<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1997
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OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from to
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Commission File No.: 0-23962
BUDGET GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 59-3227576
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
125 Basin Street, Suite 210, Daytona Beach, FL 32114
(Address of principal executive offices)
(904) 238-7035
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(Registrant's telephone number, including area code)
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 and 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 [ ]
25,802,300 shares of common stock were outstanding as of November 10, 1997,
comprised of 23,865,700 shares of the registrant's Class A common stock, par
value $0.01, and 1,936,600 shares of the registrant's Class B common stock, par
value $0.01.
The Exhibit Index, filed as a part of this report, appears on page 13.
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<PAGE> 2
INDEX
<TABLE>
<S> <C> <C>
PART I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1997 (unaudited)
and December 31, 1996 3
Consolidated Statements of Operations for the Three and Nine-Month
Periods Ended September 30, 1997 and 1996 (unaudited) 4
Consolidated Statement of Changes in Stockholders' Equity
for the Nine-Month Period Ended September 30, 1997 (unaudited) 5
Consolidated Statements of Cash Flows for the Nine-Month
Periods Ended September 30, 1997 and 1996 (unaudited) 6
Notes to Unaudited Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures about Market Risk 12
PART II. Other Information
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Default Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signature Page 14
</TABLE>
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BUDGET GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1997 1996
(UNAUDITED)
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<S> <C> <C>
Cash and cash equivalents $ 148,178 $ 50,490
Restricted cash 378,485 66,336
Trade and vehicle receivables, net 275,972 31,302
Accounts receivable, related parties 58 58
Prepaid expenses, inventories and deposits 79,143 13,972
Vehicle inventory 34,168 16,413
Revenue earning vehicles, net 1,989,965 319,257
Property and equipment, net 131,340 18,502
Other assets 49,259 --
Intangibles, including goodwill, net 395,233 70,893
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Total assets $ 3,481,801 $ 587,223
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable and accrued expenses $ 467,535 $ 31,127
Capital lease obligations 448 580
Deferred income taxes 25,585 7,406
Notes payable 2,583,585 454,109
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Total liabilities 3,077,153 493,222
Common stock warrant -- 2,000
STOCKHOLDERS' EQUITY
Convertible preferred stock 105,750 --
Common stock 200 112
Additional paid-in-capital 264,469 89,856
Foreign currency translation adjustment (258) --
Retained earnings 34,817 2,363
Treasury stock (330) (330)
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Total stockholders' equity 404,648 92,001
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Total liabilities and stockholders' equity $ 3,481,801 $ 587,223
=========== ===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
3
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BUDGET GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(Dollar amounts in thousands except per share data)
<TABLE>
<CAPTION>
FOR THE THREE-MONTH PERIODS ENDED SEPTEMBER 30, FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30,
1997 1996 1997 1996
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<S> <C> <C> <C> <C>
OPERATING REVENUE:
Rental revenue $ 391,332 $ 62,689 $ 685,891 $ 166,531
Car sales revenue 71,030 38,803 172,623 94,489
Royalties and other revenue 20,084 -- 32,702 --
------------ ------------ ------------ ------------
Total operating revenue 482,446 101,492 891,216 261,020
OPERATING EXPENSES:
Direct vehicle and operating 42,536 9,900 80,938 24,392
Depreciation - vehicles 102,626 15,960 187,842 43,983
Depreciation - non-vehicle 6,684 705 12,046 1,915
Cost of car sales 61,308 30,432 147,376 77,727
Advertising, promotion and selling 34,014 6,492 69,064 17,101
Facilities 35,775 5,507 66,101 14,924
Personnel 86,937 14,234 158,340 38,239
General and administrative 19,946 2,628 36,654 8,013
Amortization 2,006 472 4,981 1,468
------------ ------------ ------------ ------------
Total operating expenses 391,832 86,330 763,342 227,762
------------ ------------ ------------ ------------
Operating income 90,614 15,162 127,874 33,258
------------ ------------ ------------ ------------
Other (income) expense:
Vehicle interest 35,473 6,579 63,268 18,542
Other interest, net 7,339 1,630 12,629 2,561
Interest income - restricted cash (2,118) 266 (3,931) (521)
Related party interest -- -- -- 118
------------ ------------ ------------ ------------
Total other (income) expense 40,694 8,475 71,966 20,700
INCOME BEFORE INCOME TAXES 49,920 6,687 55,908 12,558
Provision for income taxes 20,967 2,047 23,454 4,395
------------ ------------ ------------ ------------
NET INCOME $ 28,953 $ 4,640 $ 32,454 $ 8,163
============ ============ ============ ============
NET INCOME PER COMMON AND COMMON
EQUIVALENT SHARES:
PRIMARY $ 1.14 $ 0.42 $ 1.68 $ 0.94
============ ============ ============ ============
FULLY DILUTED $ 0.98 $ 0.41 $ 1.48 $ 0.93
============ ============ ============ ============
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING:
PRIMARY 25,340,000 11,175,000 19,324,000 8,675,000
============ ============ ============ ============
FULLY DILUTED 30,992,000 11,196,000 24,393,000 8,820,000
============ ============ ============ ============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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BUDGET GROUP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Foreign
Convertible Additional Currency Total
Preferred Common Paid-In Translation Retained Treasury Stockholders'
(Dollar amounts in thousands) Stock Stock Capital Adjustment Earnings Stock Equity
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $ - $112 $ 89,856 $ - $2,363 $(330) $ 92,001
Shares issued in conjunction
with acquisition of Budget
Rent a Car Corporation 105,750 105,750
Net proceeds from stock offering
and exercise of stock options 88 174,613 174,701
Foreign currency translation (258) (258)
Net Income 32,454 32,454
-------- ---- -------- ----- ------- ----- ---------
Balance at September 30, 1997 $105,750 $200 $264,469 $(258) $34,817 $(330) $ 404,648
======== ==== ======== ===== ======= ===== =========
</TABLE>
* See accompanying notes to unaudited consolidated financial statements
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BUDGET GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
(Dollar amounts in thousands) FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30,
1997 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 32,454 $ 8,163
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 199,888 45,898
Intangible Amortization 4,981 2,767
(Gain)/Loss on sale of vehicles and equipment (3,486) -
Deferred income taxes 25,179 -
Provision for losses on accounts receivable 471 -
Changes in operating assets and liabilities
net of effects from acquisitions:
Accounts receivable (44,054) (17,154)
Prepaid expenses, inventories and deposits (12,101) (2,734)
Vehicle inventory (2,585) (13,479)
Accounts payable and accrued expenses 21,358 12,923
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Total adjustments 189,651 28,221
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Net cash provided by operating activities 222,105 36,384
CASH FLOWS FROM INVESTING ACTIVITIES:
Restricted cash 309,469 59,324
Proceeds from sale of revenue earning vehicles 1,066,185 189,646
Purchases of revenue earning vehicles (1,795,692) (341,244)
Purchase of BRACC and franchise operations,
net of cash acquired (143,164) (15,099)
Proceeds from the sale of property and equipment 8,049 -
Purchases of property and equipment (7,436) (11,510)
Proceeds from disposition of other assets - net 962 -
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Net cash used in investing activities (561,627) (118,883)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving credit/notes payable
to banks and other notes payable 434,356 26,074
Principal payments on revolving credit/notes
payable to banks and other notes payable (179,272) (34,613)
Proceeds from fleet lender notes 525,252 152,901
Principal payments on fleet lender notes (497,833) (90,295)
Proceeds from commercial paper 5,012,743 -
Principal payments on commercial paper (4,720,456) -
Proceeds from issuance of common stock 174,701 44,440
Principal payments on capital leases (132) (116)
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Net cash provided by financing activities 749,359 98,391
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Net increase in cash and cash equivalents 409,837 15,892
Cash and cash equivalents, beginning of period 116,826 357
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Cash and cash equivalents, end of period $ 526,663 $ 16,249
========== =========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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BUDGET GROUP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Budget Group,
Inc., previously named Team Rental Group, Inc. (the "Company"), have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and note disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. The Company believes that the accompanying consolidated financial
statements contain all adjustments (consisting of normal, recurring accruals)
which, in the opinion of management, are necessary to present fairly the
Company's consolidated financial condition, results of operations and cash flows
for the periods presented.
It is suggested that these consolidated financial statements be read in
conjunction with the financial statements and the notes thereto contained in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996.
Operating results for the interim periods are not necessarily indicative of the
results that may be expected for the full year ending December 31, 1997.
Certain amounts in the 1996 financial statements have been reclassified to
conform with the current year presentation.
On April 29, 1997, pursuant to stock purchase agreements entered into on January
13, 1997 the Company completed its acquisition of Budget Rent a Car Corporation
("BRACC") in a purchase transaction (the "BRACC Acquisition") and changed its
name to Budget Group, Inc. After the consummation of the BRACC Acquisition,
BRACC and its franchisees (collectively referred to as the "Budget System")
operate the third largest worldwide general use car and truck rental system,
with approximately 3,200 locations and a peak fleet size during 1996 of 266,000
cars and 18,000 trucks. The Budget System includes locations in both the airport
and local (downtown and suburban) markets in all major metropolitan areas in the
United States, in many other small and mid-size U.S. markets and in more than
110 countries worldwide. Pro forma for the BRACC Acquisition, the Budget System
included approximately 455 company-owned locations in the United States at
December 31, 1996, accounting for approximately 76% of 1996 U.S. system-wide
revenues. In addition, Budget franchisees operated approximately 500
royalty-paying franchise locations in the United States at December 31, 1996.
Budget is one of only three vehicle rental systems that offer rental vehicles
throughout the world under a single brand name, with locations in Europe,
Canada, Latin America, the Middle East, Asia/Pacific and Africa. The Budget
System currently maintains more local market rental locations throughout the
world than its major competitors. The Budget System is also unique among major
car rental systems in that it rents trucks in most major markets worldwide. The
Budget System's consumer truck rental fleet is the fourth largest in the United
States. The Company is also one of the largest independent retailers of late
model vehicles in the United States, with 26 retail car sales facilities (under
the name "Budget Car Sales") and pro forma revenues of $246.9 million for 1996.
The consolidated financial statements for the nine-month period ended September
30, 1997 give effect to the Company's acquisition of BRACC from the date of
acquisition through the end of the period. The Company owned BRACC throughout
the three-month period ended September 30, 1997.
The consolidated financial statements for the three and nine-month periods ended
September 30, 1996 give effect to the Company's acquisition of all of the
outstanding stock of the Budget franchise in Phoenix, Arizona, VPSI, Inc.
("VPSI"), and ValCar Rental Car Sales, Inc. ("ValCar") from the date of
acquisition through the end of the periods presented. See note 2 to unaudited
consolidated financial statements.
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2. ACQUISITIONS
Acquisition of Van Pool Operations - In February 1996, the Company purchased for
a nominal amount all of the outstanding stock of VPSI located in Detroit,
Michigan. VPSI provides commuter van pooling services to business commuters in
22 states, and operated a rental fleet of approximately 3,300 vans as of the
acquisition date.
Acquisition of Phoenix Franchise - In February 1996, the Company purchased all
of the outstanding stock of Arizona Rent-A-Car Systems, Inc., located in
Phoenix, Arizona, for approximately $18 million consisting of cash of
approximately $5.0 million, promissory notes of $10.0 million and 272,727
shares of Class A common stock.
Acquisition of ValCar Rental Car Sales, Inc. - On August 1, 1996, the Company
acquired all of the outstanding stock of ValCar Rental Car Sales, Inc. for
$400,000 cash. ValCar owns and operates four retail vehicle sales facilities in
Indianapolis, Indiana, and was formerly owned by a director and officer of the
Company.
If the acquisitions (including the acquisition of BRACC) had occurred at the
beginning of the periods presented, the Company's results of operations would be
as shown in the following table. These unaudited pro forma results are not
necessarily indicative of the actual results of operations that would have
occurred had the acquisitions actually been made at the beginning of the
respective periods.
<TABLE>
<CAPTION>
NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1997 1996
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<S> <C> <C>
(In thousands except per share data)
Operating revenue 1,251,783 1,161,349
Income before income taxes 30,238 37,210
Net income 18,217 21,582
Earnings per share .72 .88
</TABLE>
On July 31, 1997, the Company acquired the fleet and certain other assets and
assumed certain liabilities of Premier Car Rental, Inc. ("Premier") for
approximately $87.2 million. Premier owns and operates 9,000 vehicles from 101
locations in 13 major U.S. markets. Premier will operate as its own brand and
continue to serve the insurance replacement market. In 1996, Premier had
revenues of approximately $61.0 million. The Company does not expect this
acquisition to have a material effect on earnings in 1997.
In September 1997, the Company entered into a letter of intent to purchase the
St. Louis, Missouri Budget franchisee for approximately $9.0 million, consisting
of $1.0 million in cash and $8.0 million in Class A Common Stock. This
franchisee has six locations and a peak fleet of approximately 1,100 vehicles
with revenue of approximately $16.0 million in 1996.
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3. SUBSEQUENT EVENTS
Purchase of Cruise America, Inc. - On October 20, 1997, the Company announced
its plans to acquire Mesa, Arizona based Cruise America, Inc. ("Cruise
America"), in a stock-for-stock transaction. Cruise America is one of the
largest North American companies specializing primarily in the rental and sale
of recreational vehicles. Under the terms of the letter of intent signed by the
parties relating to the transaction, Cruise America stockholders would receive
0.28073 shares of the Companys Class A Common Stock for each share of Cruise
America common stock, or a total of approximately 1.77 million shares of the
Companys Class A Common Stock. Cruise America operates a network of 17
company-owned facilities and 74 satellite rental centers, with a combined fleet
of more than 4,300 recreational vehicles. Cruise America had revenues of
approximately $95.6 million and income before income taxes of approximately $3.8
million for its fiscal year ended April 30, 1997.
The Company expects that the Cruise America acquisition will close in late
January 1998. The completion of the transaction will be subject to satisfactory
completion of due diligence, the execution of a definitive merger agreement,
approval by Cruise Americas stockholders, the receipt of all necessary
regulatory approvals and other customary closing conditions. There can be no
assurance that the parties will agree on the terms of a definitive merger
agreement or that, if such agreement is signed, that the transaction ultimately
will close.
Conversion of preferred stock and stock issuance - On October 1, 1997 FSG, Inc.,
an affiliate of Ford Motor Company, converted the 4,500 shares of Series A
Convertible Preferred Stock of the Company that it held into 4,500,000 shares of
Class A Common Stock. These shares were sold in a public offering at $33 per
share, along with 367,500 shares from other selling stockholders and 450,000 new
primary shares issued by the Company.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Company's original operation, acquired in April 1987, was the Budget
franchise for the San Diego metropolitan area, exclusive of the airport
location, which it acquired in 1988. The Company acquired the Albany and
Rochester, New York franchises and the Richmond, Virginia franchise in 1991.
Concurrent with the Company's initial public offering on August 25, 1994, the
Company purchased the Budget operations in Philadelphia and Pittsburgh,
Pennsylvania and Cincinnati, Ohio. In November 1994, the Company acquired the
Fort Wayne, Indiana Budget franchise and opened its first retail car sales
facility in San Diego, California. The Company acquired the Dayton, Ohio and
Charlotte, North Carolina Budget franchises in January 1995, the Hartford,
Connecticut Budget franchise in March 1995 and the Los Angeles Budget franchise
in October 1995. During 1995, the Company opened four retail car sales
facilities, including locations in Philadelphia, Pennsylvania; Richmond,
Virginia; Charlotte, North Carolina; and a second location in San Diego,
California; and acquired retail car sales facilities in Dayton, Ohio and
Ontario, California. In February 1996, the Company acquired the Phoenix, Arizona
Budget franchise territory and VPSI, Inc., a commuter van pooling service with
operations in many regions throughout the United States. In April 1996, the
Company opened two retail car sales facilities, including its first facility in
Cincinnati, Ohio and its second facility in Dayton, Ohio. In August 1996, the
Company acquired ValCar Rental Car Sales, Inc., the operator of four retail
vehicle sales facilities in Indianapolis, Indiana.
In April 1997, the Company acquired Budget Rent a Car Corporation. In
connection with the acquisition, the Company changed its name to Budget Group,
Inc. For a further discussion of this transaction, see Note 1 to the Company's
financial statements herein.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company's operations have been funded by cash provided from
operating activities and by financing provided by banks, automobile
manufacturers' captive finance companies and leasing companies. The Company's
existing indebtedness at September 30, 1997 has interest rates ranging from 5.7%
to 9.6%. The Company intends to fund its operations through asset-backed notes
and revolving credit facilities with financial institutions for fleet financing
and working capital, as well as through other similar facilities and through
placements or offerings of additional debt and/or equity securities.
At September 30, 1997, the Company had $2.285 billion borrowed under
asset-backed notes, which are utilized largely to finance vehicles eligible for
certain manufacturers' guaranteed repurchase programs. Proceeds from the notes
that are temporarily unutilized for vehicle financing are maintained in
restricted cash accounts with the trustees. The notes are collateralized by the
secured vehicles and the restricted cash accounts. Rates on asset-backed notes
at September 30, 1997 range from 5.7% to 7.8%.
The Company's other vehicle obligations consist of outstanding lines of credit
to purchase rental fleet and retail car sales inventory. Collateralized
available lines of credit at September 30, 1997 consist of $13 million for
rental vehicles and $35 million for retail car sales inventory with maturity
dates ranging from October 1997 through May 1998. Vehicle obligations are
collateralized by revenue earning vehicles financed under these credit
facilities and proceeds from the sale, lease or rental of rental vehicles and
retail car sales inventory. Interest payments for other vehicle obligations are
due monthly at annual interest rates ranging from 7.1% to 8.5% at September 30,
1997. Management expects vehicle obligations will generally be repaid within
one year from the balance sheet date with proceeds received from either the
repurchase of the vehicles by the manufacturers in accordance with the terms of
the manufacturers' rental fleet programs or from the sale of the vehicles.
Monthly payments of interest only for retail car sales inventory obligations are
required at an annual interest rate of 8.5% at September 30, 1997. Retail car
sales inventory obligations are paid when the inventory is sold but in no event
later than 120 days after the date of purchase.
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Working Capital Facilities. At September 30, 1997, the Company had a working
capital facility of $300.0 million, which requires monthly interest payments on
the outstanding balance at a rate based on LIBOR plus 1.75%. This agreement
expires in 2002, is secured primarily by cash, accounts receivable and vehicles
and is subject to certain covenants, the most restrictive of which require the
Company to maintain certain financial ratios and minimum tangible net worth and
restrict the payment of cash dividends. At September 30, 1997, the Company had
$256.1 million in letters of credit outstanding under this facility.
Senior Notes Payable. At September 30, 1997, the Company had $165.0 million of
outstanding senior notes payable. The notes bear interest at rate of 9.57% and
mature in 2007.
Convertible Subordinated Notes. At September 30, 1997, the Company had $125.0
million aggregate principal amount of convertible notes outstanding. At a
conversion price of $20.07 per share, $80.0 million of Series A Convertible
Notes are convertible into 3,986,049 shares of Class A Common Stock, bear
interest at a rate of 7.0% and mature in 2007. At a conversion price of $27.96
per share, $45.0 million of Series B Convertible Notes are convertible into
1,609,442 shares of Class A Common Stock, bear interest at a rate of 6.85% and
mature in 2007.
CHANGE IN FINANCIAL CONDITION
Total assets increased $2.895 billion from $587.2 million at December 31, 1996
to $3.482 billion at September 30, 1997. This increase resulted primarily from
increases in revenue-earning vehicles of $1.671 billion and intangibles of
$324.3 million. These increases were largely a result of the acquisition of
BRACC. Restricted cash increased $312.1 million from $66.3 million at December
31, 1996 to $378.5 million at September 30, 1997 reflecting the seasonal
increase in the disposal of rental vehicles occurring in September and the
impact of the acquisition of BRACC.
Total liabilities increased $2.584 billion from $493.2 million at December 31,
1996 to $3.077 billion at September 30, 1997 due primarily to an additional
$2.129 billion of net borrowings largely to finance the vehicles of BRACC. The
increase in stockholders' equity of approximately $312.6 million was due to the
public offering of 8,625,000 shares of Class A Common Stock and issuance of
convertible preferred stock in April 1997 in conjunction with the acquisition of
BRACC and current year earnings.
RESULTS OF OPERATIONS
General Operating Results. Net income for the first nine months of 1997
increased $24.3 million to $32.5 million from $8.2 million in 1996. Earnings
per share for the first nine months of 1997 increased to $1.48 per fully diluted
share from $.93 per fully diluted share in 1996. Income before income taxes
increased $43.3 million for the first nine months of 1997 to $55.9 million from
$12.6 million for the first nine months of 1996. Net income for the third
quarter of 1997 increased $24.3 million to $28.9 million from $4.6 million in
1996. Earnings per share for the third quarter of 1997 increased to $.98 per
fully diluted share from $.41 per fully diluted share in 1996. Income before
taxes increased $43.2 million for the third quarter of 1997 to $49.9 million
from $6.7 million for the third quarter of 1996.
Operating Revenues. Vehicle rental revenue increased $519.4 million in the first
nine months of 1997 to $685.9 million from $166.5 million in the first nine
months of 1996. Such revenues for the third quarter of 1997 increased $328.6
million to $391.3 million from $62.7 million in 1996. These increases were due
to the acquisition of BRACC which added a significant number of locations and
vehicles to the Company's operations. Revenue from the sales of vehicles
increased $78.1 million in the first nine months of 1997 to $172.6 million from
$94.5 million in the first nine months of 1996. Such revenues for the third
quarter of 1997 increased $32.2 million to $71.0 million from $38.8 million in
1996. These increases were due to the addition of the car sales operations of
BRACC as well as new stores opened by the Company. Royalties and other revenues
totaled $32.7 million in the first nine months of 1997 and $20.1 million in the
third quarter of 1997 and largely represent royalty and other fees due from the
Company's franchisees.
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Operating Expenses. Total operating expenses increased $535.5 million in the
first nine months of 1997 to $763.3 million from $227.8 million in the first
nine months of 1996. Such expenses for the third quarter of 1997 increased
$305.5 million to $391.8 million from $86.3 million in 1996. These increases
were also due to the addition of BRACC's operations to the Company's operations.
The cost of vehicles sold increased $69.7 million in the first nine months of
1997 to $147.4 million from $77.7 million in 1996. Such expenses for the third
quarter of 1997 increased $30.9 million to $61.3 million from $30.4 million in
1996. These increases are reflective of the car sales revenue growth with the
addition of BRACC car sales locations and new locations opened by the Company.
Amortization expense increased $3.5 million in the first nine months of 1997 to
$5.0 million from $1.5 million in the first nine months of 1996. Such expenses
for the third quarter of 1997 increased $1.5 million to $2.0 million from $.5
million in 1996. These increases were largely due to intangibles, including
goodwill, related to the acquisition of BRACC.
Other (Income) Expense, net. Interest expense, net of interest income, increased
$51.3 million in the first nine months of 1997 to $72.0 million from $20.7
million in the first nine months of 1996. Such expenses for the third quarter of
1997 increased $32.2 million to $40.7 million from $8.5 million in 1996. These
increases were due to the financing of fleet and other borrowings related to the
acquisition of BRACC, net of investment income due to the increase in cash.
Provision for income taxes. The provision for income taxes increased $19.1
million in the first nine months of 1997 to $23.5 million from $4.4 million for
the first nine months of 1996. The provision for the third quarter of 1997
increased $18.9 million to $21.0 million from $2.1 million in 1996. The tax
provision reflects the expected full year effective rate of 42% which is higher
than the statutory rate due to the effects of non-deductible intangible
amortization and the impact of state and local income taxes net of the federal
benefit.
RECENT PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"). SFAS
128 simplifies the standards for computing earnings per share and is effective
for all financial statements issued for periods ending after December 15, 1997.
Earlier application is not permitted. The adoption of SFAS 128 is not expected
to materially impact the Company's earnings per share.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
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PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
Not applicable.
ITEM 2 CHANGES IN SECURITIES
In January 1997, the Board of Directors authorized the issuance of
10,000 shares of Preferred Stock, par value $0.01 per share, designated as the
"Series A Convertible Preferred Stock." In connection with the acquisition of
BRACC, 4,500 shares of Series A Convertible Preferred Stock were issued to
Ford. On October 1, 1997, these shares were converted into Class A Common Stock
and the shares of Class A Common Stock were sold in a public offering.
Accordingly, the Company no longer has outstanding any shares of Preferred
Stock.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5 OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
Exhibit 11.1 Earnings Per Share
Exhibit 27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
Not applicable.
13
<PAGE> 14
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.
BUDGET GROUP, INC.
------------------
(Registrant)
Dated: November 13, 1997 By: /s/ Sanford Miller
--------------------------
Sanford Miller
Chairman of the Board and
Chief Executive Officer
Dated: November 13, 1997 By: /s/ Jeffrey D. Congdon
--------------------------
Jeffrey D. Congdon
Chief Financial Officer
14
<PAGE> 1
EXHIBIT 11.1
EARNINGS PER SHARE COMPUTATIONS
<TABLE>
<CAPTION>
NINE-MONTH PERIOD ENDED
September 30, September 30,
1997 1996
------- -------
PRIMARY EARNINGS PER SHARE: (Dollar and share amounts in 000's)
<S> <C> <C>
Net Income $ 32,454 $ 8,163
-------- -------
Shares:
Weighted average common shares outstanding 16,185 8,543
Effect of shares issuable under stock option
plans, stock purchase warrants and convertible
securities based on the treasury stock method 3,139 132
-------- -------
Adjusted common shares and equivalents 19,324 8,675
======== =======
Earnings per share - primary $ 1.68 $ 0.94
======== =======
FULLY DILUTED EARNINGS PER SHARE:
Net Income $ 32,454 $ 8,163
Effect of interest on convertible securities
net of income taxes 3,566
-------- -------
Adjusted net income 36,020 8,163
======== =======
Shares:
Weighted average common shares outstanding 16,185 8,543
Effect of shares issuable under stock option
plans, stock purchase warrants and convertible
securities based on the treasury stock method 8,208 277
-------- -------
Adjusted common shares and equivalents 24,393 8,820
======== =======
Earnings per share - fully diluted $ 1.48 $ 0.93
======== =======
</TABLE>
<PAGE> 2
EXHIBIT 11.1
EARNINGS PER SHARE COMPUTATIONS
<TABLE>
<CAPTION>
THREE-MONTH PERIOD ENDED
September 30, September 30,
1997 1996
------- -------
PRIMARY EARNINGS PER SHARE: (Dollar and share amounts in 000's)
<S> <C> <C>
Net Income $28,953 $ 4,640
------- -------
Shares:
Weighted average common shares outstanding 19,961 10,919
Effect of shares issuable under stock option
plans, stock purchase warrants and convertible
securities based on the treasury stock method 5,379 256
======= =======
Adjusted common shares and equivalents 25,340 11,175
======= =======
Earnings per share - primary $ 1.14 $ 0.42
======= =======
FULLY DILUTED EARNINGS PER SHARE:
Net Income $28,953 $ 4,640
Effect of interest on convertible securities
net of income taxes 1,417
------- -------
Adjusted net income 30,370 4,640
======= =======
Shares:
Weighted average common shares outstanding 19,961 10,919
Effect of shares issuable under stock option
plans, stock purchase warrants and convertible
securities based on the treasury stock method 11,031 277
------- -------
Adjusted common shares and equivalents 30,992 11,196
======= =======
Earnings per share - fully diluted $ 0.98 $ 0.41
======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF BUDGET GROUP, INC. FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30,
1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 526,663
<SECURITIES> 0
<RECEIVABLES> 276,030
<ALLOWANCES> 0<F1>
<INVENTORY> 2,024,133
<CURRENT-ASSETS> 2,826,826
<PP&E> 131,340
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 3,481,801
<CURRENT-LIABILITIES> 493,568
<BONDS> 2,583,585
0
105,750
<COMMON> 200
<OTHER-SE> 298,698
<TOTAL-LIABILITY-AND-EQUITY> 3,481,801
<SALES> 891,216
<TOTAL-REVENUES> 891,216
<CGS> 147,376
<TOTAL-COSTS> 615,966
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 71,966
<INCOME-PRETAX> 55,908
<INCOME-TAX> 23,454
<INCOME-CONTINUING> 32,454
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,454
<EPS-PRIMARY> 1.68
<EPS-DILUTED> 1.48
<FN>
<F1>RECEIVABLES ARE REPORTED NET OF ALLOWANCES FOR DOUBTFUL ACCOUNTS ON THE BALANCE
SHEET
<F2>PROPERTY, PLANT & EQUIPMENT IS REPORTED NET OF ACCUMULATED DEPRECIATION ON THE
BALANCE SHEET
</FN>
</TABLE>
