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UNITED STATES SECURITIES AND EXCHANGE
COMMISSION


WASHINGTON, DC 20549




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FORM 10-K

(Mark One)



| |     |                                                                                           
| | --- | ------------------------------------------------------------------------------------------
| | [X] | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 
     SECURITIES EXCHANGE ACT OF 1934
|
| |     | For the fiscal year ended December 31, 2002                                               

OR



| |     |                                                                                             
| | --- | --------------------------------------------------------------------------------------------
| | [ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
|
| |     | For the transition period from
    
    to                                                  

Commission File Number 0-30776

ANC RENTAL CORPORATION

(Debtor-in-Possession as of November 13,
2001)


(Exact name of registrant as specified in its
charter)

|                                                                                           |  |                                               |                 |  |  | 
|------------------------------------------------------------------------------------------ |  | --------------------------------------------- | --------------- |  |  | 
|Delaware(State or other jurisdiction ofincorporation or organization)                      |  | 65-0957875(I.R.S. EmployerIdentification No.)
|200 South Andrews Avenue, Fort Lauderdale, Florida(Address of principal executive offices) |  |                                               | 33301(Zip Code) | 

Registrants telephone number, including
area code:  954-320-4000

Securities registered pursuant to
Section 12(b) of the Act:

None

Securities registered pursuant to
Section 12(g) of the Act:

Common Stock

(Title of Class)


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 (#2)  No x (#1)

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 a
definitive proxy or information statement incorporated by
reference in Part III of this Form 10-K or any
amendment to this
Form 10-K.  x

Indicate by check mark whether the registrant is
an accelerated filer (as defined in Rule 12b-2 of the Act.)

Yes o  No x

As of April 28, 2003, the aggregate market
value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the
common equity was last sold as of June 28, 2002, the last
business day of the registrants most recently completed
second fiscal quarter, was approximately $8,150,000. For
purposes of this computation, shares held by directors and
executive officers of the registrant have been excluded.

Such exclusion of shares held by directors and
executive officers is not intended, nor shall it be deemed, to
be an admission that such persons are affiliates of the
registrant.

As of April 28, 2003, 45,296,139 shares of
the registrants common stock, par value $0.01 per share,
which is the only class of common stock of the registrant, were
outstanding. The Companys stock is traded on the NASD OTC
Bulletin Board.

DOCUMENTS INCORPORATED BY REFERENCE

None



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TABLE OF CONTENTS

|         |  |                                                                                                    |  |      |    | 
|-------- |  | -------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|         |  |                                                                                                    |  | Page
|         |  |                                                                                                    |  |     
|PART I  
|Item 1.  |  | Business                                                                                           |  |      | 1  | 
|Item 2.  |  | Properties                                                                                         |  |      | 20 | 
|Item 3.  |  | Legal Proceedings                                                                                  |  |      | 21 | 
|Item 4.  |  | Submission of Matters to a Vote of Security
    Holders                                            |  |      | 23 | 
|PART II 
|Item 5.  |  | Market for the Registrants Common Equity
    and Related Stockholder Matters                      |  |      | 24 | 
|Item 6.  |  | Selected Financial Data                                                                            |  |      | 24 | 
|Item 7.  |  | Managements Discussion and Analysis of
    Financial Condition and Results of Operations          |  |      | 26 | 
|Item 7A  |  | Quantitative and Qualitative Disclosures about
    Market Risk                                     |  |      | 49 | 
|Item 8.  |  | Financial Statements and Supplementary Data                                                        |  |      | 50 | 
|Item 9.  |  | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure           |  |      | 86 | 
|PART III
|Item 10. |  | Directors and Executive Officers of the Registrant                                                 |  |      | 86 | 
|Item 11. |  | Executive Compensation                                                                             |  |      | 88 | 
|Item 12. |  | Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters |  |      | 92 | 
|Item 13. |  | Certain Relationships and Related Transactions                                                     |  |      | 93 | 
|Item 14. |  | Controls and Procedures                                                                            |  |      | 98 | 
|PART IV 
|Item 15. |  | Exhibits, Financial Statement Schedules and
    Reports on Form 8-K                                |  |      | 98 | 

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PART I

Item 1.     Business

Company Overview

ANC Rental Corporation (ANC Rental)
was incorporated in Delaware in October 1999 as a wholly owned
subsidiary of AutoNation, Inc. (AutoNation or
our former Parent). On June 30, 2000 AutoNation
distributed all of our outstanding common stock to its
stockholders and we became an independent public company.

We own and operate car rental businesses under
the brand names Alamo and National. Our rental operations have a
presence in the airport leisure and business travel market. In
2002, we operated an average worldwide fleet of approximately
214,000 cars. Alamo and National serve the daily rental needs of
both leisure and business travelers from a network of more than
3,200 on-airport and near-airport locations in all
50 states of the United States, as well as in Canada,
Mexico, Europe, the Caribbean, Latin America, Asia, the Pacific
Rim, Africa and the Middle East. In the year ended
December 31, 2002, our operations generated revenue of
approximately $2.4 billion, which includes
$338 million from operations outside of North America, the
majority of which was generated in the United Kingdom.

Alamo, our value brand, has been in business for
more than 25 years. National, our premium brand, has been
operating since 1947. Alamo primarily serves the value leisure
market, while National primarily serves the airport premium
business and leisure travel market. Alamo and National operate
through both company-owned and franchised locations in the
United States and internationally.

Chapter 11 Proceedings

On November 13, 2001, ANC Rental Corporation
and certain of our direct and indirect U.S. subsidiaries (each,
a Debtor, and collectively Debtors)
filed voluntary petitions under chapter 11 of Title 11, United
States Code, in the United States Bankruptcy Court for the
district of Delaware (Case No. 01-11200 et al., Jointly
Administered). The Debtors remain in possession of their assets
and properties, and continue to operate their businesses and
manage their properties as debtors-in-possession pursuant to the
Bankruptcy Code. As a debtor-in-possession, management is
authorized to operate the business, but may not engage in
transactions outside the ordinary course of business without
Court approval. For example, certain types of capital
expenditures, certain sales of assets and certain requests for
additional financings will require approval by the Bankruptcy
Court. There is no assurance that the Bankruptcy Court will
grant any requests for such approvals. Subsequent to the filing
of the chapter 11 petitions, we obtained several court
orders that authorized us to pay certain pre-petition
liabilities and take certain actions to preserve the going
concern value of the business, thereby enhancing the prospects
of reorganization. Our financial statements have been prepared
on a going concern basis, which contemplates continuity of
operations, realization of assets, and payment of liabilities in
the ordinary course of business. However, as a result of the
chapter 11 filing, there is no assurance that the carrying
amounts of assets will be realized or that liabilities will be
settled for amounts recorded. The Debtors do not include our
international operations, our insurance captive or our fully
consolidated special purpose financing entities.

The confirmation of a plan of reorganization is
our primary objective. After negotiations with various parties
in interest, we expect to present a plan or plans of
reorganization to the Court to reorganize our business and to
restructure our obligations. This plan or plans of
reorganization could change the amounts reported in the
financial statements and cause a material change in the carrying
amount of assets and liabilities. We expect that a certain
portion of the pre-petition liabilities recorded will be subject
to compromise.

The plan or plans of reorganization, when filed,
will set forth the means for treating claims, including
liabilities subject to compromise and interests in our company.
Such means may take a number of different forms. A plan of
reorganization may result in, among other things, significant
dilution or elimination of certain classes of existing interests
as a result of the issuance of equity securities to creditors or
new investors. Other

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interests such as certain of the pre-petition
insurance reserves may need to be addressed and resolved in the
ordinary course of business as a result of needing to maintain
mandatory insurance coverage or for other compelling business or
legal reasons. We are in the early stages of formulating a plan
of reorganization. The confirmation of any plan or plans of
reorganization will require creditor acceptance as required
under the Bankruptcy Code and approval of the Bankruptcy Court.


Under bankruptcy law, actions by creditors to
collect pre-petition indebtedness owed by the Debtors at the
filing date, as well as most litigation pending against us, are
stayed and other pre-petition contractual obligations may not be
enforced against the Debtors. We have notified all known
claimants and historical creditors that the Bankruptcy Court
established a bar date of January 14, 2003. A bar date is
the date by which a claimant, whose claim against the Debtors is
either omitted from or listed different from the amount or
status described in the schedules of liabilities filed by the
Debtors with the Bankruptcy Court, must file a claim against the
Debtors if the claimant wishes to participate in the
chapter 11 case as provided for in any Plan of
Reorganization. In addition, the Debtors have the continuing
right, subject to Court approval and other conditions, to assume
or reject any pre-petition executory contracts and unexpired
leases. Parties affected by these subsequent rejections may file
claims with the Bankruptcy Court subject to an extended bar
date. Any damages resulting from rejection of executory
contracts and unexpired leases are treated as unsecured
pre-petition claims. The amounts of claims filed by creditors
could be significantly different from their recorded amounts.
Due to material uncertainties, it is not possible to predict the
length of time we will operate under chapter 11 protection,
the outcome of the proceedings in general, whether we will
continue to operate under our current organizational structure,
which contracts and leases will be assumed or rejected, the
effect of the proceedings on our businesses or the recovery by
creditors and equity holders of the company.

Under the Bankruptcy Code, post-petition
liabilities and pre-petition liabilities subject to compromise
must be satisfied before shareholders can receive any
distribution. The ultimate recovery to shareholders, if any,
will not be determined until the end of the case when the fair
value of our assets is compared to the liabilities and claims
against us. There can be no assurance that any value will be
ascribed to our common stock in the bankruptcy proceeding.

As a result of the bankruptcy filings and related
events, there is no assurance that the carrying amounts of
assets will be realized or that liabilities will be liquidated
or settled for the amounts recorded. In addition, confirmation
of a plan of reorganization, or disapproval thereof, could
change the amounts reported in our financial statements. Our
financial statements do not include any adjustments that may
result from the resolution of these uncertainties. In
particular, our financial statements do not reflect adjustments
to the carrying value of assets or the amount and classification
of liabilities that ultimately may be necessary as a result or a
plan of reorganization. Adjustments necessitated by a plan of
reorganization will materially change the amounts reported in
the consolidated financial statements included elsewhere herein.

The ability of the company to continue as a going
concern is dependent upon, among other things, (i) our
ability to generate adequate sources of liquidity, (ii) our
ability to generate sufficient cash from operations,
(iii) the ability of our subsidiaries that are not included
in the chapter 11 cases to obtain necessary financing,
(iv) confirmation of a plan or plans of reorganization
under the Bankruptcy Code, and (v) our ability to achieve
profitability following such confirmation. Because we can give
no assurance that we can achieve any of the foregoing, there is
substantial uncertainty about our ability to continue as a going
concern.

ANC Rental Business Strategy

Our goal is to be the brand leaders in our
industry, achieving consistent, sustainable and profitable
growth. Our success will be driven by customer satisfaction,
employee pride and value creation. The core elements of our
overall strategy include:



| |   |                                                                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Increase Customer
    Focus.We believe consistently
    exceeding customer expectations will result in increased loyalty
    and maximize the value of our customers to us.

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| |   |                                                                                                                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Execute a Focused Multi-Brand Strategy.We are implementing numerous marketing
    and other initiatives aimed at optimizing the position of Alamo
    and National as separate brands in the airport marketplace
    capitalizing on their established brand equity and inherent
    strengths.
|
| |  | Improve Profitability.Through our restructuring efforts, we
    are committed to increasing profitability, operating margins and
    stakeholder value through specific initiatives to increase
    revenue, lower costs and improve fleet utilization.                                        
|
| |  | Continually develop the skills of our
    associates.Our success is driven by
    our teams ability to focus on the execution of our plan.
    As an organization, we will provide the tools to improve their
    quality and performance in serving our customers.                           

Restructuring Efforts

During 2001 we commenced a comprehensive review
of our business practices and processes to identify the key
operational, organizational and system changes required to
return us to profitability and position us for future growth
(the Restructuring Plan). The Restructuring Plan was
focused on the execution of an innovative dual
branded strategy built upon the unique attributes of the
Alamo and National brands. The plan required realignment of our
organizational structure, programs and third party relationships
in support of this strategy and the achievement of significant
reductions in the Companys global cost structure.

During 2002 we focused our restructuring efforts
on six aspects of our business in order to improve
profitability. The six operating focuses included:
(i) brand positioning, (ii) rate, product and rental
policy programs, (iii) non-vehicle related cost reduction
opportunities, (iv) internal management reporting and
fiscal budget processes, (v) customer reservations process,
and (vi) revenue management policies and procedures. The
discussion below summarizes certain of the key initiatives
launched in 2002 and their current status. We believe our
substantial completion of the Restructuring Plan during 2002
provides a strong foundation for our 2003 Business Plan.



| |                               
| | ------------------------------
| | Airport Location Consolidation

As of the date of the bankruptcy filing, Alamo
and National operated under 140 separate stand-alone concession
agreements at seventy airports including most of the major
airports in the United States. During 2002, we consolidated as
many of these separately branded locations as possible into dual
branded locations. We believe that by consolidating operations
into one dual branded facility we will be able to lower
operating costs and improve vehicle utilization, lower personnel
expense, and reduce rent expense. While material uncertainties
and negotiations with third parties make it difficult to predict
the length of time it will take to complete each location
consolidation or whether all of the anticipated consolidations
will occur as planned, we plan to substantially complete the
facility consolidation program during 2003. As of March 31,
2003 we have dual branded our operations at forty-six of these
airports and have received court orders allowing us to dual
brand an additional three airport locations, which we expect to
complete by the end of 2003.



| |                                             
| | --------------------------------------------
| | Combining Information Technology
    Systems

We currently operate two separate and distinct
information technology systems, one for each of our brands. We
plan to migrate to one information system and abandon the other.
We believe that by combining information technology onto one of
our operating systems cost savings can be achieved. Additional
benefits of migrating to one system are expected to include a
reduction of support staff, elimination of duplicative system
infrastructures, improved operational efficiency, lower cost of
training, and standardization across the organization. The
migration to one information technology system is not without
significant risks, such as the ability to successfully migrate
onto one system, additional delays in implementation, the
temporary loss of business functionality, questions regarding
the scalability of existing infrastructure, and the need for
coordination with third party vendors to accept system changes.

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| |                                            
| | -------------------------------------------
| | Exiting Certain International
    Locations

In August 2002, we sold certain assets and
transferred specific liabilities related to our Holland and
Belgium operations to an unrelated third party and entered into
a ten-year franchise agreement. We realized approximately
$10.1 million in net proceeds from this transaction. In the
third and fourth quarters of 2002, our German operating and
financing subsidiaries filed for receivership in Germany under
local law.



| |                                             
| | --------------------------------------------
| | Closure of Alamo Local Market
    Operations

During the fourth quarter of 2002, management
approved and announced a plan for the closure and abandonment of
our Alamo Local Market Division. The plan included provisions
for employee terminations, closure of locations, and disposal or
transfers of fleet to other operations.



| |                              
| | -----------------------------
| | Changes in License Operations

We have modified our past licensee structure and
have entered into new dual branded licensing
agreements that include but are not be limited to
(i) selling or transferring ownership of certain Alamo
locations in existing National licensee markets to the current
National licensee, (ii) increasing the fees charged to our
licensees, and (iii) licensing Alamo to current National
licensees in those markets where an Alamo location currently
does not exist. As of March 31, 2003, we have reached an
agreement with the Policy Advisory Committee of our licensees
and have entered into new agreements with the vast majority of
our domestic licensees.



| |                       
| | ----------------------
| | Strategic Alternatives

In addition to addressing marketing, customer
service and operating issues, we continue to assess and explore
strategic alternatives that may include the sale of all or part
of our business.

Airport Operations

We currently operate Alamo and National locations
at on-airport and near-airport locations on a worldwide basis
through both company-owned and licensed rental locations. We
operate in three separate and distinct geographic regions: the
United States, Canada and International, which includes rental
operations primarily located in Europe.



| |                                 
| | --------------------------------
| | Business Strategy and Operations

The business strategy for our airport operations
includes the following principal components:



| |   |                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Execute a Focused Multi-Brand
    Strategy.While our brands both
    compete in the airport market, each executes a specific strategy
    targeted at its core businesses:



| |   |                                                                                                                                                                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Alamo focuses on value-oriented renters,
    primarily leisure and small business travelers. Alamo markets to
    value oriented leisure travelers, particularly families, and
    aims to associate Alamo with the vacation experience.                                                                                                                            
|
| |  | National seeks to further improve its position as
    a premium brand that is focused on business and frequent
    travelers. Nationals marketing is designed to educate
    travelers about Nationals strong service
    offerings  particularly Emerald
    Club  and emphasizes transaction speed, ease, and
    vehicle choice as positive brand attributes.



| |   |                                                                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Provide a Superior Customer
    Experience.Each brand continually
    seeks consistent delivery of its service offerings to their
    specific customer bases:



| |   |                                                                                                                                                                                                                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Alamos focus is to become the preferred
    value brand in the rental market. We believe that the small
    business renter and the leisure renter have similar needs making
    Alamo a natural fit for all value conscious renters. Our
    strategy is to expand our current leisure renting relationships
    to also include value conscious business travel.

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Nationals focus is to provide the frequent
    traveler rapid and efficient service which minimizes interaction
    and paperwork at our rental facilities. Nationals
    Emerald Aisleservice allows a customer enrolled in the
    brands proprietary Emerald Clubprogram to complete
    the rental transaction without having to visit the rental
    counter. The customer may proceed directly to the Emerald
    Aisle,select the car of his or her choice, and proceed to
    the exit gate where the transaction is completed without paper
    in a matter of minutes. Frequent travelers familiar with the
    Emerald Aisleprogram have enthusiastically endorsed the
    service and we believe that National will benefit as travelers
    become more aware of the brands service attributes.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Utilize the Internet to Fuel Organic
    Growth.We will continue to
    aggressively develop our e-commerce business through the use of
    our web sites and key e-commerce partner relationships for both
    brands. National recently launched a breakthrough product
    Quickrent. Quickrentenables an Internet customer
    to not only reserve, but also functionally rent their car on
    line. Upon arrival at the location they proceed to the vehicle
    and directly to the exit gate eliminating the need to stop at
    the rental counter. We believe this product will provide a
    premium internet experience, build customer loyalty and
    satisfaction and provide additional opportunities to reduce our
    operating transaction costs. We expect to achieve our goal of
    continually improving the functionality of our web sites by
    leveraging our Internet expertise, technology and research
    across all of our brands. We are also expanding
    business-to-business connectivity between our web sites and
    corporate accounts, travel agents and tour operators in order to
    facilitate communication, administration, information and data
    flow.



| |                        
| | -----------------------
| | Alamo Rental Operations

We believe the Alamo brand enjoys both domestic
and international recognition for meeting the needs of travelers
concerned with obtaining the best value for their dollar. Alamo
has historically served a large number of discretionary
travelers who rent cars for leisure purposes. Also important to
the Alamo brand are middle market and small business customers,
as well as other customers who have selected Alamo as a
secondary supplier for commercial travel.

Due to the brands value-oriented leisure
focus, Alamos top ten rental locations are located in
major tourist destinations, such as Florida, California, Nevada
and Hawaii. In 2002 these top ten locations include cities such
as Orlando, Miami, Los Angeles, Las Vegas, Fort Lauderdale,
Tampa, San Francisco, Maui, and other major markets, which
collectively generate approximately 42% of Alamos total
domestic revenue. Because the Alamo brand primarily targets the
leisure traveler, approximately 37% of its business comes from
the direct consumer sub-market (including Internet revenues),
approximately 48% comes from domestic and international tour,
travel agent and affinity (e.g. travel clubs, airlines, hotels,
etc.) channels and the remainder comes from the value-oriented
business travel segment.



| |                           
| | --------------------------
| | National Rental Operations

National has built its reputation in the industry
as a provider of premium vehicle rental services, targeting the
needs of the frequent traveler. Nationals business base is
more diverse than Alamos as a result of the brands
focus on the frequent premium business traveler. Nationals
top ten rental locations, which generate approximately 29% of
its total revenue, comprise major business travel destinations,
such as Los Angeles, Atlanta, Dallas, Seattle, Newark, Chicago,
Philadelphia and Detroit. The National brand has found success
positioning itself in the business travel market. Accordingly,
commercial accounts represent approximately 48% of its revenue.
Its remaining revenue comes from the leisure travel market
through sources such as Emerald Club Members, travel agents and
affinity groups.



| |                    
| | -------------------
| | Sales and Marketing

In order to better leverage our sales and
marketing efforts and thereby lower our operating costs, we have
merged our sales force into one team that has a specifically
tailored focus for each brand.

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The Alamo brand focuses its sales and marketing
activities on the following customer segments:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Domestic and International Tour
    Operators.Tour operators create
    package tours by assembling various components of travel such as
    airfare, hotel, car rental and destination features. Our sales
    force contracts with tour operators, typically for one year, to
    be a primary or secondary provider of car rental services for
    these tour operators packaged vacations.                                                                
|
| |  | Travel Agencies.Alamo enjoys preferred relationships with large consortia groups
    such as American Express, Vacation.com and Carlson Wagonlit who
    offer our car rental services through their extensive travel
    agency networks. Alamo markets to front-line travel agents
    through global distribution systems and its proprietary Alamo
    CASH-IN Club program which is an incentive program developed
    specifically for front-line agents.
|
| |  | Direct Customers.Alamo markets to consumers using the Internet at our
    Alamo.comwebsite, television, newspapers, specialized
    seasonal product offerings (such as ski products), targeted
    direct mail and e-mail and partnership efforts. Alamo also
    leverages its partnership with Disney as the Official Car Rental
    Company of Walt Disney World and Disneyland.                                                                           

The National brand focuses its sales and
marketing activities on the following customer segments:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Corporate Accounts.National has had a strong presence in the corporate market for
    over 50 years and primarily serves its corporate renters
    via its sales force who contract and maintain relationships with
    corporate accounts. Emerald Clubmembership offers
    corporate renters a quick and easy paperless rental and their
    choice of vehicle at the Emerald Aisle.           
|
| |  | Emerald Club.National Emerald Clubmembers are served through a
    dedicated communication area at our reservation centers and
    through special booking paths at our Nationalcar.comweb
    site. In addition, National uses telesales and direct marketing
    efforts to reach and service small and mid-size accounts which
    are an important component of its mix of corporate business.
|
| |  | Other Frequent
    Renters.National markets its products
    to frequent renters through the Internet, television,
    newspapers, trade publications and direct marketing and
    partnership efforts.                                                                                                                                                                                           

Both Alamo and National contract with, and
participate in, association and affinity programs, including
travel clubs, trade and professional associations and
conventions, in order to reach their members with special
benefits and promotions. In addition, several of the programs
provide renters with discounts and rewards at retail outlets,
restaurants and travel clubs.



| |             
| | ------------
| | Reservations

We operate three reservations centers located in
Charleston, South Carolina, Boca Raton, Florida and Salt Lake
City, Utah. Our central reservation system routes calls to all
centers for optimal utilization so customers get the quickest
and best service. A large percentage of Alamos and
Nationals bookings are directed to our reservation system
through airline and other third-party reservation systems,
including systems operated by Sabre Holdings, Galileo
International, Worldspan and Amadeus. Separately, we believe the
Internet is an attractive low cost alternative to traditional
reservation processes. The Internet provides the consumer with
real-time, interactive services, which tend to be used over and
over again.



| |                                
| | -------------------------------
| | International Rental Operations

We operate the Alamo and National brands in 77
countries outside the United States and Canada. Internationally,
we have over 2,300 locations consisting of both on-airport and
city operations. Alamo and National have an international fleet
of approximately 151,000 rental vehicles, of which approximately
33,000 are within company-owned locations.

With the exception of the United Kingdom, Germany
and Switzerland, we operate primarily through franchised
locations in Europe, Africa, the Middle East, Asia, the Pacific
Rim, Australia, Latin America and the Caribbean. Our operations
outside North America accounted for approximately 11% of our
revenue for the

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year ended December 31, 2002, of which
approximately 78% was generated in the United Kingdom, where we
believe we have a leading market position.


Until October 1997, our international
company-owned operations consisted solely of Alamo locations in
the United Kingdom, Germany and several smaller continental
European countries. In October 1997, we significantly increased
our international presence with the acquisition of EuroDollar
plc, which moved us into a market leadership role in the United
Kingdom. Commencing in February 1998, we began the consolidation
and expansion of our international operations, combining the
acquired EuroDollar operations with Alamos European
operations and some existing EuroDollar licensees and joint
ventures. Since that time, we have focused our efforts on
re-branding the businesses and developing the network for both
the Alamo and National brands.

Before February 1, 1998, National served its
customers in Europe, Africa and the Middle East through a
marketing affiliation with Europcar/Interrent. Beginning
February 1, 1998, as a result of the acquisition and
rebranding of EuroDollar in the fourth quarter of 1997, National
began to operate, and in some cases license, its own locations
in each of these markets. National serves its customers in Japan
and other parts of the Pacific through a marketing affiliation
in Japan. In July 2000, our unprofitable Australian operations
were divested in a sale to an independent third party, who then
became a National licensee.

In August 2002, we sold certain assets and
transferred specific liabilities related to our Holland and
Belgium operations to an unrelated third party and entered into
a ten-year franchise agreement. In the third and fourth quarters
of 2002, our German operating and financing subsidiaries filed
for receivership in Germany under local law.

Within the European marketplace, the business
market accounts for approximately 66% of our revenue, the
leisure market accounts for approximately 31% of our revenue and
the insurance replacement market accounts for approximately 3%
of our revenue.

Internationally, Alamos market strength is
in the leisure rental market with its focus on generating
inbound leisure business to the United States from tour
operators, car rental brokers and retail travel agencies.
National supports its local country sales forces in Europe with
a pan-European sales organization covering all major countries.
The pan-European sales organization is geographically based at
the point of decision for each multinational account, creating a
seamless global account management system to benefit
multinational corporate customers.

Additional financial information with respect to
revenues and assets of our International operations is included
in Note 15 of our Consolidated Financial Statements included
elsewhere herein.

ANC Rental Fleet Operations



| |                                                     
| | ----------------------------------------------------
| | Fleet Management Strategy for Airport
    Operations

The single largest cost to a rental car company
is its fleet. Since the mid 1980s, vehicle rental companies have
acquired vehicles primarily through manufacturer repurchase
programs. Repurchase prices under these programs are based on
either a specified percentage of original vehicle cost
determined in the month the vehicle is returned or the original
capitalization cost less a set daily depreciation amount. These
repurchase programs limit a vehicle rental companys
residual value risk with respect to vehicles purchased under the
programs.

We hold vehicles in our daily rental fleet for up
to fifteen months, with the average vehicle age being less than
nine months. Approximately 96% of our model year 2002 vehicle
acquisitions for the airport operations of Alamo and National
were acquired under operating leases or manufacturer repurchase
programs and were not subject to residual value risk.
Manufacturer repurchase programs allow cars conforming to the
terms of the agreement to be returned to the manufacturer at the
end of their service lives at a predetermined residual value.
For the model year 2001, 3.7% of the repurchase program cars
were not returned to the manufacturer or were subsequently
rejected by the manufacturer after their return.

7



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##### 



We place a strong emphasis on vehicle maintenance
since quick and proper repairs are critical to fleet
utilization. To accomplish this task we employ full-time
National Institute for Automotive Service Excellence fully
certified technician instructors. In addition, we use specific
manufacturer dealerships to maintain and service our vehicles.
These dealerships provide us with qualified and experienced
technicians with established manufacturer relationships.



| |               
| | --------------
| | Vehicle Supply

General Motors has been the principal supplier of
rental vehicles to Alamo and National for many years. Our supply
agreement with General Motors requires us to purchase a minimum
number of units spanning all the General Motors brands. In
return, General Motors has agreed to provide certain incentives
as well as a minimum number of vehicles. In model year 2002,
vehicles manufactured by General Motors made up approximately
61% of our total domestic rental fleet purchases. In an effort
to efficiently manage our fleet cost we may modify the mix of
vehicles we purchase in the 2003 model year. We expect to
purchase a lesser percentage of our domestic rental fleet from
General Motors, replacing it with other vehicle suppliers
including, but not limited to, Chrysler, Mitsubishi, Toyota,
Isuzu, Ford, Nissan and Suzuki.

Information Technology

A comprehensive network of hardware and software
applications support our rental operations. Key system
applications include reservations, rental operations, fleet
management, third-party reservation systems and tour operator
links, Internet web sites, commission processing, billing,
accident claims, financial and human resources. We believe our
information technology infrastructure allows us to manage our
operations on a real-time basis and quickly respond to changing
market dynamics.

Domestically, our Odyssey information system
supports the National brand while the Alamo brand uses a legacy
system. Both systems are fully integrated information systems
that include reservations, rental operations and fleet
management. We intend to consolidate the information technology
platforms supporting the Alamo and National airport businesses
over the next twelve months. We believe that by consolidating we
will incur lower administrative costs as operations are
standardized on one common platform.

Nationals UK operations use a fully
integrated separate system, with interfaces to both Odyssey and
Alamos systems.

Customers

No single customer represented greater than 10%
of our total revenue during 2002.

Competition

The automotive rental industry is capital
intensive and is characterized by intense price and service
competition. We believe we compete through a competitive pricing
structure, increased service levels, better vehicle quality,
availability and value, and convenient rental locations
maintained in good condition. In any given location, we may
encounter competition from national, regional and local vehicle
rental companies. The brands we primarily compete against
domestically are Avis, Budget, Dollar, Enterprise, Hertz and
Thrifty. In Europe and other foreign markets, our vehicle rental
business competes with the companies listed previously and other
national and local vehicle rental companies.

At times, industry-wide price pressures have
adversely affected the major vehicle rental companies, and our
vehicle rental business has, on such occasions, priced its
product in response to these pressures. Moreover, at times when
the vehicle rental industry has experienced vehicle oversupply,
competitive pressure has intensified, with a negative impact on
the industrys rental rates. We continually focus on
optimizing our cost structure to improve our overall competitive
position.

In the last two years there have been significant
changes in the ownership of participants in the vehicle rental
industry. Ford Motor Company and Cendant Inc. acquired the
outstanding shares of Hertz and Avis, respectively in 2001. In
2002 Cendant Inc. acquired certain assets and liabilities of
Budget Group, Inc. We

8



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believe Hertz, Avis, Enterprise and Budget are
significantly better capitalized than most of the remaining
participants in the industry and, as such, more formidable as
competitors as they gain access to wider sources of capital at
lower rates.


Automotive Rental Regulations

Our operations generally are subject to various
federal, state and local laws and regulations including those
relating to taxing and licensing of vehicles, consumer
protection, finance, insurance, advertising, currency controls,
used vehicle sales, zoning and land use, environmental and labor
matters. In addition, a majority of states have considered
legislation affecting the sale of loss damage waiver products.
To date, approximately half of the states have enacted
legislation requiring disclosure to each customer at the time of
rental that the customers personal automobile insurance
may cover damage to the rental vehicle and therefore purchase of
a collision damage waiver may be unnecessary. In addition,
certain states such as Nevada, California and Illinois have
capped the price at which collision damage waivers can be sold.
New York previously prohibited the sale of collision damage
waivers, and New York and Illinois capped the liability of the
renter for damage to the vehicle at a specific dollar value. New
York recently repealed the prohibition of the sale of collision
damage waiver and the damage recovery dollar value cap and
replaced it with a price cap on the sale of collision damage
waivers. Adoption of national or state legislation limiting the
sale or capping the rates of collision damage waiver products
could further restrict sales of this product and additional
limitations of potential customer liability could increase the
cost of our operations. During recent years, however, two states
enacted legislation to rescind the price control of collision
damage waivers, two others have raised their price caps, and two
states have enacted legislation to partially rescind renter
immunity from liability and permit the sale of collision damage
waivers.

As a result of private and past governmental
regulatory legal proceedings in some states regarding the sale
of other optional service items at the rental counter, such as
liability insurance, personal accident coverage, personal
effects coverage and other travel related coverages, the vehicle
rental industry has requested regulatory agencies and
legislative bodies to provide affirmative authorization for the
sale of these services and products. To date, a substantial
majority of states have either adopted clarifying legislation to
fully exempt the industry from licensing requirements or enacted
special or limited licenses to specifically cover the sale of
insurance products incidental to the vehicle rental. However,
the outcome of the legal proceedings and the initiation of any
future governmental regulatory proceedings could negatively
impact the revenue generated from the sale of these services and
products.

Our operations are also subject to various
federal, state and local consumer protection laws and
regulations including those relating to advertising and
disclosure of charges to customers. The National Association of
Attorneys General has promulgated suggested guidelines for
vehicle rental advertisements. Alamo and two other industry
participants are subject to substantially similar consent
decrees resulting from Federal Trade Commission inquiries
initiated in 1989, which consent decrees require certain
disclosures to customers at each stage of the rental
transaction, including in advertisements, of charges that are
mandatory and not otherwise reasonably avoidable. The rental car
industry has sought and obtained legislation in numerous states
which expressly permits the separate itemization of vehicle
registration fees and other charges.

Trademarks

We own a number of registered trademarks
including Alamo®, National®, National
Car Rental®, Emerald Club® and
QuickSilver®. We also have a number of applications
pending to register other marks. These trademarks are important
to our business. The current registrations of our service marks
and trademarks in the United States and foreign countries are
effective for varying periods of time, and may be renewed
periodically provided that we comply with all applicable laws.

9



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##### 



Environmental Matters

The operation of our business is subject to a
variety of requirements of national, state/provincial, and local
governments that regulate health, safety, the environment,
zoning, and land use. Each nation, state, and province in which
we operate has its own laws and regulations governing the
management of hazardous materials, water discharges and air
emissions, solid waste disposal, and, in most cases, the release
and cleanup of regulated substances, and liability for these
matters. In addition, government authorities at all levels may
require permits for some activities at our facilities, and these
permits may be subject to renewal, modification, or revocation.
These governmental authorities can enforce compliance with these
regulatory requirements, and may seek injunctions or impose
fines and other sanctions, including criminal penalties, for
alleged violations. Our company has incurred, and will continue
to incur costs, to comply with applicable environmental laws and
regulations.

Our companys principal on-going
environmental regulatory compliance obligations arise from our
use of fuel (unleaded gasoline and diesel) and motor oil. Our
company stores these petroleum products in above and underground
storage tanks of varying capacities. We upgraded or replaced our
underground storage tanks to comply with federal standards that
became effective in 1998. We carry out a compliance program to
ensure that underground storage tanks do not release their
contents to the environment. In 2002, our company initiated a
comprehensive inspection and equipment-upgrading program in
response to new requirements applicable to our underground
storage tanks in California. We do not expect the costs of
equipment upgrading identified as being necessary as a result of
the California inspection program to have a material adverse
effect on our capital expenditures, earnings, or competitive
position.

In 2001, the U.S. governments General
Accounting Office issued a report calling for more frequent
regulatory inspections of facilities that store petroleum
products in underground storage tanks. Our storage tanks are
(and we expect them to continue to be) inspected frequently by
state and local regulatory officials. Fines imposed as the
result of non-compliances detected through such inspections have
not had (and we do not expect them to have) a material adverse
effect on us. In 2003, several members of Congress introduced
legislation that, if enacted, may impose additional regulatory
obligations (including training requirements) upon operators of
petroleum storage tanks.

For above ground storage tanks, we (i) have
a compliance program to ensure they have adequate secondary
containment to prevent releases to the environment, and
(ii) implement plans to prevent or respond to inadvertent
spills. In 2002, we modified our compliance program for above
ground storage tanks in response to rule changes that became
effective nationally in the U.S. We do not expect the cost of
these modifications to have a material adverse effect on our
capital expenditures, earnings, or competitive position.

In certain U.S. jurisdictions, our company must
operate equipment, and routinely assess the integrity of this
equipment, to reduce the release of fuel vapors into the air. We
(i) have installed the necessary equipment in those
jurisdictions where it is required, (ii) assess the
equipments integrity in compliance with rules that may
vary in each local air quality management district, and
(iii) carry out a program to ensure that facility employees
have the necessary training to operate and maintain such
equipment.

Discharges of wastewater associated with our
companys operations, chiefly from vehicle washing, are
also subject to federal, state/provincial, and local rules. In
some situations, these rules require our company to install
oil/water separators or grease traps, the costs of which are not
material. In some situations, we must obtain permits to
discharge to municipal sewer systems or to operate car wash
wastewater recycle systems. Our company is generally not subject
to U.S. federal rules governing the discharge of storm water
from its locations. In some instances, however, and usually
because of a contractual commitment to a landlord, a company
location adopts and implements a storm water pollution
prevention plan.

In addition to the on-going regulatory compliance
obligations described above, our company has liability for
addressing past releases from its petroleum storage tank systems
or for having sent used oil off-site for management. For past
releases on property that our company owns or leases (or
formerly owned or leased), the objective is to obtain a
determination from a state environmental agency that there is no
need for further remedial action (no further
action). Our company is currently pursuing no further
action determinations for

10



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approximately eighty locations at which it
currently or formerly operated. For many of the locations which
our company operates or operated under the National Car Rental
brand, our company is indemnified (pursuant to an asset purchase
agreement) for the costs of measures necessary to obtain no
further action determinations. In some U.S. states, the costs
are payable or recoverable from state underground storage tank
trust funds.


In some situations, our companys ability to
secure no further action determinations depends upon decisions
committed to the discretion of our landlords. Every U.S. state
agency overseeing our companys efforts to obtain no
further action determinations applies some variation of a
risk-based corrective action regime. Under such a regime, the
residual petroleum that may remain after remedial efforts are
undertaken depends upon possible exposure to the residue, and,
hence, current and future site use. As a result, some no further
action determinations where petroleum residue remains depend
upon the imposition of an institutional (e.g., deed or
groundwater use restriction) or engineering (e.g.,
paving) control. In many cases, the landowner (i.e., the
companys landlord) must consent to the imposition of an
institutional control. We do not believe that any decision by
our landlords to withhold consent to the imposition of
institutional controls in connection with risk-based corrective
actions will have a material adverse effect on us.

Our company has experienced a few situations in
which its having transported used oil for off-site management
has resulted in liability under the Comprehensive Environmental
Response, Compensation, and Liability Act (the Superfund
statute) and its state counterparts. That statute imposes
strict, retroactive, and joint-and-several liability. Our
companys Superfund liability has not in the past had a
material adverse effect on our financial condition and our
results of operations. The Miami-Dade Airport, a company
landlord, has asserted the most substantial Superfund claim
against our company to date, albeit for releases at a location
at which the company formerly operated. We are defending against
that claim vigorously and asserting that it is covered by a
contractual indemnity.

Liability Insurance and Bonding

The nature of our business exposes us to the risk
of liabilities arising out of our operations. These potential
liabilities could involve, for example, claims of employees,
customers or third parties for personal injury or property
damage occurring in the course of our operations, and claims for
personal injury, property damage, and damage to the environment
in cases where we may be held responsible for the escape of
harmful materials. We could also be subject to fines and civil
and criminal penalties in connection with alleged violations of
regulatory requirements.

The nature of our business also exposes us to
significant risk of liability for damages arising primarily out
of accidents involving automobiles rented from our vehicle
rental fleet. Laws in some states impose vicarious liability on
automotive rental companies, which increases our risk. Subject
to the risk levels discussed below, we manage our exposure
through a combination of qualified self insurance, and risk
transfer to insurance companies which are rated as financially
sound by insurance rating agencies. We are substantially
self-insured for the majority of our incurred liability. We
carry certain excess liability coverage, but catastrophic losses
may occur which exceed the amount of our coverage limits.

We either purchase commercial insurance or act as
our own qualified self-insurer for automobile liability, general
liability, workers compensation and employers
liability claims. Historically, we retained up to $1.0 million
of risk per claim, plus claims handling expense, under our
various property, auto liability and general liability insurance
programs. In the fourth quarter of 2001, we raised this
retention up to $5.0 million in auto liability and general
liability insurance programs. We purchase excess liability
insurance to provide insurance in excess of the primary
liability insurance policies and/or retained losses subject to
certain deductibles. The level of risk we retain may change in
the future as insurance market conditions or other factors
affecting the economics of our insurance purchasing change.
Although we strive to operate safely and prudently and have,
subject to certain limitations and exclusions, certain excess
liability insurance, we may be exposed to uninsured or
underinsured losses that could have a material adverse effect on
our results of operations and financial condition.

Provisions for retained or self-insured claims
are made by charges to expense based upon periodic evaluations
of the estimated ultimate liabilities on reported and unreported
claims. We have collateral

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requirements that are set by insurance companies,
which underwrite our insurance programs. Our collateral
requirements may change from time to time, based on, among other
things, our claims experience, financial performance or credit
quality and level of retention.


Surety bonding is required in numerous aspects of
our business. Many of our airport concession agreements require
us to obtain surety bonds for the benefit of the airport.
Similarly, bonding is required in a number of other areas
including insurance and titling. Although we currently have an
agreement with a surety to issue bonds on our behalf through
2003, the loss of our ability to obtain surety bonds would have
an adverse effect on our business and financial condition.

Currently, certain of our operating subsidiaries
are self-insured in 32 states. Periodically, these states review
the self-insured status of those entities. Loss of
self-insurance status could have a material adverse effect on
us. Due to our chapter 11 filing and our current financial
condition we cannot assure you that we will be able to maintain
or renew our self-insurance status in each state.

Employees

At December 31, 2002, we employed
approximately 15,000 associates worldwide, approximately 2,200
of whom were covered by 37 collective bargaining agreements.
Currently, Alamo and National are in the process of negotiating
seven collective bargaining agreements, which have expired, and
27 agreements which will expire in 2003 and three agreements
which will expire in 2004. We have no collective bargaining
agreements outside of North America. We also employ a
substantial number of temporary and seasonal workers, and we
engage outside services, as is customary in the industry,
principally for the non-revenue movement of the rental fleet
between locations. We believe that we have good relations with
our employees.

Seasonality

Our business, and particularly the leisure travel
market, is highly seasonal. Our third quarter, which includes
the peak summer travel months, has historically been the
strongest quarter of the year. During the peak season, we
traditionally increase our rental fleet and workforce to
accommodate increased rental activity. As a result, any
occurrence that disrupts travel patterns during the summer
period could have a material adverse effect. The first and
fourth quarters for our operations are generally the weakest
because of limited leisure travel and a greater potential for
weather conditions, either adverse or unseasonable, to impact
our business. Moreover, many of our operating expenses including
rent, general insurance and administrative personnel remain
fixed throughout the year and cannot be reduced during periods
of decreased rental demand. The events of September 11,
2001 and the war with Iraq, have impacted air travel patterns,
and have directly affected our business, and the historical
norms of our industry.

Risk Factors

In addition to the other information included in
this Form 10-K, you should be aware of the following risk
factors in connection with our business and ownership of shares
of our common stock. We also caution that this Form 10-K
contains forward-looking statements. The words
believes, should be,
anticipates, plans, expects,
intends and estimates, and similar
expressions, identify these forward-looking statements. Although
we believe that our expectations reflected in these
forward-looking statements are based on reasonable assumptions,
our assumptions may not prove to be correct. Because our
assumptions and expectations are subject to risks and
uncertainties, actual results may differ materially from the
expectations expressed by these forward-looking statements.
Important factors that could cause actual results to differ
materially from our expectations regarding our financial
condition and reflected in our forward-looking statements
include the following risk factors. See Forward Looking
Statements included elsewhere in this Form 10-K.



| |                                                                               
| | ------------------------------------------------------------------------------
| | There are significant uncertainties relating
    to our bankruptcy proceeding.

Our future results are dependent upon the
successful confirmation and implementation of a plan or plans of
reorganization. We have not yet submitted such a plan or plans
to the Bankruptcy Court for approval and

12



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cannot make any assurances that we will be able
to obtain any such approval in a timely manner. When proposed,
our plan or plans of reorganization may not receive the
requisite acceptance by creditors and other parties in interest
and may not be confirmed by the Bankruptcy Court. In addition,
due to the nature of the reorganization process, actions may be
taken by creditors or other parties in interest that may have
the effect of preventing or unduly delaying confirmation of a
plan of reorganization in connection with the chapter 11 cases.
Our ability to maintain existing financing or obtain new
financing to fund our operations and our relations with our
customers and suppliers may be harmed by protracted bankruptcy
proceedings. Further, we cannot predict the ultimate amount of
our liabilities that will be subject to a plan of reorganization.


Other negative consequences that could arise as a
result of the bankruptcy proceedings include:



| |   |                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | making us more vulnerable to a continued downturn
    in our industry or a downturn in the economy in general;                                                                
|
| |  | limiting our flexibility in planning for, or
    reacting to, changes in our businesses and the industries in
    which we operate;                                           
|
| |  | the incurrence of significant costs associated
    with the reorganization;                                                                                                   
|
| |  | impacts on our relationship with suppliers and
    customers, including loss of confidence in our ability to
    fulfill contractual obligations due to financial uncertainty;
|
| |  | placing us at a competitive disadvantage compared
    to our competitors;                                                                                                     
|
| |  | limiting our ability to borrow additional funds;
    and                                                                                                                      
|
| |  | negatively impacting our ability to attract,
    retain and compensate key executives and to retain employees
    generally.                                                  

Once a plan or plans of reorganization is
finalized, approved and implemented, our operating results may
be adversely affected by the possible reluctance of prospective
lenders, customers and suppliers to do business with a company
that recently emerged from bankruptcy proceedings.



| |                                                                                                     
| | ----------------------------------------------------------------------------------------------------
| | Uncertainty with respect to treatment of our
    liabilities could negatively affect our operations.

As of the filing of the chapter 11 cases, in
general all pending litigation against us has been stayed and no
party may take any action to realize on our pre-petition claims
except pursuant to further order of the Bankruptcy Court. In
addition, we may reject pre-petition executory contracts and
unexpired lease obligations, and parties affected by these
rejections may file claims with the Bankruptcy Court. While we
anticipate substantially all liabilities as of the petition date
will be dealt with in accordance with the ultimate plan or plans
of reorganization which will be proposed and voted on in
accordance with the provisions of the Bankruptcy Code, there can
be no assurance that all the liabilities will be handled in this
manner. In addition, additional liabilities subject to the
bankruptcy proceedings may arise in the future as a result of
the rejection of executory contracts and/or unexpired leases,
and from the determination of the Bankruptcy Court (or agreement
by parties in interest) of allowed claims for contingencies and
other disputed amounts. Conversely, the assumption of executory
contracts and unexpired leases may convert liabilities shown as
subject to compromise to post-petition liabilities. Due to the
uncertain nature of many of the potential claims, we are unable
to project the magnitude of such claims with any degree of
certainty.



| |                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------
| | Our status as a debtor-in-possession under
    chapter 11 of the Bankruptcy Code raises going
    concern questions.

Our commencement of chapter 11 cases in the
Bankruptcy Court, and other factors such as our recurring
losses, raise substantial doubt as to our ability to continue as
a going-concern. The financial statements contained herein have
been prepared assuming that we will continue as a going-concern
with the realization of assets and the settlement of liabilities
and commitments in the normal course of business. However, as a
result of the bankruptcy cases and circumstances relating to
this event, including our leveraged financial structure and
losses from operations, such realization of assets and
liquidation of liabilities and the ability to complete

13



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our contracts and process them in an efficient
manner is subject to significant uncertainty. While in chapter
11, we may sell or otherwise dispose of assets (subject to
Bankruptcy Court approval), and liquidate or settle liabilities
for amounts other than those reflected in the financial
statements. Further, a plan or plans of reorganization could
materially change the amounts reported in the financial
statements.


Our ability to continue as a going-concern is
contingent upon, among other things, confirmation of a plan or
plans of reorganization, future profitable operations and the
ability to generate sufficient cash flow from operations and
financing arrangements to meet ongoing obligations. We cannot
assure you that we will achieve any of the foregoing.

We have notified all known claimants and
historical creditors that the Bankruptcy Court established a bar
date of January 14, 2003. A bar date is the date by which a
claimant, whose claim against the Debtors is either omitted from
or listed different from the amount or status described in the
schedules of liabilities filed by the Debtors with the
Bankruptcy Court, must file a claim against the Debtors if the
claimant wishes to participate in the chapter 11 case as
provided for in any Plan of Reorganization. In addition, the
Debtors have the continuing right, subject to Court approval and
other conditions, to assume or reject any pre-petition executory
contracts and unexpired leases. Parties affected by these
subsequent rejections may file claims with the Bankruptcy Court
subject to an extended bar date. Any damages resulting from
rejection of executory contracts and unexpired leases are
treated as unsecured pre-petition claims. The amounts of claims
filed by creditors could be significantly different from their
recorded amounts.



| |                                                                                   
| | ----------------------------------------------------------------------------------
| | Holders of our common stock and debt may lose
    all or part of their investment.

You may lose all or part of your investment in
our common stock. The Bankruptcy Code requires that all debts be
settled before stockholders can receive any recovery in our
restructuring unless otherwise agreed by the class of unsecured
creditors. We cannot assure you that our restructuring will
ultimately result in any value for our stockholders. In the
event of a liquidation, we believe that our equity would have no
value. Furthermore, we cannot predict the value of any recovery
to the holders of our debt. The holders of our unsecured debt
will likely receive less than the holders of our secured debt.
All of our assets and the assets of a majority of our
subsidiaries are pledged to secure our debt obligations under
various secured debt facilities. Under applicable law,
collateral for secured claims must be used first to satisfy
secured claims.



| |                                               
| | ----------------------------------------------
| | We have significant working capital
    needs.

Currently, our working capital needs are being
satisfied by cash accumulated during our bankruptcy. We have the
ability to use cash collateral by order of the Bankruptcy Court
through July 19, 2003. Our ability to continue to use this
cash collateral is contingent on our meeting certain criteria.
Failure to meet these criteria will have a material adverse
effect on our financial condition. In order to meet our peak
financing needs in 2003, we may need to refinance existing fleet
debt, potentially obtain additional debtor-in-possession
financing or increase the capacity of our working capital
facilities or replace such facilities. Recent and continued
operating losses, our bankruptcy, the credit quality of our
debt, our status as a debtor-in-possession under chapter 11 and
capital market conditions may adversely affect our ability to
refinance our debt or obtain additional financing. As a result,
we cannot assure you that we will be able to refinance our
existing debt or increase the capacity of our working capital
funds. In addition, no assurances can be given that our existing
sources of liquidity will be adequate to fund our liquidity
needs throughout the reorganization process or, if additional
sources of liquidity become necessary during the reorganization
process, that they would be available to us or adequate. Any
liquidity shortages during the reorganization process would
likely have a material adverse effect on our business and
financial condition as well as on our ability to successfully
restructure and emerge from bankruptcy.



| |                                                       
| | ------------------------------------------------------
| | We have substantial debt and are highly
    leveraged.

We have a substantial amount of debt outstanding
(some of which is subject to compromise), which could adversely
affect our financial health. Our vehicle fleet is primarily
acquired through the issuance of vehicle secured debt, and we
rely heavily on our ability to obtain debt financing to operate
our business. You

14



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should read the Financial Condition
section of Managements Discussion and Analysis of
Financial Condition and Results of Operations for a
description of our debt and capital structure. As of
December 31, 2002, we had approximately $3.5 billion of
debt outstanding, including approximately $3.25 billion of
vehicle debt and $250.7 million of non-vehicle debt. The
Debtors filing for chapter 11 represented an Event of
Default under each of our financing facilities. Under bankruptcy
law, the Debtors are not permitted to make scheduled principal
and interest payments with respect to pre-petition debt unless
specifically ordered by the Court.


Depending on the resolution of our bankruptcy
proceedings, we could emerge from bankruptcy highly leveraged
with substantial debt service obligations. This leveraged
position could have important consequences for you. For example,
our leverage could:



| |   |                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | limit our ability to obtain additional financing,
    if needed, for working capital, capital expenditures,
    acquisitions, debt service requirements or other purposes;                                          
|
| |  | increase our vulnerability to adverse economic
    and industry conditions;                                                                                                                                         
|
| |  | require us to dedicate a substantial portion of
    our cash flow from operations to payments on our debt, thereby
    reducing funds available for operations, future business
    opportunities or other purposes;
|
| |  | limit our flexibility in planning for, or
    reacting to, changes in our business and the industry in which
    we compete; and                                                                                    
|
| |  | place us at a competitive disadvantage compared
    to our competitors that have less debt.                                                                                                                         

We have liens on all of our revenue-earning and
non-revenue-earning assets. The presence of these liens will
limit our ability to raise additional incremental senior secured
financing in the future.



| |                                                                            
| | ---------------------------------------------------------------------------
| | We are subject to material restrictions on the
    conduct of our business.

We are operating most of our business as
debtors-in-possession pursuant to the Bankruptcy Code. Under
applicable bankruptcy law, during the pendency of the
chapter 11 cases, we will be required to obtain the
approval of the Bankruptcy Court prior to engaging in any
transaction outside the ordinary course of business. In
connection with any such approval, creditors and other parties
in interest may raise objections to such approval and may appear
and be heard at any hearing with respect to any such approval.
Accordingly, although we may sell assets and settle liabilities,
including for amounts other than those reflected on our
financial statements, with the approval of the Bankruptcy Court,
there can be no assurance that the Court will approve any sales
or settlements that we propose. The Bankruptcy Court also has
authority to oversee and exert control over our ordinary course
operations.

In addition, we have entered into a
debtor-in-possession financing agreement, which contains
material restrictions on our operations. These restrictions
limit our ability to, among other things, incur certain debt,
create certain liens, pay dividends, make certain investments,
sell certain assets, pledge assets, enter into a change in
control transaction, or enter into affiliate transactions. Such
restrictions may limit our ability to respond to changing
business conditions and may prevent us from engaging in
transactions which we might otherwise consider beneficial.



| |                                                                      
| | ---------------------------------------------------------------------
| | We have experienced losses, which may continue
    in future periods.

We have experienced net losses of $534.1 million
for the year ended December 31, 2002 and $606.7 million for
the year ended December 31, 2001. In addition, for the
first quarter of 2003, we anticipate that our net loss will
approximate $92.7 million. We can not assure you that we will be
able to generate net income in the future. Continued losses, and
the resulting impact on operating cash flow, will adversely
affect our financial condition, and our ability to obtain
financing.

15



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| |                                          
| | -----------------------------------------
| | We primarily use one surety
    provider.

In the normal course of business we are required
to post performance and surety bonds as financial guarantees of
our performance with airports, self-regulatory authorities and
insurance companies. Substantially all of our surety bonding is
provided by one surety. Because of our financial performance and
a difficult surety market we have provided to our surety a
security interest in certain of our assets and cash collateral.
We currently have an agreement with our surety to issue bonds on
our behalf through 2003. However, substantially all of our
surety bonds expire in 2003 and there is no assurance that our
surety provider will provide us with adequate surety bonding
coverage for the remainder of 2003 or beyond. The loss of our
ability to obtain surety bonds would have an adverse effect on
our business and financial condition.



| |                                                       
| | ------------------------------------------------------
| | We are self-insured in certain domestic
    locations.

Certain of our domestic operating subsidiaries
are self-insured for property, auto liability and general
liability. In 2001, we raised the risk we retain for auto and
general liability from up to $1.0 million to up to $5.0 million.
There is no guarantee we will be able to renew or continue
property liability insurance at current deductible levels.
Additionally, state insurance regulatory authorities, on a
periodic basis, review our self-insurance status, which includes
but is not limited to, a review of our financial condition. Due
to our chapter 11 filing and our financial condition we cannot
assure you that we will be able to maintain or renew our
self-insurance status and as such, we may be required to obtain
third party insurance at higher costs or we may be precluded
from operating in certain locations.



| |                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------
| | Competition in the automotive rental industry
    has and may continue to impact our prices and/or market
    share.

We operate in a highly competitive industry. We
believe that price is one of the primary competitive factors in
the automotive rental industry, particularly in the leisure
market. From time to time, we or our competitors, some of which
have access to substantial capital, may attempt to compete
aggressively by lowering rental prices. To the extent that we
lower prices to attempt to enhance or retain market share, we
may adversely impact our operating margins. Conversely, if we
opt not to match competitors price reductions we may lose
market share, resulting in decreased volume and revenue.



| |                          
| | -------------------------
| | Our business is seasonal.

Our business, and particularly the leisure travel
market, is highly seasonal. Our third quarter, which includes
the peak summer travel months, has historically been the
strongest quarter of the year. During the peak season, we
traditionally increase our rental fleet and workforce to
accommodate increased rental activity. As a result, any
occurrence that disrupts travel patterns during the summer
period could have a material adverse effect. The first and
fourth quarters for our operations are generally the weakest
because there is limited leisure travel and a greater potential
for weather conditions, either adverse or unseasonable, to
impact our business. Moreover, many of our operating expenses
including rent, general insurance and administrative personnel,
remain fixed throughout the year and cannot be reduced during
periods of decreased rental demand. The events of
September 11, 2001 and the war with Iraq, have impacted air
travel patterns, and have directly affected our business and the
historical norms of our industry. As a result, we cannot assure
you that we will have the ability to conduct our operations
efficiently or profitably at all times during a year.



| |                                                                      
| | ---------------------------------------------------------------------
| | A decrease in air travel would significantly
    impact our business.

Our Alamo and National on-airport and
near-airport locations generate substantially all of our total
revenue and as such are highly dependent on air travel. Events
such as, the war with Iraq, the outbreak of SARS and the
terrorist acts of September 11, 2001 have resulted in a
downturn in air travel both domestically and internationally. A
sustained material decrease in airline passenger traffic would
significantly reduce our customer volume and significantly
impact our business. Other events that could reduce airline
passenger traffic include a general economic downturn, labor
unrest, airline bankruptcies and consolidations, substantially

16



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##### 



higher air fares, adverse weather conditions, the
outbreak of war, high-profile crimes against tourists and
further incidents of terrorism.




| |                                                                              
| | -----------------------------------------------------------------------------
| | Increases in fuel costs or reduced fuel
    supplies could harm our business.

We could be adversely affected by significant
increases in fuel prices, limitations on fuel supplies and the
imposition of mandatory allocations or rationing of fuel. In
particular, increased fuel costs could result in increased
airline ticket prices to consumers, which could have an adverse
effect on business and leisure travel and tourism, resulting in
a significant decrease in customer volume for our businesses.
Political and military events involving or affecting the Middle
East such as the war in Iraq, could have a significant impact,
temporary or permanent, on fuel costs and availability.



| |                                                                           
| | --------------------------------------------------------------------------
| | Changes in manufacturers repurchase
    programs may affect our business.

During the year ended December 2002, we operated
a combined fleet of approximately 214,000 owned and leased
vehicles. For the 2002 model year, approximately 96% of vehicle
acquisitions were covered by vehicle manufacturer repurchase
programs or operating leases and not subject to residual value
risk. Under these manufacturers repurchase programs, we
agree to purchase a minimum number of vehicles directly from
franchised dealers of the manufacturer at a specified price. The
manufacturer, in turn, agrees to buy those vehicles back from us
at a future date at a price that is based upon the capitalized
cost of the vehicles less an agreed upon depreciation factor
and, in certain cases, an adjustment for damage and/or excess
mileage. Repurchase programs limit our risk of a decline in the
residual value of our fleet and enable us to fix our
depreciation expense in advance. Vehicle depreciation is the
largest component of our cost of operations. We could have
difficulty managing costs relating to the acquisition and
disposition of our vehicles if manufacturers reduce the
availability of repurchase programs or related incentives, or
reduce the number of vehicles available to vehicle rental
companies through repurchase programs.

We currently obtain a substantial portion of our
financing in reliance on repurchase programs. A significant
adverse change in our financial condition or our relationship
with investment grade vehicle manufacturers would make obtaining
needed vehicle-secured debt financing on favorable terms
significantly more difficult.

In addition, the timing of the receipt or
disposition of vehicles from automobile manufacturers can
significantly impact our business and results of operations. We
incur greater expense when we receive vehicles too early from
manufacturers or when manufacturers are unable to receive
returned vehicles on a timely basis. Separately, we incur
greater expense when we undertake steps to reduce our fleet size
as a result of weak market volumes. The nature of the costs
incurred during a fleet reduction primarily include, but are not
limited to, accelerated depreciation charges and turn-in charges
imposed under the terms of our manufacturer repurchase
agreements for vehicles returned ahead of schedule.



| |                                                                                 
| | --------------------------------------------------------------------------------
| | Some of our rental fleet is subject to
    residual value risk upon disposition.

As of December 31, 2002, we were subject to
residual value risk on approximately 13% of our fleet, which
were not covered by manufacturers or other repurchase
programs. Residual value risk is the risk that a vehicles
market value at the time it is sold will be less than its
depreciated value. The residual value of non-program vehicles
depends on factors including the general level of pricing in the
automotive industry for both new and used vehicles. Prices for
used vehicles generally decrease if the automotive manufacturers
increase the retail sales incentives they offer on new vehicles.
Because it is difficult to predict the impact or timing of
future manufacturer incentive programs, used vehicle demand and
other factors that influence used vehicle resale values, we may
not be able to manage effectively the residual value risk on our
non-program vehicles which would increase our costs associated
with using non-program vehicles in our rental fleet.



| |                                           
| | ------------------------------------------
| | Cost of our rental fleet may
    increase.

During the last few years, the average price of
new cars has increased. In December 2002, we entered into a new
agreement with General Motors under which the average price of
new cars increased. The effect on us

17



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##### 



of these price increases has been softened by
periodic manufacturers sales incentive programs that tend
to lower the average cost of vehicles. We anticipate that new
vehicle prices will continue to increase, but we cannot assure
you that the manufacturers sales incentive programs will
remain available to keep our costs down, nor can we assure you
that we will be able to control our rental fleet costs or
selection, or to pass on any increases in vehicle cost to our
customers. The cost of our rental fleet is also impacted by the
relative mix of short-term vehicles, vehicles held up to six
months, versus the mix of long-term vehicles, vehicles held up
to twelve months. Additionally, our costs are impacted by the
relative mix of models and manufacturers.




| |                                                                                
| | -------------------------------------------------------------------------------
| | We depend on General Motors as our principal
    vehicle rental fleet supplier.

General Motors, through its franchised dealers,
is our principal supplier of rental fleet vehicles. The number
of vehicles we purchase varies from year to year. In model year
2002, we purchased approximately 61% of our aggregate domestic
rental fleet from General Motors. In model year 2003, we may
purchase a lesser amount of our domestic rental fleet from
General Motors. Shifting significant portions of our fleet
purchases to other manufacturers would require significant
lead-time. Separately, General Motorss inability to supply
us with the planned number and type of vehicles in a timely
manner could result in our fleet being inadequate in size or in
the types of vehicles available to us to meet customers
demands, thereby resulting in a loss of revenue. In addition, if
General Motors is not able to offer competitive terms and
conditions and we are not able to purchase sufficient quantities
of vehicles from other automobile manufacturers on competitive
terms and conditions, then we may be forced to purchase vehicles
at higher prices or on otherwise less favorable terms. Such a
situation could adversely affect us through increased vehicle
acquisition and depreciation costs that we are not able to
offset sufficiently through rental rate increases passed through
to our customers.



| |                                                            
| | -----------------------------------------------------------
| | We rely on asset-backed financing to purchase
    vehicles.

We have relied and will continue to rely on
asset-backed financing to purchase vehicles. As of
December 31, 2002, we had outstanding approximately $3.25
billion of asset-backed indebtedness relative to our fleet. If
our access to asset-backed financing were reduced, we cannot be
sure that we would be able to obtain replacement financing on
favorable terms. As a result, any disruption in the market for
asset-backed securities or in our ability to access that market
could adversely affect our liquidity and our ability to purchase
vehicles for our fleet. Our chapter 11 filing has made it more
difficult and costly to access this market and there can be no
assurance we will be able to obtain the necessary financing to
purchase vehicles. You should also read the Financial
Condition section under Managements Discussion
and Analysis of Financial Condition and Results of
Operations for a description of our asset-backed financing
programs.



| |                                                                  
| | -----------------------------------------------------------------
| | An increase in interest rates could reduce our
    profitability.

A majority of our debt accrues interest at
floating interest rates. We use interest rate caps to manage the
impact of interest rate changes on our variable rate debt.
Although fixed or capped interest rate debt was 100% of our
total debt outstanding as of December 31, 2002, a
substantial increase in interest rates, up to the strike price
of our caps, would significantly increase our cost of
indebtedness.



| |                                                             
| | ------------------------------------------------------------
| | Problems may arise from the consolidation of
    our brands.

As we renew airport concession agreements,
airport agencies may prohibit dual branding at some consolidated
facilities. Should a significant number of these airport
agencies prohibit dual branding, our ability to execute this
strategy will be adversely affected. Additionally certain
airport authorities have filed legal challenges with the U.S.
Bankruptcy Court, arguing that we should not be able to maintain
concession agreements under which we operate both of our brands,
under a single concession agreement. To date, however, the U.S.
Bankruptcy Court has rejected their arguments. A critical
component of our restructuring plan is to achieve cost savings
by consolidating airport operations. Should the appellate courts
agree with the objectors position it could affect our
ability to consolidate these airports.

18



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| |                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------
| | We may have clean-up costs and liabilities
    relating to storage and handling of petroleum and other
    materials.

Our domestic and international service facilities
use tanks to store petroleum products such as gasoline, diesel
fuel, motor oil and waste oil and also handle other materials
that may under certain circumstances harm human health or the
environment. At many of these locations, one or more tanks
containing such materials are located underground. We cannot
assure you that these tanks or related systems or other
materials will not result in soil or groundwater contamination.
In addition, historical operations, including activities
relating to automobile and bus maintenance, at some of our
currently and formerly owned or operated properties, have
resulted in releases into soil or groundwater. Any such
contamination, release or spill, depending on factors such as
the material involved, quantity and environmental setting, and
impacts on third parties, could result in significant
remediation expenditures, claims, liabilities, and interruptions
to our operations.



| |                                                                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our former Parent has engaged in certain
    transactions that are under review by the IRS and may have a
    materially adverse effect on our financial condition, results of
    operations and cash flows.

During the time we were part of our former
Parents consolidated Federal Income Tax Return our former
Parent engaged in certain transactions that are of a type that
the Internal Revenue Service has indicated it intends to
challenge. Generally, the transactions relate to accelerations
of certain future projected tax deductions. Based upon
disclosures from AutoNation a settlement has been reached with
the Internal Revenue Service however, until and unless paid by
AutoNation, we may still have several liability with AutoNation
to the Internal Revenue Service for all transactions, that
occurred while we were part of AutoNations consolidated
Federal tax returns. We have included below an excerpt from
AutoNations periodic report on Form 10-Q as of
March 31, 2003 regarding these transactions:



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In March 2003, the Company (AutoNation)
    entered into a settlement agreement with the Internal Revenue
    Service (IRS) with respect to the tax treatment of
    certain transactions entered into by the Company (AutoNation) in
    1997 and 1999, including a transaction that generally had the
    effect of accelerating projected tax deductions relating to
    health and welfare benefits. Under the agreement, the Company
    (AutoNation) owes the IRS net aggregate payments of
    approximately $470 million. An initial net payment of
    approximately $350 million is due in March 2004, and three
    subsequent payments of approximately $40 million each are due in
    March 2005, 2006 and 2007, respectively.

With respect to this risk, we have reached an
agreement with our former Parent and the Unsecured
Creditors Committee that resolves potential claims
relating to our bankruptcy, including potential claims arising
out of the spin-off from AutoNation in 2000. The agreement is
subject to bankruptcy court approval, which the parties will
seek to obtain in early May.

The key terms of the settlement include the
following: (i) our former Parent will continue to guarantee
certain surety bonds issued by the Company until December 2006.
Our former Parents obligations under this guarantee are
capped at $29.5 million; (ii) in addition, upon our
successful exit from bankruptcy, our former Parent will
guarantee an additional $10.5 million of our surety bonds until
December 2006 and, upon a permanent reduction of the guarantees,
our former Parent will pay one-half of the permanent reduction,
or up to $20 million, to a trust established for the benefit of
our unsecured creditors; (iii) we and the unsecured
creditors will provide a full release of any potential claims
against our former Parent arising from the spin-off and our
former Parent will release most of the pre-petition claims that
it has asserted in the bankruptcy; (iv) our former Parent
will indemnify us for any adjustments made by the IRS to the
consolidated Federal Income Tax Return for the periods we were
part of such returns.



| |                                                             
| | ------------------------------------------------------------
| | The market for our common stock is currently
    not liquid.

Our common stock was delisted from NASDAQ in
November 2001. As a result, a liquid public market for our
common stock does not exist, which may make it difficult for you
to sell our common stock. Our common stock is traded on the NASD
OTC Bulletin Board Market. There may be very limited demand for
our common stock.

19



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| |                                                                                                            
| | -----------------------------------------------------------------------------------------------------------
| | Certain of our financial statements are
    unaudited and we are precluded from registering
    securities.

As previously discussed during the fourth quarter
of 2002, management approved and announced a plan to close and
abandon our Alamo Local Market Division. We substantially
completed our plan of abandonment in the fourth quarter of 2002.
The plan included provisions for employee terminations, closure
of locations and disposals or transfers of our fleet to our
other operations. Pursuant to the provisions of Statement of
Financial Accounting Standards No. 144, Accounting
for the Impairment or Disposal of Long-Lived Assets
(SFAS 144), the net assets and operating results of
our Alamo Local Market Division have been classified as a
discontinued operation causing restatement of all prior periods
presented in our annual report on Form 10-K for the fiscal
year ended December 31, 2002. Previously our financial
statements were audited by Arthur Andersen LLP however, in July
2002 we terminated Arthur Andersen LLP and engaged Ernst &
Young LLP as our independent certified public accountants.

Pursuant to the provisions of Statements on
Auditing Standards Section 9508, Reports on Audited
Financial Statements: Auditing Interpretations of
Section 508 paragraph .70, which, sets forth the
guidance for requiring re-audits, Ernst & Young LLP,
have determined that due to the discontinuance of the Alamo
Local Market Division they would need to re-audit the prior two
years of financial statements presented in our 2002 annual
report on Form 10-K. We believe that the cost and time to
re-audit our historical periods will provide financial statement
users with little to no valuable information. Currently the
administrative burden relative to preparing the re-audit is not
in the interest of our current or future security holders or
creditors, because such a re-audit would divert our limited
financial and human capital resources from working towards our
emergence from bankruptcy. As such, our restated results of
operations and financial condition as of and for each of the two
years ended December 31, 2001 and 2000 are presented herein
as unaudited. In the opinion of management, the Consolidated
Financial Statements contain all material adjustments, necessary
to fairly re-state the financial position, the results of
operations and cash flows as of and for each of the two years
ended December 31, 2001 and 2000 along with the related
disclosures herein and are adequate to make the information
presented not misleading.

However, you should realize that presentation of
unaudited financial statements in our annual report on
Form 10-K does not comply with Securities and Exchange Act
Regulations, and until we file audited financial statements for
three years as required under Regulation S-X the Securities
and Exchange Commission will neither declare effective any
registration statements or post-effective amendments, nor
consider compliant any proxy or other filing that requires our
financial statements. In addition, we are precluded from making
offerings under effective registration statements or
Regulation D until we file the required audited financial
statements.

Item 2.     Properties

Our combined rental businesses, both owned and
franchised, conduct operations at more than 3,200 locations
throughout the world, of which approximately 900 are located
within North America and approximately 2,300 are located outside
North America. These locations include rental and sales offices
and rental and service facilities located on or near airports
and in central business districts in major U.S. cities and
suburban areas. We lease most of these premises.

Our facilities serving airport locations are
located on airport property or near the airport in locations
convenient for bus transport of customers to the airport. We
lease many of these airport locations from governmental
authorities charged with the operation of the airports under
arrangements generally providing for either the payment of a
fixed rent or the payment of rent based on a percentage of
revenue at a location with a guaranteed annual minimum payment.
Most of our other facility leases provide for fixed rental
payments. Each of the airport facilities in the metropolitan
areas we serve includes, in addition to concession space,
vehicle storage and maintenance areas, as well as rental and
return facilities. Typical airport facility leases may not
necessarily have the same duration as our local airport
concession agreement. Most of our airport facility leases expire
at varying times over the next ten years. Some of these
off-airport leases include purchase options at the end of their
terms. Some airport concession agreements require us to obtain
surety

20



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##### 



bonds for the benefit of the airport. Any failure
to obtain or maintain these bonds would constitute a default
under the concession agreements and could result in our loss of
position at such airport.


We lease reservation centers in Charleston, South
Carolina, Boca Raton, Florida and Salt Lake City, Utah, and
office facilities in Fort Lauderdale, Florida and Boca Raton,
Florida. We believe that our facilities are sufficient for our
needs.

Item 3.     Legal
Proceedings

On November 13, 2001, ANC Rental Corporation
and the other Debtors filed voluntary petitions under chapter 11
of title 11, United States Code, in the United States Bankruptcy
Court for the District of Delaware (Case No. 01-11200 et al.,
Jointly Administered). The Debtors remain in possession of their
assets and properties, and continue to operate their businesses
and manage their properties as debtors-in-possession pursuant to
the Bankruptcy Code. As a result of the bankruptcy filing, any
claims involving Debtors that arose during periods prior to
November 13, 2001 are considered pre-petition claims and
ultimately will give rise to plaintiffs status as
unsecured creditors in the event plaintiffs are successful in
establishing liability. Currently, much of the pre-petition
litigation brought by private parties in which Debtors are
defendants has been stayed due to the automatic stay provisions
of the Bankruptcy Code.

We are currently a defendant in two purported
class actions that have been brought in two states in which the
plaintiffs seek unspecified damages and injunctive relief
arising out of our allegedly improper sale of optional insurance
products in connection with vehicle rentals. A common feature of
the two actions is a claim that applicable insurance laws were
violated in the sale of the optional insurance products
(Liability Insurance Supplement and Personal Accident
Insurance/Personal Effects Coverage) because our counter sales
representatives were not licensed insurance salespersons.
Details of those actions appear below. A final order of
dismissal in the Alabama Case was appealed to the Eleventh
Circuit. The appeal as to National was stayed pursuant to the
automatic stay provision of the bankruptcy code. The remaining
case, pending in Illinois, has also been stayed pursuant to the
automatic stay provision of the Bankruptcy Code. Other similar
actions in Alabama and Wisconsin have been concluded and/or
dismissed with no finding of liability to our company.

In October 1997, Shannon Leonard, Theresa Moore
and Coley Whetstone, Jr. v. National Car Rental Systems,
Inc. and certain other car rental companies was commenced in
Circuit Court of Coosa County, Alabama. We 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). 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. We 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. In January 2002, the Eleventh Circuit remanded the case
to the U.S. District Court (M.D. Ala.) with instructions to
remand it to state court, but stayed the appeal as to National.

In April 1998, Angela Godfrey, individually and
on behalf of all others similarly situated v. Alamo Rent-A-Car,
Inc. and a company that issued the subject insurance policy was
commenced in the Circuit Court of Cook County, Illinois. The
case purports to be a class action on behalf of all persons in
Illinois who rented from Alamo and who purchased optional
insurance products. We removed the action to the United States
District Court for the Northern District of Illinois. In
September 1999, the case was remanded to the Circuit Court of
Cook County, Illinois following the granting of plaintiffs
motion to remand. Alamos motion to dismiss the amended
complaint has been filed but the action has been stayed pursuant
to the automatic stay provision of the Bankruptcy Code.

In March 2000, National Car Rental System, Inc.
and another car rental company were sued in a class action in a
California state court under Californias Private Attorney
General statute. The suit contends that the vehicle refueling
provisions in Nationals rental agreement that set forth
the renters fuel options are materially misleading. In a
similar case brought against another rental car company in 1998,
the California

21



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##### 



Court of Appeals, First Appellate District in
March 2000 sustained in part and reversed in part the trial
courts entry of judgment in favor of that rental car
company and ordered the matter remanded with respect to the
plaintiffs challenge of the manner in which that company
discloses and explains its fuel service charge, but upheld the
trial courts ruling that such refueling charges were
permissible under California law if properly disclosed. The case
has been stayed pursuant to the automatic stay provision of the
Bankruptcy Code.


In November 2000, National Car Rental System,
Inc. and Alamo Rent-A-Car along with all of the major car rental
companies were sued in California state court in a class action
lawsuit. The Plaintiffs allege that the rental car companies
failed to adequately display a disclaimer relating to the sale
of collision damage waiver (CDW) as required by statute.
The lawsuit further contends that rental car companies have not
given adequate oral disclosures at time of rental also as set
forth by statute. National and Alamo have filed demurrers
requesting the matter be dismissed on the ground that the
statutes do not provide a private right of action. The case has
been settled and is awaiting the process of approving the class
settlement.

During the acquisition of certain assets from
Tilden Car Rental in 1996, National Car Rental (Canada) (a
non-debtor entity) was assigned the remaining years on a 99-year
net lease for a parking garage in downtown Montreal. In 2001 the
landlord moved in Quebec Court to terminate the lease and seeks
National Car Rental (Canada) and the former Tilden group to pay
for the repairs. National Canada is contesting the eviction and
its responsibility to pay for structural repairs that the
landlord failed to properly disclose. Repairs are estimated
between Cnd$2 million and Cnd$5 million. This case is not stayed
by the bankruptcy filing and is currently proceeding.

In April 2001, National Car Rental Systems, Inc.
and its principal auto auction vendor in California were sued in
a class action lawsuit in the Superior Court of California. The
case purports to be a class action on behalf of all persons who
are alleged to have bought National vehicles at auction, on
clean titles, which the plaintiffs contend should have been
designated salvage under California law. The case has been
stayed pursuant to the automatic stay provision of the
Bankruptcy Code.

The Department of Justice (DOJ) has
commenced an investigation concerning compliance by National Car
Rental and Alamo Rent-A-Car with certain provisions of the
Americans With Disabilities Act. The investigation contends that
at certain airports National and Alamo maintain an inadequate
number of 16 person vehicles that are equipped with wheel chair
lifts. This investigation is not stayed by the bankruptcy filing.

Thirty-seven former and current Somali employees
filed a suit in May 2001 in the District Court of Minnesota
against ANC Rental Corporation, Alamo Rent-A-Car, LLC, and
National Car Rental, Inc. The lawsuit involves employment
practices at Alamo and Nationals rental facilities at the
Minneapolis airport. The allegations involve discrimination
based on race, color, national origin, and religion. They also
allege violations of the Fair Labor Standards Act. The case has
been stayed pursuant to the automatic stay provision of the
Bankruptcy Code.

United Services Automobile Association
(USAA) and USAA Alliance Services LP brought a claim
against National Car Rental System, Inc. in 2000 for alleged
trademark infringement and unauthorized use of the USAA mark,
unfair competition, breach of contract and an accounting of
profits. Plaintiffs claims arise out of Nationals
practice of offering a courtesy discount to USAA members, when
contacted by them, following termination of a previously
existing marketing agreement between National and USAA. The case
has been settled subject to Bankruptcy Court approval.

We believe we have meritorious defenses in the
foregoing actions and will defend ourselves vigorously.

In addition to the matters described above, we
are a party to various legal proceedings which have arisen in
the ordinary course of our business. While we cannot predict the
results of any of these matters with certainty, we believe that
losses, if any, resulting from the ultimate resolution of these
matters will not have a material adverse effect on our results
of operations or financial condition. However, an unfavorable
resolution of any matter individually or any number of matters
in the aggregate could materially adversely affect our results
of operations or cash flows for the quarterly periods in which
they are resolved.

22



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##### 



In addition, as discussed in the section titled
Automotive Regulations, Alamo and a number of our competitors
are subject to a consent decree with the Federal Trade
Commission that requires certain disclosures to customers at
each stage of the rental transaction.

Item 4.     Submission
of Matters to a Vote of Security Holders

No matters were submitted to a vote of
stockholders of the Company during the fourth quarter of the
fiscal year ended December 31, 2002.

23



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##### 



PART II



|        |                                                                              
|------- | -----------------------------------------------------------------------------
|Item 5. | Market for the Registrants Common
    Equity and Related Stockholder Matters

From July 3, 2000 to November 26, 2001,
our common stock was traded on the Nasdaq National Market System
under the symbol ANCX. Effective November 26,
2001 we were delisted for failure to meet minimum listing
requirements and began trading on the NASD OTC Bulletin Board
under the symbol ANCXQ. The following table sets forth, for the
periods indicated, the high and low closing prices per share of
the common stock as reported by Nasdaq (through
November 26, 2001) or the NASD OTC Bulletin Board.

|               |  |      |      |     |  |   |      | 
|-------------- |  | ---- | ---- | --- |  | - | ---- | 
|2002           |  | High |      | Low
|               |  |      |      |    
|First Quarter  |  | $    | 0.35 |     |  | $ | 0.04 | 
|Second Quarter |  | $    | 0.65 |     |  | $ | 0.18 | 
|Third Quarter  |  | $    | 0.25 |     |  | $ | 0.10 | 
|Fourth Quarter |  | $    | 0.16 |     |  | $ | 0.02 | 

|               |  |      |      |     |  |   |      | 
|-------------- |  | ---- | ---- | --- |  | - | ---- | 
|2001           |  | High |      | Low
|               |  |      |      |    
|First Quarter  |  | $    | 7.00 |     |  | $ | 2.00 | 
|Second Quarter |  | $    | 5.35 |     |  | $ | 2.71 | 
|Third Quarter  |  | $    | 4.26 |     |  | $ | 0.52 | 
|Fourth Quarter |  | $    | 1.10 |     |  | $ | 0.03 | 

On April 21, 2003, the closing price of our
common stock was $0.04 per share as reported by the NASD OTC
Bulletin Board. On April 21, 2003, we believe there were up
to approximately 45,500 stockholders.

We have not declared or paid any cash dividends
on our common stock since our spin-off from AutoNation on
June 30, 2000. We currently do not anticipate paying cash
dividends in the foreseeable future. In addition, our ability to
pay dividends is limited by restrictions placed upon the debtor
companies of ANC by its chapter 11 bankruptcy filing on
November 13, 2001. Also, ANCs debtor-in-possession
financing agreement prohibits ANC from paying dividends.

In 2001 we issued warrants to purchase
approximately 3.7 million shares of our common stock to the
lender under our interim credit facility. The warrants have a
term of ten years and an exercise price of $0.01 per share.
Later in 2001 we issued additional warrants to purchase
approximately 1.4 million shares of our common stock to the same
lender. These warrants also have a term of ten years and an
exercise price of $0.01 per share. These warrants were issued in
accordance with the registration exemption provided by
Section 4(2) under the Securities Act.



|         |                        
|-------- | -----------------------
|Item  6. | Selected Financial Data

The following table presents selected
consolidated statement of operations and balance sheet data of
our company for the periods and the dates indicated, in each
case as restated for the discontinued operations of our Alamo
Local Market Division which was abandoned and closed in the
fourth quarter of 2002.

We derived the selected operations statement data
for 2002, 2001 (unaudited), and 2000 (unaudited), and the
selected balance sheet data as of December 31, 2002 and
2001 (unaudited) presented below, from our Consolidated
Financial Statements included elsewhere in this Form 10-K.
We derived our selected unaudited statement of operations data
for 1999 and 1998 and the selected unaudited balance sheet data
as of December 31, 2000, 1999, and 1998, from our
consolidated financial statements for those periods, not
included herein. Our financial statements as of and for the year
ended December 31, 2002 are audited. The other financial
statements included herein are not audited but in our opinion
reflect all adjustments, necessary to fairly restate the
presentation of this data.

You should read the selected consolidated
financial data below in conjunction with our Consolidated
Financial Statements and notes thereto as of December 31,
2002 and 2001, and for each of the three years in the period
ended December 31, 2002, and our Managements
Discussion and Analysis of Financial Condition and Results of
Operations, included elsewhere in this Form 10-K.

24



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##### 



During the fourth quarter of 2002, management
approved and announced a plan to close and abandon our Alamo
Local Market Division. The Company substantially completed its
plan of abandonment in the fourth quarter of 2002. The plan
included provisions for employee terminations, closure of
locations, and disposals or transfers of our fleet to our other
operations. Pursuant to the provisions of SFAS 144, the net
assets and operating results of our Alamo Local Market Division
are classified as discontinued operations.

All historical share and per share data included
in the Consolidated Statements of Operations and Comprehensive
Income has been retroactively adjusted for the recapitalization
of the former Parents 100 shares of common stock into
45,142,728 shares of Common Stock on June 30, 2000 as more
fully described in the Notes to Consolidated Financial
Statements.

Basic earnings per share is calculated based on
the weighted average shares of common stock outstanding during
each applicable period. Diluted earnings per share is calculated
based on the weighted average shares of common stock
outstanding, plus the dilutive effect of common stock purchase
warrants and stock options, calculated using the if converted
and the treasury stock method, respectively. Due to the net loss
for the year ended December 31, 2002 and 2001, the stock
options and common stock purchase warrants were not dilutive.
Due to the net loss for the year ended December 31, 2000,
the stock options were not dilutive; there were no common stock
purchase warrants outstanding. For each of the two years in the
period ended December 31, 1999, there was no dilutive
effect from stock options or common stock purchase warrants, as
there were none outstanding.

Statement of operations and balance sheet data,
as restated, is as follows for the periods presented, in
millions (except per share amounts):

|                                                                                                                                        |                   |                                  |         |             |   |      |         |        |   |      |         |       |   |   |         |       |   |   |         |      | 
|--------------------------------------------------------------------------------------------------------------------------------------- | ----------------- | -------------------------------- | ------- | ----------- | - | ---- | ------- | ------ | - | ---- | ------- | ----- | - | - | ------- | ----- | - | - | ------- | ---- | 
|                                                                                                                                        |                   |                                 
|                                                                                                                                        |                   | For the Years Ended December 31,
|                                                                                                                                        |                   |                                 
|                                                                                                                                        |                   | 2002                             |         | 2001        |   | 2000 |         | 1999   |   | 1998
|                                                                                                                                        |                   |                                  |         |             |   |      |         |        |   |     
|                                                                                                                                        |                   |                                  |         |            
|                                                                                                                                        |                   | (Audited)                        |         | (Unaudited)
|Statement of Operations Data:                                                                                                           |                   |                                  |         |             |   |      |         |        |   |      |         |       |   |   |         |       |   |   |         |     
|Revenue                                                                                                                                 |                   | $                                | 2,393.8 |             |   | $    | 2,896.7 |        |   | $    | 3,250.5 |       |   | $ | 3,253.3 |       |   | $ | 3,221.9 |     
|Net income (loss) from continuing operations
    before cumulative effect of change in accounting principle and
    extraordinary items |                   |                                  | (335.8  | )           |   |      | (581.5  | )      |   |      | (1.0    | )     |   |   | (66.9   | )     |   |   | 97.7    |     
|Net income (loss)                                                                                                                       |                   |                                  | (534.1  | )           |   |      | (606.7  | )      |   |      | (2.0    | )     |   |   | (71.0   | )     |   |   | 108.9   |     
|Earnings (loss) per share:                                                                                                              |                   |                                  |         |             |   |      |         |        |   |      |         |       |   |   |         |       |   |   |         |     
|                                                                                                                                        | Basic and diluted |                                  | $       | (11.79      | ) |      | $       | (13.42 | ) |      | $       | (0.04 | ) |   | $       | (1.57 | ) |   | $       | 2.41 | 

|                               |  |                    |         |             |  |      |         |      |  |      |         |  |  |   |         |  |  |   |         | 
|------------------------------ |  | ------------------ | ------- | ----------- |  | ---- | ------- | ---- |  | ---- | ------- |  |  | - | ------- |  |  | - | ------- | 
|                               |  |                   
|                               |  | As of December 31,
|                               |  |                   
|                               |  | 2002               |         | 2001        |  | 2000 |         | 1999 |  | 1998
|                               |  |                    |         |             |  |      |         |      |  |     
|                               |  |                    |         |            
|                               |  | (Audited)          |         | (Unaudited)
|Balance Sheet Data:            |  |                    |         |             |  |      |         |      |  |      |         |  |  |   |         |  |  |   |         | 
|Total assets                   |  | $                  | 4,705.6 |             |  | $    | 6,053.9 |      |  | $    | 6,796.9 |  |  | $ | 6,314.7 |  |  | $ | 6,060.7 | 
|Vehicle debt                   |  |                    | 3,251.0 |             |  |      | 4,263.0 |      |  |      | 4,521.6 |  |  |   | 4,531.6 |  |  |   | 4,221.3 | 
|Other debt                     |  |                    | 250.7   |             |  |      | 247.3   |      |  |      | 276.7   |  |  |   | 107.4   |  |  |   | 48.0    | 
|Shareholders equity (deficit) |  |                    | (285.6  | )           |  |      | 221.2   |      |  |      | 892.6   |  |  |   | 463.9   |  |  |   | 562.6   | 

25



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##### 





|         |                                                                                          
|-------- | -----------------------------------------------------------------------------------------
|Item  7. | Managements Discussion and Analysis
    of Financial Condition and Results of Operations

Basis of Presentation

During the fourth quarter of 2002, management
approved and announced a plan to close and abandon our Alamo
Local Market Division. We substantially completed our plan of
abandonment in the fourth quarter of 2002. The plan included
provisions for employee terminations, closure of locations and
disposals or transfers of our fleet to our other operations.
Pursuant to the provisions of Statement of Financial Accounting
Standards No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets (SFAS 144),
the net assets and operating results of our Alamo Local Market
Division have been classified as a discontinued operation
causing restatement of all prior periods presented in our annual
report on Form 10-K for the fiscal year ended
December 31, 2002. Previously our financial statements were
audited by Arthur Andersen LLP however, in July 2002 we
terminated Arthur Andersen LLP and engaged Ernst & Young LLP
as our independent certified public accountants.

Pursuant to the provisions of Statements on
Auditing Standards Section 9508, Reports on Audited
Financial Statements: Auditing Interpretations of
Section 508 paragraph .70, which, sets forth the
guidance for requiring re-audits, Ernst & Young LLP, have
determined that due to the discontinuance of the Alamo Local
Market Division they would need to re-audit the prior two years
of financial statements presented in our 2002 annual report on
Form 10-K. We believe that the cost and time to re-audit
our historical periods will provide financial statement users
with little to no valuable information. Currently the
administrative burden relative to preparing the re-audit is not
in the interest of our current or future security holders or
creditors, because such a re-audit would divert our limited
financial and human capital resources from working towards our
emergence from bankruptcy. As such, our restated results of
operations and financial condition as of and for each the two
years ended December 31, 2001 and 2000 are presented herein
as unaudited. In the opinion of management, the Consolidated
Financial Statements contain all material adjustments, necessary
to fairly re-state the financial position, the results of
operations and cash flows as of and for each of the two years
ended December 31, 2001 and 2000 along with the related
disclosures herein and are adequate to make the information
presented not misleading.

However, you should realize that presentation of
unaudited financial statements in our annual report on
Form 10-K does not comply with Securities and Exchange Act
Regulations, and until we file audited financial statements for
three years as required under Regulation S-X the Securities
and Exchange Commission will neither declare effective any
registration statements or post-effective amendments, nor
consider compliant any proxy or other filing that requires our
financial statements. In addition, we are precluded from making
offerings under effective registration statements or
Regulation D until we file the required audited financial
statements.

Additionally, these financial statements have
been prepared in accordance with the AICPAs Statement of
Position 90-7, Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code
(SOP 90-7). SOP 90-7 requires segregating
pre-petition liabilities that are subject to compromise and
identifying all transactions and events that are directly
associated with the reorganization of our business. A certain
portion of the liabilities recorded at December 31, 2002
and December 31, 2001 are expected to be subject to
compromise. Also in accordance with SOP 90-7, after the
filing date, interest is no longer accrued on any unsecured and
undersecured debt. For the year ended December 31, 2002
such amounts approximated $1.0 million.

Separately, we have restated our 2001 and 2000
balance sheets to report certain vehicle leases as capital
leases whereas in the prior periods they were reported as
operating leases. The change resulted from a different
interpretation of the fleet financing and manufacturer
arrangements. The restatement resulted in an increase of both
assets (vehicles) and fleet debt on the balance sheet by the
same dollar amount. As of December 31, 2002 and 2001
vehicles and vehicle debt increased $302.3 million and
$285.2 million, respectively.

You should read the following discussion in
conjunction with our Consolidated Financial Statements and the
related notes thereto included elsewhere in this Form 10-K.

26



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##### 



Overview

We rent vehicles on a daily, weekly or monthly
basis to leisure and business travelers principally from
on-airport or near-airport locations through Alamo and National.
We operate mainly in the United States, Europe and Canada. We
generate revenue primarily from vehicle rental charges and the
sale of ancillary rental products. Approximately 85% of our
rental revenue is derived from vehicle rental charges with the
remaining 15% derived from the sale of liability and other
accident protection products, fuel usage fees, and customer
convenience products including vehicle upgrades, additional or
underage (for drivers under the age of 25) driver privileges,
infant seat rentals, cellular phone rentals and ski rack rentals.

Prior to June 30, 2000, we were a wholly
owned subsidiary of AutoNation, Inc. (AutoNation or
former Parent). AutoNation announced its intention
to separate its automotive rental business from its automotive
retail business in August 1999, and in September 1999, announced
its intention to distribute its entire interest in us to
AutoNations stockholders on a tax-free basis (the
Distribution). On May 31, 2000
AutoNations board of directors approved the spin-off and
set a record date of June 16, 2000 and a distribution date
of June 30, 2000. The Distribution occurred on
June 30, 2000 at which point we became an independent,
publicly owned company. In connection with the Distribution we
entered into agreements with AutoNation, which provide for the
separation of our business from AutoNations and govern
various interim and ongoing relationships between the companies.

As a wholly owned subsidiary of AutoNation, we
received services from AutoNation which supported our
accounting, auditing, cash management, corporate communications,
corporate development, facilities management, finance and
treasury, human resources and benefit plan administration,
information technology, insurance and risk management, legal,
payroll, purchasing and tax operations. AutoNation also provided
us with the services of a number of its executives and
employees. In consideration for these services, AutoNation
allocated to us a portion of its overhead costs related to these
services. These allocations were historically based on the
proportion of our invested capital to the consolidated invested
capital of AutoNation and its subsidiaries, including our
company, and based upon various proportional cost allocation
methods. We believe that the amounts allocated to us in 1999
were no less favorable than costs we would have incurred to
obtain these services on our own or from unaffiliated third
parties. No amounts have been allocated in 2000 or 2001. As a
result of the foregoing, the historical consolidated financial
information for 1999 and 2000 included in this filing does not
necessarily reflect what our consolidated financial position,
results of operations and cash flows would have been had we
operated as a separate, stand-alone entity during the periods
presented.

Chapter 11 Proceedings

On November 13, 2001, ANC Rental Corporation
and other Debtors filed voluntary petitions under
chapter 11 of Title 11, United States Code, in the
United States Bankruptcy Court for the district of Delaware
(Case No. 01-11200 et al., Jointly Administered). The
Debtors remain in possession of their assets and properties, and
continue to operate their businesses and manage their properties
as debtors-in-possession pursuant to the Bankruptcy Code. As a
debtor-in-possession, management is authorized to operate the
business, but may not engage in transactions outside the
ordinary course of business without Court approval. For example,
certain types of capital expenditures, certain sales of assets
and certain requests for additional financings will require
approval by the Bankruptcy Court. There is no assurance that the
Bankruptcy Court will grant any requests for such approvals.
Subsequent to the filing of the chapter 11 petitions, we
obtained several court orders that authorized us to pay certain
pre-petition liabilities and take certain actions to preserve
the going concern value of the business, thereby enhancing the
prospects of reorganization. Our financial statements have been
prepared on a going concern basis, which contemplates continuity
of operations, realization of assets, and payment of liabilities
in the ordinary course of business. However, as a result of the
chapter 11 filing, there is no assurance that the carrying
amounts of assets will be realized or that liabilities will be
settled for amounts recorded. The Debtors do not include our
international operations, our insurance captive or our
consolidated special purpose financing entities.

The confirmation of a plan of reorganization is
our primary objective. After negotiations with various parties
in interest, we expect to present a plan or plans of
reorganization to the Court to reorganize our

27



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##### 



business and to restructure our obligations. This
plan or plans of reorganization could change the amounts
reported in the financial statements and cause a material change
in the carrying amount of assets and liabilities. We expect that
a certain portion of the pre-petition liabilities recorded will
be subject to compromise.


The plan or plans of reorganization, when filed,
will set forth the means for treating claims, including
liabilities subject to compromise and interests in our company.
Such means may take a number of different forms. A plan of
reorganization may result in, among other things, significant
dilution or elimination of certain classes of existing interests
as a result of the issuance of equity securities to creditors or
new investors. Other interests such as certain of the
pre-petition insurance reserves may need to be addressed and
resolved in the ordinary course of business as a result of
needing to maintain mandatory insurance coverage or for other
compelling business or legal reasons. We are in the early stages
of formulating a plan of reorganization. The confirmation of any
plan or plans of reorganization will require creditor acceptance
as required under the Bankruptcy Code and approval of the
Bankruptcy Court.

Under bankruptcy law, actions by creditors to
collect pre-petition indebtedness owed by the Debtors at the
filing date, as well as most litigation pending against us, are
stayed and other pre-petition contractual obligations may not be
enforced against the Debtors. We have notified all known
claimants and historical creditors that the Bankruptcy Court
established a bar date of January 14, 2003. A bar date is
the date by which a claimant, whose claim against the Debtors is
either omitted from or listed different from the amount or
status described in the schedules of liabilities filed by the
Debtors with the Bankruptcy Court, must file a claim against the
Debtors if the claimant wishes to participate in the chapter 11
case as provided for in any Plan of Reorganization. We are
currently in the process of researching and reconciling the
claims that have been submitted. In addition, the Debtors have
the continuing right, subject to Court approval and other
conditions, to assume or reject any pre-petition executory
contracts and unexpired leases. Parties affected by these
subsequent rejections may file claims with the Bankruptcy Court
regardless of the bar date. Any damages resulting from rejection
of executory contracts and unexpired leases are treated as
unsecured pre-petition claims. The amounts of claims filed by
creditors could be significantly different from their recorded
amounts. Due to material uncertainties, it is not possible to
predict the length of time we will operate under chapter 11
protection, the outcome of the proceedings in general, whether
we will continue to operate under our current organizational
structure, which contracts and leases will be assumed or
rejected, the effect of the proceedings on our businesses or the
recovery by creditors and equity holders of the company.

Under the Bankruptcy Code, post-petition
liabilities and pre-petition liabilities subject to compromise
must be satisfied before shareholders can receive any
distribution. The ultimate recovery to shareholders, if any,
will not be determined until the end of the case when the fair
value of our assets is compared to the liabilities and claims
against us. There can be no assurance that any value will be
ascribed to our common stock in the bankruptcy proceeding.

As a result of the bankruptcy filings and related
events, there is no assurance that the carrying amounts of
assets will be realized or that liabilities will be liquidated
or settled for the amounts recorded. In addition, confirmation
of a plan of reorganization, or disapproval thereof, could
change the amounts reported in our financial statements. Our
financial statements do not include any adjustments that may
result from the resolution of these uncertainties. In
particular, our financial statements do not reflect adjustments
to the carrying value of assets or the amount and classification
of liabilities that ultimately may be necessary as a result or a
plan of reorganization. Adjustments necessitated by a plan of
reorganization could materially change the amounts reported in
the consolidated financial statements included elsewhere herein.

The ability of the company to continue as a going
concern is dependent upon, among other things, (i) our
ability to generate adequate sources of liquidity, (ii) our
ability to generate sufficient cash from operations,
(iii) the ability of our subsidiaries that are not included
in the chapter 11 cases to obtain necessary financing,
(iv) confirmation of a plan or plans of reorganization
under the Bankruptcy Code, and (v) our ability to achieve
profitability following such confirmation. Because we can give
no assurance that we can achieve any of the foregoing, there is
substantial uncertainty about our ability to continue as a going
concern.

28



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##### 



Management Changes

In the fourth quarter of 2002, William N.
Plamondon, III, formerly our Chief Restructuring Officer,
succeeded Lawrence Ramaekers as our Chief Executive Officer, who
announced his retirement at year-end. In addition, Travis Tanner
was named as Executive Vice President responsible for worldwide
sales, marketing, operations, business system development, brand
integrity, information technology, reservations and revenue
management. Additionally, Douglas Laux assumed the roll of
Senior Vice President and Chief Financial Officer from the
departing Wayne Moor.

Consolidated Results of Continuing
Operations

A summary of our operating results from
continuing operations and key operating statistics is as follows
for each of the three years ended December 31, 2002 (dollars in
millions except rental revenue per day), as restated:

|                                                                             |  |           |         |   |  |               |       |   |  |               |         |   |  |  |       |   |  |   |         |   |  |  |       |  
|---------------------------------------------------------------------------- |  | --------- | ------- | - |  | ------------- | ----- | - |  | ------------- | ------- | - |  |  | ----- | - |  | - | ------- | - |  |  | ----- | -
|                                                                             |  | 2002      |         | % |  | 2001          |       | % |  | 2000          |         | %
|                                                                             |  |           |         |   |  |               |       |   |  |               |         |  
|                                                                             |  | (Audited) |         |   |  | (As Restated) |       |   |  | (As Restated) |         |  
|                                                                             |  |           |         |   |  | (Unaudited)   |       |   |  | (Unaudited)   |         |  
|Revenue                                                                      |  | $         | 2,393.8 |   |  |               | 100.0 |   |  | $             | 2,896.7 |   |  |  | 100.0 |   |  | $ | 3,250.5 |   |  |  | 100.0 |  
|Direct operating costs                                                       |  |           | 1,104.6 |   |  |               | 46.1  |   |  |               | 1,269.5 |   |  |  | 43.8  |   |  |   | 1,270.7 |   |  |  | 39.1  |  
|Vehicle depreciation, net                                                    |  |           | 717.8   |   |  |               | 30.0  |   |  |               | 922.9   |   |  |  | 31.9  |   |  |   | 916.9   |   |  |  | 28.2  |  
|Selling, general and administration                                          |  |           | 497.8   |   |  |               | 20.8  |   |  |               | 633.3   |   |  |  | 21.8  |   |  |   | 685.6   |   |  |  | 21.1  |  
|Transition and reorganization expenses                                       |  |           | 164.9   |   |  |               | 6.9   |   |  |               |        |   |  |  |      |   |  |   |        |   |  |  |      |  
|Impairment of goodwill                                                       |  |           |        |   |  |               |      |   |  |               | 210.8   |   |  |  | 7.3   |   |  |   |        |   |  |  |      |  
|Amortization of goodwill                                                     |  |           |        |   |  |               |      |   |  |               | 8.4     |   |  |  | 0.3   |   |  |   | 10.0    |   |  |  | 0.3   |  
|Interest income                                                              |  |           | (4.7    | ) |  |               | (0.2  | ) |  |               | (6.3    | ) |  |  | (0.2  | ) |  |   | (4.9    | ) |  |  | (0.2  | )
|Interest expense                                                             |  |           | 206.5   |   |  |               | 8.6   |   |  |               | 320.8   |   |  |  | 11.1  |   |  |   | 365.9   |   |  |  | 11.3  |  
|Other expense, net                                                           |  |           | 42.7    |   |  |               | 1.8   |   |  |               | 19.8    |   |  |  | 0.7   |   |  |   | 3.4     |   |  |  | 0.1   |  
|                                                                             |  |           |         |   |  |               |       |   |  |               |         |   |  |  |       |   |  |   |         |   |  |  |       |  
|Income (loss) from continuing operations
    before benefit for income taxes |  | $         | (335.8  | ) |  |               | (14.0 | ) |  | $             | (482.5  | ) |  |  | (16.7 | ) |  | $ | 2.9     |   |  |  | 0.1   |  
|                                                                             |  |           |         |   |  |               |       |   |  |               |         |   |  |  |       |   |  |   |         |   |  |  |       |  
|Key statistics                                                               |  |           |         |   |  |               |       |   |  |               |         |   |  |  |       |   |  |   |         |   |  |  |       |  
|Rental revenue per day                                                       |  | $         | 38.36   |   |  |               |       |   |  | $             | 36.48   |   |  |  |       |   |  | $ | 37.16   |   |  |  |       |  
|Charge days (in millions)                                                    |  |           | 61.3    |   |  |               |       |   |  |               | 78.2    |   |  |  |       |   |  |   | 86.0    |   |  |  |       |  
|Average fleet                                                                |  |           | 214,453 |   |  |               |       |   |  |               | 272,874 |   |  |  |       |   |  |   | 295,650 |   |  |  |       |  
|Fleet utilization                                                            |  |           | 78.3    | % |  |               |       |   |  |               | 78.5    | % |  |  |       |   |  |   | 79.5    | % |  |  |       |  



| |                                           
| | ------------------------------------------
| | Years Ended December 31, 2002 and
    2001



| |        
| | -------
| | Revenue

Revenue was $2,393.8 million for the year ended
December 31, 2002, and $2,896.7 million for the year ended
December 31, 2001. The decrease in revenue of $502.9
million or 17.4% is primarily due to lower charge day volume of
$616.9 million or 21.3% and lower licensee revenue of $1.1
million, offset by higher revenue per day of $80.5 million or
2.8%, and the favorable effects of foreign exchange movements of
$34.6 million or 1.2%.

Charge day volume declined in the year ended
December 31, 2002 compared to the same period in the prior
year by approximately 16.9 million days. The majority of the
decrease was realized in North America with the Alamo brand
declining 7.9 million days and the National brand declining 7.4
million days. The balance of the decline in charge day volumes
was realized in our international division. Our business was
adversely affected by a weak domestic economy, the lingering
effects of the terrorist events of September 11, 2001, our
Bankruptcy filing, and management pricing and fleet allocation
decisions made to benefit our more profitable lines of business.
Additionally, during 2002 we have experienced a loss in market
share.

29



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##### 



These economic factors continue to adversely
affect our business in 2003. Until such time as the overall
economy, in particular airline travel, strengthens, we expect
that we will need to reduce the size of our fleet and reduce
overhead costs in order to mitigate our declines in revenue.
Events such as, the war with Iraq, the outbreak of SARS and the
terrorist acts of September 11, 2001 have resulted in a downturn
in air travel both domestically and internationally. A sustained
material decrease in airline passenger traffic would
significantly reduce our customer volume and significantly
impact our business.

The increase in revenue per day for the year
ended December 31, 2002 as compared to the same period in
the prior year reflects a favorable domestic airport pricing
environment.



| |                       
| | ----------------------
| | Direct Operating Costs

Direct operating costs include costs specifically
related to the operation and maintenance of the fleet, field
personnel, facility costs and variable operating costs such as
insurance, agency fees, and fuel. Direct operating costs were
$1,104.6 million for the year ended December 31, 2002 and
$1,269.5 million for the year ended December 31,
2001. As a percent of revenue, direct operating costs were
46.1% for the year ended December 31, 2002 and 43.8% for
the year ended December 31, 2001.

Direct operating expenses decreased approximately
$164.9 million year over year. Fleet operating expenses for the
year ended December 31, 2001 included additional expense to
reduce our fleet size after September 11, 2001 to meet
lower demand and to reclaim and re-deploy displaced vehicles
throughout our system-wide operations. Our cost reduction
programs in conjunction with operating a smaller average fleet
contributed to lower personnel costs of $30.7 million or 2.4%,
lower variable transaction costs of $83.6 million or 6.6%,
lower net damage costs of $37.0 million or 2.9%, and lower other
fleet related costs, including maintenance, transportation, and
disposal costs, of $31.2 million or 2.5%. Facility maintenance
costs remained relatively flat, decreasing slightly by $1.6
million or 0.1%. Offsetting these savings were unfavorable
foreign exchange movements of $19.2 million or 1.5%.



| |                     
| | --------------------
| | Vehicle Depreciation

Depreciation expense includes vehicle
depreciation, net of manufacturer incentives, gains and losses
on vehicle sales in the ordinary course of business and rent
expense for vehicles operated under operating lease
arrangements. Vehicle depreciation was $717.8 million for the
year ended December 31, 2002 and $922.9 million for the
year ended December 31, 2001. As a percent of revenue,
vehicle depreciation was 30.0% for the year ended December 31,
2002 and 31.9% for the year ended December 31, 2001.

The decrease in vehicle depreciation of $205.1
million or 22.2% was primarily due to the benefits of a
decreasing fleet size, which lowered our costs by approximately
$197.6 million or 21.4%, decreased depreciation rates, the
result of a decreased loss on sale of vehicles, of approximately
$14.5 million or 1.6%, offset by the adverse impact of
foreign exchange rate movements of approximately
$7.0 million or 0.8%.

Domestically, we rent vehicles on an operating
lease basis from certain vehicle manufacturers. Our leased fleet
is typically rented for approximately six months. Vehicles under
operating leases approximated 21.3% of our average fleet for the
year ended December 31, 2002, 13.0% of our average fleet
for the year ended December 31, 2001 and 14.0% of our
average fleet for the year ended December 31, 2000. We
expect that in future periods we will finance an increased
number of vehicles using operating leases.



| |                                                
| | -----------------------------------------------
| | Selling, General and Administrative
    Expense

Selling, general and administrative expenses were
$497.8 million for the year ended December 31, 2002 and
$633.3 million for the year ended December 31, 2001. As a
percentage of revenue, selling, general and administrative
expenses were 20.8% for the year ended December 31, 2002
and 21.8% for the year ended December 31, 2001. The
decrease in selling, general and administrative expenses of
$135.5 million or 21.4%, was due to lower advertising and
selling expenses of $26.8 million, or 4.2%, lower variable
selling costs of approximately $55.6 million or 8.8%, the result
of lower overall charge day volumes during the period, and
reductions in general overhead spending approximating $48.5
million or 7.7%. Separately, in the third quarter

30



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##### 



of 2002 we reversed $15.0 million or 2.4% of
advertising expense and bonus expense accrued in 2001 which were
subsequently determined to be in excess of their ultimate
settlement value. The adverse effects of foreign exchange rate
movements affected our costs by approximately $10.4 million or
1.6%.




| |                                          
| | -----------------------------------------
| | Transition and Reorganization
    Efforts

In an effort to return us to profitability, we
are implementing a series of transition plans designed to
improve the quality of customer service while lowering costs to
deliver such service.

Transition and reorganization expenses for the
year ended December 31, 2002 are as follows (in millions):

|                                         |  |      |      |          |  |       |       |   |  |   |       | 
|---------------------------------------- |  | ---- | ---- | -------- |  | ----- | ----- | - |  | - | ----- | 
|                                         |  |     
|                                         |  | 2002
|                                         |  |     
|                                         |  | Cash |      | Non-Cash |  | Total
|                                         |  |      |      |          |  |      
|Airport location consolidation           |  | $    | 4.9  |          |  | $     | 29.8  |   |  | $ | 34.7  | 
|Combining information technology systems |  |      | 20.2 |          |  |       | 77.6  |   |  |   | 97.8  | 
|Exiting certain international locations  |  |      | 3.7  |          |  |       | 17.5  |   |  |   | 21.2  | 
|Professional fees and other              |  |      | 39.2 |          |  |       | (28.0 | ) |  |   | 11.2  | 
|                                         |  |      |      |          |  |       |       |   |  |   |       | 
|                                         |  | $    | 68.0 |          |  | $     | 96.9  |   |  | $ | 164.9 | 
|                                         |  |      |      |          |  |       |       |   |  |   |       | 



| |                               
| | ------------------------------
| | Airport Location Consolidation

As of the date of the bankruptcy filing, Alamo
and National operated under 140 separate stand-alone concession
agreements at seventy airports including most of the major
airports in the United States. During 2002, we consolidated as
many of these separately branded locations as possible into dual
branded locations. We believe that by consolidating operations
into one dual branded facility we will be able to lower
operating costs and improve vehicle utilization, lower personnel
expense, and reduce rent expense. We plan to substantially
complete the facility consolidation program during 2003. Due to
material uncertainties and negotiations with third parties, it
is not possible to predict the length of time it will take to
complete each location consolidation or whether all of the
anticipated consolidations will occur as planned. As of
March 31, 2003 we have dual branded our operations at
forty-six of these airports and have received court orders
allowing us to dual brand an additional three airport locations,
which we expect to complete by the end of 2003.

We have incurred $34.7 million in expenses
relative to our airport location consolidation project for the
year ended December 31, 2002. The non-cash component was
primarily comprised of impairment charges and excess
depreciation of approximately $32.8 million, and a gain on
rejected leases of $3.0 million recorded in the second half of
2002.



| |                                             
| | --------------------------------------------
| | Combining Information Technology
    Systems

We currently operate two separate and distinct
information technology systems, one for each of our Alamo and
National brands. By the end of 2003 or early 2004, we plan to
have migrated to one information system and abandoned the other.
We believe that by combining information technology onto one of
our operating systems cost savings can be achieved. Additional
benefits of migrating to one system are expected to include a
reduction of support staff, elimination of duplicative system
infrastructures, improved operational efficiency, lower cost of
training, and standardization across the organization. The
migration to one information technology system is not without
significant risks, such as the ability to successfully migrate
onto one system, additional delays in implementation, the
temporary loss of business functionality, questions regarding
the scalability of existing infrastructure, and the need for
coordination with third party vendors to accept system changes.
We have accelerated the depreciation on the system we plan to
abandon in order to fully depreciate the remaining carrying
value of $42.2 million as of December 31, 2002 over its
estimated remaining useful life. In the fourth quarter of 2002,
we revised the information technology systems estimated
useful life and as such, the excess depreciation charge
approximated $2.1 million per month from the beginning of
October 2002.

31



---



##### 



We have incurred $97.8 million in expenses
relative to the combining of information technology systems for
the year ended December 31, 2002. The cash component
primarily related to external consulting while the non-cash
component primarily related to excess depreciation.



| |                                            
| | -------------------------------------------
| | Exiting Certain International
    Locations

In August 2002, we sold certain assets and
transferred specific liabilities related to our Holland and
Belgium operations to an unrelated third party and entered into
a ten-year franchise agreement. We realized approximately $10.1
million in net proceeds from this transaction. Additionally, we
recorded, in the third quarter, a reorganization charge of
approximately $1.4 million related to losses on the sale of
these assets.

In the third and fourth quarters of 2002, our
German operating and financing subsidiaries filed for
receivership in Germany under local law. As such in the third
quarter, we recorded an impairment charge of approximately $15.8
million to reserve our net investment in these operations.



| |                            
| | ---------------------------
| | Professional Fees and Other

We have incurred professional fees of
approximately $39.7 million for the year ended December 31,
2002 for services rendered on behalf of our creditors and us.
Pursuant to SOP 90-7, we have reclassified approximately
$0.5 million of excess interest income to transition and
reorganization expense for the year ended December 31, 2002.

In the first quarter of 2003, the Bankruptcy
Court approved an order regarding the settlement of claims
concerning the holder of our $200.0 million interim financing
fixed-rate note. The order provides for an allowed secured claim
of $180.0 million and an allowed unsecured claim of $25.0
million. The secured claim will accrue interest at 10%, half of
which will be paid currently with the remaining half paid upon
emergence. For the quarter ended December 31, 2002, we
reversed to transition and reorganization excess expense accrued
interest, net of debt issue costs and note discounts, of
approximately $36.0 million relative to this facility.
Finally, we accrued allowed unsecured claims of approximately
$8.0 million.



| |                               
| | ------------------------------
| | Changes in Licensee Operations

We have modified our past licensee structure and
have entered into new dual branded licensing
agreements that include but are not be limited to
(i) selling or transferring ownership of certain Alamo
locations in existing National licensee markets to the current
National licensee, (ii) increasing the fees charged to our
licensees, and (iii) licensing Alamo to current National
licensees in those markets where an Alamo location currently
does not exist. As of March 31, 2003, we have reached an
agreement with the Policy Advisory Committee of our licensees
and have entered into new agreements with the vast majority of
our domestic licensees.



| |                         
| | ------------------------
| | Amortization of Goodwill

In June 2001, FASB released Statement of
Financial Accounting Standards No. 142, Goodwill and
Intangible Assets (SFAS 142) which
supercedes APB Opinion No. 17, Intangible
Assets. SFAS 142 eliminates the current requirement
to amortize goodwill and indefinite-lived intangible assets,
addresses the amortization of intangible assets with defined
lives and addresses the impairment testing and recognition for
goodwill and intangible assets. SFAS 142 applies to
goodwill and intangible assets arising from transactions
completed before and after the Statements effective date.
SFAS 142 was effective for the company beginning
January 1, 2002 and as a result we ceased amortizing
intangible assets at that time.

As of January 1, 2002 we had approximately
$127.1 million of goodwill related to our operations in the
United Kingdom. In the first quarter of calendar year 2002, we
began performing an impairment analysis of goodwill. SFAS 142
requires us, upon adoption and at least annually, to reassess
the recoverability of goodwill and intangible assets. As
required, we completed the first step of the goodwill transition
impairment test, which requires determining the fair value of
the net assets allocated to the reporting unit. Since the fair
value of the reporting unit, as of January 1, 2002, was
less than the carrying value of the net assets, we performed

32



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##### 



step two of the SFAS 142 impairment test, which
required us to allocate the fair value of the reporting unit to
all underlying assets and liabilities, including both recognized
and unrecognized tangible and intangible assets based on their
fair value. SFAS 142 requires any impairment noted be recorded
at the date of adoption restating first quarter 2002 results.
Impairment charges that resulted from the application of the
above test are recorded as a cumulative effect of a change in
accounting principle in the first quarter of the year ending
December 31, 2002. As such we have recognized an impairment
charge of approximately $106.2 million relative to our
operation in the United Kingdom.




| |                
| | ---------------
| | Interest Income

Interest income was $4.7 million for the
year ended December 31, 2002 and $6.3 million for the year
ended December 31, 2001. The decrease in interest income is
due primarily to an overall lower invested cash balance.



| |                 
| | ----------------
| | Interest Expense

The components of interest expense as of
December 31 are as follows:

|                     |  |      |       |      |  |   |       | 
|-------------------- |  | ---- | ----- | ---- |  | - | ----- | 
|                     |  | 2002 |       | 2001
|                     |  |      |       |     
|Vehicle interest     |  | $    | 143.5 |      |  | $ | 258.0 | 
|Non-vehicle interest |  |      | 63.0  |      |  |   | 62.8  | 
|                     |  |      |       |      |  |   |       | 
|                     |  | $    | 206.5 |      |  | $ | 320.8 | 
|                     |  |      |       |      |  |   |       | 

Vehicle interest expense was $143.5 million for
the year ended December 31, 2002 and $258.0 million for the
year ended December 31, 2001. As a percentage of revenue,
vehicle interest expense was 6.0% for the year ended
December 31, 2002 and 8.9% for the year ended
December 31, 2001. The decrease in vehicle interest expense
of approximately $114.5 million or 44.4% was due primarily to
lower average vehicle debt outstanding for the comparative
period coupled with lower weighted average interest rates.

Non-vehicle interest expense was $63.0 million
for the year ended December 31, 2002 and $62.8 million for the
year ended December 31, 2001. As a percentage of revenue,
non-vehicle interest expense was 2.6% for the year ended
December 31, 2002 and 2.2% for the year ended
December 31, 2001. The increase in non-vehicle interest
expense is approximately $0.2 million. Amortization of debt
issue costs and note discount relative to these facilities was
$6.5 million for the year ended December 31, 2002 and $15.3
million for the year ended December 31, 2001. Offsetting
this decrease was an increase in our overall rates on these
facilities as a result of our bankruptcy.



| |                            
| | ---------------------------
| | Other (Income) Expense, Net

The components of other (income) expense,
net as of December 31, are as follows:

|                                                                                     |  |      |      |      |  |   |      | 
|------------------------------------------------------------------------------------ |  | ---- | ---- | ---- |  | - | ---- | 
|                                                                                     |  | 2002 |      | 2001
|                                                                                     |  |      |      |     
|Fair value adjustment on interest rate hedges and
    recognition of deferred losses |  | $    | 39.1 |      |  | $ | 7.8  | 
|Loss on sale and leaseback transactions                                              |  |      |     |      |  |   | 4.2  | 
|Other (income) expense                                                               |  |      | 3.6  |      |  |   | 7.8  | 
|                                                                                     |  |      |      |      |  |   |      | 
|                                                                                     |  | $    | 42.7 |      |  | $ | 19.8 | 
|                                                                                     |  |      |      |      |  |   |      | 

Effective January 1, 2001 we adopted
Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging
Activities (SFAS 133), as amended. For
additional information regarding the adoption of SFAS 133
please refer to Note 17 of our Notes to Consolidated
Financial Statements. The effect of applying these new standards
for the year ended December 31, 2001 was a mark-to-market
loss of $2.0 million. The amounts recognized related to the
changes in fair market value of the time value component of our
stand-alone caps. Due to reductions in our fleet debt and the
termination of certain of our interest rate hedges we recognized
deferred losses of approximately $39.1 million and
$5.8 million for the year ended December 31, 2002 and
December 31, 2001, respectively.

33



---



##### 



During 2001, we entered into a series of sale and
leaseback transactions, which yielded net proceeds of
approximately $110.3 million. The leases, with terms of not less
than 20 years, are treated as operating leases. Gains
realized on the sale of the properties have been deferred and
are being recognized over the life of the respective leases as a
reduction to the related rent expense. Losses recognized
currently in earnings approximated $4.2 for the year ended
December 31, 2001. Deferred transaction gains that will
amortize over the life of the leases approximated $34.1 million
of which $27.8 million and $32.8 million remained as of
December 31, 2002 and December 31, 2001, respectively.

Other expense, net was $3.6 million for the year
ended December 31, 2002 and $7.8 million for year ended
December 31, 2001. The decrease is due to the higher
spending on legal and bank fees during 2001 to amend our various
credit facilities.



| |                           
| | --------------------------
| | Provision for Income Taxes

As a result of significant adverse changes in the
business environment, current operating cash flow losses and
projected operating cash flow losses for the foreseeable future,
management believes that it is more likely than not that the tax
assets are no longer realizable and as disclosed in our
Form 10-Q for the period ended September 30, 2001 we
ceased accruing benefit for current period losses and recorded a
$103.5 million valuation allowance for certain tax assets and
net operating loss carry-forwards. The provision for income
taxes was $99.0 million for the year ended December 31,
2001.



| |                                             
| | --------------------------------------------
| | Closure of Alamo Local Market
    Operations

During the fourth quarter of 2002, management
approved and announced a plan to close and abandon our Alamo
Local Market Division. We substantially completed our plan of
abandonment in the fourth quarter of 2002. The plan included
provisions for employee terminations, closure of locations, and
disposal or transfer of fleet to our other operations. Pursuant
to the provisions of Statement of Financial Accounting Standards
No. 144 Accounting for the Impairment or Disposal of
Long-Lived Assets (SFAS 144), the net assets
and operating results of our Alamo Local Market Division is
classified as a discontinued operation. Assets remaining as of
December 31, 2002 primarily related to receivables while
liabilities remaining relate to pre-petition trade payables, and
certain self-insurance reserves.

A summary of operating results, total assets and
total liabilities relating to our Alamo Local Market Division
for the periods indicated are as follows:

|                                                                                                         |  |      |       |      |  |      |       |  |  |   |       | 
|-------------------------------------------------------------------------------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- |  |  | - | ----- | 
|                                                                                                         |  | 2002 |       | 2001 |  | 2000
|                                                                                                         |  |      |       |      |  |     
|Revenue                                                                                                  |  | $    | 119.5 |      |  | $    | 266.2 |  |  | $ | 274.6 | 
|Net loss from discontinued operations, net of
    benefit from income taxes of $0 in 2002, 2001 and 2000 |  |      | 92.1  |      |  |      | 32.3  |  |  |   | 1.0   | 
|Total assets                                                                                             |  |      | 15.4  |      |  |      | 72.0  |  |  |   | 219.3 | 
|Total liabilities                                                                                        |  |      | 27.3  |      |  |      | 49.6  |  |  |   | 33.4  | 

As of March 31, 2003 the net liability from
discontinued operations approximated $18.2 million (unaudited),
which primarily relates to receivables less self-insurance
reserves and pre-petition payables.



| |                                                        
| | -------------------------------------------------------
| | Cumulative Effect of Change in Accounting
    Principle

On January 1, 2002 we adopted SFAS 142, and
recognized an impairment charge of $106.2 million relative to
our operation in the United Kingdom. As previously discussed, on
January 1, 2001 we adopted SFAS 133 and recognized a gain
upon adoption of approximately $11.6 million pre-tax or $7.1
million after-tax.



| |                                           
| | ------------------------------------------
| | Years Ended December 31, 2001 and
    2000



| |        
| | -------
| | Revenue

Revenue was $2,896.7 million for the year ended
December 31, 2001, and $3,250.5 million for the year ended
December 31, 2000. The decrease in revenue of $353.8
million or 10.9% is primarily due to lower

34



---



##### 



charge day volume of $292.5 million or 9.0%,
lower revenue per day of $36.2 million or 1.1%, the unfavorable
effects of foreign exchange movements of $16.9 million or 0.5%,
and lower licensee revenue of $8.2 million or 0.2%.


Charge day volume declined in the year ended
December 31, 2001 compared to the same period in the prior
year by approximately 7.9 million days. The decrease was
realized in North America with the Alamo brand declining 4.6
million days and the National brand declining 3.9 million days,
offset by increases in our international division. Approximately
4.4 million days or 56.2% of the year-to-date decline in charge
days occurred in the fourth quarter due in part to the terrorist
events of September 11, 2001. The balance of the decline in
charge day volumes was the result of a weak economy throughout
2001.

The decline in revenue per day for the year ended
December 31, 2001 as compared to the same period in the
prior year was the result of a weak economy and an extremely
competitive pricing environment in the domestic airport market.



| |                       
| | ----------------------
| | Direct Operating Costs

Direct operating costs include costs specifically
related to the operation and maintenance of the fleet, field
personnel, facility costs and variable operating costs such as
insurance, agency fees, and fuel. Direct operating costs were
$1,269.5 million for the year ended December 31, 2001 and
$1,270.7 million for the year ended December 31, 2000. As a
percent of revenue, direct operating costs were 43.8% for the
year ended December 31, 2001 and 39.1% for the year ended
December 31, 2000.

Fleet operating expenses increased approximately
$22.3 million primarily driven by increased damages and
turn-back costs, fleet maintenance and fleet transportation
costs. These increases are the result of reducing fleet levels
beyond those of the prior year to meet lower forecasted demand.
Fleet operating expenses were also adversely impacted by the
terrorist events of September 11. As a result of
September 11 we experienced a high level of one-way
rentals. As such, we realized higher than normal fleet operating
costs as we incurred additional expenses to reclaim the
displaced fleet. Facility and facility maintenance increased
approximately $21.5 million due to increased rent, the result of
sale and leaseback transactions in the first and second quarters
as well as increased facility operating costs. Offsetting these
increases were lower personnel costs of approximately $28.7
million due to our cost reduction programs in the first half of
the year as well as lower variable transaction costs of
approximately $7.7 million, the result of lower overall charge
day volumes during the period. The benefits of foreign exchange
rate movements lowered our costs by approximately $8.6 million
for the year ended December 31, 2001.



| |                     
| | --------------------
| | Vehicle Depreciation

Vehicle depreciation includes vehicle
depreciation, net of manufacturer incentives, and gains and
losses on vehicle sales in the ordinary course of business and
rent expense for certain of our leased fleet. Vehicle
depreciation was $922.9 million for the year ended
December 31, 2001 and $916.9 million for the year ended
December 31, 2000. As a percent of revenue, vehicle
depreciation was 31.9% for the year ended December 31, 2001
and 28.2% for the year ended December 31, 2000.

The increase in vehicle depreciation of $6.0
million was due to increased depreciation of approximately $82.3
million primarily due to higher vehicle acquisition costs and
changes in the mix of our fleet. Offsetting this increase were
the benefits of a decreasing fleet size, which lowered our costs
by approximately $73.0 million, and the benefits of foreign
exchange rate movements, which lowered our costs by
approximately $3.3 million.



| |                                                
| | -----------------------------------------------
| | Selling, General and Administrative
    Expense

Selling, general and administrative expenses were
$633.3 million for the year ended December 31, 2001 and
$685.6 million for the year ended December 31, 2000. As a
percentage of revenue, selling, general and administrative
expenses were 21.8% for the year ended December 31, 2001
and 21.1% for the year ended December 31, 2000. The
decrease in selling, general and administrative expenses of
$52.3 million was due to lower variable selling costs of
approximately $19.7 million, the result of lower overall charge
day volumes

35



---



##### 



during the period. Reduced marketing, advertising
and general overhead spending approximated $29.1 million. The
benefits of foreign exchange rate movements lowered our costs by
approximately $3.5 million.


During the first quarter of 2001, as part of a
cost reduction plan, we reduced our workforce in excess of 700
people with a total expected annual expense reduction of
approximately $25.0 million. The severance related to those
terminations was $2.0 million. Transition costs, not recurring
in 2001, were $17.7 million for the year ended December 31,
2000. These costs related to our fourth quarter 1999
restructuring plan, and were not previously accruable as part of
the 1999 charge. The transition costs are primarily comprised of
employee retention bonuses, support for information systems, and
personnel costs related to hiring, relocation and training. For
the quarter ended December 31, 2001 we incurred
approximately $2.1 million of professional fees for services
rendered on our behalf as well as on behalf of our creditors.



| |                       
| | ----------------------
| | Impairment of Goodwill

During the year ended December 31, 2001 we
recognized a charge of $210.8 million related to the impairment
of goodwill. As a result of significant adverse changes in the
business environment, current operating cash flow losses and
projected operating cash flow losses for the foreseeable future,
we determined that enterprise level goodwill related to our
domestic operations was no longer realizable and was impaired.



| |                
| | ---------------
| | Interest Income

Interest income was $6.3 million for the year
ended December 31, 2001 and $4.9 million for the year ended
December 31, 2000. The increase in interest income is due
primarily to an overall higher invested cash balance.



| |                 
| | ----------------
| | Interest Expense

The components of interest expense as of
December 31 are as follows:

|                     |  |      |       |      |  |   |       | 
|-------------------- |  | ---- | ----- | ---- |  | - | ----- | 
|                     |  | 2001 |       | 2000
|                     |  |      |       |     
|Vehicle interest     |  | $    | 258.0 |      |  | $ | 323.1 | 
|Non-vehicle interest |  |      | 62.8  |      |  |   | 42.8  | 
|                     |  |      |       |      |  |   |       | 
|                     |  | $    | 320.8 |      |  | $ | 365.9 | 
|                     |  |      |       |      |  |   |       | 

Vehicle interest expense was $258.0 million for
the year ended December 31, 2001 and $323.1 million for the year
ended December 31, 2000. As a percentage of revenue,
vehicle interest expense was 8.9% for the year ended
December 31, 2001 and 9.9% for the year ended
December 31, 2000. The decrease in vehicle interest expense
of approximately $65.1 million or 20.1% was due primarily to
lower average vehicle debt outstanding for the comparative
period coupled with lower weighted average interest rates.

Non-vehicle interest expense was $62.8 million
for the year ended December 31, 2001 and $42.8 million for the
year ended December 31, 2000. As a percentage of revenue,
non-vehicle interest expense was 2.2% for the year ended
December 31, 2001 and 1.3% for the year ended
December 31, 2000. The increase in non-vehicle interest
expense of approximately $20.0 million or 46.7% was due
primarily to interest and debt issue costs related to our
interim financing and our revolving credit facilities.
Amortization of debt issue costs and note discount relative to
these facilities was $15.3 million for the year ended
December 31, 2001 and $13.4 million for the year ended
December 31, 2000.



| |                            
| | ---------------------------
| | Other (Income) Expense, Net

The components of other (income) expense,
net as of December 31, are as follows:

|                                                                                     |  |      |      |      |  |   |     | 
|------------------------------------------------------------------------------------ |  | ---- | ---- | ---- |  | - | --- | 
|                                                                                     |  | 2001 |      | 2000
|                                                                                     |  |      |      |     
|Fair value adjustment on interest rate hedges and
    recognition of deferred losses |  | $    | 7.8  |      |  | $ |    | 
|Loss on sale and leaseback transactions                                              |  |      | 4.2  |      |  |   |    | 
|Other (income expense)                                                               |  |      | 7.8  |      |  |   | 3.4 | 
|                                                                                     |  |      |      |      |  |   |     | 
|                                                                                     |  | $    | 19.8 |      |  | $ | 3.4 | 
|                                                                                     |  |      |      |      |  |   |     | 

36



---



##### 



Effective January 1, 2001 we adopted
Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging
Activities (SFAS 133), as amended. The effect
of applying these new standards for the year ended
December 31, 2001 was a mark-to-market loss of $2.0
million. The amounts recognized related to the changes in fair
market value of the time value component of our stand-alone
caps. Due to reductions in our fleet debt and the termination of
certain interest rate hedges we recognized deferred losses of
approximately $5.8 million.

During 2001, we entered into a series of sale and
leaseback transactions, which yielded net proceeds of
approximately $110.3 million. The leases, with terms of not less
than 20 years, are treated as operating leases. Gains
realized on the sale of the properties have been deferred and
are being recognized over the life of the respective leases as a
reduction of the related rent expense. Losses recognized in
earnings approximated $4.2 for the year ended December 31,
2001.

Other expense, net was $7.8 million for the
year ended December 31, 2001 and $3.4 million for year
ended December 31, 2000. The increase is due to the higher
spending on legal and bank fees to amend our various credit
facilities.



| |                           
| | --------------------------
| | Provision for Income Taxes

The provision for income taxes was $103.5
million, of which $4.5 million is included in the
cumulative effect of change in accounting principle, net of
taxes, for the year ended December 31, 2001 and
$3.9 million for the year ended December 31, 2000.
During the third quarter of 2001 we recognized a charge of
$103.5 million related to the establishment of a valuation
allowance for certain tax benefits and net operating loss
carry-forwards. As a result of significant adverse changes in
the present business environment, current operating cash flow
losses and projected operating cash flow losses for the
foreseeable future, management believed that it was more likely
than not that the tax assets were no longer realizable.

Quarterly Results of Operations
(unaudited)

The following sets forth our summary quarterly
results of continuing operations for the years ended
December 31, 2002 and December 31, 2001 (dollars in
millions except revenue per day). This data is all unaudited and
has been restated to reflect the discontinuation of our Alamo
Local Market operations:

|                                                                    |  |         |         |   |  |         |       |   |  |         |         |   |  |         |       |   |  |      |         |   |  |  |       |   |  |   |         |   |  |  |       |   |  |   |         |   |  |  |       |  
|------------------------------------------------------------------- |  | ------- | ------- | - |  | ------- | ----- | - |  | ------- | ------- | - |  | ------- | ----- | - |  | ---- | ------- | - |  |  | ----- | - |  | - | ------- | - |  |  | ----- | - |  | - | ------- | - |  |  | ----- | -
|                                                                    |  | First   |         |   |  | Second  |       |   |  | Third   |         |   |  | Fourth  |       |   |  | Full |         |  
|                                                                    |  | Quarter |         | % |  | Quarter |       | % |  | Quarter |         | % |  | Quarter |       | % |  | Year |         | %
|                                                                    |  |         |         |   |  |         |       |   |  |         |         |   |  |         |       |   |  |      |         |  
|2002                                                                |  |         |         |   |  |         |       |   |  |         |         |   |  |         |       |   |  |      |         |   |  |  |       |   |  |   |         |   |  |  |       |   |  |   |         |   |  |  |       |  
|Revenue                                                             |  | $       | 552.1   |   |  |         | 100.0 |   |  | $       | 620.1   |   |  |         | 100.0 |   |  | $    | 682.0   |   |  |  | 100.0 |   |  | $ | 539.6   |   |  |  | 100.0 |   |  | $ | 2,393.8 |   |  |  | 100.0 |  
|Direct operating costs                                              |  |         | 266.6   |   |  |         | 48.2  |   |  |         | 273.8   |   |  |         | 44.3  |   |  |      | 295.8   |   |  |  | 43.4  |   |  |   | 268.4   |   |  |  | 49.6  |   |  |   | 1,104.6 |   |  |  | 46.1  |  
|Vehicle depreciation, net                                           |  |         | 172.6   |   |  |         | 31.3  |   |  |         | 191.7   |   |  |         | 30.9  |   |  |      | 191.7   |   |  |  | 28.2  |   |  |   | 161.8   |   |  |  | 30.0  |   |  |   | 717.8   |   |  |  | 30.0  |  
|Selling, general and administrative                                 |  |         | 132.7   |   |  |         | 24.0  |   |  |         | 131.7   |   |  |         | 21.2  |   |  |      | 123.0   |   |  |  | 18.0  |   |  |   | 110.4   |   |  |  | 20.5  |   |  |   | 497.8   |   |  |  | 20.8  |  
|Transition cost                                                     |  |         | 46.7    |   |  |         | 8.5   |   |  |         | 63.2    |   |  |         | 10.2  |   |  |      | 58.3    |   |  |  | 8.5   |   |  |   | (3.3    | ) |  |  | (0.6  | ) |  |   | 164.9   |   |  |  | 6.9   |  
|Interest income                                                     |  |         | (1.4    | ) |  |         | (0.3  | ) |  |         | (1.1    | ) |  |         | (0.2  | ) |  |      | (1.1    | ) |  |  | (0.2  | ) |  |   | (1.1    | ) |  |  | (0.2  | ) |  |   | (4.7    | ) |  |  | (0.2  | )
|Interest expense                                                    |  |         | 45.3    |   |  |         | 8.2   |   |  |         | 47.3    |   |  |         | 7.6   |   |  |      | 55.3    |   |  |  | 8.1   |   |  |   | 58.6    |   |  |  | 10.9  |   |  |   | 206.5   |   |  |  | 8.6   |  
|Other (income)/expense, net                                         |  |         | 12.2    |   |  |         | 2.2   |   |  |         | 13.5    |   |  |         | 2.1   |   |  |      | 8.3     |   |  |  | 1.2   |   |  |   | 8.7     |   |  |  | 1.6   |   |  |   | 42.7    |   |  |  | 1.8   |  
|                                                                    |  |         |         |   |  |         |       |   |  |         |         |   |  |         |       |   |  |      |         |   |  |  |       |   |  |   |         |   |  |  |       |   |  |   |         |   |  |  |       |  
|Loss from continuing operations before benefit
    for income taxes |  | $       | (122.6  | ) |  |         | (22.1 | ) |  | $       | (100.0  | ) |  |         | (16.1 | ) |  | $    | (49.3   | ) |  |  | (7.2  | ) |  | $ | (63.9   | ) |  |  | (11.8 | ) |  | $ | (335.8  | ) |  |  | (14.0 | )
|                                                                    |  |         |         |   |  |         |       |   |  |         |         |   |  |         |       |   |  |      |         |   |  |  |       |   |  |   |         |   |  |  |       |   |  |   |         |   |  |  |       |  
|Key statistics                                                      |  |         |         |   |  |         |       |   |  |         |         |   |  |         |       |   |  |      |         |   |  |  |       |   |  |   |         |   |  |  |       |   |  |   |         |   |  |  |       |  
|Rental revenue per day                                              |  | $       | 38.59   |   |  |         |       |   |  | $       | 39.00   |   |  |         |       |   |  | $    | 38.70   |   |  |  |       |   |  | $ | 37.04   |   |  |  |       |   |  | $ | 38.36   |   |  |  |       |  
|Charge days                                                         |  |         | 14.0    |   |  |         |       |   |  |         | 15.6    |   |  |         |       |   |  |      | 17.3    |   |  |  |       |   |  |   | 14.4    |   |  |  |       |   |  |   | 61.3    |   |  |  |       |  
|Average fleet                                                       |  |         | 202,376 |   |  |         |       |   |  |         | 222,277 |   |  |         |       |   |  |      | 233,767 |   |  |  |       |   |  |   | 199,390 |   |  |  |       |   |  |   | 214,453 |   |  |  |       |  
|Utilization                                                         |  |         | 77.1    | % |  |         |       |   |  |         | 77.2    | % |  |         |       |   |  |      | 80.4    | % |  |  |       |   |  |   | 78.0    | % |  |  |       |   |  |   | 78.3    | % |  |  |       |  

37



---



##### 



|                                                                    |  |         |         |   |  |         |       |   |  |         |         |   |  |         |       |   |  |      |         |   |  |  |       |   |  |   |         |   |  |  |       |   |  |   |         |   |  |  |       |  
|------------------------------------------------------------------- |  | ------- | ------- | - |  | ------- | ----- | - |  | ------- | ------- | - |  | ------- | ----- | - |  | ---- | ------- | - |  |  | ----- | - |  | - | ------- | - |  |  | ----- | - |  | - | ------- | - |  |  | ----- | -
|                                                                    |  | First   |         |   |  | Second  |       |   |  | Third   |         |   |  | Fourth  |       |   |  | Full |         |  
|                                                                    |  | Quarter |         | % |  | Quarter |       | % |  | Quarter |         | % |  | Quarter |       | % |  | Year |         | %
|                                                                    |  |         |         |   |  |         |       |   |  |         |         |   |  |         |       |   |  |      |         |  
|2001                                                                |  |         |         |   |  |         |       |   |  |         |         |   |  |         |       |   |  |      |         |   |  |  |       |   |  |   |         |   |  |  |       |   |  |   |         |   |  |  |       |  
|Revenue                                                             |  | $       | 705.6   |   |  |         | 100.0 |   |  | $       | 784.9   |   |  |         | 100.0 |   |  | $    | 836.0   |   |  |  | 100.0 |   |  | $ | 570.2   |   |  |  | 100.0 |   |  | $ | 2,896.7 |   |  |  | 100.0 |  
|Direct operating costs                                              |  |         | 304.5   |   |  |         | 43.1  |   |  |         | 323.6   |   |  |         | 41.1  |   |  |      | 346.0   |   |  |  | 41.3  |   |  |   | 295.4   |   |  |  | 51.7  |   |  |   | 1,269.5 |   |  |  | 43.8  |  
|Vehicle depreciation, net                                           |  |         | 217.7   |   |  |         | 30.8  |   |  |         | 246.2   |   |  |         | 31.4  |   |  |      | 266.0   |   |  |  | 31.9  |   |  |   | 193.0   |   |  |  | 33.9  |   |  |   | 922.9   |   |  |  | 31.9  |  
|Selling, general and administrative                                 |  |         | 151.6   |   |  |         | 21.5  |   |  |         | 154.1   |   |  |         | 19.6  |   |  |      | 171.2   |   |  |  | 20.5  |   |  |   | 156.4   |   |  |  | 27.4  |   |  |   | 633.3   |   |  |  | 21.8  |  
|Impairment of goodwill                                              |  |         |        |   |  |         |      |   |  |         |        |   |  |         |      |   |  |      | 210.8   |   |  |  | 25.2  |   |  |   |        |   |  |  |      |   |  |   | 210.8   |   |  |  | 7.3   |  
|Amortization of intangibles                                         |  |         | 2.5     |   |  |         | 0.4   |   |  |         | 2.5     |   |  |         | 0.3   |   |  |      | 2.5     |   |  |  | 0.3   |   |  |   | 0.9     |   |  |  | 0.2   |   |  |   | 8.4     |   |  |  | 0.3   |  
|Interest income                                                     |  |         | (1.3    | ) |  |         | (0.2  | ) |  |         | (1.9    | ) |  |         | (0.2  | ) |  |      | (1.6    | ) |  |  | (0.2  | ) |  |   | (1.5    | ) |  |  | (0.3  | ) |  |   | (6.3    | ) |  |  | (0.2  | )
|Interest expense                                                    |  |         | 85.2    |   |  |         | 12.1  |   |  |         | 87.5    |   |  |         | 11.2  |   |  |      | 83.0    |   |  |  | 9.9   |   |  |   | 65.1    |   |  |  | 11.4  |   |  |   | 320.8   |   |  |  | 11.1  |  
|Other/income expense, net                                           |  |         | 6.2     |   |  |         | 0.9   |   |  |         | (0.4    | ) |  |         |      |   |  |      | 4.6     |   |  |  | 0.6   |   |  |   | 9.4     |   |  |  | 1.7   |   |  |   | 19.8    |   |  |  | 0.7   |  
|                                                                    |  |         |         |   |  |         |       |   |  |         |         |   |  |         |       |   |  |      |         |   |  |  |       |   |  |   |         |   |  |  |       |   |  |   |         |   |  |  |       |  
|Loss from continuing operations before benefit
    for income taxes |  | $       | (60.8   | ) |  |         | (8.6  | ) |  | $       | (26.7   | ) |  |         | (3.4  | ) |  | $    | (246.5  | ) |  |  | (29.5 | ) |  | $ | (148.5  | ) |  |  | (26.0 | ) |  | $ | (482.5  | ) |  |  | (16.7 | )
|                                                                    |  |         |         |   |  |         |       |   |  |         |         |   |  |         |       |   |  |      |         |   |  |  |       |   |  |   |         |   |  |  |       |   |  |   |         |   |  |  |       |  
|Key statistics                                                      |  |         |         |   |  |         |       |   |  |         |         |   |  |         |       |   |  |      |         |   |  |  |       |   |  |   |         |   |  |  |       |   |  |   |         |   |  |  |       |  
|Rental revenue per day                                              |  | $       | 36.85   |   |  |         |       |   |  | $       | 36.60   |   |  |         |       |   |  | $    | 36.89   |   |  |  |       |   |  | $ | 35.32   |   |  |  |       |   |  | $ | 36.48   |   |  |  |       |  
|Charge days                                                         |  |         | 18.9    |   |  |         |       |   |  |         | 21.1    |   |  |         |       |   |  |      | 22.3    |   |  |  |       |   |  |   | 15.9    |   |  |  |       |   |  |   | 78.2    |   |  |  |       |  
|Average fleet                                                       |  |         | 266,933 |   |  |         |       |   |  |         | 298,986 |   |  |         |       |   |  |      | 300,881 |   |  |  |       |   |  |   | 224,696 |   |  |  |       |   |  |   | 272,874 |   |  |  |       |  
|Utilization                                                         |  |         | 78.5    | % |  |         |       |   |  |         | 77.6    | % |  |         |       |   |  |      | 80.6    | % |  |  |       |   |  |   | 76.8    | % |  |  |       |   |  |   | 78.5    | % |  |  |       |  



| |            
| | -----------
| | Seasonality

Our business, and particularly the leisure travel
market, is highly seasonal. Our third quarter, which includes
the peak summer travel months, has historically been the
strongest quarter of the year. During the peak season, we
traditionally increase our rental fleet and workforce to
accommodate increased rental activity. As a result, any
occurrence that disrupts travel patterns during the summer
period could have a material adverse effect. The events of
September 11, 2001, which occurred in our third quarter,
had a significant impact on our business. The first and fourth
quarters for our operations are generally the weakest because
there is limited leisure travel and a greater potential for
weather conditions, either adverse or unseasonable, to impact
our business. Moreover, many of our operating expenses such as
rent, general insurance and administrative personnel remain
fixed throughout the year and cannot be reduced during periods
of decreased rental demand. Given the seasonality of our
operations, our revenue and variable operating and selling
expenses are generally higher in aggregate dollars during the
second and third quarters as compared to the first and fourth
quarters. In addition, in part due to seasonality, our cost of
operations as a percentage of revenue is generally higher during
the first and fourth quarters as compared to the second and
third quarters. Charge day volumes have not fully returned to
pre-September 11 levels. As such, prior performance may not
be an indication of future seasonal results.



| |                 
| | ----------------
| | 2002 versus 2001

This section analyzes our quarterly results
during 2002 compared to our quarterly results during 2001.
Revenue, on a quarter over quarter basis, decreased 21.8% in the
first quarter, 21.0% in the second quarter, 18.4% in the third
quarter and 5.4% in the fourth quarter. The declines were
primarily driven by lower volume of charge days, and offset by
higher revenue per day. Charge day volumes declined 25.6% in the
first quarter, 26.1% in the second quarter, 22.5% in the third
quarter and 9.8% in the fourth quarter. Revenue per day
increased 4.7% in the first quarter, 6.6% in the second quarter,
4.9% in the third quarter and 4.9% in the fourth quarter. Charge
day volumes were lower throughout 2002 compared to 2001 due to
poor economic conditions resulting in part in lower air travel
and price and fleet allocation decisions made in 2002 to shift
business toward higher yielding channels of business. The
increase in revenue per day for the year ended December 31,
2002 as compared to the same period in the prior year reflects a
favorable domestic airport pricing environment.

Direct operating costs, on a quarter over quarter
basis, decreased 12.5% in the first quarter, 15.4% in the second
quarter, 14.5% in the third quarter, and 9.1% in the fourth
quarter. The declines are due to cost reduction programs and
lower variable transaction costs due to lower volumes.

38



---



##### 



Depreciation, on a quarter over quarter basis,
decreased 20.7% in the first quarter, 22.1% in the second
quarter, 27.9% in the third quarter and 16.2% in the fourth
quarter. The decrease is due primarily to lower costs due to
operating a smaller average fleet and changes in the mix of our
fleet.

Selling, general and administrative expenses, on
a quarter over quarter basis, decreased 12.5% in the first
quarter, 14.5% in the second quarter, 28.1% in the third quarter
and 29.4% in the fourth quarter. The declines are due to lower
variable selling costs and overhead spending. In the third
quarter of 2002, we reversed $15.0 million of accruals related
to advertising and bonuses.

Interest expense, on a quarter over quarter
basis, decreased 46.8% in the first quarter, 45.9% in the second
quarter, 33.3% in the third quarter and 10.1% in the fourth
quarter. The quarter to quarter relationship is due to lower
average vehicle debt outstanding through operating a lower
average fleet, and lower interest rates.

Cash Flows

Following is a discussion of the major components
of changes in cash flows for the years ended December 31,
2002, 2001 and 2000.



| |                                                   
| | --------------------------------------------------
| | For the Years Ended December 31, 2002 and
    2001



| |                                     
| | ------------------------------------
| | Cash Flows from Operating Activities

Cash provided by operating activities was
$378.8 million for the year ended December 31, 2002,
and $1,343.8 million for the year ended December 31,
2001. The decrease in cash provided by operating activities in
2002 as compared to 2001 is primarily due to reduced proceeds
from vehicle sales through operating a smaller fleet. Associated
with a smaller fleet is the reduction in vehicle depreciation.
The decrease in proceeds from receivables is due to a large
number of manufacturer receivables for vehicle dispositions in
the latter half of the fourth quarter of 2000 being collected in
the first quarter of 2001.



| |                                     
| | ------------------------------------
| | Cash Flows from Investing Activities

Cash flows used in investing activities was
$1.6 million for the year ended December 31, 2002, and
cash flows provided by investing activities were
$84.0 million for the year ended December 31, 2001.
Cash provided by investing activities in 2001 were primarily
derived from our sale and leaseback transactions which were not
recurring in 2002.



| |                                     
| | ------------------------------------
| | Cash Flows from Financing Activities

Cash flows used in financing activities for the
year ended December 31, 2002 was $464.0 million, and
cash flows used in financing activities were
$1,253.5 million for the year ended December 31, 2001.
The decrease in cash flows used in financing activities is
primarily due to increases in proceeds from restricted cash
which were used to fund payments of outstanding vehicle debt and
purchase new vehicles. You should read the Financial
Condition section of Managements Discussion
and Analysis of Financial Condition and Results of
Operations contained herein.



| |                                                   
| | --------------------------------------------------
| | For the Years Ended December 31, 2001 and
    2000



| |                                     
| | ------------------------------------
| | Cash Flows from Operating Activities

Cash flows provided by operating activities were
$1,343.8 million for the year ended December 31, 2001,
and cash flows used in operating activities were
$139.5 million for the year ended December 31, 2000.
The increase in cash provided by operating activities in 2001 as
compared to 2000 is primarily due to reduced vehicle purchases
in order to operate a smaller average fleet, and increases in
proceeds from vehicle manufacturer receivables for reasons
previously discussed. The increase in amounts due from
manufacturers is primarily the result of the timing of cash
receipts from manufacturers for vehicle dispositions.

39



---



##### 





| |                                     
| | ------------------------------------
| | Cash Flows from Investing Activities

Cash flows provided by investing activities were
$84.0 million for the year ended December 31, 2001,
and cash flows provided by investing activities were
$6.0 million for the year ended December 31, 2000. The
increase in cash provided by investing activities, as previously
discussed, is due to proceeds from our sale and leaseback
transactions. Cash flows used in investing activities for
capital additions during the year ended December 31, 2001
were $32.4 million and during the year ended
December 31, 2000 were $71.5 million.



| |                                     
| | ------------------------------------
| | Cash Flows from Financing Activities

Cash flows used in financing activities for the
year ended December 31, 2001 were $1,253.5 million,
and cash flows provided by financing activities were
$10.1 million for the year ended December 31, 2000.
The increase in cash flows used in financing activities in 2001
as compared to 2000 is primarily due to investments in
restricted cash and lower overall net proceeds from other
non-vehicle financings. In addition, in the first half of 2000,
we received capital contributions from our former Parent of
approximately $204.4 million. Please refer to our
discussion of Financial Condition contained within the
Managements Discussion and Analysis of Financial Condition
and Results of Operations.

Financial Condition

Our capital structure consists of vehicle debt,
non-vehicle debt (also referred to on our balance sheet as
other debt), and equity contributed to us by our
former Parent. Vehicle debt represents the debt programs used to
finance our fleet and consists of: (i) asset-backed
medium-term note programs; (ii) lease programs for a
portion of our fleet; and (iii) various other committed and
uncommitted fleet facilities used to fund our European
operations. Our non-vehicle financing consists of: (i) a
debtor-in-possession loan from a vehicle manufacturer (entered
into in the first quarter of 2003); (ii) a three-year
secured revolving credit facility; (iii) a supplemental
term note; (iv) a six-year term loan; (v) notes
payable to a vehicle manufacturer used for working capital; and
(vi) various international working capital arrangements
related to our European and Canadian operations.



| |             
| | ------------
| | Vehicle Debt

We primarily finance our domestic vehicle
purchases through wholly-owned, consolidated, special purpose
financing subsidiaries. These financing subsidiaries obtain
funds by issuing asset-backed medium-term notes into the capital
markets. The financing subsidiaries in turn lease vehicles to
the domestic operating subsidiaries of Alamo and National. Our
international operations in Europe and Canada provide their own
financing for vehicle purchases through various asset-backed
financings, leases and secured loans on a country-by-country
basis.

The Debtors filing for bankruptcy
represented an Event of Default under each of the domestic
financing facilities and certain of our international facilities
for which the parent company is guarantor. However, in the
United States the special purpose financing subsidiaries are not
Debtors and have continued making scheduled interest payments to
the third party note holders.

The Event of Default triggered provisions in the
medium-term note agreements requiring an accelerated repayment
of the amounts outstanding. In the fourth quarter of 2001, MBIA,
our primary debt surety provider, agreed to delay the
accelerated repayment provisions. In February 2002, the
Bankruptcy Court approved, on a final basis, a fleet financing
agreement with MBIA where MBIA allowed for the release of
certain restricted funds supporting the MBIA insured outstanding
series of medium-term notes for the purchase of new vehicles.
The agreement made available up to $1.0 billion of
previously frozen funds for the acquisition of new fleet. On
May 10, 2002, the Bankruptcy Court approved on a final
basis, an agreement with MBIA to allow us to continue to use
$2.3 billion of our fleet financing facilities on a
revolving basis. As such, we are allowed to use proceeds
received from the disposition of vehicles financed by these
facilities to purchase new vehicles. Through a series of court
orders the agreement is set to expire in June 2003. We expect to
file a motion in the second quarter of 2003 to extend this
agreement.

40



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##### 



Additionally in May 2002, we issued a
$275.0 million variable funding asset-backed note. In June
2002, we amended this facility to allow for borrowings of up to
$575.0 million. In August 2002, we refinanced the maturing
variable funding note with the issuance of $600.0 million
of asset-backed medium-term notes with a term of approximately
two years at a floating rate based upon LIBOR. Upon the
emergence from chapter 11, we may need to refinance these
asset-backed medium-term notes. We hedged our floating interest
rate risk through the purchase of an interest rate cap with a
strike price of 6.5%. We expect the interest rate cap to be
effective in hedging interest rate risk.

In the fourth quarter of 2002 we repaid amounts
outstanding under our auction-rate note program.

We are currently in discussions with lenders to
provide funding for seasonal capacity, maintain existing
capacity and replace maturing capacity. However, as a result of
the chapter 11 filing and the Event of Default we cannot provide
any assurance that we will be able to maintain existing capacity
or obtain the needed funding, or at what interest rate and
collateral requirements. Additionally, the Event of Default and
chapter 11 filing has adversely effected the financing
facilities of our international operations. As such, each lender
continues to review their loans with us. There is no assurance
that existing loans will not be cancelled or adversely modified.



| |                 
| | ----------------
| | Non-vehicle Debt

In June 2000, we entered into a three-year
secured revolving credit facility with a borrowing base capacity
of up to $175.0 million at a floating rate, currently based
upon a spread of 2.75% above LIBOR. In the third quarter of
2001, we reduced our capacity under this facility to
$70.0 million of which $63.9 million supported letters
of credit. As of December 31, 2002, $32.7 million of
letters of credit were secured by the facility and approximately
$29.1 million of letters of credit and fees were drawn on
the facility. As a result of the chapter 11 filing we are
precluded from drawing on the facility. We expect that during
2003 substantially all of the holders of outstanding letters of
credit will draw against the facility.

In June 2000 we also entered into a supplemental
secured revolving credit facility with availability of the
lesser of (1) $40.0 million and (2) an amount
equal to $175.0 million less the borrowing base of the
resized $175.0 million secured revolving credit facility.
On its one year maturity date, our $40.0 million
supplemental secured revolving credit facility was converted
into a term loan maturing on May 31, 2003. Interest on the
supplemental secured term loan is payable at a floating rate,
initially based upon a spread of 4.5% above LIBOR and increasing
by 50 basis points on the first day of each January, April,
July and October.

On June 30, 2000 we entered into an
agreement with a lender for interim financing of $225.0 million
in connection with our separation from our former Parent. The
initial term of the interim financing was 12 months. We
have extended $200.0 million of the interim financing into
a six-year term loan, and in accordance with the term of the
agreement, upon conversion to the term loan we issued warrants
representing approximately 3.7 million shares and we paid a
fee of $6.0 million. The term loan bears interest at an
increasing rate starting at 14.5% as of October 1, 2001 and
increases by 50 basis points each 90-day period up to a
maximum rate of 18.0%. The term loan may, at the option of the
lender, be exchanged into a fixed-rate note with a similar
maturity. The warrants have a term of 10 years and an
exercise price of $0.01 per share. The fair value of the
warrants on June 30, 2001, the date of issue, was
$11.0 million. The fair value of the warrants was treated
as a note discount, and was amortized as a component of interest
expense, over the term of the refinancing. As discussed further
in this section, as of December 31, 2002 all remaining note
discounts for warrants issued have been reversed. Upon request
of the holder of the notes and warrants we are required to file
registration statements with the Securities and Exchange
Commission which will register the fixed-rate notes referred to
above and the shares of common stock issuable upon the exercise
of the warrants. To the extent we do not file these registration
statements or they are not declared effective within certain
time constraints we will be required to pay penalties. In
connection with the consummation of our sale and leaseback
transactions, we were obligated to use the proceeds to pay-down
the interim financing. However, as part of an amendment to the
interim rate facility, the lender agreed that such proceeds
could be used for general corporate purposes until
September 30, 2001, at which time we would be required to
pay-down the interim financing by approximately $70.0 million.

41



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##### 



As of September 30, 2001, we further amended
our financing facilities, deferring the $70.0 million
principal payment until November 30, 2001, and suspended
certain financial covenants through November 15, 2001.
Concurrent with the amendments we issued additional warrants
representing approximately 1.4 million shares of common
stock. These warrants also have a term of ten years from their
issue date and an exercise price of $0.01 per share. The fair
value of the additional warrants on September 30, 2001, the
date of issue, was $0.7 million. The fair value of the
warrants was recorded as a note discount and was amortized as a
component of interest expense over the term of the note using
the effective interest method.

In the first quarter of 2003, the Bankruptcy
Court approved an order regarding the settlement of claims
concerning the holder of our $200.0 million interim
financing fixed-rate note. The order provides for an allowed
secured claim of $180.0 million and an allowed unsecured
claim of $25.0 million. The secured claim will accrue
interest at 10%, half of which will be paid currently with the
remaining half paid upon emergence. As of December 31,
2002, we reversed to transition and reorganization expense
accrued interest in excess of, debt issue costs and note
discounts netting approximately $36.0 million.

The Debtors filing for chapter 11
represented an Event of Default under each of these financing
facilities. Under bankruptcy law, the Debtors are not
permitted to make scheduled principal and interest payments
unless specifically ordered by the Bankruptcy Court.

Regarding our international operations, in April
2002 our United Kingdom subsidiary entered into a fleet
financing and working capital facility with third party lenders
which allows the operation, for limited periods of time, to use
certain vehicle proceeds, usually classified as restricted cash,
to support general working capital needs thereby reducing the
daily draw of its £20.0 million or approximately
$33.0 million working capital facility.

In the first quarter of 2003, we entered into a
secured loan agreement with a vehicle supplier in an amount not
to exceed $62.5 million. In exchange for the lending
commitment, we committed to purchase a stated number of model
year 2004 vehicles from the lender. A portion of the loan is
expected to be repaid by forgoing vehicle incentive payments
earned during the last half of 2003 and into 2004, should the
debt remain outstanding. We currently expect to repay any
amounts outstanding under the loan before December 30,
2003. However, any amounts outstanding under the agreement on
December 30, 2003 will begin to accrue interest at a
floating rate based on a spread over LIBOR. Notwithstanding the
forgoing, amounts outstanding under the agreement are to be
repaid at the earliest of: (i) June 30, 2004;
(ii) closing of a sale of all or part of the Debtors
estate; (iii) appointment of a trustee; (iv) the
effective date of a confirmed plan of reorganization;
(v) conversion of the Bankruptcy Case to a chapter 7
case; (vi) dismissal of the core Bankruptcy Case; (vii)
appointment of an examiner to manage the affairs of the Debtor;
or (viii) an Event of Default, which includes among other
things, a material adverse change in our business. The agreement
includes negative covenants which prohibits our ability to,
among other things, and subject to exceptions, sell assets, pay
dividends, make investments, incur debt, incur liens, issue
guarantees and enter into transactions with affiliates.



| |               
| | --------------
| | Surety Bonding

In the normal course of business, we are required
to post performance and surety bonds, letters of credit, and/or
cash deposits as financial guarantees of our performance. To
date, we have satisfied financial responsibility requirements
for airports, regulatory agencies and insurance companies by
making cash deposits, obtaining surety bonds or by obtaining
bank letters of credit. At March 6, 2003, we had
outstanding surety bonds of approximately $127.2 million, which
expire during 2003. Because of our financial performance and a
difficult surety market we provided our principal surety
provider a security interest in our assets. Continued losses
will adversely affect our financial condition and our ability to
maintain or renew these surety bonds. In addition, we can not
assure you that our primary surety provider will continue to
consent to maintaining these surety bonds or provide new bonds
or renew existing bonds as needed, which could have a material
adverse effect on our business, consolidated results of
operations and/or our financial condition. In the first quarter
of 2002, we entered into an agreement, approved by the
Bankruptcy Court, with our primary surety provider to post
additional cash collateral in exchange for the commitment of the
surety provider to issue designated surety bonds for the
remainder of 2002. As of March 6, 2003 we had deposited
$12.5 million with our primary

42



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##### 



surety provider. On March 17, 2003, the
Bankruptcy Court approved a new agreement with our primary
surety provider, which provides for us to deposit up to an
additional $35.5 million with our primary surety provider
in exchange for their commitment to issue, renew or refrain from
canceling surety bonds in the amount of up to
$126.0 million for the remainder of 2003. Additionally, our
former Parent provides financial guarantees of approximately
$29.5 million in favor of our surety provider.




| |                      
| | ---------------------
| | Financing Requirement

As previously discussed we are operating certain
of our domestic operating subsidiaries under Bankruptcy Court
protection. The protection enabled us to accumulate cash by not
paying our obligations timely and deferring, pursuant to the
Bankruptcy Code, two of our depreciation payments on our fleet.

As of March 31, 2003, cash and cash
equivalents approximated $99.0 million of which
$77.9 million is held by the Debtors. On April 10,
2002, the Bankruptcy Court approved our use of this cash
collateral, subject to achieving certain cash flow projections
as debtors-in-possession through September 22, 2002. In
March 2003, the Bankruptcy Court extended our approved use of
this cash collateral to July 19, 2003. During this period,
we plan to use this cash collateral to finance our ongoing
operations.

Separately, we have been engaged in
investigating, and are continuing to pursue, strategic
alternatives to maximize stakeholder value and strengthen our
financial condition. These strategic alternatives may include
the sale of all or part of our business. A sale of all or part
of our business could result in proceeds substantially less than
the carrying amounts of assets and liabilities.

In connection with these strategic initiatives,
certain parties engaged in our reorganization or financing may
earn contingent incentives, success or emergence fees. The
success fees are to be paid based upon a sliding scale affected
by the passage of time and the value realized upon
reorganization or sale of our business.

We expect these success or emergence fees would
not exceed $21.0 million of which, $12.5 million is
payable to our primary vehicle debt surety provider.




| |              
| | -------------
| | Contingencies

In March 2002, the Bankruptcy Court approved, on
a final basis, a key employee retention plan. The purpose of the
plan is to retain certain key employees critical to the
near-term success of our restructuring by providing financial
incentives and security against unanticipated termination of
employment and to incentivize them to maximize stockholder
value. There are three levels of participation in the plan (Tier
I, Tier II, and Tier III.)

The Base Retention (Tier I) is available to
all participants in the plan and is payable upon the earlier of
June 30, 2003, involuntary termination of employment
other than for cause or death or permanent
disability, sale of the company or the consummation by the
Bankruptcy Court of a plan of reorganization. The Base Retention
approximates fifty percent of the participants base salary
and is payable in a cumulative lump sum, approximating $7.0
million.

The Holdback Retention is for Tier II and Tier
III participants payable upon a Triggering Event. A
Triggering Event occurs when a plan of
reorganization of the Company under chapter 11 is approved by
the United States Bankruptcy Court so long as the plan of
reorganization is subsequently confirmed by the Bankruptcy Court
without material modifications, or the date upon which a motion
seeking approval of the sale of all or substantially all of the
operating assets of the Company is approved, so long as the sale
is subsequently consummated without material modifications. The
Holdback Retention is paid based upon a sliding scale affected
by the passage of time and value realized in the
Triggering Event.

During the time we were part of our former
Parents consolidated Federal Income Tax Return, our former
Parent engaged in certain transactions that are of a type that
the Internal Revenue Service has indicated it intends to
challenge. Based upon disclosures from AutoNation a settlement
has been reached with the Internal Revenue Service, however,
until and unless paid by AutoNation, we may still have several
liability with AutoNation to the Internal Revenue Service for
all transactions, that occurred while we were part of

43



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##### 



AutoNations consolidated Federal tax
returns. We have included below an excerpt from
AutoNations periodic report on Form 10-Q as of
March 31, 2003 regarding these transactions:




| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In March 2003, the Company (AutoNation)
    entered into a settlement agreement with the Internal Revenue
    Service (IRS) with respect to the tax treatment of
    certain transactions entered into by the Company (AutoNation) in
    1997 and 1999, including a transaction that generally had the
    effect of accelerating projected tax deductions relating to
    health and welfare benefits. Under the agreement, the Company
    (AutoNation) owes the IRS net aggregate payments of
    approximately $470 million. An initial net payment of
    approximately $350 million is due in March 2004, and three
    subsequent payments of approximately $40 million each are due in
    March 2005, 2006 and 2007, respectively.

Recently we reached an agreement with our former
Parent and the Unsecured Creditors Committee that resolves
potential claims relating to our bankruptcy, including potential
claims arising out of the spin-off from AutoNation in 2000. The
agreement is subject to bankruptcy court approval, which the
parties will seek to obtain in early May.

The key terms of the settlement include the
following: (i) the Companys former Parent will
continue to guarantee certain surety bonds issued by the Company
until December 2006; our former Parents obligations under
this guarantee are capped at $29.5 million; (ii) in
addition, upon our successful exit from bankruptcy, our former
Parent will guarantee an additional $10.5 million of our surety
bonds until December 2006 and, upon a permanent reduction of the
guarantees, our former Parent will pay one-half of the permanent
reduction, or up to $20 million, to a trust established for the
benefit of our unsecured creditors; (iii) the Company and
the unsecured creditors will provide a full release of any
potential claims against our former Parent arising from the
spin-off and our former Parent will release most of the
pre-petition claims that it has asserted in the bankruptcy;
(iv) our former Parent will indemnify us for any
adjustments made by the IRS to the consolidated Federal Income
Tax Return for the periods we were part of such returns.



| |                 
| | ----------------
| | Continued Losses

Continued losses will adversely affect our
financial condition and may affect our ability to obtain
incremental financing, satisfy our liquidity needs, comply with
covenants contained within our loan agreements and fully realize
certain deferred tax and intangible assets. There is no
assurance that we will be able to generate sufficient operating
cash flows, secure additional financing facilities to meet our
on-going financing needs, refinance existing indebtedness,
comply with covenants in future periods or fully realize certain
deferred tax and intangible assets. Our continued losses and
chapter 11 filing raise substantial doubt about our ability to
continue as a going concern.



| |            
| | -----------
| | Derivatives

Separately, we use interest rate derivative
financial instruments to manage the impact of interest rate
changes on our variable-rate vehicle debt. During the year,
these derivative instruments consisted of interest rate caps.
Our floor agreements were terminated by our counterparty as of
November 14, 2001. Typically, the amounts exchanged by the
counter parties are based upon the notional amounts and other
terms, generally related to interest rates. Notional principal
amounts related to interest rate caps were $3.48 billion and
$2.88 billion as of December 31, 2002 and 2001,
respectively. The interest rate caps and floors effected a
weighted average interest rate of 6.65% for the year ended
December 31, 2002, 6.25% for the year ended
December 31, 2001 and 6.79% for the year ended
December 31, 2000. Variable rates on our remaining interest
rate caps are indexed to LIBOR.



| |                                                       
| | ------------------------------------------------------
| | Contractual Obligations and Commercial
    Commitments

We have various commitments primarily related to
long-term debt, commercial paper and short-term borrowings
outstanding for vehicle purchases, airport concession fee and
operating lease commitments related to airport and other
facilities, and vehicle purchases. As a result of the bankruptcy
we can provide no assurances that we will be able to fund these
commitments in whole or in part with cash generated from
operations, sales proceeds from disposal of used vehicles or the
continuation of asset-backed notes to replace

44



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##### 



existing notes when they mature. The following
table provides details regarding our contractual cash
obligations and other commercial commitments subsequent to
December 31, 2002 assuming we remain a going concern:


PAYMENTS DUE OR COMMITMENT EXPIRATION BY
PERIOD

|                              |                                 |               |         |         |  |      |         |       |  |      |         |         |  |         |       |       |  |   |      |      |  |   |      |      |  |   |       |       | 
|----------------------------- | ------------------------------- | ------------- | ------- | ------- |  | ---- | ------- | ----- |  | ---- | ------- | ------- |  | ------- | ----- | ----- |  | - | ---- | ---- |  | - | ---- | ---- |  | - | ----- | ----- | 
|                              |                                 |               |         |         |  |      |         |       |  |      |         |         |  | Beyond 
|                              |                                 | Total         |         | 2003    |  | 2004 |         | 2005  |  | 2006 |         | 2007    |  | 5 Years
|                              |                                 |               |         |         |  |      |         |       |  |      |         |         |  |        
|                              |                                 |              
|                              |                                 | (In millions)
|Contractual cash obligations: |                                 |               |         |         |  |      |         |       |  |      |         |         |  |         |       |       |  |   |      |      |  |   |      |      |  |   |       |      
|                              | Vehicle debt                    |               | $       | 3,251.0 |  |      | $       | 934.2 |  |      | $       | 1,909.9 |  |         | $     | 406.9 |  |   | $    |     |  |   | $    |     |  |   | $     |      | 
|                              | Non-vehicle debt                |               |         | 310.7   |  |      |         | 310.7 |  |      |         |        |  |         |       |      |  |   |      |     |  |   |      |     |  |   |       |      | 
|                              | Operating lease commitments     |               |         | 944.3   |  |      |         | 143.9 |  |      |         | 111.0   |  |         |       | 84.8  |  |   |      | 67.4 |  |   |      | 62.6 |  |   |       | 474.6 | 
|                              | Deposits to surety provider     |               |         | 35.5    |  |      |         | 35.5  |  |      |         |        |  |         |       |      |  |   |      |     |  |   |      |     |  |   |       |      | 
|                              | Key employee retention payments |               |         | 7.0     |  |      |         | 7.0   |  |      |         |        |  |         |       |      |  |   |      |     |  |   |      |     |  |   |       |      | 
|                              |                                 |               |         |         |  |      |         |       |  |      |         |         |  |         |       |       |  |   |      |      |  |   |      |      |  |   |       |      
|                              |                                 | $             | 4,548.5 |         |  | $    | 1,431.3 |       |  | $    | 2,020.9 |         |  | $       | 491.7 |       |  | $ | 67.4 |      |  | $ | 62.6 |      |  | $ | 474.6 |      
|                              |                                 |               |         |         |  |      |         |       |  |      |         |         |  |         |       |       |  |   |      |      |  |   |      |      |  |   |       |      

|                |                               |               |       |       |  |      |       |       |  |      |   |      |  |         |   |   |  |   |   |   |  |   |   |   |  |   |   |   | 
|--------------- | ----------------------------- | ------------- | ----- | ----- |  | ---- | ----- | ----- |  | ---- | - | ---- |  | ------- | - | - |  | - | - | - |  | - | - | - |  | - | - | - | 
|                |                               |               |       |       |  |      |       |       |  |      |   |      |  | Beyond 
|                |                               | Total         |       | 2003  |  | 2004 |       | 2005  |  | 2006 |   | 2007 |  | 5 Years
|                |                               |               |       |       |  |      |       |       |  |      |   |      |  |        
|                |                               |              
|                |                               | (In millions)
|Credit Support: |                               |               |       |       |  |      |       |       |  |      |   |      |  |         |   |   |  |   |   |   |  |   |   |   |  |   |   |  
|                | Outstanding letters of credit |               | $     | 32.7  |  |      | $     | 32.7  |  |      | $ |     |  |         | $ |  |  |   | $ |  |  |   | $ |  |  |   | $ |  | 
|                | AutoNation guarantee          |               |       | 29.5  |  |      |       | 29.5  |  |      |   |     |  |         |   |  |  |   |   |  |  |   |   |  |  |   |   |  | 
|                | Surety bonds                  |               |       | 127.2 |  |      |       | 127.2 |  |      |   |     |  |         |   |  |  |   |   |  |  |   |   |  |  |   |   |  | 
|                |                               |               |       |       |  |      |       |       |  |      |   |      |  |         |   |   |  |   |   |   |  |   |   |   |  |   |   |  
|                |                               | $             | 189.4 |       |  | $    | 189.4 |       |  | $    |  |      |  | $       |  |   |  | $ |  |   |  | $ |  |   |  | $ |  |  
|                |                               |               |       |       |  |      |       |       |  |      |   |      |  |         |   |   |  |   |   |   |  |   |   |   |  |   |   |  

Transaction with Former Parent

In connection with our spin-off from our former
Parent, AutoNation contributed certain assets and liabilities to
us. Such contributions included (i) cash approximating
$204.4 million, (ii) an insurance subsidiary with a net
deficit of $39.1 million and (iii) the current portion of
taxes payable and certain other non-cash liabilities
approximating $6.7 million. The shareholders equity
balance is subject to further adjustment pending potential
changes in estimated shared assets and liabilities between
AutoNation and us as well as certain other matters. During the
three months ended September 30, 2000 we reimbursed
AutoNation $4.6 million in cash due to changes in the
estimated shared assets and liabilities between our companies.
For the three months ended December 31, 2000 we settled
certain non-cash liabilities with AutoNation approximating
$2.5 million.

Critical Accounting Policies



| |        
| | -------
| | General

Our discussion and analysis of our financial
condition and results of operations are based upon our
consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the
United States assuming we are a going concern. The preparation
of these financial statements requires us to make estimates and
judgements that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. On an ongoing basis, we
evaluate our estimates, including those related to areas that
require a significant level of judgement or are otherwise
subject to an inherent degree of uncertainty. These areas
include allowances for doubtful accounts, revenue earning
vehicles, intangible and long-lived assets, self-insured
liabilities, income taxes and commitments and contingencies. We
base our estimates on historical experience, our observance of
trends in particular areas, information and/or valuations
available from outside sources and various other assumptions
that we believe to be reasonable under the circumstances and
which form the basis for making judgements about the carrying
value of assets and liabilities that may not be readily apparent
from other sources. Actual amounts could differ significantly
from amounts previously estimated.

45



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We believe that of our significant accounting
policies (please refer to Note 6 of our Consolidated Financial
Statements herein), the following may involve a higher degree of
judgement and complexity.



| |                                
| | -------------------------------
| | Allowance for Doubtful Accounts

We maintain allowances for doubtful accounts for
estimated losses from the inability or failure of our customers
to make payments for rental activity, damage reimbursement or
sales of vehicles. The allowances are based on current trends
and historical collection experience and a percentage of our
accounts receivable by aging category. In determining these
percentages, we look to historical write-offs, current trends in
the credit quality of our customer base and in billing dispute
resolution as well as changes in credit policy.



| |                         
| | ------------------------
| | Revenue Earning Vehicles

Vehicles are stated at cost less accumulated
depreciation. We recognize depreciation on program vehicles
based upon the applicable manufacturer depreciation schedule
straight-line over the vehicles expected useful life.
Typical useful life would range from three to fourteen months
with an average useful life of nine months. Depreciation expense
is recognized on non-program vehicles in amounts expected to
result in the recovery of estimated residual values upon
disposal. In determining these depreciation rates, we look at
historical disposal experience and holding periods, trends in
the wholesale and retail market for vehicles and model specific
factors where warranted. Vehicles held for disposal are
evaluated as a group and recorded at the lower-of-cost-or-market
(less estimated selling costs).



| |                         
| | ------------------------
| | Self-Insured Liabilities

We are largely self-insured with respect to
personal and property liability claims up to specified limits.
Third party insurance is maintained in limited areas and for
claims in excess of those specified limits. The liability
recorded as a result of these actuarially computed estimates may
experience material changes from year to year as incurred but
not reported incidents become known, and known claims are
settled.



| |             
| | ------------
| | Income Taxes

We record a valuation allowance to reduce our
deferred tax assets to the amount which, we estimate, is more
likely than not to be realized. While we have considered future
taxable income and ongoing tax planning strategies in assessing
the need for the valuation allowance, in the event we were to
determine that we would be able to realize deferred tax assets
in the future in excess of the net recorded amount, the
resulting adjustment to deferred tax assets would increase
income in the period such determination was made. Similarly,
should we determine that we would not be able to realize all or
part of our net deferred tax assets in the future, an adjustment
to deferred tax assets would decrease income in the period such
determination was made.



| |                      
| | ---------------------
| | Financial Instruments

We estimate fair values of each of our financial
instruments, including derivative instruments. These financial
instruments are not publicly traded on an organized exchange. In
the absence of quoted market prices, we must develop an estimate
of fair value using present value cash flow models, which may
involve significant judgements and assumptions, including
estimates of future interest rate levels based on interest rate
yield curves and estimation of the timing of future cash flows.
The use of different assumptions may have a material effect on
the estimated fair value amounts recorded in the financial
statements. In addition, hedge accounting requires that at the
beginning of each hedge period, we justify the probability of
the occurrence of transactions for cash flow hedges. The use of
different assumptions and changing market conditions may impact
the results of the effectiveness assessment and ultimately the
timing of when the underlying hedged items are recorded in
earnings. See also Item 7A. Quantitative and
Qualitative Disclosures About Market Risk.

46



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##### 





| |                                     
| | ------------------------------------
| | Goodwill and Other Intangible Assets

We have reviewed the carrying values of our
goodwill and other intangible assets, primarily debt issue cost,
as required by SFAS No. 142, Goodwill and Other
Intangible Assets, by comparing the carrying values of our
reporting units to their fair values and determined that the
carrying amounts of our reporting units did not exceed their
respective fair values. When determining fair value, we utilized
various assumptions, including projections of future cash flows,
appraisals from investment advisors or recent offers. A change
in these underlying assumptions will cause a change in the
results of the tests and, as such, could cause fair value to be
less than the respective carrying amounts. In such event, we
would then be required to record a charge, which would impact
earnings. We will continue to review the carrying values of
goodwill and other intangible assets for impairment annually, or
more frequently if circumstances indicate impairment may have
occurred.

New Accounting Pronouncements

In June 2002, the FASB issued SFAS No. 146,
Accounting for Costs Associated with Exit or Disposal
Activities. SFAS 146 addresses financial accounting and
recognition of liabilities for costs associated with exit or
disposal activities, requiring that such liabilities be
recognized and measured initially at fair value only when a
liability is incurred. SFAS No. 146 will be effective for
exit or disposal activities that are initiated after December
31, 2002. Management does not believe the adoption of SFAS
No. 146, as of January 1, 2003, will have a material
effect on the Companys financial position, results of
operations or cash flows.

In November 2002, the FASB issued Interpretation
No. 45 (FIN 45), Guarantors
Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others. FIN 45
requires a guarantor to recognize, at the inception of certain
guarantees, a liability for the fair value of the obligation
undertaken in issuing the guarantee. FIN 45 also requires
additional disclosure about the guarantors obligations
under certain guarantees that it has issued. The initial
recognition and measurement provisions of this interpretation
are applicable prospectively to guarantees issued or modified
after December 31, 2002 and the disclosure requirements are
effective for financial statements issued after
December 15, 2002. Management does not believe the adoption
of FIN 45 will have a material impact on our consolidated
financial position, results of operations or cash flows.

In December 2002, the FASB issued SFAS
No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure. SFAS
No. 148 amends SFAS No. 123, Accounting for
Stock-Based Compensation to provide alternative methods of
transition for a voluntary change to the fair value based method
of accounting for stock-based employee compensation. In
addition, this statement amends the disclosure requirement of
SFAS No. 123 to require more prominent and more frequent
disclosures in both annual and interim financial statements
about the effects of stock-based compensation. The annual and
interim disclosure guidance of SFAS No. 148 is effective
for fiscal years beginning after December 15, 2002.
Management does not believe the adoption of SFAS 148 will have a
material impact on our consolidated financial position, results
of operations or cash flows.

In January 2003, the FASB issued FIN 46,
Consolidation of Variable Interest Entities. This
interpretation of Accounting Research Bulletin No. 51,
Consolidated Financial Statements, addresses when a
company should include in its financial statements the assets
and liabilities of unconsolidated variable interest entities.
FIN 46 is effective for all variable interest entities created
after January 31, 2003 and for variable interest entities
in which an enterprise obtains an interest after that date. FIN
46 is effective for fiscal years or interim periods beginning
after June 15, 2003 for variable interest entities in which an
enterprise holds a variable interest that it acquired before
February 15, 2003. Management does not believe the adoption
of FIN 46 will affect the Companys financial position,
results of operations or cash flows.

Forward-Looking Statements

Certain statements and information included in
this Form 10-K constitute forward-looking
statements within the meaning of the Federal Private
Securities Litigation Reform Act of 1995. These statements
contain or express our intentions, beliefs, expectations,
strategies or predictions for the future. In addition, from time
to time we or our representatives may make forward-looking
statements, orally or in writing. Furthermore,

47



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##### 



such forward-looking statements may be included
in our filings with the Securities and Exchange Commission or
press releases or oral statements made by or with the approval
of one of our executive officers. Forward-looking statements in
this Form 10-K include, among others, statements regarding:




| |   |                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our ability to execute our restructuring plans
    and achieve the desired financial results and cost savings;                                                                                                                      
|
| |  | our expectations regarding our ability to finance
    our liquidity needs;                                                                                                                                                          
|
| |  | our ability to obtain credit facilities, surety
    bonds, letters of credit and other services and the costs and
    other financial terms of these facilities and services and our
    ability to refinance existing indebtedness;
|
| |  | the continued demand for our rental vehicles and
    our ability to adjust the size of our fleet to meet demand;                                                                                                                    
|
| |  | our ability to successfully emerge from chapter
    11;                                                                                                                                                                             
|
| |  | our ability to achieve operating leverage and
    economies of scale in our business;                                                                                                                                               
|
| |  | our ability to consolidate our brands at our
    airport locations;                                                                                                                                                                 
|
| |  | our ability to consolidate our information
    technology systems;                                                                                                                                                                  
|
| |  | our ability to restructure our existing licensee
    agreements;                                                                                                                                                                    
|
| |  | our ability to achieve cost savings through the
    consolidation of our business in certain areas; and                                                                                                                             
|
| |  | our ability to generate cash flow from operations.                                                                                                                                                                                  

These forward-looking statements involve known
and unknown risks, uncertainties and other factors which may
cause our actual results, performance, or achievements to be
materially different from any future results, performance, or
achievements expressed or implied by these forward-looking
statements. These factors include, among other things:



| |   |                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | uncertainties related to our chapter 11
    proceedings;                                                                                                                                       
|
| |  | our ability to obtain adequate financing and our
    ability to refinance existing indebtedness;                                                                                               
|
| |  | our substantial debt;                                                                                                                                                                          
|
| |  | risks that our operating losses may continue;                                                                                                                                                  
|
| |  | risks relating to our reliance on our primary
    surety provider;                                                                                                                             
|
| |  | the impact of competition in the automotive
    rental industry;                                                                                                                               
|
| |  | the seasonal nature of our business;                                                                                                                                                           
|
| |  | the effects of decreases in air travel;                                                                                                                                                        
|
| |  | the effects of terrorism on our business;                                                                                                                                                      
|
| |  | the effects of war or measures taken by
    governments in connection with war that impact the travel
    business;                                                                            
|
| |  | increases in fuel costs or reduced fuel supplies
    and their effects on air travel;                                                                                                          
|
| |  | the continued availability of repurchase
    programs, the ability of the manufacturers to fulfill their
    obligations under these programs and the increasing cost of our
    vehicle fleet;
|
| |  | a percentage of our rental fleet is subject to
    residual value risk upon disposition;                                                                                                       
|
| |  | risks relating to our dependence on General
    Motors as our principal vehicle supplier;                                                                                                      
|
| |  | risks relating to our reliance on asset-backed
    financing and the risk to our business of an increase in
    interest rates;                                                                

48



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##### 





| |   |                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the adoption of federal, state or local
    regulations including those that restrict our ability to sell
    optional products;                               
|
| |  | risks relating to the Internal Revenue
    Services review of certain transactions entered into by
    our former Parent for which we may be severally liable;
|
| |  | potential legal challenges by our competitors
    and/or franchisees to parts of our restructuring plan;                                                       
|
| |  | problems that may arise as a result of the
    consolidation of our brands at airport locations;                                                               
|
| |  | problems that may arise from our efforts to
    operate on one information technology platform, and                                                            
|
| |  | our ability to issue registered securities.                                                                                                                    

We undertake no obligation to update or revise
publicly any forward-looking statement, whether as a result of
new information, future events or otherwise, other than as
required by law. All subsequent written and oral forward-looking
statements attributable to us or persons acting on our behalf
are expressly qualified in their entirety by the cautionary
statements contained in this Form 10-K.



|         |                                                                
|-------- | ---------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures
    About Market Risks

The tables below provide information about our
market sensitive financial instruments and constitute
forward-looking statements. All items described are
non-trading.

Our major market risk exposure is changing
interest rates, primarily in the United States. Due to our
limited foreign operations, we do not have material market risk
exposures relative to changes in foreign exchange rates. Our
policy is to manage interest rates through the use of a
combination of fixed and floating rate debt. We use interest
rate caps to adjust interest rate exposures when appropriate,
based upon market conditions. We enter into interest rate caps
with a group of financial institutions with investment grade
credit ratings, thereby minimizing the risk of credit loss.
Maturity dates for variable rate debt caps are based upon
expected maturity dates. Average rates under interest rate caps
are based upon contractual rates. Should interest rates increase
one hundred basis points for all of 2003 we will incur
approximately $25.5 million in additional interest expense
on approximately $2.55 billion of variable rate debt.

Fair value estimates are made at a specific point
in time, based on relevant market information about the
financial instrument. These estimates are subjective in nature
and involve uncertainties and matters of significant judgment.
The fair value of variable rate debt approximates the carrying
value since interest rates are variable and, thus, approximate
current market rates. The fair value of interest rate caps is
determined from valuation models which are then compared to
dealer quotations and represents the discounted future cash
flows through maturity or expiration using current rates, and is
effectively the amount we would pay or receive to terminate the
agreements.

|                   |                        |                        |         |      |   |              |       |      |   |      |         |            |   |       |       |      |   |   |   |   |  |   |   |   |  |   |         |   |  |   |         |   | 
|------------------ | ---------------------- | ---------------------- | ------- | ---- | - | ------------ | ----- | ---- | - | ---- | ------- | ---------- | - | ----- | ----- | ---- | - | - | - | - |  | - | - | - |  | - | ------- | - |  | - | ------- | - | 
|                   |                        |                        |         |      |   |             
|                   |                        | Expected Maturity Date |         |      |   | Fair Value  
|                   |                        |                        |         |      |   | December 31,
|December 31, 2002: |                        | 2003                   |         | 2004 |   | 2005         |       | 2006 |   | 2007 |         | Thereafter |   | Total |       | 2002
|                   |                        |                        |         |      |   |              |       |      |   |      |         |            |   |       |       |     
|                   |                        |                       
|                   |                        | (In millions)         
|(Asset)/Liability  |                        |                        |         |      |   |              |       |      |   |      |         |            |   |       |       |      |   |   |   |   |  |   |   |   |  |   |         |   |  |   |         |  
|Variable rate debt |                        | $                      | 85.2    |      |   | $            | 569.4 |      |   | $    | 1,492.9 |            |   | $     | 406.9 |      |   | $ |  |   |  | $ |  |   |  | $ | 2,554.4 |   |  | $ | 2,554.4 |  
|                   | Average interest rates |                        |         | 4.18 | % |              |       | 2.59 | % |      |         | 2.02       | % |       |       | 2.73 | % |   |   |  |  |   |   |  |  |   |         |  |  |   |         |  | 
|Interest rate caps |                        |                        | 1,081.5 |      |   |              | 500.0 |      |   |      | 1,492.9 |            |   |       | 406.9 |      |   |   |  |   |  |   |  |   |  |   | 3,481.3 |   |  |   | (4.2    | )
|                   | Average rate           |                        |         | 6.68 | % |              |       | 7.30 | % |      |         | 7.08       | % |       |       | 8.54 | % |   |   |  |  |   |   |  |  |   |         |  |  |   |         |  | 

|                   |                        |                        |       |      |   |              |       |      |   |      |         |            |   |       |       |      |   |   |       |      |   |   |   |   |  |   |         |   |  |   |         |   | 
|------------------ | ---------------------- | ---------------------- | ----- | ---- | - | ------------ | ----- | ---- | - | ---- | ------- | ---------- | - | ----- | ----- | ---- | - | - | ----- | ---- | - | - | - | - |  | - | ------- | - |  | - | ------- | - | 
|                   |                        |                        |       |      |   |             
|                   |                        | Expected Maturity Date |       |      |   | Fair Value  
|                   |                        |                        |       |      |   | December 31,
|December 31, 2001: |                        | 2002                   |       | 2003 |   | 2004         |       | 2005 |   | 2006 |         | Thereafter |   | Total |       | 2001
|                   |                        |                        |       |      |   |              |       |      |   |      |         |            |   |       |       |     
|                   |                        |                       
|                   |                        | (In millions)         
|(Asset)/Liability  |                        |                        |       |      |   |              |       |      |   |      |         |            |   |       |       |      |   |   |       |      |   |   |   |   |  |   |         |   |  |   |         |  
|Variable rate debt |                        | $                      | 753.4 |      |   | $            | 544.4 |      |   | $    | 1,000.0 |            |   | $     | 300.0 |      |   | $ | 222.7 |      |   | $ |  |   |  | $ | 2,820.5 |   |  | $ | 2,820.5 |  
|                   | Average interest rates |                        |       | 2.83 | % |              |       | 2.95 | % |      |         | 2.18       | % |       |       | 2.17 | % |   |       | 2.77 | % |   |   |  |  |   |         |  |  |   |         |  | 
|Interest rate caps |                        |                        | 858.5 |      |   |              | 500.0 |      |   |      | 1,000.0 |            |   |       | 300.0 |      |   |   | 222.8 |      |   |   |  |   |  |   | 2,881.3 |   |  |   | (22.3   | )
|                   | Average rate           |                        |       | 6.37 | % |              |       | 7.30 | % |      |         | 6.71       | % |       |       | 7.74 | % |   |       | 7.88 | % |   |   |  |  |   |         |  |  |   |         |  | 

49



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##### 





|         |                                                
|-------- | -----------------------------------------------
|Item  8. | Financial Statements and Supplementary
    Data



INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS


|                                                                                                                                                                                                  |  |      |    | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                                                                                                                                  |  | Page
|                                                                                                                                                                                                  |  |     
|Report of Independent Certified Public Accountants                                                                                                                                                |  |      | 51 | 
|Consolidated Balance Sheets as of
    December 31, 2002 and 2001, as restated (unaudited)                                                                                                         |  |      | 52 | 
|Consolidated Statements of Operations and
    Comprehensive Loss for the Years Ended December 31, 2002,
    2001 as restated (unaudited) and 2000 as restated
    (unaudited)                     |  |      | 53 | 
|Consolidated Statements of Shareholders
    Equity (Deficit) for the Years Ended December 31, 2000 as
    restated (unaudited), 2001 as restated (unaudited) and 2002                            |  |      | 54 | 
|Consolidated Statements of Cash Flows for the
    Years Ended December 31, 2002, 2001 as restated
    (unaudited) and 2000 as restated (unaudited)                                                |  |      | 55 | 
|Notes to Consolidated Financial Statements                                                                                                                                                        |  |      | 56 | 
|Financial Statement Schedule II, Valuation
    and Qualifying Accounts and Reserves, for the Years Ended
    December 31, 2002, 2001 as restated (unaudited) and
    2000 as restated (unaudited) |  |      | 99 | 

50



---



##### 



REPORT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS

To the Board of Directors and Shareholders of ANC
Rental Corporation:

We have audited the accompanying consolidated
balance sheet of ANC Rental Corporation and subsidiaries as of
December 31, 2002 and the related consolidated statements
of operations and comprehensive loss, shareholders equity
(deficit), and cash flows for the year then ended. Our audit
also included the financial statement schedule listed in the
Index at Item 15(a) as of December 31, 2002 and for
the year then ended. These financial statements and schedule are
the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements and schedule based on our audit.

We conducted our audit in accordance with
auditing standards generally accepted in the United States.
Those standards 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. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.

In our opinion, the financial statements referred
to above present fairly, in all material respects, the
consolidated financial position of ANC Rental Corporation and
subsidiaries at December 31, 2002, and the consolidated
results of their operations and their cash flows for the year
then ended, in conformity with accounting principles generally
accepted in the United States. Also, in our opinion, the related
financial statement schedule as of December 31, 2002 and
for the year then ended, when considered in relation to the
basic financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.

The accompanying financial statements have been
prepared assuming that ANC Rental Corporation will continue as a
going concern. As more fully described in Note 2, the
Company has incurred recurring operating losses and has a net
capital deficiency. In addition on November 13, 2001, the
Company and certain of its direct and indirect U.S. subsidiaries
filed voluntary petitions for reorganization under
Chapter 11 of the United States Bankruptcy Code. These
conditions raise substantial doubt about the Companys
ability to continue as a going concern. Managements plans
in regard to these matters are also described in Note 2.
The financial statements do not include any adjustments to
reflect the possible future effects on the recoverability and
classification of assets or the amounts and classification of
liabilities that may result from the outcome of this uncertainty.

As discussed in Note 18 to the financial
statements, on January 1, 2002, ANC Rental Corporation
adopted Statement of Financial Accounting Standard No. 142,
Goodwill and other intangibles.

/s/ Ernst & Young LLP

Fort Lauderdale, Florida

May 16, 2003.


51



---



##### 



ANC RENTAL CORPORATION

(Debtor-in-Possession as of November 13,
2001)


CONSOLIDATED BALANCE SHEETS

As of December 31,


(In Millions Except Share and Per Share
Amounts)


|                                                   |                                                                                                                                                 |                                      |                                                          |               |        |         |         |        |       |         | 
|-------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------ | -------------------------------------------------------- | ------------- | ------ | ------- | ------- | ------ | ----- | ------- | 
|                                                   |                                                                                                                                                 | 2002                                 |                                                          | 2001         
|                                                   |                                                                                                                                                 |                                      |                                                          |              
|                                                   |                                                                                                                                                 |                                      |                                                          | (As Restated)
|                                                   |                                                                                                                                                 |                                      |                                                          | (Unaudited)  
|ASSETS                                            
|Cash and cash equivalents                          |                                                                                                                                                 | $                                    | 166.2                                                    |               |        | $       | 310.8   |       
|Restricted cash and cash equivalents               |                                                                                                                                                 |                                      | 813.6                                                    |               |        |         | 1,310.0 |       
|Receivables, net                                   |                                                                                                                                                 |                                      | 331.8                                                    |               |        |         | 338.4   |       
|Prepaid expenses                                   |                                                                                                                                                 |                                      | 49.6                                                     |               |        |         | 43.7    |       
|Vehicles, net                                      |                                                                                                                                                 |                                      | 2,954.4                                                  |               |        |         | 3,377.5 |       
|Property and equipment, net                        |                                                                                                                                                 |                                      | 266.5                                                    |               |        |         | 434.0   |       
|Goodwill, net                                      |                                                                                                                                                 |                                      | 20.9                                                     |               |        |         | 127.1   |       
|Other assets                                       |                                                                                                                                                 |                                      | 102.6                                                    |               |        |         | 90.0    |       
|Net investment in discontinued operations          |                                                                                                                                                 |                                      |                                                         |               |        |         | 22.4    |       
|                                                   |                                                                                                                                                 |                                      |                                                          |               |        |         |         |       
|                                                   |                                                                                                                                                 |                                      | Total assets                                             |               | $      | 4,705.6 |         |        | $     | 6,053.9 | 
|                                                   |                                                                                                                                                 |                                      |                                                          |               |        |         |         |       
|LIABILITIES AND SHAREHOLDERS EQUITY
    (DEFICIT)
|Accounts payable                                   |                                                                                                                                                 | $                                    | 111.1                                                    |               |        | $       | 88.4    |       
|Accrued liabilities                                |                                                                                                                                                 |                                      | 235.7                                                    |               |        |         | 203.7   |       
|Insurance reserves                                 |                                                                                                                                                 |                                      | 139.8                                                    |               |        |         | 62.3    |       
|Vehicle debt                                       |                                                                                                                                                 |                                      | 3,251.0                                                  |               |        |         | 4,263.0 |       
|Other debt                                         |                                                                                                                                                 |                                      | 250.7                                                    |               |        |         | 247.3   |       
|Deferred income taxes                              |                                                                                                                                                 |                                      | 253.7                                                    |               |        |         | 253.7   |       
|Other liabilities                                  |                                                                                                                                                 |                                      | 221.7                                                    |               |        |         | 199.0   |       
|Net liability from discontinued operations         |                                                                                                                                                 |                                      | 11.9                                                     |               |        |         |        |       
|Liabilities subject to compromise                  |                                                                                                                                                 |                                      | 515.6                                                    |               |        |         | 515.3   |       
|                                                   |                                                                                                                                                 |                                      |                                                          |               |        |         |         |       
|                                                   |                                                                                                                                                 |                                      | Total liabilities                                        |               |        | 4,991.2 |         |        |       | 5,832.7 | 
|                                                   |                                                                                                                                                 |                                      |                                                          |               |        |         |         |       
|Commitments and contingencies                      |                                                                                                                                                 |                                      |                                                          |               |        |         |         |       
|Shareholders equity (deficit):                    |                                                                                                                                                 |                                      |                                                          |               |        |         |         |       
|                                                   | Preferred stock, par value $0.001 per share;
    10,000,000 shares authorized; none issued                                                      |                                      |                                                          |              |        |         |         |       |      
|                                                   | Common stock, par value $0.01 per share;
    250,000,000 shares authorized; 45,296,139 issued and outstanding
    at December 31, 2002 and 2001 |                                      |                                                          | 0.5           |        |         |         | 0.5    |      
|                                                   | Additional paid-in capital                                                                                                                      |                                      |                                                          | 907.6         |        |         |         | 907.6  |      
|                                                   | Retained deficit                                                                                                                                |                                      |                                                          | (1,133.8      | )      |         |         | (599.7 | )    
|                                                   | Accumulated other comprehensive loss                                                                                                            |                                      |                                                          | (59.9         | )      |         |         | (87.2  | )    
|                                                   |                                                                                                                                                 |                                      |                                                          |               |        |         |         |       
|                                                   |                                                                                                                                                 | Total shareholders equity (deficit) |                                                          |               | (285.6 | )       |         |        | 221.2 |        
|                                                   |                                                                                                                                                 |                                      |                                                          |               |        |         |         |       
|                                                   |                                                                                                                                                 |                                      | Total liabilities and shareholders equity
    (deficit) |               | $      | 4,705.6 |         |        | $     | 6,053.9 | 
|                                                   |                                                                                                                                                 |                                      |                                                          |               |        |         |         |       

The accompanying notes are an integral part of
these statements.

52



---



##### 



ANC RENTAL CORPORATION

(Debtor-in-Possession as of November 13,
2001)


CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE LOSS

For the Years Ended
December 31,


(In Millions Except Per Share
Amounts)


|                                                                                                                                 |                                                                                                           |      |         |               |   |               |         |         |   |   |         |         |  
|-------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------- | ---- | ------- | ------------- | - | ------------- | ------- | ------- | - | - | ------- | ------- | -
|                                                                                                                                 |                                                                                                           | 2002 |         | 2001          |   | 2000         
|                                                                                                                                 |                                                                                                           |      |         |               |   |              
|                                                                                                                                 |                                                                                                           |      |         | (As Restated) |   | (As Restated)
|                                                                                                                                 |                                                                                                           |      |         | (Unaudited)   |   | (Unaudited)  
|REVENUE                                                                                                                          |                                                                                                           | $    | 2,393.8 |               |   | $             | 2,896.7 |         |   | $ | 3,250.5 |        
|EXPENSES:                                                                                                                        |                                                                                                           |      |         |               |   |               |         |         |   |   |         |        
|                                                                                                                                 | DIRECT OPERATING COSTS                                                                                    |      |         | 1,104.6       |   |               |         | 1,269.5 |   |   |         | 1,270.7 |  
|                                                                                                                                 | VEHICLE DEPRECIATION, NET                                                                                 |      |         | 717.8         |   |               |         | 922.9   |   |   |         | 916.9   |  
|                                                                                                                                 | SELLING, GENERAL, AND ADMINISTRATIVE                                                                      |      |         | 497.8         |   |               |         | 633.3   |   |   |         | 685.6   |  
|                                                                                                                                 | TRANSITION AND REORGANIZATION EXPENSES                                                                    |      |         | 164.9         |   |               |         |        |   |   |         |        |  
|                                                                                                                                 | IMPAIRMENT OF GOODWILL                                                                                    |      |         |              |   |               |         | 210.8   |   |   |         |        |  
|                                                                                                                                 | AMORTIZATION OF INTANGIBLE ASSETS                                                                         |      |         |              |   |               |         | 8.4     |   |   |         | 10.0    |  
|                                                                                                                                 | INTEREST INCOME                                                                                           |      |         | (4.7          | ) |               |         | (6.3    | ) |   |         | (4.9    | )
|                                                                                                                                 | INTEREST EXPENSE                                                                                          |      |         | 206.5         |   |               |         | 320.8   |   |   |         | 365.9   |  
|                                                                                                                                 | OTHER EXPENSE (INCOME), NET                                                                               |      |         | 42.7          |   |               |         | 19.8    |   |   |         | 3.4     |  
|                                                                                                                                 |                                                                                                           |      |         |               |   |               |         |         |   |   |         |        
|                                                                                                                                 | INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE
    INCOME TAXES                                          |      |         | (335.8        | ) |               |         | (482.5  | ) |   |         | 2.9     |  
|                                                                                                                                 | PROVISION FOR INCOME TAXES                                                                                |      |         |              |   |               |         | 99.0    |   |   |         | 3.9     |  
|                                                                                                                                 |                                                                                                           |      |         |               |   |               |         |         |   |   |         |        
|NET LOSS FROM CONTINUING OPERATIONS                                                                                              |                                                                                                           |      | (335.8  | )             |   |               | (581.5  | )       |   |   | (1.0    | )      
|NET LOSS FROM DISCONTINUED OPERATIONS, NET OF
    BENEFIT FROM INCOME TAXES OF $0 IN 2002, 2001 AND 2000                         |                                                                                                           |      | (92.1   | )             |   |               | (32.3   | )       |   |   | (1.0    | )      
|                                                                                                                                 |                                                                                                           |      |         |               |   |               |         |         |   |   |         |        
|NET LOSS BEFORE CUMULATIVE EFFECT OF CHANGE IN
    ACCOUNTING PRINCIPLES                                                         |                                                                                                           |      | (427.9  | )             |   |               | (613.8  | )       |   |   | (2.0    | )      
|                                                                                                                                 |                                                                                                           |      |         |               |   |               |         |         |   |   |         |        
|Cumulative effect of changes in accounting
    principles, net of provision for income taxes of $0 in 2002 and
    $4.5 in 2001. |                                                                                                           |      | (106.2  | )             |   |               | 7.1     |         |   |   |        |        
|                                                                                                                                 |                                                                                                           |      |         |               |   |               |         |         |   |   |         |        
|NET LOSS                                                                                                                         |                                                                                                           |      | (534.1  | )             |   |               | (606.7  | )       |   |   | (2.0    | )      
|                                                                                                                                 |                                                                                                           |      |         |               |   |               |         |         |   |   |         |        
|OTHER COMPREHENSIVE LOSS, NET OF TAX EFFECT OF $0:                                                                               |                                                                                                           |      |         |               |   |               |         |         |   |   |         |        
|                                                                                                                                 | Foreign currency translation adjustment                                                                   |      |         | 8.0           |   |               |         | (3.6    | ) |   |         | (4.1    | )
|                                                                                                                                 | Changes in fair value of interest rate hedges and
    reclassification adjustments                        |      |         | 19.3          |   |               |         | (58.5   | ) |   |         |        |  
|                                                                                                                                 |                                                                                                           |      |         |               |   |               |         |         |   |   |         |        
|COMPREHENSIVE LOSS, NET OF TAX BEFORE CUMULATIVE
    EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE                                    |                                                                                                           |      | (506.8  | )             |   |               | (668.8  | )       |   |   | (6.1    | )      
|                                                                                                                                 |                                                                                                           |      |         |               |   |               |         |         |   |   |         |        
|                                                                                                                                 | Cumulative effect of change in accounting
    principle, net of benefit for income taxes of $9.3 in 2001. |      |         |              |   |               |         | (14.6   | ) |   |         |        |  
|                                                                                                                                 |                                                                                                           |      |         |               |   |               |         |         |   |   |         |        
|COMPREHENSIVE LOSS                                                                                                               |                                                                                                           | $    | (506.8  | )             |   | $             | (683.4  | )       |   | $ | (6.1    | )      
|                                                                                                                                 |                                                                                                           |      |         |               |   |               |         |         |   |   |         |        
|BASIC AND DILUTED LOSS PER SHARE:                                                                                                |                                                                                                           |      |         |               |   |               |         |         |   |   |         |        
|                                                                                                                                 | CONTINUING OPERATIONS                                                                                     |      | $       | (7.41         | ) |               | $       | (12.87  | ) |   | $       | (0.02   | )
|                                                                                                                                 | DISCONTINUED OPERATIONS                                                                                   |      |         | (2.03         | ) |               |         | (0.71   | ) |   |         | (0.02   | )
|                                                                                                                                 | CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
    PRINCIPLES                                                  |      |         | (2.35         | ) |               |         | 0.16    |   |   |         |        |  
|                                                                                                                                 |                                                                                                           |      |         |               |   |               |         |         |   |   |         |        
|BASIC AND DILUTED LOSS PER SHARE                                                                                                 |                                                                                                           | $    | (11.79  | )             |   | $             | (13.42  | )       |   | $ | (0.04   | )      
|                                                                                                                                 |                                                                                                           |      |         |               |   |               |         |         |   |   |         |        
|SHARES USED IN COMPUTING PER SHARE AMOUNTS:                                                                                      |                                                                                                           |      |         |               |   |               |         |         |   |   |         |        
|                                                                                                                                 | Basic and diluted                                                                                         |      |         | 45.3          |   |               |         | 45.2    |   |   |         | 45.1    |  

The accompanying notes are an integral part of
these statements.

53



---



##### 



ANC RENTAL CORPORATION

(Debtor-in-Possession as of November 13,
2001)


CONSOLIDATED STATEMENTS OF SHAREHOLDERS
EQUITY (DEFICIT)

For the Years Ended December 31, 2000,
2001 and 2002


(In Millions)


|                                         |                                                                                        |                                                                                                        |       |              |   |            |      |          |   |               |     |               |   |           |       |       |   |   |          |        |   |   |       |   |       |   |        |        |       |  
|---------------------------------------- | -------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------ | ----- | ------------ | - | ---------- | ---- | -------- | - | ------------- | --- | ------------- | - | --------- | ----- | ----- | - | - | -------- | ------ | - | - | ----- | - | ----- | - | ------ | ------ | ----- | -
|                                         |                                                                                        |                                                                                                        |       |              |   |            |      |          |   | Accumulated   |     |              
|                                         |                                                                                        |                                                                                                        |       | Common Stock |   | Additional |      | Retained |   | Other         |     | Shareholders
|                                         |                                                                                        | Investment                                                                                             |       |              |   | Paid-In    |      | Earnings |   | Comprehensive |     | Equity       
|                                         |                                                                                        | By Parent                                                                                              |       | Shares       |   | Amount     |      | Capital  |   | (Deficit)     |     | Loss          |   | (Deficit)
|                                         |                                                                                        |                                                                                                        |       |              |   |            |      |          |   |               |     |               |   |          
|BALANCE AT DECEMBER 31, 1999 (unaudited) |                                                                                        | $                                                                                                      | 733.0 |              |   |            |     |          |   | $             |    |               |   | $         |      |       |   | $ |         |        |   | $ | (6.4  | ) |       | $ | 726.6  |       
|                                         | Net income (loss)                                                                      |                                                                                                        |       | (9.0         | ) |            |      |         |   |               |     |              |   |           |       |      |   |   |          | 7.0    |   |   |       |  |       |   |        | (2.0   | )    
|                                         | Other comprehensive loss:                                                              |                                                                                                        |       |              |   |            |      |          |   |               |     |               |   |           |       |       |   |   |          |        |   |   |       |   |       |   |        |        |      
|                                         |                                                                                        | Foreign currency translation adjustments                                                               |       |              |  |            |      |          |  |               |     |               |  |           |       |       |  |   |          |        |  |   |       |   | (4.1  | ) |        |        | (4.1  | )
|                                         | Net contribution from Parent                                                           |                                                                                                        |       | 172.0        |   |            |      |         |   |               |     |              |   |           |       |      |   |   |          |       |   |   |       |  |       |   |        | 172.0  |      
|                                         | Transfer to common stock and additional paid-in
    capital and distribution of shares |                                                                                                        |       | (896.0       | ) |            |      | 45.1     |   |               |     | 0.5           |   |           |       | 895.5 |   |   |          |       |   |   |       |  |       |   |        |       |      
|                                         | Issuance of stock for employee benefit plan                                            |                                                                                                        |       |             |   |            |      | 0.1      |   |               |     |              |   |           |       | 0.1   |   |   |          |       |   |   |       |  |       |   |        | 0.1    |      
|                                         |                                                                                        |                                                                                                        |       |              |   |            |      |          |   |               |     |               |   |           |       |       |   |   |          |        |   |   |       |   |       |   |        |       
|BALANCE AT DECEMBER 31, 2000 (unaudited) |                                                                                        |                                                                                                        |      |              |   |            | 45.2 |          |   |               | 0.5 |               |   |           | 895.6 |       |   |   | 7.0      |        |   |   | (10.5 | ) |       |   | 892.6  |       
|                                         | Net loss                                                                               |                                                                                                        |       |             |   |            |      |         |   |               |     |              |   |           |       |      |   |   |          | (606.7 | ) |   |       |  |       |   |        | (606.7 | )    
|                                         | Other comprehensive loss:                                                              |                                                                                                        |       |              |   |            |      |          |   |               |     |               |   |           |       |       |   |   |          |        |   |   |       |   |       |   |        |        |      
|                                         |                                                                                        | Foreign currency translation adjustments                                                               |       |              |  |            |      |          |  |               |     |               |  |           |       |       |  |   |          |        |  |   |       |   | (3.6  | ) |        |        | (3.6  | )
|                                         |                                                                                        | Changes in fair value of interest rate hedges of
    $77.8 and reclassification adjustments of $(19.3) |       |              |  |            |      |          |  |               |     |               |  |           |       |       |  |   |          |        |  |   |       |   | (58.5 | ) |        |        | (58.5 | )
|                                         |                                                                                        | Cumulative effect of change in accounting
    principle                                                |       |              |  |            |      |          |  |               |     |               |  |           |       |       |  |   |          |        |  |   |       |   | (14.6 | ) |        |        | (14.6 | )
|                                         | Issuance of common stock purchase warrants                                             |                                                                                                        |       |             |   |            |      |         |   |               |     |              |   |           |       | 11.7  |   |   |          |       |   |   |       |  |       |   |        | 11.7   |      
|                                         | Issuance of stock for employee benefit plan                                            |                                                                                                        |       |             |   |            |      | 0.1      |   |               |     |              |   |           |       | 0.3   |   |   |          |       |   |   |       |  |       |   |        | 0.3    |      
|                                         |                                                                                        |                                                                                                        |       |              |   |            |      |          |   |               |     |               |   |           |       |       |   |   |          |        |   |   |       |   |       |   |        |       
|BALANCE AT DECEMBER 31, 2001 (unaudited) |                                                                                        |                                                                                                        |      |              |   |            | 45.3 |          |   |               | 0.5 |               |   |           | 907.6 |       |   |   | (599.7   | )      |   |   | (87.2 | ) |       |   | 221.2  |       
|                                         | Net loss                                                                               |                                                                                                        |       |             |   |            |      |         |   |               |     |              |   |           |       |      |   |   |          | (534.1 | ) |   |       |  |       |   |        | (534.1 | )    
|                                         | Other comprehensive income:                                                            |                                                                                                        |       |              |   |            |      |          |   |               |     |               |   |           |       |       |   |   |          |        |   |   |       |   |       |   |        |        |      
|                                         |                                                                                        | Foreign currency translation adjustments                                                               |       |              |  |            |      |          |  |               |     |               |  |           |       |       |  |   |          |        |  |   |       |   | 8.0   |   |        |        | 8.0   |  
|                                         |                                                                                        | Changes in fair value of interest rate hedges of
    $(19.4) and reclassification adjustments of $38.7 |       |              |  |            |      |          |  |               |     |               |  |           |       |       |  |   |          |        |  |   |       |   | 19.3  |   |        |        | 19.3  |  
|                                         |                                                                                        |                                                                                                        |       |              |   |            |      |          |   |               |     |               |   |           |       |       |   |   |          |        |   |   |       |   |       |   |        |       
|BALANCE AT DECEMBER 31, 2002.            |                                                                                        | $                                                                                                      |      |              |   |            | 45.3 |          |   | $             | 0.5 |               |   | $         | 907.6 |       |   | $ | (1,133.8 | )      |   | $ | (59.9 | ) |       | $ | (285.6 | )     
|                                         |                                                                                        |                                                                                                        |       |              |   |            |      |          |   |               |     |               |   |           |       |       |   |   |          |        |   |   |       |   |       |   |        |       

The accompanying notes are an integral part of
these statements.

54



---



##### 



ANC RENTAL CORPORATION

(Debtor-in-Possession as of November 13,
2001)


CONSOLIDATED STATEMENTS OF CASH
FLOWS

For the Years Ended
December 31,


(In Millions)


|                                                     |                                                                                               |                                    |                                                                                      |               |   |               |          |           |   |          |        |           |   |          |  
|---------------------------------------------------- | --------------------------------------------------------------------------------------------- | ---------------------------------- | ------------------------------------------------------------------------------------ | ------------- | - | ------------- | -------- | --------- | - | -------- | ------ | --------- | - | -------- | -
|                                                     |                                                                                               | 2002                               |                                                                                      | 2001          |   | 2000         
|                                                     |                                                                                               |                                    |                                                                                      |               |   |              
|                                                     |                                                                                               |                                    |                                                                                      | (As Restated) |   | (As Restated)
|                                                     |                                                                                               |                                    |                                                                                      | (Unaudited)   |   | (Unaudited)  
|CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:     |                                                                                               |                                    |                                                                                      |               |   |               |          |           |   |          |        |          
|                                                     | Net loss                                                                                      |                                    | $                                                                                    | (534.1        | ) |               | $        | (606.7    | ) |          | $      | (2.0      | )
|                                                     | Adjustments to reconcile net loss to net cash
    provided by (used in) operating activities: |                                    |                                                                                      |               |   |               |          |           |   |          |        |           |  
|                                                     |                                                                                               |                                    | Net loss from discontinued operations                                                |               |   | 92.1          |          |           |   | 32.3     |        |           |   | 1.0      |  
|                                                     |                                                                                               |                                    | Purchases of vehicles                                                                |               |   | (5,901.0      | )        |           |   | (5,454.6 | )      |           |   | (7,682.4 | )
|                                                     |                                                                                               |                                    | Sales of vehicles                                                                    |               |   | 5,557.4       |          |           |   | 5,721.4  |        |           |   | 6,595.3  |  
|                                                     |                                                                                               |                                    | Depreciation of vehicles, net                                                        |               |   | 717.8         |          |           |   | 922.9    |        |           |   | 916.9    |  
|                                                     |                                                                                               |                                    | Provision for bad debt                                                               |               |   | 14.1          |          |           |   | 9.1      |        |           |   | 7.7      |  
|                                                     |                                                                                               |                                    | Loss (gain) on sale of assets and asset
    impairments                              |               |   | 31.3          |          |           |   | 4.2      |        |           |   | (1.1     | )
|                                                     |                                                                                               |                                    | Cumulative effect of changes in accounting
    principles, net of income taxes       |               |   | 106.2         |          |           |   | (7.1     | )      |           |   |         |  
|                                                     |                                                                                               |                                    | Fair value adjustment on interest rate hedges and
    recognition of deferred losses |               |   | 39.1          |          |           |   | 7.8      |        |           |   |         |  
|                                                     |                                                                                               |                                    | Depreciation and amortization of property and
    equipment                          |               |   | 152.9         |          |           |   | 74.5     |        |           |   | 72.2     |  
|                                                     |                                                                                               |                                    | Amortization of intangible assets and debt issue
    costs                           |               |   | 30.9          |          |           |   | 38.4     |        |           |   | 35.2     |  
|                                                     |                                                                                               |                                    | Deferred income tax provision                                                        |               |   |              |          |           |   | 99.0     |        |           |   | 3.9      |  
|                                                     |                                                                                               |                                    | Impairment of intangible assets and goodwill                                         |               |   | 13.5          |          |           |   | 210.8    |        |           |   |         |  
|                                                     |                                                                                               | Changes in assets and liabilities: |                                                                                      |               |   |               |          |           |   |          |        |           |   |         
|                                                     |                                                                                               |                                    | Receivables                                                                          |               |   | (31.9         | )        |           |   | 298.3    |        |           |   | (49.2    | )
|                                                     |                                                                                               |                                    | Prepaid expenses and other assets                                                    |               |   | (39.2         | )        |           |   | 16.9     |        |           |   | 4.8      |  
|                                                     |                                                                                               |                                    | Accounts payable and accrued liabilities                                             |               |   | 122.2         |          |           |   | (28.9    | )      |           |   | (96.4    | )
|                                                     |                                                                                               |                                    | Other liabilities                                                                    |               |   | 7.5           |          |           |   | 5.5      |        |           |   | 54.6     |  
|                                                     |                                                                                               |                                    |                                                                                      |               |   |               |          |           |   |          |        |          
|                                                     |                                                                                               |                                    | 378.8                                                                                |               |   |               | 1,343.8  |           |   |          | (139.5 | )        
|                                                     |                                                                                               |                                    |                                                                                      |               |   |               |          |           |   |          |        |          
|CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES:     |                                                                                               |                                    |                                                                                      |               |   |               |          |           |   |          |        |          
|                                                     | Purchases of property and equipment                                                           |                                    |                                                                                      | (26.9         | ) |               |          | (32.4     | ) |          |        | (71.5     | )
|                                                     | Proceeds from sale of property and equipment                                                  |                                    |                                                                                      | 25.3          |   |               |          | 116.4     |   |          |        | 33.2      |  
|                                                     | Proceeds from sale of investments                                                             |                                    |                                                                                      |              |   |               |          |          |   |          |        | 45.7      |  
|                                                     | Other                                                                                         |                                    |                                                                                      |              |   |               |          |          |   |          |        | (1.4      | )
|                                                     |                                                                                               |                                    |                                                                                      |               |   |               |          |           |   |          |        |          
|                                                     |                                                                                               |                                    | (1.6                                                                                 | )             |   |               | 84.0     |           |   |          | 6.0    |          
|                                                     |                                                                                               |                                    |                                                                                      |               |   |               |          |           |   |          |        |          
|CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES:     |                                                                                               |                                    |                                                                                      |               |   |               |          |           |   |          |        |          
|                                                     | Proceeds from vehicle financing                                                               |                                    |                                                                                      | 3,365.2       |   |               |          | 35,601.0  |   |          |        | 45,433.7  |  
|                                                     | Payments on vehicle financing                                                                 |                                    |                                                                                      | (4,335.5      | ) |               |          | (35,848.3 | ) |          |        | (45,676.9 | )
|                                                     | Decrease (increase) in restricted cash                                                        |                                    |                                                                                      | 496.4         |   |               |          | (973.0    | ) |          |        | (135.8    | )
|                                                     | Net proceeds (payments) from other debt                                                       |                                    |                                                                                      | 10.6          |   |               |          | 16.7      |   |          |        | 175.3     |  
|                                                     | Cash transfers from Parent                                                                    |                                    |                                                                                      |              |   |               |          |          |   |          |        | 204.4     |  
|                                                     | Subsidiary limited partner contributions
    (distributions)                                  |                                    |                                                                                      | 17.3          |   |               |          | (18.1     | ) |          |        | 47.4      |  
|                                                     | Debt issue costs                                                                              |                                    |                                                                                      | (27.6         | ) |               |          | (31.1     | ) |          |        | (35.1     | )
|                                                     | Other                                                                                         |                                    |                                                                                      | 9.6           |   |               |          | (0.7      | ) |          |        | (2.9      | )
|                                                     |                                                                                               |                                    |                                                                                      |               |   |               |          |           |   |          |        |          
|                                                     |                                                                                               |                                    | (464.0                                                                               | )             |   |               | (1,253.5 | )         |   |          | 10.1   |          
|                                                     |                                                                                               |                                    |                                                                                      |               |   |               |          |           |   |          |        |          
|Cash provided by (used in) continuing operations     |                                                                                               |                                    | (86.8                                                                                | )             |   |               | 174.3    |           |   |          | (123.4 | )        
|Cash provided by (used in) discontinued operations   |                                                                                               |                                    | (57.8                                                                                | )             |   |               | 131.2    |           |   |          | 128.7  |          
|                                                     |                                                                                               |                                    |                                                                                      |               |   |               |          |           |   |          |        |          
|INCREASE (DECREASE) IN CASH AND CASH
    EQUIVALENTS |                                                                                               |                                    | (144.6                                                                               | )             |   |               | 305.5    |           |   |          | 5.3    |          
|CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD     |                                                                                               |                                    | 310.8                                                                                |               |   |               | 5.3      |           |   |          |       |          
|                                                     |                                                                                               |                                    |                                                                                      |               |   |               |          |           |   |          |        |          
|CASH AND CASH EQUIVALENTS AT END OF PERIOD           |                                                                                               | $                                  | 166.2                                                                                |               |   | $             | 310.8    |           |   | $        | 5.3    |          
|                                                     |                                                                                               |                                    |                                                                                      |               |   |               |          |           |   |          |        |          

The accompanying notes are an integral part of
these statements

55



---



##### 



ANC RENTAL CORPORATION

(Debtor-In-Possession as of November 13,
2001)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(2001 and 2000 Amounts Unaudited)


(In Millions Except Share Data)


1. Basis of Presentation

The accompanying Consolidated Financial
Statements include the accounts of ANC Rental Corporation and
its subsidiaries (the Company or ANC).
All significant intercompany accounts and transactions have been
eliminated. These Financial Statements have been prepared on a
going concern basis, which contemplates continuity of
operations, realization of assets, and payment of liabilities in
the ordinary course of business, and do not reflect adjustments
that might result if the Debtors are unable to continue as a
going concern.

The Company rents vehicles on a daily, weekly or
monthly basis at airport or near-airport locations through the
brand names of Alamo and National. Alamo
and National operate both domestically and internationally in
the airport leisure and business rental market. Alamo primarily
serves the value leisure market while National primarily serves
the airport premium business and leisure travel market. Alamo
and National operate through both company-owned and franchised
locations in the United States and internationally. In the year
ended December 31, 2002, Alamo had North American revenue
of approximately $1.0 billion and National had North American
revenue of approximately $1.1 billion. In 2002, international
operations outside of North America had revenue of approximately
$338 million, the majority of which was generated in the United
Kingdom.

These financial statements have also been
prepared in accordance with the AICPAs Statement of
Position 90-7, Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code
(SOP 90-7). SOP 90-7 requires segregating
pre-petition liabilities that are subject to compromise and
identifying all transactions and events that are directly
associated with the reorganization of our business. A certain
portion of the liabilities recorded at December 31, 2002
and December 31, 2001 are expected to be subject to
compromise. Also in accordance with SOP 90-7, after the
filing date, interest is no longer accrued on any unsecured and
undersecured debt. For the year ended December 31, 2002
such amounts approximated $1.0 million.

During the fourth quarter of 2002, management
approved and announced a plan to close and abandon the Alamo
Local Market Division, our former insurance replacement and
local market business. The Company substantially completed its
plan of abandonment in the fourth quarter of 2002. The plan
included provisions for employee terminations, closure of
locations and disposals or transfers of fleet to other
operations. Pursuant to the provisions of Statement of Financial
Accounting Standards No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets
(SFAS 144), the net assets and operating
results of Alamo Local Market have been classified as a
discontinued operation causing restatement of all prior periods
presented in the annual report on Form 10-K for the fiscal
year ended December 31, 2002. Previously the Companys
financial statements were audited by Arthur Andersen LLP
however, in July 2002 the Company terminated Arthur Andersen LLP
and engaged Ernst & Young LLP as its independent
certified public accountants.

Pursuant to the provisions of Statements on
Auditing Standards Section 9508, Reports on Audited
Financial Statements: Auditing Interpretations of
Section 508 paragraph .70, which, sets forth the
guidance for requiring re-audits, Ernst & Young LLP,
have determined that due to the discontinuance of the Alamo
Local Market Division they would need to re-audit the prior two
years of financial statements presented in our 2002 annual
report on Form 10-K. Management believes that the cost and
time to re-audit the historical periods will provide financial
statement users with little to no valuable information.
Currently the administrative burden relative to preparing the
re-audit is not in the interest of current or future security
holders or creditors, because such a re-audit would divert the
Companys limited financial and human capital resources
from working towards our emergence from bankruptcy. As such, the
Companys restated results of operations and financial
condition as of and for each the two years ended
December 31, 2001 and 2000 are presented

56



---



##### 



ANC RENTAL CORPORATION


(Debtor-In-Possession as of November 13,
2001)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

herein as unaudited. In the opinion of
management, the Consolidated Financial Statements contain all
material adjustments, necessary to fairly re-state the financial
position, the results of operations and cash flows as of and for
each of the two years ended December 31, 2001 and 2000 along
with the related disclosures herein and are adequate to make the
information presented not misleading.

Presentation of unaudited financial statements in
the annual report on Form 10-K does not comply with
Securities and Exchange Act Regulations, and until the Company
files audited financial statements for three years as required
under Regulation S-X the Securities and Exchange Commission
will neither declare effective any registration statements or
post-effective amendments, nor consider compliant any proxy or
other filing that requires the Companys financial
statements. In addition, the Company is precluded from making
offerings under effective registration statements or
Regulation D until it files the required audited financial
statements.

Separately, the Company has restated its 2001 and
2000 balance sheets to report certain vehicle leases as capital
leases whereas in the prior periods they were reported as
operating leases. The change resulted from a different
interpretation of the fleet financing and manufacturer
arrangements. The restatement resulted in an increase of both
assets (vehicles) and fleet debt on the balance sheet by the
same dollar amount. As of December 31, 2002 and 2001
vehicles and vehicle debt increased $302.3 million and $285.2
million, respectively.

The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts
of revenue and expenses during the reporting period. Actual
results could differ from those estimates. Significant estimates
include but are not limited to allowances for doubtful accounts,
accumulated vehicle depreciation, insurance reserves, valuation
allowances on deferred tax assets and managements
estimates of future cash flows used to assess recoverability of
long-lived assets. The primary assumption used by management is
that the Company will continue as a going concern. However,
should the Company not obtain financing or cease to continue as
a going concern the reported amounts of assets and liabilities
will change materially.

Prior to June 30, 2000 the Company was a
wholly owned subsidiary of AutoNation, Inc. (our former
Parent or AutoNation). In August 1999,
AutoNation announced its intention to separate its automotive
rental business from its automotive retail business and in
September 1999, announced its intention to distribute its entire
interest in the Company to AutoNations stockholders on a
tax-free basis (the Distribution), subject to
conditions and consents described in the Separation and
Distribution Agreement. On May 31, 2000, the former
Parents board of directors approved the spin-off and set a
record date of June 16, 2000 and a distribution date of
June 30, 2000. The Distribution occurred on June 30,
2000 at which point the Company became an independent, publicly
owned company. The Company entered into agreements with
AutoNation, which provided for the separation of the
Companys business from AutoNation and govern various
interim and ongoing relationships between the companies. All
historical share and per share data included in the Consolidated
Statements of Operations and Comprehensive Loss, have been
retroactively adjusted for the recapitalization of the former
Parents 100 shares of common stock into 45,142,728 shares
of Common Stock on June 30, 2000.

Basic earnings (loss) per share is
calculated based on the weighted average shares of common stock
outstanding during the period. Diluted earnings per share is
calculated based on the weighted average shares of common stock
outstanding, plus the dilutive effect of common stock purchase
warrants and stock options, calculated using the if converted
and the treasury stock method, respectively. Due to the losses
for the years ended December 31, 2002 and 2001, the stock
options and common stock purchase warrants were not dilutive.

57



---



##### 



ANC RENTAL CORPORATION


(Debtor-In-Possession as of November 13,
2001)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Due to the net loss for the year ended
December 31, 2000, the stock options were not dilutive;
there were no common stock purchase warrants outstanding during
the year ended December 31, 2000.

2. Chapter 11 Proceedings

On November 13, 2001, ANC Rental Corporation
and certain of its direct and indirect U.S. subsidiaries (each,
a Debtor, and collectively Debtors)
filed voluntary petitions under chapter 11 of Title 11, United
States Code, in the United States Bankruptcy Court for the
district of Delaware (Case No. 01-11200 et al., Jointly
Administered). The Debtors remain in possession of their assets
and properties, and continue to operate their businesses and
manage their properties as debtors-in-possession pursuant to the
Bankruptcy Code. As a debtor-in-possession, management is
authorized to operate the business, but may not engage in
transactions outside the ordinary course of business without
Court approval. For example, certain types of capital
expenditures, certain sales of assets and certain requests for
additional financings will require approval by the Bankruptcy
Court. There is no assurance that the Bankruptcy Court will
grant any requests for such approvals. Subsequent to the filing
of the chapter 11 petitions, the Company obtained several court
orders that authorized it to pay certain pre-petition
liabilities and take certain actions to preserve the going
concern value of the business, thereby enhancing the prospects
of reorganization. The Consolidated Financial Statements have
been prepared on a going concern basis, which contemplates
continuity of operations, realization of assets, and payment of
liabilities in the ordinary course of business. However, as a
result of the chapter 11 filing, there is no assurance that the
carrying amounts of assets will be realized or that liabilities
will be settled for amounts recorded. The Debtors do not include
international operations, an insurance captive or consolidated
special purpose financing entities.

The confirmation of a plan of reorganization is
the Companys primary objective. After negotiations with
various parties in interest, management expects to present a
plan or plans of reorganization to the Court to reorganize the
business and to restructure its obligations. This plan or plans
of reorganization could change the amounts reported in the
financial statements and cause a material change in the carrying
amount of assets and liabilities. Management expects that a
certain portion of the pre-petition liabilities recorded will be
subject to compromise.

The plan or plans of reorganization, when filed,
will set forth the means for treating claims, including
liabilities subject to compromise and interests in our company.
Such means may take a number of different forms. A plan of
reorganization may result in, among other things, significant
dilution or elimination of certain classes of existing interests
as a result of the issuance of equity securities to creditors or
new investors. Other interests such as certain of the
pre-petition insurance reserves may need to be addressed and
resolved in the ordinary course of business as a result of
needing to maintain mandatory insurance coverage or for other
compelling business or legal reasons. The Company is in the
early stages of formulating a plan of reorganization. The
confirmation of any plan or plans of reorganization will require
creditor acceptance as required under the Bankruptcy Code and
approval of the Bankruptcy Court.

Under bankruptcy law, actions by creditors to
collect pre-petition indebtedness owed by the Debtors at the
filing date, as well as most litigation pending against us, are
stayed and other pre-petition contractual obligations may not be
enforced against the Debtors. The Company has notified all known
claimants and historical creditors that the Bankruptcy Court
established a bar date of January 14, 2003. A bar date is
the date by which a claimant, whose claim against the Debtors is
either omitted from or listed different from the amount or
status described in the schedules of liabilities filed by the
Debtors with the Bankruptcy Court, must file a claim against the
Debtors if the claimant wishes to participate in the chapter 11
case as provided for in any plan of reorganization. We are
currently in the process of researching and reconciling the
claims that have been submitted. In addition, the Debtors have
the continuing right, subject to Court approval and other
conditions, to assume or reject any pre-petition executory
contracts and unexpired leases. Parties affected by

58



---



##### 



ANC RENTAL CORPORATION


(Debtor-In-Possession as of November 13,
2001)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

these subsequent rejections may file claims with
the Bankruptcy Court regardless of the bar date. Any damages
resulting from rejection of executory contracts and unexpired
leases are treated as unsecured pre-petition claims. The amounts
of claims filed by creditors could be significantly different
from their recorded amounts. Due to material uncertainties, it
is not possible to predict the length of time the Debtors will
operate under chapter 11 protection, the outcome of the
proceedings in general, whether the Company will continue to
operate under its current organizational structure, which
contracts and leases will be assumed or rejected, the effect of
the proceedings on the business or the recovery by creditors and
equity holders of the Company.

Under the Bankruptcy Code, post-petition
liabilities and pre-petition liabilities subject to compromise
must be satisfied before shareholders can receive any
distribution. The ultimate recovery to shareholders, if any,
will not be determined until the end of the case when the fair
value of assets is compared to the liabilities and claims
against the Debtors. There can be no assurance that any value
will be ascribed to the Companys common stock in the
bankruptcy proceeding.

As a result of the bankruptcy filings and related
events, there is no assurance that the carrying amounts of
assets will be realized or that liabilities will be liquidated
or settled for the amounts recorded. In addition, confirmation
of a plan of reorganization, or disapproval thereof, could
change the amounts reported in the financial statements. The
financial statements do not include any adjustments that may
result from the resolution of these uncertainties. In
particular, the financial statements do not reflect adjustments
to the carrying value of assets or the amount and classification
of liabilities that ultimately may be necessary as a result or a
plan of reorganization. Adjustments necessitated by a plan of
reorganization could materially change the amounts reported in
the Consolidated Financial Statements included herein.

The Company has incurred recurring operating
losses and has a net capital deficiency. The ability of the
Company to continue as a going concern is dependent upon, among
other things, (i) its ability to generate adequate sources
of liquidity, (ii) its ability to generate sufficient cash
from operations, (iii) the ability of its subsidiaries that
are not included in the chapter 11 cases to obtain
necessary financing, (iv) confirmation of a plan or plans
of reorganization under the Bankruptcy Code, and (v) its
ability to achieve profitability following such confirmation.
Because the Company can give no assurance that it can achieve
any of the foregoing, there is substantial doubt about the
Companys ability to continue as a going concern.

Separately, the Company has been engaged in
investigating, and is continuing to pursue, strategic
alternatives to maximize stakeholder value and strengthen our
financial condition. These strategic alternatives may include
the sale of all or part of the Companys business. A sale
of all or part of the Companys business could result in
proceeds substantially less than the carrying amounts of assets
and liabilities.

3. Transition and Reorganization
Expenses

Transition and reorganization expenses for the
year ended December 31, 2002 are as follows:

|                                         |  |                   |      |      |  |       |       |   |  |   |       | 
|---------------------------------------- |  | ----------------- | ---- | ---- |  | ----- | ----- | - |  | - | ----- | 
|                                         |  |                  
|                                         |  | Year Ended       
|                                         |  | December 31, 2002
|                                         |  |                  
|                                         |  |                   |      | Non- |  |      
|                                         |  | Cash              |      | Cash |  | Total
|                                         |  |                   |      |      |  |      
|Airport location consolidation           |  | $                 | 4.9  |      |  | $     | 29.8  |   |  | $ | 34.7  | 
|Combining information technology systems |  |                   | 20.2 |      |  |       | 77.6  |   |  |   | 97.8  | 
|Exiting certain international locations  |  |                   | 3.7  |      |  |       | 17.5  |   |  |   | 21.2  | 
|Professional fees and other              |  |                   | 39.2 |      |  |       | (28.0 | ) |  |   | 11.2  | 
|                                         |  |                   |      |      |  |       |       |   |  |   |       | 
|                                         |  | $                 | 68.0 |      |  | $     | 96.9  |   |  | $ | 164.9 | 
|                                         |  |                   |      |      |  |       |       |   |  |   |       | 

59



---



##### 



ANC RENTAL CORPORATION


(Debtor-In-Possession as of November 13,
2001)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

For the year ended December 31, 2002 the
Company has made cash payments relative to its transition and
reorganization expense of $59.0 million.



| |                               
| | ------------------------------
| | Airport Location Consolidation

As of the date of the bankruptcy filing Alamo and
National operated under 140 separate stand-alone concession
agreements at seventy airports, including most of the major
airports in the United States. The Company plans to consolidate
as many of these separately branded locations as possible into
dual branded locations. The Company believes that by
consolidating operations into one dual branded facility it will
be able to lower operating costs and improve vehicle
utilization, lower personnel expense, and reduce rent expense.
The Company expects to substantially complete its facility
consolidation program during 2003. Due to material uncertainties
and negotiations with third parties, it is not possible to
predict the length of time it will take to complete each
location consolidation or whether all of the contemplated
location consolidations will occur as planned. As of
March 31, 2003, the Company had dual branded its operations
at forty-six of these airports and had received court orders
allowing it to dual brand an additional three airport locations,
which it expects to complete by the end of 2003.

The Company incurred $34.7 million in expenses
relative to its airport location consolidation project for the
year ended December 31, 2002. For the year ended
December 31, 2002, the non-cash component was primarily
comprised of impairment charges and excess depreciation of
approximately $32.8 million, and a gain on rejected leases of
$3.0 million in the second half of 2002.



| |                                             
| | --------------------------------------------
| | Combining Information Technology
    Systems

The Company currently operates two separate and
distinct information technology systems, one for each of its
Alamo and National brands. By the end of 2003 or early 2004, the
Company plans to migrate to one information system and abandon
the other. The Company believes that by combining information
technology onto one of our operating systems, cost savings can
be achieved. Additional benefits of migrating to one system are
expected to include a reduction of support staff, elimination of
duplicative system infrastructures, improved operational
efficiency, lower cost of training, and standardization across
the organization. The migration to one information technology
system is not without significant risks, such as the ability to
successfully migrate onto one system, additional delays in
implementation, temporary loss of business functionality,
questions regarding the scalability of existing infrastructure
and the need for coordination with other third party vendors to
accept system changes. The Company accelerated depreciation on
the system it plans to abandon in order to fully depreciate the
remaining carrying value of $42.2 million as of
December 31, 2002 over its estimated remaining useful life.
In the fourth quarter of 2002, the Company revised the
information technology systems estimated useful life and
as such, the excess depreciation charge approximated $2.1
million per month beginning in October 2002.

The Company incurred $97.8 million in expenses
relative to the combining of information technology systems for
the year ended December 31, 2002. The cash component
primarily related to external consulting while the non-cash
component primarily related to excess depreciation.



| |                                            
| | -------------------------------------------
| | Exiting Certain International
    Locations

In August 2002, the Company sold certain assets
and transferred specific liabilities related to its Holland and
Belgium operations to an unrelated third party and entered into
a ten-year franchise agreement. The Company realized
approximately $10.1 million in net proceeds from this
transaction. In the third quarter, the Company recorded a
reorganization charge of approximately $1.4 million related to
losses on the sale of these assets.

60



---



##### 



ANC RENTAL CORPORATION


(Debtor-In-Possession as of November 13,
2001)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

In the third and fourth quarters of 2002,
respectively, the Companys German operating and financing
subsidiaries filed for receivership in Germany under local law.
As such, in the third quarter, the Company recorded an
impairment charge of approximately $15.8 million to reserve its
net investment in the German operations.



| |                            
| | ---------------------------
| | Professional Fees and Other

The Company incurred professional fees of
approximately $39.7 million for services rendered on behalf of
the Company and its creditors for the year ended
December 31, 2002. Pursuant to SOP 90-7, we have
reclassified approximately $0.5 million of excess interest
income to transition and reorganization expense for the year
ended December 31, 2002.

In the first quarter of 2003, the Bankruptcy
Court approved an order regarding the settlement of claims
concerning the holder of the Companys interim financing
fixed-rate note. The order provides for an allowed secured claim
of $180.0 million and an allowed unsecured claim of $25.0
million. The secured claim will accrue interest at 10%
commencing in February 2003, half of which will be paid
currently with the remaining half paid upon emergence. As of
December 31, 2002, the Company reversed to transition and
reorganization expense excess accrued interest, net of debt
issue costs and note discounts, of approximately $36.0 million
relative to this facility. Finally, we accrued allowed unsecured
claims of approximately $8.0 million.



| |                                             
| | --------------------------------------------
| | Closure of Alamo Local Market
    Operations

During the fourth quarter of 2002, the Company
approved and announced a plan to close and abandon its Alamo
Local Market Division. The Company substantially completed its
plan of abandonment in the fourth quarter of 2002. The plan
included provisions for employee terminations, closure of
locations and disposal or transfers of fleet to the
Companys other operations. Pursuant to the provisions of
Statement of Financial Accounting Standards (SFAS)
No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets (SFAS 144), the net assets
and operating results of the Companys Alamo Local Market
Division is classified as a discontinued operation. Assets
remaining as of December 31, 2002 primarily related to
trade receivables while liabilities remaining relate to
pre-petition trade payables and certain self insurance reserves.

A summary of operating results, total assets and
total liabilities in the Companys Alamo Local Market
Division for the periods indicated are as follows:

|                                                                                           |  |      |       |             |  |      |       |  |  |   |       | 
|------------------------------------------------------------------------------------------ |  | ---- | ----- | ----------- |  | ---- | ----- |  |  | - | ----- | 
|                                                                                           |  | 2002 |       | 2001        |  | 2000
|                                                                                           |  |      |       |             |  |     
|                                                                                           |  |      |       |            
|                                                                                           |  |      |       | (Unaudited)
|Revenue                                                                                    |  | $    | 119.5 |             |  | $    | 266.2 |  |  | $ | 274.6 | 
|Net loss from discontinued operations net of
    income taxes of $0 in 2002, 2001 and 2000 |  |      | 92.1  |             |  |      | 32.3  |  |  |   | 1.0   | 
|Total assets                                                                               |  |      | 15.4  |             |  |      | 72.0  |  |  |   | 219.3 | 
|Total liabilities                                                                          |  |      | 27.3  |             |  |      | 49.6  |  |  |   | 33.4  | 

4. Liabilities Subject to
Compromise

The classification of liabilities subject to
compromise is based on currently available information and
analysis. As additional information and analysis is completed
or, as the Court rules on relevant matters, the classification
of amounts in this category may change. Due to the nature of the
bankruptcy proceedings the amount of any changes could be
significant. Additionally, it is not possible to predict the
amount, if any, at which each type of liability will be
satisfied.

61



---



##### 



ANC RENTAL CORPORATION


(Debtor-In-Possession as of November 13,
2001)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The Company has pre-petition liabilities subject
to compromise as follows:

|                                |  |              |       |              |  |   |       | 
|------------------------------- |  | ------------ | ----- | ------------ |  | - | ----- | 
|                                |  | December 31, |       | December 31,
|                                |  | 2002         |       | 2001        
|                                |  |              |       |             
|                                |  |              |       | (Unaudited) 
|Accounts payable                |  | $            | 81.5  |              |  | $ | 79.2  | 
|Unsecured debt                  |  |              | 60.0  |              |  |   | 35.0  | 
|Terminated interest rate hedges |  |              | 82.3  |              |  |   | 82.3  | 
|Insurance reserves              |  |              | 210.5 |              |  |   | 241.7 | 
|Accrued liabilities             |  |              | 47.0  |              |  |   | 46.7  | 
|Other liabilities               |  |              | 34.3  |              |  |   | 30.4  | 
|                                |  |              |       |              |  |   |       | 
|                                |  | $            | 515.6 |              |  | $ | 515.3 | 
|                                |  |              |       |              |  |   |       | 

Certain of the pre-petition insurance reserves
may need to be addressed and resolved in the ordinary course of
business as a result of needing to maintain mandatory insurance
coverage or for other compelling business or legal reasons.

5. Debtor and Non-Debtor Consolidating Balance
Sheets and Consolidating Statements of Operations

The following combining statements of Debtors and
non-debtors as of December 31, 2002 have been prepared
assuming continuity of operations, realization of assets and
payment of liabilities. The divisions and subsidiaries excluded
from the bankruptcy proceedings relate to international
subsidiaries, an insurance captive and consolidated special
purpose financing entities.

|                                                 |                                                          |         |        |             |  |              |         |         |  |   |        |        |   |   |         |         | 
|------------------------------------------------ | -------------------------------------------------------- | ------- | ------ | ----------- |  | ------------ | ------- | ------- |  | - | ------ | ------ | - | - | ------- | ------- | 
|                                                 |                                                          | Debtors |        | Non-Debtors |  | Eliminations |         | Total  
|                                                 |                                                          |         |        |             |  |              |         |        
|Assets                                           |                                                          |         |        |             |  |              |         |         |  |   |        |        |   |   |         |        
|Cash and cash equivalents                        |                                                          | $       | 112.8  |             |  | $            | 53.4    |         |  | $ |       |        |   | $ | 166.2   |        
|Restricted cash and cash equivalents             |                                                          |         | 0.6    |             |  |              | 813.0   |         |  |   |       |        |   |   | 813.6   |        
|Receivables, net                                 |                                                          |         | 133.8  |             |  |              | 200.4   |         |  |   | (2.4   | )      |   |   | 331.8   |        
|Prepaid expenses                                 |                                                          |         | 37.4   |             |  |              | 12.2    |         |  |   |       |        |   |   | 49.6    |        
|Vehicles, net                                    |                                                          |         | (26.3  | )           |  |              | 2,980.7 |         |  |   |       |        |   |   | 2,954.4 |        
|Property and equipment, net                      |                                                          |         | 229.0  |             |  |              | 37.5    |         |  |   |       |        |   |   | 266.5   |        
|Goodwill, net                                    |                                                          |         |       |             |  |              | 20.9    |         |  |   |       |        |   |   | 20.9    |        
|Other assets                                     |                                                          |         | 921.1  |             |  |              | 67.1    |         |  |   | (885.6 | )      |   |   | 102.6   |        
|                                                 |                                                          |         |        |             |  |              |         |         |  |   |        |        |   |   |         |        
|                                                 | Total assets                                             |         | $      | 1,408.4     |  |              | $       | 4,185.2 |  |   | $      | (888.0 | ) |   | $       | 4,705.6 | 
|                                                 |                                                          |         |        |             |  |              |         |         |  |   |        |        |   |   |         |        
|Liabilities & Shareholders Equity
    (Deficit) |                                                          |         |        |             |  |              |         |         |  |   |        |        |   |   |         |        
|Accounts payable                                 |                                                          | $       | 58.1   |             |  | $            | 52.9    |         |  | $ | 0.1    |        |   | $ | 111.1   |        
|Accrued liabilities                              |                                                          |         | 179.5  |             |  |              | 62.5    |         |  |   | (6.3   | )      |   |   | 235.7   |        
|Insurance reserves                               |                                                          |         | 63.5   |             |  |              | 81.8    |         |  |   | (5.5   | )      |   |   | 139.8   |        
|Vehicle debt                                     |                                                          |         |       |             |  |              | 3,251.0 |         |  |   |       |        |   |   | 3,251.0 |        
|Other debt                                       |                                                          |         | 249.1  |             |  |              | 1.6     |         |  |   |       |        |   |   | 250.7   |        
|Deferred income taxes                            |                                                          |         | 253.7  |             |  |              | (1.7    | )       |  |   | 1.7    |        |   |   | 253.7   |        
|Other liabilities                                |                                                          |         | 60.3   |             |  |              | 161.6   |         |  |   | (0.2   | )      |   |   | 221.7   |        
|Due (from) to affiliates                         |                                                          |         | 326.9  |             |  |              | (326.9  | )       |  |   |       |        |   |   |        |        
|Net liability in discontinued operations         |                                                          |         | 11.9   |             |  |              |        |         |  |   |       |        |   |   | 11.9    |        
|Liabilities subject to compromise                |                                                          |         | 515.6  |             |  |              |        |         |  |   |       |        |   |   | 515.6   |        
|                                                 |                                                          |         |        |             |  |              |         |         |  |   |        |        |   |   |         |        
|                                                 | Total liabilities                                        |         |        | 1,718.6     |  |              |         | 3,282.8 |  |   |        | (10.2  | ) |   |         | 4,991.2 | 
|Shareholders equity (deficit)                   |                                                          |         | (310.2 | )           |  |              | 902.4   |         |  |   | (877.8 | )      |   |   | (285.6  | )      
|                                                 |                                                          |         |        |             |  |              |         |         |  |   |        |        |   |   |         |        
|                                                 | Total liabilities and shareholders equity
    (deficit) |         | $      | 1,408.4     |  |              | $       | 4,185.2 |  |   | $      | (888.0 | ) |   | $       | 4,705.6 | 
|                                                 |                                                          |         |        |             |  |              |         |         |  |   |        |        |   |   |         |        

62



---



##### 



ANC RENTAL CORPORATION


(Debtor-In-Possession as of November 13,
2001)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                                                                               |                                        |         |         |             |   |              |         |       |   |   |          |        |   |   |         |         |  
|---------------------------------------------------------------------------------------------- | -------------------------------------- | ------- | ------- | ----------- | - | ------------ | ------- | ----- | - | - | -------- | ------ | - | - | ------- | ------- | -
|                                                                                               |                                        | Debtors |         | Non-Debtors |   | Eliminations |         | Total
|                                                                                               |                                        |         |         |             |   |              |         |      
|Revenue                                                                                        |                                        | $       | 1,964.8 |             |   | $            | 1,467.9 |       |   | $ | (1,038.9 | )      |   | $ | 2,393.8 |        
|Expenses:                                                                                      |                                        |         |         |             |   |              |         |       |   |   |          |        |   |   |         |        
|                                                                                               | Direct operating costs                 |         |         | 930.3       |   |              |         | 251.4 |   |   |          | (77.1  | ) |   |         | 1,104.6 |  
|                                                                                               | Vehicle depreciation, net              |         |         | 744.6       |   |              |         | 795.9 |   |   |          | (822.7 | ) |   |         | 717.8   |  
|                                                                                               | Selling, general, and administrative   |         |         | 412.9       |   |              |         | 221.9 |   |   |          | (137.0 | ) |   |         | 497.8   |  
|                                                                                               | Transition and reorganization expenses |         |         | 144.2       |   |              |         | 20.7  |   |   |          |       |   |   |         | 164.9   |  
|                                                                                               | Interest income                        |         |         | (2.7        | ) |              |         | (2.0  | ) |   |          |       |   |   |         | (4.7    | )
|                                                                                               | Interest expense                       |         |         | 63.3        |   |              |         | 147.0 |   |   |          | (3.8   | ) |   |         | 206.5   |  
|                                                                                               | Other expense (income), net            |         |         | 139.2       |   |              |         | (94.9 | ) |   |          | (1.6   | ) |   |         | 42.7    |  
|                                                                                               | Equity (earnings) in investee          |         |         | (8.0        | ) |              |         |      |   |   |          | 8.0    |   |   |         |        |  
|                                                                                               |                                        |         |         |             |   |              |         |       |   |   |          |        |   |   |         |        
|Income (loss) before income taxes                                                              |                                        |         | (459.0  | )           |   |              | 127.9   |       |   |   | (4.7     | )      |   |   | (335.8  | )      
|                                                                                               |                                        |         |         |             |   |              |         |       |   |   |          |        |   |   |         |        
|Provision (benefit) for income taxes                                                           |                                        |         |        |             |   |              | 13.7    |       |   |   | (13.7    | )      |   |   |        |        
|                                                                                               |                                        |         |         |             |   |              |         |       |   |   |          |        |   |   |         |        
|Income (loss) from continuing operations                                                       |                                        |         | (459.0  | )           |   |              | 114.2   |       |   |   | 9.0      |        |   |   | (335.8  | )      
|                                                                                               |                                        |         |         |             |   |              |         |       |   |   |          |        |   |   |         |        
|Net loss from discontinued operations, net of
    benefit of income taxes of $0.               |                                        |         | (92.1   | )           |   |              |        |       |   |   |         |        |   |   | (92.1   | )      
|                                                                                               |                                        |         |         |             |   |              |         |       |   |   |          |        |   |   |         |        
|Net income (loss) before cumulative effect
    of change in accounting principle               |                                        |         | (551.1  | )           |   |              | 114.2   |       |   |   | 9.0      |        |   |   | (427.9  | )      
|                                                                                               |                                        |         |         |             |   |              |         |       |   |   |          |        |   |   |         |        
|Cumulative effect of change in accounting
    principle, net of benefit of income taxes of $0. |                                        |         |        |             |   |              | (106.2  | )     |   |   |         |        |   |   | (106.2  | )      
|                                                                                               |                                        |         |         |             |   |              |         |       |   |   |          |        |   |   |         |        
|Net income (loss)                                                                              |                                        | $       | (551.1  | )           |   | $            | 8.0     |       |   | $ | 9.0      |        |   | $ | (534.1  | )      
|                                                                                               |                                        |         |         |             |   |              |         |       |   |   |          |        |   |   |         |        

6. Summary of Significant Accounting
Policies

Cash
and Cash Equivalents

Cash and cash equivalents consist of highly
liquid investments that have an original maturity of three
months or less at the date of purchase.

Restricted
Cash and Cash Equivalents

Restricted cash and cash equivalents consists of
amounts held in trust for payment and as security under the
Companys vehicle debt programs as well as amounts on
deposit for insurance claims.

|                                     |  |      |       |             |  |   |         | 
|------------------------------------ |  | ---- | ----- | ----------- |  | - | ------- | 
|                                     |  | 2002 |       | 2001       
|                                     |  |      |       |            
|                                     |  |      |       | (Unaudited)
|Restricted cash for vehicle debt     |  | $    | 750.7 |             |  | $ | 1,262.2 | 
|Restricted cash for insurance claims |  |      | 62.9  |             |  |   | 47.8    | 
|                                     |  |      |       |             |  |   |         | 
|                                     |  | $    | 813.6 |             |  | $ | 1,310.0 | 
|                                     |  |      |       |             |  |   |         | 

Regarding the Companys international
operations, in April 2002, the Companys United Kingdom
subsidiary entered into a fleet finance and working capital
facility with third party lenders which allows the operation,
for limited periods of time, to use certain vehicle proceeds,
usually classified as restricted cash, to support general
working capital needs thereby reducing the daily draw of its
£20.0 million or approximately $33.0 million working
capital facility.

63



---



##### 



ANC RENTAL CORPORATION


(Debtor-In-Possession as of November 13,
2001)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Receivables

The components of receivables, net of allowance
for doubtful accounts as of December 31 are as follows:

|                                      |  |      |       |             |  |   |       |  
|------------------------------------- |  | ---- | ----- | ----------- |  | - | ----- | -
|                                      |  | 2002 |       | 2001       
|                                      |  |      |       |            
|                                      |  |      |       | (Unaudited)
|Trade receivables                     |  | $    | 119.8 |             |  | $ | 152.0 |  
|Vehicle manufacturer receivables      |  |      | 181.1 |             |  |   | 115.3 |  
|Other                                 |  |      | 60.3  |             |  |   | 86.0  |  
|                                      |  |      |       |             |  |   |       |  
|                                      |  |      | 361.2 |             |  |   | 353.3 |  
|Less: allowance for doubtful accounts |  |      | (29.4 | )           |  |   | (14.9 | )
|                                      |  |      |       |             |  |   |       |  
|                                      |  | $    | 331.8 |             |  | $ | 338.4 |  
|                                      |  |      |       |             |  |   |       |  

The Company maintains allowances for doubtful
accounts for estimated losses from the inability or failure of
our customers to make payments for rental activity, damage
reimbursement or sales of vehicles. The allowances are based on
current trends and historical collection experience and a
percentage of our accounts receivable by aging category. In
determining these percentages, we look to historical write-offs,
current trends in the credit quality of our customer base and in
billing dispute resolution as well as changes in credit policy.

Vehicles

Vehicles are stated at cost less accumulated
depreciation. The straight-line method is used to depreciate
vehicles to their estimated residual values over periods
typically ranging from three to fourteen months. Vehicles are
typically held up to nine months. Management, on a periodic
basis, reviews depreciable lives and rates for adequacy based on
a variety of factors including general economic conditions and
the estimated holding period of the vehicles. Depreciation
expense includes amortization of deferred manufacturer
incentives and gains and losses on vehicle sales in the ordinary
course of business. Vehicles held for disposal are evaluated as
a group and recorded at the lower of cost or market.

A summary of vehicles, net as of December 31
is as follows:

|                               |  |      |         |               |  |   |         |  
|------------------------------ |  | ---- | ------- | ------------- |  | - | ------- | -
|                               |  | 2002 |         | 2001         
|                               |  |      |         |              
|                               |  |      |         | (as Restated)
|                               |  |      |         | (Unaudited)  
|Revenue earning vehicles       |  | $    | 3,317.2 |               |  | $ | 3,997.9 |  
|Less: accumulated depreciation |  |      | (362.8  | )             |  |   | (620.4  | )
|                               |  |      |         |               |  |   |         |  
|                               |  | $    | 2,954.4 |               |  | $ | 3,377.5 |  
|                               |  |      |         |               |  |   |         |  

Vehicles with a net book value of approximately
$2.57 billion and $2.68 billion at December 31, 2002 and
2001, respectively, were acquired under programs that allow the
Company to require vehicle manufacturers to repurchase vehicles
for a specified price at the end of defined holding period,
subject to varying mileage and damage limitations. Vehicles
subject to a capital leases approximated $302.3 million and
$285.2 million as of December 31, 2002 and 2001,
respectively. The Company depreciates vehicles subject to a
capital lease, to the vehicles expected residual values over the
term of the leases, which average approximately six months, as a
component of vehicle depreciation expense. The Company also
leases vehicles under operating lease agreements which require
the Company to provide normal maintenance and liability
coverage. The agreements generally have terms of four to
thirteen months. Many agreements provide for an option to
terminate the leases early and allow for the purchase of leased
vehicles subject to certain restrictions.

64



---



##### 



ANC RENTAL CORPORATION


(Debtor-In-Possession as of November 13,
2001)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Property
and Equipment

Property and equipment are recorded at cost.
Expenditures for major additions and improvements are
capitalized, while minor replacements, maintenance and repairs
are charged to expense as incurred. When property is retired or
otherwise disposed, the cost and accumulated depreciation are
removed from the accounts and any resulting gain or loss is
reflected in the Consolidated Statements of Operations and
Comprehensive Loss.

Depreciation is provided over the estimated
useful lives of the assets using the straight-line method. The
estimated useful lives are: twenty to forty years for buildings
and improvements, three to fifteen years for equipment,
including computer hardware and software, and five to ten years
for furniture and fixtures.

A summary of property and equipment as of
December 31 is as follows:

|                                                |  |      |        |             |  |   |        |  
|----------------------------------------------- |  | ---- | ------ | ----------- |  | - | ------ | -
|                                                |  | 2002 |        | 2001       
|                                                |  |      |        |            
|                                                |  |      |        | (Unaudited)
|Land                                            |  | $    | 45.9   |             |  | $ | 50.8   |  
|Furniture, fixtures and equipment               |  |      | 398.7  |             |  |   | 407.0  |  
|Buildings and improvements                      |  |      | 266.8  |             |  |   | 292.8  |  
|                                                |  |      |        |             |  |   |        |  
|                                                |  |      | 711.4  |             |  |   | 750.6  |  
|Less: accumulated depreciation and amortization |  |      | (444.9 | )           |  |   | (316.6 | )
|                                                |  |      |        |             |  |   |        |  
|                                                |  | $    | 266.5  |             |  | $ | 434.0  |  
|                                                |  |      |        |             |  |   |        |  

The Company periodically evaluates whether events
and circumstances have occurred that may warrant revision of the
estimated useful lives of property and equipment or whether the
remaining balance of property and equipment should be evaluated
for possible impairment. Such indicators include:



| |   |                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | A significant decrease in the market price of a
    long-lived asset or asset group;                                                                                                                                                              
|
| |  | A significant adverse change in the extent or
    manner in which a long-lived asset or asset group is being used
    or in its physical condition;                                                                                               
|
| |  | A significant adverse change in legal factors or
    in the business climate that could affect the value of a
    long-lived asset or asset group, including an adverse action or
    assessment by a regulator;                                  
|
| |  | An accumulation of costs significantly in excess
    of the amount originally expected for the acquisition or
    construction of a long-lived asset or asset group;                                                                              
|
| |  | A current-period operating or cash flow loss
    combined with a history of operating or cash flow losses or a
    projection or forecast that demonstrates continuing losses
    associated with the use of a long-lived asset or asset group; or
|
| |  | A current expectation that, more likely than not,
    a long-lived asset or asset group will be sold or otherwise
    disposed of significantly before the end of its previously
    estimated useful life.                                       

The Company uses an estimate of the related
undiscounted cash flows, excluding interest, over the remaining
life of the property and equipment in assessing their
recoverability. The Company measures impairment loss as the
amount by which the carrying amount of the asset(s) exceeds the
fair value of the asset(s). The Company primarily employs two
methodologies for determining the fair value of an asset. Fair
value is either the amount at which the asset could be bought or
sold in a current transaction between willing parties or the
present value of estimated expected future cash flows grouped at
the lowest level for which there are identifiable independent
cash flows.

65



---



##### 



ANC RENTAL CORPORATION


(Debtor-In-Possession as of November 13,
2001)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Other
Assets

The components of other assets as of
December 31 are as follows:

|                                    |  |      |       |             |  |   |      | 
|----------------------------------- |  | ---- | ----- | ----------- |  | - | ---- | 
|                                    |  | 2002 |       | 2001       
|                                    |  |      |       |            
|                                    |  |      |       | (Unaudited)
|Deposits                            |  | $    | 80.8  |             |  | $ | 40.7 | 
|Debt issue cost, net                |  |      | 13.8  |             |  |   | 22.3 | 
|Interest rate hedges, at fair value |  |      | 4.2   |             |  |   | 22.3 | 
|Other                               |  |      | 3.8   |             |  |   | 4.7  | 
|                                    |  |      |       |             |  |   |      | 
|                                    |  | $    | 102.6 |             |  | $ | 90.0 | 
|                                    |  |      |       |             |  |   |      | 

Direct and incremental costs incurred in
connection with the Companys debt facilities have been
recorded as a component of other assets and are being amortized
on a straight-line basis, which approximates the effective
interest method, over the terms of the related borrowing.

Goodwill

Goodwill consists of the cost of acquired
businesses in excess of the fair value of net assets acquired
and as of December 31, 2002 relates solely to our
operations in the United Kingdom.

The Company has reviewed the carrying values of
its goodwill as required by SFAS No. 142, Goodwill
and Other Intangible Assets, by comparing the carrying
values of its reporting units to their fair values and
determined that the carrying amounts of the reporting units did
not exceed their respective fair values. When determining fair
value, the Company utilized projections of future cash flows,
appraisals from investment advisors or recent offers. A change
in these underlying assumptions would cause a change in the
results of these tests and, as such, could cause fair value to
be less than the respective carrying amounts. In such event, the
Company would then be required to record a charge, which would
impact earnings. The Company will continue to review the
carrying values of goodwill and other intangible assets for
impairment annually, or more frequently if circumstances
indicate impairment may have occurred.

The Companys transition adjustment for the
adoption of SFAS 142 is more fully described in Note 18.

In September 2001, as a result of the significant
adverse changes in business environment in part due to the
events of September 11, and historical and projected cash
flow losses, the Company determined that recoverability of its
enterprise level intangible assets was not assured. As such, the
Company recognized an impairment charge for its enterprise level
intangible assets of approximately $210.8 million for the
quarter ended September 30, 2001.

Accounts
Payable

The components of accounts payable as of
December 31 are as follows:

|                                              |  |      |       |             |  |   |       |  
|--------------------------------------------- |  | ---- | ----- | ----------- |  | - | ----- | -
|                                              |  | 2002 |       | 2001       
|                                              |  |      |       |            
|                                              |  |      |       | (Unaudited)
|Trade payables                                |  | $    | 148.4 |             |  | $ | 141.5 |  
|Vehicle payables                              |  |      | 44.2  |             |  |   | 26.1  |  
|Less, amounts currently subject to compromise |  |      | (81.5 | )           |  |   | (79.2 | )
|                                              |  |      |       |             |  |   |       |  
|                                              |  | $    | 111.1 |             |  | $ | 88.4  |  
|                                              |  |      |       |             |  |   |       |  

Vehicle payables represent amounts to be financed
after period-end for vehicles acquired under the Companys
vehicle financing programs.

66



---



##### 



ANC RENTAL CORPORATION


(Debtor-In-Possession as of November 13,
2001)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Liability
Insurance

The nature of the Companys business exposes
it to the risk of liabilities arising out of its operations.
These potential liabilities could involve, for example, claims
of employees, customers or third parties for personal injury or
property damage occurring in the course of the Companys
operations, claims for remediation costs, personal injury,
property damage, and damage to the environment in cases where
the Company may be held responsible for the escape of harmful
materials. The Company could also be subject to fines and civil
and criminal penalties in connection with alleged violations of
regulatory requirements.

The nature of the Companys business also
exposes it to significant risk of liability arising primarily
out of accidents involving automobiles rented from its vehicle
rental fleet. Laws in some states impose vicarious liability on
automotive rental companies, which increases the Companys
risk. Subject to the risk levels discussed below, the Company
manages its exposure through a combination of qualified self
insurance and risk transfer to insurance companies which are
rated as financially sound by insurance rating agencies. The
Company is substantially self-insured for the majority of its
incurred liability. The Company carries certain excess liability
coverage, however, catastrophic losses may occur which exceed
the amount of coverage limits.

The Company either purchases commercial insurance
or acts as its own qualified self-insurer for automobile
liability, general liability, workers compensation and
employers liability claims. Historically, the Company
retained up to $1.0 million of risk per claim, plus claims
handling expense under its various property, auto liability and
general liability insurance programs. In the fourth quarter of
2001, the Company raised this retention up to $5.0 million in
auto and general liability insurance programs. The Company
purchases excess liability insurance to provide insurance in
excess of the primary liability insurance policies and/or
retained losses subject to certain deductibles. The level of
risk the Company retains may change in the future as insurance
market conditions or other factors affecting the economics of
its insurance purchasing change. Although the Company strives to
operate safely and prudently and has, subject to certain
limitations and exclusions, certain excess liability insurance,
the Company may be exposed to uninsured or underinsured losses
that could have a material adverse effect on its results of
operations and financial condition.

Provisions for retained or self-insured claims
are made by charges to expense based upon periodic evaluations
by management and outside actuaries of the estimated ultimate
liabilities on reported and unreported claims. Adjustments, if
any, to the estimated reserves resulting from ultimate claim
payments will be reflected in operations in the periods in which
such adjustments become known. The Company has collateral
requirements that are set by insurance companies, which
underwrite its insurance programs. The collateral requirements
may change from time to time, based on, among other things, the
Companys claims experience, financial performance or
credit quality and retention levels.

Insurance
Reserves

The components of insurance reserves as of
December 31 are as follows:

|                                              |  |      |        |             |  |   |        |  
|--------------------------------------------- |  | ---- | ------ | ----------- |  | - | ------ | -
|                                              |  | 2002 |        | 2001       
|                                              |  |      |        |            
|                                              |  |      |        | (Unaudited)
|Auto and general liability                    |  | $    | 324.8  |             |  | $ | 274.4  |  
|Other                                         |  |      | 25.5   |             |  |   | 29.6   |  
|Less, amounts currently subject to compromise |  |      | (210.5 | )           |  |   | (241.7 | )
|                                              |  |      |        |             |  |   |        |  
|                                              |  | $    | 139.8  |             |  | $ | 62.3   |  
|                                              |  |      |        |             |  |   |        |  

Certain of the pre-petition insurance reserves
may need to be addressed and resolved in the ordinary course of
business as a result of needing to maintain mandatory insurance
coverage or for other compelling business or legal reasons.

67



---



##### 



ANC RENTAL CORPORATION


(Debtor-In-Possession as of November 13,
2001)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Other
Liabilities

A summary of other liabilities as of
December 31 is as follows:

|                                              |  |      |        |             |  |   |        |  
|--------------------------------------------- |  | ---- | ------ | ----------- |  | - | ------ | -
|                                              |  | 2002 |        | 2001       
|                                              |  |      |        |            
|                                              |  |      |        | (Unaudited)
|Minority interest                             |  | $    | 158.7  |             |  | $ | 141.3  |  
|Terminated interest rate hedges at fair value |  |      | 82.3   |             |  |   | 82.3   |  
|Deferred gains on property sales              |  |      | 27.8   |             |  |   | 32.8   |  
|Other                                         |  |      | 69.5   |             |  |   | 55.3   |  
|Less, amounts currently subject to compromise |  |      | (116.6 | )           |  |   | (112.7 | )
|                                              |  |      |        |             |  |   |        |  
|                                              |  | $    | 221.7  |             |  | $ | 199.0  |  
|                                              |  |      |        |             |  |   |        |  

Minority interest represents the limited
partnership interest in a Canadian subsidiary of the Company,
which was formed in 1997. Minority interest in the
subsidiarys earnings included in interest expense was $8.6
million, $8.2 million and $7.4 million for the years ended
December 31, 2002, 2001, and 2000, respectively.

Other
Comprehensive Loss

Other comprehensive loss, net of income taxes,
consists of foreign currency translation adjustments and changes
in fair value of the Companys interest rate hedges. The
assets and liabilities of foreign subsidiaries are translated at
period-end exchange rates. Results of operations are translated
at the average rates of exchange in effect during the period.

The components of accumulated other comprehensive
loss are as follows:

|                                         |  |              |       |              |  |   |       |  
|---------------------------------------- |  | ------------ | ----- | ------------ |  | - | ----- | -
|                                         |  | December 31, |       | December 31,
|                                         |  | 2002         |       | 2001        
|                                         |  |              |       |             
|                                         |  |              |       | (Unaudited) 
|Foreign currency translation adjustments |  | $            | (6.1  | )            |  | $ | (14.1 | )
|Deferred losses on interest rate hedges  |  |              | (53.8 | )            |  |   | (73.1 | )
|                                         |  |              |       |              |  |   |       |  
|                                         |  | $            | (59.9 | )            |  | $ | (87.2 | )
|                                         |  |              |       |              |  |   |       |  

Revenue
Recognition

Revenue consists primarily of fees from rentals
and the sale of related rental products. The Company recognizes
revenue over the period in which vehicles are rented. The
Company also receives franchise fees, which are recognized in
the period in which the fee is earned from the franchisee and
represent approximately 1.7% of revenue.

Income
Taxes

Prior to June 30, 2000 the Company was
included in the consolidated federal income tax return of our
former Parent. All tax amounts have been recorded as if the
Company filed a separate federal tax return. The Company
accounts for income taxes in accordance with SFAS No. 109,
Accounting for Income Taxes. Accordingly, deferred
income taxes have been provided to show the effect of temporary
differences between the recognition of revenue and expenses for
financial and income tax reporting purposes and between the tax
basis of assets and liabilities and their reported amounts in
the financial statements.

In assessing the realizability of deferred tax
assets, management considers whether it is more likely than not
that some portion or all of the deferred tax assets will not be
realized. The Company provides valuation allowances to offset
portions of deferred tax assets due to uncertainty surrounding
the future realization of

68



---



##### 



ANC RENTAL CORPORATION


(Debtor-In-Possession as of November 13,
2001)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

such deferred tax assets. The Company adjusts the
valuation allowance in the period management determines it is
more likely than not that deferred tax assets will or will not
be realized.



| |                                 
| | --------------------------------
| | Derivative Financial Instruments

The Company utilizes interest rate protection
agreements with several counterparties to manage the impact of
interest rate changes on the Companys variable-rate
vehicle debt obligations. The Company does not use derivative
financial instruments for trading purposes. Cash proceeds on
derivative financial instruments used to manage interest rate
exposure are recorded as a component of vehicle interest
expense. On January 1, 2001 the Company adopted a new
accounting standard related to derivatives. For a further
discussion of the Companys interest rate derivatives refer
to Note 17.



| |            
| | -----------
| | Advertising

The Company expenses the cost of advertising as
incurred or when such advertising initially takes place. No
advertising costs were capitalized at December 31, 2002 or
2001. Advertising expense was $73.9 million, $98.0 million and
$133.5 million for the years ended December 31, 2002, 2001
and 2000, respectively.



| |                    
| | -------------------
| | Environmental Costs

The Companys operations involve the storage
and dispensing of petroleum products, primarily gasoline. The
Company records as expense, on a current basis, costs associated
with remediation of environmental pollution. The Company also
accrues for its proportionate share of costs associated with the
remediation of environmental pollution when it becomes probable
that a liability has been incurred and the amount can be
reasonably estimated. Estimated costs include anticipated site
testing, consulting, remediation, disposal, post-remediation
monitoring and legal fees, as appropriate. Provisions for
environmental costs are made by charges to expense upon periodic
reviews by management and outside legal counsel. Adjustments or
recoveries from third parties, if any, are reflected in
operations in the periods in which such adjustments are known
and deemed probable.



| |                         
| | ------------------------
| | Stock based compensation

The Company applies Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to
Employees, as amended, in accounting for stock-based
employee compensation arrangements whereby no compensation cost
related to stock options is deducted in determining net income.
Following our chapter 11 filing, no stock options were granted
in 2002. Had compensation cost for stock option grants under the
Companys stock option plans been determined pursuant to
SFAS No. 123, Accounting for Stock-Based
Compensation, the Companys net loss would have
increased accordingly. Using the Black-Scholes option pricing
model for all options granted after June 30, 2000, the
Companys pro forma net loss and pro forma

69



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##### 



ANC RENTAL CORPORATION


(Debtor-In-Possession as of November 13,
2001)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

weighted average fair value of options granted,
with related assumptions, are as follows for the years ended
December 31:

|                                                                                                            |                   |      |        |      |  |      |             |        |   |   |           |       |  
|----------------------------------------------------------------------------------------------------------- | ----------------- | ---- | ------ | ---- |  | ---- | ----------- | ------ | - | - | --------- | ----- | -
|                                                                                                            |                   | 2002 |        | 2001 |  | 2000
|                                                                                                            |                   |      |        |      |  |     
|Net loss, as reported                                                                                       |                   | $    | (534.1 | )    |  | $    | (606.7      | )      |   | $ | (2.0      | )    
|Less, total stock-based employee compensation
    expensed under the fair value based method for all awards |                   |      |       |      |  |      | (2.8        | )      |   |   | (4.6      | )    
|                                                                                                            |                   |      |        |      |  |      |             |        |   |   |           |      
|Pro forma loss                                                                                              |                   | $    | (534.1 | )    |  | $    | (609.5      | )      |   | $ | (6.6      | )    
|                                                                                                            |                   |      |        |      |  |      |             |        |   |   |           |      
|Pro forma loss per share:                                                                                   |                   |      |        |      |  |      |             |        |   |   |           |      
|                                                                                                            | Basic and diluted |      |        |     |  |      |             | (13.48 | ) |   |           | (0.15 | )
|Pro forma weighted average fair value of options
    granted                                                |                   |      |       |      |  |      | 2.78        |        |   |   | 2.89      |      
|Risk free interest rates                                                                                    |                   |      |       |      |  |      | 5.06        | %      |   |   | 5.11      | %    
|Expected lives                                                                                              |                   |      |       |      |  |      | 1.5-7 years |        |   |   | 5-7 years |      
|Expected volatility                                                                                         |                   |      |       |      |  |      | 65.7        | %      |   |   | 64.4      | %    

The Company believes that as a result of its
chapter 11 filing, its inability to issue shares, and the lack
of any grants under the stock option plan in 2002 there is no
value to its options as such there is no related stock based
compensation.



| |                                          
| | -----------------------------------------
| | Consolidated Statements of Cash
    Flows

The Company considers all highly liquid
investments with purchased maturities of three months or less to
be cash equivalents unless the investments are legally or
contractually restricted for more than three months. There were
no significant non-cash investing and financing transactions
during the years ended December 31, 2002, 2001 and 2000.

The Company made interest payments of
approximately $131.0 million, $292.5 million and
$344.3 million for the years ended December 31, 2002,
2001 and 2000, respectively, including interest on vehicle debt.
The Company made no tax payments during the three years ended
December 31, 2002.



| |                                                    
| | ---------------------------------------------------
| | New Accounting
    Pronouncements  Not Yet Adopted

In June 2002, the Financial Accounting Standards
Board (FASB) issued SFAS No. 146,
Accounting for Costs Associated with Exit or Disposal
Activities. SFAS 146 addresses financial accounting
and recognition of liabilities for costs associated with exit or
disposal activities, requiring that such liabilities be
recognized and measured initially at fair value only when a
liability is incurred. SFAS No. 146 will be effective for
disposal activities that are initiated after December 31,
2002. Management does not believe the adoption of SFAS
No. 146, as of January 1, 2003, will have a material
effect on the Companys financial position, results of
operations or cash flows.

In November 2002, the FASB issued Interpretation
No. 45 (FIN 45), Guarantors
Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others. FIN 45
requires a guarantor to recognize, at the inception of certain
guarantees, a liability for the fair value of the obligation
undertaken in issuing the guarantee. FIN 45 also requires
additional disclosure about the guarantors obligations
under certain guarantees that it has issued. The initial
recognition and measurement provisions of this interpretation
are applicable prospectively to guarantees issued or modified
after December 31, 2002 and the disclosure requirements are
effective for financial statements issued after
December 15, 2002. Management does not believe the adoption
of FIN 45 will have a material impact on the Companys
consolidated financial position, results of operations or cash
flows.

In December 2002, the FASB issued SFAS
No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure. SFAS
No. 148 amends SFAS No. 123, Accounting for
Stock-Based Compensa-

70



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##### 



ANC RENTAL CORPORATION


(Debtor-In-Possession as of November 13,
2001)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

tion to provide alternative methods of
transition for a voluntary change to the fair value based method
of accounting for stock-based employee compensation. In
addition, this statement amends the disclosure requirements of
SFAS No. 123 to require more prominent and more frequent
disclosures in both annual and interim financial statements
about the effects of stock-based compensation. The annual
disclosure guidance of SFAS No. 148 is effective for fiscal
years ending after December 15, 2002. The interim
disclosure requirements apply to interim periods ending after
December 15, 2002. Management does not believe the adoption
of SFAS No. 148 will affect the Companys financial
position, results of operations or cash flows.

In January 2003, the FASB issued FIN 46,
Consolidation of Variable Interest Entities. This
interpretation of Accounting Research Bulletin No. 51,
Consolidated Financial Statements, addresses when a
company should include in its financial statements the assets
and liabilities of unconsolidated variable interest entities.
FIN 46 is effective for all variable interest entities created
after January 31, 2003 and for variable interest entities
in which an enterprise obtains an interest after that date. FIN
46 is effective for fiscal years or interim periods beginning
after June 15, 2003 for variable interest entities in which an
enterprise holds a variable interest that it acquired before
February 15, 2003. Management does not believe the adoption
of FIN 46 will affect the Companys financial position,
results of operations or cash flows.

7. Vehicle Debt

Vehicle debt as of December 31 is as follows:

|                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                        |      |         |               |  |   |         |         | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ---- | ------- | ------------- |  | - | ------- | ------- | 
|                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                        | 2002 |         | 2001         
|                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                        |      |         |              
|                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                        |      |         | (as Restated)
|                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                        |      |         | (Unaudited)  
|Bank sponsored liquidity back-up facility secured
    by eligible vehicle collateral; interest based on U.S. Prime
    rate; weighted average interest rate of 4.75% at
    December 31, 2001.                                                                                                            |                                                                                                                                                                                                        | $    |        |               |  | $ | 63.8    |        
|Auction-rate note program; weighted average
    interest rate of 2.77% at December 31, 2001; maturities
    through 2006, net of a $0.3 million discount at
    December 31, 2001.                                                                                                                        |                                                                                                                                                                                                        |      |        |               |  |   | 222.7   |        
|Amounts under various asset-backed medium-term
    note programs secured by eligible vehicle collateral:                                                                                                                                                                                                  |                                                                                                                                                                                                        |      |         |               |  |   |         |        
|                                                                                                                                                                                                                                                                                                          | Fixed-rate component; weighted average interest
    rate of 6.02% at December 31, 2002 and 5.94% at
    December 31, 2001; maturities through 2004.                                                    |      |         | 500.0         |  |   |         | 1,250.0 | 
|                                                                                                                                                                                                                                                                                                          | Floating-rate component based on a spread over
    LIBOR; weighted average interest rate of 2.06% and 2.17% at
    December 31, 2002 and December 31, 2001, respectively;
    maturities through 2005. |      |         | 2,399.8       |  |   |         | 2,350.0 | 
|Vehicles subject to capital leases                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                        |      | 302.3   |               |  |   | 285.2   |        
|Other committed and uncommitted secured vehicle
    financings primarily with financing institutions in the United
    Kingdom; LIBOR based interest rates; weighted average interest
    rates of 5.25% and 4.09% at December 31, 2002 and
    December 31, 2001, respectively; maturities through 2003. |                                                                                                                                                                                                        |      | 48.9    |               |  |   | 91.3    |        
|                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                        |      |         |               |  |   |         |        
|                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                        | $    | 3,251.0 |               |  | $ | 4,263.0 |        
|                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                        |      |         |               |  |   |         |        

The Company finances its domestic vehicle
purchases through wholly-owned, consolidated, special purpose
financing subsidiaries. These financing subsidiaries obtain
funds by issuing asset-backed medium-term notes or commercial
paper into the capital markets. The financing subsidiaries in
turn lease vehicles to the domestic operating subsidiaries. The
Companys international operations in Europe and Canada
obtain

71



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##### 



ANC RENTAL CORPORATION


(Debtor-In-Possession as of November 13,
2001)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

their own financing for vehicle purchases through
various asset-backed financings, leases and secured loans on a
country by country basis.

The Companys operations in the United
Kingdom acquires vehicles from manufacturers under repurchase
programs (with guaranteed residual values). The cars are then
sold under sale-leaseback arrangements with varied third party
financing institutions. The vehicles are held for an average of
six months; the vehicle obligation accrues interest at a rate
based upon a spread over LIBOR. The minimum amount due under the
capital lease obligations is $302.3 million as of
December 31, 2002.

The Debtors filing for bankruptcy
represented an Event of Default under each of the domestic
financing facilities and certain of the Companys
international facilities for which the parent company is
guarantor. However, in the United States the special purpose
financing subsidiaries are not Debtors and have continued making
scheduled interest and principal payments to the third party
note holders.

On May 1, 2002, all amounts outstanding on
the Companys bank sponsored liquidity back-up facilities
were repaid.

In February 2002, the Bankruptcy Court approved,
on a final basis, a fleet financing agreement insured by MBIA
whereby MBIA allowed for the release of certain restricted funds
supporting the MBIA insured outstanding series of medium-term
notes for the purchase of new vehicles. The agreement made
available up to $1.0 billion of previously frozen funds for the
acquisition of new fleet. On May 10, 2002, the Bankruptcy
Court approved, on a final basis, an agreement with MBIA to
allow the Company to continue to use $2.3 billion of its
fleet financing facilities on a revolving basis. As such, the
Company is allowed to use proceeds received from the disposition
of vehicles financed by these facilities to purchase new
vehicles. Through a series of court orders, the agreement is
currently scheduled to expire in June 2003. The Company expects
to file a motion to extend the agreement beyond June 2003.

Additionally, the Company issued a $275.0 million
variable funding asset-backed note which, in June 2002, the
Company amended to allow for borrowings of up to $575.0 million.
The note bears interest at a variable rate based upon a spread
over LIBOR and was set to expire in September 2002. In August
2002, the Company refinanced the variable funding note with the
issuance of $600.0 million of vehicle asset-backed medium-term
notes with a term of approximately two years at a floating rate
based on a spread over LIBOR. Upon the emergence from chapter
11, the Company may need to refinance these asset-backed
medium-term notes. The Company hedged its floating interest rate
risk through the purchase of an interest-rate cap with a strike
price of 6.5%. The Company expects the interest-rate cap to be
effective in hedging interest rate risk.

In the fourth quarter of 2002, the Company repaid
amounts outstanding under its auction-rate note program.

At December 31, 2002, aggregate expected
maturities of vehicle debt were as follows:

|     |  |   |         | 
|---- |  | - | ------- | 
|2003 |  | $ | 934.2   | 
|2004 |  |   | 1,909.9 | 
|2005 |  |   | 406.9   | 
|     |  |   |         | 
|     |  | $ | 3,251.0 | 
|     |  |   |         | 

72



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##### 



ANC RENTAL CORPORATION


(Debtor-In-Possession as of November 13,
2001)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

8. Other Debt

Other debt as of December 31 is as follows:

|                                                                                                                                                                                                   |  |      |       |             |  |   |       |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ----- | ----------- |  | - | ----- | -
|                                                                                                                                                                                                   |  | 2002 |       | 2001       
|                                                                                                                                                                                                   |  |      |       |            
|                                                                                                                                                                                                   |  |      |       | (Unaudited)
|Secured revolving credit facility weighted
    average interest rate of 5.75% at December 31, 2002,
    matures 2003                                                                               |  | $    | 29.1  |             |  | $ |      |  
|Supplemental secured term loan at 12.25% and
    12.75% at December 31, 2002 and December 31, 2001,
    respectively, matures May 31, 2003                                                         |  |      | 40.0  |             |  |   | 40.0  |  
|Interim financing fixed rate note at 14.5% as of
    December 31, 2001 increasing 0.5% each 90 day period
    thereafter capped at 18.0%, net of a $10.4 million discount at
    December 31, 2001 |  |      |      |             |  |   | 189.6 |  
|Secured claim $180.0 million at 10.0% from
    February 2003 and an unsecured claim of $25.0 million                                                                                               |  |      | 205.0 |             |  |   |      |  
|Unsecured notes payable to vehicle manufacturer;
    weighted average interest rates of 2.63% and 4.26% at
    December 31, 2002 and December 31, 2001, matures June
    2002                      |  |      | 35.0  |             |  |   | 35.0  |  
|Notes payable to former owners of acquired
    business; interest payable using LIBOR based rates; weighted
    average interest of 6.45% at December 31, 2001                                     |  |      |      |             |  |   | 2.4   |  
|Other uncommitted credit facilities and other
    notes relating to the Companys international subsidiaries;
    interest ranging from 5.53% to 8.75%; maturing through 2002                      |  |      | 1.6   |             |  |   | 15.3  |  
|                                                                                                                                                                                                   |  |      |       |             |  |   |       |  
|                                                                                                                                                                                                   |  |      | 310.7 |             |  |   | 282.3 |  
|                                                                                                                                                                                                   |  |      |       |             |  |   |       |  
|Less, amounts considered to be subject to
    compromise                                                                                                                                           |  |      | (60.0 | )           |  |   | (35.0 | )
|                                                                                                                                                                                                   |  |      |       |             |  |   |       |  
|                                                                                                                                                                                                   |  | $    | 250.7 |             |  | $ | 247.3 |  
|                                                                                                                                                                                                   |  |      |       |             |  |   |       |  

As of December 31, 2002 debt classified as
other debt is considered to be current. The Debtors filing
for chapter 11 represented an Event of Default under each of
these financing facilities. Under bankruptcy law, the Debtors
are not permitted to make scheduled principal and interest
payments with respect to their pre-petition debt unless
specifically ordered by the Court. As a result of the
Companys filing for chapter 11 it has not made principle
payments currently due relative to its debt classified as Other
Debt.

In June 2000, the Company entered into a
three-year secured revolving credit facility with a borrowing
base capacity of up to $175.0 million at a floating rate,
currently based upon a spread of 2.75% above LIBOR. In the third
quarter of 2001, the Company reduced its capacity under this
facility to $70.0 million of which $63.9 million supported
outstanding letters of credit. As of December 31, 2002,
$32.7 million of letters of credit were secured by the facility
and approximately $29.1 million of letters of credit and fees
were drawn on the facility. As a result of the chapter 11
filing, the Company itself is precluded from drawing on this
facility. The Company expects that during 2003 substantially all
holders of outstanding letters of credit will draw against the
facility.

The Company also entered into a supplemental
secured revolving credit facility with availability of the
lesser of (1) $40.0 million and (2) an amount equal to
$175.0 million less the borrowing base of the resized $175.0
million secured revolving credit facility. On its one year
maturity date, the $40.0 million supplemental secured revolving
credit facility was converted into a term loan maturing on
May 31, 2003. Interest on the supplemental secured term
loan is payable at a floating rate, initially based upon a
spread of 4.5% above LIBOR and increasing by 50 basis points on
the first day of each January, April, July and October.

On June 30, 2000 the Company entered into an
agreement with a lender for interim financing of $225.0 million
in connection with its separation from its former Parent. The
initial term of the interim financing was

73



---



##### 



ANC RENTAL CORPORATION


(Debtor-In-Possession as of November 13,
2001)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

12 months. The Company extended $200.0
million of the interim financing into a six-year term loan. In
accordance with the terms of the agreement, upon conversion to
the term loan the Company issued immediately exercisable
warrants representing approximately 3.7 million shares and paid
a fee of $6.0 million to the lender. The term loan bears
interest at an increasing rate starting at 14.5% as of
October 1, 2001 and increases by 50 basis points each
90 day period up to a maximum of 18.0%. The term loan may,
at the option of the lender, be exchanged into a fixed-rate note
with a similar maturity. The warrants have a term of 10 years
and an exercise price of $0.01 per share. The fair value of the
warrants on June 30, 2001, the date of issue, was $11.0
million. The fair value of the warrants was treated as a note
discount, and was amortized as a component of interest expense,
over the term of the refinancing. As discussed further in this
Note, as of December 31, 2002 all remaining note discounts
for warrants issued have been reversed. Upon request of the
holder of the notes and warrants the Company is required to file
registration statements with the Securities and Exchange
Commission which register the fixed-rate notes referred to above
and the shares of common stock issuable upon the exercise of the
warrants. To the extent the Company does not file these
registration statements or they are not declared effective
within certain time constraints the Company will be required to
pay penalties.

In the first and second quarters of 2001, the
Company consummated a series of sale and leaseback transactions.
As a result, the Company was obligated to use the proceeds to
pay-down the interim financing. However, as part of an amendment
to the interim note facility the lender agreed that such
proceeds could be used for general corporate purposes until
September 30, 2001 at which time the Company would be
required to pay-down the interim financing by approximately
$70.0 million.

As of September 30, 2001, the Company
further amended its financing facilities, deferring the $70.0
million principal payment until November 30, 2001, and
suspending certain financial covenants through November 15,
2001. Concurrent with the amendments the Company issued
additional immediately exercisable warrants representing
approximately 1.4 million shares of common stock. These warrants
have a term of ten years from their issue date and an exercise
price of $0.01 per share. The fair value of the additional
warrants on September 30, 2001, the date of issue, was $0.7
million. The fair value of the warrants was recorded as a note
discount and was amortized as a component of interest expense
over the term of the note using the effective interest method.

In the first quarter of 2003, the Bankruptcy
Court approved an order regarding the settlement of claims
concerning the holder of the Companys $200.0 million
interim financing fixed-rate note. The order provides for an
allowed secured claim of $180.0 million and an allowed unsecured
claim of $25.0 million. The secured claim will accrue interest
at 10%, half of which will be paid currently with the remaining
half paid upon emergence. The effect of this settlement has been
reflected in these consolidated financial statements. As of
December 31, 2002, the Company reversed to transition and
reorganization expense accrued interest in excess of, debt issue
cost and note discounts netting approximately $36.0 million.

The Companys governing documents for its
credit facilities and interim financing, entered into during
2000 and subsequently amended, require the Company to maintain
certain financial ratios including, but not limited to,
financial performance measures and limits on additional
indebtedness. In addition these documents restrict the
Companys ability to: sell assets; grant or incur liens on
our assets; repay certain indebtedness; pay dividends, make
certain investments or acquisitions; issue certain guarantees;
enter certain sale and leaseback transactions; repurchase or
redeem capital stock; engage in mergers or consolidation; and
engage in certain transactions with our affiliates.

74



---



##### 



ANC RENTAL CORPORATION


(Debtor-In-Possession as of November 13,
2001)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

9. Income Taxes

The components of the provision
(benefit) for income taxes for the years ended
December 31 are as follows:

|                                     |         |      |      |      |  |      |       |   |  |   |      |     | 
|------------------------------------ | ------- | ---- | ---- | ---- |  | ---- | ----- | - |  | - | ---- | --- | 
|                                     |         | 2002 |      | 2001 |  | 2000
|                                     |         |      |      |      |  |     
|Current:                             |         |      |      |      |  |      |       |   |  |   |      |    
|                                     | Federal |      | $    |     |  |      | $     |  |  |   | $    | 0.8 | 
|                                     | State   |      |      |     |  |      |       |  |  |   |      | 4.0 | 
|                                     | Foreign |      |      |     |  |      |       |  |  |   |      |    | 
|Federal and state deferred           |         |      | (7.6 | )    |  |      | 96.0  |   |  |   | (3.6 | )  
|Foreign deferred                     |         |      | 7.6  |      |  |      | 7.5   |   |  |   | 2.7  |    
|                                     |         |      |      |      |  |      |       |   |  |   |      |    
|Provision (benefit) for income taxes |         | $    |     |      |  | $    | 103.5 |   |  | $ | 3.9  |    
|                                     |         |      |      |      |  |      |       |   |  |   |      |    

A reconciliation of the provision
(benefit) for income taxes calculated using the statutory
federal income tax rate to the Companys provision
(benefit) for income taxes for the years ended
December 31 is as follows:

|                                                                    |  |      |        |      |  |      |        |   |  |   |     | 
|------------------------------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | - |  | - | --- | 
|                                                                    |  | 2002 |        | 2001 |  | 2000
|                                                                    |  |      |        |      |  |     
|Provision (benefit) at statutory federal
    income tax rate        |  | $    | (117.5 | )    |  | $    | (176.1 | ) |  | $ | 0.6 | 
|Goodwill                                                            |  |      |       |      |  |      | 27.6   |   |  |   | 1.9 | 
|Non-deductible expenses                                             |  |      | 27.1   |      |  |      | 5.1    |   |  |   | 0.9 | 
|State income taxes, net of federal benefit                          |  |      | (13.4  | )    |  |      | (18.0  | ) |  |   | 0.1 | 
|Change in valuation allowance                                       |  |      | 104.6  |      |  |      | 265.1  |   |  |   |    | 
|Foreign income tax provision (benefit) at
    other than U.S. rates |  |      | (0.8   | )    |  |      | (0.2   | ) |  |   | 0.4 | 
|                                                                    |  |      |        |      |  |      |        |   |  |   |     | 
|Provision (benefit) for income taxes                                |  | $    |       |      |  | $    | 103.5  |   |  | $ | 3.9 | 
|                                                                    |  |      |        |      |  |      |        |   |  |   |     | 

Components of the net deferred income tax
liability at December 31 are as follows:

|                                  |                                       |      |       |        |   |   |       |        |  
|--------------------------------- | ------------------------------------- | ---- | ----- | ------ | - | - | ----- | ------ | -
|                                  |                                       | 2002 |       | 2001  
|                                  |                                       |      |       |       
|Deferred income tax liabilities:  |                                       |      |       |        |   |   |       |       
|                                  | Book basis in property over tax basis |      | $     | 337.1  |   |   | $     | 393.1  |  
|Deferred income tax assets:       |                                       |      |       |        |   |   |       |       
|                                  | Net operating loss carry forwards     |      |       | (318.0 | ) |   |       | (232.9 | )
|                                  | Accruals not currently deductible     |      |       | (191.7 | ) |   |       | (201.2 | )
|Valuation allowance               |                                       |      | 426.3 |        |   |   | 294.7 |       
|                                  |                                       |      |       |        |   |   |       |       
|Net deferred income tax liability |                                       | $    | 253.7 |        |   | $ | 253.7 |       
|                                  |                                       |      |       |        |   |   |       |       

At December 31, 2002, the Company had
available domestic net operating loss carry forwards of
approximately $683.6 million and foreign net operating loss
carry forwards of approximately $104.4 million, the majority of
which have an indefinite carry forward. The expiration of the
domestic net operating loss carry forwards is as follows: $10.0
million in 2011, $180.4 million in 2020, $223.8 million in 2021
and $269.4 million in 2022. In assessing the realizability of
deferred tax assets, management considers whether it is more
likely than not that some portion or all of the deferred tax
assets will not be realized. The Company provides valuation
allowances to offset portions of deferred tax assets due to
uncertainty surrounding the future realization of such deferred
tax assets. The Company adjusts the valuation allowance in the
period management determines it is more likely than not that
deferred tax assets will or will not be realized. Upon our
emergence from chapter 11 or sale the Companys net
operating loss carry-forwards may be limited as to their use.

75



---



##### 



ANC RENTAL CORPORATION


(Debtor-In-Possession as of November 13,
2001)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

During the third quarter of 2001, the Company
recorded a charge of $103.5 million related to the establishment
of a valuation allowance for certain tax benefits and net
operating loss carryforwards. As a result of significant adverse
changes in the present business environment, current operating
cash flow losses and projected operating cash flow losses for
the foreseeable future, management believed that it was more
likely than not that the tax assets were no longer realizable.

The Company entered into a tax sharing agreement
with AutoNation on June 30, 2000. The primary purpose of the
agreement is to reflect each partys rights and obligations
relating to payments and refunds of taxes that are attributable
to periods beginning before and including June 30, 2000 and
any taxes resulting from transactions effected in connection
with the spin-off. The agreement also covers the handling of
audits, settlements, elections, accounting methods and return
filings in cases where both companies have an interest in the
results of these activities. With respect to any period ending
on or before the spin-off or any tax period in which the
spin-off occurs, AutoNation will:



| |   |                                                                                                                                                                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | continue to be the sole and exclusive agent for
    the Company in all matters relating to its income, franchise,
    property, sales and use tax liabilities,                                                                                                             
|
| |  | bear any costs relating to tax audits, including
    tax assessments and any related interest and penalties and any
    legal, litigation, accounting or consulting expenses, subject to
    the Companys obligation to pay for items relating to the
    rental business,
|
| |  | continue to have the sole and exclusive
    responsibility for the preparation and filing of consolidated
    federal and consolidated or combined state income tax returns,
    and                                                                                       
|
| |  | generally have the powers, in AutoNations
    sole discretion, to contest or compromise any claim or refund on
    the Companys behalf.                                                                                                                                  

During the time the Company was part of
AutoNations consolidated Federal Income Tax Return,
AutoNation engaged in certain transactions that are of a type
that the Internal Revenue Service has indicated it intends to
challenge. Based upon disclosures from AutoNation a settlement
has been reached with the Internal Revenue Service, however,
until and unless paid by AutoNation, the Company may still have
several liability with AutoNation to the Internal Revenue
Service for all transactions, that occurred while the Company
was part of AutoNations consolidated Federal tax returns.
The Company has included below an excerpt from AutoNations
periodical report on Form 10-Q as of March 31, 2003
regarding these transactions.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In March 2003, the Company (AutoNation)
    entered into a settlement agreement with the Internal Revenue
    Service (IRS) with respect to the tax treatment of
    certain transactions entered into by the Company (AutoNation) in
    1997 and 1999, including a transaction that generally had the
    effect of accelerating projected tax deductions relating to
    health and welfare benefits. Under the agreement, the Company
    (AutoNation) owes the IRS net aggregate payments of
    approximately $470 million. An initial net payment of
    approximately $350 million is due in March 2004, and three
    subsequent payments of approximately $40 million each are due in
    March 2005, 2006 and 2007, respectively.

Recently the Company reached an agreement with
AutoNation and the Unsecured Creditors Committee that
resolves potential claims relating to its bankruptcy, including
potential claims arising out of the spin-off from AutoNation in
2000. The agreement is subject to bankruptcy court approval,
which the parties will seek to obtain in early May. As part of
this agreement, the Company will receive indemnity from
AutoNation regarding these tax claims, and the Company will
reject the tax sharing agreement.

10. Stock Options

On June 28, 2000 the Companys Board of
Directors and AutoNation as sole shareholder approved the ANC
Rental Corporation Stock Option Plan. The total amount of shares
issuable under the Plan is 9,000,000.

76



---



##### 



ANC RENTAL CORPORATION


(Debtor-In-Possession as of November 13,
2001)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

On June 30, 2000, the Companys Board
of Directors approved the grant, to key employees and directors
of the Company, of options to purchase 6,695,000 shares of
Common Stock, at a price equal to the average of the daily high
and low market price of the Common Stock on July 3, 2000,
the date of grant. The options granted have a term of ten years
from the date of grant, and vest in equal 25% increments over
three and one-half years commencing on January 1, 2001 and
annually thereafter. As part of the initial grant each outside
director received a grant of options to purchase 100,000 shares
of Common Stock, which vested immediately. The Companys
Chairman received a grant of options to purchase 750,000 shares
of Common Stock, which vested immediately.

In May of 2001, the Companys Board of
Directors and its shareholders approved a plan that granted
options to purchase 750,000 shares of Common Stock to the
Companys Chairman and then Chief Executive Officer and
granted each outside director options, which vested immediately,
to purchase 50,000 shares of Common Stock. One third of the
Chairmans options vested immediately and one third will
vest on each of the first two anniversaries of the grant date,
subject to continued employment.

A summary of issued stock option transactions is
as follows for the years ended December 31:

|                                                            |  |        |      |                  |  |        |      |                  |  |        |      |                  |  |   |      |  |  |  |      |   |  |   |      | 
|----------------------------------------------------------- |  | ------ | ---- | ---------------- |  | ------ | ---- | ---------------- |  | ------ | ---- | ---------------- |  | - | ---- |  |  |  | ---- | - |  | - | ---- | 
|                                                            |  |        |      |                  |  |       
|                                                            |  | 2002   |      | 2001             |  | 2000  
|                                                            |  |        |      |                  |  |       
|                                                            |  |        |      | Weighted-Average |  |        |      | Weighted-Average |  |        |      | Weighted-Average
|                                                            |  | Shares |      | Exercise Price   |  | Shares |      | Exercise Price   |  | Shares |      | Exercise Price  
|                                                            |  |        |      |                  |  |        |      |                  |  |        |      |                 
|Options and warrants outstanding at beginning of
    period |  |        | 6.4  |                  |  | $      | 4.86 |                  |  |        | 6.5  |                  |  | $ | 5.20 |  |  |  |     |   |  | $ |     | 
|Granted                                                     |  |        |     |                  |  | $      |     |                  |  |        | 1.5  |                  |  | $ | 3.72 |  |  |  | 6.6  |   |  | $ | 5.20 | 
|Exercised                                                   |  |        |     |                  |  | $      |     |                  |  |        |     |                  |  | $ |     |  |  |  |     |   |  | $ |     | 
|Cancelled                                                   |  |        | (1.5 | )                |  | $      | 5.19 |                  |  |        | (1.6 | )                |  | $ | 5.19 |  |  |  | (0.1 | ) |  | $ | 5.19 | 
|                                                            |  |        |      |                  |  |        |      |                  |  |        |      |                  |  |   |      |  |  |  |      |   |  |   |      | 
|Options outstanding at end of period                        |  |        | 4.9  |                  |  | $      | 4.77 |                  |  |        | 6.4  |                  |  | $ | 4.86 |  |  |  | 6.5  |   |  | $ | 5.20 | 
|                                                            |  |        |      |                  |  |        |      |                  |  |        |      |                  |  |   |      |  |  |  |      |   |  |   |      | 
|Options exercisable at end of period                        |  |        | 3.5  |                  |  | $      | 4.70 |                  |  |        | 3.0  |                  |  | $ | 4.86 |  |  |  | 1.3  |   |  | $ | 5.20 | 
|Options available for future grants                         |  |        | 0.9  |                  |  |        |     |                  |  |        | 0.9  |                  |  |   |     |  |  |  | 2.4  |   |  |   |     | 

A summary of outstanding and exercisable options
by price range as of December 31, 2002:

|                         |  |                   |     |             |  |          |      |                   |  |          |      |  |  |  |     |  |  |  |      | 
|------------------------ |  | ----------------- | --- | ----------- |  | -------- | ---- | ----------------- |  | -------- | ---- |  |  |  | --- |  |  |  | ---- | 
|                         |  |                   |     | Weighted    |  |          |      |                   |  |         
|                         |  |                   |     | Average     |  |          |      |                   |  |         
|                         |  | Number            |     | Remaining   |  | Weighted |      | Number            |  | Weighted
|                         |  | Outstanding       |     | Contractual |  | Average  |      | Exercisable       |  | Average 
|                         |  | as of             |     | Life        |  | Exercise |      | as of             |  | Exercise
|Range of Exercise Prices |  | December 31, 2002 |     | (in years)  |  | Price    |      | December 31, 2002 |  | Price   
|                         |  |                   |     |             |  |          |      |                   |  |         
|2.53  4.90              |  |                   | 1.4 |             |  |          | 8.30 |                   |  |          | 3.72 |  |  |  | 1.1 |  |  |  | 3.61 | 
|5.19  6.94              |  |                   | 3.5 |             |  |          | 7.18 |                   |  |          | 5.21 |  |  |  | 2.4 |  |  |  | 5.20 | 
|                         |  |                   |     |             |  |          |      |                   |  |          |      |  |  |  |     |  |  |  |      | 
|2.53  6.94              |  |                   | 4.9 |             |  |          | 7.45 |                   |  |          | 4.77 |  |  |  | 3.5 |  |  |  | 4.70 | 
|                         |  |                   |     |             |  |          |      |                   |  |          |      |  |  |  |     |  |  |  |      | 

11. Commitments and
Contingencies

Legal
Proceedings

The Company is a party to various legal
proceedings, which have arisen, in the ordinary course of
business. While the results of these matters cannot be predicted
with certainty, the Company believes that losses, if any,
resulting from the ultimate resolution of these matters will not
have a material adverse effect on

77



---



##### 



ANC RENTAL CORPORATION


(Debtor-In-Possession as of November 13,
2001)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

the Companys consolidated results of
operations, cash flows or financial position. However,
unfavorable resolution could affect the consolidated results of
operations or cash flows for the quarterly periods in which they
are resolved.

Lease
Commitments

The Company and its subsidiaries lease real
property, equipment and software under various operating leases
with terms from 1 to 25 years. The Company has also entered
into various airport concession and permit agreements which
generally provide for payment of a percentage of revenue from
vehicle rentals with a guaranteed minimum lease obligation.

Expenses under real property, equipment and
software leases and airport concession and permit agreements
(excluding amounts charged through to customers) for the years
ended December 31 are as follows:

|                                    |                                                               |       |      |       |       |   |      |       |       | 
|----------------------------------- | ------------------------------------------------------------- | ----- | ---- | ----- | ----- | - | ---- | ----- | ----- | 
|                                    |                                                               | 2002  |      | 2001 
|                                    |                                                               |       |      |      
|Real property                       |                                                               | $     | 76.8 |       |       | $ | 67.8 |      
|Equipment and software              |                                                               |       | 22.6 |       |       |   | 22.8 |      
|Airport concession and permit fees: |                                                               |       |      |       |       |   |      |      
|                                    | Minimum fixed obligations                                     |       |      | 144.2 |       |   |      | 142.6 |      
|                                    | Additional amounts, based on revenue from vehicle
    rentals |       |      | 59.3  |       |   |      | 91.6  |      
|                                    |                                                               |       |      |       |       |   |      |      
|                                    |                                                               | Total |      | $     | 302.9 |   |      | $     | 324.8 | 
|                                    |                                                               |       |      |       |       |   |      |      

Future minimum lease obligations under
noncancelable real property, equipment and software leases and
airport agreements with initial terms in excess of one year at
December 31, 2002 are as follows:

|           |  |   |       | 
|---------- |  | - | ----- | 
|2003.      |  | $ | 143.9 | 
|2004.      |  |   | 111.0 | 
|2005.      |  |   | 84.8  | 
|2006.      |  |   | 67.4  | 
|2007.      |  |   | 62.6  | 
|Thereafter |  |   | 474.6 | 
|           |  |   |       | 
|           |  | $ | 944.3 | 
|           |  |   |       | 

Aggregate maturities of the Companys
capital leases for vehicles are included in the expected debt
maturities table in Note 7.

Other
Matters

In the normal course of business, the Company is
required to post performance and surety bonds, letters of
credit, and/or cash deposits as financial guarantees of the
Companys performance. To date, the Company has satisfied
financial responsibility requirements for regulatory agencies
and insurance companies by making cash deposits, obtaining
surety bonds or by obtaining bank letters of credit. As of
March 6, 2003, the Company had outstanding surety bonds of
approximately $127.2 million, the majority of which expire
during 2003, and at December 31, 2002 had outstanding
letters of credit totaling $32.7 million.

The Company continues to investigate and pursue
strategic alternatives to maximize stakeholder value and
strengthen the Companys financial condition. These
strategic alternatives may include the sale or closure of all or
part of its business. In connection with these initiatives
certain parties engaged in the reorganization or financing of
the Company may earn contingent incentives, success or emergence
fees. The success fees are to be paid based upon a sliding scale
affected by the passage of time and the value realized upon
reorganization

78



---



##### 



ANC RENTAL CORPORATION


(Debtor-In-Possession as of November 13,
2001)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

or sale of the Company. The Company expects these
success or emergence fees would not exceed $21.0 million,
of which an emergence fee of $12.5 million is payable to the
Companys primary vehicle debt surety provider.

In March 2002, the Bankruptcy Court approved, on
a final basis, a key employee retention plan. The purpose of the
plan is to retain certain key employees critical to the
near-term success of our restructuring by providing financial
incentives and security against unanticipated termination of
employment and to incentivize them to maximize stakeholder
value. There are three levels of participation in the plan (Tier
I, Tier II, and Tier III).

The Basic Retention (Tier I) is available to all
participants in the plan and is payable upon the earlier of
June 30, 2003, involuntary termination of employment
other than for cause or death or permanent
disability, sale of the company or the consummation by the
Bankruptcy Court of a plan of reorganization. The Base Retention
approximates fifty percent of the participants base salary
and is payable in a cumulative lump sum, approximating $7.0
million.

The Holdback Retention is for Tier II and Tier
III participants payable upon a Triggering Event. A
Triggering Event occurs when a plan of
reorganization of the Company under chapter 11 is approved by
the United States Bankruptcy Court so long as the plan of
reorganization is subsequently confirmed by the Bankruptcy Court
without material modifications, or the date upon which a motion
seeking approval of the sale of all or substantially all of the
operating assets of the Company is approved so long as the sale
is subsequently consummated without material modifications. The
Holdback Retention is paid based upon a sliding scale affected
by the passage of time and value realized in the
Triggering Event.

12. Fair Value of Financial
Instruments

The fair value of a financial instrument
represents the amount at which the instrument could be exchanged
in a current transaction between willing parties, other than in
a forced sale or liquidation. Fair value estimates are made at a
specific point in time, based on relevant market information
about the financial instrument. These estimates are subjective
in nature and involve uncertainties and matters of significant
judgment, and therefore cannot be determined with precision. The
assumptions used have a significant effect on the estimated
amounts reported.

The following methods and assumptions were used
by the Company in estimating fair value disclosures for
financial instruments:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Cash and cash equivalents, restricted cash and
    cash equivalents, trade and manufacturer receivables, other
    assets, accounts payable, accrued liabilities, other liabilities
    and variable-rate debt:The amounts
    reported in the accompanying Consolidated Balance Sheets
    approximate fair value assuming the Company continues as a going
    concern.                                                                                                    
|
| |  | Fixed rate medium-term notes payable:The fair value of medium-term notes
    payable is estimated based on the quoted market prices for the
    same or similar issues.                                                                                                                                                                                                                                                                                                      
|
| |  | Interest rate caps and floors:The fair value of interest rate caps
    and floors is determined from valuation models which are then
    compared to dealer quotations and represents the discounted
    future cash flows through maturity of expiration using current
    rates, and is effectively the amount the Company would pay or
    receive to terminate the agreements. As of December 31,
    2001 all of the Companys interest rate floors were
    terminated.

79



---



##### 



ANC RENTAL CORPORATION


(Debtor-In-Possession as of November 13,
2001)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The following table sets forth the carrying
amounts and fair values of the Companys financial
instruments, except for those noted above for which carrying
amounts approximate fair value, as of December 31:

|                                         |  |          |        |       |  |          |     |       |  |   |          |   |  |   |      | 
|---------------------------------------- |  | -------- | ------ | ----- |  | -------- | --- | ----- |  | - | -------- | - |  | - | ---- | 
|                                         |  |          |        |      
|                                         |  | 2002     |        | 2001 
|                                         |  |          |        |      
|                                         |  | Carrying |        | Fair  |  | Carrying |     | Fair 
|Assets (Liabilities)                     |  | Amount   |        | Value |  | Amount   |     | Value
|                                         |  |          |        |       |  |          |     |      
|Fixed rate medium-term notes payable     |  | $        | (500.0 | )     |  | $        |    |       |  | $ | (1,250.0 | ) |  | $ |     | 
|Interim financing                        |  |          | (205.0 | )     |  |          |    |       |  |   | (200.0   | ) |  |   |     | 
|Interest rate caps                       |  |          | 4.3    |       |  |          | 4.3 |       |  |   | 22.3     |   |  |   | 22.3 | 
|Interest rate floors/due to counterparty |  |          | (82.3  | )     |  |          |    |       |  |   | (82.3    | ) |  |   |     | 

Due to uncertainty surrounding the chapter 11
filing, the fair value of the medium-term notes, interim
financing and amounts due to counterparty, which are Debtor
obligations, is not determinable.

13. Business and Credit
Concentrations

The Company owns and operates vehicle rental
facilities primarily in the United States, Europe and Canada.
The automotive rental industry in which the Company operates is
highly seasonal. The majority of the Companys revenue is
derived from airport locations. Changes in the volume of air
travel will have an effect on the Companys profitability.

As of December 31, 2002 approximately 86.6%
of the fleet was covered by manufacturer repurchase programs or
leased and not subject to residual value risk. At
December 31, 2002 and 2001, the Company had vehicle
receivables from manufacturers of $181.1 million and $115.3
million, respectively. Concentrations of credit risk with
respect to non-vehicle manufacturer receivables are limited due
to the wide variety of customers and markets in which services
are provided as well as their dispersion across many different
geographic areas primarily in the United States. Consequently,
at December 31, 2002, the Company does not consider itself
to have any significant non-vehicle manufacturer receivable
concentrations of credit risk.

General Motors, through its franchised dealers,
is the Companys principal supplier of rental fleet
vehicles. The number of vehicles the Company purchases varies
from year to year. In model year 2002, the Company purchased
approximately 61% of its aggregate domestic rental fleet from
General Motors. In return, General Motors has agreed to provide
certain incentives as well as a minimum number of vehicles.

14. Related Party Transactions

AutoNation distributed all of the Companys
common stock to its shareholders as of June 30, 2000. The
Companys relationship with AutoNation since the spin-off
has been governed by a separation and distribution agreement and
other agreements entered into in June 2000 in connection with
the spin-off. Certain of the directors of the Company are
directors of AutoNation.

Before the spin-off from AutoNation, AutoNation
had provided guarantees in support of the Companys debt
financing. Pursuant to a reimbursement agreement entered into
with AutoNation before the distribution date, some of this
credit support remains in place following the spin-off. In
particular, AutoNation continues to guarantee certain annual
rent expense in connection with various real estate lease
obligations and vehicle leases. The Company has reimbursement
obligations to AutoNation to the extent AutoNation is required
to satisfy any of its guarantees of any of its obligations.
These reimbursement obligations are payable upon
AutoNations demand, except in the event that certain of
the Companys loans and credit facilities remain in effect
as of the date of AutoNations demand. Additionally, as
part of the issuance in 2001 of a $29.5 million surety bond,
AutoNation provided a $29.5 million back-up guarantee for the
benefit of Liberty Mutual Insurance Company, the Companys
primary surety provider. The reimbursement agreement was amended
to

80



---



##### 



ANC RENTAL CORPORATION


(Debtor-In-Possession as of November 13,
2001)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

provide for a reduction in AutoNations
back-up guarantee over the course of the next five years. The
Company paid AutoNation $1.1 million and $0.3 million for its
guarantees of the Companys debt for the year ended
December 31, 2001 and 2000, respectively. No amounts were
paid for the year ended December 31, 2002.

The Company entered into a transitional services
agreement with AutoNation on June 30, 2000. The services
agreement has been terminated. During 2000, the Company paid
AutoNation approximately $0.6 million under this agreement.
During 2000, AutoNation paid the Company approximately $0.2
million under this agreement. The Company believes that the fees
paid and received for these services are no less favorable than
those that could be obtained from unaffiliated third parties.

The Company entered into two leases with
AutoNation: (i) a lease for approximately 161,000 square
feet of office space to serve as ANCs corporate
headquarters and (ii) a lease for approximately 31,600
square feet of computer data center space at AutoNations
data center.

Payments due under the lease for the corporate
headquarters total approximately $2.0 million. ANC has an option
to extend the term for two additional periods of five years
each. The lease payments will be increased on the fifth and
eighth anniversary of the start of the lease. Increases in lease
payments will be based on increases in the Consumer Price Index.
In no event will the adjusted lease payment for the fifth year
be lower than the initial rate or more than 15% higher. In no
event will the adjusted lease payment for the eighth year be
lower than the seventh year or more than 9% higher. During the
fourth quarter of 2000 AutoNation transferred ownership in this
property to an unrelated third party.

Payments due under the lease for the computer
data center space total approximately $0.9 million per year. The
lease has an initial term of two years, with an option to extend
the term for an additional two years. If extended, the lease
payments will be increased based on increases in the Consumer
Price Index. In no event will the adjusted lease payment be more
than 6% higher than the initial lease payment.

The Company believes that the lease payments
reflect fair market value and that the terms of the leases are
no less favorable than could be obtained from persons unrelated
to us.

After the spin-off from AutoNation, the Company
entered into three-year contracts with AutoNation pursuant to
which ANC will purchase a substantial portion of vehicles from
certain dealerships owned by AutoNation; will source a portion
of parts at a negotiated market rate from certain dealerships
owned by AutoNation and have the right to operate replacement
car rental businesses at certain dealerships owned by
AutoNation. ANC also has corporate car rental contracts with
AutoNation and some of its subsidiaries. However, during 2001
the vehicle and parts supply agreements were terminated.
Management believes amounts that were charged and paid under
these contracts and arrangements are consistent with amounts
charged to and paid by unaffiliated customers and suppliers.

The total dollar volume related to the above
discussed transactions and paid to AutoNation for each of the
three years ended December 31 is as follows: dealer mark-up
paid on vehicle purchases approximated $0.3 million for 2001 and
$1.5 million for 2000 and 1999; and parts purchases approximated
$2.3 million for 2001 and $7.5 million for 2000 and 1999.
Amounts related to the operation of replacement car rental sites
at AutoNation dealerships, and revenue received from
AutoNations corporate car rental contracts were not
material for each of the three years ended December 31,
2001.

During 2002, 2001 and 2000, the Companys
Chairman had a beneficial ownership interest in Certified
Vacations, Inc. (Certified Vacations), a domestic
tour operator that has conducted business with the Company.
Total gross revenue recognized by the Company from Certified
Vacations was approximately $4.0 million, $5.7 million and $8.7
million for the years ended December 31, 2002, 2001, and
2000, respectively.

81



---



##### 



ANC RENTAL CORPORATION


(Debtor-In-Possession as of November 13,
2001)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

It is the Companys policy that transactions
with related parties must be on terms that, on the whole, are no
less favorable than those that would be available from unrelated
parties. It is managements belief that all of the
transactions described met that standard at the time the
transactions were effected.

15. Segment Information

The Company follows SFAS No. 131,
Disclosures about Segments of an Enterprise and Related
Information, which requires certain segment financial
information to be disclosed on the basis that it is used
internally for evaluating segment performance and deciding how
to allocate resources. Management reviews its operating results
and makes resource allocation decisions based primarily upon
geographic regions. The Companys management segments are
defined as (i) United States Rental Group, comprising of
both Alamo and National domestic operations (ii) Canada,
and (iii) International, comprising Alamo and National
operations located primarily in Europe. The Company believes its
management segments exhibit similar economic characteristics,
share the same product, types of customers and points of
service. Accordingly, as permitted under SFAS 131, for financial
reporting purposes the Company has aggregated its management
segments into one segment, automotive rental.

The Company operates primarily in the United
States, Europe and Canada. Revenue generated from Company-owned
automotive rental locations is recorded in the country in which
the vehicle is rented. Revenue generated from licensees is
recognized in the country in which the revenue is received. The
accounting policies of each geographic area are the same as
those described in the summary of significant accounting
policies. The following table presents geographic financial
information as of and for the years ended December 31:

|             |  |          |         |               |  |              |       |  |  |   |         | 
|------------ |  | -------- | ------- | ------------- |  | ------------ | ----- |  |  | - | ------- | 
|             |  |         
|             |  | 2002    
|             |  |         
|             |  | Domestic |         | International |  | Consolidated
|             |  |          |         |               |  |             
|Revenue      |  | $        | 1,964.8 |               |  | $            | 429.0 |  |  | $ | 2,393.8 | 
|Total assets |  |          | 3,971.6 |               |  |              | 734.0 |  |  |   | 4,705.6 | 

|             |  |             |         |               |  |              |       |  |  |   |         | 
|------------ |  | ----------- | ------- | ------------- |  | ------------ | ----- |  |  | - | ------- | 
|             |  |            
|             |  | 2001       
|             |  |            
|             |  | Domestic    |         | International |  | Consolidated
|             |  |             |         |               |  |             
|             |  |            
|             |  | (Unaudited)
|Revenue      |  | $           | 2,429.3 |               |  | $            | 467.4 |  |  | $ | 2,896.7 | 
|Total assets |  |             | 5,300.4 |               |  |              | 753.5 |  |  |   | 6,053.9 | 

|             |  |             |         |               |  |              |       |  |  |   |         | 
|------------ |  | ----------- | ------- | ------------- |  | ------------ | ----- |  |  | - | ------- | 
|             |  |            
|             |  | 2000       
|             |  |            
|             |  | Domestic    |         | International |  | Consolidated
|             |  |             |         |               |  |             
|             |  |            
|             |  | (Unaudited)
|Revenue      |  | $           | 2,794.9 |               |  | $            | 455.6 |  |  | $ | 3,250.5 | 
|Total assets |  |             | 6,031.1 |               |  |              | 765.7 |  |  |   | 6,796.8 | 

16. Quarterly Financial Information
(Unaudited)

The Companys operations, and particularly
the leisure travel market, are highly seasonal. In these
operations, the third quarter, which includes the peak summer
travel months, has historically been the strongest quarter of
the year. During the peak season, the Company increases its
rental fleet and workforce to accommodate increased rental
activity. As a result, any occurrence that disrupts travel
patterns during the summer period could have a material adverse
effect. The first and fourth quarters for the Companys
operations are generally the weakest, because of limited leisure
travel and a greater potential for adverse or unseasonable
weather conditions to impact the Companys operations. Many
of the operating expenses such as

82



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##### 



ANC RENTAL CORPORATION


(Debtor-In-Possession as of November 13,
2001)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

rent, general insurance and administrative
personnel remain fixed throughout the year and cannot be reduced
during periods of decreased rental demand.

The following tables present certain of the
Companys operating results for each of the eight fiscal
quarters in the two-year period ended December 31, 2002.
The information for each of these quarters is unaudited and has
been prepared on the same basis as the audited and unaudited
Consolidated Financial Statements included in this
Form 10-K. In the opinion of management, all necessary
adjustments, which consist only of normal and recurring
accruals, have been included to fairly present the unaudited
quarterly results. In addition, the quarterly results have been
restated to exclude our discontinued operations.

|                                                                         |  |  |      |         |  |         |        |         |  |         |        |   |  |   |        |   |  |   |        |  
|------------------------------------------------------------------------ |  |  | ---- | ------- |  | ------- | ------ | ------- |  | ------- | ------ | - |  | - | ------ | - |  | - | ------ | -
|                                                                         |  |  |      | First   |  | Second  |        | Third   |  | Fourth 
|                                                                         |  |  |      | Quarter |  | Quarter |        | Quarter |  | Quarter
|                                                                         |  |  |      |         |  |         |        |         |  |        
|Revenue                                                                  |  |  | 2002 |         |  | $       | 552.1  |         |  | $       | 620.1  |   |  | $ | 682.0  |   |  | $ | 539.6  |  
|                                                                         |  |  | 2001 |         |  | $       | 705.6  |         |  | $       | 784.9  |   |  | $ | 836.0  |   |  | $ | 570.2  |  
|Net loss from continuing operations before income
    taxes              |  |  | 2002 |         |  | $       | (122.6 | )       |  | $       | (100.0 | ) |  | $ | (49.3  | ) |  | $ | (63.9  | )
|                                                                         |  |  | 2001 |         |  | $       | (60.8  | )       |  | $       | (26.7  | ) |  | $ | (246.5 | ) |  | $ | (148.5 | )
|Net loss before cumulative effect of change in
    accounting principles |  |  | 2002 |         |  | $       | (139.5 | )       |  | $       | (117.3 | ) |  | $ | (72.8  | ) |  | $ | (98.3  | )
|                                                                         |  |  | 2001 |         |  | $       | (40.0  | )       |  | $       | (23.5  | ) |  | $ | (381.6 | ) |  | $ | (168.7 | )
|Net loss                                                                 |  |  | 2002 |         |  | $       | (245.7 | )       |  | $       | (117.3 | ) |  | $ | (72.8  | ) |  | $ | (98.3  | )
|                                                                         |  |  | 2001 |         |  | $       | (32.9  | )       |  | $       | (23.5  | ) |  | $ | (381.6 | ) |  | $ | (168.7 | )
|Basic and diluted loss per share                                         |  |  | 2002 |         |  | $       | (5.42  | )       |  | $       | (2.59  | ) |  | $ | (1.61  | ) |  | $ | (2.17  | )
|                                                                         |  |  | 2001 |         |  | $       | (0.73  | )       |  | $       | (0.52  | ) |  | $ | (8.44  | ) |  | $ | (3.73  | )

17. Derivatives

In June 1998 the FASB issued SFAS No. 133
Accounting for Derivative Instruments and Hedging
Activities . SFAS 133, as amended, became effective for
the Company on January 1, 2001. The Companys
derivative instruments qualify for hedge accounting treatment
under SFAS 133.

The major market risk hedged by the Company is
the changes in LIBOR-based interest rates. The Company uses
interest rate derivatives to adjust interest rate exposures,
when appropriate, based upon market conditions. During 2002 the
Company used stand-alone interest rate caps to manage its
floating rate risk.

The Company measures effectiveness of its
stand-alone caps by comparing the changes in fair value of its
stand-alone caps to a hypothetical derivative that would be
perfectly effective in offsetting changes in fair value of the
hedged cash flows. The Company expects little to no
ineffectiveness relative to its stand-alone caps and as such
changes in the fair value of the stand-alone caps are recorded
as a component of other comprehensive income.

For the year ended December 31, 2002, the
Company neither received proceeds from its stand-alone caps nor
made payments under its floors, as these floors were terminated
by the counterparty in the fourth quarter of 2001. For the year
ended December 31, 2001, the Company reclassified net
payments of approximately $1.1 million under its caps, and $13.8
million under its floors, to vehicle interest expense, a
component of interest expense.

As a result of the Debtors filing for
chapter 11 in the fourth quarter of 2001, the counterparty to
the interest rate floors terminated its agreement with the
Company. As such, the interest rate floors ceased being an
effective hedge. The Company is amortizing deferred losses
related to the floors from other comprehensive income to current
earnings over the life of the remaining debt outstanding.
Amortization of deferred losses

83



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##### 



ANC RENTAL CORPORATION


(Debtor-In-Possession as of November 13,
2001)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

recognized in earnings approximated $35.4 million
and $5.8 million for the years ended December 31, 2002 and
2001, respectively. The Company expects amortization of these
deferred losses will approximate $24.4 million for the year
ended December 31, 2003.

Certain of the Companys vehicle financing
facilities are amortizing and as such the Company reclassified
$3.5 million of deferred losses on interest rate caps
related to these facilities from accumulated other comprehensive
loss to current earnings for the year ended December 31,
2002.

18. Effect of Adopting New Accounting
Pronouncements

On June 30, 2001 the FASB finalized and
issued SFAS 141, Business Combinations and SFAS 142,
Goodwill and Other Intangible Assets. The Company
has adopted the provisions of SFAS 141, which requires all
business combinations initiated after June 30, 2001 to be
accounted for using the purchase method, eliminating the pooling
of interests method. Additionally, acquired intangible assets
should be separately recognized if the benefit of the intangible
asset is obtained through contractual or other legal rights, or
if the intangible asset can be sold, transferred, licensed,
rented, or exchanged, regardless of the acquirers intent
to do so.

The provisions of SFAS 142 applied immediately to
all acquisitions completed after June 30, 2001. Goodwill
and intangible assets with indefinite lives existing at
June 30, 2001 were amortized until December 31, 2001.
Effective January 1, 2002 such amortization ceased, as
companies were required to adopt the new rules on that date,
resulting in an $8.4 million decrease in amortization for the
year ended December 31, 2002 compared to the same period in
2001. Net loss for the year ended December 31, 2001,
adjusted for the impact of amortization, would have been $598.3
million or $13.24 per share. Net income for the year ended
December 31, 2000, adjusted for the impact of amortization,
would have been $8.0 million or $0.18 per share. As of January
1, 2002, the Company had approximately $127.1 million of
goodwill related to its operations in the United Kingdom. SFAS
142 requires the Company upon adoption and at least annually to
reassess recoverability of goodwill and intangible assets. The
Company, as required, completed the first step of the goodwill
transition impairment test as of June 30, 2002, which
requires determining the fair value of the reporting unit, as
defined by SFAS 142, and comparing it to the carrying value
of the net assets allocated to the reporting unit. Since the
fair value of the reporting unit was less than the carrying
value of the net assets, the Company performed step two of the
SFAS 142 impairment test, which required the Company to
allocate the fair value of the reporting unit to all underlying
assets and liabilities, including both recognized and
unrecognized tangible and intangible assets based on their fair
values. Any impairment noted must be recorded at the date of
adoption restating first quarter results. Impairment charges
that result from the application of the above test are recorded
as a cumulative effect of change in accounting principle in the
first quarter of the year ending December 31, 2002. The
Company recognized a goodwill impairment charge of approximately
$106.2 million related to its operations in the United Kingdom
upon adoption of SFAS 142.

Effective January 1, 2002, the Company
adopted the provisions of SFAS 144, Accounting for
the Impairment or Disposal of Long-Lived Assets.
SFAS 144 supercedes SFAS No. 121, Accounting for
the Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed of, and Accounting Principles Board Opinion
No. 30, Reporting the Results of
Operations  Reporting the Effect of the Disposal of a
Segment of a Business and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions (APB
30). SFAS 144 established a single accounting model
for assets to be disposed of by sale whether previously held and
used or newly acquired. SFAS 144 retains the provisions of
APB 30 for the presentation of discontinued operations in
the income statement but broadens the presentation to include a
component of an entity. The adoption of SFAS 144 impacts
the Companys financial statements for the discontinued
operations of the Alamo Local Market Division. The Alamo Local
Market Division has losses before income taxes of

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##### 



ANC RENTAL CORPORATION


(Debtor-In-Possession as of November 13,
2001)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

$92.1 million, $32.3 million and
$1.0 million for the years ended December 31, 2002,
2001 and 2000, respectively.

19. Recent Developments

In the first quarter of 2003, the Company has
entered into a secured loan agreement with a vehicle supplier in
an amount not to exceed $62.5 million. In exchange for the
lending commitment, the Company committed to purchase a stated
number of model year 2004 vehicles from the lender. A portion of
the loan is expected to be repaid by forgoing vehicle incentive
payments earned during the last half of 2003 and into 2004,
should the debt remain outstanding. The Company currently
expects to repay any amounts outstanding under the loan before
December 31, 2003. However, any amounts outstanding under
the agreement on December 31, 2003 will begin to accrue
interest at a floating rate based on a spread over LIBOR.
Notwithstanding the foregoing, amounts outstanding under the
agreement are to be repaid at the earliest of:
(i) June 30, 2004; (ii) closing of a sale of all or
part of the Debtors estate; (iii) appointment of a
Trustee; (iv) the effective date of a confirmed plan of
reorganization; (v) conversion of the Bankruptcy Case to a
Chapter 7 case; (vi) dismissal of the Bankruptcy Case;
(vii) appointment of an examiner to manage the affairs of
the Debtor; or (viii) an Event of Default. which, includes
among other things a material adverse change in our business.
The agreement includes negative covenants which prohibits our
ability to, among other things and subject to exceptions, sell
assets, pay dividends, make investments, incur new debt, incur
liens, issue guarantees and enter into transactions with
affidavits.

The Company has reached an agreement with its
former Parent and the Unsecured Creditors Committee that
resolves potential claims relating to the Companys
bankruptcy, including potential claims arising out of the
spin-off from AutoNation in 2000. The agreement is subject to
bankruptcy court approval, which the parties will seek to obtain
in early May.

The key terms of the settlement include the
following: (i) the Companys former Parent will
continue to guarantee certain surety bonds issued by the Company
until December 2006; our former Parents obligations under
this guarantee are capped at $29.5 million; (ii) in
addition, upon the Companys successful exit from
bankruptcy, our former Parent will guarantee an additional $10.5
million of our bonds until December 2006 and, upon a permanent
reduction of the guarantees, our former Parent will pay one-half
of the permanent reduction, or up to $20 million, to a trust
established for the benefit of its unsecured creditors;
(iii) the Company and the unsecured creditors will provide
a full release of any potential claims against our former Parent
arising from the spin-off and our former Parent will release
most of the pre-petition claims that it has asserted in the
bankruptcy.

Separately, the Company has been engaged in
investigating, and is continuing to pursue, strategic
alternatives to maximize stakeholder value and strengthen our
financial condition. These strategic alternatives may include
the sale of all or part of the Companys business. A sale
of all or part of the Companys business could result in
proceeds substantially less than the carrying amounts of assets
and liabilities.

85



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|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|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

Executive Officers

William N. Plamondon, III,55, has been one of our directors
since June 2000 and, as of October 9, 2002, has assumed the
roles of Chief Executive Officer and President. From October
2001 to October 2002, Mr. Plamondon served as our Chief
Restructuring Officer. Mr. Plamondon founded R.I. Heller
Company LLC, a management consulting firm, in April 1998 and
serves as its President and Chief Executive Officer.
Additionally, as of December 2000 Mr. Plamondon became a
senior advisor to E&Y Capital Advisors LLC, a position which
he resigned upon assuming the role of our Chief Restructuring
Officer. Prior to founding R.I. Heller, Mr. Plamondon
served as President and Chief Executive Officer of First
Merchants Acceptance Corporation, a national financing company,
from April 1997 until April 1998, and served as a director of
First Merchants from March 1995 until April 1998.
Mr. Plamondon was the President of Budget Rent-A-Car
Corporation from June 1992 until February 1997 and held other
management positions with Budget from 1978 until 1992.

Edward L. Jones,54,
has served as our Senior Vice President, Human Resources since
November 1999. From January 1999 until November 1999,
Mr. Jones served as Vice President, Human Performance
Organization for AutoNations North American Rental Group
and from August 1997 until January 1999 he served as Corporate
Vice President, Human Performance Organization for AutoNation.
Prior to joining AutoNation, Mr. Jones served as Director,
Human Resources for Express, Inc., a national clothing retailer
and wholly owned subsidiary of Limited, Inc., from January 1991
until July 1997.

Douglas C. Laux,50,
has served as our Senior Vice President and Chief Financial
Officer since October 2002. Mr. Laux was an independent
consultant for ANC Rental from December 2001 to October 2002.
During the period from 1995 to 2001, Mr. Laux served in a
variety of executive posts including CFO of each of Worldwide
Xceed Group, Inc. and Platinum Entertainment Inc. Prior to that,
Mr. Laux worked with Ernst & Young for over
20 years, the last nine years as a Partner.

Howard D. Schwartz,53, has served as our Senior Vice
President and General Counsel since November 1999. From October
1997 until November 1999, Mr. Schwartz served as Vice
President and Deputy General Counsel of AutoNation and from
January 1997 until September 1997, he served as Senior Vice
President and General Counsel of Alamo, a wholly-owned
subsidiary of AutoNation, and as Chief Litigation Counsel of
AutoNation. Prior to joining AutoNation, Mr. Schwartz was
with the national law firm of Eckert Seamans Cherin &
Mellott, LLC from 1974, where he served as the partner-in-charge
of the firms Florida operations, a member of the Executive
Committee and Co-Chairman of the Litigation department.

Travis L. Tanner,52, joined our company as Senior Vice
President, Sales and Marketing in April 2002, and as of October
2002 Mr. Tanner was named Executive Vice President
responsible for worldwide sales, marketing, operations, business
system development, brand integrity, information technology,
reservations and revenue management. From January 1999 until
October 2001 he served as Chief Executive Officer of Grand
Expeditions, an upscale travel company. Mr. Tanner was also
the President and Chief Executive Officer of Carlson Wagonlit
Travel, one of the top global travel companies, from May 1993
until December 1998. Prior to May 1993, he served as Executive
Vice President  Resorts for Walt Disney Attractions, and
President of the Carlson Travel Group.

Leland F. Wilson,37, has served as Vice President and
Treasurer of ANC Rental Corporation since November 1999 and was
promoted to Senior Vice President in April 2002. Mr. Wilson
previously served as Assistant Treasurer of AutoNation, Inc.
Prior to joining our former Parent in May 1998, Mr. Wilson
was an Assistant Vice President at Wellington Management
Company, LLP from 1997 to 1998. Before joining

86



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Wellington, Mr. Wilson was Manager of
Corporate Finance at Staples, Inc. from 1995 to 1997. Prior to
joining Staples, Mr. Wilson held various positions at Nynex
in Treasury and Operations, including Staff Director of
Financial Planning, from 1988 to 1995.


Michael J. Kipp,48,
was appointed Vice President, Corporate Controller in November
1999. From April 1998 through October 1999, he was Vice
President, Finance of the Automotive Rental Group, previously a
division of AutoNation. From May 1997 to April 1998,
Mr. Kipp was Assistant Controller of AutoNation. From 1995
to 1997, Mr. Kipp was employed by Blockbuster Entertainment
as Vice President, Financial Planning and Reporting.

Directors

Michael S. Egan,63,
has been our Chairman of the Board since June 2000 and was our
Chief Executive Officer from December 28, 2000 to
April 4, 2002. Mr. Egan also serves as Chairman and
Chief Executive Officer of Certified Vacations, Inc., a
wholesale tour operator. Mr. Egan has been the controlling
investor of Dancing Bear Investments, a privately held
investment company, since 1996. Mr. Egan also serves as a
director of Boca Resorts, Inc., a leisure, recreation and
entertainment company which owns and operates several luxury
resort hotels. In addition, Mr. Egan has served as Chairman
of the Board of theglobe.com, Inc. since August 1997 and CEO
since June 2002. Mr. Egan was the majority owner and
Chairman of Alamo Rent-A-Car, Inc. from 1986 until Alamo was
acquired by AutoNation, Inc. in November 1996. Mr. Egan
began his career with Alamo in 1976 and held various management
and ownership positions until he bought a controlling interest
in 1986.

Gordon M. Bethune,61, has been one of our directors
since June 2000. Since September 1996, Mr. Bethune has
served as Chairman of the Board and Chief Executive Officer of
Continental Airlines, Inc., the nations fifth largest
passenger airline. Mr. Bethune also served as
Continentals President and Chief Executive Officer from
November 1994 until September 1996 and as its President and
Chief Operating Officer from February 1994 until November 1994.
Mr. Bethune has been a director of Continental since August
1994. Mr. Bethune also serves on the board of directors of
Honeywell International Inc., an international developer and
supplier of advanced-technology products, systems and services.

J. P. Bryan,63, has been one of our directors
since June 2000. Currently Mr. Bryan is Senior Managing
Director of Torch Energy Advisors Incorporated which provides
accounting and operations outsourcing services to the oil and
gas businesses. Mr. Bryan was Mission Resources
Corporations Chief Executive Officer and President from
August 2, 1999 to May 15, 2000, and Chairman of the
Board from August 2, 1999 to December 6, 2000. He has
been a director of Mission Resources Corporation (or its
predecessor) since June 1997. Mr. Bryan was Mission
Resources Corporations Chairman of the Board from August
1987 to June 1997, and Chief Executive Officer from June 1994 to
January 1995 and from August 1987 to March 1998. From January
1995 to February 1998, Mr. Bryan was Chief Executive
Officer of Gulf Canada Resources Limited. He was Chairman of the
Board of Nuevo Energy Company, an independent oil and gas
company, from March 1990 to December 1997, and was Chief
Executive Officer of Nuevo from March 1990 to January 1995.
Mr. Bryan was also Chairman of the Board and Chief
Executive Officer of Torch and its predecessor from January 1985
to May 1997 and, since October 1998, has served as the Senior
Managing Director of Torch Energy Advisors Incorporated.
Mr. Bryan is also a member of the board of directors of
AutoNation, Inc., a seller of new and used automobiles.

John O. Grettenberger, Sr.,65, has been one of our directors
since June 2000. Since February 1997, Mr. Grettenberger has
served as the President of LorAnn Oils, Inc., a privately held
essential oils company. In 1984, Mr. Grettenberger was named a
Vice President of General Motors Corporation, the worlds
largest automobile manufacturer, and he served General Motors in
various capacities, most recently as the General Manager of the
Cadillac Motor Car Division, until February 1997.

H. Wayne Huizenga,65, has been one of our directors
since June 2000. From August 1995 to December 2002,,
Mr. Huizenga served as Chairman of the Board of AutoNation,
Inc. which owns the nations largest chain of franchised
automotive retail dealerships. From August 1995 to September
1999, Mr. Huizenga served as Chief Executive Officer or
Co-Chief Executive Officer of AutoNation. From May 1998 to
December 2002,

87



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##### 



Mr. Huizenga served as Chairman of the Board
of Republic Services, Inc., a solid waste services company and
from May 1998 to December 1998, served as its Chief Executive
Officer. Since September 1996, Mr. Huizenga has served as
the Chairman of the Board of Boca Resorts, Inc. Since January
1995, Mr. Huizenga also has served as the Chairman of the
Board of Extended Stay America, Inc., an owner and operator of
extended stay lodging facilities. From September 1994 until
October 1995, Mr. Huizenga served as the Vice-Chairman of
Viacom Inc., a diversified entertainment and communications
company. During the same period, Mr. Huizenga also served
as the Chairman of the Board of Blockbuster Entertainment Group,
a division of Viacom. From April 1987 through September 1995,
Mr. Huizenga served as the Chairman of the Board and Chief
Executive Officer of Blockbuster Entertainment Corporation,
during which time he helped build Blockbuster from a 19 store
chain into the worlds largest video rental company. In
September 1994, Blockbuster merged into Viacom. In 1971,
Mr. Huizenga co-founded Waste Management, Inc., which he
helped build into the worlds largest integrated solid
waste services company, and he served in various capacities,
including President, Chief Operating Officer and a director from
its inception until 1984. Mr. Huizenga also owns the Miami
Dolphins and Pro Player Stadium in South Florida, and in
addition to his directorships at AutoNation, Republic Services,
Extended Stay America and Boca Resorts, he is also a director of
NationsRent, Inc., a national equipment rental company.


Our directors, executive officers and ten percent
stockholders are required to file reports of their ownership of
our common stock with the Securities and Exchange Commission
pursuant to Section 16(a) of the Securities Exchange Act of
1934. To our knowledge, based solely on a review of the copies
of such reports furnished to us, all of such reporting
requirements were satisfied during fiscal year 2002.

Item 11.     Executive
Compensation

Executive Compensation

The following table sets forth the annual and
long-term compensation for all services rendered in all
capacities to ANC Rental Corporation, for the years ended
December 31, 2002, 2001 and 2000 by (i) the
individuals who served as our Chief Executive Officer during
fiscal 2002 and (ii) the four other most highly compensated
executive officers in fiscal 2002 who were executive officers on
December 31,

SUMMARY COMPENSATION TABLE

|                            |                             |      |      |                     |  |              |           |            |  |           |   |                 |  |  |        |         |     |  |   |         |  |  |         |        |    
|--------------------------- | --------------------------- | ---- | ---- | ------------------- |  | ------------ | --------- | ---------- |  | --------- | - | --------------- |  |  | ------ | ------- | --- |  | - | ------- |  |  | ------- | ------ | ---
|                            |                             |      |      |                     |  |              |           |            |  | Long Term |   |                
|                            |                             |      |      |                     |  | Compensation |           |           
|                            |                             |      |      | Annual Compensation |  | Awards       |           |           
|                            |                             |      |      |                     |  |              |           |           
|                            |                             |      |      |                     |  | Other        |           | Securities |  |          
|                            |                             |      |      |                     |  | Annual       |           | Underlying |  |          
|                            |                             |      |      |                     |  | Compensation |           | Options/   |  | All Other
|Name and Principal Position |                             | Year |      | Salary($)           |  | Bonus($)     |           | ($)        |  | ARS (#)   |   | Compensation($)
|                            |                             |      |      |                     |  |              |           |            |  |           |   |                
|William N. Plamondon, III   |                             |      | 2002 |                     |  |              | 676,615   |            |  |           |  |                 |  |  | 18,971 |         |     |  |  |         |  |  | 51,295  | (4)   
|                            | Chief Executive Officer and |      |      | 2001                |  |              |           | 91,385     |  |           |   |                |  |  |        |        |     |  |   | 50,000  |  |  |         | 31,000 | (6)
|                            | President(1)                |      |      | 2000                |  |              |           |           |  |           |   |                |  |  |        |        |     |  |   | 100,000 |  |  |         | 6,000  | (6)
|Lawrence J. Ramaekers       |                             |      | 2002 |                     |  |              | 1,800,000 |            |  |           |  |                 |  |  | 26,263 |         |     |  |  |         |  |  | 30,871  | (8)   
|                            | President, Chief Operating  |      |      | 2001                |  |              |           | 399,231    |  |           |   |                |  |  |        |        |     |  |   |        |  |  |         |       |    
|                            | Officer and Chief Executive |      |      | 2000                |  |              |           |           |  |           |   |                |  |  |        |        |     |  |   |        |  |  |         |       |    
|                            | Officer(2)                  |      |      |                     |  |              |           |            |  |           |   |                 |  |  |        |         |     |  |   |         |  |  |         |        |    
|Michael S. Egan             |                             |      | 2002 |                     |  |              | 233,654   |            |  |           |  |                 |  |  | 22,580 |         |     |  |  |         |  |  | 676,194 | (7)   
|                            | Chairman and Chief          |      |      | 2001                |  |              |           | 750,000    |  |           |   |                |  |  |        | 36,126  |     |  |   | 750,000 |  |  |         | 42,328 |    
|                            | Executive Officer (3)       |      |      | 2000                |  |              |           |           |  |           |   |                |  |  |        | 172,720 | (5) |  |   | 750,000 |  |  |         | 46,521 |    
|Howard D. Schwartz          |                             |      | 2002 |                     |  |              | 330,000   |            |  |           |  |                 |  |  |       |         |     |  |  |         |  |  | 6,973   | (10)  
|                            | Senior Vice President,      |      |      | 2001                |  |              |           | 330,000    |  |           |   |                |  |  |        |        |     |  |   |        |  |  |         | 6,430  |    
|                            | General Counsel and         |      |      | 2000                |  |              |           | 330,000    |  |           |   |                |  |  |        |        |     |  |   | 150,000 |  |  |         | 3,956  |    
|                            | Secretary                   |      |      |                     |  |              |           |            |  |           |   |                 |  |  |        |         |     |  |   |         |  |  |         |        |    
|Edward L. Jones             |                             |      | 2002 |                     |  |              | 225,000   |            |  |           |  |                 |  |  |       |         |     |  |  |         |  |  | 6,293   | (10)  
|                            | Senior Vice President       |      |      | 2001                |  |              |           | 225,000    |  |           |   |                |  |  |        |        |     |  |   |        |  |  |         | 5,635  |    
|                            | Human Resources             |      |      | 2000                |  |              |           | 225,000    |  |           |   |                |  |  |        |        |     |  |   | 90,000  |  |  |         | 41,710 |    

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|                            |                          |      |      |                     |  |              |         |            |  |           |        |                 |  |  |   |   |  |  |   |   |  |  |       |     | 
|--------------------------- | ------------------------ | ---- | ---- | ------------------- |  | ------------ | ------- | ---------- |  | --------- | ------ | --------------- |  |  | - | - |  |  | - | - |  |  | ----- | --- | 
|                            |                          |      |      |                     |  |              |         |            |  | Long Term |        |                
|                            |                          |      |      |                     |  | Compensation |         |           
|                            |                          |      |      | Annual Compensation |  | Awards       |         |           
|                            |                          |      |      |                     |  |              |         |           
|                            |                          |      |      |                     |  | Other        |         | Securities |  |          
|                            |                          |      |      |                     |  | Annual       |         | Underlying |  |          
|                            |                          |      |      |                     |  | Compensation |         | Options/   |  | All Other
|Name and Principal Position |                          | Year |      | Salary($)           |  | Bonus($)     |         | ($)        |  | ARS (#)   |        | Compensation($)
|                            |                          |      |      |                     |  |              |         |            |  |           |        |                
|Travis L. Tanner            |                          |      | 2002 |                     |  |              | 212,404 |            |  |           | 70,000 | (9)             |  |  |  |   |  |  |  |   |  |  | 1,275 | (8)
|                            | Executive Vice President |      |      | 2001                |  |              |         |           |  |           |        |                |  |  |   |  |  |  |   |  |  |  |       |    | 
|                            |                          |      | 2000 |                     |  |              |        |            |  |           |       |                 |  |  |  |   |  |  |  |   |  |  |      |    
|Douglas C. Laux             |                          |      | 2002 |                     |  |              | 283,745 |            |  |           |       |                 |  |  |  |   |  |  |  |   |  |  |      |    
|                            | Senior Vice President    |      |      | 2001                |  |              |         |           |  |           |        |                |  |  |   |  |  |  |   |  |  |  |       |    | 
|                            | Chief Financial Officer  |      |      | 2000                |  |              |         |           |  |           |        |                |  |  |   |  |  |  |   |  |  |  |       |    | 






| |     |                                                                                                                                                          
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Mr. Plamondon assumed the role of Chief
    Executive Officer and President as of October 9, 2002.                                                       
| | (2) | Mr. Ramaekers served in the role of
    President, Chief Operating Officer and Chief Executive Officer
    from April 4, 2002 to October 9, 2002.        
| | (3) | Mr. Egan served in the role of Chief
    Executive Officer from December 28, 2000 to April 4,
    2002. Mr. Egan has been our Chairman since June 2000.  
| | (4) | This amount reflects the cost of life and
    disability insurance of $6,551 and relocation payments of
    $44,744.                                     
| | (5) | This amount reflects the amount we paid in
    respect of Mr. Egans personal use of a private
    airplane for the year ended 2000.                     
| | (6) | This amount reflects board of director fees.                                                                                                             
| | (7) | This amount reflects severance of $500,000, board
    of director fees of $148,269 and the cost of life, medical and
    disability insurance of $27,925.
| | (8) | This amount reflects the cost of life and
    disability insurance.                                                                                      
| | (9) | This amount reflects a signing on bonus.                                                                                                                 

|     |                                                                                                             
|---- | ------------------------------------------------------------------------------------------------------------
|(10) | This amount reflects the cost of life and
    disability insurance, and employer 401(K) match contributions.

Option Grant Table

We did not grant options to the executive
officers named in the summary compensation table under our stock
option plan during fiscal 2002.

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Option Exercise Table

The following table describes the number of
shares of common stock covered by both exercisable and
unexercisable options granted to our executive officers named in
the summary compensation table under our stock option plan as of
December 31, 2002. No options were exercised by these
executive officers during fiscal 2002.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL
YEAR

AND FISCAL YEAR-END OPTION/SAR
VALUES


|                          |  |                              |           |                           |  |             |         |               |  |  |   |  |  |  |   | 
|------------------------- |  | ---------------------------- | --------- | ------------------------- |  | ----------- | ------- | ------------- |  |  | - |  |  |  | - | 
|                          |  |                              |           |                           |  |            
|                          |  | Number of Securities         |           |                          
|                          |  | Underlying Unexercised       |           | Value of Unexercised In- 
|                          |  | Options/SARs at Fiscal Year- |           | The-Money Options/SARs   
|                          |  | End (#)                      |           | At Fiscal Year-End ($)(1)
|                          |  |                              |           |                          
|Name                      |  | Exercisable                  |           | Unexercisable             |  | Exercisable |         | Unexercisable
|                          |  |                              |           |                           |  |             |         |              
|William N. Plamondon, III |  |                              | 150,000   |                           |  |             |        |               |  |  |  |  |  |  |  | 
|Lawrence J. Ramaekers     |  |                              |          |                           |  |             |        |               |  |  |  |  |  |  |  | 
|Michael S. Egan           |  |                              | 1,250,000 |                           |  |             | 250,000 |               |  |  |  |  |  |  |  | 
|Howard D. Schwartz        |  |                              | 150,000   |                           |  |             |        |               |  |  |  |  |  |  |  | 
|Edward L. Jones           |  |                              | 90,000    |                           |  |             |        |               |  |  |  |  |  |  |  | 
|Travis L. Tanner          |  |                              |          |                           |  |             |        |               |  |  |  |  |  |  |  | 
|Douglas C. Laux           |  |                              |          |                           |  |             |        |               |  |  |  |  |  |  |  | 






|    |                                                                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | None of the options were in-the-money
    as of December 31, 2002, based on the closing price of
    $0.05 per share of our common stock as of December 31, 2002
    as reported by the NASD OTC Bulletin Board.

Employment Agreements

In March 2002, the Bankruptcy Court approved, on
a final basis, a key employee retention plan. The purpose of the
plan is to retain certain key employees critical to the
near-term success of our restructuring by providing financial
incentives and security against unanticipated termination of
employment. There are three levels of participation in the plan
(Tier I, Tier II, Tier III). Tier II and
Tier III cover two retention payments, while Tier I
covers only base retention payments.

The Base Retention is payable upon the earlier of
June 30, 2003, involuntary termination of employment
other than for cause or death or permanent
disability, sale of the company or the consummation by the
Bankruptcy Court of a plan of reorganization. The Base Retention
approximates fifty percent of the participants base salary
and is payable in a lump sum.

The Holdback Retention is payable upon a
Triggering Event. A Triggering Event
occurs when a plan of reorganization of the Company under
chapter 11 is approved by the United States Bankruptcy
Court so long as the plan of reorganization is subsequently
confirmed by the Bankruptcy Court without material
modifications, or the date upon which a motion seeking approval
of the sale of all or substantially all of the operating assets
of the Company is approved, so long as the sale is subsequently
consummated without material modifications. The Holdback
Retention is paid based upon a sliding scale affected by the
passage of time and value realized in the Triggering
Event.

In March 2002, we and Mr. Ramaekers entered
into a twenty-one month employment agreement, approved by the
bankruptcy court, providing for his employment as our President
and Chief Operating Officer. Under this agreement
Mr. Ramaekers earned an annual salary of $1,800,000.

Mr. Ramaekers was eligible for a success fee
upon a Triggering Event. A Triggering
Event is defined as the date upon which the Plan of
Reorganization is subsequently approved and confirmed by the
Bankruptcy Court without material modifications, or the date
upon which a motion seeking approval of the sale of all or
substantially all the operating assets of the Company is
approved, so long as the sale is subsequently consummated
without material modifications. The success fee was to be paid
based upon a sliding scale affected by the passage of time and
value realized by the Triggering Event. In no event was the
success fee to exceed $5.0 million. In addition to the
success fee, Mr. Ramaekers was eligible for a fee of
$900,000 should a

90



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Triggering Event occur on or before
September 30, 2003. Mr. Ramaekers has resigned
his position with us and as such, is no longer entitled to any
success fees.


Compensation Committee Interlocks and Insider
Participation

Decisions with respect to executive compensation
are made by the compensation committee of our board of
directors. The members of the compensation committee as of
December 31, 2002 were Messrs. Bethune and
Grettenberger. None of the members of the compensation committee
has ever been an officer or employee of ANC Rental Corporation
or any of our subsidiaries.

Director Compensation

Directors who are full time employees of ANC
Rental Corporation receive no compensation for serving on our
board of directors or board committees.

For fiscal 2002, each non-employee director who
chaired a committee of the board of directors received a
retainer of $3,500 for each committee chairmanship held and
$2,500 for each non-chairman committee position held. For fiscal
2002, each non-employee director also received an annual
retainer of $25,000. For fiscal 2002 all non-employee directors
have been entitled to the use of a vehicle, while founding
non-employee directors and those directors with three years of
service are entitled to the use of a vehicle for life. For
fiscal 2002, for those directors who used a vehicle, the imputed
income ranged from $11,160 to $36,665 depending on the model
selected and the number of months of usage. Directors are also
reimbursed for traveling costs and other out-of-pocket expenses
incurred in attending board and committee meetings.

91



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|          |                                                                                                       
|--------- | ------------------------------------------------------------------------------------------------------
|Item  12. | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder
    Matters

EQUITY COMPENSATION PLAN INFORMATION

The following table provides certain information,
as of December 31, 2002, relating to the equity
compensation plans under which options to acquire our common
stock may be granted. However we are currently precluded from
granting any shares under this plan.

|                                                               |       |                         |           |                   |  |                         |      |      |  |  |   |   | 
|-------------------------------------------------------------- | ----- | ----------------------- | --------- | ----------------- |  | ----------------------- | ---- | ---- |  |  | - | - | 
|                                                               |       |                         |           | Weighted-         |  | Number of Securities   
|                                                               |       |                         |           | Average           |  | Remaining Available for
|                                                               |       | Number of Securities    |           | Exercise Price of |  | Future Issuance Under  
|                                                               |       | to be Issued Upon       |           | Outstanding       |  | Equity Compensation    
|                                                               |       | Exercise of Outstanding |           | Options,          |  | Plans (Excluding       
|                                                               |       | Options, Warrants       |           | Warrants          |  | Securities Reflected in
|                                                               |       | And Rights(a)           |           | and Rights(b)     |  | Column(a)(c)           
|                                                               |       |                         |           |                   |  |                        
|Equity Compensation Plans Approved by Security
    Holders     |       |                         | 4,950,000 |                   |  | $                       | 4.77 |      |  |  |  |  
|Equity Compensation Plans Not Approved by
    Security Holders |       |                         |          |                   |  |                         |     |      |  |  |  |  
|                                                               |       |                         |           |                   |  |                         |      |      |  |  |   |  
|                                                               | Total |                         |           | 4,950,000         |  |                         | $    | 4.77 |  |  |   |  | 
|                                                               |       |                         |           |                   |  |                         |      |      |  |  |   |  

The following table includes information
regarding the beneficial ownership of our common stock by
(i) each person who we believe to be the beneficial owner
of more than five percent of our common stock, based on a review
of filings with the Securities and Exchange Commission,
(ii) each of our directors, (iii) each of the
executive officers named in the summary compensation table and
(iv) all of our directors and executive officers as a
group. In most cases, each individual has sole voting and
investment power with respect to the shares he or she
beneficially owns. When this is not the case, voting and
investment power is clarified in a footnote.

|                                                                     |  |                    |           |               |  |  |       |  
|-------------------------------------------------------------------- |  | ------------------ | --------- | ------------- |  |  | ----- | -
|                                                                     |  | Number of Shares   |           | Percentage of
|Name                                                                 |  | Beneficially Owned |           | Class(1)     
|                                                                     |  |                    |           |              
|5% Stockholders:                                                     |  |                    |           |               |  |  |       |  
|Lehman Brothers Commercial Paper Inc.(2)                             |  |                    | 5,102,178 |               |  |  | 11.26 | %
|Michael S. Egan(3)                                                   |  |                    | 3,953,943 |               |  |  | 8.73  | %
|ESL Partners, L.P. and related entities(4)                           |  |                    | 3,845,000 |               |  |  | 8.49  | %
|DCB Holdings, Inc.(5)                                                |  |                    | 3,422,740 |               |  |  | 7.56  | %
|Michael DeGroote(6)                                                  |  |                    | 2,478,900 |               |  |  | 5.47  | %
|Harris W. Hudson(7)                                                  |  |                    | 2,349,597 |               |  |  | 5.19  | %
|Other Directors:                                                     |  |                    |           |               |  |  |       |  
|Gordon M. Bethune(8)                                                 |  |                    | 150,000   |               |  |  | *     |  
|J.P. Bryan(8)                                                        |  |                    | 150,000   |               |  |  | *     |  
|John O. Grettenberger, Sr.(8)                                        |  |                    | 155,000   |               |  |  | *     |  
|H. Wayne Huizenga(9)                                                 |  |                    | 150,366   |               |  |  | *     |  
|Named Executive Officers:                                            |  |                    |           |               |  |  |       |  
|William N. Plamondon, III(8)                                         |  |                    | 152,722   |               |  |  | *     |  
|Lawrence J. Ramaekers                                                |  |                    |          |               |  |  | *     |  
|Howard D. Schwartz(8)                                                |  |                    | 166,343   |               |  |  | *     |  
|Edward L. Jones(10)                                                  |  |                    | 90,000    |               |  |  | *     |  
|Travis L. Tanner                                                     |  |                    |          |               |  |  | *     |  
|Douglas C. Laux                                                      |  |                    |          |               |  |  | *     |  
|All directors and executive officers as a group
    (12 persons)(11) |  |                    | 5,108,374 |               |  |  | 11.28 | %






|  |                                                                                                                                           
|- | ------------------------------------------------------------------------------------------------------------------------------------------
|* | The percentage of shares of common stock
    beneficially owned does not exceed one percent of the
    outstanding shares of common stock.

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##### 



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Percentages are based on 45,296,139 shares of
    common stock outstanding on March 31, 2003. Calculations of
    percentage of beneficial ownership assume the exercise by only
    the named stockholder of all options or warrants for the
    purchase of common stock held by such stockholder which are
    exercisable within 60 days of March 31, 2003.                                                                                                                                                                                                                                                                                                                                           
|(2) | Represents warrants issued in connection with our
    Amended and Restated Senior Loan Agreement. The warrants have an
    exercise price of $0.01 per share and a ten-year term.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(3) | Includes (i) 110,000 shares owned directly
    by Mr. Egan, (ii) 2,152,863 shares owned by the
    Michael S. Egan Living Trust, of which Mr. Egan is the
    sole trustee, (iii) an aggregate of 441,080 shares
    owned by certain trusts established for the benefit of members
    of Mr. Egans family and (iv) options to acquire
    1,250,000 shares of common stock which are exercisable
    within 60 days of March 31, 2002. Mr. Egans
    address is 110 Broward Blvd., Fort Lauderdale,
    Florida 33301. This information is based on a
    Schedule 13D filed by Mr. Egan dated May 4, 2001.                                                                                           
|(4) | Includes (i) 2,563,889 shares owned by ESL
    Partners, L.P., a Delaware limited partnership,
    (ii) 596,924 shares owned by ESL Limited, a Bermuda
    corporation, (iii) 96,380 shares owned by ESL
    Institutional Partners, L.P., a Delaware limited partnership,
    and (iv) 587,807 shares owned by ESL Investors,
    L.L.C., a Delaware limited liability company. The address of ESL
    Partners, L.P., ESL Institutional Partners, L.P. and ESL
    Investors L.L.C. is One Lafayette Place, Greenwich, CT 06830.
    The address of ESL Limited is Hemisphere House, 9 Church
    Street, Hamilton, Bermuda. This information is based on a
    Schedule 13G filed on February 14, 2003.
|(5) | Includes 3,422,740 shares of common stock
    held by DCB Holdings, Inc., a Florida corporation whose sole
    voting shareholder is Mr. Dan Breeden, Jr. This
    information is based on a Schedule 13G filed by
    Mr. Breeden dated December 21, 2001. The address of
    DCB Holdings is 450 East Las Olas Blvd, Fort Lauderdale,
    Florida 33301.                                                                                                                                                                                                                                                                                                                                                
|(6) | 2,453,900 of the shares beneficially owned by
    Mr. DeGroote are held in the name of Westbury (Bermuda)
    Ltd., a Bermuda corporation, of which he is the sole
    shareholder. Mr. DeGrootes and Westbury (Bermuda)
    Ltd.s address is Victoria Hall, 11 Victoria Street,
    P.O. Box HM 1065, Hamilton, HMEX, Bermuda. This information is
    based on a Schedule 13G filed by Mr. DeGroote dated
    July 13, 2000.                                                                                                                                                                                                                                                                          
|(7) | 2,312,097 of the shares beneficially owned by
    Mr. Hudson are beneficially owned by the Harris W.
    Hudson Limited Partnership, a Nevada limited partnership, and
    Harris W. Hudson, Inc. a Nevada Corporation controlled by
    Mr. Hudson. Mr. Hudsons business address is
    110 S.E. Sixth Street, Fort Lauderdale, Florida 33301.
    This information is based on a Schedule 13G filed by
    Mr. Hudson dated July 7, 2000.                                                                                                                                                                                                                                                              
|(8) | Includes 150,000 shares of common stock issuable
    upon exercise of options that are exercisable within
    60 days of March 31, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(9) | Includes (i) 366 shares owned directly by
    Mr. Huizenga and (ii) options to acquire 150,000
    shares of common stock which are exercisable within 60 days
    of April 30, 2002. Mr. Huizengas business
    address is 450 East Las Olas Blvd, Fort Lauderdale,
    Florida 33301. This information is based on a
    Schedule 13D filed by Mr. Huizenga dated
    December 31, 2001 and a Form 4 filed by
    Mr. Huizenga on January 10, 2002.                                                                                                                                                                                                                                                    

|     |                                                                                                                                           
|---- | ------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Includes 90,000 shares of common stock issuable
    upon exercise of options that are exercisable within
    60 days of March 31, 2003.   
|(11) | Includes 2,380,000 shares of common stock
    issuable upon exercise of options that are exercisable within
    60 days of March 31, 2003.

Item 13.     Certain
Relationships and Related Transactions

As part of our Chapter 11 filing, the
Debtors have the right, subject to court approval and other
conditions, to assume or reject any pre-petition executory
contracts and unexpired losses. Parties effected by these
rejections may file claims with the court. We can provide no
assurance that after negotiations with various parties in
interest, the terms of the agreements described herein will or
will not be significantly revised or that any of these
agreements will be assumed or rejected.

93



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Transactions with AutoNation

AutoNation distributed all of our common stock to
its shareholders as of June 30, 2000. Our relationship with
AutoNation since the spin-off has been governed by a separation
and distribution agreement and other agreements entered into in
June 2000 in connection with the spin-off. The material
provisions of these agreements are described in the following
paragraphs. In addition, H. Wayne Huizenga and
J.P. Bryan are directors of both our company and AutoNation.



| |                           
| | --------------------------
| | Settlement with AutoNation

We have reached an agreement with AutoNation and
the Unsecured Creditors Committee that resolves potential
claims relating to our bankruptcy, including potential claims
arising out of the spin-off from AutoNation in 2000. The
agreement is subject to bankruptcy court approval, which the
parties will seek to obtain in early May.

The key items of the settlement include the
following: (i) AutoNation will continue to guarantee
certain surety bonds issued by the Company until December 2006.
AutoNations obligations under this guarantee are capped at
$29.5 million; (ii) in addition, upon our successful
exit from bankruptcy, AutoNation will guarantee an additional
$10.5 million of our surety bonds until December 2006 and
upon a permanent reduction of the guarantees AutoNation will pay
one-half of the permanent reduction, or up to $20 million,
to a trust established for the benefit of our unsecured
creditors; (iii) we and the unsecured creditors will
provide a full release of any potential claims against
AutoNation arising from the spin-off and AutoNation will release
most of the pre-petition claims that it has asserted in the
bankruptcy; (iv) our former Parent will indemnify us for
any adjustments made by the IRS to the consolidated Federal
Income Tax Return for the periods we were part of such returns.
Additionally, upon court approval we will extend our lease for
the computer data center and reject our remaining agreements
with AutoNation.



| |                                          
| | -----------------------------------------
| | Separation and Distribution
    Agreement

Before the spin-off we entered into a separation
and distribution agreement with AutoNation. This agreement set
forth the agreements between the parties with respect to the
principal corporate transactions required to effect the
separation of our automotive rental business from
AutoNations automotive retail business and also contained
other agreements governing our relationship with AutoNation
after the spin-off.

In conjunction with the spin-off, AutoNation
separated its existing businesses so that after the spin-off,
(1) the assets and liabilities of its automotive rental and
related businesses were owned by us and (2) the assets and
liabilities of its automotive retail and related businesses were
owned by AutoNation or its subsidiaries. Specifically, our
assets and liabilities upon completion of the separation
consisted of (a) those assets and liabilities related to
AutoNations automotive rental business, (b) those
assets acquired and liabilities incurred or accrued after
March 31, 2000 and (c) all other assets, rights and
liabilities expressly allocated to the company or its
subsidiaries under the distribution agreement or any ancillary
agreements.

The distribution agreement provided that, subject
to the terms and conditions of the agreement, the IRS letter
ruling and the facts and representations submitted to the IRS,
both ANC Rental Corporation and AutoNation would take all
reasonable steps necessary and appropriate to cause all
conditions to the spin-off to be satisfied and then to effect
the spin-off. We agreed with AutoNation that neither of us would
take, or permit any of our respective affiliates to take, any
action which reasonably could be expected to prevent the
spin-off from qualifying as a tax-free distribution to
AutoNation or its stockholders or which would be inconsistent
with any representation of fact or submission made in connection
with or in the IRS letter ruling. We also agreed with AutoNation
to take any reasonable actions necessary for the spin-off to
qualify as a tax-free distribution to AutoNation and its
stockholders.

The distribution agreement provides for a full
and complete release and discharge of all liabilities (including
any contractual agreements or arrangements existing or alleged
to exist) existing or arising from all acts and events occurring
or failing to occur or alleged to have occurred or to have
failed to occur and all conditions existing or alleged to have
existed on or before June 30, 2000 between us and
AutoNation,

94



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##### 



including in connection with the transactions and
all other activities to implement the spin-off, except as
described in the agreement.


Except as provided in the distribution agreement,
we agreed to indemnify, defend and hold harmless AutoNation and
each of its directors, officers and employees from and against
all liabilities relating to, arising out of or resulting from
(i) our failure or the failure of any other person to pay,
perform or otherwise promptly discharge any of our liabilities
in accordance with their respective terms, (ii) matters
relating to our automotive rental businesses and our liabilities
and contracts, (iii) any breach by us of the distribution
agreement or any of the ancillary agreements entered into by the
parties in connection with the spin-off and (iv) any untrue
statement of a material fact or omission to state a material
fact, or alleged untrue statements or omissions, with respect to
information relating to us contained in the registration
statement filed in connection with the spin-off.

Subject to exceptions provided in the
distribution agreement, AutoNation agreed to indemnify, defend
and hold us and each of our directors, officers and employees
harmless from and against all liabilities relating to, arising
out of or resulting from: (i) AutoNations failure or
the failure of any other person to pay, perform or otherwise
promptly discharge any liabilities of AutoNation other than our
liabilities, (ii) matters relating to AutoNations
automotive retail and related businesses and its liabilities and
contracts, (iii) any breach by AutoNation of the
distribution agreement or any of the other related agreements
and (iv) any untrue statement of a material fact or
omission to state a material fact, or alleged untrue statements
or omissions, with respect to information relating to AutoNation
contained in the registration statement filed in connection with
the spin-off. The distribution agreement describes specific
procedures with respect to claims subject to indemnification and
related matters.

The distribution agreement provides for
indemnification by us and AutoNation with respect to contingent
liabilities primarily relating to our respective businesses or
otherwise assigned to one of us. The distribution agreement
provides for the establishment of a contingent claims committee
comprised of one representative designated from time to time by
each of AutoNation and us that will establish procedures for
resolving disagreements between us and AutoNation as to
contingent gains and contingent liabilities.

The distribution agreement provides for the
sharing of some contingent liabilities. We and AutoNation agreed
to allocate responsibility for any shared contingent liability
equally between the two companies, or upon another methodology
which the contingent claims committee may establish. AutoNation
will assume the defense of, and may seek to settle or
compromise, any third party claim that is a shared contingent
liability, and the costs and expenses of this action will be
included in the amount to be shared by the parties.

The distribution agreement provides that we and
AutoNation will have the exclusive right to any benefit received
with respect to any contingent gain that primarily relates to
the business of, or that is expressly assigned to, ANC Rental
Corporation or AutoNation. Each of ANC Rental Corporation and
AutoNation will have sole and exclusive authority to manage,
control and otherwise determine all matters whatsoever with
respect to this type of contingent gain that primarily relates
to its respective business. We agreed with AutoNation to share
any benefit that may be received from any contingent gain that
is not related to the business of, or that is not expressly
assigned to either of us, equally between the two companies, or
upon another methodology to be established by the contingent
claims committee. AutoNation will have the sole and exclusive
authority to manage, control and otherwise determine all matters
whatsoever with respect to any shared contingent gain; and
AutoNation may elect not to pursue any shared contingent gain
for any reason whatsoever, including a different assessment of
the merits of any action, claim or right or any business reasons
that are in the best interests of AutoNation without regard to
our best interests, and that AutoNation will have no liability
to any person as a result of any determination of this kind.



| |                                                    
| | ---------------------------------------------------
| | Transitional Services Agreement with
    AutoNation

We entered into a transitional services agreement
with AutoNation on June 30, 2000. The services agreement
has been terminated. During 2000 we paid or accrued AutoNation
approximately $645,000 under this agreement. During 2000,
AutoNation paid us approximately $183,000 under this agreement.
We believe

95



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##### 



that the fees we paid and received for these
services are no less favorable to us than we could obtain from
unaffiliated third parties. We did not incur any charges in 2001.




| |                                          
| | -----------------------------------------
| | Tax Sharing Agreement with
    AutoNation

We entered into a tax sharing agreement with
AutoNation on June 30, 2000. The primary purpose of the
agreement is to reflect each partys rights and obligations
relating to payments and refunds of taxes that are attributable
to periods beginning before and including June 30, 2000 and
any taxes resulting from transactions effected in connection
with the spin-off. The agreement also covers the handling of
audits, settlements, elections, accounting methods and return
filings in cases where both companies have an interest in the
results of these activities. With respect to any period ending
on or before the spin-off or any tax period in which the
spin-off occurs, AutoNation will:



| |   |                                                                                                                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | continue to be the sole and exclusive agent for
    us in all matters relating to the income, franchise, property,
    sales and use tax liabilities of ANC Rental Corporation,                                                                              
|
| |  | bear any costs relating to tax audits, including
    tax assessments and any related interest and penalties and any
    legal, litigation, accounting or consulting expenses, subject to
    our obligation to pay for items relating to our rental business,
|
| |  | continue to have the sole and exclusive
    responsibility for the preparation and filing of consolidated
    federal and consolidated or combined state income tax returns,
    and                                                                         
|
| |  | generally have the powers, in AutoNations
    sole discretion, to contest or compromise any claim or refund on
    our behalf.                                                                                                                              



| |                       
| | ----------------------
| | Leases with AutoNation

Before the spin-off we, as the tenant, entered
into two leases with AutoNation or an affiliate of AutoNation:
(i) a lease for approximately 161,000 square feet of office
space to serve as our corporate headquarters and (ii) a
lease for approximately 31,600 square feet of computer data
center space at AutoNations data center. Both properties
are located in Fort Lauderdale, Florida.

Payments due under the lease for the corporate
headquarters total approximately $2.0 million. In addition,
we pay operating expenses, real estate taxes, insurance and
utilities relating to the facility. We have an option to extend
the term for two additional periods of five years each. The
lease payments will be increased on the fifth and eighth
anniversary of the start of the lease. Increases in lease
payments will be based on increases in the Consumer Price Index.
In no event will the adjusted lease payment for the fifth year
be lower than the initial rate or more than 15% higher. In no
event will the adjusted lease payment for the eighth year be
lower than the seventh year or more than 9% higher. During the
fourth quarter of 2000 AutoNation transferred ownership in this
property to an unrelated third party.

Payments due under the lease for the computer
data center space total approximately $0.9 million which
includes our proportionate share of the operating expenses, real
estate taxes, insurance and utilities of the facility. The lease
has an initial term of two years, with an option to extend the
term for an additional two years. If extended, the lease
payments will be increased based on increases in the Consumer
Price Index. In no event will the adjusted lease payment be more
than 6% higher than the initial lease payment.

We believe that the lease payments reflect fair
market value and that the terms of the leases are no less
favorable than could be obtained from persons unrelated to us.



| |                                            
| | -------------------------------------------
| | Reimbursement Agreement with
    AutoNation

Before the spin-off from AutoNation, AutoNation
had provided guarantees in support of our debt financing.
Pursuant to a reimbursement agreement entered into with
AutoNation before the distribution date, some of this credit
support remained in place following the spin-off. In particular,
AutoNation continued to guarantee certain annual rent expense in
connection with various real estate lease obligations and a
vehicle lease. We will have reimbursement obligations to
AutoNation to the extent AutoNation is required to satisfy

96



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##### 



any of its guarantees of any of its obligations.
These reimbursement obligations are payable upon
AutoNations demand, except in the event that certain of
our loans and credit facilities remain in effect as of the date
of AutoNations demand. In that event, the amount of our
obligations to AutoNation will be converted to a loan maturing
91 days after the date that all loans under those
facilities are paid in full, but not later than
September 29, 2003. Each reimbursement obligation or loan
payable by us to AutoNation under that reimbursement agreement
will bear interest at an annual rate up to 18%. We have paid
AutoNation a fee for the amount of its credit support in an
aggregate amount of approximately $1.1 million in 2001 and
$343,000 in 2000. Additionally, as part of the issuance in 2001
of a $29.5 million surety bond AutoNation provided a
$29.5 million back-up guarantee for the benefit of Liberty
Mutual Insurance Company, our primary surety provider. The
reimbursement agreement was amended to provide for a reduction
in AutoNations back-up guarantee over the course of the
next five years.




| |                                 
| | --------------------------------
| | Other Agreements with AutoNation

After the spin-off from AutoNation, we entered
into three year contracts with AutoNation pursuant to which we
(i) purchase a substantial portion of our vehicles from
certain dealerships owned by AutoNation, (ii) purchase a
portion of our parts at a negotiated market rate from certain
dealerships owned by AutoNation and (iii) have the right to
operate replacement car rental businesses at certain dealerships
owned by AutoNation. We also have corporate car rental contracts
with AutoNation and some of its subsidiaries. However, during
2001, the vehicle and parts supply agreements were terminated.
We have found other third party suppliers. Amounts charged and
paid under these contracts and arrangements are consistent with
amounts charged to and paid by unaffiliated customers and
suppliers.

The total dollar volume related to the above
discussed transactions and paid to AutoNation for the year ended
December 31, 2001 is as follows: (i) dealer mark-up of
approximately $0.3 million was paid on vehicle purchases or
typically less than one percent of acquisition cost;
(ii) parts purchases approximated $2.3 million; and
(iii) rent paid for replacement car rental sites
approximated substantially the same amounts as in prior years.
Vehicle rental payments we received from AutoNation approximated
substantially the same amounts as in prior years.

The total dollar volume related to the above
discussed transactions and paid to AutoNation for the year ended
December 31, 2000 is as follows: (i) dealer mark-up of
approximately $1.5 million was paid on vehicle purchases of
approximately $3.2 billion or less than one percent of
acquisition cost; (ii) parts purchases approximated
$7.5 million; and (iii) rent paid for replacement car
rental sites approximated $300,000. Vehicle rental payments we
received from AutoNation approximated $225,000.

Other Related Party Transactions

Mr. Plamondon, as of December 2000, became a
senior advisor to E&Y Capital Advisors LLC. During 2001, we
retained the services of E&Y Capital Advisors LLC. Fees
incurred and paid related to these services approximated
$3.1 million. Mr. Plamondon resigned from his position
with E&Y Capital Advisors upon becoming our Chief
Restructuring Officer in October 2001.

Mr. Egan has a beneficial ownership interest
in Certified Vacations, Inc., a domestic tour operator that has
conducted business with us. Mr. Egan also serves as
Certified Vacations Chairman and Chief Executive Officer.
Total gross revenue recognized by us from Certified Vacations
was approximately $4.0 million and $5.7 million for
the year ended December 31, 2002 and 2001, respectively. In
addition, we incurred marketing expense of approximately $48,000
and $69,000 to Certified Vacations during 2002 and 2001
respectively. Additionally, during 2001 and 2000, Certified
Vacations, similar to most large tour operators, had the same
use of our vehicles at little or no cost to them. Vehicle
expense, primarily comprised of depreciation, related to these
units approximated $23,300 for 2002 and $16,000 in 2001.

It is our policy that transactions with related
parties must be on terms that, on the whole, are no less
favorable than those that would be available from unrelated
parties. Based on our experience in the industries in which we
operate and the terms of our transactions with unrelated
parties, it is our belief that all of the transactions described
above met that standard at the time the transactions were
effected.

97



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##### 



Item 14.     Controls
and Procedures

a) Evaluation of disclosure controls and
procedures

We maintain a set of disclosure controls and
procedures designed to ensure that information required to be
disclosed by the Company in reports that it files or submits
under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported to the Companys
principal executive officers. Within the 90-day period prior to
the filing of this report, an evaluation was carried out under
the supervision and with the participation of the Companys
management, including the Chief Executive Officer
(CEO) and Chief Financial Officer (CFO),
of the effectiveness of our disclosure controls and procedures.
Based on that evaluation, the CEO and CFO have concluded that
the Companys disclosure controls and procedures are
effective.

b) Changes in internal controls

Subsequent to the date of their evaluation, there
have been no significant changes in the Companys internal
controls or in other factors that could significantly affect
these controls.

PART IV



|         |                                                                    
|-------- | -------------------------------------------------------------------
|Item 15. | Exhibits, Financial Statement Schedules and
    Reports on Form 8-K



| |        |                                                                                                                                                                    
| | ------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a)(1) | Financial Statements of the Company are set forth
    in Part II, Item 8.                                                                                          
|
| | (2)    | Financial Statement Schedule II, Valuation
    and Qualifying Accounts and Reserves, for each of the three
    years ended December 31, 2002 is submitted herewith.
|
| | (3)    | Exhibits  See Exhibit Index included
    elsewhere in this document.                                                                                              
|
| | (b)    | Reports on Form 8-K.                                                                                                                                               

Form 8-K, dated October 10, 2002 (filed
October 10, 2002), Item 9 reporting the appointment of
William Plamondon as ANC Rental Corporations new Chief
Executive Officer, and ANC Rental Corporations exit from
the Insurance  Replacement business.

Form 8-K, dated October 24, 2002 (filed
October 24, 2002), Item 9 reporting ANC Rental
Corporations filing its Debtor monthly operation
report with the Bankruptcy Court for the period ended
September 30, 2002.

Form 8-K, dated November 25, 2002
(filed November 25, 2002), Item 9 reporting ANC Rental
Corporations filing its Debtor monthly operation
report with the Bankruptcy Court for the period ended
October 31, 2002.

Form 8-K, dated December 20, 2002
(filed December 20, 2002), Item 9 reporting ANC Rental
Corporations filing its Debtor monthly operation
report with the Bankruptcy Court for the period ended
November 30, 2002.

98



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##### 



SCHEDULE II

ANC RENTAL CORPORATION

VALUATION AND QUALIFYING ACCOUNTS AND
RESERVES

(In Millions)


|                                             |                  |           |   |            |  |            |   |       |  |         |   |        |      |  |   |       |      |  |   |       | 
|-------------------------------------------- | ---------------- | --------- | - | ---------- |  | ---------- | - | ----- |  | ------- | - | ------ | ---- |  | - | ----- | ---- |  | - | ----- | 
|                                             |                  | Balance   |   |            |  |            |   |       |  |        
|                                             |                  | at        |   | Additions  |  |            |   |       |  | Balance
|                                             |                  | Beginning |   | Charged to |  |            |   |       |  | at End 
|Classifications                              |                  | of Year   |   | Income     |  | Deductions |   | Other |  | of Year
|                                             |                  |           |   |            |  |            |   |       |  |        
|Allowance for doubtful accounts:             |                  |           |   |            |  |            |   |       |  |         |   |        |      |  |   |       |      |  |   |      
|                                             | 2002             |           | $ | 14.9       |  |            | $ | 14.1  |  |         | $ | (7.6   | )(1) |  | $ | 8.0   | (7)  |  | $ | 29.4  | 
|                                             | 2001 (unaudited) |           |   | 26.4       |  |            |   | 9.1   |  |         |   | (20.6  | )(1) |  |   |      |      |  |   | 14.9  | 
|                                             | 2000 (unaudited) |           |   | 38.3       |  |            |   | 7.7   |  |         |   | (19.6  | )(1) |  |   |      |      |  |   | 26.4  | 
|Restructuring reserves:                      |                  |           |   |            |  |            |   |       |  |         |   |        |      |  |   |       |      |  |   |      
|                                             | 2002             |           | $ | 7.0        |  |            | $ |      |  |         | $ |       |      |  | $ | (2.0  | )(3) |  | $ | 5.0   | 
|                                             | 2001 (unaudited) |           |   | 11.8       |  |            |   |      |  |         |   | (4.8   | )(2) |  |   |      |      |  |   | 7.0   | 
|                                             | 2000 (unaudited) |           |   | 26.2       |  |            |   |      |  |         |   | (13.5  | )(2) |  |   | (0.9  | )(3) |  |   | 11.8  | 
|Insurance reserves:                          |                  |           |   |            |  |            |   |       |  |         |   |        |      |  |   |       |      |  |   |      
|                                             | 2002             |           | $ | 304.0      |  |            | $ | 193.1 |  |         | $ | (146.8 | )(4) |  | $ |      |      |  | $ | 350.3 | 
|                                             | 2001 (unaudited) |           |   | 284.3      |  |            |   | 193.4 |  |         |   | (173.7 | )(4) |  |   |      |      |  |   | 304.0 | 
|                                             | 2000 (unaudited) |           |   | 110.2      |  |            |   | 214.5 |  |         |   | (182.0 | )(4) |  |   | 141.6 | (5)  |  |   | 284.3 | 
|Valuation allowance for deferred tax assets: |                  |           |   |            |  |            |   |       |  |         |   |        |      |  |   |       |      |  |   |      
|                                             | 2002             |           | $ | 294.7      |  |            | $ | 104.6 |  |         | $ | (5.2   | )(8) |  | $ | 32.2  | (6)  |  | $ | 426.3 | 
|                                             | 2001 (unaudited) |           |   | 16.0       |  |            |   | 265.1 |  |         |   |       |      |  |   | 13.6  | (7)  |  |   | 294.7 | 
|                                             | 2000 (unaudited) |           |   | 16.0       |  |            |   |      |  |         |   |       |      |  |   |      |      |  |   | 16.0  | 






|    |                                                                                            
|--- | -------------------------------------------------------------------------------------------
|(1) | Primarily accounts written-off.                                                            
|(2) | Primarily cash payments of costs associated with
    restructuring activities.             
|(3) | Amount reversed to income.                                                                 
|(4) | Primarily represents cash payments on settled
    claims.                                  
|(5) | Primarily represents non-cash transfers of
    liability from/(to) our former Parent.      
|(6) | Valuation allowance for net operating loss
    carry-forwards from discontinued operations.
|(7) | Primarily represents reclassification of reserves
    from other balance sheet accounts.   
|(8) | Primarily represents net operating loss
    written-off.                                   

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##### 



SIGNATURES

Pursuant to the requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, ANC Rental
Corporation has duly caused this report on Form 10-K to be
signed on its behalf by the undersigned, thereunto duly
authorized.



| |                       
| | ----------------------
| | ANC Rental Corporation



| |     |                              
| | --- | -----------------------------
| | By: | /s/ WILLIAM N. PLAMONDON, III

| |                                          
| | -----------------------------------------
| |                                          
| | William N. Plamondon, III                
| | Chief Executive Officer and
    President

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

|                                                        |  |                                                                                   |  |      |              | 
|------------------------------------------------------- |  | --------------------------------------------------------------------------------- |  | ---- | ------------ | 
|Signature                                               |  | Title                                                                             |  | Date
|                                                        |  |                                                                                   |  |     
|/s/ MICHAEL S. EGANMichael S. Egan                      |  | Chairman of the Board                                                             |  |      | May 21, 2003 | 
|                                                       
|/s/ WILLIAM N. PLAMONDON, IIIWilliam N. Plamondon, III  |  | Chief Executive Officer, President and Director
    (Principal Executive Officer) |  |      | May 21, 2003 | 
|                                                       
|/s/ DOUGLAS C. LAUXDouglas C. Laux                      |  | Senior Vice President and Chief Financial Officer                                 |  |      | May 21, 2003 | 
|                                                       
|/s/ GORDON M. BETHUNEGordon M. Bethune                  |  | Director                                                                          |  |      | May 21, 2003 | 
|                                                       
|/s/ J.P. BRYANJ.P. Bryan                                |  | Director                                                                          |  |      | May 21, 2003 | 
|                                                       
|/s/ JOHN O. GRETTENBERGER, SRJohn O. Grettenberger, Sr. |  | Director                                                                          |  |      | May 21, 2003 | 
|                                                       
|/s/ H. WAYNE HUIZENGAH. Wayne Huizenga                  |  | Director                                                                          |  |      | May 21, 2003 | 

100



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##### 



CERTIFICATIONS PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002

Certification by Chief Executive
Officer

I, William N. Plamondon, III, certify that:

1. I have reviewed this annual report on
Form 10-K of ANC Rental Corporation;

2. Based on my knowledge, this annual report
does not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this
annual report;

3. Based on my knowledge, the financial
statements, and other financial information included in this
annual report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual
report;

4. The registrants other certifying
officers and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and we have:



| |                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a. designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this annual report is being prepared;
|
| | b. evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | c. presented in this annual report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                

5. The registrants other certifying
officers and I have disclosed, based on our most recent
evaluation, to the registrants auditors and the audit
committee of the registrants board of directors (or
persons performing the equivalent function):



| |                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a. all significant deficiencies in the
    design or operation of internal controls which could adversely
    affect the registrants ability to record, process,
    summarize and report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b. any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                    

6. The registrants other certifying
officers and I have indicated in this annual report whether or
not there were significant changes in internal controls or in
other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies
and material weaknesses.



| |     |                              
| | --- | -----------------------------
| | By: | /s/ WILLIAM N. PLAMONDON, III

| |                          
| | -------------------------
| |                          
| | William N. Plamondon, III
| | Chief Executive Officer  

Date: May 21, 2003

101



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##### 



Certification by Chief Financial
Officer

I, Douglas C. Laux, certify that:

1. I have reviewed this annual report on
Form 10-K of ANC Rental Corporation;

2. Based on my knowledge, this annual report
does not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this
annual report;

3. Based on my knowledge, the financial
statements, and other financial information included in this
annual report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual
report.

4. The registrants other certifying
officers and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and we have:



| |                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a. designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this annual report is being prepared;
|
| | b. evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | c. presented in this annual report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                

5. The registrants other certifying
officers and I have disclosed, based on our most recent
evaluation, to the registrants auditors and the audit
committee of the registrants board of directors (or
persons performing the equivalent function):



| |                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a. all significant deficiencies in the
    design or operation of internal controls which could adversely
    affect the registrants ability to record, process,
    summarize and report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b. any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                    

6. The registrants other certifying
officers and I have indicated in this annual report whether or
not there were significant changes in internal controls or in
other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies
and material weaknesses.



| |     |                    
| | --- | -------------------
| | By: | /s/ DOUGLAS C. LAUX

| |                        
| | -----------------------
| |                        
| | Douglas C. Laux        
| | Chief Financial Officer

Date: May 21, 2003

102



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##### 



EXHIBIT INDEX

|        |      |  |  |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|------- | ---- |  |  | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |  |  |            
|Number  |      |  |  | Description
|        |      |  |  |            
|        | 3.1  |  |  |             |  | Amended and Restated Certificate of Incorporation
    of ANC Rental Corporation (incorporated by reference to
    Exhibit 3.1 to ANC Rentals Form 8-K as filed on
    July 14, 2000).                                                                                                                                                                                                                                                                                                                                                                                   
|        | 3.2  |  |  |             |  | Amended and Restated Bylaws of ANC Rental
    Corporation (incorporated by reference to Exhibit 3.2 to
    ANC Rentals Form 8-K as filed on July 14, 2000).                                                                                                                                                                                                                                                                                                                                                                                                             
|        | 4.1  |  |  |             |  | Form of Specimen Common Stock Certificate of ANC
    Rental (incorporated by reference to Exhibit 4.1 to ANC
    Rentals Registration Statement on Form 10 as filed on
    June 6, 2000).                                                                                                                                                                                                                                                                                                                                                                               
|        | 4.2  |  |  |             |  | Amended and Restated Series 1999-1
    Supplement, dated as of June 30, 2000, between Alamo
    Financing L.P. and The Bank of New York, as Trustee, to the Base
    Indenture, dated February 26, 1999 (incorporated by
    reference to Exhibit 4.2 to ANC Rentals
    Form 10-K for the year ended December 31, 2000).                                                                                                                                                                                                                                               
|        | 4.3  |  |  |             |  | Amended and Restated Series 1999-1
    Supplement dated as of June 30, 2000, between CarTemps
    Financing L.P. and The Bank of New York, as Trustee, to the Base
    Indenture, dated February 26, 1999 (incorporated by
    reference to Exhibit 4.3 to ANC Rentals
    Form 10-K for the year ended December 31, 2000).                                                                                                                                                                                                                                             
|        | 4.4  |  |  |             |  | Amended and Restated Series 1999-1
    Supplement, dated as of June 30, 2000, between National Car
    Rental Financing Limited Partnership and The Bank of New York,
    as Trustee, to the Base Indenture, dated as of April 30,
    1996 (incorporated by reference to Exhibit 4.4 to ANC
    Rentals Form 10-K for the year ended
    December 31, 2000).                                                                                                                                                                                                           
|        | 4.5  |  |  |             |  | Base Indenture, dated April 30, 1996,
    between National Car Rental Financing L.P. and The Bank of New
    York. (incorporated by reference to Exhibit 4.5 to ANC
    Rentals Form 10-K for the year ended
    December 31, 2000).                                                                                                                                                                                                                                                                                                                                    
|        | 4.6  |  |  |             |  | Base Indenture, dated February 26, 1999,
    between Alamo Financing L.P. and The Bank of New York and the
    related Supplemental Indenture, dated June 30, 2000
    (incorporated by reference to Exhibit 4.6 to ANC
    Rentals Form 10-K for the year ended
    December 31, 2000).                                                                                                                                                                                                                                                                                
|        | 4.7  |  |  |             |  | Base Indenture, dated February 26, 1999,
    between CarTemps Financing L.P. and The Bank of New York and the
    related Supplemental Indenture, dated June 30, 2000
    (incorporated by reference to Exhibit 4.7 to ANC
    Rentals Form 10-K for the year ended
    December 31, 2000).                                                                                                                                                                                                                                                                             
|        | 4.8  |  |  |             |  | Base Indenture dated as of February 26, 1999
    between ARG Funding Corp. and The Bank of New York, as Trustee
    (incorporated by reference to Exhibit 4.4 to ANC
    Rentals Registration Statement on Form 10 as filed on
    June 6, 2000).                                                                                                                                                                                                                                                                                                                       
|        | 4.9  |  |  |             |  | Amended and Restated Series 1999-1
    Supplement, dated as of June 30, 2000, between ARG Funding
    Corp. and The Bank of New York, as Trustee, to the ARG Base
    Indenture (incorporated by reference to Exhibit 4.9 to ANC
    Rentals Form 10-K for the year ended
    December 31, 2000). Portions of this document have been
    omitted pursuant to an application for confidential treatment
    pursuant to Rule 24b-2 under the Securities Exchange Act of
    1934, as amended.                                                                           
|        | 4.10 |  |  |             |  | Amended and Restated Series 1999-2
    Supplement dated June 30, 2000 (incorporated by reference
    to Exhibit 4.10 to ANC Rentals Form 10-K for the
    year ended December 31, 2000). Portions of this document
    have been omitted pursuant to an application for confidential
    treatment pursuant to Rule 24b-2 under the Securities
    Exchange Act of 1934, as amended.                                                                                                                                                                                    
|        | 4.11 |  |  |             |  | Amended and Restated Series 1999-3
    Supplement dated June 30, 2000 (incorporated by reference
    to Exhibit 4.11 to ANC Rentals Form 10-K for the
    year ended December 31, 2000). Portions of this document
    have been omitted pursuant to an application for confidential
    treatment pursuant to Rule 24b-2 under the Securities
    Exchange Act of 1934, as amended.                                                                                                                                                                                    
|        | 4.12 |  |  |             |  | Fourth Amended and Restated Master Collateral
    Agency Agreement dated as of June 30, 2000 among ANC Rental
    Corporation as Master Servicer, National Car Rental System,
    Inc., Alamo Rent-A-Car, LLC., Spirit Rent-A-Car, Inc. d/b/a/
    CarTemps USA, Alamo Financing, L.P., National Car Rental
    Financing Limited Partnership and CarTemps Financing, L.P., as
    lessor grantors, and Citibank N.A., as master collateral agent
    (incorporated by reference to Exhibit 4.12 to ANC
    Rentals Form 10-K for the year ended
    December 31, 2000).

103



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##### 



|        |      |  |  |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------- | ---- |  |  | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |  |  |            
|Number  |      |  |  | Description
|        |      |  |  |            
|        | 4.13 |  |  |             |  | Amended and Restated Master Motor Vehicle Lease
    and Servicing Agreement dated as of June 30, 2000 among
    National Car Rental Financing Limited Partnership, as lessor,
    National Car Rental System, Inc., as lessee, and ANC Rental
    Corporation, as guarantor and servicer (incorporated by
    reference to Exhibit 4.13 to ANC Rentals
    Form 10-K for the year ended December 31, 2000).                     
|        | 4.14 |  |  |             |  | Amended and Restated Master Motor Vehicle Lease
    and Servicing Agreement dated as of June 30, 2000 among
    CarTemps Financing L.P., as lessor, Spirit-Rent-A-Car, Inc., as
    lessee, and ANC Rental Corporation, as guarantor and servicer
    (incorporated by reference to Exhibit 4.14 to ANC
    Rentals Form 10-K for the year ended
    December 31, 2000).                                                        
|        | 4.15 |  |  |             |  | Amended and Restated Master Motor Vehicle Lease
    and Servicing Agreement dated as of June 30, 2000 among
    Alamo Financing L.P., as lessor, Alamo Rent-A-Car, LLC, as
    lessee, and ANC Rental Corporation, as guarantor and servicer
    (incorporated by reference to Exhibit 4.15 to ANC
    Rentals Form 10-K for the year ended
    December 31, 2000).                                                             
|        | 4.16 |  |  |             |  | Amended and Restated $175,000,000 Credit
    Agreement, dated as of June 30, 2000, among ANC Rental
    Corporation, Lehman Brothers Inc., Lehman Commercial Paper Inc.
    and Congress Financial Corporation (Florida) (incorporated by
    reference to Exhibit 10.1 to ANC Rentals
    Form 8-K as filed on July 14, 2000).                                                                                                 
|        | 4.17 |  |  |             |  | Amended and Restated $40,000,000 Credit
    Agreement, dated as of June 30, 2000, among ANC Rental
    Corporation, Lehman Brothers Inc., and Lehman Commercial Paper
    Inc. (incorporated by reference to Exhibit 10.2 to ANC
    Rentals Form 8-K as filed on July 14, 2000).                                                                                                                                               
|        | 4.18 |  |  |             |  | Guarantee and Collateral Agreement (Borrowing
    Base Facility), dated as of June 30, 2000 (incorporated by
    reference to Exhibit 10.3 to ANC Rentals
    Form 8-K as filed on July 14, 2000).                                                                                                                                                                                                                              
|        | 4.19 |  |  |             |  | Guarantee and Collateral Agreement (Supplemental
    Facility), dated as of June 30, 2000 (incorporated by reference
    to Exhibit 10.4 to ANC Rentals Form 8-K as filed
    on July 14, 2000).                                                                                                                                                                                                                                
|        | 4.20 |  |  |             |  | Amended and Restated $225,000,000 Senior Loan
    Agreement, dated as of June 30, 2000, among ANC Rental
    Corporation, Lehman Brothers Inc. and Lehman Commercial Paper
    Inc. (incorporated by reference to Exhibit 10.5 to ANC
    Rentals Form 8-K as filed on July 14, 2000).                                                                                                                                          
|        | 4.21 |  |  |             |  | Indenture, dated as of June 30, 2000, among
    ANC Rental Corporation, the guarantors named therein and The
    Bank of New York (incorporated by reference to Exhibit 10.6
    to ANC Rentals Form 8-K as filed on July 14,
    2000).                                                                                                                                                                                        
|        | 4.22 |  |  |             |  | Equity Registration Rights Agreement, dated as of
    June 30, 2000, between ANC Rental Corporation and Lehman
    Commercial Paper Inc. (incorporated by reference to
    Exhibit 10.7 to ANC Rentals Form 8-K as filed on
    July 14, 2000).                                                                                                                                                                                 
|        | 4.23 |  |  |             |  | Debt Registration Rights Agreement, dated as of
    June 30, 2000, between ANC Rental Corporation, the
    guarantors named therein and Lehman Commercial Paper Inc.
    (incorporated by reference to Exhibit 10.8 to ANC
    Rentals Form 8-K as filed on July 14, 2000)                                                                                                                                                      
|        | 4.24 |  |  |             |  | Warrant Agreement, dated as of June 30,
    2000, between ANC Rental Corporation and The Bank of New York
    (incorporated by reference to Exhibit 10.9 to ANC
    Rentals Form 8-K as filed on July 14, 2000).                                                                                                                                                                                                                
|        | 4.25 |  |  |             |  | Escrow Agreement, dated as of June 30, 2000,
    among ANC Rental Corporation, Lehman Brothers Inc., Lehman
    Commercial Paper Inc. and The Bank of New York (incorporated by
    reference to Exhibit 10.10 to ANC Rentals
    Form 8-K as filed on July 14, 2000).                                                                                                                                                          
|        | 4.26 |  |  |             |  | Subsidiary Guaranty, dated as of June 30,
    2000, by the guarantors named therein in favor of Lehman
    Commercial Paper Inc. (incorporated by reference to
    Exhibit 10.11 to ANC Rentals Form 8-K as filed
    on July 14, 2000).                                                                                                                                                                                        
|        | 4.27 |  |  |             |  | First Amendment, dated as of August 29,
    2000, to the Amended and Restated Credit Agreement, dated as of
    June 30, 2000, among ANC Rental Corporation, Lehman
    Brothers Inc., Lehman Commercial Paper Inc., Bankers Trust
    Company and Congress Financial Corporation (incorporated by
    reference to Exhibit 10.1 to ANC Rentals Quarterly
    Report on Form 10-Q for the Quarter ended
    September 30, 2000).

104



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##### 



|        |      |  |  |             |  |                                                                                                                                                                                                                                                                                                                                                                                                 
|------- | ---- |  |  | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |  |  |            
|Number  |      |  |  | Description
|        |      |  |  |            
|        | 4.28 |  |  |             |  | First Amendment, dated as of August 29,
    2000, to the Amended and Restated Credit Agreement, dated as of
    June 30, 2000, among ANC Rental Corporation, Lehman
    Brothers Inc., and Lehman Commercial Paper Inc. (incorporated by
    reference to Exhibit 10.2 to ANC Rentals Quarterly
    Report on Form 10-Q for the Quarter ended
    September 30, 2000).                         
|        | 4.29 |  |  |             |  | First Amendment, dated as of September 29,
    2000, to the Amended and Restated Senior Loan Agreement, dated
    as of June 30, 2000, among ANC Rental Corporation, Lehman
    Brothers Inc., and Lehman Commercial Paper Inc. (incorporated by
    reference to Exhibit 10.3 to ANC Rentals Quarterly
    Report on Form 10-Q for the Quarter ended
    September 30, 2000).                 
|        | 4.30 |  |  |             |  | Assumption Agreements, dated as of
    October 4, 2000, by ANC Information Technology, Inc., ANC
    Information Technology Holding, Inc. and ANC Information
    Technology, L.P. (incorporated by reference to Exhibit 4.30
    to ANC Rentals Form 10-K for the year ended
    December 31, 2000).                                                                                          
|        | 4.31 |  |  |             |  | Assumption Agreement (Subsidiary Guarantee),
    dated as of October 5, 2000, and related Guarantee by ANC
    Information Technology, Inc., ANC Information Technology
    Holding, Inc. and ANC Information Technology, L.P. (incorporated
    by reference to Exhibit 4.31 to ANC Rentals
    Form 10-K for the year ended December 31, 2000).                                              
|        | 4.32 |  |  |             |  | Assumption Agreement (Debt Registration Rights
    Agreement), dated as of October 5, 2000 by ANC Information
    Technology, Inc., ANC Information Technology Holding, Inc. and
    ANC Information Technology, L.P. (incorporated by reference to
    Exhibit 4.32 to ANC Rentals Form 10-K for the
    year ended December 31, 2000).                                                       
|        | 4.33 |  |  |             |  | Supplemental Indenture, dated as of
    October 5, 2000, among ANC Rental Corporation, the
    guarantors named therein and The Bank of New York (incorporated
    by reference to Exhibit 4.33 to ANC Rentals
    Form 10-K for the year ended December 31, 2000).                                                                                                                            
|        | 4.34 |  |  |             |  | Assumption Agreements, dated as of
    December 29, 2000, by ANC Financial Corporation,
    ANCProperties, LLC, NCR Affiliate Services
    Properties, LLC, ANC Financial Properties, LLC, and ANCIT
    Collector Corporation (incorporated by reference to
    Exhibit 4.34 to ANC Rentals Form 10-K for the
    year ended December 31, 2000).                                             
|        | 4.35 |  |  |             |  | Assumption Agreement (Subsidiary Guarantee),
    dated as of December 29, 2000, and related Guarantee by ANC
    Financial Corporation, ANCTMProperties, LLC, NCR
    Affiliate Services Properties, LLC, ANC Financial Properties,
    LLC, and ANCIT Collector Corporation (incorporated by reference
    to Exhibit 4.35 to ANC Rentals Form 10-K for the
    year ended December 31, 2000).
|        | 4.36 |  |  |             |  | Assumption Agreement (Debt Registrations Rights
    Agreement), dated as of December 29, 2000 by ANC Financial
    Corporation, ANCProperties, LLC, NCR Affiliate
    Services Properties, LLC, ANC Financial Properties, LLC, and
    ANCIT Collector Corporation (incorporated by reference to
    Exhibit 4.36 to ANC Rentals Form 10-K for the
    year ended December 31, 2000).         
|        | 4.37 |  |  |             |  | Supplemental Indenture, dated as of
    December 29, 2000 among ANC Rental Corporation, the
    guarantors named therein and The Bank of New York (incorporated
    by reference to Exhibit 4.37 to ANC Rentals
    Form 10-K for the year ended December 31, 2000).                                                                                                                           
|        | 4.38 |  |  |             |  | Second Amendment, dated as of March 29,
    2001, to the Amended and Restated Senior Loan Agreement, dated
    as of June 30, 2000, among ANC Rental Corporation, Lehman
    Brothers Inc., and Lehman Commercial Paper Inc. (incorporated by
    reference to Exhibit 4.1 to ANC Rentals
    Form 10-Q for the quarter ended March 31, 2001).                                                 
|        | 4.39 |  |  |             |  | Second Amendment, dated as of March 29,
    2001, to the Amended and Restated Credit Agreement, dated as of
    June 30, 2000, among ANC Rental Corporation, Lehman
    Brothers Inc., Lehman Commercial Paper Inc. and Congress
    Financial Corporation (incorporated by reference to
    Exhibit 4.2 to ANC Rentals Form 10-Q for the
    quarter ended March 31, 2001).                   
|        | 4.40 |  |  |             |  | Second Amendment, dated as of March 29,
    2001, to the Amended and Restated Credit Agreement, dated as of
    June 30, 2000, among ANC Rental Corporation, Lehman
    Brothers Inc., and Lehman Commercial Paper Inc. (incorporated by
    reference to Exhibit 4.3 to ANC Rentals
    Form 10-Q for the quarter ended March 31, 2001).                                                      

105



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##### 



|        |      |  |  |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                        
|------- | ---- |  |  | ----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |  |  |            
|Number  |      |  |  | Description
|        |      |  |  |            
|        | 4.41 |  |  |             |  | Third Amendment, dated as of June 26, 2001,
    to the Amended and Restated Credit Agreement, dated as of
    June 30, 2000, among ANC Rental Corporation, Lehman
    Brothers Inc., Lehman Commercial Paper Inc., Bankers Trust
    Company, and Congress Financial Corporation (Florida)
    (incorporated by reference to Exhibit 4.1 to ANC
    Rentals Form 10-Q for the quarter ended June 30,
    2001).       
|        | 4.42 |  |  |             |  | Third Amendment, dated as of June 26, 2001,
    to the Amended and Restated Credit Agreement, dated as of
    June 30, 2000, among ANC Rental Corporation, Lehman
    Brothers Inc., and Lehman Commercial Paper Inc. (incorporated by
    reference to Exhibit 4.2 to ANC Rentals
    Form 10-Q for the quarter ended June 30, 2001).                                                                                
|        | 4.43 |  |  |             |  | First Amendment, dated as of June 22, 2001,
    to the Debt Registration Rights Agreement, dated as of
    June 30, 2000, among ANC Rental Corporation, the
    subsidiaries of the Company parties thereto, and Lehman
    Commercial Paper Inc. (incorporated by reference to
    Exhibit 4.3 to ANC Rentals Form 10-Q for the
    quarter ended June 30, 2001).                                                    
|        | 4.44 |  |  |             |  | First Amendment, dated as of June 22, 2001,
    to the Equity Registration Rights Agreement, dated as of
    June 30, 2000, among ANC Rental Corporation and Lehman
    Commercial Paper Inc. (incorporated by reference to
    Exhibit 4.4 to ANC Rentals Form 10-Q for the
    quarter ended June 30, 2001).                                                                                                        
|        | 4.45 |  |  |             |  | Collateral Agreement, dated as of August 30,
    2001, among ANC Rental Corporation, certain of its Subsidiaries,
    Wilmington Trust Company, as Trustee, Liberty Mutual Insurance
    Company, as Surety, and Lehman Commercial Paper Inc.
    (incorporated by reference to Exhibit 4.45 to ANC
    Rentals Form 10-K for the year ended
    December 31, 2001).                                                  
|        | 4.46 |  |  |             |  | Trust Agreement, dated as of August 30,
    2001, among ANC Rental Corporation, certain of its Subsidiaries,
    and Wilmington Trust Company, as Trustee. (incorporated by
    reference to Exhibit 4.46 to ANC Rentals
    Form 10-K for the year ended December 31, 2001).                                                                                                                                         
|        | 4.47 |  |  |             |  | Agreement, dated as of August 30, 2001,
    between ANC Rental Corporation and Liberty Mutual Insurance
    Company. (incorporated by reference to Exhibit 4.47 to ANC
    Rentals Form 10-K for the year ended
    December 31, 2001).                                                                                                                                                                               
|        | 4.48 |  |  |             |  | Surety Bond Guarantee and Assumption Agreement,
    dated as of August 30, 2001, by certain subsidiaries of ANC
    Rental Corporation in favor of Liberty Mutual Insurance Company.
    (incorporated by reference to Exhibit 4.48 to ANC
    Rentals Form 10-K for the year ended
    December 31, 2001).                                                                                                           
|        | 4.49 |  |  |             |  | First Amendment, dated as of August 30,
    2001, to Reimbursement Agreement, dated as of June 30,
    2000, between ANC Rental Corporation and AutoNation, Inc.
    (incorporated by reference to Exhibit 4.49 to ANC
    Rentals Form 10-K for the year ended
    December 31, 2001).                                                                                                                               
|        | 4.50 |  |  |             |  | Fifteenth Amendment, dated as of August 30,
    2001, to the Amended and Restated Senior Loan Agreement, dated
    as of June 30, 2000, among ANC Rental Corporation, Lehman
    Brothers Inc., and Lehman Commercial Paper Inc. (incorporated by
    reference to Exhibit 4.50 to ANC Rentals
    Form 10-K for the year ended December 31, 2001).                                                                   
|        | 4.51 |  |  |             |  | Fourth Amendment, dated as of September 28,
    2001, to the Amended and Restated Credit Agreement, dated as of
    June 30, 2000, among ANC Rental Corporation, Lehman
    Brothers Inc., Lehman Commercial Paper Inc., Banker Trust
    Company and Congress Financial Corporation (Florida).
    (incorporated by reference to Exhibit 4.51 to ANC
    Rentals Form 10-K for the year ended
    December 31, 2001).
|        | 4.52 |  |  |             |  | Fourth Amendment, dated as of September 28,
    2001, to the Amended and Restated Credit Agreement, dated as of
    June 30, 2000, among ANC Rental Corporation, Lehman
    Brothers Inc., and Lehman Commercial Paper Inc. (incorporated by
    reference to Exhibit 4.52 to ANC Rentals
    Form 10-K for the year ended December 31, 2001).                                                                        
|        | 4.53 |  |  |             |  | Sixteenth Amendment, dated as of
    September 28, 2001, to the Amended and Restated Senior Loan
    Agreement, dated as of June 30, 2000, among ANC Rental
    Corporation, Lehman Brothers Inc. and Lehman Commercial Paper
    Inc. (incorporated by reference to Exhibit 4.53 to ANC
    Rentals Form 10-K for the year ended
    December 31, 2001).                                                             

106



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##### 



|        |      |  |  |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|------- | ---- |  |  | ----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |  |  |            
|Number  |      |  |  | Description
|        |      |  |  |            
|        | 4.54 |  |  |             |  | Warrant Agreement, dated as of September 28,
    2001, between ANC Rental Corporation and The Bank of New York
    (incorporated by reference to Exhibit 4.54 to ANC
    Rentals Form 10-K for the year ended
    December 31, 2001).                                                                                                                                                                                                                                                                                                                                                                     
|        | 4.55 |  |  |             |  | Registration Rights Agreement, dated as of
    September 28, 2001, among ANC Rental Corporation and Lehman
    Commercial Paper Inc. (incorporated by reference to
    Exhibit 4.55 to ANC Rentals Form 10-K for the
    year ended December 31, 2001).                                                                                                                                                                                                                                                                                                                                                   
|        | 4.56 |  |  |             |  | Warrant Agreement, dated as of September 28,
    2001, between ANC Rental Corporation and The Bank of New York,
    (incorporated by reference to Exhibit 4.56 to ANC
    Rentals Form 10-K for the year ended
    December 31, 2001).                                                                                                                                                                                                                                                                                                                                                                    
|        | 4.57 |  |  |             |  | Indenture, dated as of September 28, 2001,
    among ANC Rental Corporation, certain of its subsidiaries, and
    The Bank of New York, as Trustee. (incorporated by reference to
    Exhibit 4.57 to ANC Rentals Form 10-K for the
    year ended December 31, 2001).                                                                                                                                                                                                                                                                                                                                    
|        | 4.58 |  |  |             |  | First Amendment, dated as of November 9,
    2001, to the Agreement, dated as of August 30, 2001,
    between ANC Rental Corporation and Liberty Mutual Insurance
    Company. (incorporated by reference to Exhibit 4.58 to ANC
    Rentals Form 10-K for the year ended
    December 31, 2001).                                                                                                                                                                                                                                                                                                         
|        | 4.59 |  |  |             |  | Order dated March 13, 2002, Approving
    Settlement of Disputes Between the Debtors and Liberty Mutual
    Insurance Company and Providing, Inter Alia, for the Debtors to
    Obtain Post-Petition Surety Bonding and Related Relief.
    (incorporated by reference to Exhibit 4.59 to ANC
    Rentals Form 10-K for the year ended
    December 31, 2001).                                                                                                                                                                                                                                            
|        | 4.60 |  |  |             |  | Order dated May 10, 2002, authorizing
    certain of the Debtors to lease certain vehicles and authorizing
    the Debtors to assume and provide certain protections in
    connection with Existing Master Lease Agreements. (incorporated
    by reference to Exhibit 4.60 to ANC Rentals
    Form 10-K for the year ended December 31, 2001).                                                                                                                                                                                                                                                          
|        | 4.61 |  |  |             |  | Amended and Restated Base Indenture, dated
    August 30, 2002, between ARG Funding Corp. II, as
    Issuer and The Bank of New York, as Trustee (incorporated by
    reference to Exhibit 4.1 to ANC Rentals
    Form 10-Q for the quarter ended September 30, 2002).                                                                                                                                                                                                                                                                                                                                    
|        | 4.62 |  |  |             |  | Master Motor Vehicle Lease and Servicing
    Agreement, dated as of August 30, 2002, among Alamo
    Financing L.P., as Group IV lessor, Alamo Rent-A-Car, LLC,
    as Group IV lessee, and ANC Rental Corporation as guarantor
    and servicer. Portions of this document have been omitted
    pursuant to an application for confidential treatment pursuant
    to Rule 24b-2 under the Securities Exchange Act of 1934, as
    amended (incorporated by reference to Exhibit 4.2 to ANC
    Rentals Form 10-Q for the quarter ended
    September 30, 2002).                                        
|        | 4.63 |  |  |             |  | Master Motor Vehicle Lease and Servicing
    Agreement, dated as of August 30, 2002, among CarTemps
    Financing L.P., as Group IV lessor, Spirit Rent-A-Car,
    Inc., as Group IV lessee, and ANC Rental Corporation as
    guarantor and servicer. Portions of this document have been
    omitted pursuant to an application for confidential treatment
    pursuant to Rule 24b-2 under the Securities Exchange Act of
    1934, as amended (incorporated by reference to Exhibit 4.3
    to ANC Rentals Form 10-Q for the quarter ended
    September 30, 2002).                                   
|        | 4.64 |  |  |             |  | Master Motor Vehicle Lease and Servicing
    Agreement, dated as of August 30, 2002, among National Car
    Rental Financing Limited Partnership, as Group IV lessor,
    National car Rental System, Inc., as Group IV lessee, and
    ANC Rental Corporation as guarantor and servicer. Portions of
    this document have been omitted pursuant to an application for
    confidential treatment pursuant to Rule 24b-2 under the
    Securities Exchange Act of 1934, as amended (incorporated by
    reference to Exhibit 4.4 to ANC Rentals
    Form 10-Q for the quarter ended September 30, 2002).
|        | 4.65 |  |  |             |  | Amended and Restated Series 2002-2
    Supplement, dated as of August 30, 2002, between ARG
    Funding Corp. II, as Issuer, and The Bank of New York, as
    Trustee, to the Amended and Restated Base Indenture, dated as of
    August 30, 2002. Portions of this document have been
    omitted pursuant to an application for confidential treatment
    pursuant to Rule 24b-2 under the Securities Exchange Act of
    1934, as amended (incorporated by reference to Exhibit 4.5
    to ANC Rentals Form 10-Q for the quarter ended
    September 30, 2002).                                      

107



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##### 



|        |       |  |  |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------- | ----- |  |  | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |  |  |            
|Number  |       |  |  | Description
|        |       |  |  |            
|        | 4.66  |  |  |             |  | Fifty Amended and Restated Master Collateral
    Agency Agreement dated as of June 11, 2002 among ANC Rental
    Corporation as Master Servicer, National Car Rental Financing
    Limited Partnership, Alamo Financing L.P., CarTemps Financing
    L.P., Alamo Rent-A-Car LLC, National Car Rental System, Inc.
    Spirit Rent-A-Car, Inc. d/b/a/ Alamo, as grantors and Citibank
    N.A. as Master Collateral Agent (incorporated by reference to
    Exhibit 4.6 to AN Rentals Form 10-Q for the
    quarter ended September 30, 2002).
|        | 4.67  |  |  |             |  | Loan and Security Agreement by and among ANC
    Rental Corporation, chapter 11 Debtor in Possession, the
    Guarantors Named therein and Daimler Chrysler Corporation dated
    March 17, 2003.                                                                                                                                                                                                                                                                                                                                             
|        | 4.68  |  |  |             |  | Order dated March 19, 2003 approving the
    settlement between Debtors and Lehman Commercial Paper, Inc. and
    Lehman Brothers.                                                                                                                                                                                                                                                                                                                                                                                                            
|        | 4.69  |  |  |             |  | Order dated March 17, 2003 authorizing the
    Debtors to obtain further post petition surety bonding from
    Liberty Mutual Insurance Company, providing for additional
    collateral and granting relief.                                                                                                                                                                                                                                                                                                                                 
|        | 4.70  |  |  |             |  | Order dated March 19, 2003 authorizing
    continued use of cash collateral through July 19, 2003 and
    granting replacement liens and adequate protection.                                                                                                                                                                                                                                                                                                                                                                                 
|        | 4.71  |  |  |             |  | Third amended and restated financing agreement,
    dated as of April 15, 2003, between ANC Rental Corporation
    and MBIA Insurance Corporation, to the amended and restated
    financing agreement dated November 8, 2002.                                                                                                                                                                                                                                                                                                                
|        | 10.1  |  |  |             |  | Letter Agreement between ANC Rental Corporation
    and General Motors dated December 9, 2002. Portions of this
    document have been omitted pursuant to an application for
    confidential treatment pursuant to Rule 24b-2 under the
    Securities Exchange Act of 1934, as amended.                                                                                                                                                                                                                                                    
|        | 10.2  |  |  |             |  | Separation and Distribution Agreement, dated as
    of June 30, 2000, between ANC Rental Corporation and
    AutoNation, Inc. (incorporated by reference to
    Exhibit 10.12 to ANC Rentals Form 8-K as filed
    on July 14, 2000).                                                                                                                                                                                                                                                                                                        
|        | 10.3  |  |  |             |  | Transitional Services Agreement, dated as of
    June 30, 2000, between ANC Rental Corporation and
    AutoNation, Inc. (incorporated by reference to
    Exhibit 10.13 to ANC Rentals Form 8-K as filed
    on July 14, 2000).                                                                                                                                                                                                                                                                                                              
|        | 10.4  |  |  |             |  | Tax Sharing Agreement, dated as of June 30,
    2000, between ANC Rental Corporation and AutoNation, Inc.
    (incorporated by reference to Exhibit 10.14 to ANC
    Rentals Form 8-K as filed on July 14, 2000).                                                                                                                                                                                                                                                                                                                            
|        | 10.5  |  |  |             |  | Reimbursement Agreement, dated as of
    June 30, 2000, between ANC Rental Corporation and
    AutoNation, Inc. (incorporated by reference to
    Exhibit 10.18 to ANC Rentals Form 8-K as filed
    on July 14, 2000).                                                                                                                                                                                                                                                                                                                      
|        | 10.6  |  |  |             |  | Lease Agreement by and between ANC Rental and
    AutoNation (incorporated by reference to Exhibit 10.6 to
    ANC Rentals Form 10-K for the year ended
    December 31, 2000).                                                                                                                                                                                                                                                                                                                                                              
|        | 10.7  |  |  |             |  | Lease Agreement by and between ANC Rental and
    AutoNation (incorporated by reference to Exhibit 10.7 to
    ANC Rentals Form 10-K for the year ended
    December 31, 2000).                                                                                                                                                                                                                                                                                                                                                              
|        | 10.8  |  |  |             |  | ANC Rental Corporation 2000 Stock Option Plan
    (incorporated by reference to Exhibit 10.15 to ANC
    Rentals Form 8-K as filed on July 14, 2000).                                                                                                                                                                                                                                                                                                                                                                                        
|        | 10.9  |  |  |             |  | ANC Rental Corporation Employee Stock Purchase
    Plan (incorporated by reference to Exhibit 10.16 to ANC
    Rentals Form 8-K as filed on July 14, 2000).                                                                                                                                                                                                                                                                                                                                                                                  
|        | 10.10 |  |  |             |  | Forms of Nonqualified Stock Option Agreements
    Under ANC Rental Corporation Stock Option Plan (incorporated by
    reference to Exhibit 10.17 to ANC Rentals
    Form 8-K as filed on July 14, 2000).                                                                                                                                                                                                                                                                                                                                     
|        | 10.11 |  |  |             |  | Employment Agreement between ANC Rental
    Corporation and Lawrence J. Ramaekers. (incorporated by
    reference to Exhibit 10.11 to ANC Rentals Form 10-K
    for the year ended December 31, 2001).                                                                                                                                                                                                                                                                                                                                       
|        | 10.12 |  |  |             |  | ANC Rental Corporation Key Employee Severance
    Protection Plan (incorporated by reference to Exhibit 10.1
    to ANC Rentals Form 10-Q for the quarter ended
    March 31, 2001).                                                                                                                                                                                                                                                                                                                                                         
|        | 10.13 |  |  |             |  | ANC Rental Corporation Key Employee Retention
    Plan and Agreement (incorporated by reference to
    Exhibit 10.13 to ANC Rentals Form 10-K for the
    year ended December 31, 2001).                                                                                                                                                                                                                                                                                                                                                     

108



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##### 



|        |      |  |  |             |  |                                                                                                                                                                                      
|------- | ---- |  |  | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |  |  |            
|Number  |      |  |  | Description
|        |      |  |  |            
|        | 21.1 |  |  |             |  | List of subsidiaries of ANC Rental Corporation.                                                                                                                                      
|        | 23.1 |  |  |             |  | Consent of Independent Certified Public
    Accountants.                                                                                                                             
|        | 99.1 |  |  |             |  | Certification of the Chief Executive Officer of
    the Company pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002.    
|        | 99.2 |  |  |             |  | Certification of the Principal Financial Officer
    of the Company pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002.

109