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Dollar Thrifty Automotive Group Inc. Reports Operating Results (10-K)
Posted by: gurufocus (IP Logged)
Date: February 28, 2012 05:19PM

Dollar Thrifty Automotive Group Inc. (DTG) filed Annual Report for the period ended 2011-12-31. Dollar Thrifty has a market cap of $2.21 billion; its shares were traded at around $76.17 with a P/E ratio of 14.9 and P/S ratio of 1.4. Dollar Thrifty had an annual average earning growth of 1.5% over the past 10 years.



Highlight of Business Operations:

Franchising United States and Canada Both Dollar and Thrifty sell U.S. franchises on an exclusive basis for specific geographic areas, generally outside the top 75 U.S. airport markets. Most franchisees are located at or near airports that generate a lower volume of vehicle rentals than the airports served by company-owned stores. In Canada, Dollar and Thrifty sell franchises in markets generally outside the top eight airport markets. The typical length of a franchise is ten years with a renewal option for five years if certain conditions are met. The franchisee may terminate the franchise for convenience upon 120 days written notice and Dollar and Thrifty may terminate upon breach of the agreement or for cause as defined in the agreement. - 10 - Dollar and Thrifty offer franchisees the opportunity to dual franchise in smaller U.S. and Canadian markets. Under a dual franchise, one franchisee can operate both the Dollar and the Thrifty brand, thus allowing them to generate more business in their market while leveraging fixed costs. Dollar and Thrifty license to franchisees the use of their respective brand service marks in the vehicle rental and leasing and parking businesses. Franchisees of Dollar and Thrifty pay an initial franchise fee generally based on the population, number of airline passengers, total airport vehicle rental revenues and the level of any other vehicle rental activity in the franchised territory, as well as other factors. Dollar and Thrifty offer their respective franchisees a wide range of products and services which may not be easily or cost effectively available from other sources. System Fees in the U.S. Dollar - In addition to an initial franchise fee, each Dollar U.S. franchisee is generally required to pay a system fee equal to 8% of rental revenue at airport locations and 6% at suburban operations. Thrifty - In addition to the initial franchise fee, each Thrifty U.S. franchisee pays a fee generally ranging from 6% to 8% of rental revenue. System Fees in Canada All Dollar and Thrifty Canadian franchisees, whether operating a single-brand or co-brand location, pay a monthly fee generally equal to 8% of rental revenue. Franchisee Services and Products Dollar and Thrifty provide their U.S. and Canadian franchisees a wide range of products and services, including reservations, marketing programs and assistance, branded supplies, image and standards, rental rate management analysis and customer satisfaction programs. Additionally, Dollar and Thrifty offer their respective franchisees centralized corporate account and tour billing and travel agent commission payments.

DTG Operations primarily purchases Non-Program Vehicles, for which it bears the full risk and potential benefits of changes in residual values because the vehicles are not covered by a manufacturer s Residual Value Program. Non-Program Vehicles typically have lower acquisition costs and lower depreciation rates than comparable Program Vehicles, and also allow the Company to reduce its risk related to the creditworthiness of the vehicle manufacturers. The manufacturer does not set any terms or conditions on the resale of Non-Program Vehicles other than requiring minimum holding periods. At December 31, 2011, approximately 96% of all vehicles operated by DTG Operations were Non-Program Vehicles. In 2011, 2010 and 2009, the Company recorded gains on sales of Non-Program Vehicles of $46.9 million, $63.1 million and $35.1 million, respectively. These gains represented an average gain per Non-Program Vehicle sold of $1,190, $1,105 and $700 in 2011, 2010 and 2009, respectively.

Vehicle-related expenses increased $27.3 million, which included an increase in gasoline expense of $12.6 million and an increase in toll and ticket expense of $4.4 million. Increased sales of pre-paid fuel and toll road products are a focus for the Company, and the majority of the increase in these expenses is recovered through customer revenue related to these products. Additionally, the Company experienced a $7.5 million increase in vehicle maintenance expense due to the increase in the rental fleet size and the number of higher mileage vehicles in the fleet compared to 2010, a $1.4 million increase in shuttling expense and a $0.7 million increase in general excise and surcharge taxes. All other vehicle-related expenses increased $0.7 million.

Vehicle rental revenue remained basically flat with a 0.9% increase in revenue per day, offset by a 0.9% decrease in rental days. On a same store basis, vehicle rental revenue was up 1.6% in 2010 compared to 2009, due to company-owned store closures in 2009. Other revenue decreased $9.1 million. This decrease was primarily due to a $9.5 million decline in leasing revenue, primarily due to the termination of a substantial portion of the licensee vehicle leasing program during 2009 and a $1.8 million decrease in the market value of investments in the Company s deferred compensation and retirement plans, partially offset by an increase of $1.8 million in fees and services revenue derived from franchisees. The revenue relating to the deferred compensation and retirement plans is attributable to the mark-to-market valuation of the corresponding investments and is offset in selling, general and administrative expenses and, therefore, has no impact on net income. Expenses

Vehicle rental revenue remained basically flat with a 0.9% increase in revenue per day, offset by a 0.9% decrease in rental days. On a same store basis, vehicle rental revenue was up 1.6% in 2010 compared to 2009, due to company-owned store closures in 2009. Other revenue decreased $9.1 million. This decrease was primarily due to a $9.5 million decline in leasing revenue, primarily due to the termination of a substantial portion of the licensee vehicle leasing program during 2009 and a $1.8 million decrease in the market value of investments in the Company s deferred compensation and retirement plans, partially offset by an increase of $1.8 million in fees and services revenue derived from franchisees. The revenue relating to the deferred compensation and retirement plans is attributable to the mark-to-market valuation of the corresponding investments and is offset in selling, general and administrative expenses and, therefore, has no impact on net income.

Read the The complete Report



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