Hertz 2012 Annual Report Download - page 43

ITEM 1. BUSINESS (Continued)
December 31, 2012, no customer of HERC accounted for more than 1.5% of HERC’s worldwide rental
revenues. Of HERC’s combined U.S. and Canadian rental revenues for the year ended December 31,
2012, approximately 37% were derived from customers operating in the construction industry (the
majority of which were in the non-residential sector) and approximately 27% 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, 2012, 95% of HERC’s
revenues came from customers who were invoiced by HERC for rental charges, while 5% came from
customers paying with third-party charge, credit or debit cards, cash or used another method of
payment. For the year ended December 31, 2012, 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, 2012, 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 $38,000. As of December 31, 2012, the average age
of HERC’s worldwide rental fleet was 43 months.
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 six countries in Europe, in Afghanistan
and Chile. 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
operations in the United States represented approximately 70% of our worldwide equipment rental
revenues during the year ended December 31, 2012. In the United States and Canada, the other top
national-scale industry participants are United Rentals, Inc., or ‘‘URI,’’ Sunbelt Rentals, Home Depot
Rentals and Aggreko North America. A number of individual Caterpillar, Inc., or ‘‘CAT,’’ dealers also
participate in the equipment rental market in the United States, Canada, France and Spain. In France, the
other principal national-scale industry participants are Loxam, Kiloutou and Laho. Aggreko also
participates in the power generation rental markets in France and Spain. In China, the other principal
19