Hertz 2008 Annual Report Download - page 42

ITEM 1. BUSINESS (Continued)
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. To
the extent that HERC is not willing to match or remain within a competitive margin of our competitor’s
pricing, it could also have an adverse impact on our results of operations due to lower rental volume. For
the year ended December 31, 2006, we believe industry pricing, improved in the United States, Canada,
France and Spain. For the years ended December 31, 2007 and 2008, based on publicly available
information, we believe the U.S. equipment rental industry experienced downward pricing. HERC
experienced higher equipment rental volumes and pricing worldwide for the years ended December 31,
2006 and 2007, with pricing increases in 2007 attributable to higher price activity in Canada and Europe
offsetting lower price activity in the U.S. HERC experienced lower equipment rental volumes and pricing
worldwide for the year ended December 31, 2008. We believe that HERC’s competitive success has
been primarily the product of its more than 40 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.
Other Operations
Our wholly-owned subsidiary, Hertz Claim Management Corporation, or ‘‘HCM,’’ provides claim
administration services to us and, to a lesser extent, to third parties. These services include investigating,
evaluating, negotiating and disposing of a wide variety of claims, including third-party, first-party, bodily
injury, property damage, general liability and product liability, but not the underwriting of risks. HCM
conducts business at five regional offices in the United States. Separate subsidiaries of ours conduct
similar operations in eight countries in Europe.
Seasonality
Generally, car rental and equipment rental are seasonal businesses, with decreased levels of business in
the winter months and heightened activity during spring and summer. To accommodate increased
demand, we increase our available fleet and staff during the second and third quarters of the year. As
business demand declines, fleet and staff are decreased accordingly. However, certain operating
expenses, including minimum concession fees, real estate taxes, rent, insurance, utilities, maintenance
and other facility-related expenses, the costs of operating our information technology systems and
minimum staffing costs, remain fixed and cannot be adjusted for seasonal demand. See ‘‘Item 1A—Risk
Factors—Risks Related to Our Business—Our business is highly seasonal.’’ The following tables set
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