Hertz 2014 Annual Report Download - page 33

Table of Contents



Our 2014 operating results suffered due to areas of inefficiency within the organization, excess fleet capacity and an aging fleet, which we believe
negatively impacted our market share. We have moved aggressively to pursue opportunities to deliver cost savings, increase our efficiency and
regain customer loyalty. If we are unsuccessful in taking advantage of these opportunities and continue to lose market share, we may be unable to
align our cost structure to lower levels of demand, which could depress our margins. In addition, some internet travel intermediaries use generic
indicators of the type of vehicle (such as “standard” or “compact”) at the expense of brand identification and some intermediaries have launched
their own loyalty programs to develop loyalties to their reservation system rather than to our brands. If the volume of sales made through internet
travel intermediaries increases significantly and consumers develop stronger loyalties to these intermediaries rather than to our brands, our
business and revenues could be harmed. If our market share suffers due to lower levels of customer loyalty, our financial results could continue to
suffer.


We review our goodwill and indefinite lived intangible assets for impairment whenever events or changes in circumstances indicate that the
carrying amount of these assets may not be recoverable and at least annually. If economic deterioration occurs, then we may be required to record
charges for goodwill or indefinite lived intangible asset impairments in the future, which could have a material adverse non-cash impact on our
results of operations.

A significant portion of our annual revenues are generated outside the U.S., and we intend to pursue additional international growth opportunities.
Operating in many different countries exposes us to varying risks, which include: (i) multiple, and sometimes conflicting, foreign regulatory
requirements and laws that are subject to change and are often much different than the domestic laws in the U.S., including laws relating to taxes,
automobile-related liability, insurance rates, insurance products, consumer privacy, data security, employment matters, cost and fee recovery, and
the protection of our trademarks and other intellectual property; (ii) the effect of foreign currency translation risk, as well as limitations on our ability
to repatriate income; (iii) varying tax regimes, including consequences from changes in applicable tax laws; (iv) local ownership or investment
requirements, as well as difficulties in obtaining financing in foreign countries for local operations; and (v) political and economic instability, natural
calamities, war, and terrorism. The effects of these risks may, individually or in the aggregate, materially adversely affect our results of operations,
liquidity, cash flows and ability to diversify internationally.

Our cars may be subject to safety recalls by their manufacturers. A recall may cause us to retrieve cars from renters and decline to rent recalled
cars until we can arrange for the steps described in the recall to be taken. If a large number of cars are the subject of a recall or if needed
replacement parts are not in adequate supply, we may not be able to rent recalled cars for a significant period of time. Those types of disruptions
could jeopardize our ability to fulfill existing contractual commitments or satisfy demand for our vehicles, and could also result in the loss of
business to our competitors. Depending on the severity of any recall, it could materially adversely affect our revenues, create customer service
problems, reduce the residual value of the recalled cars and harm our general reputation.

In recent years our industry has been characterized by rapid changes in technology and customer demands. For example, in recent years, industry
participants have taken advantage of new technologies to improve fleet efficiency, decrease customer wait times and improve customer
satisfaction. Many industries have also seen the entry of new competitors whose businesses are based on emerging mobile platforms. Our ability
to continually improve our current processes and products in response to changes in technology is essential in maintaining our competitive
position and maintaining current levels of customer satisfaction. We may experience technical or other difficulties that could delay or prevent the
development, introduction or marketing of new products or enhanced product offerings.
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Source: HERTZ GLOBAL HOLDINGS INC, 10-K, July 16, 2015 Powered by Morningstar® Document Research℠
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