Dollar Thrifty Posts Best 1Q Profit Ever
TULSA, Okla. — Just days after Hertz Global Holdings signed an agreement to buy it, Dollar Thrifty Automotive Group reported on Wednesday that the company posted its most profitable first quarter in its history.
Company executives revealed in an abbreviated conference call that Dollar Thrifty's net income for the first quarter was $27.3 million, or $0.91 per diluted share. They highlighted the strong net income turnaround as compared to a net loss of $8.9 million, or $0.42 loss per diluted share, that Dollar Thrifty sustained in the same span of 2009.
Executives also pointed out that their first-quarter net income for both 2009 and this year included a favorable impact of $0.14 per diluted share, both of which relate to changes in fair value of derivatives.
"We are very pleased to report that our performance in the first quarter of 2010 represents the most profitable first quarter in the company's history," noted Scott Thompson, president and chief executive officer.
Dollar Thrifty went on to detail that its total revenue was $348.3 million in the most recent quarter. That figure was off from what the company compiled in the same quarter a year ago, which was $362.4 million.
Executives attributed the revenue decline to a 7.4-percent decrease in rental days, partially offset by a 3.9-percent improvement in revenue per day. On a same store basis, the company said its rental revenues for locations that were open during both periods were consistent with the prior year's first quarter.
The company also noted that the closing of unprofitable stores last year continues to benefit its return on assets.
Dollar Thrifty's first quarter 2010 average fleet was down 5.2 percent compared to the first quarter of 2009. It added that the ending fleet was up 2.4 percent from the first quarter of 2009.
Furthermore, Dollar Thrifty shared that its non-GAAP net income for the first quarter was $23.0 million, or $0.76 per diluted share. That figured was compared to a non-GAAP net loss of $11.8 million, or $0.55 loss per diluted share, for the 2009 first quarter.
The company mentioned that its non-GAAP net income figures from the past two first quarters excludes the changes in fair value of derivatives and non-cash charges related to the impairment of long-lived assets, net of related tax impact.
In other financial news, Dollar Thrifty also highlighted that its corporate adjusted EBITDA for the first quarter of 2010 was $49.4 million, compared with a loss of $2.4 million in the first quarter of 2009.
"This marks our fifth consecutive quarter of year-over-year improvement in corporate adjusted EBITDA and the most profitable first quarter in the company's history. Our strategy of maintaining price discipline, focusing on cost efficiency, and continually working to lower our fleet operating costs continues to yield results," Thompson emphasized.
Moving on, Dollar Thrifty revealed that its vehicle depreciation per unit for the first quarter of 2010 totaled $206 per month. Executives said fleet cost for the quarter was positively impacted by the overall strength of the used-vehicle market, combined with changes they made last year to fleet planning and remarketing operations. They stressed the changes were designed to lower fleet depreciation costs per unit and mitigate enterprise risk.
They changes Dollar Thrifty mentioned were:
—Diversification of manufacturers to facilitate better vehicle selections.
—Extension of fleet holding periods.
—Improved mix optimization.
—A move toward greater proportion of risk vehicles in the fleet.
—Improvements in remarketing processes.
Dollar Thrifty went on to mention that its vehicle utilization in the first quarter was 80.3 percent, down 180 basis points from the year-ago quarter. Executives indicated that utilization was adversely impacted in the first quarter of this year by an increase in the number of risk vehicles held for remarketing during the period and the their focus on price discipline in remarketing of vehicles.
In terms of what the company classifies as its operating expenses — direct vehicle and operating expenses and selling, general and administrative expenses — Dollar Thrifty reported a drop from the year-ago quarter. The company attributed the situation as a result of transaction declines, cost reduction efforts and cost efficiency initiatives.
As a percentage of revenues, Dollar Thrifty indicated its operating expenses totaled 65.5 percent of revenues in the first quarter of 2010, compared to 63.9 percent during the same span last year.
Elsewhere, Dollar Thrifty said its interest expense, net of interest income, for the first quarter of this year declined $4.7 million on a year-over-year basis. Executives pointed out that this was primarily as a result of a $540 million reduction in the average quarterly debt outstanding for 2010 compared to 2009 and partially offset by lower returns on the company's invested cash.
Since the fourth quarter of 2008, Dollar Thrifty noted it has repaid $1.0 billion of debt, and its results should continue to benefit from the reduced leverage.
Few New Details on Hertz Acquisition
At the outset of Wednesday's call, Dollar Thrifty's executive vice president, general counsel and secretary, Vicki Vaniman, cautioned that company executives could share little more about the pending transaction with Hertz. The company also did not allow for a question-and-answer session following a recap of its first-quarter financial performance.
"There's a formal SEC disclosure process we will be following," Thompson insisted near the end of the call.
"We expect that our S-4 and related documents will be filed with the SEC within approximately 30 days. That document will include details about the proposed transaction, and I'm sure you can understand our communications will be limited to that document and related materials that we file with the SEC," he explained.
"We expect the transaction to close within six to 12 months," Thompson added.
The president and CEO then went on to reiterate a similar position about the acquisition that he shared when the announcement was made at the beginning of the week.
"The combination of Dollar Thrifty with a larger company like Hertz will provide Dollar Thrifty with greater resources and technology need to expand our leisure rental brands. We see the combination of the brands with Hertz as very compelling," Thompson noted.
"Dollar Thrifty's management team, which took over this company in October 2008 during troubled times, is fully engaged in operating the business. It's committed to the success of Dollar Thrifty and the interest of its shareholders. We continue to appreciate the support of our customers, employees, suppliers, vendors and certainly our investors," Thompson went on to say.
"We intend to maintain this focus pending completion of our acquisition by Hertz, and expect that our combination with a larger company that has a broader base of revenues and access to greater technology will allow the Dollar and Thrifty brands to offer improved services and grow at a much more rapid pace than as a standalone company," he concluded.