Thrifty Car Rental 2008 Annual Report Download - page 36

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The decrease in selling, general and administrative expenses in 2008 resulted from the following:
¾ Personnel related expenses decreased $7.9 million primarily due to a $4.7 million decrease in
performance share expense related to declining results compared to performance targets for
2008 compared to 2007, a $1.8 million decrease in retirement expense and a $1.4 million
decrease in 401(k) expense due to the suspension of matching contributions during the first
quarter of 2008. These decreases were partially offset by a $1.0 million increase in stock options
expense.
¾ Transition costs relating to the outsourcing of IT and call center operations decreased $4.6
million, including salary related expenses.
¾ Sales and marketing expense decreased $3.2 million due primarily to decreased Internet-related
spending and other marketing related costs.
¾ Software expenses decreased $2.8 million primarily due to a decrease in outsourcing expenses.
¾ Separation costs, primarily related to the elimination of certain positions from the organizational
structure, were lower by $1.0 million.
¾ The change in the market value of investments in the Company’s deferred compensation and
retirement plans increased selling, general and administrative expenses $5.5 million due to a
reduction in the loss on these plans in 2008 compared to 2007, which is offset in other revenue
and, therefore, did not impact net income.
Net interest expense increased $0.8 million in 2008 primarily due to a decrease in interest
reimbursements relating to vehicle programs and lower earnings on invested funds resulting from lower
interest rates, partially offset by lower average vehicle debt. As a percent of revenue, net interest
expense was 6.5% in 2008, compared to 6.3% in 2007.
Goodwill and long-lived asset impairment expense increased $363.1 million in 2008, due to non-cash
charges in 2008 relating to goodwill impairment of $281.2 million, reacquired franchise rights impairment
of $69.0 million, certain IT initiative write-offs of $10.5 million and impairment of substantially all of the
Company’s Canadian operations long-lived assets of $6.1 million. In 2007, the Company wrote-off
certain fleet related software totaling $3.7 million made obsolete by the Pros Fleet Management Software
the Company began implementing during the third quarter of 2007.
The change in fair value of the Company’s interest rate swap agreements was a decrease of $36.1 million
in 2008 compared to a decrease of $39.0 million in 2007 resulting in a year over year increase of $2.9
million.
The income tax benefit for 2008 was $116.4 million. The effective income tax rate was (25.5)% for 2008
compared to 90.5% for 2007. The decrease in the effective tax rate was primarily due to the taxable
benefit related to the pre-tax loss in 2008 compared to pre-tax income in 2007 and the non-cash write-off
of goodwill (of which only a portion of the write-off receives a deferred tax benefit) and other long-lived
assets. The Company reports taxable income for the U.S. and Canada in separate tax jurisdictions and
establishes provisions separately for each jurisdiction. On a separate, domestic basis, the U.S. effective
tax rate approximates the statutory tax rate including the effect of state income taxes and the impact of
establishing valuation allowances for net operating losses that could expire. However, no income tax
benefit was recorded for Canadian losses in 2008, due to an overall pre-tax loss, thus reducing the
consolidated effective tax rate and increasing the consolidated effective tax rate in 2007.
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