Dollar Thrifty Automotive Group Inc. provided an update on corporate adjusted EBITDA and fleet cost expectations for the full year of 2011, as well as preliminary guidance on expected results for the first quarter of 2011.
The company expects corporate adjusted EBITDA, excluding merger-related expenses, to be within a range of $235 million to $260 million for the full year of 2011, an increase of about 30 percent from the company's previously announced guidance range. Dollar Thrifty said that the primary driver of the improvement is lower fleet cost expectations and confidence in the upcoming summer rental season.
The company's initial 2011 fleet cost guidance assumed that the used car market would moderate in 2011 from 2010 levels, thus negatively impacting residual values. Conditions in the used vehicle market have remained very robust during the first three months of 2011, with tight supplies of late model used vehicles and high demand driving residual values to new record levels, according to the company.
Based on information currently available, Dollar Thrifty expects industry fundamentals to remain favorable, positively impacting residual value estimates. The company is lowering its estimate for vehicle depreciation per unit to a range of $240 to $250 per month for the full year of 2011.
"As we disclosed on our year-end earnings conference call, we expected significant upside in fleet costs in 2011 if the used car market continued at the strong levels experienced in 2010," according to Scott L. Thompson, president and CEO. "We are now in the prime selling season for used vehicles, and are realizing very favorable results based on the vigor of the used car market combined with our enhanced pricing strategies."
"Accordingly, we have revised our fleet cost targets to reflect continued favorable market conditions," Thompson said. "Since our year-end earnings call, the rental pricing and volume environment have improved following the winter storms that impacted January and February. The combination of these factors has given us significantly greater confidence in our 2011 operating performance."
The company expects rental revenue for the first quarter to be flat to down one percent compared to the first quarter of 2010. The unfavorable impact of the winter storms on rental revenues for the quarter is estimated at $5 to $10 million.
Corporate adjusted EBITDA, excluding merger-related expenses, is expected to range from $25 to $30 million for the first quarter of 2011. Corporate adjusted EBITDA, excluding merger-related expenses of $1.7 million in the first quarter of 2010 totaled $51.1 million.
Dollar Thrifty said it expects gains from sales of vehicles to be only $7 million in the first quarter of 2011, compared to $25.7 million of gains in the first quarter of 2010 as the company plans to dispose of approximately 7,300 fewer risk vehicles in the first quarter of 2011 compared to first quarter of 2010.