Hertz 2011 Annual Report Download - page 78

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Restructuring
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 2011, 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 8,960 employees.
For the years ended December 31, 2011, 2010 and 2009, our consolidated statement of operations
includes restructuring charges relating to various initiatives of $56.4 million, $54.7 million and
$106.8 million, respectively.
Additional efficiency and cost saving initiatives are being developed, however, we presently do not have
firm plans or estimates of any related expenses.
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.’’
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.’’
Revenue Earning Equipment
Our principal assets are revenue earning equipment, which represented approximately 57% of our total
assets as of December 31, 2011. Revenue earning equipment consists of vehicles utilized in our car
rental operations and equipment utilized in our equipment rental operations. For the year ended
December 31, 2011, 48% of the vehicles purchased for our combined U.S. and international car rental
fleets were subject to repurchase by automobile manufacturers under contractual repurchase and
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