Hertz 2009 Annual Report Download - page 39

ITEM 1. BUSINESS (Continued)
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 seven countries in Europe and Africa.
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 Spain and 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 67% of our
worldwide equipment rental revenues during the year ended December 31, 2009. In the United States
and Canada, the other top national-scale industry participants are United Rentals, Inc., or ‘‘URI,’’ RSC
Equipment Rental, Inc., or ‘‘RSC,’’ and Sunbelt 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, Kiloutou and Laho.
Competition in the equipment rental industry is intense, and it often takes the form of price competition.
HERC’s competitors, some of which may have access to substantial capital, may seek to compete
aggressively on the basis of pricing. To the extent that HERC matches downward competitor pricing
without reducing our operating costs, it could have an adverse impact on our results of operations. For
the years ended December 31, 2007, 2008 and 2009, based on publicly available information, we believe
the U.S. equipment rental industry experienced downward pricing. HERC experienced higher
equipment rental volumes and pricing worldwide for the year ended December 31, 2007, with pricing
increases attributable to higher price activity in Canada and Europe offsetting lower price activity in the
U.S. HERC experienced lower equipment rental volumes and pricing worldwide for the years ended
December 31, 2008 and 2009. We believe that HERC’s competitive success has been primarily the
product of its more than 40 years of experience in the equipment rental industry, its systems and
procedures for monitoring, controlling and developing its branch network, its capacity to maintain a
comprehensive rental fleet, the quality of its sales force and its established national accounts program.
Other Operations
Our wholly-owned subsidiary, Hertz Claim Management Corporation, or ‘‘HCM,’’ provides claim
administration services to us and, to a lesser extent, to third parties. These services include investigating,
evaluating, negotiating and disposing of a wide variety of claims, including third-party, first-party, bodily
injury, property damage, general liability and product liability, but not the underwriting of risks. HCM
conducts business at five regional offices in the United States. Separate subsidiaries of ours conduct
similar operations in seven countries in Europe.
Seasonality
Generally, car rental and equipment rental are seasonal businesses, with decreased levels of business in
the winter months and heightened activity during spring and summer. To accommodate increased
demand, we increase our available fleet and staff during the second and third quarters of the year. As
business demand declines, fleet and staff are decreased accordingly. However, certain operating
19