Hertz 2007 Annual Report Download - page 183

HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 14—Related Party Transactions
Relationship with Ford
Prior to the Acquisition, we were an indirect, wholly-owned subsidiary of Ford. We and certain of our
subsidiaries had entered into contracts, or other transactions or relationships, with Ford or subsidiaries
of Ford, the most significant of which are described below.
Car purchases/repurchases and advertising arrangements
Over the three years ended December 31, 2007, on a weighted average basis, approximately 35% of the
cars acquired by us for our U.S. car rental fleet, and approximately 30% of the cars acquired by us for our
international fleet, were manufactured by Ford and its subsidiaries. During the year ended December 31,
2007, approximately 24% of the cars we acquired domestically were manufactured by Ford and
subsidiaries and approximately 25% of the cars we acquired for our international fleet were
manufactured by Ford and its subsidiaries.
On July 5, 2005, Hertz, one of its wholly-owned subsidiaries and Ford signed a Master Supply and
Advertising Agreement, effective July 5, 2005 and expiring August 31, 2010, that covers the 2005
through 2010 vehicle model years. This agreement replaces and supersedes previously existing joint
advertising and vehicle supply agreements that would have expired August 31, 2007.
The terms of the Master Supply and Advertising Agreement only apply to our fleet requirements and
advertising in the United States and to Ford, Lincoln or Mercury brand vehicles, or ‘‘Ford Vehicles.’’
Under the Master Supply and Advertising Agreement, Ford has agreed to supply to us and we have
agreed to purchase from Ford, during each of the 2005 through 2010 vehicle model years, a specific
number of Ford Vehicles. Ford has also agreed in the Master Supply and Advertising Agreement to pay
us a contribution toward the cost of our advertising of Ford Vehicles equal to one-half of our total
expenditure on such advertising, up to a specified maximum amount. To be eligible for advertising cost
contribution under the Master Supply and Advertising Agreement, the advertising must meet certain
conditions, including the condition that we feature Ford Vehicles in a manner and with a prominence that
is reasonably satisfactory to Ford. It further provides that the amounts Ford will be obligated to pay to us
for our advertising costs will be increased or reduced according to the number of Ford Vehicles acquired
by us in any model year, provided Ford will not be required to pay any amount for our advertising costs
for any year if the number of Ford Vehicles acquired by us in the corresponding model year is less than a
specified minimum except to the extent that our failure to acquire the specified minimum number of Ford
Vehicles is attributable to the availability of Ford Vehicles or Ford vehicle production is disrupted for
reasons beyond the control of Ford. To the extent we acquire less than a specified minimum number of
Ford Vehicles in any model year, we have agreed to pay Ford a specified amount per vehicle below the
minimum.
The amounts contributed by Ford for the years ended December 31, 2007 and 2006, the Successor
period ended December 31, 2005 and the Predecessor period ended December 20, 2005 were (in
millions of dollars) $24.9, $42.7, $1.3 and $42.4, respectively. The advertising contributions paid by Ford
for the 2007 vehicle model year under the Master Supply and Advertising Agreement were less than the
advertising contributions we received from Ford for the 2006 model year due to a reduction in the
number of Ford Vehicles acquired. We do not expect that the reductions in Ford’s advertising
contributions will have a material adverse effect on our results of operations. We incurred net advertising
expense for the years ended December 31, 2007 and 2006, the Successor period ended December 31,
2005 and the Predecessor period ended December 20, 2005 of (in millions of dollars) $173.5, $154.5,
$5.0 and $159.9, respectively.
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