Dollar Rent A Car 2011 Annual Report Download - page 85

The Company is a defendant in several class action lawsuits in California and one in Colorado. The California lawsuits allege that the pass through of
the California trade and tourism commission and airport concession fees violate antitrust laws and various other rights and laws by compelling out-of-
state visitors to subsidize the passenger car rental tourism assessment program, violation of the California Business and Professions Code breach of
contract. The Company has accrued a contingency related to the preliminary settlement.
The Colorado lawsuit alleges violation of the Colorado Consumer Protection Act. The lawsuit in Colorado was dismissed with prejudice in July 2010
and the plaintiffs filed a notice of appeal in August 2010. Appellate briefing was completed on May 16, 2011 and oral argument on the appeal occurred
on December 6, 2011, and the parties are awaiting a ruling. The Company intends to vigorously defend these matters. Given the inherent uncertainties
of litigation, the Company cannot predict the ultimate outcome or reasonably estimate the amount of ultimate loss that may arise from these lawsuits.
Various other legal actions, claims and governmental inquiries and proceedings have been in the past, or may be in the future, asserted or instituted
against the Company, including other purported class actions or proceedings relating to the Hertz transaction terminated in October 2010 or a potential
acquisition transaction, and some that may demand large monetary damages or other relief which could result in significant expenditures. Litigation is
subject to many uncertainties and is inherently unpredictable. The Company is also subject to potential liability related to environmental matters. The
Company establishes reserves for litigation and environmental matters when the loss is probable and reasonably estimable. It is reasonably possible
that the final resolution of some of these matters may require the Company to make expenditures in excess of established reserves. The term
“reasonably possible” is used herein to mean that the chance of a future transaction or event occurring is more than remote but less than probable. The
Company evaluates developments in its legal matters that could affect the amount of previously accrued reserves and makes adjustments as
appropriate. Significant judgment is required to determine both likelihood of a further loss and the estimated amount of the loss. With respect to
outstanding litigation and environmental matters, based on current knowledge, the Company believes that the amount or range of reasonably possible
loss will not, either individually or in the aggregate, have a material adverse effect on its business or consolidated financial statements. However, the
outcome of such legal matters is inherently unpredictable and subject to significant uncertainties.
Other
On April 4, 2011, the Company and HP Enterprise Services, LLC (“HP”) entered into a three and one-half year data processing service agreement (the
“Service Agreement”), which requires annual payments of approximately $20 million for 2012 and 2013 and approximately $10 million for 2014. The
Company also has a telecommunications contract which will require annual payments totaling $1.2 million for 2012. Additionally, the Company has
software and hardware maintenance agreements which require annual payments totaling approximately $2.1 million and $1.5 million for 2012 and
2013, respectively.
In addition to the letters of credit described in Note 8, the Company had letters of credit totaling $4.0 million and $5.5 million at December 31, 2011
and 2010, respectively, which are primarily used to support insurance programs and airport concession obligations in Canada. The Company may
also provide guarantees on behalf of franchisees to support compliance with airport concession bids. Non-performance of the obligation by the
franchisee would trigger the obligation of the Company. At December 31, 2011, there were no such guarantees on behalf of franchisees.
At December 31, 2011, the Company had outstanding vehicle purchase commitments of approximately $1.3 billion over the next 12 months.
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