Hertz 2007 Annual Report Download - page 38

RPD was down less than one percentage point. During the year ended December 31, 2007, we
experienced mid to high single digit volume growth in our European operations and our car rental RPD
was above the level of our RPD during the year ended December 31, 2006.
Our competitors, some of which may have access to substantial capital or which may benefit from lower
operating costs, may seek to compete aggressively on the basis of pricing. To the extent that we match
downward competitor pricing without reducing our operating costs, it could have an adverse impact on
our results of operations. To the extent that we are not willing to match or remain within a reasonable
competitive margin of our competitors’ pricing, it could also have an adverse impact on our results of
operations, as we may lose market share. As a result of increased use of the Internet as a travel
distribution channel, pricing transparency has increased. See ‘‘Item 1A—Risk Factors—Risks Related to
Our Business—We face intense competition that may lead to downward pricing, or an inability to
increase prices, which could have a material adverse impact on our results of operations.’’ We believe,
however, that the prominence and service reputation of the Hertz brand and our extensive worldwide
ownership of car rental operations provide us with a competitive advantage.
Equipment Rental
Operations
We, through HERC, operate an equipment rental business in the United States, Canada, France and
Spain. On the basis of total revenues, we believe HERC is one of the largest equipment rental companies
in the United States and Canada combined and in France and Spain. HERC has operated in the United
States since 1965.
HERC’s principal business is the rental of equipment. HERC offers a broad range of equipment for
rental; major categories include earthmoving equipment, material handling equipment, aerial and
electrical equipment, air compressors, pumps, generators, small tools, compaction equipment and
construction-related trucks.
HERC’s comprehensive line of equipment enables it to supply equipment to a wide variety of customers
from local contractors to large industrial plants. The fact that many larger companies, particularly those
with industrial plant operations, now require single source vendors, not only for equipment rental, but
also for management of their total equipment needs fits well with HERC’s core competencies.
Arrangements with such companies may include maintenance of the tools and equipment they own,
supplies and rental tools for their labor force and custom management reports. HERC supports this
through its dedicated in-plant operations, tool trailers and plant management systems.
As of December 31, 2007, HERC operated 376 equipment rental branches, of which 248 were in 41
states within the United States, 34 were in Canada, 84 were in France and 10 were in Spain. HERC’s
rental locations generally are situated in industrial or commercial zones. A growing number of locations
have highway or major thoroughfare visibility. The typical location is approximately three acres in size,
though smaller in Europe, and includes a customer service center, an equipment service area and
storage facilities for equipment. The branches are built or conform to the specifications of the HERC
prototype branch, which stresses efficiency, safety and environmental compliance. Most branches have
stand-alone maintenance and fueling facilities and showrooms.
During the years ended December 31, 2006 and 2007, HERC added eight and six U.S. locations,
respectively, two and one new Canadian location(s), respectively, and seven and seven locations in
Europe, respectively. HERC expects to add over 30 additional locations worldwide in 2008. In
connection with its U.S. expansion, we expect HERC will incur non-fleet start-up costs of approximately
$0.7 million per location and additional fleet acquisition costs, including costs to transport equipment
from one branch to another, over an initial twelve-month period of approximately $2 to $4 million per
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