Hertz 2014 Annual Report Download - page 32

Table of Contents


                    

As our fleet of rental equipment ages, the cost of maintaining such equipment, if not replaced within a certain period of time, generally increases.
Determining the optimal age at disposition for our rental equipment is subjective and requires considerable estimates by management. We have
made estimates regarding the relationship between the age of our rental equipment, the maintenance and repair costs and the market value of
used equipment. Our future financial condition, results of operations, liquidity and cash flows could be adversely affected because our
maintenance and repair costs may be higher than estimated and market values of used equipment may fluctuate.

                 
                     

A substantial portion of our revenues are derived from the rental of equipment in the non-residential construction and industrial end markets, which
are cyclical in nature. Our industry experienced a decline in construction and industrial activity as a result of the economic downturn that
commenced in the latter part of 2008 and continued through 2010. The weakness in our end markets led to a decrease in the demand for our rental
equipment and intensifying price competition from other equipment rental industry participants. In addition, other industries in which we operate,
such as the oil and gas industry and the entertainment industry, may be subject to different factors and economic cycles that could have an effect
on demand for our products and services within those industries. Recently, declines in oil prices have led to a significant slowdown in activity in
the oil and gas industry, which has negatively affected our rentals to participants in this industry. Decreases in general or industry-specific
economic activity adversely affect our operating results by causing our revenues to decline and, because certain of our costs are fixed, our
operating margins to be reduced. While many areas of the global economy are improving, a slowdown in the economic recovery or worsening of
economic conditions, in particular with respect to North American construction and general industrial activities, could cause weakness in our end
markets and adversely affect our revenues and operating results.
The following factors, among others, may cause weakness in our end markets, either temporarily or long-term:
a decrease in expected levels of infrastructure spending;
a decrease in the expected levels of rental versus ownership of equipment;
a lack of availability of credit;
an increase in the cost of construction materials;
an increase in interest rates;
adverse weather conditions, which may temporarily affect a particular region; or
terrorism or hostilities involving the United States or Canada.


We are continuing to implement initiatives to reduce our operating expenses. These initiatives may include headcount reductions, business
process outsourcing, business process re-engineering, internal reorganization and other expense controls. We cannot assure you that our cost
reduction initiatives will achieve any further success. Whether or not successful, our cost reduction initiatives involve significant expenses and we
expect to incur further expenses associated with these initiatives, some of which may be material in the period in which they are incurred.
Even if we achieve further success with our cost reduction initiatives, we face risks associated with our initiatives, including declines in employee
morale or the level of customer service we provide, the efficiency of our operations or the effectiveness of our internal controls. Any of these risks
could have a material adverse impact on our results of operations, financial condition, liquidity and cash flows.
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Source: HERTZ GLOBAL HOLDINGS INC, 10-K, July 16, 2015 Powered by Morningstar® Document Research℠
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