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Financial Statement Analysis: A Practitioner's Guide, Fourth Edition by FERNANDO ALVAREZ, MARTIN FRIDSON

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Appendix

Explanation of Pro Forma Adjustments for Hertz Global Holdings, Inc./DTG

Adjustments included in the column under the heading “Pro Forma Adjustments” represent the following:

a. To adjust amortization expense for the estimated amortization expense of customer relationship intangible assets acquired, with an estimated fair value of $105 million and an estimated useful life of ten years.

b. To adjust interest expense as follows:

Year Ended Six Months Ended
December 31, 2009 June 30, 2010
(In thousands)
Amortization of the fair value adjustment to debt $ 24,840 $ 7,320
Elimination of interest expense due to the extinguishment of DTG's existing non-vehicle debt(i) (9,405) (4,111)
Elimination of amortization of deferred financing costs associated with extinguished debt (3,392) (726)
Interest expense on additional borrowings under Hertz's Senior ABL facility used to partially finance the merger(ii) 6,944 3,472
 Total $ 18,987 $ 5,955
(i)Includes the elimination of letter of credit and commitment fees relating to DTG's revolving credit facility.(ii)Represents interest expense at an assumed current rate of 1.85% (June 30, 2010 LIBOR plus 150 basis points) net of assumed savings of 50 basis points on the drawn amount, as historical information includes a facility fee equal to 50 basis points on any available and undrawn amount. A change of one-eighth of 1% (12.5 basis points) in the interest rate associated with this variable rate borrowing would result ...

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