Hertz 2008 Annual Report Download - page 41

ITEM 1. BUSINESS (Continued)
Unlike in our car rental business, where we enter into rental agreements with the people who will operate
the cars being rented, HERC ordinarily enters into a rental agreement with the legal entity—typically a
company, governmental body or other organization—seeking to rent HERC’s equipment. Moreover,
unlike in our car rental business, where our cars are normally picked up and dropped off by customers at
our rental locations, HERC delivers much of its rental equipment to its customers’ job sites and retrieves
the equipment from the job sites when the rentals conclude. Finally, unlike in our car rental business,
HERC extends credit terms to many of its customers to pay for rentals. Thus, for the year ended
December 31, 2008, 95% of HERC’s revenues came from customers who were invoiced by HERC for
rental charges, while 4% came from customers paying with third-party charge, credit or debit cards and
1% came from customers who paid with cash or used another method of payment. For the year ended
December 31, 2008, bad debt expense represented 0.6% of HERC’s revenues.
Fleet
HERC acquires its equipment from a variety of manufacturers. The equipment is typically new at the time
of acquisition and is not subject to any repurchase program. The per-unit acquisition cost of units of
rental equipment in HERC’s fleet varies from over $200,000 to under $100. As of December 31, 2008, the
average per-unit acquisition cost (excluding small equipment purchased for less than $5,000 per unit) for
HERC’s fleet in the United States was approximately $36,000. As of December 31, 2008, the average age
of HERC’s rental fleet in the United States was 37 months. We believe that this fleet is one of the youngest
fleets in the industry. Having a younger fleet reduces maintenance expenses, which generally escalate
as equipment ages. As of December 31, 2008, the average age of HERC’s international rental fleet was
35 months in Canada, 31 months in France and Spain and 5 months in China, which we believe is
roughly comparable to or younger than the average ages of the fleets of HERC’s principal competitors in
those countries.
HERC disposes of its used equipment through a variety of channels, including private sales to
customers and other third parties, sales to wholesalers, brokered sales and auctions.
Licensees
HERC licenses the Hertz name to equipment rental businesses in eight countries in Europe and the
Middle East. The terms of those licenses are broadly similar to those we grant to our international car
rental licensees.
Competition
HERC’s competitors in the equipment rental industry range from other large national companies to small
regional and local businesses. In each of the five countries where HERC operates, the equipment rental
industry is highly fragmented, with large numbers of companies operating on a regional or local scale.
The number of industry participants operating on a national scale is, however, much smaller. Other than
in China, HERC is one of the principal national-scale industry participants in the countries where it
operates. HERC’s operations in the United States represented approximately 69% of our worldwide
equipment rental revenues during the year ended December 31, 2008. In the United States and Canada,
the other top five national-scale industry participants are United Rentals, Inc., or ‘‘URI,’’ RSC Equipment
Rental, Inc., or ‘‘RSC,’’ Sunbelt Rentals, Home Depot Rentals and NES Rentals. A number of individual
Caterpillar dealers also participate in the equipment rental market in the United States, Canada, France
and Spain. In France, the other principal national-scale industry participants are Loxam and Kiloutou,
while in Spain, the other principal national-scale industry participants are GAM and Hune.
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