Dollar Rent A Car 2011 Annual Report Download - page 41

Significant fluctuations within direct vehicle and operating expense in 2010 primarily resulted from the following:
Ø Communications and computer expenses decreased $5.7 million due to cost reduction initiatives.
Ø Vehicle-related costs decreased $5.5 million. This decrease is due primarily to a decrease in vehicle repairs and maintenance expense of $9.5
million, resulting from operating a newer and slightly reduced average fleet in 2010 compared to 2009, a $5.4 million decrease in vehicle insurance
expenses primarily due to a change in insurance reserves resulting from favorable developments in claim history and a $2.3 million decrease in net
vehicle damages resulting from improved damage recovery collections. The decreases were partially offset by a $7.8 million increase in gasoline
expense resulting primarily from higher average gas prices, which is generally recovered in revenues from customers, and a $5.6 million increase
in vehicle tag and tax expense, which is also a result of operating a newer average fleet in 2010 compared to 2009.
Ø Personnel-related expenses decreased $4.9 million. Approximately $3.5 million of the decrease resulted from a reduction in the number of
employees attributable to lower transaction levels and continued cost efficiency initiatives, while the Company also realized a $3.9 million decrease
in group insurance expense due to favorable claims and reductions in personnel. These decreases were partially offset by a $1.6 million increase
in the vacation accrual due to a related policy change beginning in 2010, coupled with a $0.9 million increase in incentive compensation expense
for 2010.
Ø Bad debt expense decreased $3.3 million due to improved collection experience in 2010 and the bankruptcy of one of the Company’s tour operators
in 2009.
Ø Facility and airport concession expenses decreased $1.8 million due to a decrease in rent expense of $1.4 million, primarily due to company-owned
store closures and a decrease in concession fees of $0.4 million.
Ø All other direct vehicle and operating expenses decreased $1.8 million.
Net vehicle depreciation and lease charges decreased $126.9 million. As a percent of revenue, net vehicle depreciation expense and lease charges were 19.5% in
2010, compared to 27.6% in 2009.
The decrease in net vehicle depreciation and lease charges resulted from the following:
Ø Ø Vehicle depreciation expense decreased $98.5 million, primarily resulting from a 19.8% decrease in the average depreciation rate due to
significantly improved conditions in the used car market, extended vehicle holding periods, fleet consisting of various vehicle manufacturers and
of more diversified vehicle types, and process improvements made by the Company in vehicle remarketing practices, coupled with a 2.0%
decrease in the average depreciable fleet.
Ø Ø Net vehicle gains on disposal of risk vehicles (reductions to net vehicle depreciation and lease charges), which effectively represent revisions to
previous estimates of vehicle depreciation charges by reducing vehicle depreciation and lease charges, increased $28.0 million from a $35.1
million gain in 2009 to a $63.1 million gain in 2010. This increase in gains on vehicle dispositions resulted from more units sold during 2010
and a higher average gain per unit as compared to 2009, attributable to a stronger resale market in 2010 compared to 2009.
Ø Ø Lease charges for vehicles leased from third parties decreased $0.4 million in 2010.
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