,470 ) — ( 2,470 ) Distributions to noncontrolling interests (2) — — — — — — — ( 36 ) ( 36 ) December 31, 2021 100 $ — $ 7,190 $ — $ ( 2,626 ) $ ( 214 ) $ 4,350 $ — $ 4,350 (1) See Note 15, "Related Party Transactions." (2) Effective October 31, 2021, the 767 lease agreement was terminated. See Note 3, "Divestitures." The accompanying notes are an integral part of these financial statements. 102 Table of Contents THE HERTZ CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) Years Ended December 31, 2021 2020 2019 Cash flows from operating activities: Net income (loss) $ 1,156 $ ( 1,855 ) $ ( 45 ) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and reserves for revenue earning vehicles 600 2,259 2,791 Depreciation and amortization, non-vehicle 196 225 203 Amortization of deferred financing costs and debt discount (premium) 122 59 52 Loss on extinguishment of debt 8 5 43 Stock-based compensation charges 10 ( 2 ) 18 Provision for receivables allowance 125 94 53 Deferred income taxes, net 270 ( 353 ) 28 Technology-related intangible and other asset impairments — 213 — Write-off of intercompany loan — 133 — Reorganization items, net 150 8 — (Gain) loss from the sale of a business ( 400 ) — — (Gain) loss on marketable securities — — ( 30 ) (Gain) loss on sale of non-vehicle capital assets ( 8 ) ( 24 ) ( 39 ) Other ( 5 ) 5 ( 8 ) Changes in assets and liabilities: Non-vehicle receivables ( 210 ) 195 ( 88 ) Prepaid expenses and other assets ( 20 ) 94 ( 8 ) Operating lease right-of-use assets 274 366 402 Non-vehicle accounts payable ( 70 ) 98 65 Accrued liabilities ( 108 ) ( 61 ) ( 98 ) Accrued taxes, net 24 ( 52 ) 14 Operating lease liabilities ( 291 ) ( 375 ) ( 428 ) Self-insured liabilities ( 17 ) ( 76 ) ( 18 ) Net cash provided by (used in) operating activities 1,806 956 2,907 Cash flows from investing activities: Revenue earning vehicles expenditures ( 7,154 ) ( 5,542 ) ( 13,714 ) Proceeds from disposal of revenue earning vehicles 2,818 10,098 9,486 Non-vehicle capital asset expenditures ( 71 ) ( 98 ) ( 224 ) Proceeds from non-vehicle capital assets disposed of or to be disposed of 16 60 27 Sales of marketable securities — 74 — Collateral payments ( 303 ) — — Collateral returned in exchange for letters of credit 280 — — Proceeds from the sale of a business, net of cash sold 871 — — Other ( 1 ) ( 1 ) — Net cash provided by (used in) investing activities ( 3,544 ) 4,591 ( 4,425 ) Cash flows from financing activities: Proceeds from issuance of vehicle debt 14,323 4,546 13,013 Repayments of vehicle debt ( 12,607 ) ( 10,751 ) ( 11,530 ) Proceeds from issuance of non-vehicle debt 4,644 1,812 3,016 Repayments of non-vehicle debt ( 6,352 ) ( 855 ) ( 3,732 ) 103 Table of Contents THE HERTZ CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (In millions) Years Ended December 31, 2021 2020 2019 Payment of financing costs ( 185 ) ( 75 ) ( 53 ) Early redemption premium payment ( 85 ) — ( 34 ) Advances to Hertz Holdings — ( 5 ) ( 12 ) Contributions from (distributions to) noncontrolling interests ( 38 ) ( 75 ) 49 Dividends paid to Hertz Holdings ( 2,470 ) — — Contributions from Hertz Holdings 5,642 — 750 Net cash provided by (used in) financing activities 2,872 ( 5,403 ) 1,467 Effect of foreign currency exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents ( 34 ) 46 1 Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents during the period 1,100 190 ( 50 ) Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period (1) 1,550 1,360 1,410 Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period (1) $ 2,650 $ 1,550 $ 1,360 Supplemental disclosures of cash flow information: Cash paid during the period for: Interest, net of amounts capitalized: Vehicle $ 257 $ 335 $ 431 Non-vehicle 198 109 272 Income taxes, net of refunds 40 ( 11 ) 21 Operating lease liabilities 472 546 575 Supplemental disclosures of non-cash information: Purchases of revenue earning vehicles included in accounts payable, net of incentives $ 27 $ 9 $ 165 Sales of revenue earning vehicles included in vehicle receivables 33 144 667 Fleet payables included in liabilities subject to compromise — 2 — Purchases of non-vehicle capital assets included in accounts payable 24 7 40 Revenue earning vehicles and non-vehicle capital assets acquired through capital leases 79 32 23 Purchases of non-vehicle capital assets included in liabilities subject to compromise — 18 — Operating lease right-of-use assets obtained in exchange for lease liabilities 177 152 680 Non-cash capital contribution from Hertz Holdings 65 — — (1) Amounts include cash and cash equivalents and restricted cash and cash equivalents which were held for sale as of December 31, 2020, prior to the completion of the Donlen Sale in the first quarter of 2021, as described in Note 3 , " Divestitures ." The accompanying notes are an integral part of these financial statements. 104 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1— Background Hertz Global Holdings, Inc. was incorporated in Delaware in 2015 to serve as the top-level holding company for Rental Car Intermediate Holdings, LLC, which wholly owns The Hertz Corporation, Hertz Global's primary operating company. Hertz was incorporated in Delaware in 1967 and is a successor to corporations that have been engaged in the vehicle rental and leasing business since 1918. Hertz operates its vehicle rental business globally primarily through the Hertz, Dollar and Thrifty brands from company-owned, licensee and franchisee locations in the U.S., Africa, Asia, Australia, Canada, the Caribbean, Europe, Latin America, the Middle East and New Zealand. The Company also sells vehicles through Hertz Car Sales and operates the Firefly vehicle rental brand and Hertz 24/7 car sharing business in international markets. As disclosed in Note 3, "Divestitures," on March 30, 2021 the Company completed the Donlen Sale, a business which provided vehicle leasing and fleet management services. Chapter 11 and Emergence In March 2020, the World Health Organization declared COVID-19 a global pandemic. In response to COVID-19, local and national governments around the world instituted shelter-in-place and similar orders and travel restrictions, and airline and other travel decreased suddenly and dramatically. As a result of the impact of COVID-19 and the associated government responses on travel demand, late in the first quarter of 2020, the Company experienced a high level of rental cancellations and a significant decline in forward bookings. In response, the Company began aggressive actions to eliminate costs. However, it faced significant ongoing expenses, including a large lease payment with respect to its vehicle fleet that increased as a result of COVID-19's impact on the car market. On the Petition Date, the Debtors filed petitions for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court. The Chapter 11 Cases were jointly administered for procedural purposes only under the caption In re The Hertz Corporation, et al., Case No. 20-11218 (MFW) . While in Chapter 11, the Debtors operated as debtors-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. In general, as debtors-in-possession under the Bankruptcy Code, the Debtors were authorized to continue to operate as an ongoing business but could not engage in transactions outside the ordinary course of business without the prior approval of the Bankruptcy Court. On May 14, 2021, the Debtors filed the Plan of Reorganization, and the solicitation version of the Supplement to the Disclosure Statement which was approved by the Bankruptcy Court on May 14, 2021. On June 10, 2021, the Plan of Reorganization was confirmed by the Bankruptcy Court. On the Effective Date, the Plan of Reorganization became effective in accordance with its terms and the Debtors emerged from Chapter 11. On the Effective Date, as a result of the Plan of Reorganization, the reorganized Company received cash proceeds of $ 7.5 billion comprised of: • $ 2.8 billion from the purchase of common stock in reorganized Hertz Global by the Plan Sponsors and certain other investment funds and entities; • $ 1.6 billion from the purchase of common stock in reorganized Hertz Global pursuant to the 2021 Rights Offering; • $ 1.5 billion (less a 2 % upfront discount and stock issuance fees) from the purchase of preferred stock of reorganized Hertz Global by Apollo; and • $ 1.5 billion in proceeds from the Company's secured exit term loan facilities (the "Term Loans"). Such cash proceeds were used, in part, to provide payments to the Company's stakeholders pursuant to the terms of the Plan of Reorganization as follows: • the holders of administrative, priority and secured claims received payment in cash in full; • the holders of the approximately $ 1.0 billion of obligations owed with respect to the Company's DIP Credit Agreement received payment in cash in full; 105 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) • the holders of the Company's Senior Term Loan, Senior RCF and Letter of Credit Facility received payment in cash in full with respect to all non-contingent liquidated claims; • the holders of claims with respect to the Senior Second Priority Secured Notes received payment in cash in full; • the holders of the Company's € 725 million European Vehicle Notes received payment in cash in full; • the holders of the € 257 million term loan facility incurred by Hertz International Ltd. received payment in cash in full; • the holders of claims with respect to the unsecured Senior Notes and the holders of claims with respect to the Alternative Letter of Credit Facility received payment in cash with respect to (i) all remaining principal, (ii) accrued and unpaid interest as of the Petition Date at the contract rate, and (iii) accrued and unpaid interest from the Petition Date to the Effective Date at the federal judgment rate (at such rate in effect as of the Petition Date), subject to the rights of creditors (if any) to bring a claim for the payment of additional interest and/or premiums, as further disclosed in Note 6, "Debt;" and • the holders of general unsecured claims will receive payment in cash in full plus interest at the federal judgment rate from the Petition Date to the date of payment (at such rate in effect as of the Petition Date), subject to the rights of creditors to bring a claim for payment of additional interest. All of the Hertz Global equity interests existing as of the Effective Date were cancelled on such date in accordance with the Plan of Reorganization with existing equity holders receiving (i) cash in the amount of $ 1.53 per share of existing interests, (ii) their pro rata share of 3 % of the common shares of reorganized Hertz Global, subject to dilution, and (iii) either Public Warrants, for in the aggregate of up to 18 % of reorganized Hertz Global common stock issued and outstanding on the Effective Date, subject to dilution and certain conditions, or subscription rights to participate in the 2021 Rights Offering as disclosed below. In accordance with the Plan of Reorganization, Hertz Global commenced a 2021 Rights Offering, under which eligible holders of Hertz Global's common stock and certain eligible holders of the Company's Senior Notes and lenders under the Alternative Letter of Credit Facility could purchase up to $ 1.6 billion of shares of reorganized Hertz Global common stock at a purchase price of $ 10.00 per share. Pursuant to the EPCA, certain parties agreed to purchase all unsubscribed shares in the 2021 Rights Offering (the "Backstop Parties"). The final expiration date for the 2021 Rights Offering occurred on June 15, 2021, with eligible holders subscribing to purchase 127,362,114 shares (approximately $ 1.3 billion), with the Backstop Parties to purchase the remaining 36,137,887 shares (approximately $ 361 million). Hertz Global closed the 2021 Rights Offering upon emergence from the Chapter 11 Cases on the Effective Date. Pursuant to the terms of the EPCA, the Backstop Parties received a backstop fee equal in the amount of $ 164 million (payable in shares of reorganized Hertz Global common stock valued at $ 10.00 per share). As a result of these transactions, on the Effective Date, Hertz Global issued 471,102,462 shares of common stock as follows: • 14,133,024 shares to existing stockholders; • 277,119,438 shares to Plan Sponsors pursuant to the EPCA; • 127,362,114 shares to eligible participants pursuant to the Rights Offering; and • 52,487,886 shares to the Backstop Parties pursuant to the EPCA. During the third quarter of 2021, the Company issued additional shares pursuant to the rounding provisions of the 2021 Rights Offering for cash proceeds of approximately $ 4 million at a purchase price of $ 10.00 . On the Effective Date, in accordance with the Plan of Reorganization, reorganized Hertz Global issued 1,500,000 shares of preferred stock to Apollo and received gross proceeds of $ 1.5 billion, less a 2 % upfront discount and stock issuance fees. During the fourth quarter of 2021, all 1,500,000 shares of the Series A Preferred Stock were repurchased and retired by Hertz Global at $ 1,250 per share. On the Effective Date, in accordance with the Plan of Reorganization, reorganized Hertz Global entered into a public warrant agreement (the "Public Warrant Agreement") and issued 89,049,029 Public Warrants, subject to certain conditions. The Public Warrants are exercisable from the date of issuance until June 30, 2051 at which time 106 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) all unexercised Public Warrants will expire and the rights of the holders of such expired Public Warrants will terminate. The Public Warrants had an initial exercise price of $ 13.80 and are subject to adjustment from time to time upon the occurrence of any payments of cash dividends, certain dilutive events, and recurring fair value adjustments (See Note 12, "Fair Value Measurements"). See Note 16, "Equity and Mezzanine Equity – Hertz Global," and Note 18, "Public Warrants - Hertz Global," for additional information on the new equity and Public Warrants issued upon the Company's Chapter 11 emergence. On the Effective Date, the reorganized Company entered into the First Lien Credit Agreement in an aggregate amount of $ 2.8 billion comprised of senior secured term loan facilities in an aggregate principal amount of $ 1.5 billion plus the First Lien RCF in an aggregate committed amount of $ 1.3 billion. Additionally, the reorganized Company entered into a new ABS facility program with an aggregate principal amount of $ 6.8 billion comprised of variable funding notes with a principal amount up to $ 2.8 billion and medium term notes in an aggregate principal amount of $ 4.0 billion. On the Effective Date, substantially all existing non-vehicle debt and all existing ABS facilities under the HVF II U.S. ABS Program were repaid in full and terminated in accordance with the Plan of Reorganization. See Note 6, "Debt," for additional information. NYSE Delisting and Nasdaq Listing As a result of the filing of the Chapter 11 Cases, the NYSE suspended trading of Hertz Global common stock after the market close on October 29, 2020. On October 30, 2020, Hertz Global common stock began trading exclusively on the OTC market under the symbol "HTZGQ," and was delisted from the NYSE on November 10, 2020. Upon deregistration of Hertz Global common stock under Section 12(b) of the Exchange Act, Hertz Global common stock remained registered under Section 12(g) of the Exchange Act. As discussed above, on the Effective Date, all of the Hertz Global common stock then existing was cancelled and Hertz Global issued 471,102,462 shares of its new common stock pursuant to the Plan of Reorganization. On November 8, 2021, reorganized Hertz Global successfully completed its Nasdaq listing, in which shares of its new common stock were registered with the SEC for a public offering by certain selling stockholders. On November 9, 2021, reorganized Hertz Global's common stock and Public Warrants began trading on Nasdaq under the trading symbols "HTZ" and "HTZWW," respectively. See Note 16 , " Equity and Mezzanine Equity – Hertz Global." Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern and contemplate the realization of assets and the satisfaction of liabilities in the normal course of business. During the Chapter 11 Cases, the Company’s ability to continue as a going concern was contingent upon the Company’s ability to successfully implement the Company’s Plan of Reorganization, among other factors. As a result of the implementation of the Plan of Reorganization, management believes there is no longer substantial doubt about the Company's ability to continue as a going concern. Note 2— Significant Accounting Policies Accounting Principles The Company’s consolidated financial statements have been prepared in accordance with U.S. GAAP. Reclassifications Certain prior period amounts have been reclassified to conform with current period presentation. Non-vehicle depreciation expense is now reported on a separate line item in the consolidated statement of operations for all periods presented. 107 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Principles of Consolidation The consolidated financial statements of Hertz Global include the accounts of Hertz Global, its wholly-owned and majority owned U.S. and international subsidiaries, and its VIEs, as applicable. The consolidated financial statements of Hertz include the accounts of Hertz, its wholly-owned and majority-owned U.S. and international subsidiaries, and its VIEs, as applicable. The Company consolidates a VIE when it is deemed the primary beneficiary. The Company accounts for its investment in joint ventures using the equity method when it has significant influence but not control and is not the primary beneficiary. All significant intercompany transactions are eliminated in consolidation. Accounting Standards Codification 852 - Reorganizations Effective on the Petition Date, the Company applied accounting standards applicable to reorganizations, Accounting Standards Codification ("ASC") 852 - Reorganizations ("Topic 852"), in preparing its consolidated financial statements, which required the financial statements, for periods subsequent to the commencement of the Chapter 11 Cases, to distinguish transactions and events that were directly associated with the reorganization from the ongoing operations of the business. Accordingly, Pre-petition obligations of the Debtors that were subject to the Chapter 11 Cases were classified as liabilities subject to compromise in the accompanying consolidated balance sheet as of December 31, 2020. These liabilities were reported at the amounts the Company anticipated would be allowed by the Bankruptcy Court, even if they were subject to settlement at lesser amounts. See Note 20, "Liabilities Subject to Compromise," for additional information. In addition, certain charges related to the Chapter 11 Cases were recorded as reorganization items, net in the accompanying consolidated statements of operations for the years ended December 31, 2021 and 2020. See Note 21, "Reorganization Items, Net," for additional information. Under Topic 852, companies must apply “fresh-start” accounting rules upon emergence from Chapter 11 reorganization if certain conditions are met. The Company did not qualify for "fresh-start" accounting under Topic 852 upon emergence from Chapter 11. Use of Estimates and Assumptions The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and footnotes. Actual results could differ materially from those estimates. Significant estimates inherent in the preparation of the consolidated financial statements include depreciation of revenue earning vehicles, reserves for litigation and other contingencies, accounting for income taxes and related uncertain tax positions, pension and postretirement benefit costs, the recoverability of long-lived assets, useful lives and impairment of long-lived tangible and intangible assets including goodwill, valuation of stock-based compensation, self-insured liabilities, allowance for doubtful accounts, the retail value of loyalty points, and fair value of financial instruments, among others. Revenue Earning Vehicles Revenue earning vehicles are stated at cost, net of related discounts and incentives from manufacturers. Holding periods typically range from six to thirty-six months . Generally, when revenue earning vehicles are acquired outside of a vehicle repurchase program, the Company estimates the period that the Company will hold the asset, primarily based on historical measures of the amount of rental activity (e.g., automobile mileage). The Company also estimates the residual value of the applicable revenue earning vehicles at the expected time of disposal, taking into consideration factors such as make, model and options, age, physical condition, mileage, sale location, time of the year, channel of disposition (e.g., auction, dealer direct, retail) and market conditions . Depreciation is recorded over the estimated holding period. Depreciation rates are reviewed on a quarterly basis based on management's ongoing assessment of present and estimated future market conditions, their effect on residual values at the expected time of disposal and the estimated holding periods. Gains and losses on the sale of vehicles, including the costs 108 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) associated with disposals, are included in depreciation of revenue earning vehicles and lease charges in the accompanying consolidated statements of operations. For program vehicles, the manufacturers agree to repurchase program vehicles at a specified price or guarantee the depreciation rate on the vehicles during established repurchase or auction periods, subject to, among other things, certain vehicle condition, mileage and holding period requirements. Guaranteed depreciation 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. The Company records a provision in accumulated depreciation for excess mileage and vehicle condition, as necessary, during the holding period. Donlen's revenue earning vehicles were leased under long term agreements with its customers. These leases contained provisions whereby Donlen had a contracted residual value guaranteed by the lessee, such that it did not bear the risk of any gains or losses on the disposal of these vehicles. Donlen accounted for its lease contracts using the appropriate lease classifications. The Donlen business was sold on March 30, 2021, as disclosed in Note 3 , " Divestitures ." The Company continually evaluates revenue earning vehicles to determine whether events or changes in circumstances have occurred that may warrant revision of the residual value or holding period. Self-insured Liabilities Self-insured liabilities in the accompanying consolidated balance sheets include public liability, property damage, general liability, liability insurance supplement, personal accident insurance, and worker's compensation. These represent an estimate for both reported accident claims not yet paid, and claims incurred but not yet reported and are recorded on an undiscounted basis. Reserve requirements are based on rental volume and actuarial evaluations of historical accident claim experience and trends, as well as future projections of ultimate losses, expenses and administrative costs. The adequacy of the liability is regularly monitored based on evolving accident claim history and insurance related state legislation changes. If the Company's 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 The Company tests the recoverability of its goodwill and indefinite-lived intangible assets by performing an impairment analysis on an annual basis, as of October 1, and at interim periods when circumstances require as a result of a triggering event. A goodwill impairment charge is calculated as the amount by which a reporting unit's carrying amount exceeds its fair value. For goodwill, fair value is determined 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. In the second quarter of 2021, in connection with the Chapter 11 Emergence as disclosed in Note 1 , " Background," and changes in how the Company's CODM regularly reviews operating results and allocates resources, the Company revised its reportable segments to include Canada, Latin America and the Caribbean in its Americas RAC reportable segment, which were previously included in its International RAC reportable segment. Accordingly, prior periods have been restated to conform with the revised presentation. The Company has identified two reportable segments, which are organized based on the products and services provided by its operating segments and the geographic areas in which its operating segments conduct business: Americas RAC and International RAC. The fair values of the reporting units are estimated using the net present value of discounted cash flows generated by each reporting unit and incorporate various assumptions related to discount rates, growth rates, cash flow projections, tax rates and terminal value rates specific to the reporting unit to which they are applied. Discount rates are set by using the 109 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) WACC methodology. The Company’s discounted cash flows are based upon reasonable and appropriate assumptions about the underlying business activities of the Company’s reporting units. In the impairment analysis for an indefinite-lived intangible asset, the Company compares the carrying value of the asset to its estimated fair value and recognizes an impairment charge whenever the carrying amount of the asset exceeds its estimated fair value. The estimated fair value for a tradename utilizes a relief-from-royalty income approach, which includes the Company’s revenue projections for each asset, along with assumptions for royalty rates, tax rates and WACC. Income Taxes The Company recognized the effects of the TCJA enacted on December 22, 2017, which created the global intangible low-tax income ("GILTI") provision that imposes U.S. tax on certain earnings of foreign subsidiaries that are subject to foreign tax below a certain threshold. GILTI taxes are recorded in current income tax expense as incurred. In 2018 and 2019, the Company asserted indefinite reinvestment on certain of its foreign earnings. Effective as of December 31, 2020, the Company no longer asserts permanent reinvestment of foreign earnings, due to the impact from COVID-19, as disclosed in Note 1, "Background." Valuation Allowances The Company’s current and future provision for income taxes is impacted by the initial recognition of and changes in valuation allowances in certain jurisdictions. The Company intends to maintain these allowances until it is more likely than not that the deferred tax assets will be realized. The Company’s future provision for income taxes will include no tax benefit with respect to losses incurred in these jurisdictions. Accordingly, income taxes are impacted by changes in valuation allowances and the mix of earnings among jurisdictions. The Company evaluates the realizability of its deferred tax assets on a quarterly basis. In completing this evaluation, the Company considers all available evidence in order to determine whether, based on the weight of the evidence, a valuation allowance for its deferred tax assets is necessary. Such evidence includes the evaluation of historical cumulative earnings and losses in recent years, future reversals of deferred tax liabilities, the availability of carry forwards and the remaining period of the respective carry forward, future taxable income (exclusive of the reversal of temporary differences and carryforwards), and any applicable tax-planning strategies that are available. If, based on the weight of the evidence, it is more likely than not that all or a portion of the Company’s deferred tax assets will not be realized, a valuation allowance is recorded. If operating results improve or decline on a continual basis in a particular jurisdiction, the Company’s decision regarding the need for a valuation allowance could change resulting in either the initial recognition or reversal of a valuation allowance in that jurisdiction, which could have a significant impact on income tax expense in the period recognized and subsequent periods. In determining the provision for income taxes for financial statement purposes, the Company makes certain estimates and judgments, which affect its evaluation of the carrying value of its deferred tax assets, as well as its calculation of certain tax liabilities. Uncertain Tax Positions The calculation of the Company’s gross unrecognized tax benefits and liabilities includes uncertainties in the application of, and changes in, complex tax regulations in a multitude of jurisdictions across its global operations. The Company recognizes tax benefits and liabilities based on its estimates of whether, and the extent to which, additional taxes will be due. The Company adjusts these benefits and liabilities based on changing facts and circumstances; however, due to the complexity of these uncertainties and the impact of tax audits, the ultimate resolutions may differ significantly from the Company’s estimates. 110 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Revenue Recognition In February 2016, the FASB issued guidance that replaced the existing lease guidance in U.S. GAAP and in 2018 and 2019 issued amendments and updates to the new lease standard (collectively "Topic 842"). Upon adoption of Topic 842, on January 1, 2019, the Company accounts for revenue earned from vehicle rentals and rental related activities wherein an identified asset is transferred to the customer and the customer has the ability to control that asset under Topic 842, as further updated in 2021. The Company recognizes two types of revenue: (i) lease revenue; and (ii) revenue from contracts with customers. The Company reports revenues for taxes or non-concession fees collected from customers on behalf of governmental authorities on a net basis. Vehicle Rental and Rental Related Revenues The Company recognizes revenue from its vehicle rental operations when persuasive evidence of a contract exists, the performance obligations have been satisfied, the transaction price is fixed or determinable and collection is reasonably assured. Performance obligations associated with vehicle rental transactions are satisfied over the rental period, except for the portion associated with loyalty points, as further described below. Rental periods are short term in nature. Performance obligations associated with rental related activities, such as charges to the customer for the fueling of vehicles and value-added services such as loss damage waivers, insurance products, navigation units, supplemental equipment and other consumables, are also satisfied over the rental period. Revenue from charges that are charged to the customer, such as gasoline, vehicle licensing and airport concession fees, is recorded on a gross basis with a corresponding charge to direct vehicle and operating expense. Sales commissions paid to third parties are generally expensed when incurred due to the short-term nature of the related transaction on which the commission was earned and are recorded within selling, general and administrative expense. Payments are due from customers at the completion of the rental, except for customers with negotiated payment terms, generally net 30 days or less, which are invoiced and remain as accounts receivable until collected. Loyalty Programs - The Company offers loyalty programs, primarily Hertz Gold Plus Rewards, wherein customers are eligible to earn loyalty points that are redeemable for free rental days or can be converted to loyalty points for redemption of products and services under loyalty programs of other companies. Upon adoption of ASC 606, Revenue from Contracts with Customers ("Topic 606"), each transaction that generates loyalty points results in the deferral of revenue equivalent to the retail value at the date the points are earned. The associated revenue is recognized when the customer redeems the loyalty points at some point in the future. The retail value of loyalty points is estimated based on the current retail value measured as of the date the loyalty points are earned, less an estimated amount representing loyalty points that are not expected to be redeemed (“breakage”). Breakage is reviewed on a quarterly basis and includes significant assumptions such as historical breakage trends and internal Company forecasts. Customer Rebates - The Company has business customers that rent vehicles based on terms that have been negotiated through contracts with their employers, or other entities with which they are associated (“commercial contracts”), which can differ substantially from the terms on which the Company rents vehicles to the general public. Some of the commercial contracts contain provisions which allow for rebates to the entity based on achieving a specific rental volume threshold. Rebates are treated as lease incentives and are recognized as a reduction of revenue at the time of the rental based on the rebate expected to be earned by the entity. Licensee Revenue The Company has franchise agreements which allow an independent entity to rent their vehicles under the Company’s brands, primarily Hertz, Dollar or Thrifty, for a franchise fee. Franchise fees are earned over time for the duration of the franchise agreement and are typically based on the larger of a minimum payment or an amount 111 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) representing a percentage of net sales of the franchised business. Franchise fees that relate to a future contract term, such as initial fees or renewal fees, are deferred and recognized over the term of the franchise agreement. Ancillary Retail Vehicle Sales Revenue Ancillary retail vehicle sales represent revenues generated from the sale of warranty contracts, financing and title fees, and other ancillary services associated with vehicles disposed of at the Company’s retail outlets. These revenues are recorded at the point in time when the Company sells the product or provides the service to the customer. These revenues exclude the sale price of the vehicle which is a component of the gain or loss on the disposition and is included in depreciation of revenue earning vehicles and lease charges in the accompanying consolidated statements of operations. Fleet Leasing and Fleet Management Revenue The Company's Donlen subsidiary, which sold substantially all of its assets and certain liabilities on March 30, 2021, generated revenue from various fleet leasing and fleet management services. Donlen’s operating leases for fleets had lease periods that were typically for twelve months, after which the lease converted to a month-to-month lease, allowing the vehicle to be surrendered any time thereafter. The Company's fleet leases contained a terminal rental adjustment clause ("TRAC") where, upon sale of the vehicle following the termination of the lease, a TRAC adjustment may result through which the lessee was credited or charged with the gain or loss on the vehicle's disposal. Such TRAC adjustments were considered variable charges. Fleet management services were comprised of fuel purchasing and management, preventive vehicle maintenance, repair consultation, toll management and accident management. Fleet management revenue was recognized net of any fees collected from customers on behalf of third-party service providers, as services were rendered. Contract Balances The Company recognizes receivables and liabilities resulting from its contracts with customers. Contract receivables primarily consist of receivables from customers for vehicle rentals. Contract liabilities primarily consist of obligations to customers for prepaid vehicle rentals and related to the Company’s points-based loyalty programs. Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents Cash and cash equivalents include cash on hand and highly liquid investments with an original maturity of three months or less. The Company's cash and cash equivalents are invested in various investment grade institutional money market funds, and bank money market and interest-bearing accounts. Restricted cash and restricted cash equivalents include cash and cash equivalents that are not readily available for use in the Company's operating activities. Restricted cash and restricted cash equivalents are primarily comprised of proceeds from the disposition of vehicles pledged under the terms of vehicle debt financing arrangements and are restricted for the purchase of revenue earning vehicles and other specified uses under the vehicle debt facilities, cash utilized as credit enhancement under those arrangements, proceeds from the Term Loan C which are utilized to collateralize letters of credit, and certain cash accounts supporting regulatory reserve requirements related to the Company's self-insurance. These funds are primarily held in demand deposit and money market accounts or in highly rated money market funds with investments primarily in government and corporate obligations. Deposits held at financial institutions may exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand and are maintained with financial institutions with reputable credit and therefore bear minimal credit risk. The Company limits exposure relating to financial instruments by diversifying the financial instruments among various counterparties, which consist of major financial institutions. 112 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Receivables, Net of Allowance Receivables are stated net of allowances and primarily represent credit extended to vehicle manufacturers, customers that satisfy defined credit criteria, and amounts due from customers resulting from damage to rental vehicles. The estimate of the allowance for doubtful accounts is based on the Company's future expected losses and its judgement as to the likelihood of ultimate payment. Actual receivables are written-off against the allowance for doubtful accounts when the Company determines the balance will not be collected. Estimates for future credit memos are based on historical experience and are reflected as reductions to revenue, while bad debt expense is reflected as a component of direct vehicle and operating expense in the accompanying consolidated statements of operations. Property and Equipment, Net The Company's property and equipment, net consisted of the following: (In millions) December 31, 2021 December 31, 2020 Land, buildings and leasehold improvements $ 971 $ 1,277 Service vehicles, equipment and furniture and fixtures 339 761 Less: accumulated depreciation ( 702 ) ( 1,372 ) Total property and equipment, net $ 608 $ 666 Land is stated at cost and reviewed annually for impairment as further disclosed above in "Long-lived Assets, Including Finite-lived Intangible Assets." Property and equipment are stated at cost and are depreciated utilizing the straight-line method over the estimated useful lives of the related assets. Estimated useful lives are as follows: Buildings 1 to 50 years Furniture and fixtures 1 to 5 years Service vehicles and equipment 1 to 25 years Leasehold improvements The lesser of the economic life or the lease term Depreciation expense for property and equipment, net for the years ended December 31, 2021, 2020 and 2019 was $ 108 million, $ 129 million and $ 122 million, respectively. The Company follows the practice of charging maintenance and repair costs for service vehicles, furniture and fixtures, and equipment, including the cost of minor replacements, to maintenance expense. Long-lived Assets, Including Finite-lived Intangible Assets Finite-lived intangible assets include concession agreements, technology, customer relationships and other intangibles. Long-lived assets and intangible assets with finite lives, including technology-related intangibles, are amortized using the straight-line method over the estimated economic lives of the assets, which range from one to fifty years and two to twenty years , respectively. Long-lived assets and intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. Measurement of an impairment loss for long-lived assets that management expects to hold and use is based on the estimated fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying value or estimated fair value less costs to sell. 113 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Stock-Based Compensation The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. That cost is to be recognized over the period during which the employee is required to provide service in exchange for the award. Forfeitures are accounted for when they occur. The Company has estimated the fair value of options issued at the date of grant using a Black-Scholes option-pricing model, which includes assumptions related to volatility, expected term, dividend yield and risk-free interest rate. The Company accounts for restricted stock unit ("RSU") and performance stock unit ("PSU") awards when granted as equity classified awards. For RSUs the expense is based on the grant-date fair value of the stock and the number of shares that vest, recognized over the service period. For any PSUs and performance share awards ("PSAs") granted, the expense is based on the grant-date fair value of the stock, recognized over a service period depending upon the applicable performance condition. For any PSUs and PSAs, the Company re-assesses the probability of achieving the applicable performance condition quarterly and adjusts the recognition of expense accordingly. The Company includes the excess tax benefit within income tax expense in the accompanying consolidated statements of operations when realized. Fair Value Measurements U.S. GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal market or, if none exists, the most advantageous market, for the specific asset or liability at the measurement date (referred to as the "exit price"). Fair value is a market-based measurement that is determined based upon assumptions that market participants would use in pricing an asset or liability, including consideration of nonperformance risk. The Company assesses the inputs used to measure fair value using the three-tier hierarchy promulgated under U.S. GAAP. This hierarchy indicates the extent to which inputs used in measuring fair value are observable in the market. Level 1: Inputs that reflect quoted prices for identical assets or liabilities in active markets that are observable. Level 2: Inputs other than quoted prices included in Level 1 that are observable either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. Level 3: Inputs that are unobservable to the extent that observable inputs are not available for the asset or liability at the measurement date and include management's judgment about assumptions market participants would use in pricing the asset or liability. Financial Instruments The Company is exposed to a variety of market risks, including the effects of changes in interest rates, gasoline and diesel fuel prices and foreign currency exchange rates. The Company manages exposure to these market risks through regular operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments. Financial instruments are viewed as risk management tools and have not been used for speculative or trading purposes. In addition, financial instruments are entered into with a diversified group of major financial institutions in order to manage the Company's exposure to counterparty nonperformance on such instruments. The Company measures all financial instruments at their fair value and does not offset the derivative assets and liabilities in its accompanying consolidated balance sheets. As the Company does not have financial instruments that are designated and qualify as hedging instruments, the changes in their fair value are recognized currently in the Company's operating results. 114 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Foreign Currency Translation and Transactions Assets and liabilities of international subsidiaries whose functional currency is the local currency are translated at the rate of exchange in effect on the balance sheet date; income and expenses are translated at the average exchange rates throughout the year. The related translation adjustments are reflected in accumulated other comprehensive income (loss) in the accompanying consolidated balance sheets. Foreign currency exchange rate gains and losses resulting from transactions are included in other (income) expense in the accompanying consolidated statements of operations. Advertising Advertising production costs are deferred and expensed when the advertising first takes place. Advertising communication costs are expensed as incurred. Advertising costs are reflected as a component of selling, general and administrative expenses in the accompanying consolidated statements of operations and for the years ended December 31, 2021, 2020 and 2019 were $ 162 million, $ 112 million and $ 318 million, respectively. Divestitures The Company classifies long-lived assets and liabilities to be disposed of as held for sale in the period in which they are available for immediate sale in their present condition and the sale is probable and expected to be completed within one year. The Company initially measures assets and liabilities held for sale at the lower of their carrying value or fair value less costs to sell and assesses their fair value quarterly until disposed. When the divestiture represents a strategic shift that has (or will have) a major effect on the Company's operations and financial results, the disposal is presented as a discontinued operation. Recently Issued Accounting Pronouncements Adopted Scope of Reference Rate Reform In January 2021, the FASB issued guidance that clarifies that entities with derivative instruments affected by changes to the interest rates used for discounting, margining or contract price alignment due to reference rate reform may elect to apply certain optional expedients and exceptions, including contract modification relief, provided in Topic 848. Entities may elect to apply the guidance on contract modifications either (1) retrospectively as of any date from the beginning of any interim period that includes March 12, 2020 or (2) prospectively to new modifications from any date in an interim period that includes or is after January 7, 2021, up to the date that financial statements are available to be issued. The Company will apply the guidance prospectively, as applicable, and does not expect a material impact on its financial position, results of operations or cash flows. Note 3— Divestitures Donlen Sale In November 2020, the Company entered into a stock and asset purchase agreement with Freedom Acquirer LLC (the "Buyer"), an affiliate of Athene Holding Ltd., to sell substantially all of the assets of its wholly-owned subsidiary Donlen. On March 30, 2021, the Company completed the sale. The proceeds from the sale were subject to certain post-closing adjustments in the second quarter of 2021 based on the level of assumed indebtedness, working capital and fleet equity. For the year ended December 31, 2021, the Company recognized a pre-tax gain in its corporate operations of $ 400 million, net of the impact of foreign currency adjustments, based on the difference in cash proceeds received of $ 891 million less $ 543 million net book value of assets sold plus a $ 53 million receivable in connection with the sale where cash proceeds were received in September 2021. On March 30, 2021, the Company and the Buyer entered into a transition services agreement which provides for certain transitional services in connection with the sale. 115 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The assets and liabilities of Donlen included in the sale were classified as held for sale in the accompanying consolidated balance sheet as of December 31, 2020. Assets and liabilities classified as held for sale are required to be recorded at the lower of the carrying value or fair value less any costs to sell. The major classes of assets and liabilities held for sale as of December 31, 2020 are presented below at their carrying value. (in millions) December 31, 2020 ASSETS Cash and cash equivalents $ 3 Restricted cash and cash equivalents 68 Receivables, net 207 Prepaid expenses and other assets 28 Revenue earning vehicles, net 1,432 Property and equipment, net 6 Operating lease right-of-use assets 2 Intangible assets, net 29 Goodwill 36 Total assets held for sale $ 1,811 LIABILITIES Accounts payable $ 76 Accrued liabilities 19 Accrued taxes, net 3 Vehicle debt 1,327 Operating lease liabilities 6 Total liabilities held for sale $ 1,431 Termination of 767 Auto Leasing Agreement In January 2018, Hertz entered into a Master Motor Vehicle Lease and Management Agreement (the “767 Lease Agreement”) pursuant to which Hertz granted 767 Auto Leasing LLC (“767”) the option to acquire certain vehicles from Hertz at rates aligned with the rates at which Hertz sold vehicles to third parties where 767’s payment obligations were guaranteed by American Entertainment Properties Corp. ("AEPC"). The 767 Lease Agreement was terminated effective October 31, 2021. Prior to the termination of the 767 Lease Agreement, the Company determined that it was the primary beneficiary of 767 due to its power to direct the activities of 767 that most significantly impacted 767's economic performance and the Company's obligation to absorb 25 % of 767's gains/losses and, accordingly, 767 was consolidated by the Company as a VIE. During the year ended December 31, 2021, 767 distributed $ 38 million to AEPC along with the return of certain vehicles, and there were no cash contributions from AEPC to 767. During the year ended December 31, 2020, 767 distributed $ 75 million to AEPC and there were no cash contributions from AEPC to 767, except for certain services. Sale of Marketable Securities In 2020, the Company sold marketable securities for $ 74 million and recognized an immaterial gain on the sale in its corporate operations, which was included in other (income) expense, net in the accompanying consolidated statement of operations for the year ended December 31, 2020. 116 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Sale of Non-vehicle Capital Assets In 2019, the Company completed the sale of certain non-vehicle capital assets in its Americas RAC segment and recognized a $ 39 million pre-tax gain on the sale which was included in other (income) expense, net in the accompanying consolidated statement of operations for the year ended December 31, 2019. In 2020, the Company received additional cash from the sale and recognized an additional $ 20 million pre-tax gain on the sale, which was included in other (income) expense, net in the accompanying consolidated statement of operations for the year ended December 31, 2020. Note 4— Revenue Earning Vehicles The components of revenue earning vehicles, net are as follows: December 31, (In millions) 2021 2020 (1) Revenue earning vehicles $ 10,506 $ 7,492 Less accumulated depreciation ( 1,518 ) ( 1,467 ) 8,988 6,025 Revenue earning vehicles held for sale, net (2) 238 37 Revenue earning vehicles, net $ 9,226 $ 6,062 (1) Excludes amounts associated with Donlen that are classified as held for sale as of December 31, 2020. See Note 3, "Divestitures," for additional information. (2) Represents the carrying amount of vehicles placed on the Company's retail lots for sale or actively in the process of being sold through other disposition channels. Note 5— Goodwill and Intangible Assets, Net 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 ASC 350 - Intangibles, Goodwill and Other ("Topic 350"), the Company tests the recoverability of its goodwill and indefinite-lived intangible assets by performing an impairment analysis. An impairment is deemed to exist if the carrying value of goodwill or indefinite-lived intangible assets exceed their fair value as determined using level 3 inputs under the GAAP fair value hierarchy. The reviews of fair value involve judgment and estimates, including projected revenues, long-term growth rates, royalty rates and discount rates. The Company believes that its valuation techniques and assumptions are reasonable for this purpose. The Company performed the goodwill impairment analyses using the income approach, a measurement using level 3 inputs under the U.S. GAAP fair value hierarchy. In performing the impairment analyses, the weighted-average cost of capital used in the discounted cash flow model was calculated based upon the fair value of the Company's debt and stock price with a debt-to-equity ratio comparable to the vehicle rental car industry. This present value model requires management to estimate future cash flows and forecasted EBITDA margins and capital investments of each reporting unit. The Company revised its reportable segments in Q2 2021, as disclosed in Note 19, "Segment Information," and the change in reporting units had no impact to the valuation of the Company's goodwill. The assumptions the Company used to estimate future cash flows and EBITDA margins are consistent with the assumptions that the reporting units use for internal planning purposes, which the Company believes would be generally consistent with that of a market participant. The discount rate used for each reporting unit ranged from 13.0 % to 13.5 %. Each of the Company's reporting units had a fair value that exceeded its respective carrying value, the lowest of which was greater than 25 %. The Company performed the intangible impairment analyses for indefinite-lived intangible assets using the relief-from-royalty income approach, a measurement using level 3 inputs under the U.S. GAAP fair value hierarchy. The Company considered consistent factors as described above related to goodwill in addition to royalty rates. The 117 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) assumptions the Company uses to estimate royalty rates are consistent with the assumptions that the reporting units use for internal planning purposes, which the Company believes would be generally consistent with that of a market participant. The discount rate used for each indefinite-lived intangible ranged from 13.0 % to 13.5 %. All indefinite-lived intangibles were noted to have fair values that exceeded their carrying values, the lowest of which was greater than 25 %. Technology-related Intangible and Other Assets Due to uncertainty surrounding the Company's financial ability to complete certain information technology projects as a result of COVID-19 and the filing of the Chapter 11 Cases, as disclosed in Note 1, "Background," the Company concluded in the second quarter of 2020 that there was an impairment of such technology-related intangible assets and capitalized cloud computing implementation costs. In the second quarter of 2020, the Company recorded an impairment charge of $ 193 million in its corporate operations, representing an impairment of the carrying value of the abandoned portion of such assets as of June 30, 2020 of $ 124 million and $ 69 million of technology-related intangible assets and other assets, respectively. Goodwill The following summarizes the changes in the Company's goodwill by segment: (In millions) Americas RAC segment International RAC segment Total Balance as of January 1, 2021 Goodwill (1) $ 1,029 $ 236 $ 1,265 Accumulated impairment losses — ( 220 ) ( 220 ) 1,029 16 1,045 Goodwill disposal and other changes during the period — — — — — — Balance as of December 31, 2021 Goodwill 1,029 236 1,265 Accumulated impairment losses — ( 220 ) ( 220 ) $ 1,029 $ 16 $ 1,045 (1) Excludes goodwill of $ 36 million associated with Donlen that was classified as held for sale as of December 31, 2020. See Note 3, "Divestitures," for additional information. (In millions) Americas RAC segment International RAC segment Total (1) Balance as of January 1, 2020 Goodwill $ 1,029 $ 236 $ 1,265 Accumulated impairment losses — ( 218 ) ( 218 ) 1,029 18 1,047 Goodwill disposal and other changes during the period — ( 2 ) ( 2 ) — ( 2 ) ( 2 ) Balance as of December 31, 2020 Goodwill 1,029 236 1,265 Accumulated impairment losses — ( 220 ) ( 220 ) $ 1,029 $ 16 $ 1,045 (1) Excludes goodwill of $ 36 million associated with Donlen that was classified as held for sale as of December 31, 2020. See Note 3, "Divestitures," for additional information. 118 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Intangible Assets, Net Intangible assets, net, consists of the following major classes: December 31, 2021 (In millions) Gross Carrying Amount Accumulated Amortization Net Carrying Value Amortizable intangible assets: Customer-related $ 269 $ ( 269 ) $ — Concession rights 408 ( 405 ) 3 Technology-related intangibles 359 ( 271 ) 88 Other (1) 48 ( 45 ) 3 Total 1,084 ( 990 ) 94 Indefinite-lived intangible assets: Tradenames (2) 2,794 — 2,794 Other (3) 24 — 24 Total 2,818 — 2,818 Total intangible assets, net $ 3,902 $ ( 990 ) $ 2,912 December 31, 2020 (4) (In millions) Gross Carrying Amount Accumulated Amortization Net Carrying Value Amortizable intangible assets: Customer-related $ 269 $ ( 269 ) $ — Concession rights 408 ( 365 ) 43 Technology-related intangibles 355 ( 228 ) 127 Other (1) 48 ( 44 ) 4 Total 1,080 ( 906 ) 174 Indefinite-lived intangible assets: Tradenames (2) 2,794 — 2,794 Other (3) 24 — 24 Total 2,818 — 2,818 Total intangible assets, net $ 3,898 $ ( 906 ) $ 2,992 (1) Other amortizable intangible assets primarily include reacquired franchise rights. (2) As of December 31, 2021 and 2020, $ 2.2 billion was recorded in the Company's Americas RAC segment and $ 600 million in the Company's International RAC segment. (3) Other indefinite-lived intangible assets primarily consist of reacquired franchise rights. (4) Excludes intangible assets associated with Donlen that were classified as held for sale as of December 31, 2020. See Note 3, "Divestitures," for additional information. Years Ended December 31, (In millions) 2021 2020 2019 Amortization of intangible assets $ 88 $ 96 $ 81 119 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following table summarizes the Company's expected amortization expense based on its amortizable intangible assets as of December 31, 2021: (In millions) 2022 $ 41 2023 24 2024 17 2025 6 2026 2 After 2026 4 Total expected amortization expense $ 94 Note 6— Debt The Company's debt, including its available credit facilities, consists of the following ($ in millions) as of December 31, 2021 and 2020. The table and disclosures below exclude debt associated with Donlen that was classified as held for sale as of December 31, 2020. See Note 3, "Divestitures," for additional information. Facility Weighted-Average Interest Rate as of December 31, 2021 Fixed or Floating Interest Rate Maturity December 31, 2021 December 31, 2020 Non-Vehicle Debt Term B Loan 3.75 % Floating 6/2028 $ 1,294 $ — Term C Loan 3.75 % Floating 6/2028 245 — Senior Notes Due 2026 4.63 % Fixed 12/2026 500 — Senior Notes Due 2029 5.00 % Fixed 12/2029 1,000 — First Lien RCF N/A Floating 6/2026 — — Other Non-Vehicle Debt (1) 8.49 % Fixed Various 16 18 Senior Secured Superpriority Debtor-in-Possession Credit Agreement N/A N/A N/A — 250 Unamortized Debt Issuance Costs and Net (Discount) Premium ( 69 ) ( 25 ) Total Non-Vehicle Debt Not Subject to Compromise 2,986 243 Non-Vehicle Debt Subject to Compromise (2) Senior Term Loan N/A N/A N/A — 656 Senior RCF N/A N/A N/A — 615 Senior Notes (2) N/A N/A N/A — 2,700 Senior Second Priority Secured Notes N/A N/A N/A — 350 Promissory Notes N/A N/A N/A — 27 Alternative Letter of Credit Facility (3) N/A N/A N/A — 114 Senior RCF Letter of Credit Facility N/A N/A N/A — 17 Unamortized Debt Issuance Costs and Net (Discount) Premium — ( 36 ) Total Non-Vehicle Debt Subject to Compromise — 4,443 Vehicle Debt HVF III U.S. ABS Program HVF III U.S. Vehicle Variable Funding Notes HVF III Series 2021-A Class A (4) 1.62 % Floating 6/2023 2,813 — 120 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Facility Weighted-Average Interest Rate as of December 31, 2021 Fixed or Floating Interest Rate Maturity December 31, 2021 December 31, 2020 HVF III Series 2021-A Class B (4) 3.65 % Fixed 6/2023 188 — 3,001 — HVF III U.S. Vehicle Medium Term Notes HVF III Series 2021-1 (4) 1.66 % Fixed 12/2024 2,000 — HVF III Series 2021-2 (4) 2.12 % Fixed 12/2026 2,000 — 4,000 — HVF II U.S. ABS Program HVF II U.S. Vehicle Variable Funding Notes HVF II Series 2013-A (5) N/A N/A N/A — 1,940 — 1,940 HVF II U.S. Vehicle Medium Term Notes HVF II Series 2015-3 N/A N/A N/A — 163 HVF II Series 2016-2 N/A N/A N/A — 263 HVF II Series 2016-4 N/A N/A N/A — 187 HVF II Series 2017-1 N/A N/A N/A — 199 HVF II Series 2017-2 N/A N/A N/A — 164 HVF II Series 2018-1 N/A N/A N/A — 468 HVF II Series 2018-2 N/A N/A N/A — 94 HVF II Series 2018-3 N/A N/A N/A — 95 HVF II Series 2019-1 N/A N/A N/A — 330 HVF II Series 2019-2 N/A N/A N/A — 354 HVF II Series 2019-3 N/A N/A N/A — 352 — 2,669 Vehicle Debt - Other European Vehicle Notes (6) N/A N/A N/A — 888 European ABS (4) 1.80 % Floating 10/2023 395 263 Hertz Canadian Securitization (4) 2.49 % Floating 1/2023 191 53 Australian Securitization (4) 1.66 % Floating 4/2022 128 97 New Zealand RCF 3.49 % Floating 6/2022 39 35 U.K. Financing Facility 3.68 % Floating 1/2022-12/2024 98 105 U.K. Toyota Financing Facility 2.20 % Floating 2/2022-2/2023 9 — Other Vehicle Debt 2.89 % Floating 1/2022-12/2024 93 37 953 1,478 Unamortized Debt Issuance Costs and Net (Discount) Premium ( 33 ) ( 63 ) Total Vehicle Debt Not Subject to Compromise 7,921 6,024 Total Debt Not Subject to Compromise $ 10,907 $ 6,267 N/A - Not applicable (1) Other non-vehicle debt is primarily comprised of $ 12 million in capital lease obligations . (2) Reference to the "Senior Notes" includes the series of Hertz's unsecured senior notes set forth in the table below which were included in liabilities subject to compromise in the accompanying consolidated balance sheet as of December 31, 2020. On the Effective Date, in 121 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) accordance with the Plan of Reorganization, the Senior Notes were repaid in full and terminated. On July 1, 2021, Wells Fargo Bank, National Association, as indenture trustee for the Senior Notes, filed a complaint against Hertz and certain of its subsidiaries requesting declaratory judgement that additional amounts are owed with respect to certain premiums and post-petition interest with respect to the Senior Notes. Hertz disputes that any such amounts are owed and on August 2, 2021 filed a motion to dismiss the complaint. On December 23, 2021, the Company's motion to dismiss was granted by the Bankruptcy Court. See Note 14, "Contingencies and Off-Balance Sheet Commitments," for additional information. (In millions) Outstanding Principal Senior Notes December 31, 2021 December 31, 2020 6.250 % Senior Notes due October 2022 $ — $ 500 5.500 % Senior Notes due October 2024 — 800 7.125 % Senior Notes due August 2026 — 500 6.000 % Senior Notes due January 2028 — 900 $ — $ 2,700 (3) Includes default interest as of December 31, 2020. (4) Maturity reference is to the earlier "expected final maturity date" as opposed to the subsequent "legal final maturity date." The expected final maturity date is the date by which Hertz and investors in the relevant indebtedness originally expect the outstanding principal of the relevant indebtedness to be repaid in full. The legal final maturity date is the date on which the outstanding principal of the relevant indebtedness is legally due and payable in full. (5) Includes default interest as of December 31, 2020, which was comprised of an increase in the contractual spread. (6) References to the "European Vehicle Notes" include the series of Hertz Holdings Netherlands B.V.'s, an indirect wholly-owned subsidiary of Hertz organized under the laws of the Netherlands ("Hertz Netherlands"), unsecured senior notes (converted from Euros to U.S. Dollars at a rate of 1.22 to 1 as of December 31, 2020) set forth in the table below. On the Effective Date, in accordance with the Plan of Reorganization, the European Vehicle Notes were repaid in full and cancelled. (In millions) Outstanding Principal European Vehicle Notes December 31, 2021 December 31, 2020 4.125 % Senior Notes due October 2021 $ — $ 276 5.500 % Senior Notes due March 2023 — 612 $ — $ 888 Chapter 11 and Emergence As a result of filing the Chapter 11 Cases, as disclosed in Note 1, "Background," the Company reclassified certain of its non-vehicle debt instruments, net of deferred financing costs, discounts and premiums, as applicable, to liabilities subject to compromise in the accompanying consolidated balance sheet as of December 31, 2020. The filing of the Chapter 11 Cases constituted an event of default that accelerated the Debtors’ obligations under the Senior Term Loan, the Senior RCF, the Letter of Credit Facility and the Alternative Letter of Credit Facility. Additionally, the filing triggered defaults, termination events and/or amortization events under certain obligations of (i) Hertz International Limited ("HIL"), Hertz Netherlands and the direct and indirect subsidiary companies located outside of the U.S. and Canada (collectively the "International Subsidiaries"), some of which were waived or amended subject to certain time limitations, and (ii) HVF, HVF II, and certain other vehicle financing subsidiaries (collectively the "Non-Debtor Financing Subsidiaries"). As disclosed in Note 1, "Background," on May 14, 2021, the Debtors filed the Plan of Reorganization with the Bankruptcy Court, which was confirmed by the Bankruptcy Court on June 10, 2021. On the Effective Date, the Company emerged from Chapter 11 as disclosed in Note 1, "Background" and, in accordance with the Plan of Reorganization, substantially all existing non-vehicle debt and all existing ABS facilities under the HVF II U.S. ABS Program and the HVIF U.S. ABS Program were repaid in full and cancelled, as further disclosed below. Upon the Debtor's emergence from Chapter 11 and the associated debt payoffs, any events of default, termination and/or amortization events ceased to exist. 122 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Non-Vehicle Debt First Lien Credit Agreement Pursuant to the Plan of Reorganization, on the Effective Date, Hertz entered into a credit agreement (the "First Lien Credit Agreement") that provides for the following: • Term B Loan for term loans in an aggregate principal amount of $ 1.3 billion; • Term C Loan for term loans that are available to cash collateralize letters of credit in an aggregate principal amount of $ 245 million; and • the First Lien RCF for revolving loans and letters of credit up to an aggregate principal amount of $ 1.3 billion. Proceeds received on the Effective Date, as a result of the Plan of Reorganization, under the First Lien Credit Agreement were used to (i) repay certain existing indebtedness of the Debtors; (ii) pay fees, expenses and costs associated with the consummation of the Plan of Reorganization; (iii) fund distributions required in connection with the Plan of Reorganization; (iv) provide funds for working capital and general corporate purposes; and (v) backstop or replace existing letters of credit. Term B Loan and Term C Loan (collectively, the "Term Loans") : The Term Loans bear interest based on an alternate base rate as per the First Lien Credit Agreement or adjusted LIBOR, in each case plus an applicable margin of (i) 2.25 % in the case of the alternate base rate, or (ii) 3.25 % in the case of the adjusted LIBOR. In each case, the margin may change depending on Hertz's consolidated total corporate leverage ratio, as defined in the First Lien Credit Agreement (the "Total Corporate Leverage Ratio"). The Term Loans include provisions for a transition to an alternative benchmark index other than LIBOR. The First Lien Credit Agreement requires the Term B Loan to be repaid in quarterly installments of $ 3.3 million per quarter beginning on September 30, 2021 until maturity. The Term Loans mature on June 30, 2028. First Lien RCF : The First Lien RCF bears interest, at a benchmark rate plus spread. Loans under the facility are available in various currencies including USD, Eurodollar, Australian dollar, Canadian dollar and Sterling. Benchmark rates for the relevant currencies include, the relevant LIBOR rate, the Prime rate, the Bank Bill Swap Reference Bid Rate for Australian dollars, Canadian prime rate, an adjusted Canadian Dollar Offered Rate ("CDOR") or the Daily Simple Sterling Overnight Index Average ("SONIA"). ABR Loans and Canadian Prime Rate Loans, as defined under the First Lien Credit Agreement, bear interest at the relevant benchmark rate plus an initial applicable margin of 2.50 %. The First Lien RCF includes provisions for a transition to an alternative benchmark index other than LIBOR. The margin for Euro currency Loans (including USD loans), SONIA loans and Canadian dollar BA Equivalent Loans, as defined in the First Lien Credit Agreement, is dependent upon the Company's Consolidated Total Corporate Leverage Ratio, as defined under the First Lien Credit Agreement. As of December 31, 2021, that margin was 3.00 %. In each case, the margin may change depending on Hertz’s Total Corporate Leverage Ratio. The First Lien RCF matures on June 30, 2026. 2021 Senior Notes In November 2021, Hertz issued $ 1.5 billion of unsecured senior notes consisting of $ 500 million Senior Notes Due 2026 and $ 1.0 billion Senior Notes Due 2029. The Senior Notes Due 2026 and the Senior Notes Due 2029 are Hertz's senior unsecured obligations and are guaranteed by each of Hertz’s direct and indirect U.S. subsidiaries that are guarantors under the First Lien Credit Agreement. Proceeds from the issuance of the Senior Notes Due 2026 and the Senior Notes Due 2029 were contributed to Hertz Global through a dividend distribution from Hertz to repurchase all outstanding shares of Hertz Global's Series A Preferred Stock. See Note 16, "Equity and Mezzanine Equity – Hertz Global." 123 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DIP Credit Agreement On October 29, 2020, the Bankruptcy Court entered an order authorizing the Debtors to obtain certain debtor-in-possession financing (the "DIP Order"). In accordance with the Bankruptcy Court’s order, on October 30, 2020, Hertz, as borrower, and Hertz Global and certain of its subsidiaries located in the U.S. and Canada, in each case that were debtors in the Chapter 11 Cases, as guarantors (collectively, the "DIP Debtors"), entered into the DIP Credit Agreement. The DIP Credit Agreement provided for DIP Loans, of which (i) up to $ 1.0 billion could be used as equity for new interim fleet financing, which gave the DIP Debtors the ability to replenish their vehicle fleet, and (ii) up to $ 800 million could be used for working capital and general corporate purposes and had limited covenants and events of default, including one milestone that required the filing of a plan of reorganization by August 1, 2021. On February 16, 2021, Hertz borrowed an additional $ 250 million as per the minimum draw requirements of the DIP Credit Agreement. On the Effective Date, in accordance with the Plan of Reorganization, the DIP Credit Agreement was paid in full and terminated. Senior Facilities On the Effective Date, in accordance with the Plan of Reorganization, the Senior Term Loan, the Senior RCF and drawn amounts under the Senior RCF Letter of Credit Facility and Letter of Credit Facility were paid in full and terminated. Senior Notes and Senior Second Priority Secured Notes On the Effective Date, in accordance with the Plan of Reorganization, the Company's Senior Notes and Senior Second Priority Secured Notes were paid in full and terminated. Promissory Notes On the Effective Date, in accordance with the Plan of Reorganization, the Promissory Notes were paid in full and terminated. Alternative Letter of Credit Facility On the Effective Date, in accordance with the Plan of Reorganization, the Alternative Letter of Credit Facility was paid in full and terminated. HIL Credit Agreement In April 2021, Hertz International Limited ("HIL") entered into a multi-draw term loan facility (the "HIL Credit Agreement") which provided an aggregate maximum principal of € 250 million to meet the liquidity requirements of the European business. In May 2021, resulting from a change in the Company's plan of reorganization sponsorship, the HIL Credit Agreement was terminated and HIL entered into a new multi-draw term loan facility (the "Second HIL Credit Agreement") which also provided for an aggregate maximum principal of € 257 million that was funded by certain of the Plan Sponsors. On the Effective Date, in accordance with the Plan of Reorganization, the Second HIL Credit Agreement was paid in full and terminated. 124 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Vehicle Debt HVF III U.S. ABS Program In June 2021, Hertz established a securitization platform, the HVF III U.S. ABS Program, to facilitate its financing activities relating to vehicles used by Hertz in the U.S. daily vehicle rental operations. HVF III, a wholly-owned, special-purpose and bankruptcy remote subsidiary of Hertz, is the issuer of variable funding notes and medium term notes under the HVF III U.S. ABS Program. HVF III entered into a base indenture that permits it to issue term and variable funding rental car asset-backed securities, secured by a collateral pool consisting primarily of the rental vehicles used in the Company's U.S. vehicle rental operations and the related incentive and repurchase program vehicle receivables. Within each series of HVF III U.S. Vehicle Medium Term Notes, the issued notes are subordinated based on class. Pursuant to the Plan of Reorganization, in June 2021, HVF III issued Series 2021-A Variable Funding Rental Car Asset Backed Notes (the "Series 2021-A Notes"), the Series 2021-1 Fixed Rate Rental Car Asset Backed Notes (the "Series 2021-1 Notes") and the Series 2021-2 Fixed Rate Rental Car Asset Backed Notes (the "Series 2021-2 Notes" and, together with the Series 2021-A Notes and the Series 2021-1 Notes, the “HVF III Series 2021 Notes”). HVF III Series 2021-A Notes: In June 2021, Hertz issued the Series 2021-A Class A Notes with a maximum principal amount of up to $ 2.8 billion. In December 2021, Hertz issued the Series 2021-A Class B Notes with a maximum principal amount of up to $ 188 million. The HVF III Series 2021- A Notes have a maturity date of June 2023. HVF III Series 2021-1 Notes : On the Effective Date, Hertz issued the Series 2021-1 Notes in four classes (Class A, Class B, Class C and Class D) in an aggregate principal amount of $ 2.0 billion. There is subordination within the Series 2021-1 Notes based on class. HVF III Series 2021-2 Notes: On the Effective Date, Hertz issued the Series 2021-2 Notes in four classes (Class A, Class B, Class C and Class D) in an aggregate principal amount of $ 2.0 billion. There is subordination within the Series 2021-2 Notes based on class. In June 2021, in connection with the issuance of the HVF III Series 2021 Notes, Hertz entered into a new Master Motor Vehicle Operating Lease and Servicing Agreement (the “Operating Lease”) among HVF III, as lessor, Hertz, as a lessee, servicer and guarantor, DTG Operations, Inc., a wholly-owned subsidiary of the Company, as a lessee and other permitted lessees (together with Hertz and DTG Operations, Inc., the "Lessees"), pursuant to which HVF III will lease vehicles to the Lessees. Proceeds received upon issuance from the HVF III Series 2021 Notes were used to fund the purchases of certain vehicles and for the repayment in full of (i) approximately $ 3.5 billion in aggregate outstanding principal of notes issued by HVF II, as described below, and (ii) approximately $ 2.2 billion in aggregate outstanding principal of notes issued by Hertz Vehicle Interim Financing, a direct wholly-owned bankruptcy remote subsidiary of Hertz ("HVIF"). The manufacturer rebates associated with HVF and HVIF were transferred to HVF III as part of the purchase agreements with HVF and HVIF. Any remaining funds are expected to be used for the future purchase or refinancing of vehicles to be leased under the Operating Lease. HVF III Series 2022 Notes In January 2022, Hertz issued the Series 2022-1 Notes and the Series 2022-2 Notes in an aggregate principal amount of $ 1.5 billion. Proceeds from the issuance of the Series 2022-1 Notes and the Series 2022-2 Notes will be used to repay amounts outstanding on the Series 2021-A Notes. Any remaining funds are expected to be used for the future purchase or refinancing of vehicles to be leased under the Operating Lease. HVF III Series 2022-1 Notes : In January 2022, Hertz issued the Series 2022-1 Notes in four classes (Class A, Class B, Class C and Class D) in an aggregate principal amount of $ 750 million. There is subordination within the 125 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Series 2022-1 Notes based on class. An affiliate of HVF III purchased the Class D Notes, and as a result approximately $ 98 million of the aggregate principal amount is eliminated in consolidation. HVF III Series 2022-2 Notes : In January 2022, Hertz issued the Series 2022-2 Notes in four classes (Class A, Class B, Class C and Class D) in an aggregate principal amount of $ 750 million. There is subordination within the Series 2022-2 Notes based on class. An affiliate of HVF III purchased the Class D Notes, and as a result approximately $ 98 million of the aggregate principal amount is eliminated in consolidation. HVF II U.S. ABS Program On the Effective Date, in accordance with the Plan of Reorganization, all HVF II U.S. Vehicle Medium Term Notes and HVF II U.S Vehicle Variable Funding Notes were paid in full and terminated. Any and all outstanding Bankruptcy Court orders and other agreements relating to HVF II were terminated on the Effective Date as a result of the termination of the notes. HVIF U.S. ABS Program On the Effective Date, in accordance with the Plan of Reorganization, the HVIF Series 2020-1 was paid in full and terminated. Vehicle Debt-Other European Vehicle Notes On the Effective Date, in accordance with the Plan of Reorganization, the European Vehicle Notes were paid in full and terminated. European ABS The European ABS is the primary vehicle financing facility for the Company's vehicle rental operations in France, the Netherlands, Germany and Spain. The lenders under the European ABS have been granted a security interest in the owned rental vehicles used in the Company's vehicle rental operations in these countries and certain contractual rights related to such vehicles. In April 2021, International Fleet Financing No. 2 BV ("IFF No. 2") entered into a comprehensive restructuring of the European ABS. The terms of the restructured European ABS provide for aggregate maximum borrowings of € 450 million and extend the maturity to April 2022. In accordance with the Plan of Reorganization, the guarantees provided by Hertz relating to the restructured European ABS, including all contingent claims in respect of such guarantees, were fully released on the Effective Date. In December 2021, the European ABS was amended to increase the aggregate maximum borrowings to € 750 million and to extend the maturity to October 2023. In connection with the amendment, Hertz entered into a performance guarantee with respect to certain obligations of certain of its subsidiaries in their capacities as lessees, servicers and administrators under the European ABS. Hertz Canadian Securitization On January 27, 2021, TCL Funding Limited Partnership, a bankruptcy remote, indirect, wholly-owned, special purpose subsidiary of Hertz, entered into the Funding LP Series 2021-A Notes which provides for aggregate maximum borrowings of CAD$ 350 million on a revolving basis, subject to availability under the borrowing base limitation. The initial draw was used, in part, to pay the outstanding obligations under the Funding LP Series 2015-A Notes, including any unpaid default interest. As a result of the payoff of the Funding LP Series 2015-A Notes, the Hertz Canadian Securitization amortization event ceased to exist. 126 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Australian Securitization HA Fleet Pty Limited, an indirect wholly-owned subsidiary of Hertz, is the issuer under the Australian Securitization. The Australian Securitization is the primary fleet financing facility for Hertz's vehicle rental operations in Australia. The lender under the Australian Securitization has been granted a security interest primarily in the owned rental vehicles used in its vehicle rental operations in Australia and certain contractual rights related to such vehicles. An amortization event that would have arisen under the Australian Securitization as a result of the filing of the Chapter 11 Cases was waived in May 2020, and in June 2021, such waiver was superseded by an amendment of the Australian Securitization. The terms of the amended Australian Securitization provide for aggregate maximum borrowings of AUD$ 210 million and extend the maturity to April 2022. In accordance with the Plan of Reorganization, the guarantees provided by Hertz relating to the restructured Australian Securitization, including all contingent claims in respect of such guarantees, were fully released on the Effective Date. In January 2022, the Australian Securitization was amended to increase the aggregate maximum borrowings to AUD$ 250 million and to extend the maturity to April 2024. New Zealand RCF Hertz New Zealand Holdings Limited, an indirect wholly-owned subsidiary of Hertz, is the borrower under a credit agreement that provides for aggregate maximum borrowings on a revolving basis under an asset-based revolving credit facility (the “New Zealand RCF”). The New Zealand RCF is the primary vehicle financing facility for its vehicle rental operations in New Zealand. In May 2021, Hertz New Zealand Holdings Limited, an indirect, wholly-owned subsidiary of Hertz, amended its credit agreement to provide for aggregate maximum borrowings of NZD$ 60 million and to extend the maturity to June 2022. U.K. Financing Facility Events of default that would have arisen under the U.K. Financing Facility as a result of filing the Chapter 11 Cases were waived in May 2020 (as amended from time to time), and, in April 2021, such waivers were superseded by a comprehensive restructuring of the U.K. Financing Facility. The terms of the restructured U.K. Financing Facility provide for aggregate maximum borrowings of £ 100 million and extend the maturity to April 2022. In accordance with the Plan of Reorganization, guarantees provided by Hertz relating to the restructured U.K. Financing Facility, including all contingent claims in respect of such guarantees, were fully released on the Effective Date. U.K. Toyota Financing Facility In May 2021, Hertz U.K. Limited entered into the U.K. Toyota Financing Facility to finance the acquisition of certain motor vehicles which provides for aggregate maximum borrowings of £ 10 million maturing, upon extension, in June 2022. Loss on Extinguishment of Debt The Company incurred losses in the form of early redemption premiums and/or the write-off of deferred financing costs associated with certain redemptions, terminations and waiver agreements. Loss on extinguishment of debt is presented in Reorganization items, net, unless otherwise noted in the table below, in the accompanying consolidated statements of operations. 127 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following table reflects the amount of loss for each respective redemption/termination: Years Ended December 31, Redemption/Termination (in millions) 2021 2020 2019 Non-Vehicle Debt HIL Credit Agreement (1) $ 8 $ — $ — Second HIL Credit Agreement 5 — — Total Non-Vehicle Debt 13 — — Non-Vehicle Debt (subject to compromise) Senior Term Loan 16 — — Senior RCF 22 — — Senior Notes 29 — — Senior Second Priority Secured Notes (2) 4 — 39 Promissory Notes 2 — — Alternative Letter of Credit Facility 7 — — Letter of Credit Facility 8 — — 5.875 % Senior Notes due 2020 (2) — — 2 7.375 % Senior Notes due 2021 (2) — — 2 Total Non-Vehicle Debt (subject to compromise) 88 — 43 Vehicle Debt HVF II U.S. Vehicle Variable Funding Notes 9 — — HVF II U.S. Vehicle Medium Term Notes 39 — — HVIF II Series 2020-1 21 — — European Vehicle Notes 29 — — European ABS (3) — 5 — Total Vehicle Debt 98 5 — Total Loss on Extinguishment of Debt $ 199 $ 5 $ 43 (1) The loss on extinguishment is recorded in non-vehicle interest expense, net in the accompanying consolidated income statement for the year ended December 31, 2021. (2) The loss on extinguishment incurred in 2019 was recorded in non-vehicle interest expense, net in the accompanying consolidated income statement for the year ended December 31, 2019. (3) The loss on extinguishment was recorded in vehicle interest expense, net in the accompanying consolidated income statement for the year ended December 31, 2020. Maturities As of December 31, 2021, the nominal amounts of maturities of debt for each of the years ending December 31 are as follows: (In millions) 2022 2023 2024 2025 2026 After 2026 Non-Vehicle Debt $ 20 $ 20 $ 15 $ 13 $ 513 $ 2,474 Vehicle Debt 311 3,617 2,026 — 2,000 — Total $ 331 $ 3,637 $ 2,041 $ 13 $ 2,513 $ 2,474 The Company has reviewed its debt facilities and determined that it is probable that the Company will be able, and has the intent, to refinance these facilities at such times as the Company determines appropriate prior to their respective maturities. 128 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Borrowing Capacity and Availability Borrowing capacity and availability comes from the Company's revolving credit facilities, which are a combination of variable funding asset-backed securitization facilities, cash-flow based revolving credit facilities, asset-based revolving credit facilities and the First Lien RCF. Creditors under each such asset-backed securitization facility and asset-based revolving credit facility have a claim on a specific pool of assets as collateral. With respect to each such asset-backed securitization facility and asset-based revolving credit facility, the Company refers to the amount of debt it can borrow given a certain pool of assets as the borrowing base. The Company refers to "Remaining Capacity" as the maximum principal amount of debt permitted to be outstanding under the respective facility (i.e., with respect to a variable funding asset-backed securitization facility or asset-based revolving credit facility, the amount of debt the Company could borrow assuming it possessed sufficient assets as collateral) less the principal amount of debt then-outstanding under such facility and, in the case of the First Lien RCF, less any issued standby letters of credit. With respect to a variable funding asset-backed securitization facility or asset-based revolving credit facility, the Company refers to "Availability Under Borrowing Base Limitation" as the lower of Remaining Capacity or the borrowing base less the principal amount of debt then-outstanding under such facility (i.e., the amount of debt that can be borrowed given the collateral possessed at such time). The following facilities were available to the Company as of December 31, 2021 and are presented net of any outstanding letters of credit: (In millions) Remaining Capacity Availability Under Borrowing Base Limitation Non-Vehicle Debt First Lien RCF $ 925 $ 925 Total Non-Vehicle Debt 925 925 Vehicle Debt HVF III Series 2021-A — — European ABS 456 — Hertz Canadian Securitization 82 — Australian Securitization 24 — U.K. Financing Facility 37 — U.K. Toyota Financing Facility 5 — New Zealand RCF 2 — Total Vehicle Debt 606 — Total $ 1,531 $ 925 Letters of Credit On the Effective Date, in accordance with the Plan of Reorganization, drawn letters of credit under the Senior RCF, the Letter of Credit Facility and the Alternative Letter of Credit Facility were paid in full and terminated. To the extent any of the related issued letters of credit remained outstanding as of the Effective Date, certain of these letters of credit were deemed to be issued under the First Lien RCF. For the remainder, the Company provided cash collateral to backstop these obligations. As of December 31, 2021, there were outstanding standby letters of credit totaling $ 591 million comprised primarily of $ 245 million issued under the Term C Loan and $ 330 million were issued under the First Lien RCF. As of December 31, 2021, there remains no capacity to issue additional letters of credit under the Term C Loan. Such letters of credit have been issued primarily to support the Company's insurance programs, vehicle rental 129 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) concessions and leaseholds as well as to provide credit enhancement for its asset-backed securitization facilities. As of December 31, 2021, none of the issued letters of credit have been drawn upon. Pledges Related to Vehicle Financing Substantially all of the Company's 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 or asset-backed securities programs. None of the value of such assets (including the assets owned by Hertz Vehicle Financing III LLC and various other domestic and international subsidiaries that facilitate the Company's international securitizations) will be available to satisfy the claims of unsecured creditors unless the secured creditors are paid in full. The Company has a 25 % ownership interest in IFF No. 2, whose sole purpose is to provide commitments to lend in various currencies subject to borrowing bases comprised of revenue earning vehicles and related assets of certain of Hertz International, Ltd.'s subsidiaries. IFF No. 2 is a VIE and the Company is the primary beneficiary, therefore, the assets, liabilities and results of operations of IFF No. 2 are included in the accompanying consolidated financial statements. As of December 31, 2021 and 2020, IFF No. 2 had total assets of $ 734 million and $ 464 million, respectively, comprised primarily of loans receivable, and total liabilities of $ 733 million and $ 464 million, respectively, comprised primarily of debt. Covenant Compliance The First Lien Credit Agreement requires Hertz to comply with the following financial covenant subsequent to the expiration of the Relief Period which expired effective as of September 30, 2021: a First Lien Ratio of less than or equal to 3.00 to 1.00 in the first and last quarters of the calendar year and 3.50 to 1.00 in the second and third quarters of the calendar year. The financial covenant disclosed above was effective beginning in the third quarter of 2021. As of December 31, 2021, Hertz was in compliance with the First Lien Ratio. In addition to financial covenants, the First Lien Credit Agreement contains customary affirmative covenants including, among other things, the delivery of quarterly and annual financial statements and compliance certificates, conduct of business, maintenance of property and insurance, compliance with environmental laws and the granting of security interest for the benefit of the secured parties under that agreement on after-acquired real property, fixtures and future subsidiaries. The First Lien Credit Agreement also contains customary negative covenants, including, among other things, the incurrence of liens, indebtedness, asset dispositions and restricted payments. As of December 31, 2021, the Company was in compliance with all covenants in the First Lien Credit Agreement. Accrued Interest As of December 31, 2021 and 2020, accrued interest was $ 12 million and $ 136 million, respectively, which is included in accrued liabilities in the accompanying consolidated balance sheets. There was $ 70 million of accrued interest included in liabilities subject to compromise in the accompanying consolidated balance sheet as of December 31, 2020 related to the filing of the Chapter 11 Cases as disclosed above. Restricted Net Assets As a result of the contractual restrictions on Hertz and certain of its subsidiaries' ability to pay dividends (directly or indirectly) under various terms of its debt, as of December 31, 2021, the restricted net assets of the subsidiaries of Hertz and Hertz Global exceed 25 % of their total consolidated net assets, respectively. Note 7— Employee Retirement Benefits The Company sponsors multiple domestic and international employee retirement benefit plans where benefits are based upon years of service and compensation. The Hertz Corporation Account Balance Defined Benefit Pension Plan (the “Hertz Retirement Plan”) is a U.S. cash balance plan, which was amended in 2014 to permanently 130 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) discontinue future benefit accruals and participation under the plan for non-union employees. The majority of union employees have since discontinued participation in the Hertz Retirement Plan as the result of collective bargaining. Some of the Company’s international subsidiaries have defined benefit retirement plans or participate in various insured or multiemployer plans. In certain countries, when the subsidiaries make the required funding payments, they have no further obligations under such plans. The Company's benefit plans are generally funded, except for certain non-qualified U.S. defined benefit plans and in Germany, France and Italy, where unfunded liabilities are recorded. The Company also sponsors defined contribution plans for certain eligible U.S. and non-U.S. employees, where contributions are matched based on specific guidelines in the plans. Accordingly, the Company sponsors postretirement health care and life insurance benefits for a limited number of employees with hire dates prior to January 1, 1990. Management makes certain assumptions relating to discount rates, salary growth, long-term return on plan assets, retirement rates, mortality rates and other factors when determining amounts to be recognized. These assumptions are reviewed annually by management, assisted by the enrolled actuary, and updated as warranted. The Company uses a December 31 measurement date for all of the plans and utilizes fair value to calculate the market-related value of pension assets for purposes of determining the expected return on plan assets and accounting for asset gains and losses. Actual results that differ from the Company's assumptions are accumulated and amortized over future periods and, therefore, significant differences in actual experience or significant changes in assumptions would affect the Company's pension costs and obligations. The Company recognizes an asset for each over-funded plan and a liability for each underfunded plan in the consolidated balance sheets. Pension plan liabilities are revalued annually based on updated assumptions and information about the individuals covered by the plan. For pension plans, if accumulated actuarial gains and losses are in excess of a 10 percent corridor, the excess is amortized on a straight-line basis over the average remaining service period of active participants. Prior service cost is amortized on a straight-line basis from the date recognized over the average remaining service period of active participants, when applicable. Additionally, the Company previously sponsored the Hertz Corporation Benefit Equalization Plan ("BEP") and the Hertz Corporation Supplemental Executive Retirement Plans (together with the BEP, the "Supplemental Plans"). The Supplemental Plans were rejected in the Company's Chapter 11 Cases and terminated in connection with the Plan of Reorganization. As a result, participants in the Supplemental Plans were no longer entitled to benefit payments and were considered general creditors of the Company. As of December 31, 2020, the Company classified $ 24 million of its U.S. pension benefit obligation as liabilities subject to compromise in its accompanying consolidated balance sheet which were paid through the claim settlement process in 2021. 131 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following tables set forth the funded status and the net periodic pension cost of the Hertz Retirement Plan and other U.S. based retirement plans, other postretirement benefit plans including health care and life insurance plans covering domestic (i.e., U.S.) employees and the retirement plans for international operations (“Non-U.S.”), together with amounts included in the accompanying consolidated balance sheets and statements of operations: Pension Benefits Postretirement U.S. Non-U.S. Benefits (U.S.) (In millions) 2021 2020 2021 2020 2021 2020 Change in Benefit Obligation Benefit obligation as of January 1 $ 522 $ 559 $ 340 $ 286 $ 12 $ 12 Service cost — — 1 1 — — Interest cost 12 15 4 5 1 — Plan curtailments — ( 2 ) — — — — Plan settlements ( 26 ) ( 88 ) ( 6 ) ( 5 ) — — Benefits paid ( 27 ) ( 3 ) ( 5 ) ( 6 ) ( 1 ) ( 1 ) Foreign currency exchange rate translation — — ( 7 ) 17 — — Actuarial (gain) loss ( 16 ) 41 ( 20 ) 42 — 1 Benefit obligation as of December 31 (1) $ 465 $ 522 $ 307 $ 340 $ 12 $ 12 Change in Plan Assets Fair value of plan assets as of January 1 $ 488 $ 503 $ 258 $ 228 $ — $ — Actual return gain on plan assets 9 74 4 28 — — Company contributions 24 2 5 4 1 1 Plan settlements ( 26 ) ( 88 ) ( 6 ) ( 5 ) — — Benefits paid ( 27 ) ( 3 ) ( 5 ) ( 6 ) ( 1 ) ( 1 ) Foreign currency exchange rate translation — — ( 1 ) 9 — — Fair value of plan assets as of December 31 $ 468 $ 488 $ 255 $ 258 $ — $ — Funded Status of the Plan Plan assets less than benefit obligation $ 3 $ ( 34 ) $ ( 52 ) $ ( 82 ) $ ( 12 ) $ ( 12 ) (1) As a result of filing the Chapter 11 Cases, as disclosed in Note 1, "Background," participants of the Supplemental Plans were no longer entitled to benefit payments as of December 31, 2020 and were considered general creditors of the Company. As such, the Company classified $ 24 million of its U.S. pension benefit obligation as liabilities subject to compromise in the accompanying consolidated balance sheet as of December 31, 2020. In 2021, discount rates increased, resulting in actuarial gains for the U.S. and Non-U.S. pension and postretirement plans. In addition, the Non-U.S. pension plans were revalued on new census data in 2021 resulting in an additional gain, which was mostly offset by a loss from an increase in the inflation assumption. In 2020, discount rates decreased, resulting in actuarial losses for the U.S. and Non-U.S. pension and postretirement plans. In addition, an increase in the inflation assumption in 2020 resulted in an actuarial loss in the Non-U.S. pension plan. 132 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Pension Benefits Postretirement U.S. Non-U.S. Benefits (U.S.) ($ in millions) 2021 2020 2021 2020 2021 2020 Amounts recognized in balance sheets: Prepaid expenses and other assets $ 3 $ — $ 30 $ 14 $ — $ — Accrued liabilities — ( 34 ) ( 82 ) ( 96 ) ( 12 ) ( 12 ) Net obligation recognized in the balance sheets $ 3 $ ( 34 ) $ ( 52 ) $ ( 82 ) $ ( 12 ) $ ( 12 ) Prior service credit $ — $ — $ ( 2 ) $ ( 2 ) $ — $ — Net gain (loss) ( 28 ) ( 47 ) ( 72 ) ( 93 ) — ( 1 ) Accumulated other comprehensive income (loss) ( 28 ) ( 47 ) ( 74 ) ( 95 ) — ( 1 ) Funded/(Unfunded) accrued pension or postretirement benefit 31 13 22 13 ( 12 ) ( 11 ) Net obligation recognized in the balance sheets $ 3 $ ( 34 ) $ ( 52 ) $ ( 82 ) $ ( 12 ) $ ( 12 ) Total recognized in other comprehensive (income) loss $ ( 20 ) $ ( 26 ) $ ( 21 ) $ 23 $ ( 1 ) $ 1 Total recognized in net periodic benefit cost and other comprehensive (income) loss $ ( 14 ) $ ( 20 ) $ ( 20 ) $ 25 $ ( 1 ) $ 1 Accumulated Benefit Obligation as of December 31 (1) $ 465 $ 522 $ 306 $ 338 N/A N/A Weighted-average assumptions as of December 31 Discount rate 2.7 % 2.3 % 1.7 % 1.4 % 2.2 % 2.3 % Expected return on assets 4.5 % 4.5 % 3.0 % 3.0 % N/A N/A Average rate of increase in compensation 4.3 % 4.3 % 2.1 % 2.1 % N/A N/A Interest crediting rate 3.8 % 3.8 % N/A N/A N/A N/A Initial health care cost trend rate N/A N/A N/A N/A 5.6 % 5.5 % Ultimate health care cost trend rate N/A N/A N/A N/A 4.0 % 4.5 % Number of years to ultimate trend rate N/A N/A N/A N/A 25 18 N/A - Not applicable (1) As a result of filing of the Chapter 11 Cases, as disclosed in Note 1, "Background," participants of the Supplemental Plans were no longer entitled to benefit payments as of December 31, 2020 and were considered general creditors of the Company. As such, the Company classified $ 24 million of its U.S. pension benefit obligation as liabilities subject to compromise in the accompanying consolidated balance sheet as of December 31, 2020. The discount rate used to determine the December 31, 2021 and 2020 benefit obligations for U.S. pension plans was based on the rate from the Mercer Pension Discount Curve-Above Mean Yield that is appropriate for the duration of the Company's plan liabilities. For its plans outside the U.S., the discount rate reflected the market rates for an optimized subset of high-quality corporate bonds currently available with the discount rate in a country determined based on a yield curve constructed from high quality corporate bonds in that country. The rate selected from the yield curve has a duration that matches its plan. The expected return on plan assets for each funded plan is based on expected future investment returns considering the target investment mix of plan assets. 133 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following table sets forth the net periodic pension and postretirement (including health care, life insurance and auto) expense charged to net income (loss). The components of net periodic pension expense (benefit), other than service cost, were included in other (income) expense, net in the accompanying consolidated statements of operations. Pension Benefits Postretirement Benefits (U.S.) U.S. Non-U.S. Years Ended December 31, ($ in millions) 2021 2020 2019 2021 2020 2019 2021 2020 2019 Components of Net Periodic Pension and Postretirement Expense (Benefit) Service cost $ — $ — $ — $ 1 $ 1 $ 1 $ — $ — $ — Interest cost 12 15 21 4 5 6 1 — — Expected return on plan assets ( 18 ) ( 20 ) ( 22 ) ( 7 ) ( 7 ) ( 9 ) — — — Net amortizations — 2 6 2 1 1 — — — Settlement loss 12 9 5 1 2 — — — — Net pension and postretirement expense (benefit) $ 6 $ 6 $ 10 $ 1 $ 2 $ ( 1 ) $ 1 $ — $ — Weighted-average discount rate for expense (January 1) 2.2 % 3.1 % 4.2 % 1.4 % 1.9 % 2.7 % 1.9 % 3.2 % 4.2 % Weighted-average assumed long-term rate of return on assets (January 1) 4.5 % 4.8 % 6.3 % 3.0 % 3.2 % 4.8 % N/A N/A N/A Weighted-average interest crediting rate for expense 3.8 % 3.8 % 3.8 % N/A N/A N/A N/A N/A N/A Initial health care cost trend rate N/A N/A N/A N/A N/A N/A 5.5 % 5.8 % 6.1 % Ultimate health care cost trend rate (rate to which cost trend is expected to decline) N/A N/A N/A N/A N/A N/A 4.5 % 4.5 % 4.5 % Number of years to ultimate trend rate N/A N/A N/A N/A N/A N/A 25 18 19 N/A - Not applicable The net of tax loss in accumulated other comprehensive income (loss) as of December 31, 2021 and 2020 relating to pension benefits of the Hertz Retirement Plan was $ 88 million and $ 122 million, respectively. The provisions charged to net income (loss) for the years ended December 31, 2021, 2020 and 2019 for all other pension plans were approximately $ 5 million, $ 6 million and $ 11 million, respectively. The provisions charged to net income (loss) for the years ended December 31, 2021, 2020 and 2019 for the defined contribution plans were approximately $ 16 million, $ 11 million and $ 27 million, respectively. Plan Assets The Company has a long-term investment outlook for the assets held in the Company sponsored plans, which is consistent with the long-term nature of each plan's respective liabilities. The Company has two major plans which reside in the U.S. and the United Kingdom. 134 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The U.S. Plan The U.S. Plan (the “Plan”) has a target asset allocation mix of 70 % in investments intended to hedge the impact of capital market movements ("Immunizing Portfolio Investments"), comprised primarily of fixed income securities, and 30 % in investments intended to earn more than the pension liability growth over the long-term ("Growth Portfolio Investments"). The Growth Portfolio Investments are primarily invested in passively managed equity funds, international and emerging market funds that are actively managed and non-investment grade fixed income funds. The overall strategy and the Immunizing Portfolio Investments are managed by professional investment managers. The investments within these asset classes are diversified in order to minimize the risk of large losses. The Plan assumes a 4.5 % expected long-term annual weighted-average rate of return on assets. The fair value measurements of the Company's U.S. pension plan assets are based upon inputs that reflect quoted prices for identical assets or liabilities in active markets that are observable (Level 1) and significant observable inputs (Level 2) that reflect quoted prices for similar assets or liabilities in active markets. The fair value measurements of the U.S. pension plan assets relate to common collective trusts and other pooled investment vehicles consisting of the following asset categories: (In millions) December 31, 2021 December 31, 2020 Asset Category Level 1 Level 2 Measured at NAV (1) Level 1 Level 2 Measured at NAV (1) Cash $ 5 $ — $ — $ 6 $ — $ — Short Term Investments — 27 — — 28 — Equity Funds (2) : U.S. Large Cap — 59 — — 66 — U.S. Small Cap — 7 — — 11 — International Large Cap — 28 — — 36 — International Small Cap — 5 — — 7 — International Emerging Markets — 6 6 — 6 9 Fixed Income Securities: U.S. Treasuries — 24 — — 18 — Corporate Bonds — 247 — — 245 — Government Bonds — 12 — — 9 — Municipal Bonds — 10 — — 10 — Derivatives - Interest Rate 3 2 — 3 — — Non-Investment Grade Fixed Income (2) — 27 — — 34 — Total fair value of pension plan assets $ 8 $ 454 $ 6 $ 9 $ 470 $ 9 (1) Includes certain investments where the fair value measurement utilizes the net asset value ("NAV") and as such, are not classified in the fair value levels above. (2) The Level 2 investments relate to investment funds that publish daily NAV per unit. The daily NAV is available to participants in the funds and redemptions can be made daily at the current NAV. The fair value and units are determined and published, and are the basis for current transactions. The investments are not eligible for the NAV practical expedient. However, they are measured at the published NAV because the quoted NAV per unit represents the price at which the investment would be sold in a transaction between independent market participants. The U.K. Plan The Company's United Kingdom defined benefit pension plan (the "U.K. Plan") has a target allocation of 30 % actively managed diversified growth and multi-asset credit funds, 10 % passive equity funds and 60 % protection portfolio that consists of liability driven investments, Sterling liquidity fund and United Kingdom corporate bonds. The actively managed diversified growth and multi-asset credit funds are intended to deliver a long-term equity-like return but with reduced levels of volatility. The protection portfolio is designed to partially hedge the interest rate and inflation expectation exposure of the liabilities which are measured on a local regulatory basis. The amount that is required to be invested in each fund to maintain target hedge ratios will vary over time as the 135 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) value of the liabilities change and the allocations within the protection portfolio will be allowed to vary accordingly. All of the invested assets of the U.K. Plan are held via pooled funds managed by professional investment managers. The U.K. Plan assumes a 3.0 % expected long-term weighted-average rate of return on assets for the Plan in total. The Company's U.K. Plan comprises $ 248 million of the $ 255 million in fair value of Non-U.S. plan assets as of December 31, 2021 and comprises $ 251 million of the $ 258 million in fair value of Non-U.S. plan assets as of December 31, 2020. The fair value measurements of the Company's U.K. Plan assets are based upon inputs that reflect quoted prices for identical assets or liabilities in active markets that are observable (Level 1) and significant observable inputs that reflect quoted prices for similar assets or liabilities in active markets (Level 2). The fair value measurements of the U.K. Plan assets relate to common collective trusts and other pooled investment vehicles consisting of the following asset categories: (In millions) December 31, 2021 December 31, 2020 Asset Category Level 1 Level 2 Measured at NAV (1) Level 1 Level 2 Measured at NAV (1) Actively Managed Multi-Asset Funds: Diversified Growth Funds (2) $ — $ 37 $ — $ — $ 39 $ — Multi Asset Credit — — 38 — — 37 Passive Equity Funds: U.K. Equities (2) — 12 — — 12 — Overseas Equities (2) — 14 — — 14 — Passive Bond Funds: Corporate Bonds — 27 — — 27 — Liability Driven Investments (2) — 96 — — 98 — Liquidity Fund 24 — — 24 — — Total fair value of pension plan assets $ 24 $ 186 $ 38 $ 24 $ 190 $ 37 (1) Includes certain investments where the fair value measurement utilizes NAV and as such, are not classified in the fair value levels above. (2) The Level 2 investments relate to investment funds that publish daily NAV per unit. The daily NAV is available to participants in the funds and redemptions can be made daily at the current NAV. The fair value and units are determined and published, and are the basis for current transactions. The investments are not eligible for the NAV practical expedient. However, they are measured at the published NAV because the quoted NAV per unit represents the price at which the investment would be sold in a transaction between independent market participants. Contributions The Company's policy for funded plans is to contribute annually, at a minimum, amounts required by applicable laws, regulations and union agreements. From time to time, the Company makes contributions beyond those legally required. In 2021 and 2020, the Company did not make any cash contributions to its U.S. qualified pension plan. In 2021 and 2020, the Company made contributions to its U.S. non-qualified pension plans of $ 24 million and $ 2 million, respectively. The Company made discretionary contributions of $ 3 million to its U.K. Plan during each of the years ended December 31, 2021 and 2020. The Company does no t anticipate contributing to the U.S. qualified pension plan during 2022. The Company does not anticipate contributing any significant amounts to the U.K. Plan and anticipates contributing $ 2 million to its other international plans during 2022. The level of 2022 and future contributions will vary, and is dependent on a number of factors including investment returns, interest rate fluctuations, plan demographics, funding regulations and the results of the final actuarial valuation. 136 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Estimated Future Benefit Payments The following table presents estimated future benefit payments: (In millions) Pension Benefits Postretirement Benefits (U.S.) 2022 $ 33 $ 3 2023 33 1 2024 35 1 2025 36 1 2026 39 1 2027 to 2031 206 3 $ 382 $ 10 Multiemployer Pension Plans The Company contributes to several multiemployer defined benefit pension plans under collective bargaining agreements that cover certain of its union-represented employees. The risks of participating in such plans are different from the risks of a single-employer plan, in the following respects: a) Assets contributed to a multiemployer plan by one employer may be used to provide benefits to employees of other participating employers. b) If a participating employer ceases to contribute to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers. c) If the Company ceases to have an obligation to contribute to the multiemployer plan in which the Company had been a contributing employer, the Company may be required to pay to the plan an amount based on the underfunded status of the plan and on the history of its participation in the plan prior to the cessation of its obligation to contribute. The amount that an employer that has ceased to have an obligation to contribute to a multiemployer plan is required to pay to the plan is referred to as a withdrawal liability. Amounts accrued for benefit payments under the Company's multiemployer pension plans of $ 20 million represent the net present value of the projected liabilities from withdrawal claims as of December 31, 2021. The Company's participation in multiemployer plans is outlined in the table below. For plans that are not individually significant to the Company, the total amount of contributions is presented in the aggregate. EIN /Pension Plan Number Pension Protection Act Zone Status FIP / RP Status Pending /Implemented (1) Contributions by The Hertz Corporation (In millions) Surcharge Imposed Expiration Dates of Collective Bargaining Agreements Pension Fund 2021 2020 2021 2020 2019 Western Conference of Teamsters 91-6145047 Green Green N/A $ 4 $ 5 $ 8 N/A 2/28/2022 Other Plans 1 2 4 Total Contributions $ 5 $ 7 $ 12 N/A Not applicable (1) Indicates whether a Funding Improvement Plan, as required under the Code to be adopted by plans in the “yellow” zone, or a Rehabilitation Plan, as required under the Code to be adopted by plans in the “red” zone, is pending or has been implemented as of the end of the plan year that ended in 2021. 137 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 8— Stock-Based Compensation The stock-based compensation expense associated with the Hertz Holdings stock-based compensation plans is pushed down from Hertz Global and recorded on the books at the Hertz level. 2021 Omnibus Incentive Plan During the fourth quarter of 2021, Hertz Global's Board approved the Hertz Global Holdings, Inc. 2021 Omnibus Incentive Plan (the “2021 Omnibus Plan"). The 2021 Omnibus Plan is intended to satisfy the requirement as provided in the Plan of Reorganization to adopt a new management incentive equity plan. In accordance with the Plan of Reorganization, the Company is initially authorized to issue up to 62,250,055 shares of its common stock pursuant to awards granted under the 2021 Omnibus Plan. In addition, beginning on June 30, 2022, and ending on June 20, 2031 (an “Evergreen Date”), the total authorized shares under the 2021 Omnibus Plan will automatically increase by a number of shares equal to 2 % of the total number of shares of the Company's common stock outstanding on the June 29th immediately preceding the applicable Evergreen Date. Notwithstanding the foregoing, the Company's Board may act prior to the Evergreen Date of a given year to provide that there will be no automatic increase for such year, or that the increase for such year will be a lesser number of shares. As of December 31, 2021, 56,840,434 shares of the Company's common stock are authorized and remain available for future grants under the 2021 Omnibus Plan. During the year ended December 31, 2021, compensation expense of $ 7 million and a related income tax benefit of $ 2 million was recognized for grants made under the 2021 Omnibus Plan. As of December 31, 2021, there was $ 105 million of total unrecognized compensation cost expected to be recognized over the remaining 2.8 years, on a weighted average basis, of the requisite service period that began on the grant dates. The 2021 Omnibus Plan provides for the award of stock options, stock appreciation rights ("SARs"), performance stock, PSUs, performance units ("PUs"), restricted stock, RSUs, share awards and deferred stock units to eligible recipients. Under the 2021 Omnibus Plan, the Compensation Committee of the Board (the "Compensation Committee") has the authority to determine the eligible recipients to whom awards may be granted, the types of awards and their terms or conditions. Stock Options and SARs The 2021 Omnibus Plan provides that stock option grants may be either incentive stock options or non-statutory stock options, however, the Company may not grant incentive stock options until such time as the plan has been approved by the Company's stockholders. Except in the case of replacement awards, stock options will have an exercise price per share that is no less than fair market value of the Company's common stock on the stock option grant date. SARs may be granted to participants in tandem with stock options or on their own. Unless otherwise determined by the Compensation Committee at or after the grant date, tandem SARs will have substantially similar terms as the stock options with which they are granted. Generally, each SAR will entitle the participant upon exercise to an amount (in cash, shares or a combination of cash and shares, as determined by the Compensation Committee) equal to the product of (i) the excess of (A) the fair market value on the exercise date of one share of common stock, over (B) the strike price per share, times (ii) the number of shares of common stock covered by the SAR. The Company accounts for stock options as equity-classified awards and recognizes compensation cost on a straight-line basis over the vesting period. The value of each stock option award is estimated on the grant date using a Black-Scholes option valuation model that incorporates the assumptions noted in the following table. 138 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The Company calculates the expected volatility based on the historical movement of its stock price. Grants Assumption 2021 Expected volatility 75 % Expected dividend yield — % Expected term (years) 6 Risk-free interest rate 1.19 % Weighted-average grant date fair value $ 17.12 A summary of stock option activity under the 2021 Omnibus Plan as of December 31, 2021 is presented below: Options Shares Weighted Average Exercise Price Weighted- Average Remaining Contractual Term (years) Aggregate Intrinsic Value (In millions) Outstanding as of January 1, 2021 — $ — — $ — Granted 3,682,215 26.17 — — Exercised — — — — Forfeited or Expired ( 3,360 ) 26.17 — — Outstanding as of December 31, 2021 3,678,855 26.17 9.9 — Exercisable as of December 31, 2021 — — — — Non-vested as of December 31, 2021 3,678,855 Performance Stock Awards, Performance Stock Units and Performance Units PSAs, PSUs and PUs granted under the 2021 Omnibus Plan will vest based on the achievement of predetermined performance goals over performance periods determined by the Compensation Committee or upon the occurrence of certain events, as determined by the Compensation Committee. PSAs are awards of common stock that are subject to forfeiture until predetermined performance conditions have been achieved. A PSU is a contractual right to receive a stated number of shares of common stock, or if provided by the Compensation Committee on or after the grant date, cash equal to the fair market value of such shares of common stock or any combination of shares of common stock and cash having an aggregate fair market value equal to such stated number of shares of common stock, which right is forfeitable until the achievement of predetermined performance conditions. PUs represent the right to receive a cash denominated award, payable in cash or shares of common stock or a combination thereof, and are forfeitable until the achievement of predetermined performance conditions. As of December 31, 2021, there were no issued or outstanding grants of PSAs, PSUs or PUs under the 2021 Omnibus Plan. Restricted Stock and Restricted Stock Units Restricted stock and RSUs granted under the Omnibus Plan will vest based on a minimum period of service or the occurrence of events specified by the Compensation Committee. Restricted stock and RSUs are subject to forfeiture until vested. Compensation expense for RSUs is based on the grant date fair value, and is recognized ratably over the vesting period. For grants issued in 2021, the vesting period is three years except for 500,000 shares which will vest in the first half of 2022. 139 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) A summary of RSU activity as of and for the year ended December 31, 2021 under the 2021 Omnibus Plan is presented below: Shares Weighted- Average Fair Value Aggregate Intrinsic Value (In millions) Outstanding as of January 1, 2021 — $ — $ — Granted 1,727,406 26.17 — Vested — — — Forfeited or Expired ( 1,120 ) 26.17 — Outstanding as of December 31, 2021 1,726,286 26.17 43 Additional information pertaining to RSU activity under the 2021 Omnibus Plan was as follows: Years Ended December 31, 2021 Total fair value of awards that vested (in millions) $ — Weighted-average grant-date fair value of awards 26.17 Deferred Stock Units Each deferred stock unit granted under the 2021 Omnibus Plan represents a contractual right to receive a stated number of shares of common stock of the Company or if provided by the Compensation Committee in accordance with the 2021 Omnibus Plan on or after the grant date, cash equal to the fair value of such shares of common stock or any combination of shares of common stock and cash having an aggregate fair market value equal to such stated number of shares of common stock, on a specified future date. During the year ended December 31, 2021, there were approximately 24,000 outstanding shares of deferred stock units under the 2021 Omnibus Plan. 2016 Omnibus Incentive Plan On the Effective Date, in accordance with the Plan of Reorganization, all existing common stock and outstanding equity awards under the 2016 Omnibus Incentive Plan (the "2016 Omnibus Plan") were cancelled without any distribution, and the 2016 Omnibus Plan was deemed to be cancelled. As a result, the Company recognized $ 10 million related to the unrecognized portion of share-based compensation under the terminated 2016 Omnibus Plan in reorganization expense during the second quarter of 2021, which is reflected in the Company's consolidated statement of operations for the year ended December 31, 2021. See Note 21, "Reorganization Items, Net." As amended, the 2016 Omnibus Plan contained 11,767,723 shares which were available to grant pursuant to the terms and conditions of the 2016 Omnibus Plan before its termination on the Effective Date. A summary of the total compensation expense and associated income tax benefits recognized for the 2016 Omnibus Plan, including the cost of stock options, RSUs, PSUs and PSAs is as follows: Years Ended December 31, (In millions) 2021 2020 2019 Compensation expense (credit) $ 3 $ ( 2 ) $ 18 Income tax provision (benefit) ( 1 ) — ( 2 ) Total $ 2 $ ( 2 ) $ 16 As of December 31, 2021, there was no unrecognized compensation cost related to the 2016 Omnibus Plan as the plan was deemed cancelled on the Effective Date. 140 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Stock Options and SARs All stock options and SARs granted under the 2016 Omnibus Plan had a per-share exercise price of not less than the fair market value of one share of Hertz Global's common stock on the grant date. Stock options and SARs vested based on a minimum period of service or the occurrence of events (such as a change in control, as defined in the 2016 Omnibus Plan) specified by the Compensation Committee of the Board. No stock options or SARs were exercisable after a maximum of ten years from the grant date. The Company accounted for stock options as equity-classified awards and recognized compensation cost on a straight-line basis over the vesting period. The value of each option award was estimated on the grant date using a Black-Scholes option valuation model that incorporated the assumptions noted in the following table. The Company calculated the expected volatility based on the historical movement of its stock price. Grants Assumption 2021 (1) 2020 (1) 2019 (2) Expected volatility — % — % 68.5 % Expected dividend yield — % — % — % Expected term (years) 0 0 7 Risk-free interest rate — % — % 1.93 % Weighted-average grant date fair value $ — $ — $ 9.19 (1) There were no options approved to be granted by the Compensation Committee in 2021 or 2020. (2) Options granted in 2019 were solely related to the incremental grants awarded as part of the 2019 Rights Offering, as disclosed in Note 16, "Equity and Mezzanine Equity – Hertz Global." A summary of stock option activity under the 2016 Omnibus Plan as of December 31, 2021 is presented below: Options Shares Weighted Average Exercise Price Weighted- Average Remaining Contractual Term (years) Aggregate Intrinsic Value (In millions) Outstanding as of January 1, 2021 99,038 $ 34.76 2.3 $ — Granted — — — — Exercised — — — — Forfeited or Expired (1) ( 99,038 ) 34.76 — — Outstanding as of December 31, 2021 — — — — Exercisable as of December 31, 2021 — — — — (1) Includes all remaining outstanding stock options that were deemed to be cancelled on the Effective Date. A summary of non-vested stock option activity under the 2016 Omnibus Plan as of December 31, 2021 is presented below: Non-vested Shares Weighted- Average Exercise Price Weighted-Average Grant-Date Fair Value Non-vested as of January 1, 2021 23,249 $ 18.07 $ 9.06 Granted — — — Vested — — — Forfeited or expired (1) ( 23,249 ) 18.07 9.06 Non-vested as of December 31, 2021 — — — (1) Includes all outstanding non-vested stock options that were deemed to be cancelled on the Effective Date. 141 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Additional information pertaining to stock option activity under the 2016 Omnibus Plan is as follows: Years Ended December 31, (In millions) 2021 2020 2019 Aggregate intrinsic value of stock options exercised $ — $ — $ — Cash received from the exercise of stock options — — — Fair value of options that vested — — 5 Tax benefit realized on exercise of stock options — — — Performance Stock Awards, Performance Stock Units, Restricted Stock and Restricted Stock Units The 2020 threshold performance achievement set forth in the 2018, 2019 and 2020 PSU awards under the 2016 Omnibus Plan failed to be met due to the COVID-19 pandemic impact on the Company's financial results. Additionally, on August 4, 2020, in recognition of the Chapter 11 Cases, all long-term incentive plans were frozen and as such, no additional common shares of the Company could be issued for PSA, PSU, or RSU equity awards under the 2016 Omnibus Plan. A summary of the PSU and PSA activity as of December 31, 2021 under the 2016 Omnibus Plan is presented below: Shares Weighted- Average Fair Value Aggregate Intrinsic Value (In millions) Outstanding as of January 1, 2021 1,813,305 $ 16.47 $ 2 Granted — — — Vested — — — Forfeited or Expired (1) ( 1,813,305 ) 16.47 — Outstanding as of December 31, 2021 — — — (1) Included all outstanding PSUs and PSAs under the 2016 Omnibus Plan that were deemed to be cancelled on the Effective Date. A summary of RSU activity as of and for the year ended December 31, 2021 under the 2016 Omnibus Plan is presented below: Shares Weighted- Average Fair Value Aggregate Intrinsic Value (In millions) Outstanding as of January 1, 2021 782,056 $ 15.11 $ 1 Granted — — — Vested — — — Forfeited or Expired (1) ( 782,056 ) 15.11 — Outstanding as of December 31, 2021 — — — (1) Included all outstanding RSUs under the 2016 Omnibus Plan that were deemed to be cancelled on the Effective Date. Additional information pertaining to RSU activity under the 2016 Omnibus Plan is as follows: Years Ended December 31, 2021 2020 2019 Total fair value of awards that vested (In millions) $ — $ 8 $ 12 Weighted-average grant date fair value of awards — 12.18 18.66 142 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 9— Leases The Company adopted Topic 842 in accordance with the effective date on January 1, 2019. In the Revenue Recognition section of Note 2, "Significant Accounting Policies," the Company discloses that revenue earned from vehicle rentals and from other forms of rental related activities wherein an identified asset is transferred to the customer and the customer has the ability to control that asset, is accounted for under Topic 842. The Company enters into certain agreements as a lessor under which it rents vehicles and leases fleets to customers. The Company enters into certain agreements as a lessee to rent real estate, vehicles and other equipment and to conduct its vehicle rental operations under concession agreements. If any of the following criteria are met, the Company classifies the lease as a financing lease (as a lessee) or as a direct financing or sales-type lease (both as a lessor): • The lease transfers ownership of the underlying asset to the lessee by the end of the lease term; • The lease grants the lessee an option to purchase the underlying asset that the Company is reasonably certain to exercise; • The lease term is for 75 % or more of the remaining economic life of the underlying asset, unless the commencement date falls within the last 25 % of the economic life of the underlying asset; • The present value of the sum of the lease payments equals or exceeds 90 % of the fair value of the underlying asset; or • The underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. Leases that do not meet any of the above criteria are accounted for as operating leases. The Company combines lease and non-lease components in its contracts under Topic 842, when permissible. The following further describes the Company's leasing transactions. Lessor The Company's operating leases for vehicle rentals have rental periods that are typically short term (e.g., daily or weekly) and can generally be extended for up to one month or terminated at the customer's discretion. Rental charges are computed on a limited or unlimited mileage rate, or on a time rate plus a mileage charge. In connection with the vehicle rental, the Company offers supplemental equipment rentals (e.g., child seats and ski racks) which are deemed lease components. The Company also offers value-added services in connection with the vehicle rental, which are deemed non-lease components, such as loss or collision damage waiver, theft protection, liability and personal accident/effects insurance coverage, premium emergency roadside service and satellite radio. Additionally, the Company charges for variable services primarily consisting of tolls and refueling charges incurred during the rental period, and for fees associated with the early or late termination of the vehicle lease. The Company mitigates residual value risk of its revenue earning vehicles by utilizing manufacturer repurchase and guaranteed depreciation programs, using sophisticated vehicle diagnostic and repair equipment to maintain the condition of its vehicles and through periodic reviews of vehicle depreciation rates based on management's ongoing assessment of present and estimated future market conditions. Prior to the Donlen Sale on March 30, 2021, as further disclosed in Note 3, "Divestitures," the Company had operating leases for fleets as part of its Donlen business which had lease periods that were typically for twelve months, after which the lease converted to a month-to-month lease, allowing the vehicle to be surrendered any time thereafter. These leases contained terminal rental adjustment clauses which were considered variable charges. 143 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following table summarizes the amount of operating lease income and other income included in total revenues in the accompanying consolidated statements of operations for the years ended December 31, 2021, 2020 and 2019: (In millions) 2021 2020 2019 Operating lease income from vehicle rentals $ 6,885 $ 4,320 $ 8,579 Operating lease income from fleet leasing 149 639 674 Variable operating lease income 131 30 164 Revenue accounted for under Topic 842 7,165 4,989 9,417 Revenue accounted for under Topic 606 171 269 362 Total revenues $ 7,336 $ 5,258 $ 9,779 Lessee As a lessee, the Company has the following types of operating leases: • Concession agreements which grant the Company the right to conduct its vehicle rental operations at airports, hotels and train stations and to use building space such as terminal counters and parking garages; • Real estate leases for its off airport vehicle rental locations and other premises; • Revenue earning vehicle leases; and • Other equipment leases. The Company's lease terms generally range from one month to thirty-five years and a number of agreements contain escalation clauses, which increase the payment obligation based on a fixed or variable rate and renewal options. The length of renewals vary and may result in different payment terms. Payment terms are based on fixed rates explicit in the lease, including guaranteed minimums and/or variable rates based on: • Operating expenses, such as common area charges, real estate taxes and insurance; • A percentage of revenues or sales arising at the relevant premises; and/or • Periodic inflation adjustments. The Company recognizes a right-of-use asset and lease liability in its accompanying consolidated balance sheets for leases with a term greater than twelve months. Options to extend or terminate a lease are included in the Company's right-of-use asset and lease liability when it is reasonably certain that such options will be exercised. The Company does not recognize right-of-use assets or lease liabilities for short-term leases (i.e., those with a term of twelve months or less) and recognizes lease expense on a straight-line basis over the lease term, as applicable. To determine the present value of its lease payments, the Company utilizes the interest rate implicit in the lease agreement. If the implicit interest rate cannot be determined in the lease agreement, the Company utilizes the Company's collateralized incremental borrowing rate as of the date of adoption, January 1, 2019, or the commencement date of the lease, whichever is later. As a result of the impact from COVID-19 as disclosed in Note 1, "Background," the Company received rent concessions in the form of abatement and payment deferrals of fixed and variable rent payments for its airport and off airport locations in the amount of approximately $ 300 million during the year ended December 31, 2020, which substantially represented amounts previously due in 2020. The Company elected to apply the accounting relief provided by the FASB and elected to not evaluate whether the concession was a modification. The Company accounted for the concession as if it was part of the existing contract. In 2021 and 2020, the Bankruptcy Court entered the Lease Rejection Orders which applied, in the aggregate, to 278 and 359 off airport locations, respectively, and to 34 and 66 airport locations, respectively, in the Company's Americas RAC segment. 144 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following table summarizes the amount of lease costs incurred by the Company for the years ended December 31, 2021, 2020 and 2019: Years ended December 31, (In millions) 2021 2020 2019 Minimum fixed lease costs: Short-term lease costs $ 171 $ 142 $ 130 Operating lease costs 449 527 545 Total 620 669 $ 675 Variable lease costs 165 23 326 Total lease costs $ 785 $ 692 $ 1,001 The following summarizes the weighted-average remaining lease term and weighted-average discount rate for the Company's operating leases as a lessee as of December 31, 2021: Weighted-average remaining lease term (in years) 11.8 Weighted-average discount rate 10.3 % The following table summarizes the Company's minimum fixed lease obligations under existing agreements as a lessee, excluding variable concession obligations in excess of minimum annual guarantees and short-term leases, as of December 31, 2021: (In millions) 2022 $ 390 2023 341 2024 275 2025 212 2026 165 After 2026 1,153 Total lease payments 2,536 Interest ( 1,026 ) Operating lease liabilities as of December 31, 2021 $ 1,510 Note 10— Restructuring Europe Restructuring Due to the continued impact from COVID-19 as disclosed in Note 1, "Background," and reductions in European government support, the Company initiated a restructuring program in March 2021 in its International RAC segment. The total number of employees affected for the year ended December 31, 2021 was approximately 900 . The program is expected to be completed in 2022. U.S. Restructuring Due to the impact from COVID-19 as disclosed in Note 1, "Background," the Company initiated a restructuring program beginning in April 2020, affecting approximately 11,000 U.S. employees in its Americas RAC segment and corporate operations. This program was substantially completed in the third quarter of 2020. 145 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Restructuring Charges Restructuring charges under these programs are as follows: Years ended December 31, (In millions) 2021 2020 By Type: Termination benefits $ 27 $ 37 Lease and contract terminations 3 $ — Facility closures 2 — Total $ 32 $ 37 Years ended December 31, (In millions) 2021 2020 By Caption: Direct vehicle and operating $ 16 $ 25 Selling, general and administrative 16 12 Total $ 32 $ 37 Years ended December 31, (In millions) 2021 2020 By Segment: Americas RAC segment $ — $ 34 International RAC segment 32 — Corporate operations — 3 Total $ 32 $ 37 The tables above do not include pension-related settlement charges incurred during the year ended December 31, 2020. See Note 7, "Employee Retirement Benefits." 146 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following table summarizes the activity affecting the restructuring accrual, which is recorded in accrued liabilities or, for the year ended December 31, 2020, reclassified to liabilities subject to compromise in the accompanying consolidated balance sheet. (In millions) Termination Benefits Other Total Balance as of December 31, 2019 $ 1 $ — $ 1 Charges incurred 37 — 37 Cash payments ( 29 ) — ( 29 ) Classified to liabilities subject to compromise (1) ( 7 ) — ( 7 ) Other ( 2 ) — ( 2 ) Balance as of December 31, 2020 — — — Charges incurred 27 5 32 Cash payments ( 32 ) — ( 32 ) Other non-cash reductions — ( 3 ) ( 3 ) Reclassified from liabilities subject to compromise (1) 7 — 7 Balance as of December 31, 2021 $ 2 $ 2 $ 4 (1) As a result of filing the Chapter 11 Cases, the Company classified $ 7 million of restructuring charges to liabilities subject to compromise in the accompanying consolidated balance sheet as of December 31, 2020. On the Effective Date, in connection with the Plan of Reorganization, the Company reclassified $ 7 million of accrued and unpaid restructuring charges from liabilities subject to compromise. See Note 20, "Liabilities Subject to Compromise." Note 11— Income Tax (Provision) Benefit The components of income (loss) before income taxes for the Company's domestic and foreign operations are as follows: Hertz Global As of December 31, (In millions) 2021 2020 2019 Domestic $ 710 $ ( 1,692 ) $ 28 Foreign ( 27 ) ( 360 ) ( 15 ) Total income (loss) before income taxes $ 683 $ ( 2,052 ) $ 13 Hertz As of December 31, (In millions) 2021 2020 2019 Domestic $ 1,501 $ ( 1,823 ) $ 35 Foreign ( 27 ) ( 360 ) ( 15 ) Total income (loss) before income taxes $ 1,474 $ ( 2,183 ) $ 20 147 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The total income tax provision (benefit) consists of the following: Hertz Global and Hertz As of December 31, (In millions) 2021 2020 2019 Current: Federal $ — $ — $ — Foreign 24 18 20 State and local 21 4 16 Total current 45 22 36 Deferred: Federal 252 ( 356 ) 1 Foreign 19 35 ( 1 ) State and local 2 ( 30 ) 27 Total deferred 273 ( 351 ) 27 Total provision (benefit) - Hertz Global 318 ( 329 ) 63 Federal deferred tax (provision) benefit applicable to Hertz Holdings — 1 2 Total provision (benefit) - Hertz $ 318 $ ( 328 ) $ 65 The principal items of the U.S. and foreign net deferred tax assets and liabilities are as follows: Hertz Global and Hertz As of December 31, (In millions) 2021 2020 Deferred tax assets: Employee benefit plans $ 14 $ 44 Net operating loss carry forwards 1,321 825 Capital loss carryforwards 167 3 Federal and state tax credit carry forwards 64 55 Accrued and prepaid expenses 195 124 Operating lease liabilities 390 390 Total deferred tax assets 2,151 1,441 Less: valuation allowance ( 690 ) ( 651 ) Total net deferred tax assets 1,461 790 Deferred tax liabilities: Depreciation on tangible assets ( 1,342 ) ( 380 ) Intangible assets ( 711 ) ( 723 ) Operating lease right-of-use assets ( 408 ) ( 406 ) Total deferred tax liabilities ( 2,461 ) ( 1,509 ) Net deferred tax liability - Hertz Global ( 1,000 ) ( 719 ) Deferred tax asset - net operating loss applicable to Hertz Holdings ( 3 ) ( 5 ) Net deferred tax liability - Hertz $ ( 1,003 ) $ ( 724 ) 148 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Hertz Global and Hertz In determining valuation allowances, an assessment of positive and negative evidence was performed regarding realization of the deferred tax assets. This assessment included the evaluation of cumulative earnings and losses in recent years, scheduled reversals of deferred tax liabilities, the availability of carryforwards and the remaining period of the respective carry forward, future taxable income and any applicable tax-planning strategies that are available. As of December 31, 2021, the Company has U.S. federal net operating loss carryforwards ("Federal NOLs") of approximately $ 4.0 billion, $ 839 million tax effected and federal tax credits of approximately $ 28 million. Federal NOLs have an indefinite carryforward period, which may offset 80% of taxable income generated in any future year. The federal tax credits begin expiring in 2035. The Company has not recorded a valuation allowance on its Federal NOLs or federal tax credits as there were adequate U.S. deferred tax liabilities that could be realized within the carry forward periods. During 2021 as part of a restructuring of the European operations, we generated a tax loss of approximately $ 1.3 billion, which was characterized as a capital loss in the 2021 provision. Separately, the company generated approximately $ 600 million of taxable capital gains on the disposition of the Donlen Corporation. As a result, the Company has approximately $ 670 million, $ 141 million U.S, federal tax-effected, of capital loss carryforward for which a full valuation allowance is recorded. The Company has filed a request for a pre-filing agreement with the Internal Revenue Service to determine whether the capital loss on European restructuring qualifies as an ordinary loss. As of December 31, 2021, the Company has state net operating loss carryforwards ("State NOLs") of approximately $ 4.8 billion of which $ 1.0 billion have an indefinite utilization period with remaining State NOLs beginning to expire in 2022. The tax effected State NOLs are recorded as a deferred tax asset in the amount of $ 245 million, and are offset, in part, by a valuation allowance totaling $ 171 million. In addition, as of December 31, 2021, the Company had approximately $ 35 million in state tax credits that are fully offset by a valuation allowance. The state tax credits expire over various years beginning in 2022 depending upon when they were generated and the particular jurisdiction. As of December 31, 2021, the Company has foreign net operating loss carry forwards ("Foreign NOLs") of approximately $ 1.0 billion, of which $ 911 million have an indefinite utilization period with the remaining Foreign NOLs beginning to expire in 2024. The tax effected Foreign NOLs are recorded as a deferred tax asset of $ 239 million, and are offset by valuation allowances totaling $ 239 million. In addition, as of December 31, 2021, the Company has no tax credits in foreign jurisdictions. Due to the ownership changes before and upon emergence form Chapter 11, the utilization of the Company's Federal, State and Foreign NOLs may be subject to limitations. Estimates of these limitations have been reflected in the tax provision. 149 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The significant items in the reconciliation of the statutory and effective income tax rates consists of the following items in the table below. Percentages are calculated from the underlying numbers in thousands, and as a result, may not agree to the amount when calculated in millions. Hertz Global and Hertz Years Ended December 31, 2021 2020 2019 Statutory federal tax rate 21 % 21 % 21 % State and local income taxes, net of federal effect 7 5 ( 102 ) Change in state rates, net of federal effect 2 1 ( 17 ) Foreign tax rate differential — — ( 31 ) Change in foreign statutory rates ( 2 ) — 15 Federal and foreign permanent differences 1 — ( 3 ) Tax credits ( 1 ) — ( 75 ) Withholding taxes 1 — 62 Valuation allowance 11 ( 11 ) 591 Change in fair value of public warrants 22 — — Non-deductible bankruptcy expenses 15 — — European reorganization ( 46 ) — — Uncertain tax positions 12 — 29 U.S. tax on foreign earnings 2 — — Stock option shortfalls — — 7 Other 2 — 3 Effective tax rate - Hertz Global 47 16 500 Hertz Holdings exclusive items ( 25 ) ( 1 ) ( 174 ) Effective tax rate - Hertz 22 % 15 % 326 % The Company recorded a tax provision in 2021 compared to a tax benefit in 2020. The change was primarily driven by improvements in the Company's financial performance in 2021, changes in the mix of earnings and losses in jurisdictions for which no tax benefit can be recognized, non-deductible bankruptcy expenses, and reduced by the tax benefits of the European reorganization. Hertz Holdings exclusive items are comprised of transactions specific to Hertz Holdings only. The Company recorded a tax benefit in 2020 compared to a tax provision in 2019. The change was due primarily to significant losses in 2020 resulting from the effect of COVID-19, offset, in part, by the impact of valuation allowances on net deferred tax assets. As of December 31, 2021, total unrecognized tax benefits are $ 106 million and, if settled, $ 35 million would favorably impact the effective tax rate in future periods. However, considering correlative adjustments associated 150 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) with some uncertain tax positions, the net impact on the income tax provision would be approximately $ 9 million if settled. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: Hertz Global and Hertz Years Ended December 31, (In millions) 2021 2020 2019 Balance as of January 1 $ 53 $ 48 $ 49 Increase (decrease) attributable to tax positions taken during prior periods 65 5 5 Increase (decrease) attributable to tax positions taken during the current year 19 1 1 Decrease attributable to settlements with taxing authorities ( 31 ) ( 1 ) ( 7 ) Balance as of December 31 $ 106 $ 53 $ 48 The Company is subject to examination by taxing authorities throughout the world. The tax years that are open for examination span from 2008 to 2021. During 2020, the IRS proposed transfer pricing adjustments to the Company's 2014 and 2015 tax years, for which the company is pursuing competent authority relief. In the second quarter of 2021, the IRS concluded its audit of the Company's 2016 tax year which resulted in no audit adjustments. During June 2021, the Company received final resolution to its request for competent authority relief concerning a German and U.S. transfer pricing matter covering the 2005 - 2010 tax years. The Company has reassessed its uncertain tax positions upon receipt of the new information for tax years 2011 - 2021, which did not result in a material adjustment as it reduced an NOL with a full valuation allowance. The Company's assumptions and estimates pertaining to uncertain tax positions require significant judgment. It is possible that the tax authorities could challenge the Company's estimates and assumptions used to assess the tax benefits, and the actual amount of the tax benefits related to uncertain tax positions may differ materially from these estimates. Additionally, the Company is under audit in several U.S. states and other foreign jurisdictions, and it is reasonably possible that the amount of unrecognized tax benefits may change as the result of the completion of ongoing examinations, the expiration of the statute of limitations or other unforeseen circumstances. The amount that is reasonably possible to change during the next twelve months is not expected to be significant. Net, after-tax interest and penalties related to tax liabilities are classified as a component of income tax in the accompanying consolidated statements of operations which were not significant for the years ended December 31, 2021, 2020 and 2019. Net, after-tax interest and penalties were accrued as a component of tax in the Company's consolidated balance sheet in the amount of $ 7 million and $ 9 million as of December 31, 2021 and 2020, respectively. Beginning the first quarter of 2020, Hertz Global no longer asserts permanent reinvestment of foreign earnings with respect to its non-U.S. earnings, due to the impact from COVID-19 as disclosed in Note 1, "Background." Note 12— Fair Value Measurements Under U.S. GAAP, entities are allowed to measure certain financial instruments and other items at fair value. The Company has not elected the fair value measurement option for any of its assets or liabilities that meet the criteria for this option. Irrespective of the fair value option previously described, U.S. GAAP requires certain financial and non-financial assets and liabilities of the Company to be measured on either a recurring basis or on a nonrecurring basis. 151 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Fair Value Disclosures The fair value of cash, restricted cash, accounts receivable, accounts payable and accrued liabilities, to the extent the underlying liability will be settled in cash, approximates the carrying values because of the short-term nature of these instruments. Debt Obligations The fair value of the debt facilities is estimated based on quoted market rates as well as borrowing rates currently available to the Company for loans with similar terms and average maturities (i.e. Level 2 inputs). December 31, 2021 December 31, 2020 (In millions) Nominal Unpaid Principal Balance Aggregate Fair Value Nominal Unpaid Principal Balance Aggregate Fair Value Non-Vehicle Debt (1) $ 3,055 $ 3,065 $ 4,747 $ 3,382 Vehicle Debt 7,954 7,908 6,087 6,021 Total $ 11,009 $ 10,973 $ 10,834 $ 9,403 (1) Includes Non-Vehicle Debt included in liabilities subject to compromise in the accompanying consolidated balance sheet as of December 31, 2020. See Note 6, "Debt." Assets and Liabilities Measured at Fair Value on a Recurring Basis The following table summarizes the Company's cash equivalents, restricted cash equivalents and Public Warrants that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy as follows: December 31, 2021 December 31, 2020 (In millions) Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Assets: Cash equivalents and restricted cash equivalents $ 1,678 $ — $ — $ 1,678 $ 723 $ — $ — $ 723 Liabilities: Public warrants $ 1,324 $ — $ — $ 1,324 $ — $ — $ — $ — Cash Equivalents and Restricted Cash Equivalents The Company’s cash equivalents and restricted cash equivalents primarily consist of investments in money market funds and bank money market and interest-bearing accounts. The Company determines the fair value of cash equivalents and restricted cash equivalents using a market approach based on quoted prices in active markets (i.e. Level 1 inputs). Public Warrants Under the Plan of Reorganization, reorganized Hertz Global issued Public Warrants, which are classified as liabilities at fair value in the accompanying consolidated balance sheet as of December 31, 2021 in accordance with the provisions of ASC 480, Distinguishing Liabilities from Equity ("Topic 480"). See Note 18, "Public Warrants - Hertz Global," for further details. Upon issuance on the Effective Date, the initial fair value of the Public Warrants was $ 800 million. The Company calculates the fair value based on the end-of-day quoted market price, a Level 1 input of the fair value hierarchy. For the year ended December 31, 2021, the fair value adjustment was a loss of $ 627 million and is recorded in change in fair value of Public Warrants in the accompanying consolidated statement of operations for Hertz Global for the year ended December 31, 2021. 152 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis Donlen Assets As of December 31, 2020 as a result of the then-impending Donlen Sale, the associated assets and liabilities were classified as assets held for sale and liabilities held for sale, respectively, in the accompanying consolidated balance sheet as of December 31, 2020 and were recorded at the lower of carrying value or fair value less any costs to sell. The Company completed the Donlen Sale on March 30, 2021. See Note 3, "Divestitures," for additional information. Note 13— Accumulated Other Comprehensive Income (Loss) Changes in the accumulated other comprehensive income (loss) balance by component (net of tax) is as follows: (In millions) Pension and Other Post-Employment Benefits Foreign Currency Items Unrealized Losses from Currency Translation Adjustments on Terminated Net Investment Hedges Accumulated Other Comprehensive Income (Loss) Balance as of January 1, 2021 $ ( 122 ) $ ( 71 ) $ ( 19 ) $ ( 212 ) Other comprehensive income (loss) before reclassification 22 ( 36 ) — ( 14 ) Amounts reclassified from accumulated other comprehensive income (loss) 12 — — 12 Balance as of December 31, 2021 $ ( 88 ) $ ( 107 ) $ ( 19 ) $ ( 214 ) (In millions) Pension and Other Post-Employment Benefits Foreign Currency Items Unrealized Losses from Currency Translation Adjustments on Terminated Net Investment Hedges Accumulated Other Comprehensive Income (Loss) Balance as of January 1, 2020 $ ( 118 ) $ ( 52 ) $ ( 19 ) $ ( 189 ) Other comprehensive income (loss) before reclassification ( 15 ) ( 19 ) — ( 34 ) Amounts reclassified from accumulated other comprehensive income (loss) 11 — — 11 Balance as of December 31, 2020 $ ( 122 ) $ ( 71 ) $ ( 19 ) $ ( 212 ) Note 14— Contingencies and Off-Balance Sheet Commitments Legal Proceedings Self-Insured Liabilities The Company is currently a defendant in numerous actions and has received numerous claims on which actions have not yet commenced for self-insured liabilities arising from the operation of motor vehicles rented from the Company. The obligation for self-insured liabilities on self-insured U.S. and international vehicles, as stated in the accompanying consolidated balance sheets, represents an estimate for both reported accident claims not yet paid and claims incurred but not yet reported. The related liabilities are recorded on an undiscounted basis and are based on rental volume and actuarial evaluations of historical accident claim experience and trends, as well as future projections of ultimate losses, expenses, premiums and administrative costs. As of December 31, 2021 and 2020, the Company's liability recorded for self-insured liabilities was $ 463 million and $ 488 million, respectively. The Company believes that its analysis is based on the most relevant information available, combined with reasonable 153 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) assumptions. The liability is subject to significant uncertainties. The adequacy of the liability is regularly monitored based on evolving accident claim history and insurance related state legislation changes. If the Company's estimates change or if actual results differ from these assumptions, the amount of the recorded liability is adjusted to reflect these results. Loss Contingencies From time to time the Company is a party to various legal proceedings, typically involving operational issues common to the vehicle rental business, including claims by employees, former employees and governmental investigations. The Company has summarized below the material legal proceedings to which the Company was a party during the year ended December 31, 2021 or the period after December 31, 2021, but before the filing of this 2021 Annual Report. In re Hertz Global Holdings, Inc. Securities Litigation - In November 2013, a purported shareholder class action, Pedro Ramirez, Jr. v. Hertz Global Holdings, Inc., et al., was commenced in the U.S. District Court for the District of New Jersey naming Old Hertz Holdings and certain of its officers as defendants and alleging violations of the federal securities laws. The complaint alleged that Old Hertz Holdings made material misrepresentations and/or omissions of material fact in certain of its public disclosures in violation of Section 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder. The complaint sought an unspecified amount of monetary damages on behalf of the purported class and an award of costs and expenses, including counsel fees and expert fees. The complaint, as amended, was dismissed with prejudice on April 27, 2017 and on September 20, 2018, the Third Circuit affirmed the dismissal of the complaint with prejudice. On February 5, 2019, the plaintiffs filed a motion asking the federal district court to exercise its discretion and allow the plaintiffs to reinstate their claims to include additional allegations from the administrative order agreed to by the SEC and the Company in December 2018, which was supplemented by reference to the Company’s subsequently filed litigation against former executives (disclosed below). On September 30, 2019, the federal district court of New Jersey denied the plaintiffs’ motion for relief from the April 27, 2017 judgment and a related motion to allow the filing of a proposed fifth amended complaint. On October 30, 2019, the plaintiffs filed a notice of appeal with the U.S. Court of Appeals for the Third Circuit. The parties fully briefed the appeal and oral argument had been scheduled for June 19, 2020. As a result of the Company's bankruptcy, the appeal was stayed as to the Company, but the plaintiffs advocated that the appeal could proceed against the individual defendants. On October 13, 2020, the Third Circuit affirmed the District Court’s dismissal of the plaintiffs’ motion for relief against the individual defendants since the motion was not timely filed and the appeal as to the Company remained stayed. In February 2021, the parties participated in a bankruptcy-related mediation process and arrived at a tentative settlement wherein the Company would pay a $ 250,000 cash settlement. In return, the plaintiffs would voluntarily dismiss all claims in the underlying action with prejudice and withdraw the plaintiffs’ Proofs of Claim with prejudice. On March 12, 2021, the Bankruptcy Court approved the tentative settlement and the terms of the settlement have now been fully implemented. This matter is now closed. Make-Whole and Post-Petition Interest Claims - On July 1, 2021, Wells Fargo Bank, N.A., in its capacity as indenture trustee of (1) 6.250 % Unsecured Notes due 2022, (2) 5.500 % Unsecured Notes due 2024, (3) 7.125 % Unsecured Notes due 2026, and (4) 6.000 % Unsecured Notes due 2028 issued by The Hertz Corporation (collectively, the “Notes”), filed a complaint (the “Complaint”) against The Hertz Corporation, Dollar Rent A Car, Inc., Dollar Thrifty Automotive Group, Inc., Donlen Corporation, DTG Operations, Inc., DTG Supply, LLC, Firefly Rent A Car LLC, Hertz Car Sales LLC, Hertz Global Services Corporation, Hertz Local Edition Corp., Hertz Local Edition Transporting, Inc., Hertz System, Inc., Hertz Technologies, Inc., Hertz Transporting, Inc., Rental Car Group Company, LLC, Smartz Vehicle Rental Corporation, Thrifty Car Sales, Inc., Thrifty, LLC, Thrifty Insurance Agency, Inc., Thrifty Rent A Car System, LLC, and TRAC Asia Pacific, Inc. (collectively referred to in this summary as “Defendants”). The filing of the Complaint initiated the adversary proceeding captioned Wells Fargo Bank, National Association v. The Hertz Corporation, et al. pending in the United States Bankruptcy Court for the District of Delaware, Adv. Pro. No. 21-50995 (MFW). The Complaint seeks a declaratory judgment that the holders of the Unsecured Notes are entitled to 154 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) payment of certain redemption premiums and post-petition interest that they assert total $ 271,684,720 plus interest at the contractual default rate or in the alternative are entitled to payment post-petition interest at the applicable contractual rate that they assert totals $ 124,512,653 plus interest at the New York statutory rate. On July 2, 2021, Defendants were summoned to file a motion or answer to the Complaint within 30 days. On August 2, 2021, the Defendants filed a motion to dismiss both counts for declaratory judgment, which was argued before Judge Walrath on November 9, 2021. On December 23, 2021, the Bankruptcy Court dismissed Wells Fargo’s claims with respect to (i) the redemption premium allegedly owed on the 2022 and 2024 Notes and (ii) post-petition interest at the contract rate. As a result, only Wells Fargo’s claims for a redemption premium with respect to the 2026 and 2028 Senior Notes now remain. Additionally, note holders that elected to participate in the 2021 Rights Offering waived their right to collect on the make whole premium. Therefore, since some of the 2026 and 2028 note holders elected to participate in the 2021 Rights Offering, the total amount which may be owed with respect to the asserted make whole premium for those series of notes will be reduced further. The Defendants dispute that any such amounts are owed and intend to respond and otherwise vigorously defend claims set forth therein. The Company cannot predict the outcome or timing of this litigation. Additionally, some creditors in the Chapter 11 Cases may assert that the Company owes additional interest and, in certain cases, additional make whole or other premiums. These claims could be material. The Company retains all rights with respect to any such asserted amounts and intends to vigorously defend against any such asserted claims. There can be no assurance regarding the outcome of any of the litigation regarding the validity or, if deemed valid, the amount of any such additional asserted interest and make whole claims and as such, the Company cannot predict the outcome or timing of this litigation. The Company maintains an internal compliance program through which it from time to time identifies potential violations of laws and regulations applicable to the Company. When the Company identifies such matters, the Company conducts an internal investigation and otherwise cooperates with governmental authorities, as appropriate. The Company has established reserves for matters where the Company believes that losses are probable and can be reasonably estimated. Other than the aggregate reserve established for claims for self-insured liabilities, none of those reserves are material. For matters where the Company has not established a reserve, the ultimate outcome or resolution cannot be predicted at this time, or the amount of ultimate loss, if any, cannot be reasonably estimated. These matters are subject to many uncertainties and the outcome of the individual litigated matters is not predictable with assurance. It is possible that certain of the actions, claims, inquiries or proceedings could be decided unfavorably to the Company or any of its subsidiaries involved. Accordingly, it is possible that an adverse outcome from such a proceeding could exceed the amount accrued in an amount that could be material to the Company's consolidated financial condition, results of operations or cash flows in any particular reporting period. Other Proceedings Litigation Against Former Executives - The Company filed litigation in the U.S. District Court for the District of New Jersey against Mark Frissora, Elyse Douglas and John Jefferey Zimmerman on March 25, 2019, and in state court in Florida against Scott Sider on March 28, 2019, all of whom were former executive officers of Old Hertz Holdings. The complaints predominantly allege breach of contract and seek repayment of incentive-based compensation received by the defendants in connection with restatements included in the Old Hertz Holdings Form 10-K for the year ended December 31, 2014 and related accounting for prior periods. The Company is also seeking recovery for the costs of the SEC investigation that resulted in an administrative order on December 31, 2018 with respect to events generally involving the restatements included in Old Hertz Holdings Form 10-K for the year ended December 31, 2014 and other damages resulting from the necessity of the restatements. The Company is pursuing these legal proceedings in accordance with its clawback policy and contractual rights. In October 2019, the Company entered into a confidential Settlement Agreement with Elyse Douglas. In September and October 2020, the judge in the New Jersey action entered orders requiring the parties and applicable insurers to attend and participate in mediation. The attorneys in the Florida action voluntarily agreed to participate in the same mediation which was held on November 30, 2020. The mediation was unsuccessful, but settlement discussions continued 155 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) and, on April 14, 2021, the Bankruptcy Court approved a Settlement Agreement between the Company and Scott Sider. The Florida action is now closed. On December 29, 2021, the Company entered into a settlement agreement with Jeff Zimmerman, leaving Mark Frissora as the sole remaining defendant in this litigation. Fact discovery has now been completed in the New Jersey action and the case will proceed to the pre-trial phase of experts’ reports and experts’ depositions. Pursuant to the agreements governing the separation of Herc Holdings from Hertz Global that occurred on June 30, 2016, Herc Holdings is entitled to 15 % of the net proceeds of any repayment or recovery. Indemnification Obligations In the ordinary course of business, the Company has executed 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. Specifically, the Company has 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 the Company may be held responsible could be substantial. In addition, Hertz entered into customary indemnification agreements with Hertz Holdings and certain of the Company's stockholders and their affiliates pursuant to which Hertz Holdings and Hertz will indemnify those entities and their respective affiliates, directors, officers, partners, members, employees, agents, representatives and controlling persons, against certain liabilities arising out of performance of a consulting agreement with Hertz Holdings and each of such entities and certain other claims and liabilities, including liabilities arising out of financing arrangements or securities offerings. The Company has entered into customary indemnification agreements with each of its directors and certain of its officers. Performance under these indemnification obligations would generally be triggered by a breach of terms of the contract or by a third-party claim. In connection with the Spin-Off, the Company executed an agreement with Herc Holdings that contains mutual indemnification clauses and a customary indemnification provision with respect to liability arising out of or resulting from assumed legal matters. The Company regularly evaluates the probability of having to incur costs associated with these indemnification obligations and has accrued for expected losses that are probable and estimable. Note 15— Related Party Transactions Transactions and Agreements between Hertz Holdings and Hertz In June 2019, Hertz entered into a master loan agreement with Hertz Holdings for a facility size of $ 425 million with an expiration in June 2020 (the "2019 Master Loan"). The interest rate was based on the U.S. Dollar LIBOR rate plus a margin. As a result of filing the Chapter 11 Cases, as disclosed in Note 1, "Background," the full amount outstanding under the 2019 Master Loan was deemed uncollectible, resulting in a charge of $ 133 million during the second quarter of 2020, which is included in the accompanying consolidated statement of operations for Hertz for the year ended December 31, 2020. Additionally, the loan due to an affiliate, which represents a tax-related liability from Hertz to Hertz Holdings, in the amount of $ 65 million was classified as liabilities subject to compromise in the accompanying consolidated balance sheet of Hertz as of December 31, 2020. On the Effective Date, the $ 65 million tax-related liability from Hertz to Hertz Holdings was reinstated. See Note 20, "Liabilities Subject to Compromise." As of December 31, 2021, the $ 65 million tax-related liability has been settled via a non-cash distribution from Hertz to Hertz Holdings. On May 23, 2020, Hertz entered into a new master loan agreement with Hertz Holdings for a facility size of $ 25 million with an expiration in May 2021 (the "New Loan"). The interest rate was based on the U.S. Dollar LIBOR rate plus a margin. As of December 31, 2020, there was $ 1 million outstanding under the New Loan representing advances and any accrued but unpaid interest. 156 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) In May 2021, upon expiration of the New Loan, Hertz entered into a new master loan agreement with Hertz Holdings for a facility size of $ 25 million with an expiration in May 2022 (the "2021 Master Loan"), where amounts outstanding under the New Loan were transferred to the 2021 Master Loan. The interest rate is based on the U.S. Dollar LIBOR rate plus a margin. On the Effective Date, in connection with the Chapter 11 Emergence, the ATM Program contribution from Hertz Global, as disclosed in Note 16, "Equity and Mezzanine Equity – Hertz Global," was used to settle amounts outstanding under the New Loan. As of December 31, 2021, there was no outstanding balance under the 2021 Master Loan. Other Relationships In connection with its vehicle rental businesses, the Company enters into millions of rental transactions every year involving millions of customers. In order to conduct those businesses, the Company also procures goods and services from thousands of vendors. Some of those customers and vendors may be affiliated with members of the Company's Board. The Company believes that all such rental and procurement transactions involved terms no less favorable to the Company than those that it believes would have been obtained in the absence of such affiliation. The Company's Audit Committee oversees compliance through our Standards of Business Conduct, reviews conflicts of interest involving directors and determines whether to approve each transaction that involves the Company or any of its affiliates, on one hand, and (directly or indirectly) a director or member of his or her family or any entity managed by any such person, on the other hand. 767 Auto Leasing LLC In January 2018, Hertz entered into the 767 Lease Agreement pursuant to which Hertz granted 767, an entity affiliated with a related party until May 2020, the option to acquire certain vehicles from Hertz. The 767 Lease Agreement was terminated effective October 31, 2021 as disclosed in Note 3, "Divestitures." Note 16— Equity and Mezzanine Equity – Hertz Global Emergence from Bankruptcy In connection with the Chapter 11 Emergence, all of Hertz Global's existing authorized, issued, and outstanding common and preferred stock were cancelled. As of the Effective Date, there are 1,000,000,000 shares of reorganized Hertz Global common stock and 100,000,000 shares of reorganized Hertz Global preferred stock authorized for issuance. On the Effective Date, in accordance with the Plan of Reorganization, reorganized Hertz Global issued common stock as follows: • 277,119,438 shares purchased by the Plan Sponsors; • 14,133,024 shares issued, pro rata, to existing stockholders; • 127,362,114 shares issued pursuant to the 2021 Rights Offering; and • 52,487,886 shares distributed to the Backstop Parties. As of the Effective Date, 471,102,462 shares of reorganized Hertz Global common stock and 1,500,000 shares of reorganized Hertz Global preferred stock were issued and outstanding. The parties, including the Plan Sponsors who purchased reorganized Hertz Global common stock and preferred stock (collectively, the "Equity Commitment Parties"), the subscribers to the 2021 Rights Offering, and the Backstop Parties purchased an aggregate of (i) $ 4.7 billion of reorganized Hertz Global common stock and (ii) $ 1.5 billion (less a 2 % upfront discount and stock issuance fees) of reorganized Hertz Global preferred stock as described below. The excess par value for the common stock shares issued by reorganized Hertz Global was recorded to additional paid-in capital in the accompanying consolidated balance sheet of Hertz Global. As of December 31, 2021, all 1,500,000 shares of preferred shares have been repurchased and retired by reorganized Hertz Global as described in the Tender Offer below. 157 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Common Stock Under reorganized Hertz Global's revised articles of incorporation, 1,000,000,000 shares of reorganized Hertz Global common stock, par value $ 0.01 per share, have been authorized for issuance. Each share represents one vote on matters presented to the voting stockholders of reorganized Hertz Global. The consideration received by reorganized Hertz Global upon the issuance of common stock that exceeded the par value was recorded in additional paid-in capital in the accompanying consolidated balance sheet of Hertz Global as of December 31, 2021. The reorganized Hertz Global common stock is not convertible and does not accrue dividends. Dividends, if any, are paid only upon a valid declaration by the Board of reorganized Hertz Global, and such declarations are subject to customary legal and regulatory restrictions, restrictions related to the Series A Preferred Stock, and applicable debt covenants. 2021 Rights Offering In accordance with the Plan of Reorganization, approximately 35 % of reorganized Hertz Global common stock was offered pursuant to the 2021 Rights Offering for an aggregate purchase price of $ 1.6 billion of shares of reorganized Hertz Global common stock at a purchase price of $ 10.00 per share. The 2021 Rights Offering subscription was first made available to eligible existing Hertz Global stockholders ("Eligible Existing Stockholders") on a pro rata basis to their existing common stock interest, and second, if not fully subscribed and funded by Eligible Existing Stockholders, to certain eligible holders of the Company's Senior Notes and lenders under the Alternative Letter of Credit Facility, pursuant to certain subscription procedures. The final expiration date for the 2021 Rights Offering occurred on June 15, 2021. Hertz Global closed the offering upon emergence from the Chapter 11 Cases on the Effective Date with Eligible Existing Stockholders subscribing to purchase 127,362,114 shares of reorganized Hertz Global common stock for gross proceeds of approximately $ 1.3 billion. The unsubscribed portion of the 2021 Rights Offering was backstopped by the Backstop Parties resulting in the issuance of 36,137,887 shares of reorganized Hertz Global common stock for gross proceeds of $ 361 million. The Backstop Parties were compensated a backstop fee of $ 164 million in reorganized Hertz Global common stock valued at $ 10.00 per share which is included in the 2021 Rights Offering in the accompanying Consolidated Statements of Changes in Mezzanine Equity and Stockholders' Equity. During the third quarter of 2021, reorganized Hertz Global issued additional shares pursuant to the rounding provisions of the 2021 Rights Offering for cash proceeds of approximately $ 4 million at a purchase price of $ 10.00 per share. Public Warrants On the Effective Date, in accordance with the Plan of Reorganization, reorganized Hertz Global issued 89,049,029 Public Warrants. See Note 18 , " Public Warrants - Hertz Global," for attributes of the Public Warrants, which are classified at fair value as a liability for financial reporting purposes under U.S. GAAP. Mezzanine Equity - Preferred Stock In accordance with the revised articles of incorporation of reorganized Hertz Global, 100,000,000 shares of preferred stock, par value $ 0.01 per share, have been authorized for issuance. Mezzanine Equity – Series A Preferred Stock In connection with the Plan of Reorganization, reorganized Hertz Global issued 1,500,000 shares of preferred stock on the Effective Date, with an initial stated value of $ 1,000 per share, to Apollo, on behalf of one or more investment funds, separate accounts, and other entities owned, controlled, managed, and/or advised by Apollo or its affiliates, for $ 1.5 billion, less a 2 % upfront discount and stock issuance fees. Shares of the Series A Preferred Stock accrued dividends payable in cash semi-annually in arrears, at a rate of 9 % per annum prior to June 30, 2023 and generally increasing thereafter. The first cash dividend payment was payable on the six-month anniversary of the Effective Date. 158 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) As no one person or entity controls the voting stock of reorganized Hertz Global, a potential change-in-control action could be outside the Company's control and result in a non-compliance event, which could then result in a mandatory redemption of all outstanding shares of Series A Preferred Stock. Accordingly, the Series A Preferred Stock was classified as mezzanine equity upon issuance and recorded at its redemption amount. Pursuant to the certificate of designations for the Series A Preferred Stock, Hertz Global could redeem the Series A Preferred Stock in whole or in part at any time and from time to time, in cash, at a redemption price equal to the then-current accrued stated value of the Series A Preferred Stock being redeemed, subject to a multiple of invested capital floor price equal to a specified multiple 1.30 times the $ 1,000 per share liquidation preference. Tender Offer for Repurchase of Series A Preferred Stock On November 23, 2021, Hertz Global commenced the Tender Offer to repurchase all 1,500,000 outstanding shares of its Series A Preferred Stock at a per-share price of $ 1,250 . The Tender Offer expired on December 21, 2021 and all shares of the Series A Preferred Stock were repurchased at a price of $ 1,250 per share for aggregate payments by Hertz Global of $ 1.9 billion. Hertz Global funded the share repurchases in the Tender Offer with available cash, including proceeds from the offering of the Senior Notes Due 2026 and Senior Notes Due 2029 which were contributed to Hertz Global through a dividend distribution from Hertz. The repurchased shares of Series A Preferred Stock were simultaneously retired. Concurrent with the Tender Offer, Hertz Global solicited consents from a majority of the holders of the Series A Preferred Stock to amend the certificates of designation of the Series A Preferred Shares in order to eliminate the requirement that, without the affirmative vote or consent of holders of a majority of the Series A Preferred Shares outstanding, Hertz Global could not make certain restricted payments (as defined in the certificate of designations) and certain of Hertz Global's unrestricted subsidiaries could not make certain payments in respect of junior stock (as defined in the certificate of designations). Based on the final results of the Tender Offer, the requisite consent of at least a majority of the outstanding Series A Preferred Shares required to approve the proposed amendment was obtained, although it was not necessary to implement the amendment in light of the fact that all Series A Preferred Shares were tendered in the Tender Offer. The difference between the carrying value of the Series A Preferred Stock at expiration of the Tender Offer and the redemption value paid by Hertz Global, including approximately $ 7 million in certain fees, of $ 450 million is recorded to Hertz Global's additional paid in capital as of December 31, 2021, and accordingly, is subtracted from net income available to common stockholders of Hertz Global for purposes of calculating basic and diluted earnings per share for the year ended December 31, 2021. In connection with the Tender Offer, any unpaid dividends that the Preferred Stockholders were entitled to pursuant to the original Preferred Stock terms were forfeited upon acceptance of the Tender Offer. Registration Status of Stock Issued on the Effective Date and Nasdaq Listing With the exception of the shares of reorganized Hertz Global's common stock issued to the Backstop Parties, the direct investment commitment under the EPCA and the 2021 Rights Offering, the common stock and the Public Warrants issued by the reorganized Hertz Global pursuant to the Plan of Reorganization on the Effective Date were issued under an exemption from the registration requirements of the Securities Act under the Bankruptcy Code. Shares of reorganized Hertz Global common stock issued to the Backstop Parties, the direct investment commitment under the EPCA, the 2021 Rights Offering and the Series A Preferred Stock were issued under Section 4(a)(2) of the Securities Act. On November 8, 2021, reorganized Hertz Global successfully completed its Nasdaq listing, in which shares of its new common stock were registered with the SEC for a public offering by certain selling stockholders. On November 9, 2021, reorganized Hertz Global's common stock and Public Warrants began trading on Nasdaq under the trading symbols "HTZ" and "HTZWW," respectively. In conjunction with the registration of Hertz Global's common stock in the Nasdaq listing, certain selling stockholders offered and sold 44,520,000 shares of Hertz Global's common stock to the public. Of these shares, Hertz Global repurchased from the underwriters 10,344,828 shares for an aggregate 159 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) purchase price of $ 300 million which is included in treasury stock in the accompanying Hertz Global consolidated balance sheet as of December 31, 2021. Share Repurchase Program for Common Stock On November 29, 2021, Hertz Global's Board approved a share repurchase program that authorizes the repurchase of up to $ 2.0 billion worth of shares of Hertz Global's outstanding common stock. Any repurchases will be made at the discretion of 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. The share repurchase authorization 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. There can be no assurance as to the timing or number of shares of any repurchases. Between the inception of the share repurchase program and December 31, 2021, a total of 17,106,026 shares of Hertz Global's common stock were repurchased by Hertz Global at an average share price of $ 23.83 , resulting in an aggregate purchase price of $ 408 million. This amount was included in treasury stock in the accompanying Hertz Global consolidated balance sheet as of December 31, 2021. Between January 1, 2022 and February 17, 2022, a total of 20,589,620 shares of Hertz Global's common stock were repurchased at an average share price of $ 20.95 resulting in an aggregate purchase price of $ 431 million. Stockholders' Equity Prior to Plan of Reorganization Equity of Hertz Global Holdings, Inc. As of December 31, 2020, there were 40 million shares of Hertz Holdings preferred stock authorized, par value $ 0.01 per share, 400 million shares of Hertz Holdings common stock authorized, par value $ 0.01 per share, and 2 million shares of treasury stock. In accordance with the Plan of Reorganization, all pre-reorganization equity interests were cancelled as of the Effective Date. 2019 Rights Offering In June 2019, Hertz Global filed a prospectus supplement to its Registration Statement on Form S-3 declared effective by the SEC on June 12, 2019 for a rights offering to raise gross proceeds of approximately $ 750 million and providing for the issuance of up to an aggregate of 57,915,055 new shares of Hertz Global common stock (the "2019 Rights Offering"). Upon closing in July 2019, the 2019 Rights Offering was fully subscribed resulting in Hertz Global selling 57,915,055 shares of its common stock for gross proceeds of $ 750 million. Open Market Sale Agreement In June 2020, subsequent to approval from the Bankruptcy Court and pursuant to a prospectus supplement to the Registration Statement, Hertz Global entered into an open market sale agreement under which it could offer and sell, from time to time, shares of its common stock, par value $ 0.01 per share, having an aggregate offering price of up to $ 500 million ("ATM Program"). Prior to its suspension on June 15, 2020 and ultimate termination on June 18, 2020, Hertz Global issued 13,912,368 shares under the ATM Program for net proceeds of approximately $ 28 million, which is included in non-vehicle restricted cash in the accompanying consolidated balance sheet as of December 31, 2020. On the Effective Date, in accordance with the Plan of Reorganization, all shares that had been issued under the ATM Program were cancelled. Additionally, on the Effective Date, Hertz Global contributed the $ 28 million of net proceeds to Hertz which was recorded in additional paid-in capital in the accompanying consolidated balance sheet of Hertz as of December 31, 2021. 160 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 17— Earnings (Loss) Per Common Share – Hertz Global Basic earnings (loss) per common share has been computed based upon the weighted-average number of common shares outstanding. Diluted earnings (loss) per common share has been computed based upon the weighted-average number of common shares outstanding plus the effect of all potentially dilutive common stock equivalents, including Public Warrants, except when the effect would be anti-dilutive. For the year ended December 31, 2021, the diluted weighted-average shares outstanding included the dilutive impact of Public Warrants where the Company assumed share settlement of the Public Warrants as of the beginning of the reporting period. Additionally, the Company removes the change in fair value of Public Warrants when computing diluted earnings (loss) per common share, when the impact of Public Warrants is dilutive. As disclosed in Note 16, "Equity and Mezzanine Equity – Hertz Global," the Tender Offer to repurchase all outstanding shares of the Series A Preferred Stock expired in December 2021 with all shares of the Series A Preferred Stock repurchased by Hertz Global. The difference between the carrying value of the Series A Preferred Stock at expiration of the Tender Offer and the redemption value paid by Hertz Global was deemed a dividend to the holders of Hertz Global's Series A Preferred Stock, along with certain fees for purposes of computing basic and diluted earnings per share below. As dividends represent earnings that were not available to the holders of Hertz Global's common stock when computing basic and diluted earnings (loss) per common share, they are reflected as an adjustment to net income (loss) available to common stockholders when computing basic and diluted earnings (loss) per common share for Hertz Global. The following table sets forth the computation of basic and diluted earnings (loss) per common share: Years Ended December 31, (In millions, except per share data) 2021 2020 2019 Numerator: Net income (loss) attributable to Hertz Global $ 366 $ ( 1,714 ) $ ( 58 ) Series A Preferred Stock deemed dividends (1) ( 450 ) — — Net income (loss) available to Hertz Global common stockholders $ ( 84 ) $ ( 1,714 ) $ ( 58 ) Denominator: Basic weighted-average common shares outstanding 315 150 84 2019 Rights Offering adjustment (2) — — 33 Diluted weighted-average common shares outstanding 315 150 117 Antidilutive Public Warrants 14 — — Antidilutive stock options, RSUs, PSUs and PSAs 1 2 2 Total antidilutive 15 2 2 Earnings (loss) per common share: Basic $ ( 0.27 ) $ ( 11.44 ) $ ( 0.49 ) Diluted $ ( 0.27 ) $ ( 11.44 ) $ ( 0.49 ) (1) Reflects the difference between the carrying value of the Series A Preferred Stock at expiration of the Tender Offer and the redemption value paid by Hertz Global, including approximately $ 7 million in certain fees. (2) Reflects the impact of the 2019 Rights Offering subscription period and the weighted-average impact of the issuance of 57,915,055 shares from the 2019 Rights Offering on July 18, 2019. Under the Plan of Reorganization approved by the Bankruptcy Court, the 2021 Rights Offering subscription was made available to Eligible Existing Stockholders on a pro rata basis to their existing common stock interests; therefore earnings (loss) per common share have not been retrospectively adjusted for reporting periods prior to the Effective Date for the 2021 Rights Offering. Note 18— Public Warrants - Hertz Global On the Effective Date, in accordance with the Plan of Reorganization and the Public Warrant Agreement, reorganized Hertz Global issued 89,049,029 Public Warrants with an initial exercise price of $ 13.80 per Public 161 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Warrant, subject to certain conditions. The Public Warrants allow the holders to purchase up to 18 % of the aggregate number of reorganized Hertz Global common interests issued and outstanding as of the Effective Date. Each Public Warrant will entitle the holders to receive one share of reorganized Hertz Global common stock. The Public Warrants have a 30-year term and are exercisable from the date of issuance until June 30, 2051, at which time any unexercised Public Warrants will expire, and the rights of the holders to purchase reorganized Hertz Global common stock will terminate. The exercise price of the Public Warrants is subject to adjustment from time to time upon any payment of cash dividends relating to reorganized Hertz Global's common stock and the occurrence of certain dilutive events as described in the Public Warrant Agreement. As of December 31, 2021, the exercise price remains $ 13.80 . Between the Effective Date and December 31, 2021, 6,040,280 Public Warrants were exercised, of which 428,102 were cashless exercises and 5,612,178 were exercised for $ 13.80 per share. The Public Warrants are freely transferable, subject only to applicable securities laws and the restrictions on transfers and sales of Public Warrants and reorganized Hertz Global's common stock. On November 9, 2021, the Public Warrants began trading on Nasdaq under the symbol HTZWW. The Public Warrants previously traded on the over-the-counter market. The Company accounts for the Public Warrants in accordance with the provisions of Topic 480, under which the Public Warrants meet the definition of a freestanding financial instrument. Although these are publicly traded warrants, they are classified as liabilities due to certain settlement provisions that are only applicable in the event of change of control (as defined by the Public Warrant Agreement). The Public Warrants are recorded at fair value in the accompanying consolidated balance sheet as of December 31, 2021. See Note 12, "Fair Value Measurements." Note 19— Segment Information The Company’s CODM assesses performance and allocates resources based upon the financial information for the Company’s reportable segments. In the second quarter of 2021, in connection with the Chapter 11 Emergence as disclosed in Note 1 , " Background," and changes in how the Company's CODM regularly reviews operating results and allocates resources, the Company revised its reportable segments to include Canada, Latin America and the Caribbean in its Americas RAC reportable segment, which were previously included in its International RAC reportable segment. Accordingly, prior periods have been restated to conform with the revised presentation. The Company has identified two reportable segments, which are consistent with its 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 (cars, crossovers, vans and light trucks), as well as sales of value-added services, in the U.S., Canada, Latin America and the Caribbean; and • International RAC - rental and leasing of vehicles (cars, vans, crossovers and light trucks), as well as sales of value-added services internationally and consists primarily of the Company's Europe and other international locations. In addition, in the second quarter of 2021, as a result of the Donlen Sale, as disclosed in Note 3, "Divestitures," the All Other Operations reportable segment, which consisted primarily of the Company's former Donlen business, was no longer deemed a reportable segment. In addition to its reportable segments and other operating activities, the Company has corporate operations ("Corporate") which includes general corporate assets and expenses and certain interest expense (including net interest on non-vehicle debt). Corporate includes other items necessary to reconcile the reportable segments to the Company's total amounts. 162 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following tables provide significant statement of operations and balance sheet information by reportable segment for each of Hertz Global and Hertz, as well as Adjusted EBITDA, the measure used to determine segment profitability. Years Ended December 31, (In millions) 2021 2020 2019 Revenues Americas RAC $ 6,215 $ 3,756 $ 7,208 International RAC 985 872 1,899 Total reportable segments 7,200 4,628 9,107 All other operations (1) 136 630 672 Total Hertz Global and Hertz $ 7,336 $ 5,258 $ 9,779 Depreciation of revenue earning vehicles and lease charges Americas RAC $ 343 $ 1,352 $ 1,706 International RAC 154 243 388 Total reportable segments 497 1,595 2,094 All other operations (1)(2) — 435 469 Total Hertz Global and Hertz $ 497 $ 2,030 $ 2,563 Depreciation and amortization, non-vehicle assets Americas RAC $ 166 $ 182 $ 159 International RAC 16 19 20 Total reportable segments 182 201 179 All other operations (1) 2 10 10 Corporate 12 14 14 Total Hertz Global and Hertz $ 196 $ 225 $ 203 Interest expense, net Americas RAC $ 198 $ 259 $ 166 International RAC 62 80 84 Total reportable segments 260 339 250 All other operations (1) 13 40 31 Corporate 196 229 524 Total Hertz Global 469 608 805 Hertz interest income from loan to Hertz Global — ( 2 ) ( 7 ) Total - Hertz $ 469 $ 606 $ 798 Adjusted EBITDA Americas RAC $ 2,173 $ ( 810 ) $ 512 International RAC 90 ( 229 ) 115 Total reportable segments 2,263 ( 1,039 ) 627 All other operations (1) 13 93 100 Corporate ( 146 ) ( 49 ) ( 78 ) Total Hertz Global and Hertz $ 2,130 $ ( 995 ) $ 649 163 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) As of December 31, (In millions) 2021 2020 Revenue earning vehicles, net Americas RAC $ 7,897 $ 5,120 International RAC 1,329 942 Total reportable segments 9,226 6,062 All other operations (1)(3) — 1,432 Total Hertz Global and Hertz $ 9,226 $ 7,494 Property and equipment, net Americas RAC $ 449 $ 490 International RAC 67 78 Total reportable segments 516 568 All other operations (1)(4) — 6 Corporate 92 98 Total Hertz Global and Hertz $ 608 $ 672 Total assets Americas RAC $ 14,352 $ 11,337 International RAC 2,978 2,661 Total reportable segments 17,330 13,998 All other operations (1)(5) — 1,818 Corporate 2,453 1,092 Total Hertz Global (6) 19,783 16,908 Corporate - Hertz (7) ( 3 ) ( 28 ) Total Hertz (6) $ 19,780 $ 16,880 (1) Substantially comprised of the Company's Donlen business, which was sold on March 30, 2021. (2) Depreciation for the Donlen business was suspended while classified as held for sale. See Note 3, "Divestitures." (3) Includes $ 1.4 billion of revenue earning vehicles, net classified as held for sale as of December 31, 2020 as disclosed in Note 3, "Divestitures." (4) Includes $ 6 million of property and equipment, net classified as held for sale as of December 31, 2020 as disclosed in Note 3, "Divestitures." (5) Includes $ 1.8 billion of assets classified as held for sale as of December 31, 2020 as disclosed in Note 3, "Divestitures." (6) The consolidated total assets of Hertz Global and Hertz as of December 31, 2021 and 2020 included total assets of VIEs of $ 734 million and $ 511 million, respectively, which can only be used to settle obligations of the VIEs. See "Pledges Related to Vehicle Financing" in Note 6, "Debt," and "Termination of 767 Auto Leasing Agreement" in Note 3, "Divestitures," for further information. (7) Excludes net proceeds from the ATM Program of $ 28 million as of December 31, 2020 as disclosed in Note 16, "Equity and Mezzanine Equity – Hertz Global." 164 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Years Ended December 31, (In millions) 2021 2020 2019 Revenue earning vehicles and non-vehicle capital assets Americas RAC: Expenditures $ ( 5,935 ) $ ( 4,059 ) $ ( 9,790 ) Proceeds from disposals 2,137 7,965 6,643 Net expenditures - Hertz Global and Hertz $ ( 3,798 ) $ 3,906 $ ( 3,147 ) International RAC: Expenditures $ ( 1,123 ) $ ( 930 ) $ ( 2,995 ) Proceeds from disposals 626 1,855 2,517 Net expenditures - Hertz Global and Hertz $ ( 497 ) $ 925 $ ( 478 ) All other operations: Expenditures $ ( 155 ) $ ( 615 ) $ ( 1,043 ) Proceeds from disposals 70 335 352 Net expenditures - Hertz Global and Hertz $ ( 85 ) $ ( 280 ) $ ( 691 ) Corporate: Expenditures $ ( 12 ) $ ( 36 ) $ ( 110 ) Proceeds from disposals 1 3 1 Net expenditures - Hertz Global and Hertz $ ( 11 ) $ ( 33 ) $ ( 109 ) The Company operates in the U.S. and in international countries. International operations are substantially in Europe. The operations within major geographic areas for each of Hertz Global and Hertz are summarized below: Years Ended December 31, (In millions) 2021 2020 2019 Revenues U.S. $ 6,186 $ 4,271 $ 7,596 International 1,150 987 2,183 Total Hertz Global and Hertz $ 7,336 $ 5,258 $ 9,779 As of December 31, (In millions) 2021 2020 Revenue earning vehicles, net U.S. $ 7,639 $ 4,974 International 1,587 1,088 Total Hertz Global and Hertz $ 9,226 $ 6,062 Property and equipment, net U.S. $ 527 $ 570 International 81 96 Total Hertz Global and Hertz $ 608 $ 666 165 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) As of December 31, (In millions) 2021 2020 Total assets U.S. (1) $ 16,174 $ 13,732 International (2) 3,609 3,176 Total Hertz Global 19,783 16,908 U.S. - Hertz ( 3 ) ( 28 ) Total Hertz $ 19,780 $ 16,880 (1) Includes $ 1.8 billion of assets classified as held for sale as of December 31, 2020 as disclosed in Note 3, "Divestitures." (2) Includes $ 48 million of assets classified as held for sale as of December 31, 2020 as disclosed in Note 3, "Divestitures." Reconciliations of Adjusted EBITDA by reportable segment to consolidated amounts are summarized below: Hertz Global Years Ended December 31, (In millions) 2021 2020 2019 Adjusted EBITDA: Americas RAC $ 2,173 $ ( 810 ) $ 512 International RAC 90 ( 229 ) 115 Total reportable segments 2,263 ( 1,039 ) 627 All other operations (1) 13 93 100 Corporate (2) ( 146 ) ( 49 ) ( 78 ) Total Hertz Global 2,130 ( 995 ) 649 Adjustments: Non-vehicle depreciation and amortization ( 196 ) ( 225 ) ( 203 ) Non-vehicle debt interest, net (3) ( 185 ) ( 153 ) ( 311 ) Vehicle debt-related charges (4) ( 72 ) ( 55 ) ( 38 ) Restructuring and restructuring related charges (5) ( 76 ) ( 64 ) ( 14 ) Technology-related intangible and other asset impairments (6) — ( 213 ) — Information technology and finance transformation costs (7) ( 12 ) ( 42 ) ( 114 ) Reorganization items, net (8) ( 677 ) ( 175 ) — Pre-reorganization charges and non-debtor financing charges (9) ( 42 ) ( 109 ) — Gain from the Donlen Sale (10) 400 — — Change in fair value of Public Warrants (11) ( 627 ) — — Other items (12) 40 ( 21 ) 44 Income (loss) before income taxes $ 683 $ ( 2,052 ) $ 13 166 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Hertz Years Ended December 31, (In millions) 2021 2020 2019 Adjusted EBITDA: Americas RAC $ 2,173 $ ( 810 ) $ 512 International RAC 90 ( 229 ) 115 Total reportable segments 2,263 ( 1,039 ) 627 All other operations (1) 13 93 100 Corporate (2) ( 146 ) ( 49 ) ( 78 ) Total Hertz 2,130 ( 995 ) 649 Adjustments: Non-vehicle depreciation and amortization ( 196 ) ( 225 ) ( 203 ) Non-vehicle debt interest, net (3) ( 185 ) ( 151 ) ( 304 ) Vehicle debt-related charges (4) ( 72 ) ( 55 ) ( 38 ) Restructuring and restructuring related charges (5) ( 76 ) ( 64 ) ( 14 ) Technology-related intangible and other asset impairments (6) — ( 213 ) — Write-off of intercompany loan (13) — ( 133 ) — Information technology and finance transformation costs (7) ( 12 ) ( 42 ) ( 114 ) Reorganization items, net (8) ( 513 ) ( 175 ) — Pre-reorganization charges and non-debtor financing charges (9) ( 42 ) ( 109 ) — Gain from the Donlen Sale (10) 400 — — Other items (12) 40 ( 21 ) 44 Income (loss) before income taxes $ 1,474 $ ( 2,183 ) $ 20 (1) Substantially comprised of the Company's Donlen business, which was sold on March 30, 2021 as disclosed in Note 3, "Divestitures." (2) Represents other reconciling items primarily consisting of general corporate expenses as well as other business activities. (3) For 2021, includes $ 8 million of loss on extinguishment of debt associated with the payoff and termination of the HIL Credit Agreement recorded in the second quarter. See Note 6, "Debt," for further information. (4) Represents vehicle debt-related charges relating to the amortization of deferred financing costs and debt discounts and premiums. (5) Represents charges incurred under restructuring actions as defined in U.S. GAAP. See Note 10, "Restructuring," for further information. Also includes restructuring related charges such as incremental costs incurred directly supporting business transformation initiatives. (6) For 2020, represents a $ 193 million impairment of technology-related intangible assets and capitalized cloud computing implementations costs and a $ 20 million impairment of the Hertz tradename, as disclosed in Note 5, "Goodwill and Intangible Assets, Net." (7) Represents costs associated with the Company's information technology and finance transformation programs, both of which are multi-year initiatives to upgrade and modernize the Company's systems and processes. (8) Represents charges incurred associated with the filing of and the emergence from the Chapter 11 Cases, as disclosed in Note 21, "Reorganization Items, Net." (9) Represents charges incurred prior to the filing of the Chapter 11 Cases, as disclosed in Note 1, "Background," which were comprised of preparation charges for the reorganization, such as professional fees. Also, includes certain non-debtor financing and professional fee charges. (10) Represents the net gain from the sale of the Company's Donlen business on March 30, 2021 as disclosed in Note 3, "Divestitures." (11) Represents the change in fair value during the reporting period for the Company's outstanding Public Warrants. (12) Represents miscellaneous items, including non-cash stock-based compensation charges, and amounts attributable to noncontrolling interests. For 2021, includes $ 100 million associated with the suspension of depreciation during the first quarter for the Donlen business while classified as held for sale, partially offset by $ 17 million for certain professional fees, $ 14 million of charges related to the settlement of bankruptcy claims, charges for a multiemployer pension plan withdrawal liability and letter of credit fees. For 2020, also includes $ 16 million associated with the Donlen Asset Sale, partially offset by $ 18 million for losses associated with certain vehicle damages. For 2019, also includes a $ 30 million gain on marketable securities and a $ 39 million gain on the sale of non-vehicle capital assets. (13) For 2020, represents the write-off of the 2019 Master Loan between Hertz and Hertz Holdings, as disclosed in Note 15, "Related Party Transactions." 167 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 20— Liabilities Subject to Compromise The accompanying consolidated balance sheet as of December 31, 2020 includes amounts classified as liabilities subject to compromise, which represented Pre-petition liabilities the Company anticipated would be allowed as claims in the Chapter 11 Cases. These amounts represented the Debtors' current estimate of known or potential obligations to be resolved in connection with the Chapter 11 Cases. The following table summarizes liabilities subject to compromise as of December 31, 2020: (In millions) December 31, 2020 Accounts payable $ 267 Accrued liabilities (1) 166 Accrued taxes, net 19 Accrued interest on debt subject to compromise 70 Debt subject to compromise (2) 4,443 Liabilities subject to compromise - Hertz Global 4,965 Due from affiliate - Hertz (3) 65 Liabilities subject to compromise - Hertz $ 5,030 (1) Included $ 24 million of U.S. pension benefit obligation reported as liabilities subject to compromise as of December 31, 2020. (2) See Note 6, "Debt," for details of Pre-petition, non-vehicle debt reported as liabilities subject to compromise as of December 31, 2020. (3) See Note 15, "Related Party Transactions," for details of a Pre-petition intercompany loan due to an affiliate reported as liabilities subject to compromise as of December 31, 2020. As a result of the Chapter 11 Emergence and implementation of the Plan of Reorganization, the Company reinstated certain liabilities that had been classified as liabilities subject to compromise in the accompanying consolidated balance sheet as of December 31, 2020. The following table represents the reinstatement of liabilities subject to compromise, which include Pre-petition liabilities that were allowed to be or that were estimated to be allowed as claims in the Chapter 11 Cases. (In millions) Effective Date Reinstated on the Effective Date: Accounts payable $ 257 Accrued liabilities 99 Accrued taxes, net 14 Liabilities reinstated - Hertz Global 370 Stockholder's equity - Due to affiliate - Hertz (1) 65 Liabilities reinstated - Hertz $ 435 (1) See Note 15, "Related Party Transactions," for details of a Pre-petition intercompany loan due to an affiliate reported as liabilities subject to compromise as of December 31, 2020 that was settled via a non-cash distribution from Hertz to Hertz Holdings. Note 21— Reorganization Items, Net The Debtors incurred incremental costs as a result of the Chapter 11 Cases and settlement of liabilities under the Plan of Reorganization which were recorded as reorganization items, net in the accompanying consolidated statements of operations for the years ended December 31, 2021 and 2020. 168 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following tables summarize reorganization items, net: Hertz Global Years Ended December 31, (In millions) 2021 2020 Professional fees and other bankruptcy related costs $ 257 $ 175 Loss on extinguishment of debt (1) 191 — Backstop fee 164 — Breakup fee (2) 77 — Contract settlements 25 — Cancellation of share-based compensation grants (3) ( 10 ) — Net gain on settlement of liabilities subject to compromise ( 22 ) — Other, net ( 5 ) — Reorganization items, net $ 677 $ 175 Hertz Years Ended December 31, (In millions) 2021 2020 Professional fees and other bankruptcy related costs $ 257 $ 175 Loss on extinguishment of debt (1) 191 — Breakup fee (2) 77 — Contract settlements 25 — Cancellation of share-based compensation grants (3) ( 10 ) — Net gain on settlement of liabilities subject to compromise ( 22 ) — Other, net ( 5 ) — Reorganization items, net $ 513 $ 175 (1) Includes loss on extinguishment of debt resulting from the implementation of the Plan of Reorganization on the Effective Date. Primarily composed of write-offs of unamortized deferred loan origination costs and early termination fees associated with terminated debt agreements. See Note 6, "Debt," for further information. (2) Breakup fee paid to prior plan sponsors Centerbridge Partners, L.P., Warburg Pincus LLC, Dundon Capital Partners, LLC and certain of their respective affiliates and certain holders of the Senior Notes upon Emergence in accordance with an Equity Purchase and Commitment and Agreement entered into on April 3, 2021 which was subsequently terminated. (3) See Note 8, "Stock-Based Compensation," for further details. Cash payments during the years ended December 31, 2021 and 2020 totaled $ 485 million and $ 102 million, respectively. As of December 31, 2021, $ 25 million was recorded in accounts payable in the accompanying consolidated balance sheet as of December 31, 2021. As of December 31, 2020, $ 46 million and $ 19 million were recorded in accrued liabilities and accounts payable, respectively, in the accompanying consolidated balance sheet as of December 31, 2020. 169 Table of Contents SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT HERTZ GLOBAL HOLDINGS, INC. PARENT COMPANY BALANCE SHEETS (In millions, except par value) December 31, 2021 2020 ASSETS Cash and cash equivalents $ 1 $ — Restricted cash and restricted cash equivalents — 28 Total cash, cash equivalents, restricted cash and restricted cash equivalents 1 28 Non-vehicle receivables, net of allowance 1 — Prepaid expenses and other assets 1 1 Investments in subsidiaries, net 4,350 — Deferred income taxes, net 2 5 Due from Hertz — 65 Total assets $ 4,355 $ 99 LIABILITIES AND STOCKHOLDERS' EQUITY Accrued liabilities $ 54 $ — Public Warrants 1,324 — Due to Hertz — 1 Investments in subsidiaries, net — 42 Total liabilities 1,378 43 Stockholders' equity: Preferred stock, $ 0.01 par value, no shares issued and outstanding — — Common stock, $ 0.01 par value, 477,233,278 and 158,235,410 shares issued, respectively and 449,782,424 and 156,206,478 shares outstanding, respectively 5 2 Additional paid-in capital 6,209 3,047 Accumulated deficit ( 2,315 ) ( 2,681 ) Accumulated other comprehensive income (loss) ( 214 ) ( 212 ) Equity before treasury stock 3,685 156 Treasury stock, at cost, 27,450,854 and 2,028,932 common shares as of December 31, 2021 and 2020, respectively ( 708 ) ( 100 ) Total stockholders' equity 2,977 56 Total liabilities and stockholders' equity $ 4,355 $ 99 The accompanying notes are an integral part of these financial statements. 170 Table of Contents SCHEDULE I (Continued) CONDENSED FINANCIAL INFORMATION OF REGISTRANT HERTZ GLOBAL HOLDINGS, INC. PARENT COMPANY STATEMENTS OF OPERATIONS (In millions) Years Ended December 31, 2021 2020 2019 Total Revenues $ — $ — $ — Expenses: Interest expense, net — 2 7 Write-off of intercompany loan — ( 133 ) — Reorganization items net 164 — — Change in fair value of Public Warrants 627 — — Total expenses 791 ( 131 ) 7 Income (loss) before income taxes and equity in earnings (losses) of subsidiaries ( 791 ) 131 ( 7 ) Income tax (provision) benefit — 1 2 Equity in earnings (losses) of subsidiaries, net of tax 1,157 ( 1,846 ) ( 53 ) Net income (loss) 366 ( 1,714 ) ( 58 ) Series A Preferred Stock deemed dividends ( 450 ) — — Net income (loss) available to Hertz Holdings common stockholders $ ( 84 ) $ ( 1,714 ) $ ( 58 ) The accompanying notes are an integral part of these financial statements. 171 Table of Contents SCHEDULE I (Continued) CONDENSED FINANCIAL INFORMATION OF REGISTRANT HERTZ GLOBAL HOLDINGS, INC. PARENT COMPANY STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (In millions) Years Ended December 31, 2021 2020 2019 Net income (loss) $ 366 $ ( 1,714 ) $ ( 58 ) Total other comprehensive income (loss) ( 2 ) ( 23 ) 3 Total comprehensive income (loss) $ 364 $ ( 1,737 ) $ ( 55 ) The accompanying notes are an integral part of these financial statements. PARENT COMPANY STATEMENTS OF CASH FLOWS (In millions) Years Ended December 31, 2021 2020 2019 Net cash provided by (used in) operating activities $ — $ ( 3 ) $ ( 7 ) Cash flows from financing activities: Proceeds from loans with Hertz — 5 12 Proceeds from Plan Sponsors 2,781 — — Proceeds from rights offerings, net 1,639 — 748 Contributions to Hertz ( 5,642 ) — ( 750 ) Proceeds from exercises of Public Warrants 77 — — Proceeds from issuance of preferred stock 1,433 — — Distributions to common stockholders ( 239 ) — — Purchases of treasury shares ( 654 ) — — Repurchase of preferred stock ( 1,883 ) — — Payments for Nasdaq listing costs ( 9 ) — — Dividends from Hertz 2,470 — — Proceeds from issuance of stock, net — 28 — Other — ( 2 ) ( 3 ) Net cash provided by (used in) financing activities ( 27 ) 31 7 Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents during the period ( 27 ) 28 — Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period 28 — — Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period $ 1 $ 28 $ — The accompanying notes are an integral part of these financial statements. 172 Table of Contents SCHEDULE I (Continued) HERTZ GLOBAL HOLDINGS, INC. NOTES TO PARENT COMPANY FINANCIAL STATEMENTS Note 1— Background and Basis of Presentation Hertz Global Holdings, Inc. was incorporated in Delaware in 2015 and wholly owns Rental Car Intermediate Holdings, LLC which wholly owns Hertz, Hertz Global's primary operating company. On May 22, 2020, Hertz Global, Hertz and certain of their direct and indirect subsidiaries in the U.S. and Canada filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware. On June 30, 2021, these entities emerged from bankruptcy. The Chapter 11 Cases were being jointly administered by the Bankruptcy Court under the caption In re The Hertz Corporation, et al., Case No. 20-11218 (MFW) . Refer to Note 1, "Background," to its Notes to the consolidated financial statements included in this 2021 Annual Report under the caption Item 8, "Financial Statements and Supplementary Data," for further information. These condensed parent company financial statements reflect the activity of Hertz Holdings as the parent company to Hertz and have been prepared in accordance with Rule 12-04, Schedule 1 of Regulation S-X, as the restricted net assets of Hertz exceed 25% of the consolidated net assets of Hertz Holdings. This information should be read in conjunction with the consolidated financial statements of Hertz Global included in this 2021 Annual Report under the caption Item 8, "Financial Statements and Supplementary Data." Note 2— Contingencies For a discussion of the commitments and contingencies of Hertz Holdings, refer to the sections below included in Note 14, "Contingencies and Off-Balance Sheet Commitments," to the Notes to its consolidated financial statements included in this 2021 Annual Report under the caption Item 8, "Financial Statements and Supplementary Data." • In re Hertz Global Holdings, Inc. Securities Litigation • Litigation Against Former Executives The remaining sections of Note 14, "Contingencies and Off-Balance Sheet Commitments," and Note 9, "Leases," to the Notes to its consolidated financial statements included in this 2021 Annual Report under the caption Item 8, "Financial Statements and Supplementary Data," describe the commitments and contingencies of Hertz Holdings, including its subsidiaries. Note 3— Dividends In 2021, $ 2.5 billion in cash dividends were paid by Hertz to Hertz Holdings to fund the Tender Offer and common stock share repurchases as further disclosed in Note 16, "Equity and Mezzanine Equity – Hertz Global" to the Notes to its consolidated financial statements in this 2021 Annual Report under the caption Item 8, "Financial Statements and Supplementary Data." Additionally, in December 2021, a $ 65 million tax-related liability for a loan due from Hertz to Hertz Holdings was settled via a non-cash distribution as further disclosed in Note 15, "Related Party Transactions," to the Notes to its consolidated financial statements in this 2021 Annual Report under the caption Item 8, "Financial Statements and Supplementary Data." There were no non-cash dividends paid by Hertz in 2020 or 2019. Note 4— Share Repurchase For a discussion of the share repurchase program of Hertz Holdings, refer to Note 16, "Equity and Mezzanine Equity – Hertz Global" to the Notes to its consolidated financial statements in this 2021 Annual Report under the caption Item 8, "Financial Statements and Supplementary Data." In 2021, Hertz Holdings repurchased 173 Table of Contents SCHEDULE I (Continued) HERTZ GLOBAL HOLDINGS, INC. NOTES TO PARENT COMPANY FINANCIAL STATEMENTS (continued) 27,450,854 shares for $ 708 million. This amount was included in treasury stock in the accompanying parent-only balance sheets of Hertz Holdings as of December 31, 2021. Between January 1, 2022 and February 17, 2022, Hertz Holdings repurchased a total of 20,589,620 shares for $ 431 million. Note 5— Transactions with Affiliates and Investments in Subsidiaries For a discussion of Hertz Holdings transactions with Hertz under the master loan, refer to Note 15, "Related Party Transactions," to the Notes to its consolidated financial statements in this 2021 Annual Report under the caption Item 8, "Financial Statements and Supplementary Data." For the year ended December 31, 2020, the negative balance in investments in subsidiaries, net in the accompanying parent-only balance sheet of Hertz Holdings reflects the $ 42 million stockholder's deficit attributable to Hertz. 174 Table of Contents SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES (In millions) Balance at Beginning of Period Additions Charged to Expense Translation Adjustments Deductions Balance at End of Period Receivables allowances: Year ended December 31, 2021 $ 46 $ 125 $ — $ ( 121 ) (1) $ 50 Year ended December 31, 2020 35 94 (2) — ( 83 ) (1)(2) 46 Year ended December 31, 2019 27 53 — ( 45 ) (1) 35 Tax valuation allowances: Year ended December 31, 2021 $ 651 $ 78 $ ( 39 ) $ — $ 690 Year ended December 31, 2020 396 218 37 — 651 Year ended December 31, 2019 318 75 3 — 396 (1) Amounts written off, net of recoveries. (2) Activity includes allowances associated with Donlen which have been classified as held for sale as of December 31, 2020, as disclosed in Note 3, "Divestitures," to the notes to the Company's consolidated financial statements in this 2021 Annual Report under the caption Item 8, "Financial Statements and Supplementary Data." 175 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. ITEM 9A. CONTROLS AND PROCEDURES HERTZ GLOBAL HOLDINGS, INC. Evaluation of Disclosure Controls and Procedures Our senior management has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined under Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this 2021 Annual Report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of December 31, 2021, the Company’s disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure. Management’s Report on Internal Control over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Internal control over financial reporting has inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting can also be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements will not be prevented or detected on a timely basis by internal control over financial reporting. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this inherent risk. Management, including our Chief Executive Officer and our Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2021. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control - Integrated Framework (2013). Based on this assessment, management has concluded that we did maintain effective internal control over financial reporting as of December 31, 2021. The effectiveness of our internal control over financial reporting as of December 31, 2021 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report, which appears in this 2021 Annual Report. Changes in Internal Control over Financial Reporting Remediation of Previously Reported Material Weakness As previously disclosed in Part II Item 9A Controls and Procedures in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, we identified a material weakness associated with information technology general controls (“ITGCs”), specifically logical security controls over financially significant system applications. 176 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES ITEM 9A. CONTROLS AND PROCEDURES (Continued) During 2021, we implemented our previously disclosed remediation plan, which included completing the following remediation actions: • Performed an assessment of the IT organization to determine the sufficiency of resources with the appropriate level of knowledge, experience and training commensurate with our ITGC internal controls and executed all recommendations arising from the assessment. • Clarified and communicated roles for ITGC control owners and Sarbanes-Oxley (SOX) project management team through confirming the identification of each control owner, reinforcing requirements and creating a culture of accountability to enforce the compliance of ITGCs. • Administered enhanced re-trainings for ITGC control owners regarding risks, controls and maintaining adequate evidence. • Improved existing de-provisioning controls for timely execution of removal of terminated user access. • Enhanced monitoring of ITGC design and operational effectiveness through implementation of monthly remediation progress status dashboards with the Chief Information Officer and Chief Financial Officer, which was then summarized quarterly to the Audit Committee of the Board of Directors. During the fourth quarter ended December 31, 2021, we completed the necessary testing to conclude that the material weakness was remediated as of December 31, 2021. Except for the material weakness remediation described above, there were no changes in our internal control over financial reporting that occurred during the three months ended December 31, 2021, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. HERTZ CORPORATION Evaluation of Disclosure Controls and Procedures Our senior management has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined under Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this 2021 Annual Report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of December 31, 2021, the Company’s disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure. Management’s Report on Internal Control over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Internal control over financial reporting has inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting can also be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements will not be prevented or detected on a timely basis by internal control over financial reporting. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this inherent risk. Management, including our Chief Executive Officer and our Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2021. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control - Integrated Framework (2013). Based on this assessment, management has concluded that we did maintain effective internal control over financial reporting as of December 31, 2021. 177 Table of Contents HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES THE HERTZ CORPORATION AND SUBSIDIARIES