Hertz 2009 Annual Report Download - page 34

ITEM 1. BUSINESS (Continued)
the cars or equipment we purchase increases, our financial condition and results of operations may be
materially adversely affected.’’
Purchases of cars are financed through cash from operations and by active and ongoing global
borrowing programs. See ‘‘Item 7—Management’s Discussion and Analysis of Financial Condition and
Results of Operations—Liquidity and Capital Resources.’’
We maintain automobile maintenance centers at certain airports and in certain urban and off-airport
areas, which provide maintenance facilities for our car rental fleet. Many of these facilities, which include
sophisticated car diagnostic and repair equipment, are accepted by automobile manufacturers as
eligible to perform and receive reimbursement for warranty work. Collision damage and major repairs
are generally performed by independent contractors.
We dispose of non-program cars, as well as program cars that become ineligible for manufacturer
repurchase or guaranteed depreciation programs, through a variety of disposition channels, including
auctions, brokered sales, sales to wholesalers and dealers and, to a lesser extent and primarily in the
United States, sales at retail through a network of ten company-operated car sales locations dedicated
exclusively to the sale of used cars from our rental fleet. During the year ended December 31, 2009, of
the cars that were not repurchased by manufacturers, we sold approximately 88% at auction or on a
wholesale basis, while approximately 7% were sold at retail and approximately 5% through other
channels.
Licensees
We believe that our extensive worldwide ownership of car rental operations contributes to the
consistency of our high-quality service, cost control, fleet utilization, yield management, competitive
pricing and our ability to offer one-way rentals. However, in certain U.S. and international markets, we
have found it more efficient to utilize independent licensees, which rent cars that they own. Our licensees
operate locations in over 140 countries, including most of the countries where we have company-
operated locations. See ‘‘Item 1A—Risk Factors—Risks Related to Our Business—Maintaining favorable
brand recognition is essential to our success, and failure to do so could materially and adversely affect
our results of operations.’’
We believe that our licensee arrangements are important to our business because they enable us to offer
expanded national and international service and a broader one-way rental program. Licenses are issued
principally by our wholly-owned subsidiaries, Hertz System, Inc., or ‘‘System,’’ in the United States, and
Hertz International, Ltd., or ‘‘HIL,’’ in countries outside of the United States under franchise
arrangements to independent licensees and affiliates who are engaged in the car rental business in the
United States and in many other countries.
Licensees generally pay fees based on a percentage of their revenues or the number of cars they
operate. The operations of all licensees, including the purchase and ownership of vehicles, are financed
independently by the licensees, and we do not have any investment interest in the licensees or their
fleets. System licensees share in the cost of our U.S. advertising program, reservations system, sales
force and certain other services. Our European and other international licensees also share in the cost of
our reservations system, sales force and certain other services. In return, licensees are provided the use
of the Hertz brand name, management and administrative assistance and training, reservations through
our reservations channels, the Hertz #1 Club and #1 Club Gold programs, our ‘‘Rent-it-Here/
Leave-it-There’’ one-way rental program and other services. In addition to car rental, certain licensees
outside the United States engage in car leasing, chauffeur-driven rentals and renting camper vans under
the Hertz name.
14