<PAGE>
================================================================================
U.S. 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 June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission file number 1-13647
--------------------
DOLLAR THRIFTY AUTOMOTIVE GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 73-1356520
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) 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_____
The number of shares outstanding of the registrant's Common Stock as of July 31,
2000 was 24,165,433.
================================================================================
1
<PAGE>
DOLLAR THRIFTY AUTOMOTIVE GROUP, INC.
FORM 10-Q
CONTENTS
Page
PART I - FINANCIAL INFORMATION.................................................3
ITEM 1. FINANCIAL STATEMENTS.......................................3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.............11
ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK.............................17
PART II - OTHER INFORMATION...................................................18
ITEM 1. LEGAL PROCEEDINGS.........................................18
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.......18
ITEM 5. OTHER INFORMATION.........................................19
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K..........................19
SIGNATURES....................................................................20
FACTORS AFFECTING FORWARD LOOKING STATEMENTS
Some of the statements contained herein under "Management's Discussion and
Analysis of Financial Condition and Results of Operations" may constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Although Dollar Thrifty Automotive Group, Inc.
believes such forward-looking statements are based on reasonable assumptions,
such statements are not guarantees of future performance and certain factors
could cause results to differ materially from current expectations. These
factors include: economic and competitive conditions in markets and countries
where our customers reside and where our companies and their franchisees
operate; changes in capital availability or cost; costs and other terms related
to the acquisition and disposition of automobiles; and certain regulatory and
environmental matters. Should one or more of these risks or uncertainties, among
others, materialize, actual results could vary materially from those estimated,
anticipated or projected. Dollar Thrifty Automotive Group, Inc. undertakes no
obligation to update or revise forward-looking statements to reflect changed
assumptions, the occurrence of unanticipated events or changes to future
operating results over time.
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors and Stockholders of
Dollar Thrifty Automotive Group, Inc.:
We have reviewed the accompanying consolidated balance sheet of Dollar Thrifty
Automotive Group, Inc. and subsidiaries as of June 30, 2000, and the related
consolidated statement of income for the three-month and six-month periods ended
June 30, 2000 and 1999, and the condensed consolidated statement of cash flows
for the six-month periods ended June 30, 2000 and 1999. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and of making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with auditing standards generally accepted in the United States of America, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such consolidated financial statements for them to be in conformity
with accounting principles generally accepted in the United States of America.
We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the consolidated balance sheet of
Dollar Thrifty Automotive Group, Inc. and subsidiaries as of December 31, 1999,
and the related consolidated statements of income, stockholders' equity, and
cash flows for the year then ended (not presented herein); and in our report
dated February 2, 2000, except for Note 17, as to which the date is March 2,
2000, we expressed an unqualified opinion on those consolidated financial
statements.
DELOITTE & TOUCHE LLP
Tulsa, Oklahoma
July 19, 2000, except for Note 4 as
to which the date is August 3, 2000
3
<PAGE>
<TABLE>
<CAPTION>
DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999
-----------------------------------------------------------------------------------------------------------------------
(In Thousands Except Per Share Data)
Three Months Six Months
Ended June 30, Ended June 30,
------------------------- -------------------------
(Unaudited)
2000 1999 2000 1999
---- ---- ---- ----
REVENUES:
<S> <C> <C> <C> <C>
Vehicle rentals $213,146 $183,636 $388,009 $333,951
Vehicle leasing 54,746 59,430 98,032 106,932
Fees and services 15,891 14,487 30,042 26,174
Other 2,940 1,797 5,063 3,844
---------- ---------- ---------- ----------
Total revenues 286,723 259,350 521,146 470,901
---------- ---------- ---------- ----------
COSTS AND EXPENSES:
Direct vehicle and operating 82,357 75,647 154,156 141,642
Vehicle depreciation and lease charges, net 83,943 78,899 157,669 148,535
Selling, general and administrative 50,494 48,236 96,691 92,156
Interest expense, net of interest income 24,682 24,672 45,301 44,523
Amortization of cost in excess of net
assets acquired 1,462 1,402 2,908 2,942
---------- ---------- ---------- ----------
Total costs and expenses 242,938 228,856 456,725 429,798
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 43,785 30,494 64,421 41,103
INCOME TAX EXPENSE 19,024 13,506 28,348 18,718
---------- ---------- ---------- ----------
NET INCOME $24,761 $16,988 $36,073 $22,385
========== ========== ========== ==========
EARNINGS PER SHARE:
Basic $ 1.02 $ 0.70 $ 1.49 $ 0.93
========== ========== ========== ==========
Diluted $ 1.01 $ 0.69 $ 1.47 $ 0.92
========== ========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
----------------------------------------------------------------------------------------
JUNE 30, 2000 AND DECEMBER 31, 1999
(In Thousands Except Share Data)
June 30, December 31,
2000 1999
------------- ------------
(Unaudited)
ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 104,305 $ 77,500
Restricted cash and investments 38,909 144,671
Receivables, net 135,956 140,156
Prepaid expenses and other assets 54,261 43,493
Revenue-earning vehicles, net 2,090,210 1,507,692
Property and equipment, net 74,906 69,941
Income tax receivable - 10,573
Intangible assets, net 175,327 177,627
------------- ------------
$ 2,673,874 $2,171,653
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable $ 74,677 $ 57,242
Accrued liabilities 134,643 115,232
Income taxes payable 3,111 -
Deferred income tax liability 12,298 5,660
Public liability and property damage 49,869 58,783
Debt and other obligations 1,983,035 1,555,609
------------- ------------
Total liabilities 2,257,633 1,792,526
------------- ------------
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; issued and outstanding
24,164,166 and 24,158,429, respectively 242 242
Additional capital 710,264 709,040
Accumulated deficit (293,391) (329,464)
Foreign currency translation adjustment (874) (691)
------------- ------------
416,241 379,127
------------- ------------
$ 2,673,874 $2,171,653
============= ============
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2000 AND 1999
-------------------------------------------------------------------------------------------
(In Thousands)
Six Months
Ended June 30,
-----------------------------
(Unaudited)
2000 1999
----------- -----------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $250,903 $183,310
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Revenue-earning vehicles:
Purchases (1,704,262) (1,600,510)
Proceeds from sales 960,544 784,389
Restricted cash and investments, net 105,762 31,323
Property and equipment
Purchases (10,029) (8,657)
Proceeds from sale 232 968
Acquisition of businesses, net of cash acquired (2,681) -
----------- -----------
Net cash used in investing activities (650,434) (792,487)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt and other obligations:
Proceeds 1,281,091 2,192,132
Payments (853,784) (1,567,725)
Issuance of common shares 76 221
Vehicle financing issue costs (1,047) (3,124)
----------- -----------
Net cash provided by financing activities 426,336 621,504
----------- -----------
CHANGE IN CASH AND CASH EQUIVALENTS 26,805 12,327
CASH AND CASH EQUIVALENTS:
Beginning of period 77,500 49,505
----------- -----------
End of period $ 104,305 $ 61,832
=========== ===========
SUPPLEMENTAL DISCLOSURE OF NONCASH
OPERATING AND INVESTING ACTIVITIES:
Direct financing leases of vehicles to franchisees $ 15,561 $ -
=========== ===========
</TABLE>
See notes to consolidated financial statements.
6
<PAGE>
DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999
--------------------------------------------------------------------------------
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
Dollar Thrifty Automotive Group, Inc. and its subsidiaries (the "Company").
The Company's significant wholly owned subsidiaries include Dollar Rent A
Car Systems, Inc. ("Dollar") and Thrifty, Inc. Thrifty, Inc. is the parent
company to Thrifty Rent-A-Car System, Inc. which is the parent company to
Thrifty Canada Ltd. ("TCL") (individually and collectively referred to as
"Thrifty").
The accounting policies set forth in Note 2 to the consolidated financial
statements contained in the Form 10-K filed with the Securities Exchange
Commission on March 22, 2000 have been followed in preparing the
accompanying consolidated financial statements.
The consolidated financial statements and notes thereto for interim periods
included herein have not been audited by independent public accountants. In
the Company's opinion, 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. VEHICLE DEPRECIATION AND LEASE CHARGES, NET
Vehicle depreciation and lease charges includes the following (in
thousands):
Three Months Six Months
Ended June 30, Ended June 30,
-------------------- ---------------------
2000 1999 2000 1999
-------- -------- --------- ---------
Depreciation of revenue-earning
vehicles, net $76,056 $76,677 $145,725 $144,572
Rents paid for vehicles leased 7,887 2,222 11,944 3,963
-------- -------- --------- --------
$83,943 $78,899 $157,669 $148,535
======== ======== ========= ========
7
<PAGE>
3. 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.
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):
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
-------------------------- ---------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net income $ 24,761 $ 16,988 $ 36,073 $ 22,385
============ ============ ============ ============
Basic EPS:
Weighted average common shares 24,163,020 24,127,896 24,161,797 24,126,806
============ ============ ============ ============
Basic EPS $ 1.02 $ 0.70 $ 1.49 $ 0.93
============ ============ ============ ============
Diluted EPS:
Weighted average common shares 24,163,020 24,127,896 24,161,797 24,126,806
Shares contingently issuable:
Stock options 187,991 227,406 181,376 175,678
Performance awards 202,230 132,912 202,230 133,062
Director compensation shares deferred 17,382 11,429 16,141 10,132
------------ ------------ ------------ ------------
Shares applicable to diluted 24,570,623 24,499,643 24,561,544 24,445,678
============ ============ ============ ============
Diluted EPS $ 1.01 $ 0.69 $ 1.47 $ 0.92
============ ============ ============ ============
</TABLE>
At June 30, 2000, options to purchase 1,568,617 shares of common stock were
outstanding but were not included in the computation of diluted earnings
per share because the options' exercise price was greater than the average
market price of the common shares.
8
<PAGE>
4. DEBT AND OTHER OBLIGATIONS
Debt and other obligations as of June 30, 2000 and December 31, 1999
consist of the following (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------- -------------
Vehicle Debt and Other Financing:
<S> <C> <C>
Asset backed notes, net of discount $ 1,327,597 $ 1,343,311
Commercial paper, net of discount 479,384 80,376
Other vehicle debt 111,945 86,452
Limited partner interest in limited partnership 64,021 45,361
------------- -------------
Total vehicle debt and other financing 1,982,947 1,555,500
Other Notes Payable 88 109
------------- -------------
Total debt and other obligations $ 1,983,035 $ 1,555,609
============= =============
</TABLE>
On March 2, 2000, the Commercial Paper Program was renewed for a 364-day
period at a maximum size of $780 million, backed by a renewal of the
Liquidity Facility totaling $700 million.
On August 3, 2000, the Company completed a five-year extension of the
$215,000,000 Senior Secured Revolving Credit Facility. The new five-year
term expires in August 2, 2005.
5. COMPREHENSIVE INCOME
Comprehensive income is comprised of the following (in thousands):
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
--------------------- ----------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net income $24,761 $16,988 $36,073 $22,385
Foreign currency translation adjustment (159) 133 (183) 230
--------- --------- --------- ---------
Comprehensive income $24,602 $17,121 $35,890 $22,615
========= ========= ========= =========
</TABLE>
9
<PAGE>
6. BUSINESS SEGMENTS
The Company has two reportable segments: Dollar and Thrifty. These
reportable segments are strategic business units that offer different
products and services. They are managed separately based on the fundamental
differences in their operations. The contributions of these segments to
revenues and income before income taxes are summarized below (in
thousands):
For the Three Months
Ended June 30, 2000 Dollar Thrifty Other Total
----------------------------- ----------- ---------- -------- ----------
Revenues $ 218,283 $ 68,243 $ 197 $ 286,723
Income before income taxes $ 34,005 $ 9,871 $ (91) $ 43,785
For the Three Months
Ended June 30, 1999 Dollar Thrifty Other Total
----------------------------- ----------- ---------- -------- ----------
Revenues $ 189,290 $ 69,907 $ 153 $ 259,350
Income before income taxes $ 22,908 $ 7,586 $ - $ 30,494
For the Six Months
Ended June 30, 2000 Dollar Thrifty Other Total
----------------------------- ----------- ----------- --------- -----------
Revenues $ 397,637 $ 123,212 $ 297 $ 521,146
Income before income taxes $ 49,652 $ 14,860 $ (91) $ 64,421
For the Six Months
Ended June 30, 1999 Dollar Thrifty Other Total
----------------------------- ----------- ----------- --------- -----------
Revenues $ 343,845 $ 126,738 $ 318 $ 470,901
Income before income taxes $ 28,703 $ 12,400 $ - $ 41,103
7. 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.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company, Dollar, Thrifty and their respective subsidiaries are
sometimes referred to in this report collectively as the "Group". The majority
of Dollar's revenue is derived from renting vehicles to customers from
company-owned stores, while the majority of Thrifty's revenue is generated from
leasing vehicles and providing services to franchisees.
Results of Operations
The following table sets forth the percentage of total revenues in the
Group's consolidated statement of income:
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
------------------------ ------------------------
(Percentage of Revenue)
2000 1999 2000 1999
---------- ---------- ----------- ----------
Revenues:
<S> <C> <C> <C> <C>
Vehicle rentals 74.3% 70.8% 74.5% 70.9%
Vehicle leasing 19.1% 22.9% 18.8% 22.7%
Fees and services 5.5% 5.6% 5.8% 5.6%
Other 1.1% 0.7% 0.9% 0.8%
---------- ---------- ----------- ----------
Total revenues 100.0% 100.0% 100.0% 100.0%
---------- ---------- ----------- ----------
Costs and expenses:
Direct vehicle and operating 28.7% 29.2% 29.6% 30.1%
Vehicle depreciation and lease charges, net 29.3% 30.4% 30.2% 31.5%
Selling, general and administrative 17.6% 18.6% 18.6% 19.6%
Interest expense, net of interest income 8.6% 9.5% 8.7% 9.5%
Amortization of cost in excess of net
assets acquired 0.5% 0.5% 0.5% 0.6%
---------- ---------- ----------- ----------
Total costs and expenses 84.7% 88.2% 87.6% 91.3%
---------- ---------- ----------- ----------
Income before income taxes 15.3% 11.8% 12.4% 8.7%
Income tax expense 6.7% 5.2% 5.5% 4.0%
---------- ---------- ----------- ----------
Net income 8.6% 6.6% 6.9% 4.7%
========== ========== =========== ==========
</TABLE>
11
<PAGE>
The Group's major sources of revenue are as follows (in thousands):
Three Months Six Months
Ended June 30, Ended June 30,
---------------------- -----------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
Vehicle rental revenue:
Dollar $ 204,552 $ 174,761 $ 372,803 $ 319,071
Thrifty 8,594 8,875 15,206 14,880
---------- ---------- ---------- ----------
$ 213,146 $ 183,636 $ 388,009 $ 333,951
========== ========== ========== ==========
Vehicle leasing revenue:
Dollar $ 7,011 $ 8,132 $ 12,155 $ 13,701
Thrifty 47,735 51,298 85,877 93,231
---------- ---------- ---------- ----------
$ 54,746 $ 59,430 $ 98,032 $ 106,932
========== ========== ========== ==========
The following table sets forth certain selected operating data of the Group for
the U.S. and Canada Company-Owned Stores:
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
------------------------ -----------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
Vehicle Rental Data:
<S> <C> <C> <C> <C>
Average number of vehicles operated 68,366 60,921 62,543 56,283
Number of rental days 5,295,150 4,743,448 9,661,610 8,733,930
Average revenue per day $ 40.26 $ 38.70 $ 40.15 $ 38.25
Monthly average revenue per vehicle $ 1,039 $ 1,005 $ 1,034 $ 989
Vehicle Leasing Data:
Average number of vehicles leased 39,068 41,323 35,219 37,755
Monthly average revenue per vehicle $ 467 $ 479 $ 464 $ 472
</TABLE>
Three Months Ended June 30, 2000 Compared with Three Months Ended June 30, 1999
Revenues
Total revenues for the quarter ended June 30, 2000 increased $27.4
million, or 10.6%, to $286.7 million compared to the second quarter of 1999. The
growth in total revenue was due to an increase in vehicle rental revenue of
16.1% and a 9.7% increase in fees and services revenue partially offset by a
decline in vehicle leasing revenue of 7.9% over the second quarter of 1999.
12
<PAGE>
The Group's vehicle rental revenue for the second quarter of 2000 was
$213.1 million, a $29.5 million increase (a $29.8 million increase for Dollar
and a $0.3 million decrease at Thrifty) from the second quarter of 1999. The
growth in vehicle rental revenue at Dollar was the result of an increase of
12.4% in rental days combined with a 4.1% increase in revenue per day. The
vehicle rental revenue growth at Dollar that related to the acquisition of
franchise operations was $3.7 million, which represented 12.5% of Dollar's total
vehicle rental revenue growth in the second quarter.
Vehicle leasing revenue for the second quarter of 2000 was $54.7
million, a $4.7 million decrease from the second quarter of 1999. This decline
was due primarily to a modification of the lease program at Thrifty that
eliminated certain incentives previously made available to franchisees with a
corresponding reduction in the lease rate. While the changes made by Thrifty
resulted in a reduction of vehicle leasing revenue, they had no impact on
operating income. In addition, Thrifty made some vehicles available under direct
financing leases as opposed to operating leases.
Fees and services revenue increased 9.7% to $15.9 million as compared
to the second quarter of 1999 due to growth in franchisee rental revenue.
Expenses
Total expenses increased 6.2% from $228.9 million in the second quarter
of 1999 to $242.9 million in the second quarter of 2000. This increase was due
primarily to a $17.9 million, or 10.8% increase at Dollar and a $3.9 million, or
6.3% decrease at Thrifty. Total expenses as a percentage of revenue declined to
84.7% in 2000 from 88.2% in 1999.
Direct and vehicle operating expenses for the second quarter of 2000
increased $6.7 million, or 8.9%, over the 1999 second quarter, comprised of a
$10.2 million increase at Dollar and a $3.5 million decrease at Thrifty. The
overall increase at Dollar was due to higher airport concession rents, personnel
and vehicle operating costs. The decrease at Thrifty was due to the change in
the lease program structure discussed above.
Net vehicle depreciation expense and lease charges increased $5.0
million, or 6.4%, in the second quarter of 2000 as compared to the second
quarter of 1999, consisting of a $6.0 million increase at Dollar offset by a
$1.0 million decrease at Thrifty. Vehicle depreciation expense increased $1.5
million, or 1.8%, due to a 1.0% decrease in depreciable fleet (3.5% increase at
Dollar and a 7.9% decrease at Thrifty) and a 2.8% increase in the average
depreciation rate (3.9% increase at Dollar and a 0.4% increase at Thrifty). Net
vehicle gains on the disposal of non-program vehicles were $11.5 million for the
second quarter of 2000 and $9.3 million for the second quarter of 1999. Lease
charges, for vehicles leased from third parties, increased $5.7 million due to
an increase in the number of vehicles leased in the second quarter of 2000.
Selling, general and administrative expenses of $50.5 million for the
second quarter of 2000 increased 4.7% from $48.2 million in the second quarter
of 1999, comprised of a $1.3 million increase at Dollar and a $0.7 million
increase at Thrifty. This increase was due primarily to higher personnel costs.
Net interest expense increased slightly primarily due to higher average
vehicle debt and interest rates in the second quarter of 2000 as compared to the
second quarter of 1999 partially offset by an increase in the interest earned on
invested restricted cash and other interest income.
The effective tax rate for the second quarter of 2000 was 43.4% down from
44.3% for the second quarter of 1999. The decrease in the effective rate was due
primarily to an increase in income before income taxes. The effective tax rate
differs from the U.S. statutory rate due primarily to non-deductible
amortization costs in excess of net assets acquired, state and local taxes and
losses relating to TCL for which no benefit was recorded.
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.
13
<PAGE>
Operating Results
Income before income taxes increased $13.3 million, or 43.6% to $43.8
million for the second quarter of 2000. This growth was due to a $11.1 million
increase at Dollar and a $2.2 million increase at Thrifty.
Six Months Ended June 30, 2000 Compared with Six Months Ended June 30, 1999
Revenues
Total revenues for the six months ended June 30, 2000 increased $50.2
million, or 10.7%, to $521.1 million compared to the six months ended June 30,
1999. The growth in total revenue was due to an increase in vehicle rental
revenue of 16.2% and a 14.8% increase in fees and services revenue partially
offset by a decline in vehicle leasing revenue of 8.3% over the first half of
1999.
The Group's vehicle rental revenue for the first half of 2000 was
$388.0 million, a $54.0 million increase (a $53.7 million increase for Dollar
and a $0.3 million increase at Thrifty) from the first half of 1999. The growth
in vehicle rental revenue at Dollar was the result of an increase of 11.1% in
rental days combined with a 5.1% increase in revenue per day. The vehicle rental
revenue growth at Dollar that related to the acquisition of franchise operations
was $4.2 million, which represented 7.9% of Dollar's total vehicle rental
revenue growth for the six months ended June 30, 2000.
Vehicle leasing revenue for the first half of 2000 was $98.0 million, a
$8.9 million decrease from the first half of 1999. This decline was due
primarily to a modification of the lease program at Thrifty that eliminated
certain incentives previously made available to franchisees with a corresponding
reduction in the lease rate. While the changes made by Thrifty resulted in a
reduction of vehicle leasing revenue, they had no impact on operating income. In
addition, Thrifty made some vehicles available under direct financing leases as
opposed to operating leases.
Fees and services revenue increased 14.8% to $30.0 million as compared
to the first half of 1999 due to growth in franchisee rental revenue.
Expenses
Total expenses increased 6.3% from $429.8 million in the first half of
1999 to $456.7 million in the first half of 2000. This increase was due
primarily to a $32.8 million, or 10.4% increase at Dollar and a $6.0 million, or
5.2% decrease at Thrifty. Total expenses as a percentage of revenue declined to
87.6% in 2000 from 91.3% in 1999.
Direct and vehicle operating expenses for the first half of 2000
increased $12.5 million, or 8.8%, compared to the first half of 1999, comprised
of a $16.5 million increase at Dollar and a $4.0 million decrease at Thrifty.
The overall increase at Dollar was due to higher airport concession rents,
personnel and other vehicle operating costs partially offset by lower insurance
costs. The decrease at Thrifty was due to the change in the lease program
structure discussed above.
Net vehicle depreciation expense and lease charges increased $9.1
million, or 6.1%, in the first half of 2000 as compared to the first half of
1999, consisting of a $11.7 million increase at Dollar offset by a $2.6 million
decrease at Thrifty. Vehicle depreciation expense increased $4.7 million, or
3.0%, due to a 0.2% increase in depreciable fleet (5.1% increase at Dollar and a
7.4% decrease at Thrifty) and a 2.8% increase in the average depreciation rate
(3.5% increase at Dollar and a 0.7% increase at Thrifty). Net vehicle gains on
the disposal of non-program vehicles were $15.7 million for the first half of
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2000 and $12.1 million for the first half of 1999. Lease charges, for vehicles
leased from third parties, increased $8.0 million due to an increase in the
number of vehicles leased in the first half of 2000.
Selling, general and administrative expenses of $96.7 million for 2000
increased 4.9% from $92.2 million in 1999, comprised of a $3.6 million increase
at Dollar and a $0.6 million increase at Thrifty. This increase was due
primarily to higher personnel costs.
Net interest expense increased $0.8 million, or 1.7%, to $45.3 million
in the first half of 2000 primarily due to higher average vehicle debt levels
and interest rates as compared to the first half of 1999 partially offset by an
increase in the interest earned on invested restricted cash and other interest
income.
The effective tax rate for the first half of 2000 was 44.0% down from 45.5%
for the first half of 1999. The decrease in the effective rate was due primarily
to an increase in income before income taxes. The effective rate differs from
the U.S. statutory rate due primarily to non-deductible amortization costs in
excess of net assets acquired, state and local taxes and losses relating to TCL
for which no benefit was recorded.
Operating Results
The Group had income before income taxes of $64.4 million for the six
months ended June 30, 2000 as compared to $41.1 million for the six months ended
June 30, 1999, a 56.7% increase. This growth was due to a $20.9 million increase
at Dollar and a $2.5 million increase at Thrifty.
Seasonality
The Group's business is subject to seasonal variations in customer
demand, with the summer vacation period representing the peak season for vehicle
rental. During the peak season, the Group 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 Group. The first and fourth
quarters for the Group's rental operations are generally the weakest, when there
is limited leisure travel and a greater potential for adverse weather
conditions. Many of the operating expenses such as rent, general insurance and
administrative personnel are fixed and cannot be reduced during periods of
decreased rental demand.
Liquidity and Capital Resources
The Group's primary cash requirements are for the acquisition of
revenue-earning vehicles and to fund its U.S. and Canadian operations. For the
six months ended June 30, 2000, cash provided by operating activities was $250.9
million.
Cash used in investing activities was $650.4 million. The principal use
of cash in investing activities was the purchase of revenue-earning vehicles,
which totaled $1.7 billion ($1.1 billion at Dollar and $600 million at Thrifty)
which was partially offset by $960.5 million ($606.9 million at Dollar and
$353.6 million at Thrifty) in proceeds from the sale of used revenue-earning
vehicles. The Group's need for cash to finance vehicles is highly seasonal and
typically peaks in the second and third quarters of the year when fleet levels
build to meet seasonal rental demand. The Group expects to continue to fund its
revenue-earning vehicles with cash provided from operations and increased
secured vehicle financing. Restricted cash and investments decreased $105.8
million for the six months ended June 30, 2000. Restricted cash and investments
are restricted for the acquisition of revenue-earning vehicles and other
specified uses under the asset backed notes discussed below. The Group also used
cash for the purchase of non-vehicle capital expenditures of $10.3 million.
These expenditures consist primarily of airport facility improvements for the
Group's rental locations and investments in information technology equipment and
systems. Dollar also acquired the franchised operations of its largest Texas
licensee on March 13, 2000, which used $2.7 million of cash, net of assets
acquired and liabilities assumed. These expenditures were financed with cash
provided from operations.
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The Group has significant requirements for bonds and letters of credit
to support its insurance programs and airport concession commitments. At June
30, 2000, the insurance companies had issued approximately $69.3 million in
bonds to secure these obligations.
Asset Backed Notes
The asset backed note program at June 30, 2000 was comprised of $1.33
billion in asset backed notes with maturities ranging from 2000 to 2005.
Borrowings under the asset backed notes are secured by eligible vehicle
collateral and bear interest at fixed rates on $1.29 billion ranging from 5.90%
to 7.10% and floating rates on $37.4 million ranging from LIBOR plus .95% to
LIBOR plus 1.25%. Proceeds from the asset backed notes that are temporarily
unutilized for financing vehicles and certain related receivables are maintained
in restricted cash and investment accounts, which were approximately $36.4
million at June 30, 2000.
Commercial Paper Program and Liquidity Facility
The Company has a commercial paper program of up to $780 million and a
364 day, $700 million liquidity facility to support the commercial paper
program. Borrowings under the commercial paper program are secured by eligible
vehicle collateral and bear interest based on market-dictated commercial paper
rates. At June 30, 2000, the Group had $479.4 million in commercial paper
outstanding under its commercial paper program. The commercial paper program and
the liquidity facility are renewable annually.
Other Vehicle Debt
At June 30, 2000, other vehicle debt included borrowings of $101.3 million
under revolving lines of credit with a vehicle manufacturer finance subsidiary
that bears interest at rates based on commercial paper rates. Also included in
other vehicle debt are borrowings of $1.6 million under a $12 million revolving
line of credit from a bank that bears interest at rates based on LIBOR. These
lines are collateralized by the vehicles financed under the facilities.
Limited Partner Interest in Limited Partnership
In February 1999, the TCL Funding Limited Partnership ("Partnership")
was created with TCL as the General Partner and an unrelated bank's conduit as
the Limited Partner. The Limited Partner's interest is reflected in Note 4 of
the Notes to Consolidated Financial Statements as Limited Partner Interest in
Limited Partnership.
The Partnership agreement has a five-year term with the purpose to
purchase, own, lease and rent vehicles throughout Canada. The Limited Partner
has committed to funding approximately CDN$150 million to the Partnership which
they fund through the issuance and sale of notes in the Canadian commercial
paper market.
Due to the nature of the relationship between TCL and the Partnership,
the consolidated statements include the accounts of the Partnership. The Limited
Partner's income share was $1.4 million for the six months ended June 30, 2000
as compared to $0.3 million for the six months ended June 30, 1999, which is
included in the Consolidated Statement of Income as interest expense.
At June 30, 2000, TCL had $5.7 million outstanding under a revolving
line of credit, which is reflected in Note 4 of the Notes to Consolidated
Financial Statements as other vehicle debt. The line of credit supports TCL's
investment in the Partnership.
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Revolving Credit Facility
The Company has a $215 million five-year, senior secured, revolving
credit facility (the "Revolving Credit Facility") that expires December 2002.
The Revolving Credit Facility is used to provide letters of credit with a
sublimit of $190 million and cash for operating activities with a sublimit of
$70 million. The Group had letters of credit outstanding under the Revolving
Credit Facility of approximately $74.5 million and no working capital borrowings
at June 30, 2000. On August 3, 2000, the Company completed a five-year extension
of the Revolving Credit Facility. The new five-year term expires in August 2,
2005.
DaimlerChrysler Credit Support
DaimlerChrysler Corporation ("DaimlerChrysler") provides credit support
for the Group's vehicle fleet financing in the form of a letter of credit
facility. The letter of credit amount declines annually over five years, which
began September 30, 1999, by the greater of $5.7 million or 50% of the Group's
excess cash flow, as defined. The credit support amount was approximately $22.8
million at June 30, 2000. The Company may need to replace reductions in the
letter of credit amount with cash from operations or with borrowings or letters
of credit under the Revolving Credit Facility. To secure reimbursement
obligations under the DaimlerChrysler credit support agreement, DaimlerChrysler
has liens and security interests on certain assets of the Group.
New Accounting Standards
Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities," establishes
accounting and reporting standards for derivative instruments and for hedging
activities. It requires that all derivatives be recognized as either assets or
liabilities in the statement of financial position and be measured at fair
value. During 1999, the Financial Accounting Standards Board delayed the
effective date of SFAS No. 133 for one year to fiscal years beginning after June
15, 2000. In June 2000, SFAS No. 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities," was issued which amended portions
of SFAS No. 133. The Company plans to adopt SFAS No. 133, as amended, beginning
January 1, 2001.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin ("SAB") 101, "Revenue Recognition in Financial
Statements." SAB 101 provides guidance on applying generally accepted accounting
principles to revenue recognition issues in financial statements. In June 2000,
the SEC issued SAB 101B, "Second Amendment: Revenue Recognition in Financial
Statements." SAB 101B delays the implementation date of SAB 101 to the fourth
quarter of 2000. The Company will adopt SAB 101 pursuant to SAB 101B as required
in the fourth quarter of 2000 and is evaluating the effect that such adoption
may have on its consolidated results of operation and financial position.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following information about the Group's market sensitive financial
instruments constitutes a "forward-looking" statement. The Group's primary
market risk exposure is changing interest rates, primarily in the United States.
The Group's policy is to manage interest rates through use of a combination of
fixed and floating rate debt. A portion of the Group's borrowings are
denominated in Canadian dollars which exposes the Group to market risk
associated with exchange rate fluctuations. The Group has entered into no
hedging or derivative transactions. All items described are non-trading and are
stated in U.S. Dollars.
At June 30, 2000, there were no significant changes in the Group's
quantitative disclosures about market risk compared to December 31, 1999, which
is included under Item 7A of the Company's most recent Form 10-K.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Various legal actions, claims and governmental inquiries and
proceedings are pending or may be instituted or asserted in the future against
the Company and its subsidiaries. Litigation is subject to many uncertainties,
and the outcome of the individual litigated matters is not predictable with
assurance. It is possible that certain of the actions, claims, inquiries or
proceedings, including those discussed above, could be decided unfavorably to
the Company or the subsidiaries involved. Although the amount of liability with
respect to these matters cannot be ascertained, potential liability is not
expected to materially affect the consolidated financial position or results of
operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
[a] On May 25, 2000, the 2000 Annual Meeting of Stockholders of the Company
was held. Proxies for the meeting were solicited pursuant to Section
14(a) of the Securities Exchange Act of 1934 and there was no
solicitation in opposition to management's director nominees.
[b] The Company's stockholders elected Molly Shi Boren, Thomas P. Capo,
Joseph E. Cappy, Edward L. Hogan, Maryann N. Keller, Edward C. Lumley,
John C. Pope, John P. Tierney and Edward L. Wax to serve as directors
of the Company until the next Annual Meeting of Stockholders or until
their successors have been duly elected.
[c] The votes cast by the Company's stockholders for the election of
directors listed in paragraph (b), as determined by the final report of
the inspectors, are set forth below:
NUMBER OF VOTES
-----------------------------
NOMINEE FOR WITHHELD
------------------- ------------ -----------
Molly Shi Boren 20,068,583 1,601,242
Thomas P. Capo 19,984,990 1,684,835
Joseph E. Cappy 20,069,390 1,600,435
Edward J. Hogan 20,068,383 1,601,442
Maryann N. Keller 20,069,390 1,600,435
Edward C. Lumley 19,982,390 1,687,435
John C. Pope 20,067,490 1,602,335
John P. Tierney 19,984,490 1,685,335
Edward L. Wax 20,068,890 1,600,935
The Company's stockholders voted on the following proposals:
Proposal 1 - Election of Directors. See paragraphs (b) and (c) above.
Proposal 2 - Appointment of Deloitte & Touche LLP as Auditors for the 2000 year.
A proposal to appoint Deloitte & Touche LLP as independent public accountants to
audit the books of account and other corporate records of the Company for 2000
was adopted, with 21,655,969 votes cast for, 7,651 votes cast against and 6,205
votes abstained.
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Proposal 3 - Long-Term Incentive Plan Share Increase. A proposal to amend the
Company's Long-Term Incentive Plan to increase the maximum number of Shares of
Common Stock available for issuance under the Long-Term Incentive Plan by
2,400,000 shares. The proposal was approved by the affirmative vote of
13,747,150 shares, which constitute a majority of the issued and outstanding
shares. In addition, this proposal received 5,456,163 votes cast against, 11,645
votes abstained and there were 2,454,867 broker non-votes.
ITEM 5. OTHER INFORMATION
The Company has established the date for its next Annual Meeting of
Stockholders, which will be held on May 24, 2001.
On June 26, 2000, The Company entered into a new five-year vehicle
supply agreement with DaimlerChrysler effective July 1, 2001. DaimlerChrysler
has agreed to make specified volumes of DaimlerChrysler vehicles available to
the Company through July 2006.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
[a] Index of Exhibits
Exhibit 10.19 Second Amendment to Long-Term Incentive Plan dated as of
May 25, 2000
Exhibit 10.20 Vehicle Supply Agreement between DaimlerChrysler Motors
Corporation and Dollar Thrifty Automotive Group, Inc.
executed June 26, 2000
Exhibit 27.1 Financial Data Schedule (EDGAR version only)
[b] Reports on Form 8-K
No report on Form 8-K was filed by the Company during or
applicable to the quarter ended June 30, 2000.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned; thereunto duly authorized, in the City of Tulsa, Oklahoma, on
August 9, 2000.
DOLLAR THRIFTY AUTOMOTIVE GROUP, INC.
By: /s/ JOSEPH E. CAPPY
------------------------------------------
Name: Joseph E. Cappy
Title: Chairman of the Board, President,
Chief Executive Officer
Principal Executive Officer
By: /s/ STEVEN B. HILDEBRAND
------------------------------------------
Name: Steven B. Hildebrand
Title: Executive Vice President and
Chief Financial Officer
Principal Accounting Officer and Principal
Financial Officer
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