Hertz 2013 Annual Report Download - page 18

Table of Contents
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Customers
HERC's customers consist predominantly of commercial accounts and represent a wide variety of industries, such as construction,
petrochemical, automobile manufacturing, railroad, power generation, shipbuilding and entertainment and special events. Serving a number
of different industries enables HERC to reduce its dependence on a single or limited number of customers in the same business and
somewhat reduces the seasonality of HERC's revenues and its dependence on construction cycles. HERC primarily targets customers in
medium to large metropolitan markets. For the year ended December 31, 2013, no customer of HERC accounted for more than 3% of
HERC's worldwide rental revenues. Of HERC's combined U.S. and Canadian rental revenues for the year ended December 31, 2013,
approximately 38% were derived from customers operating in the construction industry (the majority of which were in the non-residential
sector) and approximately 26% 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, 2013,
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, 2013, 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, 2013, 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 $39,300. As of December 31, 2013, 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.
Franchisees
HERC licenses the Hertz name to equipment rental businesses in seven countries in Europe, one country in the Middle East, two countries
in Central Asia and two countries in Central and South America. The terms of those licenses are broadly similar to those we grant to our
international car rental franchisees.
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 71% of our worldwide equipment rental revenues during the year ended December 31, 2013. 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 national-scale industry
participants are Zicheng Corporation, Aggreko, Jin He Yuan, Lei Shing Hong and Far East Rental. In Saudi Arabia, the other principal
national-scale industry participants are Bin Quraya, Al Zahid Tractors (CAT), Saudi Diesel, Rapid Access, Eastern Arabia and Rental
Solutions & Services (RSS) Saudi Ltd.
Competition in the equipment rental industry is intense, and it often takes the form of price competition. HERC's competitors, some of which
may have access to substantial capital, may seek to compete aggressively on the basis of pricing. To the extent that HERC matches
downward competitor pricing without reducing our operating costs, it could have an adverse impact on our results of operations. We believe
that HERC's competitive success has been primarily the product of its approximately 50 years of experience in the equipment rental industry,
its systems and procedures for monitoring, controlling and developing its branch network, its capacity to maintain a comprehensive rental
fleet, the quality of its sales force and its established national accounts program.
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Source: HERTZ CORP, 10-K, March 31, 2014 Powered by Morningstar® Document Research℠
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