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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002

OR

     
o   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
(State or other jurisdiction
of incorporation or organization)		   73-1356520
(I.R.S. Employer
Identification No.)

5330 East 31st Street
Tulsa, Oklahoma 74135
(Address of principal executive offices and zip code)

(918) 660-7700
(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 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 o

The number of shares outstanding of the registrant’s Common Stock as of October 31, 2002 was 24,492,903.

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
  
 
 
15
 
 
  
ITEM 3.
  
QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
  
 
 
23
 
 
  
ITEM 4.
  
CONTROLS AND PROCEDURES
  
 
23
 
PART II  -
  
OTHER INFORMATION
  
 
23
 
 
  
ITEM 1.
  
LEGAL PROCEEDINGS
  
 
23
 
 
  
ITEM 5.
  
OTHER INFORMATION
  
 
23
 
 
  
ITEM 6.
  
EXHIBITS AND REPORTS ON FORM 8-K
  
 
24
 
SIGNATURES
  
 
  
 
25

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 upon 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: price and product competition; economic and competitive conditions in markets and countries where our customers reside and where our companies and their franchisees operate; airline travel patterns; changes in capital availability or cost; costs and other terms related to the acquisition and disposition of automobiles and conducting business; 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

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 September 30, 2002, and the related consolidated statements of income for the three-month and nine-month periods ended September 30, 2002 and 2001, and the consolidated statements of cash flows for the nine-month periods ended September 30, 2002 and 2001. 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, 2001, 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 8, 2002, except for Note 18, as to which the date is February 26, 2002, we expressed an unqualified opinion on those consolidated financial statements.

 
 

DELOITTE & TOUCHE LLP

Tulsa, Oklahoma
October 23, 2002

 
 
 
 
 
 
 
 
 
 
 
 

3

DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001

(In Thousands, Except Per Share Data)
                                       
          Three Months      Nine Months   
          Ended September 30,     Ended September 30,  
         
   
 
          2002 2001     2002 2001  
         
   
 
             (Unaudited)  
REVENUES:
                                  
 
Vehicle Rentals
   $ 268,019     $ 242,310     $ 703,498     $ 667,154  
 
Vehicle leasing
     52,653       48,495       127,960       129,927  
 
Fees and services
     15,408       16,467       43,892       44,434  
 
Other
     1,588       675       7,543       7,912  
 
  
   
   
   
 
   
Total revenues
     337,668       307,947       882,893       849,427  
 
  
   
   
   
 
COSTS AND EXPENSES:
                                  
 
Direct vehicle and operating
     113,537       110,298       310,234       305,455  
 
Vehicle depreciation and lease charges, net
     119,242       113,532       284,034       285,727  
 
Selling, general and administrative
     43,803       40,994       134,438       130,001  
 
Interest expense, net of interest income
     27,066       26,923       70,344       70,093  
 
Amortization of goodwill
     -       1,544       -       4,633  
 
  
   
   
   
 
   
Total costs and expenses
     303,648       293,291       799,050       795,909  
 
  
   
   
   
 
INCOME BEFORE INCOME TAXES
     34,020       14,656       83,843       53,518  
 
INCOME TAX EXPENSE
     12,813       8,618       32,963       25,854  
 
  
   
   
   
 
NET INCOME
   $ 21,207     $ 6,038     $ 50,880     $ 27,664  
 
  
   
   
   
 
EARNINGS PER SHARE:
                                
 
Basic
   $ 0.87     $ 0.25     $ 2.10     $ 1.15  
 
  
   
   
   
 
 
Diluted
   $ 0.85     $ 0.25     $ 2.05     $ 1.13  
 
  
   
   
   
 

See notes to consolidated financial statements.

 
 
 
 
 
 
 
 
 
 

4

DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2002 AND DECEMBER 31, 2001

(In Thousands, Except Share and Per Share Data)
                           
              September 30,      December 31,   
              2002     2001  
             
   
 
              (Unaudited)        
ASSETS:
                
Cash and cash equivalents
   $ 109,956     $ 37,532  
Restricted cash and investments
     354,988       48,090  
Receivables, net
     206,214       197,224  
Prepaid expenses and other assets
     66,925       64,946  
Revenue-earning vehicles, net
     2,211,624       1,525,553  
Property and equipment, net
     90,910       100,587  
Income taxes receivable
     53,678       8,149  
Software, net
     16,138       16,552  
Goodwill, net
     165,113       165,059  
             
   
 
         
 
   $ 3,275,546     $ 2,163,692  
             
   
 
LIABILITIES AND STOCKHOLDERS' EQUITY
                
 
LIABILITIES:
                
Accounts payable
   $ 39,505     $ 25,741  
Accrued liabilities
     183,488       112,626  
Deferred income tax liability
     131,048       22,132  
Public liability and property damage
     37,689       23,139  
Debt and other obligations
     2,384,934       1,516,733  
             
   
 
       
Total liabilities
       2,776,664       1,700,371  
             
   
 
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
24,492,670 and 24,310,816, respectively
     245       243  
Additional capital
     712,069       708,962  
Accumulated deficit
     (186,738 )     (237,618 )
Accumulated other comprehensive loss
     (26,694 )     (8,266 )
             
   
 
       
Total stockholders’ equity
       498,882       463,321  
 
  
   
 
         
 
   $ 3,275,546     $ 2,163,692  
             
   
 

See notes to consolidated financial statements.

 

5

DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001

(In Thousands)
                           
            Nine Months  
            Ended September 30,  
           
 
            2002   2001  
           
 
 
            (Unaudited)    
                   
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
   $ 50,880     $ 27,664  
Adjustments to reconcile net income to net cash provided
by operating activities:
                
   
Depreciation:
                
     
Vehicle depreciation
   288,437       278,785  
     
Non-vehicle depreciation
   10,843       9,726  
   
Net gains from disposition of revenue-earning vehicles
     (10,386 )     (12,230 )
   
Amortization
     3,305       7,249  
   
Common stock option transactions
     -       30  
   
Net losses from sale of property
     132       -  
   
Provision for losses on receivables
     6,391       19,321  
   
Deferred income taxes
     120,494       15,512  
   
Change in assets and liabilities, net of acquisitions:
                
     
Income taxes payable/receivable
     (45,529 )     3,219  
     
Receivables
     58,263       49,250  
     
Prepaid expenses and other assets
     3,259       (3,883 )
     
Accounts payable and accrued liabilities
     54,481       (32,798 )
     
Public liability and property damage
     14,550       (11,655 )
     
Other
     64       (372 )
 
  
   
 
       
Net cash provided by operating activities
     555,184       349,818  
 
  
   
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Revenue-earning vehicles:
                
 
Purchases
     (2,725,625 )     (2,339,743 )
 
Proceeds from sales
     1,688,062       1,607,339  
Net change in restricted cash and investments
     (306,898 )     (156,398 )
Property, equipment and software:
                
 
Purchases
     (4,235 )     (26,368 )
 
Proceeds from sales
     35       483  
Acquisition of businesses, net of cash acquired
     (38 )     (2,153 )
 
  
   
 
       
Net cash used in investing activities
   $ (1,348,699 )   $ (916,840 )
 
  
   
 

(Continued)

 
 
 
 

6

DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001

(In Thousands)
                           
            Nine Months
            Ended September 30,
           
            2002   2001
           
 
            (Unaudited)  
                   
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt and other obligations:
                
 
Proceeds
   $ 5,668,265     $ 6,737,900  
 
Payments
     (4,800,162 )     (6,151,166 )
Issuance of common shares
     3,109       1,771  
Purchase of common stock for treasury
     -       (3,615 )
Financing issue costs
     (5,273 )     (5,107 )
 
  
   
 
       
Net cash provided by financing activities
     865,939       579,783  
 
  
   
 
CHANGE IN CASH AND CASH EQUIVALENTS
     72,424       12,761  
 
CASH AND CASH EQUIVALENTS:
Beginning of period
     37,532       38,493  
 
  
   
 
End of period
   $   109,956     $   51,254  
 
  
   
 
SUPPLEMENTAL DISCLOSURES OF NONCASH ACTIVITIES:
 
Direct financing and sales-type receivables
   $   73,618     $   39,528  
 
  
   
 
 
Deferred income on sales-type lease receivables
   $ 177     $ 224  
 
  
   
 
 
Acquisition of franchises
   $ -     $ 422  
 
  
   
 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 
Cash paid for (refund of) income taxes to (from) taxing authorities
   $ (42,343 )   $ 6,686  
 
  
   
 

See notes to consolidated financial statements.

 
 
 
 
 
 
 
 
 
 
 

7

DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2002 and 2001

(Unaudited)

1.        BASIS OF PRESENTATION

  The accompanying consolidated financial statements include the accounts of Dollar Thrifty Automotive Group, Inc. ("DTG") and its subsidiaries. DTG's significant wholly owned subsidiaries include Dollar Rent A Car Systems, Inc. ("Dollar") and Thrifty, Inc. Thrifty, Inc. is the parent company to Thrifty Car Sales, Inc. and Thrifty Rent-A-Car System, Inc. which is the parent company to Thrifty Canada Ltd. ("TCL") (individually and collectively referred to as "Thrifty"). The term the "Company" is used to refer to DTG and subsidiaries, individually or collectively, as the context may require.

  The accounting policies set forth in Note 2 to the consolidated financial statements contained in the Form 10-K filed with the Securities Exchange Commission on March 20, 2002 have been followed in preparing the accompanying consolidated financial statements.

  The consolidated financial statements and notes thereto for the 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.

  Certain reclassifications have been made in the three-month and nine-month periods ended September 30, 2001 consolidated financial statements to conform to the classifications used in the three-month and nine-month periods ended September 30, 2002 financial statements.

2.        VEHICLE DEPRECIATION AND LEASE CHARGES, NET

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

                                         
          Three Months       Nine Months  
          Ended September 30,       Ended September 30,  
         
     
 
          2002 2001       2002 2001  
         
     
 
   
Depreciation of revenue-earning vehicles, net
   $ 116,715     $ 108,853       $ 278,051     $ 266,555  
   
Rents paid for vehicles leased
     2,527     &n