Thrifty Car Rental 2011 Annual Report Download - page 9

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http://www.dtag.com. The SEC also maintains a Web site that contains all of the Company’s filings at
http://www.sec.gov. Information on the Company’s Web site is not incorporated into this Form 10-K.
The Company has a code of business conduct, which is available on the Company’s Web site under
the heading, “About DTG”. The Company’s Board of Directors has adopted a corporate governance
policy and Board committee charters, which are updated periodically and can be found on the
Company’s Web site under the heading, “Corporate Governance”. A copy of the code of business
conduct, the corporate governance policy and the charters are available without charge upon request
to the Company’s headquarters as listed on the front of this Form 10-K, attention “Investor Relations”
department.
Industry Overview
The Company competes primarily in the U.S. car rental industry. The U.S. daily car rental industry
has two principal markets: the airport market and the local market. Vehicle rental companies that
focus on the airport market rent primarily to leisure and business travelers. Companies focusing on
the local market rent primarily to persons who need a vehicle periodically for personal or business
use or who require a temporary replacement vehicle. Rental companies also sell used vehicles and
ancillary products such as refueling services, navigation systems and loss damage waivers to
vehicle renters. As a general matter, the car rental industry is significantly dependent on conditions
in the overall leisure and business travel markets.
Vehicle rental companies typically incur substantial debt to finance their fleets which makes them
dependent on access to the fleet financing and capital markets to fund operations, and also has a
direct impact on profitability due to the interest costs associated with the debt and fluctuations in
interest rates. Although the fleet financing market has improved significantly since 2009, new
issuances in these markets, including those undertaken by the Company, have required higher
collateral enhancement rates than the industry has faced historically. This increase in collateral
enhancements will have a direct impact on the capital required to support operations in future
periods.
Vehicle rental companies are also dependent on vehicle manufacturers and overall economic
conditions in the new and used vehicle markets, as these factors directly impact the cost of acquiring
vehicles, and the ultimate disposition value of vehicles, both of which impact operating cost.
Historically, rental companies acquired a large portion of their fleets under residual value programs
(“Residual Value Programs”), under which vehicle manufacturers repurchase or guarantee the resale
value of the vehicle in future periods, thereby allowing the rental companies to fix their holding cost
of the vehicle (“Program Vehicles”). Most vehicle rental companies have in recent periods increased
their vehicle purchases made outside of Residual Value Programs to lower fleet costs and reduce
the risk related to the creditworthiness of the vehicle manufacturers, which has increased their
dependence on the used vehicle market in terms of both determining holding cost, and for ultimate
disposition of the vehicles. Vehicle rental companies bear residual value risk for these vehicles,
which are referred to as “Non-Program Vehicles” or “risk vehicles”.
The U.S. rental car industry has nine top brands which are owned by four companies. Three of the
companies are publicly held: Dollar and Thrifty operated by the Company; Avis and Budget operated
by Avis Budget Group, Inc. (“Avis Budget”) and Hertz and Advantage operated by Hertz Global
Holdings, Inc. (“Hertz”). The remaining three brands of Alamo, National and Enterprise are operating
subsidiaries of Enterprise Rent-A-Car Company, which is privately held. The Company also faces
competition from local and regional car rental companies in the United States, some of which have
the ability to impact pricing in numerous large airports in the United States. There is intense
competition in the U.S. car rental industry on the basis of price, service levels, vehicle quality, vehicle
availability and the convenience and condition of rental locations.
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