Thrifty Car Rental 2009 Annual Report Download - page 72

The fair value of derivative assets and liabilities, consisting of interest rate cap and swaps as
discussed above, is calculated using proprietary models utilizing observable inputs as well as future
assumptions related to interest rates and other applicable variables. These calculations are
performed by the financial institutions which are counterparties to the applicable swap agreements
and reported to the Company on a monthly basis. The Company uses these reported fair values to
adjust the asset or liability as appropriate. The Company evaluates the reasonableness of the
calculations by comparing similar calculations from other counterparties for the applicable period.
The following estimated fair values of financial instruments have been determined by the Company
using available market information and valuation methodologies.
Cash and Cash Equivalents, Cash and Cash Equivalents – Required Minimum Balance,
Restricted Cash and Investments, Receivables, Accounts Payable, Accrued Liabilities and
Vehicle Insurance Reserves – The carrying amounts of these items are a reasonable estimate of
their fair value. The Company maintains its cash and cash equivalents in accounts that may not be
federally insured. The Company has not experienced any losses in such accounts and believes it is
not exposed to significant credit risk.
Debt and Other Obligations – At December 31, 2009, the fair value of the asset backed medium
term notes with fixed interest rates of $110.4 million was more than the carrying value of $110.0
million by approximately $0.4 million. Additionally, the fair value of debt with variable interest rates
of $1.5 billion was less than the carrying value of $1.6 billion by approximately $97.1 million. The
fair values of the asset backed medium term notes were developed using a valuation model that
utilizes current market and industry conditions, assumptions related to the Monolines providing
financial guaranty policies on those notes and the limited market liquidity for such notes.
Additionally, the fair value of the Term Loan was similarly developed using a valuation model and
current market conditions.
Letters of Credit and Surety Bonds – The letters of credit and surety bonds of $147.1 million and
$40.8 million, respectively, have no fair value as they support the Company's corporate operations
and are not anticipated to be drawn upon.
Foreign Currency Translation Risk – A portion of the Company’s debt is denominated in
Canadian dollars, thus, its carrying value is impacted by exchange rate fluctuations. However, this
foreign currency risk is mitigated by the underlying collateral, which is the Canadian fleet.
13. EMPLOYEE BENEFIT PLANS INCLUDING SHARE-BASED PAYMENT PLANS
Employee Benefit Plans
The Company sponsors a retirement savings plan that incorporates the salary reduction provisions
of Section 401(k) of the Internal Revenue Code and covers substantially all employees of the
Company meeting specific age and length of service requirements. In 2007, the Company matched
the employee’s contribution up to 6% of the employee’s eligible compensation in cash, subject to
statutory limitations. Effective February 22, 2008, the Company suspended its employer matching
contribution through December 31, 2008. However, in 2009, the Company re-instituted its match of
the employee’s contribution up to 2% of the employee’s eligible compensation in cash, subject to
statutory limitations.
Contributions expensed by the Company totaled $1.8 million, $1.3 million and $5.4 million in 2009,
2008 and 2007, respectively.
Included in accrued liabilities at December 31, 2009 and 2008 is $2.8 million and $3.0 million,
respectively, for employee health claims which are self-insured by the Company. The accrual
includes amounts for incurred and incurred but not reported claims. The Company expensed $20.2
million, $20.6 million, and $23.1 million for self-insured health claims incurred in 2009, 2008 and
2007, respectively.
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