Hertz 2015 Annual Report Download - page 31

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, the availability of our fleet and the market value of used equipment. If maintenance and repair costs are higher than estimated or
in-service times or market values of used equipment are lower than estimated, our future financial condition, results of operations, liquidity and
cash flows could be adversely affected.
                    


A substantial portion of HERC’s revenues are derived from the rental of equipment in the non-residential construction and industrial end markets,
which are cyclical in nature. The equipment rental 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 HERC’s end markets led to a decrease in the
demand for rental equipment and intensifying price competition from other equipment rental industry participants. In addition, other industries in
which HERC operates, 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. 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 industrial activities, could have an effect on demand for our products and services within those industries and
ultimately could 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, Canada or international markets.


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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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.