Thrifty Car Rental 2007 Annual Report Download - page 82

The accrual for Vehicle Insurance Reserves includes amounts for incurred and incurred but not
reported losses. Such liabilities are necessarily based on actuarially determined estimates and
management believes that the amounts accrued are adequate. At December 31, 2007 and 2006,
the public liability and property damage amounts have been discounted at 3.0% and 4.7% (assumed
risk free rate), respectively, based upon the actuarially determined estimated timing of payments to
be made in future years. Discounting resulted in reducing the accrual for public liability and property
damage by $3,351,000 and $5,720,000 at December 31, 2007 and 2006, respectively. SLI amounts
are not discounted. Estimated future payments of Vehicle Insurance Reserves as of December 31,
2007 are as follows (in thousands):
2008 35,008$
2009 16,905
2010 11,373
2011 6,793
2012 3,617
Thereafter 2,397
Aggregate undiscounted public liability and property damage 76,093
Effect of discounting (3,351)
Public liability and property damage, net of discount 72,742
Supplemental liability insurance 37,292
Total vehicle insurance reserves 110,034$
Contingencies
The Company is a defendant in several class action lawsuits in California. The lawsuits allege that
the Company violated wage and hour laws, including not providing meal and rest breaks, failure to
reimburse uniform maintenance and failure to pay overtime wages and retaliation, that the
Company overcharged customers for certain damage waivers, 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. The Company intends to vigorously defend these matters. As
these cases are in the early stages of the legal process, and 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 claims and legal proceedings have been asserted or instituted against the Company,
including some purporting to be class actions, and some which demand large monetary damages or
other relief which could result in significant expenditures. Litigation is subject to many uncertainties
and the outcome of individual matters is not predictable with assurance. 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, over an extended period of time and in a
range of amounts that cannot be reasonably estimated. 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 likely. Although the final resolution of any such matters could have a material effect on the
Company’s consolidated operating results for the particular reporting period in which an adjustment
of the estimated liability is recorded, the Company believes that any resulting liability should not
materially affect its consolidated financial position.
Other
The Company is party to a data processing services agreement which requires annual payments
totaling approximately $31,000,000 for 2008, $30,000,000 for 2009 and $23,000,000 for 2010 and
2011. The Company also has a telecommunications contract which will require annual payments
totaling $2,000,000 for 2008 and $1,000,000 for 2009. Additionally, the Company has software and
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