Thrifty Car Rental 2008 Annual Report Download - page 63

6. REVENUE–EARNING VEHICLES
Revenue-earning vehicles consist of the following:
2008 2007
Revenue-earning vehicles 2,358,573$ 3,085,649$
Less accumulated depreciation (412,494) (277,295)
1,946,079$ 2,808,354$
December 31,
(In Thousands)
Dollar and Thrifty entered into U.S. vehicle supply agreements (the “VSA”) with Chrysler, which
commenced with the 1997 model year. The VSA provides that the Company will purchase at least
75% of its vehicles from Chrysler to obtain the agreed upon incentive payments until a certain
minimum level is reached. 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 Chrysler products exclusively, and the Company will receive promotional
payments from Chrysler for each model year. Purchases of revenue-earning vehicles from Chrysler
were $1.7 billion, $3.4 billion and $3.7 billion during 2008, 2007 and 2006, respectively.
Historically, vehicle acquisition terms provided 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 Chrysler 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 operations. 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 Chrysler for guaranteed residual value program payments, promotional payments,
interest reimbursement and other incentives, other than recovery costs, totaled $670.4 million,
$771.5 million and $784.6 million in 2008, 2007 and 2006, respectively, of which a substantial
portion of the payments relate to the Company’s guaranteed residual value program and are
included in Due from Chrysler within Receivables, net on the consolidated balance sheet. Buyback
payments received from the Canadian subsidiary of Chrysler were $132.9 million, $133.1 million and
$172.2 million in 2008, 2007 and 2006, respectively, and are included in Due from Chrysler within
Receivables, net on the consolidated balance sheet.
Additionally, the Company acquires both Program and Non-Program Vehicles from other
manufacturers. The aggregate amount of payments recognized from all manufacturers other than
Chrysler for buyback or repurchase payments, guaranteed residual value program payments,
interest reimbursement and other incentives, other than recovery costs, totaled $251.1 million,
$188.6 million and $108.4 million in 2008, 2007 and 2006, respectively, of which a substantial
portion of the payments relate to the manufacturers’ buyback programs, and are included in Other
Vehicle Manufacturer Receivables within Receivables, net on the consolidated balance sheet.
Rent expense for vehicles leased from other vehicle manufacturers and third parties under operating
leases was $1.2 million, $2.9 million and $7.1 million for 2008, 2007 and 2006, respectively, and is
included in vehicle depreciation and lease charges, net.
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