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, 2004
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.
| 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)
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 o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act): Yes x No o
The number of shares outstanding of the registrant’s Common Stock as of October 29, 2004 was 25,021,207.
Page
PART I - FINANCIAL INFORMATION
| ITEM | 1. FINANCIAL STATEMENTS | 3 |
| ITEM | 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF |
| FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 17 |
| ITEM | 3. QUANTITATIVE AND QUALITATIVE |
| DISCLOSURES ABOUT MARKET RISK | 26 |
| ITEM | 4. CONTROLS AND PROCEDURES | 26 |
PART II - OTHER INFORMATION
| ITEM | 1. LEGAL PROCEEDINGS | 27 |
| ITEM | 2. UNREGISTERED SALES OF EQUITY SECURITIES |
| AND USE OF PROCEEDS | 28 |
| ITEM | 5. OTHER INFORMATION | 28 |
| ITEM | 6. EXHIBITS | 28 |
| SIGNATURES | 29 |
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 the companies’ customers reside and where the companies and their franchisees operate; natural hazards or catastrophes; incidents of terrorism; airline travel patterns; changes in capital availability or cost; costs and other terms related to the acquisition and disposition of automobiles; systems or communications failures; costs of conducting business and changes in structure or operations; and certain regulatory and environmental matters and litigation risks. Should one or more of these risks or uncertainties, among others, materialize, actual results could vary 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
| ITEM 1. | FINANCIAL STATEMENTS |
To the Board of Directors and
Stockholders of
Dollar Thrifty Automotive Group, Inc.:
We have reviewed the accompanying condensed consolidated balance sheet of Dollar Thrifty Automotive Group, Inc. and subsidiaries (the “Company”) as of September 30, 2004, and the related condensed consolidated statements of income for the three-month and nine-month periods ended September 30, 2004 and 2003, and cash flows for the nine-month periods ended September 30, 2004 and 2003. These interim financial statements are the responsibility of the Company’s management.
We conducted our reviews in accordance with standards of the Public Company Accounting Oversight Board (United States). 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 standards of the Public Company Accounting Oversight Board (United States), 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 reviews, we are not aware of any material modifications that should be made to such condensed consolidated interim 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 standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Dollar Thrifty Automotive Group, Inc. and subsidiaries as of December 31, 2003, 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 March 12, 2004, we expressed an unqualified opinion on those consolidated financial statements.
/s/ DELOITTE & TOUCHE LLP
Tulsa, Oklahoma
November 4,
2004
3
| Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Unaudited) | ||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||
| REVENUES: Vehicle rentals |
$ | 377,989 | $ | 308,691 | $ | 960,374 | $ | 750,762 | ||||||
| Vehicle leasing | 24,688 | 41,863 | 63,165 | 120,531 | ||||||||||
| Fees and services | 16,384 | 15,372 | 43,467 | 43,235 | ||||||||||
| Other | 2,085 | 4,525 | 7,788 | 10,505 | ||||||||||
| Total revenues | 421,146 | 370,451 | 1,074,794 | 925,033 | ||||||||||
| COSTS AND EXPENSES: Direct vehicle and operating |
205,832 | 148,129 | 542,480 | 368,152 | ||||||||||
| Vehicle depreciation and lease charges, net | 88,033 | 110,790 | 222,017 | 299,891 | ||||||||||
| Selling, general and administrative | 60,487 | 51,694 | 164,287 | 141,490 | ||||||||||
| Interest expense, net of interest income | 26,280 | 24,765 | 68,527 | 66,542 | ||||||||||
| Total costs and expenses | 380,632 | 335,378 | 997,311 | 876,075 | ||||||||||
| INCOME BEFORE INCOME TAXES | 40,514 | 35,073 | 77,483 | 48,958 | ||||||||||
| INCOME TAX EXPENSE | 15,480 | 13,709 | 31,784 | 20,671 | ||||||||||
| INCOME BEFORE CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE |
25,034 | 21,364 | 45,699 | 28,287 | ||||||||||
| CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE |
- | - | 3,730 | - | ||||||||||
| NET INCOME | $ | 25,034 | $ | 21,364 | $ | 49,429 | $ | 28,287 | ||||||
| BASIC EARNINGS PER SHARE: Income before cumulative effect of a change in accounting principle |
$ | 1.00 | $ | 0.87 | $ | 1.83 | $ | 1.16 | ||||||
| Cumulative effect of a change in accounting principle | - | - | 0.15 | - | ||||||||||
| Net income | $ | 1.00 | $ | 0.87 | $ | 1.98 | $ | 1.16 | ||||||
| DILUTED EARNINGS PER SHARE: Income before cumulative effect of a change in accounting principle |
$ | 0.96 | $ | 0.84 | $ | 1.74 | $ | 1.12 | ||||||
| Cumulative effect of a change in accounting principle | - | - | 0.14 | - | ||||||||||
| Net income | $ | 0.96 | $ | 0.84 | $ | 1.88 | $ | 1.12 | ||||||
See notes to condensed consolidated financial statements.
4
| September 30, 2004 |
December 31, 2003 |
|||||||
|---|---|---|---|---|---|---|---|---|
| (Unaudited) | ||||||||
| ASSETS: | ||||||||
| Cash and cash equivalents | $ | 199,371 | $ | 192,006 | ||||
| Restricted cash and investments | 283,743 | 536,547 | ||||||
| Receivables, net | 186,552 | 163,465 | ||||||
| Prepaid expenses and other assets | 86,688 | 67,375 | ||||||
| Revenue-earning vehicles, net | 2,620,933 | 2,136,719 | ||||||
| Property and equipment, net | 96,302 | 97,939 | ||||||
| Software and other intangible assets, net | 19,226 | 14,587 | ||||||
| Goodwill | 251,899 | 203,861 | ||||||
| $ | 3,744,714 | $ | 3,412,499 | |||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| LIABILITIES: | ||||||||
| Accounts payable | $ | 48,861 | $ | 48,515 | ||||
| Accrued liabilities | 174,235 | 171,148 | ||||||
| Deferred income tax liability | 194,658 | 160,923 | ||||||
| Public liability and property damage | 79,253 | 56,294 | ||||||
| Vehicle debt and obligations | 2,656,334 | 2,442,162 | ||||||
| Total liabilities | 3,153,341 | 2,879,042 | ||||||
| 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; | ||||||||
| 25,718,507 and 25,196,941 issued, respectively, and | ||||||||
| 25,021,207 and 24,960,941 outstanding, respectively | 257 | 252 | ||||||
| Additional capital | 741,859 | 729,306 | ||||||
| Accumulated deficit | (121,518 | ) | (170,947 | ) | ||||
| Accumulated other comprehensive loss | (11,694 | ) | (19,345 | ) | ||||
| Treasury stock, at cost (697,300 | ||||||||
| and 236,000 shares, respectively) | (17,531 | ) | (5,809 | ) | ||||
| Total stockholders' equity | 591,373 | 533,457 | ||||||
| $ | 3,744,714 | $ | 3,412,499 | |||||
See notes to condensed consolidated financial statements.
5
| Nine Months Ended September 30, |
||||||||
|---|---|---|---|---|---|---|---|---|
| (Unaudited) | ||||||||
| 2004 |
2003 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income | $ | 49,429 | $ | 28,287 | ||||
| Adjustments to reconcile net income to | ||||||||
| net cash provided by operating activities: | ||||||||
| Depreciation: | ||||||||
| Vehicle depreciation | 226,639 | 292,267 | ||||||
| Non-vehicle depreciation | 13,158 | 11,231 | ||||||
| Net (gains)/losses from disposition of revenue- | ||||||||
| earning vehicles | (17,787 | ) | 2,693 | |||||
| Amortization | 4,111 | 3,994 | ||||||
| Performance share incentive plan | 4,068 | 2,413 | ||||||
| Net losses from sale of property and equipment | 237 | 91 | ||||||
| Provision for losses on receivables | 1,848 | 4,677 | ||||||
| Deferred income taxes | 29,427 | 20,462 | ||||||
| Change in assets and liabilities, net of acquisitions: | ||||||||
| Income taxes receivable | - | 22,048 | ||||||
| Receivables | (11,605 | ) | 95,829 | |||||
| Prepaid expenses and other assets | (8,626 | ) | (7,716 | ) | ||||
| Accounts payable and accrued liabilities | 12,969 | 1,197 | ||||||
| Public liability and property damage | 22,959 | 13,647 | ||||||
| Other | 683 | 836 | ||||||
| Net cash provided by operating activities | 327,510 | 491,956 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Revenue-earning vehicles: | ||||||||
| Purchases | (2,815,495 | ) | (2,758,849 | ) | ||||
| Proceeds from sales | 2,116,503 | 2,055,546 | ||||||
| Net change in restricted cash and investments | 252,804 | (75,765 | ) | |||||
| Property, equipment and software: | ||||||||
| Purchases | (18,202 | ) | (12,694 | ) | ||||
| Proceeds from sales | 34 | 34 | ||||||
| Acquisition of businesses, net of cash acquired | (50,240 | ) | (29,553 | ) | ||||
| Net cash used in investing activities | (514,596 | ) | (821,281 | ) | ||||
(Continued)
6
| Nine Months Ended September 30, |
||||||||
|---|---|---|---|---|---|---|---|---|
| (Unaudited) | ||||||||
| 2004 |
2003 |
|||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Vehicle debt and obligations: | ||||||||
| Proceeds | 4,143,320 | 4,075,539 | ||||||
| Payments | (3,936,365 | ) | (3,743,248 | ) | ||||
| Issuance of common shares | 8,490 | 2,395 | ||||||
| Purchase of common stock for the treasury | (11,722 | ) | (1,943 | ) | ||||
| Financing issue costs | (9,272 | ) | (5,102 | ) | ||||
| Net cash provided by financing activities | 194,451 | 327,641 | ||||||
| CHANGE IN CASH AND CASH EQUIVALENTS | 7,365 | (1,684 | ) | |||||
| CASH AND CASH EQUIVALENTS: | ||||||||
| Beginning of period | 192,006 | 143,485 | ||||||
| End of period | $ | 199,371 | $ | 141,801 | ||||
| SUPPLEMENTAL DISCLOSURES OF NONCASH ACTIVITIES: | ||||||||
| Receivables from capital lease of vehicles to franchisees | $ | 13,317 | $ | 38,884 | ||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ||||||||
| Cash paid for: | ||||||||
| Income taxes to taxing authorities | $ | 2,357 | $ | (22,233 | ) | |||
| Interest | $ | 68,715 | $ | 65,816 | ||||
See notes to condensed consolidated financial statements.
7
| 1. | BASIS OF PRESENTATION |
| The accompanying condensed consolidated financial statements include the accounts of Dollar Thrifty Automotive Group, Inc. (“DTG”) and its subsidiaries. DTG’s significant wholly owned subsidiaries include DTG Operations, Inc., Thrifty, Inc., Dollar Rent A Car, Inc., Rental Car Finance Corp. (“RCFC”) and Dollar Thrifty Funding Corp. Thrifty, Inc. is the parent company to Thrifty Rent-A-Car System, Inc., which is the parent company to Dollar Thrifty Automotive Group Canada Inc. (“DTG Canada”). Beginning March 31, 2004, Thrifty Rent-A-Car System, Inc. National Advertising Committee (“Thrifty National Ad”) was consolidated in the financial statements of DTG under the provisions of FASB Interpretation No. 46, “Consolidation of Variable Interest Entities,” as amended in December 2003 (“FIN 46(R)”), an interpretation of Accounting Research Bulletin No. 51 (Note 14). The term the “Company” is used to refer to DTG and subsidiaries, individually or collectively, as the context may require. |