DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. 
By TULSA, Okla., Aug. 1, 2012 /PRNewswire/ -- Dollar Thrifty Automotive Group, Inc. (NYSE: DTG) today reported results for the second quarter ended June 30, 2012. Net income for the 2012 second quarter was $49.4 million, or $1.69 per diluted share, compared to net income of $42.5 million, or $1.36 per diluted share, for the second quarter of 2011. The Company also reported Corporate Adjusted EBITDA for the second quarter of 2012 of $88.3 million, up from $81.2 million in the second quarter of 2011.
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"We are pleased to report record second quarter results, particularly in light of the disappointing current economic environment. Rental day growth, improved vehicle utilization, a strong used vehicle market and continued focus on cost control all contributed to the year-over-year improvement and mitigated the softness in pricing," said Scott L. Thompson, Chairman, President and Chief Executive Officer.
For the quarter ended June 30, 2012, the Company's vehicle rental revenue was $378.9 million, compared to $378.2 million in the second quarter of 2011. Revenue per unit was $1,077 in second quarter 2012 compared to $1,080 for the same period last year. The Company realized rental day growth of 4.2 percent, which was mostly offset by a 3.8 percent decrease in revenue per day. Utilization in the second quarter of 2012 was 80.3 percent, compared to 77.4 percent in the second quarter of 2011, with the average fleet size consistent year over year.
Fleet cost per vehicle was $162 per month in the second quarter of 2012, compared to $188 per month in the second quarter of 2011. The decrease in fleet cost per vehicle was attributable to lower base depreciation rates due to the ongoing strength of the used vehicle market and the resulting favorable impact on vehicle residual values, combined with a year-over-year increase in gains on sales of risk vehicles. The Company sold approximately 18,700 risk vehicles at a total gain of $22.5 million during the second quarter of 2012 compared to approximately 8,400 risk vehicles at a total gain of $17.8 million in the second quarter of 2011. The increase in the number of risk vehicles sold is attributable to a substantial fleet refresh cycle underway in 2012.
Direct vehicle and operating expenses and selling, general and administrative expenses (operating expenses) totaled $243.9 million in the second quarter of 2012 compared to $239.8 million in the second quarter of 2011. The increase was primarily due to more favorable loss experience realized in the Company's vehicle insurance programs in the second quarter of 2011. Operating expenses totaled 61.7 percent of revenues for the second quarter of 2012, compared to 60.7 percent of revenues in the second quarter of 2011. Interest expense, net, declined to $15.3 million in the second quarter of 2012, down from $18.3 million in the second quarter of 2011. The decrease in interest expense primarily reflects the Company's refinancing of its legacy fleet financing facilities at lower interest rates in the second half of 2011.
Six-Month Results
For the six months ended June 30, 2012, net income was $89.8 million, or $3.03 per diluted share, compared to net income of $59.0 million, or $1.89 per diluted share, for the comparable period in 2011. The Company reported Corporate Adjusted EBITDA for the six months ended June 30, 2012 of $165.1 million, compared to $117.5 million for the six months ended June 30, 2011.
The Company noted that gains on risk vehicle sales totaled $36.8 million for the six months ended June 30, 2012, compared to $25.8 million for the six months ended June 30, 2011, primarily due to an increase in the number of risk vehicles sold of approximately 17,700 units on a year-over-year basis.
Liquidity and Capital Resources
As of June 30, 2012, the Company had $285 million in cash and cash equivalents, and an additional $199 million in restricted cash and investments primarily available for the purchase of vehicles and/or repayment of vehicle financing obligations. The Company noted that as a result of its fleet refresh cycle and seasonal fleet investments, its investment in the fleet has increased approximately $640 million since December 31, 2011. Those investments were funded by a blend of unrestricted cash, restricted cash and vehicle debt. Non-vehicle capital expenditures for the six months ended June 30, 2012 totaled approximately $10 million. Investments in fleet will decline significantly during the balance of the year.
As previously announced, during the quarter the Company reduced its outstanding enhancement letters of credit supporting its secured vehicle financing facilities by approximately $145 million, utilizing a portion of its excess cash to meet the collateral enhancement requirements under those facilities. As a result of the reduction in letters of credit and seasonal increases in the fleet, the Company increased its investment in its securitization trusts for collateral enhancement to approximately $670 million as of June 30, 2012. The Company retains the flexibility to replace a portion of this cash collateral with funds borrowed under its Revolving Credit Facility or the issuance of letters of credit as it deems appropriate. As of June 30, 2012, the Company had approximately $65 million of letters of credit outstanding and available capacity of approximately $385 million under its $450 million Revolving Credit Facility.
With respect to share repurchase activity, the Company noted that it repurchased 283,250 shares at an average price of $78.81 during the second quarter of 2012. These repurchases are in addition to the previously disclosed 1.515 million shares repurchased through March 31, 2012. As of June 30, 2012, the Company had approximately $273 million in share repurchase capacity remaining under its current share repurchase program.
"I am pleased to announce that we continued to return cash to shareholders through share repurchases during the quarter, bringing total share repurchases in 2012 to approximately $127 million. We continue to evaluate all alternatives for maximizing shareholder value, including the rationalization of the capital structure through share repurchases or other means," said Thompson.
As of June 30, 2012, the Company's tangible net worth was $663 million, and the Company had no corporate debt outstanding.
Merger Activity and FTC Update
The Company noted that neither Hertz nor any other company has put forward an offer during 2012 to purchase the Company, despite persistent press reports about commitments Hertz has made to the Federal Trade Commission ("FTC") to divest of certain of Dollar Thrifty's assets in the context of a hypothetical transaction. The Company noted that those reports have created uncertainty for its employees and business partners, and the Company has communicated its concerns regarding these reported divestiture commitments to senior officials at the FTC. The Company noted that after three years of merger-related activity and speculation, it believes it is time for a compelling offer to be made or for this process to come to a close so that the Company can move forward under its stand alone plan without the constant distraction of merger speculation.
2012 Outlook Update
The Company updated guidance for rental revenue, fleet cost expectations and earnings per share for the full year of 2012. The Company's revenue guidance is based on the revenue per day environment experienced in the first six months of 2012. The Company expects that continued rental day growth, offset by compression in revenue per day, will result in full year 2012 rental revenues increasing modestly compared to 2011.
The Company noted that the used vehicle market has been strong throughout the first half of 2012, and the Company has sold approximately 33,100 vehicles at a realized gain of $36.8 million during the six months ended June 30, 2012. The Company noted that it expects the used vehicle market to remain strong through at least the back half of the year, subject to normal seasonality. The Company noted that gains on sales of risk vehicles will decline significantly in the back half of the year as its fleet refresh cycle winds down. The Company is improving its fleet cost outlook for the full year of 2012, which it now expects to range from $200 - $210 per vehicle per month.
The Company noted that the expected improvement in fleet costs will be mostly offset by the change in revenue mix between volume and price. Accordingly, the Company is reaffirming its prior guidance for Corporate Adjusted EBITDA for the full year of 2012 of $285 million to $310 million.
Finally, the Company noted that it is revising its earnings per share guidance based on share repurchase activity that has been completed through June 30, 2012. The Company is now targeting diluted earnings per share to range from $5.25 to $5.70 per share for 2012, up from its previously announced range of $5.00 to $5.60 per share.
Webcast and conference call information
A conference call to review the Company's second quarter 2012 results will be held at 8:00 a.m. CDT on Wednesday, August 1, 2012. A live audio webcast of the call will be available on the Company's website www.dtag.com. Domestic participants should call 888-603-9215 and use the passcode "Dollar Thrifty." The number for international participants is 203-827-7046. A replay of the conference call will be made available one hour following its conclusion. To access the domestic audio replay, call 866-382-4783. The international replay number is 203-369-0362. The audio replay of the call will be available through August 15, 2012. It will also be available on the Investor Information page of the corporate website for one year.
About Dollar Thrifty Automotive Group, Inc.
Through its Dollar Rent A Car and Thrifty Car Rental brands, the Company has been serving value-conscious leisure and business travelers since 1950. The Company 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 280 corporate locations in the United States and Canada, with approximately 5,900 employees located mainly in North America. In addition to its corporate operations, the Company maintains global service capabilities through an expansive franchise network of approximately 1,300 franchise locations in 82 countries. For additional information, visit www.dtag.com or the brand 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 relating to our business that could materially affect our future results include:
-- constraints on our growth and profitability given the challenges we face
in increasing our market share in the key airport and local markets we
serve, high barriers to entry in the insurance replacement market,
capital and other constraints on expanding company-owned stores
internationally and the challenges we would face in further reducing our
expenses;
-- the impact of the continuing challenging global economic environment,
the ongoing Eurozone sovereign debt issues and governmental actions to
address budget deficits through austerity and other measures, which are
fueling concerns about global economic prospects and could materially
adversely affect unemployment rates and consumer discretionary spending,
including for international inbound travel to the United States and for
leisure travel more generally, on which we are substantially dependent;
-- the continuing significant political unrest and other concerns involving
certain oil-producing countries, which has contributed to price
volatility for petroleum products, and in recent periods higher average
gasoline prices, which could affect both broader economic conditions and
consumer spending levels;
-- the impact of pricing and other actions by competitors;
-- our ability to manage our fleet mix to match demand and meet our target
for vehicle depreciation costs, particularly in light of the significant
level of risk vehicles (i.e., those vehicles not acquired through a
guaranteed residual value program) in our fleet and our exposure to
wholesale used vehicle prices;
-- 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,
including the impact on vehicle depreciation costs in 2012 based on
pricing volatility in the used vehicle market;
-- our ability to reduce our fleet capacity as and when projected by our
plans;
-- the continuing strength of the U.S. automotive industry on which we
depend for vehicle supply;
-- airline travel patterns, including disruptions or reductions in air
travel resulting from capacity reductions, pricing actions, severe
weather conditions, industry consolidation or other events, particularly
given our dependence on leisure travel;
-- access to reservation distribution channels, particularly as the role of
the Internet and mobile applications increases in the marketing and sale
of travel-related services;
-- the effectiveness of actions we take to maintain a low cost structure
and to manage liquidity;
-- the impact of repurchases of our common stock pursuant to our share
repurchase program;
-- our ability to obtain cost-effective financing as needed without unduly
restricting our operational flexibility;
-- our ability to comply with financial covenants, and the impact of those
covenants on our operating and financial flexibility;
-- whether our preliminary expectations about our federal income tax
position are affected by changes in our expected fleet size or
operations or further legislative initiatives relating to taxes in the
United States or elsewhere;
-- our ability to continue to defer the reversal of prior period tax
deferrals and the availability of accelerated depreciation payments in
future periods, the lack of either of which could result in material
cash federal income tax payments in future periods;
-- 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;
-- disruptions in the operation or development of information and
communication systems that we rely on, including those relating to
methods of payment;
-- local market conditions where we and our franchisees do business,
including whether franchisees will continue to have access to capital as
needed; and
-- the impact of other events that can disrupt consumer travel, such as
natural and man-made catastrophes, pandemics, social unrest and actual
and perceived threats or acts of 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.
Table 1
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Dollar Thrifty Automotive Group, Inc.
Consolidated Statement of Income
--------------------------------
(In thousands, except share and per share data)
Unaudited
Three months ended As % of
June 30, Total revenues
2012 2011 2012 2011
---- ---- ---- ----
Revenues:
Vehicle rentals $378,897 $378,191 95.8% 95.7%
Other 16,489 16,938 4.2% 4.3%
Total revenues 395,386 395,129 100.0% 100.0%
Costs and Expenses:
Direct vehicle and operating 196,461 190,958 49.7% 48.3%
Vehicle depreciation and lease charges, net 57,506 66,510 14.5% 16.8%
Selling, general and administrative 47,477 48,843 12.0% 12.4%
Interest expense, net 15,327 18,295 3.9% 4.6%
Total costs and expenses 316,771 324,606 80.1% 82.1%
(Increase) decrease in fair value of derivatives 209 (416) 0.1% (0.1%)
--- ---- --- -----
Income before income taxes 78,406 70,939 19.8% 18.0%
Income tax expense 28,979 28,434 7.3% 7.2%
Net income $49,427 $42,505 12.5% 10.8%
======= ======= ==== ====
Earnings per share:
Basic $1.77 $1.47
Diluted $1.69 $1.36
Weighted average number
of shares outstanding:
Basic 28,001,134 28,896,750
Diluted 29,242,131 31,290,603
Six months ended As % of
June 30, Total revenues
2012 2011 2012 2011
---- ---- ---- ----
Revenues:
Vehicle rentals $717,986 $710,463 95.5% 95.6%
Other 33,674 33,013 4.5% 4.4%
Total revenues 751,660 743,476 100.0% 100.0%
Costs and Expenses:
Direct vehicle and operating 380,673 369,263 50.6% 49.7%
Vehicle depreciation and lease charges, net 99,237 140,684 13.2% 18.9%
Selling, general and administrative 93,025 97,790 12.4% 13.1%
Interest expense, net 32,395 39,272 4.3% 5.3%
Total costs and expenses 605,330 647,009 80.5% 87.0%
(Increase) decrease in fair value of derivatives 485 (3,890) 0.1% (0.5%)
--- ------ --- -----
Income before income taxes 145,845 100,357 19.4% 13.5%
Income tax expense 56,047 41,329 7.5% 5.6%
Net income $89,798 $59,028 11.9% 7.9%
======= ======= ==== ===
Earnings per share: (a)
Basic $3.16 $2.05
Diluted $3.03 $1.89
Weighted average number
of shares outstanding:
Basic 28,374,782 28,829,062
Diluted 29,613,718 31,171,999
(a) The underlying diluted per share information is calculated from the weighted average common and common stock equivalents outstanding during each quarter, which may fluctuate based on quarterly income
levels and market prices. Therefore, the sum of the quarters' per share information may not equal the total year amounts.
Table 2
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Dollar Thrifty Automotive Group, Inc.
Selected Operating and Financial Data
-------------------------------------
Three months ended Six months ended
June 30, 2012 June 30, 2012
------------- -------------
OPERATING DATA:
Vehicle Rental Data:
Average number of vehicles
operated 117,222 109,319
% change from prior year 0.4% 1.8%
Number of rental days 8,563,364 16,040,134
% change from prior year 4.2% 5.3%
Vehicle utilization 80.3% 80.6%
Percentage points change from prior
year 2.9 p.p. 2.2 p.p.
Average revenue per day $44.25 $44.76
% change from prior year (3.8%) (4.0%)
Monthly average revenue per
vehicle $1,077 $1,095
% change from prior year (0.3%) (0.7%)
Average depreciable fleet 118,485 110,536
% change from prior year 0.5% 2.1%
Monthly average depreciation (net)
per vehicle $162 $150
% change from prior year (13.8%) (30.9%)
FINANCIAL DATA: (in millions)
(unaudited)
Non-vehicle depreciation and
amortization $6 $12
Non-vehicle interest expense 1 4
Non-vehicle interest income (1) (1)
Non-vehicle capital expenditures 5 10
Cash paid for income taxes 22 14
Selected Balance Sheet Data
---------------------------
(In millions)
June 30, December 31,
2012 2011 2011
---- ---- ----
(unaudited)
Cash and cash equivalents $285 $456 $509
Restricted cash and investments 199 126 353
Revenue-earning vehicles, net 2,108 1,800 1,468
Vehicle debt 1,562 1,330 1,400
Non-vehicle debt (corporate debt) - 143 -
Stockholders' equity 683 607 608
Tangible Net Worth Calculation
------------------------------
(In millions)
June 30, December 31,
2012 2011 2011
---- ---- ----
(unaudited)
Stockholders' equity $683 $607 $608
Less: Software, net (20) (23) (22)
Tangible net worth $663 $584 $586
Table 3
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Dollar Thrifty Automotive Group, Inc.
Non-GAAP Measures
-----------------
Corporate Adjusted EBITDA means earnings, excluding the impact of the (increase) decrease in fair value of derivatives, before non-vehicle interest expense, income taxes, non-vehicle depreciation, amortization, and certain other items as shown below. The Company
believes Corporate Adjusted EBITDA is important as it provides a supplemental measure of the Company's liquidity by adjusting earnings to exclude certain non-cash items, taxes and corporate-level capital structure decisions (i.e. non-vehicle interest), thus,
allowing the Company's management, including the chief operating decision maker, as well as investors and analysts, to evaluate the Company's operating cash flows based on the core operations of the Company.
Additionally, the Company believes Corporate Adjusted EBITDA is a relevant measure of operating performance in providing a measure of profitability that focuses on the core operations of the Company while excluding certain items that do not directly reflect ongoing
operating performance. The Company's management, including the chief operating decision maker, uses Corporate Adjusted EBITDA to evaluate the Company's performance and in preparing monthly operating performance reviews and annual operating budgets. The items
excluded from Corporate Adjusted EBITDA, but included in the calculation of the Company's reported net income, are significant components of its consolidated statements of income, and must be considered in performing a comprehensive assessment of overall financial
performance. Corporate Adjusted EBITDA is not defined under GAAP and should not be considered as an alternative measure of the Company's net income, cash flow or liquidity. Corporate Adjusted EBITDA amounts presented may not be comparable to similar measures
disclosed by other companies.
Three months ended Six months ended
June 30, June 30,
2012 2011 2012 2011
---- ---- ---- ----
(in thousands) (in thousands)
Reconciliation of Net Income to
Corporate Adjusted EBITDA
-------------------------
Net income - as reported $49,427 $42,505 $89,798 $59,028
(Increase) decrease in fair value of derivatives 209 (416) 485 (3,890)
Non-vehicle interest expense 1,717 2,873 4,326 5,344
Income tax expense 28,979 28,434 56,047 41,329
Non-vehicle depreciation 4,321 4,933 8,857 9,773
Amortization 1,826 1,941 3,601 3,807
Non-cash stock incentives 1,791 928 3,416 2,137
Other - (8) (1,431) (12)
Corporate Adjusted EBITDA $88,270 $81,190 $165,099 $117,516
======= ======= ======== ========
Reconciliation of Corporate Adjusted EBITDA
to Cash Flows From Operating Activities
---------------------------------------
Corporate Adjusted EBITDA $88,270 $81,190 $165,099 $117,516
Vehicle depreciation, net of gains/losses from disposal 57,506 66,501 99,237 140,666
Non-vehicle interest expense (1,717) (2,873) (4,326) (5,344)
Change in assets and liabilities and other (24,446) 8,327 (24,967) 34,597
------- ----- ------- ------
Net cash provided by operating activities (b) $119,613 $153,145 $235,043 $287,435
======== ======== ======== ========
Memo:
Net cash used in investing activities $(390,662) $(138,307) $(584,184) $(367,829)
Net cash provided by / (used in) financing activities (b) $64,706 $(77,313) $125,970 $73,314
Full Year
2012 2011
---- ----
(in millions)
Reconciliation of Pretax Income to (forecasted) (actual)
Corporate Adjusted EBITDA
-------------------------
Pretax income $247 - $272 $261
(Increase) decrease in fair value of derivatives (2012 amount is YTD June 2012) - (3)
Non-vehicle interest expense 7 11
Non-vehicle depreciation 18 19
Amortization 7 7
Non-cash stock incentives 7 3
Other (1) -
Corporate Adjusted EBITDA $285 - $310 $298
=========== ====
(b) Certain reclassifications have been made to the 2011 financial information to conform to the classifications used in 2012.
SOURCE Dollar Thrifty Automotive Group, Inc.
