Dollar Thrifty Automotive Group Delivers Record First Quarter Revenue
Net income jumps on 19 percent revenue gain
Chief Financial Officer
Tulsa, Oklahoma, April 29, 2004: Dollar Thrifty Automotive Group, Inc. (NYSE: DTG) reported results for the first quarter ended March 31, 2004. Total revenue for the quarter was a record $298.7 million, up 19.3 percent from the prior year’s first quarter. Net income for the quarter was $6.5 million, or $.25 per diluted share, including $.14 per share favorable cumulative effect of a change in accounting principle to adopt FASB Interpretation No. 46(R), “Consolidation of Variable Interest Entities” (“FIN 46(R)”). The Company also continued to be impacted during the first quarter from the implementation of Emerging Issues Task Force No. 02-16 “Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor” (“EITF 02-16”). First quarter earnings were lower by approximately $2.7 million or $.10 per diluted share to reflect the remaining non-cash transition impact of implementing this new accounting method. For the 2003 first quarter, net income was $0.6 million or $.02 per diluted share.
The strong first quarter revenue growth was driven by a 33.8 percent increase in vehicle rental revenue resulting from substantial volume increases. Total rental days increased by 37.0 percent with same store rental days up 15.7 percent while franchise acquisitions and greenfield stores contributed another 21.3 percent to rental day growth. Vehicle leasing revenue declined from last year’s first quarter primarily due to a shift of vehicles from franchise to corporate operations resulting from franchise acquisitions and to lower lease rates.
The Company continues to execute its growth strategy of acquiring both Dollar and Thrifty franchises in key U.S. and Canadian markets. During the first quarter, the Company acquired the Thrifty franchise operations in Aspen, Colorado, Greensboro and Raleigh-Durham, North Carolina, and completed the acquisition of the Dollar franchise operations in Aspen and Vancouver, Canada. In addition, the Company completed the acquisition of the Thrifty franchise in Ft. Myers, Florida, on April 1 and announced the pending acquisition of the Thrifty franchises in Orlando and Tampa, Florida, with an effective date of May 1. These acquisitions will add approximately 7,000 vehicles on an annualized basis to the Company’s rental fleet.
“Our impressive first quarter results were driven by strong transaction growth, improved efficiency and favorable vehicle cost trends,” Gary Paxton, President and Chief Executive Officer, said. “We made tremendous progress on our franchise acquisition initiative, achieved excellent same store growth and operated the vehicle fleet at a record first quarter utilization rate of 86.6 percent. While revenue per day was down slightly on a year over year basis, we are pleased with the growing consumer demand for our two brands and the efficiencies of our consolidated operating model. We will continue to build on this momentum and focus on providing our customers with an exceptional car rental value every time.”
During the first quarter, DTG purchased 147,100 shares under its two-year $30 million share repurchase program. Since announcing the program in July, DTG has repurchased 383,100 shares at a total cost of approximately $9.6 million.
Adoption of New Accounting Principle (FIN 46(R))
The Company adopted FIN 46(R) as of March 31, 2004, as required, to consolidate the results of Thrifty’s National Advertising Fund (“TNAF”). The Company has determined that TNAF is a variable interest entity for which the Company is the primary beneficiary, and must be consolidated with the Company’s results under this new accounting principle. The cumulative effect of this accounting change increased net income by $3.7 million, or $.14 per diluted share.
Adoption of New Accounting Method (EITF 02-16)
As discussed previously, during the fourth quarter of 2003 the Company commenced implementation of EITF 02-16 for accounting for purchase and promotion payments received from its primary vehicle supplier. The application of this new accounting method resulted in a $.10 per diluted share reduction in first quarter results. There will be no additional transitional impact of adopting EITF 02-16, however there will be some quarterly seasonal impact under this new accounting method.
The Company expects continued growth in travel in 2004 as the economy improves. “We are seeing excellent transaction growth demonstrating the strength of our two value brands,” Paxton said. “We will continue to pursue our franchise acquisition strategy and strive for increased operating efficiencies resulting from our consolidated operating model and organizational structure. These savings are allowing us to invest in improved IT systems, marketing initiatives and infrastructure to facilitate additional growth.” The Company is raising its estimate for 2004 earnings per share to a range of $1.75 to $2.00 based on higher same store growth, acquisitions announced in 2004 and favorable cost trends. Previous guidance was to earn in a range of $1.60 to $1.90 per share. The Company’s earnings guidance excludes the cumulative effect of a change in accounting principle. The new earnings guidance is based on achieving 8 percent to 10 percent growth in same store rental days as compared to 2003 and for revenue per day to be about the same as last year.