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Dollar Thrifty Automotive Group Inc. Reports Operating Results (10-Q)

October 26, 2009 | About:
10qk

10qk

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Dollar Thrifty Automotive Group Inc. (DTG) filed Quarterly Report for the period ended 2009-09-30.

Dollar Thrifty Automotive Group Inc. operates two vehicle rental companies Dollar and Thrifty which maintain separate daily vehicle rental businesses. They also license independent franchisees to rent vehicles under their brands. The Group offers value-priced rental vehicles under the Dollar and Thrifty brands. The Group's brands appeal to leisure customers including tourists and to small businesses and independent business travelers. Dollar Thrifty Automotive Group Inc. has a market cap of $539.34 million; its shares were traded at around $24.81 with and P/S ratio of 0.32. Dollar Thrifty Automotive Group Inc. had an annual average earning growth of 2% over the past 10 years. GuruFocus rated Dollar Thrifty Automotive Group Inc. the business predictability rank of 2-star.

Highlight of Business Operations:

During the third quarter of 2009, the Company’s revenues declined primarily due to a 21.3% reduction in the number of rental days, of which approximately 4.0% resulted from corporate store closures, and the remainder resulted from lower demand levels and reduction in fleet capacity. The Company matched fleet capacity with the decline in rental demand, resulting in a reduction of the average fleet by approximately 20%. Transaction declines were partially offset by an 11.5% increase in average revenue per day. The Company’s vehicle depreciation and lease charges were impacted favorably as a result of lower fleet levels, in addition to a reduction in the depreciation rate per vehicle due to improved residual values, mix optimization and improved remarketing efforts. Direct vehicle and operating expenses declined for the quarter as a result of lower transaction levels and continued focus on cost reduction efforts. There was an increase in fair value of derivatives during the third quarter of 2009 compared to a decrease during the third quarter of 2008. These items contributed to income before income taxes of $48.4 million for the third quarter of 2009, compared to income before income taxes of $30.7 million in the third quarter of 2008.

Other revenue decreased $3.3 million due to a $3.0 million decrease in leasing revenue, primarily due to elimination of the franchisee leasing program, and a $1.6 million decrease in fees and services revenue from franchisees, partially offset by an increase of $2.3 million in the market value of investments in the Company’s deferred compensation and retirement plans. 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.

During the nine months ended September 30, 2009, the Company’s revenues declined primarily due to an 18.3% reduction in the number of rental days of which approximately 4.0% resulted from corporate store closures and the remainder resulted from lower demand levels and reduction in fleet capacity. The Company matched fleet capacity with the decline in rental demand, resulting in a reduction of the average fleet by approximately 16%. Transaction declines were partially offset by a 9.4% increase in average revenue per day. The Company’s vehicle depreciation and lease charges were impacted favorably as a result of lower fleet levels. Direct vehicle and operating expenses declined for the nine months ended September 30, 2009 as a result of lower transaction levels and continued focus on cost reduction efforts. The Company experienced an increase in the fair value of derivatives during the nine months ended September 30, 2009 compared to a decrease in the nine months ended September 30, 2008. The Company had goodwill and long-lived asset impairment expense of $350.1 million during the nine months ended September 30, 2008, due to non-cash charges relating to goodwill impairment of $281.1 million and reacquired franchise rights impairment of $69.0 million. These items contributed to income before income taxes of $57.6 million for the nine months ended September 30, 2009, compared to a loss before income taxes of $347.9 million for the nine months ended September 30, 2008.

Other revenue decreased $5.8 million due to a decrease of $6.7 million in leasing revenue, primarily due to elimination of the franchise leasing program, a $3.9 million decrease in fees and services revenue and a $1.1 million decrease in parking income, partially offset by a $6.9 million increase in the market value of investments in the Company’s deferred compensation and retirement plans. 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.

Net vehicle depreciation and lease charges for the nine months ended September 30, 2009 decreased $61.5 million, primarily due to a 16.3% decrease in depreciable vehicles, partially offset by a 1.4% increase in the average depreciation rate. The decrease in depreciable vehicles results from efforts to match the fleet with current demand levels. The increase in the depreciation rate reflects the one-time $12.9 million settlement of certain manufacturer incentives that lowered per vehicle depreciation expense in 2008 and did not recur in 2009. As a percent of revenue, net vehicle depreciation and lease charges were 28.7% for the nine months ended September 30, 2009, compared to 30.3% for the nine months ended September 30, 2008.

A non-cash goodwill and long-lived asset impairment charge of $350.1 million ($265.2 million after-tax) was recorded in the first quarter of 2008 resulting from a continuing decline in the Company’s stock price which led to a re-evaluation of goodwill and other intangible assets for impairment.

Read the The complete Report

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10qk
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