Hertz 2008 Annual Report Download - page 24

PART I
ITEM 1. BUSINESS
Our Company
We own what we believe is the largest worldwide general use car rental brand and one of the largest
equipment rental businesses in the United States and Canada combined, both based on revenues. Our
Hertz brand name is one of the most recognized in the world, signifying leadership in quality rental
services and products. In our car rental business segment, we and our independent licensees and
associates accept reservations for car rentals at approximately 8,100 locations in approximately 145
countries. We are the only car rental company that has an extensive network of company-operated rental
locations both in the United States and in all major European markets. We maintain the leading airport
car rental brand market share, by overall reported revenues, in the United States and at the 42 major
airports in Europe where we have company-operated locations and data regarding car rental
concessionaire activity is available. We believe that we also maintain the second largest market share, by
revenues, in the off-airport car rental market in the United States. In our equipment rental business
segment, we rent equipment through approximately 345 branches in the United States, Canada, France,
Spain and China, as well as through our international licensees. We and our predecessors have been in
the car rental business since 1918 and in the equipment rental business since 1965. We have a
diversified revenue base and a highly variable cost structure and are able to dynamically manage fleet
capacity, the most significant determinant of our costs. Our revenues have grown at a compound annual
growth rate of 6.8% over the last 20 years, with year-over-year growth in 17 of those 20 years.
The car and equipment rental industries are significantly influenced by general economic conditions.
The car rental industry is also significantly influenced by developments in the travel industry, and,
particularly, in airline passenger traffic. The United States and international markets are currently
experiencing a significant decline in economic activities, including a tightening of credit markets,
reduced airline passenger traffic, reduced consumer spending and volatile fuel prices. During 2008, this
resulted in a rapid decline in the volume of car rental transactions, an increase in depreciation and fleet
related costs as a percentage of revenue, lower industry pricing and lower residual values for the
non-program cars that we sold. See ‘‘Item 7—Management’s Discussion and Analysis of Financial
Condition and Results of Operations’’ in this Annual Report.
Corporate History
Hertz Holdings was incorporated by the Sponsors in Delaware in 2005 to serve as the top-level holding
company for the consolidated Hertz business. Hertz was incorporated in Delaware in 1967. Hertz is a
successor to corporations that have been engaged in the car and truck rental and leasing business since
1918 and the equipment rental business since 1965. Ford acquired an ownership interest in Hertz in
1987. Prior to this, Hertz was a subsidiary of UAL Corporation (formerly Allegis Corporation), which
acquired Hertz’s outstanding capital stock from RCA Corporation in 1985.
The Acquisition
On December 21, 2005, investment funds associated with or designated by the Sponsors, through an
indirect wholly-owned subsidiary of Hertz Holdings, acquired all of Hertz’s common stock from a
subsidiary of Ford in the Acquisition, for aggregate consideration of $4,379 million in cash, debt
refinanced or assumed of $10,116 million and transaction fees and expenses of $447 million. To finance
the cash consideration for the Acquisition, to refinance certain of our existing indebtedness and to pay
related transaction fees and expenses, the Sponsors used:
• equity contributions totaling $2,295 million from the investment funds associated with or
designated by the Sponsors;
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