Thrifty Car Rental 2006 Annual Report Download - page 62

6. REVENUE–EARNING VEHICLES
Revenue-earning vehicles consist of the following:
2006 2005
Revenue-earning vehicles 2,834,060$ 2,354,426$
Less accumulated depreciation (210,341) (151,536)
2,623,719$ 2,202,890$
December 31,
(In Thousands)
Dollar and Thrifty entered into U.S. vehicle supply agreements (the “VSA”) with DaimlerChrysler,
which commenced with the 1997 model year and have been extended or renewed as applicable to
cover all model years since inception in 1997. The VSA provides that the Company will purchase at
least 75% of its vehicles from DaimlerChrysler until a certain minimum level is reached, of which
80% will be Program Vehicles and 20% will be Non-Program. In September 2006, the VSA was
amended to enable the Company to acquire vehicles through the 2011 model year. Under the terms
of the VSA, Dollar and Thrifty will advertise and promote DaimlerChrysler products exclusively, and
the Company will receive promotional payments from DaimlerChrysler for each model year.
Purchases of revenue–earning vehicles from DaimlerChrysler were $3,714,080,000, $3,454,082,000
and $3,008,813,000 during 2006, 2005 and 2004, respectively.
Vehicle acquisition terms provide for guaranteed residual values in the U.S. or buybacks in Canada
on the majority of vehicles, under specified conditions. Guaranteed residual and buyback payments
provide the Company sufficient proceeds on disposition of revenue-earning vehicles to realize the
carrying value of these vehicles. Payments received are included in proceeds from sales of
revenue-earning vehicles and applied against the related receivables reflected in Due from
DaimlerChrysler within Receivables, net on the balance sheet (Note 5). Additionally, the Company
receives other incentives primarily related to the disposal of revenue-earning vehicles, which
amounts have been reflected as offsets to vehicle depreciation expense in the consolidated
statements of income. Promotional payments received under the VSA are recognized as a reduction
of the cost of the vehicles when acquired. The Company also receives interest reimbursement for
Program Vehicles while at auction and for certain delivery related interest costs, which amounts are
reflected as offsets in interest expense, net. The aggregate amount of payments recognized from
DaimlerChrysler for guaranteed residual value program payments, promotional payments, interest
reimbursement and other incentives, other than recovery costs, totaled $784,595,000, $842,071,000
and $848,518,000 in 2006, 2005 and 2004, respectively, of which a substantial portion of the
payments relate to the Company’s guaranteed residual value program and are included in Due from
DaimlerChrysler within Receivables, net on the consolidated balance sheet. Buyback payments
received from the Canadian subsidiary of DaimlerChrysler were $172,191,000, $154,029,000 and
$138,069,000 in 2006, 2005 and 2004, respectively, and are included in Due from DaimlerChrysler
within Receivables, net on the consolidated balance sheet.
Additionally, the Company acquires both Program and Non-Program Vehicles from other
manufacturers. Rent expense for vehicles leased from other vehicle manufacturers and third parties
under operating leases was $7,146,000, $9,556,000 and $16,921,000 for 2006, 2005 and 2004,
respectively, and is included in vehicle depreciation and lease charges, net. Amounts due over the
next five years for vehicles under operating leases with terms greater than one year total $3,754,000
and are payable as $2,591,000 in 2007, $966,000 in 2008, $197,000 in 2009, and no amounts due
in 2010 or 2011.
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