Dollar Thrifty Reports Strong Second Quarter, Seeks to Quell Merger Talk
By James Shillinglaw
August 01, 2012 12:10 PM
Dollar Thrifty Automotive Group, Inc. (DTAG), a day after Hertz, a former bidder for DTAG, reported strong second quarter results, said its own income for the second quarter was $49.4 million compared to net income of $42.5 million in the same quarter last year. DTAG also reported corporate adjusted EBITDA for the second quarter was $88.3 million, up from $81.2 million in the second quarter of 2011.
"We are pleased to report record second quarter results, particularly in light of the disappointing current economic environment,” said Scott Thompson, chairman, president and CEO of DTAG. “Rental day growth, improved vehicle utilization, a strong used vehicle market and continued focus on cost control all contributed to the year-over-year improvement and mitigated the softness in pricing.”
In its earnings release, DTAG also noted that neither Hertz nor any other company has put forward an offer during 2012 to purchase the company, despite persistent press reports about commitments Hertz has made to the Federal Trade Commission (FTC) to divest of certain Dollar Thrifty assets if such a transaction were to occur. DTAG noted that those reports have created uncertainty for its employees and business partners, and it has communicated its concerns regarding these reported divestiture commitments to senior officials at the FTC. DTAG noted that after three years of merger-related activity and speculation, it believes it is time for a compelling offer to be made or for this process to come to a close so that the it can move forward under its standalone plan.
DTAG reported second quarter vehicle rental revenue was $378.9 million, compared to $378.2 million in the second quarter of 2011. Revenue per unit was $1,077 in second quarter 2012 compared to $1,080 for the same period last year. DTAG realized rental day growth of 4.2 percent, which was mostly offset by a 3.8 percent decrease in revenue per day. Utilization in the second quarter of 2012 was 80.3 percent, compared to 77.4 percent in the second quarter of 2011, with the average fleet size consistent year over year.
Fleet cost per vehicle was $162 per month in the second quarter of 2012, compared to $188 per month in the second quarter of 2011. DTAG said the decrease in fleet cost per vehicle was attributable to lower base depreciation rates due to the ongoing strength of the used vehicle market and the resulting favorable impact on vehicle residual values, combined with a year-over-year increase in gains on sales of risk vehicles. The company also sold approximately 18,700 risk vehicles at a total gain of $22.5 million during the second quarter of 2012 compared to approximately 8,400 risk vehicles at a total gain of $17.8 million in the second quarter of 2011. The increase in the number of risk vehicles sold is attributable to a substantial fleet refresh cycle underway in 2012.
Direct vehicle and operating expenses and selling, general and administrative expenses (operating expenses) totaled $243.9 million in the second quarter of 2012 compared to $239.8 million in the second quarter of 2011. The increase was primarily due to more favorable loss experience realized in the company's vehicle insurance programs in the second quarter of 2011. Operating expenses totaled 61.7 percent of revenues for the second quarter of 2012, compared to 60.7 percent of revenues in the second quarter of 2011. Interest expense, net, declined to $15.3 million in the second quarter of 2012, down from $18.3 million in the second quarter of 2011. The decrease in interest expense primarily reflects the Company's refinancing of its legacy fleet financing facilities at lower interest rates in the second half of 2011.
DTAG also noted that it repurchased 283,250 shares of stock at an average price of $78.81 during the second quarter of 2012. These repurchases are in addition to the previously disclosed 1.515 million shares repurchased through March 31, 2012. As of June 30, 2012, the company had approximately $273 million in share repurchase capacity remaining under its current share repurchase program. As of June 30, 2012, DTAG’s tangible net worth was $663 million, and the Company had no corporate debt outstanding.