Thrifty Car Rental 2006 Annual Report Download - page 26

Environmental legislation and regulations and related administrative policies have changed rapidly in
recent years. There is a risk that governmental environmental requirements, or enforcement thereof, may
become more stringent in the future and that we may be subject to additional legal proceedings brought
by government agencies or private parties for environmental matters. In addition, there may be additional
locations of which we are currently unaware at which wastes generated by us may have been released or
disposed. In the future, these locations may become the subject of cleanup for which we may be liable, in
whole or part. Accordingly, there can be no assurance that the Company’s future environmental liabilities
will not be material to the Company’s consolidated financial position or results of operations or cash flows.
Vehicle Financing
We depend on the capital markets for financing our vehicles using primarily asset backed financing
programs. We use our cash and letters of credit under our bank loan facility to provide more collateral for
these financing programs at different levels for vehicles covered by manufacturer programs that
guarantee the value of the vehicle at time of sale and vehicles not covered by these manufacturer
programs. The collateral requirements are lower for those vehicles covered by manufacturer programs
particularly when the manufacturer has a strong credit rating. Significant changes to our vehicle mix by
manufacturer or adverse changes to the credit ratings of the related manufacturers could materially
increase the amount of collateral required to finance our vehicle fleet. In addition, any difficulty in
accessing the asset backed financing markets could materially impact our ability or the cost of financing
our vehicle fleet.
Interest Rates
We incur a large amount of debt to purchase vehicles. While the majority of this debt bears interest at
fixed rates due to our interest rate swap agreements, a portion of this debt bears interest at short-term
floating rates. Therefore, we are exposed to increases in interest rates. The amount of our financing
costs affects the amount we must charge our customers to be profitable. Increased interest rates could
have a material adverse impact on our results of operations if we are unable to pass increased financing
costs through to our customers or if we lose customers to competitors due to increased rental rates
resulting from an increase in our financing costs.
Outsourcing of Information Technology
On August 1, 2006, we signed an agreement with EDS to handle a range of our information technology
services beginning October 1, 2006. If EDS fails to meet our required information technology needs due
to a lack of technical ability or financial condition or otherwise, we may suffer a loss of business
functionality and productivity, which would adversely affect our results. Additionally, if there is a disruption
in our relationship with EDS, we may not be able to secure another IT supplier to adequately meet our
information technology needs on acceptable terms, which could result in performance issues and a
significant increase in costs.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
The Company owns its headquarters located at 5330 East 31st Street, Tulsa, Oklahoma. This location is
a three building office complex that houses the headquarters and Tulsa reservation centers for Dollar and
Thrifty. These buildings and the related improvements were mortgaged in December 1997 to Credit
Suisse, as administrative agent for a syndicate of banks. The mortgage was executed in connection with
the Revolving Credit Facility, as described in “Management’s Discussion and Analysis of Financial
Condition and Results of Operation - Liquidity and Capital Resources”.
In connection with the Revolving Credit Facility, the Company also executed mortgages in favor of Credit
Suisse encumbering its real property located in Tampa, Las Vegas, Ft. Lauderdale, Dallas, Houston and
Salt Lake City.
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