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UNITED STATES

FORM 10-Q

Commission file number 0-30776

ANC RENTAL CORPORATION

(Exact name of registrant as specified in its charter)

(954) 320-4000

     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 December 31, 2002, the registrant had outstanding 45,296,139 shares of Common Stock, par value $0.01 per share.

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ANC RENTAL CORPORATION

INDEX

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PART I — FINANCIAL INFORMATION

Item 1.     Financial Statements

ANC RENTAL CORPORATION

The accompanying notes are an integral part of these statements.

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ANC RENTAL CORPORATION

The accompanying notes are an integral part of these statements.

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ANC RENTAL CORPORATION

The accompanying notes are an integral part of this statement.

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ANC RENTAL CORPORATION

The accompanying notes are an integral part of these statements.

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ANC RENTAL CORPORATION

1.     INTERIM FINANCIAL STATEMENTS

      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 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 have 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. These financial statements have also been prepared in accordance with the AICPA’s Statement of Position 90-7, Financial Reporting by Entities in Reorganization Under the Bankruptcy Code (“SOP 90-7”). SOP 90-7 requires segregating pre-petition liabilities that are subject to compromise and identifying all transactions and events that are directly associated with the reorganization of the Company. A certain portion of the liabilities recorded at March 31, 2002 and December 31, 2001, are expected to be subject to compromise. Also in accordance with SOP 90-7, after the filing date, interest is no longer accrued on any unsecured and undersecured debt. For the three months ended March 31, 2002 such interest approximated $0.4 million.

      It should be noted that these Condensed Consolidated Financial Statements have been prepared on a going concern basis, which contemplates continuity of operations, realization of assets, and payment of liabilities in the ordinary course of business 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 concerns about the Company’s ability to continue as a going concern. 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 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 year ended December 31, 2001.

      Prior to June 30, 2000 the Company was a wholly owned subsidiary of AutoNation, Inc. (“former Parent” or “AutoNation”). On June 30, 2000 AutoNation distributed its interest in the Company to its

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 loss per share is calculated based on the weighted average shares of common stock outstanding during the period. Diluted earnings per share is calculated based on the weighted average shares of common stock outstanding, plus the dilutive effect of stock options, calculated using the treasury stock method, and common stock purchase warrants, calculated using the if-converted method. As of March 31, 2002 the Company had 6.3 million 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 per share for the three month period ended March 31, 2002. In the three months ended March 31, 2001 there were no dilutive effects from common stock purchase warrants, as there were none outstanding.

      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 year financial statements have been reclassified to conform to the current year presentation.

2.     OPERATIONS UNDER 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. 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. 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 and take certain actions to preserve the going concern value of the business, thereby enhancing the prospects of reorganization.

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

      The plan or plans of reorganization, when filed, will set forth the means for treating claims, including liabilities subject to compromise and interests in 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. Other

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

interests such as certain of the pre-petition insurance reserves may need to be addressed and resolved in the ordinary course of business as a result of needing to maintain mandatory insurance coverage or for other compelling business or legal reasons. The Company is in the early stages of formulating a plan of reorganization. The confirmation of any plan or plans of reorganization will require creditor acceptance as required under the Bankruptcy Code and approval of the Bankruptcy Court. Under bankruptcy law, actions by creditors to collect pre-petition indebtedness owed by the Debtors at the filing date are stayed and other pre-petition contractual obligations may not be enforced against the Debtors. The Company has notified all known claimants and historical creditors that the Bankruptcy Court has established a bar date of January 14, 2003. A bar date is the date by which a claimant, whose claim against the Debtors has been listed different in amount or status or omitted from the schedules of liabilities filed by the Debtors with the Bankruptcy Court, must file a claim against the Debtors if the claimant wishes to participate in the chapter 11 case as provided for in any Plan of Reorganization. In addition, the Debtors have the continuing right, subject to Court approval and other conditions, to assume or reject any pre-petition executory contracts and unexpired leases. Parties affected by these rejections may file claims with the Bankruptcy Court regardless of the bar date. Any damages resulting from rejection of executory contracts and unexpired leases are treated as unsecured pre-petition claims. It should be noted that the amounts of claims filed by creditors could be significantly different from their recorded amounts. Due to material uncertainties, it is not possible to predict the length of time the 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.

      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 that any value will be ascribed to the Company’s common stock in the bankruptcy proceeding.

3.     TRANSITION AND REORGANIZATION EXPENSES

      In an effort to return the Company to profitability, management is implementing a series of transition plans designed to improve the quality of customer service while lowering costs to deliver such service. Transition and reorganization expenses for the three months ended March 31, 2002 are as follows (unaudited):

      As of March 31, 2002 the Company has paid approximately $6.1 million of the total $10.9 million of cash related expenses incurred for the three months ended March 31, 2002.

     Airport Location Consolidation

      At seventy airports including most of the major airports in the United States, Alamo and National operated under 140 separate stand-alone concession agreements as of the date of the bankruptcy filing. The Company plans to consolidate as many of these separately branded locations as possible into dual branded

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

locations. The Company believes that by consolidating operations into one dual branded facility it will be able to lower operating costs and improve vehicle utilization, lower personnel expense, and reduce rent expense. The Company expects to substantially complete its facility consolidation program during the first six months of 2003. Accordingly, the Company has accelerated the amortization on $32.8 million of assets, which will be abandoned, upon consolidation. The excess depreciation charge due to the accelerated amortization approximated $3.1 million per month through August 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 contemplated location consolidations will be completed successfully. As such, the Company may need to change its estimate of assets’ remaining useful lives and revise depreciation policies on a prospective basis. As of November 30, 2002, the Company had dual branded its operations at forty-one of these airports and had received court orders allowing it to dual brand an additional seven airport locations, which it expects to complete by the end of the first quarter