Dollar Rent A Car 2011 Annual Report Download - page 49

With certain other vehicle manufacturers, the entire balance of proceeds from vehicle sales comes directly from the manufacturer. In either case, the
Company bears the risk of collectability on that receivable from the vehicle manufacturer. The Company monitors its vehicle manufacturer
receivables based on time outstanding, manufacturer strength and length of the relationship.
 – The Company self-insures or retains a portion of the exposure for losses related to bodily injury and property damage
liability claims along with the risk retained for the supplemental liability insurance program. The obligation for Vehicle Insurance Reserves
represents an estimate of both reported accident claims not yet paid and claims incurred but not yet reported, up to the Company’s risk retention
level. The Company records expense related to Vehicle Insurance Reserves on a monthly basis based on rental volume and projections of ultimate
losses, expenses, premiums and administrative costs that are derived from historical accident claim experience and trends. Management monitors the
adequacy of the liability and monthly accrual rates based on third-party actuarial analysis of the development of the claim reserves, the accident
claim history and rental volume. Since the ultimate disposition of the claims is uncertain, the likelihood of materially different results is
possible. However, the potential volatility of these estimates is reduced due to the frequency of actuarial reviews and significant historical data
available for similar claims.
 – The Company estimates its consolidated effective state income tax rate using a process that estimates state income taxes by entity and
by tax jurisdiction. Changes in the Company’s operations in these tax jurisdictions may have a material impact on the Company’s effective state
income tax rate and deferred state income tax assets and liabilities. Additionally, the Company records deferred income tax assets and liabilities
based on the temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities by applying
enacted statutory tax rates that management believes will be applicable to future years for these differences. Changes in tax laws and rates in future
periods may materially affect the amount of recorded deferred tax assets and liabilities. The Company also utilizes the Like-Kind Exchange Program
to defer tax basis gains on disposal of eligible revenue-earning vehicles. This Program requires the Company to make material estimates related to
future fleet activity. The Company’s income tax returns are periodically examined by various tax authorities who may challenge the Company’s tax
positions. While the Company believes its tax positions are more likely than not supportable by tax rulings, interpretations, precedents or
administrative practices, there may be instances in which the Company may not succeed in defending a position being examined. Resulting
adjustments could have a material impact on the Company’s financial position or results of operations.
New Accounting Standards
For a discussion on new accounting standards refer to Item 8 - Note 1 of Notes to Consolidated Financial Statements.
2012 Outlook
The Company expects an improving U.S. travel market and a strong used vehicle market in 2012. The Company is providing the following guidance for
2012 with respect to key drivers of its business model:
· Vehicle rental revenues are projected to be up 3 – 5 percent compared to 2011.
· Vehicle depreciation costs for the full year of 2012 are expected to be within a range of $220 to $240 per vehicle per month.
o The Company is utilizing a Manheim index of 124 for the full year of 2012 for purposes of estimating residual values and depreciation
rates.
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