Dollar Thrifty Automotive 10-Q 2003 Q3 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2003

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-13647

DOLLAR THRIFTY AUTOMOTIVE GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction
of incorporation or organization) 73-1356520
(I.R.S. Employer
Identification No.)

5330 East 31st Street, Tulsa, Oklahoma 74135
(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code:   (918) 660-7700

     Indicate by check mark whether the registrant  (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and  (2) has been subject to such filing requirements for the past 90 days:  Yesx  Noo

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act):  Yesx  Noo

     The number of shares outstanding of the registrant’s Common Stock as of October 31, 2003 was 24,775,397.

DOLLAR THRIFTY AUTOMOTIVE GROUP, INC.

FORM 10-Q

CONTENTS

			Page
PART I  -	FINANCIAL INFORMATION
	ITEM 1.	FINANCIAL STATEMENTS	3
	ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF
		FINANCIAL CONDITION AND RESULTS OF OPERATIONS	16
	ITEM 3.	QUANTITATIVE AND QUALITATIVE
		DISCLOSURES ABOUT MARKET RISK	24
	ITEM 4.	CONTROLS AND PROCEDURES	24
PART II  -	OTHER INFORMATION
	ITEM 1.	LEGAL PROCEEDINGS	25
	ITEM 5.	OTHER INFORMATION	25
	ITEM 6.	EXHIBITS AND REPORTS ON FORM 8-K	25
SIGNATURES			27

FACTORS AFFECTING FORWARD-LOOKING STATEMENTS

          Some of the statements contained herein under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although Dollar Thrifty Automotive Group, Inc. believes such forward-looking statements are based upon reasonable assumptions, such statements are not guarantees of future performance and certain factors could cause results to differ materially from current expectations. These factors include: price and product competition; economic and competitive conditions in markets and countries where the companies’ customers reside and where the companies and their franchisees operate; airline travel patterns; changes in capital availability or cost; costs and other terms related to the acquisition and disposition of automobiles; costs of conducting business and changes in structure or operations; and certain regulatory and environmental matters. Should one or more of these risks or uncertainties, among others, materialize, actual results could vary materially from those estimated, anticipated or projected. Dollar Thrifty Automotive Group, Inc. undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time.

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PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

INDEPENDENT ACCOUNTANTS’ REPORT

To the Board of Directors and Stockholders of
Dollar Thrifty Automotive Group, Inc.:

We have reviewed the accompanying condensed consolidated balance sheet of Dollar Thrifty Automotive Group, Inc. and subsidiaries as of September 30, 2003, and the related condensed consolidated statements of income for the three-month and nine-month periods ended September 30, 2003 and 2002, and the condensed consolidated statements of cash flows for the nine-month periods ended September 30, 2003 and 2002. These interim financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to such condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet of Dollar Thrifty Automotive Group, Inc. and subsidiaries as of December 31, 2002, and the related consolidated statements of income, stockholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated February 28, 2003, we expressed an unqualified opinion on those consolidated financial statements.

/s/ DELOITTE & TOUCHE LLP

Tulsa, Oklahoma
November 10, 2003

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DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002

(In Thousands Except Per Share Data)

			Three Months						Nine Months
			Ended September 30,						Ended September 30,
				(Unaudited)
			2003			2002			2003			2002
REVENUES:
	Vehicle rentals			$	308,691		$	268,019		$	750,762		$	703,498
	Vehicle leasing				41,863			52,653			120,531			127,960
	Fees and services				15,372			15,408			43,235			43,892
	Other				4,525			1,588			10,505			7,543
		Total revenues			370,451			337,668			925,033			882,893
COSTS AND EXPENSES:
	Direct vehicle and operating				148,129			122,958			358,897			319,655
	Vehicle depreciation and lease charges, net				110,790			109,821			309,146			274,613
	Selling, general and administrative				51,694			43,803			141,490			134,438
	Interest expense, net of interest income				24,765			27,066			66,542			70,344
		Total costs and expenses			335,378			303,648			876,075			799,050
INCOME BEFORE INCOME TAXES					35,073			34,020			48,958			83,843
INCOME TAX EXPENSE					13,709			12,813			20,671			32,963
NET INCOME				$	21,364		$	21,207		$	28,287		$	50,880
EARNINGS PER SHARE:
	Basic			$	0.87		$	0.87		$	1.16		$	2.10
	Diluted			$	0.84		$	0.85		$	1.12		$	2.05

See notes to condensed consolidated financial statements.

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DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2003 AND DECEMBER 31, 2002

(In Thousands Except Share and Per Share Data)

		September 30,			December 31,
		2003			2002
		(Unaudited)
ASSETS:
Cash and cash equivalents		$	141,801		$	143,485
Restricted cash and investments			410,614			334,849
Receivables, net			188,825			249,912
Prepaid expenses and other assets			73,058			59,785
Revenue-earning vehicles, net			2,387,937			1,994,200
Property and equipment, net			93,563			92,181
Income taxes receivable			39,266			61,314
Software and other intangible assets, net			14,287			15,381
Goodwill			196,814			165,327
		$	3,546,165		$	3,116,434
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable		$	39,884		$	53,660
Accrued liabilities			184,694			164,847
Deferred income tax liability			154,705			134,637
Public liability and property damage			53,153			39,506
Vehicle debt and obligations			2,581,977			2,224,303
	Total liabilities		3,014,413			2,616,953
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY:
Preferred stock, $.01 par value: Authorized 10,000,000 shares; none outstanding			-			-
Common stock, $.01 par value: Authorized 50,000,000 shares; 24,780,319 and 24,599,890 issued, respectively, and 24,698,119 and 24,599,890 outstanding, respectively			248			246
Additional capital			721,887			717,081
Accumulated deficit			(162,500	)		(190,787	)
Accumulated other comprehensive loss			(25,940	)		(27,059	)
Treasury stock, at cost (82,200 shares)			(1,943	)		-
	Total stockholders’ equity		531,752			499,481
		$	3,546,165		$	3,116,434

See notes to condensed consolidated financial statements.

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DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002

(In Thousands)

					Nine Months
					Ended September 30,
					(Unaudited)
					2003			2002
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income				$	28,287		$	50,880
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation:
			Vehicle depreciation			301,522			279,016
			Non-vehicle depreciation			11,231			10,843
		Net (gains)/losses from disposition of revenue-earning vehicles				2,693			(10,386	)
		Amortization				3,994			3,305
		Performance share incentive plan				2,413			1,931
		Net losses from sale of property and equipment				91			132
		Provision for losses on receivables				4,677			6,391
		Deferred income taxes				20,462			120,494
		Change in assets and liabilities, net of acquisitions:
			Income taxes payable/receivable			22,048			(45,529	)
			Receivables			94,948			67,684
			Prepaid expenses and other assets			(7,716	)		3,259
			Accounts payable and accrued liabilities			2,735			52,550
			Public liability and property damage			13,647			14,550
			Other			836			64
				Net cash provided by operating activities		501,868			555,184
CASH FLOWS FROM INVESTING ACTIVITIES:
	Revenue-earning vehicles:
		Purchases				(2,762,386	)		(2,725,625	)
		Proceeds from sales				2,049,171			1,688,062
	Net change in restricted cash and investments					(75,765	)		(306,898	)
	Property, equipment and software:
		Purchases				(12,694	)		(4,235	)
		Proceeds from sales				34			35
	Acquisition of businesses, net of cash acquired					(29,553	)		(38	)
				Net cash used in investing activities		(831,193	)		(1,348,699	)
									(Continued)

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DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002

(In Thousands)

					Nine Months
					Ended September 30,
					(Unaudited)
					2003			2002
CASH FLOWS FROM FINANCING ACTIVITIES:
	Vehicle debt and obligations:
		Proceeds				4,075,539			5,668,265
		Payments				(3,743,248	)		(4,800,162	)
	Issuance of common shares					2,395			3,109
	Purchase of common stock for the treasury					(1,943	)		-
	Financing issue costs					(5,102	)		(5,273	)
				Net cash provided by financing activities		327,641			865,939
CHANGE IN CASH AND CASH EQUIVALENTS						(1,684	)		72,424
CASH AND CASH EQUIVALENTS:
	Beginning of period					143,485			37,532
	End of period				$	141,801		$	109,956
SUPPLEMENTAL DISCLOSURES OF NONCASH ACTIVITIES:
	Receivables from capital lease of vehicles to franchisees				$	38,884		$	73,618
	Deferred income on capital lease of vehicles to franchisees				$	-		$	177
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
	Cash paid for/(refund of):
			Income taxes to taxing authorities		$	(22,233	)	$	(42,343	)
			Interest		$	65,816		$	69,462

See notes to condensed consolidated financial statements.

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DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPEMBER 30, 2003 AND 2002

(Unaudited)

1.       BASIS OF PRESENTATION

Effective January 1, 2003, the Company realigned its corporate operating structure from a brand structure to a functional structure combining the management of operations and administrative functions for both the Dollar and Thrifty brands. Due to the realignment, the Company will no longer report Dollar and Thrifty as operating segments. Consistent with the new structure, management will make business and operating decisions on an overall company basis. Financial results will not be available by brand.

The accompanying condensed consolidated financial statements include the accounts of Dollar Thrifty Automotive Group, Inc. (“DTG”) and its subsidiaries. DTG’s significant wholly owned subsidiaries include DTG Operations, Inc., Thrifty, Inc., Dollar Rent A Car, Inc., Rental Car Finance Corp. (“RCFC”) and Dollar Thrifty Funding Corp. Thrifty, Inc. is the parent company to Thrifty Rent-A-Car System, Inc., which is the parent company to Dollar Thrifty Automotive Group Canada, Inc. (“DTAG Canada”). The term the “Company” is used to refer to DTG and subsidiaries, individually or collectively, as the context may require.

The accounting policies set forth in Note 2 to the consolidated financial statements contained in the Form 10-K filed with the Securities Exchange Commission on March 18, 2003 have been followed in preparing the accompanying condensed consolidated financial statements.

The condensed consolidated financial statements and notes thereto for interim periods included hereinhave notbeen audited by independent public accountants. The condensed consolidated financial statements and notes thereto have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the Company’sopinion, all adjustments (which include only normal recurring adjustments) necessary for a fair presentation of the results of operations for the interim periods have been made. Results for interim periods are not necessarily indicative of results for a full year.

During the quarter ended September 30, 2003, the Company reclassified the amortization of vehicle manufacturer’s purchase incentives to vehicle depreciation and lease charges, net. Previously such amortization was recorded as offsets against direct vehicle and operating expense. Comparable amounts in the condensed consolidated financial statements for 2002 have been reclassified to conform to the classifications used in the condensed consolidated financial statements in 2003. These reclassifications had no impact on revenue or net income.

2.       ACQUISITIONS

During the nine months ended September 30, 2003, the Company acquired certain assets and assumed certain liabilities relating to 42 locations from former franchisees in Hawaii, Manchester, Atlanta, Houston, Miami, Ft. Lauderdale, West Palm Beach, Florida; Ontario, California; and Edmonton, Alberta, Canada for the Thrifty brand and the master franchise rights in Canada for the Dollar brand. Total cash paid, net of cash acquired, for these acquisitions in 2003 was $29,553,000. The goodwill recognized in these transactions totaled $30,980,000, all of which is amortizable for tax purposes. Each of these transactions has been accounted for using the purchase method of accounting and operating results of the acquirees from the dates of acquisition, which are individually not material to amounts presented for the three months and nine months ended September 30, 2003, are included in the consolidated statements of income of the Company.

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3.       VEHICLE DEPRECIATION AND LEASE CHARGES, NET

   Vehicle depreciation and lease charges includes the following (in thousands):

	Three Months				Nine Months
	Ended September 30,				Ended September 30,
	2003		2002		2003		2002
Depreciation of revenue-earning vehicles, net	$	108,641	$	107,294	$	304,215	$	268,630
Rents paid for vehicles leased		2,149		2,527		4,931		5,983
	$	110,790	$	109,821	$	309,146	$	274,613

4.       EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is based on the combined weighted average number of common shares and dilutive potential common shares outstanding which include, where appropriate, the assumed exercise of options. In computing diluted earnings per share, the Company has utilized the treasury stock method.

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The computation of weighted average common and common equivalent shares used in the calculation of basic and diluted earnings per share (“EPS”) is shown below (in thousands except share and per share data):

		Three Months						Nine Months
		Ended September 30,						Ended September 30,
		2003			2002			2003			2002
Net income			$	21,364		$	21,207		$	28,287		$	50,880
Basic EPS:
	Weighted average common shares			24,517,960			24,328,726			24,489,428			24,247,140
Basic EPS			$	0.87		$	0.87		$	1.16		$	2.10
Diluted EPS:
	Weighted average common shares			24,517,960			24,328,726			24,489,428			24,247,140
Shares contingently issuable:
	Stock options			437,797			295,124			262,848			300,118
	Performance awards			268,028			120,300			231,637			120,300
	Shares held for compensation plans			201,782			163,521			195,579			165,138
	Director compensation shares deferred			70,527			48,203			64,513			45,306
Shares applicable to diluted				25,496,094			24,955,874			25,244,005			24,878,002
Diluted EPS			$	0.84		$	0.85		$	1.12		$	2.05

For the three months ended September 30, 2003 and 2002 and the nine months ended September 30, 2003 and 2002, options to purchase shares of common stock totaling 81,300 and 1,048,300, respectively, and 1,043,700 and 1,048,300, respectively, were outstanding but were not included in the computation of diluted earnings per share because the exercise price was greater than the average market price of the common shares.

5.       STOCK-BASED COMPENSATION

Prior to January 1, 2003, the Company accounted for stock-based compensation plans (which include stock options and performance shares) using the intrinsic value method prescribed in Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees.” Given the original terms of the Company’s plans, no compensation cost was recognized for the Company’s stock option plans in prior periods. Compensation cost of stock options, if any, was measured as the excess of the quoted market price of the Company’s stock at the date of grant over the amount the grantee must pay to acquire the stock. Compensation cost for shares issued under performance share plans was recorded based upon the current market value of the Company’s stock at the end of each period.

Effective January 1, 2003, the Company adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123 changing from the intrinsic value-based method to the fair value-based method of accounting for stock-based compensation, electing the prospective treatment option, which will require recognition as compensation expense for all future employee awards granted, modified or settled as allowed under SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure,” an amendment of SFAS No. 123. Compensation cost for stock options and performance shares is recognized based on the fair value of the awards granted at the grant date.

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The following table provides pro forma results as if the fair value-based method had been applied to all outstanding and unvested awards, including stock options and performance shares, in each period presented (in thousands):

		Three Months						Nine Months
		Ended September 30,						Ended September 30,
		2003			2002			2003			2002
Net income, as reported		$	21,364		$	21,207		$	28,287		$	50,880
Add: compensation expense related to performance shares included in reported net income, net of related tax effects			943			240			1,395			1,172
Deduct: compensation expense related to stock options granted prior to January 1, 2003 and performance shares determined under fair value-based method for all awards, net of related tax effects			(1,181	)		(1,322	)		(2,260	)		(3,283	)
Pro forma net income		$	21,126		$	20,125		$	27,422		$	48,769
Earnings per share:
	Basic, as reported	$	0.87		$	0.87		$	1.16		$	2.10
	Basic, pro forma	$	0.86		$	0.83		$	1.12		$	2.01
	Diluted, as reported	$	0.84		$	0.85		$	1.12		$	2.05
	Diluted, pro forma	$	0.83		$	0.81		$	1.09		$	1.96

No stock options were granted after January 1, 2003. The Black-Scholes option valuation model was used to estimate the fair value of the options at the date of grant for purposes of the pro forma amounts noted. The following assumptions were used for the three months and nine months ended September 30, 2003 and 2002: weighted-average expected life of the awards of five years, volatility factor of 54.57%, risk-free interest rate of 4.46% and no dividend payments.

6.       RECEIVABLES

Receivables consist of the following (in thousands):

	September 30,			December 31,
	2003			2002
Trade accounts receivable	$	110,297		$	103,577
Notes receivable		4,426			7,485
Financing receivables, net		44,624			67,845
Due from DaimlerChrysler		48,358			90,534
		207,705			269,441
Less: Allowance for doubtful accounts		(18,880	)		(19,529	)
	$	188,825		$	249,912

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Trade accounts and notes receivable include primarily amounts due from franchisees and tour operators arising from billings under standard credit terms for services provided in the normal course of business, accrued revenue on open rental contracts and amounts due from the sale of revenue-earning vehicles. Notes receivable are accepted from certain franchisees at current market interest rates with varying maturities and are generally guaranteed by franchisees.

Financing receivables arise from direct financing and sales-type leases of vehicles with franchisees. These receivables principally have terms up to one year and are collateralized by the vehicles.

Due from DaimlerChrysler is comprised primarily of amounts due under various guaranteed residual, buyback, incentive and promotion programs, which are paid according to contract terms and are generally received within 60 days.

7.       GOODWILL

The Company adopted the provisions of SFAS No. 141, “Business Combinations” and SFAS No. 142, “Goodwill and Other Intangible Assets” as required on January 1, 2002, with the exception of the earlier adoption of the requirement to use the purchase method of accounting for all business combinations initiated after June 30, 2001. On January 1, 2002, the Company ceased amortization of goodwill. During the first quarter of 2002, the Company completed its transitional goodwill impairment test in accordance with SFAS No. 142 for each reporting unit as of January 1, 2002, and determined that goodwill was not impaired. The Company selected the second quarter to perform its annual impairment testing and consistent with 2002, during the second quarter of 2003, the Company completed the annual impairment test of goodwill and concluded goodwill was not impaired. The Company will complete the annual impairment test on goodwill during the second quarter of each year unless circumstances arise that require more frequent testing.

Due to the corporate structure realignment (Note 1), the Company no longer has separate reporting units. Therefore, beginning in 2003, the Company performed its goodwill impairment test on a consolidated basis.

The changes in the carrying amount of goodwill for the nine months ended September 30, 2003 are as follows (in thousands):

Balance as of January 1, 2003	$	165,327
Goodwill through acquisitions during year		30,980
Effect of change in rates used for foreign currency translation		507
Balance as of September 30, 2003	$	196,814

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8.      VEHICLE DEBT AND OBLIGATIONS

Vehicle debt and obligations as of Sepember 30, 2003 and December 31, 2002 consist of the following (in thousands):

		September 30,		December 31,
		2003		2002
Asset backed notes, net of discount		$	1,524,916	$	1,379,465
Commercial paper, net of discount			397,657		308,048
Conduit Facility			275,000		250,000
Other vehicle debt			253,608		227,834
Limited partner interest in limited partnership			130,796		58,956
	Vehicle debt and obligations	$	2,581,977	$	2,224,303

In March 2003, the Company completed an amendment of the $215 million Revolving Credit Facility (the “Revolver”) affecting a financial covenant, which also included limiting expenditures for non-vehicle capital assets and franchisee acquisitions if certain covenant levels are not maintained. On July 31, 2003, the Company completed another amendment of the Revolver, which among other provisions, allows the Company to retain the higher limitation for franchisee acquisitions in 2003. The Company had letters of credit outstanding under the Revolver of approximately $186.9 million and no working capital borrowings at September 30, 2003.

On February 24, 2003, the Commercial Paper Program was renewed for another 364-day period at a maximum size of $554 million backed by a renewal of the Liquidity Facility, in the amount of $485 million.

On March 18, 2003, the asset backed Variable Funding Note Purchase Facility (the “Conduit Facility”) was increased from $250 million to $275 million.

On March 25, 2003, RCFC issued $375 million of asset backed notes (the “2003 Series Notes”) to replace maturing asset backed notes and provide for growth in the Company’s fleet. The 2003 Series Notes are floating rate notes that have a term of four years. In conjunction with the issuance of the 2003 Series Notes, the Company also entered into an interest rate swap agreement to convert this floating rate debt to fixed rate debt (Note 9).

On April 10, 2003, an existing bank vehicle line of credit was renewed and increased from $70 million to $87 million, which is included in other vehicle debt.

On May 28, 2003, the Canadian fleet securitization program (referred to as Limited partner interest in limited partnership in the table above) was increased from CND$150 million to CND$200 million to satisfy the acquisition growth in the Canadian fleet. This program has an expiration date of December 31, 2004.

During the third quarter of 2003, existing manufacturer lines of credit totaling $290 million, which are included in other vehicle debt, were renewed at existing capacity levels.

9.       DERIVATIVE FINANCIAL INSTRUMENTS

The Company is exposed to market risks, such as changes in interest rates. Consequently, the Company manages the financial exposure as part of its risk management program, by striving to reduce the potentially adverse effects that the potential volatility of the financial markets may have on the Company’s operating results. In 2001, the Company began entering into interest rate swap agreements, in conjunction with each related new asset backed note issuance in 2001 through 2003, to convert variable interest rates on a total of $900 million in asset backed notes to fixed interest rates. These swaps, which have termination dates through May 2007, constitute cash flow hedges and satisfy the criteria for hedge accounting. The Company reflects these swaps in its statement of financial position as a liability at fair

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market value, which was approximately $43 million at September 30, 2003, and the Company recorded the related loss of $0.6 million, which is net of income taxes, in comprehensive income for the nine-month period ended September 30, 2003 (Note 10). Deferred gains and losses are recognized in earnings as an adjustment to interest expense over the same period in which the related interest payments being hedged are recognized to earnings. Based on projected market interest rates, the Company estimates the net amount of approximately $16 million of the existing deferred loss at September 30, 2003 is expected to be reclassified into earnings within the next twelve months.

10.       COMPREHENSIVE INCOME

Comprehensive income is comprised of the following (in thousands):

	Three Months					Nine Months
	Ended September 30,					Ended September 30,
	2003		2002			2003			2002
Net income	$	21,364	$	21,207		$	28,287		$	50,880
Interest rate swap adjustment		6,683		(12,816	)		(614	)		(18,398	)
Foreign currency translation adjustment		287		(431	)		1,733			(30	)
Comprehensive income	$	28,334	$	7,960		$	29,406		$	32,452

11.     INCOME TAXES

U.S. operating results are included in the Company's consolidated U.S. income tax returns and as such the Company has established tax provisions separately for U.S. taxable income and Canadian income and losses, for which no income tax benefit was recorded. The Company has provided for income taxes in the U.S. and in Canada based on taxable income or loss and other tax attributes separately for each jurisdiction. Deferred income taxes are provided for the temporary differences between the financial reporting basis and the tax basis of the Company's assets and liabilities. A valuation allowance is recorded for deferred income tax assets when management determines it is more likely than not that such assets will not be realized.

For the three months and nine months ended September 30, 2003, the effective tax rate of 39.1% and 42.2%, respectively, differed from the U.S. statutory rate due primarily to the state and local taxes and lower profits or losses relating to DTAG Canada for which no income tax benefit was recorded due to full valuation allowance.

12.     SHARE REPURCHASE PROGRAM

On July 30, 2003, the Company announced that its Board of Directors had authorized a stock repurchase program which allows the repurchase of up to $30 million of the Company’s stock over the next two years in the open market or in privately negotiated transactions. On August 11, 2003, the Company began repurchasing shares and repurchased 82,200 shares during the third quarter of 2003 at an average price of $23.60 per share, totaling $1.9 million.

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13.      COMMITMENTS AND CONTINGENCIES

Guarantees

The Company may provide guarantees, including certain letters of credit or performance bonds, on behalf of franchisees to support compliance with airport concession bids. Non-performance of the obligation by the franchisee would trigger the obligation of the Company. As of September 30, 2003, the maximum future payments under these guarantees are $0.4 million with expirations through 2004. As of September 30, 2003, the Company has not recognized a liability for guarantees issued or modified after December 31, 2002, which totaled $0.1 million due to the absence of any fair value at inception of the guarantee and the likelihood of a triggering event is not probable.

Contingencies

Various claims and legal proceedings have been asserted or instituted against the Company, including some purporting to be class actions, and some which demand large monetary damages or other relief which could result in significant expenditures. Litigation is subject to many uncertainties, and the outcome of individual matters is not predictable with assurance. The Company is also subject to potential liability related to environmental matters. The Company establishes reserves for litigation and environmental matters when the loss is probable and reasonably estimable. It is reasonably possible that the final resolution of some of these matters may require the Company to make expenditures, in excess of established reserves, over an extended period of time and in a range of amounts that cannot be reasonably estimated. The term “reasonably possible” is used herein to mean that the chance of a future transaction or event occurring is more than remote but less than likely. Although the final resolution of any such matters could have a material effect on the Company’s consolidated operating results for the particular reporting period in which an adjustment of the estimated liability is recorded, the Company believes that any resulting liability should not materially affect its consolidated financial position.

14.     NEW ACCOUNTING STANDARD

In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities,” (“FIN 46”) an interpretation of Accounting Research Bulletin No. 51. FIN 46 requires existing unconsolidated variable interest entities (“VIE’s”) to be consolidated by their primary beneficiaries if that company is subject to a majority of the risk of loss, if any, from the VIE’s activities, or entitled to receive a majority of the entity’s residual returns, or both. The consolidation requirements of FIN 46 were effective immediately for VIE’s created after January 31, 2003 or variable interests obtained after that date. For VIE’s in which the company holds a variable interest acquired before February 1, 2003, the consolidation requirements are effective in the first fiscal year or interim period beginning after December 15, 2003. As a result of the evaluation of the effects that adoption of FIN 46 will have on the Company’s consolidated financial statements, the Company believes that its involvement with Thrifty Rent-A-Car System, Inc. National Advertising Committee (“Thrifty National Ad”) will qualify Thrifty National Ad as a VIE with the Company representing the primary beneficiary. Thrifty National Ad is a separate entity organized for the purpose of conducting the advertising and promotion programs for the Thrifty Car Rental brand as directed by the Thrifty Car Rental franchisee network and representatives of the Company. The total assets of Thrifty National Ad were approximately $7 million as of September 30, 2003. The Company’s estimated maximum exposure to loss as a result of its continuing involvement with Thrifty National Ad is expected to be minimal as expenditures are managed by Thrifty National Ad based on revenues. The Company has not created or obtained an interest in any VIE after January 31, 2003.

15.     SUBSEQUENT EVENTS

On November 1, 2003, the Company acquired its franchised operations in Las Vegas, Nevada, and Hartford, Connecticut. Additionally, the Company agreed to acquire its franchised operations in Memphis, Tennessee effective in December, 2003.

******

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ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF
	FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

          The following table sets forth the percentage of total revenues in the Company's condensed consolidated statements of income:

			Three Months						Nine Months
			Ended September 30,						Ended September 30,
			2003			2002			2003			2002
			(Percentage of Revenue)
Revenues:
	Vehicle rentals			83.3	%		79.4	%		81.2	%		79.7	%
	Vehicle leasing			11.3			15.6			13.0			14.5
	Fees and services			4.2			4.6			4.7			5.0
	Other			1.2			0.4			1.1			0.8
		Total revenues		100.0			100.0			100.0			100.0
Costs and expenses:
	Direct vehicle and operating			40.0			36.4			38.8			36.2
	Vehicle depreciation and lease charges, net			29.9			32.5			33.4			31.1
	Selling, general and administrative			14.0			13.0			15.3			15.2
	Interest expense, net of interest income			6.6			8.0			7.2			8.0
		Total costs and expenses		90.5			89.9			94.7			90.5
Income before income taxes				9.5			10.1			5.3			9.5
Income tax expense				3.7			3.8			2.2			3.7
Net income				5.8	%		6.3	%		3.1	%		5.8	%

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The following table sets forth certain selected operating data of the Company:

		Three Months				Nine Months
		Ended September 30,				Ended September 30,
U.S. and Canada		2003		2002		2003		2002
Vehicle Rental Data: (includes new stores)
(Company-Owned Stores)
	Average number of vehicles operated		94,335		80,968		79,752		71,354
	Number of rental days		7,391,000		6,266,441		18,268,664		16,334,496
	Average revenue per day	$	41.77	$	42.77	$	41.10	$	43.07
	Monthly average revenue per vehicle	$	1,091	$	1,103	$	1,046	$	1,095
Vehicle Rental Data: (excludes new stores)
(Company-Owned Stores)
	Average number of vehicles operated		86,153		80,968		73,813		71,354
	Number of rental days		6,775,193		6,266,441		16,941,774		16,334,496
Vehicle Leasing Data:
	Average number of vehicles leased		30,659		37,695		29,663		31,238
	Monthly average revenue per vehicle	$	455	$	466	$	451	$	455

Three Months Ended September 30, 2003 Compared with Three Months Ended September 30, 2002

           During the third quarter, the travel industry experienced improving trends. Airline traffic trends for the third quarter declined by only 2.6% compared to the third quarter of the prior year, an improvement over the 5.4% decline experienced during the second quarter of 2003. Year over year rental rate trends for the Company were also down 2.3% during the third quarter compared to the third quarter of the prior year, an improvement over the 5.9% decline experienced during the second quarter of 2003.

           Revenues

           Total revenues for the quarter ended September 30, 2003 increased $32.8 million, or 9.7%, to $370.5 million compared to the third quarter of 2002. The increase in total revenue was primarily due to a 15.2% increase in vehicle rental revenue, partially offset by a decrease in vehicle leasing revenue of 20.5%.

           The Company’s vehicle rental revenue for the third quarter of 2003 was $308.7 million, a $40.7 million increase from the third quarter of 2002. The increase in vehicle rental revenue was the result of a 17.9% increase in rental days, partially offset by a 2.3% decrease in revenue per day. The growth in rental days resulted from operating new locations, certain of which were previously franchised, which accounted for a 9.8% increase. Additionally, rental days on a same store basis increased 8.1%.

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           Vehicle leasing revenue for the third quarter of 2003 was $41.9 million, a $10.8 million decrease from the third quarter of 2002. This decline was due to an 18.7% decline in the average lease fleet related to fewer vehicles leased to franchisees, partially due to the shift of several locations from franchised operations to corporate operations, coupled with a 2.4% decline in the average lease rate.

           Fees and services revenue decreased 0.2% to $15.4 million as compared to the third quarter of 2002. This decline was primarily related to the shift of several locations from franchised operations to corporate operations totaling approximately $1.0 million, offset by increased revenue from existing franchisees.

           Other revenue for the third quarter of 2003 was $4.5 million, a $2.9 million increase from the third quarter of 2002. This increase primarily relates to a $3.5 million increase in the fair market value of investments designated to fund the Company’s deferred compensation and retirement plans. The revenue related to mark to market valuation of these investments is offset by corresponding amounts in selling, general and administrative expense, thus, having no impact on net income.

          Expenses

           Total expenses increased 10.4% from $303.6 million in the third quarter of 2002 to $335.4 million in the third quarter of 2003. Total expenses as a percentage of revenue increased to 90.5% in the third quarter of 2003 from 89.9% in the third quarter of 2002.

           Direct vehicle and operating expenses for the third quarter of 2003 increased $25.2 million, or 20.5%, over the third quarter of 2002. The increase in costs related primarily to higher fleet and transaction levels partially due to the operation of additional corporate stores. Direct vehicle and operating expenses were 40.0% of revenue in the third quarter of 2003 compared to 36.4% of revenue in the third quarter of 2002.

           Net vehicle depreciation expense and lease charges increased $1.0 million, or 0.9%, in the third quarter of 2003 as compared to the third quarter of 2002. Net vehicle losses on the disposal of non-program vehicles were $1.7 million for the third quarter of 2003, compared to losses of $1.0 million for the third quarter of 2002. Vehicle depreciation expense increased $0.7 million, or 0.6%, due to a 5.6% increase in depreciable fleet partially offset by a 5.0% decrease in the average depreciation rate. Lease charges, for vehicles leased from third parties, decreased $0.4 million to $2.1 million for the third quarter of 2003, due to a decrease in the number of vehicles leased. Net vehicle depreciation and lease charges were 29.9% of revenue in the third quarter of 2003 compared to 32.5% of revenue in the third quarter of 2002.

           Selling, general and administrative expenses of $51.7 million for the third quarter of 2003 increased 18.0% from $43.8 million in the third quarter of 2002. This increase was due primarily to a $3.5 million increase in the Company’s deferred compensation and retirement plan expense attributable to the increase in the mark to market valuation of the corresponding investments, an increase of $1.2 million in sales and marketing costs and a $1.8 million increase in expenses relating to performance based compensation plans during the quarter. The remaining $1.4 million increase relates to various general and administrative activities, including information technology system efforts. Selling, general and administrative expenses were 14.0% of revenue in the third quarter of 2003 compared to 13.0% of revenue in the third quarter of 2002.

           Net interest expense decreased $2.3 million, or 8.5%, to $24.8 million due to lower interest rates in the third quarter of 2003 as compared to the third quarter of 2002, partially offset by an increase in average vehicle debt. Net interest expense was 6.6% of revenue in the third quarter of 2003 compared to 8.0% of revenue in the third quarter of 2002.

           The effective tax rate for the third quarter of 2003 was 39.1% compared to 37.7% for the third quarter of 2002. This increase in the effective tax rate was due primarily to changes in the relationship of U.S. and Canadian pretax income year over year. The Company reports taxable income for the U.S. and Canada in separate tax jurisdictions and establishes provisions separately for each jurisdiction. On a separate, domestic basis, the U.S. effective tax rate approximates the statutory tax rate including the effect of state income taxes. However, on a consolidated basis, no income tax benefit is recorded for forecasted calendar year Canadian losses in 2003 coupled with an expected unused loss carryover, thus, increasing the consolidated effective tax rate.

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           Interim reporting requirements for applying separate, annual effective income tax rates to U.S. and Canadian operations, combined with the seasonal impact of Canadian operations, will cause significant variations in the Company’s quarterly consolidated effective income tax rates.

          Operating Results

           Income before income taxes increased $1.1 million, or 3.1%, to $35.1 million for the third quarter of 2003.

Nine Months Ended September 30, 2003 Compared with Nine Months Ended September 30, 2002

          Revenues

           Total revenues for the nine months ended September 30, 2003 increased $42.1 million, or 4.8%, to $925.0 million compared to the nine months ended September 30, 2002. The growth in total revenue was primarily due to an increase in vehicle rental revenue of 6.7%, partially offset by a decrease in vehicle leasing revenue of 5.8%.

           The Company’s vehicle rental revenue for the nine months ended September 30, 2003 was $750.8 million, a $47.3 million increase from the nine months ended September 30, 2002. The increase in vehicle rental revenue was the result of an 11.8% increase in rental days, partially offset by a 4.6% decrease in revenue per day. The growth in rental days resulted from operating new locations, certain of which were previously franchised, which accounted for an 8.1% increase. Additionally, rental days on a same store basis increased 3.7%.

           Vehicle leasing revenue for the nine months ended September 30, 2003 was $120.5 million, a $7.4 million decrease from the nine months ended September 30, 2002. This decline was due to a 5.0% decrease in the average lease fleet related to fewer vehicles leased to franchisees, partially due to the shift of several locations from franchised operations to corporate operations, coupled with a 0.9% decline in the average lease rate.

           Fees and services revenue decreased 1.5% to $43.2 million as compared to the nine months ended September 30, 2002, primarily related to the shift of several locations from franchised operations to corporate operations totaling approximately $2.0 million, partially offset by increased revenue from existing franchisees.

           Other revenue was $10.5 million for the nine months ended September 30, 2003, up $3.0 million from the same period last year. This increase primarily relates to a $2.9 million increase in the fair market value of investments designated to fund the Company’s deferred compensation and retirement plans. The revenue related to mark to market valuation of these investments is offset by corresponding amounts in selling, general and administrative expense, thus, having no impact on net income.

          Expenses

           Total expenses increased 9.6% from $799.1 million for the nine months ended September 30, 2002 to $876.1 million for the nine months ended September 30, 2003. Total expenses as a percentage of revenue increased to 94.7% in 2003 from 90.5% in 2002.

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           Direct vehicle and operating expenses for the nine months ended September 30, 2003 increased $39.2 million, or 12.3%, compared to the nine months ended September 30, 2002. The increase in costs related primarily to higher fleet and transaction levels, partially related to the operation of additional corporate stores. Direct vehicle and operating expenses were 38.8% of revenue for the nine months ended September 30, 2003 compared to 36.2% of revenue for the nine months ended September 30, 2002.

           Net vehicle depreciation expense and lease charges increased $34.5 million, or 12.6%, in the nine months ended September 30, 2003 as compared to the nine months ended September 30, 2002. Vehicle depreciation expense increased $22.5 million, or 8.1%, primarily due to a 7.5% increase in depreciable fleet. Net vehicle losses on the disposal of non-program vehicles were $2.7 million for the nine months ended September 30, 2003, compared to net vehicle gains of $10.4 million for the nine months ended September 30, 2002. Lease charges, for vehicles leased from third parties, decreased $1.1 million due to a decrease in the number of vehicles leased in the nine months ended September 30, 2003. Net vehicle depreciation and lease charges were 33.4% of revenue for the nine months ended September 30, 2003 compared to 31.1% of revenue for the nine months ended September 30, 2002.

           Selling, general and administrative expenses of $141.5 million for the nine months ended September 30, 2003 increased 5.2% from $134.4 million for the nine months ended September 30, 2002. This increase was due to a $2.9 million increase in the Company’s deferred compensation and retirement plan expense attributable to the increase in the mark to market valuation of the corresponding investments, an increase of $2.8 million in sales and marketing costs, partially offset by lower personnel related expense of $2.0 million due primarily to lower incentive compensation accruals. The remaining $3.4 million increase relates to various general and administrative activities, including information technology system efforts. Selling, general and administrative expenses were 15.3% of revenue for the nine months ended September 30, 2003 compared to 15.2% of revenue for the nine months ended September 30, 2002.

           Net interest expense decreased $3.8 million, or 5.4%, to $66.5 million in the nine months ended September 30, 2003 primarily due to lower interest rates, partially offset by an increase in average vehicle debt. Net interest expense was 7.2% of revenue for the nine months ended September 30, 2003 compared to 8.0% of revenue for the nine months ended September 30, 2002.

           The effective tax rate for the nine month period ended September 30, 2003 was 42.2% compared to 39.3% for the nine month period ended September 30, 2002. This increase in the effective tax rate was due primarily to lower U.S. pretax earnings in relationship to Canadian pretax losses. The Company reports taxable income for the U.S. and Canada in separate tax jurisdictions and establishes provisions separately for each jurisdiction. On a separate, domestic basis, the U.S. effective tax rate approximates the statutory tax rate including the effect of state income taxes. However, on a consolidated basis, no income tax benefit is recorded for forecasted calendar year Canadian losses in 2003 coupled with an expected unused loss carryover, thus, increasing the consolidated effective tax rate.

          Operating Results

           Income before income taxes decreased $34.9 million, or 41.6%, to $49.0 million for the first nine months of 2003.

Outlook

           Economic indicators are generally positive, pointing to an improving U.S. economy and increased travel demand in 2004. Pricing trends are improving, although still challenging with rental rates still below prior year levels.

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Seasonality

           The Company’s business is subject to seasonal variations in customer demand, with the summer vacation period representing the peak season for vehicle rental. During the peak season, the Company increases its rental fleet and workforce to accommodate increased rental activity. As a result, any occurrence that disrupts travel patterns during the summer period could have a material adverse effect on the annual performance of the Company. The first and fourth quarters for the Company’s rental operations are generally the weakest, when there is limited leisure travel and a greater potential for adverse weather conditions. Many of the operating expenses such as rent, general insurance and administrative personnel are fixed and cannot be reduced during periods of decreased rental demand.

Liquidity and Capital Resources

           The Company’s primary uses of liquidity are for the purchase of vehicles for its rental and leasing fleets, non-vehicle capital expenditures, franchisee acquisitions and for working capital. The Company also uses letters of credit or insurance bonds to secure certain commitments related to airport concession agreements, insurance programs, and for other purposes.

           The Company’s primary sources of liquidity are cash generated from operations, secured vehicle financing, the Revolving Credit Facility and insurance bonds. Cash generated by operating activities of $501.9 million for the nine months ended September 30, 2003, is primarily the result of net income, adjusted for depreciation and reduced receivable balances. The liquidity necessary for purchasing vehicles is primarily obtained from secured vehicle financing, most of which is asset backed notes, sales proceeds from disposal of used vehicles and cash generated by operating activities. The asset backed notes require varying levels of credit enhancement or overcollateralization, which is provided by a combination of cash, vehicles and letters of credit. These letters of credit are provided under the Company’s Revolving Credit Facility.

           The Company believes that its cash generated from operations, availability under its Revolving Credit Facility, insurance bonding programs and secured vehicle financing programs are adequate to meet its liquidity requirements for the foreseeable future, including the acceleration of franchisee acquisitions relating to the Company’s new corporate strategy and the Company’s stock repurchase program of up to $30 million over the next two years. A significant portion of the secured vehicle financing consists of asset backed notes. The Company generally issues additional notes each year to replace maturing notes and provide for growth in its fleet. The Company believes the asset backed note market continues to be a viable source of vehicle financing. The Company, like the rental car industry, has experienced increases during the last year in the level of credit enhancement or additional collateral required for new asset backed notes, the Conduit Facility and the Commercial Paper Program. These increased requirements have reduced liquidity available for other corporate purposes. The Company believes it has sufficient resources to meet these requirements.

           Cash used in investing activities was $831.2 million. The principal use of cash in investing activities was the purchase of revenue-earning vehicles, which totaled $2.8 billion, partially offset by $2.0 billion in proceeds from the sale of used revenue-earning vehicles. The Company’s need for cash to finance vehicles is highly seasonal and typically peaks in the second and third quarters of the year when fleet levels build to meet seasonal rental demand. The Company expects to continue to fund its revenue-earning vehicles with cash provided from operations and increased secured vehicle financing. The Company also used cash for the purchase of non-vehicle capital expenditures of $12.7 million. These expenditures consist primarily of airport facility improvements for the Company’s rental locations and investments in information technology equipment and systems. The Company also acquired the franchised operations of its Hawaii, Manchester, Atlanta, Houston, Miami, Ft. Lauderdale, West Palm Beach, Florida, and Ontario, California, franchisees in the U.S. and the Edmonton franchisee in Canada of the Thrifty brand and the master franchise rights of the Dollar brand in Canada during the first nine months of 2003, which totaled $29.6 million in use of cash. These expenditures were financed with cash provided from operations. At September 30, 2003, restricted cash and investments totaled $410.6 million, increasing $75.8 million during the nine months ended September 30, 2003. Restricted cash and investments are restricted for the acquisition of revenue-earning vehicles and other specified uses as defined under the asset backed note program, the Canadian fleet securitization partnership program, the Like-Kind Exchange Program and provide collateral for interest rate swap agreements relating to asset backed notes.

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           Cash received in financing activities was $327.6 million primarily due to the issuance of $375 million in asset backed notes in March 2003, a $90 million increase in commercial paper issued, the increase of $25 million under the Conduit Facility and a net increase of $72 million in borrowings under the Canadian fleet securitization partnership program, partially offset by the maturity of asset backed notes totaling $230 million.

           On July 30, 2003, the Company announced that its Board of Directors had authorized up to $30 million to repurchase the Company’s shares over a two-year period. During the nine months ended September 30, 2003, the Company repurchased 82,200 shares of common stock at an average price of $23.60 per share totaling approximately $1.9 million.

           The Company has significant requirements for bonds and letters of credit to support its insurance programs and airport concession commitments. At September 30, 2003, the insurance companies had issued approximately $43.7 million in bonds to secure these obligations.

          Asset Backed Notes

           The asset backed note program at September 30, 2003 was comprised of $1.52 billion in asset backed notes with maturities ranging from 2003 to 2007. Borrowings under the asset backed notes are secured by eligible vehicle collateral. Asset backed notes totaling $1.34 billion bear interest at fixed rates ranging from 3.64% to 7.10%, including certain floating rate notes swapped to fixed rates. Asset backed notes totaling $186.1 million bear interest at floating rates ranging from LIBOR plus 0.64% to LIBOR plus 1.05%.

          Conduit Facility

           In March 2003, an existing bank increased its commitment in the Conduit Facility, raising the capacity to $275 million, which was fully utilized, at September 30, 2003.

          Commercial Paper Program and Liquidity Facility

           Effective February 24, 2003, the Commercial Paper Program was renewed for another 364-day period at a maximum size of $554 million, backed by a renewal of the Liquidity Facility in the amount of $485 million. The Commercial Paper Program and the Liquidity Facility are renewable annually. Borrowings under the Commercial Paper Program are secured by eligible vehicle collateral and bear interest based on market-dictated commercial paper rates. At September 30, 2003, the Company had $397.7 million in commercial paper outstanding.

          Vehicle Debt and Obligations

           Vehicle manufacturer and bank lines of credit provided $400.6 million in capacity at September 30, 2003. The Company had $253.6 million in borrowings outstanding under these lines at September 30, 2003. All lines of credit are primarily collateralized by the related vehicles.

           The Company has financed its Canadian vehicle fleet through a five-year fleet securitization partnership program, which began in February 1999. This program was amended in May 2003, increasing the vehicle financing up to CND$200 million funded through a bank commercial paper conduit and extending the expiration date of the program through December 31, 2004. At September 30, 2003, the Company had approximately CND$176.5 million (US$130.8 million) funded under this program.

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          Revolving Credit Facility

           The Company has a $215 million five-year, senior secured, revolving credit facility (the “Revolving Credit Facility”) that expires in August 2005. The Revolving Credit Facility is used to provide working capital borrowings and letters of credit. Working capital borrowings under the Revolving Credit Facility are limited to $70 million. In March 2003, the Company completed an amendment affecting a financial covenant, which also included limiting expenditures for non-vehicle capital assets and franchisee acquisitions if certain covenant levels are not maintained. On July 31, 2003, the Company completed another amendment of the Revolving Credit Facility, which among other provisions, allows the Company to retain the higher limitation for franchisee acquisitions in 2003. The Company had letters of credit outstanding under the Revolving Credit Facility of approximately $186.9 million and no working capital borrowings at September 30, 2003.

New Accounting Standards

           In June 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 143, “Accounting for Asset Retirement Obligations” which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. It applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and (or) the normal operation of a long-lived asset, except for certain obligations of lessees. This statement is effective for financial statements issued for fiscal years beginning after June 15, 2002. The Company adopted the provisions of SFAS No. 143 as required on January 1, 2003. Adoption of SFAS No. 143 had no material effect on the consolidated financial statements of the Company.

           In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” This statement supersedes Emerging Issues Task Force (“EITF”) No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity.” Under this statement, a liability or a cost associated with a disposal or exit activity is recognized at fair value when the liability is incurred rather than at the date of an entity’s commitment to an exit plan as required under EITF No. 94-3. The provisions of this statement are effective for exit or disposal activities that are initiated after December 31, 2002, with early adoption permitted. The Company adopted the provisions of SFAS No. 146 as required on January 1, 2003. Adoption of SFAS No. 146 had no material effect on the consolidated financial statements of the Company.

           In November 2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” This interpretation elaborates on the disclosures to be made by a guarantor in its financial statements about its obligations under certain guarantees that it has issued. It also requires a guarantor to recognize, at the inception of a guarantee, a liability for the fair value of the obligation it has undertaken in issuing the guarantee. The initial recognition and initial measurement provisions of the interpretation are applicable on a prospective basis to guarantees issued or modified beginning in 2003. The disclosure requirements were effective for interim or annual financial statements beginning on December 31, 2002.

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           In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities,” (“FIN 46”) an interpretation of Accounting Research Bulletin No. 51. FIN 46 requires existing unconsolidated variable interest entities (“VIE’s”) to be consolidated by their primary beneficiaries if that company is subject to a majority of the risk of loss, if any, from the VIE’s activities, or entitled to receive a majority of the entity’s residual returns, or both. The consolidation requirements of FIN 46 were effective immediately for VIE’s created after January 31, 2003 or variable interests obtained after that date. For VIE’s in which the company holds a variable interest acquired before February 1, 2003, the consolidation requirements are effective in the first fiscal year or interim period beginning after December 15, 2003. As a result of the evaluation of the effects that adoption of FIN 46 will have on the Company’s consolidated financial statements, the Company believes that its involvement with Thrifty Rent-A-Car System, Inc. National Advertising Committee (“Thrifty National Ad”) will qualify Thrifty National Ad as a VIE with the Company representing the primary beneficiary. Thrifty National Ad is a separate entity organized for the purpose of conducting the advertising and promotion programs for the Thrifty Car Rental brand as directed by the Thrifty Car Rental franchisee network and representatives of the Company. The total assets of Thrifty National Ad were approximately $7 million as of September 30, 2003. The Company’s estimated maximum exposure to loss as a result of its continuing involvement with Thrifty National Ad is expected to be minimal as expenditures are managed by Thrifty National Ad based on revenues. The Company has not created or obtained an interest in any VIE after January 31, 2003.

           SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities” was issued and effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003 and requires prospective accounting treatment.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

           The following information about the Company’s market sensitive financial instruments constitutes a “forward-looking” statement. The Company’s primary market risk exposure is changing interest rates, primarily in the United States. The Company’s policy is to manage interest rates through use of a combination of fixed and floating rate debt and interest rate swap agreements. All items described are non-trading and are stated in U.S. dollars. Because a portion of the Company’s debt is denominated in Canadian dollars, its carrying value is impacted by exchange rate fluctuations.

           At September 30, 2003, there were no significant changes in the Company’s quantitative disclosures about market risk compared to December 31, 2002, which is included under Item 7A of the Company’s most recent Form 10-K, except for the addition of the derivative financial instrument noted in Note 9 to the condensed consolidated financial statements.

ITEM 4. CONTROLS AND PROCEDURES

a) Evaluation of disclosure controls and procedures

             We maintain a set of disclosure controls and procedures designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. An evaluation was carried out under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of our disclosure controls and procedures. Based on that evaluation, the CEO and CFO have concluded that the Company’s disclosure controls and procedures are effective as of the end of the period covered by this report.

b) Changes in internal controls

            Effective with the corporate reorganization on January 1, 2003, the Company implemented changes to certain internal controls over financial reporting and processes. The Company does not believe there are any significant deficiencies or material weaknesses in internal controls over financial reporting due to these changes. The Company will continue to monitor internal controls over financial reporting to ensure their effectiveness.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

           Various legal actions, claims and governmental inquiries and proceedings are pending or may be instituted or asserted in the future against the Company and its subsidiaries. Litigation is subject to many uncertainties, and the outcome of the individual litigated matters is not predictable with assurance. It is possible that certain of the actions, claims, inquiries or proceedings could be decided unfavorably to the Company or the subsidiaries involved. Although the amount of liability with respect to these matters cannot be ascertained, potential liability is not expected to materially affect the consolidated financial position or results of operations of the Company.

ITEM 5. OTHER INFORMATION

           The Company has established the date for its next Annual Meeting of Stockholders, which will be held on May 21, 2004.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

[a] Index of Exhibits

Exhibit	3.2	By-Laws of DTG, as amended and restated, which were approved by the DTG Board of Directors on September 25, 2003 and became effective October 1, 2003
Exhibit	4.105	Second Amendment to Second Amended and Restated Credit Agreement dated as of July 31, 2003 among DTG, DTG Operations, formerly known as Dollar Rent A Car Systems, Inc., Thrifty, Various Financial Institutions named therein and Credit Suisse First Boston
Exhibit	10.31	Fifth Amendment to Employment Continuation Plan for Key Employees, which became effective October 1, 2003
Exhibit	10.32	Letter agreement dated as of October 20, 2003 amending the Vehicle Supply Agreement between DaimlerChrysler Motors Company, LLC and DTG
Exhibit	15.11	Letter from Deloitte & Touche LLP regarding interim financial information
Exhibit	31.3	Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit	31.4	Certification by the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit	32.3	Certification by the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit	32.4	Certification by the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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[b] Reports on Form 8-K

             During the quarterly period ended September 30, 2003, and between such date and the filing of this Form 10-Q, the Company filed or furnished the following reports on Form 8-K:

             Current report on Form 8-K dated July 30, 2003, included press release reporting the financial results of the Company for the quarter ended June 30, 2003.

             Current report on Form 8-K dated September 26, 2003, included press release announcing changes in key leadership positions at Dollar Thrifty Automotive Group, Inc.

             Current report on Form 8-K dated October 29, 2003, included press release reporting the financial results of the Company for the quarter ended September 30, 2003.

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SIGNATURES

           Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned; thereunto duly authorized, in the City of Tulsa, Oklahoma, on November 12, 2003.

DOLLAR THRIFTY AUTOMOTIVE GROUP, INC.

By:	/s/ GARY L. PAXTON
Name:	Gary L. Paxton
Title:	President, Chief Executive Officer and Principal Executive Officer
By:	/s/ STEVEN B. HILDEBRAND
Name:	Steven B. Hildebrand
Title:	Executive Vice President, Chief Financial Officer, Principal Financial Officer and Principal Accounting Officer

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