On Aug. 4, Dollar Thrifty Automotive Group Inc. reported results for the second quarter ended June 30, 2009. Net income for the 2009 second quarter was $12.4 million, or 55 cents per diluted share, compared to net income of $10.8 million, or 49 cents per diluted share, for the comparable 2008 quarter. The net income for the second quarter of 2009 included income of 24 cents per diluted share, compared to income of 72 cents per diluted share in last year’s second quarter, both of which related to increases in fair value of derivatives.
Non-GAAP net income for the 2009 second quarter was $6.9 million, or 30 cents per diluted share, compared to a non-GAAP net loss of $5 million, or 23 cents loss per diluted share for the 2008 second quarter. Non-GAAP net income (loss) excludes the (increase) decrease in fair value of derivatives, net of related tax impact.
“We were pleased with this quarter’s operating results, particularly in light of the contracting economy and the bankruptcy of Chrysler, one of our major suppliers,” said Scott L. Thompson, CEO and president. “Over the past two quarters, we have taken a number of steps to enhance our operating performance and cash flow, and those actions, combined with improved used vehicle residual values and firmer rental pricing, drove our improved second quarter performance.”
For the quarter ended June 30, 2009, the company’s total revenue was $399.6 million, as compared to $445.7 million for the comparable 2008 period. The decline in revenue was primarily driven by a 20.3 percent decrease in rental days, partially offset by a 12.1 percent improvement in revenue per day. The second quarter average fleet was down approximately 15 percent compared to last year’s second quarter.
“Revenue for the quarter was in line with our previously announced expectations and these results are consistent with our focus on maximizing return on assets, rather than on the revenue growth strategy employed in 2008,” said Thompson. “As we have previously stated, our focus for 2009 and beyond is on improving the quality of our revenue by concentrating on enhancing rate per day and, at times, sacrificing transaction days as necessary to achieve the optimal revenue mix.”
Per vehicle depreciation cost of $365 per month in the second quarter of 2009 was approximately 1.1 percent lower than the comparable quarter of 2008. On a sequential basis, per vehicle depreciation cost per month declined approximately 6.9 percent, primarily due to a lower proportion of program vehicles, escalating vehicle residual values and improved fleet management. Vehicle utilization, a measure of fleet efficiency, was 80.6 percent, down 5.1 percentage points from last year’s second quarter as normal vehicle dispositions were disrupted by the Chrysler bankruptcy and management focused on enhancing the quality of revenues. Direct vehicle operating expenses and selling, general and administrative expenses were lower in the second quarter of 2009 compared to the same quarter in 2008 as a result of transaction declines and cost reduction initiatives. Interest expense for the second quarter declined due to significant debt reductions year over year.
Six Month Results
For the six months ended June 30, 2009, net income was $3.5 million, or 15 cents per diluted share, compared to a net loss of $287.2 million, or $13.49 loss per diluted share for the comparable period in 2008. The net income for the six months ended June 30, 2009 included income of 38 cents per diluted share related to an increase in fair value of derivatives, compared to a loss of 4 cents per diluted share for the six months ended June 30, 2008 related to a decrease in fair value of derivatives. In addition, the net loss for the six months ended June 30, 2008 included non-cash charges of $12.45 per diluted share related to the impairment of goodwill and long-lived assets.
The non-GAAP loss per diluted share for the six months ended June 30, 2009 was 23 cents, compared to a non-GAAP loss per diluted share of $1 for the same period in 2008. Non-GAAP net loss excludes the (increase) decrease in fair value of derivatives and the non-cash charges related to the impairment of goodwill and long-lived assets, net of related tax impact.
Liquidity and Capital Resources
As of June 30, 2009, the company had $263 million in cash and cash equivalents, including $100 million that represents a required minimum balance to be maintained as part of an amendment to the company’s Senior Secured Credit Facilities. As of June 30, 2009, the company also had $545 million in restricted cash and investments primarily available for the purchase of vehicles and/or repayment of vehicle financing obligations.
The company is in full compliance with all of the financial covenants under its various financing arrangements with lenders.
The company expects the overall environment in the rental car industry to remain challenging in the second half of 2009, as economic conditions negatively impact consumer confidence and travel demand. Based on the company’s expected fleet size and projected industry-wide rental day demand, the Company narrowed its prior revenue guidance. The company now expects rental revenues to decline 8 to 10 percent for the full year of 2009 compared to 2008. Falling rental days are expected to be somewhat mitigated by an increase in rate per day. For the remainder of 2009, management expects the used vehicle market to show year-over-year improvement.
“As we have previously stated, our focus for 2009 is on maximizing revenue per day, reducing expenses, de-leveraging our balance sheet and diversifying our fleet investment, all in order to properly position the Company for an expected economic recovery in 2010. This quarter represents another step forward towards our recovery and demonstrates the earnings potential of our new strategy,” said Thompson.