Hertz 2010 Annual Report Download - page 40

ITEM 1. BUSINESS (Continued)
Customers
HERC’s customers consist predominantly of commercial accounts and represent a wide variety of
industries, such as construction, petrochemical, automobile manufacturing, railroad, power generation
and shipbuilding. Serving a number of different industries enables HERC to reduce its dependence on a
single or limited number of customers in the same business and somewhat reduces the seasonality of
HERC’s revenues and its dependence on construction cycles. HERC primarily targets customers in
medium to large metropolitan markets. For the year ended December 31, 2010, no customer of HERC
accounted for more than 2% of HERC’s rental revenues. Of HERC’s combined U.S. and Canadian rental
revenues for the year ended December 31, 2010, approximately 40% were derived from customers
operating in the construction industry (the majority of which were in the non-residential sector) and
approximately 30% were derived from customers in the industrial business, while the remaining
revenues were derived from rentals to governmental and other types of customers.
Unlike in our car rental business, where we enter into rental agreements with the end-user who will
operate the cars being rented, HERC ordinarily enters into a rental agreement with the legal entity—
typically a company, governmental body or other organization—seeking to rent HERC’s equipment.
Moreover, unlike in our car rental business, where our cars are normally picked up and dropped off by
customers at our rental locations, HERC delivers much of its rental equipment to its customers’ job sites
and retrieves the equipment from the job sites when the rentals conclude. HERC extends credit terms to
many of its customers to pay for rentals. Thus, for the year ended December 31, 2010, 95% of HERC’s
revenues came from customers who were invoiced by HERC for rental charges, while 4% came from
customers paying with third-party charge, credit or debit cards and 1% came from customers who paid
with cash or used another method of payment. For the year ended December 31, 2010, bad debt
expense represented 0.4% of HERC’s revenues.
Fleet
HERC acquires its equipment from a variety of manufacturers. The equipment is typically new at the time
of acquisition and is not subject to any repurchase program. The per-unit acquisition cost of units of
rental equipment in HERC’s fleet varies from over $200,000 to under $100. As of December 31, 2010, the
average per-unit acquisition cost (excluding small equipment purchased for less than $5,000 per unit) for
HERC’s fleet in the United States was approximately $36,000. As of December 31, 2010, the average age
of HERC’s rental fleet in the United States was 50 months, 50 months in Canada, 49 months in France,
31 months in Spain, 21 months in Italy and 19 months in China.
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 five countries in Europe. 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 six 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. HERC is
one of the principal national-scale industry participants in the U.S., Canada and France. HERC’s
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