Herc Holdings Inc (HRI) 2010 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to Hertz Global Holdings first quarter 2010 earnings call. The Company has asked me to remind you that certain statements made on this call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements are not guarantees of performance and by their nature are subject to inherent uncertainties. Actual results may differ materially and any forward-looking information relayed on this call speaks only as of this date and the Company undertakes no obligation to update that information to reflect changed circumstances.

Additional information concerning these statements is contained in the Company's press release regarding its first-quarter results issued this morning and in the risk factors and forward-looking statements section of the Company's 2009 Form 10-K. This filing is available from the SEC, the Hertz website or the Company's investor relations department.

I would like to remind you that today's call is being recorded by the Company and is also being made available for replay starting Wednesday at 9 AM Eastern time and running through May 10, 2010. I would now like to turn the call over to our host, Leslie Hunziker, please go ahead.

Good morning and welcome to Hertz Global Holdings 2010 first-quarter conference call. You should all have our press release and associated financial information. We also have provided slides to accompany our conference call which can be accessed on our website at www.hertz.com\investorrelations.

In a minute, I will turn the call over to Mark Frissora, Hertz's Chairman and CEO. Also speaking today is Elyse Douglas, our Chief Financial Officer. In addition, we have Scott Sider, Executive Vice President and President of Vehicle Rental and Leasing, the Americas; Michel Taride, Executive Vice President and President, Hertz International; and Gerry Plescia, Executive Vice President and President of Hertz Equipment Rental. They will be on hand for the Q&A session.

Today we will use certain non-GAAP financial measures, all of which are reconciled with GAAP numbers in our press release and at the back of the slide presentation, both of which are posted on our website. We believe that our profitability and performance is better demonstrated using these non-GAAP metrics.

Our call today focuses on Hertz Global Holdings Inc., the publicly traded company. Results for the Hertz Corporation differ only slightly as explained in our press release. Now I'll turn the call over to Mark Frissora.

Thanks, Lesley; and good morning, everyone. Thanks for joining us. I'm sure all of you have seen our announcement this morning on our acquisition of Dollar Thrifty. I will talk more about it later in the call, but let me say briefly that this is a very important and strategic transaction for us in that it fills a gap in our product portfolio with a strong mid-tier value offering.

Having Dollar Thrifty under the Hertz family of brands, products and services will allow us to expand our global presence, boost our market position and realize the financial benefits from the substantial synergies between the two companies. Now let's take a quick look at the latest quarter on slide 6. And then we'll get into details of the acquisition later on in the presentation today.

2010 is off to a very promising start. In the US, rental car volumes are exceeding our expectations with strong advanced bookings through the peak summer season. Similarly, Europe's reservations for the summer months are robust as well.

And while Europe rental got off to a slow start, today the rebound we're seeing is well ahead of where we thought it would be at this point in the year. So the momentum in rental car across the globe is very encouraging.

We are cautiously optimistic about the return of demand for rental equipment. In the first quarter we benefited from the industrial market's early recovery in select regions of the world. In terms of worldwide volume, from the trough to peak between this January and April, units on rent are up 14.5% and utilization has increased over the same period by 790 basis points.

This brought a bit of good news to the challenging market conditions for equipment rental overall. Seasonal weakness and a tough year-over-year comp were our hurdles we were expecting. But the year-over-year revenue increase in our industrial business exceeded our expectations. The only concern we have going forward is whether pricing in the equipment rental market will improve at the same rate as volume.

In addition to the tough conditions in the equipment rental market for the first quarter, we had two unusual hurdles to overcome. The first was the severe winter weather that affected all of our businesses.

We incurred lost revenue in the US and in Europe due to rental cancellations resulting from the severe and erratic storms. We also had incremental costs related to snow removal and rental car utilization was impacted by the volume and eruption as well as free redistribution due to an increase in one-way rentals and reduced car sales when some US auctions in the Northeast were negatively impacted by the harsh weather.

In February, we experienced a second disruption when Toyota issued a recall on its most popular vehicles. Ultimately the recall turned out to be only a two-week event and we have already been fully compensated for lost sales and their associated costs.

However, utilization in US suffered because in the end, we had to ground nearly 13% of our fleet while waiting for details on the specifications of the recall and the resulting repair. When we first learned about the recall, we had no idea how long our fleet would be out of service, so we immediately stopped deleting older cars and to a smaller extent, took early delivery of future orders for some of our other OEM suppliers.

This put us about a month behind plan with fleet sales in the quarter. The good news is that here at the end of April right now, we have the fleet right sized to demand which puts us in great shape heading into the peak summer months.

Overall, I am really pleased with our financial performance at the beginning of the year. When you exclude the impact of weather conditions and the supplier recall, even our utilization was in line.

While I'm on the topic of fleet efficiency, let me take this opportunity on slide seven to dispel any notion you may have that we are over-fleeting based on inflated demand expectations and therefore jeopardizing pricing for the sake of share. That is just nonsense.

In the US, we have improved fleet efficiency since 2007. In '07, it was 77.82%; in '08, it was 77.7; in '09, it was 79.63%. And while the first quarter of 2010 was impacted by unusual situations outside of our control, efficiency so far for April is slightly ahead of last year's level in the similar period. You just can't deliver high utilization if you are over-fleeted.

It's important to remember that Hertz is a highly diversified growth company, executing a much different model than our competitors. With that in mind, you will understand that we are fleeting appropriately to capture the recovering base demand, including the strong return of the corporate traveler as well as our own expansion into the leisure economy market where we have 25 new Advantage locations under a year old with plans to open an additional 25 locations this year; the off-airport sector where we are in the process of opening hundreds of locations to service insurance replacement accounts better and the car sharing market where we are ramping up promotions to convert members into users.

Our fleet growth for 2010 is primarily directed at these opportunities, as we are only planning for modest growth in the airport leisure segment. The bottom line on pricing is that Hertz commands a premium price for our premium service. We will institute price increases as frequently as appropriate. That is when demand is rising and the market is supportive.

On the next slide, in the US in early January, we raised prices on February [forward] rentals. Unfortunately these met with competitive resistance and had to be rolled back.

In early April, we tried again with a price increase nationally for airport leisure rentals beginning in June. This increase has been sustainable because of the strong summer demand. Finally, just last week, we raised prices again in about 50% of the US locations.

Coming out of the recession, we are starting to gather momentum and transaction days and price are equal drivers of growth strategy across every business. As I told you, our model is differentiated from the rest of the market.

We have six lines of business which individually have total revenues ranging from $0.5 billion up to $1.8 billion. And each business has a different cadence and its own growth characteristics.

On slide nine, we have illustrated the expanse of our opportunities in these businesses even if we only get back to the 2007 peak. For example, total rental car revenues in the US from commercial accounts at the airport is down $337 million below 2007 levels.

That means that at the end of 2009, we still had 33% more growth to capture before we are back to peak revenue levels in this business. The good news is we are on our way.

You can see that commercial airport revenues improved 7% in the first quarter and that includes a 17% volume increase in March. Similarly on a consolidated basis, you can see there's a huge amount of growth opportunity to capitalize on over the next couple of years. It is significant. Now let's get into specifics for the first quarter starting on slide 10.

On Q1 consolidation, total company consolidated revenues was up 6.1% in the latest three months driven by another strong performance in US rental car as the business traveler returned. The increase in rental car demand more than offset a 15% revenue decline in equipment rental.

Our worldwide rent-a-car customer satisfaction scores improved nearly 12% in the first quarter as we continued to refresh our fleet, capitalize on our richer mix of car classes and improved overall service through lean Six Sigma process initiatives which are currently being rolled out across our major airport locations in the US and Europe.

We took actions in the first quarter to generate cost savings of $99 million or 33% of our total 2010 targeted savings. You can see our progress on the next slide. Worldwide rental car net depreciation per unit improved 12% due to improved fleet management practices on both the buy and sell side.

All of this helped drive our consolidated adjusted pre-tax margin 330 basis points higher and our consolidated corporate EBITDA margin, 140 basis points higher than last year. As I said, the US rental car business continues to be the catalyst behind the Company's progress as seen.

Switching to US rent-a-car, in the US, total revenues were up 9.9% in the quarter compared with last year. Other growth, you can see on slide 12 that airport contributed 45%, Advantage accounted for 33% of the increase, off-airport added another 21.5% of that increase.

Ancillary revenues which is included in each business unit's revenue also made a large contribution. Commercial rentals on airport which are made up of large corporate customers and small business account programs delivered a 7.4% revenue increase over last year on escalating demand for our large business accounts.

Our small business accounts which are highly contributory are not yet seeing the same pace of recovery as their Fortune 500 counterparts. But as that business ramps up, it will incrementally benefit both volume and pricing.

On slide 13, revenue per day or RPD which encompasses both price and mix was up over the prior year. For our Hertz airport operations excluding Advantage, overall RPD was up 1.2% on 3.1% higher transaction days. In the airport leisure segment, we increase RPD 3.4% despite no change in volume year over year.

On the flip side, commercial airport RPD declined 1.4% while its transaction days were up 7.1%. Switching to off-airport, RPD was up 1.9% on 6.5% higher volumes, driven by both the leisure and vehicle replacement businesses.

On the next slide, US fleet efficiency fell 320 basis points in the first quarter. In addition to the Toyota recall and severe weather conditions, the increase in short-term corporate rentals accounted for the balance of the decline. As I mentioned, utilization is now back on track and up year over year.

Monthly depreciation per vehicle was 14.4% lower in the 2009 first quarter's level driven by strategic fleet management actions including lower acquisition costs. US rental car employee productivity improved by 3.7%.

Our net promoter score rose 790 basis points in the US or 18%, reflecting the appeal of a newer fleet and the addition of popular new car classes. And on the used car front, residual values are significantly improved from last year when we experienced some of the lowest levels in our history.

The US rental car adjusted pretax margin was up 410 basis points in the first quarter. For corporate EBITDA, we achieved a 380 basis point margin improvement benefiting from better-than-expected US leisure demand, recovering corporate volumes and disciplined cost management.

Switching to Europe now. The European rental car business on slide 15 got off to a slow start this year due to adverse weather conditions and an air traffic controller strike in France.

And a continued revenue decline in our truck and van business there which typically follows lagging commercial and industrial trends. But things are getting better.

Revenue per transaction was up nearly 2% while direct operating expenses were down about 2% and monthly net depreciation per vehicle favorably declined 10% due to stabilizing residual values across the continent and lower acquisition costs for the 2010 model year vehicles.

Europe's suggested pretax loss improved 25.6% from last year on a nearly 1% decline in revenue. The recovery in select European regions is happening earlier than we had anticipated.

We saw a surprising upturn in both price and volume beginning in March for our corporate and leisure rentals. In fact, March was the first month in 18 consecutive months that we reported rental rate revenue growth in Europe.

We will have to monitor this against the travel interruption caused by the volcanic activity in Iceland. But based on the [advanced reservation deal], we believe a more favorable trend is underway in Europe.

On the next slide for equipment rental, in the first quarter rental volume was down 14.4% from last year. But sequentially, year over year volumes declined at a much slower pace than the 2009 fourth quarter's 24.2% decline.

The positive catalyst came from momentum in the industrial sector, primarily from new petrochem projects in Canada after oil topped $80 per barrel and from an infrastructure project in the Southeastern United States. For all of North America, industrial volumes were positive year over year in the first quarter and pricing was down only about 5%.

Worldwide our pricing in the latest three months was down 8%. I'll note that the year-over-year pricing comp was much tougher for Hertz than for some of our competitors as our pricing was down only 4.2% in last year's first quarter.

Our competitors -- one of our competitors had a 11.5% decline in the first quarter of 2009. In the face of the downturn for the last 10 months, we have been tightening Hertz's cost structure by implementing long-term process improvements, rationalizing locations and deferring major maintenance projects for our underutilized fleet. Now we're working to get our equipment overhauled or tuned up in time to capture the early demands in the markets we serve.

This requires more substantial investments in maintenance that until recently had been deferred. In the quarter, maintenance costs were equal to last year despite a 15% revenue decline.

These factors drove equipment rental's worldwide EBITDA margin down to 33.8%, still in line with our expectations. By the second half of the year, we expect corporate EBITDA margins to return to last year's 40% plus levels.

Based on our positive first-quarter volume trajectory which continued into April, we believe that the first quarter is the bottom of the seasonal and cyclical trough and expect to continue to see sequential monthly improvements going forward.

Switching now to revenue opportunities. Our diversification of businesses, markets and products is a competitive advantage for Hertz. We are extending our Hertz umbrella brand across a range of services, allowing us to sell more products to existing customers and reach out to new markets.

Products that Connect by Hertz, off-airport insurance replacement and multi-month rental offering will help smooth out the seasonality of our revenue and new brands like Advantage appeal to the most price conscious segment of travelers were we currently have only a limited share.

In support of the Hertz Classic brand, we launched a new national TV campaign in the middle of March called Journey On, from which we have received very positive feedback and gotten thousands of online reviews. The advertising campaign is next scheduled to launch in France in May in time for the holiday summer booking season.

Now let me give you an update on slide 17 on a few of our growth initiatives before I turn the call over to Elyse for a detailed financial review. For the urban hourly renters, we continue to expand Connect by Hertz, adding five new universities to our car sharing program in the first quarter, including the University of Kentucky, bringing the total to 38 schools.

Our Connect membership now exceeds 15,000 subscribers. For the value conscious traveler, our US prepaid rental program continued to build momentum, generating $20.7 million of revenue in the first quarter.

Since launching in December 2008, this program has delivered nearly $103 million of revenue. Our Advantage economy leisure offering which we acquired in April 2009 has surpassed our expectations for market share, margin and volume.

In the first quarter, we are on pace for an annual revenue run rate of nearly $150 million. Today Advantage is profitable with 25 airport locations covering major US leisure destinations including the one recently opened in Texas.

The brand already has 1.3% of the US airport revenue and we have plans to open an additional 25 airport locations by year end. In the first quarter, demand for Advantage rentals and its ancillary products were strong, especially in advance of Easter.

In the $10 billion off-airport sector, we opened up 100 net new locations in the first quarter, primarily collocating with body shops, hotels and repair facilities to serve the needs of insurance replacement customers.

Off-airport rentals which also include leisure and local business rentals and monthly or multi-month rentals are typically priced lower than airport rentals due to the higher utilization achieved but they also have a much lower cost structure than airport rentals, enabling the off-airport business to generate equally profitable growth in mature markets. Off-airport leisure and business demand continues at a stable pace as airlines cut capacity and consumers opt to drive to their leisure or local business destinations.

Finally, total US ancillary revenue from upselling car classes and marketing additional products like insurance, refueling, child seats, ski racks and DVD players increased 23% year over year in the first quarter as both airport and off-airport locations focus on this revitalized program. We are investing in our employees, innovating our products offering and refreshing our fleet. As a result, our service scores are climbing. We're successfully executing a growth plan that's positioning us to deliver even more for our customers. With that, I will turn it over to Elyse for a more detailed financial review.

Thanks, Mark, and good morning everyone. Let me begin on slide 18. We are very pleased with the first quarter financial performance. The recovery that began in US rental car late last year continues to build momentum and the turnaround is evidenced in the results.

On a consolidated basis, we generated $1.7 billion of revenue, up 6% or a $96 million increase over the same period last year. As Mark mentioned, worldwide rental car growth more than offset the continued revenue decline in Worldwide Hertz. I will talk more about revenue growth drivers when I discuss results by business units in just a minute.

On a GAAP pretax and an adjusted pretax basis, we were able to reduce last year's losses by 24.9% and 40.7% respectively. The improvement was driven by reductions in depreciation expense and SG&A which were down as a percent of revenue on a GAAP basis by 370 and 50 basis points respectively. Direct operating expenses remained flat as a percent of sales year over year in spite of equipment rentals revenue decline.

Adjusted EPS improved 52% in the quarter, reflecting a $0.12 per share loss in the latest period compared with a $0.25 per share loss in the first quarter of 2009. The improvement was driven by higher revenue, efficiency savings, lower depreciation costs and reduced restructuring expenses.

Diluted earnings per share on a GAAP basis improved by 27% from a loss of $0.51 to a loss of $0.37 per share last year. The strength in US rental car operations together with the stabilization of European rental car helped to offset the challenging quarter experienced by our worldwide equipment rental business as it came up against its toughest year-over-year comps since the recession began.

Now let me give you some more detail on the performance trends by business unit. On slide 19, our worldwide car rental revenue for the quarter of $1.4 billion was up 10.8% year over year or 7% including the benefits of foreign currency.

US revenue growth was up close to 10% while Europe was essentially flat. Other international markets saw revenue growth particularly Brazil, Australia and New Zealand which were up 19%, 4% and 8%, respectively including currency effects.

Worldwide Rent-a-Car generated corporate EBITDA $54.4 million within the quarter which is seasonally the lowest volume quarter for the Company. The reported earnings represent a $65.3 million year over year improvement.

This improvement was driven by revenue growth, lower per unit depreciation per month and the realization of cost efficiencies, all contributing to the 450 basis points adjusted pretax margin improvement experienced during the quarter. Turning to worldwide rental car fleet efficiency on slide 20 as Mark mentioned, the Toyota recall and the unusually harsh weather had a negative effect on fleet utilization in the latest quarter.

In the US in addition to the recall and weather, the return of the corporate traveler whose average rental transaction length is only two to three days had an adverse effect on fleet utilization. You will remember that corporate travel volumes were down significantly in 2009 while off-airport volumes which have an average transaction length of six days were growing.

In the 2010 first quarter, 32% of our domestic [risk car] deletions were sold through alternative channels and not through traditional wholesale auctions. As Mark mentioned, this typically reduces cost of sales, improves sale price and keeps sale cars on rent longer.

Now, let's take a look, a close look at rental cars fleet cost measured as monthly net fleet depreciation per unit. Our year-over-year worldwide car costs were down 12% in the latest quarter.

In the US, we reduced car costs on a per unit basis by 14.4% from a year earlier. As you can see on slide 21, our domestic monthly depreciation costs have been decreasing sequentially since the fourth quarter of 2008 when used car residuals were at historic lows.

The sequential quarterly improvements in car costs are credited to our execution of disciplined fleet sourcing strategies, better portfolio mix and continued strength in the domestic used car market. We expect lower year-over-year depreciation for the full year 2010 as we add better priced cars into our fleet and continue to optimize domestic mix to serve a variety of customer preferences.

In Europe monthly depreciation per car also continued to improve in the first quarter, falling 9.6% from 2009's first quarter on a constant dollar basis. And just like US rental car, our purchasing terms have improved with our latest round of fleet negotiations, helping to counter the stabilizing but still low residual values across the continent. For the full year, we expect US and European car costs to be down 5 to 6% and 7%, respectively.

On a worldwide basis, our fleet was 66% risk at the end of the first quarter with an average fleet age of 8.2 months, younger by almost two months versus last year. At quarter end, risk cars in our US fleet also represented 66% of the total domestic fleet and the average age of the overall US fleet was 7.7 months compared with 10.2 months in the first quarter of 2009.

We continued to sell our US risk cars at approximately 20.5 months and bringing in new cars in order to freshen up our fleet to enhance the customer experience. In Europe, we're also refreshing the fleet with a more appealing mix of cars.

Now let's turn to the results of our equipment rental business on slides 22 and 23. Hertz first-quarter revenue was $237 million, a decrease of 15.2% year over year.

Volume declined 14.4% in the latest quarter with pricing down 8% versus down 4.2% in the 2009 first quarter. Industry fleet capacity remains high, keeping pricing pressure on the entire industry.

In the quarter, we reduced the equipment rentals business's direct operating and SG&A cost by 6% in the quarter. However, the pace of revenue decline and the increased maintenance cost on an older fleet drove corporate EBITDA margins below 40%.

However, we do see demand for industrial and construction equipment beginning to pick up into the second quarter. This is causing us to further increase maintenance spending in order to get underutilized fleet ready for rent as Mark indicated

You can see that our equipment rental fleet on an average acquisition cost basis was down 6.2% year over year. Moving to slide 24, first-quarter equipment fleet purchases were $31.9 million versus disposals on a first-cost basis of $88.8 million. This compares to first-quarter 2009 where additions were $31.9 million and disposals were $220 million on a first cost basis.

And while there was some improvement in equipment residual values, prices still remain unattractive. Therefore we currently expect to sell limited amounts of equipment at auction this year.

At March 31, our worldwide equipment fleet age was 47 months, a two-month increase from 2009 year-end. Now let's move on to slide 25 for an update on our $1.7 billion international refinancing.

We expect to complete the remaining fleet refinancing sometime this summer. In Europe where the bulk of the refinancing will take place, we are currently negotiating three related financings. A secured revolving credit facility, amending and extending our existing fleet securitization facility and a bond offering. We are in the process of finalizing the terms and conditions of these transactions and expect to close in June.

In Australia, we expect to utilize securitization or other secured financing as our primary source of fleet financing and to continue to opportunistically access operating and capital lease financing that is locally available.

Finally we are going to upsize our Brazilian facility through a syndicated loan process with existing and new lenders. We continue to be confident that these refinancings will be in place over the course of the summer.

We also feel very comfortable with the progress we have made toward completing this refinancing and we will be providing additional details as each transaction closes. Net interest expense was $179 million in the quarter, up $15.7 million over last year, driven by $11.5 million of interest on our convertible debt that was issued in the second quarter last year. This is on slide 26.

For the full year, there's no change in our estimates. We still expect 2010 interest expense to increase by $90 million to $110 million over the 2009 levels based on the fleet debt refinancing that took place in the US in 2009 and the upcoming international refinancing.

Restructuring and restructuring related charges in the latest quarter were $16 million of which $15.3 million was cash compared with $38.4 million in restructuring and related charges in the same period last year. These charges mainly relate to employee reductions, facility closing costs and consulting fees.

We still expect restructuring and restructuring related charges of no more than $50 million for 2010. This excludes any impact from the acquisition.

For the first quarter, the GAAP effective income tax rate was 7%, cash income taxes paid in the quarter were $24.6 million. The GAAP effective income tax rate is lower than the statutory tax rate primarily due to losses in certain non-US jurisdictions for which no tax benefit is realized.

On an adjusted basis, we use a rate of 34% which is a normalized rate over the long-term. We estimate cash taxes to be 40 to $47 million for the full year of 2010. Now if you turn to slide 27, you will see that we comfortably met both of our quarterly corporate financial covenants.

In fact, our corporate consolidated leverage ratio was 3.71 times, well below the maximum 4.75 times allowed and corporate interest coverage ratio was 3.29 times, well above the minimum requirement of 2.25 times. As a reminder, the convertible debt issued under Hertz Global Holdings in May is not counted in these covenant calculations due to the covenants only applied to the Hertz Corporation results.

On the next slide, let's take a look at cash flow. Cash flow from operations in the quarter was $301.2 million, a 63.3% improvement over the first quarter of 2009, reflecting improving business trends.

The first quarter's levered cash flow which is cash available to pay down corporate debt was negative $148.7 million versus negative $36.7 million in 2009, reflecting the impact of increased investment in fleet. As you are aware, at this time in 2009, we were reducing fleet levels and extending the average age of the fleet.

The fleeting patterns this year were significantly different as demand is building and we are refreshing our fleet with 2010 model year cars and enhancing our mix of higher end vehicles. And last year, Hertz was also de-fleeting aggressively as demand for equipment dropped off precipitously. We slowed the pace of equipment sales to roughly half the level of deletion we had in the 2009 first-quarter sales as used equipment residuals remain low.

I should also note that a more sizable portion of our US fleet is funded by our recently refinanced domestic fleet debt which lowered our US advance rate by 7 percentage points year over year, requiring a higher use of corporate cash flow to acquire fleet. In the second quarter, we also expect levered cash flow to be negative as we add rental car fleet to meet peak summer demand.

But those seasonal investments will ultimately provide positive cash flow when we de-fleet coming out of the peak to adjust for the lower fourth-quarter demand. We ended the quarter with a total net corporate debt of $3.8 billion, total net fleet debt of $5.6 billion and $800.7 million of unrestricted cash on our balance sheet. At the end of the quarter, we had $1.7 billion of corporate liquidity available to fund our growth initiatives. With that, I will turn it back to Mark.

Thanks, Elyse. Let's move to slide 29 if we can. The strength of the US rental car business continues to dominate our consolidated financial improvement and in the first quarter, corporate rental car transactions were the biggest contributor to the progress we delivered year over year.

Companies are now saying that their cuts in travel spending are behind them which supports the continuation of this favorable trend. The outlook for leisure travel in the peak season gets better each week with reservations for the third quarter currently up double-digit percentages globally.

As we look ahead, right now volume represents the biggest upside in the 2010 guidance we issued in February. While conditions are still very uncertain as they relate to rental car and equipment rental pricing and Europe is just recovering from the turbulence in the airline industry sparked by Iceland's recent volcanic eruption, volumes continue to gain momentum.

In rental car, even with the recent price increases in the US and Europe, the reservation build continues to be strong. Additionally the return of the commercial customers supports upside volume opportunities worldwide.

In fact, in the US in March, commercial airport volumes were up 17% from a year earlier and March 2010 also marks the first time since July 2008 that both large corporate accounts and small business accounts reported year-over-year monthly revenue growth. In the equipment rental business, the demand uptick in the industrial markets helped in part by initial stimulus spending encourages us that the trajectory out of the trough could be a bit better than we expected. Industry pricing across both businesses however is still wild card but I can tell you with certainty that we will be efficiently fleeted and as always, we will capitalize on opportunities to improve pricing.

In addition to the volume acceleration, strong fleet management execution on both the buy and sell side is driving depreciation lower, outpacing our earlier projections for the year. Our strategy to capture a better residual and improve utilization by keeping our cars on rent right up until the point of sale is generating traction as we pursue alternative used car sales channels in the US.

One of our new products is our Rent-to-Buy offering. We now offer our rental cars for sale direct to consumers in 19 states across the country. On average, since the product launch, we have been able to get a much higher price per car than what we would normally get at auction. And our cost of a direct to consumer sale is lower than an auction sale.

Since the end of 2009, the number of unique visitors to our website has increased 75%. So we're definitely building awareness. And we expect recognition and transactions through the site continue to grow as result of our recent partnership with Kelly Blue Book who will provide price comparisons to prospective customers directly from our website. So we're really stepping up our efforts to capture more retail car sales.

As a result of the higher than expected volumes and the declining depreciation cost as well as the early onset of an economic recovery in Europe, we are updating the guidance we put in place at the beginning of the year to reflect our optimism for the macro environment as well as a greater return on our strategic initiatives. This guidance however does not reflect any benefits from the acquisition.

On slide 30 for the year, we now project revenues to be between 7.5 and $7.7 billion. It's a higher revenue coupled with a substantial cost savings achieved in just the first quarter leads us to upwardly revise adjusted pretax guidance to between $290 million and $305 million which would be a 46% increase over 2009.

Our corporate EBITDA expectation is roughly 10% higher than that last year as we get more comfortable with the ease of the year-over-year equipment rental comparison in the second half and as the industrial project pipeline expands. Using 410 million shares for the full year, that would deliver earnings per diluted share between $0.43 and $0.45, a 48% improvement year over year.

I will remind you that in the second quarter last year, we took salary actions to sustain operations through the most challenging period of the recession. Now that those actions have been reversed, we'll have a tough comp year over year in the quarter, in the current quarter.

For the longer term, one of the things we think people should consider when they think about Hertz is the magnitude of the impact on consolidated profitability when the equipment rental business turns positive. The equipment rental business becomes an unrivaled competitive advantage for us at that point.

Annual adjusted pretax margins for equipment rental were 21% at our peak, higher than rental car margins. It has always been an accretive driver of earnings momentum and with our strong cost focus over the last two years, business segment diversification and global expansion; it should be able to produce even greater profit margins coming out of this cycle.

Now let's talk a little bit about the acquisition. Starting on slides four and five of the Dollar Thrifty deck, as you know on Sunday, we signed a definitive agreement under which Hertz will acquire Dollar Thrifty for $41 per share including assumed debt in a mix of cash and Hertz common stock.

Post acquisition, Hertz will be a $9.3 billion company with roughly 9800 locations on six contents worldwide. Our multi-brand US market share will expand from 19% today to 24% post deal, making us the second-largest rental car provider.

We are excited about the opportunity to further expand our customer reach. This is clearly a strategic acquisition and we believe Dollar Thrifty is an excellent fit for Hertz as you can see on slide six and slide seven. Together we will be able to compete even more effectively and efficiently against other multi-brand car rental companies, offering customers a full range of rental options between Hertz, Dollar, Thrifty and Advantage brands.

Financially on slide eight, we believe the deal is attractive as it's immediately accretive to earnings and structured to maintain Hertz's strong credit profile. We have identified at least $180 million of synergies already primarily in fleet, IT systems and procurement; enabling the combined company to operate at even a lower cost.

I will note that in our assumptions, we have not included any revenue synergies. But there are actually quite a lot of opportunities there. For example, the Thrifty brand in particular has a strong international presence which will help to accelerate our leisure value strategy in Europe and other international markets.

Additionally Dollar Thrifty has a presence off airport which will support our strategy to build our position in this growing market. Dollar Thrifty's services suppliers and customers complements Hertz's business and extends or ability to deliver compelling services to broader-based customers. With that, let's open it up to questions. Operator?

(Operator Instructions) Brian Johnson, Barclays Capital.

Yes, Mark, and Elyse, can you give us some sense of how you are seeing pricing playing out as we go into the summer season? In particular, what is going in the leisure market? Where do the price increases get you? When you say up, is it over sequentially or is it year over year? And then what is the tenor of discussions with corporations especially as they get their employees back on the road again?

So if we just look at leisure pricing per rent-a-car, in the US, again I mentioned in the script that we were able to pull an increase most recently for the summer season going forward in June. We are attempting to pull another increase now and hopeful that with the strong demand that we are seeing, that other rental company car companies will see that as well and the other fleets will stay tight enough that the industry could support a modest increase for the summer season.

In Europe, we are seeing much stronger dynamics on pricing where pricing in the summer season actually looks significantly stronger than what I just outlined in the US, again, due to very strong demand and tighter fleets in the Europe continent. On the equipment rental side, again on pricing, just you never know with equipment rental.

We expect that as volume continues to improve and as the year-over-year comp becomes easier, that pricing will get down to neutral. As it relates to business travel and our corporate customers, we continue to see pressure but nothing like we saw last year.

We were seeing 500 to 600 basis points reduction in pricing last year as we went through the recession. Things are still tough. We're certainly not at 500 or 600 basis points but 100 to 200 basis points kind of pressure we're seeing with larger customers. That's being offset though with smaller customers where we're able to see a little bit better increases there.

So net net, we're pretty neutral on the environment, the pricing environment in business. We think that the number kind of worst case scenario would be 100, 200 basis points down. Best case scenario, flat to up 100. Again, very difficult because we're renewing contracts every single month and every single contact, it's a different competitive set and different play.

And on the on-airport leisure, the price increases you're looking at for June, where would that get the year-over-year number to on the leisure side? The equivalent of what might go in slide 13?

I'm not going to forecast that. I mean you know, if you just look at a straight number, the reason I don't want to forecast because I don't know what capacitive response is going to be. We could change that five times in the next three days.

Pricing is extremely competitive and hour by hour, day by day. So for me to make a forecast, it's almost -- it's grounded in non-reality. I'll put it that way to you. But I will tell you this. If it's stuck and we've got everything we put forward so far, we get a 200 basis points improvement in the third quarter.

Okay (technical difficulty)

Himanshu Patel, JPMorgan.

A couple questions. First on the earnings. For the US rent-a-car commercial pricing, Mark, what quarter would you expect that to flip to positive?

I don't have an expectation like that. I wish I could tell you one. But the best -- I mean, I think the comps become extremely easy by the fourth quarter of this year.

So if I were to make a prediction that you can't count on because I don't know what competitors are going to do, I would make a prediction of fourth quarter. That's about the best way I could answer it, unfortunately.

Okay, I think URI noted that they had started seeing an uptick in used equipment prices. I'm wondering, what are you guys seeing out there on used prices for equipment?

I think similar things. I mean we would echo their remarks. In fact, if you look at cash proceeds on sales for us this quarter, they were $52 million. I think in documents from the other competitors, we saw that URI was $35 million and RSC was $27 million.

So we were at $52 million. We felt pretty good obviously and we're seeing that improve. So in terms of cash proceeds on sales, you'll see us continue to sell the right fleet as that market continues to be relatively better than it's been in the last year or so.

And just historically, is that how upturns in that market start?

Absolutely, absolutely, yes.

On the Dollar Thrifty announcement, have you guys had preliminary discussions with the FTC and where are they on sort of antitrust issues here?

We haven't had -- no official discussions with the FTC at this point. We feel pretty good about our position there. We have certainly been advised by a great team of lawyers and so has Dollar Thrifty.

And based on that review that we had, we feel highly confident the transaction will pass muster. So I think it's fair to say that we wouldn't embark on this transaction unless we had a high degree of confidence that this transaction would be approved.

Okay and then a couple of small technical questions. The Dollar Thrifty cash dividend, would that be a tax redistribution?

No, it's not.

It's not, okay. Then the $180 million of synergies. Two questions on that. How long would that take be realized?

And then can you help us just size that relative to sort of the synergies you were able to realize at Advantage? And I know orders of magnitude are totally different here, but how are you looking at it in terms of the volumes of the two business or the revenues of the two businesses?

Is this a synergy number that we should view as being very reasonable or conservative, aggressive relative to sort of what you had seen before an Advantage? How should we think of that number?

Well Advantage only has four airports. So there really wasn't any synergies there, right? We built Advantage from scratch.

We used to have about 50 or 60 airports but those have kind of wind -- they wound down over a two-year period before bankruptcy. So that's a very difficult comp.

I will tell you that we have done a lot of work integrating franchisees and other smaller rental car companies, feel highly confident that 180 will be realized. In fact, that's a conservative estimate.

And I bring it up because we have the numbers. We know what it is. It's not like it hasn't been identified. We have the concrete hard evidence, the 180 is a minimum that will deliver and that will be over about an 18 month period after closing.

So when the final deal closes, we would expect to get that in at least 18 months; provides about $0.30 per share, about 25% accretion rate; and again, very positive about that. I don't feel like there's really any issues around it at all. In fact, our number is much higher than that as we initially did our due diligence but we feel confident in giving you a number of 180.

Emily Shanks, Barclays Capital.

A quick question. Can you give us what Dollar Thrifty's cash balance was as of March 31?

No.

No, we can't.

They are going to give you that on their earnings call.

Okay, okay, I thought I would ask. And then are we (multiple speakers)

Nice try, Emily.

Thanks, I had to. Around the bond deal for the international financing, can we assume that's going to be a six-year bond deal out of a vehicle related bucket subsidiary?

That is what we are working toward right now.

And then just a question around off-airport generally. We've heard some of your competitors, it seems like are shuttering their storefronts and was just curious if you view that as an opportunity to take more market share or how you're viewing that as a growth channel right now?

This is on equipment rental, right?

No, I'm sorry; on the US car rental off-airport market.

I'm sorry. On off-airport, we feel like we're gaining share right now and we look at it as an opportunity for sure. Scott, you want to talk to that?

We see that as an opportunity. We have had really strong growth off-airport, middle double-digit growth and we see that continuing. With people closing locations, that's just more opportunity for us. We opened over 100 locations the first quarter. We are going to continue with the growth to the forecast through the end of the year.

Can we assume that along with the growth, it remains a profitable business?

The margins are improving significantly and it is a profitable business.

The margins actually this year, Emily, will double from last year. We made money, solid pretax margins last year kind of mid to high single digit margins last year and we expect the margins at a minimum to double. So we feel really good about the profitability of that business model and how it's contributory to our earnings.

Great, thanks. Good luck.

Rich Kwas, Wells Fargo Securities.

I guess on depreciation, I know you gave guidance for year-over-year declines of 5% roughly. I guess should we expect that sequentially to continue to come down as the year progresses?

Year over year it will go down. I don't know if I would say sequentially, no. I don't think we would say that. But we can say year over year it will continue to probably improve a little bit.

Okay and then, Mark, within the $180 million regarding the synergies with Dollar, could you break those out? I know you gave some detail in terms of what buckets they could fall in, but what's most significant? And then when you talk about potential revenue synergy, how are you thinking about that right now?

Well we didn't put any of those in as you know and I guess where we see the opportunity primarily on the revenue synergy side would be in Europe. Obviously in Europe, there's a big opportunity for leisure because we don't participate in a huge way there and yet there are markets and locations that Dollar Thrifty has and using that brand name, we could open up very low cost places if you will with the Thrifty brand and leverage that pretty quickly in Europe.

I don't want to give you a number at this point just because we're sizing the opportunity and will be expanding as soon as the deal is closed. We will be able to expand that footprint. But it's significant.

In terms of the synergies we have identified, it's fair to say that fleet ends up being a big area, probably in the neighborhood of $70 million kind of numbers. Fairly easy to get to those, that level. And these are on the conservative side.

Information technology, probably at least $20 million there. Then non-fleet procurement, supply chain, we have a fairly large supply chain network and by using the same pricing we have now with the additional buy that we have with Dollar Thrifty could yield as much as 25, $30 million. So those are the biggest buckets. I've got a lot of other one-offs that I won't go into. But those are the biggest drivers right now.

Okay, great. Thanks. And then just final question on equipment rental. I think in terms of the original guidance, you had talked about getting to flat revenue performance year over year in the middle of the year and potentially up because of easier comps.

Do you feel -- you clearly feel more positive on the industrial front. What about non-residential construction? Any improvement, things getting any better there because that is sich a big piece of your mix still?

It is and we still feel good about that. Gerry, would you offer us some comments?

Sure, that portion of our business is now down to 38% of the total business. So it is a little bit less. But we are seeing sequential improvement in commercial projects.

Still negative year over year but warehousing, hotels and the like are starting to move sequentially month over month. So the negatives will get less. That combined with our industrial strength and some more stimulus related water and sewer projects, transportation terminals; when you mix it all together, the non-residential will sequentially get better mixed with the industrial; we still feel good about the back half positive revenue return.

Chris Agnew, MKM Partners.

First question, a little bit of a bigger picture question. Can you give us a sense of where you think you are in terms of fleet management and continuing to improve depreciation per unit costs? I think you talked a little bit about vehicle remarketing initiatives, increasing your risk mix. And how does Does Dollar thrifty help you to that end?

So on fleet, if we talk about it -- I'll talk about it two different ways. I will frame it with and without Dollar Thrifty.

Without Dollar Thrifty, we continue to shift our mix in selling cars on a remarketing basis to nontraditional channels like auction. So our goal is to get to 50% of our sales that would be non-auction. So it'd be either dealer direct or through a rent-to-buy.

As that improves, we obviously drive our depreciation down per car because we are getting $300 more per car on average and that (inaudible) depreciation number. So we believe the guidance we have given so far is conservative and there is upside.

As we get better and better remarketing, there is upside in terms of our net depreciation per vehicle. In addition to that, the better utilization numbers that you are going to see versus the first quarter provide upside for us as well.

Then in terms of looking at Dollar Thrifty in combination, as you know, we peak midweek in terms of demand. Most of our larger cities will experience 90 to 93% plus utilization on Tuesday, Wednesdays and Thursdays. And then as the weekend approaches, we kind of ramp down to probably 70% roughly.

So we have some inefficiencies obviously on those airports. Dollar Thrifty's demand patterns really match ours so that they supplement and provide a synergy for us. When we combine the fleets of both companies, we treat them all the same and we will be able to pool that fleet on the weekend and that same fleet will end up using rentals on the weekend and provide a much higher utilization. We think our utilization could go up maybe as much as 300 basis points just by combining the two fleets.

Okay, thanks. A follow-up question to earlier. You said you have had no official discussions with the FTC. Have you opened a line of communication at all? And if there are, how are you going to address areas of potential market concentration? And how does it work in terms of seeking to reduce that or counter presence or things like that?

This is Jeff Zimmerman. We have not initiated any formal conversations with the FTC and we will do our formal filing in approximately mid May. The merger agreement that we entered into requires that we undertake certain divestiture risks if the agency were to determine that there was an unacceptable concentration.

Mark mentioned earlier and I want to reiterate that we have looked at this very, very carefully with capable counsel on both sides and remain very, very confident that this deal will be approved.

The merger agreement itself calls out for a carveout and that carveout we think provides adequate protection for deal certainty on this. It's a large number as the carveout in the merger agreement and again, that number provides very, very great deal of certainty. Feel confident that this is a deal that we will get done and the FTC will approve it.

Our market share position at a high level is very low compared to our competitors. I might mention to you that in the slide we showed you guys on Dollar Thrifty acquisition, the total rental market in the US, we have about a 20% share. Enterprise has about 53% share and Avis Budget I believe is number two at approximately 20 -- what is their share? 20%? I think it's more -- it's on the slide, let me just -- they are 20%. So post acquisition, we will be at 23% compared to Enterprise's 53%, compared to Avis Budget's 20%.

So we end up picking up a couple of share points against Avis and Enterprise still ends up being over twice our share of the total rental market. So we feel confident given the view of the market that we will be in good shape from an antitrust standpoint.

Excellent, thank you very much. Good luck.

John Healy, Northcoast Research.

Good morning and congrats on the results and the deal. I wanted to talk a little bit, Elyse, about kind of your longer-term view on the capital structure of the Company.

Obviously this deal would help you bring down the leverage ratio of the Company. Can you talk a little bit about kind of your goals there and how Dollar Thrifty may fold into Hertz and get you closer to those goals?

And the second part of that question, obviously the deal increases the percentage of business and profits on the rent-a-car side away from the equipment rental side even further. Your thoughts in terms of the long-term vision of Hertz and the portfolio of its business, how you see that maybe over the next cycle?

Sure, well obviously and I think we showed this to you on slide eight of the (inaudible) deck or the Dollar Thrifty deck that we provided, this deal at closing on a pro forma basis doesn't improve our overall leverage.

Obviously we're going to be looking at our liquidity, so we may actually some but this will clearly be credit positive to credit neutral at a minimum. So we've recently gone to the rating agencies and looked out over the next three years and we think we have a clear path to investment grade and that's clearly one of our objectives.

So we've got a number of initiatives in addition to the acquisition as well as just growth initiatives in our business and profit improvement that's going to drive a lower leverage over the next two years. So our goal is still to remain investment grade and we think we have a clear roadmap to get there.

With respect to our view of the portfolio, we constantly look at the portfolio and opportunities for us to potentially create shareholder value and we will continue to do that. So right now, we're happy with where the portfolio sits between rent-a-car and equipment rental but obviously if the right opportunity comes up to create shareholder value, we will certainly take a hard look at it.

And, Mark, with the strong performance out of rent-a-car this quarter in terms of both rates and volumes, could you get some perspective if you feel like you gained market share versus your peers in the first quarter and maybe how you feel Hertz's results maybe compared to the market results?

Yes, I think we definitely gained share. You can see that in the January data and the February data as well from the airport authority. So we know we gained share against our competitors. I guess in terms of how we stack up on growth versus our competitors, I think it would be very favorable and I think it will be driven by the fact that again, we have strong business rebound and that business rebound helped us.

But in addition to having we think the highest share of the Fortune 500 companies, we also have a couple other drivers. One is that off-airport growth that is very strong for us unlike our competitors and that is a big growth driver.

And the second thing that's very big for us is because we have a global network and we big corporate owned stores and locations in Europe, our inbound business which is in all sectors, it's inbound on both leisure and business, that business is a big chunk of our US rent-a-car revenues. It's about $700 million to $800 million a year and inbound is up significantly.

People are traveling more on inbound as well from Europe into the US and from US to Europe. And that piece is generating fairly large growth. And finally, Advantage as you know is up $29.6 million year over year.

So that new leisure brand is driving a lot of growth for us as well. These are all things that are new for Hertz that our competitors arguably don't have some of those growth drivers that are helping us differentiate ourselves.

Okay and then lastly a question, Mark; kind of a bigger picture one as well. Obviously there's always been discussion that this industry would consolidate even further to the three players over time. I was just hoping to get some color from you on why now and kind of what propelled the deals I guess to come to a head at this point?

I think we reported that we started this round of discussions probably in November of last year and it's fair to say that those discussions evolve as the stock price and earnings evolve. So we felt that it was a good opportunity for both companies to get together at this time when there has been a lot of value creation on Dollar Thrifty's side.

When we look at continued future value creation, it would be enhanced by partnering with Hertz because we provide basically an awful lot of systems support and investment that's already been made in our Company that they would have to make and then of course the synergies of the two companies combined, because they have such a good fit in each airport, where our weakness is on leisure is their strength. That combination really helps us be a better player in all segments of the leisure market, whether it's midrange, the Spartan traveler or what we call the high-end leisure market where Hertz Classic brand plays best.

So it just really fits all of those and it makes us feel good that now is the right time at the industry's returning. There's so much upside. As you know on the slide I presented on the peak to trough on all of our segments, there's just tremendous upside right now. And what better time to do a merger when the industry conditions are becoming favorable and have been favorable for a little bit of time. So we thought it was the right time given the marketplace conditions and given the fact that Dollar Thrifty's journey -- both companies could really benefit from having each other's help and achieving a lower cost position in the overall industry by partnering together.

Okay. Thank you, guys.

Sachin Shah, Capstone Global.

Just to clarify some of the regulatory issues, so what regulatory approvals are needed to complete the deal?

The FTC will review the deal for antitrust purposes. We will also undergo a similar review by Canadian authorities. We will initiate that process as I mentioned earlier in mid-May.

We cannot predict with any certainty how long it will take, but we would expect that this process would be concluded no later than the early part of Q4 and we would move to closing at that point in time.

Okay, so you expect the closing of the deal sometime in the fourth quarter of this year, calendar year?

Yes, it could be sooner than that. It could be a little later. We think most likely somewhere in the fourth quarter. I think that's the best way to say it.

Dealing with the FTC, it's a variable process depending on what the issues are etc. But sometimes these processes go very quickly if they don't offer a review and we would hope that would happen but if it doesn't happen, and it's more longer what I call a review process, typically it's fair to say that could be five to six months, four to six months, in that range.

Four to six months to completion from now.

Correct.

Just one more question about the synergies. You mentioned frequently on the call $180 million of synergies. You also mentioned that it could be slightly higher and then you also mentioned that there are significant revenue synergies.

So I'm just trying to understand as a numeric amount what number should we reference because it seems like 180 is about 7.5% of approximately the deal value. It seems that it could actually be in the 200s, if not more.

I think the deal value and the synergies related to the deal value are actually fairly high. I studied all the deals over the last couple of years, having synergies of 180 on a deal value of $1.2 billion (multiple speakers) as a percent of revenues is pretty high if you estimate it as a percent of revenue.

I'm actually looking at enterprise value. I'm just trying to understand -- it's already high. I'm in agreement with you. But it seems that you're understating the synergy amount. I'm just trying to understand you know quantitatively how much that is.

We're very consistent in the way we try to talk to investors and we always want to get give investors a number they can count on. So certainly when it comes to cost take-out and understanding that,we have a core competency of that at Hertz now that has been developed over the last four years.

We feel really good about our ability to be efficient and together with the Dollar Thrifty teams, we have worked on these synergies and feel very confident in that number. If I go over that number, then confidence starts to dwindle.

I want to always be able to hit the number and overdeliver on it. So that's why I said it's conservative. In terms of revenue synergies, again those are unknown. I wouldn't want to give you those until we finally get a much better forecasting process in place after working with Dollar Thrifty and their franchisees around the world to see where the opportunity is there.

Okay, just one last question. The special dividend is expected to be paid before the deal is closed. Any timing on the special dividend payout?

It will be pretty much simultaneous with the close, right before.

Okay. Thank you. Good day.

[JJ Bernet], Citadel.

Given how attractive this deal is for Hertz and the auto rental industry in general, can you please tell us how much consideration was given to a transaction involving a larger component of stock, so that Dollar Thrifty shareholders may participate more fully in value created by this consolidation?

It was determined basically off of our financing requirements. So just like we have shareholders and we also have banks, we looked at the mix as being optimal for our credit profile and at the same time, providing value and upside to future shareholders as well.

So we thought it was the appropriate mix in terms of discussions. I gave my best answer. I can't talk about confidential discussions we had, whether it be at the board level or otherwise. But we feel that this was the best financing I guess we can come up with and yet preserves some value for shareholders and Dollar Thrifty on the upside.

And the reason for not providing more equity capital? I can't imagine the banks would've been averse to that kind of structure and where it was done with a larger component of equity involved, particularly given how well the stocks -- the deal was being received today. This looks like you're paying something along the lines of three times proforma EBITDA for Dollar Thrifty which seems like a complete steal.

First of all, that's not true. I don't even have a three number on any banker's statement on either side.

Well let's do it this way. You take the midpoint of the guidance that Dollar Thrifty has provided and we will get a sense of what their numbers are over the next few weeks and you take a look at the $180 million which is a number that you put out in terms of operating synergies and you look at the enterprise value of Dollar Thrifty which I believe even on this transaction is about $1 billion of enterprise value. If you run the math and just do one number divided by the other, I think you come up with something that is in the low threes and those are using your numbers.

Hey, if you want to go off the call -- I totally disagree with you and I'll just take it off the call (multiple speakers)

Okay and I'm more than happy to express my views down the road as well. Thank you.

You can express your views all you want. I'm just saying if you want to discuss the details of the valuation of it, I would be happy to go off-line. I don't think (multiple speakers)

I appreciate that. I am just using numbers you've given us and that Dollar Thrifty has given us. So unless there is a change in what Dollar has said, I presume these numbers and the math I have done is absolutely 100% correct.

And my numbers are absolutely 100% correct as well and I can go over them with you on the call right now.

Okay.

So we can agree to disagree on it and I will use methodology that's used by any banker or anyone in business as well. So I'm not disputing that your numbers are accurate, I'm just saying that the math and how you do the math, there's a lot of devil in the details.

We need to understand what normalized EBITDA is for Dollar Thrifty, we need to understand what normalized EBTIDA is for us. We need to make sure that we're all calculating the numbers the same way.

In terms of the value to both shareholders, it's excellent and the synergies are unique to these two companies. So I feel like we've generated a transaction that will be a win-win for both companies given what the industry is doing now and what the future holds for it. It sounds like you're upset about something but I would love to go off-line with you and we'll talk about it.

What own both so we're happy today. We would just rather be happier.

Well let's see what we can do to make you happy, okay?

Michael Millman, Millman Research.

I guess starting off on the yield and going to some other things, could you talk about what are their requirements, shareholder approval requirements, sort of following up on the last question?

Yes, it does require their shareholder approval.

Okay and it seems to me one of the biggest synergies is the ability to price the classic Hertz brand better. You didn't discuss that at all. Could you give us some idea of what kind of synergies you might envision there over the next couple (multiple speakers)

We didn't put any pricing into the synergies. To me that's not a synergy, that's a marketplace condition and I don't talk about pricing on calls because of antitrust issues.

In general, we think obviously industry consolidation is always good. Having said that, we think it makes it a more competitive universe with all the competitors out there given that we now have -- we compare more favorably to other competitors.

Every competitor out there, Michael, has a value brand. We for the first time bought a small one out of bankruptcy and it's really at the low-end of the leisure segment which is a small piece of it.

This allows us to compete in the full leisure segment now. For the first time, it allows us to be competitive in the marketplace. We have been uncompetitive frankly, having only one brand which was the Hertz brand.

So we feel this allows us to give -- to be more competitive with our competitors in the marketplace. It gives us that freedom that way. In terms of shareholder approval, yes, the deal is contingent upon their shareholders to approve.

We feel really good about that. There's a lot of crossover between shareholders; about a 66, 67% overlap in terms of their top shareholders and our top shareholders. So that's a big overlap and that's also reasons why we feel pretty confident this will be approved.

And we're seeing that, what you talked about, with probably the largest potential -- maybe synergy's not a good word for it. I'm not sure if you are agreeing with that or not.

I think what we've said, Michael, is these are just cost saves, is all we're looking at in this particular --

And regarding current business, could you talk about US fleet year over year as compared -- as of April, whatever date today is?

Fleet levels, you mean?

Fleet levels, please.

I think our fleet roughly is up a little over 10% right now. And obviously, we're seeing demand levels higher than that. We're actually pretty tight fleeted. If you were to talk to our regional vice presidents in the US, they're all screaming for more fleet right now. And we're not giving it to them right now. We're being tightly fleeted. We want to drive a right fleet situation to make sure there's an opportunity at least to improve pricing.

Regarding your cost, could you talk about why I guess you would call reconciliation items as actually up year over year?

What is -- the ancillary revenues?

No, the reconciliation items. I think what you call corporate expense.

I don't know. I don't have that data here in front of me. Are you looking at one of the attachments that we gave on the --

No, I'm looking at your income statement.

We'll take that question off-line, Michael. Happy to take your call after this one. I don't have a ready answer for you, but be happy to answer that overall costs are definitely down. So feel pretty good about our ability to manage costs right now.

Regarding US fleet, it looks like in the first quarter, the OEMs sold about twice as much into the fleets as the fleet sold. Is this something you're seeing continuing? Is this a concern or is this Toyota?

You said it sounds like the OEMs are doing what again? I'm not sure I (multiple speakers)

It looks like in the first quarter OEMs sold about twice as many cars to the rental fleet as the daily rental fleets sold into the residual markets.

Anything you want to comment on, John, on fleet? I have our fleet Executive Vice President here. I don't know if (multiple speakers)

I think what you're seeing in the market is just your normal seasonal fleeting up for the summer season. You see more fleet relatively speaking increase as Q1 going into the summer season. And then as you start to come out of the selling season, you'll see more aggressive de-fleeting, just normal seasonal pattern.

So we're going to take another question. Next, operator?

Bob McAdoo, Avondale Partners.

Most of my questions have been answered. Just a quick clarification. When you talk about the synergies of the deal and you talk about consolidating the fleet and what goes on there, the portion of it that you're talking about there, is that in terms of your processes and buying and selling and remarketing or whatever or are you including in that the value of being able to cross-utilize the fleet or maybe actually have less cars on the fleet because you can use their cars on the weekend?

All of the above. You mentioned (multiple speakers) each one of those is distinct -- what you mentioned, they're all cost reduction opportunities that we have identified, every one of those.

Okay and that's part of the number that you gave us?

That's correct, that's correct, yes.

Would you like to take another question?

Yes, sure. We'll take another question.

Jordyn Hymowitz, Philadelphia Financial.

First off, thanks for all the disclosure on the pricing by the various divisions. It makes it much more helpful to analyze. I really appreciate that.

You're welcome.

Question on the airport market share on airport, combined you guys are what, about 42, 43 at this point?

(multiple speakers) no, 26.

We have about 26% share of airport market share.

26 (multiple speakers) and Dollar Thrifty is what, 12?

Dollar Thrifty is around 12 (multiple speakers) actually it's 11.

That's 38, that's combined. But is there some limit in any region, like can you be 50% in one city? Or what is the upper end you think you can be in any one city before you have to (inaudible)? If 38 is the blended, what is the high end you're allowed to be, you think?

The various vagaries of HSR and how the FTC will determine what it is that needs to be carved down if anything will probably most likely be determined by shares over 40 or 50%. And in addition to that, it would be of the total market. It doesn't necessarily have to be on airport.

What they would look at on airport is not only share, but they would look at pricing and they would determine how many competitors would be on airport. If there's five competitors on airport, right now most of the major airports that are there today have anywhere from eight to nine competitors. In addition to those eight or nine competitors in most of those major airports, the pricing is very low.

For example, take Orlando, take LAX, take Chicago; very low pricing already in place at those major airports. So the likelihood is if there's going to be any kind of a carveout of airports, it would be a very small airport and it would be with pricing that is very high. So that's just typically -- it's a multi-tiered approach they use in evaluating that. And that multi-tier approach would be used here obviously.

So we feel confident that we have done all the analysis ourselves. We have hired lawyers that actually were former FTC people and feel good that we will get this deal done and that is not an issue. It's just an issue that there may be a few airports that may be carved out, maybe not, depending on how they look at the share.

Okay, what were your gains on [off-fleet] vehicles in the quarter?

What were gains? I don't know that I have that number. Do you guys have a number on gains for the quarter?

I do. It was $2.5 million was actually a slight loss. As you know we adjusted depreciation to really get as close to zero as we possibly can in the quarter and that's really across the entire rent-a-car (multiple speakers)

Final question is in the month of April, you disclosed that your fleet remained pretty tight. A number -- I'm sorry, not a number. One at the sell side analysts put out a note a day or two ago that said pricing was weaken in April. Can you say what pricing in the month of April was specifically in the US?

No, we're not -- we haven't been forecasting that, no. I'm not going to get into that pricing discussion. My attorneys advised me not to.

Congratulations and again, much appreciated, the additional disclosure. It makes it much easier to figure things out.

Operator, I think it's time for us to end the call. I want to thank everyone for listening and appreciate your attention and your support throughout this process.

Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation and for using AT&T Executive teleconference service. You may now disconnect.