Hertz 2012 Annual Report Download - page 98

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
EXPENSES
Years Ended
December 31,
2011 2010 $ Change % Change
(in millions of dollars)
Expenses:
Fleet related expenses ....................... $1,120.6 $1,003.2 $117.4 11.7%
Personnel related expenses ................... 1,478.0 1,411.2 66.8 4.7%
Other direct operating expenses ................ 1,967.8 1,869.0 98.8 5.3%
Direct operating .......................... 4,566.4 4,283.4 283.0 6.6%
Depreciation of revenue earning equipment and
lease charges ........................ 1,905.7 1,868.1 37.6 2.0%
Selling, general and administrative ............ 745.3 664.5 80.8 12.2%
Interest expense .......................... 699.7 773.4 (73.7) (9.5)%
Interest income .......................... (5.5) (12.3) 6.8 (55.3)%
Other (income) expense, net ................. 62.5 — 62.5 NM
Total expenses ........................ $7,974.1 $7,577.1 $397.0 5.2%
Total expenses increased 5.2%, but total expenses as a percentage of revenues decreased from 100.2%
for the year ended December 31, 2010 to 96.1% for the year ended December 31, 2011.
Direct Operating Expenses
Car Rental Segment
Direct operating expenses for our car rental segment of $3,840.3 million for 2011 increased
$235.6 million, or 6.5%, from 2010 as a result of increases in fleet related expenses, other direct
operating expenses and personnel related expenses.
Fleet related expenses for our car rental segment of $926.8 million for 2011 increased
$104.7 million, or 12.7% from 2010. The increase was primarily related to worldwide rental volume
demand which resulted in increases in gasoline costs of $58.4 million, self insurance expenses of
$10.1 million, vehicle license taxes of $7.4 million, vehicle maintenance costs of $6.2 million and
vehicle registration fees of $5.4 million, as well as the effects of foreign currency translation of
approximately $29.4 million. The increase in gasoline costs also related to higher gasoline prices.
These increases were partly offset by a decrease in vehicle damage costs of $11.5 million.
Other direct operating expenses for our car rental segment of $1,695.5 million for 2011 increased
$74.9 million, or 4.6% from 2010. The increase was primarily related to increases in field
administrative expenses of $23.0 million, customer service costs of $13.8 million, third-party claim
management expenses of $12.9 million, concession fees of $12.8 million, computer costs of
$10.1 million, charge card fees of $4.7 million and reservation costs of $4.3 million, as well as the
effects of foreign currency translation of approximately $36.8 million. The increases were primarily a
result of improved worldwide rental volume demand. The increase in field administrative expenses
also related to a reimbursement received from a manufacturer in 2010. The increases in other direct
operating expenses were partly offset by decreases in facilities expenses of $34.8 million, field
systems of $4.7 million and restructuring and restructuring related charges of $2.8 million. The
decrease in facilities expenses primarily related to gains recognized on the sale of certain properties
in 2011.
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