DOLLAR THRIFTY AUTOMOTIVE GROUP
REPORTS RECORD SECOND QUARTER EARNINGS
Company Reports Sixth Consecutive Quarter of Year-Over-Year
Double-Digit Growth in Corporate Adjusted EBITDA
Tulsa, Oklahoma, August 3, 2010: Dollar Thrifty Automotive Group, Inc. (NYSE: DTG) today reported results for the second quarter ended June 30, 2010. Net income for the 2010 second quarter was $42.3 million, or $1.40 per diluted share, compared to net income of $12.4 million, or $0.55 per diluted share, for the comparable 2009 quarter. Net income for the second quarter of 2010 included income of $0.15 per diluted share, compared to income of $0.24 per diluted share in last year’s second quarter, both of which related to increases in fair value of derivatives.
Non-GAAP net income for the 2010 second quarter was $38.0 million, or $1.26 per diluted share, compared to non-GAAP net income of $6.9 million, or $0.30 per diluted share, for the 2009 second quarter. Non-GAAP net income (loss) excludes the (increase) decrease in fair value of derivatives and the non-cash charges related to the impairment of long-lived assets, net of related tax impact.
The Company reported Corporate Adjusted EBITDA for the second quarter of 2010 of $74.3 million, compared to $20.9 million in the second quarter of 2009. The Company noted that it incurred merger-related expenses of $6.8 million during the quarter, negatively impacting reported results. Excluding these merger-related expenses, Corporate Adjusted EBITDA for the second quarter of 2010 was $81.1 million. Reconciliations of non-GAAP to GAAP results are included in Tables 3 and 4.
“The Company’s ongoing efforts in the areas of revenue management, expense control and fleet management continue to reap significant benefits, as demonstrated by our sixth consecutive quarter of year-over-year double-digit growth in Corporate Adjusted EBITDA,” said Scott L. Thompson, President and Chief Executive Officer. “Our day-to-day focus continues to be on improving the Company’s return on assets while maximizing our cash flow. I am pleased to report that we are on track to make 2010 the most profitable year in the history of the Company,” said Thompson.
On a same-store basis, rental revenues for locations that were open during the second quarter of both 2010 and 2009 were up 2.9 percent compared to last year’s second quarter. For the quarter ended June 30, 2010, the Company’s total revenue was $396.2 million, as compared to $399.6 million for the comparable 2009 period. The decline in total revenue was primarily driven by a decline in vehicle leasing revenue, resulting from a planned reduction in vehicles leased to franchisees. Vehicle rental revenue for the quarter was consistent on a year-over-year basis as an 80 basis point improvement in rate per day offset a 50 basis point decline in rental days. The second quarter 2010 average fleet was down 0.8 percent compared to the second quarter of 2009, while the ending fleet was up 0.9 percent from the second quarter of 2009.
“We are pleased with the results for the quarter, having realized increases in transaction days and utilization on a same-store basis, while continuing to realize pricing improvement in a more challenging and competitive pricing environment. Based on our solid second quarter results combined with our current reservation book and our outlook for the economy, we expect revenue growth going forward,” said Thompson.
Vehicle depreciation per unit for the second quarter of 2010 totaled $193 per month as the Company continued to benefit from the overall strength of the used vehicle market, in addition to changes the Company made in 2009 to its fleet planning and remarketing operations that were designed to lower fleet depreciation costs per unit and mitigate enterprise risk. Vehicle utilization was 80.8 percent, up 20 basis points from last year’s second quarter.
Operating expenses (direct vehicle and operating expenses and selling, general and administrative expenses) were higher in the second quarter of 2010 compared to the same quarter in 2009 primarily as a result of $6.8 million of merger-related costs incurred, in addition to a $3 million increase in self insured vehicle liability reserves related to a vicarious liability claim that is currently under appeal by the Company. These costs were partially offset by ongoing cost reduction efforts and cost efficiency initiatives. As a percentage of revenues, operating expenses totaled 62.7 percent of revenues in the second quarter of 2010, compared to 61.0 percent in the second quarter of 2009, primarily as a result of the cost increases noted above.
Interest expense, net of interest income, for the second quarter of 2010 declined $1.3 million on a year-over-year basis primarily as a result of approximately $300 million in net reduction in the debt outstanding for 2010 compared to 2009, partially offset by reduced interest income as the Company deployed the excess cash balances on hand in 2009 to reduce indebtedness, and to reinvest in the rental fleet.
Six Month Results
For the six months ended June 30, 2010, net income was $69.6 million, or $2.31 per diluted share, compared to net income of $3.5 million, or $0.15 per diluted share for the comparable period in 2009. Net income for the six months ended June 30, 2010 included income of $0.29 per diluted share, compared to income of $0.38 per diluted share for the six months ended June 30, 2009, both of which related to increases in fair value of derivatives.
Non-GAAP net income for the six months ended June 30, 2010 was $61.0 million, or $2.02 per diluted share, compared to non-GAAP net loss of $4.9 million, or $0.23 loss per diluted share, for the same period in 2009. Non-GAAP net income (loss) excludes the (increase) decrease in fair value of derivatives and the non-cash charges related to the impairment of long-lived assets, net of related tax impact.
The Company reported Corporate Adjusted EBITDA for the six months ended June 30, 2010 of $123.7 million, compared to $18.5 million for the six months ended June 30, 2009. The Company noted that it incurred merger-related expenses of $8.5 million during the first half of 2010, negatively impacting reported results. Excluding these merger-related expenses, Corporate Adjusted EBITDA for the six months ended June 30, 2010 was $132.2 million. Reconciliations of non-GAAP to GAAP results are included in Tables 3 and 4.
Liquidity and Capital Resources
As of June 30, 2010, the Company had $370 million in cash and cash equivalents and an additional $114 million in restricted cash and investments primarily available for the purchase of vehicles and/or repayment of vehicle financing obligations. The Company’s tangible net worth as of June 30, 2010 was $443 million.
During the quarter, the Company repaid $200 million of maturing medium term notes utilizing a combination of restricted cash and borrowings under newly completed fleet financing facilities. As previously reported, the Company completed a two-year $200 million variable funding note facility in April of 2010 which was fully drawn upon issuance. In addition, during June, the Company completed a three-year $300 million variable funding note facility that is currently undrawn, and will provide additional liquidity for repayment of the Company’s next scheduled debt maturity of $600 million of medium term notes that begin amortizing in December 2010.
2010 Outlook - Update
In addition to announcing results for the quarter, the Company reaffirmed its previously announced guidance updates for 2010 for revenue, fleet costs and Corporate Adjusted EBITDA, as well as for fleet costs for 2011.
As previously announced, the Company expects rental revenue growth in 2010 of 1 to 2 percent over 2009 as growth in the back half of 2010 is expected to more than offset the decline realized during the first half of the year.
The Company noted that it sold approximately 32,500 risk vehicles during the first half of 2010 at a cumulative pretax gain of $53.2 million. The Company also noted that it expects gains from vehicle dispositions to decline significantly during the second half of 2010, and as a result, expects its depreciation per unit per month to be within a range from $300 to $310 per unit per month during the third and fourth quarters of 2010. Based on results for the first half of 2010, combined with the fleet cost outlook for the third and fourth quarters, the Company expects its full year 2010 fleet cost to be $245 to $255 per unit per month.
Based on the Company’s actual results through the second quarter and its outlook for revenue and fleet costs for the remainder of 2010, the Company expects Corporate Adjusted EBITDA, excluding merger-related expenses, to be within a range of $200 million to $220 million for the full year of 2010. The Company’s 2009 Corporate Adjusted EBITDA was $99.4 million.
In addition, the Company reaffirmed its expected fleet cost for 2011 to be within a range of $300 to $310 per unit per month. The Company noted that the ongoing positive effects of changes made in its operations and fleet management, combined with solid macroeconomic factors in the used car market, are expected to impact fleet costs in 2011 and beyond.
About Dollar Thrifty Automotive Group, Inc.
Through its Dollar Rent A Car and Thrifty Car Rental brands, DTG has been serving value-conscious leisure and business travelers since 1950. DTG maintains a strong presence in domestic leisure travel in virtually all of the top U.S. and Canadian airport markets, and also derives a significant portion of its revenue from international travelers to the U.S. under contracts with various international tour operators. Dollar and Thrifty have approximately 300 corporate locations in the United States and Canada, with approximately 6,000 employees located mainly in North America. In addition to its corporate operations, DTG maintains global service capabilities through an expansive franchise network of over 1,250 franchises in 81 countries. For additional information, visit www.dtag.com or the bra nd sites at www.dollar.com and www.thrifty.com.
Cautionary Statement Regarding Forward-Looking Statements
This press release contains “forward-looking statements” about our expectations, plans and performance. These statements use such words as “may,” “will,” “expect,” “believe,” “intend,” “should,” “could,” “anticipate,” “estimate,” “forecast,” “project,” “plan” and similar expressions. These statements 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:
| · | the impact of our pending acquisition by Hertz Global Holdings, Inc. (“Hertz”) or developments involving the proposed transaction or related matters, including, among other things, diversion of management’s attention from day-to-day operations, a loss of key personnel, disruption of our operations, an inability to obtain regulatory and stockholder approvals on the terms and schedule contemplated, and the impact of pending or future litigation relating to the proposed transaction; |
| · | the impact of persistent pricing and demand pressures, particularly in light of the continuing volatility in the global financial and credit markets and concerns about global economic prospects and the timing and strength of a recovery, and whether consumer confidence and spending levels will continue to improve; |
| · | whether ongoing governmental and regulatory initiatives in the United States and elsewhere to stimulate economic growth will be successful; |
| · | the impact of pricing and other actions by competitors, particularly as they increase fleet sizes in anticipation of seasonal activity; |
| · | our ability to manage our fleet mix to match demand and meet our target for vehicle depreciation costs, particularly in light of the significant increase in the level of risk vehicles (i.e., those vehicles not acquired through a guaranteed residual value program) in our fleet and our exposure to the used vehicle market; |
| · | the cost and other terms of acquiring and disposing of automobiles and the impact of conditions in the used vehicle market on our vehicle cost and our ability to reduce our fleet capacity as and when projected by our plans; |
| · | the timing and strength of a recovery in the U.S. automotive industry, particularly in light of our dependence on vehicle supply from U.S. automotive manufacturers; |
| · | the effectiveness of actions we take to manage costs and liquidity; |
| · | our ability to obtain cost-effective financing as needed (including replacement of asset backed notes and other indebtedness as it comes due) without unduly restricting operational flexibility; |
| · | our ability to comply with financial covenants or to obtain necessary amendments or waivers, and the impact of the terms of any required amendments or waivers, such as potential reductions in lender commitments; |
| · | our ability to manage the consequences under our financing agreements of an event of bankruptcy with respect to any of the monoline insurers that provide credit support for our asset backed financing structures; |
| · | the potential for significant cash tax payments in 2010 as a result of the reduction in our fleet size, our use of bonus depreciation methods and the resulting impact of our inability to defer gains on the disposition of our vehicles under our like-kind exchange program; |
| · | airline travel patterns, including disruptions or reductions in air travel resulting from airline bankruptcies, industry consolidation, capacity reductions and pricing actions or other events; |
| · | local market conditions where we and our franchisees do business, including whether franchisees will continue to have access to capital as needed; |
| · | volatility in gasoline prices; |
| · | access to reservation distribution channels; |
| · | disruptions in the operation or development of information and communication systems that we rely on, including those relating to methods of payment; |
| · | the cost of regulatory compliance, costs and other effects of potential future initiatives, including those directed at climate change and its effects, and the costs and outcome of pending litigation; and |
| · | the impact of natural and man-made catastrophes and terrorism. |
Forward-looking statements should be considered in light of information in this press release and other filings we make with the Securities and Exchange Commission (“SEC”).
Important Information for Investors and Stockholders
This document does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. Hertz has filed with the SEC a preliminary registration statement on Form S-4 (registration statement number 333-167085) that includes a preliminary proxy statement of DTG that also constitutes a preliminary prospectus of Hertz. Hertz and DTG also plan to file other documents with the SEC regarding the proposed transaction. After the registration statement has been declared effective by the SEC, a definitive proxy statement/prospectus will be mailed to stockholders of DTG. INVESTORS AND STOCKHOLDERS OF DTG ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS AND OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMA TION ABOUT THE PROPOSED TRANSACTION. Investors and stockholders may obtain free copies of the proxy statement/prospectus and other documents containing important information about Hertz and DTG, once such documents are filed with the SEC, through the website maintained by the SEC at www.sec.gov. Copies of the documents filed with the SEC by Hertz are also available free of charge on Hertz’s internet website at www.hertz.com or by contacting Hertz’s Investor Relations Department at 201-307-2100. Copies of the documents filed with the SEC by DTG are available free of charge on DTG’s internet website at www.dtag.com or by contacting DTG’s Investor Relations Department at 918-669-2119. Hertz, DTG, their respective directors and certain of their executive officers may be deemed to be participants in the solicitation of proxies from the stockholders of DTG in connection with the proposed transaction. Information about the directors and executive officers of Hertz is set forth in its proxy s tatement for its 2010 annual meeting of stockholders, which was filed with the SEC on April 9, 2010.
Information about the directors and executive officers of DTG is set forth in its proxy statement for its 2010 annual meeting of stockholders, which was filed with the SEC on April 27, 2010. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, is contained in the preliminary proxy statement/prospectus and will be contained in other relevant materials to be filed with the SEC when they become available.
H. Clifford Buster III
Chief Financial Officer
