Thrifty Car Rental 2008 Annual Report Download - page 35

Significant fluctuations within direct vehicle and operating expense in 2008 primarily resulted from the
following:
¾ Vehicle related costs increased $15.3 million. This increase resulted primarily from higher fuel
expense of $11.1 million resulting from higher average gas prices on fuel inventory consumed,
increased fuel consumption associated with the transportation of vehicles to auction, and a
significant increase in fuel expense in conjunction with the reduction of the fleet. In addition,
vehicle maintenance expense increased $5.2 million and vehicle insurance expense increased
$3.0 million. These increases were partially offset by a decrease in net vehicle damage of $7.5
million. All other fleet related expenses increased $3.5 million.
¾ Bad debt expense increased $6.7 million of which $5.5 million relates to one of the Company’s
largest tour operators filing for bankruptcy during the third quarter of 2008.
¾ Facility and airport concession expenses increased $1.1 million. This increase primarily resulted
from increases in rent expense of $2.6 million, partially offset by a decrease in concession fees of
$1.4 million, which are primarily based on a percentage of revenue generated from the airport
facility.
¾ Personnel related expenses decreased $20.0 million. The decrease primarily resulted from a
transaction driven reduction in the number of employees, resulting in a decrease of $24.4 million,
partially offset by a $7.4 million increase in salary cost. Additionally, there was a decrease of $2.9
million in 401(k) expense due to the suspension of matching contributions that began during the
first quarter of 2008.
Net vehicle depreciation and lease charges increased $61.5 million. Net vehicle depreciation expense
and lease charges were $363 per unit in 2008, compared to $311 per unit in 2007. As a percent of
revenue, net vehicle depreciation expense and lease charges were 31.8% in 2008, compared to 27.1% in
2007.
The increase in net vehicle depreciation and lease charges in 2008 resulted from the following:
¾ Vehicle depreciation expense increased $45.3 million, resulting primarily from a 12.9% increase
in the average depreciation rate due to vehicle manufacturer price increases on Program
Vehicles and lower residual values on Non-Program Vehicles due to a soft used car market.
These increases were partially offset by a higher mix of Non-Program Vehicles, which typically
have lower depreciation rates, and resolving outstanding incentive negotiations relating to prior
model years with the Company’s primary vehicle supplier, which resulted in increased incentive
income recognition.
¾ Net vehicle gains on the disposal of Non-Program Vehicles, which reduce vehicle depreciation
and lease charges, decreased $17.9 million. This decrease resulted primarily from significantly
fewer units sold in 2008, as a result of the longer hold periods, and a lower average gain per unit
due to softness in the used car market.
¾ Leasing charges, for vehicles leased from third parties, decreased $1.7 million due to a decrease
in the average number of vehicles leased.
Selling, general and administrative expenses for 2008 decreased $16.8 million. As a percent of revenue,
selling, general and administrative expenses were 12.6% in 2008, compared to 13.1% in 2007.
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