Hertz 2010 Annual Report Download - page 52

ITEM 1A. RISK FACTORS (Continued)
from us or disrupting air travel, on which a significant portion of our car rental business relies. In addition,
significant increases in fuel prices or a reduction in fuel supplies could negatively impact our equipment
rental business by increasing the cost of buying new equipment, since fuel is used in the manufacturing
process and in delivering equipment to us, and by reducing the mobility of our fleet, due to higher costs
of transporting equipment between facilities or regions. Accordingly, significant increases in fuel prices
or reduced supplies of fuel could have a material adverse effect on our financial condition and results of
operations.
Our foreign operations expose us to risks that may materially adversely affect our results of
operations.
A significant portion of our annual revenues are generated outside the United States, and we intend to
pursue additional international growth opportunities. Operating in many different countries exposes us
to varying risks, which include: (i) multiple, and sometimes conflicting, foreign regulatory requirements
and laws that are subject to change and are often much different than the domestic laws in the United
States, including laws relating to taxes, automobile-related liability, insurance rates, insurance products,
consumer privacy, data security, employment matters, cost and fee recovery, and the protection of our
trademarks and other intellectual property; (ii) the effect of foreign currency translation risk, as well as
limitations on our ability to repatriate income; (iii) varying tax regimes, including consequences from
changes in applicable tax laws; (iv) local ownership or investment requirements, as well as difficulties in
obtaining financing in foreign countries for local operations; and (v) political and economic instability,
natural calamities, war, and terrorism. The effects of these risks may, individually or in the aggregate,
materially adversely affect our results of operations and ability to diversify internationally.
Manufacturer safety recalls could create risks to our business.
Our cars may be subject to safety recalls by their manufacturers. A recall may cause us to retrieve cars
from renters and decline to rent recalled cars until we can arrange for the steps described in the recall to
be taken. We could also face liability claims if a recall affects cars that we have sold. If a large number of
cars are the subject of a recall or if needed replacement parts are not in adequate supply, we may not be
able to rent recalled cars for a significant period of time. Those types of disruptions could jeopardize our
ability to fulfill existing contractual commitments or satisfy demand for our vehicles, and could also result
in the loss of business to our competitors. Depending on the severity of any recall, it could materially
adversely affect our revenues, create customer service problems, reduce the residual value of the
recalled cars and harm our general reputation.
Our business is heavily reliant upon communications networks and centralized information
technology systems and the concentration of our systems creates risks for us.
We rely heavily on communication networks and information technology systems to accept
reservations, process rental and sales transactions, manage our fleets of cars and equipment, account
for our activities and otherwise conduct our business. Our reliance on these networks and systems
exposes us to various risks that could cause a loss of reservations, interfere with our ability to manage
our fleet, slow rental and sales processes and otherwise materially adversely affect our ability to manage
our business effectively. We have centralized our reservations function for the United States in one facility
in Oklahoma City, Oklahoma, and we have concentrated our accounting functions for the United States
in two facilities in Oklahoma City. Our reservations and accounting functions for our European
operations are similarly centralized in a single facility near Dublin, Ireland. In addition, our major
information technology systems are centralized in two facilities in Oklahoma City. Any disruption,
termination or substandard provision of these services, whether as the result of localized conditions
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