What does Dollar Rent A Car consider to be included in 'cash and cash equivalents'?
Dollar_Rent_A_Car Franchise · 2025 FDDAnswer from 2025 FDD Document
Cash and cash equivalents include cash on hand and highly liquid investments with an original maturity of three months or less. The Company's cash and cash equivalents are invested in various investment grade institutional money market funds, and bank money market and interest-bearing accounts.
Restricted cash and cash equivalents include cash and cash equivalents that are not readily available for use in the Company's operating activities. Restricted cash and cash equivalents are primarily comprised of proceeds from the disposition of vehicles pledged under the terms of vehicle debt financing arrangements and are restricted for the purchase of revenue earning vehicles and other specified uses under the vehicle debt facilities, cash utilized as credit enhancement under those arrangements, proceeds from the Term C Loan which are utilized to collateralize letters of credit, and certain cash accounts supporting regulatory reserve requirements related to the Company's self-insurance. These funds are primarily held in demand deposit and money market accounts or in highly rated money market funds with investments primarily in government and corporate obligations.
Deposits held at financial institutions may exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand and are maintained with financial institutions with reputable credit and therefore bear minimal credit risk. The Company limits exposure relating to financial instruments by diversifying the financial instruments among various counterparties, which consist of major financial institutions.
Source: Item 23 — RECEIPTS (FDD pages 102–301)
What This Means (2025 FDD)
According to the 2025 Dollar Rent A Car FDD, cash and cash equivalents include cash on hand and highly liquid investments with an original maturity of three months or less. These assets are invested in various investment grade institutional money market funds, as well as bank money market and interest-bearing accounts.
In assessing Dollar Rent A Car's financial health, it's important to distinguish between cash and cash equivalents and restricted cash and cash equivalents. The latter are not readily available for the company's operating activities. These restricted funds primarily consist of proceeds from the disposition of vehicles pledged under debt financing arrangements. These funds are restricted for purchasing revenue-earning vehicles and other specified uses under the vehicle debt facilities. They also include cash used as credit enhancement under those arrangements, proceeds from the Term C Loan used to collateralize letters of credit, and certain cash accounts supporting regulatory reserve requirements related to the company's self-insurance.
The deposits held at financial institutions may exceed the amount of insurance provided on such deposits; however, these deposits are generally redeemable upon demand and maintained with financial institutions with reputable credit, bearing minimal credit risk. Dollar Rent A Car manages its exposure to financial instruments by diversifying them among various counterparties, which consist of major financial institutions.