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Oh Intern Intern Intern, what in the world are you thinking? You believe that you are more in touch with the "real" business world than everyone else. Not to downplay your education, but I think you are bit mislead. A finance degree is a valuable one at this time in our economy, but please do not ramble on as though you have even the slightest idea what the "real" business world is about. You have not entered the real world yet and when you do accept a position outside ERAC, you will see how horrible of a company they are.

Being in finance, you can surely explain this to me. Why is there no IPO on the market for them? Ah yes they tried, but they could not meet the guidelines set for by the GAAP (I am sure you know what that is). The depreciation of 2% on vehicles far exceeds the GAAP of 1.5%. Their questionable accounting practices led to the firing of their CFO (because he questioned ERAC's accounting methods). Interesting how most branches make money off flip. That is because they have the branch absorb too much depreciation and cause a false profit when the vehicle is sold. It is kind of like buying shirt, wearing it a day, saying it is only worth half its value and then reselling it at 3/4 original value and calling that a profit. It is not a profit. It is unethical and most likely illegal. Hence, no IPO for ERAC.

As far as your $60,000/year job in finance, GRAB IT! That sounds like an excellent position. I can see you have some brains, though you can be easily mislead down the improper path. It is incredible that you are young and motivated, but trust me, if you are the least bit intelligent, you would run from ERAC. Look at your higher-ups, do you think that they would have a chance in the "real" business world? Most of them, this has been their only "real" world experience and thus they think it is the best. If you put them in any other organization, they would fail. Trust me, I have seen it. Many L2's and L3's have tried to compete in my marketplace (after being let go due to ESQI) and have fallen flat on their face. It is a great deal harder to manage people's money than it is to sell CDW.

Please feel free to respond. I cannot believe that you are so ingrained with ERAC already. Do not let them fool you into working for them for good.

[chitown1]

Why all the APOLIGIES???!!!!

SEE, That is why people quit!!! Enterprise is second rate outfit whne it comes to giving customers what they want and expect..They expect a nice clean car, not something just in with dirt and chip crumbs in the seat! If you think the employee's do a good job "vacumning", you are in a differnt realm !!!

[Intern]

Originally Posted by GUNIT1

Being in finance, you can surely explain this to me. Why is there no IPO on the market for them? Ah yes they tried, but they could not meet the guidelines set for by the GAAP (I am sure you know what that is). The depreciation of 2% on vehicles far exceeds the GAAP of 1.5%. Their questionable accounting practices led to the firing of their CFO (because he questioned ERAC's accounting methods). Interesting how most branches make money off flip. That is because they have the branch absorb too much depreciation and cause a false profit when the vehicle is sold. It is kind of like buying shirt, wearing it a day, saying it is only worth half its value and then reselling it at 3/4 original value and calling that a profit. It is not a profit. It is unethical and most likely illegal. Hence, no IPO for ERAC.

Although GAAP (Generally Accepted Accounting Principles) has more to deal with accounting majors than finance majors I will try to answer your question the best that I can. I know that there are several different types of depreciation methods such as straight line and accelerated depreciation just to name two. The only GAAP rule that I am aware of allows a vehicle to depreciate over the course of five years. What I do know is that Enterprise is not doing anything illegal. Enterprise does have an accelerated depreciation method when it comes to depreciation of their cars that when they sell the cars the salvage value is higher than the book value. When Enterprise does their taxes they must recognize these gains though. For example, if they have a vehicle that sells for 20,000 and Enterprise has done accelerated depreciation methods to where the book value is 15,000. Not only does Enterprise get taxed from the 20,000 (at a tax rate of 40% would come out to 8,000) but they also get taxed on the difference of the salvage value and book value (5,000 x 40% = 2,000). Combined Enterprise would pay 10,000 in taxes alone on the sale of this car this car. Granted, if you used a depreciation method that was more accurate you would not pay any taxes on gains made from selling the vehicle but during the life of the vehicle you would have. The result in the end is still the same. Enterprise still pays the same in taxes, the governement could care less how you depreciate your asset they are still getting the same amount, whether you want to pay upfront or later is up to you. Depreciating an asset this way obviously shows better numbers when it comes to profits and allows Enterprise to keep that money for a little while which could potentially earn interest. A perfect analogy would be when people fill out their W-2 statements, a person may put one dependent on their W-2 even though they are single and have no true dependents. Up front they get to keep more money when they get their pay checks as oppose to if they had not recognized any dependents. However when they do their taxes the person that filed 0 exemptions will be paying less than the person that put 1 dependent when they didn't have any dependents. The effective result is the same with both people paying the same amount in taxes. It all comes down to whether you want to pay more now or later.

With regards to why Enterprise is private as opposed to being public has more to do with the raising of capital. Corporations go public simply to raise capital at a cheaper cost than by borrowing money. Right now, as far as I know, Enterprise doesn't need to get more capital for business. They are not in a position right now where they need to get capital quickly. Do I think Enterprise will go public in the future? Sure. Essentially all Enterprise has to do is modify their computer program to base depreciation from 1.5% instead of 2% assuming what you are saying is true that the depreciation method they are using is what is holding them back. I do know that one of the GAAP rules when it comes to depreciation is that an asset must be keep for at least one year. You know as well as I that Enterprise doesn't keep most of their vehicles for longer than one year. In that case Enterprise wouldn't have the tax advantage of depreciating their assets thus paying more in the way in taxes at the end of the year. Its not just Enterprise, you know that all other rental car companies are public as of to date. The only reason why Hertz is going public is due to Ford being in some financial trouble and they are trying to raise capital quickly due to their junk bond status by S&P. By selling off the company and getting capital they will ask for a re-evaluation by S&P showing that they have enough capital to cover debt so they can get away from their junk bond status. I hope I was able to answer your question.

Why don't you 2 finance nerds go beat off over your adding machines.

[GUNIT]

Originally Posted by Intern

Although GAAP (Generally Accepted Accounting Principles) has more to deal with accounting majors than finance majors I will try to answer your question the best that I can. I know that there are several different types of depreciation methods such as straight line and accelerated depreciation just to name two. The only GAAP rule that I am aware of allows a vehicle to depreciate over the course of five years. What I do know is that Enterprise is not doing anything illegal. Enterprise does have an accelerated depreciation method when it comes to depreciation of their cars that when they sell the cars the salvage value is higher than the book value. When Enterprise does their taxes they must recognize these gains though. For example, if they have a vehicle that sells for 20,000 and Enterprise has done accelerated depreciation methods to where the book value is 15,000. Not only does Enterprise get taxed from the 20,000 (at a tax rate of 40% would come out to 8,000) but they also get taxed on the difference of the salvage value and book value (5,000 x 40% = 2,000). Combined Enterprise would pay 10,000 in taxes alone on the sale of this car this car. Granted, if you used a depreciation method that was more accurate you would not pay any taxes on gains made from selling the vehicle but during the life of the vehicle you would have. The result in the end is still the same. Enterprise still pays the same in taxes, the governement could care less how you depreciate your asset they are still getting the same amount, whether you want to pay upfront or later is up to you. Depreciating an asset this way obviously shows better numbers when it comes to profits and allows Enterprise to keep that money for a little while which could potentially earn interest. A perfect analogy would be when people fill out their W-2 statements, a person may put one dependent on their W-2 even though they are single and have no true dependents. Up front they get to keep more money when they get their pay checks as oppose to if they had not recognized any dependents. However when they do their taxes the person that filed 0 exemptions will be paying less than the person that put 1 dependent when they didn't have any dependents. The effective result is the same with both people paying the same amount in taxes. It all comes down to whether you want to pay more now or later.

With regards to why Enterprise is private as opposed to being public has more to do with the raising of capital. Corporations go public simply to raise capital at a cheaper cost than by borrowing money. Right now, as far as I know, Enterprise doesn't need to get more capital for business. They are not in a position right now where they need to get capital quickly. Do I think Enterprise will go public in the future? Sure. Essentially all Enterprise has to do is modify their computer program to base depreciation from 1.5% instead of 2% assuming what you are saying is true that the depreciation method they are using is what is holding them back. I do know that one of the GAAP rules when it comes to depreciation is that an asset must be keep for at least one year. You know as well as I that Enterprise doesn't keep most of their vehicles for longer than one year. In that case Enterprise wouldn't have the tax advantage of depreciating their assets thus paying more in the way in taxes at the end of the year. Its not just Enterprise, you know that all other rental car companies are public as of to date. The only reason why Hertz is going public is due to Ford being in some financial trouble and they are trying to raise capital quickly due to their junk bond status by S&P. By selling off the company and getting capital they will ask for a re-evaluation by S&P showing that they have enough capital to cover debt so they can get away from their junk bond status. I hope I was able to answer your question.

Very nice retort intern, but you are forgeting that ERAC did at one time believe and some say still believes that they should go public. With private financial records, and questionable accounting practices they have not been able to go public. Read this article.

http://www.lawmemo.com/docs/mo/dunn.htm

The top brass would have to cut their HUGE commission checks and abide by rules set forth by outside LEGAL organizations. They would hate that.

Hertz is going public because Ford needs money, which is true, but they are also growing, so it is a smart business decision. With the automotive market (especially American companies) on the decline, Ford needs money.

Watch as gas and interest rates rise, ERAC will feel the pinch. Trust me they are profitible now, but the pyramid scheme is falling. Once HLE makes a strong push into the replacement vehicle market, ERAC will stumle.

As for the person with the finance geeks comment, grow up. You will need us when you want a mortgage, plan your retirement or kids college funds, to protect your money when your wife divorces your small minded a$$. So play nice.

I already run all that stuff myself there toughguy, I just think it is funny that you 2 keep beating your chests to see who is tougher in comparing a financial analysis of Enterprise. Let it go.

[Intern]

GUNIT,

I am truly impressed. I read the vast majority of the article that you posted and it was obvious that based solely from the article that Dunn was fired for esentially reporting "bad news" about compensation, depreciation, and how Enterprise would have to organize their financial statements. Kudos to you.

I think the easist way for Enterprise to handle their issues with regards to depreciating vehicles is simply to keep all vehicles for no longer than one year. From what I understand Hertz keeps their cars for shorter periods than we do. By keeping the vehicles for less than one year you eliminate your problems with depreciating the vehicle and regonizing any capital gains (it would eliminate capital gains).

I am sorry if everyone has the impression of me as someone who is a die-hard Enterprise employee that "bleeds green". Im sorry but I am not. I think that Enterprise is a good company that is a leader but wont be for long in the future if they do not constantly make improvements. I would say that Hertz is in a very strong position right now, especially by posting an increase in revenues from the previous year by 28.2% compared to Enterprise's 7.2%.

Im interested to see what happens with Hertz and how the public is going to respond when they are public. I think Ford is smart with how they are going to issue Hertz's stock by just releasing a small piece for the IPO, naturally the stock price will increase after an IPO and Hertz will probably at that point sell issue the remaining amount. It allows them to make a few extra bucks this way compared to releasing 100% of the company at once.

Like it or not, rental cars are nothing more than a commodities based market. The car is essentially the same whether you get the car from Hertz, Enterprise, Avis, etc. Its going to come down to a price war and who has the cheapest price. I hope I am out of Enterprise when it gets to serious crunch time when the rental car industry is making razor thin profits. It is coming for all those that "bleed green".

[FailingEnterpriseAdmin]

Originally Posted by Intern

Like it or not, rental cars are nothing more than a commodities based market. The car is essentially the same whether you get the car from Hertz, Enterprise, Avis, etc. Its going to come down to a price war and who has the cheapest price. I hope I am out of Enterprise when it gets to serious crunch time when the rental car industry is making razor thin profits. It is coming for all those that "bleed green".

I disagree. Customer service is a significant differentiator between rental car companies. I'm gladly paying a higher daily rate at a non-ERAC company because I get such excellent customer service there and such bad service at Enterprise.

For some customers, price may be all that matters. For "road warrior" customers, service is far more important.

Admin

Originally Posted by FailingEnterpriseAdmin

I disagree. Customer service is a significant differentiator between rental car companies. I'm gladly paying a higher daily rate at a non-ERAC company because I get such excellent customer service there and such bad service at Enterprise.

For some customers, price may be all that matters. For "road warrior" customers, service is far more important.

Admin

Admin,

You actually nailed. You got the WHOLE POINT FOR ESQI. In a market where the product is the same, a customer will go for value and service. If they are treated better, they will have no issue paying a slightly higher price. Amazing Admin, it truly is. Now if they would only live by their words...........................what a great dream that is.

GUNIT

[GP51Sux]

Originally Posted by Intern

I think the easist way for Enterprise to handle their issues with regards to depreciating vehicles is simply to keep all vehicles for no longer than one year. From what I understand Hertz keeps their cars for shorter periods than we do. By keeping the vehicles for less than one year you eliminate your problems with depreciating the vehicle and regonizing any capital gains (it would eliminate capital gains).

Some states have regulations on this. I believe here, you have to keep a vehicle over 1 year or pay a HEFTY penalty for the resale. I remember remarketing and car sales always telling me this. However, sometimes (like when the Muranos and Altimas were first hot), that the money made on the sale was huge compared to the unit cost + penalty - depreceation.