Hertz 2008 Annual Report Download - page 109

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
RPD for worldwide car rental was unchanged from 2006, as a slight improvement of 0.9% in international
RPD was offset by a slight decline of 0.4% in U.S. RPD. U.S. airport RPD increased 0.7%, reflecting our
increased pricing, partly offset by a decline in U.S. off-airport RPD of 2.2%, reflecting the continued
growth of longer length, lower RPD business, which has a lower cost profile. Our strategy includes
increasing penetration in the off-airport market and growing the online leisure market, particularly in the
longer length weekly sector, which is characterized by lower vehicle costs and lower transaction costs at
lower RPD. Increasing our penetration in these sectors is consistent with our long term strategy to
generate profitable growth.
Revenues from our equipment rental operations increased 5.0%, due to higher rental volume and
improved pricing worldwide and the effects of foreign currency translation of $34.0 million.
Revenues from all other sources increased 15.0%, primarily due to an increase in car rental licensee
revenue of $13.9 million.
Expenses
Years Ended
December 31,
2007 2006 $ Change % Change
Expenses:
Direct operating ........................... $4,644.1 $4,476.0 $168.1 3.8%
Depreciation of revenue earning equipment ........ 2,003.4 1,757.2 246.2 14.0%
Selling, general and administrative .............. 775.9 723.9 52.0 7.2%
Interest, net of interest income ................. 875.4 900.7 (25.3) (2.8)%
Total expenses ........................... $8,298.8 $7,857.8 $441.0 5.6%
Total expenses increased 5.6%, and total expenses as a percentage of revenues decreased from 97.5%
for the year ended December 31, 2006 to 95.5% in for the year ended December 31, 2007.
Direct operating expenses increased 3.8% as a result of increases in other direct operating expenses,
fleet related expenses and personnel related expenses.
Other direct operating expenses increased $115.3 million, or 6.3%. The increase was primarily
related to an increase in worldwide rental volume including increases in concession fees in our car
rental operations of $45.3 million and commission fees of $30.8 million, restructuring charges of
$41.2 million, and the effects of foreign currency translation of approximately $50.4 million.
Fleet related expenses increased $52.0 million, or 5.0%. The increase was primarily related to an
increase in worldwide rental volume and included increases in self-insurance of $17.9 million,
gasoline costs of $15.5 million, vehicle licenses and taxes of $8.3 million, vehicle registration fees of
$6.5 million and the effects of foreign currency translation of approximately $39.5 million.
Personnel related expenses increased by $0.8 million. The increase was primarily related to
increases in international wages of $32.3 million related to the effects of foreign currency of
$35.2 million and incentive compensation of $7.4 million, partly offset by a decrease in the
employee vacation accrual resulting from a change in our U.S. vacation policy of $29.9 million and a
decrease in U.S. wages of $5.5 million.
Depreciation of revenue earning equipment for our car rental operations of $1,695.4 million for the year
ended December 31, 2007 increased 14.6% from $1,479.6 million for the year ended December 31,
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