Hertz 2010 Annual Report Download - page 73

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
number of part time and seasonal workers. However, certain operating expenses, including rent,
insurance, and administrative overhead, remain fixed and cannot be adjusted for seasonal demand.
As part of our ongoing effort to implement our strategy of reducing operating costs, we have evaluated
our workforce and operations and made adjustments, including headcount reductions and business
process reengineering resulting in optimized work flow at rental locations and maintenance facilities as
well as streamlined our back-office operations and evaluated potential outsourcing opportunities. When
we made adjustments to our workforce and operations, we incurred incremental expenses that delay the
benefit of a more efficient workforce and operating structure, but we believe that increased operating
efficiency and reduced costs associated with the operation of our business are important to our
long-term competitiveness.
During 2007 through 2010, we announced several initiatives to improve our competitiveness and
industry leadership through targeted job reductions. These initiatives included, but were not limited to,
job reductions at our corporate headquarters and back-office operations in the U.S. and Europe. As part
of our re-engineering optimization we outsourced selected functions globally. In addition, we
streamlined operations and reduced costs by initiating the closure of targeted car rental locations and
equipment rental branches throughout the world. The largest of these closures occurred in 2008 which
resulted in closures of approximately 250 off-airport locations and 22 branches in our U.S. equipment
rental business. These initiatives impacted approximately 12,000 employees.
For the years ended December 31, 2010, 2009 and 2008, our consolidated statement of operations
includes restructuring charges relating to various initiatives of $54.7 million, $106.8 million and
$216.2 million, respectively.
See Note 12 of the Notes to our consolidated financial statements included in this Annual Report under
caption ‘‘Item 8—Financial Statements and Supplementary Data.’’
On April 25, 2010, we entered into a definitive merger agreement, or the ‘‘Merger Agreement,’’ under
which we agreed to acquire Dollar Thrifty Automotive Group, Inc. or ‘‘Dollar Thrifty,’’ subject to certain
conditions, including the condition that Dollar Thrifty shareholders vote to adopt the Merger Agreement.
The Merger Agreement was subsequently amended on September 10, 2010, to increase the
consideration payable by us to Dollar Thrifty stockholders. On September 30, 2010, stockholders of
Dollar Thrifty did not vote in favor of the proposal to adopt the Merger Agreement. As a result, on
October 1, 2010, we terminated the Merger Agreement. We incurred legal, accounting, financial advisory
and other expenses of approximately $21.3 million during the year ended December 31, 2010 in
connection with the terminated Dollar Thrifty transaction.
Critical Accounting Policies and Estimates
Our discussion and analysis of financial condition and results of operations are based upon our
consolidated financial statements, which have been prepared in accordance with accounting principles
generally accepted in the United States of America, or ‘‘GAAP.’’ The preparation of these financial
statements requires management to make estimates and judgments that affect the reported amounts in
our financial statements and accompanying notes.
We believe the following critical accounting policies affect the more significant judgments and estimates
used in the preparation of our financial statements and changes in these judgments and estimates may
impact our future results of operations and financial condition. For additional discussion of our
accounting policies, see Note 2 to the Notes to our consolidated financial statements included in this
Annual Report under the caption ‘‘Item 8—Financial Statements and Supplementary Data.’’
49