Hertz 2009 Annual Report Download - page 76

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The statements in this discussion and analysis regarding industry outlook, our expectations regarding the
performance of our business and the other non-historical statements are forward-looking statements.
These forward-looking statements are subject to numerous risks and uncertainties, including, but not
limited to, the risks and uncertainties described in ‘‘Item 1A—Risk Factors.’’ The following discussion and
analysis provides information that we believe to be relevant to an understanding of our consolidated
financial condition and results of operations. Our actual results may differ materially from those contained
in or implied by any forward-looking statements. You should read the following discussion and analysis
together with the sections entitled ‘‘Cautionary Note Regarding Forward-Looking Statements,’’
‘‘Item 1A—Risk Factors,’’ ‘‘Item 6—Selected Financial Data’’ and our consolidated financial statements
and related notes included in this Annual Report under the caption ‘‘Item 8—Financial Statements and
Supplementary Data.’’
Overview
We are engaged principally in the business of renting cars and renting equipment.
Our revenues primarily are derived from rental and related charges and consist of:
•Car rental revenues (revenues from all company-operated car rental operations, including
charges to customers for the reimbursement of costs incurred relating to airport concession fees
and vehicle license fees, the fueling of vehicles and the sale of loss or collision damage waivers,
liability insurance coverage and other products);
•Equipment rental revenues (revenues from all company-operated equipment rental operations,
including amounts charged to customers for the fueling and delivery of equipment and sale of
loss damage waivers); and
•Other revenues (fees and certain cost reimbursements from our licensees and revenues from our
car leasing operations and our third-party claim management services).
Our equipment rental business also derives revenues from the sale of new equipment and consumables.
Our expenses primarily consist of:
•Direct operating expenses (primarily wages and related benefits; commissions and concession
fees paid to airport authorities, travel agents and others; facility, self-insurance and reservation
costs; the cost of new equipment and consumables purchased for resale; and other costs relating
to the operation and rental of revenue earning equipment, such as damage, maintenance and
fuel costs);
•Depreciation expense relating to revenue earning equipment (including net gains or losses on the
disposal of such equipment). Revenue earning equipment includes cars and rental equipment;
•Selling, general and administrative expenses (including advertising); and
• Interest expense.
The car and equipment rental industries are significantly influenced by general economic conditions. In
the final three months of 2008 and in 2009, both the car and equipment rental markets experienced
unprecedented declines due to the precipitous slowdown in consumer spending as well as significantly
reduced demand for industrial and construction equipment. The car rental industry is also significantly
influenced by developments in the travel industry, and, particularly, in airline passenger traffic, while the
equipment rental segment is being impacted by the difficult economic and business environment as
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