Hertz 2007 Annual Report Download - page 83

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis of our results of operations and financial condition includes a
discussion of periods prior to the consummation of the Transactions. Accordingly, the discussion and
analysis of historical periods prior to the year ended December 31, 2006 does not reflect the significant
impact that the Transactions had on us, including significantly increased leverage and liquidity
requirements. The statements in this discussion and analysis regarding industry outlook, our expectations
regarding the performance of our business and the other non-historical statements are forward-looking
statements. These forward-looking statements are subject to numerous risks and uncertainties, including,
but not limited to, the risks and uncertainties described in ‘‘Item 1A—Risk Factors.’’ The following
discussion and analysis provides information that we believe to be relevant to an understanding of our
consolidated financial condition and results of operations. Our actual results may differ materially from
those contained in or implied by any forward-looking statements. You should read the following
discussion together with the sections entitled ‘‘Cautionary Note Regarding Forward-Looking
Statements,’’ ‘‘Item 1A—Risk Factors,’’ ‘‘Item 6—Selected Financial Data’’ and our consolidated financial
statements and related notes included in this Annual Report under the caption ‘‘Item 8—Financial
Statements and Supplementary Data.’’
Overview
We are engaged principally in the business of renting cars and renting equipment.
Our revenues primarily are derived from rental and related charges and consist of:
• Car rental revenues (revenues from all company-operated car rental operations, including
charges to customers for the reimbursement of costs incurred relating to airport concession fees
and vehicle license fees, the fueling of vehicles and the sale of loss or collision damage waivers,
liability insurance coverage and other products);
• Equipment rental revenues (revenues from all company-operated equipment rental operations,
including amounts charged to customers for the fueling and delivery of equipment and sale of
loss damage waivers); and
• Other revenues (fees and certain cost reimbursements from our licensees and revenues from our
car leasing operations and our third-party claim management services).
Our equipment rental business also derives revenues from the sale of new equipment and consumables.
Our expenses primarily consist of:
• Direct operating expenses (primarily wages and related benefits; commissions and concession
fees paid to airport authorities, travel agents and others; facility, self-insurance and reservation
costs; the cost of new equipment and consumables purchased for resale; and other costs relating
to the operation and rental of revenue earning equipment, such as damage, maintenance and
fuel costs);
• Depreciation expense relating to revenue earning equipment (including net gains or losses on the
disposal of such equipment). Revenue earning equipment includes cars and rental equipment;
• Selling, general and administrative expenses (including advertising); and
• Interest expense, net of interest income.
63