HERTZ CORP, 10-K, 2000-03-17

HERTZ CORP
10-K, 2000-03-17
AUTO RENTAL & LEASING (NO DRIVERS)

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<PAGE> 1

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999, or

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-7541

THE HERTZ CORPORATION
(Exact Name of Registrant as Specified in its Charter)

<TABLE>
<S> <C>
DELAWARE 13-1938568
(State of Incorporation) (I.R.S. Employer Identification No.)
225 BRAE BOULEVARD,
PARK RIDGE, NEW JERSEY 07656-0713
(Address of Principal Executive Offices) (Zip Code)
</TABLE>

Registrant's telephone number, including area code: 201-307-2000

Securities Registered Pursuant to Section 12(b) of the Act:

<TABLE>
<CAPTION>
Name of Each Exchange
Title of Each Class On Which Registered
------------------- ---------------------
<S> <C>
Class A Common Stock, Par Value $.01 per share New York Stock Exchange
6 5/8% Junior Subordinated Notes due July 15, 2000 New York Stock Exchange
7% Junior Subordinated Notes due July 15, 2003 New York Stock Exchange
</TABLE>

Securities Registered Pursuant to Section 12(g) of the Act:
NONE

Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

The aggregate market value of the voting stock held by non-affiliates of the
Registrant, based on the New York Exchange Composite Transaction closing price
of the Class A Common Stock ($35.9375 per share), as of March 1, 2000, was
$648,332,805. For purposes of this computation, 5% beneficial owners of the
Registrant are deemed to be affiliates. Such determination should not be deemed
an admission that such beneficial owners are, in fact, affiliates of the
Registrant. At March 1, 2000, 40,512,699 shares of the Registrant's Class A
Common Stock, par value $0.01 per share, were outstanding and 67,310,167 shares
of the Registrant's Class B Common Stock, par value $0.01 per share, were
outstanding.

Documents Incorporated By Reference

<TABLE>
<CAPTION>
Document Where Incorporated
-------- ------------------
<S> <C>
Proxy Statement for 2000 Part III (Items 10, 11, 12 and 13)
Annual Meeting of Stockholders
</TABLE>
<PAGE> 2

PART I

ITEM 1. BUSINESS.

GENERAL
The Hertz Corporation (together with its subsidiaries, referred to herein as
"Hertz" or the "Company") is a majority-owned subsidiary of Ford Motor Company
("Ford"). In April 1997, the Company reclassified all of its outstanding common
stock, par value $1.00 per share, owned by Ford into 67,310,167 shares of Class
B Common Stock, par value $.01 per share, (the "Class B Common Stock"), and
reclassified all of its outstanding 10% Cumulative Series A Preferred Stock and
variable rate Cumulative Series B Preferred Stock beneficially owned by Ford
into 20,245,833 shares of its Class A Common Stock, par value $.01 per share,
(the "Class A Common Stock").

On April 30, 1997, the Company issued and sold 20,010,000 shares of its Class A
Common Stock, in an initial public offering ("Offering"). After the Offering,
Ford beneficially owned (i) 49.4% of the outstanding Class A Common Stock (which
has one vote per share) and (ii) 100% of the outstanding Class B Common Stock of
the Company (which has five votes per share). At December 31, 1999, the common
stock beneficially owned by Ford represents in the aggregate 94.6% of the
combined voting power of all of the Company's outstanding common stock and 81.2%
of the economic interest in the Company. Accordingly, Ford is able to direct the
election of all of the members of the Company's Board of Directors and exercise
a controlling influence over the business and affairs of the Company.

The Company and its affiliates and independent licensees operate what the
Company believes is the largest car rental business in the world based upon
revenues and one of the largest industrial and construction equipment rental
businesses in the United States based upon revenues. The Company's Hertz brand
name is recognized worldwide as a leader in quality rental and leasing services
and products. The Company, together with its affiliates and independent
licensees, currently rents and leases cars and light trucks, rents industrial
and construction equipment and operates its other businesses from approximately
6,500 locations throughout the United States and in approximately 140 foreign
countries and jurisdictions. For the year ended December 31, 1999, the Company
generated record revenues, income before income taxes and net income of $4.7
billion, $560.4 million and $336.0 million, respectively. The Company and its
predecessors have been profitable in every year since 1952, when one of the
Company's predecessors first became a public company.

Certain statements contained in this Report under "Business" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
including, without limitation, those concerning (i) the Company's expansion
plans for its various businesses, (ii) the Company's liquidity and capital
expenditures, (iii) the percentage of cars expected to be acquired from Ford in
the future, (iv) the terms upon which cars will be acquired, (v) the development
of the Company's strategic information systems and (vi) the effects on the
Company of certain legal proceedings, contain certain forward-looking statements
concerning the Company's operations, economic performance and financial
condition. Because such statements involve risks and uncertainties, actual
results may differ materially from those expressed or implied by such
forward-looking statements. Factors that could cause such differences include,
but are not limited to, economic downturn; competition; the Company's dependence
on air travel; limitations upon the Company's liquidity and capital raising
ability (see "Management's Discussion and Analysis of Financial Condition and
Results of Operations"); increases in the cost of cars and limitations on the
supply of competitively priced cars; Ford's continued control of the Company;
and seasonality in the Company's businesses.

CAR RENTAL
The Company believes it maintains the largest network of company-owned car
rental locations both in the United States and in Europe, and the largest number
of on-airport car rental locations in the world, enabling the Company to provide
consistent quality, pricing and service worldwide. The Company derives
approximately 81% of its car rental revenues from on-airport locations.
According to information disclosed by the largest 164 U.S. airports, the Company
maintained the leading on-airport car rental market share at such airports
during 1999 of approximately 30% in terms of revenues and has maintained market
share at approximately this level during each of the last five years.

During 1999, approximately 54% of the Company's worldwide car rental revenues
were generated from business travelers and approximately 46% from leisure
travelers. The Company has a worldwide marketing and sales organization focused
on both commercial accounts/group sales and the travel industry, including
travel agents, as well as a comprehensive program of retail and trade
advertising, internet, direct mail and other targeted marketing.

1
<PAGE> 3

The Company's Hertz #1 Club Gold service provides an expedited rental service to
members at over 800 locations worldwide. At December 31, 1999, there were over
three million active Hertz #1 Club Gold members who accounted for approximately
47% of the Company's U.S. car rental transactions in 1999. Through its many
travel industry relationships with airlines and hotels, the Company has targeted
the most frequent travelers to become Hertz #1 Club Gold members.

The Company's worldwide car rental operations and certain other related
activities generated $3.8 billion in revenue and $513 million in income before
income taxes during 1999.

INDUSTRIAL AND CONSTRUCTION EQUIPMENT RENTAL
The Company, through its wholly-owned subsidiary, Hertz Equipment Rental
Corporation ("HERC"), maintains a significant market share in the North American
industrial and construction equipment rental market. HERC rents a broad range of
earthmoving equipment, material handling equipment, aerial and electrical
equipment, air compressors, small tools, compaction equipment and
construction-related trucks through a network in North America of 262 branch
locations.

HERC maintains an established national accounts program with over 1,500
customers who generated 34% of HERC's North American revenues in 1999. As of
December 31, 1999, HERC maintained a fleet with an original investment cost of
approximately $1,954 million and a weighted-average age of 26 months. HERC
generated $843 million in revenue and $84 million in income before income taxes
during 1999.

OTHER ACTIVITIES
Other activities of the Company include self-insurance operations for both its
car rental and industrial and construction equipment rental businesses, car
leasing operations in certain international markets, the sales of its used cars
and equipment, third-party claim management services and telecommunications
services in the United States.

The Company, which was incorporated in Delaware in 1967, is a successor to
corporations that have been engaged in the automobile and truck leasing and
rental business since 1918. As a result of a series of transactions in 1993 and
1994, the Company became a wholly-owned subsidiary of Ford. Prior to that time
and until 1987, when Ford first acquired an ownership interest in the Company,
the Company had been a subsidiary of UAL Corporation (formerly Allegis
Corporation) ("UAL"), which had acquired the Company's outstanding capital stock
from RCA Corporation ("RCA") in 1985. See Notes 1 and 5 to the Notes to the
Company's consolidated financial statements included in this Report.

The Company's principal executive offices are located at 225 Brae Boulevard,
Park Ridge, New Jersey 07656. The Company's telephone number is (201) 307-2000
and its web site is www.hertz.com.

"Hertz," "HERC," "The Source," "Hertz Local Edition," "Hertz #1 Club Gold," "The
Hertz #1 Club," and "Hertz NeverLost" are trademarks or service marks of the
Company. All other trademarks, service marks or brand names appearing in this
Report are the property of their respective holders.

BUSINESS SEGMENTS
The Company's business consists of two significant segments, rental and leasing
of cars and light trucks ("car rental"), and the rental of industrial,
construction and material handling equipment ("industrial and construction
equipment rental"). Set forth below is certain information with respect to these
segments, as well as "corporate and other," for the year ended December 31,
1999. Corporate and other includes general corporate expenses, as well as other
business activities, such as claim management and telecommunication services.
See Note 11 to the Notes to the Company's consolidated financial statements
included in this Report.

2
<PAGE> 4

<TABLE>
<CAPTION>
Year Ended December 31, 1999
-----------------------------------------------------
Industrial and
Construction
Equipment Corporate
Car Rental Rental and Other
------------ -------------- ------------
Amount % Amount % Amount % Total
------ --- ------ --- ------ --- ------
Dollars in millions
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues........................................ $3,822 81 $ 843 18 $ 51 1 $4,716
Amortization of intangibles..................... 2 7 9 32 17 61 28
Operating income (loss) (pre-tax income before
interest)..................................... 752 83 176 20 (26) (3) 902
Income (loss) before income taxes............... 513 92 84 15 (37) (7) 560
Revenue earning equipment, net, at end of
year.......................................... 4,762 76 1,502 24 -- -- 6,264
</TABLE>

The Company and its subsidiaries, affiliates and independent licensees operate
locations throughout the United States and in approximately 140 foreign
countries and jurisdictions. Set forth below is certain information with respect
to the Company's U.S. and foreign operations for the year ended December 31,
1999 (substantially all of the Company's foreign operations consist of car
rental and leasing and equipment rental operations).

<TABLE>
<CAPTION>
Year Ended December 31, 1999
------------------------------------
U.S. Foreign
------------ ------------
Amount % Amount % Total
------ --- ------ --- ------
Dollars in millions
<S> <C> <C> <C> <C> <C>
Revenues.................................................... $3,639 77 $1,077 23 $4,716
Amortization of intangibles................................. 24 86 4 14 28
Operating income (pre-tax income before interest)........... 763 85 139 15 902
Income before income taxes.................................. 459 82 101 18 560
Revenue earning equipment, net, at end of year.............. 5,088 81 1,176 19 6,264
</TABLE>

WORLDWIDE CAR RENTAL

U.S. OPERATIONS
CAR RENTAL. The Company provides car rental services throughout the United
States in or around all major U.S. cities and operates a nationwide, toll-free
reservations system. Car rental facilities are operated at all major airports
and in the central business districts and key suburban commercial centers in
major U.S. cities.

The Company uses a wide variety of makes and models of cars for daily rental
purposes, nearly all of which are current year or the previous year's models.
The Company rents cars on a daily, weekend, weekly or monthly basis, with rental
charges computed on a limited or unlimited mileage rate, or on a time rate plus
a mileage charge. The Company's rates vary at different locations depending on
local market, competitive and cost factors, and virtually all rentals are made
utilizing rate plans under which the customer is responsible for gasoline used
during the rental. In addition to car rentals and licensee fees, the Company
generates revenues from providing customers with ancillary products and services
such as Hertz #1 Club Gold, the Company's Rent It Here -- Leave It There
program, supplemental equipment (child seats, ski racks and portable cellular
phones), loss or collision damage waiver, liability insurance and personal
effects coverage, Hertz NeverLost navigational system and gasoline payment
options.

3
<PAGE> 5

The Company conducts operations in the United States through company-owned and
licensee operated locations. Company-owned locations are those locations through
which the Company rents cars that it owns, as compared to licensee locations
through which licensees rent cars that they own. The Company believes that its
extensive worldwide ownership of its operations contributes to the consistency
of its high-quality service, strict cost control, fleet utilization, yield
management, competitive pricing and the Company's ability to offer one-way
rentals through its Rent It Here -- Leave It There program. However, in certain
smaller domestic markets, the Company has found it more efficient to operate
through licensees. Together with its licensees, the Company operated a peak
domestic fleet of more than 277,000 cars in 1999. At December 31, 1999, the
Company owned 94% of all the cars in the combined Company-owned and licensee
fleet.

The Company maintains automobile maintenance centers at certain airports and in
certain urban and suburban areas, providing maintenance facilities for the
Company's rental fleet. Many of these facilities, which include sophisticated
car diagnostic and repair equipment, are accepted by automobile manufacturers as
eligible to perform and receive reimbursement for warranty work. Collision
damage and major repairs are generally performed by independent contractors.

AIRPORT OPERATIONS. The Company estimates that airport revenues accounted for
approximately 90% of its car rental revenues in the United States in 1999. The
Company has concession agreements at approximately 240 airports in the United
States. These agreements are entered into with airport authorities, through
either negotiation or a bidding process, for a fixed number of car rental
counter positions. The agreements typically provide for concession payments
based upon a specified percentage of revenue generated at the airport, subject
to a minimum annual fee, and sometimes include fixed rent for terminal counters
or other leased properties and facilities.

SUBURBAN OPERATIONS. At December 31, 1999, the Company operated 485 suburban
locations. As part of the Company's long-range growth plan, the suburban network
will be expanded in calendar year 2000. A majority of these locations offer
insurance replacement and automobile dealer service loaner programs and are
marketed under the Hertz Local Edition ("HLE") brand name. HLE provides local
use and replacement car rental services in major commercial centers and other
suburban areas in the United States. The services provided at HLE locations
include providing replacement vehicles when customers' personal vehicles are out
of service, generally due to an accident, theft or mechanical problem. A
significant percentage of these rentals are referrals from insurance companies
and car dealerships, which generally pay for all or a significant portion of the
costs of such rentals.

INTERNATIONAL OPERATIONS
At December 31, 1999, the Company and its subsidiaries, affiliates and
licensees, operated in approximately 140 foreign countries and jurisdictions.
Outside the United States, and primarily in Europe, the Company and its
licensees operated a combined peak fleet of approximately 195,000 cars during
1999. In general, international operations are conducted similarly to those of
the Company in the United States. Although the Company has found it more
efficient to conduct a greater proportion of its international operations
through licensees as compared to the Company's U.S. operations, it continues to
conduct its operations primarily through Company-owned locations in the major
European markets. The international car rental operations of the Company that
generated the highest volumes of business in 1999 were those conducted in
France, Germany, Italy, the United Kingdom, Canada, Australia, Spain and
Switzerland. In addition, the Company owns operations in Puerto Rico, St. Thomas
(USVI), New Zealand, Brazil, Belgium, Luxembourg and The Netherlands. See Note 5
to the Notes to the Company's consolidated financial statements included in this
Report. The Company believes that, as in the United States, it maintains the
leading airport car rental market share in Europe with a 1999 market share of
approximately 28% in terms of revenues.

As in the United States, the Company offers Hertz #1 Club Gold service at most
major airport locations within Europe, Canada, Australia and New Zealand. The
Company's global reservations system allows customers worldwide to book
reservations in any of the Company's worldwide markets. Additionally, a local or
toll-free telephone number is offered in all major foreign countries which
provides access to the Company's global car rental reservations system.

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CUSTOMERS
To focus its marketing, sales and pricing functions, the Company divides its
customers into two groups, business and leisure. Business customers include
large commercial accounts, small business accounts and government authorities.
In 1999, business customers generated approximately 55% of the Company's U.S.
car rental revenue from 61% of the Company's U.S. car rental transactions.

Leisure customers, including wholesale tour customers, represent the balance of
the Company's U.S. car rental revenues and transactions, or approximately 45% of
the Company's U.S. car rental revenue on 39% of the Company's U.S. car rental
transactions. Revenue per transaction is higher for leisure rentals as compared
to business rentals because leisure rentals are generally for longer periods.
The Company's success in the leisure market is the result of its quality of
service and the Company's competitive pricing. A significant number of leisure
customers are the same customers who rent from the Company on business. Over the
last several years, the relative proportion of the Company's revenues from
business and leisure customers has remained relatively stable.

In 1999, the Company's business customers generated approximately 48% of the
Company's international car rental revenues from 63% of the Company's
international car rental transactions. In 1999, the Company's international
leisure customers generated approximately 52% of the Company's international car
rental revenues from 37% of the Company's international car rental transactions.

The Company believes that quality of service is of critical importance to
customer satisfaction and brand loyalty. Accordingly, the Company places a high
priority on monitoring and evaluating customer satisfaction through, among other
methods, a series of rating systems, car and location inspections and management
reporting.

REVENUE MANAGEMENT
The Company uses a point-of-sale revenue management program through which
counter sales representatives sell car upgrades, supplemental equipment and
optional services. This program of identifying and satisfying additional
customer requirements enhances the Company's revenues and transaction yields.

MARKETING, SALES AND ADVERTISING
The Company has a worldwide marketing and sales organization focused on both
commercial accounts/group sales and the travel industry, including travel
agents, as well as a comprehensive program of retail and trade advertising,
direct mail and other targeted marketing (such as special rental packages for
skiers and golfers).

The Company's commercial and group sales force supports larger commercial
accounts, smaller corporate affiliations, government and group relationships
(such as the American Automobile Association, the American Association of
Retired Persons, the American Bar Association and the American Medical
Association.). In order to provide targeted sales to the travel industry
community, the Company has sales employees and engages independent contractors
throughout the United States, all of whom are dedicated to serving travel
agents, airlines, tour wholesalers and related sources of rentals.

In the United States, the Company markets to leisure customers predominantly
through television and radio media advertising and through newspaper and
magazine print advertising. Print advertising is primarily rate-related,
highlighting leisure rates for weekly and weekend rentals.

The Company conducts an active national and international advertising program,
the cost of which is supported in part by contributions from the Company's
independent licensees. The Company is also a party to a cooperative advertising
agreement with Ford pursuant to which Ford shares some of the cost of certain of
the Company's advertising programs in the United States and abroad that feature
the Ford name or products. The advertising programs also involve cooperative
advertising arrangements with airlines, hotels and others in the travel
industry.

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During the five-year period ended December 31, 1999, the Company's total
advertising and related expenditures (almost all of which were related to car
rental operations) and the sources contributing thereto were approximately as
follows:

<TABLE>
<CAPTION>
Paid By 1999 1998 1997 1996 1995
- - - - - - - - - - - - - - - - - - ------- -------- -------- -------- -------- --------
Dollars in thousands
<S> <C> <C> <C> <C> <C>
The Company and Subsidiaries................... $153,373 $159,610 $148,912 $148,034 $134,487
Ford........................................... 47,510 44,254 45,162 45,459 44,112
Licensees...................................... 8,524 8,599 8,660 8,454 8,740
-------- -------- -------- -------- --------
Total.................................. $209,407 $212,463 $202,734 $201,947 $187,339
======== ======== ======== ======== ========
</TABLE>

In addition, licensees spend additional amounts for local advertising and sales
promotions that feature the Hertz name.

NAVIGATIONAL EQUIPMENT AGREEMENT
In June 1999, the Company entered into a limited liability company agreement
with a subsidiary of Orbital Sciences Corporation ("Orbital"), whereby a limited
liability company was formed to purchase NeverLost vehicle navigation systems
from another subsidiary of Orbital for installation in selected vehicles in the
Company's worldwide fleet. During 1999, the Company invested $14.8 million under
this agreement, which represents a 40% ownership interest.

CAR ACQUISITION
The Company believes it is the largest single private purchaser of new cars in
the world, acquiring approximately 285,000 cars in the United States and a total
of approximately 450,000 cars worldwide during the 1999 model year.
Consequently, the acquisition and disposition of cars are important activities
for the Company and have a significant impact on profitability. The Company
acquires, subject to availability, a majority of its cars pursuant to various
fleet repurchase programs established by automobile manufacturers. Under these
programs, automobile manufacturers agree to repurchase cars at a specified price
during established repurchase periods, subject to certain car condition and
mileage requirements. Repurchase prices under the repurchase programs are based
on either (i) a predetermined percentage of original car cost and the month in
which the car is returned or (ii) the original capitalization cost less a set
daily depreciation amount. These repurchase programs limit the Company's
residual risk with respect to cars purchased under the programs. For this
reason, cars purchased by car rental companies under repurchase programs are
sometimes referred to by industry participants as "non-risk" cars. Conversely,
those cars not purchased under repurchase programs for which the car rental
company is exposed to residual risk are sometimes referred to as "at-risk" cars.
During 1999, non-risk cars as a percentage of all cars purchased by the
Company's U.S. operations and international operations were approximately 84%
and 73%, respectively.

The holding period for the Company's rental cars ranges from five to 12 months.
The Company's flexibility to adjust the holding period for cars, particularly
under repurchase programs with automobile manufacturers, enables the Company to
adjust its fleet size up or down relatively quickly in response to changing
market conditions. At December 31, 1999, the average age of rental cars in the
Company's fleet was six months.

Over the five years ended December 31, 1999, on a weighted-average basis,
approximately 65% of the cars acquired by the Company for its U.S. car rental
fleet, and approximately 28% of the cars acquired by the Company for its
international fleet, were manufactured by Ford. During 1999, approximately 68%
of the cars acquired by the Company domestically were manufactured by Ford, 10%
were manufactured by Mazda, 8% were manufactured by Toyota, 5% were manufactured
by DaimlerChrysler AG and the remainder were manufactured by various American,
Japanese, Korean and European manufacturers. See Note 8 to the Notes to the
Company's consolidated financial statements included in this Report. In its
foreign operations, the Company utilizes cars manufactured abroad by
subsidiaries of Ford and by other manufacturers. In 1999, approximately 27% of
the cars acquired by the Company for its international fleet were manufactured
by Ford, which represented the largest percentage of any automobile manufacturer
in that year. Negotiations with automobile manufacturers include determination
of the initial purchase price of the car and establishment of the payment terms.
New car repurchase programs or residual value guarantees, approval for using the
Company's facilities for warranty repairs, as well as the establishment of
cooperative advertising and promotion programs also are negotiated with the
manufacturers.

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Purchases of cars are financed through funds provided from operations and by
active and ongoing global borrowing programs. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."

USED CAR SALES
The Company disposes of "at risk" cars as well as those "non-risk" cars that are
not returned to the manufacturer through auctions, 47 domestic retail car sales
locations and, in Europe, through wholesale operations. Upon the sale of a car,
the difference between the net proceeds from sale and the remaining book value
is recorded as an adjustment to depreciation in the period when sold. See Note 8
to the Notes to the Company's consolidated financial statements included in this
Report.

LICENSEES
While the Company believes that its extensive worldwide ownership of its
operations provides an important competitive advantage, the Company has found it
more efficient to operate through licensees in certain markets. The Company's
licensees operate from approximately 140 countries and jurisdictions worldwide.
The Company believes that its licensee arrangements are important to the
Company's business because they enable the Company to offer expanded national
and international service and a broader Rent It Here -- Leave It There program.
The Company's wholly-owned subsidiaries, Hertz System, Inc. ("System") and Hertz
International, Ltd. ("Hertz International"), issue licenses under franchise
arrangements to independent licensees and affiliates who are engaged in the car
rental business in the United States and in many foreign countries and
jurisdictions.

Licensees generally pay fees based on the number of cars they operate and/or on
revenues. The operations of all licensees, including the purchase and ownership
of vehicles, are financed independently by the licensee with the Company having
no investment interest in the licensee or in the licensee's fleet. Licensees
also share in the cost of the Company's advertising program, reservations
system, sales force and certain other services. In return, licensees are
provided with the use of the Hertz brand name, management and administrative
assistance, training, the availability of the Company's charge cards, The Hertz
#1 Club reservations service, the Rent It Here -- Leave It There program and
other services. System, which owns the Company's service marks and trademarks
and certain proprietary know-how used by licensees, establishes the uniform
standards and procedures under which all such licensees operate.

System licenses ordinarily are limited as to transferability without the
Company's consent and are terminable by the Company only for cause or after a
fixed term. Licensees may generally terminate for any reason on 90 days' notice
to System. Initial license fees or the price for the sale to a licensee of a
corporate location may be payable over a term of several years. New licenses
continue to be issued and, from time to time, licensee businesses are purchased
by the Company.

CAR LEASING
Hertz owns 100% of its car leasing operations in the United Kingdom, Australia,
New Zealand and Brazil. Leases are generally closed-end where the Company is
subject to risk with respect to the market value of cars at the time of
disposition. Recently, Hertz International entered into a license agreement and
management service agreement with Axus International, Inc. ("Axus"), a car
leasing company wholly-owned by Ford Motor Credit Corporation, whereby Hertz
International has licensed the Hertz name and will provide management services
to Axus under a five-year contract covering select international markets. Axus
operates throughout Europe and in New Zealand and Australia with total revenues
in 1999 of $701 million.

INDUSTRIAL AND CONSTRUCTION EQUIPMENT RENTAL

OPERATIONS
HERC's principal business is the rental of industrial and construction
equipment. HERC operates across 40 states in the United States, seven provinces
in Canada and in France and Spain. HERC rents over 250 types of equipment, major
categories that include earthmoving equipment, material handling equipment,
aerial and electrical equipment, air compressors, compaction equipment and
construction-related trucks. Earthmoving, material handling and aerial equipment
accounted for 73% of HERC's original investment cost at December 31, 1999.
HERC's more than 136,000 pieces of rental equipment have an average age of 26
months and an original investment cost of approximately $1,954 million at
December 31, 1999.

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<PAGE> 9

HERC is one of the largest sellers of used industrial and construction equipment
in the United States. It has developed an extensive used equipment sales program
that disposed of equipment having an original cost of approximately $278 million
in 1999. HERC has a dedicated used equipment sales force and has also developed
an export market through its overseas contacts. Additionally, HERC in the past
has employed and may, from time to time in the future, employ a broker network
in the United States to dispose of its used equipment.

HERC's comprehensive line of equipment enables HERC to supply equipment to a
wide range of customers from the local contractor to large industrial plants.
Also, larger companies, particularly those with industrial plant operations, are
requiring single source vendors, not only for equipment rental, but also for
management of their total equipment needs. This includes maintenance of their
owned equipment, tools and supplies for their labor force, and custom management
reports. HERC responded to this by creating its Industrial Resources Group which
serves customers through its dedicated in-plant operations and regional
industrial centers.

HERC's rental locations generally are situated in industrial or commercial
zones. A growing number of locations have highway or major thoroughfare
visibility. The average location is two acres in size and includes a customer
service center, an equipment service area and storage facilities for equipment.
The branches are built or conformed to the specifications of the HERC prototype
branch, which stresses efficiency, safety and environmental compliance. Each
branch has stand-alone maintenance and fueling facilities and showrooms.

CUSTOMERS
HERC's customers consist predominantly of commercial accounts and represent a
wide variety of industries, such as railroad, automobile manufacturing,
petrochemicals, movie production, shipbuilding and construction. Serving a
number of different industries enables HERC to reduce its dependence on a single
or limited number of customers in the same business. HERC maintains an
established national accounts program with over 1,500 customers, which generated
34% of HERC's North American revenues in 1999. HERC has over 130,000 customers,
and in 1999 no single customer of HERC accounted for more than 3% of its
revenues. HERC primarily targets customers in medium to large metropolitan
markets.

HERC operations in North America are organized and managed in 11 geographic
regions. During each of the five years ended December 31, 1999, no single
geographic region accounted for more than 20% of HERC's revenues. This
geographic diversification means HERC is better positioned to withstand a
regional recession than local or regional competitors which, the Company
believes, are more dependent on the economic condition of a single region.

EXPANSION AND ACQUISITIONS
The Company believes the equipment rental industry in the United States
generates approximately $20 billion in revenue annually. It is a large,
fragmented market that is currently undergoing a major consolidation process.
HERC has been pursuing an active acquisition strategy to capitalize on its size,
purchasing power, experience in operating an established national network and
strong, existing management team. This strategy is designed to provide
controlled growth and to augment the Company's geographic coverage, customer
base and product lines. In 1999, HERC acquired 11 equipment rental and sales
companies and opened 21 new rental branches in the United States and Canada.
Also, in 1999, HERC opened seven new branches in Spain, seven in France and
acquired one business in France and one in Spain. See Note 5 to the Notes to the
Company's consolidated financial statements included in this Report.

SALES AND MARKETING
HERC focuses its major sales and marketing strategy on local, multi-regional and
national users of industrial and construction equipment. The strategy is led by
a national accounts sales organization and is backed by a field sales force of
highly trained sales professionals. Each branch has its own dedicated sales
force.

HERC's national sales force effectively emphasizes HERC's strengths such as its
geographically diverse system of branches and the size, consistency and quality
of its fleet. HERC reaches its smaller accounts through a local sales force. The
Company believes that the combination of HERC's professional sales force, high
quality fleet and the ability to transfer equipment from various locations to
satisfy local demands provides it with a competitive advantage.

8
<PAGE> 10

EQUIPMENT ACQUISITION
HERC selectively buys its equipment from vendors with reputations for high
product quality, reliability and significant market share. HERC's major
suppliers are JLG Industries, Inc., Deere & Company (John Deere equipment),
Navistar International Corporation, CNH Global (Case equipment), Ford, Kobelco
America Inc., Gennie Industries and Ingersoll-Rand Company.

Centralized purchasing has allowed HERC to standardize its equipment
specifications by model and geographic needs, allowing for economies of scale.
HERC has developed a fully automated fleet planning and purchasing process that
streamlines and expedites equipment orders.

The Company believes that HERC's equipment age is a major competitive advantage
and assures customer satisfaction with equipment as well as lower maintenance
costs. Through aggressive used equipment sales, the Company has been able to
maintain an average fleet age of 26 months.

The Company is generally at risk with respect to the residual value of all the
equipment used in its industrial and construction equipment rental operations.

EQUIPMENT DISPOSAL
The Company believes that HERC is one of the largest distributors of used
industrial and construction equipment in the United States and has established
itself as a highly reliable supplier of used equipment. In 1999, HERC disposed
of equipment having an original cost of approximately $278 million.

Pricing for used HERC equipment is centralized. Relationships with major
equipment brokers and wholesalers allow HERC to trim fleet levels and mix to
improve utilization. HERC publishes The Source magazine two to three times per
year and distributes it nationally to over 60,000 existing and prospective
customers. This full color publication advertises price, model, year and
location of used equipment for sale. The Company also maintains on its web site
a similar listing of over 5,000 pieces of used equipment that can be searched by
make, model or location.

This overall used equipment strategy has allowed HERC to maintain what it
believes to be the youngest fleet in the industry by selling off assets that are
between 24 and 60 months old on average. With a younger fleet, HERC has
significantly reduced its maintenance and repair costs which are largely covered
by manufacturer warranties. The Company has been able to exploit its significant
presence in the U.S. market for sales of used industrial and construction
equipment to actively manage its fleet size and, in particular, to reduce fleet
levels during typical seasonal downturns.

STRATEGIC INFORMATION SYSTEMS
Centralized control, achieved through the use of the Company's strategic systems
technology, of major business processes such as reservations, rate structures
and fleet control, provides the disciplined environment in which the Company can
deliver consistent quality service at its car rental and equipment rental
operations. The Company maintains real-time communications with its many
locations through, what it believes is, the largest private data network in the
industry.

GLOBAL CAR RENTAL RESERVATIONS SYSTEM
The Company's global car rental reservations system operates through real-time,
on-line centers on five continents. Direct access with other computerized
reservations systems allow real-time processing for travel agents and corporate
travel departments. Company rental locations worldwide depend upon the global
reservations system to provide information critical to fleet and personnel
planning, rate management and the timely computerized delivery of reservations.
Customer information captured and made available in the reservations process
supports such premium services as Hertz #1 Club Gold.

The Company's reservations system annually handles approximately 40 million
incoming calls, during which customers inquire about locations, rates and
availability, and place or modify reservations. In addition, millions of
inquiries and reservations come to the Company through travel agents, travel
industry partners and the Company's web site. The Company maintains and
continually monitors quality standards for accuracy and consistency in the
reservations process. The Company's reservations system is designed to ensure
that availability of cars, rates and personal profile information is reliably
applied and that correct information is delivered at the proper time to the
customer's rental destination.

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<PAGE> 11

YIELD MANAGEMENT SYSTEM
Yield management affords the opportunity to achieve greater returns from a fixed
number of assets. The Company's yield management system is designed to optimize
car rental revenue through controlling, simultaneously, the availability of
various rates as well as the availability of cars. The system monitors the flow
of demand over time on a location by location basis, in order to supply a
sufficient number of cars when available rates are high.

COMPETITIVE RATE DETECTION
The Company recognizes that it is essential to respond promptly to pricing
changes in the marketplace. The ability to respond rests on the ability to
detect pricing changes when they occur. The Company believes it has the most
sophisticated competitive price detection software in the industry. Developed
internally and using a rate transmission from Galileo (an external worldwide
travel reservation system), competitors' rate changes are compiled nightly. The
system detects material changes in competitors' rates, by location, for every
date on the planning horizon, allowing resources to be allocated in response to
these changes.

Internationally, canvassing has a more manual emphasis due to the limited
information available concerning competitors in the external travel reservation
systems. However, the Company's European operations have in place a reporting
system which parallels the information available in the United States.

COST ALLOCATION MODEL
The Company's cost allocation model supports the Company's objective that all
customer segments of its business must provide contributions above a
strategically set threshold. Contribution per rental day is determined by
location, customer segment and car and equipment category by using data from the
financial management system, the fleet accounting system, the marketing database
and the yield management process. Additional models, based on this core cost
allocation model analysis, determines the profitability of individual customer
accounts by rental location.

To support the Company's European operations, a comparable cost allocation model
is used to reflect the individual operating environments of the respective
countries and to manage profitability.

DISASTER RECOVERY
The Company's systems disaster recovery planning is a comprehensive, ongoing
process which is updated as products are developed, tested and modified.
Disaster recovery for reservations, financial and other strategic systems is
provided at alternative locations serviced by third parties or at Company
maintained facilities.

OTHER OPERATIONS OF THE COMPANY

CLAIM MANAGEMENT
The Company's wholly-owned subsidiary, Hertz Claim Management Corporation
("HCM"), provides claim administration services to the Company and to outside
customers. These services include investigating, evaluating, negotiating and
disposing of a wide variety of claims, including third party, first party,
bodily injury, property damage, general liability and product liability, but not
the underwriting of risks.

TELECOMMUNICATIONS
In 1991, the Company began purchasing and reselling telecommunications services
through its subsidiary, Hertz Technologies, Inc. ("HTI"). HTI takes advantage of
the Company's negotiated rates with its telecommunications carriers to market
custom designed rate packages and services to small and medium size businesses
throughout the United States. Over the past year, the customer base has been
expanded to include services to several larger wholesale customers. Available
services include call detail and management reports, inbound/outbound call
packages and travel calling card services that include voice mail and fax
options.

The knowledge of competitive telecommunications services gained from developing
a leading management information system for the Company's car rental operations
has resulted in significant savings to the Company. Due to the nature of the
telecommunications business, there is very little overhead or capital investment
required. Services are sold through independent sales agents and other groups.
HTI provides its services from Oklahoma City, Oklahoma.

10
<PAGE> 12

INSURANCE
For its domestic operations, the Company is, where permitted by applicable local
law, a qualified self-insurer against liability resulting from accidents under
certificates of self insurance for financial responsibility in all states where
its vehicles are registered. The Company also self-insures general public
liability and property damage for all domestic operations. Since July 1, 1987,
all claims have been retained and borne by the Company up to a limit of $5
million for each occurrence, and the Company maintains insurance with
unaffiliated carriers in excess of $5 million up to $450 million per occurrence.
HCM administers this public liability and property damage program through a
network of eight regional offices throughout the United States.

For its international operations, the Company purchases insurance to comply with
local legal requirements. Vehicle liability insurance is purchased from a wholly
owned subsidiary, Probus Insurance Company Europe Limited ("Probus"), a direct
writer domiciled in Dublin, Ireland. Probus underwrites the Company's Pan
European motor vehicle liability program (except Switzerland) up to $1 million
per occurrence. Probus reinsures this risk through Hertz International RE
Limited, a wholly owned subsidiary of the Company, operating as a reinsurer in
Dublin, Ireland. Excess coverage for claims that exceed $1 million per
occurrence continue to be maintained with unaffiliated carriers. In foreign
operations other than Europe, the Company is self-insured at various amounts up
to $150,000 per occurrence and maintains excess liability insurance coverage up
to $450 million per occurrence with unaffiliated carriers.

Provisions for public liability and property damage on self-insured domestic and
foreign claims are made by charges to expense based upon evaluations of
estimated ultimate liabilities on reported and unreported claims. At December
31, 1999, this liability was estimated at $292.6 million for combined domestic
and foreign operations.

Ordinarily, collision damage costs and the costs of stolen or unaccounted for
cars are carried on a self-insured basis, with such costs being charged to
expense as incurred.

HERC generally requires its customers to provide their own liability insurance
on rented equipment with HERC held harmless under various agreements.

Other types of insurance usually carried by business organizations, such as
worker's compensation (i.e., on a fronted basis up to $5 million per
occurrence), property (including boiler and machinery and business
interruption), commercial crime and fidelity, performance bonds and directors'
and officers' liability insurance, are purchased from various insurance
companies in amounts deemed adequate by the Company for the respective hazards.
The Company and its directors and officers participate as additional insureds in
certain insurance policies maintained by Ford.

COMPETITION
The markets in which the Company operates are highly competitive. In any given
location, the Company may encounter competition from national, regional and
local companies. In the United States, the Company's principal competitors in
the car rental business market are Avis Rent A Car Systems, Inc. and National
Car Rental System, Inc. ("National"), and in the leisure market, the Company's
principal competitors are Alamo Rent-a-Car Inc. ("Alamo") and Budget Group, Inc.
National and Alamo are owned by AutoNation, Inc. In Europe, the Company's
principal competitors in the car rental market are Avis Europe plc, Europcar,
Sixt and National Car Rental. The Company competes primarily on the basis of
customer service and price. In addition, the Company believes extensive
worldwide ownership of its operations and its access to the global capital
markets provide it with an advantage over its competitors.

The Company is expanding its presence in the local use and insurance replacement
markets in the United States where Enterprise Rent-A-Car Company is currently
the Company's major competitor.

The Company believes that HERC is one of the largest equipment rental companies
in the United States. HERC's competitors range from other large national
companies, such as United Rentals, Inc. and Rental Service Division of Atlas
Copco Inc., to many small regional businesses. HERC's competitive success is, in
part, due to its systems and procedures for monitoring, controlling and
developing its branch network, its capacity to maintain a comprehensive rental
fleet and its established national accounts program.

The Company believes that price is one of the primary competitive factors in the
car and industrial and construction equipment rental markets. Competitors of the
Company, many of which have access to substantial capital, may seek to compete
aggressively on the basis of pricing. To the extent that the Company matches
downward competitor

11
<PAGE> 13

pricing, it could have an adverse impact on the Company's results of operations.
To the extent that the Company is not willing to match competitor pricing, it
could also have an adverse impact on the Company's results of operations as the
Company may lose market share.

EMPLOYEES
On December 31, 1999, the Company employed approximately 27,700 persons in its
domestic and foreign operations. Labor contracts covering the terms of
employment of approximately 5,400 employees in the United States are presently
in effect under 172 active contracts with local unions, affiliated primarily
with the International Brotherhood of Teamsters and the International
Association of Machinists (AFL-CIO). Labor contracts covering approximately
1,800 of these employees will expire during 2000. Employee benefits in effect
include group life insurance, hospitalization and surgical insurance, pension
plans and an income savings plan. Overseas employees are covered by a wide
variety of union contracts and governmental regulations affecting, among other
things, compensation, job retention rights and pensions. The Company has had no
material work stoppage as a result of labor problems during the last 10 years.
The Company believes its labor relations to be good.

In addition to the employees referred to above, the Company employs a
substantial number of temporary workers, and engages outside services, as is
customary in the industry, principally for the non-revenue movement of the
rental fleet between locations.

GOVERNMENTAL REGULATION AND ENVIRONMENTAL MATTERS
Throughout the world, the Company is subject to numerous types of governmental
controls, including those relating to price regulation and advertising, currency
controls, labor matters, charge card operations, environmental protection, used
car sales and franchising.

The Company's operations, as well as those of its competitors, could be affected
by any limitation in the fuel supply or by any imposition of mandatory
allocation or rationing regulations. In the event of a severe disruption of fuel
supplies, the operations of all car and industrial and construction equipment
renting and leasing companies could be adversely affected. Historically, there
has been no disruption of operations resulting from lack of fuel availability.

The environmental legal and regulatory requirements applicable to the Company's
operations pertain to (i) the operation and maintenance of automobiles, trucks
and other vehicles, such as heavy equipment, buses and vans; (ii) the ownership
and operation of tanks for the storage of petroleum products, including
gasoline, diesel fuel and used oil; and (iii) the generation, storage,
transportation and disposal of waste materials, including used oil, vehicle wash
sludge and waste water. The Company has made, and will continue to make,
expenditures to comply with applicable environmental laws and regulations.

The use of automobiles and other vehicles is subject to various governmental
requirements designed to limit environmental damage, including those caused by
emissions and noise. Generally, these requirements are met by the manufacturer
except, on occasion, equipment failure requiring repair by the Company. Measures
are being taken at certain locations in states that require the installation of
Stage II Vapor Recovery equipment to reduce the loss of vapor during the fueling
process.

The Company operates approximately 459 underground tanks in the U.S. to store
petroleum products, and the Company believes its tanks are maintained in
material compliance with environmental regulations, including federal and state
financial responsibility requirements for corrective action and third-party
claims due to releases. The Company has established a compliance program for its
tanks to ensure that (i) the tanks are properly registered with the state in
which the tanks are located; and (ii) the tanks have been either upgraded or
replaced to meet federal and state leak detection and spill, overfill and
corrosion protection requirements. The Company spent approximately $1.8 million
in 1999 to complete the registration and upgrade or replacement of such tanks.

The Company is also incurring and providing for expenses for the cleanup of
contamination from petroleum discharges at its owned and leased properties, as
well as contamination at other locations at which the Company's wastes have
reportedly been identified. With respect to cleanup expenditures for petroleum
discharges at the Company's owned or leased properties, the Company has received
reimbursement, in whole or in part, from certain states that maintain
underground storage tank petroleum cleanup reimbursement funds. Such funds have
been established to assist tank owners in the payment of cleanup costs
associated with releases from registered tanks. The Company expects to

12
<PAGE> 14

continue to receive reimbursement for cleanup costs incurred due to releases
from certain of its tanks. With respect to off-site locations at which the
Company's wastes have reportedly been identified, the Company has been and
continues to be required to contribute to cleanup costs due to strict joint and
several cleanup liability imposed by the federal Comprehensive Environmental
Response, Compensation and Liability Act of 1980 and state hazardous waste
disposal site statutes. The Company has recovered a substantial amount of such
costs incurred through settlements with its insurance carriers.

Environmental legislation and regulations and related administrative policies
have changed rapidly in recent years. There is a risk that governmental
environmental requirements, or enforcement thereof, may become more stringent in
the future and that the Company may be subject to legal proceedings brought by
government agencies or private parties with respect to environmental matters. In
addition, with respect to cleanup of contamination, additional locations at
which wastes generated by the Company may have been released or disposed, and of
which the Company is currently unaware, may in the future become the subject of
cleanup for which the Company may be liable, in whole or part. Accordingly,
while the Company believes that it is in substantial compliance with applicable
requirements of environmental laws, there can be no assurance that the Company's
future environmental liabilities will not be material to the Company's
consolidated financial position or results of operations or cash flows.

ITEM 2. PROPERTIES.

The Company's owned operations are carried on at 2,498 locations worldwide,
including rental and sales offices, car sales locations and service facilities
located on or near airports and in central business districts in major U.S.
cities and suburban areas. Most of these premises are leased, except for 150
that are owned in fee. The Company has various concession agreements with
governmental authorities and private companies charged with the operation of
airports under arrangements generally providing for payment of rents and a
percentage of revenues with a guaranteed annual minimum fee. See Note 10 to the
Notes to the Company's consolidated financial statements included in this
Report.

The Company owns three major facilities in the vicinity of Oklahoma City,
Oklahoma at which reservations for its worldwide car rental operations are
processed, global strategic information systems are serviced and major domestic
and international accounting functions are performed. The Company maintains its
executive offices in an owned facility in Park Ridge, New Jersey. The Company
also has an owned reservation center and leased financial center near Dublin,
Ireland, for centralized European reservation operations and accounting
functions.

ITEM 3. LEGAL PROCEEDINGS.

The Company is not required to disclose any pending legal proceedings in
response to Item 103 of Regulation S-K. The following information is furnished
on a supplemental basis.

The Company is currently a defendant in three purported class actions that have
been brought in two states, in which the plaintiffs seek unspecified damages and
injunctive relief arising out of the Company's allegedly improper sale of one or
more optional insurance products (Liability Insurance Supplement and Personal
Accident Insurance/Personal Effects Coverage) in connection with vehicle
rentals. A common feature of the actions is a claim that applicable insurance
laws were violated in the sale of optional insurance products because the
Company's counter sales representatives were not licensed insurance
salespersons. Details of those actions appear below. Other similar actions in
Texas, Alabama, Wisconsin and California have been concluded and/or dismissed
with no finding of liability to the Company.

On September 2, 1997, Ben C. Martin, Archie Powell, William Johnson,
individually and on behalf of all others similarly situated v. The Hertz
Corporation, et al. was commenced in Circuit Court of Mobile County, Alabama.
The Company and the other defendant car rental companies removed the action to
the United States District Court for the Southern District of Alabama (Mobile).
The plaintiffs moved to remand and, after a court-imposed stay of the
proceedings, the case was remanded to the Circuit Court of Mobile County,
Alabama. In December of 1999, the Company filed a Motion For Judgment on the
Pleadings -- similar to a motion previously filed and granted in the Leonard
case (below). In February 2000, the Court dismissed the plaintiff's case with
prejudice. The deadline for filing an appeal is pending. Martin purports to be a
class action on behalf of all individuals in the United States who rented from
the defendants and paid for optional insurance products.

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<PAGE> 15

defendant car rental companies removed the action to the United States District
Court for the Middle District of Alabama, Northern Division (Montgomery). As
with the Martin case, Leonard purports to be a class action on behalf of all
persons in the United States who rented from the defendants and, as part of that
rental, purchased optional insurance products. The Company and the other
defendant car rental companies filed a series of motions which sought dismissal
of the various causes of action based upon the judge's initial ruling that a
private right of action does not exist under Alabama law for the alleged
unlicensed sale of insurance. A final order of dismissal was entered in January
of 2000 and the plaintiffs subsequently filed a Notice of Appeal to the U.S.
Court of Appeals for the Eleventh Circuit in Atlanta, Georgia.

On June 2, 1999, Fred Saffer and Jennifer Nicoletta, on behalf of themselves and
all others similarly situated v. The Hertz Corporation, Enterprise Rent-A-Car,
et al. was commenced in Superior Court of New Jersey, Law Division, Essex
County. The initial complaint claimed that the collection by the Company of New
Jersey general sales tax on certain fueling charges imposed on renters was not
required by law and was an unfair trade practice. The complaint was later
amended to include a claim that the Company sold optional insurance products
without appropriate licensure, similar to the claims advanced in the other
actions described above. The Company moved to dismiss the insurance-related
components of the complaint for failure to state a claim on which relief could
be granted, and that motion was granted. The undismissed portion of the action
was stayed pending the resolution of a sales tax refund claim that the Company
brought administratively. The plaintiff subsequently moved for reconsideration
and also requested permission of the court to file a second amended complaint
seeking to add an additional class representative and to add requests for relief
based on additional allegations of misconduct relating to fueling charges and
sales taxes imposed on the sale of loss damage waiver to renters of vehicles.
Those motions are pending.

The Company is also a defendant in a private attorney general action which
challenges the Company's practices in offering the optional fuel and service
charge. On January 20, 1998, Peter Schnall, on behalf of himself and all others
similarly situated v. The Hertz Corporation was commenced in the Superior Court
of California, County of San Francisco. The complaint alleged violations of the
California Business and Professions Code by claiming that the optional fuel and
service charge constitutes an "unlawful business practice" and that the prices
charged constitute unfair liquidated damages under the rental agreement. The
Company filed demurrers to the initial complaint and an amended complaint, and
the trial court sustained the demurrer to the amended complaint without leave to
amend. The trial court then entered judgment in the Company's favor in June of
1998. Plaintiff appealed the trial court's decision to the Court of Appeal of
California, First Appellate District in San Francisco. In an opinion issued in
March 2000, the Court of Appeal sustained in part and reversed in part the trial
court's decision and ordered the matter remanded with respect to plaintiff's
challenge of the manner in which the Company discloses and explains the fuel and
service charge.

The Company believes it has meritorious defenses in the foregoing actions and
will defend itself vigorously.

In February 2000, a patent infringement suit naming the Company as a defendant
was filed in the U.S. District Court for the Eastern District of Texas by an
individual, Allan Konrad, who holds three patents allegedly covering
intranet/internet use. Mr. Konrad also owns a fourth patent application
allegedly covering e-commerce. Thirty-eight other companies, including Ford, are
codefendants in this litigation. The Company procures all products and services
related to this infringement allegation from suppliers and believes that it is
entitled to be indemnified by these suppliers for any loss that may result from
this litigation.

The technology covered in the Konrad patents relates to computer system
configuration and a method of using that configuration. More specifically, a
local host (personal workstation), remote host (server), a network connecting
the local host to the remote host, and various computer service functionalities
are claimed to be covered by these patents. Technology of this type is widely
used in the Company and continued use is required.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

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<PAGE> 16

EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth certain information with respect to the executive
officers of the Company, and their ages as of March 1, 2000:

<TABLE>
<CAPTION>
NAME AGE POSITION AND OFFICE
- - - - - - - - - - - - - - - - - - ---- --- -------------------
<S> <C> <C>
Craig R. Koch........................ 53 President and Chief Executive Officer
Brian J. Kennedy..................... 58 Executive Vice President, Marketing and Sales
Joseph R. Nothwang................... 53 Executive Vice President and President, Vehicle Rental and
Leasing, The Americas and Pacific
Gerald A. Plescia.................... 44 Executive Vice President and President, Hertz Equipment
Rental Corporation
Paul J. Siracusa..................... 54 Executive Vice President and Chief Financial Officer
Robert J. Bailey..................... 65 Senior Vice President, Quality Assurance and Administration
Harold E. Rolfe...................... 42 Senior Vice President, General Counsel and Secretary
Donald F. Steele..................... 61 Senior Vice President, Employee Relations
Charles L. Shafer.................... 56 Vice President and President, Hertz Europe Limited
Claude B. Burgess.................... 45 Vice President, Technology and e-Business
Richard J. Foti...................... 53 Controller
Robert H. Rillings................... 59 Treasurer
</TABLE>

None of the Company's officers has any family relationship with any director or
other officer. "Family relationship" for this purpose means any relationship by
blood, marriage or adoption, not more remote than first cousin.

Set forth below is the principal occupation of each of the executive officers
named above during the past five years.

Mr. Koch was elected President and Chief Executive Officer of the Company
effective January 2000. From September 1993 through December 1999, he served as
President and Chief Operating Officer. From February 1988 through August 1993,
he served as Executive Vice President and President of North America Car Rental
operations of the Company. He served as President and Chief Operating Officer of
the Company from May 1987 to February 1988. In October 1983, he became Executive
Vice President and General Manager of the Company's Car Rental Division after
having served as Vice President and General Manager since March 1980. He has
been a director of the Company since June 1994 and previously served as a
director of the Company from May 1987 to July 1993 and from October 1983 to
September 1985.

Mr. Kennedy was elected Executive Vice President, Marketing and Sales of the
Company in February 1988. From May 1987 through January 1988, he served as
Executive Vice President and General Manager of the Car Rental Division of the
Company. Prior to that time, from October 1983, he served as Senior Vice
President, Marketing.

Mr. Nothwang is Executive Vice President of the Company and was named President
of Vehicle Rental and Leasing, The Americas and Pacific effective January 2000.
From October 1998 through December 1999, he served as Executive Vice President
of the Company and General Manager of Vehicle Rental and Leasing, The Americas
and Pacific. From September 1995 through September 1998, he served as Executive
Vice President and General Manager, U.S. Car Rental. He served as Vice President
and General Manager U.S. Car Rental from September 1993 through August 1995.
Previously, he served as Division Vice President, Region Operations since 1985.
He served in various operating positions since 1976.

Mr. Plescia was elected Executive Vice President of the Company and President of
Hertz Equipment Rental Corporation in July 1997. He served as Division Vice
President, Field Operations for Hertz Equipment Rental Corporation from May 1992
to July 1997. Previously, he served in various operating positions since 1979.

Mr. Siracusa was elected Executive Vice President and Chief Financial Officer of
the Company in July 1997. He served as Vice President, Finance and Chief
Financial Officer, Hertz International, Ltd. from January 1996 to July 1997. He
served as Staff Vice President and Controller, Worldwide Car Rental from August
1994 through December 1995. He served as Division Vice President and Controller,
North America Car Rental from March 1988 through July 1994. Previously, he
served in various functions with the Company since 1969.

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<PAGE> 17

Mr. Bailey was elected Senior Vice President of the Company in May 1990.
Previously, he served in various functions with the Company since 1956, except
for the years 1966 and 1981.

Mr. Rolfe was elected Senior Vice President and General Counsel of the Company
in October 1998 and Secretary of the Company in May 1999. He served as Vice
President and General Counsel of Corporate Property Investors, Inc. in New York
from June 1991 to September 1998. Previously, he served with the law firm of
Cravath, Swaine & Moore in New York from October 1983 to April 1991.

Mr. Steele was elected Senior Vice President, Employee Relations of the Company
in July 1984. Previously, he served in various functions with the Company since
1972.

Mr. Shafer was elected Vice President of the Company in February 1998 and
President of Hertz Europe Limited in January 1998. He served as U.S. Car Rental
Division Vice President, Region Operations, Western Region from January 1991
through December 1997. Previously, he served in various functions with the
Company since 1966.

Mr. Burgess was elected Vice President, Technology and e-Business effective
March 1, 2000. From November 1999 through February 2000, he served as Staff Vice
President, Business Development. From May 1997 through October 1999, he served
as Staff Vice President, Acquisitions and Diversified Businesses. Prior to that
time, from August 1993, he served as Division Vice President, Florida Region
Operations. Previously, he served in various operating positions since 1979.

Mr. Foti was elected Controller of the Company in July 1997. He served as Staff
Vice President, Internal Audit from February 1990 to July 1997. Previously, he
served in various positions with the Company since 1978.

Mr. Rillings was elected Treasurer of the Company in November 1986. Previously,
he served in various positions with the Company since 1961.

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<PAGE> 18

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

The Class A Common Stock of the Company is listed on the New York Stock
Exchange. The high and low sales prices for the Class A Common Stock and the
dividends paid per share on the Class A Common Stock and Class B Common Stock
for each quarterly period from April 25, 1997, the date the Class A Common Stock
began trading on the New York Stock Exchange, were as follows:

<TABLE>
<CAPTION>
Class A Common Stock Price Per Share*
-------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
1999
- - - - - - - - - - - - - - - - - - ----
High........................................................ 54 1/16 64 3/16 60 7/8 51 1/8
Low......................................................... 36 7/8 49 37 3/4 37 15/16
Dividends per share of Class A Common Stock and Class B
Common Stock.............................................. $.05 $.05 $.05 $.05
1998
- - - - - - - - - - - - - - - - - - ----
High........................................................ 47 50 1/8 51 7/8 45 5/8
Low......................................................... 35 15/16 38 36 11/16 27 9/16
Dividends per share of Class A Common Stock and Class B
Common Stock.............................................. $.05 $.05 $.05 $.05
1997
- - - - - - - - - - - - - - - - - - ----
High........................................................ N/A 37 3/4 39 3/8 41 3/4
Low......................................................... N/A 27 7/8 31 7/8 34
Dividends per share of Class A Common Stock and Class B
Common Stock.............................................. -- -- $.05 $.05
</TABLE>

- - - - - - - - - - - - - - - - - - ---------------
* Price reflects New York Stock Exchange Composite Transactions. The initial
public offering price was $24.00 per share.

As of March 1, 2000, there were 8,793 record and beneficial holders of the
Company's Class A Common Stock and one holder of the Company's Class B Common
Stock.

Dividends on the Company's common stock are paid when declared by the Board of
Directors. The Company paid cash dividends of $21.6 million on common stock in
1999 and $21.6 million in 1998.

On February 1, 2000, the Board of Directors declared a quarterly dividend of
$.05 per share on its Class A and Class B Common Stock payable on March 10, 2000
to shareholders of record as of February 15, 2000.

Certain debt instruments under which the Company has issued debt securities
restrict the Company's ability to pay dividends. Such restrictions generally
provide that the Company may not pay dividends, invest in its own shares or
permit investments by certain subsidiaries of the Company ("Restricted
Subsidiaries") in the Company's shares subsequent to a specified date if,
together with total investments by the Company and its Restricted Subsidiaries
in subsidiaries that are not Restricted Subsidiaries made subsequent to such
specified date, the aggregate of any such dividends or investments exceeds the
sum of (i) a specified dollar amount, (ii) the aggregate net income of the
Company and its Restricted Subsidiaries earned subsequent to such specified date
and (iii) net proceeds received from capital stock issued subsequent to such
specified date. At December 31, 1999, approximately $991 million of consolidated
stockholders' equity was free of such limitations.

17
<PAGE> 19

ITEM 6. SELECTED FINANCIAL DATA.

SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY

The selected consolidated income statement data for each of the years in the
three-year period ended December 31, 1999, and consolidated balance sheet data
as of December 31, 1999 and 1998 presented below were derived from the audited
consolidated financial statements of the Company and the related notes thereto
included in this Report. The selected consolidated income statement data for
each of the years in the two-year period ended December 31, 1996, and
consolidated balance sheet data as of December 31, 1997, 1996 and 1995 presented
below were derived from audited consolidated financial statements of the Company
and the related notes thereto not included in this Report. The financial data
presented below and the related notes thereto should be read in conjunction with
the consolidated financial statements of the Company and the related notes
thereto included in this Report.

<TABLE>
<CAPTION>
Years ended or at December 31,
------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------
Dollars in millions
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Revenues
Car rental..................... $3,728.5 $3,484.8 $3,329.9 $3,161.6 $2,911.7
Industrial and construction
equipment rental............. 842.9 631.3 444.5 392.3 332.3
Car leasing.................... 39.8 37.5 40.9 35.4 35.6
Other(a)....................... 104.5 84.7 76.0 79.0 121.0
------- ------- ------- ------- -------
Total revenues............. 4,715.7 4,238.3 3,891.3 3,668.3 3,400.6
------- ------- ------- ------- -------
Expenses(b)
Direct operating............... 2,120.7 1,948.8 1,849.1 1,812.6 1,741.1
Depreciation of revenue earning
equipment(c)................. 1,240.8 1,078.0 979.6 892.7 803.9
Selling, general and
administrative............... 452.4 439.8 417.1 407.7 376.2
Interest, net of interest
income of $12.2, $11.5,
$13.8, $10.4 and $16.8....... 341.4 306.3 302.2 298.8 307.1
------- ------- ------- ------- -------
Total expenses............. 4,155.3 3,772.9 3,548.0 3,411.8 3,228.3
------- ------- ------- ------- -------
Income before income taxes....... 560.4 465.4 343.3 256.5 172.3
Provision for taxes on
income(d)...................... 224.4 188.4 141.7 97.9 67.1
------- ------- ------- ------- -------
Net income....................... $ 336.0 $ 277.0 $ 201.6 $ 158.6 $ 105.2
======= ======= ======= ======= =======
Earnings Per Share(e)
Basic.......................... $ 3.11 $ 2.56 $ 1.86 $ 1.47 $ .97
Diluted........................ $ 3.10 $ 2.55 $ 1.86 $ 1.46 $ .97
======= ======= ======= ======= =======

Weighted-average number of shares
outstanding
Basic.......................... 107,968,511 108,067,850 108,227,916 108,227,916 108,227,916
Diluted........................ 108,558,338 108,561,352 108,630,236 108,630,236 108,630,236
Ratio of earnings to
fixed charges(f)............... 2.3 2.2 1.9 1.7 1.4
======== ======== ======== ======= =======

BALANCE SHEET DATA
Revenue earning equipment, net
Cars........................... $ 4,762.3 $4,472.5 $4,039.8 $4,318.3 $3,627.2
Other equipment................ 1,501.4 1,309.5 852.0 717.4 543.0
Total assets..................... 10,136.7 8,872.6 7,435.5 7,649.2 6,656.6
Total debt....................... 6,602.2 5,759.8 4,715.7 5,091.8 4,297.5
Stockholders' equity............. 1,674.0 1,393.8 1,136.2 989.4 836.3
</TABLE>

18
<PAGE> 20

- - - - - - - - - - - - - - - - - - ---------------
(a) Includes fees from licensees (other than expense reimbursement from
licensees) and revenue from claim management and telecommunications
services.

(b) Certain prior year amounts have been reclassified to conform to the current
year presentation.

(c) For 1999, 1998, 1997, 1996 and 1995 includes net credits of $29.6 million,
$14.5 million, $3.3 million, $23.2 million and $6.4 million, respectively,
primarily from net proceeds received in excess of book value on the
disposal of revenue earning equipment. Effective January 1, 1997 and July
1, 1994, certain estimated useful lives being used to compute the provision
for depreciation of revenue earning equipment used in the industrial and
construction equipment rental business were increased to reflect changes in
the estimated residual values to be realized upon disposal of the
equipment. As a result of this change, depreciation of revenue earning
equipment for the years 1997 and 1995 decreased by $10.4 million and $12.0
million, respectively.

(d) Includes credits of $13.9 million for the year 1996, resulting from
adjustments made to tax accruals in connection with tax audit evaluations
and the effects of prior years' tax-sharing arrangements between the Company
and its former parent companies, UAL and RCA. For the year 1995, includes
$6.5 million of credits relating to foreign taxes which were offset against
U.S. income tax liabilities.

(e) The basic and diluted earnings per share for the years ended December 31,
1996 and 1995 assumes that the weighted-average shares outstanding during
1997 were outstanding for the corresponding periods in 1996 and 1995.

(f) Earnings have been calculated by adding interest expense and the portion of
rentals estimated to represent the interest factor to income before income
taxes. Fixed charges include interest charges (including capitalized
interest) and the portion of rentals estimated to represent the interest
factor.

19
<PAGE> 21

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

GENERAL
The Company is engaged principally in the business of renting and leasing cars
and renting industrial and construction equipment.

The Company's revenues principally are derived from rental and related charges
and consist of:

- Car rental revenues (revenues from all owned car and truck operations,
including loss or collision damage waivers, liability insurance and other
products)

- Industrial and construction equipment rental revenues

- Car leasing revenues

- Other revenues (fees from the Company's licensees, revenues from the
Company's claim management and telecommunications services)

The Company's expenses consist of:

- Direct operating expenses (primarily wages and related benefits;
concessions and commissions paid to airport authorities, travel agents and
others, and other costs relating to the operation and rental of the
revenue earning equipment, such as maintenance and reservations)

- Depreciation expense relating to revenue earning equipment (including net
gains or losses on the disposal of such equipment). Revenue earning
equipment includes cars, trucks and industrial and construction equipment.

- Selling, general and administrative expenses (including advertising)

- Interest expense relating primarily to the funding of the acquisition of
revenue earning equipment

The Company's profitability is primarily a function of the volume and pricing of
rental transactions and the utilization of cars and equipment. Significant
changes in the purchase price of cars and equipment or interest rates can also
have a significant effect on the Company's profitability depending on the
ability of the Company to adjust pricing for these changes. The Company's
business requires significant expenditures for cars and equipment and the
Company consequently requires substantial liquidity to finance such
expenditures.

At December 31, 1999, 71% of the cars in the Company's car rental fleet were
subject to repurchase by automobile manufacturers under guaranteed repurchase
programs pursuant to which automobile manufacturers agree to repurchase cars,
subject to certain car conditions and mileage requirements, at a specified price
after a minimum period of service. See "Business -- Worldwide Car Rental -- Car
Acquisition." The Company's industrial and construction equipment is not subject
to such guaranteed repurchase programs.

The following discussion and analysis provides information that management
believes to be relevant to understanding the Company's consolidated financial
condition and results of operations. This discussion should be read in
conjunction with the financial statements and the related notes thereto
contained in the Company's consolidated financial statements included in this
Report.

20
<PAGE> 22

RESULTS OF OPERATIONS
The following table sets forth for each of the years indicated, the percentage
of operating revenues represented by certain items in the Company's consolidated
statement of income:

<TABLE>
<CAPTION>
Percentage of Revenues
------------------------
Years Ended
December 31,
------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Revenues:
Car rental................................................ 79.1% 82.2% 85.5%
Industrial and construction equipment rental.............. 17.9 14.9 11.4
Car leasing............................................... .8 .9 1.1
Other..................................................... 2.2 2.0 2.0
----- ----- -----
100.0 100.0 100.0
----- ----- -----
Expenses:
Direct operating.......................................... 45.0 46.0 47.5
Depreciation of revenue earning equipment................. 26.3 25.4 25.2
Selling, general and administrative....................... 9.6 10.4 10.7
Interest, net of interest income.......................... 7.2 7.2 7.8
----- ----- -----
88.1 89.0 91.2
----- ----- -----
Income before income taxes.................................. 11.9 11.0 8.8
Provision for taxes on income............................... 4.8 4.5 3.6
----- ----- -----
Net income.................................................. 7.1% 6.5% 5.2%
===== ===== =====
</TABLE>

YEAR ENDED DECEMBER 31, 1999 COMPARED WITH YEAR ENDED
DECEMBER 31, 1998

REVENUES
The Company achieved record revenues of $4,715.7 million in 1999, which
increased by 11.3% from $4,238.3 million in 1998.

Revenues from car rental operations of $3,728.5 million in 1999 increased by
7.0% from $3,484.8 million in 1998. This increase of $243.7 million was
primarily the result of a worldwide increase in transactions of 7.3% that
contributed $256.4 million in increased revenue. Revenue was reduced by
approximately $35 million from the effect of the strong U.S. dollar on foreign
currency translation. The translation impact of exchange rates on net income is
not significant because the majority of the Company's foreign expenses are also
incurred in local currencies.

Revenues from industrial and construction equipment rental of $842.9 million in
1999 increased by 33.5% from $631.3 million in 1998. Of this $211.6 million
increase, approximately $146.1 million was due to an increase in volume
resulting from the inclusion of 26 acquired businesses worldwide. Approximately
$65.5 million was due to increased activity from existing and greenfield
locations which grew 12.4%.

Revenues from all other sources of $144.3 million in 1999 increased by 18.1%
from $122.2 million in 1998, primarily due to an increase in telecommunications
and franchise revenues. This increase was partly offset by the effects of
foreign currency translation.

EXPENSES
Total expenses of $4,155.3 million in 1999 increased by 10.1% from $3,772.9
million in 1998, although total expenses as a percentage of revenues decreased
to 88.1% in 1999 from 89.0% in 1998.

Direct operating expenses of $2,120.7 million in 1999 increased by 8.8% from
$1,948.8 million in 1998, but were lower in 1999 as a percentage of revenues due
to more efficient fixed cost coverage. The increase was primarily the result of
the expansion of the industrial and construction equipment rental business and
higher wages in car rental operations,

21
<PAGE> 23

which corresponds with the increase in transaction volume. The overall increase
was moderated by foreign currency translation changes, recoveries of concession
fees and refueling costs and decreases in other vehicle operating costs in car
rental operations.

Depreciation of revenue earning equipment for the car rental and car leasing
operations of $1,029.3 million in 1999 increased by 11.3% from $924.4 million in
1998, primarily due to an increase in the number of cars operated worldwide and,
to a lesser extent, an increase in the cost of cars. These increases were partly
offset by an increase in the net proceeds received in 1999 in excess of book
value on the disposal of the cars, resulting in a $5.7 million gain in 1999 as
compared to $.5 million loss in 1998.

Depreciation of revenue earning equipment for the industrial and construction
equipment rental operations of $211.5 million in 1999 increased by 37.7% from
$153.6 million in 1998, primarily due to acquisitions of equipment rental and
sales companies and an increase in both the volume and cost of equipment
operated. These increases were partly offset by an increase in the net proceeds
received in excess of book value on the disposal of the equipment resulting in a
$23.9 million gain in 1999 versus a $14.9 million gain in 1998.

Selling, general and administrative expenses of $452.4 million in 1999 increased
by 2.9% from $439.8 million in 1998, but decreased as a percentage of revenue to
9.6% in 1999 from 10.4% in 1998. The increase in 1999 resulted from increases in
sales promotion and administrative expenses and were partly offset by lower
advertising costs in 1999 and by foreign currency translation changes. The sales
promotion increase was primarily a result of the growth of the industrial and
construction equipment rental operations.

Interest expense of $341.4 million in 1999 increased 11.5% from $306.3 million
in 1998, primarily due to higher average debt levels in 1999, partially offset
by a lower weighted-average interest rate in 1999.

The tax provision of $224.4 million in 1999 increased 19.1% from $188.4 million
in 1998. The effective tax rate in 1999 was 40.0% as compared to 40.5% in 1998.
The increase in provision was due to higher income before income taxes in 1999.
See Notes 1 and 9 to the Notes to the Company's consolidated financial
statements included in this Report.

NET INCOME
The Company achieved record net income of $336.0 million in 1999, or $3.10 per
share, on a diluted basis, representing an increase of 21.3% from $277.0
million, or $2.55 per share on a diluted basis, in 1998. This increase was
primarily due to higher revenues and improved profit margins in the worldwide
car rental operations and the net effect of other contributing factors noted
above.

YEAR ENDED DECEMBER 31, 1998 COMPARED WITH YEAR ENDED DECEMBER 31, 1997

REVENUES
The Company achieved record revenues of $4,238.3 million in 1998, which
increased by 8.9% from $3,891.3 million in 1997.

Revenues from car rental operations of $3,484.8 million in 1998 increased by
4.7% from $3,329.9 million in 1997. This increase of $154.9 million was the
result of a worldwide increase in transactions of 3.7% and pricing of
approximately 3.7%, partially offset by a decrease in average transaction length
in the United States, that contributed $184.7 million in increased revenue.
Revenue was reduced by $29.8 million from the effect of the strong U.S. dollar
on foreign currency translation. The translation impact of exchange rates on net
income is not significant because the majority of the Company's foreign expenses
are also incurred in local currencies.

Revenues from industrial and construction equipment rental of $631.3 million in
1998 increased by 42.0% from $444.5 million in 1997. Of this $186.8 million
increase, approximately $120.3 million was due to an increase in volume
resulting from the inclusion of 13 acquired businesses and the opening of 33 new
locations worldwide in the last 12 months, and approximately $66.5 million was
due to increased activity from existing locations which grew 15%.

Revenues from all other sources of $122.2 million in 1998 increased by 4.5% from
$116.9 million in 1997, primarily due to an increase in franchise revenues. This
increase was partly offset by the effects of foreign currency translation.

22
<PAGE> 24

EXPENSES
Total expenses of $3,772.9 million in 1998 increased by 6.3% from $3,548.0
million in 1997, although total expenses as a percentage of revenues decreased
to 89.0% in 1998 from 91.2% in 1997.

Direct operating expenses of $1,948.8 million in 1998 increased by 5.4% from
$1,849.1 million in 1997, but were lower in 1998 as a percentage of revenues due
to more efficient fixed cost coverage. The increase was primarily due to
increased wage, commission, facility and reservation costs in car rental
operations, which corresponds with the increase in transaction volume, and in
industrial and construction equipment rental operations which opened or acquired
105 worldwide locations in 1998. The overall increase was moderated by foreign
currency translation changes, recoveries of concession fees and refueling costs
and favorable self-insurance claims and decreases in vehicle damage and other
vehicle operating costs in car rental operations.

Depreciation of revenue earning equipment for the car rental and car leasing
operations of $924.4 million in 1998 increased by 4.9% from $881.1 million in
1997, primarily due to an increase in the number of cars operated worldwide and
an increase in the cost of cars in international operations. These increases
were partly offset by an increase in the net proceeds received in 1998 in excess
of book value on the disposal of the cars (which resulted in a loss of $.5
million in 1998 as compared to a loss of $10.5 million in 1997).

Depreciation of revenue earning equipment for the industrial and construction
equipment rental operations of $153.6 million in 1998 increased by 55.9% from
$98.5 million in 1997, primarily due to acquisitions of equipment rental and
sales companies and an increase in both the volume and cost of equipment
operated. This increase was partly offset by an increase in the net proceeds
received in excess of book value on the disposal of the equipment resulting in a
$14.5 million gain in 1998 versus a $13.8 million gain in 1997.

Selling, general and administrative expenses of $439.8 million in 1998 increased
by 5.4% from $417.1 million in 1997, but decreased as a percentage of revenue to
10.4% in 1998 from 10.7% in 1997. The increase in 1998 resulted from increases
in advertising and sales promotion expenses, primarily as a result of the growth
of the industrial and construction equipment rental operations.

Interest expense of $306.3 million in 1998 increased 1.4% from $302.2 million in
1997, primarily due to higher debt levels and lower interest income in 1998,
partially offset by a lower weighted-average interest rate in 1998 and interest
expense of $4.3 million incurred in 1997, relating to funding the $460 million
dividend paid by the Company on its common stock to Ford in 1997.

The tax provision of $188.4 million in 1998 increased 33.0% from $141.7 million
in 1997. The effective tax rate in 1998 was 40.5% as compared to 41.3% in 1997.
The increase in provision was due to higher income before income taxes in 1998.
The decrease in the effective tax rate is primarily due to the impact of foreign
earnings. See Notes 1 and 9 to the Notes to the Company's consolidated financial
statements included in this Report.

NET INCOME
The Company achieved record net income of $277.0 million in 1998, or $2.55 per
share, on a diluted basis, representing an increase of 37.4% from $201.6
million, or $1.86 per share on a diluted basis, in 1997. This increase was
primarily due to higher revenues and improved profit margins in the worldwide
car rental operations and the net effect of other contributing factors noted
above.

LIQUIDITY AND CAPITAL RESOURCES
The Company's domestic and foreign operations are funded by cash provided by
operating activities, and by extensive financing arrangements maintained by the
Company in the United States, Europe, Australia, New Zealand, Canada and Brazil.
The Company's investment grade credit ratings provide it with access to global
capital markets to meet its borrowing needs. The Company primarily uses funds
for the acquisition of revenue earning equipment which consists of cars and
industrial and construction equipment. For the year ended December 31, 1999, the
Company's expenditures for revenue earning equipment were $8,505.0 million
(offset by proceeds from the sale of such equipment of $6,766.3 million). These
assets are purchased by the Company in accordance with the terms of agreements
negotiated with automobile and equipment manufacturers. In 1999, the Company
expended $143.6 million for businesses acquired and assumed $26.1 million of
related debt, and invested $14.8 million in a business venture. For the year
ended December 31, 1999, the Company's capital investments for property and
non-revenue earning equipment were $323.2 million.

23
<PAGE> 25

To finance its domestic requirements, the Company maintains an active commercial
paper program. The Company is also active in the domestic medium-term and
long-term debt markets. From time to time, the Company files with the Securities
and Exchange Commission shelf registration statements relating to debt
securities to allow for the issuance of unsecured senior, senior subordinated
and junior subordinated debt securities on terms to be determined at the time
the securities are offered for sale. At December 31, 1999, the Company had
available $1 billion for issuance under an effective registration statement. The
total amount of medium-term and long-term debt outstanding as of December 31,
1999 was $3.6 billion with maturities ranging from 2000 to 2028.

Borrowing for the Company's international operations consists mainly of loans
obtained from local and international banks and commercial paper programs
established in Australia, Canada and Ireland. The Company guarantees only the
borrowings of its subsidiaries in Australia, Canada and Ireland, which consist
principally of commercial paper and short-term bank loans. All borrowings by
international operations either are in the international operation's local
currency or, if in non-local currency, fully hedged to minimize foreign exchange
exposure. At December 31, 1999, total debt for the foreign operations was $973
million, of which $969 million was short-term (original maturity of less than
one year) and $4 million was long-term. At December 31, 1999 total amounts
outstanding (in millions of U.S. dollars) under the Australian, Irish and
Canadian commercial paper programs were $117, $168 and $197, respectively.

At December 31, 1999, the Company had committed credit facilities available
totaling $3.1 billion. Of this amount, $2.2 billion is represented by a
combination of multi-year and 364-day global committed credit facilities
provided by 30 relationship banks. In addition to direct borrowings by the
Company, these facilities allow any subsidiary of the Company to borrow on the
basis of a guarantee by the Company. Effective July 1, 1999, the multi-year
facilities totaling $1,128 million were renegotiated. Currently, $63 million
expires on June 30, 2002, $137 million expires on June 30, 2003, and $928
million expires on June 30, 2004. The 364-day facilities, totaling $1,038
million, expire on June 21, 2000. The multi-year facilities that expire in 2004
have an evergreen feature which provides for the automatic extension of the
expiration date one year forward unless timely notice is provided by the bank.
Under the terms of the 364-day facilities totaling $963 million, the Company is
permitted to convert any amount outstanding prior to expiration into a four-year
term loan.

In addition to these bank credit facilities, in February 1997, Ford extended to
the Company a line of credit of $500 million, which currently expires June 30,
2001. This line of credit has an evergreen feature that provides on an annual
basis for automatic one-year extensions of the expiration date, unless notice is
provided by Ford at least one year prior to the then scheduled expiration date.

The Company's decision to withdraw earnings or investments from foreign
countries is, in some cases, influenced by exchange controls and the utilization
of foreign tax credits, and may also be affected by fluctuations in exchange
rates for foreign currencies and by revaluation of such currencies in relation
to the U.S. dollar by the governments involved. Foreign operations have been
financed to a substantial extent through loans from local lending sources in the
currency of the countries in which such operations are conducted. Car rental
operations in foreign countries are, from time to time, subject to governmental
regulations imposing varying degrees of currency restrictions. Currency
restrictions and other regulations historically have not had a material impact
on the Company's operations as a whole.

Under the Company's Long-Term Equity Compensation Plan and Employee Stock
Purchase Plan, 1.55 million shares of its Class A Common Stock may be
repurchased to meet plan requirements. Through December 31, 1999, 1.1 million
shares were repurchased under these programs.

Car rental is a seasonal business, with decreased travel in both the business
and leisure segments in the winter months and heightened activity during the
spring and summer. To accommodate increased demand, the Company increases its
available fleet and staff during the second and third quarters. As business
demand declines, fleet and staff are decreased as well. However, certain
operating expenses, including rent, insurance, and administrative overhead,
remain fixed and cannot be adjusted for seasonal demand. In certain geographic
markets, the impact of seasonality has been reduced by emphasizing leisure or
business travel in the off-seasons.

24
<PAGE> 26

The table below shows capital expenditures (net of proceeds received from the
sale of revenue earning equipment) and financial results by quarter for 1999 and
1998.

<TABLE>
<CAPTION>
Capital Operating
Expenditures Income Income Earnings
(Net of Sale (Pre-Tax Before Per Share
Proceeds Income Before Income Net ---------------
Received) Revenues Interest) Taxes Income Basic Diluted
------------ -------- ------------- ------ ------ ----- -------
Dollars in millions
<S> <C> <C> <C> <C> <C> <C> <C>
1999
- - - - - - - - - - - - - - - - - - ----
First Quarter............... $ 835.7 $1,033.0 $159.2 $ 82.0 $ 48.8 $ .45 $ .45
Second Quarter.............. 1,224.0 1,167.4 226.3 146.9 87.9 .81 .81
Third Quarter............... 198.4 1,344.8 326.4 232.7 139.0 1.29 1.28
Fourth Quarter.............. (220.2) 1,170.5 189.9 98.8 60.3 .56 .56
-------- -------- ------ ------ ------ ----- -----
Total Year................ $2,037.9 $4,715.7 $901.8 $560.4 $336.0 $3.11 $3.10
======== ======== ====== ====== ====== ===== =====
1998
- - - - - - - - - - - - - - - - - - ----
First Quarter............... $ 661.8 $ 898.8 $129.4 $ 60.7 $ 35.4 $ .33 $ .33
Second Quarter.............. 1,289.4 1,048.4 200.7 127.3 75.0 .69 .69
Third Quarter............... 63.4 1,225.1 286.2 200.3 118.7 1.10 1.09
Fourth Quarter.............. 5.3 1,066.0 155.4 77.1 47.9 .44 .44
-------- -------- ------ ------ ------ ----- -----
Total Year................ $2,019.9 $4,238.3 $771.7 $465.4 $277.0 $2.56 $2.55
======== ======== ====== ====== ====== ===== =====
</TABLE>

MARKET RISKS
The Company is exposed to a variety of market risks, including the effects of
changes in interest rates and foreign currency exchange rates. The Company
manages its exposure to these market risks through its regular operating and
financing activities and, when deemed appropriate, through the use of derivative
financial instruments. Derivative financial instruments are viewed as risk
management tools and are not used for speculative or trading purposes. In
addition, derivative 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. For more information on
these exposures see Note 14 to the Notes to the Company's consolidated financial
statements included in this Report.

INTEREST RATE RISK
The Company and its subsidiaries have entered into arrangements to manage
exposures to fluctuations in interest rates. These arrangements consist of
interest rate swap agreements. The effect of these agreements is to make the
Company less susceptible to changes in interest rates by effectively converting
certain variable rate debt to fixed rate debt. The Company has assessed its
exposure to changes in interest rates by analyzing the sensitivity to its
earnings assuming various changes in market interest rates. Assuming an
instantaneous increase of one percentage point in interest rates on the existing
debt portfolio, the Company's net income would decline by approximately $19
million over a 12-month period.

FOREIGN CURRENCY RISK
The Company and its subsidiaries have entered into arrangements to manage
exposure to fluctuations in foreign exchange rates for certain foreign currency
loans and selected marketing programs. These arrangements consist of foreign
exchange forward contracts and the purchase of foreign exchange options. The
effect of exchange rate changes on these financial instruments would not
materially affect the consolidated financial position, results of operations or
cash flows of the Company.

YEAR 2000
The Company initiated a comprehensive year 2000 date conversion project plan in
early 1997. The Company's year 2000 effort included worldwide computer-based
applications, operating software, computer hardware, telecommunications systems,
external data exchanges, electronic equipment and facilities systems. The
Company completed all testing and remediation of its systems and all contingency
plans prior to December 31, 1999.

25
<PAGE> 27

The Company expended approximately $20.4 million from inception of the project
through December 31, 1999. Approximately $7.4 million of the cost of conversion
was incurred during 1999. The Company does not anticipate incurring any
significant additional costs. As of the date of this filing, the Company has not
been affected by any Year 2000 software or computer-related problems. The
Company will continue to monitor its internal systems, major vendors and service
providers.

EURO CURRENCY CONVERSION
The single European currency ("euro") was introduced on January 1, 1999 with a
complete transition to this new currency by January 1, 2002. The Company is
pricing its product in euros during the transition period as customers require.
The conversion to the euro has not had a material effect on pricing, hedging
costs, systems modification costs or exposure to changes in foreign currency
exchange rates.

The Company is preparing for a conversion to the euro for internal accounting
purposes at the end of the year 2001. Earlier implementation may take place in
certain countries where it would be operationally feasible to do so.

The Company will continue to evaluate the impact of the euro conversion over
time. Based on currently available information, the conversion to the euro is
not expected to have a material effect on the Company's financial position or
results of operations or cash flows.

ACCOUNTING CHANGE
In the first quarter of 1999, the Company adopted Statement of Position 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use" ("SOP 98-1"), dealing with the costs of internal use software. SOP
98-1 requires capitalization of such costs after certain preliminary development
efforts have been made. Costs capitalized are direct costs and interest costs
related to development efforts. Prior to the adoption of this standard, the
Company expensed these costs as incurred. Adoption of this standard did not have
a material effect on the Company's financial position, results of operations or
cash flows.

RECENT PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes a new model for
accounting for derivatives and hedging activities. In July 1999, the FASB
delayed the effective date to fiscal years beginning after June 15, 2000. The
Company will adopt SFAS No. 133 beginning January 1, 2001. The adoption of SFAS
No. 133 is not expected to have a material effect on the Company's financial
position or results of operations or cash flows.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

See Management's Discussion and Analysis of Financial Condition and Results of
Operations which appears on pages 20 to 26 of this Report.

26
<PAGE> 28

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

REPORT OF INDEPENDENT ACCOUNTANTS

To The Hertz Corporation:

In our opinion, the accompanying consolidated financial statements present
fairly, in all material respects, the financial position of The Hertz
Corporation (a majority-owned subsidiary of Ford Motor Company) and its
subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States. In addition, in our opinion, the financial statement
schedule listed in Item 14(a)2, presents fairly in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements. These financial statements and financial
statement schedule are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits. We conducted our audits of
these statements in accordance with auditing standards generally accepted in the
United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

PRICEWATERHOUSECOOPERS LLP

Florham Park, New Jersey
January 18, 2000

27
<PAGE> 29

THE HERTZ CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
December 31,
-------------------------
1999 1998
----------- ----------
Dollars in thousands
<S> <C> <C>
ASSETS
Cash and equivalents (Note 14).............................. $ 208,652 $ 188,466
Receivables, less allowance for doubtful accounts of $24,299
(1998 -- $16,040) (Schedule II)........................... 1,092,955 893,440
Due from affiliates (Note 8)................................ 698,612 430,169
Inventories, at lower of cost or market..................... 57,546 39,502
Prepaid expenses and other assets (Notes 4 and 5)........... 120,270 85,823
Revenue earning equipment, at cost (Note 8):
Cars...................................................... 5,277,472 4,980,516
Less accumulated depreciation........................... (515,128) (508,008)
Other equipment........................................... 1,953,854 1,653,941
Less accumulated depreciation........................... (452,420) (344,416)
----------- ----------
Total revenue earning equipment..................... 6,263,778 5,782,033
----------- ----------
Property and equipment, at cost:
Land, buildings and leasehold improvements................ 806,058 692,926
Service equipment......................................... 775,010 662,141
----------- ----------
1,581,068 1,355,067
Less accumulated depreciation........................... (673,710) (623,259)
----------- ----------
Total property and equipment........................ 907,358 731,808
----------- ----------
Franchises, concessions and contract costs, net of
amortization (Note 5)..................................... 13,570 13,107
Cost in excess of net assets of purchased businesses, net of
amortization (Note 5)..................................... 773,966 708,210
----------- ----------
Total assets........................................ $10,136,707 $8,872,558
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable (Note 8)................................... $ 546,111 $ 510,441
Accrued salaries and other compensation..................... 215,310 204,208
Other accrued liabilities................................... 388,997 392,367
Accrued taxes............................................... 146,405 113,217
Debt (Notes 3 and 14)....................................... 6,602,220 5,759,783
Public liability and property damage (Schedule II).......... 292,573 307,219
Deferred taxes on income (Note 9)........................... 271,100 191,500
Commitments and contingencies (Notes 10, 12 and 14)
Stockholders' equity (Notes 1 and 3):
Class A Common Stock, $0.01 par value, 440,000,000 shares
authorized, 40,956,858 shares issued.................... 410 410
Class B Common Stock, $0.01 par value, 140,000,000 shares
authorized, 67,310,167 shares issued.................... 673 673
Additional capital paid-in................................ 982,298 982,564
Unamortized restricted stock grants....................... (3,452) (7,845)
Retained earnings......................................... 766,513 452,110
Accumulated other comprehensive income (Note 4)........... (52,499) (20,776)
Treasury stock, at cost, 420,725 shares................... (19,952) (13,313)
----------- ----------
Total stockholders' equity.......................... 1,673,991 1,393,823
----------- ----------
Total liabilities and stockholders' equity.......... $10,136,707 $8,872,558
=========== ==========
</TABLE>

The accompanying notes are an integral part of this statement.

28
<PAGE> 30

THE HERTZ CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME

<TABLE>
<CAPTION>
Years ended December 31,
--------------------------------------
1999 1998 1997
---------- ---------- ----------
Dollars in thousands
<S> <C> <C> <C>
Revenues:
Car rental................................................ $3,728,429 $3,484,770 $3,329,858
Industrial and construction equipment rental.............. 842,932 631,338 444,508
Car leasing............................................... 39,825 37,547 40,905
Other (Note 5)............................................ 104,480 84,678 76,049
---------- ---------- ----------
Total revenues...................................... 4,715,666 4,238,333 3,891,320
---------- ---------- ----------
Expenses:
Direct operating.......................................... 2,120,688 1,948,837 1,849,120
Depreciation of revenue earning equipment (Note 8)........ 1,240,818 1,078,009 979,560
Selling, general and administrative....................... 452,408 439,821 417,158
Interest, net of interest income of $12,157, $11,482 and
$13,826 (Note 3)........................................ 341,359 306,274 302,212
---------- ---------- ----------
Total expenses.......................................... 4,155,273 3,772,941 3,548,050
---------- ---------- ----------
Income before income taxes.................................. 560,393 465,392 343,270
Provision for taxes on income (Note 9)...................... 224,392 188,383 141,652
---------- ---------- ----------
Net income (Notes 2 and 7).................................. $ 336,001 $ 277,009 $ 201,618
========== ========== ==========
Earnings per share (Notes 2 and 7):
Basic..................................................... $ 3.11 $ 2.56 $ 1.86
========== ========== ==========
Diluted................................................... $ 3.10 $ 2.55 $ 1.86
========== ========== ==========
</TABLE>

The accompanying notes are an integral part of this statement.

29
<PAGE> 31

THE HERTZ CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
Common Unamortized Accumulated
and Additional Restricted Other Total
Preferred Capital Stock Retained Comprehensive Treasury Stockholders'
Stock Paid-In Grants Earnings Income Stock Equity
--------- ---------- ----------- --------- ------------- -------- -------------
Dollars in thousands
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES AT

DECEMBER 31, 1996................. $ 485,901 $ 59,008 $ -- $ 435,352 $ 9,104 $ -- $ 989,365
Comprehensive Income
Net income.................... 201,618 201,618
Translation adjustment
changes..................... (39,587) (39,587)
Unrealized holding gains on
securities.................. 64 64
----------
Total Comprehensive Income.... 162,095
----------
Cash dividend to Ford........... (30,566) (429,434) (460,000)
Issuance of Preferred Stock..... 129,000 129,000
Redemption of Preferred Stock... (130,135) (130,135)
Reclassify Ford-owned stock..... (485,025) 485,025 --
Sale of Class A Common Stock.... 207 469,686 (16,825) 453,068
Cash dividends on Common Stock.. (10,821) (10,821)
Amortization of restricted stock
grants........................ 3,625 3,625
Forfeiture of 59,865 shares of
restricted stock grants....... (1,437) 1,437 --
--------- --------- -------- --------- -------- -------- ----------
DECEMBER 31, 1997................. 1,083 980,581 (11,763) 196,715 (30,419) -- 1,136,197
Comprehensive Income Net
income........................ 277,009 277,009
Translation adjustment
changes..................... 9,552 9,552
Unrealized holding gains on
securities.................. 91 91
----------
Total Comprehensive Income.... 286,652
----------
Cash dividends on Common Stock.. (21,614) (21,614)
Acquisition of Treasury Stock... 1 (16,511) (16,510)
Exercise of stock options....... 400 2,743 3,143
Tax benefits from stock options
and restricted stock.......... 1,555 1,555
Issuance of 30,000 shares of
restricted stock grants....... 745 (1,200) 455 --
Amortization of restricted stock
grants........................ 4,400 4,400
Forfeiture of 29,930 shares of
restricted stock grants....... (718) 718 --
--------- --------- -------- --------- -------- -------- ----------
DECEMBER 31, 1998................. 1,083 982,564 (7,845) 452,110 (20,776) (13,313) 1,393,823
Comprehensive Income Net
income........................ 336,001 336,001
Translation adjustment
changes..................... (29,972) (29,972)
Unrealized holding losses on
securities.................. (283) (283)
Minimum pension liability
adjustment.................. (1,468) (1,468)
----------
Total Comprehensive Income.... 304,278
----------
Cash dividends on Common Stock.. (21,598) (21,598)
Acquisition of Treasury Stock... (29,903) (29,903)
Exercise of stock options....... (6,417) 23,264 16,847
Tax benefits from stock options
and restricted stock.......... 6,151 6,151
Amortization of restricted stock
grants........................ 4,393 4,393
--------- --------- -------- --------- -------- -------- ----------
DECEMBER 31, 1999................. $ 1,083 $ 982,298 $ (3,452) $ 766,513 $(52,499) $(19,952) $1,673,991
========= ========= ======== ========= ======== ======== ==========
</TABLE>

The accompanying notes are an integral part of this statement.

30
<PAGE> 32

THE HERTZ CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------------------
1999 1998 1997
----------- ----------- -----------
Dollars in thousands
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 336,001 $ 277,009 $ 201,618
Non-cash expenses:
Depreciation of revenue earning equipment............... 1,240,818 1,078,009 979,560
Depreciation of property and equipment.................. 112,296 108,462 88,102
Amortization of intangibles............................. 27,623 25,775 19,961
Amortization of restricted stock grants................. 4,393 4,400 3,625
Provision for public liability and property damage...... 123,950 114,373 122,540
Provision for losses for doubtful accounts.............. 19,824 5,051 9,623
Deferred income taxes................................... 79,600 25,500 49,200
Revenue earning equipment expenditures.................... (8,504,986) (7,705,138) (7,556,693)
Proceeds from sales of revenue earning equipment.......... 6,766,256 5,914,783 6,597,601
Changes in assets and liabilities, net of effects from
sale of operations:
Receivables............................................. (273,373) (69,226) 1,224
Due from affiliates..................................... (268,443) (6,735) 32,591
Inventories and prepaid expenses and other assets....... (33,058) 3,495 (5,376)
Accounts payable........................................ 45,215 (6,551) 93,410
Accrued liabilities..................................... 23,083 49,201 (21,117)
Accrued taxes........................................... 35,786 12,265 (7,631)
Payments of public liability and property damage claims
and expenses............................................ (139,008) (117,098) (132,807)
----------- ----------- -----------
Net cash flows (used in) provided by operating
activities.............................................. $ (404,023) $ (286,425) $ 475,431
=========== =========== ===========
</TABLE>

The accompanying notes are an integral part of this statement.

31
<PAGE> 33

THE HERTZ CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------------------
1999 1998 1997
----------- ----------- -----------
Dollars in thousands
<S> <C> <C> <C>
Cash flows from investment activities:
Property and equipment expenditures....................... $ (323,208) $ (246,601) $ (172,346)
Proceeds from sales of property and equipment............. 24,032 17,083 26,765
Available-for-sale securities:
Purchases............................................... (3,876) (2,854) (2,448)
Sales................................................... 3,689 2,603 2,332
Proceeds from sale of operations, net of cash............. -- 4,341 2,079
Investment in joint venture............................... (14,800) -- --
Purchases of various operations, net of cash (see
supplemental disclosures below)......................... (143,643) (343,883) (2,200)
----------- ----------- -----------
Net cash used in investing activities................... (457,806) (569,311) (145,818)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from issuance of long-term debt.................. 1,046,743 454,057 403,228
Repayment of long-term debt............................... (368,715) (452,595) (212,176)
Short-term borrowings:
Proceeds................................................ 1,855,218 2,347,206 1,621,577
Repayments.............................................. (2,117,979) (1,409,263) (1,660,299)
Ninety-day term or less, net............................ 498,031 (15,195) (489,763)
Cash dividend paid to Ford................................ -- -- (460,000)
Issuance of preferred stock to Ford....................... -- -- 129,000
Redemption of preferred stock from Ford................... -- -- (130,135)
Sale of common stock...................................... -- -- 453,068
Cash dividends paid on common stock....................... (21,598) (21,614) (10,821)
Purchase of treasury stock................................ (29,903) (16,510) --
Exercise of stock options................................. 16,847 3,143 --
Tax benefit from exercise of stock options................ 6,151 1,555 --
----------- ----------- -----------
Net cash used in financing activities................... 884,795 890,784 (356,321)
----------- ----------- -----------
Effect of foreign exchange rate changes on cash............. (2,780) 798 17
----------- ----------- -----------
Net increase (decrease) in cash and equivalents during the
period.................................................... 20,186 35,846 (26,691)
Cash and equivalents at beginning of year................... 188,466 152,620 179,311
----------- ----------- -----------
Cash and equivalents at end of year......................... $ 208,652 $ 188,466 $ 152,620
=========== =========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest (net of amounts capitalized)................... $ 354,991 $ 315,566 $ 297,661
Income taxes............................................ 122,703 149,038 103,468
</TABLE>

In connection with acquisitions made during the years 1999, 1998 and 1997,
liabilities assumed were $67 million, $132 million and $5 million, respectively.

The accompanying notes are an integral part of this statement.

32
<PAGE> 34

THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CHANGE IN OWNERSHIP
The Hertz Corporation (together with its subsidiaries, referred to herein as
"Hertz" or the "Company"), which was incorporated in Delaware in 1967, is a
successor to corporations which were engaged in the automobile and truck rental
and leasing business since 1918. UAL Corporation ("UAL") purchased the Company
from RCA Corporation ("RCA") in August 1985. Park Ridge Corporation ("Park
Ridge"), which was 80%-owned by Ford Motor Company ("Ford"), purchased the
Company from UAL in December 1987. On April 29, 1994, Ford purchased all of the
common stock of the Company owned by Park Ridge Limited Partnership which
resulted in the Company becoming a wholly-owned subsidiary of Ford.

On February 27, 1997, the Company issued to Ford 1,290 shares of its 5.11%
Cumulative Series C Preferred Stock, par value $.01 per share, (the "Series C
Preferred Stock"), in exchange for U.S. Treasury securities having an aggregate
fair market value at that time of $129 million. On February 27, 1997, the
Company paid a dividend of $460 million on its common stock to Ford in the form
of a 5.475% promissory note, which was fully repaid by March 10, 1997. In
connection with these transactions, cash and equivalents were increased by $129
million, notes payable were increased by $460 million, additional capital
paid-in was increased by $129 million relating to the issuance of the Series C
Preferred Stock and decreased by $30.6 million relating to the payment of the
dividend on the common stock, and retained earnings was decreased by $429.4
million relating to the payment of the dividend on the common stock. On April
30, 1997, the Company redeemed all the issued and outstanding shares of the
Series C Preferred Stock.

In April 1997, the Company reclassified all of its outstanding common stock, par
value $1.00 per share, owned by Ford into 67,310,167 shares of Class B Common
Stock, par value $.01 per share, and reclassified all of its outstanding 10%
Cumulative Series A Preferred Stock and variable rate Cumulative Series B
Preferred Stock beneficially owned by Ford into 20,245,833 shares of its Class A
Common Stock, par value $.01 per share. The Company also issued 701,025 shares
of its Class A Common Stock pursuant to an employee benefit plan.

On April 30, 1997, the Company issued and sold 20,010,000 shares of its Class A
Common Stock in an initial public offering (the "Offering") and received net
proceeds of $453 million from the sale, and redeemed its 1,290 shares of Series
C Preferred Stock for $130 million. The net proceeds received from the Offering
were used to pay down notes payable. At December 31, 1999, the common stock
beneficially owned by Ford represents in the aggregate 94.6% of the combined
voting power of all of the Company's outstanding common stock and 81.2% of the
economic interest in the Company. Accordingly, Ford is able to direct the
election of all of the members of the Company's Board of Directors and exercise
a controlling influence over the business and affairs of the Company.

PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of The Hertz
Corporation and its domestic and foreign subsidiaries. All significant
intercompany transactions have been eliminated.

CONSOLIDATED STATEMENT OF CASH FLOWS
For purposes of this statement, the Company considers all highly liquid debt
instruments purchased with an original maturity of three months or less to be
cash equivalents. See Change in Ownership for non-cash investing and financing
activities.

33
<PAGE> 35
THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

DEPRECIABLE ASSETS
The provisions for depreciation and amortization are computed on a straight-line
basis over the estimated useful lives of the respective assets, as follows:

<TABLE>
<S> <C>
Revenue Earning Equipment:
Cars...................................................... 3 to 6 years
Other equipment........................................... 3 to 10 years
Buildings................................................... 20 to 50 years
Leasehold improvements...................................... Term of lease
Capitalized internal use software........................... 1 to 5 years
Service cars and service equipment.......................... 3 to 25 years
Franchises, concessions and contract costs.................. 10 to 40 years
Cost in excess of net assets of purchased businesses........ 20 to 40 years
</TABLE>

Hertz follows the practice of charging maintenance and repairs, including the
cost of minor replacements, to maintenance expense accounts. Costs of major
replacements of units of property are charged to property and equipment accounts
and depreciated on the basis indicated above. Gains and losses on dispositions
of property and equipment are included in income as realized. Upon disposal of
revenue earning equipment, depreciation expense is adjusted for the difference
between the net proceeds from sale and the remaining book value.

ENVIRONMENTAL CONSERVATION
The use of automobiles and other vehicles is subject to various governmental
controls designed to limit environmental damage, including that caused by
emissions and noise. Generally, these controls are met by the manufacturer,
except in the case of occasional equipment failure requiring repair by Hertz. To
comply with environmental regulations, measures are taken at certain locations
to reduce the loss of vapor during the fueling process and to maintain, upgrade
and replace underground fuel storage tanks. Hertz is also incurring and
providing for expenses for the cleanup of petroleum discharges and other alleged
violations of environmental laws arising from the disposition of waste products.
Hertz does not believe that it will be required to make any material capital
expenditures for environmental control facilities or to make any other material
expenditures to meet the requirements of governmental authorities in this area.
Liabilities for these expenditures are recorded when it is probable that
obligations have been incurred and the amounts can be reasonably estimated.

PUBLIC LIABILITY AND PROPERTY DAMAGE
Provisions for public liability and property damage on self-insured domestic and
foreign claims are made by charges to expense based upon evaluations of
estimated ultimate liabilities on reported and unreported claims. For its
domestic operations, the Company is, where permitted by applicable local law, a
qualified self-insurer against liability resulting from accidents under
certificates of self-insurance for financial responsibility in all states
wherein its vehicles are registered. The Company also self-insures general
public liability and property damage for all domestic operations. Since July 1,
1987, all claims have been retained and borne by the Company up to a limit of $5
million for each occurrence, and the Company maintains insurance with
unaffiliated carriers in excess of $5 million up to $450 million per occurrence.

34
<PAGE> 36
THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

operations other than Europe, the Company is self-insured at various amounts up
to $150,000 per occurrence and maintains excess liability insurance coverage up
to $450 million per occurrence with unaffiliated carriers.

FOREIGN CURRENCY TRANSLATION
Assets and liabilities of foreign subsidiaries are translated at the rate of
exchange in effect on the balance sheet date; income and expenses are translated
at the average rate of exchange prevailing during the year. The related
translation adjustments are reflected in "Accumulated other comprehensive
income" in the stockholders' equity section of the consolidated balance sheet.
Foreign currency gains and losses resulting from transactions are included in
earnings.

INCOME TAXES
Effective April 30, 1994, the Company and its domestic subsidiaries have filed
consolidated Federal income tax returns with Ford. The Company filed its own
consolidated Federal income tax returns with its domestic subsidiaries after
December 31, 1987; prior thereto, from September 1, 1985 to December 31, 1987
they were included in the consolidated Federal income tax return of UAL, and
prior thereto in the consolidated Federal income tax return of RCA. The Company
provides for current and deferred taxes as if it filed a separate consolidated
tax return with its domestic subsidiaries, except that under a tax sharing
arrangement with Ford, the Company's right to reimbursement for foreign tax
credits is determined based on the usage of such foreign tax credits by the
consolidated group. The Company and its subsidiaries account for investment tax
credits under the flow-through method. As of December 31, 1999, U.S. income
taxes have not been provided on $278 million in undistributed earnings of
foreign subsidiaries that have been or are intended to be permanently reinvested
outside the United States or are expected to be remitted free of taxes.

ADVERTISING
Advertising and sales promotion costs are expensed as incurred. Hertz is a party
to a cooperative advertising agreement with Ford pursuant to which Ford
participates in some of the cost of certain of Hertz' advertising programs in
the United States and abroad which feature the Ford name or products. The
amounts contributed by Ford for the years ended December 31, 1999, 1998 and 1997
were (in millions) $47.5, $44.3 and $45.2, respectively. This program is
expected to continue in the future. The Company incurred net advertising expense
for the years ended December 31, 1999, 1998 and 1997 of (in millions) $153.4,
$159.6 and $148.9, respectively.

The Company and Ford have entered into a Joint Advertising Agreement, which
commenced on September 1, 1997 for a period of ten years. Under the Joint
Advertising Agreement, Ford has agreed to pay to the Company one-half of the
Company's advertising costs, up to a limit of $39 million for the first fiscal
year and, for each fiscal year thereafter, a limit equal to the prior year's
limit adjusted for inflation, subject to a ceiling. In addition, if for any
fiscal year, one-half of the Company's advertising costs exceed such limit and
the Company has purchased from Ford a percentage of its car fleet requirements
for its car rental business conducted in the United States for the corresponding
model year (the "Ford Vehicle Share") equal to 58% or more, then Ford will pay
to the Company additional amounts for such excess advertising costs. To be
eligible for cost reimbursement under the Joint Advertising Agreement, the
advertising must meet certain conditions, including the condition that it
indicates that the Company features Ford vehicles in a manner and with a
prominence that is reasonably satisfactory to Ford. The Joint Advertising
Agreement further provides that if the Ford Vehicle Share for any model year is
less than 55%, Ford will not be obligated to pay the Company any amount for its
advertising costs for that fiscal year, except to the extent that the Company's
failure to achieve a 55% Ford Vehicle Share is attributable to (a) Ford's
failure to supply a sufficient quantity of cars for the Company to achieve a 55%
Ford Vehicle Share or (b) the fact that the terms and conditions of Ford's car
fleet programs offered to the Company were not competitive with the terms and
conditions for the supply of cars offered by other automobile manufacturers to
the Company and other daily car rental companies. In no event, however, will
Ford be required to pay any amount for the Company's advertising costs for any
year if the Ford Vehicle Share for the corresponding model year is less than
40%.

PENSION AND INCOME SAVING PLANS
Qualified domestic employees, after completion of specified periods of service,
are eligible to participate in the Retirement Plan for the Employees of The
Hertz Corporation ("Hertz Retirement Plan") and in The Hertz Corporation Income
Savings Plan ("Hertz Income Savings Plan"). Payments are made to pension plans
of others pursuant to various collective bargaining agreements. Under the Hertz
Retirement Plan, the Company pays the entire cost and

35
<PAGE> 37
THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

employees are not required to contribute. For each plan year beginning January
1, 1999 and thereafter, a qualified employee's cash balance account is credited
with an annual cash balance credit equal to: (a) 3% of pensionable earnings for
that plan year in the case of a qualified employee who is credited with 60 or
less continuous months of service from most recent date of hire, or (b) 5% of
pensionable earnings for that plan year in the case of a qualified employee who
is credited with 61 or more continuous months of service from most recent date
of hire (6.5% of pensionable earnings for that plan year in the case of a
qualified employee who is credited with more than 120 continuous months of
service from the most recent hire date, effective January 1, 2000). In the case
of a qualified employee who is first credited with 60 or 120 continuous months
of service after January 1 of a plan year, the percentage of pensionable
earnings utilized in determining the annual cash balance credit for that plan
year shall be increased to 5% or 6.5%, effective as of the first day of the
month coincident with or next following the completion of 60 or 120 continuous
months of service, respectively. This benefit is credited with guaranteed
interest rates compounded annually based on rates issued by the Pension Benefit
Guaranty Corporation in effect for the preceding December. In addition, all
qualified employees age 50 or over with 10 or more years of credited service as
of July 1, 1987, will have an additional amount of their pensionable earnings
credited to their account. Hertz' funding policy is to contribute at least the
minimum amount required by the Employee Retirement Income Security Act of 1974.

Under the Hertz Income Savings Plan, the Company contributes 50% of the first 6%
of the employee's contribution for a maximum match contribution by the Company
of 3% of the employee's base salary.

Most of the Company's foreign subsidiaries have defined benefit retirement plans
or are required to participate in government plans. These plans are all funded,
except in Germany, where an unfunded liability is recorded. In certain
countries, when the subsidiaries make the required funding payments, they have
no further obligations under such plans.

IMPAIRMENT OF LONG-LIVED ASSETS AND INTANGIBLES
The Company evaluates the carrying value of goodwill for potential impairment on
an ongoing basis. Such evaluations compare operating income before amortization
of goodwill to the amortization recorded for the operations to which the
goodwill relates. The Company also considers projected future operating results,
trends and other circumstances in making such estimates and evaluations. In
addition, the Company reviews long-lived assets and certain identifiable
intangibles for impairment whenever events or changes in circumstances indicate
that the carrying value of an asset may not be recoverable.

USE OF ESTIMATES AND ASSUMPTIONS
Use of estimates and assumptions as determined by management is required in the
preparation of consolidated financial statements in conformity with generally
accepted accounting principles. Actual results could differ from those estimates
and assumptions.

RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the current year
presentation.

RECENT PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes a new model for
accounting for derivatives and hedging activities. In June 1999, the FASB
delayed the effective date to fiscal years beginning after June 15, 2000. The
Company will adopt SFAS No. 133 beginning January 1, 2001. The

36
<PAGE> 38
THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

adoption of SFAS No. 133 is not expected to have a material effect on the
Company's financial position or results of operations or cash flows.

NOTE 2 -- EARNINGS PER SHARE
The following table sets forth the computations of basic earnings per share and
diluted earnings per share (in thousands of dollars, except per share amounts):

<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Basic earnings per share:
Net income.................................... $ 336,001 $ 277,009 $ 201,618
------------ ------------ ------------
Average common shares outstanding............. 107,968,511 108,067,850 108,227,916
------------ ------------ ------------
Basic earnings per share...................... $ 3.11 $ 2.56 $ 1.86
============ ============ ============
Diluted earnings per share:
Net income.................................... $ 336,001 $ 277,009 $ 201,618
------------ ------------ ------------
Average common shares outstanding............. 107,968,511 108,067,850 108,227,916
Dilutive effect of stock options.............. 589,527 493,502 402,320
------------ ------------ ------------
Average diluted common shares
outstanding................................. 108,558,038 108,561,352 108,630,236
------------ ------------ ------------
Diluted earnings per share.................... $ 3.10 $ 2.55 $ 1.86
============ ============ ============
</TABLE>

At December 31, 1998 options to purchase 1,017,600 shares of common stock were
outstanding, but were not included in the computation of diluted earnings per
share because the options' exercise price were greater than the average market
price of the common shares.

NOTE 3 -- DEBT
Debt of the Company and its subsidiaries (in thousands of dollars) consists of
the following:

<TABLE>
<CAPTION>
December 31,
------------------------
1999 1998
---------- ----------
<S> <C> <C>
Notes payable, including commercial paper, average interest
rate: 1999, 6.0%; 1998, 5.4%.............................. $2,082,417 $2,151,792
Promissory notes, average interest rate: 1999, 6.9%; 1998,
7.0% (effective average interest rate: 1999, 6.9%; 1998,
7.0%); net of unamortized discount: 1999, $9,344; 1998,
$4,157; due 2000 to 2028.................................. 3,140,657 2,445,843
Junior subordinated promissory notes, average interest rate
6.9%, net of unamortized discount: 1999, $115; 1998, $158;
due 2000 to 2003.......................................... 399,885 399,842
Subsidiaries' debt:
Short-term borrowings --
Banks, average interest rate: 1999, 4.2%; 1998, 4.6%; in
foreign currencies.................................... 486,838 550,365
Commercial paper, average interest rate: 1999, 5.0%;
1998, 5.4%; in foreign currencies..................... 482,097 206,176
Others, average interest rate: 1998, 3.5%; in foreign
currencies............................................ -- 625
Other borrowings, average interest rate: 1999, 8.2%; 1998,
9.5%; in dollars and foreign currencies................. 10,326 5,140
---------- ----------
Total....................................................... $6,602,220 $5,759,783
========== ==========
</TABLE>

37
<PAGE> 39
THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The aggregate amounts of maturities of debt, in millions, are as follows: 2000,
$3,301.2 (including $3,021.4 of commercial paper, demand and other short-term
borrowings); 2001, $402.0; 2002, $550.8; 2003, $400.2; 2004, $250.3; after 2004,
$1,697.7. Included in these maturities at the earliest possible redemption date
are $150 million of promissory notes of the Company at 6.3%, due 2006, which
have put options that can be exercised by the holders of such notes at the
option of the holders in 2002.

During the year ended December 31, 1999, short-term borrowings, in millions,
were as follows: maximum amounts outstanding $2,903.1 commercial paper and
$672.6 banks; monthly average amounts outstanding $2,448.1 commercial paper
(weighted-average interest rate 5.1%) and $559.0 banks (weighted-average
interest rate 3.8%).

The Company and its subsidiaries have entered into arrangements to manage
exposures to fluctuations in interest rates. See Note 14 -- Financial
Instruments.

During the year ended December 31, 1998, short-term borrowings, in millions,
were as follows: maximum amounts outstanding $2,512.7 commercial paper and
$720.8 banks; monthly average amounts outstanding $1,881.0 commercial paper
(weighted-average interest rate 5.6%) and $580.9 banks (weighted-average
interest rate 4.9%).

During the year ended December 31, 1997, short-term borrowings, in millions,
were as follows: maximum amounts outstanding $2,369.1 commercial paper, $782.4
banks and $502.3 other; monthly average amounts outstanding $1,792.4 commercial
paper (weighted-average interest rate 5.5%), $621.1 banks (weighted-average
interest rate 4.9%) and $115.9 other (weighted-average interest rate 5.1%).

The net amortized discount charged to interest expense for the years ended
December 31, 1999, 1998 and 1997 relating to debt and other liabilities, in
millions, was $1.3, $.9 and $1.2, respectively.

At December 31, 1999, the Company had committed credit facilities available
totaling $3.1 billion. Of this amount, $2.2 billion is represented by a
combination of multi-year and 364-day global committed credit facilities
provided by 30 relationship banks. In addition to direct borrowings by the
Company, these facilities allow any subsidiary of the Company to borrow based on
a guarantee by the Company. Effective July 1, 1999, the multi-year facilities
totaling $1,128 million were renegotiated. Currently, $63 million expires on
June 30, 2002, $137 million expires on June 30, 2003, and $928 million expires
on June 30, 2004. The 364-day facilities, totaling $1,038 million, expire on
June 21, 2000. The multi-year facilities that expire in 2004 have an evergreen
feature which provides for the automatic extension of the expiration date one
year forward unless timely notice is provided by the bank. Under the terms of
the 364-day facilities totaling $963 million, the Company is permitted to
convert any amount outstanding prior to expiration into a four-year term loan.

In addition to these bank credit facilities, in February 1997, Ford extended to
the Company a line of credit of $500 million, which is available and currently
expires June 30, 2001. This line of credit has an evergreen feature that
provides on an annual basis for automatic one-year extensions of the expiration
date, unless timely notice is provided by Ford at least one year prior to the
then scheduled expiration date. Obligations of the Company under this agreement
would rank pari pasu with the Company's senior debt securities. A commitment fee
of .09% per annum is payable on the unused available credit.

The Company maintains a Sales Agency Agreement with Ford Financial Services,
Inc., an NASD registered broker/ dealer and an indirect, wholly-owned subsidiary
of Ford ("FFS"), whereby FFS acts as the exclusive dealer for the Company's
domestic commercial paper program. The Company pays fees to FFS which range from
.035% to .05% per annum of commercial paper placed depending upon the monthly
average dollar value of the notes outstanding in the portfolio. In 1999, the
Company paid FFS approximately $708,000 of such fees. FFS is under no obligation
to purchase any of the notes for its own account. FFS has acted as the Company's
exclusive commercial paper dealer since October 1994, and the Sales Agency
Agreement may not be amended or terminated without the written consent of both
parties. The Company, through its subsidiary Hertz Australia Pty. Limited, has a
similar agreement with Ford Credit Australia Limited, also an indirect,
wholly-owned subsidiary of Ford Motor Company.

38
<PAGE> 40
THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Borrowing for the Company's international operations consists mainly of loans
obtained from local and international banks. All borrowings by international
operations either are in the international operation's local currency or, if in
non-local currency, are fully hedged to minimize foreign exchange exposure. The
Company guarantees only the borrowings of its subsidiaries in Australia, Canada
and Ireland, which consist principally of commercial paper and short-term bank
loans. At December 31, 1999, the total debt for the foreign operations was $973
million, of which $969 million was short-term (original maturity of less than
one year) and $4 million was long-term. At December 31, 1999, the total amounts
outstanding (in millions of U.S. dollars) under the Canadian, Irish and
Australian commercial paper programs were $197, $168 and $117, respectively.

NOTE 4 -- AVAILABLE-FOR-SALE SECURITIES
As of December 31, 1999 and 1998, "Prepaid expenses and other assets" in the
consolidated balance sheet include available-for-sale securities at fair value.
The fair value is calculated using information provided by outside quotation
services. These securities include various governmental and corporate debt
obligations. For the years ended December 31, 1999, 1998 and 1997, proceeds, in
millions, of $3.7, $2.6 and $2.3, respectively, were received from the sale of
available-for-sale securities, and gross realized gains, in whole dollars, of
$23,681, $74,098 and $41,626 and gross realized losses of $14,398, $0 and
$2,993, respectively, were included in earnings. Actual cost was used in
computing the realized gain and loss on the sale.

The following is a summary of available-for-sale securities at December 31, 1999
and December 31, 1998 (in thousands):

<TABLE>
<CAPTION>
Gross Gross Estimated
Unrealized Unrealized Fair
Cost Gains Losses Value
------ ---------- ---------- ---------
<S> <C> <C> <C> <C>
DECEMBER 31, 1999
Government debt obligations....................... $2,818 $ 13 $ (86) $2,745
Corporate debt obligations........................ 3,247 1 (98) 3,150
------ ---- ----- ------
Total........................................... $6,065 $ 14 $(184) $5,895
====== ==== ===== ======
DECEMBER 31, 1998
Government debt obligations....................... $1,621 $ 42 $ (7) $1,656
Corporate debt obligations........................ 4,245 111 -- 4,356
------ ---- ----- ------
Total........................................... $5,866 $153 $ (7) $6,012
====== ==== ===== ======
</TABLE>

39
<PAGE> 41
THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The amortized cost and estimated fair value of available-for-sale securities at
December 31, 1999 are as follows (in thousands):

<TABLE>
<CAPTION>
Estimated
Cost Fair Value
------ ----------
<S> <C> <C>
Due in one year or less..................................... $ -- $ --
Due after one year through five years....................... 4,818 4,683
Due after five years through ten years...................... 1,247 1,212
------ ------
Total............................................... $6,065 $5,895
====== ======
</TABLE>

NOTE 5 -- PURCHASES AND SALES OF OPERATIONS
During the year ended December 31, 1999, the Company acquired 11 North American
and two European equipment rental and sales companies. The Company also acquired
five European car and truck rental companies. The aggregate purchase price of
the acquisitions was $143.6 million, net of cash acquired, plus the assumption
of $26.1 million of debt. The aggregate consideration exceeded the fair value of
the net assets acquired by approximately $92.1 million, which has been
recognized as goodwill and is being amortized over periods from 15 to 40 years.
The acquisitions were accounted for as purchases, and the results of operations
have been included in the Company's consolidated financial statements since
their respective dates of acquisition. Had the acquisitions occurred as of the
beginning of the year, the effect of including their results would not be
material to the results of operations of the Company.

In June 1999, the Company entered into a limited liability company agreement
with a subsidiary of Orbital Sciences Corporation ("Orbital"), whereby a limited
liability company was formed to purchase NeverLost vehicle navigation systems
from another subsidiary of Orbital for installation in selected vehicles in the
Company's worldwide fleet. During 1999, the Company invested $14.8 million under
this agreement, which represents a 40% ownership interest. The investment
(included in "Prepaid expense and other assets" in the consolidated balance
sheet) is accounted for using the equity method of accounting.

During the year ended December 31, 1998, the Company acquired one European and
12 North American equipment rental and sales companies. The aggregate purchase
price of the acquisitions was $343.9 million, net of cash acquired, plus the
assumption of $94.0 million of debt. The aggregate consideration exceeded the
fair value of the net assets acquired by approximately $224.8 million, which has
been recognized as goodwill and is being amortized over periods from twenty-five
to forty years. The acquisitions were accounted for as purchases, and the
results of operations have been included in the Company's consolidated financial
statements since their respective dates of acquisition. Had the acquisitions
occurred as of the beginning of the year, the effect of including their results
would not be material to the results of operations of the Company. The aggregate
purchase price included $5.4 million paid to shareholders of two of the acquired
companies in exchange for covenants not to compete, which are being amortized
over the contractual terms of the individual covenants.

In May 1998, the Company sold its corporate owned operations in Portugal to a
licensee. The net proceeds from the sale were approximately $4.6 million, which
exceeded book value by approximately $.3 million. In conjunction with the sale,
the Company received an initial license fee of $2.5 million. The total assets of
these operations at May 31, 1998 were $19.6 million, and revenues and net income
for the year ended December 31, 1997 were $14.9 million and $.8 million,
respectively.

In June 1997, the Company sold its corporate owned operations in Denmark and
Norway to a licensee. The net proceeds from the sale were approximately $1.4
million, which was less than book value by approximately $.9 million. In
conjunction with the sale, the Company received an initial license fee of $3
million. The total assets of these operations at June 30, 1997 were $97 million,
and revenues and net loss for the year ended December 31, 1996 were $15.7
million and $1.2 million, respectively.

40
<PAGE> 42
THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In connection with the acquisition of the Company by Park Ridge in December 1987
and UAL in August 1985, the excess of the purchase price over the consolidated
equity of the Company at the time of these purchases was $658.3 million. These
costs are being amortized by the Company over 40 years. The unamortized amount
of such costs at December 31, 1999 was $451.9 million.

NOTE 6 -- EMPLOYEE RETIREMENT BENEFITS AND INCOME SAVINGS PLANS
The following tables set forth the funded status and the net periodic pension
cost of the Hertz Retirement Plan and other postretirement benefit plans for
health care and life insurance covering its domestic ("U.S.") employees and the
retirement plans for foreign operations ("Non-U.S.") and amounts included in the
consolidated balance sheet and statement of income (in millions of dollars):

<TABLE>
<CAPTION>
Pension Benefits
---------------------------------- Other Benefits
U.S. Plans Non-U.S. Plans (U.S.)
--------------- ---------------- ---------------
1999 1998 1999 1998 1999 1998
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Change in Benefit Obligation
Benefit obligation at January 1.............. $155.3 $125.2 $ 47.5 $ 44.5 $ 9.1 $ 8.1
Service cost................................. 13.0 11.5 2.9 2.9 .3 .3
Interest cost................................ 9.9 8.6 3.2 3.1 .6 .5
Amendments................................... 4.6 -- -- -- -- --
Employee contributions....................... -- -- .9 .9 .1 .1
Benefits paid................................ (4.1) (5.0) (.8) (1.9) (.3) (.2)
Foreign exchange translation................. -- -- (1.7) (1.0) -- --
Actuarial (gain) loss........................ (37.6) 15.0 (.6) (1.0) (1.8) .3
------ ------ ------ ------ ------ ------
Benefit obligation at December 31............ $141.1 $155.3 $ 51.4 $ 47.5 $ 8.0 $ 9.1
====== ====== ====== ====== ====== ======
Change in Plan Assets
Fair value of plan assets at January 1....... $132.2 $120.4 $ 41.0 $ 33.0 $ -- $ --
Actual return on plan assets................. 17.5 16.3 .5 7.0 -- --
Company contributions........................ .4 .5 2.3 2.2 .2 .1
Employee contributions....................... -- -- .9 .9 .1 .1
Benefits paid................................ (4.1) (5.0) (.8) (1.9) (.3) (.2)
Foreign exchange translation................. -- -- (.5) .3 -- --
Other........................................ -- -- (.6) (.5) -- --
------ ------ ------ ------ ------ ------
Fair value of plan assets at December 31..... $146.0 $132.2 $ 42.8 $ 41.0 $ -- $ --
====== ====== ====== ====== ====== ======
Funded Status of the Plan
Plan assets in excess of (less than) benefit
obligation................................. $ 4.9 $(23.1) $ (8.6) $ (6.5) $ (8.0) $ (9.1)
Unamortized:
Transition obligation...................... .2 .5 -- -- -- --
Prior service cost (gains)................. 4.2 (.1) -- -- -- --
Net (gains) losses......................... (72.2) (25.8) .6 (.9) (2.9) (1.2)
------ ------ ------ ------ ------ ------
Net amount recognized........................ $(62.9) $(48.5) $ (8.0) $ (7.4) $(10.9) $(10.3)
====== ====== ====== ====== ====== ======
</TABLE>

41
<PAGE> 43
THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
Pension Benefits
---------------------------------- Other Benefits
U.S. Plans Non-U.S. Plans (U.S.)
--------------- ---------------- ---------------
1999 1998 1999 1998 1999 1998
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Amounts Recognized in the Balance Sheet
Assets/(Liabilities)
Intangible assets (including prepaid
assets).................................... $ 1.8 $ -- $ .1 $ -- $ -- $ --
Accrued liabilities.......................... (64.7) (48.5) (9.6) (6.5) (10.9) (10.3)
Accumulated other comprehensive income....... -- -- 1.5 -- -- --
Other........................................ -- -- -- (.9) -- --
------ ------ ------ ------ ------ ------
Net amount recognized...................... $(62.9) $(48.5) $ (8.0) $ (7.4) $(10.9) $(10.3)
====== ====== ====== ====== ====== ======
Pension Plans in Which Accumulated Benefit
Obligation Exceeds Plan Assets at December 31
Projected benefit obligation................. $ 3.8 $ -- $ 10.3 $ --
Accumulated benefit obligation............... 2.7 -- 9.4 --
Fair value of plan assets.................... -- -- -- --
Assumptions as of December 31
Discount rate................................ 7.75% 6.25% 5.5%- 5.5%- 7.75% 6.50%
7.75% 7.5%
Expected return on assets.................... 9.0% 9.0% 6.25%- 6.25%- N/A N/A
8.5% 8.5%
Average rate of increase in compensation..... 5.5% 5.5% 3.0%- 3.0%- N/A N/A
6.5% 6.5%
Initial health care cost trend rate.......... -- -- -- -- 7.25% 7.5%
Ultimate health care cost trend rate......... -- -- -- -- 5.0% 6.0%
Number of years to ultimate trend rate....... -- -- -- -- 9 3
</TABLE>

Assumptions used for the non-U.S. plans vary by country and are made in
accordance with local conditions, but do not vary materially from those used in
the U.S. plan. Plan assets consist principally of investments in stocks,
government bonds and other fixed income securities.

42
<PAGE> 44
THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------------------------------------------------------
Pension Benefits Other Benefits (U.S.)
------------------------------------------------------- ---------------------
1999 1998 1997 1999 1998 1997
---------------- ----------------- ---------------- ----- ----- -----
U.S. Non-U.S. U.S. Non-U.S. U.S. Non-U.S.
----- -------- ------ -------- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Components of net periodic
benefit cost:
Service cost................... $13.0 $ 2.9 $ 11.5 $ 2.9 $ 8.0 $2.1 $ .3 $.3 $ .3
Interest cost.................. 9.9 3.2 8.6 3.1 7.6 3.1 .5 .5 .5
Expected return on plan
assets....................... (9.1) (3.5) (8.2) (2.8) (7.2) (2.4) -- -- --
Amortization:
Transition................... .3 -- .3 -- .3 -- -- -- --
Amendments................... .3 -- -- -- -- -- -- -- --
Gains/(losses) and other..... 1.1 .6 .3 (.1) .2 -- -- (.1) (.1)
----- ----- ------ ----- ----- ----- ---- --- ----
Net pension/postretirement
expense...................... $15.5 $ 3.2 $ 12.5 $ 3.1 $ 8.9 $2.8 $ .8 $.7 $ .7
===== ===== ====== ===== ===== ===== ==== === ====
Discount rate for expense........ 6.25% 5.5%- 6.75% 6.5%- 7.25% 7.0%- 6.5% 7.0% 7.5%
7.5% 7.5% 7.5%
Assumed long-term rate of return
on assets...................... 9.0% 6.25%- 9.0% 6.5%- 9.0% 7.0%- -- -- --
8.5% 8.5% 8.5%
Initial health care cost trend
rate........................... -- -- -- -- -- -- 7.5% 7.0% 7.2%
Ultimate health care cost trend
rate........................... -- -- -- -- -- -- 5.0% 6.4% 6.6%
Number of years to ultimate trend
rate........................... -- -- -- -- -- -- 10 4 5
</TABLE>

Changing the assumed health care cost trend rates by one percentage point is
estimated to have the following effects in whole dollars:

<TABLE>
<CAPTION>
One Percentage One Percentage
Point Increase Point Decrease
-------------- --------------
<S> <C> <C>
Effect on total of service and interest cost
components........................................... $ 69,200 $ 61,700
Effect on postretirement benefit obligation............ 515,200 464,400
</TABLE>

The estimated cost for postretirement health care and life insurance benefits is
accrued on an actuarially determined basis. The 1999 increase in the number of
years to ultimate trend rate resulted from changes in trend assumptions.

The provisions charged to income for the years ended December 31, 1999, 1998 and
1997 for all other pension plans were approximately (in millions) $9.7, $8.1 and
$7.7, respectively.

The provisions charged to income for the years ended December 31, 1999, 1998 and
1997 for the Hertz Income Savings Plan were approximately (in millions) $6.1,
$5.1 and $4.2, respectively.

NOTE 7 -- STOCK-BASED COMPENSATION
The Company sponsors a stock-based incentive plan (the "Plan") covering certain
officers and other executives of the Company. The Plan is administered by the
Compensation Committee (the "Committee") appointed by the Board of Directors.
The Company adopted the Plan effective as of April 25, 1997. Awards granted
under the plan are based on shares of Class A Common Stock. The Plan provides
for the grant of incentive and nonqualified stock options, stock appreciation
rights, restricted stock, performance shares and performance units ("Awards").

43
<PAGE> 45
THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Officers and certain key salaried employees of the Company with potential to
contribute to the future success of the Company or its subsidiaries are eligible
to receive Awards under the Plan. Each option granted shall expire at such time
the Committee shall determine at the time of grant; provided, that no option
shall be exercisable later than the tenth anniversary date of its grant.

The total number of shares of Class A Common Stock that may be subject to Awards
under the Plan is 8,120,000 shares. The Awards granted vest over various
anniversaries of the date of grant with all Awards vesting by the fifth
anniversary of the date of grant. At December 31, 1999, 4,205,841 shares were
available for award under the Plan.

In 1998 and 1997, the Company granted awards of 30,000 shares and 701,025 shares
of restricted stock, respectively. As of December 31, 1999, 89,795 shares of
restricted stock had been forfeited. Upon issuance of the restricted shares, the
unamortized value of restricted stock is charged to stockholders' equity and is
amortized as compensation expense ratably over the restriction periods. Total
compensation cost charged against income related to restricted stock awards was
$4.4 million, $4.4 million and $3.6 million in 1999, 1998 and 1997,
respectively.

On May 21, 1999, shareholders approved an employee stock purchase plan (the
"ESPP"), which became effective on July 1, 1999. The ESPP allows eligible
employees an opportunity to purchase shares of Class A Common Stock through
accumulated payroll deductions at 85% of the closing price at the end of each
quarterly offering period.

The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25"). Under APB 25, no
compensation expense is recognized for the Company's employee stock options
because the exercise price of the options equals the market price of the
underlying stock on the date of grant.

The following pro forma information regarding net income and net income per
share is required when APB 25 accounting is elected, and was determined as if
the Company had accounted for its employee stock options under the fair value
method of SFAS No. 123, "Accounting for Stock-Based Compensation." The fair
values for these options were estimated at the date of grant using a
Black-Scholes option pricing model with the following assumptions used for
grants in 1999, 1998 and 1997: risk-free interest rate of 4.86%, 5.56% and
6.75%, respectively; volatility factors of 33%, 30% and 22%, respectively;
dividend yields of .48%, .41% and .83%, respectively, and an average expected
life of the options of four years for 1999, 1998 and 1997. For purposes of pro
forma disclosures, the estimated fair values of the options are amortized to
expense over the option's vesting periods.

Had the compensation cost of the Company's stock-based compensation plans been
determined based on the fair value methods of SFAS No. 123, the Company's net
income and earnings per share would have been reduced to the pro forma amounts
indicated below:

<TABLE>
<CAPTION>
1999 1998 1997
------------------------ ------------------------ ------------------------
As Reported Pro Forma* As Reported Pro Forma* As Reported Pro Forma*
----------- ---------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net income (in
millions).......... $336.0 $328.9 $277.0 $273.3 $201.6 $200.5
Earnings per share
Basic.............. $ 3.11 $ 3.04 $ 2.56 $ 2.53 $ 1.86 $ 1.85
Diluted............ $ 3.10 $ 3.03 $ 2.55 $ 2.52 $ 1.86 $ 1.85
</TABLE>

* The pro forma effect on net income and earnings per share for 1999, 1998 and
1997 is not representative of the pro forma effect in future years since
compensation cost is allocated on a straight-line basis over the vesting periods
of the grants, which extend beyond the reported years. Additional awards in
future years are anticipated.

44
<PAGE> 46
THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A summary of option transactions is presented below:

<TABLE>
<CAPTION>
1999 1998 1997
-------------------- -------------------- --------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at January 1................ 2,066,501 $35.98 1,267,610 $24.00 -- $ --
Granted................................. 1,166,700 $41.53 1,058,400 $48.33 1,423,470 $24.00
Expired or canceled..................... (72,731) $41.54 (128,550) $31.84 (155,860) $24.00
Exercised............................... (476,943) $30.74 (130,959) $24.00 -- --
--------- --------- ---------
Outstanding at December 31.............. 2,683,527 $39.17 2,066,501 $35.98 1,267,610 $24.00
========= ========= =========
Options exercisable at year-end......... 511,733 $33.61 322,842 $24.00 -- --
Weighted-average fair value of options
granted during year................... $13.29 $15.16 $ 6.47
</TABLE>

The following table summarizes information about stock options outstanding at
December 31, 1999:

<TABLE>
<CAPTION>
Options Outstanding at Options Exercisable at
December 31, 1999 December 31, 1999
--------------------------------------- ----------------------
Weighted Weighted Weighted
Average Average Number of Average
Number of Remaining Exercise Shares Exercise
Range of Exercise Prices Shares Contractual Life Price Exercisable Price
- - - - - - - - - - - - - - - - - - ------------------------ --------- ---------------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$24.00...................................... 689,562 7.3 $24.00 306,520 $24.00
$33.88 - $50.00............................. 855,565 8.3 $48.26 201,913 $48.08
$41.38 - $44.88............................. 1,138,400 9.1 $41.53 3,300 $41.38
</TABLE>

NOTE 8 -- REVENUE EARNING EQUIPMENT
Revenue earning equipment is used in the rental of cars and industrial and
construction equipment and the leasing of cars under closed-end leases where the
disposition of the cars upon termination of the lease is for the account of
Hertz. Revenue is recorded as earned under the terms of the rental or leasing
contract. Revenue on open contracts is accrued to the balance sheet date based
on the terms in the contracts. Expenses are recorded as incurred. Over the three
years ended December 31, 1999, on a weighted-average basis, approximately 65% of
the cars acquired by the Company for its U.S. rental car fleet, and
approximately 24% of the cars acquired by the Company for its international
fleet, were manufactured by Ford. During 1999, approximately 68% of the cars
acquired by the Company domestically were manufactured by Ford. In 1999,
approximately 27% of the cars acquired by the Company for its international
fleet were manufactured by Ford, which represented the largest percentage of any
automobile manufacturer in that year.

Under operating leases, aggregate minimum future rental payments to be received
for cars leased at December 31, 1999 are approximately as follows (in millions):
$28.1 in 2000, $17.7 in 2001, $5.8 in 2002 and $1.0 in 2003. Cars under lease at
December 31, 1999, which are owned by Hertz, amounted to $101.9 million, net of
accumulated depreciation of $34.1 million.

45
<PAGE> 47
THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Depreciation of revenue earning equipment includes the following (in thousands
of dollars):

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1999 1998 1997
---------- ---------- --------
<S> <C> <C> <C>
Depreciation of revenue earning equipment................... $1,251,937 $1,077,965 $968,923
Adjustment of depreciation upon disposal of the equipment... (29,582) (14,452) (3,251)
Rents paid for vehicles leased.............................. 18,463 14,496 13,888
---------- ---------- --------
Total..................................................... $1,240,818 $1,078,009 $979,560
========== ========== ========
</TABLE>

Effective January 1, 1997, certain lives being used to compute the provision for
depreciation of revenue earning equipment used in the Company's industrial and
construction equipment rental business were increased to reflect changes in the
estimated residual values to be realized when the equipment is sold. As a result
of this change, depreciation of revenue earning equipment for the year 1997
decreased $10.4 million.

The adjustment of depreciation upon disposal of revenue earning equipment for
the years ended December 31, 1999, 1998 and 1997 included (in millions) net
gains of $23.9, $14.9 and $13.8, respectively, on the sale of industrial and
construction equipment, and a net gain of $5.7 and net losses $.5 and $10.5,
respectively, on the sale of cars used in the car rental and car leasing
operations.

The Company and Ford have entered into a Car Supply Agreement, which commenced
on September 1, 1997 for a period of ten years. Under the Car Supply Agreement,
Ford and the Company have agreed to negotiate in good faith on an annual basis
with respect to the supply of cars. Ford has agreed to supply to the Company and
the Company has agreed to purchase from Ford, for each car model year during the
term of the agreement (i.e., the 1998 model year through the 2007 model year),
(a) the lesser of 150,000 cars or 55% of the Company's fleet requirements for
its car rental business conducted in the United States, (b) 35% of the Company's
fleet requirements for its car rental business conducted in Europe; and (c) 55%
of the Company's fleet requirements for its car rental business conducted other
than in the United States and Europe. For each model year, at least 50% of the
cars supplied by Ford are required to be non-risk cars. The Car Supply Agreement
also provides that, for each model year, Ford must strive to offer car fleet
programs to the Company on terms and conditions that are competitive with terms
and conditions for the supply of cars then being offered by other automobile
manufacturers to the Company and other daily car rental companies. In addition,
for each model year, Ford must supply cars to the Company on terms and
conditions that are no less favorable than those offered by Ford to other daily
car rental companies, excluding franchised Ford vehicle dealers who rent cars.

As of December 31, 1999 and 1998, Ford owed the Company and its subsidiaries
$698.6 million and $430.2 million, respectively, in connection with various car
repurchase and warranty programs. As of December 31, 1999 and 1998, the Company
and its subsidiaries owed Ford $30.1 million and $9.7 million, respectively
(which amounts are included in "Accounts payable" in the consolidated balance
sheet), in connection with cars purchased. These transactions were made and are
being paid in the ordinary course of business.

During the year ended December 31, 1999, the Company purchased Ford cars at a
cost of approximately $4.3 billion, and sold cars to Ford or its affiliates
under various repurchase programs for approximately $3.2 billion.

46
<PAGE> 48
THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 9 -- TAXES ON INCOME
The provision for taxes on income consists of the following (in thousands of
dollars):

<TABLE>
<CAPTION>
Years ended December 31,
--------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Current:
Federal.................................................. $ 95,726 $113,027 $ 56,629
Foreign.................................................. 31,799 28,389 22,203
State and local.......................................... 17,267 21,467 13,620
-------- -------- --------
Total current.......................................... 144,792 162,883 92,452
-------- -------- --------
Deferred:
Federal.................................................. 57,900 22,300 42,130
Foreign.................................................. 7,700 (2,000) 1,970
State and local.......................................... 14,000 5,200 5,100
-------- -------- --------
Total deferred......................................... 79,600 25,500 49,200
-------- -------- --------
Total provision.................................... $224,392 $188,383 $141,652
======== ======== ========
</TABLE>

The principal items in the deferred tax provision (benefit) are as follows (in
thousands of dollars):

<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------
1999 1998 1997
-------- -------- -------
<S> <C> <C> <C>
Difference between tax and book depreciation................ $ 95,206 $ 57,777 $17,704
Accrued and prepaid expense deducted for tax purposes when
paid or incurred.......................................... (18,236) (28,801) (2,683)
Tax operating loss (carryforwards) utilized................. 1,753 (2,599) 2,763
Federal alternative minimum tax credit (carryforwards)
utilized.................................................. 877 (877) 31,416
-------- -------- -------
Total deferred provision.................................. $ 79,600 $ 25,500 $49,200
======== ======== =======
</TABLE>

The principal items in the deferred tax liability at December 31, 1999 and 1998
are as follows (in thousands of dollars):

<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Difference between tax and book depreciation................ $ 480,055 $ 384,849
Accrued and prepaid expense deducted for tax purposes when
paid or incurred.......................................... (198,246) (180,010)
Tax operating loss carryforwards............................ (10,709) (12,462)
Federal alternative minimum tax credit carryforwards........ -- (877)
--------- ---------
Total............................................... $ 271,100 $ 191,500
========= =========
</TABLE>

The tax operating loss carryforwards at December 31, 1999 of $10.7 million
relate to certain foreign operations and have the following expiration dates (in
millions): $2.6 in 2005 and $8.1 with no expiration date. It is anticipated that
such operations will become profitable in the future and the carryforwards will
be fully utilized.

47
<PAGE> 49
THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The principal items accounting for the difference in taxes on income computed at
the U.S. statutory rate of 35% and as recorded are as follows (in thousands of
dollars):

<TABLE>
<CAPTION>
Years ended December 31,
--------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Computed tax at statutory rate............................. $196,138 $162,887 $120,145
State and local income taxes, net of Federal income tax
benefit.................................................. 20,324 17,334 12,168
Tax effect on the amortization of the cost in excess of the
Company's net assets..................................... 7,176 6,384 5,770
Income taxes on foreign earnings at effective rates
different from the U.S. statutory rate, including the
anticipated realization of certain foreign tax benefits
and the effect of subsidiaries' gains and losses and
exchange adjustments with no tax effect.................. 3,790 2,254 3,118
All other items, net, none of which exceeded 5% of computed
tax...................................................... (3,036) (476) 451
-------- -------- --------
Total provision.......................................... $224,392 $188,383 $141,652
======== ======== ========
</TABLE>

NOTE 10 -- LEASE AND CONCESSION AGREEMENTS
Hertz has various concession agreements, which provide for payment of rents and
a percentage of revenue with a guaranteed minimum and real estate leases under
which the following amounts were expensed (in thousands of dollars):

<TABLE>
<CAPTION>
Years ended December 31,
--------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Rents...................................................... $ 57,362 $ 46,974 $ 45,553
Concession fees:
Minimum fixed obligations................................ 170,724 152,302 125,714
Additional amounts, based on revenues.................... 147,723 155,940 140,790
-------- -------- --------
Total.............................................. $375,809 $355,216 $312,057
======== ======== ========
</TABLE>

As of December 31, 1999, minimum obligations under existing agreements referred
to above are approximately as follows (in thousands of dollars):

<TABLE>
<CAPTION>
Rents Concessions
------- -----------
<S> <C> <C>
Years ended December 31, 2000............................... $47,706 $109,927
2001........................................................ 41,283 92,679
2002........................................................ 34,628 73,668
2003........................................................ 28,538 41,269
2004........................................................ 21,638 14,026
Years after 2004............................................ 63,890 60,814
</TABLE>

48
<PAGE> 50
THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In addition to the above, Hertz has various leases on cars and office and
computer equipment under which the following amounts were expensed (in thousands
of dollars):

<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Cars........................................................ $18,463 $14,496 $13,888
Office and computer equipment............................... 19,108 17,948 18,618
------- ------- -------
Total............................................... $37,571 $32,444 $32,506
======= ======= =======
</TABLE>

As of December 31, 1999, minimum obligations under existing agreements referred
to above that have a maturity of more than one year are as follows (in
thousands): office and computer equipment 2000, $9,611; 2001, $6,571; 2002,
$3,786; 2003, $632; 2004, $117; after 2004, $50.

NOTE 11 -- SEGMENT INFORMATION
The Company has adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," effective with the year ended December 31,
1998. The statement requires companies to disclose segment data based on how
management makes decisions about allocating resources to segments and measuring
their performance.

The Company has identified two significant segments: rental and leasing of cars
and light trucks ("car rental"); and rental of industrial, construction and
materials handling equipment ("industrial and construction equipment rental").
The contribution of these segments, as well as "corporate and other," for each
of the three years ended December 31, 1999 are summarized below (in millions of
dollars). Corporate and other includes general corporate expenses, principally
amortization of intangibles, certain interest expense, as well as other business
activities, such as claim management and telecommunication services (in millions
of dollars).

<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Revenues
Car rental................................................ $ 3,822 $ 3,573 $ 3,419
Industrial and construction equipment rental.............. 843 631 445
Corporate and other....................................... 51 34 27
------- ------- -------
Total................................................... $ 4,716 $ 4,238 $ 3,891
======= ======= =======
Income (loss) before income taxes
Car rental................................................ $ 513 $ 425 $ 312
Industrial and construction equipment rental.............. 84 77 72
Corporate and other....................................... (37) (37) (41)
------- ------- -------
Total................................................... $ 560 $ 465 $ 343
======= ======= =======
Depreciation of revenue earning equipment
Car rental................................................ $ 1,029 $ 924 $ 881
Industrial and construction equipment rental.............. 212 154 99
Corporate and other....................................... -- -- --
------- ------- -------
Total................................................... $ 1,241 $ 1,078 $ 980
======= ======= =======
</TABLE>

49
<PAGE> 51
THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Depreciation of property and equipment
Car rental................................................ $ 85 $ 80 $ 73
Industrial and construction equipment rental.............. 25 26 13
Corporate and other....................................... 2 2 2
------- ------- -------
Total................................................... $ 112 $ 108 $ 88
======= ======= =======
Amortization of intangibles
Car rental................................................ $ 2 $ 5 $ 3
Industrial and construction equipment rental.............. 9 4 --
Corporate and other....................................... 17 17 17
------- ------- -------
Total................................................... $ 28 $ 26 $ 20
======= ======= =======
Operating income (loss) (pre-tax income before interest)
Car rental................................................ $ 752 $ 656 $ 550
Industrial and construction equipment rental.............. 176 143 122
Corporate and other....................................... (26) (27) (27)
------- ------- -------
Total................................................... $ 902 $ 772 $ 645
======= ======= =======
Total assets at end of year
Car rental................................................ $ 7,331 $ 6,691 $ 5,888
Industrial and construction equipment rental.............. 2,268 1,883 1,034
Corporate and other....................................... 538 299 514
------- ------- -------
Total................................................... $10,137 $ 8,873 $ 7,436
======= ======= =======
Revenue earning equipment, net, at end of year
Car rental................................................ $ 4,762 $ 4,473 $ 4,040
Industrial and construction equipment rental.............. 1,502 1,309 852
Corporate and other....................................... -- -- --
------- ------- -------
Total................................................... $ 6,264 $ 5,782 $ 4,892
======= ======= =======
Revenue earning equipment and property and equipment
Car rental
Expenditures.............................................. $ 8,237 $ 7,326 $ 7,345
Proceeds from sale........................................ (6,605) (5,809) (6,539)
------- ------- -------
Net expenditures........................................ $ 1,632 $ 1,517 $ 806
======= ======= =======
Industrial and construction equipment rental
Expenditures.............................................. $ 575 $ 625 $ 365
Proceeds from sale........................................ (185) (123) (105)
------- ------- -------
Net expenditures........................................ $ 390 $ 502 $ 260
======= ======= =======
</TABLE>

50
<PAGE> 52
THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Corporate and other
Expenditures.............................................. $ 16 $ 1 $ 39
Proceeds from sale........................................ -- -- --
------- ------- -------
Net expenditures........................................ $ 16 $ 1 $ 39
======= ======= =======
</TABLE>

The Company operates in the United States and in foreign countries. The
operations within major geographic areas are summarized as follows (in millions
of dollars):

<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Revenues
United States............................................. $ 3,639 $ 3,283 $ 2,993
Foreign operations (substantially Europe)................. 1,077 955 898
------- ------- -------
Total................................................... $ 4,716 $ 4,238 $ 3,891
======= ======= =======
Income before income taxes
United States............................................. $ 459 $ 377 $ 273
Foreign operations (substantially Europe)................. 101 88 70
------- ------- -------
Total................................................... $ 560 $ 465 $ 343
======= ======= =======
Depreciation of revenue earning equipment
United States............................................. $ 1,044 $ 931 $ 857
Foreign operations (substantially Europe)................. 197 147 123
------- ------- -------
Total................................................... $ 1,241 $ 1,078 $ 980
======= ======= =======
Depreciation of property and equipment
United States............................................. $ 89 $ 85 $ 69
Foreign operations (substantially Europe)................. 23 23 19
------- ------- -------
Total................................................... $ 112 $ 108 $ 88
======= ======= =======
Amortization of intangibles
United States............................................. $ 24 $ 21 $ 18
Foreign operations (substantially Europe)................. 4 5 2
------- ------- -------
Total................................................... $ 28 $ 26 $ 20
======= ======= =======
Operating income (pre-tax income before interest)
United States............................................. $ 763 $ 648 $ 540
Foreign operations (substantially Europe)................. 139 124 105
------- ------- -------
Total................................................... $ 902 $ 772 $ 645
======= ======= =======
Total assets at end of year
United States............................................. $ 8,044 $ 6,916 $ 5,893
Foreign operations (substantially Europe)................. 2,093 1,957 1,543
------- ------- -------
Total................................................... $10,137 $ 8,873 $ 7,436
======= ======= =======
</TABLE>

51
<PAGE> 53
THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Revenue earning equipment, net, at end of year
United States............................................. $ 5,088 $ 4,749 $ 4,015
Foreign operations (substantially Europe)................. 1,176 1,033 877
------- ------- -------
Total................................................... $ 6,264 $ 5,782 $ 4,892
======= ======= =======
Revenue earning equipment and property and equipment
United States
Expenditures............................................ $ 6,596 $ 5,904 $ 5,723
Proceeds from sale...................................... (4,992) (4,192) (4,640)
------- ------- -------
Net expenditures...................................... $ 1,604 $ 1,712 $ 1,083
======= ======= =======
Foreign operations (substantially Europe)
Expenditures............................................ $ 2,232 $ 2,048 $ 2,026
Proceeds from sale...................................... (1,798) (1,740) (2,004)
------- ------- -------
Net expenditures...................................... $ 434 $ 308 $ 22
======= ======= =======
</TABLE>

NOTE 12 -- LITIGATION
The Company is currently a defendant in three purported class actions that have
been brought in two states, in which the plaintiffs seek unspecified damages and
injunctive relief arising out of the Company's allegedly improper sale of one or
more optional insurance products (Liability Insurance Supplement and Personal
Accident Insurance/Personal Effects Coverage) in connection with vehicle
rentals. A common feature of the actions is a claim that applicable insurance
laws were violated in the sale of optional insurance products because the
Company's counter sales representatives were not licensed insurance
salespersons. Details of those actions appear below. Other similar actions in
Texas, Alabama, Wisconsin and California have been concluded and/or dismissed
with no finding of liability to the Company.

On September 2, 1997, Ben C. Martin, Archie Powell, William Johnson,
individually and on behalf of all others similarly situated v. The Hertz
Corporation, et al. was commenced in Circuit Court of Mobile County, Alabama.
The Company and the other defendant car rental companies removed the action to
the United States District Court for the Southern District of Alabama (Mobile).
The plaintiffs moved to remand and, after a court-imposed stay of the
proceedings, the case was remanded to the Circuit Court of Mobile County,
Alabama. In December of 1999, the Company filed a Motion for Judgment on the
Pleadings -- similar to a motion previously filed and granted in the Leonard
case (below). In February 2000, the Court dismissed the plaintiff's case with
prejudice. The deadline for filing an appeal is pending. Martin purports to be a
class action on behalf of all individuals in the United States who rented from
the defendants and paid for optional insurance products.

On October 2, 1997, Shannon Leonard, Theresa Moore and Coley Whetstone, Jr. v.
Enterprise Rent A Car, The Hertz Corporation, et al. was commenced in Circuit
Court of Coosa County, Alabama. The Company and the other defendant car rental
companies removed the action to the United States District Court for the Middle
District of Alabama, Northern Division (Montgomery). As with the Martin case,
Leonard purports to be a class action on behalf of all persons in the United
States who rented from the defendants and, as part of that rental, purchased
optional insurance products. The Company and the other defendant car rental
companies filed a series of motions which sought dismissal of the various causes
of action based upon the judge's initial ruling that a private right of action
does not exist under Alabama law for the alleged unlicensed sale of insurance. A
final order of dismissal was entered in January of 2000 and the plaintiffs
subsequently filed a Notice of Appeal to the U.S. Court of Appeals for the
Eleventh Circuit in Atlanta, Georgia.

52
<PAGE> 54
THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

On June 2, 1999, Fred Saffer and Jennifer Nicoletta, on behalf of themselves and
all others similarly situated v. The Hertz Corporation, Enterprise Rent-A-Car,
et al. was commenced in Superior Court of New Jersey, Law Division, Essex
County. The initial complaint claimed that the collection by the Company of New
Jersey general sales tax on certain fueling charges imposed on renters was not
required by law and was an unfair trade practice. The complaint was later
amended to include a claim that the Company sold optional insurance products
without appropriate licensure, similar to the claims advanced in the other
actions described above. The Company moved to dismiss the insurance-related
components of the complaint for failure to state a claim on which relief could
be granted, and that motion was granted. The undismissed portion of the action
was stayed pending the resolution of a sales tax refund claim that the Company
brought administratively. The plaintiff subsequently moved for reconsideration
and requested permission of the court to file a second amended complaint seeking
to add an additional class representative and to add requests for relief based
on additional allegations of misconduct relating to fueling charges and sales
taxes imposed on the sale of loss damage waiver to renter of vehicles. Those
motions are pending.

The Company believes that it has meritorious defenses in the foregoing actions
and will defend itself vigorously.

In addition to the foregoing, various legal actions, claims and governmental
inquiries and proceedings are pending or may be instituted or asserted in the
future against the Company and its subsidiaries. Litigation is 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, including those discussed above, could be decided
unfavorably to the Company or the subsidiary involved. Although the amount of
liability with respect to these matters cannot be ascertained, potential
liability in excess of related accruals is not expected to materially affect the
consolidated financial position or results of operations or cash flows of the
Company.

53
<PAGE> 55
THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 13 -- QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
A summary of the quarterly operating results during 1999 and 1998 were as
follows (in thousands):

<TABLE>
<CAPTION>
Earnings
Operating Income Income Per Share
(Pre-tax Income Before Income Net ---------------
Revenues Before Interest) Taxes Income Basic Diluted
---------- ---------------- ------------- -------- ----- -------
<S> <C> <C> <C> <C> <C> <C>
1999
First quarter............ $1,032,955 $159,189 $ 82,039 $ 48,761 $ .45 $ .45
Second quarter........... 1,167,389 226,276 146,929 87,903 .81 .81
Third quarter............ 1,344,808 326,409 232,695 139,036 1.29 1.28
Fourth quarter........... 1,170,514 189,878 98,730 60,301 .56 .56
---------- -------- -------- -------- ----- -------
Total Year............. $4,715,666 $901,752 $560,393 $336,001 $3.11 $ 3.10
========== ======== ======== ======== ===== =======
1998
First quarter............ $ 898,796 $129,358 $ 60,726 $ 35,407 $ .33 $ .33
Second quarter........... 1,048,357 200,675 127,291 75,057 .69 .69
Third quarter............ 1,225,145 286,212 200,318 118,678 1.10 1.09
Fourth quarter........... 1,066,035 155,421 77,057 47,867 .44 .44
---------- -------- -------- -------- ----- -------
Total Year............. $4,238,333 $771,666 $465,392 $277,009 $2.56 $ 2.55
========== ======== ======== ======== ===== =======
</TABLE>

NOTE 14 -- FINANCIAL INSTRUMENTS
Financial instruments, which potentially subject the Company to concentrations
of credit risk, consist principally of cash equivalents and trade receivables.
The Company places its cash equivalents with financial institutions and limits
the amount of credit exposure to any one financial institution. Concentrations
of credit risk with respect to trade receivables are limited due to the large
number of customers comprising the Company's customer base, and their dispersion
across different businesses and geographic areas. All borrowings by foreign
operations are either in the foreign operation's local currency or, if in
non-local currency, on a fully hedged basis to minimize foreign exchange
exposure. As of December 31, 1999, the Company had no significant concentration
of credit risk.

CASH AND EQUIVALENTS
Fair value approximates cost indicated on the balance sheet at December 31,
1999, because of the short-term maturity of these instruments.

DEBT
Fair value 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. Carrying value was used as fair value for borrowings with an initial
maturity of 93 days or less. The fair value of all debt at December 31, 1999
approximated $6.47 billion compared to carrying value of $6.60 billion.

FINANCIAL INSTRUMENTS
The Company and its subsidiaries have entered into arrangements to manage
exposure to fluctuations in interest rates. These arrangements consist of
interest-rate swap agreements ("swaps"). The differential paid or received on
these agreements is recognized as an adjustment to interest expense. These
agreements are not entered into for trading purposes. The effect of these
agreements is to make the Company less susceptible to changes in interest rates
by effectively converting certain variable rate debt to fixed rate debt. Because
of the relationship of current market rates to historical fixed rates, the
effect at December 31, 1999 of the swap agreements is to give the Company an
overall effective weighted-average rate on debt of 6.33%, with 44% of debt
effectively subject to variable interest rates, compared to a weighted-average
interest rate on debt of 6.31%, with 46% of debt subject to variable interest
rates

54
<PAGE> 56
THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

when not considering the swap agreements. At December 31, 1999, these agreements
expressed in notional amounts aggregated $89.1 million swaps. Notional amounts
are not reflective of the Company's obligations under these agreements because
the Company is only obligated to pay the net amount of interest rate
differential between the fixed and variable rates specified in the contracts.
The Company's exposure to any credit loss in the event of non-performance by the
counterparties is further mitigated by the fact that all of these financial
instruments are with significant financial institutions that are rated "A" or
better by the major credit rating agencies. At December 31, 1999, the fair value
of all outstanding contracts, which is representative of the Company's
obligations under these contracts, assuming the contracts were terminated at
that date, was approximately a net receivable of $1.0 million.

The Company and its subsidiaries have entered into arrangements to manage
exposure to fluctuations in foreign exchange rates for certain foreign currency
loans and selected marketing programs. These arrangements consist of foreign
exchange forward contracts and the purchase of foreign exchange options. At
December 31, 1999, the total notional amount of these instruments was $83.6
million and the fair value of all outstanding contracts, which is representative
of the Company's obligations under these contracts, assuming the contracts were
terminated at that date, was approximately a net payable of $.2 million.

The fair value of the interest rate and foreign currency instruments were
estimated using market prices provided by financial institutions. The following
is the estimated fair value and notional amount of the outstanding instruments
at December 31, 1999 and their maturity dates (in millions):

<TABLE>
<CAPTION>
Fair Notional
Maturity Value(a) Amount(b)
-------- -------- ---------
<S> <C> <C> <C>
Interest Rate Instruments
2000 $31.6
- - - - - - - - - - - - - - - - - - - Assets................................................... --
- - - - - - - - - - - - - - - - - - - Liabilities.............................................. .1
2001 30.5
- - - - - - - - - - - - - - - - - - - Assets................................................... .3
- - - - - - - - - - - - - - - - - - - Liabilities.............................................. --
2002 24.9
- - - - - - - - - - - - - - - - - - - Assets................................................... .7
- - - - - - - - - - - - - - - - - - - Liabilities.............................................. --
2003 2.1
- - - - - - - - - - - - - - - - - - - Assets................................................... .1
- - - - - - - - - - - - - - - - - - - Liabilities.............................................. --
----- -----
Total................................................... $ 1.0 $89.1
===== =====
Foreign Currency Instruments(c)
2000 $75.4
- - - - - - - - - - - - - - - - - - - Assets................................................... --
- - - - - - - - - - - - - - - - - - - Liabilities.............................................. .1
2001 8.2
- - - - - - - - - - - - - - - - - - - Assets................................................... --
- - - - - - - - - - - - - - - - - - - Liabilities.............................................. .1
----- -----
Total................................................... $ (.2) $83.6
===== =====
</TABLE>

(a) Fair value is representative of the Company's obligation under the
contracts, assuming the contracts were terminated at December 31, 1999.

(b) The notional amount represents the contract amount and does not represent
the amount at risk.

(c) As of December 31, 1999, no one currency represented the majority of the
outstanding foreign currency instruments, except for forward contracts to
sell French Francs and buy United States Dollars in the amount of $70.1
million and options to sell British Pounds in the notional amount of $7.7
million and Japanese Yen in the notional amount of $3.6 million.

55
<PAGE> 57

SCHEDULE II

THE HERTZ CORPORATION AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

<TABLE>
<CAPTION>
Additions Deductions
Balance at ---------- -----------------------
Beginning of Charged to Translation Balance at
Year Income Adjustments Other End of Year
------------ ---------- ----------- -------- -----------
Dollars in thousands
<S> <C> <C> <C> <C> <C>
1999
Allowance for doubtful
accounts..................... $ 16,040 $ 19,824 $1,297 $ 10,268(a) $ 24,299
======== ======== ====== ======== ========
Public liability and property
damage....................... $307,219 $123,950 $ (412) $139,008(b) $292,573
======== ======== ====== ======== ========
1998
Allowance for doubtful
accounts..................... $ 13,927 $ 5,051 $ (373) $ 3,311(a) $ 16,040
======== ======== ====== ======== ========
Public liability and property
damage....................... $310,475 $114,373 $ 531 $117,098(b) $307,219
======== ======== ====== ======== ========
1997
Allowance for doubtful
accounts..................... $ 12,268 $ 9,623 $ 978 $ 6,986(a) $ 13,927
======== ======== ====== ======== ========
Public liability and property
damage....................... $321,118 $122,540 $ 376 $132,807(b) $310,475
======== ======== ====== ======== ========
</TABLE>

- - - - - - - - - - - - - - - - - - ---------------
(a) Amounts written off, net of recoveries.

(b) Payments of claims and expenses.

56
<PAGE> 58

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information called for by Item 10 is incorporated by reference from the
information under the caption "Election of Directors" and "Executive Officers
and Compensation" in the Company's Proxy Statement for its 2000 annual meeting
of stockholders.

For information concerning the Executive Officers of the Company, see "Executive
Officers of the Registrant" under Part I of this report.

ITEM 11. EXECUTIVE COMPENSATION.
The information called for by Item 11 is incorporated by reference from the
information under the caption "Executive Officers and Compensation" in the
Company's Proxy Statement for its 2000 annual meeting of stockholders.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information called for by Item 12 is incorporated by reference from the
information under the caption "Security Ownership" in the Company's Proxy
Statement for its 2000 annual meeting of stockholders.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information called for by Item 13 is incorporated by reference from the
information under the caption "Certain Relationships and Related Transactions"
in the Company's Proxy Statement for its 2000 annual meeting of stockholders.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

Page
----

(a) 1. Financial Statements:
The Hertz Corporation and Subsidiaries --
Report of Independent Public Accountants......................... 27
Consolidated Balance Sheet at December 31, 1999 and 1998......... 28
Consolidated Statement of Income for the years ended December 31, 1999,
1998 and 1997...................................................... 29
Consolidated Statement of Stockholders' Equity for the years ended
December 31, 1999, 1998 and 1997............................... 30
Consolidated Statement of Cash Flows for the years ended December 31,
1999, 1998 and 1997................................................. 31-32
Notes to Consolidated Financial Statements........................ 33-54

2. Financial Statement Schedules:
The Hertz Corporation and Subsidiaries --
Schedule II -- Valuation and qualifying accounts for the years
ended December 31, 1999, 1998 and 1997......................... 55

3. Exhibits:
(3) Articles of Incorporation and By-Laws
(a) Restated Certificate of Incorporation of the Company.*
(b) By-Laws of the Company, effective January 1, 2000.

57
<PAGE> 59

(4) Instruments defining the rights of security holders, including
indentures
(a) At December 31, 1999, the Company had various obligations which
could be considered as long-term debt, none of which exceeded 10%
of the total assets of the Company on a consolidated basis. The
Company agrees to furnish to the Commission upon request a copy of
any such instrument defining the rights of the holders of such
long-term debt.
(10) Material Contracts.
(a) Car Supply Agreement between the Company and Ford.*
(b) Joint Advertising Agreement between the Company and Ford.*
(c) Tax-Sharing Agreement between the Company and Ford.*
(d) The Hertz Corporation Benefit Equalization Plan.*
(e) The Hertz Corporation Supplemental Retirement and Savings Plan, as
amended.*
(f) The Hertz Corporation Executive Incentive Compensation Plan.*
(g) The Hertz Corporation Long-Term Incentive Plan.*
(h) Form of The Hertz Corporation Special Supplemental Executive
Pension Benefit for Frank A.
Olson and William Sider.*
(i) Employment Agreement between the Company and Frank A. Olson.*
(j) Employment Agreement between the Company and Craig R. Koch.*
(k) Employment Agreement between the Company and Brian J. Kennedy.*
(l) Employment Agreement between the Company and Joseph R. Nothwang
(filed as Exhibit (10)(n) to the
Company's Annual Report on Form 10-K for the year ended December 31,
1997).
(m) Employment Agreement between the Company and Gerald A. Plescia
(filed as Exhibit (10)(o) to the
Company's Annual Report on Form 10-K for the year ended December 31,
1997).
(n) Employment Agreement between the Company and Paul J. Siracusa
(filed as Exhibit (10)(p) to the Company's Annual Report on
Form 10-K for the year ended December 31, 1997).
(o) The Hertz Corporation Supplemental Executive Retirement Plan
(filed as Exhibit (10)(o) to
the Company's Annual Report on Form 10-K for the year ended December
31, 1998).
(12) Computation of Consolidated Ratio of Earnings to Fixed Charges for
each of the five years in the period ended December 31, 1999
(21) Subsidiaries of the Company as of December 31, 1999
(23) Consent of Independent Accountants
(27) Consolidated Financial Data Schedule for the year ended December 31,
1999
- - - - - - - - - - - - - - - - - - ---------------
* Incorporated herein by reference from the Company's Registration Statement No.
333-22517 on Form S-1.

(b) Reports on Form 8-K.

The Company filed a Form 8-K dated October 15, 1999, reporting the issuance of a
press release with respect to its third quarter 1999 earnings.

The Company filed a Form 8-K dated October 25, 1999, reporting the issuance of a
press release with respect to its declaration of a quarterly dividend.

Schedules and exhibits not included above have been omitted because the
information required has been included in the financial statements or notes
thereto or are not applicable or not required.

58
<PAGE> 60

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

THE HERTZ CORPORATION
(Registrant)

By: /s/ PAUL J. SIRACUSA
----------------------------------
Paul J. Siracusa
Executive Vice President and
Chief Financial Officer

March 17, 2000

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated.

/s/ CRAIG R. KOCH President and Chief Executive Officer
- - - - - - - - - - - - - - - - - - ----------------------------------------------------- (Principal Executive Officer)
Craig R. Koch

/s/ FRANK A. OLSON Director and Chairman of the Board
- - - - - - - - - - - - - - - - - - -----------------------------------------------------
Frank A. Olson

/s/ W. WAYNE BOOKER Director
- - - - - - - - - - - - - - - - - - -----------------------------------------------------
W. Wayne Booker

/s/ LOUIS C. BURNETT Director
- - - - - - - - - - - - - - - - - - -----------------------------------------------------
Louis C. Burnett

/s/ MICHAEL T. MONAHAN Director
- - - - - - - - - - - - - - - - - - -----------------------------------------------------
Michael T. Monahan

/s/ PETER J. PESTILLO Director
- - - - - - - - - - - - - - - - - - -----------------------------------------------------
Peter J. Pestillo

/s/ JOHN M. RINTAMAKI Director
- - - - - - - - - - - - - - - - - - -----------------------------------------------------
John M. Rintamaki

/s/ JOHN M. THOMPSON Director
- - - - - - - - - - - - - - - - - - -----------------------------------------------------
John M. Thompson

/s/ JOSEPH A. WALKER Director
- - - - - - - - - - - - - - - - - - -----------------------------------------------------
Joseph A. Walker

/s/ PAUL J. SIRACUSA Executive Vice President and Chief Financial
- - - - - - - - - - - - - - - - - - ----------------------------------------------------- Officer
Paul J. Siracusa (Principal Financial Officer)

/s/ RICHARD J. FOTI Staff Vice President and Controller
- - - - - - - - - - - - - - - - - - ----------------------------------------------------- (Principal Accounting Officer)
Richard J. Foti
</TABLE>

59
<PAGE> 61

EXHIBIT INDEX

<TABLE>
<S> <C>
(3)(b) By-Laws of the Company, effective January 1, 2000.

(12) Computation of Consolidated Ratio of Earnings to Fixed
Charges for each of the five years in the period ended
December 31, 1999.
(21) Subsidiaries of the Company as of December 31, 1999.
(23) Consent of Independent Accountants.
(27) Consolidated Financial Data Schedule for the year ended
December 31, 1999.
</TABLE>

<PAGE> 1
Exhibit 3 (b)

BY-LAWS

THE HERTZ CORPORATION
(THE "COMPANY")

EFFECTIVE APRIL 22, 1997

AMENDED NOVEMBER 30, 1999, EFFECTIVE JANUARY 1, 2000

ARTICLE I.

OFFICES

The registered office of the Company shall be in the City of
Wilmington, County of New Castle, State of Delaware. The Company may also have
one or more offices at such other places, either inside or outside of the State
of Delaware, as the Board of Directors may from time to time determine or as the
business of the Company may require. The books and records of the Company may be
kept (subject to the provisions of the laws of the State of Delaware) at any
place, either inside or outside of the State of Delaware, as from time to time
may be determined by the Board of Directors.

ARTICLE II.

STOCKHOLDERS

SECTION 1. PLACE OF MEETING.

Meetings of stockholders (whether annual or special) shall be held at
such place, either inside or outside of the State of Delaware, as the Board of
Directors shall from time to time determine.

SECTION 2. ANNUAL MEETING.

The annual meeting of stockholders shall be held on the last Thursday
of May of each year or at such other time as shall be determined by the Board of
Directors. Should said day be a legal holiday, such annual meeting shall be held
on the preceding regular business day. If, for any reason, the annual meeting be
not held at the time aforesaid, the directors shall fix another date for such
meeting.
<PAGE> 2
SECTION 3. SPECIAL MEETINGS.

Unless otherwise prescribed by law or by the Company's certificate of
incorporation, as amended from time to time (the "Charter"), special meetings of
stockholders may be held at any time on call of the Chairman of the Board of
Directors or, the President, or, at the request in writing of a majority of the
Board of Directors, any officer. Such request shall state the purpose or
purposes of the proposed meeting.

SECTION 4. NOTICE OF MEETINGS.

Except as otherwise provided by law, at least twenty (20) days' notice
of stockholders' meetings stating the time and place and the objects thereof
shall be given by the Chairman of the Board of Directors, the President, the
Secretary or an Assistant Secretary to each stockholder of record having voting
power in respect of the business to be transacted thereat. Subject to Section 5
of this Article II, no business other than that stated in the notice shall be
transacted at any meeting.

SECTION 5. NOTICE OF STOCKHOLDER BUSINESS AND NOMINATIONS.

(A) Annual Meetings of Stockholders. (1) Nominations of persons for
election to the Board of Directors and the proposal of business to be considered
by the stockholders may be made at an annual meeting of stockholders (a)
pursuant to the Company's notice of meeting delivered pursuant to Section 4 of
this Article II, (b) by or at the direction of the Board of Directors or (c) by
any stockholder of the Company who is entitled to vote at the meeting, who
complied with the notice procedures set forth in paragraphs (A)(2) and (A)(3) of
this Section 5 and who was a stockholder of record at the time such notice is
delivered to the Secretary of the Company.

(2) For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to clause (c) of paragraph (A)(1) of
this Section 5, the stockholder must have given timely notice thereof in writing
to the Secretary of the Company and such business must be a proper subject for
stockholder action under the General Corporation Law of the State of Delaware.
To be timely, a stockholder's notice shall be delivered to the Secretary at the
principal executive offices of the Company not less than sixty (60) days nor
more than ninety (90) days prior to the first anniversary of the preceding
year's annual meeting; provided, however, that in the event that the date of the
annual meeting is advanced by more than thirty (30) days or delayed by more than
sixty (60) days from such anniversary date, notice by the stockholder to be
timely must be so delivered not earlier than the ninetieth day prior to such
annual meeting and not later than the close of business on the later of the
sixtieth day prior to such annual meeting or the tenth day following the day on
which public announcement of the date of such meeting is first made. Such
stockholder's notice shall set forth (a) as to each person whom the stockholder
proposes to nominate for election or reelection as a director all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), (including such person's written consent to being named in
the proxy statement as a nominee and to serving as a director if elected); (b)
as to any other business that the stockholder proposes to bring before the
meeting, a brief description of the business desired to be brought before the
meeting, the reasons for conducting such business at the meeting and any
material interest in such business of such stockholder and the beneficial owner,
if any, on whose behalf the proposal is made; and (c) as to

2
<PAGE> 3
the stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made (i) the name and address of such
stockholder, as they appear on the Company's books, and of such beneficial owner
and (ii) the class and number of shares of the Company which are owned
beneficially and of record by such stockholder and such beneficial owner. If the
stockholder or beneficial owner intends to solicit proxies in support of any
such nomination or proposal, such stockholder's notice shall also include a
representation to that effect.

(3) Notwithstanding anything in the second sentence of paragraph (A)(2) of this
Section 5 to the contrary, in the event that the number of directors to be
elected to the Board of Directors is increased and there is no public
announcement naming all of the nominees for director or specifying the size of
the increased Board of Directors made by the Company at least seventy (70) days
prior to the first anniversary of the preceding year's annual meeting, a
stockholders' notice required by this Section 5 shall also be considered timely,
but only with respect to nominees for any new positions created by such
increase, if it shall be delivered to the Secretary at the principal executive
offices of the Company not later than the close of business on the tenth day
following the day on which such public announcement is first made by the
Company.

(B) Special Meetings of Stockholders. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the Company's notice of meeting pursuant to Section 4 of
this Article II. Nominations of persons for election to the Board of Directors
may be made at a special meeting of stockholders at which directors are to be
elected pursuant to the Company's notice of meeting (a) by or at the direction
of the Board of Directors or (b) by any stockholder of the Company who is
entitled to vote at the meeting, who complies with the notice procedures set
forth in this Section 5 and who is a stockholder of record at the time such
notice is delivered to the Secretary of the Company. Nominations by stockholders
of persons for election to the Board of Directors may be made at such a special
meeting of stockholders if the stockholder's notice required by paragraph (A)(2)
of this Section 5 shall be delivered to the Secretary at the principal executive
offices of the Company not earlier than the ninetieth day prior to such special
meeting and not later than the close of business on the later of the sixtieth
day prior to such special meeting or the tenth day following the day on which
public announcement is first made of the date of the special meeting and of the
nominees proposed by the Board of Directors to be elected at such meeting.

(C) General. (1) Except as is provided in Section 1 of Article III of
these By-Laws with respect to vacancies in the Board of Directors, only persons
who are nominated in accordance with the procedures set forth in this Section 5
shall be eligible to serve as directors and only such business shall be
conducted at a meeting of stockholders as shall have been brought before the
meeting in accordance with the procedures set forth in this Section 5. Except as
otherwise provided by law, the Charter or these By-Laws, the chairman of the
meeting shall have the power and duty to determine whether a nomination or any
business proposed to be brought before the meeting was made in accordance with
this Section 5 and, if any proposed nomination or business is not in compliance
with this Section 5, or if a stockholder or beneficial owner solicits proxies in
support of a nomination or proposal without having made the representation
required in paragraph (A)(2) of this Section 5, to declare that such proposal or
nomination shall be disregarded.

(2) For purposes of this Section 5, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national

3
<PAGE> 4
news service or in a document publicly filed by the Company with the Securities
and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.

(3) Notwithstanding the foregoing provisions of this Section 5, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this Section 5. Nothing in this Section 5 shall be deemed to affect any
rights of stockholders to request inclusion of proposals in the Company's proxy
statement pursuant to Rule 14a-8 under the Exchange Act.

SECTION 6. QUORUM.

At any meeting of stockholders, the number of shares the holders of
which shall be present or represented by proxy in order to constitute a quorum
for, and the votes that shall be necessary for, the transaction of any business
shall be as expressly provided in Article 4 of the Charter. At any meeting of
stockholders at which a quorum is not present, the person serving as chairman of
the meeting or the holders of shares entitled to cast a majority of all of the
votes which could be cast at such meeting by the holders of outstanding shares
of stock of the Company who are present in person or by proxy and who are
entitled to vote on every matter that is to be voted on without regard to class
at such meeting may adjourn the meeting from time to time.

SECTION 7. ORGANIZATION AND CONDUCT OF BUSINESS.

The Chairman of the Board of Directors shall act as chairman of
meetings of the stockholders. The Board of Directors may designate any other
officer or director of the Company to act as chairman of any meeting in the
absence of the Chairman of the Board of Directors, and the Board of Directors
may further provide for determining who shall act as chairman of any
stockholders' meeting in the absence of the Chairman of the Board of Directors
and such designee. The person serving as chairman of any meeting of stockholders
shall determine the order of business and the procedure at the meeting,
including such regulation of the manner of voting and the conduct of discussion
as seem to him or her in order.

The Secretary of the Company shall act as secretary of all meetings of
the stockholders, but in the absence of the Secretary, the presiding officer may
appoint any other person to act as secretary of any meeting.

SECTION 8. PROXIES AND VOTING.

At any meeting of stockholders, every stockholder entitled to vote may
vote in person or by proxy authorized by an instrument in writing or by a
transmission permitted by law filed in accordance with the procedure established
for the meeting. Any copy, facsimile telecommunication or other reliable
reproduction of the writing or transmission created pursuant to this paragraph
may be substituted or used in lieu of the original writing or transmission for
any and all purposes for which the original writing or transmission could be
used, provided that such copy, facsimile telecommunication or other reproduction
shall be a complete reproduction of the entire original writing or transmission.

All voting, including on the election of directors but excepting where
otherwise required by law, may be a voice vote; provided, however, that upon
demand therefor by a stockholder entitled to vote or by his or her proxy, a
stock vote shall be taken. Every stock vote shall be

4
<PAGE> 5
taken by ballots, each of which shall state the name of the stockholder or proxy
voting and such other information as may be required under the procedure
established for the meeting.

SECTION 9. STOCK LISTS.

A complete list of stockholders entitled to vote at any meeting of
stockholders, arranged in alphabetical order for each class of stock and showing
the address of each such stockholder and the number of shares registered in his
or her name, shall be open to the examination of any such stockholder, for any
purpose germane to the meeting, during ordinary business hours for a period of
at least ten (10) days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or if not so specified, at the place where the meeting is to be
held.

The stock list shall also be kept at the place of the meeting during
the whole time thereof and shall be open to the examination of any such
stockholder who is present. This list shall presumptively determine the identity
of the stockholders entitled to vote at the meeting and the number of shares
held by each of them.

SECTION 10. RATIFICATION.

Any transaction questioned in any stockholders' derivative suit, or any
other suit to enforce alleged rights of the Company or any of its stockholders,
on the ground of lack of authority, defective or irregular execution, adverse
interest of any director, officer or stockholder, nondisclosure, miscomputation
or the application of improper principles or practices of accounting may be
approved, ratified and confirmed before or after judgment by the Board of
Directors or by the holders of the Company's Class A Common Stock, par value
$.01 per share ("Class A Common Stock") and the holders of the Company's Class B
Common Stock, par value $.01 per share ("Class B Common Stock") voting as
provided in paragraph (g) of Article 4 of the Charter, and, if so approved,
ratified or confirmed, shall have the same force and effect as if the questioned
transaction had been originally duly authorized, and said approval, ratification
or confirmation shall be binding upon the Company and all of its stockholders
and shall constitute a bar to any claim or execution of any judgment in respect
of such questioned transaction.

SECTION 11. INSPECTORS OF ELECTION.

The Board of Directors may, and to the extent required by law, shall,
in advance of any meeting of stockholders, appoint one or more inspectors to act
at the meeting, decide upon the qualification of voters, count the votes, decide
the results and make a written report thereof in accordance with the General
Corporation Law of the State of Delaware. The Board of Directors may designate
one or more persons as alternate inspectors to replace any inspector who fails
to act. If no inspector or alternate is able to act at a meeting of
stockholders, the person presiding at the meeting may, and to the extent
required by law, shall, appoint one or more inspectors to act at the meeting.
Each inspector, before entering upon the discharge of his or her duties, shall
take and sign an oath faithfully to execute the duties of inspector with strict
impartiality and according to the best of his or her ability. Every vote taken
by ballots shall be counted by an inspector or inspectors appointed by the Board
of Directors or the person presiding at the meeting, as the case may be.

5
<PAGE> 6
ARTICLE III.

BOARD OF DIRECTORS

SECTION 1. NUMBER, TERM OF OFFICE AND ELIGIBILITY.

Subject to any rights of holders of preferred stock to elect additional
directors under specified circumstances, the number of directors of the Company
shall be fixed from time to time exclusively by resolution of the Board of
Directors adopted by the affirmative vote of directors constituting not less
than a majority of the total number of directors that the Company would have if
there were no vacancies on the Company's Board of Directors, but shall consist
of not more than twelve (12) nor less than three (3) directors. Each director
shall be elected annually by ballot by the holders of Class A Common Stock and
the holders of Class B Common Stock voting as provided in paragraph (g) of
Article 4 of the Charter at the annual meeting of stockholders, to serve until
his or her successor shall have been elected and shall have qualified, except as
provided in this Section 1. No person may be elected or re-elected a director of
the Company if at the time of his or her election or re-election he or she shall
have attained the age of seventy years, and the term of any director who shall
have attained such age while serving as a director shall terminate as of the
time of the first annual meeting of stockholders following his or her seventieth
birthday; provided, however, that the Board of Directors by resolution may waive
such age limitation in any year and from year to year with respect to any
director or directors. Subject to any rights of holders of preferred stock, and
unless the Board of Directors otherwise determines, any vacancy occurring in the
Board of Directors caused by death, resignation, increase in number of directors
or otherwise may be filled by the affirmative vote of a majority of the
remaining members of the Board of Directors, though less than a quorum, or by a
sole remaining director, and except as otherwise provided by law, any such
vacancy may not be filled by the stockholders of the Company, and any director
so elected shall hold office until the next election of directors and until his
or her successor is duly elected and qualified, or until his or her earlier
death, resignation or removal.

SECTION 2. MEETINGS.

Meetings of the Board of Directors may be held at such place, either
inside or outside of the State of Delaware, as may from time to time be
designated by the Chairman of the Board of Directors, the President or
resolution of the Board of Directors or as may be specified in the call of any
meeting. In the absence of any such designation, the meetings shall be held at
the principal executive office of the Company in Park Ridge, New Jersey.

An annual meeting of the Board of Directors shall be held on the same
day as, and as soon as practicable following the annual meeting of stockholders
or at such other time or place as shall be determined by the Board of Directors
at its regular meeting next preceding said annual meeting of stockholders.
Regular meetings of the Board of Directors shall be held on the last Thursday of
February, May, August and November of each year or at such other time as shall
be determined by the Board of Directors. Should said day be a legal holiday,
such regular meeting shall be held on the next Thursday that is not a legal
holiday.

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Special meetings of the Board of Directors may be held at any time on
the call of the Chairman of the Board of Directors, the President or one-third
of the directors then in office. Meetings may be held at any time or place
without notice if all the directors are present or if those not present waive
notice of the meeting in writing.

SECTION 3. NOTICE OF MEETINGS.

The Secretary or an Assistant Secretary shall give notice of the time
and place of meetings of the Board of Directors (excepting the annual meeting of
directors) by (i) mailing or sending via courier such notice not later than
during the second day preceding the day on which such meeting is to be held, or
(ii) by (a) sending a facsimile transmission or other form of electronic
communication containing such notice or (b) delivering such notice personally or
by telephone, in each case, not later than during the first day preceding the
day on which such meeting is to be held to each director. Unless otherwise
stated in the notice thereof any and all business may be transacted at any
meeting.

SECTION 4. QUORUM AND ORGANIZATION OF MEETINGS.

One-third of the total number of members of the Board of Directors as
constituted from time to time, but in no event less than three, shall constitute
a quorum for the transaction of business; but if at any meeting of the Board of
Directors there shall be less than a quorum present, a majority of those present
may adjourn the meeting from time to time, and the meeting may be held as
adjourned without further notice or waiver. Except as otherwise provided by law
or by the Charter or these By-Laws, a majority of the directors present at any
duly constituted meeting may decide any question brought before such meeting.

The Board of Directors shall elect one of its members to be Chairman of
the Board of Directors. The Chairman of the Board of Directors shall lead the
Board of Directors in fulfilling its responsibilities as set forth in these
By-Laws, including its responsibility to oversee the performance of the Company,
and shall determine the agenda and perform all other duties and exercise all
other powers which are or from time to time may be delegated to him or her by
the Board of Directors.

Meetings of the Board of Directors shall be presided over by the
Chairman of the Board of Directors or, in his or her absence, by the President,
or in the absence of the Chairman of the Board of Directors and the President by
such other person as the Board of Directors may designate or the members present
may select.

SECTION 5. POWERS.

In addition to the powers and authorities by these By-Laws expressly
conferred upon them, the Board of Directors shall have and may exercise all such
powers of the Company and do all such lawful acts and things that are not by
statute, the Charter or these By-Laws directed or required to be exercised or
done by the stockholders. Without prejudice to or limitation of such general
powers and any other powers conferred by statute, the Charter or these By-Laws,
the Board of Directors shall have the following powers:

(1) To determine, subject to the requirements of law and of
paragraph (c)(2) of Article 4 of the Charter, what, if any, dividends
shall be declared and paid to the

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stockholders out of net profits, current or accumulated, or out of
surplus or other assets of the Company available for dividends.

(2) To fix, and from time to time to vary, the amount of
working capital of the Company, and to set aside from time to time out
of net profits, current or accumulated, or surplus of the Company such
amount or amounts as they in their discretion may deem necessary and
proper as, or as a safeguard to the maintenance of, working capital, as
a reserve for contingencies, as a reserve for repairs, maintenance, or
rehabilitation, as a reserve for revaluation of profits of the Company
or for such other proper purpose as may in the opinion of the directors
be in the best interests of the Company; and in their sole discretion
to abolish or modify any such provision for working capital or any such
reserve, and to credit the amount thereof to net profits, current or
accumulated, or to the surplus of the Company.

(3) To purchase, or otherwise acquire for the Company, any
business, property, rights or privileges which the Company may at the
time be authorized to acquire, at such price or consideration and
generally on such terms and conditions as they think fit; and at their
discretion to pay therefor either wholly or partly in money, stock,
bonds, debentures or other securities of the Company.

(4) To create, make and issue mortgages, bonds, deeds of
trust, trust agreements or negotiable or transferable instruments or
securities, secured by mortgage or otherwise, and to do every other act
and thing necessary to effect the same.

(5) To appoint any person or corporation to accept and hold in
trust for the Company any property belonging to the Company, or in
which it is interested, or for any other purpose, and to execute such
deeds and do all things requisite in relation to any such trust.

(6) To remove any officer of the Company with or without
cause, and from time to time to devolve the powers and duties of any
officer upon any other person for the time being.

(7) To confer upon any officer of the Company the power to
appoint, remove and suspend subordinate officers, agents and employees.

(8) To determine who shall be authorized on the Company's
behalf, either generally or specifically, to make and sign bills,
notes, acceptances, endorsements, checks, releases, receipts,
contracts, conveyances and all other written instruments executed on
behalf of the Company.

(9) To make and change regulations, not inconsistent with
these By-Laws, for the management of the Company's business and
affairs.

(10) To adopt and, unless otherwise provided therein, to amend
and repeal, from time to time, bonus and supplemental compensation
plans for employees (including employees who are officers or directors)
of the Company or any subsidiary. Power to construe, interpret,
administer, modify or suspend any such plan shall be vested in the
Board of Directors or a committee thereof.

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(11) To adopt a retirement plan, or plans, for the purpose of
making retirement payments to employees (including employees who are
officers or directors) of the Company or of any subsidiary thereof; and
to adopt a group insurance plan, or plans, for the purpose of enabling
employees (including employees who are officers or directors) of the
Company or of any subsidiary thereof to acquire insurance protection;
any such retirement plan or insurance plan, unless otherwise provided
therein, shall be subject to amendment or revocation by the Board of
Directors.

(12) To delegate any of the powers of the Board of Directors
in the course of the business of the Company to any officer, employee
or agent, and to appoint any person the agent of the Company, with such
powers (including the power to subdelegate) and upon such terms as the
Board of Directors may think fit.

SECTION 6. RELIANCE UPON BOOKS, REPORTS AND RECORDS.

Each director, each member of any committee designated by the Board of
Directors and each officer, in the performance of his or her duties, shall be
fully protected in relying in good faith upon such information, opinions,
reports or statements presented to the Company by any of its officers or
employees, or by committees of the Board of Directors, or by any other person,
as to matters such director, member or officer, as the case may be, reasonably
believes are within such person's professional or expert competence and who has
been selected with reasonable care by the Board of Directors or by any such
committee, or in relying in good faith upon other records of the Company.

SECTION 7. COMPENSATION OF DIRECTORS.

Directors, as such, may receive, pursuant to resolution of the Board of
Directors, fixed fees and other compensation for their services as directors,
including, without limitation, services as members of committees of the Board of
Directors; provided, however, that nothing herein contained shall be construed
to preclude any director from serving the Company in any other capacity and
receiving compensation therefor.

SECTION 8. MEETINGS BY MEANS OF CONFERENCE TELEPHONE.

Unless otherwise provided by the Charter or these By-Laws, members of
the Board of Directors, or any committee designated by the Board of Directors,
may participate in a meeting of the Board of Directors or such committee by
means of a conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation in a meeting pursuant to this Section 8 shall constitute presence
in person at such meeting.

ARTICLE IV.

COMMITTEES

SECTION 1. COMMITTEES OF THE BOARD OF DIRECTORS.

There are hereby established as committees of the Board of Directors an
Audit Committee, a Compensation Committee and a Nominating Committee, each of
which shall have the powers and functions set forth in Sections 2, 3 and 4
hereof, respectively, and such additional

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powers as may be delegated to it by the Board of Directors. The Board of
Directors may from time to time establish additional standing committees or
special committees of the Board of Directors, each of which shall have such
powers and functions as may be delegated to it by the Board of Directors. The
Board of Directors may abolish any committee established by or pursuant to this
Section 1 as it may deem advisable. Each such committee shall consist of two or
more directors, the exact number being determined from time to time by the Board
of Directors. Designations of members of each such committee, and, if desired,
alternates for members, shall be made by the Board of Directors. Designations of
the chairman of each such committee, and, if desired, a vice chairman, shall be
made by the Board of Directors or by action of such committee. In the absence or
disqualification of any member of any committee and any alternate member in his
or her place, the member or members of the committee present at the meeting and
not disqualified from voting whether or not he or she or they constitute a
quorum, may by unanimous vote appoint another member of the Board of Directors
to act at the meeting in the place of the absent or disqualified member. Each
committee shall have a secretary who shall be designated by its chairman. A vice
chairman of a committee shall act as the chairman of the committee in the
absence or disability of the chairman.

SECTION 2. AUDIT COMMITTEE.

The Audit Committee shall select and engage, on behalf of the Company,
independent public accountants to (1) audit the books of account and other
corporate records of the Company and (2) perform such other duties as the Audit
Committee may from time to time prescribe. The Audit Committee shall transmit
financial statements certified by such independent public accountants to the
Board of Directors after the close of each fiscal year. The selection of
independent public accountants for each fiscal year shall be made in advance of
the annual meeting of stockholders in such fiscal year and shall be submitted
for ratification or rejection at such meeting. The Audit Committee shall confer
with such accountants and review and approve the scope of the audit of the books
of account and other corporate records of the Company. The Audit Committee shall
have the power to confer with and direct the officers of the Company to the
extent necessary to review the internal controls, accounting practices,
financial structure and financial reporting of the Company. From time to time
the Audit Committee shall report to and advise the Board of Directors concerning
the results of its consultation and review and such other matters relating to
the internal controls, accounting practices, financial structure and financial
reporting of the Company as the Audit Committee believes merit review by the
Board of Directors. The Audit Committee also shall perform such other functions
and exercise such other powers as may be delegated to it from time to time by
the Board of Directors.

SECTION 3. COMPENSATION COMMITTEE.

The Compensation Committee shall fix from time to time the salaries of
(i) members of the Board of Directors who are officers or employees of the
Company, (ii) the President, all Executive Vice Presidents and all Senior Vice
Presidents of the Company and (iii) Vice Presidents of the Company who are
elected officers of the Company. It also shall perform such functions as may be
delegated to it under the provisions of any bonus, supplemental compensation,
special compensation or stock option plan of the Company.

SECTION 4. NOMINATING COMMITTEE.

The Nominating Committee from time to time shall consider and make
recommendations to the Board of Directors with respect to nominations or
elections of directors and officers of the

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Company and the appointments of such other employees of the Company as shall be
referred to the Nominating Committee.

The Nominating Committee from time to time shall consider the size and
composition of the Board of Directors and make recommendations to the Board of
Directors with respect to such matters. Prior to the annual meeting of
stockholders each year, and prior to any special meeting of stockholders at
which a director is to be elected, the Nominating Committee shall recommend to
the Board of Directors persons proposed to constitute the nominees whose
election at such meeting will be recommended by the Board of Directors.

The authority vested in the Nominating Committee by this Section 4
shall not derogate from the power of individual members of the Board of
Directors to recommend or place in nomination persons other than those
recommended by the Nominating Committee.

The Nominating Committee also shall perform such other functions and
exercise such other powers as may be delegated to it from time to time by the
Board of Directors.

SECTION 5. OTHER COMMITTEES.

The Board of Directors, or any committee, officer or employee of the
Company, may establish additional standing committees or special committees to
serve in an advisory capacity or in such other capacities as may be permitted by
law, the Charter and these By-Laws. The members of any such committee need not
be members of the Board of Directors. Any committee established pursuant to this
Section 5 may be abolished by the Board of Directors or by the person or body by
whom it was established as he, she or it may deem advisable. Each such committee
shall consist of two or more members, the exact number being determined from
time to time by such person or body. Designations of members of each such
committee and, if desired, alternates for members, shall be made by such person
or body, at whose will all such members and alternates shall serve. The chairman
of each such committee shall be designated by such person or body. Each such
committee shall have a secretary who shall be designated by the chairman.

SECTION 6. RULES AND PROCEDURES.

Each committee may fix its own rules and procedures and shall meet at
such times and places as may be provided by such rules, by resolution of the
committee or by call of the chairman or vice chairman. Notice of meeting of each
committee, other than of regular meetings provided for by its rules or
resolutions, shall be given to committee members. The presence of one-third of
its members, but not less than two, shall constitute a quorum of any committee,
and all questions shall be decided by a majority vote of the members present at
the meeting. All action taken at each committee meeting shall be recorded in
minutes of the meeting.

SECTION 7. APPLICATION OF ARTICLE.

Whenever any provision of any other document relating to any committee
of the Company named therein shall be in conflict with any provision of this
Article IV, the provisions of this Article IV shall govern, except that if such
other document shall have been approved by the stockholders, voting as provided
in the Charter, or by the Board of Directors, the provisions of such other
document shall govern.

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ARTICLE V.

OFFICERS

SECTION 1. OFFICERS.

The Officers of the Company may include a President, who shall be
chosen from among the directors, one or more Executive Vice Presidents, one or
more Senior Vice Presidents, one or more Vice Presidents, a Treasurer, a
Controller, a General Counsel and a Secretary, each of whom shall be elected by
the Board of Directors to hold office until his or her successor shall have been
chosen and shall have qualified. The Board of Directors may elect and the
President may appoint one or more Assistant Vice Presidents, one or more
Assistant Treasurers, one or more Assistant Controllers, one or more Deputy,
Associate or Assistant General Counsels, one or more Assistant Secretaries, and
the Board of Directors may elect or appoint such other officers as it may deem
necessary, or desirable, each of whom shall have such authority, shall perform
such duties and shall hold office for such term as may be prescribed by the
Board of Directors from time to time. Any person may hold at one time more than
one office, excepting that the duties of the President and Secretary shall not
be performed by one person.

SECTION 2. PRESIDENT AND CHIEF EXECUTIVE OFFICER.

Subject to the provisions of these By-Laws and to the direction of the
Board of Directors, the President shall be the Chief Executive Officer of the
Company and shall have ultimate authority for decisions relating to the general
management and control of the affairs and business of the Company and shall
perform all other duties and exercise all other powers commonly incident to the
position of Chief Executive Officer or which are or from time to time may be
delegated to him or her by the Board of Directors, or which are or may at any
time be authorized or required by law. He or she may redelegate from time to
time and to the full extent permitted by law, in writing, to officers or
employees of the Company any or all of such duties and powers, and any such
redelegation may be either general or specific. Whenever he or she so shall
delegate any of his or her authority, he or she shall file a copy of the
redelegation with the Secretary of the Company.

SECTION 3. CHIEF OPERATING OFFICER.

The Chief Operating Officer shall be selected by the Board of
Directors. Subject to the provisions of these By-Laws and to the direction of
the Board of Directors and of the President, he or she shall have such powers
and shall perform such duties as from time to time may be delegated to him or
her by the Board of Directors or by the President, or which are or may at any
time be authorized or required by law.

SECTION 4. EXECUTIVE VICE PRESIDENTS, SENIOR VICE PRESIDENTS AND VICE
PRESIDENTS.

Each of the Executive Vice Presidents, each of the Senior Vice
Presidents and each of the other Vice Presidents shall have such powers and
shall perform such duties as may be delegated to him or her by the Board of
Directors, by the President, by the Chief Operating Officer or such other
officer or officers to whom he or she is directly responsible.

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SECTION 5. TREASURER AND ASSISTANT TREASURER.

The Treasurer, subject to the direction of the Board of Directors,
shall have the care and custody of all funds and securities of the Company which
may come into his or her hands. When necessary or proper he or she shall endorse
on behalf of the Company, for collection, checks, notes and other obligations,
and shall deposit all funds of the Company in such banks or other depositaries
as may be designated by the Board of Directors or by such officers or employees
as may be authorized by the Board of Directors so to designate. He or she shall
perform all acts incident to the office of Treasurer, subject to the control of
the Board of Directors and such other officer or officers to whom he or she is
directly responsible. He or she may be required to give a bond for the faithful
discharge of his or her duties, in such sum and upon such conditions as the
Board of Directors may require.

At the request and direction of the Treasurer or, in the case of his or
her absence or inability to act, any Assistant Treasurer may act in his or her
place. In the case of the death of the Treasurer, or in the case of his or her
absence or inability to act without having designated an Assistant Treasurer to
act temporarily in his or her place, the Assistant Treasurer so to perform the
duties of the Treasurer shall be designated by the Board of Directors, the
President, the Chief Operating Officer or such other officer or officers to whom
he or she is directly responsible.

SECTION 6. SECRETARY AND ASSISTANT SECRETARY.

The Secretary shall keep full and accurate minutes of the meetings of
the stockholders and of the Board of Directors in the proper record book of the
Company provided therefor, and, when required, the minutes of meetings of the
committees, and shall be responsible for the custody of all such minutes.
Subject to the direction of the Board of Directors, the Secretary shall have
custody of the stock ledgers and documents of the Company. He or she shall have
custody of the corporate seal of the Company and shall affix and attest such
seal to any instrument whose execution under seal shall have been duly
authorized. He or she shall give due notice of meetings and, subject to the
direction of the Board of Directors, shall perform all other duties commonly
incident to his or her office or as properly required of him or her by such
officer or officers to whom he or she is directly responsible and shall enjoy
all other powers commonly incident to his or her office.

At the request and direction of the Secretary or, in the case of his or
her absence or inability to act, any Assistant Secretary may act in his or her
place. In the case of the death of the Secretary, or in the case of his or her
absence or inability to act without having designated an Assistant Secretary to
act temporarily in his or her place, the Assistant Secretary or other person so
to perform the duties of the Secretary shall be designated by the Board of
Directors or the President.

SECTION 7. ASSISTANT VICE PRESIDENTS AND OTHER OFFICERS.

Each Assistant Vice President and other officers shall perform such
duties commonly incident to his or her office or as properly required of him or
her by the President or the Chief Operating Officer and such other officer or
officers to whom he or she is directly responsible.

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SECTION 8. GENERAL COUNSEL.

The General Counsel shall have general supervision of all matters of a
legal nature concerning the Company. He or she shall perform all such duties
commonly incident to his or her office or as properly required of him or her by
the President, the Chief Operating Officer and such other officer or officers to
whom he or she is directly responsible.

SECTION 9. CONTROLLER.

The Controller shall keep and maintain the books of account of the
Company in such manner that they fairly present the financial condition of the
Company and its subsidiaries. The Controller shall have such powers and shall
perform such duties as may be delegated to him or her by the Board of Directors,
the President, the Chief Operating Officer or the appropriate Executive Vice
President, Senior Vice President or Vice President or such other officer or
officers to whom he or she is directly responsible.

SECTION 10. SALARIES.

Salaries of officers, agents or employees shall be fixed from time to
time by the Board of Directors or by such committee or committees, or person or
persons, if any, to whom such power shall have been delegated by the Board of
Directors. An employment contract, whether with an officer, agent or employee,
if expressly approved or specifically authorized by the Board of Directors, may
fix a term of employment thereunder; and such contract, if so approved or
authorized, shall be valid and binding upon the Company in accordance with the
terms thereof, provided that this provision shall not limit or restrict in any
way the right of the Company at any time to remove from office, discharge or
terminate the employment of any such officer, agent or employee prior to the
expiration of the term of employment under any such contract.

SECTION 11. VACANCIES.

A vacancy in any office filled by election of the Board of Directors
may be filled by the Board of Directors by the election of a new officer who
shall hold office, subject to the provisions of this Article V, until the
regular meeting of the directors following the next annual meeting of the
stockholders and until his or her successor is elected.

SECTION 12. REMOVAL OR DISCHARGE.

Any officer may be removed or discharged by the President at any time
excepting an officer who is also a director. Any officer, whether or not he or
she also is a director, may be discharged at any time by the Board of Directors.

ARTICLE VI.

RESIGNATIONS

Any director, officer or agent of the Company, or any member of any
committee, may resign at any time by giving written notice to the Board of
Directors, the Chairman of the Board of Directors, the President or the
Secretary of the Company. Any such resignation shall take

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effect at the time specified therein, or if the time be not specified therein,
then upon receipt thereof. The acceptance of such resignation shall not be
necessary to make it effective.

ARTICLE VII.

CAPITAL STOCK - DIVIDENDS - SEAL

SECTION 1. CERTIFICATES OF SHARES.

The certificates for shares of the capital stock of the Company shall
be in such form, not inconsistent with the Charter, as shall be approved by the
Board of Directors. The certificates shall be numbered and signed by the
Chairman of the Board of Directors, the President, an Executive Vice President,
a Senior Vice President or a Vice President, and also by the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary. Any and all
signatures may be facsimiles.

All certificates shall bear the name of the persons owning the shares
represented thereby, shall state the number of shares represented by such
certificate and the date of issue; and such information shall be entered in the
Company's original stock ledger.

SECTION 2. ADDRESSES OF STOCKHOLDERS.

It shall be the duty of every stockholder to notify the Company of such
stockholder's post office address and of any change therein. The latest address
furnished by each stockholder shall be entered on the original stock ledger of
the Company and the latest address appearing on such original stock ledger shall
be deemed conclusively to be the post office address and the last-known post
office address of such stockholder. If any stockholder shall fail to notify the
Company of such stockholder's post office address, it shall be sufficient to
send corporate notices to such stockholder at the address, if any, understood by
the Secretary to be such stockholder's post office address, or in the absence of
such address, to such stockholder, at the General Post Office in the City of
Wilmington, State of Delaware.

SECTION 3. LOST, DESTROYED OR STOLEN CERTIFICATE.

Any person claiming a stock certificate in lieu of one lost, destroyed
or stolen, shall give the Company an affidavit as to his, her or its ownership
of the certificate and of the facts which go to prove that it has been lost,
destroyed or stolen. If required by the Board of Directors, he, she or it also
shall give the Company a bond, in such form as may be approved by the Board of
Directors, sufficient to indemnify the Company against any claim that may be
made against it on account of the alleged loss of the certificate or the
issuance of a new certificate. A new certificate shall be issued upon receipt of
such an affidavit and, if required, upon the giving of such a bond.

SECTION 4. RECORD OF HOLDER OF SHARES.

The Company shall be entitled to treat the holder of record of any
share or shares as the holder in fact thereof, and accordingly shall not be
bound to recognize any equitable or other

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claims to or interest in such shares on the part of any other person, whether or
not it shall have express or other notice thereof, save as expressly provided by
the General Corporation Law of the State of Delaware. The Company shall be
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares to receive dividends and to vote as such owner.

SECTION 5. RECORD DATE.

In order that the Company may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders, or to receive payment of
any dividend or other distribution or allotment of any rights or to exercise any
rights in respect of any change, conversion or exchange of stock (other than
conversions or exchanges pursuant to Article 4 of the Charter) or for the
purpose of any other lawful action, the Board of Directors may fix a record
date, which record date shall not precede the date on which the resolution
fixing the record date is adopted and which record date shall not be more than
sixty (60) nor less than ten (10) days before the date of any meeting of
stockholders, nor more than sixty (60) days prior to the time for such other
action as hereinbefore described; provided, however, that if no record date is
fixed by the Board of Directors, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given or,
if notice is waived, at the close of business on the day next preceding the day
on which the meeting is held, and, for determining stockholders entitled to
receive payment of any dividend or other distribution or allotment of rights or
to exercise any rights of change, conversion or exchange of stock (other than
conversions or exchanges pursuant to Article 4 of the Charter) or for any other
purpose, the record date shall be at the close of business on the day on which
the Board of Directors adopts a resolution relating thereto.

A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.

If stockholders are entitled to consent to corporate action in writing
without a meeting in accordance with the General Corporation Law of the State of
Delaware and the Charter, in order that the Company may determine the
stockholders entitled to so consent, the Board of Directors may fix a record
date, which shall not precede the date upon which the resolution fixing the
record date is adopted by the Board of Directors, and which record date shall be
not more than ten (10) days after the date upon which the resolution fixing the
record date is adopted and if no record date has been fixed by the Board of
Directors and if no prior action by the Board of Directors is required by the
General Corporation Law of the State of Delaware, the record date shall be the
first date on which a signed written consent setting forth the action taken or
proposed to be taken is delivered to the Company in the manner prescribed by
Article 13 of the Charter. If stockholders are entitled to consent to corporate
action in writing without a meeting in accordance with the General Corporation
Law of the State of Delaware and the Charter, and no record date has been fixed
by the Board of Directors and prior action by the Board of Directors is required
by the General Corporation Law of the State of Delaware with respect to the
proposed action by written consent of the stockholders, the record date for
determining stockholders entitled to consent to corporate action in writing
shall be at the close of business on the day on which the Board of Directors
adopts the resolution taking such prior action.

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SECTION 6. REGULATIONS.

The Board of Directors shall have power and authority to make all such
rules and regulations not inconsistent with any of the provisions of Article 4
of the Charter, as it may deem expedient, concerning the issue, transfer and
registration of certificates for shares of the stock of the Company.

SECTION 7. CORPORATE SEAL.

The corporate seal shall be in such form as shall from time to time be
approved by the Board of Directors. If and when so authorized by the Board of
Directors, a duplicate of the seal may be kept and used by the Secretary or
Treasurer or by any Assistant Secretary or Assistant Treasurer.

ARTICLE VIII.

EXECUTION OF CONTRACTS AND OTHER DOCUMENTS

SECTION 1. CONTRACTS, ETC.

Except as otherwise prescribed in these By-Laws, such officers,
employees or agents of the Company as shall be specified by the Board of
Directors shall sign, in the name and on behalf of the Company, all deeds,
bonds, contracts, mortgages and other instruments or documents, the execution of
which shall be authorized by the Board of Directors; and such authority may be
general or confined to specific instances. Except as otherwise provided herein
or as so authorized by the Board of Directors, no officer, agent or employee of
the Company shall have power or authority to bind the Company by any contract or
engagement or to pledge, mortgage, sell or otherwise dispose of its credit or
any of its property or to render it pecuniarily liable for any purpose or in any
amount.

SECTION 2. CHECKS, DRAFTS, ETC.

Except as otherwise provided in these By-Laws, all checks, drafts,
notes, bonds, bills of exchange or other orders, instruments or obligations for
the payment of money shall be signed by such officer or officers, employee or
employees, or agent or agents, as the Board of Directors shall by resolution
direct. The Board of Directors may, in its discretion, also provide by
resolution for the countersignature or registration of any or all such orders,
instruments or obligations for the payment of money.

17
<PAGE> 18
ARTICLE IX.

FISCAL YEAR

The fiscal year of the Company shall begin the first day of January in
each year.

ARTICLE X.

MISCELLANEOUS

SECTION 1. ORIGINAL STOCK LEDGER.

As used in these By-Laws and in the Charter, the words "original stock
ledger" shall mean the record maintained by the Secretary of the Company of the
name and address of each of the holders of shares of any class of stock of the
Company, and the number of shares and the numbers of the certificates for such
shares held by each of them, taking into account transfers at the time made by
and recorded on the transfer sheets of each of the Transfer Agents of the
Company although such transfers may not have been posted in the record
maintained by the Secretary.

SECTION 2. NOTICES AND WAIVERS THEREOF.

Whenever any notice whatever is required by these By-Laws, the Charter
or any of the laws of the State of Delaware to be given to any stockholder,
director or officer, such notice, except as otherwise provided by the laws of
the State of Delaware, may be given personally or by telephone or be given by
facsimile transmission or other form of electronic communication, addressed to
such stockholder at the address set forth as provided in Section 2 of Article
VII of these By-Laws, or to such director or officer at his or her Company
location, if any, or at such address as appears on the books of the Company, or
the notice may be given in writing by depositing the same in a post office, or
in a regularly maintained letter box, or by sending it via courier in a
postpaid, sealed wrapper addressed to such stockholder at the address set forth
in Section 2 of Article VII of these By-Laws, or to such director or officer at
his or her Company location, if any, or such address as appears on the books of
the Company.

Any notice given by facsimile transmission or other form of electronic
communication shall be deemed to have been given when it shall have been
transmitted. Any notice given by mail or courier shall be deemed to have been
given when it shall have been mailed or delivered to the courier.

A waiver of any such notice in writing, including by facsimile
transmission, signed or dispatched by the person entitled to such notice or by
his or her duly authorized attorney, whether before or after the time stated
therein, shall be deemed equivalent to the notice required to be given, and the
presence at any meeting of any person entitled to notice thereof shall be deemed
a waiver of such notice as to such person.

18
<PAGE> 19
SECTION 3. VOTING UPON STOCKS.

The Board of Directors (whose authorization in this connection shall be
necessary in all cases) may from time to time appoint an attorney or attorneys
or agent or agents of the Company, or may at any time or from time to time
authorize the Chairman of the Board of Directors, the President, any Executive
Vice President, any Senior Vice President, any Vice President, the Treasurer or
the Secretary to appoint an attorney or attorneys or agent or agents of the
Company, in the name and on behalf of the Company, to cast the votes which the
Company may be entitled to cast as a stockholder or otherwise in any other
corporation or association, any of the stock or securities of which may be held
by the Company, at meetings of the holders of the stock or other securities of
such other corporation or association, or to consent in writing to any action by
any such other corporation or association and the Board of Directors or any
aforesaid officer so authorized may instruct the person or persons so appointed
as to the manner of casting such votes or giving such consent, and the Board of
Directors or any aforesaid officer so authorized may from time to time authorize
the execution and delivery, on behalf of the Company and under its corporate
seal, or otherwise, of such written proxies, consents, waivers or other
instruments as may be deemed necessary or proper in the premises.

ARTICLE XI.

AMENDMENTS

These By-Laws may be altered, amended or repealed at any meeting of the
Board of Directors or of the stockholders, provided that notice of such
alteration, amendment or repeal be contained in the notice of such meeting of
the Board of Directors or stockholders (subject, in the case of meetings of
stockholders, to the provisions of Article II of these By-Laws), as the case may
be. All such amendments must be approved by the affirmative vote of the holders
of at least 75% of the total voting power of all classes of outstanding capital
stock, voting together as a single class (if effected by action of the
stockholders), or by the affirmative vote of directors constituting not less
than a majority of the total number of directors that the Company would have if
there were no vacancies on the Company's Board of Directors (if effected by
action of the Board of Directors).

<PAGE> 1

EXHIBIT 12

THE HERTZ CORPORATION AND SUBSIDIARIES

COMPUTATION OF CONSOLIDATED RATIO OF EARNINGS
TO FIXED CHARGES (UNAUDITED)

<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------------
1999 1998 1997 1996 1995
---------- -------- -------- -------- --------
(In Thousands of Dollars Except Ratios)
<S> <C> <C> <C> <C> <C>
Income before income taxes............... $ 560,393 $465,392 $343,270 $256,569 $172,344
Interest expense......................... 353,516 317,756 316,038 309,249 323,871
Portion of rent estimated to represent
the interest factor.................... 90,463 78,435 72,752 69,188 75,874
---------- -------- -------- -------- --------
Earnings before income taxes and fixed
charges................................ $1,004,372 $861,583 $732,060 $635,006 $572,089
========== ======== ======== ======== ========
Interest expense (including capitalized
interest).............................. $ 355,309 $318,967 $316,536 $309,843 $325,021
Portion of rent estimated to represent
the interest factor.................... 90,463 78,435 72,752 69,188 75,874
---------- -------- -------- -------- --------
Fixed charges............................ $ 445,772 $397,402 $389,288 $379,031 $400,895
========== ======== ======== ======== ========
Ratio of earnings to fixed charges....... 2.3 2.2 1.9 1.7 1.4
========== ======== ======== ======== ========
</TABLE>

<PAGE> 1

EXHIBIT 21

SUBSIDIARIES OF THE COMPANY*

<TABLE>
<CAPTION>
December 31, 1999
-----------------------------------------------------------------------------
State or Number of Subsidiaries
Jurisdiction of Nature of Principal ------------------------
Name of Subsidiary Incorporation Business Conducted United States Foreign
------------------ --------------- ------------------------------ ------------- -------
<S> <C> <C> <C> <C>
Hertz International, Ltd. .... Delaware Through its subsidiaries, 1 47
rents and lease vehicles, and
rents industrial and
construction equipment. Also
issues licenses for the
renting and leasing of
vehicles.
Hertz Equipment Rental
Corporation................. Delaware Renting industrial and 1 --
construction equipment
Hertz International RE
Limited..................... Ireland Reinsurer -- 1
</TABLE>

- - - - - - - - - - - - - - - - - - ---------------
* Certain subsidiaries have been omitted, as they do not in the aggregate
constitute a significant subsidiary.

<PAGE> 1

EXHIBIT 23

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in the Registration Statement of
The Hertz Corporation on Form S-3 (File No. 333-34501) and on Form S-8 (File No.
333-80457) of our report dated January 18, 2000, on our audits of the
consolidated financial statements and financial statement schedule of The Hertz
Corporation as of December 31, 1999 and 1998, and for the years ended December
31, 1999, 1998 and 1997 which report is included in this Annual Report on Form
10-K.

PRICEWATERHOUSECOOPERS LLP

Florham Park, New Jersey
March 17, 2000

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> DEC-31-1999
<CASH> 18,545
<SECURITIES> 190,107
<RECEIVABLES> 1,117,254
<ALLOWANCES> (24,299)
<INVENTORY> 57,546
<CURRENT-ASSETS> 0
<PP&E> 8,812,394
<DEPRECIATION> (1,641,258)
<TOTAL-ASSETS> 10,136,707
<CURRENT-LIABILITIES> 0
<BONDS> 6,602,220
0
0
<COMMON> 1,083
<OTHER-SE> 1,672,908
<TOTAL-LIABILITY-AND-EQUITY> 10,136,707
<SALES> 0
<TOTAL-REVENUES> 4,715,666
<CGS> 0
<TOTAL-COSTS> 3,794,090
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 19,824
<INTEREST-EXPENSE> 341,359
<INCOME-PRETAX> 560,393
<INCOME-TAX> 224,392
<INCOME-CONTINUING> 336,001
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 336,001
<EPS-BASIC> 3.11
<EPS-DILUTED> 3.10

</TABLE>