Dollar Rent A Car 2011 Annual Report Download - page 23

We are also subject to operational limitations under the terms of our asset-backed financing programs, including percentage limitations on the number
of vehicles purchased from specified manufacturers and on the number of Program Vehicles in the fleet. These may prevent us from making opportunistic
vehicle purchases in order to obtain cost savings that might otherwise be available through a manufacturer subject to the limitations. These limitations could
also impact our targeted fleet mix in ways that adversely affect our results of operations and prospects.
Like-Kind Exchange Program
We use a Like-Kind Exchange Program (hereinafter defined) for our vehicles where we dispose of our vehicles and acquire replacement vehicles in
such a way that we defer the gain on these dispositions for tax purposes. The use of this Like-Kind Exchange Program has allowed us to defer a material
amount of federal and state income taxes beginning in 2002. In order to obtain the benefit of the deferral of the gains on disposal of our vehicles, we must
acquire replacement vehicles within a specified time frame, and must also maintain or increase the overall size of our fleet comparable to the prior tax year. Our
ability to defer the gains on the disposition of our vehicles under our Like-Kind Exchange Program is affected by significant downsizing of our
fleet. Projection of the results under the Like-Kind Exchange Program is complex, requires numerous assumptions and is not subject to precise
estimation. Actual results depend upon future sale and purchase transactions extending up to 180 days after year-end and actual results may differ from
current projections.
The Company’s ability to continue to defer the reversal of prior period tax deferrals will depend on a number of factors, including the size of the
Company’s fleet, as well as the availability of accelerated depreciation methods in future years. Accordingly, the Company may make material cash federal
income tax payments in future periods.
Seasonality
Our business is subject to seasonal variations in customer demand, with the summer vacation period representing the peak season for vehicle rentals.
Any event that disrupts rental activity, fleet supply, or industry fleet capacity during the second and third quarters could have a disproportionately material
adverse effect on our liquidity, our cash flows and/or our results of operations in those periods and for the full year.
Customer Surcharges
In almost every state, we recover various costs associated with the title and registration of our vehicles and, where permitted, the concession cost
imposed by airport authorities or the owners and/or operators of the premises from which our vehicles are rented. Consistent with industry-wide business
practices, we separately state these additional surcharges in our rental agreements and invoices and disclose the existence of these surcharges to customers
together with an estimated total price, inclusive of these surcharges, in all distribution channels. This standard practice complies with the Federal Trade
Commission Act and has been upheld by several courts. However, there are several legislative proposals in certain states that, if enacted, would define which
surcharges are permissible and establish calculation formulas that may differ from the manner in which we set our surcharges.
Enactment of any of these proposals could restrict our ability to recover all of the surcharges we currently charge and may have a material adverse
impact on our results of operations.
Laws and Regulations
We are subject to a wide variety of laws and regulations in the U.S. and Canada and other jurisdictions in which we operate, and changes in the level
of government regulation of our business have the potential to materially alter our business practices and adversely affect our financial position and results of
operations. Depending on the jurisdiction, those changes may come about through new legislation, the issuance of new laws and regulations or changes in the
interpretation of existing laws and regulations by a court, regulatory body or governmental official.
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