TULSA, Okla. — Dollar Thrifty Automotive Group, Inc. (NYSE: DTG) today reported results for the third quarter ended September 30, 2011. Net income for the 2011 third quarter was $66.6 million, or $2.13 per diluted share, compared to net income of $49.2 million, or $1.62 per diluted share, for the third quarter of 2010. Net income for the third quarter of 2011 included a charge of $0.01 per diluted share related to a decrease in fair value of derivatives, compared to income of $0.13 per diluted share for the third quarter of 2010 related to an increase in fair value of derivatives.
Non-GAAP net income for the 2011 third quarter was $66.9 million, or $2.14 per diluted share, compared to non-GAAP net income of $45.8 million, or $1.51 per diluted share, for the 2010 third quarter. Non-GAAP net income excludes the (increase) decrease in fair value of derivatives and the non-cash charges related to the impairment of long-lived assets, net of related tax impact.
The Company reported Corporate Adjusted EBITDA for the third quarter of 2011 of $117.6 million, compared to $81.8 million in the third quarter of 2010.
The Company noted that its GAAP and non-GAAP earnings as well as its Corporate Adjusted EBITDA for the third quarter of 2010 were negatively impacted by $11.9 million of merger-related expenses, while the third quarter of 2011 was not impacted by such expenses.
“We are pleased that the Company is reporting the highest quarterly profit in its history. We remain keenly focused on profitable revenue growth, productivity initiatives, cost control and disciplined fleet management,” said Scott L. Thompson, President and Chief Executive Officer.
For the quarter ended September 30, 2011, the Company’s total revenue was $451.7 million, as compared to $443.5 million for the comparable 2010 period. Vehicle rental revenue for the quarter was up 2.4 percent, driven by a 4.1 percent increase in rental days, partially offset by a 1.7 percent decrease in revenue per day. The average fleet for the quarter was up 4.3 percent compared to the prior year period. Vehicle utilization in the third quarter of 2011 was 83.9 percent, compared to 84.0 percent in the third quarter of 2010.
Fleet cost per vehicle was $186 per month in the third quarter of 2011, compared to $262 per month in the third quarter of 2010. The Company’s base depreciation rate continued to benefit from the overall strength of the used vehicle market and the resulting favorable impact on residual values. The Company noted that gains on sales of risk vehicles, a component of vehicle depreciation, totaled $17.4 million in the third quarter of 2011, up from $10.0 million in the third quarter of 2010. The average gain per vehicle sold during the third quarter of 2011 was $1,125 per unit, compared to $632 per unit in the third quarter of 2010.
Direct vehicle and operating expenses and selling, general and administrative expenses (operating expenses) totaled $262.4 million in the third quarter of 2011, compared to $263.6 million in the third quarter of 2010. The decrease in operating expenses primarily resulted from a reduction in merger-related expenses of $11.9 million, partially offset by an increase in direct costs attributable to the overall increase in fleet size and increased ancillary revenues. Excluding merger-related expenses, operating expenses totaled 58.1 percent of revenues for the third quarter of 2011, compared to 56.7 percent of revenues for the third quarter of 2010. The Company noted that although the operating expense percentage increased, the increase was attributable to direct costs associated with increased sales penetration of certain ancillary products, such as pre-paid fuel and toll road products. The Company noted that the increased expense associated with incremental ancillary sales was more than fully recovered through rental revenues.
“We are pleased with the rental day growth achieved this quarter and the strength of our forward bookings. Although the pricing environment was a headwind this quarter, we continue to benefit from a favorable used vehicle market and our efficient, low-cost operating structure,” said Thompson.
Nine-Month Results
For the nine months ended September 30, 2011, net income was $125.6 million, or $4.03 per diluted share, compared to net income of $118.7 million, or $3.93 per diluted share for the comparable period in 2010. Net income for the nine months ended September 30, 2011 included income of $0.06 per diluted share, compared to income of $0.41 per diluted share for the nine months ended September 30, 2010 related to increases in fair value of derivatives.
Non-GAAP net income for the nine months ended September 30, 2011 was $123.7 million, or $3.96 per diluted share, compared to non-GAAP net income of $106.8 million, or $3.53 per diluted share, for the same period in 2010. Non-GAAP net income excludes the (increase) decrease in fair value of derivatives and the non-cash charges related to the impairment of long-lived assets, net of related tax impact. The Company noted that both its GAAP and non-GAAP earnings for the nine months ended September 30, 2011 and 2010 were negatively impacted by merger-related expenses of $4.6 million and $20.5 million, respectively. Additionally, the Company noted that gains on risk vehicle sales totaled $43.1 million for the nine months ended September 30, 2011, down from $63.2 million for the nine months ended September 30, 2010 primarily due to approximately 18,500 fewer vehicles sold in 2011 compared to 2010.
The Company reported Corporate Adjusted EBITDA for the nine months ended September 30, 2011 of $235.1 million, compared to $205.5 million for the nine months ended September 30, 2010. Corporate Adjusted EBITDA for the nine months ended September 30, 2011 and 2010 was negatively impacted by merger-related expenses of $4.6 million and $20.5 million, respectively.
Liquidity and Capital Resources
As of September 30, 2011, the Company had $499 million in cash and cash equivalents, and an additional $201 million in restricted cash and investments primarily available for the purchase of vehicles and/or repayment of vehicle financing obligations.
During the second quarter of 2011, the Company fully repaid and terminated its Canadian fleet financing facility. Additionally, during the third quarter, the Company repaid all of its outstanding corporate debt totaling $143 million. These actions are expected to reduce the Company’s interest expense by approximately $9 million annually.
As previously announced, the Company has completed three fleet financing facilities since July of this year, including the issuance of $500 million of Series 2011-1 medium-term notes, the renewal of its Series 2010-3 variable funding notes in an aggregate principal amount of $600 million, and the issuance of $400 million of Series 2011-2 medium-term notes. The Company noted that it has now effectively pre-funded all of its upcoming debt maturities for 2012, and has significantly extended its fleet financing maturity profile into 2013 and beyond. The cost of funds on the new series of notes is lower than the majority of the Company’s fleet financing sources that the new notes will replace, which will be favorable for future years’ interest expense. Additionally, the advance rates on the notes increased to 69 percent, compared to 65 percent on the Company’s variable funding notes issued in 2010, thereby lowering the overall amount of collateral enhancement required to be provided by the Company.
As of September 30, 2011, the Company’s tangible net worth was $647 million and the Company had no corporate debt.
Share Repurchase Program Initiated
As previously announced, the Company’s Board of Directors has authorized the repurchase of up to $400 million of DTG stock. The Company noted that it will execute a Forward Stock Repurchase Agreement for $100 million worth of stock over a three-month period, commencing on or around November 7, 2011. The timing and amount of future share repurchases will be based on market conditions and other factors, although as previously announced, the Company currently expects to repurchase up to $100 million of stock per quarter over the next four quarters. The Company may also repurchase shares through accelerated stock buyback programs, in privately negotiated transactions, pursuant to derivative instruments or other types of transactions and arrangements. The share repurchase program may be increased, suspended or discontinued at any time.
2011 Outlook – Fourth Quarter Update
The Company noted it expected 1 to 2 percent rental revenue growth in the fourth quarter with growth in days offsetting a slight decline in revenue per day. The Company further noted that its fleet cost outlook for the full year of 2011 of $215 – $225 per vehicle per month remains unchanged.
Based on the factors outlined above, the Company is currently targeting Corporate Adjusted EBITDA for the full year of 2011 to be within a range of $270 million to $290 million. This estimate excludes the impact of merger-related expenses incurred to date and that may be incurred during the remainder of 2011.
About Dollar Thrifty Automotive Group, Inc.
Through its Dollar Rent A Car and Thrifty Car Rental brands, the Company has been serving value-conscious leisure and business travelers since 1950. The Company maintains a strong presence in domestic leisure travel in virtually all of the top U.S. and Canadian airport markets, and also derives a significant portion of its revenue from international travelers to the U.S. under contracts with various international tour operators. Dollar and Thrifty have approximately 300 corporate locations in the United States and Canada, with approximately 5,900 employees located mainly in North America. In addition to its corporate operations, the Company maintains global service capabilities through an expansive franchise network of approximately 1,275 franchises in 82 countries. For additional information, visit www.dtag.com or the brand sites at www.dollar.com and www.thrifty.com.
