Hertz 2011 Annual Report Download - page 89

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Fleet related expenses for our equipment rental segment of $193.8 million for 2011 increased
$13.1 million, or 7.2% from 2010. The increase was primarily related to continued aging of the fleet
which resulted in an increase in maintenance costs of $11.2 million and increased worldwide rental
volume resulting in increased freight and delivery costs of $6.5 million, as well as the effects of
foreign currency translation of approximately $2.6 million. These increases were partly offset by
decreases in insurance and licenses of $3.8 million and personal property taxes of $2.6 million.
Personnel related expenses for our equipment rental segment of $222.2 million for 2011 increased
$12.4 million, or 5.9% from 2010. The increase was related to increases in salaries and related
expenses of $9.0 million primarily related to improved results, as well as the effects of foreign
currency translation of approximately $3.3 million.
Depreciation of Revenue Earning Equipment and Lease Charges
Car Rental Segment
Depreciation of revenue earning equipment and lease charges for our car rental segment of
$1,651.4 million for 2011 increased 3.6% from $1,594.6 million for 2010. The increase was primarily due
the effects of foreign currency translation of approximately $34.8 million, a 7.5% increase in average fleet
and an increase due to the acquisition of Donlen and its related depreciation expense of $117.0 million.
The increase was partly offset by an improvement in certain vehicle residual values and a change in mix
of vehicles.
Equipment Rental Segment
Depreciation of revenue earning equipment and lease charges in our equipment rental segment of
$254.3 million for 2011 decreased 7.0% from $273.5 million for 2010. The decrease was primarily due to
higher residual values on the disposal of used equipment, partly offset by a 2.6% increase in the average
acquisition cost of rental equipment operated during the period and the effects of foreign currency
translation of approximately $3.1 million.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 12.2%, due to increases in administrative, sales
promotion and advertising expenses.
Administrative expenses increased $54.5 million, or 13.6%, primarily due to increases in salaries
and related expenses of $34.0 million, consulting expenses of $8.8 million, travel and entertainment
expenses of $3.5 million and legal expense of $2.5 million, as well as the effects of foreign currency
translation of approximately $8.4 million, partly offset by a decrease in unrealized loss on derivatives
of $3.4 million.
Sales promotion expenses increased $14.3 million, or 11.1%, primarily related to increases in sales
salaries and commissions due to improved results, as well as the effects of foreign currency
translation of approximately $2.7 million.
Advertising expenses increased $12.0 million, or 9.0%, primarily due to increased media and
production related to the new campaign (‘‘Gas and Brake’’), as well as the effects of foreign
currency translation of approximately $4.3 million.
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