Dollar Thrifty Automotive 10-Q 2008 Q1 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 March 31, 2008

OR

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

                                                              For the transition period from______________to______________

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:  Yes   X     No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act:

      Large accelerated filer  X       Accelerated filer    Non-accelerated filer    Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):  Yes   No   X   

The number of shares outstanding of the registrant’s Common Stock as of April 30, 2008 was 21,601,502.

DOLLAR THRIFTY AUTOMOTIVE GROUP, INC.
FORM 10-Q

CONTENTS

Page

PART I  -  FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS (UNAUDITED) 3

ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF

       FINANCIAL CONDITION AND RESULTS OF OPERATIONS 20

ITEM 3.    QUANTITATIVE AND QUALITATIVE

       DISCLOSURES ABOUT MARKET RISK 27

ITEM 4.    CONTROLS AND PROCEDURES 27

PART II  -  OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS 28

ITEM 1A. RISK FACTORS 29

ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES

       AND USE OF PROCEEDS 29

ITEM 6.    EXHIBITS 30

SIGNATURES 31

INDEX TO EXHIBITS 32

FACTORS AFFECTING FORWARD-LOOKING STATEMENTS

This report contains “forward-looking statements” about our expectations, plans and performance, including those under “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Outlook for 2008.” These statements use such words as “may,” “will,” “expect,” “believe,” “intend,” “should,” “could,” “anticipate,” “estimate,” “forecast,” “project,” “plan” and similar expressions. Management believes they are based on reasonable assumptions, but they do not guarantee future performance and Dollar Thrifty Automotive Group, Inc. assumes no obligation to update them. Risks and uncertainties that could materially affect future results include whether recent favorable pricing, demand and utilization trends will persist during the upcoming peak rental season; the impact of pricing and other actions by competitors, particularly if demand softens; airline travel patterns, including disruptions or reductions in air travel resulting from recent airline bankruptcies and industry consolidation or other factors such as fuel costs; the cost and other terms of acquiring and disposing of automobiles; the financial performance and prospects of our principal vehicle supplier; our ability to manage our fleet mix to match demand and reduce vehicle depreciation costs, particularly as we increase the level of Non-Program Vehicles (those without a guaranteed residual value) and exposure to fluctuations in the used car market; our ability to comply with financial covenants and to obtain financing as needed without unduly restricting operational flexibility, particularly given recent events involving the credit markets and Monolines that provide credit support for our asset-backed financing structures; the effectiveness of other actions we take to manage costs and liquidity; disruptions in information and communication systems we rely on; access to reservation distribution channels; the cost of regulatory compliance and the outcome of pending litigation; local market conditions where we and our franchisees do business; and the impact of natural catastrophes and terrorism. Forward-looking statements should be considered in light of information in this report and our other filings with the Securities and Exchange Commission.

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PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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 (the “Company”) as of March 31, 2008, and the related condensed consolidated statements of operations and cash flows for the three-month periods ended March 31, 2008 and 2007. These interim financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), 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 reviews, 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 the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Dollar Thrifty Automotive Group, Inc. and subsidiaries as of December 31, 2007, and the related consolidated statements of income, stockholders’ equity and comprehensive income, and cash flows for the year then ended (not presented herein); and in our report dated February 29, 2008, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2007 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ DELOITTE & TOUCHE LLP

Tulsa, Oklahoma

May 12, 2008

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DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2008 AND 2007

(In Thousands Except Per Share Data)

			Three Months
			Ended March 31,
			(Unaudited)
			2008			2007
REVENUES:
	Vehicle rentals		$	377,971		$	370,568
	Other			18,535			27,395
		Total revenues		396,506			397,963
COSTS AND EXPENSES:
	Direct vehicle and operating			215,363			201,437
	Vehicle depreciation and lease charges, net			122,662			93,283
	Selling, general and administrative			53,672			65,301
	Interest expense, net of interest income			22,137			19,070
	Goodwill and other intangible asset impairment			350,144			-
		Total costs and expenses		763,978			379,091
	(Increase) decrease in fair value of derivatives			28,147			7,793
INCOME (LOSS) BEFORE INCOME TAXES				(395,619	)		11,079
INCOME TAX EXPENSE (BENEFIT)				(97,677	)		5,917
NET INCOME (LOSS)			$	(297,942	)	$	5,162
BASIC EARNINGS (LOSS) PER SHARE			$	(14.07	)	$	0.22
DILUTED EARNINGS (LOSS) PER SHARE			$	(14.07	)	$	0.21

See notes to condensed consolidated financial statements.

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DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

MARCH 31, 2008 AND DECEMBER 31, 2007

(In Thousands Except Share and Per Share Data)

		March 31,			December 31,
		2008			2007
		(Unaudited)
ASSETS:
Cash and cash equivalents		$	136,356		$	101,025
Restricted cash and investments			267,369			132,945
Receivables, net			182,355			238,127
Prepaid expenses and other assets			80,621			92,163
Revenue-earning vehicles, net			2,598,237			2,808,354
Property and equipment, net			121,333			122,303
Income taxes receivable			11,187			11,334
Intangible assets, net			35,046			103,777
Goodwill			-			281,424
		$	3,432,504		$	3,891,452
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable		$	69,253		$	80,537
Accrued liabilities			234,982			198,042
Deferred income tax liability			161,718			267,412
Vehicle insurance reserves			107,659			110,034
Debt and other obligations			2,589,723			2,656,562
	Total liabilities		3,163,335			3,312,587
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;   28,016,408 and 27,903,258 issued, respectively, and   21,601,502 and 21,488,352 outstanding, respectively			280			278
Additional capital			799,975			799,449
Retained earnings (deficit)			(289,431	)		8,511
Accumulated other comprehensive loss			(14,086	)		(1,804	)
Treasury stock, at cost (6,414,906 shares)			(227,569	)		(227,569	)
	Total stockholders’ equity		269,169			578,865
		$	3,432,504		$	3,891,452

See notes to condensed consolidated financial statements.

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DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED MARCH 31, 2008 AND 2007

(In Thousands)

					Three Months
					Ended March 31,
					(Unaudited)
					2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income (loss)				$	(297,942	)	$	5,162
	Adjustments to reconcile net income (loss) to net cash provided by operating activities:
		Depreciation:
			Vehicle depreciation			122,266			95,729
			Non-vehicle depreciation			5,242			5,314
		Net (gains) losses from disposition of revenue-earning vehicles				15			(3,446	)
		Amortization				1,642			1,638
		Performance share, stock option and restricted stock plan				868			817
		Interest income earned on restricted cash and investments				(2,224	)		(4,000	)
		Net (gains) losses from sale of property and equipment				45			(209	)
		Goodwill and other intangible asset impairment				350,144			-
		Provision for losses on receivables				950			109
		Deferred income taxes				(97,783	)		3,578
		Decrease in fair value of derivatives				28,147			7,793
		Change in assets and liabilities, net of acquisitions:
			Income taxes payable/receivable			147			642
			Receivables			53,973			24,686
			Prepaid expenses and other assets			11,502			(16,700	)
			Accounts payable			(8,946	)		2,695
			Accrued liabilities			(8,865	)		416
			Vehicle insurance reserves			(2,375	)		2,072
			Other			(788	)		181
				Net cash provided by operating activities		156,018			126,477
CASH FLOWS FROM INVESTING ACTIVITIES:
	Revenue-earning vehicles:
		Purchases				(977,378	)		(1,433,410	)
		Proceeds from sales				1,065,214			1,125,597
	Net change in restricted cash and investments					(132,200	)		283,614
	Property, equipment and software:
		Purchases				(8,954	)		(11,804	)
		Proceeds from sales				4			1,193
	Acquisition of businesses, net of cash acquired					(566	)		(20,018	)
				Net cash used in investing activities		(53,880	)		(54,828	)
									(Continued)

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DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED MARCH 31, 2008 AND 2007

(In Thousands)

					Three Months
					Ended March 31,
					(Unaudited)
					2008			2007
CASH FLOWS FROM FINANCING ACTIVITIES:
	Debt and other obligations:
		Proceeds from vehicle debt and other obligations				1,340,842			1,373,865
		Payments of vehicle debt and other obligations				(1,407,057	)		(1,438,661	)
		Payments of non-vehicle debt				(625	)		-
		Payments of debt assumed through acquisition				-			(14,092	)
	Issuance of common shares					33			246
	Financing issue costs					-			(449	)
				Net cash used in financing activities		(66,807	)		(79,091	)
CHANGE IN CASH AND CASH EQUIVALENTS						35,331			(7,442	)
CASH AND CASH EQUIVALENTS:
	Beginning of period					101,025			191,981
	End of period				$	136,356		$	184,539
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
	Cash paid for / (refunded of):
			Income taxes to (from) taxing authorities		$	(52	)	$	3,278
			Interest		$	25,744		$	24,726
SUPPLEMENTAL DISCLOSURES OF NONCASH ACTIVITIES:
	Purchases of property, equipment and software included    in accounts payable				$	2,294		$	1,194

See notes to condensed consolidated financial statements.

7

DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2008 AND 2007

(Unaudited)

1. BASIS OF PRESENTATION

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. (“DTG 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 and Exchange Commission on February 29, 2008 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 an independent registered public accounting firm. 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.

2. SHARE-BASED PAYMENT PLANS

Long-Term Incentive Plan

At March 31, 2008, the Company’s common stock authorized for issuance under the long-term incentive plan (“LTIP”) for employees and non-employee directors was 1,608,141 shares. The Company has 45,857 shares available for future LTIP awards at March 31, 2008 after allocating for the maximum potential shares that could be awarded under existing LTIP grants. The Company issues new shares of remaining authorized common stock to satisfy LTIP awards.

Compensation cost for performance shares, non-qualified option rights and restricted stock awards is recognized based on the fair value of the awards granted at the grant-date.The Company recognized compensation costs of $0.9 million during the three months ended March 31, 2008 and 2007, for such awards.

Option Rights Plan – Under the LTIP, the Committee may grant non-qualified option rights to key employees and non-employee directors.

The Company recognized $0.1 million in compensation costs (included in the $0.9 million discussed above) for the three months ended March 31, 2008 related to the 2008 award, as required by SFAS No. 123(R), “Share-based payment” (“SFAS No. 123(R)”). No expense was recognized for the three months ended March 31, 2007 because all previously issued stock options were fully vested at January 1, 2006 when the Company adopted SFAS No. 123(R). Under SFAS 123(R), expense is only recognized during the applicable performance period for options issued on or after the date

8

SFAS No. 123(R) was adopted, or for any unvested options existing at that date. The Black-Scholes option valuation model was used to estimate the fair value of the options at the date of grant. The assumptions used to calculate compensation expense relating to the stock option award in 2008 were as follows: Weighted-average expected life of the awards of six years, volatility factor of 35.78%, risk-free rate of 3.19% and no dividend payments.

The options issued during the three months ended March 31, 2008 vest after three years. Expense is recognized over the performance period which is the vesting period. Unrecognized expense remaining for the options at March 31, 2008 is $2.7 million.

The following table sets forth the non-qualified option rights activity under the LTIP for the three months ended March 31, 2008:

				Weighted-
			Weighted-	Average	Aggregate
	Number of		Average	Remaining	Intrinsic
	Shares		Exercise	Contractual	Value
	(In Thousands)		Price	Term	(In Thousands)
Outstanding at January 1, 2008	465		$            17.49
Granted	295		24.38
Exercised	(3	)	11.10
Canceled	-		-
Outstanding at March 31, 2008	757		$            20.20	5.29	$              300
Options exercisable at March 31, 2008	462		$            17.53	2.39	$              300

The following table summarizes information regarding fixed non-qualified option rights that were outstanding at March 31, 2008:

	Options Outstanding						Options Exercisable
			Weighted-Average		Weighted-				Weighted-
Range of	Number		Remaining		Average		Number		Average
Exercise	Outstanding		Contractual Life		Exercise		Exercisable		Exercise
Prices	(In Thousands)		(In Years)		Price		(In Thousands)		Price
$10.50 - $17.6875		143		2.69	$	12.10		143	$	12.10
$19.1875 - $19.375		263		2.15		19.31		263		19.31
$21.1875 - $24.38		351		8.70		24.14		56		22.91
$10.50 - $24.38		757		5.29	$	20.20		462	$	17.53

Performance Shares – Performance shares are granted to Company officers and certain key employees. The awards granted in 2008, 2007 and 2006 established a target number of shares that generally vest at the end of a three year requisite service period following the grant-date. The number of performance shares ultimately earned will range from zero to 200% of the target award, depending on the level of corporate performance over each of the three years, which is considered the performance period. For the awards granted in 2008 and 2007, the grant-date fair value for the performance indicator portion of the awards is based on the closing market price of the Company’s common shares at the date of grant. The market condition based portion of the awards is estimated on the date of grant using a lattice-based option valuation model and the assumptions noted in the following table:

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	Three months ended March 31,
	2008			2007
Weighted-average expected life (in years)		3			3
Expected price volatility		34.00	%		28.10	%
Risk-free interest rate		2.27	%		4.88	%

The following table presents the status of the Company’s nonvested performance shares as of March 31, 2008 and any changes during the three months ended March 31, 2008:

			Weighted-Average
	Shares		Grant-Date
Nonvested Shares	(In Thousands)		Fair Value
Nonvested at January 1, 2008	522		$                    44.69
Granted	147		24.38
Vested	(138	)	37.47
Forfeited	(117	)	39.48
Nonvested at March 31, 2008	414		$                    41.38

At March 31, 2008, the total compensation cost related to nonvested performance share awards not yet recognized is estimated at approximately $7.8 million, depending upon the Company’s performance against targets specified in the performance share agreement. This estimated compensation cost is expected to be recognized over the weighted-average period of 1.9 years. Values of the performance shares earned will be recognized as compensation expense over the requisite service period. The total intrinsic value of vested and issued performance shares during the three months ended March 31, 2008 was $4.0 million. The maximum amount for which performance shares may be granted under the LTIP during any year to any participant is 160,000 common shares.

Restricted Stock Units – Under the LTIP, non-employee directors were granted restricted stock units. These grants generally vest at the end of the fiscal year in which the grants were made. The grant-date fair value of the award is based on the closing market price of the Company’s common shares at the date of grant. During the three months ended March 31, 2008, the Company granted 7,000 shares with a grant-date fair value of $11.58 and the right to receive cash payments representing 15,295 shares at the grant date price. At March 31, 2008, the total compensation cost related to nonvested restricted stock unit awards not yet recognized is approximately $0.2 million, which is expected to be recognized over the next nine months.

3. ACQUISITIONS

During the three months ended March 31, 2008, the Company did not acquire any new locations from franchisees. However, $0.6 million previously withheld pending final settlement of acquisitions made in previous periods was disbursed to former franchisees.

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4. VEHICLE DEPRECIATION AND LEASE CHARGES, NET

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

	Three Months
	Ended March 31,
	2008		2007
Depreciation of revenue-earning vehicles	$	122,266	$	95,729
Net (gains) losses from disposal of revenue-earning vehicles		15		(3,446	)
Rents paid for vehicles leased		381		1,000
	$	122,662	$	93,283

5. 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. Because the Company incurred a loss from continuing operations in the first quarter of 2008, outstanding stock options, performance awards and employee and director compensation shares deferred are anti-dilutive. Accordingly, basic and diluted weighted average shares outstanding are equal for such period.

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):

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		Three Months
		Ended March 31,
			2008			2007
Net income (loss)			$	(297,942	)	$	5,162
Basic EPS:
	Weighted-average common shares			21,174,980			23,248,966
Basic EPS			$	(14.07	)	$	0.22
Diluted EPS:
	Weighted-average common shares			21,174,980			23,248,966
Shares contingently issuable:
	Stock options			-			203,204
	Performance awards			-			282,722
	Employee compensation shares deferred			-			375,240
	Director compensation shares deferred			-			194,494
Shares applicable to diluted				21,174,980			24,304,626
Diluted EPS			$	(14.07	)	$	0.21

For the three months ended March 31, 2008, the following summarizes the Company’s outstanding common stock equivalents that were anti-dilutive and therefore excluded from the computation of diluted EPS: 25,758 (stock options); 248,554 (performance awards); 347,364 (employee compensation shares deferred); 181,742 (director compensation shares deferred).

For the three months ended March 31, 2007, all options to purchase shares of common stock were included in the computation of diluted earnings per share because no exercise price was greater than the average market price of the common shares.

6. RECEIVABLES

Receivables consist of the following (in thousands):

	March 31,			December 31,
	2008			2007
Trade accounts receivable	$	110,077		$	109,833
Due from Chrysler		54,307			95,023
Other vehicle manufacturer receivables		13,222			15,809
Car sales receivable		10,680			22,125
Notes receivable		274			250
Fair value of interest rate swap		-			1,078
		188,560			244,118
Less: Allowance for doubtful accounts		(6,205	)		(5,991	)
	$	182,355		$	238,127

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Trade accounts and notes receivable include primarily amounts due from rental customers, franchisees and tour operators arising from billings under standard credit terms for services provided in the normal course of business. Notes receivable are generally issued by certain franchisees at current market interest rates with varying maturities and are generally guaranteed by franchisees.

Due from Chrysler 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.

Other vehicle manufacturer receivables include primarily amounts due under guaranteed residual, buyback and incentive programs, which are paid according to contract terms and are generally received within 60 days.

Car sales receivable include primarily amounts due from car sale auctions for the sale of both Program and Non-Program Vehicles. Vehicles purchased by vehicle rental companies under programs where either the rate of depreciation or the residual value is guaranteed by the manufacturer are referred to as “Program Vehicles.” Vehicles not purchased under these programs and for which vehicle rental companies therefore bear residual value risk are referred to as “Non-Program Vehicles.”

Fair value of interest rate swap represents the fair market value on interest rate swap agreements (Note 10).

7. INTANGIBLE ASSETS

Intangible assets consist of the following (in thousands):

	March 31,			December 31,
	2008			2007
Amortized intangible assets
Software and other intangible assets	$	79,938		$	77,888
Less accumulated amortization		(44,892	)		(43,312	)
		35,046			34,576
Unamortized intangible assets
Reacquired franchise rights		-			69,201
Total intangible assets	$	35,046		$	103,777

The Company establishes unamortized separately identifiable intangible assets, referred to as reacquired franchise rights, when acquiring locations from franchisees. Intangible assets with indefinite useful lives, such as reacquired franchise rights, are not amortized, but are subject to impairment testing annually or more frequently if events and circumstances indicate there may be impairment. The Company has elected to perform the annual impairment test on the indefinite lived intangible assets during the second quarter of each year, unless circumstances arise that require more frequent testing. Intangible assets with finite useful lives are amortized over their respective useful lives.

During 2007, the Company completed its annual impairment test of each reacquired franchise right and concluded no impairment was indicated. In March 2008, based on the present operating environment and in conjunction with reassessment of goodwill impairment (see discussion under Note 8 below), the Company reassessed its reacquired franchise rights for impairment. Impairment testing under SFAS No. 142, "Goodwill and Other Intangible Assets" ("SFAS No. 142") also applies to reacquired franchise rights. Based on the assessment at March 31, 2008, management concluded that reacquired franchise rights were impaired, and the Company recorded a $69.0 million non-cash charge (pre-tax) related to the impairment of the entire reacquired franchise rights ($42.0 million after-tax).

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8. GOODWILL

The Company was required to record a non-cash charge for goodwill impairment in the first quarter of 2008. Under SFAS No. 142, the Company is required on at least an annual basis to perform a goodwill impairment assessment, which requires, among other things, a reconciliation of current equity market capitalization to stockholders' equity. As a result of the decline in the Company's stock price, the Company's total stockholders' equity exceeded its equity market capitalization including applying a reasonable control premium. The Company is required to place greater emphasis on the current stock price than on management's long-range forecast in performing its impairment assessment.

Based on this evaluation in the first quarter of 2008, management concluded that the entire goodwill was impaired and the Company recorded a $281.2 million non-cash charge (pre-tax) related to the impairment of goodwill ($223.2 million after-tax).

The changes in the carrying amount of goodwill for the three months ended March 31, 2008 are as follows (in thousands):

Balance as of January 1, 2008	$	281,424
Effect of change in rates used for foreign currency translation		(252	)
Goodwill impairment		(281,172	)
Balance as of March 31, 2008	$	-

9. DEBT AND OTHER OBLIGATIONS

Debt and other obligations as of March 31, 2008 and December 31, 2007 consist of the following (in thousands):

			March 31,			December 31,
			2008			2007
Vehicle debt and other obligations
Asset backed medium term notes:
	2007 Series notes		$	500,000		$	500,000
	2006 Series notes			600,000			600,000
	2005 Series notes			400,000			400,000
	2004 Series notes			250,000			500,000
				1,750,000			2,000,000
		Discounts on asset backed medium term notes		(21	)		(23	)
		Asset backed medium term notes, net of discount		1,749,979			1,999,977
Conduit Facility				12,000			12,000
Commercial paper, net of discount of $234 and $131				247,897			25,851
Other vehicle debt				219,326			234,472
Limited partner interest in limited partnership				112,396			135,512
	Total vehicle debt and other obligations			2,341,598			2,407,812
Non-vehicle debt
Term Loan				248,125			248,750
	Total non-vehicle debt			248,125			248,750
Total debt and other obligations			$	2,589,723		$	2,656,562

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10. 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 volatility of the financial markets may have on the Company’s operating results. The Company has used interest rate swap agreements, for each related new asset backed medium term note issuance in 2004 through 2007, to effectively convert variable interest rates on a total of $1.6 billion in asset backed medium term notes to fixed interest rates. These swaps have termination dates through July 2012. The Company reflects these swaps on its balance sheet at fair market value, which totaled approximately $94.9 million at March 31, 2008, all comprised of liabilities, included in accrued liabilities. At December 31, 2007, these swaps totaled $47.8 million comprised of liabilities, included in accrued liabilities, of approximately $48.9 million, and assets, included in receivables, of approximately $1.1 million.

The interest rate swap agreements related to the asset backed medium term note issuances in 2004, 2005 and 2006 do not qualify for hedge accounting treatment under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”, as amended (“SFAS No. 133”); therefore, the change in the interest rate swap agreements’ fair values must be recognized as an (increase) decrease in fair value of derivatives in the consolidated statement of income. For the three months ended March 31, 2008 and 2007, the Company recorded the related change in the fair value of the swap agreements of $28.1 million and $7.8 million, respectively, as a net decrease in fair value of derivatives in its condensed consolidated statements of operations.

The interest rate swap agreement entered into in May 2007 related to the 2007 asset backed medium term note issuance (“2007 Swap”) constitutes a cash flow hedge and satisfies the criteria for hedge accounting under the “long-haul” method. Related to the 2007 Swap, the Company recorded a loss of $11.1 million, which is net of income taxes, in total comprehensive income (loss) for the three month period ended March 31, 2008. 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 in earnings. Based on projected market interest rates, the Company estimates that approximately $8.1 million of net deferred loss related to the 2007 Swap will be reclassified into earnings within the next twelve months.

11. FAIR VALUE MEASUREMENTS

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" ("SFAS No. 157"). SFAS No. 157 defines fair value, establishes a frame work for measuring fair value in accordance with accounting principles generally accepted in the United States, and expands disclosures about fair value measurements. The Company has adopted the provisions of SFAS No. 157 as of January 1, 2008. Although the adoption of SFAS No. 157 did not materially impact its financial condition, results of operations, or cash flow, the Company is now required to provide additional disclosures as part of its financial statements.

SFAS No. 157 establishes a three-tier fair value hierarchy, which categorizes the inputs used in measuring fair value. These categories include (in descending order of priority): Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

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The following table shows assets and liabilities measured at fair value as of March 31, 2008 on the Company's balance sheet, and the input categories associated with those assets and liabilities:

				Fair Value Measurments at Reporting Date Using
	Total Fair			Quoted Prices in		Significant Other			Significant
(in thousands)	Value Assets			Active Markets		Observable			Unobservable
	(Liabilities)			for Identical Assets		Inputs			Inputs
Description	at 3/31/08			(Level 1)		(Level 2)			(Level 3)
Derivatives	$	(94,897	)	$	-	$	(94,897	)	$	-
Deferred Compensation Plan Assets		6,294			-		6,294			-
Deferred Compensation Plan Liabilities		(6,294	)		-		(6,294	)		-
Total	$	(94,897	)	$	-	$	(94,897	)	$	-

The fair value of derivatives, consisting of interest rate swaps as discussed above, is calculated using proprietary models utilizing observable inputs as well as future assumptions related to interest rates and other applicable variables. These calculations are performed by the financial institutions which are counterparties to the applicable swap agreements and reported to the Company on a monthly basis. The Company uses these reported fair values to adjust the asset or liability as appropriate. The Company evaluates the reasonableness of the calculations by comparing similar calculations from other counterparties for the applicable period.

12. COMPREHENSIVE INCOME (LOSS)

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

	Three Months
	Ended March 31,
	2008			2007
Net income (loss)	$	(297,942	)	$	5,162
Interest rate swap adjustment on 2007 swap		(11,118	)		-
Foreign currency translation adjustment		(1,164	)		107
Comprehensive income (loss)	$	(310,224	)	$	5,269

13. INCOME TAXES

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. The Company has established tax provisions separately for U.S. taxable income and Canadian losses, for which no income tax benefit was recorded. 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.

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For the three months ended March 31, 2008, the overall effective tax rate of (24.7%) differed from the U.S. statutory rate due primarily to the non-cash write-off of goodwill (of which only a portion of the write-off receives a deferred tax benefit), and reacquired franchise rights, partially offset by state and local taxes, dissolution of the Thrifty Rent-A-Car System, Inc. National Advertising Committee, and losses relating to DTG Canada for which no benefit was recorded due to full valuation allowance.

As of March 31, 2008, the Company had no material liability for unrecognized tax benefits and no material adjustments to the Company’s opening financial position were required. There are no material tax positions for which it is reasonably possible that unrecognized tax benefits will significantly change in the twelve months subsequent to March 31, 2008.

The Company files income tax returns in the U.S. federal and various state, local and foreign jurisdictions. In the Company’s significant tax jurisdictions, the tax years 2004 through 2007 are subject to examination by federal taxing authorities and the tax years 2003 through 2007 are subject to examination by state and foreign taxing authorities.

The Company accrues interest and penalties on underpayment of income taxes related to unrecognized tax benefits as a component of income tax expense in the condensed consolidated statement of income. No amounts were recognized for interest and penalties upon adoption of FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109" as amended ("FIN No. 48") or during the three months ended March 31, 2008 and 2007.

14. SHARE REPURCHASE PROGRAM

On February 9, 2006, the Company announced that its Board of Directors had authorized a $300 million share repurchase program, which will extend through December 31, 2008, to replace the $100 million program of which $44.7 million had been used to repurchase shares. During the three months ended March 31, 2008, the Company did not repurchase shares of common stock. Since inception of the share repurchase programs through March 31, 2008, the Company has repurchased 6,414,906 shares of common stock at an average price of $35.48 per share totaling approximately $227.6 million, all of which were made in open market transactions. At March 31, 2008, the $300 million share repurchase program had $117.1 million of remaining authorization that extends through December 31, 2008. The Company is continuing the suspension of repurchasing shares under its share repurchase program that began during the fourth quarter 2007.

15. COMMITMENTS AND 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.

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16. NEW ACCOUNTING STANDARDS

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”), which is effective for fiscal years beginning after November 15, 2007. This statement defines fair value, establishes a framework for measuring fair value and expands the related disclosure requirements. The Company adopted the provisions of SFAS No. 157 as required on January 1, 2008, except for nonfinancial assets and nonfinancial liabilities that are subject to delayed adoption in accordance with Staff Position FAS 157-2 issued by the FASB in February 2008. FAS 157-2 delays required adoption of the SFAS No. 157 for nonfinancial assets and liabilities until fiscal years and interim periods beginning after November 15, 2008. The Company is currently evaluating the impact of the additional disclosures required upon full implementation and plans to fully implement SFAS 157 as required on January 1, 2009.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – including an amendment of FASB Statement No. 115” (“SFAS No. 159”). This statement permits entities to make an irrevocable election to measure certain financial instruments and other assets and liabilities at fair value on an instrument-by-instrument basis. Unrealized gains and losses on items for which the fair value option has been elected should be recognized in earnings at each subsequent reporting date. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The Company adopted the provisions of SFAS No. 159 as required on January 1, 2008. No such elections were made by the Company during the three months ended March 31, 2008.

In May 2007, the FASB issued FASB Staff Position (“FSP”) No. FIN 48-1, “Definition of Settlement in FASB Interpretation No. 48” (“FSP No. FIN 48-1”). This FSP amends FIN No. 48 to provide guidance on how an enterprise should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits under FIN No. 48. The Company applied the provisions of FSP No. FIN 48-1 upon the initial adoption of FIN No. 48 on January 1, 2007, as required. The application of this FSP did not have a material impact on the Company’s consolidated financial position or results of operations.

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations” (“SFAS No. 141(R)”) and SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51” (“SFAS No. 160”) which are both effective for fiscal years beginning after December 15, 2008. SFAS No. 141(R) requires the acquirer to recognize assets and liabilities and any noncontrolling interest in the acquiree at the acquisition date at fair value and requires the acquirer in a step-acquisition to recognize the identifiable assets and liabilities at the full amounts of their fair value. SFAS No. 160 amends ARB No. 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and the deconsolidation of a subsidiary and changes the layout of the consolidated income statement and classifies noncontrolling interests as equity in the consolidated balance sheet. The Company plans to adopt the provisions of SFAS No. 141(R) and SFAS No. 160 as required on January 1, 2009. The Company is currently evaluating the impact SFAS No. 141(R) and SFAS No. 160 will have on its consolidated financial position and results of operations.

In February 2008, the FASB issued Staff Position No. 157-1, “Fair Value Measurements” (“FSP No. 157-1”) amending SFAS No. 157, to exclude the fair value measurement and disclosure requirements for lease obligations accounted for under SFAS No. 13, “Accounting for Leases.” The application of this FSP did not have a material impact on the Company’s consolidated financial position or results of operations.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“SFAS No. 161”), which is effective for fiscal years beginning after December 15, 2008. SFAS No. 161 requires expanded disclosures related to an entity’s derivative instruments and hedging activities. The Company plans to adopt the provisions of SFAS No. 161 as required on January 1, 2009. The Company is currently evaluating the impact SFAS No. 161 will have on its consolidated financial position and results of operations and related disclosures.

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17. SUBSEQUENT EVENTS

On May 8, 2008, the Company renewed its Variable Funding Note Purchase Facility (the “Conduit Facility”) for another 364-day period with a capacity of $215 million. In conjunction with this renewal, the Company modified the minimum net worth covenant to exclude the impact of any goodwill or other intangible asset impairment, and increased the percentage of Non-Program Vehicles allowed. Additionally, a covenant was added to maintain a minimum level of excess liquidity. The renewal resulted in higher fees and requires increased enhancement levels to be maintained by the Company.

On May 8, 2008, the Company renewed its Commercial Paper Program (the “Commercial Paper Program”) for another 364-day period at a maximum capacity of $800 million supported by a 364-day extension of the Liquidity Facility (the “Liquidity Facility”) in the amount of $278 million. At any time, the Company may only issue commercial paper in an amount that does not exceed the sum of the Liquidity Facility and the letter of credit supporting the commercial paper notes. In conjunction with this renewal, the Company modified the minimum net worth covenant to exclude the impact of any goodwill or other intangible asset impairment, and increased the percentage of Non-Program Vehicles allowed. Additionally, a covenant was added to maintain a minimum level of excess liquidity. The renewal resulted in higher fees and requires increased enhancement levels to be maintained by the Company.

*******

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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 operations:

			Three Months
			Ended March 31,
			2008			2007
			(Percentage of Revenue)
Revenues:
	Vehicle rentals			95.3	%		93.1	%
	Other			4.7			6.9
		Total revenues		100.0			100.0
Costs and expenses:
	Direct vehicle and operating			54.3			50.6
	Vehicle depreciation and lease charges, net			30.9			23.4
	Selling, general and administrative			13.5			16.4
	Interest expense, net of interest income			5.7			4.8
	Goodwill and other intangible asset impairment			88.3			-
		Total costs and expenses		192.7			95.2
	(Increase) decrease in fair value of derivatives			7.1			2.0
Income (loss) before income taxes				(99.8	)		2.8
Income tax expense (benefit)				(24.7	)		1.5
Net income (loss)				(75.1	%)		1.3	%

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

		Three Months
		Ended March 31,
					Percentage
	2008		2007		Change
U.S. and Canada
Vehicle Rental Data: (includes franchise acquisitions)
Average number of vehicles operated		111,168		109,114		1.9%
Number of rental days		8,407,876		8,172,820		2.9%
Vehicle utilization		83.1%		83.2%		(0.1) p.p.
Average revenue per day	$	44.95	$	45.34		(0.9%	)
Monthly average revenue per vehicle	$	1,133	$	1,132		0.1%
Average depreciable fleet		111,781		111,578		0.2%

Three Months Ended March 31, 2008 Compared with Three Months Ended March 31, 2007

During the first quarter of 2008, the Company experienced higher vehicle depreciation and interest costs. This increase in costs, along with a non-cash goodwill and other intangible asset impairment charge and the decrease in the fair value of derivatives, resulted in significantly lower profits for the first quarter of 2008 as compared to last year’s first quarter.

Operating Results

The Company had a loss before income taxes of $395.6 million for the first quarter of 2008, compared to income before income taxes of $11.1 million in the first quarter of 2007.

Revenues

	Three Months
	Ended March 31,				$ Increase/			% Increase/
	2008		2007		(decrease)			(decrease)
	(in millions)
Vehicle rentals	$	378.0	$	370.6	$	7.4			2.0%
Other		18.5		27.4		(8.9	)		(32.3%	)
Total revenues	$	396.5	$	398.0	$	(1.5	)		(0.4%	)
Vehicle rental metrics:
Number of rental days		8,407,876		8,172,820		235,056			2.9%
Average revenue per day		$44.95		$45.34		($0.39	)		(0.9%	)

Vehicle rental revenue for the first quarter of 2008 increased 2.0%, due to a 2.9% increase in rental days totaling $10.7 million, partially offset by a 0.9% decrease in revenue per day totaling $3.3 million.

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Other revenue decreased $8.9 million due to a $2.8 million decrease in leasing revenue and a $1.8 million decrease in fees and services revenue primarily related to the shift of several locations from franchise operations to corporate operations. Additionally, there was a decrease of $4.5 million in the market value of investments in the Company’s deferred compensation and retirement plans. The revenue relating to the deferred compensation and retirement plans is attributable to the mark to market valuation of the corresponding investments and is offset in selling, general and administrative expenses and, therefore, has no impact on net income.

Expenses

	Three Months
	Ended March 31,				$ Increase/			% Increase/
	2008		2007		(decrease)			(decrease)
	(in millions)
Direct vehicle and operating	$	215.4	$	201.4	$	14.0			6.9%
Vehicle depreciation and lease charges, net		122.6		93.3		29.3			31.5%
Selling, general and administrative		53.7		65.3		(11.6	)		(17.8%	)
Interest expense, net of interest income		22.1		19.1		3.0			16.1%
Goodwill and other intangible asset impairment		350.2		-		350.2			100.0%
Total expenses	$	764.0	$	379.1	$	384.9			101.5%
(Increase) decrease in fair value of derivatives	$	28.1	$	7.8	$	20.3			261.2%

Direct vehicle and operating expenses for the first quarter of 2008 increased $14.0 million, primarily due to higher costs per transaction coupled with higher transaction levels. As a percent of revenue, direct vehicle and operating expenses were 54.3% in the first quarter of 2008, compared to 50.6% in the first quarter of 2007.

The increase in direct vehicle and operating expense in the first quarter of 2008 resulted from the following:

Ø Vehicle related expenses increased $6.3 million. This increase resulted primarily from an increase in gasoline expense of $3.0 million, which is generally recovered in revenue from customers, and an increase in vehicle insurance expense of $1.1 million. All other vehicle related expenses increased $2.2 million.

Ø Facility and airport concession fees increased $3.2 million. This increase resulted primarily from increased concession fees of $1.7 million due to increased revenues subject to concession fees and change in the average concession fee percentage paid in the first quarter 2008 compared to first quarter 2007, and increases in rent expense of $1.5 million.

Ø Litigation settlements charged as expense totaled $1.3 million due to the settlement of two legal cases during the first quarter of 2008.

Ø Computer expense increased $1.4 million due primarily to increased equipment lease expense.

Net vehicle depreciation and lease charges for the first quarter of 2008 increased $29.3 million. As a percent of revenue, net vehicle depreciation and lease charges were 30.9% in the first quarter of 2008, compared to 23.4% in the first quarter of 2007.

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The increase in net vehicle depreciation and lease charges in the first quarter of 2008 resulted from the following:

Ø Vehicle depreciation expense increased $26.5 million, resulting primarily from a 27.2% increase in the average depreciation rate. The increase in the depreciation rate was primarily the result of an increase in depreciation rates on Program and Non-Program Vehicles (hereinafter defined), partially offset by a higher mix of Non-Program Vehicles, which typically have lower average depreciation rates. Vehicles purchased by vehicle rental companies under programs where either the rate of depreciation or the residual value is guaranteed by the manufacturer are referred to as “Program Vehicles.” Vehicles not purchased under these programs and for which vehicle rental companies therefore bear residual value risk are referred to as “Non-Program Vehicles.”

Ø Net vehicle gains on disposal of Non-Program Vehicles, which reduce vehicle depreciation and lease charges, decreased $3.5 million. This decrease resulted primarily from a lower average gain per unit.

Ø Lease charges, for vehicles leased from third parties, decreased $0.6 million due primarily to a decrease in the average number of units leased.

Selling, general and administrative expenses for the first quarter of 2008 decreased $11.6 million. As a percent of revenue, selling, general and administrative expenses were 13.5% of revenue in the first quarter of 2008, compared to 16.4% in the first quarter of 2007.

The decrease in selling, general and administrative expenses in the first quarter of 2008 resulted from the following:

Ø Personnel related expenses decreased $3.6 million. This decrease resulted primarily from organizational streamlining, of approximately $1.4 million, implemented in the third quarter of 2007, a $1.8 million decrease in incentive compensation expense and a $0.5 million reduction in retirement expense. The decrease in the incentive compensation is primarily related to lower levels of earnings in the first quarter of 2008 compared to the first quarter of 2007.

Ø The market value of investments in the Company’s deferred compensation and retirement plans decreased $4.5 million, which is offset in other revenue and, therefore did not impact net income.

Ø Transition costs relating to the outsourcing of information and technology services and call center operations decreased $2.5 million, including salary related expenses.

Net interest expense for the first quarter of 2008 increased $3.0 million due to higher interest rates related to the Term Loan (hereinafter defined) and lower cash balances, coupled with a decrease in interest reimbursements relating to vehicle programs. Net interest expense was 5.7% of revenue in the first quarter of 2008, compared to 4.8% in the first quarter of 2007.

A non-cash goodwill and other intangible asset impairment charge of $350.2 million ($265.2 million after-tax) was recorded in the first quarter of 2008 resulting from a continuing decline in the Company’s stock price which led to a re-evaluation of goodwill and other intangible assets for impairment.

The income tax benefit for the first quarter of 2008 was $97.7 million. The effective income tax rate in the first quarter was (24.7%) compared to 53.4% in the first quarter of 2007. The decrease in the effective tax rate was primarily due to the taxable benefit related to the pre-tax loss in the first quarter of 2008 compared to the pre-tax income in the first quarter of 2007, the non-cash write-off of goodwill (of which only a portion of the write-off receives a deferred tax benefit), and reacquired franchise rights, partially offset by the dissolution of the Thrifty Rent-A-Car System, Inc. National Advertising Committee. 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.

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Outlook for 2008

The Company expects the operating environment to remain challenging through at least the first half of 2008 due to concerns about the strength of the economy and the impact on consumer spending. However, the Company has seen positive trends in pricing, demand and utilization following weak January operating conditions.

The Company’s fleet capacity will be tightened up going forward in 2008 as the Company adjusts fleet to match consumer demand. In light of the current economic environment, the Company believes that other car rental companies may take similar actions. It is anticipated that these actions may result in increased rental pricing in 2008.

Vehicle depreciation cost increases continue to trend upward in the first half of 2008 as the Company absorbs declines in the used car market. The Company has been increasing its level of Non-Program Vehicles in its fleet and expects to have about sixty percent of its fleet acquired as Non-Program Vehicles for the 2008 year. The Company believes that this action, together with the anticipated extension of fleet holding periods, will help alleviate some of the cost increases in vehicle depreciation. However, increasing the percentage of Non-Program Vehicles increases the Company's exposure to the volatility in the used car market.

The Company has begun to realize efficiencies in its vehicle acquisition and remarketing efforts and improvements in fleet planning as a result of the implementation of the fleet optimization software, and expects to improve on these efficiencies through the remainder of 2008 and into 2009.

The Company will continue to monitor developments in the bank and capital markets, especially relating to the asset backed medium term note market. The Company has asset backed medium term notes insured by AMBAC, XL Capital and FGIC (collectively referred to as the “Monolines”). If insolvency or bankruptcy of one of these Monolines were to occur, the notes insured by such Monoline may begin to amortize, which means that as the vehicles are sold in the normal course of business, the proceeds from those vehicle dispositions would be used to repay the noteholders. Should amortization occur in connection with one of the Monolines, the Company expects to have sufficient excess financing capacity to maintain its current level of business operations. However, the Company continues to explore other means of financing its fleet given the expectation in the near term that the asset backed medium term note market will continue to be difficult to access due to overall negative market conditions including financial difficulties being encountered by the Monolines and other bond insurers.

Additionally, the Company will benefit from cost savings initiatives implemented in 2007 and is implementing additional initiatives to reduce certain operating and administrative costs in 2008 as well as taking other actions to preserve liquidity in 2008.

Seasonality

The Company’s business is subject to seasonal variations in customer demand, with the summer vacation period representing the peak season for vehicle rentals. 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.

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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, and for working capital. The Company uses both cash and letters of credit to support asset backed vehicle financing programs. 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 Senior Secured Credit Facilities (hereinafter defined) and insurance bonds. Cash generated by operating activities of $156 million for the three months ended March 31, 2008 was primarily the result of net loss, adjusted for depreciation, a change in fair value of derivatives, non-cash goodwill and other intangible assets impairment and a reduction in outstanding vehicle manufacturers’ receivables. The liquidity necessary for purchasing vehicles is primarily obtained from secured vehicle financing, sales proceeds from disposal of used vehicles and cash generated by operating activities. The asset backed medium term notes and commercial paper programs require varying levels of credit enhancement or overcollateralization, which are provided by a combination of cash, vehicles, letters of credit and proceeds from the Term Loan. 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, proceeds from its Term Loan and secured vehicle financing programs are adequate to meet its liquidity requirements for the foreseeable future. A significant portion of the secured vehicle financing is available through the asset backed commercial paper programs and bank facilities, which are 364-day commitments that are renewable annually. The successful annual renewal of these facilities along with the Company’s existing asset backed medium term notes and other secured vehicle financing facilities are expected to be sufficient to meet 2008 vehicle financing requirements, even considering the amortization of the 2004 Series notes. The Company has no further maturities of the asset-backed medium term notes until 2010. Historically, the Company had issued additional asset backed medium term notes each year to increase or replace maturing vehicle financing capacity; however, recent volatility in the credit markets and the downgrading or risk of downgrading of the bond insurers, including the Monolines, has limited access to this market in 2008. With the renewal of the Commercial Paper Program and Conduit Facility, the Company is experiencing increases in the level of credit enhancement required. These increased enhancement and collateral requirements have reduced the liquidity available for other corporate purposes. The Company believes it has sufficient resources to meet these credit enhancement requirements.

Cash used in investing activities was $53.9 million. The principal use of cash in investing activities during the three months ended March 31, 2008 was the purchase of revenue-earning vehicles, which totaled $1.0 billion, offset by $1.1 billion in proceeds from the sale of used revenue-earning vehicles. The Company’s need for cash to finance vehicles is seasonal and typically peaks in the second and third quarters of the year when fleet levels build to meet seasonal rental demand. Fleet levels are the lowest in the first and fourth quarters when rental demand is at a seasonal low. Restricted cash at March 31, 2008 increased $134.4 million from December 31, 2007, including $132.2 million provided by vehicle disposition proceeds coupled with interest income earned on restricted cash and investments of $2.2 million. 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 non-vehicle capital expenditures of $8.9 million. These expenditures consist primarily of airport facility improvements for the Company’s rental locations and investments in information technology equipment and systems.

Cash used in financing activities was $66.8 million primarily due to the maturity of asset backed medium term notes totaling $250.0 million and a decrease in other existing bank vehicle lines of credit of $38.3 million, partially offset by a $222.0 million net increase in commercial paper.

The Company has significant requirements to maintain letters of credit and surety bonds to support its insurance programs and airport concession commitments. At March 31, 2008, the Company had $58.5 million in letters of credit, including $45.9 million in letters of credit noted under the Revolving Credit Facility, and $41.4 million in surety bonds to secure these obligations.

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Asset Backed Medium Term Notes

The asset backed medium term note program at March 31, 2008 was comprised of $1.8 billion in asset backed notes with maturities ranging from 2008 to 2012. Borrowings under the asset backed notes are secured by eligible vehicle collateral and bear interest at fixed rates ranging from 4.20% to 5.27% including certain floating rate notes swapped to fixed rates.

In late February 2008, the Company amended the minimum net worth covenant in three of its four monoline agreements to exclude the impact of any goodwill or other intangible asset impairment, while the Company provided increased enhancement for one agreement not amended in order to comply with the existing minimum net worth covenant.

Conduit Facility

On May 8, 2008, the Company renewed its Variable Funding Note Purchase Facility (the “Conduit Facility”) for another 364-day period with a capacity of $215 million. In conjunction with this renewal, the Company modified the minimum net worth covenant to exclude the impact of any goodwill or other intangible asset impairment, and increased the percentage of Non-Program Vehicles allowed. Additionally, a covenant was added to maintain a minimum level of excess liquidity. The renewal resulted in higher fees and requires increased enhancement levels to be maintained by the Company. At March 31, 2008, the Company had $12.0 million outstanding under the Conduit Facility.

Commercial Paper Program and Liquidity Facility

On May 8, 2008, the Company renewed its Commercial Paper Program (the “Commercial Paper Program”) for another 364-day period at a maximum capacity of $800 million supported by a 364-day extension of the Liquidity Facility (the “Liquidity Facility”) in the amount of $278 million. At any time, the Company may only issue commercial paper in an amount that does not exceed the sum of the Liquidity Facility and the letter of credit supporting the commercial paper notes. In conjunction with this renewal, the Company modified the minimum net worth covenant to exclude the impact of any goodwill or other intangible asset impairment, and increased the percentage of Non-Program Vehicles allowed. Additionally, a covenant was added to maintain a minimum level of excess liquidity. The renewal resulted in higher fees and requires increased enhancement levels to be maintained by the Company. At March 31, 2008, the Company had $247.9 million in commercial paper outstanding under the Commercial Paper Program.

Vehicle Debt and Obligations

Vehicle manufacturer and bank lines of credit provided $312 million in capacity at March 31, 2008. The Company had $219.3 million in borrowings outstanding under these lines at March 31, 2008. All lines of credit are collateralized by the related vehicles.

The Company finances its Canadian vehicle fleet through a fleet securitization program. Under this program, DTG Canada can obtain vehicle financing up to CND $300 million funded through a bank commercial paper conduit which expires May 31, 2010. At March 31, 2008, DTG Canada had approximately CND $115.4 million (US $112.4 million) funded under this program.

Senior Secured Credit Facilities

On June 15, 2007, the Company entered into $600 million in new Senior Secured Credit Facilities (the “Senior Secured Credit Facilities”) comprised of a $350 million Revolving Credit Facility (the “Revolving Credit Facility”) and a $250 million Term Loan (the “Term Loan”). The Senior Secured Credit Facilities contain certain financial and other covenants, including a covenant that sets the maximum amount the Company can spend annually on the acquisition of non-vehicle capital assets, a maximum leverage ratio and a limitation on cash dividends and share repurchases, and are collateralized by a first priority lien on substantially all material non-vehicle assets of the Company. As of March 31, 2008, the Company is in compliance with all covenants.

The Revolving Credit Facility expires on June 15, 2013, and will be used to provide working capital borrowings and letters of credit. Interest rates on loans under the Revolving Credit Facility are, at

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the option of the Company, based on either prime rates, which are payable quarterly, or Eurodollar rates, which are payable based on an elected interest period of one, two, three or six months. The Revolving Credit Facility permits the combination of letter of credit usage and working capital borrowing up to $350 million with no sublimits on either. The Company had letters of credit outstanding under the Revolving Credit Facility of approximately $146.2 million and no working capital borrowings at March 31, 2008.

The Term Loan expires on June 15, 2014, and requires minimum quarterly principal payments which began in September 2007, but depending on the level of excess cash flows and other factors, the required principal payments may be increased. At March 31, 2008, the Company had $248.1 million outstanding under the Term Loan.

New Accounting Standards

For a discussion on new accounting standards refer to Note 16 of the Notes to condensed consolidated financial statements in Item 1 – Financial Statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company’s primary market risk exposure is changing interest rates, primarily in the United States. The Company manages 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. However, this foreign currency risk is mitigated by the underlying collateral which is the Canadian fleet. The fair value of the interest rate swaps is calculated using projected market interest rates over the term of the related debt instruments as provided by the counter parties.

Based on the Company’s level of floating rate debt (excluding notes with floating interest rates swapped into fixed rates) at March 31, 2008, a 50 basis point fluctuation in interest rates would have an approximate $4 million impact on the Company’s expected pretax income on an annual basis. This impact on pretax income would be modified by earnings from cash and cash equivalents and restricted cash and investments, which are invested on a short-term basis and subject to fluctuations in interest rates. At March 31, 2008, cash and cash equivalents totaled $136.4 million and restricted cash and investments totaled $267.4 million.

At March 31, 2008, there were no significant changes in the Company’s quantitative disclosures about market risk compared to December 31, 2007, which is included under Item 7A of the Company’s most recent Form 10-K, except for the net change of the derivative financial instruments noted in Notes 9 and 10 to the condensed consolidated financial statements, and except for the change in fair value since December 31, 2007 for the tabular entry, "Vehicle Debt and Obligations - Floating Rates," from $1,990.7 million to $1,803.5 million, which reduction also includes the amortization of asset backed medium term notes described in Note 9 of notes to the consolidated financial statements.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company maintains 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 (“SEC”) rules and forms. The disclosure controls and procedures are also designed with the objective of ensuring such information is accumulated and communicated to the Company’s management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing

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the disclosure controls and procedures, the Company’s management was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures.

As required by SEC Rule 13a-15(b), the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the CEO and CFO, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the quarter covered by this report. Based on that evaluation, the CEO and CFO have concluded that the Company’s disclosure controls and procedures are effective at the reasonable assurance level as of the end of the quarter covered by this report.

Changes in Internal Control Over Financial Reporting

There has been no change in the Company’s internal control over financial reporting as defined in Rules 13a–15(f) and 15d–15(f) under the Exchange Act, identified in connection with the evaluation of the Company’s internal control performed during the fiscal quarter ended March 31, 2008 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The following summarizes material developments that have occurred with regard to previously reported legal proceedings:

On April 8, 2008, the U.S. District Court for the Southern District of California granted the defendants’ motion to dismiss, with leave to amend; the putative class action lawsuit captioned Michael Shames et al. v. The Hertz Corp. et al., No. 07 CV 2174H (U.S. District Court, Southern District of California), on the ground that plaintiffs failed to state claims for which relief could be granted. This case was filed on November 14, 2007 against the Company and six other rental car companies, and the California Travel and Tourism Commission and its Executive Director, and contained claims that the pass-through of the California Trade and Tourism Commission assessments and airport concession fees authorized by legislation effective in January 2007 violated federal antitrust laws, the California Unfair Competition Act and California's False Advertising Law. The plaintiffs have filed an amended complaint.

Various other 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 final resolution of any such matters could have a material effect on the Company's consolidated operating results for a 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.

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ITEM 1A. RISK FACTORS

There have been no changes to the risk factors disclosed in Item 1A of our most recent Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

a) Recent Sales of Unregistered Securities

None.

b) Use of Proceeds

None.

c) Purchases of Equity Securities by the Issuer and Affiliated Purchasers

					Total Number of		Approximate
					Shares Purchased		Dollar Value of
	Total Number		Average		as Part of Publicly		Shares that May Yet
	of Shares		Price Paid		Announced Plans		Be Purchased under
Period	Purchased		Per Share		or Programs		the Plans or Programs
January 1, 2008 - January 31, 2008		-	$	-		-	$	117,149,000
February 1, 2008 - February 29, 2008		-	$	-		-	$	117,149,000
March 1, 2008 - March 31, 2008		-	$	-		-	$	117,149,000
Total		-				-

On February 9, 2006, the Company announced that its Board of Directors had authorized a $300 million share repurchase program to replace the $100 million program of which $44.7 million had been used to repurchase shares. The Company did not repurchase shares during the three months ended March 31, 2008. Since inception of the share repurchase programs through March 31, 2008, the Company has used $227.6 million to repurchase shares. All share repurchases were made in open market transactions. This $300 million share repurchase program has $117.1 million of remaining authorization that extends through December 31, 2008.

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ITEM 6. EXHIBITS

3.2	Amended and Restated By-Laws of DTG, as amended, which were approved by the DTG Board of Directors on January 31, 2008, filed as the same numbered exhibit with DTG’s Form 8-K, filed February 6, 2008, Commission File No. 1-13647*
10.158	Dollar Thrifty Automotive Group, Inc. 2008 Incentive Compensation Plan, filed as the same numbered exhibit with DTG’s Form 8-K, filed February 6, 2008, Commission File No. 1-13647*
10.159	Form of Performance Unit Grant Agreement between the Company and the applicable employee, filed as the same numbered exhibit with DTG’s Form 8-K, filed February 6, 2008, Commission File No. 1-13647*
10.160	Form of Stock Option Grant Agreement between the Company and the applicable employee, filed as the same numbered exhibit with DTG’s Form 8-K, filed February 6, 2008, Commission File No. 1-13647*
10.189	Retirement and Separation Agreement by and between Yves Boyer and Dollar Thrifty Automotive Group, Inc. effective and enforceable on December 31, 2007**
15.30	Letter from Deloitte & Touche LLP regarding interim financial information**
31.49	Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002**
31.50	Certification by the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002**
32.49	Certification by the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
32.50	Certification by the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**

-------------------------------------

* Incorporated by reference

**Filed herewith

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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.

DOLLAR THRIFTY AUTOMOTIVE GROUP, INC.

May 12, 2008 By: /s/ GARY L. PAXTON

Gary L. Paxton

President, Chief Executive Officer and Principal

Executive Officer

May 12, 2008 By: /s/ RICHARD W. NEU

Richard W. Neu

Interim Chief Financial Officer and Principal

Financial Officer

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INDEX TO EXHIBITS

Exhibit Number Description

10.189	Retirement and Separation Agreement by and between Yves Boyer and Dollar Thrifty Automotive Group, Inc. effective and enforceable on December 31, 2007
15.30	Letter from Deloitte & Touche LLP regarding interim financial information
31.49	Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.50	Certification by the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.49	Certification by the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.50	Certification by the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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