Ladies and gentlemen, thank you for standing by. Welcome to the Hertz Global Holdings' Second Quarter 2017 Earnings Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. I'd like to remind you that today's call is being recorded by the company. I would now like to turn the call over to our host, Leslie Hunziker. Please go ahead.

Thank you. Good morning, everyone. By now, 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. I want to remind you that certain statements made on this call contain forward-looking information 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 this date, and the company undertakes no obligation to update that information to reflect changed circumstances. Additional information concerning these statements is contained in our earnings press release and in the risk factors and forward-looking statements section of our 2016 Form 10-K and our second quarter 2017 Form 10-Q. Copies of these filings are available from the SEC and on the Hertz website. Today, we'll use certain non-GAAP financial measures, all of which are reconciled with GAAP numbers in our press release and related Form 8-K, which are posted on our website. We believe that our profitability and performance is better demonstrated using these non-GAAP metrics. Our call today focuses on Hertz Global Holdings, Inc., the publicly-traded company. Results for the Hertz Corporation are materially the same as Hertz Global Holdings. On the call today, we have Kathy Marinello, Hertz's CEO; and Tom Kennedy, our Chief Financial Officer. Now, I'll now turn the call over to Kathy.

Thank you, Leslie, and good afternoon, everyone. The second quarter results reflect the continuation of the work we're doing and the investments we're making to transform the company. The weak results were in line with our expectations. There are always inefficiencies and incremental expenses in the early stages of an operational turnaround as processes are being assessed and redesigned, products are being transitioned and investments are being seeded and expenses incurred ahead of the results. And even though inefficiencies in investments coupled with U.S. residual pressure, have caused earnings weakness in the first half of the year, early progress on our strategic initiatives is validating the long-term plan. After joining the company seven months ago, the first thing I did was to flatten the organization and put together a cross-functional, collaborative team in the U.S. to redefine the strategy and develop our multi-year turnaround plan. The overarching goal is to position Hertz for consistent long-term growth as the industry leader. You'll recall that as part of this effort, we revealed what was working and what wasn't. We prioritized initiatives and we committed to spending the necessary amount to fix the issues and upgrade all aspects of the business. In 2017, we've allocated gross non-vehicle CapEx of more than $200 million targeted towards technology and facility updates to build a smart network that leverages our data and distribution assets to serve our customers more quickly and flexibly in every channel. In addition to these capital expenditures, we expect to incur approximately $300 million of expenses against adjusted corporate EBITDA this year to improve the rental experience from fleet quality and service excellence to digital e-commerce platforms and systems update. A big piece of that includes investing in our employees, equipping them to deliver enhanced service, convenience and product expertise. The end…

Thank you, Kathy. Good afternoon, everyone, and thank you for joining the call. During my update, I'm going to provide an overview of our second quarter results, an update on our balance sheet and capital market initiatives, and provide some early insight into how the third quarter is developing. As you may remember, on our last call, we said that we expected the second quarter to be challenging as a result of continued increases in U.S. RAC vehicle costs, driven by expected declines in market residuals and our elevated sales activity, as we resized the fleet capacity and rebalanced our mix of car classes. Continued pricing pressure in U.S. RAC due to the inevitable inefficiencies during the fleet transformation and continued elevated levels spending to fix and invest in core areas of our U.S. business like fleet and service, as well as in global technology and marketing initiatives, all with the focus on and commitment to delivering long-term growth and margin expansion. Since it is our largest businesses segment and the focus of the operational turnaround, let me start by providing some insight into the operating performance and revenue trends in the U.S. rental car segment. In the second quarter, total revenue declined 4%, driven by a 3% decline in transaction days and a 2% decline in total revenue per day. The 3% reduction in transaction days was in part the result of 4% decline in off-airport volumes due to last year's high-level of replacement rentals from significant customer vehicle recall activity. Airport volumes declined 2%, consistent with the first quarter's results as the company focused on higher-quality revenue with rising vehicle costs and due in part to the impact of enforcing stricter debit card policies, which we discussed during the first quarter call. Total revenue per day in the…

And we do have a question from Chris Agnew with MKM Partners. Please go ahead.

Thank you very much. Good afternoon. Tom, thanks for all the detail on fleet cost depreciation. So as we think about the second half of the year, is it fair to take the sort of second quarter run rate? And then, if we eliminate what you identified as the wholesale rebalancing figure, I think it was about $38, does that give us the kind of run rate we should be thinking about for the second half?

Chris, clearly, our objective in calling out the unit cost is to give you and the investors a perspective of what we believe to be more transitory versus what should be ongoing impact on fleet costs. The ongoing impact on fleet cost will be the mix investment we're making, because we're going to be continue to be at that level. We've not changed our view, but we'll continue to have the impact of that view. The residual the declining are off 3.5% (26:01) although recent data would indicate maybe that's starting to abate somewhat. There's been some positive news in our own performance in July on our wholesale sales and our retail sales. We're not posting losses anywhere close to we were in the first half of the year, which again is a good leading indicator. Then, when we do our rate view in September, we should be in line. So we did call out in the first quarter and the second quarter what we believe to be the impact of the elevated sales, the losses on those sales. And as a result, we believe that it's transitory in nature. So we're not giving guide, but I think it's a good way to look at how you would disaggregate our fleet cost and try to get to what is a run rate impact versus what is really kind of transitory in nature.

Good. Thank you. And then, just a follow-up. The ride-hailing impact you identified in the second quarter, I think you said it was a 1% headwind on second quarter pricing. Would that be fair to assume that that's the same through the rest of the year? And then, in July, that would imply that pricing is actually stronger without that headwind, about 4%?

Yeah. I mean, I think, this is the first quarter I think we've been more transparent because it's starting to become more significant, and it's important for us to clarify kind of what the core year-over-year impact is on rate relative to what might be a new business model that's growing and is it a lower RPD. So, yeah, it's fair to say in the second quarter that had about a 1 point impact on the pricing. So ex that, the pricing would have been 1% better. The July results are consistent. We're not giving kind of forward guide. The riding business does start to grow a little bit in the fourth quarter, but the impact for the third quarter, the relative impact is around another 1 point headwind on the reported external pricing. But again, from our perspective, if you think about it, the July results, preliminary results being up 3, is really on the core business is up 4 (28:05).

Okay. Thank you. And we have a question from the line of David Tamberrino with Goldman Sachs. Please go ahead. David Tamberrino - Goldman Sachs & Co. LLC: Great. Thanks for taking my questions today. Maybe just following up on that. The size of your ride-hailing fleet, can you just dive into how big that is? It didn't seem like it was that large to begin with, but you're calling out impacts to fleet size, I think, utilization as well and pricing. So how big of a fleet is that at least today?

Yes, David. So, again, we said that the fleet decline, I think, it's around 2 points difference between reported and the core. So it's about 2 points. If you think about our average fleet, that is about the size of the fleet that's dedicated to riding. We had essentially very little last year. So from a year-over-year standpoint, it is fairly significant, and it's been growing. During the third quarter, it's not growing as much because as we experienced second quarter that the focus is going to be on the core business, that's during the peak earnings season. But we expect it to then start to grow again after we get past the peak earnings season. David Tamberrino - Goldman Sachs & Co. LLC: Got it. And then, the higher pricing that you're able to get so far through July, is that enough to offset the incremental vehicle depreciation expense from the premium vehicles that you're buying?

Well, every 1 point increase in pricing annually is worth $55 million, is the sensitivity. And we said in prior quarters, our investment in mix is around a $78 million investment on the mix. This year, it's $70 million to $80 million. So from an mix investment relative to pricing, the pricing we're getting would be more than what's required. But you have the mix investment and the residual environment, and what we're working towards is a number of drivers to try to continue to mitigate the residual impact. And that has continued to grow the disposition channel through retail and alternative, which are higher profitability. And then working, with our OEM partners, to negotiate pricing that's reflective of the market environment as what the residuals are. So those are factors that, I think, that people need to think about. The fleet costs are cyclical in nature, and there are factors that help over time to abate that increase. We, I think, have been disproportionately impacted in the first half of the year on our fleet cost because of specific issues related to Hertz on driving out excess fleet and significantly taking elevated sales and elevated sales and losses. And that will abate in the second half of the year as well.

Okay. Thank you. And we now have a call from the line of Yilma Abebe with JPMorgan. Please go ahead.

Thank you. My first question is, if I look at the restricted cash balance of $879 million, is the proceeds that were expected to be used for the 2018 redemption, is any of that in there or has that been pulled out?

So the restricted cash on the balance sheet at quarter end is primarily made up of the second lien bond proceeds that are going to be used, as I said in my remarks, be used by the end or before the end of third quarter on the redemption of corporate debt.

Okay. So the redemption of the 2018, so that has happened already, that's fully reflected in the closing balance sheet?

Correct. The redemption 2018 was an event that occurred prior to the end of the close. The remaining proceeds, and then we did carry $450 million of the revolver, and then there were $16 million of expenses. And so, the remaining proceeds of around $134 million are what primarily comprised of restricted cash on the balance sheet at the end of the second quarter.

Okay. Thank you. And we do have a question from Chris Woronka with Deutsche. Please go ahead.

Hey. Good afternoon, guys. I think Kathy mentioned a number of about $300 million investment and not really the CapEx, just kind of operational initiatives flowing through this year. Is there a way to kind of think about how much of that is one-time in nature versus how much will stick around?

Yeah. I mean, I think the primary item there that is more runway would be the fleet. There's a portion of that investment which is related to the fleet mix that we've said is $70 million, $80 million. We're, obviously, continuing to iterate that and optimizing on that. But, Chris, that is one that will continue. Largely, there are some sales and marketing that we'll determine that what's the right level of sales and marketing. That might continue. But largely there's a lot of IT investment that's even – there's CapEx IT, below-the-line IT, but there's EBITDA impacting IT that is going to be transitory in nature. Meaning, we're going to have elevated levels of IT this year and some into next year, but ultimately that's going to obviously stop as we modernize our systems, and that's not going to continue. So I would characterize we haven't determined our 2018, 2019 plans yet, but there's a portion of that we'll continue, but we're always going to be iterating around what the optimal kind of run rate is on step-up in sales and marketing and then the fleet mix.

Okay, great. And the follow-up is, I know you guys have significantly refreshed the fleet and kind of a little bit off-cycle this year. But I assume you'll still be buying some model 2018s at some point. Do you guys have a preliminary view on what that might look like in terms of pricing, cost?

Yeah. I mean, we're purposeful in what our commitments are in model 2018s. We've committed to probably around 50% of our buy. What we expect to buy would be – we always believe a proportion of what we ultimately believe we need uncommitted to create flexibility or offer flexibility of spot deals, as well as just making sure we have clarity on where the market's headed, the overall demand market's headed, from a transaction standpoint. So that will continue. We're achieving, as I said, we're working with our OEM partners who've been great to work with, who have been helping I think the company evaluate what the residual market is and where it's headed, and negotiating pricing that we believe is reflective of the reality that there's residual risk in the out years. And so, that's what we've been negotiating from a pricing standpoint on that fleet.

Well, I think, we've also looked at the fleet mix, what's in the fleet, and how to buy smarter and better. And we're not phasing into the same kind of challenges for the years going out, either for the 2017 buys or the 2018 buys. And the OEMs, we have great relationships with them. And even on some of the 2017 buys, we've been able to change some of the mix and what goes into the cars to come up with a better mix of cars that our customers are looking for, as well as we'll sell at a better price when we go to sell them out into the future. So, overall, I think prior to me joining and since then, we have a continuing improving relationship with the OEMs to create a win-win situation. If we're buying vehicles that are more desirable, that's going to help the residual market as well.

Okay. Thank you. And we have a question from Michael Millman with Millman Research. Please go ahead.

Thank you. So I think from what you said, it sounds like you will be paying less for model 2018s than you paid for model 2017s. Can you also tell us what you expect the size of fleet to look like June 30th of 2018 compared with the current size?

I mean, Michael, we have assumptions kind of what kind of the relative growth is. I think GDP is historically a good indicator preview. But, obviously, as you noticed from our second quarter results on fleet and our third quarter early the July kind of days being down, fleets down as well in July, not equal to the days being down, but it is down a couple points in July. We're going to be targeting to be somewhat conservative on a fleet level standpoint relative to maybe help the company perhaps (36:46) in the past. And the strategy is going to be the fleet to flex up when the demand materializes and hold cars and/or get more cars in as opposed to, I think, where we were kind of trapped in the past is, having a little bit too early optimistic recovery curve which was resulting in levels of fleet that requires to flex down which, as you know, is much harder to do having followed the industry as long as you have. It's much harder particularly with less program content in your fleet mix. So we'll be conservative in our approach. We'll be having a strategy of more flexing up than flexing down. And I think we'll be more disciplined than perhaps we have been in the past.

Okay. And changing the subject a little bit. Can you talk about where you think you stand on general technology, AI kind of things with Avis? And where do you think you stand compared to that with ERAC? And I might also add in terms of where you think you are in terms of conversions? Thank you.

Well, yeah, I would say, we've been somewhat quiet on this in general, but we are working with three different AI groups. And we've found, particularly on the revenue management side as well as the fleet management side, we've been getting some pretty solid insights that have helped us and we're starting to feel some of the impact around bookings and pricing. We also will be using this from a fleet buy demand perspective to better match where our cars are needed and where the demand is. But at the same time, we're getting some real insights into our customers, our customers' needs and also around the sales process. We're very fortunate that we have a terrific sales network for being best-in-class around buying and selling cars. And as we apply some of these AI capabilities in that area, we think we can do better at picking all the right cars, as well as knowing where to sell them and when to sell them to maximize our value of those cars over their lifetime with us.

Okay. Thank you. And we now have a question from the line of Dan Levy with Barclays. Please go ahead.

Hi. Thank you. Could you provide some broad strokes on the weak free cash flow in the quarter? I think it was a $530 million use of cash. And does this relate to why your revolver was fully drawn? Was there a true-up of the ABS Trust in the quarter?

Yeah, Dan. So the big picture change in kind of corporate liquidity from a quarter-end 1 to quarter-end 2 about $570 million change in corporate liquidity, and then these are proxies for your free cash flow. So they approximately equal. Operational performance, obviously, has been disappointing, driven by the relationship between pricing and fleet cost in the U.S. That is approximately a $340 million drag on liquidity from quarter-end to quarter-end. As we said earlier, we are in a very elevated period of non-vehicle investments. So, year-to-date, I think we're up towards $90 million and in the quarter alone it was $45 million and $90 million. So, ear-to-date, so non-vehicle CapEx is up. And then fleet was around $250 million. But to be clear, about $170 million of that was for Europe, as Europe is even more seasonally pronounced (40:28) more you need cash there. We didn't have the seasonal facility in place this year like we had for last year, so we used more corporate cash for the European facility. There wasn't a large true-up per se in the U.S. ABS. We do have mark-to-markets, and we're constantly making (40:43) a lease payment. There are ebbs and flows of that requirement. But yeah, generally, we drew the revolver for some of that seasonal facility. That's what the revolver's there for, is to fund the seasonal needs, particularly in this year when Europe didn't have a separate seasonal facility, we did rely (41:00) for that. And as we said, we wanted to make sure, in my remarks, what has – the liquidity on the balance sheet at the end of the quarter. And we'll determine the third quarter, along with our determination by/or before the end of the quarter the use of the restricted proceeds of paying down debt, of corporate debt will also determine what's the right amount of unrestricted cash and undrawn revolver to have at the end of the third quarter.

Yeah. Got it. And then, just as a follow-up. If I had to break apart some of the price declines we've seen in the recent years – I know in the past you've talked to the negative mix shift that we've seen due to the loss of share around large contracted commercial customers. So I'm just wondering what have the share trends been in large commercial? I mean, have those shares decline ceased? Is there a path to seeing improved share and thus improved mix? How long does it take to yield the benefits of that better service offering around that?

We are already seeing some of the benefits. We did just bring on a fairly large international client that we've moved 99% or 98% of their business over, and it's actually run very successful. We're also seeing the stabilization of our corporate share, as well as the percent of share that we have in accounts that we call splitter accounts. So we have a really solid team from a sales and relationship perspective. And they have been going out and raising more attention to the Ultimate Choice rollout, the significant improvement in the mix of cars, the service improvements that they're seeing, and some of the promotions that we've been running as well. So again, we are starting to see some of the benefits of the hard work and the upgrades. Generally speaking, as we've made the revenue management and system improvements, along with improved service, Ultimate Choice and better cars, we are slowly and certainly starting to see the impact.

Okay. Thank you. And we have a question from the line of John Healy with Northcoast. Please go ahead.

Thank you. Kathy, I wanted to get your thoughts, just generally speaking. I know you guys are not giving guidance or anything like that. But I have to say, this is probably one of the more optimistic calls I've heard from Hertz since a while. And I'm beginning to wonder if we're at a kind of inflection point. You guys have talked to positive pricing trends. You've talked about fixing the fleet issues. I've got to imagine you're starting to get some benefit from some of the initiatives in place. You've kind of changed your team running. Are we at a point where it's reasonable for investors, do you think, to start expecting EBITDA growth on a year-over-year basis? I know, last year, you guys had a tough third quarter, and I think around $330 million. But I just wanted to try to see if it's reasonable for us to start benchmarking dollar improvements more so than just kind of the discussion points?

Well, I'll go back to something I said as I first joined the company which is, there is absolutely nothing structural that exists in this company or the marketplace that Hertz can't return back to the margins it's seen in the past. And most of the issues have been self-inflicted. But at the same time, we are really playing catch-up for multiple years of not investing in the company. So it's not like I am trying to fix something that just went wrong for a year or two. There were multiple years where the investments were made into technology, into service, in the fleet that we're having to call back on now. And so, I think the positive that I feel is, when we come out at the end of 2018 with the technology updates in place, with the better fleet in place for now well over a year, as well as we're doing a lot of hard work on just getting the right process in place out of our different sites, ensuring that as we have these better cars that we're running utilization rates, that the cars are clean, that they're well-maintained and things that sounds easy. But getting everybody through the exit gate and making sure everybody's in the right car even when it's touchless where they can just walk in and get into one of the Ultimate Choice cars, there's a lot that goes into it. So I'm not going to be too aggressive on when we'll start to see us back up at those margins. But one would hope we will slowly and surely see improvement in our revenue, improvement in the pricing to better match the quality of the cars, the service, as well as the cost of those cars, and then start to see the goodness that comes out of doing the right service or the right process at the right time in the service. But I think, as everybody knows in this industry, it's how well you buy and sell the cars, and it's how well you match the bookings, the supply and the demand with price as well. And so, I think, with a lot of the work we've done, on the earlier question, around AI, the lot of the work we're doing with AI and machine learning and understanding supply and demand and where the cars need to be, it's a learning process. But I think, as time progresses, we've got the right initiatives in place to really start seeing the benefit. So I don't know that I really answered your question. It maybe boils down to it's going to be probably another solid six quarters of hard work and fairly hefty investments. But then, structurally, we should start to see some real strong goodness coming out of it.

Okay. Fair enough. And just one follow-up question. I apologize, I was going through security, when Tom mentioned it, at the airport. But could you touch on the change of control item? I wasn't too familiar with everything you guys were saying there. What was the threshold that was kind of touched? And is there any sort of impact to the tax-free status of the spin associated with the threshold that was reached?

No. John, there's no impact to the tax-free status of the spin. It's not related. It's a technical IRS regulation that there's a trailing three-month monitoring of shareholders 5% or greater and how that changes over time. And if you essentially have a turnover in that that exceeds 50% ownership, that you then trigger a potential limitation of NOL usage. That is the traditional way it's looked at. And in a car rental company like ours that has a large built-in gain as a result of the like-kind exchange program, you can essentially mitigate any limitations (48:00) usage. Because of your built-in gain you can advertise that built-in gain as an offset. So you essentially don't have any limitations on your NOLs.

Thank you. And from the line of Anj Singh with Credit Suisse. Please go ahead. Anjaneya K. Singh - Credit Suisse Securities (USA) LLC: Hi, thanks for taking my questions. I was hoping you can discuss your pricing improvement commentary for July and early Q3. Would it be possible for you to discuss how much of that is being driven by mix versus, let's say, ancillary versus – I'm trying to get a sense of what is apples-to-apples, just pure pricing from better environment versus things like mix or your ability to yield pricing through systems upgrades? And then, I guess, related to that question, can you give us a sense of where the new modules are starting to have the most tangible effect? Which KPI do you expect to show improvement here in the early days?

Well, where we've seen some very strong improvement, and I think it is time to a better fleet, Ultimate Choice, better operations and clearly our revenue management system, is in the Hertz brand. We're really seeing some goodness there from a retail and overall perspective. We're doing a lot better in matching supply and demand there. At the same time, we're also seeing pricing move up in our other brands, our value brands. What we have seen not as much strengthen is the ancillary product and revenue there. So again as we look at we do have a – we've brought in two new agencies around branding and positioning in our products to work with us and how to better position our different ancillary products to match the needs of our customers. So they're more attractive, and we are able to get better pricing on it. At the same time though, we've seen a much better match between understanding where the supply and demand is coming from, the AI work that we've done and the revenue management system that we have in place, and we're still working out the bugs. It's not 100% there. But we're already seeing significant strength for both July, August and even going into September from our efforts there. Anjaneya K. Singh - Credit Suisse Securities (USA) LLC: Okay, got it. And then, for a follow-up question, would you be able to share your fleet mix outside of compact cars right now? Perhaps which segment are you most skewed to now that you fix this compact car exposure?

Well, generally speaking, we are down to 16% on compact. And then, what we've done is, we still have a pretty big market for mid-size and full-size, but then we've also moved a lot of that percent of what was down in the compacts into the SUVs. And the good news on the SUVs is they sell for a really – they hold the residual values very nicely. And in some cases, we were able to sell at a gain. So we're seeing pretty good goodness there. So, basically, we have about 50% of the mix in mid-size and full-size; about, I would say, another 35% up in SUV and specialty and premium; and then 15%, 16% in compact. And I think the other thing to note is, we've been really smart in negotiating with the OEMs the trends and just basically what's inside of the car. And so, the features and just smart things like things in the cars that are easier to clean and maintain overall. So we've done a lot of good work with the OEMs to make sure what's in the cars is what our customers need and want as well.

Okay. Thank you. From the line of Hamzah Mazari with Macquarie Capital. Please go ahead. Hamzah Mazari - Macquarie Capital (USA), Inc.: All right. Thank you. The first question is just on pricing. I was hoping if you could give us a sense of what commercial pricing is doing in July. How much of your commercial business is currently contracted and your view on whether commercial follows leisure?

I guess, I don't necessarily see commercial following leisure. I think there has been consistent pressure on the commercial pricing, and that's due to the competition around that space. So I think a lot of the goodness we saw in pricing was more around the leisure and retail area. We didn't see significant downturns in commercial pricing, but I don't think that's an area that we're going to be able to see much movement upwards in due to the competition level. Hamzah Mazari - Macquarie Capital (USA), Inc.: Got it. And just a follow-up. You mentioned sort of six quarters of heavy lifting. You threw out a $180 million incremental spend number. We talked about $80 million on the fleet side. Is the investment spend going to come down in 2019? Is that the way we should view this and that most of this is a catch-up in order to effectively turn around the business?

Yeah. I would say that we will see it come down in 2018. Not hugely dramatic, but it will be, I think, significant and noticeable. And then, 2019, even more so. Candidly, this is just a phenomenal amount of investment spending that we are bringing in very close and in a timeframe that normally you'd spread over five to seven years. But the reality is, the board and the management team think we can't wait any longer and we have to move on, beat the challenges that we have in building these improvements. If you look into the future of autonomous driving, right, which I do think is eight to 10 years out. I'm not one of these people who thinks it is tomorrow, and I have a pretty deep involvement with OEMs that in this market work quite well around this space. No matter what, you have to be really great at managing a fleet and you have to have the assets that make you really great at managing a fleet. And the good news for us is, the better we are around doing that and the more time and money we spend into invest in that, not only do we create enormous goodness within our current business, but it really does position you for winning down in the future. And so, as companies get into this autonomous space, there's nobody out there that has, I would say, the assets we have in this regard and that we have both Donlen, which actually we're in a Donlen building right now in Chicago. So we have a large, very significant corporate fleet management company that manages large corporate fleets and all the capabilities around that. And then, we also have this consumer-based large rental car company that we're focusing on being the best at managing fleets and getting the best service and profitability out of that by the investments we're making right now. So in my view, and I think our team and our board's view, is to prepare for the future it's about making this company operate at a very high level around how it manages fleet. And then combining that with a great corporate fleet management company, we'll be very well-positioned in the future. So the good news is, we just have to focus at business at hand and it's the best preparation for the future.

Okay. Thank you. From the line of Doug Karson with Bank of America. Please go ahead.

Yes, hi. Thanks for taking my question. I wanted just to dig a little deeper on the revolver draw. I understand that it's used for this purpose, but $1.1 billion of cash from the balance sheet seems to be a little bit in excess of what you may need to run the business. And if cash flow is going to be positive in the second half of the year, is this a prudent action, better safe than sorry, or is this cash that you may need in the third quarter? Just seems like it's a lot.

Yeah. I mean, Doug, as I said in my script and in my remarks and I think answered a question, we don't disagree. I think we were being prudent going to the peak earning season. Clearly, we have an elevated level of investment, but we also wanted to see the visibility in July and August as we're now seeing. And to ensure that as we did expect internally that we started to see improvements in pricing, improvements in the performance of the business that that would give us the better clarity and, again, transparency for ourselves to determine then what's the right amount of cash we have in the balance sheet in the second half of the year versus revolver paid out. We acknowledge there's negative carry. It's not normally what we would do. But as we went through this elevated sales of fleet activity in the second quarter and really in the first half, we wanted to see the residual market near-term performance, wanted to see our sales on our wholesales in July and August, we wanted to see pricing and everything else. And clearly, it's a seasonal period too where, as you know, we all fleet up, international fleet's up even more significantly in the second quarter in even U.S. And we did have a seasonal facility in place this year in Europe. So we expect the second half of the year to be free cash flow positive. The early indications are it's even better than our internal expectations. And so, we'll revisit as we enter here in the third quarter, the optimal level of cash and undrawn revolver, along with the deployment of the second lien remaining proceeds on the refinancing of the corporate debt, all that as part of kind of the comprehensive conclusion of kind of our work on our balance sheet initiatives.

That's a very helpful answer. I had one or two other follow-ups, so kind of squeeze in. You may not be able to answer this question. But I know investors are kind of interested about decision around the 2019s and the 830-some-odd-million of cash you have restricted for that purpose. Would you entertain buying back longer dated debt that has a lower dollar price in the kind of context of that restricted cash? And also, can that restricted cash be used to pay the revolver back?

Yeah. For the revolver, we'd have to reduce commitments. We could do that, and then that would free up equal amount of the second lien proceeds from restricted/unrestricted cash. Basically, you can do that to the revolver, you reduce commitments. As far as which components of our corporate debt complex we intend to refinance, we're looking at all the different options, including continuing to evaluate the 2019s. We do need to address the 2019s because it does become a current maturity in the first part of next year. So it's something we need to address relative to all the other options that would be available to us, and that's what we're still evaluating. And then, we'll actually just make the right economic decision for the company. The real objective of all this is to create the runway for us to continue to allow, Kathy, to invest and fix the business to drive longer-term margin and growth perspective or earnings, but balancing kind of the near-term maturities and kind of what the optimal level of the debt complex is. So we're going to be working on that and, as I said in my script, come to a decision by or before the end of the third quarter.

Okay. Thank you. And there are no further calls in queue.

Great. Thank you, everyone. We appreciate your listening in this evening. Have a great night. Thank you.

And, ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and for using AT&T Executive Teleconference. You may now disconnect. Thank you.