Dollar Thrifty Automotive Group (DTG)

Q1 2012 Earnings Call

May 09, 2012 9:00 am ET

Executives

Vicki Vaniman - Executive Vice President, Secretary and General Counsel

Scott L. Thompson - Chairman, Chief Executive Officer and President

H. Clifford Buster - Chief Financial Officer, Senior Executive Vice President and Treasurer

Analysts

Christopher Agnew - MKM Partners LLC, Research Division

Presentation

Operator

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Welcome and thank you for joining the Dollar Thrifty Automotive Group First Quarter Financial Results. [Operator Instructions] This conference is being recorded. If anyone has any objections, please disconnect at this time. I would now like to turn the call over to Vicki Vaniman, General Counsel.

Vicki Vaniman

Thank you. Good morning, and welcome to the Dollar Thrifty Automotive Group, Inc. First Quarter 2012 Earnings Release Conference Call. Scott Thompson, Chairman, President and Chief Executive Officer; and Cliff Buster, Chief Financial Officer, will be the hosts for today's call.

Some of the comments contained in this conference call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those expressed in forward-looking statements due to many factors.

These factors include, among others, matters that Dollar Thrifty has noted in its latest earnings release and filings with the SEC. Dollar Thrifty undertakes no obligation to update or revise forward-looking statements.

Today, the company will use certain non-GAAP financial measures, all of which are reconciled with GAAP numbers and can be found in today's press release or posted to our company website at www.dtag.com under the Investor Info tab.

And now I would like to turn the call over to Scott to discuss our first quarter earnings.

Scott L. Thompson

Thank you, Vicki, and good morning, everyone. We're pleased to report not only another quarter of significant year-over-year improvement, but also the highest first quarter profit in the company's history. A strong used vehicle market combined with continued emphasis in the area of cost control, productivity initiatives, fleet utilization and balance sheet management enabled us to achieve these results in spite of a competitive rate environment.

Net income for 2012 first quarter was $40.4 million or $1.35 per diluted share compared to net income of $16.5 million or $0.53 per diluted share for the first quarter of 2011. This represents 155% increase in earnings per diluted share compared to the first quarter 2011.

We're also pleased to report adjusted -- corporate adjusted EBITDA for the first quarter of 2012 of $76.8 million compared to $36.3 million for the first quarter of 2011, 111% increase compared to prior year.

Revenue -- rental revenues for the first quarter of 2012 increased 2.1%, driven primarily by a 6.5% increase in rental base partially offset by a 4.2% decrease in revenue per day. We continue to be very pleased with the continued growth in the leisure travel volumes and the strong demand for our value-oriented product offering.

Revenue per unit, or RPU, totaled $1,115 per unit per month the first quarter 2012 compared to $1,131 per unit per month for the first quarter of 2011. We're more focused on RPU than RPV or total revenue. We believe that it's consistent with our return-on-asset approach and it's helpful when thinking about the appropriate fleet growth.

Fleet cost improvement was a substantial component in the escalation in profitability this quarter. Fleet cost per vehicle for the first quarter of 2012 declined to $136 per month compared to $251 per vehicle per month in the first quarter of 2011. Consistent with last quarter, our base depreciation rates continue to benefit from the ongoing strength in the used vehicle market. Additionally, during the first quarter of 2012, we realized gains on sale of risk vehicles of $14.3 million compared to $7.9 million in last year's first quarter.

Cliff will now review additional financial highlights for the quarter.

H. Clifford Buster

Thanks, Scott. Before I go through the financial highlights, I would like to address our diluted share count, which has been a bit complex. During the last 3 quarters of 2011, we highlighted that our diluted share count had increased significantly although there had been no significant equity grants since 2010. This was the result of the application of the treasury stock method for accounting purposes in computing diluted shares.

The diluted share count in 2011 increased due to 2 factors: Our inability to benefit from the tax deduction resulting from assumed stock option exercises due to the fact that the company was not a cash taxpayer in 2011, which effectively lowered the number of shares assumed to be repurchased under the treasury stock method; and secondly, the appreciation in our share price reduced the number of shares assumed to be repurchased from the proceeds of option exercises.

Based on tax regulation currently in effect and our current projections for significant pretax income for 2012, we now expect to be a cash taxpayer in 2012, although at a substantially lower rate than the statutory rate. Accordingly, or perhaps due to diluted EPS, we are now assuming the repurchase of shares related to the benefit of the tax deduction from stock option exercises.

Our revised EPS guidance for 2012 reflects the current company's current expectations that it will be a cash taxpayer in 2012 and that it will be able to benefit from the tax deduction on stock option exercises. The tax regulations change favorably with respect to bonus depreciation methods. It might negatively impact our diluted shares outstanding and positively impact our free cash flow in future periods.

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