Hertz 2008 Annual Report Download - page 66

ITEM 1A. RISK FACTORS (Continued)
acquire a business similar to our car rental or equipment rental operations. Given that we are not wholly-
owned by any one of the three Sponsors, the Sponsors may be inclined to direct relevant corporate
opportunities to entities which they control individually rather than to us. So long as investment funds
associated with or designated by the Sponsors continue to indirectly own a significant amount of the
outstanding shares of our common stock, even if that amount is less than 50%, the Sponsors will
continue to be able to strongly influence or effectively control our decisions. While we have adopted a
code of ethics and business conduct that applies to all of our directors, it does not preclude the
Sponsors from becoming engaged in businesses that compete with us or preclude our directors from
taking advantage of business opportunities other than those made available to them through the use of
their position as directors or the use of our property. In addition, our amended and restated certificate of
incorporation provides that the Sponsors are under no obligation to communicate or offer any corporate
opportunity to us, even if such opportunity might reasonably have been expected to be of interest to us
or our subsidiaries. See Note 14 to the Notes to our consolidated financial statements included in this
Annual Report under caption ‘‘Item 8—Financial Statements and Supplemental Data.’’
Risks Relating to Our Substantial Indebtedness
We have substantial debt and may incur substantial additional debt, which could adversely affect
our financial condition, our ability to obtain financing in the future and our ability to react to
changes in our business.
As of December 31, 2008, we had an aggregate principal amount of debt outstanding of
$11,033.9 million and a debt to equity ratio, calculated using the total amount of our outstanding debt net
of unamortized discounts of 7.5 to 1.
Our substantial debt could have important consequences to us. For example, it could:
• make it more difficult for us to satisfy our obligations to the holders of our outstanding debt
securities and to the lenders under our Senior Credit Facilities, the U.S. Fleet Debt, International
Fleet Debt and International ABS Fleet Financing Facility, resulting in possible defaults on and
acceleration of such indebtedness;
• require us to dedicate a substantial portion of our cash flows from operations to make payments
on our debt, which would reduce the availability of our cash flows from operations to fund working
capital, capital expenditures or other general corporate purposes;
• increase our vulnerability to general adverse economic and industry conditions, including interest
rate fluctuations, because a portion of our borrowings, including under the agreements governing
our U.S. Fleet Debt, International Fleet Debt, International ABS Fleet Financing Facility and our
Senior Credit Facilities, are at variable rates of interest;
• place us at a competitive disadvantage to our competitors with proportionately less debt or
comparable debt at more favorable interest rates;
• limit our ability to refinance our existing indebtedness or borrow additional funds in the future;
• limit our flexibility in planning for, or reacting to, changing conditions in our business and industry;
and
• limit our ability to react to competitive pressures, or make it difficult for us to carry out capital
spending that is necessary or important to our growth strategy and our efforts to improve
operating margins.
Any of the foregoing impacts of our substantial indebtedness could have a material adverse effect on our
business, financial condition and results of operations.
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