Hertz 2014 Annual Report Download - page 31

Table of Contents


than originally expected without the risk of loss in the event of an economic downturn or to respond to changes in rental demand would be reduced.

                    

If any manufacturer of our program cars does not fulfill its obligations under its repurchase or guaranteed depreciation agreement with us, whether
due to default, reorganization, bankruptcy or otherwise, then we would have to dispose of those program cars without receiving the benefits of the
associated programs (we could be left with a substantial unpaid claim against the manufacturer with respect to program cars that were sold and
returned to the manufacturer but not paid for, or that were sold for less than their agreed repurchase price or guaranteed value) and we would also
be exposed to residual risk with respect to these cars.
The failure by a manufacturer to pay such amounts could cause a credit enhancement deficiency with respect to our asset-backed and asset-
based financing arrangements, requiring us to either reduce the outstanding principal amount of debt or provide more collateral (in the form of cash,
vehicles and/or certain other contractual rights) to the creditors under any such affected arrangement.
If one or more manufacturers were to adversely modify or eliminate repurchase or guaranteed depreciation programs in the future, our access to
and the terms of asset-backed and asset-based debt financing could be adversely affected, which could in turn have a material adverse effect on
our liquidity, cash flows, financial condition and results of operations.

Third-party distribution channels accounted for approximately 50% of our car rental reservations for the year ended December 31, 2014. These
third-party distribution channels include traditional and online travel agencies, third-party internet sites, airlines and hotel companies, marketing
partners such as credit card companies and membership organizations and global distribution systems that allow travel agents, travel service
providers and customers to connect directly to our reservations systems, with the largest source of reservations being global distribution systems.
Loss of access to any of these channels, changes in pricing or commission structures or a reduction in transaction volume could have an adverse
impact on our financial condition or results of operations, particularly if our customers are unable to access our reservation systems through
alternate channels.

The market value of our equipment at the time of its disposition could be less than its estimated residual value or its depreciated value at such
time. A number of factors could affect the value received upon disposition of our equipment, including:
the market price for similar new equipment;
wear and tear on the equipment relative to its age and the performance of preventive maintenance;
the time of year that it is sold;
the supply of used equipment relative to the demand for used equipment, including as a result of changes in economic conditions or
conditions in the markets that we serve; and
the existence and capacities of different sales outlets and our ability to develop and maintain different types of sales outlets.
Since we include in income from operations the difference between the sales price and the depreciated value of an item of equipment sold, a sale
of equipment below its depreciated value could adversely affect our income from operations. Accordingly, our ability to reduce the size of our
equipment rental fleet in the event of an economic downturn or to respond to changes in rental demand is subject to the risk of loss based on the
residual value of rental equipment.
20
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.