Hertz 2009 Annual Report Download - page 94

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
EXPENSES
Years Ended
December 31,
2008 2007 $ Change % Change
(in millions of dollars)
Expenses:
Fleet related expenses ...................... $1,210.9 $1,097.9 $ 113.0 10.3%
Personnel related expenses ................... 1,560.1 1,609.4 (49.3) (3.1)%
Other direct operating expenses ............... 2,159.0 1,936.8 222.2 11.5%
Direct operating .......................... 4,930.0 4,644.1 285.9 6.2%
Depreciation of revenue earning equipment ...... 2,194.2 2,003.4 190.8 9.5%
Selling, general and administrative ............ 769.6 775.9 (6.3) (0.8)%
Interest expense ......................... 870.0 916.7 (46.7) (5.1)%
Interest and other income, net ............... (24.8) (41.3) 16.5 (40.0)%
Impairment charges ....................... 1,168.9 — 1,168.9 100.0%
Total expenses ......................... $9,907.9 $8,298.8 $1,609.1 19.4%
Total expenses increased 19.4%, and total expenses as a percentage of revenues increased from 95.5%
for the year ended December 31, 2007 to 116.2% for the year ended December 31, 2008.
Direct Operating Expenses
Direct operating expenses increased 6.2% as a result of increases in other direct operating expenses
and fleet related expenses, partly offset by a decrease in personnel related expenses.
Other direct operating expenses increased $222.2 million, or 11.5%. The increase was primarily
related to increases in restructuring and restructuring related charges of $144.6 million, facility
expenses of $46.6 million, customer service costs of $14.6 million, commission fees of $14.0 million
and concession fees in our car rental operations of $10.7 million, including the effects of foreign
currency translation of approximately $29.9 million.
Fleet related expenses increased $113.0 million, or 10.3%. The increase was primarily related to
increases in gasoline costs of $64.2 million and vehicle damage and maintenance costs of
$57.4 million, including the effects of foreign currency translation of approximately $27.5 million.
Personnel related expenses decreased by $49.3 million, or 3.1%. The decrease was primarily
related to reductions in U.S. wages of $47.0 million, management incentive compensation costs of
$26.4 million and information technology costs of $10.1 million, partly offset by increases in
international wages and benefits of $24.4 million primarily related to the effects of foreign currency
of approximately $20.9 million and an increase in U.S. benefits of $16.5 million primarily relating to
the decrease in the employee vacation accrual resulting from a change in our U.S. vacation policy in
2007.
Depreciation of Revenue Earning Equipment
Car Rental Segment
Depreciation of revenue earning equipment for our car rental segment of $1,843.8 million for the year
ended December 31, 2008 increased 8.8% from $1,695.4 million for the year ended December 31, 2007.
The increase was primarily due to a $36.6 million net increase in depreciation in certain of our car rental
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