##### Table of Contents









UNITED STATES

SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549




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FORM 10-Q

|           |  |                                                                                                 
|---------- |  | ------------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                                 
|[X]        |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR
    15(d) OF
    THE SECURITIES EXCHANGE ACT OF 1934 
|           |  | For the quarterly period ended
    September 30, 2001                                           
|           |  | OR                                                                                              
|[  ]       |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR
    15(d) OF
    THE SECURITIES EXCHANGE ACT OF 1934



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Commission file number 0-30776



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ANC RENTAL CORPORATION

(Exact name of registrant as specified in its
charter)


|                                                                           |  |                                                   
|-------------------------------------------------------------------------- |  | --------------------------------------------------
|Delaware(State or other Jurisdiction of
    Incorporation or Organization) |  | 65-0957875(I.R.S. Employer
    Identification No.)

|                                                                                                   |  |                
|-------------------------------------------------------------------------------------------------- |  | ---------------
|200 South Andrews Avenue,
    Fort Lauderdale, Florida(Address of principal executive
    offices) |  | 33301(Zip Code)

(954) 320-4000

(Registrants telephone number, including
area code)


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)

As of May 15, 2002, the registrant had
outstanding 45,296,139 shares of Common Stock, par value $0.01
per share.



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TABLE OF CONTENTS



|                                |                                                                                               |                                                                    |  |  |  |  |  | 
|------------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------------------------------ |  |  |  |  |  | 
|PART I -- FINANCIAL INFORMATION
|                                | Item 1. Financial Statements                                                                 
|                                |                                                                                               | CONDENSED CONSOLIDATED BALANCE SHEETS                             
|                                |                                                                                               | UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS         
|                                |                                                                                               | UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
|                                |                                                                                               | UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS         
|                                |                                                                                               | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS              
|                                | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                | Item 3. Quantitative and Qualitative Disclosures About Market Risks                          
|PART II -- OTHER INFORMATION   
|                                | Item 1. Legal Proceedings                                                                    
|                                | Item 2. Changes in Securities and Use of Proceeds                                            
|                                | Item 3. Defaults Upon Senior Securities                                                      
|                                | Item 4. Submission of Matters to a Vote of Security Holders                                  
|                                | Item 5. Other Information                                                                    
|                                | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                     
|RISK FACTOR                    



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##### Table of Contents



ANC RENTAL CORPORATION

INDEX

|                                  |  |                                                                                                                                   |  |      |    | 
|--------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                  |  |                                                                                                                                   |  | Page
|                                  |  |                                                                                                                                   |  |     
|PART I.
    FINANCIAL INFORMATION
|Item 1.                           |  | Financial Statements:                                                                                                             |  |      |    | 
|                                  |  | Condensed Consolidated Balance Sheets as of
    September 30, 2001 (Unaudited) and December 31, 2000                              |  |      | 1  | 
|                                  |  | Unaudited Condensed Consolidated Statements of
    Operations for the Three and Nine Months Ended
    September 30, 2001 and 2000 |  |      | 2  | 
|                                  |  | Unaudited Condensed Consolidated Statement of
    Shareholders Equity for the Nine Months Ended
    September 30, 2001           |  |      | 3  | 
|                                  |  | Unaudited Condensed Consolidated Statements of
    Cash Flows for the Nine Months Ended September 30, 2001 and
    2000           |  |      | 4  | 
|                                  |  | Notes to Condensed Consolidated Financial
    Statements                                                                          |  |      | 5  | 
|Item 2.                           |  | Managements Discussion and Analysis of
    Financial Condition and Results of Operations                                         |  |      | 16 | 
|Item 3.                           |  | Quantitative and Qualitative Disclosures About
    Market Risk                                                                    |  |      | 30 | 
|PART II.
    OTHER INFORMATION   
|Item 1.                           |  | Legal Proceedings                                                                                                                 |  |      | 31 | 
|Item 2.                           |  | Changes in Securities and Use of Proceeds                                                                                         |  |      | 31 | 
|Item 3.                           |  | Defaults Upon Senior Securities                                                                                                   |  |      | 31 | 
|Item 4.                           |  | Submission of Matters to a Vote of Security
    Holders                                                                           |  |      | 31 | 
|Item 5.                           |  | Other Information                                                                                                                 |  |      | 31 | 
|Item 6.                           |  | Exhibits and Reports on Form 8-K                                                                                                  |  |      | 31 | 

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##### Table of Contents






PART I  FINANCIAL
INFORMATION




Item 1.     Financial
Statements

ANC RENTAL CORPORATION






CONDENSED CONSOLIDATED BALANCE
SHEETS


(In millions except share and per share
amounts)


|                                         |                                                                                                                                                                                               |                                            |         |              |         |   |         |       |         | 
|---------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------- | ------------ | ------- | - | ------- | ----- | ------- | 
|                                         |                                                                                                                                                                                               | September 30,                              |         | December 31,
|                                         |                                                                                                                                                                                               | 2001                                       |         | 2000        
|                                         |                                                                                                                                                                                               |                                            |         |             
|                                         |                                                                                                                                                                                               | (Unaudited)                                |         |             
|ASSETS                                  
|Cash and cash equivalents                |                                                                                                                                                                                               | $                                          | 31.8    |              |         | $ | 6.3     |      
|Restricted cash and cash equivalents     |                                                                                                                                                                                               |                                            | 457.3   |              |         |   | 337.0   |      
|Receivables, net                         |                                                                                                                                                                                               |                                            | 566.3   |              |         |   | 681.4   |      
|Prepaid expenses                         |                                                                                                                                                                                               |                                            | 57.4    |              |         |   | 68.9    |      
|Vehicles, net                            |                                                                                                                                                                                               |                                            | 4,774.1 |              |         |   | 4,451.4 |      
|Property and equipment, net              |                                                                                                                                                                                               |                                            | 463.1   |              |         |   | 576.0   |      
|Intangible assets, net                   |                                                                                                                                                                                               |                                            | 128.0   |              |         |   | 347.9   |      
|Other assets                             |                                                                                                                                                                                               |                                            | 84.6    |              |         |   | 68.7    |      
|                                         |                                                                                                                                                                                               |                                            |         |              |         |   |         |      
|                                         |                                                                                                                                                                                               | Total assets                               |         | $            | 6,562.6 |   |         | $     | 6,537.6 | 
|                                         |                                                                                                                                                                                               |                                            |         |              |         |   |         |      
|LIABILITIES AND SHAREHOLDERS
    EQUITY
|Accounts payable                         |                                                                                                                                                                                               | $                                          | 167.9   |              |         | $ | 242.4   |      
|Accrued liabilities                      |                                                                                                                                                                                               |                                            | 255.7   |              |         |   | 241.0   |      
|Insurance reserves                       |                                                                                                                                                                                               |                                            | 293.5   |              |         |   | 290.5   |      
|Vehicle debt                             |                                                                                                                                                                                               |                                            | 4,529.2 |              |         |   | 4,228.9 |      
|Other debt                               |                                                                                                                                                                                               |                                            | 280.9   |              |         |   | 276.7   |      
|Deferred income taxes                    |                                                                                                                                                                                               |                                            | 253.7   |              |         |   | 143.6   |      
|Other liabilities                        |                                                                                                                                                                                               |                                            | 397.1   |              |         |   | 221.9   |      
|                                         |                                                                                                                                                                                               |                                            |         |              |         |   |         |      
|                                         |                                                                                                                                                                                               | Total liabilities                          |         |              | 6,178.0 |   |         |       | 5,645.0 | 
|                                         |                                                                                                                                                                                               |                                            |         |              |         |   |         |      
|Commitments and contingencies            |                                                                                                                                                                                               |                                            |         |              |         |   |         |      
|Shareholders equity:                    |                                                                                                                                                                                               |                                            |         |              |         |   |         |      
|                                         | Preferred stock, par value $0.001 per share;
    10,000,000 shares authorized; none issued                                                                                                    |                                            |         |             |         |   |         |      |        
|                                         | Common stock, par value $.01 per share;
    250,000,000 shares authorized; 45,223,611 and 45,158,707 issued
    and outstanding at September 30, 2001 and December 31,
    2000, respectively |                                            |         | 0.5          |         |   |         | 0.5   |        
|                                         | Additional paid-in capital                                                                                                                                                                    |                                            |         | 907.5        |         |   |         | 895.6 |        
|                                         | Retained earnings (deficit)                                                                                                                                                                   |                                            |         | (431.1       | )       |   |         | 7.0   |        
|                                         | Accumulated other comprehensive loss                                                                                                                                                          |                                            |         | (92.3        | )       |   |         | (10.5 | )      
|                                         |                                                                                                                                                                                               |                                            |         |              |         |   |         |      
|                                         |                                                                                                                                                                                               |                                            | 384.6   |              |         |   | 892.6   |      
|                                         |                                                                                                                                                                                               |                                            |         |              |         |   |         |      
|                                         |                                                                                                                                                                                               | Total liabilities and shareholders equity |         | $            | 6,562.6 |   |         | $     | 6,537.6 | 
|                                         |                                                                                                                                                                                               |                                            |         |              |         |   |         |      

The accompanying notes are an integral part of
these statements.

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##### Table of Contents



ANC RENTAL CORPORATION






UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS


(In millions except per share
amounts)


|                                                                                                            |         |                    |        |                   |  |      |         |      |  |   |         |      |  |   |         |      | 
|----------------------------------------------------------------------------------------------------------- | ------- | ------------------ | ------ | ----------------- |  | ---- | ------- | ---- |  | - | ------- | ---- |  | - | ------- | ---- | 
|                                                                                                            |         |                    |        |                  
|                                                                                                            |         | Three Months Ended |        | Nine Months Ended
|                                                                                                            |         | September 30,      |        | September 30,    
|                                                                                                            |         |                    |        |                  
|                                                                                                            |         | 2001               |        | 2000              |  | 2001 |         | 2000
|                                                                                                            |         |                    |        |                   |  |      |         |     
|Revenue                                                                                                     |         | $                  | 908.3  |                   |  | $    | 1,003.8 |      |  | $ | 2,527.9 |      |  | $ | 2,721.8 |     
|Direct operating costs                                                                                      |         |                    | 378.5  |                   |  |      | 360.4   |      |  |   | 1,069.7 |      |  |   | 1,061.6 |     
|Vehicle depreciation, net                                                                                   |         |                    | 295.8  |                   |  |      | 279.5   |      |  |   | 808.5   |      |  |   | 748.5   |     
|Selling, general, and administrative                                                                        |         |                    | 179.4  |                   |  |      | 165.9   |      |  |   | 501.9   |      |  |   | 548.4   |     
|Impairment of intangible assets                                                                             |         |                    | 210.8  |                   |  |      |        |      |  |   | 210.8   |      |  |   |        |     
|Amortization of intangible assets                                                                           |         |                    | 2.5    |                   |  |      | 2.5     |      |  |   | 7.5     |      |  |   | 7.5     |     
|Interest income                                                                                             |         |                    | (1.6   | )                 |  |      | (2.6    | )    |  |   | (4.8    | )    |  |   | (3.2    | )   
|Interest expense                                                                                            |         |                    | 87.9   |                   |  |      | 114.3   |      |  |   | 269.7   |      |  |   | 287.1   |     
|Fair value adjustment on interest rate hedges                                                               |         |                    |       |                   |  |      |        |      |  |   | 2.3     |      |  |   |        |     
|Other expense, net                                                                                          |         |                    | 5.0    |                   |  |      | 0.1     |      |  |   | 8.5     |      |  |   | 3.0     |     
|                                                                                                            |         |                    |        |                   |  |      |         |      |  |   |         |      |  |   |         |     
|Income before income taxes                                                                                  |         |                    | (250.0 | )                 |  |      | 83.7    |      |  |   | (346.2  | )    |  |   | 68.9    |     
|Provision for income taxes                                                                                  |         |                    | 131.5  |                   |  |      | 32.7    |      |  |   | 99.0    |      |  |   | 26.9    |     
|                                                                                                            |         |                    |        |                   |  |      |         |      |  |   |         |      |  |   |         |     
|Net income (loss) before cumulative effect
    of change in accounting principle                            |         |                    | (381.5 | )                 |  |      | 51.0    |      |  |   | (445.2  | )    |  |   | 42.0    |     
|Cumulative effect of change in accounting
    principle, net of provision for income taxes of $4.5 in 2001. |         |                    |       |                   |  |      |        |      |  |   | 7.1     |      |  |   |        |     
|                                                                                                            |         |                    |        |                   |  |      |         |      |  |   |         |      |  |   |         |     
|Net income (loss)                                                                                           |         | $                  | (381.5 | )                 |  | $    | 51.0    |      |  | $ | (438.1  | )    |  | $ | 42.0    |     
|                                                                                                            |         |                    |        |                   |  |      |         |      |  |   |         |      |  |   |         |     
|Basic earnings (loss) per share before
    cumulative effect of change in accounting principle              |         | $                  | (8.44  | )                 |  | $    | 1.13    |      |  | $ | (9.85   | )    |  | $ | 0.93    |     
|Basic earnings (loss) per share                                                                             |         | $                  | (8.44  | )                 |  | $    | 1.13    |      |  | $ | (9.69   | )    |  | $ | 0.93    |     
|Diluted earnings (loss) per share before
    cumulative effect of change in accounting principle            |         | $                  | (8.44  | )                 |  | $    | 1.10    |      |  | $ | (9.85   | )    |  | $ | 0.92    |     
|Diluted earnings (loss) per share                                                                           |         | $                  | (8.44  | )                 |  | $    | 1.10    |      |  | $ | (9.69   | )    |  | $ | 0.92    |     
|Shares used in computing per share amounts:                                                                 |         |                    |        |                   |  |      |         |      |  |   |         |      |  |   |         |     
|                                                                                                            | Basic   |                    |        | 45.2              |  |      |         | 45.1 |  |   |         | 45.2 |  |   |         | 45.1 | 
|                                                                                                            | Diluted |                    |        | 45.2              |  |      |         | 46.3 |  |   |         | 45.2 |  |   |         | 45.5 | 

The accompanying notes are an integral part of
these statements.

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##### Table of Contents



ANC RENTAL CORPORATION






UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF
SHAREHOLDERS EQUITY


(In millions)


|                              |                             |                                                                                                  |      |            |   |           |     |               |   |               |       |        |      |   |        |   |   |   |       |   |       |   |        |   |       |  
|----------------------------- | --------------------------- | ------------------------------------------------------------------------------------------------ | ---- | ---------- | - | --------- | --- | ------------- | - | ------------- | ----- | ------ | ---- | - | ------ | - | - | - | ----- | - | ----- | - | ------ | - | ----- | -
|                              |                             |                                                                                                  |      |            |   |           |     | Accumulated   |   |              
|                              |                             | Common Stock                                                                                     |      | Additional |   | Retained  |     | Other         |   |              
|                              |                             |                                                                                                  |      | Paid-In    |   | Earnings/ |     | Comprehensive |   | Shareholders
|                              |                             | Shares                                                                                           |      | Amount     |   | Capital   |     | (Deficit)     |   | Loss          |       | Equity
|                              |                             |                                                                                                  |      |            |   |           |     |               |   |               |       |       
|BALANCE AT DECEMBER 31, 2000  |                             |                                                                                                  | 45.2 |            |   | $         | 0.5 |               |   | $             | 895.6 |        |      | $ | 7.0    |   |   | $ | (10.5 | ) |       | $ | 892.6  |  
|Net loss                      |                             |                                                                                                  |     |            |   |           |    |               |   |               |      |        |      |   | (438.1 | ) |   |   |      |   |       |   | (438.1 | )
|                              | Other comprehensive income: |                                                                                                  |      |            |   |           |     |               |   |               |       |        |      |   |        |   |   |   |       |   |       |   |        |   |      
|                              |                             | Foreign currency translation adjustments                                                         |      |            |  |           |     |               |  |               |       |        |     |   |        |   |  |   |       |   | (2.6  | ) |        |   | (2.6  | )
|                              |                             | Unrealized loss on interest rate hedges                                                          |      |            |  |           |     |               |  |               |       |        |     |   |        |   |  |   |       |   | (64.6 | ) |        |   | (64.6 | )
|                              |                             | Cumulative effect of change in accounting
    principle, net of benefit for income taxes of $9.3 |      |            |  |           |     |               |  |               |       |        |     |   |        |   |  |   |       |   | (14.6 | ) |        |   | (14.6 | )
|                              |                             | Issuance of common stock purchase warrants                                                       |      |            |  |           |     |               |  |               |       |        | 11.7 |   |        |   |  |   |       |   |      |   |        |   | 11.7  |  
|                              |                             | Issuance of shares for employee benefit plan                                                     |      |            |  |           |     |               |  |               |       |        | 0.2  |   |        |   |  |   |       |   |      |   |        |   | 0.2   |  
|                              |                             |                                                                                                  |      |            |   |           |     |               |   |               |       |        |      |   |        |   |   |   |       |   |       |   |        |  
|BALANCE AT SEPTEMBER 30, 2001 |                             |                                                                                                  | 45.2 |            |   | $         | 0.5 |               |   | $             | 907.5 |        |      | $ | (431.1 | ) |   | $ | (92.3 | ) |       | $ | 384.6  |  
|                              |                             |                                                                                                  |      |            |   |           |     |               |   |               |       |        |      |   |        |   |   |   |       |   |       |   |        |  

The accompanying notes are an integral part of
this statement.

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##### Table of Contents



ANC RENTAL CORPORATION






UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS


(In millions)


|                                                                |                                                                                                                      |                                                                     |        |           |          |   |        |           |          |  
|--------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------- | ------ | --------- | -------- | - | ------ | --------- | -------- | -
|                                                                |                                                                                                                      |                                                                    
|                                                                |                                                                                                                      | Nine Months Ended                                                  
|                                                                |                                                                                                                      | September 30,                                                      
|                                                                |                                                                                                                      |                                                                    
|                                                                |                                                                                                                      | 2001                                                                |        | 2000     
|                                                                |                                                                                                                      |                                                                     |        |          
|CASH AND CASH EQUIVALENTS USED IN OPERATING
    ACTIVITIES:     |                                                                                                                      |                                                                     |        |           |          |   |        |          
|                                                                | Net income (loss)                                                                                                    |                                                                     | $      | (438.1    | )        |   | $      | 42.0      |         
|                                                                | Adjustments to reconcile net income to net cash
    and cash equivalents provided by (used in) operating activities: |                                                                     |        |           |          |   |        |           |         
|                                                                |                                                                                                                      | Impairment of intangible assets                                     |        |           | 210.8    |   |        |           |         |  
|                                                                |                                                                                                                      | Cumulative effect of change in accounting
    principle, net of tax |        |           | (7.1     | ) |        |           |         |  
|                                                                |                                                                                                                      | Fair value adjustment on interest rate hedges                       |        |           | 2.3      |   |        |           |         |  
|                                                                |                                                                                                                      | Loss (gain) on sale of property                                     |        |           | 4.2      |   |        |           | (1.1     | )
|                                                                |                                                                                                                      | Depreciation and amortization of property and
    equipment         |        |           | 59.1     |   |        |           | 57.6     |  
|                                                                |                                                                                                                      | Amortization of intangible assets and debt issue
    costs          |        |           | 31.9     |   |        |           | 23.2     |  
|                                                                |                                                                                                                      | Deferred income tax provision                                       |        |           | 99.0     |   |        |           | 26.9     |  
|                                                                |                                                                                                                      | Depreciation of vehicles                                            |        |           | 808.5    |   |        |           | 748.5    |  
|                                                                |                                                                                                                      | Purchases of vehicles                                               |        |           | (5,243.4 | ) |        |           | (5,963.0 | )
|                                                                |                                                                                                                      | Sales of vehicles                                                   |        |           | 4,065.5  |   |        |           | 4,428.3  |  
|                                                                | Changes in assets and liabilities, net:                                                                              |                                                                     |        |           |          |   |        |           |         
|                                                                |                                                                                                                      | Receivables                                                         |        |           | 115.0    |   |        |           | 139.1    |  
|                                                                |                                                                                                                      | Prepaid expenses and other assets                                   |        |           | 8.3      |   |        |           | 5.9      |  
|                                                                |                                                                                                                      | Accounts payable and accrued liabilities                            |        |           | (62.5    | ) |        |           | (33.1    | )
|                                                                |                                                                                                                      | Other liabilities                                                   |        |           | 1.0      |   |        |           | 36.8     |  
|                                                                |                                                                                                                      |                                                                     |        |           |          |   |        |          
|                                                                |                                                                                                                      |                                                                     | (345.5 | )         |          |   | (488.9 | )        
|                                                                |                                                                                                                      |                                                                     |        |           |          |   |        |          
|CASH AND CASH EQUIVALENTS PROVIDED BY INVESTING
    ACTIVITIES: |                                                                                                                      |                                                                     |        |           |          |   |        |          
|                                                                | Purchases of property and equipment                                                                                  |                                                                     |        | (30.8     | )        |   |        | (68.6     | )       
|                                                                | Proceeds from sale of property and equipment                                                                         |                                                                     |        | 116.3     |          |   |        | 33.5      |         
|                                                                | Proceeds from sale of investments                                                                                    |                                                                     |        |          |          |   |        | 31.3      |         
|                                                                | Other                                                                                                                |                                                                     |        |          |          |   |        | (1.4      | )       
|                                                                |                                                                                                                      |                                                                     |        |           |          |   |        |          
|                                                                |                                                                                                                      |                                                                     | 85.5   |           |          |   | (5.2   | )        
|                                                                |                                                                                                                      |                                                                     |        |           |          |   |        |          
|CASH AND CASH EQUIVALENTS PROVIDED BY FINANCING
    ACTIVITIES: |                                                                                                                      |                                                                     |        |           |          |   |        |          
|                                                                | Proceeds from vehicle financing                                                                                      |                                                                     |        | 31,073.7  |          |   |        | 39,739.1  |         
|                                                                | Payments on vehicle financing                                                                                        |                                                                     |        | (30,860.0 | )        |   |        | (39,695.3 | )       
|                                                                | Proceeds from issuance of other debt                                                                                 |                                                                     |        | 285.2     |          |   |        | 291.8     |         
|                                                                | Payments on other debt                                                                                               |                                                                     |        | (269.5    | )        |   |        | (134.6    | )       
|                                                                | Cash transfers from Parent                                                                                           |                                                                     |        |          |          |   |        | 204.4     |         
|                                                                | Subsidiary limited partner contributions                                                                             |                                                                     |        | 87.8      |          |   |        | 131.4     |         
|                                                                | Debt issue costs and purchases of interest rate
    hedges                                                           |                                                                     |        | (30.7     | )        |   |        | (29.0     | )       
|                                                                | Other                                                                                                                |                                                                     |        | (1.0      | )        |   |        | (1.2      | )       
|                                                                |                                                                                                                      |                                                                     |        |           |          |   |        |          
|                                                                |                                                                                                                      |                                                                     | 285.5  |           |          |   | 506.6  |          
|                                                                |                                                                                                                      |                                                                     |        |           |          |   |        |          
|Increase in cash and cash equivalents                           |                                                                                                                      |                                                                     | 25.5   |           |          |   | 12.5   |          
|Cash and cash equivalents at beginning of period                |                                                                                                                      |                                                                     | 6.3    |           |          |   |       |          
|                                                                |                                                                                                                      |                                                                     |        |           |          |   |        |          
|Cash and cash equivalents at end of period                      |                                                                                                                      | $                                                                   | 31.8   |           |          | $ | 12.5   |          
|                                                                |                                                                                                                      |                                                                     |        |           |          |   |        |          

The accompanying notes are an integral part of
these statements.

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##### Table of Contents



ANC RENTAL CORPORATION






NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS


(In millions except share data)


1.     INTERIM
FINANCIAL STATEMENTS

On November 13, 2001, the Company 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 accompanying Condensed Consolidated Financial
Statements include the accounts of ANC Rental Corporation and
its subsidiaries (the Company) and have been
prepared by the Company pursuant to the rules and regulations of
the Securities and Exchange Commission (SEC). All
significant intercompany accounts and transactions have been
eliminated. Certain information related to the Companys
organization, significant accounting policies and footnote
disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles has
been condensed or omitted. In the opinion of management, the
Condensed Consolidated Financial Statements contain all material
adjustments, consisting of only normal recurring adjustments,
necessary to fairly state the financial position, the results of
operations and cash flows for the periods presented and the
disclosures herein are adequate to make the information
presented not misleading. Income taxes during these interim
periods have been provided based upon the Companys
anticipated annual effective income tax rate.

Additionally, these Condensed Consolidated
Financial Statements have been prepared on a going concern
basis, which contemplates continuity of operations, realization
of assets, and payments 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s significant losses, and its Chapter 11
Filing raise substantial doubt about the Companys ability
of continue as a going concern. The Company intends to file a
plan or plans of reorganization with the Bankruptcy Court.
Continuing as a going concern is dependent upon, among other
things, the Companys formulation of a plan or plans of
reorganization, the success of future business operations, and
the generation of sufficient cash from operations and financing
sources to meet the Companys obligations. The Condensed
Consolidated Financial Statements do not reflect: (i) the
realizable value of assets on a liquidation basis or their
availability to satisfy liabilities; (ii) aggregate
pre-petition liability amounts that may be allowed for
unrecorded claims or contingencies, or their status or priority;
(iii) the effect of any changes to the Debtors
capital structure or in the Debtors business operations as
the result of an approved plan or plans of reorganization; or
(iv) adjustments to the carrying value of asset or
liability amounts that may be necessary as a result of actions
by the Bankruptcy Court.

Operating results for interim periods are not
necessarily indicative of the results that can be expected for a
full year. These interim financial statements should be read in
conjunction with the Companys audited Consolidated
Financial Statements and notes thereto appearing in the
Companys annual report on Form 10-K for the years
ended December 31, 2001 and 2000.

Prior to June 30, 2000, the Company was a
wholly owned subsidiary of AutoNation, Inc. (our former
Parent or AutoNation). On June 30, 2000,
AutoNation distributed its interest in the Company to its
shareholders on a tax-free basis 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 Unaudited Condensed Consolidated Statements of
Operations, 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.

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

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ANC RENTAL CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

common stock outstanding, plus the dilutive
effect of stock options, calculated using the treasury stock
method, and common stock purchase warrants calculated using the
if-converted method. As of September 30, 2001 the Company
had 7.4 million stock options outstanding and
5.1 million common stock purchase warrants outstanding,
which due to their anti-dilutive nature were not included in the
calculation of diluted earnings (loss) per share. For the three
and nine month periods ended September 30, 2000 the
dilutive effects from stock options were 1.2 million shares
and 0.4 million shares, respectively. There were no common
stock purchase warrants outstanding in 2000.

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. 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.

Certain amounts in the prior years
financial statements have been reclassified to conform to the
current year presentation.

2.     DECLARATION OF
BANKRUPTCY

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. There is no assurance that the Bankruptcy Court
will grant any requests for such approval. Subsequent to the
filing of the Chapter 11 petitions, the Company obtained
several Court orders that authorized it to pay certain
pre-petition liabilities (such as employee wages and benefits)
and take certain actions to preserve the going concern value of
the business, thereby enhancing the prospects of reorganization.
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. 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 confirmation of a plan of reorganization is
the Companys primary objective. After negotiations with
various parties in interest, the Company expects to present a
plan of reorganization to the Court to reorganize the
Companys businesses and to restructure its obligations.
This plan of reorganization could change the amounts reported in
the financial statements and cause a material change in the
carrying amount of assets and liabilities. The Company expects
that a significant portion of the liabilities recorded will be
subject to compromise.

The plan of reorganization, when filed, will set
forth the means for treating claims, including liabilities
subject to compromise and interests in the 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. The Company is in the early stages of formulating a
plan of reorganization. The confirmation of any plan 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
are stayed and other pre-petition contractual obligations may
not be enforced against the Company. In addition, the Debtors
have the right, subject to Court approval and other conditions,
to assume or reject any pre-petition executory contracts and
unexpired leases. Parties affected by these rejections may file
claims with the Court. The Company has prepared and submitted
the schedules setting forth the Debtors assets and
liabilities as of the date of the petition as reflected in our
accounting records. The amounts of claims filed by

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##### Table of Contents



ANC RENTAL CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

creditors could be significantly different from
their recorded amounts. Due to material uncertainties, it is not
possible to predict the length of time the Company 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, the effect of the proceedings
on the Companys businesses or the recovery by creditors
and equity holders of the Company. The divisions and operations
that are not part of the Chapter 11 filing relate to
international operations, an insurance captive, and special
purpose vehicle financing entities.

Under the Bankruptcy Code, post-petition 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 the Companys
assets is compared to the liabilities and claims against the
Company. There can be no assurance as to what value, if any,
will be ascribed to the Companys common stock in the
bankruptcy proceeding.

Future financial statements will be 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 the Company. A significant
portion of the liabilities recorded at September 30, 2001
are expected to be subject to compromise. Also in accordance
with SOP 90-7, after the filing date, interest will no longer be
accrued on any unsecured and undersecured debt.

3.     RECEIVABLES

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

|                                      |  |               |       |              |  |   |       |  
|------------------------------------- |  | ------------- | ----- | ------------ |  | - | ----- | -
|                                      |  | September 30, |       | December 31,
|                                      |  | 2001          |       | 2000        
|                                      |  |               |       |             
|                                      |  | (Unaudited)   |       |             
|Trade receivables                     |  | $             | 231.6 |              |  | $ | 207.4 |  
|Vehicle manufacturer receivables      |  |               | 244.8 |              |  |   | 423.6 |  
|Other                                 |  |               | 111.2 |              |  |   | 90.9  |  
|                                      |  |               |       |              |  |   |       |  
|                                      |  |               | 587.6 |              |  |   | 721.9 |  
|Less: allowance for doubtful accounts |  |               | (21.3 | )            |  |   | (40.5 | )
|                                      |  |               |       |              |  |   |       |  
|                                      |  | $             | 566.3 |              |  | $ | 681.4 |  
|                                      |  |               |       |              |  |   |       |  

4.     VEHICLES

A summary of vehicles is as follows:

|                               |  |               |         |              |  |   |         |  
|------------------------------ |  | ------------- | ------- | ------------ |  | - | ------- | -
|                               |  | September 30, |         | December 31,
|                               |  | 2001          |         | 2000        
|                               |  |               |         |             
|                               |  | (Unaudited)   |         |             
|Vehicles                       |  | $             | 5,429.5 |              |  | $ | 5,030.7 |  
|Less: accumulated depreciation |  |               | (655.4  | )            |  |   | (579.3  | )
|                               |  |               |         |              |  |   |         |  
|                               |  | $             | 4,774.1 |              |  | $ | 4,451.4 |  
|                               |  |               |         |              |  |   |         |  

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ANC RENTAL CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

5.     PROPERTY AND
EQUIPMENT

A summary of property and equipment is as follows:

|                                                |  |               |        |              |  |   |        |  
|----------------------------------------------- |  | ------------- | ------ | ------------ |  | - | ------ | -
|                                                |  | September 30, |        | December 31,
|                                                |  | 2001          |        | 2000        
|                                                |  |               |        |             
|                                                |  | (Unaudited)   |        |             
|Land                                            |  | $             | 50.5   |              |  | $ | 121.0  |  
|Furniture, fixtures and equipment               |  |               | 424.2  |              |  |   | 420.1  |  
|Buildings and improvements                      |  |               | 303.9  |              |  |   | 324.7  |  
|                                                |  |               |        |              |  |   |        |  
|                                                |  |               | 778.6  |              |  |   | 865.8  |  
|Less: accumulated depreciation and amortization |  |               | (315.5 | )            |  |   | (289.8 | )
|                                                |  |               |        |              |  |   |        |  
|                                                |  | $             | 463.1  |              |  | $ | 576.0  |  
|                                                |  |               |        |              |  |   |        |  

During the first half of 2001 the Company entered
into a series of sale and leaseback transactions for some of its
owned land and buildings which yielded net proceeds of
approximately $110.3 million. The leases, with terms of not
less than 20 years, are treated as operating leases, and
will result in approximately $3.0 million per quarter of
incremental rent expense over and above the amounts incurred
during 2000. Gains realized on the sale of the properties have
been deferred and are being recognized over the life of the
respective leases. Such transaction gains approximated
$34.1 million. Losses recognized currently in earnings
approximated $4.2 million for the nine months ended
September 30, 2001.

6.     OTHER
ASSETS

The components of other assets are as follows:

|                                    |  |              |      |              |  |   |      | 
|----------------------------------- |  | ------------ | ---- | ------------ |  | - | ---- | 
|                                    |  | September 30 |      | December 31,
|                                    |  | 2001         |      | 2000        
|                                    |  |              |      |             
|                                    |  | (Unaudited)  |      |             
|Deposits                            |  | $            | 35.1 |              |  | $ | 33.8 | 
|Debt issue costs, net               |  |              | 26.9 |              |  |   | 25.7 | 
|Interest rate hedges, at fair value |  |              | 12.4 |              |  |   |     | 
|Other                               |  |              | 10.2 |              |  |   | 9.2  | 
|                                    |  |              |      |              |  |   |      | 
|                                    |  | $            | 84.6 |              |  | $ | 68.7 | 
|                                    |  |              |      |              |  |   |      | 

7.     IMPAIRMENT OF
INTANGIBLE ASSETS

The Company continually evaluates whether events
and circumstances have occurred that may warrant revision of the
estimated useful life of its intangible assets, or whether the
remaining balance of these intangible assets should be evaluated
for possible impairment. Goodwill is comprised of both
enterprise level goodwill and goodwill associated with specific
long-lived assets. Enterprise level goodwill is evaluated for
impairment in accordance with APB 17, Intangible
Assets, while goodwill identified with specific assets is
evaluated in accordance with Statement of Financial Accounting
Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets To Be Disposed
Of. In each case, the Company uses an estimate of the
related undiscounted cash flows of operations or assets that
benefit from the goodwill over the remaining life of intangible
assets in assessing their recoverability.

For enterprise level goodwill, the Company
measures the amount of impairment as the excess of the carrying
value of the goodwill over the estimate of undiscounted future
cash flows. In September 2001, as a result of the significant
adverse changes in the business environment in part due to
September 11, and historical and projected cash flow
losses, the Company determined that recoverability of its
enterprise level

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ANC RENTAL CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

intangible assets was not assured. As such, the
Company has recognized an impairment charge for its enterprise
level intangible assets of approximately $210.8 million for
the quarter ended September 30, 2001.

For goodwill associated with specific long-lived
assets, the Company measures impairment as the excess of the
carrying value of the goodwill over the fair value of the
related assets. Fair value is either the amount 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. Present value discount
rates are estimated based upon the rate that would be required
for a similar investment with similar risks.

On January 1, 2002, the Company adopted
Statement of Financial Accounting Standards No. 142,
Goodwill and Other Intangible Assets. However, the
Company is still evaluating the impact of adoption. The Company
expects to complete Step 1 of the transition impairment
test by June 30, 2002, in accordance with SFAS 142. Since
this step is not completed management is unable to quantify the
impact of adoption.

8.     VALUATION
ALLOWANCE ON CERTAIN TAX ASSETS

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. During the third
quarter of 2001, the Company recorded a charge of
$131.5 million related to the establishment of a valuation
allowance for certain tax benefits, net operating loss
carry-forwards and a reversal of losses benefited in the first
and second quarters of 2001. 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.

9.     ACCOUNTS
PAYABLE

The components of accounts payable are as follows:

|                 |  |               |       |              |  |   |       | 
|---------------- |  | ------------- | ----- | ------------ |  | - | ----- | 
|                 |  | September 30, |       | December 31,
|                 |  | 2001          |       | 2000        
|                 |  |               |       |             
|                 |  | (Unaudited)   |       |             
|Trade payables   |  | $             | 71.7  |              |  | $ | 123.1 | 
|Vehicle payables |  |               | 96.2  |              |  |   | 119.3 | 
|                 |  |               |       |              |  |   |       | 
|                 |  | $             | 167.9 |              |  | $ | 242.4 | 
|                 |  |               |       |              |  |   |       | 

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

10.     OTHER
LIABILITIES

Components of other liabilities are as follows:

|                                    |  |               |       |              |  |   |       | 
|----------------------------------- |  | ------------- | ----- | ------------ |  | - | ----- | 
|                                    |  | September 30, |       | December 31,
|                                    |  | 2001          |       | 2000        
|                                    |  |               |       |             
|                                    |  | (Unaudited)   |       |             
|Minority interest                   |  | $             | 236.9 |              |  | $ | 159.5 | 
|Interest rate hedges, at fair value |  |               | 73.0  |              |  |   |      | 
|Deferred gains on property sales    |  |               | 33.3  |              |  |   |      | 
|Other                               |  |               | 53.9  |              |  |   | 62.4  | 
|                                    |  |               |       |              |  |   |       | 
|                                    |  | $             | 397.1 |              |  | $ | 221.9 | 
|                                    |  |               |       |              |  |   |       | 

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##### Table of Contents



ANC RENTAL CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Minority interest represents the limited
partnership interest in a subsidiary of the Company. Minority
interest in the subsidiarys income is included in vehicle
interest expense and was $3.0 million and $2.8 million
for the three months ended September 30, 2001 and 2000,
respectively, and $6.7 and $5.6 million for the nine months
ended September 30, 2001 and 2000, respectively.

11.     VEHICLE
DEBT

Vehicle debt is as follows:

|                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                         |               |         |              |  |   |         |         | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------- | ------- | ------------ |  | - | ------- | ------- | 
|                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                         | September 30, |         | December 31,
|                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                         | 2001          |         | 2000        
|                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                         |               |         |             
|                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                         | (Unaudited)   |         |             
|Amounts under various commercial paper programs
    secured by eligible vehicle collateral; interest based on
    market-dictated commercial paper rates; weighted average
    interest rates of 3.59% and 6.77% at September 30, 2001 and
    December 31, 2000, respectively                             |                                                                                                                                                                                                         | $             | 117.9   |              |  | $ | 642.7   |        
|Auction-rate note program; weighted average
    interest rate of 3.65% at September 30, 2001; maturities
    through 2006, net of a $0.4 million discount                                                                                                                                                  |                                                                                                                                                                                                         |               | 310.9   |              |  |   |        |        
|Amounts under various asset-backed medium-term
    note programs secured by eligible vehicle collateral:                                                                                                                                                                                                   |                                                                                                                                                                                                         |               |         |              |  |   |         |        
|                                                                                                                                                                                                                                                                                                           | Fixed rate component; weighted average interest
    rate of 6.11% at September 30, 2001 and 6.30% at
    December 31, 2000; maturities through 2004.                                                    |               |         | 1,425.0      |  |   |         | 1,750.0 | 
|                                                                                                                                                                                                                                                                                                           | Floating rate component based on a spread over
    LIBOR; weighted average interest rate of 3.32% and 6.93% at
    September 30, 2001 and December 31, 2000,
    respectively; maturities through 2005. |               |         | 2,550.0      |  |   |         | 1,750.0 | 
|Other committed and uncommitted secured vehicle
    financings primarily with financing institutions in the United
    Kingdom; LIBOR based interest rates; weighted average interest
    rates of 4.73% and 5.62% at September 30, 2001 and
    December 31, 2000, respectively; maturities through 2002. |                                                                                                                                                                                                         |               | 125.4   |              |  |   | 86.2    |        
|                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                         |               |         |              |  |   |         |        
|                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                         | $             | 4,529.2 |              |  | $ | 4,228.9 |        
|                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                         |               |         |              |  |   |         |        

At September 30, 2001, aggregate expected
maturities of vehicle debt were as follows:

|           |  |   |         | 
|---------- |  | - | ------- | 
|2001       |  | $ | 654.6   | 
|2002       |  |   | 1,088.7 | 
|2003       |  |   | 758.0   | 
|2004       |  |   | 1,417.0 | 
|2005       |  |   | 300.0   | 
|Thereafter |  |   | 310.9   | 
|           |  |   |         | 
|           |  | $ | 4,529.2 | 
|           |  |   |         | 

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

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ANC RENTAL CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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.

In the Companys international operations no
facility has been cancelled because of the Companys
Chapter 11 filing. However, each lender is reviewing their
loans with the Company. There is no assurance that existing
loans will not be cancelled or adversely modified.

The Debtors 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 payments to the third party note holders.

As of November 14, 2001 the Companys
commercial paper program was repaid with the proceeds from the
liquidity back-up facilities. As of December 31, 2001
borrowings under the liquidity back-up facilities approximated
$63.8 million of which all amounts have been subsequently repaid.

As a result of the Event of Default
$175.0 million of medium-term notes were repaid and retired
on November 20, 2001. Additionally, the Event of Default
triggered provisions in the medium-term note agreements
requiring an accelerated repayment of the amounts outstanding.
In the fourth quarter, 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 makes available up to $1.0 billion
of previously frozen funds for the acquisition of new fleet. On
May 13, 2002 the agreement expired.

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
will be allowed to use proceeds received from the disposition of
vehicles financed by these facilities to purchase new vehicles.
The agreement is set to expire in September 2002. However,
should certain operating or financing criteria be met the
agreement will be extended to November 2002. Additionally, the
Company issued a $275.0 million variable funding
asset-backed note, which at the Companys option can be
increased to $350.0 million. The note will bear interest at
a variable rate based upon a spread over LIBOR and is set to
expire in September 2002.

12.     OTHER
DEBT

Other debt is as follows:

|                                                                                                                                                                                                                                                                                       |  |               |       |              |  |   |       | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ----- | ------------ |  | - | ----- | 
|                                                                                                                                                                                                                                                                                       |  | September 30, |       | December 31,
|                                                                                                                                                                                                                                                                                       |  | 2001          |       | 2000        
|                                                                                                                                                                                                                                                                                       |  |               |       |             
|                                                                                                                                                                                                                                                                                       |  | (Unaudited)   |       |             
|Secured revolving credit facility weighted
    average interest rate of 11.0%                                                                                                                                                                                                          |  | $             |      |              |  | $ | 17.0  | 
|Supplemental secured term loan at 8.64% matures
    May 31, 2003                                                                                                                                                                                                                       |  |               | 40.0  |              |  |   |      | 
|Interim financing fixed rate note at 14.0%
    through September 30, 2001 increasing 0.5% each quarter
    thereafter capped at 18.0%, matures June 30, 2007, net of an
    $11.0 million discount in 2001                                                                             |  |               | 189.0 |              |  |   | 200.0 | 
|Notes payable to vehicle manufacturer; weighted
    average interest rates of 4.26% and 7.45% at September 30,
    2001 and December 31, 2000 respectively, matures 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% and 5.86% at September 30, 2001
    and December 31, 2000, respectively; redeemable at the
    option of the holder through maturity in 2003 |  |               | 2.4   |              |  |   | 8.5   | 

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ANC RENTAL CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                                                                                                                                                     |  |               |       |              |  |   |       | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ----- | ------------ |  | - | ----- | 
|                                                                                                                                                                     |  | September 30, |       | December 31,
|                                                                                                                                                                     |  | 2001          |       | 2000        
|                                                                                                                                                                     |  |               |       |             
|                                                                                                                                                                     |  | (Unaudited)   |       |             
|Other uncommitted credit facilities of the
    Companys international subsidiaries and other notes;
    interest ranging from 2.50% to 8.75%; maturing through 2001 |  |               | 14.5  |              |  |   | 16.2  | 
|                                                                                                                                                                     |  |               |       |              |  |   |       | 
|                                                                                                                                                                     |  | $             | 280.9 |              |  | $ | 276.7 | 
|                                                                                                                                                                     |  |               |       |              |  |   |       | 

As of September 30, 2001 aggregate expected
maturities of other debt exclusive of note discounts
approximating $11.0 million are as follows: $86.9 million
in 2001, $35.0 million in 2002, $40.0 million in 2003
and $130.0 million in 2007.

In June 2000, the Company entered into a
three-year secured revolving credit facility with 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 was
used to support outstanding letters of credit as of
September 30, 2001. As a result of the Chapter 11
filing the Company is precluded from drawing on this 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
12 months. The Company has 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 the Company issued warrants representing
approximately 3.7 million shares and 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 warrants are treated as a note discount, and are being
amortized as a component of interest expense, over the term of
the refinancing. 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 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
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 connection with the consummation of the sale
and leaseback transactions, 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 a
$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 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,

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ANC RENTAL CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

2001, the date of issue, was $0.7 million.
The fair value of the warrants were recorded as a note discount
and are being amortized as a component of interest expense over
the term of the note using the effective interest method.

The Companys governing documents for its
credit facilities and interim financing, entered into during
2000 and subsequently amended, require us 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 consolidations; and engage in certain
transactions with our affiliates.

The Debtors 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 Court.

13.     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 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.

14.     ADOPTION OF
NEW ACCOUNTING STANDARD

In June 1998 the Financial Accounting Standards
Board (FASB) issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging
Activities (SFAS 133). SFAS 133, as
amended, became effective for the Company on January 1,
2001.

The major market risk hedged by the Company is
the changes in LIBOR-based interest rates. The Companys
policy is to manage interest rate risk through a combination of
fixed and floating rate debt. The Company uses interest rate
derivatives to adjust interest rate exposures, when appropriate,
based upon market conditions. As of January 1, 2001 these
derivatives consisted of stand-alone interest rate caps and a
combination of interest rate caps and floors to create synthetic
swaps. As of December 31, 2001 the Company only has
stand-alone caps. The Company enters into derivatives with a
group of financial institutions with investment grade ratings,
thereby minimizing credit risk. The Company monitors the credit
worthiness of the counterparties and presently does not expect
default by any of the counterparties. The Company does not
obtain collateral in connection with its derivative financial
instruments. The Companys derivative instruments qualify
for hedge accounting treatment under SFAS 133. In order to
qualify for hedge accounting certain criteria must be met
including a requirement that both at inception of the hedge, and
on an ongoing basis, the hedging relationship is expected to be
highly effective in offsetting cash flows attributable to the
hedged risk during the term of the hedge. Hedge accounting
treatment permits certain changes in the fair value of the
Companys qualifying derivatives to be deferred in other
comprehensive income and subsequently reclassified to earnings
to offset the impact of the related hedged interest rate.
Changes in fair value of non-qualifying derivatives and the
ineffective portion of changes in fair value of qualifying
derivatives must be recorded immediately through earnings.

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

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ANC RENTAL CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

caps and as such changes in the fair value of the
stand-alone caps are recorded as a component of other
comprehensive income.

The FASB continues to provide implementation
guidance on technical issues regarding SFAS 133. In June 2001,
the FASB approved alternative accounting treatment that allows
changes in the fair value of the Companys stand-alone caps
to be recorded as a component of other comprehensive income. The
Company adopted the alternative treatment as of July 1,
2001, and as such the Company recognizes changes in fair value
due to time value currently in other comprehensive income and as
such the expiring portion of time value for the respective caps
will be reflected in earnings of future quarters.

Based upon the fair values of the caps and the
floors at January 1, 2001 the Company recognized assets of
$24.7 million and liabilities of $34.0 million. In
addition, the Company de-recognized approximately
$3.1 million of net deferred losses related to the
unwinding of certain swaps and floors primarily due to the
separation from its former Parent. The net deferred losses
related to the unwound derivatives are reflected as a component
of accumulated other comprehensive income and will continue to
amortize over the remaining life of the respective debt that was
hedged.

The Company reclassified proceeds from its
stand-alone caps of approximately $1.1 million for the
three and nine months ended September 30, 2001 to vehicle
interest expense, a component of interest expense for the three
and nine months ended September 30, 2001. The Company
reclassified payments under the floor component of its synthetic
swaps of approximately $5.9 million and $11.2 million
for the three and nine months ended September 30, 2001,
respectively. Amortization related to deferred losses was
reclassified from other comprehensive income to vehicle interest
expense and approximated $0.3 and $0.8 million for the
three and nine months ended September 30, 2001,
respectively. The Company expects no proceeds from its
stand-alone caps over the next twelve months.

As a result of the Debtors filing for
chapter 11 in the fourth quarter, the counter party to the
interest rate floors terminated its agreement with the Company.
As such, the interest rate floors ceased being an effective
hedge and the Company will amortize these deferred losses,
approximating $82.3 million, from other comprehensive
income to current earnings over the life of the remaining debt
outstanding. Losses recognized in the fourth quarter of 2001
approximated $5.8 million. The Company expects amortization
of these deferred losses to be of approximately
$35.4 million in 2002.

15.  COMPREHENSIVE INCOME

Comprehensive income includes effects of foreign
currency translation and changes in fair value of certain
derivative financial instruments, which qualify for hedge
accounting. Comprehensive income for the periods indicated are
as follows (unaudited):

|                                                                                                             |                                         |                    |        |                   |   |      |      |      |   |   |        |       |   |   |      |      |  
|------------------------------------------------------------------------------------------------------------ | --------------------------------------- | ------------------ | ------ | ----------------- | - | ---- | ---- | ---- | - | - | ------ | ----- | - | - | ---- | ---- | -
|                                                                                                             |                                         |                    |        |                  
|                                                                                                             |                                         | Three Months Ended |        | Nine Months Ended
|                                                                                                             |                                         | September 30,      |        | September 30,    
|                                                                                                             |                                         |                    |        |                  
|                                                                                                             |                                         | 2001               |        | 2000              |   | 2001 |      | 2000
|                                                                                                             |                                         |                    |        |                   |   |      |      |     
|Net income (loss)                                                                                            |                                         | $                  | (381.5 | )                 |   | $    | 51.0 |      |   | $ | (438.1 | )     |   | $ | 42.0 |     
|Other comprehensive income (loss), net of tax:                                                               |                                         |                    |        |                   |   |      |      |      |   |   |        |       |   |   |      |     
|                                                                                                             | Foreign currency translation adjustment |                    |        | 1.0               |   |      |      | (6.5 | ) |   |        | (2.6  | ) |   |      | (3.8 | )
|                                                                                                             | Unrealized loss on interest rate hedges |                    |        | (55.8             | ) |      |      |     |   |   |        | (64.6 | ) |   |      |     |  
|                                                                                                             |                                         |                    |        |                   |   |      |      |      |   |   |        |       |   |   |      |     
|Other comprehensive income (loss), net of tax
    before cumulative effect of change in accounting principle |                                         |                    | (436.3 | )                 |   |      | 44.5 |      |   |   | (505.3 | )     |   |   | 38.2 |     
|Unrealized loss on investment                                                                                |                                         |                    |       |                   |   |      |     |      |   |   |       |       |   |   | (0.1 | )   

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ANC RENTAL CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                                                    |  |                    |        |                   |  |      |      |      |  |   |        |   |  |   |      | 
|------------------------------------------------------------------- |  | ------------------ | ------ | ----------------- |  | ---- | ---- | ---- |  | - | ------ | - |  | - | ---- | 
|                                                                    |  |                    |        |                  
|                                                                    |  | Three Months Ended |        | Nine Months Ended
|                                                                    |  | September 30,      |        | September 30,    
|                                                                    |  |                    |        |                  
|                                                                    |  | 2001               |        | 2000              |  | 2001 |      | 2000
|                                                                    |  |                    |        |                   |  |      |      |     
|Cumulative effect of change in accounting
    principle, net of tax |  |                    |       |                   |  |      |     |      |  |   | (14.6  | ) |  |   |     | 
|                                                                    |  |                    |        |                   |  |      |      |      |  |   |        |   |  |   |      | 
|Other comprehensive income (loss)                                   |  | $                  | (436.3 | )                 |  | $    | 44.5 |      |  | $ | (519.9 | ) |  | $ | 38.1 | 
|                                                                    |  |                    |        |                   |  |      |      |      |  |   |        |   |  |   |      | 

The components of accumulated other comprehensive
loss are as follows:

|                                         |  |               |       |              |  |   |       |  
|---------------------------------------- |  | ------------- | ----- | ------------ |  | - | ----- | -
|                                         |  | September 30, |       | December 31,
|                                         |  | 2001          |       | 2000        
|                                         |  |               |       |             
|                                         |  |              
|                                         |  | (Unaudited)  
|Foreign currency translation adjustments |  | $             | (13.1 | )            |  | $ | (10.5 | )
|Deferred losses on interest rate hedges  |  |               | (79.2 | )            |  |   |      |  
|                                         |  |               |       |              |  |   |       |  
|                                         |  | $             | (92.3 | )            |  | $ | (10.5 | )
|                                         |  |               |       |              |  |   |       |  

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|         |                                                                                          
|-------- | -----------------------------------------------------------------------------------------
|Item  2. | Managements Discussion and Analysis
    of Financial Condition and Results of Operations

The following should be read in conjunction with
the Condensed Consolidated Financial Statements and notes
thereto under Item 1. In addition, reference should be made
to the Companys audited Consolidated Financial Statements
and notes thereto and related Managements Discussion and
Analysis of Financial Condition and Results of Operations
included in the Companys annual report on Form 10-K
for the years ended December 31, 2001 and 2000 as filed
with the Securities and Exchange Commission.

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,
and to local customers who need replacement or daily rental
vehicles from locations in neighborhood areas through our Alamo
Local Market Division. 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 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.

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 all., 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 (such as employee wages and benefits)
and take certain actions that will 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. 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 confirmation of a plan of reorganization is
our primary objective. After negotiations with various parties
in interest, we expect to present a plan of reorganization to
the Court to reorganize our business and to restructure our
obligations. This plan 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 significant portion of the
liabilities recorded are expected to be subject to compromise.

The plan 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

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##### Table of Contents



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. We are in the early
stages of formulating a plan of reorganization. The confirmation
of any plan 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 litigation pending against us, are
stayed and other pre-petition contractual obligations may not be
enforced against the Debtors. In addition, the Debtors have the
right, subject to Court approval and other conditions, to assume
or reject any pre-petition executory contracts and unexpired
leases. Parties affected by these rejections may file claims
with the Court. We have prepared and submitted the schedules
setting forth the Debtors assets and liabilities as of the
date of the petition as reflected in our accounting records. 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, 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 as to what value, if any,
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. The
ability of the company to continue as a going concern is
dependent upon, among other things, (1) our ability to
generate adequate sources of liquidity, (2) our ability to
generate sufficient cash from operations, (3) the ability
of our subsidiaries that are not included in the Chapter 11
cases to obtain necessary financing, (4) confirmation of a
plan or plans of reorganization under the Bankruptcy Code, and
(5) 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 doubt about
our ability to continue as a going concern.

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 of 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.

Management Changes

In connection with our restructuring efforts we
have made certain changes to our senior management team.
Lawrence Ramaekers, a veteran of numerous restructurings and
formerly president of National Car Rental, joined us as
President and Chief Operating Officer in late 2001. In April
2002, Mr. Ramaekers also became our Chief Executive
Officer. Michael Egan, previously our Chief Executive Officer,
continues as our non-executive Chairman of the Board. In
addition, during 2001 Bill Plamondon, formerly president of
Budget Rent-A-Car, was named our Chief Restructuring Officer,
and Wayne Moor was named our Senior Vice President and Chief
Financial Officer. Also, in the second quarter of 2002, we
announced that Travis Tanner would assume the role of Senior
Vice President, Sales and Marketing. We are confident that our
senior management team has the experience and industry knowledge
to lead us during our reorganization.

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Restructuring Efforts

In an effort to return us to profitability, we
are implementing a series of restructuring plans designed to
improve the quality of customer service while lowering costs to
deliver such service. The restructuring plans can be classified
into the following categories:



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

At most major airports in the United States, we
operate Alamo and National as stand-alone rental facilities.
During 2002, we plan to consolidate up to 144 separately branded
locations throughout the United States into a maximum of
seventy-two 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 incur less rent
expense. We plan to complete the facility consolidation program
by December 2002. We will amortize the net book value of the
assets relative to the closure of these facilities on a
straight-line basis over the expected remaining useful life of
ten months. We estimate the excess depreciation charge will
approximate $3.1 million per month beginning in March 2002.
Due to material uncertainties, negotiations with third parties,
and the legal challenges of certain competitors, 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 such, we may need to
change the estimate of an assets remaining useful life and
revise depreciation policies on a prospective basis.



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

We currently operate two separate and distinct
information technology systems. During 2002, we plan to migrate
to one information system and abandon the other. We believe that
by combining information technology onto the existing Alamo
legacy operating system cost savings can be achieved. Additional
benefits of migrating to the Alamo legacy 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, including, but not limited to,
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. We will amortize the remaining net book value of assets
related to the abandoned system on a straight-line basis over
the expected remaining useful life of twelve months. We estimate
the excess depreciation charges will approximate
$10.0 million per month beginning January 1, 2002.



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

The Company intends to modify its current
licensee structure by entering into new dual branded
licensing agreements that will include but are not limited to
(1) selling or transferring ownership of certain Alamo
locations in existing National licensee markets to the current
National licensee, (2) increasing our current royalty rate
charged to our franchisee base, and (3) licensing our Alamo
locations to current National licensees in those markets where
an Alamo location currently does not exist.



| |                                            
| | -------------------------------------------
| | Closure of Alamo Local Market
    Locations

In the first quarter of 2002, we closed
approximately 182 unprofitable locations. Costs incurred
relative to these closures approximated $5.6 million, and
primarily related to disposition of fleet impaired assets and
accruals for rent and severance.

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| |                                   
| | ----------------------------------
| | Consolidated Results of Operations

A summary of our operating results is as follows
for the periods indicated (in millions except for the
statistical amounts as noted):

|                                    |                           |                                  |        |                                 |   |      |        |    |  |      |         |         |   |      |        |   |  |   |         |         |   |  |        |    |  |   |         |         |   |  |        |   | 
|----------------------------------- | ------------------------- | -------------------------------- | ------ | ------------------------------- | - | ---- | ------ | -- |  | ---- | ------- | ------- | - | ---- | ------ | - |  | - | ------- | ------- | - |  | ------ | -- |  | - | ------- | ------- | - |  | ------ | - | 
|                                    |                           |                                  |        |                                
|                                    |                           | Three Months Ended September 30, |        | Nine Months Ended September 30,
|                                    |                           |                                  |        |                                
|                                    |                           | 2001                             |        | %                               |   | 2000 |        | %  |  | 2001 |         | %       |   | 2000 |        | %
|                                    |                           |                                  |        |                                 |   |      |        |    |  |      |         |         |   |      |        |  
|Revenue                             |                           | $                                | 908.3  |                                 |   |      | 100.0% |    |  | $    | 1,003.8 |         |   |      | 100.0% |   |  | $ | 2,527.9 |         |   |  | 100.0% |    |  | $ | 2,721.8 |         |   |  | 100.0% |  
|Direct operating costs              |                           |                                  | 378.5  |                                 |   |      | 41.6   |    |  |      | 360.4   |         |   |      | 35.9   |   |  |   | 1,069.7 |         |   |  | 42.2   |    |  |   | 1,061.6 |         |   |  | 39.0   |  
|Vehicle depreciation, net           |                           |                                  | 295.8  |                                 |   |      | 32.6   |    |  |      | 279.5   |         |   |      | 27.9   |   |  |   | 808.5   |         |   |  | 32.0   |    |  |   | 748.5   |         |   |  | 27.5   |  
|Selling, general and administration |                           |                                  | 179.4  |                                 |   |      | 19.8   |    |  |      | 163.9   |         |   |      | 16.3   |   |  |   | 499.9   |         |   |  | 19.8   |    |  |   | 532.7   |         |   |  | 19.6   |  
|Severance/transition cost           |                           |                                  |       |                                 |   |      |       |    |  |      | 2.0     |         |   |      | 0.2    |   |  |   | 2.0     |         |   |  | 0.1    |    |  |   | 15.7    |         |   |  | 0.6    |  
|Impairment of intangible assets     |                           |                                  | 210.8  |                                 |   |      | 23.2   |    |  |      |        |         |   |      |       |   |  |   | 210.8   |         |   |  | 8.3    |    |  |   |        |         |   |  |       |  
|Amortization of intangible assets   |                           |                                  | 2.5    |                                 |   |      | 0.3    |    |  |      | 2.5     |         |   |      | 0.3    |   |  |   | 7.5     |         |   |  | 0.3    |    |  |   | 7.50    |         |   |  | 0.3    |  
|Interest income                     |                           |                                  | (1.6   | )                               |   |      | (0.2   | )  |  |      | (2.6    | )       |   |      | (0.3   | ) |  |   | (4.8    | )       |   |  | (0.2   | )  |  |   | (3.2    | )       |   |  | (0.1   | )
|Interest expense                    |                           |                                  | 87.9   |                                 |   |      | 9.7    |    |  |      | 114.3   |         |   |      | 11.4   |   |  |   | 269.7   |         |   |  | 10.7   |    |  |   | 287.1   |         |   |  | 10.5   |  
|Other expense, net                  |                           |                                  | 5.0    |                                 |   |      | 0.5    |    |  |      | 0.1     |         |   |      |       |   |  |   | 10.8    |         |   |  | 0.5    |    |  |   | 3.0     |         |   |  | 0.1    |  
|                                    |                           |                                  |        |                                 |   |      |        |    |  |      |         |         |   |      |        |   |  |   |         |         |   |  |        |    |  |   |         |         |   |  |        |  
|Income (loss) before income taxes   |                           | $                                | (250.0 | )                               |   |      | (27.5  | )% |  | $    | 83.7    |         |   |      | 8.3    | % |  | $ | (346.2  | )       |   |  | (13.7  | )% |  | $ | 68.9    |         |   |  | 2.5%   |  
|                                    |                           |                                  |        |                                 |   |      |        |    |  |      |         |         |   |      |        |   |  |   |         |         |   |  |        |    |  |   |         |         |   |  |        |  
|Key Statistics                      |                           |                                  |        |                                 |   |      |        |    |  |      |         |         |   |      |        |   |  |   |         |         |   |  |        |    |  |   |         |         |   |  |        |  
|                                    | Revenue per day           |                                  | $      | 35.77                           |   |      |        |    |  |      | $       | 36.35   |   |      |        |   |  |   | $       | 35.67   |   |  |        |    |  |   | $       | 36.35   |   |  |        |   | 
|                                    | Charge days (in millions) |                                  |        | 25.0                            |   |      |        |    |  |      |         | 27.2    |   |      |        |   |  |   |         | 69.9    |   |  |        |    |  |   |         | 73.8    |   |  |        |   | 
|                                    | Average fleet             |                                  |        | 339,576                         |   |      |        |    |  |      |         | 362,312 |   |      |        |   |  |   |         | 327,142 |   |  |        |    |  |   |         | 337,270 |   |  |        |   | 
|                                    | Fleet utilization         |                                  |        | 80.2                            | % |      |        |    |  |      |         | 81.6    | % |      |        |   |  |   |         | 78.2    | % |  |        |    |  |   |         | 79.8    | % |  |        |   | 



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

Revenue was $908.3 million for the three
months ended September 30, 2001, and $1,003.8 million
for the three months ended September 30, 2000. The decrease
in revenue of $95.5 million or 9.5% is primarily due to
lower charge day volume of 7.9% or $78.8 million, lower
revenue per day of 1.2% or $11.9 million, the unfavorable
effects of foreign exchange movements of 0.3% or
$2.6 million and lower licensee and other revenue of 0.2%
or $2.2 million.

The decline in charge day volume for the three
months ended September 30, 2001 as compared to the same
period in the prior year approximated 2.2 million days. The
declines were realized in North America with the Alamo brand
declining 1.4 million days and the National brand declining
1.2 million days. The declines were the result of an
already weak economy restricting commercial and tour travel,
further compounded by the terrorist events of September 11.
Slight increases in charge days were realized in both our
International and Alamo Local Market divisions.

Revenue was $2,527.9 million for the nine
months ended September 30, 2001, and $2,721.8 million
for the nine months ended September 30, 2000. The decrease
in revenue of $193.9 million or 7.1% was primarily due to
lower charge day volume of 5.2% or $140.8 million, lower
revenue per day of 1.1% or $30.0 million, the unfavorable
effects of foreign exchange movements of 0.6% or $17.2 million
and lower licensee and other revenue of 0.2% or
$5.9 million.

The decline in charge day volume for the nine
months ended September 30, 2001 as compared to the same
period in the prior year approximated 3.9 million days. The
majority of the declines were realized in North America with
Alamo declining by 2.1 million days and National declining
2.0 million days. The decrease in charge day volumes in
North America was the result of issues previously discussed.
Increases in charge days internationally were offset by declines
realized at our Alamo Local Market brand.

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The declines in revenue per day for the three and
nine months ended September 30, 2001 as compared to the
same period in the prior year are the result of a weakening
economy and an extremely competitive pricing environment in the
domestic airport market.

Following the events of September 11, 2001
there has been a significant decline in air travel and related
car rentals at airports worldwide, particularly in the U.S. We
cannot accurately predict the extent or duration of the decline
in air travel. Approximately ninety percentage of the
Companys revenue is derived from airport locations and
therefore a continued decline in air travel may have a material
adverse effect on our financial position and results of
operations.

Direct operating
costs

Direct operating costs include costs specifically
related to the operation and maintenance of the fleet such as
field personnel, facility costs and variable transaction costs
including, but not limited to, insurance, agency fees, and fuel.
Direct operating costs were $378.5 million for the three
months ended September 30, 2001 and $360.4 million for
the three months ended September 30, 2000. As a percentage
of revenue, direct operating costs were 41.6% for the three
months ended September 30, 2001 and 35.9% for the three
months ended September 30, 2000.

Direct operating costs increased by
$18.1 million or 5.0% during the three months ended
September 30, 2001 compared to the three months ended
September 30, 2000. Fleet operating expenses increased
approximately $14.2 million due to increased fleet damages
and turn-back costs, fleet transportation costs, and related
personnel expenses. 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 $7.3 million due to increased rent, the
result of our sale and leaseback transactions, as well as
increased facility operating costs. Other direct operating cost
increases approximated $1.7 million. Offsetting these
increases were lower variable transaction costs of approximately
$3.9 million, the result of lower overall charge day
volumes during the period as well as the benefits of foreign
exchange rate movements, which lowered our costs by
approximately $1.2 million.

Direct operating costs were $1,069.7 million
for the nine months ended September 30, 2001 and
$1,061.6 million for the nine months ended
September 30, 2000. As a percentage of revenue, direct
operating costs were 42.2% for the nine months ended
September 30, 2001 and 39.0% for the nine months ended
September 30, 2000. Direct operating costs increased
approximately $8.1 million or 0.8%. Fleet operating expenses
increased approximately $21.0 million due to increased fleet
damages, turn-back costs and fleet transportation costs. These
increases are attributable to the same factors as previously
discussed. Facility and facility maintenance increased
approximately $14.8 million for the same reasons previously
discussed. Offsetting these increases were lower personnel costs
of approximately $11.4 million due to our cost reduction
programs in the first half of the year, and 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.

Vehicle
depreciation

Vehicle depreciation includes vehicle
depreciation, net of manufacturer incentives, and gains and
losses on vehicle sales in the ordinary course of business.
Vehicle depreciation was $295.8 million for the three
months ended September 30, 2001 and $279.5 million for
the three months ended September 30, 2000. As a percent of
revenue, vehicle depreciation was 32.6% for the three months
ended September 30, 2001 and 27.9% for the three months
ended September 30, 2000.

The increase in vehicle depreciation of
$16.3 million is primarily due to increased depreciation
rates partially offset by lower average fleet size on a year
over year basis. The increase in depreciation rates of
approximately $39.1 million is primarily due to higher vehicle
acquisition costs coupled with changes in the mix of our fleet,
as well as provisions incurred relative to the disposition of
our at-risk vehicles. Offsetting

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these increases were the benefits of a decreasing
fleet size, which lowered our costs by approximately
$22.3 million, as well as the benefits of foreign exchange
rate movements, which lowered our costs by approximately
$0.5 million.


Vehicle depreciation was $808.5 million for
the nine months ended September 30, 2001 and
$748.5 million for the nine months ended September 30,
2000. As a percent of revenue vehicle depreciation was 32.0% for
the nine months ended September 30, 2001 and 27.5% for the
nine months ended September 30, 2000. The increase in vehicle
depreciation of $60.0 million is primarily due to reasons
previously discussed. Higher vehicle acquisition costs, changes
in the mix of our fleet, and provisions incurred relative to the
disposition of vehicles served to increase vehicle depreciation
by approximately $102.7 million. Offsetting these increases were
the benefits of a decreasing fleet size, which lowered our costs
by approximately $39.3 million, as well as the benefits of
foreign exchange rate movements, which lowered our costs by
approximately $3.4 million.

Selling, general
and administrative

Selling, general and administrative expenses were
$179.4 million for the three months ended
September 30, 2001 and $163.9 million for the three
months ended September 30, 2000. As a percentage of
revenue, selling, general and administrative expenses were 19.8%
for the three months ended September 30, 2001 and 16.3% for
the three months ended September 30, 2000. The increase in
selling, general and administrative expenses of
$15.5 million is a result of increased advertising and
selling expenses approximating $7.1 million due to
increased spending as a percentage of revenue in order to
maintain market share. The balance of the increase is primarily
due to increases in professional fees, consulting costs and
other expenses, including the favorable effects of foreign
exchange of $0.5 million.

Selling, general and administrative expenses were
$499.9 million for the nine months ended September 30,
2001 and $532.7 million for the nine months ended
September 30, 2000. As a percentage of revenue selling,
general and administrative expenses were 19.8% for the nine
months ended September 30, 2001 and 19.6% for the nine
months ended September 30, 2000. The decrease in selling,
general and administrative expenses of $32.8 million was
due to lower variable selling costs of approximately
$10.6 million, the result of lower overall charge day
volumes during the period. Reduced marketing, advertising
spending and general overhead spending in the first half of the
year approximating $18.9 million. The benefits of foreign
exchange rate movements lowered our costs by approximately
$3.3 million.

Impairment of
intangible assets

During the quarter ended September 30, 2001
we recognized a charge of $210.8 million related to the
impairment of intangible assets. 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 believe certain intangible assets were
no longer realizable and were impaired. See Note 7 to Condensed
Consolidated General Statements contained elsewhere herein.

Severance/transition
cost

During the first quarter of 2001, as part of a
cost reduction plan, we reduced our workforce by more than 700
people with a total anticipated annual expense reduction of
approximately $25.0 million. The severance related to those
terminations was $2.0 million.

Transition costs were $15.7 million for the
nine months ended September 30, 2000. These costs related to our
fourth quarter 1999 restructuring plan, and were not previously
accruable as part of the 1999 charge.

Interest income

Interest income was $1.6 million for the
three months ended September 30, 2001 and $2.6 million
for the three months ended September 30, 2000. Interest
income was $4.8 million for the nine months ended
September 30, 2001 and $3.2 million for the nine months
ended September 30, 2000. The decrease in interest income
for the quarter is due primarily to an overall lower invested
cash balance coupled with lower interest

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rates. The increase in interest income for the
year to date period is due primarily to an overall higher
invested cash balance.


Interest expense

Interest expense for the periods indicated
comprised (in millions):

|                             |  |                    |      |                   |  |      |       |      |  |   |       |  |  |   |       | 
|---------------------------- |  | ------------------ | ---- | ----------------- |  | ---- | ----- | ---- |  | - | ----- |  |  | - | ----- | 
|                             |  |                    |      |                  
|                             |  | Three Months Ended |      | Nine Months Ended
|                             |  | September 30,      |      | September 30,    
|                             |  |                    |      |                  
|                             |  | 2001               |      | 2000              |  | 2001 |       | 2000
|                             |  |                    |      |                   |  |      |       |     
|Vehicle interest expense     |  | $                  | 73.6 |                   |  | $    | 97.2  |      |  | $ | 221.7 |  |  | $ | 263.0 | 
|Non-vehicle interest expense |  |                    | 14.3 |                   |  |      | 17.1  |      |  |   | 48.0  |  |  |   | 24.1  | 
|                             |  |                    |      |                   |  |      |       |      |  |   |       |  |  |   |       | 
|                             |  | $                  | 87.9 |                   |  | $    | 114.3 |      |  | $ | 269.7 |  |  | $ | 287.1 | 
|                             |  |                    |      |                   |  |      |       |      |  |   |       |  |  |   |       | 

The decrease in vehicle interest expense is due
to lower average vehicle debt outstanding for the comparative
period coupled with lower weighted average interest rates. The
decrease in non-vehicle interest expense for the comparative
three month period is due to the full amortization of fees
related to our interim facility in the second quarter of 2001
offset by higher interest expense on the interim term loan, the
supplemental secured term loan and amortization of a note
discount. The increase in non-vehicle interest expense for the
comparative nine month period is due primarily to interest and
debt issue costs related to our interim financing and our
revolving credit facilities. Amortization of debt issue costs
relative to these facilities approximated $1.7 million for
the three months ended September 30, 2001 and
$13.6 million for the nine months ended September 30,
2001.

Other expense, net

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

|                                              |  |               |     |               |  |      |     |      |  |   |      |  |  |   |     | 
|--------------------------------------------- |  | ------------- | --- | ------------- |  | ---- | --- | ---- |  | - | ---- |  |  | - | --- | 
|                                              |  |               |     |              
|                                              |  | Three Months  |     | Nine Months  
|                                              |  | Ended         |     | Ended        
|                                              |  | September 30, |     | September 30,
|                                              |  |               |     |              
|                                              |  | 2001          |     | 2000          |  | 2001 |     | 2000
|                                              |  |               |     |               |  |      |     |     
|Fair value adjustment on interest rate hedges |  | $             |    |               |  | $    |    |      |  | $ | 2.3  |  |  | $ |    | 
|Loss on sale and leaseback transactions       |  |               |    |               |  |      |    |      |  |   | 4.2  |  |  |   |    | 
|Other expenses, net                           |  |               | 5.0 |               |  |      | 0.1 |      |  |   | 4.3  |  |  |   | 3.0 | 
|                                              |  |               |     |               |  |      |     |      |  |   |      |  |  |   |     | 
|                                              |  | $             | 5.0 |               |  | $    | 0.1 |      |  | $ | 10.8 |  |  | $ | 3.0 | 
|                                              |  |               |     |               |  |      |     |      |  |   |      |  |  |   |     | 

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 14 of our Notes to Condensed Consolidated
Financial Statements. The effect of applying these new standards
for the nine months ended September 30, 2001 was a
mark-to-market loss of $2.3 million. The amounts recognized
related to the changes in fair market value of the time value
component of our stand-alone caps.

As a result of weak operating performance and
resulting declines in operating cash flow we required additional
liquidity to meet projected working capital needs. During the
second quarter of 2001, we completed our previously announced
program of sale and leaseback transactions. Completed sales
yielded net proceeds of approximately $110.3 million. The
leases, with terms of not less than 20 years, are treated
as operating leases, and will result in approximately
$3.0 million per quarter of incremental rent expense over
and above the amounts incurred during 2000. Gains realized on
the sale of the properties have been deferred and are being
recognized over the life of the respective leases. Losses
recognized currently in earnings approximated $4.2 million for
the nine months ended September 30, 2001. Deferred
transaction gains that will amortize over the life of the leases
approximated $34.1 million of which $33.3 million
remained as of September 30, 2001.

Other expense, net was $5.0 million for the
three months ended September 30, 2001 and $0.1 million for
the three months ended September 30, 2000. Other expense,
net was $4.3 million for the nine months ended

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September 30, 2001 and $3.0 million for
the nine months ended September 30, 2000. The increase is
due to the higher spending on legal and bank fees to amend our
various credit facilities.


Provision/
Benefit for income taxes

The provision for income taxes was
$131.5 million for the three months ended
September 30, 2001 and $32.7 million for the three
months ended September 30, 2000. The provision for income taxes
was $99.0 million for the nine months ended
September 30, 2001 and $26.9 million for the nine
months ended September 30, 2000. During the third quarter of
2001 we recognized a charge of $131.5 million related to the
establishment of a valuation allowance for certain tax benefits,
net operating loss carry-forwards and a reversal of losses
benefited in the first and second quarters of 2001. 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 believes that it was more likely than not that the
tax assets were no longer realizable.

Restructuring
and other charges

During the fourth quarter of 1999, the Company
approved and announced plans to significantly restructure its
operations, which resulted in a pre-tax restructuring charge of
$40.5 million. The restructuring plan included provisions
for the consolidation of the North American headquarters,
headcount reductions, and the closure of certain marginally
profitable or unprofitable domestic and international locations,
as well as the reduction of fleet. At September 30, 2001,
$5.1 million remained accrued relative to the 1999 plan,
with most of the remaining accruals being for continuing lease
obligations. During the quarter excess severance and rent
accruals of approximately $1.4 million were reversed.
Separately, we increased provisions for certain lease
commitments by approximately $1.4 million due to a
reduction in expected sub-let income. We charged
$0.4 million to these reserves during the three month
period ended September 30, 2001 and $3.7 million to
these reserves during the nine month period ended
September 30, 2001. The charges were primarily comprised of
severance and rent paid during the period.

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
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 result in a
significant decrease in customer volume. 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. 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, and, as a result, prior
performance may not be an indication of future seasonal results.

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Third Quarter
2001 versus Second Quarter 2001

A summary of our quarterly operating results is
as follows for the periods indicated (in millions except for
statistical amounts as noted):

|                                    |                           |                    |        |         |   |          |       |    |  |   |       |         |   |  |       |    | 
|----------------------------------- | ------------------------- | ------------------ | ------ | ------- | - | -------- | ----- | -- |  | - | ----- | ------- | - |  | ----- | -- | 
|                                    |                           |                   
|                                    |                           | Three months ended
|                                    |                           |                   
|                                    |                           | September 30,      |        |         |   | June 30, |       |   
|                                    |                           | 2001               |        | %       |   | 2001     |       | % 
|                                    |                           |                    |        |         |   |          |       |   
|Revenue                             |                           | $                  | 908.3  |         |   |          | 100.0 | %  |  | $ | 850.6 |         |   |  | 100.0 | % 
|Direct operating costs              |                           |                    | 378.5  |         |   |          | 41.6  |    |  |   | 354.9 |         |   |  | 41.6  |   
|Vehicle depreciation, net           |                           |                    | 295.8  |         |   |          | 32.6  |    |  |   | 271.1 |         |   |  | 31.9  |   
|Selling, general and administrative |                           |                    | 179.4  |         |   |          | 19.8  |    |  |   | 162.7 |         |   |  | 19.1  |   
|Impairment of intangible assets     |                           |                    | 210.8  |         |   |          | 23.2  |    |  |   |      |         |   |  |      |   
|Amortization of intangible assets   |                           |                    | 2.5    |         |   |          | 0.3   |    |  |   | 2.5   |         |   |  | 0.3   |   
|Interest income                     |                           |                    | (1.6   | )       |   |          | (0.2  | )  |  |   | (1.9  | )       |   |  | (0.2  | ) 
|Interest expense                    |                           |                    | 87.9   |         |   |          | 9.7   |    |  |   | 92.3  |         |   |  | 10.9  |   
|Other (income) expense, net         |                           |                    | 5.0    |         |   |          | 0.5   |    |  |   | (0.5  | )       |   |  |      |   
|                                    |                           |                    |        |         |   |          |       |    |  |   |       |         |   |  |       |   
|Loss before income taxes            |                           | $                  | (250.0 | )       |   |          | (27.5 | )% |  | $ | (30.5 | )       |   |  | (3.6  | )%
|                                    |                           |                    |        |         |   |          |       |    |  |   |       |         |   |  |       |   
|Key Statistics                      |                           |                    |        |         |   |          |       |    |  |   |       |         |   |  |       |   
|                                    | Revenue per day           |                    | $      | 35.77   |   |          |       |    |  |   | $     | 35.54   |   |  |       |    | 
|                                    | Charge days (in millions) |                    |        | 25.0    |   |          |       |    |  |   |       | 23.6    |   |  |       |    | 
|                                    | Average fleet             |                    |        | 339,576 |   |          |       |    |  |   |       | 337,388 |   |  |       |    | 
|                                    | Fleet utilization         |                    |        | 80.2    | % |          |       |    |  |   |       | 76.9    | % |  |       |    | 

Our third quarter is historically a stronger
revenue period than the second quarter. As such, revenue
increased $57.7 million or 6.8% in the third quarter as
compared to the second quarter 2001. The increase in revenue is
primarily driven by an increase in rental volume of 6.0% coupled
with an increase in pricing of 0.7%. Our third and fourth
quarters were adversely impacted by the events of
September 11. These events will continue to adversely
impact our volume for the foreseeable future. For example,
during the two month period ended August 31, 2001 charge
day volume was approximately 9% below the prior year. In
contrast during our fourth quarter, charge day volume was 20%
below the prior year.

Direct operating costs increased
$23.7 million during the quarter ended September 30,
2001 compared to the quarter ended June 30, 2001 due to
increases in variable transaction costs, field personnel costs,
and facility costs. These increases were primarily the result of
increased rental volume coupled with increased fleet damages,
turn-back costs, and fleet transportation costs related to the
efforts of decreasing fleet size and reclaiming displaced fleet.

Vehicle depreciation increased $24.7 million
during the quarter ended September 30, 2001 compared to the
quarter ended June 30, 2001 primarily due to the increase
of fleet to meet seasonal demand as well as higher vehicle
acquisition costs coupled with changes in the mix of our fleet,
and provisions incurred relative to the disposition of vehicles.

Selling, general and administrative costs
increased $16.7 million during the quarter ended
September 30, 2001 compared to the quarter ended
June 30, 2001 primarily due to higher variable selling
costs, the result of higher overall charge day volume and
increased marketing and advertising spending.

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Interest expense components are as follows for
the three month periods indicated (in millions):

|                             |  |               |      |          |  |   |      | 
|---------------------------- |  | ------------- | ---- | -------- |  | - | ---- | 
|                             |  | September 30, |      | June 30,
|                             |  | 2001          |      | 2001    
|                             |  |               |      |         
|Vehicle interest expense     |  | $             | 73.6 |          |  | $ | 75.7 | 
|Non-vehicle interest expense |  |               | 14.3 |          |  |   | 16.6 | 
|                             |  |               |      |          |  |   |      | 
|                             |  | $             | 87.9 |          |  | $ | 92.3 | 
|                             |  |               |      |          |  |   |      | 

The decrease in vehicle interest expense is due
to lower average interest rates in the current period. The
decrease in non-vehicle interest expense is due to the full
amortization of fees related to the interim facility in the
second quarter of 2001 offset by increased interest expense on
the interim term loan, the supplemental secured term loan and
amortization of a note discount.

Cash Flows

The following discussion relates to the major
components of changes in cash flows for the nine month periods
ended September 30, 2001 and 2000.

Cash
Flows from Operating Activities

Cash used in operating activities was
$345.5 million for the nine months ended September 30,
2001, and cash used in operating activities was $488.9 million
for the nine months ended September 30, 2000. The decrease
in cash used in operating activities in 2001 as compared to 2000
is primarily due to reduced vehicle purchases in order to
operate a smaller average fleet, and changes in working capital
including lower vehicle manufacturer receivables. The decrease
in amounts due from manufacturers is primarily the result of the
timing of cash receipts from manufacturers for vehicle
dispositions.

Cash
Flows from Investing Activities

Cash flows provided by investing activities were
$85.5 million for the nine months ended September 30,
2001, and cash flows used in investing activities were
$5.2 million for the nine months ended September 30,
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 nine months ended
September 30, 2001 were $30.8 million and during the
nine months ended September 30, 2000 were
$68.6 million.

Cash
Flows from Financing Activities

Cash flows provided by financing activities for
the nine months ended September 30, 2001 were
$285.5 million, and cash flows provided by financing
activities were $506.6 million for the nine months ended
September 30, 2000. The decrease in cash flows from
financing activities in 2001 as compared to 2000 is primarily
due to lower overall net proceeds from fleet and 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 on
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: (1) commercial paper
programs; (2) asset-backed medium-term and auction-rate
note programs; and (3) various other committed and
uncommitted fleet facilities used to fund our European
operations. Our non-vehicle financing consists of: (1) a
three-year secured revolving credit facility with one year
remaining; (2) a supplemental term note with one year
remaining; (3) a six year term loan; (4) notes payable
to a vehicle manufacturer; (5) a seller-financed
acquisition note payable, which was repaid

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in February 2002; and (6) various
international working capital arrangements related to our
European and Canadian operations.


Vehicle
Debt

We finance our domestic vehicle purchases through
wholly-owned, fully consolidated, special purpose financing
subsidiaries. These financing subsidiaries obtain funds by
issuing medium term notes or commercial paper into the capital
markets. The financing subsidiaries in turn lease vehicles to
the domestic operating subsidiaries of Alamo, National and Alamo
Local Market. 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.

As of November 14, 2001 our commercial paper
program was repaid with the proceeds from our liquidity back-up
facilities. As of December 31, 2001 borrowings under the
liquidity back-up facilities approximated $63.8 million of
which all amounts have been subsequently repaid with the
proceeds from the sale of vehicles.

As a result of the Event of Default
$175.0 million of medium-term notes were repaid and retired
on November 20, 2001. Additionally, the Event of Default
triggered provisions in the medium-term note agreements
requiring an accelerated repayment of the amounts outstanding.
In the fourth quarter, 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 13, 2002 the agreement expired.

On May 10, 2002, the Company reached an
agreement with MBIA and its creditors to allow the Company to
continue to use $2.3 billion of its fleet financing
facilities. As such, the Company will be allowed to use proceeds
received from the disposition of vehicles financed by these
facilities to purchase new vehicles. The agreement is set to
expire in September 2002. However, should certain operating or
financing criteria be met the agreement will be extended to
November 2002. Additionally, the Company issued a $275.0 million
variable funding asset-backed note, which at the Companys
option can be increased to $350.0 million. The note will
bear interest at a variable rate based upon a spread over LIBOR
and is set to expire in September 2002.

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 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. In our international operations no
facility has been cancelled because of our Chapter 11
filing. However, each lender is reviewing 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, we
reduced our capacity under this facility to $70.0 million.

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.
As of April 30, 2002, $63.9 million of letters of
credit were secured by the secured revolving credit facility. On
its one year maturity date, our $40.0 million supplemental

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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 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 warrants are treated as a note discount,
and are being amortized as a component of interest expense, over
the term of the refinancing. 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.

As of September 30, 2001, we further amended
our financing facilities, thus deferring a $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 were recorded as a note discount and are being
amortized as a component of interest expense over the term of
the note using the effective interest method.

Our governing documents for our credit facilities
and interim financing, entered into during 2000 and subsequently
amended, require us to maintain certain financial ratios
including, but not limited to financial performance measures and
limits on additional indebtedness. In addition these documents
restrict our 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 consolidations; and
engage in certain transactions with our affiliates.

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 Court.

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 regulatory agencies and insurance companies by making cash
deposits, obtaining surety bonds or by obtaining bank letters of
credit. At April 30, 2002, we had outstanding surety bonds
of approximately $140.1 million, the majority of which expire
during 2002. Because of our financial performance and a
difficult surety market we provided our principle surety
provider a security interest in certain of our assets. Continued
losses will adversely affect our financial condition and our
ability to maintain or renew these surety bonds. In addition, we
cannot 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

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condition. In the first quarter of 2002, we have
entered into an agreement, approved by the bankruptcy court,
with our surety provider to post additional cash collateral in
exchange for the commitment of the surety to issue designated
surety bonds for the remainder of 2002. As of March 31,
2002 we have deposited $6.0 million with our surety
provider and we may be required under the provisions of our
agreement to deposit up to an additional $12.0 million.


Financing
Requirement

As previously discussed we are operating certain
of our domestic operating subsidiaries under Bankruptcy
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.
For the first half of 2002, we expect that our current liquidity
needs can be financed through operating cash flow.

In addition, we have been engaged in
investigating, and are continuing to pursue, strategic
alternatives to maximize stakeholder value and strengthen our
financial condition. We have engaged investment advisors to
assist us in evaluating these options. Separately, we are
planning a reorganization, which we will file with the
Bankruptcy Court.

Continued
Losses

Continued losses will adversely affect our
financial condition and may affect our ability to obtain
incremental financing, comply with certain covenants contained
within our loan agreements and fully utilize 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 utilize certain deferred tax and
intangible assets.

Forward-Looking Statements

Certain statements and information included in
this Form 10-Q constitute forward-looking
statements within the meaning of the 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, such forward-looking statements may
be included in our filings with the Securities and Exchange
Commission or press or oral statements made by or with the
approval of one of our executive officers. Forward-looking
statements in this Form 10-Q include, among others,
statements regarding:



| |   |                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our ability to execute our restructuring plans
    and achieve the desire financial results and cost savings;                                                                                                                       
|
| |  | 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 continue growth of 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
    economics 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 achieve cost savings through the
    consolidation of our business in certain areas; and                                                                                                                             
|
| |  | our ability to generate cash flow from operations.                                                                                                                                                                                  

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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 the 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;                                                                                                                                                  
|
| |  | increases in fuel costs or reduced fuel supplies
    and their effects on air travel;                                                                                                      
|
| |  | the continued availability of repurchase
    programs, the ability of 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;                                                            
|
| |  | the adoption of federal, state or local
    regulations including those that restrict our ability to sell
    optional products;                                                           
|
| |  | potential legal challenges by our competitors
    and/or franchisees to parts of our restructuring plan; and                                                                               
|
| |  | problems that may arise as a result of the
    consolidation of our brands at airport locations.                                                                                           

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 filing.

New Accounting Pronouncements

In June 2001, the Financial Accounting Standards
Board (FASB) released Statement of Financial
Accounting Standards No. 141, Business Combinations,
which supercedes Accounting Principles Board (APB) Opinion
No 16, Business Combinations. SFAS 141 eliminates
the pooling-of-interests method of accounting for business
combinations and modifies the application of the purchase
accounting method. The elimination of the pooling-of-interests
method is effective for transactions initiated after
June 30, 2001. The remaining provisions of SFAS 141
will be effective for transactions accounted for using the
purchase method that completed after June 30, 2001. At this
time, the Statement will not have an impact on our consolidated
financial statements.

In June 2001, FASB also released Statement of
Financial Accounting Standards No. 142, Goodwill and
Intangible Assetswhich 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 a
defined life and addresses the impairment testing and
recognition for goodwill and intangible assets. SFAS 142
will apply to goodwill and intangible assets arising from
transactions completed

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##### Table of Contents



before and after the Statements effective
date. SFAS 142 is effective for the Company beginning
January 1, 2002 and as a result we will cease amortizing
intangible assets and we may recognize an impairment charge in
2002.


In August 2001, the FASB issued SFAS
No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, which is effective for fiscal years
beginning after December 15, 2001. SFAS No. 144
supersedes SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets to Be Disposed Of, and the
accounting and reporting provisions relating to disposal of a
segment of a business contained in Accounting Principles Board
Opinion No. 30, Reporting the Results of
Operations  Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions. SFAS
No. 144 also amends Accounting Research Bulletin
No. 51, Consolidated Financial Statements to
eliminate the exception to consolidation for which control is
likely to be temporary. This standard had no effect on the
Companys consolidated financial statements upon adoption.




Item 3.     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 derivatives to adjust interest rate exposures when
appropriate, based upon market conditions. These derivatives
consist of interest rate caps and floors which we enter into
with a group of financial institutions with investment grade
credit ratings, thereby minimizing the risk of credit loss. We
use variable to fixed interest rate caps and floors to manage
the impact of interest rate changes on our variable rate debt.
Maturity dates for variable rate debt caps and floors are based
upon contractual maturity dates. Average rates under interest
rate caps and floors are based upon contractual rates.

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 and
floors 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   
|                     |                        |                        |       |      |   | September 30,
|September 30, 2001:  |                        | 2001                   |       | 2002 |   | 2003          |       | 2004 |   | 2005 |       | Thereafter |   | Total |         | 2001
|                     |                        |                        |       |      |   |               |       |      |   |      |       |            |   |       |         |     
|                     |                        |                       
|                     |                        | (In millions)         
|Asset/(Liability)    |                        |                        |       |      |   |               |       |      |   |      |       |            |   |       |         |      |   |   |       |      |   |   |       |      |   |   |         |   |  |   |         |  
|Variable rate debt   |                        | $                      | 546.7 |      |   | $             | 498.7 |      |   | $    | 540.0 |            |   | $     | 1,000.0 |      |   | $ | 300.0 |      |   | $ | 310.9 |      |   | $ | 3,196.3 |   |  | $ | 3,196.3 |  
|                     | Average interest rates |                        |       | 3.91 | % |               |       | 3.47 | % |      |       | 3.67       | % |       |         | 3.30 | % |   |       | 3.30 | % |   |       | 3.65 | % |   |         |  |  |   |         |  | 
|Interest rate caps   |                        |                        | 312.4 |      |   |               | 458.0 |      |   |      | 500.0 |            |   |       | 1,000.0 |      |   |   | 300.0 |      |   |   | 310.9 |      |   |   | 2,881.3 |   |  |   | 12.4    |  
|                     | Average rate           |                        |       | 6.98 | % |               |       | 5.73 | % |      |       | 7.30       | % |       |         | 6.71 | % |   |       | 7.74 | % |   |       | 7.77 | % |   |         |  |  |   |         |  | 
|Interest rate floors |                        |                        |      |      |   |               |      |      |   |      | 500.0 |            |   |       | 300.0   |      |   |   |      |      |   |   |      |      |   |   | 800.0   |   |  |   | (73.0   | )
|                     | Average rate           |                        |       |     |   |               |       |     |   |      |       | 7.30       | % |       |         | 6.26 | % |   |       |     |   |   |       |     |   |   |         |  |  |   |         |  | 

|                     |                        |                        |       |      |   |              |       |      |   |      |       |            |   |       |       |      |   |   |   |   |  |   |   |   |  |   |         |   |  |   |         |   | 
|-------------------- | ---------------------- | ---------------------- | ----- | ---- | - | ------------ | ----- | ---- | - | ---- | ----- | ---------- | - | ----- | ----- | ---- | - | - | - | - |  | - | - | - |  | - | ------- | - |  | - | ------- | - | 
|                     |                        |                        |       |      |   |             
|                     |                        | Expected Maturity Date |       |      |   | Fair Value  
|                     |                        |                        |       |      |   | December 31,
|December 31, 2000:   |                        | 2001                   |       | 2002 |   | 2003         |       | 2004 |   | 2005 |       | Thereafter |   | Total |       | 2000
|                     |                        |                        |       |      |   |              |       |      |   |      |       |            |   |       |       |     
|                     |                        |                       
|                     |                        | (In millions)         
|Asset/(Liability)    |                        |                        |       |      |   |              |       |      |   |      |       |            |   |       |       |      |   |   |   |   |  |   |   |   |  |   |         |   |  |   |         |  
|Variable rate debt   |                        | $                      | 760.0 |      |   | $            | 595.6 |      |   | $    | 500.0 |            |   | $     | 700.0 |      |   | $ |  |   |  | $ |  |   |  | $ | 2,555.6 |   |  | $ | 2,555.6 |  
|                     | Average interest rates |                        |       | 6.73 | % |              |       | 6.98 | % |      |       | 6.90       | % |       |       | 6.94 | % |   |   |  |  |   |   |  |  |   |         |  |  |   |         |  | 
|Interest rate caps   |                        |                        |      |      |   |              | 550.0 |      |   |      | 500.0 |            |   |       | 700.0 |      |   |   |  |   |  |   |  |   |  |   | 1,750.0 |   |  |   | 24.7    |  
|                     | Average rate           |                        |       |     |   |              |       | 5.73 | % |      |       | 7.30       | % |       |       | 6.26 | % |   |   |  |  |   |   |  |  |   |         |  |  |   |         |  | 
|Interest rate floors |                        |                        |      |      |   |              |      |      |   |      | 500.0 |            |   |       | 300.0 |      |   |   |  |   |  |   |  |   |  |   | 800.0   |   |  |   | (34.0   | )
|                     | Average rate           |                        |       |     |   |              |       |     |   |      |       | 7.30       | % |       |       | 6.26 | % |   |   |  |  |   |   |  |  |   |         |  |  |   |         |  | 

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PART II  OTHER
INFORMATION




Item 1.     Legal
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,
continue to operate their businesses and manage their properties
as debtors-in-possession pursuant to the Bankruptcy Code.




Item 2.     Changes
in Securities and Use of Proceeds

Not applicable.




Item 3.     Defaults
Upon Senior Securities

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, continue to operate their businesses and
manage their properties as debtors-in-possession pursuant to the
Bankruptcy Code. The Debtors filing for Chapter 11
represented an Event of Default under each of the Debtors
financing facilities. Under bankruptcy law, the Debtors are not
permitted to make scheduled principal and interest payments
unless specifically ordered by the Court.




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

Not applicable.




Item 5.     Other
Information

Not applicable.




Item 6.     Exhibits
and Reports on Form 8-K

(a) Exhibits

|        |     |             |  |                                                                                                                                                                                                                                                                                                                                                                                 
|------- | --- | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |     |            
|Number  |     | Description
|        |     |            
|        | 4.1 |             |  | Collateral Agreement, dated as of August 20,
    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
    Corporations Form 10-K for the year ended
    December 31, 2001).
|        | 4.2 |             |  | 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 Corporations
    Form 10-K for the year ended December 31, 2001).                                                                                       
|        | 4.3 |             |  | Agreement, dated as of August 30, 2001,
    among ANC Rental Corporation and Liberty Mutual Insurance
    Company. (incorporated by reference to Exhibit 4.47 to ANC
    Rental Corporations Form 10-K for the year ended
    December 31, 2001).                                                                                                                              
|        | 4.4 |             |  | Surety Bond Guarantee and Assumption Agreement,
    dated as of August 30, 2001, by certain subsidiaries of ANC
    Rental Corporation and AutoNation, Inc. (incorporated by
    reference to Exhibit 4.48 to ANC Rental Corporations
    Form 10-K for the year ended December 31, 2001).                                                                                     
|        | 4.5 |             |  | 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
    Corporations Form 10-K for the year ended
    December 31, 2001).                                                                            

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|        |      |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------- | ---- | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |            
|Number  |      | Description
|        |      |            
|        | 4.6  |             |  | 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 Corporations
    Form 10-K for the year ended December 31, 2001).                                                                     
|        | 4.7  |             |  | 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. Banker Trust
    Company and Congress Financial Corporation (Florida)
    (incorporated by reference to Exhibit 4.51 to ANC Rental
    Corporations Form 10-K for the year ended December
    31, 2001).
|        | 4.8  |             |  | 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 Corporations
    Form 10-K for the year ended December 31, 2001).                                                                          
|        | 4.9  |             |  | Sixteenth 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 4.53 to ANC
    Rental Corporations Form 10-K for the year ended
    December 31, 2001).                                                                    
|        | 4.10 |             |  | 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
    Corporations Form 10-K for the year ended
    December 31, 2001).                                                                                                                                                                                   
|        | 4.11 |             |  | 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 Corporations
    Form 10-K for the year ended December 31, 2001).                                                                                                                                                                 
|        | 4.12 |             |  | 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
    Corporations Form 10-K for the year ended
    December 31, 2001).                                                                                                                                                                                   
|        | 4.13 |             |  | 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 Corporations
    Form 10-K for the year ended December 31, 2001).                                                                                                                                                   
|        | 99.1 |             |  | Risk factors as disclosed in ANC Rental
    Corporations Form 10-K for the year ended
    December 31, 2001.                                                                                                                                                                                                                                                                                                                        

(b) Reports on Form 8-K.

Form 8-K, dated August 2, 2001 (filed
August 2, 2001), Item 9, reporting ANC Rental
Corporations results for the three and six months ended
June 30, 2001 and 2000.

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SIGNATURES

Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto duly
authorized.

|                    |  |                                                                                                                                                     
|------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------
|Dated: May 21, 2002 |  | ANC RENTAL CORPORATION                                                                                                                              
|                   
|                    |  | By: /s/ WAYNE MOORWayne Moor
    Senior Vice President and Chief Financial
    Officer (Principal Financial Officer and Duly
    Authorized Officer)

33