Ladies and gentlemen, thank you for standing by. Welcome to Hertz Global Holdings 2011 Fourth Quarter and Full Year Conference Call. The company has asked me to remind you that certain statements made on this call contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of performance and, by their nature, are subject to inherent uncertainties. Actual results may differ materially. Any forward-looking information relayed on this call speaks only as of the date -- as of this date, and the company undertakes no obligation to update that information to reflect changed circumstances. Additional information concerning these statements is contained in the company's press release regarding its fourth quarter and full year results issued yesterday, and in the risk factors and forward-looking statements section of the company's 2010 Form 10-K and quarterly reports. Copies of these filings are available from the SEC, the Hertz website or the company's Investor Relations department. I would like to remind you that today's call is being recorded by the company and is also being made available for replay starting today at 12:30 p.m. Eastern Time and running through March 8, 2012. I would now like to turn the call over to our host, Leslie Hunziker. Please go ahead.

Good morning. You should all have our press release and associated financial information. We've also provided slides to accompany our conference call that can be accessed on our website at www.hertz.com Investor Relations. Today, we'll use certain non-GAAP financial measures, all of which are reconciled with GAAP numbers in our press release and at the back of the slide presentation, both of which are posted on our website. We believe that our profitability and performance is better demonstrated using these non-GAAP metrics. Our call today focuses on Hertz Global Holdings Incorporated, a publicly traded company. Results for the Hertz Corporation differed only slightly, as explained in our press release. With regard to our Investor Relations calendar over the next couple of months, we'll be presenting at the JPMorgan High-Yield Conference on February 29, the Auto Rental News Show in Las Vegas on March 12 and the BofA auto summit on April 4. This morning, in addition to Mark Frissora, Hertz' Chairman and CEO; and Elyse Douglas, our Chief Financial Officer; on the call, we have Scott Sider, Executive Vice President and President of Vehicle Renting and Leasing in the Americas; Michel Taride, Executive Vice President and President, Hertz International; and Lois Boyd, Executive Vice President and President of Hertz Equipment Rental Corporation. They'll be on hand for the Q&A. Now, I'll turn the call over to Mark.

Good morning, everyone, and thanks for joining us. I'm sure I'm preaching to the choir when I say the stock's performance over the last week has been extremely disappointing, especially when you consider that 2011 was a great year for Hertz. Let's start on Slide 6, and I'll show you what I mean. As you can see, records were set on many fronts. We achieved the highest full year consolidated adjusted pretax income and margin in the company's history at $680.5 million and 8.2%, respectively. This exceeds the previous peak in 2007 of $656.4 million and 7.6%. While our record earnings were supported by the early-stage recovery in the equipment rental market, the contribution was most evident in our worldwide rental car business. To be specific, in the worldwide rental car, we achieved the highest volume level and record volume growth year-over-year for both the fourth quarter and for 2011. On the earnings front, on both a GAAP and adjusted basis, worldwide rent a car reported record pretax income and margin for the fourth quarter and full year. On an annual basis, the new peak for rental car adjusted pretax margin is 12%, up from 9.9% in 2010, the previous peak, and even the prerecession level of 8.7% in 2007. Corporate EBITDA for global rental car also set new historical highs from both an actual dollar and a margin perspective in 2011. Moving to Slide 7. Clearly, our year-over-year performance was significant. The incremental upside to earnings came from the successful execution of our strategic initiatives to grow and diversify our revenue streams, increase efficiency and productivity and improve our capital structure. We made substantial progress on the actions we outlined last year to build out our value brand, expand our insurance replacement network and further penetrate equipment rental end…

Thanks, Mark. Good morning, everyone. Let me begin on Slide 14, focusing primarily on our fourth quarter financial results on both a GAAP and an adjusted basis. Consolidated revenue for the quarter was up 9.7% to $2 billion, with the rental car division growing 9.5%, including Donlen revenue of $107.5 million. The equipment rental division improved 11.1%. Consolidated adjusted pretax income increased 136.5% in the quarter to $165.1 million, driven by higher revenues as well as lower fleet and interest costs and lower operating expenses. GAAP pretax income was $92.8 million versus last year's fourth quarter loss of $6 million, despite incurring approximately $5 million more in restructuring and restructuring related charges year-over-year to better align future costs in Europe with the weakening macro demand. In the fourth quarter, we generated cost savings of $117 million. About half of the savings came from direct operating expenses, which declined almost 400 basis points as a percent of revenues as shown on Slide 15. This reduction was due to improved operating leverage in Hertz as the business continues to recover, gains on property sales and equipment, lower damage costs in the Rent A Car business, partially offset by higher gasoline expenses. Let me spend a minute on the fourth quarter property sale gains of $38 million, which we highlighted in our earnings release. Each year, we open and close locations. In the U.S. alone this year, we opened 415 and closed 168 locations, incurring gains, losses as well as start-up and closing costs. Estimates for these costs and gains are always included in our guidance. These property sales are in line with our asset-light strategy to reduce our brick-and-mortar and move to a lower cost facility model. In addition, every year, we incur costs which are not specifically highlighted that are embedded…

Thanks, Elyse. I'm going to pick up on Slide 34. So you've all seen our initial guidance. It reflects our best estimate based on today's global economic and operating environment. As we get more visibility and if things change, we'll update our forecast as appropriate. But right now, the IMF is projecting 1.8% real GDP growth in the U.S. in 2012, but only 0.2% growth in the Eurozone countries. Some economists are even forecasting a year-over-year macro decline in Europe. But with all of our growth initiatives they brought a recovery in equipment rental and a full year's contribution from Donlen. We believe we can overcome the near recessionary environment in Europe to generate 7% to 8% global revenue growth this year. In the short time we've been working with Donlen, we've discovered that there are more opportunities to leverage each other's strengths and competitive advantages than we originally thought. We currently have 9 new products and programs in various stages of development, from early conception through beta testing. These products leverage the best technology and expertise from both companies and give our customers the industry-widest range of offerings from a single mobility provider. Not only are we developing new and innovative products, but we're enhancing several of our existing products to create an even more expansive offering that will improve efficiencies across all areas of vehicle and equipment rental and leasing. As Elyse mentioned, we're planning for roughly 13% top line growth in our leasing business this year. On Slide 35, you can see that we're targeting volume growth of 5.5% to 6.5% in worldwide rental car. The incremental growth will be driven by the strategic initiatives I outlined earlier on the call, along with the rollout of Advantage abroad and our expansion in emerging markets. On the equipment…

[Operator Instructions] And first, we go to the line of Brian Johnson with Barclays Capital.

Would like to just drill down a bit more, especially in light of some of the reports from competitors, on the leisure pricing environment in north -- in the U.S., how that's -- is that seemingly getting any better? Your fleet grew exactly in line with your rental base, so maybe want to understand a bit of how you're managing that. And then -- so that's sort of an Elyse-more question. Then for Mark, maybe, we talked after first quarter about your utilization management focus in on issues. Maybe you could update on that because I think this 80%, I don't know if it's close to a record but maybe getting there.

Yes, so on the fleet utilization number, it is a record, and we still think there's upside as we mature our strategy around off-airport growth, which drives a longer rental length, 13 days on average versus airport, which is roughly 3, 3.5 days. And then as we continue to grow Advantage, that also has a longer rental length, typically 6 days to 7 days and, again, beating the Hertz classic brand on-airport, which is, again, about 3. So as those strategies mature and get more traction, we expect our utilization opportunity to improve. I mean, long term, I think I've told investors in the past, we think we could get to 85, 88, kind of percent kind of numbers as both of those strategies begin to mature more and more over the next 2 to 3 years. Elyse, I don't know if you want to talk about the first part of the question. I'm not sure if...

Leisure RPD.

What's that?

Leisure RPD.

Yes, leisure RPD, which -- in terms of -- I mean, I guess in that, in the press release as well as in the -- in our script this morning, pretty much we said what we saw, which is an improvement from fourth quarter levels, so we're seeing sequential improvement on that, and that's about all we can say. I mean there's really not a whole lot else to talk about. We don't want to -- we want to make sure that we're consistent in our comments in what we said in the script and what we say now, which is that we feel that things have improved from what we're seeing today.

The only thing I would add is that we are being very flexible in terms of how we acquire the fleet, so that we can acquire to meet the demand and not be in a situation to be overrun [indiscernible].

Yes, Brian. We typically will buy only about probably 70% of what we really need for the year. And so we have about 30% of our capacity that's flexible, and we're able to flex up or down on that by either buying or selling cars. And so we're pretty good at being able to kind of judge where we need to be and be at the right place. We're pretty accurate on that. We've not had many problems being too loose or too tightly fleeted. We're usually right where we need to be based on the demand planning model we've had in place now for over 1.5 years.

Next, we'll go to a question from the line of Michael Millman from Millman Research.

You mentioned, I think, 2.2% effect from mix. Is that something we can use going forward to assume mix will cost you that amount roughly each quarter?

I think, Michael, I think that's a good number. It may -- any given quarter, it may get higher or it may go a little lower, but I think it's about right. We've had it go -- like, in a month, we'll have it go to -- we track it every week, but it's gone 2.5%. We've seen it even gone 3%. I mean, the month of February -- I mean, it can go high depending on the month and the quarter. In general, it's probably not going to go lower. If anything, if our strategies work, it will go higher. Okay?

Next, we have a question from the line of Rich Kwas from Wells Fargo Securities.

Mark, on the guidance for worldwide price, what's embedded for leisure on-airport for the U.S. market? In recent months, you've been a little more constructive on the potential for year-over-year performance in 2012. How should we think about that relative to what you've provided for guidance on a worldwide basis?

Yes, we don't break that out, Rich, so I can't give that to you. I guess, again, for us -- do you have another question about this that you want to ask? Because I want to answer a question for you, so.

Okay, so on the -- just a bigger picture question, Mark. On franchising, pretty big increase expected for 2012 versus 2011. As we look out longer term, is there a bit of a snowball effect? You said you've laid a lot of the groundwork in 2011, so if you think out 2013, '14, I know your goal is to get to investment grade down the line, franchising is a big piece of that, but I mean, should we expect '13, '14 even bigger increases on the franchising front?

No, I mean, I certainly think on longer term -- I think we gave you a number here of $600 million to $700 million in kind of U.S. Rent A Car. I mean, that number could be larger. I mean, it could be $1 billion kind of longer term. And in Europe, certainly, I mean, there are -- it takes -- again, when you're talking about a whole country or a whole region of the country, these are big agreements that we're negotiating right now, and yes, we try to be conservative when we give you the numbers. $600 million and $700 million, I mean, it could be as much as $1.2 billion. It could be double that if our strategies work and if we're able to work out the agreements the way we want to with potential franchisees. We have a lot of interest right now. We have a lot deals under consideration. So again, I think the strategy is a good one. We feel really good about our ability to control quality and still buy the fleet and still be able to have our leverage and, at the same time, provide a very high quality customer satisfaction experience as most of our franchisees actually develop NPS scores that are equal or better than the scores that we have. And they're all in our NPS system. So again, we have very good control of quality. But I think this strategy can get us to investment grade faster. Obviously, when you're looking at taking $1 billion out of your capital number, that throws a lot of free cash flow our way and would help us get to the right ratios faster.

Next, we go to the line of Chris Agnew from MKM Partners.

Question on vehicle remarketing, I was wondering if you could provide an update on your goals this year and maybe longer term for the direct-to-consumer vehicle remarketing strategy and whether this year, you start to see incremental cost savings increase as you scale that business? Or do you need to continue to invest in infrastructure? And then maybe very quick question for Elyse, on Donlen depreciation, is that above or below the corporate EBITDA line, and should we model that to grow in line with revenues?

The first question was with respect to...

Yes. You're -- he's asking about the infrastructure, and I guess -- Scott's here with me. Scott, why don't you tell them how many states we're kind of licensed in and ready to set up to sell used cars and how many more will be in this year? And then talk about also salespeople. We added a few last year and where we are this year.

Thanks, Mark. In terms of the number of states we're licensed for Rent2Buy, we're licensed in 36 states today to sell Rent2Buy. We're continuing also to open more retail car sales locations and we're combining those with our off-airport locations. So we feel comfortable that this year, our retailers -- direct-to-customers retail car sales will improve by about 50% on a year-over-year basis. And then in terms of dealer direct, we've added over a dozen dealer direct managers. We feel that the penetration will go up about 30% more dealer direct sales. So both of those 2 items will help us to improve our residual values.

And then I think, Chris, your other question on Donlen depreciation, and it will be treated like Rent A Car depreciation. It will be in the worldwide Rent A Car results.

Next, we go to the line of Emily Shanks from Barclays Capital.

I just have a question related to the way to think about cash flow, 2 parts. The first one is can you give us an update on what used car residual values are in Europe? And then secondly, can you please just expand, Mark, on your comments around the robust acquisition pipeline relative to HERC? What type of size acquisitions are you targeting and how are you thinking about that?

Elyse, why don't you...

Sure. Okay. So U.S. car residuals. I mean, we are [indiscernible] plan a continued improvement in residual values, and I would say that on a age-adjusted basis, in the fourth quarter, we were about -- I'm just trying to get -- about 3 -- about 2.5 points above where we were a year ago. The residuals continue to be strong. And then in -- does that answer the question on residuals? Emily? Oh, she gets cut off. And so hopefully that -- if that doesn't, Emily, please dial back in. And then your second question was on HERC acquisitions. And I think they'll be kind of more in line with what we've been doing in the past couple of quarters in terms of size.

No, I was curious specifically in Europe for used car residuals, what trends you're seeing there, what your outlook is?

Car residuals in the fourth quarter were softer year-over-year, and we are still seeing softness in the first quarter, and we do expect the residuals to improve toward the back half of 2012, in the second half of 2012, I should say.

Next, we go to the line of John Healy with Northcoast Research.

Mark, I was hoping you could talk a little bit more about the off-airport business. I think you mentioned how many locations you opened in the quarter. Can you update us on where you are in terms of the number of locations across the country? Does that number need to keep increasing? And if not, what sort of benefit do we get in the cost structure? And how confident do you feel that you can keep growing at these double-digit rates, and do you see further share gain opportunity? It sounded like you mentioned a big insurance company that you're doing business with this year, but are there more of those out there? And if so, what's the upside if you can capture some of those?

So I'm going to let Scott Sider answer that, since he's very intimately involved in it.

To answer your first question, we feel very confident that we can continue to grow double-digit off-airport in the foreseeable future. In terms of additional locations, we do anticipate a net increase in locations of 250 to 300 locations per year. And that will probably be at least over the next 3 to 5 years. We continue to improve in the insurance replacement. You saw that in the top 5 companies, we grew over 20%, and we see that continually going forward. So we don't see any slow up in the off-airport growth in the near term.

Next, we go to the line of Adam Silver from Babson Capital Management.

My question's already been asked, but I have one follow-up question in relation to acquisitions in the equipment rental space. What's your long-term outlook on industry consolidation in light of the recently announced RSC-URI merger?

First of all, our policy is not to comment or speculate on acquisitions and divestitures. So that's my answer. In terms of just broadly speaking, I guess, the industry is, I think -- did a consolidation move that's fairly large, and I think that's kind of where it stands today. I wouldn't speculate on anything other than that. I think that the status quo is kind of where I see it.

Next, we have a question from the line of Fred Lowrance from Avondale Partners.

Just wanted to see if we could drill down a little bit more into the $38 million gain that you reported or net gain that you reported in the quarter. We're kind of used to $1 million here, $1 million there, don't really pay too much attention to it, but obviously, this one is kind of huge and really moves the needle on earnings. So I'm wondering if you could kind of give us some color on what was this. Was this sort of accelerated franchising activities means more gross gains on sale? Was it fewer store openings, so fewer opening costs? I mean, what was driving this and made it so much different from prior quarters and prior years?

Fred, I don't know, did you listen to the script? I mean, we really dealt with that issue. I think we told you that we -- each year, we open and close locations. In the U.S. alone this year, we opened 415 and closed 168, incurring a lot of gains and losses as well as start-up and closing costs. All of this runs through direct operating expenses. Direct operating expenses this year were $4.3 billion, in the fourth quarter, I know over $1 billion. And these property sales are in line with our asset-light strategy to reduce brick-and-mortar. In addition, every year, we incur costs, which are not specifically highlighted like -- that are embedded in DOE, so that offset gains and losses. So this year, for example, there were roughly $90 million of costs that offset those gains. Examples of those costs included unrecoverable concession fees, consolidated facility costs. Again, over $90 million of those -- in fact, just one item was we had $22 million of unrecovered gasoline costs. We had -- I know when we look at concession fees alone, that number can be $35 million for this year. So again, these costs offset gains that we have, but we felt we would call out this particular gain because it was large enough to call it out and be totally transparent around it, so. But just to put it in context of our global DOE, again, it's a $4.3 billion number. So every single quarter, when we sit and look at our risk and opportunities, we look at those risks and opportunities, and we include that in our guidance. So as we looked at this quarter, as we have in all other quarters, we knew what we had in the bank and what we don't have in the bank in terms of risks and opportunities. And so what I'm trying to say is that this is something that wasn't a surprise for us. But -- so I guess in terms of going forward, we would expect that we will probably have gains and losses on real estate sales going forward. Our asset-light strategy tries to get less assets if -- as it relates to real estate and more virtual models. So as we go forward, I'm sure we'll be looking at some gains as well.

Next, we have a question from the line of Yilma Abebe from JPMorgan. Yilma Abebe - JP Morgan Chase & Co, Research Division: High-level question on your path to investment grade. You mentioned the growth in the franchise business potentially accelerating that path. If you look at all the drivers on a cap structure in terms of attaining the investment grade ratings, can you give us a little more context in terms of the importance of the franchise business in orders of magnitude?

I'm not sure how I can address your specific question about how franchising fits in, but in terms of investment grade goals here, as we said, our net corporate debt to EBITDA leverage this -- ended the year at 2.6%, and we believe that if we're in the 1.5% range, our stats begin to look more like the investment grade model. The other point is one of the criteria of one of the agencies is that we have less secured debt. And as you know, most of our fleet financing is all secured. So surely, the franchise strategy helps us in terms of meeting that goal.

[Operator Instructions] We have a follow-up from John Healy with Northcoast Research.

Mark, Elyse, I think kind of a big picture question, kind of, as you talked about your goal for investment grade. When I think about your business, and I think it's a great goal to have, with the Rent A Car side, I feel like you're kind of already borrowing kind of at the investment grade status with enhancing the facilities. And maybe you could borrow a bit better if you were investment grade, but I was kind of wondering what sort of real benefit do you guys get out of being investment grade, and how do you weigh that maybe in terms of maybe instead of approaching it, maybe buying back stock? I was just trying to understand kind of what the real upside could be if you guys do move towards that?

No, you're absolutely right, John. In the U.S., because of the ABS market, we can very cost effectively finance the fleet, and I would argue that those rates are clearly investment grade level borrowing costs. On the corporate side, though, our costs are higher, so we do, on the corporate debt side, we'd get the benefit of a lower interest expense. But when you look outside the U.S., the situation isn't quite as robust. The ABS market is not as robust and, therefore, we do have higher fleet costs in jurisdictions outside the U.S., which are key growth areas for us. So that's really where we see the benefit. And in terms of how we utilize our excess cash flow, whether to pay down debt, buy back shares, make acquisitions, invest in growth strategies, we constantly look at all those options and make the decision based on what we feel drives the greatest shareholder value.

And we have a question from the line of Bobby Jones from Highland Capital.

I'm really sorry to beat the horse on this one. I was just wondering maybe if you could just quickly touch on how your acquisition strategy plays into your desire to attain a investment grade rating, certainly with things in the pipeline and that sort.

Our goal on any acquisitions we make is always to try to make it credit neutral within the first year. So that's always accretive and always credit neutral. I mean, accretive in the first year and credit neutral in the first year. So I guess we wouldn't expect any acquisition to really hurt our strategy for becoming investment grade. In fact, in some cases, it may accelerate it, depending on who the acquisition is. So we feel like we'll be consistent in that as we move throughout the year, at least in the short-term time horizon.

And speakers, we have no further questions at this time. You may continue.

Thank you, everyone, for attending and look forward to talking to you next time.

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