Hertz 2014 Annual Report Download - page 19

Table of Contents


Customers who rent from us for “business” purposes include those who require cars in connection with commercial activities, the activities of
governments and other organizations or for temporary vehicle replacement purposes. Most business customers rent cars from us on terms that we
have negotiated with their employers or other entities with which they are associated, and those terms can differ substantially from the terms on
which we rent cars to the general public. We have negotiated arrangements relating to car rental with many large businesses, governments and
other organizations, including most Fortune 500 companies.
Customers who rent from us for “leisure” purposes include not only individual travelers booking vacation travel rentals with us but also people
renting to meet other personal needs. Leisure rentals, generally, are longer in duration and generate more revenue per transaction than do business
rentals. Leisure rentals also include rentals by customers of U.S. and international tour operators, which are usually a part of tour packages that
can include air travel and hotel accommodations.
Our business and leisure customers rent from both our airport and off airport locations. Demand for airport rentals is correlated with airline travel
patterns, and transaction volumes generally follow enplanement and GDP trends on a global basis. Customers often make reservations for airport
rentals when they book their flight plans, which make our strong relationships with travel agents, associations and other partners (e.g., airlines) a
key competitive advantage in generating consistent and recurring revenue streams.
Off airport rentals include insurance replacements, therefore, we must establish agreements with the referring insurers establishing the relevant
rental terms, including the arrangements made for billing and payment. While we estimate our share of the insurance replacement rental market
was approximately 16% of the estimated insurance rental revenue volume in the U.S. for the year ended December 31, 2014, we have identified
approximately 193 insurance companies, ranging from local or regional carriers to large, national companies, as our target insurance replacement
market. As of December 31, 2014, we were a preferred or recognized supplier of 180 of these approximately 193 insurance companies and a co-
primary at 39 of these approximately 193 insurance companies.

We believe we are one of the largest private sector purchasers of new cars in the world. During the year ended December 31, 2014, we operated a
peak rental fleet in the U.S. of approximately 517,500 cars and a combined peak rental fleet in our international operations of approximately
189,000 cars, and in each case exclusive of our franchisees' fleet and Donlen's leasing fleet. During the year ended December 31, 2014, our
approximate average holding period for a rental car was 20 months in the U.S. and 14 months in our international operations.
The cars we purchase are either program cars or non-program cars. For program cars, under our repurchase programs, the manufacturers agree to
repurchase cars at a specified price or guarantee the depreciation rate on the cars during established repurchase or auction periods, subject to,
among other things, certain car condition, mileage and holding period requirements. Repurchase prices under repurchase programs are based on
either a predetermined percentage of original car cost and the month in which the car is returned or the original capitalized cost less a set daily
depreciation amount. Guaranteed depreciation programs guarantee on an aggregate basis the residual value of the cars covered by the programs
upon sale according to certain parameters which include the holding period, mileage and condition of the cars. These repurchase and guaranteed
depreciation programs limit our residual risk with respect to cars purchased under the programs and allow us to determine depreciation expense in
advance.
Program cars as a percentage of all cars purchased within each of our U.S. and International car rental segments were as follows:












U.S. 49%

18%

19%

45%

54%
International 59%

57%

53%

55%

56%
8
Source: HERTZ GLOBAL HOLDINGS INC, 10-K, July 16, 2015 Powered by Morningstar® Document Research℠
The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,
except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.